CEO Update 2007

The year in review saw Scicom operating in an increasingly challenging client environment, driven by global pressures to reduce cost. Scicom nevertheless, was able to rise to the challenge and deliver satisfactory financial and operational results. This was driven primarily by prudent cost mitigation, new client acquisitions, an organisational restructuring exercise and enhanced revenues through a series of evolving and innovative service offerings to our multinational client-base.

Consolidated revenue for the financial year ended 30 June 2007 rose significantly by 40% to RM109 million. New contracts secured during the 2007 financial year include contracts with clients based in Australia, Singapore, Hong Kong and Malaysia worth approximately RM60 million over a three-year period.

The Group's profit after taxation for the year was 24.4% higher at RM11.3 million from the Group's preceding year's profit of RM9.1 million. The Group's total asset base has increased by 7.1 % to RM52.7 million as at 30 June 2007 over the preceding year's asset base of RM49.2 million.

Our operations are centred in Malaysia with full service offerings also I available in India and the USA. Malaysia continues to be our global headquarters with 1,182 staff followed by 168 staff in India and 140 staff in the USA. Our global headcount stands at 1,490 staff as of 30 June 2007.

Scicom's brand is increasingly well regarded as a reputable force in the Outsourcing industry. During the financial year, Scicom was named the "Malaysian Contact Centre Service Provider of the Year" by Frost & Sullivan. This is the second time that Scicom has won this prestigious award. Scicom was also placed in the "Top Global 100 Services Providers" listing for 2007, based on the survey as conducted by "Global Services" Magazine and neolT, a distinction which we also earned in 2006. For 2007, "Global Services" magazine listed Scicom amongst the "Top 10 Companies to Watch in Emerging Asian Markets" category, and named Scicom within the Top 10 nominees for "Specialty Application Development Providers". Scicom continues to be at the fore-front of the industry in Malaysia delivering world-class services to multinational clients. For the financial year ended 30 June 2007, foreign currency earnings constituted 96% of the Group's total revenue.

Financial year 2007 has been a challenging year for Scicom. Our clients have requested reductions in cost to commensurate with their own global cost and market challenges which have resulted in reduced margins for the Group. Consolidations taking place in our competitor environment both in India and the Philippines have also contributed to the Group providing increasingly competitive prices to compete in a globalised service delivery environment. Additionally, the strengthening of the Ringgit Malaysia has resulted in an increase in cost to our multinational client-base.

In part to mitigate global cost and margin pressures as described herein, Scicom has expanded beyond its core service offerings of the provision of complex premier customer care solutions, technical helpdesk support and associated fulfilment activities, to encompass new services in data analytics, customer relationship management consultancy, relationship marketing, software development, educational and training services, primarily focussing on our core activity within the Business Process Outsourcing/Shared Services Outsourcing ("BPO/SSO") industry.

In line with our expanded service offerings, Scicom has invested and continues to invest in its human capital, systems and resources in order to cater for rapid scalability and be globally competitive in terms of attracting our targeted MNC client-base. The creation of a dedicated Project Management Office, improved management information systems and quality initiatives has resulted in the Group having a clear competitive advantage vis-a-vis the competition in Malaysia and the region.

The Group's wholly owned subsidiary - Scicom (Academy) Sdn Bhd, is the Group's integrated training arm. External training in relation to soft skills and hard skills for a contact centre environment has been very successful and has resulted in a client-base across Asia Pacific and the Middle-East. A formal approach to the business in terms of skill-based education has been completed with the creation of internationally accredited certifications and diplomas. The Group through affiliations with Universities in the United Kingdom ("UK"), USA and professional bodies, has set up an internationally recognised accredited Customer Relationship Management ("CRM") diploma and degree course specially tailored for the BPO/SSO industry, with the aim of improving the quality of work force (at both entry and management level) in the contact centre and the BPO/SSO industries.

The Group has set up a subsidiary -Jade Apple Marketing Sdn Bhd ("JAMSB"), with offices in Malaysia and Singapore to tap into the lucrative CRM-Loyalty- Relationship marketing opportunities in the region. This is a natural progression in terms of value-added services in respect of the Group's customer care BPO/ SSO proposition. Greater margins and an expanded MNC client-base are a result of the synergistic association of Scicom Group and JAMSB.

The Group expects growth to continue organically from existing projects and from new projects secured, along with our new lines of business as described above. Furthermore, negotiations are currently in place with overseas business prospects that would pave the way for expansion in terms of new business wins within the Group's BPO/SSO space. The Group is also focused in increasing revenues and contribution to bottom line earnings through potential joint-ventures, which would accelerate the growth of the Company.

Scicom has entered into a Memorandum of Understanding ("MOU") with PT Infomedia Nusantara ("Infomedia") in order to enhance Infomedia's outsourcing business proposition to its existing clients and to provide the necessary expertise in the pursuit of further development of the business in ndonesia. This new business arrangement once concluded will also allow Scicom to venture into the growing BPO industry in the Republic of Indonesia and Infomedia will provide long-term synergistic benefits to the core business offering of Scicom. It would also provide an avenue for Scicom to strengthen its client-base, extend its service product offerings and enhance its linguistic offerings.

The global outlook for the BPO/SSO while bright in terms of size and growth is now less about labour arbitrage but more about performance and return on investment. Large MNCs increasingly look to locations and companies that can offer a cost, value return, scalability and quality proposition. India continues to be the preferred choice for the USA and UK-based clients, and is accelerating its higher value BPO/SSO proposition in terms of offering services such as bio-technology outsourcing, software development, and financial and data analytics. Philippines has shown tremendous growth in the BPO/SSO space and provides English voice support primarily to clients in the USA, UK and Australia. IDC Market Research estimates the BPO contract base value in Asia Pacific (excluding Japan) at approximately USD7 billion in 2006 rising to USD15 billion in 2011.

We believe that our focus in providing increasingly complex solutions to our clients and consistently striving to move up the value chain in terms of services will result in the Group obtaining better margins, longer contract tenure and provide a higher barrier to exit for our clients. We are then able to offer our young professionals longer employment tenure, relevant training, a challenging work environment and market competitive compensation and benefits.

Malaysia with its natural strengths of good infrastructure, multi-lingual capabilities, skilled workforce and industry centric government policies continues to be the location of choice for a centralised hub for multinational clients with a customer-base in Asia Pacific. With its excellent English skills, Malaysia also figures well for servicing customers for the UK and USA markets. Scicom with over ten years of experience, value-added services, multi-lingual capability (over 40 languages), a proven management team and an excellent track record in servicing multinational clients is well positioned to continue to grow substantially for the foreseeable future.

I would like to thank our clients for their trust and continued support. Our friends in the media industry and business partners for their confidence in us. Our regulators for their support and assistance, our Board of Directors for their guidance and finally, my sincere gratitude goes to the employees of the Scicom Group for their loyalty, dedication and professionalism.

LEO ARIYANAYAKAM
Chief Executive Officer