UMW HOLDINGS BERHAD (Company No P) (Incorporated in Malaysia under the Companies Act, 1965)

Transcription

1 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt as to the course of action to be taken, you should consult your stockbroker, bank manager, solicitor, accountant or other professional advisers immediately. Bursa Malaysia Securities Berhad takes no responsibility for the contents of this Circular, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this Circular. UMW HOLDINGS BERHAD (Company No P) (Incorporated in Malaysia under the Companies Act, 1965) CIRCULAR TO SHAREHOLDERS IN RELATION TO THE (I) (II) PROPOSED DISTRIBUTION OF 1,204,777,400 ORDINARY SHARES IN UMW OIL & GAS CORPORATION BERHAD ( UMW-OG ) ( UMW-OG SHARES ), BEING THE ENTIRE SHAREHOLDING OF UMW HOLDINGS BERHAD ( UMWH ) IN UMW-OG, ON THE BASIS OF APPROXIMATELY 1.03 UMW-OG SHARES FOR EACH ORDINARY SHARE HELD IN UMWH TO THE ENTITLED SHAREHOLDERS OF UMWH, BY WAY OF REDUCING THE ISSUED AND PAID-UP SHARE CAPITAL OF UMWH BY RM704,759,950 ( PROPOSED DISTRIBUTION ); AND PROPOSED REDUCTION OF THE ISSUED AND PAID-UP SHARE CAPITAL OF UMWH BY RM89,722,249 ( PROPOSED CAPITAL REDUCTION ) (COLLECTIVELY REFERRED TO AS PROPOSALS ) AND NOTICE OF EXTRAORDINARY GENERAL MEETING Principal Adviser The resolutions pertaining to the Proposals will be tabled for your consideration at the Extraordinary General Meeting ( EGM ) of the Company to be held at the UMW Auditorium, UMW Holdings Berhad, No. 3, Jalan Utas (15/7), Batu Tiga Industrial Estate, Shah Alam, Selangor Darul Ehsan, Malaysia on Thursday, 4 May 2017 at a.m. or at any adjournment thereof. The Notice of EGM in relation to the Proposals and the Form of Proxy are enclosed in this Circular. You are entitled to attend and vote at the EGM or to appoint a proxy or proxies to attend and vote on your behalf. The completed Form of Proxy must be lodged at the Registered Office of the Company at 3 rd Floor, The Corporate, No. 10, Jalan Utas (15/7), Batu Tiga Industrial Estate, Shah Alam, Selangor Darul Ehsan, Malaysia not less than twenty-four (24) hours before the time appointed for the taking of the poll or any adjournment thereof. The lodging of the Form of Proxy will not preclude you from attending and voting at the EGM should you subsequently decide to do so. Last date and time for lodging the Form of Proxy : Wednesday, 3 May 2017 at a.m. (being the approximate time appointed for the taking of the poll at the EGM) Date and time of the EGM : Thursday, 4 May 2017 at a.m. or at any adjournment thereof This Circular is dated 12 April 2017

2 DEFINITIONS The following definitions apply throughout this Circular unless the context requires otherwise: Act : Companies Act, 2016 ASB : Amanah Saham Bumiputera Board : Board of Directors of UMWH Bursa Securities : Bursa Malaysia Securities Berhad Circular : This circular to the shareholders of the Company in relation to the Proposals dated 12 April 2017 Distribution Shares : 1,204,777,400 UMW-OG Shares held by UMWH to be distributed pursuant to the Proposed Distribution EGM : Extraordinary general meeting Entitled Shareholders : Shareholders of UMWH whose names appear in the Record of Depositors of the Company on the Entitlement Date Entitlement Date : A date to be determined and announced later by the Board, on which the names of the shareholders of the Company must appear in the Record of Depositors of the Company as at 5.00 p.m. in order to be entitled to participate in the Proposed Distribution EPS : Earnings per share Former Share Premium Amount : RM794,482,199, being the amount in the share premium account of the Company prior to the commencement of the Act FPE : Financial period ended FYE : Financial year ended/ending, as the case may be High Court : High Court of Malaya IC : The interpretations committee of the International Financial Reporting Standards Foundation IC 17 : IC Interpretation 17 Distributions of Non-cash Assets to Owners, which requires, inter-alia, an entity to measure a liability to distribute noncash assets as a dividend to its owners at the fair value of the assets to be distributed Initial Announcement : Announcement made by UMWH on 19 January 2017 in relation to the Initial Proposed Distribution and Proposed Amendments Initial Proposed Distribution : Proposed distribution of the Distribution Shares to the Entitled Shareholders via the Proposed Bonus Issue and the Proposed Redemption KLIBOR : Kuala Lumpur Interbank Offered Rate, being the average interest rate at which term deposits are offered between prime banks in the Malaysian wholesale money market or interbank market Listing Requirements : Main Market Listing Requirements of Bursa Securities LPD : 15 March 2017, being the latest practicable date prior to the printing of this Circular i

3 DEFINITIONS (Cont d) Maybank IB : Maybank Investment Bank Berhad NA : Net assets O&G : Oil and gas PACs : Persons acting in concert as defined under the Capital Markets and Services Act, 2007 and the Rules on Take-Overs, Mergers and Compulsory Acquisitions Proposals : Collectively, the Proposed Distribution and the Proposed Capital Reduction Proposed Amendments : Proposed amendments to the memorandum and articles of association of UMWH Proposed Bonus Issue : Proposed bonus issue of 1,204,777,400 RPS to be issued by UMWH to the Entitled Shareholders on the basis of approximately 1.03 RPS for each existing UMWH Share held on the Entitlement Date Proposed Capital Reduction Proposed Distribution : Proposed reduction of the Share Capital of UMWH by RM89,722,249 : Proposed distribution of the Distribution Shares to the Entitled Shareholders by way of reducing the Share Capital of UMWH by RM704,759,950 Proposed Redemption : Proposed subsequent redemption of the RPS at a premium which will be satisfied by the Distribution Shares Record of Depositors : A record provided by Bursa Malaysia Depository Sdn. Bhd. pursuant to Chapter 24 of the Rules of Bursa Depository Registrar of Companies : Registrar of the Companies Commission of Malaysia Residual Shares : Remaining UMW-OG Shares held by the Company after the completion of the Proposed Distribution RPS : Redeemable preference shares of RM0.01 each in UMWH Rules of Bursa Depository : The rules of Bursa Malaysia Depository Sdn. Bhd. issued pursuant to the Securities Industry (Central Depositories) Act, 1991 Share Capital : Collectively, issued and paid-up share capital UMW-OG : UMW Oil & Gas Corporation Berhad UMW-OG Group : UMW-OG and its subsidiaries UMW-OG Share : Ordinary share in UMW-OG UMWH or Company : UMW Holdings Berhad UMWH Group : Collectively, UMWH and its subsidiaries UMWH Share or Share : Ordinary share in UMWH ii

