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Realising

Potential Annual Report


2016

Scomi Group Bhd


CONTENTS

002 048
Key Financial Indicators Statement on Risk Management and Internal Control

003 056
Key Financial Highlights Audit and Risk Management Committee Report

004 060
Additional Information
Corporate Structure

006 062
Statement of Directors’ Responsibility
Corporate Statement

007 066
Corporate Information Financial Statements

008 192
Board of Directors Analysis of Shareholdings

016 196
Chairman’s Statement List of Properties

020 199
Management Review of Operations Corporate Directory

026 202
Corporate Social Responsibility Notice of Annual General Meeting

030
Statement on Corporate Governance Form of Proxy
KEY FINANCIAL INDICATORS


2016 2015 2014 2013 2011
RM’000 RM’000 RM’000 RM’000 RM’000

Continuing operations
Turnover 1,383,332 1,798,572 1,653,059 1,922,368 1,402,566

EBITDA 170,003 231,858 217,394 257,188 8,529


Depreciation and amortisation 110,032 97,524 97,501 106,413 127,380
Finance costs 34,178 30,427 38,834 129,678 48,856
Share of profit/(loss) in associates 495 (124) (247) 133 (2,978)
Share of (loss)/profit from joint-ventures (10,628) 1,117 5,310 6,568 3,754

Profit/(loss) before tax 25,793 103,907 81,059 21,097 (167,707)
Taxation (13,889) (37,535) (50,113) (27,557) (19,298)

Profit/(loss) from continuing operations 11,904 66,372 30,946 (6,460) (187,005)
Loss from discontinued operations - (71) (9,258) (62,989) (170,156)

Profit/(loss) for the year 11,904 66,301 21,688 (69,449) (357,161)
Non-controlling interest 10,632 (22,045) (16,732) 2,616 133,456

Profit/(loss) attributed to owners of
the Company 22,536 44,256 4,956 (66,833) (223,705)

Numbers of shares in issue (‘000) 1,917,510 1,568,637 1,568,637 1,564,540 1,187,688


Weighted average number of
shares assumed in issue (‘000) 1,903,083 1,554,210 1,554,210 1,285,589 1,391,731
Weighted average number of shares used
to compute diluted earnings per share (‘000) 1,903,083 1,903,083 1,903,083 1,638,733 1,394,528

Basic - Net EPS (sen)** 1.18 2.85 0.31 (5.20) (16.07)

Fully diluted - Net EPS (sen)@ 1.18 2.33 0.26 (4.07) (16.04)

Notes

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

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

002 Scomi Group Bhd


Annual Report 2016
KEY FINANCIAL HIGHLIGHTS

Turnover (RM Million) Total Assets


2011 1402.57 (RM Million)

2,550
12 months
2011 1402.57
12 2011
12
2013
months 1402.57 1992.37
15 months
months
2013 1992.37 2015 : 2,795
2013
15 2014
months 1992.37
1653.06
15 months
12
2014
12 2014
1653.06
2015
months
12 months
months
1653.06
1798.57
12
2015 1798.57 Net Tangible Assets
122016
2015
months 1383.33 1798.57
12 months
(RM Million)
2016
358
1383.33
122016
months 1383.33
12 months

2015 : 342
Profit/(Loss) Before Tax (RM Million)
Shareholders’ Fund
2011 (167.70) (RM Million)
12 months

12
2011
12 2011
2013
months
15 months
months
(167.70)
(167.70) 21.10 654
2013 21.10
2015 : 637
2013
15 2014
months 21.10 81.06
15 months
12
2014
12 2014
81.06
2015
months
12 months
months
81.06
103.91
12
2015 103.91 Basic Earnings per
122016
2015
months 25.79 103.91
12 months share
2016 25.79 (sen)
122016
months
25.79
12 months
1.18
Profit/(Loss) Attributed to Owners of the Company 2015 : 2.85
(RM Million)

2011 (223.70) Net Assets Per Share


12 months
2011 (223.70) (Attributable to owners
12 2011 of the Company)
2013
months
12 months
months
(223.70) (66.83)
15
2013 (66.83) (sen)
2013
34
15 2014
months (66.83) 4.96
15 months
12
2014
12 2014
4.96
2015
months 4.96
44.26
12
12 months
months
2015
2015 : 41
44.26
122016
2015
months 44.26
22.54
12 months
2016 22.54
122016
months
12 months
22.54

003 Scomi Group Bhd


Annual Report 2016
CORPORATE STRUCTURE
as at 30 June 2016

SCOMI GROUP BHD1

65.65%2

Scomi Oiltools Scomi International Scomi Energy


Bermuda Limited Private Limited Services Bhd1
(Bermuda) (Singapore)

51% 49% 50%


Scomi Oiltools Scomi Oiltools Scomi Solutions
Overseas (M) (Europe) Ltd Sdn Bhd Transenergy
Limited (Scotland) Gemini Sprint Emerald Logistics
Shipping Pte Ltd
(Mauritius) Sdn Bhd Sdn Bhd
(Labuan)

51% 21.08%
KMC Oiltools Scomi Oiltools Inc Scomi Ecosolve
Trans Advantage Marineco Limited Southern Petroleum
Algerie EURL (Texas, USA) Limited Transportation Joint
(BVI) Sdn Bhd (Labuan) Stock Company
(Algeria)
(Vietnam)
48% 4%
Scomi Oiltools Oilfield Services de Scomi Precision Scomi Marine
Scomi D & P Scomi KMC
Egypt SAE3,4 Mexico S de RL de CV5* Engineering Sdn Bhd Services Pte Ltd
Sdn Bhd Sdn Bhd
(Egypt) (Mexico) (Singapore)

49% 30%

Scomi Oiltools de Scomi Chemicals King Bridge Enterprises Ophir Production


Mexico S de RL de CV5* Sdn Bhd Sdn Bhd Scomi Oiltools
Limited
(Mexico) (BVI) (Thailand) Ltd8
(Thailand)
80.54%
Scomi Capital 95%
Limited PT Rig Tenders Scomi Sosma
(Labuan) Indonesia Tbk 6 Sdn Bhd PT Scomi Oiltools
(Indonesia) (Indonesia)

Global Learning
and Development 95%
Rig Tenders Marine Scomi Anticor
Sdn Bhd Pte Ltd S.A.S7 PT Inti Jatam Pura
(Singapore) (France) (Indonesia)
70% 50%
Scomi Energy Rig Tenders
Sdn Bhd Sosma (B) Sdn Bhd* Scomi Oiltools
Offshore Pte Ltd (Brunei) (RUS) LLC
(Singapore) (Russia)

Scomi Enviro CH Ship


Sdn Bhd Management Pte Ltd
(Singapore)

95%
Scomi OBM Grundtvig Marine PT Batuah Abadi Lines
Terminal Sdn Bhd Pte Ltd (Indonesia)
(Singapore)

CH Logistics Pte Ltd Scomi Vessels Pte Ltd


(Singapore) (Labuan)

004 Scomi Group Bhd


Annual Report 2016
72.33%

Scomi Engineering
Bhd1

50%

Transenergy Scomi Oilfield Scomi OMS


Scomi Transit
Shipping Limited Oilfield Services Ltd
Projects Sdn Bhd
Management (Bermuda) (BVI)
Sdn Bhd

Scomi Oiltools Scomi Oiltools KMCOB Capital Scomi Oiltools Ltd Scomi Transit Scomi Transit
Sdn Bhd Pty Ltd Berhad (Cayman Islands) Projects Brazil Projects Brazil
(Australia) Sdn Bhd (Sao Paulo) Sdn Bhd

50% 49% 51%


Global Oilfield Scomi Oiltools Scomi Oiltools Urban Transit Urban Transit
Scomi Platinum
Products Sdn Bhd Oman LLC (Cayman) Ltd Servicos Do Private Limited 11
Sdn Bhd
(Oman) (Cayman Islands) Brasil LTDA10 (India)
(Brazil)

50% 80%
Scomi Oiltools (S) Scomi Equipment Inc. Scomi Oiltools Vibratherm Limited Scomi
Pte Ltd (Texas, USA) (Africa) Limited Quark Fabricação De
(England & Wales) Transportation Equipamentos Ferroviårios
(Singapore) (Cayman Islands) Systems Sdn Bhd
E Serviços De Engenharia LTDA
(Brazil)

KMC Oiltools India KMC Oiltools BV*


Pte Ltd9 (Netherlands) Scomi Rail Scomi Special
(India) Bhd Vehicles Sdn Bhd

95% 60%

PT Multi Jaya Wasco Oil Service


Persada Company Nigeria Scomi Coach Scomi Trading
(Indonesia) Limited Sdn Bhd Sdn Bhd
(Nigeria)

Scomi Coach
Marketing Sdn Bhd
Key:

Energy Services Division 1. Listed on the Bursa Malaysia Securities Berhad (Kuala Lumpur Stock Exchange). 7. Includes 1 Preferential Share each held by 2 different individuals.
2. Includes 0.01% held by Scomi Energy Sdn Bhd. 8. Includes 1 Class A share each held by Scomi Oiltools Ltd and Scomi Oiltools (Cayman) Ltd.
3. Scomi Oiltools Bermuda Limited holds on trust for Scomi Oilfield Limited 9. Includes 1 share held by Scomi Oiltools Ltd.
Oilfield Services (Western) Division pursuant to a trust deed dated 8 March 2013. 10. Includes 1 quota (similar to share in other jurisdictions) held by Scomi Rail Bhd.
4. Includes 1 share each held by Scomi Oiltools Ltd and Scomi Oiltools (Cayman) Ltd. 11. Includes 0.0004% held by Scomi Rail Bhd.
5. Includes 1 share held by an individual.
Notes:
6. Listed on the Indonesia Stock Exchange.
Transport Solutions Division * The company has been placed under members’ voluntary liquidation.
• Except as otherwise expressly stated, all companies in this corporate structure are
incorporated in Malaysia.
• Except as otherwise expressly stated, all companies in this corporate structure are wholly
owned by their respective holding companies.

005 Scomi Group Bhd


Annual Report 2016
CORPORATE STATEMENT

With a presence in 48 locations


across 21 countries, the Scomi group
of companies is a global technology
enterprise in the energy and
logistics industries.

We are a global technology We provide innovative Our shareholders:


enterprise. solutions. We are committed to providing
long-term superior returns to our
Our global reach, capabilities and We innovate to respond to an shareholders.
talent provide us with the necessary evolving environment. Our products
resources to develop and own new and operations meet today’s needs Our people:
technology in all areas of our business. while anticipating tomorrow’s. We are We aim to provide our employees
committed to developing competitive with developmental opportunities
and innovative solutions to create so they can succeed on personal and
We focus on Energy & efficiency, add value and grow with professional levels.
Logistics. our customers to shape our future.
Our suppliers:
All our businesses are focused on We will treat our suppliers as our
the Energy and/or Logistics sectors We aim to realise potential for partners in the mutual interest of
with the ability to compete globally. our stakeholders. business growth.
All of us in the Scomi family should
remember that any new initiatives we Our customers: Our society / environment:
undertake will focus on these areas of We will develop and offer customers As a good corporate citizen, we will
business. innovative and competitive products give back to the communities we
and services that help them grow operate in, worldwide.
their business.

006 Scomi Group Bhd


Annual Report 2016
CORPORATE INFORMATION

Board of Directors
Dato’ Mohammed Azlan Bin Hashim Foong Choong Hong
Independent Non-Executive Chairman Non-Independent Non-Executive Director

Tan Sri Nik Mohamed Bin Nik Yaacob Lee Chun Fai
Independent Non-Executive Director Non-Independent Non-Executive Director

Tan Sri Mohamed Azman Bin Yahya Cyrus Eruch Daruwalla


Independent Non-Executive Director Non-Independent Non-Executive Director

Dato’ Sreesanthan A/L Eliathamby Shah Hakim @ Shahzanim Bin Zain


Non-Independent Non-Executive Director Non-Independent Executive Director/Chief Executive Officer

Dato’ Abdul Hamid Bin Sh Mohamed Senior Independent Non-Executive Director


Independent Non-Executive Director
Tan Sri Nik Mohamed Bin Nik Yaacob
Email: nik.mohamed@scomidirectors.com.my
or info@scomigroup.com.my

Audit and Risk Management Administrative and Auditors


Committee Correspondence Address KPMG (Firm No.: AF 0758)
Tan Sri Nik Mohamed Bin Nik Yaacob Level 17, 1 First Avenue Chartered Accountants
(Chairman) Bandar Utama Level 10, KPMG Tower
Dato’ Sreesanthan A/L Eliathamby 47800 Petaling Jaya 8, First Avenue, Bandar Utama
Dato’ Abdul Hamid Bin Sh Mohamed Selangor Darul Ehsan 47800 Petaling Jaya
Malaysia Selangor Darul Ehsan
Nomination and Tel : 03-7717 3000 Malaysia
Remuneration Committee Fax : 03-7728 5258
Dato’ Mohammed Azlan Bin Hashim Website : www.scomigroup.com.my Principal Banker
(Chairman)
Email : info@scomigroup.com.my CIMB Bank Berhad
Tan Sri Mohamed Azman Bin Yahya 18th Floor, Menara CIMB
Lee Chun Fai Registrar Jalan Stesen Sentral 2
Symphony Share Registrars Sdn Bhd Kuala Lumpur Sentral
Level 6, Symphony House 50470 Kuala Lumpur
Registered Office Malaysia
Level 17, 1 First Avenue Pusat Dagangan Dana 1
Bandar Utama Jalan PJU 1A/46
47800 Petaling Jaya 47301 Petaling Jaya Stock Exchange Listing
Selangor Darul Ehsan Selangor Darul Ehsan Main Market of Bursa Malaysia
Malaysia Malaysia Securities Berhad
Tel : 03-7717 3000 Tel : 03-7841 8000 Stock Name: Scomi
Fax : 03-7728 5258 Helpdesk : 03-7849 0777 Stock Code: 7158
Fax : 03-7841 8008/8151/8152
Investor Relations
Company Secretaries Zubaidi Bin Harun
Ong Wei Leng (MAICSA 7053539) Level 17, 1 First Avenue
Chong Mei Yan (MAICSA 7047707) Bandar Utama
47800 Petaling Jaya
Selangor Darul Ehsan
Malaysia
Tel : 03-7717 3000
Fax : 03-7728 5258
Email : info@scomigroup.com.my

007 Scomi Group Bhd


Annual Report 2016
BOARD OF DIRECTORS

DATO’ MOHAMMED AZLAN BIN Dato’ Azlan is a Chartered Accountant by profession, he graduated with a Bachelor of
HASHIM Economics from Monash University, Australia. He is a fellow member of the Institute of
Chairman, Chartered Accountants, Australia, Malaysian Institute of Directors, Malaysia Institute of
Independent Non-Executive Director Chartered Secretaries and Administrators, an honorary member of the Institute of Internal
Auditors, Malaysia and a member of the Malaysian Institute of Accountants.
Dato’ Azlan, aged 59, Malaysian, is an
Independent Non-Executive Director He has extensive experience in the corporate sector including financial services and
and the Chairman of the Company. He investments. Among others, he has served as Chief Executive of Bumiputra Merchant
was appointed to the Board on 13 July Bankers Berhad, Group Managing Director of Amanah Capital Malaysia Berhad and Executive
2004. Chairman of Bursa Malaysia Berhad Group.

Current directorships in public companies and other organisations include Khazanah


Nasional Berhad, Labuan Financial Services Authority, D&O Green Technologies Berhad, SILK
Holdings Berhad and IHH Healthcare Berhad. He is a member of the Investment Panel of
the Retirement Fund Incorporated and the Chairman of the Board of Directors of University
Malaysia Terengganu.

Dato’ Azlan is a member of, and the Chairman of the Nomination and Remuneration
Committee of the Board. He attended all of the 6 Board Meetings held during the financial
year ended 31 March 2016.

Tan Sri Nik holds a Diploma in Mechanical Engineering, a Bachelor of Engineering (Hons) TAN SRI NIK MOHAMED BIN
from Monash University, Australia and a Masters in Business Management from the Asian NIK YAACOB
Institute of Management, Philippines. He also completed the Advanced Management Independent Non-Executive Director
Programme at Harvard University in the United States.

He served as the Group Chief Executive of Sime Darby Berhad from 1993 until his retirement Tan Sri Nik, 67, a Malaysian, is an
in June 2004. He was also the Chairman of the Advisory Council of National Science Independent Non-Executive Director of
Centre and Chairman of the Board of Universiti Teknologi MARA (UITM) and served as a the Company and was appointed to the
member of the INSEAD East Asian Council, National Council for Scientific Research and Board on 13 July 2004.
Development, Co-ordinating Council for the Public-Private Sectors in the Agricultural Sector,
National Coordinating Committee on emerging Multilateral Trade Issues and the Industrial
Coordinating Council. He was a representative for Malaysia in the APEC Business Advisory
Council and the Asia-Europe Business Forum.

Other Malaysian public companies in which he is a director are GuocoLand (Malaysia) Berhad,
Symphony Life Berhad and Scomi Energy Services Bhd. Tan Sri Nik is also the Executive
Director of Yayasan Kepimpinan Perdana (Perdana Leadership Foundation).

Tan Sri Nik is the Chairman of the Audit and Risk Management Committee of the Board. He
attended all of the 6 Board Meetings held during the financial year ended 31 March 2016.

008 Scomi Group Bhd


Annual Report 2016
TAN SRI MOHAMED AZMAN BIN YAHYA He graduated with a first class honours degree in Economics from the London School of
Independent Non-Executive Director Economics and Political Science and is a member of the Institute of Chartered Accountants in
England and Wales and the Malaysian Institute of Accountants, and a fellow member of the
YBhg Tan Sri Mohamed Azman bin Malaysian Institute of Banks.
Yahya, a Malaysian, aged 52, is a
Independent Non-Executive Director of Tan Sri Azman started his career at KPMG in London before returning to Malaysia in 1988
the Company and was appointed to the where he built his career in investment banking to become the Chief Executive of Amanah
Board on 17 March 2003. Merchant Bank.

During the Asian Financial Crisis in 1998, Tan Sri Azman was appointed by the Malaysian
Government to set-up and head Danaharta, the national asset management company and
subsequently became its chairman until 2003. He was also the Chairman of the Corporate
Debt Restructuring Committee (CDRC) which was set-up by Bank Negara Malaysia to mediate
and assist in the debt restructuring of viable companies until its closure in 2002. These two
entities were set-up to assist the financial and corporate sectors in managing the crisis, and
both were successful in their missions leading to their closure after the crisis. In 2002, he
returned to the private sector and founded Symphony House Sdn Bhd (formerly known as
Symphony House Berhad). He is currently the Executive Chairman of Symphony Life Berhad
and the Chairman of Ranhill Holdings Berhad. He also sits on the board of AIA Group Limited,
listed on the Hong Kong Stock Exchange.

Outside his professional engagements, Tan Sri Azman is active in public service and sits on
the boards of Khazanah Nasional Berhad, PLUS Expressways International Berhad, Ekuiti
Nasional Berhad, Sepang International Circuit Sdn Bhd and the Chairman of Motorsports
Association of Malaysia.

Tan Sri Azman serves as a member of the Capital Market Advisory Group of Securities
Commission Malaysia and the Special Economic Council of the Prime Minister’s Department.

Tan Sri Azman is a member of the Nomination and Remuneration Committee of the Board. He
attended 5 out of the 6 Board Meetings held during the financial year ended 31 March 2016.

Dato’ Sreesanthan, is an Advocate & Solicitor and a Consultant with the legal firm of Messrs DATO’ SREESANTHAN A/L ELIATHAMBY
Logan Sabapathy & Co. Non-Independent Non-Executive Director

Dato’ Sreesanthan obtained his undergraduate law degree from the University of Malaya and Dato’ Sreesanthan, aged 55, a
his post graduate degree in law from the University of Oxford, United Kingdom. Malaysian, is a Non-Independent Non-
Executive Director of the Company and
He was formerly a Partner with the legal firm of Messrs Zain & Co, Messrs Zul Rafique was appointed to the Board on 18 April
& Partners and Messrs Kadir Andri & Partners. Dato’ Sreesanthan is on the Disciplinary 2006.
Committee Panel of the Advocates and Solicitors’ Disciplinary Board.

Dato’ Sreesanthan is a member of the Audit and Risk Management Committee of the Board.
He attended 5 out of the 6 Board Meetings held during the financial year ended 31 March
2016.

009 Scomi Group Bhd


Annual Report 2016
BOARD OF DIRECTORS (cont’d)

DATO’ ABDUL HAMID BIN SH Dato’ Hamid is a Fellow of the Association of Chartered Certified Accountants. He started
MOHAMED his career in the accounting firm Messrs Lim Ali & Co / Arthur Young, before moving on to
Independent Non-Executive Director merchant banking with Bumiputra Merchant Bankers Berhad. He later moved on to the
Amanah Capital Malaysia Berhad Group, an investment banking and finance group, where
Dato’ Hamid, aged 51, a Malaysian, was he led the corporate planning and finance functions until 1998 when he joined the Kuala
appointed as an Independent Non- Lumpur Stock Exchange (KLSE), now known as Bursa Malaysia Berhad. He joined the KLSE
Executive Director on 8 May 2014. in 1998 as Senior Vice President in charge of the Strategic Planning & International Affairs
Division and was promoted to Deputy President (Strategy and Development) in 2002. He
was re-designated as Chief Financial Officer in 2003. During his five years with the KLSE
Group, he held diverse roles and had experience in strategy, corporate finance, business
transformation, finance and administration, treasury, external affairs and public relations. He
led KLSE’s acquisitions of the Kuala Lumpur Options and Financial Futures Exchange (KLOFFE)
and the Commodity and Monetary Exchange of Malaysia (COMMEX) and their merger to form
the Malaysia Derivatives Exchange (MDEX), and the acquisition of the Malaysian Exchange of
Securities Dealing and Automated Quotation (MESDAQ). He also led KLSE’s demutualisation
exercise.

He is currently the Executive Director of Symphony House group of companies and his
directorships in other public companies include SILK Holdings Berhad, Pos Malaysia Berhad
and MMC Corporation Berhad.

Dato’ Hamid is a member of the Audit and Risk Management Committee of the Board. He
attended all of the 6 Board Meetings held during the financial year ended 31 March 2016.

010 Scomi Group Bhd


Annual Report 2016
FOONG CHOONG HONG Mr Foong graduated from Middlesex University (UK) in Management Studies majoring in
Non-Independent Non-Executive Director Finance, and is a Fellow of the Chartered Management Institute (UK) (FCMI), and a Certified
Financial Planner (CFP).
Mr Foong, aged 55, a Malaysian, is
a Non-Independent Non-Executive Mr Foong is the Managing Director of Asian Asset Group (AAG). Founded in 1987, the
Director of the Company and was company’s objective was to bring in strategic investment and provide a trading bridge
appointed to the Board on 17 March between businesses in the Far East and the UK. Mr Foong provided the ‘trusted-bridge’ which
2003. British Corporates can rely upon for investment & trade facilitation, management and quality
assurance for products & services and on time shipment deliveries.

In 1988, Mr Foong started a joint-venture company with Power Supermarkets (UK) a wholly
owned company of Associated British Foods (UK) public listed company, to develop a Far
Eastern sourcing and trading house based in Malaysia.

Through his close working co-operation with the manufacturers in Southeast Asia and East
Asia, he invested with many new factory start-ups and made many of these strategic partners
into successful business ventures along this development journey. Mr Foong provided the
ideas and confidence to the manufacturers to venture into new products and services out
of their normal domain, and provided the international bridge to foreign markets which the
manufacturers would normally not have.

Mr Foong professional career started in the city of London, United Kingdom where he was
with British merchant bank - Robert Fleming Merchant Bank (UK). The British bank also
operated Asia’s largest merchant bank & fund management company at that time – Jardine
Fleming (Hong Kong). He was the Economist responsible for Southeast Asia strategy, and
investments where he worked in their international investment & fund management division
looking after Insurance and Institutional pension funds.

Throughout his working career, he has been involved with many successful companies from
manufacturing of FMCG products, Agriculture & mineral resources, Plantations, Refineries,
Logistics & distribution to name some examples.

Building on more than 30 years of Asia and global trade experience, and coupled with
extensive industry knowledge and operational experience in a wide array of industries,
including a merchant banking foundation he continues to significantly value-add to the
businesses he gets involved with.

He holds board positions on publicly traded companies and senior positions in an advisory
role working with MNCs to plan and oversee corporate development activities in Asia. He
also sits on the Trade & Investment Committee at the Malaysian International Chamber of
Commerce International (MICCI).

He attended all of the 6 Board Meetings held during the financial year ended 31 March 2016.

011 Scomi Group Bhd


Annual Report 2016
BOARD OF DIRECTORS (cont’d)

LEE CHUN FAI He holds a Bachelor of Accountancy (Honours) degree from University Utara Malaysia (1995)
Non-Independent Non-Executive Director and a Master of Business Administration from Northwestern University (Kellogg) and The
Hong Kong University of Science & Technology (2012).
Mr Lee, 45, a Malaysian, was appointed
to the Board as Non-Independent Non- He started his career with a public accounting firm. In October 1995, he joined Road Builder
Executive Director on 31 May 2015. (M) Holdings Bhd (“RBH Group”) and was the Head of Corporate Services Division of RBH
Group prior to the acquisition of RBH Group by IJM Corporation Berhad (“IJM”) in 2007.
Currently, he is the Deputy Chief Executive Officer and Deputy Managing Director of IJM and
also Head of Corporate Strategy & Investment of the IJM Group. Previously, he has served as
the Deputy Chief Financial Officer.

His directorships in other public companies include Scomi Energy Services Bhd, Kumpulan
Europlus Berhad and IJM Land Berhad. He is also a Director in Road Builder (M) Holdings Bhd.

He is a member of the Nomination and Remuneration Committee of the Board. He attended


4 out of the 5 Board Meetings held during the financial year ended 31 March 2016 since his
appointment.

He graduated with a Bachelor of Commerce (Honours) degree from University of Bombay in CYRUS ERUCH DARUWALLA
1982, and was admitted as an associate member of the Association of Chartered Certified Non-Independent Non-Executive Director
Accountants, United Kingdom in 1993.
Mr Cyrus, aged 54, an Indian citizen,
Upon graduation he completed his audit articleship with Ernst & Young, London, UK is a Non-Independent Non-Executive
prior to joining Addmoss Taylor & Partners, London, before being appointed as Senior Director of the Company and was
Accountant for Portlands of Blackheath Ltd., UK in 1987. In Malaysia, he worked as Head appointed to the Board on 23 May
of Professional Programmes for Emile Woolf Far East Sdn Bhd, before being appointed as 2016.
Group Financial Controller for the Sri America Group of Companies. In 1999, he joined
PricewaterhouseCoopers, Malaysia as Manager before assuming the position of Executive
Director in 2003.

Mr Cyrus joined IJM Corporation Berhad (“IJM”) in September 2006 as Chief Financial Officer,
heading the Accounts & Finance Department for the overall Group. He is a Director of Road
Builder (M) Holdings Bhd and Scomi Engineering Bhd and is also an Executive Director for
several of IJM Group’s overseas entities.

012 Scomi Group Bhd


Annual Report 2016
SHAH HAKIM @ SHAHZANIM BIN ZAIN Encik Shah Hakim started his career as an auditor with Ernst & Young and was subsequently
Chief Executive Officer/ promoted as Consulting Manager, responsible for servicing large corporations. He went on
Non-Independent Executive Director to be appointed as Executive Director of a regional packaging manufacturer in 1992, with
direct operational responsibility. He currently sits on the Board of Scomi Energy Services Bhd,
Encik Shah Hakim, aged 51, a Scomi Engineering Bhd and KMCOB Capital Berhad.
Malaysian, is the Chief Executive
Officer/ Non-Independent Executive He attended 5 out of the 6 Board Meetings held during the financial year ended 31 March
Director of the Company and was 2016.
appointed to the Board on 3 March
2003.

Notes:

Save as disclosed, none of the Directors have:


• any family relationship with any Director and/or major shareholder of Scomi Group Bhd;
• any conflict of interest, or any personal interest in any business arrangement, involving Scomi Group Bhd;
• any conviction for offences within the past five (5) years (other than traffic offences, if any);
• any public sanction or penalty imposed by the relevant regulated bodies during the financial year ended 31 March 2016.

013 Scomi Group Bhd


Annual Report 2016
CHAIRMAN’S STATEMENT

Dear Stakeholders,

For the financial year ended 31 March 2016 (“FY2016”), Scomi


Group Bhd (“SGB” or “the Group”) continued to exemplify
resilience in the face of volatile conditions within the external
operating environment. The slump in crude oil prices
precipitated an overall dampening of global sentiment, which
led to a slowdown across key economies. This impacted the
performance of our Energy Services division which comprises
Oilfield Services (“OFS”) and Marine Services.

In particular, the OFS unit witnessed a slowdown as pricing Despite the challenging conditions, the Group maintained
structure of contracts were impacted. The unfavourable its track record of profitability. Guided by three broad
operating conditions led to the delay of drilling projects strategies to grow core business, expand product offering
across the markets and in certain cases, cancellation of and build integration capability, SGB continued to register
projects. The Marine Services unit also saw reduced revenue various business and operational achievements.
and earnings due to both weak oil and coal prices, which
translated to compressed margins for our coal contracts
and lower utilisation of offshore vessels. In spite of this, the FINANCIAL OVERVIEW
Energy Services division remained profitable in FY2016 after
implementing various measures to control cost, optimise In FY2016, SGB posted revenue of RM1.38 billion. Earnings
efficiency and expand product offering. before income tax, depreciation and amortisation (“EBITDA”)
was RM170 million while profit after tax (“PAT”) stood at
With regards to Transport Solutions, the division was RM11.9 million. The Group’s Profit after Tax and Minority
awarded additional works for its Line 17 – Gold São Paulo Interests (“PATAMI”) improved to RM22.5 million.
monorail project in Brazil worth RM504.6 million, post
FY2016. However, the division faced various delays beyond
its control for completion of on-hand monorail projects as CREATING VALUE
well as decisions to award new jobs. Project delays affected
topline across Malaysia, India and Brazil and flowed through The Group is driven to enhance its products, processes and
to our bottom-line. After posting an operating profit for develop its people. This is essential for continuous internal
FY2015, impairment on receivables and provisions made for improvement as well as to unlock value for all stakeholders
one-off expenses saw the division registering a loss after tax while improving competitiveness. In FY2016, I am pleased
for the year under review. to share that we made further strides in research and
development (“R&D”) as well as innovation.

016 Scomi Group Bhd


Annual Report 2016
Energy Services has brought to market several new product CORPORATE GOVERNANCE
innovations. These include graphene-enhanced drilling
fluids and lubricants, environmentally friendly base oil On matters of corporate governance, the Board adheres
for drilling operations and well stimulation fluids. These to the best practices, principles and recommendations as
products were designed to increase operational efficiency outlined in the Second Edition of the Malaysian Code of
and ultimately reduce the cost per barrel of production Corporate Governance 2012. The Board also has ensured
while minimising impact on the environment. that the management of the Group has been in line with the
various Group policies. Among the Group’s key policies are:
For Transport Solutions, the R&D team at the North Kuala
Lumpur Facility (“NKLF”) in Malaysia has also been working • Anti-Corruption Policy
on several new prototype trains that will bolster the • Code of Conduct
competitive ability of the division. • Global Finance Policy
• Global ICT Policy
We have also continued to drive the creation of value within • Global People Policy
the communities that we operate in. This includes job • Global Procurement Policy
creation, sharing of technology and expertise, developing • Global Health, Safety & Environment Policy
local infrastructure and much more. SGB has left a positive • Quality Policy
footprint amongst local communities in India, Brazil, • Risk Management Framework and Policy; and
Malaysia and beyond. • Workplace Management Policy

AWARDS & ACCOLADES CORPORATE SOCIAL RESPONSIBILITY

Testament to our excellence in engineering, the Group’s Corporate Social Responsibility forms a major part of the
Transport Solutions division was accorded a special mention Group’s business philosophy which is guided based on
at the recent Malaysian Construction Industry Excellence the Group’s triple bottom-line of people, planet and profit.
Awards in September 2015 for its outstanding work for The Board is of the view that in achieving a sustainable
the Mumbai Monorail Phase 1. The award, under the business, it is imperative that we look beyond just profits
International Achievement category, gives us much pride and revenues, but look to create value that benefits all
as it recognises our engineering capability and ability to stakeholders. As such, SGB has initiated various plans,
deliver on a significant international public transportation policies, programmes and initiatives towards realising its
project. Moreover, it is industry recognition that further CSR agenda.
strengthens the Group’s credibility as a proven international
engineering company. CSR goes hand-in-hand with the nature of our businesses
– urban transport solutions and oil and gas. The former
intrinsically has a strong social benefit to communities
and cities. Hence, CSR efforts are a natural extension of our
business philosophy of building a better world through
helping individuals and communities. The latter is a highly
regulated industry where CSR related factors such as safety,
the environment, operating knowledge and efficiency are
of prime importance. Hence, our CSR efforts are directly
focused on emphasising these areas.

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Annual Report 2016
CHAIRMAN’S STATEMENT (cont’d)

We continue to emphasise the development of human OUTLOOK


capital through various outreach activities. We seek to
strengthen ties with local communities; to help them We expect operating conditions to remain challenging
become self-sustaining and fully reap the fruits of progress. for the Group’s core businesses in energy and public
Full details of these endeavours can be found in the transportation. With oil prices trending around the USD50
Corporate Social Responsibility section of this annual report. mark, the oil and gas sector will continue to be impacted
although there are pockets where activities remain positive
and tendering robust.
BOARD CHANGES
Unless there is a significant upward movement in the oil
On 23 May 2016, Mr. Cyrus Eruch Daruwalla was appointed prices, activity under Energy Services will likely remain soft
to the Board of Directors of SGB as a Non-Independent – resulting in delay in projects, reduction in capex spending
Non-Executive Director. He brings with him a wealth of and greater pricing pressures.
experience and we look forward to his valuable contribution
and guidance in driving the Group forward. To mitigate these expected challenges, the Energy Services
division is constantly working with customers to improve
efficiency through new products and enhanced services.
GOING FORWARD The division will also focus on protecting market share,
actively managing our cost and improving liquidity while
In creating a more robust Group structure that will allow us also looking to tap into new markets.
to better compete globally and meet the ever challenging
business conditions, the Group has restructured the The continued market volatility is also expected to impact
company into four distinctive business divisions – Scomi the Group’s Transport Solutions division especially in
Energy for OFS and Marine Services; Scomi Engineering securing new projects. Various mitigation actions are
for R&D, design and manufacture of rail and commercial being executed to alleviate the effects. In addition, the
vehicles; Scomi International which will drive initiatives division continues to pursue monorail bids in Chennai
in its participation in various turnkey, concessions and and Bangalore in India, Turkey, Sri Lanka, Brazil, Thailand
privatisation projects for the transport and energy and Malaysia as well as new opportunities for Commercial
business; and Scomi Chemicals which will focus on utilising Vehicles in the leasing and maintenance business.
nanotechnology as a platform to develop enhanced
chemical products for various industries. As a Group, we will continue to drive internal cost
restructuring and drive efficiency as we are committed to
The new structure provides greater clarity, enhances being an efficient, low-cost high-premium organisation
integration and improves synergy while enhancing our offering the most competitive rates to our customers and
competitiveness in the marketplace. It also allows the Group attractive returns to our shareholders.
to leverage on existing resources to tap new business
ventures and opportunities. Our greatest asset remains our people, the human
talent and capital that continues to provide the passion
and innovation that drives us forward and provides a
competitive edge for the Group.

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Annual Report 2016
ACKNOWLEDGEMENTS

On behalf of the Board of Directors, I wish to express our appreciation for our shareholders for their continued vote of
confidence and support; to my fellow Board members whose counsel and wisdom have been instrumental in guiding the
path of SGB and to the various national governments, government agencies and municipalities as well as our business
partners for your support and relationship throughout the year.

Naturally, I also convey our deepest thanks to the Management Team and our staff who have contributed to the Company’s
resilient performance throughout FY2016. Thank you for your commitment and passion that has enabled the Group to thrive
in spite of adversity. I look forward to continued excellence as we move forward together to greater heights in FY2017.

Dato’ Mohammed Azlan Bin Hashim


Chairman

019 Scomi Group Bhd


Annual Report 2016
MANAGEMENT REVIEW OF OPERATIONS

Dear Stakeholders,

In financial year ended 31 March 2016 (“FY2016”), Scomi Group


Bhd (“SGB” or “the Group”) continued to achieve progress in
line with its business strategies of growing core businesses,
expanding product lines and building integration capability.

Despite the various challenges faced amidst turbulent PAT for OFS was RM43.5 million while Marine Services
economic conditions, both our Energy Services and incurred Loss after tax of RM52.3 million. Transport
Transport Solutions divisions registered various operational Solutions aslo recorded a loss after tax of RM1.8 million
achievements, albeit whilst recording reduced revenue and due to continued delays which led to reduced revenue
earnings. and earnings recognition coupled with impairments on
receivables and provisions made for one-off expenses.
Despite crude oil prices at an 11-year record low, coupled Nevertheless, the Group’s gearing ratio remains healthy at
with reduced demand and delays in projects, we have 0.89 times with cash and bank balances of RM188 million.
managed to maintain our track record of profitability.
We continued to grow our global brand as a leader in
technology and expertise, with a proven track record ENERGY SERVICES
in delivering global offerings for energy services and
transport solutions. The Group’s Energy Services division consists of the Oilfield
Services (“OFS”) and Marine Services business units. The
year under review was generally marked by record low
FINANCIAL PERFORMANCE crude oil prices as well as reduced coal prices which had a
significant impact on the division.
In FY2016, SGB posted revenue of RM1.38 billion of which
Oilfield Services (“OFS”) was the largest contributor at Rig count was significantly lower in Malaysia, Indonesia
RM1.01 billion. Marine Services and Transport Solutions and West Africa where customers scaled down or deferred
posted revenues of RM194.9 million and RM174.5 million their operations due to the slide in oil prices. This trend
respectively. was evident across the world with Latin America, Europe,
Asia Pacific, US and Canada showing a declining rig count.
The Group registered a gross profit of RM261.9 million However, the Middle Eastern markets have seen marginal
while earnings before income tax, depreciation and increased activity over the period.
amortisation (“EBITDA”) was RM170 million. Profit after
tax (“PAT”) stood at RM11.9 million and profit after tax and
minority interests (“PATAMI”) was RM22.5 million.

020 Scomi Group Bhd


Annual Report 2016
Although none of our customers cancelled any major TRANSPORT SOLUTIONS
projects, there were delays in awarding of new projects
as well as in the implementation of certain upstream The Transport Solutions division is currently executing
activities. In mitigating these issues, the division focused on monorail projects in Brazil, India and Malaysia. In Brazil, the
introducing new products into the market. These include Group, via its subsidiary, Scomi Engineering Bhd (“SEB”)
Confi-N-Surf, an advanced surfactant designed to remove was awarded additional works for its Line 17 – Gold São
oil-based drilling fluids filter cake; HyPR-Graph Lube and Paulo monorail project worth RM504.6 million. In 2013,
Confi-Graph Lube – nanographene-enhanced lubricants SEB was awarded a contract to provide the design, systems
for water-based and oil-based drilling fluids; Plat-Drill R – a integration and certain key components of the rolling
renewable base fluid classified as synthetic-based fluid stocks. Pursuant to this award for additional works, SEB
manufactured from biomass feedstock; and GraphEat – a is now directly contracted to provide full rolling stocks
biocide for various industry applications. and additional systems, which include the provision of
signalling system, operations control centre system, track
On the development and production front, the Group switches, power rails, power supply & distribution system
through its subsidiary, Scomi Energy Services Bhd, is and fibre optics as well as cable trays.
currently executing the Ophir small field risk service
contract. The project is progressing as its field development The Line 17 – Gold alignment spans 8.8 kilometres and will
plan was approved by PETRONAS in September 2015. feature automatic train operation (driverless) technology.
The global reduction in oil price and drilling activity has When completed, the monorail trains can transport 20,600
allowed the Ophir project to reduce its development costs, passengers per hour per direction and reach speeds of
ensuring that the project remains viable in current oil up to 80 kilometres per hour. The project is targeted for
price environment. The project’s first oil is targeted for the completion in the first quarter of 2018.
second half of 2017.
Apart from the above, in March 2016, SEB set up a R$50
Oilfield Services million facility for the manufacture of monorail trains,
including rolling stock and bogies. The manufacturing
In Indonesia, OFS secured a USD41.6 million contract for facility will be built on a 98,000-square metre plot
drilling fluids (“DF”). Over in Oman, we secured a USD36 of land, which was awarded to SEB by the São Paulo
million drilling waste management project (“DWM”). In state government in recognition of its commitment
Saudi Arabia, the team won a USD22 million contract for to the development of the Brazilian urban transport
DF while in Myanmar, the unit was awarded with a USD21 infrastructure. Upon completion, this facility will
million contract for DF. manufacture monorail trains for the Line 17 – Gold and also
have the capacity to build metro and light rail trains.
The unit’s order book currently stands at over USD1 billion
with total outstanding bids at USD700 million. However, Still in Brazil, works on the 14.35-kilometre São Paulo Line
actual contract awards are being delayed due to the 18 project is expected to begin soon. SEB is currently
current downturn in activity level. functioning as the technology provider to the Consortium
which was awarded the project. We anticipate strong
Marine Services revenue contribution from São Paulo Line 18 going
forward. More importantly, the project will give us valuable
The coal business in Malaysia and Indonesia remained experience in managing a joint public-private monorail
flat throughout FY2016 largely due to weak prices for the project.
commodity. This contributed to lower tonnage carried and
lesser shipments for all contracts. Several non-recurring
expenses such as impairment of goodwill, write-off of
dry dock expenses, impairment of vessels in joint venture
companies and discounts further affected overall numbers.

021 Scomi Group Bhd


Annual Report 2016
MANAGEMENT REVIEW
OF OPERATIONS (cont’d)

In India, SEB together with a partner, is currently operating OUTLOOK


and maintain Phase 1 of the Mumbai Monorail. Since its
launch in February 2014, it has transported over 13 million Looking at present market conditions, we foresee the
passengers to date. Work on Phase 2, which spans 10.76 year ahead to remain challenging with crude oil prices
kilometres, is over 85% complete. Phase 2 will link Wadala remaining low amid slow global economic recovery. The oil
to Jacob Circle with ten stations and is anticipated to be price is trending around the USD50 per barrel; and Capex
the higher ridership section. Daily ridership is expected to and Opex within the industry have declined for the second
increase four-fold once Phase 2 is commissioned. consecutive year. Going forward, the Management is
closely monitoring the situation and will exercise prudence
In Malaysia, work on the Kuala Lumpur monorail fleet in this current market.
expansion project is over 83% complete which consists of
the civil works (stations extension, construction of a new The Group is currently facing another challenging year,
depot, stabling yard and train wash plant), wayside systems principally as a result of the sharp drop in upstream oil &
along the entire alignment, new signalling system for four- gas drilling activities, and continuing delays in completion
car trains and mixed fleet operations and delivery of six of on-hand monorail infrastructure projects as well as final
trains. decisions to award new ones.

The Commercial Vehicles unit also saw project delays While we cannot control external forces, the Management
as well as lower than budgeted sales. Even so, the unit has been proactive and doubled its efforts to restructure
continued to provide a steady revenue stream via the internal cost while generating new revenue streams for the
provision of vehicles for sales and leasing, as well as for Group. We are also looking at improving cash flow as well
operations and maintenance (“O&M”). as creating a more efficient and effective operational and
organisational structure.
Among the highlights included completion of bus chassis
assembly contract for a British client in June 2016. Also In the long-term, there is much to draw confidence
of note was the design, manufacture and delivery of a from. Global trends such as population growth will lead
mobile Command Centre and a mobile HAZMAT vehicle for to increased demand for energy and urban transport
a client in Malaysian. The HAZMAT vehicle is equipped to solutions. We are certainly aligned to these global growth
handle disasters containing hazardous material including trajectories and are well positioned to capitalise on these
chemical, biological and radioactive materials. provided we continue to remain resilient, and competitive
to weather the current volatility. Internally, we will continue
On a separate note, SEB signed a ground-breaking to focus on being low-cost, efficient and a technology
Collaborative Agreement (“CA”) with Skoda for the leader to ultimately win in the marketplace and emerge a
Mass Rapid Transit (“MRT”) and Light Rail Transit (“LRT”) global leader in our respective business operations.
vehicle joint development. The CA will pave the way for
both parties to emerge with new product offerings to We draw confidence from our robust business
complement their existing suite of transport solutions, fundamentals, our healthy financial position and also
product and services for worldwide distribution. from the inherent strengths and capabilities of the Group,
namely that of our strong brand reputation and track
record throughout the markets we serve.

022 Scomi Group Bhd


Annual Report 2016
Through our OFS unit under Energy Services, the Group will look to provide integrated services to compete in a wider
market while re-assessing its production cycle to unlock efficiencies within the supply chain. This will be beneficial as we
seek to provide Lowest-Cost-Per-Barrel solutions given the current low oil price environment.

We believe that the Group is able to increase its market share in the regions of Asia, West Africa, Russia and the Middle East
as there is opportunity to offer more comprehensive service packages to existing as well as new customers. In addition to
our drilling and completion services, we are now able to provide facilities, operations and maintenance services.

We will intensify our focus on graphene-enhanced products as we explore new, non-traditional markets. This includes
generating new products for other industries utilising nanographene technology. Our unique value proposition based
on our integrated solutions capability, experience and global operations network hold us in good stead in securing new
contracts and further expanding our international footprint.

Outlook for the Marine Services unit under Energy Services also remains challenging. However, the unit has secured coal
affreightment contracts in Malaysia and Indonesia, thereby having a steady 2-3 year recurring earnings base for operations.
On the offshore side, persistent low oil price have curbed demand for offshore vessels but we look to increase vessel
utilisation by offering more competitive charter rates.

The Transport Solutions division will remain focused on project execution for its Kuala Lumpur, Mumbai and Brazil monorail
projects. The Group continues to pursue monorail projects in multiple markets and new growth opportunities for the
commercial vehicles in the leasing and maintenance business, both locally and abroad.

