Operating Sub sidiar ies

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2 Operating Sub sidiar ies Jasa Merin (Malaysia) Sdn Bhd, ( Jasa Merin ) commenced operation in For over 30 years, Jasa Merin has been providing offshore support vessel ( OSV ) services to oil majors such as PETRONAS Carigali Sdn Bhd, ExxonMobil Exploration and Production Malaysia Inc. and Sarawak Shell Bhd. Presently, Jasa Merin operates a fleet of 19 vessels comprising 2 Straight Supply Vessels ( SSV ) and 17 Anchor Handling Tug Supply Vessels ( AHTS ). SSV are vessels specifically designed to transport equipment and cargoes to and from offshore installations whilst AHTS vessels undertake anchor handling functions (positioning and retrieval of drilling rig anchors) and towing activities (repositioning of rigs to other drilling locations) in addition to providing services of SSV. Jasa Merin operates two classes of AHTS, namely 60 MTBP AHTS which are the standard AHTS deployed in shallow waters, and 120 MTBP AHTS equipped with Dynamic Positioning System that support both shallow and deep water operations. Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd ( SILK ) is the concession owner of Kajang Traffic Dispersal Ring Road, better known as Kajang SILK Highway. The concession runs for a period of 33 years, ending in Kajang SILK Highway stretches for 37 km and is a primary urban road serving south eastern corridor of Klang Valley, linking Balakong, Sg. Long, Kajang, Bangi, Serdang and Putrajaya as well as these townships to the Sungai Besi Highway (Besraya), the North South Expressway, Cheras-Kajang Highway, Kajang-Seremban Highway (LEKAS), South Klang Valley Expressway, and in the future, to the KL Outer Ring Road.

3 CONTENT 2 Corporate Information 3 Profile of Board of Directors 6 Chairman s Statement 9 Five-Year Group Financial Summary 10 Corporate Governance Statement 16 Audit Committee Report 20 Statement on Risk Management and Internal Control 23 Statement of Corporate Social Responsibility 24 Financial Statements 92 Additional Compliance Information 93 Substantial Shareholders 94 Directors Interests in Shares and Analysis of Shareholdings 97 Notice of 17 th Annual General Meeting Proxy Form Annual Report SILK Holdings Berhad ( V) 1

4 CORPORATE INFORMATION Executive Chairman, Non-Independent Executive Director Dato Mohd Azlan Hashim Deputy Chairman, Independent Non-Executive Director Tan Sri Datuk Seri Razman M Hashim Non-Independent Non-Executive Director Johan Zainuddin bin Dzulkifli Independent Non-Executive Directors Dato Harun bin Md Idris Tai Keat Chai Abdul Hamid bin Sh. Mohamed Nik Abdul Malik bin Nik Mohd Amin AUDIT COMMITTEE Tai Keat Chai (Chairman) Dato Harun bin Md Idris Abdul Hamid bin Sh. Mohamed Nik Abdul Malik bin Nik Mohd Amin (appointed on 1 October 2014) RISK MANAGEMENT COMMITTEE Johan Zainuddin bin Dzulkifli (Chairman) Nik Abdul Malik bin Nik Mohd Amin Jamaludin Mohd Nor NOMINATION AND REMUNERATION COMMITTEE Tan Sri Datuk Seri Razman M Hashim (Chairman) Dato Mohd Azlan Hashim Dato Harun bin Md Idris INFRASTRUCTURE COMMITTEE Nik Abdul Malik bin Nik Mohd Amin (Chairman) Johan Zainuddin bin Dzulkifli Dato Hj. Din bin Adam Jamaludin Mohd Nor Adzmi Shafie COMPANY SECRETARIES Kwan Wai Kein (MAICSA ) Sothirajen a/l S.Paranjothi (LS ) REGISTERED OFFICE Level 22, Axiata Tower No. 9, Jalan Stesen Sentral 5 Kuala Lumpur Sentral Kuala Lumpur Malaysia Tel No. : (03) Fax No. : (03) PRINCIPAL PLACE OF BUSINESS Oil & Gas Support Services Division: Jasa Merin (Malaysia) Sdn Bhd No. 7776, Jalan Kubang Kurus Kemaman Terengganu Darul Iman Malaysia Tel : (09) Fax : (09) Infrastructure Division: Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd Plaza Tol Sungai Balak KM28.3A, Lebuhraya KAJANG SILK Kajang Selangor Darul Ehsan Malaysia Tel No : (03) Fax No : (03) SHARE REGISTRAR Symphony Share Registrars Sdn Bhd Level 6, Symphony House Pusat Dagangan Dana 1 Jalan PJU 1A/ Petaling Jaya Selangor Darul Ehsan Malaysia Tel No : (03) Fax No : (03) / AUDITORS KPMG Chartered Accountants SOLICITORS Christopher & Lee Ong PRINCIPAL BANKERS Affin Bank Berhad Affin Islamic Bank Berhad Bank Pembangunan Malaysia Berhad Malayan Banking Berhad Maybank Islamic Berhad STOCK EXCHANGE LISTING Main Market of Bursa Malaysia Securities Berhad WEBSITE ADDRESS 2 Annual Report SILK Holdings Berhad ( V)

