SEMBCORP MARINE · vessels at 11 per cent, bulk carriers at 8 per cent, passenger vessels at 2 per cent and the remaining 10 per cent comprising a mix of vessels such as dredgers

29 Tanjong Kling Road,

Singapore 628054

Tel: (65) 6265 1766

Fax: (65) 6261 0738 / 6265 0201

Website: www.sembcorpmarine.com.sg

Company Reg. No: 196300098Z

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Annual Report 08

Corporate Profile, Vision & Core Values 2

Letter To Shareholders 4

At A Glance 10• Group Financial Highlights 11• Group Quarterly Results 12• Financial Calendar 14• Corporate Directory 15• Corporate Structure 16• Significant Events 18• Awards & Accolades 22

Corporate Governance And Transparency 24• Board Of Directors 38• Management Team 44• Investor Relations 46• Shareholders’ Information 48• Share Prices And Monthly Volumes 49

Risk Management & Financial Review 50• Risk Management 51• Group Five-year Financial Summary 54• Value Added Statement & Productivity Ratios 58• Economic Value Added 60

Market Review & Outlook 62

Corporate Social Responsibility 68

Human Capital 72

Promoting Health, Safety, Security And Environment 78

Competitive Edge & Capabilities 90

Contents

Sembcorp Marine aims to be the world leader in ship repair, shipbuilding, ship conversion,

rig building and offshore engineering & construction, providing innovative solutions that

exceed its customers’ expectations. While anchoring itself for future growth, the Group

continues to commit itself to fulfilling the changing needs and aspirations of its employees. Community ResponsibilityWe view our business as being an integralpart of society. We are committed to be aresponsible corporate citizen, both locallyand globally, contributing to communityimprovements, and to create a caringorganisation.

Sembcorp Marine is a leading global marine and offshore engineering group specialising in

a full spectrum of integrated solutions ranging from ship repair, shipbuilding, ship conversion

and rig building to offshore engineering & construction. As one of the largest marine and

offshore engineering leaders in Asia, the Group has a global network spanning six strategic

hubs – Singapore, China, India, USA, Brazil and the Middle East. Sembcorp Marine’s Singapore

hub consists of Jurong Shipyard, Sembawang Shipyard, PPL Shipyard, SMOE and Jurong SML,

supported by P.T. Karimun Sembawang Shipyard and P.T. SMOE (Batam) in Indonesia.

CORPORA TE V ISION

IntegrityWe believe in and perform our duties withhonesty, dedication and responsibility.We value loyalty, trustworthiness, reliabilityand openness as essential personalattributes in our corporate culture.

Health, Safety, Security andEnvironmental PreservationWe are committed to continuously promote asafe and healthy work environment for ourcustomers, employees, contractors and thecommunity. We take responsibility for our ownsafety, security and for others both on and offthe job.

InnovativenessWe believe that innovation and creativity are crucialto stay ahead of the competition and bring aboutbetter efficiency in the organisation. We secureindustry leadership through constant innovativetechnological and engineering solutions andencouraging entrepreneurship.

QualityWe constantly and consciously strive to achieve world-class quality standards in everything we do for ourcustomers, to improve our quality of life and to add valuefor our shareholders. We believe in continuousimprovement and enhancing our competencies to meetrapid global changes.

People-CentrednessWe respect and value every individual regardless of his or her position inour organisation. We provide equal opportunities and a conduciveenvironment for employees to attain their full potential. We reward allemployees fairly, benchmarking their performance to best practices. Webelieve in building a learning organisation for our people to acquireknowledge and skills to achieve professionalism.

TeamworkWe are committed to working together andhaving trust in one another to achievecommon organisational goals and results.We believe in promoting closer relationshipsand developing team spirit among ourpeople to encourage speedy and opencommunication and to care for each other.

Customer ServiceOur customer is the key to our success. We continueto provide innovative solutions that add value toour customers and to build lasting relationshipswith them based on trust and shared purpose.

CORE VALUES

CORPORATE PROFILE

2 Sembcorp Marine Ltd • Annual Report 2008 3

Sail-away of FPSO Hai Yang Shi You 117.


Dear ShareholdersSembcorp Marine achieved an outstanding year of solid growthin 2008, posting record highs in revenue and profit.

Record Earnings in 2008Group turnover grew by 12 per cent from $4.5 billionin 2007 to $5.1 billion in 2008, driven mainly by itscore businesses of rig building, ship conversion andoffshore, and ship repair.

At $430 million, profit after tax and minority interest(PATMI), following a one-off charge of $44 million inthe fourth quarter arising from the commercialsettlement with BNP Paribas of foreign exchangetransactions, was 78 per cent higher than the $241million in 2007.

Were this one-off charge of $44 million excluded, thePATMI for 2008 would have been $474 million. Thisis 31 per cent higher than the PATMI for 2007 whichwould have been $362 million had the one-off foreignexchange charge and non-operating items for thatyear been excluded.

Group operating profits recorded an increase of 44per cent from $349 million in 2007 to $502 million in

2008, while group pre-tax profits rose 49 per centfrom $365 million in 2007 to $545 million in 2008.These increases came mainly from the higherrevenue and operating margins from the rig buildingand ship repair businesses, offset by the lowercontributions from the Cosco Shipyard Group.

Earnings per share increased 78 per cent to 20.83cents in 2008. Return on equity improved 80 per centto 29 per cent, while economic value added saw anincrease of 843 per cent to $337 million.

Foreign Exchange TransactionsDuring the year, Sembcorp Marine’s subsidiary JurongShipyard had reached a full and final amicablesettlement with BNP Paribas for the claim of US$50.7million, strictly on commercial basis. Arising from thesettlement, a charge of US$30.0 million was expensedin the Group’s Income Statement in the fourth quarterof 2008. Going forward, any other settlements arisingfrom the foreign exchange transactions, if any, will berecognised as and when they are realised.

REVENUE BY SECTORS (FY 2008 VS FY 2007)

2008

16%

56%

27%

1%

2007

16%

55%

25%

2%

2%

Ship repair Rig building Ship conversion/offshore Shipbuilding Others

LETTER TOSHAREHOLDERS

$’m $’m

$5.1 billion $4.5 billion

$2,840

$1,354

$795

$73

$2

$2,499

$1,131

$82

$71$731

LETTER TO SHAREHOLDERS


DividendThe Board of Directors has recommended a final one-tier tax-exempt dividend of 6.00 cents per share to bepaid on 13 May 2009, subject to the approval ofshareholders at the Annual General Meeting on 17April 2009. This is in addition to the interim one-tiertax-exempt dividend of 5.00 cents per share paid on1 September 2008. Total dividend for 2008 will be11.00 cents per share, an increase of 26 per cent from8.73 cents per share paid in 2007.

Review of Business OperationsAll three core businesses of the Group grew in 2008.Group turnover increased 12 per cent from $4.5 billionin 2007 to $5.1 billion in 2008 on the back of stronggrowth in the rig building, ship conversion and offshore,and ship repair businesses. Rig building accountedfor 56 per cent of total turnover in 2008, followed byship conversion and offshore at 27 per cent, ship repairat 16 per cent and others at 1 per cent.

• Ship Conversion and Offshore

The ship conversion and offshore business registeredthe highest growth at 20 per cent from $1.1 billion in2007 to $1.4 billion in 2008. Major completions within

the year included three tankers converted to floating-production-storage-offloading (FPSO) vessels and onetanker converted to a floating-storage-offloading (FSO)vessel. Other specialised conversions completedincluded a newbuilt hull to heavy-lift derrick pipelayvessel and the topsides fabrication and integration ofa newbuilt FPSO.

At year end, work-in-progress projects included theconversion of a scientific vessel to an integrated oceandrilling scientific vessel; the conversion of twoFPSOs; the conversion of a heavy-lift crane vessel;the conversion of a passenger and car carrier into anaccommodation and repair vessel; the conversion oftwo hulls to ultra-deepwater semi-submersibledrilling rigs; the construction of an offshore platformintegrated deck, and the construction of an offshoreplatform. Other projects in the planning andengineering stages included the HBD offshore platform,a fallpipe rock dumping vessel and a floating-drilling-production-storage-offloading (FDPSO) conversion.

• Rig Building

The rig building business registered a 14 per centgrowth at $2.8 billion compared with $2.5 billion in2007. A record total of 11 rigs were delivered on time

or ahead of schedule during the year. These includedtwo units of sixth-generation semi-submersible rigsand nine units of jack-up rigs.

Landmark deliveries during the year includedthe turnkey construction of two ultra-deepwatersemi-submersible drilling rigs built based on theFriede & Goldman Millennium Class design. Thisaccomplishment of delivering two sixth-generationsemi-submersibles in a year was made possible byJurong Shipyard’s proprietary breakthrough ‘Load-outand Mating-in-dock’ and ‘Transverse Skidding’ rigconstruction techniques.

An impressive nine deep drilling offshore jack-up rigswere delivered during the year. These turnkey jack-uprigs were built based on the Group’s proprietary PacificClass 375 design.

The Group’s rig building order book as at year endcomprised eight units of sixth-generation Friede &Goldman design ultra-deepwater semi-submersibledrilling rigs, 11 units of proprietary design Pacific Classdeep drilling jack-up units, a CJ70 design harsh-environment jack-up rig and a heavy-lift jack-up barge,all of which were in varying engineering, productionand construction stages.

• Ship Repair

Ship repair recorded turnover growth of 8.7 per centfrom $731 million in 2007 to $795 million in2008. A total of 269 vessels were docked for repairsand maintenance, an improvement over 256 vesselsin 2007. Vessels from customers under Alliance,Favoured Customer Contracts and other regularcustomers accounted for 86 per cent of the repairs.

The average value per vessel grew 3 per cent from$2.86 million per vessel in 2007 to $2.95 million pervessel in 2008. Tankers accounted for 42 per cent ofvessels repaired followed by offshore vessel upgradingat 15 per cent, liquefied natural gas (LNG) and liquefiedpetroleum gas (LPG) carriers at 12 per cent, containervessels at 11 per cent, bulk carriers at 8 per cent,passenger vessels at 2 per cent and the remaining 10per cent comprising a mix of vessels such as dredgersand cargo vessels.

Associate and Joint-Venture ContributionsTotal pre-tax profit contributions from associates andjoint-venture companies declined 20 per cent to $65.3million in 2008 from $81.8 million in 2007. This declinecame mainly from the Cosco Shipyard Group.

11.00

8.73

1.30*

1.30

2.80*

2.80

3.20*

3.20

3.50*

3.50

3.60*

3.60

3.60*

3.60

2.80*

2.80

5.40*

5.40

4.30*

4.30

8.90*

8.90

DIVIDEND

cents

2000 2001 2002 2003 2004 2005 2006 2007 2008

12

10

8

6

4

2

0

FY Dividend*Interim Dividend Final Dividend

199919981997

5.16

3.57*

5.00

6.00

*FY Dividend adjusted for 2 bonus shares for every 5 ordinary shares Operating Margin Gross Profit Margin

%

MARGIN & PROFIT EXPANSION

2007 20082003 2004 2005 2006

$’million

2002

12.9

9.99.1

7.7

12.6

8.99.5

7.0

8.8

6.8

8.0

5.9

8.3

6.4

14

12

10

8

6

4

2

0

740

640

540

440

340

240

140

4090 7493

125

228

349

502

128102

120

170

295

411

655

Operating Profit Gross Profit

Goh Geok Ling Tan Kwi KinChairman Group President & CEO

2 March 2009

LETTER TO SHAREHOLDERS


Managing the ChallengesThe Group’s focus on increasing operational efficiencythrough innovation, production process improvementsand well-accepted proprietary designs saw operatingmargins increasing from 5.9 per cent in 2005 to 9.9per cent in 2008.

In line with its innovation strategy, the Group continuesto improve and streamline its work processes formaximum operational efficiency, resource utilisationand cost efficiency. Critical in ensuring its competitiveedge and relevance in the fast-changing offshore andmarine market, the Group will continue to invest inresearch and development to further enhance itsproprietary engineering, design and productioncapabilities. It is also in partnership with varioustechnology partners from the government, educationaland private sectors for several research and developmentprojects, including the development of the region’sfirst water ballast treatment system.

Equally important is the need to raise health, safety,security and environmental standards and to invest inpeople development. These efforts will support the

Group’s efforts to maintain the trust and confidenceof customers and stakeholders and to build a safety-conscious, well-trained and capable workforce to deliveradded value and service excellence.

Going forward, the Group will continue to strivetowards delivering creditable performance and valueto shareholders. Its strategy to ride through thesechallenging times is to maintain a strong balance sheetand to be in a net cash position.

Outlook and ProspectsThe world economy continues to deteriorate since theend of 2008. While we remain cautiously optimisticof our results in 2009, we are also prepared that shouldthe financial market deteriorate further as the yearprogresses, we may receive possible requests forcancellations from our customers. If these situationsshould arise, the Group will naturally make the necessaryannouncements expeditiously.

Despite the uncertain global economic climate, theGroup is confident that the long-term fundamentalsand outlook for the marine and offshore industry

$’million

NET ORDER BOOK (excluding ship repair)

Shipbuilding Jack-up Rig Ship Conversion & Offshore Semi-submersible Rig

10,000

9000

8000

7000

6000

5000

4000

3000

2000

1000

0

2003

1,08177192

584

228

2004

2,288

589

1,212

487

2005

5,341

2,018

992

298

2,033

2006

5,472

2,240

948

86

2,198

2007

6,960

2,726

1,536

2,692

2008

9,019

2,991

1,819

4,209

continue to be positive in the light of continued globalreliance on oil and gas and the accelerating depletionof oil and gas reserves.

Having weathered through several economic down-cycles since its inception in 1963, Sembcorp Marinehas proven its resilience, adaptability and fortitude.The Group is optimistic about riding through thisdownturn buoyed by a strong $9.0 billion net orderbook for rig building, ship conversion and offshoreprojects, including new orders of $5.7 billion securedin 2008. These marine and offshore engineeringprojects will provide the Group with a solid base-loadof orders to keep its shipyards busy with progressivecompletion and deliveries from 2009 to early 2012.

For ship repair, the Group believes that Singapore’sstrategic location and reputation as an internationalmaritime centre coupled with its strategic alliancesand partnerships fostered with long-term customerswill provide a stable base-load to cushion the impactof the current economic turmoil.

The market for large FPSO units and productionplatforms is expected to remain strong based onowners’ long-term commercial viability of the projects.Such projects have longer gestation periods andconstitute part of the owners’ investment portfoliodesigned to provide future output to replacedepleting reserves.

Board & ManagementThe Board would like to extend a warm welcome toMr Richard Edward Hale OBE and Mr Lim Ah Doo, bothof whom were appointed directors of Sembcorp Marine.

Mr Richard Edward Hale OBE, appointed a non-independent director to the Board on 22 April 2008,was subsequently appointed Deputy Chairman on7 May 2008. His vast experience in the corporate worldwould further add value to the Group and its operations.

Mr Lim Ah Doo, who joined the Board as anindependent director on 7 November 2008, broughtwith him more than 25 years of experience in theinvestment banking industry and corporate world.

His appointment underscored Sembcorp Marine’scommitment to further enhance effective corporategovernance.

Mr Kiyotaka Matsuzawa stepped down as anindependent director due to health reasons with effectfrom 7 May 2008. The Board would like to thankMr Matsuzawa and his alternate director Mr HirohikoSakurai for their contributions.

Mr Tan Tew Han, an independent director appointedto the board on 17 April 2003 and serving as Chairmanof the Audit and Special Committees, has decided tostep down with effect from 24 February 2009 due tohis personal commitments. The Board would like tothank him for his invaluable contributions during hissix-year tenure.

On behalf of the Board, we would like to express ourheartfelt gratitude to our valued customers, partnersand business associates for their steadfast support andcontinued trust in us. We also like to thank our dedicatedteam of management, employees and subcontractorsfor their hard work and commitment. As we braceourselves for the challenges ahead, it is important forus to forge ahead and rise above the odds as oneunited team.

Finally, we would like to express our sincereappreciation to all our valued shareholders for theircontinued interest and unwavering belief in theGroup during these challenging times. We are gratefulfor your relentless support and will continue to deliveron our commitment to maximise returns on ourshareholders’ investments.

6


AT A GLANCE

GROUP FINANCIAL HIGHLIGHTS

For the year (S$’000) 2008 2007 % Change

Group Income StatementRevenue 5,063,948 4,513,123 12Profits

EBITDA 572,544 413,109 39Operating Profit 501,837 349,029 44Profit Before Tax 544,958 364,721 49Attributable Profit - include FX & NoI# 429,918 240,989 78Attributable Profit - exclude FX & NoI# 473,667 362,273 31

Group Balance SheetTotal Assets 4,611,817 4,462,847 3Total Liabilities 3,251,858 2,757,131 18Net Tangible Assets 1,311,858 1,672,471 (22)

Shareholders’ Funds 1,317,985 1,680,060 (22)Minority Interests 41,974 25,656 64Capital Employed 1,359,959 1,705,716 (20)

Bank Balances, Fixed Deposits and Cash 2,054,032 740,477 177Interest-bearing Borrowings (222,238) (441,669) (50)Net Cash 1,831,794 298,808 513

Financial RatiosEarnings Per Share (EPS)

EPS - include FX & NoI# (cents) 20.83 11.72 78EPS - exclude FX & NoI# (cents) 22.95 17.62 30

Dividend Per ShareOne-tier tax-exempt (cents) 11.00 8.73 26

Net Assets Value per share (cents) 64.11 81.13 (21)Net Tangible Assets per share (cents) 63.81 80.76 (21)

Return on Turnover - include FX & NoI# (%) 8.49 5.34 59Return on Turnover - exclude FX & NoI# (%) 9.35 8.03 16

Return on Total Assets - include FX & NoI# (%) 9.48 6.11 55Return on Total Assets - exclude FX & NoI# (%) 10.44 9.18 14

Return on Equity - include FX & NoI# (%) 28.68 15.97 80Return on Equity - exclude FX & NoI# (%) 31.60 24.00 32

# FX & NoI - Foreign exchange transactions and Non-Operating Items

AT A GLANCE

Naming of PetroJack IV built by Jurong Shipyardon 13 December 2008.

AT A GLANCE


GROUP QUARTERLY RESULTS

2008 ($’000) 1Q 2Q 3Q 4Q Total

Turnover 916,118 1,386,093 1,144,246 1,617,491 5,063,948Operating Profit 79,464 111,455 142,148 168,770 501,837EBITDA 95,234 128,332 160,586 188,392 572,544Profit before Tax 115,146 160,720 180,937 88,155 544,958Attributable Profit 91,339 128,253 140,894 69,432 429,918Earnings per share (cents)

Year-to-date 4.41 10.62 17.45 20.83Earnings per share (cents)

In-quarter 4.41 6.21 6.83 3.38 20.83

2007 ($’000) 1Q 2Q 3Q 4Q Total

Turnover 953,743 1,051,598 1,171,069 1,336,713 4,513,123Operating Profit 74,101 74,048 74,051 126,829 349,029EBITDA 87,354 87,990 92,685 145,080 413,109Profit before Tax 84,663 106,699 96,381 76,978 364,721Attributable Profit 73,738 85,100 81,359 792 240,989Earnings per share (cents)

Year-to-date 3.59 7.74 11.70 11.72Earnings per share (cents)

In-quarter 3.59 4.15 3.96 0.02 11.72

2008 QUARTERLYTURNOVER

1800

1600

1400

1200

1000

800

600

400

200

0

$’million

1Q

916.1

2Q

1,386.1

3Q

1,144.2

4Q

1,617.5

2007 QUARTERLYTURNOVER

1800

1600

1400

1200

1000

800

600

400

200

0

$’million

1Q

953.7

2Q

1,051.6

3Q

1,171.1

4Q

1,336.7

2008 QUARTERLYOPERATING PROFIT

180

160

140

120

100

80

60

40

20

0

$’million

1Q

79.5

2Q

111.5

3Q

142.1

4Q

168.8

2007 QUARTERLYOPERATING PROFIT

180

160

140

120

100

80

60

40

20

0

$’million

1Q

74.1

2Q

74.0

3Q

74.1

4Q

126.8

91.3

115.1

128.3

160.7

140.9

180.9

73.7

84.7 85.1

106.7

81.4

96.4

69.4

88.2

2008 QUARTERLY PROFIT BEFORETAX AND ATTRIBUTABLE PROFIT

Profit before Tax

Attributable Profit

200

180

160

140

120

100

80

60

40

20

0

$’million

4Q3Q2Q1Q

0.8

77.0

2007 QUARTERLY PROFIT BEFORETAX AND ATTRIBUTABLE PROFIT

Profit before Tax

Attributable Profit

200

180

160

140

120

100

80

60

40

20

0

$’million

4Q3Q2Q1Q

AT A GLANCE


FINANCIAL CALENDAR

Financial Year 2008

Financial Year

Announcements ofResults & Dividends

2007 Full Year

Quarter 1, 2008

Quarter 2, 2008

Quarter 3, 2008

2007 FinalDividend Payment

Delivery ofAnnual Report

Delivery of EGM Notice

Annual GeneralMeeting/ExtraordinaryMeeting

2008 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Feb 22

May 7

Aug 5

Nov 4

May 16

Apr 7

Mar 31

Apr 22

Financial Year 2009

Financial Year

Announcements ofResults & Dividends

2008 Full Year

Quarter 1, 2009

Quarter 2, 2009

Quarter 3, 2009

2008 FinalDividend Payment

Delivery ofAnnual Report

Delivery of EGM Notice

Annual GeneralMeeting/ExtraordinaryMeeting

2009 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

Feb 24

May 8

Aug 4

Nov 4

May 13

Apr 2

Apr 2

Apr 17

Registered Office29 Tanjong Kling Road, Singapore 628054

Telephone : (65) 6265 1766

Fax : (65) 6265 0201/ (65) 6261 0738

Website : www.sembcorpmarine.com.sg

E-mail : [email protected]

Share RegistrarKCK Corpserve Pte Ltd

333 North Bridge Road

#08-00 KH Kea Building

Singapore 188721

AuditorKPMG LLP

Certified Public Accountants

Singapore

Audit Partner : Tan Wah Yeow

(appointed during financial year ended

31 December 2008)

Principal BankersDBS Bank Ltd

Oversea-Chinese Banking Corporation Limited

Standard Chartered Bank

The Hongkong and Shanghai BankingCorporation Limited

United Overseas Bank Limited

Share ListingSembcorp Marine’s shares are listed on the

Singapore Exchange Securities Trading Limited

Joint Company SecretariesTan Yah Sze

Kwong Sook May

CORPORATE DIRECTORY

Corporate Office Building.

AT A GLANCE


CORPORATE STRUCTUREas at 31 March 2009

100%

100%

100%

100%

85%

100%

30%

100%

90%

60%

100% 85%

100%

85.8%

100%

100%

35%

100%

100%

100%

100%

100%

70%

Baker Marine Pte Ltd

Singapore Shipyards

Jurong Shipyard Pte Ltd

Sembawang Shipyard Pte Ltd

SMOE Pte Ltd

Jurong SML Pte Ltd

PPL Shipyard Pte Ltd

Supporting CompaniesOverseas Shipyards

Sembcorp Marine Ltd

P.T. Karimun Sembawang Shipyard(Indonesia)

Cosco Shipyard Group (China)

SembMarine (Middle East) Pte Ltd

Sembcorp-Sabine Industries Inc (USA)

P.T. SMOE (Indonesia)

Sembcorp Marine Technology Pte Ltd

R&D

Shenzhen Chiwan Offshore Petroleum EquipmentRepair & Manufacture Co. Ltd (China)

Bulk Trade Pte Ltd

Jurong Marine Services Pte Ltd

JPL Industries Pte Ltd

Jurong Autoblast Services Pte Ltd

Shanghai Jurong MarineEngineering & Technology Co. Ltd (China)

JPL Services Pte Ltd

Jurong Machinery andAutomation Pte Ltd

Jurong Integrated Services Pte Ltd

Jurong Marine Contractors Pte Ltd

Dolphin Shipping Company Pte Ltd

JANUARY• Sail-away of West Triton, a Pacific Class 375 jack-

up rig, following its delivery by PPL Shipyard toSeadrill in December 2007

• Delivery of Sapura 3000, a DP2 heavy lift andpipelay vessel, by Sembawang Shipyard, toNautical Vessels

• Launch of Green Wave Environmental CareCompetition for Schools 2008 and AwardPresentation Ceremony for 2007 winners

FEBRUARY• Delivery of Ashmore Guardian, a patrol vessel

converted from a fishing vessel, by Jurong SML toGardline Australia

• Strike steel of Pacific Class 375 jack-up rig (P2022)by PPL Shipyard for Egyptian Drilling Company

• Announcement of full-year 2007 financial results

MARCH• Delivery of West Sirius, the first of four F&G ExD-

design ultra-deepwater semi-submersible rigsbuilt by Jurong Shipyard for Seadrill

• Naming and delivery of PetroJack II, a PacificClass 375 jack-up rig built by Jurong Shipyard forPetroJack

• Delivery of Wan Hai 317, the sixth 2,646 TEUproprietary design Jubilee Class newbuiltcontainership by Jurong Shipyard for Wan HaiLines after its naming in January 2008

• Keel-laying of Topaz Driller (P2021), a PacificClass 375 jack-up rig built by PPL Shipyard forVantage Drilling

• Participation in Seatrade Cruise exhibition bySembawang Shipyard in Miami, Florida, with afocus on the passengership repair market

• Participation in the Careers 2008 recruitment fair

APRIL• Naming of WilForce, a Pacific Class 375 proprietary

design jack-up rig, following its delivery by PPLShipyard to Awilco Offshore in March 2008

• Delivery of Raroa, a floating-production-storage-offloading (FPSO) vessel converted from a tanker,by Jurong Shipyard to Tanker Pacific OffshoreTerminals

• Delivery of Pontresina, a proprietary Jubilee Classdesign 2,646 TEU containership built by JurongShipyard for Reederei F Laeisz, after its naming inJanuary 2008

• 45th Annual General Meeting and ExtraordinaryGeneral Meeting for shareholders

• Signing of a Strategic Alliance Agreement withRio de Janeiro-based Mac Laren Shipyard to operatea shipyard in Brazil for all future offshore oil andgas related projects to be undertaken in Brazil

MAY• Delivery of Aban VIII, a Pacific Class 375 design jack-

up rig built by PPL Shipyard and Sembawang Shipyardfor Aban Singapore, after its naming in April 2008

• Naming and delivery of Sedra II, the second 5,100 dwtdouble-hull bunker tanker built by Jurong SML forKuwait Oil Tanker Company

• Announcement of first-quarter 2008 financial results

• Participation in the Offshore Technology Conference2008, a key event for the offshore oil and gas industry

• Donation of $195,000 to disaster victims of CycloneNargis and the Sichuan earthquake

JUNE• Keel-laying of Aquamarine Driller (P2020), a

Pacific Class 375 jack-up rig by PPL Shipyard forVantage Drilling

• Strike-steel of Pacific Class 375 jack-up rig (P2026)by PPL Shipyard for Seadrill

• Participation in Posidonia 2008, a key exhibitionin Athens, Greece, for the international shippingand maritime community

AT A GLANCE


SIGNIFICANT EVENTS

JULY• Delivery of Deep Driller 7, the third Pacific Class

375 jack-up rig built by PPL Shipyard for DeepDrilling Invest

• Delivery of Dhirubhai-1, India's first deepwaterFPSO vessel converted from a tanker by JurongShipyard for Aker Contracting FP, after its namingin June 2008

• Keel-laying of a self-elevating heavy-lift newbuildjack-up barge by Jurong Shipyard for AramcoOverseas Company

AUGUST• Sail-away of Hakuryu-10, a Pacific Class 375

jack-up rig, from PPL Shipyard after its delivery toJapan Drilling Co. in June 2008 and its naming inJuly 2008

• Announcement of half-year 2008 financial results

• Sponsorship of the National Day Parade 2008SPARK! interactive spectators' display andparticipation in the parade marching contingent

• National Day Observance Ceremony graced byMr Gan Kim Yong, Acting Minister for Manpower

SEPTEMBER• Delivery and sail-away of Maersk Convincer, the

second Pacific Class 375 jack-up rig built by JurongShipyard for Maersk Contractors, after its namingin August 2008

• Delivery of Queensway, a floating-storage-offloading(FSO) vessel converted from a tanker by JurongShipyard for Tanker Pacific Offshore Terminals, afterits blessing ceremony in August 2008

• Strike-steel of a Pacific Class 375 jack-up (P2028)by PPL Shipyard for Egyptian Drilling Company

• Sponsorship of International Enterprise Singapore'sLatinAsia Business Forum 2008

• Participation in the Shipbuilding, Machinery &Marine Technology event, the world's largestmaritime exhibition in Hamburg, Germany, bySembawang Shipyard

OCTOBER• Keel-laying of a GustoMSC CJ70 design harsh-

environment newbuild jack-up rig by Jurong Shipyardfor PetroProd D&P I after its strike-steel in February2008

• Strike-steel of proprietary design Pacific Class 375 jack-up rig West Elara (P2027) by PPL Shipyard for Seadrill

• Sponsorship of the first Singapore Nautical Runorganised by Maritime and Port Authority of Singapore

DECEMBER• Delivery of Emerald Driller, a Pacific Class 375

jack-up rig built by PPL Shipyard, to VantageDrilling ahead of schedule

• Delivery of FPSO Hai Yang Shi You 117 aftermodularisation and integration of topsidesby SMOE and Sembawang Shipyard and afterits sail-away ceremony in November 2008

• Naming of PetroJack IV, the fourth PacificClass 375 jack-up rig contracted by PetroJack,in Jurong Shipyard

• Delivery of Aban Abraham after majorupgrades and refurbishment by SembawangShipyard to Aban Offshore

• Official opening of the new ProjectCoordination Centre at Jurong Shipyard

• Participation in 'Meeting Global Challengesand Opportunities in the Marine & OffshoreIndustry' conference organised by theAssociation of Singapore Marine Industries

AT A GLANCE


SIGNIFICANT EVENTS

NOVEMBER• Delivery of West Taurus, the second of four F&G ExD-design ultra-

deepwater semi-submersible rigs by Jurong Shipyard for Seadrill,ahead of schedule after its naming in September 2008

• Sail-away of WilSeeker, a Pacific Class 375 jack-up rig, after itsdelivery by PPL Shipyard to Awilco Offshore in September 2008and its naming in October 2008

• Delivery of Aoka Mizu, a newbuilt FPSO conversion by SembawangShipyard from a newbuilt hull, to Bluewater Energy Services, afterits naming in May 2008

• Keel-laying of Pacific Class 375 jack-up West Leda (P2026) by PPLShipyard for Seadrill

• Strike-steel of a Pacific Class 375 jack-up rig (P2023) by PPL Shipyardfor Egyptian Offshore Drilling Company

• Strike-steel of a HBD offshore platform by SMOE for MaerskOlie og Gas AS

• Official opening of PT SMOE Indonesia's new Phase II YardDevelopment

• Announcement of third-quarter 2008 financial results• Donation of $300,000 in SchoolBAG grants by Sembcorp Marine

to 1,492 needy students

AT A GLANCE


SingaporeInternational 10012th Ranking:Sembcorp MarineRanking for 12th highestoverseas revenue in thisyear’s SingaporeInternational 100 Rankingby International EnterpriseSingapore

AT A GLANCE

AWARDS & ACCOLADES

Most Transparent Company Award(Non-Electronics Manufacturing)Runner-up: Sembcorp MarineRecognition by the Securities Investors Association ofSingapore for excellence in corporate governanceand transparency

H.E.A.L.T.H. AwardsPlatinum Awards:Jurong Shipyard, Jurong SML ShipyardPlatinum Awards by the Health PromotionBoard to Jurong Shipyard and Jurong SMLfor achieving at least two Gold Awardsconsecutively and demonstrating tangibleresults in workplace health promotionprogrammes

Workplace Safety & Health Innovation Awards

Innovation Awards:Jurong Shipyard & Sembawang ShipyardAwards by the Ministry of Manpower to JurongShipyard’s Safe Stage Team and Sembawang Shipyard’sHull Spiderz Team for their respective innovative “HPHook” and the “Spider Grab” innovations, which ledto safety excellence and workplace improvement

H.E.A.L.T.H. AwardsSmoke-Free Award: Jurong SML ShipyardSmoke-Free Award by the Health Promotion Board forcomprehensive and effective quit-smoking initiativesat the workplace

Workplace Safety & Health Innovation Awards

Safety & Health Recognition Awards:Sembawang ShipyardAwards by the Ministry of Manpower for five projects– Aban Abraham, Aban VIII, BW Endeavour, Hai YangShi You 117 and Sapura 3000 – for achieving zeroincidents over a million man-hours

Friend of the Arts Award

Recipient: Sembcorp MarineAward by the National ArtsCouncil in recognition ofSembcorp Marine’scontributions to the Singaporearts community

SHARE Corporate AwardWinner: Sembawang ShipyardAward by the Community Chest of Singapore for itsemployees’ strong support of SHARE donations andother fund-raising activities

H.E.A.L.T.H. AwardsGold Award:Sembawang ShipyardGold Award by the Health PromotionBoard to Sembawang Shipyard foractive promotion of workplace health

Minister for Defence AwardWinner: Jurong SML ShipyardAward by the Ministry of Defence foroperational readiness, serviceabilityof assets and commitment towardsTotal Defence

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H�BD �I �K ��S


Supporting the Board Risk Committee (“BRC”) in theimplementation of the Enterprise Risk Management(“ERM”) programme is the ERM Committee – amanagement working committee with members(business unit heads and their CROs) from the variousStrategic Business Units (“SBUs”) and the representativesof the key corporate functions like Risk Management,Internal Audit, Finance, HR, Legal and Investor Relations.This all-inclusive make-up of the ERM Committeeenables a comprehensive and in-depth considerationof the Group’s risk exposures and internal controls.