Shah Hakim Zain


Group Chief Executive Officer

023 Scomi Group Bhd


Annual Report 2016
CORPORATE SOCIAL RESPONSIBILITY

Scomi Group Bhd (“SGB” or “the Group”) is proud of our heritage


of strong commitment and involvement in giving back to
the communities we operate in. We are ever mindful of our
responsibility in making a difference to the local community and
have aligned our corporate social responsibility (“CSR”) initiatives
with our business objectives. This would ensure effective and
efficient implementation, whilst allowing for a more strategic
and sustained delivery of results. In short, we have embraced
CSR as our Group’s way of life.

We continue to engage in a number of CSR initiatives to Our adherence to the industry’s regulatory requirements is
positively impact our stakeholders, essentially focusing reinforced by the Group’s own stringent requirements and
on the four social pillars identified by the Group, namely quality standards. In order to ensure the strong technical
the marketplace where we conduct our business, staff capability and capacity to adhere to such standards, we
development at our workplace, the community we operate have instituted a robust risk management and corporate
in and the environment which we live in. governance framework. This promotes a culture of checks
and balances in reinforcing the importance of compliance
We have streamlined our decision-making process, our in a particularly high risk environment like ours.
business strategies and implementation of action plans
- essentially our working culture, building upon these
As a means to progress with developing technologically
pillars to strengthen and integrate ourselves toward this
improved products and services, SGB taps on its own
altruistic cause. Our highly skilled and technically capable
internal resources to drive this forward. SGB has invested
employees – our greatest assets – have been passionate in
in R&D centres in Malaysia as well as in France and the
driving this noble cause and actively participating in CSR
activities organised by the Group. United States. In addition, our ongoing collaborations with
partners have produced competitive, innovative solutions,
As guided by our Corporate Statement, we continuously designed for cutting-edge performance whilst being
aim to realise the potential for our stakeholders who environmentally friendly.
constitute our employees, customers, shareholders,
suppliers, society and the environment as well. On this The Group’s commitment to ethical and professional
note, we have invested in Research and Development business operations is demonstrated by adopting fair
(“R&D”) to further enable more cost-effective, innovative business practices in all areas of our operations. We have
products which epitomise green solutions for developed a Global Procurement Policy which promotes an
environmental preservation. environment of fair-dealing and integrity in procurement
activities so as to ensure proper demand and acquisition
management. To further demonstrate SGB’s strong
OUR MARKETPLACE, OUR BUSINESS ARENA principles of business ethics, we are mindful to apply this
throughout our operations, coupled with transparency,
In this highly competitive industry with strict regulations accountability and good governance.
governing operations, we are resolute in driving our business
operations and corporate responsibility to align with the In our engagement with both internal and external
highest ethical standards in our business engagement with stakeholders, the Group places a high emphasis
our stakeholders, both internal as well as external. on communications as a means to achieve a better

026 Scomi Group Bhd


Annual Report 2016
understanding, buy-in and implementation of policies and OUR WORKPLACE, OUR FAMILY
processes. We engage our workforce with open, interactive
communications and regular updates. These sessions As a global service provider in the energy and transport
provide employees with an opportunity for sharing their solutions industries, SGB’s established performance stems
views, concerns and providing feedback so that all parties from its highly skilled and technically capable multinational
are kept well-informed and stay aligned with the Group’s workforce. As at end FY2016, our total workforce strength
objectives. This reinforces a strong culture of accountability, at 48 locations in 21 countries numbered 2,000 employees.
anchored firmly in an environment of trust and respect. We are of the firm belief that our employees are not just our
greatest assets, they are also our competitive advantage.
Similarly, the Group, periodically conducts briefings with
analysts and investors. Engagement channels such as these The demands and expectation of the energy and
serve to strengthen the alignment and understanding of transportation industries are evolving rapidly and we
need to ensure we keep pace with the environment and
our corporate vision and progress updates. This is besides
with technology, hence our focus on enhancing capacity
the required timely announcements to Bursa Malaysia
and capability. As outlined in our Corporate Statement,
Berhad on material activities and events, distribution of
we aim to provide our employees with developmental
quarterly “Letter to Shareholders” on the Group’s financial
opportunities so they can succeed on a personal as well as
performance to the related investment community and professional level.
also media releases on key developments of our business.
Another more conventional avenue stakeholders have is to As a measure of our commitment to develop our
access our corporate website for the latest updates on our employees, our Global Learning and Development
corporate activities, including our Annual Reports, Circulars (“GLaD”) unit is fully responsible for this important
to Shareholders, media releases and media coverage. aspect. Employees benefit from an extensive range of
development programmes coordinated by this unit to
Our corporate presence was further profiled at various enhance their soft skills and provide technical competency
external speaking opportunities where our staff training. Its coverage extends across the entire width
participated as speakers or presenters as listed below: and breath of the organisation, including the Group’s
subsidiaries and associate companies.
1. HR & Recruitment Interactive Conference (9 July
2015) in Kuala Lumpur We are cognisant that each individual employee has
2. Malaysia Petroleum Resources Corporation 3rd career aspirations of their own and to this, a development
Industry Talk-Panel Session (20 August 2015) in Kuala programme is personalised in order to assist them
Lumpur realise their fullest potential. All employees go through
3. Rail Business Asia 2015 (2-4 September 2015) in Kuala Performance Assessment and Capability Enhancement
Lumpur (“PACE”) where measures and targets are mapped
out and agreed at the outset. In order to maintain
4. HR & Recruitment Roundtable Summit Kuala Lumpur
alignment, employees are engaged in meaningful and
(30 September – 1 October 2015)
‘real conversations’ with their supervisors during their
5. 2015 Malaysia Oil & Gas Assembly (7 October 2015) in
performance monitoring sessions, centring on their
Kuala Lumpur
individual professional growth, performance and gap
6. 2015 Asia Pacific Oil & Gas Conference and Exhibition identification. This open and conducive environment
(20-22 October 2015) in Indonesia nurtures a vibrant and productive workforce which is
7. International Association of Business Communicators aligned with SGB’s objectives.
Meeting (Malaysia Chapter) (28 October 2015) in
Kuala Lumpur SGB recognises that a conducive work environment results
8. Offshore Technology Conference Asia 2016 in Kuala in enhanced employee productivity and had introduced
Lumpur flexible working hours for employees. With this added
flexibility, employees are able to better manage time
Additionally, the Group is also represented across various outside of office hours. To encourage a healthy lifestyle,
associations within the oil and gas industry as listed below: SGB organised a fun-filled ‘Laughter Yoga’ event which
was widely received. This is in addition to annual festive
1. Malaysian Oil & Gas Services Council celebrations at the Group’s global locations which serve
2. Malaysia Gas Association as a social platform for employees to renew and improve
3. Society of Petroleum Engineers working relationships.

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Annual Report 2016
CORPORATE SOCIAL
RESPONSIBILITY (cont’d)

The work culture at SGB is based on ‘leadership by Communication on current HSE issues such as the Zika
example’. This is seen in our townhalls or small focus group virus and haze are disseminated, alongside energy saving
meetings, whereby the Group Chief Executive Officer tips and workplace safety advice as well as ergonomics.
meets with various staff from all levels of the workforce To ensure dissemination of information directly from
to communicate company developments and share SGB’s corporate headquarters, Q&HSE teams have been
specific updates. The aim is not simply to disseminate appointed across SGB’s operations to drive activities locally.
information via a top-down approach but to also engage
staff, solicit their input and feedback, and to create greater In June 2015, SGB introduced the Hazard Hunt Card
accountability and involvement amongst all levels of (“HHC”) online system for its worldwide operations to allow
employees. This ultimately leads to greater understanding employees to report unsafe acts and unsafe conditions
across the organisation of our corporate direction and at the workplace. The Group organised numerous system
enables a stronger buy-in of its policies. familiarisation activities to increase employee engagement
and awareness on Q&HSE as well as to strengthen global
reporting.
QUALITY & HEALTH, SAFETY AND
ENVIRONMENT A Q&HSE dashboard was also implemented to enable a
summary overview across SGB’s operations and pinpoint
Quality & Health, Safety and Environment (“Q&HSE”) specific areas for increased support. In addition, the Group
has always been at the very core of our values at SGB. launched the Journey Management Plan system which was
This is resolutely driven by our corporate vision which designed to enable better of work travels and subsequently
places health and safety as a cornerstone of our business, minimise risk.
alongside our aim to achieve a record of workplace health
that leads the world.
OUR COMMUNITY, OUR SHARED
In our effort to develop competitive and innovative RESPONSIBILITY
solutions to meet the rapidly evolving environment, we are
continuously guided by our integrity in how we operate Our CSR initiatives are more than just an obligatory
and in our engagement with all our stakeholders. function; it is our way of life at SGB and is undertaken
with passion and compassion toward the marginalised
Risks are invariably to be expected, particularly in our community.
industry and on this basis, SGB has in place a robust and
comprehensive risk management system, aligning with As a responsible corporate citizen, the Group organises
international and local accredited standards. With such several programmes to give back to the society we operate
a system as our foundation, we have worked to instil a in. We factor in community initiatives such that every
strong HSE culture in each and every employee. Simply employee is required to take part in at least two projects a
put, this culture empowers our employees to act with year to fulfil their CSR key performance indicators.
accountability, guided by tenets of honesty, respect and
trust, to do what is right. One such activity organised on 23 January 2016 was
at Pusat Jagaan Nur Sakinah, a shelter in Shah Alam
SGB’s Global Q&HSE policy and affiliated procedures are for around 50 deserving children. A total of 30 of our
reviewed periodically to ensure stringent safety standards employees volunteered their time to participate in
are maintained. In addition, global best practices are beautifying the premises under the sweltering sun. They
incorporated as such continuous improvement is crucial to rolled up their sleeves to partake in weeding, clearing
stay relevant in this rapidly evolving business environment debris, taking down old fencing and even planting a ‘Scomi’
of ours. To ensure employees’ awareness and importance Mango tree. To spruce up the interior, our volunteers laid
of compliance of such policies and procedures, various down rubber mats in the children’s rooms and took time
channels such as face-to-face engagements, emails and to engage the children in games. The visit culminated in
quarterly Q&HSE newsletters are utilised to cascade this a delicious luncheon for the children and their caregivers.
throughout our organisation. The team also engaged the services of a clown to entertain
the children – seeing their wide smiles and hearing their
cheerful laughter was in itself reward enough for our
volunteers.

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Annual Report 2016
On 27 February 2016, SGB organised an event for In addition, SGB also developed a highly advanced water
the benefit of the Society for the Severely Mentally treatment system called PlatClean. The system utilises
Handicapped, Selangor and Federal Territory (“SSMH”) in graphene technology to remove water contaminants
Petaling Jaya. At this event, participants were encouraged such as of hydrocarbon material, solids, divalent salts and
to contribute a plant to help beautify the home. A total of scalants, chemicals, sulfides and biological material.
30 employees set aside time to volunteer their services to
add some joy and gladness to the 50 children and adults at For Transport Solutions, SGB’s expertise in designing and
this centre. In addition to cleaning up the centre, the group building monorails provides a proven green transportation
of volunteers also planted a ‘Scomi’ Soursop tree in the solution that enables the public to significantly reduce
centre’s garden. their carbon footprint. Running on electricity, monorail
systems are intrinsically environment-friendly as they do
On 26 March 2016, SGB’s employees joined and helped not release any carbon emissions. Additionally, in serving
organise an annual sports event organised by the as public transport, they significantly reduce the number
Persatuan Dyslexia Malaysia (“PDM”) for over 500 children of vehicles on the roads which in turn, further minimises
with dyslexia. With this year’s theme ‘Dyslexia Awareness carbon emission. Not one to rest on our laurels, SGB is
through Sukaneka’, the event aimed to raise the awareness actively pursuing improving the energy-efficiency of our
of dyslexia and to promote management of this condition. monorail trains by making them lighter hence requiring
Prior to this event, a call went out to our employees to less power to propel them and by improving the efficiency
contribute their pre-loved jeans to be placed in goodie of the engines.
bags and handed out to the children. A total of 58 SGB
volunteers took up various roles – assisting in the overall In this area, SGB has successfully demonstrated its expertise
logistics of the event such as sports events, managing the in a number of projects around the globe. SGB, together
registration desk and sales of refreshments. There was with its consortium partner, have designed, built and are
even an all-women’s team from SGB leading the Jazzercise currently maintaining and operating the Mumbai Monorail,
session at the event. It was indeed a most memorable day in India. Phase 1 of the project which has been operational
for the children taking part in the games as well as our since 2 February 2014, spans 8.92 kilometres from Wadala
volunteers. to Chembur. Its viability was proven particularly during the
monsoon in June 2015, in which the monorail continued its
The devastation of the April 2015 earthquakes in Nepal services whilst all other ground level public transportation
reverberated emotionally across the world, touching our systems ground to a halt.
hearts at SGB as well. A ‘Help Nepal Earthquake’ donation
drive was organised on 6 May 2015 in support of those Such was its engineering feat that this project was awarded
affected by the tragedy. a special mention in the International Achievement
category of the Malaysian Construction Industry Excellence
Awards 2015.
THE ENVIRONMENT WE LIVE IN
In Malaysia, SGB’s Kuala Lumpur Monorail Fleet Expansion
In the face of global climate change issues, SGB feels it is Project, the first of its kind mixed fleet operations for
the duty of all organisations to adopt various measures monorail globally is already over 83% completed. In Brazil,
to reduce impact upon the environment. At SGB, we SGB is working on three monorail projects as well as setting
are working resolutely on creating a greener portfolio up a manufacturing facility in São Paulo with the intention
of products in both our Energy Services and Transport to build metro and light rail trains not only for the local
Solutions divisions. market but also for other neighbouring North American
countries.
In Energy Services, SGB and a partner, have developed a
green base oil for our drilling fluids which performs well SGB is indeed proud of the steps our employees and the
in extreme temperature and pressure conditions. This company has taken to improve the lives of our community
product, PlatDrill R, has been acknowledged as being and assist in efforts to preserve our environment.
‘readily biodegradable’ and non-toxic. The benefit this The environment is held in trust for our children. Scomi
brings to our customers is the additional cost-savings in Group Bhd firmly believes that, in working together as
having to avoid incurring costs in converting toxic into one, we can truly make a difference in our community, our
non-toxic wastes. nation and the world.

029 Scomi Group Bhd


Annual Report 2016
STATEMENT ON CORPORATE GOVERNANCE

The vision of Scomi Group Bhd (“SGB” or the “Company”) and its
group of companies (the “Group”) is to be a global technology
enterprise, providing innovative solutions to the energy and
logistics industries, with an aim to realise potential for our
shareholders and stakeholders. Whilst striving for this, the
Board of Directors (the “Board”) of the Company is committed to
providing a satisfactory return to its shareholders and fulfilling its
corporate governance obligations and responsibilities in the best
interests of the Company and its shareholders.

Towards this end, the Board strives to ensure that The Group is led and controlled by an effective Board
the highest standards of corporate governance are which assumes, amongst others, the following principal
practiced by the Company and the Group and views roles and responsibilities in discharging its stewardship
this as a fundamental part of discharging its roles and role, and fiduciary and leadership functions:
responsibilities.
• reviewing and adopting a strategic plan for the
This Corporate Governance statement sets out the Company and the Group;
extent of how the Group has applied and complied with
the principles and recommendations as set out in the The Board constructively challenges and contributes
Malaysian Code on Corporate Governance 2012 (the to the development of the Company and the Group’s
“Code”) and the Main Market Listing Requirement of Bursa strategic directions, and subsequently monitors the
Malaysia Securities Berhad (“Bursa Malaysia”) (“Listing implementation of the strategic business plan by
Requirements”) for the financial year ended 31 March 2016 the Management to ensure sustainable growth and
(“FY2016”). optimisation of returns for the Company and the
Group.

PRINCIPLE 1 – ESTABLISH CLEAR ROLES AND The Group has in place an annual strategy planning
RESPONSIBILITIES session, whereby the Management presents to the
Board its recommended strategy and proposed
The Board is responsible for, and has the authority to strategic business plans for the upcoming financial
determine, all matters relating to the management and year. At the annual strategy planning and budget
operation of the Company, whilst the Management Board meeting, the Board reviews and deliberates
manages the Company and the Group in accordance with upon the proposed strategic business plans for
the strategic direction and delegations of the Board. The the upcoming financial year as well as probes
responsibility of the Board is to oversee the activities of the Management to ensure Management has taken, and
Management in carrying out these delegated duties. suggests Management to take, into consideration the
varying opportunities and risks whilst developing the
strategic business plan.

030 Scomi Group Bhd


Annual Report 2016
In conjunction with this, the Board also reviews (“ARMC”) and the Board and highlights concerns
and approves the proposed annual budget for the and issues, if any, faced by the Group. The actual
upcoming financial year and the key performance performance of the Group is assessed on a quarterly
indicators (“KPIs”) for the Corporate Balanced basis against the approved FY2016 budget, the
Scorecard (“BSC”) as prepared and presented by the results of the corresponding quarter of FY2015 and
Management. the immediate preceding quarter. Where significant
variances in the performance results are reported by
The strategy planning session for FY2016 began at the Management to the ARMC and the Board, it is
the Global Executive Meeting held in January 2015, accompanied with explanations, clarifications and the
where all the Senior Management were invited to the corrective action taken. Besides this, the ARMC and
meeting to discuss and develop the mitigation plans the Board were also informed by the Management of
for the identified strategic risks, the proposed 3-year the key initiatives and significant operational issues.
strategic business plan, the proposed FY2016 budget A summary of the performance of each business unit
and the proposed Corporate BSC. Subsequent to is also provided to the Board. The relevant members
this, the Management prepared and presented the of the Management were in attendance at the
3-year strategic business plan, the proposed FY2016 ARMC and/or Board meetings to support the GCEO
budget and the proposed Corporate BSC for the in presenting the updates on the progress of key
Board’s review and approval at the Board meeting initiatives, business targets and achievements to date,
held in March 2015. The Board deliberated on the and to provide clarification on the challenges and
strategic directions, the 3-year strategic business issues faced by the Management and business units.
plan, the proposed FY2016 budget and the proposed
Corporate BSC of the Company and the Group and • identifying principal risks of the Company and
discussed and agreed upon the expectations of the the Group and ensuring the implementation of
Board with the Management. appropriate internal controls and mitigation measures
to manage these risks;
The proposed 3-year strategic business plan,
the proposed FY2016 budget and the proposed Whilst the Board has overall responsibility for the
Corporate BSC were subsequently approved by the Group’s risk management framework and internal
Board in March 2015. controls system, it has delegated the implementation
of these risk management framework and internal
• overseeing and evaluating the conduct and controls system to the Management and tasked the
performance of the Company and the Group’s ARMC with the oversight responsibility to review the
business; adequacy and effectiveness of the risk management
framework and internal controls system.
The Group Chief Executive Officer (“GCEO”) has
overall responsibility, with the support of the Key However, the Board recognises that such systems
Management Team, for the day-to-day management are designed to manage and reduce, rather than
of the business and implementation of the Board’s eliminate, the risks identified to acceptable levels.
policies, directives, strategies and decisions. Therefore, the internal controls implemented can
only provide reasonable and not absolute assurance
On a quarterly basis, the GCEO reviews the Group’s against the occurrence of any material misstatement,
key financial performance metrics with both the loss or fraud.
Audit and Risk Management Committee of the Board

031 Scomi Group Bhd


Annual Report 2016
STATEMENT ON CORPORATE
GOVERNANCE (cont’d)

The Management reports to the ARMC on a quarterly The Board, through the NRC, develops and agrees
basis on all risks areas faced by the Group and the the GCEO’s BSC with the GCEO based on the strategic
audit findings identified from the internal audit objectives, measures and KPIs which are aligned to
activities conducted by the Group Internal Audit the Group’s corporate goal and strategic business
Department (“GIA”). The ARMC then deliberates the plan set by the Board.
actions taken by the Management to address those
high risks areas and audit findings. The ARMC also Following the determination of the measures and
acts as an intermediary between the Management or KPIs for the GCEO, the same will be cascaded down
other employees, and the external auditors where the to his direct reports. The GCEO reviews the progress
external auditors are invited to present to the ARMC of achievements of the KPIs or initiatives as set out
the audit plan, the audit findings, the independent in the BSC of his direct reports on a monthly basis,
auditors’ report as well as any other matters allowing for timely response and corrective action
considered by the external auditors as important to be taken to catch up to their targeted plan. These
and requiring the ARMC’s attention. The ARMC also achievements are then flowed into the GCEO’s BSC
conducts private meetings with the external auditors, which, together with the summary of achievements
to give opportunity to the external auditors to raise by his direct reports, are reviewed quarterly by the
any matters without the presence of the Executive ARMC and the Board.
Board Member and Management. Minutes of the
meetings of the ARMC which record the deliberations In discharging its responsibility on succession
of the ARMC are presented to the Board. The planning, the NRC and the Board receive assurance
Chairman of the ARMC will also report to the Board from the GCEO that all candidates appointed to the
on the principal risks and internal controls related Senior Management positions are of sufficient calibre
matters and recommendations deliberated by the and there is a plan in place to provide for the orderly
ARMC at the immediate subsequent Board meeting. succession of Senior Management.

Details of the Enterprise Risk Management Framework The NRC is also tasked by the Board to evaluate the
and internal controls system of the Group are as set performance of the GCEO against the approved KPIs
out in the Statement of Risk Management and Internal or initiatives as set out in the BSC of the GCEO at the
Control in this Annual Report. end of each financial year. Subsequently, the NRC
provides the Board with its recommendation for the
• reviewing the adequacy and the integrity of the GCEO’s performance evaluation at the end of the
management information, risk management and financial year, for decision.
internal controls system of the Company and the
Group; • overseeing the development and implementation
of the investor relations and shareholder
The risk management and internal controls system communications policy for the Company and the
of the Company and the Group is subject to the Group.
Board’s regular review with a view towards appraising
the adequacy, effectiveness and efficiency of such Recognising the importance of accurate and timely
system within the Group and also to ensure that these public disclosures of corporate information in order
systems are viable and robust. for the shareholders to exercise their ownership rights
on an informed basis, the Board has established a
• overseeing management performance and ensure Global Communications Policy.
a sound succession plan for key positions with the
Company;

032 Scomi Group Bhd


Annual Report 2016
To enhance the Board and the Management’s and checks and balances are incorporated therein. The
accountability to the Company and its shareholders, the TOR and DAL are continuously reviewed and updated to
Board has established clear functions reserved for the ensure their relevance to the Group’s operations as well as
Board and those delegated to the Management. The for compliance with legislation and standards.
Board operates under a Board Charter and Board Policy
Manual, which establishes a formal schedule of matters and The Board has established two (2) committees of the
outlines the types of information required for the Board’s Board, namely the ARMC and the NRC, which operate
attention and deliberation at the Board meetings. The within clearly defined written TOR. The Board Committees
Board Charter is available on the Company’s website at deliberate issues on a broad and in-depth basis before
www.scomigroup.com.my. putting up any recommendation to the Board for decision.
Notwithstanding the existence of the Board Committees
To ensure the effective discharge of its functions and and the relevant authorities granted to a committee
responsibilities, the Board has delegated specific under its TOR, ultimate responsibility for the affairs of
responsibilities to the relevant Board Committees, GCEO the Company and decision-making lies with the Board.
and Management through a clear and formally defined The Board keeps itself abreast of the significant matters
written terms of reference (“TOR”) and delegated authority and resolutions deliberated by each Board Committee
limits (“DAL”), which are the primary instruments that through the reports by the Chairman of the relevant Board
govern and manage the decision-making process in the Committees and the tabling of the Minutes of the Board
Group. Whilst the objective of the DAL is to empower Committee meetings and circular resolutions passed by
Management, the key principle adhered to in its each Board Committee at the immediate subsequent Board
formulation is to ensure that a system of internal controls meeting.

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

BOARD COMMITTEES

ARMC NRC

Chairman/Independent Non-Executive Director


Dato’ Mohammed Azlan Bin Hashim - C

Independent Non-Executive Directors

Tan Sri Nik Mohamed Bin Nik Yaacob C -

Tan Sri Mohamed Azman Bin Yahya - M

Dato’ Abdul Hamid Bin Sh Mohamed M -

Non-Independent Non-Executive Directors

Dato’ Sreesanthan A/L Eliathamby(1) M -

Dato’ Teh Kean Ming(2) - -

Mr Foong Choong Hong - -

Mr Lee Chun Fai(3)(4) - M

Mr Cyrus Eruch Daruwalla (5)


- -

GCEO/Non-Independent Executive Director

Encik Shah Hakim @ Shahzanim Bin Zain - -

033 Scomi Group Bhd


Annual Report 2016
STATEMENT ON CORPORATE
GOVERNANCE (cont’d)

Notes: The Group is also committed to openness, probity and


accountability. An important aspect of accountability and
C - Chairman M – Member transparency is the existence of a mechanism to enable
(1) Resigned as a member of the NRC on 23 May 2016. employees of the Group to voice their concerns in a
(2) Resigned as a Non-Independent Non-Executive Director responsible and effective manner. It is a fundamental term
on 31 May 2015. of every contract of employment that an employee will
(3) Appointed as a Non-Independent Non-Executive faithfully serve his employer and not disclose confidential
Director on 31 May 2015. information about the employers’ affairs. Nevertheless,
(4) Appointed as a member of the NRC on 23 May 2016. where an individual discovers information which he
(5) Appointed as a Non-Independent Non-Executive believes shows serious malpractice or wrongdoing within
Director on 23 May 2016. the organisation, there should be internal mechanisms to
enable him to safely report, in good faith, on any suspected
In discharging its duties and responsibilities, the Board breaches of the law or company procedure that has come
is guided by the Code of Conduct of the Group which to his notice.
provides the framework to ensure that the Group conduct
itself in compliance with laws and ethical values. The To address this concern, the Group has formalised and
Board and all employees of the Company and the Group established a Whistleblower Framework and Policy,
are committed to adhering to best practices in corporate to provide an avenue for employees to raise genuine
governance and observing the highest standards of concerns internally or report any breach or suspected
integrity and behaviour in all activities conducted by breach of any law or regulation, including the Group’s
the Company and the Group, including the interaction policies and procedures, to the Disclosure Officer in a
with its customers, suppliers, shareholders, employees safe and confidential manner, thereby ensuring that
and business partners, and within the community and employees may raise concerns without fear of reprisals.
environment in which the Company and the Group The Whistleblower Framework and Policy is subject to
operate. The Board ensures that compliance is monitored periodic assessment and review to ensure that it remains
through a Confirmation of Compliance declaration process relevant to the Group’s changing business circumstances.
where all employees of the Group of grades 15 and above The Group has also put in safeguards to protect the identity
are required to confirm their receipt and understanding of of the Whistleblower to encourage employees of the Group
the Code of Conduct and further to certify their continued to report any breach or reasonably suspected wrongful
compliance with the Code of Conduct on an annual basis. malpractices without fear of reprisal so that the problem
can be identified at an early stage and resolved quickly
It is a condition of appointment and/or employment with within the Group. The Whistleblower Framework and
the Group that the Board and all employees of the Group to Policy is available on the Company’s website at
comply with the Code of Conduct and all applicable laws, www.scomigroup.com.my.
regulations and other policies of the Group and failure to
comply may result in the commencement of disciplinary The Board is cognisant of the importance of business
proceedings that may lead to termination of appointment sustainability and, in managing the Group’s business,
and/or employment. take into consideration its impact on the environment
and society in general. Balancing the environment, social
The appropriateness and effectiveness of the Code and governance aspects with the interest of various
of Conduct of the Group are continuously monitored stakeholders is essential to enhancing investor and public
and appropriate agreed improvements and reporting trust. We acknowledge our responsibility to all the lives
procedures will be adopted where necessary. The Code of we touch either directly or indirectly, and are committed
Conduct is available on the Company’s website at to making a positive impact in the many communities
www.scomigroup.com.my. where we have a presence while further strengthening
our corporate reputation via upholding a culture of

034 Scomi Group Bhd


Annual Report 2016
integrity and transparency. Over the years, our approach PRINCIPLE 2 – STRENGTHEN COMPOSITION
towards corporate social responsibility has become
progressively more holistic, evolving from individual acts The success of the Board in fulfilling its oversight
of philanthropy to becoming a mindset that influences responsibility depends on its size, composition and
business decision and strategy. We further ensure that this leadership qualities.
mindset is shared among all our employees by reinforcing
the principles of integrity and corporate citizenry in our The Articles of Association of the Company provides for
training and internal communication, and encouraging a a minimum of two (2) directors and a maximum of 12
spirit of volunteerism across our operations globally. Apart directors. At any one time, at least two (2) Directors or
from the Code of Conduct, the Group has in place other one-third (1/3) of the Board, whichever is higher, shall be
internal policies and procedures to address corporate Independent Directors, who are to provide independent
sustainability. We also realise that, given the nature of judgment, experience and objectivity to the Board
the businesses we are involved in, we can make a positive deliberations so that the interests of all shareholders are
impact on the environment. Hence, we invest significantly taken into account by the Board. The Directors shall elect a
in research and development to develop ‘green’ products Chairman among themselves who shall be a Non-Executive
that are efficient, cost-effective and, most importantly, Director.
environmentally friendly. The Board also strives to
promote conservation and encourages a paperless During the financial year under review, the Board consisted
environment for all Board and Board Committees meetings, of eight (8) members, comprising one (1) Executive Director
where digital access are given to meeting papers to save and seven (7) Non-Executive Directors (including the
on the distribution of hard copies. Chairman) of whom four (4) are independent as defined
by the Listing Requirements. During this period, the
Every Director has full, free and unrestricted access to Independent Directors made up 50% of the composition
information within the Group. Where required, the Board of the Board. Hence, the composition of the Board fulfils
and its Committees are provided with independent the prescribed requirement for one-third (1/3) of the
professional advice or other advice in furtherance of their Board to be Independent Directors. The appointment of
duties, the cost of which is borne by the Company. The Independent Directors is to ensure that the Board includes
Board may also seek advice from the Management or directors who can effectively exercise their best judgment
request further explanation, information or update on any objectively for the exclusive benefit of the Company and
aspect of the Group’s operations or business concerns. the Group.
The Board is supplied with quality and timely information,
which allows it to discharge its responsibilities effectively The composition of the Board reflects a diversity of
and efficiently. The agenda for each meeting together with backgrounds, skills and experiences in the areas of
a set of comprehensive Board Papers for each agenda item business, economics, finance, legal, general management
are delivered to each Director in advance of meetings, to and strategy that contributes effectively in leading and
enable the Board sufficient time to review the matters to directing the management and affairs of the Group. Given
be deliberated for effective discussion and decision making the calibre and integrity of its members and the objectivity
during the meeting, and where necessary, to obtain and independent judgment brought by the Independent
supplementary information before the meeting. Directors, the Board is of the opinion that its current size
and composition contribute to an effective Board.
In addition, the Directors have full and unrestricted access
to the advice and dedicated support services of the two
(2) company secretaries appointed by the Board. The
Company Secretaries, who are qualified, experienced and
competent, advise the Board on procedural and regulatory
requirements to ensure that the Board adheres to the
board policies, procedures and regulatory requirements in
carrying out its roles and responsibilities effectively.

035 Scomi Group Bhd


Annual Report 2016
STATEMENT ON CORPORATE
GOVERNANCE (cont’d)

The Company has also appointed an Independent The members of the NRC are appointed by the Board
Non-Executive Director of the Company as the Senior based on recommendations from the NRC and comprise
Independent Director of the Company. The main duties at least three (3) members who are all non-executive, a
and responsibilities of the Senior Independent Director majority of whom are independent directors. Members of
of the Company are to serve as the point of contact the NRC elect a Chairman from among themselves who is
between the Independent Directors and the Chairman an Independent Non-Executive Director. All members of
on sensitive issues and to act as a designated contact to the NRC, including the Chairman, shall hold office only so
whom shareholders’ concerns or queries may be raised, long as they serve as Directors of the Company. Members
as an alternative to the formal channel of communication of the NRC may relinquish their membership in the NRC
with shareholders. For any concerns or queries regarding with prior written notice to the Company Secretary. The
the Group, the shareholders may convey to the Senior NRC reports its recommendations back to the Board for its
Independent Director of the Company via the following consideration and approval. In the event of any vacancies
channels: arising in the NRC resulting in the number of members
of the NRC falling below three (3), the vacancy should be
SCOMI GROUP BHD
Mail : filled within three months of it arising. The NRC meets at
Level 17, 1 First Avenue least once during a financial year. In the interim period
Bandar Utama between meetings, if the need arises, issues shall be
47800 Petaling Jaya resolved through circular resolution. A circular resolution in
Selangor Darul Ehsan writing, stating the reason(s) to arrive at a recommendation
Malaysia or resolution, signed by a majority of the members, shall
Attention: Tan Sri Nik Mohamed Bin Nik Yaacob, be valid and effective as if it had been passed at a meeting
Senior Independent Director duly convened and constituted.

Fax : +603 7728 5258 The duties and responsibilities of the NRC are set out in
the TOR of the NRC which is available at the Company’s
Email : info@scomigroup.com.my website at www.scomigroup.com.my.

A brief description of the background of each Director is The appointment of directors is a vital process as it
as set out in the Profile of Directors section of this Annual determines the composition and quality of the Board’s
Report. mix of skills and competencies. The nomination and
appointment of new directors takes place within the
The NRC established by the Board is tasked to: parameters set out in the TOR of the NRC and the Board
Composition Policy.
• ensure an effective process for selection of new
directors and assessment of the effectiveness of the The Board, through the NRC undertakes an annual
Board and Board Committees and the performance assessment of the Board as a whole and each individual
of individual directors which will result in the Directors’ performance. This includes a review of the
required mix of skills, experience and responsibilities desirable mix of competencies, qualification, knowledge,
being present on the Board; skills, expertise and personal characteristics of Directors
and any gaps that exist in the optimum mix of skills
• establish, review and report to the Board on a formal required for the Board.
and transparent policy on Executive Directors’
remuneration; and When it is determined that a new director is necessary to
complement existing Directors, the Board first determines
• review and recommend to the board the the target knowledge, skills and personal characteristics
remuneration of the Executive Directors in all its sought. Such criteria ensures that all candidates are fairly
forms with the aim of attracting, retaining and and equitably considered and evaluated irrespective
motivating individuals of the highest quality needed of, amongst others, sex, race, sexual orientation, age,
to run the Company successfully. disability, and religion or ethnic origin in compliance with
the Company’s Code of Conduct.

036 Scomi Group Bhd


Annual Report 2016
The NRC is then tasked with the responsibility of searching Based on the chronology of the Directors’ appointment to
for and making a recommendation in relation to the the Board, the following directors shall retire by rotation in
appointment of a director. It goes about this task in one of accordance with Article 82 of the Articles of Association of
two ways. It may use the wide network of people known to the Company:
its members to identify possible candidates or it may brief (a) Dato’ Mohammed Azlan Bin Hashim;
a search consultant on the target knowledge, skills and (b) Dato’ Sreesanthan A/L Eliathamby; and
personal characteristics sought then obtain a ‘short list’ of (c) Mr Shah Hakim @ Shahzanim Bin Zain.
candidates. The Chairman of the NRC then interviews such
shortlisted candidates. In accordance with Article 89 of the Articles of Association
of the Company, any Director appointed to fill a casual
The Chairman of the NRC shall make a recommendation vacancy or as an additional Director shall only hold office
to the NRC, which in turn shall make a recommendation until the next following AGM and shall then be eligible for
to the Board. In making these recommendations, the NRC re-election. In compliance with Article 89 of the Articles
shall ensure an effective process for the selection of new of Association of the Company, Mr Cyrus Eruch Daruwalla,
directors to the Board. who was appointed to the Board on 23 May 2016 and holds
office until the forthcoming AGM of the Company, and who
Based on the recommendations of the NRC, the Board shall being eligible, offers himself for re-election as a Director of
have power at any time and from time to time, to appoint the Company at the forthcoming AGM of the Company.
any person to be a director of the Company, either to fill
a casual vacancy or as an addition to the existing Board All the Directors concerned, who are required to retire from
subject to the maximum number fixed in the Articles of office pursuant to Article 82 or Article 89 of the Articles
Association of the Company. of Associations of the Company, have consented to offer
themselves for re-election at the forthcoming AGM.
During the financial year under review, the NRC has
reviewed and recommended to the Board the appointment For the purpose of determining the eligibility of
of Mr Lee Chun Fai as a Non-Independent Non-Executive the Directors who are standing for re-election or re-
Director of the Company. The Board approved the NRC’s appointment at the 14th AGM to be held on 18 August
recommendation and Mr Lee Chun Fai was appointed to 2016, the Board, via the NRC, has conducted an assessment
the Board on 31 May 2015. As newly appointed directors on the performance and contribution of each of the
shall hold office until the next following Annual General Directors concerned and the review of the mix of skills,
Meeting (“AGM”) of the Company, Mr Lee Chun Fai, being experience and competencies of the Directors concerned
eligible and offering himself for re-election, was re-elected and collectively agree that they meet the criteria of
at the 13th AGM held on 8 September 2015 (“13th AGM”). character, experience, integrity, competence and time to
Mr Lee Chun Fai has subsequently been appointed as a effectively discharge their respective roles as Directors, as
member of the NRC on 23 May 2016. prescribed by Paragraph 2.20A of the Listing Requirements.
The profiles of these Directors are set out in this Annual
In accordance with Article 82 of the Articles of Association Report.
of the Company and Paragraph 7.26(2) of the Listing
Requirements, at least one-third (1/3) of the Board is Upon the recommendation by the NRC, the Board has
subject to retirement by rotation at each AGM and a pleasure in proposing the re-election of the following
retiring director shall retain office until the close of the directors who being eligible, offer themselves for re-
AGM of the Company at which he retires. Pursuant to election at the forthcoming AGM of the Company:
Article 82 of the Articles of Association of the Company, (a) Dato’ Mohammed Azlan Bin Hashim;
Tan Sri Nik Mohamed Bin Nik Yaacob, Tan Sri Mohamed (b) Dato’ Sreesanthan A/L Eliathamby;
Azman Bin Yahya and Mr Foong Choong Hong retired from (c) Mr Shah Hakim @ Shahzanim Bin Zain; and
the Board and were re-elected at the 13th AGM. (d) Mr Cyrus Eruch Daruwalla.

037 Scomi Group Bhd


Annual Report 2016
STATEMENT ON CORPORATE
GOVERNANCE (cont’d)

All these retiring directors had abstained from deliberation • reviewed the skills, experience and competencies of
and decision on their own eligibility to stand for re-election the non-executive Directors;
at the relevant NRC and Board meetings, where applicable.
• assessed the adequacy of the size and composition of
The NRC is also responsible for reviewing candidates the Board;
for appointment to the Board Committees and makes
appropriate recommendations thereon to the Board for • reviewed the proposed remuneration for the Non-
approval. Executive Directors of the Company;

It is tasked with assessing the effectiveness of the Board


• reviewed the retirement and re-election of the
and Board Committees and the performance of individual
Directors pursuant to the Articles of Association of the
directors in order to ensure that the required mix of skills
Company;
and experience are present on the Board. In the course
of assessing the effectiveness of the Board and the Board
• evaluated and recommended to the Board the
Committees and the contributions of each individual
director, the NRC also evaluates and determines the training GCEO’s BSC for the financial year under review;
needs for each of the Directors in order to enhance the skills
of the directors and aid them in the discharge of their duties • reviewed and recommended to the Board the GCEO’s
as directors. BSC for the new financial year;

The NRC together with the GCEO, representing the • reviewed and recommended to the Board the
Management, collectively conducted the assessments of remuneration package for the GCEO;
the effectiveness of the Board and its Committees and the
performance of each individual Director, which considered • reviewed and recommended to the Board the
the qualification, contribution and performance of mechanism for assessment of the GCEO’s BSC;
Directors taking into account their competencies, character,
commitment, integrity, experience and time expended in • reviewed and recommended to the Board the
meeting the needs of the Group. The Chairman of the NRC proposed amendments to the TOR for the NRC;
will discuss the NRC’s assessment of the performance of
each individual Director with the Directors concerned on a • reviewed and recommended to the Board the
one-to-one basis. All assessments and evaluations carried proposed change in the Chief Financial Officer (“CFO”)
out by the NRC in the discharge of its functions are properly of the Company;
documented, summarised and reported to the Board.
• reviewed the developments relating to legal
During the financial year under review, the NRC consisted
proceedings taken by the authorities against one of
of three (3) members, who are all non-executive directors
the Directors; and
and a majority of whom are independent directors. In
accordance with the approved TOR of the NRC, the NRC
• reviewed and recommended to the Board the
carried out the following activities during the FY2016:
appointment of a new Director.
• assessed the annual performance of each individual
Director; The NRC is also responsible for the review of the overall
remuneration policy for the Directors and the GCEO
• assessed the continued independence of each whereupon recommendations are submitted to the Board
Independent Director; for approval. The NRC advocates a fair and transparent
remuneration policy framework such that the Group may
• reviewed the skills, experience and competencies attract, retain and motivate high quality Directors. Besides
of each individual Director and based thereupon, the remuneration practices and trends by other similar
assessed the training needs of each individual players in the market, the level of Directors’ remuneration
Director; is also attributed to a few key factors, amongst them,
qualification, experience and responsibilities of the
• assessed the effectiveness of the Board, the ARMC Directors to the Board and Board Committees.
and other Committees of the Board;

038 Scomi Group Bhd


Annual Report 2016
The Non-Executive Directors are paid by way of fees for The structure of the remuneration package for the Non-
their services, as from time to time determined by the Executive Directors was last revised by the Board in respect
Company in AGM and are not compensated based on of the financial year ended 31 December 2009 and since
the Company’s (Group’s) performance and results as this then the remuneration package for the Non-Executive
may impair the Directors’ objectivity and independence, Directors has remained unchanged. In view of the current
particularly when asked to endorse risky business decisions challenges in the oil and gas industry, although with the
that may have a vast upside potential. The Non-Executive increasing tasks, responsibilities, liabilities and burdens on
Directors are reimbursed for all their travelling, hotel and Non-Executive Directors as well as tighter corporate and
other expense properly and necessarily expended by them capital market rules and regulations, the Board concurred
in and about the business of the Company including their with the recommendation of the NRC to maintain the
travelling and other expenses incurred in attending the same remuneration policy and Directors’ fees for the Non-
meetings of the Board or any Board Committees of the Executive Directors in respect of the FY2016, which in turn
Company. is to be approved by the shareholders at the forthcoming
AGM of the Company. The aggregate remuneration paid to
The remuneration of the GCEO comprises principally salary the Directors of the Group who served during the financial
and other benefits, taking into consideration market rates year, and the bands, are as follows:
and practices.

Executive Director Non-Executive Directors


(RM’000) (RM’000) Total
(RM’000)
Group Company Group Company
Salaries and bonuses 2,490 2,490 - - 2,490
Defined contribution plan 399 399 - - 399
Fees 120* - 658* 492* 778*
Allowances - - 126 98 126
Estimated value of benefit-in-kind 128 128 - - 128
Total 3,137 3,017 784 590 3,921

* The proposed Annual Directors’ Fees are subject to the shareholders’ approval at the forthcoming AGM of the Company or
respective subsidiaries companies.

The aggregate remuneration above is categorised into the following bands:

Executive Director Non-Executive Total


Directors
RM10,000 to RM60,000 - 1 1
RM60,001 to RM110,000 - 4 4
RM110,001 to RM160,000 - 1 1
RM160,001 to RM210,000 - 2 2
Up to RM3,200,000 1 - 1

039 Scomi Group Bhd


Annual Report 2016
STATEMENT ON CORPORATE
GOVERNANCE (cont’d)

PRINCIPLE 3 – REINFORCE INDEPENDENCE Executive Directors and their ability to act in the best
interests of the Company during deliberations at Board
The roles of the Chairman and the GCEO are held by two meetings. Further, the Board had approved that Dato’
separate individuals and are distinct and separate with Mohammed Azlan Bin Hashim and Tan Sri Nik Mohamed
each having a clear scope of duties and responsibilities Bin Nik Yaacob to continue to act as Independent Non-
to ensure there is a balance of power and authority. The Executive Director of the Company based on the following
division of the responsibilities of the Chairman and the justifications:
GCEO has been clearly defined in the Board Charter of the
Company. (a) that they continue to fulfil the criteria set out in the
definition of “Independent Director” in the Listing
The Chairman is responsible for the leadership, Requirements;
effectiveness, conduct and governance of the Board, while (b) that their vast experience and expertise enables
the GCEO has overall responsibility, with the support of the the Board to discharge its duties effectively and in a
Key Management Team, for the day-to-day management competent manner;
of the business and implementation of the Board’s policies, (c) that although they have served the Company as
directives, strategies and decisions. This crucial partnership Independent Directors for cumulative terms of
dictates the long term success of the Company and the more than nine (9) years each, they have at all times
Group. acted in the best interest of the Company, providing
independent views to the deliberations and decision
In general, the tenure of an Independent Director shall making of the Board and Board Committees and fully
not exceed a cumulative term of nine (9) years. However, understand the Company’s objective and strategies
pursuant to our Board Composition Policy, it has been as well as the business operation of the Company
determined that this general rule shall not be applicable and the Group and able to provide critical oversight;
to any Independent Director, who is holding office as the (d) they have proven to be reliable Independent
chairman of the Company or any subsidiary that is listed Directors with their professionalism, aptitude and
on any securities exchange. In such case, the Director outlook of business perspective, devoted sufficient
concerned shall be deemed an Independent Director time and attention to their professional obligations
provided: for informed and balance decision making and have
also exercised due care and diligence during their
(a) he fulfils the criteria set out in the definition of tenure in the best interest of the Company and the
“Independent Director” set out in the Listing shareholders; and
Requirements or the relevant regulations governing (e) they have provided confirmation in writing that they
entities listed on such other securities exchange; and are independent of the Management, the Board and
(b) he provides confirmation in writing that he is major shareholders and are free from any business
independent of the Management, the Board and or other relationship which could interfere with the
major shareholders and is free from any business exercise of independent judgment or the ability to
or other relationship which could interfere with the act in the best interests of the Company and the
exercise of independent judgment or the ability to Group.
act in the best interests of the Company and the
Group. PRINCIPLE 4 – FOSTER COMMITMENT

In line with the recommendation 3.1 of the Code, the The Board meets a minimum of six (6) times a year, with
Board, through the NRC, has assessed the independence special meetings convened as and when necessary. The
of each Independent Director annually. Taking into Board is responsible for setting the corporate goals
consideration interests disclosed by each Independent of the Group and in mapping medium and long term
Director and having regard to the criteria for assessing strategic plans, which are reviewed on a regular basis.
the independence of Directors under the annual Board Regular periodic review of the Group’s performance and
assessment, the Board Composition Policy of the Company implementation of the management’s action plans are
and the Listing Requirements, the Board is satisfied with conducted by the Board to assess the progress made
the level of independence demonstrated by all the Non- towards achieving the overall goals of the Group.