4 DEFINITIONS (Cont d) CURRENCIES RM and sen : Ringgit Malaysia and sen respectively RMB : China Yuan Renminbi SGD : Singapore Dollar THB : Thailand Baht USD : United States Dollar All references to you in this Circular are to the shareholders of the Company. Unless specifically referred to, words denoting the singular shall, where applicable, include the plural and vice versa, and words denoting the masculine gender shall, where applicable, include the feminine and/or neuter genders and vice versa. References to persons shall include corporations, unless otherwise specified. Any reference in this Circular to any enactment, code, rules and regulations is a reference to that enactment, code, rules and regulations as for the time being amended or re-enacted. Any discrepancy in the tables included in this Circular between the amounts listed, actual figures and the totals thereof are due to rounding. Any reference to a time of day in this Circular is a reference to Malaysian time and date. This Circular includes forward-looking statements. All statements other than statements of historical facts included in this Circular including, without limitation, those regarding the Group s financial position, business strategies, prospects, plans and objectives of the Company for future operations, are forwardlooking statements. There can be no assurance that such forward-looking statements will materialise, be fulfilled or be achieved. (The rest of this page is intentionally left blank) iii

5 CONTENTS PAGE LETTER TO THE SHAREHOLDERS OF UMWH IN RELATION TO THE PROPOSALS: 1. INTRODUCTION DETAILS OF THE PROPOSED DISTRIBUTION DETAILS OF THE PROPOSED CAPITAL REDUCTION BACKGROUND INFORMATION ON UMW-OG RATIONALE AND BENEFITS OF THE PROPOSALS RISK FACTORS EFFECTS OF THE PROPOSALS APPROVALS REQUIRED INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM DIRECTORS RECOMMENDATION TENTATIVE TIMETABLE CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING COMPLETION EGM FURTHER INFORMATION APPENDICES I BACKGROUND INFORMATION ON UMW-OG 13 II AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF UMW-OG FOR THE FYE 31 DECEMBER 2015 TOGETHER WITH THE AUDITORS REPORT THEREON 24 III FURTHER INFORMATION 112 NOTICE OF EGM FORM OF PROXY ENCLOSED ENCLOSED iv

6 UMW HOLDINGS BERHAD (Company No P) (Incorporated in Malaysia under the Companies Act, 1965) Registered Office 3 rd Floor, The Corporate No. 10, Jalan Utas (15/7) Batu Tiga Industrial Estate Shah Alam Selangor Darul Ehsan Malaysia 12 April 2017 Board of Directors Tan Sri Dato Sri Hamad Kama Piah bin Che Othman (Group Chairman, Non-Independent Non-Executive Director) Badrul Feisal bin Abdul Rahim (President & Group CEO, Executive Director) Dr. Leong Chik Weng (Non-Independent Non-Executive Director) Datuk Seri Dr. Nik Norzrul Thani bin N.Hassan Thani (Non-Independent Non-Executive Director) Dato Siow Kim Lun (Senior Independent Non-Executive Director) Dato Mohd. Nizam bin Zainordin (Non-Independent Non-Executive Director) Khalid bin Sufat (Independent Non-Executive Director) Rohaya binti Mohammad Yusof (Non-Independent Non-Executive Director) Tan Sri Hasmah binti Abdullah (Independent Non-Executive Director) Dato Eshah binti Meor Suleiman (Independent Non-Executive Director) To : Shareholders of the Company Dear Sir/Madam, (I) (II) PROPOSED DISTRIBUTION; AND PROPOSED CAPITAL REDUCTION 1. INTRODUCTION On 19 January 2017, on behalf of the Board, Maybank IB announced that UMWH intends to undertake the Initial Proposed Distribution and the Proposed Amendments. On 26 January 2017, the Companies Commission of Malaysia announced that the Act will come into effect on 31 January 2017, save for the provisions relating to registration of company secretaries and corporate rescue mechanisms. 1

7 With the Act coming into effect, all amounts standing to the credit of UMWH s share premium account has become part of UMWH s share capital. In this regard, UMWH will no longer be able to carry out the mechanics under the Initial Proposed Distribution as set out in the Initial Announcement. The table below illustrates the treatment of the share premium account of the Company pursuant to the commencement of the Act: Prior to the commencement of the Act After the commencement of the Act (RM'000) (RM'000) Share Capital 584,147 1,378,629 Share premium 794,482 - On 27 February 2017, on behalf of the Board, Maybank IB announced that UMWH will not be undertaking the Proposed Bonus Issue and Proposed Redemption to facilitate the Initial Proposed Distribution. Instead, UMWH will now undertake the Proposed Distribution by way of reducing its Share Capital by RM704,759,950. As the Proposed Amendments were meant to facilitate the issuance of the RPS pursuant to the Proposed Bonus Issue, which will no longer be undertaken by UMWH, UMWH will not proceed with the Proposed Amendments. Subsequently on 3 March 2017, on behalf of the Board, Maybank IB announced that UMWH intends to undertake the Proposed Capital Reduction. THE PURPOSE OF THIS CIRCULAR IS TO PROVIDE YOU WITH THE DETAILS OF THE PROPOSALS AND TO SEEK YOUR APPROVAL FOR THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM. THE NOTICE OF EGM TOGETHER WITH THE FORM OF PROXY ARE ENCLOSED IN THIS CIRCULAR. YOU ARE ADVISED TO READ AND CONSIDER CAREFULLY THE CONTENTS OF THIS CIRCULAR TOGETHER WITH THE APPENDICES BEFORE VOTING ON THE RESOLUTIONS PERTAINING TO THE PROPOSALS TO BE TABLED AT THE FORTHCOMING EGM. 2. DETAILS OF THE PROPOSED DISTRIBUTION 2.1 Background information on the Proposed Distribution To facilitate the Proposed Distribution, UMWH will undertake a reduction of its Share Capital by RM704,759,950, being the cost of investment of the Company in UMW-OG Shares, by a special resolution and confirmation by the High Court pursuant to Sections 115(a) and 116 of the Act. As at the LPD, UMWH holds 1,204,777,400 UMW-OG Shares, representing approximately 55.73% of the issued and paid-up share capital of UMW-OG. For illustrative purposes only, based on the Company s latest unaudited management accounts for the FYE 31 December 2016, the balance of the Company s Share Capital after the implementation of the Proposed Distribution will be as follows: Company level Unaudited as at 31 December 2016 (RM 000) Share Capital 1,378,629 Less: Amount to be cancelled pursuant to the Proposed Distribution (1) (704,760) After the Proposed Distribution 673,869 2