5 PROFILE OF BOARD OF DIRECTORS Dato Mohd Azlan Hashim Malaysian, aged 57 Executive Chairman (Non-Independent) Member, Nomination and Remuneration Committee Dato Mohd Azlan Hashim was appointed to the Board of SHB as Non-Executive Director on 4 June 2008 and was subsequently appointed as Executive Chairman on 24 June A Chartered Accountant by profession, he graduated with a Bachelor of Economics from Monash University, Australia. He is a Fellow Member of the Institute of Chartered Accountants, Australia, member of Malaysian Institute of Accountants, Fellow Member of Malaysian Institute of Directors, Fellow Member of the Institute of Chartered Secretaries and Administrators and Honorary Member of The Institute of Internal Auditors, Malaysia. He has extensive experience in the corporate sector including financial services and investments. Among others, he has served as Chief Executive of Bumiputra Merchant Bankers Berhad, Group Managing Director of Amanah Capital Malaysia Berhad and Executive Chairman of Bursa Malaysia Berhad Group. Current directorships in public companies and other organisations include Khazanah Nasional Berhad, Labuan Financial Services Authority, D&O Green Technologies Berhad, Scomi Group Berhad and IHH Healthcare Berhad. He is also a member of Employees Provident Fund and the Government Retirement Fund Inc. Investment Panels. He has attended all of the 6 Board Meetings held in the financial year. Tan Sri Datuk Seri Razman M Hashim Malaysian, aged 75 Non-Executive Deputy Chairman (Independent) Chairman, Nomination and Remuneration Committee Tan Sri Datuk Seri Razman M Hashim was appointed to the Board of SHB on 10 June 2002 and currently serves as Non-Executive Deputy Chairman. A Member of Australian Institute of Bankers with more than 34 years of experience in the banking industry. Joined Standard Chartered Bank Malaysia Berhad in 1964 and served in various capacities including secondments to the Bank s branches in London, Europe, Hong Kong and Singapore. In 1994, was appointed as Executive Director / Deputy Chief Executive of Standard Chartered Bank Malaysia Berhad until his retirement in June In the same month in 1999, was appointed as Chairman of MBf Finance Berhad by Bank Negara Malaysia as its nominee until January 2002 when the finance company was sold to Arab-Malaysian Group. Tan Sri Datuk Seri Razman is currently the Deputy Executive Chairman of Sunway Berhad and Chairman of Berjaya Land Berhad. His current directorships in other public companies include MAA Group Berhad, MAA Takaful Berhad and Mycron Steel Berhad. He has attended 5 out of the 6 Board Meetings held in the financial year. Dato Harun bin Md Idris Malaysian, aged 63 Independent Non-Executive Director Member, Audit Committee Member, Nomination and Remuneration Committee Dato Harun bin Md Idris was appointed to the Board of SHB as Independent Non-Executive Director on 12 August Graduate of the University Kebangsaan Malaysia with Diploma in Police Science, Dato Harun joined the Royal Malaysian Police (RMP) on 1 June 1970 as a Probationary Inspector. He served the RMP for 39 years and retired on 9 April 2009 with the rank of Deputy Commissioner of Police (DCP). His last post was as the Deputy Director 1, Special Branch. In his long and distinguished career with the RMP, Dato Harun had served in various capacities including as the head of Special Branch of Perak, Kedah and Sarawak. He has no directorship in other public companies. He has attended 5 out of the 6 Board Meetings held in the financial year. Annual Report SILK Holdings Berhad ( V) 3

6 PROFILE OF BOARD OF DIRECTORS Johan Zainuddin bin Dzulkifli Malaysian, aged 52 Non-Executive Director (Non-Independent) Chairman, Risk Management Committee Member, Infrastructure Committee Johan Zainuddin bin Dzulkifli was appointed to the Board of SHB as Non-Executive Director on 4 June He is a Fellow of the Association of Chartered Certified Accountants and attained a Post Graduate Diploma in Islamic Banking and Finance from the International Islamic University, Malaysia. He began his career as a Financial Accountant with a multinational company in 1986 after his graduation. In 1989, he joined a merchant bank as an Assistant Manager in the Corporate Advisory department. He subsequently left and joined a public listed company as Vice President of Corporate and Business Development in 1992 and, in 1997 he joined another public listed company as the Head of Corporate Services until He is well versed in areas of corporate advisory and business development. He has no directorship in other public companies. He has attended all of the 6 Board Meetings held in the financial year. Tai Keat Chai Malaysian, aged 60 Independent Non-Executive Director Chairman, Audit Committee Tai Keat Chai was appointed to the Board of SHB as Independent Non-Executive Director on 18 August He is a member of the Institute of Chartered Accountants in England & Wales and the Malaysian Institute of Accountants. He began his career with KPMG in London in 1977 and a year later joined Price Waterhouse (now known as PwC) in Kuala Lumpur. In 1981, he joined Amanah Merchant Bank Berhad (now known as Alliance Investment Bank Berhad) where he worked for 7 years. In 1990, he ventured into the stockbroking industry and has worked in SJ Securities Sdn Bhd, JB Securities Sdn Bhd (now known as A.A.Anthony Securities Sdn Bhd) and BBMB Securities Sdn Bhd (now known as Kenanga Investment Bank Berhad) as General Manager, Director and dealer s representative respectively. Currently he is a Director of Fiscal Corporate Services Sdn Bhd. Current directorships in other public listed companies include Chuan Huat Resources Berhad, Cuscapi Berhad, Formis Resources Berhad and Microlink Solutions Berhad. He has attended all of the 6 Board Meetings held in the financial year. Abdul Hamid bin Sh. Mohamed Malaysian, aged 49 Independent Non-Executive Director Member, Audit Committee Abdul Hamid bin Sh. Mohamed was appointed to the Board of SHB as Independent Non- Executive Director on 18 August He is a Fellow of the Association of Chartered Certified Accountants. A graduate of the Emile Woolf School of Accountancy, London he began his career as Officer in the Corporate Banking department in Bumiputra Merchant Bankers Berhad in1989 and rose to the position of Manager. In 1994, he joined Amanah Capital Malaysia Berhad (formerly known as Komplek Kewangan Malaysia Berhad) as Senior Manager Corporate Planning, heading the newly created Corporate Planning department under the Corporate Services division and promoted to Assistant General Manager, Corporate Planning in 1997 and to Head of Corporate Services division in January He joined Kuala Lumpur Stock Exchange (now known as Bursa Malaysia) in May 1998 as Senior Vice President in charge of Strategic Planning & International Affairs division and was promoted to Deputy President (Strategy & Development) in He was re-designated as Chief Financial Officer in Currently he serves as the Executive Director of Symphony House Berhad. Current directorships in other public companies include Symphony House Berhad, MMC Corporation Berhad, Scomi Group Berhad and Pos Malaysia Bhd. He has attended 4 out of the 6 Board Meetings held in the financial year. 4 Annual Report SILK Holdings Berhad ( V)

