PART A: EXPLANATORY NOTES AS PER MASB 26

A1.	Basis of preparation of interim financial reports

These interim financial statements are prepared in accordance with the Malaysian Accounting Standards Board (“MASB”) Standard No.26 “Interim Financial Reporting” and paragraph 9.22 of the Bursa Malaysia Securities Berhad (“Bursa Malaysia”)’s Listing Requirements and should be read in conjunction with the Company’s annual financial statements for the year ended 31st December 2003.

The accounting policies and presentation adopted for the interim financial statements are consistent with those adopted in the annual financial statements for the year ended 31st December 2003.

A2.	Qualification of financial statements

The preceding year annual financial statements were not subject to any qualification.

A3.	Seasonal and cyclical factors 

The group’s results were not materially affected by any major seasonal or cyclical factors.
	
A4.	Unusual and extraordinary items 

There were no exceptional and/or extraordinary items affecting assets, liabilities, equity, net income or cash during the current quarter under review.

A5.	Material changes in estimates

There were no material changes in estimates of amount reported in the current quarter under review.

A6.	Issuance and repayment of debt and equity securities	

Save as disclosed below, there were no issuances, cancellations, share buy-backs, resale of shares bought back and repayment of debt and equity securities:

During the year ended 31st December 2004, the authorised share capital of the Company was subdivided from 200,000,000 ordinary shares of RM0.50 each to 1,000,000,000 ordinary shares of RM0.10 each.

Apart from that, the Company amended its By-Laws and Articles in relation to Employees’ Share Option Scheme (“ESOS”) to align with the amendments to the Listing Requirements of Bursa Malaysia.  With the amendment, the maximum percentage of shares that may be issued under ESOS had been increased from 10% to 15% of the issued share capital of the Company.

During the year ended 31st December 2004, the issued and paid-up share capital of the Company was increased from 100,000,000 ordinary shares of RM0.50 each to 894,134,400 ordinary shares of RM0.10 each by the issuance of:

A6.	Issuance and repayment of debt and equity securities (cont’d)

(i)	10,000,000 new ordinary shares of RM0.50 each of the Company pursuant to the Private Placement on 19th January 2004 at the issue price of RM12.50 per share; 

(ii)	1,099,800 new ordinary shares of RM0.50 each pursuant to the exercise of options granted under the ESOS at the option price of RM1.38 per share; 

(iii)	66,659,880 new ordinary shares pursuant to the completion of the bonus issue, on the basis of 3 new ordinary shares for every 5 existing ordinary shares; 
 
(iv)	Subdivision of the enlarged issued and paid-up share capital of 177,759,680 ordinary shares of RM0.50 each into 888,798,400 ordinary shares of RM0.10 each on the basis of 5 new ordinary shares of RM0.10 each for every 1 ordinary share of RM0.50 each; and

(v)	5,336,000 new ordinary shares of RM0.10 each pursuant to the exercise of options granted under the ESOS at the option price of RM0.17 per share.
	
A7.	Dividends Paid	

The final dividend of 3%, less income tax of 28%, amounting to RM1,921,375 in respect of the financial year ended 31st December 2003 was paid on 30th August 2004.

On 1st November 2004, the Company paid an interim dividend of 3%, less income tax of 28% (2003: 3% less income tax of 28%), amounting to RM1,930,732 in respect of the financial year ended 31st December 2004.

A8.	Segmental information 

	4th Quarter ended		Year ended	
	31 Dec 2004		31 Dec 2004	

	Division	
Revenue	Profit/(loss) 
before tax		
	Revenue	Profit / (Loss) 
before tax	
	RM`000		RM`000		RM`000	RM`000	
	Oil & Gas	195,832	26,914		536,775	72,144	
	Transportation Engineering	13,488	(574)		46,970	(581)	
	Marine Transportation	3,116	1,330		6,469	2,905	
	Investment Holding	3,067	150		14,792	6,865	
	215,503	27,820		605,006	81,333	
	Inter-segment elimination	(2,296)	(265)		(14,549)	(6,730)	
	Total	213,207	27,555		590,457	74,603	