8 Note: (1) Based on the Company s cost of investment in the UMW-OG Shares held amounting to RM704,759,950. The Distribution Shares shall be determined on the basis of approximately 1.03 UMW-OG Shares for each UMWH Share held by the Entitled Shareholders on the Entitlement Date. In determining the Entitled Shareholder s entitlement to the Distribution Shares, any fractional entitlements to the Distribution Shares (if any) shall be disregarded and the aggregate of such will be dealt with in such manner or terms as the Board may deem fit in a fair and equitable manner or such terms that are in the best interests of the Company. Any Residual Shares following the distribution of the Distribution Shares to the Entitled Shareholders will be dealt with in such manner as the Board may deem fit. Accordingly, it is the intention of the Board to dispose of any Residual Shares via the open market. Upon completion of the Proposed Distribution, the Entitled Shareholders will hold the Distribution Shares in proportion to their shareholdings in UMWH as at the Entitlement Date, and upon disposal of the Residual Shares (if any), UMWH will cease to be a shareholder of UMW-OG. An order by the High Court pursuant to Section 116 of the Act will be sought to confirm the reduction in the Share Capital of UMWH by RM704,759,950 for purposes of the Proposed Distribution after the approval of the shareholders of UMWH at the forthcoming EGM has been obtained. The effective date of the reduction in the Share Capital of UMWH for purposes of the Proposed Distribution will be the date of the lodgement of a sealed copy of the order of the High Court confirming the cancellation of the Share Capital of UMWH by the amount of RM704,759,950 with the Registrar of Companies. On 3 March 2017, UMWH was informed that ASB and its PACs will not be obligated to undertake a mandatory take-over offer for all the remaining UMW-OG Shares not already owned by ASB and its PACs as a result of the Proposed Distribution. In view thereof, no application to the Securities Commission Malaysia for an exemption from the obligation to undertake a mandatory take-over offer will be submitted. ASB, PNB as well as the other unit trust funds managed by PNB (collectively, ASB and its PACs ) are deemed to be parties acting in concert with UMWH in relation to the UMW- OG Shares by virtue of Section 216(3) of the Capital Markets and Services Act, 2007 (collectively, Concert Group ). As at the LPD, the collective shareholding of the Concert Group in UMW-OG is approximately 68.5%. After the Proposed Distribution, the collective shareholding of the Concert Group in UMW-OG will be reduced to approximately 45.1% and none of the member of the Concert Group s direct shareholding in UMW-OG will increase to more than 33%. As such, ASB and its PACs would not be obligated to undertake any mandatory take-over offer for all the remaining UMW-OG Shares not already owned by ASB and its PACs after the Proposed Distribution. 2.2 Ranking of the Distribution Shares The Distribution Shares will be distributed free from all encumbrances and shall rank equally in all respects with the other UMW-OG Shares in issue with all rights and entitlements attached including dividends, rights, allotments and/or other distributions that may be declared, made or paid to shareholders, on or after the date on which the Distribution Shares are credited into the Central Depository System accounts of the Entitled Shareholders. 3

9 2.3 Liabilities to be assumed There are no liabilities, including contingent liabilities and guarantees, to be assumed by the Entitled Shareholders pursuant to the Proposed Distribution. 2.4 Original cost of investment Details of the original cost of investment of UMWH in the Distribution Shares are as follows: Date of acquisition / allotment No. of UMW-OG Shares Amount (RM 000) Balance brought forward (1) 1,192,343, , December ,000,000 2, December ,000,000 2,351 2 January , January ,148,500 2,736 6 January ,000,000 2,287 8 January , January , January ,000,000 2, January ,000,000 2, January , January ,000,000 2, January ,000,000 2, January ,000,000 2, March ,000,000 2, March ,000,000 2,161 1,204,777, ,615 Deemed capital contribution (2) 78, ,760 Notes: (1) Balance brought forward prior to UMW-OG being listed on the Main Market of Bursa Securities. (2) This amount relates to the waiver provided to UMW-OG for the early settlement of the shareholder loans as part of the restructuring exercise of UMW-OG prior to UMW-OG s listing on the Main Market of Bursa Securities. This amount has been classified as part of the cost of investment of UMWH in UMW-OG. 2.5 Use of proceeds There will be no proceeds to be raised by UMWH from the Proposed Distribution. 2.6 Details of the intercompany loan owing by UMW-OG UMWH had on 2 June 2016 provided financial assistance in the form of an intercompany loan of RM308 million to UMW-OG, for UMW-OG s working capital requirements to ensure continuity of its day-to-day operations ( Shareholder Loan ). The nature of the working capital requirements mainly relates to the payment of consumable and raw materials used, crew and staff costs, and other operating expenses which include, amongst others, repair and maintenance, third party manpower services and barge rental. 4

10 The Shareholder Loan is at an interest rate of 6-month KLIBOR % per annum and with a repayment period of 5 years and was funded through UMWH s internal funds. The terms of the intercompany loan were agreed upon on an arm s length basis. As the Shareholder Loan is a separate contractual agreement between UMWH and UMW- OG, the repayment of the Shareholder Loan was not made a condition to the Proposed Distribution as the Proposed Distribution is undertaken in conjunction with UMWH s plan to exit its investments in the O&G industry. In addition, the exclusion of the repayment of the Shareholder Loan as a condition to the Proposed Distribution would expedite the completion of the Proposed Distribution. The management of UMWH will continuously monitor the financial position of UMW-OG and engage with UMW-OG to ensure the timely repayment of the Shareholder Loan. The management of UMWH is also of the opinion that the recoverability of the Shareholder Loan would not be an issue as UMW-OG will remain as a listed company following the Proposed Distribution and an investee company of ASB, PNB as well as the other unit trust funds managed by PNB. Notwithstanding the above, the Shareholder Loan is expected to be repaid within the stipulated time of 5 years, or at any other time at the full discretion of UMWH. Upon completion of the Proposed Distribution, the Shareholder Loan will be classified as an amount owing by former subsidiary under the assets segment of UMWH s statement of financial position. As at the LPD, the amount of the Shareholder Loan outstanding is RM308 million. 3. DETAILS OF THE PROPOSED CAPITAL REDUCTION 3.1 Background information on the Proposed Capital Reduction Following from the Proposed Distribution, the balance of the Former Share Premium Amount would be RM89,722,249. In view of this, UMWH intends to utilise the entire balance of the Former Share Premium Amount by reducing its Share Capital via the Proposed Capital Reduction which involves the reduction of the Share Capital of UMWH by RM89,722,249 by a special resolution and confirmation by the High Court pursuant to Sections 115(a) and 116 of the Act. For illustrative purposes only, based on the Company s unaudited management accounts for the FYE 31 December 2016, the balance of the Company s Share Capital after the implementation of the Proposed Capital Reduction taking into consideration the Proposed Distribution will be as follows: Company level Unaudited as at 31 December 2016 (RM 000) Share Capital 1,378,629 Less: Amount to be cancelled pursuant to the Proposed Distribution (704,760) After the Proposed Distribution 673,869 Less: Amount to be cancelled pursuant to the Proposed Capital Reduction (89,722) After the Proposed Capital Reduction (1) 584,147 Note: (1) Upon completion of the Proposals, the Share Capital of the Company will be the same as prior to the commencement of the Act. The credit arising from the Proposed Capital Reduction will be utilised to set off against the unaudited accumulated losses of UMWH at the Company level for the FYE 31 December 5

