yong nyan choi yong guan choi - malaysiastock.biz yong nyan choi, a malaysian, aged 59, was...

Mr Yong nyan Choi, a Malaysian, aged 59, was appointed to the Board of MHB on 14 January 2011. He was awarded a Master’s Degree in Business Administration in 1995 and a Bachelor of Science Degree in Civil Engineering in 1976, both from the University of Strathclyde, Glasgow, United Kingdom. He obtained his Diploma in Civil Engineering from Technical College, Kuala lumpur in 1972.

He began his career in 1972 as Engineering Assistant at Public Works Department Sarawak, Executive Engineer, Konsortium Malaysia, Kuching and joined Shell in 1978 where he held various positions in Malaysia and abroad before being appointed as the General Manager of Shell China Sourcing in China until his retirement in 2008. Currently, he manages his own management consultancy business.

Mr Yong is a member of the Board Audit Committee.

yong nyan ChoI @yong guan ChoIIndependent Non-Executive Director

21annual report for the financial period ended 31 december 2011Malaysia Marine and Heavy engineering Holdings berHad

Mr Bernard di Tullio, a French, aged 63, was appointed to the Board of MHB on 22 november 2010. He graduated from the Ecole Special De Mecanique D’eletricite (ESME) Paris as a Graduate Engineer in Mechanical/Electrical in 1974 and from the Institute D’administration Des Enterprise Paris Dess in Management in 1978.

Mr di Tullio was appointed as Advisor to the Chairman and Chief Executive Officer of Technip in november 2011. He has been with Technip Group for 37 years, having served 24 years in Technip Geoproduction (M) Sdn Bhd (TPGM). Prior to his current position, he was the President & Chief Operating Officer of Technip (2005-2011); President & Chief Executive Officer, Asia Pacific, Technip Group (1998 – 2005); President & Chief Operating Officer of TPGM and the Managing Director, Technip Far East Sdn Bhd (1986 – 2005).

Mr di Tullio is a member of the Board Audit Committee.

bernard rene franCoIs dI

tullIoNon-Independent Non-Executive Director

profIle of dIreCtors

22 annual report for the financial period ended 31 december 2011Malaysia Marine and Heavy engineering Holdings berHad

CaptaIn raJalIngam subramanIamNon-Independent Non-Executive Director

Captain Rajalingam Subramaniam, a Malaysian, aged 46, was appointed to the Board of MHB on 15 June 2010. He holds a Master’s Degree in Business Administration from Universiti Utara Malaysia and a Master Certificate of Competency – Foreign Going from Akademi laut Malaysia (AlAM), a wholly-owned subsidiary of MISC Berhad.

Captain Rajalingam gained admission into AlAM as a cadet officer in 1983 and subsequently sailed on MISC vessels as a Sea Going Officer. In 1996, he was appointed as a Marine Superintendent in Fleet Chemical. Between 1996 and 2005, he was assigned various responsibilities in Fleet Management and Audit Department ranging from Health, Security, Safety & Environment, Vetting, Fleet Operations and Audit. When AET Group became a part of MISC Berhad, Captain Rajalingam became the General Manager of AET Shipmanagement (Singapore) Pte ltd in April 2005, before being promoted as its Group Vice President, Ship Management in 2007. He was appointed as Honorary Commander of the Royal Malaysian Navy in November 2009, in recognition of MISC’s support to the Naval Reservist Programme and his role as Patron of MISC’s naval Reservist. Captain Rajalingam has been elected as an Intertanko Executive Committee Member and The london P & I Club Director in 2010.

He also sits as board member of Malaysia Marine and Heavy Engineering Sdn Bhd, a wholly-owned subsidiary of the Company, as well as several subsidiaries and joint venture companies within the MISC Berhad Group.

Captain Rajalingam is a member of the Remuneration Committee of the Board.

23annual report for the financial period ended 31 december 2011Malaysia Marine and Heavy engineering Holdings berHad

yee yang ChIenNon-Independent Non-Executive Director

Mr Yee Yang Chien, a Malaysian, aged 44, was appointed to the Board of MHB on 1 April 2008. He holds a Degree in Financial Accounting/Management and Economics from the University of Sheffield, United Kingdom.

Mr Yee is the Vice President, Corporate Planning and Development of MISC Berhad. He was an auditor prior to being involved in the equity research and investment banking arena with various local and international financial institutions such as HlG Capital Berhad and Merrill lynch (Malaysia) over a span of 10 years. He had since focused mainly on corporate planning work with emphasis on strategic planning, mergers and acquisitions and risk management. He had also served MISC Berhad for 2 years since 2003 in which he was involved in the acquisition of the current MISC Berhad’s subsidiary, AET Group (AET). He had also served as Group Vice President of Corporate Planning AET from June 2005 prior to rejoining MISC Berhad.

Mr Yee also sits on the board of Malaysia Marine and Heavy Engineering Sdn Bhd, a wholly-owned subsidiary of the Company, as well as several subsidiaries and joint venture companies within the MISC Berhad Group.

Mr Yee is a member of the nomination Committee of the Board.


annual report for the financial period ended 31 december 2011Malaysia Marine and Heavy engineering Holdings berHad

domInIQue de sorasManaging Director & Chief Executive Officer

Mr Dominique de Soras, a French, aged 55, was appointed to the Board of MHB on 1 February 2011. He graduated with an Engineering Degree and MSc in Mechanical Engineering from Ecole catholique de Arts et Metiers (ECAM) in lyon, France.

Mr de Soras has 21 years of experience in the oil and gas industry which covers areas of petroleum engineering, operations management, commercial and major projects in the oil and gas industry. He has broad experience in senior executive roles within the contracting oil and gas industry in business development, acquisitions and major project delivery and in general management of asset base organisation with large capital expenditure budget, implying definition of a clear strategic objective to maintain and grow the asset base. Prior to joining the Company, Mr de Soras was the President, Subsea Division of Technip (2007 – 2010), Executive Vice President, Oil and Gas Division of Technip (2006 – 2007) and Vice President, Offshore Resources Profit Unit of Technip Offshore UK limited (2001 – 2006). He was also a member of Technip’s Executive Committee. He has worked with the Conflexip Group since 1982 until 2006, having held various senior positions.

Mr de Soras is the Chairman of several subsidiaries and jointly controlled entities of the MHB Group.

additional Information:

1. none of the Directors has any family relationship with any other Directors and/or major shareholders of the Company or has any conflict of interest with the Company.

2. none of the Directors has convictions for offences within the past ten years.3. The details of Directors’ attendance at Board Meetings held in the financial period

ended 31 December 2011 are set out in the Statement on Corporate Governance on page 65 of the Annual Report.

annual report for the financial period ended 31 december 2011Malaysia Marine and Heavy engineering Holdings berHad 25annual report for the financial period ended 31 december 2011

Malaysia Marine and Heavy engineering Holdings berHad

managementCommIttee

2. ahmaDZakIaBDmalIk Senior General Manager, OperationsEncik Ahmad Zaki Abd Malik was appointed as the Senior General Manager, Operations of Malaysia Marine and Heavy Engineering Sdn Bhd on 1 April 2010. He joined MISC Berhad in December 2000 and held various positions with his last position as General Manager, Maintenance of Fleet Management Services. In 1984, he graduated from South Shield Marine and Technical College, South Shield, England with a Diploma in Marine Engineering. He obtained his First Class Marine Engineer Certificate of Competency from the United Kingdom. He is a Director of Techno Indah Sdn Bhd, a subsidiary of the Company.

3. WanmashItahWanaBDullahsanI Chief Financial OfficerCik Wan Mashitah Wan Abdullah Sani was appointed as the Chief Financial Officer (CFO) of MHB on 30 June 2010. She was the CFO of Malaysia Marine and Heavy Engineering Sdn Bhd (MMHE) since May 2010. She joined MISC Berhad in 2002 and held various positions with her last position being the General Manager, Finance before being seconded to MMHE. Her former experience before joining the MISC Group was as a professional accountant at Grant Thornton, Malaysia. Cik Wan Mashitah is an accountant by profession. She is a fellow of the Chartered Association of Certified Accountants, United Kingdom and a member of Malaysian Institute of Accountants (MIA). Cik Wan Mashitah sits on the board of several subsidiaries and jointly controlled entities of the MHB Group.

1. DomInIqueDesoras Managing Director & Chief Executive Officer

01 02

03



0405

0607

4. manoel franCIsCo avelIno gomes General Manager, Marketing & Sales

Mr Manoel Francisco Avelino Gomes was appointed as the General Manager, Marketing & Sales on 30 June 2010. He began his career with Jurong Engineering Pte ltd, Singapore in 1976 before joining Malaysia Marine and Heavy Engineering Sdn Bhd in 1981 as Head of Projects, Shipbuilding and rose to Senior Manager and later Director of Shipbuilding & Conversion. Mr Manoel Gomes holds a Master’s Degree in Business Administration from Brunel University, United Kingdom and a Bachelor of Engineering (Mechanical) Degree from the University of Singapore. He is a member of the Institute of Engineers, Malaysia and also a registered Professional Engineer (Mechanical) with the Board of Engineers, Malaysia (BOEM). He is a director of several subsidiaries and jointly controlled entities of the MHB Group.

5. ausmal kardIn General Manager, Legal, Corporate Secretarial and Administration

Encik Ausmal Kardin was appointed as the General Manager, Legal, Corporate Secretarial and Administration and also the Company Secretary of MHB on 30 June 2010. He joined Malaysia Marine and Heavy Engineering Sdn Bhd in March 2010 as General Manager, legal & Administration. He started his career with MISC Berhad in 1994 where he held various positions within the legal & Corporate Secretarial Affairs Division. His last position in MISC Berhad was as Senior Manager, Maritime legal Services before joining Bumi Armada Berhad as Vice President, legal & Secretarial in 2005. Encik Ausmal graduated with a Bachelor’s Degree in Law from the University of Wales, Aberystwyth and is also a licensed Company Secretary. Encik Ausmal is also the Company Secretary of several subsidiaries and jointly controlled entities of the MHB Group.

6. rooyahaItI yakub General Manager, Human Resource

Puan Rooyahaiti Yakub joined Malaysia Marine and Heavy Engineering Sdn Bhd in July 2010 as the General Manager, Human Resource. She has worked in various industries namely, manufacturing, telecommunication, engineering and construction holding positions within the human resource management and development. She holds a Master’s Degree specialising in Human Resource Development from the University of Hull, United Kingdom.

7. frederIC dabe General Manager, Projects

Mr Frederic Dabe joined MMHE on 12 September 2011 as the General Manager, Projects. He has worked in various companies with almost 20 years of experience in marine and offshore industries including conversions and various phases of EPCIC projects with renowned international organisations. Mr Dabe is a qualified Welding Engineer from ESSA France. He also holds a Master’s Engineering Degree in naval Architecture from EnSIETA France, a Master’s of Science in Offshore Engineering from Cranfield Institute of Technology United Kingdom and a Master’s in Economics and Business Administration from nantes-IAE France.



statIstICs onshareholdIngs as at 4 April 2012

Authorised Share Capital : RM2,500,000,000.00 divided into 5,000,000,000 ordinary shares of RM0.50 eachIssued and Paid-up Share Capital : RM800,000,000.00 divided into 1,600,000,000 ordinary shares of RM0.50 eachClass of Shares : Ordinary shares of RM0.50 eachVoting Rights : One vote per ordinary share

analysIs of shareholdIngs

no. of % of % of Issuedsize of shareholdings shareholders shareholders no. of shares share Capital

less than 100 42 0.55 462 0.00100 – 1,000 2,325 30.57 2,102,698 0.131,001 – 10,000 4,276 56.23 16,575,025 1.0410,001 – 100,000 779 10.24 23,197,375 1.45100,001 to less than 5% of issued shares 181 2.38 358,125,140 22.385% and above of issued shares 2 0.03 1,199,999,300 75.00

total 7,605 100.00 1,600,000,000 100.00

substantIal shareholders according to theregister of substantial shareholders

% of Issuedno. nameof substantial shareholders no. of shares shareCapital

1 MISC Berhad 1,064,000,000 66.502 Technip – held through HSBC nominees (Asing) Sdn Bhd 135,999,300 8.50



30 largest shareholders

% of Issuedno. nameof shareholders no. of shares shareCapital

1 MISC BERHAD 1,064,000,000 66.50

2 HSBC NOMINEES (ASING) SDN BHD 135,999,300 8.50

TECHNIP

3 CITIGROUP NOMINEES (TEMPATAN) SDN BHD 62,471,100 3.90

EMPLOYEES PROVIDENT FUND BOARD

4 AMANAHRAYA TRUSTEES BERHAD 52,524,100 3.28

SKIM AMANAH SAHAM BUMIPUTERA

5 KUMPULAN WANG PERSARAAN (DIPERBADANKAN) 22,410,400 1.40


EXEMPT AN FOR AMERICAN INTERNATIONAL ASSURANCE BERHAD

7 LEMBAGA TABUNG ANGKATAN TENTERA 13,874,700 0.87

8 CARTABAN NOMINEES (ASING) SDN BHD 13,574,500 0.85

EXEMPT AN FOR STATE STREET BANK & TRUST COMPANY (WEST CLT OD67)


AMANAH SAHAM WAWASAN 2020


EXEMPT AN FOR EASTSPRING INVESTMENTS BERHAD



30 largest shareholders (Cont’d.)


statIstICs on shareholdIngs

11 LEMBAGA TABUNG HAJI 11,815,300 0.74


BBH AND CO BOSTON FOR VANGUARD EMERGING MARKETS STOCK INDEX FUND

13 VALUECAP SDN BHD 7,675,000 0.48


AMANAH SAHAM MALAYSIA


AMANAH SAHAM DIDIK

16 PERMODALAN NASIONAL BERHAD 6,000,000 0.38

17 CARTABAN NOMINEES (ASING) SDN BHD 4,833,300 0.30

GOVERNMENT OF SINGAPORE INVESTMENT CORPORATION PTE LTD FOR GOVERNMENT OF SINGAPORE (C)


EXEMPT An FOR JPMORGAn CHASE BAnK, nATIOnAl ASSOCIATIOn (U.A.E.)

19 AMSEC NOMINEES (TEMPATAN) SDN BHD 4,501,400 0.28

AMTRUSTEE BERHAD FOR CIMB ISLAMIC DALI EQUITY GROWTH FUND (UT-CIMB-DALI)


EXEMPT An FOR JPMORGAn CHASE BAnK, nATIOnAl ASSOCIATIOn (U.S.A.)


EMPLOYEES PROVIDENT FUND BOARD (PHEIM)


BNY BRUSSELS FOR CITY OF NEW YORK GROUP TRUST


PUBLIC ISLAMIC EQUITY FUND


EMPLOYEES PROVIDENT FUND BOARD (CIMB PRIN)

25 PERTUBUHAN KESELAMATAN SOSIAL 3,244,600 0.20



30 largest shareholders (Cont’d.)



SEKIM AMANAH SAHAM NASIONAL


PUBLIC ISLAMIC DIVIDEND FUND


KUMPULAN WANG PERSARAAN (DIPERBADANKAN) (CIMB EQUITIES)

29 CITIGROUP NOMINEES (ASING) SDN BHD 1,662,400 0.10

lEGAl & GEnERAl ASSURAnCE (PEnSIOnS MAnAGEMEnT) lIMITED (A/C 1125250001)


PUBLIC ISLAMIC SELECT ENTERPRISES FUND

total 1,506,640,600 94.16

dIreCtors’ Interests In the Company and/or Its related CorporatIons

The direct and deemed interests of the Directors in the shares of the Company and/or its related corporations are maintained by the Company in the Register of Directors’ Shareholdings pursuant to Section 134 of the Companies Act, 1965. The details of the Directors’ interests are disclosed in the Directors’ Report on page 92 of this Annual Report.



We have 39 years of invaluable experience, capabilities and the expertise to deliver integrated heavy engineering and marine services to the oil and gas industry.

ChaIrman’s statement

FINANCIAL YEAR 2011 HAS BEEN AN EVENTFUL YEAR FOR MALAYSIA MARINE AND HEAVY ENGINEERING HOLDINGS BERHAD (MHB) DESPITE IT BEING A PERIOD OF OnlY nInE MOnTHS. DURInG THIS PERIOD, THE GROUP INTENSIFIED ITS EFFORTS ON PROJECT EXECUTION AND DELIVERY AS WELL AS ON S E C U R I n G n E W O R D E R S . W E A R E A l S O STRENGTHENING OUR FOUNDATION BY EXPANDING OUR CAPACITY AND BUILDING OUR INSTITUTIONAL CAPABILITIES TO ACCELERATE OUR JOURNEY FORWARD AS A COMPETITIVE PLAYER IN THE REGIOn.

For the year under review, the global economic environment remained sluggish. The world had not fully recovered from the financial crisis that started four years ago, and the Eurozone debt problem has created further financial turbulence. On a more optimistic note, however, oil prices remained at a high level above USD100 per barrel creating a vibrant Exploration and Production (E&P) industry as more projects are put into the development phase.

On the domestic front, renewed focus by PETRONAS on domestic E&P development and enhanced oil recovery initiatives bode well for us, as we partake in many opportunities that became available.

datuk nasarudIn md IdrIsChairman,Non-Independent Non-Executive Director

fInanCIal hIghlIghts

For the 9 months period ended 31 December 2011, the Group posted a net profit of RM205.9 million on the back of RM2.14 billion in revenue. Both revenue and net profit were lower for this financial period compared to the previous year due to several factors. Our reporting period for 2011 is only for 9 months following a change in our financial year end to 31 December to coincide with that of our parent company. As of January 2011, the Turkmenistan Block 1 Phase 1 was novated to our jointly controlled entity (JCE), MMHE-TPGM Sdn Bhd and hence revenue for this project is recognised under this JCE. In addition, no profit could be recognised for most of the new projects being executed as they had yet to reach their profit recognition threshold at the end of the financial period.

As at 31 December 2011, MHB’s financial position remained strong with RM2.09 billion in cash and no long-term liabilities. Going forward, the cash will be utilised effectively for our yard optimisation programme and development of facilities to support the Group’s growth.

dIvIdend

Given our performance for the period, the Board of Directors has recommended a final single tier dividend of 10 sen per share in respect of the financial period ended 31 December 2011 amounting to RM160 million. The proposed dividend, if approved by the shareholders, will be paid on 4 July 2012 to shareholders registered at the close of business on 13 June 2012.



Corporate development

The major highlight in our corporate development for 2011 was our acquisition of the Sime Darby Engineering Sdn Bhd’s (SDE) fabrication yard located in Pasir Gudang. This yard, which is located only 5 kilometres from our existing yard, will add another 46.8 hectares to our yard space, making it a combined total of 197.4 hectares. In terms of capacity, we will have a combined capacity of 129,700 MT per year, reinforcing our market leadership as the largest fabrication yard in Malaysia. The enlarged yard and expanded capacity will enable us to deliver projects of larger scale and complexity in line with our aspiration to be a leading heavy engineering and fabrication yard in the region. Along with the yard, we also welcomed former employees of SDE into the MHB Group. This will further enable our growth plans as we have been short of technical resources and talents in the past.

Nevertheless, we realise that yard space and people alone are not enough to position ourselves as a leader in the industry. We need to be strong in project execution and delivery, efficient, and more cost effective. To this end, we have embarked on a groupwide transformation programme. This would involve reorganising ourselves, revamping our key processes to be more efficient, enhancing our engineering and project management capabilities, relooking the way we manage our subcontractors, and instituting a performance culture within our organisation. Key to this transformation effort is building upon our institutional capabilities to deliver our brand promise to our customers. I do not see this transformation programme to be a one-time effort, but rather a journey that MHB will undertake painstakingly in the years to come to ensure our long term sustainability and success.

last year, we brought our strategic partnership with Technip one step further by forming a new joint venture (JV) company, i.e. Technip MHB Hull Engineering Sdn Bhd (TMH). Through this JV, we aim to provide cost-effective hull engineering designs that are safe, robust and tailor-made to suit our clients’ needs. TMH combines the expertise and capabilities of MHB and Technip enabling us to offer a more comprehensive design solution and value-added services to our clients.




future outlook

With these initiatives put in place, MHB is poised to take advantage of the many opportunities that will become available in the near future. PETROnAS has announced huge capital spending over the next five years on new and existing developments, onshore as well as offshore, in order to boost production and increase the contribution of the oil and gas industry to the national economy. High oil prices will also encourage more developments in the E&P industry in the region as more projects become economically viable. I am confident that, if we are able to integrate the former SDE yard with our existing facility well, MHB will be in a position of strength and scale to offer our services in what promises to be a vibrant industry.

The journey ahead will be challenging but yet exciting. However, we must continue to work diligently on our transformation initiatives to enhance our overall competitiveness in cost, project execution and delivery. Galvanising our people to work towards a common purpose will be key to our success, and we will continue to invest in our talents and enhance our capabilities.

appreCIatIon

I would like to take this opportunity to express my gratitude to my fellow Board members for their collective counsel and wisdom which had enabled us to steer MHB through these challenging times.

To all the employees of the MHB Group, I thank you for your dedication and commitment as well as for the sacrifices made to put MHB on a stronger footing on its path to success.

To our esteemed shareholders, I would like to express my sincere appreciation for your support and trust in the Board of Directors and Management of MHB.

lastly, my heartfelt thank you to our customers who have entrusted upon us your projects. let me assure you that we will continually improve ourselves to deliver a better value proposition to you.

datuk nasarudIn md IdrIsChairman



md & Ceo’s reportD E S P I T E T H E G L O B A L E C O N O M Y N O T RECOVERING AS EXPECTED IN 2011, THE OIL AND GAS INDUSTRY CONTINUED TO BE RESILIENT AS THE PRICE OF CRUDE OIL STABILISED AT A FAVOURABLE LEVEL, BOTH DUE TO SUPPLY CONCERNS AS WELL AS INCREASED DEMAND FOR ENERGY FROM EMERGInG MARKETS. THESE TWO FACTORS HAVE DRIVEN GREATER UPSTREAM EXPLORATION AND PRODUCTION (E&P) ACTIVITY, AND THE YEAR WITNESSED SUSTAINED UPWARD CAPEX DUE TO IMPROVED PROJECT VIABIlITY.

The vibrant oil and gas environment had a positive impact on MHB Group for the nine months ended 31 December 2011. During this period, we managed to secure new orders intake worth RM2.9 billion, the more notable wins being the Tapis Enhanced Oil Recovery (EOR) project, and conversions of the floating storage unit (FSU) and floating production, storage and offloading unit (FPSO) facilities, namely the FSU lekas and FPSO Cendor. The Tapis EOR project represents the first large-scale and full-field implementation of an EOR process in Malaysia, while the FSU Lekas conversion is the first FSU conversion by a Malaysia-based company, and also one of the first few in the world. These projects bear a strong testimony to our capabilities in delivering quality service and engineering and construction solutions for the oil and gas industry.

domInIQue de soras Managing Director & Chief Executive Officer

md & Ceo’sreportD E S P I T E T H E G L O B A L E C O N O M Y N O TRECOVERING AS EXPECTED IN 2011, THE OILAND GAS INDUSTRY CONTINUED TO BERESILIENT AS THE PRICE OF CRUDE OILSTABILISED AT A FAVOURABLE LEVEL, BOTHDUE TO SUPPLY CONCERNS AS WELL ASINCREASED DEMAND FOR ENERGY FROMEMERGInG MARKETS. THESE TWO FACTORSHAVE DRIVEN GREATER UPSTREAMEXPLORATION AND PRODUCTION (E&P) ACTIVITY, AND THE YEAR WITNESSEDSUSTAINED UPWARD CAPEX DUE TOIMPROVED PROJECT VIABIlITY.

The vibrant oil and gas environment had a positive impact on MHB Group for the nine months ended 31 December 2011. During this period, we managed to secure new orders intake worth RM2.9 billion, the more notable wins being the Tapis Enhanced Oil Recovery (EOR) project, and conversions of the floating storage unit (FSU) and floating production, storage and offloading unit (FPSO) facilities, namely the FSU lekas and FPSO Cendor. The Tapis EOR project represents the first large-scale and full-field implementation of an EOR process in Malaysia, while the FSU Lekas conversion is the first FSU conversion by a Malaysia-based company, and also one of the first few in the world. These projects bear a strong testimony to our capabilities in delivering quality service and engineering and construction solutions for the oil and gas industry.



We have made significant progress in our continuous efforts to transform MHB Group into a prominent engineering, procurement, construction, installation and commissioning (EPCIC) service provider. Our yard capacity has increased through our Sime Darby Engineering Sdn Bhd’s (SDE) yard acquisition initiative and our ongoing yard optimisation programme. At the same time, we are building up our management team and growing our institutional capabilities. A structured business transformation plan is currently underway to capitalise on the synergies expected from the enlarged entity going forward.

busIness segment revIew

engineering and Construction

MHB’s order book for engineering and construction projects stood at RM2.56 billion as at 31 December 2011. Of the on-going projects, several are nearing completion. This includes the Gumusut-Kakap semi-submersible, one of Asia’s first deepwater floating production system (FPS) for MISC Berhad, who owns and will operate the FPS off the coast of Sabah for Sabah Shell Petroleum Company. Another pioneering project nearing completion is the Kinabalu nAG Topside for Petronas Carigali Sdn Bhd. This 15,000 MT high-temperature, high pressure (HTHP) gas production topside represents the first of its kind in Malaysia, and is designed to produce 500 million standard cubic feet per day (mmscfd) of gas.

We have made significant progress in our continuous efforts to transform MHB Group into a prominent engineering, procurement, construction, installation and commissioning (EPCIC) service provider. Our yard capacity has increased through our Sime Darby Engineering Sdn Bhd’s (SDE) yard acquisition initiative and our ongoing yard optimisation programme. At the same time, we are building up our management team and growing our institutional capabilities. A structured business transformation plan is currently underway to capitalise on the synergies expected from the enlarged entity going forward.

busIness segment revIew

engineering and Construction

MHB’s order book for engineering and construction projects stood at RM2.56 billion as at 31 December 2011. Of the on-going projects, several are nearing completion. This includes the Gumusut-Kakap semi-submersible, one of Asia’s first deepwater floating production system (FPS) for MISC Berhad, who owns and will operate the FPS off the coast of Sabah for Sabah Shell Petroleum Company. Another pioneering project nearing completion is the Kinabalu nAG Topside for Petronas Carigali Sdn Bhd. This 15,000 MT high-temperature, high pressure (HTHP) gas production topside represents the first of its kind in Malaysia, and is designed to produce 500 million standard cubic feet per day (mmscfd) of gas.


Meanwhile, we are also completing our tenth contract with Sofec Inc, the OSX-3 FPSO External Turret, which marks our 17th turret project. Once installed on the FPSO, it will be deployed at the Campos Basin, offshore Brazil. Our repeat business with Sofec and solid track record in turret projects builds on our reputation as a reliable service provider in the oil and gas industry.

