content kuala lumpur sentral 50470 kuala lumpur malaysia tel no. : (03) 2273 1919 fax no. : (03)...

Jasa Merin (Malaysia) Sdn Bhd, (“Jasa Merin”) commenced operati on in 1982. For over 30 years, Jasa Merin has been providing off shore support vessel (“OSV”) services to oil majors such as PETRONAS Cari-gali Sdn Bhd, ExxonMobil Explorati on and Producti on Malaysia Inc. and Sarawak Shell Bhd. Presently, Jasa Merin operates a fl eet of 19 vessels comprising 2 Straight Supply Vessels (“SSV”) and 17 Anchor Handling Tug Supply Vessels (“AHTS”).

SSV are vessels specifi cally designed to transport equipment and cargoes to and from off shore installati ons whilst AHTS vessels un-dertake anchor handling functi ons (positi oning and retrieval of drill-ing rig anchors) and towing acti viti es (repositi oning of rigs to other drilling locati ons) in additi on to providing services of SSV. Jasa Mer-in 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 Positi oning System that support both shal-low and deep water operati ons.

Sistem Lingkaran-Lebuhraya Kajang Sdn Bhd (“SILK”) is the conces-sion owner of Kajang Traffi c Dispersal Ring Road, bett er known as Kajang SILK Highway. The concession runs for a period of 33 years, ending in 2037. 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.

Operating Subsidiaries

Annual Report 2014 - SILK Holdings Berhad (405897-V) 1

CONTENT2 Corporate Information

3 Profi le 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 17th Annual General Meeting

Proxy Form

Annual Report 2014 - SILK Holdings Berhad (405897-V)2

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 Dzulkifl i

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 Dzulkifl i (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 Dzulkifl i Dato’ Hj. Din bin Adam Jamaludin Mohd Nor Adzmi Shafi e

COMPANY SECRETARIES

Kwan Wai Kein (MAICSA 7055765) Sothirajen a/l S.Paranjothi (LS 0005734)

REGISTERED OFFICE Level 22, Axiata Tower No. 9, Jalan Stesen Sentral 5 Kuala Lumpur Sentral 50470 Kuala Lumpur Malaysia Tel No. : (03) 2273 1919 Fax No. : (03) 2273 8310

PRINCIPAL PLACE OF BUSINESS

Oil & Gas Support Services Division:Jasa Merin (Malaysia) Sdn BhdNo. 7776, Jalan Kubang Kurus24000 KemamanTerengganu Darul ImanMalaysiaTel : (09) 851 1100Fax : (09) 858 3237

Infrastructure Division:Sistem Lingkaran-Lebuhraya Kajang Sdn BhdPlaza Tol Sungai BalakKM28.3A, Lebuhraya KAJANG SILK43000 KajangSelangor Darul EhsanMalaysiaTel No : (03) 8921 0000Fax No : (03) 8921 0001

SHARE REGISTRARSymphony Share Registrars Sdn BhdLevel 6, Symphony HousePusat Dagangan Dana 1Jalan PJU 1A/4647301 Petaling JayaSelangor Darul Ehsan MalaysiaTel No : (03) 7841 8000 Fax No : (03) 7841 8151 / 7841 8152

AUDITORSKPMGChartered Accountants

SOLICITORSChristopher & Lee Ong

PRINCIPAL BANKERSAffi n Bank BerhadAffi n Islamic Bank BerhadBank Pembangunan Malaysia BerhadMalayan Banking BerhadMaybank Islamic Berhad

STOCK EXCHANGE LISTINGMain Market of Bursa Malaysia Securities Berhad

WEBSITE ADDRESSwww.silk.my


PROFILE OF BOARD OF DIRECTORS

Dato’ Mohd Azlan HashimMalaysian, aged 57Executive Chairman (Non-Independent) Member, Nomination and Remuneration Committee

Tan Sri Datuk Seri Razman M HashimMalaysian, aged 75 Non-Executive Deputy Chairman (Independent) Chairman, Nomination and Remuneration Committee

Dato’ Harun bin Md IdrisMalaysian, aged 63Independent Non-Executive DirectorMember, Audit Committee 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 2008.

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 fi nancial 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 fi nancial year.

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 1999. 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 fi nance 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 fi nancial year.

Dato’ Harun bin Md Idris was appointed to the Board of SHB as Independent Non-Executive Director on 12 August 2009.

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.



Johan Zainuddin bin Dzulkifl iMalaysian, aged 52Non-Executive Director (Non-Independent)Chairman, Risk Management CommitteeMember, Infrastructure Committee

Tai Keat ChaiMalaysian, aged 60Independent Non-Executive DirectorChairman, Audit Committee

Abdul Hamid binSh. MohamedMalaysian, aged 49Independent Non-Executive DirectorMember, Audit Committee

Johan Zainuddin bin Dzulkifl i was appointed to the Board of SHB as Non-Executive Director on 4 June 2008.

He is a Fellow of the Association of Chartered Certifi ed 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 2002. He is well versed in areas of corporate advisory and business development.



Tai Keat Chai was appointed to the Board of SHB as Independent Non-Executive Director on 18 August 2008.