11 2016. For illustrative purposes only, based on the Company s unaudited consolidated financial statements for the FYE 31 December 2016, the balance of the accumulated (losses)/profits of the Company and the Group after the implementation of the Proposed Capital Reduction will be as follows: Unaudited as at 31 December 2016 Company level (1) (RM 000) Group level (RM 000) Accumulated (losses) / profits (115,156) 2,932,718 Add: Amount to be credited pursuant to the Proposed Capital Reduction 89,722 89,722 After the Proposed Capital Reduction (25,434) 3,022,440 Note: (1) Based on the Company s unaudited management accounts for the FYE 31 December An order by the High Court will be sought to confirm the Proposed Capital Reduction after the approval of the shareholders of UMWH at the forthcoming EGM has been obtained. For avoidance of doubt, the order by the High Court will be sought at the same time for both the reduction in the Share Capital of UMWH for purposes of the Proposed Distribution and the Proposed Capital Reduction. The effective date of the Proposed Capital Reduction will be the date of the lodgement of a sealed copy of the order of the High Court confirming the Proposed Capital Reduction with the Registrar of Companies. 4. BACKGROUND INFORMATION ON UMW-OG UMW-OG was incorporated in Malaysia under the Companies Act, 1965 as a private limited company on 12 November 2009 under the name of UMW Oil & Gas Corporation Sdn. Bhd. It was converted into a public company under its present name on 14 May 2013 and was listed on the Main Market of Bursa Securities on 1 November UMW-OG is principally involved in investment holding whilst its subsidiaries are principally engaged in the following: (a) (b) provision of drilling services for exploration, development and production wells and workover services to the upstream sector of the O&G industry; and provision of threading, inspection and repair services for oil country tubular goods in Malaysia and overseas, with a focus on premium connections used in high-end and complex wells. Further information on UMW-OG is set out in Appendix I of this Circular. 5. RATIONALE AND BENEFITS OF THE PROPOSALS The O&G sector has been affected by the fall in crude oil prices. Although it is expected to recover gradually going forward, as the O&G business of UMWH is capital intensive in nature and given the various demands on capital, UMWH has taken the strategic decision to exit the O&G sector and refocus the UMWH Group s growth trajectory on three core sectors, namely automotive, equipment, and manufacturing and engineering. This strategy is expected to strengthen the UMWH Group s financial position to embark on new investments in these core areas of businesses as its platform for future expansion and value creation. 6

12 5.1 Proposed Distribution The Proposed Distribution is undertaken in conjunction with UMWH s plan to exit its investments in the O&G industry, as represented by its shareholding in UMW-OG as well as its interests in other investments in the O&G sector which are held by UMWH other than the UMW-OG Group. On 19 January 2017, UMW-OG announced that it is proposing to acquire interests in certain companies in the O&G sector and embark upon a recapitalisation exercise via a rights issue. With the Proposed Distribution, the shareholders of UMWH will be able to directly participate in the equity of UMW-OG at no cost. Accordingly, the Proposed Distribution is undertaken instead of an outright disposal of UMWH s shareholding in UMW- OG as the Proposed Distribution provides UMWH s shareholders with direct exposure to 2 separate listed companies following the completion of the Proposed Distribution, and provides greater flexibility to investors to manage their investment exposure or rebalance their portfolio in each of these businesses independent of each other according to their individual investment objectives. The Proposed Distribution further provides the shareholders of UMWH the opportunity to independently gauge the appropriate value of their interests in UMW-OG and manage their investments in UMW-OG, which would not be possible under an outright disposal of the Company s shareholding in UMW-OG. Following the Proposed Distribution, UMWH will be able to fully focus on managing its growth and risks related solely to its automotive, equipment, manufacturing and engineering businesses. The reduction in the Share Capital of UMWH is merely the mechanism to be undertaken by UMWH for the purpose of distributing the UMW-OG Shares to the Entitled Shareholders. 5.2 Proposed Capital Reduction The Proposed Capital Reduction will enable the Company to utilise the entire balance of the Former Share Premium Amount after taking into consideration the Proposed Distribution. Pursuant to the Proposed Capital Reduction, the Company s statement of financial position will be rationalised and will place the Company on a better financial footing. 6. RISK FACTORS The risk factors (which may not be exhaustive) pertaining to the Proposals are set out below: 6.1 Completion Risk The Proposals are conditional upon the approvals set out in Section 8 of this Circular. There can be no assurance that all the approvals can be obtained, failing which, the Proposals may be aborted or its implementation may be delayed. The Company will take all reasonable steps to ensure that the approvals are obtained to facilitate the completion of the Proposals. 6.2 Risk associated with the Shareholder Loan Any adverse economic conditions, financial difficulties or adverse changes to UMW-OG s business and/or operations could impair the ability of UMW-OG to repay the Shareholder Loan or cause UMW-OG to delay the payment of the Shareholder Loan following the Proposed Distribution. Upon completion of the Proposed Distribution and upon disposal of the Residual Shares (if any), UMWH will cease to be a shareholder of UMW-OG. Notwithstanding the above, UMW-OG is still obligated to pay the required interest amount to UMWH in accordance with the terms of the Shareholder Loan. 7

13 The Company continues to undertake prudent financial management. However, any delay or default in payment of the Shareholder Loan by UMW-OG could have an impact on UMWH s financial condition, results of operations and cash flows. In the event of default by UMW-OG on the repayment of the Shareholder Loan, UMWH may have to write off the entire outstanding amount of the Shareholder Loan of RM308 million as at the LPD together with interest income arising from the Shareholder Loan, which will have a corresponding impact of reducing the net profit and net assets of the Company by RM308 million and any interest accrued. 7. EFFECTS OF THE PROPOSALS 7.1 Share Capital The effects of the Proposals on the Share Capital of the Company are as follows: No. of UMWH Shares Amount (RM 000) As at the LPD 1,168,293,932 1,378,629 To be cancelled pursuant to the Proposed Distribution - (1) (704,760) 1,168,293, ,869 To be cancelled pursuant to the Proposed Capital Reduction - (89,722) 1,168,293, ,147 Note: (1) Based on the Company s cost of investment in the UMW-OG Shares held amounting to RM704,759, Substantial shareholders shareholding The Proposals will not have any effect on the shareholdings of the substantial shareholders of the Company. 7.3 NA and gearing For illustrative purposes only, based on the audited consolidated statement of financial position of UMWH as at 31 December 2015 and on the assumption that the Proposals had been effected on that date, the proforma effects of the Proposals on the NA and gearing of the UMWH Group are as follows: 8

