ANNUAL REPORT 2009 - Sembcorp Marine...Year-to-date 4.41 10.62 17.45 20.83 Earnings per share (cents) In-quarter 4.41 6.21 6.83 3.38 20.83 Corporate Stewardship Aerial view of Jurong

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

AN

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T 2009

CONTENTS

01 FY 2009 Key Figures02 Group Quarterly Results

Corporate Stewardship

05 Letter to Shareholders12 Corporate Profile14 Global Strategic Hub 16 Board of Directors22 Senior Management24 Corporate Governance & Transparency36 Risk Management40 Investor Relations & Communications44 Shareholders’ Information46 Financial Calendar47 Corporate Directory48 Corporate Structure50 Awards & Accolades

Financial Review

54 Group Financial Highlights55 Group Five-Year Performance Review63 Economic Value Added

Operations Review & Market Outlook

66 Significant Events70 Operations Review & Market Outlook

Forging the Future

79 Staying Globally Competitive81 Long-term Partnerships82 Investing in Productivity & Innovation

Corporate and Social Responsibility

85 Workplace Safety & Health89 People Development & Training92 Workplace Health Promotion95 Contributions to the Community99 Going Green

Annual Report 2009 1

FY 2009 KEY FIGURES

$5.7 billionTurnover

$938 millionEBITDA

$908 millionProfit Before Tax

15 centsTotal Dividends Per Share

91 centsNet Asset Value

Per Share

$986 millionGross Profit

$862 millionOperating Profit

$700 millionPATMI

34 centsEarnings Per Share

$8.2 billionMarket Capitalisationas at 8 March 2010

Sembcorp Marine A leading global marine and offshore engineering group for more than 47 years. •

Comprehensive portfolio encompassing the full spectrum of integrated solutions in ship repair, shipbuilding, •

ship conversion, rig building, topsides fabrication and offshore engineering & construction.

Strong track record for quality and timely delivery as well as ability to handle complex turnkey projects and •

repairs while meeting high standards of health, safety, security and environment.

Development and ownership of proprietary designs for rigs and container vessels as well as innovative •

capabilities in fast-track semi-submersible construction.

Continuous research and development to innovate work processes to further raise operational efficiency for •

greater competitiveness.

Long-term strategic alliances with international ship operators that provide a steady and growing base-load •

in ship repair.

Key DevelopmentsAnnounced plans to develop a 206-hectare modern, work-efficient and integrated New Yard Facility at •

Tuas View Extension in Singapore to position Sembcorp Marine for sustainable growth and expansion of

its businesses.

Formed a joint venture with Kakinada Seaports to establish and operate a marine and offshore facility on •

the east coast of India.

Announced plans to build a new shipyard in the State of Espirito Santo in Brazil to cater directly to one of the •

fastest growing offshore oil and gas exploration and production markets in the world.

Forging the Future

Ocean Courage

2 Sembcorp Marine Ltd Annual Report 2009 3

FY 2009 AT A GLANCE

• Turnover: $5.7 billion Increased 13%, driven mainly by rig building sector.

• Attributable Profit: $700 million Increased 63%, due to operational efficiencies

and execution of projects ahead of schedule.

• Earnings Per Share: 34 cents Increased 63%. EPS growth kept pace with

attributable profit.

• Total Dividends Per Share: 15 cents Increased 36%, in view of exceptional results

for FY 2009.

• Net Asset Value Per Share: 91 cents Increased 42%. Balance Sheet was further

strengthened.

Group Quarterly Results2009 ($’000) 1 Q 2 Q 3Q 4Q Total

Turnover 1,363,494 1,497,618 1,520,411 1,343,219 5,724,742

Operating Profit 134,603 166,731 173,985 387,035 862,354

EBITDA 152,175 184,794 192,029 408,604 937,602

Profit before Tax 151,285 178,864 182,638 394,848 907,635

Attributable Profit 120,199 138,053 144,618 297,248 700,118

Earnings per share (cents)

Year-to-date 5.85 12.56 19.58 34.02


In-quarter 5.85 6.71 7.02 14.44 34.02

2008 ($’000) 1 Q 2 Q 3Q 4Q Total

Turnover 916,118 1,386,093 1,144,246 1,617,491 5,063,948

Operating Profit 79,464 111,455 142,148 168,770 501,837

EBITDA 95,234 128,332 160,586 188,392 572,544

Profit before Tax 115,146 160,720 180,937 88,155 544,958

Attributable Profit 91,339 128,253 140,894 69,432 429,918


Year-to-date 4.41 10.62 17.45 20.83


In-quarter 4.41 6.21 6.83 3.38 20.83

Corporate Stewardship

Aerial view of Jurong Shipyard.

4 Sembcorp Marine Ltd

Dear Shareholders Record Highs in Revenue and ProfitIn 2009, Group turnover grew by 13 per cent from $5.1 billion in 2008 to $5.7 billion, driven mainly by its rig-building sector which registered an increase of 28 per cent due to progressive recognition of rig-building projects.

Group operating profit, at $862 million, was 72 per cent higher as compared with $502 million in 2008. At pre-tax profit level, earnings increased by 67 per cent to $908 million from $545 million in 2008, on the back of higher operating results from rig-building projects.

Group attributable profit after tax increased by 63 per cent to $700 million, the highest ever achieved by the Group. The record PATMI was due to operational efficiencies and the execution of projects ahead of schedule, resulting in better margins as well as the resumption of margin recognition for some projects in the fourth quarter of 2009.

Profit levels rose to new highs with earnings per share growing by 63 per cent to 34 cents, return on equity attaining a record 43.7 per cent and economic value-added reaching a high of $608 million.

Update and Upsize of Multi-currency, Multi-issuer Debt Issuance ProgrammeIn January 2010, Sembcorp Marine and its subsidiaries updated and upsized their current multi-currency, multi-issuer debt issuance programme, established since 1995, from $500 million to $2 billion.

Letter to Shareholders

Sembcorp Marine delivered

record performance in

2009 amid a challenging

operating environment that

prevailed during the year.

Besides posting record

highs in revenue and profit,

the Group also announced

expansion plans in

Singapore, India and Brazil

for long-term sustainable

growth.

Mr Wong Weng Sun President & CEO

Mr Goh Geok LingChairman

The update should enable the Group to rapidly access funds from debt capital markets to meet funding needs in growing its offshore and marine businesses. The increase in the limit will also provide the flexibility to capitalise on any opportunities should the need arise.

Update on Foreign Exchange TransactionsDuring the year, Sembcorp Marine’s subsidiary Jurong Shipyard initiated legal proceedings to recover a sum of $289.9 million that was paid to Societe General. Jurong Shipyard remains of the view that the underlying transactions are not valid and binding.

Delivering Shareholder ValueThe Directors of Sembcorp Marine are recommending a total final one-tier tax-exempt cash dividend of 10 cents per share, comprising a final ordinary dividend of 6 cents plus a special dividend of 4 cents per share, in view of the exceptional results.

Including the interim one-tier tax-exempt cash dividend of 5 cents per share paid on 1 September 2009, total dividend for 2009 will be 15 cents per share, an increase of 36 per cent over the 11 cents per share paid in 2008.

The proposed final dividend, if approved at the Annual General Meeting to be held on 20 April 2010, will be paid on 10 May 2010.

Review of Business OperationsThe global financial turmoil and declining oil prices that affected the industry at the close of 2008 also impacted the offshore and marine industry in 2009. Orders slowed and caution prevailed as market players watched how the economic and financial markets would pan out.

Despite the challenging operating environment, Sembcorp Marine was successful in securing contracts worth $1.25 billion in 2009. These included the building of two bare-deck hulls into ultra-deepwater semi-submersible rigs for delivery at the end of 2010 and 2011, the conversion of a Floating Production Storage Offloading (FPSO) vessel and the engineering and construction of two offshore platforms.

Business SegmentGroup turnover in 2009 increased by 13 per cent, from $5.1 billion in 2008 to $5.7 billion in 2009. Rig building accounted for 64 per cent of total turnover in 2009, followed by ship conversion and offshore at 23 per cent, ship repair at 12 per cent, and others at 1 per cent.

Rig Building•The rig-building sector registered the highest growth at 28 per cent, increasing from $2.8 billion in 2008 to $3.6 billion in 2009. Operationally, the Group’s yards were kept busy with the execution of rig projects that were secured in prior years.

Despite the tough operating environment which also affected our customers in 2009, the Group remained focused in executing and delivering our projects on time or ahead of schedule. Confidence remained in the market as completed rigs were delivered albeit with some sales to new owners.

PetroRig I, a sixth-generation Friede and Goldman ExD design ultra-deepwater semi-submersible rig, was sold via public tender by Jurong Shipyard to Diamond Offshore Services Company, a related company of Diamond Offshore Drilling Inc., in June 2009. The semi-submersible, renamed Ocean Courage, was delivered on schedule to its new owner the same month. Jurong Shipyard delivered a second ultra-deepwater semi-submersible rig, the Ocean Valor (previously PetroRig II), on schedule to Diamond Offshore Drilling Limited in October 2009. Its previous owner PetroRig II Pte Ltd sold the construction contract to Diamond Offshore Drilling Limited in September 2009. A third ultra-deepwater

semi-submersible rig, PetroRig III, was sold to Grupo R, a Mexican conglomerate, by the owner in December 2009. The delivery of PetroRig III is scheduled for March 2010.

In September 2009, Jurong Shipyard terminated its contract with Petroprod D&P I for the construction of a harsh-environment jack-up rig, having failed to receive milestone payments due under the contract. Meanwhile, the yard has received interest from potential buyers, which it is still evaluating. Jurong Shipyard is confident that it would be able to receive all payments to be earned under the contract upon the sale of this MSC CJ70 harsh-environment jack-up rig.

December 2009 witnessed the sale of a deepwater jack-up drilling rig under construction by PPL Shipyard to Vietsopetro, the national oil company of Vietnam. The shipyard had, in November 2009, exercised its right to acquire from Seadrill Limited the second jack-up rig unit West Elara based on mutually beneficial terms as agreed by all parties in January 2009.

