Annual Report 2012...TANJUNG OFFSHORE BERHAD (662315-U) TANJUNG OFFSHORE BERHAD (662315-U) Annual Report 2012 Focused on GROWTH ANNUAL REPORT 2012 Suite 5 …

TANJUNG OFFSHORE BERHAD(662315-U)

TAN

JUN

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(662315-U)

Annual R

eport 2012

Focused on GROWTH

ANNUAL REPORT 2012

Suite 5-1, Level 5, Wisma UOA Damansara II, No. 6, Changkat Semantan, Damansara Heights, 50490 Kuala Lumpur.Tel: +60-3-2087 7000 Fax: +60-3-2087 7040

www.tanjungoffshore.com.my

2 CORPORATE INFORMATION

5 CORPORATE STRUCTURE

7 TANJUNG OFFSHORE BERHAD

8 TANJUNG OFFSHORE SERVICES SDN BHD

9 TANJUNG MAINTENANCE SERVICES SDN BHD

10 GAS GENERATORS (M) SDN BHD

11 CENDOR MOPU PRODUCER LIMITED

12 TANJUNG NEWENERGY SERVICES SDN BHD

13 TANJUNG CSI SDN BHD

15 FIVE (5) YEARS GROUP FINANCIAL HIGHLIGHTS

17 NOTICE OF ANNUAL GENERAL MEETING

19 DIRECTORS’ PROFILE

22 CHAIRMAN’S STATEMENT

26 MANAGING DIRECTOR’S REVIEW

30 AUDIT COMMITTEE REPORT

33 STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

34 STATEMENT ON INTERNAL CONTROL

35 STATEMENT OF CORPORATE GOVERNANCE

41 OTHER INFORMATION

44 FINANCIAL STATEMENTS

112 LIST OF PROPERTIES OWNED BY THE GROUP

114 ANALYSIS OF SHAREHOLDINGS / WARRANTHOLDINGS

• FORM OF PROXY

CONTENTS

TANJUNG OFFSHORE BERHAD (662315-U)

ANNUAL REPORT 2012

2

CORPORATE INFORMATION

BOARD OF DIRECTORSName / Designation

Datuk Seri Syed Ali Bin Tan Sri Syed Abbas Alhabshee (Independent Non-Executive Chairman)

Harzani Bin Azmi (Managing Director)

Tan Wee Koh (Executive Director)

Muhammad Sabri Bin Ab Ghani (Executive Director)

Dato‘ Dr. (H) Ab Wahab Bin Haji Ibrahim(Independent Non-Executive Director)

Edwanee Cheah Bin Abdullah(Independent Non-Executive Director)

George William Warren Jr(Independent Non-Executive Director)


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AUDIT COMMITTEE

ChairmanDato’ Dr. (H) Ab Wahab Bin Haji Ibrahim(Independent Non-Executive Director)

MemberEdwanee Cheah Bin Abdullah (Independent Non-Executive Director)

George William Warren Jr(Independent Non-Executive Director)

Datuk Seri Syed Ali Bin Tan Sri Syed Abbas Alhabshee(Independent Non-Executive Chairman)

COMPANY SECRETARIES

Kang Shew Meng (MAICSA 0778565)Seow Fei San (MAICSA 7009732)

REGISTERED OFFICE

802, 8th Floor, Block CKelana Square, 17 Jalan SS7/2647301 Petaling JayaSelangor Darul EhsanTel : 03-7803 1126Fax : 03-7806 1387

HEAD / MANAGEMENT OFFICE

Suite 5-1, Level 5, Wisma UOA Damansara IINo. 6, Changkat SemantanDamansara Heights50490 Kuala LumpurTel : 03-2087 7000

AUDITORS / REPORTING ACCOUNTANTS

AljeffriDean (Firm No.: AF 1366)Chartered Accountants2-5-13, 5th Floor, Menara KLH(Business Centre)No. 2, Jalan Kasipillay51200 Kuala LumpurTel : 03-2381 1170

LEGAL ADVISORS

Mah – Kamariyah & Philip Koh3A07, Block B, Phileo Damansara II15 Jalan 16/11, Off Jalan Damansara46350 Petaling JayaSelangorTel : 03-7956 8686

Zul Rafi que & PartnersD3-3-8, Solaris DutamasNo. 1, Jalan Dutamas 150480 Kuala LumpurTel : 03-6209 8228

Chambers of Krish Maniam & CoNo. 14, Jalan Medan Setia 2Plaza DamansaraDamansara Heights50490 Kuala Lumpur Tel : 03-2095 5551

PRINCIPAL BANKERS

Malayan Banking Berhad (Company No. 3813-K)Setapak Business Centre2nd Floor, Maybank Setapak343 Jalan Pahang53000 Kuala LumpurTel : 03-4022 0784

Standard Chartered Bank Malaysia Berhad(Company No. 115793-P)Level 13, Menara Standard Chartered30 Jalan Sultan Ismail50250 Kuala LumpurTel : 03-2117 7810

PRINCIPAL BANKERS (cont’d)

AmInvestment Bank Berhad(Company No. 23742-V)Level 15, Bangunan AmBank Group55 Jalan Raja Chulan50200 Kuala LumpurTel : 03-2078 2633

REGISTRAR

Tricor Investor Services Sdn. Bhd.(Company No. 118401-V) Level 17, The Gardens North TowerMid Valley City Lingkaran Syed Putra59200 Kuala LumpurTel : 03-2264 3883Fax : 03-2282 1886

STOCK EXCHANGE LISTING

Main Market of Bursa Malaysia Securities Berhad

STOCK INFORMATION

Stock Name: TGOFFS, TGOFFS-WA, TGOFFS-WB

Stock Code: 7228, 7228-WA, 7228-WB

Bloomberg Code: TOFF MK


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TANJUNG OFFSHORE BERHADTANJUNG OFFSHORE SERVICES SDN BHDTANJUNG NEWENERGY SERVICES SDN BHDKuala Lumpur (Head Offi ce)Suite 5-1 , Level 5Wisma UOA Damansara IINo. 6 Changkat SemantanDamansara Heights50490 Kuala Lumpur.Tel : 03-2087 7000Fax : 03-2087 7040 / 7041

TANJUNG OFFSHORE SERVICES SDN BHD Pasir Gudang (Operation Offi ce)No 38A, Jalan 9/17 Perjiranan 9,81700, Pasir Gudang, Johor Darul Takzim.Tel : +607 255 2886Fax : +607 255 2986Email: [email protected]

TANJUNG OFFSHORE SERVICES SDN BHDNo 399, Lot 405A Parkcity Commercial Square,Phase 5, Jalan Kembar Budin,97000 Bintulu, SarawakTel : 086-337698

GAS GENERATORS (M) SDN BHDLot 993, Off Jalan Balakong,Balakong, Seri Kembangan,43300 Selangor.Tel : +603 8961 3390Fax : +603 8962 3390Email: [email protected]

TANJUNG MAINTENANCE SERVICES SDN BHDKemaman (Operation/Maintenance Centre)Lot D1 & D2, Kawasan MIEL Teluk Kalung,24007 Kemaman,Terengganu Darul Iman,Malaysia.Tel : +609 863 5390 Fax : +609 863 5387Email: [email protected] : www.tanjungmaintenance.com.my

TANJUNG MAINTENANCE SERVICES SDN BHDKemaman Supply Base CentreWarehouse No 3, Door 1,2,3,7 & 8,Kemaman Supply Base, Phase 1,24007 Kemaman, Terengganu Darul Iman, Malaysia.Tel : +609 862 3360/ 62Fax : +609 862 3361Email: [email protected]

TANJUNG MAINTENANCE SERVICES SDN BHDLot 1591, Block 26 (P.O. Box 107)Kidurong Light Estate,Jalan Tanjung Kidurong,97000 Bintulu, Sarawak, Malaysia.Tel : +6086 255 103Fax : +6086 254 103

TANJUNG MAINTENANCE SERVICES SDN BHDTANJUNG OFFSHORE SERVICES SDN BHDMiri (Operation/Maintenance Center)Lot MCLD, 1315, Jalan Primula,Piasau Industrial Estate,Miri, Sarawak, Malaysia.Tel : +6085 661 330Fax : +6085 661 320email :[email protected] :[email protected]

TANJUNG MAINTENANCE SERVICES SDN BHD (TMS)Labuan (Operation/Maintenance Centre)SK 0467, Kampung Sungai Kling,Off Jalan Rancha Rancha,87008 Wilayah Persekutuan Labuan.(TMS) Tel : +6087 414 481 Fax : +6087 413 234Email: [email protected]



ANNUAL REPORT 2012

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GROUP CORPORATE STRUCTURE

TANJUNG OFFSHORE BERHAD

51%

100%

20%

100%

100%

100%

100%

50%

GASTEC

TMS

CMPL

TNE

TOMS

TCSI

TOS

51% UGG

100% TPC

WII

TOS: Tanjung Offshore Services Sdn Bhd

TPC: Tanjung Petroconsult Sdn Bhd

TMS: Tanjung Maintenance Services Sdn Bhd

TNE: Tanjung New Energy Services Sdn Bhd

TOMS: Tanjung Offshore Marine Services Sdn Bhd

TCSI: Tanjung CSI Sdn Bhd

GASTEC: Gas Generators (Malaysia) Sdn Bhd

UGG: Universal Gas Generators Sdn. Bhd.