7 PROFILE OF BOARD OF DIRECTORS Nik Abdul Malik bin Nik Mohd Amin Malaysian, aged 56 Independent Non-Executive Director Chairman, Infrastructure Committee Member, Audit Committee Member, Risk Management Committee Nik Abdul Malik bin Nik Mohd Amin was appointed to the Board of SHB as Independent Non-Executive Director on 24 February He graduated from the University of Leeds, United Kingdom with Bachelor of Science (Honours) in Civil Engineering. He is a graduate member of The Institute of Engineers Malaysia and Board of Engineers Malaysia. He started his career as Project Engineer with FAO/United Nations Development Programme in 1981 in a pilot project collaboration with the Drainage and Irrigation Department of Terengganu Darul Iman ( DID Terengganu ). He subsequently joined DID Terengganu in 1983 as District Engineer, and was subsequently promoted to Planning and Design Engineer in Between 1986 and 1989, he served as Project Engineer and Executive Director in two private construction companies, before assuming his current position as Managing Director of ND Group of companies, an established property developer and Class A contractor. He has no directorship in other public companies. He has attended all of the 6 Board Meetings held in the financial year. NOTES: 1. Family Relationship with Director and/or Major Shareholder None of the Directors has any family relationship with any director and/or major share holder of SHB. 2. Conflict of Interest None of the Directors has any conflict of interest with SHB Group. 3. Conviction for Offences None of the Directors has been convicted for offences within the past 10 years other than traffic offences, if any. Annual Report SILK Holdings Berhad ( V) 5

8 CHAIRMAN S STATEMENT ON BEHALF OF THE BOARD OF DIRECTORS, I AM PLEASED TO PRESENT THE ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS OF SILK HOLDINGS BERHAD FOR THE YEAR ENDED 31 JULY FINANCIAL PERFORMANCE SILK Holdings Berhad ( SHB or the Group ) posted a revenue of RM million for the financial year ended 31 July 2014, a dip from the RM million recorded previously (refer to Chart 1). Given the significance of the Oil & Gas Support Services Division to the Group s overall performance, the reduced fleet utilization rate during the earlier part of the financial year, due to scheduled vessel docking, repairs and pending redeployment inbetween contracts, had an impact on the Group s revenue performance. Chart 1- Group Revenue (RM Mil) This resulted in the Group recording a marginally lower pre-tax profit of RM 42 million for the financial year, compared with the pre-tax profit of RM 42.9 million recorded in the previous financial year (refer to Chart 3) FY 10 Chart 3- Group PBT (RM Mil) (5.7) FY FY 12 FY FY FY 10 FY 11 FY 12 FY 13 FY 14 Notwithstanding this, SHB improved its earnings before interest, taxation, depreciation and amortisation ( EBITDA ) for the financial year ended 31 July 2014 to RM million, exceeding the EBITDA of RM million recorded in the previous corresponding period (refer to Chart 2). Chart 2- Group EBITDA (RM Mil) FY 10 FY 11 FY 12 FY 13 FY 14 The improvement in EBITDA was however impacted by higher depreciation, amortisation and finance costs recorded during the year, arising from delivery of three (3) new vessels, JM Cemerlang,JM Gemilang and JM Abadi. Following SHB s entering into a conditional Share Sale Agreement ( SSA ) with Road Builder (M) Holdings Bhd ( RBH ) for the disposal of its 100% equity interest in Sistem Lingkaran-Lebuhraya Kajang Sdn. Bhd. ( SILK Highway ) for a cash consideration of RM 395 million ( Proposed Disposal ) on 20 June 2014, the results and performance of its Highway Infrastructure Division, for which SILK Highway is the main operating company, are presented separately as loss from discontinued operations, ( LDO ) net of tax. For the financial year ended 31 July 2014, the LDO stands at RM 36.5 million, compared to RM 36.1 million for the previous corresponding year. The LDO is significant due to a recalculation of the finance charges attributable to SILK Highway to comply with MFRS 139. Despite the encouraging Group pre-tax profit performance, the charges attributable to the discontinued operations resulted in an overall Group net loss attributable to owners of the parent amounting to RM 10.4 million for the financial year ended 31 July 2014 compared to RM 15.2 million for the previous financial year. Notwithstanding the current impact of the discontinued operations to the bottom-line, the Board remains optimistic as this will cease to have a negative accounting impact once the proposed disposal is completed. OPERATING CONDITIONS Oil & Gas Support Services Division Jasa Merin (M) Sdn Bhd ( Jasa Merin ), the main operating company under the Oil & Gas Support Services Division, continues to be a competitive oil & gas services provider during the financial year under review. Its status as a preferred service provider remained strong during that period, whereby the Division announced a total of 7 new contracts for vessels and 2 extensions to previous mandates. 6 Annual Report SILK Holdings Berhad ( V)