The ERM Committee has various sub-committees thatlook into certain critical areas in project management,finance, safety, human resource and procurement.These sub-committees are headed by appropriatefunctional heads. They meet regularly to discuss thelatest developments and issues as well as consider andimplement any corresponding mitigation actions. Theoutcome of these discussions are presented and furtherreviewed during the ERM Committee meetings beforetabling to the BRC.

The senior management in consultation with the Boardregularly review the Group’s strategies and operationsto keep in line with the Group’s risk appetite andbusiness objectives. The impact of the changes to thebusiness environment are also considered during thereviews. Key risks that have emerged during the reviewsinclude:

• Project management risks• Financial risks• Health, safety, security & environment risks• Human resource risks• External environment risks• Investment risks• Reputation risks

a. Project management risksAs the Group’s main business activities relate to itsprojects, a significant proportion of the risks reside inthe day-to-day operations of project execution. A setof contract bidding criteria and process flow has beenestablished to guide the subsidiary companies in theirbid for projects. This is further augmented by contractcheck lists by the various specialist departments to

ensure compliance with proper due diligenceprocedures. To tighten variation order (“VO”)management, a set of recommended VO clauses hasbeen developed.

The SBUs provide regular updates on their projectstatus and all issues arising thereon are discussed andaddressed in the project risk management meetingschaired by the Group President/CEO and attended bythe heads of the subsidiary companies and keymanagement staff. The matters updated will includework schedules, costs, work variations, financial andcontractual matters including adherence to paymentsschedules.

b. Financial risksGiven the Group’s wide range of marine & offshoreactivities, exposure to financial risks takes various formsand magnitude. To mitigate these risks, policies andprocedures have been established and communicatedto the Group’s subsidiary companies. Policies coverareas in treasury operations including foreign exchangehedging, credit and inter-company transactions -parameters and limits are set out to institute controlsand appropriate thresholds of approval.

Operationally, the policies seek to minimise the Group’scost of capital, the adverse effects of fluctuations incurrency and interest rate on income and ensure sufficientfunds are available to meet financial obligations andoperational needs. The Group’s treasury activities arecentrally managed at the Sembcorp Marine Group Level.

The CFO heads the finance committee, attended byrelevant key personnel from all the subsidiarycompanies. The key financial risks include the following:

i) Interest Rate Risk

The Group’s policy is to maintain an efficient optimalinterest cost structure using a mix of fixed and variablerate debt, where working capital is financed by variablerate loans. Surplus funds, if any, are placed withreputable banks. The Group obtains additional fundingthrough bank borrowings and leasing arrangements.The Group’s policy is to obtain the most favourableinterest rate available without increasing its foreigncurrency exposure.

RISK MANAGEMENT& FINANCIAL REVIEW

Aerial view of Sembawang Shipyard.

R ISK MANAGEMENT

R ISK MANAGEMENT


ii) Foreign Exchange Risk

The Group is exposed to foreign exchange risk arisingfrom sales and purchases denominated in foreigncurrencies, primarily the US dollar and Euro. To minimiseexposures on foreign exchange risks, the Group arrangesfor natural hedging by matching costs in the samecurrency as sales. Where there are net foreign exchangeexposures, the Group will hedge them. The onlypermitted instruments are plain vanilla forward contractsand spot transactions, managed centrally at GroupTreasury.

iii) Liquidity Risk

To manage liquidity risk, the Group monitors its netoperating cash flow, maintains a level of cash and cashequivalent and secures committed funding facilitiesfrom financial institutions. In assessing the adequacy ofthese facilities, management reviews working capitalrequirements so as to mitigate the effects of fluctuationsin cash flow. Short-term funding is obtained fromoverdraft facilities and bank loans.

iv) Credit Risk

The Group manages credit risk arising from sales tocustomers through a stringent credit evaluation processand regular monitoring thereafter. The managementof credit risk is on an aggregate basis by including allexisting relationships with a particular customer orrelated entities of the same corporate organisation.

c. Health, safety, security & environment risksThe Group Safety Committee continues to work towardsan accident-free environment through a range ofinitiatives and programmes, including:

• Risk assessment & management for the top risksidentified

• Information sharing – past incidents and safetyinnovation projects

• Review and update of the safety Best Practice Manual(“BPM”) in line with statutory requirements andchanges in legislation

• Competency gap analysis and remedial training –collaboration with course providers (localtertiary institutions)

• Validation & audit by external safety consultants• New internal programme – “REV” (review, evaluate

& validate) for identified key areas in confined space,hotwork, work at height, lifting operations & electricalhazards

A new milestone was achieved when a FPSO (Floating,Production, Storage & Offloading) project undertakenjointly by SSPL and SMOE achieved 25 million LTI-free(Lost Time Injury) man-hours and recognition awardfrom the Ministry of Manpower. This was also a newsafety performance record for the customer,ConocoPhillips.

d. Human resource (“HR”) risksThe successful realisation of the Group’s strategic businessplan cannot be possible without the right people inplace. Loss of key senior staff will jeopardise these plans.Recognising this, the Group is always looking to retainand hire the “right” people to maintain and enhanceits competitive edge.

In this respect, comprehensive HR policies for recruitment,compensation and development for employees havebeen established. The Board Executive Resource andCompensation Committee has oversight of the Group’sremuneration policies and oversees management,development and succession plans for key managementpositions. On the working level, the Group HR Committeemeets regularly to address key HR issues.

Key risk areas include management succession,selection and recruitment, compensation and benefits.A succession planning process is in place topromote smooth management transition and minimiseoperational disruptions arising from changes in keypersonnel. Talent management ensures potentialsuccessors are identified and groomed for futuremanagement appointments.

Attractive terms including remuneration, benefits andcareer development opportunities are offered in orderto retain capable staff and attract new ones. Otherschemes include implementing pro-family policies andencouraging work-life balance.

e. External environment risksWith the unfolding of the global economic crisis, it isevident that the developments in the externalenvironment can have far reaching influence and deepimpact on the Group’s activities. Recognising this, theGroup has placed even stronger emphasis on this areawhich basically encompasses everything outside of theGroup’s control. These external environment factorsinclude commodities price volatility, foreign exchangemovements, credit crunch, recession, geo-politics andregulatory environment.

Other than affecting its own operations, some of theGroup’s vendors, contractors, suppliers and customersas well. Given the interdependent relationships, stepshave been taken to minimise adverse impacts, whilemaintaining the Group’s interests. This is evidencedby mutually agreeable payment defermentarrangements worked out with customers facingfinancing difficulties. At the same time, the Groupmonitors its exposures to its customers, vendors andother counterparties such as banks and engagesthem regularly.

f. Investment risksThe Group seeks to grow its business throughorganic growth of its existing capabilities,development of new capabilities andacquisition of business entities or operatingassets. Investment activities, rangingfrom the identification of targets to theundertaking of due diligence exercises, aresupported by a team of experiencedmanagers and augmented by externalprofessionals for specialised services. Thebusiness proposals are risk assessed andevaluated by senior management beforeseeking final Board of Directors’ approval.

g. Reputation risksThe Group values its reputation in the marketand has put in place a communicationprogramme to ensure timely and effectivecommunication of key information to itsstakeholders at all times.

h. Other initiativesIn 2008, in line with the Group’s continual improvementof its internal controls, a new risk-based governanceprogramme, Control Self Assessment ("CSA") wasrolled out in Jurong Shipyard, covering the majorbusiness processes. This exercise was conductedin collaboration with external consultants. Theprogramme will be expanded in scope and extendedto the other SBUs. This programme entails staffto assess their compliance with key controls on aregular basis, highlight deviations and formulateaction plans to rectify deviations. Counter checksby independent parties will be conducted toensure compliance.

The Group will continue to review and improve itsenterprise risk management system, policies andprocesses to ensure relevance and effectiveness towardsachieving its business objectives. This is especially moreessential and critical under current challenging macrofinancial and economic conditions. Nevertheless, theGroup believes that there are opportunities to be seizedamidst the tough times ahead.

TTP (Third Transmission Pipeline) project by SMOE.

F INANCIAL REVIEW


For the year 2004 2005 2006 2007 2008($’000) ($’000) ($’000) ($’000) ($’000)

Turnover 1,362,764 2,119,279 3,545,049 4,513,123 5,063,948Operating Profit 92,933 124,549 228,233 349,029 501,837Profit Before Tax - include FX & NoI# 113,089 159,855 310,871 364,721 544,958Profit Before Tax - exclude FX & NoI# 116,155 155,836 283,008 444,660 588,707PATMI - include FX & NoI# 94,087 121,398 238,388 240,989 429,918PATMI - exclude FX & NoI# 97,153 119,361 217,848 362,273 473,667

Dividend - Interim 17,067 28,880 40,867 73,783 102,906Dividend - Final 69,157 81,495 142,483 106,353 123,350

Dividend - Total 86,224 110,375 183,350 180,136 226,256

Group Balance SheetProperty, plant and equipment 460,020 579,584 679,024 675,585 697,702Associates & Joint ventures 67,487 106,880 147,255 205,502 269,609Other Investments 23,666 77,931 346,987 689,554 138,376Other Long Term Assets 88,258 68,628 69,583 45,990 70,611Current Assets 1,219,934 1,493,114 2,186,652 2,846,216 3,435,519Current Liabilities (651,692) (982,871) (1,690,896) (2,397,423) (3,111,640)Long Term Liabilities (204,963) (227,569) (368,382) (359,708) (140,218)

1,002,710 1,115,697 1,370,223 1,705,716 1,359,959

Share Capital 142,761 145,036 418,631 442,549 443,347Capital, Foreign Currency

Translation and Other Reserves 240,772 318,271 209,093 502,173 (81,359)Retained Profits 585,367 602,238 710,615 735,338 955,997Minority Interests 33,810 50,152 31,884 25,656 41,974

1,002,710 1,115,697 1,370,223 1,705,716 1,359,959

Per ShareEPS - include FX & NoI# (cents) 4.73* 6.03* 11.71* 11.72 20.83EPS - exclude FX & NoI# (cents) 4.88* 5.93* 10.70* 17.62 22.95Net Tangible Assets (cents) 48.00* 52.30* 64.64* 80.76 63.81Net Assets Value (cents) 48.49* 52.48* 65.30* 81.13 64.11

Financial RatiosReturn on Equity - include FX & NoI# (%) 9.92 11.93 19.83 15.97 28.68Return on Equity - exclude FX & NoI# (%) 10.25 11.73 18.12 24.00 31.60

Return on Total Assets- include FX & NoI# (%) 5.56 5.80 8.28 6.11 9.48Return on Total Assets - exclude FX & NoI# (%) 5.74 5.70 7.57 9.18 10.44

Operating Profit/Equity (%) 9.80 12.24 18.99 23.13 33.48Current Ratio (times) 1.87 1.52 1.29 1.19 1.10Net Gearing (times) Net cash Net cash Net cash Net cash Net cashDividend Cover (times) 1.10 1.10 1.30 1.34 1.90

* Adjusted for two Bonus Shares for every five existing ordinary shares# FX & NoI - Foreign exchange transactions and Non-Operating Items

GROUP FIVE-YEAR FINANCIAL SUMMARY TURNOVER ANDOPERATING PROFIT

Turnover

Operating Profit

5500

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

$’million

20082007200620052004

1,363

2,119

3,545

4,513

$’million

92.9

124.5

228.2

349.0

550

500

450

400

350

300

250

200

150

100

50

0

5,064

501.8

OPERATING PROFIT MARGIN

Operating Profit Margin

Operating Profit/Equity

20082007200620052004

6.85.9 6.4

7.7

%

40

35

30

25

20

15

10

5

0

9.812.2

19.0

23.1

9.9

33.5

The Chevron-Jurong Shipyard alliance team celebrating their repair achievement.


ECONOMIC VALUE ADDED (EVA)

EVA attributable to Shareholders (exclude UI)

Weighted Average Cost of Capital

350

300

250

200

150

100

50

0

-50

$’million

20082007200620052004

11.3

63.4

139.9

-45.3

6.2

5.35.9

6.3

%

14

12

10

8

6

4

2

0

6.0

336.5

RETURN ON EQUITY ANDRETURN ON TOTAL ASSETS

Return On Equity

Return On Total Assets

EARNINGS PER SHARE

EPS - before tax

EPS - after tax

20082007200620052004

9.9

11.9

19.8

16.0

cents

2008

28

26

24

22

20

18

16

14

12

10

8

6

4

2

0

2007200620052004

4.735.69

11.71

15.27

11.72

17.74

5.6 5.8

8.3

6.1

6.03

7.95

30

28

26

24

22

20

18

16

14

12

10

8

6

4

2

0

%

28.7

9.5

ASSETS

20082007200620052004

$’million

Property, Plant and Equipment

Associates & Joint Ventures

Other Investments

Other Long Term Assets

Current Assets

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

1,859.4

2,326.1

3,429.5

4,611.8

46.0

460.067.523.788.3

1,219.9

579.6

1,493.1

106.977.968.6

679.0

147.2

347.0

69.6

2,186.7

675.6

205.5

689.6

2,846.2

4,462.9

3,435.5

70.6138.4

269.6

697.7

F INANCIAL REVIEW

20.83

26.40

-81.4

SHAREHOLDERS’ FUND

1800

1600

1400

1200

1000

800

600

400

200

0

$’million

20082007200620052004

1,002.71,115.7

1,370.2

1,705.7

1360.0

Issued Capital

Capital, Foreign Currency Translation & Other Reserves

Retained Profits

Minority Interest

Return on Equity

33.8

585.4

240.8

142.8

50.2

602.2

318.3

145.0

710.6

209.1

418.6

25.7

735.3

502.2

442.5

10

12

20

16

31.9

443.3

956.0

42.0

29

-200

%

40

35

30

25

20

15

10

5

0

NET ASSETS VALUE ANDNET TANGIBLE ASSETS PER SHARE

cents

Net Assets Value

Net Tangible Assets

20082007200620052004

48.00

48.4952.30

52.48

64.64

65.30

80.76

90

80

70

60

50

40

30

20

10

0

81.13

63.81

64.11

LIABILITIES

3500

3000

2500

2000

1500

1000

500

0

$’million

Current Liabilities

20082007200620052004

856.7

1,210.4

2,059.3

2,757.1

651.7

205.0982.9

227.5

1,690.9

368.4

2,397.4

359.7

3,111.6

140.2

3,251.8

Long Term Liabilities

F INANCIAL REVIEW


VALUE ADDED STATEMENT & PRODUCTIVITY RATIOS

2004 2005 2006 2007 2008$’000 $’000 $’000 $’000 $’000

Turnover 1,362,764 2,119,279 3,545,049 4,513,123 5,063,948

Less: Bought In Materials (1,062,339) (1,734,961) (2,957,566) (3,722,062) (3,993,848)

Gross Value Added From Operations 300,425 384,318 587,483 791,061 1,070,100

Investment, Interest & Other Income 49,654 42,917 79,514 292,629 67,140

Share Of Associates’ Results 12,208 12,313 40,923 74,075 56,995

Share Of Joint Ventures’ Results 1,070 1,011 3,441 7,718 8,305

Other Non-Operating Expenses (14,307) (12,409) (30,792) (20,143) (78,108)

Foreign Exchange Transactions - - - (302,922) (43,749)

349,050 428,150 680,569 842,418 1,080,683

Distribution:

To Employees : Salaries, Wages & Benefits 180,833 216,533 299,052 379,897 429,895

To Government : Income & Other Taxes 21,844 41,888 73,880 130,198 111,677

To Providers of Capital :

Interest Paid on Borrowings 2,822 4,785 10,549 13,692 11,370

Dividends 56,881 98,036 122,362 216,266 209,259

Retained in Business :

Depreciation and Amortisation 37,497 37,766 45,514 66,353 70,592

Retained Profits 38,121 23,362 116,026 24,723 220,659

Minority Interests 3,017 4,186 10,143 10,738 21,324

Non-Production Costs 8,035 1,594 3,043 551 5,907

Total Distribution 349,050 428,150 680,569 842,418 1,080,683

Average Number of Employees 5,572 6,241 7,592 9,570 10,330

Employment Costs 180,833 216,533 299,052 379,897 429,895

Value Added Per Employee 53.92 61.58 77.38 82.66 103.59

Employment Cost Per Employee 32.45 34.70 39.39 39.70 41.62

Value Added Per Employment Costs 1.66 1.77 1.96 2.08 2.49

Value Added Per Dollar Investmentin Property, Plant and Equipment 0.65 0.66 0.87 1.17 1.53

Value Added Per Dollar Turnover 0.22 0.18 0.17 0.18 0.21

PRODUCTIVITY RATIOS

Value Added Per $ Investment in Property, Plant and Equipment

Value Added Per $ Turnover

20082007200620052004

0.22

0.65

0.18

0.66

0.17

0.87

1.17

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0

0.18

PRODUCTIVITY RATIOS

20082007200620052004

1.661.77

1.962.08

2.8

2.4

2.0

1.6

1.2

0.8

0.4

0

53.9

61.6

77.482.7

Value Added Per $ Employment Costs

Value Added Per Employee

$'000

120

100

80

60

40

20

0

0.21

1.53

2.49

103.6

DISTRIBUTION OF VALUE ADDED

450

400

350

300

250

200

150

100

50

0

$’million

Distribution to Employees

Distribution to Providers of Capital

Distribution to Government

20082007200620052004

21.8

59.7

180.8

41.9

102.8

216.5

73.9

132.9

299.1

130.2

230.0

379.9

111.7

220.6

429.9

Raroa FPSO setting sail from Jurong Shipyard after a successful conversion.

ECONOMIC VALUE ADDED

2008 2007$’000 $’000

Net Operating Profit Before Tax 479,658 282,928

Adjust for:Share of Associates and Joint Ventures’ Profit 65,300 81,793Interest Expenses 13,066 15,835Others 13,360 253

Adjusted Profit Before Interest and Tax 571,384 380,809

Cash Operating Taxes (Note 1) (98,612) (114,446)

NOPAT 472,772 266,363

Average Capital Employed (Note 2) 1,951,809 1,807,838

Weighted Average Cost of Capital (Note 3) 6.0% 6.3%

Capital Charge 117,109 113,894

EVA 355,663 152,469

Less: Minority Share of EVA 19,166 8,491

EVA Attributable to Ordinary Shareholders 336,497 143,978

Less: Unusual Items (UI) Gains (Note 4) - 189,272

EVA Attributable to Shareholders (exclude UI) 336,497 (45,294)

Note 1: The reported current tax is adjusted for the statutory tax impact of interest expense.

Note 2: Monthly average total assets less non-interest bearing liabilities plus timing provision, goodwill written off / amortised / impairedand present value of operating leases.

Note 3: The Weighted Average Cost of Capital is calculated in accordance with Sembcorp Industries Ltd Group EVA Policy as follows:i) Cost of Equity using Capital Asset Pricing Model with market risk premium at 6.0% (2007: 6.0%);ii) Risk-free rate of 2.74% (2007: 3.05%) based on yield-to-maturity of Singapore Government 10 years Bonds;iii) Ungeared beta 0.6 (2007: 0.6) based on Sembcorp Industries risk categorisation; andiv) Cost of Debt rate at 3.53% (2007: 4.12%) using 5-year Singapore Dollar Swap Offered rate plus 55 basis point.

(2007: 5-year Singapore Dollar Swap Offered rate plus 75 basis point)

Note 4: Unusual Items (UI) refer to divestment of subsidiaries and associates, long-term investments and disposal of major property, plantand equipment.

F INANCIAL REVIEW

60 Sembcorp Marine Ltd • Annual Report 2008

MARKET REVIEW & OUTLOOK

SHIP REPAIR• Ship repair recorded turnover increase of 8.7%

from $731.1 million in 2007 to $794.8 millionin 2008.

• Total of 269 vessels docked for repairs andmaintenance, an improvement over 256 vesselsin 2007.

• Vessels from Alliances, Favoured CustomerContracts and other regular customersaccounted for 86% of repairs.

01 0802 03 04 05 06 07

486

423

346

456

531

612

731

795800

700

600

500

400

300

200

100

0

$’million

01 0802 03 04 05 06 07

104

89

107

81

189

211

82

• With delivery of all three units of shipbuildingprojects in 1H 2008, there will be no shipbulidingprojects going forward.

• Deliberate scaling down to focus on rig buildingand offshore business.

SHIPBUILDING

2

$’million

250

200

150

100

50

0

• Ship conversion & offshore registered highestgrowth at 20% from $1.1 billion in 2007 to$1.4 billion in 2008.

• Major completions included conversion of threetankers to FPSO, one FSO, one newbuilt hullto heavy-lift derrick pipelay vessel and topsidesfabrication and integration of newbuilt FPSO.

SHIP CONVERSION & OFFSHORE

01 0802 03 04 05 06 07

$’million

1200

1000

800

600

400

200

0

204

332

391

615

886913

1,131

1,354

3000

2500

2000

1500

1000

500

0

RIG BUILDING• Rig building registered a 14% growth at $2.8

billion compared with $2.5 billion in 2007.• A record total of 11 rigs were delivered on time

and ahead of schedule in 2008. These includedtwo semi-submersibles and nine jack-up rigs.

01 0802 03 04 05 06 07

$’million

1,729

95 131 118

381

2,840

2,499


$’million

6000

5000

4000

3000

2000

1000

0

CORE BUSINESSES (REVENUE 2001 TO 2008)

08

5064

06

3545

05

2119

04

1362

03

1068

02

1011

Ship Repair Shipbuilding Ship Conversion/Offshore Rig Building Others

01

854

07

4514



While the financial turmoil has a dampening impact onthe world economy and the current oil prices, the long-term fundamentals and outlook for the marine andoffshore industry continue to be positive in the light ofcontinued global reliance on oil and gas and acceleratingdepletion of oil and gas reserves.

The long view is still positive

The International Energy Agency (IEA), in its 2008 WorldEnergy Outlook, forecasts demand for primary energyto grow at a rate of 1.6 per cent each year through2030. Most of the demand will come from emergingareas, particularly China and the Middle East, with Chinaaccounting for 43 per cent of oil demand between 2007and 2030 and Middle East and India each contributingan additional 20 per cent. The Organisation of thePetroleum Exporting Countries (OPEC), in its 2008World Oil Outlook, further predicts world oil demandto grow 113.3 mb/d by 2030, an increase of around27 mb/d.

World Economic Outlook

According to the International Monetary Fund (IMF) in its latest update in January 2009, world growth is projectedto fall to 0.5 per cent in 2009, its lowest rate since World War II. Despite wide-ranging policy actions, financialstrains remain acute, pulling down the real economy. A sustained economic recovery will not be possible untilthe financial sector’s functionality is restored and credit markets are unclogged.

Projections Projections2007 % 2008 % 2009 % 2010 %

World Output 5.2 3.4 0.5 3.0

Advanced economies 2.7 1.0 -2.0 1.1 United States 2.0 1.1 -1.6 1.6

Euro area (15) 2.6 1.0 -2.0 0.2Japan 2.4 -0.3 -2.6 0.6Other advanced economies 4.6 1.9 -2.4 2.2

Emerging market and developing economies 8.3 6.3 3.3 5.0Africa 6.2 5.2 3.4 4.9Central and Eastern Europe 5.4 3.2 -0.4 2.5Commonwealth of Independent States 8.6 6.0 -0.4 2.2

Developing Asia 10.6 7.8 5.5 6.9China 13.0 9.0 6.7 8.0

Middle East 6.4 6.1 3.9 4.7

Western Hemisphere 5.7 4.6 1.1 3.0

Source : IMF

ExxonMobil sees world energy demand growing 1.2per cent per year through 2030, generating theequivalent of 310 mboe/d in 2030 compared with 229mboe/d in 2005. It also foresees that transportationdemand will grow by 40 per cent, power generationby 50 per cent, industrial by 28 per cent andresidential/commercial by 10 per cent.

To meet this growing demand and to offset depletingfield production, new supplies of oil must be found.The average production-weighted decline rate ofworldwide oil fields is about 6.7 per cent for fields thathave passed their production peak. This rate is expectedto grow to 8.6 per cent in 2030. In the long view, thereis a widely held consensus that an increasingly pressingneed exists to find new oil sources. There is also aconsensus that the deepwater frontier represents oneof the best opportunities for finding new large sourcesof oil.

Aerial view of Jurong Shipyard. Aerial view of Sembawang Shipyard.



17

OFFSHORE PRODUCTION MARKET : FLOATERS

30

25

20

15

10

5

0

Ultra-deepwater >1500m Deep water 1000 - 1500m <1000m water depth

No. ofUnits

Gulf ofMexico Africa SE Asia Brazil

Australia/NZ N. Europe

SWA/M EAST Mediterranean China TBD

5

12

10

9

8

27

2

3

16

21

12

10

5

27

11

11

18

1

19

6

68

8

1 1

Oil will remain the world’s main source of energy foryears to come

The IEA believes that oil will remain the world’s mainsource of energy for many years to come, even underthe most optimistic of assumptions about thedevelopment of alternative fuel sources. But the sourcesof oil, the cost of producing it and the prices thatconsumers will have to pay are extremely uncertain.The IEA feels that while market imbalances will feedprice volatility, the era of cheap oil is over.

Floaters being planned or under study

There are now 232 floating production systems in serviceworldwide. Floating-production-storage-offloading(FPSO) vessels comprise 62 per cent of the current

NorthAtlantic

5

6

11

1

total, production semis 18 per cent, tension leg platforms9 per cent, production spars 7 per cent, productionbarges 3 per cent and floating-storage-regasificationunits (FSRUs) 1 per cent. There are also 86 floating-storage-offloading (FSO) vessels, without productioncapability, in service worldwide.

IMA’s December 2008 report identifies 143 projectscurrently in the bidding, design or planning stage thatpotentially require floating production or storage systems.West Africa and Brazil are the most active regions, with27 projects each in the bidding or planning stage,followed by Southeast Asia, Europe and the Gulf ofMexico. In terms of water depth, 36 projects are inultra-deepwater, 29 in water depth between 1,000 and1,500 metres and 78 in less than 1,000 metres.

Source : IMA

Dhirubhai-1, India’s first deepwater FPSO vessel.

Emerald Driller, a proprietary Pacific Class 375 jack-up rigdelivered by PPL Shipyard 48 days ahead of schedule.

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PROMOTING HEALTH,SAFETY, SECURITY AND ENVIRONMENT

Healthy and Active LivingBelieving that a healthy and motivated workforce would translate into positive benefits for the Group, SembcorpMarine provided a holistic range of workplace health promotion programmes to help employees achieve totalwellness in body, mind and spirit. Lending their strong support and commitment, senior management representativesparticipated actively in these programmes that focused on health and wellness, active living and work-life balance.

Health & WellnessAs education provided the foundation to effectivehealthcare and disease prevention, the Group held arange of workshops and talks covering topics fromhealthy eating, cancer prevention and HIV/AIDsawareness to smoking cessation, stress managementand cholesterol reduction.

To keep chronic illnesses in check, yards conductedhealth screenings to provide targeted treatment andtimely interventions to employees identified with high-risk ailments such as hypertension, high blood pressure,stroke, high cholesterol and diabetes. Jurong Shipyardfurther continued its Chronic Disease Medical Plan forretired employees, which subsidised the medicaltreatment costs for those diagnosed with chronicillnesses for five years after their retirement.

Special events were also organised to raise awarenessamong staff about healthy and active living. InSeptember 2008, Jurong Shipyard’s annual A.C.T.I.V.E.(All Companies Together in Various Exercises) Day sawemployees enjoying a low-impact half-hour exercisesession where they learnt to use special elastic workoutbands to tone and shape up.

Yards also distributed fruits and nuts during key healthevents to highlight the importance of a high dailyintake of vitamins and minerals. To promote the benefitsof a balanced diet, Jurong SML designated a HealthySandwich Day during the year, offering a sandwichbuffet of healthy vegetables, fillings and sauces.

Various dengue prevention programmes were also inplace at the Group’s yards for the well-being ofpersonnel. Besides educating employees and contractorsabout the disease and proper housekeeping practices,regular inspections were also conducted to identifyand prevent the breeding of Aedes mosquitoes.

Fit & Active LivingTo make exercise convenient and accessible, yardsoffered a wide variety of workplace fitness classes.Featuring both low-impact and high-energy work-outs, these classes ranged from tai chi, yoga, hi-loaerobics and kick-boxing to line dancing and bellydancing to suit employees of different age groupsand interests.

Jurong Shipyard recently replaced its former gymnasiumwith a bigger and better facility to encourage employeesto adopt a regular fitness regime. The new gymnasiumnow offers a comprehensive range of cardio- and

Annual A.C.T.I.V.E. Day mass workout.

Health screening for early detection.

Healthy food education.

PROMOTING HEALTH, SAFETY, SECURITY AND ENVIRONMENT


weight-training equipment, supported by part-timetrainer services for employees to engage in full-bodyworkouts. It also featured a well-furbished studio forthe yard’s series of workplace exercise and danceclasses. Both Jurong Shipyard and PPL Shipyard, whichintroduced gymnasium facilities in 2007, have dedicatedworkout days solely for ladies to motivate more femaleemployees to exercise.

Participation in sporting tournaments for games – suchas soccer, basketball, badminton, table-tennis, sepaktakraw and bowling – after work offered another avenueto build team spirit and rapport among staff of alllevels within their yards and across the Group.

The Group’s yards were also actively involved in eventsinitiated by external organisations during the year.These included the Maritime and Port Authority’sInternational Sports Meet for Seafarers and Singapore

Nautical Run; SAFRA’s Singapore Bay Run and ArmyHalf Marathon; Singapore Air Force’s Paya Lebar AirbaseRun, and the Standard Chartered Marathon.

Work-life BalanceThe Group encouraged employees to maintain a healthywork-life balance for optimal performance at work.The numerous outdoor activities organised throughoutthe year provided an avenue for them to workout,interact and have fun beyond the workplace.

During the year, Jurong Shipyard and Jurong SMLorganised treks through the Southern Ridges, one ofSingapore’s latest nature attractions. Besides visitingkey attractions along the nine-kilometre chain ofgreen open spaces, employees tucked into healthyfeasts of fruits at the end of their journeys. SembawangShipyard also held a ‘Get Fit With Your Feet’ event and

a walkathon for employees to build up their stamina,fitness and endurance. Recreational trips to destinationssuch as Pulau Ubin, Bintan, Kukup and Desaru werefurther organised for employees to relax and rechargetheir mind, body and spirit.

Another important area saw the imparting of vitalskills for the proficient management of work, familyand personal lives. The Group’s yards held talks ontopics such as effective child management, healthymarriage maintenance, retirement preparation andgood financial planning.

Stress management techniques were also covered.Jurong Shipyard ran holistic therapy workshops toeducate staff in massage and stretching techniquesfor stress and backache relief, while SembawangShipyard, Jurong SML, PPL Shipyard and SMOE heldtalks and workshops for staff to pick up practical tipsand knowledge for achieving total wellness and mentalwell-being.

Recognition and AwardsThe workplace health promotion efforts of SembcorpMarine and its yards did not go unnoticed. JurongShipyard, Jurong SML and Sembawang Shipyardbagged top accolades during the Singapore HEALTH(Helping Employees Achieve Lifetime Health) Awardsceremony organised by the Health Promotion Board.

Additionally, Jurong Shipyard and Jurong SML set amilestone by being the first in the industry to achievethe prestigious Platinum HEALTH Award, whileSembawang Shipyard bagged a Gold HEALTH Awardfor the second consecutive year. Jurong SML was alsoa recipient of the Smoke-Free Award, which recognisedits comprehensive and effective quit-smoking initiativesat the workplace.

Since the launch of their workplace health programmesin the late 1990s, Jurong Shipyard, Jurong SML andSembawang Shipyard had seen signif icantimprovements in their employees’ health. Participationrate for health-related activities had also increased.Notably, Jurong Shipyard had witnessed a decrease incholesterol and blood pressure levels over the years,a rise in health screening participation from 28% in2000 to almost 78% in 2007, and a drop in averagemedical cost per employee by one-third during thesame period.

Jurong SML’s targeted interventions on smokers,hypertension, obesity and diabetes had also showngood progress. The yard’s quit-smoking initiatives andsmoking cessation programme demonstratedcommendable results, with smoking rates decliningfrom 36% in 2002 to 19.2% in 2007.

Learning stretching exercises. Southern Ridges Nature Trek.

Building team bonding beyond the workplace.

