Scomi Group Annual Report 2006 Key Highlights and Chairman's Address

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SCOMI GROUP BHD (571212-A)
ANNUAL REPORT 2006
P o t e n t i a l
Scomi Group Bhd
SCOMI GROUP BHD
SCOMI GROUP BHD (571212-A)

Suite 5.03, 5th Floor, Wisma Chase Perdana, Off Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur, Malaysia Tel : +603-2080 5080 Fax : +603-7490 5131 / 2080 5131
ANNUAL REPORT
2006
SCOMI GROUP BHD
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S e e
Others see PROMISE
WE SEE
our commitment towards the environment
and preservation for sustainable development and a promising future for all generations.
Others see CONNECTIVITY
WE SEE
a convergence of state-of-the-art technology to further
improve efficiency for the development of new products and creation of innovative solutions.
Others see HORIZON
WE SEE
the vast business opportunities
traversing the limitless expanse of our borderless world.
See Potential. See
SCOMI GROUP BHD

ANNUAL REPORT
2006
CONTENTS
2 4 5 6 12 Key Financial Indicators & Key Financial Highlights Corporate Legal Structure Business Activities Key Address from the Chairman Interview with the Group Chief Executive Officer 26 28 34 36 44 46 Corporate Information Profile of Directors Executive Committee Corporate Governance Statement Internal Control Statement Audit and Risk Management Committee Report 55 51 54 Additional Information Directors Responsibility Statement Financial Statements 156 Notice of Annual General Meeting 158 Statement Accompanying the Notice of Fifth Annual General Meeting Form of Proxy
147 Analysis of Shareholdings 152 List of Properties 154 Corporate Directory
5th AGM
22nd June 2007 Friday 10.00 a.m. Nirvana Ballroom, Crowne Plaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur
KEY FINANCIAL INDICATORS &

KEY FINANCIAL HIGHLIGHTS
FOR THE YEAR ENDED 31 DECEMBER 2006
S co m i G ro u p B h d A n n u a l R e p o r t 2 0 0 6
Total Assets (RM Million)

2006 2,585 2006
Shareholders Fund (RM Million)

592
2005
1,949
2005
550
Earnings Per Share (Sen)

2006 8.5 2006
Net Assets Per Share (Sen)

58
2005
15.6
2005
55
Net Tangible Assets (RM Million)

2006 39
2005
33
Turnover (RM000)
2006 2005 2004 2003 2002 1,577,495 1,067,972 590,457 201,257 158,512
Profit Before Taxation (RM000)

2006 2005 2004 2003 2002 120,722 186,812* 74,603 25,955 20,507
Pat After Minority Interests (RM000)

2006 2005 2004 2003 2002 84,545 151,692** 61,494 17,857 14,644
Notes: * This includes the exceptional gain arising from the disposal of the machine shops amounting to RM151.447 mil ** This includes the exceptional gain arising from the disposal of the machine shops amounting to RM139.005 mil
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2006 RM000 Turnover 1,577,495
2005 RM000 1,067,972
2004 RM000 590,457
2003 RM000 201,257
2002 RM000 158,512
EBITDA Depreciation Interest expense Share of Profit in Associated Companies Share of Profit from Jointly Controlled Entities PBT Taxation PAT Minority interests PAT after minority interests
253,129 (53,984) (78,207) 30,084 (288) 120,722 (20,851) 99,871 15,326 84,545
271,031 (41,848) (42,181) 6,429 19 186,812 (13,937) 172,875 21,184 151,691
103,146 (17,640) (12,017) 114 1,000 74,603 5,571 69,032 (7,538) 61,494
30,505 (3,146) (1,459) 54 0 25,955 (8,102) 17,853 4 17,857
23,554 (3,426) (1,072) 1,451 0 20,507 (5,863) 14,644 14,644
Number of Shares in issue (000) Weighted average number of Shares in issue (000) Weighted average number of Shares used to compute diluted earnings per share (000) Basic Net EPS** Fully Diluted Net EPS@
1,005,352 995,025 1,017,507 8.5 sen 8.3 sen
992,080 972,877 1,015,833 15.6 sen 14.9 sen
894,134 884,598 932,431 7.0 sen 6.6 sen
100,000 593,312 629,387 3.0 sen 2.8 sen
46,935 375,480 375,480 3.9 sen 3.9 sen
Notes: ** Based on the PAT after minority interests and on the weighted average number of Shares assumed to be issued in the respective years after taking into consideration bonus issue and share split exercise. @ Based on PAT after minority interests and on the weighted average number of Shares assumed to be issued in the respective years after taking into consideration bonus and share split exercise and the dilutive effect of unexercised ESOS. The financial highlights on pages 2 and 3 reflect the pro forma Groups financial performance based on the assumption that the Group structure upon listing (excluding KMC Oiltools Bermuda Ltd group and all subsequent acquisitions by the Group), has been in existence throughout 2002 and 2003. This reflects the restructing exercise undertaken by Scomi Group Bhd pursuant to its listing on 13 May 2003. 2004 to 2006: The financial highlights on pages 2 and 3 reflect the actual audited results of Scomi Group Bhd. 2002 & 2003:
CORPORATE LEGAL
STRUCTURE
OILFIELD SERVICES
SCOMI OILFIELD LIMITED (BERMUDA)
KMC OILTOOLS BERMUDA LIMITED (BERMUDA) SCOMI ENGINEERING BHD 71.0%
ENERGY & LOGISTICS ENGINEERING
ENERGY LOGISTICS
SCOMI MARINE BHD 42.75% 60% SCOMI OILSERVE SDN BHD #
70%
PRODUCTION ENHANCEMENT
SCOMI ENERGY SDN BHD
SCOMI NTC SDN BHD
SCOMI CHEMICALS SDN BHD
SCOMI SOSMA SDN BHD ##
NOTE Public listed entities

*
Scomi Marine Bhd has 2 public listed companies which are 80.5% owned PT Rig Tenders Indonesia TBK (Indonesia) and 29.1% owned CH Offshore Ltd (Singapore) Formerly known as Oilserve Marine Sdn Bhd Formerly known as Sosma Sdn Bhd
# ##
1.
This structure does not include the subsidiaries of KMC Oiltools Bermuda Limited, Scomi Marine Bhd, Scomi Engineering Bhd, Scomi Sosma Sdn Bhd and companies that are dormant or have ceased operations.
2.
Except as otherwise expressly stated, all companies within the Scomi Group Bhd group of companies are incorporated in Malaysia.
BUSINESS
ACTIVITIES
SCOMI GROUP BHD
OILFIELD SERVICES
ENERGY & LOGISTICS ENGINEERING
ENERGY LOGISTICS
PRODUCTION ENHANCEMENT
Drilling fluids (DF)
Machine shop
Marine logistics for coal industry
Production chemicals
Drilling waste management solutions (DWM)
Logistics engineering (special purpose vehicles, rail, bus & defence)
Offshore support services for Oil & Gas industry
Industrial chemicals
Gas business
Distribution of oilfield products & services
KEY ADDRESS
FROM THE CHAIRMAN
Financial year 2006 was another sterling year for Scomi Group Bhd (Scomi, the Group or the Company). Record turnover and profits were achieved by all the business divisions within the Group.
CHAIRMAN
Tan Sri Datuk Asmat bin Kamaludin
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Dear Stakeholder,
The Groups 2006 performance was the result of a series of actions taken over the last several years to steadily transform the company. We invested in targeted acquisitions, technological partnerships and strategic ventures to continue building capabilities in areas with high value and growth potential. In addition, we accelerated our move to become a globally integrated entity via acquisitions. These actions have resulted in a more balanced mix of businesses and a stronger, more competitive and sustainable global business. On behalf of the Board of Directors, I take great pleasure in presenting the Annual Report and Audited Financial Statements of Scomi Group Bhd for the financial year ended (FYE) 31 December 2006. Malaysias Real GDP strengthened by 5.9% in 2006 compared to 5.3% the year before, underpinned by robust domestic demand and continued strong exports. Export-oriented industries grew by an overall 7.5%, led by a 13.6% growth in Petroleum Products industry (including LNG). In mineral form, gross exports for crude oil and condensates and LNG grew by 8.1% and 12% respectively in 2006. (source: BNM 2006 AR)
ECONOMIC AND INDUSTRY ENVIRONMENT

In 2006, the global economy strengthened further by an estimated 5% following a growth of 4.9% in 2005. Oil prices reached record highs for the second consecutive year in 2006. Oil prices rose, particularly in the first half of the year, due to uncertainties over supply amid robust demand conditions and geopolitical tensions affecting some of the key oil-producing countries. As a result, global drilling activity expanded (in average active rig count measure) by 398 rigs or by 14% in 2006 to 3,275 rigs. (source: Spears & Associates, Inc March 2007)
KEY ADDRESS
FROM THE CHAIRMAN
(CONTD.)
FINANCIAL PERFORMANCE
Financial Review Turnover 2006 saw Scomi yet again posting an outstanding top-line growth as turnover grew by 48% to RM1.58 billion over RM1.07 billion recorded in 2005. The Oilfield Services division and Energy & Logistics Engineering division contributed 74% and 20% of turnover respectively with the balance coming from Energy Logistics and Production Enhancement. Geographically, Asia was the largest contributor to the Groups turnover comprising 49% of turnover. This was mainly due to the availability of a complete product mix of the Group in the region, where all four lines of businesses are present. Asia was followed by the Americas at 19%, the Middle East, North Africa and Turkmenistan (MENAT) at 16%, Europe at 11%, and West Africa at 5%. For the year under review, the dynamic growth came about mainly as a result of the restructuring, acquisitions and strategic investments made in prior years. I am pleased to advise that your company has recorded an average Compounded Annual Growth Rate (CAGR) of 57% over the last six years. Profits The net profit for the year under review of RM84.5 million represents a 44% drop over 2005s net profit of RM151.7 million. This was due to the exceptional gain recorded on disposal of our engineering business in 2005 and a much higher effective tax rate in 2006. Excluding the one-off gain registered in the year 2005, the underlying core net profit for FYE 2006 would show a growth of 58%. This significant growth was a result of the tremendous growth in our turnover as well as improved Gross Profit margin by 3.2%-points during the year 2006.
Dividend In respect of the financial year ended 31st December 2006, the Board of Directors has proposed a gross final dividend of 15%, less 27% income tax (2005: 12% gross final dividend, less 28% income tax). The declaration of the final dividend is subject to the approval of the Companys shareholders at the forthcoming Annual General Meeting of the Company.
CORPORATE DEVELOPMENTS
Acquisition of MTrans Transportation On the 10th of July 2006, the Groups 71% subsidiary company, Scomi Engineering Bhd, completed the acquisition of a 51% stake in MTrans Transportation Systems Sdn Bhd (MTrans). I am pleased to announce that the interest in MTrans has further been raised to 91% on the 3rd of April 2007. With the acquisition, we have enhanced our technology ownership in the manufacturing of monorail and buses.
JV with NATCO On 18 July 2006, Scomi entered into a Joint Venture agreement with the National Tank Company of USA (NATCO) to pursue the building of an enhanced oil recovery and gas conditioning business in South East Asia. NATCO is a global market leader in the design, fabrication and supply of packaged/modular process equipment with a portfolio of proprietary production equipment technology. NATCOs membrane separation systems enable carbon dioxide (CO2) separation from natural gas streams. With the joint venture, Scomi will have access to proprietary production equipment technology developed for the industry and get a head-start in its venture into the highly niche hydrocarbon industry. We envisage this taking place within the next one to two years, driven by the urgent demand for such technology in the South East Asian region where the existence of CO2 in certain gas producing fields are high.
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Restructuring of Oilfield Services Division On the 9th of August 2006, with the objective of raising capital to fund growth and pare down debt, Scomi announced its intention to list its Oilfield Ser vices division, namely KMC Oiltools Bermuda Ltd (KMCOBL), on the Singapore Stock Exchange. Following this, Scomi completed KMCOBLs internal restructuring and debt restructuring on the 20th of December 2006. On the 16th of March 2007, however, Scomi announced its proposal to divest part of its stake in the Oilfield Services division to Standard Chartered Private Equity Ltd (SCPEL), a private equity fund. Subject to approvals being obtained by the relevant approving authorities, this is targeted to complete by the end of June 2007. The proposed divestment was for a 19.9% interest in Scomi Oilfield Ltd (SOL), the newly created parent company of KMCOBL, to SCPEL for USD99.5 million. As this transaction fulfils Scomis objective of raising capital, the earlier proposed listing of KMCOBL, has therefore been deferred. The proposed investment by SCPEL is a positive reflection of investors confidence in Scomi, particularly the growth prospects of our Oilfield Services business. With this move, Scomi will also be able to more efficiently manage its balance sheet as it will enable Scomi to de-gear its borrowings which will result in cost savings for the Company.
while prospects for the Eurozone look brighter following signs of broad-based recovery in major member countries. Growth in the Asian region is expected to remain encouraging, increasingly supported by domestic demand, particularly in China and India. Growth in world trade in 2007 is projected at 4.5%. Domestic Bank Negara Malaysia, in its 2006 Annual Report, forecasts that the Malaysian economy will strengthen further with a 6.0% growth in 2007 having expanded by 5.9% in 2006. In an environment of moderating inflation, domestic demand will be sustained as improved consumer and business confidence translates into stronger private expenditure. The economy is expected to fare better in the second half of the year. (source: BNM 2006 AR)
Industry and Business Outlook Oil & Gas Industry 2007 is anticipated to be another good year for most segments of the oilfield equipment and service industry. Oil prices are expected to decline by 10% in comparison to 2006, due to supply capacity growing faster than incremental demand as several mega-projects in the Caspian Sea, West Africa, and Canada are reaching completion simultaneously. More importantly, by continuing to trade above USD60/barrel (USD64 as at 9th April 2007), oil prices remain high
PROSPECTS
Economic Outlook Global The outlook for the global economy in 2007 remains fairly optimistic. Despite a slight moderation in export growth expected in the first half of the year, overall growth is expected to be sustained at above 4% for the fifth consecutive year. The International Monetary Fund forecasts that global economic growth in 2007 will be reasonably strong at 4.5%. Recovery in Japan would continue, albeit at a more measured pace,
enough to attract new investment in the upstream sector. The same analysis that shows supply growing faster than demand in 2007, also indicates that after 2008, demand will once again be outpacing supply as the number of new mega-projects slows.
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KEY ADDRESS
FROM THE CHAIRMAN
(CONTD.)
The expected sustained high demand for oil and gas bodes well for our businesses. Rising exploration and development activities will positively affect demand for our products and services. According to the latest report by Spears & Associates, Inc (March 2007), overall worldwide drilling activity is projected to increase by 8%. US drilling activity will undergo a fifth straight year of double-digit growth in 2007 with an 11% increase in rig count, which accounts for 52% of world rigs. This positive global outlook of the oil & gas industry is expected to benefit our Oilfield Services division, Energy Engineering business (under Energy and Logistics Engineering division), Production Enhancement division and the Offshore Support Services business (under Energy Logistics division). Transportation Industry Moving into 2007, we see a firm commitment of the Malaysian Government to speed up the implementation of the 9th Malaysia Plan (9MP) with many projects underway. For Scomi, the 9MPs allocation of RM15 billion for Defence and RM5.2 billion for Rail & Urban Transportation augurs well for our Logistics Engineering business. Our proven monorail technology and bus manufacturing capabilities are ready to offer solutions for a better transportation system brought upon by increasing urban population in cities in Malaysia as well as other countries. Coal Industry Coal usage in Emerging Asia is expected to double by year 2030 with the rising coal-fired power plant, diminishing of oil reserves and strong consumption by China and India. Demand from China is projected to triple. Indonesia, Malaysia and Thailand are anticipated to increasingly rely on coal-fired plants to meet growing energy demand. (source: Energy Information Administration)
Countries import coal for a variety of reasons. Malaysia has a national fuel diversity goal and coal is an important part of a secure energy supply strategy. Malaysias coal reserves are small at 4 million tonnes against annual consumption of more than 10 million tonnes. Average monthly usage has tripled since year 2000. National utility firm Tenaga Nasional estimated coal to rise to over 30% of the generation mix by 2010, from approximately 24% in 2005 and 5% in 2000. With such requirement, Indonesia, which has vast reserves of high-quality low sulfur coal exceeding its own domestic requirements, is expected to provide the bulk of import demand given the proximity and lower transport cost. This again is positive for our Energy Logistics business as the demand for transportation of coal is anticipated to increase as well.
Overall We believe the energy industry is in the midst of a new era of capital investment creating a paradigm shift in this historically cyclical business. With todays tightly-balanced market fundamentals, operators require innovative solutions that lower the overall cost of developing their energy assets. At Scomi, our people are focused on creating and delivering new technology and service offerings that provide value for our customers, promote safety and protect our environment. In these demanding times, we are fortunate to have dedicated professionals in the industry to help us execute our strategy and accomplish our goals.
APPRECIATION
I wish to thank the Government and the regulatory bodies, our stakeholders and shareholders, our loyal customers and suppliers, business associates and partners, analysts and fund managers, contractors and financiers, for their continuing confidence in and support of Scomi. I would also like to express my sincere gratitude to my fellow directors for their invaluable guidance and counsel.
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Our achievements would not have been possible without the hard work and dedication of our employees to whom we are most grateful. As we enter this new era of technology, business and global society, I am proud of the worldwide Scomi team for bringing us to this point. I am grateful to you, our shareholders, for your support in this journey. I hope and trust that you are pleased with how your company is growing and evolving. My colleagues on the Board and I are excited by the possibilities of how together with our clients, our partners and your good selves we can bring this enterprise into its next phase of growth and discovery. With everyones support and commitment, we are confident that Scomi will rise to the challenges in the coming years and will achieve its mission of becoming an Effective Global Competitor.
Sincerely,

Chairman Scomi Group Bhd
12
INTERVIEW WITH THE

GROUP CHIEF EXECUTIVE OFFICER

Shah Hakim Zain
13
WHAT HAS
Our growth has been bolstered by our strategy of leveraging on our global network of over 4,100 high-calibre, dedicated people in 36 countries as well as our business and technology acquisitions for organic growth. As a result of all these initiatives, Scomi today features prominently as a global, technology and environment company.
PROPELLED
SCOMIS GROWTH IN SUCH A SHORT TIME?
WHAT ARE SOME OF THE
CHANGES
THAT SCOMI HAS UNDERGONE FOR THE BETTER?
Scomi today is a very different enterprise from what it was since its listing in year 2003. We have fundamentally reshaped our company be it from the technology, strategy, business model, processes or company culture perspectives and are now poised to capture attractive growth and profit opportunities in each of our industry segments. What is even more remarkable is that Scomi has achieved all these changes while continuing to deliver steady results in terms of turnover, net profit, earnings per share and cash performance.
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INTERVIEW WITH THE

(CONTD.)
HOW DID THE
2006 marked the completion of the global expansion phase for Scomi. For financial year (FY) 2006, business growth was driven by improved performance from all business divisions as a result of a series of actions taken over the past few years to steadily transform the group into a consolidated global entity focusing on technology and the environment. For the period under review, our turnover grew by 48% to RM1.58 billion as a result of growth in all business divisions. Our net profit increased by 58% to RM84.5 million over FY 2005 (excluding the RM98.2 million one-off gain on the disposal of our machine shop business in Asia to subsidiary Scomi Engineering Bhd and other exceptional items in 2005). This was despite a much higher effective tax rate in 2006 compared to 2005. The excellent financial results were contributed by each of our four business lines, which posted growth in both turnover and profits.
GROUP
FARE IN THE YEAR UNDER REVIEW?
WHAT KEY AREAS DID SCOMI
HOW DID THE
FOCUS
ON?
We focused on undertaking strategic acquisitions and technological partnerships that have enabled us to continue building our capabilities in high value return and growth areas. We also focused our efforts on increasing productivity to expand margins and improve efficiency as well as accelerated our move to become a globally integrated business entity. All these have resulted in a more balanced mix of businesses and a stronger, more competitive and sustainable global business for the Group.
OILFIELD SERVICES DIVISION PERFORM?

We continue to successfully leverage on our existing DWM market presence to market our DF business. 2006 marked the maiden year that we penetrated the Canada and USA DF markets, a vast and vital source of future DF growth. We also successfully penetrated Turkmenistan which is a strong success story that underscores our ability to successfully provide integrated DF and DWM solutions. Thus, today from our 35 countries, we provide both DF and DWM solutions in 12 countries and DWM solutions in the remaining countries. Other contributors to Oilfield Services division turnover were the Machine Shops in the western hemisphere and Distribution of Oilfield Products and Services at 4% each.
The Oilfield Services division provides integrated drilling fluids and drilling waste management ser vices and solutions, as well as distribution of oilfield products and services. With operations at 61 locations across 35 countries, this division is the largest contributor to turnover, garnering over three fourths of the Groups result. In 2006, Oilfield Services turnover grew by 51%. Key contributors to the divisions turnover were Drilling Waste Management (DWM) which contributed 65%, followed by Drilling Fluids (DF) at 27%. The change was brought about by new market penetration for our DF business in 2006. The DF business turnover grew by an impressive 81% of its value recorded in 2005, whilst turnover for the DWM business rose steadily by 37%.
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Over 32% of the Oilfield Services divisions turnover was generated by Asia, followed by the Americas (26%), MENAT (Middle East, North Africa and Turkmenistan) (17%), Europe (18%) and West Africa (7%). Malaysia was marginally ahead of the USA as the largest
WHAT IS THE BREAKDOWN BY
turnover generator for Oilfield Services at 15.4% compared to 15.0% from the USA. This result came on the back of the commencement of major tenders awarded in Malaysia between late 2005 and early 2006. On the other hand, the improved contribution by the USA is a result of its significant turnover growth of 89% over that of 2005, attributed by increased DWM business and commencement of DF operations in the country. Turkmenistan also made a sizeable contribution from its first year of operations, at 5.0% of the Oilfield Services divisions overall turnover, making it the top contributing country in our MENAT region. We are today, starting to see the return from this operation after investing significant capital for operational set up in 2005. Our North Sea operations in the United Kingdom and Norway also registered respectable growth of 32%. This is commendable performance as they were challenged by adverse weather conditions during the final quarter of the year.
REGION FOR
OILFIELD SERVICES TURNOVER?
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INTERVIEW WITH THE

(CONTD.)
WHAT IS THE
OUTLOOK FOR THE

OILFIELD SERVICES BUSINESS?
It is estimated that the global market value of the DF and DWM businesses in 2007 is worth approximately USD6.9 billion and USD2.3 billion respectively. The total market value of USD9.2 billion in 2007 represents a 13% growth in comparison to 2006s estimated growth rate of 8%. Given that the global integrated market is dominated by DF, at 78% in the past or at 75% as forecasted for 2007, the change to a higher contribution by DF of 27% to the Oilfields Services divisions turnover in 2006, was a welcome shift. It has provided the impetus for us to continue exploiting the potentially lucrative DF market while leveraging on our DWM markets. The Group continues to strengthen its DF presence in the USA, Canada, North Sea and MENAT (Saudi Arabia, Libya, Iran and Algeria). We are also actively exploring opportunities in the UK, Nigeria, Venezuela and Mexico. In growing our DWM business, we will focus on areas that have good potential, namely the Americas, Saudi Arabia and Iran. For the DWM business, we are introducing new and enhanced DWM equipment such as drilling chokes, big bowl centrifuges and new generation shakers, all of which represent a leap in technology. As an environmentalfocused organisation, we are always seeking better solutions which protect rules our and environment. This focus is in line with the increasing international enforcement on the preser vation and conservation of the environment.
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HOW DID THE ENGINEERING DIVISION FARE IN 2006?

Our Energy & Logistics Engineering division is involved in the provision of machine shop services under Energy Engineering as well as the fabrication of special purpose vehicles, rail, monorail, bus and urban transportation solutions under the Logistics Engineering division. The business of this division is carried out by Scomis Second Board listed subsidiary, Scomi Engineering Bhd (Scomi Engineering).
ENERGY & LOGISTICS

The Energy Engineering (EE) business remained the major turnover driver, growing by 35% and contributing 64% to the overall Energy & Logistics Engineering divisions turnover. EE business growth was primarily attributed to the recurring orders it received from its client in Saudi Arabia. The Logistics Engineering (LE) business posted a notable 111% growth
Turnover for this division increased by 55% in the financial year under review. (For the purpose of comparison, the financial results of the Scomi Engineering group for the financial year 2005 are calculated on a proforma basis as the different units under the division were only brought together as one division in the fourth quarter of 2005).
in turnover due to the consolidation of the results of MTrans Transportation Systems Sdn Bhd (MTrans), whose 51% equity interest acquisition by Scomi Engineering was completed in July 2006.
WHAT WAS THE REGIONAL
CONTRIBUTION TO THE
ENERGY & LOGISTICS ENGINEERING DIVISION TURNOVER?
Regionally, Singapore remained the dominant contributor to Scomi Engineerings turnover at 51% due to the exponential growth of its EE business. Malaysia, with its more complete product mix was the second highest turnover contributor at 41%. The balance turnover was contributed by operating units in the region, primarily from the EE business in Brunei, Indonesia, Thailand and Australia.
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INTERVIEW WITH THE

(CONTD.)
WHAT DOES THE FOR THE ENERGY & LOGISTICS ENGINEERING DIVISION?
FUTURE HOLD
the global market. With the rising need for viable, high quality and cost-efficient urban transportation solutions globally, Scomi Engineering is well positioned, both in capability and presence, to seize opportunities and to realise value for itself. We expect to introduce our enhanced monorail technology within the year, while active marketing for this product has already kicked-off both locally and globally. The bus manufacturing business also shows increased demand in both the local and international market. In Malaysia, the Rapid KL bus model and operations (under Rangkaian Pengangkutan Integrasi Deras Sdn Bhd, a company under Ministry of Finance Incorporated) that manages all LRT and bus operations, has prompted other bus operators to emulate similar initiatives of introducing newer and more modern buses, via a replacement programme. This certainly opens up opportunities for Scomi Engineerings bus manufacturing business locally. In terms of exports, Macau has been added to our list of current customers from Hong Kong, Cyprus and Bangladesh. Another product line under the LE business is the manufacture
We are confident of the divisions ability to expand its business especially with the various technologies that it owns within its businesses. We will focus on the Asian region as well as the Middle East markets. Having increased our product range with the addition of urban transportation solutions to our portfolio (via MTrans), we are confident of entering new market niches and garnering market share. The EE unit is growing via capacity expansion and product range enhancement. Existing locations are expanding by introducing new services and technology. In line with this, our Singapore machine shop expanded its facilities in December 2006 whilst the Labuan plant is currently expanding its capacity. Brunei, on the other hand, is introducing additional enhanced ser vices such as hard-banding and tubular inspection. We believe these are steps forward to increasing the competitiveness of these facilities. The unit is also expanding its market presence and has commenced operations in Irian Jaya in May 2007. Plans are also underway to start up an operations in Saudi Arabia and Sakhalin Island during the year 2007. The contribution from the logistics engineering unit is expected to be more significant in 2007, with the addition of MTrans to its stable. Scomi Engineering has invested significantly to embark on intensive research and development for its monorail technology. This is in line with its strategy of acquiring and enhancing technology to make it relevant and competitive in
of defence vehicles. During the year under review, Scomi Engineering signed technical collaboration agreements with French based Nexter (formerly known as GIAT) and a Korean company Doosan Infracore Inc. These technical and manufacturing collaborations are anticipated to show major progress next year when a range of wheeled armoured vehicles is marketed in the region.
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HOW DOES THE PRODUCTION ENHANCEMENT DIVISION FIT INTO THE
OVERALL STRATEGY
OF THE ORGANISATION?
The Production Enhancement (PE) division comprises two business units: the industrial and production chemicals business, and the gas business. Its industrial and production chemicals business deals with the supply of chemicals as well as support services for the downstream and upstream oil and gas industry. The gas business is today involved in the carbon dioxide (CO2) separation from natural gas production, enhanced oil recovery (EOR) for mature fields, and oil/water treatment systems. The PE division is currently a relatively small contributor to the Groups financial performance, constituting only 3% of the Groups turnover. Nonetheless, it has been clearly identified as the future growth area for the Group as seen in its 105% increase in turnover. This growth was due to increased sales from the Industrial Chemicals and the acquisition of Anticor Chimie S.A, France (Anticor), a company based in France, which was completed on 31st August 2006.
WHAT HAVE TAKEN PLACE ON THE PRODUCTION ENHANCEMENT FRONT?

Scomi has bought an 80% equity interest in French company Anticor, known for its strong research and development facility for Production Chemicals. The remaining 20% interest will be acquired in the next three years. With the technological advancements made through this acquisition, we have embarked on an extensive global marketing plan. The strategy is to leverage on the current market presence of the Group as well as established relationships in targeted countries. In addition, in July 2006, Scomi formed a joint venture with National Tank Company The joint venture company, Scomi NTC, undertakes activities primarily to build the businesses of the separation of high concentrations of naturally occurring carbon (NATCO), a company incorporated in Delaware, USA, to pursue the building of oilfield production equipment business, including EOR and gas conditioning facilities in South East Asia. NATCO is a global market leader in the design, fabrication and supply of packaged/modular process equipment with a portfolio of proprietary production equipment technology. These technological acquisitions and collaboration will ensure access to proprietary production equipment technology and the R&D capability while maintaining our relevance in the industry sectors we serve. dioxide CO2 from natural gas production, EOR for mature fields, and oil/water treatment systems. The business will utilise NATCOs proprietary oilfield production equipment technology developed for the industry which includes the membrane separation system, Cynara membrane technology.
DEVELOPMENTS
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INTERVIEW WITH THE

(CONTD.)
HOW DID THE
ENERGY LOGISTICS BUSINESS FARE?