9 CHAIRMAN S STATEMENT JM Abadi - the latest addition to the Group s fleet was delivered to Jasa Merin on 21 July The Division deployed a total of 23 vessels (inclusive of third party vessels and owned-vessels subsequently disposed during the financial year) to various clients during the financial year under review (refer to Chart 4), similar to the 23 vessels deployed during the previous financial year. Fleet utilisation was slightly lower for the financial year ended 31 July 2014 compared to the previous financial year, but has firmed up towards the end of the financial year despite the continuing competitive market space. Expectations are that competition will remain tight going forward, particularly for the 60-metric tonne anchor-handling tug/supply vessels ( AHTS ) sub-segment. However, the Board is confident that barring unforeseen circumstances, the contributions from the Oil & Gas Support Services Division will remain positive Chart 4- Vessel Deployment 2 12 FY 10 FY 11 FY 12 FY 13 Own rd Party 2 21 FY 14 CORPORATE DEVELOPMENTS During the course of the financial year under review, SHB had carried out various strategic initiatives aimed at strengthening the foundation of the company and maintaining focus on what the Board deems as future growth areas, as follows: 1. Acquisition of 49% equity interest in four ship-owning companies from GMV-Jasa Sdn Bhd On 15 November 2013, the Group announced that Jasa Merin, a 70%-owned subsidiary of AQL Aman Sdn Bhd ( AQL ), which in turn is a wholly-owned subsidiary of SHB, had on the same date served a notice to GMV-Jasa Sdn Bhd ( GMV-Jasa ) to exercise Jasa Merin s rights under the Joint-Venture Agreement ( JVA ) with GMV- Jasa, to acquire the remaining 49% equity interest held by GMV-Jasa in four (4) ship-owning companies ( SOCs ). The acquisition was undertaken based on the premise that it would allow Jasa Merin to have full control of the SOCs and therefore enable it to better manage and control the operations and commercial decisions in respect of the vessels owned by the SOCs. Additionally, the vessels owned by the SOCs (which comprise four 120 metric tonne AHTS) offered better prospects and potentially higher profit margin as compared to the 60 metric tonne AHTS segment given the greater demand for larger capacity vessels within the industry at the time. The acquisition was approved by shareholders of SHB at its Extraordinary General Meeting ( EGM ) held on 13 December The acquisition was duly completed on 26 December 2013, with Jasa Merin paying a purchase consideration of approximately RM 49.5 million to GMV-Jasa to complete the transaction. Annual Report SILK Holdings Berhad ( V) 7

10 CHAIRMAN S STATEMENT 2. Private Placement of 30,000,000 new ordinary shares of RM0.25 in SHB On 9 May 2014, SHB announced it was undertaking a Private Placement exercise of up to 30,000,000 new ordinary shares of RM0.25 ( Placement Shares ) each in SHB, representing approximately 6.2% of the issued and paid-up share capital of SHB. The Placement Shares were to be issued under the existing general mandate obtained pursuant to Section 132D of the Companies Act, 1965 approved by SHB s shareholders at its 16th Annual General Meeting ( AGM ) convened on 13 December The Private Placement was duly completed on 30 May A total of 30,000,000 Placement Shares were placed out at an issue price of RM per Placement Share, raising a total amount of RM million. The proceeds from the Private Placement have been earmarked to fund investment opportunities being explored by SHB. 3. Proposed Disposal of 100% equity interest in Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd On 20 June 2014, SHB entered into a conditional SSA with RBH for the disposal of its 100% equity interest in SILK Highway for a cash consideration of RM 395 million. The rationale behind the Proposed Disposal is to enable the Group to unlock its investment in SILK Highway. Given that the Group s growth for the last few years has largely been due to its Oil & Gas Support Services Division, the Proposed Disposal is also expected to open up additional opportunities for the Group and its shareholders. It will certainly enable greater focus on enhancing the value of its Oil & Gas Support Services Division. With the oil & gas sector set to benefit further from favourable structural trends, the creation of a business focused on this sector therefore is a strategic move intended to benefit SHB s shareholders. The Proposed Disposal is conditional upon several conditions ( Conditions Precedent ), including the approvals of the Unit Kerjasama Awam Swasta ( UKAS ) in the Prime Minister s Department of the Government of Malaysia ( GoM ), holders of SILK Highway s Sukuk Mudharabah and the shareholders of the Company. It is also subject to SHB having procured the release of its obligation under the corporate guarantee dated 18 December 2008 issued to Affin Investment Bank Berhad pursuant to the Sukuk Mudharabah, and RBH, being satisfied with the results of Due Diligence Inquiry ( DDI ) on SILK Highway and its subsidiary. As at to date, the approvals mentioned above are still pending. PROSPECTS Oil & Gas Support Services Division Given the acquisition of the SOCs and the Proposed Disposal, the Oil & Gas Support Services Division is set to remain the Group s main revenue contributor as it continues to strengthen its position in the market. With an excellent safety and delivery track record and its relatively young and modern fleet, coupled with various operational initiatives being carried out, the Division via Jasa Merin, is likely to retain its position as a preferred partner for many exploration and production specialists operating in Malaysian waters. As such, barring any unforeseen circumstances, the Division is expected to continue to contribute positively to the Group in the current financial year. DIVIDENDS In order to continue building the foundations for the Group to enable it to achieve long-term and sustainable growth, the Board of Directors are not able to recommend the declaration of any dividend for the financial year ended 31 July With sustained growth and expected improved operating and financial performance in the future, the Board will revisit and review this position for the benefit of its shareholders. ACKNOWLEDGEMENT On behalf of the Board of Directors, I wish to extend our sincere appreciation to the Group s management, staff and employees, at all levels and across the various functions. The Board acknowledges the collective effort of the Group staff throughout the financial year, particularly with respect to the various initiatives undertaken. I would also like to convey my sincere appreciation to all members of our Group Board of Directors. Their collective counsel in the past financial year has been invaluable in guiding the Group forward. It is hoped that the Board will continue to be committed to the Group. I would also like to take this opportunity to convey the Board s appreciation to all our valued customers, business partners and financiers for their continued support. Their continued confidence and support have been instrumental in allowing the Group to progress to where it is now. Lastly, on behalf of the Board, I would also like to convey our gratitude to all our shareholders for their patience and unwavering support. I sincerely thank you all and hope that you will continue to support the Board in its objective to take the Group forward. Thank you. DATO MOHD AZLAN HASHIM Executive Chairman 8 Annual Report SILK Holdings Berhad ( V)