During the financial period, we secured two new projects from ExxonMobil; namely the earlier-mentioned Tapis EOR and the Telok Gas Development projects. Both are part of the Entry Point Projects under the Economic Transformation Programme’s Oil, Gas and Energy National Key Economic Area. Our scope of work for the Tapis EOR includes the procurement, fabrication, testing, load-out, transport, installation and commissioning of two topsides, one jacket and two inter-platform bridges. The Tapis-Q riser platform and Tapis-R integrated deck are estimated to weigh 2,300 MT and 18,000 MT respectively. With regard to the Telok Gas Development project, the Group is responsible for the procurement, fabrication, onshore testing, load-out and offshore hookup and commissioning of two topsides and two corresponding 4-legged jackets to support the platforms. The two topsides, Telok A and Telok B, are unmanned facilities wellhead topsides with the total combined weight of approximately 11,160 MT.

With regard to our business in Turkmenistan, in the financial period ended 2011, we successfully delivered the onshore gas terminal (OGT) for Petronas Carigali Turkmenistan Sdn Bhd. The OGT was built to process gas produced by the MCR-A platform installed on the gravity base structure (GBS), which the Group had fabricated earlier; and which is now operating in the Caspian Sea. Building on this success, we are actively exploring other exciting opportunities to enhance our presence in the Turkmenistan and Caspian oil and gas market.

md & Ceo’s report



marine repair and Conversion

The marine repair environment continued to be challenging due to overcapacity in the shipping industry, leading to low freight rates and decline in repair activity. nevertheless, the Group managed to record a higher revenue in the financial period due to better performance in our repair work for lnG carriers. The higher revenue was also attributed to renewed efforts to penetrate the third party rig repair market, as well as to offering repairs for specialised mobile sea platforms. More than half of our marine repair projects were carried out for third-party or non-MISC owned vessels, underscoring our ability to deliver quality service to external clients. We also continued to focus on repairing other energy vessels including LPG carriers and tankers, which made up slightly less than half of total marine repair projects for the Group during the period.

The marine conversion segment remained a meaningful contributor to the Group’s revenue and profits. The FSU lekas mentioned earlier would be moored at Malaysia’s very first regasification terminal at Sungai Udang, Melaka. Meanwhile, the FPSO Cendor conversion represents MHB’s 11th FPSO-FSO conversion project, reinforcing our reliability in delivering projects to foster repeat orders. Upon its completion, FPSO Cendor will be deployed by MISC Berhad for Petrofac at the Cendor Phase 2 Area.

strategic partnerships

MMHE-SHI LNG

Our strategic collaboration with Samsung Heavy Industries (SHI) has been rewarding, with profit contribution from international lnG carriers. We believe this reflects an upward trend and will maintain a positive momentum going forward.

We expect continued positive synergies in our partnership with SHI considering the optimistic prospects for membrane cargo containment systems of lnG carriers. This is further supported by SHI’s competitive edge with the successful completion of the improved version of their membrane cargo containment system.



MMHE-ATB

We have also derived positive synergies from our joint venture (JV) company with ATB in terms of the fabrication of pressure vessels and related process equipment. We anticipate that our strategic partnership will position the company to capitalise on future business opportunities and prospects.

Technip MHB Hull Engineering (TMH)

The JV company between MHB and Technip, TMH, was established in July 2011 and subsequently launched in november 2011. TMH is leveraging on Technip’s design engineering capability to compliment MHB’s fabrication expertise. The move is to capitalise on the expected growth in demand for more efficient and innovative floating structures to serve increased E&P activity in deepwater and unconventional offshore fields.

TMH offers the offshore oil and gas industry the value proposition of world class, cost effective designs that are safe, robust and tailor-made to suit client’s individual needs. We are positioning TMH as an industry innovator, capable of developing the kind of cutting-edge technology required to unlock hydrocarbon reserves in frontier areas. Given its unique strengths, we are confident that TMH will emerge as a key player when it bids for engineering services for FPSO conversion projects. This JV underscores our commitment to providing the best solutions and services for our clients.

yard optimisation

The yard optimisation programme that we embarked on in year 2006 is progressing well in the period under review. We have completed the new auto blast and priming workshop and increased the blasting and priming capacity of the yard to facilitate on-schedule fabrication activities. Several other optimisation initiatives are under way, including the construction of a 55,000 MT skid track, bulkhead and quay wall to facilitate the load out of Tapis EOR project. We are currently also completing the infrastructure works at the leased Idemitsu land and dredging works to facilitate the loadout of the Gumusut Kakap FPS. With the completion of the yard acquisition from SDE, we are reassessing our total requirements to ensure both yards will be fully optimised for greater capacity and efficiency.

To date, we have invested a total of RM732 million in the yard Optimisation Programme, of which RM77 million was injected during the nine months period ended 31 December 2011.

business transformation

Acquisition and Integration of Sime Darby Engineering Sdn Bhd yard in Pasir Gudang

MHB has acquired Sime Darby Engineering’s (SDE) yard in Pasir Gudang. This marks a significant milestone in terms of growing our capacity.

With the acquisition, our total production capacity has increased from 69,700 MT to 129,700 MT per annum, making us one of the biggest fabrication yards in this region. In addition, we welcomed the employees of SDE to join and grow with us in building a new future. To ensure a smooth integration of the new yard with our existing Pasir Gudang yard, communications and work stream programmes were executed in December 2011, resulting in a smooth and seamless handover on the disposal date.

Groupwide business performance improvement initiatives

We are constantly seeking ways to improve our business processes and systems in order to raise our level of productivity at every stage of our operations. Our objective is to create an organisation that is more focused on project delivery and to maximise business and operations synergies from the expanded capacity and resources. Several initiatives have been identified towards this end, and we look forward to realising the anticipated business enhancements which will enable the Group to deliver on clients’ requests, no matter how challenging or complex they may be.

Human Resource Transformation

We are focused on building up our leadership team. In this respect, we have been successful in recruiting several high calibre and experienced individuals into our organisation. At the same time, we have promoted a number of high-performing staff from within the Group to further develop their leadership and management capabilities.

We also realised that in order to sustain this talent pool and to become a high-performing organisation, we need to nurture a culture of excellence that rewards results. Towards this end, we have developed a Human Resource Transformation Roadmap, focused on enhancing our Group talent as well as talent sourcing. We have already embarked on a capability development programme with our strategic partner, Technip, aimed at securing a leadership pipeline and nurturing functional talent that is able to meet current and future requirements of the business.

md & Ceo’s report



health, safety and environment

MHB places the highest priority on maintaining a safe working environment, as this is essential for optimum productivity as well as for the prevention of injury and the preservation of our assets. We continuously upgrade our Health, Safety and Environment (HSE) policies according to industry best practice and monitor our performance against international benchmarks.

In the financial period ended 2011, we recorded a total of 21.04 million manhours. Our total recordable injury frequency (TRIF) stood at 0.38% and our lost time injury frequency (lTIF) was 0.05%.

outlook and prospects

While the global economic environment is expected to experience an extended period of slow growth, hydrocarbon energy demand will still remain strong in the near to mid-term future as a result of demand from emerging economies. Correspondingly, we anticipate further growth in E&P spend, which will benefit service providers such as MHB.

Demand for engineering and construction services is expected to remain strong and positive, especially in Asia Pacific and Turkmenistan. However, current and future field development will become more challenging technically; with an increasing portion of E&P spend being geared towards EOR, marginal field development, high CO2 gas resource development and HPHT plays. MHB has been supporting PETRONAS in its push to enhance Malaysia’s production profile by tackling these increasingly challenging field developments. This is done by fabricating the first HPHT topside and EOR project in Malaysia and by building one of Asia’s first deepwater FPS. With our expertise and track record, we look forward to making further contributions in these exciting frontiers. At the same time we are cautiously optimistic about growing demands for conversions to floating production systems, especially in the Asia Pacific, Central America, South America and Africa regions.

Increasing demand for LNG and gas is also a bright spot in the shipping industry, and we intend to entrench ourselves more firmly in this market space. With the exception of LNG carriers, overcapacity of vessels coupled with low freight rates, continues to weigh down the marine repair market. nevertheless, we believe that our yards’ strategic location, strong network of partners and strategic collaborations with long term customers; as well as our business focus on energy vessels will continue to serve us well. Building on our presence in the South East Asian LNG carrier repair market, we will continue to focus on this segment of the industry as its prospects look bright given the increasing regional demand for lnG.

appreciation

On behalf of the management of MHB, I would like to extend my appreciation to our valued clients for their support and loyalty, and to our numerous partners for their integrity, reliability and constantly high level of professionalism in working towards common goals. My appreciation also goes to the Malaysian Government and its agencies for maintaining a healthy operating environment in Malaysia. As for our shareholders, I would like to assure you that you are foremost in our minds and that we strive to optimise our bottom line so as to deliver value to you.

This is my first full year of service at MHB and I would like to express my heartfelt gratitude to our Chairman, Datuk Nasarudin Md Idris, the Board of Directors and the various Board Committees for their wisdom and guidance which have greatly eased my transition into the Group. Finally, I would like to thank the real treasure of MHB – our staff, for their dedication and commitment to the Group. Without them, we would not be the leading marine and heavy engineering organisation of choice that we are today.




busIness overvIew & hIghlIghts

mhb busIness hIghlIghts 1 aprIl 2011 – 31 deCember 2011

may 2011

26 best Investor relations award

MHB received the Best Investor Relations Award for its IPO at the Malaysian Investor Relations Association (MIRA) Award.

31 fpso Cendor Contract awarded

MHB through its subsidiary, MMHE, signed a contract with MISC Berhad for repair, life extension and conversion (RLEC) of MT Onozo, an Aframax tanker into a floating production, storage and offloading (FPSO) facility for Cendor phase 2 development project.

august 2011

8 modification of royal malaysian navy (rmn) auxiliary vessel

MMHE successfully completed modification of RMN auxiliary vessel, Bunga Mas Enam for MISC Berhad, the second Malaysian registered merchant ship to be modified for RMN, the first being the Bunga Mas lima (BM5) in year 2009.

25 proposed acquisition of sime darby engineering sdn bhd

MHB announced that MMHE had entered into a definitive sale and purchase agreement for the proposed acquisition of Sime Darby Engineering Sdn Bhd yard in Pasir Gudang.

July 2011

6 Jv agreement with technip on hull engineering

MHB signed a joint venture (JV) agreement with Technip Geoproduction (M) Sdn Bhd (TPGM) for the establishment of Technip MHB Hull Engineering Sdn Bhd (TMH) which performs hull engineering services on floating structures for the oil and gas industry.

June 2011

16 fsu lekas project awarded

MMHE was awarded another conversion project for the repair, life extension and conversion of MISC Berhad’s Tenaga Satu, a liquefied Natural Gas (LNG) carrier, into a floating storage unit (FSU) facility, known as FSU lekas.

June 16

fsu lekas project awarded to mmhe

may 26

mhb received the best Investor relations award



september 2011

21 mhb Inaugural agm

MHB held its inaugural Annual General Meeting (AGM) on 21 September 2011 following its listing on the Main Market of Bursa Malaysia in year 2010. The AGM was attended by 420 shareholders and proxies.

oCtober 2011

18 telok gas development project awarded

MMHE was awarded a contract for the Telok Gas Development Project by ExxonMobil Exploration and Production Malaysia Inc (EMEPMI).

november 2011

3 mmhe bagged new tapis eor Contract from emepmI

MMHE signed another contract with ExxonMobil Exploration and Production Malaysia Inc (EMEPMI) for the Tapis Enhanced Oil Recovery (EOR) project.

25 november 2011 – technip mhb hull engineering sdn bhd launched

Technip in collaboration with MHB, successfully launched their joint venture (JV) company, Technip MHB Hull Engineering Sdn Bhd (TMH) which was attended by TMH’s potential clients.

offshore business unit (obu)

Construction of Asia’s first deepwater semi-• submersible floating production system (FPS) Gumusut-Kakap Project for MISC Berhad.

Responsible for the engineering, procurement and • construction of KNPG-B Topsides for PETRONAS Carigali Sdn Bhd. The 18,000 MT structure is for Kinabalu Non-Associated Gas (NAG) Development project.

Construction of integrated deck unit (topsides), Tapis • R, which is the main structure for Tapis Enhanced Oil Refinery (EOR) project.

Responsible for procurement, fabrication, testing, load • out and tie-down of the four legged Tapis Q Jacket (1,800 MT) and construction of Tapis Q platform (2,300 MT) for ExxonMobil Exploration and Production Malaysia Inc (EMEPMI).

Construction of platforms and jackets for Telok A and • Telok B for ExxonMobil Exploration and Production Malaysia Inc (EMEPMI). The platforms are gas satellite platforms for Telok A and Telok B with an estimated weights of 1,750 MT and 1,650 MT respectively.

Responsible for the engineering, fabrication and • construction of OSX3 External Turret. The turret with estimated weight of 3,500 MT is constructed for the OSX leasing B.V-FPSO, Campos Basin Offshore Brazil.

marine repair business unit (mrbu)

Repair, construction, life extension and conversion of • LNG carrier, Tenaga Satu, into a floating storage unit (FSU) facility for Petronas Gas Berhad (PGB).

Conversion, repair and life extension of MT Onozo, an • Aframax tanker owned by MISC Berhad into a floating production, storage and offloading (FPSO) facility.

ongoing ProJeCTs



4

6

8

10

shareperformanCe

month Closingprice (rm) volumetraded

Mar-12 5.49 30,874,000

Feb-12 5.33 25,093,100

Jan-12 5.36 17,239,000

Dec-11 5.66 13,243,600

Nov-11 5.60 22,689,500

Oct-11 6.30 45,802,700

Sep-11 5.50 39,771,600

Aug-11 6.54 74,218,500

Jul-11 7.65 41,658,800

Jun-11 8.33 35,464,100

1-Ap

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fInanCIalCalendar

2011

2012

16 augusT

21 february

17 noveMber

06 June

04 July

Quarterly results DiviDenDs annual General MeetinG

Quarterly results DiviDenDs annual General MeetinG

q1fye2011 results announced

fye2011 results announced

annualgeneralmeeting

finalDividendpayable

q1fye2011 results announced

finalDividendannounced



as THe leading oil and gas fabriCaTor in Malaysia wiTH 39 years of exPerienCe in Heavy engineering in THe oil and gas indusTry, MHb PlaCes HigH PrioriTy on ensuring our business is ConduCTed resPonsibly. we aCknowledge our obligaTion To address THe requireMenTs of all our sTakeHolders, THus ensuring THe beTTerMenT of our eMPloyees, CoMMuniTy, indusTry and THe environMenT.

To ensure our business sustainability objectives are met, we continuously embed best practices across the Group to improve our way of doing things. Our Corporate Responsibility (CR) initiatives cover the following key areas, which are crucial to the wellbeing of our stakeholders:

CorporateresponsIbIlItyreport

» QualIty

» health, safety and envIronment

» supply ChaIn management

» human CapItal development

» CommunIty

QualIty

MHB is committed to ensuring a consistent high quality of service delivery. This is achieved via a series of strategies and programmes implemented across the Group. Through our subsidiary, MMHE, MHB is ISO 9001:2008 certified for its Quality Management System where quality improvement methods are planned and communicated.

We monitor the effectiveness of our quality initiatives, ensuring that all activities are carried out as planned and create added value for the Group. All our facilities are well maintained so as to function reliably and optimally to meet high standards of performance at all times.



enhancing Quality awareness

several comprehensive programmeswere held to educate all levels of employees on the importance of quality andtomotivate them to uphold the highest standards. programmes conductedwere:

• train the trainers forWelding• nonDestructive testing (nDt)• BasicWeldingawarenessprogramme

THe ‘Train THe Trainer’ PrograMMe Has been adoPTed To eMbed a susTainable CulTure of qualiTy awareness wiTHin THe grouP. in 2011, we suCCessfully Trained 9 welding engineers To beCoMe Trainers. THey were equiPPed wiTH CruCial key welding knowledge, inCluding welding MeTallurgy, doCuMenTaTion, eleCTrode ConsuMable ConTrol and disTorTion ConTrol.

an employee performing the ultrasonic testing, a non destructive test



» QualIty» health, safety and envIronment» supply ChaIn management» human CapItal development» CommunIty

monitoringquality assuranceCompliance

MHB has introduced a Quality Monitoring System to maintain a consistent high quality performance. The structured approach serves as a proactive measure to monitor compliance, with initiatives such as:

• Quality meetings and discussions across the Group

• Audits, inspections and surveillance checks where significant findings are communicated to the Management.

Corporate responsIbIlIty report

We are developing a Quality Pocket Book for all employees to serve as comprehensive reference material. The book incorporates essential information and best practices to ensure quality and is illustrated with images, flow charts and diagrammes for easy comprehension.

In addition, MHB organises annual awareness initiatives as follows:

• Good Welding Practice Campaign

• Incentives for the best quality achievers

• Quality Management System training

MMHE participated in the Shell Quality Day 2011 organised by Sarawak Shell Berhad (SSB) in Miri, Sarawak. It was held to promote quality awareness and best practice among engineering-related industries.

In year 2011, 11 audits on projects and divisions were conducted to verify quality assurance compliance. The findings were subsequently presented to the Management for follow-up actions.

In addition, MHB successfully implemented a real-time monitoring system, named Construction Progress Tracking (CPT), and an Offshore/Onshore Construction Management System (OCMS) for the KnPG-B Topsides and Gumusut-Kakap FPS projects. The implementation of these systems for the Tapis and Telok projects is at the development stage.

For marine repair activities, MHB developed a similar initiative in which an online database system is used to track the inspection status.

mhb team at shell Quality day 2011



ImprovingCompetency level

As our service delivery is dependent on the performance of our employees, MHB is committed to providing relevant training to continuously enhance the skills, knowledge and competencies of our human capital.

In 2011, the following training modules were conducted:

• CSWIP 3.0, CSWIP 3.1 or CSWIP 3.2 for welding inspectors

• nACE level 1, level 2 or level 3 for blasting/painting inspectors and other internationally or nationally recognised competencies

MHB has produced 14 qualified welding engineers through our skills development programme. These engineers are now facilitating the Basic Welding Awareness Programme for welding inspectors. Increase subcontractor Quality Compliance

MHB realises that subcontractors play a major role in producing quality service, hence their understanding of MHB’s requirements is crucial. In 2011, ten audits were conducted to identify their compliance to our quality system requirements. The quality compliance was evaluated and improvement actions were recommended to the audited subcontractors.

The main purpose of these audits was to gauge the compliance level of our subcontractors to our standards and encourage greater commitment to improving current processes.

Increase Customer satisfaction

MHB has a reliable mechanism for maintaining and increasing customer satisfaction across the divisions. Any feedback or complaint from clients is immediately attended to with solutions provided.

The year 2011 proved to be challenging, as feedback was unsatisfactory by our standards. The issues were mostly related to the engineering and procurement of FPSO Cendor and operational issues for the Gumusut-Kakap project. All issues were identified and appropriate action plans were established and implemented for further improvement.

developing Competent Internal auditors

To enhance the competencies of our internal auditors, we have introduced a structured audit development programme to train new auditors and equip them with the required skills to fulfil their functions. The auditors’ manhours were tracked, and reports issued were evaluated as part of the competency monitoring.

establishment of price of non-Conformance (ponC)

MHB places high importance on tracking the cost of non-value added activities such as repairs, reworks and other related works to rectify non-conformance. To address these issues, a procedure has been established to systematically cover the following costs:

• Internal Failure Cost – costs deficiencies discovered before delivery, which are associated with failure to meet the explicit or implicit needs of our external or internal customers.

• External Failure Cost – costs associated with deficiencies that are found after a product is received by our customers.

• Appraisal Cost – costs incurred to determine the degree of conformance to quality requirements.

• Prevention Cost – costs incurred to keep failure and appraisal costs to a minimum.




health, safety and envIronment

MHB views Health, Safety and Environment (HSE) as of paramount importance. It is committed to strengthen the implementation of HSE initiatives across the Group in order to create a culture of healthy living, work safety and environmental conservation.

hse through leadership & Commitment

We continuously looking for ways and means to strengthen our HSE commitments. A HSE Management Committee (HSE MC), which comprises senior management and employee representatives, meets monthly to monitor the Group’s HSE performance and to provide input on issues related to health, safety and the environment.

Our senior management also conducts a monthly HSE walkabout to reinforce a culture of safety and to foster a closer relationship with employees. Through these walkabouts, the senior management team is able to identify gaps in our HSE practices and rectify these issues.

health

The management firmly believes in creating a healthy work environment to nurture a healthy workforce. To ensure our employees’ wellbeing, we protect them from work-related illnesses and encourage the adoption of a healthy lifestyle. On top of that, we provide our employees with health and medical benefits.

Through the risk assessment process, we identified all occupational health risks in our operations and developed health programmes to minimise the risk of exposure to our employees. Detailed noise and chemical exposure monitoring are conducted in areas identified during risk assessments.

Every year, we organise various health talks and promote occupational and general health by focusing on topics such as chemical management, respiratory protection, indoor air quality, stress management, ergonomics and dengue awareness. We also carry out regular food hygiene inspections and conduct an annual food hygiene awareness programme for our canteen operators. In addition to this, we also organise sports events and blood donation drives to fuel a healthy culture among our employees.

In MMHE West yard in Pasir Gudang, an in-house clinic managed by a reputable medical service provider, offers our employees easy access to medical attention and more importantly, immediate assistance in cases of emergency.

» QualIty» health, safety and envIronment» supply ChaIn management» human CapItal development» CommunIty

blood donation drive



safety

MHB, through MMHE, is BS OHSAS 18001:2007 certified which demonstrate of the effectiveness of our Occupational Safety and Health Management System. The certification also reflects our ability to maintain zero tolerance of HSE non-conformity.

MHB has launched the MMHE 10 Safety Rules which are aimed at creating a positive and pro-active HSE mindset that will influence the everyday behaviour of workforce.

In year 2011, a series of sustainable HSE activities including safety talks and promotions were carried out including the UCUX Enhancement Programme, Scaffolding

Safety, HEMP Competency Training and Prohibition of Mobile Phone Usage at Operation Area Programme.

We are also strengthening our incident prevention mechanisms by establishing an initiative to enhance incident reporting. Employees are encouraged to report near-misses and minor incidents as pre-emptive measures against serious incidents. As a result, our lost time injury frequency (lTIF) per million manhours in year 2011 was 0.05 and the total recordable injury frequency (TRIF) was 0.38. A severity frequency of 0.29 for every one million manhours was recorded, compared to 161.99 in year 2010. This notable improvement marked the effectiveness of the implemented initiatives.

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07/08 08/09 09/10 10/11 20110

0.15

0.05

0.10

0.35

0.30

0.25

0.20

0.40

0.31

0.39

0.19

0.050.05

07/08 08/09 09/10 10/11 20110

0.3

0.1

0.2

0.7

0.6

0.5

0.4

0.8

0.62

0.47 0.42

0.19

0.38

Meanwhile, no fatality was reported as opposed to one case in the year before. These results speak of the strong commitment at MHB to continuously reinforcing safety standards at the workplace.

project site visit by hse legislation agencies from the government



environment

As a renowned player in the heavy engineering industry, MHB is committed to conducting our operations in a manner that sustains a healthy environment in the long term. We are guided by our Health, Safety and Environment Policy Statement and ISO 14001:2004 Environmental Management System [EMS] requirements.

MHB also strives to improve and increase the level of environmental awareness of our employees while maintaining a solid business performance. We believe their eco-conscience will continue to grow with positive reinforcement as the Group makes further progress.

The initiatives cover the provision of supplies for the:

• Construction, refurbishment and conversion of ships and marine vessels

• Fabrication of offshore and onshore production systems

• Manufacture of pressure vessels and other heavy industrial process equipment

• Treatment of slop and sludge

Our commitment to environmental conservation is exemplified by our Environmental Management Structure, which is headed by our MD & CEO and strongly supported by the rest of MHB’s management.

environmental Management Programme

The Environmental Management programme (EMP) was developed from a thorough evaluation of the environmental impact of every aspect of our business and operations. With the EMP, each division identifies the environmental impact of its operations and evaluates the seriousness of this impact on a yearly basis or as and when a new project, material, activity or service is introduced, before setting each project’s objectives and targets. Based on this evaluation, the most significant environmental aspects will be identified and discussed at the annual HSE Management Committee meeting. After reviewing achievements of ongoing projects, fresh objectives and targets for new projects are determined.

The EMP has created a sense of ownership among our employees in protecting the environment and instilled a sense of personal responsibility for the environment at the workplace.

Principal activities of divisional eMPs

Principal activities in year 2011 included compliance related to legal requirements – namely EQ (Clean Air) Regulation 1979, EQ (Industrial Effluent) 2009, EQ (Scheduled Waste) Regulation 2005, (Sewage) Regulation 2009, EQ (Environment Impact Aspect) Order 1987 and EQ (Solid Waste Management) Regulation 2009. The environmental objectives, targets and programmes were set, some of which have been achieved while others are still in progress.




environmental objectives, targets and programmes

oBJeCtIve target aChIevement

To comply with 1EQ (Clean Air) Regulation 1979

To reduce dust emissions from blasting activities

Determination of exposure limit of dust and particulate matters from blasting activities; and proposal of suitable technology and facility, e.g. shade netting

To control dust and smoke from metal spray activities

Installation of Local Exhaust Ventilation (LEV) system with cleaning device

To obtain approval from the Director General of Department of Environment for all fuel burning equipment, i.e. compressor engine driven or gen-set with fuel consumption as stated in EQ (Clean Air) regulation 36

In process of identifying type and number of fuel burning equipment on premises

To comply with 1EQ (Industrial Effluent) Regulation 2009

To construct a centralised chemical cleaning workshop with proper treatment facilities to ensure effluents discharged are within legal limits

In process of upgrading the toilet facilities and construction of Sewage Treatment Plant facilities. Construction will start by mid 2012

To comply with 1EQ (Sewage) Regulation 2009

To upgrade the existing toilet for new Sewage Treatment Plant (STP) facility

To ensure all sites and office toilet discharge water parameters are within permissible specifications

To comply with 1EQ (Scheduled Waste) Regulation 2005

To comply with Department of Environment storage facilities guideline for centralised scheduled waste storage area

Centralised scheduled wastes storage area is under construction, and is targeted for completion by end 2012

To comply with 1EQ (Environment Impact Aspect) Regulations

To ensure compliance with Environment Impact Aspect and EMP requirements for MMHE yard development project

Conduct monthly environmental audit of ambient air, water, noise and ground water pollution as per Department of Environment’s Environment Impact Aspect approval

To comply with 1EQ (Solid Waste Management) Regulation 2009

To reduce volume of solid waste Study current process of managing domestic waste and adopt the 3R concept

1EQ: Environmental Quality, which is referred to in the Law of Malaysia Act 127, Environmental Quality Act, 1974



waste Management Programme

MHB strongly upholds the principle of value creation in waste management as we strive to reduce costs and improve operational effectiveness while ensuring the environment is conserved. Due to the sensitive nature of our business, we are fully aware of our environmental liabilities and the fact that we are subject to contingencies pursuant to environmental laws and regulations.