Our Energy Logistics (EL) business, carried out under our 42.7%-owned associate company Scomi Marine Bhd (Scomi Marine), is focused on two sectors, namely Marine Logistics services (ML), and Offshore Support services (OSS). Today, Scomi Marine owns and operates one of the largest fleets in South East Asia with a market presence in Malaysia, Singapore, Indonesia, Thailand, Australia, UAE, Qatar, and Saudi Arabia. The ML business, provides marine transportation services to major coal producers a very critical function within the coal supply chain as well as inbound and outbound logistics services and port and terminal management services. Presently, it has a footprint in Indonesia, where we serve two of the largest coal producers there. The OSS business provides vessels for offshore oil and gas activities such as seismic surveys, rig towing, anchor handling, positioning and mooring of drilling rigs, fire fighting, general transportation and maintenance, offshore accommodation, and offshore construction. For FY 2006, turnover grew by 118% to RM511 million over FY 2005 (that included the jewellery business disposed off during the year). The ML business generated 87% of turnover, while the OSS business contributed the remaining 13%.
21
WITH ALL THE UNCERTAINTY IN ENERGY PRICES, ARE YOU ABOUT ENERGY LOGISTICS FUTURE PROSPECTS?
With the demand for coal increasing, we are well positioned to leverage on our presence in the South East Asia region. Coal consumption in Emerging Asia is expected to double by year 2030 with rising commissioning of coal-fired power plants and strong consumption by China and India. The reflagging of 27 vessels from the ML unit to our Indonesian subsidiary in September 2006 is expected to improve cost efficiency going forward. The exercise was undertaken to address the increased port charges by the Indonesian authority on foreign flagged vessels and to prepare ourselves for the imposition of the countrys Cabotage ruling. We are also ready to tap the potential offered by the increase in global oil and gas exploration and production activities, especially deepwater activities. The purchase of six new and higher powered Anchor Handling Tug Supply (AHTS) vessels by our 29.07% associate company, CH Offshore Limited to be delivered between 2008 and 2010, in addition to the newly delivered AHTS vessel, the Tourmaline, will see the expansion of our fleets deepwater capabilities. This increased capability makes us more competitive to capture market presence especially in the South East Asia, Asia Pacific and Middle East regions. With the tight supply of larger and high powered vessels such as the AHTS in the South East Asian region, rates (especially for this upper market segment) are steadily firming up and are expected to remain attractive.
OPTIMISTIC
AS SCOMI CONTINUES TO GROW, WHAT
STRATEGIES DO YOU HAVE IN

PLACE TO OPEN DOORS FOR THE GROUP?
I believe a strong brand based on our achievements will act as forerunner. While we have grown and expanded exponentially, our target is to achieve global recognition. For this we need best in class products, services and operations to compete effectively with other global players. In preparing us to move into this global recognition phase, we have embarked on a lifetime commitment of building a strong Scomi brand. In early 2006, the Group commenced on a branding exercise to define our business and to develop a brand platform for the group. We first did a brand audit with appointed consultants to ascertain the issues facing the Scomi brand. This involved our internal and external stakeholders from employees to Directors, shareholders, partners, suppliers and customers. From there we developed and adopted the masterbrand platform and architecture that would drive our Scomi brand.
22
INTERVIEW WITH THE

(CONTD.)
HOW WOULD YOU DESCRIBE THE
SCOMI BRAND?
In branding Scomi, we aspire to provide our customers a streamlined promise and experience, irrespective of location, business, industr y segment and operational size. In achieving this, streamlining is approached through two key elements of our brand which are in form and substance. In form, the masterbrand Scomi is used throughout the organisation to give the visual association of our operations and businesses thus building equity in the brand. All subsidiary companies will incorporate Scomi as part of their names and adopt a single Scomi logo throughout the organisation. This process is currently ongoing and is expected to complete in 2007. We believe that this streamlining in form will result in a better understanding of our products, services and offerings. Project BEST identified the gap in our In substance, Scomis brand vision is Realising Potential, supported by four brand attributes and four brand values. This encapsulates everything that Scomi stands for, as we can proudly say we are among the few Malaysian companies with a global presence and a diversified cosmopolitan team who can offer a dynamic partnership. Scomi also aims to be a partner of choice giving the oppor tunity for a par tnership that unlocks potential and creates value both for our partners and ourselves. We are very optimistic of our brand and believe that it will become a powerful platform to unite all the businesses and staff within the group into one group, one name, one brand Scomi thus allowing the Group and all employees to Realise Potential. It will be the platform to shape our corporate culture with common values and aspiration. We are now in the second phase of Project BEST which is the execution of the initiatives identified. Our target is that all of the initiatives identified in the blueprint will be executed and completed within the next three years. processes vis a vis best practices, and identified initiatives to transform and adopt these best practices. A third par ty professional consulting firm was appointed to undertake the first phase of the Project BEST which started from September 2006 until Februar y 2007. The first phase provided us with the blueprint for Scomis overall transformation needs in five key streams sales and marketing, operations, finance, human resource and information technology. We have also embarked on an initiative to improve our ability to attract, retain and continuously motivate key talents to deliver our business goals. Towards this end, we have taken steps to ensure that our global talents are competitively rewarded based on their competencies, relevant to the set business strategies. The MTP, on the other hand, is an 18-month programme for high potential graduates with the right attitude and all-rounded skills. The programme is aimed at building certain key competencies in the participants, for them to perform better in their specific line of work.
HOW WILL YOU
HUMAN RESOURCE DEVELOPMENT

To prepare the organisation for the planned transformation, we embarked on a talent management programme for fresh graduates and middle management level, via a Management Development Program (MDP) and Management Trainee Program
ACTION
THIS INTERNALLY?
TRANSFORMATION INITIATIVE
In line with Scomis brand architecture, there is a need for an internal alignment of our processes. To increase efficiency and improve performance, we embarked on a transformation project codenamed Project BEST (Business Excellence for Scomis Transformation).
(MTP). The MDP aims to equip middle management with an enhanced understanding of business and management skills over a three year period. This programme will also address succession planning within the organisation in order to sustain the company for continuous improvement and exponential growth. The inaugural MDP commenced in March 2007 with 19 participants mainly from the Asia region.
23
SCOMI HAS
GROWN EXPONENTIALLY.
HOW DO YOU PLAN TO STAY ON TOP?
FOCUS FOR 2007

Within the organisation, we recognise that we need to consolidate ourselves and align the Group internally to make it sustainable for the long term. As such, I have set forth key focus areas for the year 2007 that need to be micro-focused upon by all operating units within the group to keep the company on track and to strengthen the foundation to support our future growth. Financial Management to achieve better aligned growth in terms of top and bottom-line results, better returns as measured by Return On Equity (ROE) and Return On Capital Employed (ROCE) and stronger financial position via more disciplined financial and cost efficiency management, cash management and debt refinancing and restructuring processes; Customer Focus by streamlining our global customer management, aligning products across all lines of business, establishing a marketing function for the group and improving corporate communications; Process Efficiency via improved operational processes, market strategies and realignment of businesses. Human Capital Development by focusing on a competency-based framework, talent management and improving employees structure.
24
INTERVIEW WITH THE

(CONTD.)
WHAT
POTENTIAL CHALLENGES AND RISKS DO YOU
ANTICIPATE COMING UP AGAINST IN 2007?

As per our internal analysis, the Ringgit/USD exchange rate in 2006 averaged RM3.68. At the time of writing, the Ringgit level strengthened to RM3.45 or by 6.7% (as at 9th April 2007). Given that majority of our turnover, especially those of our oilfield services, are derived in USD, the growth is likely to be lower when translated into Ringgit denomination. While this may be out of our control, it is essential that we continue to strive for a respectable organic growth for our businesses, obtain a better pricing or project margin for our products and services and continue to diversify our businesses.
WHAT DOES YOUR
GROWTH STRATEGY FOR 2007 ENTAIL?

Environmental orientation by
focusing on new and innovative product solutions that are environmental-friendly, addressing the increased environmental awareness and legislation. We are confident that as we accelerate on our journey to transformation, the organisation will prepare itself adequately to embrace change. We are confident that we will grow all our businesses organically and will make a conscious effort to build a strong brand in the via market domestic and global markets. To further expand our footprint, we will identify our key targets and emerging markets by geography, by client and industry. We are committed to meeting the goals and strategies which have been formulated and will set our sights on achieving global recognition as an effective global competitor.
While we continue to enhance our internal processes and align ourselves across the globe, we are also building upon our growth strategy which centres on three broad focus areas:
Technological
innovation
by
Global
expansion
leveraging on the invested technology and automation of processes for enhanced and optimal product solutions as well as improved process efficiency and informed decision making.
segregation and penetration as well as leveraging on existing infrastructure to gain further growth momentum and recognition.
25
WHAT DO YOU NEED TO ENSURE YOUR
INITIATIVES
GET OFF THE GROUND EFFECTIVELY?
With the start of the business transformation project to support the brand development initiative for the next 24 to 30 months, the real challenge from hereon will be for us to adopt a new and improved culture and to implement viable solutions. All these efforts will be consciously and relentlessly undertaken with the awareness that we want to become a company that can effectively operate anywhere in the world and compete with the best in class, irrespective of business and turnover. I seek the support of all involved management, employees, stakeholders, business partners and clients to help us embrace this change and to realise our transformation in building a strong Scomi brand. Our transformation initiatives at the operational or shareholding levels, will position the Group as a company with quality earnings and will ultimately maximise shareholders value. I thank all our stakeholders, internal and external, for the confidence you have and continue to have in the Company. We on our part will do our utmost to tap opportunities within and outside our organisation to realise the best value for you.
Shah Hakim Zain

Group Chief Executive Officer
26
CORPORATE
INFORMATION
DIRECTORS
Tan Sri Datuk Asmat bin Kamaludin (Chairman) Tan Sri Nik Mohamed bin Nik Yaacob Datuk Hamzah bin Bakar Datuk Haron bin Siraj Dato Mohammed Azlan bin Hashim Dato Mohamed Azman bin Yahya Foong Choong Hong Sreesanthan a/l Eliathamby Shah Hakim @ Shahzanim bin Zain
OPTIONS COMMITTEE
Datuk Hamzah bin Bakar (Chairman) Datuk Haron bin Siraj Shah Hakim @ Shahzanim bin Zain (appointed w.e.f. 22nd March 2007)
NOMINATION AND REMUNERATION COMMITTEE

(formed on 11th May 2007) Tan Sri Datuk Asmat bin Kamaludin (Chairman) Dato Mohamed Azman bin Yahya Datuk Hamzah bin Bakar
AUDIT AND RISK MANAGEMENT COMMITTEE

(formed on 9th November 2006) Dato Mohammed Azlan bin Hashim (Chairman) Tan Sri Nik Mohamed bin Nik Yaacob Foong Choong Hong Sreesanthan a/l Eliathamby
27
REGISTERED OFFICE
Suite 5.03, 5th Floor Wisma Chase Perdana Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur Tel Fax : 603 2080 5080 : 603 7490 5131/2080 5131
ADVOCATES & SOLICITORS

Albar & Partners Advocates & Solicitors 6th Floor, Faber Imperial Court Jalan Sultan Ismail 50250 Kuala Lumpur Malaysia
PRINCIPAL BANKERS
CIMB Bank Berhad (formerly known as BumiputraCommerce Bank Berhad) Lot P5.5, Persiaran Perbandaran Bangunan UMNO Section 14 40000 Shah Alam Selangor Darul Ehsan
ADMINISTRATIVE AND CORRESPONDENCE ADDRESS

Suite 5.03, 5th Floor Wisma Chase Perdana Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur Malaysia Tel Fax Website Email : 603 2080 5080 : 603 7490 5131/2080 5131 : www.scomigroup.com.my : info@scomigroup.com.my
COMPANY SECRETARIES
Chong Mei Yan (MAICSA 7047707) Kuok Yew Lee (MAICSA 7052080)
Malaysia HSBC Bank Malaysia Berhad 2nd Floor, Leboh Ampang 50100 Kuala Lumpur Malaysia
AUDITORS
PricewaterhouseCoopers (AF: 1146) Chartered Accountants 11th Floor, Wisma Sime Darby Jalan Raja Laut P.O.Box 10192 50706 Kuala Lumpur Malaysia
STOCK EXCHANGE LISTING

Main Board of Bursa Malaysia Securities Berhad Stock Name: Scomi Stock Code: 7158
REGISTRAR
Symphony Share Registrars Sdn Bhd Level 26, Menara Multi-Purpose Capital Square No 8 Jalan Munshi Abdullah 50100 Kuala Lumpur Malaysia Tel Fax : 603 2721 2222 : 603 2721 2530/31
CURRENCY
Ringgit Malaysia (RM)
28
PROFILE OF
DIRECTORS
Tan Sri Nik Mohamed bin Nik Yaacob
Datuk Hamzah bin Bakar

YBhg Tan Sri Datuk Asmat, 63, a Malaysian, is an Independent Non-Executive Director and the Chairman of SGB. He was appointed to the Board on 3rd March 2003. YBhg Tan Sri Datuk Asmat holds a Bachelor of Ar ts (Honours) degree in Economics from the University of Malaya, and he also holds a Diploma in European Economic Integration from the University of Amsterdam. YBhg Tan Sri Datuk Asmat has vast experience in various capacities in the public service and his last position was as the Secretary-General of the Ministry of International Trade and Industry, a position he held from 1992 to 2001. He has served as Economic Counsellor for Malaysia in Brussels and has worked with several international bodies such as ASEAN, World Trade Organisation and the Asia-Pacific Economic Co-operation, representing Malaysia in relevant negotiations and agreements. YB hg Tan Sri Datuk Asmat has also been actively involved in several national organisations such as Permodalan Nasional B hd, Johor Corporation, the Small and Medium Scale Industries Corporation (SMIDEC) and the Malaysia External Trade Development Co-operation (MATRADE) while in the Malaysian Government service. Other Malaysian public companies in which he is a director are UMW Holdings Berhad, Y TL Cement Berhad, Permodalan Nasional Bhd, Malaysian Pacific Industries Bhd, Carlsberg Brewer y Malaysia B hd, Lion Industries Corporation Berhad, Panasonic Manufacturing Malaysia Berhad, Symphony House B hd, Salwan Corporation Berhad, Trans-Asia Shipping Corporation Berhad and Compugates Holdings Berhad. He also serves on the Board of JACTIM Foundation. YBhg Tan Sri Datuk Asmat is a member of, and chairs the Nomination and Remuneration Committee of the Board. He attended all of the 7 Board Meetings held in the year ended 31st December 2006.
29
Tan Sri Nik Mohamed bin Nik Yaacob

YBhg Tan Sri Nik Mohamed, 57, a Malaysian, is an Independent Non-Executive Director of SGB and was appointed to the Board on 13th July 2004. YBhg Tan Sri Nik Mohamed holds an Engineering Degree from Monash University and a Masters in Business Management from the Asian Institute of Management. He served as the Group Chief Executive of Sime Darby Berhad from 1993 until his retirement in June 2004, and also served on the Boards of many of the Sime Darby group companies during this time. Other Malaysian public companies in which he is a director are Perbadanan Nasional Berhad, GuocoLand (Malaysia) Berhad, Bolton Berhad, Scomi Marine Bhd and Supercomal Technologies Berhad. YBhg Tan Sri Nik Mohamed is also the Executive Director of Yayasan Kepimpinan Perdana (Perdana Leadership Foundation). YBhg Tan Sri Nik Mohamed is a member of the Audit and Risk Management Committee of the Board. He attended all of the 7 Board Meetings held in the year ended 31st December 2006.

YBhg Datuk Hamzah, 63, a Malaysian, is an Independent Non-Executive Director of SGB and was appointed to the Board on 17th March 2003. YBhg Datuk Hamzah holds a Bachelor of Science with Honours in Economics from The Queens University of Belfast, United Kingdom, and a Masters Degree in Public Policy and Administration from the University of Wisconsin, Madison, United States of America. He was previously attached to the Economic Planning Unit of the Prime Ministers Department where he ser ved in various positions within that department for 12 years. Thereafter, he joined the Petroliam Nasional Berhad group of companies where he served for 20 years until his retirement in June 2000. Other Malaysian public companies in which he is a director are Bumiputra-Commerce Holdings Berhad, SapuraCrest Petroleum Berhad and CIMB Investment Bank Berhad (formerly known as Commerce International Merchant Bankers Berhad). YBhg Datuk Hamzah is a member of the Nomination and Remuneration Committee, and is the Chairman of the Options Committee of the Board. He attended 5 out of the 7 Board Meetings held in the year ended 31st December 2006.
30
PROFILE OF
DIRECTORS
(CONTD.)
Datuk Haron bin Siraj
Dato Mohamed Azman bin Yahya
Dato Mohammed Azlan bin Hashim

YB hg Datuk Haron, 62, a Malaysian, is an Independent Non-Executive Director of SGB and was appointed to the Board on 17th March 2003. YB hg Datuk Haron graduated from the University of Manchester, United Kingdom, with a Bachelor of Arts with Honours in Economics, and also holds a Masters Degree in Development Economics from Williams College, United States of America. YBhg Datuk Haron started his career as an Assistant Controller with the Ministry of Commerce and Industry. He subsequently served as the Principal Assistant Secretary, and later as the Under Secretary, in the Ministry of Primary Industries until 1980. Subsequently, he served as the Minister Counsellor (Economic Affairs) of the Permanent Mission of Malaysia in Geneva, Switzerland, and returned to Malaysia to join the Ministr y of International Trade and Industr y, holding various directorship positions, and was later appointed as Deputy Secretary-General (Trade) in 1990. YBhg Datuk Haron subsequently served as Permanent Representative of Malaysia to the United Nations and other International Organisations (including the GAT T and the W TO) and Specialised Agencies in Geneva, Switzerland from September 1992 to December 1996. On his return, he was appointed as the SecretaryGeneral of the Ministry of Primary Industries where he served until 2000. He served as the Chief Executive Officer of the Malaysian Palm Oil Promotion Council from 2000 until his retirement in January 2006. Other Malaysian public companies in which he is a director are Kulim (Malaysia) Berhad, Jerneh Asia Berhad and Jerneh Insurance Berhad. YBhg Datuk Haron was the chairman of Audit Committee of the Board until 9th November 2006. YBhg Datuk Haron is a member of the Options Committee of the Board. He attended all of the 7 Board Meetings held in the year ended 31st December 2006.
31

YBhg Dato Azman, 43, a Malaysian, is a NonIndependent Non-Executive Director of SGB and was appointed to the Board on 17th March 2003. YBhg Dato Azman holds a First Class Honours Degree in Economics from the London School of Economics and Political Science and is a member of the Institute of Chartered Accountants in England and Wales, the Malaysian Institute of Accountants and a Fellow of the Malaysian Institute of Banks. YBhg Dato Azman is the director and group chief executive of Symphony House Berhad and Bolton Berhad. Prior to this, YBhg Dato Azman was appointed by the Government of Malaysia in 1998 to set-up and head Danaharta Nasional Berhad and subsequently became its chairman until 2003. He was also the Chairman of the Corporate Debt Restructuring Committee until its closure in 2002. His previous career appointments include auditing with KPMG in London, finance with the Island & Peninsular Group and investment banking with Bumiputra Merchant Bankers and Amanah Merchant Bank, the latter as Chief Executive. Outside his professional engagement, YBhg Dato Azman is active in public service. He sits on the boards of a number of Government Linked Corporations namely Khazanah Nasional Berhad, Malaysia Airline Systems Berhad, PLUS Expressways Berhad and Pharmaniaga Berhad. YBhg Dato Azman also serves as a member of the Bursa Malaysia Securities Market Consultative Panel, the National Council for Scientific Research and Development and the National Innovation Council. He holds the post of Adjunct Professor at the International Islamic University Management Centre, the Chairman of Motorsports Commission of Malaysia and is a director of the Kuala Lumpur Business Club. YB hg Dato Azman is a member of the Nomination and Remuneration Committee of the Board. He attended 6 out of the 7 Board Meetings held in the year ended 31st December 2006.

YBhg Dato Azlan, 50, a Malaysian, is an Independent Non-Executive Director of SGB and was appointed to the Board on 13th July 2004. YBhg Dato Azlan graduated with a Bachelor of Economics from Monash University in 1978, and has had extensive experience in the corporate sector. YBhg Dato Azlan is the Chairman of PROTON Holdings Berhad and D & O Ventures Berhad. He also serves as a Non-Executive Director of various government and non-government related entities including Khazanah Nasional Berhad, Employees Provident Fund, Malaysian IndustryGovernment Group For High Technology, Labuan Offshore Financial Services Authority Malaysia, Golden Pharos Berhad and PECD Berhad. He has served in various capacities in the financial services industry and investment holding companies, including as Chief Executive/Executive Director Bumiputra-Merchant Bankers Berhad, Group Managing Director Amanah Capital Malaysia Berhad and Executive Chairman Kuala Lumpur Stock Exchange and its group. He has also served on various government bodies, including Finance Committee on Corporate Governance, the Second National Economic Consultative Council and Financial Reporting Foundation. YBhg Dato Azlan chairs the Audit and Risk Management Committee of the Board. He attended all of the 7 Board Meetings held in the year ended 31st December 2006.
32
PROFILE OF
DIRECTORS
(CONTD.)
Foong Choong Hong
Sreesanthan a/l Eliathamby
Shah Hakim bin Zain
Foong Choong Hong

Mr Foong, 46, a Malaysian, is a NonIndependent Non-Executive Director of SGB and was appointed to the Board on 17th March 2003. Mr Foong holds a postgraduate degree in Management Studies majoring in Finance, from Middlesex University, United Kingdom. He also holds a Masters in Business Administration from the Irish International University. Mr Foong star ted his career with Rober t Fleming Merchant Bank in the United Kingdom as a Economist responsible for South-East Asian markets and as an adviser for European and British pension funds and insurance companies on investments in South-East Asia and the Far East. Mr Foong returned to Malaysia to develop a joint venture company with Powers Supermarkets (UK), a then wholly-owned unit of Associated British Foods public listed company, to develop a Far Eastern sourcing house based in Malaysia. Mr Foong is a Certified Financial Planner and also a fellow of the Char tered Management Institute (UK). He also plays an advisory role in the Investment Committee of several multinational companies for the identification of investments and development of business opportunities. He is currently the Managing Director of Asian Asset Group Sdn Bhd and a director of Asian Asset Management Sdn Bhd. Mr Foong is a member of the Audit and Risk Management Committee of the Board. He attended 6 out of the 7 Board Meetings held in the year ended 31st December 2006.
33
Sreesanthan a/l Eliathamby

Mr Sreesanthan, 46, a Malaysian, is an Independent Non-Executive Director of SGB and was appointed to the Board on 18th April 2006. Mr Sreesanthan obtained his undergraduate law degree from the University of Malaya and his post graduate degree in law from the University of Oxford, United Kingdom. Mr Sreesanthan is an Advocate & Solicitor and a Partner with the legal firm of Messrs. Kadir, Andri & Partners. He was formerly a Legal Assistant and later a Partner with the legal firm of Messrs. Zain & Co. Subsequent to that, he was a Partner in the legal firm of Messrs. Zul Rafique & Partners. Mr Sreesanthan is also a member of the Investment Committee of Amanah Saham Wawasan 2020, an accredited mediator of the Malaysian Mediation Centre, a member of the Bursa Malaysia Central Depository Advisory Committee and a member of the Investigating Tribunal Panel of the Advocates and Solicitors Disciplinary Board. He currently sits on the Board of Chemical Company of Malaysia Berhad. Mr Sreesanthan is a member of the Audit and Risk Committee of the Board and had attended 5 out of the 6 Board Meetings held in the year ended 31st December 2006 since his appointment.
Shah Hakim bin Zain

Encik Shah Hakim, 42, a Malaysian, is the Chief Executive Officer/Non-Independent Executive Director of SGB and was appointed to the Board on 3rd March 2003. Encik Shah Hakim started his career as an auditor with Ernst & Young and was subsequently promoted as Consulting Manager, responsible for servicing large corporations. He went on to be appointed as Executive Director of a regional packaging manufacturer in 1992, with direct operational responsibility. He currently sits on the Board of Sapura Industrial Berhad, Scomi Marine Bhd, Scomi Engineering Bhd and KMCOB Capital Berhad. Encik Shah Hakim is a member of the Options Committee of the Board. Encik Shah Hakim attended all of the 7 Board Meetings held in the year ended 31st December 2006.
Note: None of the Directors have any family relationship with any other Director and/or major shareholder of Scomi Group Bhd. None of the Directors are involved in any conflict of interest, or any personal interest in any business arrangement, involving Scomi Group Bhd. None of the Directors have been convicted for offences within the past ten years (other than traffic offences, if any).
34
EXECUTIVE
COMMITTEE
1st row from left to right:
Shah Hakim Zain Group Chief Executive Officer Loong Chun Nee Group Chief Financial Officer Chuah Mei Lin Head Legal & Group Internal Compliance Division Rohaida Ali Badaruddin Head Corporate Services Division
2nd row from left to right:
Chris Pianca President Oilfield Services Division Hilmy Zaini Zainal SVP Energy & Logistics Engineering Division Mukhnizam Mahmud CFO Energy Logistics Division
35
CORPORATE GOVERNANCE
36-43
STATEMENT
INTERNAL CONTROL
44-45
STATEMENT
AUDIT AND RISK MANAGEMENT

46-50
COMMITTEE REPORT
ADDITIONAL
51-53
INFORMATION
DIRECTORS RESPONSIBILITY
54
STATEMENT
36
STATEMENT
The Board recognises that good corporate governance practices create an effective and
GOVERNANCE IS THE SYSTEM BY WHICH THE COMPANYS OWNERS AND ITS REPRESENTATIVES ON THE BOARD ENSURE THAT IT PURSUES, DOES NOT DEVIATE FROM AND ONLY ALLOCATES RESOURCES TO, ITS DEFINED PURPOSE.
responsible organisation and that collectively, they are not an exercise in compliance. To promote and nurture the highest standards of corporate governance within the Group, the Board has put in place a framework designed to build sustainable financial performance and at the same time, ensure that there is sufficient and credible transparency, integrity and accountability in its operations. The goal is to ensure that the
The Board of Directors of Scomi Group Bhd (the Board) is committed to the highest level of governance and strives to foster a culture that values ethical standards, social responsibilities, personal and corporate integrity, and respect for others, in pursuit of its Corporate Vision. This approach to governance is based on the belief that there are linkages between high-quality governance and the creation of shareholder (partner) value.
Group is in the forefront of good governance and is recognised as an exemplar y organisation in this respect. The Board is committed to ensuring that the Principles and Best Practices as set out in the Malaysian Code of Corporate Governance (the Code) are applied to the Group and the Board is pleased to state how the Group has continued to apply the Principles and complied in all material respects with the Best Practices of the Code during the financial year ended 31st December 2006.
37
THE BOARD OF DIRECTORS

An effective Board leads and controls the Group. The Board meets at a minimum of six (6) times a year, with special meetings convened when necessary. The Board is primarily responsible to set the overall corporate goals of the Group and to map the medium and long term strategic plans on an annual basis. Timely and periodic review of the Groups performance and implementation of the managements action plans are conducted by the Board to assess the progress made towards achieving the overall goals of the Group. The Board currently consists of the Chairman and eight (8) Members. The composition of the Board reflects a diversity of backgrounds, skills and experiences in the areas of business, economics, finance, legal, general management and strategy that has contributed effectively in leading and directing the Group. A brief description of the background of each Director is contained within the Profile of Directors section as set out on pages 28 to 33 of the Annual Report. The Board is of the opinion that its current composition and size constitute an effective Board to the Group. Furthermore, the strong representation of high calibre Independent Non-Executive Directors, being a majority of the Board, provides the necessary balance. Although all the Directors have an equal responsibility for the Groups operations, the role of these Independent Non-Executive Directors is particularly important in ensuring that the strategies proposed by Management are fully discussed and deliberated, and the
long term interests of the shareholders, employees, customers, suppliers, and the many communities in which the Group conducts its businesses are taken into account. There is also separate and clear division of responsibilities between the Chairman and the Group Chief Executive Officer (CEO). Each has a clear scope of duties and responsibilities that ensure the balance of power and authority. The Chairman is responsible for ensuring the Boards effectiveness and conduct whilst the CEO has overall responsibility for the operational and business units, organisational effectiveness and implementation of Board policies, directives, strategies and decisions. In addition, the Nomination Committee periodically reviews the CEOs Balanced Scorecard, which is an effective tool for performance monitoring and assessment of the CEOs performance. The Board has also delegated specific responsibilities to five (5) Committees of the Board (Audit, Nomination, Remuneration, Options and Risk Management Committees). During the year, the Board had decided to merge the Audit and the Risk Management Committees. The Board is of the view that the combined role will provide the Audit and Risk Management Committee with a holistic view of the risks and controls of the Group and enhance the effectiveness of the Committee in assessing the relevance and effectiveness of the implemented internal controls and ensure that key risks are adequately mitigated.
38
STATEMENT
(CONTD.)
Composition of the Board and its Committees are as follows: Audit and Risk Management Committee (with effect from 9th Nov 2006) Audit Committee (dissolved on 9th Nov 2006) Risk Management Committee (dissolved on 9th Nov 2006)
Chairman Tan Sri Datuk Asmat bin Kamaludin (Independent Non-Executive Director) Independent Non-Executive Directors Tan Sri Nik Mohamed bin Nik Yaacob Dato Mohammed Azlan bin Hashim Datuk Haron bin Siraj Datuk Hamzah bin Bakar Sreesanthan a/l Eliathamby (appointed on 18th April 2006) Non-Independent Non-Executive Directors Dato Mohamed Azman bin Yahya Foong Choong Hong Mukhnizam bin Mahmud (resigned on 18th April 2006) CEO/Non-Independent Executive Director Shah Hakim @ Shahzanim bin Zain C Chairman Note:
1
M M M M M
M C M
C M
M C M
M C
M M M
M1
M Member
Appointed a member of the Options Committee on 22nd March 2007
Options Committee
Board of Directors
Remuneration Committee
Nomination Committee
39
BOARD MEETINGS & SUPPLY OF INFORMATION

During the financial year ended 31st December 2006, seven (7) Board Meetings were held (one of which was Special). The attendance records of the Directors, together with their attendance at Committee meetings are: Audit Committee (dissolved on 9th Nov 2006) Risk Management Committee (dissolved on 9th Nov 2006)
Audit and Risk Management Committee (formed on 9th Nov 2006)
Tan Sri Datuk Asmat bin Kamaludin Tan Sri Nik Mohamed bin Nik Yaacob Dato Mohamed Azman bin Yahya Dato Mohammed Azlan bin Hashim Datuk Haron bin Siraj Datuk Hamzah bin Bakar Foong Choong Hong Mukhnizam bin Mahmud (resigned on 18th April 2006) Sreesanthan a/l Eliathamby (appointed on 18th April 2006) Shah Hakim @ Shahzanim bin Zain
7/7 7/7 6/7 7/7 7/7 5/7 6/7
4/4 4/4
1/1 1/1 1/1
1/1 1/1 1/1
2/2 2/2 2/2
1/1 1/1 1/1
1/1 1/1
1/1
2/2
1/1
5/6 7/7
1/2
1/1
All Directors are provided with a set of Board Papers prior to each meeting. The Board Papers, which include the agenda of the meeting, are issued in sufficient time prior to the meeting to enable the Directors to review the matters to be deliberated and to participate in the discussions during the meetings.
Options Committee
Board Meeting
Remuneration Committee
Nomination Committee
40
STATEMENT
(CONTD.)
APPOINTMENT TO THE BOARD

The proposed appointment of new Board Members and the proposed re-election of existing Directors are reviewed and assessed by the Nomination Committee. Thereafter, the Nomination Committee on submits its recommendation Board for approval. The primar y role of the Nomination Committee is to review the required mix of skills, experience and attributes on the Board and the composition of the Board. The Nomination Committee is additionally responsible for evaluating individual Director s per formance for the previous financial year. The CEOs Balance Scorecard for 2006 is reviewed by the Committee before it is tabled for approval by the Board. During the financial year ended the proposed
The Nomination Committee comprises three (3) Non-Executive Directors, a majority of whom are Independent. The Nomination Committee meets as and when required, and at least once every financial year. The salient terms of reference of the Nomination Committee are as follows:
To review and assess the training needs of individual Directors and to propose suitable training programmes to be attended
To assist in developing the CEOs mission and objectives, succession for the CEO and annual evaluation of CEOs performance
appointment or re-election of Directors to the
To recommend to the Board potential candidates for directorships or Board Committee seats
To conduct annual review of the required mix and experience and other qualities, including core competencies which NonExecutive Directors should bring to the Board
DIRECTORS CONTINUING EDUCATION