All in, a total of four jack-up rig units and three semi-submersible rigs were delivered during the year. These units were delivered either ahead of schedule or on schedule to their respective owners.



Ship conversion and offshore•Turnover from the ship conversion and offshore sector showed a slight decline of 1 per cent at $1.3 billion, as compared with $1.4 billion in 2008. The decline was attributable to lower revenue recognition from the sector as compared with the fourth quarter of 2008 in which there was variation order settlement for a turnkey conversion project. Borealis, a DP3 dynamic positioning vessel equipped with a 5,000T crane, was sold by its owner to Acergy S.A. in December 2009. Following the acquisition by Acergy, the vessel will be converted from a pure heavy-lift vessel to a heavy-lift pipelay vessel for operations in deepwater and harsh environments worldwide.

Three units, comprising two offshore platforms for the Tunu North field and the CPOC (Carigali-PTTEPI Operating Company) integrated deck, were delivered on schedule to their owners in 2009.

Ship Repair•The ship repair sector registered a decline in revenue from $795 million in 2008 to $706 million in 2009, due to a slowdown in seaborne trade. The Group enjoyed continued support from its alliance and Favoured Customer Contract partners and regular customers, who provided a steady base-load of projects. These customers accounted for 83 per cent of our ship-repair revenue in 2009.

A total of 282 vessels were repaired in 2009. This was 5 per cent higher as compared with 2008. The average value per vessel, at $2.50 million, was 15 per cent lower as compared with 2008.

Tankers accounted for 34 per cent, followed by LNG/LPG gas carriers at 18 per cent, drillship and FPSO upgrading at 13 per cent, passenger ships at 5 per cent, containerships and bulk carriers at 8 per cent each, cargo ships at 3 per cent and other vessels at 11 per cent.

Managing the challengesDespite the challenging operating environment in 2009, the Group remained focused on executing and delivering our projects on time or ahead of schedule. This together with the strategy to increase operational efficiency through innovation, production process improvements and building well-accepted proprietary designs paid off with operating margin increasing from 9.9 per cent in 2008 to 15.1 per cent in 2009.

To strengthen the competitive edge, the Group continued to improve and streamline its work processes for maximum operational efficiency, resource utilisation and cost efficiency. Its continuous investment in research and development will further enhance its proprietary engineering, design and production capabilities. The Group is also currently collaborating with various technology partners from

the government, educational and private sectors to forge new frontiers in maritime research, including eco-friendlier operations and green technologies.

The Group also maintained its emphasis on raising health, safety, security and environmental standards and investing in people development of its direct and subcontractor workforce. These efforts continued to maintain the trust and confidence of customers and stakeholders and to build a safety conscious, well-trained and capable workforce to deliver added value and service excellence.

Going forward, the Group is focused on delivering creditable performance and value to shareholders, with a strategy to maintain a strong balance sheet to ride through these challenging times.

Significant Developments for Sustainable GrowthDuring the year, Sembcorp Marine unveiled plans to position the Group for sustainable growth and expansion of its marine and offshore businesses.

New Yard Development•In November 2009, Sembcorp Marine announced its plans to develop a modern, work-efficient and integrated New Yard Facility to position the Group for sustainable growth. Development of the 206-hectare facility, to be done in three phases over a period of 16 years, will harness the Group’s more than 47 years of experience in managing and operating shipyards. Initial operations are targeted to begin in mid-2012. The first phase of development of the New Yard, which covers 73.3 hectares, is expected to be fully completed by the end of 2013.

The custom-built state-of-the-art yard facility is designed to serve a wide range of vessels including Very Large Crude Carriers (VLCC), new generations of mega containerships, LNG carriers and passenger ships. It will also be geared to meet future market needs for environmentally-sustainable solutions with provision for offshore fabrication facilities.

With the New Yard, the Group will benefit from resource optimisation and economies of scale



Dedicated workforce.

through greater synergy, production efficiency and critical mass. This will enable the Group to provide enhanced services, faster turnaround times and cost-competitive solutions to our customers.

The New Yard Facility will serve as a centralised and integrated “one-stop solutions” hub for ship repair and conversion, shipbuilding, rig building and offshore engineering & construction. With this strategic new initiative, the business will be well-poised to respond to the anticipated increase in dock capacity demand and offshore oil and gas activities driven by growth in seaborne and oil trade in Asia.

The turnkey construction contract of $443.25 million for the first phase of the New Yard development was awarded to Zhen Hua (S) Engineering for the design and construction of the proposed four VLCC drydocks, quays, piers and other ancillary works. Construction work commenced in November 2009, with completion scheduled for May 2013.

The preliminary estimate of the first phase of the New Yard is around $750 million. This will be funded through a combination of debt facilities and internal funds generated from operations of existing shipyards.

Expansion in India•Sembmarine Kakinada Ltd (SKL), a joint venture between Sembawang Shipyard and Kakinada Seaports, was formed in November 2009 to establish and operate a marine and offshore facility catering to offshore drilling units and merchant vessels trading or operating in Indian waters. SKL is strategically located between Vishakhapatnam and Chennai Port on the East Coast of India, one of the world’s key oil and gas exploration areas.

Sembcorp Marine through Sembawang Shipyard holds an effective 19.9 per cent share in the joint venture, with an option to increase the stake to 40 per cent. Sembawang Shipyard will have management control of the facility which began immediate first-phase operations. It will be developed within the next three to five years into a one-stop integrated offshore service facility offering services including the repair and servicing of offshore vessels and ships, newbuilding of offshore vessels and ships, riser and equipment repairs and modules fabrication.

Strategic Foothold in Brazil•In February 2010, Sembcorp Marine’s Jurong Shipyard also announced that it will be building a new shipyard in Brazil to cater directly to one of the fastest growing offshore oil and gas exploration and production markets in the world.

A freehold land area of 825,000 square metres with 1.6 kilometres of coastline in the state of Espirito Santo in Brazil has been acquired for development into a shipyard. Located in the Municipal of Aracruz, the site is about 80 kilometres by road north of Vitoria, the capital of Espirito Santo, which is the second largest producer of oil in Brazil. The site is strategically sited close to the offshore Espirito Santo Basin, one of the recently discovered giant pre-salt oil basins offshore Brazil, making it an ideal location to support the country’s oil and gas activities.

The investment in the new shipyard is in line with Sembcorp Marine’s global hub strategy and it reinforces the Group’s commitment to forging a strategic foothold in Brazil to grow its offshore oil and gas businesses.

Outlook and ProspectsMoving into 2010, the Group has a net order book of $5.5 billion with completion and deliveries stretching till early 2012. This includes $1.25 billion in new orders that were secured in 2009.

The year ahead sees increasing confidence with the global economy showing signs of recovery albeit at different speeds in the various regions, driven largely by Asia. Demand for energy is also expected to grow. Fundamentals for the offshore oil and gas sector remain intact with prices of oil stabilising within the range of US$70 to US$80 a barrel. Long-term fundamentals driving deepwater exploration and production activities are expected to continue in order to replenish declining oil and gas reserves and to increase production to meet growing energy demand. Although the Group’s order book may benefit from this growth, severe competition is expected from other shipyards.

For ship repair, the Group’s bigger docks are well-booked due to strong support from alliance and Favoured Customer Contract partners, regular customers and its niche market segment of LNG carrier refurbishment.

Sembcorp Marine will continue to build up its order book, further sharpen its leading edge as a globally competitive Group and pursue growth opportunities in all sectors in the coming year. With the existing orders, the Group expects to achieve satisfactory results for 2010.

Board & ManagementMr Tan Kwi Kin, who was at the helm of Sembcorp Marine since 1990, stepped down as Group President and Chief Executive Officer in May 2009 upon retirement. He was appointed Senior Advisor of Sembcorp Marine and remains as a Director on the Board. The Board would like to thank him for his invaluable contributions throughout his first 43 years of service with the Group.

On behalf of the Board, we would like to express our heartfelt gratitude to our valued customers, partners and business associates for their steadfast support and continued trust in us. We would also like to thank our dedicated team of management, employees, union and subcontractor partners for their hard work and commitment in riding through the challenges in 2009. We shall continue working together as a

united and resilient team to further enhance our operational efficiencies and build a globally competitive Group for sustainable growth.

Finally, we would like to express our sincere appreciation to all our valued shareholders for their continued interest and unwavering belief in the Group during such challenging times. We are grateful for your relentless support and will continue to deliver on our commitment to optimise the returns to our shareholders.

Goh Geok Ling Wong Weng SunChairman President & CEO

8 March 2010福



CORPORATE VISION

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.


Corporate Profile

IntegrityWe believe in and perform our duties with honesty, dedication

and responsibility. We value loyalty, trustworthiness, reliability and openness

as essential personal attributes in our corporate culture.

Health, Safety,

Security and Environmental Preservation

We are committed to continuously promote a safe and healthy work environment

for our customers, employees, contractors and the community. We take

responsibility for our own safety, security and for others

both on and off the job.

QualityWe constantly and consciously

strive to achieve world-class quality standards in everything we do for our

customers, to improve our quality of life and to add value for our shareholders. We believe in continuous improvement

and enhancing our competencies to meet rapid global

changes. TeamworkWe are committed to working

together and having trust in one another to achieve common

organisational goals and results. We believe in promoting closer

relationships and developing team spirit among our people to

encourage speedy and open communication and

to care for each other.

Community Responsibility

We view our business as being an integral part of society. We are committed to be a

responsible corporate citizen, both locally and globally, contributing to community

improvements, and to create a caring organisation.

Customer Satisfaction

Our customer is the key to our success. We continue to provide

innovative solutions that add value to our customers and to build

lasting relationships with them based on trust and

shared purpose.

People-Centredness

We respect and value every individual regardless of his or her

position in our organisation. We provide equal opportunities and a conducive

environment for employees to attain their full potential. We reward all employees fairly, benchmarking their performance to best

practices. We believe in building a learning organisation for our people to acquire knowledge

and skills to achieve professionalism.