11 FIVE-YEAR GROUP FINANCIAL SUMMARY RM 000 RM 000 RM 000 RM 000 RM 000 Restated Restated RESULTS REVENUE 223, , , , ,884 Profit/(loss) before taxation 34,499 (5,725) 17,343 42,927 41,959 Taxation (12,861) (6,176) (7,953) (7,682) (747) Profit/(loss) after taxation 21,638 (11,901) 9,390 35,245 41,212 Loss from discontinued operation, net of tax (36,140) (36,488) Profit/(loss) for the year 21,638 (11,901) 9,390 (895) 4,724 Less non-controlling interests (11,604) 665 (10,069) (14,344) (15,138) PROFIT/(LOSS) ATTRIBUTABLE TO SHAREHOLDERS 10,034 (11,236) (679) (15,239) (10,414) BASIC EARNINGS / (LOSS) PER SHARE (SEN) - from continuing operations 3.1 (2.9) (0.2) from discontinued operations (9.1) (7.9) - net 3.1 (2.9) (0.2) (3.9) (2.3) FINANCIAL POSITION Property, vessels and equipment 684, , ,553 1,146,114 1,173,064 Concession intangible assets 912, , , ,382 - Goodwill ,883 13, Deferred tax benefits , , Available for sale financial assets Current assets 118, , , , ,648 Non-current assets classified as held for sale - 1, ,107,533 TOTAL ASSETS 1,717,170 1,898,330 2,084,459 2,326,418 2,414,921 Liabilities classified as held for sale ,082,525 Current liabilities 296, , , , ,477 Long-term liabilities 1,237,791 1,520,182 1,663,316 1,827, ,686 TOTAL LIABILITIES 1,534,016 1,706,609 1,835,921 2,073,383 2,171,688 TOTAL NET ASSETS/ SHAREHOLDERS FUNDS 183, , , , ,233 SHARE CAPITAL 96,959 99,262 99, , ,020 NET ASSETS PER SHARE ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY(SEN) Annual Report SILK Holdings Berhad ( V) 9

12 CORPORATE GOVERNANCE STATEMENT The Board of Directors of SILK Holdings Berhad (hereinafter the Company ) and its Group of companies (hereinafter the Group ) fully appreciates the role good governance plays in enhancing shareholders value. The Board is committed towards compliance with the requirements set out in the Malaysian Code on Corporate Governance 2012 (hereinafter the Code ) and strives to adopt the substance behind the corporate governance prescriptions to the best of its ability. The Board is pleased to report to its shareholders on the application of the 8 Principles as set out in the Code within the Company during the financial year. PRINCIPLE 1: ESTABLISH CLEAR ROLES AND RESPONSIBILITIES Functions of the Board and Management The Board takes it upon itself to ensure that shareholders interests and its goal of creating sustainable value over the longterm are always kept in view in any major decision it makes. The Board does so by segregating its role to that of overall stewardship and setting the strategic direction for the Company. The Management manages the day-to-day operations of the Company, in accordance with the strategic direction and delegations of the Board. The Board continuously oversees the activities of Management in carrying out these delegated duties. Roles and responsibilities of the Board The Company is led and controlled by a balanced and effective Board where it assumes, amongst others, the following principal responsibilities in discharging its stewardship role and fiduciary and leadership functions: a) Setting the objectives, goals and strategic plans with a view to maximising shareholder value; b) Adopting and monitoring progress of strategies, budgets, plans and policies; c) Overseeing the conduct of businesses to evaluate whether the businesses are properly managed; d) Identifying principal risks and ensuring the implementation of appropriate systems to mitigate and manage these risks.; e) Considering Management s recommendations on key issues including acquisitions, divestments, restructuring, funding and significant capital expenditure; f) Human resources planning and development; and g) Reviewing the adequacy and integrity of internal control systems and management information systems, including systems for compliance with applicable laws, regulations, rules, directives and guidelines. The Board has set up the following Committees and will periodically review their terms of reference and operating procedures. The Committees are required to report to the Board on all their deliberations and recommendations and such reports are incorporated in the minutes of the Board Meetings. Audit Committee The Audit Committee comprises Tai Keat Chai as Chairman, Dato Harun bin Md Idris, Abdul Hamid bin Sh. Mohamed and Nik Abdul Malik bin Nik Mohd Amin. The Audit Committee is set up to play an active role in assisting the Board in discharging its governance responsibilities. The composition of the Audit Committee, its terms of reference, attendance of meetings and a summary of its activities are set out on pages 16 to 19 of the Annual Report. Risk Management Committee The Risk Management Committee comprises Johan Zainuddin bin Dzulkifli as Chairman, Nik Abdul Malik bin Nik Mohd Amin and Jamaludin Mohd Nor. The Risk Management Committee is tasked with the responsibility to oversee the investment activities of the Group, approving appropriate investment appraisal as well as identification of strategic investment opportunities for the Company and its businesses. Nomination & Remuneration Committee The Nomination & Remuneration Committee comprises Tan Sri Datuk Seri Razman M Hashim as Chairman, Dato Mohd Azlan Hashim and Dato Harun bin Md Idris. 10 Annual Report SILK Holdings Berhad ( V)