CMPL: Cendor Mopu Producer Ltd

WII Well Integrity International Sdn Bhd


ANNUAL REPORT 2012

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GROUP CORPORATE STRUCTURE

The details of the subsidiaries and associated company of Tanjung as at 22 April 2013 are as follows: -


Company Date And Place Issued And Fully Effective Principal Activity Of Incorporation/ Paid-Up Share Equity Acquisition Capital Interest (RM) (%) TOS 28.04.1983 7,500,000 100.00 Integrated service provider to the oil and gas Malaysia and related industries.

TPC 17.10.1991 11,200,000 100.00 Provision of engineering and professional Malaysia manpower services to the oil and gas and related industries. TMS 24.05.1996 4,000,000 100.00 Provision of maintenance services to the oil and Malaysia gas and related industries.

TNE 07.03.1997 350,000 100.00 Provision of project management services to the Malaysia engineering and energy industries. TOMS 01.11.2006 2 100.00 Own and lease offshore vessels to local and Malaysia international oil industry majors. TCSI 03.11.2006 6,000,000 100.00 Supply, design, confi gure, integrate, test, install Malaysia and commission distributed control systems, programmable logic controllers, supervisory control and data acquisitions, safety shutdown systems, fi re gas systems, fi re addressable systems, liquid and gas analyser systems, control valves, instrumentation and electrical heat tracing systems and to train and supply manpower for after sales services. GASTEC 05.01.2009 4,791,437 51.00 Manufacturing and trading of all types of machinery, equipment and generators used for welding, cutting, cooking and other commercial applications. UGG 22.11.1996 2,000,000 51.00 Selling and letting of gas generators.

Associated Company CMPL 07.11.2005 USD1,960,000 20.00 To own, lease, sub-lease, maintain, operate, manage the Mobile Offshore Production Unit to carry out oil and gas operations

WII 22.01.2013 2 50.00 Provision of engineering and maintenance services.


ANNUAL REPORT 2012

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Tanjung Offshore Berhad (Tanjung) was incorporated in Malaysia on 11 August 2004 and its shares are currently listed on the Main Market of Bursa Malaysia Securities Berhad. Tanjung is principally an investment holding company, whilst its subsidiaries and associated companies are principally involved in the provision of engineering equipment packages, equipment maintenance services and production platform services to the oil and gas and related industries in Malaysia and the region.

Tanjung’s main operating subsidiary, Tanjung Offshore Services Sdn Bhd (TOS) commenced operations in March 1990. TOS is involved in providing comprehensive services to the oil and gas industry and holds various exclusive agencies for a wide range of engineering equipment and parts in Malaysia.

In May 1996, Tanjung Maintenance Services Sdn Bhd (TMS) was incorporated to provide complete maintenance support services to the oil and gas industry such as manpower, maintenance and repair works for offshore oil and gas platforms and onshore plants.

In 2009, Tanjung acquired a 51% equity stake in Gas Generators (M) Sdn Bhd (Gastec), Gastec is principally involved in the manufacturing and marketing of gas generators in both the industrial and offshore oil and gas markets.

Various other subsidiaries and associated companies were set up to further enhance the provision of integrated support services to the oil majors such as Tanjung NewEnergy Services Sdn Bhd (TNE), Tanjung Petroconsult Sdn Bhd (TPC), Tanjung CSI Sdn Bhd and Cendor Mopu Producer Limited.

Tanjung Group is actively involved in both the upstream and downstream markets within the oil and gas industry and participates in all stages of the life cycle of the Production Sharing Contracts as follows:-

EXPLORATION Surface GeochemistrySeismic activities Vessel servicesDrilling services

DEVELOPMENTHookup & commissioningDrilling servicesStructure & constructionEngineering Equipment

PRODUCTIONFlow of oil & gas to onshore plantsPower generationSystems application Engineering equipmentMaintenance services

MAINTENANCERetrofi ttingStructural strength & corrosion assessmentEngineering equipment maintenance

ABANDONMENTDismantling of structuresDecommissioning of machinery & equipmentPollution control exercise and assessment



ANNUAL REPORT 2012

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TANJUNG OFFSHORE SERVICES SDN BHD

Tanjung Offshore Services Sdn Bhd (TOS) is a wholly owned subsidiary of Tanjung Offshore Berhad (Tanjung). TOS commenced business in mid 1990s and has since grown into a reputable integrated service provider for the oil and gas industry. With years of experience in the oil & gas industry, TOS offers services such as customised engineered equipment packages, drilling & platform services, project management of contracts, spares and parts for equipment and other related services. TOS is one of the main operating companies within the Tanjung Group of companies which offers a diverse range of product and services to the oil majors.

Having obtained various Petronas licences for various categories of products and services, TOS is also the exclusive agent in Malaysia for various world-renowned Original Equipment Manufacturers (OEM) such as pumps, control systems, switchgears, instrumentations and valves that are widely used in the upstream and downstream activities of the oil and gas industry.

TOS has a full package of supplies and services which entails the initial engineering design layout, project management & planning, implementation, installation, commissioning followed by scheduled maintenance, troubleshooting and reliable after-sales services. TOS identifi es the requirement of each client, and assist in the front-end engineering design (FEED). Throughout this phase, constant and comprehensive technical discussions with our prospective clients as part of our value added services in developing innovative ideas in the exploration, production, maintenance and abandonment stages of fi elds’ development.

Together with our clients, we continue to closely monitor the progress of projects undertaken to ensure various process methods are in compliance to the approved design and specifi cations. TOS is continuously increasing its range of products and services to meet the stringent requirements of the industry.

Platform services

Engineering equipment

Gas generation packages

Maintenance services


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TANJUNG MAINTENANCE SERVICES SDN BHD

Tanjung Maintenance Service Sdn Bhd (TMS) was incorporated in 1996 to provide complete maintenance services to the oil and gas operators in Malaysia and the region. As of todate, TMS is operating from fi ve (5) main workshop/maintenance centres situated in Teluk Kalung and Kemaman Supply Base (both in Terengganu), Labuan, Miri and Bintulu. TMS currently employ 200 staff of various experiences and expertise. Our maintenance centres provide a “one stop” maintenance services to various upstream oil and gas operators such as Petronas Carigali Sdn Bhd, Sarawak Shell Berhad, Exxon Mobil Exploration and Production Malaysia Inc.,Talisman Malaysia Limited, Nippon Oil Ltd and Newfi eld Sarawak Malaysia Inc. and others.

Our maintenance workshops also provide various maintenance services to downstream petrochemical and power plants situated in Paka and Gebeng in Terengganu and Bintulu in Sarawak. These customers include Petronas Dagangan Sdn Bhd, Petronas Penapisan (Terengganu) Sdn Bhd, Petronas Gas Berhad, BASF Petronas Chemicals Sdn Bhd, Petlin Malaysia Sdn Bhd and BP Chemical (M) Sdn Bhd.

Our complete maintenance services at our maintenance workshops include:-

• Services, repair, overhaul & test various types of rotating equipment including diesel engines

• Services, repair, retrofi t & test all types of valves & actuators

• Fabrication of parts, piping works and machining;• Metal coating or metal spray;• Rotor dynamic balancing;• On-line greasing or lubrication;• Condition Based Monitoring (CBM) such as vibration

monitoring;• Wellhead maintenance & services; • Asset Integrity Management System including Reliability,

Availability & Maintainability Study and Asset Performance Management;

• Schedule oil sampling (SOS) and thermography;• Service, repair, overhaul and test of turbo machinery.

We are one of the few local service providers which have set up complete workshops in all the main oil and gas hubs in both Peninsular and East Malaysia. We are also ISO 9001 certifi ed and have trained our human capital and invested in the latest technologies to enable us to move towards niche and knowledge based maintenance technologies. In doing so, we aim to be at the forefront of the total solutions provider concept for maintenance services in the Malaysia and the region.

Overhaul & machining services

Valve on-site services

Gear box services

Repair of pump casing

Welding & cutting services


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GAS GENERATORS (M) SDN BHDUNIVERSAL GAS GENERATORS SDN BHD

On 5 January 2009, Tanjung Offshore Berhad acquired as a 51% equity interest in Gas Generators ( Malaysia) Sdn Bhd (Gastec) and its subsidiaries (Gastec Group). Gastec Group is principally involved in the manufacturing and marketing of gas generators in both the industrial and offshore oil and gas markets.

Nitrogen is an inert gas used primarily for purging of tanks and pipelines to enhance overall plant safety. The generator produces nitrogen from compressed air thereby eliminating the cost and hazard associated with transporting of nitrogen gas cylinders offshore.

Gastec Group has operations in the ASEAN region with active presence in Kuala Lumpur, Bangkok, Jakarta and Manila.

The Gastec Group also design and manufactures nitrogen gas generators for on-site gas production facilities on long term “built, operate and transfer” and “built, operate and own” contracts to both industrial and oil and gas industries.


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CENDOR MOPU PRODUCER LIMITED

Cendor MOPU Producer Limited (CMPL) was incorporated on 7 November 2005. Tanjung Offshore Berhad (Tanjung) owns a 20% equity in CMPL while the remaining 80% equity is held by Global Process Systems Sdn Bhd. CMPL’s principal activity is to own, lease, sub-lease, maintain, operate, manage the Mobile Offshore Production Unit (MOPU) to perform production operations within Malaysian waters.