A8.	Segmental information (cont’d)

	4th Quarter ended		Year ended	
	31 Dec 2003		31 Dec 2003	

	Division	
Revenue	Profit/(Loss)
before tax		
	Revenue	Profit/(Loss)
before tax	
	RM`000	RM`000		RM`000	RM`000	
	Oil & Gas	50,578	11,151		129,492	22,106	
	Transportation Engineering	7,496	(1,811)		33,121	(540)	
	Marine Transportation	-   	-   		-   	-   	
	Investment Holding	2,917	330		4,065	1,211	
	60,991	9,670		166,678	22,777	
	Inter-segment elimination	(2,880)	(547)		(4,200)	(1,847)	
	Total	58,111	9,123		162,478	20,930	

Marine Transportation’s business operation commenced only in June 2004, hence there is no comparative figure.

A9.	Valuation of property, plant and equipment

There is no revaluation of property, plant and equipment as the group does not adopt a revaluation policy on property, plant and equipment.

A10.	Material events subsequent to the balance sheet date    

There was no material event subsequent to the balance sheet date that has not been reflected in this condensed financial statement except as disclosed in Note B8( f - i).
 
A11.  	Changes in composition of the group

(a)	OilServe Marine Sdn Bhd (formerly known as Wira Kukuh Sdn Bhd)

On 2nd January 2004, the Company acquired a total of 60,000 ordinary shares of RM1.00 each representing 60% of the issued and paid-up share capital of OilServe Marine Sdn Bhd (“OilServe Marine”).

With the acquisition, OilServe Marine became a subsidiary of the Company.  The remaining 40,000 ordinary shares representing 40% of the issued and paid-up share capital of OilServe Marine was subscribed for by SapuraCrest Petroleum Berhad (formerly known as Crest Petroleum Berhad) on 2nd January 2004.

On 28th October 2004, the authorised capital of OilServe Marine was increased from RM100,000 to RM5,000,000 by the creation of 4,900,000 ordinary shares of RM1.00 each.

A11.  	Changes in composition of the group (cont’d)

Accordingly, the issued and paid-up share capital of OilServe Marine was increased from RM100,000 to RM2,000,000 by the creation of 1,900,000 ordinary shares of RM1.00 each at par to the following allottees: -
	No. of shares
Scomi Group Bhd	1,140,000
SapuraCrest Petroleum Berhad 
(formerly known as Crest Petroleum Berhad)	760,000
		--------------
		1,900,000
		=======

OilServe Marine was incorporated on 3rd December 2003.  Its principal activity is the provision of marine vessels transportation services to the oil and gas industry.  OilServe Marine commenced its operation on 8th June 2004.

(b)	OilServe (L) Berhad

The Company’s 60%-owned subsidiary, OilServe Marine, had, on 13th January 2004, incorporated OilServe (L) Berhad (“OilServe (L)”), an offshore company in Labuan. Therefore the group’s effective interest in OilServe (L) is 60%.  

OilServe (L)’s principal activity is the leasing of marine vessels.   It commenced its operation on 8th June 2004.

(c)	Oiltools International Limited	

The Company had, on 1st July 2004, acquired 70.9% equity interest of Oiltools International Limited (“Oiltools”) via its wholly-owned subsidiary, Kota Minerals & Chemicals Sdn Bhd (“KMC”), for a total cash consideration of USD77,383,443 (approximately RM294 million).   On 4th August 2004, KMC acquired another 6.8% equity interest in Oiltools for a total cash consideration of USD5,769,259 (RM21.9 million).   

The group’s effective interest in Oiltools as at 31st December 2004 is 77.7%.

(d)	KMC Oiltools (S) Pte. Ltd.	

Oiltools had on 21st October 2004 subscribed for 2 ordinary shares of SGD1.00 each representing the entire issued and paid-up share capital in KMC Oiltools (S) Pte. Ltd. (“KMCOPL”), a private company limited by shares in Singapore.