All members of the Board have attended the Mandatory Accreditation Programme as required under the Listing Requirements of Bursa Malaysia Securities Berhad. During the financial year ended
To review the annual assessment of the effectiveness of the Board as a whole, the Board Committees and the contributions of individual Directors
31st December 2006, the Directors attended various training programmes, conferences, seminars and courses organised by the relevant Groups regulator y business, authorities directors and roles, professional bodies on areas relevant to the responsibilities, effectiveness and corporate governance issues.
31st December 2006, Encik Mukhnizam bin Mahmud resigned from the Board and Mr Sreesanthan a/l Eliathamby was appointed to the Board. In accordance with Article 89 of the Company s Ar ticles of Association, Mr Sreesanthan a/l Eliathamby had retired from the Board and was re-elected by the shareholders during the 4th Annual General Meeting of the Company held on 28th June 2006. Additionally, at the same Annual General Meeting, three (3) directors had retired in accordance with Article 82 of the Companys Articles of Association, and were re-elected by the shareholders. The Directors who were re-elected were: Dato Mohamed Azman bin Yahya Foong Choong Hong Shah Hakim @ Shahzanim bin Zain

To examine the size of the Board with a view to present recommendations to the Board on the optimum number of Directors to ensure its effectiveness To ensure new appointees to the Board undergo orientation and education programmes To review Board Succession Plans, minimum once a year, to maintain an appropriate balance of skills, experience and exper tise on the Board and to provide advice to the Board accordingly To make recommendations to the Board concerning the re-election of Directors under the retirement by rotation provisions in the Companys Articles of Association
DIRECTORS REMUNERATION
The Remuneration Committee carries out the annual review of the overall remuneration policy for Directors, CEO and key Senior Management Officers and recommendations are submitted to the Board for approval. The Remuneration Committee is also responsible for a fair and transparent remuneration policy framework such that the Group can attract, retain and motivate high quality individuals to manage its business and other key areas of the Groups operations.
41
The remuneration of the Executive Director comprises principally salar y and other benefits, taking into consideration market rates and practices. Additionally, he is entitled to options under the Groups Employees Share Option Scheme, which are exercisable based on overall per formance of the Executive Director in achieving the set targets.
The Non-Executive Directors remuneration is based on standard agreed fees, in addition to allowances for attendance at Board and Board Committee meetings. The Directors are also entitled to options under the Groups Employees Share Option Scheme. All Directors who had served for the current financial year are to be paid an annual Directors fee upon shareholders approval at the 5th Annual General Meeting.
The primary objective of the Remuneration Committee is to establish, review and report to the Board on a formal and transparent procedure for developing a policy on Executive Directors remuneration and compensation of Non-Executive Directors. In addition, the Committee reviews and recommends to the Board the remuneration of the Executive Directors with the aim of attracting, retaining and motivating individuals of the highest quality needed to run the Group successfully.
The aggregate of remuneration paid to the Directors of the Group who served during the financial year, and the bands, are as follows: Executive Director (RM000) Salaries Fees Allowances Bonuses Estimated value of benefit-in-kind Total 752 22 774 Non-Executive Directors (RM000) 381.9 80.1 462 Total (RM000) 752 381.9 80.1 22 1,236
The Remuneration Committee comprises three (3) Non-Executive Directors, a majority of whom are Independent. The Remuneration Committee meets as and when required, and at least once every financial year. The salient terms of reference of the Remuneration Committee are as follows:
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 To conduct a review and thereon provide advice and recommendation to the Board on all aspects of reward structure accorded to the Executive and NonExecutive Directors in terms of the
The aggregate remuneration above is broadly categorised into the following bands: Executive Director Up to RM50,000 RM50,001 to RM100,000 RM100,001 to RM150,000 RM700,001 to RM800,000 1 Non-Executive Directors 1 7 Total 1 7
various components (basic salary, basis of increment applied, annual bonuses, directorship fee, Employees Share Option Scheme, Benefits-in-Kind and other terms of employment/directorship) To determine and agree on the Groups policy on the duration of contracts with Executive Directors, and notice periods and termination payments under such contracts, with a view to ensuring that any termination payments are fair to the
Note: 1. The fees paid were for Directors services rendered for financial year ended 31st December 2006. The fees for financial year 2006 are subject to shareholders approval at the 5th Annual General Meeting. 2. Tan Sri Nik Mohamed is Chairman of Scomi Marine Bhd; Shah Hakim is Executive Director of Scomi Marine Bhd and Scomi Engineering Bhd. Shah Hakim did not earn any fees nor remuneration from either company for the year under review.
42
STATEMENT
(CONTD.)
individual and the Group, that failure is not rewarded and the duty to mitigate loss is fully recognised
The Audit and Risk Management Committee Report, enumerating its membership, terms of reference and activities during the financial year ended 31st December 2006 is set out on pages 46 to 50 of this Annual Report.
To ensure the maximum number of new options that may be offered to an Eligible Employee and/or Person shall not exceed the limits set against their respective categories and complies to the criteria for allocation as set out in the Bye-Laws
To consider any published guidelines or recommendations regarding the remuneration of Directors of listed companies which it considers relevant or appropriate
OPTIONS COMMITTEE
The Options Committee was established with the primary objective of overseeing the administration of the Groups Employees Share Option Scheme (ESOS) in accordance with the Bye-Laws. As at the date of this report, the Options Committee comprises two (2) Independent Non-Executive Directors. The Options Committee meets as and when required, and at least once during the financial year. The salient terms of reference of the Options Committee are as follows:
To evaluate and decide on the Eligible Employees and/or Eligible Persons periodic entitlement to exercise his/their options as stipulated in the ESOS ByeLaws
AUDIT AND RISK MANAGEMENT COMMITTEE

During the financial period, the Board had decided to merge the Audit and the Risk Management Committees. The Board is of the view that the combined role will provide the Audit and Risk Management Committee with a holistic view of the risks and controls of the Group and enhance the effectiveness of the Committee in assessing the relevance and effectiveness of the implemented internal controls and ensure that key risks are adequately mitigated. The primary objective of the Audit and Risk Management Committee is to assist the Board of Directors to review the adequacy and integrity of the Groups financial administration and reporting, internal control and risk management systems including the management information system and systems for compliance with applicable laws, regulations, rules, directives and guidelines.
To make offers to Eligible Employees and/or Persons of the Group who are entitled to participate in the Scheme after taking into consideration the performance, seniority, number of years in service, employee grading and/or the potential contribution of the Eligible Employee and/or Person
To recommend to the Board of Directors, 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 Groups shareholders at a general meeting
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 ESOS ByeLaws, throughout the duration of the Scheme
AUDIT SUPPORTS THE GROUP IN ACCOMPLISHING THE GROUP S OBJEC TIVES BY BRINGING A SYSTEMATIC,
The Audit and Risk Management Committee comprises four (4) Non-Executive Directors, a majority of whom are Independent. The Audit and Risk Management Committee meets as and when required and at least four (4) times during the financial year.
DISCIPLINED APPROACH TO EVALUATE AND IMPROVE THE EFFECTIVENESS OF RISK MANAGEMENT, INTERNAL CONTROL AND GOVERNANCE PROCESSES.
43
ACCOUNTABILITY & AUDIT

Accountability to Shareholders The Board acknowledges the importance of ensuring high quality, relevant information are made available to shareholders in a timely manner to keep them abreast of all material business matters affecting the Group. Towards ensuring the effective dissemination of information, the Group maintains a Shareholders Communication and Investor Relations Policy. The Policy outlines how the Group identifies and distributes information in a timely manner to all shareholders. It also reinforces the Groups commitment to the continuous disclosure obligations imposed by law, and describes the procedures implemented to ensure compliance. Regulatory Announcements, Annual Reports, Quarterly Financial Results and other relevant information are accessible via the Groups website at www.scomigroup.com.my . Any persons wishing to receive email alerts or make any request for documents are able to do so via submission to the Groups website. Additionally, shareholders are encouraged to attend the Annual General Meeting (AGM) which is attended by the Directors and external auditors, where shareholders may raise questions, voice their concerns and vote on proposed resolutions.
Financial Reporting The Board is committed to providing a balanced and true view of its financial performance and prospects in all its reports to stakeholders and regulatory authorities. This is channelled through the audited financial statements, quarterly announcements of the Groups unaudited results as well as the Chairmans Statement and Review of Operations in the Annual Report. The Group strives to make timely releases of all result announcements and press releases to the media. In discharging its fiduciary responsibility, the Board is assisted by the Audit and Risk Management Committee to oversee the financial reporting processes and the quality of the Groups financial statements. The Statement of Responsibility by Directors in respect of the preparation of the annual audited financial statements for the financial year under review is set out on page 54 of this Annual Report.
The expanding size and geographical spread of the Group involve exposure to a wide variety of risks, the nature of these risks means that events may occur which could give rise to unanticipated or unavoidable losses. The Groups systems of internal control are designed to provide reasonable without absolute assurance against the risk of material errors, fraud or losses occurring. The Audit and Risk Management Committee meets on a regular basis to ensure that there is clear accountability for managing significant identified risks and that identified risks are satisfactorily addressed on an ongoing basis. In addition, the adequacy and effectiveness of the internal control system is also periodically reviewed by the Audit and Risk Management Committee. The Statement of Internal Control is set out on pages 44 to 45 of this Annual Report.
Relationship with Auditors The Audit and Risk Management Committee maintains appropriate, formal and transparent
Internal Control The Board acknowledges its overall responsibility for the continuous maintenance of a sound system of internal control with a view to safeguarding shareholders investment and the Groups assets.
relationship with the Groups external and internal auditors. The Committee meets the external auditor without the presence of Executive Directors or Management, whenever necessary, and at least once a year. Among the matters discussed at these meetings are the audit plan, audit findings and financial statements.
THE BOARD IS ACCOUNTABLE TO THE SHAREHOLDERS FOR THE PERFORMANCE AND ACTIVITIES OF THE GROUP. IT EMBEDS SHAREHOLDER INTEREST IN THE GOALS ESTABLISHED FOR THE GROUP.
The roles of the Audit and Risk Management Committee in relation to both the internal and external auditors are described in the Audit and Risk Management Committee report as set out on pages 46 to 50 of this Annual Report.
44
INTERNAL CONTROL
STATEMENT
INTRODUCTION
Paragraph 15.27 (b) of the Listing Requirements of Bursa Malaysia Securities Berhad requires the Board of Directors of a listed entity to include a statement on the state of internal control in the Annual Report. The Malaysian Code on Corporate The key characteristics of the Groups system of internal control are summarised below. Delegated Authority Limits, Standard Operating Procedures and Guidelines Organisation Structure The Group has an organisation structure that The Board acknowledges its responsibility for ensuring the existence of sound and effective internal control and risk management practices within the Group. The Board continuously evaluates appropriate initiatives to strengthen the transparency and efficiency of its operations taking into account the requirements for sound and appropriate internal controls and management information systems within the Group. However it should be noted that any system of internal control can only provide reasonable and not absolute assurance against material misstatement or loss, and that risks should be continuously monitored and managed. There are five Board Committees entrusted by the Board to oversee the key areas of internal audit, risk management, employees share option scheme, and the nomination and remuneration of directors. During the year, the Board had decided to merge the Audit Committee and the Risk Management Committee. The Board is of the view that the combined role will provide the Audit and Risk Management Committee with a holistic view An Integrated Quality Management System (IQMS) is in place for which periodical, internal and external quality audits are conducted to ensure compliance to the quality management system. is aligned to business requirements and delineates authorisation levels and proper segregation of duties. A process of hierarchical reporting is in place to establish accountability in the business operations. Delegated Authority Limits are in place for various standard financial operating and non-financial and transactions. Additionally, documented procedures guidelines were adopted by management to regulate the Groups functional processes in compliance to the relevant authorities, laws and industry requirements. Governance provides that listed entities should maintain a sound system of internal control to safeguard shareholders investments and the Groups assets.
INTERNAL CONTROL FRAMEWORK

This statement covers the group operations of Scomi Group Bhd but excludes that of Scomi Marine Bhd, an associated company listed on Bursa Malaysia Securities Berhad.
of the risks and controls of the Group and enhance the effectiveness of the Committee in assessing the relevance and effectiveness of the implemented internal controls and ensure that key risks are adequately mitigated.
45
Business Plans The Group has a rolling 5-Year Business Strategic Plan that maps out its strategic objectives and business directions. The strategic plan is reviewed and adopted by the Board. The ongoing performance of each business operating unit and suppor t function is reviewed on a monthly basis against their targets during the management committee meetings, where further explanation and clarifications are noted on the variances repor ted. The per formance reviews are escalated to the Board on a quarterly basis.
Assurance Mechanism The Audit and Risk Management Committee of the Group has been tasked with the primary objective of assisting the Board to review the adequacy and integrity of the Groups internal control and management information systems. The Group has an Internal Audit Department whose principal responsibility is to undertake regular and systematic reviews of the system of internal control so as to provide independent assurance that such systems continue to operate satisfactorily and effectively in the Group. An annual statutory audit performed by the
Going Forward: The Board is committed to continuously strengthen the risk management and efficiency of its operations. The Board and management have begun to undertake a comprehensive review of the governance and internal control framework at all its business entities. Emphasis will be given by the Board to develop a culture of ownership, management and accountability for risks throughout the group.
Risk Management The Group has reviewed and updated its Enterprise Risk Management (ERM) framework to align it with the current group structure. This framework sets out the processes for the continual identification, management and reporting of risks affecting the various businesses of the Group. A process to profile the risks of key business units in the Group has also commenced. The Groups Audit and Risk Management Committee has been established to evaluate the evolving risks that affect the Groups operations and the management action plans put in place to monitor and manage the risks.
external auditors provides additional assurance on the controls over financial processes throughout the Group. The Management Letters issued by the external auditors were presented to the Audit and Risk Management Committee and the Board for deliberations.
Information & Communication The Board has a Board Policy Manual which establishes a formal schedule of matters which outlines the types of information required for the Boards attention and deliberation at Board meetings. Comprehensive Board papers, which include financial and non-financial matters such as quar terly results, business strategies, explanation of group and individual division/product per formances, key operational issues, key acquisitions and corporate activities of the Group were escalated to the Board for review and approval.
46

COMMITTEE REPORT
The Board of Directors (the Board) of Scomi Group Bhd (the Company or SGB) is pleased to present the Report of the Audit and Risk Management Committee for the financial year under review. The Audit and the Risk Management Committees were merged as the Audit and Risk Management Committee on 9th November 2006. The Board of Directors of the Company is of the opinion that the merged Audit and Risk Management Committee will provide the members of the Committee with a holistic view of the risks and controls of the Group.
TERMS OF REFERENCE OF THE AUDIT AND RISK MANAGEMENT COMMITTEE
Objective To assist the Board of Directors to review the adequacy and integrity of the Groups financial administration and repor ting, internal control and risk management systems including the management information system and systems for compliance with applicable laws, regulations, rules, directives and guidelines.
Balance And Composition (a) The members of the Audit and Risk Management Committee shall be appointed by the Board of Directors and shall comprise at least 4 members, a majority of whom are independent non-executive directors. (b) None of the members of the Audit and Risk Management Committee shall be an alternate director.
47
(c)
A majority of the members of the committee must be financially literate with sufficient financial experience and ability and at least one member of the Audit and Risk Management Committee must be an Accountant as defined by the Bursa Malaysia Securities Berhad Listing Requirements.
Powers Of The Audit and Risk Management Committee (a) In carr ying out its duties and responsibilities, the Audit and Risk Management Committee shall, at the expense of the Company,
(c)
Where the Audit and Risk Management Committee is of the view that a matter reported by it to the Board of Directors has not been satisfactorily resolved resulting in a breach of the Listing Requirements of Bursa Malaysia Securities Berhad, the Audit and Risk Management Committee is authorised to promptly report such matters to Bursa Malaysia Securities Berhad.
Have the authority to investigate any matter within its terms of reference;
(d)
The Committee shall have a mixture of expertise and experience, including an understanding of the industry(ies) in which the Group operates.
Have full, free and unrestricted access to the Company s and Groups records, proper ties, Duties And Responsibilities Of The Committee (a) To consider the appointment of the external auditor, 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 in accordance with the Committees policies and procedures, and regularly review:
personnel and other resources; (e) Members of the Audit and Risk Management Committee shall elect a Chairman from among themselves who is an Independent Non-Executive Director.

Have
direct
communication
channels with the external auditors and person(s) carr ying out the internal audit function; Be able to obtain independent professional or other advice in furtherance of their duties; and
(f )
Members of the Committee may relinquish their membership in the Committee with prior written notice to the Company Secretary.
Be able to convene meetings with the external auditors, excluding the attendance of the executive members of the Committee, whenever deemed necessary.
the adequacy of the Committees policies and procedures for preapproving the use of the independent auditors for non-audit services with a view to auditor independence;
(g)
In the event of any vacancies arising in the Committee resulting in the number of members of the Committee falling below four (4), the vacancy should be filled within three months of it arising. (b)
The Audit and Risk Management Committee is not authorised to implement its recommendations on behalf of the Board but shall report its recommendation back to the Board for its consideration and implementation.

the non-audit services pre-approved in accordance with the Committees policies and procedures; and fees paid to the independent auditors for pre-approved nonaudit services;
(h)
Appointment of each Committee member shall be for a period of up to three years. The Committee Chairman shall not serve consecutive terms in that capacity, although he may remain a member of the Committee and may serve as Committee Chairman again in a future term.
(c)
Monitor regular rotation of audit partners by the independent auditors;
48

COMMITTEE REPORT
(CONTD.)
(d)
To discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved;
Review the internal audit plan and results of the internal audit process and where necessary ensure that appropriate action is taken on the recommendation of the internal audit function;
(n)
To
review
and
consider
the
appropriateness and adequacy of internal processes for risk oversight and management. Committee shall:
In
par ticular,
the
(e)
To act as an intermediary between the management or other employees, and the external auditors;
Consider whether the Group has effective management systems in place to identify, assess, monitor and manage its key risk areas;
Review any appraisal or assessment of the performance of members of the internal audit function;
(f )
To review the quarterly and year-end financial statements, focusing particularly on:
Approve the appointment or termination of employment of the head of the internal audit function and to review his/her performance appraisal or assessment; and
Review, approve and ensure adherence to the Groups risk management policy and strategies;
Any changes in accounting policies and practices
Establish the roles and respective accountabilities of the Board, the Committee and Management in managing risks;
Significant adjustments arising from the audit
Receive reports from management on resignations of other internal audit staff members, their reasons for resigning and to review the per formance audit staff appraisal conducted or by

Litigation that could affect results materially
Provide for regular review of the effectiveness of the Groups implementation of its risk management system; Receive regular reports on the risk profile of the Group, describing material risks (both financial and non-financial) faced by the Group and action plans taken by management to mitigate the risks;
The going concern assumption Compliance standards requirements; with and accounting other legal (j)
assessment of the other internal management; To consider and report back to the Board of Directors any related party transactions and conflict of interest situation that may arise within the company or group including any course of conduct that raises questions of management integrity; (k) To consider the major findings of internal investigations and managements response;

(g)
To discuss problems and reservations arising from the interim and final audits, and any matter the auditor may wish to discuss (in the absence of management where necessary);
Review the appropriateness of managements response to key risk areas;
(h)
To review the external auditor s management letter and managements response;
(o)
In relation to major business investment proposals and/or feasibility studies: To review and evaluate the risks associated with any proposal/ feasibility study prepared by the project sponsor(s), particularly that all risks have been considered and are within the Boards risk appetite and that action plans or strategies to mitigate identified risks are adequate;
(i)
In relation to the internal audit function:
(l)
To consider other topics as defined by the Board of Directors;
Review the adequacy of the scope, functions and resources of the internal audit function, and that it has the necessary authority to carry out its work; (m)
To review and verify that the allocation of options pursuant to the Companys Employees Share Option Scheme (ESOS) complies with the criteria disclosed to the employees;
49
To conduct meetings with the project sponsor(s) and CEO, if necessary, to discuss risk matters related to the proposal; and
(c)
The Company Secretary shall act as secretary of the Audit and Risk Management Committee and shall be responsible, with the concurrence of the Chairman of the Audit and Risk Management Committee, for drawing up and circulating the agenda and notice of meetings together with supporting explanatory documentation to all Audit and Risk Management Committee members at least five (5) days prior to each meeting. If there is a unanimous consent by the members of the Board present in the meeting, a short notice shall suffice.
To make a recommendation to the Board on the appropriate course of action to take; (d)
The Secretary of the Audit and Risk Management Committee shall record all proceedings and minutes are to be prepared and circulated to the Audit and Risk Management Committee members and the Board of Directors. In addition, the Chairman of the Audit and Risk Management Committee will report significant matters and resolutions, at each Board of Directors meeting.
(p)
To oversee the Groups internal compliance and control systems established by management, including reviewing the effectiveness of these systems and approving managements programmes and policies to ensure effectiveness.
MEMBERSHIP AND MEETINGS

Prior to the formation of the Audit and Risk Management Committee, the members of the Audit Committee during the period under the review are as follows:
Meetings and Minutes (a) The Audit and Risk Management Committee shall meet at least 4 times during a financial year. In order to form a quorum, the majority of members present must be independent directors. Mukhnizam bin Mahmud (b) The CEO, the Head of the Group Internal Audit Depar tment and a representative of the external auditors shall normally attend meetings. Other persons may attend meetings only upon the invitation of the Audit and Risk Management Committee. However, at least once a year the Committee shall meet with the external auditors without executive board members or management present. (resigned on 16th April 2006) Sreesanthan a/l Eliathamby (appointed on 18th April 2006) Datuk Haron bin Siraj Tan Sri Nik Mohamed bin Nik Yaacob NAME
AUDIT COMMITTEE Chairman Member Member DESIGNATION Independent Non-Executive Director Independent Non-Executive Director Non-Independent Non-Executive Director Member Independent Non-Executive Director
During the financial year under review, the Audit Committee convened four (4) meetings and the meetings were fully attended by the Audit Committee members, except for Sreesanthan a/l Eliathamby who attended one out of two meetings that were convened since he was appointed to the Committee. Meetings were held on 22nd February 2006, 5th April 2006, 25th May 2006 and 23rd August 2006 respectively.
50

COMMITTEE REPORT
(CONTD.)
With the formation of the Audit and Risk Management Committee on 9 November 2006, the members are as follows: AUDIT AND RISK MANAGEMENT NAME Dato Mohammed Azlan bin Hashim Tan Sri Nik Mohamed bin Nik Yaacob Foong Choong Hong COMMITTEE Chairman Member Member DESIGNATION Independent Non-Executive Director Independent Non-Executive Director Non-Independent Non-Executive Director Sreesanthan a/l Eliathamby Member Independent Non-Executive Director
The Head of the Internal Audit Department repor ts directly to the Audit and Risk Management Committee and attends its meetings to present the depar tments findings, highlighting any areas of concern for deliberation. During the financial year under review, the Internal Audit Department carried out the following activities: 1. Reviewed and agreed with the Audit & Risk Management Committee the audit plan, risk-based audit strategy, scope of work and resource requirements;
During the financial year under review, the Audit and Risk Management Committee convened one (1) meeting and the meeting was fully attended by the Audit and Risk Management Committee members. The meeting was held on 23rd November 2006. 2. Reviewed and appraised the soundness, adequacy and application of accounting, financial and other controls and promoting effective controls in the Group and the Company; 3. Ascertained the extent of compliance with established policies, procedures and statutory requirements; 4. Ascertained the extent to which the Groups and the Companys assets are accounted for and safeguarded from 2. Reviewed the audit reports for the Group and the Company by the external auditors and internal audit department; 5. 3. 4. Considered the major findings by the auditors and managements responses thereto; Reviewed the quarterly and annual reports of the Group and the Company prior to submission to the Board of Directors for consideration and approval; 5. Conducted a meeting with the external auditors without the presence of the Executive Board Members and management; and 6. Reviewed and verified that the allocation of options pursuant to the Companys ESOS scheme is in compliance with the criteria for allocation of options. 8. 7. 6. Appraised the reliability and usefulness of information developed within the Group and the Company for management; Recommended improvements to the existing system of internal control; Carried out investigations and special reviews requested by management; and Identified opportunities to improve the operations and processes in the Group and the Company. losses of all kinds;
ACTIVITIES FOR THE YEAR

In line with the terms of reference of the Audit and Risk Management Committee, the following activities were carried out by the Audit and Risk Management Committee for the financial year under review in accordance with its functions and duties: 1. Reviewed the audit plans for the year, of the Group and the Company, prepared by the internal audit department;
INTERNAL AUDIT FUNCTION

The Group has an Internal Audit Department whose principal responsibility is to undertake regular and systematic reviews of the system of internal control so as to provide reasonable assurance that such system continues to operate satisfactorily and effectively in the Group.
51
ADDITIONAL
INFORMATION
SANCTIONS AND/OR PENALTIES
For the financial year under review, there were no sanctions and/or penalties imposed on the company, its Directors or Management.
DISCLOSURE OF RELATED PARTY TRANSACTIONS

In relation to Related Party Transactions of a revenue or trading nature which are necessar y for the Groups day-to-day operations and transacted in the ordinary course of business with related parties, the
MATERIAL CONTRACTS INVOLVING DIRECTORS AND MAJOR SHAREHOLDERS INTEREST

Other than contracts entered into and disclosed as Related Party Transactions in Note 32 to the Financial Statements, there are no other material contracts, including contracts relating to loans (not being in the ordinary course of business) of the Company, involving 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.
Company will make an immediate notification or announcement to Bursa Malaysia where appropriate and required. Significant Related Party Transactions are disclosed in Note 32 to the Financial Statements.
52
ADDITIONAL
INFORMATION
(CONTD.)
DISCLOSURE OF RECURRENT RELATED PARTY TRANSACTIONS

The following is the breakdown of the aggregate value of the transactions conducted pursuant to the Shareholders Mandate during the financial year where: (i) (ii) the consideration, value of the assets, capital outlay or cost of the aggregated transactions is equal to or exceeds RM1 million; or any one of the percentage ratios of such aggregated transactions is equal to or exceeds 1%;
whichever is the lower. Transactions Between Scomi Group Company Aggregate value during Financial Year ended 31st December 2006 (RM) 2,000,000.00
Related Party
Nature of Transactions
Interested Director, Major Shareholder and person connected
Scomi Group Bhd
Scomi Marine Bhd (a 42.75% associate company of Scomi Group Bhd)
Provision of administrative services: Human Resource Administration of Employee Share Share Option Scheme Legal and Company Secretarial Corporate Communication and Publication Investor Relations Corporate Finance Information Technology and Treasury Provision of administrative services to Scomi Engineering Bhd as mentioned in the column above
Interested Substantial Shareholders: Dato Kamaluddin Abdullah, Shah Hakim Zain, Kaspadu Sdn Bhd and Onstream Marine Sdn Bhd Interested Directors: Tan Sri Nik Mohamed Nik Yaacob and Shah Hakim Zain
Scomi Group Bhd
Scomi Engineering Bhd (a 71% subsidiary of Scomi Group Bhd)
2,000,000.00
Interested Substantial Shareholders: Dato Kamaluddin Abdullah, Shah Hakim Zain, Kaspadu Sdn Bhd and Onstream Marine Sdn Bhd Interested Director: Shah Hakim Zain Interested Director: Datuk Hamzah Bakar
Scomi Oilserve Sdn Bhd (formerly known as Oilserve Marine Sdn Bhd) (a 60% subsidiary of Scomi Group Bhd) Scomi Oilserve Sdn Bhd (formerly known as Oilserve Marine Sdn Bhd) (a 60% subsidiary of Scomi Group Bhd)
TL Offshore Sdn Bhd
Chartering of marine vessels to TL Offshore Sdn Bhd
8,613,000.00
Sarku Engineering Services Sdn Bhd
Chartering of marine vessels to Sarku Engineering Services Sdn Bhd
3,672,000.00
Interested Director: Datuk Hamzah Bakar
The Shareholders mandate for the above transactions shall not be subject to annual renewal.
53
DIRECTORS CONFLICT OF INTEREST

The Directors do not have any existing conflicts of interest or any interest in any business arrangement involving Scomi Group Bhd and its subsidiaries.
VARIATION IN RESULTS
There were no significant variations between the audited results for the financial year and the unaudited results previously announced.
NON AUDIT FEES

Non Audit Fees paid during the financial year under review ended 31st December 2007 amounted to RM381,000 and is disclosed in Note 25 to the Financial Statements.
STATUS OF UTILISATION OF PRIVATE PLACEMENT PROCEEDS

Bond Issue As at 31st March 2006, the Company issued the four th series of the Serial Bonds amounting to RM120 million. Proceeds from this last issuance was utilised for working capital purposes.
SHARE BUY-BACKS
The following is the Share Buy-back actioned during the year under review ended 31st December 2006. 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 companys treasury shares nor have there been any shares cancelled during the year under review. 2006 Average Number of shares bought back Highest Price (RM) Jan Feb RM000 March April May June July Aug Sept (8,472) Oct Nov Dec 174,869 TOTAL 3,425,900 3,364,022.11 10,000 900,000 515,400 1,599,500 300,000 1,000 100,000 1.08 0.97 1.08 0.97 1.18 1.03 1.01 0.87 0.82 1.18 1.13 1.09 0.99 0.86 Lowest Price (RM) Purchase Price of Shares (RM) 1.18 1.08 1.04 0.91 0.83 1.08 0.97 Total Purchase Price (RM) 11,899.32 979,463.00 535,002.66 1,487,822.79 250,925.10 1,094.44 97,814.80
RM630 million nominal value Murabahah Notes On 14th December 2006, the Company issued RM630 million nominal value Murabahah Notes and the status of utilisation of the proceeds is as follows:-
Gross proceeds Share issue expenses Settlement of SGBs bonds Repayment of Borrowings Working Capital & Capex for KMCOB Group Balance as at 31st December 2006
630,000 (4,608) (250,000) (192,051)
54
DIRECTORS RESPONSIBILITY
STATEMENT
The Directors are required by the Companies Act, 1965 (the Act) to lay before the Company (Scomi Group Bhd) at its Annual General Meeting, the financial statements (which include the consolidated balance sheet and the consolidated income statement) of Scomi Group Bhd and its subsidiaries (the Group) for each financial year, made out in accordance with the applicable approved accounting standards and the provisions of the Act.
The financial statements of the Company and the Group for the financial year ended 31st December 2006 are set out on pages 55 to 146 of this annual report. It is the responsibility of the Directors to take reasonable steps to ensure that the consolidated balance sheet gives a true and fair view of the state of affairs of the Group at the end of the financial year to which it relates and the consolidated income statement gives a true and fair view of the results of the Group for the financial year to which it relates and to ensure that the financial statements are made out in accordance with applicable approved accounting standards and the provisions of the Act. The Directors have the responsibility of The Directors have relied on the system of internal control of the Group to provide them with reasonable grounds to believe that the accounting and other records maintained by the Group sufficiently explain the transactions and financial position of the Group and enable a true and fair consolidated balance sheet and a true and fair consolidated income statement for the Group and the documents ensuring that the Group keeps proper accounting and other records which accurately disclose the financial position of the Group and which enable them to ensure that the financial statements comply with the Act. required by the Act to be attached thereto to be prepared for the financial year to which these financial statements relate.
FINANCIAL
STATEMENTS
56 62 64 66 68 Directors Report Balance Sheets Income Statements Consolidated Statement of Changes in Equity Company Statement of Changes in Equity 69 72 145 145 146 Cash Flow Statements Notes to the Financial Statements Statement by Directors Statutory Declaration Report of the Auditors
56
DIRECTORS
REPORT
The Directors have pleasure in presenting their report and the audited financial statements of the Group and Company for the financial year ended 31 December 2006.
PRINCIPAL ACTIVITIES
The principal activities of the Company are investment holding and the provision of management services. The principal activities of the Group consist of the provision of oilfield equipment, supplies and services, manufacturing, construction and fabrication of monorail trains, railway systems, buses and specialised vehicles, provision of marine vessel transportation services and design, field deployment and distribution of oil and gas production chemicals. There have been no significant changes in the nature of these activities during the financial year, except for certain new activities following the acquisition of new subsidiaries as disclosed in Note 33 to the financial statements.
FINANCIAL RESULTS
Group RM000 Profit for the financial year 99,871 Company RM000 140,643
Attributable to: Companys equity holders Minority interest
84,545 15,326
140,643
DIVIDENDS
The dividends on ordinary shares paid or declared by the Company since the end of the previous financial year were as follows: RM000 In respect of the financial year ended 31 December 2005, final gross dividend of 6%, less income tax of 28%, paid on 25 September 2006: as shown in the Directors report of that year, dividends on 992,076,700 ordinary shares dividends on additional 9,808,200 ordinary shares due to exercise of employee share options
4,286 42 4,328
The Directors now recommend the payment of a final dividend of 15%, less income tax of 27%, amounting to RM11,008,608 in respect of the financial year ended 31 December 2006. This proposed final dividend is subject to the approval of shareholders at the forthcoming Annual General Meeting and will be reflected in the financial statements for the financial year ending 31 December 2007 upon approval by the shareholders.
RESERVES AND PROVISIONS