14 Audited as at 31 December 2015 After the Proposed Distribution (1) After the Proposed Capital Reduction (RM 000) (RM 000) (RM 000) Share Capital 1,378,629 (2) 673, ,147 Other reserves 445,702 (3) 83,470 83,470 Retained earnings 4,760,127 (3) 3,969,800 4,059,522 Shareholder s equity/ NA 6,584,458 4,727,139 4,727,139 Non-controlling interests 2,799,413 1,323,732 1,323,732 Total Equity 9,383,871 6,050,871 6,050,871 No. of UMWH Shares in issue 1,168,293,932 1,168,293,932 1,168,293,932 NA per UMWH Share (RM) Total borrowings 6,014,752 2,010,457 2,010,457 Gearing (times) (4) Notes: (1) The Proposed Distribution will result in a demerger of the UMW-OG Group from the UMWH Group and the reduction of RM704,759,950 in the Share Capital of UMWH. (2) Based on the Company s cost of investment in the UMW-OG Shares held amounting to RM704,759,950. (3) Reduction of other reserves and retained earnings of the UMWH Group due to the demerger of the UMW-OG Group from the UMWH Group. (4) Gearing is calculated as total borrowings divided by total equity. For information purposes, unaudited accumulated losses of UMWH at the company level for the FYE 31 December 2016 amounts to RM115,156,353 and pursuant to the Proposed Capital Reduction, this will result in a reduction of the Company s accumulated losses by RM89,722, Earnings and EPS Proposed Distribution For illustrative purposes only, assuming that the Proposed Distribution had been completed on 1 January 2015, being the beginning of the FYE 31 December 2015, the proforma effects of the Proposed Distribution on the earnings and EPS of the UMWH Group are as follows: 9

15 Audited as at 31 December 2015 (RM'000) After the Proposed Distribution (RM 000) (Loss) for the year attributable to equity holders of the Company (37,171) (37,171) Add : UMW-OG s loss for the year attributable to equity holders of the Company - (1) 205,327 Add : Gain on deemed disposal of UMW-OG arising from the Proposed Distribution - (2) 1,143,039 Proforma net (loss)/profit (37,171) 1,311,195 (Loss)/Earnings per Share (sen) (3.2) Notes: (1) Based on UMWH s equity shareholding in UMW-OG. (2) Gain on deemed disposal of UMW-OG arising from the Proposed Distribution is derived based on the fair value of the Distribution Shares measured at RM2.35/UMW-OG Share as at 31 December 2014 as required by IC 17. For illustrative purposes only, assuming that the Proposed Distribution had been completed on 1 January 2016, being the beginning of the FYE 31 December 2016, the proforma effects of the Proposed Distribution on the earnings and EPS of the UMWH Group are as follows: Unaudited as at 31 December 2016 (RM'000) After the Proposed Distribution (RM 000) (Loss) for the year attributable to equity holders of the Company (1,690,576) (1,690,576) Add : UMW-OG s loss for the year attributable to equity holders of the Company - (1) 661,001 Less : Loss on deemed disposal of UMW-OG arising from the Proposed Distribution - (2) (211,953) Proforma net (loss) (1,690,576) (1,241,528) (Loss) per Share (sen) (144.7) (106.3) Notes: (1) Based on UMWH s equity shareholding in UMW-OG. (2) Loss on deemed disposal of UMW-OG arising from the Proposed Distribution is derived based on the fair value of the Distribution Shares measured at RM1.07/UMW-OG Share as at 31 December 2015 as required by IC Proposed Capital Reduction The Proposed Capital Reduction will not have any effect on the earnings and EPS of the UMWH Group. 7.5 Convertible securities As at the LPD, the Company does not have any convertible securities in issue. 10

16 8. APPROVALS REQUIRED The Proposals are subject to the following being obtained: (i) (ii) (iii) approval of the shareholders of UMWH at the forthcoming EGM; confirmation from the High Court for the Proposals via an order; and approvals/consents of any other relevant authorities and/or parties, if required. The Proposed Capital Reduction is conditional upon the Proposed Distribution. The Proposals are not conditional upon any other corporate exercise/scheme of the Company which has been announced but is pending completion. 9. INTERESTS OF THE DIRECTORS, MAJOR SHAREHOLDERS AND/OR PERSONS CONNECTED WITH THEM None of the Directors, major shareholders of UMWH and/or persons connected with them have any interest, direct or indirect, in the Proposals, save for their respective entitlements to the Distribution Shares as shareholders of UMWH, for which all other Entitled Shareholders are similarly entitled to. 10. DIRECTORS RECOMMENDATION The Board, having considered all aspects of the Proposals including the rationale and effects of the Proposals, is of the opinion that the Proposals are in the best interests of the Company. Accordingly, the Board recommends that you vote in favour of the resolutions pertaining to the Proposals to be tabled at the forthcoming EGM. 11. TENTATIVE TIMETABLE Barring any unforeseen circumstances and subject to all required approvals being obtained, the Proposals are expected to be completed in the third (3 rd ) quarter of The tentative timetable for the Proposals is as follows: Event Tentative timeline EGM 4 May 2017 Application to the High Court for the Proposals Early/Mid May 2017 Confirmation from the High Court for the Proposals End June 2017 Entitlement Date Mid/End July 2017 Lodgement of a sealed copy of the order of the High Court with the Registrar of Companies Mid/End July 2017 Completion of the Proposals Mid/End July

17 12. CORPORATE EXERCISE/SCHEME ANNOUNCED BUT PENDING COMPLETION Save for the Proposals and as disclosed below, there are no other corporate exercises or schemes which have been announced by the Company but pending completion as at the LPD: (i) On 27 November 2015, UMW Corporation Sdn. Bhd. ( UMWC ), a wholly-owned subsidiary of the Company, had entered into a Settlement Agreement ( SA ) with UMW Development Sdn. Bhd. ( UMWD ), a 51% subsidiary within the UMWH Group, in respect of the settlement of the liabilities due from UMWD to UMWC amounting to RM229,792,101 ( Liabilities ) ( Proposed Settlement ). The settlement of the Liabilities will be made via a transfer of several parcels of land belonging to UMWD to UMWC or any other whollyowned entity as may be nominated by UMWC, for a total consideration of RM242,462, On 29 March 2016, UMWC and UMWD mutually agreed to extend the completion date of the SA to 31 December 2016 to allow for full satisfaction of all conditions precedent in the SA. On 29 December 2016, UMWC and UMWD mutually agreed to further extend the completion date of the SA to 27 May 2017 to allow for full satisfaction of all conditions precedent in the SA. The Proposed Settlement is not conditional upon any other corporate exercise/scheme of the Company. 13. EGM The EGM will be held at the UMW Auditorium, UMW Holdings Berhad, No. 3, Jalan Utas (15/7), Batu Tiga Industrial Estate, Shah Alam, Selangor Darul Ehsan, Malaysia on Thursday, 4 May 2017 at a.m. or at any adjournment thereof, for the purpose of considering and if deemed fit, passing the resolutions to give effect to the Proposals. You are advised to refer to the Notice of EGM and Form of Proxy which are enclosed in this Circular. If you are unable to attend and vote in person at the EGM, you may appoint a proxy or proxies to attend and vote on your behalf. If you wish to do so, you must complete and deposit the Form of Proxy at the Registered Office of the Company, 3 rd Floor, The Corporate, No. 10, Jalan Utas (15/7), Batu Tiga Industrial Estate, Shah Alam, Selangor Darul Ehsan, Malaysia not less than twenty-four (24) hours before the time appointed for the taking of the poll or any adjournment thereof. The lodging of the Form of Proxy will not preclude you from attending and voting in person at the EGM should you subsequently decide to do so. 14. FURTHER INFORMATION You are advised to refer to the attached appendices for further information. Yours faithfully for and on behalf of the Board of UMW HOLDINGS BERHAD TAN SRI DATO SRI HAMAD KAMA PIAH BIN CHE OTHMAN Group Chairman 12