In year 2011, we generated approximately 16,048.69 MT of scheduled wastes from our daily activities, representing a decrease of 20.9% compared to the previous year as illustrated in the graph below:


Among our principal disposal methods are:

• reuse of spentCopper slag One of the key environmental initiatives was to manage the disposal of spent copper slag from the blasting

process. Spent copper slag is a viable alternative to sand in the manufacture of blended cement. With approval from the Department of Environment, MHB, through MMHE, signed an agreement with local cement companies to recycle our spent copper slag.

• recycling ofusedpaint Containers Almost 100% of used paint containers at MMHE yard are sent for recycling, while paint waste is sent for incineration

by contractors licensed by the Department of Environment.

• resale of scheduledWastes Almost 100% of Spent lubricating, Spent Hydraulic, Electric/Electronic and acid battery wastes in MMHE yard are

sent for recovery, while paint waste and contaminated rags are sent for incineration by contractors licensed by the Department of Environment.

• sludgeDisposal – techno IndahsdnBhd Our subsidiary, Techno Indah Sdn Bhd, provides an off-site integrated facility for the treatment and disposal of

sludge and slop oil from ship tanks. Used oil recovered from slop oil is sold to recyclers and some of it is returned into the incinerator firing stream to partially replace fuel.

This ‘waste to energy’ treatment plant stores and incinerates oil-based wastes allowing us to save on electricity and reduce our carbon footprint. The sludge disposal plant is the first in Malaysia to use a fluidised bed combustion technology and the only facility in Malaysia ratified to the MARPOl 73/78.

0

5000

10000

15000

20000

25000

FY 09/10 FY 10/11 FY 2011

24,347

20,301

16,048



environmental Monitoring Programme

MHB takes great pride in our track record of adhering to all applicable laws and regulations pertaining to environmental management.

During the development of our yard optimisation programme to increase MMHE’s Pasir Gudang yard efficiency, all construction activities conformed to the relevant environmental regulations and requirements. In line with Department of Environment guidelines, an external consultant has been appointed to carry out independent monthly environmental monitoring. To date, air quality, gaseous stack emissions, noise levels for day and night, marine water and water treatment system samples have tested well below the limits required under the respective regulations.

Monthly environmental monitoring was conducted at the yard and indicators showed that we had met our environmental performance standards. The Environmental Monitoring Report was submitted to the Department of Environment as required by the Environmental Impact Assessment.

other initiatives

As a responsible corporate citizen who takes HSE standards in the industry seriously and in support of the regulators, MHB took part in the “Sambutan Minggu Keselamatan dan Kesihatan Pekerjaan 2011” (Celebration of Safety & Health Week) organised by the National Council of Occupational Safety and Health (nCOSH).

supply ChaIn management

MHB takes seriously our commitment to conducting our business ethically for the benefit of all stakeholders. In line with the acquisition of MMHE-East, the integration and transformation of the Company entails the rebranding of the Procurement Division to become the Supply Chain Management (SCM) division. The vision of the SCM Division is to provide value added service to the Business Units and to Corporate requirements from end to end. The division also continuously equips its personnel with the necessary skills and tools to meet the Group’s governance and overall business objectives.

SCM has been optimising its processes and operations to provide operational excellence in the oil and gas industry. Focusing on innovation, it has implemented several new initiatives that will result in operational efficiencies between MHB and vendors/suppliers as well as contributing towards cost savings.

• Cost saving Initiatives

MHB embeds cost-saving initiatives in our procurement processes to ensure value for money spent, without compromising on the service quality. These initiatives include:

¤ Establishing a subcontracting frame agreement to protect projects’ costs from proposal stage up to completion. The intent is to also incorporate the subcontractors as resident contractors for the yard hence enabling long term performance management.

¤ Enhance material price agreements to manage material price escalations and nurture long-term relationships with suppliers.

• procurementprocess Improvement Initiatives

To ensure governance and efficiency, the new SCM Division undertakes to incorporate in its scorecard the following initiatives:

¤ Rationalising the procurement process in line with the business model.

¤ Optimising the utilisation of a specific procurement system to speed up processes through automation.

¤ Building vendor database to create a databank for suppliers/subcontractors and to strategically control the suppliers’ base for purchasing and subcontracting activities.

¤ Enhancing vendor performance management to ensure quality deliverance of supplies and services to support the business objectives.

¤ Enhancing warehouse management through minimising inventory to control costs, optimising the efficiency of processes from goods receipt up to goods issuance and management of surplus and scraps to control value leakages.

¤ Standardising the terms and conditions for relevant transactions to protect the company from liabilities and risks.




human CapItal development

MHB recognises the important role of its human capital as they are our most important asset and lend a competitive edge to the Group; allowing us to position ourselves strategically among the top global players in the oil and gas construction and marine engineering industry. We realise that we need to place greater emphasis on the leadership and competency development of our people to further enhance our business competitiveness, as well as for the purpose of succession planning.

Several programmes were initiated towards this end in year 2011.

development Centre programme

The Development Centre Programme is geared towards identifying high potentials for succession into key positions within the Group. At Development Centre sessions, senior executives up to the level of general managers are assessed on their leadership potential and competency levels. This allows MHB to develop a pool of talents whom we then nurture to assume positions of greater responsibility.

mhb – technip knowledge exchange Initiative

MHB collaborates with Technip for functional capability development in the areas of engineering, project management, contract management and cost control. In year 2011, the second phase of the MHB-Technip collaboration saw 19 selected engineers mobilised to Technip offices and projects in Kuala lumpur and Indonesia for a period of 18 months for exposure to international standards of engineering. In year 2012, MHB plans to mobilise another 16 engineers to Technip for this invaluable on-the-job training.

executive development programme

MHB provided developmental opportunities for 70 fresh engineering graduates via an Executive Development Programme, which focuses on four main areas – engineering, estimating, procurement and contract management. The trainees are currently undergoing intensive on-the-job and classroom training conducted by both in-house experts and external trainers to accelerate their career development. The training lasts between eight to 24 months.

By the close of year 2011, a total of RM1.74 million had been invested in MHB employees’ learning and development, focusing primarily on developing their technical skills.

Moving forward, MHB realises the need to nurture a culture of excellence that recognises results with rewards. Towards this end, we have developed a roadmap to further enhance current initiatives as well as to intensify talent sourcing with the objective of establishing ourselves as a ‘preferred employer’ within the oil and gas industry. This roadmap is to be implemented in phases from year 2012 till year 2015.


CommunIty

MHB believes that charity begins at home. With yards operating in Pasir Gudang, Johor, we support the local communities in these areas by focusing on the underprivileged and helping them to improve their livelihood while empowering them with new knowledge and skills. As a result of various community outreach programmes, we have established a good rapport with members of these communities.

In the financial year 2011, we conducted the following community development and education programmes:

mhb road safety programme

In collaboration with Petrosains, we conducted the MHB Road Safety Programme for more than 100 children of our employees at the Dewan Serbaguna in Pusat Bandar Pasir Gudang.

sentuhan harapan petronas

Together with our parent Company, MISC Berhad, we launched a “Sentuhan Harapan PETRONAS” community outreach programme to support the basic needs of 200 families living in Pasir Gudang and Kukup for a period of two years.

mhb Charity drive

We donated foodstuff and cash to 66 poor families living around Pasir Gudang, including Kampung Pasir Gudang Baru, Kampung Pasir Puteh, Kampung Perigi Acheh and Kampung Tanjung langsat.

Children’s back to school sale

We helped to ease employees’ financial constraints by subsidising the cost of their children’s school uniforms and stationeries.

welder training programme

At MHB, we believe in sharing our knowledge, expertise and capabilities with our youth. In year 2009, we signed a Memorandum of Understanding with the Ministry of Human Resources, PETRONAS and MMHE to train high-grade welders for the oil and gas industry. Since then, more than 500 welders from the Institut Latihan Perindustrian and Institut Kemahiran MARA have benefited from this programme.

Internship programme

MHB also provides on-the-job training to undergraduates from local and foreign universities. Interns are attached to both operations and corporate divisions and are assigned mentors to guide them in their learning process.

others

MHB contributed to other causes which were channeled towards:

• The Marine Science and Technology Conference and Exhibition 2011 organised by Universiti Teknologi Malaysia (UTM)

• 17th World Kite Festival in Pasir Gudang organised by the Pasir Gudang Municipal Council

• Jogathon & Fundraising Dinner for Sekolah Kebangsaan Cahaya Baru in Masai, Johor

• Refurbishing the Textbook loan Scheme operation room at Bandar Seri Alam Secondary School in Masai, Johor

mhb road safety programme

sentuhan harapan petronas


We take pride in the high standards of management and delivery of our customers’ projects, and strive to continuously improve our Quality, Health, Safety and Environmental performance.

THE BOARD OF DIRECTORS OF MALAYSIA MARINE AND HEAVY ENGINEERING HOLDINGS BERHAD (MHB) (BOARD) IS COMMITTED TO CONTINUALLY STRIVE FOR THE HIGHEST STANDARD OF CORPORATE GOVERNANCE THROUGHOUT THE MHB GROUP (GROUP) WHICH IS ESSENTIAL IN MAXIMISING SHAREHOLDER VALUE AND BUILDING SUSTAINABLE GROWTH.

This statement sets out the Group’s corporate governance processes and activities during the financial period with reference to the principles and best practices of good governance as set out in the Malaysian Code on Corporate Governance (Code).

the board

(a) principal responsibilities of the board

The main task of the Board is to oversee the overall strategy and business direction of the Group to assure the shareholders that their interests are being met in the best possible manner. The Board deals with and decides on Group related issues including:-

• the Group’s strategies and business plan;

• business conduct and key operational initiatives;

• f inancial plans and annual budget and performance reviews;

• major investments, divestments and funding proposals;

• succession planning and remuneration policy;

• risk management; and

• corporate governance practices.

(b) Constitution of an effective board

The Board consists of nine (9) Directors, all of whom are non-executive, except for the Managing Director & Chief Executive Officer (MD & CEO). Of the eight (8) non-executive Directors, four (4) are independent Directors, which exceeds the requirement for one-third (1/3) of the Board members to be independent as set out under the Bursa Malaysia Securit ies Berhad’s (Bursa Malaysia) Main Market listing Requirements. The profile of each Director is presented on pages 16 to 25 of the Annual Report.

The Board consists of members with a balance of skills, attributes, knowledge and experience. They are industry leaders and professionals who possess the background and expert ise in specialised fields such as strategic planning, corporate finance and accounting, oil and gas industry , procurement and contracts and management which are critical to the Group’s business and growth. Each Director brings to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made.

statement onCorporate governanCe



The roles of the Chairman and the MD & CEO are kept separate to ensure an appropriate balance of power, increased accountability and capacity of the Board for independent decision making. The Board is headed by the Chairman who leads and ensures effective and comprehensive Board discussion including strategic issues and business development, planning and execution. The primary role of the MD & CEO is to effectively manage and supervise the day-to-day business operations of the Group in accordance with the Group’s strategies and policies.

The independent non-executive Directors are independent of management and free from any business or other relationships that could materially interfere with their independent judgement in deliberating matters of the Board.

The non-executive Directors have the ability and business insights to ensure that the strategies proposed by the Management are fully deliberated and examined in the long-term interest of the Group, as well as the shareholders and other stakeholders.

The size and composition of the Board are reviewed annually, taking into account the scope, nature and diversity of the business operations of the Group.

(c) board meetings and supply of Information

To assist the Directors in planning for their attendance at Board meetings as well as Annual General Meeting (AGM), the meetings are scheduled in advance of the new financial year. The Board meets on a scheduled basis, at least four (4) times a year in conjunction with the release of the Group’s quarterly financial results to Bursa Malaysia. Additional meetings are held as and when required.

During the financial period ended 31 December 2011, nine (9) Board meetings were held. Details of the attendance of the Directors in office during the period under review are as follows:-

members no. ofmeetings attended

Datuk Nasarudin Md Idris (Chairman) 9 out of 9

Dato' Halipah binti Esa 9 out of 9

Datuk Khoo Eng Choo 9 out of 9

Heng Heyok Chiang @ Heng Hock Cheng 9 out of 9

Yong Nyan Choi @ Yong Guan Choi 9 out of 9

Bernard Rene Francois di Tullio 7 out of 9

Yee Yang Chien 7 out of 9

Captain Rajalingam Subramaniam 9 out of 9

Dominique de Soras 9 out of 9

All Board meetings follow an agenda, which together with a set of Board papers containing documentation for each item on the agenda, is distributed to the Board members prior to the Board meeting to ensure that Directors have sufficient time to evaluate the matters and be prepared for discussion at the meetings. However, sensitive matters may be tabled at the meeting itself. Members of senior management who may provide additional insights into the matters at hand will be present at the relevant time during the Board meeting.

Each scheduled Board meeting includes review of financial and non-financial information covering amongst others, strategic, operational, regulatory, governance and human resource issues. Minutes of Board Committee meetings are presented to the Board and the respective Committees’ chairpersons brief the Board on major issues deliberated by each Board Committee. There are matters reserved specifically for the Board’s decision, including the approval of the Group’s plans and budget, major investments, acquisitions and divestments, appointment of key management positions as well as establishment of key policies and procedures.



statement on Corporate governanCe

Minutes of the Board meetings which include a record of the decisions and resolutions of the Board meetings are properly maintained by the Company Secretary. The Directors have full access to the advice and services of the Company Secretary who is responsible for ensuring that Board meeting procedures are followed and that applicable rules and regulations are complied with.

(d) appointment and re-election of directors

The Nomination Committee of the Board recommends to the Board, candidates for directorships to be filled in the Company by considering the following factors:-

• skills, knowledge, expertise and experience;

• professionalism;

• integrity; and

• in the case of candidates for the position of independent non-executive Directors, the ability to discharge such responsibilities/functions as expected of an independent non-executive director.

The Nomination Committee also make appropriate recommendations to the Board the renewal or extension of Directors’ appointment and re-election of retiring Directors.

The Company’s Articles of Association provides that all Directors shall submit themselves for re-election at least every three (3) years in compliance with the listing Requirements. The Articles of Association also provides that at least one-third (1/3) of the Directors who are longest in office shall retire from office and shall be eligible for re-election. Directors who are newly appointed by the Board shall hold office until the next AGM of the Company and shall then retire and be eligible for election by the shareholders. Directors over seventy (70) years of age are required to submit themselves for re-appointment annually in accordance with the Companies Act, 1965.

(e) the board Committees

The Board is supported by the following Committees established by the Board to ensure the Board’s effectiveness and to efficiently discharge its duties and responsibilities. Each Board Committee operates within its terms of reference, which clearly define its functions and responsibilities. Minutes of Board Committee meetings are circulated at Board Meetings.

board audit Committee (baC)

The BAC assists the Board in ensuring integrity of financial reporting and that there is in place sound internal control systems. Its main responsibilities are to ensure that there are effective risk monitoring and compliance procedures and to act in the interest of the shareholders in respect of matters or issues that affect the financial performance of the Group. The composition and the key functions of the BAC and the summary of its activities are as set out in the BAC Report on pages 78 to 82 of the Annual Report.

nomination Committee (nC)

The NC was established with the primary responsibility of proposing and recommending to the Board, candidates for directorships to be filled in the Board and Committees of the Board. The other duties and responsibilities of the nC include the following:-

• to make appropriate recommendations to the Board on matters on renewal or extension of Directors’ appointment and re-election of retiring Directors;

• to annually review the Board’s required mix of skills and experience and other qualities, including core competencies which non-executive Directors should bring to the Board; and

• to implement a process for assessing the effectiveness of the Board as a whole, the Board Committees and also the contribution of each individual Director to the effective decision making of the Board, through an evaluation process.



The nC also facilitates the Board in reviewing, annually, the effectiveness of the Board and Board Committees. During the year, the Board key performance indicators (KPIs) have been developed based on specific criteria such as the Board structure, operations and roles and responsibilities. The assessment of the Board’s effectiveness and performance during the year was conducted based on the said KPIs and a set of performance evaluation questionnaires.

The nC comprises three (3) members. All members of the nC are non-executive Directors, and two (2) of whom are independent. The members of the nC and their attendance at the meetings held during the financial period ended 31 December 2011 are as follows:-


Datuk Khoo Eng Choo (Chairman) 3 out of 3

Dato’ Halipah binti Esa 3 out of 3

Yee Yang Chien 3 out of 3

remuneration Committee (rC)

The RC was established with the responsibility of proposing and recommending to the Board:-

• the remuneration and compensation of the Directors, the MD & CEO and the Management Committee members of the Company; and

• the annual bonus quantum for the Group.

The RC also ensures that the remuneration packages are consistent with the Group’s objectives and strategies and benchmarked against industry standards. The RC reviews annually, the scorecard of the MD & CEO and the achievements.

The RC comprises three (3) members. All members of the RC are non-executive Directors, two (2) of whom are independent. The members of the RC and their attendance at the meetings held during the financial period ended 31 December 2011 are as follows:-


Heng Heyok Chiang @ Heng Hock Cheng (Chairman) 5 out of 5

Dato’ Halipah binti Esa 5 out of 5

Captain Rajalingam Subramaniam 5 out of 5




(f) directors’ remuneration

With the exception of the MD & CEO, all non-executive Directors are paid Directors’ fees which shall be subsequently approved by the shareholders at the AGM. For the financial period under review, the breakdown of fees and meeting attendance allowances received by each Director is as listed below:-

nameofDirectors

annualfees(rm)

Boardmeeting

attendanceallowance

(rm)

BoardCommitteesmeeting

attendanceallowance

(rm)total(rm)

Datuk Nasarudin Md Idris 81,000 36,000 – 117,000

Dato' Halipah binti Esa 54,000 27,000 34,000 115,000

Datuk Khoo Eng Choo 54,000 27,000 21,000 102,000

Heng Heyok Chiang @ Heng Hock Cheng 54,000 27,000 27,000 108,000

Yong Nyan Choi @ Yong Guan Choi 54,000 27,000 12,000 93,000

Bernard Rene Francois di Tullio 54,000 21,000 6,000 81,000

Yee Yang Chien 54,000 21,000 6,000 81,000

Captain Rajalingam Subramaniam 54,000 27,000 10,000 91,000

total 459,000 213,000 116,000 788,000

The MD & CEO is not entitled to Directors’ fee as he is remunerated as a member of Management. The MD & CEO’s remuneration package comprised the following:-

• Basic Salary The basic salary for the executive Director was recommended by the RC and approved by the Board and is

fixed for the duration of his contract.

• Variable bonus The bonus payable to the MD & CEO is measured against agreed targets and key performance indicators.

• Benefits-in-Kind The MD & CEO is entitled to housing allowance and a company car.

The aggregate remuneration of Directors categorised into appropriate components are set out in the Financial Statements on page 128 and 129 of the Annual Report.

(g) directors’ training

All the Directors have attended the Mandatory Accreditation Programme (MAP) in compliance with the Listing Requirements.

The Directors are encouraged to attend continuous education programmes, talks, seminars, workshops, conferences and other training programmes to enhance their skills and knowledge and to ensure Directors keep abreast with new developments in the business environment.



During the financial period under review, the Directors have attended among others, the following training programmes:-

trainingprogrammes organised by Date

Insurance Insights Financial Institutions Directors’ Education Programme, Bank Negara Malaysia & PIDM

27 – 28 June 2011

Nomination & Remuneration Committee Programme

Financial Institutions Directors’ Education Programme, Bank Negara Malaysia & PIDM

18 – 19 July 2011

Driving the Corporate Governance Agenda Minority Shareholder Watchdog Group

28 July 2011

Corporate Finance Programme Financial Institutions Directors’ Education Programme, Bank Negara Malaysia & PIDM

30 September – 1 October 2011

Risk Management in Today’s Economy MISC Berhad & Columbus Circle 5 October 2011

De-mystifying Directors’ Duties & their implications under the Listing Requirements

MISC Berhad & Bursatra Sdn Bhd 5 October 2011

EPF Corporate Governance Programme Employees Provident Fund 29 November 2011

The new Corporate Governance Blueprint and Regulatory Updates Seminar 2011

F e d e r a t i o n o f P u b l i c L i s t e d Companies and Malaysian Institute of Corporate Governance

14 December 2011

shareholders and Investors

The Board values its dialogue and engagement with both institutional shareholders and private investors and recognises that timely and equal dissemination of relevant information be provided to them. The AGM is the principal forum of dialogue with the shareholders and also an avenue for the Chairman and Board members to respond personally to all queries and provide sufficient clarification on issues and concerns raised by the shareholders.

Other than the forum of the AGM, the other medium of communication between the Company and shareholders and/or investors are as follows:

• quarterly financial statements and annual reports;

• announcements on major corporate developments to Bursa Malaysia pursuant to the listing Requirements;

• the Company’s general meetings;

• the Company’s website at www.mhb.com.my; and

• meetings between the Company’s senior management and analysts/investors throughout the year.

Further details on our investor relations activities are provided on pages 86 and 87 of the Annual Report.



aCCountabIlIty and audIt

(a) financial reporting

The Board aims to present a balanced and meaningful assessment of the Group’s financial performance, position and prospects, primarily through the annual financial statements, quarterly and half yearly announcements of results to the shareholders as well as the Chairman’s Statement and MD & CEO’s Report on the business segment review in the Annual Report. The Board is assisted by the BAC to oversee the Group’s financial reporting processes and the quality of its financial reporting.

(b) Internal Control

The Board acknowledges its overall responsibility for continuous maintenance of a sound system of internal control to safeguard shareholders’ investment and the Group’s assets. This principle is further elaborated under the Statement on Internal Control by the Directors on pages 73 to 77 of the Annual Report.

(c) relationship with the external auditors

The Board ensures that there are formal and transparent arrangements for the maintenance of an objective and professional relationship with the external auditors. The BAC met with the external auditors twice during the financial period without the presence of the Management to discuss any matters that they may wish to present.

(d) related party transactions

The Group has established the following procedures and guidelines and internal controls to ensure that related party transactions (RPTs) and recurrent related party transactions (RRPTs) have been or will be entered into on normal commercial terms and on terms which are or will not be more favourable to the related parties than those generally available to third parties dealing at arm’s length and are not or will not be to the detriment of the Company’s minority shareholders:-

(a) The BAC reviews, from time to time:

i. any RPTs/RRPTs and conflicts of interests that may arise within the Group; and

ii. the procedures set by the Company to monitor RPTs/RRPTs to ensure that these transactions are carried out on normal commercial terms not more favourable to the related party than those generally available to third parties dealing at arm’s length and are not to the detriment of the Company’s minority shareholders.

(b) Information on related parties and review procedures applicable to all RPTs/RRPTs which involve interest, direct or indirect, of such related parties shall be disseminated to all MHB’s business units, service units and MHB’s subsidiaries from time to time, for their reference in ensuring that all transactions with such related parties are undertaken on arm’s length basis and on normal commercial terms which are not or will not be more favourable to the related parties than those generally available to the public.

(c) All operating divisions and MHB’s subsidiaries review their existing information systems on an on-going basis to ensure that features are incorporated into the systems for capturing information on RPTs/RRPTs at source. All heads of departments in the Group are advised to report on all transactions with related parties.

(d) Proper records shall be maintained to record all transactions with related parties which are entered into and a database which contains the information on all RPTs/RRPTs within the Group is being maintained.




(e) RPTs/RRPTs will only be undertaken by the Company and subsidiaries after the Company or the relevant subsidiary has ascertained that the transaction prices, rentals, terms and conditions, quality of products/services will be comparable with those prevailing in the market and will meet industry standards. The transaction prices will be based on the prevailing market rates/prices of the service or product or will otherwise accord with the normal commercial terms and applicable industry norms. The interests of non-interested shareholders will also be taken into account when entering into RPTs/RRPTs to ensure that their rights and interests are upheld.

(f) Where possible, at least 2 other contemporaneous/similar transactions with unrelated third parties for similar products/services and/or quantities will be used as comparison to determine whether the price and terms offered to/by the related parties are fair and reasonable and comparable to those offered to/by other unrelated third parties for the same or substantially similar type of products/services and/or quantities.

In the event that quotation or comparative pricing from unrelated third parties cannot be obtained, the transaction price will be based on prevailing market rates or prices that are agreed upon under similar commercial arrangements for transactions with third parties, business practices and policies and other methods of price comparison and on terms which are generally in line with industry norms in order to ensure that the RPTs/RRPTs are not detrimental to the Company or the Group.

(g) Ongoing awareness sessions with employees and stakeholders to ensure sufficient knowledge on RPTs/RRPTs in order to comply with the listing Requirements;

(h) Internal audit shall review the internal control process and records of RPTs/RRPTs within the affected scope during the course of audit engagements to verify that the relevant approvals have been obtained and review procedures in respect of such transactions are adhered to. Any divergence will be reported to the BAC.

(i) The BAC shall review the audit reports and any other reports required from time to time to ascertain that the procedures established to monitor RPTs/RRPTs have been complied with.

(j) In the event that a member of the BAC or Board has an interest and/or deemed interest in any particular RPT/RRPT, he or she shall declare his or her interest therein and will have to refrain from any deliberation and also abstain from voting on the matter at the BAC meeting or Board meeting in respect of that transaction.

(k) A process flow is defined to articulate the necessary steps of the process. If the BAC is of the view that the abovementioned procedures are insufficient to ensure that RPTs/RRPTs are undertaken on an arm’s length basis and on normal commercial terms and on terms that are not more favourable to the transacting party than those generally available to third parties dealing at arm’s length during their periodic review of the procedures, the BAC has the discretion to request for additional procedures to be imposed on the RPTs/RRPTs.




Details of the RRPTs entered into by the Group during the financial period ended 31 December 2011 are set out below:-

no nature of transaction transactingparty relatedparty

1 Fabrication and construction of oil and gas offshore structures

PETRONAS Carigali Sdn Bhd Petroliam Nasional Berhad (PETRONAS)1

MISC Berhad (MISC) MISC2

2 Provision of dry docking and repairs MISC MISC2

3 Provision of conversion, life extension of vessels into Floating, production, storage and off-loading (FPSO)/floating, storage and off loading (FSO)

MISC MISC2

Malaysia Offshore Floating Terminals (Labuan) Ltd

4 Purchase of oil products from PETRONAS Group

PETRONAS Dagangan Berhad

PETRONAS1

PETRONAS Smartpay Centre Sdn Bhd

5 Provision of services/sale of equipment & materials

Prime Sourcing International Sdn Bhd

PETRONAS1

PETRONAS Management Training Sdn Bhd

MISC Agencies (Singapore) Pte Ltd

MISC2

6 Provision of logistics solution MISC Integrated Logistics Sdn Bhd

MISC2

1 PETRONAS is a major shareholder of the Company by virtue of its 62.67% equity interest in MISC 2 MISC is a major shareholder of the Company

PricewaterhouseCoopers Capital Sdn Bhd (PwCC) has been appointed as the independent adviser to carry out an independent review of the Group’s methods and procedures to determine that the transaction prices and terms of the RRPTs are carried out on normal commercial terms and not to the detriment of its minority shareholders. The letter of opinion from PwCC is included on pages 83 and 84 of the Annual Report.