Material transfers to or from reserves or provisions during the financial year are as disclosed in the financial statements.
57
ISSUE OF SHARES
During the financial year, the issued and paid-up share capital of the Company was increased from RM99,207,670 comprising 992,076,700 ordinary shares of RM0.10 each, to RM100,535,230 comprising 1,005,352,300 ordinary shares of RM0.10 each, by way of the issuance of: (i) 12,192,100 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the Employees Share Option Scheme (ESOS) at the option price of RM0.17 per share for cash; 106,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM1.12 per share for cash; 122,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM0.94 per share for cash; 440,500 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM0.90 per share for cash; and 415,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM0.87 per share for cash.
(ii)
(iii)
(iv)
(v)
The new ordinary shares issued during the financial year ranked pari passu in all respects with the existing ordinary shares of the Company.
TREASURY SHARES
During the financial year, the Company repurchased 3,425,900 of its issued and paid-up share capital from the open market on Bursa Malaysia for RM3,364,022. The average price paid for the shares repurchased was approximately RM0.98 per share. Details of the Treasury shares are set out in Note 20(b) to the financial statements.
EMPLOYEES SHARE OPTION SCHEME

The Company implemented an Employees Share Option Scheme (ESOS) on 28 April 2003 for a period of 10 years. The ESOS is governed by the ByLaws which were approved by the shareholders on 28 March 2003. Details of the ESOS are set out in Note 20(c) to the financial statements. The Company has been granted an exemption by the Companies Commission of Malaysia from having to disclose the names of option holders who were granted less than 1,000,000 options under the ESOS during the financial year. This information has been separately filed with the Companies Commission of Malaysia. Details of options granted during the financial year under the ESOS over the ordinary shares of RM0.10 each in the Company for option holders with options exceeding 1,000,000 are as follows: Number of options granted 000 1,120
ESOS grant date
ESOS price RM 0.84
Bartholomew Joseph Raymond Corray
19.12.2006
58
DIRECTORS
REPORT
(CONTD.)
SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

Significant events during the financial year are disclosed in Note 35 to the financial statements.
SIGNIFICANT EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

Significant events subsequent to the balance sheet date are disclosed in Note 36 to the financial statements.
DIRECTORS
The Directors who have held office during the period since the date of the last report are as follows: Tan Sri Datuk Asmat bin Kamaludin Tan Sri Nik Mohamed bin Nik Yaacob Datuk Hamzah bin Bakar Datuk Haron bin Siraj Dato Mohamed Azman bin Yahya Dato Mohammed Azlan bin Hashim Foong Choong Hong Sreesanthan A/L Eliathamby Shah Hakim @ Shahzanim bin Zain (Chief Executive Officer) (Chairman)
DIRECTORS INTERESTS
According to the Register of Directors Shareholdings, particulars of interests of Directors who held office at the end of the financial year in shares and options over shares in the Company are as follows: Number of ordinary shares of RM0.10 each in the Company At 1.1.2006 000 Direct interest in the Company Tan Sri Datuk Asmat bin Kamaludin Datuk Haron bin Siraj Dato Mohamed Azman bin Yahya Foong Choong Hong Shah Hakim @ Shahzanim bin Zain Indirect interest in the Company + Dato Mohamed Azman bin Yahya # Shah Hakim @ Shahzanim bin Zain 12,000 345,337 1,500 10,500 345,337 250 120 400 160 960 100 *1,729 (50) (600) 200 120 500 160 2,089 Bought 000 Sold 000 At 31.12.2006 000
59
DIRECTORS INTERESTS (CONTINUED)

Number of ordinary shares of RM1.00 each in a subsidiary At 1.1.2006 000 Direct interest in Scomi Engineering Bhd Shah Hakim @ Shahzanim bin Zain Indirect interest in the Scomi Engineering Bhd # Shah Hakim @ Shahzanim bin Zain + 192,568 192,568 100 100 Bought 000 Sold 000 At 31.12.2006 000
Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Dato Mohamed Azman bin Yahya and his spouses direct shareholdings in Gajahrimau Capital Sdn Bhd, of which 10,000,000 shares are held through CIMSEC Nominees (Tempatan) Sdn Bhd.
Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Shah Hakim @ Shahzanim bin Zains legal and/or beneficial shareholding in Kaspadu Sdn Bhd, which holds an interest in Scomi Group Bhd, which in turn is a substantial shareholder of Scomi Engineering Bhd. Number of options over ordinary shares of RM0.10 each in the Company Exercise price RM/share At 1.1.2006 000 1,000 600 600 600 600 600 600 1,357 6,000 Granted 000 Exercised 000 At 31.12.2006 000 1,000 600 600 600 600 600 600 1,357 6,000
Tan Sri Datuk Asmat bin Kamaludin Tan Sri Nik Mohamed bin Nik Yaacob Datuk Hamzah bin Bakar Datuk Haron bin Siraj Dato Mohamed Azman bin Yahya Dato Mohammed Azlan bin Hashim Foong Choong Hong Shah Hakim @ Shahzanim bin Zain
1.24 1.34 1.24 1.24 1.24 1.34 1.24 0.17 1.12
Share options exercised on 28 December 2005 which were alloted on 6 January 2006.
60
DIRECTORS
REPORT
(CONTD.)
DIRECTORS INTERESTS (CONTINUED)

Number of options over ordinary shares of RM1.00 each in a subsidiary Exercise price RM/share Direct interest in Scomi Engineering Bhd Shah Hakim @ Shahzanim bin Zain 1.00 2,000 2,000 At 1.1.2006 000 Granted 000 Exercised 000 At 31.12.2006 000
By virtue of his interests in the shares and options in the Company as disclosed above, Shah Hakim @ Shahzanim bin Zain is deemed to have interest in the shares of all its subsidiaries. Other than as disclosed above, according to the Register of Directors Shareholdings, the Directors in office at the end of the financial year did not hold any interest in the shares and options over shares in the Company or shares, options over shares and debentures of its related corporations during the financial year.
DIRECTORS BENEFITS
During and at the end of the financial year, no arrangements subsisted to which the Company is a party, being arrangements with the object or objects of enabling Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, except for options over shares granted by the Company and a subsidiary, Scomi Engineering Bhd, to eligible employees including certain Directors of the Company pursuant to the Companys and Scomi Engineering Bhds respective Employees Share Option Schemes. 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 28 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 32 to the financial statements.
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS

Before the income statements and balance sheets were made out, the Directors took reasonable steps: (a) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of allowance for doubtful debts and 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.
61
STATUTORY INFORMATION ON THE FINANCIAL STATEMENTS (CONTINUED)

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) (c) which would render the values attributed to current assets in the financial statements of the Group and Company misleading; or which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and Company misleading or inappropriate. No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will or may affect the ability of the Group or Company to meet their obligations when they fall due. At the date of this report, there does not exist: (a) any charge on the assets of the Group or Company which has arisen since the end of the financial year which secures the liability of any other person; or (b) any contingent liability of the Group or Company which has arisen since the end of the financial year.
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements which would render any amount stated in the financial statements misleading. In the opinion of the Directors: (a) other than as disclosed in Notes 35 and 39 to the financial statements, the results of the operations of the Group and Company during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature; and (b) except as disclosed in Note 36 to the financial statements, 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 likely to affect substantially the results of the operations of the Group or Company for the financial year in which this report is made.
AUDITORS
The auditors, PricewaterhouseCoopers, have expressed their willingness to continue in office.
Signed on behalf of the Board of Directors in accordance with their resolution dated 20 April 2007.
TAN SRI DATUK ASMAT BIN KAMALUDIN CHAIRMAN
SHAH HAKIM @ SHAHZANIM BIN ZAIN CHIEF EXECUTIVE OFFICER
62
BALANCE
SHEETS
AS AT 31 DECEMBER 2006
Group Note 2006 RM000 NON-CURRENT ASSETS Property, plant and equipment Intangible assets Investment properties Investments in subsidiaries Investments in associates Investments in jointly controlled entities Amount due from a jointly controlled entity Other investments Deferred tax assets 5 6 7 8 9 10 11 12 23 413,651 552,888 1,782 367,818 19 5,171 990 8,860 1,351,179 CURRENT ASSETS Inventories Receivables, deposits and prepayments Tax recoverable Short term investment Short term deposits, cash and bank balances 15 16 13 14 294,454 624,273 7,161 7,750 300,787 1,234,425 LESS: CURRENT LIABILITIES Payables Borrowings Provision for redundancy Current tax liabilities 17 18 19 484,279 245,865 3,304 39,728 773,176 NET CURRENT ASSETS/(LIABILITIES) 461,249 1,812,428 287,147 176,240 2,653 21,820 487,860 242,657 1,461,352 189,554 438,436 6,337 96,190 730,517 330,950 516,673 1,926 366,929 19 543 1,655 1,218,695 2005 RM000
Company 2006 RM000 2005 RM000
1,731 654,852 360,124 1,016,707
1,485 386,518 360,000 748,003
660,041 2,253 11,400 673,694
231,848 2,037 26,571 260,456
633,623 84,773 718,396 (44,702) 972,005
199,769 53 199,822 60,634 808,637
63
Group Note 2006 RM000 CAPITAL AND RESERVES ATTRIBUTABLE TO EQUITY HOLDERS OF THE COMPANY Share capital Share premium Treasury shares Other reserves Retained earnings Equity and reserves attributable to the Companys equity holders Minority interest TOTAL EQUITY AND RESERVES NON-CURRENT LIABILITIES Other payables Borrowings Provision for redundancy Provision for retirement benefits Deferred tax liabilities 17 18 19 22 23 76,045 1,084,882 2,192 4,162 8,149 1,175,430 1,812,428 102,638 750,706 6,648 3,528 6,471 869,991 1,461,352 592,376 44,622 636,998 550,225 41,136 591,361 27 20 21 20 100,535 233,823 (3,364) (45,964) 307,346 99,208 231,748 (7,860) 227,129 2005 RM000
Company 2006 RM000 2005 RM000
100,535 233,823 (3,364) 9,498 139,189
99,208 231,748 6,028 2,874
479,681 479,681
339,858 339,858
67,236 424,927 161 492,324 972,005
88,451 380,167 161 468,779 808,637
The notes set out on pages 72 to 146 form an integral part of, and should be read in conjunction with, these financial statements.
64
INCOME
STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006
Group Note 2006 RM000 Revenue Cost of sales Gross profit Other operating income Administrative expenses Marketing and sales expenses Other operating expenses Finance cost Share of results of associates Share of results of jointly controlled entities Profit before taxation Taxation Profit for the financial year 25 27 26 24 1,577,495 (1,126,508) 450,987 24,564 (176,713) (125,992) (7,782) (74,198) 30,084 (228) 120,722 (20,851) 99,871 2005 RM000 1,067,972 (802,203) 265,769 174,924 (107,225) (101,953) (9,297) (41,854) 6,429 19 186,812 (13,937) 172,875
Company 2006 RM000 52,916 52,916 165,262 (25,416) (12,474) (32,140) 148,148 (7,505) 140,643 2005 RM000 49,100 49,100 1,295 (23,880) (2,252) (5,944) 18,319 (9,203) 9,116
Attributable to: Companys equity holders Minority interest Profit for the financial year 84,545 15,326 99,871 151,691 21,184 172,875 140,643 140,643 9,116 9,116
65
Group Note 2006 sen Earnings per ordinary share of RM0.10 each attributable to the Companys equity holders: Basic 29 8.50 15.59 2005 sen
Fully diluted
8.31
14.93
Dividends per ordinary share of RM0.10 each: Gross
30 1.50 1.20
Net (after tax)
1.09
0.86
66
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
Attributable to equity holders of the Company Exchange Share Note capital RM000 Group At 1 January 2006 Net loss not recognised in income statement currency translation differences Profit for the financial year Issue of shares Purchase of Treasury shares Recognition of share-based payments Share of reserves in subsidiaries and associates Acquisition of subsidiaries Accretion of interest in subsidiaries Final dividend paid in respect of the financial year ended 31 December 2005 At 31 December 2006 30 100,535 233,823 (3,364) (57,881) 11,917 (4,328) 307,346 (4,328) 592,376 44,622 (4,328) 636,998 33(a) 33(a) (282) (282) (509) 14,919 (27,871) (791) 14,919 (27,871) 20(d) 6,808 6,808 1,621 8,429 20(a), 20(d), 21 20(b) (3,364) (3,364) (3,364) 1,327 2,075 (43,993) (637) 84,545 (43,993) 84,545 2,765 15,326 (43,993) 99,871 2,765 99,208 231,748 (13,888) 6,028 227,129 550,225 41,136 591,361 Share premium RM000 Treasury shares RM000 fluctuation reserve RM000 Share option reserve RM000 Retained earnings RM000 Total RM000 Minority interest RM000 Total equity RM000
67
Attributable to equity holders of the Company Exchange Share Note capital RM000 Group At 1 January 2005 (as restated) Net loss not recognised in income statement currency translation differences Profit for the financial year Issue of shares Share issue expenses Recognition of share-based payments Recognition of additional premium on ESOS exercised Recognition of additional interest in a subsidiary Dilution of interest in subsidiaries Final dividend paid in respect of the financial year ended 31 December 2004 Interim dividend paid in respect of the financial year ended 31 December 2005 At 31 December 2005 30 99,208 231,748 (13,888) 6,028 (4,285) 227,129 (4,285) 550,225 41,136 (4,285) 591,361 (2,141) (2,141) (2,141) 13,674 (7,257) 13,674 (7,257) 20(d), 21 134 (134) 20(d) 20(a), 21 9,794 137,593 (3,700) (16,286) 6,162 151,691 (16,286) 151,691 147,387 (3,700) 6,162 21,184 (16,286) 172,875 147,387 (3,700) 6,162 89,414 97,721 2,398 81,864 271,397 13,535 284,932 Share premium RM000 fluctuation reserve RM000 Share option reserve RM000 Retained earnings RM000 Total RM000 Minority interest RM000 Total equity RM000
68
COMPANY STATEMENT
OF CHANGES IN EQUITY
Non-distributable Share option reserve RM000
Distributable
Note
Share capital RM000
Share premium RM000
Treasury shares RM000
Retained earnings RM000
Total RM000
Company At 1 January 2006 Profit for the financial year Issue of shares Recognition of share-based payments Purchase of treasury shares Final dividend paid in respect of the financial year ended 31 December 2005 At 31 December 2006 20(a), 20(d), 21 20(d) 20(b)
99,208 1,327
231,748 2,075
6,028 (338)
2,874 140,643
339,858 140,643 3,064
(3,364)
3,808
3,808 (3,364)
30
100,535
233,823
(3,364)
9,498
(4,328) 139,189
(4,328) 479,681
Non-distributable Share option reserve RM000
Distributable
Note
Share capital RM000
Share premium RM000
Retained earnings RM000
Total RM000
Company At 1 January 2005 Profit for the financial year Issue of shares Share issue expenses Recognition of share-based payments Recognition of additional premium on ESOS exercise Final dividend paid in respect of the financial year ended 31 December 2004 Interim dividend paid in respect of the financial year ended 31 December 2005 At 31 December 2005 30 20(d) 20(d), 21 20(a), 21
89,414 9,794 99,208
97,721 137,593 (3,700) 134 231,748
6,162 (134) 6,028
184 9,116 (2,141) (4,285) 2,874
187,319 9,116 147,387 (3,700) 6,162 (2,141) (4,285) 339,858
69
CASH FLOW
STATEMENTS
Group 2006 RM000 CASH FLOWS FROM OPERATING ACTIVITES Profit before taxation Adjustments for: Depreciation, amortisation and impairment Bad debts written off Inventories written back Realisation of negative goodwill Unrealised (gain)/loss on foreign exchange Gain on disposal of property, plant and equipment Property, plant and equipment written off Gain on dilution of interest in/disposal of subsidiary companies Provision for redundancy Provision for profit guarantee Provision for retirement benefits Share of profit in associated companies Share of loss/(profit) in jointly controlled entity Share option expense Interest expense Interest income Operating cash flows before working capital changes Changes in working capital: Increase in inventories Increase in receivables, deposits and prepayments Increase in payables (90,624) (185,171) 141,337 83,889 (30,826) (26,153) 7,996 64,368 67,078 (16,285) (1,347) 2 1,939 1,950 (30,084) 228 6,808 71,345 (4,009) 218,347 46,245 (67) (6,864) 143 (14,500) 2,355 (139,005) (1,011) (6,429) (19) 6,162 39,856 (327) 113,351 120,722 186,812 2005 RM000
Company 2006 RM000 2005 RM000
148,148
18,319
981 (5,293) (159,198) 8,500 3,410 30,838 (963) 26,423
4,956 2,572 117 (93) 2,252 1,187 6,494 (550) 35,254
(35,717) 617 (8,677)
(168,730) 457 (133,019)
70
CASH FLOW
STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2006 (CONTD.)
Group Note 2006 RM000 CASH FLOWS FROM OPERATING ACTIVITIES Cash generated from/(used in) operations Tax paid Interest paid Redundancy paid Retirement benefits paid Net cash generated from/(used in) operating activities CASH FLOWS FROM INVESTING ACTIVITIES Investment in an associated company Acquisition of subsidiaries Proceeds from disposal of subsidiaries Purchase of property, plant and equipment Proceeds from disposal of property, plant and equipment Investment in a jointly controlled entity (Purchase of )/proceeds from sale of other investments Additions to intangible assets Decrease in amount due from joint venture Dividend received Interest received Net cash used in investing activities 33(a) (71,692) (103,003) 6,143 (141) (8,113) (1,576) 6,184 4,009 (168,189) (360,000) (25,992) (128,731) 17,920 3,034 (849) 62,582 327 (431,709) 83,889 (16,366) (6,257) (5,354) (1,037) 54,875 64,368 (18,148) (3,244) (2,103) (319) 40,554 2005 RM000
Company 2006 RM000 2005 RM000
(8,677) (7,721) (16,398)
(133,019) (11,665) (144,684)
(124) (272,989) 164,250 (1,227) 6,184 963 (102,943)
(360,000) (912) 3,033 550 (357,329)
71
Group Note 2006 RM000 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of ordinary shares Treasury shares Share issue expenses paid Issue of share capital arising from the exercise of ESOS Subsidiarys issuance of share capital from the exercise of ESOS Proceeds from bank borrowings Repayment of bank borrowings Interest paid on borrowings Payment of other payables Dividends paid Decrease/(increase) in short-term deposits pledged as security Net cash generated from financing activities NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS AT BEGINNING OF FINANCIAL YEAR CURRENCY TRANSLATION DIFFERENCES CASH AND CASH EQUIVALENTS AT END OF FINANCIAL YEAR 58,160 (2,009) 217,879 (1,331) 58,160 20(b) (3,364) 3,063 1,325 825,133 (472,222) (65,108) (4,586) (4,328) (4,871) 275,042 161,728 145,746 (3,700) 1,641 504,752 (166,763) (36,574) (4,742) (6,426) 16,712 450,646 59,491 2005 RM000
Company 2006 RM000 2005 RM000
(3,364) 3,063 159,954 (28,547) (22,608) (4,328) 5,952 110,122 (9,219)
145,746 (3,700) 1,641 380,000 (6) (6,426) (18,800) 498,455 (3,558)
7,771 (1,448)
11,329 7,771
CASH AND CASH EQUIVALENTS COMPRISE: Short term deposits with licensed banks Cash and bank balances Bank overdrafts 196,087 104,700 (57,037) 243,750 Less: Short-term deposits pledged as security (25,871) 217,879 28,280 67,910 (17,030) 79,160 (21,000) 58,160 5,269 6,131 11,400 (12,848) (1,448) 20,613 5,958 26,571 (18,800) 7,771
72
NOTES TO THE
FINANCIAL STATEMENTS
PRINCIPAL ACTIVITIES
The principal activities of the Company are investment holding and the provision of management services. The principal activities of the Group consist of the provision of oilfield equipment, supplies and services, manufacturing, construction and fabrication of monorail trains, railway systems, buses and specialised vehicles, provision of marine vessel transportation services and design, field deployment and distribution of oil and gas production chemicals. There have been no significant changes in the nature of these activities during the financial year, except for certain new activities following the acquisition of new subsidiaries as disclosed in Note 33 to the financial statements.
BASIS OF ACCOUNTING
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. The financial statements comply with 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 the MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities 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 Companys 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 38 to the financial statements. During the financial year, the Directors of the Company adopted the following Financing Reporting Standards (FRS) issued by the MASB: (a) Standards and amendments to published standards that are effective The new accounting standards and amendments to published standards that are effective for the Companys financial years beginning on or after 1 January 2006 are as follows: FRS 3 FRS 5 FRS 101 FRS 102 FRS 108 FRS 110 FRS 116 FRS 121 FRS 128 FRS 131 FRS 132 FRS 133 Business Combinations Non-current Assets Held for Sale and Presentation of Discontinued Operations Presentation of Financial Statements Inventories Accounting Policies, Changes in Accounting Estimates and Errors Events After the Balance Sheet Date Property, Plant and Equipment The Effect of Changes in Foreign Exchange Rates Investments in Associates Interest in Joint Ventures Financial Instruments: Disclosure and Presentation Earnings Per Share
73
BASIS OF ACCOUNTING (CONTINUED)

(a) Standards and amendments to published standards that are effective (continued) FRS 136 FRS 138 FRS 140 Impairment of Assets Intangible Assets Investment Property
A summary of the impact of the new accounting standards on the financial statements of the Group and Company is set out in Note 39 to the financial statements. All changes in accounting policies have been made in accordance with the transition provisions in the respective standards, amendments to published standards and interpretations. All standards and amendments to published standards adopted by the Group require retrospective application other than: FRS 3 FRS 5 prospectively for business combinations for which the agreement date is on or after 1 January 2006; prospectively for non-current assets (or disposal groups) that meet the criteria to be classified as held for sale and to operations that meet the criteria to be classified as discontinued on/after 1 January 2006; (b) FRS 116 FRS 121 the exchange of property, plant and equipment is accounted at fair value prospectively; and prospective accounting for goodwill and fair value adjustments as part of foreign operations.
The Group early adopted the following standards in the prior financial year: FRS 2 FRS 127 Share-based Payment Consolidated and Separate Financial Statements
Amendment to FRS 1192004 Employee Benefits Actuarial Gains and Losses, Group Plans and Disclosures
(c)
Standards and amendments to published standards that are not yet effective and have not been early adopted The new standards and amendments to published standards that are mandatory for the Groups financial years beginning on or after 1 January 2007 or later periods, but which the Group has not early adopted, are as follows: FRS 117 Leases (effective for accounting periods beginning on or after 1 October 2006): This standard requires the classification of leasehold land as prepaid lease payments. The Group will apply this standard from financial periods beginning on 1 January 2007; FRS 124 Related Party Disclosures (effective for accounting periods beginning on or after 1 October 2006): This standard will affect the identification of related parties and some other related party disclosures. The Group will apply this standard from financial periods beginning on 1 January 2007; and FRS 139 Financial Instruments: Recognition and Measurement: This new standard establishes principles for recognising and measuring financial assets, financial liabilities and some contracts to buy and sell non-financial items. Other than hedge accounting which has been adopted by the Group during the financial year, the Group will apply this standard when effective. The Group has relied on the transitional provision of FRS 117, FRS 124 and FRS 139 not to disclose the possible impact that application of those standards will have on the Group and Companys financial statements in the period of initial application.
(d)
The standard that is not yet effective and also not applicable to the Groups financial statements is FRS 6 Exploration for and Evaluation of Mineral Resources (effective for accounting periods beginning on or after 1 January 2007). FRS 6 is not relevant to the Groups operations as the Group does not carry out exploration for and evaluation of mineral resources.
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NOTES TO THE
GENERAL INFORMATION
The financial statements of the Group and the Company were authorised for issue on 20 April 2007 by the Board of Directors. 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 address of the registered office of the Company is Suite 5.03, 5th Floor, Wisma Chase Perdana, Off Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur. The principal place of business of the Company is located at Suite 10.2 10.3, 10th Floor, Wisma Chase Perdana, Off Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unless otherwise stated, the following accounting policies have been used consistently in dealing with items that are considered material in relation to the financial statements. (a) Basis of consolidation The consolidated financial statements incorporate the audited financial statements of the Company and its subsidiaries made up to the end of the financial year. Subsidiaries are those corporations, partnerships or other entities (including special purpose entities) in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated using the purchase method of accounting except for certain business combinations involving entities or businesses under common control with agreement dates on/after 1 January 2006, which were accounted for using the merger method or pooling of interest method. 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. Under the merger method of accounting, the results of subsidiaries are presented as if the merger had been effected throughout the current and previous financial years. The assets and liabilities combined are accounted for based on the carrying amounts from the perspective of the common control shareholder at the date of transfer. On consolidation, the cost of the merger is cancelled with the values of the shares received. Any resulting credit difference is classified as equity and regarded as a non-distributable reserve. Any resulting debit difference is adjusted against any suitable reserve. Any share premium, capital redemption reserve and any other reserves which are attributable to share capital of the merged enterprises, to the extent that they have not been capitalised by a debit difference, are reclassified and presented as movement in other capital reserves.
75
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(a) Basis of consolidation (continued) 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 minority interest. The excess of the cost of acquisition over the fair value of the Groups share of the identifiable net assets required is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. See accounting policy Note 4(e)(iii) on goodwill on consolidation. The Group has taken advantage of the exemption provided by FRS 3 to apply the Standard prospectively. Accordingly, business combinations entered into prior to the effective date have not been restated to comply with this Standard. Intragroup transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Minority interest represents the portion of the 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. Where more than one exchange transaction is involved, any adjustment to the fair values of the subsidiarys 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 Groups share of its net assets as of the date of disposal including the cumulative amount of any exchange differences that relate to the subsidiary, is recognised in the consolidated income statement. (b) Transactions with minority interest The Group applies a policy of treating transactions with minority interest as transactions with parties external to the Group. Disposals to minority interest result in gains and losses for the Group that are recorded in the income statement. Purchases from minority interest result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary. (c) 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 the power to exercise control over those policies. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The Groups investments in associates include goodwill identified on acquisition, net of any accumulated impairment losses. See accounting policy Note 4(f ) on impairment of non-financial assets.
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NOTES TO THE

(c) Investments in associates (continued) The Groups 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 reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Groups share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Groups interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of impairment of the asset transferred. Where necessary, in applying the equity method, adjustments are made to the financial statements of associates to ensure consistency of accounting policies with those of the Group. Dilution gains and losses in associates are recognised in the income statement. (d) 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 Groups interest in jointly controlled entities is accounted for in the consolidated financial statements by the equity method of accounting. Equity accounting involves recognising the Groups share of the post-acquisition results of jointly controlled entities in the income statement and its share of post-acquisition movements within reserves in reserves. The cumulative post-acquisition movements are adjusted against the cost of the investment and includes goodwill on acquisition, net of accumulated impairment losses. See accounting policy Note 4(f ) 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.
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(e) Intangible assets (i) Patents Patent rights are stated at cost. These costs are amortised on a straight-line basis over the useful economic life of the patent rights or over 20 years, whichever is lower. (ii) Research and development Research expenditure is recognised as an expense when incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when the following criteria are fulfilled: (a) (b) (c) (d) (e) it is technically feasible to complete the intangible asset so that it will be available for use or sale; management intends to complete the intangible asset and use or sell it; there is an ability to use or sell the intangible asset; it can be demonstrated how the intangible asset will generate probable future economic benefits; adequate technical, financial and other resources to complete the development and to use or sell the intangible asset are available; and (f ) the expenditure attributable to the intangible asset during its development can be reliably measured.
Other development expenditure that do not meet these criteria are recognised as an expense when incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Capitalised development costs are recorded as intangible assets and amortised from the point at which the asset is ready for use on a straight-line basis over its useful life, not exceeding five years. (iii) Goodwill Goodwill represents the excess of the purchase consideration over the fair value of the Groups share of the identifiable net assets of subsidiaries, jointly controlled entities and associates at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Negative goodwill is recognised immediately in the income statement. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from synergies of the business combination in which the goodwill arose. Each of those cash-generating units represents the Groups investment in each primary reporting segment (Note 34). In respect of acquisitions of joint ventures and associates, the carrying amount of goodwill is included in the carrying amount of the investment in joint ventures and associates respectively. Such goodwill is also tested for impairment as part of the overall balance.
78
NOTES TO THE

(f) Impairment of non-financial assets Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever event or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment is measured by comparing the carrying value of an asset with its recoverable amount. An impairment loss is recognised for the amount by which the carrying amount may not be recoverable. Recoverable amount is the higher of net realisable value and value in use, which is measured by reference to discounted future cash flows. Recoverable amounts are estimated for individual assets or, if it is not possible, for the relevant cash generating units. Impairment losses on goodwill are not reversed. Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. An impairment loss is charged to the income statement immediately. Any subsequent increase in the recoverable amount of an asset is treated as a reversal of the previous impairment loss and is recognised to the extent of the carrying amount of the asset that would have been determined (net of amortisation and depreciation) had no impairment loss been recognised. The reversal is recognised in the income statement immediately. (g) Investments Investments in subsidiaries, jointly controlled entities and associates are shown at cost less accumulated impairment losses. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. See accounting policy Note 4(f ) on impairment of non-financial assets. Investments in other non-current investments are shown at cost and an allowance for diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investments. Where there has been a decline other than temporary in the value of an investment, such a decline is recognised as an expense in the period in which the decline is identified. On disposal of an investment, the difference between net disposal proceeds and its carrying amount is charged/credited to the income statement. (h) Property, plant and equipment Property, plant and equipment are stated at cost less accumulated depreciation or amortisation and impairment losses, if any. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs are included in the assets 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 charged to the income statement during the financial year in which they are incurred. Freehold land is not amortised as it has an infinite life. Leasehold land is amortised over the period of the respective leases that range from 7 to 999 years.
79