KMCOPL was incorporated in Singapore on 21st October 2004 and has an authorised share capital of SGD2,000,000 divided into 2,000,000 ordinary shares of SGD1.00 each, of which 2 ordinary shares are issued and fully paid-up.   

KMCOPL is intended to be involved principally in the provision of drilling fluids, drilling waste management and other associated services to the oil and gas industry and the distribution of third party equipment and products.

A11.  	Changes in composition of the group (cont’d)

(e)	Scomi Sdn Bhd	

On 7 January 2005, the SGB Board approved the acquisition of SCOPE from SSB for a consideration of RM250,000, being the original cost of investment by SSB.

Except for the above, there were no changes in the composition of the group during the quarter under review.

A12.   	Contingent liabilities

Details of contingent liabilities of the group as at 31st December 2004 are as follows: -

	RM`000	
	Guarantees relating to borrowings of associates	              -	
	Guarantees relating to borrowings of jointly controlled entity		              -	
	Guarantee given to third party in respect of credit arrangement 		provided to a subsidiary	50	
	Various legal claims of subsidiaries	1,482	
	Total	1,532	

A13.	Capital and operating lease commitments 

Authorised capital commitments not provided for in the financial statements as at 31st December 2004.

	Approved and contracted for
RM`000		Approved but not contracted for
RM`000	
Acquisition of shares in Oiltools (Put and Call Option)				
	-   Derrick Acquisition 	54,267		-	
	-   Pianca Acquisition	49,400		-	
	Property	-   		4,729	
	Vessels	-   		69,160	
	Plant and Machinery 	10,507		3,832	
	Office Equipment, Furniture and Fittings	121		198	
	Motor Vehicles	2,533		836	
	Total	116,828		78,755	

A13.	Capital and operating lease commitments (cont’d)

Operating leases commitments:

Future minimum lease rental payable	Due within 1 year
RM’000		Due within 1 & 5 years
RM’000		Due after 5 years
RM’000
	
Property	1,843		2,728		           426	
Plant and Machinery	              34		              27		             -	
Office Equipment, Furniture and Fittings	              623		         1,429		             -	

Total	           
          2,500		        
         4,184		          
           426	

A14.	Significant related party transactions

There were no significant related party transactions entered into during the quarter under review. 

PART B:	ADDITIONAL INFORMATION REQUIRED BY THE BURSA MALAYSIA SECURITIES BERHAD’S LISTING REQUIREMENTS

B1.	Review of performance for the year ended 31st December 2004
	
B1 should be read in conjunction with A8 above.

The group recorded a revenue of RM590.46 million for the year ended 31st December 2004 with approximately 91% of the revenue contributed by its Oil & Gas Division.   The Oil & Gas Division had benefited from the increase in exploration, development and production activities in the oil and gas industry.

The group achieved a net profit of RM61.5 million for the year ended 31st December 2004 with approximately 97% of the profits contributed by Oil & Gas Division.

The acquisition of a 77.7% interest in KMC Oiltools Bermuda Limited (“Oiltools”) contributed positively to the increase in the group’s revenue and profits.  Although only two quarters of Oiltools’ results were consolidated, approximately 44% and 39% of the group’s revenue and profits, respectively, were contributed by Oiltools.

The drilling fluids unit within the Oil & Gas Division succeeded in securing new businesses during the year, namely the supply of drilling fluids to Murphy Oil Sarawak and the provision of synthetic based mud to Sarawak Shell Berhad and Sabah Shell Petroleum Company Limited. The unit also saw an increase in its international operations, namely in Sudan, Myanmar and Indonesia and participated in various tenders internationally together with the newly acquired drilling waste management unit (a unit of Oiltools).   

The business of tank rental and mud treatment facility services also contributed positively to the group’s performance during the period under review. 

The drilling waste management product line within the Oil & Gas Division also had a successful year with growth mainly driven by environmental awareness and legislation. The increase in drilling activity contributed to strong equipment and screen sales. Major rental contract awards during the year included the provision of ship to shore services for Statoil in the Barents Sea, the provision of thermal treatment services to Seaharvest in Egypt, the award of the dryer contract to EPMI in Malaysia, the sale of Derrick equipment to Nabors in Saudi and the provision of centrifuging services to Chevron
Texaco in Nigeria

Technology continued to be the focus in the effort to stay ahead of the competition and the big bowl centrifuges were introduced to the Canadian market with great success. Norway saw the introduction of the cuttings discharge pump while the drying technology was responsible for contracts in the USA, Canada, Nigeria, Congo, Malaysia and Australia.