CMPL is the fi rst Malaysian company that introduced the concept and viability of MOPU in extracting oil from marginal fi elds in Malaysian waters. The MOPU is a jack up drilling rig which has been converted into an oil production platform which is designed to operate on a stand alone basis at a designated location.

Since its inception, CMPL has been managing one (1) unit of MOPU which is currently contracted to Petrofac (Malaysia PM-304) Limited. As of to date, the MOPU is operating at Cendor oilfi eld which is situated off the coast of Terengganu.

Given the successful launch of the MOPU, Tanjung will continue to explore new ideas and concepts that facilitate the extraction of oil from fi elds in Malaysia and the region.


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TANJUNG NEWENERGY SERVICES SDN BHD

Tanjung NewEnergy Services Sdn Bhd (TNE) was established in 1997 to provide a wide range of energy related products and services which are cost effi cient solutions to the oil majors. Our power generation systems are also environmentally friendly through better use and management of energy resources.

Our main engineering products are as follows:-

• Centrifugal Pumps;

• Nitrogen Gas Generator;

• Dynamic Position System;

• CCTV Surveillance System for Oil and Gas;

• Umbilical Subsea Cables;

• Solar Power Panels; and

• Self Priming Marine Pumps.

TNE has a total commitment to engineering excellence, fi tness for purpose, design and an uncompromising approach to quality. TNE recognizes the benefi ts of an effective quality assurance programme in promoting and achieving high standards of service and minimizing costs and delay to project programmes.


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TANJUNG CSI SDN BHD

Tanjung CSI Sdn Bhd (Tanjung CSI) is a wholly-owned subsidiary of Tanjung Offshore Berhad.

In the area of industrial fi eld instrumentation and automation, Tanjung CSI represents and provide services amongst others as follows:

• Process & safety automation, measurement, analytical, actuation instrumentations and wet gas metering system;

• Fire & gas integrated security systems and fi eld detectors;

• Gas analyzers for moisture, H2S and CO measurements;

• Severn Glocon – control valves;

• Severn Unival – choke valves;

• Liquid & gas metering solutions for custody transfer/allocation and pipe line detection system or PLDS;

• PQE – power quality consultancy services;

• Brodie – PD meters, variable area fl ow meters and a full range of fl ow accessories;

• Multiphase Flow Metering Solutions; and

• Rotating machineries engineering solutions focuses on supplying high quality and innovative control solutions for turbines and compressors.

Tanjung CSI is also a certifi ed channel partner and system integrator for ABB Control & Safety systems, such as the Industrial IT 800 xA, Freelance, PlantguardTM and TriguardTM system product lines. Complementing ABB in the area of Fire and Gas system solution with Fire & Safety, which produce industry renowned SIL2 Addressable Fire and Gas systems and fi eld devices. Our scope of capabilities include the full suite of engineering services, beginning from design, system confi guration, system integration, testing, staging, training all the way up to system commissioning at site, as well providing post implementation services.

Our range of capabilities also extends to include fi eld instrumentation, and associated services, such as calibration, repair services, valves and positioned assembly works, as well as hybrid and gas analyzer sampling system design and fabrication.

Tanjung CSI also extends its services in the area of electrical power distribution and stability by performing and providing quality control and consultation to ensure that the electrical power supply of a site is regulated appropriately.

Tanjung CSI’s goal is to be recognized as a premier industrial control, safety and instrumentation solution provider for the Malaysian Oil & Gas industry.


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• Providing Quality Products & Services;• Optimising Resources;• New Technologies;• Enhancing Technical Competencies; and• Full Compliance to Health, Safety and Environmental regulations.

To support the oil and gas industry as a “one stop solutions provider” through:-

MISSION AND PHILOSOPHY


ANANANNUNUNUALALAL RRREPEPEPORORORTTT 202020121212

To be the preferred service provider to the oil majors in Malaysia and the region.

OUR VISION


ANNUAL REPORT 2012

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As restated 2008 2009 2010 2011 2012 RM’000 RM’000 RM’000 RM’000 RM’000

Revenue 574,273 649,657 541,807 334,437* 263,707*

EBITDA 66,283 49,036 76,690 (47,869)* (20,752)*

Net Profi t / (Loss) before tax 34,225 4,775 8,014 (56,168) (25,718)

Net Profi t / (Loss) after tax 31,448 3,616 7,588 (55,396) (11,585)

Pre - tax Margin / (Loss) (%) 5.96 0.74 1.48 (16.79) (9.75)

Net Margin / (Loss) (%) 5.48 0.56 1.40 (16.56) (4.39)

Basic Earnings / (Loss) per share (sen) 14.63 1.25 2.55 (19.14) (3.99)

* Excludes discontinued operations.

FIVE (5) YEARS GROUP FINANCIAL HIGHLIGHTS

Revenue (RM’000)

650,000 -

600,000 -

550,000 -

500,000 -

450,000 -

400,000 -

350,000 -

300,000 -

250,000 -

200,000 -

150,000 -

100,000 -

0 -2008 2009 2010 2011 2012

574,273

649,657

541,807

334,437

263,707

Net Profi t / (Loss) After Tax (RM’000)

60 -

50 -

40 -

30 -

20 -

10 -

0 -2008 2009 2010 2011

31,448

3,616 7,588

(55,396)

(11,585)

2012

-10 -

-20 -

-30 -

-40 -

-50 -

-60 -


ANNUAL REPORT 2012

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FIVE (5) YEARS GROUP FINANCIAL HIGHLIGHTS

77.82%203.69m

22.18%58.04m

Revenue Breakdown for the year ended 2012

Engineering EquipmentServices

Maintenance Services

Shareholders’ funds

2008 = 322,265,0512009 = 322,083,4522010 = 373,185,8282011 = 323,287,4452012 = 166,275,581

Share price performance of Tanjung versus the KLCI between 30 May 2012 and 23 April 2013.

2012

2011

2010

2009

2008

0 -

50 -

100

-

150

-

200

-

250

-

300

-

350

-

400

-

322,265,051

322,083,452

373,185,828

(million)

323,287,445

166,275,581


ANNUAL REPORT 2012

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NOTICE IS HEREBY GIVEN THAT the Ninth Annual General Meeting of the Company will be held at Kenanga Room, Kelab Darul Ehsan, Taman Tun Abdul Razak, Jalan Kerja Air Lama, 68000 Ampang Jaya, Selangor Darul Ehsan on Thursday, 23 May 2013 at 10.00 a.m. to transact the following businesses:-

AGENDA

1. To receive the Audited Financial Statements for the fi nancial year ended 31 December 2012 and the Reports of Directors and Auditors thereon.

2. To approve the payment of Directors’ fees for the fi nancial year ended 31 December 2012. 3. To re-elect the following Directors retiring in accordance with Article 103 of the Company’s Articles of

Association:- (i) Dato’ Dr. (H) Ab Wahab Bin Haji Ibrahim (ii) Mr. Tan Wee Koh 4. To re-elect Encik Muhammad Sabri Bin Ab Ghani retiring in accordance with Article 109 of the Company’s

Articles of Association:-

5. To appoint Messrs. AljeffriDean as Auditors of the Company and authorise the Directors to determine their remuneration.

6. As Special Business to consider and if thought fi t, to pass the following Ordinary Resolution, with or

without modifi cations:-

ORDINARY RESOLUTION AUTHORITY TO ISSUE SHARES “THAT pursuant to Section 132D of the Companies Act, 1965, the Directors be and are hereby authorised

to issue shares in the Company at any time until the conclusion of the next Annual General Meeting and under such terms and conditions and for such purposes as the Directors may, in their absolute discretion, deem fi t provided that the aggregate number of shares to be issued does not exceed 10 per centum of the issue share capital of the Company for the time being, subject always to the approval of all relevant regulatory bodies being obtained for such issue and allotment.”

7. To transact any other business of which due notice shall have been given.

BY ORDER OF THE BOARD

SEOW FEI SANKANG SHEW MENGSecretaries

Petaling Jaya30 April 2013

Resolution 1

Resolution 2

Resolution 3Resolution 4

Resolution 5

Resolution 6

Resolution 7

NOTICE OF ANNUAL GENERAL MEETING


ANNUAL REPORT 2012

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Notes:

1. Only depositors whose names appear on the Record of Depositors as at 17 May 2013 shall be entitled to attend, speak and vote at the said meeting or appoint proxies to attend, speak and vote on his/her behalf.

2. A member entitled to attend and vote at the meeting shall not be entitled to appoint more than two (2) proxies to attend and

vote in his/her stead. A proxy may but need not be a member of the Company and the provisions of Section 149(1)(b) of the Companies Act, 1965 shall not apply.

3. Where a member appoints two (2) proxies, the appointment shall be invalid unless he/she specifi es the proportions of his/her shareholding to be represented by each proxy.

4. Where a Member is an authorised nominee as defi ned under the Central Depositories Act, it may appoint one (1) proxy in respect of each Securities Account it holds with ordinary shares of the Company standing to the credit of the said Securities Account.

5. Where a Member of the Company is an Exempt Authorised Nominee which holds ordinary shares in the Company for multiple benefi cial owners in one securities account known as an omnibus account, there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each omnibus account its holds.