Representatives from Sembcorp Marine’s shipyards displaying their Singapore HEALTH Awards.



Workplace Safety & SecuritySembcorp Marine remained ever vigilant in its efforts to ensure high standards of safety and security in itsoperations. By creating a safe and secure work environment, the Group was able to inspire confidence amongits people, customers and stakeholders to stay ahead in today’s competitive business environment.

Benchmarking for ExcellenceThe steadfast commitment of Sembcorp Marine’s yards towards health, safety, security and environmentalexcellence was recognised globally. Classification societies – such as ABS Quality Evaluations, Det Norske Veritasand Lloyd’s Register – endorsed the yards with accreditations for achieving high standards in quality, safety andenvironmental management.

The Group also appointed external safety consultants to conduct validation audits to ensure safety processesand systems complied with regulatory requirements and industry code of practices.

Safety Performance in 2008Sembcorp Marine’s efforts in promoting greaterworkplace safety and health within its yards led toa lower Accumulative Frequency Rate for the year.Based on the number of considerable accidentsper million man-hours, the Group attained anAccumulative Frequency Rate of 0.71 this year,an improvement from 1.09 in 2007. The Group’sAccumulative Severity Frequency Rate, whichmeasured the number of man-days lost per millionman-hours, also improved significantly to 67.01 in2008, from 260.01 in 2007.

Shipyards Quality Safety Environment

Jurong Shipyard ISO 9001:2000 OHSAS 18001:2007 -ABS Quality Evaluations Inc. ABS Quality Evaluations Inc2007 Recertification 2008 Recertification

Sembawang Shipyard ISO 9001:2000 OHSAS 18001:1999 ISO 14001:2004Det Norske Veritas Det Norske Veritas Det Norske Veritas2006 Recertification 2006 Recertification 2006 RecertificationMaintained Level 9 (Level 9)

PPL Shipyard ISO 9001:2000 - -ABS Quality Evaluations Inc2007 Recertification

Jurong SML ISO 9001:2000 OHSAS 18001:2007 -ABS Quality Evaluations Inc ABS Quality Evaluations Inc2006 Recertification 2007 Certified

SMOE ISO 9001:2000 OHSAS 18001: 2007 ISO 14001:2004Lloyd’s Register ABS Quality Evaluations Inc Det Norske VeritasQuality Assurance Ltd 2007 Recertification 2007 Recertification2006 Recertification

Safety Achievements for ProjectsSMOE and Sembawang Shipyard achieved anoutstanding safety track record of 25 millionman-hours without Lost Time Incidents for theirwork on the floating-production-storage-offloading(FPSO) Hai Yang Shi You 117, involving themodularisation and integration of 32,000 tonnes oftopside facilities. This largest-ever project undertakenby both yards to date also received recognition fromthe Ministry of Manpower in 2007 and 2008.

Customers also commended the yards for their safetyexcellence in ship repair. Chevron Shipping presenteda special safety award to Jurong Shipyard for attainingmore than 3 million man-hours without Lost TimeIncident for Chevron projects since August 2001, whileSembawang Shipyard received an award from BPShipping for achieving 1 million man-hours withoutincident for BP vessel repairs since October 2006.

National RecognitionJurong Shipyard, Sembawang Shipyard and SMOE wona series of accolades at the Workplace Safety and Health

Awards hosted by the WSH Council and supported bythe Ministry of Manpower in October 2008.

Sembawang Shipyard bagged five Safety and HealthAward Recognition for Projects (SHARP) awards forAban Abraham, Aban VIII, BW Endeavour, Hai YangShi You 117 and Sapura 3000, which achieved zeroincidents over a million man-hours.

Jurong Shipyard’s Safe Stage team and SembawangShipyard’s Hull Spiderz team each received the WSHInnovation Award for innovation in developing betterand safer working methods for safety excellence and

SAFETY PERFORMANCE

AccumulativeFrequency Rateper millionman-hours

1998

708.0

1999

989.9

2000

992.7

2001

1416.1

1600

1400

1200

1000

800

600

400

200

0

2008

67.0

AccumulativeSeverity Rateper millionman-hours

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0

2007

260.0

2002

342.9

2003

277.4

2004

678.3

2005

147.3

2006

583.3

4.4

3.33.1

3.8

3.0

3.4

2.8

2.1

1.1

3.2

ASR AFR

0.7

3 million man-hours without LTI Safety Award from Chevron Shipping. 1 million man-hours without LTI Safety Award by BP Shipping.



workplace improvement. In addition, Mr Selathorais/o KR Suppiah, a lifting supervisor from SMOE, wasrecognised with the Safety & Health Award forSupervisors for his team’s incident-free track record ofmore than three years.

A Robust FrameworkSembcorp Marine maintained a robust health, safetyand environment framework aimed at fostering a safeworking environment for employees and contractors,promoting a proactive safety culture and harnessinginnovation for safety excellence.

This strategy was effectively carried through by allbusiness units via Occupational Health & Safety SteeringCommittees chaired by the managing directors of therespective yards. The strategic directions were furthertranslated to specific action plans by the WorkplaceSafety and Health Committees and Vessel SafetyCoordination Committees, which were thencommunicated to managers and supervisors whowould brief their charges in small groups. Keepingforeign employees in the loop, the yards woulduse various channels and languages to disseminatesafety reminders.

Further emphasising the importance of safety, theGroup’s yards jointly implemented the REV programme

in mid-2008. The three components of the REV strategy– Review, Educate and Validate – were focusedon reinforcing safety and minimising risks at work.

Implemented every quarter, the REV programmeinvolved heightened onboard safety inspections forall vessels and projects, comprehensive multi-lingualsafety briefings with a clear focus on specific risk areasas well as on-site safety audits and proactive riskassessments to heighten safety awareness andminimise the possibility of incidents.

Workplace Safety and Health CultureAll yards within the Group have specific health, safetyand environmental work plans covering safety ineducation, engineering, enforcement, environment,evaluation and efficiency. These plans also includebehavioural-based safety initiatives and promotionactivities that reinforce the safety culture. Thesepromotional initiatives ranged from safety campaignsand innovation competitions to safety quizzes andcontests to encourage greater awareness ofoccupational health and safety.

Where excellence in safety performance was achieved,cash benefits and awards went out to project teams,yard subsidiaries and contractor partners. Some yards,such as Jurong Shipyard, Sembawang Shipyard and

Jurong SML, further implemented a complementarymerit and demerit point system to motivate employeesand contractor partners towards zero-incident andgreater health, safety and environmental performance.

Promoting Greater AwarenessAs a role model in safety, Sembcorp Marine becamea key sponsor in the Ministry of Manpower ‘SafetyStarts with Me’ national campaign, which sought toencourage a proactive attitude and greater involvementtowards safety on a national level.

The Group also held several WSH Innovation Carnivalsto encourage the sharing of creative ideas across itsyards and showcase projects that had enhanced safetyand operational efficiency. Jurong Shipyard, forexample, held a ‘Towards Safety Excellence’ campaignin June 2008, attended by key Ministry of Manpowerrepresentatives. The event saw the launch of a newin-house produced safety DVD on scaffold safety.

That same month, Sembawang Shipyard took adifferent approach by organising its carnival under itsProgramme-based Engagement (ProBE) strategy ofengaging employees and stakeholders to advanceoccupational health and safety standards. The event,themed ‘Safety Starts with Me’, was attended byrepresentatives from the Singapore Civil Defence Force,Traffic Police, National Environment Agency andHealth Promotion Board.

PPL Shipyard also took the initiative to introduce ajoint inspection programme where employees fromother departments were taught to carry out health,safety and environment inspections. Besides fosteringgreater participation in safety monitoring, this initiativeencouraged knowledge exchange and improvedrapport between departments.

Workers testing their safety knowledge at the mobile exhibition.

Towards safety excellence.bizSAFE safety training for contractors.



Education & TrainingYards within the Group continued to hold safetyinductions to familiarise new employees and contractorworkers with safety rules, regulations and risk assessmentguidel ines before they commenced work.Supplementing these were other internal and externalcourses that focused on safety in specific areas, includingthe usage of aerial platforms, overhead and gantrycranes, fork-lift driving and working at heights.

Reaching out to contractor partners, the yards inSingapore were active supporters of the WorkplaceSafety and Health Council’s bizSAFE programme, whichwould progressively recognise contractors foroccupational health and safety advancements as theystrive for third-party certification. This programmeencouraged contractors to integrate risk managementand workplace safety and health management systemsinto their operations.

Emergency PreparednessEnsuring a high-level of emergency preparedness,Sembcorp Marine included its employees, contractorsand customer partners in its total health, safety, securityand environment as well as risk management strategy.

During the year, more than 148 emergency evacuationdrills were held at workshops and offices as well as onboardvessels and rigs across the Group's yards in Singapore.

The drills, which covered a range of scenarios fromterrorist threats to fire hazards, enabled employeesand partners to practise their emergency responsetechniques and familiarise themselves with emergencyevacuation procedures.

Joint patrols and emergency exercises were alsoconducted together with partners from the SingaporeCivil Defence Force, Singapore Police Force and thePolice Coast Guards to ensure seamless coordinationduring contingencies.

Security ControlsTo mitigate the risk of security threats, Sembcorp Marineand its yards continued to maintain high levels ofvigilance in protecting its people, assets and operations.

In line with international security concerns, increasedprecautions were laid in place in prevention of terrorism.Waterfront and shipside security was also heightenedwith increased close-circuit camera monitoringaround the yards supplemented by daily 24-hoursurveillance patrols.

The yards kept an active vigil with patrols at strategicaccess points and stringent security checks onemployees, visitors and vehicles entering the premises.At Jurong Shipyard, employees and contractorsunderwent additional authentication with a vein-pattern recognition biometric security system andRFID smartcards.

Security personnel were also dispatched upon requestto control access and security onboard vessels and rigswhile in the yards or during sea trials.

Joint Cooperation with PartnersSembcorp Marine’s yards continued to forge closerelationships with various government agencies and

industry associates in the areas of joint cooperationand knowledge sharing in preventing and counteringsafety and security threats.

Jurong Shipyard, together with two neighbouringyards, worked closely again with the JurongWest Neighbourhood Police Centre under the WestZone Shipyard Safety & Security Watch Grouppartnership to reinforce safety and security withinthe yard and its vicinity.

The Group’s yards also participated in variousknowledge sharing activities with external safety andsecurity partners. One such event was the Home TeamWestern Sector Workshop participated by JurongShipyard in February 2008. Organised by the SingaporeCivil Defence Force, the event allowed the yard toexchange knowledge with teams from other industriesand to build stronger links with Home Team personnelfrom the Singapore Civil Defence Force, ImmigrationDepartment, Singapore Police Force and SingaporePrisons Department.

Jurong Shipyard was also invited by the SingaporePolice Force to share its innovation excellence strategyat the SPF 3i (Ideas, Improvement, Innovation)Convention in August 2008.

Safety drills at Sembawang Shipyard and SMOE.

Codename ‘Ex Red Whale’, an exercise onboard British Confidence jointly organised by Sembawang Shipyard and Singapore Civil Defence Force in cooperation with BP Shipping.

Sharing safety and security insights with Home Team Western Sector.



Towards Greener OperationsUnderstanding the close inter-relationship betweenthe business and the environment, Sembcorp Marineand its yards were constantly seeking greener solutionsfor environmental safety and conservation.

ISO-14001-accredited subsidiaries Sembawang Shipyardand SMOE put in place structured and proactiveenvironmental management systems to ensure thattheir operations complied with the regulatoryrequirements and were in line with industry best practices.

Eco-friendlier production processes, such ashydroblasting and enclosed blasting, were practisedin the shipyards as far as possible to minimise theimpact of yard operations on the environment.

Recycling & ConservationTo optimise resources and minimise wastage, SembcorpMarine and its subsidiaries continued their efforts inthe recycling of by-products and other materials.

At Jurong Shipyard, used copper slag, a by-product ofblasting operations, continued to be recycled by anothersubsidiary, JPL Industries. The copper slag wouldfirst be treated and then used to produce buildingbricks and pavement blocks for sale and yarddevelopment purposes.

Employees were encouraged to adopt the goodpractice of recycling as part of environmentalconservation efforts. The placement of additional binsfor the recycling of paper, plastic and glass at convenient

and strategic venues across the Group’s yards was anadditional measure to enhance recycling participationamong staff.

Resource optimisation was another important focus asthe Group took steps to make energy-saving and eco-efficient processes a way of life in the workshops andoffices. The message of recycling and resourceconservation was also actively communicated toemployees through publicity efforts in various mediumssuch as posters, banners and newsletters.

Enhancing the WorkplaceTo ensure a clean, conducive and safe workenvironment, the Group’s yards continued to instillthe value of good housekeeping among employeesand contractor partners through various initiatives.

At Jurong Shipyard, a Housekeeping Day was designatedevery week in which personnel went through asystematic process of cleaning and tidying theirrespective work areas. PPL Shipyard also implementeda comprehensive housekeeping programme thatincluded weekly inspections and an award recognitionsystem to reward departments with the besthousekeeping practices.

The creation of green spaces was actively undertakenthrough the regular planting of trees and flowers acrossthe Group’s yards. The concept of a ‘Garden Shipyard’environment continued to flourish since the launch ofSembawang Shipyard’s Tree Planting Campaign in2006. The yard held its Tree Planting Day in December2008 to add to its growing showcase of trees andflowering plants in its landscape.

Promoting Community AwarenessSembcorp Marine took its steadfast green commitmentfurther by organising and supporting various greeninitiatives to promote greater environmental awarenesswithin the community.

Sembawang Shipyard took the lead by organising its2008 Green Wave Environmental Care Project, anannual competition which aims to inspire andmotivate youths to develop innovative solutions andideas for environmental protection and improvement.The competition, which was launched in 2003, sawvery positive response this year with a total of 260

Environmental PreservationA strong proponent of environmental care and protection, Sembcorp Marine demonstrated its commitmenttowards environmental conservation and social responsibility through its conscious efforts to further the greencause within and beyond its yards. The aim was to protect the best interest of its people and the community.

entries from almost 1,000 students from primaryschools, secondary schools, junior colleges, institutesof technical education and tertiary institutions.

The top 50 projects teams were recognised with cashprizes and commendation awards during a ceremonyin January 2009. The contest continued to be atestament of the yard’s close relationship with itsalliance partners – Shell International Trading andShipping Company and BP Shipping – who generouslyprovided the top cash prizes as well as work attachmentopportunities for post-secondary school winners.

In addition, Sembawang Shipyard sponsored theNational University of Singapore Green Carnival inAugust 2008. Supported by the National EnvironmentAgency, the event sought to fight climate changeand promote environmentally sustainable lifestyles.

Another project with the National Environment Agencysaw Sembawang Shipyard participating in the Clean &Green Singapore Schools’ Carnival held during Cleanand Green Week 2008 to encourage environmentalcare and protection among students. More than 15,000students from over 190 schools, from pre-school to pre-tertiary levels, took part in the carnival, which waslaunched by Dr Amy Khor, Senior Parliamentary Secretary,Ministry for the Environment & Water Resources.

The Group’s subsidiary, JPL Industries, was one of thekey sponsors of the “Semakau Corporate EnvironmentalOutreach (CEO) Run 2008” organised by the NationalEnvironmental Agency on 19 October 2008. SeniorManagement from JPL Industries took part in the runand tree planting activities to mark their commitmenttowards environmental conservation and protection.

Green Wave Environmental Care Competition launched since 2003 aims to inspire and motivate youths to develop innovative solutions and ideas for environmental protection and improvement. Senior management from JPL Industries at the Semakau CEO Run 2008.

COMPETITIVE EDGE& CAPABILITIES


Breakthrough LNG Longevity & Refit ContractsDuring the year, Sembcorp Marine was awarded along-term longevity contract and an evergreenfavoured customer contract (FCC) by InternationalGas Transportation Company, the parent shippingcompany of the North West Shelf Venture, for the lifeextension and repair of its fleet of Liquefied NaturalGas (LNG) vessels.

The longevity and evergreen FCC contracts, signedbetween IGTC’s shipping advisor North West ShelfShipping Service Company (NWSSSC) and SembcorpMarine’s subsidiary Sembawang Shipyard in Septemberand December 2008 respectively, are the first of theirkind between a major LNG operator and a Singaporeshipyard group.

Strategic Customer Partnerships

Positioning itself for sustained growth, Sembcorp Marine forged ahead in its strategy of building strategicpartnerships, leveraging innovation and strengthening capabilities to reinforce its leading presenceand competitiveness. Strategic alliances formed with the Group’s overseas associates and customershelped to establish win-win partnerships and mutually beneficial working relationships that reapsynergistic benefits for all parties.

Forging Strategic PartnershipsCultivating long-term alliances with valued customers have always been an important tactical focus as they ensurea steady flow of recurring ship repair work and a stable baseload order book for the Group.

Sembcorp Marine’s yards have won the confidence of globally renowned companies with their proven trackrecords and strong technical capabilities. Companies that have committed to strategic alliance, favoured customercontract (FCC) and long-term partnerships with the Group’s yards include prominent shipowners as well as oiland gas majors.

Company Contract Type

BP Shipping (UK)

BHP Billiton (Australia)

Chevron Shipping LLC

JO Tankers Alliance

NOL Shipping

Shell International Trading and Shipping Co Limited (UK)

Alaska Tanker Co (USA)

ASP Shipmanagement Group (UK)

BW Gas ASA

ConocoPhillips Inc (USA)

EMS Ship Management (ex-TESMA)

Euronav Shipmanagement B.V. (Belgium)FCC

Exmar Shipmanagement B.V. (Belgium)

Kumiai Senpaku

Taiwan Marine Transport

TECTO B.V. (Belgium)

Transocean Eastern Pte Limited

V Ships (Monaco)

North West Shelf Shipping FCC / LNG longevityService Company (Australia) and refit

Nor Offshore

Police Coast Guard Docking & Maintenance

PSA Marine

Republic of Singapore Navy New LST Maintenance

Load-out and Mating-in-Dock technique to acceleratethe semi-submersible construction process.

Marking the LNG carrier longevity contract signing with International Gas TransportationCompany Limited, the parent company of North West Shelf Venture.

COMPETITIVE EDGE & CAPABILITIES


The longevity contract commits both partners to co-operate in the life extension of IGTC’s fleet of six Moss-Rosenberg type LNG carriers as they progressivelyreach their 20th year in service. The first vessel,Northwest Sanderling, is scheduled to undergo lifeextension and upgrading at Sembawang Shipyard inJune 2009 at an estimated cost of S$35 million.

The evergreen FCC contract will see IGTC’s six Moss-Rosenberg LNG vessels and one membrane LNG carrierundergoing major refits and regular maintenance inSembcorp Marine's Sembawang Shipyard and JurongShipyard from 2009.

Strengthening FCC PartnershipsSembawang Shipyard’s good relationship with itscustomers was also evident from various FCC contractawards and renewals during the year.

EMS Ship Management, formerly known as TESMA,renewed its FCC contract with Sembawang Shipyardin May 2008. With the renewal of the FCC contract,which was signed back in 2002, the yard will continueto be EMS Ship Management’s exclusive partner forthe drydocking and repair of its fleet of owned andmanaged vessels.

The yard also secured two FCC contracts in October2008 from Transocean Eastern Pte Ltd, a subsidiary ofthe world’s largest drilling contractor Transocean Inc,and Norways’ BW Gas ASA, formerly known as BergesenWorldwide Gas.

Transocean Eastern, which controls 26 drilling unitsoperating in Middle East and Asia, is expected to repairand upgrade two to four rigs at Sembawang Shipyardannually. The first rig under the contract, Harvey Ward,arrived the same month for repairs.

Under the FCC contract with BW Gas, SembawangShipyard will carry out repairs for all LNG and LPGcarriers scheduled for docking in the area. A total offour BW Gas vessel dockings are expected in 2009.

Enhancing Operational CapabilitiesSembcorp Marine’s yards built up their capabilitieswith the installation of new facilities and equipmentto further enhance operational effectivenessand competitiveness.

Jurong Shipyard saw the official opening of a newProject Coordination Centre by Mr Tan Kwi Kin,Sembcorp Marine’s Group President & Chief ExecutiveOfficer, at the yard’s Tanjong Kling location onDecember 22, 2008. Able to house up to 700 persons,the 4,800 m2 facility serves as a strategic hub for theeffective planning, coordination and execution of thevarious ship repair, shipbuilding, ship conversion, rigbuilding and offshore engineering projects in the yard.

New equipment and machinery were also added toenhance the operational efficiency of the Group’s yards.Jurong Shipyard saw the installation of two units of

300-tonne cranes to increase its cranage capacity, theinstallation of three new enclosed blasting chambersand the addition of blasting equipment to complementits growing marine and offshore engineering operations.

To further boost its offshore engineering andconstruction capabilities, SMOE added a rigid threadcutting machine, an automated pipe spool weldingmachine, a band saw machine, a hydraulic puncherand a 250-tonne trawler crane to increase its productionefficiency and capacity.

Beyond Singapore, Sembcorp Marine’s Indonesiansubsidiary P.T. SMOE further expanded its facilitiesto provide stronger support to the Group’s home-based operations. P.T. SMOE Indonesia increased itsoperational capabilities to handle more than 500,000manhours of work per month with the launch of itsnew Phase II yard development.

Officially opened on November 14, 2008 by BapakDrs. H. Ismeth Abdullah, Governor of Kepulauan RiauProvince, the new yard development on Batam Islandfeatures enhanced facilities. These include three largeworkshops each totalling 20,460 m2 and measuring110m x 62m, a new auto-blasting and paintingworkshop equipped with one of the largest and mostsophisticated machinery in South East Asia, a reinforced275m long quay wall that can now accommodatejackets of up to 15,000 tonnes or decks of up to 10,000

tonnes, an additional 310m skidway, and a well-equipped medical centre with its own ambulance.

In addition to equipment and facilities upgrades, theyards also enhanced their information managementsystems, resulting in improved information sharingand more efficient work processes. Security forinformation systems was also increased to protect theyards’ intellectual and technological assets.

As part of efforts to benchmark against internationalstandards, Sembcorp Marine participated in a missiontrip to Japan as part of an industry delegation led bythe Association of Singapore Marine Industries (ASMI).Through the visit, the Group gained a deeperunderstanding of the technological developments andbest practices adopted by industry peers to furtherenhance operational performance within its yards.

Investing in Research and InnovationTo maintain its leading edge, Sembcorp Marineinvested considerable resources into the researchand development of marine and offshore technologyto stay at the forefront of industry developmentsand advancements.

Gearing up for future challenges in the offshore sector,research and development efforts continued to bechanneled by Sembcorp Marine Technology towards

FCC contract signing with EMS Shipmanagement. Official opening of the Project Coordination Centre to enhance operational capabilities.

FCC contract signing with Transocean Eastern.

Official opening of Phase II yard development in Batam by P.T. SMOE Indonesia.

• Complete SensorThe Complete Sensor developed by JurongIntegrated Services enables the timely detection ofpeople and objects in the path of travellingmachinery such as overhead cranes, CNC plate-

cutting machines, andwelding gantries to preventcollision incidents. Whenan obstruction is detected,the system’s sensing linetriggers off a tactile switchwhich temporarily disablesthe machine. It also comes

with an emergency switch which serves as anadditional back-up for greater protection. Thisinnovation has resulted in enhanced safety in theworkshops and greater morale among employees.

• Rudder Nut TurnerThe Rudder Nut Turner is an innovative deviceconceived by Sembawang Shipyard’s MechanicalDepartment to provide a stable support platformfor the refitting of the rudder nut during propulsionworks. This is a more stableand secure alternative thanthe conventional turntablemethod, where workersare exposed to material-falling hazards.

The device also enables easier alignment and greaterease when refitting rudder nuts. Besides minimisingthe likelihood of incidents and pinch-point injuries,higher productivity is also achieved with refittingtime sped up by 35%.

• Portable PlatformThe Portable Platform was developed by JurongShipyard and Seah Marine Engineering to providescaffolders with a temporary platform and a securestanding point in the ship’s cargohold for the manualdistribution of scaffold materials in areas where airwinches cannot be set up. Comprising a gratedplatform, the light-weight Portable Platform isdesigned with two secure points made up of fourhooks to be secured to the ladders to provideworkers with a proper foothold instead of havingto juggle their weight on the ladder. This enhancessafety during the scaffold erection process and leadsto increased morale on the job.

• HP HookDesigned to enhance safetywhile working at heights, theHP Hook by Jurong Shipyard’sHull Painting Departmentcreates an extended outlet forthe secure hooking of thesafety harness to scallop holes.The HP Hook also doubles upas an additional anchor pointfor the second safety life lineto prevent falling and swinging hazards. Thissignificantly enhances safety and reduces fallinghazards during scaffold work.

• Semi-Automatic Lifting Gears (Spider Grab)The Semi-Automatic Lifting Gears innovation, alsoknown as the Spider Grab, is a customised liftingdevice with a semi-automatic locking mechanismcreated by Sembawang Shipyard’s Hull Departmentto aid the process of lifting and handling irregularshaped outfitting items. It eliminates the needto weld eye plates, thusenhancing work efficiencywhile minimising the safetyrisks and material damageassociated with hotwork andgrinding. The device, whichcan be operated from adistance, also enables workersto keep a safe distance fromthe lifting works.

COMPETITIVE EDGE & CAPABILITIES


the development of high-performance proprietarydesigns and critical components for offshore rigs andships. Successful proprietary designs previouslydeveloped by the Group included the Pacific Class 375deep drilling jack-up by PPL Shipyard and the JubileeClass 2,646 TEU containership by Jurong Shipyard.

Marine technology was another focal point. In August2008, Sembcorp Marine Technology entered intoan agreement with technology partners fromSPRING Singapore, Ngee Ann Polytechnic’s Marine& Offshore Centre for Innovation, SIF Technologies andMemiontec to develop the region’s first chemical-freeballast water treatment system.

The project aimed to develop a system in line withnew regulations from the International MaritimeOrganisation that required all newly built vessels tobe fitted with a ballast water treatment system tominimise the risk of harmful aquatic organisms beingspread by ballast water from ships.

Turning Knowledge into Intellectual AssetsThe transformation of proprietary knowledge andinnovations to intellectual assets was an importantfocus in the Group’s strategy of maintaining itscompetitive advantage.

To harness the full value of these intellectual assets,patents were progressively filed for the Group’sproprietary production processes and workplaceinnovations. In 2008, patent rights were awarded toJurong Shipyard for its breakthrough, award-winning‘Load-out and Mating-in-Dock’ technique to acceleratethe semi-submersible construction process. This proventechnique, which enabled the simultaneousconstruction and subsequent integration of the rig’s

upper and lower hulls in a drydock environment, hadbeen successfully used by the yard to deliver two unitsof the fifth-generation ultra-deepwater semi-submersibles – Development Driller I and DevelopmentDriller II – in 2005.

Another highly successful patent-pending engineeringinnovation pioneered by Jurong Shipyard was the‘Transverse Skidding’ semi-submersible constructiontechnique, which complements the ‘Load-outand Mating-in-Dock’ technique for the fast-trackbuilding and sequential assembly of multiple semi-submersible rigs.

By leveraging these innovative techniques, the yardwas able to optimise its capacity to build more thantwo semi-submersible units in a year, as proven by thesuccessful deliveries of two sixth-generation ultra-deepwater semi-submersible units, West Sirius andWest Taurus, in 2008.

Innovating for Workplace ImprovementThe Group believes in unleashing the full potential ofemployees’ ideas for continuous workplaceimprovement. It actively promoted the proactivecontribution of innovative solutions among employeesthrough competitions and carnivals in whichoutstanding innovations were showcased andhonoured. By encouraging employees to transformtheir ideas to practical workplace innovations, it wasable to reap both tangible and intangible benefits,including cost-savings arising from productivityimprovements, improved quality, safety and betteremployee morale.

Some notable innovations developed by employeesduring the year include:

Load-out and Mating-in-Dock technique.

Sembcorp Marine Technology with partners from Ngee Ann Polytechnic,SPRING Singapore, SIF Technologies and Memiontec.

Safe Stage team from Jurong Shipyard’s Hull Painting Department.


FPSO Aoka Mizu completed in Sembawang Shipyard.

General Information 98

Directors’ Report 99

Statement by Directors 118

Independent Auditors' Report 119

Balance Sheets 120

Income Statements 122

Consolidated Statement of Changes in Equity 123

Consolidated Cash Flow Statement 126

Notes to the Financial Statements 130

Supplementary Information 184

Major Properties 186

Notice of Annual General Meeting 187

Proxy Form 191

Contents

97


GENERAL INFORMATIONSembcorp Marine Ltd and its Subsidiaries

D IRECTORS’ REPORTSembcorp Marine Ltd and its Subsidiaries

Directors

Goh Geok Ling Chairman

Richard Hale, OBE Deputy Chairman (Appointed on 22 April 2008)

Tan Kwi Kin Group President and CEO

Tan Pheng Hock

Tan Tew Han (Resigned on 24 February 2009)

Ajaib Haridass

Tang Kin Fei

Ron Foo Siang Guan

Joseph Kwok Sin Kin

Ngiam Joke Mui

Lim Ah Doo (Appointed on 7 November 2008)

Wong Weng Sun (Alternate to Tan Kwi Kin)

Kiyotaka Matsuzawa (Resigned on 7 May 2008)

Hirohiko Sakurai (Alternate to Kiyotaka Matsuzawa, resigned on 7 May 2008)

Joint Company Secretaries

Tan Yah Sze

Kwong Sook May

Registrar

KCK Corpserve Pte Ltd

333 North Bridge Road

#08-00 KH Kea Building

Singapore 188721

Registered Office

29 Tanjong Kling Road

Singapore 628054

Auditors

KPMG LLP

Audit Partner

Tan Wah Yeow (Appointed since 2008)

The Directors present their report to the members together with the audited financial statements of Sembcorp Marine Ltd

(the “Company”) and its subsidiaries (collectively, the “Group”) for the year ended 31 December 2008.

Directors of the Company

The names of the Directors of the Company in office at the date of this report are:

Goh Geok Ling Chairman

Richard Hale, OBE Deputy Chairman (Appointed on 22 April 2008)

Tan Kwi Kin Group President and CEO

Tan Pheng Hock

Tan Tew Han (Resigned on 24 February 2009)

Ajaib Haridass

Tang Kin Fei

Ron Foo Siang Guan

Joseph Kwok Sin Kin

Ngiam Joke Mui

Lim Ah Doo (Appointed on 7 November 2008)

Wong Weng Sun (Alternate to Tan Kwi Kin)

Arrangements to enable Directors to acquire shares and debentures

Other than the Sembcorp Marine Share Plans and Sembcorp Industries Share Plans, neither at the end of the financial year,

nor at any time during the financial year was the Company a party to any arrangement whose object is to enable the

Directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any

other body corporate.