18 APPENDIX I BACKGROUND INFORMATION ON UMW-OG 1. HISTORY AND BUSINESS UMW-OG was incorporated in Malaysia under the Companies Act, 1965 as a private limited company on 12 November 2009 under the name of UMW Oil & Gas Corporation Sdn Bhd. It was converted into a public company under its present name on 14 May 2013 and was listed on the Main Market of Bursa Securities on 1 November UMW-OG is principally involved in investment holding whilst its subsidiaries are principally engaged in the following: (i) (ii) provision of drilling services for exploration, development and production wells and workover services to the upstream sector of the oil & gas industry; and provision of threading, inspection and repair services for oil country tubular goods in Malaysia and overseas, with a focus on premium connections used in high-end and complex wells. The following diagram provides an overview of the UMW-OG Group's main businesses: UMW-OG GROUP Drilling Services Oilfield Services Offshore drilling Hydraulic workover Oil country tubular goods threading, inspection and repair services As at the LPD, the UMW-OG Group has a fleet of eight (8) offshore drilling rigs consisting of one (1) semi-submersible rig and seven (7) premium jack-up rigs, five (5) hydraulic workover units ( HWU ) and six (6) oilfield plants in four (4) countries, namely in Malaysia, Thailand, China and Turkmenistan. The audited net book value ( NBV ) of the UMW-OG Group s offshore drilling rigs, HWUs and oilfield plants as at 31 December 2015 are as follows: Asset type NBV (RM 000) Semi-submersible rig NAGA 1 6,455 Sub-Total 6,455 Premium jack-up rigs UMW NAGA 2 615,567 UMW NAGA 3 662,132 UMW NAGA 4 857,285 UMW NAGA 5 955,494 UMW NAGA 6 900,577 UMW NAGA 7 952,677 13

19 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) Asset type NBV (RM 000) UMW NAGA 8 961,381 Sub-Total 5,905,113 HWUs UMW GAIT UMW GAIT UMW GAIT 3 15,298 UMW GAIT 5 20,192 UMW GAIT 6 19,155 Sub-Total 54,901 Oilfield plants (by country) Malaysia (1) 18,396 Thailand (2) 2,617 China 24,142 Turkmenistan 8,507 Sub-Total 53,662 Total 6,020,131 Notes: (1) Being the collective NBV of two oilfield plants owned by UMW-OG in Malaysia. (2) Being the collective NBV of two oilfield plants owned by UMW-OG in Thailand.. As at the LPD, the UMW-OG Group owns a leasehold parcel of industrial land with an area of approximately 13,909 square metres comprising a detached factory, a guard house and a 3- storey research and development building in Tianjin, the People s Republic of China ( Industrial Land ). The tenure of the lease is 50 years, expiring in The Industrial Land is held by and registered under UMW Oilfield Services (Tianjin) Co., Limited. The audited NBV of the Industrial Land including the building erected thereon as at 31 December 2015 is RMB35,465,456 (or RM22,827,920 based on Bank Negara Malaysia s middle rate of RMB : RM1.00, as at the LPD). 2. SHARE CAPITAL The share capital of UMW-OG as at the LPD is as follows: No. of shares Amount RM Share capital UMW-OG Shares 2,162,000,000 1,081,000,000 14

20 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) 3. DIRECTORS The directors of UMW-OG and their respective shareholdings in UMW-OG as at the LPD are as follows: Direct Indirect Name Nationality Designation No. of UMW-OG Shares % No. of UMW-OG Shares % Tan Sri Asmat bin Kamaludin Malaysian Chairman/ Non- Independent Non Executive Director Dato' Abdul Rahman bin Ahmad Malaysian Deputy Chairman/ Non- Independent Non Executive Director Rohaizad bin Darus Malaysian President/ Non- Independent Executive Director 1,000, Badrul Feisal bin Abdul Rahim Malaysian Non- Independent Non- Executive Director Razalee bin Amin Malaysian Independent Non- Executive Director 203, Dato Afifuddin bin Abdul Kadir Malaysian Senior Independent Non- Executive Director 275, Cheah Tek Kuang Malaysian Independent Non- Executive Director , * Dato Ibrahim bin Marsidi Malaysian Independent Non- Executive Director 30, * - - Note: * Shareholding is negligible 15

21 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) 4. SUBSTANTIAL SHAREHOLDERS The substantial shareholders of UMW-OG and their respective shareholdings in UMW-OG as at the LPD are as follows: Name Country of incorporation/ Nationality Direct No. of UMW- OG Shares % Indirect No. of UMW- OG Shares % UMWH Malaysia 1,204,777, Amanahraya Trustees Berhad - ASB Malaysia 181,597, SUBSIDIARIES AND ASSOCIATED COMPANIES The subsidiaries and associated companies of UMW-OG as at the LPD are as follows: Name Date/Place of incorporation Issued and paidup share capital RM (unless otherwise stated) Effective equity interest % Principal activities UMW JDC Drilling Sdn Bhd UMW Malaysian Ventures Sdn Bhd UMW Singapore Ventures Pte Ltd UMW Rig Asset (L) Ltd 12 June 1987/ Malaysia 26 September 2008/ Malaysia 25 March 2009/ Singapore 5 April 2013/ Labuan, Malaysia 350, Provision of drilling operations for the oil and gas industry 240,965, Investment holding SGD9,500, Investment holding USD596,412, Investment holding Subsidiaries of UMW Malaysian Ventures Sdn Bhd UMW Offshore Drilling Sdn Bhd UMW Oilpipe Services Sdn Bhd UMW Workover Sdn Bhd 29 July 2003/ Malaysia 14 August 1984/ Malaysia 29 December 1983/ Malaysia 234,725, Contract offshore drilling business and operations and other engineering services for oil and gas exploration, development and production in Malaysia and overseas 4,250, Provision of threading, inspection, repair and maintenance services for oil country tubular goods 57,174, Provision of workover operations for the oil and gas industry. 16