ComplIanCe statement

The Board is satisfied that the Company has complied with the best practices of the Code during the financial period under review.

This statement is made in accordance with the resolution of the Board of Directors dated 4 April 2012.



THE MALAYSIAN CODE ON CORPORATE GOVERNANCE REQUIRES LISTED COMPANIES TO MAINTAIN A SOUND SYSTEM OF INTERNAL CONTROL TO SAFEGUARD SHAREHOlDERS’ InVESTMEnT AnD THE GROUP’S ASSETS. PARAGRAPH 15.26(B) OF THE BURSA SECURITIES lISTInG REQUIREMEnTS REQUIRES THE BOARD TO MAKE A STATEMENT ABOUT THE STATE OF INTERNAL CONTROL OF THE LISTED ENTITY, MALAYSIA MARINE AND HEAVY EnGInEERInG HOlDInGS BERHAD, AS A GROUP.

Bursa Securities’ Statement on Internal Control: Guidance for Directors of Public listed Companies provides guidance for compliance with these requirements.

The Board of Directors (“the Board”) is pleased to provide the following statement which outlines the nature and scope of internal control of the Group during the financial period ended 31 December 2011 and is committed to continuously improve the Group’s system of internal control.

aCCountabIlIty of the board

The Board acknowledges its overall responsibility for the Group’s system of internal control and its effectiveness to safeguard the shareholders’ investment and the Group’s assets. This includes reviewing the strategic direction, financial, operational and compliance controls and the risk management policies and procedures.

In discharging its stewardship responsibilities to the Group, the Board, provides risk operating parameters and guidelines to maximise shareholders’ value whilst meeting the needs of the customers, employees and all related stakeholders. The Group currently is guided by the PETROnAS risk management framework to identify the key risk areas, evaluate the impact and set broad strategic policies relating to the risks and the relevant controls thereof, whilst developing our own specific framework. The Board then delegates to the Management to implement the Board’s direction and policies on risk and control.

It should be noted that the system of internal control is designed to manage, control and mitigate risks appropriately rather than eliminating the risk of failure, in order to achieve its business objectives. Accordingly, these internal controls systems can only provide reasonable and not absolute assurance against material misstatement or loss or the occurrence of unforeseeable circumstances.

The Board has established a continuous process for identifying, evaluating and managing the significant risks faced by the Group, which has been in place for the financial year under review. This process includes updating system of internal controls when there are changes to business environment and regulatory guidelines.

The process is regularly reviewed by the Board and is in accordance with the guidance as contained in the publication – statement on Internal Control: guidance for directors of public listed Companies.

statement on Internal Control



rIsk management framework

The Group has a Risk Management Unit (“RMU”) that is entrusted to manage and monitor the risks of the MHB Group. During the financial period, the Group adopts the PETRONAS Enterprise Risk Management (“ERM”) policy in identifying, assessing, reporting and monitoring the ever changing risks facing the Group and taking the specific measures to mitigate these identified risks.

The Group benefits from being part of the PETRONAS and MISC Group, which has an established Risk Management Committee, which defines, develops and recommends risk management strategies and policies for the PETRONAS and MISC Group.

The implementation of risk management activities are undertaken at corporate and operations level and risk reports are generated and monitored by risk committees on regular intervals prior to escalation to the Risk Council (“RC”).

The RC was formed comprising of members of management to oversee the overall risk activities in the Group, with the following objectives:

• Continuous identification, assessment, mitigation and monitoring of all principal risks of the Group

• Coordinate and prioritise the risk management activities of the Group to ensure all principal risks are adequately managed

• Ensure that a comprehensive risk management policies and framework is in place to provide a strong control environment

• Ensure the Group’s risk management strategies are continuously aligned with its business strategies and risk tolerance, where risks are considered in the Group’s long term plans and investment or capital allocations

• Ensure that adequate resources, expertise and information to manage risks are available throughout the Group

• Propagate a risk awareness culture among the Group’s stakeholders, in particular all staff levels in the Group, by way of continuous risk training and education.

The RC meets on regular intervals and updates any risk management issues to the Board through the Board Audit Committee.

In managing the principal risks of the Group, four (4) risk categories have been identified namely Generic, Credit and Finance, Bidding and Project Risk which are supported and governed by respective risk management frameworks and guidelines.

These risk categories are managed on various platforms including participation in Group Risk Committees at MISC Group level.

Finance Risk Management is monitored and reviewed under the finance risk Committee (“frC”). FRC is responsible to develop and formulate finance risk framework, guidance, policies and control procedures to mitigate and control exposure to MHB Group of Companies. It also provides on avenue to discuss and resolve credit issues with clients on accounts receivables.

The key finance risks that are monitored by the FRC include:

(a) Counterparty risks from Clients, Banks and Suppliers.

(b) Foreign exchange risks from financial transactions.

(c) Interest rate risk from placement of funds in money market.

(d) liquidity risks arising from inability to meet its working capital requirement.




risk Council (rC)*

Concurrently, The Group has a representative in the mIsC finance risk Committee (“mfrC”), which regularly reviews the credit and finance risks. The MFRC formulates its credit & trading risks based on the credit & trading operational guidelines issued by the PETRONAS Group’s financial risk management operational Committee (“frmoCo”). The credit & trading risk framework and guidelines have been developed to ensure all matters relating to credit & trading risks are being addressed accordingly. The MFRC provides guidance, direction and monitor compliance to the financial risk management framework and guidelines. MFRC helps to manage the finance risk exposures that include counterparty risk, liquidity risk, foreign exchange risk and interest rate risk.

Generic Risk Management are being addressed and monitored at divisional level. Endorsed Generic Risk Registers are reviewed and deliberated in the Risk Council meeting periodically.

Risks in relation to bidding activities are addressed and managed at bidding approval Committee (“biaC”). BiAC is responsible to ensure various project-related risks are identified and evaluated during the bidding stage. The risk assessment activities include review on the bid proposal, proposed contract terms and conditions as well as bid clarifications. The BiAC also will propose bid approach method and negotiation strategy for bid during the assessment. All BiAC members are members of the Management Committee (“MC”).

Project Risk Management are being addressed and monitored at project management level during the project contract tenure. In addition, for long duration projects, periodic reporting on progress is presented to the MC under Project Management Report (“PMR”) Review, which includes assessing the project risks and evaluating the mitigations to be implemented to reduce the risk impact, if any. Project updates and issues are reported to the Board on quarterly basis.

The risk management reporting structure is as depicted below:

Note * Chaired by MD & CEO ** The Group is also represented at MISC’s Finance Risk Committee

board of dIreCtors (board)

Boardaudit Committee (BaC)

Project RiskGeneric RiskFinance Risk Committee**

Bidding Approval Committee

(BiAC)

Project Management Report

management Committee (mC)*



key proCesses of the group’s system of Internal Control

The process of governing the effectiveness and integrity of the system of internal control is carried throughout the various areas as follows:

1 The baC operates within its terms of reference in ensuring that there is effective risk monitoring, internal control and corporate governance to provide the level of assurance required by the Board.

2 The Group engages mIsC group Internal audit (“gIa”), which is functionally reporting directly to the BAC, to perform independent planned approved audits and initiatives within the Group in evaluating and assessing the effectiveness of risk management, internal control and governance process. GIA also conducts additional assurance assignments, control improvement engagements and special reviews arising from any potential irregularities upon request by the Management or BAC. The BAC reviews, deliberates and endorses the annual and long term audit plan and strategy including scope of work and resources. Results of the audit engagement are presented and deliberated during quarterly BAC meeting. The Group has formed an Internal Audit Team in the Financial Period to support GIA in executing the internal audit activities.

The key in solving lapses in internal controls is the effective execution of the Audit Plan and close monitoring of the Agreed Corrective Actions (“ACA”) which are embodied in the audit reports. GIA monitors the status of implementation of these ACAs through the Quarterly Audit Status Assessment. The findings are recorded in the consolidated reports which are submitted to the BAC.

In addition, BAC conducts half yearly and yearly review and assessment on the GIA’s functions and resources scope of work and its annual plan and strategy. The conducts of internal audit work is governed by the Internal Audit Charter and the Internal Audit Charter Memorandum. In addition, the internal audit work also conforms to the Institute of Internal Auditor’s (“IIA’s) International Standards for the Professional Practice of Internal Auditing.

3 senior management sets the tone for an effective control environment and culture in the organisation through the Group’s shared values, developed to focus on the importance of these four key values:

• loyalty

• Integrity

• Professionalism

• Cohesiveness

The importance of the shared values is manifested in the Code of Conduct which is issued to all staff upon joining. Employees are required to strictly adhere to the Code in performing their duties.

4 The hse management Committee (“hse mC”) is responsible in setting the overall direction on HSE implementation to continuously meet legal compliance as a minimum. hse mC also drives strategies and monitors performance to ensure HSE risks are managed to as low as reasonably practicable by carrying out annual review of HSE Management System as well as monthly assessment and discussion on performance and HSE initiatives.

5 There is also a Corporate security (“Csd”) Division which maintains a clear policy, procedures and framework with the aim to continuously monitor adherence to established industry security standards as well as international security standards applicable under the relevant codes.

other sIgnIfICant elements of Internal Control systems

1 The Board reviews quarterly reports from Management on key operating performance, legal, environmental and regulatory matters. Financial performance is deliberated by the MC and also tabled to the BAC and Board on a quarterly basis.

2 limits of authority (“loa”) manual provides a sound framework of authority and accountability within the organisation and facilitates quality and timely corporate decision making at the appropriate level in the organisation’s hierarchy.




3 The Group performs a comprehensive annual planning and budgeting exercise which involves the development of business strategies for the next five years to achieve the Group’s vision. The long term strategies are supported by initiatives to be accomplished in the upcoming year, and for effective implementation, the initiatives are tied to specific measurable indicators which will be evaluated against the relevant business/service units and subsidiaries’ deliverables. The Group’s strategic directions are then reviewed annually taking into account current progress level and other indicators such as latest development in the industry, changes in market conditions and significant business risks. In addition to that, the Group’s business plan is translated into budgetary numbers for the next five years and is presented to the Board annually for deliberation and approval. During the year, financial performance is analysed and reported monthly and quarterly to the Group’s MC.

4 There is a clear procedure for investment appraisal for equity investment or divestment or capital expenditure. In relation for yard optimisation programme, a specific review will be conducted by technical review Committee on the technical aspects and the commercial feasibility of the programme before submission to the Board for approval.

5 Contract award Committee (“CaC”) is a review committee whose role is to ensure that tendering, contracting and purchasing activities within their jurisdiction are conducted in an effective, transparent and fair manner in the interest of the Group. CaC members are of multi-discipline background to ensure balanced composition to provide different perspective and views for the feedback.

6 The professionalism and competency of staff are enhanced through structured development programs. new entrants are subject to a stringent recruitment process. A performance management system (“pms”) is established to review and measure staff performance. Action plans to address staff developmental requirements are prepared and implemented timely. This is to ensure that staffs are able to deliver the expected performances so that the Group can meet its plans and targets. The review of the staffs’ performance, upgrading and promotion is conducted by management development Committee for the Managerial grade and above, whereas the performance, upgrading and promotion for Executive grade and below is performed by executive development Committee. The two Committees sit regularly during the year under review.

The Board does not regularly review the internal control system of its jointly controlled entities, as the Board does not have direct control over their operations. notwithstanding, the Group’s interests are served through representation on the board of the respective jointly controlled entities, placement of management staff as key employees of the jointly controlled entities and receipt and review of management accounts and inquiries thereon. These representations also provide the Board with information for timely decision making on the performance of the Group’s investments of the jointly controlled entities.

revIew by external audItors

The external auditors, Messrs Ernst & Young, have reviewed this Statement on Internal Control for inclusion in the Annual Report for the financial period ended 31 December 2011, in compliance with Paragraph 15.23 of the listing Requirements, and reported to the Board that nothing has come to their attention to cause them to believe that the statement is inconsistent with their understanding of the process adopted by the Board in reviewing the adequacy and integrity of the system of internal controls.

For the financial year under review, based on enquiry, information and assurance provided, the Board is satisfied that the system of internal control was generally satisfactory. Measures would continuously be taken to ensure on-going adequacy and effectiveness of internal controls, and to safeguard the Group’s assets and shareholders’ investment.




THE BOARD OF DIRECTORS OF MALAYSIA MARINE AND HEAVY ENGINEERING HOLDINGS BERHAD IS PLEASED TO PRESENT THE BOARD AUDIT COMMITTEE (BAC) REPORT FOR THE FINANCIAL PERIOD ENDED 31 DECEMBER 2011.

The BAC was established by the Board with the function of assisting the Board in ensuring that there are effective risk monitoring and compliance procedures to provide the level of assurance required by the Board. During the financial period, the BAC carried out its duties and responsibilities in accordance with its terms of reference.

ComposItIon and meetIngs

The BAC consists of four (4) independent and one (1) non-independent Directors. Datuk Khoo Eng Choo is a member of the Malaysian Institute of Accountants (MIA) which meets the requirement of paragraph 15.09(1)(c) of the listing Requirements where at least one (1) member of the BAC must be a qualified accountant.

During the financial period, six (6) BAC meetings were held. The BAC members and their details of attendance at the BAC meetings are as follows:-

members Designationno. ofmeetingsattended

Dato’ Halipah binti Esa Independent Non-Executive Director

Chairperson 6 out of 6

Datuk Khoo Eng Choo Independent Non-Executive Director

Member 6 out of 6

Heng Heyok Chiang @ Heng Hock Cheng Independent Non-Executive Director

Member 6 out of 6

Yong Nyan Choi @ Yong Guan Choi Independent Non-Executive Director

Member 6 out of 6

Bernard Rene Francois di Tullio Non-Independent Non-Executive Director

Member 3 out of 6

board audIt CommIttee report



summary of terms of referenCe

Composition

The Committee shall be appointed by the Board from amongst its Directors and shall consist of not less than three (3) members with the majority being independent Directors. At least one (1) member of the Committee must be a member of the MIA or have at least three (3) years working experience and have passed the examinations specified in Part 1 of the 1st Schedule of the Accountants Act 1967 or be a member of one of the associations of accountants specified by Part II of the 1st Schedule of the Accountants Act 1967.

no alternate Director can be appointed as a member of the Committee. The members of the Committee shall elect a Chairman from among the members who shall be an independent non-executive Director.

meetings

Meetings shall be held not less than four (4) times a year. The quorum shall be two (2) members. The external auditors may request a meeting of the Committee if they consider it necessary.

At least twice a year, the Committee shall sit with the external auditors without any executive Board Member present. As the internal audit function is sourced from the Group Internal Audit of MISC Berhad (GIA), the General Manager, GIA shall be the Secretary of the Committee. The Managing Director & Chief Executive Officer, the Chief Financial Officer and representative of the external auditors shall normally attend the meetings of the Committee.

At the conclusion of each meeting, recommendations are made for the Management to improve the internal controls, procedures and systems of the Group, wherever applicable.

authority

The Committee is authorised by the Board to investigate any activity within its terms of reference and may obtain external legal or independent professional advice if it considers necessary.

duties and responsibilities

The duties of the Committee shall include the following and other duties as may be determined by the Board from time to time:-

Review, appraise, report and make appropriate recommendations to the Board of Directors on:-

(a) the audit plan, evaluation of the system of internal controls and the internal audit report with the internal and external auditors;

(b) the assistance and co-operation given by the employees of the Corporation to the external auditors;

(c) the adequacy of the scope, functions and resources of the internal audit functions and that it has the necessary authority to carry out its work;

(d) the internal audit programme, processes, the results of the internal audits, processes or investigation undertaken and whether or not appropriate action is taken on the recommendations of the internal audit functions;




(e) the quarterly results and year end financial statements, prior to the approval by the Board of Directors, focusing particularly on:-

• changes in or implementation of major accounting policy changes; • significant and unusual events; and • compliance with accounting standards and other legal requirements;

(f) any related party transaction and conflict of interest situation that may arise within the Corporation or Group including any transaction, procedure or course of conduct that raise questions of management integrity;

(g) the quality and effectiveness of the entire accounting and internal control system of the Group;

(h) the accounting policies adopted by Management and accepted by the external auditors, where alternatives are also acceptable;

(i) the effects of any change in accounting principles or of any development emanating from the accounting profession or any statutory authority;

(j) the adequacy of the disclosure of information essential for a fair and full presentation of the financial affairs of the Group;

(k) any significant difficulties encountered or material discoveries and findings made by the internal or external auditors; and

(l) the firm of external auditors retained by the Group and the fees payable to the external auditors and any change in their fees, and recommendation, if any, to retain or replace such firm in the ensuing year.

summary of aCtIvItIes

In line with the terms of reference of the BAC, the following activities were carried out by the Committee during the financial period:-

(i) financial and annual reporting

(a) Reviewed and recommended for Board’s approval, the quarterly financial statements and the necessary announcements relating to the Group’s financial results to Bursa Malaysia.

(b) Reviewed and recommended for Board’s approval, the annual audited financial statements. (c) Reviewed and recommended for Board’s approval, the Statement on Corporate Governance, the Statement

on Internal Control and the BAC Report for inclusion in the Annual Report.

(ii) Internal audit (a) Reviewed the long term and annual internal audit strategy and plan to ensure adequate scope and

comprehensive coverage over the activities of the Group. (b) Reviewed the internal audit reports issued by GIA on the effectiveness and adequacy of governance, risk

management, operational and compliance processes. (c) Reviewed the adequacy and effectiveness of agreed corrective actions taken by the Management on all

significant and secondary audit issues raised. (d) Reviewed the effectiveness and adequacy of audit process, resource requirements and assessed the

performance of the GIA on half yearly basis. (e) Prior to the Committee meetings, the Chairperson held private sessions and discussions with the Head and

senior staff of GIA on audit reports and any internal audit related matters.



(iii) external audit (a) Reviewed the external auditors’ terms of engagement, audit plan and strategy and scope of work for the

financial period. (b) Reviewed the results and issues arising from the external audit for the financial period and the resolution

of issues highlighted in their report to the BAC and Management’s response. (c) Assessed the performance and effectiveness of the external auditors and made recommendations to the

Board on their appointment and audit fee. (d) Met with the external auditors without the presence of Management to ensure there were no restrictions on

the scope of their audit and to discuss any matters that they may wish to present.

(iv) risk management

(a) Reviewed the progress of the risk management functions and its on-going activities for identifying, evaluating, monitoring and managing risks.

(b) Received and reviewed reports from Management on key strategic and operational risks to ensure these are being managed effectively.

(c) Decided on the way forward in managing strategic and operational risks which are to be implemented via Enterprise Risk Management (ERM) approach.

(d) Reviewed the risk management governance structure to enable an effective implementation of ERM.

(v) others

(a) Reviewed the related party transactions entered into by the Group on a quarterly basis. (b) Reviewed the guidelines on related party transactions and recurrent related party transactions for the

Group. (c) Reviewed the proposed revision to the limits of authority manual for the Group.

Internal audIt funCtIons and aCtIvItIes

In the discharge of its duties, the BAC is strongly supported by GIA. GIA functionally reports directly to the Committee, conducts independent scheduled audits to ensure there are effective risk monitoring, internal controls, governance process and compliance procedures to provide the level of assurance required by the Board.

In conducting their independent audits, GIA places emphasis on risk based auditing approach which forms an integral part of the audit plans. The key in solving lapses in internal control is the discipline execution of the audit plans, submission of audit findings, recommendations on audit issues and close follow-up of the agreed corrective actions which are encompassed in the audit reports. Such regular monitoring is essential to ensure the integrity and effectiveness of the Group’s system of internal control.

GIA submits their findings and recommendations on audit issues to the Managing Director & Chief Executive Officer of the Company at audit close out meetings to share and agree on issues that may have arisen during such audits. Subsequently, the reports together with deliberations at the audit close out meetings are tabled at the BAC meetings for decisions.

At the Board of Directors’ meetings, the Chairperson of the Committee highlights key audit issues and overall decisions and resolutions made during the BAC meeting to the Board members.

During the financial period, the internal auditors had carried out audits according to the internal audit plan approved by the BAC.




statement on reCurrent related party transaCtIons (rrpts)

The BAC has reviewed the procedures mentioned on pages 70 and 71 of the Annual Report and is of the view that the said procedures are sufficient to ensure that the RRPTs are fair, reasonable and in the best interest of the MHB Group. The BAC is satisfied that the Group has put in place adequate procedures and processes to monitor, track and identify RRPTs in a timely and orderly manner to ensure that the RRPTs are, at all times, carried out on normal commercial terms and consistent with the Group’s practices and are not to the detriment of the minority shareholders. The procedures and processes will be reviewed from time to time based on recommendations from the internal audit team of the Company.

The above view is also based on the report and opinion from PricewaterhouseCoopers Capital Sdn Bhd (PwCC) who has been appointed as the independent adviser to carry out an independent review of the Group’s methods and procedures relating to RRPTs. The letter of opinion from PwCC is included on pages 83 and 84 of the Annual Report.

This report is made in accordance with the resolution of the Board of Directors dated 4 April 2012.



letter of opInIon from Independent advIser

Board Audit CommitteeMalaysia Marine and Heavy Engineering Holdings BerhadLevel 31, Menara DayabumiJalan Sultan Hishamuddin50050 Kuala Lumpur

4 April 2012

Dear Sirs,

revIew on methods or proCedures In determInIng and revIewIng transaCtIon prICes and terms of reCurrent related party transaCtIons

1 IntroduCtIon

Malaysia Marine and Heavy Engineering Holdings Berhad (‘MHB’) is a leading marine and heavy engineering services provider in Malaysia, primarily focused in the oil and gas sector. The principal business of MHB consists of engineering and construction, marine conversion, and marine repair services from the repair yards in Pasir Gudang (Johor, Malaysia) and Kiyanly (Turkmenistan). MHB was listed on the Bursa Malaysia Securities Berhad (‘Bursa Malaysia’) main market on 29 October 2010.

This letter has been prepared for the purpose of inclusion in the Annual Report for the financial period ended 31 December 2011 pursuant to the waiver for compliance with Paragraph 10.09 of Bursa Malaysia Main Market listing Requirements (‘lR’) granted by Bursa Malaysia based on its letters to MHB dated 15 July 2011 (‘the Waiver’).

As part of the Waiver which was granted on the following transactions;

1. Fabrication and construction of oil and gas offshore structure for Petronas Group & MISC – Petronas Carigali Sdn Bhd.

2. Provision of dry docking and repairs of MISC’s vessels. 3. Provision of conversion, life extension of vessels into floating, production, storage and off – loading (‘FPSO’)/

floating, storage and off loading (‘FSO’). 4. Purchase of oil products from Petronas Group – Petronas Dagangan Berhad. 5. Provision of Services/Sale of Equipment & Materials from Petronas Group – MITCO Sdn Bhd. 6. Provision of logistics solution by MISC’s subsidiaries – MISC Integrated logistics Sdn Bhd (‘MIlS’). 7. Others – Rental of external warehouse by Petronas Group – Petronas Carigali Sdn Bhd.;

MHB is required to disclose in its Annual Report after the listing date, an independent financial adviser’s opinion that the methods or procedures in determining the transaction prices and terms of the RRPTs are sufficient to ensure that these transactions will be carried out on normal commercial terms and will not be to the detriment of its minority shareholders (the ‘minority shareholders’).

2 terms of referenCe

To comply with the condition attached to the waiver as described above, PricewaterhouseCoopers Capital Sdn Bhd (‘pwCC’) has been appointed as the independent financial adviser to provide an opinion on whether the methods or procedures in determining the transaction prices and terms of the RRPTs are sufficient to ensure that these transactions will be carried out on normal commercial terms and will not be to the detriment of Minority Shareholders.

PwCC’s views as set forth in this letter are based on the prevailing market and economic conditions, and our analysis of the information provided to us by MHB up to the date of this letter. Accordingly, this opinion shall not take into account any event or condition which occur after that date.



The scope of our review for the purposes of this letter covers the RRPT contracts entered into by MHB and its subsidiaries on or after 1 April 2011 and up to 31 December 2011 (‘period of review’) for the seven (7) categories of RRPTs set out in Section 1 above.

PwCC’s work is solely in respect of the review of methods or procedures in determining the transaction prices of the RRPTs and we were not involved in the formulation of these procedures adopted by the Company.

In the course of our evaluation of the procedures, we have performed the following:

• Desktop reviews of documented standard operating procedures and relevant Board and Management reports that were used to determine and review the transaction prices and terms of RRPTs;

• Performed a walkthrough on selected RRPTs, the procedures undertaken to determine transaction prices and terms of RRPTs;

• Discussions with selected members of Senior Management on the methods and procedures employed by MHB to determine and review the transaction prices and terms of RRPTs; and

• Interviews with the Audit Committee to understand the Board’s role in reviewing RRPTs.

We have not conducted any procedures on information included in MHB’s 2011 Annual Report.

3 revIew proCedures In determInIng and revIewIng transaCtIon prICes and terms of rrpts

Details of such review procedures and threshold limits are set out in MHB’s Guidelines Document on Related Party Transactions and Recurrent Related Party Transactions for MHB Group (2011) as endorsed by the Board Audit Committee (‘BAC’) on 14 november 2011 and approved on 4 April 2012 (‘Guidelines Document’). These procedures are summarised in the Statement on Corporate Governance of this Annual Report, and Shareholders are advised to read the information carefully.

In our review of procedures for determining the transaction prices of the RRPTs, we have considered the following:

(a) The Directors’ rationale for, and the benefits accruing to the Group arising from the RRPTs;

(b) The classes of Related Parties and the nature and description of the RRPTs; and

(c) The review procedures for the RRPTs.

Bursa Malaysia had on 15 July 2011 granted MHB a waiver from complying with Chapter 10.09 of the Main Market listing Requirements of Bursa Malaysia, of having to seek shareholders approval in relation to the supply, sale, purchase, provision and usage of goods, services and facilities which form part of MHB’s integrated operations in a total of seven (7) categories.

MHB had used the Guidelines Document in the RRPT process during the Period of Review. Based on the result of our sample tests, there were no exceptions as it relates to the price determination process for those specific samples selected.

Based on work performed, improvement areas have been discussed and agreed with the BAC and incorporated in the Guidelines Document approved on 4 April 2012.

4 opInIon

Our sample testing did not note any exceptions as it relates to the methods and procedures undertaken to determine that transaction prices and terms of the RRPTs are carried out on normal commercial terms and will not be to the detriment of its minority shareholders.