Directors’ interests in shares, share options and debentures

The following Directors who held office at the end of the financial year had, according to the register required to be kept

under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares, share options, or debentures of the

ultimate holding company, Sembcorp Industries Ltd (“SCI”), or any other related corporations as stated below:

Name of Director Other shareholdings inand corporation in Description of Exercise Shareholdings registered in which the Director iswhich interest held interests period the name of Director deemed to have an interest

At beginning At end At beginning At endof the year of the year of the year of the year

Goh Geok Ling

Sembcorp Marine Options to subscribeLtd for ordinary shares

- at $2.38 per share 03/10/2007 196,000 196,000 – –to

02/10/2011

Conditional award of – 0 to 40,040 0 to 40,040 – –30,800 restrictedshares to be deliveredafter 2008 (Note 4a)




Directors’ interests in shares, share options and debentures (cont’d)



Goh Geok Ling

Sembcorp Marine Conditional award of – – 0 to 33,000 – –Ltd (cont’d) 22,000 restricted

shares to be deliveredafter 2009 (Note 4b)

Sembcorp Industries Ordinary shares – 202,500 215,000 131,600 131,600Ltd Options to subscribe

for ordinary shares

- at $0.78 per share 03/06/2004 6,250 – – –to

02/06/2008

- at $0.93 per share 19/11/2004 6,250 – – –to

18/11/2008

- at $0.99 per share 18/05/2005 12,500 12,500 – –to

17/05/2009

- at $1.16 per share 23/11/2005 12,500 12,500 – –to

22/11/2009

- at $2.37 per share 02/07/2006 26,250 26,250 – –to

01/07/2010

- at $2.36 per share 22/11/2006 26,250 26,250 – –to

21/11/2010

- at $2.52 per share 10/06/2007 70,000 70,000 – –to

09/06/2011


Conditional award of – – 0 to 20,550 – – 13,700 restricted




Richard Hale, OBE #

Sembcorp Industries Ordinary shares – 147,500 182,500 – –Ltd Options to subscribe

for ordinary shares

- at $0.78 per share 03/06/2004 17,500 – – –to

02/06/2008

- at $0.93 per share 19/11/2004 17,500 – – –to

18/11/2008

- at $0.99 per share 18/05/2005 26,250 26,250 – –to

17/05/2009

- at $1.16 per share 23/11/2005 26,250 26,250 – –to

22/11/2009

- at $2.37 per share 02/07/2006 26,250 26,250 – –to

01/07/2010

- at $2.36 per share 22/11/2006 35,000 35,000 – –to

21/11/2010

- at $2.52 per share 10/06/2007 140,000 140,000 – –to

09/06/2011


Conditional award of – – 0 to 25,500 – –17,000 restrictedshares to be deliveredafter 2009 (Note 4b)

Tan Kwi Kin

Sembcorp Marine Ordinary shares – 5,033,280 6,300,912 – –Ltd Options to subscribe

for ordinary shares

- at $0.71 per share 09/08/2004 1,120,000 520,000 – –to

08/08/2013







Tan Kwi Kin

Sembcorp Marine Options to subscribeLtd (cont’d) for ordinary shares

- at $0.74 per share 11/08/2005 980,000 980,000 – –to

10/08/2014

- at $2.11 per share 12/08/2006 980,000 980,000 – –to

11/08/2015

- at $2.38 per share 03/10/2007 420,000 420,000 – –to

02/10/2016Conditional award of – 0 to 630,000 – – –420,000 performanceshares to be deliveredafter 2007 (Note 1a)

Conditional award of – 0 to 525,000 0 to 525,000 – – 350,000 performance

shares to be deliveredafter 2008 (Note 2a)

Conditional award of – 0 to 525,000 0 to 525,000 – – 350,000 performance


Conditional award of – – 0 to 375,000 – –250,000 performanceshares to be deliveredafter 2010 (Note 2c)

Conditional award of – 0 to 114,660 75,264 – – 88,200 restricted


Conditional award of – 0 to 182,000 0 to 182,000 – – 140,000 restricted






Tan Kwi KinSembcorp Industries Ordinary shares – 112,125 127,750 – –Ltd Options to subscribe

for ordinary shares

- at $0.78 per share 03/06/2004 3,125 – – –to

02/06/2013- at $0.93 per share 19/11/2004 3,125 – – –

to18/11/2013

- at $0.99 per share 18/05/2005 6,250 – – –to

17/05/2014- at $1.16 per share 23/11/2005 6,250 3,125 – –

to22/11/2014

- at $2.37 per share 02/07/2006 9,375 9,375 – –to

01/07/2015- at $2.36 per share 22/11/2006 9,375 9,375 – –

to21/11/2015

- at $2.52 per share 10/06/2007 25,000 25,000 – –to

09/06/2016

Tan Pheng HockSembcorp Marine Ordinary shares – 183,750 273,000 – –Ltd Options to subscribe

for ordinary shares

- at $0.71 per share 09/08/2004 17,500 – – –to

08/08/2008- at $0.74 per share 11/08/2005 35,000 – – –

to10/08/2009

- at $2.11 per share 12/08/2006 36,750 12,250 – –to

11/08/2010- at $2.38 per share 03/10/2007 49,000 36,750 – –

to02/10/2011

Conditional award of – 0 to 19,110 0 to 19,110 – – 14,700 restrictedshares to be deliveredafter 2008 (Note 4a)Conditional award of – – 0 to 18,000 – –12,000 restrictedshares to be deliveredafter 2009 (Note 4b)







Tan Tew Han

Sembcorp Marine Ordinary shares – 25,200 262,500 – –Ltd Options to subscribe

for ordinary shares

- at $0.71 per share 09/08/2004 79,800 – – –to

08/08/2008

- at $0.74 per share 11/08/2005 210,000 52,500 – –to

10/08/2009

- at $2.11 per share 12/08/2006 196,000 196,000 – –to

11/08/2010

- at $2.38 per share 03/10/2007 196,000 196,000 – –to

02/10/2011

Conditional award of – 0 to 37,310 0 to 37,310 – – 28,700 restricted



Ajaib Haridass


for ordinary shares

- at $0.74 per share 11/08/2005 45,500 – – –to

10/08/2009

- at $2.11 per share 12/08/2006 70,000 35,000 – –to

11/08/2010

- at $2.38 per share 03/10/2007 105,000 105,000 – –to

02/10/2011Conditional award of – 0 to 37,310 0 to 37,310 – –28,700 restrictedshares to be deliveredafter 2008 (Note 4a)



Ajaib Haridass

Sembcorp Marine Conditional award of – – 0 to 28,500 – –Ltd (cont’d) 19,000 restricted


Tang Kin Fei


for ordinary shares

- at $2.11 per share 12/08/2006 14,000 7,000 – –to

11/08/2010

- at $2.38 per share 03/10/2007 73,500 73,500 – –to

02/10/2011



Sembcorp Industries Ordinary shares – 1,181,841 2,354,011 – –Ltd Options to subscribe

for ordinary shares

- at $0.78 per share 03/06/2004 50,000 – – –to

02/06/2013

- at $0.93 per share 19/11/2004 50,000 – – –to

18/11/2013

- at $0.99 per share 18/05/2005 100,000 50,000 – –to

17/05/2014

- at $1.16 per share 23/11/2005 100,000 50,000 – –to

22/11/2014

- at $2.37 per share 02/07/2006 300,000 150,000 – –to

01/07/2015







Tang Kin Fei

Sembcorp Industries Options to subscribeLtd (cont’d) for ordinary shares

- at $2.36 per share 22/11/2006 300,000 150,000 – –to

21/11/2015

- at $2.52 per share 10/06/2007 300,000 300,000 – –to

09/06/2016

Conditional award of – 0 to 641,754 – – – 427,836 performance


Conditional award of – 0 to 642,366 0 to 642,366 – –428,244 performanceshares to be deliveredafter 2008 (Note 2a)

Conditional award of – 0 to 612,360 0 to 612,360 – –408,240 performanceshares to be deliveredafter 2009 (Note 2b)

Conditional award of – – 0 to 600,000 – –400,000 performanceshares to be deliveredafter 2010 (Note 2c)

Conditional award of – 0 to 91,246 60,830 – –70,189 restrictedshares to be deliveredafter 2007 (Note 3b)



Ron Foo Siang Guan

Sembcorp Marine Ordinary shares – – 7,000 30,000 30,000Ltd



Ron Foo Siang Guan


- at $2.38 per share 03/10/2007 28,000 21,000 – –to

02/10/2011Conditional award of – 0 to 25,480 0 to 25,480 – –19,600 restrictedshares to be deliveredafter 2008 (Note 4a)


Sembcorp Industries Ordinary shares – 17,820 17,820 – –Ltd

Joseph Kwok Sin Kin


for ordinary shares

- at $2.38 per share 03/10/2007 28,000 21,000 – –to

02/10/2011



Ngiam Joke Mui

Sembcorp Marine Ordinary shares – 136,500 157,500 – 25,000Ltd Options to subscribe

for ordinary shares

- at $0.74 per share 11/08/2005 10,500 – – –to

10/08/2014

- at $2.11 per share 12/08/2006 21,000 10,500 – –to

11/08/2015







Ngiam Joke Mui


- at $2.38 per share 03/10/2007 21,000 21,000 – –to

02/10/2016

Conditional award of – – 0 to 13,500 – –9,000 restricted sharesto be delivered after2009 (Note 4b)

Sembcorp Industries Ordinary shares – 514,610 605,634 24,250 24,250Ltd Options to subscribe

for ordinary shares

- at $0.99 per share 18/05/2005 31,250 31,250 – –to

17/05/2014

- at $1.16 per share 23/11/2005 31,250 31,250 – –to

22/11/2014

- at $2.37 per share 02/07/2006 62,500 62,500 – –to

01/07/2015

- at $2.36 per share 22/11/2006 62,500 62,500 – –to

21/11/2015

- at $2.52 per share 10/06/2007 93,750 93,750 – –to

09/06/2016

Conditional award of – 0 to 128,351 – – –85,567 performanceshares to be deliveredafter 2007 (Note 1c)

Conditional award of – 0 to 128,474 0 to 128,474 – –85,649 performanceshares to be deliveredafter 2008 (Note 2a)

Conditional award of – 0 to 122,472 0 to 122,472 – –81,648 performanceshares to be deliveredafter 2009 (Note 2b)



Ngiam Joke Mui

Sembcorp Industries Conditional award of – – 0 to 120,000 – –Ltd (cont’d) 80,000 performance

shares to be deliveredafter 2010 (Note 2c)

Conditional award of – 0 to 38,019 25,346 – –29,245 restrictedshares to be deliveredafter 2007 (Note 3c)




Lim Ah Doo #

Sembcorp Industries Ordinary shares – 9,768 9,768 – –Ltd

Wong Weng Sun


for ordinary shares

- at $0.71 per share 09/08/2004 57,750 57,750 – –to

08/08/2013

- at $0.74 per share 11/08/2005 126,000 126,000 – –to

10/08/2014

- at $2.11 per share 12/08/2006 350,000 350,000 – –to

11/08/2015

- at $2.38 per share 03/10/2007 175,000 175,000 – –to

02/10/2016

Conditional award of – 0 to 315,000 – – – 210,000 performance

shares to be deliveredafter 2007 (Note 1d)







Wong Weng SunSembcorp Marine Conditional award of – 0 to 210,000 0 to 210,000 – –Ltd (cont’d) 140,000 performance

shares to be deliveredafter 2008 (Note 2a)Conditional award of – 0 to 262,500 0 to 262,500 – –175,000 performanceshares to be deliveredafter 2009 (Note 2b)Conditional award of – – 0 to 187,500 – –125,000 performanceshares to be deliveredafter 2010 (Note 2c)Conditional award of – 0 to 49,140 32,256 – –37,800 restrictedshares to be deliveredafter 2007 (Note 3d)Conditional award of – 0 to 91,000 0 to 91,000 – –70,000 restrictedshares to be deliveredafter 2008 (Note 4a)Conditional award of – – 0 to 75,000 – –50,000 restricted sharesto be delivered after2009 (Note 4b)

Sembcorp Industries Ordinary shares – 37,500 37,500 – –Ltd Options to subscribe

for ordinary shares

- at $0.78 per share 03/06/2004 1,250 1,250 – –to

02/06/2013- at $0.93 per share 19/11/2004 1,250 1,250 – –

to18/11/2013

- at $0.99 per share 18/05/2005 2,500 2,500 – –to

17/05/2014- at $1.16 per share 23/11/2005 7,500 7,500 – –

to22/11/2014

- at $2.37 per share 02/07/2006 7,500 7,500 – –to

01/07/2015- at $2.36 per share 22/11/2006 7,500 7,500 – –

to21/11/2015

- at $2.52 per share 10/06/2007 14,000 14,000 – –to

09/06/2016

# At date of appointment of Director.

Note 1: The actual number delivered will depend on the achievement of set targets over a 3-year period from 2005 to 2007. Achievement of targets below targets levelwill mean no performance shares will be delivered, while achievement up to 150% will mean up to 1.5 times the number of conditional performance sharesawarded could be delivered.(a) For this period, 630,000 shares were released on 24 March 2008.(b) For this period, 641,754 shares were released on 28 March 2008.(c) For this period, 128,351 shares were released on 28 March 2008.(d) For this period, 315,000 shares were released on 24 March 2008.

Note 2: The actual number delivered will depend on the achievement of set targets over a 3-year period as indicated below. Achievement of targets below targets level willmean no performance shares will be delivered, while achievement up to 150% will mean up to 1.5 times the number of conditional performance shares awarded couldbe delivered.(a) Period from 2006 to 2008(b) Period from 2007 to 2009(c) Period from 2008 to 2010

Note 3: The actual number to be released will depend on the achievement of set targets over a 2-year period from 2006 to 2007. Achievement of targets below targets levelwill mean no restricted shares will be delivered, while achievement up to 130% will mean up to 1.3 times the number of conditional restricted shares awarded couldbe delivered.(a) For this period, 37,632 shares (1/3 of the 112,896 shares) were released under the award on 24 March 2008 and the remaining shares will be vested in year

2009/2010.(b) For this period, 30,416 shares (1/3 of the 91,246 shares) were released under the award on 28 March 2008 and the remaining shares will be vested in year

2009/2010.(c) For this period, 12,673 shares (1/3 of the 38,019 shares) were released under the award on 28 March 2008 and the remaining shares will be vested in year

2009/2010.(d) For this period, 16,128 shares (1/3 of the 48,384 shares) were released under the award on 24 March 2008 and the remaining shares will be vested in year

2009/2010.

Note 4: The actual number to be released will depend on the achievement of set targets at the end of the 2-year performance period as indicated below. Achievement of targetsbelow targets level will mean no restricted shares will be delivered, while achievement up to 130% (for restricted shares to be delivered before 2009) will mean up to1.3 times the number of conditional restricted shares awarded could be delivered and achievement up to 150% (for restricted shares to be delivered after 2009) willmean up to 1.5 times the number of conditional restricted shares awarded could be delivered.(a) Period from 2007 to 2008(b) Period from 2008 to 2009

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debenturesor share options of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment,if later, or at the end of the financial year.

There were no changes in the Directors’ interests in the Company and related corporations between the end of the financialyear and 21 January 2009.

Directors’ contractual benefits

Since the end of the previous financial year, no Director of the Company has received or become entitled to receive a benefit byreason of a contract made by the Company or a related corporation with the Director, or with a firm of which the Director is amember, or with a company in which the Director has a substantial financial interest, except:

(a) As disclosed in Note 24 to the financial statements on the payment of professional fees to a firm in which Mr Ajaib Haridass, aDirector of the Company, is a member;

(b) As disclosed in Note 36 to the financial statements on the key management personnel compensation; and

(c) Certain Directors who have employment relationships with the holding company and received remuneration in those capacities.

Share-based Incentive Plans

The Company’s Share Option Plan, Performance Share Plan and Restricted Stock Plan (collectively, the “Share Plans”) were approvedand adopted by the shareholders at an Extraordinary General Meeting of the Company held on 31 May 2000 and modified atthe Extraordinary General Meeting of the Company held on 21 April 2005.

The Executive Resource and Compensation Committee (the “Committee”) of the Company has been designated as the Committeeresponsible for the administration of the Share Plans. The Committee comprises the following members, all of whom are directors:

Goh Geok Ling (Chairman)Tan Pheng HockJoseph Kwok Sin Kin




Share-based Incentive Plans (cont’d)

The Share Option Plan and Restricted Stock Plan are the incentive scheme for directors and employees of the Company and itssubsidiaries (the “Group”) whereas the Performance Share Plan is aimed primarily at key executives of the Group. Under theRestricted Stock Plan, the managerial participants of the Group will be awarded restricted shares, while the non-managerialparticipants of the Group will receive their awards in an equivalent cash value.

The Share Plans are intended to attract, retain and incentivise participants to higher standards of performance and encouragegreater dedication and loyalty by enabling the Company to give recognition to past contributions and services; as well as motivatingparticipants to contribute to the long-term prosperity of the Group.

The Share Option Plan provides the Company with means whereby non-executive directors and employees of the Group, andcertain categories of persons who can make significant contributions through their close working relationship with the Group, suchas employees of the Company’s Parent Group and non-executive directors and employees of the Company’s associates, are givenan opportunity to participate in the equity of the Company.

The Company designates Sembcorp Industries Ltd as the Parent Group.

The Performance Share Plan and Restricted Stock Plan award fully-paid shares to participants to achieve pre-determined targetsthat create and enhance economic values for shareholders of the Company, and/or to accomplish time-based service conditions.Awards will be released to participants as fully-paid shares, or their equivalent cash value or combinations thereof, free-of-chargeprovided that the conditions of the awards are achieved and subject to approval by the Committee.

Awards granted under the Performance Share Plan are released at the end of the performance period only when the pre-determinedtargets have been achieved. Awards granted under the Restricted Stock Plan vest only after the satisfactory completion of time-based service conditions, or where the award is performance related, after a further period of service beyond the performance targetcompletion date. No minimum vesting period is prescribed under the Restricted Stock Plan and the length of the vesting periodin respect of each award will be determined on a case-by-case basis.

The shares are settled by physical delivery of shares by way of issuance of new shares or existing shares procured by the Companyfor transfer to the employees or cash in lieu of the shares.

No share options were granted in 2007 and 2008. Restricted shares were awarded to managerial participants of the SCM Groupwith the objective to eventually replace share options as a long term incentive plan. Under the Restricted Stock Plan, participantsmust achieve pre-determined targets that create and enhance economic values for shareholders of the Company. If these targetsare achieved, managerial participants are awarded with restricted shares while non-managerial participants will receive theequivalent value in cash.

Sembcorp Marine Share Option Plan

Under the rules of the Share Option Plan, participants who ceased to be employed by the Group, Parent Group or Associate byreason of ill health, injury or disability, redundancy, retirement at or after the legal retirement age, retirement before the legalretirement age, death, etc, or any other event approved by the Committee, may be allowed by the Committee to retain theirunexercised Options. The Committee may determine the number of shares comprised in that Option which may be exercisedand the period during which such Option shall be exercisable, being a period not later than the expiry of the Exercise Period inrespect of that Option. Such Option may be exercised at any time notwithstanding that the date of exercise of such Optionfalls on a date prior to the first day of the Exercise Period in respect of such Option.

Other information regarding the Share Option Plan is as follows:

(i) The exercise price of the options can be set at market price or a discount to the market price not exceeding 20% of the marketprice in respect of options granted at the time of grant. Market price is the volume-weighted average price for the shares onthe Singapore Exchange for three consecutive trading days prior to grant date of that Option. For all options granted to date,the exercise prices are set at market price.

(ii) The options can be exercised 12 months after the grant for market price options. Further vesting period for the exercise ofthe options may be set. The Group imposed a further vesting over 4 years for managers and above for retention purposes.

(iii) In 2008, options were either settled by the issuance of new SCM shares or by issuance of treasury shares of SCM.

(iv) The options granted expire after 5 years for non-executive directors, and 10 years for the employees of Group and ParentGroup.

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The details of options of the Company granted/exercised since commencement of the Scheme up to 31 December 2008 wereas follows:

Aggregate optionsAggregate cancelled/lapsed/ Aggregate Aggregate options

Option participants options granted not accepted options exercised outstanding

Directors of the CompanyGoh Geok Ling 196,000 – – 196,000Tan Kwi Kin 6,900,000 – (4,000,000) 2,900,000Tan Pheng Hock 269,500 – (220,500) 49,000Tan Tew Han 699,800 – (255,300) 444,500Ajaib Haridass 403,000 – (263,000) 140,000Tang Kin Fei 124,000 – (43,500) 80,500Ron Foo Siang Guan 28,000 – (7,000) 21,000Joseph Kwok Sin Kin 28,000 – (7,000) 21,000Ngiam Joke Mui 122,000 – (90,500) 31,500Wong Weng Sun 1,208,500 – (499,750) 708,750

Former Directors of the Company 6,918,000 – (1,631,000) 5,287,000

Other executives 115,755,895 (13,341,686) (86,374,415) 16,039,794

132,652,695 (13,341,686) (93,391,965) 25,919,044

Since the commencement of the Share Option Plan, no options have been granted to the controlling shareholders of the Companyor their associates. No participant under the Share Option Plan has been granted 5% or more of the total options available.No options have been offered at a discount.

The options granted by the Company do not entitle the holders of the options, by virtue of such holdings, to any right to participatein any share issue of any other company.

Sembcorp Marine Performance Share Plan

Under the Performance Share Plan, the awards granted conditional on performance targets are set based on medium-term corporateobjectives at the start of each rolling three-year performance qualifying period. A specific number of performance shares shall beawarded at the end of the 3-year performance cycle depending on the extent of the achievement of the performance conditionsestablished at the onset.

The performance levels were calibrated based on Wealth Added and Total Shareholders’ Return. For each performancemeasure, three distinct performance levels are set. A minimum of threshold performance must be achieved to trigger anAchievement Factor, which in turn determines the number of shares to be finally awarded. Performance shares to be deliveredwill range between 0% to 150% of the original award.

Senior management participants are also required to hold a minimum percentage of the shares released to them under thePerformance Share Plan to maintain a beneficial ownership stake in the Group, for the duration of their employment or tenurewith the Group. A maximum cap is set based on a multiple of the individual participant’s Annual Base Salary. Any excesscan be sold off, but in the event of a short fall, they have a two calendar year period to meet the minimum percentagerequirement.

With the Committee’s approval on the achievement factor for the achievement of the performance targets for theperformance period 2005 to 2007, a total of 1,627,500 (2007: 369,000) performance shares were released, of which anadditional 542,500 (2007: nil) performance shares were awarded for the over-achievement of the performance targets.These shares were released via the issuance of treasury shares.

The details of performance shares of the Company awarded since commencement of the Performance Share Plan up to 31 December2008 were as follows:

Conditional Additionalperformance Aggregate Aggregate performance Aggregate

shares conditional conditional Aggregate shares awarded conditionalawarded performance performance conditional arising from performance

Performance Shares during the shares shares performance targets met sharesparticipants year awarded released shares lapsed during the year outstanding

Director of the Company- Tan Kwi Kin 250,000 2,890,000 (1,724,400) (425,600) 210,000 950,000

Alternate director of the Company

- Wong Weng Sun 125,000 650,000 (315,000) – 105,000 440,000

Key management and executives of the Group 415,000 1,675,000 (682,500) – 227,500 1,220,000

At 31 December 2008 790,000 5,215,000 (2,721,900) (425,600) 542,500 2,610,000

The total number of performance shares in awards granted conditionally and representing 100% of targets achieved, but notreleased as at 31 December 2008, was 2,610,000 (2007: 2,905,000). Based on the multiplying factor, the actual release of theawards could range from zero to a maximum of 3,915,000 (2007: 4,357,500) performance shares.

Sembcorp Marine Restricted Stock Plan

Since 2007, share option grant ceased. Restricted shares were awarded to managerial participants of the SCM Group with theobjective to eventually replace share options as a long term incentive plan.

Under the Restricted Stock Plan, the awards granted conditional on performance targets are set based on corporate objectives atthe start of each rolling two-year performance qualifying period. The performance criteria are set and performance levels for therestricted shares are calibrated based on Return on Equity and Total Shareholders’ Return. For awards granted before 2008, threedistinct performance levels are set for each performance measure. A minimum threshold performance must be achieved to triggeran Achievement Factor, which in turn determines the number of shares to be finally awarded. Based on the criteria, restricted sharesto be delivered for awards granted from 2006 onwards will range from 0% to 130% of the original award.

For awards granted in 2008, four distinct performance levels are set for each performance measure. A minimum threshold performancemust be achieved to trigger an Achievement Factor, which in turn determines the number of shares to be finally awarded. Basedon the criteria, restricted shares to be delivered will range from 0% to 150% of the original award.

The managerial participants of the Group will be awarded restricted shares under the Restricted Stock Plan, while the non-managerialparticipants of the Group will receive their awards in an equivalent cash value. This cash-settled notional restricted shares awardfor non-managerial participants is known as the Sembcorp Challenge Bonus.

A specific number of restricted shares shall be awarded at the end of the two-year performance cycle depending on the extent ofthe achievement of the performance conditions established at the onset. There is a further vesting of three years after the performanceperiod, during which one-third of the awarded shares are released each year to managerial participants. Non-managerial participantswill receive the equivalent in cash at the end of the two-year performance cycle, with no further vesting conditions.

Senior management participants are also required to hold a minimum percentage of the shares released to them under the RestrictedStock Plan to maintain a beneficial ownership stake in the Group, for the duration of their employment or tenure with the Group.A maximum cap is set based on a multiple of the individual participant’s Annual Base Salary. Any excess can be sold off, but inthe event of a shortfall, they have a two calendar year period to meet the minimum percentage requirement.





A total of 3,573,000 (2007: 3,038,940) restricted shares of Sembcorp Marine Ltd were awarded on 7 April 2008 (2007: 12 June2007) for the performance period 2008 to 2009 (2007: 2007 to 2008).

The total number of Sembcorp Marine Ltd’s restricted shares in awards granted conditionally and representing 100% of targetsachieved, but not released as at end 2008, was 8,762,851 (2007: 5,747,227). Based on the multiplying factor, the actual releaseof the awards could range from zero to a maximum of 11,679,787 (2007: 7,471,395) restricted shares.

During the year, a total of 2,048,393 restricted shares were awarded to participants of which 708,128 restricted shares were releasedvia issuance of treasury shares and the balance remained for a further vesting of 2 years.

A total of 957,400 (2007: 816,250) notional restricted shares of Sembcorp Marine Ltd’s shares were awarded on 7 April 2008 (2007:12 June 2007) for the Challenge Bonus for the performance period 2008 to 2009 (2007: 2007 to 2008).

The total number of notional restricted shares in awards for the Challenge Bonus granted conditionally and representing 100% oftargets to be achieved, but not released as at end 2008, was 1,866,248 (2007: 1,046,458). Based on the multiplying factor, thenumber of notional restricted shares to be converted into the funding pool could range from zero to a maximum of 2,606,642(2007: 1,360,396).

The maximum number of performance shares and restricted shares which could be delivered, when aggregated with the numberof new shares issued and issuable in respect of all options granted, is within the 15% limit of the share capital of the Company onthe day preceding the relevant date of the grant.

The details of restricted shares of the Company awarded since commencement of the Restricted Stock Plan up to 31 December2008 were as follows:

Conditional Additionalrestricted Aggregate Aggregate restricted Aggregate Aggregate

shares conditional conditional shares awarded conditional conditionalawarded restricted restricted arising from restricted restricted

Restricted Shares during the shares shares targets met shares sharesparticipants year awarded lapsed during the year released outstanding


Goh Geok Ling 22,000 52,800 – – – 52,800Tan Kwi Kin 100,000 328,200 – 24,696 (37,632) 315,264Tan Pheng Hock 12,000 26,700 – – – 26,700Kiyotaka Matsuzawa 9,000 21,600 (1,680) – (10,920) 9,000Tan Tew Han 19,000 47,700 – – – 47,700Ajaib Haridass 19,000 47,700 – – – 47,700Tang Kin Fei 12,000 30,900 – – – 30,900Ron Foo Siang Guan 17,000 36,600 – – – 36,600Joseph Kwok Sin Kin 12,000 30,900 – – – 30,900Ngiam Joke Mui 9,000 9,000 – – – 9,000Wong Weng Sun 50,000 157,800 – 10,584 (16,128) 152,256

Other executives 3,292,000 8,688,592 (483,726) 442,613 (643,448) 8,004,031

3,573,000 9,478,492 (485,406) 477,893 (708,128) 8,762,851

Audit Committee

The members of the Audit Committee are:

Tan Tew Han (Chairman) (Resigned on 24 February 2009)Lim Ah Doo (Chairman) (Appointed on 24 February 2009)Richard Hale, OBE (Appointed on 7 May 2008)Ron Foo Siang GuanAjaib Haridass (Resigned on 7 May 2008)

The Audit Committee held five meetings during the financial year. In performing its functions, the Audit Committee met with theCompany’s external and internal auditors to discuss the scope of their work, the results of their examination and evaluation of theCompany’s internal accounting control system.

The Audit Committee performs the functions specified in Section 201B of the Singapore Companies Act, the Listing Manual of theSingapore Exchange, and the Code of Corporate Governance.

The Audit Committee also reviewed the following:

• assistance provided by the Company’s officers to the internal and external auditors;• financial statements of the Group and the Company prior to their submission to the directors of the Company for adoption;

and• interested person transactions (as defined in Chapter 9 of the Listing Manual of the Singapore Exchange).

The Audit Committee has full access to the management and is given the resources required for it to discharge its functions. It hasfull authority and the discretion to invite any director or executive officer to attend its meetings. The Audit Committee alsorecommends the appointment of the external auditors and reviews the level of audit and non-audit fees.

The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to theBoard of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming AnnualGeneral Meeting of the Company.

Auditors

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

On behalf of the Board of Directors,

GOH GEOK LINGDirector

TAN KWI KINDirector

Singapore24 February 2009


Sembcorp Marine Ltd and its Subsidiaries

STATEMENT BY D IRECTORSSembcorp Marine Ltd and its Subsidiaries

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF THE COMPANY

In our opinion:

(a) the financial statements set out on pages 120 to 183 are drawn up so as to give a true and fair view of the state of affairs ofthe Group and of the Company as at 31 December 2008, the results and changes in equity of the Group and of the Companyand cash flows of the Group for the year ended on that date in accordance with the provisions of the Act and SingaporeFinancial Reporting Standards; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as andwhen they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements for issue.

On behalf of the Board of Directors,

GOH GEOK LINGDirector

TAN KWI KINDirector


We have audited the accompanying financial statements of Sembcorp Marine Ltd (the Company) and its subsidiaries (the Group),which comprise the balance sheets, income statements, and statements of changes in equity of the Group and of the Companyas at 31 December 2008, and cash flow statement of the Group for the year then ended, and a summary of significant accountingpolicies and other explanatory notes, as set out on pages 120 to 183. The financial statements for the year ended 31 December2007 were audited by another auditor whose report dated 19 March 2008 expressed an unqualified opinion on thosestatements.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisionsof the Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards. This responsibility includes:

(a) devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assetsare safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that theyare recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and tomaintain accountability of assets;

(b) selecting and applying appropriate accounting policies; and

(c) making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordancewith Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of thefinancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevantto the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriatein the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An auditalso includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion:

(a) the consolidated financial statements of the Group and the income statement, balance sheet and statement of changes inequity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial ReportingStandards to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008, theresults and changes in equity of the Group and of the Company and cash flows of the Group for the year ended on that date;and

(b) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated inSingapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

KPMG LLPPublic Accountants andCertified Public Accountants



BALANCE SHEETSSembcorp Marine Ltd and its Subsidiaries

BALANCE SHEETSSembcorp Marine Ltd and its Subsidiaries

Note Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Non-current assets

Property, plant and equipment 3 697,702 675,585 111,532 114,423Investment properties 4 – – 54,037 55,950Investments in subsidiaries 5 – – 620,252 631,243Investments in associates and

joint ventures 6 269,609 205,502 107,369 109,161Other long term investments 7 138,376 689,554 97,317 435,353Long term trade receivables 8 18,025 21,400 18,025 21,400Long term other receivables 9 37,023 17,001 73,944 229,693Intangible assets 10 6,127 7,589 122 122Deferred tax assets 18 9,436 – – –

1,176,298 1,616,631 1,082,598 1,597,345

Current assets

Inventories and work-in-progress 11 834,789 1,560,709 – –Trade receivables 8 480,396 450,714 16,123 22,588Other receivables, deposits and

prepayments 9 66,302 81,463 166,846 20,718Derivative financial assets 12 – 12,853 – –Bank balances, fixed deposits

and cash 13 2,054,032 740,477 12,454 74,082

3,435,519 2,846,216 195,423 117,388

Current liabilities

Trade payables 14 1,638,812 1,384,701 18,843 15,430Other payables 15 26,869 69,772 113,103 110,826Provisions 16 38,188 2,797 – –Progress billings in excess of

work-in-progress 11 966,990 564,608 – –Interest-bearing borrowings 17 202,238 259,800 149,945 –Derivative financial liabilities 12 71,394 731 – –Provision for taxation 167,149 115,014 422 2,830

3,111,640 2,397,423 282,313 129,086

Net current assets/(liabilities) 323,879 448,793 (86,890) (11,698)

As at 31 December 2008


Non-current liabilities

Interest-bearing borrowings 17 20,000 181,869 – 149,869Derivative financial liabilities 12 49,731 – – –Deferred tax liabilities 18 61,261 168,738 34,163 95,850Long term other payables 15 2,603 1,599 32,849 –Other provisions 20 6,623 7,502 2,895 2,895

140,218 359,708 69,907 248,614

1,359,959 1,705,716 925,801 1,337,033

Equity attributable to shareholdersof the Company

Share capital 21 443,347 442,549 443,347 442,549Reserves 22 874,638 1,237,511 482,454 894,484

1,317,985 1,680,060 925,801 1,337,033Minority interests 41,974 25,656 – –

Total equity 1,359,959 1,705,716 925,801 1,337,033

The accompanying notes form an integral part of these financial statements.