040 Scomi Group Bhd


Annual Report 2016
The schedule of meetings of the Board and its Committees During the FY2016, six (6) Board Meetings were held.
as well as the AGM is prepared and circulated to the Board The Board is satisfied with the level of commitment
before the beginning of the year to facilitate the Directors given by the Directors towards fulfilling their roles
in planning ahead. Special meetings of the Board and and responsibilities as Directors of the Company. The
its Committees are convened between the scheduled attendance record of the Directors at the meetings of the
meetings as and when urgent and important direction Board and its Committees is as follows:
from and/or decisions of the Board and/or its Committees
are required.

meeting attendance
(attended/held)

BOARD ARMC NRC

Chairman/ Independent Non-Executive Director


Dato’ Mohammed Azlan Bin Hashim 6/6 - 3/3

Independent Non-Executive Directors


Tan Sri Nik Mohamed Bin Nik Yaacob 6/6 9/9 -

Tan Sri Mohamed Azman Bin Yahya 5/6 - 3/3

Dato’ Abdul Hamid Bin Sh Mohamed 6/6 9/9 -

Non-Independent Non-Executive Directors 6/6 8/8 -

Dato’ Sreesanthan A/L Eliathamby(1) 5/6 8/9 3/3

Dato’ Teh Kean Ming(2) 0/1 - -

Mr Foong Choong Hong 6/6 - -

Mr Lee Chun Fai(3)(4) 4/5 - -

Mr Cyrus Eruch Daruwalla(5) - - -

GCEO/Non-Independent Executive Director

Encik Shah Hakim @ Shahzanim Bin Zain 5/6 - -

Notes:

(1) Resigned as a member of the NRC on 23 May 2016.


(2) Resigned as a Non-Independent Non-Executive Director on 31 May 2015.
(3) Appointed as a Non-Independent Non-Executive Director on 31 May 2015.
(4) Appointed as a member of the NRC on 23 May 2016.
(5) Appointed as a Non-Independent Non-Executive Director on 23 May 2016.

041 Scomi Group Bhd


Annual Report 2016
STATEMENT ON CORPORATE
GOVERNANCE (cont’d)

The Board is supplied with quality and timely For this purpose, a dedicated training budget for the
information, which allows the Directors to discharge their Directors’ continuing education is provided each year
responsibilities effectively and efficiently. The meeting by the Company. In addition to the NRC’s evaluation
agenda together with a set of comprehensive Board and determination of the training needs for each of the
Papers for each agenda item are delivered to each Director Directors, the Directors may also request to attend training
in advance of meetings, to enable the Board sufficient courses according to their needs as a Director or member
time to review the matters to be deliberated and to allow of the respective Board Committees on which they
for effective discussion and decision making during the serve. Throughout the period under review, the Directors
meeting, and where necessary, to obtain supplementary were also invited to attend a series of talks on Corporate
information before the meeting. At the Board meeting, Governance organised by Bursa Malaysia together with
the Chairman encourages constructive, open and healthy various professional associations and regulatory bodies.
debate and ensures that resolutions are circulated and
deliberated so that all Board decisions reflect the collective An appropriate induction has been provided to the newly
view of the Board. Directors are given the chance to freely appointed Director in order for him to familiarise himself
express their views or share information with their peers in with the Group’s organisational structure, strategic plans,
the course of deliberation at the Board. Any Director who significant financial, accounting and risk issues and other
has a direct and/or indirect interest in the subject matter important matters and become effective in his role within
to be deliberated will abstain from deliberation and voting the shortest practicable time.
on the same during the meeting. All deliberations at the
meetings of the Board and its Committees in arriving at During the FY2016, all members of the Board attended
the decisions and conclusions are properly recorded by the various training programmes, conferences, seminars
Company Secretary by way of minutes of meetings. and courses organised by the relevant regulatory
authorities and professional bodies on areas relevant to
All Board members are obliged to notify the Chairman of the Group’s business, Directors’ roles, responsibilities,
the Board before accepting any new directorship. The effectiveness and/or corporate governance issues. Training
notification shall include an indication of time that will programmes, conferences, seminars and courses attended
be spent on the new appointment. The Chairman shall by Directors during the year under review are as follows:
also notify the Board if he has any new directorship or
significant commitments outside the Company. Corporate Governance

The Directors are also in compliance with Paragraph • Advocacy Session on Management Discussion &
15.06 of the Listing Requirements on the restriction on Analysis for CEO and CFO
the number of directorships in listed companies held • Audit Oversight Board Conversation with Audit
by the Directors. The Company Secretary monitors the Committees
number of directorships held by each Director to ensure • Briefing on Sustainability Statement
compliance at all times. The list of directorships of each • Bursa Talk: Customised Advocacy Session for
Director is updated regularly and is tabled for the notation Directors and Senior Management
of the Board on a quarterly basis. The Board is satisfied • Bursa Talk: New Environmental, Social & Governance
that the external directorships of the Board members (ESG) Index and Methodology Rating
have not impaired their ability to devote sufficient time in • Corporate Governance Breakfast Series with
discharging their roles and responsibilities effectively. Directors: Board Reward & Recognition
• Corporate Governance Breakfast Series with
All Directors have attended the Mandatory Accreditation Directors: Bringing the Best Out in Boardrooms
Programme as required under the Listing Requirements • Corporate Governance Directors’ Workshop: The
except Mr Cyrus Eruch Daruwalla who shall endeavour to Interplay between Corporate Governance, Non-
fulfil this requirement within the timeframe permitted by Financial Information and Investment Decision
Bursa Malaysia. To remain relevant in the rapidly changing • Corporate Disclosure Policy under the Listing
and complex modern business environment, our Directors Requirements and Related Party and Recurrent
are committed to continuing education and lifelong Related Party Transactions
learning to fulfil their responsibilities to the Company and • Governance Transformation in ASEAN Conference:
enhance their contributions to board deliberations. Reform and Priorities

042 Scomi Group Bhd


Annual Report 2016
• Independent Directors’ Programme – The Essence of • Global Transformation Forum 2015
Independence • HSBC Thought Leadership Seminar
• Lead the Change - Getting Women on Boards • Invest Malaysia 2016
• Malaysia-ASEAN Corporate Governance Scorecard • Invest Malaysia Kuala Lumpur
2015 • Khazanah Megatrend Forum 2015 on “Harnessing
• Sustainability Engagement Series: Customised Creative Disruption: Unlocking the Power of Inclusion
Program for Directors/CEO of Listed Issuers Innovation”
• Sustainability Symposium • Maybank Conference: The Business of Innovation
• The New Auditor’s Report – Sharing the UK 2015
Experience • Perdana Leadership Foundation Discourse Series 19:
• Workshop on Board Chairman Series Part II: Islam and Islamisation
Leadership Excellence from the Chair • Perdana Leadership Foundation Roundtable:
Towards Sustainable Malay Leadership in the Public
Business Management, Economics, Finance, Legal and and Private Sectors
Industry Update • Senior Management Forum: Focused, Execution and
Enhancing Capabilities
• 2015 KPMG Alumni Inaugural Launch Program: • Special Commemorative Seminar on Tun Abdul
Outlook 2015 - Opportunities and You Razak, our Prime Minister from 1970 to 1976
• 22nd Africa Oil Week/ Africa Upstream Conference • Strategic Review Workshop: Corporate Functions
2015 • Talk on Companies Bill
• 22nd CLSA Investors’ Forum • Thailand & ASEAN Conference 2015
• 9th International Petroleum Technology Conference • TPPA by PricewaterhouseCoopers
• Abu Dhabi International Petroleum Exhibition and • UBS ASEAN Conference 2015
Conference 2015 • World Capital Markets Symposium 2015
• ASEAN 2015 Development Forum: Promote
International Cooperation on Industrial Capacity on Apart from attending the training programmes,
Two Countries, Twin Parks conferences and seminars organised by the relevant
• Blue Ocean Strategy Workshop: Lab 1 – Visual regulatory authorities and professional bodies, the
Awakening Directors continuously received briefings and updates
• Blue Ocean Strategy Workshop: Lab 2 – Visual on regulatory and industry development, including
Exploration information on the Group’s businesses and operations, risk
• Blue Ocean Strategy Workshop: Lab 3 – Visual management activities and other initiatives undertaken by
Strategy Creation the Group.
• Briefing on Trans-Pacific Partnership Agreement
(“TPPA”) by Datuk J. Jayasiri
• Budget Talk 2016 by PricewaterhouseCoopers PRINCIPLE 5 – UPHOLD INTEGRITY IN FINANCIAL
• Directors’ In-house Training by SCOMI on “Strategy REPORTING
Briefing on Industry Trends, Nanotechnology and
Transport Solutions” The Board is committed to provide a balanced and true
• Directors’ In-house Training on “Amendments to the view of the Group’s financial performance and prospects in
Listing Requirements” all its reports to shareholders, stakeholders and regulatory
• Directors’ In-house Training on “Shaking Things Up: authorities. Prompt release of announcements of the
Technology that Transforms and How to Keep Pace” quarterly financial statements and press releases reflect
• Directors’ In-house Training on “Understanding the the Board’s commitment to provide timely and transparent
Latest Law relating to Development of Buildings disclosures of the performance of the Group. This is also
intended for Subdivision and Management of channelled through the audited financial statements,
Buildings and Common Property” quarterly announcements of the Group’s unaudited results
• Fung Healthcare Leadership Summit 2015 as well as the Chairman’s Statement and the Management
• Global Private Equity Submit 2015: Private Equity- Review of Operations in the Annual Report.
Extracting Intrinsic Value

043 Scomi Group Bhd


Annual Report 2016
STATEMENT ON CORPORATE
GOVERNANCE (cont’d)

The Directors’ Responsibility in respect of the preparation twice a year. Meetings with the external auditors are held
of the annual audited financial statements for the financial to further discuss the Group’s audit plans, audit findings,
year under review is set out on Statement of Directors’ financial statements, as well as to seek their professional
Responsibility of this Annual Report. advice on other related matters.

In discharging its fiduciary responsibility, the Board is The ARMC is also tasked by the Board to consider the
assisted by the ARMC to oversee the financial reporting appointment of the external auditor, the audit fee and
processes and the quality of the Group’s financial any questions relating to the resignation or dismissal
statements. The ARMC members, all of whom are as well as all non-audit services to be provided by the
financially literate, reviewed the Company and the Group’s external auditors to the Company with a view to auditor
financial statements, prior to recommending them for independence and to provide its recommendations
approval by the Board and issuance to the shareholders thereon to the Board. The ARMC has received confirmation
and stakeholders. The ARMC has met nine (9) times from the external auditors that for the audit of the financial
during the financial year under review in order to carry out statements of the Group and Company for the FY2016,
their duties in accordance with the TOR. The GCEO and they have maintained their independence in accordance
CFO formally presented to the ARMC and the Board the with their firm’s requirements and with the terms of
details of financial performance of the Company and the relevant professional and regulatory requirements and
Group, for review of quarter-to-quarter and year-to-date they have reviewed the non-audit services provided to
performance against the proposed FY2016 budget. the Group during the financial year in accordance with the
independence requirements and are not aware of any non-
The primary objective of the ARMC is to assist the Board audit services that have compromised their independence
to review the adequacy and integrity of the Group’s as external auditors of the Group. The external auditors
financial administration and reporting, internal control also reaffirmed their independence at the completion of
and risk management systems, including the management the audit.
information system and systems for compliance with
applicable laws, regulations, rules, directives and The ARMC had at its meeting held on 15 July 2016
guidelines. undertook an annual assessment of the suitability and
independence of the external auditors in accordance with
The Board, through the ARMC, maintains an appropriate, the Policy on the Selection of External Auditors of the
formal and transparent relationship with the Group’s Company which was adopted in 2014. Being satisfied with
internal and external auditors. The ARMC is guided by the KPMG’s performance, technical competency and audit
Group’s policies and procedures in accessing the suitability independence as well as fulfilment of criteria as set out
and independence of the external auditors, which also in the Policy on the Selection of External Auditors of the
includes the provision of non-audit services by the external Company and Paragraph 15.21 of the Listing Requirements,
auditors to the Group and the Company to ensure their the ARMC recommended the re-appointment of KPMG,
independence is not compromised. Those policies and who have consented to act, as external auditors of the
procedures are to be read in conjunction with the TOR of Company for the financial year ending 31 March 2017. The
the ARMC, which outlines the duties and responsibilities Board at its meeting held on 15 July 2016 concurred with
of the ARMC relating to the appointment of the external the ARMC on its recommendation for the shareholders’
auditors. approval to be sought at the forthcoming AGM on the re-
appointment of KPMG as external auditors of the Company
The ARMC has explicit authority to communicate directly for the financial year ending 31 March 2017.
with the Group’s internal and external auditors and vice
versa the Group’s internal and external auditors also The membership, TOR, roles and relationship with both the
have direct access to the ARMC to highlight any issues of internal and external auditors and activities of the ARMC
concern at any time. Further, the ARMC meets the external during the FY2016 are set out on ARMC Report of this
auditors without the presence of Executive Directors or Annual Report.
the Management whenever necessary, but no less than

044 Scomi Group Bhd


Annual Report 2016
PRINCIPLE 6 – RECOGNISE AND MANAGE RISKS PRINCIPLE 7 – ENSURE TIMELY AND HIGH QUALITY
DISCLOSURE
The Board firmly believes in maintaining a sound risk
management framework and internal controls system The Board recognises the importance of maintaining
with a view to safeguard shareholders’ investment and the transparency and accountability to its shareholders. The
assets of the Group. The size and geographical spread of Board ensures that all the shareholders of the Company
the Group involve exposure to a wide variety of risks, where are treated equitably and the rights of all investors are
the nature of these risks means that events may occur protected. The Board provides its shareholders and
which could give rise to unanticipated or unavoidable investors with comprehensive, accurate and quality
losses. information on a timely and non-selective basis, in order to
keep them abreast of all material business matters affecting
In establishing and reviewing the risk management and the Company and the Group.
internal controls system, the Board recognises that such
systems can provide only reasonable, but not absolute, Timely disclosure of material information is critical towards
assurance against the occurrence of any material building and maintaining corporate credibility and investor
misstatement or loss. confidence. Recognising the importance of accurate and
timely public disclosures of corporate information in order
The ARMC meets on a regular basis to ensure that there is for the shareholders to exercise their ownership rights
clear accountability for managing significant identified risks on an informed basis, the Board has established a Global
and that identified risks are satisfactorily addressed on an Communications Policy with the following intention:
ongoing basis. In addition, the adequacy and effectiveness • to provide guidance and structure in disseminating
of the risk management and internal controls system is also corporate information to, and in dealing with
periodically reviewed by the ARMC. investors, analysts, media representatives, employees
and the public;
The Board has received assurance from the GCEO and • to raise management and employees’ awareness on
the CFO that the Group’s risk management and internal the disclosure requirements and practices;
controls system is operating adequately and effectively, in • to ensure compliance with legal and regulatory
all material aspects. requirements on disclosure; and
• to protect the brand equity of the Group by
Regular assessments on the adequacy and integrity of managing the risk associated with the brand i.e.
the internal controls and monitoring of compliance with exposures to the brand that can undermine its
policies and procedures are also carried out through ability to maintain its desired differentiation and
internal audits. The risk-based internal audit plan that competitive advantage.
covers internal audit coverage and scope of work is
presented to the ARMC for its consideration and approval The Global Communications Policy outlines how the Group
annually. Internal audit reports encompassing the audit identifies and distributes information in a timely manner to
findings together with recommendations thereon are all shareholders. It also reinforces the Group’s commitment
presented to the ARMC on a quarterly basis. The GIA, to the continuous disclosure obligations imposed by law,
senior and functional line management are tasked to and describes the procedures implemented to ensure
ensure management action plans are carried out effectively compliance.
and regular follow-up audits are performed to monitor the
continued compliance. The Board through the Management oversees the Group’s
corporate disclosure practices and ensures implementation
The main features of the risk management framework and and adherence to the policy. The Board has authorised
internal controls system of the Group are as set out on the GCEO as the primary spokesperson responsible for
Statement on Risk Management and Internal Control of this communicating information to all stakeholders including
Annual Report. the public.

045 Scomi Group Bhd


Annual Report 2016
STATEMENT ON CORPORATE
GOVERNANCE (cont’d)

The Group also maintains a corporate website, The Company at all times dispatched its notices of the AGM
www.scomigroup.com.my to disseminate information and any general meetings of the shareholders, Annual
and enhance its investor relations. All disclosures, Report and related circular to shareholders at least twenty
material information and announcements made to Bursa one (21) days before the AGM and any general meetings
Malaysia are published on the website shortly after the of the shareholders, unless otherwise required by law,
same is released by the news wire service or the relevant in order to provide sufficient time to shareholders to
authorities. Supplemental, non-material information will understand and evaluate the matters involved as well as to
be posted on the website as soon as practicable after it is make necessary arrangements to attend, participate and
available. vote either in person, by corporate representative, by proxy
or by attorney, to exercise their ownership rights on an
The Group recognises the need for due diligence in informed basis during the AGM and any general meetings
maintaining, updating and clearly identifying the accuracy, of the shareholders. Where special business items are to
veracity and relevance of information on the website. All be transacted, a full explanation is provided in the notice
timely disclosure and material information will be clearly of the AGM and any general meetings of the shareholders
date-identified and retained on the website as part of or the related circular to shareholders in order to assist the
the public disclosure record for a minimum period of 2 shareholders’ understanding of matters and the implication
years. The Group Communications division has ongoing of their decision in voting for or against a resolution.
responsibility for ensuring that information in the website
is up-to-date. All the resolutions set out in the notices of the AGM
and any general meetings of the shareholders are put
In addition, the email address, name and contact number to vote by show of hands, unless otherwise required
of the Company’s designated person is listed in the website by shareholders or by law. The Board encourages and
to enable the public to forward queries to the Company. facilitates poll voting where the Chairman of the AGM
and any general meeting of the shareholders will inform
Besides that, the Company regularly organises separate shareholders of their right to demand a poll vote at the
briefings for fund managers, institutional investors and commencement of the AGM and any general meetings
investment analysts as well as the media, not only to of the shareholders. The outcome of the AGM and any
promote the dissemination of the financial results of the general meetings of the shareholders is announced to
Company and the Group but also to keep them updated on Bursa Malaysia on the same day the meeting is held.
the progress and development of the Group’s business and
prospect. The Board, the Management Team, both internal and
external auditors of the Company and if required, the
Advisers, are present at the AGM and any general meetings
PRINCIPLE 8 – STRENGTHEN RELATIONSHIP BETWEEN of the shareholders to answer questions or concerns raised
COMPANY AND SHAREHOLDERS by shareholders.

Shareholders are encouraged to attend the AGM and Before the commencement of the AGM and any
any general meetings of the shareholders, which is the general meetings of the shareholders, the Directors
principal forum for dialogue between the Board and the and the Management Team will take the opportunity
shareholders and provides shareholders the opportunity to engage directly with the shareholders to account for
to raise questions or concerns with regards to the Group as their stewardship of the Company. Direct engagement
a whole as well as to discuss any other important matters with shareholders provides the shareholders a better
with the Management and the Board. appreciation of the Company’s objectives, quality of its
management and the challenges faced, while also making
the Company aware of the expectations and concerns of its
shareholders.

046 Scomi Group Bhd


Annual Report 2016
During the AGM and any general meetings of the
shareholders, there is always a presentation by the GCEO
or any representative from the Management Team on the
Group’s strategy, the operations and financial performance
of the Group, the major developments and the prospects
of the Group and the subject matters tabled for decision.
Besides that, the Chairman of the AGM and any general
meetings of the shareholders will invite the shareholders
to raise questions pertaining to the Company’s financial
performance and other items for adoption at the meeting,
before putting a resolution to vote. The Chairman of the
AGM and any general meetings of the shareholders will
also share with the shareholders the Company’s responses
to questions submitted in advance of the AGM and any
general meetings of the shareholders by the Minority
Shareholder Watchdog Group.

At the 13th AGM, all of the 8 Directors were present in


person to engage directly with shareholders, and be
accountable for their stewardship of the Company. There
was a presentation by the GCEO of the Group’s strategy,
the operations and financial performance of the Group,
the major developments and the prospects of the Group
to the shareholders. The Chairman of the AGM also
invited shareholders to raise questions pertaining to the
Company’s financial performance and other items for
adoption at the meeting, before putting a resolution to
vote. The Directors, GCEO, Management, internal and
external auditors were in attendance to respond to the
questions or concerns raised by shareholders.

This Statement is made in accordance with the resolution


of the Board dated 18 July 2016.

047 Scomi Group Bhd


Annual Report 2016
STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROL

INTRODUCTION

Pursuant to the Main Market Listing Requirements of Bursa


Malaysia Securities Berhad (“Bursa Malaysia”) (“Listing
Requirements”), Practice Note 9 issued by Bursa Malaysia and
the principles set out in the Malaysian Code on Corporate
Governance 2012 (the “Code”), the Board of Directors of Scomi
Group Bhd (the “Company”) (the “Board”) is committed to
maintain a sound risk management framework and internal
controls system to safeguard shareholders’ investment and the
assets of the Company and its group of companies (the “Group”).

The Board is guided by the Statement on Risk Management The Board has overall responsibility for the Group’s risk
& Internal Control - Guidelines for Directors of Listed Issuers management framework and internal controls system
in making disclosures concerning the main features of and has delegated the implementation of the risk
the risk management framework and internal controls management framework and internal controls system to
system of the Group pursuant to the Paragraph 15.26(b) the Management whilst the Audit and Risk Management
of the Listing Requirements. Set out below is the Group’s Committee of the Board (the “ARMC”) was tasked by the
Statement on Risk Management and Internal Control for Board with oversight responsibility to review the adequacy
the financial year ended 31 March 2016. This Statement and effectiveness of the risk management framework
covers all of the Group’s operations, save for Scomi and internal controls system. On a quarterly basis, the
Engineering Bhd and Scomi Energy Services Bhd, both Management reports to the ARMC on all risk areas faced by
being subsidiaries of the Company listed on Bursa Malaysia. the Group and findings identified from the internal audit
reviews conducted by the Group Internal Audit (“GIA”) as
well as the actions taken by the Management to address
BOARD RESPONSIBILITY those high risks areas and audit findings. Minutes of the
meetings of the ARMC which recorded these deliberations
The Board is fully committed to ensure the existence of an were presented to the Board. The Chairman of the ARMC
effective risk management framework and internal controls will also report to the Board on the principal risks and
system within the Group, and continuously reviews and internal controls related matters and recommendations
evaluates the adequacy and effectiveness of the framework deliberated by the ARMC at the immediate subsequent
and system. However, the Board recognises that such Board meeting.
systems are designed to manage and reduce, rather
than eliminate, the risks identified to acceptable levels. The risk management and internal controls system is
Therefore, the internal controls implemented can only subject to the Board’s regular review with a view towards
provide reasonable and not absolute assurance against the appraising the adequacy, effectiveness and efficiency of
occurrence of any material misstatement, loss or fraud. such system within the Group and also to ensure that these
systems are viable and robust.

048 Scomi Group Bhd


Annual Report 2016
The Board has received assurance from the Group Chief The Framework is summarised in the diagram below, which
Executive Officer (“GCEO”) and the Chief Financial Officer sets out:
that the Group’s risk management and internal controls
system is operating adequately and effectively, in all • the fundamentals and principles of risk management
material aspects. that is to be applied in all situations and throughout
all levels of the organisation;
Taking into consideration the assurance from the • the process for identifying, assessing, responding,
Management Team and input from the relevant monitoring and reporting of risks and controls;
assurance providers, the Board is of the view that the risk • the roles and responsibilities of each level of
management and internal controls system of the Group management in the Group; and
is satisfactory and adequate to safeguard shareholders’ • the mechanisms, tools and techniques for managing
investment and the assets of the Group. The Group risks in the Group.
will continue to take measures to strengthen the risk
management framework and internal controls system of
Policy
the Group.

Identification
RISK MANAGEMENT FRAMEWORK Objective Area

As
ng

s es
rti
Strategic Corporate
With the increasingly complex and dynamic business

sm
po
Operational Risk Business Unit

en
Re
environment, proactive management of the overall Management

t
Reporting Process Market Unit
business risks is a prerequisite in ensuring that the t
Compliance Mo en Product
organisation achieves its strategic objectives. The Group nit tm
ori ea Project
is committed to ensuring that it plans and executes ng Tr
activities to ensure that the risks inherent in its business
are identified and effectively managed. Risk management
Risk Reporting Structure
activities are to be regarded as an integral part of the
Group’s philosophy and business practices and not in Infrastructure
isolation. The management of risks is aimed at achieving
an appropriate balance between realising opportunities for The risk management process is an ongoing process
gains while minimising losses to the Group. commencing from the beginning of any major new project,
venture or change in operational environment. The
The Group has established an Enterprise Risk Management process includes systematic activities of risk identification,
Framework (“Framework”) which serves to inform and assessment, treatment, monitoring and reporting. This risk
provide guidance to Directors, senior management, management process is applied to all levels of activity in
functional line management and staff in managing risks the Group, with the objective of establishing accountability
affecting the businesses and operations of the Group. and ensuring mitigation at the source of the risk.

The level of risk tolerance of the Group is expressed through


the use of a risk impact and likelihood matrix. Once the risk
level is determined, the risk owner is required to deal with
the relevant risks by adhering to the Group’s risk treatment
guidance on the actions to be taken and establish Risk
Action Plans (“RAP”) to detail out activities to be carried
out to mitigate the risks. Each activity in the RAP has target
timeline for implementation. The Group will only accept
a commercial level of risk that will provide reasonable
assurance on the long term profitability of the Group.

049 Scomi Group Bhd


Annual Report 2016
STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROL (cont’d)

Every individual in the Group plays an integral role in the The Management reports to the ARMC on a quarterly basis
effective management of its risks. The risk management on high risks areas faced by the Group and the adequacy
reporting structure adopted by the Group from and effectiveness of the internal controls system adopted
transactional levels to the Board is summarised as follows: throughout the Group. The ARMC will report to the Board
on all significant risk related matters deliberated at its
meetings.
Board of
Directors Further information on the Group’s risk management and
internal audit activities is highlighted in the ARMC Report
of this Annual Report.

Audit & Risk Internal


Management Audit INTERNAL CONTROLS SYSTEM
Committee

The internal controls system of the Group covers amongst


other matters on governance, organizational, financial,
Ad-hoc Risk Risk Management business strategy, operations, regulatory and compliance
Management Working control matters including the following:
Working Committee Committee

Clear and Structured Organisational Reporting Lines


Enterprise
Assurance The Group has a well defined organisation structure that is
Department aligned to its business requirements and also to ensure that
checks and balances exist throughout the Organisation.

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

In addition, the Group employs the Balanced Scorecard


The Framework implemented within the Group ensures framework that implements and measures the goals and
that the key business and operational risks faced by all targets for individual employees in alignment with the
business operating units within the Group are continually business objectives and strategies of the Group.
defined, highlighted, reported and managed. Monitoring
of the Risk Action Plans during the year under review was The Board is supported by two (2) Board Committees which
performed by the Management, the progress of which was provide focus and counsel in the areas of:
reported to the ARMC on a quarterly basis.
1. Audit and Risk Management; and
The Framework will be reviewed periodically by the 2. Nomination and Remuneration of Directors.
Management and the Board to ensure its continued
application and relevance. Certain Board responsibilities are delegated to the Board
Committees through clearly defined Terms of Reference,
which are reviewed from time to time.

050 Scomi Group Bhd


Annual Report 2016
Further details of the Board Committees are contained in Performance Assessment and Capability Enhancement
the Statement on Corporate Governance of this Annual (“PACE”)
Report.
The Balanced Scorecard (“BSC”) is the integral part of PACE
The Board has a Board Charter and a Board Composition and the annual corporate BSC of the CEO is developed in
Policy which establish a formal schedule of matters and line with the strategic objectives and the approved annual
outlines types of information required for the Board’s budget of the Group. The Key Performance Indicators
attention and deliberation at Board meetings. (“KPI”) as set out in the employees’ scorecard, which are
based on the Corporate BSC approach, are used to track
Comprehensive Board papers, which include financial and and measure staff performance.
non-financial matters such as quarterly results, business
strategies, explanation of the performance of the Group The Nomination and Remuneration Committee of the
and individual business divisions, key operational issues, Board (the “NRC”) is tasked by the Board to review the
corporate activities and exercises of the Group, etc. are proposed initiatives, measures and targets to be included
escalated to the Board for deliberation and approval. in the BSC of the CEO and evaluate the performance of the
CEO against the targeted key result areas or initiatives as
Strategic Business Plan and Annual Budget set out in the BSC of the CEO at the end of each financial
year end. Subsequently, the NRC provides the Board with
The Board constructively challenges and contributes to its recommendations with regards to the proposed BSC
the development of the Group’s strategic directions and for the CEO for each financial year and the results of the
annually reviews the Group’s strategic business plan. The evaluation of the performance of the CEO at the end of the
Board probes the Management to ensure the Management financial year.
has taken into consideration the varying opportunities and
risks whilst developing the strategic business plan. Following the determination of the measures and targets
for the CEO, the same will be cascaded down to his direct
The Group’s annual strategic business plan and budget reports. The CEO reviews the progress of achievements
is reviewed, deliberated and approved by the Board. The in targeted key results areas or initiatives as set out in the
expectations of the Board are clearly discussed with, and BSCs of his direct reports on a monthly basis, allowing for
understood by, the Management. timely response and corrective action to be taken to catch
up to their targeted plan.
The Board is also responsible for monitoring the
implementation of the strategic business plan and for Business Evaluation Committee (“BEC”)
assessing the actual performance of the Group against the
annual strategic business plan and budget as well as to The BEC which comprises cross functional representatives
provide guidance to the Management. has been established to review all critical decisions
involving investments, disposals, tenders, joint ventures,
On a quarterly basis, the CEO reviews the Group’s key capital expenditures and award of contracts. The BEC
financial performance metrics with the ARMC and the will assist in evaluating risks associated with those critical
Board and highlights any concerns and issues, if any. The decisions and the reasonableness of the associated
actual performance of the Group is assessed against the mitigating factors.
approved budget on a quarterly basis where explanations,
clarifications and corrective action taken for significant
variances are reported by the Management to the ARMC
and the Board.

051 Scomi Group Bhd


Annual Report 2016
STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROL (cont’d)

The BEC aims to assist the CEO and respective business Code of Conduct
units to:
(i) review the long and short term economic, The Board and employees of the Group are committed to
commercial, operational, risk, strategy and other adhering to the best practices in corporate governance and
relevant factors considered by the business units in observing the highest standards of integrity and behaviour
preparing bids and/or submission for tenders; in all activities conducted by the Group, including the
(ii) ensure adherence to the decision making processes interaction with its customers, suppliers, shareholders,
when selecting suppliers, contractors and/or employees and business partners, and within the
customers for goods and services on a tender basis; community and environment in which the Group operates.
(iii) strengthen the Group’s business position, by aligning
the process of reviewing contracts, partnerships and The Board and employees of the Group play an important
supplies/services; and role in establishing, maintaining and enhancing the
(iv) leverage on the opportunities that the Group’s overall reputation, image and brand of the Group and ensuring
infrastructure may present, that can benefit the the observance to and compliance with the standards of
individual business unit. integrity and behaviour that the Group is committed to.

The BEC is not an approving body but provides an All employees of the Group of grades 15 and above are
independent assessment to the respective business units required to confirm their receipt and understanding of
on critical decisions drawing upon the expertise of its the Code of Conduct and further required to certify their
members and makes recommendations to the CEO prior to continued compliance with the Code of Conduct on an
approval by the relevant approving authorities as set out in annual basis.
the Delegated Authority Limits approved by the Board.
The Group has also established a Suppliers Code of
Delegated Authority Limits (“DAL”) Conduct, pursuant to which its supply chain are required to
adhere to the following:
The Board’s approving authority on certain specified • that it operates within safe working conditions;
activities is delegated to the Management through a clearly • that its workers are treated with dignity and respect;
and formally defined DAL which is the primary instrument and
that governs and manages the business decision making • that environmentally responsible manufacturing
process in the Group. Whilst the objective of the DAL is to processes are implemented and adhered to.
empower Management, the key principle adhered to in its
formulation is to ensure that a system of internal controls, In addition to these commitments, the Group requires its
and checks and balances are incorporated therein. suppliers (“Suppliers”) to adhere, in all of their activities, to
the laws, rules and regulations of the countries in which
The DAL is implemented in accordance with the Group’s they operate.
policies and procedures and in compliance with the
applicable statutory and regulatory requirements. The In furtherance of these commitments and towards the
DAL is continuously reviewed and updated to ensure its advancement of social and environmental responsibility,
relevance to the Group’s operations. the Group requires its Suppliers to implement the Suppliers
Code of Conduct which shall be read together with the
contract/agreement between the Group and the Supplier.

052 Scomi Group Bhd


Annual Report 2016
The Group expects the Supplier to abide by the Suppliers Whistleblower Framework and Policy
Code of Conduct when conducting business with or for the
Group. It is the responsibility of every Supplier to comply The Group has in place a Whistleblower Framework
with the principles of the Suppliers Code of Conduct, as and Policy, to provide an avenue for employees to raise
amended from time to time. genuine concerns internally or report any breach or
suspected breach of any law or regulation, including the
The breach of the Suppliers Code of Conduct may lead Group’s policies and procedures, to the Disclosure Officer
to formal warnings, disclosure of the nature of breach to in a safe and confidential manner, ensuring employees can
all employees of the Group, removal from the Group’s raise concerns without fear of reprisals. These disclosures
preferred vendor list and/or immediate termination as the are investigated, pursuant to which remedial and/or
Group’s Supplier subject to terms of contract/agreement, disciplinary actions may be taken, if warranted. These
depending on the severity of the situation. disclosures and the results of the investigations undertaken
are reported to the Board on a timely basis.
Policies, Procedures, Processes and Systems
The Group has also put in safeguards to protect the identity
Processes are documented into clear and formalized of the Whistleblower to encourage employees of the
internal policies and procedures to ensure compliance Group, and indeed anyone else, to report any breach or
with internal controls and relevant rules and regulations. reasonably suspected wrongful malpractices or act without
Regular reviews are performed to ensure that the policies fear of reprisal so that the problem can be identified at an
and procedures remain current and relevant. These early stage and resolved quickly within the Group.
documents are made available on the Scomi intranet for
easy access by the employees. Competency and Talent Management

The Group is also utilizing SAP throughout most of its To enhance the competencies of the Group’s talent
business units as the main Enterprise Resource Planning pool and establish a culture of continuous learning,
(“ERP”) system. Global Learning and Development Sdn Bhd, a subsidiary
of Scomi Group Berhad, runs a series of training and
Information and Communication development programmes based on the Learning and
Development Framework that defines training based on
Following from a clear organisational reporting structure, technical and non-technical programmes. This is to ensure
information is communicated and disseminated to all that employees are kept up-to-date with the required
employees in all locations within the Group. competencies to carry out their duties and responsibilities
towards achieving the Group’s objectives. A KPI on the
To ensure compliance to Chapter 14 of the Listing minimum learning hours per employee is in place to
Requirements, the Board and the Principal Officers encourage employees’ learning, growth and knowledge-
of the Company are informed in advance before the sharing.
commencement of each closed period, during which
time they are to comply with the additional disclosure The Group also conducts staff performance appraisals
requirements related to their dealings as set out in the semi-annually in order to enhance the level of staff
Listing Requirements. They are also reminded that they are competency in carrying out their duties and responsibilities
not allowed to deal in the listed securities of the Company towards achieving the Group’s objectives.
as long as they are in possession of material and price-
sensitive information relating to the Company in order to
avoid any insider trading.

053 Scomi Group Bhd


Annual Report 2016
STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROL (cont’d)

Besides assessing the performance of the employees of In addition to this internal assurance mechanism, the
the Group, using PACE, the Group has also from time to Group also received extensive and detailed ARMC reports
time undertaken a 360-degree assessment exercise as and the management letter from its External Auditors
part of the Group’s employee’s development initiative. that primarily focuses on financial controls. The ARMC
The 360-degree assessment is a development tool used reports and the management letter were also presented
to measure the leadership competencies for all Managers. to the ARMC for deliberations. In the event of any
In a 360-degree assessment, feedback is provided by the non-compliance, appropriate corrective actions have
subordinates, peers, supervisors and the employee himself. been taken in addition to amendments to the relevant
The 360-degree assessment will produce a report where procedures, if required.
the results as well as a compilation of verbatim comments
will be used by the Management to plan and map specific Besides that, the ARMC also conducted at least two private
paths in the development of the Managers. Through this meetings with the External Auditors, to give opportunity
talent development programme, the Management is able to the External Auditors to raise any matters without
to carry out succession planning effectively and enhance executive board members or the Management present.
leadership capabilities of all Managers as well as to develop
a healthy pipeline of talent for the Group. Quality, Health, Safety and Environment (“QHSE”)

Independent Assurance Mechanism Clear, formalised and documented Global Q&HSE Policies
are in place to outline employees’ roles and responsibilities
Regular assessments on the adequacy and integrity of towards the prevention of accidents, the elimination of
the internal controls and monitoring of compliance with hazards and in ensuring a safe working environment. The
policies and procedures are carried out through internal Group adopts strict standards and controls to continuously
audits. The internal audit function is carried out by the improve the application and performance of the safety
Group Internal Audit (“GIA”) which reports to the ARMC management systems as a safe working environment is
and is independent of the activities and operations of fundamental to the Group’s success in business operations.
the Group. The GIA functions are in accordance with the
Internal Audit Charter and the Internal Audit Policies and The Group has also established a comprehensive Q&HSE
Procedures Manual, which have been approved by the Management Systems and dedicated to implementing
ARMC and the Board respectively. The internal audit plan it in our global daily operations to ensure continuous
which sets out the internal audit coverage and scope of improvement in Q&HSE performance and to effectively
work is presented for ARMC and the Board’s consideration manage change. Active setting and monitoring of clear
and approval annually before its implementation. Q&HSE objectives and targets, high and visible Q&HSE
commitment and leadership from all levels in the
Internal audit reports, which encompass audit findings organization is the key of success for Q&HSE systems of the
together with recommendations thereon, are presented Group.
to the ARMC during its quarterly meetings. The GIA, senior
and functional line management are tasked to ensure The Q&HSE Management System is comprised of the
management action plans are carried out effectively corporate policy statements and standards, Management
and regular follow-up audits are performed to monitor System expectations, and system tools including Q&HSE
continued compliance. procedures, checklists, local work instructions and other
associated documentation.

054 Scomi Group Bhd


Annual Report 2016
REVIEW OF THIS STATEMENT

The External Auditors have reviewed this Statement on


Risk Management and Internal Control pursuant to the
scope set out in Recommended Practice Guide 5 (Revised),
Guidance for Auditors on Engagements to Report on the
Statement on Risk Management and Internal Control
included in the Annual Report (“RPG 5”) issued by the
Malaysian Institute of Accountants (“MIA”) for inclusion in
the annual report of the Group for the financial year ended
31 March 2016, and reported to the Board that nothing has
come to their attention that cause them to believe that the
Statement on Risk Management and Internal Control, in
all material respects, has not been prepared in accordance
with the disclosures required by paragraphs 41 and 42 of
the Statement on Risk Management and Internal Control:
Guidelines for Directors of Listed Issuers, or is factually
inaccurate.

RPG 5 does not require the External Auditors to consider


whether the Statement on Risk Management and Internal
Control covers all risks and controls, or to form an opinion
on the adequacy and effectiveness of the Group’s risk
management and internal controls system including the
assessment and opinion by the Board and Management
thereon. The External Auditors are also not required
to consider whether the processes described to deal
with material internal control aspects of any significant
problems disclosed in the annual report will, in fact,
remedy the problems.

This Statement is made in accordance with the resolution


of the Board dated 18 July 2016.

055 Scomi Group Bhd


Annual Report 2016
audit and RISK MANAGEMENT
committee report

The Board of Directors of Scomi Group Bhd (the “Company” or


“SGB”) (the “Board”) is pleased to present the Report of the Audit
and Risk Management Committee (the “ARMC” or “Committee”)
for the financial year ended 31 March 2016.

TERMS OF REFERENCE MEETINGS AND ATTENDANCE

The details of the Terms of Reference of the ARMC are A total of nine (9) ARMC meetings were held during the
available for reference on the Company’s website at year under review, which were on 21 May 2015, 25 June
www.scomigroup.com.my. 2015, 9 July 2015, 18 August 2015, 29 September 2015, 17
November 2015, 4 December 2015, 4 February 2016 and 16
March 2016. A quorum, established by the presence of a
COMPOSITION majority of members who are Independent Directors, was
always met. The Group Chief Executive Officer (“GCEO”),
During the year under review, the ARMC comprised three the Chief Financial Officer (“CFO”), the Chief Legal and
(3) members, all of whom are Non-Executive Directors, with Governance Officer and the Head of Group Internal Audit
a majority of them being Independent Directors. (“GIA”) were invited to all ARMC meetings to provide
a direct flow of information to the ARMC as well as to
As disclosed in the profiles of the ARMC members as provide clarification in the event of any issues arising. The
set out in the Profile of Directors section of this Annual responsible personnel having charge over the relevant
Report, at least one member of the Committee fulfils auditees was invited to brief the ARMC on specific issues
the financial expertise requirement of the Main Market involving their respective areas of responsibility arising
Listing Requirements of Bursa Malaysia Securities Berhad from the risk management and internal audit reports.
(“Listing Requirements”) and the majority of the members
of the Committee are financially literate with sufficient The external auditors were also invited to present to the
financial experience and ability to assist in discharging the ARMC the audit plan, the audit findings, the independent
Board’s fiduciary duties with respect to its responsibility for auditors’ report as well as any other matters as they
overseeing the following: considered were important for the ARMC’s attention.
(i) the financial administration and reporting process During the financial year under review, the ARMC has
and ensuring that the financial results of the Group conducted two (2) private meetings with the external
and the Company are truly and fairly presented in its auditors, to give opportunity to the external auditors to
financial statements; raise any matters without the presence of the executive
(ii) the adequacy and effectiveness of the risk board members and management.
management and internal control systems;
(iii) the performance of the external and internal audit
functions; and
(iv) the fairness and reasonableness of the related party
transactions (“RPTs”) entered into by the Company
with related parties.

The composition of the ARMC complies with paragraph


15.09(1) of the Listing Requirements.