Transportation Engineering Division’s performance was generally affected by lower GP margins because of the shortage of steel in the world market in 2004 which affected the pricing structure of the division’s products and services. Furthermore, the inability to realise certain projected contracts also affected the business unit’s performance.   

The Marine Transportation Division recorded a profit before tax margin of 43% for the quarter under review.

B2.	Variation of results against preceding quarter 

B2 should be read in conjunction with A8 above.

The group’s turnover for the current quarter was RM213.2 million (3Q 2004: RM211.1 million).   The group’s net profit for the quarter was RM21.4 million (3Q 2004: RM25.2 million).

There was an increase of 1% in group turnover compared with the preceding quarter with Oiltools contribution to turnover and net profit of 68% and 46%, respectively.  The turnover contributed by the Oil & Gas Division and Transportation Engineering Division were 91% and 6%, respectively.

The net profit for the group decreased by 8% compared with the preceding quarter mainly due to the higher share of profits from Oiltools which is subject to minority interest. This is evidenced by the fact that profit after tax (before minority interest) is marginally higher than the previous quarter.

The Oil & Gas Division continued to register good performance in its turnover with an increase of 1.3% compared with the preceding quarter of RM193.3 million mainly due to the contribution from Oiltools.

There is a reduction in turnover for Transportation Engineering Division of 10% compared with the preceding quarter of RM15.0 million. Profit before tax decreased significantly because most of the sales for this quarter are low margin products.

Marine Transportation Division’s turnover increased by 5% but profit before tax reduced by 8% compared with the preceding quarter. 

B3.	Current year prospects 

Oil & Gas Division

Domestically and internationally, KMC Oiltools is actively participating in bids and tenders offering drilling waste management and drilling fluids leveraging on Oiltools current market presence in 28 countries. Thus, the division is expected to increase its drilling fluids market share significantly. Additionally, KMC Oiltools is targeting several new countries with good market potential.
  
Marine Transportation Division

The proposed investment into Habib Corporation Berhad will create opportunities to expand marine vessel transportation of bulk aggregates and offshore support services in the oil & gas industry. Furthermore this deal, is expected to propel Marine Transportation Division into a new arena of challenge as a major regional marine transportation and offshore support service company focusing on the oil and gas industry, in line with Scomi’s strategy to become a prominent regional player in the sector.

Manufacturing Division (Transportation Engineering and Machine Shop)

The proposed disposal of the division to Bell & Order Berhad would allow the machine shop businesses and transportation engineering division to have direct access to capital markets, to raise funds for future expansion. 

B4.	Variance of actual and profit forecast / profit guarantee 

The group has not provided any quarterly profit forecast and there is no profit guarantee issued by the group or the Company. 

B5.	Taxation 

< --- Individual Quarter --- >		
< --- Cumulative Quarter ---- >	
	
Current Year Quarter	
Preceding Year Quarter	
	
Current Year To Date	Preceding Year Corresponding Period	
	31 Dec 2004
RM`000	31 Dec 2003
RM`000		31 Dec 2004
RM`000	31 Dec 2003
RM`000	
Income Tax	4,522	3,747	     	6,432	7,122 	
Transfer (from)/to deferred
tax	
(749)	
12   		
(749)	
12	
Under/(Over)provision in         respect of previous quarters/years	
(2,672)	
(222)		
(111)	
(222)	
	1,101	3,537		5,572	6,912 	

A reconciliation of income tax expense applicable to profit before taxation at the statutory income tax rate to income tax expense at the effective income tax rate of the Group is as follows: -
	