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.


Abdul Hamid bin Sh. Mohamed was appointed to the Board of SHB as Independent Non-Executive Director on 18 August 2008.

He is a Fellow of the Association of Chartered Certifi ed Accountants. A graduate of the Emile Woolf School of Accountancy, London he began his career as Offi cer 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 1998.

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 2002. He was re-designated as Chief Financial Offi cer in 2003. 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.




Nik Abdul Malik bin Nik Mohd AminMalaysian, aged 56Independent Non-Executive DirectorChairman, Infrastructure CommitteeMember, 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 2009.

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 1984. 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.



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.



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 2014.

“ “

FINANCIAL PERFORMANCE SILK Holdings Berhad (“SHB” or “the Group”) posted a revenue of RM 276.9 million for the fi nancial year ended 31 July 2014, a dip from the RM 306.5 million recorded previously (refer to Chart 1). Given the signifi cance of the Oil & Gas Support Services Division to the Group’s overall performance, the reduced fl eet utilization rate during the earlier part of the fi nancial year, due to scheduled vessel docking, repairs and pending redeployment in-between contracts, had an impact on the Group’s revenue performance.

Notwithstanding this, SHB improved its earnings before interest, taxation, depreciation and amortisation (“EBITDA”) for the fi nancial year ended 31 July 2014 to RM 190.7 million, exceeding the EBITDA of RM 174.1 million recorded in the previous corresponding period (refer to Chart 2).

The improvement in EBITDA was however impacted by higher depreciation, amortisation and fi nance costs recorded during the year, arising from delivery of three (3) new vessels, JM Cemerlang,JM Gemilang and JM Abadi.

This resulted in the Group recording a marginally lower pre-tax profi t of RM 42 million for the fi nancial year, compared with the pre-tax profi t of RM 42.9 million recorded in the previous fi nancial year (refer to Chart 3).

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 fi nancial 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 signifi cant due to a recalculation of the fi nance charges attributable to SILK Highway to comply with MFRS 139.

Despite the encouraging Group pre-tax profi t 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 fi nancial year ended 31 July 2014 compared to RM 15.2 million for the previous fi nancial 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 fi nancial 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.

Chart 1- Group Revenue (RM Mil)

223.9 247.7

341.1 306.5 276.9

FY 10 FY 11 FY 12 FY 13 FY 14

Chart 2- Group EBITDA (RM Mil)

FY 10 FY 11 FY 12 FY 13 FY 14

131.7 129.4

193.5174.1

190.7

Chart 3- Group PBT (RM Mil)

(5.7)

34.5

17.3

42.9

FY 10 FY 11 FY 12 FY 13

42.0

FY 14

CHAIRMAN’S STATEMENT


The Division deployed a total of 23 vessels (inclusive of third party vessels and owned-vessels subsequently disposed during the fi nancial year) to various clients during the fi nancial year under review (refer to Chart 4), similar to the 23 vessels deployed during the previous fi nancial year. Fleet utilisation was slightly lower for the fi nancial year ended 31 July 2014 compared to the previous fi nancial year, but has fi rmed up towards the end of the fi nancial 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 confi dent that barring unforeseen circumstances, the contributions from the Oil & Gas Support Services Division will remain positive.

CORPORATE DEVELOPMENTSDuring the course of the fi nancial 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 profi t 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 2013. 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.

Own 3rd Party

Chart 4- Vessel Deployment

FY 10 FY 11 FY 12 FY 13

1012

1618

5

FY 14

21

2

22

6


“ JM Abadi - the latest addition to the Group’s fl eet was delivered to Jasa Merin on 21 July 2014.”


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 fl eet, 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 fi nancial 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 fi nancial year ended 31 July 2014. With sustained growth and expected improved operating and fi nancial performance in the future, the Board will revisit and review this position for the benefi t 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 fi nancial 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 fi nancial 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 fi nanciers for their continued support. Their continued confi dence 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 HASHIMExecutive Chairman

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 2013.

The Private Placement was duly completed on 30 May 2014. A total of 30,000,000 Placement Shares were placed out at an issue price of RM 0.725 per Placement Share, raising a total amount of RM 21.75 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 thevalue of its Oil & Gas Support Services Division. With the oil & gas sector set to benefi t further from favourable structural trends, the creation of a business focused on this sector therefore is a strategic move intended to benefi t 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 Affi n Investment Bank Berhad pursuant to the Sukuk Mudharabah, and RBH, being satisfi ed 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.