056 Scomi Group Bhd


Annual Report 2016
The members of the ARMC and their attendance are as follows:

NAME ARMC DESIGNATION ATTENDANCE


(attended/held)

Tan Sri Nik Mohamed Bin Nik Yaacob Chairman Independent Non-Executive Director 9/9

Dato’ Sreesanthan A/L Eliathamby Member Non-Independent Non-Executive Director 8/9

Dato’ Abdul Hamid Bin Sh Mohamed Member Independent Non-Executive Director 9/9

The minutes of each ARMC meeting were recorded and 3. reviewed the suitability, independence and
tabled to the ARMC for adoption at subsequent ARMC objectivity of the external auditors in accordance with
meetings and thereafter all minutes of ARMC meetings the Policy on the Selection of External Auditors;
and circular resolutions passed are presented to the
Board for notation. The Chairman of the ARMC reported 4. recommended the re-appointment of the external
the Committee’s recommendations to the Board for its auditors to the Board after conducting an assessment
consideration and implementation as well as highlighted of the performance, technical competency and audit
the significant matters and resolutions deliberated by the independence of the external auditors as well as
ARMC to the Board at its immediate subsequent meeting. ensuring that the external auditors fulfill the criteria
set out in the Company’s Policy on the Selection of
The Board, through its Nomination and Remuneration External Auditors and paragraph 15.21 of the Listing
Committee, has reviewed the performance of the ARMC Requirements;
and the skills, experience and competencies possessed
by the members of the ARMC through an annual ARMC 5. reviewed and discussed with the external auditor the
effectiveness assessment. The Board is satisfied with nature and scope of the audit plan and ensure that
the performance of the ARMC and its members where the audit plan is comprehensive;
they have carried out their duties and responsibilities in
accordance with the Terms of Reference of the ARMC. 6. reviewed the external auditor’s report on the status
of the audit for the financial year, management letter
and management’s response thereto;
SUMMARY OF ACTIVITIES FOR THE FINANCIAL YEAR
7. considered the major audit findings arising from the
In accordance with the approved Terms of Reference of the statutory audit activities conducted by the external
ARMC, the ARMC carried out the following activities during auditors and management’s responses thereto;
the financial year ended 31 March 2016:
8. reviewed the performance and effectiveness of
1. reviewed the quarterly financial performance and the external auditor for the statutory audit services
annual audited financial statements of the Group and provided;
the Company prior to submission to the Board for
consideration and approval; 9. reviewed and recommended to the Board the
proposed non-audit services to be provided by the
2. reviewed the quarterly financial performance of the external auditors in accordance with the Policy on the
Company and its substantial subsidiaries against the Selection of External Auditors;
approved budget where explanations, clarifications
and corrective action taken for significant variances 10. reviewed the audit fees and non-audit fees payable
are reported by the Management to the ARMC; to the external auditors based on the approved audit
plan and non-audit services for the Group and the
Company and recommended the same to the Board
for approval;

057 Scomi Group Bhd


Annual Report 2016
audit and RISK MANAGEMENT
committee report (cont’d)

11. conducted private meetings with the external 20. reviewed the global risk management strategy of the
auditors, without the presence of the GCEO, Group;
Management and Head of GIA, to give the external
auditors the opportunity to raise any matters 21. reviewed the Group and the Company’s risk profiles
of concern and, arising therefrom, directing and actions plan taken by the Management to control
Management to take further action on such matters; and mitigate the risks on a quarterly basis;

12. reviewed and approved the annual risk-based internal 22. reviewed the Group’s risk management and internal
audit plan and scope of work for the Group and the controls system and practices for the identification
Company and ensured the adequacy of resources and management of risks established by the
and competencies of the GIA to carry out the internal Management and be reasonably assured that the
audit on all significant businesses and support same is operating adequately and effectively;
functions based on identification and evaluation of
the respective risks and control environment; 23. received assurance from the GCEO and the CFO that
the Group’s risk management and internal controls
13. reviewed the internal audit reports comprising system is operating adequately and effectively, in all
audit findings, recommendations and management material aspects;
responses for the Group and the Company prepared
by the GIA; 24. reviewed and evaluated risk considerations in relation
to major business investment and/or divestment
14. reviewed the reports prepared by the GIA relating to proposals, corporate exercises and adequacy of action
the follow-up audits on all major areas of concern and plans taken by the Management to mitigate risks
recurring issues and risk areas to assess the extent identified;
to which the Management has made progress in
implementing the agreed action plans arising from 25. reviewed and evaluated risk considerations in relation
the prior internal audit reviews; to the strategies established by the Group’s Human
Resource for the retention of employees of the Group;
15. reviewed the GIA in accordance with the Internal
Audit Charter and the independence of the GIA; 26. reviewed the Minutes of the ARMC meetings of
substantial subsidiaries;
16. reviewed the proposed initiatives, measures and key
performance indicators (“KPIs”) to be included in the 27. reviewed the annual Statements on Corporate
Balanced Scorecard (“BSC”) of the Head of GIA and Governance, Risk Management and Internal Control
evaluated the performance of the Head of GIA against and ARMC Report to be published in the Annual
the KPIs or initiatives as set out in the BSC of the Head Report;
of GIA at the end of financial year;
28. tabled the approved Minutes of the ARMC meetings
17. reviewed the performance appraisal of the GIA staff for the notation of the Board on a quarterly basis; and
conducted by the Head of GIA;
29. reported significant matters and resolutions
18. reviewed the transactions to be entered into by deliberated by the ARMC to the Board.
the Company with related parties and provide
recommendations on the same to the Board;

19. reviewed the list of related party transactions and


conflict of interest entered into by the Company;

058 Scomi Group Bhd


Annual Report 2016
INTERNAL AUDIT FUNCTION 3. ascertained the level of operational compliance
with established policies, procedures and statutory
The Group has an in-house Internal Audit Department led requirements;
by the Head of GIA. The Head of GIA reports directly to the
ARMC and administratively to the CFO during the financial 4. ascertained the extent to which the Group’s and the
year under review. The GIA carried out their functions Company’s assets are accounted for, verification of
according to the standards set by recognised professional their existence and safeguarding assets from losses;
bodies.
5. appraised the reliability and usefulness of information
The GIA provides independent and objective assessment
developed within the Group and the Company for
on the adequacy and effectiveness of the governance,
management;
risk management and internal control processes within
the Group. Through the GIA, the Company undertakes
6. identified and recommended opportunities for
regular and systematic reviews of the risk management
improvements to the existing system of internal
and internal controls system so as to provide reasonable
control, operations and processes in the Group and
assurance that such internal controls system continues to
operate adequately and effectively in the Group. the Company;

The GIA reports directly to the ARMC to ensure impartiality 7. provided the Board, through the ARMC, reasonable
and independence. The ARMC reviews the risk based assurance of the effectiveness of the Group’s risk
internal audit plans and scope of work for the year for the management, internal control and governance
Group and the Company as well as the performance of the processes;
GIA in undertaking their internal audit function. The ARMC
has direct communication channels with, and full access to, 8. conducted follow-up audits on all major areas of
the GIA for all internal audit reports prepared. concern and recurring themes to enhance the
governance, risk management and control processes
During the financial year under review, the GIA conducted within the Group and the Company; and
various internal audit engagements in accordance with
the approved risk-based internal audit plans that are 9. reviewed the annual Statement on Risk Management
consistent with the corporate goal of the Group. Details and Internal Control and the ARMC report to be
of the internal audit activities carried out by the GIA are as published in the Annual Report.
follows:
The total costs incurred by the GIA for the internal audit
1. prepared and presented the risk-based internal audit function of the Group (excluding Scomi Engineering Bhd
plan, audit strategy, scope of work and resource Group and Scomi Energy Services Bhd Group) for the
requirements to the ARMC for deliberation and financial year ended 31 March 2016 was approximately
approval; RM963,339.

2. evaluated and appraised the soundness, adequacy This Statement is made in accordance with the resolution
and application of financial and other controls and of the Board dated 18 July 2016.
promoting effective controls in the Group and the
Company at reasonable cost;

059 Scomi Group Bhd


Annual Report 2016
additional information

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

There was no material contract entered into by the Group involving the interest of Directors and major shareholders,
either still subsisting at the end of the financial year ended 31 March 2016 or entered into since the end of the
previous financial year.

2. Non-Audit Fees

Fees incurred in respect of non-audit services during the financial year under review ended 31 March 2016 amounted
to RM248,000 and is disclosed in Note 26 to the financial statement.

3. Share Buy-back

There was no share buy-back during the financial year under review ended 31 March 2016. As disclosed in Note 16,
all shares bought back previously have been maintained as treasury shares and there has not been any resale of the
Company’s treasury shares.

Details of the treasury shares are as tabulated below:

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

Balance as at
1 April 2015/31 March 2016 14,427,200 0.406 1.479 1.296 18,695,746

4. Options, Warrants and Convertible Securities

During the financial year, 348,873,287 new ordinary shares of RM0.10 each were issued by the Company pursuant to
the conversion of convertible redeemable secured bonds of an aggregate nominal value of RM110 million.

060 Scomi Group Bhd


Annual Report 2016
5. Director’s Conflict of Interest

Save as disclosed below and the disclosures in the Notes to the Financial Statements of the Company for the financial
year ended 31 March 2016, the Directors do not have any existing conflicts of interest or any personal interest in any
business arrangement involving Scomi Group Bhd (“SGB” or the “Company”):

Nature of existing conflict of


Director interest Transaction

Tan Sri Mohamed Azman Bin Tan Sri Mohamed Azman Bin Provisions of share registrar
Yahya Yahya is an Independent Non- services and human resources
Executive Director of the Company; services to the Company and its
and an Executive Director and group of companies by Symphony
Major Shareholder of Symphony Share Registrars Sdn Bhd and
House Sdn Bhd (formerly known Symphony Corporatehouse Sdn Bhd
as Symphony House Berhad), the respectively.
holding company of Symphony
Share Registrars Sdn Bhd and
Symphony Corporatehouse Sdn Bhd.

Dato’ Abdul Hamid Bin Sh Dato’ Abdul Hamid Bin Sh Mohamed Provisions of share registrar
Mohamed is an Independent Non-Executive services and human resources
Director of the Company; and an services to the Company and its
Executive Director of Symphony group of companies by Symphony
Share Registrars Sdn Bhd and Share Registrars Sdn Bhd and
Symphony Corporatehouse Sdn Bhd. Symphony Corporatehouse Sdn Bhd
respectively.

Shah Hakim @ Shahzanim Bin Shah Hakim @ Shahzanim Bin Zain is (i) Leasing Agreement with Orix
Zain the Chief Executive Officer/ Non- Rentec (Malaysia) Sdn Bhd
Independent Executive Director for the leasing of personal
of the Company; and a substantial computers, which are supplied
shareholder of Suria Business to them by a related party,
Solutions Sdn Bhd (“Suria”). Suria;
(ii) Provision of maintenance
services by Suria for
Scomi’s UCIPT (Unified
Communications based on IP
Telephony); and
(iii) Provision of maintenance
and support services by Suria
for Scomi’s VMWare (Virtual
Machine) Server for a term of 2
years.

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

061 Scomi Group Bhd


Annual Report 2016
STATEMENT Of directors’
responsibility

The Directors are required by the Companies Act, 1965 (the


“Act”) to prepare the financial statements of Scomi Group Bhd
(the “Company”) and its subsidiaries (the “Group”) for each
financial year which have been made out in accordance with
the applicable Malaysian Financial Reporting Standards, the
International Financial Reporting Standards, the provisions of the
Act, and the Main Market Listing Requirements of Bursa Malaysia
Securities Berhad, and to present it before the Company at its
annual general meeting.

The Directors are responsible to ensure that the financial The Directors are responsible to ensure that the Group and
statements give a true and fair view of the state of affairs the Company keep accounting records which disclose with
of the Group and the Company as at 31 March 2016, and of reasonable accuracy the financial position of the Group
the results and cash flows of the Group and the Company and the Company which enable them to ensure that the
for the financial year ended 31 March 2016. financial statements comply with the Act.

In preparing the financial statements, the Directors have: The Directors are also responsible for taking such steps as
• adopted appropriate accounting policies and applied are reasonably open to them to preserve the interests of
them consistently; stakeholders, to safeguard the assets of the Group, and to
• made judgments and estimates that are reasonable detect and prevent fraud and other irregularities.
and prudent; and
• prepared the financial statements on a going
concern basis.

062 Scomi Group Bhd


Annual Report 2016
063 Scomi Group Bhd
Annual Report 2016
FINANCIAL STATEMENTS

067 Directors’ Report

073 Statements of Financial Position

075 Statements of Profit or Loss and Other Comprehensive Income

077 Consolidated Statement of Changes in Equity

079 Company Statement of Changes in Equity

080 Statements of Cash Flows

083 Notes to the Financial Statements

187 Supplementary Financial Information on the Breakdown of


Realised and Unrealised Profits or Losses

188 Statement by Directors

189 Statutory Declaration

190 Independent Auditors’ Report

066 Scomi Group Bhd


Annual Report 2016
DIRECTORS’ REPORT
For The Year Ended 31 March 2016

The Directors have pleasure in submitting their report and the audited financial statements of the Group and of the Company for the financial
year ended 31 March 2016.

Principal activities

The Company is principally engaged in investment holding activities, whilst the principal activities of the significant subsidiaries are as stated in
Note 6 to the financial statements. There has been no significant change in the nature of these activities during the financial year.

Results

Group Company
RM’000 RM’000

Profit/(Loss) for the year 11,904 (27,757)

Attributable to:
Owners of the Company 22,536 (27,757)
Non-controlling interests (10,632) -

11,904 (27,757)

Reserves and provisions

There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed in the financial
statements.

DividendS

No dividend was paid during the financial year and the Directors do not recommend any dividend to be paid for the financial year under review.

Consolidation of subsidiaries with different financial year end

The Companies Commission of Malaysia had granted an order pursuant to Section 168(8) of the Companies Act, 1965 approving the application
by the Company to allow the following subsidiaries of the Company to continue to have or to adopt a financial year which does not coincide with
the Company in relation to the financial year ended 31 March 2016, subject to the following conditions:

(i) the Company is required to report this approval in its Directors’ Report; and
(ii) the Company is to ensure compliance with the Ninth Schedule of the Companies Act, 1965 and the approved accounting standards
pertaining to the preparation of consolidated accounts.

067 Scomi Group Bhd


Annual Report 2016
DIRECTORS’ REPORT
For The Year Ended 31 March 2016 (cont’d)

Consolidation of subsidiaries with different financial year end (continued)

Subsidiaries of the Company affected by the above are as follows:

(a) Scomi Oiltools (Europe) Limited;


(b) Scomi Oiltools Inc;
(c) KMC Oiltools Algeria EURL;
(d) Scomi Oiltools de Mexico S de RL de CV; and
(e) Oilfield Services de Mexico S de RL de CV.

Directors of the Company

Directors who served since the date of the last report are:

Dato’ Mohammed Azlan bin Hashim


Tan Sri Nik Mohamed bin Nik Yaacob
Tan Sri Mohamed Azman bin Yahya
Dato’ Sreesanthan a/l Eliathamby
Dato’ Abdul Hamid bin Sh Mohamed
Foong Choong Hong
Shah Hakim @ Shahzanim bin Zain
Lee Chun Fai
Cyrus Eruch Daruwalla (appointed on 23 May 2016)

Directors’ interests in shares

The interests and deemed interests in the shares and options over shares of the Company and of its related corporations (other than wholly
owned subsidiaries) of those who were Directors at financial year end (including the interests of the spouses or children of the Directors who
themselves are not Directors of the Company) as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM0.10 each

At At
1.4.2015 Bought Sold 31.3.2016
’000 ’000 ’000 ’000

The Company
Direct interests
Foong Choong Hong 410 - - 410
Shah Hakim @ Shahzanim bin Zain 1,950
1
- - 1,950
1

Indirect interests
Tan Sri Mohamed Azman bin Yahya 13,750
2
- - 13,750
2

Shah Hakim @ Shahzanim bin Zain 3


175,917 - - 3
175,917

068 Scomi Group Bhd


Annual Report 2016
Directors’ interests in shares (continued)

Number of ordinary shares of RM1.00 each

At At
1.4.2015 Bought Sold 31.3.2016
’000 ’000 ’000 ’000

Subsidiaries
Scomi Engineering Bhd (“SEB”)
Direct interest
Shah Hakim @ Shahzanim bin Zain 623
4
- - 623
4

Indirect interest
Shah Hakim @ Shahzanim bin Zain 537
5
- - 537
5

Number of ordinary shares of RM0.45 each

At At
1.4.2015 Bought Sold 31.3.2016
’000 ’000 ’000 ’000

Scomi Energy Services Bhd (“SESB”)


Direct interest
Shah Hakim @ Shahzanim bin Zain 6
2,108 - - 6
2,108

Indirect interest
Shah Hakim @ Shahzanim bin Zain 57
5
- - 57
5


1
1,421,000 shares held through Maybank Securities Nominees (Tempatan) Sdn. Bhd. pledged Securities Account for Shah Hakim @ Shahzanim
bin Zain (Margin) and Maybank Nominees (Tempatan) Sdn. Bhd. pledged Securities Account for Shah Hakim @ Shahzanim bin Zain.


2
Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Tan Sri Mohamed Azman bin Yahya and his spouse’s direct
shareholdings in Gajahrimau Capital Sdn. Bhd. whereby all the 13,750,000 shares are held through ABB Nominee (Tempatan) Sdn. Bhd..


3
Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through Shah Hakim @ Shahzanim bin Zain’s shareholding in
Kaspadu Sdn. Bhd. and Rentak Rimbun Sdn. Bhd..


4
123,000 shares held through Maybank Securities Nominees (Tempatan) Sdn. Bhd. pledged Securities Account for Shah Hakim @ Shahzanim
bin Zain (Margin).


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


6
Held through Maybank Securities Nominees (Tempatan) Sdn. Bhd. pledged Securities Account for Shah Hakim @ Shahzanim bin Zain
(Margin).

069 Scomi Group Bhd


Annual Report 2016
DIRECTORS’ REPORT
For The Year Ended 31 March 2016 (cont’d)

Directors’ interests in shares (continued)

~ Number of options over ordinary shares of RM1.00 each

Exercise
price At At
RM/share 1.4.2015 Exercised Forfeited 31.3.2016
Subsidiary ’000 ’000 ’000 ’000

Direct interest
SEB
Shah Hakim @ Shahzanim bin Zain 1.00 1,500 - (1,500)(1) -

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

(1) The options of SEB expired on 26 January 2016.

Save as disclosed above, none of the other Directors holding office at 31 March 2016 had any interest in the shares and options over shares of the
Company and of its related corporations during the financial year.

Directors’ benefits

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any benefit (other than a
benefit included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the financial statements or
the fixed salary of a full time employee of the Company or of related corporations) by reason of a contract made by the Company or a related
corporation with the Director or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial
interest other than those disclosed in Note 34 to the financial statements.

There were no arrangements during and at the end of the financial year which had the object 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.

Issue of shares and debentures

During the financial year, the Company issued 348,873,287 new ordinary shares of RM0.10 each at RM0.365 per ordinary share pursuant to the
conversion of convertable redeemable secured bonds of an aggregate nominal value of RM110 million.

There were no other changes in the authorised, issued and paid-up capital of the Company during the financial year. There were no debentures
issued during the financial year.

Treasury shares

There was no repurchase of the Company’s shares during the financial year under review. Details of the treasury shares are set out in Note 16 to
the financial statements.

070 Scomi Group Bhd


Annual Report 2016
Options granted over unissued shares

No options were granted to any person to take up unissued shares of the Company during the financial year.

Significant eventS durinG the year

Details of the significant event during the year are disclosed in Note 36 to the financial statements.

Subsequent events

Details of the subsequent event are disclosed in Note 37 to the financial statements.

Other statutory information

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to ascertain that:

i) all known bad debts have been written off and adequate provision made for doubtful debts, and

ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an amount which they
might be expected so to realise.

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

i) that would render the amount written off for bad debts or the amount of the provision for doubtful debts in the Group and in the Company
inadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company misleading, or

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

iv) not otherwise dealt with in this report or the financial statements that would render any amount stated in the financial statements of the
Group and of the Company misleading.

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

i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which secures the liabilities
of any other person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

071 Scomi Group Bhd


Annual Report 2016
DIRECTORS’ REPORT
For The Year Ended 31 March 2016 (cont’d)

Other statutory information (continued)

No contingent liability or other liability of any company in the Group 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 substantially affect the ability of the Group
and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, except for the business development costs incurred by SEB and SESB written off in the Group’s and the Company’s
financial statements and the inventory loss as disclosed in Note 38, the financial performance of the Group and of the Company for the financial
year ended 31 March 2016 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any
such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

Auditors

The auditors, Messrs KPMG, have indicated their willingness to accept re-appointment.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Dato’ Mohammed Azlan bin Hashim

Shah Hakim @ Shahzanim bin Zain

Petaling Jaya

Date: 18 July 2016

072 Scomi Group Bhd


Annual Report 2016
Statements of
financial Position
As At 31 March 2016

<----------------------------- Group -----------------------------> <-------------- Company --------------->

Note 31.3.2016 31.3.2015 1.4.2014 31.3.2016 31.3.2015


RM’000 RM’000 RM’000 RM’000 RM’000
Restated

Assets
Property, plant and equipment 3 608,818 659,640 646,220 533 864
Investment properties 4 2,440 2,495 2,516 4,366 4,418
Intangible assets 5 295,193 295,572 292,033 - -
Investments in subsidiaries 6 - - - 1,219,663 1,219,663
Investments in associates 7 7,439 - 124 - -
Investments in joint ventures and
joint operations 8 66,081 68,967 54,935 - -
Deferred tax assets 9 37,198 31,087 32,759 - -
Trade and other receivables 10 335 1,125 - 60,042 55,669
Available-for-sale financial assets 11 104 104 104 - -

Total non-current assets 1,017,608 1,058,990 1,028,691 1,284,604 1,280,614

Inventories 12 213,324 241,526 227,286 - -


Current tax assets 21,455 15,542 15,457 - -
Trade and other receivables 10 1,109,618 1,243,021 1,148,810 19,002 42,395
Cash and bank balances 13 188,047 236,330 229,882 46 940

1,532,444 1,736,419 1,621,435 19,048 43,335


Assets classified as held for sale - - 63,222 - -

Total current assets 1,532,444 1,736,419 1,684,657 19,048 43,335

Total assets 2,550,052 2,795,409 2,713,348 1,303,652 1,323,949

Equity
Share capital 14 191,751 156,864 156,864 191,751 156,864
Share premium 15 444,831 352,379 352,379 444,831 352,379
Treasury shares 16 (18,696) (18,696) (18,696) (18,696) (18,696)
Convertible bond reserve 17 - 106,471 106,471 - 106,471
Other reserves 18 (97,744) (87,013) (96,648) - -
Retained earnings 133,386 127,176 107,379 628,690 677,315

Total equity attributable to owners of the


Company 653,528 637,181 607,749 1,246,576 1,274,333
Non-controlling interests 6(a) 537,002 536,598 504,534 - -

Total equity 1,190,530 1,173,779 1,112,283 1,246,576 1,274,333

073 Scomi Group Bhd


Annual Report 2016
Statements of
financial Position
As At 31 March 2016 (cont’d)

<----------------------------- Group -----------------------------> <-------------- Company --------------->

Note 31.3.2016 31.3.2015 1.4.2014 31.3.2016 31.3.2015


RM’000 RM’000 RM’000 RM’000 RM’000
Restated

Liabilities
Trade and other payables 19 5,684 5,682 2,969 - -
Loans and borrowings 20 174,810 183,388 261,583 319 1,244
Provision for retirement benefits 21 7,359 6,644 5,952 - -
Derivative financial liabilities 22 28,845 40,366 23,715 - -
Deferred tax liabilities 9 8,602 7,982 6,469 - -

Total non-current liabilities 225,300 244,062 300,688 319 1,244

Trade and other payables 19 482,652 560,045 507,246 56,178 48,159


Loans and borrowings 20 596,368 769,866 709,522 579 213
Derivative financial liabilities 22 15,247 11,784 5,378 - -
Current tax liabilities 39,326 34,885 21,430 - -
Deferred Government grant 23 629 988 1,347 - -

1,134,222 1,377,568 1,244,923 56,757 48,372


Liabilities classified as held for sale - - 55,454 - -

Total current liabilities 1,134,222 1,377,568 1,300,377 56,757 48,372

Total liabilities 1,359,522 1,621,630 1,601,065 57,076 49,616

Total equity and liabilities 2,550,052 2,795,409 2,713,348 1,303,652 1,323,949

The notes on pages 083 to 186 are an integral part of these financial statements.

074 Scomi Group Bhd


Annual Report 2016
Statements of profit or loss and
other comprehensive income
For The Year Ended 31 March 2016

Group Company

Note 2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000
Restated

Continuing operations
Revenue 24 1,383,332 1,798,572 - 933
Cost of sales/services (1,121,479) (1,442,502) - -

Gross profit 261,853 356,070 - 933


Other income 105,764 34,284 6,228 131,705
Selling and distribution expenses (71,670) (77,314) - -
Administrative expenses (210,124) (168,924) (32,049) (20,052)
Other expenses (20,415) (13,857) (2,003) (73,923)

Results from operating activities 65,408 130,259 (27,824) 38,663


Finance costs 25 (34,178) (30,427) (1,622) (444)
Finance income 4,696 3,082 1,689 2,594
Share of profit/(loss) of equity-accounted associates,
net of tax 7 495 (124) - -
Share of (loss)/profit of equity-accounted joint ventures,
net of tax 8 (10,628) 1,117 - -

Profit/(Loss) before tax 26 25,793 103,907 (27,757) 40,813


Tax expense 27 (13,889) (37,535) - -

Profit/(Loss) from continuing operations 11,904 66,372 (27,757) 40,813

Discontinuing operations
Loss from discontinuing operations, net of tax - (71) - -

Profit/(Loss) for the year 11,904 66,301 (27,757) 40,813

Other comprehensive income, net of tax


Items that are or may be reclassified subsequently to
profit or loss
Cash flow hedges 18,768 4,956 - -
Foreign currency translation differences for foreign
operations (13,916) (9,537) - -

Other comprehensive income for the year, net of tax 4,852 (4,581) - -

Total comprehensive income/(loss) for the year 16,756 61,720 (27,757) 40,813

075 Scomi Group Bhd


Annual Report 2016
Statements of profit or loss and
other comprehensive income
For The Year Ended 31 March 2016 (cont’d)

Group Company

Note 2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000
Restated

Profit/(Loss) attributable to:


Owners of the Company 22,536 44,256 (27,757) 40,813
Non-controlling interests 6 (a) (10,632) 22,045 - -

Profit/(Loss) for the year 11,904 66,301 (27,757) 40,813

Total comprehensive income/(loss) attributable to:


Owners of the Company 15,142 29,324 (27,757) 40,813
Non-controlling interests 1,614 32,396 - -

Total comprehensive income/(loss) for the year 16,756 61,720 (27,757) 40,813

Basic earnings per ordinary share (sen):


Continuing operations 28 1.18 2.85
Discontinued operations 28 - -

Diluted earnings per ordinary share (sen):


Continuing operations 28 1.18 2.33
Discontinued operations 28 - -

The notes on pages 083 to 186 are an integral part of these financial statements.

076 Scomi Group Bhd


Annual Report 2016
Consolidated statement of
changes in equity
For The Year Ended 31 March 2016

<----------------------------------------Attributable to owners of the Company---------------------------------->


<---------------------------------Non-distributable--------------------------------> Distributable
Non-
Share Share Treasury Other Convertible Retained controlling Total
Group capital premium shares reserves bonds earnings Total interests equity
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 April 2014 156,864 352,379 (18,696) (96,648) 106,471 107,379 607,749 504,534 1,112,283

Foreign currency translation


differences for foreign
operations, as previously
stated - - - (17,702) - - (17,702) 8,903 (8,799)
Prior year adjustment 38 - - - (484) - - (484) (254) (738)

Foreign currency translation


differences for foreign
operations, restated - - - (18,186) - - (18,186) 8,649 (9,537)
Cash flow hedges - - - 3,254 - - 3,254 1,702 4,956

Total other comprehensive


income for year, restated - - - (14,932) - - (14,932) 10,351 (4,581)

Profit for the year, as previously


stated - - - - - 49,413 49,413 24,741 74,154
Prior year adjustment 38 - - - - - (5,157) (5,157) (2,696) (7,853)

Profit for the year, restated - - - - - 44,256 44,256 22,045 66,301

Total comprehensive income


for the year, restated - - - (14,932) - 44,256 29,324 32,396 61,720
Contributions by and distributions
to owners of the Company

Share options:
- value of options terminated - - - (284) - 392 108 (108) -
Disposal and deconsolidation of
subsidiaries - - - 24,851 - (24,851) - - -
Dividend paid by subsidiary
to NCI - - - - - - - (224) (224)

Total transactions with owners


of the Company - - - 24,567 - (24,459) 108 (332) (224)

At 31 March 2015, restated 156,864 352,379 (18,696) (87,013) 106,471 127,176 637,181 536,598 1,173,779

Note 14 Note 15 Note 16 Note 18 Note 17 Note 6(a)

077 Scomi Group Bhd


Annual Report 2016
Consolidated statement of
changes in equity
For The Year Ended 31 March 2016 (cont’d)

<----------------------------------------Attributable to owners of the Company---------------------------------->


<---------------------------------Non-distributable--------------------------------> Distributable
Non-
Share Share Treasury Other Convertible Retained controlling Total
Group capital premium shares reserves bonds earnings Total interests equity
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 April 2015, restated 156,864 352,379 (18,696) (87,013) 106,471 127,176 637,181 536,598 1,173,779

Foreign currency translation


differences for foreign
operations - - - (19,715) - - (19,715) 5,799 (13,916)
Cash flow hedges - - - 12,321 - - 12,321 6,447 18,768

Total other comprehensive


income for year - - - (7,394) - - (7,394) 12,246 4,852
Profit for the year - - - - - 22,536 22,536 (10,632) 11,904

Total comprehensive income


for the year - - - (7,394) - 22,536 15,142 1,614 16,756
Contributions by and distributions
to owners of the Company

Share options:
- value of options terminated - - - (3,337) - 4,547 1,210 (1,210) -
Conversion of convertible bonds 34,887 92,452 - - (106,471) (20,868) - - -
Other movements - - - - - (5) (5) - (5)

Total transactions with owners


of the Company 34,887 92,452 - (3,337) (106,471) (16,326) 1,205 (1,210) (5)

At 31 March 2016 191,751 444,831 (18,696) (97,744) - 133,386 653,528 537,002 1,190,530

Note 14 Note 15 Note 16 Note 18 Note 17 Note 6(a)

The notes on pages 083 to 186 are an integral part of these financial statements.

078 Scomi Group Bhd


Annual Report 2016
statement of
changes in equity
For The Year Ended 31 March 2016

<---------------------------Non-distributable------------------------> Distributable
Share Share Treasury Convertible Retained Total
Company capital premium shares bonds earnings equity
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

At 1 April 2014 156,864 352,379 (18,696) 106,471 636,502 1,233,520


Profit and total comprehensive income for the year - - - - 40,813 40,813

At 31 March 2015/1 April 2015 156,864 352,379 (18,696) 106,471 677,315 1,274,333
Loss and total comprehensive expense for the year - - - - (27,757) (27,757)
Contributions by and distributions to owners of the
Company
Conversion of Convertible Bonds 34,887 92,452 - (106,471) (20,868) -

At 31 March 2016 191,751 444,831 (18,696) - 628,690 1,246,576

Note 14 Note 15 Note 16 Note 17

The notes on pages 083 to 186 are an integral part of these financial statements.

079 Scomi Group Bhd


Annual Report 2016
Statements of
cash flows
For The Year Ended 31 March 2016

Group Company

Note 2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000
Restated

Cash flows from operating activities


Profit/(Loss) before tax from:
- continuing operations 25,793 103,907 (27,757) 40,813
- discontinued operations - (71) - -

25,793 103,836 (27,757) 40,813


Adjustments for:
Amortisation of:
- intangible assets 2,734 3,104 - -
- Government grant (359) (359) - -
Depreciation
- property, plant and equipment 107,511 94,622 350 369
- investment properties 146 157 52 51
Disposal (gain)/loss of:
- property, plant and equipment (221) (96) - (180)
- assets held for sale - 71 - -
Finance costs 63,706 63,920 1,622 444
Finance income (4,696) (3,082) (1,689) (2,594)
Gain on liquidation/winding up of subsidiaries (24,081) (11,235) - -
Impairment losses:
- goodwill 7,014 - - -
- property, plant and equipment - 449 - -
- inventories 7,095 1,330 - -
- receivables 8,814 8,773 - -
- amount due from subsidiaries - - - 70,206
Provisions:
- retirement benefits 1,477 590 - -
Reversal of impairment losses:
- property, plant and equipment (1,182) - - -
- investment in subsidiary - - - (129,464)
- investment in associate (6,944) - - -
- inventories (4,137) (4,834) - -
- receivables (7,914) (4,101) - -
Reversal of provision:
- litigation (29,792) - - -
Share of results in:
- associates (495) 124 - -
- joint ventures 10,628 (1,117) - -
Unrealised loss/(gain) on foreign exchange 1,862 (2,891) 205 2,070

080 Scomi Group Bhd


Annual Report 2016
Group Company

Note 2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000
Restated

Cash flows from operating activities (continued)


Write-off:
- business development charges 13,873 - 13,873 -
- property, plant and equipment 530 171 - -
- inventories 4,835 10,470 - -
- receivables 4,376 4,246 - -

Operating profit/(loss) before changes in


working capital 180,573 264,148 (13,344) (18,285)
Changes in working capital:
Inventories 20,409 (22,189) - -
Trade and other receivables, prepayments and other
financial assets 116,167 (89,815) (5,026) (48,801)
Trade and other payables (47,599) 29,641 17,987 (63,216)

Cash generated from/(used in) operations 269,550 181,785 (383) (130,302)


Net tax paid (35,124) (19,162) - -
Retirement benefits paid (753) (255) - -

Net cash from/(used in) operating activities 233,673 162,368 (383) (130,302)

Cash flows from investing activities


Acquisition of:
- a subsidiary company - - - (60)
- joint venture company (5,566) (1,452) - -
- property, plant and equipment (ii) (33,520) (61,096) (19) (263)
Advances to joint venture company - (10,059) - -
Proceeds from:
- disposal of property, plant and equipment 5,127 5,887 - 180
- disposal of assets held for sale - 5,289 - -
- capital repayment - - - 129,464
Development expenditure incurred (5,827) (5,730) - -
Repayment of advance from jointly-controlled entity 336 - - -
Interest received 4,696 4,078 1,689 2,594

Net cash (used in)/from investing activities (34,754) (63,083) 1,670 131,915

081 Scomi Group Bhd


Annual Report 2016
Statements of
cash flows
For The Year Ended 31 March 2016 (cont’d)

Group Company

Note 2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000
Restated

Cash flows from financing activities


Proceeds from bank borrowings 24,444 577,256 - 225
Repayment of bank borrowings (207,049) (499,765) (559) (605)
Interest paid on borrowings (50,939) (65,712) (1,622) (420)
Decrease in short-term deposits pledged as security 734 11,531 - -
Dividend paid by subsidiary to non-controlling interests - (224) - -

Net cash (used in)/from financing activities (232,810) 23,086 (2,181) (800)

Net(decrease)/increase in cash and cash equivalents (33,891) 122,371 (894) 813


Effect of exchange rate fluctuations on cash held (5,392) (11,260) - -
Cash and cash equivalents at 1 April 83,727 (27,384) 940 127

Cash and cash equivalents at 31 March (i) 44,444 83,727 46 940

Notes to statements of cash flows

(i) Cash and cash equivalents

Cash and cash equivalents included in the statements of cash flows comprise the following statements of financial position amounts:

Group Company

Note 2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Deposits placed with licensed banks 13 25,904 77,596 - -


Less: Pledged deposits 13 (69,233) (69,967) - -

(43,329) 7,629 - -
Cash and bank balances 13 162,143 158,734 46 940
Bank overdrafts 20 (74,370) (82,636) - -

44,444 83,727 46 940

(ii) Acquisition of property, plant and equipment

During the financial year, the Group acquired property, plant and equipment with an aggregate cost of RM33,520,000 (2015: RM61,096,000),
of which RM97,700 (2015: RM289,000) were acquired by means of finance leases.

(iii) Conversion of Convertible Redeemable Secured Bonds

During the financial year, non-cash transactions included the issuance of 348,873,287 new ordinary shares of RM0.10 each by the Company
pursuant to the conversion of Convertible Redeemable Secured Bonds of an aggregate nominal value of RM110 million (See Note 17).

The notes on pages 083 to 186 are an integral part of these financial statements.

082 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements

Scomi Group Bhd is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market of Bursa Malaysia
Securities Berhad. The address of the principal place of business and registered office of the Company is as follows:

Level 17, 1 First Avenue


Bandar Utama
47800 Petaling Jaya
Selangor Darul Ehsan

The consolidated financial statements of the Company as at and for the financial year ended 31 March 2016 comprise the Company and its
subsidiaries (together referred to as the “Group” and individually referred to as “Group Entities”) and the Group’s interests in associates and joint
ventures. The financial statements of the Company as at and for the financial year ended 31 March 2016 also include joint operations.

The Company principally engaged in investment holding activities, whilst the principal activities of the significant subsidiaries are stated in Note
6 to the financial statements.

These financial statements were authorised for issue by the Board of Directors on18 July 2016.

1. Basis of preparation

(a) Statement of compliance

The financial statements of the Group and the Company have been prepared in accordance with Malaysian Financial Reporting
Standards (“MFRSs”), International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia.

The following are accounting standards, amendments and interpretations of the MFRSs that have been issued by the Malaysian
Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Company:

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2016
• MFRS 14, Regulatory Deferral Accounts
• Amendments to MFRS 5, Non-current Assets Held for Sale and Discontinued Operations (Annual Improvements 2012-2014 Cycle)
• Amendments to MFRS 7, Financial Instruments: Disclosures (Annual Improvements 2012-2014 Cycle)
• Amendments to MFRS 10, Consolidated Financial Statements, MFRS 12, Disclosure of Interests in Other Entities and MFRS 128,
Investments in Associates and Joint Ventures – Investment Entities: Applying the Consolidation Exception
• Amendments to MFRS 11, Joint Arrangements – Accounting for Acquisitions of Interests in Joint Operations
• Amendments to MFRS 101, Presentation of Financial Statements – Disclosure Initiative
• Amendments to MFRS 116, Property, Plant and Equipment and MFRS 138, Intangible Assets – Clarification of Acceptable Methods
of Depreciation and Amortisation
• Amendments to MFRS 116, Property, Plant and Equipment and MFRS 141, Agriculture – Agriculture: Bearer Plants
• Amendments to MFRS 119, Employee Benefits (Annual Improvements 2012-2014 Cycle)
• Amendments to MFRS 127, Separate Financial Statements – Equity Method in Separate Financial Statements
• Amendments to MFRS 134, Interim Financial Reporting (Annual Improvements 2012-2014 Cycle)

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2017
• Amendments to MFRS 107, Statement of Cash Flows – Disclosure Initiative
• Amendments to MFRS 112, Income Taxes – Recognition of Deferred Tax Assets for Unrealised Losses

083 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

1. Basis of preparation (continued)

(a) Statement of compliance (continued)

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2018
• MFRS 9, Financial Instruments (2014)
• MFRS 15, Revenue from Contracts with Customers

MFRSs, Interpretations and amendments effective for annual periods beginning on or after 1 January 2019
• MFRS 16, Leases

MFRSs, Interpretations and amendments effective for a date yet to be confirmed


• Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates and Joint Ventures – Sale or
Contribution of Assets between an Investor and its Associate or Joint Venture

The Group and the Company plans to apply the abovementioned accounting standards, amendments and interpretations:

• from the annual period beginning on 1 April 2016 for those accounting standards, amendments or interpretations that are
effective for annual periods beginning on or after 1 January 2016.

• from the annual period beginning on 1 April 2017 for those amendments that are effective for annual periods beginning on or
after 1 January 2017.

• from the annual period beginning on 1 April 2018 for those accounting standards that are effective for annual periods beginning
on or after 1 January 2018.

• from the annual period beginning on 1 April 2019 for the accounting standard that is effective for annual periods beginning on
or after 1 January 2019.

The initial application of the accounting standards, amendments or interpretations are not expected to have any material financial
impacts to the current period and prior period financial statements of the Group and the Company except as mentioned below:

MFRS 15, Revenue from Contracts with Customers

MFRS 15 replaces the guidance in MFRS 111, Construction Contracts, MFRS 118, Revenue, IC Interpretation 13, Customer Loyalty
Programmes, IC Interpretation 15, Agreements for Construction of Real Estate, IC Interpretation 18, Transfers of Assets from Customers
and IC Interpretation 131, Revenue - Barter Transactions Involving Advertising Services.

The Group is currently assessing the financial impact that may arise from the adoption of MFRS 15.

MFRS 9, Financial Instruments

MFRS 9 replaces the guidance in MFRS 139, Financial Instruments: Recognition and Measurement on the classification and measurement
of financial assets and financial liabilities, and on hedge accounting.

The Group is currently assessing the financial impact that may arise from the adoption of MFRS 9.

084 Scomi Group Bhd


Annual Report 2016
1. Basis of preparation (continued)

(a) Statement of compliance (continued)

MFRS 16, Leases

MFRS 16 replaces the guidance in MFRS 117, Leases, IC Interpretation 4, Determining whether an Arrangement contains a Lease, IC
Interpretation 115, Operating Leases – Incentives and IC Interpretation 127, Evaluating the Substance of Transactions Involving the Legal
Form of a Lease.

The Group is currently assessing the financial impact that may arise from the adoption of MFRS 16.

Amendments to MFRS 10, Consolidated Financial Statements, MFRS 12, Disclosure of Interests in Other Entities and MFRS 128,
Investments in Associates and Joint Ventures – Investment Entities: Applying the Consolidation Exception

The amendments to MFRS 10, MFRS 12 and MFRS 128 require an investment entity parent to fair value a subsidiary providing
investment-related services that is itself an investment entity, an intermediate parent owned by an investment entity group can be
exempt from preparing consolidated financial statements and a non-investment entity investor can retain the fair value accounting
applied by its investment entity associate or joint venture.

The Group is currently assessing the financial impact that may arise from the adoption of the amendments.

(b) Basis of measurement

The financial statements have been prepared on the historical cost basis other than as disclosed in Note 2.

(c) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency. All financial
information is presented in RM and has been rounded to the nearest thousand, unless otherwise stated.

(d) Critical accounting estimates and judgements

Estimates and judgements are continually evaluated by the Directors and are based on historical experience, Directors’ best knowledge
of current events and actions, and other factors, including expectations of future events that are believed to be reasonable under the
circumstances.

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions involving a higher degree of judgement or complexity, or area where
estimates and assumptions have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are addressed below.

085 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

1. Basis of preparation (continued)

(d) Critical accounting estimates and judgements (continued)

(i) Assessment of penalties payable by SEB

Provision for liquidated ascertained damages (“LAD”) are possible penalties that may arise from the late delivery of contract
deliverables. In assessing the probability that an outcome of resources will be required to settle the obligation, management
considers the outcome of the Extension of Time (“EOT”) application based on circumstances of the projects, specific past
experiences with the employer and expert advice as detailed below:

(a) Contract with Mumbai Metropolitan Region Development Authority (“MMRDA”)

On 7 November 2008, the MMRDA of India awarded a contract for the Design, Development and Construction of a Monorail
System (“the Project I” or “ the Contract”) for a lump sum amount of Rs 2,460 crores (equivalent to about RM1.7 billion) to
the unincorporated consortium of Larsen & Toubro Ltd and SEB (“the Consortium”), for which SEB’s share of the value of
the Contract is Rs 1,097 crores (equivalent to about RM720 million) based on its scope of works. The design, development,
construction/manufacture/supply, testing and commissioning of the system including safety certification for commercial
operations are to be completed within 30 months from the award of the Contract.

The Consortium has continuously apprised MMRDA of the status of the project and sought extensions of time as allowed
under the Contract terms. Following discussions, MMRDA had on 31 May 2011 granted the Consortium with an EOT for each
of the Phase 1 and Phase 2 works completion key-dates to 31 December 2011 and 22 November 2012 respectively.

As the Project I encountered further delays, certain Phase 1 key milestones stated in the Contract were not met as at 31
December 2011.

The Consortium has requested for a further EOT for Phase 1 up to 14 July 2012 vide its letter dated 30 December 2011 and
SEB engaged specialist advisors to assist in the assessment of delay events, submission of claims for extension of time and
assessing the Consortium’s contractual obligations.

A specialist advisor via an EOT claim report dated 8 November 2012 has stated that the Consortium had grounds to apply for
a further extension of time for both Phase 1 and Phase 2 up to July 2014.

Based on the specialist advisors assessment, the Consortium vide its letter dated 9 November 2012 requested for a further
EOT for Phase 1 and Phase 2 until 26 July 2014. Subsequent to the above submissions, MMRDA vide a letter dated 4 December
2012 had granted the Consortium a further EOT of up to 31 March 2013 for Phase 1 and up to 31 December 2013 for Phase 2.

Subsequent to the submissions for a further EOT by the Consortium vide its letter dated 20 November 2013, MMRDA vide
a letter dated 13 December 2013 had granted the Consortium a further EOT of up to 30 June 2014 for the project and vide
a letter dated 17 April 2014, had further granted the Consortium an EOT of up to 26 September 2015 for the project. On 1
February 2014, Phase 1 has been officially commissioned.

Due to further delays, certain Phase 2 key milestones stated in the Contract were not met as at 31 March 2015. Based on
management’s internal assessment, Phase 2 was expected to be completed in 2016. During the year, based on the specialist
advisors assessment, the Consortium vide its letter dated 9 September 2015 requested for a further EOT for Phase 2 until 9
August 2017. Subsequent to the above submissions, MMRDA vide a letter dated 17 June 2016 had granted the Consortium
a further and final EOT of up to 15 August 2017 for the project.

086 Scomi Group Bhd


Annual Report 2016
1. Basis of preparation (continued)

(d) Critical accounting estimates and judgements (continued)

(i) Assessment of penalties payable by SEB (continued)

(a) Contract with Mumbai Metropolitan Region Development Authority (“MMRDA”) (continued)

Notwithstanding that the EOT had been granted by MMRDA, MMRDA reserves its rights to recover liquidated damages, if
any, at the end of the project.

In reliance of the past experience with MMRDA in granting EOTs and the advice received from the specialist advisor, the
Directors are of the opinion that no provision for potential penalties or liquidated damages is required as at 31 March 2016.

(b) Contract with Prasarana Malaysia Berhad (“PMB”)

On 10 December 2010, Scomi Transit Projects Sdn Bhd (“STP”), a wholly owned subsidiary of SEB, was awarded a monorail
expansion contract for RM494 million (“the Project II”). The Project II was to be completed on 31 July 2013. Due to various
circumstances, the Project II had encountered delays and certain key milestones stated in the contract had not been met
as at 31 March 2016.

STP has continuously apprised the customer of the status of the project and sought extension of time as allowed under
the contract terms. Following discussions, the customer had on 19 December 2012 granted STP with EOT for the first four
key milestones to 30 April 2013 but the overall completion date remained at 31 July 2013. This has led to further claim
submissions by STP to the customer.

Subsequent to the submissions, the customer vide a letter dated 2 October 2013 had granted the STP a further EOT of up
to 27 December 2013. As the Project II encountered further delays, the customer vide a letter dated 14 March 2014 had
granted STP a further EOT of up to 25 April 2014.

A specialist advisor via an EOT claim report dated 22 May 2014 had stated that STP has grounds to apply for a further
extension of time up to 18 September 2015. On 15 April 2015, the customer vide a supplemental letter granted STP a
further EOT up to 15 June 2016.

During the year, the Project II activities and work continued normally, with the customer approving claims, billings and
making payments accordingly except for the matters as further explained in Note 36(b). On 9 June 2016, STP received
a Notice of Termination (“the Notice”) from PMB which gave STP 14 days from the notice date to renew a performance
bond connected with Project II, failing which the Project II contract will be terminated. Following the receipt of the Notice
dated 9 June 2016 issued by PMB, STP initiated legal proceeding against PMB by a way of Originating Summons dated
20 June 2016.

On 21 June 2016, the High Court in Kuala Lumpur granted an interim order and injunction restraining PMB from
terminating the Project II contract based on the Notice or otherwise giving effect to the Notice pending the hearing and
disposal of the Originating Summons until further order of the Court.

Based on the advice received from both the specialist and legal advisors, the Directors are of the opinion that no provision
for potential penalties is required as at 31 March 2016.

087 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

1. Basis of preparation (continued)

(d) Critical accounting estimates and judgements (continued)

(i) Assessment of penalties payable by SEB (continued)

(c) Contract with Metro Company of Sao Paulo

On 30 July 2011, the Metro Company of Sao Paulo (“Metro Company”) awarded a contract for the implementation of
a monorail system, including design, civil works, manufacture, supply of systems and rolling stock material, including
a fleet of 24 trains (3 cars per train) for the Line 17 - Gold - of Metro Sao Paulo (“Project III”) for a lump sum amount of
BRL1,396 million (equivalent to about RM2,380 million) to the Consorcio Monotrilho Intergracoam (“the Consortium”), for
which SEB’s share of the value of the Contract is BRL132 million (equivalent to about RM226 million) based on its scope of
works. The Project III was to be completed by January 2015.