22 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) Name UMW Oilpipe Services (Turkmenistan) Ltd Date/Place of incorporation 4 August 2006/Labuan Malaysia Subsidiaries of UMW Rig Asset (L) Ltd UMW Drilling Co Ltd UMW Drilling (2) (L) Ltd UMW Drilling (3) (L) Ltd UMW Drilling (4) (L) Ltd UMW Drilling (5) (L) Ltd UMW Drilling (6) (L) Ltd UMW Drilling (7) (L) Ltd UMW Drilling (8) (L) Ltd 7 March 2005/Labuan, Malaysia 8 January 2007/ Labuan, Malaysia 8 January 2007/ Labuan, Malaysia 7 June 2012/ Labuan, Malaysia 12 June 2013/ Labuan, Malaysia 12 June 2013/ Labuan, Malaysia 5 February 2014/ Labuan, Malaysia 5 February 2014/ Labuan, Malaysia Offshore Driller 4 Ltd 8 April 2011/ Cayman Islands Issued and paidup share capital RM (unless otherwise stated) Effective equity interest % Principal activities USD625, Provision of threading, inspection, repair and maintenance services for oil country tubular goods USD6,000, Ownership and leasing of rig USD118,700, Ownership and leasing of rig USD20,500, Ownership and leasing of rig USD213,000, Ownership and leasing of rig USD70,000, Ownership and leasing of rig USD67,000, Ownership and leasing of rig USD70,000, Ownership and leasing of rig USD100, Ownership and leasing of rig USD38, Dormant Subsidiary of UMW Singapore Ventures Pte Ltd UMW Oilfield Services (Tianjin) Co., Limited 1 November 2002/ People s Republic of China Subsidiary of UMW Drilling 2 (L) Ltd UMW Standard 1 Pte Ltd 29 November 2006/ Singapore Subsidiary of UMW Drilling 3 (L) Ltd UMW Standard 3 Pte Ltd 29 November 2006/ Singapore USD2,800, Provision of threading, inspection, repair and maintenance services for oil country tubular goods USD76,500, Ownership and leasing of rig USD74,000, Dormant 17

23 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) Name Date/Place of incorporation Subsidiary of UMW Drilling 4 (L) Ltd Offshore Driller B324 Ltd 15 December 2010/ Cayman Islands Subsidiaries of UMW Offshore Drilling Sdn Bhd UMW Drilling Academy Sdn Bhd UMW Offshore Drilling Ltd 11 April 2013/ Malaysia 16 September 2015/ Cayman Islands Subsidiary of UMW Oilpipe Services Sdn Bhd UOT (Thailand) 9 January Limited 1997/ Thailand Associated company of UMW-OG Oil-Tex (Thailand) Company Limited 1 July 1983/ Thailand Issued and paidup share capital RM (unless otherwise stated) Effective equity interest % USD42, Dormant Principal activities 20,000, Provision of trainings and courses in relation to oil and gas drilling activities USD100, Contract drilling operations and other engineering services for oil and gas exploration, development and production THB25,000, Provision of threading, inspection, repair and maintenance services for oil country tubular goods THB7,000, Provision of logistic services for the oil and gas industry 6. MATERIAL COMMITMENTS AND CONTINGENT LIABILITIES 6.1 Material commitments Save as disclosed below, as at 31 December 2016, the board of directors of UMW-OG is not aware of any material commitments incurred or known to be incurred by the UMW-OG which may have a material impact on the profits and/or NA of the UMW-OG Group: Unaudited As at 31 December 2016 RM 000 Approved and contracted for: Land and buildings 321 Equipment, plant and machinery 8,361 Others 38 Approved but not contracted for: Land and buildings 4,403 Equipment, plant and machinery 33,877 Others 6,185 Total 53,185 18

24 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) 6.2 Contingent liabilities As at 31 December 2016, the board of directors of UMW-OG is not aware of any contingent liabilities which, upon becoming enforceable, may have a material impact on the profits and/or NA of the UMW-OG Group. 7. MATERIAL CONTRACTS The UMW-OG Group has not entered into any material contracts (not being contracts entered into in the ordinary course of business) within the two (2) years immediately preceding 31 December MATERIAL LITIGATION Save as disclosed below, as at 31 December 2016, the UMW-OG Group is not engaged in any material litigation, claims or arbitration, either as plaintiff or defendant, and the board of directors of UMW-OG is not aware of any proceedings, pending or threatened, against the UMW-OG Group or of any facts likely to give rise to any proceedings which may materially affect the business or financial position of the UMW-OG Group: (i) UMW Offshore Drilling Sdn Bhd ("UOD" or Claimant ) a wholly-owned subsidiary within UMW-OG Group, had on 10 April 2015, served a Notice of Arbitration on Frontier Oil Corporation ( FOC or Respondent ), to seek, among others, an award for damages and/or compensation for all losses arising from the Respondent s breach of contract but not limited to the early termination fee amounting to USD19.2 million. On 14 August 2015, UOD served its Statement of Claim and the Respondent filed its Statement of Defence dated 18 September 2015 denying, among others, that the Claimant is entitled to the early termination fee, damages, cost, interest or any other sums, without any counterclaim against UOD. The pleadings closed with the Statement of Reply submitted by the Claimant dated 23 October On 25 August 2016, FOC served an Amended Statement of Defence and Counterclaim seeking, among others, their alleged loss and damages on account of alleged nonperformance and/or breach as follows:- (a) (b) (c) (d) (e) USD20.00 million, being the loss of revenue; and/or Further or alternatively, damages reflecting loss of the extended well test value in the sum of USD9.70 million; and/or Further or alternatively, cost of wasted expenditure of USD1.36 million; and/or Further or alternatively, liquidated damages in the sum of USD3.84 million; and Interest and Respondent's costs, fees and expenses associated with the arbitration. On 13 October 2016, UOD as the Claimant has served its Amended Reply and Defence to Counterclaim on the Respondent. UOD has been advised by its solicitors from the facts of its case that UOD has a good claim and a good defence to the Respondent s counterclaim. 19

25 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) 9. FINANCIAL INFORMATION The summary financial information of UMW-OG based on the audited consolidated financial statements of UMW-OG for the past three (3) FYE 31 December 2013 to 2015 and the unaudited consolidated financial statements for the FYE 31 December 2016 is as follows: Audited Unaudited FYE 31 December FYE December 2016 RM 000 RM 000 RM 000 RM 000 Revenue 737,752 1,014, , ,808 Other operating income 37,891 11,209 35,994 33,674 Changes in inventories 62 (280) Finished goods purchased (1,250) (1,216) (1,956) (4,509) Raw materials and consumables used (66,544) (77,252) (77,670) (58,317) Employee benefits (137,352) (183,273) (188,561) (125,650) Depreciation and amortisation (89,383) (133,106) (246,119) (285,361) Impairment provisions - - (347,722) (780,236) Other operating expenses (258,762) (353,335) (324,230) (183,871) (Loss)/Profit from operations 222, ,650 (310,354) (1,083,428) Finance costs (23,740) (26,092) (64,059) (117,314) Investment income 7,690 32,048 25,466 16,899 Share of results of associate (Loss)/Profit before tax 206, ,156 (348,426) (1,183,540) Income tax expense (14,791) (30,398) (20,005) (5,450) Loss from discontinued operations (5,263) (Loss)/Profit for the year 186, ,758 (368,431) (1,188,990) Other comprehensive income: Other comprehensive income that may be reclassified to profit or loss in subsequent periods (net of tax): Foreign currency translation 19, , ,174 95,580 Cash flow hedge 2,868 2,692 Net other comprehensive income that may be reclassified to profit or loss in subsequent periods, representing the total comprehensive income for the year 205, , ,611 (1,090,718) (Loss)/Profit attributable to: Equity holders of the Company - from continuing operations 190, ,996 (369,277) (1,186,184) - from discontinued operations (1,400) , ,996 (369,277) (1,186,184) 20