13 CORPORATE GOVERNANCE STATEMENT Access to information and advice The Board recognises that the decision making process is highly contingent on the quality of information furnished. As such, all Directors have unrestricted access to any information pertaining to the Company and the Group. The Directors are also notified of any corporate announcements released to Bursa Securities and the impending restriction in dealing with the securities of the Company prior to the announcement of the financial results or corporate proposals. All Directors have full and timely access to information with Board papers distributed in advance of meetings. Every Director also has unhindered access to the Senior Management and the advice and services of the Company Secretaries as well as independent professional advisers including the external auditors. The Board is regularly updated by the Company Secretaries on new statutory and regulatory requirements relating to the duties and responsibilities of Directors. Where necessary, the Board also has access to external advice. There is a formal procedure approved by the Board for all Directors, whether as a full Board or in their individual capacity, to obtain independent professional advice, when necessary, at the Company s expense. Qualified and competent Company Secretary In order to assist the Board with its functions, the Company has appointed two (2) qualified Company Secretaries. Details of the two persons can be found on page 2 of this Annual Report. Board charter The Board recognises the need for the functions, powers and responsibilities of the Board and its various Committees to be clearly articulated, internalised and publicised. At present, the Board has yet to formally adopt and publish these into a suitable Board Charter. This will be reviewed periodically. Should the need for a formal Board Charter arise, the Board will formulate and adopt it. PRINCIPLE 2: STRENGTHEN COMPOSITION Nomination & Remuneration Committee The Nomination & Remuneration Committee currently comprises the following: 1) Tan Sri Datuk Seri Razman M Hashim (Chairman) 2) Dato Mohd Azlan Hashim 3) Dato Harun bin Md Idris The Nomination & Remuneration Committee is made up of three (3) members, the majority of whom are independent. The Nomination Committee is empowered by the Board and its terms of reference include bringing to the Board recommendations on the appointment of new directors besides assessing the effectiveness of Board Committees and the Board as a whole. The Nomination & Remuneration Committee is also entrusted to systematically assess the contribution of each Director due for retirement before recommending to the Board for their re-election in accordance with the provisions of the Articles and Association of the Company and the relevant provisions of the Companies Act, The Board takes note of the recommendation in the Malaysian Code of Corporate Governance for the Nomination & Remuneration Committee to comprise exclusively of non-executive directors, a majority of whom must be independent. The Board is of the opinion however, that there are sufficient safeguards against conflicts of interest within the Nomination & Remuneration Committee and as such will be maintaining the current arrangement. Criteria for recruitment and annual assessment of Directors The Board, through the Nomination & Remuneration Committee, appraises the composition and effectiveness of the Board on an annual basis and believes that the current composition brings the required mix of skills and core competencies required for the Board to discharge its duties effectively. New appointees will be considered and evaluated by the Nomination & Remuneration Committee based on a set of criteria. Such evaluation criteria does not take into account the ethnicity or gender of the proposed new director in keeping with norms set by the Board that neither the ethnicity nor gender of a particular candidate for appointment to the Board is an influencing factor. The Nomination & Remuneration Committee will then recommend the candidates to be approved and appointed by the Board. The Company Secretary will ensure that all appointments are properly made and that legal and regulatory obligations are met. New Directors are expected to have such expertise so as to qualify them to make positive contributions to the Board, performance of its duties and to give sufficient commitment, time and attention to the affairs of the Company. They are also briefed by the Chairman, Company Secretary and members of the management on the nature of business and current issues within the Company and the Group. Annual Report SILK Holdings Berhad ( V) 11

14 CORPORATE GOVERNANCE STATEMENT Formal and transparent remuneration policies and procedures The remuneration of the Executive Directors is structured on the basis of linking rewards to corporate and individual performance. For Non-Executive Directors, the level of remuneration reflects the experience and level of responsibilities. The Board as a whole recommends the fees for the Directors with individual Directors abstaining from decisions in respect of their individual remuneration. The fees payable to the Directors are subject to the approval of shareholders. The breakdown of the remuneration for the Directors of the Company during the financial year is as follows:- Executive Director Non-Executive Directors Total RM 000 RM 000 RM 000 Salaries Fees Other emoluments Total remunerations The number of directors whose remunerations fall under the following bands is as follows:- Executive Director Non-Executive Directors Total RM 000 RM 000 RM 000 Range of remunerations: Up to RM50, RM50,001 to RM100, RM300,001 to RM350, PRINCIPLE 3: REINFORCE INDEPENDENCE Composition of the Board The current Board comprises seven (7) Directors who possess the necessary skills and experience relevant to the business operations of the Company. The composition of the Board is broadly balanced to reflect the interests of major shareholders, management and minority shareholders. Of the seven (7) Directors, one (1) is non-independent and performs an executive function, namely Dato Mohd Azlan Hashim. One (1) director, namely Johan Zainuddin bin Dzulkifli is also non-independent but performs no executive function at Company level. The remaining members of the Board of Directors are independent non-executive Directors. The profile for each of the members of the Board is contained on pages 3 to 5 of this Annual Report. The Company s Articles of Association provides that 1/3 of the Board are subject to retirement by rotation at each Annual General Meeting. Each Director shall retire at least once every 3 years but shall be eligible for re-election. The Directors to retire in each year are those who have been longest in office since their last election or appointment. To assist the shareholders in their decision, sufficient information such as personal profile, attendance of meetings and the shareholding of each Director standing for re-election are disclosed in the Statement Accompanying Notice of Annual General Meeting. Separation of Positions of Chairman and CEO/Managing Director The Board is headed by Dato Mohd Azlan Hashim, acting as the Executive Chairman of the Company. Given Dato Mohd Azlan s strong leadership, business acumen and wide experience, the Board continues to maintain this arrangement which it feels is in the best interest of the Company. The Company has opted to address the issue of adequate check and balances by having a majority independent Board. 5 out of 7 Board members are Independent Directors with diverse professional and business backgrounds. Decisions by the Board are only made after the issues had been deliberated at length by the Board, wherein the views of each Board member are sought. Annual Assessment of Independent Directors The Board, with the assistance of the Nomination & Remuneration Committee, assesses the Independent Directors on an annual basis with the aim of ensuring the Independent Directors continue to bring independent and objective judgement to the Board thereby mitigating conflict of interest and undue influence from interested parties. 12 Annual Report SILK Holdings Berhad ( V)