As at 31 December 2008



INCOME STATEMENTSSembcorp Marine Ltd and its Subsidiaries

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYSembcorp Marine Ltd and its Subsidiaries Year ended 31 December 2008



Turnover 23 5,063,948 4,513,123 33,372 33,256Cost of sales (4,408,772) (4,101,637) (17,808) (16,698)

Gross profit 655,176 411,486 15,564 16,558Other operating income 19,638 42,859 46 280Other operating expenses (54,129) (12,823) (959) (901)General and administrative expenses (118,848) (92,493) (16,896) (18,065)

Operating profit/(loss) 24 501,837 349,029 (2,245) (2,128)Finance income 25 32,940 27,530 150,995 379,363Finance costs 26 (11,370) (13,692) (4,512) (4,590)Foreign exchange transactions 27 (43,749) (302,922) – –Non-operating income 28 – 230,625 – 2,259Non-operating expenses 28 – (7,642) – –Share of results of associates and

joint ventures 29 65,300 81,793 – –

Profit before taxation 544,958 364,721 144,238 374,904Income tax (expense)/credit 30 (93,716) (112,994) 640 (5,514)

Profit for the year 451,242 251,727 144,878 369,390

Attributable to:Shareholders of the Company 429,918 240,989 144,878 369,390Minority interests 21,324 10,738 – –

Profit for the year 451,242 251,727 144,878 369,390

Earnings per share (cents) 31Basic 20.83 11.72Diluted 20.72 11.63

Year ended 31 December 2008

At 1

Janu

ary

2008

442,

549

–14

,084

(18,

304

)27

,368

–47

9,02

573

5,33

81,

680,

060

25,6

561,

705,

716

Fore

ign

curre

ncy

trans

latio

n–

––

15,1

61–

––

–15

,161

182

15,3

43

Net

fair

valu

e ch

ange

s–

––

––

(74,

558)

(452

,961

)–

(527

,519

)–

(527

,519

)

Net

inco

me

reco

gnise

d di

rect

ly in

equ

ity–

––

15,1

61–

(74,

558)

(452

,961

)–

(512

,358

)18

2(5

12,1

76)

Prof

it fo

r the

yea

r–

––

––

––

429,

918

429,

918

21,3

2445

1,24

2

Tota

l rec

ogni

sed

inco

me

and

expe

nses

for t

he y

ear

––

– 15

,161

–(7

4,55

8)(4

52,9

61)

429,

918

(82,

440)

21,5

06(6

0,93

4)

Issue

of s

hare

s

-un

der S

hare

Opt

ion

Plan

798

––

––

––

–79

8–

798

-to

min

ority

shar

ehol

der

––

––

––

––

–52

952

9

Purc

hase

of t

reas

ury

shar

es–

(93,

745)

––

––

––

(93,

745)

–(9

3,74

5)

Issua

nce

of tr

easu

ry sh

ares

–37

,890

––

(27,

664

)–

––

10,2

26–

10,2

26

Div

iden

ds p

aid

to

-Co

mpa

ny’s

shar

ehol

ders

(Not

e 32

)–

––

––

––

(209

,259

)(2

09,2

59)

–(2

09,2

59)

-m

inor

ity sh

areh

olde

rs–

––

––

––

––

(5,8

22)

(5,8

22)

Cost

of s

hare

-bas

ed p

aym

ent

––

––

12,3

45–

––

12,3

4510

512

,450

At

31 D

ecem

ber

2008

443,

347

(55,

855)

14,0

84(3

,143

)12

,049

(74,

558)

26,0

6495

5,99

71,

317,

985

41,9

741,

359,

959

Att

rib

uta

ble

to

sh

areh

old

ers

of

the

Co

mp

any

GR

OU

P

Shar

eca

pita

l$’

000

Capi

tal

rese

rve

$’00

0

Fore

ign

curr

ency

tran

slat

ion

rese

rve

$’00

0

Shar

e-ba

sed

com

pens

atio

nre

serv

e$’

000

Avai

labl

e-fo

r-sa

lere

serv

e$’

000

Reve

nue

rese

rve

$’00

0To

tal

$’00

0

Min

orit

yin

tere

sts

$’00

0

Tota

leq

uity

$’00

0

Hed

ging

rese

rve

$’00

0

Rese

rve

for

own

shar

es$’

000

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of

the

se fi

nanc

ial s

tate

men

ts.


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYSembcorp Marine Ltd and its Subsidiaries

STATEMENT OF CHANGES IN EQUITYSembcorp Marine Ltd and its Subsidiaries Year ended 31 December 2008Year ended 31 December 2008

At

1 Ja

nuar

y 20

0844

2,54

9–

960

26,9

4532

0,12

054

6,45

91,

337,

033

Net

fair

valu

e ch

ange

s–

––

–(2

77,2

27)

–(2

77,2

27)

Net

inco

me

reco

gnis

ed d

irect

ly in

eq

uity

––

––

(277

,227

)–

(277

,227

)

Prof

it fo

r th

e ye

ar–

––

––

144,

878

144,

878

Tota

l rec

ogni

sed

inco

me

and

exp

ense

s fo

r th

e ye

ar–

––

–(2

77,2

27)

144,

878

(132

,349

)

Issu

e of

sha

res

unde

r Sh

are

Op

tion

Plan

798

––

––

–79

8

Purc

hase

of t

reas

ury

shar

es–

(93,

745

)–

––

–(9

3,74

5)

Issu

ance

of t

reas

ury

shar

es–

37,8

90–

(26,

975

)–

–10

,915

Div

iden

ds p

aid

to C

omp

any’

s sh

areh

olde

rs (

Not

e 32

)–

––

––

(209

,259

)(2

09,2

59)

Cos

t of

sha

re-b

ased

pay

men

t

-ch

arge

d to

inco

me

stat

emen

t–

––

3,15

0–

–3,

150

-is

sued

to

emp

loye

es o

f sub

sidi

arie

s–

––

9,25

8–

–9,

258

At

31

Dec

emb

er 2

00

84

43

,34

7(5

5,8

55

)9

60

12

,37

84

2,8

93

48

2,0

78

92

5,8

01

At

1 Ja

nuar

y 20

0741

8,63

1–

960

11,8

2011

7,39

839

3,33

594

2,14

4

Net

fair

valu

e ch

ange

s–

––

–20

2,72

2–

202,

722

Net

inco

me

reco

gnis

ed d

irect

ly in

eq

uity

––

––

202,

722

–20

2,72

2

Prof

it fo

r th

e ye

ar–

––

––

369,

390

369,

390

Tota

l rec

ogni

sed

inco

me

and

exp

ense

s fo

r th

e ye

ar–

––

–20

2,72

236

9,39

057

2,11

2

Issu

e of

sha

res

unde

r Sh

are

Op

tion

Plan

23,9

18–

––

––

23,9

18

Div

iden

ds p

aid

to C

omp

any’

s sh

areh

olde

rs (

Not

e 32

)–

––

––

(216

,266

)(2

16,2

66)

Cos

t of

sha

re-b

ased

pay

men

t

-ch

arge

d to

inco

me

stat

emen

t–

––

3,63

8–

–3,

638

-is

sued

to

emp

loye

es o

f sub

sidi

arie

s–

––

11,4

87–

–11

,487

At

31

Dec

emb

er 2

00

74

42

,54

9–

96

02

6,9

45

32

0,1

20

54

6,4

59

1,3

37

,03

3

Shar

eca

pita

l$’

000

Capi

tal

rese

rve

$’00

0

Rese

rve

for

own

shar

es$’

000

Shar

e-ba

sed

com

pens

atio

nre

serv

e$’

000

Avai

labl

e-fo

r-sa

lere

serv

e$’

000

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nue

rese

rve

$’00

0To

tal

$’00

0C

OM

PA

NY

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of

the

se fi

nanc

ial s

tate

men

ts.

At 1

Janu

ary

2007

418,

631

14,4

19(1

2,05

5)12

,162

194,

567

710,

615

1,33

8,33

931

,884

1,37

0,22

3

Fore

ign

curr

ency

tran

slatio

n–

–(6

,289

)–

––

(6,2

89)

(1,0

48)

(7,3

37)

Net

fair

valu

e ch

ange

s–

––

–43

1,88

5–

431,

885

–43

1,88

5

Net

inco

me

reco

gnise

d di

rect

ly in

equ

ity–

–(6

,289

)–

431,

885

–42

5,59

6(1

,048

)42

4,54

8

Prof

it fo

r the

yea

r–

––

––

240,

989

240,

989

10,7

3825

1,72

7

Real

isatio

n of

fair

valu

e th

roug

h in

com

e st

atem

ent

upon

disp

osal

––

––

(147

,413

)–

(147

,413

)–

(147

,413

)

Tota

l rec

ogni

sed

inco

me

and

expe

nses

for t

he y

ear

––

(6,2

89)

–28

4,47

224

0,98

951

9,17

29,

690

528,

862

Issue

of n

ew s

hare

s

-un

der S

hare

Opt

ion

Plan

23,9

18–

––

––

23,9

18–

23,9

18

-to

min

ority

sha

reho

lder

––

––

––

–14

714

7

Div

iden

ds p

aid

to

-C

ompa

ny’s

sha

reho

lder

s (N

ote

32)

––

––

–(2

16,2

66)

(216

,266

)–

(216

,266

)

-m

inor

ity s

hare

hold

ers

––

––

––

–(1

4,34

7)

(14,

347)

Disp

osal

of a

sub

sidia

ry

–(3

35)

40–

(14)

–(3

09)

(1,8

24)

(2,1

33)

Cos

t of s

hare

-bas

ed p

aym

ent

––

–15

,206

––

15,2

0610

615

,312

At

31 D

ecem

ber

200

744

2,54

914

,084

(18,

304)

27,3

6847

9,02

573

5,33

81,

680,

060

25,6

561,

705,

716

Att

rib

utab

le t

o s

har

eho

lder

s o

f th

e C

om

pan

y

GR

OU

P

Shar

eca

pita

l$’

000

Capi

tal

rese

rve

$’00

0

Fore

ign

curr

ency

tran

slat

ion

rese

rve

$’00

0

Shar

e-ba

sed

com

pens

atio

nre

serv

e$’

000

Avai

labl

e-fo

r-sa

lere

serv

e$’

000

Reve

nue

rese

rve

$’00

0To

tal

$’00

0

Min

orit

yin

tere

sts

$’00

0

Tota

leq

uity

$’00

0

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of

the

se fi

nanc

ial s

tate

men

ts.


CONSOLIDATED CASH FLOW STATEMENTSembcorp Marine Ltd and its Subsidiaries

CONSOLIDATED CASH FLOW STATEMENTSembcorp Marine Ltd and its Subsidiaries Year ended 31 December 2008Year ended 31 December 2008

Note 2008 2007$’000 $’000

Cash Flows from Financing Activities

Dividends paid:

- by the Company (209,259) (216,266)

- to minority shareholders (5,822) (14,347)

Proceeds from issue of shares by the Company 11,713 23,918

Payments on finance leases (1,761) (759)

Repayment of borrowings (837,531) (375,107)

Proceeds from borrowings 618,021 436,023

Purchase of treasury shares (93,745) –

Net cash outflow from financing activities (518,384) (146,538)

Net increase in cash and cash equivalents 1,313,555 247,329

Cash and cash equivalents at beginning of year 740,477 493,148

Cash and cash equivalents at end of year 13 2,054,032 740,477

Note 2008 2007$’000 $’000

Cash Flows from Operating Activities

Operating profit 501,837 349,029Adjustments for:

Gain on disposal of property, plant and equipment, net (822) (4,781)Share-based payment expenses 19,484 15,312Amortisation 1,577 4,249Fair value adjustment of hedging instruments 42,755 (13,136)Depreciation of property, plant and equipment 69,130 59,831Property, plant and equipment written off 701 1,057

Operating income before reinvestment in working capital 634,662 411,561Inventories and work-in-progress 1,128,302 (345,786)Trade and other receivables (32,123) (33,317)Trade and other payables 301,732 469,776

Cash generated from operations 2,032,573 502,234Investment and interest income received 32,504 27,779Income taxes paid (42,613) (44,960)Interest paid (12,069) (12,798)

Net cash inflow from operating activities 2,010,395 472,255Net payment to banks relating to foreign exchange transactions (93,452) (260,589)

1,916,943 211,666Cash Flows from Investing ActivitiesAcquisition of subsidiaries, net, Note (a) – 160Investment in associates and joint ventures (250) (4,819)Purchase of property, plant and equipment, Note (b) (96,924) (103,874)Capital refund from an associate – 52Capital contribution by minority shareholders 529 –Dividends from associates 10,478 12,760Proceeds from:- disposal of property, plant and equipment 1,141 46,008- disposal of a subsidiary, Note (c) – 3,208- sale of other long term investments 22 272,950Purchase of other long term investments – (44,244)

Net cash (outflow)/inflow from investing activities (85,004) 182,201

The acquisition and disposal of the following subsidiaries have been shown as a single item:

Name of subsidiaries Effective interest acquired/ Effective dates(disposed)

2007

Acquisition in prior year

Shanghai Jurong Marine Engineering & Technology Co Ltd 70% 26 July 2007

Disposal in prior year

Jurong Clavon Pte Ltd (55%) 31 March 2007

The accompanying notes form an integral part of these financial statements. The accompanying notes form an integral part of these financial statements.

(c) Disposal of a subsidiary

The effect on the individual assets and liabilities is set out below:Disposal of a

subsidiary2008 2007$’000 $’000

Property, plant and equipment – (578)

Investment in associate – (2,099)

Inventory and work-in-progress – (1,036)

Receivables – (18,390)

Other assets – (26)

Bank balances and cash – (222)

Bank overdraft – 577

Payables – 17,374

Provision for taxation and deferred taxation – 347

Net assets disposed of – (4,053)

Minority interests – 1,824

Realisation of reserves to income statement – 309

Gain on disposal – (933)

Disposal consideration received – (2,853)

The disposal of a subsidiary, net of cash, is represented by:

2008 2007$’000 $’000

Cash received – 2,853

Bank and cash balances disposed of – (222)

Bank overdraft disposed of – 577

Net cash inflow – 3,208

(a) Acquisition of a subsidiary

The effect on the individual assets and liabilities is set out below:Acquisition of a

subsidiary2008 2007$’000 $’000

Property, plant and equipment – 3,824*

Intangible asset – 5,603*

Receivables – 14

Bank balances and cash – 511

Payables – (45)

Deferred taxation – (1,882)*

Net assets acquired+ – 8,025

Minority interests – (147)

Goodwill – (7,527)*

Purchase consideration paid – 351

+ Represents both book values and fair values of assets and liabilities acquired.

* Goodwill provisionally determined in 2006 was reduced by $7,527,000 and property, plant and equipment, intangible asset, and deferred taxation increasedby $3,806,000, $5,603,000 and $1,882,000 respectively in 2007 based on the final valuation report received from the independent valuer in 2007.

The acquisition of a subsidiary, net of cash, is represented by:

2008 2007$’000 $’000

Cash paid – (351)

Bank and cash balances acquired – 511

Net cash inflow – 160

(b) During the year, the Group acquired property, plant and equipment with an aggregate cost of $99,798,000(2007: $106,764,000) of which $2,874,000 (2007: $2,890,000) was acquired by means of finance lease.


CONSOLIDATED CASH FLOW STATEMENTSembcorp Marine Ltd and its Subsidiaries

CONSOLIDATED CASH FLOW STATEMENTSembcorp Marine Ltd and its Subsidiaries Year ended 31 December 2008Year ended 31 December 2008

The accompanying notes form an integral part of these financial statements. The accompanying notes form an integral part of these financial statements.


NOTES TO THE F INANCIAL STATEMENTSSembcorp Marine Ltd and its Subsidiaries

NOTES TO THE F INANCIAL STATEMENTSSembcorp Marine Ltd and its Subsidiaries Year ended 31 December 2008Year ended 31 December 2008

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 24 February 2009.

1 Domicile and Activities

The Company is a limited liability company, which is incorporated in the Republic of Singapore. Its immediate andultimate holding company is Sembcorp Industries Ltd (“SCI”) which is incorporated in the Republic of Singapore.Related companies in these financial statements refer to subsidiaries and associates of SCI.

The Company domiciles in Singapore and its registered office and principal place of business is located at 29 TanjongKling Road, Singapore 628054.

The principal activities of the Company are the provision of management services and investment holding. Theprincipal activities of the subsidiaries, associates and joint ventures are stated in Note 41.

2 Summary of significant accounting policies

2.1 Basis of preparation

The financial statements are presented in Singapore dollars (“SGD” or “$”) and all values are rounded to the nearestthousand (“$’000”) except when otherwise indicated. The financial statements have been prepared in accordancewith Singapore Financial Reporting Standards (“FRS”).

The financial statements have been prepared on a historical cost basis except where otherwise described in theaccounting policies below.

The preparation of financial statements in conformity with FRS requires management to make judgements, estimatesand assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities,income and expenses. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognised in the period in which the estimate is revised and in any future periods affected.

Information about significant areas of estimation uncertainty and critical judgements in applying accounting policiesthat have the most significant effect on the amount recognised in the financial statements are discussed in Note 40.

The accounting policies set out below have been applied consistently by the Group and to all periods presented inthese financial statements.

2.2 Foreign currency

Functional and presentation currency

Items included in the financial statements of each company in the Group are measured using the currency of theprimary economic environment in which the company operates (“the functional currency”). The consolidated financialstatements are presented in Singapore dollars, which is the Company’s functional and presentation currency.

Foreign currency transactions and balances

Transactions in foreign currencies are translated into the functional currency at foreign exchange rates ruling at thedates of the transactions. At each balance sheet date:

• Foreign currency monetary items are translated into the functional currency using foreign exchange rate rulingat that date.

• Non-monetary assets and liabilities measured at historical cost in foreign currencies are translated into the functionalcurrency using foreign exchange rates at the dates of the transactions.

• Non-monetary assets and liabilities measured at fair value in foreign currencies are translated into the functionalcurrency at foreign exchange rates ruling at the dates the fair value was determined.

Foreign exchange differences arising on the settlement or from translation of monetary items are recognised in theincome statement except for exchange differences arising from monetary items that form part of the Group’s netinvestment in foreign subsidiaries, which are recognised in the Company’s income statement and reclassified toforeign currency translation reserve in the consolidated financial statements. Such exchange differences are releasedto the income statement upon disposal of the investment as part of the gain or loss on disposal.

Foreign exchange differences arising from non-monetary items measured in fair value are recognised directly inequity when non-monetary items’ gains or losses are recognised directly in equity. Conversely when non-monetaryitems’ gains or losses are recognised directly in the income statement, foreign exchange differences arising fromthese items are recognised directly in the income statement.

Foreign operations

The results and financial positions of foreign operations (none of which has the currency of a hyperinflationaryeconomy) that have a functional currency different from the presentation currency are translated into thepresentation currency as follows:

• assets and liabilities are translated at foreign exchange rates ruling at the date of the balance sheet,• revenues and expenses are translated at average rates, and• all resulting foreign exchange differences are taken to the foreign currency translation reserve.

On disposal, accumulated foreign currency translation differences are recognised in the consolidated income statementas part of the gain or loss on disposal.

2.3 Consolidation

Subsidiaries

Subsidiaries are those companies that are controlled by the Group. Control exists when the Group has the power,directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from itsactivities.

The existence and effect of potential voting rights that are presently exercisable or presently convertible are consideredwhen assessing whether the Group controls another company.

Investments in subsidiaries are stated in the Company’s balance sheet at cost less accumulated impairment losses.The financial statements of subsidiaries are included in the consolidated financial statements from the date that controlcommences until the date that control ceases.

All business combinations are accounted for using the purchase method. Under the purchase method, the cost ofan acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred orassumed at the date of exchange, plus costs directly attributable to the acquisition. The excess of the Group’s interestin the fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition is creditedto the income statement in the period of the acquisition.




2. Summary of significant accounting policies (cont’d)

Business combinations that involve entities under common control are excluded from the scope of FRS 103. Suchcombinations are accounted at historical cost in a manner similar to the pooling-of-interests method, in the preparationof the consolidated financial statements. Under this method of accounting, the difference between the value of theshare capital issued and the value of shares received is taken to the merger reserve.

The interest of minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilitiesrecognised. Subsequently, any losses applicable to the minority interest in excess of the minority interest are allocatedagainst the interests of the parent.

Associates

Associates are companies in which the Group has significant influence, but not control, over the financial and operatingpolicies.

The existence and effect of potential voting rights that are presently exercisable or presently convertible are consideredwhen assessing whether the Group has significant influence over another company.

In the Group’s financial statements, they are accounted for using the equity method of accounting from the datethat significant influence commences until the date that significant influence ceases. When the Group’s share of lossesexceeds the carrying amount of the associate (including any other unsecured receivables, that in substance, form partof the Group’s net investment in the associate), recognition of further losses is discontinued unless the Group hasincurred obligations or made payments on its behalf to satisfy obligations of the associate that the Group has guaranteedor otherwise committed on behalf of.

The excess of the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities overthe cost of acquisition is credited to the income statement in the period of the acquisition. Where the auditedfinancial statements are not available, the share of results is arrived at from unaudited management financialstatements made up mainly to the end of the accounting year to 31 December.

Joint Ventures

Joint ventures are those enterprises whose activities the Group has joint control over, established by contractualagreement and requiring unanimous consent for strategic financial and operating decisions.

The existence and effect of potential voting rights that are presently exercisable or presently convertible are consideredwhen assessing whether the Group has joint control over the enterprise.

For incorporated joint ventures, the Group accounts for the joint ventures in the same manner as associates, fromthe date joint control commences until the date that the joint control ceases.

For unincorporated joint ventures, the proportionate share in the unincorporated joint ventures’ individual income,expenses, assets and liabilities are included in financial statements of the Group with items of a similar nature on aline-by-line basis.

The excess of the Group’s interest in the fair value of the identifiable assets, liabilities and contingent liabilities overthe cost of acquisition is credited to the income statement in the period of the acquisition. Where the audited financialstatements are not available, the share of results is arrived at from unaudited management financial statements madeup mainly to the end of the accounting year to 31 December.

Associates and Joint Ventures in the Company’s Financial Statements

Investments in associates and joint ventures are stated in the Company’s balance sheet at cost less accumulatedimpairment losses.

The results of the associates and joint ventures are included in the Company’s income statement to the extent ofdividends received and receivable, provided the Company’s right to receive the dividend is established before thebalance sheet date.

Transactions Eliminated on Consolidation

All significant intra-group transactions, balances and unrealised gains or losses are eliminated on consolidation.Unrealised gains resulting from transactions with associates and joint ventures are eliminated to the extent of theGroup’s interest in the enterprise. Unrealised losses are eliminated in the same way as unrealised gains, but only tothe extent that there is no evidence of impairment.

Accounting Policies of Subsidiaries, Associates and Joint Ventures

Where necessary, accounting policies for subsidiaries and material associates and joint ventures have been adjustedon consolidation to be consistent with the policies adopted by the Group.

2.4 Goodwill on consolidation

Goodwill

Goodwill arising on acquisition represents the excess of the cost of acquisition over the fair value of the Group’s shareof the identifiable assets, liabilities and contingent liabilities acquired. Goodwill on acquisition of subsidiaries is includedin intangible assets. Goodwill on acquisition of associates and joint ventures is included in investments in associatesand joint ventures.

Goodwill is stated at cost less accumulated impairment losses.

Negative goodwill

Negative goodwill arising on acquisition represents the excess of the net fair value of the Group’s share of the identifiableassets, liabilities and contingent liabilities acquired over the cost of acquisition and is credited to incomestatement in the period of acquisition.

2.5 Revenue recognition

Revenue from ship and rig repair, building and conversion are recognised on the percentage of completion method,provided the work is at least 20% completed and the outcome of the contract can be reliably estimated. The percentageof completion is measured by reference to the percentage of costs incurred to-date to the estimated total costs foreach contract, with due consideration made to include only those costs that reflect work performed.

When an outcome of a contract cannot be estimated reliably, revenue is recognised only to the extent of costs incurredthat are likely to be recoverable. An expensed loss on a contract is recognised immediately in the income statementwhen it is foreseeable.

Income on goods sold and other services rendered is recognised on completion of delivery. Charter hire income istaken to the income statement on an accrual basis over the charter hire period. Rental income receivable underoperating leases is recognised in the income statement on a straight-line basis over the term of the lease. Leaseincentives granted are recognised as a reduction of rental income over the lease term on a straight-line basis. Contingentrentals are recognised as income in the accounting period in which they are earned.

Interest income is recognised as interest accrues (using the effective interest method).

Dividend income is recognised when the Group’s right to receive payment is established.


2.6 Property, plant and equipment

Property, plant and equipment are stated at cost or valuation less accumulated depreciation and impairment losses.The cost of an item is recognised as an asset if, and only if, it is probable that future economic benefits associatedwith the item will flow to the Group and the cost of the item can be measured reliably. The cost of an asset comprisesits purchase price and any directly attributable costs of bringing the asset to working condition for its intended use.Expenditure for additions, improvements and renewals are capitalised and expenditure for maintenance and repairsare charged to the income statement.

Where property, plant and equipment are revalued, any surplus on revaluation is credited to the asset revaluationreserve. A decrease in net carrying amount arising on revaluation of property, plant and equipment is charged to theincome statement to the extent that it exceeds any surplus held in reserve relating to previous revaluations of thesame asset.

2.7 Depreciation

Depreciation of an asset begins when it is available for use and is computed on the straight-line method to write offthe cost or valuation of property, plant and equipment over their estimated useful lives. Construction-in-progress isnot depreciated as these assets are not available for use. The estimated useful lives of property, plant and equipmentare as follows:

Freehold and leasehold land and buildings 45 years or remaining period of leaseQuays and dry docks 60 years or remaining period of leasePlant, machinery and tools 3 to 10 yearsMotor vessels, launches, cranes and floating docks 3 to 20 yearsMotor vehicles 3 to 5 yearsFurniture and office equipment 3 to 5 yearsUtilities and fittings 30 yearsComputer equipment 1 to 5 years

The residual value, useful life and depreciation method are reviewed at each financial year-end to ensure that theamount, method and period of depreciation are consistent with previous estimates and the expected pattern ofconsumption of the future economic benefits embodied in the items of property, plant and equipment.

Fully depreciated assets are retained in the financial statements until they are no longer in use and no further chargefor depreciation is made in respect of these assets. Property, plant and equipment are derecognised upon disposalor when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognitionof the asset is included in the income statement in the year the asset is derecognised.

2.8 Investment properties

Investment properties comprise significant portions of land and buildings and quays that are held for long-term rentalyields or for capital appreciation, or both.

Investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciationand accumulated impairment losses. Depreciation is recognised in the income statement on a straight-line basis overthe estimated useful lives of the investment properties. The estimated useful lives are 45 to 60 years, or the remainingperiod of lease. Depreciation methods, useful lives and residual values of investment properties are reassessed at thereporting date.

Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovationsand improvements is capitalised as an addition and the carrying amounts of the replaced components are writtenoff to the income statement. The cost of maintenance, repairs and minor improvements is charged to the incomestatement when incurred.

Investment properties are derecognised either when they have been disposed of or when the investment property ispermanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losseson the retirement or disposal of an investment property are recognised in the income statement in the year ofretirement or disposal.

2.9 Financial assets

Financial assets are classified as one of financial assets at fair value through profit or loss, loans and receivables, oravailable-for-sale financial assets, as appropriate. Financial assets are recognised on the balance sheet when, and onlywhen, the Group becomes a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets notmeasured at fair value through profit or loss, directly attributable transaction costs. The Group determines theclassification of its financial assets after initial recognition and, where allowed and appropriate, re-evaluates thisdesignation at each financial year-end.

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e. the datethat the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financialassets that require delivery of assets within the period generally established by regulation or convention in themarketplace concerned.

Financial assets at fair value through profit or loss

Financial assets are included in the category ‘financial assets at fair value through profit or loss’ if they are acquiredfor the purpose of selling in the near term. Derivative financial instruments are also classified as ‘financial assets atfair value through profit or loss’ unless they are designated as effective hedging instruments. Such assets aresubsequently measured at fair value. Gains or losses on ‘financial assets at fair value through profit or loss’ arerecognised in the income statement.

Loans and receivables

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market areclassified as loans and receivables. Such assets are carried at amortised cost using the effective interest method, lessimpairment losses. Gains and losses are recognised in income statement when the loans and receivables are derecognisedor impaired, as well as through the amortisation process.

Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale orare not classified in any of the other categories. After initial recognition, available-for-sale financial assets are measuredat fair value with gains or losses, other than impairment losses recognised in the available-for-sale reserve until theinvestment is derecognised or until the investment is determined to be impaired at which time the cumulative gainor loss previously reported in equity, or a part thereof, is included in the income statement.

The fair value of investments that are actively traded in organised financial markets is determined by reference to therelevant exchange’s quoted market bid prices at the close of business on the balance sheet date. For investmentswhere there is no active market, fair value is determined using valuation techniques.

Investments in equity instruments that do not have a quoted market price in an active market and whose fair valuecannot be reliably measured are measured at cost less impairment losses.





2.10 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, bank balances and fixed deposits. These also include bank overdraftsthat form an integral part of the Group’s cash management.

2.11 Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or groupof financial assets is impaired. A financial asset is considered impaired if objective evidence indicates that one or moreevents have had a negative effect on the estimated future cash flow of that asset.

Assets carried at amortised cost

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred,the amount of the loss is measured as the difference between the asset’s carrying amount and the present value ofestimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount ofthe asset is reduced through the use of an allowance account. The amount of the loss is recognised in the incomestatement.

When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if anamount was charged to the allowance account, the amounts charged to the allowance account are written off againstthe carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, theGroup considers factors such as the probability of insolvency or significant financial difficulties of the debtor anddefault or significant delay in payments.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectivelyto an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed.Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carryingvalue of the asset does not exceed its amortised cost at the reversal date.

Assets carried at cost

If there is objective evidence that an impairment loss on a financial asset carried at cost has been incurred, the amountof the loss is measured as the difference between the asset’s carrying amount and the present value of estimatedfuture cash flows discounted at the current market rate of return for a similar financial asset. Such impairment lossesare not reversed in subsequent periods.

Available-for-sale financial assets

A significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, andthe disappearance of an active trading market are considerations to determine whether there is objective evidencethat investment securities classified as available-for-sale financial assets are impaired.

When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and thereis objective evidence that the value of the asset is impaired, the cumulative loss that had been recognised directly inequity is recognised in the income statement even though the financial asset has not been derecognised. The amountof the cumulative loss that is recognised in the income statement is the excess of acquisition cost less any impairmentloss on that financial asset previously recognised in the income statement, over its current fair value.

Impairment losses once recognised in the income statement in respect of available-for-sale financial assets are notreversed through the income statement. Any subsequent increase in fair value of such assets is recognised directly inequity.

2.12 Derecognition of financial assets

A financial asset is derecognised when the contractual rights to receive cash flows from the asset have expired.

On derecognition of a financial asset, the difference between the carrying amount and the sum of (a) the considerationreceived (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss thathas been recognised directly in equity is recognised in the income statement.

2.13 Inventories and work-in-progress

Inventories consist mainly of steel and other materials used for ship and rig repair, building and conversion and arestated at the lower of cost and net realisable value. Cost is principally determined on the weighted average method.Allowance is made for all deteriorated, obsolete and slow-moving items.

Work-in-progress represents the gross unbilled amount expected to be collected from customers for contract workcompleted to date. This comprises mainly uncompleted ship and rig repair, building and conversion jobs. It is measuredat cost plus profit recognised to date less progress billings and recognised losses. Cost includes materials, directlabour, sub-contractors’ costs and an appropriate allocation of fixed and variable production overheads. Allowanceis made for anticipated losses, if any, on work-in-progress when the possibility of loss is ascertained.

Work-in-progress is presented as part of inventories in the balance sheet. If payments received from customers exceedthe profit recognised, the difference is presented as progress billings in excess of work-in-progress on the balancesheet.

2.14 Financial liabilities

Financial liabilities include trade payables on normal trade terms, other payables, amounts due to subsidiaries, associates,related companies, joint ventures and related parties, and interest-bearing loans and borrowings.

Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to thecontractual provisions of the financial instrument. Financial liabilities are initially recognised at fair value of considerationreceived less directly attributable transaction costs and subsequently measured at amortised cost using the effectiveinterest method.

Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through theamortisation process. The liabilities are derecognised when the obligation under the liability is discharged or cancelledor has expired.

2.15 Borrowing costs

Borrowing costs are generally expensed as incurred. Borrowing costs are capitalised if they are directly attributableto the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commenceswhen the activities to prepare the asset for its intended use or sale are in progress and the expenditure andborrowing costs are being incurred. Borrowing costs are capitalised until the assets are ready for their intended use.If the resulting carrying amount of the asset exceeds its recoverable amount, an impairment loss is recorded.





2.16 Leases

Finance lease assets (where a company is the lessor)

Amounts due from lessees under finance leases are recorded as receivables at the amount of the Group’s netinvestment in the leases. Finance lease income is allocated to accounting periods so as to reflect a constantperiodic rate of return on the Group’s net investment outstanding in respect of the leases.

Finance lease assets (where a company is the lessee)

Finance leases are those leasing agreements that give rights approximating to ownership. Assets financed undersuch leases are treated as if they had been purchased outright and are capitalised at the inception of the lease at thefair value of the leased asset or, if lower, at the present value of the minimum lease payments. The correspondingleasing commitments are shown as obligations to the lessor. Depreciation of the relevant assets is provided for asin Note 2.7 above. Lease payments are treated as consisting of capital and interest elements and the interest isamortised on the reducing balance basis over each lease term and charged to the income statement.

Operating leases (where a company is the lessee)

Where the Group has the use of assets under operating leases, payments made under the leases are recognised inthe income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised inthe income statement as an integral part of the total lease payments made.

2.17 Employee benefits

Defined contribution plans

Obligations for contributions to defined contribution plans are recognised as an expense in the income statementas incurred.

Employee leave entitlement

Employee entitlements to annual leave are recognised when they accrue to employees. An accrual is made for theestimated liability for leave as a result of services rendered by employees up to the balance sheet date.

Retirement gratuity

Retirement benefits payable to certain categories of employees upon their retirement are provided for in the financialstatements based on their entitlement under the staff benefit plan or, in respect of unionised employees who joinedon or before 31 December 1988, based on an agreement with the union.