26 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) Audited Unaudited FYE 31 December FYE December 2016 RM 000 RM 000 RM 000 RM 000 Non-controlling interests - from continuing operations 1,511 1, (2,806) - from discontinued operations (3,863) (2,352) 1, (2,806) 186, ,758 (368,431) (1,188,990) Total comprehensive (loss)/income attributable to: Equity holders of the Company - from continuing operations 209, , ,174 (1,086,412) - from discontinued operations (1,400) , , ,174 (1,086,412) Non-controlling interests - from continuing operations 1,672 2,027 2,437 (4,306) - from discontinued operations (3,863) (2,191) 2,027 2,437 (4,306) 205, , ,611 (1,090,718) Issued and paid-up share capital (RM 000) Shareholders funds/na attributable to owner of UMW-OG (RM 000) 1,081,000 1,081,000 1,081,000 1,081,000 2,833,135 3,199,826 3,333,000 2,246,588 Basic/Diluted (loss)/earnings per share (sen) (1) (3) (17.08) (54.87) Current ratio (times) Total borrowings (RM'000) 859,592 2,254,849 4,004,295 3,791,349 Gearing ratio (times) (2) Notes: (1) Basic/diluted (loss)/earnings per share is calculated by dividing net (loss)/profit attributable to equity holders of the company by the weighted average number of ordinary shares in issue during the year. (2) Gearing ratio is calculated as total borrowings divided by shareholder s funds/na attributable to owner of UMW-OG. (3) Excluding losses from discontinued operations. 21

27 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) Commentaries on financial performance FYE 31 December 2013 (FYE 2012 numbers were prepared based on merger accounting or pooling of interest method FYE 2013 consolidation method) Revenue of UMW-OG increased by 1.9% or RM13.5 million to RM737.8 million (Unaudited FYE 31 December 2012: RM724.3 million) and the PBT increased by 178.0% or RM132.4 million to RM206.8 million (Unaudited FYE 31 December 2012: RM74.4 million). The minimal increase in revenue was primarily due to only 1 month of revenue contribution from HAKURKYU-5 semisubmersible drilling rig as compared to a full-year contribution of revenue in FYE 31 December The increase in PBT was mainly due to the higher utilisation rate of NAGA 1, improved charter rate of UMW NAGA 2 in Vietnam and a 3 full quarters of contribution from UMW NAGA 4 which commenced a 3-year contract with Petronas Carigali Sdn Bhd in April FYE 31 December 2014 Revenue of UMW-OG increased by 37.6% or RM277.1 million to RM1,014.9 million (FYE 31 December 2013: RM737.8 million) and the PBT increased by 37.4% or RM77.4 million to RM284.2 million (FYE 31 December 2013: RM206.8 million). The increase in revenue and PBT was mainly due to the following: (i) additional revenue contributions from the new premium offshore jack-up rigs, UMW NAGA 5 and UMW NAGA 6 from May 2014 and October 2014, respectively; (ii) full year revenue contribution in FYE 31 December 2014 compared to only nine (9) months of operation in FYE 31 December 2013 by UMW NAGA 4, a new premium offshore jack-up rig which commenced operation in April 2013; (iii) (iv) higher rig utilisation and favourable time charter rates recorded by both offshore jack-up rigs, UMW NAGA 2 and UMW NAGA 3, in FYE 31 December 2014 after moving to Vietnam. In FYE 31 December 2013, UMW NAGA 2 underwent upgrading work at Batam upon completion of its drilling services contract at a lower time charter rate in another overseas country whereas UMW NAGA 3 experienced some downtime due to underwater inspection in lieu of dry-docking and damage to some of its ballast tanks; and improved revenue contributions from the hydraulic workover unit, UMW GAIT 3, in FYE 31 December 2014 from higher utilisation rate as well as barge and equipment rental. FYE 31 December 2015 Revenue of UMW-OG decreased by 17.2% or RM175.0 million to RM839.9 million (FYE 31 December 2014: RM1,014.9 million) and the PBT decreased by 222.6% or RM632.6 million to a LBT of RM348.4 million (FYE 31 December 2014: PBT of RM284.2 million). The decrease in revenue and PBT was mainly due to: (i) (ii) lower time charter rates, lower utilisation rates achieved by some of the assets in the UMW-OG Group due to five-yearly special periodical survey or idling in between contracts and pre-operating expenses of two (2) new offshore jack-up rigs which commenced operations in September and November 2015; and impairment provisions amounting to RM347.7 million in relation to rigs, hydraulic workover units, drilling equipment and goodwill of the Company. 22

28 APPENDIX I BACKGROUND INFORMATION ON UMW-OG (Cont d) Unaudited FYE 31 December 2016 Revenue of UMW-OG decreased by 61.8% or RM519.1 million to RM320.8 million (FYE 31 December 2015: RM839.9 million) and the LBT increased by 239.7% or RM835.1 million to a LBT of RM1,183.5 million (FYE 31 December 2015: LBT of RM348.4 million). The decrease in revenue and PBT was mainly due to: (i) (ii) lower asset utilisation coupled with reduced charter rates caused by surplus drilling rigs; demands for oil pipes threading, inspection and repair services remained low; and (iii) impairment loss of RM780.2 million for the FYE 31 December The audited consolidated financial statements of UMW-OG were not subject to any audit qualification for the past three (3) FYE 31 December 2013 to There are no accounting policies adopted in the preparation of UMW-OG s consolidated financial statements which are peculiar to the UMW-OG Group and its business operations. We confirmed that the consolidated financial statements were prepared in accordance with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act, 1965 in Malaysia. (The rest of this page is intentionally left blank) 23

29 DECEMBER 2015 TOGETHER WITH THE AUDITORS REPORT THEREON 24

30 FINANCIAL STATEMENTS 2 Directors Report 6 Statement by Directors 6 Statutory Declaration 7 Independent Auditors Report 9 Consolidated Statement of Financial Position 11 Consolidated Statement of Comprehensive Income 12 Consolidated Statement of Changes in Equity 13 Consolidated Statement of Cash Flows 15 Statement of Financial Position 16 Statement of Comprehensive Income 17 Statement of Changes In Equity 18 Statement of Cash Flows 20 Notes to the Financial Statements 87 Supplemetary Information 25