15 CORPORATE GOVERNANCE STATEMENT Tenure of an Independent Director The tenure of the service of an Independent Director is capped at nine years. Upon completion of nine years of service, an Independent Director may continue to serve on the Board subject to the director s re-designation as a Non-Independent Director. However, subject to the assessment of the Nomination & Remuneration Committee, an independent Director can remain as an independent director after serving a cumulative term of nine years subject to the shareholders approval in a general meeting. Currently, there are no Independent Directors on the Board who have served in that capacity for more than nine years. Board Meetings The Board normally meets at least once every quarter to review the Company and Group s financial, operational and business performances. Notices and agenda of meetings duly endorsed by the Executive Chairman together with relevant board papers are given prior to the meetings, for the Directors to study and evaluate. A total of 6 Board meetings were held during the financial year. A summary of attendance for each of the Board of Directors is as follows: Name of Directors: Number of Meetings Attended Percentage of Attendance (%) Dato Mohd Azlan Hashim 6/6 100 Tan Sri Datuk Seri Razman M Hashim 5/6 83 Dato Harun bin Md Idris 6/6 100 Johan Zainuddin bin Dzulkifli 6/6 100 Tai Keat Chai 6/6 100 Abdul Hamid bin Sh. Mohamed 4/6 66 Nik Abdul Malik bin Nik Mohd Amin 6/6 100 PRINCIPLE 4: FOSTER COMMITMENT Time commitment and acceptance of new directorships The Board complies with Paragraph of the Main Market Listing Rules on the restriction on the number of directorships in listed companies held by the Directors. The Company Secretary monitors the number of directorships held by each Director to ensure compliance at all times. The list of directorships of each Director is updated regularly and is tabled for the notation of the Board on a quarterly basis. The Board is satisfied that the external directorships of the Board members have not impaired their ability to devote sufficient time in discharging their roles and responsibilities effectively as well as regularly updating and enhancing their knowledge and skills. Access to appropriate continuing education programmes During the financial year, the Directors attended various training programmes and seminars organised by the relevant regulatory authorities and professional bodies to broaden their knowledge and to keep abreast with the relevant changes in law, regulations and the business environment. A selection of the training programmes, seminars and workshops attended by the Directors during the financial year are, inter-alia, on areas relating to business environment, corporate governance, capital markets and financial reporting. Topic / Organiser Date Related Party Transaction From Governance Challenges to 9 September 2013 Impactful Results Corporate Accountability The Blessings Within 12 September 2013 Redefining Markets : Sustaining Growth and Resilience 22 to 23 October 2013 Shell Maritime Contractor Safety Conference 13 to14 November 2013 Ethics and the Board of Directors 18 November 2013 Personal Data Protection Act, January 2014 GEM 2014 Directors Training 16 January 2014 Oil and Gas Industry Overview, QHSE and Personal Data Protection Act Compliance Marine Contractors Senior Management Engagement Session 4 to 5 May 2014 Annual Report SILK Holdings Berhad ( V) 13

16 CORPORATE GOVERNANCE STATEMENT PRINCIPLE 5: UPHOLD INTEGRITY IN FINANCIAL REPORTING Compliance with applicable financial reporting standards In presenting the annual financial statements, annual report and quarterly announcement of results to shareholders, the Board aims to provide a balanced and understandable assessment of the Group s financial position, performance and prospects. The Board is assisted by the Audit Committee to oversee the Group s financial reporting processes and the quality of its financial reporting. The Directors are responsible in the preparation of the Annual Audited Financial Statements to give a true and fair view of the state of affairs, results and cash flows of the Company and of the Group at the end of the financial year. In preparing the financial statements, the Directors ensure that suitable accounting policies have been applied consistently, and that reasonable and prudent judgments and estimates have been made. All applicable approved accounting standards and provisions of the Companies Act, 1965 have been complied with. Policies and procedures to assess the suitability and independence of external auditors The Board maintains, via the Audit Committee, an active, transparent and professional relationship with its Auditors. The role of the Audit Committee in relation to the Independent Auditors is disclosed in the Audit Committee Report set out on pages 16 to 19 of the Annual Report. PRINCIPLE 6: RECOGNISE AND MANAGE RISKS Framework to manage risks The Board acknowledges its overall responsibility for ensuring that a sound system of internal control is maintained throughout the Group and the need to review its effectiveness regularly. The Board recognizes that risks cannot be totally eliminated and the system of internal controls instituted can only help to minimize and manage risks and provide some assurance that the assets of the Company and of the Group are safeguarded against material loss and unauthorized use and that the financial statements are not materially misstated. The Statement on Risk Management and Internal Control set out on pages 20 to 22 of this Annual Report provides an overview on the state of internal controls within the Group. Establishment of an internal audit function reporting directly to the Audit Committee The Group s Internal Audit function has been outsourced to an external consultant, Columbus Advisory Sdn. Bhd., who reports directly to the Audit Committee. The Internal Audit function currently reviews and appraises the risk management and internal control processes of the Group. The Statement on Risk Management and Internal Control set out on page 20 to 22 of this Annual Report provides an overview of the Group s approach to ensuring the effectiveness of the risk management and internal control processes within the Group. PRINCIPLE 7: ENSURE TIMELY AND HIGH QUALITY DISCLOSURE Existence of appropriate corporate disclosure policies and procedures The Board acknowledges the importance of ensuring that it has in place appropriate corporate disclosure policies and procedures which leverage on information technology as recommended by the Code. The Company currently observes and complies with the disclosure requirements as set out in Bursa Malaysia s Main Market Listing Requirements, guided by Bursa s Corporate Disclosure Guide. The Board has also approved and adopted a Corporate Disclosure Policy which outlines the Group s approach towards the determination and dissemination of material information, the circumstances under which the confidentiality of information will be maintained, response to market rumours and restrictions on insider trading. This Policy also provides guidance and structure in disseminating corporate information to, and in dealing with, investors, analysts, media and the investing public. Leverage on information technology for effective dissemination of information The Company has established a website at from which investors and shareholders can access for information relating to the Company, its businesses and periodic performance reports. 14 Annual Report SILK Holdings Berhad ( V)