(h) Property, plant and equipment (continued) Other property, plant and equipment are depreciated on a straight line basis calculated to write off the cost of the assets to their residual values over their estimated useful lives. The principal annual rates used for this purpose are as follows: Freehold buildings Leasehold buildings Tools, plant and machinery Office equipment, fittings and computers Motor vehicles Vessels Monorail test track Renovation 2 20% 2 33 1/3% 8 1/3 33 1/3% 10 33 1/3% 15 33 1/3% 6 2/3% 3 1/3% 33 1/3%
Residual values and useful lives of assets are reviewed, and adjusted if appropriate, at each balance sheet date. At each balance sheet date, the Group assesses whether there is any indication of impairment. Where an indication of impairment exists, the carrying amount of the asset is assessed and written down immediately to its recoverable amount. See accounting policy Note 4(f ) 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. (i) Investment properties Investment properties, principally comprising freehold office buildings, are held for long term rental yields or for capital appreciation or both, and are not occupied by the Group. Investment properties are carried at cost less any accumulated depreciation and impairment losses. Investment properties are depreciated on a straight line basis to write off the costs of the assets to their residual values over their estimated useful life of 20 years. On disposal of an investment property, or when it is permanently withdrawn from use and no future economic benefits are expected from its disposal, it is derecognised (eliminated from the balance sheet). The difference between the net disposal proceeds and the carrying amounts is recognised in profit or loss in the period of the retirement or disposal. (j) Receivables Trade and other receivables are carried at invoiced amount less allowance for doubtful debts. Bad debts are written off in the period in which they are identified. Allowance for doubtful debts is determined based on estimates of probable losses which may arise from noncollection of certain receivables upon review of all material outstanding amounts at the balance sheet date.
80
NOTES TO THE

(k) Assets acquired under lease arrangements Leases of property, plant and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases. Assets acquired under finance lease arrangements are included in property, plant and equipment and are depreciated over their useful lives. Outstanding obligations due under lease agreements, after deducting attributable finance expenses, are included as liabilities in the financial statements. The finance element of lease rentals are allocated and charged to the income statement on a straight line basis over the period of the lease. Where a significant portion of the risks and rewards of ownership are retained by the lessor, such arrangements are classified as operating leases. Lease rental payments in respect of operating leases (net of any incentives received from the lessor) are charged to the income statement on the straight line basis over the lease term. (l) Assets acquired under hire purchase financing Assets acquired under hire purchase financing are included in property, plant and equipment and are depreciated over their useful lives. Outstanding obligations, after deducting attributable finance expenses, are included as liabilities in the financial statements. Finance expenses are charged to the income statement on a straight line basis over the period of financing. (m) Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average or first-in-first-out basis. For work-in-progress and manufactured inventories, cost consists of direct materials, incidental costs in bringing the inventories to their present location, direct labour and an appropriate proportion of fixed and variable manufacturing overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business less the costs of completion and applicable variable selling expenses. (n) Foreign currencies (i) Functional and presentation currency Items included in the financial statements of each of the Groups 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 Companys functional and presentation currency. (ii) Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at yearend exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.
81

(n) Foreign currencies (continued) (iii) 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: assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations are taken to shareholders equity. When a foreign operation is partially disposed of or sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. (o) Income tax Income tax on the profit or loss for the financial year comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the financial year and is measured using the tax rates that have been enacted at the balance sheet date. Deferred tax is recognised in full, using the liability method, on temporary differences at the balance sheet date between the tax base of assets and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is 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 measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantially enacted at the balance sheet date. Deferred tax is recognised on temporary differences arising on investments in subsidiaries, associates and joint ventures except where the timing of the reversal of temporary difference can be controlled and if is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax is recognised in the income statement, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax is also charged or credited directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill.
82
NOTES TO THE

(p) Revenue recognition Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the enterprise and the amount of the revenue can be measured reliably. Revenue is shown net of value-added tax, returns, rebates and discounts, and after eliminating sales within the Group. (i) Sale of goods Sale of goods is recognised when significant risks and rewards of ownerships of the goods are transferred to the buyer. (ii) Rendering of services Revenue from rendering of services is recognised in the accounting period in which the services are rendered, by reference to completion of the specific transaction, assessed on the basis of the actual service provided as a proportion of the total services to be provided. (iii) Interest income Interest is recognised on a time proportion basis that reflects the effective yield on the asset, taking into account the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. (iv) Rental income Rental income from operating leases is recognised on a straight-line basis over the term of the lease. (v) Charter income Revenue from charter hire is recognised on accrual basis but is deferred when the terms of billings have not been agreed by third parties or when certain conditions necessary for realisation have yet to be fulfilled. (vi) Dividend income Dividend income is recognised when the right to receive payment is established. (vii) Management fee income Management fee income is recognised on an accrual basis, based on services rendered. (viii) Commission income Commission income is recognised in the accounting period in which goods of principals are sold. (q) Cash and cash equivalents For purposes of the cash flow statements, cash and cash equivalents comprise cash in hand, bank balances, deposits held at call with banks excluding deposits which are pledged for banking facilities, and other short-term, highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are included within borrowings in current liabilities on the balance sheet.
83

(r) Employee benefits (i) Short term benefits Wages, salaries and bonuses are recognised as an expense in the financial year in which the associated services are rendered by employees of the Group. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences, and short term non-accumulating compensated absences such as sick leave are recognised when the absences occur. (ii) Defined contribution plan As required by law, companies in Malaysia make contributions to the Employees Provident Fund (EPF). Some of the Groups foreign subsidiaries make contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. Such contributions are recognised as employee benefit expense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. (iii) Defined benefit plan A defined benefit plan is a pension plan that is not a defined contribution plan. Typically, defined benefit plans define an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation. The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets, together with adjustments for actuarial gains or losses and past service costs. The defined benefit obligation is calculated by independent actuaries using the projected unit credit method. The Group determines the present value of the defined benefit obligation and the fair value of any plan assets with sufficient regularity such that the amounts recognised in the financial statements do not differ materially from the amounts that would be determined at the balance sheet date. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approximating to the terms of the related pension liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the greater of 10% of the value of plan assets or 10% of the defined benefit obligation are charged or credited to income over the employees expected average remaining working lives. Past-service costs are recognised immediately in income, unless the changes to the plan are conditional on the employees remaining in service for a specified period of time (the vesting period). In this case, the past-service costs are amortised on a straight-line basis over the vesting period. (iv) Termination benefits Certain foreign subsidiaries of the Group recognise termination benefits when they are 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 balance sheet date are discounted to present value.
84
NOTES TO THE

(r) Employee benefits (continued) (v) Share-based compensation The Company operates an equity-settled, share-based compensation plan for the Directors and employees of the Company and its subsidiaries (ESOS). The fair value of the employee services received in exchange for the grant of the options is recognised as an expense in the income statement. The total amount to be recognised over the vesting period is calculated by reference to the fair value of the options granted. At each balance sheet date, the Company revises its estimates of the number of options that are expected to become exercisable and the effect of any revision of the original estimates is recognised in the income statement and a corresponding adjustment made to equity over the remaining vesting period. When the options are exercised, the proceeds received (net of directly attributable transaction costs) are credited to share capital and share premium respectively. The proceeds received net of any directly attributable transactions costs are credited to share capital (nominal value) and share premium when the options are exercised. Salient features of the Companys share option scheme are disclosed in Note 20(c) to the financial statements. (s) Financial instruments (i) Description A financial instrument is any contract that gives rise to both a financial asset of one enterprise and a financial liability or equity instrument of another enterprise. A financial asset is any asset that is cash, a contractual right to receive cash or another financial asset from another enterprise, a contractual right to exchange financial instruments with another enterprise under conditions that are potentially favourable, or an equity instrument of another enterprise. A financial liability is any liability that is a contractual obligation to deliver cash or another financial asset to another enterprise, or to exchange financial instruments with another enterprise under conditions that are potentially unfavourable. (ii) Financial instruments recognised on the balance sheet The particular recognition method adopted for other financial instruments recognised on the balance sheet is disclosed in the individual accounting policy note associated with each item. (iii) Fair value estimation for disclosure purposes The fair value of publicly traded derivatives and securities is based on quoted market prices at the balance sheet date. The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using forward exchange market rates at the balance sheet date. In assessing the fair value of other derivatives and financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for the specific or similar instruments are used for long term debt. Other techniques, such as option pricing models and estimated discounted value of future cash flows, are used to determine fair value for the remaining financial instruments. In particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial instruments.
85

(s) Financial instruments (continued) (iii) Fair value estimation for disclosure purposes (continued) The full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining hedged item is more than 12 months; it is classified as a current asset or liability when the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability. (t) Derivative financial instruments and hedging activities Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group has entered into some Cross Currency Interest Rate Swaps (CCIRS) that are designated as cash flow hedges for the Groups exposure to foreign exchange on its Murabahah Medium Term Notes (the Notes). These contracts entitle the Group to receive profit and principal amounts in Ringgit Malaysia and oblige the Group to pay profit and principal amounts in United States Dollar, thus allowing the Group to issue the Notes in Ringgit Malaysia and swap them into United States Dollar. The Group documents, at the inception of the transaction, the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in the hedging reserve within equity and transferred to the income statement in the periods when the profits on the Notes are recognised in the income statement. The changes in fair value relating to the ineffective portion of the CCIRS are recognised immediately in the income statement within other net gains/(losses). (u) Segmental information Segment reporting is presented for enhanced assessment of the Groups risks and returns. A business segment is a group of assets and operations engaged in providing products or services that is subject to risk and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those components operating in other economic environments. Segment revenues and expenses are those directly attributable to the segments and include any joint revenue and expenses where a reasonable basis of allocation exists. Segment assets include all assets used by a segment and consist principally of cash, receivables, inventories and property, plant and equipment, net of allowances and accumulated depreciation and amortisation. Most segment assets can be directly attributed to the segments on a reasonable basis. Segment assets and liabilities do not include income tax assets and liabilities respectively.
86
NOTES TO THE

(v) Contingent liabilities and contingent assets The Group does not recognise a contingent liability but discloses its existence in the financial statements. A contingent liability is a possible obligation that arises from past events whose existence will be confirmed by the occurrence or non-occurrence of one or more uncertain future events beyond the control of the Group or a present obligation that is not recognised because 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. 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 its existence where inflows of economic benefits are probable, but not virtually certain. In the acquisition of subsidiaries by the Group under a business combination, the contingent liabilities assumed are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The Group recognises separately the contingent liabilities of the acquirees as part of allocating the cost of a business combination where their fair values can be measured reliably. Where the fair values cannot be measured reliably, the resulting effect will be reflected in the goodwill arising from the acquisitions. Subsequent to the intial recognition, the Group measures the contingent liabilities that are recognised separately at the date of acquisition at the higher of the amount that would be recognised in accordance with the provisions of FRS 1372004 and the amount initially recognised less, when appropriate, cumulative amortisation recognised in accordance with FRS 118. (w) Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, when it is probable that an outflow of resources will be required to settle the obligation, and when a reliable estimate of the amount can be made. Where the Group expects a provision to be reimbursed (for example, under an insurance contract), the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an 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 currect market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.
87

(x) Borrowings (i) Classification Borrowings are initially recognised based on the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings. Interest, dividends, losses and gains relating to a financial instrument, or a component part, classified as a liability is reported within finance cost in the income statement. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. (ii) Capitalisation of borrowing costs Borrowing costs incurred to finance the construction of property, plant and equipment are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the asset for its intended use. Borrowing costs incurred to finance property development activities and construction contracts are accounted for in a similar manner. All other borrowing costs are expensed. (y) Share capital (i) Classification Ordinary shares and non-redeemable preference shares with discretionary dividends are classified as equity. Other shares are classified as equity and/or liability according to the economic substance of the particular instrument. Distributions to holders of a financial instrument classified as an equity instrument are charged directly to equity. (ii) Share issue costs Incremental external costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds. (iii) Dividends to shareholders of the Company Dividends on redeemable preference shares are recognised as a liability on an accrual basis. Other dividends are recognised as a liability in the period in which they are declared. (iv) Purchase of own shares Where the Company or its subsidiaries purchases the Companys equity share capital, the consideration paid, including any directly attributable incremental external costs, net of tax, is deducted from total shareholders equity as Treasury shares until they are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental external costs and the related tax effects, is included in shareholders equity.
88
NOTES TO THE
PROPERTY, PLANT AND EQUIPMENT

Freehold land RM000 Freehold buildings RM000 Long term leasehold land RM000 Short term leasehold land RM000
Group
Cost At 1 January 2006 Acquisition of subsidiaries (Note 33(a)) Additions Disposals Write-offs Currency translation differences At 31 December 2006 Accumulated depreciation At 1 January 2006 Charge for the financial year (Note 25) Disposals Write-offs Currency translation differences At 31 December 2006 Net book value At 31 December 2006
1,393 8,020 (740) 8,673
8,920 10,724 (513) 19,131
1,520 1,520
3,866 159 2,797 6,822
1,686 891 178 2,755
314 314
274 166 400 840
8,673
16,376
1,206
5,982
Group
Freehold land RM000
Freehold buildings RM000
Long term leasehold land RM000
Cost At 1 January 2005 Acquisition of subsidiaries (Note 33(a)) Additions Disposals Write-offs Currency translation differences At 31 December 2005 Accumulated depreciation At 1 January 2005 Charge for the financial year (Note 25) Disposals Write-offs Currency translation differences At 31 December 2005 Net book value At 31 December 2005
817 576 1,393
3,778 5,143 750 (751) 8,920
1,520 1,520
914 1,053 (281) 1,686
1,393
7,234
1,520
89
Leasehold buildings RM000
Tools, plant and machinery RM000
Renovation, office equipment, fittings and computers RM000
Motor vehicles RM000
Vessels RM000
Monorail test tracks RM000
Total RM000
8,179 2,041 (16) 1,859 12,063
542,672 5,547 92,909 (26,330) (16) (15,296) 599,486
32,133 282 6,386 (1,667) (153) (7,298) 29,683
26,138 481 8,801 (589) (2,967) 31,864
27,288 (1,872) 25,416
14,800 14,800
652,109 39,854 110,296 (28,586) (185) (24,030) 749,458
236 2,574 (16) 337 3,131
283,801 39,985 (21,648) (16) (9,571) 292,551
21,400 3,768 (1,644) (151) (3,909) 19,464
10,988 4,879 (498) (2,715) 12,654
2,774 1,330 (252) 3,852
246 246
321,159 53,839 (23,790) (183) (15,218) 335,807
8,932
306,935
10,219
19,210
21,564
14,554
413,651
Short term leasehold land RM000
Leasehold buildings RM000
Tools, plant and machinery RM000
Renovation, office equipment, fittings and computers RM000
Motor vehicles RM000
Vessels RM000
Total RM000
4,958 2,247 (3,328) (11) 3,866
14,657 1,103 723 (1,558) (6,746) 8,179
424,104 34,354 115,323 (16,891) (3,420) (10,798) 542,672
23,333 53 9,410 (1,764) (197) 1,298 32,133
14,929 68 12,176 (2,625) 1,590 26,138
27,460 (100) (72) 27,288
514,036 40,721 142,149 (26,266) (3,617) (14,914) 652,109
402 189 (314) (3) 274
9,196 88 (2,932) (6,116) 236
270,820 33,011 (15,755) (1,154) (3,121) 283,801
18,342 3,213 (1,772) (109) 1,726 21,400
9,370 2,333 (2,074) 1,359 10,988
960 1,816 (2) 2,774
310,004 41,703 (22,847) (1,263) (6,438) 321,159
3,592
7,943
258,871
10,733
15,150
24,514
330,950
90
NOTES TO THE
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Office Motor vehicles Company Cost At 1 January 2006 Additions At 31 December 2006 Accumulated depreciation At 1 January 2006 Charge for the financial year (Note 25) At 31 December 2006 Net book value at 31 December 2006 68 71 139 221 646 578 1,224 864 173 332 505 646 887 981 1,868 1,731 360 360 1,681 407 2,088 331 820 1,151 2,372 1,227 3,599 RM000 equipment and fittings RM000 Renovation RM000 Total RM000
Cost At 1 January 2005 Additions Disposals At 31 December 2005 Accumulated depreciation At 1 January 2005 Charge for the financial year (Note 25) Disposals At 31 December 2005 Net book value at 31 December 2005 68 68 292 207 439 646 1,035 70 103 173 158 277 610 887 1,485 360 360 962 720 (1) 1,681 278 53 331 1,240 1,133 (1) 2,372
91
PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

(i) The net book values of property, plant and equipment of the Group acquired under hire purchase are as follows: Group 2006 RM000 Hire purchase Motor vehicles Tools, plant and machinery Office equipment, fittings and computers 2005 RM000
13,828 5,809 325
13,011 4,283 78
(ii)
Certain property, plant and equipment of the group are charged as security for banking facilities as disclosed in Note 18 to the financial statements. During the financial year, the Group acquired property, plant and equipment at aggregate costs of RM110,296,000 (2005: RM142,149,000), of which RM7,293,000 (2005: RM13,418,000) is by means of hire purchase arrangements.
(iii)
INTANGIBLE ASSETS
Goodwill RM000 Patents RM000 Development cost RM000 Total RM000
Group Cost At 1 January 2006 Currency translation differences Additions Adjustment to cost of business combination Acquisition of subsidiaries (Note 33(a)) At 31 December 2006 Accumulated impairment and amortisation At 1 January 2006 Currency translation differences Amortisation for the financial year (Note 25) Impairment for the financial year At 31 December 2006
515,452 (124) 2,000 30,168 547,496
3,464 (264) 470 3,670
1,576 2,786 4,362
518,916 (388) 1,576 2,000 33,424 555,528
(15) 375 360
2,243 (179) 216 2,280
2,243 (194) 216 375 2,640
Net book value At 31 December 2006
547,136
1,390
4,362
552,888
92
NOTES TO THE
INTANGIBLE ASSETS (CONTINUED)

Development costs comprise an amount of RM2,786,000 in respect of monorail technical know how arising from the acquisition of a subsidiary (see Note 33(a)) and RM1,576,000 comprising internally generated expenditure on development costs on major projects where it is reasonably anticipated that the costs will be recovered through future commercial activity. The remaining amortisation period at financial year end in respect of the technical know-how is 10 years whilst the amortisation of the internally generated development costs will only commence when the asset is available for use. No amortisation charge has been provided in the current financial year for the development costs acquired as the amounts are immaterial. The remaining amortisation period for the acquired patents at balance sheet date is 9 years (2005: 10 years). Goodwill Group Cost At 1 January 2005 (as restated (Note 39)) Currency translation differences Additions Arising from changes in group composition At 31 December 2005 Accumulated amortisation At 1 January 2005 Currency translation differences Amortisation for the financial year (Note 25) At 31 December 2005 Net book value At 31 December 2005 515,452 1,221 516,673 2,056 (3) 190 2,243 2,056 (3) 190 2,243 337,649 (45) 177,848 515,452 2,622 (7) 849 3,464 340,271 (52) 849 177,848 518,916 RM000 Patents RM000 Total RM000
93
INTANGIBLE ASSETS (CONTINUED)

The carrying amounts of goodwill allocated to the Groups cash-generating units (CGUs) are as follows: 2006 RM000 Oilfield services Energy and engineering logistics Production enhancement 318,813 224,349 3,974 547,136 2005 RM000 312,211 203,241 515,452
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use pre-tax cash flow projections based on financial budgets approved by the Directors covering a five-year period using the estimated growth rates which are based on past performance and their expectations of market developments. The terminal value is calculated based on the projected net tangible assets of the CGUs at the end of the five years. The growth rate does not exceed the long term average growth rate for the relevant CGUs. The key assumptions used in the value in use calculations for the significant CGUs are as follows: Energy and Oilfield Services % Growth rate Pre-tax discount rate 50.00 6.50 Engineering Logistics % 35.00 6.50
The weighted average growth rates are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant segments.
94
NOTES TO THE
INVESTMENT PROPERTIES
Group 2006 RM000 Net book value At start of financial year Depreciation for the financial year (Note 25) Currency translation differences At end of financial year 1,926 (145) 1 1,782 2,071 (145) 1,926 2005 RM000
Cost Accumulated depreciation Net book value
2,889 (1,107) 1,782
2,888 (962) 1,926
The fair value of the properties as at 31 December 2006 was estimated at RM2.1 million based on a valuation by an independent professionally qualified valuer. The following amounts have been recognised in the income statement: Group 2006 RM000 Rental income Direct operating expenses of investment properties that did not generate rental income 151 30 2005 RM000 76 57
95
INVESTMENTS IN SUBSIDIARIES
Company 2006 RM000 Investments in subsidiaries, at cost quoted shares in Malaysia unquoted shares 286,854 367,998 654,852 Accumulated impairment losses 654,852 288,057 102,807 390,864 (4,346) 386,518 2005 RM000
Market value of shares quoted in Malaysia
254,189
259,966
Details of the significant subsidiaries are as follows: Country of Name of company incorporation Groups effective equity interest 2006 % Significant subsidiaries of Scomi Group Bhd KMC Oiltools Bermuda Limited# Scomi Engineering Bhd * Scomi OilServe Sdn Bhd (formerly known as OilServe Marine Sdn Bhd) Scomi Energy Sdn Bhd (formerly known as Modular Value Sdn Bhd) Scomi Chemicals Sdn Bhd Malaysia 100 Distribution of chemical products Malaysia 100 100 Investment holding and provision of projects management services Bermuda Malaysia Malaysia 100 71.2 60 92.5+ 71.5 60 Investment holding Investment holding Provision of marine vessel transportation services 2005 % Principal activities
96
NOTES TO THE
INVESTMENTS IN SUBSIDIARIES (CONTINUED)

Country of Name of company incorporation Groups effective equity interest 2006 % Significant subsidiaries of KMC Oiltools Bermuda Limited Scomi Oiltools Sdn Bhd (formerly known as Kota Minerals & Chemicals Sdn Bhd) KMC Oiltools Overseas (M) Limited KMC Oiltools (Cayman) Ltd # KMC Oiltools Ltd # KMC Oiltools (Europe) Limited # Scomi Oiltools Inc # (formerly known as KMC Oiltools Inc) Oiltools (Africa) Ltd # Jersey 100 92.5 Investment holding, oilfield equipment, supplies and services KMC Oiltools de Venezuela S.A. # Scomi Oiltools (S) Pte Ltd # (formerly known as KMC Oiltools (S) Pte Ltd) KMC Oiltools Canada Inc # Canada 100 92.5 Provision of oilfield equipment, supplies and services Venezuela Singapore 100 100 92.5 92.5 Provision of oilfield equipment, supplies and services Provision of oilfield equipment, supplies and services Mauritius 100 100+ Provision of oilfield equipment, supplies and services Malaysia 100 100++ Provision of oilfield equipment, supplies and services 2005 % Principal activities
Cayman Islands Cayman Islands United Kingdom USA
100 100 100 100
92.5 92.5 92.5 92.5
Provision of oilfield equipment, supplies and services Provision of oilfield equipment, supplies and services Provision of oilfield equipment, supplies and services Provision of oilfield equipment, supplies and services
97

Country of Name of company incorporation Groups effective equity interest 2006 % Significant subsidiaries of Scomi Engineering Bhd Scomi OMS Oilfield Holdings Sdn Bhd (formerly known as OMS Oilfield Holdings (Malaysia) Sdn Bhd) * OMS Oilfield Services Pte Ltd # Singapore 71.2 71.5 Investment holding and provision of machine shop services MTrans Transportation Systems Sdn Bhd * Significant subsidiary of Scomi OMS Oilfield Holdings Sdn Bhd (formerly known as OMS Oilfield Holdings (Malaysia) Sdn Bhd) Scomi OMS Oilfield Services Sdn Bhd (formerly known as OMS Oilfield Services (Malaysia) Sdn Bhd) * Subsidiaries of MTrans Transportation Systems Sdn Bhd MTrans Technology Berhad * Malaysia 36.3 Manufacture, and supply of monorail trains and related services MTrans Bus Sdn Bhd * Malaysia 36.3 Manufacturing, fabrication and assembly of commercial coaches and truck vehicle bodies Malaysia 71.2 71.5 Provision of machine shop services for tools and equipment used in the petroleum industry Malaysia 36.3 Investment holding Malaysia 71.2 71.5 Investment holding 2005 % Principal activities
98
NOTES TO THE

Country of Name of company incorporation Groups effective equity interest 2006 % Significant subsidiary of Scomi Oilserve Sdn Bhd (formerly known as Oilserve Marine Sdn Bhd) OilServe (L) Berhad Labuan, Malaysia 60 60 Leasing of marine vessels and provision of marine vessel transportation services Significant subsidiary of Scomi Energy Sdn Bhd Scomi NTC Sdn Bhd * Malaysia 70 Provision of oil and gas production systems and services Significant subsidiaries of Scomi Chemicals Sdn Bhd Scomi Sosma Sdn Bhd (formerly known as Sosma Sdn Bhd) Anticor Chimie S.A. # France 80 Design and field deployment of various oil and gas production chemicals * # + Audited by PricewaterhouseCoopers, Malaysia Audited by affiliates of PricewaterhouseCoopers, Malaysia Audited by firms other than PricewaterhouseCoopers, Malaysia and its affiliates Interest held directly by Scomi Oiltools Sdn Bhd prior to the completion of the Internal Restructuring on 20 December 2006 (Note 35(d)) Malaysia 100 75+ Distribution of chemical products 2005 % Principal activities
++ Interest held directly by Scomi Group Bhd prior to the completion of the Internal Restructuring on 20 December 2006 (Note 35(d))
99
INVESTMENTS IN ASSOCIATES
Group 2006 RM000 Shares quoted in Malaysia, at cost Unquoted shares, at cost+ Share of post-acquisition profits and reserves Currency translation differences 360,124 728 7,107 (141) 367,818 2005 RM000 200,000 160,728 6,201 366,929 Company 2006 RM000 360,124 360,124 2005 RM000 200,000 160,000 360,000
Market value of shares quoted in Malaysia
237,913
173,043
237,913
173,043
The Groups share of the results, gross assets and liabilities of the associates are as follows: Groups Name of company Country of incorporation effective equity interest % 2006 Scomi Marine Bhd Zubair Oiltools LLC Malaysia Oman 42.7 49.0 753,705 5,133 (345,449) (748) 160,103 8,199 29,492 592 Assets RM000 Liabilities RM000 Revenue RM000 Net profit RM000
2005 Scomi Marine Bhd Zubair Oiltools LLC Malaysia Oman 29.6 49.0 539,958 3,699 (261,340) (477) 40,323 4,589 6,247 182
Comprised Redeemable Cumulative Convertible Preference Shares in an associate, Scomi Marine Bhd, which have not been converted into ordinary shares in the prior year
100
NOTES TO THE
10 INVESTMENTS IN JOINTLY CONTROLLED ENTITIES

Group 2006 RM000 Unquoted shares, at cost Share of post-acquisition (loss)/profits 141 (122) 19 2005 RM000 19 19
The Groups share of the results, gross assets and liabilities of the jointly controlled entities are as follows: Groups Name of company Country of incorporation effective equity interest % 2006 Sosma (B) Sdn Bhd Titan Tubular Nigeria Limited Brunei Nigeria 37.5 50.1 161 5,140 (142) (5,217) (141) Assets RM000 Liabilities RM000 Revenue RM000 Net (loss)/ profit RM000
2005 Sosma (B) Sdn Bhd Brunei 37.5 161 (142) 355 19
Share of joint ventures operating lease commitment is RM1,592,000. There are no contingent liabilities relating to the Groups interest in the joint venture and no contingent liabilities of the venture itself.
11 AMOUNT DUE FROM A JOINTLY CONTROLLED ENTITY

Group 2006 RM000 Amount due from a jointly controlled entity 5,171 2005 RM000
The amount due from a jointly controlled entity is unsecured, interest-free and is not repayable within the next 12 months.
101
12 OTHER INVESTMENTS
Group 2006 RM000 Shares quoted in Malaysia, at cost Unquoted shares, at cost 447 543 990 2005 RM000 543 543
Market value of quoted shares
357
13 INVENTORIES
Group 2006 RM000 Consumables Raw materials Work-in-progress Finished goods 13,228 39,541 73,119 168,566 294,454 2005 RM000 14,637 24,478 30,344 120,095 189,554
The cost of inventories recognised as expense and included in cost of sales of the Group amounted to RM668,333,000 (2005: RM466,392,000).
102
NOTES TO THE
14 RECEIVABLES, DEPOSITS AND PREPAYMENTS

Group 2006 RM000 Trade receivables Amounts receivable from: subsidiaries trade non-trade associates trade jointly controlled entities trade staff 584 2,119 515,780 Other receivables Deposits Prepayments 60,536 14,592 33,365 624,273 639 1,653 300,146 101,864 13,951 22,475 438,436 136 645,452 3,656 484 10,449 660,041 102 218,593 3,637 202 9,416 231,848 4,093 3,454 863 831 40,187 604,266 21,459 196,201 508,984 2005 RM000 294,400 Company 2006 RM000 2005 RM000
Amounts due from subsidiaries and associates including trade balances, are unsecured, interest free and have no fixed terms of repayment. Amounts due from staff and jointly controlled entities are unsecured, interest free and have no fixed terms of repayment. Group 2006 RM000 The Groups currency exposure profile of receivables, deposits and prepayment is analysed as follows: US Dollar Pound Sterling Singapore Dollar Norwegian Kroner Nigerian Naira Canadian Dollar Others 408,689 45,583 4,323 8,073 2,030 8,762 13,279 242,648 18,721 976 16,032 7,141 6,845 2005 RM000
103
15 SHORT TERM INVESTMENT

Group 2006 RM000 Investment in a money market fund, at cost 7,750 2005 RM000
Market value
7,750
The effective rate of return averaged at 3.00% per annum.
16 SHORT TERM DEPOSITS, CASH AND BANK BALANCES

Group 2006 RM000 Short term deposits with licensed banks Cash and bank balances 196,087 104,700 300,787 2005 RM000 28,280 67,910 96,190 Company 2006 RM000 5,269 6,131 11,400 2005 RM000 20,613 5,958 26,571
The Groups currency exposure profile of short term deposits, cash and bank balances is analysed as follows: Group 2006 RM000 US Dollar Norwegian Kroner Singapore Dollar Pound Sterling Canadian Dollar Nigerian Naira Others 121,896 1,818 473 491 692 480 14,408 2005 RM000 43,074 368 2,403 739 1,922 887 10,492
104
NOTES TO THE
16 SHORT TERM DEPOSITS, CASH AND BANK BALANCES (CONTINUED)