Due to changes in the scope of work from the initial 24 trains (3 Cars per train) to 18 trains (5 Cars per train) and various
circumstances, the Project III had encountered delays. The Consortium has continuously apprised Metro Company of the
status of the project and sought extensions of time as allowed under the contract terms. Following discussions, Metro
Company had on 30 August 2013 granted the Consortium with an EOT to 28 September 2015.

In 2015, Metro Company announced delays in Project III with the expected completion in 2019 due to various
circumstances and as such, granted the Consortium an EOT to 27 December 2019 vide a letter dated 24 April 2015.

In reliance of the EOT granted by Metro Company on 24 April 2015 and the advice received from the specialist advisor, the
Directors are of the opinion that no provision for potential penalties is required as at 31 March 2016.

(ii) Assessment of indirect taxes payable in SEB

During the course of execution of the Project I described in Note 1(d)(i)(a) above, SEB and its wholly-owned subsidiary, Scomi
Rail Bhd (“SRB”), will supply goods and services which would typically attract various indirect taxes in India. The tax consultants
of the Company had assessed the potential indirect taxes payable to the Central Government, State Government and Local
Municipality of that country and are of the view that:

(a) There are certain legislations empowering the Central Government, State Government and Local Authority of that
country to grant exemptions/concessions in cases where the respective Governments and authorities are satisfied that
the project is in the interest of the public;

(b) Past precedents indicated that the respective Governments and Authorities of that country have exercised their
discretionary powers to grant exemptions/concessions for specific projects in the interest of the public; and

(c) Given the legal provisions, and past precedents, a reasonable case for tax exemptions/concessions can be made, subject
to discretions of the respective Governments and Authorities of that country.

Applications and representations had been made by management to the respective Governments and Authorities and the
matter is under consideration at the respective authorities.

088 Scomi Group Bhd


Annual Report 2016
1. Basis of preparation (continued)

(d) Critical accounting estimates and judgements (continued)

(ii) Assessment of indirect taxes payable in SEB (continued)

Following the Central Government of India budget in March 2012, the custom duty rates had been reduced. As a result, the
total imputed value of custom duties based on delivery of 15 trains and applying the revised applicable tax rates had reduced
indirect taxes by RM13.1 million (Rs 22 crores). The Central Government of India Budget announced in March 2013 that the
custom duty rates had been reduced further from 16% to 13% which had reduced indirect taxes exposure by RM2.8 million
(Rs 5 crores). In addition, with effect from 1 January 2014, under the India-Malaysia Comprehensive Economic Cooperation
Agreement, the basic custom duties for rolling stocks will be reduced to 0%, which further reduced the exposure by RM1.0
million (Rs 2 crores). Based on the above, there is no residual financial exposure on the indirect taxes payable, as the impact
of any remaining indirect taxes payable can be offset against the maximum amount contractually reimbursable by MMRDA.

SEB had also issued a writ of summons against the Local Authority to recover indirect taxes paid to date and is confident of a
successful outcome based on past legal precedents. The hearing date fixed on 31 March 2016 has been postponed and there is
currently no fixed hearing date as of the date of this report.

Based on the above, the Directors are of the opinion that:

(a) There is a reasonable case for claim of tax exemptions/concessions;

(b) A reasonable estimate of the likely outcome of additional indirect taxes payable, if any, cannot be ascertained at this
stage; and

(c) A full recovery of indirect taxes paid in advance amounting to RM35 million (2015: RM34 million) as disclosed in Note 10
is expected.

(iii) Estimated impairment of goodwill and amortisation of intangible assets

The Group tests goodwill for impairment annually in accordance with its accounting policy. More regular reviews are performed
if events indicate that this is necessary.

Determining whether goodwill is impaired requires an estimation of the value in use and fair value less costs of disposals of
the cash-generating units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the
future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to calculate present value.
Fair value less costs of disposals is determined based on indicative values on a willing buyer willing seller basis, as provided
by an independent valuer. The recoverable amounts of goodwill have been determined based on the higher of fair value less
costs of disposals and value in use calculations, which resulted in an impairment loss during the financial year amounting to
RM7,014,000 (2015: Nil).

(i) The Group tests goodwill and capitalised development costs work-in-progress for impairment annually and has also
tested capitalised development costs for impairment due to certain impairment indicators. The recoverable amounts of
cash-generating units (“CGUs”) were determined based on the value in use calculations. The calculations require the use
of estimates and assumptions as set out in Note 5 to the financial statements, which resulted in no impairment arising.

(ii) Capitalised development expenditure is recognised when the criteria for recognition is met and amortised based on an
estimated sales unit method. Significant judgment is required in determining the estimated sales units, which is based on
technological obsolescence, secured contracts, projects tendered and expectations of market growth, which determine
the amount of amortisation recognised. During the current financial year, the Directors re-assessed and determined that
the estimated sales units for monorail are 750 units (2015: 750 units).

089 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

1. Basis of preparation (continued)

(d) Critical accounting estimates and judgements (continued)

(iii) Estimated impairment of goodwill and amortisation of intangible assets (continued)

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.

The carrying amount of goodwill and estimates used in the calculation are disclosed in Note 5 to the financial statements.

(iv)
Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining recoverability
of withholding and income taxes worldwide provision for income taxes, including determination of taxable income, capital
allowances and deductibility of certain expenses during the estimation of the provision for income taxes. There are many
transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.

The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due.
The Group has made assumptions and judgements in relation to provision for tax disputes based on, among others, historical
experience with local tax authorities in the relevant countries and timing of the potential liabilities. These assumptions and
judgements are made in consultation with and according to the advice from local independent tax professionals. Any changes
to these assumptions and judgements will impact the carrying amount of the potential liabilities.

Where the final tax outcome of these matters is different from the amounts that were initially recorded, such as if the actual
future taxable profits, or if the amounts of carry forward tax losses, unutilised tax incentives and capital allowances that are
approved by the tax authorities differ from those currently estimated by the Group, such differences will impact the income tax
and deferred income tax provisions in the period in which such determination is made.

Deferred tax assets are recognised to the extent that it is probable that taxable income will be available against which the
temporary differences can be utilised. Significant judgement is required in determining the amount of deferred tax assets that
can be recognised, based upon the likely timing and level of future taxable income. Based on projections of future taxable
income and the underlying assumptions as detailed in Note 1(d) including a positive outcome with PMB, the continued financial
support from lenders, the ability of the Group to obtain EOT for the on-going projects and to attain profitable operations to
generate sufficient cash flows to fulfil their obligations as and when they fall due, the subsidiaries have recognised deferred
tax assets on tax losses and unabsorbed capital allowances incurred amounting to approximately RM34 million (2015: RM31
million).

(v) Construction contracts profits

The Group recognises contract profits based on the percentage of completion method. The percentage of completion of a
construction contract is determined based on the proportion that the contract costs incurred for work performed to-date bear
to the estimated total costs for the contract. When it is probable that the estimated total contract costs of a contract will exceed
the total contract revenue of the contract, the expected loss of the contract is recognised as an expense immediately.

Significant judgement is required in the estimation of total contract costs. Where the actual total contract costs is different from
the estimated total contract costs, such differences will impact the contract profits recognised.

090 Scomi Group Bhd


Annual Report 2016
1. Basis of preparation (continued)

(d) Critical accounting estimates and judgements (continued)

(vi) Construction contract revenue

The Group has estimated total contract revenue based on the initial amount of revenue agreed in the contract, variations in
the contract work and claims that can be measured reliably based on the latest available information and reliance on work of
specialist. In the absence of such information, the Directors’ best estimates are derived from reasonable assumptions, experience
and judgement. During the financial year, variation orders were recognised based on percentage of completion less related
costs in respect of additional work scope instructions by the customers and additional interest costs and overheads incurred
due to delays, which have been granted EOTs or based on legal advice and independent assessments by specialist advisors.

The claims for EOT and variation orders (“VO”) supporting the recognition of revenue are subject to significant risks and
uncertainties in light of the nature of the projects. In estimating the amounts of claims for EOT and VO, estimates and judgements
applied included expectation of future events. Negotiations and final actual acceptance of the claims by the customers could
be significantly different from the Directors’ estimates of the future profitability or outcomes since anticipated events may not
occur as expected and the variation could be material.

Where the actual approved variations and claims differ from the estimates, such difference will impact the contract revenue,
profit/(losses) recognised and the amounts due from customers on contract.

(vii)
Litigations

The Group operates across many countries and is required to comply with all applicable laws and regulations of the countries in
which the Group operates. Significant judgement is required to determine the likelihood of the obligation and the estimation
of amounts to be recognised in respect of legal matters, subject to uncertain future events. The legal cases may extend over
several years and the amount or timing may differ from current assumptions.

(viii) Impairment of receivables

The Group makes allowance for doubtful debts on an assessment of the recoverability of receivables. Allowances are applied
to receivables where events or changes in circumstances indicate that the carrying amounts may not be recoverable. The
Group specifically analyses historical bad debts, customer concentration, customer creditworthiness, current economic trends
and changes in customer payment terms when making a judgement to evaluate the adequacy of the allowance for doubtful
debts. Where the expectations differ from the original estimates, the differences will impact the carrying value of receivables
as disclosed in Note 10.

(ix) Impairment of property, plant and equipment – marine vessels

The recoverable amounts of marine vessels have been determined based on the higher of fair value less costs of disposals and
value in use calculations as disclosed in Note 3. Based on this assessment, there was no impairment charge recognised in profit
or loss for the financial year ended 31 March 2016 (2015: Nil).

(x) Impairment of investments in subsidiaries, associates and joint ventures

The Company assesses the impairment of investments in subsidiaries, associates and joint ventures when there is an indication
of impairment. The carrying amounts are disclosed in Note 6, Note 7 and Note 8. Based on this assessment, the Company did
not recognise any impairment loss for investment in a subsidiary, associate and joint venture in the profit or loss for the financial
year ended 31 March 2016 (2015: Nil). The recoverable amount of investment in subsidiary was determined based on the value
in use calculation as disclosed in Note 5.

091 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies

The accounting policies set out below have been applied consistently to the periods presented in these financial statements and have been
applied consistently by Group Entities, unless otherwise stated.

(a) Basis of consolidation

(i) Subsidiaries

Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences until the date that control ceases.

The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with the entity and
has the ability to affect those returns through its power over the entity. Potential voting rights are considered when assessing
control only when such rights are substantive. The Group also considers it has de facto power over an investee when, despite
not having the majority of voting rights, it has the current ability to direct the activities of the investee that significantly affect
the investee’s return.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any impairment losses,
unless the investment is classified as held for sale or distribution. The cost of investments includes transaction costs.

(ii) Business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is the date on which
control is transferred to the Group.

For new acquisitions, the Group measures the cost of goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

For each business combination, the Group elects whether it measures the non-controlling interests in the acquiree either at fair
value or at the proportionate share of the acquiree’s identifiable net assets at the acquisition date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection
with a business combination are expensed as incurred.

(iii) Acquisitions of non-controlling interests

The Group accounts all changes in its ownership interest in a subsidiary that do not result in a loss of control as equity transactions
between the Group and its non-controlling interest holders. Any difference between the Group’s share of net assets before and
after the change, and any consideration received or paid, is adjusted to or against Group reserves.

092 Scomi Group Bhd


Annual Report 2016
2. Significant accounting policies (continued)

(a) Basis of consolidation (continued)

(iv) Acquisitions from entities under common controls

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls
the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or,
if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities
acquired are recognised at the carrying amounts recognised previously in the Group controlling shareholder’s consolidated
financial statements. The components of equity of the acquired entities are added to the same components within Group
equity and any resulting gain/loss is recognised directly in equity.

(v) Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former subsidiary, any non-
controlling interests and the other components of equity related to the former subsidiary from the consolidated statement
of financial position. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any
interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is
accounted for as an equity accounted investee or as an available-for-sale financial asset depending on the level of influence
retained.

(vi)
Associates

Associates are entities, including unincorporated entities, in which the Group has significant influence, but not control, over the
financial and operating policies.

Investments in associates are accounted for in the consolidated financial statements using the equity method less any
impairment losses, unless it is classified as held for sale or distribution.The cost of the investment includes transaction costs.
The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of the
associates, after adjustments if any, to align the accounting policies with those of the Group, from the date that significant
influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest including any long-
term investments is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group
has an obligation or has made payments on behalf of the associate.

When the Group ceases to have significant influence over an associate, any retained interest in the former associate at the
date when significant influence is lost is measured at fair value and this amount is regarded as the initial carrying amount of a
financial asset. The difference between the fair value of any retained interest plus proceeds from the interest disposed of and
the carrying amount of the investment at the date when equity method is discontinued is recognised in the profit or loss.

When the Group’s interest in an associate decreases but does not result in a loss of significant influence, any retained interest
is not remeasured. Any gain or loss arising from the decrease in interest is recognised in profit or loss. Any gains or losses
previously recognised in other comprehensive income are also reclassified proportionately to the profit or loss if that gain or
loss would be required to be reclassified to the profit or loss on the disposal of the related assets or liabilities.

Investments in associates are measured in the Company’s statement of financial position at cost less any impairment losses,
unless the investment is classified as held for sale or distribution. The cost of the investment includes transaction costs.

093 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(a) Basis of consolidation (continued)



(vii) Joint arrangements

Joint arrangements are arrangements of which the Group has joint control, established by contracts requiring unanimous
consent for decisions about the activities that significantly affect the arrangements’ returns.

Joint arrangements are classified and accounted for as follows:


• A joint arrangement is classified as “joint operation” when the Group or the Company has rights to the assets and
obligations for the liabilities relating to an arrangement. The Group and the Company account for each of its share of the
assets, liabilities and transactions, including its share of those held or incurred jointly with the other investors, in relation
to the joint operation.

• A joint arrangement is classified as “joint venture” when the Group or the Company has rights only to the net assets of
the arrangements. The Group accounts for its interest in the joint venture using the equity method.Investments in joint
venture are measured in the Company’s statement of financial position at cost less any impairment losses, unless the
investment is classified as held for sale or distribution. The cost of investment includes transaction costs.

(viii)
Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable directly or indirectly
to the equity holders of the Company, are presented in the consolidated statement of financial position and statement of
changes in equity within equity, separately from equity attributable to the owners of the Company. Non-controlling interests
in the results of the Group is presented in the consolidated statement of profit or loss and other comprehensive income as an
allocation of the profit or loss and the comprehensive income for the year between non-controlling interests and owners of the
Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so
causes the non-controlling interests to have a deficit balance.

(ix) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are
eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with equity-accounted associates and joint ventures are eliminated against the
investment to the extent of the Group’s interest in the investees. Unrealised losses are eliminated in the same way as unrealised
gains, but only to the extent that there is no evidence of impairment.

094 Scomi Group Bhd


Annual Report 2016
2. Significant accounting policies (continued)

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group Entities at exchange rates at
the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are retranslated to the
functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of the reporting date,
except for those that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that
the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on the
retranslation of available-for-sale equity instruments or a financial instrument designated as a hedge of currency risk, which are
recognised in other comprehensive income.

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign operation
is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such a monetary
item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income,
and are presented in the foreign currency translation reserve (“FCTR”) in equity.

(ii) Operations denominated in functional currencies other than Ringgit Malaysia (“RM”)

The assets and liabilities of operations denominated in functional currencies other than RM, including goodwill and fair value
adjustments arising on acquisition, are translated to RM at exchange rates at the end of the reporting period. The income and
expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to RM at exchange
rates at the dates of the transactions.

The income and expenses of foreign operations in hyperinflationary economies are translated to RM at the exchange rate at the
end of the reporting period. Prior to translating the financial statements of foreign operations in hyperinflationary economies,
their financial statements for the current period are restated to account for changes in the general purchasing power of the
local currency. The restatement is based on relevant price indices at the end of the reporting period.

Foreign currency differences are recognised in other comprehensive income and accumulated in the foreign currency translation
reserve (“FCTR”) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share
of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that
control, significant influence or joint control is lost, the cumulative amount in the FCTR related to that foreign operation is
reclassified to profit or loss as part of the gain or loss on disposal.

When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the relevant proportion of
the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in
an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant
proportion of the cumulative amount is reclassified to profit or loss.

095 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(c) Financial instruments

(i) Initial recognition and measurement

A financial asset or a financial liability is recognised in the statement of financial position when, and only when, the Group or
the Company becomes a party to the contractual provisions of the instrument.

A financial instrument is recognised initially, at its fair value plus, in the case of a financial instrument not at fair value through
profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial instrument.

An embedded derivative is recognised separately from the host contract and accounted for as a derivative if, and only if, it is
not closely related to the economic characteristics and risks of the host contract and the host contract is not categorised at fair
value through profit or loss. The host contract, in the event an embedded derivative is recognised separately, is accounted for
in accordance with policy applicable to the nature of the host contract.

(ii) Financial instrument categories and subsequent measurement

The Group and the Company categorise financial instruments as follows:

Financial assets

(a) Financial assets at fair value through profit or loss

Fair value through profit or loss category comprises financial assets that are held for trading, including derivatives (except
for a derivative that is a financial guarantee contract or a designated and effective hedging instrument), contingent
consideration in a business combination or financial assets that are specifically designated into this category upon initial
recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments whose fair values cannot
be reliably measured are measured at cost.

Other financial assets categorised as fair value through profit or loss are subsequently measured at their fair values with
the gain or loss recognised in profit or loss.

(b) Loans and receivables

Loans and receivables category comprises debt instruments that are not quoted in an active market.

Financial assets categorised as loans and receivables are subsequently measured at amortised cost using the effective
interest method.

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Annual Report 2016
2. Significant accounting policies (continued)

(c) Financial instruments (continued)

(ii) Financial instrument categories and subsequent measurement (continued)

(c) Available-for-sale financial assets

Available-for-sale category comprises investment in equity and debt securities instruments that are not held for trading.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot
be reliably measured are measured at cost. Other financial assets categorised as available-for-sale are subsequently
measured at their fair values with the gain or loss recognised in other comprehensive income, except for impairment
losses, foreign exchange gains and losses arising from monetary items and gains and losses of hedged items attributable
to hedge risks of fair value hedges which are recognised in profit or loss. On derecognition, the cumulative gain or loss
recognised in other comprehensive income is reclassified from equity into profit or loss. Interest calculated for a debt
instrument using the effective interest method is recognised in profit or loss.

All financial assets, except for those measured at fair value through profit or loss, are subject to review for impairment (see Note
2(l)(i)).

Financial liabilities

All financial liabilities are subsequently measured at amortised cost other than those categorised as fair value through profit
or loss.

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for a derivative that is a
financial guarantee contract or a designated and effective hedging instrument), contingent consideration in a business
combination or financial liabilities that are specifically designated into this category upon initial recognition.

Derivatives that are linked to and must be settled by delivery of unquoted equity instruments that do not have a quoted price
in an active market for identical instruments whose fair values otherwise cannot be reliably measured are measured at cost.

Other financial liabilities categorised as fair value through profit or loss are subsequently measured at their fair values with the
gain or loss recognised in profit or loss.

(iii) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a
loss it incurs because a specified debtor fails to make payment when due in accordance with the original or modified terms of
a debt instrument.

Fair value arising from financial guarantee contracts are classified as deferred income and is amortised to profit or loss using a
straight-line method over the contractual period or, when there is no specified contractual period, recognised in profit or loss
upon discharge of the guarantee. When settlement of a financial guarantee contract becomes probable, an estimate of the
obligation is made. If the carrying value of the financial guarantee contract is lower than the obligation, the carrying value is
adjusted to the obligation amount and accounted for as a provision.

097 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(c) Financial instruments (continued)

(iv) Regular way purchase or sale of financial assets

A regular way purchase or sale is a purchase or sale of a financial asset under a contract whose terms require delivery of the asset
within the time frame established generally by regulation or convention in the marketplace concerned.

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable, using trade date accounting.
Trade date accounting refers to:

(a) the recognition of an asset to be received and the liability to pay for it on the trade date; and

(b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition of a receivable from
the buyer for payment on the trade date.

(v) Hedge accounting

Fair value hedge

A fair value hedge is a hedge of the exposure to changes in fair value of a recognised asset or liability or an unrecognised firm
commitment, or an identified portion of such an asset, liability or firm commitment, that is attributable to a particular risk and
could affect the profit or loss.

In a fair value hedge, the gain or loss from remeasuring the hedging instrument at fair value or the foreign currency component
of its carrying amount translated at the exchange rate prevailing at the end of the reporting period is recognised in profit or loss.
The gain or loss on the hedged item, except for hedge item categorised as available-for-sale, attributable to the hedged risk is
adjusted to the carrying amount of the hedged item and recognised in profit or loss. For a hedge item categorised as available-
for-sale, the fair value gain or loss attributable to the hedge risk is recognised in profit or loss.

Fair value hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or
exercised, the hedge is no longer highly effective or the hedge designation is revoked.

Cash flow hedge

A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with
a recognised asset or liability or a highly probable forecast transaction and could affect the profit or loss. In a cash flow hedge,
the portion of the gain or loss on the hedging instrument that is determined to be an effective hedge is recognised in other
comprehensive income and the ineffective portion is recognised in profit or loss.

Subsequently, the cumulative gain or loss recognised in other comprehensive income is reclassified from equity into profit or
loss in the same period or periods during which the hedged forecast cash flows affect profit or loss. If the hedge item is a non-
financial asset or liability, the associated gain or loss recognised in other comprehensive income is removed from equity and
included in the initial amount of the asset or liability. However, loss recognised in other comprehensive income that will not be
recovered in one or more future periods is reclassified from equity into profit or loss.

Cash flow hedge accounting is discontinued prospectively when the hedging instrument expires or is sold, terminated or
exercised, the hedge is no longer highly effective, the forecast transaction is no longer expected to occur or the hedge designation
is revoked. If the hedge is for a forecast transaction, the cumulative gain or loss on the hedging instrument remains in equity until
the forecast transaction occurs. When the forecast transaction is no longer expected to occur, any related cumulative gain or loss
recognised in other comprehensive income on the hedging instrument is reclassified from equity into profit or loss.

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Annual Report 2016
2. Significant accounting policies (continued)

(c) Financial instruments (continued)

(vi)
Derecognition

A financial asset or a part of it is derecognised when, and only when the contractual rights to the cash flows from the financial
asset expire or control of the asset is not retained or substantially all of the risks and rewards of ownership of the financial asset
are transferred to another party. On derecognition of a financial asset, the difference between the carrying amount and the sum
of the consideration received (including any new asset obtained less any new liability assumed) and any cumulative gain or loss
that had been recognised in equity is recognised in profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract is discharged,
cancelled or expires. On derecognition of a financial liability, the difference between the carrying amount of the financial
liability extinguished or transferred to another party and the consideration paid, including any non-cash assets transferred or
liabilities assumed, is recognised in profit or loss.

(vii) Offsetting financial instruments

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

(d) Property, plant and equipment

(i) Recognition and measurement

Items of property, plant and equipment are measured at cost less any accumulated depreciation and any accumulated
impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs directly attributable
to bringing the asset to working condition for its intended use, and the costs of dismantling and removing the items and
restoring the site on which they are located. The cost of self-constructed assets also includes the cost of materials and direct
labour. Cost also may include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency
purchases of property, plant and equipment.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When significant parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from
disposal with the carrying amount of property, plant and equipment and is recognised net within “other income” and “other
expenses” respectively in profit or loss.

(ii) Subsequent costs

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the
item if it is probable that the future economic benefits embodied within the component will flow to the Group or the Company,
and its cost can be measured reliably. The carrying amount of the replaced component is derecognised to profit or loss. The
costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

099 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(d) Property, plant and equipment (continued)

(iii)
Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual assets are assessed,
and if a component has a useful life that is different from the remainder of that asset, then that component is depreciated
separately.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item
of property, plant and equipment from the date that they are available for use. Leased assets are depreciated over the shorter
of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the
lease term. Freehold land is not depreciated. Property, plant and equipment under construction are not depreciated until the
assets are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:

• Freehold buildings 5 – 50 years


• Leasehold buildings 3 – 50 years
• Marine vessels 25 years
• Tools, plant and machinery 3 – 12 years
• Renovation, office equipment, fittings and computers 3 – 10 years
• Motor vehicles 3 – 7 years
• Monorail test track 33 years

Depreciation methods, useful lives and residual values are reviewed at the end of the reporting period, and adjusted as
appropriate.

(e) Leased assets

(i) Finance lease

Leases in terms of which the Group or the Company assumes substantially all the risks and rewards of ownership are classified
as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the
present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with
the accounting policy applicable to that asset.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the
outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic
rate of interest on the remaining balance of the liability. Contingent lease payments are accounted for by revising the minimum
lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Leasehold land which in substance is a finance lease is classified as property, plant and equipment or as investment property if
held to earn rental income or for capital appreciation or for both.

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Annual Report 2016
2. Significant accounting policies (continued)

(e) Leased assets (continued)

(ii) Operating lease

Leases, where the Group or the Company does not assume substantially all the risks and rewards of ownership are classified
as operating leases and, except for property interest held under operating lease, the leased assets are not recognised on the
statement of financial position. Property interest held under an operating lease, which is held to earn rental income or for
capital appreciation or both, is classified as investment property and measured using fair value model.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease
incentives received are recognised in profit or loss as an integral part of the total lease expense, over the term of the lease.
Contingent rentals are charged to profit or loss in the reporting period in which they are incurred.

(f) Intangible assets

(i) Goodwill

Goodwill arises on business combinations is measured at cost less any accumulated impairment losses. In respect of equity-
accounted associates and joint ventures, the carrying amount of goodwill is included in the carrying amount of the investment
and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying
amount of the equity-accounted associates and joint venture.

(ii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and
understanding, is recognised in profit or loss as incurred.

Expenditure on development activities, whereby the application of research findings are applied to a plan or design for the
production of new or substantially improved products and processes, is capitalised only if development costs can be measured
reliably, the product or process is technically and commercially feasible, future economic benefits are probable and the Group
intends to and has sufficient resources to complete development and to use or sell the asset.

The expenditure capitalised includes the cost of materials, direct labour and overheads costs that are directly attributable to
preparing the asset for its intended use. For qualifying assets, borrowing costs are capitalised in accordance with the accounting
policy on borrowing costs. Other development expenditure is recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less any accumulated amortisation and any accumulated impairment
losses.

(iii) Other intangible assets

Intangible assets, other than goodwill, that are acquired by the Group, which have finite useful lives, are measured at cost less
any accumulated amortisation and any accumulated impairment losses.

101 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(f) Intangible assets (continued)

(iv)
Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to
which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in
profit or loss as incurred.

(v) Amortisation

Goodwill and intangible assets with indefinite useful lives are not amortised but are tested for impairment annually and
whenever there is an indication that they may be impaired.

Other intangible assets are amortised from the date that they are available for use. Amortisation is based on the cost of an
asset less its residual value. Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of
intangible assets.

The estimated useful lives for the current and comparative periods are as follows:

2016 2015
• capitalised development costs:
- Drilling waste equipment and EMS engineering package 11 years 12 years
- Bus 5 years 5 years
• patents rights 2 years 3 years

Development cost work-in-progress are amortised based on the expected production unit of 750 (2015: 750).

Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted, if
appropriate.

(g) Investment properties

(i) Investment properties carried at cost

Investment properties are properties which are owned to earn rental income or for capital appreciation or for both, but not
for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

Investment properties are stated at cost less any accumulated depreciation and any accumulated impairment losses, consistent
with the accounting policy for property, plant and equipment as stated in accounting policy Note 2(d).

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed
investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the
investment property to a working condition for their intended use and capitalised borrowing costs.

Depreciation is charged to the profit or loss on a straight-line basis over the estimated useful lives of 20 to 50 years for buildings.
Freehold land is not depreciated.

An investment property is derecognised on its disposal, or when it is permanently withdrawn from use and no future economic
benefits are expected from its disposal.The difference between the net disposal proceeds and the carrying amount is recognised
in profit or loss in the period in which the item is derecognised.

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Annual Report 2016
2. Significant accounting policies (continued)

(g) Investment properties (continued)

(ii) Reclassification to/from investment property

When an item of property, plant and equipment is transferred to investment property following a change in its use, any
difference arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair
value is recognised directly in equity as a revaluation of property, plant and equipment. However, if a fair value gain reverses
a previous impairment loss, the gain is recognised in profit or loss. Upon disposal of an investment property, any surplus
previously recorded in equity is transferred to retained earnings; the transfer is not made through profit or loss.

When the use of a property changes such that it is reclassified as property, plant and equipment or inventories, its fair value at
the date of reclassification becomes its cost for subsequent accounting.

(h) Inventories

Inventories are measured at the lower of cost and net realisable value.

The cost of inventories is calculated using the weighted average method, and includes expenditure incurred in acquiring the
inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the
case of work-in-progress and finished goods, cost includes an appropriate share of production overheads based on normal operating
capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the
estimated costs necessary to make the sale.

(i) Non-current assets held for sale or distribution to owners

Non-current assets, or disposal group comprising assets and liabilities, that are expected to be recovered primarily through sale or
distribution to owners rather than through continuing use, are classified as held for sale or distribution.

Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in
accordance with the Group’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their
carrying amount and fair value less costs of disposal.

Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on pro rata basis,
except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property,
which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held
for sale or distribution and subsequent gains or losses on remeasurement are recognised in profit or loss. Gains are not recognised in
excess of any cumulative impairment loss.

Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated.
In addition, equity accounting of equity-accounted associates and joint ventures ceases once classified as held for sale or distribution.

103 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(j) Construction work-in-progress

Construction work-in-progress represents the gross unbilled amount expected to be collected from customers for contract work
performed to date. It is measured at cost plus profit recognised to date less progress billings and recognised losses. Cost includes
all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract
activities based on normal operating capacity.

Construction work-in-progress is presented as part of trade and other receivables as amount due from contract customers in the
statement of financial position for all contracts in which costs incurred plus recognised profits exceed progress billings. If progress
billings exceed costs incurred plus recognised profits, then the difference is presented as amount due to contract customers which is
part of the deferred income in the statement of financial position.

(k) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments which have an
insignificant risk of changes in fair value with original maturities of three months or less, and are used by the Group and the Company
in the management of their short term commitments. For the purpose of the statement of cash flows, cash and cash equivalents are
presented net of bank overdrafts and pledged deposits.

(l) Impairment

(i) Financial assets

All financial assets (except for financial assets categorised as fair value through profit or loss, investments in subsidiaries and
investment in associates and joint ventures) are assessed at each reporting date whether there is any objective evidence of
impairment as a result of one or more events having an impact on the estimated future cash flows of the asset. Losses expected
as a result of future events, no matter how likely, are not recognised. For an investment in an equity instrument, a significant or
prolonged decline in the fair value below its cost is an objective evidence of impairment. If any such objective evidence exists,
then the impairment loss of the financial asset is estimated.

An impairment loss in respect of loans and receivables and held-to-maturity investments is recognised in profit or loss and
is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows
discounted at the asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an
allowance account.

An impairment loss in respect of available-for-sale financial assets is recognised in profit or loss and is measured as the difference
between the asset’s acquisition cost (net of any principal repayment and amortisation) and the asset’s current fair value, less
any impairment loss previously recognised. Where a decline in the fair value of an available-for-sale financial asset has been
recognised in the other comprehensive income, the cumulative loss in other comprehensive income is reclassified from equity
to profit or loss.

An impairment loss in respect of unquoted equity instrument that is carried at cost is recognised in profit or loss and is measured
as the difference between the financial asset’s carrying amount and the present value of estimated future cash flows discounted
at the current market rate of return for a similar financial asset.

104 Scomi Group Bhd


Annual Report 2016
2. Significant accounting policies (continued)

(l) Impairment (continued)

(i) Financial assets (continued)

Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale is not
reversed through profit or loss.

If, in a subsequent period, the fair value of a debt instrument increases and the increase can be objectively related to an event
occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed, to the extent that the
asset’s carrying amount does not exceed what the carrying amount would have been had the impairment not been recognised
at the date the impairment is reversed. The amount of the reversal is recognised in profit or loss.

(ii) Other assets

The carrying amounts of other assets (except for inventories, amount due from contract customers, deferred tax assets, assets
arising from employee benefits and non-current assets (or disposal groups) classified as held for sale) are reviewed at the end of
each reporting period to determine whether there is any indication of impairment. If any such indication exists, then the asset’s
recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives or that are not yet available
for use, the recoverable amount is estimated each period at the same time.

For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash
inflows from continuing use that are largely independent of the cash inflows of other assets or cash-generating units. Subject
to an operating segment ceiling test, for the purpose of goodwill impairment testing, cash-generating units to which goodwill
has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which
goodwill is monitored for internal reporting purposes. The goodwill acquired in a business combination, for the purpose of
impairment testing, is allocated to a cash-generating unit or a group of cash-generating units that are expected to benefit from
the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs of disposal.
In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that
reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit exceeds its estimated
recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are
allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating unit (group of cash-generating
units) and then to reduce the carrying amounts of the other assets in the cash-generating unit (groups of cash-generating units)
on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods
are assessed at the end of each reporting period for any indications that the loss has decreased or no longer exists. An impairment
loss is reversed if there has been a change in the estimates used to determine the recoverable amount since the last impairment
loss was recognised. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Reversals of impairment losses are credited to profit or loss in the financial year in which the reversals are recognised.

105 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(m) Equity instruments

Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.

(i) Issue expenses

Costs directly attributable to the issue of instruments classified as equity are recognised as a deduction from equity.

(ii) Ordinary shares

Ordinary shares are classified as equity.

(iii) Preference share capital

Preference share capital is classified as equity if it is non-redeemable, or is redeemable but only at the Company’s option, and
any dividends are discretionary. Dividends thereon are recognised as distributions within equity.

(iv) Repurchase, disposal and reissue of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, including directly attributable
costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares that are not subsequently cancelled
are classified as treasury shares in the statement of changes in equity.

Where treasury shares are sold or reissued subsequently, the difference between the sales consideration net of directly
attributable costs and the carrying amount of the treasury shares is recognised in equity.

(n) Compound financial instruments

A compound financial instrument is a non-derivative financial instrument that contains both a liability and an equity component.

Compound financial instruments issued by the Group comprise convertible notes that can be converted to share capital at the option
of the holder, when the number of shares to be issued does not vary with changes in their fair value.

The proceeds are first allocated to the liability component,determined based on the fair value of a similar liability that does not have
a conversion feature or similar associated equity component. The residual amount is allocated as the equity component. Any directly
attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at amortised cost using
the effective interest method. The equity component of a compound financial instrument is not remeasured subsequent to initial
recognition.

Interest and losses and gains relating to the financial liability are recognised in profit or loss. On conversion, the financial liability is
reclassified to equity; no gain or loss is recognised on conversion.

106 Scomi Group Bhd


Annual Report 2016
2. Significant accounting policies (continued)

(o) Employee benefits

(i) Short-term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick leave are measured
on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group
has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the
obligation can be estimated reliably.

(ii) State plans

The Group’s contributions to statutory pension funds are charged to profit or loss in the financial year to which they relate.
Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

(iii) Defined benefit plans

The Group’s net obligation in respect of defined benefit retirement plans is calculated separately for each plan by estimating the
amount of future benefit that employees have earned in the current and prior periods, discounting that amount and deducting
the fair value of any plan assets.

The calculation of defined benefits obligations is performed annually by a qualified actuary using the projected unit credit
method. When the calculation results in a potential asset to the Group, the recognised asset is limited to the present value of
economic benefits available in the form of any future refunds from the plan or reductions in future contributions to the plan.
To calculate the present value of economic benefits, consideration is given to any applicable minimum funding requirements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets
(excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in other
comprehensive income. The Group determines the net interest expense or income on the net defined liability or asset for the
period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to
the then net defined benefit liability or asset, taking into account any changes in the net defined benefit liability or asset during
the period as a result of contributions and benefit payments.

Net interest expense and other expenses relating to defined benefit plans are recognised in profit or loss.

When the benefits of a plan are changed or when a plan is curtailed, the resulting change in benefit that relates to past service
or the gain or loss on curtailment is recognised immediately in profit or loss. The Group recognises gain and losses on the
settlement of a defined benefit plan when the settlement occurs.

(iv) Share-based payment transactions

The grant date fair value of share-based payment granted to employees is recognised as an employee expense, with a
corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The
amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market
vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number
of awards that meet the related service and non-market performance conditions at the vesting date.

107 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(o) Employee benefits (continued)

(iv) Share-based payment transactions (continued)

For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured
to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of employee share options is measured using a binomial lattice model. Measurement inputs include share price
on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility
adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based
on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on
government bonds). Service and non-market performance conditions attached to the transactions are not taken into account
in determining fair value.

(v) Termination benefits

Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and
when the Group recognises costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the
end of the reporting period, then they are discounted.

(p) Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated
reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and
the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

(i) Warranties

A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical
warranty data and a weighting of all possible outcomes against their associated probabilities.

(q) Revenue and other income

(i) Goods sold

Revenue from the sale of goods in the course of ordinary activities is measured at fair value of the consideration received
or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when persuasive
evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have
been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods
can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be
measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount
is recognised as a reduction of revenue as the sales are recognised.

(ii) Services

Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the
end of the reporting period. The stage of completion is assessed by reference to surveys of work performed.

108 Scomi Group Bhd


Annual Report 2016
2. Significant accounting policies (continued)

(q) Revenue and other income (continued)

(iii)
Construction contracts

Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive
payments, to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome
of a construction contract can be estimated reliably, contract revenue and contract cost are recognised in profit or loss in
proportion to the stage of completion of the contract. Contract expenses are recognised as incurred unless they create an asset
related to future contract activity.

The stage of completion is assessed by reference to the proportion that contract costs incurred for work performed to-date bear
to the estimated total contract costs.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent
of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognised immediately in profit
or loss.

(iv)
Commissions

When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net
amount of commission made by the Group.

(v) Rental income

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease
incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from
sub-leased property is recognised as other income.

(vi)
Government grants

Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will
be received and that the Group will comply with the conditions associated with the grant; they are then recognised in profit or
loss as other income on a systematic basis over the useful life of the asset.

Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis
in the same periods in which the expenses are recognised.

(vii)
Interest income

Interest income is recognised as it accrues using the effective interest method in profit or loss except for interest income arising
from temporary investment of borrowings taken specifically for the purpose of obtaining a qualifying asset which is accounted
for in accordance with the accounting policy on borrowing costs.

(viii) Charter hire income

Revenue from charter hire is recognised on an accrual basis but is deferred when the terms of billings have not been agreed by
third parties or when certain conditions necessary for realisation have yet to be fulfilled.

109 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(q) Revenue and other income (continued)

(ix) Management and agency fees

Management and agency fees are recognised on an accrual basis by reference to completion of the specific transaction,
assessed on the basis of the actual services provided as a proportion of the total services to be provided.

(r) Borrowing costs

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in
profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that
necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised as part of the cost of those
assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the asset is being
incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its intended use or sale are
in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all the activities necessary to prepare the
qualifying asset for its intended use or sale are interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is
deducted from the borrowing costs eligible for capitalisation.

(s) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the
extent that it relates to a business combination or items recognised directly in equity or other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for theyear, using tax rates enacted or substantively
enacted by the end of the reporting period, and any adjustment to tax payable in respect of previous financial years.

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying amounts of assets
and liabilities in the statement of financial position and their tax bases. Deferred tax is not recognised for the following temporary
differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business
combination and that affects neither accounting nor taxable profit or loss. Deferred tax is measured at the tax rates that are expected
to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by
the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they
relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle
current tax assets and liabilitieson a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the
temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period and are reduced to the
extent that it is no longer probable that the related tax benefit will be realised.

110 Scomi Group Bhd


Annual Report 2016
2. Significant accounting policies (continued)

(t) Discontinued operations

A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical
area of operations that has been disposed of or is held for sale or distribution, or is a subsidiary acquired exclusively with a view to
resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held
for sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of profit or loss and other
comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative period.

(u) Earnings per ordinary share

The Group presents basic and diluted earnings per share data for its ordinary shares (“EPS”).

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average
number of ordinary shares outstanding during the period, adjusted for own shares held.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of
ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise
convertible notes and share options granted to employees.

(v) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur
expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. Operating segment
results are reviewed regularly by the chief operating decision maker, which in this case is the Chief Executive Officer of the Group,
to make decisions about resources to be allocated to the segment and to assess its performance, and for which discrete financial
information is available.

(w) Contingencies

(i) Contingent liabilities

Where it is not probable that an outflow of economic benefits will be required, or the amount cannot be estimated reliably,
the obligation is not recognised in the statements of financial position and is disclosed as a contingent liability, unless the
probability of outflow of economic benefits is remote. Possible obligations, whose existence will only be confirmed by the
occurrence or non-occurrence of one or more future events, are also disclosed as contingent liabilities unless the probability of
outflow of economic benefits is remote.

(ii) Contingent assets

When an inflow of economic benefits of an asset is probable where it arises from past events and where existence will be
confirmed only by the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of
the entity, the asset is not recognised in the statements of financial position but is being disclosed as a contingent asset. When
the inflow of economic benefit is virtually certain, then the related assets is recognised.

111 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

2. Significant accounting policies (continued)

(x) Fair value measurements

Fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
The measurement assumes that the transaction to sell the asset or transfer the liability takes place either in the principal market or in
the absence of a principal market, in the most advantageous market.

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate economic benefits
by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and
best use.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible. Fair value are
categorised into different levels in a fair value hierarchy based on the input used in the valuation technique as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access at the measurement
date.
Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or
indirectly.
Level 3: unobservable inputs for the asset or liability.

The Group recognises transfers between levels of the fair value hierarchy as of the date of the event or change in circumstances that
caused the transfers.

112 Scomi Group Bhd


Annual Report 2016
3. Property, plant and equipment

Renovation,
office
Tools, plant equipment,
Freehold Freehold Leasehold Marine and fitting and Motor Monorail Capital work-
land buildings buildings vessels machinery computers vehicles test track in-progress Total
Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost
At 1 April 2014 9,876 40,694 15,124 762,174 517,962 56,750 21,743 14,795 24,080 1,463,198
Additions - - 204 - 48,471 1,941 1,554 - 8,926 61,096
Disposals - - - - (10,266) (855) (2,098) - - (13,219)
Write-off - - - - (469) (56) (188) - - (713)
Reclassification - - - 8,965 (483) 483 - - (8,965) -
Effect of movements in
exchange rates 1 225 441 94,721 39,590 1,670 (1,262) - 2,897 138,283

At 31 March 2015/
1 April 2015 9,877 40,919 15,769 865,860 594,805 59,933 19,749 14,795 26,938 1,648,645
Additions - - 320 - 14,212 547 1,424 - 17,017 33,520
Disposals - - - (5,098) (9,838) (1,145) (673) - - (16,754)
Write-off - - (1,610) - (1,598) (19) - - - (3,227)
Reclassification - - - 43,182 (3,570) 3,570 - - (43,182) -
Effect of movements in
exchange rates 1 81 49 44,021 16,751 284 295 - 2,366 63,848

At 31 March 2016 9,878 41,000 14,528 947,965 610,762 63,170 20,795 14,795 3,139 1,726,032

113 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

3. Property, plant and equipment (continued)

Renovation,
office
Tools, plant equipment,
Freehold Freehold Leasehold Marine and fitting and Motor Monorail Capital work-
land buildings buildings vessels machinery computers vehicles test track in-progress Total
Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Depreciation
and impairment
At 1 April 2014

Accumulated
depreciation - 6,511 11,798 343,096 289,961 42,866 9,163 3,929 - 707,324
Accumulated
impairment loss - - 500 99,395 9,759 - - - - 109,654

- 6,511 12,298 442,491 299,720 42,866 9,163 3,929 - 816,978


Depreciation for
the year - 800 730 38,582 43,917 7,367 2,733 493 - 94,622
Impairment loss - - 147 - 302 - - - - 449
Disposals - - - - (4,917) (556) (1,955) - - (7,428)
Write-off - - - - (322) (32) (188) - - (542)
Reclassification - - - - (292) 292 - - - -
Effect of movements in
exchange rates - 327 376 57,845 25,008 1,113 257 - - 84,926
At 31 March 2015

Accumulated
depreciation - 7,638 12,904 439,523 353,355 51,050 10,010 4,422 - 878,902
Accumulated
impairment loss - - 647 99,395 10,061 - - - - 110,103

- 7,638 13,551 538,918 363,416 51,050 10,010 4,422 - 989,005

114 Scomi Group Bhd


Annual Report 2016
3. Property, plant and equipment (continued)

Renovation,
office
Tools, plant equipment,
Freehold Freehold Leasehold Marine and fitting and Motor Monorail Capital work-
land buildings buildings vessels machinery computers vehicles test track in-progress Total
Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Depreciation
and impairment
(continued)
At 1 April 2015

Accumulated
depreciation - 7,638 12,904 439,523 353,355 51,050 10,010 4,422 - 878,902
Accumulated
impairment loss - - 647 99,395 10,061 - - - - 110,103

- 7,638 13,551 538,918 363,416 51,050 10,010 4,422 - 989,005


Depreciation for
the year - 776 753 46,758 49,426 6,647 2,658 493 - 107,511
Reversal of impairment
loss - - (502) - (680) - - - - (1,182)
Disposals - - - (4,325) (5,395) (1,291) (616) - - (11,627)
Write-off - - (1,315) - (1,368) (14) - - - (2,697)
Reclassification - - - - 134 (134) - - - -
Effect of movements in
exchange rates - 87 29 26,779 8,895 161 253 - - 36,204
At 31 March 2016

Accumulated
depreciation - 8,501 12,371 508,735 405,047 56,419 12,305 4,915 - 1,008,293
Accumulated
impairment loss - - 145 99,395 9,381 - - - - 108,921

- 8,501 12,516 608,130 414,428 56,419 12,305 4,915 - 1,117,214

Carrying amounts

At 1 April 2014 9,876 34,183 2,826 319,683 218,242 13,884 12,580 10,866 24,080 646,220

At 31 March 2015/
1 April 2015 9,877 33,281 2,218 326,942 231,389 8,883 9,739 10,373 26,938 659,640

At 31 March 2016 9,878 32,499 2,012 339,835 196,334 6,751 8,490 9,880 3,139 608,818

115 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

3. Property, plant and equipment (continued)

Office
Motor equipment
vehicles and fittings Renovation Total
RM’000 RM’000 RM’000 RM’000

Company
Cost
At 1 April 2014 2,075 3,662 741 6,478
Additions 251 3 9 263
Disposals (963) - - (963)

At 31 March 2015/1 April 2015 1,363 3,665 750 5,778


Additions - 19 - 19
Disposals (228) - - (228)

At 31 March 2016 1,135 3,684 750 5,569

Accumulated depreciation
At 1 April 2014 1,530 3,237 741 5,508
Depreciation for the year 153 215 1 369
Disposals (963) - - (963)

At 31 March 2015/1 April 2015 720 3,452 742 4,914


Depreciation for the year 170 179 1 350
Disposals (228) - - (228)

At 31 March 2016 662 3,631 743 5,036

Carrying amounts

At 1 April 2014 545 425 - 970

At 31 March 2015/1 April 2015 643 213 8 864

At 31 March 2016 473 53 7 533

116 Scomi Group Bhd


Annual Report 2016
3. Property, plant and equipment (continued)

(a) Leased plant and equipment

The net carrying amount of leased property, plant and equipment acquired under finance lease arrangements as at the end of the
reporting period are as follows:

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Motor vehicles 8,294 10,361 473 643

(b) Leasehold buildings

The entire leasehold buildings of the Group are situated on parcels of land owned by third parties and a State Government.