2010 2011 2012 2013 2014 RM’000 RM’000 RM’000 RM’000 RM’000 Restated Restated

RESULTSREVENUE 223,939 247,726 341,063 306,538 276,884

Profi t/(loss) before taxation 34,499 (5,725) 17,343 42,927 41,959Taxation (12,861) (6,176) (7,953) (7,682) (747)Profi t/(loss) after taxation 21,638 (11,901) 9,390 35,245 41,212 Loss from discontinued operation, net of tax - - - (36,140) (36,488)Profi t/(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 10,034 (11,236) (679) (15,239) (10,414)TO SHAREHOLDERS

BASIC EARNINGS / (LOSS) PERSHARE (SEN)

- from continuing operations 3.1 (2.9) (0.2) 5.2 5.6- from discontinued operations - - - (9.1) (7.9)- net 3.1 (2.9) (0.2) (3.9) (2.3)

FINANCIAL POSITION Property, vessels and equipment 684,765 871,329 898,553 1,146,114 1,173,064 Concession intangible assets 912,242 901,648 890,458 876,382 - Goodwill 647 647 13,883 13,883 647 Deferred tax benefi ts - - 122,768 133,710 29 Available for sale fi nancial assets 600 600 - - - Current assets 118,916 123,035 158,167 156,140 133,648 Non-current assets classifi ed as held for sale - 1,071 630 189 1,107,533

TOTAL ASSETS 1,717,170 1,898,330 2,084,459 2,326,418 2,414,921 Liabilities classifi ed as held for sale - - - - 1,082,525 Current liabilities 296,225 186,427 172,605 245,937 214,477Long-term liabilities 1,237,791 1,520,182 1,663,316 1,827,446 874,686TOTAL LIABILITIES 1,534,016 1,706,609 1,835,921 2,073,383 2,171,688

TOTAL NET ASSETS/SHAREHOLDERS’ FUNDS 183,154 191,721 248,538 253,035 243,233

SHARE CAPITAL 96,959 99,262 99,262 108,333 129,020

NET ASSETS PER SHARE ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY(SEN) 35.4 32.3 43.5 37.7 35.8

FIVE-YEAR GROUP FINANCIAL SUMMARY


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 fi nancial 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 long-term 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 fi duciary 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 signifi cant capital expenditure;f) Human resources planning and development; andg) 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 Dzulkifl i 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 identifi cation 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.

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 notifi ed 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 fi nancial 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.

Qualifi ed and competent Company Secretary

In order to assist the Board with its functions, the Company has appointed two (2) qualifi ed 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 Hashim3) 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, 1965.

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 suffi cient safeguards against confl icts 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 infl uencing 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 suffi cient 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.


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 refl ects 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 fi nancial year is as follows:-

Executive Director Non-Executive Directors Total RM’000 RM’000 RM’000

Salaries 204 - 204Fees - 156 156Other emoluments 105 90 195Total remunerations 309 246 555

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’000Range of remunerations:Up to RM50,000 - 2 2RM50,001 to RM100,000 - 3 3RM300,001 to RM350,000 1 - 1

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 refl ect 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 Dzulkifl i 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 profi le 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 offi ce since their last election or appointment. To assist the shareholders in their decision, suffi cient information such as personal profi le, 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 confl ict of interest and undue infl uence from interested parties.



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 fi nancial, 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 fi nancial 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 100Tan Sri Datuk Seri Razman M Hashim 5/6 83Dato’ Harun bin Md Idris 6/6 100Johan Zainuddin bin Dzulkifl i 6/6 100Tai Keat Chai 6/6 100Abdul Hamid bin Sh. Mohamed 4/6 66Nik 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 15.06 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 satisfi ed that the external directorships of the Board members have not impaired their ability to devote suffi cient 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 fi nancial 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 fi nancial year are, inter-alia, on areas relating to business environment, corporate governance, capital markets and fi nancial reporting.

Topic / Organiser Date

Related Party Transaction – From Governance Challenges to 9 September 2013Impactful Results

Corporate Accountability – The Blessings Within 12 September 2013

Redefi ning 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, 2010 7 January 2014

GEM 2014 Directors’ Training 16 January 2014Oil and Gas Industry Overview, QHSE andPersonal Data Protection Act Compliance

Marine Contractors Senior Management Engagement Session 4 to 5 May 2014



PRINCIPLE 5: UPHOLD INTEGRITY IN FINANCIAL REPORTING

Compliance with applicable fi nancial reporting standards

In presenting the annual fi nancial statements, annual report and quarterly announcement of results to shareholders, the Board aims to provide a balanced and understandable assessment of the Group’s fi nancial position, performance and prospects. The Board is assisted by the Audit Committee to oversee the Group’s fi nancial reporting processes and the quality of its fi nancial 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 fl ows of the Company and of the Group at the end of the fi nancial year. In preparing the fi nancial 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 fi nancial 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 confi dentiality 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 http://www.silk.my from which investors and shareholders can access for information relating to the Company, its businesses and periodic performance reports.



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, fi nancial 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 clarifi cations 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 2014.




FORMATION

The Audit Committee was formed by the Board of Directors at its meeting on 16 August 2002.

The objective of the Audit Committee is to assist the Board of Directors in fulfi lling its fi duciary responsibilities relating to internal controls, fi nancial and accounting records and policies as well as fi nancial 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 fi nancial year and the attendance of the Committee Members was as follows :

Name of Committee Member Number of Meetings Attended

Tai Keat Chai 5/5Dato’ Harun bin Md Idris 4/5Abdul Hamid bin Sh. Mohamed 5/5

The Company Secretaries, the Internal Auditors and the Chief Financial Offi cer 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 defi ned 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 specifi ed in Part I of the 1st Schedule of the Accountants Act, 1967; or (ii) is a member of one of the Associations specifi ed in Part II of the 1st Schedule of the Accountants Act,

1967; or (c) who must have at least 3 years post qualifi cation experience in accounting or fi nance and:- (i) has a degree/masters/doctorate in accounting or fi nance; 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 fi nancial offi cer of a corporation or having the function of being primarily responsible for the management of the fi nancial 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.