The effective interest rates for short term deposits, cash and bank balances at the balance sheet date were as follows: Group 2006 % Short term deposits with licensed banks Bank balances 3.12-3.70 1.05 2005 % 2.40-3.70 1.05 Company 2006 % 2.60-3.10 2005 % 2.30-4.00
Short term deposits of the Group and Company have maturity periods ranging from 1 to 30 days (2005: 1 day to 45 days). Bank balances are deposits held at call with banks. Short term deposits of certain subsidiaries amounting to RM25,383,000 (2005: RM21,000,000) have been pledged to licensed banks for banking facilities as disclosed in Note 18 to the financial statements.
17 PAYABLES
Group 2006 RM000 Current liabilities Trade payables Accruals Other payables Amount payable to subsidiaries non-trade 484,279 Non-current liabilities Other payables 76,045 560,324 102,638 389,785 67,236 700,859 88,451 288,220 287,147 584,299 633,623 189,006 199,769 335,899 97,106 51,274 169,130 64,982 53,035 26,772 22,552 10,431 332 2005 RM000 Company 2006 RM000 2005 RM000
105
17 PAYABLES (CONTINUED)
Group 2006 RM000 The Groups currency exposure profile of payables is analysed as follows: US Dollar Pound Sterling Singapore Dollar Norwegian Kroner Nigerian Naira Canadian Dollar Others 256,463 33,045 13,078 5,125 6,071 3,301 15,143 25,118 98,889 5,098 2,990 4,005 2005 RM000
Included in other payables of the Group is an amount of RM101,663,991 (2005: RM107,366,170) owing to a Director of a subsidiary, KMC Oiltools Bermuda Limited, of which RM76,045,000 is repayable after 1 year, for the purchase of shares in the said subsidiary. The amount is unsecured, interest-free, and repayable in three equal annual instalments. The non-trade payables due to subsidiaries are unsecured, interest-free with no fixed terms of repayments.
18 BORROWINGS
Group 2006 RM000 Current Bank overdrafts Bank borrowings (secured) Syndicated term loan (secured) Other term loans (secured) Hire purchase payables 57,037 75,782 45,890 62,287 4,869 245,865 17,030 99,024 15,160 41,198 3,828 176,240 45,890 38,830 53 84,773 53 53 2005 RM000 Company 2006 RM000 2005 RM000
106
NOTES TO THE
18 BORROWINGS (CONTINUED)
Group 2006 RM000 Non-current Bonds (secured) Syndicated term loan (secured) Other term loans (secured) Hire purchase payables 876,024 174,813 22,912 11,133 1,084,882 Total borrowings Bank overdrafts Bank borrowings (secured) Bonds (secured) Syndicated term loan (secured) Other term loans (secured) Hire purchase payables 57,037 75,782 876,024 220,703 85,199 16,002 1,330,747 17,030 99,024 380,000 252,119 163,763 15,010 926,946 250,000 220,703 38,830 167 509,700 380,000 220 380,220 380,000 236,959 122,565 11,182 750,706 250,000 174,813 114 424,927 380,000 167 380,167 2005 RM000 Company 2006 RM000 2005 RM000
The Groups currency exposure profile of borrowings is analysed as follows: US Dollar Pound Sterling Canadian Dollar Singapore Dollar Nigerian Naira Others 336,214 39,014 13,467 850 352 457,586 18,965 14,573 834 1,160 136 259,533
107
Group 2006 RM000 The maturity profile of borrowings is analysed as follows: Due within the next 12 months Due between 1 and 2 years Due between 2 and 5 years Due after 5 years 245,865 89,155 566,778 428,949 1,084,882 1,330,747 176,240 28,702 332,605 389,399 750,706 926,946 84,773 77,660 247,267 100,000 424,927 509,700 53 100,167 280,000 380,167 380,220 2005 RM000 Company 2006 RM000 2005 RM000
(a)
The effective interest rates per annum on the Groups borrowings at the balance sheet date are as follows: 2006 % Bank overdrafts Bonds Syndicated term loan Other term loans Bank borrowings Hire purchase payables 6.00-9.00 6.10-6.80 7.00 5.87-8.75 4.57-7.50 2.00-13.00 2005 % 5.00-7.00 6.80 7.00 4.24-7.00 3.80-4.20 2.00-14.00
108
NOTES TO THE
(b) Bonds The Bonds comprise the following: (i) RM500 million nominal value serial bonds of the Company with RM380 million issued on 28 September 2005 and the remaining RM120 million issued on 28 March 2006 through the establishment of a medium term notes programme (MTN Notes). On 21 November 2006, the Company entered into a Supplemental Deed to vary the terms of the Trust Deed. The Company then exercised an option to swap RM250 million nominal value of the MTN Notes with RM250 million nominal value of the Murabahah Bonds (Note 18(b) (ii)). Consequent to the swap as set out in Note 35(g), the RM500 million nominal value MTN Notes have been reduced to RM250 million. The maturity dates of the MTN Notes range from 5 years to 7 years from the date of issuance. The coupon rates of the MTN Notes for the first three years are at 4.5% per annum and 7.5% per annum thereafter. The effective interest rate is 6.8% per annum. The MTN Notes are secured by: (i) (ii) (ii) Second share charge over shares of KMC Oiltools Bermuda Limited (KMCOB); and Priority and security sharing agreement.
A subsidiary, KMCOB Capital Limited (KMCOB Capital), issued RM630 million of Medium Term Notes on 14 December 2006, under the Murabahah Islamic principle (Murabahah Bonds). The Murabahah Bonds were issued in 4 series with tenures from 4 to 7 years from the date of issue. The profit rate ranges from 5.75% to 6.15% per annum, payable semi-annually in arrears. The Murabahah Bonds are secured by: (i) (ii) (iii) (iv) Corporate guarantees from KMCOB and certain subsidiaries companies of KMCOB; Share charge over the shares of certain subsidiaries companies; Debenture over the present and future asset of KMCOB Capital; and Assignment over Financial Services Reserve Account (FSRA) of KMCOB Capital.
(c)
Syndicated term loan The Syndicated term loan is repayable over seven (7) semi-annual instalments on repayment dates and in the amounts specified in the agreements which are summarised as follows: USD000 RM000 equivalent Due within 12 months Due between 1 and 2 years Due between 2 and 5 years 13,000 22,000 27,522 62,522 45,890 77,660 97,153 220,703
109
(c) Syndicated term loan (continued) The above facility is secured by way of: (i) First Share Charge over the shares of KMCOB and all other marketable and public quoted shares, stocks, shares, bonds, debentures, notes, warrants and other securities deemed fit in the subsidiary; and (ii) (d) The Priority and Security Sharing Agreement.
Other term loans, bank overdrafts and trade facilities A term loan of a subsidiary denominated in USD of RM28,240,000 (USD8,000,000) (2005: RM37,067,000: USD10,000,000) is secured by way of a negative pledge over the present and future fixed floating assets of a subsidiary company, a Standby Letter of Credit and also a corporate guarantee of the subsidiary company. The loan is repayable in quarterly instalments falling due between 15 March 2006 and 15 June 2009, with a minimum prepayment sum of RM10,590,000 (USD3,000,000) to be made in 2007. The other term loans, bank overdrafts and trade facilities of the Group are secured by way of: (i) (ii) (iii) (iv) (v) (vi) First Share Charge over the shares of KMCOB; debentures creating fixed and floating charges over assets of certain subsidiaries; corporate guarantees from the Company; Blanket Counter Indemnity and Trade Finance General Agreement from the subsidiaries; irrevocable letter of undertaking from third parties; an indefeasible and perfected first priority statutory mortgage over the vessels of a subsidiary;
(vii) legal deed of assignment of the insurance, earnings and requisition compensation of the vessels of a subsidiary; (viii) proportionate guarantee of the loan facility in a subsidiary company by another shareholder of the subsidiary; (ix) (x) (xi) assignment of the Bareboat Charterers interest in the insurance in favour of the bank; pledge of shares of certain subsidiaries; and landed properties of subsidiaries.
110
NOTES TO THE
(e) Hire purchase payables Group 2006 RM000 Instalments payable: Not later than 1 year Later than 1 year but not later than 5 years Later than 5 years 5,738 12,058 37 17,833 Less: Future finance charges Present value of hire purchase payables Analysed as: Due within 12 months Due after 12 months 4,869 11,133 16,002 3,828 11,182 15,010 53 114 167 53 167 220 (1,831) 16,002 4,676 12,566 189 17,431 (2,421) 15,010 60 129 189 (22) 167 60 189 249 (29) 220 2005 RM000 Company 2006 RM000 2005 RM000
19 PROVISION FOR REDUNDANCY

Group 2006 RM000 At beginning of financial year Charged to income statement (Note 25) Paid during the financial year Currency translation differences At end of financial year 9,301 1,939 (5,354) (390) 5,496 2005 RM000 11,434 (2,103) (30) 9,301
Included in: Current liabilities Non-current liabilities 3,304 2,192 5,496 2,653 6,648 9,301
111
19 PROVISION FOR REDUNDANCY (CONTINUED)

During the financial year ended 31 December 2004, a wholly-owned subsidiary of the Group, KMCOB, started negotiations with two labour unions in relation to redundancy claims from its employees of its Nigerian subsidiary. In March 2005, KMCOB agreed terms with its two labour unions and signed an agreement on a phased redundancy plan over a four-year period, concluding in the financial year ending 31 December 2008, the total liability of which amounted to approximately USD3,000,000 (RM10,590,000). The Group expects the payments to be phased over a four-year period from financial years 31 December 2005 to 31 December 2008.
20 SHARE CAPITAL
Group and Company 2006 000 Authorised Ordinary shares of RM0.10 each: At beginning and end of financial year 3,000,000 300,000 3,000,000 300,000 2006 RM000 2005 000 2005 RM000
Issued and fully paid Ordinary shares of RM0.10 each: At beginning of financial year Issued during the financial year: private placement exercise of share options 13,276 13,276 At end of financial year 1,005,352 1,327 1,327 100,535 89,415 8,527 97,942 992,076 8,941 853 9,794 99,208 992,076 99,208 894,134 89,414
112
NOTES TO THE
20 SHARE CAPITAL (CONTINUED)

(a) Increase in share capital During the financial year, the issued and paid-up share capital of the Company was increased from RM99,207,670 comprising 992,076,700 ordinary shares of RM0.10 each, to RM100,535,230 comprising 1,005,352,300 ordinary shares of RM0.10 each, by way of the issuance of: (i) 12,192,100 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the Employees Share Option Scheme (ESOS) at the option price of RM0.17 per share for cash; (ii) 106,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM1.12 per share for cash; (iii) 122,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM0.94 per share for cash; (iv) 440,500 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM0.90 per share for cash; and (v) 415,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM0.87 per share for cash. In the prior financial year, the authorised share capital of the Company of RM100,000,000 comprising 1,000,000,000 ordinary shares of RM0.10 each, was increased to RM300,000,000 comprising 3,000,000,000 ordinary shares of RM0.10 each, by the creation of an additional 2,000,000,000 new ordinary shares of RM0.10 each. In addition, the issued and paid-up share capital of the Company was increased from RM89,413,440 comprising 894,134,400 ordinary shares of RM0.10 each, to RM99,207,670 comprising 992,076,700 ordinary shares of RM0.10 each by way of: (i) the issue of 89,415,000 new ordinary shares of RM0.10 each of the Company pursuant to a private placement on 25 February 2005, at the issue price of RM1.63 per share for cash for the purpose of working capital and repayment of borrowings; (ii) the issue of 8,326,300 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price RM0.17 per share for cash; and (iii) the issue of 201,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM1.12 per share for cash. The new ordinary shares issued during the financial year and in the prior financial year ranked pari passu in all respects with the existing shares of the Company.
113

(b) Treasury shares The shareholders of the Company, by an ordinary resolution passed in an Annual General Meeting held on 28 June 2006, renewed their approval for the Company to repurchase its own shares. The Directors of the Company are committed to enhancing the value of the Company to its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders. During the financial year, the Company repurchased 3,425,900 of its issued and paid-up share capital from the open market on Bursa Malaysia for RM3,364,022. The average price paid for the shares repurchased was approximately RM0.98 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 2006. At the balance sheet date, the number of outstanding shares in issue after setting Treasury shares off against equity is 1,001,926,400. (c) Employees Share Option Scheme The Company implemented an Employees Share Option Scheme (ESOS) on 28 April 2003 for a period of 10 years. The ESOS is governed by the By-Laws which were approved by the shareholders on 28 March 2003. On 15 June 2004, the Company amended the By-Laws and its Articles of Association (Articles) to align them with the amendments to the Listing Requirements issued by Bursa Malaysia Securities Berhad which became effective on 10 February 2004, and the amendments to Schedule I of the Securities Commission (SC) Act, 1993. With the amendments, the total number of shares under the ESOS was increased from ten percent (10%) to fifteen percent (15%) of the total issued and paid-up share capital of the Company and participation in the ESOS was extended to include Non-Executive Directors. The amendments to the By-Laws and Articles were approved by the shareholders of the Company on 16 June 2004 at the 2nd Annual General Meeting. The salient features of the ESOS are as follows: (i) The total number of shares comprising options exercised, options remaining exercisable and unexercised offers pending acceptance under the ESOS shall not exceed fifteen percent (15%) of the total issued and paid-up share capital of the Company, such that not more than fifty percent (50%) of the shares available under the ESOS are allocated, in aggregate, to the Directors and senior management of the Group; (ii) Not more than ten percent (10%) of the shares available under the ESOS is allocated to any individual Director or employee who, either singly or collectively through his/her associates, holds twenty percent (20%) or more in the issued and paid-up share capital of the Company;
114
NOTES TO THE

(c) Employees Share Option Scheme (continued) (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 Companys ESOS By-Laws such as retirement, ill health, injury, physical or mental disability, and subjected always to the discretion and written approval of the Options Committee of the Company; (iv) The option price under the ESOS is the volume weighted average market price quoted on Bursa Malaysia for the past five (5) consecutive market days prior to the date of grant, save that a discount of not more than ten percent (10%) may be given at the absolute discretion of the Options Committee for options granted after the listing of the Company. The option price shall not be lower than the par value of the shares of the Company of RM0.10; (v) Options granted under the ESOS carry no dividend or voting rights. Upon exercise of the options, shares issued rank pari passu in all respects with existing ordinary shares of the Company; and (vi) The options granted are exercisable upon receipt of notice of entitlement to exercise from the ESOS Secretariat by or before 1 April of each year based on annual entitlement. Acceleration of the annual entitlement is dependent on the Employee Performance Rating achieved in the preceding year. (d) Share Option Reserve The movements in share option reserve are as follows: Group 2006 RM000 At beginning of the financial year Charged to income statement (Note 25) Company Subsidiary Transferred to subsidiaries Transferred to share premium account Share of reserve in subsidiaries and associates At end of the financial year 3,808 3,000 (637) (282) 11,917 6,162 (134) 6,028 3,410 398 (338) 9,498 1,187 4,975 (134) 6,028 6,028 2005 RM000 Company 2006 RM000 6,028 2005 RM000
115

(d) Share Option Reserve (continued) The movements in the number of share options outstanding and their related weighted average exercise prices are as follows: 2006 Average exercise price RM At beginning of financial year Granted Forfeited Exercised At end of financial year 0.83 0.83 0.69 0.23 0.92 Options 000 131,654 16,606 (19,272) (13,276) 115,712 2005 Average exercise price RM 0.70 1.08 0.98 0.20 0.83 Options 000 105,970 44,860 (10,649) (8,527) 131,654
Out of the outstanding options, 26,503,100 units (2005: 10,728,000 units) of options were exercisable. Share options were exercised on a regular basis throughout the financial year, and the weighted average share price for the financial year is RM1.07 (2005: RM1.36). The options outstanding at the financial year end had exercise prices ranging from RM0.17 to RM1.51 (2005: RM0.17 to RM1.51) and remaining contractual life of 6 years (2005: 7 years). All options granted under the scheme will expire on 27 April 2013. The weighted average fair value of options granted during the financial year determined using the Trinomial valuation model was RM0.83 per option (31.12.2005: RM1.06). The significant inputs into the model were as follows: 2006 Valuation assumptions: Expected volatility of share prices Expected dividend yield Expected option life Weighted average share price at the date of grant Risk-free interest rate (per annum) 35% 0.70% 28 years RM0.89/share 3.61%4.48% 35% 0.70% 28 years RM1.19/share 3.26%4.28% 2005
The volatility measured at the standard deviation of continuously compounded share returns is based on statistical analysis of daily share prices over the last 3 years.
116
NOTES TO THE
21 SHARE PREMIUM
Group and Company 2006 RM000 At 1 January Premium of RM1.53 per share arising from the issuance of 89,415,000 new ordinary shares of RM0.10 each Premium of RM0.07 per share arising from the exercise of 12,192,100 (2005: 8,326,200) share options Premium of RM1.02 per share arising from the exercise of 106,000 (2005: 201,000) share options Premium of RM0.84 per share from the exercise of 122,000 share options Premium of RM0.80 per share from the exercise of 440,500 share options Premium of RM0.77 per share from the exercise of 415,000 share options Additional premium from share options exercised Share issue expenses At 31 December 854 108 102 352 320 339 233,823 136,805 583 205 134 (3,700) 231,748 231,748 2005 RM000 97,721
22 PROVISION FOR RETIREMENT BENEFITS

Group 2006 RM000 Non-current liabilities Balance sheet obligations for retirement benefits 4,162 3,528 2005 RM000
Income statement charge/(credit) for retirement benefits (Note 25)
1,950
(1,011)
The amounts recognised in the balance sheet are determined as follows: Group 2006 RM000 Present value of unfunded obligations Unrecognised actuarial losses 4,162 2005 RM000 3,581 (53)
Liability in balance sheet
4,162
3,528
117
22 PROVISION FOR RETIREMENT BENEFITS (CONTINUED)

The amounts recognised in the income statement are as follows: Group 2006 RM000 Current service cost Interest cost 1,950 2005 RM000 228 197
1,950
425
Write back of provision for retirement benefits
(1,436)
Total included in staff costs
1,950
(1,011)
Of the total staff costs, RM1,001,000 (2005: RM49,000), RM574,000 (2005: RM239,000), and RM375,000 (2005: RM722,000) were included in Cost of sales, Marketing and sales expenses, and Administrative expenses respectively. The movements in the liability recognised in the balance sheet are as follows: Group 2006 RM000 At beginning of the financial year Total expenses charged/(credited) to the income statement (Note 25) Benefits paid Curtailment arising from disposal of subsidiary Currency translation differences At end of the financial year 3,528 1,950 (1,037) (279) 4,162 2005 RM000 5,024 (1,011) (319) (156) (10) 3,528
118
NOTES TO THE
22 PROVISION FOR RETIREMENT BENEFITS (CONTINUED)

The principal actuarial assumptions used were as follows: Group 2006 Discount rate Future salary increases Normal retirement age 10.5% 5%-9% 55-60 2005 12% 10% 55
Assumptions regarding mortality experience are based on advice from published statistics and experience in each territory. The last actuarial valuation was performed as at 31 December 2006.
23 DEFERRED TAX
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same tax authority. The following amounts, determined after appropriate offsetting, are shown in the balance sheet: Group 2006 RM000 Deferred tax assets Deferred tax liabilities: subject to income tax 8,149 (711) 6,471 4,816 161 161 161 161 (8,860) 2005 RM000 (1,655) Company 2006 RM000 2005 RM000
119
23 DEFERRED TAX (CONTINUED)

Group 2006 RM000 At beginning of financial year (Credited)/charged to income statement (Note 27) property, plant and equipment tax losses and capital allowances provisions for other liabilities and charges others 85 (3,227) (968) (1,148) (5,258) Acquisition of subsidiaries (Note 33(a)) Others Currency translation differences At end of financial year 689 (933) (25) (711) 1,826 (1,194) 632 (91) (12) 4,816 161 65 65 161 4,816 2005 RM000 4,287 Company 2006 RM000 161 2005 RM000 96
Deferred tax assets Property, plant and equipment Tax losses and capital allowances Provision for other liabilities and charges Payables Others (582) (5,930) (929) (624) (795) (8,860) (2,213) 558 (1,655)
Deferred tax liabilities Property, plant and equipment Others 7,618 531 8,149 5,413 1,058 6,471 161 161 161 161
120
NOTES TO THE
23 DEFERRED TAX (CONTINUED)

The amount of deductible temporary differences and unused losses for which no deferred tax asset is recognised in the balance sheet are as follows: Group 2006 RM000 Deductible temporary differences Tax losses 24,536 30,103 2005 RM000 10,832 20,699 Company 2006 RM000 2005 RM000
24 REVENUE
Group 2006 RM000 Management fee Dividend income Sales of goods Rendering of services Rental/chartering income Commission income Others 2,000 922,462 296,313 334,099 22,621 1,577,495 2005 RM000 1,120 602,402 229,664 204,211 9,291 21,284 1,067,972 Company 2006 RM000 18,728 34,188 52,916 2005 RM000 11,391 37,709 49,100
121
25 PROFIT BEFORE TAXATION

Group 2006 RM000 Profit before taxation is stated after charging/(crediting): Amortisation of intangible assets (Note 6) Impairment losses Investments in subsidiaries Receivables reversal Intangible assets (Note 6) Inventories write-down Auditors remuneration: Statutory audit current year under provision in previous years Other services current year underprovision in previous years Bad debts (recovered)/written off Cost of inventories written back Depreciation of property, plant and equipment (Note 5) Depreciation of investment properties (Note 7) Gain on disposal of property, plant and equipment (Gain)/loss on foreign exchange realised unrealised Gain on disposal of a subsidiary Lease rental plant and machinery property Property, plant and equipment written off (Note 5) Rental of land and premises Rental of silo/equipment Rental income Research and development expenses Realisation of negative goodwill Provision for profit guarantee 42,250 5,506 2 4,689 3,062 (2,497) 276 56,244 9,286 2,354 3,151 (7,353) (218) 365 (6,864) 8,500 47 797 2,252 (3,849) (16,285) (926) 143 (139,005) 193 (5,293) (159,198) 117 (93) 374 7 (224) 53,839 145 (1,347) 1,270 (931) (67) 41,703 145 (14,500) 32 981 2,572 610 1,980 364 1,995 10 60 32 27 3,650 375 1,992 2,673 (891) 1,000 4,346 216 190 2005 RM000 Company 2006 RM000 2005 RM000
122
NOTES TO THE
25 PROFIT BEFORE TAXATION (CONTINUED)

Group 2006 RM000 Employee benefit cost: Wages, salaries and bonus Defined contribution retirement plan Defined benefit retirement plans (Note 22) Termination benefits Provision for redundancy (Note 19) Share option expenses (Note 20(d)) current year (over)/under provision in prior year Other long-term benefits Other employee benefits 9,929 (3,121) 653 53,391 320,235 6,162 147 41,681 232,050 3,134 276 1,190 10,805 1,187 255 4,947 244,252 3,220 1,950 8,022 1,939 175,212 3,685 (1,011) 6,174 5,347 858 3,001 504 2005 RM000 Company 2006 RM000 2005 RM000
26 FINANCE INCOME AND COST

Group 2006 RM000 Finance income Interest income Finance cost Interest expense on borrowings and leases Amortisation/write-off of ancillary costs incurred in connection with the arrangement of bank borrowings (6,862) (78,207) Net finance cost (74,198) (2,325) (42,181) (41,854) (2,265) (33,103) (32,140) (6,494) (5,944) (71,345) (39,856) (30,838) (6,494) 4,009 327 963 550 2005 RM000 Company 2006 RM000 2005 RM000
123
27 TAXATION
Group 2006 RM000 Current tax Malaysian income tax Foreign tax 4,914 21,195 26,109 Deferred tax (Note 23) (5,258) 20,851 8,945 4,360 13,305 632 13,937 7,505 7,505 7,505 9,138 9,138 65 9,203 2005 RM000 Company 2006 RM000 2005 RM000
Current tax Current year (Over)/under accrual in prior financial years 27,116 (1,007) 26,109 16,828 (3,523) 13,305 7,841 (336) 7,505 9,087 51 9,138
Deferred tax Reversal and origination of temporary differences Over accrual in prior financial years (1,255) (4,003) (5,258) 20,851 2,622 (1,990) 632 13,937 7,505 65 65 9,203
124
NOTES TO THE
27 TAXATION (CONTINUED)
The reconciliation between taxation and profit before taxation is as follows: Group 2006 % Numerical reconciliation between the average effective tax rate and the Malaysian tax rate: Applicable tax rate Tax effects of: expenses not deductible for tax purposes utilisation of previously unrecognised tax losses income not subject to tax different tax rates in other countries current financial years tax losses not recognised over accrual in respect of previous financial years share of results of associates Average effective tax rate 12 (6) (3) (6) 3 (4) (7) 17 6 (18) (5) (3) (1) 7 9 (1) (31) 5 22 50 28 28 28 28 2005 % Company 2006 % 2005 %
The Company has sufficient tax credits under Section 108 of the Income Tax Act, 1967 to frank the payment of dividends out of all its retained earnings as at 31 December 2006.
28 DIRECTORS REMUNERATION
The Directors of the Company in office during the financial year are as follows: Non-executive Directors Tan Sri Datuk Asmat bin Kamaludin Tan Sri Nik Mohamed bin Nik Yaacob Datuk Hamzah bin Bakar Datuk Haron bin Siraj Dato Mohamed Azman bin Yahya Dato Mohammed Azlan bin Hashim Foong Choong Hong Sreesanthan A/L Eliathamby Executive Director Shah Hakim @ Shahzanim bin Zain
125
28 DIRECTORS REMUNERATION (CONTINUED)

The aggregate amount of emoluments receivable by Directors of the Company during the financial year is as follows: Group 2006 RM000 Non-executive Directors: fees other emoluments Executive Directors: salaries and bonus estimated monetary value of benefits-in-kind 752 22 1,236 420 7 838 752 22 1,236 420 7 782 382 80 356 55 382 80 300 55 2005 RM000 Company 2006 RM000 2005 RM000
29 EARNINGS PER SHARE

(a) Basic earnings per share Basic earnings per share of the Group is calculated by dividing the profit attributable to ordinary equity holders 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 20(b)). Group 2006 Profit attributable to ordinary equity holders of the Company (RM000) 84,545 2005 151,691
Weighted average number of ordinary shares in issue
(000)
995,025
972,877
Basic earnings per share
(sen)
8.50
15.59
126
NOTES TO THE
29 EARNINGS PER SHARE (CONTINUED)

(b) Diluted earnings per shares For the diluted earnings per share calculation, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares from share options granted to employees. For share options granted to employees, a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average share price of the Companys shares) based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the share options. The difference is added to the denominator as an issue of ordinary shares for no consideration. This calculation serves to determine the bonus element in the ordinary shares outstanding for the purpose of computing the dilution. No adjustment is made to the profit for the period for the share options calculation. Group 2006 Profit attributable to equity holders of the Company (RM000) 84,545 2005 151,691
Weighted average number of ordinary shares in issue Adjustments for: share options Weighted average number of ordinary shares for diluted earnings per share
(000)
995,025
972,877
(000) (000)
22,482 1,017,507
42,956 1,015,833
Diluted earnings per share
(sen)
8.31
14.93
127
30 DIVIDENDS
Group and Company 2006 Gross dividend per share sen Interim dividend of 6% paid in respect of the financial year ended 31.12.2005 Final dividend of 6% paid in respect of the financial year ended 31.12.2005 Proposed final dividend of 15% in respect of financial year ended 31.12.2006 Dividend in respect of the financial year 1.50 1.50 11,009 11,009 1.20 8,613 0.60 4,328 0.60 4,285 Dividend, net of tax of 27% RM000 2005 Gross dividend per share sen Dividend, net of tax of 28% RM000
Dividend per share recognised as distribution to ordinary equity holders of the Company 0.60 0.43 0.90 0.65
At the forthcoming Annual General Meeting on 22 June 2007, final gross dividend in respect of the financial year ended 31 December 2006 of 1.50 sen per share less income tax of 27% (2005: 0.60 sen per share less income tax of 28%) amounting to RM11,008,608 (2005: RM4,285,771) will be proposed for shareholders approval.
128
NOTES TO THE
31 COMMITMENTS AND CONTINGENT LIABILITIES

Group 2006 RM000 (a) Capital expenditure: Authorised and contracted for Authorised but not contracted for 84,315 69,961 154,276 79,400 43,288 122,688 103 1,468 1,571 5,500 5,500 2005 RM000 Company 2006 RM000 2005 RM000
Analysed as follows: property, plant and equipment put and call options for KMCOB shares (Note 31(d)) acquisition of additional shares in subsidiaries others 115,959 25,780 12,537 154,276 68,754 38,130 15,804 122,688 1,571 1,571 5,500 5,500
(b)
Lease commitments: Instalments payable not later than 1 year later than 1 year but not later than 5 years after 5 years 7,583 22,366 14,621 44,570 9,546 9,103 3,739 22,388 204 1,020 1,224 49 230 279
(c)
Contingent liabilities: Corporate guarantees given to subsidiaries on utilised banking facilities Guarantees given to third party in respect of credit arrangements to a subsidiary company Share of contingent liabilities of an associate 448 11,120 11,568 9,092 8,208 17,300 456,016 466,841 456,016 466,841
129
31 COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)

(d) Put and call options The Company (the Buyer) entered into put and call option agreements (Agreements) with Derrick Corporation and Christopher Robert Pianca (collectively referred to as the Sellers) in 2004 with the following arrangements: (i) (ii) the Buyer grants to the Sellers an option to sell to the Buyer and to require the Buyer to buy the option shares in KMCOB; and the Sellers grant to the Buyer an option to buy, and to require the Sellers to sell the option shares in KMCOB.
The Company has appointed one of its subsidiaries to be the nominee for the Agreements. The put and call option with Christopher Robert Pianca has been accounted for in the financial statements as outlined in Note 39(b)(ii) to the financial statements. During the financial year, the Company has also accelerated the exercise of the put and call option with Derrick Corporation pursuant to the Internal Restructuring of the Group as outlined in Note 35(d) to the financial statements. 2006 Tranche three option Derrick Corporation Ordinary shares A Preference shares B Preference shares C Preference shares 793,683 74,917 943,750 3,454 793,683 74,917 943,750 3,454 Total 2005 Tranche three option Total
Purchase Price USD RM equivalent 10,034,000 38,130,000 10,034,000 38,130,000
Option date
1 April 2007
130
NOTES TO THE
32 RELATED PARTY RELATIONSHIPS AND TRANSACTIONS

Related party relationships exist between the Company and the following entities: (a) (b) (c) The significant subsidiaries as disclosed in Note 8 of the financial statements; The associates as disclosed in Note 9 to the financial statements; Lintas Travel & Tours Sdn Bhd (Lintas) and Symphony Share Registers Sdn Bhd (Symphony), being companies connected to certain Directors; (d) (e) CH Offshore Pte Ltd (CHO) is a company with common Directors with the Company; and TL Offshore Sdn Bhd (TLO) and Sarku Engineering Sdn Bhd (Sarku) are subsidiaries of a corporate shareholder of a subsidiary, Scomi OilServe Sdn Bhd. Group 2006 RM000 Significant transactions with related parties: Management fees receivable from Scomi Marine Bhd Share registration fee paid to Symphony Airline ticketing services provided by Lintas Chartering of marine vessels from CHO Chartering of marine vessels from TLO and Sarku (2,000) 180 2,247 24,639 12,285 (500) 53 398 875 24,560 2005 RM000
33 SIGNIFICANT ACQUISITION OF SUBSIDIARIES