We have prepared this letter for the use of MHB in connection with the conditions of the Waiver imposed by Bursa Malaysia. A copy of the letter may be reproduced in the Annual Report.

Yours faithfully,

PricewaterhouseCoopers Capital Sdn Bhd




The Directors are responsible to prepare annual audited financial statements of the Group and of the Company in accordance with the provisions of the Companies Act, 1965 and the requirements of the applicable approved Financial Reporting Standards issued by the Malaysian Accounting Standards Board.

The Directors are also responsible to ensure that the annual audited financial statements of the Group and of the Company are prepared with reasonable accuracy from the financial records of the Group and of the Company so as to give a true and fair view of the state of affairs of the Group and of the Company as at the financial period and of their financial performance and the cash flows for the financial period then ended.

In preparing the annual audited financial statements of the Group and of the Company for the financial period ended 31 December 2011, the Directors have ensured that, the appropriate and relevant accounting policies were adopted and consistently applied, reasonable and prudent estimates were exercised and a going concern basis was adopted.

The Directors have the overall responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and of the Company to prevent and detect fraud and other irregularities.


dIreCtors’ responsIbIlIty statementON PREPARATION OF FINANCIAL STATEMENTS



Investor relatIons reportThe financial period under review is a nine-month period due to the change in the Company’s financial year end to 31st December. Throughout the financial period, MHB has continued with its communication and dialogue with the investment community and our shareholders. The objective of MHB IR Programme is to ensure regular, fair, effective and timely communication with our stakeholders, including the financial community. The Company strives to ensure that members of the investment community have sufficient overall understanding of the Group’s operations, financial performance and corporate strategies to make informed investment decisions.

Some of the IR programme highlights and initiatives during the period under review are as follows:

• Provide timely disclosure of information on quarterly results, corporate developments and all material announcements as required under Bursa Malaysia’s listing Requirements

• MHB has updated its corporate portal and enhanced the user-friendliness and overall visual appeal of the Company’s website. The dedicated IR section has been enhanced and most recent uploads are now displayed prominently. Quarterly IR Reports and slide presentations shown during the Company’s Analyst Briefings were being uploaded on the corporate portal, http://www.mhb.com.my/, on the same day when the quarterly financial results were announced to Bursa Malaysia. This facilitates simultaneous and instantaneous dissemination of information to all the Company’s stakeholders

• Analyst Briefings were conducted during the final quarter and six-month period by MD & CEO and CFO to provide a comprehensive review of MHB’s financial performance, operations, initiatives as well as strategies going forward

• The analyst briefings conducted included a section on FPSO (floating production storage and offloading), description and details of new contracts secured by MHB, as well as updates on strategic initiatives and the yard acquisition proposal

• MHB participated and presented at Invest Malaysia 2011 in Kuala lumpur. The conference was organised by Maybank Investment Bank and MHB was invited and given the privilege to update especially domestically-based as well as regional fund managers that attended the event

• MHB organised two visits to our Pasir Gudang yard in Johor Baru during the period under review. The first was organised in conjunction with Invest Malaysia 2011 to provide members of the investment community and especially fund managers a better understanding and appreciation of MHB’s operations and structures that are currently being fabricated at the yard. The second visit was organised especially for analysts to assist them to formulate a better knowledge of MHB’s projects at hand



• MD & CEO gave a presentation during the Company’s 22nd Annual General Meeting in September 2011, giving minority shareholders, invited guests and representatives from the Minority Shareholder Watchdog Group (MSWG), an update on MHB’s business operations, financial results, recently acquired contracts and strategic plans and initiatives

• Minority shareholders were also given the opportunity by MHB’s Board of Directors to have their queries answered at the Company’s 22nd Annual General Meeting

• Research reports written by analysts are compiled regularly. Feedback was provided to senior management of MHB on the investment community’s views of the Company, which was used to manage market expectations

• The IR team conducted regular one-on-one meetings with analysts, fund managers and shareholders. Enquiries were also attended to on a timely manner

MHB received the “Best Investor Relations for an IPO” award from the Malaysian Investor Relations Association (MIRA) in May 2011. The award recognises the efforts and initiatives undertaken by listed companies to ensure a constant and high level of engagements and information disclosure to investors. The IR awards survey was undertaken by Thomson Reuters Extel Surveys where over 700 buy-side and sell-side professionals globally were invited to participate in the survey.

In June 2011, MHB was included in both the Morgan Stanley Capital International (MSCI) Malaysia Index and FTSE Bursa Malaysia KlCI Index. These indices are widely used as benchmark by domestic and international institutional investors to measure the equity market’s performance.

The following Management Personnel are responsible for IR activities:managing director & Chief executive officerChief financial officerInvestor relations & business research



addItIonalComplIanCeInformatIonThe following information is provided in accordance with Paragraph 9.25 of the Main Market listing Requirements of Bursa Malaysia Securities Berhad as set out in Appendix 9C thereto.

1 status of utilisation of proceeds

As at 4 April 2012, the status of utilisation of proceeds raised from corporate exercise is as follows:

Deviation

purpose

originalproposedutilisationrm’000

revisedproposedutilisationrm‘000

actualutilisationrm‘000

Intendedtimeframeforutilisation

amountrm‘000 %

Yard optimisation programme

833,780 445,830 – Within 48 months upon listing

– –

Capital Expenditure in Turkmenistan

110,000 110,000 Within 48 months upon listing

– –

Listing Expenses 37,000 31,517 31,5171 Fully utilised 5,483 14.8

Acquisition of Pasir Gudang yard from Sime Darby Engineering Sdn Bhd (Acquisition)

– 393,433 393,4332 Fully utilised – –

total 980,780 980,780 424,950 5,483 14.8

1 As the actual listing expenses were lower than the estimated amount, the unutilised balance of RM5,483,000 will be allocated for the yard optimisation programme as per disclosure in the Company’s Prospectus dated 6 October 2010.

2 The amount of RM393,433,000 which was utilised for the purchase consideration of the Acquisition forms part and parcel of the yard optimisation programme.



2 material Contracts

There were no material contracts entered into or subsisting between the Company and its Directors or major shareholders during the financial period except as disclosed in the audited financial statements of this Annual Report.

3 sanctions and/or penalties

During the financial period, there were no sanctions and/or penalties imposed on the Company and its subsidiaries, Directors or Management by any regulatory body.

4 non-audit fees

The amount of non-audit fees paid to the Company’s external auditors or their affiliates for services rendered to the Group for the financial period ended 31 December 2011 was RM5,570 (RM2,364,055 for the financial year ended 31 March 2011).

5 share buy-backs

The Company did not purchase any of its own shares during the financial period.

6 options, warrants or Convertible securities

The Company did not issue any options, warrants or convertible securities during the financial period.

7 depository receipt programme

The Company did not sponsor any depository receipt programme during the financial period.

8 profit estimate, forecast or projection

The Company did not make any release on the profit estimate, forecast or projection for the financial period.

9 profit guarantee

The Company did not give any profit guarantee during the financial period.



fInanCIalstatements

92 Directors’ Report 97 Statement by Directors 97 Statutory Declaration 98 Independent Auditors’ Report 100 Statements of Comprehensive Income 101 Statements of Financial Position 103 Consolidated Statement of Changes in Equity 104 Statement of Changes in Equity 105 Consolidated Statement of Cash Flows 107 Statement of Cash Flows 108 Notes to the Financial Statements 159 Supplementary Information

aCCounTabiliTy

dIreCtors’ report

The directors have pleasure in presenting their report together with the audited financial statements of the Group and of the Company for the financial period ended 31 December 2011.

prInCIpal aCtIvItIes

The principal activity of the Company is investment holding. The principal activities of the subsidiaries and jointly controlled entities are described in note 14 and note 15 to the financial statements respectively. There have been no significant changes in the nature of the principal activities during the financial period.

Change In fInanCIal year end

The financial year end of the Company was changed from 31 March to 31 December so as to be coterminous with the year end of its ultimate holding company as required by Companies Act, 1965. Accordingly, the current financial statements are prepared for nine (9) months from 1 April 2011 to 31 December 2011. As a result, the comparative figures stated in the statements of comprehensive income, statements of changes in equity and statements of cash flows and the related notes are not comparable.

results

The results of the Group and of the Company for the financial period ended 31 December 2011 are as follows:

group Company rm’000 rm’000

Profit net of tax 205,927 172,447 Profit attributable to:Equity holders of the Company 205,601 172,447Non-controlling interests 326 – 205,927 172,447

There were no material transfers to or from reserves or provisions during the financial period other than as disclosed in the financial statements.

In the opinion of the directors, the results of the operations of the Group and of the Company during the financial period were not substantially affected by any item, transaction or event of a material and unusual nature.



dIvIdends

The amounts of dividends paid by the Company since 31 March 2011 was as follows: rm’000In respect of the financial year ended 31 March 2011 as reported in the directors’ report of that year:

Final (single-tier) dividend of 5 sen per share on 1,600,000,000 ordinary shares, paid on 19 October 2011 80,000

At the forthcoming Annual General Meeting, a final single-tier dividend will be proposed for shareholders’ approval in respect of the financial period ended 31 December 2011 of 10 sen per ordinary share on 1,600,000,000 ordinary shares, amounting to a dividend payable of RM160 million. The financial statements for the current financial period do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December 2012.

dIreCtors

The names of the directors of the Company in office since the date of the last report are:

Datuk Nasarudin bin Md IdrisDato’ Halipah binti EsaDatuk Khoo Eng ChooHeng Heyok Chiang @ Heng Hock ChengYong Nyan Choi @ Yong Guan ChoiBernard Rene Francois di TullioYee Yang ChienCaptain Rajalingam SubramaniamDominique Marie Bruno Francois Veyre de Soras

dIreCtors’ benefIts

Neither at the end of the financial period, nor at any time during that period, did there subsist any arrangement to which the Company was a party, whereby the directors might acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the previous financial year, no director has received or become entitled to receive any benefits by reason of a contract made by the Company or a related corporation with any director or with a firm of which he is a member, or with a company in which he has a substantial financial interest, other than:

(a) benefits included in the aggregate amount of emoluments received or due and receivable by the directors or the fixed salary of a full-time employee of the Company as shown in Note 6 and Note 7 to the financial statements respectively; or

(b) benefits included in the aggregate amount of emoluments received or due and receivable by the directors of related companies; or

(c) the fixed salary of a full-time employee of related companies.



dIreCtors’ report

dIreCtors’ Interests

According to the register of directors’ shareholdings, the interests of directors in office at the end of the financial period in shares in the Company and its related corporations during the financial period were as follows:

1 april 31 december 2011 acquired sold 2011Direct interest:Ordinary shares of RM0.50 each

theCompanyDatuk Nasarudin bin Md Idris 10,000 – – 10,000Dato’ Halipah binti Esa 10,000 – – 10,000Datuk Khoo Eng Choo 10,000 – – 10,000Heng Heyok Chiang @ Heng Hock Cheng 10,000 – – 10,000Captain Rajalingam Subramaniam 10,000 – – 10,000Dominique Marie Bruno Francois Veyre de Soras 10,000 – – 10,000

Ordinary shares of RM1.00 each

klCCpropertyholdingsBerhad, a related companyDatuk Nasarudin bin Md Idris 5,000 – – 5,000Heng Heyok Chiang @ Heng Hock Cheng 40,000 20,000 – 60,000

petronasgasBerhad, a related companyDatuk Nasarudin bin Md Idris 3,000 – – 3,000


petronasChemicalsgroupBerhad, a related companyDatuk Nasarudin bin Md Idris 10,000 – – 10,000Dato’ Halipah binti Esa 10,000 – – 10,000Datuk Khoo Eng Choo 30,000 – – 30,000

Deemed interest:Ordinary shares of RM0.50 each

theCompanyDato’ Halipah binti Esa 10,000 – – 10,000


petronasChemicals groupBerhad, a related companyDato’ Halipah binti Esa 13,100 – – 13,100

None of the other directors in office at the end of the financial period had any interest in shares in the Company or its related corporations during the financial period.



other statutory InformatIon

(a) Before the statements of comprehensive income and statements of financial position of the Group and of the Company were made out, the directors took reasonable steps:

(i) to ascertain that proper action had been taken in relation to the writing off of bad debts and the making of provision for doubtful debts and satisfied themselves that there were no known bad debts and that adequate provision had been made for doubtful debts; and

(ii) to ensure that any current assets which were unlikely to realise their value as shown in the accounting records in the ordinary course of business had been written down to an amount which they might be expected so to realise.

(b) At the date of this report, the directors are not aware of any circumstances which would render: (i) it necessary to write off any bad debts or the amount of the provision for doubtful debts in the financial

statements of the Group and of the Company inadequate to any substantial extent; and (ii) the values attributed to the current assets in the financial statements of the Group and of the Company

misleading.

(c) At the date of this report, the directors are not aware of any circumstances which have arisen which would render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.

(d) At the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or financial statements of the Group and of the Company which would render any amount stated in the financial statements misleading.

(e) As at the date of this report, there does not exist: (i) any charge on the assets of the Group or of the Company which has arisen since the end of the financial

period which secures the liabilities of any other person; or (ii) any contingent liability of the Group or of the Company which has arisen since the end of the financial

period.

(f) In the opinion of the directors: (i) no contingent or other liability has become enforceable or is likely to become enforceable within the period

of twelve months after the end of the financial period which will or may affect the ability of the Group or of the Company to meet their obligations when they fall due; and

(ii) no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial period and the date of this report which is likely to affect substantially the results of the operations of the Group or of the Company for the financial period in which this report is made.



dIreCtors’ report

sIgnIfICant events

Details of the significant events are disclosed in note 35 to the financial statements.

audItors

The auditors, Ernst & Young, have expressed their willingness to continue in office.

Signed on behalf of the Board in accordance with a resolution of the directors dated 20 February 2012.

Datuknasarudin binmd Idris DominiquemarieBrunofrancois veyre desoras



We, Datuk nasarudin bin Md Idris and Dominique Marie Bruno Francois Veyre de Soras, being two of the directors of Malaysia Marine and Heavy Engineering Holdings Berhad, do hereby state that, in the opinion of the directors, the accompanying financial statements set out on pages 100 to 158 are drawn up in accordance with Financial Reporting Standards and the 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 at 31 December 2011 and of their financial performance and the cash flows for the period then ended.

The information set out in Note 36 on page 159 to the financial statements have been prepared in accordance with the Guidance on Special Matter no. 1, Determination of Realised and Unrealised Profits or losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad listing Requirements, issued by the Malaysian Institute of Accountants.

Signed on behalf of the Board in accordance with a resolution of the directors dated 20 February 2012.

Datuknasarudin binmd Idris DominiquemarieBrunofrancois veyre desoras

I, Wan Mashitah binti Wan Abdullah Sani, being the officer primarily responsible for the financial management of Malaysia Marine and Heavy Engineering Holdings Berhad, do solemnly and sincerely declare that the accompanying financial statements set out on pages 100 to 158 are in my opinion correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.

Subscribed and solemnly declared bythe abovenamed Wan Mashitah binti WanAbdullah Sani at Kuala Lumpur in theFederal Territory on 20 February 2012 Wanmashitah bintiWanabdullahsani

Before me,

statement by dIreCtorsPursuant to section 169(15) of the Companies Act, 1965

statutory deClaratIonPursuant to section 169(16) of the Companies Act, 1965



Independent audItors’ reportto the members of Malaysia Marine and Heavy Engineering Holdings Berhad (Incorporated in Malaysia)

report on the fInanCIal statements

We have audited the financial statements of Malaysia Marine and Heavy Engineering Holdings Berhad, which comprise the statements of financial position as at 31 December 2011 of the Group and of the Company, and the statements of comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for the period then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 100 to 158.

directors’ responsibility for the financial statementsThe directors of the Company are responsible for the preparation of financial statements that give a true and fair view in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia, and for such internal control as the directors determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

auditors’ responsibilityOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the 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 the accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

opinionIn our opinion, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the 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 at 31 December 2011 and of their financial performance and cash flows for the period then ended.



report on other legal and regulatory reQuIrements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:

(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries have been properly kept in accordance with the provisions of the Act.

(b) We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes.

(c) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act.

other reportIng responsIbIlItIes

The supplementary information set out in note 36 on page 159 is disclosed to meet the requirement of Bursa Malaysia Securities Berhad. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter no. 1, Determination of Realised and Unrealised Profits or losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

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.

ernst & young Ismed darwis bin bahatiarAF: 0039 no. 2921/04/12(J)Chartered Accountants Chartered Accountant

Kuala Lumpur, Malaysia20 February 2012



statements of ComprehensIve InCome

group Company 1.4.2011 1.4.2010 1.4.2011 1.4.2010 to to to to note 31.12.2011 31.3.2011 31.12.2011 31.3.2011 rm’000 rm’000 rm’000 rm’000

Revenue 3 2,137,034 4,435,420 160,000 1,110,375Cost of sales (1,773,602) (3,866,590) – –

Gross profit 363,432 568,830 160,000 1,110,375Other operating income 4 62,417 56,752 24,036 13,753Selling and distribution expenses (1,041) (1,035) (305) (102)Administrative expenses (166,137) (147,708) (6,816) (4,843)Other operating expenses (55,654) (77,289) (9) (4)

Operating profit 5 203,017 399,550 176,906 1,119,179Finance income/(costs) 8 1,079 (769) – –Share of profit of jointly controlled entities 15 46,752 25,245 – –

Profit before taxation 250,848 424,026 176,906 1,119,179Taxation 9 (44,921) 26,450 (4,459) (78,496)

Profit net of tax 205,927 450,476 172,447 1,040,683

Other comprehensive income:Loss on cash flow hedges (3,407) – – –

Total comprehensive income for the period/year 202,520 450,476 172,447 1,040,683

Profit attributable to:Equity holders of the Company 205,601 450,748 172,447 1,040,683Non-controlling interests 326 (272) – –

205,927 450,476 172,447 1,040,683

Total comprehensive income attributable to:Equity holders of the Company 202,194 450,748 172,447 1,040,683Non-controlling interests 326 (272) – –

202,520 450,476 172,447 1,040,683

Earnings per share attributable to equity holders of the Company (sen per share)

Basic 10 12.85 31.13

statements of ComprehensIve InComeFor the financial period ended 31 December 2011

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.



group Company note 31.12.2011 31.3.2011 31.12.2011 31.3.2011 rm’000 rm’000 rm’000 rm’000

assets

non-current assetsProperty, plant and equipment 12 1,090,619 1,030,256 – –Land use rights 13 65,569 67,114 – –Investment in subsidiaries 14 – – 664,132 664,132Investment in jointly controlled entities 15 61,037 35,019 3,000 –Other investment 16 15 15 – –Deferred tax assets 17 57 9,686 – –

1,217,297 1,142,090 667,132 664,132

Current assetsInventories, at cost 25,593 30,632 – –Trade and other receivables 18 1,131,267 2,303,957 165,709 92,038Tax recoverable 2,724 2,453 – –Cash and bank balances 20 2,085,585 1,448,122 980,596 955,969

3,245,169 3,785,164 1,146,305 1,048,007

total assets 4,462,466 4,927,254 1,813,437 1,712,139

equity and liabilities

equity attributable to equity holders of the Company

Share capital 21 800,000 800,000 800,000 800,000Share premium 21 818,263 818,263 818,263 818,263Cash flow hedge reserve 22 (3,407) – – –Retained earnings 805,728 680,127 180,142 87,695

2,420,584 2,298,390 1,798,405 1,705,958Minority interests 3,628 3,302 – –

total equity 2,424,212 2,301,692 1,798,405 1,705,958

statements of fInanCIal posItIonAs at 31 December 2011




statements of fInanCIal posItIon as at 31 December 2011

group Company note 31.12.2011 31.3.2011 31.12.2011 31.3.2011 rm’000 rm’000 rm’000 rm’000

non-current liabilitiesDeferred income 23 – 991 – –Deferred tax liabilities 17 26,675 – – –

26,675 991 – –

Current liabilitiesTrade and other payables 24 1,926,504 2,534,942 12,334 5,478Provisions 25 61,625 61,327 – –Income tax payable 21,122 28,302 2,698 703Derivatives 26 2,328 – – –

2,011,579 2,624,571 15,032 6,181

total liabilities 2,038,254 2,625,562 15,032 6,181

total equity and liabilities 4,462,466 4,927,254 1,813,437 1,712,139




ConsolIdated statement of Changes In eQuItyFor the financial period ended 31 December 2011


attributable to equity holders of the Company Cash flow share share hedge distributable non- capital premium reserve retained controlling total (note 21) (note 21) (note 22) earnings total interests equity rm’000 rm’000 rm’000 rm’000 rm’000 rm’000 rm’000

at 1 april 2011 800,000 818,263 – 680,127 2,298,390 3,302 2,301,692 Total comprehensive

income – – (3,407) 205,601 202,194 326 202,520

transaction with equity holders of the Company

Dividends on ordinary shares (Note 11) – – – (80,000) (80,000) – (80,000)

Total transactions with equity holders of the Company – – – (80,000) (80,000) – (80,000)

at 31 december 2011 800,000 818,263 (3,407) 805,728 2,420,584 3,628 2,424,212

attributable to equity holders of the Company share share distributable non- capital premium retained controlling total (note 21) (note 21) earnings total interests equity rm’000 rm’000 rm’000 rm’000 rm’000 rm’000

at 1 april 2010 16,220 – 1,182,159 1,198,379 14,785 1,213,164 Total comprehensive income – – 450,748 450,748 (272) 450,476


Disposal of interest in a subsidiary – – – – (11,211) (11,211)Dividends on ordinary shares

(Note 11) – – (300,000) (300,000) – (300,000)Issuance of bonus issue

(Note 21(a)) 652,780 – (652,780) – – –Issuance of ordinary shares

(Note 21) 131,000 849,780 – 980,780 – 980,780 Share issuance expenses

(Note 21(b)) – (31,517) – (31,517) – (31,517)Total transactions with equity

holders of the Company 783,780 818,263 (952,780) 649,263 (11,211) 638,052

at 31 march 2011 800,000 818,263 680,127 2,298,390 3,302 2,301,692



(accumulated losses)/ share share distributable capital premium retained total (note 21) (note 21) earnings equity rm’000 rm’000 rm’000 rm’000

at 1 april 2011 800,000 818,263 87,695 1,705,958Total comprehensive income – – 172,447 172,447


Dividends on ordinary shares (Note 11) – – (80,000) (80,000)Total transaction with equity holders

of the Company – – (80,000) (80,000)

at 31 december 2011 800,000 818,263 180,142 1,798,405

at 1 april 2010 16,220 – (208) 16,012Total comprehensive income – – 1,040,683 1,040,683


Dividends on ordinary shares (Note 11) – – (300,000) (300,000)Issuance of bonus issue (Note 21(a)) 652,780 – (652,780) –Issuance of ordinary shares (Note 21) 131,000 849,780 – 980,780Share issuance expenses (Note 21(b)) – (31,517) – (31,517)Total transaction with equity holders

of the Company 783,780 818,263 (952,780) 649,263

at 31 march 2011 800,000 818,263 87,695 1,705,958

statement of Changes In eQuItyFor the financial period ended 31 December 2011




group 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000Cash flows from operating activitiesProfit before taxation 250,848 424,026Adjustments for:

Property, plant and equipment– depreciation 30,008 34,901– write-off 5,020 315Amortisation of land use rights 1,545 2,059Interest expense – 769Provision for/(reversal of) provision for warranty 298 (445)Provision for liquidated ascertained damages – 11,553Gain on dilution of interest in a subsidiary – (419)Impairment loss of trade receivables 4,303 874Interest income (43,954) (36,899)Change in fair value of hedging derivatives (1,079) –Net unrealised foreign exchange losses 2,657 6,039Inventories written off 334 5,097Share of profit of jointly controlled entities (46,752) (25,245)

Operating profit before working capital changes 203,228 422,625Inventories 4,705 2,794Trade and other receivables 1,173,998 268,128Trade and other payables (624,026) (710,890)

Cash generated from/(used in) operations 757,905 (17,343)Interest paid – (3,466)Tax paid (16,068) (28,528)

net cash generated from/(used in) operating activities 741,837 (49,337)

ConsolIdated statement of Cash flowsFor the financial period ended 31 December 2011




ConsolIdated statement of Cash flows for the financial period ended 31 December 2011

group 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000Cash flows from investing activitiesPurchase of property, plant and equipment (95,391) (143,160)Net cash inflow on the dilution of interest in a subsidiary – 3,924Interest received 50,283 22,833Dividend income from jointly controlled entities 23,734 1,600

Net cash used in investing activities (21,374) (114,803)

Cash flows from financing activitiesProceeds from issuance of ordinary shares – 980,780Share issuance expenses (Note 21(b)) – (31,517)Dividends paid on ordinary shares (Note 11) (80,000) (300,000)Repayment from immediate holding company – 500,000Net repayment of borrowings – (302,900)Investment in a jointly controlled entity (3,000) –

net cash (used in)/generated from financing activities (83,000) 846,363

net change in cash and cash equivalents 637,463 682,223Cash and cash equivalents at beginning of period 1,448,122 765,899

Cash and cash equivalents at end of period (note 20) 2,085,585 1,448,122




Company 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000Cash flows from operating activitiesProfit before taxation 176,906 1,119,179Adjustments for: Interest income (24,036) (13,553) Dividend income from subsidiaries (160,000) (1,110,375)

Operating loss before working capital changes (7,130) (4,749) Trade and other receivables (14) 7,586 Trade and other payables 6,857 4,649

Cash (used in)/generated from operations (287) 7,486 Interest received 30,378 1,570 Tax paid (2,464) (2,400)

Net cash generated from operating activities 27,627 6,656

Cash flows from investing activitiesDividend income received 80,000 300,000

Net cash generated from investing activities 80,000 300,000

Cash flows from financing activitiesProceeds from issuance of ordinary shares – 980,780Share issuance expenses (Note 21(b)) – (31,517)Dividends paid on ordinary shares (Note 11) (80,000) (300,000)Investment in a jointly controlled entity (3,000) –

net cash (used in)/generated from financing activities (83,000) 649,263

net change in cash and cash equivalents 24,627 955,919Cash and cash equivalents at beginning of period 955,969 50

Cash and cash equivalents at end of period (note 20) 980,596 955,969


statement of Cash flowsFor the financial period ended 31 December 2011



notes to the fInanCIal statements

1. Corporate InformatIon

The Company is a public limited liability company, incorporated and domiciled in Malaysia, and is listed on the Main Market of Bursa Malaysia Securities Berhad (”Bursa Malaysia”). The registered office of the Company is located at level 31, Menara Dayabumi, Jalan Sultan Hishamuddin, 50050 Kuala lumpur.

The principal place of business is located at Pasir Gudang Industrial Estate, 81707 Pasir Gudang, Johor.

The immediate and ultimate holding companies of the Company are MISC Berhad and Petroliam Nasional Berhad, both of which are incorporated in Malaysia. The immediate holding company is listed on the Bursa Malaysia.