The Group’s net obligation in respect of retirement benefits is the amount of future benefits that employees haveearned in return for their service in current and prior periods. The obligation is calculated using projected salaryincreases and is discounted to its present value, and the fair value of any related assets is deducted.

Equity and equity-related compensation benefits

Employee stock option

The share option programme allows the Group’s employees to acquire shares of the Group companies. The fair valueis measured at grant date and spread over the period during which the employees become unconditionally entitledto the options (the vesting period). The fair value of options granted is recognised as an employee expense with acorresponding increase in equity using the binomial option-pricing model. At each balance sheet date, the Grouprevises its estimates of the number of options that are expected to become exercisable. It recognises the impactof the revision of original estimates in employee expense and in a corresponding adjustment to equity over theremaining vesting period.

The proceeds received net of any directly attributable transaction costs are credited to share capital when the optionsare exercised.

Performance Share Plan

The fair value of equity related compensation is measured using the Monte Carlo simulation method as at the dateof the grant. The method involves projecting future outcomes using statistical distributions of key random variablesincluding share prices and volatility of returns.

In estimating the fair value of the compensation cost, market based performance conditions are taken into account.Therefore, for performance share grants with market based performance conditions, the compensation cost ischarged to the income statement with a corresponding increase in equity on a basis that fairly reflects the mannerin which the benefits will accrue to the employee under the plan over the service period to which the performanceperiod relates, irrespective of whether this performance condition is satisfied.

Restricted Stock Plan

Similar to the Performance Share Plan, the fair value of equity related compensation is measured using the MonteCarlo simulation method as at the date of the grant. The method involves projecting future outcomes using statisticaldistributions of key random variables including share prices and the volatility of returns. This model takes into theaccount the probability of achieving the performance conditions in the future.

The fair value of the compensation cost is measured at grant date and spread over the service period to which theperformance criteria relate and the period during which the employees become unconditionally entitled to the shares.The compensation cost is charged to the income statement with a corresponding increase in equity on a basis thatfairly reflects the manner in which the benefits will accrue irrespective of whether this performance condition issatisfied.

At balance sheet date, the Group revises its estimates of the number of performance-based restricted shares that theemployees are expected to receive based on the achieving of non-market performance conditions and the numberof shares ultimately given. It recognises the impact of the revision of the original estimates in employee expense anda corresponding adjustment to equity over the remaining vesting period.

In the Company’s separate financial statements, the fair value of options, performance shares and restricted sharesgranted to employees of its subsidiaries is recognised as an increase in the cost of the Company’s investment insubsidiaries, with a corresponding increase in equity over the vesting period.

Cash-related compensation benefits

Challenge bonus

The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes intoconsideration the share price of the Company. The Group recognises a provision when contractually obliged to payor where there is a past practice that has created a constructive obligation to pay.

The compensation cost is measured at the fair value of the liability at each balance sheet date and spread over theservice period to which the performance criteria relates and the period during which the employees becomeunconditionally entitled to the bonus. The liability takes into account the probability of achieving the performanceconditions in the future.

Until the liability is settled, the Group will re-measure the fair value of the liability at each balance sheet date and atthe date of settlement with any changes in fair value recognised in the income statement for the period.

2.18 Provisions

A provision is recognised when there is a present obligation (legal or constructive) as a result of a past event and itis probable that an outflow of resources embodying economic benefits will be required to settle the obligation, anda reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each balance sheet dateand adjusted to reflect the current best estimate.








2.19 Impairment of non-financial assets

The Group assesses at each balance sheet date whether there is any indication that an asset may be impaired. If anysuch indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate ofthe asset’s recoverable amount.

An asset’s recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use,the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects currentmarket assessments of the time value of money and the risks specific to the asset. For an asset that does not generatecash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds itsrecoverable amount. All impairment losses are recognised in the income statement or treated as a revaluation decreasefor assets carried at revalued amount to the extent that the impairment loss does not exceed the amount held in theasset revaluation reserve for that same asset.

An assessment is made at each reporting date as to whether there is any indication that previously recognisedimpairment losses recognised for an asset may no longer exist or may have decreased. If such indication exists, therecoverable amount is estimated. A previously recognised impairment loss is reversed if there has been a change inthe estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that theasset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciationor amortisation, if no impairment loss had been recognised. Reversal of an impairment loss is recognised in the incomestatement unless the asset is carried at revalued amount, in which case the reversal in excess of impairment losspreviously recognised through the income statement is treated as a revaluation increase. After such a reversal, thedepreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value,on a systematic basis over its remaining useful life.

An impairment loss in respect of goodwill is not reversed unless the loss was caused by a specific external event ofan exceptional nature that is not expected to recur, and the increase in recoverable amount relates clearly to thereversal of the effect of that specific event.

2.20 Income tax expense

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statementexcept to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantivelyenacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carryingamounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferredtax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognitionof assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxableprofit, and differences relating to investments in subsidiaries and joint ventures to the extent that it is probable thatthey will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to beapplied to the temporary differences when they reverse, based on the laws that have been enacted or substantivelyenacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offsetcurrent tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxableentity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their taxassets and liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available againstwhich the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and arereduced to the extent that it is no longer probable that the related tax benefit will be realised.

2.21 Derivative financial instruments

Derivative financial instruments are used to manage exposures to foreign exchange and interest rate risks arising fromoperational, financing and investment activities. Derivative financial instruments are not used for trading purposes.

Derivative financial instruments are recognised initially at fair value. Subsequent to initial recognition, derivativefinancial instruments are remeasured at fair value. The gain or loss on remeasurement to fair value is recognisedimmediately in the income statement. However, where derivatives qualify for hedge accounting, recognition of anyresultant gain or loss depends on the nature of the item being hedged as described below:-

Fair value hedges

Where a derivative financial instrument hedges the changes in fair value of a recognised asset or liability or anunrecognised firm commitment (or an identified portion of such asset, liability or firm commitment), any gain or losson the hedging instrument is recognised in the income statement. The hedged item is also stated at fair value inrespect of the risk being hedged, with any gain or loss recognised in the income statement.

Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised assetor liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financialinstrument is recognised directly in equity. The ineffective part of any gain or loss is recognised immediately in theincome statement. When the forecast transaction subsequently results in the recognition of a non-financial asset ornon-financial liability, or the forecast transaction for a non-financial asset or non-financial liability becomes a firmcommitment for which fair value hedge accounting is applied, the associated cumulative gain or loss is removed fromequity and included in the initial cost or other carrying amount of the non-financial asset or liability. If a hedge of aforecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated gainsand losses that were recognised directly in equity are reclassified into the income statement in the same period orperiods during which the asset acquired or liability assumed affects the income statement.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedgerelationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that pointremains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedgedtransaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognisedimmediately in the income statement.

2.22 Financial guarantee contracts

Financial guarantee contract are accounted for as insurance contracts. A provision is recognised based on theCompany’s estimate of the ultimate cost of settling all claims incurred but unpaid at the balance sheet date. Theprovision is assessed by reviewing individual claims and tested for adequacy by comparing the amount recognisedand the amount that would be required to settle the guarantee contract.

2.23 Segment reporting

A segment is a distinguishable component of the Group that is engaged either in providing products or services(business segment), or in providing products or services within a particular economic environment (geographicalsegment), which is subject to risks and rewards that are different from those of other segments.




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3. Property, plant and equipment (cont’d)

Docks, launches, Plant, cranes and machinery

marine vessels and tools Others TotalCompany $’000 $’000 $’000 $’000Cost or valuation

Balance at 1 January 2007

At cost 138,709 7,609 1,232 147,550At valuation 25,152 – – 25,152

163,861 7,609 1,232 172,702Additions – – 1,584 1,584

Balance at 31 December 2007 163,861 7,609 2,816 174,286

Balance at 31 December 2007 and1 January 2008

At cost 138,709 7,609 2,816 149,134At valuation 25,152 – – 25,152

163,861 7,609 2,816 174,286Additions – – 509 509


Balance at 31 December 2008At cost 138,709 7,609 3,325 149,643At valuation 25,152 – – 25,152

163,861 7,609 3,325 174,795

Accumulated depreciation

Balance at 1 January 2007 49,414 5,555 839 55,808Charge for the year 2,769 853 433 4,055Balance at 31 December 2007 and

1 January 2008 52,183 6,408 1,272 59,863Charge for the year 2,768 103 529 3,400


Carrying amount

At 1 January 2007 114,447 2,054 393 116,894

At 31 December 2007 111,678 1,201 1,544 114,423

At 31 December 2008 108,910 1,098 1,524 111,532

(a) The carrying amounts of docks, launches, cranes and marine vessels included certain docks and quays stated at Directors’valuation of $25,152,000 in the year 1973. Subsequent additions to these docks and quays were stated at cost. Therevaluation was done on a one-off basis and accordingly, the transitional provision in FRS 16 – Property, Plant andEquipment was adopted to continue with its existing policy of stating these docks and quays at cost and revaluedamounts. If the following re-valued assets of the Group and Company had been included in the financial statementsat cost less accumulated depreciation, the net written down value would have been:

Group and Company2008 2007$’000 $’000

Docks and quays 5,501 5,749

The re-valued net book value of the docks and quays is $9,296,000 (2007: $9,715,000).

(b) As at balance sheet date, the net book value of property, plant and equipment under “Plant, machinery and tools”and“Others” acquired under finance lease agreements amounted to $4,518,000 (2007: $2,890,000) for the Group.

(c) Others comprise motor vehicles, furniture and office equipment, utilities and fittings and computer equipment.

4 Investment propertiesCompany

2008 2007$’000 $’000

CostBalance at 1 January 95,862 93,662Transfer from subsidiary – 2,200

Balance at 31 December 95,862 95,862

Accumulated depreciationBalance at 1 January 39,912 37,999Depreciation 1,913 1,913


Net book value 54,037 55,950

The investment properties of the Company are used by the Group in carrying out its principal activities and areaccounted for as property, plant and equipment at the Group. As there is no readily available market for suchinvestment properties, it is impractical to determine the fair value of these investment properties.

The following amounts are recognised in the income statement:Company

2008 2007$’000 $’000

Rental income 18,903 17,478Operating expenses arising from rental of investment properties (17,781) (16,565)

5 Investments in subsidiariesCompany

2008 2007$’000 $’000

Unquoted shares, at cost 635,503 646,494Allowance for impairment loss (15,251) (15,251)

620,252 631,243

Allowance for impairment loss of a subsidiaryBalance at 1 January and 31 December 15,251 15,251

Details of the Company’s subsidiaries are set out in Note 41.




6 Investments in associates and joint venturesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

AssociatesUnquoted shares, at cost 111,688 113,480 107,369 109,161Share of net post-acquisition reserves 137,486 79,976 – –

249,174 193,456 107,369 109,161Joint venturesUnquoted shares, at cost 890 640 – –Share of net post-acquisition reserves 19,545 11,406 – –

20,435 12,046 – –

269,609 205,502 107,369 109,161

Details of the Group’s associates and joint ventures are set out in Note 41.

Summarised financial information on the associates is as follows:Group

2008 2007$’000 $’000

Combined results of associates:Turnover 2,247,798 2,092,066

Profit before taxation 334,051 359,640Taxation (44,677) (27,901)

Profit for the year 289,374 331,739

Combined assets and liabilities of associates:Non-current assets 1,808,721 1,188,780Current assets 4,136,631 2,105,047Current liabilities (4,207,959) (2,377,057)Non-current liabilities (688,349) (93,635)

Net assets 1,049,044 823,135

The aggregate amounts of each of current assets, non-current assets, current liabilities, non-current liabilities, incomeand expenses relating to the Group’s interest in joint ventures are as follows:

Group2008 2007$’000 $’000

The Group’s share of combined results of joint ventures:Turnover 14,775 15,165

Profit before taxation 8,306 7,718Taxation (132) (2,203)

Profit for the year 8,174 5,515

The Group’s share of combined assets and liabilities of joint ventures:Non-current assets 57,984 28,599Current assets 6,062 7,423Current liabilities (29,847) (9,242)Non-current liabilities (13,764) (14,734)

Net assets 20,435 12,046

7 Other long term investmentsGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Available-for-sale financial assetsQuoted equity securities, at fair value 107,231 657,992 66,283 404,151

Unquoted non-equity securities,at fair value 251 404 251 404

Unquoted equity securities, at cost 30,861 30,883 30,783 30,798

Financial assets at fair value throughprofit or lossQuoted equity securities, at fair value 33 69 – –Forward foreign currency contracts,

at fair value (Note 12) – 206 – –

138,376 689,554 97,317 435,353

Unquoted equity securities which have no market prices and whose fair value cannot be reliably measured usingvaluation techniques are stated at cost less impairment.

8 Trade receivablesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Current assetsTrade receivables, Note (a) 488,185 456,023 16,774 23,239Allowance for doubtful receivables, Note (b) (7,789) (5,309) (651) (651)

480,396 450,714 16,123 22,588Non-current assetsExternal lease receivables, Note (c) 18,025 21,400 18,025 21,400

498,421 472,114 34,148 43,988

(a) Current assetsGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Associates – 515 – –Related companies 4,802 1,833 4,801 1,720Subsidiaries – – 7,948 5,317Joint ventures 28 2,987 – –External parties 479,981 435,137 651 651External lease receivables, Note (c) 3,374 15,551 3,374 15,551

488,185 456,023 16,774 23,239

Other than lease receivables as explained in Note (c), the remaining balances shown above are interest-free.All the amounts due from subsidiaries, associates, related companies, joint ventures and related parties areunsecured, repayable on demand and to be settled in cash.

8. Trade receivables (cont’d)

(b) Allowance for external party doubtful receivablesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Balance at 1 January 5,309 10,104 651 651Currency re-alignment (1) (116) – –Charge for the year 5,652 412 – –Write-back for the year (1,301) (2,121) – –Bad debts written off (1,870) (2,970) – –

Balance at 31 December 7,789 5,309 651 651

Net bad debts written off directlyto income statement – 26 – –

(c) Additional information on finance lease receivables

Group and Company

2008Receivable within 1 year 4,218 – 4,218 (844) 3,374Receivable after 1 year but within 5 years 16,875 3,000 19,875 (1,850) 18,025

21,093 3,000 24,093 (2,694) 21,3992007Receivable within 1 year 16,875 1,500 18,375 (2,824) 15,551Receivable after 1 year but within 5 years 16,875 – 16,875 (2,474) 14,401Receivable after 5 years 4,219 3,000 7,219 (220) 6,999

37,969 4,500 42,469 (5,518) 36,951

Under the terms of the lease agreements, no contingent rents were recognised. Interest rates were 4.25%(2007: 4.25%) per annum. These lease receivables relate to the leases of marine vessels for which the lesseeshave the option to purchase the marine vessels during the term of the leases.

The Group’s maximum exposure to credit risk for trade and other receivables at the balance sheet date is as follows:

Group2008 2007$’000 $’000

By business activityShip and rig repair, building and conversion 582,885 545,860Ship chartering 15,431 17,001Others 11,316 13,123

609,632 575,984

Minimumlease

payment$’000

Estimatedresidual

value$’000

Total grossinvestment

in lease$’000

Unearnedinterestincome$’000

Present valueof minimum

lease payment$’000

The age analysis of trade and other receivables past due but not impaired is as follows:

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Past due 0 to 3 months 42,600 59,919 – –Past due 3 to 6 months 12,308 43,023 – –Past due 6 to 12 months 7,220 26,394 – –More than 1 year 22,436 42,550 47 47

84,564 171,886 47 47

The allowance account in respect of trade and other receivables is used to record impairment losses unless theGroup is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is consideredirrecoverable and the amount charged to the allowance account is written off against the carrying amount of theimpaired financial asset.

Based on historical default rates, the Group believes that the amount of impairment allowance made is adequate inrespect of trade and other receivables. These receivables are mainly arising by customers that have a good collectiontrack record with the Group.

Trade receivables that are individually determined to be impaired at the balance sheet date relate to receivables thatare in significant financial difficulty and have defaulted on payments.

9 Other receivables, deposits and prepaymentsGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Current assetsDeposits and recoverables, Note (a) 58,039 53,726 3,103 7,041Non-trade receivables, Note (b) 289 8,135 163,685 13,607Prepayments 6,584 17,499 – –Staff loans, Note (c) 1,390 2,103 58 70

66,302 81,463 166,846 20,718Non-current assetsLong term other receivables, Note (d) 37,023 17,001 73,944 229,693

103,325 98,464 240,790 250,411

(a) Deposits and recoverablesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

GST refundable 34,047 25,841 – –Interest receivable 591 155 – –Recoverables 9,945 14,200 1,871 4,493Tax recoverable 1,602 3,009 937 1,938Withholding tax recoverable 8,577 7,585 – –Sundry deposits 3,277 2,936 295 610

58,039 53,726 3,103 7,041

Recoverables are stated after deducting allowance for doubtful debts of $97,000 (2007: $97,000).

Withholding tax recoverable arose from the acquisition of subsidiaries in prior years and is guaranteed by the vendor.







9. Other receivables, deposits and prepayments (cont’d)

(b) Non-trade receivablesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Non interest-bearingAssociates and joint ventures 250 353 – –Related company 39 10 – –Subsidiaries – – 14,060 13,607

Immediate holding company – 7,772 – –Interest-bearing

Loan to subsidiary, Note (e) – – 149,625 –

289 8,135 163,685 13,607

All non interest-bearing amounts due from associates, joint ventures, related company, subsidiaries and the immediateholding company, which comprise mainly advances and payments on behalf, are unsecured, repayable on demandand to be settled in cash.

(c) Staff loans

Staff loans are denominated in Singapore dollars and bear interest at 3.0% (2007: 3.0%) per annum.

(d) Long term other receivablesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Non interest-bearingLoans to subsidiary – – 73,944 80,068

Loans and advances to joint ventures 36,790 17,001 – –Interest-bearing

Staff loans, Note (c) 233 – – –Loan to subsidiary, Note (e) – – – 149,625

37,023 17,001 73,944 229,693

All non interest-bearing loans and advances to subsidiaries and joint ventures are unsecured, and to be settled in cash,except for the loan to a joint venture of $21,359,000 (2007: nil) which bears interest at 1.72469% (2007: nil) perannum. The settlement of these amounts is neither planned nor likely to occur in the foreseeable future. As these are,in substance, a part of the Company’s net investment in these entities, they are stated at cost.

(e) Loan to subsidiary

The loan to a subsidiary of $149,625,000 (2007: $149,625,000) repayable in September 2009 has been classifiedas short term in 2008. It is unsecured, bears interest at a fixed rate of 3.1% (2007: 3.1%) per annum, and is to besettled in cash.

10 Intangible assetsGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Goodwill on consolidation, Note (a) 5,940 5,940 – –Other intangible assets, Note (b) – 1,462 – –Club memberships, Note (c) 187 187 122 122

6,127 7,589 122 122

(a) Goodwill on consolidationGroup

2008 2007$’000 $’000

Balance at 1 January 5,940 13,467Acquisition of subsidiaries – (7,527)*


Carrying amounts of goodwill allocated to each of the Group’s cash-generating units are as follows:Group

2008 2007$’000 $’000

Ship and rig repair, building and conversion 4,917 4,917Others 1,023 1,023

Total 5,940 5,940

For goodwill impairment testing, the recoverable amounts of cash-generating units of the Group are determinedbased on a value in use calculation using cash flow projections from financial budgets approved by seniormanagement for the next financial year.

(b) Other intangible assetsGroup

2008 2007$’000 $’000

CostBalance at 1 January 5,678 75Acquisition of subsidiaries – 5,603*


Accumulated amortisationBalance at 1 January 4,216 72Charge for the year 1,462 4,144


Net book value – 1,462

12 Derivative financial assets and liabilities2008 2007

Group Notional Assets/ Notional Assets/amount (Liabilities) amount (Liabilities)$’000 $’000 $’000 $’000

Forward foreign currency contracts:Bought contracts 2,605,128 (120,124) 706,210 13,059

Interest rate swap 32,000 (1,001) 44,000 (731)

Balance at 31 December 2,637,128 (121,125) 750,210 12,328

Comprises:Current derivative financial assets – – 701,348 12,853Non-current derivative financial

assets (Note 7) – – 4,862 206Current derivative financial liabilities 1,950,645 (71,394) 44,000 (731)Non-current derivative

financial liabilities 686,483 (49,731) – –

2,637,128 (121,125) 750,210 12,328

As at 31 December 2008, the settlement dates on open derivative contracts ranged between 1 to 37 months (2007:1 to 17 months). The fixed interest rate on the interest rate swap is 3.93% (2007: 3.93%) per annum and isused to hedge the interest rate risk arising from the term loan as disclosed in Note 17(b).

Details of the forward foreign currency contracts and foreign exchange swap contracts are as follows:

Group2008 2007$’000 $’000

Contracts to deliver USD and receive SGD 2,600,926 706,210Contracts to deliver USD and receive EUR 4,202 –

2,605,128 706,210

13 Bank balances, fixed deposits and cash

Bank balances, fixed deposits and cash comprise:Group Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Fixed deposits 1,630,147 526,558 – 67,508Bank balances and cash 423,885 213,919 12,454 6,574Cash and cash equivalents in the

cash flow statement 2,054,032 740,477 12,454 74,082

Fixed deposits of the Group placed with financial institutions have maturity periods ranging from 2 days to 9 months(2007: 2 days to 21 months) from the financial year-end and interest rates ranging from 0.30% to 6.44%(2007: 0.52% to 5.24%) per annum, which are also the effective interest rates. Fixed deposits of the Company placedwith financial institutions in 2007 have maturity periods of 2 days from the financial year-end and an interestrate of 3.96% per annum, which is also the effective interest rate.




10. Intangible assets (cont’d)

* Goodwill provisionally determined in 2006 was reduced by $7,527,000 and property, plant and equipment, intangible asset, and deferredtaxation increased by $3,806,000, $5,603,000 and $1,882,000 respectively in 2007 based on the final valuation report received from theindependent valuer in 2007.

(c) Club memberships

Club memberships are stated at cost and after deducting allowance for impairment loss of $653,000 (2007: $653,000)for the Group and $468,000 (2007: $468,000) for the Company.

11 Inventories and work-in-progressGroup

2008 2007$’000 $’000

Materials, Note (a) 43,668 27,995Finished goods, Note (a) 3,585 2,401Work-in-progress, Note (b) 787,536 1,530,313

834,789 1,560,709

(a) Materials and finished goods are stated after deducting allowance for inventories obsolescence of:

Group2008 2007$’000 $’000

Allowance for inventories obsolescence:Balance at 1 January 2,506 1,690Charge for the year 1,728 875Write-back for the year (29) (59)Obsolescence written off (73) –


Materials 3,634 2,075Finished goods 498 431

4,132 2,506

(b) Work-in-progressGroup

2008 2007$’000 $’000

Costs and attributable profits less allowance for foreseeable losses 5,191,916 6,071,214Progress billings (5,371,370) (5,105,509)

(179,454) 965,705

Comprising:Work-in-progress 787,536 1,530,313

Progress billings in excess of work-in-progress (966,990) (564,608)

(179,454) 965,705

14 Trade payablesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Associates and joint ventures 2,105 8,009 – –Immediate holding company 1,356 854 1,348 850Related companies 1,525 1,464 – –Subsidiaries – – 17 82External parties 1,633,826 1,374,374 17,478 14,498

1,638,812 1,384,701 18,843 15,430

All the amounts due to associates, joint ventures, the immediate holding company, related companies and subsidiariesare interest-free, unsecured, repayable on demand and to be settled in cash.

15 Other payables Group Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Current payablesDeposits received 1,431 1,429 26 26GST payables 2,396 147 492 55Finance lease liabilities (Note 19) 1,155 1,046 – –Non-trade payables, Note (a) 20,644 64,528 111,401 109,561Interest payable 1,243 2,622 1,184 1,184

26,869 69,772 113,103 110,826

Non-current payablesFinance lease liabilities (Note 19) 2,603 1,599 – –Non-trade payables to subsidiary, Note (b) – – 32,849 –

2,603 1,599 32,849 –

29,472 71,371 145,952 110,826

(a) Non-trade payables

Subsidiaries – – 111,311 107,692Associates and joint ventures – 1,783 – 1,783Related company 11,722 17 – –External parties 8,922 62,728 90 86

20,644 64,528 111,401 109,561

The non-trade payables to subsidiaries, associates, joint ventures and the related company are unsecured,interest free, repayable on demand and to be settled in cash.

(b) Non-trade payables to subsidiary

The non-trade payables to the subsidiary are unsecured, interest-free and to be settled in cash. The settlementof this amount is neither planned nor likely to occur in the foreseeable future. As this is in substance, a return ofcapital to the holding company, it is stated at cost.

16 ProvisionsGroup

2008 2007$’000 $’000

Provision for retirement gratuities (Note 20) 470 –Provision for warranty, Note (a) 37,718 2,797

38,188 2,797

(a) Provision for warrantyBalance at 1 January 2,797 3,020Currency re-alignment 133 –Charge/(write back) to income statements 29,330 (223)Reclassification 5,458 –


17 Interest-bearing borrowingsGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Current liabilitiesShort term bank loans, Note (a) 40,293 112,839 – –Term loan, Note (b) 12,000 12,000 – –Medium term notes, Note (c) 149,945 134,961 149,945 –

202,238 259,800 149,945 –

Non-current liabilitiesTerm loan, Note (b) 20,000 32,000 – –Medium term notes, Note (c) – 149,869 – 149,869

20,000 181,869 – 149,869

Total interest-bearing borrowings 222,238 441,669 149,945 149,869

(a) The unsecured short term bank loans are repayable in January 2009 (2007: January 2008) and bear interest ratesranging from 1.80% to 3.15% (2007: 2.56% to 5.70%) per annum.

(b) The term loan is repayable in 60 equal monthly instalments of $1 million each and is to be fully repaid on30 August 2011. The term loan bears interest at 0.25% per annum above the SWAP rate. An interest rate swapwas entered to repay the interest of this loan at a fixed rate of 3.93% (2007: 3.93%) per annum. The term loanis secured by a corporate guarantee from a subsidiary.

(c) During 2004, the Company established a $500,000,000 Multicurrency Multi-issuer Debt Issuance Programme (the“MTN”) pursuant to which the Company, together with its subsidiaries Jurong Shipyard Pte Ltd and SembawangShipyard Pte Ltd (“Issuing Subsidiaries”), may from time to time issue the Notes (as defined below), subject toavailability of funds from the market. The obligations of Issuing Subsidiaries under the Notes are fully guaranteedby the Company.

Under the MTN, the Company or any of the Issuing Subsidiaries may from time to time issue notes in series ortranches in Singapore dollars or any other currency (the “Notes”). Such Notes are listed on the Singapore ExchangeSecurities Trading Limited and are cleared through the Central Depository (Pte) Ltd.




17. Interest-bearing borrowings (cont’d)

The outstanding principal amount of the Notes are as follows:2008 2007$’000 $’000

Group and Company5-years 3.00% per annum Notes issued on 27/9/2004 and due on 26/9/2009 150,000 150,000

Group1-year 2.91% per annum Notes issued on 30/8/2007 and due on 1/9/2008 – 60,0001-year 2.82% per annum Notes issued on 4/10/2007 and due on 6/10/2008 – 75,000

150,000 285,000

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

MTN borrowings- current 150,000 135,000 150,000 –- non-current – 150,000 – 150,000Capitalised issue expenses (55) (170) (55) (131)

149,945 284,830 149,945 149,869

Capitalised issue expensesBalance at 1 January 170 221 131 205Amount paid – 54 – –Amortised during the year (115) (105) (76) (74)

Balance at 31 December 55 170 55 131

The Notes are redeemable at par.

18 Deferred tax assets and liabilities

Deferred tax assets and liabilities (prior to offsetting of balances) during the year are as follows:

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Deferred tax assets (9,436) – – –Deferred tax liabilities 61,261 168,738 34,163 95,850

51,825 168,738 34,163 95,850

Movements in net deferred tax assets and liabilities are as follows:

Balance at 1 January 168,738 109,535 95,850 58,184Currency re-alignment (48) (484) – –Charge/(write-back) to income statements (2,544) 1,398 (893) (3,250)Acquisition of subsidiary (Note 10) – 1,882 – –Disposal of subsidiary – (221) – –Charge to equity (114,321) 56,628 (60,794) 40,916

Balance at 31 December 51,825 168,738 34,163 95,850




Deferred taxation arises as a result of:Group Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Deferred tax liabilitiesDifferences in depreciation 60,354 60,293 24,901 25,613Fair value adjustments 44,441 105,236 9,443 70,237Other 6,680 5,456 – –

111,475 170,985 34,344 95,850

Deferred tax assetsAllowance for doubtful receivables (1,600) (283) – –Unutilised tax losses, capital and investment

allowances and donations likely to be utilised (529) (1,057) (181) –Employee benefits (3,973) (816) – –Fair value adjustments (53,526) – – –Other deferred tax assets (22) (91) – –

(59,650) (2,247) (181) –

51,825 168,738 34,163 95,850

Deferred tax assets not recognised as a result of:Group

2008 2007$’000 $’000

Unutilised tax losses and capital and investment allowances unlikely to be utilised (4,486) (8,561)Others (3,195) (1,071)

(7,681) (9,632)

Deferred tax assets have not been recognised in respect of the above temporary differences as it is not probable thatfuture taxable profit will be available against which the Group can utilise the benefits therefrom.

19 Finance lease liabilitiesMinimum Unearned Present value

lease interest of minimumpayment income lease payment

Group $’000 $’000 $’0002008Payable after 1 year but within 5 years 2,953 (350) 2,603Payable within 1 year 1,304 (149) 1,155

4,257 (499) 3,7582007Payable after 1 year but within 5 years 1,840 (241) 1,599Payable within 1 year 1,152 (106) 1,046

2,992 (347) 2,645

The finance lease agreements do not contain any escalation clauses and do not provide for contingent rents. Theimplicit interest rate is 5.5% (2007: 5.9%) per annum. The net book value of assets acquired under hire purchaseagreements is disclosed in Note 3. Lease terms do not contain restrictions concerning dividend, additional debtor further leasing.




20 Other provisionsGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Provision for retirement gratuities, Note (a) 1,896 2,773 – –Provision for restoration of property,

plant and equipment, Note (b) 4,727 4,729 2,895 2,895

6,623 7,502 2,895 2,895

(a) Provision for retirement gratuities

Balance at 1 January 2,773 3,209 – –Utilised during the year (407) (436) – –

Balance at 31 December 2,366 2,773 – –Less: Amount due within 12 months

(Note 16) (470) – – –

Amount due after 12 months 1,896 2,773 – –

(b) Provision for restoration of property, plant and equipment

Balance at 1 January 4,729 4,790 2,895 2,895Currency re-alignment (2) (61) – –

Balance at 31 December 4,727 4,729 2,895 2,895

21 Share capitalGroup and Company

No. of ordinary shares2008 2007

Issued and fully paid, with no par value:Balance at 1 January 2,070,855,320 1,463,908,815Issue of bonus shares – 591,046,630Exercise of share options 516,150 15,899,875

Balance at 31 December 2,071,371,470 2,070,855,320

During the year ended 31 December 2008, the Company acquired 26,106,000 (2007: nil) ordinary shares in theCompany through purchases on the Singapore Exchange Securities Trading Limited. The total amount paid toacquire the shares was $93,745,000 (2007:nil) and this is presented as a deduction from equity under “reservefor own shares”.

The Company reissued 10,561,633 (2007: nil) treasury shares during the year pursuant to its share based incentiveplans (Note 33). As at 31 December 2008, the Company held 15,544,367 (2007: nil) treasury shares.

The holders of ordinary shares (excluding treasury shares) are entitled to receive dividends as declared from time totime and are entitled to one vote per share at meetings of the Company. All shares (excluding treasury shares) rankequally with regard to the Company’s residual assets. During the year, other than the issue of new shares upon theexercise of share options under the Sembcorp Marine Share Option Plan (the “Plan”), there was no other issue ofnew shares.

22 ReservesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

DistributableReserve for own shares (1) (55,855) – (55,855) –Revenue reserve 955,997 735,338 482,078 546,459

Non-distributableForeign currency translation reserve (2) (3,143) (18,304) – –Asset revaluation reserve 960 960 960 960Share-based compensation reserve (3) 12,049 27,368 12,378 26,945Available-for-sale reserve (4) 26,064 479,025 42,893 320,120Hedging reserve (5) (74,558) – – –Other capital reserves (6) 13,124 13,124 – –

874,638 1,237,511 482,454 894,484

(1) Reserve for own shares comprises the cost of the Company’s shares held by the Company.(2) The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations

whose functional currencies are different from that of the Group’s presentation currency. It is also used to record the effect of hedging net investments inforeign operations.

(3) Share-based compensation reserve represents the equity-settled share options, restricted shares and performance shares awarded to employees. The reserveis made up of the cumulative value of services received from employees relating to such awards.

(4) Available-for-sale reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognised or impaired. Thereduction in the available-for-sale reserve during the year mainly arose from fair value changes in the Group’s long term quoted investments.

(5) Hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments relating to hedgedtransactions that have not yet occurred.

(6) Other capital reserves mainly relate to the transfer from revenue reserve in accordance with the regulations of the foreign jurisdiction in which theGroup’s subsidiaries and associates operate.