AUDIT COMMITTEE REPORT



1.7 The terms of offi ce and performance of the Committee and each of its members shall be reviewed by the Board no less than once every 3 years. However, the appointment terminates when a member ceases to be a Director.

1.8 Each member of the Committee is entitled to one (1) vote in deciding the matters deliberated at the meeting. The decision that gained the majority votes shall be the decision of the Committee.

1.9 Chairman’s casting vote In the event of an equality of votes, the Chairman of the Committee shall be entitled to a second or casting vote.

2. Meetings

2.1 The quorum for a Committee Meeting shall be at least 2 members, the majority of whom must be Independent Directors.

2.2 The Committee shall meet at least 4 times a year and such additional meetings as the Chairman shall decide.

2.3 Notwithstanding paragraph 2.2 above, upon the request of any member of the Committee, non-member Directors, the Internal or Independent Auditors, the Chairman shall convene a meeting of the Committee to consider the matters brought to its attention.

2.4 Members’ Circular Resolution

A Resolution in writing signed by all members shall be effectual as if it had been passed at a meeting of the Committee.

All such resolutions shall be described as “Members’ Circular Resolutions” and shall be forwarded or otherwise delivered to the Company Secretaries without delay and shall be recorded by the Company Secretaries in the Minutes Book. Any such resolution may consist of several documents in the like form, each signed by one (1) or more members.

The expressions “in writing” or “signed” include approval by legible confi rmed transmission by facsimile, telex, cable, telegram or other forms of electronic communications.

2.5 Participation at Committee Meeting by way of electronic means

Members may participate in a meeting of the Committee by means of a conference telephone or similar electronic tele-communicating equipment by means of which all persons participating in the meeting can hear each other and participate throughout the duration of the communication between the members and participation in a meeting pursuant to this provision shall constitute presence in person at such meeting.

2.6 The Independent Auditors have the right to appear and be heard at any meeting of the Committee and shall appear before the Committee when required to do so.

2.7 The non-member Executive Directors and employees of the Company and of the Group may normally attend the meetings to assist in its deliberations and resolutions of matters raised. However, at least twice a year, the Committee shall meet with the Independent Auditors without the presence of the executive members of the Committee.

2.8 The Internal Auditors shall be in attendance at all meetings to present and discuss the audit reports and other related matters as well as the recommendations relating thereto and to follow-up on all relevant decisions made.

2.9 The Company Secretaries shall act as Secretaries of the Committee and shall be responsible, with the concurrence of the Chairman, for drawing up and circulating the agenda and the notice of meetings together with the supporting explanatory documentation to members prior to each meeting.

2.10 The Secretaries of the Committee shall be entrusted to record all proceedings and minutes of all meetings of the Committee.

2.11 In addition to the availability of detailed minutes of the Committee Meetings to all Board members, the Committee at each Board Meeting will report a summary of signifi cant matters and resolutions.

3. Rights and Authority

The Committee is authorized to:-

3.1 Investigate any matter within its terms of reference.

3.2 Have adequate resources required to perform its duties.

3.3 Have full and unrestricted access to information, records and documents relevant to its activities.

3.4 Have direct communication channels with the Independent and Internal Auditors.

3.5 Engage, consult and obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise it considers necessary.


4. Functions and Duties

4.1 To review and recommend for the Board’s approval, the Internal Audit Charter which defi nes the independent purpose, authority, scope and responsibility of the internal audit function in the Company and the Group.

4.2 To review the following and report to the Board:-

(a) With the Independent Auditors:-

(i) the audit plan and audit report and the extent of assistance rendered by employees of the Group;

(ii) the audit fees and on matters concerning their suitability for nomination, appointment and re-appointment and the underlying reasons for resignation or dismissal as Auditors;

(iii) the management letter and management’s response; and

(iv) issues and reservations arising from audits.

(b) With the Internal Auditors:-

(i) the adequacy and relevance of the scope, functions and resources of the Internal Auditors and the necessary authority to carry out its work;

(ii) the results of internal audit assessment including recommendations and actions taken;

(iii) the extent of cooperation and assistance rendered by employees of the Group; and

(iv) the appraisal of the performance of the internal audit including that of the senior staff and any matter concerning their appointment and termination.

(c) The quarterly results and year-end fi nancial statements prior to the approval by the Board, focusing particularly on:-

(i) changes and implementation of major accounting policies and practices;

(ii) signifi cant and unusual issues;

(iii) going concern assumption; and

(iv) compliance with accounting standards, regulatory and other legal requirements.

(d) The major fi ndings of investigations and management response.

(e) The propriety of any related party transaction and confl ict of interest situation that may arise within the Company or the Group including any transaction, procedure or course of conduct that raises questions of management integrity.

4.3 To report any breaches of the Main Market Listing Requirements which have not been satisfactorily resolved, to Bursa Securities.