6. The instrument appointing a proxy shall be in writing under the hand of the appointer or of his/her attorney duly authorised in writing or, if the appointer is a corporation, either under its Common Seal or under the hand of its offi cer or attorney duly authorised.

7. The instrument appointing a proxy and the power of attorney or other authority (if any), under which it is signed or a notarially certifi ed copy thereof, must be deposited at the Company’s Share Registrar’s Offi ce at Tricor Investor Services Sdn. Bhd., Level 17, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur, not less than forty eight hours (48) hours before the time appointed for holding the meeting or any adjournment thereof.

EXPLANATORY NOTES ON SPECIAL BUSINESS:

Resolution 7 - Authority to Issue Shares

At last year’s Eighth Annual General Meeting held on 27 June 2012, authority was given to Directors to allot and issue no more than 10% of the issued share capital of the Company. As at the date of this notice, no new shares in the Company were issued pursuant to the authority granted, accordingly the mandate will lapse at the conclusion of the Ninth Annual General Meeting. As such, the Board would like to seek for a renewal of the mandate.

The proposed Resolution 7, if passed, will give the Directors of the Company, from the date of the above Annual General Meeting, authority to allot and issue shares from the unissued capital of the Company for such purposes as the Directors may deem fi t and in the interest of the Company. The authority will provide fl exibility to the Company for any possible fund raising activities, including but not limited to further placing of shares for purpose of funding future investment project(s), working capital and/or acquisitions.

The authority, unless revoked or varied by the Company in general meeting, will expire at the conclusion of the next Annual General Meeting of the Company.

NOTICE OF ANNUAL GENERAL MEETING


ANNUAL REPORT 2012

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DIRECTORS’ PROFILE

A Malaysian, aged 51 is the Independent Non-Executive Chairman of Tanjung Offshore Berhad (“Tanjung”). Datuk Seri Syed Ali Bin Tan Sri Syed Abbas Alhabshee (Datuk Seri Syed Ali) was appointed to the Board of Directors of Tanjung on 9 March 2005. He also serves as the Chairman of the Nomination Committee (“NC”) and Remuneration Committee (“RC”) and a member of Audit Committee (“AC”) of Tanjung. He was awarded a Professional Diploma in Leadership and Management by the New Zealand Institute of Management, New Zealand in 2003.

He ventured into business in the early 1980s and held directorships in several private and public corporations involved in a diverse range of businesses. He holds a directorship in C.I. Holdings Berhad and Bright Packaging Industry Berhad and is the Chairman of UZMA Berhad and Asia Media Group Bhd respectively. He is also the Chairman of Redtone International Berhad.

Datuk Seri Syed Ali is the Chairman of Composites Technology Research Malaysia Sdn. Bhd., a company which is controlled by the Ministry of Finance. He is also the Chairman of Yayasan Pendidikan Cheras, Kuala Lumpur. Datuk Seri Syed Ali was a member of Dewan Negara (Senate) of Malaysia from 21 April 2003 to 21 April 2009. As of todate, he is also a board member of Tourism Malaysia and Suruhanjaya Syarikat Malaysia.

Datuk Seri Syed Ali Bin Tan Sri Syed Abbas Alhabshee Independent Non-Executive Chairman

Harzani bin AzmiManaging Director

A Malaysian, aged 46, is the Group Managing Director of Tanjung. He was appointed to the Board of Directors of Tanjung on 23 April 2012.

Harzani bin Azmi, (En Harzani) has over 25 years of experience in the oil and gas industry both domestically and internationally. He has been instrumental in the setting up of Proserv Far East Pte Ltd for the Asia Pacifi c region, a Norwegian based company which is involved in the production technology and services for the energy industry worldwide.

He was the Vice President of Oriental Trading Co. Ltd, based in Doha, Qatar that specializes in the provision of engineering and project management services via his close business relationship with the Qatar royal family. He has managed and coordinated oil and gas projects valued at more than RM1.0 billion in Qatar.

En Harzani was the President/Director for WT Petrotech USA, Inc based in the United States and Indonesia which specializes in oil and gas production, process, wellhead and safety controls including pneumatic, hydraulic, eletro-hydraulic, PLC-based and solar powered system. He was also the Vice President/Director of Bumi Wangsa Sdn Bhd and Rimaco (M) Sdn Bhd.

En Harzani shall oversee the new business direction of Tanjung Group in seeking strategic growth within the oil and gas industry.


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Tan Wee KohExecutive Director

A Malaysian, aged 45, is the Executive Director of Tanjung. Mr Tan Wee Koh (Mr Eric) was appointed to the Board of Directors of Tanjung on 23 April 2012. Mr Eric is also the founder and chief executive offi cer of Gas Generators (Malaysia) Sdn Bhd (Gastec), a subsidiary of Tanjung which specializes in the design and manufacture of gas processing equipment for the oil and gas industry. He has been with Tanjung Group since January 2009.

Mr Eric holds a bachelor degree in Mechanical Engineering from the University of Melbourne and has over 19 years sales and marketing as well as project management experience in the oil and gas industry. With his new appointment to the Board of Tanjung, he shall be principally responsible for the overall operations and engineering packages division of Tanjung.

Dato’ Dr. (H) Ab Wahab Bin Haji IbrahimIndependent Non-Executive Director

A Malaysian, aged 61 is an Independent Non-Executive Director and the Chairman of the AC of Tanjung. Dato’ Dr. (H) Ab Wahab Bin Haji Ibrahim (Dato’ Ab Wahab) was appointed to the Board of Directors of Tanjung on 9 March 2005 and also serves as a member of the NC and RC. He is a Chartered Accountant and also a member of the Malaysian Institute of Accountants. He holds a Diploma and Advanced Diploma in Accounting from University Technology Mara and his experience spans over 27 years in the area of fi nance and accounting. He began his career in the Corporate Finance Division at PETRONAS in 1978 and later assumed the role of Finance Manager for PETRONAS Gas Berhad (“PGB”), a subsidiary of PETRONAS. He was also appointed as Joint Company Secretary and was a member of the Management Committee for PGB.

Following the successful implementation of the listing of PETRONAS Gas Berhad, he was further reassigned as Head of the Finance and IT Division of OGP Technical Services Sdn. Bhd., another subsidiary of PETRONAS in 1996, a position he held until 2004. In 2007, he obtained his Master of Business Administration (Management Studies) from University of Rockhampton and in the same year was honoured with the Honorary Doctorate Degree in Public Service by the Irish International University, Ireland. He is also an independent non-executive Director of Uzma Berhad and Alam Maritim Resources Berhad. He also serves as the Chairman of Alam Maritim Resources Berhad’s Audit Committee.

Muhammad Sabri Bin Ab. GhaniExecutive Director

A Malaysian, aged 41, is the Executive Director of Tanjung. En Muhammad Sabri Bin Ab. Ghani (En Sabri) was appointed to the Board of Directors of Tanjung on 21 March 2013. En Sabri is currently the Group Vice President of Business Development. He also holds directorships in various subsidiaries within the Tanjung Group.

He has more than 17 years of experience in the fi eld of project management activities especially in the oil & gas and energy industry. He joined the Tanjung Group in 1996 as a Project Engineer and was subsequently promoted to various positions within the Group. He specializes in application engineering and turbomachinery packages especially in gas compression for offshore application.

En Sabri is a graduate from the School of Mechanical and Offshore Engineering, The Robert Gordon University Aberdeen, Scotland and holds a Degree in Mechanical and Offshore Engineering. He also holds a Diploma in Petroleum Engineering from University Technology Malaysia. He is a registered graduate mechanical engineer with Board of Engineers Malaysia (BEM) since 1996.


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Edwanee Cheah bin Abdullah Independent Non-Executive Director

A Malaysian, aged 62 is the Independent Non-Executive Director of Tanjung. En Edwanee Cheah bin Abdullah (Encik Edwanee) was appointed to the Board of Directors of Tanjung on 9 March 2005. Encik Edwanee also serves as a member of the AC, NC and RC of Tanjung. He holds a Masters in Business and Administration (Technology) from Deakin University and is a Member of the Association of Professional Engineers, Scientists and Managers, Australia. His strong technical background is complemented by a wide and diverse business experience. He has over 30 years of international experience in the energy sector and has served various business units of the Shell International Exploration and Production in Europe, USA, Africa, Middle East and Asia and has a good standing on the international projects community. Through his exposure and knowledge in energy sector he is now a professional in managing large oil and gas development projects and has successfully delivered several projects of value over USD1 billion. His area of expertise is in strategic planning, commercial deal making, and in leading large groups of technical and commercial resources. As of todate, he is still an active oil and gas consultant for various multinational corporations and Malaysian contractors.

George William Warren Jr. Independent Non-Executive Director

an American, aged 43, was appointed as Independent Non-Executive Director of Tanjung on 28 August 2007 and is a member of the AC. Mr George William Warren Jr. (George. Warren) holds a Bachelor of Science Degree in Accounting (Graduating with Beta Alpha Psi Accounting Honours) from the Louisiana State University, United States. In 1993, after graduation, he joined Wegmann Dazet & Co., a professional corporation of certifi ed public accountants in New Orleans, Louisiana, where he was both a Senior Auditor and a Forensic Auditor. In 1997, he was appointed as the Managing Director of BWB Controls, Inc., Louisiana, a worldwide manufacturer of pneumatic, hydraulic and electric surface safety equipment engineered specifi cally for the oil and gas industry. In 2006, he became a Director in Mezco Fabrication, L.L.C., at Carencro, Louisiana, a manufacturer of precision sheet metal parts utilising laser cutting technology for the oil and gas industry, a position he holds until present day, a manufacturer of precision sheet metal parts utilising laser cutting technology for the oil and gas industry, a position he holds until present day.