InnovativenessWe believe that innovation and

creativity are crucial to stay ahead of the competition and bring about better

efficiency in the organisation. We secure industry leadership through constant

innovative technological and engineering solutions

and encouraging entrepreneurship.

CORE VALUES


Global Strategic Hub

Located on Karimun •Island.Complements •Singapore yards.Fully equipped 30.7- •hectare fabrication yard.Fabrication works.•

Located west of •Singapore.68 hectares in two •locations with 4 graving drydocks totalling 1.1 million dwt and 2,728 m berthing quays.A “one-stop” total •shipyard in ship repair, shipbuilding, ship conversion, rig building and offshore engineering.

Located west of •Singapore.12.3 hectares of land •area with a total dock capacity of 62,500 dwt.Repair of small •and medium-sized vessels, fabrication of customised structures.

Located north of •Singapore.86 hectares of land area •with 5 docks totalling 775,000 dwt along with 4 km of berthing quays.Ship repair & upgrading, •ship conversion & offshore, niche market of LNG gas carriers, passenger vessels. Located north •

of Singapore and adjacent to Sembawang Shipyard.25 hectares of land •area with fabrication facilities.Engineering and •construction of offshore production platforms and floating production facilities.

Located west of •Singapore.20.8 hectares of •land area with water frontage of 1,090 m and berthage of 300 m.Design and •construction of offshore drilling rigs from shallow water to deep water.

Located on Batam Island, •Indonesia.Complements Singapore •yards.52.2-hectare fabrication •yard with workshops, 275 m of quayside and skidway.Construction of fixed •platforms and offshore installations, fabrication of topside modules.

BrazilEstaleiro Jurong Aracruz

Located in Municipal of Aracruz, Espirito Santo State.•Land area of 82.5 hectares and 1.6 km of coastline.•Drilling rigs construction, FPSO integration, topside •modules fabrication, ship and rig repairs & upgrading.

Mac Laren ShipyardLocated in Niteroi, State of Rio de Janeiro.•Land area of 40.8 hectares, waterfront land of •12.8 hectares.FPSO integration, topside modules fabrication, •rig repairs & upgrading.

IndiaSembmarine Kakinada

Located between Vishakhapatnam and Chennai Port, •East Coast of India.Land area of 30 acres (phase I).•Riser/equipment repairs, afloat repairs, modules •fabrication, repairs & servicing of offshore vessels and merchant vessels.

Pipavav ShipyardLocated within vicinity of Pipavav Port, Gujarat, West •Coast of India.Land area of 85 hectares with drydock and workshop •facilities.Shipbuilding.•

USA

Brazil

Saudi Arabia

India

Singapore

China

Karimun

New Yard Facility (Phase 1)

Batam

Singapore Hub

Middle EastSembmarine Middle East

Located on Al Jazeera Island, Yanbu Commercial Port, •Saudi Arabia.Land area of 21 hectares.•Shipbuilding, ship repairing and marine engineering •services.

People’s Republic of ChinaCosco Shipyard Group

7 shipyards along coastal cities of Dalian, Lianyungang, •Nantong, Shanghai, Qidong, Zhoushan, and Guangdong.Drydocks, quays, workshop facilities.•Ship repair, shipbuilding, ship conversion and offshore.•

United States of AmericaSembcorp-Sabine Shipyard

Located in Sabine Pass, Texas.•Land area of 90 hectares and 240 m berthage. •Repairs, building and refurbishment of drilling rigs.•

Located at Tuas View •Extension, west of Singapore.73.3 hectares, 4 VLCC graving •docks with total capacity of 1.55 million dwt, quay length of 3,408 m.Ship repair, rig repair, •upgrading and ship conversion.Construction activities of yard •commenced in December 2009 with yard completion scheduled at end 2013. Partial operations in 2012.

MR RON FOO SIANG GUANNon-Executive/

Independent DirectorMR TANG KIN FEINon-Executive/

Non-Independent Director

MR JOSEPH KWOK SIN KINNon-Executive/

Independent Director

MR RICHARD HALE, OBEDeputy Chairman, Non-Executive/

Non-Independent DirectorMR GOH GEOK LINGChairman, Non-Executive/


MR LIM AH DOONon-Executive/


MR TAN PHENG HOCKNon-Executive/


MR WONG WENG SUNPresident & Chief Executive Officer

Executive/Non-Independent Director

MR TAN KWI KINSenior Advisor, Non-Executive/


MR AJAIB HARIDASSNon-Executive/

Independent DirectorMRS LIM JOKE MUINon-Executive/


Annual Report 2009 1716 Sembcorp Marine Ltd

Board of Directors


MR GOH GEOK LINGChairman Non-Executive/Non-Independent Director

Appointed 14 February 2006

Mr Goh is a non-independent director who heads the Board’s Executive Committee, Executive Resource & Compensation Committee and serves as a member in the Nominating Committee.

Currently the Chairman of Jurong Shipyard, Sembawang Shipyard and SMOE, Mr Goh also serves as a director of Venture Corporation and Sembcorp Industries. In addition, he is a member of the Board of Trustees of Nanyang Technological University.

Mr Goh holds a Bachelor of Engineering from the University of Sydney, Australia. His past directorships in listed companies and major appointments between 2007 and 2009 were with DBS Bank, DBS Group Holdings and 02Micro International.

MR RICHARD HALE, OBEDeputy Chairman Non-Executive/Non-Independent Director

Appointed 22 April 2008, Deputy Chairman 7 May 2008

Mr Hale is a non-independent director who serves on the Board’s Audit and Risk Committees.

He is a director in the board of Sembcorp Industries and heads its Audit and Risk Committees. He is also the Chairman of CapitaCommercial Trust Management and a director of CapitaLand. Previously, he was a director and CEO Singapore of The Hongkong and Shanghai Banking Corporation.

Mr Hale was educated at Radley College, Abingdon, United Kingdom. His past directorships in listed companies and major appointments between 2007 and 2009 were with the Ascott Group, BM Trust Management and Wheelock Properties (Singapore).

MR WONG WENG SUNPresident & Chief Executive Officer Executive/Non-Independent Director

Appointed 1 May 2009

Mr Wong is the President and Chief Executive Officer of Sembcorp Marine and the Managing Director of Jurong Shipyard. Prior to this, he served as President and Chief Operating Officer of Sembcorp Marine. He was an alternate director to Mr Tan Kwi Kin from 3 May 2006 to April 2009. He sits on the board of a number of its subsidiaries that include Jurong Shipyard, PPL Shipyard and SMOE.

Mr Wong first joined Jurong Shipyard in 1988 as an engineer before rising to become its General Manager in charge of project management. Currently, he is the President of the Association of Singapore Marine Industries. He is also a board member of the Maritime and Port Authority of Singapore and the Singapore Maritime Foundation, the Deputy Chairman of the WSHC (Marine Industries) Committee and a member of the WSH Council.

Mr Wong holds a Bachelor of Mechanical Engineering (Marine). He also obtained a Master in Business Administration from Oklahoma City University, United States.

MR TAN KWI KINSenior Advisor Non-Executive/Non-Independent Director

Appointed 1 April 1990

Mr Tan became Senior Advisor of Sembcorp Marine after his retirement as Group President and Chief Executive Officer from 1 May 2009.

A veteran in the marine industry in Singapore, Mr Tan has 43 years of working experience in Jurong Shipyard. He started his career with Jurong Shipyard in 1966 as a junior engineer in the Design Department before rising to become the manager in charge of production control in 1975, General Manager in 1981 and Managing Director in 1990. When Sembawang

Shipyard merged with Jurong Shipyard in 1997, Mr Tan was appointed President of the Jurong Shipyard group of companies.

Mr Tan is also a director of Jurong Shipyard, Sembawang Shipyard, PPL Shipyard, SMOE, Karimun Shiprepair & Engineering, JPL Corporation, JPL Industries, JPL Concrete Products, Sembcorp Marine Technology and Zhen Hua (Singapore) Engineering.

He graduated from Tokyo University, Japan, in 1965 with a Bachelor of Engineering (Mechanical).

MR AJAIB HARIDASSNon-Executive/Independent Director

Appointed 31 October 2003

Mr Haridass is an independent director. He heads the Board’s Risk Committee and serves as a member of the Special Committee and the Executive Committee.

He is currently the Managing Partner of Haridass Ho & Partners, a legal firm he set up in 1985. With more than 33 years of legal experience, Mr Haridass specialises in all admiralty matters, both litigious and non-litigious, from ship sale and purchase, the financing aspects of such transactions, marine insurance to general commercial and banking litigation.

Mr Haridass is also an accredited mediator of the Singapore Mediation Centre, a General Committee member of the Singapore Chamber of Maritime Arbitration, an arbitrator of the Korean Commercial Arbitration Board, a member of the SIAC Panel of Arbitrators, a member of the Singapore Maritime Arbitrators Association and a panel member for Disciplinary Inquiries at the Public Service Commission. He is a member of the Board of Visiting Justices, Board of Inspection (Prisons Department) and Board of Visitors (Welfare Homes), Ministry of Community Development, Youth & Sports. In addition, he is the Vice Chairman of the Home Detention Advisory Committee, Ministry of Home Affairs in Singapore, Magistrate of the Subordinate

Courts, Referee at Small Claims Tribunal and Mediator at Criminal Relational Disputes, Subordinate Courts, a Commissioner for Oaths, Notary Public and a Justice of Peace.

Graduating from the University of London in 1974 with a Bachelor of Law (Honours) degree, Mr Haridass was called to the English Bar at the Middle Temple in 1975 and admitted as an Advocate & Solicitor of the Supreme Court of Singapore in 1976.

MR LIM AH DOONon-Executive/Independent Director

Appointed 7 November 2008

Mr Lim is an independent director and heads the Board’s Audit Committee. He brings with him vast experience and wide knowledge as a former senior banker and corporate executive. He is currently director of EDB Investments, GP Industries and SM Investments Corporation.