4.4 To prepare the Audit Committee Report for inclusion in the Company’s Annual Report covering:-

(a) the composition of the Committee including the name, designation and directorship of the members;

(b) the terms of reference of the Committee;

(c) the number of meetings held and details of attendance of each members; (d) a summary of the activities of the Committee in the discharge of its functions and duties; and

(e) a summary of the activities of the internal audit function. 4.5 To review the following for publication in the Company’s Annual Report:-

(a) the disclosure statement of the Board on:-

(i) the Company’s applications of the principles set out in Part I of the Malaysian Code on Corporate Governance; and

(ii) the extent of compliance with the best practices set out in Part II of the Malaysian Code on Corporate

Governance, specifying reasons for any area of non-compliance and the alternative measures adopted in such areas.

(b) the statement on the Board’s responsibility for the preparation of the annual audited fi nancial statements.



(c) the disclosure statement on the state of the risk management and internal control system of the Company and of the Group.

(d) other disclosure forming the contents of the annual report spelt out in Part A of Appendix 9C of the Main

Market Listing Requirements of Bursa Securities.

The above functions and duties are in addition to such other functions as may be agreed to from time to time by the Committee and the Board.

5. Internal Audit Functions

5.1 The Company has appointed Messrs. Columbus Advisory Sdn. Bhd. as the Internal Auditor to undertake the Group’s internal audit function.

5.2 The Internal Auditor shall have unrestricted access to the Committee Members and report to the Committee whose scope of responsibility includes overseeing the development and the establishment of the internal audit function.

5.3 In respect of routine administrative matters, the Internal Auditor shall report to the Executive Chairman or his designate.

5.4 The total costs incurred for the internal audit function of the Group for the fi nancial year ended 31 July 2014 was RM50,000.

ACTIVITIES OF THE COMMITTEE FOR THE FINANCIAL YEAR ENDED 31 JULY 2014

The summary of activities of the Committee in the discharge of its duties and responsibilities is as follows:-

(a) Reviewed the adequacy and relevance of the scope, functions, resources, risk based internal audit plan and results of the internal audit assessment with the Internal Auditor.

(b) Reviewed the audit activities carried out by the Internal Auditor and the audit reports to ensure corrective actions were taken in addressing the internal control gaps reported.

(c) Reviewed with the Independent Auditors, the audit plan of the Company and of the Group for the year (inclusive of risk and audit approach, audit fees and issues) prior to the commencement of the annual statutory audit.

(d) Reviewed the fi nancial statements, the audit report, issues and reservations arising from the statutory audit with the Independent Auditors.

(e) Reviewed and discussed the management accounts with Management.

(f) Reviewed all recurrent related party transactions entered into by the Company and the Group at the Committee’s quarterly meetings to ensure that the transactions entered into were at arm’s length basis and on normal commercial terms.

(g) Discussed the implications of any latest changes and pronouncements on the Company and the Group issued by the statutory and regulatory bodies.

(h) Reported to the Board on signifi cant issues and concerns discussed during the Committee’s meetings together with applicable recommendations. Minutes of meetings were tabled, discussed and noted by all Board members.

INTERNAL AUDIT ACTIVITIES REPORT FOR THE FINANCIAL YEAR ENDED 31 JULY 2014

The summary of activities of the Internal Auditor is as follows:-

(a) Prepared the annual audit plan for approval by the Audit Committee.

(b) Performed risk based audits on strategic business units of the Company and of the Group, which covered assessment on adequacy and integrity of the internal control systems for the management and key operating processes.

(c) Performed follow-up on status of management’s implementation on internal audit recommendations.

(d) Issued audit reports to the Committee and management by identifying weaknesses and improvement opportunities as well as highlighting recommendations for improvements.

(e) Reported to the Committee on results of audit assessment on the adequacy and appropriateness of internal controls (including compliance with the procedures established) on the management and key operating processes of strategic management, toll operations, highway maintenance, traffi c safety & security, vessel operations, health, safety & environmental management and human capital development.

(f) Reviewed the appropriateness of the disclosure statements in regard to compliance with the Malaysian Code on Corporate Governance and the state of internal controls as well as the Audit Committee Report.

(g) Attended Committee meetings to table and discuss the audit reports and followed up on matters raised.



STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

INTRODUCTION

The Malaysian Code on Corporate Governance 2012 stipulates that the Board of Directors of listed companies shall maintain a sound system of internal control to safeguard shareholders’ investment and the Group’s assets. Set out below is the Group’s Statement on Risk Management and Internal Control (“Statement”), made in compliance with Paragraph 15.26(b) and Practice Note 9 of the Main Market Listing Requirements of Bursa Malaysia Securities Berhad and the Statement on Risk Management and Internal Control: Guidelines for Directors of Listed Issuers.

THE BOARD’S RESPONSIBILITY

The Board places importance on, and is committed to maintaining effective risk management practices and a sound system of internal control within the Group to ensure good corporate governance. The Board affi rms its responsibility for reviewing the adequacy and integrity of the Group’s system of internal control and management information systems, including systems for compliance with applicable laws, rules, directives, guidelines and risk management practices.