23 Turnover

Turnover represents sales from the various activities described in Note 1 and Note 41, including the revenue recognisedon contracts relating to ship and rig repair, building and conversion which are at least 20% completed.

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Services rendered to external parties:Ship and rig repair, building

and conversion 5,009,179 4,475,281 – –Others 2,235 2,707 – –

Services rendered to subsidiaries:Rental income – – 18,903 17,478Management fee – – 14,469 15,778

Sale of goods to external parties 52,534 35,135 – –

5,063,948 4,513,123 33,372 33,256

Year ended 31 December 2008



NOTES TO THE F INANCIAL STATEMENTSSembcorp Marine Ltd and its SubsidiariesYear ended 31 December 2008

24 Operating profit/loss

Operating profit/loss is stated after charging/(crediting):

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Directors’ remuneration:Directors of the Company 1,272 4,528 1,272 4,528Other directors of subsidiaries 4,936 4,920 – –

Professional fees paid to a firm in whicha director is a member 134 148 – –

Non-audit fees paid/payable:Auditors of the Company – 185 – 35Other auditors 33 – – –

Foreign currency exchange loss 10,371 11,072 714 723Gain on disposal of property, plant and

equipment, net (822) (4,781) – –Fair value adjustment on hedging

instruments 42,755 (13,136) – –Operating lease expenses 18,164 17,345 9,106 7,208

Staff costs, which include Directors’ remuneration for the year, are as follows:

Salaries and bonus 350,975 312,576 9,017 9,958Defined contribution plan 16,798 15,963 133 107Share-based compensation 19,484 15,312 3,186 3,638Directors’ fee:

Directors of the Company 1,066 980 1,066 980Other directors of subsidiaries 8 8 – –

Other employee benefits 41,564 35,058 387 335

429,895 379,897 13,789 15,018

25 Finance incomeGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Gross dividend from:Unquoted subsidiaries – – 129,631 338,918Unquoted associates – – 10,478 29,477Quoted equity shares 7,810 6,044 4,910 2,813

7,810 6,044 145,019 371,208

Interest income from:Subsidiary – – 4,730 5,069Trade receivables 906 1,902 906 1,679Fixed deposits and bank balances 22,582 17,128 338 1,403Related companies 1,455 2,357 – –Others 187 99 2 4

25,130 21,486 5,976 8,155

32,940 27,530 150,995 379,363

26 Finance costsGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Finance costs:Subsidiary – – – (14)Related company – (76) – (76)Borrowings (11,100) (13,295) (4,512) (4,500)Interest rate swap - fair value through

profit and loss (270) (321) – –

(11,370) (13,692) (4,512) (4,590)

27 Foreign exchange transactions

Arising from the various unauthorised foreign exchange transactions entered into previously by an employee of theCompany for the account of one of its wholly-owned subsidiary, Jurong Shipyard Pte Ltd (“JSPL”), $302.9 million wascharged to the income statement in 2007. During the year, another $43.7 million had been charged to the incomestatement following the full and final amicable settlement of BNP Paribas’s claim of $73.1 million (Note 34), strictlyon commercial basis.

Going forward, JSPL intends to recover the S$289.9 million paid to Societe Generale (“SG”) in 2007 as JSPL’s positionis that the underlying transactions with SG are not valid and binding. If JSPL succeeds in doing so, there will be aninflow of funds to be recognised in the financial statements at that relevant point in time.

28 Non-operating income and expensesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Non-operating incomeGain on disposal of:

Available-for-sale quoted equityinvestments – 229,692 – –

Subsidiary – 933 – 2,259

– 230,625 – 2,259

Non-operating expensesDepreciation of asset previously held for sale – (2,334) – –Professional fees incurred in disputing the

foreign exchange transactions (Note 27) – (5,308) – –

– (7,642) – –

29 Share of results of associates and joint venturesGroup

2008 2007$’000 $’000

Share of profit for the year 65,300 81,793Share of taxation for the year (Note 30) (1,822) (8,145)

63,478 73,648




30 Income tax expenseGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

In respect of profit for the year:Current taxation 95,682 103,650 – 8,413Deferred taxation 2,540 5,744 (870) (562)

98,222 109,394 (870) 7,851

(Over)/Under provision in respect of prior years:

Current taxation (1,244) (199) 253 351Deferred taxation (5,084) (4,346) (23) (2,688)

(6,328) (4,545) 230 (2,337)

Share of taxation of associates and jointventures (Note 29) 1,822 8,145 – –

Income tax expense 93,716 112,994 (640) 5,514

As at 31 December 2008, certain subsidiaries have unutilised tax losses of $17,985,000 (2007: $39,879,000) andother temporary differences of $10,161,000 (2007: $5,965,000) available for set-off against future taxable incomesubject to the income tax provisions and agreement by the relevant tax authorities of the various jurisdictions.

The unutilised tax losses and capital allowances in a subsidiary amounting to $4,312,000 (2007: $10,779,000) willexpire between 2009 to 2011 (2007: 2008 to 2011). The amounts of tax losses and capital allowances previouslycarried forward at the beginning of the year and which have been utilised in the year to arrive at the computationof tax liabilities for the year are as disclosed below.

A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax ratefor the years ended 31 December is as follows:

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Tax at 18% (2007: 18%) 86,338 50,927 25,963 67,483Exempt income, capital gains and tax

incentives/concessions (5,381) (3,511) (27,654) (60,039)Effect of changes in tax rate – (5,111) – (2,688)Effect of different tax rate in

foreign jurisdictions 3,547 4,297 – –Effect of unremitted overseas losses – (790) – –Effect on utilisation of deferred tax assets

not previously recognised (4,947) (3,749) – –Non deductible expenses 8,047 5,768 821 415Foreign exchange transactions and related

professional fees* 8,561 55,481 – –(Over)/Under provision in respect of

prior years (6,328) 566 230 351Deferred tax assets not recognised 2,900 839 – –Others (843) 132 – (8)

Effective tax 91,894 104,849 (640) 5,514Share of taxation of associates and

joint ventures 1,822 8,145 – –

Income tax expense 93,716 112,994 (640) 5,514

* The Group will be claiming a tax deduction for an amount of $8,561,000 (2007: $55,481,000), calculated at 18%, in the current year’s tax return arisingfrom the foreign exchange transactions (Note 27). The amounts are separately disclosed pending the Inland Revenue Authority of Singapore’s confirmationthat the deduction will be allowed. The tax return for financial year ended 31 December 2007 (Year of Assessment 2008) had been prepared on thesame basis.

31 Earnings per share

(a) Basic earnings per share (“EPS”) is calculated by dividing the profit attributable to shareholders after deductingminority interests of $429,918,000 (2007: $240,989,000) by the weighted average number of ordinary sharesin issue during the year of 2,064,292,229 (2007: 2,055,671,704).

(b) Diluted EPS is calculated after adjusting for those shares not yet exercised under the Sembcorp Marine ShareOption Plan as follows:

Group2008 2007

Weighted average number of ordinary shares in issue during the year 2,064,292,229 2,055,671,704Effect of dilutive share options 10,250,000 16,686,000Weighted average number of ordinary shares outstanding used in the

calculation of diluted EPS 2,074,542,229 2,072,357,704

(c) Basic and diluted EPS are as follows:Group

2008 2007Cents Cents

Basic EPS 20.83 11.72Diluted EPS 20.72 11.63




32 Dividends

The proposed net dividend of $123,350,000 (2007: $106,856,000) represents a one-tier tax-exempt dividend of6.00 cents per share (2007: final one-tier tax-exempt dividend of 5.16 cents per share).

Group and Company2008 2007$’000 $’000

Dividends paidInterim one-tier tax-exempt dividend of 5.00 cents per share(2007: 3.57 cents per share) 102,906 73,783

2007 final one-tier tax-exempt dividend of 5.16 cents per share(2007: 2006 final dividend of 7.14 cents per share less tax of 18% andone-tier tax-exempt dividend of 1.07 cents per share) 106,353 142,483

209,259 216,266

33 Share-based incentive plans

The Company’s Share Option Plan, Performance Share Plan and Restricted Stock Plan (collectively, the “Share Plans”)were approved and adopted by the shareholders at an Extraordinary General Meeting of the Company held on31 May 2000 and modified at the Extraordinary General Meeting of the Company held on 21 April 2005.

During the year, the Group has charged to the income statement the fair value of the awards made under theShare Plans at grant date:-

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Share Option Plan 2,320 4,615 418 833Performance Share Plan 2,130 2,363 1,399 1,601Restricted Stock Plan 7,959 8,147 1,333 1,204Challenge Bonus 7,034 – 36 –

19,443 15,125 3,186 3,638

Oth

er in

form

atio

n re

gard

ing

the

Shar

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ans

are

as fo

llow

s:-

(a)

Shar

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Pla

n

No

shar

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tions

wer

e gr

ante

d in

200

7 an

d 20

08.

The

deta

ils o

f the

op

tions

gra

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und

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n Pl

ans

on u

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ued

shar

es o

f the

Com

pan

y ar

e as

follo

ws:

08/0

9/20

00$0

.50

198,

870

(7,7

00)

–19

1,17

015

198,

870

191,

170

408

/09/

2001

to

07/0

9/20

10

27/0

9/20

01$0

.47

259,

280

(80,

570)

–17

8,71

025

259,

280

178,

710

3828

/09/

2002

to

27/0

9/20

11

07/1

1/20

02$0

.64

513,

650

(177

,250

)(7

00)

335,

700

6351

3,65

033

5,70

011

308

/11/

2003

to

07/1

1/20

12

08/0

8/20

03$0

.71

142,

800

(142

,800

)–

––

142,

800

–10

109

/08/

2004

to

08/0

8/20

08 *

08/0

8/20

03$0

.71

2,13

0,49

0(1

,106

,820

)(8

,400

)1,

015,

270

109

2,13

0,49

01,

015,

270

786

09/0

8/20

04 t

o 08

/08/

2013

10/0

8/20

04$0

.74

430,

500

(378

,000

)–

52,5

001

280,

000

52,5

0028

011

/08/

2005

to

10/0

8/20

09 *

10/0

8/20

04$0

.74

6,85

6,20

5(3

,154

,220

)(1

15,1

00)

3,58

6,88

546

22,

412,

955

3,58

6,88

52,

334

11/0

8/20

05 t

o 10

/08/

2014

11/0

8/20

05$2

.11

365,

750

(115

,500

)–

250,

250

413

4,75

014

7,00

024

312

/08/

2006

to

11/0

8/20

10 *

11/0

8/20

05$2

.11

12,6

35,3

35(2

,609

,460

)(3

22,4

00)

9,70

3,47

591

53,

582,

935

5,34

8,77

55,

506

12/0

8/20

06 t

o 11

/08/

2015

02/1

0/20

06$2

.38

724,

500

(75,

250)

–64

9,25

07

136,

500

281,

750

179

03/1

0/20

07 t

o 02

/10/

2011

*

02/1

0/20

06$2

.38

11,3

19,4

90(8

94,5

85)

(469

,071

)9,

955,

834

1,06

22,

388,

059

4,31

8,85

72,

129

03/1

0/20

07 t

o 02

/10/

2016

35,5

76,8

70(8

,742

,155

)(9

15,6

71)

25,9

19,0

4412

,180

,289

15,4

56,6

1711

,713

Dat

e of

gran

t of

opti

ons

Exer

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rsh

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exer

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d

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canc

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d/la

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/not

acce

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outs

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at31

/12/

2008

Num

bers

of o

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lder

s(i

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ctor

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t31

/12/

2008

Num

ber

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sex

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1/1/

2008

Num

ber

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sex

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31/1

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08Ex

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ons

exer

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d du

ring

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year

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pita

l$’

000

* Ap

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able

to

non-

exec

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e D

irect

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ompa

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Sem

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arin

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d’s

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5,89

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2007

: $1.

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the

year

was

$3.

33 (

2007

: $3.

52).




33. Shared-based incentive plans (cont’d)

(b)Performance Share Plan

Under the Performance Share Plan, the awards granted conditional on performance targets are set based onmedium-term corporate objectives at the start of each rolling three-year performance qualifying period. A specificnumber of performance shares are awarded at the end of the three-year performance cycle depending on theextent of the achievement of the performance conditions established at the onset.

For performance share awards granted in or after 2005, the performance criteria were based on Wealth Addedand Total Shareholders’ Return. For each performance measure, three distinct performance levels are set. Aminimum of threshold performance must be achieved to trigger an Achievement Factor, which in turn determinesthe number of shares to be finally awarded. Based on the criteria, performance shares to be delivered for awardsgranted previously will range between 0% to 150% of the original award.

Participants are also required to hold a minimum percentage of the shares released to them under the PerformanceShare Plan to maintain a beneficial ownership stake in the Group, for the duration of their employment or tenurewith the Group. A maximum cap is set based on a multiple of the individual participant’s Annual Base Salary.Any excess can be sold off, but in the event of a shortfall, they have a two calendar year period to meet theminimum percentage requirement.

During the year, a total of 790,000 (2007: 700,000) performance shares in awards were granted conditionallyto the participants for the performance period 2008 to 2010 (2007: 2007 to 2009).

The details of the Company’s performance shares awarded since commencement of the Performance SharePlan (in aggregate) up to 31 December 2008 are as follows:

Conditional Additionalperformance Aggregate Aggregate performance Aggregate

shares conditional conditional Aggregate shares awarded conditionalawarded performance performance conditional arising from performance

Performance Shares during the shares shares performance targets met sharesparticipants year awarded released shares lapsed during the year outstanding

Director of the Company- Tan Kwi Kin 250,000 2,890,000 (1,724,400) (425,600) 210,000 950,000

Alternate director of the Company

- Wong Weng Sun 125,000 650,000 (315,000) – 105,000 440,000

Key management and executives of the Group 415,000 1,675,000 (682,500) – 227,500 1,220,000

790,000 5,215,000 (2,721,900) (425,600) 542,500 2,610,000

The total number of performance shares in awards granted conditionally and representing 100% of targets achieved,but not released as at 31 December 2008, was 2,610,000 (2007: 2,905,000). Based on the multiplying factor,the actual release of the awards could range from zero to a maximum of 3,915,000 (2007: 4,357,500) performanceshares.

Fair value of Performance Shares

The fair value of the performance shares are estimated using a Monte Carlo simulation methodology at themeasurement dates, which are grant dates for equity-settled awards. The assumptions used under the model andfair values of performance shares granted in 2008 and 2007 are as follows:

Date of grant 7 April 2008 12 June 2007

Fair value at measurement date $2.65 $4.25

Assumptions under the Monte Carlo model

Share price $3.77 $4.78Expected volatility:

Sembcorp Marine Ltd 30.9% 24.6%Morgan Stanley Capital International (“MSCI”) AC Asia

Pacific excluding Japan Industrials Index 21.9% 13.8%Correlation with MSCI 61.3% 30.0%Risk-free interest rate 1.1% 2.5%Expected dividend 5.0% 4.9%

The expected volatility is based on the historical volatility over the most recent period that is commensuratewith the expected life of the performance shares.

(c)Restricted Stock Plan and Challenge Bonus

In 2006, as part of the redesigned approach, restricted shares were awarded to managerial employees of theGroup, with the objective to eventually replace share options as a long term incentive for them.

Under the Restricted Stock Plan, the awards granted conditional on performance targets are set based on corporateobjectives at the start of each rolling two-year performance qualifying period. The performance criteria are setand performance levels for the restricted shares are calibrated based on Return on Equity and Total Shareholders’Return. For each performance measure, three distinct performance levels are set. A minimum of thresholdperformance must be achieved to trigger an Achievement Factor, which in turn determines the number of sharesto be finally awarded. Based on the criteria, restricted shares to be delivered for awards granted from 2006 to2007 will range from 0% to 130% of the original award, and restricted shares to be delivered for awards grantedin 2008 will range from 0% to 150% of the original award.

The managerial participants of the Group will be awarded restricted shares under the Restricted Stock Plan, whilethe non-managerial participants of the Group will receive their awards in an equivalent cash value. This cash-settled notional restricted shares award for non-managerial participants is known as Challenge Bonus.

A specific number of restricted shares shall be awarded at the end of the two-year performance cycle dependingon the extent of the achievement of the performance conditions established at the onset. There is a further vestingof three years after the performance period, during which one-third of the awarded shares are released each year.Non-managerial participants will receive the equivalent in cash at the end of the two-year performance cycle, withno further vesting conditions.

Senior management participants are also required to hold a minimum percentage of the shares released to themunder the Restricted Stock Plan to maintain a beneficial ownership stake in the Group, for the duration of theiremployment or tenure with the Group. A maximum cap is set based on a multiple of the individual participant’sAnnual Base Salary. Any excess can be sold off, but in the event of a shortfall, they have a two calendar year periodto meet the minimum percentage requirement.

A total of 3,573,000 (2007: 3,038,940) restricted shares of Sembcorp Marine Ltd’s shares were awarded on 7 April2008 (2007: 12 June 2007) for the performance period 2008 to 2009 (2007: 2007 to 2008).




33. Shared-based incentive plans (cont’d)

The details of restricted shares of the Company awarded since commencement of the Restricted Stock Plan upto 31 December 2008 are as follows:

Conditional Additionalrestricted Aggregate Aggregate restricted Aggregate Aggregate

shares conditional conditional shares awarded conditional conditionalawarded restricted restricted arising from restricted restricted

Restricted Shares during the shares shares targets met shares sharesparticipants year awarded lapsed during the year released outstanding


Goh Geok Ling 22,000 52,800 – – – 52,800

Tan Kwi Kin 100,000 328,200 – 24,696 (37,632) 315,264

Tan Pheng Hock 12,000 26,700 – – – 26,700

Kiyotaka Matsuzawa 9,000 21,600 (1,680) – (10,920) 9,000

Tan Tew Han 19,000 47,700 – – – 47,700

Ajaib Haridass 19,000 47,700 – – – 47,700

Tang Kin Fei 12,000 30,900 – – – 30,900

Ron Foo Siang Guan 17,000 36,600 – – – 36,600

Joseph Kwok Sin Kin 12,000 30,900 – – – 30,900

Ngiam Joke Mui 9,000 9,000 – – – 9,000

Wong Weng Sun 50,000 157,800 – 10,584 (16,128) 152,256

Other executives 3,292,000 8,688,592 (483,726) 442,613 (643,448) 8,004,031

3,573,000 9,478,492 (485,406) 477,893 (708,128) 8,762,851

The total number of Sembcorp Marine Ltd’s restricted shares in awards granted conditionally and representing100% of targets achieved, but not released as at end 2008, was 8,762,851 (2007: 5,747,227). Based onthe multiplying factor, the actual release of the awards could range from zero to a maximum of 11,679,787(2007: 7,471,395) restricted shares.

During the year, a total of 2,048,393 restricted shares were awarded to participants of which 708,128 restrictedshares were released via issuance of treasury shares and the balance remained for a further vesting of 2 years.

A total of 957,400 (2007: 816,250) notional restricted shares of Sembcorp Marine Ltd’s shares were awarded on7 April 2008 (2007: 12 June 2007) for the Challenge Bonus for the performance period 2008 to 2009 (2007: 2007to 2008).

The total number of notional restricted shares in awards for the Challenge Bonus granted conditionally andrepresenting 100% of targets to be achieved, but not released as at end 2008, was 1,866,248 (2007: 1,046,458).Based on the multiplying factor, the number of notional restricted shares to be converted into the funding poolcould range from zero to a maximum of 2,606,642 (2007: 1,360,396).

Fair value of Restricted Shares

The fair value of the restricted shares is estimated using a Monte Carlo simulation methodology at the measurementdates, which are the grant dates for equity-settled awards.

The assumptions used under the model and fair values of restricted shares granted during the year are as follows:


Fair value at measurement date $3.06 $4.15


Assumptions under the Monte Carlo model

Share price $3.77 $4.78Expected volatility:

Sembcorp Marine Ltd 30.9% 24.6%Straits Times Index 15.9% 10.0%

Correlation vs Straits Times Index 47.6% 14.1%Risk-free interest rate 0.9% - 1.3% 2.4% - 2.6%Expected dividend 5.0% 4.9%

The expected volatility is based on the historical volatility over the most recent period that is commensurate withthe expected life of the restricted shares.

Fair value of Challenge Bonus

The fair value of the compensation cost is based on the notional number of restricted shares awarded for the ChallengeBonus and the market price at the vesting date.

34 Contingent liabilitiesGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Outstanding litigation, Note 27 – 73,117 – –Unsecured bankers guarantees – 28,474 – –Unsecured corporate guarantees granted

in respect of:Performance of subsidiaries – – 4,561,725 4,026,932Banking facilities provided to associates – 57,182 – 57,182

35 CommitmentsGroup Company

2008 2007 2008 2007$’000 $’000 $’000 $’000

Commitments not provided for in thefinancial statements are as follows:

(a) Approved capital commitment:Approved capital expenditure and- Committed 799 7,231 – –- Not contracted 5,006 15,078 – –Uncalled capital and commitment

on investments 47,150 47,281 47,150 47,281

52,955 69,590 47,150 47,281(b) Minimum lease rental payable in

respect of land and buildings:

Within 1 year 13,186 12,989 8,109 8,121After 1 year but within 5 years 20,795 26,506 5,071 10,151After 5 years 21,609 23,881 – –

55,590 63,376 13,180 18,272

The leases do not contain escalation clauses and do not provide for contingent rents. Lease terms do not containrestrictions on the Group activities concerning dividends, additional debt or further leasing.

Certain leases include renewal options for additional lease period of 10 to 15 years and at rental ratesbased on prevailing market rates.




36 Significant related party transactions

Significant transactions during the year between the Group and its related parties on terms as agreed between therespective parties and which are not otherwise disclosed elsewhere in these financial statements consist of:

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Immediate holding companyManagement fee payable 250 250 250 250

Related companiesSales 3,009 1,483 – –Purchases 38,561 27,825 – –Others 1,023 – – –

Associates and joint venturesSales 191 831 – –Purchases 21,542 255,699 – –

Compensation of key management personnel

Directors of the Company, President & Chief Operating Officer/Managing Director of Jurong Shipyard Pte Ltd, DeputyPresident/Managing Director of Sembawang Shipyard Pte Ltd, Chief Financial Officer, Managing Director of PPLShipyard Pte Ltd and Managing Director of SMOE Pte Ltd are considered to be key management personnel. Theyhave the authority and responsibility for planning, directing and controlling the activities of the Group.

The key management personnel compensation are as follows:Group

2008 2007$’000 $’000

Directors’ remuneration and fees 2,338 5,507Other key management personnel remuneration 2,672 2,054

5,010 7,561

Fair value of share-based compensation 2,921 3,060

CPF contributions of key management personnel 45 42

Remuneration of key management personnel includes salary, annual bonus, contributions to CPF, allowances, variablebonuses and performance shares.

The Company adopts an incentive compensation plan, which is tied to the creation of Economic Value Added (“EVA”),as well as to attainment of individual performance goals for its key executives. A “bonus bank” is used to hold incentivecompensation credited in any year. Typically, one-third of the available balance is paid out in cash each year, withthe balance being carried forward to the following year. Such carried forward balances of the bonus bank may eitherbe reduced or increased in future, based on yearly EVA performance of the Group.

Fair value of share-based compensation relates to share options, performance shares and restricted shares grantedthat were charged to the income statement.

37 Segment reporting

(a) Business segments

The Group has 3 main business segments that are organised and managed separately according to their respectivebusiness activities. The 3 business segments are ship and rig repair, building and conversion, ship charteringand others. The activities of these business segments are described in Note 1 and Note 41.

Segment accounting policies are the same as the policies described in Note 2 with inter-segment sales andtransfers carried out on an arm’s length basis. Segment assets consist primarily of property, plant and equipment,current assets and exclude inter-segment balances. Segment liabilities comprise mainly of operating liabilitiesand exclude inter-segment balances.

Ship and rigrepair, building Ship

2008 and conversion chartering Others Eliminations Total$’000 $’000 $’000 $’000 $’000

TurnoverSales to external parties 5,011,414 – 52,534 – 5,063,948Inter-segment sales – – 281,344 (281,344) –

Consolidated sales 5,011,414 – 333,878 (281,344) 5,063,948

ResultsSegment results 492,733 (378) 9,482 – 501,837Finance income 32,917 – 23 – 32,940Finance costs (11,370) – – – (11,370)Foreign exchange transactions (43,749) – – – (43,749)Share of results of associates

and joint ventures 56,953 8,308 39 – 65,300

Profit before taxation 527,484 7,930 9,544 – 544,958Taxation (91,700) (131) (1,885) – (93,716)

Profit after taxation 435,784 7,799 7,659 – 451,242

Other informationCapital expenditure 95,259 – 4,789 – 100,048Depreciation 67,793 – 1,337 – 69,130Amortisation 1,577 – – – 1,577

Segment assets 2,536,650 15,764 31,585 – 2,583,999Interest-bearing assets 1,726,825 – 17,255 – 1,744,080Investment in associates

and joint ventures 248,915 20,187 507 – 269,609Deferred tax assets 9,374 – 62 – 9,436Tax recoverable 4,693 – – – 4,693

Total assets 4,526,457 35,951 49,409 – 4,611,817

Segment liabilities 2,781,534 5 15,913 – 2,797,452Interest-bearing liabilities 225,996 – – – 225,996Deferred tax liabilities 60,611 – 650 – 61,261Provision for taxation 164,798 525 1,826 – 167,149

Total liabilities 3,232,939 530 18,389 – 3,251,858




37. Segment reporting (cont’d)

Ship and rigrepair, building Ship

2007 and conversion chartering Others Eliminations Total$’000 $’000 $’000 $’000 $’000

TurnoverSales to external parties 4,475,281 – 37,842 – 4,513,123Inter-segment sales – – 174,210 (174,210) –

Consolidated sales 4,475,281 – 212,052 (174,210) 4,513,123

ResultsSegment results 342,041 (515) 7,503 – 349,029Finance income 26,927 141 462 – 27,530Finance costs (13,692) – – – (13,692)Foreign exchange transactions (302,922) – – – (302,922)Non-operating income 230,625 – – – 230,625Non-operating expenses (7,642) – – – (7,642)Share of results of associates

and joint ventures 73,627 8,118 48 – 81,793

Profit before taxation 348,964 7,744 8,013 – 364,721Taxation (108,962) (2,217) (1,815) – (112,994)

Profit after taxation 240,002 5,527 6,198 – 251,727

Other informationCapital expenditure 155,095 500 232 – 155,827Depreciation 60,922 – 1,243 – 62,165Amortisation 4,249 – – – 4,249

Segment assets 3,448,015 17,783 28,648 – 3,494,446Interest-bearing assets 741,238 385 18,267 – 759,890Investment in associates

and joint ventures 191,234 12,011 2,257 – 205,502Tax recoverable 2,630 – 379 – 3,009

Total assets 4,383,117 30,179 49,551 – 4,462,847

Segment liabilities 2,010,906 10 18,149 – 2,029,065Interest-bearing liabilities 444,314 – – – 444,314Deferred taxation 167,979 – 759 – 168,738Provision for taxation 112,190 538 2,286 – 115,014

Total liabilities 2,735,389 548 21,194 – 2,757,131

(b) Geographical segments

The Group operates in 7 (2007: 7) countries and principally in the Republic of Singapore. Pricing of inter-segmentsales and transfers are carried out on an arm’s length basis.

In presenting information on the basis of geographical segments, segment revenue is based on the geographicallocation of customers. Segment assets are based on the geographical location of the assets.

Singapore Rest of Asia Europe Others Elimination Total2008 $’000 $’000 $’000 $’000 $’000 $’000

Revenue from externalcustomers 1,269,577 1,889,064 1,595,358 309,949 – 5,063,948

Segment assets 4,238,607 363,683 – 9,527 – 4,611,817

Capital expenditure 83,406 16,556 – 86 – 100,048

2007

Revenue from externalcustomers 1,015,449 1,055,206 2,188,761 253,707 – 4,513,123

Segment assets 4,099,879 346,028 – 16,940 – 4,462,847

Capital expenditure 143,720 12,107 – – – 155,827

38 Financial risk management

The main risks arising from the Group’s financial instruments are credit risk, foreign currency risk, interest rate risk,liquidity risk and market risk. The Board of Directors reviews and agrees policies for managing each of these risks andthey are summarised below:

Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on itsobligations.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased creditrisk exposure. The Group manages credit risk arising from sales to customers through a stringent credit evaluationprocess and regular monitoring thereafter. The management of credit risk is on an aggregate basis by including allexisting relationships with a particular customer or related entities of the same corporate organisation. There is nosignificant concentration of credit risk on the outstanding financial instruments as at year end.

The carrying amounts of trade and other receivables, cash and cash equivalents and derivatives with positive fair valuesrepresent the Group’s maximum exposure to credit risk.

Cash and fixed deposits are placed in banks and financial institutions which are regulated. The Group limits its creditrisk exposure in respect of investments by only investing in liquid securities and only with counterparties that have asound credit rating.

Company USD Others Total$’000 $’000 $’000

At 31 December 2007

Financial assets

Bank balances, fixed deposits and cash 63,551 – 63,551

Trade and other receivables 651 – 651

Other investments – 250 250

Net financial assets 64,202 250 64,452

A 10% strengthening of the following currencies against the Singapore dollar at the balance sheet date for theGroup’s and Company’s monetary items, including forward foreign exchange contracts and swaps, would haveincreased/(decreased) equity and profit and loss by the amounts shown below. The analysis assumes that all othervariables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2007.

Group CompanyEquity Profit and loss Equity Profit and loss

2008 2007 2008 2007 2008 2007 2008 2007$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

USD (158,484) 750 45,937 (58,749) – – 101 6,420

EUR – – 5,865 6,250 – – – –

SGD – – 63,393 10,179 – – – –

Others 199 – 904 1,985 13 – – 25

(158,285) 750 116,099 (40,335) 13 – 101 6,445

A 10% weakening of the above currencies against the Singapore dollar at the balance sheet date would have equalbut opposite effects on the above currencies to the amounts shown above, on the basis that all other variables remainconstant.

Interest rate riskInterest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instrumentswill fluctuate because of changes in market interest rates.

The Group’s policy is to maintain an efficient optimal interest cost structure using a mix of fixed and variable ratedebts, where working capital is financed mainly by variable rate loans while long term investments are financed mainlyby fixed rate loans. To manage this mix in a cost-efficient manner, the Group enters into interest rate swaps, in whichthe Group agrees to exchange, at specific intervals, the difference between fixed and variable rate interest amountscalculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge underlyingdebt obligations. After taking into account the effect of an interest rate swap, the Group’s borrowings are substantiallyat a fixed rate of interest. Surplus funds, if any, are placed with reputable banks.

The Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy isto obtain the most favourable interest rates available without increasing its foreign currency exposure.

Sensitivity analysisBased on the cash and cash equivalents for the Group of $2,054,032,000 (2007: $740,477,000), it is estimated thata one percentage point increase in interest rate would increase the Group’s profit before taxation by approximately$20,540,000 (2007: $7,405,000). The analysis is performed on the same basis for 2007.




38. Financial risk management (cont’d)

Foreign currency risk

The Group incurs foreign currency risk on sales and purchases that are denominated in a currency other than theSingapore dollar, primarily the United States dollar (“USD”) and the Euro (“EUR”). To minimise exposure on foreigncurrency risks, the Group usually settles such transactions within 30 day terms.

The Group also utilises forward foreign currency contracts and swaps to hedge foreign currency denominatedfinancial assets, liabilities and firm commitments. Under this programme, increases or decreases in the Group’s foreigncurrency denominated financial assets, liabilities and firm commitments are partially offset by gains and losses on thehedging instruments. The Group does not use forward foreign currency contracts and swaps for trading purpose.

The Group’s and Company’s foreign currency exposures are as follows:

Group SGD USD EUR Others Total$’000 $’000 $’000 $’000 $’000

At 31 December 2008Financial assetsBank balances, fixed deposits

and cash 49,316 725,813 69,392 11,617 856,138Trade and other receivables 16,500 314,376 29,653 8,106 368,635Other investments – – – 1,990 1,990

65,816 1,040,189 99,045 21,713 1,226,763

Financial liabilitiesTrade and other payables 105,323 199,784 44,292 8,777 358,176Interest-bearing borrowings – 38,381 – 1,912 40,293

105,323 238,165 44,292 10,689 398,469

Net financial (liabilities)/assets (39,507) 802,024 54,753 11,024 828,294


and cash 19,617 195,031 105,142 2,386 322,176Trade and other receivables 14,074 98,761 4,923 7,724 125,482Other investments – – – 15,289 15,289

33,691 293,792 110,065 25,399 462,947

Financial liabilitiesTrade and other payables 135,480 108,911 47,570 5,549 297,510Interest-bearing borrowings – 66,165 – – 66,165

135,480 175,076 47,570 5,549 363,675

Net financial (liabilities)/assets (101,789) 118,716 62,495 19,850 99,272

Company USD Others Total$’000 $’000 $’000


and cash 357 – 357Trade and other receivables 651 – 651Other investments – 132 132

Net financial assets 1,008 132 1,140





Liquidity riskLiquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations dueto shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches ofthe maturities of financial assets and liabilities. Short term funding is obtained from overdraft facilities and bankborrowings. The Group’s and the Company’s objective is to maintain a balance between continuity of funding andflexibility through the use of stand-by credit facilities.