During his 18-year distinguished banking career in Morgan Grenfell, he held several key positions including chairing Morgan Grenfell (Asia). He also chaired the Singapore Investment Banking Association in 1994. From 2003 to 2008, he was Vice Chairman and President of the RGM group, a leading global resource-based group. He was also formerly the Independent Commissioner of PT Indosat, Indonesia, a council member of Singapore-Shandong Business Council and Singapore-Jiangsu Co-operation Council and the chairman of EDB Management.

Mr Lim holds an honours degree in Engineering from the Queen Mary College, University of London in 1971, and a Master in Business Administration from the Cranfield School of Management in 1976.

Board of Directors


MR TANG KIN FEINon-Executive/Non-Independent Director

Appointed 1 May 2005

Mr Tang is a non-independent director and serves as a member on the Board’s Risk, Special and Executive Committees.

He is Group President and Chief Executive Officer of Sembcorp Industries. With over 20 years at Sembcorp, he is credited with spearheading the development of its utilities business into a leading energy, water and centralised utilities provider serving an international customer base in Singapore, the United Kingdom, China, Vietnam, the United Arab Emirates and Oman.

His board appointments in the Sembcorp Marine Group include chairing the board of PPL Shipyard and directorships at Jurong Shipyard, Sembawang Shipyard, SMOE and Baker Marine. Mr Tang is also Deputy Chairman of International Enterprise Singapore, a member of the APEC Business Advisory Council and president of the Singapore Water Association. A council member of the Singapore Business Federation, Mr Tang serves on several China-Singapore, Saudi-Singapore and Abu Dhabi- Singapore business councils. In addition, he is a director of the School of Science and Technology, Singapore, and sits on the board of the Kwong Wai Shiu Hospital, a charitable hospital which provides care for needy patients.

Mr Tang holds a First Class Honours degree in Mechanical Engineering from the University of Singapore and underwent the Advanced Management Programme at INSEAD. He held a previous directorship in GuocoLeisure.

MR RON FOO SIANG GUAN Non-Executive/Independent Director

Appointed 30 June 2006

Mr Foo is an independent director who heads the Board’s Special Committee and serves as a member in the Risk Committee and the Audit Committee.

He brings with him more than 35 years of extensive auditing, accounting and financial experience in Singapore and overseas. Mr Foo has been a partner of PricewaterhouseCoopers, Singapore for 22 years before retiring from active service in December 2005. Mr Foo is presently a director of the Singapore Deposit Insurance Corporation and NTUC Income Insurance Co-Operative, SIA Engineering Company and a member of the Competition Appeal Board.

Mr Foo has also been actively involved as a council member in the Institute of Certified Public Accountants of Singapore (ICPAS) and was awarded the ICPAS Gold Medal 2004 in recognition of his outstanding contributions and distinguished service to the accounting profession and the community. Presently, he is a member of the Canadian Institute of Chartered Accountants, Canada and a fellow of the Institute of Certified Public Accountants of Singapore.

MR TAN PHENG HOCKNon-Executive/Independent Director

Appointed 16 April 2001

Mr Tan is an independent director and serves as a member on the Board’s Nominating Committee and the Executive Resource and Compensation Committee.

He is the President and Chief Executive Officer of public-listed Singapore Technologies Engineering (ST Engineering). He is also Chairman of the Nanyang Polytechnic Board of Governors and the Singapore Workforce Development Authority and sits on the board of Neptune Orient Lines. Mr Tan began his career with the ST Engineering Group as

an engineer in ST Marine in 1981. He held various senior appointments in the Group including that of executive vice president of ST Marine, president of ST Kinetics, president and chief operating officer of ST Engineering before assuming his current position.

In 2009, Mr Tan was appointed director of ST Engineering Finance I Ltd, chairman and director of Singapore Airshow & Events and Chairman of Lifelong Learning Endowment Fund Advisory Council. He holds a Bachelor of Science (First Class Honours) in Marine Engineering from the University of Surrey, United Kingdom and a Master of Science in Management from Stanford University, United States.

MRS LIM JOKE MUI (nee NGIAM JOKE MUI)Non-Executive/Non-Independent Director

Appointed 24 November 2007

Mrs Lim is a non-independent director and serves as a member on the Board’s Special Committee.

She is currently the Group Chief Financial Officer of Sembcorp Industries where she oversees the corporate finance and treasury, accounts, tax, information technology and risk management functions across the group. She also sits on the boards of various Sembcorp Marine companies, including the boards of Jurong Shipyard, Sembawang Shipyard and SMOE.

Mrs Lim has more than 30 years of experience in various finance and other corporate functions. During her career with DBS Land, she managed large financing transactions via the equity and debt markets and was involved in major corporate merger and acquisition exercises and initial public offerings. She holds a Bachelor of Accountancy degree from the University of Singapore.

MR JOSEPH KWOK SIN KIN Non-Executive/Independent Director

Appointed 30 June 2006

Mr Kwok is an independent director who heads the Board’s Nominating Committee and serves as a member in the Executive Resource & Compensation Committee.

He is currently the Chief Executive Officer of Carlisle Leasing International and Seacastle Inc. and director on the board of Seacastle Singapore.

His distinguished career in the marine industry also included several key appointments in the Neptune Orient Lines (NOL) Group from 1981 to 2003. During this time, Mr Kwok served as group COO, CEO of the chartering and enterprises division, and chairman of Neptune Shipmanagement Services. Following that, he led AET (formerly American Eagle Tankers, Inc.), a wholly-owned subsidiary of MISC, as president and chief executive officer between 2003 and 2005.

Mr Kwok’s past appointments included directorships in MPA Venture and various subsidiaries and associated companies of NOL and AET. He was previously an executive committee member of INTERTANKO and a board member of ABS, BIMCO, UK P&I Club, and International Tanker Owner Pollution Federation Ltd.

Board of Directors


Senior Management

MR WONG WENG SUNPresident & CEO, •Sembcorp MarineManaging Director, •Jurong ShipyardBachelor of Mechanical •Engineering, University of Technology (Malaysia), Master of Business Administration, Oklahoma City University

MR LEE YEOK HOONExecutive Director, Jurong •ShipyardDiploma in Mechanical •Engineering, Singapore Polytechnic

MS WONG LEE LINExecutive Director, •Sembawang ShipyardBachelor of Arts, Bachelor of •Social Sciences (Honours), National University of Singapore

MR HO NEE SINManaging Director, SMOE•Master of Science, Imperial •College, University of London

MR FREDDIE WOOExecutive Director, Jurong •SMLDiploma in Mechanical/•Production Engineering, Singapore Polytechnic

MR ONG POH KWEEDeputy President, •Sembcorp MarineManaging Director, •Sembawang ShipyardBachelor of Marine •Engineering, University of Newcastle-Upon-Tyne (UK), Master of Business Administration, Sloan School of Management, Massachusetts Institute of Technology, US

MS JUDY HANSenior Vice President, •Investor Relations & CommunicationsBachelor of Arts, Bachelor •of Social Sciences (Honours) in Economics, National University of Singapore

MS CHIONH KEAT YEESenior Vice President, Group •Performance Management & Group Mergers & AcquisitionsACCA, UK, Member, •Institute of Certified Public Accountants, Singapore

MS TAN YAH SZEVice President, Legal & Joint •Company SecretaryBachelor of Law, National •University of Singapore

MR TAN HENG JACKVice President, Internal Audit•Bachelor of Accountancy, •Nanyang Technological University

MS JESSIE LAUVice President, Administration•Bachelor of Science (Business •Administration), Oklahoma City University

MS KWONG SOOK MAYJoint Company Secretary•Chartered Secretary, •ACIS, Member, Singapore Association of the Institute of Chartered Secretaries and Administrators (SAICSA)

CORPORATE FUNCTIONSSHIPYARDS (SBUs)

MR DOUGLAS TAN AH HWA

Managing Director, PPL •ShipyardBachelor of Science •(Mechanical), National University of Taiwan, Master of Science (Mechanical), Lamar University, Texas

MR WONG PENG KINDirector of Group Human •ResourceBachelor of Business •Administration (Honours), National University of Singapore

MR TAN CHENG TATChief Financial Officer•Bachelor of Accountancy •(Honours), National University of Singapore, Fellow Member, Institute of Certified Public Accountants, Singapore

MR NG THIAM POHSenior Vice President, Risk •ManagementBachelor of Science •(Naval Architecture & Ocean Engineering) 1st Class Honours, University of Glasgow

MR WEE KENG HWEESenior Vice President, •Corporate DevelopmentBachelor of Engineering, •Yokohama National University, Master of Science, National University of Singapore


Corporate Governance & TransparencyThe Sembcorp Marine Group is committed to meeting high standards of corporate governance. Its corporate governance principles reflect its strong belief in protecting and enhancing shareholder value in a sustainable way. The Group firmly believes that the professionalism, integrity and commitment of its Board members and employees, supported by a sound system of policies, practices and internal controls are the cornerstones that will enable it to preserve long-term value and returns for its shareholders.

Sembcorp Marine endorses the principles of the Code of Corporate Governance issued by the Singapore Exchange Securities Trading Ltd. This report outlines Sembcorp Marine’s corporate governance processes and activities for the financial year with reference to the principles set out in the Code.

Board of Directors

Effective Board to Lead and Effect Controls:

Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with the management to achieve this and the management remains accountable to the Board.

The Board’s responsibility is to oversee the business, affairs and performance of the Sembcorp Marine Group in the best interests of its shareholders. The Board focuses its activities on the Group’s key requirements such as:

Providing entrepreneurial leadership and directions of the Group•

Ensuring prudent and effective controls•

Setting values and standards to ensure obligations to shareholders •are met

Overseeing the proper conduct of the Group’s business•

To ensure efficient discharge of its responsibilities and to provide independent oversight of the management, the Board has established a number of Board committees, including the Audit Committee, Executive Resource & Compensation Committee, Nominating Committee, Board Risk Committee and the Executive Committee. These committees comprise mostly independent and/or non-executive directors. Other ad-hoc committees can be formed from time to time to look into specific areas when the need arises, such as the Special Committee established in 2007.