Attendance of Board of Directors MeetingThe Directors’ attendance of Board of Directors Meeting can be found in the Statement of Corporate Governance of this Annual Report.

Family relationship with any director and/or major shareholderNone of the Directors has any family relationship with any director and/or major shareholder of the Company.

Confl ict of interestNone of the Directors has any confl ict of interest with the Company.

Conviction of OffenceNone of the Directors has been convicted of any offence within the past ten (10) years other than traffi c offences.


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22

CHAIRMAN’S STATEMENT

DATUK SERI SYED ALI BINTAN SRI SYED ABBAS ALHABSHEEIndependent Non-Executive Chairman


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23


Dear Shareholders,On behalf of the Board of Directors of Tanjung Offshore Berhad (“Board”) (“Tanjung” or “Company”) and its subsidiaries (“Tanjung Group” or “Group”), I hereby present to our valued shareholders, Tanjung’s annual report and the audited fi nancial statements of Tanjung Group for the fi nancial year ended (FYE) 2012.

Financial Performance

For the FYE 2012, Tanjung registered a total revenue of RM263.71 million and a loss after taxation of RM11.58 million. Total revenue for the year registered a decrease of 21.15% as compared to total revenue of RM334.44 registered in FYE 2011. Notwithstanding the decrease in revenue, the loss after taxation of RM11.58 million recorded during the year showed an improvement as compared to the loss after taxation of RM55.40 million registered in FYE 2011.

The decrease in revenue is mainly due completion of various engineering equipment contracts during the year. Total revenue was also affected by competitive and fragmented market for engineering equipment and maintenance contracts within Malaysia. The one off losses on disposal and closure of subsidiaries also affected our fi nancial performance for FYE 2012.

During the year, the Group has undergone a business rationalization plan to reduce high operational costs and divested overseas businesses to focus on our strengths in Malaysia. We are confi dent of achieving our turnaround plans so as to deliver a turnaround in revenue and profi tability in the near term.

As at 31 December 2012, the Group’s shareholders funds stood at RM166.28 million as compared to RM323.29 million as at FYE 2011. The reduction in shareholders’ funds is mainly due to the disposal of our marine business during the year.

Revenue (RM’000)

650,000 -

600,000 -

550,000 -

500,000 -

450,000 -

400,000 -

350,000 -

300,000 -

250,000 -

200,000 -

150,000 -

100,000 -

0 -2008 2009 2010 2011 2012

2008 2009 2010 2011 2012

574,273

649,656

541,807

334,437

263,707

Net Profi t / (Loss) After Tax (RM’000)

31,448

3,6167,588

(55,396)

(11,585)

-60 -

-50 -

40 -

30 -

20 -

10 -

0 -

-10 -

-20 -

-30 -

-40 -

-50 -

-60 -


ANNUAL REPORT 2012

24

to reward and support able students from the lower income group to further their studies at higher institutions of learning. We have also sponsored practical training courses as part of the overall graduate programmes at local universities such as Universiti Teknologi Mara, International Islamic University Malaysia, Universiti Kuala Lumpur, Universiti Malaya, Universiti Utara Malaysia and Universiti Tenaga Nasional. These practical training programmes involved hands-on training at our maintenance workshops and formal seminars and discussions at our offi ces for various engineering disciplines within the oil and gas industry.

Through these practical training programmes, we are also able to offer employment to local graduates who have passed our formal selection criteria. We believe in supporting these programmes which will provide mutual benefi ts to the career development of local graduates and Tanjung Group on a long term basis.

During the year, we have also contributed fi nancially to the “Persatuan Kanak-Kanak Istimewa Ampang” to lend our support to the childcare centre that provides support and guidance to children with special needs and care.


Outlook for the Oil and Gas Industry

We remain optimistic on the prospects of oil and gas industry in Malaysia as our government had announced various plans to boost the industry under its Economic Transformation Programme with investments up to RM75 billion over the next 15 to 20 years. These investments are expected to spur various activities within the industry and we expect oil majors to actively enhance their exploration, development, production and maintenance operations in the near future.

Corporate Social Responsibility

During the year we continued with our corporate social responsibility programmes to promote:

• Awareness of Health, Safety and Environmental (HSE) performances;

• Development of Staff; and• Community Services.

In ensuring that all staff within Tanjung Group are aware and perform their tasks in accordance to health, safety and environmental requirements, we always strive to eliminate any potential risks of injury or hazards at our workplaces and offi ces through various seminars conducted by professionals to promote HSE work ethics at all times. Various operational processes are reviewed and updated regularly so as to ensure the safety of personnel at all levels of operations in our core business divisions. All HSE regulations and procedures have been communicated to all staff, business associates and visitors to all our offi ces, workshops, operation centres and vessels.

The Tanjung Group has also supported various community services and activities at “Yayasan Pendidikan Cheras” which was established to support the education needs of children from low income groups in Kuala Lumpur. We have provided various scholarships, incentives and support programmes


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25

TANJUNG OFFSHORE BERHAD (66( 2315-U))

ANNUAL REPORT 2012


Dividend

Save for the special tax exempt dividend per share of RM0.44 which was paid out on 18 September 2012, no dividend was declared for the fi nancial year ended 31 December 2012.

Corporate Governance

The Board believes in the maintenance of the highest standards of corporate governance practices within the Group as a fundamental part of discharging our responsibilities to protect and maximize shareholders’ value and enhancing the continued business prosperity of the Group. The measures implemented have been highlighted in the Corporate Governance Report in this annual report.

Investor Relations

During the year, we have conducted analyst briefi ngs so as to establish proactive and timely communication linkages with the investment community such as institutional investors, fund managers, analysts and media on our fi nancial performance and business operations. Our Company’s website is also updated on a regular basis to refl ect the latest developments and improving public awareness of the Group at the same time.

Appreciation

On behalf of the Board, I wish to extend my gratitude and appreciation to our management and staff for their continuous commitment and dedication in achieving our long term plans.

We would also like to take this opportunity to thank our stakeholders who believe in the long term prospects of the Group, oil majors, in particular PETRONAS, for their continuous support over the years, our business associates and principals for successful collaborations in executing our projects.

Lastly, my special thanks also to my colleagues on the Board of Tanjung for their invaluable support and guidance throughout theyear.

...............................................................DATUK SERI SYED ALIBIN TAN SRI SYED ABBAS ALHABSHEEIndependent Non-Executive Chairman30 April 2013


ANNUAL REPORT 2012


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26

It is the policy of Tanjung Offshore Berhad and its subsidiaries (Tanjung Group) that allour work activities shall be conducted in amanner which safeguards the Health, Safety and Welfare of all persons and preserves thenatural Environment, as far as it is practicable.

Our Health, Safety and Environment (HSE) objectives shall bear equal importance with our fundamental business objectives.

Every employee of Tanjung Group isobligated to work safely, to cooperate and act responsibly in preventing injury to him/her and to others.

In pursuance of this policy and in adherence to all legislative and other requirements with the commitment to achieve continuous improvement, Tanjung Group shall endeavor to :-

• Prevent all accidents, occupational diseases and fi res

• Prevent damage to equipment, items, plant and property

• Protect and preserve the environment

• Implement safe system of work

• Safeguards the interest of the general public and surrounding community

• Promote safety awareness and provide training to Tanjung Group’s employees to achieve our HSE objectives

• Provide forum and platform to employees, customers and contractors to actively participate in our HSE programme

26

HEALTH,SAFETYENVIRONMENT POLICY&


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27

MANAGING DIRECTOR’S REVIEW

HARZANI BIN AZMIManaging Director


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During the FYE 2012, the Group registered total revenue of RM263.71 million which represents a decrease of 21.15% as compared to that recorded in the previous FYE 2011 of RM334.44 million. Notwithstanding a lower revenue, the Group showed improvement in the loss after taxation of RM11.58 million in FYE 2012 as compared to a loss after taxation of RM55.40 million in FYE 2011.

Overall revenue was lower in FYE 2012 due to the completion of various engineering equipment contracts and the expiration of our drilling rig contract in September 2011. Total revenue was also affected by competitive and fragmented market for engineering equipment and maintenance contracts within Malaysia. The one off losses on disposal and closure of subsidiaries such as Tanjung Kapal Services Sdn Bhd, Citeh Energy Recovery Systems Ltd and PT Tanjung Offshore Nusantara have also affected our fi nancial performance for FYE 2012.

Engineering Equipment Services

In FYE 2011, the engineering equipment division registered total revenue of RM203.69 million which represented an increase of 11.97% as compared to RM181.91 million registered in FYE 2011. The increase in revenue from the engineering equipment division is mainly due to the business rationalization plan initiated by the management in the early part of FYE 2012.