Notwithstanding this, as with any internal control system, the Group’s system of internal control is designed to manage rather than to eliminate the risk of failure to achieve business objectives. It follows, therefore, that the system of internal control can only provide reasonable but not absolute assurance against material misstatement or loss.

The Group has in place an on-going process of identifying, evaluating, monitoring and managing the key risks affecting the achievement of its business objectives throughout the year.

ASSURANCE MECHANISM

The Audit Committee (“AC”) is tasked by the Board with the duty of reviewing and monitoring the effectiveness of the Group’s system of internal control. In carrying out its responsibilities, the Group has appointed Messrs. Columbus Advisory Sdn. Bhd. (“CASB”) to carry out internal audits based on a risk-based audit plan approved by the AC. Based on these audits, the AC is provided by CASB with periodic reports highlighting observations, recommendations and management action plans to improve the system of internal control.

In addition, the AC also reviews and deliberates on any matters relating to internal control highlighted by the independent auditors in the course of their statutory audit of the fi nancial statements of the Group. There were no signifi cant internal control weaknesses identifi ed during the fi nancial year.

The Report of the AC is set out on pages 16 to 19 of the Annual Report.

THE GROUP’S SYSTEM OF INTERNAL CONTROL

Monitoring Mechanisms and Management Style

Scheduled periodic meetings of the Board, Board Committees and Management represent the main platform by which the Group’s performance and conduct is monitored.

The daily running of the business is entrusted to the respective Chief Operating Offi cers and their management teams. Under the purview of the Chief Operating Offi cers, the heads of department are empowered with the responsibility of managing their respective operations. The Chief Operating Offi cers communicate the Board’s expectations to management at management meetings as well as through attendance at various operations meetings. At these meetings, operational and fi nancial risks are discussed and dealt with.

The Board is responsible for setting the business direction and overseeing the conduct of the Group’s operations through various management reporting mechanisms. Through these mechanisms, the Board is informed of all major control issues pertaining to internal controls, regulatory compliance and risk taking.

Enterprise Risk Management Framework

In dealing with its stewardship responsibilities, the Board recognises that effective risk management is part of good business management practice. The Board acknowledges that all areas of the Group’s activities involve some degree of risk, and is committed to ensuring that the Group has an effective risk management framework which will allow the Group to be able to identify, evaluate and manage risks that affect the achievement of the Group’s business objectives within defi ned risk parameters in a timely and effective manner.

The risk management framework has been embedded in the Company’s management systems. The Management assists the Board in implementing the process of identifying, evaluating and managing signifi cant risks applicable to their respective areas of business and in formulating suitable internal controls to mitigate and control these risks.



The key elements of the Enterprise Risk Management (“ERM”) activities include:• Establishing ERM framework• Risk assessment process• Risk action implementation process• Risk action monitoring process• Continuous ERM monitoring and communication

The Group has completed a comprehensive risk assessment process whereby signifi cant risks are summarised into a risk map and presented to the Audit Committee for its consideration. Risk registers have been developed for each of the risks identifi ed. Having identifi ed those risks that can signifi cantly affect the business and operations, dedicated risk owners were appointed (from the management team) to work on the development of key risk action plans required (as well as the implementation of such action plans) together with a group of risk co-owners across the departments. New developments in businesses and operations are subject to the risk assessment process as the risk profi le of the business changes.

Key Elements of the Group’s System of Internal Control

The current system of internal control in the Group has within it, the following key elements:

• Group vision, mission and corporate philosophy and strategic direction, which are communicated to employees.• A Board which retains control over the Group with appropriate management reporting mechanisms which enable the

Board to review the Group’s progress.• Board approved annual budgets and management plans.• Management meetings involving discussions on operational issues at subsidiary level.• Comprehensive and clearly documented standard operating policies and procedures manuals that provide guidelines

and authority limits over various operating, fi nancial and human resource matters, which are subject to regular review for improvement.

• The use of the intranet as an effective means of communication and knowledge sharing.• Communication of policies and guidelines in relation to human resource matters to all employees through a staff

handbook which is also available on the intranet. • A systematic performance appraisal system for all levels of staff.• Relevant training provided to personnel across all functions to maintain a high level of competency and capability.

THE BOARD’S COMMITMENT

The Board recognises that the Group operates in a dynamic business environment in which the internal control system must be responsive in order to be able to support its business objectives. To this end, the Board remains committed towards maintaining a sound system of internal control and believes that a balanced achievement of its business objectives and operational effi ciency can be attained.

ADEQUACY AND EFFECTIVENESS OF RISK MANAGEMENT AND INTERNAL CONTROL

The Executive Director of the operating subsidiaries and the Chief Financial Offi cer have provided the Board with assurance that the Group risk management and internal control systems are operating adequately and effectively, in all material aspects, to ensure achievement of corporate objectives.

Taking into consideration the assurance from the management team, the Board is of the view that the system of risk management and internal controls in place for the year under review is sound and adequate to safeguard the Group’s assets.