(c) Impairment loss - Marine vessels

The recoverable amounts of the vessels of the Group were determined based on the higher of fair value less costs of disposal and
value in use calculation. Based on the calculations, no impairment has been recognised in the current financial year.

The value in use calculations use pre-tax cash flow projections based on financial budgets approved by the Board covering a five-year
period. The key assumptions used in the value in use calculation in the current financial year are as follows:

2016
%

Revenue growth rates in the first 5 years 0.0
Discount rate 12.0
Terminal growth rate 0.0

Based on the calculations, no impairment has been recognised in the current financial year. However, an increase/(decrease) of a
one percentage point in the discount rate used would have (decrease)/increase the recoverable amount by approximately (RM9.5
million)/RM11.2 million.

(d) Security

The net carrying amount of property, plant and equipment of the Group charged as security for banking facilities granted to the
Group (see Note 20) are as follows:

Group

2016 2015
RM’000 RM’000

Marine vessels 8,633 17,460


Land and buildings 16,600 16,837

25,233 34,297

117 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

4. Investment properties

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Cost
At 1 April 5,269 5,109 4,678 4,678
Effect of movements in exchange rates 91 160 - -

At 31 March 5,360 5,269 4,678 4,678

Depreciation and impairment


At 1 April

Accumulated depreciation 2,320 2,139 260 209


Accumulated impairment loss 454 454 - -

2,774 2,593 260 209

Depreciation for the year 146 157 52 51


Effect of movements in exchange rates - 24 - -
At 31 March

Accumulated depreciation 2,466 2,320 312 260


Accumulated impairment loss 454 454 - -

2,920 2,774 312 260

Carrying amount
At 31 March 2,440 2,495 4,366 4,418

Fair value at 31 March 7,743 6,612 7,000 6,650

The following is recognised in profit or loss in respect of investment properties:

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Rental income 182 501 408 408

There were no direct operating expenses arising from investment property that generated rental income during the year as all expenses
were incurred by the tenant.

118 Scomi Group Bhd


Annual Report 2016
4. Investment properties (continued)

(a) Security

Investment properties of the Company are charged as security for banking facilities granted to the Company (see Note 20).

(b) Fair value information

Fair value of investment properties are categorised as follows:

Level 1 Level 2 Level 3 Total


RM’000 RM’000 RM’000 RM’000

Group
2016
Freehold land - 4,193 - 4,193
Freehold land and buildings - 3,550 - 3,550

- 7,743 - 7,743

2015
Freehold land - 3,282 - 3,282
Freehold land and buildings - 3,330 - 3,330

- 6,612 - 6,612

Company
2016
Freehold land and buildings - 7,000 - 7,000

2015
Freehold land and buildings - 6,650 - 6,650

119 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

4. Investment properties

(b) Fair value information (continued)

Level 1 fair value

Level 1 fair value is derived from quoted price (unadjusted) in active markets for identical investment properties that the entity can
access at the measurement date.

Level 2 fair value

Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable for the investment
property, either directly or indirectly.

Level 2 fair values of land and buildings is determined by external, independent property valuers. The fair values of land and buildings
have been generally derived using the comparison method. In this approach, sales and listing of comparable properties recorded
within the same location are compiled. Sales price of comparable properties in close proximity are adjusted for differences in
attributes to arrive at a comparison.

Level 3 fair value

Level 3 fair value is estimated using unobservable inputs for the investment property.

5. Intangible assets

Development
<--------Capitalised development costs--------> <---costs work-in-progress--->

Drilling Mass rapid EMS


waste transit/ engineering
Goodwill Patents Monorail Bus equipment Propulsion package Total
Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Cost
At 1 April 2014 238,291 12,509 116,932 1,016 5,889 18,525 2,667 395,829
Additions - - 1,198 3,750 782 - - 5,730
Effect of movements in exchange rates 265 87 - - 233 - 457 1,042

At 31 March 2015/1 April 2015 238,556 12,596 118,130 4,766 6,904 18,525 3,124 402,601
Additions - - - - 2,720 - 3,107 5,827
Reclassification of other receivables - - - - - - 3,253 3,253
Effect of movements in exchange rates 173 65 - - 170 - (43) 365

At 31 March 2016 238,729 12,661 118,130 4,766 9,794 18,525 9,441 412,046

120 Scomi Group Bhd


Annual Report 2016
5. Intangible assets (continued)

Development
<--------Capitalised development costs--------> <---costs work-in-progress--->
Drilling Mass rapid EMS
waste transit/ engineering
Goodwill Patents Monorail Bus equipment Propulsion package Total
Group RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Amortisation and impairment losses


At 1 April 2014

Accumulated amortisation - 12,031 7,180 356 3,393 - - 22,960


Accumulated impairment losses 80,836 - - - - - - 80,836

80,836 12,031 7,180 356 3,393 - - 103,796


Amortisation for the year - 56 2,686 191 171 - - 3,104
Effect of movements in exchange rates - 53 - - 76 - - 129
At 31 March 2015

Accumulated amortisation - 12,140 9,866 547 3,640 - - 26,193


Accumulated impairment losses 80,836 - - - - - - 80,836

80,836 12,140 9,866 547 3,640 - - 107,029


At 1 April 2015

Accumulated amortisation - 12,140 9,866 547 3,640 - - 26,193


Accumulated impairment losses 80,836 - - - - - - 80,836

80,836 12,140 9,866 547 3,640 - - 107,029

Amortisation for the year - 65 1,224 1,235 210 - - 2,734


Impairment loss 7,014 - - - - - - 7,014
Effect of movements in exchange rates - 33 - - 43 - - 76
At 31 March 2016

Accumulated amortisation - 12,238 11,090 1,782 3,893 - - 29,003


Accumulated impairment losses 87,850 - - - - - - 87,850

87,850 12,238 11,090 1,782 3,893 - - 116,853

Carrying amounts
At 1 April 2014 157,455 478 109,752 660 2,496 18,525 2,667 292,033

At 31 March 2015/1 April 2015 157,720 456 108,264 4,219 3,264 18,525 3,124 295,572

At 31 March 2016 150,879 423 107,040 2,984 5,901 18,525 9,441 295,193

121 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

5. Intangible assets (continued)

(a) Amortisation

The amortisation of patents and capitalised development costs is allocated to the cost of inventory and is recognised in cost of sales
as inventory is sold. Amortisation included within construction contract costs during the financial year amounted to RM1,224,000
(2015: RM2,686,000).

The remaining useful lives of the patents, bus and drilling waste capitalised development costs are 2 years, 4 months and 11 years
respectively (2015: 3 years, 1 year and 12 years respectively).

The additional development cost capitalised is for the development of the bus chassis during the financial year and was amortised
based on 1,200 units (2015: Nil units).

(b) Impairment

(i) Impairment testing for cash-generating units containing goodwill

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

Group

2016 2015
RM’000 RM’000

Oilfield services 102,156 101,983


Marine services - Indonesia - 7,014
Transport solutions 48,723 48,723

150,879 157,720

The recoverable amount of the CGUs in the current financial year is determined based on value in use calculations for oilfield
services, transport solutions and marine services.

The value in use calculations use pre-tax cash flow projections based on approved financial budgets. The projections were
based on an approved business plan and reflect the expectation of usage, revenue, growth, operating costs, technological
obsolescence and margins based on past experience and current assessment of market share, expectations of market growth
and industry growth.

122 Scomi Group Bhd


Annual Report 2016
5. Intangible assets (continued)

(b) Impairment (continued)

(i) Impairment testing for cash-generating units containing goodwill (continued)

Goodwill allocated to Marine Services

Goodwill allocated to Marine Services – Indonesia CGU arose from the Marine Logistics Business acquired from Chuan Hup
Holdings Limited on 30 September 2005.

During the year, the CGU with the allocated goodwill was reviewed for impairment using the value in use calculations. The
value in use calculations use pre-tax cash flow projections for each vessel based on financial budgets approved by the Board
covering a five-year period. Based on the calculations, a full impairment of RM7,014,000 (2015: RM Nil) has been recognised in
the current financial year.

The value in use calculations use pre-tax cash flow projections based on financial budgets approved by the Board covering a
five-year period. The key assumptions used in the value in use calculation in the current financial year is as follows:

2016 2015
% %

Revenue growth rates in the first 5 years 0 - 3.5 0 - 8.0
Discount rate 12.0 15.0
Terminal growth rate 0.0 1.0

The projections over these periods were based on an approved business plan and reflect the expectation of usage, revenue,
growth, operating costs and margins based on past experience and current assessment of market share, expectations of market
growth and industry growth. The discount rate used is pre-tax and reflect specific risk relating to the Marine Services industry in
Indonesia. The terminal growth rate is based on long term growth rate of the Marine Services industry.

Goodwill allocated to Oilfield Services

During the year, the cash-generating units with the allocated goodwill was reviewed for impairment using the value in use
calculations. The value in use calculations use pre-tax cash flow projections for each country based on financial budgets
approved by the Board covering a five-year period. Based on the calculations, no impairment has been recognised in the
current financial year.

The value in use calculations use pre-tax cash flow projections based on financial budgets approved by the Board covering a
five-year period. The key assumptions used in the value in use calculations of CGUs are as follows:

2016 2015
% %

Revenue growth rates in the first 5 years 0.0 - 52.0 5.0 - 74.0
Discount rates 9.0 - 23.0 9.0 - 21.0
Terminal growth rate 0.0 1.0

The projections over these periods were based on an approved business plan and reflect the expectation of usage, revenue,
growth, operating costs and margins based on past experience and current assessment of market share, expectations of market
growth and industry growth. The discount rates used are pre-tax and reflect specific risk relating to individual countries in which
the Group operates in. The terminal growth rates are based on long term growth rates relating to the individual countries.

123 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

5. Intangible assets (continued)

(b) Impairment (continued)

(i) Impairment testing for cash-generating units containing goodwill (continued)

Based on the calculations no impairment has been recognised in the current financial year. However, an increase/(decrease) of
a one percentage point in the discount rate used would have (decreased)/increased the recoverable amount by approximately
(RM67 million)/RM 79 million.

Rail Operations

The recoverable amounts of Rail Operations goodwill have been based on value in use calculations.

The projections over a five-year period were based on an approved business plan and reflect the expectation of usage, revenue
growth, operating costs and margins based on past experience.

The key assumptions used in the value in use calculations for the Rail Operations CGU are as follows:

Pre-tax Profit Terminal


Value in use basis discount rate margin range growth rate

2016
Rail operations Existing secured projects and anticipated 16%-21% 3%-30% Not applicable
projects over the remaining useful life of
the current monorail technology

* In 2016, the discount rates applied to impairment assessment are based on the internal weighted average cost of capital
adjusted for the country risk premium.

Pre-tax Profit Terminal


Value in use basis discount rate Margin range growth rate

2015
Rail operations Existing secured projects and anticipated 10% 3%-30% Not applicable
projects over the remaining useful life of
the current monorail technology

124 Scomi Group Bhd


Annual Report 2016
5. Intangible assets (continued)

(b) Impairment (continued)

(ii) Development cost work-in-progress

Transport Solutions

Development costs work-in-progress has been tested for impairment based on expectations of market growth and industry
growth.

Pre-tax Profit Terminal


Value in use basis discount rate margin range growth rate

2016
Mass rapid transit Anticipated projects over the expected 16% 14% Not applicable
(MRT) useful life of the current MRT technology

Propulsion Existing secured projects and anticipated 10% 3% -30% Not applicable
projects over the remaining useful life of
the current propulsion technology

2015
Mass rapid transit Anticipated projects over the expected 10% 14% Not applicable
(MRT) useful life of the current MRT technology

Propulsion Existing secured projects and anticipated 10% 3% -30% Not applicable
projects over the remaining useful life of
the current propulsion technology

A reasonable possible change in the assumptions used will not result in any change to the impairment conclusion.

125 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

6. Investments in subsidiaries

Company

2016 2015
RM’000 RM’000

At cost
Quoted shares in Malaysia 1,219,026 1,219,026
Unquoted shares 152,598 152,598

1,371,624 1,371,624
Less: Impairment loss (151,961) (151,961)

1,219,663 1,219,663

At market value
Quoted shares in Malaysia 382,132 884,754

Details of the significant subsidiaries are as follows:

Principal place of
business/Country of Effective ownership
Name of entity incorporation Principal activities interest

2016 2015
% %

Significant subsidiaries of Scomi Group Bhd

Scomi Energy Services Bhd (“SESB”) Malaysia Investment holding 65.6 65.6

Scomi Engineering Bhd (“SEB”) Malaysia Investment holding, provision of 72.3 72.3
management services to subsidiaries and
the design, manufacture and supply of
monorail trains and related services.

During the financial year, the Company assessed the impairment of investments in subsidiaries. Based on this assessment, the recoverable
amount of investments is higher than the carrying value. The recoverable amount of investment in subsidiary was determined based on the
value in use calculation as disclosed in Note 5.

126 Scomi Group Bhd


Annual Report 2016
6. Investments in subsidiaries (continued)

Details of the significant subsidiaries are as follows (continued):

Principal place of
business/Country of Effective ownership
Name of entity incorporation Principal activities interest

2016 2015
% %

Significant subsidiaries of SESB

Scomi Marine Services Pte. Ltd. # Singapore Investment holding 65.6 65.6

Scomi Oilfield Limited (“SOL”) ~ Bermuda Investment holding 65.6 65.6

Trans Advantage Sdn. Bhd. Malaysia Provision of marine 65.6 65.6


transportation services

Scomi KMC Sdn. Bhd. Malaysia Provision of engineering services, sales of a 34.1 34.1
(including 4% held by Scomi Oiltools wide range of specialised chemicals
Sdn. Bhd.) and support services to the oil and gas
industry

Scomi Sosma Sdn. Bhd. Malaysia Distribution of chemical products and 65.6 65.6
services

Scomi D&P Sdn. Bhd. Malaysia Provision of turnkey services for marine and 65.6 65.6
oil and gas industry

Significant subsidiary of Scomi Marine Services Pte. Ltd.

PT Rig Tenders Indonesia Tbk # + Indonesia Provision of ship owning and chartering 52.8 52.8

Significant subsidiaries of PT Rig Tenders Indonesia, Tbk

Rig Tenders Marine Pte. Ltd. # Singapore Ship chartering 52.8 52.8

CH Logistic Pte. Ltd. # Singapore Investment holding 52.8 52.8

CH Ship Management Pte. Ltd. # Singapore Provision of management services 52.8 52.8

Grundtvig Marine Pte. Ltd. # Singapore Investment holding 52.8 52.8

Subsidiary of Grundtvig Marine Pte. Ltd.

PT Batuah Abadi Lines # Indonesia Ship owning and chartering 50.2 50.2

127 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

6. Investments in subsidiaries (continued)

Details of the significant subsidiaries are as follows (continued):

Principal place of
business/Country of Effective ownership
Name of entity incorporation Principal activities interest

2016 2015
% %

Significant subsidiary of Scomi Sosma Sdn. Bhd.

Scomi Anticor S.A.S. α France Research, development and trading of new 65.6 65.6
products for processing crude or refined
oil

Significant subsidiaries of SOL

Scomi Oiltools Sdn. Bhd. Malaysia Supplies a wide range of specialised 65.6 65.6
chemicals and support services to the oil
and gas industry

Scomi Oiltools (Cayman) Ltd. # Qatar & United Arab Provision of oilfield equipment, supplies 65.6 65.6
Emirates/ and services
Cayman Islands

Scomi Oiltools Ltd. # Pakistan & Myanmar/ Provision of oilfield equipment, supplies 65.6 65.6
Cayman Islands and services

Scomi Oiltools (Africa) Limited Congo & Nigeria/ Investment holding and provision of oilfield 65.6 65.6
Cayman Island equipment supplies and services

Scomi Oiltools (Thailand) Limited # Thailand Provision of oilfield equipment, supplies 65.6 65.6
and services

Scomi Oiltools Egypt SAE # (1) Egypt Provision of oilfield equipment, supplies 65.6 65.6
and services

Scomi Oiltools Pty. Ltd. # Australia Provision of oilfield equipment, supplies 65.6 65.6
and services

Scomi Oiltools (S) Pte. Ltd. α Singapore Investment holding and provision of oilfield 65.6 65.6
equipment, supplies and services

KMCOB Capital Berhad Malaysia Undertake the issuance of private debt 65.6 65.6
securities and refinancing exercise

128 Scomi Group Bhd


Annual Report 2016
6. Investments in subsidiaries (continued)

Details of the significant subsidiaries are as follows (continued):

Principal place of
business/Country of Effective ownership
Name of entity incorporation Principal activities interest

2016 2015
% %

Significant subsidiaries of SOL (continued)

Scomi Oiltools Oman LLC # Oman Provision of oilfield equipment, supplies 33.5 33.5
and services

KMC Oiltools BV @ Netherlands Intellectual property holder and co-ordinator 65.6 65.6

Significant subsidiaries of Scomi Oiltools (Africa) Limited

WASCO Oil Services Company Nigeria Nigeria Provision of oilfield equipment, supplies and 39.4 39.4
Limited services and machine shop services

Significant subsidiaries of Scomi Oiltools (S) Pte. Ltd.

KMC Oiltools India Pte. Ltd. # India Provision of oilfield equipment, supplies 65.6 65.6
and services

PT Scomi Oiltools # Indonesia Provision of oilfield equipment, supplies 65.6 65.6


and services

Scomi Oiltools Russia LLC # Russia Provision of oilfield equipment, supplies 65.6 65.6
and services

Significant subsidiaries of SEB

Urban Transit Private Limited # India Supply of transportation infrastructure 72.3 72.3
system, equipment and services

Urban Transit Servicos Do Brasil LTDA # Brazil Supply of transportation infrastructure 72.3 72.3
systems, equipment and services

Scomi Special Vehicles Sdn. Bhd. Malaysia Manufacture and fabrication of road 72.3 72.3
transport equipment, material handling
equipment and in the provision of related
engineering support services

Scomi Transportation Systems Sdn. Bhd. Malaysia Investment holding 72.3 72.3

129 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

6. Investments in subsidiaries (continued)

Details of the significant subsidiaries are as follows (continued):

Principal place of
business/Country of Effective ownership
Name of entity incorporation Principal activities interest

2016 2015
% %

Significant subsidiaries of SEB

Scomi Transit Projects (Sao Paulo) Malaysia Development, manufacture and supply of 72.3 72.3
Sdn. Bhd. monorail transportation infrastructure
systems equipment and services

Significant subsidiary of Scomi Special Vehicles Sdn. Bhd.

Scomi Trading Sdn. Bhd. Malaysia Marketing agent for road transport 72.3 72.3
equipment and related product

Significant subsidiaries of Scomi Transportation Systems Sdn. Bhd.

Scomi Rail Bhd Malaysia Design, manufacture, and supply of 72.3 72.3
monorail trains and related services

Scomi Coach Sdn. Bhd. Malaysia Manufacturing, fabrication and 72.3 72.3
assembly of commercial coaches
and truck vehicle bodies

# Audited by other member firms of KPMG International.


+ Listed on the Indonesian Stock Exchange.
α Not audited by member firms of KPMG International.
~ Scomi Oilfield Limited (“SOL”), a subsidiary of the Group entered into a Letter of Variation to defer the transfer of shares of Scomi
Oiltools Egypt SAE (“SOES”) from Scomi Oiltools Bermuda Limited (“SOBL”), a subsidiary of the ultimate holding company, to SOL to a
date to be mutually agreed later and until such time, SOBL will continue to hold the SOES shares in its name as trustee for SOL’s sole
and exclusive benefit as the beneficiary, based on the terms of a trust deed entered into by SOBL and SOL. As a result thereof, SOES
has been consolidated as a subsidiary.

(1)
The shareholdings in Scomi Oiltools Egypt SAE are currently registered in the name of Scomi Oiltools Bermuda Limited and, pursuant
to a trust deed dated 8 March 2014, are held in trust for Scomi Oilfield Limited.
@ Not required to be audited.

130 Scomi Group Bhd


Annual Report 2016
6. Investments in subsidiaries (continued)

a) Non-controlling interest in subsidiaries

The Group’s subsidiaries that have material non-controlling interests (“NCI”) are SESB and SEB as follows:

2016

SESB SEB Total


RM’000 RM’000 RM’000

NCI percentage of ownership and voting interest 34.35% 27.67%

Carrying amount of NCI 468,167 68,835 537,002

Loss allocated to NCI (10,122) (510) (10,632)

Summarised financial information before intra-group elimination

As at 31 March 2016

SESB SEB
RM’000 RM’000

Non-current assets 739,044 257,544


Current assets 820,898 703,462
Non-current liabilities (153,395) (131,007)
Current liabilities (540,767) (564,726)

Net assets 865,780 265,273

131 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

6. Investments in subsidiaries (continued)

a) Non-controlling interest in subsidiaries (continued)

Summarised financial information before intra-group elimination (continued)

Year ended 31 March 2016

SESB SEB
RM’000 RM’000

Revenue 1,208,784 174,548

Loss for the year (11,918) (1,843)

Total comprehensive income/(expense) 25,049 (4,391)

Cash flows from operating activities 130,972 55,583


Cash flows (used in)/from investing activities (37,573) 1,349
Cash flows used in financing activities (142,981) (48,507)

Net (decrease)/increase in cash and cash equivalents (49,582) 8,425

Dividends paid to NCI - -

2015

SESB SEB Total


RM’000 RM’000 RM’000
Restated Restated

NCI percentage of ownership and voting interest 34.35% 27.67%

Carrying amount of NCI 467,866 68,732 536,598

Profit allocated to NCI 21,942 103 22,045

132 Scomi Group Bhd


Annual Report 2016
6. Investments in subsidiaries (continued)

a) Non-controlling interest in subsidiaries (continued)

Summarised financial information before intra-group elimination

As at 31 March 2015

SESB SEB
RM’000 RM’000
Restated

Non-current assets 775,355 262,243


Current assets 1,010,443 734,030
Non-current liabilities (229,055) (68,810)
Current liabilities (716,746) (657,799)

Net assets 839,997 269,664

Year ended 31 March 2015

SESB SEB
RM’000 RM’000
Restated

Revenue 1,560,239 238,321

Profit for the year 67,429 378

Total comprehensive income/(expense) 99,114 (627)

Cash flows from/(used in) operating activities 133,855 (17,609)


Cash flows used in investing activities (64,978) (4,807)
Cash flows (used in)/from financing activities (53,882) 116,927

Net increase in cash and cash equivalents 14,995 94,511

Dividends paid to NCI 224 -

133 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

7. Investments in associates

Group

2016 2015
RM’000 RM’000

At cost
Unquoted shares
- outside Malaysia 16,857 16,857
Less: Impairment loss (9,789) (16,733)
Less: Share of post-acquisition loss 371 (124)

7,439 -

Details of the associates are as follows:

Principal place of
business/Country of Effective ownership
Name of entity incorporation Principal activities interest

2016 2015
% %

Held by SESB

Southern Petroleum Transportation Vietnam Owner and operator of tankers 13.8 13.8
Joint Stock Company

Emerald Logistics Sdn. Bhd. Malaysia Ship chartering and management 32.1 32.1

Held by Scomi Marine Services Pte. Ltd.

King Bridge Enterprise Ltd British Virgin Investment holding 32.1 32.1
Islands

134 Scomi Group Bhd


Annual Report 2016
7. Investments in associates (continued)

The following table summarises the information of the Group’s material associate, adjusted for any differences in accounting policies and
reconciles the information to the carrying amount of the Group’s interest in the associate.

2016 2015
Group RM’000 RM’000

Summarised financial information before intra-group elimination


As at 31 March
Total assets 190,371 7,053
Total liabilities (138,788) (8,312)

Net assets/(liabilities) 51,583 (1,259)

Year ended 31 March


Profit/(Loss) from continuing operations/Total other comprehensive income/(loss) 1,728 (1,048)

Included in the total comprehensive income is:


Revenue 103,468 18,472

Reconciliation of net assets to carrying amount as at 31 March


Group’s share of net assets 7,439 -

Carrying amount in the statement of financial position 7,439 -

Group’s share of results for the year ended 31 March


Group’s share of profit or loss from continuing operations 495 (124)

Group’s share of total comprehensive income/(expense) 495 (124)

Other information
Dividends received - -

135 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

8. Investments in joint ventures and joint operations

Group

Note 2016 2015


RM’000 RM’000

At cost
Unquoted shares - outside Malaysia 4,464 4,098
Share of post-acquisition reserves 16,474 25,870
Deemed investment - capital contribution (a) 44,814 38,670
Deemed investment - financial guarantee liabilities 329 329

Share of net assets 66,081 68,967

(a) Deemed investment – capital contribution

The deemed investment – capital contribution relates to advances provided to certain joint ventures that are contractually not
receivable until the external borrowings of the joint ventures have been repaid.

(b) Details of the joint ventures and joint operations are as follows:

Principal place of
business/Country of Effective equity
Name of entity incorporation Principal activities interest

2016 2015
% %

Joint ventures under SESB

MarineCo Limited * Malaysia Leasing of marine vessels and 33.5 33.5


the provision of marine vessels
transportation services

Gemini Sprint Sdn. Bhd.* Malaysia Chartering of marine vessels, manage 33.5 33.5
the maintenance of marine vessels
and provision of offshore marine
services

Transenergy Shipping Pte. Ltd. Malaysia Ship chartering 32.8 32.8

Transenergy Shipping Management Malaysia Ship chartering and management 32.8 32.8
Sdn. Bhd.

Rig Tenders Offshore Pte. Ltd.* Singapore Dormant 32.8 32.8

136 Scomi Group Bhd


Annual Report 2016
8. Investments in joint ventures and joint operations (continued)

(b) Details of the joint ventures and joint operations are as follows (continued):

Principal place of
business/Country of Effective ownership
Name of entity incorporation Principal activities interest

2016 2015
% %

Joint venture under Scomi Sosma Sdn. Bhd.

Sosma (B) Sdn. Bhd. Brunei Dormant 32.8 32.8

Joint venture under Scomi Oilfield Limited

Vibratherm Limited # England and Manufacture and/or assembly of 32.8 32.8


Wales equipment for drilling waste
treatment

Scomi Platinum Sdn. Bhd. Malaysia Dormant 32.8 32.8

Joint venture under Scomi D&P Sdn. Bhd.

Ophir Production Sdn. Bhd. Malaysia Development andproduction of crude 19.7 19.7
oil

Joint venture under SEB

Quark Fabricacao de Equipamentos Brazil Dormant 27.2 27.2


Ferroviarios E. Servicos De Engenharia
LTDA

Joint operations under SEB

Larsen & Toubro and SEB India Design, civil construction, manufacture 36.1 36.1
(unincorporated consortium) and supply of monorail trains and
provision of related engineering
support services and engineering
works involving the design,
construction, installation, testing
and commissioningof electrical and
mechanical systems in relation to the
Mumbai monorail project

* Companies with ownership of more than half of the equity shareholding in the companies but treated as joint ventures pursuant
to the contracting rights and obligations of the respective joint venture agreement.
# As at the date of the financial statements, Vibratherm Limited remained inactive, therefore no share of results was recorded.

137 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

8. Investments in joint ventures and joint operations (continued)

Summarised financial information of joint ventures

2016 2015
RM’000 RM’000

As at 31 March
Total assets 185,755 198,027
Total liabilities (124,936) (86,727)

Net assets 60,819 111,300

Group’s share of net assets 40,914 65,677

Capital contribution - 9,592

Year ended 31 March


Revenue 55,226 32,968
Loss for the year (22,349) (1,843)
Group’s share of results for the year (10,628) 1,117

Summarised financial information of joint operations

2016 2015
RM’000 RM’000

Revenue 2,568 2,132


Cost of sales (11,159) (11,084)

Gross loss (8,591) (8,952)

Receivables 9,754 7,186


Payables 28,407 (17,248)

* As at the date of the financial statements, Vibratherm Limited remained inactive, therefore no share of results was recorded.

138 Scomi Group Bhd


Annual Report 2016
9. Deferred tax assets/(liabilities)

Recognised deferred tax assets/(liabilities)

Deferred tax assets and liabilities are attributable to the following:

Assets Liabilities Net

2016 2015 2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group
Tax losses, capital allowances and tax
incentives 70,899 60,755 - - 70,899 60,755
Property, plant and equipment - - (42,751) (42,843) (42,751) (42,843)
Others 4,557 8,367 (4,109) (3,174) 448 5,193

Tax assets/(liabilities) 75,456 69,122 (46,860) (46,017) 28,596 23,105


Set off (38,258) (38,035) 38,258 38,035 - -

Net tax assets/(liabilities) 37,198 31,087 (8,602) (7,982) 28,596 23,105

Movement in temporary differences during the year

Movements in deferred tax assets and liabilities during the year are as follows:

Effect of Effect of
Recognised movements At Recognised movements
At in profit in exchange 31.3.2015/ in profit in exchange At
1.4.2014 or loss rate 1.4.2015 or loss rates 31.3.2016
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group
Tax losses, capital allowances
and tax incentives 25,598 35,160 (3) 60,755 10,017 127 70,899
Provisions 1,738 (1,738) - - - - -
Property, plant and equipment (2,267) (39,580) (996) (42,843) 218 (126) (42,751)
Deductible temporary
differences 1,221 4,027 (55) 5,193 (4,561) (184) 448

26,290 (2,131) (1,054) 23,105 5,674 (183) 28,596

Note 27 Note 27

139 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

9. Deferred tax assets/(liabilities) (continued)

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items (stated at net):

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Deductible temporary differences 60,839 53,183 5,335 5,773


Unutilised tax losses and tax incentives 52,128 68,355 15,415 9,665

112,967 121,538 20,750 15,438

Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available
against which the Group and the Company can utilise the benefits therefrom.

140 Scomi Group Bhd


Annual Report 2016
10. Trade and other receivables

Group Company

Note 2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Non-current
Amount due from subsidiary (a) - - 60,042 55,669
Other receivables 335 1,125 - -

335 1,125 60,042 55,669

Current
Trade
Trade receivables (b) 386,203 581,484 - -
Less: Allowance for impairment loss (47,276) (47,584) - -

Trade receivables - net 338,927 533,900 - -


Amount due from customers on contract (c) 525,291 458,353 - -

864,218 992,253 - -

Non-trade
Amount due from subsidiaries (d) - - 119,999 133,394
Amount due from joint ventures (d) 5,861 2,631 - -
Deposits 17,973 30,086 1,253 367
Prepayments 33,425 28,918 9 8
Indirect tax recoverable (e) 38,940 33,694 - -
Other receivables (f) 149,201 155,439 - 10,885
Less: Allowance for impairment loss - - (102,259) (102,259)

245,400 250,768 19,002 42,395

1,109,618 1,243,021 19,002 42,395

1,109,953 1,244,146 79,044 98,064

(a) The amount is in respect of unsecured and interest free advances to SEB which is not expected to be repaid within a period of 12
months from the date of the statements of financial position.

(b) Trade receivables are non-interest bearing and credit terms for trade receivables range from 30 to 120 days (2015: 30 to 120 days).
They are recognised at their original invoice amounts which represent their fair values on initial recognition.

141 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

10. Trade and other receivables (continued)

(c) Amount due from customers on contract

Group

2016 2015
RM’000 RM’000

Construction contract costs incurred to date and attributable profits 1,514,838 1,564,340
Less: Progress billings (989,547) (1,105,987)

Amount due from customers on contract 525,291 458,353

Retention receivable on contract, included in “trade receivables” 22,468 21,500

Advance received on contract, included in “other payables” (27,824) (21,343)

Amount due from customers on contract have been collateralised for borrowings. In the event of defaults under the loan agreements
by a subsidiary, the banks have the right to receive the cash flows from these amounts. Without default, a subsidiary will bill and
collect these amounts and allocate new amounts as collateral.

During the current financial year, trade receivables and amounts due from customers on contract includes amounts of RM21 million
(2015: RM72 million) and RM198.9 million (2015: RM184.3 million) respectively relating to a subsidiary of the Group, Scomi Transit
Projects Sdn Bhd (“STP”) for the Kuala Lumpur Monorail Fleet Expansion Project. Following receipt of the Notice of Termination dated
9 June 2016 (“Notice”) issued by Prasarana Malaysia Berhad (“PMB”), STP had initiated legal proceedings against PMB. The High Court
has on 21 June 2016 granted STP an interim order and injunction restraining PMB from terminating the Kuala Lumpur Monorail Fleet
Expansion Project (“the Project”) contract with STP based on the Notice or otherwise giving effect to the Notice pending the hearing
and disposal of the Originating Summons and further orders of the High Court.

(d) Related party balances receivable of the Group and the Company

- Amount due from subsidiaries is unsecured and non-interest bearing except for certain advances amounting to RM11.3 million
(2015: RM10.6 million) which bear interest at 6.00% (2015: 6.00%) per annum and are repayable within the next 12 months.

- Amounts due from joint ventures are unsecured, interest free and repayable upon demand.

(e) Indirect tax recoverable relates to the Mumbai Monorail project as disclosed in Note 1(d)(ii).

(f) Included in other receivables are:

- Advances to suppliers for purchase of marine vessels of the Group in the prior financial year amounting RM11.2 million.

- Value-Added-Tax (“VAT”) recoverable of the Group amounting to RM59.0 million (2015: RM54.0 million).

- Retention sum of the Group and Company in the prior financial year RM9.14 million held in escrow by a solicitor in relation to
the disposal of Scomi Nigeria Pte Limited.

142 Scomi Group Bhd


Annual Report 2016
11. Available-for-sale financial assets

Group

2016 2015
RM’000 RM’000

At fair value
Shares quoted in Malaysia 104 104

Available-for-sale financial assets are denominated in Ringgit Malaysia.

12. Inventories

Group

2016 2015 2014


RM’000 RM’000 RM’000
Restated

At cost
Consumables 28,188 25,609 18,585
Raw materials 6,018 18,761 23,412
Work-in-progress 2,570 5,068 7,577
Finished goods 176,548 192,088 177,712

213,324 241,526 227,286

Recognised in profit or loss:


Inventories recognised as cost of sales 478,814 777,288 698,200
Write-down to net realisable value - - 38
(Reversal)/Allowance for inventory obsolescence (168) 302 -
Inventories written down 4,835 10,470 -
Reversal of write-down (3,969) (4,834) (2,705)

The write-down and reversal are included in cost of sales.

143 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

13. Cash and bank balances

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Short term deposits placed with licensed banks 25,904 77,596 - -


Cash and bank balances 162,143 158,734 46 940

188,047 236,330 46 940

The effective interest rates for short term deposits placed with licensed banks of the Group and of the Company at the end of the reporting
period range from 0.18% to 6.50% (2015: 0.05% to 6.50%) per annum. Short term deposits of the Group and of the Company have maturity
periods ranging from 1 day to 365 days (2015: 1 day to 365 days).

Short term deposits of certain subsidiaries amounting to RM69,233,000 (2015: RM69,967,000) have been pledged to licensed banks for
banking facilities granted to the Group as disclosed in Note 20 to the financial statements.

14. Share capital

Group and Company

2016 2015

Number Number
of shares Amount of shares Amount
’000 RM’000 ’000 RM’000

Authorised:
Ordinary shares of RM0.10 each
At 1 April/31 March 3,000,000 300,000 3,000,000 300,000

Issued and fully paid shares classified as equity:


Ordinary shares of RM0.10 each:
At 1 April 1,568,637 156,864 1,568,637 156,864
Issued during the financial year
- conversion of bonds 348,873 34,887 - -

At 31 March 1,917,510 191,751 1,568,637 156,864

Ordinary shares

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at
meetings of the Company. In respect of the Company’s treasury shares that are held by the Group (see Note 16), all rights are suspended
until those shares are reissued.

144 Scomi Group Bhd


Annual Report 2016
15. Share premium

Group and Company

2016 2015
RM’000 RM’000

At 1 April 352,379 352,379


Additions arising from:
- conversion of bonds 92,452 -

At 31 March 444,831 352,379

Share premium comprises the premium paid on subscription of shares in the Company over and above the par value of the shares.

16. Treasury shares

The shareholders of the Company, by an ordinary resolution passed in an Annual General Meeting held on 8 September 2015, renewed
their approval for the Company to repurchase its own shares. The Directors of the Company are committed to enhancing the value of the
Company to its shareholders and believe that the repurchase plan can be applied in the best interests of the Company and its shareholders.

There was no repurchase of the Company’s shares during the financial year. As treasury shares, the rights attached as to voting, dividends
and participation in other distribution are suspended. None of the treasury shares repurchased has been sold as at 31 March 2016.

At the date of the reporting period, 14,427,200 (2015: 14,427,200) ordinary shares are held as treasury shares at a carrying amount of
RM18,695,746 (2015: RM18,695,746), and the number of outstanding shares in issue after setting off against treasury shares is 1,903,082,941
(2015: 1,554,209,654).

17. Convertible bonds reserve

Group and Company

2016 2015
RM’000 RM’000

At 1 April/31 March - 106,471

145 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

17. Convertible bonds reserve (continued)

The Company issued 110.0 million zero coupon Convertible Redeemable Secured Bonds at its nominal value of RM1.00 each share to IJM
Corporation Berhad (“IJM”) for cash on 8 February 2013 (“Issue Date”). The salient features of the Convertible Bonds are as follows:

(i) The Convertible Bonds are secured vide a first party legal charge over 313,043,478 ordinary shares of RM0.45 each in SESB held by the
Company (“Charged SESB Shares”).

(ii) The Charged SESB Shares will be proportionately discharged upon redemption/conversion of the Convertible Bonds (as the case may
be).

(iii) IJM has the option to convert all or any part of the Convertible Bonds into fully paid SGB Shares at any time on or before 5 February
2016.

(iv) For the purposes of conversion, the Convertible Bonds will carry a yield of 5% per annum calculated daily.

All outstanding Convertible Bonds will automatically be converted into SGB Shares upon maturity.

(v) The conversion price is at RM0.33.

(vi) The Company has the option to redeem all or any part of the outstanding Convertible Bonds in cash at each anniversary of the Issue
Date, subject to the following terms :

(a) the redemption price will be the nominal value of the Convertible Bonds plus 10% yield for each full year that the Convertible
Bonds remain outstanding; and,

(b) consent is obtained from IJM in respect of the redemption on the 1st and 2nd anniversary from the Issue Date unless:

(i) the Group Shares have been traded at a price of not less than RM0.50 (based on daily volume weighted average market
price) for 90 days consecutively prior to the respective 1st and 2nd anniversary of the Issue Date; and

(ii) SGB has recorded profit after taxation and minority interest (consolidated basis) for the latest 2 quarters prior to the
redemption.

All Convertible Bonds redeemed by SGB shall be cancelled and cannot be resold.

All Convertible Bonds were converted at a revised price of RM0.365. A total of 348,873,287 shares were issued to IJM and listed on 19
February 2016.

146 Scomi Group Bhd


Annual Report 2016
18. Other reserves

Translation Hedge Share option Other


Note reserve reserve reserve reserve Total
Group RM’000 RM’000 RM’000 RM’000 RM’000

At 1 April 2014 (89,398) (37,753) 3,621 26,882 (96,648)


Other comprehensive
(loss)/income

- Currency translation differences (17,702) - - - (17,702)


- Transfer to profit or loss - 3,254 - - 3,254

Total other comprehensive


(loss)/income (17,702) 3,254 - - (14,448)
Value of share option terminated - - (284) - (284)
Disposal and deconsolidation of
subsidiaries 24,851 - - - 24,851

At 31 March 2015/1 April 2015,


as previously stated (82,249) (34,499) 3,337 26,882 (86,529)

Prior year adjustment 38 (484) - - - (484)

At 1 April 2015, restated (82,733) (34,499) 3,337 26,882 (87,013)


Other comprehensive
(loss)/income

- Currency translation differences (19,715) - - - (19,715)


- Transfer to profit or loss - 12,321 - - 12,321

Total other comprehensive


(loss)/income (19,715) 12,321 - - (7,394)
Value of share option terminated - - (3,337) - (3,337)

At 31 March 2016 (102,448) (22,178) - 26,882 (97,744)

Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign
operations, as well as from the translation of liabilities that hedge the Group’s net investment in a foreign operation.

Hedge reserve
The hedge reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedges related to hedged
transactions that have not yet occurred.

Share option reserve


The share option reserve comprises the cumulative value of employee services received for the issue of share options. When the option is
exercised, the amount from the share option reserve is transferred to share premium. When the share options expire, the amount from the
share option reserve is transferred to retained earnings.

147 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

19. Trade and other payables

Group Company

Note 2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Non-current
Other payables and accruals (a) 5,684 5,682 - -

Current
Trade payables (b) 292,592 334,025 - -
Amount due to subsidiaries (c) - - 46,856 31,111
Amount due to associates (c) 1,421 914 - -
Amount due to joint ventures (c) 1,301 2,867 - -

Provisions (d) 1,118 1,118 - -


Other payables and accurals (a) 186,220 221,121 9,322 17,048

482,652 560,045 56,178 48,159

488,336 565,727 56,178 48,159

(a) Other payables and accurals

In the prior financial year, included in current liabilities of the Group and the Company was an amount of RM9.52 million owing
to Standard Chartered Private Equity Limited and Fuji Investment I arising from the acquisition of a 23.9% equity interest in Scomi
Oiltools Bermuda Limited.

(b) Trade payables

Trade payables are non-interest bearing and credit terms for trade payables range from cash term to 120 days (2015: cash term to 120
days).

(c) Amounts due to subsidiaries, associates and joint ventures

Amounts due to subsidiaries, associates and joint ventures are unsecured, non-interest bearing and repayable on demand.

(d) Provisions

Included in provisions is an amount of RM1.1 million (2015: RM1.1 million) for certain legal claims brought against a subsidiary of the
Group arising from the ordinary course of business. Management is uncertain of the expected utilisation of the balance provided as at
31 March 2016, but are of the view that the outcome of these legal claims will not give rise to any significant loss beyond the amount
provided as at 31 March 2016.

148 Scomi Group Bhd


Annual Report 2016
20. Loans and borrowings

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Non-current
Guaranteed Serial
Bonds - secured 102,927 156,359 - -
Term loans - secured 41,973 12,822 65 841
Revolving credits - secured 25,635 7,252 - -
Finance lease liabilities 4,275 6,955 254 403

174,810 183,388 319 1,244

Current
Guaranteed Serial
Bonds - secured 52,838 54,085 - -
Term loans - secured 206,428 309,515 439 60
Bank overdrafts - secured 74,370 82,636 - -
Bankers’ acceptances - secured 760 3,884 - -
Trust receipts - secured - 17,730 - -
Revolving credits - secured 258,487 298,904 - -
Finance lease liabilities 3,485 3,112 140 153

596,368 769,866 579 213

771,178 953,254 898 1,457

Bank overdraft and bank borrowings

During the current financial year, the current portion of the Group for revolving credits and bank overdraft includes an outstanding amount
of RM219.4 million (2015: RM238.5 million) relates to a subsidiary of the Group which has yet to obtain further extension of the facilities from
the lenders who provided financing for the Kuala Lumpur Monorail Fleet Expansion Project.

Security

(a) RM300.00 million Guaranteed Serial Bonds

The Bonds are secured by an irrevocable and unconditional financial guaranteed insurance policy issued by Danajamin Nasional
Berhad and certain Guarantors pursuant to a financial guarantee insurance facility of an aggregate principal amount of RM300 million
and such amount equivalent to 1 coupon payment obligation of the Bonds.

149 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

20. Loans and borrowings (continued)

Security (continued)

(b) Other loans and borrowings

The term loans, bank overdrafts and bank borrowings of the Group are secured by:

(i) Legal charge over certain landed properties, machinery and equipment of project financed, securities and vessels of certain
subsidiaries;
(ii) Negative pledge over the present and future, fixed and floating assets of certain subsidiaries;
(iii) Assignment of contract proceeds relevant bank accounts, escrow account, rental agreemnets, debentures over machinery,
insurance policies and performance bond;
(iv) Standby Letter of Credit (“SBLC”) facility secured by corporate guarantee provided by a subsidiary company;
(v) Pledge over shares and/or acceptable stocks in subsidiaries of the Company including 380,025,400 ordinary shares in SESB for
credit facilities made available to certain subsidiaries;
(vi) Top up and cash deficiency agreement in certain subsidiaries;
(vii) A charge over the 3-month interest of the Facility Limit placed upfront (“Upfront Deposit”) in a debt service reserve account
(“DSRA”); and
(viii) Corporate Guarantees from certain subsidiaries and Syarikat Jaminan Pembiayaan Perniagaan Berhad.