		< --- Individual Quarter --- >		< --- Cumulative Quarter ---- >	
	
Current Year Quarter	
Preceding Year Quarter	
	
Current Year To Date	Preceding Year Corresponding Period	
	31 Dec 2004
%	31 Dec 2003
%		31 Dec 2004
%	31 Dec 2003
%	
	Malaysian statutory tax rate 	28.0	28.0		28.0	28.0	
	Tax effects of:						
	-	income not subject  to tax	             (14.5)	-		(19.2)	-	
	-	different tax rates in other 		countries	(1.9)	-		(1.9)	-	
-	overprovision  in respect 
   of previous quarters/ years	(9.7)	(2.3)		(0.2)	(1.0)	
	-	expenses not deductible for 		tax purposes	14.1	4.6		5.2	2.0	
 -	unrecognised tax loss/
    unabsorbed capital allowance	(8.6)	8.5		(3.2)	4.0	
 -  deferred tax assets not 
    recognised	(3.4)	-		(1.2)	-	
	Effective tax rate 	4.0	38.8		7.5	33.0	

B6.	Unquoted investments and/or properties 

For unquoted investment during the quarter under review, please refer to A11 (c) for details.

B7.	Quoted and marketable investments 

Details of investments in quoted securities as at the reporting date are as follows:

	RM`000	
	Total investments at cost	3,033	
	Total investments at market value	3,033	

B8. 	Status of corporate proposal
  
a)	Private Placement

The Private Placement of 10,000,000 new ordinary shares of RM0.50 each of the Company was issued on 19th January 2004 and granted listing and quotation on the Second Board of the Bursa Malaysia with effect from 27th January 2004.

The status of utilisation of the proceeds raised from the Private Placement exercise is as follows:

	RM ‘000
Gross proceeds	125,000
Share issue expenses		(1,913)
Working capital		(105,512)
Advances given to OilServe Marine		(5,722)	**
			________
		11,853
			======

** 	Pending capitalisation into share capital as approved by Securities Commission on 10th May 2004 for a change in the utilisation of proceeds arising from the Private Placement. 

b)	Bonus Issue and Share Split

The shares issued pursuant to the Bonus Issue were allotted on 30th April 2004 and the Share Split was implemented immediately thereafter.  

The issuance of up to 66,659,880 new ordinary shares of RM0.50 each in the Company pursuant to the Bonus Issue was credited as fully paid-up by the Company on the basis of 3 new ordinary shares for every 5 existing ordinary shares

Subsequently, the enlarged issued and paid-up share capital of 177,759,680 ordinary shares of RM0.50 each was sub-divided into 888,798,400 ordinary shares of RM0.10 each on the basis of 5 new ordinary shares of RM0.10 each for every 1 ordinary share RM0.50 each.

B8. 	Status of corporate proposal (cont’d)

c)	Transfer of Listing Status

The Company had, on 13th May 2004, transferred the listing of and quotation for its entire enlarged issued and paid-up share capital comprising 888,798,400 ordinary shares of RM0.10 each from the Second Board to the Main Board of Bursa Malaysia after the completion of the Bonus Issue and Share Split.

d)	Acquisition of Oiltools International Limited 

On 5th November 2003, the Company entered into the Sale and Purchase Agreements for the acquisition of Oiltools from 3i Group PLC, 3i Parallel Venture LP, 3i UKIP II LP (“collectively known as 3i Vendors”), Parallel Ventures Managers Limited, Pall Corporation, Pall Netherlands B.V. (“collectively known as Pall Vendors”).  These acquisitions are collectively known as the 3i and Pall Acquisitions.

On 20th January 2004, the Bermuda Monetary Authority approved the transfer of shares in Oiltools to KMC, a wholly owned subsidiary of the Company, the granting to the Company of options over the shares in Oiltools and subsequent transfer to KMC, upon the exercise of the options of shares in Oiltools.

On 30th January 2004, the Company entered into conditional put and call option agreements with Derrick Corporation and Mr Christopher Pianca, respectively, to acquire the entire shareholdings of Derrick (“Derrick Acquisition”) and Mr Christopher Pianca (“Pianca Acquisition”) in Oiltools.