(a) Acquisition of subsidiaries Financial year ended 31 December 2006 (i) On 28 April 2006, a subsidiary, Scomi Engineering Bhd (SEB), entered into an agreement to acquire 13,260,000 ordinary shares of RM1.00 each in MTrans Transportation Systems Sdn Bhd (MTrans), representing 51% of its issued and paid-up share capital, for a total purchase consideration of RM30 million which was settled in cash. MTrans has two wholly-owned subsidiaries, namely MTrans Technology Berhad and MTrans Bus Sdn Bhd (collectively known as the MTrans Group). On 10 July 2006, the acquisition was completed with all conditions precedent being met. On the same date, SEB and the vendor executed a Profit Guarantee Agreement and a Shareholders Agreement. (ii) On 31 August 2006, the Company, via its wholly-owned subsidiary, Scomi Sosma Sdn Bhd, acquired 4,800 ordinary shares of Euro 15 per ordinary shares in Anticor Chimie S.A. (Anticor), for a total consideration of Euro 600,000 or RM3,250,134, representing an 80% equity interest in Anticor. Anticor is a company incorporated in France.
131
33 SIGNIFICANT ACQUISITION OF SUBSIDIARIES (CONTINUED)

(a) Acquisition of subsidiaries (continued) (iii) On 28 April 2006, a wholly-owned subsidiary of the Company, Scomi Oiltools Sdn Bhd, acquired an additional 25% equity interest in Scomi Sosma Sdn Bhd for a purchase consideration of RM2 million, thus making Scomi Sosma Sdn Bhd a wholly-owned subsidiary of the Company. (iv) On 30 November 2006, the Company acquired the remaining 7.55% shareholding in KMCOB from Derrick Corporation pursuant to the put and call agreement as described in Note 31(d) for a purchase consideration of USD10,034,125 (RM36,504,000), thus making KMCOB a wholly-owned subsidiary of the Company. Details of net assets acquired are as follows: Group 2006 Book value as at date of acquisition RM000 Property, plant and equipment (Note 5) Intangible assets (Note 6) Other investments Inventories Receivables, deposits and prepayments Cash and bank balances Payables Borrowings Current tax liabilities Deferred tax liabilities (Note 23) Net assets Goodwill on consolidation (Note 6) Minority interest in subsidiaries acquired Cost of acquisitions * Includes incidental costs of RM722,000 Details of cash flows arising from the acquisition of subsidiaries are as follows: Purchase consideration settled in cash Less: Cash and cash equivalents of subsidiaries acquired Cash outflow of the Group on acquisition 72,476 (784) 71,692 39,854 756 85 18,036 36,496 784 (47,876) (6,893) (9,617) (689) 30,936 Fair value at date of acquisition RM000 39,854 3,256 85 18,036 36,496 784 (51,956) (6,893) (9,617) (689) 29,356 30,168 12,952 * 72,476
132
NOTES TO THE
33 SIGNIFICANT ACQUISITION OF SUBSIDIARIES (CONTINUED)

(a) Acquisition of subsidiaries (continued) The acquired business contributed revenue of RM53,266,000 and profit of RM1,944,000 to the Group for the period from date of acquisition to 31 December 2006. Had the acquisition taken effect on 1 January 2006, the revenue and profit of the Group would have been RM1,626,220,000 and RM85,639,000 respectively. These amounts have been calculated using the Groups accounting policies and by adjusting the results of the subsidiaries to reflect the additional amortisation that would have been charged assuming the fair value adjustment to intangible assets were applied from 1 January 2006, together with the consequential tax effects. Company On 20 December 2006, the Company completed the Internal Restructuring as described in Note 35(d) to the financial statements. Consequently, the Company acquired the entire shareholding in KMCOB from its wholly-owned subsidiary, Scomi Oiltools Sdn Bhd, for a purchase consideration of RM272,949,957. (b) Financial year ended 31 December 2005 On 1 January 2005, KMCOB acquired 5,000 B ordinary shares of 1 each representing 50% of the issued capital of Shetland Oiltools Limited from Shetland Leasing and Property Developments Limited for a cash consideration of 5,000. Upon completion of the acquisition, KMC Oiltools shareholding in Shetland Oiltools Limited increased from 50% to 100% and the Groups effective interest in Shetland Oiltools Limited increased from 38% to 92.5%. The acquisition was completed on 24 January 2005 and the deemed effective date of acquisition for the purpose of consolidation is 1 January 2005. (i) Details of net assets acquired are as follows: At date of acquisition 2005 RM000 Property, plant and equipment (Note 5) Inventories Trade and other receivables Cash and bank balances Trade and other payables Minority interest Share of net assets acquired Negative goodwill arising from acquisition Total consideration Less: Portion discharged by non-cash consideration 40,721 341 6,181 (4,878) (26,545) (7,909) 7,911 (6,864) 1,047 (1,008) 39 4,878 4,917
Less: Cash and cash equivalents acquired Cash flow on acquisition, net of cash acquired
133
34 SEGMENT INFORMATION
The Group is organised on a worldwide basis into four main business segments: (i) (ii) Investment holding Oilfield services (iii) Energy and engineering logistics provision of management services. provision of drilling fluids and mud engineering services to the upstream oil and gas industry; provision of drilling waste management services to the upstream oil and gas industry; supply of industrial chemicals to the downstream oil and gas and other general industries; supply of production chemicals to the upstream oil and gas industry; provision of machine shop services; intellectual property ownership and management; and provision of oilfield equipment, supplies and services. manufacture and fabrication of a wide range of quality road transport hardware, catering to specialised requirements and exigencies that can be broadly categorised to road trailers and tankers, truck-mounted equipment and airport ground support equipment; (iv) (v) Energy logistics Production enhancement provision of machine shop services; and hire of vehicles through transient rental business as well as long term leasing of corporate fleet. provision of marine vessel transportation services and leasing of marine vessels. distribution of chemical products design and field deployment of oil and gas production chemicals. Inter-segment revenue comprises management services, rental of motor vehicles and manufacture of road transport hardware. (a) Primary reporting format business segments Energy and Oilfield services RM000 2006 Revenue External revenue Inter-segment revenue Total revenue 1,158,661 5,215 1,163,876 323,940 42,394 366,334 48,612 10,237 58,849 44,282 1,059 45,341 2,000 50,916 52,916 (109,821) (109,821) 1,577,495 1,577,495 engineering logistics RM000 Energy RM000 Production RM000 Investment holding RM000 Elimination RM000 Group RM000 logistics enhancement
134
NOTES TO THE
34 SEGMENT INFORMATION (CONTINUED)

(a) Primary reporting format business segments (continued) Energy and Oilfield services RM000 2006 Results Segment results Finance costs (net) Unallocated costs Share of results of associates Share of results of jointly controlled entities Profit before taxation Taxation Profit for the financial year (228) (228) 120,722 (20,851) 99,871 592 29,492 30,084 143,019 52,549 4,480 825 200,873 (74,198) (35,809) engineering logistics RM000 Energy RM000 Production RM000 Investment holding RM000 Elimination RM000 Group RM000 logistics enhancement
Assets Segment assets Investments in associates Investments in jointly controlled entities Unallocated corporate assets Consolidated total assets 177,112 2,585,604 19 19 1,430,606 2,153 713,785 46,803 15,580 126,870 365,665 (292,989) 2,040,655 367,818
Liabilities Segment liabilities Unallocated corporate liabilities Consolidated total liabilities 752,628 1,948,606 1,027,353 356,659 36,238 14,646 65,709 (304,627) 1,195,978
135

(a) Primary reporting format business segments (continued) Energy and Oilfield services RM000 2006 Other information Capital expenditure Depreciation Amortisation 2005 Revenue External revenue Inter-segment revenue Total revenue 818,074 57,941 876,015 208,685 15,093 223,778 26,303 7,192 33,495 13,790 13,790 1,120 48,530 49,650 (128,756) (128,756) 1,067,972 1,067,972 96,694 43,014 195 52,069 8,315 80 1,364 80 145 21 1,227 1,001 150,150 53,839 216 engineering logistics RM000 Energy RM000 Production RM000 Investment holding RM000 Elimination RM000 Group RM000 logistics enhancement
Results Segment results Finance costs (net) Unallocated costs Share of results of associates Share of results of jointly controlled entities Profit before taxation Taxation Profit for the financial year 19 19 186,812 (13,937) 172,875 182 6,247 6,429 154,204 31,726 4,228 41 45,826 236,035 (41,854) (13,817)
136
NOTES TO THE

(a) Primary reporting format business segments (continued) Energy and Oilfield services RM000 2005 Assets Segment assets Investment in associates Investment in jointly controlled entities Unallocated corporate assets Consolidated total assets 310,062 1,949,212 19 19 1,212,854 1,702 501,500 42,281 6,967 259,752 365,227 (751,152) 1,272,202 366,929 engineering logistics RM000 Energy RM000 Production RM000 Investment holding RM000 Elimination RM000 Group RM000 logistics enhancement
Liabilities Segment liabilities Unallocated corporate liabilities Consolidated total liabilities 538,810 1,357,851 1,170,155 227,336 34,398 4,400 198,884 (816,132) 819,041
Other information Capital expenditure Depreciation Amortisation 120,717 36,850 190 61,221 1,908 39 1,837 54 133 839 975 182,870 41,703 190
137

(b) Secondary reporting format geographical segments Although the Groups four major business segments are managed on a worldwide basis, they operate in five principal geographical areas of the world. In Malaysia, its home country, the Groups areas of operation are principally investment holding, oil and gas, transportation engineering and marine transportation services. The Group also operates in other regions: (i) Europe (ii) Middle East and Africa (iii) Asia (iv) Americas provision of oilfield equipment, supplies and drilling waste management services; intellectual property ownership and management; and provision of machine shop services provision of oilfield equipment, supplies and drilling waste management services; provision of drilling fluids, equipment and services; and provision of machine shop services provision of oilfield equipment, supplies and drilling waste management services; provision of drilling fluids, equipment and services; provision of machine shop services; and investment holding provision of oilfield equipment, supplies and drilling waste management services; and provision of machine shop services Middle East Europe RM000 2006 Total revenue from external customers Segment assets Capital expenditure 167,833 170,034 26,533 325,114 357,638 18,483 779,795 1,186,698 63,201 304,369 326,285 40,256 384 1,677 1,577,495 2,040,655 150,150 and Africa RM000 Asia RM000 Americas RM000 Others RM000 Group RM000
2005 Total revenue from external customers Segment assets Capital expenditure 160,002 136,364 72,837 179,029 171,012 7,675 545,361 774,665 46,967 183,516 190,161 52,600 64 2,791 1,067,972 1,272,202 182,870
138
NOTES TO THE
35 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR

(a) Acquisition of remaining interest in Scomi Sosma Sdn Bhd On 28 April 2006, a subsidiary of the Company, Scomi Oiltools Sdn Bhd, acquired an additional 25% equity interest in Scomi Sosma Sdn Bhd for a purchase consideration of RM2 million, thus making Scomi Sosma Sdn Bhd a wholly-owned subsidiary of the Company. (b) Acquisition of 51% equity interest in MTrans by Scomi Engineering Bhd On 28 April 2006, the Companys subsidiary, Scomi Engineering Bhd (SEB) entered into an agreement to acquire 13,260,000 ordinary shares of RM1.00 each in MTrans Transportation Systems Sdn Bhd (MTrans), representing 51% of its issued and paid-up share capital, for a total purchase consideration of RM30 million which was settled in cash. MTrans has two wholly-owned subsidiaries, namely MTrans Technology Berhad and MTrans Bus Sdn Bhd (collectively known as the MTrans Group). On 10 July 2006, the acquisition was completed with all conditions precedent being met. On the same date, SEB and the vendor executed a Profit Guarantee Agreement and a Shareholders Agreement. (c) Conversion of RCCPS in Scomi Marine Bhd On 24 July 2006, the Company converted its entire shareholding of 160,000,000 redeemable convertible cumulative preference shares (RCCPS) in Scomi Marine Bhd (SMB) into 139,130,435 new ordinary shares of RM1.00 in SMB, thus increasing its equity interest in SMB to 42.75%. (d) Internal restructuring of the Group During the financial year, the Company had undertaken an internal restructuring of the Group which involved the restructuring of certain subsidiaries of the Company as follows: (i) (ii) (iii) (iv) The transfer of the entire shareholding in Scomi Sosma Sdn Bhd held by Scomi Oiltools Sdn Bhd to the Company; The transfer of the entire shareholding in KMCOB held by Scomi Oiltools Sdn Bhd to the Company; The transfer of the entire shareholding in Scomi Oiltools Sdn Bhd held by the Company to KMCOB; The transfer of the entire shareholding in Scomi OBM Terminal Sdn Bhd, KMC All Star Chemicals Sdn Bhd, Scomi Barite Sdn Bhd, Scomi Oiltools (Kemaman) Sdn Bhd and KMC Oiltools Overseas (M) Limited held by Scomi Oiltools Sdn Bhd to KMCOB. (collectively known as the Internal Restructuring) The transfer of Scomi Oiltools Sdn Bhds entire shareholding in KMCOB (as set out in Note 35 (d)(ii) above) was completed after the Companys acquisition (via Scomi Oiltools Sdn Bhd) of the remaining 7.55% shareholding in KMCOB from Derrick Corporation on 30 November 2006 (Derrick Shares) for a purchase consideration of USD10,034,125 (RM36,504,000). The Internal Restructuring was undertaken in conjunction with the issuance of the Murabahah Notes as set out in Note 35(g) below and the proposed listing of KMCOB as set out in Note 35(e) below. The Internal Restructuring was completed on 20 December 2006 and resulted in KMCOB becoming a wholly-owned subsidiary of SCOMI whilst Scomi Oiltools Sdn Bhd, Scomi OBM Terminal Sdn Bhd, KMC All Star Chemicals Sdn Bhd, Scomi Barite Sdn Bhd, Scomi Oiltools (Kemaman) Sdn Bhd and KMC Oiltools Overseas (M) Limited being housed directly under KMCOB.
139
35 SIGNIFICANT EVENTS DURING THE FINANCIAL YEAR (CONTINUED)

(e) Proposed listing of KMCOB Concurrent with the Companys announcement dated 9 August 2006 on the Internal Restructuring of the Group, the Company on the same date announced that it proposed to undertake a listing of KMCOB on the Singapore Exchange Securities Trading Limited (SGX-ST) (Proposed Listing of KMCOB). The proposed listing of KMCOB was expected to be implemented upon the completion of the Internal Restructuring of the Group and the Murabahah Notes. However, on 9 March 2007, the Company announced that it had resolved to defer the Proposed Listing of KMCOB until further notice, in view of the Proposed Divestment, as set out in Note 36(b). (f) Acquisition of Anticor Chimie S.A. (Anticor) On 31 August 2006, the Company, via its wholly-owned subsidiary, Scomi Sosma Sdn Bhd, acquired 4,800 ordinary shares of Euro 15 per ordinary share in Anticor Chimie S.A. (Anticor) for a total consideration of Euro 600,000 or RM3,250,134, representing a 80% equity interest in Anticor. Anticor is a company incorporated in France. (g) Issuance of RM630 million Murabahah Notes On 5 October 2006, the Company announced that KMCOB Capital Berhad (KCB), a wholly-owned subsidiary of KMCOB, proposed to undertake an issuance of up to RM630 million nominal value Murabahah Notes. The Murabahah Notes comprise 4 series notes with maturity dates ranging from four (4) years to seven (7) years from the date of issuance. The Murabahah Notes will not be listed on any stock exchange. All regulatory approvals on the Murabahah Notes had been obtained by 19 October 2006. Proceeds raised from the Murabahah Notes were drawn down on 14 December 2006 and utilised for the following: (i) settlement of intercompany advances within the Group by way of RM250 million nominal value of the Murabahah Notes being placed directly with the holders of the Companys RM500 million nominal value Medium Term Notes. (ii) (iii) repayment of bank borrowings; and working capital and future capital requirement of the KMCOB Group.
The settlement of intercompany advances within the Group (as set out in Note 35(d) above) also resulted in the Companys RM500 million nominal value Medium Term Notes being reduced to RM250 million. The issuance of the Murabahah Notes was part of the Internal Restructuring of the Group undertaken by the Group in 2006.
140
NOTES TO THE
36 SIGNIFICANT EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

(a) Proposed acquisition of 40% equity interest in MTrans On 31 January 2007, SEB entered into a Share Sale Agreement to acquire a further 10,400,002 ordinary shares of RM1.00 each in MTrans, representing 40% of the issued and paid-up share capital in MTrans, for a total purchase consideration of RM25 million which is to be satisfied in cash (Proposed Acquisition). The Share Sale Agreement is conditional upon, amongst others, the fulfilment of the following conditions within 3 months of the date of the agreement or such other date as the parties mutually agree upon in writing: (i) (ii) (iii) (iv) the approval of the Ministry of International Trade and Industry (MITI) and also the Foreign Investment Committee (FIC); the approval of the noteholders of the holding company, Scomi Group Bhd; the approval or consent of the financiers of MTrans Group, if required; and the approval of the shareholders of the vendor at a general meeting, if required, for the disposal of the shares, and the approval of the board of directors of MTrans to the transfer of the shares.
On 3 April 2007, the Company announced that all conditions precedent have been satisfied and the parties to the agreement have agreed to complete the Proposed Acquisition on this day. (b) Proposed divestment of 19.9% equity interest in Scomi Oilfield Limited (SOL) On 9 March 2007, the Company announced the divestment of 19.9% in the respective classes of the share capital of SOL, a direct subsidiary of the Company, to Standard Chartered Private Equity Limited for a cash consideration of USD99.50 million (Proposed Divestment). SOL was incorporated in Bermuda on 6 March 2007 as a company limited by shares under its current name. SOL is principally an investment holding company. For the purpose of the Proposed Divestment, KMCOB, a direct subsidiary of the Company, will be made a wholly-owned subsidiary of SOL through a restructuring exercise to be undertaken. The Proposed Divestment is subject to amongst others, approval from the Securities Commission, the holders of the Companys existing RM250 million Medium Term Notes and shareholders of the Company. (c) Proposed disposal of 100% equity interest in SCOTS by SEB On 20 March 2007, SEB entered into a share sale agreement to dispose of 500,000 ordinary shares of RM1.00 each in Scomi Transportation Solutions Sdn Bhd (SCOTS), representing 100% of the issued and paid-up share capital of the company, for a total sale consideration of RM3.8 million to be satisfied in cash (Proposed Disposal). SCOTS has a wholly-owned subsidiary, Asian Rent-A-Car Sdn Bhd (collectively known as the SCOTS Group). The Proposed Disposal is conditional upon, amongst others, the fulfillment of the following conditions within 3 months of the share sale agreement subject to such extension as the parties may mutually agree: (i) (ii) (iii) (iv) (v) the approval of the FIC; the approval of the shareholders of the Company (if required) for the disposal of the shares; approval and consent of the financiers of the Group (if required); the regulatory authorities issuing the licences and/or permits to the Group to conduct the business; and any other regulatory authorities.
The completion of the share sale agreement is also subject to the net equity in the SCOTS Group on completion date being at least zero or in the event the net equity is negative, the Company shall reimburse SCOTS an amount sufficient so that net equity is at least zero.
141
37 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The Groups financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Groups businesses whilst managing its interest rate, foreign exchange, liquidity and credit risks. The Group operates within clearly defined guidelines that are approved by the Board and the Groups policy is not to engage in speculative transactions. (a) Interest rate risk The Groups primary interest rate risk relates to interest-bearing debt; the Group had no substantial long term interest-bearing assets as at 31 December 2006. The investments in financial assets are mainly short term in nature and have been placed mostly in fixed deposits and occasionally, in short term commercial paper and investment funds. The Group manages its interest rate exposure by maintaining a mix of fixed and floating rate borrowings. The Group reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to capitalise on cheaper funding in a low interest rate environment and achieve a certain level of protection against rate hikes. The Group also uses hedging instruments such as interest rate swaps to minimise its exposure to interest rate volatility. The information on maturity dates and effective interest rates of financial assets and liabilities are disclosed in the respective notes. (b) Foreign exchange risk The Group operates internationally and is exposed to various currencies, mainly United States Dollar, Pounds Sterling, Canadian Dollar, Norwegian Kroner, Nigerian Naira, Australian Dollar and Singapore Dollar. Foreign currency denominated assets and liabilities together with expected cash flows from highly probable purchases and sales give rise to foreign exchange exposures. The Group maintains a natural hedge, whenever possible, by borrowing in currencies or entering into CCIRS that match the future revenue stream to be generated from its investments. Foreign exchange exposures in transactional currencies other than functional currencies of the operating entities are kept to an acceptable level. (c) Liquidity risk The Group manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that refinancing, repayment and funding needs are met. As part of its overall liquidity management, the Group maintains sufficient levels of cash or cash convertible investments to meet its working capital requirements. In addition, the Group strives to maintain available banking facilities at a reasonable level to its overall debt position. As far as possible, the Group raises committed funding from both capital markets and financial institutions and balances its portfolio with some short term funding so as to achieve overall cost effectiveness. (d) Credit risk Credit risk or the risk of counterparties defaulting, are controlled by the application of credit approvals, limits and monitoring procedures. Credit risks are minimised and monitored by limiting the Groups associations to business partners with high creditworthiness. Trade receivables are monitored on an ongoing basis via Group management reporting procedures. The Group does not have any significant exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial instruments.
142
NOTES TO THE
38 CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

Estimates and judgments are continually evaluated by the Directors and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Critical accounting estimates and assumptions The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, rarely equal the related actual results. To enhance the information content of the estimates, certain key variables that are anticipated to have material impact to the Groups 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. Estimated impairment of goodwill The Group tests goodwill for impairment annually in accordance with its accounting policy. More regular reviews are performed if events indicate that this is necessary. The recoverable amounts of cash generating units (CGU) were determined based on the value in use calculations. The calculations require the use of estimates as set out in Note 6. The Directors are of the opinion that any reasonably expected change in the key assumptions used to determine the recoverable amounts of the CGUs, would not result in any impairment of the goodwill allocated to the respective CGUs. Critical judgement in applying accounting policies In determining and applying accounting policies, judgement is often required in respect of items where the choice of specific policy could materially affect the reported results and financial position of the Group. However, the Directors are of the opinion that there are no accounting policies that require subjective judgement in the current financial year.
39 CHANGES IN ACCOUNTING POLICIES AND RESTATEMENT OF COMPARATIVE FIGURES

The list of new accounting standards, amendments to published standards and interpretations of existing standards that are effective for the Companys accounting periods beginning on or after 1 January 2006 is set out in Note 2. The following describes the impact of new standards, amendments and interpretations on the financial statements of the Group and Company. (a) Immaterial effect on financial statements The adoption of FRS 5, 102, 108, 110, 116, 121, 128, 131, 132, 133 and ICs did not have a material impact on the financial statements of the Group and Company. In summary: FRS 5 requires the Group and Company to continue to depreciate its property, plant and equipment where assets identified for disposal do not meet the criteria set out by that standard: previously depreciation ceased when Board has plans to sell the assets. FRS 102, 108, 110, 116, 121, 128, 131, 132 and 133 and ICs had no material effect on the Companys policies.
143
39 CHANGES IN ACCOUNTING POLICIES AND RESTATEMENT OF COMPARATIVE FIGURES (CONTINUED)

(b) Reclassification of prior year comparatives (i) Set out below are changes in accounting policies that resulted in reclassification of prior year comparatives but did not affect the recognition and measurement of the Group and Companys net assets: Under FRS 101, the Groups share of results of associates is now shown net of tax; and FRS 140 resulted in the reclassification of certain land and buildings from property, plant and equipment to investment properties. The effects of the above standards on the Group and Companys financial statements for the current and prior financial years are set out in Note 39(e) and (f ). (ii) The Company has adjusted for retrospectively, the effects of the Put and Call Option arrangement that the Company has with a vendor of KMCOB, Christopher Robert Pianca, as disclosed in Note 31(d) to the financial statements, as part of the cost of acquisition of KMCOB, as this represents a contingency effecting the purchase consideration that was probable and for which a reliable estimate could be made. The effect of this adjustment is to increase goodwill and minority interest by RM83,683,000 and RM4,768,000 respectively, with a corresponding increase in liability of RM88,451,000. The effects of these adjustments are set out in Note 39(f ). (c) FRS 3 Business combinations, FRS 136 Impairment of assets and FRS 138 Intangible Assets Business combinations Previously, where shares were issued as cost of business combination, the measurement of the shares issued were that valued by independent advisers and agreed upon by the parties to the acquisition. Under FRS 3, fair value of the shares at the date of exchange is used instead. Previously, intangible assets acquired in a business combination are recognised if, and only if, the probability recognition criterion was met. Under FRS 3, the probability recognition criterion for intangible assets is always considered to be satisfied. In addition, the cost of business combination is now allocated to contingent liabilities of the entity acquired. However, there is no effect on the consolidation financial statements from the acquisitions during the financial year. (d) FRS 140 Investment properties The adoption of FRS 140 has resulted in a change in accounting policy for investment properties. The definition of investment properties under FRS 140 has resulted in identification of additional assets of the Group that meet the definition of investment properties. These properties are now classified into a separate asset category on the balance sheet. Previously, investment properties were included in property, plant and equipment. Investment properties are stated at cost less accumulated depreciation and impairment losses. Previously, investment property was included within property, plant and equipment and stated at cost less subsequent depreciation and impairment losses. Any surpluses arising on revaluation was credited to revaluation reserves. Leasehold land was amortised in equal instalments over the period of the respective leases that ranges from 7 to 999 years while commercial buildings and apartments were amortised at 2% annually.
144
NOTES TO THE
39 CHANGES IN ACCOUNTING POLICIES AND RESTATEMENT OF COMPARATIVE FIGURES (CONTINUED)

(e) Restatement of the income statement for the financial year ended 31 December 2005 The following tables disclose the adjustments that have been made in accordance with the transitional and new provisions of the respective FRSs to each of the line items in the Groups income statements for the financial year ended 31 December 2005: As previously reported RM000 Share of results in associates Share of results of jointly controlled entities Tax expenses 7,251 33 14,773 Reclassification (Note 39(b)) RM000 (822) (14) (836) As restated RM000 6,429 19 13,937
(f)
Restatement of balance sheet as at 31 December 2005 The following tables disclose the adjustments that have been made in accordance with the transitional and new provisions of the respective FRSs to each of the line items in the Groups balance sheet for the financial year ended 31 December 2005. Group As previously stated RM000 As 31 December 2005 Property, plant and equipment Investment property, previously classified in property, plant and equipment Deferred tax liabilities Deferred tax assets Other payables current liabilities Provision for redundancy current Provision for redundancy non-current Goodwill on consolidation Minority interest Non-current other payables 332,876 4,816 3,528 432,990 45,904 20,835 330,950 1,926 6,471 1,655 2,653 6,648 516,673 41,136 102,638 As restated RM000
Company As previously stated RM000 As 31 December 2005 Investments in subsidiaries Non-current other payables 298,067 386,518 88,451 As restated RM000
STATEMENT BY
145
DIRECTORS
PURSUANT TO SECTION 169(15) OF THE COMPANIES ACT, 1965

We, Tan Sri Datuk Asmat Bin Kamaludin and Shah Hakim @ Shahzanim bin Zain, being two of the Directors of Scomi Group Bhd., state that, in the opinion of the Directors, the financial statements set out on pages 62 to 144 are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 31 December 2006 and of the results and the cash flows of the Group and Company for the financial year ended on that date in accordance with the provisions of the Companies Act, 1965 and the 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 20 April 2007.
TAN SRI DATUK ASMAT BIN KAMALUDIN CHAIRMAN
SHAH HAKIM @ SHAHZANIM BIN ZAIN CHIEF EXECUTIVE OFFICER
STATUTORY
DECLARATION
PURSUANT TO SECTION 169(16) OF THE COMPANIES ACT, 1965
I, Loong Chun Nee, the officer primarily responsible for the financial management of Scomi Group Bhd., do solemnly and sincerely declare that the financial statements set out on pages 62 to 144 are, in my opinion, correct and I make this solemn declaration conscientiously believing the same to be true, and by virtue of the provisions of the Statutory Declarations Act, 1960.
LOONG CHUN NEE Subscribed and solemnly declared by the abovenamed Loong Chun Nee at Kuala Lumpur in Malaysia on 20 April 2007, before me.
No W315 SOH AH KAU COMMISSIONER FOR OATHS
REPORT OF THE
146
AUDITORS
TO THE MEMBERS OF SCOMI GROUP BHD (Company No. 571212 A) (Incorporated in Malaysia)
We have audited the financial statements set out on pages 62 to 144. These financial statements are the responsibility of the Companys Directors. It is our responsibility to form an independent opinion, based on our audit, on these financial statements and to report our opinion to you, as a body, in accordance with Section 174 of the Companies Act, 1965 and for no other purpose. We do not assume responsibility to any other person for the content of this report. We conducted our audit in accordance with approved auditing standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and the MASB Approved Accounting Standards in Malaysia for Entities Other Than Private Entities so as to give a true and fair view of: (i) (ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and the state of affairs of the Group and Company as at 31 December 2006 and of the results and cash flows of the Group and Company for the financial year ended on that date; and (b) the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act. The names of the subsidiaries of which we have not acted as auditors are indicated in Note 8 to the financial statements. We have considered the financial statements of these subsidiaries and the auditors reports thereon. We are satisfied that the financial statements of the subsidiaries that have been consolidated with the Companys financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment made under subsection 3 of section 174 of the Act.
PRICEWATERHOUSECOOPERS (No. AF: 1146) Chartered Accountants Kuala Lumpur 20 April 2007
SRIDHARAN NAIR (No. 2656/05/08 (J)) Partner of the firm
147
ANALYSIS OF
SHAREHOLDINGS
AS AT 30 APRIL 2007
Authorised share capital Issued and paid-up capital Types of shares Voting Rights
: : : :
RM300,000,000.00 divided into 3,000,000,000 ordinary shares of RM0.10 each. RM100,748,080.00 divided into 1,007,480,800 ordinary shares of RM0.10 each. This included 5,818,900 ordinary shares purchased by the Company under share buy-back scheme and retained as treasury shares. Ordinary shares of RM0.10 each. One vote per ordinary share.
DISTRIBUTION OF SHAREHOLDINGS
Size of Shareholdings Less than 100 100 to 1,000 1,001 to 10,000 10,001 to 100,000 100,001 to less than 5% of issues shares 5% and above of issues shares Total
AS AT 30 APRIL 2007 Shareholders No. of Holders 8 2,624 8,222 2,409 419 4 13,686 % of Holders 0.06 19.17 60.08 17.60 3.06 0.03 100.00 Shareholding No. of Shares 114 2,478,486 38,746,100 76,390,200 441,177,175 442,869,825 1,001,661,900 % of Shares 0.00 0.25 3.87 7.63 44.04 44.21 100.00
148
ANALYSIS OF
SHAREHOLDINGS
AS AT 30 APRIL 2007 (CONTD.)
LIST OF TOP THIRTY (30) LARGEST SHAREHOLDERS