The management continues to appraise and have discussions with the banks on the additional collaterals that were provided for the
project’s banking facilities.

Loan covenant

The Group has various financial covenants based on debt service coverage ratio, debt to equity ratio and total net worth, all of which were
complied with as at 31 March 2016.

Finance lease liabilities

Finance lease liabilities are payable as follows:

2016 2015

Present Present
Future value of Future value of
minimum minimum minimum minimum
lease lease lease lease
payments Interest payments payments Interest payments
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Group
Less than one year 4,096 611 3,485 3,752 640 3,112
Between one and five years 4,549 274 4,275 7,650 695 6,955

8,645 885 7,760 11,402 1,335 10,067

Company
Less than one year 157 17 140 172 19 153
Between one and five years 284 30 254 450 47 403

441 47 394 622 66 556

150 Scomi Group Bhd


Annual Report 2016
21. Provision for retirement benefits

The Group operates an unfunded defined benefits plan for qualifying employees and vessel crew of its subsidiaries in Indonesia. Under the
plan, the employees and vessel crew are entitled to retirement benefits as defined in Indonesian Labour Laws and government regulations
regarding maritime.

The amounts recognised in the statement of financial position are determined as follows:

Group

2016 2015
RM’000 RM’000

Non-current
Present value of unfunded obligations 7,359 6,941
Unrecognised actuarial loss - (297)

At 31 March 7,359 6,644

The amounts recognised in the profit or loss are as follows:

Group

2016 2015
RM’000 RM’000

Current service costs 2,193 804


Interest cost 239 211
Others 122 (472)

2,554 543
Amortisation of actuarial gain (1,077) 47

1,477 590

151 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

21. Provision for retirement benefits (continued)

The movements in the retirement benefit liability recognised in the statement of financial position are as follows:

Group

2016 2015
RM’000 RM’000

At 1 April 6,644 5,952


Total expense charged to profit or loss 1,477 590
Benefit payments made during the year (753) (255)
Currency translation differences (9) 357

At 31 March 7,359 6,644

The principal actuarial assumptions used were as follows:

Group

2016 2015

Discount rates (per annum) (%) 7.5 - 8.0 7.0 - 8.0


Expected rates of salary increases (per annum) (%) 0.0 - 8.0 0.0 - 8.0
Normal retirement age (years) 45 - 55 45 - 55

The most recent actuarial valuation was carried out as at 24 April 2016 by independent professional actuaries using the projected unit credit
method.

22. Derivative financial liabilities

Nominal Nominal
value Liabilities value Liabilities
2016 2016 2015 2015
RM’000 RM’000 RM’000 RM’000

Cash flow hedges


Cross currency interest rate swaps (44,092) (44,092) (52,150) (52,150)

(44,092) (44,092) (52,150) (52,150)

Included in:
Non-current liabilities (28,845) (40,366)
Current liabilities (15,247) (11,784)

(44,092) (52,150)

152 Scomi Group Bhd


Annual Report 2016
22. Derivative financial liabilities (continued)

Cross currency interest rate swap contracts (“CCIRS”)

The notional principal amount of the outstanding CCIRSs at 31 March 2016 were RM160 million (2015: RM215 million).

The Group had entered into CCIRS during 2012 and 2013, that were designated as cash flow hedges to hedge the Group’s exposure to
foreign exchange risk on its Guaranteed Serial Bonds. These contracts entitled the Group to receive principal and fixed interest amounts in
RM and obliged the Group to pay principal and fixed interest amounts in USD and the CCIRSs reflect the timing of these cash flows. These
CCIRSs contracts have maturities of up to 4 years from 31 March 2014. The Group has assessed and continued to apply the same cashflow
hedges to hedge the issued Guaranteed Serial Bonds.

As at 31 March 2016, the Group had hedged the entire balance of the RM denominated Guaranteed Serial Bonds. The USD interest rates on
the CCIRS contracts designated as hedging instruments in the cash flow hedges ranged from 4.08% to 7.30% per annum (2015: 3.78% to
7.62% per annum) and the interest rates in RM ranged from 4.10% to 7.20% per annum (2015: 4.10% to 7.20% per annum). Gains and losses
recognised in the hedging reserve in equity on the CCIRSs as of 31 March 2016 will be continuously released to the profit or loss within
“finance cost” until the full repayment of the Guaranteed Serial Bonds.

23. Deferred Government grant

Group

2016 2015
RM’000 RM’000

At 1 April 988 1,347


Amortisation for the year (359) (359)

At 31 March 629 988

The Group received a Government grant of RM2,155,000 in 2008 to execute and develop new technology for a monorail bogie design and
development program with improvement to the design of the current monorail bogie and development of a commercially ready prototype
bogie.

Amortisation over the expected life of the related assets mirrors the pattern of consumption of the related intangible assets which is
estimated to be 6 years (2015: 6 years).

153 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

24. Revenue

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Continuing operations
Sales of goods 692,297 879,640 - -
Rental/charter hire income 408,314 549,746 - -
Rendering of services 151,464 188,811 - -
Construction contract income 125,658 179,984 - -
Management fee - - - 933
Leasing 5,523 - - -
Commission income - 363 - -
Other 76 28 - -

1,383,332 1,798,572 - 933

25. Finance costs

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Interest expense on borrowings and finance leases 21,891 21,195 1,622 444
Interest on CCIRS 5,575 1,792 - -

27,466 22,987 1,622 444

Amortisation of loan arrangement 6,712 7,440 - -

34,178 30,427 1,622 444

Group’s finance costs included under cost of sales for the financial year amounted to RM29,517,000 (2015: RM26,053,000).

154 Scomi Group Bhd


Annual Report 2016
26. Profit/(loss) before tax

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Profit/(loss) before tax from continuing operations is


stated after charging/(crediting):
Amortisation:
- Government grant (359) (359) - -
- intangible assets 2,734 3,104 - -
- loan arrangement costs - 7,440 - -
Auditor’s remuneration:
- KPMG in Malaysia
Statutory audit 1,932 1,944 260 301
Non-audit fees 248 172 18 27
- Overseas affiliates of KPMG Malaysian firm
Statutory audit 1,314 1,309 - -
- Other external auditors
Statutory audit 184 162 - -
Non-audit fees 107 109 - -
Bad debts recovered - (1,190) - -
Depreciation:
- property, plant and equipment 107,511 94,622 350 369
- investment property 146 157 52 51
Disposal of gain:
- asset held for sale - 71 - -
- property, plant and equipment (221) (96) (10) (180)
Gain on liquidation/winding up of subsidiaries (24,081) (11,235) - -
Impairment losses:
- amount due to subsidiaries - - - 70,206
- goodwill 7,014 - - -
- inventories 7,095 1,330 - -
- property, plant and equipment - 449 - -
- receivables 8,814 8,773 - -
Interest income (4,696) (3,082) (1,689) (2,594)
Inventories written down 4,835 10,470 - -
Lease rental expense:
- land and office premises 8,791 8,350 1,039 949
- plant and machineries 3,240 22,522 23 28
Net loss/(gain) on foreign exchange:
- realised 11,074 (11,864) (3,989) 32
- unrealised 1,862 (2,891) 205 2,070

155 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

26. Profit/(loss) before tax (continued)

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Profit/(Loss) before tax from continuing operations is


stated after charging/(crediting) (continued):
Provision for:
- retirement benefits 1,477 590 - -
- inventories - 11,498 - -
Rental income (182) (501) (408) (408)
Reversal of impairment losses:
- associates (6,944) - - -
- inventories (4,137) (4,834) - -
- receivables (7,914) (4,101) - -
- investment in subsidiary - - - (129,464)
- property, plant and equipment (1,182) - - -
Reversal of provision:
- litigation (29,792) - - -
Written off:
- business development charges 13,873 - 13,873 -
- property, plant and equipment 530 171 - -
- receivables 4,376 4,246 - -

Employee benefits costs (including Executive Director):


Wages, salaries and bonuses 230,452 256,610 8,584 9,553
Defined benefit plan (Note 37) 15,324 15,031 1,378 1,352
Employment costs 635 1,336 - -
Other employee benefits (including allowances) 32,665 36,303 1,102 1,172

279,076 309,280 11,064 12,077

Included in the cost of sales of the Group are the cost of inventories and services of RM862,251,000 (2015: RM693,100,000) and construction
contract costs of RM128,259,000 (2015: RM169,771,000).

156 Scomi Group Bhd


Annual Report 2016
27. Tax expense

Recognised in profit or loss

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000
Restated

Current tax expense


- Malaysian income tax 8,953 3,935 - -
- Foreign income tax 18,341 31,469 - -
- Tax benefits arising from previously unrecognised
tax losses and temporary differences (7,731) - - -

19,563 35,404 - -
Deferred tax expense (Note 9) (5,674) 2,131 - -

13,889 37,535 - -

Current tax expense


Current year 29,624 35,473 - -
Over provision in prior year (2,330) (69) - -
Tax benefit arising from previously unrecognised:
- Tax losses (3,415) - - -
- Temporary diferrences (4,316) - - -

19,563 35,404 - -

Deferred tax expense


Reversal and origination of temporary differences (3,315) 417 - -
(Over)/Under provision in prior year (2,359) 1,714 - -

(5,674) 2,131 - -

Total income tax expense 13,889 37,535 - -

157 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

27. Tax expense (continued)

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000
Restated

Profit/(Loss) before tax 25,793 103,907 (27,757) 40,813

Income tax calculated using Malaysia tax rate 24%


(2015: 25%) 6,190 25,977 (6,662) 10,203

Tax effects of:


- non-deductible expenses 20,955 18,955 864 1,958
- effect of tax rates in foreign jurisdictions 5,226 4,204 - -
- tax exempt income (5,222) (13,835) (131) (32,453)
- deferred tax assets not recognised in respect of current
year’s tax losses and unabsorbed capital allowances 6,462 7,620 5,929 9,481
- reversal of previous unrecognised timing differences of
an overseas subsidiary (4,316) - - -
- utilisation of previously unrecognised deferred tax assets (10,717) (7,031) - -
- (over)/under provision in prior year (4,689) 1,645 - 10,811

13,889 37,535 - -

28. EarningS per ordinary share

Basic earnings per ordinary share

The calculation of basic earnings per ordinary share at 31 March 2016 was based on the profit attributable to ordinary shareholders and a
weighted average number of ordinary shares outstanding, calculated as follows:

Group

2016 2015
RM’000 RM’000
Restated

Profit attributable to ordinary shareholders


Continuing operations 22,536 44,256

158 Scomi Group Bhd


Annual Report 2016
28. EarningS per ordinary share (continued)

Weighted average number of ordinary shares outstanding

Group

2016 2015
’000 ’000

Issued ordinary shares at 1 April 1,568,637 1,568,637


Treasury shares at 1 April (14,427) (14,427)
Effect of ordinary shares issued during the year 348,873 -

Weighted average number of shares (basic) 1,903,083 1,554,210

Group

2016 2015
sen sen
Restated

Basic earnings per ordinary share


From continuing operations 1.18 2.85

Diluted earnings per ordinary share

The calculation of diluted earnings per ordinary share at 31 March 2016 was based on the profit attributable to ordinary shareholders and
the weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares,
calculated as follows:

Group

2016 2015
RM’000 RM’000
Restated

Profit attributable to ordinary shareholders


Continuing operations 22,536 44,256

159 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

28. EarningS per ordinary share (continued)

Weighted average number of ordinary shares outstanding

Group

2016 2015
’000 ’000

Issued ordinary shares at 1 April 1,903,083 1,554,210


Effect of conversion of convertible Bonds - 348,873

Weighted average number of ordinary shares (diluted) 1,903,083 1,903,083

Group

2016 2015
sen sen
Restated

Diluted earnings per ordinary share


From continuing operations 1.18 2.33

The convertible redeemable secured bonds conversion is based on the assumption that the conversion takes place upon maturity.

29. Operating segment

Management has determined the operating segments based on reports reviewed by the Chief Operating Decision Maker (“CODM”) which
are used for allocating resources and assessing performance of the operating segments.

The Chief Operating Decision Maker considers the business from the industry perspective and the service rendered. The following reportable
segments have been identified:

(i) Oilfield Services - supply and manufacturing of equipment, supply of a wide range of specialised chemicals and
provision of services.

(ii) Transport Solutions - development, design, manufacture and supply of monorail transportation infrastructure systems
equipment and services, and related engineering support services.

- manufacture, fabrication and assembly of commercial coaches, truck vehicle bodies and special purpose
vehicles.

(iii) Marine Services - provision of transportation of bulk aggregates for the coal industry.

160 Scomi Group Bhd


Annual Report 2016
29. Operating segment (continued)

Performance is measured based on segment profit before tax, interest, depreciation and amortisation, as included in the internal
management reports that are reviewed by the Chief Operating Decision Maker (“CODM”) (i.e. the Group’s Chief Executive Officer). Segment
profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of
certain segments relative to other entities that operate within these industries.

Unallocated costs represent corporate expenses. Segment assets consist of property, plant and equipment, intangible assets, inventories,
receivables and cash and cash equivalents, and mainly excludes investments, deferred tax assets and current tax assets. Segment liabilities
comprise payables and exclude current tax liabilities and deferred tax liabilities.

Capital expenditure comprises additions to property, plant and equipment and intangible assets.

Segment assets

The total of segment asset is measured based on all assets (including goodwill) of a segment, as included in the internal management
reports that are reviewed by the CODM. Segment total assets is used to measure the return of assets of each segment.

Segment liabilities

Segment liabilities information is neither included in the internal management reports nor provided regularly to the CODM. Hence, no
disclosure is made on segment liability.

Segment capital expenditure

Segment capital expenditure is the total costs incurred during the financial year to acquire property, plant and equipment, and intangible
assets other than goodwill.

Inter-
External segment Total
RM’000 RM’000 RM’000

2016
Revenue
Continuing operations
Oilfield services 1,013,857 - 1,013,857
Transport solutions 174,548 - 174,548
Marine services 194,927 - 194,927
Reconciliation - - -

1,383,332 - 1,383,332

Discontinued operations
Oilfield services - - -

1,383,332 - 1,383,332

161 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

29. Operating segment (continued)

Inter-
External segment Total
RM’000 RM’000 RM’000

2015
Revenue
Continuing operations
Oilfield services 1,282,310 - 1,282,310
Transport solutions 238,321 - 238,321
Marine services 277,929 - 277,929
Reconciliation 12 - 12

1,798,572 - 1,798,572

Discontinued operations
Oilfield services - - -

1,798,572 - 1,798,572

162 Scomi Group Bhd


Annual Report 2016
29. Operating segment (continued)

<------------Continuing operations----------->

Elimination/
Oilfield Transport Marine Discontinued Unallocated
services solutions services Total operations cost Total
2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Segment results
Profit/(Loss) from operations 90,618 30,613 (42,463) 78,768 - (13,360) 65,408
Finance income 854 2,134 399 3,387 - 1,309 4,696
Finance costs (26,762) (36,370) (517) (63,649) - 29,471 (34,178)
Share of results in associates - - 495 495 - - 495
Share of results in joint
ventures (3,181) - (7,447) (10,628) - - (10,628)

Profit/(Loss) before tax 61,529 (3,623) (49,533) 8,373 - 17,420 25,793


Tax expense (21,183) 10,037 (2,731) (13,877) - (12) (13,889)

Profit/(Loss) for the year 40,346 6,414 (52,264) (5,504) - 17,408 11,904

Segment assets
Assets employed in operations 995,159 922,923 466,000 2,384,082 - 76,684 2,460,766
Investments in associates - - 7,439 7,439 - - 7,439
Investments in joint ventures 10,236 - 55,845 66,081 - - 66,081

Total assets employed 1,005,395 922,923 529,284 2,457,602 - 76,684 2,534,286

Other information
Depreciation and amortisation 53,410 9,087 47,468 109,965 - 67 110,032
Additions/(Reductions) to non-
current assets other than
financial instruments and
deferred tax assets (61,663) (7,669) 26,096 (43,236) - (3,858) (47,094)

163 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

29. Operating segment (continued)

<------------Continuing operations----------->

Elimination/
Oilfield Transport Marine Discontinued Unallocated
services solutions services Total operations cost Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
2015 Restated Restated Restated

Segment results
Profit/(Loss) from operations 131,640 30,207 111 161,958 (71) (31,699) 130,188
Finance income 2,360 996 722 4,078 - (996) 3,082
Finance costs (25,898) (33,251) (2,529) (61,678) - 31,251 (30,427)
Share of results in associates - - (124) (124) - - (124)
Share of results in joint
ventures (1,863) - 2,980 1,117 - - 1,117

Profit/(Loss) before tax 106,239 (2,048) 1,160 105,351 (71) (1,444) 103,836
Tax expense (37,092) 2,426 (2,878) (37,544) - 9 (37,535)

Profit/(Loss) for the year 69,147 378 (1,718) 67,807 (71) (1,435) 66,301

Segment assets
Assets employed in operations 1,208,321 996,273 491,079 2,695,673 - 30,769 2,726,442
Investments in associates - - - - - - -
Investments in joint ventures 68,513 - 454 68,967 - - 68,967

Total assets employed 1,276,834 996,273 491,533 2,764,640 - 30,769 2,795,409

Other information
Depreciation and amortisation 47,520 9,259 39,414 96,193 - 1,331 97,524
Additions/(Reductions) to non-
current assets other than
financial instruments and
deferred tax assets 24,010 (4,821) 11,811 31,000 - 971 31,971

164 Scomi Group Bhd


Annual Report 2016
30. Financial instruments

(a) Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

(i) Loans and receivables (“L&R”);


(ii) Fair value through profit or loss (“FVTPL”);
(iii) Available-for-sale financial assets (“AFS”);
(iv) Financial liabilities measured at amortised cost (“FL”).

Carrying
amount L&R AFS
RM’000 RM’000 RM’000

Financial assets
2016
Group
Available-for-sale financial assets 104 - 104
Trade and other receivables * 1,076,528 1,076,528 -
Cash and bank balances 188,047 188,047 -

1,264,679 1,264,575 104

Company
Trade and other receivables * 79,035 79,035 -
Cash and bank balances 46 46 -

79,081 79,081 -

2015
Group
Available-for-sale financial assets 104 - 104
Trade and other receivables * 1,215,228 1,215,228 -
Cash and bank balances 236,330 236,330 -

1,451,662 1,451,558 104

Company
Trade and other receivables * 98,056 98,056 -
Cash and bank balances 940 940 -

98,996 98,996 -

* Excluding prepayments

165 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

30. Financial instruments (continued)

(a) Categories of financial instruments (continued)

Carrying
amount FL FVTPL
RM’000 RM’000 RM’000

Financial liabilities
2016
Group
Loans and borrowings 771,178 771,178 -
Trade and other payables 488,336 488,336 -
Derivative financial liabilities 44,092 - 44,092

1,303,606 1,259,514 44,092

Company
Loans and borrowings 898 898 -
Trade and other payables 56,178 56,178 -

57,076 57,076 -

2015
Group
Loans and borrowings 953,254 953,254 -
Trade and other payables 565,727 565,727 -
Derivative financial liabilities 52,150 - 52,150

1,571,131 1,518,981 52,150

Company
Loans and borrowings 1,457 1,457 -
Trade and other payables 48,159 48,159 -

49,616 49,616 -

166 Scomi Group Bhd


Annual Report 2016
30. Financial instruments (continued)

(b) Net gains and losses arising from financial instruments

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Net (loss)/gain on:


Fair value through profit or loss (5,575) - - -
Loans and receivables 5,220 (28) - -
Financial liabilities measured at amortised cost * (34,178) (30,427) (1,622) (444)

(34,533) (30,455) (1,622) (444)

* being the finance costs incurred by the Group and the Company respectively.

(c) Financial risk management

The Group has exposure to the following risks from its use of financial instruments:

• Credit risk
• Liquidity risk
• Market risk

(d) Credit risk

Credit risk is the risk of a financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual
obligations. The Group’s exposure to credit risk arises principally from its receivables from customers and balances and deposits
placed with licensed banks. The Company’s exposure to credit risk arises principally from loans and advances to subsidiaries and
financial guarantees given to banks for credit facilities granted to subsidiaries.

Receivables

Risk management objectives, policies and processes for managing the risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.

The Group adopts the policy of dealing only with customers of appropriate credit history to mitigate credit risk. For other financial
assets, the Group adopts the policy of dealing with financial institutions and other counterparties that are regulated and with sound
credit rating.

167 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

30. Financial instruments (continued)

(d) Credit risk (continued)

Receivables (continued)

Exposure to credit risk, credit quality and collateral

The Group and the Company do not hold any collateral from their customers.

As at the end of the reporting period, the maximum exposure to credit risk arising from receivables is represented by the carrying
amounts in the statement of financial position.

Management has taken reasonable steps to ensure that receivables that are neither past due nor impaired are stated at their realisable
values. A significant portion of these receivables are regular customers that have been transacting with the Group. The Group uses
ageing analysis to monitor the credit quality of the receivables. Any receivables having significant balances past due more than 365
days, which are deemed to have higher credit risk, are monitored individually.

The exposure of credit risk for trade receivables as at the end of the reporting period by geographic region was:

Group

2016 2015
RM’000 RM’000

Malaysia 80,431 136,259


Other Asia 173,112 25,637
Middle East and Africa 75,490 307,901
Other countries 9,894 64,103

338,927 533,900

Impairment losses

The Group maintains an ageing analysis in respect of trade receivables only. The ageing of trade receivables as at the end of the
reporting period was:

Individual
Gross impairment Net
Group RM’000 RM’000 RM’000

2016
Not past due 146,109 - 146,109
Past due 0 - 30 days 72,126 - 72,126
Past due 31 - 120 days 73,682 - 73,682
More than 120 days 94,286 (47,276) 47,010

386,203 (47,276) 338,927

168 Scomi Group Bhd


Annual Report 2016
30. Financial instruments (continued)

(d) Credit risk (continued)

Receivables (continued)

Impairment losses (continued)

Individual
Gross impairment Net
Group RM’000 RM’000 RM’000

2015
Not past due 201,974 - 201,974
Past due 0 - 30 days 172,335 - 172,335
Past due 31 - 120 days 84,899 - 84,899
More than 120 days 122,276 (47,584) 74,692

581,484 (47,584) 533,900

The movements in the allowance for impairment losses of trade receivables during the financial year were:

Group

2016 2015
RM’000 RM’000

As at 1 April 47,584 41,944


Impairment loss recognised 1,900 8,773
Impairment loss reversed (2,034) (2,873)
Impairment loss written-off - (51)
Currency translation differences (174) (209)

As at 31 March 47,276 47,584

The allowance account in respect of trade receivables is used to record impairment losses. Unless the Group is satisfied that recovery
of the amount is possible, the amount considered irrecoverable is written off against the receivable directly.

Financial guarantees

Risk management objectives, policies and processes for managing the risk

As at the end of the reporting period, the Company does not provide unsecured financial guarantees to banks in respect of banking
facilities granted to its subsidiaries.

169 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

30. Financial instruments (continued)

(d) Credit risk (continued)

Investments and other financial assets

Risk management objectives, policies and processes for managing the risk

Investments are allowed only in short term deposits placed with licensed banks and only with counterparties that have a credit rating
equal to or better than the Group. Transactions involving derivative financial instruments are with approved financial institutions.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the Group has only invested in short term deposits placed with licensed banks. The maximum
exposure to credit risk is represented by the carrying amounts in the statement of financial position.

In view of the sound credit rating of counterparties, management does not expect any counterparty to fail to meet its obligations.

The investments and other financial assets are unsecured.

Intercompany loans and advances

Risk management objectives, policies and processes for managing the risk

The Company provides unsecured loans and advances to subsidiaries. The Company monitors the results of the subsidiaries regularly.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying amounts in the statement
of financial position.

Impairment losses

In the prior financial year, an impairment loss of RM70.2 million was made in respect of the amount due from subsidiaries as disclosed
in Note 26.

170 Scomi Group Bhd


Annual Report 2016
30. Financial instruments (continued)

(e) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s exposure to
liquidity risk arises principally from its various payables, loans and borrowings.

The Group maintains a level of cash and cash equivalents and bank facilities deemed adequate by the management to ensure, as far
as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

Maturity analysis

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities as at the end of the reporting
period based on undiscounted contractual payments:

Contractual More
Carrying interest Contractual Under 1 1-2 2-5 than
Group amount rate/coupon cash flows year years years 5 years
2016 RM’000 % RM’000 RM’000 RM’000 RM’000 RM’000

Non-derivative financial
liabilities
Loans and borrowings 771,178 2.10 to 7.25 794,143 606,309 135,533 52,301 -
Trade and other payables 488,336 - 488,336 488,336 - - -

1,259,514 1,282,479 1,094,645 135,533 52,301 -

Derivative financial
liabilities
Interest rate swaps:
- Outflow 44,092 4.08 to 7.30 213,158 77,299 135,859 - -
- Inflow - 4.10 to 7.20 (173,150) (62,600) (110,550) - -

1,303,606 1,322,487 1,109,344 160,842 52,301 -

2015
Non-derivative financial
liabilities
Loans and borrowings 953,254 2.10 to 13.15 988,801 782,799 90,194 115,808 -
Trade and other payables 565,727 - 565,727 565,727 - - -

1,518,981 1,554,528 1,348,526 90,194 115,808 -

Derivative financial
liabilities
Interest rate swaps:
- Outflow 52,150 3.78 to 7.62 280,925 78,394 143,231 59,300 -
- Inflow - 4.10 to 7.20 (239,558) (66,048) (121,780) (51,730) -

1,571,131 1,595,895 1,360,872 111,645 123,378 -

171 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

30. Financial instruments (continued)

(e) Liquidity risk (continued)

Maturity analysis (continued)

Contractual
interest More
Carrying rate/ Contractual Under 1 1-2 2-5 than
Company amount coupon cash flows year years years 5 years
2016 RM’000 % RM’000 RM’000 RM’000 RM’000 RM’000

Non-derivative financial
liabilities
Other payables 9,322 - 9,322 9,322 - - -
Loans and borrowings 898 2.31 to 6.95 966 616 222 128 -
Amount due to
subsidiaries * 46,856 - 46,856 46,856 - - -

57,076 57,144 56,794 222 128 -

2015
Non-derivative financial
liabilities
Other payables 17,048 - 17,048 17,048 - - -
Loans and borrowings 1,457 2.30 to 6.20 1,610 213 652 745 -
Amount due to
subsidiaries * 31,111 - 31,111 31,111 - - -

49,616 49,769 48,372 652 745 -

* Amount due to subsidiaries consist of amount due to Scomi Oiltools Bermuda Limited (“SOBL”) for inter-company balances.
The amount is payable on demand and SOBL has the rights to call the loan. However, SOBL is a wholly owned subsidiary of the
Company and can offset the payable balance by paying dividend to the Company, capital repayment and capital reduction
which is estimated to be completed in near future. The proposed plan was approved by the Board of Directors on 22 May 2015.

172 Scomi Group Bhd


Annual Report 2016
30. Financial instruments (continued)

(f) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and other prices that will affect the
Group’s financial position or cash flows.

(i) Currency risk

The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in a currency other
than the respective functional currencies of Group Entities. The currencies giving rise to this risk are primarily U.S. Dollar (“USD”),
Indian Rupee (“INR”) and Brazilian Real (“BRL”).

Risk management objectives, policies and processes for managing the risk

The Group maintains a natural hedge, whenever possible, by borrowing in currencies or entering into Cross currency interest
rate swap contracts (“CCIRS”) that match the future revenue stream to be generated from its investments.

Exposure to foreign currency risk

The Group’s exposure to foreign currency (a currency which is other than the functional currency of the Group Entities) risk,
based on carrying amounts as at the end of the reporting period was:

Denominated in

USD INR BRL


2016 RM’000 RM’000 RM’000

Balances recognised in the statement of financial position


Group
Trade and other receivables 32,036 284,080 121,116
Cash and bank balances 15,795 781 5,203
Loans and borrowings (107,942) (51,721) -
Trade and other payables (103,066) (9,017) (28,271)

Net exposure (163,177) 224,123 98,048

Company
Other receivables - - -
Cash and bank balances 27 - -
Other payables - - -
Intra-group balances 4,009 - -

Net exposure 4,036 - -

173 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

30. Financial instruments (continued)

(f) Market risk (continued)

(i) Currency risk (continued)

Exposure to foreign currency risk (continued)

Denominated in

USD INR BRL


2015 RM’000 RM’000 RM’000

Balances recognised in the statement of financial position


Group
Trade and other receivables 456,137 252,475 90,898
Cash and bank balances 139,940 1,995 7,388
Loans and borrowings (256,667) (59,841) -
Trade and other payables (299,048) (8,197) (22,427)

Net exposure 40,362 186,432 75,859

Company
Other receivables 9,155 - -
Cash and bank balances 5 - -
Other payables (8,585) - -
Intra-group balances 14,478 - -

Net exposure 15,053 - -

Currency risk sensitivity analysis

A 10% (2015: 5%) strengthening of the RM against the following currencies at the end of the reporting period would have
increased post-tax profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate
variances that the Group considered to be reasonably possible at the end of the reporting period. This analysis assumes that all
other variables, in particular interest rates, remained constant.

174 Scomi Group Bhd


Annual Report 2016
30. Financial instruments (continued)

(f) Market risk (continued)

(i) Currency risk (continued)

Exposure to foreign currency risk (continued)

Group Company
Profit or loss Profit or loss

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Group
USD (12,401) 1,514 307 564
INR 17,033 6,991 - -
BRL 7,452 2,845 - -

A 10% (2015: 5%) weakening of RM against the above currencies at the end of the reporting period would have had equal but
opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remained constant.

(ii) Interest rate risk

The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest rates. The Group’s
variable rate borrowings are exposed to a risk of change in cash flows due to changes in interest rates.

Risk management objectives, policies and processes for managing the risk

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. The Group also uses hedging
instruments such as cross currency interest rate swaps to minimise its exposure to interest rate volatility.

Exposure to interest rate risk

The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments, based on carrying
amounts as at the end of the reporting period was:

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Fixed rate instruments


Financial liabilities 176,780 249,171 898 1,457

Floating rate instruments


Financial liabilities 594,307 704,083 - -

175 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

30. Financial instruments (continued)

(f) Market risk (continued)

(ii) Interest rate risk (continued)

Interest rate risk sensitivity analysis

(a) Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial liabilities at fair value through profit or loss, and the Group does
not designate derivatives as hedging instruments under a fair value hedge accounting model. Therefore, a change in
interest rates at the end of the reporting period would not affect profit or loss.

(b) Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points (“bp”) in interest rates at the end of the reporting period would have increased/(decreased)
equity and post-tax profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular
foreign currency rates, remained constant.

Equity Profit or loss

100 bp 100 bp 100 bp 100 bp


increase decrease increase decrease
Group RM’000 RM’000 RM’000 RM’000

2016
Floating rate instruments - - (4,517) 4,517

2015
Floating rate instruments - - (5,281) 5,281

176 Scomi Group Bhd


Annual Report 2016
30. Financial instruments (continued)

(g) Hedging activities

(i) Cash flow hedge

The Group has entered into an interest rate swap to hedge the cash flow risk in relation to the fixed interest rate of Guaranteed
Serial Bonds. The interest rate swap has the same nominal value of RM160,000,000 (2015: RM215,000,000) and is settled every
six monthly, consistent with the interest repayment schedule of the bond.

The following table indicates the periods in which the cash flows associated with the interest rate swap are expected to occur
and affect profit or loss:

Expected
Carrying Cash Under 1-2 2-5
amount flows 1 year years years
Group RM’000 RM’000 RM’000 RM’000 RM’000

2016
Interest rate swap 44,092 40,008 14,699 25,309 -

2015
Interest rate swap 52,150 41,367 12,346 21,451 7,570

During the financial year, a loss of RM8,125,000 (2015: RM23,057,000) was recognised in other comprehensive income and gain
of RM9,255,000 (2015: RM28,012,000) was reclassified from equity to profit or loss as finance income.

Ineffective loss amounting to RM685,000 was recognised in profit or loss during the year in respect of the hedge.

(h) Fair value of information

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term borrowings reasonably
approximate fair values due to the relatively short term nature of these financial instruments.

It was not practicable to estimate the fair value of the Group’s investment in unquoted shares due to the lack of comparable quoted
prices in an active market and the fair value cannot be reliably measured.

177 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

30. Financial instruments (continued)

(h) Fair value of information (continued)

The table below analyses financial instruments carried at fair value and those not carried at fair value for which fair value is disclosed,
together with their fair values and carrying amounts shown in the statement of financial position.

Fair value of financial instruments Fair value of financial instruments not


carried at fair value carried at fair value Total Carrying
Group Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total fair value amount
2016 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial assets
Available-for-sale financial asset 104 - - 104 - - - - 104 104

104 - - 104 - - - - 104 104

Financial liabilities
Bonds - - - - - - 155,765 155,765 155,765 155,765
Cross currency interest rate swaps - 44,092 - 44,092 - - - - 44,092 44,092
Term loans - - - - - - 248,401 248,401 248,401 248,401
Bankers’ acceptances - - - - - - 760 760 760 760
Revolving credits - - - - - - 284,122 284,122 284,122 284,122
Finance lease liabilities - - - - - - 7,760 7,760 7,760 7,760

- 44,092 - 44,092 - - 696,808 696,808 740,900 740,900

Company
Financial liabilities
Term loans - - - - - - 504 504 504 504
Finance lease liabilities - - - - - - 394 394 394 394

- - - - - - 898 898 898 898

178 Scomi Group Bhd


Annual Report 2016
30. Financial instruments (continued)

(h) Fair value of information (continued)

Fair value of financial instruments Fair value of financial instruments not


carried at fair value carried at fair value Total Carrying
Group Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total fair value amount
2015 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000

Financial assets
Available-for-sale financial asset 104 - - 104 - - - - 104 104

104 - - 104 - - - - 104 104

Financial liabilities
Bonds - - - - - - 210,444 210,444 210,444 210,444
Cross currency interest rate swaps - 52,150 - 52,150 - - - - 52,150 52,150
Term loans - - - - - - 322,337 322,337 322,337 322,337
Bankers’ acceptances - - - - - - 3,884 3,884 3,884 3,884
Trust receipts - - - - - - 17,730 17,730 17,730 17,730
Revolving credits - - - - - - 306,156 306,156 306,156 306,156
Finance lease liabilities 10,067 10,067 10,067 10,067
- - - - - -

- 52,150 - 52,150 - - 870,618 870,618 922,768 922,768

Company
Financial liabilities
Term loans - - - - - - 901 901 901 901
Finance lease liabilities 556 556 556 556
- - - - - -

- - - - - - 1,457 1,457 1,457 1,457

Level 2 fair value

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash
flows, discounted at the market rate of interest at the end of the reporting period. For other borrowings, the market rate of interest is
determined by reference to similar borrowing arrangements.

Transfers between Level 1 and Level 2 fair values

There has been no transfer between Level 1 and 2 fair values during the financial year (2015: no transfer in either directions).

Level 3 fair value

Financial instruments not carried at fair value

Type Description of valuation technique and inputs used


Bank loans, finance Discounted cash flows using a rate based on current
leases and Guaranteed market rate of borrowing of the respective Group
Serial Bonds entities at the reporting date.

179 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

31. Capital management

The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability to continue as a going
concern, so as to maintain investor, creditor and market confidence and to sustain future development of the business. The Directors
monitor and are determined to maintain an optimal debt-to-equity ratio that complies with debt covenants and regulatory requirements.

The debt-to-equity ratios at 31 March 2016 and at 31 March 2015 were as follows:

Group

2016 2015
RM’000 RM’000
Restated

Total loans and borrowings (Note 20) 771,178 953,254


Less: Cash and bank balances (Note 13) (188,047) (236,330)

Net debt 583,131 716,924

Total equity 653,528 637,181

Net debt-to-equity ratio 0.89 1.13

There was no change in the Group’s approach to capital management during the financial year.

Under the requirement of Bursa Malaysia Securities Berhad Practice Note No. 17/2005, the Company is required to maintain a consolidated
shareholders’ equity equal to or not less than the 25 percent of the issued and paid-up capital (excluding treasury shares) and such
shareholders’ equity is not less than RM40 million. The Company has complied with this requirement.

The Group is also required to comply with various financial covenants, details of which are set out in Note 20.

180 Scomi Group Bhd


Annual Report 2016
32. Operating leases

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Less than one year 9,356 12,512 1,964 3,325


Between one and five years 11,242 8,533 - 2,217
More than five years - - - -

20,598 21,045 1,964 5,542

The Group and the Company lease office space under operating leases. The leases typically run for a period of 3 years from date of agreement,
with an option to renew the leases after that date.

Office space has been sublet by the Company to its subsidiaries. The lease and sublease expire in December 2016.

Leases as lessor

The Group lease out their fleet of coaches under operating leases.The future minimum lease receivables under non-cancellable leases are
as follows:

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Less than one year 5,520 5,520 - -


Between one and five years 16,489 22,009 - -
More than five years - - - -

22,009 27,529 - -

181 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

33. Other commitments and contingent liabilities

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Authorised capital expenditure but not recognised in the


financial statements
Contracted 2,935 90,325 - -
Not contracted 105,779 83,374 - -

108,714 173,699 - -

Analysed as:
Property, plant and equipment 108,714 173,699 - -

Contingent liabilities
Taxation 2,000 1,800 - -

The Directors are of the opinion that provisions are not required in respect of the contingent liabilities, as it is not probable that a future
sacrifice of economic benefits will be required.

34. Related parties

Identity of related parties

For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the Company has the
ability, directly or indirectly, to control or jointly control the party or exercise significant influence over the party in making financial and
operating decisions, or vice versa, or where the Group or the Company and the party are subject to common control. Related parties may
be individuals or other entities.

Related parties also include key management personnel defined as those persons having authority and responsibility for planning, directing
and controlling the activities of the Group either directly or indirectly and entity that provides key management personnel services to the
Group. The key management personnel include all the Directors of the Group, and certain members of senior management of the Group.

The Group has related party relationship with subsidiaries, associates and key management personnel.

182 Scomi Group Bhd


Annual Report 2016
34. Related parties (continued)

Significant related party transactions

Related party transactions have been entered into in the normal course of business under negotiated terms. The significant related party
transactions of the Group and the Company are shown below. The balances related to the transactions below are shown in Notes 10 and 19.

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

A. Subsidiaries
Business development charges absorbed
by the Company 13,873 - 13,873 -
Interest income on advances - - 1,633 2,590
Management fee receivable - - - 933
Rental income on investment properties - - 408 408

B. Related parties
Share registration fee paid to Symphony 55 198 38 175
Human resources services fee paid to Symphony 390 570 24 121
Airline ticketing services provided by Lintas 741 2,222 25 815
Advances to SEB - - 4,698 1,869
Advances from SESB - - (4,195) (2,775)
Reversal of impairment loss inter-company - - - (129,464)
Impairment loss inter-company receivables - - - 70,206

Symphony Share Registers Sdn. Bhd., Symphony Corporatehouse Sdn. Bhd. and Symphony BPO Solutions Sdn. Bhd. (collectively known as
“Symphony”) and Lintas Travel & Tours Sdn. Bhd. (“Lintas”) are companies connected to certain Directors.

C. Key management personnel

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Salaries and short-term employee benefits 9,142 10,995 5,177 3,973


Defined contribution plan 1,125 1,162 775 558

10,267 12,157 5,952 4,531

Other key management personnel comprise persons other than the Directors of Group Entities, having authority and responsibility for
planning, directing and controlling the activities of the Group Entities either directly or indirectly.

183 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

35. Directors’ remuneration

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

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000

Non-executive directors
Fees 658 * 829 492 * 539
Other emoluments 126 119 98 95

784 948 590 634

Executive director
Salaries and bonuses 2,490 2,705 2,490 2,705
Fees 120 * 27 - -
Defined contribution plan 399 415 399 415
Estimated monetary value of benefits-in-kind 128 254 128 254

3,137 3,401 3,017 3,374

3,921 4,349 3,607 4,008

* The Proposed Annual Directors’ Fees are subject to the shareholders’ approval at the forthcoming Annual General Meeting of the
Company or of the respective subsidiary.

36. Significant event during the financial year

During the financial year, the following events have occurred in SEB Group:

(a) Significant events in relation to the Project I:

As disclosed in Note 1(d)(i)(a), Project I activities and work continued normally, with the customer approving claims, billings and
making all payments except for the delayed payments on certain contractors’ interim claims where the customer and the SEB Group
have agreed for the interim claims to be settled through arbitration. As a result, a panel of three arbitrators have been appointed in
December 2015. The arbitration proceedings is expected to be completed within 18 months.

184 Scomi Group Bhd


Annual Report 2016
36. Significant event during the financial year (continued)

(b) Significant events in relation to the Project II:

During the financial year, due to various circumstances, Project II has encountered delays and the project milestones have not been
achieved on schedule. Scomi Transit Projects Sdn Bhd (“STP”), a subsidiary of Scomi Engineering Bhd (“SEB”), received a letter from
PMB on 4 January 2016 and 18 February 2016 respectively, being notification for STP to remedy the delay with a remedial period of 60
days. Upon expiry of the 60 days remedial period, PMB would terminate the principal contract, supplemental agreement and second
supplemental contract (collectively, “the Contract”).

On 1 March 2016, STP obtained an ex-parte injunction against PMB for the notices of remedy and restraining PMB from terminating
the Contract. Subsequently, the ex-parte injunction was extended until 1 April 2016.

On 9 March 2016, STP received a letter from PMB dated 8 March 2016, being notification for STP to remedy the delay with a remedial
period of 60 days. Upon expiry of the 60 days remedial period, PMB would terminate the Contract. As of the date of the financial
statements, there is no development with regard to this notice.

On 15 March 2016, STP received a letter dated 11 March 2016 from PMB’s solicitors stating that PMB would not be relying on its two
earlier purported notices dated 4 January 2016 and 18 February 2016 and further gave an undertaking that it would not rely on these
two notices to terminate the Project II. See Note 37 for events subsequent to year end.

37. Subsequent events after the financial year

Subsequent to the financial year, the following events have occurred in SEB Group in relation to Project II:

a) Following the litigation matters in relation to Project II as disclosed in Note 36(b), on 1 April 2016, SEB Group announced that PMB
admitted that the two notices issued on 4 January 2016 and 18 February 2016 were defective and gave an undertaking to Court that
PMB would not terminate the contract. As a result, the injunction against PMB was later withdrawn by STP.

b) On 9 June 2016, STP received a notice from PMB which gave STP 14 days from the notice date to renew a performance bond connected
with Project II, failing which the Contract will be terminated. Following the receipt of the Notice of Termination (“the Notice”) dated 9
June 2016 issued by PMB, STP initiated legal proceedings against PMB by a way of Originating Summons dated 20 June 2016.

On 21 June 2016, the High Court in Kuala Lumpur granted an interim order and injunction restraining PMB from terminating the
Project II contract based on the Notice or otherwise giving effect to the Notice pending the hearing and disposal of the Originating
Summons until further order of the Court. STP served claims on PMB amounting to approximately RM365 million pursuant to Section
5 of the Construction Industry Payment & Adjudication Act 2012 (“CIPAA”) in respect of Contract price variations and claims for
extension of time and related costs/price increases (“CIPAA Payment Claims”). In the event PMB disputes the CIPAA Payment Claims,
STP will refer the CIPAA Payment Claims to adjudication under CIPAA.

c) On 27 June 2016, following an inter partes hearing on even date, the Court extended the term of an injunction granted in the favour
of STP until further order of the Court. The Court will hear the parties legal submission on the injunction and the Originating Summons
on 21 July 2016.

185 Scomi Group Bhd


Annual Report 2016
Notes to the
financial statements (cont’d)

38. Prior year adjustment

During the financial year, SESB Group discovered an inventory variance amounting to RM16.1 million during an ad-hoc physical inventory
count conducted at one of its foreign subsidiaries arising from SESB Group’s periodic review of financial reports from its subsidiaries.

On completion of an investigation on the inventory variance, SESB Group had discovered evidence of fraudulent reporting on the
subsidiary’s inventory balances which resulted in an overstatement of the inventory balances for the financial year ended 31 March 2016 by
approximately RM4.7 million and for the financial year ended 31 March 2015 by approximately RM11.4 million. SESB Group is in the process
of initiating legal action against the parties involved.

Based on this, the Group has restated the comparatives for inventory balance as at 31 March 2015 and its corresponding effects on the
income statement for the financial year ended 31 March 2015 as follows:-

Group
31.3.2015

Previously Prior year


reported adjustments Restated
2015 RM’000 RM’000 RM’000

Statement of financial position


Inventories 252,979 (11,453) 241,526
Current tax liabilities (37,747) 2,862 (34,885)

Statement of changes in equity


Retained earnings (132,333) 5,157 (127,176)
Translation reserve 82,249 484 82,733
Non-controlling interests (539,548) 2,950 (536,598)

Statement of profit or loss and other comprehensive income


Cost of sales/services (1,432,032) (10,470) (1,442,502)
Profit before tax 114,377 (10,470) 103,907
Tax expenses (40,152) 2,617 (37,535)
Profit for the year 74,154 (7,853) 66,301
Non-controlling interests 24,741 (2,696) 22,045
Foreign currency translation differences for foreign operation (8,799) (738) (9,537)
Total comprehensive income 70,311 (8,591) 61,720

186 Scomi Group Bhd


Annual Report 2016
39. Supplementary financial information on the breakdown of realised and unrealised profits or losses

The breakdown of the retained earnings of the Group and of the Company as at 31 March, into realised and unrealised profits, pursuant to
Paragraphs 2.06 and 2.23 of Bursa Malaysia Main Market Listing Requirements, are as follows:

Group Company

2016 2015 2016 2015


RM’000 RM’000 RM’000 RM’000
Restated

Total retained earnings of the Company and its subsidiaries:


- realised 1,253,371 1,028,871 626,669 681,041
- unrealised (318,423) (400,601) 2,021 (3,726)

934,948 628,270 628,690 677,315

Total share of accumulated losses from associates:


- realised (9,418) (16,857) - -
- unrealised - - - -

Total share of retained earnings from joint ventures:


- realised 13,837 24,465 - -
- unrealised - - - -

939,367 635,878 628,690 677,315


Less: Consolidation adjustments (805,981) (508,702) - -

Total retained earnings 133,386 127,176 628,690 677,315

The determination of realised and unrealised profits is based on the Guidance of Special Matter No. 1, Determination of Realised and
Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the
Malaysian Institute of Accountants on 20 December 2010.