REVIEW OF THE STATEMENT BY INDEPENDENT AUDITORS


The Independent Auditors have reviewed this Statement on Risk Management and Internal Control pursuant to the scope set out in Recommended Practice Guide 5 (Revised), Guidance for Auditors on Engagements to Report on the Statement on Risk Management and Internal Control included in the Annual Report (“RPG 5”) issued by the Malaysian Institute of Accountants (“MIA”) for inclusion in the annual report of the Group for the fi nancial year ended 31 July 2014, and reported to the Board that nothing has come to their attention that cause them to believe that the Statement on Risk Management and Internal Control, in all material respects, has not been prepared in accordance with the disclosures required by paragraphs 41 and 42 of the Statement on Risk Management and Internal Control:Guidelines for Directors of Listed Issuers, or is factually inaccurate.

RPG 5 does not require the Independent Auditors to consider whether the Statement on Risk Management and Internal Control covers all risks and controls, or to form an opinion on the adequacy and effectiveness of the Group’s risk management and internal controls system including the assessment and opinion by the Board and Management thereon. The Independent Auditors are also not required to consider whether the processes described to deal with material internal control aspects of any signifi cant problems disclosed in the annual report will, in fact, remedy the problems.

This Statement is made in accordance with the resolution of the Board of Directors dated 30 September 2014.




The Group is committed to meeting its aspirations of improving the long-term shareholder value of the Company. In meeting this objective, it will do so via policies and arrangements that recognise its social, economic and environmental responsibilities.

In giving effect to this, the Group is committed to:

• Setting high standards and expectations for its employees to act ethically, professionally and with integrity whenever dealing with external stakeholders;

• Support collaborations with stakeholders, particularly those that are most affected by the Group’s business activities, where it is feasible to do so; and

• Pursuing a culture of delivering value for the funds invested in its activities whilst effectively managing risks to the organisation and its stakeholders.

The Group is also committed to providing high standards of safety in the working conditions for its employees and to the continual improvement of its safety performance. During the fi nancial year under review, the Group’s Oil & Gas Support Services Division, via Jasa Merin, conducted workplace and community safety campaigns. The Group is pleased to continue to ensure safety remains a priority in how it operates.

The well-being of the communities in which the Group operates is also important to its long-term development and success. It is with this in mind that during the fi nancial year under review, the Group undertook numerous steps to further strengthen ties with its immediate community by contributing to various local community activities and infrastructure. Some of these activities during the fi nancial year include:

• Organising the Group’s second blood donation campaign at Plaza Tol Sg. Balak, Kajang with the co-operation of Pusat Darah Negara, continuing on the campaign held the previous fi nancial year,

• Co-organising several “gotong-royong” activities including those held at Tanah Perkuburan Islam Sg Ramal Luar, Country Heights Interchange, and Rumah Jagaan & Rawatan Orang Tua Al-Ikhlas, Kg Pulau Meranti, Puchong, Selangor, as both a means to assist the local community as well as to strengthen the bonds of cooperation with them.

• Contribution of reading materials donated by SILK Highway employees to the library of Sekolah Kebangsaan Leftenan Adnan to ensure students of that school have access to suffi cient reading and reference material.

• The provision of fi nancial assistance to several needy families, mosques and suraus near the areas where the Group operates,

• The hosting of Raya celebrations for orphanages situated in and around Kajang.

It is the Group’s aspiration for initiatives such as these to continue well into the future.

STATEMENT OF CORPORATE SOCIAL RESPONSIBILITY

Financial Statements25 Directors’ Report

29 Statement by Directors

29 Statutory Declaration

30 Independent Auditors’ Report

31 Statements of Financial Position

34 Statements of Profi t or Loss and Other Comprehensive Income

35 Statements of Changes in Equity

37 Statements of Cash Flows

39 Notes to the Financial Statements

91 Supplementary Information on the Breakdown of Realised and Unrealised Profi ts


The Directors hereby submit their report and the audited fi nancial statements of the Group and of the Company for the fi nancial year ended 31 July 2014.

PRINCIPAL ACTIVITIES

The Company is principally engaged in investment holding, whilst the principal activities of the subsidiaries are as stated in Note 4 to the fi nancial statement. There has been no signifi cant change in the nature of these activities during the fi nancial year.

RESULTS GROUP COMPANY RM’000 RM’000(Loss)/profi t for the year attributable to: Owners of the Company (10,414) 1,909 Non-controlling interests 15,138 - 4,724 1,909

RESERVES AND PROVISIONS

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

DIVIDEND

There were no dividend proposed, declared or paid by the Company since the end of the previous fi nancial year and the Directors do not recommend any dividend to be paid for the year under review.