We have closed/ceased the overseas subsidiaries that have affected our profi tability in recent years and have refocused our operations in Malaysia and the ASEAN region in 2012. We have streamlined our operations and business model so as to generate better revenue and improved our margins. Engineering equipment contracts secured during the year comprises mainly equipment packages for offshore platforms/rigs and nitrogen generators. Most of these contracts were secured from both domestic and international markets for the development and production of oil and gas fi elds.

On behalf of the Board of Directors

(“Board”) of Tanjung Offshore Berhad

(“Tanjung” or “Company”) and its

subsidiaries (“Tanjung Group” or

“Group”), I hereby present the Group’s

performance for the fi nancial year ended

31 December 2012.

29


ANNUAL REPORT 2012TANJTANJUNGUNG OFFSOFFSHOREHORE BERBERHADHAD (66(6623152315-U)U)

ANNUAL REPORT 2012


Maintenance Services

We provide one stop maintenance services for both the upstream and downstream sector of the oil and gas industry through fi ve (5) main workshops of which two (2) are located in Kemaman, Terengganu, one (1) each in Miri, Bintulu and Labuan. We have revamped the business model and operations for our workshops through active collaboration and joint ventures with principals and business partners so as to reduce our operational costs.

For the maintenance division, the Group registered an increase in revenue of approximately 39% to RM58.04 million in FYE 2012 as compared to RM40.99 million in FYE 2011. We secured new contract extension for the wellhead maintenance contract and we aim to increase our market share other maintenance services from new and existing clients in both Peninsular and East Malaysia such as Petronas Dagangan Sdn. Bhd., Petronas (Penapisan) Terengganu Sdn. Bhd., Petronas Gas Berhad, BASF Petronas Chemicals Sdn. Bhd., BP Chemical Sdn. Bhd., ExxonMobil Exploration and Production Malaysia Inc, Bhd, Petlin Malaysia Sdn. Bhd., Nippon Oil Exploration Malaysia Ltd and and Murphy Sarawak Oil Co.

Products & Services

We have set up the Products & Services division to cater for the provision of equipment and spares trading based on agency basis with international principals. For 2013, we hope to formalise new agency agreements with new principals to expand our product scope and services to the industry.

Our People

We have also invested substantially in human capital, which is also one of the important aspects of the Group. In line with our business rationalization exercise in FYE 2012, we have also recruited and retained capable and competent personnel via various training programmes at all levels within the Group. During the year, we have sent various engineering teams for complete technical training at our principals’ centres, both local and overseas for in-depth exposures on the latest technological advances in the oil and gas industry.

Outlook for the Future

During the year, we have completed our business rationalization exercise so that we are more effi cient and effective in our business operations. We remain positive on the long term fundamentals and opportunities within the industry and our new management team is looking forward for a better year and to register new revenue growth and a turnaround in our profi tability.

…………………………HARZANI BIN AZMIManaging Director30 April 2013

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ANNUAL REPORT 2012

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ANNUAL REPORT 2012

AUDIT COMMITTEE REPORT

The primary objective of the Audit Committee is to assist the Board of Directors in discharging its statutory duties and responsibilities relating to accounting and reporting practices and to ensure the adequacy and effectiveness of the Group’s internal control measures.

COMPOSITION OF THE AUDIT COMMITTEE

The members of the Audit Committee and their respective designations who have served during the fi nancial year ended 31 December 2012 are as follows:-

Member Designation

Dato‘ Dr. (H) Ab Wahab Bin Haji Ibrahim Chairman (Independent Non-Executive Director)

Encik Edwanee Cheah Bin Abdullah Member (Independent Non-Executive Director)

Mr. George William Warren Jr Member (Independent Non-Executive Director)

Tuan Syed Yasir Arafat Bin Syed Abd Kadir* Member (Non-Independent Non-Executive Director)

* Resigned as a member of the Audit Committee on 27 February 2013.

Note: Datuk Seri Syed Ali Bin Tan Sri Syed Abbas Alhabshee was appointed an Audit Committee member on 21 March 2013.

SUMMARY OF THE TERMS OF REFERENCE OF THE AUDIT COMMITTEE

• Membership

The Audit Committee must fulfi ll the following requirements:- a) The Audit Committee must comprise of of not less than three (3) members; b) A majority of the members must be independent directors and all members must be non-executive; c) At least one member of the Audit Committee must fulfi l the requirements as prescribed or approved by the Exchange. d) The Chairman shall be an Independent, Non-Executive Director. No alternate director is appointed as a member of the

Audit Committee; e) In the event that any vacancy in the Audit Committee results in the non-compliance of the above requirements, the

Company must fi ll the vacancy within three (3) months; and f) The Company Secretary shall act as Secretary to the Audit Committee.

• Terms of Reference a) The Audit Committee shall provide assistance to the Board of Directors in fulfi lling its fi duciary responsibilities relating to

the corporate accounting and practices of the Company and its subsidiaries; b) The Audit Committee shall be granted the authority to investigate any activity of the Company and its subsidiaries, and

all employees shall be directed to co-operate as requested by members of the Committee; c) The Audit Committee shall be empowered to retain persons having special competence as necessary to assist the

Committee in fulfi lling its responsibilities; d) The Audit Committee shall provide assistance to the Board in fulfi lling its fi duciary responsibilities particularly relating to

business ethics, policies and fi nancial management control; e) The Audit Committee shall maintain a direct line of communication between the Board, External Auditors, Internal

Auditors and Management through regularly scheduled meetings; f) The Audit Committee shall provide greater emphasis on the audit functions by increasing the objectivity and independence

of External and Internal Auditors and providing a forum for discussion that is independent of the Management; g) The Audit Committee may invite any person to the meeting to assist the Audit Committee in decision-making process

and that the Audit Committee may meet exclusively as and when necessary; and h) Serious allegations that have fi nancial implications against any employee of the Company shall be referred to the Audit

Committee for investigation to be conducted.

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ANNUAL REPORT 2012


• Authority

The Audit Committee shall have the following authority as empowered by the Board of Directors:- a) The authority to investigate any matter within its terms of reference; b) The resources which are required to perform its duties; c) Full, free and unrestricted access to any information, records, properties and personnel of the Company and

any other subsidiaries (if any) or sister companies; d) Direct communication channels with the External Auditors and person(s) carrying out the internal audit

function or activity (if any); e) Able to obtain independent professional or other advice; and f) Able to convene meetings with the External Auditors and Internal Auditors together with other independent

non-executive members of the Board, excluding the attendance of any Executive Directors, at least once a year or whenever deemed necessary.

• Meetings

a) The Audit Committee shall meet at least four (4) times in a year to discuss any matters raised by the Auditors in discharging their functions. The quorum for a meeting of the Audit Committee shall be two (2); and

b) At least once a year, the whole Board shall meet with the External Auditors without the presence of any executive Board member/Managing Director or Senior Management.

• Duties and responsibilities

The duties and responsibilities of the Audit Committee with the following groups will be as follows:- i) To obtain satisfactory response from Management on reports issued by External and Internal Auditors; ii) To oversee the function of the Internal Audit Department; iii) To review arrangements established by Management for compliance with any regulatory or other external

reporting requirements, by-laws and regulations related to the Company’s operations; iv) To consider the appointment of the External Auditor, the audit fee and any questions of resignation or

dismissal, to discuss with the External Auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit fi rm is involved, their audit report and evaluation of the system of the internal controls and review the quarterly and year-end fi nancial statements of the Company;

v) To discuss problems and reservations arising from the external audits, and any matter the auditor may wish to discuss and to oversee the internal audit function; and

vi) To consider any related party transactions that may arise within the Company including any transaction, procedure or course of conduct that raises questions of Management’s integrity.

During the fi nancial year ended 31 December 2012, the Audit Committee held a total of fi ve (5) meetings, the details of attendance of which are as follows:-

Member No. of meetings attended

Dato‘ Dr. (H) Ab Wahab Bin Haji Ibrahim 5 of 5

Encik Edwanee Cheah Bin Abdullah 5 of 5

Mr. George William Warren Jr 5 of 5

Tuan Syed Yasir Arafat bin Syed Abd Kadir* 4 of 5

* Resigned as member of the Audit Committee on 27 February 2013.

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ANNUAL REPORT 2012

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ANNUAL REPORT 2012

SUMMARY OF ACTIVITIES DURING THE FINANCIAL YEAR

During the fi nancial year ended 31 December 2012, the activities of the Audit Committee included the following:-

• Reviewing of the external auditors’ scope of work and their audit plan.• Reviewing with the external and internal auditors on the results of their audit, the audit report and internal control

recommendations in respect of improvements in internal control procedures noted in the course of their audit.• Reviewed and revised the Limits of Authority at all levels of management and approved the formation of a

dedicated team to oversee the Group business rationalization plan to turnaround all business operations. • Reviewing and approving the annual audit plan of the Internal Audit Department, including the scope of work

for the fi nancial year. Reviewing the annual report and the audited fi nancial statements of the Company and the Group prior to submission to the Board for their consideration and approval. The review was to ensure that the audited fi nancial statements were drawn up in accordance with the provisions of the Companies Act, 1965 and the applicable approved accounting standards issued by the Malaysian Accounting Standards Board (“MASB”).

• Reviewing the Company’s compliance with the Listing Requirements of the Bursa Malaysia Securities Berhad (“Bursa Securities”) (“Listing Requirements”) and the applicable approved accounting standards issued by MASB.