187 Scomi Group Bhd


Annual Report 2016
Statement by Directors
pursuant to Section 169(15) of the Companies Act, 1965

In the opinion of the Directors, the financial statements set out on pages 073 to 186 are drawn up in accordance with Malaysian Financial Reporting
Standards, International Financial Reporting Standards and the requirements of Companies Act, 1965 in Malaysia so as to give a true and fair view
of the financial position of the Group and of the Company as of 31 March 2016 and of their financial performance and cash flows for the financial
year then ended.

In the opinion of the Directors, the information set out in Note 39 on page 187 to the financial statements has been compiled in accordance with
Guidance on Special Matter No.1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosures Pursuant to Bursa Malaysia
Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants, and presented based on the format prescribed by Bursa
Malaysia Securities Berhad.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Dato’ Mohammed Azlan bin Hashim

Shah Hakim @ Shahzanim bin Zain

Petaling Jaya

Date: 18 July 2016

188 Scomi Group Bhd


Annual Report 2016
Statutory declaration
pursuant to Section 169(16) of the Companies Act, 1965

I, Mukhnizam bin Mahmud, 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 073 to 187 are, to the best of my knowledge and belief, 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.

Subscribed and solemnly declared by the above named in Petaling Jaya, on 18 July 2016.

Mukhnizam bin Mahmud

Before me:

Commission for Oaths

189 Scomi Group Bhd


Annual Report 2016
Independent auditors’ report
to the members of Scomi Group Bhd

Report on the Financial Statements

We have audited the financial statements of Scomi Group Bhd, which comprise the statements of financial position as at 31 March 2016 of the
Group and of the Company, and the statements of profit or loss and other comprehensive income, changes in equity and cash flows of the Group
and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on
pages 073 to 186.

Directors’ Responsibility for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements so as to give a true and fair view in accordance with
Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of Companies Act, 1965 in Malaysia.
The Directors are also responsible for such internal control as the Directors determine is necessary to enable the preparation of financial statements
that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved
standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures
selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud
or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements that give a
true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion
on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Group and of the Company as at 31 March 2016 and
of their financial performance and cash flows for the year then ended in accordance with Malaysian Financial Reporting Standards, International
Financial Reporting Standards and the requirements of Companies Act, 1965 in Malaysia.

Emphasis of Matter

Without qualifying our opinion, we draw your attention to the following matter disclosed in the audit report of the consolidated financial
statements of a subsidiary, Scomi Engineering Berhad (“SEB Group”) for the financial year ended 31 March 2016.

A subsidiary of SEB Group, Scomi Transit Projects Sdn Bhd (“STP”), following receipt of the Notice of Termination dated 9 June 2016 (“Notice”)
issued by Prasarana Malaysia Berhad (“PMB”) had initiated legal proceedings against PMB. The High Court has on 21 June 2016 granted STP an
interim order and injunction restraining PMB from terminating the Kuala Lumpur Monorail Fleet Expansion Project (“the Project”) contract with
STP based on the Notice or otherwise giving effect to the Notice pending the hearing and disposal of the Originating Summons and further
orders of the High Court. As at 31 March 2016, an amount of RM219.9 million in respect of this Project is included in the amount due from contract
customer disclosed in Note 10(c) of the financial statements of the Group. At the date of the auditors’ report of SEB Group, the hearing on this
matter is currently on-going and outcome of this legal proceeding cannot presently be determined.

In relation to the above, SEB Group has yet to obtain further extensions of the facilities from the lenders who provided financing for the aforesaid
Project. As disclosed in Note 20 of the financial statements of the Group, it has outstanding loans and borrowings amounting to RM219.4 million
due to the project lenders that are classified as current liabilities.

190 Scomi Group Bhd


Annual Report 2016
Notwithstanding the foregoing, the financial statements of SEB Group has been prepared on a going concern basis by its’ Directors. This is based
on the assumptions that SEB Group will achieve a positive outcome in its litigation proceedings against PMB, continued financial support from
project lenders and the ability of SEB Group to attain profitable operations to generate sufficient cash flows to fulfil SEB Group’s obligations as
and when they fall due.

Accordingly, the financial statements of the SEB Group do not include any adjustments relating to the recoverability and classification of recorded
assets amounts or the classification and additional amounts of liabilities that may be necessary if SEB Group were unable to continue as going
concerns.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of
which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
(b) We have considered the accounts and auditors’ reports of all the subsidiaries of which we have not acted as auditors, which is indicated in
Note 6 to the financial statements.
(c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the Company’s financial statements are in form
and content appropriate and proper for the purposes of the preparation of the financial statements of the Group and we have received
satisfactory information and explanations required by us for those purposes.
(d) The audit reports on the accounts of the subsidiaries did not contain any qualification or any adverse comment made under Section 174(3)
of the Act.

Other Reporting Responsibilities

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The information set out in Note 39 on
page 187 to the financial statements has been compiled by the Company as required by the Bursa Malaysia Securities Berhad Listing Requirements
and is not required by the Malaysian Financial Reporting Standards or International Financial Reporting Standards. We have extended our audit
procedures to report on the process of compilation of such information. In our opinion, the information has been properly compiled, in all
material respects, in accordance with the Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context
of Disclosures Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, issued by the Malaysian Institute of Accountants and presented
based on the format prescribed by Bursa Malaysia Securities Berhad.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and
for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG Muhammad Azman bin Che Ani


Firm Number: AF 0758 Approval Number: 2922/04/18(J)
Chartered Accountants Chartered Accountant

Petaling Jaya,

Date: 18 July 2016

191 Scomi Group Bhd


Annual Report 2016
Analysis of shareholdings
As at 30 June 2016

Authorised share capital : RM300,000,000.00 divided into 3,000,000,000 ordinary shares of RM0.10 each

Issued and paid-up capital : RM191,751,014.10 divided into 1,917,510,141 ordinary shares of RM0.10 each. This included 14,427,200
ordinary shares purchased by the Company under share buy-back scheme and retained as treasury shares
(“Treasury Shares”)

Types of shares : Ordinary shares of RM0.10 each

Voting rights : One vote per ordinary share

Distribution of Shareholdings as at 30 June 2016

Shareholder Shareholding
No. of No. of Shares
Size of shareholding Shareholders % Held %*
Less than 100 281 1.42 10,980 0.00
100 to 1,000 1,775 8.96 1,506,078 0.08
1,001 to 10,000 8,948 45.17 50,614,918 2.66
10,001 to 100,000 7,490 37.81 269,339,164 14.15
100,001 to less than 5% of issued shares 1,312 6.62 1,004,991,614 52.81
5% and above of issued shares 2 0.01 576,620,187 30.30
Total: 19,808 100.00 1,903,082,941 100.00

Note:
* The percentage shareholdings have been computed net of the Company’s Treasury Shares.

List of Top Thirty (30) Largest Shareholders as at 30 June 2016

No Name of Shareholder No. of Shares Held %*


1. IJM Corporation Berhad 467,982,787 24.59
2. UOBM Nominees (Asing) Sdn Bhd 108,637,400 5.71
TAEL One Partners Ltd for Amadia Investments Ltd
3. Kaspadu Sdn Bhd 85,396,630 4.49
4. UOB Kay Hian Nominees (Asing) Sdn Bhd 53,610,250 2.82
Exempt An for UOB Kay Hian Pte Ltd (A/C Clients)
5. UOB Kay Hian Nominees (Tempatan) Sdn Bhd 33,053,055 1.74
Multi-Purpose Credit Sdn Bhd for Kaspadu Sdn Bhd
6. RHB Capital Nominees (Tempatan) Sdn Bhd 27,000,000 1.42
Pledged Securities Account for Kaspadu Sdn Bhd (SBSSB 1311005)
7. Citigroup Nominees (Asing) Sdn Bhd 25,814,500 1.36
CBNY for Dimensional Emerging Markets Value Fund
8. EB Nominees (Tempatan) Sendirian Berhad 25,700,000 1.35
Pledged Securities Account for Kaspadu Sdn Bhd (SFC)
9. CIMSEC Nominees (Tempatan) Sdn Bhd 23,000,000 1.21
CIMB for United Flagship Sdn Bhd (PB)

192 Scomi Group Bhd


Annual Report 2016
List of Top Thirty (30) Largest Shareholders as at 30 June 2016

No Name of Shareholder No. of Shares Held %*


10. Kenanga Nominees (Tempatan) Sdn Bhd 20,975,200 1.10
Pledged Securities Account for Ong Tee Thong
11. CIMSEC Nominees (Tempatan) Sdn Bhd 17,962,300 0.94
CIMB for Seow Lun Hoo @ Seow Wah Chong (PB)
12. HLB Nominees (Tempatan) Sdn Bhd 16,010,000 0.84
Pledged Securities Account for Abu Sahid Bin Mohamed
13. CIMSEC Nominees (Tempatan) Sdn Bhd 15,700,000 0.82
CIMB for Siew Mun Chuang (PB)
14. Lim Fong Peng @ Lim Fung Feng 14,492,240 0.76
15. ABB Nominee (Tempatan) Sdn Bhd 13,750,000 0.72
Pledged Securities Account for Gajahrimau Capital Sdn Bhd
16. Chan Kid Ching 11,289,100 0.59
17. Citigroup Nominees (Asing) Sdn Bhd 10,459,800 0.55
CBNY for DFA Emerging Markets Small Cap Series
18. Citigroup Nominees (Asing) Sdn Bhd 10,163,700 0.53
CBNY for Emerging Market Core Equity Portfolio DFA Investment Dimensions Group Inc
19. UOBM Nominees (Tempatan) Sdn Bhd 9,970,000 0.52
TOIC Investments Ltd for Zubaidi Bin Harun
20. Public Nominees (Tempatan) Sdn Bhd 9,023,600 0.47
Pledged Securities Account for Tung Ah Kiong (E-KLG)
21 CIMSEC Nominees (Asing) Sdn Bhd 8,949,125 0.47
Exempt An for CIMB Securities (Singapore) Pte Ltd (Retail Clients)
22. HSBC Nominees (Asing) Sdn Bhd 8,665,000 0.46
Exempt An for Bank Julius Baer & Co Ltd (Singapore Bch)
23 Citigroup Nominees (Asing) Sdn Bhd 6,582,087 0.35
Goldman Sachs International
24. HSBC Nominees (Asing) Sdn Bhd 5,050,800 0.27
Exempt An for Credit Suisse (SG BR-TST-Asing)
25. UOBM Nominees (Tempatan) Sdn Bhd 5,030,000 0.26
TOIC Investments Ltd for Helmy Had Bin Sabtu
26. CIMSEC Nominees (Tempatan) Sdn Bhd 4,730,275 0.25
CIMB for Sapura Capital Sdn Bhd (PB)
27. Au Yong Mun Yue 4,600,000 0.24
28. Low Chu Mooi 4,290,000 0.23
29. HSBC Nominees (Tempatan) Sdn Bhd 4,289,500 0.23
HSBC (M) Trustee Bhd for Pertubuhan Keselamatan Sosial (Pacific6939-407)
30. Affin Hwang Nominees (Tempatan) Sdn Bhd 4,162,500 0.22
Pledged Securities Account for Ng Kong Ghee (M02)

Note:
* The percentage shareholdings have been computed net of the Company’s Treasury Shares.

193 Scomi Group Bhd


Annual Report 2016
Analysis of shareholdings
As at 30 June 2016 (cont’d)

Shareholdings of Substantial Shareholders as at 30 June 2016

Direct Indirect
No. of Shares No. of Shares
Name of Shareholder Held %* Held %*
IJM Corporation Berhad 467,982,787 24.59 - -
Kaspadu Sdn Bhd 171,149,685 (1)
8.99 1,125,340 (2)
0.06
Shah Hakim @ Shahzanim Bin Zain 1,950,100 (3)
0.10 175,917,025 (4)
9.24
Dato’ Kamaluddin Bin Abdullah - - 172,275,025 (5)
9.05
Amadia Investments Ltd 151,637,400 (6)
7.97 - -
TAEL One Partners Ltd (acting in its capacity as the general
partner of The Asian Entrepreneur Legacy One, L.P.) (the “Fund”) - - 151,637,400(7) 7.97
United Overseas Bank Limited - - 151,637,400 (8)
7.97

Notes:
* The percentage shareholdings have been computed net of the Company’s Treasury Shares.
(1) 85,753,055 shares held through RHB Capital Nominees (Tempatan) Sdn Bhd, EB Nominees (Tempatan) Sdn Bhd and UOB Kay Hian Nominees (Tempatan) Sdn Bhd.
(2) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through its shareholding in Onstream Marine Sdn Bhd.
(3) 1,421,000 shares held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain (Margin) and Maybank
Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain.
(4) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd and Rentak Rimbun Sdn Bhd.
(5) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd.
(6) Held through UOBM Nominees (Asing) Sdn Bhd for TAEL One Partners Ltd for Amadia Investments Ltd and HLG Nominees (Asing) Sdn Bhd Exempt An for UOB Kay Hian Pte Ltd (A/C
Clients).
(7) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965. Amadia Investments Ltd is an investment vehicle of the Fund.
(8) Deemed interested by virtue of its investment in the Fund.

Shareholdings of Directors as at 30 June 2016

Direct Indirect
No. of Shares No. of Shares
Name of Director Held %* Held %*
Scomi Group Bhd
Dato’ Mohammed Azlan Bin Hashim - - - -
Tan Sri Nik Mohamed Bin Nik Yaacob - - - -
Tan Sri Mohamed Azman Bin Yahya - - 13,750,000 (1)
0.72
Dato’ Sreesanthan A/L Eliathamby - - - -
Dato’ Abdul Hamid Bin Sh Mohamed - - - -
Foong Choong Hong 410,000 0.02 - -
Lee Chun Fai - - - -
Cyrus Eruch Daruwalla - - - -
Shah Hakim @ Shahzanim Bin Zain 1,950,100(2) 0.10 175,917,025(3) 9.24

194 Scomi Group Bhd


Annual Report 2016
Related Companies
- Scomi Engineering Bhd (“SEB”)

Direct Indirect
No. of Shares No. of Shares
Name of Director Held % Held %
Shah Hakim @ Shahzanim Bin Zain 623,000 (4)
0.18 537,500 (5)
0.16

- Scomi Energy Services Bhd (“SES”)

Direct Indirect
No. of Shares No. of Shares
Name of Director Held % Held %
Shah Hakim @ Shahzanim Bin Zain 2,108,000 (6)
0.09 56,900 (5) #

Notes:
* The percentage shareholdings have been computed net of the Company’s Treasury Shares.
# Negligible.
(1) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his and his wife’s direct shareholdings in Gajahrimau Capital Sdn Bhd, whereby all the 13,750,000
shares are held through ABB Nominee (Tempatan) Sdn Bhd.
(2) 1,421,000 shares held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain (Margin) and Maybank
Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain.
(3) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Kaspadu Sdn Bhd and Rentak Rimbun Sdn Bhd.
(4) 123,000 shares held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain (Margin).
(5) Deemed interested by virtue of Section 6A(4) of the Companies Act, 1965 through his shareholding in Rentak Rimbun Sdn Bhd.
(6) Held through Maybank Securities Nominees (Tempatan) Sdn Bhd pledged Securities Account for Shah Hakim @ Shahzanim Bin Zain (Margin).

195 Scomi Group Bhd


Annual Report 2016
LIST OF PROPERTIES
As At 31 March 2016

No. Registered Owner Description/Location Existing use Tenure of land: Land/Built Up Audited NBV as Approximate
address Freehold or area at 31.03.16 (RM age of building
leasehold (years)/ '000) (FY2016)
date of acquisition

1 P.T. Rig Tenders Office building Office building Freehold/ Land area : n/a - 16 years
Indonesia, Tbk Wisma Rig Tenders 29.07.1993 Built- up area:
Jl. Dr Saharjo No.129 512 sq metres
Jakarta 12860

2 P.T. Rig Tenders Land Land for the Freehold/ Land area : 1,489.89 n/a
Indonesia, Tbk Jl. Dr Saharjo No.129 building as 01.01.1997 490 sq metres
Jakarta 12860 mentioned in Built up area
items 1 : n/a

3 P.T. Rig Tenders Single storey house Staff Freehold Land area : n/a - 18 years
Indonesia, Tbk Simpang Gatot Subroto accomodation 01.10.1995 Built-up area :
VIII, Jl. Garuda no.8 371 sq metres
Banjarmasin 70236

4 P.T. Rig Tenders Single storey house Staff Freehold Land area : n/a - 19 years
Indonesia, Tbk Jl. Veteran Simpang SMP accomodation 31.12.1996 Built-up area :
VII Rt.29 no. 66 388 sq metres
Banjarmasin 70232

5 P.T. Rig Tenders Land Land for the Freehold Land area: 190 10.88 n/a
Indonesia, Tbk Jl Belitung Darat no.88 building as 09.01.2003 sq metres
Banjarmasin 70116 mentioned in Built-up area:
item 6 n/a

6 P.T. Rig Tenders Office building Office building Freehold Land area: n/a - 21 years
Indonesia, Tbk Jl Belitung Darat no.88 06.05.1997 Built-up area :
Banjarmasin 70116 972 sq metres

7 P.T. Rig Tenders Single storey house Staff Freehold Land area : n/a 17.15 23 years
Indonesia, Tbk Persada Mas Bumi Asri accomodation 31.10.2000 Built-up area:
Barat, Jl Ahmad Yani no. 8 200 sq metres
Banjarmasin

196 Scomi Group Bhd


Annual Report 2016
No. Registered Owner Description/Location Existing use Tenure of land: Land/Built Up Audited NBV as Approximate
address Freehold or area at 31.03.16 (RM age of building
leasehold (years)/ '000) (FY2016)
date of acquisition

8 Scomi Oiltools Master: Land held under Five storey Freehold Built up area Land & 19 years
Sdn Bhd Geran 46494, Lot 42410 shop office 31.10.1999 11,755 sq ft building: 456
Pekan Cempaka,
Daerah Petaling,
Negeri Selangor,
Malaysia
(formerly known
as PT 42410 H.S.(D)
135924 part of Geran
35997 Lot 102
Geran 40176
Lot 15386 and
Geran 43061
Lot 15386,
Mukim of Sungai Buloh
Daerah Petaling,
Negeri Selangor,
Malaysia)

9 Scomi Oiltools Kemaman Warehouse Warehouse Not applicable Built-up areas: Building: Nil 25 years
Sdn Bhd No. 24, Kemaman for office use, 15.11.1991 19,200 sq ft
Supply Base, laboratory,
24007 Kemaman, milling and
Terengganu, Malaysia storage
activities

10 Scomi Sosma Land held under Land Freehold Land area: 176 n/a
Sdn Bhd Geran 250133, 7.4.2011 0.7412 hectares
Lot 7627,
Mukim of Sepang,
Selangor Darul Ehsan

Land held under Land Freehold Land area: 148 n/a


Geran 250134, 7.4.2011 0.6229 hectares
Lot 7628,
Mukim of Sepang,
Selangor Darul Ehsan

Land held under Land Freehold Land area: 166 n/a


Geran 250135, 7.4.2011 0.6993 hectares
Lot 7629,
Mukim of Sepang,
Selangor Darull Ehsan

197 Scomi Group Bhd


Annual Report 2016
LIST OF PROPERTIES
As At 31 March 2016 (cont’d)

No. Registered Owner Description/Location Existing use Tenure of land: Land/Built Up Audited NBV as Approximate
address Freehold or area at 31.03.16 (RM age of building
leasehold (years)/ '000) (FY2016)
date of acquisition

11 PT. Inti Jatam Pura Jl. Raya Duri-Dumai, Office and Leasehold Land area: Nil 26 years
KM. 131 Duri, Riau 28884 workshop 18.06.2014- 23,851m2
Indonesia 17.06.2034 Building area:
(20 years) 207.5m2

12 Scomi Coach Land and Building Factory and Freehold Land area: Land: 8,020 Building 1 :
Sdn Bhd EMR 2751 Lot 795 and EMR Office 15.04.1996 61,714m2 Building 1 6.75 yrs
2616 Lot 796 Building area: 22,168 Building 2 :
Mukim Serendah Daerah 26,556 m2 Building 2: 19.25 yrs
Hulu Selangor 8,580
Malaysia

13 Scomi Group Bhd Land and building: Office and Freehold Land area: Land & building : 11 years
Geran 58840 Lot 64254 warehouse 23.12.2009 1,575m2 4,366
Mukim of Damansara Building area:
District of Petaling 1,795m2
Selangor Darull Ehsan

198 Scomi Group Bhd


Annual Report 2016
corporate directory

CORPORATE Scomi Sosma Sdn Bhd India (Mumbai)


Level 17, 1 First Avenue KMC Oiltools India Private Ltd
Scomi Group Bhd Bandar Utama A-305, 3rd Floor, Western Edge II
Level 17, 1 First Avenue 47800 Petaling Jaya Kanakia Spaces
Bandar Utama Selangor Darul Ehsan Western Express Highway
47800 Petaling Jaya Malaysia Borivali East, Mumbai – 400 066
Selangor Darul Ehsan Tel: +603 7717 3000 Maharashtra, India
Malaysia Fax: +603 7728 5258
Tel: +603 7717 3000 Urban Transit Pvt Ltd
Fax: +603 7725 5258 Mumbai Monorail Project Office
Operating Locations 3rd Floor, Sona Building
Scomi Engineering Bhd Plot No. C/20
Level 17, 1 First Avenue Australia (Perth) 1st Road, Chembur (East)
Bandar Utama Scomi Oiltools Pty Ltd Mumbai, 400071
47800 Petaling Jaya 15, Boulder Road India
Selangor Darul Ehsan Malaga, Western Australia
Malaysia 6090 Australia Indonesia (Balikpapan)
Tel: +603 7717 3000 PT Scomi Oiltools
Fax: +603 7728 5258 Brazil (São Paulo) Jl. Mulawarman Rt 45
Urban Transit Servicos do Brasil Ltda No. 2, Manggar
Scomi Rail Bhd Berrini Trade Centre Balikpapan 76116
Level 17, 1 First Avenue Av. Engenheiro Luis Carlos Berrini, 1700 East Kalimantan, Indonesia
Bandar Utama 11° Andar, Brooklin 04571-000
47800 Petaling Jaya São Paulo, Brazil Indonesia (Banjarmasin)
Selangor Darul Ehsan PT Batuah Abadi Lines
Malaysia Congo (Pointe Noir) Jl. Belitung Darat No. 88
Tel: +603 7717 3000 Scomi Oiltools Africa Limited Rt. 19 Banjarmasin
Fax: +603 7728 5258 Zone Industrielle de la foire Kalimantan Selatan
Pointe-Noire, Congo Indonesia
Scomi Energy Services Bhd
Level 17, 1 First Avenue Egypt (Cairo) Indonesia (Duri)
Bandar Utama Scomi Oiltools Egypt S A S PT Scomi Oiltools
47800 Petaling Jaya Km 10, Ain Sukhna Road Jl. Raya Duri Dumai Km 131
Selangor Darul Ehsan Kattamia, Oilfield Services Complex Duri, Pekanbaru
Malaysia Cairo, Egypt Sumatera 28884
Tel: +603 7717 3000 Indonesia
Fax: +603 7728 5258 France
Scomi Anticor S A E Indonesia (Jakarta)
Scomi Oiltools Sdn Bhd 6 Avenue des Amandiers PT Scomi Oiltools
Level 17, 1 First Avenue Z.A. du Mardaric Gedung Tetra Pak
Bandar Utama 04310 Peyruis Suite 101/104/103
47800 Petaling Jaya France Jl. Buncit Raya Kav 100
Selangor Darul Ehsan Jakarta Selatan 12510
Malaysia Gabon Indonesia
Tel: +603 7717 3000 Oiltools (Africa) Limited
Fax: +603 7728 5258 BP 1493 PT Rig Tenders Indonesia Tbk
Boulevard Leon Mba Gedung Tetra Pak
Port-Gentil Suite 101/104/103
Gabon Republic Jl. Buncit Raya Kav 100
Jakarta Selatan 12510
Indonesia

199 Scomi Group Bhd


Annual Report 2016
corporate directory (cont’d)

Malaysia (Kemaman) Scomi Special Vehicles Sdn Bhd Qatar


Scomi Oiltools Sdn Bhd Lot 9683 Scomi Oiltools (Cayman) Limited
Warehouse 24, Letterbox No. 72 Kawasan Perindustrian Desa Aman 940 Al-Khalidia Street, Zone No.26
Kemaman Supply Base Batu 11, Desa Aman Najma, Doha, Qatar
24007 Kemaman 47000 Sungai Buloh P.O. Box 2471
Terengganu Darul Iman Selangor Darul Ehsan
Malaysia Malaysia Russia (Moscow)
Scomi Oiltools (Rus) LLC
Malaysia (Labuan) Global Research & Technology Centre 3rd floor, bld.1 24/2, Sretenka Str
Scomi Oiltools Sdn Bhd No. 9, Jalan Astaka U8/83 107045 Moscow
Labuan Integrated Base Seksyen U8 Russia
Lot 205331935, Jalan Kinabenua 40150 Shah Alam
Letter Box 82023, Selangor Darul Ehsan Russia (Western Siberia)
87030 Labuan Federal Territory Malaysia Scomi Oiltools (Rus) LLC
Labuan, Malaysia 16 bld. 7, Industrialnaya Str
Myanmar 628616 Nizhnevartovsk
MarineCo Limited Scomi Oiltools (Thailand) Ltd Tyumen Region
Level 6 (D), Main Office Tower Unit #109, Building 1, Hotel Yangon Russia
Financial Park, Jalan Merdeka No. 91/93, Corner of Pyay Road and
P O Box 80887 Kabaraye Pagoda Road Saudi Arabia
87018 Labuan Federal Territory 8th Mile Junction Scomi Oiltools (Cayman) Limited
Labuan, Malaysia Mayangone Township (Saudi Arabia Branch)
Yangon, Myanmar c/o Tanajib for General Contracting Est.
Malaysia (Miri) P O Box 30415, Salman A-farezi Street
Scomi Oiltools Sdn Bhd Nigeria (Onne) Near Silver Tower
Lot 2164, 1st Floor Wasco Oil Service Company Nigeria Limited Behind Saudi Hollandi Bank
Saberkas Commercial Centre #9 Wharf Road Al-Khobar 31952
Jalan Pujut-Lutong Onne, Rivers State, Nigeria Kingdom of Saudi Arabia
98000 Miri
Sarawak, Malaysia Wasco Oil Service Company Nigeria Limited Thailand (Bangkok)
Onne Oil & Gas Free Zone Complex Scomi Oiltools (Thailand) Ltd
Scomi Sosma Sdn Bhd Onne, Rivers State 21st Floor, CTI Tower
Lot 7985 Nigeria 191/77, Ratchadapisek Road
Senadin Enterprise Park (Phase 9) Kwaeng Klongtoey, Khet Klongtoey
Desa Senadin Oman (Azaiba) Bangkok
Jalan Lutong-Kuala Baram Scomi Oiltools Oman LLC 10110 Thailand
98000 Miri Building No. 272, Way No. 44803
Sarawak, Malaysia Office No. 1104 (2nd Floor) Thailand (Lankrabue)
Azaiba Scomi Oiltools (Thailand) Ltd
Malaysia (Selangor) Sultanate of Oman 163, Moo 6 Tumbol Lankrabue
Scomi Coach Sdn Bhd Amphur Lankrabue
Scomi Coach Marketing Sdn Bhd Pakistan (Islamabad) Kamphaengphet
Scomi Rail Bhd Scomi Oiltools Ltd (Pakistan Branch) 62170 Thailand
Lot 795, Jalan Monorel Plot No. 212, Service Road
Sungai Choh Industrial Area, I-10/3 Thailand (Songkhla)
48000 Rawang Islamabad, Pakistan Scomi Oiltools (Thailand) Ltd
Selangor Darul Ehsan 424/9 Moo 2
Malaysia Pakistan (Karachi) Songkhla – Koh Yor Road
Scomi Oiltools Ltd (Pakistan Branch) Amphur Muang, Songkhla
B-31, Moghal Tobaco 90100 Thailand
Godown No 19-20
SITE, Karachi
Pakistan

200 Scomi Group Bhd


Annual Report 2016
Turkmenistan (Ashgabat) U.A.E. (Dubai)
Scomi Oiltools Ltd Scomi Oiltools (Cayman) Ltd
(Turkmenistan Branch) Oilfield Supply Centre
Yimpash Business Centre Building B-10, Jebel Ali
Office 101(A) Turkmenbashy Street Free Zone, Dubai
54 Ashgabat United Arab Emirates
Turkmenistan 744013
United States of America (Texas)
Turkmenistan (Balkanabat) Scomi Equipment Inc
Scomi Oiltools Ltd 6818 N. Sam Houston
(Turkmenistan Branch) Parkway West
Jebel Base #2, Jebel v. Balkanabat Houston, Texas
Turkmenistan 77064 USA

Turkmenistan (Hazar) Vietnam


Scomi Oiltools Ltd Scomi Oiltools Ltd
(Turkmenistan Branch) (Vietnam Branch)
High Road 9 kilometer c/o PTSC Supply Base
Hazar 65A, 30/4 Road, Thang Nhat Ward
Turkmenistan 745030 Vung Tau City
S R Vietnam
Turkmenistan (Turkmenbashy)
Scomi Oiltools Ltd
(Turkmenistan Branch)
Shagadam Street 8, Turkmenbashy City
Turkmenistan, 745000

U.A.E. (Abu Dhabi)


Scomi Oiltools (Cayman) Ltd
Liwa Street/Liwa Tower
Mezzanine Floor, M02
P.O. Box 45333
Abu Dhabi
United Arab Emirates

201 Scomi Group Bhd


Annual Report 2016
notice of
annual general meeting

NOTICE IS HEREBY GIVEN that the 14th Annual General Meeting of


SCOMI GROUP BHD (the “Company”) will be held at Banquet Hall,
1st Floor, Kuala Lumpur Golf & Country Club, 10 Jalan 1/70D,
Off Jalan Bukit Kiara, 60000 Kuala Lumpur, Malaysia on Thursday,
18 August 2016 at 2:30 pm to transact the following business:

AS ORDINARY BUSINESS:

To consider and, if thought fit, to pass the following as Ordinary Resolutions:

1. To receive the Audited Financial Statements for the financial year ended 31 March 2016 and the Reports of
the Directors and Auditors thereon.

2. To re-elect the following Directors who retire by rotation in accordance with Article 82 of the Articles of
Association of the Company and who being eligible, offer themselves for re-election:
(i) Dato’ Mohammed Azlan Bin Hashim; (Resolution 1)
(ii) Dato’ Sreesanthan A/L Eliathamby; and (Resolution 2)
(iii) Mr Shah Hakim @ Shahzanim Bin Zain. (Resolution 3)

3. To re-elect Mr Cyrus Eruch Daruwalla who was appointed to the Board during the year and retires in (Resolution 4)
accordance with Article 89 of the Articles of Association of the Company and who being eligible, offers
himself for re-election.

4. To approve the payment of Directors’ fees amounting to RM492,163.90 for Non-Executive Directors in (Resolution 5)
respect of the financial year ended 31 March 2016.

5. To re-appoint Messrs KPMG as Auditors of the Company for the financial year ending 31 March 2017 and to (Resolution 6)
authorise the Directors to fix their remuneration.

AS SPECIAL BUSINESS:

To consider and, if thought fit, to pass the following as Ordinary Resolutions:

6. Authority to Issue and Allot Shares pursuant to Section 132D of the Companies Act, 1965 (Resolution 7)

“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 issue and allot shares in the
Company, at any time and upon such terms and conditions and for such purposes as the Directors may in
their absolute discretion deem fit, provided that the aggregate number of shares to be issued and allotted
pursuant to this resolution does not exceed ten percent (10%) of the issued and paid-up share capital of
the Company for the time being AND THAT such authority shall continue in force until the conclusion of
the next Annual General Meeting of the Company.”

202 Scomi Group Bhd


Annual Report 2016
7. Proposed Renewal of Authority for the Purchase by the Company of its ordinary shares of up to ten (Resolution 8)
percent (10%) of the issued & paid-up share capital

“THAT, subject to the Companies Act, 1965, the Memorandum and Articles of Association of the Company,
the Main Market Listing Requirements of Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Listing
Requirements”) and the approval of the relevant authorities, approval be and is hereby given for the
Company to purchase from the market of Bursa Securities such number of ordinary shares of RM0.10 each
in the Company (“Share Buy-back”) as may be determined by the Directors from time to time, and upon
such terms and conditions as the Directors may in their absolute discretion deem fit and expedient in the
interest of the Company PROVIDED THAT the aggregate number of ordinary shares purchased and/or
held pursuant to this resolution does not exceed ten percent (10%) of the total issued and paid-up share
capital of the Company at any point in time and an amount not exceeding the total retained earnings of
approximately RM628.69 million and/or share premium account of approximately RM444.83 million of
the Company based on the Audited Financial Statements for the financial year ended 31 March 2016 be
allocated by the Company for the Share Buy-back;

THAT such authority shall commence immediately upon the passing of this resolution and shall continue
to be in force until:

(i) the conclusion of the next Annual General Meeting at which time the authority will lapse, unless by an
ordinary resolution passed at the next Annual General Meeting, the authority is renewed; or

(ii) the expiration of the period within which the next Annual General Meeting after that date is required
by law to be held; or

(iii) revoked or varied by an ordinary resolution of the shareholders of the Company in a general meeting,

whichever occurs the earliest, but not so as to prejudice the completion of purchase(s) by the Company
before the aforesaid expiry date;

THAT the Directors be and are hereby authorised to take all such steps and do all acts and deeds and to
execute, sign and deliver on behalf of the Company all necessary documents to give full effect to and for
the purpose of completing or implementing the Share Buy-back in the manner set out in the Share Buy-
back Statement dated 26 July 2016, AND THAT following completion of the Share Buy-back, the power
to cancel or retain as treasury shares, any or all of the shares so purchased, resell on the market of Bursa
Securities or distribute as dividends to the shareholders of the Company or subsequently cancel, any or all
of the treasury shares, with full power to assent to any condition, revaluation, modification, variation and/
or amendment in any manner as may be required by any relevant authority or otherwise as they deem fit in
the best interests of the Company.”

8. To transact any other business of the Company for which due notice shall have been given in accordance
with the Companies Act, 1965 and the Articles of Association of the Company.

By Order of the Board

ONG WEI LENG (MAICSA 7053539)


CHONG MEI YAN (MAICSA 7047707)

Company Secretaries
Petaling Jaya

Date: 26 July 2016

203 Scomi Group Bhd


Annual Report 2016
notice of
annual general meeting (cont’d)

Notes: Audited Financial Statements for the financial year ended 31 March
2016 and the Reports of the Directors and Auditors thereon
(1) Other than an exempt authorised nominee, a member of the
Company entitled to attend and vote at the meeting may (8) The audited financial statements under Agenda 1 are laid before
appoint a proxy or proxies (but not more than two) to attend and the shareholders for discussion only as under the provisions of
vote on his/her behalf. A proxy may but need not be a member Section 169(1) and (3) of the Companies Act, 1965, the audited
of the Company. financial statements do not require a formal approval of the
shareholders and hence, the matter is not put forward for
(2) Where a member or an exempt authorised nominee appoints voting.
two proxies, the appointments shall be invalid unless he or it
specifies the proportion of his or its holding to be represented by
each proxy. Abstention from voting

(3) Where a member is an exempt authorised nominee as defined (9) The interested Directors of the Company who are shareholders
under the Securities Industry (Central Depositories) Act 1991, of the Company will abstain from voting on the relevant
who holds ordinary shares in the Company for multiple resolutions in respect of their re-election as the Director of the
beneficial owners in one securities account (“Omnibus Account”), Company at the 14th Annual General Meeting.
there is no limit to the number of proxies which the exempt
authorised nominee may appoint in respect of each Omnibus (10) All the Non-Executive Directors of the Company who are
Account it holds with ordinary shares standing to the credit of shareholders of the Company will abstain from voting on
the said Omnibus Account. Ordinary Resolution 5 concerning remuneration to the Non-
Executive Directors at the 14th Annual General Meeting.
(4) The instrument for the appointment of a proxy, in the case of an
individual shall be signed by the appointer or his/her attorney
duly authorised in writing and in the case of a corporation, Explanatory Notes on Special Business
either under seal or under the hand of an officer or attorney duly
authorised. If no name is inserted in the space for the name of (11) Ordinary Resolution 7 - Proposed renewal of the authority for
your proxy, the Chairman of the meeting will act as your proxy. Directors to issue and allot shares

(5) The instrument for the appointment of a proxy must be The ordinary resolution 7 above is proposed for the purpose
completed and deposited at the office of the Share Registrar of granting a renewed general mandate for issuance and
of the Company, Symphony Share Registrars Sdn Bhd at Level allotment of shares by the Company under Section 132D of the
6, Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, Companies Act, 1965, and if passed, will give the Directors the
47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less authority, from the date of the above Annual General Meeting,
than forty-eight (48) hours before the time appointed for holding to issue and allot shares in the Company at any time up to an
the 14th Annual General Meeting or any adjournment thereof. aggregate amount not exceeding ten percent (10%) of the
issued and paid-up share capital of the Company for such
(6) The lodging of a completed Form of Proxy to the Share Registrar purposes as the Directors may deem fit and in the interest of
of the Company will not preclude you from attending and the Company (“Share Mandate”) without convening a General
voting in person at the meeting should you subsequently wish Meeting, which may delay the capital raising initiatives and
to do so. Should you subsequently decide to attend and vote in incur relevant costs in organising the required General Meeting.
person at the meeting, you are requested to rescind your earlier
appointment of proxy(ies), and notify the Share Registrar of the The Company has not issued any new shares pursuant to
Company as soon as practicable. Section 132D of the Companies Act, 1965 under the general
authority which was approved at the 13th Annual General
(7) For the purpose of determining a member who shall be entitled Meeting held on 8 September 2015 and which will lapse at the
to attend this 14th Annual General Meeting, the Company shall conclusion of the forthcoming 14th Annual General Meeting.
be requesting Bursa Malaysia Depository Sdn Bhd in accordance
with Articles 57 and 58 of the Articles of Association of the This Share Mandate, unless revoked or varied at a General
Company and Section 34(1) of the Securities Industry (Central Meeting, will expire at the conclusion of the next Annual
Depositories) Act, 1991, to issue a General Meeting Record of General Meeting of the Company. With this Share Mandate, the
Depositors as at 15 August 2016. Only a depositor whose name Company will have the flexibility to undertake any possible fund
appears on the General Meeting Record of Depositors as at 15 raising activities, including but not limited to further placing of
August 2016 shall be entitled to attend the said meeting or shares, for the purpose of funding future investment project(s),
appoint proxies to attend and/or vote on his or its behalf. working capital and/or acquisition(s).

204 Scomi Group Bhd


Annual Report 2016
(12) Ordinary Resolution 8 - Proposed renewal of the authority to Personal data privacy
purchase own shares
(13) By lodging of a completed Form of Proxy to the Share
The ordinary resolution 8 above, if passed, will empower the Registrar of the Company for appointing a proxy(ies) and/or
Directors to purchase up to ten percent (10%) of the issued representative(s) to attend and vote in person at the 14th Annual
and paid-up share capital of the Company by utilising funds General Meeting and any adjournment thereof, a member of the
not exceeding the retained earnings and/or the share premium Company is hereby:
account of the Company. This authority, unless revoked or (i) consented to the collection, use and disclosure of the
varied at a general meeting, will expire at the earlier of either member’s personal data by the Company (or its agents)
the conclusion of the next Annual General Meeting of the for the purpose of the processing and administration by
Company or the expiry of the period within which the next the Company (or its agents) of proxies and representatives
Annual General Meeting is required by law to be held. appointed for the 14th Annual General Meeting (including
any adjournment thereof) and the preparation and
The details relating to ordinary resolution 8 are set out in the compilation of the attendance list, minutes and other
Share Buy-back Statement dated 26 July 2016. documents relating to the 14th Annual General Meeting
(including any adjournment thereof), and in order
for the Company (or its agents) to comply with any
applicable laws, listing rules, regulations and/or guidelines
(collectively, the “Purposes”);
(ii) warranted that where the member discloses the personal
data of the member’s proxy(ies) and/or representative(s) to
the Company (or its agents), the member has obtained the
prior consent of such proxy(ies) and/or representative(s)
for the collection, use and disclosure by the Company (or
its agents) of the personal data of such proxy(ies) and/or
representative(s) for the Purposes (“Warranty”); and
(iii) agreed that the member will indemnify the Company in
respect of any penalties, liabilities, claims, demands, losses
and damages as a result of the member’s breach of the
Warranty.

205 Scomi Group Bhd


Annual Report 2016
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FORM OF
PROXY
SCOMI GROUP BHD CDS Account No.
(Company No: 571212-A)
(Incorporated in Malaysia under the Companies Act, 1965)
No. of Ordinary Shares Held
Registered Office: Level 17, 1 First Avenue, Bandar Utama,
47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia

I/We* _________________________________________________________ NRIC No / Company No____________________________________


(Full name as per NRIC/Certificate of Incorporation in capital letters)

of____________________________________________________________________________________________________________________
(Full address)

being a member of Scomi Group Bhd., hereby appoint_________________________________________________________________________


(Full name as per NRIC/Passport and NRIC/Passport No)

of____________________________________________________________________________________________________________________
(Full address)

or failing him/her_______________________________________________________________________________________________________
(Full name as per NRIC/Passport and NRIC/Passport No)

of____________________________________________________________________________________________________________________
(Full address)

or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the 14th Annual General Meeting of
Scomi Group Bhd (the “Company”) to be held at Banquet Hall, 1st Floor, Kuala Lumpur Golf & Country Club, 10 Jalan 1/70D, Off Jalan Bukit
Kiara, 60000 Kuala Lumpur, Malaysia on Thursday, 18 August 2016 at 2:30 pm, or any adjournment thereof.

Ordinary Business For Against


To re-elect the following Directors who retire by rotation in accordance with
Article 82 of the Articles of Association of the Company and who being eligible,
offer themselves for re-election:
Resolution 1 (i) Dato’ Mohammed Azlan Bin Hashim
Resolution 2 (ii) Dato’ Sreesanthan A/L Eliathamby
Resolution 3 (iii) Mr Shah Hakim @ Shahzanim Bin Zain
Resolution 4 To re-elect Mr Cyrus Eruch Daruwalla who was appointed to the Board during
the year and retires in accordance with Article 89 of the Articles of Association of
the Company and who being eligible, offers himself for re-election
Resolution 5 To approve the payment of Directors’ fees amounting to RM492,163.90 for Non-
Executive Directors in respect of the financial year ended 31 March 2016
Resolution 6 To re-appoint Messrs KPMG as Auditors of the Company for the financial year
ending 31 March 2017 and to authorise the Directors to fix their remuneration
Special Business For Against
Resolution 7 Authority to Issue and Allot Shares pursuant to Section 132D of the Companies
Act, 1965
Resolution 8 Proposed Renewal of Authority for the Purchase by the Company of its ordinary
shares of up to ten percent (10%) of the issued & paid-up share capital

Please indicate with a check mark (“3”) 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 ____________________ 2016 Signature/Seal ___________________________________



Fold this flap for sealing

Notes:
(i) Other than an exempt authorised nominee, 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 or an exempt authorised nominee appoints two proxies, the appointments shall be invalid unless he or it specifies the proportion of his or its holding to be
represented by each proxy.
(iii) Where a member is an exempt authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991, who holds ordinary shares in the Company for multiple
beneficial owners in one securities account (“Omnibus Account”), there is no limit to the number of proxies which the exempt authorised nominee may appoint in respect of each
Omnibus Account it holds with ordinary shares standing to the credit of the said Omnibus Account.
(iv) The instrument for the appointment of a proxy, in the case of an individual shall be signed by the appointer or his/her attorney duly authorised in writing and in the case of a
corporation, either under seal or under the hand of an officer or attorney duly authorised. If no name is inserted in the space for the name of your proxy, the Chairman of the meeting
will act as your proxy.
(v) The instrument for the appointment of a proxy must be completed and deposited at the office of the Share Registrar of the Company, Symphony Share Registrars Sdn Bhd at Level 6,
Symphony House, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than forty-eight (48) hours before the time appointed for
holding the 14th Annual General Meeting or any adjournment thereof.
(vi) The lodging of a completed Form of Proxy to the Share Registrar of the Company will not preclude you from attending and voting in person at the meeting should you subsequently
wish to do so. Should you subsequently decide to attend and vote in person at the meeting, you are requested to rescind your earlier appointment of proxy(ies), and notify the Share
Registrar of the Company as soon as practicable.
(vii) For the purpose of determining a member who shall be entitled to attend this 14th Annual General Meeting, the Company shall be requesting Bursa Malaysia Depository Sdn Bhd in
accordance with Articles 57 and 58 of the Articles of Association of the Company and Section 34(1) of the Securities Industry (Central Depositories) Act, 1991, to issue a General Meeting
Record of Depositors as at 15 August 2016. Only a depositor whose name appears on the General Meeting Record of Depositors as at 15 August 2016 shall be entitled to attend the
said meeting or appoint proxies to attend and/or vote on his or its behalf.

Personal Data Privacy:


By lodging of a completed Form of Proxy to the Share Registrar of the Company for appointing a proxy(ies) and/or representative(s) to attend and vote in person at the 14th Annual General Meeting and
any adjournment thereof, the member accepts and agrees to the personal data privacy terms as set out in the Notice of 14th Annual General Meeting dated 26 July 2016.

Then fold here

Affix
Stamp

The Registrar of Scomi Group Bhd


Symphony Share Registrars Sdn Bhd
Level 6, Symphony House
Pusat Dagangan Dana 1
Jalan PJU 1A/46, 47301 Petaling Jaya
Selangor Darul Ehsan, Malaysia

1st fold here


Scomi Group Bhd (571212-A)

Level 17, 1 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia
+603 7717 3000 +603 7728 5258
www.scomigroup.com.my