The table below analyses the maturity profile of the Group’s and Company’s financial liabilities (including derivativefinancial liabilities) based on contractual undiscounted cash flows.

Cash flows

Carrying Contractual Less than 1 Between 1amount cash flow year and 5 years

Group $’000 $’000 $’000 $’0002008Derivative financial liabilitiesInterest rate swaps 1,001 (1,001) (1,001) –Forward foreign currency contracts– Inflow – 2,605,128 1,918,645 686,483– Outflow 120,124 (2,725,252) (1,989,038) (736,214)

Non-derivative financial liabilitiesTrade and other payables 1,665,279 (1,664,831) (1,661,878) (2,953)Interest-bearing borrowings 225,996 (232,757) (209,240) (23,517)

2,012,400 (2,018,713) (1,942,512) (76,201)

2007Derivative financial liabilitiesInterest rate swaps 731 (731) (731) –Forward foreign currency contracts– Inflow (13,059) 719,269 714,201 5,068– Outflow – (706,210) (701,348) (4,862)

Non-derivative financial liabilitiesTrade and other payables 1,451,832 (1,452,179) (1,450,339) (1,840)Interest-bearing borrowings 441,669 (452,862) (299,533) (153,329)

1,881,173 (1,892,713) (1,737,750) (154,963)

Cash flows

Carrying Contractual Less than 1 Between 1amount cash flow year and 5 years

Company $’000 $’000 $’000 $’0002008Non-derivative financial liabilitiesTrade and other payables 163,585 (163,585) (163,585) –Interest-bearing borrowings 149,945 (154,512) (154,512) –

313,530 (318,097) (318,097) –

Cash flows

Carrying Contractual Less than 1 Between 1amount cash flow year and 5 years$’000 $’000 $’000 $’000

2007Non-derivative financial liabilitiesTrade and other payables 125,046 (125,046) (125,046) –Interest-bearing borrowings 149,869 (157,842) (4,513) (153,329)

274,915 (282,888) (129,559) (153,329)

Market Risk

Market price risk is the risk that the fair value of future cash flows of the Group’s financial instruments will fluctuatebecause of changes in market prices (other than interest or exchange rates). The Group is exposed to equity pricerisk arising from its investments held. The Group manages the risk of unfavourable changes by cautious review of theinvestments before investing and continuous monitoring of the performance of investments held and assessingmarket risk relevant to which the investments operate.

Sensitivity analysis

If prices for equity securities increase by 10% with all other variables being held constant, the profit before tax andequity will increase by:

Group Company2008 2007 2008 2007$’000 $’000 $’000 $’000

Equity 10,723 65,799 6,628 40,415Profit and loss 3 7 – –

A 10% decrease in the underlying equity prices would have equal but opposite effects on the amounts shown above.The analysis is performed on the same basis for 2007 and assumes that all other variables remain constant.

Financial instruments whose carrying amount approximates fair value

Management has determined that the carrying amounts of the Group’s and Company’s cash and cash equivalents,receivables and payables (including related party balances which are expected to be repaid in accordance withnormal credit terms), and short term borrowings, based on their notional amounts, reasonably approximate their fairvalues because these are mostly short term in nature or are repriced frequently.

Financial instruments carried at other than fair value

Set out below is a comparison by category of carrying amounts and fair values of the Group’s and Company’s significantfinancial instruments that are carried in the financial statements at other than fair values as at 31 December.

2008 2007

Carrying amount Fair value Carrying amount Fair valueGroup and Company $’000 $’000 $’000 $’000

Non-current portion of: Medium Term Notes 149,945 149,945 149,869 147,810





No disclosure of fair value is made for related party balances (including associates, related companies and subsidiariesand any other related parties) which are in the nature of loans as it is not practicable to determine their fair valueswith sufficient reliability since these balances have no fixed terms of repayment although these are not expected tobe settled within twelve months from the balance sheet date.

It is not practicable to determine the fair values of unquoted equity investments held as long term investments andthe long term trade receivables carried at cost. In the opinion of the Directors, the expected cash flows from theseunquoted equity investments and long term trade receivables are believed to be in excess of their carrying amounts.

Methods and assumptions used to determine fair value

The methods and assumptions used by management to determine fair values of financial instruments other than thosewhose carrying amounts reasonably approximate their fair values as mentioned earlier, are as follows:

Financial assets and liabilities Methods and assumptions

Investment in quoted equity shares Fair value has been determined by reference to published market bid prices Medium Term Notes (quoted) at the balance sheet date without factoring in transaction costs.

Finance lease liabilities Fair value has been determined using discounted estimated cash flows.Bank borrowings (non-current) Where repayment terms are not fixed, future cash flows are projected based

on management’s best estimates. The discount rates used are the currentmarket incremental lending rates for similar types of lending, borrowingand leasing arrangements.

Forward foreign currency contracts Fair value of forward foreign currency contracts is calculated by referenceForeign exchange and to current forward exchange rates for contracts with similar maturity profiles.

interest rate swap contracts The fair values of foreign exchange and interest rate swap contracts are determined by reference to market values for similar instruments.

39 Capital management

The Group aims to maintain a strong capital base so as to maintain investor, creditor and market confidence and tosustain future development of the business, while at the same time maintaining an appropriate dividend policy toreward shareholders. The Group monitors Economic Value Added attributable to shareholders, which the Groupdefines as net operating profit after tax less capital charge excluding minority interests. The Group also monitors thelevel of dividends to ordinary shareholders.

The Group seeks to maintain a balance between the higher returns that might be possible with higher levels ofborrowings and the advantages and security afforded by a sound capital position. Capital is defined as equity attributableto the equity holders.

There were no changes in the Group’s approach to capital management during the year.

The Group is required to maintain consolidated net borrowings to consolidated net assets (less dividends, goodwilland other intangible assets) ratio of not more than 1.75. This externally imposed capital requirement has beencomplied with at each quarter in the financial year ended 31 December 2008.

40 Significant accounting estimates and judgements

Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements.They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income andexpenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevantfactors, including expectations of future events that are believed to be reasonable under the circumstances.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet datethat have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities withinthe next financial year are discussed below.

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Managementestimates the useful lives of these property, plant and equipment to be within 1 to 60 years. The carrying amount ofthe Group’s property, plant and equipment at 31 December 2008 was $697,702,000 (2007: $675,585,000). Changesin the expected level of usage and technological developments could impact the economic useful lives and theresidual values of these assets, therefore future depreciation charges could be revised.

Income tax

The Group has exposure to income taxes in various jurisdictions. Significant judgement is involved in determiningthe Group-wide provision for income taxes. There are certain transactions and computations for which the ultimatetax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expectedtax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these mattersis different from the amounts that were initially recognised, such differences will impact the income tax and deferredtax provisions in the period in which such determination is made. The carrying amount of the Group’s provision fortaxation at 31 December 2008 was $167,149,000 (2007: $115,014,000). The carrying amounts of the Group’sdeferred tax assets and liabilities at 31 December 2008 were $9,436,000 (2007: nil) and $61,261,000 (2007:$168,738,000) respectively.




41 Group companies

Details of the Group’s subsidiaries, associates and joint ventures are as follows:

Place of Effectiveincorporation equity held

Name of company and business Principal activities by the Group2008 2007

% %SubsidiariesBulk Trade Pte Ltd Singapore Bulk trading 100 100

Dolphin Shipping Company Private Limited Singapore Ship owning and chartering 100 100

JPL Corporation Pte Ltd Singapore Investment holding 70 70

Jurong Integrated Services Pte Ltd Singapore Steel fabrication work 100 100

Jurong Machinery and Automation Pte Ltd Singapore Marine and general electronic and 100 100electrical works

Jurong Marine Contractors Private Limited Singapore Provision of contract services 100 100

Jurong Shipbuilders Private Limited Singapore Investment holding 100 100

Jurong Shipyard Pte Ltd Singapore Ship and rig repair, building, 100 100conversion and related services

Jurong SML Pte Ltd Singapore Shipbuilding, ship repair and 100 100related services

Karimun Shiprepair and Engineering Pte Ltd Singapore Investment holding 100 100

PPL Shipyard Pte Ltd Singapore Rig building, repair and related services 85 85

Sembawang Shipyard Pte Ltd Singapore Ship repair and related services 100 100

Sembawang Shipyard (S) Pte Ltd Singapore Investment holding 100 100

SML Shipyard Pte Ltd Singapore Ship repair and related services 100 100

SembMarine Investment Pte Ltd Singapore Investment holding 100 100

SCM Investment Holdings Pte Ltd Singapore Investment holding 100 100

Jurong Marine Services Pte Ltd Singapore Provision of tugging and sea 100 100transportation services

SMOE Pte Ltd Singapore Engineering, construction and 100 100fabrication of offshore structures

Sembcorp Marine Technology Pte Ltd Singapore Research & development in offshore 100 100and marine technology

Sembcorp Holdings, LLC*** United States Investment holding 100 100of America

SembMarine (Middle East) Pte Ltd Singapore Investment holding 60 –

AssociatesCosco Shipyard Group Co Ltd ** People’s Ship repair and related services 30 30

Republic of China

Joint Shipyard Investment Pte Ltd ** Singapore Liquidated – 50

Joint Shipyard Management Services Pte Ltd Singapore Managing dormitories 32 32



% %Subsidiaries of Sembawang Shipyard Pte Ltd

SES Engineering (M) Sdn Bhd* Malaysia Fabrication of metal structures 100 100

SES Marine Services (Pte) Ltd Singapore Marine services 100 100

World Adventurer Pte Ltd Singapore Marine services 100 100

Sembawang Project Services Pte Ltd Singapore Building of rigs, vessels and 100 100specialised marine equipment

Subsidiaries of PPL Shipyard Pte Ltd

Baker Marine Pte Ltd Singapore Rig enhancement and upgrading 85 85services, engineering consultancy and project management, and supply of rig equipment and parts

Baker Marine Services (HK) Limited* Hong Kong Provision of rig designs 85 85

Baker Marine Technology Inc.*** United States Engineering design, research and 85 85of America development, marketing and

client services support centre

Subsidiaries of Sembcorp Holdings, LLC

Sembcorp-Sabine Industries Inc*** United States Investment holding 100 100of America

Sembcorp-Sabine Shipyard Inc*** United States Rig and vessel enhancement and 100 100of America upgrading services

Sabine Offshore Services Inc*** United States Inactive 100 100of America

Subsidiary of Jurong Shipbuilders Pte Ltd

Tridex Investment Inc. *** British Virgin Under liquidation 100 100Islands

Subsidiaries and joint venture of Jurong Shipyard Pte Ltd

Jurong Brazil-Singapore Pte Ltd Singapore Investment holding 100 100

Jurong Autoblast Services Pte Ltd Singapore Surface preparation of steel plates, 100 100structures and marine engineeringservices

Shanghai Jurong Marine Engineering & People’s Research and development of 70 70Technology Co Ltd ** Republic of technologies for civil ships and

China equipment for oceanics industries and provision of related technical consultation services

Marine Housing Services Pte Ltd** Singapore Provision of dormitory housing services 50 50




41. Group Companies (cont’d)



% %Subsidiary of Karimun Shiprepair and Engineering Pte Ltd

P.T. Karimun Sembawang Shipyard* Indonesia Ship repair and related services 100 100

Subsidiaries of JPL Corporation Pte Ltd

JPL Services Pte Ltd Singapore Equipment rental services and 70 70trading in copper slag

JPL Industries Pte Ltd Singapore Processing and distribution of 60.1 60.1copper slag

JPL Concrete Products Pte Ltd Singapore Production of concrete products 60.1 60.1

Joint ventures of Dolphin Shipping Company Private Limited

Pacific Workboats Pte Ltd** Singapore Ship leasing and marine 50 50surveying services

Dolphin Workboats Pte Ltd Singapore Ship owning and charter 50 50

Subsidiaries and associates of SMOE Pte Ltd

Straits Overseas Pte Ltd Singapore Engineering, construction and 100 100fabrication of offshore structures

Straits Offshore Pte Ltd Singapore Offshore oil and gas production 100 100facilities, manufacturing

PT SMOE Indonesia* Indonesia Engineering, construction and 90 90fabrication of offshore structures

SCE Pte Ltd Singapore Engineering, construction and 51 51fabrication of offshore structures

HQSM Engineering Pte Ltd** Singapore Engineering, procurement and 49 49construction for oil and gas related business

Shenzhen Chiwan Offshore Petroleum People’s Equipment inspection, repair and 35 35Equipment Repair & Manufacture Co. Ltd** Republic of maintenance services for oil reconnoiter

China and exploitation in South China Sea

* Audited by other member firms of KPMG** Audited by other firms*** These companies are not required to be audited under the laws of their country of incorporation

42 New or revised accounting standards and interpretations

Certain new standards, amendments and interpretations to existing standards have been published and are mandatoryfor the Group’s accounting periods beginning on or after 1 January 2009 or later periods and which the Group hasnot early adopted. The Group’s assessment of the impact of adopting these standards, amendments and interpretationsthat are relevant to the Group are set out below.

(a) FRS 1 (revised 2008) will become effective for the Group’s financial statements for the year ending 31 December2009. The revised standard requires an entity to present, in a statement of changes in equity, all owner changesin equity. All non-owner changes in equity (i.e. comprehensive income) are required to be presented in onestatement of comprehensive income or in two statements (a separate income statement and a statement ofcomprehensive income). Components of comprehensive income are not permitted to be presented in the statementof changes in equity. In addition, a statement of financial position is required at the beginning of the earliestcomparative period following a change in accounting policy, the correction of an error or the reclassification ofitems in the financial statements. FRS 1 (revised 2008) does not have any impact on the Group’s financial positionor results.

(b) FRS 108 Operating Segments (effective for annual periods beginning on or after 1 January 2009)

FRS 108 supersedes FRS 14 Segment Reporting and requires the Group to report the financial performance of itsoperating segments based on the information used internally by management for evaluating segment performanceand deciding on allocation of resources.

The Group will apply FRS 108 from 1 January 2009 and provide comparative information that conforms to therequirements of FRS 108. Currently, the Group presents segment information in respect of its business andgeographical segments.

(c) Revised FRS 23 Borrowing Costs (effective for annual periods beginning on or after 1 January 2009)

The revised standard removes the option to recognise immediately as an expense, borrowing costs that areattributable to qualifying assets, and requires an entity to capitalise borrowing costs directly attributable to theacquisition, construction or production of a qualifying asset as part of the cost of the development property.

As the Group has been capitalising the relevant borrowing costs, the revised standard is not expected to haveany impact to the Group.

The initial application of those standards (and its consequential amendments) and interpretations is not expectedto have any material impact to the Group’s financial statements. The Group has not considered the impact of FRSissued after the balance sheet date.

43 Subsequent events

(a) On 22 January 2009, the Minister for Finance announced in his Budget speech that the corporate income tax ratewill be reduced from 18% to 17% from the year of assessment 2010. The tax expense for the Group and Companyfor the year ended 31 December 2008 has been computed at the rate of 18%, being the corporate income taxrate in effect for the year.

(b) The Company acquired the remaining 30% equity interest in JPL Corporation Pte Ltd (“JPLC”) from the minorityshareholders for a consideration of $13,428,000.

44 Comparative information

The comparative figures relating to the financial statements for the year ended 31 December 2007 were audited byanother firm of certified public accountants.


SUPPLEMENTARY INFORMATIONSembcorp Marine Ltd and its Subsidiaries Year ended 31 December 2008

SUPPLEMENTARY INFORMATIONSembcorp Marine Ltd and its Subsidiaries Year ended 31 December 2008

(A) Directors’ and Key Executives’ Remuneration

Summary compensation table for the year ended 31 December 2008:

(B) Interested Person Transactions

Aggregate value of all transactionsconducted under a shareholders'mandate pursuant to Rule 920 of

the SGX Listing Manual

2008 2007$'000 $'000

Transaction for the Sales of Goods and Services

Neptune Orient Lines Ltd and its associates 10,152 15,853

PSA International Pte Ltd and its associates 2,853 2,053

Transaction for the Purchase of Goods and Services

Sembcorp Industries Limited and its associates 34,574 26,631

PSA International Pte Ltd and its associates 4,780 –

Management and Support Services

Sembcorp Industries Limited 250 250

Total Interested Person Transactions 52,609 44,787

Note:(1) Salary amount shown includes allowances, employer CPF, all fees other than directors’ fee, and other emolument.(2) Bonus amount shown includes AWS, discretionary bonus and employer CPF .(3) Taxable income from share-based compensation includes taxable income from exercise of share option, performance and restricted shares released during the

year. These relate to taxable gains and are not charged to the income statement.

Details on the share options, performance shares and restricted shares granted to the directors are set out in the Share-based Incentive Plans of the Directors’Report.

# Director’s fee for Mr Tan Pheng Hock is payable to Singapore Technologies Engineering Ltd. Directors’ fees for Mr Tang Kin Fei and Ms Ngiam Joke Mui arepayable to Sembcorp Industries Ltd.

Name of Director Salary(1) Bonus(2) Taxable income Directors’ Totalfrom share-based Feescompensation(3)

$’000 $’000 $’000 $’000 $’000

Goh Geok Ling – – – 184 184

Richard Hale, OBE – – – 95 95

Tan Kwi Kin 782 61 4,280 – 5,123

Tan Pheng Hock – – 216 #91 307

Kiyotaka Matsuzawa – – 715 18 733

Tan Tew Han – – 710 123 833

Ajaib Haridass – – 202 136 338

Tang Kin Fei – – 12 #112 124

Ron Foo Siang Guan – – 7 122 129

Joseph Kwok Sin Kin – – 11 101 112

Hirohiko Sakurai – – – 5 5

Ngiam Joke Mui – – – #72 72

Lim Ah Doo – – – 7 7

Name of Salary(1) Bonus(2) Taxable income Directors’ TotalKey Executive from share-based Fees

compensation(3)

$’000 $’000 $’000 $’000 $’000

Wong Weng Sun 396 33 1,202 – 1,631

Ong Poh Kwee 319 526 1,084 – 1,929

Tan Cheng Tat 263 172 107 – 542

Tan Ah Hwa 485 489 – – 974

Ho Nee Sin 278 140 74 – 492

NOTICE IS HEREBY GIVEN THAT the 46th Annual General Meeting of the Company will be held on Friday,April 17, 2009 at 11.00 a.m. at 29 Tanjong Kling Road, Singapore 628054 to transact the following business:-

ORDINARY BUSINESS

1 To receive and adopt the Directors’ Report and Audited Accounts for the year ended December 31, 2008and the Auditors Report thereon.

2 To declare a final one-tier tax exempt dividend of 6 cents per ordinary share for the year endedDecember 31, 2008.

3 To re-elect the following directors, each of whom will retire by rotation pursuant to Article 91 of theCompany’s Articles of Association and who, being eligible, will offer themselves for re-election:

(a) Mr Goh Geok Ling

(b) Mr Tan Pheng Hock

(c) Mr Ajaib Haridass

4 To re-elect Mr Lim Ah Doo (Independent, Chairman of Audit Committee) who will cease to hold officepursuant to Article 97 of the Company’s Articles of Association and who, being eligible, will offer himselffor re-election.

5 To re-appoint the following Directors, each of whom will retire under Section 153(6) of the CompaniesAct, Cap. 50, to hold office from the date of this Annual General Meeting until the next AnnualGeneral Meeting:

(a) Mr Tan Kwi Kin

(b) Mr Richard Hale, OBE (member of Audit Committee)

6 To approve the sum of S$1,066,649 as Directors’ Fees for the year ended December 31, 2008.(2007: S$980,208)

7 To re-appoint KPMG LLP as Auditors of the Company and authorise the Directors to fix theirremuneration.

SPECIAL BUSINESS

To consider and, if thought fit, to pass the following resolutions which will be proposed as OrdinaryResolutions:-

8 That authority be and is hereby given to the Directors of the Company to:

(a) (i) issue shares in the capital of the Company (“shares”) whether by way of rights, bonus orotherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or wouldrequire shares to be issued, including but not limited to the creation and issue of (as well asadjustments to) warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as theDirectors may in their absolute discretion deem fit; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issueshares in pursuance of any Instrument made or granted by the Directors while this Resolutionwas in force,

Resolution 1

Resolution 2

Resolution 3

Resolution 4Resolution 5

Resolution 6

Resolution 7

Resolution 8

Resolution 9

Resolution 10

Resolution 11


NOTICE OF ANNUAL GENERAL MEETINGCompany Registration Number: 196300098Z (Incorporated in the Republic of Singapore)

SEMBCORP MARINE LTD

MAJOR PROPERTIESSembcorp Marine Ltd and its Subsidiaries As at 31 March 2009

Held by Location Description & Tenure UsageApproximate Land Area

Sembcorp Jalan Samulun Land area: 198,098m2 10 years leasehold Ship repairs includingMarine Ltd Buildings, workshops, 10 years renewal drydock, berthage

drydocks and quays & workshops

Tanjong Kling Road Land area: 491,054.57m2 10 years leasehold Ship repairs, shipBuildings, workshops, 10 years renewal conversion, offshoredrydocks and quays engineering, shipbuilding

and rig building including drydock, berthage & workshops

Mendon Spring 9 units of 3-room Freehold Residential propertiesapartment with built-inarea of 99m2 per unit

Sembawang Admiralty Road East/ Land area: 860,939m2 22 years leasehold Ship repairs, shipShipyard Project Admiralty Road West Buildings, workshops, conversion, offshoreServices Pte Ltd docks and quays engineering and rig

building including docks, berthage & workshops

PPL Shipyard Pandan Road Land area : 118,749m2 15 years leasehold Rig repairs, upgradings, Pte Ltd fabrication and rig

building including berthage and workshops

Pandan Road Land area : 9,182m2 30 years leasehold Leg component fabrication

Tuas Crescent Land area : 58,255m2 5 years leasehold Fabrication facilities

Jurong SML Shipyard Road Land area: 63,141m2 6 years leasehold Ship repairs and Pte Ltd Buildings, workshops, shipbuilding including

drydocks drydocks, berthage & workshops

Tuas Road Land area : 60,760m2 14 years leasehold Shipbuilding andBuildings, workshops, fabrication including

docks and quays berthage & workshops

P.T. Karimun Karimun Island Land area: 150,000m2 30 years leasehold Ship repair andSembawang Indonesia Buildings, workshops with option for 20 fabrication includingShipyard and wharves years plus another berthage and workshops

option for 30 years

JPL Industries Jurong Pier Road Land area: 27,783m2 20 years leasehold Copper slag recyclingPte Ltd

SES Engineering No. 15 Land area : 5,235m2 Freehold Metal fabricationSdn Bhd Jalan Lambak Workshop and 3-storey workshop

Kawasan office buildingPerindustrianTaman Johor81200 Johor Bahru

P.T. SMOE Batam Island Land area : 299,001m2 30 years leasehold Workshops &Indonesia fabrication facilities



SEMBCORP MARINE LTD


SEMBCORP MARINE LTD

provided that:

(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to beissued in pursuance of Instruments made or granted pursuant to this Resolution):

(A) by way of renounceable rights issues on a pro rata basis to shareholders of the Company(“Renounceable Rights Issues”) shall not exceed 100% of the total number of issuedshares in the capital of the Company excluding treasury shares (as calculated in accordancewith paragraph (3) below); and

(B) otherwise than by way of Renounceable Rights Issues (“Other Share Issues”) shall notexceed 50% of the total number of issued shares in the capital of the Company excludingtreasury shares (as calculated in accordance with paragraph (3) below), of which the aggregatenumber of shares to be issued other than on a pro rata basis to shareholders of the Companyshall not exceed 10% of the total number of issued shares in the capital of the Companyexcluding treasury shares (as calculated in accordance with paragraph (3) below);

(2) the Renounceable Rights Issues and Other Share Issues shall not, in aggregate, exceed 100%of the total number of issued shares in the capital of the Company excluding treasury shares (ascalculated in accordance with paragraph (3) below);

(3) (subject to such manner of calculation as may be prescribed by the Singapore Exchange SecuritiesTrading Limited (“SGX-ST”)) for the purpose of determining the aggregate number of sharesthat may be issued under paragraphs (1)(A) and (1)(B) above, the percentage of issued sharesshall be based on the total number of issued shares in the capital of the Company (excludingtreasury shares) at the time this Resolution is passed, after adjusting for:-

(i) new shares arising from the conversion or exercise of any convertible securities or shareoptions or vesting of share awards which are outstanding or subsisting at the time thisResolution is passed; and

(ii) any subsequent bonus issue or consolidation or subdivision of shares;

(4) in exercising the authority conferred by this Resolution, the Company shall comply with theprovisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliancehas been waived by the SGX-ST) and the Articles of Association for the time being of theCompany; and

(5) (unless revoked or varied by the Company in General Meeting) the authority conferred by thisResolution shall continue in force until the conclusion of the next Annual General Meeting ofthe Company or the date by which the next Annual General Meeting of the Company is requiredby law to be held, whichever is the earlier.

9 That approval be and is hereby given to the Directors to:

(a) grant awards in accordance with the provisions of the Sembcorp Marine Performance Share Plan (the“Performance Share Plan”) and/or the Sembcorp Marine Restricted Stock Plan (the “RestrictedStock Plan”) (the Performance Share Plan and the Restricted Stock Plan, together the “SharePlans”); and

(b) allot and issue from time to time such number of ordinary shares in the capital of the Company asmay be required to be issued pursuant to the exercise of options granted under the Sembcorp MarineShare Option Plan and/or the vesting of awards granted under Share Plans.

Resolution 12

provided that:

(i) the aggregate number of new ordinary shares to be issued pursuant to the exercise of options granted under theSembcorp Marine Share Option Plan and the vesting of awards granted or to be granted under the Share Plans shallnot exceed 15% of the total number of issued shares in the capital of the Company (excluding treasury shares) fromtime to time; and

(ii) the aggregate number of new ordinary shares under awards to be granted pursuant to the Share Plans during theperiod commencing from the date of this Annual General Meeting of the Company and ending on the date of thenext Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Companyis required by law to be held, whichever is the earlier, shall not exceed 2% of the total number of issued shares inthe capital of the Company (excluding treasury shares) from time to time.

10 To transact any other business.

By Order of the Board

Kwong Sook May/Tan Yah SzeJoint Company Secretaries

April 2, 2009

Explanatory Notes:

Resolutions 3 to 8 – Detailed information on these Directors can be found under Board of Directors and Corporate Governance Report in the Annual Report 2008.

Resolution 6 – If re-elected, Mr Lim Ah Doo, an independent Director, will remain as the Chairman of the Audit Committee.

Resolution 8 – If re-appointed, Mr Richard Hale,OBE, a non-independent Director, will remain as a member of the Audit Commiittee.



SEMBCORP MARINE LTD

Statement pursuant to Article 54 of the Articles of Association of the Company:

Resolution 11*– is to empower the Directors to issue shares in the capital of the Company and to make or grant instruments (such as warrants or debentures) convertibleinto shares, and to issue shares in pursuance of such instruments, up to a number not exceeding (i) 100% for Renounceable Rights Issues and (ii) 50%for Other Share Issues, of which up to 10% may be issued other than on a pro rata basis to shareholders, provided that the total number of shareswhich may be issued pursuant to (i) and (ii) shall not exceed 100% of the issued shares in the capital of the Company excluding treasury shares. Theaggregate number of shares which may be issued shall be based on the total number of issued shares in the capital of the Company (excluding treasuryshares) at the time that Resolution 11 is passed, after adjusting for (a) new shares arising from the conversion or exercise of any convertible securitiesor share options or vesting of share awards which are outstanding or subsisting at the time that Resolution 11 is passed, and (b) any subsequent bonusissue or consolidation or subdivision of shares.

The authority for 100% Renounceable Rights Issues is proposed pursuant to the SGX news release of 19 February 2009 which introduced furthermeasures to accelerate and facilitate listed issuers' fund raising efforts.

Resolution 12 – is to empower the Directors to offer and grant awards pursuant to the Sembcorp Marine Performance Share Plan and the Sembcorp Marine RestrictedStock Plan (collectively, the “Share Plans”) and to issue ordinary shares in the capital of the Company pursuant to the exercise of options under theSembcorp Marine Share Option Plan (“Share Option Plan”) and/or the vesting of awards granted pursuant to the Share Plans provided that: (a)that the maximum number of ordinary shares which may be issued under the Share Option Plan and the Share Plans is limited to 15% of the totalnumber of issued shares in the capital of the Company (excluding treasury shares) from time to time, and (b) the aggregate number of new ordinaryshares under awards which may be granted pursuant to the Share Plans from this Annual General Meeting to the next Annual General Meeting shallnot exceed 2% of the total number of issued shares in the capital of the Company (excluding treasury shares) from time to time. Approval for theadoption of the Share Option Plan and the Share Plans was given by shareholders at an Extraordinary General Meeting of the Company held on May31, 2000 and modified at the Extraordinary General Meeting of the Company held on April 21, 2005. The Company has, for the time being, determinedthat it will not be granting any further options under the Share Option Plan although subsisting options granted will continue to be exercisable inaccordance with the terms of the Share Option Plan. The grant of awards under the Share Plans will be made in accordance with their respectiveprovisions.

Notes:

1. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two (2) proxies to attend and vote in hisstead. A proxy need not be a member of the Company.

2. The instrument appointing a proxy or proxies must be lodged at the registered office of the Company at 29 Tanjong Kling Road, Singapore 628054 not laterthan 48 hours before the time of the Annual General Meeting.

NOTICE OF BOOKS CLOSURE AND DIVIDEND PAYMENT DATE

NOTICE IS HEREBY GIVEN that the Register of Members and Share Transfer Books of the Company will be closed from April 29, 2009 to April 30, 2009, both datesinclusive, to determine the members’ entitlements to the proposed dividend.

Duly completed transfers in respect of ordinary shares in the capital of the Company together with all relevant documents of title received by the Company’s ShareRegistrar, KCK Corpserve Pte Ltd, 333 North Bridge Road, #08-00 KH KEA Building, Singapore 188721, up to 5 p.m. on April 28, 2009 (the “Book Closure Date”) willbe registered to determine members’ entitlements to the proposed dividend. Subject as aforesaid, members whose securities accounts with The Central Depository(Pte) Limited are credited with ordinary shares in the capital of the Company as at 5.00 p.m. on the Book Closure Date will be entitled to the proposed dividend.

The proposed dividend, if approved by the members at the 46th Annual General Meeting, will be paid on May 13, 2009.

* For the avoidance of doubt, this is a routine share issue mandate which a company seeks at AGM and that Resolution 11 should not be taken as a disclosure that the companyis currently embarking on a rights issue.

No. Resolutions For Against

Ordinary Business

1 To adopt the Directors’ Report and Accounts

2 To declare Final Dividend

3 To re-elect Goh Geok Ling

4 To re-elect Tan Pheng Hock

5 To re-elect Ajaib Haridass

6 To re-elect Lim Ah Doo

7 To re-appoint Tan Kwi Kin

8 To re-appoint Richard Hale, OBE

9 To approve Directors’ Fees

10 To re-appoint KPMG LLP as Auditors and to fix their remuneration

Special Business

11 To approve Share Issue Mandate

12 To authorise the Directors to grant awards and issue shares under Sembcorp Marine’sShare Plans and Share Options Plans

Company Registration No. 196300098Z(Incorporated in the Republic of Singapore)

PROXY FORMIMPORTANT

1. For investors who have used their CPF monies to buy SembcorpMarine Ltd’s shares, the document is forwarded to them at the requestof their CPF Approved Nominees solely. FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall beineffective for all intents and purposes if used or purported to be usedby them.

3. CPF Investors who wish to vote should contact their CPF ApprovedNominees.

I/We (Name) (NRIC/Passport No.)

of (Address)

being a member/members of the Sembcorp Marine Ltd, hereby appoint:-

Name Address NRIC/Passport NumberProportion of

Shareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the 46th Annual GeneralMeeting of the Company to be held at 29 Tanjong Kling Road, Singapore 628054 on Friday, April 17, 2009 at 11.00 a.m. and at anyadjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Resolutions as set out in the Notice of Annual General Meeting. In the absence ofspecific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matter arising at the Annual General Meeting.)

NOTES:1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter

50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If youhave Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Sharesentered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxiesshall be deemed to relate to all the Shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote instead of him. A proxy need notbe a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his holding (expressed as a percentage of the whole) to be representedby each proxy.

4. The instrument appointing a proxy or proxies must be lodged at the registered office of the Company at 29 Tanjong Kling Road, Singapore 628054 not later than 48 hours beforethe time of the Annual General Meeting.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy orproxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised.

6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Annual GeneralMeeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.

7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointorare not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of members whose Shares are enteredagainst their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have Shares enteredagainst their names in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting, as certified by The Central Depository (Pte) Limited tothe Company.

Total Number of Shares Held

Signature(s) and/or Common Seal of Member(s) Date

The Company SecretarySembcorp Marine Ltd29 Tanjong Kling Road

Singapore 628054

Affix

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