Apart from that, the Company also entered into a conditional sale and purchase agreement with Lazerich International Holdings Limited on 30th January 2004 (“Lazerich Acquisition”) to acquire Lazerich’s entire shareholdings in Oiltools.

On 30th January 2004, the Company, KMC, Mr Christopher Pianca and Derrick Corporation also entered into a conditional Shareholders’ Agreement for the purpose of outlining the rights of the respective shareholders and the management of Oiltools.

The expiry date for the 3i and Pall Acquisitions was on 1st April 2004, whereas the completion date for the Derrick Acquisition, Pianca Acquisition and Lazerich Acquisition is on 1st September 2004.   The Company had obtained agreement from 3i Vendors and Pall Vendors to extend the time to complete the 3i and Pall Acquisitions.

The Company had, on 6th April 2004, entered into the following agreements:

(i) 	3i Extension Agreement with the 3i Vendors;
(ii) 	Pall Extension Agreement with the Pall Vendors; and
(iii) 	Put and Call Option Amendment Agreement with Derrick.
The time required to fulfil all conditions precedent to completion of the 3i and Pall Acquisitions was extended from 1st April 2004 to 1st July 2004 and the time required by Derrick to fulfill the conditions precedent to completion of the Derrick Acquisition was extended from 1st September 2004 to 1st July 2007.

The 3i and Pall Acquisitions were approved by Securities Commission on 5th May 2004 and the acquisition was completed on 1st July 2004 as mentioned in A11 (c).

B8. 	Status of corporate proposal (cont’d)

The Derrick Acquisition, Pianca Acquisition and Lazerich Acquisition were approved by Securities Commission on 20th July 2004.  On 4th August 2004, KMC completed the Lazerich Acquisition with Derrick Acquisition and Pianca Acquisition being partially completed as mentioned in A11 (c).

Therefore, the group’s effective interest in Oiltools is 77.7% as of date of review.

e)	Proposed Issuance of USD100 million Nominal Value of 5-Year Unsecured Guaranteed Redeemable Convertible Bonds

On 27th October 2004, the Company proposed to issue up to USD100 million nominal value of 5-year convertible bonds ("CB") convertible into new ordinary shares of RM0.10 each, through special purpose vehicle, which would be a wholly-owned subsidiary of the Company to be incorporated in the Federal Territory of Labuan ("SCOMI-SPV") ("Proposed CB Issue").

The CB will be offered to non-residents of Malaysia (as defined under the Labuan Trust Companies Act, 1990) outside the United States in accordance with Regulation S of the United States Securities Act, 1933, by or on behalf of SCOMI-SPV.

The Proposed CB Issue will enable the Company to raise funds for its working capital and other general corporate purposes, which may include acquisitions of assets and/or businesses for the expansion of the core business of the group and/or repayment of its borrowings.

On 14th February 2005, Securities Commission (“SC”) has approved the proposed issuance of CB.

f)	Proposed Acquisition of 50% of Issued and Paid Up Capital of Shetland Oiltools Limited

On 3rd  January 2005, KMC Oiltools Bermuda Limited (“KMCOBL”) formerly known as Oiltools International  Limited, a subsidiary  of Kota Mineral and Chemicals Sdn Bhd (“KMC”) agreed to acquire 5,000 “B”  ordinary shares of £1 each (“Sale Shares”) representing fifty percent (50%) of the issued capital of Shetland Oiltools Limited(“Shetland Oiltools”) from Shetland Leasing and Property Developments Limited (“SLAP”) for a cash consideration of £5,000 negotiated at arms length basis between KMCOBL and SLAP (“the Acquistion” ). Upon completion of the acquisition, KMCOBL’s shareholding in Shetland Oiltools shall increase from 50% to 100%.

g)	Proposed Disposal of Machine Shop Business and Proposed Disposal of Scomi Sdn Bhd and Scomi Transportation and Solutions Sdn Bhd.