# The number of meetings held during the period the director was a member of the Board, or when he was a member of a committee. 1 Mr Wong Weng Sun was appointed to the Board on 1 May 2009. Mr Wong was previously alternate director to Mr Tan Kwi Kin. 2 Mr Tan Tew Han stepped down as director on 24 February 2009. 3 Mr Joseph Kwok Sin Kin is currently stationed in San Francisco, USA. NB: Special Committee did not hold any meeting in FY2009 but decisions were made via e-mail correspondences

Name of Director Board Meetings(Board)

Audit CommitteeMeetings (AC)

Board RiskCommitteeMeetings (BRC)

ExecutiveCommitteeMeetings (EXCO)

NominatingCommitteeMeetings (NC)

ExecutiveResource &CompensationCommitteeMeetings (ERCC)

No. of Meetings No. of Meetings No. of Meetings No. of Meetings No. of Meetings No. of MeetingsHeld# Attendance Held# Attendance Held# Attendance Held# Attendance Held# Attendance Held# Attendance

Goh Geok Ling 11 11 - - - - 2 2 1 1 4 4Richard Hale, OBE 11 11 4 4 4 3 - - - - - -Wong Weng Sun1 11 11 - - - - 1 1 - - - -Tan Kwi Kin 11 9 - - - - 1 1 - - - -Tan Pheng Hock 11 6 - - - - - - 1 1 4 4Tan Tew Han2 2 1 1 1 - - - - - - - -Ajaib Haridass 11 10 - - 4 4 2 2 - - - -Tang Kin Fei 11 11 - - 4 3 2 2 - - - -Ron Foo Siang Guan 11 10 4 4 4 4 - - - - - -Joseph Kwok Sin Kin3 11 3 - - - - - - 1 1 4 4Ngiam Joke Mui 11 10 - - - - - - - - - -Lim Ah Doo 11 11 3 3 - - - - - - - -

Membership in the different committees is carefully managed to ensure that there is equitable distribution of responsibilities among Board members, to maximise the effectiveness of the Board and foster active participation and contribution. Diversity of experiences and appropriate skills are also considered.

In addition, the Board has adopted a set of internal controls which sets out approval limits for transactions, procurement of goods and services, capital expenditure, investments and divestments, bank borrowings and cheque signatories’ arrangements. Approval sub-limits are also provided at Management levels to facilitate operational efficiency.

Strong and Independent Board Exercising Objective Judgment

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgment on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

Chaired by Mr Goh Geok Ling, the Board had eleven directors of whom ten are non-executive directors, and five are independent directors. Mr Wong Weng Sun who was appointed the President & CEO and Director of Sembcorp Marine on 1 May 2009, is the

executive director. Mr Tan Kwi Kin stepped down as Group President and CEO and was appointed Senior Advisor of Sembcorp Marine on 1 May 2009.

The Board is composed of a majority of non-executive directors, five of whom are independent directors, independent of management and independent in terms of character and judgement. The criterion of independence is based on the definition given by the Code, which stipulates that an independent director is one who has no relationship with the company, its related companies or its officers that could interfere or be reasonably perceived to interfere with the exercise of the directors’ independent business judgment with a view to decide in the best interests of the company in the conduct of the company’s affairs. This enables the management to benefit from an external and objective perspective on issues that are brought before the Board.

To facilitate a more effective check on management, the non-executive directors have also met without the presence of management to discuss the performance of management.

The Nominating Committee considers Tan Pheng Hock and Ajaib Haridass, both non-executive directors, as independent non-executive directors, although they are related to the company by virtue of their position as a director in a related company, and a partner in a Attendance at Board and Committee Meetings

1 Mr Wong Weng Sun ceased as Alternate Director to Mr Tan Kwi Kin and was appointed Director/President & CEO on 1 May 2009.2 Mr Tan Kwi Kin stepped down as Group President & CEO and was appointed Senior Advisor on 1 May 2009.3 Mr Tan Tew Han stepped down as Director on 24 February 2009.

Directors Position held on the BoardDate of first appointment to the Board

Date of lastre-election/ re-appointment as director

Nature of Appointment

Goh Geok Ling Chairman 14 February 2006 17 April 2009 Non-Executive/ Non-Independent

Richard Hale, OBE Deputy Chairman 22 April 2008 17 April 2009 Non-Executive/ Non-Independent

Wong Weng Sun1 Director/President & CEO 1 May 2009 Not Applicable Executive/ Non-Independent

Tan Kwi Kin2 Director/Senior Advisor 1 April 1990 17 April 2009 Non-Executive / Non-Independent

Tan Pheng Hock Director 16 April 2001 17 April 2009 Non-Executive/ Independent

Tan Tew Han3 Director 17 April 2003 22 April 2008 Non-Executive/ Independent

Ajaib Haridass Director 31 October 2003 17 April 2009 Non-Executive/ Independent

Tang Kin Fei Director 1 May 2005 22 April 2008 Non-Executive/ Non-Independent

Ron Foo Siang Guan Director 30 June 2006 20 April 2007 Non-Executive/ Independent

Joseph Kwok Sin Kin Director 30 June 2006 20 April 2007 Non-Executive/ Independent

Ngiam Joke Mui Director 24 November 2007 22 April 2008 Non-Executive/ Non-Independent

Lim Ah Doo Director 7 November 2008 17 April 2009 Non-Executive/ Independent

Board Members for 2009

law firm rendering professional services to the Group, respectively. Notwithstanding this, the Nominating Committee assesses them to be independent directors due to their manifest ability to exercise strong independent judgement in their deliberations and act in the best interests of the company, and that the nature and scope of the business relationships are not significant in the context of the Group’s and the companies’ earnings or operations, and therefore do not undermine the independence of these directors.

The directors consider that the Board is of the appropriate size and with the right mix of skills and experience given the size of Sembcorp Marine. The Board members comprise business leaders, current or retired CEOs, bankers, professionals with financial background and a practising lawyer. Profiles of the Board’s directors are found on pages 18 to 21 of this Annual Report.

Board Committees

Sembcorp Marine has six Board committees:

Audit Committee•Executive Resource & Compensation Committee•Nominating Committee•Risk Committee•Special Committee•Executive Committee•

The Audit Committee

Principle 11: The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties.

The Audit Committee currently comprises two independent directors: Mr Lim Ah Doo as Chairman of the Audit Committee and Mr Ron Foo as member, and one non-independent director, Mr Richard Hale, OBE as member.

The main responsibility of the Audit Committee is to review the Group’s general policies and control procedures relating to financial statements and reporting, and review of internal control systems, interested persons transactions as well as any matters or issues that affect the performance of the Group. These reviews are done with the external auditor, internal auditor and the management. The Committee reviews the quarterly, half-yearly and annual results announcements in addition to the financial statements at Group and company levels before they are submitted to the Board for approval. The Committee also recommends the appointment of the external auditors.

In its role, the Audit Committee assists the Board of Directors in fulfilling its fiduciary responsibilities


1 Appointed as a Member of the Executive Committee on 1 May 2009.2 Stepped down as Member of the Executive Committee with effect from 1 May 2009.

Board Members Audit Committee

Executive Resource & Compensation Committee

Nominating Committee Risk Committee Special

CommitteeExecutive Committee

Goh Geok Ling Chairman Member Chairman

Richard Hale, OBE Member Member

Wong Weng Sun1 Member

Tan Kwi Kin2

Tan Pheng Hock Member Member

Ajaib Haridass Chairman Member Member

Tang Kin Fei Member Member Member

Ron Foo Siang Guan Member Member Chairman

Joseph Kwok Sin Kin Member Chairman

Ngiam Joke Mui Member

Lim Ah Doo Chairman

Board Composition and Committees

relating to corporate accounting and reporting practices of the Group, and in respect of interested persons transactions. Its responsibility is to act in the interest of the shareholders as a whole. The Committee meets with the external and internal auditors, without the presence of the management, at least once a year to review the cooperation and assistance given by the management to its members.

The Audit Committee has reviewed the non-audit services provided by its external auditors to the Group, and is satisfied that the provision of non-audit services by the external auditors did not impair their independence as external auditors.

The Executive Resource & Compensation CommitteeThe Executive Resource & Compensation Committee (ERCC) is chaired by Mr Goh Geok Ling and its members for 2009 were Mr Joseph Kwok and Mr Tan Pheng Hock.

The primary purpose of the ERCC is to support and advise the company on remuneration matters and leadership development by:

Overseeing development of leadership and •management talentEnsuring that the Group has appropriate •remuneration policiesDesign compensation packages with focus on •long-term shareholders’ returns

The ERCC reviews and approves remuneration and promotion of key executives and decides on issues pertaining to their development and succession. It also establishes guidelines on share plans and other long-term incentive plans and approves the grant of such incentives to key executives. The underlying philosophy is to motivate executives to maximise operating and financial performance and shareholders’ value.

In addition, the Committee also reviews the remuneration of non-executive directors, executive director and senior executives, as well as major human resource management and compensation policies and practices for the rest of the Group.

On an annual basis, a comprehensive talent management programme and the succession plans were presented to the Committee for review. The Committee reviews the succession plans for key and critical positions to align the business goals and its human capital needs. This enables the company to identify the talent pool and allow focus and devotion of time and resources to leverage the full value and potential of identified successors.

The Committee currently involves and consults with human resources and compensation consultants to ensure inclusiveness in its deliberations and decisions and to keep in line with pay and employment conditions within the industry and in comparable companies.

The President & CEO is not present during the discussions relating to his own compensation, terms and conditions of service, and the review of his performance.

While the Committee’s Chairman is not independent, he is a non-executive director independent of the management with a clear separation from his role in management during the Committee’s deliberations. No Committee member or any director is involved in deliberations on any remuneration, compensation, options or any form of benefits to be granted to himself.

Nominating CommitteeThe Nominating Committee was chaired by Mr Joseph Kwok and includes Mr Goh Geok Ling and Mr Tan Pheng Hock as members.