The principal activity of the Company is investment holding. The principal activities of the subsidiaries are oil and gas engineering and construction works, marine conversion and repair, sludge disposal management and provision of repair services and dry docking of liquefied natural gas carriers.

The financial statements were authorised for issue by the Board of Directors in accordance with a resolution of the directors on 20 February 2012.

2. sIgnIfICant aCCountIng polICIes

2.1 basis of preparation

The financial statements of the Group and of the Company have been prepared in accordance with Financial Reporting Standards (“FRS”) and the Companies Act, 1965 in Malaysia. At the beginning of the current financial period, the Group and the Company adopted new and revised FRS which are mandatory for financial periods beginning on or after 1 January 2011 as described fully in note 2.3.

The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.

The financial statements are presented in Ringgit Malaysia (RM) and all values are rounded to the nearest thousand (RM’000) except when otherwise indicated.

2.2 summary of significant accounting policies

(a) subsidiaries and basis of consolidation

(i) subsidiaries

Subsidiaries are entities over which the Group has the ability to control the financial and operating policies so as to obtain benefits from their activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group has such power over another entity.

In the Company’s separate financial statements, investment in subsidiaries are accounted for at cost less impairment losses.

(ii) basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the reporting date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

notes to the fInanCIal statementsFor the financial period ended 31 December 2011



2. sIgnIfICant aCCountIng polICIes (Cont’d.)

2.2 summary of significant accounting policies (cont’d.)

(a) subsidiaries and basis of consolidation (cont’d.)

(ii) basis of consolidation (cont’d.)

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.

Acquisitions of subsidiaries are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses in the periods in which the costs are incurred and the services are received.

In business combination achieved in stages, previously held equity interests in the acquiree are re-measured to fair value at the acquisition date and any corresponding gain or loss is recognised in profit or loss.

The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree net identifiable assets.

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the acquiree’s identifiable assets and liabilities is recorded as goodwill in the statement of financial position. In instances where the latter amount exceeds the former, the excess is recognised as a gain on bargain purchase in profit or loss on the acquisition date.

Subsidiaries are consolidated from the date of business combination, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases. Uniform accounting policies are adopted in the consolidated financial statements for like transactions and events in similar circumstances.

(b) Jointly controlled entities

The Group has interests in joint ventures which are jointly controlled entities. A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that is subject to joint control, and a jointly controlled entity is a joint venture that involves the establishment of a separate entity in which each venturer has an interest.

Investment in jointly controlled entities is accounted for in the consolidated financial statements using the equity method of accounting. Under the equity method, the investment in jointly controlled entities is carried in the consolidated statement of financial position at cost adjusted for post-acquisition changes in the Group’s share of net assets of the jointly controlled entities. The Group’s share of the net profit or loss of the jointly controlled entities is recognised in the profit or loss. Where there has been a change recognised directly in the equity of the jointly controlled entities, the Group recognises its share of such changes.






(b) Jointly controlled entities (cont’d.)

In applying the equity method, unrealised gains and losses on transactions between the Group and the jointly controlled entities are eliminated to the extent of the Group’s interest in the jointly controlled entities. After application of the equity method, the Group determines whether it is necessary to recognise any additional impairment loss with respect to the Group’s net investment in the jointly controlled entities. The Group determines at each reporting date whether there is any objective evidence that the investment in the jointly controlled entities is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the jointly controlled entity and its carrying value and recognises the amount in profit or loss. The jointly controlled entities are equity accounted for from the date the Group obtains joint control until the date the Group ceases to have joint control over the jointly controlled entities.

Goodwill relating to a jointly controlled entity is included in the carrying amount of the investment and is not amortised. Any excess of the Group’s share of the net fair value of the jointly controlled entities’ identifiable assets, liabilities and contingent liabilities over the cost of the investments is excluded from the carrying amount of the investment and is instead included as income in the determination of the Group’s share of the jointly controlled entities’ profit or loss in the period in which the investments are acquired.

When the Group’s share of losses in jointly controlled entities equals or exceeds its interest in the jointly controlled entities, including any long-term interests that, in substance, form part of the Group’s net investment in the jointly controlled entities, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the jointly controlled entities.

The most recent available audited financial statements of the jointly controlled entities are used by the Group in applying the equity method. Where the dates of the audited financial statements used are not coterminous with those of the Group, the share of results is arrived at from the last audited financial statements available and management financial statements to the end of the accounting period. Uniform accounting policies are adopted for like transactions and events in similar circumstances.

On disposal of such investment, the difference between net disposal proceeds and their carrying amounts is included in profit or loss.

(c) property, plant and equipment, and depreciation

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

Subsequent to recognition, property, plant and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.





(c) property, plant and equipment, and depreciation (cont’d.)

Construction-in-progress are not depreciated as these assets are not available for use. Depreciation of property, plant and equipment is provided for on a straight-line basis to write off the cost of each asset to its residual value over the estimated useful life, at the following annual rates:

Boats 6.7% – 25% Buildings, drydocks and waste plant 2% – 10% Plant, machinery and electrical installations 4% – 20% Vehicles and transport equipment 10% – 20% Furniture and office equipment 5% – 20%

The residual values, useful life and depreciation method are reviewed at each financial period end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognised in profit or loss.

(d) Construction contracts

Where the outcome of a construction contract can be reliably estimated, contract revenue and contract costs are recognised as revenue and expenses respectively by using the stage of completion method. The stage of completion is measured by reference to the proportion of physical completion of contract.

Where the outcome of a construction contract cannot be reliably estimated, contract revenue is recognised to the extent of contract costs incurred that is probable to be recoverable. Contract costs are recognised as expenses in the period in which they are incurred.

When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

When the total of costs incurred in construction contracts plus, recognised profits (less recognised losses), exceeds progress billings, the balance is classified as amount due from customers on contracts. When the progress billings exceed costs incurred plus, recognised profits (less recognised losses), the balance is classified as amount due to customers on contracts.






(e) Impairment of non-financial assets

The carrying amounts of non-financial assets, other than construction contract assets, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated to determine the amount of impairment loss.

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the cash-generating unit (”CGU”) to which the asset belongs to.

An asset’s recoverable amount is the higher of an asset’s or CGU’s fair value less costs to sell and its value in use. 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 assessment of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

An impairment loss is recognised in profit or loss in the period in which it arises, unless the asset is carried at a revalued amount, in which case the impairment loss is accounted for as a revaluation decrease to the extent that the impairment loss does not exceed the amount held in the asset revaluation reserve for the same asset.

An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset is recognised in profit or loss, unless the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

(f) Inventories

Inventories are held for own consumption and are stated at lower of cost and net realisable value.

Cost is arrived at on the weighted average basis. The cost of raw materials and consumables comprises costs of purchase.

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





(g) financial assets

Financial assets are recognised in the statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

The Group and the Company determine the classification of the financial assets at initial recognition, and the categories include financial assets at fair value through profit or loss, loans and receivables, held-to-maturity financial assets and available-for-sale financial assets.

(i) financial assets at fair value through profit or loss Financial assets are classified as financial assets at fair value through profit or loss if they are

held for trading or are designated as such upon initial recognition.

Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term. The Group and the Company do not have any held for trading financial assets. The Group and the Company have not designated any financial assets at fair value through profit or loss.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in profit or loss. net gains or net losses on financial assets at fair value through profit or loss do not include exchange differences, interest and dividend income. Exchange differences, interest and dividend income on financial assets at fair value through profit or loss are recognised separately in profit or loss as part of other losses or other income.

Financial assets at fair value through profit or loss could be presented as current or non-current. Financial assets that are held primarily for trading purposes are presented as current whereas financial assets that are not held primarily for trading purposes are presented as current or non-current based on the settlement date.

(ii) loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. The Group’s and the Company’s loans and receivables include trade and other receivables and cash and bank balances.

Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

Loans and receivables are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.






(g) financial assets (cont’d.)

(iii) held-to-maturity financial assets

Financial assets with fixed or determinable payments and fixed maturity are classified as held-to-maturity when the Group and the Company have the positive intention and ability to hold the financial assets to maturity. The Group and the Company do not have any held-to-maturity financial assets.

Subsequent to initial recognition, held-to-maturity financial assets are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the held-to-maturity financial assets are derecognised or impaired, and through the amortisation process.

Held-to-maturity financial assets are classified as current assets, except for those having maturity dates later than 12 months after the reporting date which are classified as non-current.

(iv) available-for-sale financial assets

Available-for-sale financial assets are those financial assets that are designated as available-for-sale or are not classified in any of the three preceding categories. The Group and the Company do not have available-for-sale financial assets.

After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised. Interest income calculated using the effective interest method is recognised in profit or loss. Dividends on an available-for-sale equity instrument are recognised in profit or loss when the Group’s and the Company’s right to receive payment is established.

Investments in equity instruments whose fair value cannot be measured reliably are measured at cost less impairment loss.

Available-for-sale financial assets are classified as non-current assets unless they are expected to be realised within 12 months after the reporting date.

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date, i.e. the date that the Group and the Company commit to purchase or sell the asset.





(h) financial liabilities

Financial liabilities are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability.

Financial liabilities, within the scope of FRS 139, are recognised in consolidated statement of financial position when, and only when, the Group and the Company become a party to the contractual provisions of the financial instrument. Financial liabilities are classified as either financial liabilities at fair value through profit or loss or other financial liabilities.

(i) financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liability designated upon initial recognition as at fair value through profit or loss.

Financial liabilities held for trading includes derivatives entered into by the Group and the Company that do not meet the hedge accounting criteria. Derivative liabilities are initially measured at fair value and subsequently stated at fair value, with any resultant gains or losses recognised in profit or loss. net gains or losses on derivatives include exchange differences.

The Group and the Company have not designated any financial liabilities at fair value through profit or loss.

(ii) other financial liabilities

The Group’s and the Company’s other financial liabilities include trade and other payables and borrowings.

Trade and other payables are recognised initially at fair value plus directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.

Borrowings are recognised initially at fair value, net of transaction costs incurred and subsequently measured at amortised cost using the effective interest method. Borrowings are classified as current liabilities unless the Group and the Company have an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

For other financial liabilities, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

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






(i) 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.

Financial guarantee contracts are recognised initially as a liability at fair value, net of transaction costs. Subsequent to initial recognition, financial guarantee contracts are recognised as income in profit or loss over the period of the guarantee. If the debtor fails to make payment relating to financial guarantee contract when it is due and the Group, as the issuer, is required to reimburse the holder for the associated loss, the liability is measured at the higher of the best estimate of the expenditure required to settle the present obligation at the reporting date and the amount initially recognised less cumulative amortisation.

(j) offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statements of financial position if, and only if, there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the assets and settle the liabilities simultaneously.

(k) Impairment of financial assets

The Group and the Company assess at each reporting date whether there is any objective evidence that a financial asset is impaired.

(i) trade and other receivables and other financial assets carried at amortised cost

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. For certain categories of financial assets, such as trade receivables, assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis based on similar risk characteristics. Objective evidence of impairment for a portfolio of receivables could include the Group’s past experience of collecting payments, an increase in the number of delayed payments in the portfolio past the average credit period and observable changes in national or local economic conditions that correlate with default on receivables.

If any such evidence exists, the amount of impairment loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The impairment loss is recognised in profit or loss.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable becomes uncollectible, it is written off against the allowance account.





(k) Impairment of financial assets (cont’d.)

(i) trade and other receivables and other financial assets carried at amortised cost (cont’d.)

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.

(ii) unquoted equity securities carried at cost

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

(l) deferred income

Income from rendering of sludge cleaning services is deferred for untreated sludge.

Deferred income, which is recorded as sludge collection fees receivable net of direct expenses, will be recognised to profit or loss upon completion of the treatment or disposal process.

(m) borrowing costs

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended use or sale.

All other borrowing costs are recognised in profit or loss in the period in which they are incurred.

(n) Income tax

Income tax on the profit or loss for the period comprises current and deferred tax. Current tax is the expected amount of income taxes payable in respect of the taxable profit for the year and is measured using the tax rates that have been enacted at the reporting date.

Deferred tax is provided for, using the liability method. In principle, deferred tax liabilities are recognised for all taxable temporary differences and deferred tax assets are recognised for all deductible temporary differences, unused tax losses and unused tax credits to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, unused tax losses and unused tax credits can be utilised. Deferred tax is not recognised if the temporary difference arises from goodwill or negative goodwill or from the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction, affects neither accounting profit nor taxable profit.






(n) Income tax

Deferred tax is measured at the tax rates that are expected to apply in the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the reporting date. Deferred tax is recognised as an income or an expense and is included in profit or loss for the period, except when it arises from a transaction which is recognised directly in equity, in which case the deferred tax also recognised directly in equity, or when it arises from a business combination that is an acquisition, in which case the deferred tax is included in the resulting goodwill or the amount of any excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over the cost of the combination.

(o) provisions

Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount can be made. Provisions are reviewed at each reporting date and adjusted to reflect the current best estimate. Where the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognised as finance cost.

(p) employee benefits

(i) short term benefits

Wages, salaries, bonuses and social security contributions are recognised as an expense in the year in which the associated services are rendered by employees. Short term accumulating compensated absences such as paid annual leave are recognised when services are rendered by employees that increase their entitlement to future compensated absences. Short term non-accumulating compensated absences such as sick leave are recognised when the absences occur.

(ii) defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities or funds and will have no legal or constructive obligation to pay further contributions if any of the funds do not hold sufficient assets to pay all employee benefits relating to employee services in the current and preceding financial periods. Such contributions are recognised as an expense in the profit or loss as incurred. As required by law, companies in Malaysia make such contributions to the Employees Provident Fund (”EPF”).

(q) foreign currencies

(i) functional and presentation currency

The individual financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (”the functional currency”). The consolidated financial statements are presented in Ringgit Malaysia (RM), which is also the Company’s functional currency.





(q) foreign currencies (cont’d.)

(ii) foreign currency transactions

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency (foreign currencies) are recorded in the functional currencies using the exchange rates prevailing at the dates of the transactions. At each reporting date, monetary items denominated in foreign currencies are translated at the rates prevailing on the reporting date. non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing on the date when the fair value was determined. non-monetary items that are measured in terms of historical cost in a foreign currency are not translated.

Exchange differences arising on the settlement of monetary items, and on the translation of monetary items, are included in profit or loss for the period.

Exchange differences arising on the translation of non-monetary items carried at fair value are included in profit or loss for the period except for the differences arising on the translation of non-monetary items in respect of which gains and losses are recognised directly in equity. Exchange differences arising from such non-monetary items are also recognised directly in equity.

(r) revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:

(i) Construction contracts

Revenue from construction contracts is accounted for by the stage of completion method as described in note 2.2(d).

(ii) revenue from sludge cleaning management

Revenue from sludge management is recognised when the treatment or disposal process of sludge is completed.

(iii) Interest income

Interest income is recognised on an accrual basis using effective interest method.

(iv) rental income

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

(v) dividend income

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






(s) leases

(i) Classification

A lease is recognised as a finance lease if it transfers substantially to the Group all the risks and rewards incidental to ownership. leases of land and buildings are classified as operating or finance leases in the same way as leases of other assets. All leases that do not transfer substantially all the risks and rewards are classified as operating leases.

(ii) operating leases – the group as lessee

Operating lease payments are recognised as an expense on a straight-line basis over the term of the relevant lease.

In the case of a lease of land, the minimum lease payments or the up-front payments made represent land use rights.

(iii) operating leases - the group as lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in note 2.2 r(iv).

(t) equity investments

Ordinary shares are classified as equity. Dividends on ordinary shares are recognised in equity in the period in which they are declared.

(u) Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in value.

(v) hedge accounting

The Group uses derivatives to manage its exposure to foreign currency risk. The Group applies hedge accounting for certain hedging relationships which qualify for hedge accounting.

For the purpose of hedge accounting, hedging relationship are classified as:

– Fair value hedges, when hedging the exposure to changes in the fair value of a recognised asset or liability or an unrecognised firm commitment (except for foreign currency risk);

– Cash flow hedges, when hedging exposure to variability in cash flows that is either attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction or the foreign currency risk in an unrecognised firm commitment; or

– Hedges of a net investment in a foreign operation.





(v) hedge accounting (cont’d.)

At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes identification of the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine that they actually have been highly effective throughout the financial reporting periods for which they were designated.

Hedges of the Group which meet the strict criteria for hedge accounting are accounted for as follows:

(i) Cash flow hedges

The effective portion of the gain or loss on the hedging instrument is recognised directly in other comprehensive income into cash flow hedge reserve, while any ineffective portion is recognised immediately in profit or loss.

Amounts recognised in other comprehensive income previously are reclassified from equity to profit or loss when the hedged transaction affects profit or loss, such as when the hedged interest income or interest expense is recognised or when a forecast sale occurs. Where the hedged item is a non-financial asset or a non-financial liability, the amounts recognised previously in other comprehensive income are removed and included in the initial carrying amount of the non-financial asset or liability.

If the forecast transaction or firm commitment is no longer expected to occur, the cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss. If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if its designation as a hedge is revoked, any cumulative gain or loss previously recognised in other comprehensive income remain in equity until the forecast transaction or firm commitment affects profit or loss.

The Group uses forward currency contracts as hedges of its exposure to foreign currency risk in forecasted transactions and firm commitments.

(ii) derivatives that are not designated or do not qualify for hedge accounting

Any gains or losses arising from changes in fair value on derivatives during the year that do not qualify for hedge accounting are directly recognised in profit or loss.

(w) land use rights

land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation and accumulated impairment losses. The land use rights are amortised over their lease terms.





2.3 Changes in accounting policies and effects arising from adoption of new and revised frs

(i) frs adopted by the group and the Company

On 1 April 2011, the Group and the Company adopted the following new and amended FRS and Issues Committee (“IC”) Interpretation mandatory for annual financial periods beginning on or after 1 January 2011:

effective for annual periods beginning ondescription or after

FRS 1: First-time Adoption of Financial Reporting Standards 1 July 2010FRS 3: Business Combinations (revised) 1 July 2010FRS 127: Consolidated and Separate Financial Statements (amended) 1 July 2010Amendments to FRS 2: Share-based Payment 1 July 2010Amendments to FRS 5: non-current Assets Held for Sale and

Discontinued Operations 1 July 2010Amendments to FRS 138: Intangible Assets 1 July 2010Amendments to IC Interpretation 9: Reassessment of

Embedded Derivatives 1 July 2010IC Interpretation 12: Service Concession Arrangements 1 July 2010IC Interpretation 16: Hedges of a net Investment in a Foreign Operation 1 July 2010IC Interpretation 17: Distributions of non-cash Assets to Owners 1 July 2010FRS 1: limited Exemption from Comparatives

FRS 7 Disclosures for First Time Adopters(Amendment to FRS 1) 1 January 2011FRS 1: Additional Exemptions for First-time Adopters

(Amendments to FRS 1) 1 January 2011FRS 2: Group Cash-settled Share-based Payment

Transactions (Amendments to FRS 2) 1 January 2011Amendments to FRS 132 : Classification of Rights Issues 1 March 2010FRS 7: Improving Disclosure about Financial Instruments

(Amendments to FRS 7) 1 January 2011Amendments to FRS 1: First-time Adoption

of Financial Reporting Standards 1 January 2011Amendments to FRS 3: Business Combinations 1 January 2011Amendments to FRS 7: Financial Instruments – Disclosures 1 January 2011Amendments to FRSs ‘Improvements to FRSs (2010)’ 1 January 2011IC Interpretation 4: Determining Whether an

Arrangement contains a Lease 1 January 2011IC Interpretation 18: Transfer of Assets from Customers 1 January 2011




2.3 Changes in accounting policies and effects arising from adoption of new and revised frs

(i) frs adopted by the group and the Company (cont’d.)

Adoption of the above standards and interpretations did not have any effect on the financial performance or position of the Group and the Company except for those discussed below:

(a) frs 3: business Combinations (revised)

FRS 3 (revised) introduces a number of changes to the accounting for business combinations occurring on or after 1 July 2010. These include changes that affect the valuation of non-controlling interest, the accounting for transaction costs, the initial recognition and subsequent measurement of a contingent consideration and business combinations achieved in stages. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs and future reported results.

(b) frs 127: Consolidated and separate financial statements (amended)

The amendments to FRS 127 require that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as an equity transaction. Therefore, such transactions will no longer give rise to goodwill, nor will they give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary.

The changes by FRS 3 (revised) and FRS 127 (amended) will be applied prospectively and only affect future acquisition or loss of control of subsidiaries and transactions with non-controlling interests.

(c) amendments to frs 7 Improving disclosures about financial Instruments

The amended standard requires enhanced disclosure about fair value measurement and liquidity risk. Fair value measurements related to items recorded at fair value are to be disclosed by source of inputs using a three level fair value hierarchy (Level 1, Level 2 and Level 3), by class, for all financial instruments recognised at fair value. A reconciliation between the beginning and ending balance for level 3 fair value measurement is required. Any significant transfers between levels for the fair value hierarchy and the reasons for the transfers need to be disclosed. The fair value measurement disclosures are presented in note 32.





2.4 malaysian financial reporting standards

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

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

The Group will be required to prepare financial statements using the MFRS Framework in its first MFRS financial statements for the year ending 31 December 2012. In presenting its first MFRS financial statements, the Group will be required to restate the comparative financial statements to amounts reflecting the application of MFRS Framework. The majority of the adjustments required on transition will be made, retrospectively, against opening retained profits.

The Group has established a project team to plan and manage the adoption of the MFRS Framework.

The Group has not completed its assessment of the financial effects of the differences between Financial Reporting Standards and accounting standards under the MFRS Framework. Accordingly, the consolidated financial performance and financial position as disclosed in these financial statements for the period ended 31 December 2011 could be different if prepared under the MFRS Framework.

The Group expects to be in a position to fully comply with the requirements of the MFRS Framework for the financial year ending 31 December 2012.

2.5 significant accounting estimates and judgements

The preparation of the Group’s financial statements requires management to make judgement, estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and the disclosure of contingent liabilities at the reporting date.

There were no critical judgements made by management in the process of applying accounting policies that have significant effect on the amount recognised in the financial statements during the current financial period; other than those discussed below.

The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) depreciation of property, plant and equipment

The cost of property, plant and equipment is depreciated on a straight-line basis over the assets’ useful lives. Management estimates the useful lives of these property, plant and equipment to be within 4 to 50 years. Changes in the expected level of usage could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The information on depreciation of property, plant and equipment is as disclosed in note 12.




2.5 significant accounting estimates and judgements (cont’d.)

(ii) Construction contracts

The Group recognises revenue and expenses from construction contracts in the statement of comprehensive income by using the stage of completion method. The stage of completion is measured by reference to the proportion of physical completion of the contract work.

Significant judgement is required in determining the stage of completion, the extent of the contract costs incurred, the estimated total contract revenue and costs, as well as the recoverability of the construction contract. In making the judgement, the Group’s evaluation is based on past experience and by relying on the work of specialists.

The information on construction contracts is as disclosed in note 19.

(iii) allowance for doubtful accounts

The allowance for doubtful accounts is based on the evaluation of the receivables on an individual basis and the amount of outstanding allowances. The customer’s credit worthiness is evaluated by reviewing, among other matters, the historical collection experience and the value of collateral provided to the Group, if any.

The information on allowance for doubtful debts is as disclosed in note 18.

(iv) provision for warranty

The Group grants warranties on certain construction contracts and undertakes to repair or replace items that fail to perform satisfactorily. Provision for warranty is made based on service histories to cover the estimated liability that may arise during the warranty period. Any surplus provision is written back at the end of the warranty period while additional provision is made as and when necessary.

The information on provision for warranty is as disclosed in note 25.

(v) deferred tax assets

Deferred tax assets are recognised for all unused tax losses, unabsorbed capital allowances and unabsorbed investment tax allowances to the extent that it is probable that taxable profit will be available against which the losses and capital allowances can be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.

The information on deferred tax assets is as disclosed in note 17.




3. revenue

group Company 1.4.2011 1.4.2010 1.4.2011 1.4.2010 to to to to 31.12.2011 31.3.2011 31.12.2011 31.3.2011 rm’000 rm’000 rm’000 rm’000

Engineering and construction 1,840,311 4,156,888 – –Marine conversion and repair 295,888 277,206 – –Others 835 1,326 – –Dividend income – – 160,000 1,110,375

2,137,034 4,435,420 160,000 1,110,375

4. other operatIng InCome


Rental income 1,870 1,795 – –Interest income – deposits with licensed banks 43,954 34,835 24,036 13,553 – due from immediate holding company – 2,064 – –Gain on dilution of interest in a subsidiary – 419 – –Realised foreign exchange gains – 8,894 – –Income from scrap disposal 13,561 4,068 – –Others 3,032 4,677 – 200

62,417 56,752 24,036 13,753



5. operatIng profIt

The following amounts have been included in arriving at operating profit:

group Company 1.4.2011 1.4.2010 1.4.2011 1.4.2010 to to to to 31.12.2011 31.3.2011 31.12.2011 31.3.2011 rm’000 rm’000 rm’000 rm’000Auditors’ remuneration: – statutory audit 236 213 12 10 – others 5 5 5 5Employee benefits expense (Note 6) 144,570 128,325 5,853 3,494Property, plant and equipment (note 12): – depreciation 30,008 34,901 – – – write-off 5,020 315 – –Amortisation of land use rights (Note 13) 1,545 2,059 – –Hire of tugboat, pushers and barges 7,977 3,941 – –Rental of: – buildings 2,945 4,982 104 951 – vehicles 75 34 – – – office equipment 5,242 2,918 – – – equipment 59,979 55,159 – –Inventories written off 334 5,097 – –Foreign exchange losses: – realised 7,751 – – – – unrealised 2,657 6,039 – –Impairment loss: – trade receivables (Note 30(b)(ii)(b)) 4,303 874 – –Provision for/(reversal of provision for)

warranty (Note 25) 298 (445) – –Provision for liquidated ascertained

damages (Note 25) – 11,553 – –




6. employee benefIts expense


Wages and salaries 105,622 97,089 3,893 2,587Social security costs 816 832 5 2Contributions to a defined contribution plan 14,802 11,445 270 364Other staff related expenses 23,330 18,959 1,685 541

144,570 128,325 5,853 3,494

Included in employee benefits expense of the Group and the Company is directors’ remuneration amounting to RM1,439,000 (31.3.2011: RM1,450,000) and RM1,418,000 (31.3.2011: RM1,215,000) respectively.

7. dIreCtors’ remuneratIon

The details of remuneration receivable by directors of the Company during the period are as follows:


Executive directors remuneration: Salaries and other emoluments 1,421 1,098 1,418 931 Fees 18 45 – 21 Bonus – 76 – 76 Defined contribution plan – 198 – 154

Total executive directors’ remuneration (excluding benefits-in-kind) 1,439 1,417 1,418 1,182

Estimated money value of benefits-in-kind – 33 – 33

Total executive directors’ remuneration (including benefits-in-kind) (Note 29(b)) 1,439 1,450 1,418 1,215



7. dIreCtors’ remuneratIon (Cont’d.)