• Reviewing of the quarterly unaudited fi nancial statements and its explanatory notes thereon and recommending to the Board for Directors’ approval.

• Reviewing and approving the Internal Audit Charter.• Reviewing the risk management policy and framework for adoption by the Group, prior to submission to the

Board for consideration and approval.• Reviewing the Audit Committee Report and Statement on Internal Control prior to their inclusion in the Company’s

Annual Report.• Meeting with the External Auditors without the presence of the Management and Executive Directors.

OPTIONS FOR SHARE ISSUANCE SCHEME

No allocation of Employee Share Option Scheme Options (ESOS Scheme) was made during the year. On 7 February 2013, the previous ESOS Scheme was terminated and was replaced with a new Share Issuance Scheme. As at todate, none of the share options were allocated to Executive Directors and employees of the Group. The Share Option Committee shall meet and deliberate on this matter in due course.

INTERNAL AUDIT FUNCTION

The Head of the Internal Audit Department of the Group left the Company towards end of the fi nancial year. In the absence of the Head of the Internal Audit Department, the Group has appointed an external internal audit professional fi rm in March 2013 to perform the internal audit function of the Group. The internal audit fi rm reports directly to the Audit Committee and administratively to the Managing Director. The activities of the internal audit fi rm are guided by the Internal Audit Charter that provides its independence in evaluating and reporting on the adequacy, integrity and effectiveness of the overall internal control system, risk management and corporate governance in the Group using a systematic and disciplined approach. The reviews and control improvement initiatives conducted by the internal audit fi rm during the year were defi ned in an annual audit plan approved by the Audit Committee. The audit plan encompassed the issuance of internal audit charter, documented terms of reference for the Board and Board Committees, director’s code of ethics, service provider code of conduct and fraud prevention manual.

Other initiatives undertaken by the previous Internal Audit Department in FYE 2012, include the development of risk management policy and framework, and operational review of project management. The corresponding reports of the audit reviews performed were presented to the Audit Committee and forwarded to the Management for attention and corrective actions. The Management is responsible for ensuring that the recommended corrective actions are taken within the required timeframe. The cost incurred in relation to the internal audit function during the year was RM80,000.00.

During the year, the personnel of internal audit department attended training in order to enhance their skills and knowledge, and continuously provide value added services to the Group, in line with the requirement of the Internal Audit Charter.


33


ANNUAL REPORT 2012

STATEMENT ON RISK MANAGEMENT AND INTERNAL CONTROL

Introduction

Paragraph 15.26(b) of Listing Requirements requires the Board of Directors of public listed companies to include a statement on Risk Management and Internal Control in the Company as a Group. The Malaysian Code on Corporate Governance 2012 (“Code”) prescribes that the Board of Directors should maintain a sound system of internal control to safeguard shareholders’ investment and the company’s assets. Accordingly, the Board is pleased to provide the following statement on Risk Management and Internal Control of the Group for the fi nancial year under review.

Board Responsibilities

The Board of Directors is committed to maintain and effective system of internal controls and risk management practices in the maintenance of good corporate governance. The system of internal control is designed to identify and manage the principal risks facing the Group in pursuit of its objectives. The system covers control relating to fi nancial, operational, risk management and compliance with applicable rules and regulations.

The responsibilities of the Board in relation to the system extend to all subsidiaries of the Group. In view of the limitations inherent in any system of internal control, the Group’s system of internal control can only manage rather than eliminate the risk of failure to achieve corporate objectives and therefore can only provide reasonable and not absolute assurance against material misstatement, loss and fraud. The Group continues to take measures of the adequacy and integrity of the system of internal control.

Risk Management

The Board has established an ongoing process of identifi cation, evaluation and management of signifi cant risks pertinent to the achievement of the Group’s objectives. The Management assists the Board in the implementation of the policies and procedures on risks and controls by identifying and assessing the risks faced, and in the design, operation and monitoring of suitable internal controls to mitigate and control these risks.

A dedicated management team was established to identify, evaluate, monitor and manage all key risks faced by the Group. The framework is designed to achieve these objectives:-

• Communicate the vision, role, direction and priorities to staff and other stakeholders;• Identify, evaluate, monitor and control all key risks in an effective and effi cient manner;• Enable systematic risk review and reporting of key risks, existing control measures and any proposed action

plans; and• Create a risk-aware culture and build necessary knowledge for risk management at every level of management.

Risks which have signifi cant impact to the Group, either in fi nancial or non-fi nancial terms, are escalated to the respective team heads of division for prompt deliberation and action, where required. The Board of Directors is consulted and updated on status of projects deemed high risks.

Engagement sessions were carried out with personnel at all levels to further inculcate a risk awareness culture, improve information sharing and obtain feedback or consultation with the Board of Directors for continuous improvement purposes. The Group will continue to develop and improve its risk management practices, which are consistent with good corporate governance. In this regard, the Board has received assurance from the Managing Director and the Chief Financial Offi cer that the Group’s risk management and internal control system is operating adequately and effectively, in all material aspects, based on the risk management framework adopted by the Group.

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ANNUAL REPORT 2012

System of internal control

The Group maintains a system of internal control that serves to safeguard its assets; identify and manage risk; ensure compliance with statutory and regulatory requirements; and to ensure operational results are closely monitored and substantial variances are promptly explained.

Whilst the Board maintains control and direction over appropriate strategic, fi nancial, organisational and compliance issues, it has delegated the implementation of the system of internal controls to the executive management, led by the Managing Director. The Managing Director, who is empowered to manage the business of the Group, has primary operational responsibility for the system of internal controls.

In addition, the Board has established an Executive Committee (EXCO) to provide assistance in the management of the Group. Comprising of the Managing Director and the Executive Director, the members meet regularly to consider, resolve and manage strategic and business issues faced.

The Board convenes meetings on quarterly basis in order to maintain full and effective supervision. The Managing Director, being the principal channel of communication between the Board and the management, will lead the presentation of Board papers and provide comprehensive explanation on main issues. In arriving at any decisions based on recommendations by management and the Audit Committee, a thorough deliberation and discussion by the Board is a prerequisite.

The salient features of the Group’s system of internal control include, inter alia :-

An organisational structure with clearly defi ned lines of responsibility and relevant authority has been set up for the Group.

The Group’s management with the assistance of a centralised human resource function sets the policies for recruitment, training and appraisal of the employees within the Group.

Policies and procedures which sets out the compliance standards for daily operations for the respective business units of the Group;

The Risk Management Policy and Framework developed during the year, to help ensure that risks are managed effectively, effi ciently and coherently across the Group. Reviews of risks are undertaken for major business proposals and transactions where key risks affecting the Group are identifi ed, analysed, prioritised and managed in a consistent manner.

Approved Limits of Authority are imposed on the Management in respect of the day-to-day operations, investment decisions, acquisition and disposal of assets as a control to minimise any risk of abuse of authority.

The Group’s management meets monthly to review the operational and fi nancial performance of the businesses in the Group and its subsidiaries, and to discuss key business, operational and management issues.

The Board of Directors receives and reviews quarterly performance reports on the Group and its subsidiaries from the management, and discuss on signifi cant business and risk issues.

The Group’s management and internal auditors have conducted reviews on the system of internal control to ensure compliance with the established policies and procedures of the Group. Weaknesses are properly communicated to management and prompt corrective actions have been taken.

Established system of performance appraisal to monitor and maintain good performance standards from employees.

Organisational Structure

The Board has implemented a divisional structure for the Group. Clearly defi ned lines of responsibility and authority limits at various management levels provide a documented and auditable trail of accountability. In addition, the Group has various support functions comprising secretarial, administration, legal, human resource, procurement, project management, fi nance, corporate fi nance and information system which are centralized. This enhances the Group’s ability to achieve its strategic and operational objectives and minimize risks.

Whistle-Blowing The Group has a whistle-blowing policy and procedure to provide opportunity for employees, directors and others to raise their concerns of any malpractice within the Group. The objective of the policy and procedure is to provide and facilitate a mechanism for any whistleblower to report concern about any suspected and/or known misconduct, wrongdoings, corruption, fraud, waste and/or any abuse of power.

This will enable each case/issue can be investigated and for appropriate action to be taken to ensure that the matter is resolved effectively and within the Company wherever possible.

Conclusion

The Board is of the view that the system of internal control and risk management that had been implemented within the Group is sound and effective. The internal control procedures will be reviewed continuously in order to improve and strengthen the system to ensure ongoing adequacy, integrity and effectiveness so as to safeguard the Group’s assets and shareholders’ investments.

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ANNUAL REPORT 2012

STATEMENT OF CORPORATE GOVERNANCE

The Board of Directors (“Board”) recognises the importance of good corporate governance and is committed to the establishment and implementation of a proper framework and controls that are in line with the principles and best practices as recommended by the Code.

The Board will continuously evaluate the status of the Group’s corporate governance practices and procedures with a view to adopt and implement the Best Practices of the Code wherever applicable in the best interests of the shareholders of the Company. The Board has generally applied the Principles and Best Practices of the Code.

The Board is pleased to report herein the manner in which the Company has applied the Principles of the Code and the extent to which it has complied with the Best Practices of the Code.