On 7th January 2005, KMC Oiltools Bermuda Limited (formerly known as Oiltools International Limited) (“KMC Bermuda”) and KMC Oiltools (Cayman) Ltd (formerly known as Oiltools International (Cayman) Ltd) (“KMC Cayman”) effectively 77.7% subsidiaries of Scomi had entered into a tripartite conditional sale and purchase agreement  with Bell & Order Berhad (“B&O”) for the disposal of the entire equity interest in Oiltools Pte Ltd (“OPL”) and Oiltools Holdings (Malaysia) Sdn Bhd (“OHMSB”) respectively for an aggregate  sale  consideration of  RM237,500,000  to be  satisfied  by  the  issuance    of 160,472,973 new ordinary shares of RM1.00 each in B&O Shares (“Machine Shop Consideration Shares”) at an issue price of RM1.48 per share (“Conditional Machine Shop SPA”). 

B8. 	Status of corporate proposal (cont’d)

On 7th January 2005, the company entered into a conditional sale and purchase agreement with B&O to dispose of its entire equity interests in Scomi Sdn Bhd (“SSB”) comprising 9,281,762 ordinary shares of RM1.00 each in SSB (“SSB Shares”) to B&O and its entire equity interest in Scomi Transportation Solutions Sdn Bhd (“SCOTS”) comprising 500,000 ordinary shares of RM1.00 each in SCOTS (“SCOTS Shares”) to B&O for a total sale consideration of RM47,500,000 to be satisfied by issuance of 32,094,594 new B&O Shares (“ SSB & SCOTS Consideration Shares”) at an issue price of RM1.48 per share. 

KMC Bermuda and KMC Cayman, effectively 77.7% subsidiaries of the Company, had    on 7 January 2005 entered into a Conditional Machine Shop SPA for the following:
                        
(a)	Proposed disposal by KMC Bermuda of entire equity interest in OPL, comprising        1,010,800 ordinary shares of S$1.00 each in OPL(“OPL Shares”) to B&O
(b)	Proposed disposal by KMC Cayman of the entire equity interest in OHMSB (“OHMSB A Shares”) comprising:
(i)	900,000 Class A shares of RM1.00 each in OHMSB (“OHMSB A Shares”) and 200,000 Class B Shares of RM1.00 each in OHMSB (“OHMSB B Shares”) and 
(ii) 300,000 OHMSB A Shares and 600,000 OHMSB B Shares currently held in trust by Syarikat Pesaka Antah Sdn Bhd 

      for an aggregate sale consideration of RM237,500,000 to be satisfied by the issuance of 160,472,973 new B&O Shares at an issue price of RM1.48 per share.

h)	Proposed subscription of shares in Habib for a major stake in Singapore Based Marine Vessel Business

On 14th February 2005, the company announced a proposal to subscribe to 173,913,043 new ordinary shares of RM1.00 each in Habib Corporation Berhad (“Habib”) at issue price of RM1.15 per share. 

In the proposed transaction, Habib will undertake the acquisition of 100% marine logistics assets and business of Chuan Hup Holdings (“Chuan Hup”), 29% (205 million shares) of Chuan Hup’s interest in CH Offshore Limited (“CHO”) and the entire 49.07% (298.9055 million shares) of Chuan Hup’s equity interest in PT Rig Tenders Indonesia (“PTRT”) for a total purchase consideration of approximately S$570 million. Upon completion of the proposed transaction, the company will emerge as a major shareholder of Habib with a 29.6% equity stake.

i)	Proposed Placement

On 15 February 2005, the Company announced the proposal to undertake a placement of 89,415,000 new SCOMI Shares representing approximately ten percent (10%) of the existing issued and paid-up share capital of the Company to certain identified placees for the Placement Shares (“Proposed Placement”).

The issue price for the Placement Shares has been fixed at RM1.63 per Placement Share, which represents a discount of RM0.05 (or 3%) from the five (5) day volume-weighted average market price of RM1.68 per SCOMI Share for the period up to and including 7 February 2005.