The details of remuneration receivable by directors of the Company during the period are as follows: (cont’d.)


non-executive directors remuneration: Fees 535 525 459 413 Other emoluments 339 233 329 218Total directors’ remuneration 2,313 2,208 2,206 1,846

The number of directors of the Company whose total remuneration during the financial period fell within the following bands is analysed below:

number of directors 31.12.2011 31.3.2011

Executive directors: RM300,001 – RM350,000 – 1 RM850,001 – RM900,000 – 1 RM1,400,001 – RM1,450,000 1 –

1 2*

non–executive directors: RM1 – RM50,000 – 6 RM50,001 – RM100,000 2 2 RM100,001 – RM150,000 6 4

8 12*

9 14

* Included directors who resigned during the financial period.




8. fInanCe (InCome)/Costs

group 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000

Change in fair value of hedging derivatives (1,079) –Interest expense on term loans from:– immediate holding company – 1,579– financial institutions – 62

(1,079) 1,641less: Interest expense capitalised in qualifying assets:Construction-in-progress – (872)

(1,079) 769

9. taxatIon

Major components of income tax expense

The major components of income tax expense are as follows:


Current income tax: Malaysian income tax 9,471 8,950 4,513 78,496 Foreign tax – 36,977 – –

9,471 45,927 4,513 78,496Overprovision in prior years: Malaysian income tax (854) (29,622) (54) – Foreign tax – (7,376) – –

8,617 8,929 4,459 78,496

Deferred tax (note 17): Relating to origination and reversal of temporary differences 41,225 (36,630) – –(Over)/underprovision in prior years (4,921) 1,251 – –

36,304 (35,379) – –

Total taxation 44,921 (26,450) 4,459 78,496



9. taxatIon (Cont’d.)

Domestic income tax is calculated at the Malaysian statutory tax rate of 25% (31.3.2011: 25%) of the estimated assessable profit for the period. Taxation for other jurisdictions is calculated at the rates prevailing in the respective jurisdictions.

Reconciliation between tax expense and accounting profit

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group and of the Company is as follows:

1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000groupProfit before taxation 250,848 424,026

Taxation at Malaysian statutory tax rate of 25% (31.3.2011: 25%) 62,712 106,007

Effects of different tax rate in other countries – (9,244)Income not subject to tax (678) (105)Expenses not deductible for tax purposes 3,653 6,475Utilisation of current year’s investment tax allowances – (39,656)Utilisation of previously unrecognised tax losses

and unabsorbed capital allowances – (184)Deferred tax assets not recognised 118 –Deferred tax assets recognised on unutilised

investment tax allowances (3,421) (47,685)(Over)/underprovision of deferred tax in prior years (4,921) 1,251Overprovision of Malaysian tax expense in prior years (854) (29,622)Overprovision of foreign tax expense in prior years – (7,376)Share of results of joint venture entities (11,688) (6,311)

Income tax expense for the period 44,921 (26,450)

CompanyProfit before taxation 176,906 1,119,179

Taxation at Malaysian statutory tax rate of 25% (31.3.2011: 25%) 44,227 279,795

Income not subject to tax (40,000) (202,195)Expenses not deductible for tax purposes 286 896Overprovision of Malaysian tax expense in prior years (54) –

Income tax expense for the period 4,459 78,496




10. earnIngs per share

Basic earnings per share are calculated by dividing profit for the period attributable to ordinary equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial period, as follows:

group 31.12.2011 31.3.2011

Profit attributable to equity holders of the Company (RM’000) 205,601 450,748Weighted average number of ordinary shares in issue (‘000) 1,600,000 1,447,825Basic earnings per share (sen) 12.85 31.13

The Group has no potential ordinary shares in issue as at reporting date and therefore, diluted earnings per share has not been presented.

11. dIvIdends

Company 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000dividend recognised in respect of financial period ended

31 december/march 2011: – Final (single-tier) dividend for 31.3.2011: 5 sen per share (31.3.2010: nil ) 80,000 – – Interim dividend for 31.12.2011: nil (31.3.2011: 18 sen gross per share less 25% taxation) – 2,233 – Interim (single-tier) dividend for 31.12.2011: nil (31.3.2011: RM18.35) – 297,767

80,000 300,000

At the forthcoming Annual General Meeting, a final single-tier dividend in respect of the financial period ended 31 December 2011 of 10 sen per share on 1,600,000,000 ordinary shares, amounting to a dividend payable of RM160 million will be proposed for shareholders’ approval. The financial statements for the current financial period do not reflect this proposed dividend. Such dividend, if approved by the shareholders, will be accounted for in equity as an appropriation of retained earnings in the financial year ending 31 December 2012.



12. property, plant and eQuIpment

at at 1.4.2011 additions reclassification write-off 31.12.2011 rm’000 rm’000 rm’000 rm’000 rm’000

group – 31 december 2011

at cost:

Boats 511 – – – 511Buildings, drydocks and waste plant 822,712 – 13,913 (6,809) 829,816Plant, machinery and electrical

installation 363,695 1,457 28,944 (8,755) 385,341Vehicles and transport equipment 10,018 592 – (879) 9,731Furniture and office equipment 40,929 87 5,059 (1,480) 44,595Loose tools 7,868 – – (153) 7,715Construction-in-progress 251,242 93,255 (47,916) (282) 296,299

1,496,975 95,391 – (18,358) 1,574,008

net carrying at Charge for at amount at at 1.4.2011 the period write-off 31.12.2011 31.12.2011 rm’000 rm’000 rm’000 rm’000 rm’000

group – 31 december 2011

accumulated depreciation and impairment

Boats 467 12 – 479 32Buildings, drydocks and waste plant 198,355 13,503 (3,355) 208,503 621,313Plant, machinery and electrical

installation 215,692 14,063 (7,647) 222,108 163,233Vehicles and transport equipment 7,480 562 (879) 7,163 2,568Furniture and office equipment 37,287 1,868 (1,323) 37,832 6,763Loose tools 7,438 – (134) 7,304 411Construction-in-progress – – – – 296,299

466,719 30,008 (13,338) 483,389 1,090,619




12. property, plant and eQuIpment (Cont’d.)

dilution of at interest in a at 1.4.2010 additions reclassification write-off subsidiary 31.3.2011 rm’000 rm’000 rm’000 rm’000 rm’000 rm’000

group – 31 march 2011

at cost:

Boats 511 – – – – 511Buildings, drydocks and

waste plant 519,126 – 303,963 (34) (343) 822,712Plant, machinery and

electrical installation 307,758 12,465 45,551 (969) (1,110) 363,695Vehicles and transport

equipment 8,850 1,386 – (218) – 10,018Furniture and office

equipment 40,649 443 – (37) (126) 40,929Loose tools 7,773 110 – (15) – 7,868Construction-in-progress 477,305 128,756 (349,514) – (5,305) 251,242

1,361,972 143,160 – (1,273) (6,884) 1,496,975

net dilution of carrying at Charge for interest in a at amount at 1.4.2010 the year write-off subsidiary 31.3.2011 31.3.2011 rm’000 rm’000 rm’000 rm’000 rm’000 rm’000

group – 31 march 2011

accumulated depreciation and impairment

Boats 451 16 – – 467 44Buildings, drydocks and waste plant 180,947 17,454 (13) (33) 198,355 624,357Plant, machinery and electrical installation 201,126 15,486 (700) (220) 215,692 148,003Vehicles and transport equipment 7,221 477 (218) – 7,480 2,538Furniture and office equipment 36,084 1,322 (27) (92) 37,287 3,642Loose tools 7,292 146 – – 7,438 430Construction-in-progress – – – – – 251,242

433,121 34,901 (958) (345) 466,719 1,030,256



13. land use rIghts

group 31.12.2011 31.3.2011 rm’000 rm’000

At 1 April 2011/2010 67,114 69,173Amortisation for the period (Note 5) (1,545) (2,059)

At 31 December/March 2011 65,569 67,114

Analysed as:Short term leasehold land 65,569 67,114

Amount to be amortised:– Not later than one year 2,059 2,059– Later than one year but not later than five years 8,236 8,236– Later than five years 55,274 56,819

The leasehold and foreshore land cannot be disposed, charged or subleased without the prior consent of the Johor State Government.

14. Investment In subsIdIarIes

Company 31.12.2011 31.3.2011 rm’000 rm’000

Unquoted shares in Malaysia, at cost 664,132 664,132




14. Investment In subsIdIarIes (Cont’d.)

The subsidiaries, all of which are incorporated in Malaysia, are as follows:

name of company equity interest principal activities 31.12.2011 31.3.2011 % %

Malaysia Marine and Heavy 100 100 Oil and gas engineering and Engineering Sdn. Bhd. construction works and marine (“MMHE”) conversion and repair

Malaysia Marine and Heavy 100 100 Dormant Engineering (Turkmenistan) Sdn. Bhd.

Subsidiaries of MMHE:

MMHE-SHI lnG Sdn. Bhd. 70 70 P rovision of repair services and dry docking of liquefied natural gas carriers

Techno Indah Sdn. Bhd. 100 100 Sludge disposal management

MSE Corporation Sdn. Bhd. – 100 Dissolved on 21 October 2011

15. Investment In JoIntly Controlled entItIes

group Company 31.12.2011 31.3.2011 31.12.2011 31.3.2011 rm’000 rm’000 rm’000 rm’000

Unquoted shares at cost 14,372 11,372 3,000 –Share of post-acquisition reserves 46,665 23,647 – –

61,037 35,019 3,000 –



15. Investment In JoIntly Controlled entItIes (Cont’d.)

Details of jointly controlled entities, all of which are incorporated in Malaysia, are as follows: effective Interestname of company principal activities 31.12.2011 31.3.2011 % %

Technip MHB Hull Build and develop hull engineering 50 – Engineering Sdn. Bhd. and engineering project

MMHE-TPGM Sdn. Bhd. Provision of engineering, procurement, 60 60 construction, installation and commissioning

MMHE-ATB Sdn. Bhd. Manufacturing of pressure vessels 40 40 and tube heat exchangers

The Group’s aggregate share of the assets, liabilities and results of the jointly controlled entities are as follows:

31.12.2011 31.3.2011 rm’000 rm’000

assets and liabilitiesCurrent assets 280,278 349,225Non-current assets 9,027 8,874

Total assets 289,305 358,099

Current liabilities (222,786) (317,128)Non-current liabilities (6,091) (5,952)

Total liabilities (228,877) (323,080)

resultsRevenue 869,898 475,240Profit for the period 46,752 25,245




16. other Investment

group 31.12.2011 31.3.2011 rm’000 rm’000

Golf memberships 50 50less: Accumulated impairment losses (35) (35)

15 15

17. deferred tax

group 31.12.2011 31.3.2011 rm’000 rm’000

At 1 April 2011/2010 (9,686) 25,440Recognised in profit or loss (Note 9) 36,304 (35,379)Dilution of interest in a subsidiary – 253

At 31 December/31 March 2011 26,618 (9,686)

Presented after appropriate offsetting as follows:

Deferred tax assets (57) (9,686)Deferred tax liabilities 26,675 –

26,618 (9,686)

The components and movements of deferred tax liabilities and assets during the financial period prior to offsetting are as follows:

deferred tax liabilities of the group:

property, plant and equipment rm’000

At 1 April 2011 50,507Recognised in profit or loss (2,819)

At 31 December 2011 47,688

At 1 April 2010 37,222Recognised in profit or loss 13,420Dilution of interest in a subsidiary (135)

At 31 March 2011 50,507



17. deferred tax (Cont’d.)

deferred tax assets of the group:

unutilised investment tax receivables provisions allowance others total rm’000 rm’000 rm’000 rm’000 rm’000

At 1 April 2011 (3,373) (4,671) (47,685) (4,464) (60,193)Recognised in profit or loss 2,069 3,301 39,301 (5,548) 39,123

At 31 December 2011 (1,304) (1,370) (8,384) (10,012) (21,070)

At 1 April 2010 (7,533) (2,108) – (2,141) (11,782)Recognised in profit or loss 3,744 (2,535) (47,685) (2,323) (48,799)Dilution of interest in a subsidiary 416 (28) – – 388

At 31 March 2011 (3,373) (4,671) (47,685) (4,464) (60,193)

deferred tax assets have not been recognised in respect of the following items:

group 31.12.2011 31.3.2011 rm’000 rm’000

Unutilised tax losses 14,216 12,617Unabsorbed capital allowances 28,547 28,547Other deductible temporary differences 184 1,309

The unutilised tax losses and unabsorbed capital allowances of the Group are available indefinitely for offsetting against future taxable profits of the respective entities within the Group, subject to no substantial change in shareholdings of those entities under the Income Tax Act, 1967 and guidelines issued by the tax authority.




18. trade and other reCeIvables


Trade receivables 447,796 1,981,453 – –Purchases of inventory and project

materials paid in advance and recharges back to vendors 34,471 9,578 – –

Due from:– customers on contracts (Note 19) 627,317 299,695 – –– immediate holding company – – – 28– jointly controlled entities 12,733 8,836 – –

Deposits 20,371 1,051 – 28Prepayments 172 1,270 – –Staff loans 384 446 – –Dividend receivable – – 160,000 80,000Other receivables 11,189 20,491 5,709 11,982

1,154,433 2,322,820 165,709 92,038less: Accumulated impairment lossesTrade receivables (23,166) (18,863) – –

1,131,267 2,303,957 165,709 92,038

Included in the trade receivables of the group are amount due from:

group 31.12.2011 31.3.2011 rm’000 rm’000

(i) Immediate holding company 167,379 1,267,643

(ii) Other related companies PETROnAS Carigali (Turkmenistan) Sdn. Bhd. 13,731 155,162 PETROnAS Carigali Sdn. Bhd. 1,745 62,234 Malaysia Offshore Mobile Production. (l) ltd. 7,962 7,312

(iii) Jointly controlled entity MMHE-TPGM Sdn. Bhd. 131,871 371,983



18. trade and other reCeIvables (Cont’d.)

Included in the amount due from customers on contracts of the Group are amount due from:

group 31.12.2011 31.3.2011 rm’000 rm’000

(i) Immediate holding company 72,217 32,031

(ii) Other related companies PETROnAS Carigali (Turkmenistan) Sdn. Bhd. – 106,860 PETROnAS Carigali Sdn. Bhd. 180,914 138,198

Credit terms of trade receivables for the Group range from 30 days to 45 days (31.3.2011: 30 days to 45 days).

The amount due from immediate holding company, other related companies and jointly controlled entities are unsecured, interest free and repayable on demand.

Further information on credit risk is disclosed in note 30(b).

19. amount due from/(to) Customers on ContraCts

group 31.12.2011 31.3.2011 rm’000 rm’000

Aggregate costs incurred and recognised profits to date 8,524,552 7,403,520less: Progress billings (8,113,606) (7,406,521)

410,946 (3,001)

Amounts due from customers on contracts (Note 18) 627,317 299,695Amounts due to customers on contracts (Note 24) (216,371) (302,696)

410,946 (3,001)

Advances received on contracts (Note 24) (5,158) (3,843)

20. Cash and bank balanCes


Cash at banks and on hand 29,259 90,171 574 3,469Deposits with licensed banks 2,056,326 1,357,951 980,022 952,500

Cash and cash equivalents 2,085,585 1,448,122 980,596 955,969

The interest rates of deposits that are effective during the financial period range from 2.00% to 3.48% (31.3.2011: 2.28% to 2.85%) per annum. Deposits of the Group and the Company have an average maturity of 10 days (31.3.2011: 37 days) and 68 days (31.3.2011: 87 days) respectively at the reporting date.




21. share CapItal and share premIum

(a) share capital

number of ordinary shares amount 31.12.2011 31.3.2011 31.12.2011 31.3.2011 ‘000 ‘000 rm’000 rm’000

authorisedAt 1 April 2011/2010 5,000,000 100,000 2,500,000 100,000Subdivision of every 1 existing

ordinary shares of RM1 into 2 ordinary shares of RM0.50 each – 100,000 – –

Created during the year – 4,800,000 – 2,400,000

At 31 December 2011/ 31 March 2011 5,000,000 5,000,000 2,500,000 2,500,000

Issued and fully paidAt 1 April 2011/2010 1,600,000 16,220 800,000 16,220Subdivision of every 1 existing

ordinary shares of RM1 into 2 ordinary shares of RM0.50 each – 16,220 – –

Issue of bonus shares during the year – 1,305,560 – 652,780Issue of ordinary shares during the year – 262,000 – 131,000

At 31 December/31 March 1,600,000 1,600,000 800,000 800,000

(b) share premium

group and Company 31.12.2011 31.3.2011 rm’000 rm’000

At 1 April 2011/2010 818,263 –Arising from issuance of ordinary shares – 849,780less: Share issuance expenses – (31,517)




22. Cash flow hedge

The cash flow hedge reserve contains the effective portion of the hedge instruments as at the reporting date of RM3,407,000.

23. deferred InCome

group 31.12.2011 31.3.2011 rm’000 rm’000non-currentAt 1 April 2011/2010 991 2,326Deferred income received 77 534

1,068 2,860Recognised in profit or loss (1,068) (1,869)

At 31 December/March 2011 – 991

24. trade and other payables


Trade payables 207,783 435,261 230 150Accruals 1,370,538 1,525,627 – –Retention monies 57,160 58,368 – –Advances received on contracts (Note 19) 5,158 3,843 – –Due to:– customers on contracts (Note 19) 216,371 302,696 – –– subsidiaries – – 11,124 4,467Other payables 69,494 209,147 980 861

1,926,504 2,534,942 12,334 5,478

Credit terms of trade payables granted to the Group range from 30 days to 60 days (31.3.2011: 30 days to 60 days).

The amounts due to subsidiaries are unsecured, interest free and repayable on demand.




24. trade and other payables (Cont’d.)

Included in trade payables are amounts due to:

group 31.12.2011 31.3.2011 rm’000 rm’000

(i) Fellow subsidiary – MISC Integrated logistic Sdn. Bhd. 3,322 39,942

(ii) Other related companies – Prime Sourcing International Sdn. Bhd. (formerly known as Malaysian International Trading Corporation (Japan) Sdn. Bhd.) 1,878 43,386 – PETRONAS Dagangan Berhad 747 802

25. provIsIons

group 31.12.2011 31.3.2011 rm’000 rm’000warrantyAt 1 April 2011/2010 4,950 5,575Provision/(reversal) during the period (note 5) 298 (445)Reversal of provision for warranty arising from dilution

of interest in a subsidiary – (180)


liquidated ascertained damagesAt 1 April 2011/2010 56,377 44,824Provision during the period (Note 5) – 11,553


total provision for liabilities 61,625 61,327

Provision for warranty

The Group gives approximately one year warranty on certain construction contracts and undertake to repair or replace items that fail to perform satisfactorily. A provision has been recognised at the end of the financial period for expected warranty claims based on past experience of the level of repairs and returns.

Provision for liquidated ascertained damages

The Group recognised the provision for liquidated ascertained damages payable to its customers. The provision is recognised for expected claims based on the terms of the agreements.



26. derIvatIves

Contract/ 31.12.2011 notional fair value amount liabilities rm’000 rm’000groupCurrentCash flow hedges:– forward currency contracts 103,197 (2,328)

foreign currency risk

At 31 December 2011, the Group held forward currency contracts designated as hedges of expected future receipts denominated in United States Dollars and Singapore Dollars. The forward currency contracts are being used to hedge the foreign currency risk of the highly probable forecasted transactions.

There were no highly probable transactions for which hedge accounting had previously been used, which is no longer expected to occur. The ineffectiveness recognised in finance income in the profit or loss for the current year was RM1,079,000 (note 8).

The cash flow hedges of the expected future receipts which are expected to occur within the next 12 months, were assessed to be highly effective and a net unrealised loss of RM3,407,000, which represents the effective portion of the hedging relationship, is included in other comprehensive income.

27. CapItal CommItments

group 31.12.2011 31.3.2011 rm’000 rm’000Capital expenditure:Property, plant and equipment: Approved and contracted for 143,658 87,176 Approved but not contracted for 162,783 422,755

306,441 509,931

28. ContIngent lIabIlItIes

group 31.12.2011 31.3.2011 rm’000 rm’000

Bank guarantees extended to customers for performance bond on contracts 8,073 6,986




29. related party dIsClosures

(a) In addition to the transactions detailed elsewhere in the financial statements, the Group and the Company had the following transactions with related parties during the financial period:

group 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000

Income:Provision of services for repairs, engineering and

construction works, conversion of vessels and dry docking to immediate holding company 465,807 1,312,160

Provision of services for repairs, conversion of vessels and dry docking to fellow subsidiaries 17,379 60,978

Provision of services for repairs, engineering and construction works, conversion of vessels and dry docking to other related companies 408,840 2,875,270

Provision of services for repairs, engineering and construction works, conversion of vessels and dry docking to a jointly controlled entity 827,100 607,779

Interest income receivable from immediate holding company – 2,064

group 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000

expenses:Purchase of materials and provision for services

rendered by:– other related companies 14,077 384,267– fellow subsidiaries 83,045 107,120– a jointly controlled entity 6,111 6,286

Interest on loan from immediate holding company – 1,579

Company 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000

Income:Dividend income from a subsidiary 160,000 1,110,375

The directors are of the opinion that the transactions have been entered into in the normal course of business at terms agreed between the parties during the financial period.



29. related party dIsClosures (Cont’d.)

(b) Compensation of key management personnel

The remuneration of directors and other members of key management during the period was as follows:

group 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000

Short-term employee benefits 3,947 3,316Post-employment benefits: Defined contribution plan 266 570

4,213 3,886

Included in the total key management personnel are:

group 1.4.2011 1.4.2010 to to 31.12.2011 31.3.2011 rm’000 rm’000

Executive directors’ remuneration (Note 7) 1,439 1,450

30. fInanCIal Instruments

(a) financial risk management

The Group is exposed to various risks that are related to its core business of oil and gas engineering and construction works and marine conversion and repair. These risks arise in the normal course of the Group’s businesses.

The Group’s compliance to both MISC’s Finance Risk Management Framework and Guidelines and PETRONAS Corporate Financial Policy sets the foundation for the establishment of effective risk management across the Group.

The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s businesses and management of financial risks exposures arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk and foreign currency risk. The Board reviews and agrees policies for managing each of these risks as summarised below. It is, and has been throughout the year under review, the Group’s policy that no speculative trading in derivative financial instruments shall be undertaken.




30. fInanCIal Instruments (Cont’d.)

(b) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s exposure to credit risk arises primarily from its operating activities (primarily for trade receivables) and from its investing activities including deposits with banks and financial institutions, foreign exchange transactions and other financial instruments.

(i) maximum credit risk exposure

The Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount as disclosed in the notes 18 and 20.

(ii) trade receivables

(a) Credit risk concentration profile

The Group determines concentrations of credit risk by monitoring the industry sector profile of its receivables on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the reporting date is as follows:

group 31.12.2011 31.3.2011 rm’000 rm’000

Engineering and construction 308,619 1,856,068Marine conversion and repair 138,803 124,524Others 374 861

447,796 1,981,453

(b) Credit quality

The trade receivables that are neither past due nor impaired, past due but not impaired and impaired are disclosed below:

group 31.12.2011 31.3.2011 rm’000 rm’000

Not impaired or past due 41,260 153,170Past due 1 to 30 days not impaired 36,309 180,479Past due 31 to 60 days not impaired 8,866 1,116,163Past due 61 to 90 days not impaired 6,436 26,829Past due more than 90 days not impaired 331,759 485,949Impaired 23,166 18,863

447,796 1,981,453

Trade receivables that are neither past due nor impaired are creditworthy trade receivables with good payment record with the Group.




(b) Credit risk (cont’d.)

(ii) trade receivables (cont’d.)

(b) Credit quality (cont’d.)

Significant financial difficulties of the trade receivables, probability that the debtors will enter bankruptcy or financial reorganisation, and default or delinquency in payments (more than 90 days aging of trade receivable balances) are considered indicators that the trade receivable is impaired. Individual trade receivable is written off when management deemed the amount to be not collectible.

The movements in the allowance for impairment losses of trade receivables during the period are as follows:

group 31.12.2011 31.3.2011 rm’000 rm’000

At 1 April 2011/2010 18,863 19,659Impairment loss (Note 5) 4,306 890Reversal of impairment loss (Note 5) (3) (16)Reversal of impairment loss arising

from dilution of interest in a subsidiary – (1,670)


The allowance made is for individually assessed and impaired receivables. There were no allowance made for collective assessment.

(c) Collateral

The Group does not hold collateral as security.

(iii) other receivables

Other receivables as at 31 December 2011 are creditworthy debtors with good payment record with the Group.

(iv) Cash and bank balances

Cash and deposits with licensed banks that are neither past due nor impaired are placed with or entered into with reputable financial institutions with high credit ratings and no history of default.





(c) liquidity risk

liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s exposure to liquidity risk arises from mismatches of the maturities of financial assets and liabilities. The Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of bank loans and overdraft facilities.

As at 31 December 2011, the Group had at its disposal cash and short term deposits amounting to RM2,085,585,000 (31.3.2011: RM1,448,122,000).

The Group’s holding of cash and short term deposits, together with committed funding facilities and net cash flow from operations, are expected to be sufficient to cover its cash flow needs.

The table below summarises the maturity profile of the Group’s financial liabilities as at the reporting date based on the undiscounted contractual payments:

group:

maturity profile of the contractual cash flows

Carrying Contractual within amount cash flows 1 year rm’000 rm’000 rm’000

at 31 december 2011

Trade and other payables 1,710,133 1,710,133 1,710,133Derivatives 2,328 2,328 2,328

1,712,461 1,712,461 1,712,461

at 31 march 2011

Trade and other payables 2,232,246 2,232,246 2,232,246




(d) foreign currency risk

The Group is exposed to transactional currency risk primarily through sales and purchases that are denominated in a currency other than the functional currency of the operations to which they relate. The currencies giving rise to this risk are primarily United States Dollar (“USD”), Euro, Singapore Dollar (“SGD”) and Great Britain Pound (“GBP”).

Besides the cash flow hedge and derivatives described in Notes 22 and 26, the Group maintains a natural hedge, wherever possible, by matching the cash inflows (revenue stream) and cash outflows used for purposes such as capital expenditures and operational expenditures in the respective currencies.

(i) foreign currency sensitivity

The following table demonstrates the sensitivity of the Group’s profit before tax to a reasonably possible change in the USD, Euro, SGD and GBP exchange rates against the respective functional currencies of the Group’s entities, with all other variables held constant:

group:

effect on Change in profit before currency rate taxation

31 december 2011USD +5% 2,047 –5% (2,047)Euro +9% 1,468 –9% (1,468)SGD +2% 1,143 –2% (1,143)GBP +10% (390) –10% 390

31 march 2011USD +4% 7,397 –4% (7,397)Euro +7% 23 –7% (23)SGD +2% 799 –2% (799)GBP +9% 1,995 –9% (1,995)





(d) foreign currency risk (cont’d.)