17 CORPORATE GOVERNANCE STATEMENT PRINCIPLE 8: STRENGTHEN RELATIONSHIP BETWEEN COMPANY AND SHAREHOLDERS Promote effective communication and proactive engagements with shareholders The Board values constant dialogue and is committed to clear communication with its stakeholders. In this respect, the Company encourages active investor relations programmes, discussions and dialogues with fund managers, financial analysts and shareholders to convey information about the Company and the Group s performance, corporate strategy and other matters affecting shareholders interests. While the Group endeavours to provide as much information as possible to its shareholders and stakeholders, it is mindful of the legal and regulatory framework governing the release of material and price-sensitive information. Encouraging shareholder participation at general meetings The annual general meeting of the Company provides the principal forum for dialogue and interaction between the Board and the shareholders. The participation of shareholders, both individual and institutional, at general meetings on clarifications of pertinent and relevant information is encouraged. Encouraging poll voting The Board is cognisant of the move to encourage more voting by poll. As it stands, resolutions are generally passed by show of hands unless otherwise required by law. The Board will encourage voting by poll by indicating that shareholders can demand for it at commencement of the annual general meeting. COMPLIANCE STATEMENT The Board recognizes and views that Corporate Governance is an on-going process and is of the view that the Company has substantially complied with the recommendations of the Code and will take appropriate steps towards embracing the Principles and Recommendations under the Code at a pace and time frame consistent with the size, priority and dynamics of the Group. This statement is made in accordance with a resolution of the Board of Directors dated 30 September DATO MOHD AZLAN HASHIM Executive Chairman Annual Report SILK Holdings Berhad ( V) 15

18 AUDIT COMMITTEE REPORT FORMATION The Audit Committee was formed by the Board of Directors at its meeting on 16 August The objective of the Audit Committee is to assist the Board of Directors in fulfilling its fiduciary responsibilities relating to internal controls, financial and accounting records and policies as well as financial reporting practices of the Company and its subsidiaries ( the Group ). COMPOSITION The members of the Audit Committee during the year were as follows: 1. Tai Keat Chai Chairman (Independent Non-Executive Director) 2. Dato Harun bin Md Idris (Independent Non-Executive Director) 3. Abdul Hamid bin Sh. Mohamed (Independent Non-Executive Director) 4. Nik Abdul Malik bin Nik Mohd Amin (appointed on 1 October 2014) (Independent Non-Executive Director) MEETING AND ATTENDANCE The Audit Committee held 5 meetings during the financial year and the attendance of the Committee Members was as follows : Name of Committee Member Number of Meetings Attended Tai Keat Chai 5/5 Dato Harun bin Md Idris 4/5 Abdul Hamid bin Sh. Mohamed 5/5 The Company Secretaries, the Internal Auditors and the Chief Financial Officer were present at all meetings. At two of the meetings, the Independent Auditors were present. TERMS OF REFERENCE 1. Membership 1.1 The Committee shall be appointed by the Board of Directors from amongst the Directors of the Company and shall consist of not less than 3 members. 1.2 The majority of the members including the Chairman of the Committee shall be Independent Directors as defined in Chapter 15 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ( Bursa Securities ). 1.3 The Committee shall include at least 1 person: (a) who is a member of the Malaysian Institute of Accountants; or (b) who must have at least 3 years working experience and:- (i) have passed the examinations specified in Part I of the 1st Schedule of the Accountants Act, 1967; or (ii) is a member of one of the Associations specified in Part II of the 1st Schedule of the Accountants Act, 1967; or (c) who must have at least 3 years post qualification experience in accounting or finance and:- (i) has a degree/masters/doctorate in accounting or finance; or (ii) is a member of one of the professional accountancy organisations which has been admitted as a full member of the International Federation of Accountants; or (d) who must have at least 7 years experience being a chief financial officer of a corporation or having the function of being primarily responsible for the management of the financial affairs of a corporation. 1.4 No Alternate Director shall be appointed as a member of the Committee. 1.5 The members of the Committee shall elect a Chairman from amongst their number. 1.6 If a member of the Committee resigns, dies or for any reason ceases to be a member with the result that the number of members is reduced below 3, the Board shall, within 3 months appoint such number of new members as may be required to make up the minimum of 3 members. 16 Annual Report SILK Holdings Berhad ( V)