Name of Shareholder
AS AT 30 APRIL 2007 No. of Shares Percentage (%)
1. 2.
Onstream Marine Sdn Bhd RHB Merchant Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Kaspadu Sdn Bhd
134,396,630 84,115,055
13.42 8.40
3.
Cartaban Nominees (Asing) Sdn Bhd State Street Luxembourg Fund A5FK for AXA World Funds-Talents
56,155,357
5.61
4.
CIMB Group Nominees (Tempatan) Sdn Bhd Shah Hakim @ Shahzanim Bin Zain for Kaspadu Sdn Bhd (48580 Suya)
50,000,000
4.99
5.
Citigroup Nominees (Tempatan) Sdn Bhd Exempt An for Prudential Assurance Malaysia Berhad
37,122,800
3.71
6.
HSBC Nominees (Asing) Sdn Bhd FGCS NV for Fortis Obam N. V.
30,000,000
3.00
7.
EB Nominees (Tempatan) Sendirian Berhad Pledged Securities Account for Kaspadu Sdn Bhd (SFC)
24,000,000
2.40
8.
RHB Merchant Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Kaspadu Sdn Bhd (H)
20,000,000
2.00
9.
HSBC Nominees (Asing) Sdn Bhd BNP Paribas Securities Services Paris for Talents
18,499,000
1.85
10. 11.
Employees Provident Fund Board RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Kaspadu Sdn Bhd (MSHM761006)
15,123,725 14,700,000
1.51 1.47
12.
HSBC Nominees (Asing) Sdn Bhd Exempt An for Morgan Stanley & Co. Incorporated
14,163,200
1.41
13.
DB (Malaysia) Nominee (Asing) Sdn Bhd Exempt An for Deutsche Bank AG London (Stark)
12,656,700
1.26
14.
RHB Capital Nominees (Tempatan) Sdn Bhd Pledged Securities Account for Kaspadu Sdn Bhd (SBSSB1311005)
12,000,000
1.20
15. 16.
Lim Fong Peng @ Lim Fung Feng HSBC Nominees (Asing) Sdn Bhd Exempt An for JPMorgan Chase Bank, National Association (U.K.)
10,609,520 10,573,100
1.06 1.06
17.
M & A Nominee (Asing) Sdn Bhd Exempt An for UOB Kay Hian Pte Ltd (A/C Clients)
10,535,000
1.05
18.
HSBC Nominees (Tempatan) Sdn Bhd Nomura Asset Mgmt Sg for Employees Provident Fund
10,393,100
1.04
19.
SBB Nominees (Tempatan) Sdn Bhd Kumpulan Wang Amanah Pencen
10,377,000
1.04
149
Name of Shareholder
No. of Shares
Percentage (%)
20.
CIMSEC Nominees (Tempatan) Sdn Bhd CIMB Bank for Symphony Advisory Services Sdn Bhd (Retail Banking)
10,000,000
1.00
21.
SBB Nominees (Tempatan) Sdn Bhd Employees Provident Fund Board
8,850,000
0.88
22. 23. 24.
Abdul Aziz Bin Mohd Zain Tay Kheng Seng Cartaban Nominees (Asing) Sdn Bhd Investors Bank and Trust Company for Ishares, Inc.
8,787,885 8,235,060 7,754,500
0.88 0.82 0.77
25.
Cartaban Nominees (Asing) Sdn Bhd State Street Luxembourg Fund A5HK for AXA World Funds-Talents Bricks
7,428,500
0.74
26.
HSBC Nominees (Asing) Sdn Bhd Exempt An for Credit Suisse (SG BR-TST-Asing)
7,120,000
0.71
27.
Citigroup Nominees (Asing) Sdn Bhd CB GW Spore for American International Assurance Co. Ltd (AIA Reg Eqty Fd)
6,448,300
0.64
28.
HSBC Nominees (Asing) Sdn Bhd Exempt An for Morgan Stanley & Co. International PLC
6,036,000
0.60
29.
Cartaban Nominees (Asing) Sdn Bhd State Street Luxembourg Fund A5GK for AXA World Funds-Talents Absolute
6,007,043
0.60
30.
HSBC Nominees (Asing) Sdn Bhd TNTC for Legal and General Pacific Growth Trust (RBS AS Trustee)
5,400,000
0.54
Total
657,487,475
65.66
150
ANALYSIS OF
SHAREHOLDINGS
AS AT 30 APRIL 2007 (CONTD.)
SUBSTANTIAL SHAREHOLDERS
Name of Shareholders Kaspadu Sdn Bhd Onstream Marine Sdn Bhd Shah Hakim @ Shahzanim bin Zain Dato Kamaluddin bin Abdullah AXA Investment Managers AXA S.A Notes 1
AS AT 30 APRIL 2007 Direct Shareholding No. of Shares Held 209,815,055(1) 135,521,970 1,589,100 95,943,700
(4)
Indirect Shareholding % 20.95 13.53 0.16 9.58 No. of Shares Held 135,521,970(2) 345,337,025
(3)
% 13.53 34.48 34.48 9.58
345,337,025 95,943,700
(3)
(5)
204,815,055 shares held through RHB Capital Nominees (Tempatan) Sdn Bhd, RHB Merchant Nominees (Tempatan) Sdn Bhd, BumiputraCommerce Nominees (Tempatan) Sdn Bhd and EB Nominees (Tempatan) Sdn Bhd.
2 3 4 5
Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through its shareholding in Onstream Marine Sdn Bhd. Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd. Held through Bank of New York (Luxembourg), S.A. Brussels Branch, State Street Bank Luxembourg, S.A. and BNP Paribas Securities Services. Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through its shareholding in AXA Investment Managers.
151
DIRECTORS SHAREHOLDINGS
AS AT 30 APRIL 2007 Direct Interest No. of % of Shares 0.02 No. of Options 1,000,000# Indirect Interest No. of Shares 10,000 % of Shares *
Directors Tan Sri Datuk Asmat bin Kamaludin
Designation Independent Non-Executive Chairman
Shares 200,000
Tan Sri Nik Mohamed Nik Yaacob
Independent Non-Executive Director
600,000#
600,000#
120,000(1)
0.01
600,000#
600,000#
Non-Independent Non-Executive Director
600,000#
10,050,000(2)
1.00
Foong Choong Hong
Non-Independent Non-Executive Director
160,000
0.02
600,000#
Sreesanthan A/L Eliathamby
Shah Hakim @ Shahzanim bin Zain
Non-Independent Executive Director/CEO
1,589,100
0.16
7,356,500#
345,337,025(3)
34.48
Related Company Shah Hakim @ Shahzanim bin Zain *** Scomi Engineering Bhd Notes: *
#
2,000,000**
192,567,567
71.00
Negligible. Options granted pursuant to the Companys Employees Share Options Scheme to subscribe for ordinary shares in the Company. Options granted pursuant to Scomi Engineering Bhds (SEB) Employees Share Options Scheme to subscribe for ordinary shares in SEB. By virtue of his interests in the shares and options in SGB, the holding company of the Company, as disclosed above, he is deemed to have an interest in shares in all the subsidiaries of SGB.
** ***
(1) (2)
Held through Bumiputra-Commerce Nominees (Tempatan) Sdn Bhd. Deemed interested by virtue of Section 6A (4) of the Act, through his and his wifes direct shareholdings in Gajahrimau Capital Sdn Bhd, of which 10,000,000 shares are held through CIMSEC Nominees (Tempatan) Sdn Bhd.
(3)
Deemed interested by virtue of Section 6A (4) of the Act through his shareholding in Kaspadu Sdn Bhd.
152
LIST OF
PROPERTIES
AS AT 31 DECEMBER 2006
Registered Owner
Description/ Location Address
Existing Use
Tenure of land: ie. freehold or Leasehold (years)/ Date of Acquisition Freehold 15.04.1996
Land area/ Built-up area
Approximate age of building
Audited net book value as at 31.12.2006 (RM000) Building: 10,596 Land: 8,020
Mtrans Bus S/B (formerly known as Transcoach Sdn Bhd)
Land and Building: EMR 2751 Lot 795 and EMR 2616 Lot 796 Mukim Serendah, Daerah Hulu Selangor
Factory and Office
Land area: 61,714 sq metres Built-up area: 14,056 sq metres 7,467 sq meters for workshop, office and 2,440 sq meters for staff house
10 years
PT OMS Oilfield Services
Land: Jl. Mulawarman, RT 022 RW 07, Sepinggan Balikpapan Selatan, Kalimantan, Indonesia Land: (Lot 926C Mukim 7) and Leasehold Building: 48 Gul Circle Singapore 629581
Workshop, Office and staff house
Leasehold for 20 years (until 24.09.2026) for Office and 7 years for staff house
N/A
Land: 2,591
Scomi OMS Oilfield Services Pte Ltd
Workshop/Office
Leasehold (remaining 12 years 7 months, until 2018) 01.01.1978
Land area: 150,388 sq ft Built up area: 28,772 sq ft
19 years
Building: 1,949 Land:
Scomi Oiltools Sdn Bhd (formerly known as Kota Minerals & Chemicals Sdn Bhd)
Master Title: Five-storey Land held under shop office Geran 46494, Lot 42410 Pekan Cempaka Daerah Petaling Negeri Selangor (formerly known as PT 42410 H.S.(D) 135924 part of Geran 35997 Lot 102, Geran 40176 Lot 15386 and Geran 43061 Lot 15386, Mukim Sungai Buloh Daerah Petaling, Negeri Selangor) Postal address: No. 1-1, Block C1 Jalan PJU 1/41 Dataran Prima 47301 Petaling Jaya Selangor Darul Ehsan
Freehold 31.10.1999
Land area: Not applicable Built-up area: 11,755 sq ft
9 years (since 1997)
Land & building: 1,782
153
Registered Owner
Description/ Location Address
Existing Use
Tenure of land: ie. freehold or Leasehold (years)/ Date of Acquisition Leasehold for 20 years (until 13.03.2012) and 7 years for staff house
Land area/ Built-up area
Approximate age of building
Audited net book value as at 31.12.2006 (RM000) Building: 893
PT OMS Oilfield Services
Building: Jl. Mulawarman, RT 022 RW 07, Sepinggan Balikpapan Selatan, Kalimantan, Indonesia Kemaman Warehouse No 24 Kemaman Supply Base Terengganu
Workshop, Office and staff house
2,291 sq metres for workshop, office and 343 sq meter for staff house
9 years
Two further warehouses in addition to the Original KSB Warehouse for storage purposes (WH1 and WH2) Warehouse for office use, laboratory, milling and storage activities (Original KSB Warehouse) Shop, office, yard
Not applicable WH1 25.02.1994 WH2 28.05.1997
Land area: Not applicable Built-up area: WH1-32,400 sq ft WH2-12,800 sq ft
WH1-11 years (since 1995) WH2-7 years (since 1999)
Building: 888
Kemaman Warehouse No 24 Kemaman Supply Base Terengganu
Not applicable 15.11.1991
Building: 775
Scomi Oiltools Inc
Land and Building: 1601 SE 39th Street, Oklahoma City, OK 73129
Freehold 18.09.1998
1 acre, 5,000 sq ft
25 years
Building: 173 Land: 353
KMC Oiltools de Venezuela, S.A.
Land and Building: Via Los Pilones, KM 1, Anaco, Edo. Anzoategui, Venezuela Asian Supply Base Ranca-Ranca Industrial Estate Letter Box No 82023 87030 Labuan FT
PIMSA Machine Shop
Freehold 01.10.2000
Land area: 68,700 sq ft Structure: 22,200 sq ft
42 years
Building: 127 Land: 145
Warehouse for office use and storage activities
Not applicable 12.08.1993
Building: 211
154
CORPORATE
DIRECTORY
CORPORATE
Scomi Group Bhd 5th Floor Wisma Chase Perdana Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur Malaysia Tel : +603 2080 5080 Fax : +603 7490 5131 Scomi Oiltools (S) Pte Ltd 1, Raffles Place #26-01 OUB Centre Singapore 048616 Tel : +65 6324 5338 Fax : +65 6324 5331 Scomi Engineering Bhd 5th Floor Wisma Chase Perdana Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur Malaysia Tel : +603 2080 6222 Fax : +603 2080 6333 Scomi Marine Bhd 5th Floor Wisma Chase Perdana Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur Malaysia Tel : +603 2080 6200 Fax : +603 2080 5191 Scomi Oilserve Sdn Bhd (formerly known as Oilserve Marine Sdn Bhd) 5th Floor Wisma Chase Perdana Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur Malaysia Tel : +603 2080 5080 Fax : +603 2080 5028
OPERATING LOCATIONS
ALGERIA KMC Oiltools Algerie EURL BP 429, Zone Industrielle Bir Messaoud Hassi Messaoud W, Ouargala AMERICA-LATIN (ANACO) KMC Oiltools De Venezuela SA Av Jose Antonio Anzoategui Sector El Cinco Anaco Estado Anzoategui, Venezuela AMERICA-LATIN (BARINAS) KMC Oiltools De Venezuela SA Urbanizacion Alto Barinas Av Los Andes, C C Dona Grazla Piso 2, Ofc 4, Barinas Estado Barinas, Venezuela AMERICA-LATIN (CUIDAD OJEDA) KMC Oiltools De Venezuela SA Avenida Intercomunal Calle Arague, Sector La Playa #12 Ciudad Ojeda Estado Zulian, Venezuela AMERICA-LATIN (MATURIN) KMC Oiltools De Venezuela SA Av Raul Leoni Urbanizaction Juanico Torre Empresarial Juanico piso 7 ofic 7-3, Maturin Estado-Monagas, Venezuela AMERICA-NORTH (BAKERSFIELD) Scomi Oiltools Inc 6000, C Schirra Court Bakersfield, California 93311 USA AMERICA-NORTH (BRIDGEPORT) Scomi Oiltools Inc 5762, HWY 380, Bridgeport Texas 76426 USA AMERICA-NORTH (BROUSSARD) Scomi Oiltools Inc 216, Milestone Road Broussard, LA 70548, USA
AMERICA-NORTH (CHICKASHA) Scomi Oiltools Inc 3103, US Hwy 62 West Chickasha, Oklahoma 73018 USA AMERICA-NORTH (CORPUS CHRISTI) Scomi Oiltools Inc 416, South Navigation Corpus Christi, Texas 78405 USA AMERICA-NORTH (DAYTON) Scomi Oiltools Inc 2811, N Cleveland Street Dayton, Texas 77535 USA AMERICA-NORTH (HOBBS) Scomi Oiltools Inc 2805, NW Country Road Hobbs, New Mexico 88240 USA AMERICA-NORTH (HOUSTON) Scomi Oiltools Inc 521, N Sam Houston Parkway East, #300 Houston, TX 77060 USA AMERICA-NORTH (OKLAHOMA CITY) Scomi Oiltools Inc 1601, SE 39th Oklahoma City Oklahoma 73129 USA ANGOLA Oiltools (Africa) Limited Rue Dr Aires de Menezes No 45/47, Luanda Angola AUSTRALIA (PERTH) KMC Oiltools 15, Bolder Road Malaga, Western Australia 6090 Australia BANGLADESH (DHAKA) KMC Oiltools Ltd 7th Floor, Cosmos Centre 69/1, New Circular Road Malibagh, Dhaka-1217 Bangladesh
CANADA (CALGARY) KMC Oiltools (Canada) Inc Bow Valley Square II 700, 205-5 Avenue SW Calgary, Alberta T2P 2V7 Canada CANADA (NISKU) KMC Oiltools (Canada) Inc #3, 700-15 Avenue Nisku, Alberta T9E 7S2 Canada CHINA (BEIJING) KMC Oiltools (S) Pte Ltd Rm 1507, Tower B Eagle Plaza No 26, Xiao Yun Road Chaoyang District Beijing 100016 China CHINA (SHEKOU) KMC Oiltools (S) Pte Ltd Room 31FG, 31st Floor Times Plaza No 1, Taizi Road Shekou, Shenzhen 518067 P R China CHINA (TANGGU) KMC Oiltools (S) Pte Ltd A-1704, Teda New Skyline No 12, Nan Hai Road Teda Tianjin P R China 300457 CONGO (POINTE NOIR) Oiltools (Africs) Limited BP 685, Pointe Noire Republic Du Congo EGYPT (CAIRO) KMC Oiltools Egypt S A E KM 10, Ain Sukhna Road Kattamina Oilfield Services Complex, Cairo Egypt INDIA (MUMBAI) KMC Oiltools India Private Ltd 912A, Solitaire Corporate Park Andheri-Ghatkopar Link Road Chakala, Andheri (East) Mumbai 400093, India
155
INDONESIA (BALIKPAPAN) PT Inti Jatam Pura Jl Mulawarman Rt 23 Rw 08 No 115 Balikpapan 76115 East Kalimantan Indonesia INDONESIA (BATAM) PT Inti Jatam Pura Jl Ir Sutami, Kawasan Industri Sekupang Batam Island 29422 Indonesia INDONESIA (DURI) PT Inti Jatam Pura Jl Raya Duri Dumai Km 131 Duri, Pekanbaru Sumatera Indonesia 28271 INDONESIA (JAKARTA) PT Inti Jatam Pura Gedung Tetra Pak Suite 101/104/103 Jl Buncit Raya Kav 100 Jakarta Selatan 12510 IRAN (TEHRAN) KMC Oiltools (Cayman) Ltd #12, 2nd Floor, Mowj Tower (No 36), Shahid Sarafaz St Shahid Behesti St Tehran 1587653111, Iran KAZAKHSTAN (CASPIAN REGION) KMC Oiltools (Europe) Limited Pionerskaya Street 1A Atyrau Kazakhstan, 060002 KUWAIT (AGENT) KMC Oiltools (Cayman) Ltd Behind Commercial Bank of Kuwait (East Ahmadi Branch) Plot No 131 to 137 Block No 06 PO Box 9713 Ahmadi 61008 Kuwait MALAYSIA (KEMAMAN) Scomi Oiltools (Kemaman) Sdn Bhd (formerly known as Kota Minerals & Chemicals Sdn Bhd) Warehouse 24, Letterbox No 72 Kemaman Supply Base 24007 Kemaman, Terengganu
MALAYSIA (KUALA LUMPUR) Scomi Oiltools Sdn Bhd (formerly known as Kota Minerals & Chemicals Sdn Bhd) 5th Floor Wisma Chase Perdana Off Jalan Semantan Damansara Heights 50490 Kuala Lumpur, Malaysia MALAYSIA (LABUAN) Scomi Oiltools Sdn Bhd (formerly known as Kota Minerals & Chemicals Sdn Bhd) Asian Supply Base Ranca-Ranca Industrial Estate PO Box 82023 87018 Labuan FT East Malaysia MALAYSIA (MIRI) Scomi Oiltools Sdn Bhd (formerly known as Kota Minerals & Chemicals Sdn Bhd) Lot 2164, 1st Floor Seberkas Commercial Centre Jalan Pujut-Lutong 98000 Miri, Sarawak MEXICO (VILLAHERMOSA) KMC Oiltools De Mexico Calle 1, Nave Parque Industrial DEIT Carr. Federal Villahermosa Cardenas, KM 25 Villahermosa Tabasco CP86103 NEW ZEALAND KMC Oiltools (NZ) Pty Ltd 4, Mission Street Moturoa, New Plymouth New Zealand NIGERIA (LAGOS) Wasco Oil Service Co (NIG) Ltd Plot 16, Waziri Ibrahim Street Victoria Island, Lagos Lagos State, Nigeria NIGERIA (PORT HARCOURT) Wasco Oil Service Co (NIG) Ltd Plt 56/57, Trans Amadi PMB 005/TA, PO Box 5891 Port Harcourt Rivers State, Nigeria
NORWAY (STAVENGER) Scomi Oiltools Norge Lervigsveien 16 4014 Stavenger, Norway OMAN (RUWI) Zubair Oiltools L.L.C. Zubair Furnishing Compound Opposite Hamdan Transport Azaiba Height Sultanate of Oman PAKISTAN (ISLAMABAD) KMC Oiltools Ltd Plot No 436, Street #11A Sector 1-9/2 Islamabad, Pakistan QATAR (DOHA) KMC Oiltools (Cayman) Ltd c/o Salam Petroleum PO Box 22084 Doha, Qatar RUSSIA (MOSCOW) KMC Oiltools Ltd 4th Floor, Bldg 3, 6 1st, Kolobovsky per Moscow 27051 SAUDI ARABIA KMC Oiltools Eurotechnology Yard Dhahran-Jubail Highway Opposite Dammam TV Station Dammam, Saudi Arabia SUDAN (KHARTOUM) KMC Oiltools Overseas Co Ltd Building 152, Block 183 El Geraif Gharb, Khartoum Republic of Sudan THAILAND (BANGKOK) KMC Oiltools (Thailand) Limited 13th Floor, CTI Tower 191/77, Ratchadapisek Road Kwaeng Kongtoey Bangkok 10110, Thailand THAILAND (LANKRABUE) KMC Oiltools (Thailand) Limited 163, Moo 6 Tumbol Lankrabue Amphur Lankrabue Kamphaengphet 62170 Thailand
TURKMENISTAN (ASHGABAT) KMC Oiltools Turkmenistan Ltd Ashgabat City 74000 Azadt Street 95 A Navoi Street 68 A 2022/102 TURKMENISTAN (TURKMENBASHY) KMC Oiltools Ltd Turkmenistan Shagadam Street 8 Office 206 204, (Ferry Station Belding) Turkmenistan 745000 U.A.E (ABU DHABI) KMC Oiltools (Cayman) Ltd c/o Al Roumi General Trading PO Box 45333 Abu Dhabi United Arab Emirates U.A.E. (DUBAI) KMC Oiltools (Cayman) Ltd Oilfield Supply Centre Building B-10, Jebel Ali Free Zone Dubai United Arab Emirates UNITED KINGDOM (ABERDEEN) KMC Oiltools (Europe) Ltd Denmore House, Denmore Road Bridge of Don Industrial Estate Aberdeen AB23 8JW Scotland, UK UNITED KINGDOM (LERWICK) Shetland Oiltools Limited Greenhead Site Lerwick, Shetland ZE1 OPY VIETNAM KMC Oiltools Pte Ltd c/o PTSC Supply Base 65A, 30/4 Road, Thang Nhat Ward, Vung Tau City S R Vietnam YEMEN (SANAA) KMC Oiltools (Cayman) Ltd Arabian Oilfield Supplies & Services FZE PO Box 18164 Sanaa, Republic of Yemen
156
NOTICE OF
ANNUAL GENERAL MEETING
NOTICE IS HEREBY GIVEN that the Fifth Annual General Meeting of SCOMI GROUP BHD (the Company) will be held at Nirvana Ballroom, Crowne Plaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on 22nd June 2007 at 10.00 a.m. for the following purposes:AS ORDINARY BUSINESS: To consider and, if thought fit, to pass the following as Ordinary Resolutions: 1. To receive and adopt the Financial Statements for the financial year ended 31st December 2006 and the Reports of the Directors and Auditors thereon. 2. To approve the declaration of a first and final dividend 15 percent (15%) less tax for the financial year ended 31st December 2006. To re-elect the following Directors who are retiring in accordance with Article 82 of the Articles of Association of the Company: (i) (ii) (iii) 4. 5. Tan Sri Datuk Asmat bin Kamaludin Tan Sri Nik Mohamed bin Nik Yaacob Dato Mohammed Azlan bin Hashim (Resolution 3) (Resolution 4) (Resolution 5) (Resolution 6)
(Resolution 1)
(Resolution 2)
3.
To approve the payment of Directors fees for the financial year ended 31st December 2006. To re-appoint Messrs. PricewaterhouseCoopers as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. To transact any other ordinary business of the Company for which due notice shall have been given.
(Resolution 7) (Resolution 8)
6.
AS SPECIAL BUSINESS: To consider and, if thought fit, to pass the following as Ordinary Resolutions: 7. Authority to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965 THAT, subject to the Companies Act, 1965, 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 allot and issue 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 in any one year does not exceed ten percent (10%) of the issued and paid-up share capital of the Company at any time 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 and that such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company. By Order of the Board
(Resolution 9)
CHONG MEI YAN (MAICSA 7047707) KUOK YEW LEE (MAICSA 7052080) Company Secretaries Kuala Lumpur Date: 31st May 2007
157
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. 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 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. The instrument appointing a proxy must be completed and deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn Bhd at Level 26, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than forty-eight (48) hours before the time appointed for holding the Annual General Meeting or any adjournment thereof.
(iii)
Note 2: Explanatory Note on Item 7 of the Agenda (Resolution 9) The ordinary resolution under Item 7 above is proposed pursuant to Section 132D of the Companies Act, 1965, and if passed, will give the Directors of the Company from the date of the above Annual General Meeting, authority to issue and allot shares from the unissued share capital of the Company for such purposes as the Directors deem fit and in the interest of the Company. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next Annual General Meeting of the Company.
(iv)
158
STATEMENT ACCOMPANYING THE

NOTICE OF FIFTH ANNUAL GENERAL MEETING
1.
DIRECTORS STANDING FOR RE-ELECTION AT THE FIFTH ANNUAL GENERAL MEETING OF THE COMPANY
Details of Directors standing for re-election are as follows: Name of Director Directors Profile (page number in this Annual Report) Tan Sri Datuk Asmat bin Kamaludin Tan Sri Nik Mohamed bin Nik Yaacob Dato Mohammed Azlan bin Hashim please refer to pages 28 to 33 please refer to pages 28 to 33 please refer to pages 28 to 33
2.
DETAILS OF DIRECTORS ATTENDANCE AT BOARD MEETINGS

A total of seven (7) Board Meetings were held during the financial year ended 31st December 2006. Name of Director Tan Sri Datuk Asmat bin Kamaludin Tan Sri Nik Mohamed bin Nik Yaacob Datuk Hamzah bin Bakar Datuk Haron bin Siraj Dato Mohammed Azlan bin Hashim Dato Mohamed Azman bin Yahya Foong Choong Hong Sreesanthan a/l Eliathamby (appointed w.e.f. 18th April 2006) Shah Hakim @ Shahzanim bin Zain No. of Meetings Attended 7/7 7/7 5/7 7/7 7/7 6/7 6/7 5/6 7/7
3.
DETAILS OF DATE, TIME AND PLACE OF FIFTH ANNUAL GENERAL MEETING

The Fifth Annual General Meeting of Scomi Group Bhd will be held as follows: Date Time Place : : : 22nd June 2007 10:00 a.m. Nirvana Ballroom, Crowne Plaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur
FORM OF
PROXY
No. of Ordinary Shares Held SCOMI GROUP BHD. (Company No: 571212-A) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office: Suite 5.03, 5th Floor, Wisma Chase Perdana, Off Jalan Semantan, Damansara Heights, 50490 Kuala Lumpur, Malaysia
I/We ________________________________________________________________________ NRIC/Passport No ___________________________________

(Full name)
of _____________________________________________________________________________________________________________________________
(Full address)
being a member/members of Scomi Group Bhd, hereby appoint ________________________________________________________________________

(Full name and NRIC/Passport No.)
of _____________________________________________________________________________________________________________________________
(Full address)
or failing him/her ________________________________________________________________________________________________________________

(Full name)
of _____________________________________________________________________________________________________________________________
(Full address)
or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Fifth Annual General Meeting (AGM) of Scomi Group Bhd (the Company) to be held at Nirvana Ballroom, Crowne Plaza Mutiara Kuala Lumpur, Jalan Sultan Ismail, 50250 Kuala Lumpur on 22nd June 2007 at 10.00 a.m., or any adjournment thereof. Ordinary Business Resolution 1 Resolution 2 To receive and adopt the Financial Statements for the financial year ended 31st December 2006 and the Reports of the Directors and Auditors thereon. To approve the declaration of a first and final dividend 15 percent (15%) less tax for the financial year ended 31st December 2006. To re-elect the following Directors who are retiring in accordance with Article 82 of the Articles of Association of the Company: Resolution 3 Resolution 4 Resolution 5 Resolution 6 Resolution 7 Resolution 8 Special Business Resolution 9 Authority to Allot and Issue Shares Pursuant to Section 132D of the Companies Act, 1965. (i) (ii) (iii) Tan Sri Datuk Asmat bin Kamaludin Tan Sri Nik Mohamed bin Nik Yaacob Dato Mohammed Azlan bin Hashim For Against
To approve the payment of Directors fees for the financial year ended 31st December 2006. To re-appoint Messrs. PricewaterhouseCoopers as Auditors of the Company for the ensuing year and to authorise the Directors to fix their remuneration. To transact any other ordinary business of the Company for which due notice shall have been given. For Against
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 ______________________________ 2007
Signature/Seal ______________________________
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 in his/her stead. 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) 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 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. (iv) The instrument appointing a proxy must be completed and deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn Bhd at Level 26, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur, not less than fortyeight (48) hours before the time appointed for holding the Annual General Meeting or any adjournment thereof.
1st fold here
AFFIX STAMP
The Registrar of Scomi Group Bhd Symphony Share Registrars Sdn Bhd Level 26, Menara Multi Purpose Capital Square No. 8, Jalan Munshi Abdullah 50100 Kuala Lumpur
Then fold here
Fold this flap for sealing

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Scomi Group Bhd

SCOMI GROUP BHD

SCOMI GROUP BHD (571212-A)

Others see PROMISE

our commitment towards the environment

Others see CONNECTIVITY

a convergence of state-of-the-art technology to further

Others see HORIZON

the vast business opportunities

traversing the limitless expanse of our borderless world.

See Potential. See

SCOMI GROUP BHD

147 Analysis of Shareholdings 152 List of Properties 154 Corporate Directory

KEY FINANCIAL INDICATORS &

Total Assets (RM Million)

Shareholders Fund (RM Million)

Earnings Per Share (Sen)

Net Assets Per Share (Sen)

Net Tangible Assets (RM Million)

Profit Before Taxation (RM000)

Pat After Minority Interests (RM000)

2006 RM000 Turnover 1,577,495

2005 RM000 1,067,972

2004 RM000 590,457

2003 RM000 201,257

2002 RM000 158,512

271,031 (41,848) (42,181) 6,429 19 186,812 (13,937) 172,875 21,184 151,691

30,505 (3,146) (1,459) 54 0 25,955 (8,102) 17,853 4 17,857

23,554 (3,426) (1,072) 1,451 0 20,507 (5,863) 14,644 14,644

1,005,352 995,025 1,017,507 8.5 sen 8.3 sen

992,080 972,877 1,015,833 15.6 sen 14.9 sen

894,134 884,598 932,431 7.0 sen 6.6 sen

100,000 593,312 629,387 3.0 sen 2.8 sen

46,935 375,480 375,480 3.9 sen 3.9 sen

SCOMI OILFIELD LIMITED (BERMUDA)

KMC OILTOOLS BERMUDA LIMITED (BERMUDA) SCOMI ENGINEERING BHD 71.0%

ENERGY & LOGISTICS ENGINEERING

SCOMI MARINE BHD 42.75% 60% SCOMI OILSERVE SDN BHD #

SCOMI ENERGY SDN BHD

SCOMI NTC SDN BHD

SCOMI CHEMICALS SDN BHD

SCOMI SOSMA SDN BHD ##

NOTE Public listed entities

SCOMI GROUP BHD

ENERGY & LOGISTICS ENGINEERING

Drilling fluids (DF)

Marine logistics for coal industry

Drilling waste management solutions (DWM)

Logistics engineering (special purpose vehicles, rail, bus & defence)

Offshore support services for Oil & Gas industry

Distribution of oilfield products & services

ECONOMIC AND INDUSTRY ENVIRONMENT

Tan Sri Datuk Asmat bin Kamaludin

INTERVIEW WITH THE

GROUP CHIEF EXECUTIVE OFFICER

WHAT ARE SOME OF THE

INTERVIEW WITH THE

HOW DID THE

WHAT KEY AREAS DID SCOMI

HOW DID THE

OILFIELD SERVICES DIVISION PERFORM?

WHAT IS THE BREAKDOWN BY