(i) foreign currency sensitivity (cont’d.)

The net unhedged financial assets/(liabilities) of the Group that are not denominated in their functional currency, Ringgit Malaysia are as follows:

net financial assets/(liabilities)

held in non-functional currencies

usd euro sgd others total rm’000 rm’000 rm’000 rm’000 rm’000

at 31 december 2011Ringgit Malaysia 42,291 17,594 54,905 (4,742) 110,048

at 31 march 2011Ringgit Malaysia 196,441 5,607 40,872 24,221 267,141

31. CapItal management

The Group’s capital management is defined as the process of managing the ratio of its equity and debt structure so as to ensure that it maintains a healthy capital ratio in order to support its business and maximise shareholders value. The Group’s approach in managing capital is set out in the MISC’s Corporate Financial Policy.

32. faIr value of fInanCIal Instruments

(a) determination of fair value

(i) financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

The following are classes of financial instruments that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value:

note

Trade and other receivables (current) 18Trade and other payables (current) 24

\ The carrying amounts of these financial assets and liabilities are reasonable approximation of fair

values, due to their short-term nature.

(ii) derivatives

Forward currency contracts are valued using a valuation technique with market observable inputs. The applied valuation techniques include using present value calculations. The models incorporate various inputs including the foreign exchange spot and forward rates.



32. faIr value of fInanCIal Instruments (Cont’d.)

(b) fair value hierarchy

Presented below is the Group’s classified financial instruments carried at fair value by level of the following fair value measurement hierarchy:

(i) level 1 – Unadjusted quoted prices in active market for identical financial instrument (ii) level 2 – Inputs other than quoted prices that are observable either directly or indirectly (iii) Level 3 – Inputs that are not based on observable market data

The derivatives of the Group amounting to RM2,328,000 (31.3.2011: RMnil) are measured at level 2 hierarchy.

33. ComparatIves

During the financial period, the Company changed its financial year end from 31 March to 31 December so as to be coterminous with the year end of its immediate holding company. Accordingly, the comparatives cover a 12 months period from 1 April 2010 to 31 March 2011. The comparative amount for the statements of comprehensive income, statements of changes in equity, statements of cash flow are not in respect of comparable periods.

34. segment InformatIon

For management purposes, the Group is organised into business segments based on the services provided as follows:

(i) Engineering and construction – provision of service for oil and gas engineering and construction works.

(ii) Marine conversion and repair – provision of service for conversion and repairs of vessels including provision of repair services and drydocking of liquefied natural gas carriers.

(iii) Others – comprises supporting divisions to the Group operations and sludge disposal management.

Except as indicated above, none of the operating segments has been aggregated to form the above reportable operating segments.




34. segment InformatIon (Cont’d.)

engineering marine adjustments and conversion or construction and repair others total eliminations note Consolidated rm‘000 rm‘000 rm‘000 rm‘000 rm‘000 rm‘000 31 december 2011

revenue External customers 1,840,311 295,888 835 2,137,034 – 2,137,034 Inter-segments – 51,734 235 51,969 (51,969) A –

1,840,311 347,622 1,070 2,189,003 (51,969) 2,137,034

result Operating profit 155,926 28,252 40,865 225,043 (22,026) A 203,017 Finance income 1,079 – 1,079 Share of results of jointly

controlled entities 46,752 – 46,752

Profit before tax 272,874 (22,026) 250,848 Taxation (44,921) – (44,921)

Profit for the period 227,953 (22,026) 205,927

segment assets 1,051,947 3,410,519 B 4,462,466

segment liabilities 221,529 1,816,725 C 2,038,254

Included in operating profits are:Depreciation and amortisation (13,122) (18,431) – (31,553) – (31,553)Inventories written off – – (334) (334) – (334)Impairment loss – trade receivables – (4,303) – (4,303) – (4,303)Provision for warranty (298) – – (298) – (298)




engineering marine adjustments and conversion or construction and repair others total eliminations note Consolidated rm‘000 rm‘000 rm‘000 rm‘000 rm‘000 rm‘000 31 march 2011

revenue External customers 4,156,888 277,206 1,326 4,435,420 – 4,435,420 Inter-segments – 60,624 570 61,194 (61,194) A –

4,156,888 337,830 1,896 4,496,614 (61,194) 4,435,420

result Operating profit 316,089 48,524 1,149,380 1,513,993 (1,114,443) A 399,550 Finance costs (485) (222) (62) (769) – (769) Share of results of jointly

controlled entities 25,245 – 25,245

Profit before tax 1,538,469 (1,114,443) 424,026 Taxation 26,450 – 26,450

Profit for the year 1,564,919 (1,114,443) 450,476

segment assets 2,262,285 2,664,969 B 4,927,254

segment liabilities 306,539 2,319,023 C 2,625,562

Included in operating profits are:Depreciation and amortisation (14,610) (19,266) (3,084) (36,960) – (36,960)Inventories written off (1,078) (4,019) – (5,097) – (5,097)Impairment loss – trade receivables – (868) (6) (874) – (874)Provision for liquidated ascertained

damages – (11,553) – (11,553) – (11,553)Reversal of provision/

(provision) for warranty 725 (280) – 445 – 445





Management monitors the assets and liabilities on a group basis and not by operating segments.

Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.

note

A Inter-segment revenues and transactions are eliminated on consolidation. B The following items are deducted from total assets as reported in the statement of financial position to arrive

at segment assets:

31.12.2011 31.3.2011 rm’000 rm’000

total assets 4,462,466 4,927,254

Property, plant and equipment 1,090,619 1,030,256Land use rights 65,569 67,114Investment in jointly controlled entities 61,037 35,019Other investment 15 15Deferred tax assets 57 9,686Inventories 25,593 30,632Other receivables 79,320 41,672Tax recoverable 2,724 2,453Cash and cash equivalents 2,085,585 1,448,122

Adjustments and eliminations to total assets 3,410,519 2,664,969

total segment assets 1,051,947 2,262,285

the segment assets comprised:Due from customers on contracts 627,317 299,695Trade receivables 424,630 1,962,590

1,051,947 2,262,285




note

C The following items are deducted from total liabilities as reported in the statement of financial position to arrive at the segment liabilities:

31.12.2011 31.3.2011 rm’000 rm’000

total liabilities 2,038,254 2,625,562

Deferred income – 991Deferred tax liabilities 26,675 –Trade and other payables 1,704,975 2,228,403Provisions 61,625 61,327Derivatives 2,328 –Income tax payable 21,122 28,302

Adjustments and eliminations to total liabilities 1,816,725 2,319,023

total segment liabilities 221,529 306,539

the segment liabilities comprised:Advances received on contracts 5,158 3,843Due to customers on contracts 216,371 302,696

221,529 306,539

geographical information

The following table provides an analysis of the Group’s revenue and carrying amount of segment assets by geographical segments:

non-current revenue assets* rm’000 rm’000 31 december 2011

Malaysia 1,309,934 1,217,240Turkmenistan 827,100 –

2,137,034 1,217,240

31 march 2011Malaysia 1,394,087 1,132,404Turkmenistan 3,041,333 –

4,435,420 1,132,404

* Non-current assets other than deferred tax assets.





Information about major customers

Breakdown of revenue from major customers are as follows: 31.12.2011 31.3.2011 rm’000 rm’000

Immediate holding company– Engineering and construction 307,635 1,218,246– Marine conversion and repair 158,172 93,914

465,807 1,312,160

PETROnAS Carigali (Turkmenistan) Sdn. Bhd., a related company– Engineering and construction – 2,433,554

MMHE-TPGM Sdn. Bhd., a jointly controlled entity– Engineering and construction 827,100 607,779

35. sIgnIfICant events

(a) On 25 August 2011, Malaysia Marine and Heavy Engineering Sdn Bhd (“MMHE”), a wholly-owned subsidiary of the Company had entered into a definitive sale and purchase agreement with Sime Darby Engineering Sdn Bhd (“SDE”) for the proposed acquisition of the Pasir Gudang fabrication yard together with moveable and immovable assets located thereon for a purchase consideration of RM393.5 million, to be satisfied entirely in cash (“SPA”). The SPA is conditional upon and subject to the fulfillment of certain conditions precedent as stipulated in the SPA on or before 16 March 2012 or such later date as the parties may agree in writing to extend.

(b) On 21 October 2011, the Group dissolved its wholly-owned subsidiary, MSE Corporation Sdn. Bhd..



36. supplementary InformatIon – breakdown of retaIned profIts Into realIsed and unrealIsed

The breakdown of the retained profits of the Group and of the Company as at 31 December 2011 into realised and unrealised profits is presented in accordance with the directive issued by Bursa Malaysia dated 25 March 2010 and prepared in accordance with Guidance on Special Matter no. 1, Determination of Realised and Unrealised Profits or losses in the Context of Disclosure Pursuant to Bursa Malaysia listing Requirements, as issued by the Malaysian Institute of Accountants.


Total retained profits of the Company and its subsidiaries:– Realised 662,921 440,769 180,142 87,695– Unrealised (67,207) 28,411 – –

Total share of retained profits from jointly controlled entities:– Realised 44,751 23,413 – –– Unrealised 1,914 234 – –

642,379 492,827 180,142 87,695Add: Consolidation adjustments 163,349 187,300 – –

Retained profits as per financial statements 805,728 680,127 180,142 87,695



otherInformatIon

162 Properties owned by MHB and its subsidiaries163 Corporate Directory164 Worldwide Agents for Marine Repair & Offshore Business166 Notice of Annual General Meeting168 Statement Accompanying Notice of Annual General Meeting169 Proxy Form

propertIes owned by mhb and Its subsIdIarIes as at 31 December 2011

no. location Description

tenure& yearleaseexpires

area insq ft existinguse

age ofBldg/land(years)

approxnetBook value(rm’000)

1 PTD 22805Mukim PlentongJohor Bahru

Land, Shipyard

leasehold/ 2040

13,115,306 Marine repair, marine conversion, engineering & construction fabrication yard, ancillary facilities and office buildings.

32 35,980


Land, Shipyard

leasehold/2075

522,720 Marine repair, marine conversion, engineering & construction fabrication yard, ancillary facilities and office buildings.

36 1,093


Land leasehold/2039

2,567,862 Storage Area 2 19,382


Land leasehold/2044

698,266 Staff Quarters 28 3,249


Land leasehold/2044



Land leasehold/2044

128,502 Staff Quarters 28 597


Land leasehold/2044

169,884 Vacant 28 788


Land leasehold/2044

374,180 Vacant 28 1,745

9 Pasir GudangIndustrial Estate81707 Pasir GudangJohor (erected onland 1 and 2 above)

Warehouse,workshopsand officebuildings

leasehold/2040/2075

1,956,881 Marine repair, marine conversion, engineering & construction fabrication yard, ancillary facilities and office buildings.

34 618,838

10 Rumah Pangsa MMHE81700 Pasir Gudang(erected on land 4 to6 above)

4-storeyresidential flats

leasehold/2044




CorporatedIreCtory

malaysIa marIne and heavy engIneerIng holdIngs berhad

Level 31, Menara Dayabumi, Jalan Sultan Hishamuddin, 50050 Kuala Lumpur, MalaysiaTel : +603 2273 0266Fax : +603 2273 8916www.mhb.com.my

subsIdIarIes

malaysIa marIne and heavy engIneerIng sdn bhd

mmhe west yard

PlO 3, Jalan Pekeliling, P.O. Box 7781700 Pasir GudangJohor, MalaysiaTel : +607 251 2111/268 2111Fax : +607 251 4942

+607 251 4249 +607 251 3740

Email : [email protected]

mmhe east yard

PlO 336, Jalan Suasa, P.O. Box 5581700 Pasir GudangJohor, MalaysiaTel : +607 253 8000Fax : +607 250 8005Email : [email protected]

Branch Office in Singapore:2 Boon Leat Terrace#05-03 Harbourside 2 Industrial BuildingSingapore 119844Tel : +65 6220 7944/5Fax : +65 6224 3967

teChno Indah sdn bhd

PlO 3, Jalan Pekeliling, P.O. Box 7781700 Pasir GudangJohor, MalaysiaTel : +607 268 2891/2Fax : +607 278 3037

mmhe-shI lng sdn bhd

PlO 3, Jalan Pekeliling, P.O. Box 7781700 Pasir GudangJohor, MalaysiaTel : +607 268 1903Fax : +607 276 9151

JoIntly Controlled entItIes

mmhe-tpgm sdn bhd

Registered Office:

Level 31, Menara DayabumiJalan Sultan Hishamuddin50050 Kuala LumpurMalaysiaTel : +603 2273 0266Fax : +603 2273 8916

Branch Office in Turkmenistan:Room #407, 4th Floor1958 Street (Andalib Street, 70)Ashgabat, 744000 TurkmenistanTel : +99312 474 386Fax : +99312 474 164

mmhe-atb sdn bhd

PlO 3, Jalan Pekeliling, P.O. Box 7781700 Pasir GudangJohor, MalaysiaTel : +607 268 3111Fax : +607 252 5126

teChnIp mhb hull engIneerIng sdn bhd

Level 9, Menara JCorp249, Jalan Tun Razak50400 Kuala LumpurTel : +603 2781 6661Fax : +603 2781 6662



worldwIde agents for marIne repaIr & offshore busIness

Cyprus

epsCo Cyprus ltd

Gladstonos & Karaiskaki Street, Corner Oasis centerOffice 22, 3032, P.O. Box 51861, 4155 limassol, CYPRUSTel : 357-25-733091Fax : 357-25-336162Contact person : mr.andreasIoannou (Managing Director) M: 357-29-656 384 E: [email protected] mr.DavidWilson M: 357-996-70491 ms. Zoestanescu M: 357-996-70497

denmark

falCkformCoa/s

Automatikvej 1, 3 Floor, DK-2860 Soeburg, DEnMARKTel : 45-39-648 511Fax : 45-39-632 840Web : www.falckformco.dkContact person : mr. thomasl. falck

(Managing Director) M: 45-40-735730 E: [email protected] E: [email protected]

germany

turBo-teChnIkreparatur-WerftgmBh&Co.kg

Alstertwiete 5, D-20099 HamburgFEDERAL REPUBLIC OF GERMANYTel : 49-40-280-1057Fax : 49-40-280-3396Web : www.turbotechnik.comContact person : mr.heinzBuchholz (Sales Manager) E: [email protected] M: 49-1724-3938-28 mr.holger fiermann

(Project & Sales Manager) M: 49-160-9056-3496

greeCe

george moundreas & Co sa

167 Alkiviadou Street18535 Piraeus, GREECETel : 30-210-414 7000Fax : 30-210-414 7090Web : www.gmoundreas.grContact person : mr.Christoskaraindros

(Manager Repairs & Conversion) E: [email protected] M: 30-694-447-3675

hong kong

asIanmarIneservICeslImIteD

Room 1809-10, 18 Floor, Tai Yu Buildingno. 181, Johnston Road, Wanchai, HOnG KOnGTel : 852-2539-5011Fax : 852-2539-5800Web : www.asian-marine.comContact person : mr.Clayton yu (Director) M: 852-9093-3258; 65-9126-9911 E: [email protected] E: [email protected]

IndIa

InternatIonal marItIme agenCIes

Tower 1, Unit no. 3, The Arcade, World Trade CentreCuffe Parade Road, Colaba Mumbai – 400 005, INDIATel : 91-22-2218-2757Fax : 91-22-2216-4437Contact person : mr.kurushs.Bilimoria (President) M: 91-98203 21211 E: [email protected]

Italy, swItZerland, monaCo

banChero Costa & Co spa

Via Pammatone 2, 16121 Genoa, ITALYTel : 39-010-563 1629/6/7Fax : 39-010-563 1602Web : www.bancosta.itContact person : mr. fabioBertolini

(Commercial Manager) M: 39-335-807-8217 E: [email protected] ms. lorettaBusdon M: 39-335-736-6802 E: [email protected] mr.andreasabbion M: 39-335-736-6801 E: [email protected]

Japan

koumIservICeColtD

Room 204, Mansion-Shibakoen, 3-2-11, ShibaMinato-Ku, Tokyo 105-0014, JAPANTel : 81-3-5443-0301Fax : 81-84-982-7571Contact person : mr.koichiubuka (Director) M: 81-90-6481-0903 E: [email protected]

MARINE REPAIR



sIngapore

CuBenetasIapteltDCuBe

Block 6, Lorong Lew Lian, #02-126SINGAPORE 531006Tel : 65-6286-6745Fax : 65-6282-0317Contact person : mr.Clement see thiamhock (Director) M: 65-9119-2098 E: [email protected]

taIwan

WaleyoungCorporatIon

no. 30-3, Jhongchuan 2nd Village, Siaogong DistrictKaoshiung City 812, TAIWAN, REPUBLIC OF CHINATel : 886-7-831-4410Fax : 886-7-831-9824Contact person : ms. tracy yu (Director) E: [email protected]

unIted kIngdom, republIC of Ireland

marInemarketIng InternatIonalltD

G15 Challenge House, Sherwood Drive, BletchleyMilton Keynes, MK3 6DP, UNITED KINGDOMTel : 44-1908-378-822Fax : 44-1908-378-828Web : www.marinemi.comContact person : mr.mikemcmahon (Managing Director) M: 44-7720-074-113 E: [email protected]

unIted states of amerICa, Canada, the bahamas

DarrmarItImeservICes, llC

1340 n. Great neck Road #1272-319, Virginia BeachVirginia 23454, UNITED STATES OF AMERICATel : 1-757-472-5801Fax : 1-757-631-0024Contact Person : thomasDarr (President) E: [email protected]

korea

k-marIneCo. ltD.

Rm 604, Intellium Centum BLDG 6F, 1458U-Dong, Haeundae-Gu, Busan, 612-020, KOREATel : 82-51-464 8204 / 5/ 6 / 7Fax : 82-51-464 8208Web : www.k-marine.comContact person : mr. taeseongkweon (President) E: [email protected] [email protected]

netherlands, belgIum, luxembourg

ruysChteChnICal (agenCIeshollanDBv

Oostzeestraat 3NL – 7202 AA ZUTPHEN, NETHERLANDSTel : 31-575 515 744Fax : 31-575 515 750Web : www.ruysch.nlContact person : mr. Jeroen veraart (Sales Manager) M: 31 652 415 991 E: [email protected] mr. edward verweij M: 31 613 945 701 E: [email protected]

norway

arnulfl'orsaa/sshipbrokers/agents

Postboks 80 Nordstrand, 1112 Oslo, NORWAYTel : 47-2-104-3693Fax : 47-2-104-3691Web : www.lorsa.noContact person : mr.arnulf l 'orsa (Managing Director) M: 47-90-593-151 E: [email protected] michalWalenkiewicz (Repair) M: 47-91-365-591 E: [email protected]

OFFSHORE BUSINESS

Iran

Javaneh-BaharIColtD

Bldg. 310, West Mirdamad Blvd,Tehran 19697 63511, IRANTel : 98-21-8878 5006; 98-21-8877-7761-3Fax : 98-21-8877-4522 / 98-21-8888-1234Web : www.jb-co.comContact person : mr.gholamhossein tanha (Managing Director) M: 98-912-112-9821 E: [email protected] E: [email protected] E: [email protected]



notICe ofannual general meetIng

notICe Is hereby gIven that the 23rd annual general meeting of malaysia marine and heavy engineering holdings berhad will be held at ballroom 1 & 2, InterContinental kuala lumpur, 165 Jalan ampang, 50450 kuala lumpur on wednesday, 6 June 2012 at 11.00 a.m. for the following purposes:-

1. To receive the audited financial statements for the financial period ended 31 December 2011 and the Reports of the Directors and Auditors thereon. Resolution 1

2. To declare a final single tier dividend of 10 sen per share in respect of the financial period ended 31 December 2011. Resolution 2

3. To re-elect the following Directors who retire by rotation pursuant to Article 115 of the Company’s Articles of Association and who being eligible, have offered themselves for re-election:-

i. Datuk Khoo Eng Chooii. Heng Heyok Chiang @ Heng Hock Chengiii. Captain Rajalingam Subramaniam

Resolution 3 Resolution 4 Resolution 5

4. To approve the payment of Directors’ fees amounting to RM788,000.00 for the financial period ended 31 December 2011. Resolution 6

5. To re-appoint Messrs Ernst & Young as Auditors of the Company to hold office from the conclusion of this meeting until the conclusion of the next Annual General Meeting and to authorise the Directors to fix their remuneration. Resolution 7

6. To transact any other ordinary business of which due notice has been given in accordance with the Companies Act, 1965

notICe of dIvIdend entItlement and payment

nOTICE IS HEREBY GIVEn that subject to the approval of members at the 23rd Annual General Meeting on 6 June 2012, a final single tier dividend of 10 sen per share in respect of the financial period ended 31 December 2011 will be paid on 4 July 2012 to depositors whose names appear in the Record of Depositors on 13 June 2012.

A depositor shall qualify for entitlement to the dividend only in respect of:-i. shares transferred into the depositor’s securities account before 4.00 p.m. on 13 June 2012 in respect of ordinary

transfers; andii. shares bought on Bursa Malaysia Securities Berhad (Bursa Malaysia) on a cum entitlement basis according to

the Rules of Bursa Malaysia.

By Order of the Boardfadzillahkamaruddin (LS 0008989)ausmalkardin (LS 0009383)Company SecretariesKuala Lumpur11 May 2012



notes on proxy form

1. Only depositors whose names appear in the Record of Depositors as at 30 May 2012 shall be entitled to attend, speak and vote at the meeting.

2. A member of the Company (except if the member is an authorised nominee as defined under the Securities Industry (Central Depositories) Act 1991) shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting and where a member appoints two proxies the appointment shall be invalid unless he specifies the proportion of his holding to be represented by each proxy. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. The Form of Proxy must be signed by the appointer of the proxy, or its attorney duly authorised in writing. In the case of a corporation, the Form of Proxy shall be executed under its common seal, or signed by its attorney duly authorised in writing or by a duly authorised officer on behalf of the corporation.

4. The Form of Proxy duly completed and executed, must be deposited at the Company’s Share Registrar, Symphony Share Registrars Sdn Bhd at level 6, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than forty eight (48) hours before the time fixed for the holding of the meeting or any adjournment thereof.



statement aCCompanyIng notICe of annual general meetIng

Made pursuant to Paragraph 8.27(2) of the Main Market listing Requirements of Bursa Malaysia Securities Berhad

1. The Directors retiring and seeking re-election pursuant to Article 115 of the Company’s Articles of Association at the 23rd Annual General Meeting are:-

i. Datuk Khoo Eng Chooii. Heng Heyok Chiang @ Heng Hock Chengiii. Captain Rajalingam Subramaniam

2. The profiles of the above Directors are set out on pages 16 to 25 of this Annual Report. The details of the Directors’ shareholdings in the Company are disclosed in the Directors’ Report on page 94 of this Annual Report.


proxy form

CDS Account no.

no. of Shares Held

I/We ……………………………………………………………......................................................…….. [nRIC/Passport no.: ……………….............…….….] (Full name in block letters)

of ………………………………………………................................…….………………………………………………................................…….…………………… (Address in full)

being a member/members of Malaysia Marine and Heavy Engineering Holdings Berhad (Company no. 178821-X), do hereby

appoint ………………..……………………………………..................……......…............................…. [nRIC/Passport no.: ……………….............…….….] (Full name in block letters)

of ………………………………………………................................…….………………………………………………................................…….…………………… (Address in full)

and/or failing him/her …………………………………………............……….….........….........…….. [nRIC/Passport no.: ……………….............…….….] (Full name in block letters)

of ………………………………………………................................…….……………………………………………….........................................…….…………………… (Address in full)

and failing the abovenamed proxies, the Chairman of the Meeting, as my/our proxy to attend and to vote for me/us on my/our behalf at the 23rd Annual General Meeting of the Company to be held at Ballroom 1 & 2, InterContinental Kuala Lumpur, 165 Jalan Ampang, 50450 Kuala lumpur, Malaysia on Wednesday, 6 June 2012 at 11.00 a.m. and at any adjournment thereof. My/our proxy(ies) is/are to vote as indicated below:

no. ordInary resolutIon for agaInst1. To receive the audited financial statements for the financial period ended 31 December

2011 and the Reports of the Directors and Auditors thereon.2. To declare a final single tier dividend of 10 sen per share in respect of the financial

period ended 31 December 2011.3. To re-elect Datuk Khoo Eng Choo who retires in accordance with Article 115 of the

Company’s Articles of Association.4. To re-elect Heng Heyok Chiang @ Heng Hock Cheng who retires in accordance with

Article 115 of the Company’s Articles of Association.5. To re-elect Captain Rajalingam Subramaniam who retires in accordance with Article

115 of the Company’s Articles of Association.6. To approve the payment of Directors’ fees amounting to RM788,000.00 for the financial

period ended 31 December 2011.7. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the

Directors to fix their remuneration.

(Please indicate with a cross (X) in the space whether you wish your votes to be cast for or against the resolutions. In the absence of such specific directions, your proxy will vote or abstain as he thinks fit).

Dated this day of 2012

Signature/Common Seal of appointer

For appointment of two proxies, percentage of shareholdings to be represented by the proxies:

no of shares percentage (%)

Proxy 1

Proxy 2

total

notes:1. Only depositors whose names appear in the Record of Depositors as at 30 May 2012 shall be entitled to attend, speak and vote at the

meeting.2. A member of the Company (except if the member is an authorised nominee as defined under the Securities Industry (Central

Depositories) Act 1991) shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting and where a member appoints two proxies the appointment shall be invalid unless he specifies the proportion of his holding to be represented by each proxy. A proxy may but need not be a member of the Company and a member may appoint any person to be his proxy without limitation and the provision of Section 149(1)(b) of the Companies Act, 1965 shall not apply to the Company.

3. The Form of Proxy must be signed by the appointer of the proxy, or its attorney duly authorised in writing. In the case of a corporation, the Form of Proxy shall be executed under its common seal, or signed by its attorney duly authorised in writing or by a duly authorised officer on behalf of the corporation.

4. The Form of Proxy must be deposited at the Company’s Share Registrar, Symphony Share Registrars Sdn Bhd at level 6, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia, not less than forty eight (48) hours before the time appointed for the holding of the meeting or any adjournment thereof.


malaysia marine and heavy engineering holdings berhad

Annual General Meeting

symphony share registrars sdn bhd Level 6, Symphony House, Block D13, Pusat Dagangan Dana 1, Jalan PJU 1A/46, 47301 Petaling Jaya, Selangor Darul Ehsan, Malaysia

Please fold here to seal

Please fold here to seal

STAMP

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