The Proposed Placement will enable SCOMI to raise gross proceeds of RM145,746,450 for the repayment of its borrowings and/or general working capital requirements of SCOMI Group as follows:

B8.    Status of corporate proposal (cont’d)

	RM’000	
		
Working capital	61,246	
Repayment of borrowings	80,000	
Expenses related to Proposed Placement	4,500	
		
Total	145,746	

The completion of the Proposed Placement is currently pending the approval of Bursa Securities for the listing of and quotation for the Placement Shares on the Main Board of Bursa Securities. 

B9.   Group borrowings

The group borrowings as at the end of the reporting period are as follows:

	RM`000	
Short term borrowings	165,354	
Long term borrowings	375,415	
Total	540,769	

The group borrowings are denominated in the following currencies:

	RM`000	
Ringgit Malaysia	       55,615	
US Dollar	485,154	
Total	540,769	

B10. Off balance sheet financial instruments 

Save as disclosed below, there was no off balance sheet financial instruments as at the date of this report: -
	Notional amount as at 31st Dec 2004 RM`000	
Interest rate swap agreements		
- more than 1 year but less than 5 years	95,000	

The overseas subsidiaries’ hedging policy would aim to hedge 50% - 100% of its floating-rate liabilities into fixed rate liabilities by the use of various instruments including interest rate swaps, interest rate options etc, for duration generally not exceeding five years. The actual quantum of floating rate liability hedged would depend on the overseas subsidiaries’ view of the general trend on US Dollar interest rate.

There is no significant credit posed by the above off balance sheet financial instruments.

Overseas subsidiaries proactively manage their overall interest rate risks. Interest expenses in respect of the notional amount borrowed for the interest rate swap transactions is recognised in the income statement on an accrual basis.

B11.	Changes in material litigation 

Neither the Company nor any of its subsidiaries is engaged in any litigation or arbitration, either as plaintiff or defendant, which has a material effect on the financial position of the Company or any of its subsidiaries and the Board does not know of any proceedings pending or threatened, or of any fact likely to give rise to any proceedings, which might materially and adversely affect the position or business of the Company or any of its subsidiaries. 

B12.	Dividends 

The interim dividend of 3%, less income tax of 28% (2003: 3% less income tax of 28%), amounting to RM1,930,732 in respect of the financial year ended 31 December 2004 was paid on 1st November 2004. 

B13.	Earnings per share 

					< ---- Individual Quarter ----- >		< -- Cumulative Quarter -- > 	
	31 Dec 2004	31 Dec 2003		31 Dec 2004                                 	31 Dec 2003                                 	
	Basic earnings per share						
	Net profit attributable to 			shareholders (RM`000)	           21,420		5,591		        61,493	14,023 	
						
	Number of shares at the beginning 	of the period (‘000)		100,000 	100,000			100,000	-   	
	Effects of shares issued during the 		period (‘000)		-    	-   			-   	73,924	
	Effects of private placement (‘000)		10,000	-   			9,481	-   	
	Effects of share options exercised 		before bonus issue and share 		split (‘000)	1,100	-      		840	-   	
	Effects of bonus issue (‘000)		66,660	60,000			66,193	44,354	
	Effects of share split (‘000)		711,038	640,000			706,056	473,112	
	Effects of share options exercised 		after bonus issue and share split 		(‘000)	5,192	-    		2,028	-    	
	Weighted average number of  		shares (‘000)	893,990	800,000		884,598	591,390	
	Basic earnings per share (sen)		2.40		0.70			6.95		2.37  	
	Diluted earnings per share						
	Net profit attributable to 			shareholders (RM`000)		21,420	5,591		         61,493		14,023	
						
	Weighted average number of  		shares as per above (‘000)	                 893,990	800,000		        884,598	591,390	
	Number of shares under ESOS 		(‘000)	          104,460	72,000		72,520	72,000	
	Number of ESOS that would have 		been issued at fair value (‘000) 	            (50,321)	(7,037)		            (24,687)	            (7,037)	
	Weighted average number of  		shares - diluted (‘000)	           948,129	      864,963 		        932,431	        656,353	
	Fully diluted earnings per share 		(sen)	                2.26		0.65		             6.60		2.14 	

The comparative basic and diluted earnings per share have been restated to take into account the effect of the bonus issue and share split.