The primary purpose of this Committee is to support and advise Sembcorp Marine, its unlisted subsidiaries and, where applicable, unlisted associated companies by nominating suitable candidates who are best able to discharge their responsibilities as directors. This means evaluating the balance of skills, knowledge and experience of these boards and assessing the candidates for their regard for the law and the high standards of governance practised by the Group. Appointments to these boards are made on merit and against objective criteria. The Nominating Committee ensures that appointees have enough time available to devote to their directorship roles.

Corporate Governance & Transparency

The independence of each director is reviewed annually by the Committee.

Risk CommitteeThe Risk Committee was formed in April 2005 as part of Sembcorp Marine’s effort to formalise and strengthen its risk management framework and processes. Prior to its formation, its roles and functions were carried out by the Audit Committee. This delineation enables a better focus on pertinent risk issues faced by the Group.

Currently, the Risk Committee comprises four members, namely Mr Ajaib Haridass as Chairman, Mr Tang Kin Fei, Mr Richard Hale, OBE and Mr Ron Foo.

The Committee’s primary role and function is to assist the Board of Directors by reviewing the adequacy and effectiveness of the Group’s risk management philosophy, strategies, policies & guidelines; Group-wide risk management plans, systems, processes controls and procedures; and the Group’s risk portfolio and risk assessment including the treatment of identified risks.

Special CommitteeThe Special Committee was formed on 22 October 2007 in response to the discovery of the unauthorised foreign exchange transactions (“Unauthorised Transactions”) undertaken by the former Director, Group Finance of Sembcorp Marine. Its primary role was to assist the Board in the investigations and to deal with issues and legal proceedings arising out of these Unauthorised Transactions.

The Special Committee is currently comprised of four members: Mr Ron Foo Siang Guan as Chairman, Mr Ajaib Haridass, Mr Tang Kin Fei and Mdm Ngiam Joke Mui as members.

Executive CommitteeThe Executive Committee was formed on 7 May 2008 to assist the Board in developing the overall strategy for the Group and supervises on behalf of the Board, the management of the Group’s business and affairs.

The Executive Committee comprises four members: Mr Goh Geok Ling as Chairman, Mr Wong Weng Sun, Mr Ajaib Haridass and Mr Tang Kin Fei as members. Mr Tan Kwi Kin stepped down as a member of the Executive Committee on 1 May 2009 and was replaced by Mr Wong Weng Sun.

Chairman and Chief Executive Officer (CEO)

Principle 3: There should be clear division of responsibilities at the top of the company – the working of the Board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

There is a clear separation of the roles and responsibilities between the Chairman and the President & CEO. The President & CEO is not related to the Chairman.

The Chairman, who is non-executive, takes a leading role in the Sembcorp Marine Group’s drive to achieve and maintain a high standard of corporate governance with the full support of the directors and the management.

He is responsible for the leadership of the Board, setting its agenda and ensuring its effectiveness in all aspects of its work. He acts independently in the best interests of the Group and shareholders. The Chairman facilitates the contribution of non-executive directors in particular and ensures constructive relations between executive and non-executive directors. He also ensures that the members of the Board work together with the management in constructive debate on various matters, including strategic and operational issues. Meanwhile, the President & CEO is charged with the executive responsibility of running the Group’s business.

Formal Appointment and Re-Election of Directors

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.

The Board does not believe it is possible to compile a list of criteria which are appropriate to characterise, in all circumstances, whether a non-executive director is independent. It is the approach and attitude of each non-executive director which is important. The Board aims for diversity of knowledge and experience among its members in relation to the various businesses of the Group and the international nature of the Group.

The Board, through the delegation of its authority to the Nominating Committee, has used its best efforts to ensure that directors appointed to the Board possess the background, experience and knowledge in technology, business, finance and management skills critical to the Group’s businesses and that each director brings to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made.

Sembcorp Marine believes that all directors should retire and offer themselves for re-election at regular intervals, subject to continued satisfactory

performance. The President & CEO, while also a board member, is also required to retire and offer himself for re-election. As nomination and election of board members is the prerogative and proper right of all shareholders, this ensures the planned and progressive renewal of the board.

The Company’s Articles of Association require one-third of directors to retire and subject themselves to re-election by shareholders at every Annual General Meeting (“AGM”). In other words, no director stays in office for more than three years without being re-elected by shareholders. At the forthcoming AGM, Mdm Ngiam Joke Mui, Mr Ron Foo Siang Guan and Mr Joseph Kwok Sin Kin will retire by rotation pursuant to the one-third rotation rule.

In addition, any newly-appointed director will submit himself for retirement and election at the AGM immediately following his appointment. Thereafter, he is subject to the one-third rotation rule. Mr Wong Weng Sun, who was appointed to the Board on

Results briefing for analysts and media.



1 May 2009, will submit himself for retirement and re-election by shareholders at the forthcoming AGM.

Further, pursuant to the Companies Act, directors who are over the age of 70 would vacate their offices at the conclusion of every AGM, and be subject to re-appointment. For the forthcoming AGM, Mr Tan Kwi Kin and Mr Richard Hale, OBE would vacate their offices and submit themselves for re-appointment by the shareholders pursuant to Section 153(6) of the Companies Act.

Board Performance and Conduct of its Affairs

Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.

The Sembcorp Marine Group believes that active participation and valuable contributions are essential to the overall effectiveness of the Board. Newly-appointed directors are given briefings by the management. Facility visits to the premises are also arranged to enable them to acquire an understanding of the Group, its business activities and its strategic directions. Existing directors are also invited to such facility visits and orientation programmes.

Changes to regulations and accounting standards are monitored closely by the management. To keep pace with regulatory changes, which have an important bearing on the Group’s or directors’ disclosure obligations, the directors are briefed during Board meetings or at specially-convened sessions, including training sessions and seminars conducted by external professionals. Where necessary, the Group also sponsors its directors to training sessions, courses and seminars on new developments or changes in laws, regulations and accounting standards, which are of relevance to the Group.

Informal reviews of the Board composition and performance are undertaken on a continual basis by the Nominating Committee with inputs from the other Board members and the President & CEO to

ensure strong, independent and sound leadership for the continued success of the Group’s business. In addition, to enhance our corporate governance practice, a yearly exercise was introduced to obtain feedback from each Director on the effectiveness of the Board as a whole. Directors are required to complete a questionnaire which includes factors such as the size and composition of the Board, the Board’s access to information, Board processes and accountability as well as Board performance in relation to communication with senior management. Feedback from the Directors would be collated and discussed at a subsequent board meeting and used to highlight areas of strengths and weaknesses for future development of the Board and its committees as well as to further improve performance.

The Nominating Committee feels that the financial indicators set out in the Code as guides for evaluation of directors are more for the measurement of management’s performance and thus, less applicable to directors. The Nominating Committee recognises the contribution of directors who, over time, have developed deep insights into the Group’s businesses and would exercise its discretion to retain the services of such directors.

Full Access to Information and Resources

Principle 6: In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.

Directors at Sembcorp Marine have access to complete, adequate and timely information and resources. As a general rule, board papers are sent to directors at least 3 days before a board meeting so that they have the relevant information for consideration and deliberation at the meeting. Managers who can provide additional insight into the matters at hand would be present at the relevant time during the Board meetings.

The management further provides monthly management and other financial statements to the Board on business issues that require the Board’s

decision in addition to ongoing reports relating to the Group’s operational and financial performance. Where a physical board meeting is not possible, timely communication with members of the Board is effected through electronic means which include electronic mail and teleconferencing. Alternatively, the management will arrange to meet and brief each director personally before seeking the Board’s approval.

The Board has separate and independent access to the President & CEO, members of senior management and the Company Secretaries at all times. Where necessary, independent professional advice and consultations will be made available to directors to ensure that full information and advice are available before important decisions are made by the Board. All issues are actively debated by the Board and properly recorded.

The Company Secretaries assist the Chairman by preparing meeting agenda, attending, preparing minutes of board proceedings and ensuring good information flows within the Board and its committees. They assist the Board on compliance with the Company’s Memorandum and Articles of Association, laws and regulations, including requirements of the Companies Act, Securities Futures Act, the Singapore Exchange Securities Trading Ltd (SGX-ST), the Accounting and Corporate Regulatory Authority and shareholders. The Company Secretaries assist the Board to upkeep and implement good corporate governance and best practices across the Group.

Competitive Board Remuneration

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

Sembcorp Marine believes that the remuneration of its directors is adequate and competitive, in line with market norms. The fee structure for the directors had been revised by the Board in 2006 after benchmarking the directors’ fees against those in the public and private sectors.

The directors’ fee for 2009 is S$1,157,833.00 which

is derived from the following guidelines approved

and adopted by the Board since Year 2007:

The detailed breakdown of directors’ remuneration

is found on page 200 of the Annual Report.

The President & CEO, as Executive Director, does not

receive any director’s fees. As a lead member of the

management, he draws a compensation consisting of

a salary, allowances, bonuses, share-based incentives

conditional upon meeting certain performance targets

(details are available on page 200 of the Annual

Report). Details on the share-based incentives and

its fair value are available on pages 179 to 184 and

page 186 of the Annual Report respectively.

Non-executive directors have remuneration packages

that consist of a directors’ fee component according

to Sembcorp Marine’s Directors’ Fee Policy, an

attendance fee component and a share-based

incentives component according to the Company’s


Type of appointment Remuneration$

(i) Board of Directors- Basic Fee- Chairman’s allowance- Deputy Chairman’s allowance

50,00045,00025,000

(ii) Audit Committee- Chairman’s allowance- Members’ allowance

40,000 25,000

(iii) Risk Committee- Chairman’s allowance- Members’ allowance

25,00015,000

(iv) Executive Resource & Compensation Committee- Chairman’s allowance- Members’ allowance

25,00015,000

(v) Nominating Committee - Chairman’s allowance- Members’ allowance

25,00015,000

(vi) Executive Committee- Chairman’s allowance- Members’ allowance

40,00025,000

Notes:(1) Mr Wong Weng Sun, as an Executive Director, does not receive any director’s fee.(2) The Directors also receive attendance fee of S$2,000 (in-country) and S$5,000 (out-

country) for each board meeting, S$1,000 (in-country) and S$5,000 (out-country) for each Committee meeting and S$1,000 (in-country) and S$1,000 (during office hours) or S$2,000 (outside office hours) (out-country) for each teleconference.