DIRECTORS OF THE COMPANY

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

Dato’ Mohd Azlan HashimTan Sri Datuk Seri Razman M Hashim Dato’ Harun bin Md IdrisTai Keat ChaiJohan Zainuddin bin Dzulkifl i Abdul Hamid bin Sh MohamedNik Abdul Malik bin Nik Mohd Amin

DIRECTORS’ INTERESTS IN SHARES

The interests and deemed interests in the ordinary shares of the Company and of its related corporations (other than wholly-owned subsidiaries) of those who were Directors at year end as recorded in the Register of Directors’ Shareholdings are as follows:

Number of ordinary shares of RM0.25 each At At 1.8.2013 Converted Sold 31.7.2014

Direct interest: Johan Zainuddin bin Dzulkifl i 28,200,000 - - 28,200,000 Abdul Hamid bin Sh Mohamed 1,000,000 - - 1,000,000 Nik Abdul Malik bin Nik Mohd Amin - 2,400,000 - 2,400,000

DIRECTORS’ REPORT


DIRECTORS’ INTERESTS IN SHARES (continued)

Number of ordinary shares of RM0.25 each At At 1.8.2013 Converted Sold 31.7.2014Deemed interest: Dato’ Mohd Azlan Hashim 84,835,669 14,382,224 - 99,217,893 Johan Zainuddin bin Dzulkifl i 117,155,426 - - 117,155,426 Tai Keat Chai 1,750,000 - (750,000) 1,000,000

Number of CC-RPS of RM0.10 each At At 1.8.2013 Acquired Converted 31.7.2014

Direct interest: Dato’ Mohd Azlan Hashim - 3,595,556 (3,595,556) - Nik Abdul Malik bin Nik Mohd Amin 500,000 - (500,000) -

Number of RCULS of RM1.00 each At At 1.8.2013 Acquired Sold 31.7.2014

Direct interest Johan Zainuddin bin Dzulkifl i 7,050,000 - - 7,050,000 Deemed interest Johan Zainuddin bin Dzulkifl i 9,400,000 - - 9,400,000

By virtue of their interests in shares of the Company, Dato’ Mohd Azlan Hashim, Johan Zainuddin bin Dzulkifl i and Abdul Hamid bin Sh Mohamed are also deemed interested in the shares of all the Company’s subsidiaries during the fi nancial year end to the extent the SILK Holdings Berhad has an interest.

None of the other Directors holding offi ce at 31 July 2014 had any interest in the ordinary shares of the Company and of its related corporations during the fi nancial year.

DIRECTORS’ BENEFITS

Since the end of the previous fi nancial year, no Director of the Company has received nor become entitled to receive any benefi t (other than a benefi t included in the aggregate amount of emoluments received or due and receivable by Directors as shown in the fi nancial statements or the fi xed salary of a full time employee of the Company or of related corporations) by reason of a contract made by the Company or a related corporation with the Director or with a fi rm of which the Director is a member, or with a company in which the Director has a substantial fi nancial interest.

There were no arrangements during and at the end of the fi nancial year which had the object of enabling Directors of the Company to acquire benefi ts by means of the acquisition of shares in or debentures of the Company or any other body corporate.

ISSUE OF SHARES AND DEBENTURES

During the fi nancial year, the Company increased its issued and paid-up ordinary share capital from RM108,333,119 to RM129,019,786 (2013: RM99,262,349 to RM108,333,119) by way of:

(a) the conversion of 10,988,889 Cumulative Convertible Redeemable Preference Shares and dividends payable to 52,746,668 ordinary shares of RM0.25 each; and

(b) the issue of 30,000,000 new ordinary shares of RM0.25 each at RM0.725 per share for cash to fi nance investment opportunities.

DIRECTORS’ REPORT


DIRECTORS’ REPORT

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the fi nancial year except for the issuance of 5-year Redeemable Cumulative Unsecured Loan Stocks (“RCULS”) of RM43,750,000 in nominal value of RM1.00 on 14 October 2009 at a consideration of RM43,750,000. Each RCULS holder is entitled to exercise its conversion rights to convert RCULS into four new ordinary shares of RM0.25 each of the Company. The salient features of the RCULS are disclosed in Note 15 to the fi nancial statements.

The options offered (pursuant to the issuance of RCULS) to take up unissued ordinary shares of RM0.25 each and exercise prices are as follows:

Number of options over ordinary shares of RM0.25 each

Name Date of offer Exercise price At Granted At 1.8.2013 31.7.2014

Abdul Rahman Ali 14.10.2009 RM1.00 94,722,486 2,862,982 97,585,468 Johan Zainuddin bin Dzulkifl i 14.10.2009 RM1.00 31,574,149 954,325 32,528,474 Temuras Jaya Sdn. Bhd. 14.10.2009 RM1.00 10,524,707 318,107 10,842,814 Bijak Permai Sdn. Bhd. 14.10.2009 RM1.00 42,098,876 1,272,436 43,371,312

178,920,218 5,407,850 184,328,068

OTHER STATUTORY INFORMATION

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

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

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

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

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

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

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

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

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

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

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

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become enforceable within the period of twelve months after the end of the fi nancial year which, in the opinion of the Directors, will or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, except for those disclosed in Note 24 and Note 36 to the fi nancial statements, the fi nancial performance of the Group and of the Company for the fi nancial year ended 31 July 2014 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has any such item, transaction or event occurred in the interval between the end of that fi nancial year and the date of this report.


DIRECTORS’ REPORT

AUDITORS

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

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

........................................................................... )Dato’ Mohd Azlan Hashim )

content kuala lumpur sentral 50470 kuala lumpur malaysia tel no. : (03) 2273 1919 fax no. : (03)...

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