DIRECTORS

1. Board Responsibilities

The Board is fully aware of its role and has adopted the specifi c responsibilities that are listed in the Code, which facilitates the discharge of the Board’s stewardship responsibilities via the establishment of a Board Charter which is made available at the corporate website at www.tanjungoffshore.com.my.

a. Board Balance

The Board of Directors consists of seven (7) members comprising three (3) executive directors, and four (4) independent non-executive directors. The Board has complied with Paragraph 15.02 of the Listing Requirements that at least two or one-third of the Board, whichever is the higher are independent directors. The Board considers its current size adequate given the existing scope and nature of the Group’s business operations.

The Board is responsible for implementing the policies and decisions of the Board, overseeing the operations and developing the business and corporate strategies of the Group. The Board also monitors the performance of the Group and ensures that a proper internal control system is in place. The presence of independent non-executive directors is to provide independent and unbiased views of fi nancial and business inputs for the interest of the Group.

The Board has conducted an assessment on the Independent Directors who have served the Company for less than nine (9) years.

The Company has also formalised a set of ethical standards through a code of conduct, which is subject to periodical review, to ensure Directors practise ethical, businesslike and lawful conduct, including proper use of authority and appropriate decorum when acting as Board members.

b. Board Committees

The Board has established board committees to assist the Board in discharging their duties. These committees are as follows:-

• Audit Committee • Nomination Committee • Remuneration Committee • Share Option Committee

Audit Committee

The composition of the Audit Committee is in compliance with relevant regulatory requirements. The report of the Audit Committee is enclosed herein.

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ANNUAL REPORT 2012

Nomination Committee

The Board has established a nomination process of board members to facilitate and provide a guide for the Nomination Committee to review the Board composition and balance as well as to consider the Board’s succession planning and to identify, evaluate, select and recommend to the Board the candidate for new appointment of Directors. The Nomination Committee meets as and when required. The decision on new appointment shall be the responsibility of the Board after considering the recommendation of the Nomination Committee. The members of the Nomination Committee are as follows:-

Member Designation

Datuk Seri Syed Ali Chairman (Independent Non-Executive Chairman) Bin Tan Sri Syed Abbas Alhabshee

Dato Dr. (H) Ab Wahab Bin Haji Ibrahim Member (Independent Non-Executive Director)

Edwanee Cheah Bin Abdullah Member (Independent Non-Executive Director)


* Resigned as member of the Nomination Committee on 27 February 2012.

The Board considers that the current mix of skills and experience of its members are suffi cient for the discharge of its duties and responsibilities effectively.

The director who is subject to re-election and/or re-appointment at next Annual General Meeting is assessed by the Nomination Committee before recommendation is made to the Board and shareholders for re-election and/or re-appointment. Appropriate assessment and recommendation by the Nomination Committee is based on the yearly assessment conducted.

As all members of the Nomination Committee are Independent Directors, the assessment of the NC is conducted by the Board as a whole.

Remuneration Committee

The Board has established a remuneration policy and procedure to facilitate the Remuneration Committee to review, consider and recommend to the Board the levels and elements of remuneration of Directors with executive functions and the senior management. The Board as a whole determines the allowances of the Non-Executive Directors and the Non-Executive Chairman after considering the recommendation of Remuneration Committee. The Remuneration Committee meets as and when required.

The members of Remuneration Committee are as follows:-

Member Designation

Datuk Seri Syed Ali Bin Tan Sri Syed Abbas Alhabshee Chairman (Independent Non-Executive Chairman) Dato‘ Dr. (H) Ab Wahab Bin Haji Ibrahim Member (Independent Non-Executive Director) En Edwanee Cheah Bin Abdullah Member (Independent Non-Executive Director) Tuan Syed Yasir Arafat Bin Syed Abd Kadir * Member (Non-Independent Non-Executive Director) * Resigned as member of Remuneration Committee on 27 February 2013.


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ANNUAL REPORT 2012


Share Option Committee

The Share Option Committee was established on 2 August 2005. The Share Option Committee comprises the following members:-

Harzani bin Azmi Chairman (Managing Director)

Tan Wee Koh Member (Executive Director)


* Resigned as member of the Share Option Committee on 27 February 2013.

The Share Option Committee shall be vested with such powers and duties as are conferred upon it by the Board including the powers:-

• to administer the Share Option and to grant Options in accordance to the Bye-Laws;

• to recommend to the Board to establish, amend, and revoke Bye-Laws, rules and regulations to facilitate the implementation of the Scheme;

• to construe and interpret the provisions hereof in the best interest of the Company; and

• generally, to exercise such powers and perform such acts as are deemed necessary or expedient to promote the best interest of the Company.

Subject to the foregoing, the Share Option Committee shall exercise its discretion in such manner as it deems fi t.

As at the fi nancial year ended 31 December 2012, none of the Share Options were allocated.

c. Board Meetings

The Board meets at least four (4) times a year with additional meetings held as and when urgent issues warrant matters to be attended.

The Directors are provided before each Board Meeting, with the appropriate information relating to the matters to be

discussed and where necessary, additional information is provided during the Board meeting on signifi cant issues that arise or when specifi cally requested by a Director. The Directors whether as a full board or in their individual capacity also have access to the services of the Company Secretary and management staff. Where considered necessary, the Board may also engage the services of professionals on specialized issues in furtherance of their duties.

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ANNUAL REPORT 2012

During the fi nancial year under review, seven (7) Board Meetings were held and the Directors’ attendances at the Board Meetings were as follows:-

Attendance Datuk Seri Syed Ali Bin Tan Sri Syed Abbas Alhabshee 7/7 (Chairman, Independent Non-Executive Director)

Dato‘ Dr. (H) Ab Wahab Bin Haji Ibrahim 7/7 (Independent Non-Executive Director)

Tuan Syed Yasir Arafat Bin Syed Abd Kadir* 7/7 (Non-Independent Non-Executive Director)

Harzani Bin Azmi 7/7 (Managing Director)

Mr. Tan Wee Koh* 7/7 (Executive Director) Encik Edwanee Cheah Bin Abdullah 7/7 (Independent Non-Executive Director)

Mr. George William Warren Jr 7/7 (Independent Non-Executive Director)

Encik Muhammad Sabri Bin Ab Ghani# 0/7 (Executive Director)

* Resigned as Director on 27 February 2013. # Appointed as Director on 21 March 2013

Supply of Information

The Board recognises that the decision making process is highly dependent on the quality of information furnished. As such, the Board members have full and unrestricted access to all information concerning the Group’s affairs. Prior to the Board meetings, all Board members are provided with the agenda and board papers containing information relevant to the business of the meeting to enable them to obtain further explanations, where necessary, in order to be properly briefed before the meetings. The Board papers including information on major fi nancial, operational and corporate matters of the Group. The Board members also have access to the advice and services of the Company Secretary, senior management and independent professional advisers including the external auditors.

Along with good governance practices and in order to enhance transparency and accountability, the Board has established and put in place the following policies and procedures which full details of the policies and procedures are made available at the Company’s website at www.tanjungoffshore.com.my:

- Board Charter- Code of Conduct- Shareholder’s Right relating to General Meeting- Corporate Social Responsibility Policy

Appointment and Re-election

In accordance with Article 103 of the Company’s Articles of Association, at least one-third of the Directors for the time being shall retire from offi ce and be subject to retirement by rotation at each Annual General Meeting (“AGM”). The article also provides that all Directors shall retire once in every three (3) years in compliance with the Code. Directors who are appointed before the next AGM will retire and be subject to re-election by shareholders at the next AGM.


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ANNUAL REPORT 2012


Directors’ Training

The Board of Directors are mindful that they should receive appropriate continuous training and during the fi nancial year, they have attended presentations and briefi ngs in order to keep abreast with developments in the industry, market place and with new statutory and regulatory requirements.

During the fi nancial year ended 31 December 2012, the Directors attended in-house training programmes conducted by the Company’s external auditors and secretary. The Directors are also briefed and updated at the scheduled quarterly meetings with any relevant amendments to the Main Market Listing Requirements received from Bursa Securities and other relevant topics which are useful to them in discharging their duties effectively.

DIRECTORS’ REMUNERATION

The determination of remuneration packages of the Directors are matters for the Board as a whole. The remuneration of the Directors is structured to attract, retain and motivate them in order to run the Group successfully.

The Board reviews the remuneration of the Directors annually whereby the respective Executive Directors are abstained from discussions and decisions on their own remuneration.

The aggregate remuneration of the Directors for the fi nancial year ended 31 December 2012 is as follows:-

Executive Directors Non-Executive Directors Total (RM)

Basic salary 1,056,915.00 - 1,056,915.00

Bonuses - - -

Fees - 212,000.00 212,000.00

Total 1,056,915.00 212,000.00 1,268,915.00

Remuneration Band (RM) Executive Directors Non-Executive Directors

0 - 50,000 - -

50,001 - 100,000 - 4

100,001 - 150,000 - -

150,001 - 200,000 - -

200,001 - 250,000 - -

250,001 - 350,000 2 -

CORPORATE DISCLOSURE

The Board has, based on the recommendation of the Code, adopted a Corp

Documents

Annual Report 2012...TANJUNG OFFSHORE BERHAD (662315-U) TANJUNG OFFSHORE BERHAD (662315-U) Annual Report 2012 Focused on GROWTH ANNUAL REPORT 2012 Suite 5 …