(3) The chairman and members of the Special Committee have waived their allowances for their appointment to the Special Committee.


Employee Share Plan. Sembcorp Marine does not

have a retirement plan for non-executive directors.

The Directors’ Fee Policy is based on a scale of

fees divided into basic retainer fees as director and

additional fees for attendance and service on Board

committees (details are available on page 31 of the Annual Report). Details on the share-based incentives

and its fair value are available on pages 179 to 184

and page 186 of the Annual Report respectively.

The basis of allocation of the share-based incentives

takes into account a director’s contributions and

additional responsibilities at Board committees. The

report on directors’ remuneration is found on page

200 of the Annual Report.

Competitive Reward System and Disclosure on Remuneration

Principle 8: The level of remuneration should

be appropriate to attract, retain and motivate the

directors needed to run the company successfully but

companies should avoid paying more than is necessary

for this purpose. A significant proportion of executive

directors’ remuneration should be structured so as to

link rewards to corporate and individual performance.

Principle 9: Each company should provide clear

disclosure of its remuneration policy, level and mix

of remuneration, and the procedure for setting

remuneration in the company’s annual report. It should

provide disclosure in relation to its remuneration

policies to enable investors to understand the link

between remuneration paid to directors and key

executives, and performance.

Sembcorp Marine adopts a competitive remuneration

and reward system that ensures good performance

and retention of required talents and key executives.

The company’s remuneration and rewards system is

anchored on individual performance, performance of

the Group and its business units.

The incentive compensation plan for key executives

is tied to the creation of Economic Value Add (EVA),

as well as the attainment of individual performance

goals. An individual’s incentive compensation is

linked to the EVA created by Sembcorp Marine Group

and its subsidiaries. A “bonus bank” is used to hold

incentive compensation credited in any year. Typically,

one-third of the available balance is paid out in cash

each year, with the balance being carried forward to

the following year. The balances carried forward may

be reduced or increased in future, based on the yearly

EVA performance of the Group and its subsidiaries.

Key executives are also rewarded based on actual

performance relative to pre-agreed performance

targets, which include financial and non-financial

performance indicators such as EVA, total shareholder

return and promoting and maintaining health, safety

and environment issues. The Board believes that the

current reward systems are in line with market norms

and formulated to motivate executives to give their

best to the Group. Rewards include long-term share-

based incentives, which would further ensure the

retention of the most talented and high performing

executives in the Group. In view of the evolving

practices at major public-listed companies and to

enhance linkages between employee performance

and long-term shareholder value creation, a review

of the Group’s share-based incentives was carried

out in 2005.

The Company ceased to grant new share options

since 2007. Instead, employees were awarded

restricted stocks under the restricted stock plan. For

further details on the share-based incentives and

performance targets, please refer to pages 179 to

184 of this Report.

With respect to executive remuneration, the Board

has decided not to prepare a separate remuneration

report as most of the information is found in the

directors’ report. This Annual Report has indicated

where the information required to be disclosed can

be found.

Key executives include Managing Directors of Sembawang Shipyard Pte Ltd, PPL Shipyard Pte Ltd, SMOE Pte Ltd, the Executive Director of Jurong SML Pte Ltd, and the Chief Financial Officer.

The detailed breakdown of the key executives’ remuneration is found on page 200 of the Annual Report.

Internal Controls and Risk Management

Principle 12: The Board should ensure that the management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.

The Board, through the Risk Committee, provides oversight and ensures adequacy of the system set out to meet the requirements of Principle 12. This system of internal controls comprises the Group’s internal financial controls, operational and compliance controls, and risk management policies and processes.

A review of the effectiveness of the Group’s internal controls is conducted annually. This review is carried out via the Enterprise Risk Management (“ERM”) programme and involves management, the Strategic Business Units (“SBUs”), Group Risk Management, Group Internal Audit and external consultants, where required.

The Group continues to maintain and improve the ERM programme which is currently into its 7th year since its inception in 2004. This programme provides a framework to identify, evaluate and manage key risks faced by the Group in the pursuit of its business objectives.

For more information on the Group’s ERM programme, please refer to pages 36 to 38.

Whistle-Blowing Policy

Principle 12: The Board should ensure that the management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.

Active participation by shareholders at 46th Annual General Meeting.



The Group has adopted a constructive whistle-blowing culture to detect and deter wrongdoing in preparing and implementing accurate and complete financial policies, reports and materials as well as the internal controls essential to support its financial and accounting systems and operations.

Demonstrating its pledge to good corporate governance, the Group provides an avenue for employees or any person to report any possible improprieties in matters of financial reporting or other matters that they may encounter to the Audit Committee or any other committees established by the Audit Committee for such purposes without fear of reprisal. The Audit Committee provides an oversight role in ensuring that the appropriate actions (including independent investigations) are undertaken to address any whistle-blow complaints.

The establishment of the whistle-blowing structure also augments the Group’s ability to detect potential fraud, providing another level of comfort and assurance to investors.

Independent Internal Audit Function

Principle 13: The company should establish an internal audit function that is independent of the activities it audits.

Sembcorp Marine’s internal audit function is supported by the Internal Audit Department which reports on audit matters directly to the Audit Committee Chairman and administratively to the President & CEO. This department plans its internal audit schedules in consultation with, but independent of, the management. Its plan is submitted to the Audit Committee for approval at the beginning of each year.

To ensure that the internal audits continue to be performed by competent professionals, the Internal Audit Department continues to recruit and employ suitably qualified staff. The internal audit practices of the Department are established with reference to the standards set by the Institute of Internal Auditors (IIA). Continual efforts are being made to

align the department’s practices with the mandatory and strongly recommended guidance set forth in the new International Professional Practices Framework of the IIA. A quality assurance and improvement programme has also been established, comprising both internal and external assessments of the internal audit function.

Communication with Shareholders

Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

Principle 14: Companies should engage in regular, effective and fair communication with shareholders.

Sembcorp Marine strives to provide fair and accurate communication with shareholders on its affairs on an ongoing basis. Sembcorp Marine’s shareholders are entitled to regular, timely and comprehensive reports on financial information, material developments as well as an understanding of business directions and prospects.

The Board provides shareholders with an assessment of the Group’s performance, position and prospects on a quarterly basis via quarterly announcements of results and timely announcements of significant transactions and developments as required by the SGX-ST. All price-sensitive information on Sembcorp Marine is disseminated to its shareholders via the SGXNET so as to ensure that all shareholders have access to material information at the same time. Financial and other performance information of the Group as a whole as well as by business segments are given at the release of quarterly results. This allows shareholders to gain better insight into the earning drivers within Sembcorp Marine.

During the release of earnings results, the announcement is first released by SGXNET onto the SGX-ST website. The management team then holds a briefing or teleconference for the media and analysts. Materials used at the briefing are made available on SGXNET and on the Group’s corporate website at www.sembcorpmarine.com.sg. Following any release of earnings or price-sensitive

developments, investor relations personnel are available by email or telephone to answer questions from shareholders and the media as long as the information requested does not conflict with the SGX-ST’s rules of fair disclosure.

Apart from the regular briefings provided to media and analysts, the management team also travels regularly to attend overseas road shows and exhibitions to reach out to foreign investors.

Greater Shareholder Participation at General Meetings

Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company.

Sembcorp Marine recognises that good corporate governance requires active participation of shareholders in the decision-making at the general meetings of shareholders and encourages such participation.

Information on meetings of shareholders are made through notices published in the newspaper and reports or circulars sent to all shareholders. All registered shareholders are invited to participate in shareholder meetings. If they do not wish to attend in person, they can issue instructions to accept, reject or abstain on each individual item on the meeting agenda by giving instructions to their proxy. He or she is allowed to appoint up to two proxies to vote on his or her behalf at the meeting through proxy forms sent in advance.

Sembcorp Marine also allows CPF Investors to attend General Meetings as observers. The Chairman, President & CEO, Chairman of the Audit Committee as well as other directors will be present together with the Chief Financial Officer, the Company Secretaries and external auditors to answer questions raised by shareholders. Minutes of shareholder meetings are available on request by registered shareholders. Sembcorp Marine ensures that there are separate resolutions at general meetings on each substantially

separate issue and avoids “bundling” separate resolutions.

To facilitate attendance of shareholders at the Annual General Meeting and Extraordinary General Meeting, Sembcorp Marine arranged for buses to transport shareholders from convenient MRT stations to its registered office at 29 Tanjong Kling Road. The Group has always preferred holding the meetings at its registered office to offer shareholders the opportunity to visit the shipyard and acquaint themselves with the shipyard operations besides the opportunity to interact with the Chairman, Board of Directors and senior management of the Group. About 200 shareholders attended the AGM and EGM held on 17 April 2009.

For further details on Sembcorp Marine’s communications with its shareholders, see the “Investor Relations” section of the Annual Report.

Dealings in SecuritiesSembcorp Marine has adopted a Code of Compliance on Dealings in Securities, which prohibit dealings in the company’s securities by its officers during the period commencing one month prior to the announcement of its full-year results and two weeks prior to the quarterly results. Directors and executives are also expected to observe insider trading laws at all times even when dealing in securities within the permitted trading period.

Interested Persons Transactions (“IPT”)Shareholders have adopted an IPT mandate relating to interested persons transactions of the Group. The IPT mandate sets out the levels and procedures to obtain approval for such transactions. Information regarding the mandate is available on the corporate website at www.sembcorpmarine.com.sg. All SBUs are required to be familiar with the IPT mandate and report any such transactions to the finance department. The finance department keeps a register of Sembcorp Marine’s interested persons transactions. Information on interested persons transactions for 2009 is found on page 201.



The Group reviewed its

top risk profile to address

the tumultuous market

conditions in the past year.

Accordingly, risk priorities

were changed in response

to developments that had

happened, or were still

unraveling, on various

fronts.

The risk organisation structure, which has served the Group well to date, continues to be relevant. At the top of the hierarchy, the Board Risk Committee provides oversight as well as checks and balances to ensure rigour in the system. At the management level, the Enterprise Risk Management Committee, comprising members from the strategic business units and corporate office, reviews the effectiveness of internal controls. Other specialist sub-committees support the Enterprise Risk Management Committee to provide depth for critical issues in their respective areas.

Reporting and information flow can be top-down or bottom-up depending on the nature of the matter which arises. This flexibility allows for the timely and effective communication between the various groups of stakeholders. The regular committee meetings continue to be a mainstay on the Group’s risk management calendar, facilitating discussions and exchanges of views and ideas.

Arising from the supporting activities and discussions that led up to the annual review of the risk profile, the key risks identified were familiar ones, associated with, or inherent to, the Group’s business and operations.

External Environment Risks

The global economic crisis has shown how seemingly distant or unrelated events could have devastating effects on a company plugged into the international business network. Such vulnerabilities are unavoidable and will remain so for the Group as it depends heavily on international markets.

External environment factors that are crucial to the Group’s operations include the prices of oil and other commodities, the global economy and trade, the state of the global financial system, foreign exchange movements, geo-politics, government policies, the regulatory environ-ment and pandemic outbreaks.

The crisis has left some of the Group’s customers in difficulties. Recognising the symbiotic nature of business relationships, the Group showed understanding and flexibility in working together with its customers and their financiers and in extending deferred payment arrangements, when necessary and possible. Nonetheless, where a mutually beneficial resolution could not be attained, the Group exercised its contractual rights to sell the asset to recover the monies due. While the Group’s vendors, contractors and suppliers have been able to fulfill their obligations, constant dialogue and monitoring remain in place to detect any warning signs and to take remedial actions.

Through the risk management process, the Group continuously monitors the business environment and assesses the relevant activities and their possible impacts on the organisation.

One such development on the local front would be the increase in foreign worker levies announced in the Singapore Budget 2010. Given the labour-intensive nature of the marine industry, it was inevitable that this would result in costs and labour implications for the Group. This is viewed, not as an insurmountable challenge, but as a catalyst in the push for higher productivity.

An emerging global trend that the Group has identified and acted upon is transfer pricing enforcement by tax authorities. With the prevalence of globalisation, the corresponding growing number of cross-border related party transactions has prompted tax authorities to protect their tax base more aggressively. This means that companies with significant cross-border related party transactions will have to comply with local authorities’ requirements which include passing the arm’s length test and preparing the necessary defence documentation.

As much as the Group endeavours to minimise the impact of these risks through appropriate means, the unpredictable nature of such risks and the constraints of available mitigating measures make it impossible to eliminate them completely. A trade-off approach is taken to devise practicable and economically viable solutions that reduce risks to levels that commensurate with the Group’s risk appetite.

Project Management Risks

As the Group’s main business activities relate to its projects, a significant proportion of the risks reside in the day-to-day operational activities of project management and construction execution. The Group’s ability to deliver its projects on time or ahead of schedule, within budget and meeting quality standards, demonstrates the effectiveness of risk management elements embedded in the systems and processes. This way, contractual obligations can be met and yard defaults avoided.

Another aspect lies with third-party stakeholders such as suppliers, vendors and contractors which the Group relies on for their services and goods. Should they fail to fulfil their obligations, the Group’s ability to honour its own contractual obligations to customers on a timely basis will be compromised.

This is especially so if there are limited substitutes, in particular for specialised equipment. Such shortfalls will in turn, subject the Group to claims and liabilities. While the Group continues to be reliant on third parties, the stringent selection criteria and processes coupled with constant monitoring and assessment, help to identify warning signs.

The Project Risk Management Committee, chaired by the President & Chief Executive Officer, provides a platform for the strategic business units to report and discuss project-related issues such as progress, costs, work variations, financial and contractual matters. Where circumstances allow, the strategic business units will collaborate to realise synergies such as the rationalisation of resources.

Financial Risks

The Group’s wide range and scale of core businesses and supporting activities expose it to various financial counterparties and risks which are intrinsically linked to the global financial market landscape Policies and procedures covering key areas - treasury, foreign currency hedging, credit, inter-company transactions and approval limits for various transactions - have been established and implemented throughout the Group.

These policies set out guidelines to minimise the Group’s cost of capital, adverse effects of fluctuations in foreign currencies and interest rates on income and to ensure that sufficient funds are available to meet financial obligations and operational needs. To better position itself financially for any opportunities that may arise, the Group updated and upsized its current multi-currency, multi-issuer debt issuance programme from $500 million to $2 billion at the start of 2010.

The Finance Committee continues to look into areas of financial system integrity, regulatory reporting, accounting, risk management and compliance systems and internal and external audit issues. It is chaired by the Group Chief Financial Officer and comprises key finance personnel from the strategic business units and corporate functions of treasury, tax, internal audit and risk management.

The Group’s financial risk management is discussed in detail in Note 40 to the financial statements.

Risk Management


Health, Safety, Security and Environment Risks

The Group continues to place paramount importance in promoting a safe and healthy work environment for its customers, employees, contractors and the community. This is championed by the Group HSE Committee which involves key health, safety and environment personnel from all the yards. The Group’s safety performance is closely monitored and reported regularly to the management and the Board Risk Committee. It is also an integral part of the management’s key performance indicators, demonstrating the concern and attention on these risks.

Human Resource Risks

The successful realisation of the Group’s strategic business plans could not be possible without having the right people with the requisite qualifications, skills and expertise. Recognising this, the Group looks constantly to recruiting and retaining talent to maintain and enhance its competitive edge. In this respect, there are comprehensive human resource policies and procedures for recruitment, compensation and staff development in place.

Key risk areas include management succession, staff turnover, work-life balance and compensation and benefits. The appointment of Mr Wong Weng Sun as the new President & Chief Executive Officer, to succeed Mr Tan Kwi Kin, was in line with the Group’s succession plan and leadership renewal process. The transition was smooth with Mr Tan continuing to render invaluable service to the Group in his new capacity as Senior Advisor.

Investment Risks

The Group seeks to grow its business through organic growth of its existing capabilities and activities, development of new capabilities and acquisition of business entities or operating assets. Investment activities, ranging from the identification of targets

to the undertaking of due diligence exercises, are supported by a team of experienced managers and augmented by external professionals for specialised services. Business proposals are risk assessed and evaluated by senior management before seeking final Board of Directors’ approval.

Major investments that underwent the risk management process during the year were the 206-hectare New Yard Facility at Tuas View Extension; the new shipyard to be built in Espirito Santo, Brazil and setting up a presence on India’s east coast through a joint-venture partnership with Kakinada Seaports.

Other initiatives

The risk-based governance programme, Control Self Assessment, was rolled out to the rest of the strategic business units following the pilot implementation by Jurong Shipyard in 2008. The aim is for eventual coverage of every key business process, in line with the Group’s continual improvement of its internal controls.

Control Self Assessment requires process and control owners to assess their compliance with key controls on a regular basis, highlight deviations and formulate action plans to rectify them. Periodic reports are submitted up to the corporate office, and the processes are audited by independent parties.

Another initiative was the review of all applicable legislations, codes of practice, national standards and technical advisories. This was done to ensure that operational and compliance activities were aligned with the latest versions throughout the Group.

Going forward, horizon scanning and continuous assessment of the evolving business landscape by the management remains a top priority as the Group extends its global footprint and builds up its orderbook. The Group will continue to ensure that current risk management policies, systems and processes remain relevant and effective.

Risk Management

Strong capabilities in jack-up design and construction.38 Sembcorp Marine Ltd


Investor Relations & CommunicationsSembcorp Marine was

pro-active in its

communication with

shareholders in its objective

to build strong and enduring

relationships with the

investment community.

The Group’s best-in-class

investor relations practices

involved providing timely

communication to its

shareholders, investors,

analysts, fund managers,

the media and the general

public.

Maintaining an Open-door PolicySembcorp Marine maintained regular two-way communication with buy-side and sell-side analysts as well as fund managers. Apart from quarterly results announcements, the management and investor relations team delivered regular updates on the Group’s strategies, operational progress and insights into the various markets. One-on-one meetings, post-results luncheon meetings and conference calls were carried out during the year.

In 2009, the management held about 115 one-on-one meetings with both local and foreign institutional fund managers in Singapore. Press and analysts briefings were organised for the full-year and half-year results. This year in review, an additional meeting was held on 4 November 2009 to unveil the New Yard Facility.

A total of 11 shipyard tours were conducted for 95 local and foreign fund managers and analysts in 2009. Such shipyard tours provided institutional investors a better understanding of Sembcorp Marine’s nature of business. It also allowed the Group to showcase its quality projects and offer analysts and fund managers valuable insights into the complexity and scale of its operations.

In addition, the Group held 18 teleconferences and five post-results luncheon and breakfast meetings organised by broking houses in Singapore.

Regular roadshows abroad helped Sembcorp Marine to stay in touch with shareholders in the United Kingdom, United States, Europe, Hong Kong and Japan. Supplementing these were the numerous conferences organised by local and foreign brokers, which were an effective way for the management to meet many fund managers in one location. During the year, the Group participated in 12 such investor conferences in Singapore, meeting about 300 local and foreign institutional fund managers.

Research reports written by analysts as well as feedback from fund managers and investors post-meetings provided senior management with insights into the investment community’s views of Sembcorp Marine, which were useful for managing market expectations and formulating corporate policies.

Sembcorp Marine held its Annual General Meeting and Extraordinary General Meeting at its corporate office building at 29 Tanjong Kling Road on 17 April 2009. The events were well-attended by more than 200 shareholders and observers. Presided by Sembcorp Marine’s Chairman Mr Goh Geok Ling, the meetings progressed well with the resolutions passed by the shareholders. During the luncheon reception held after the event, shareholders engaged in a fruitful time of open discussion and lively dialogue with the Chairman, Board directors and senior management.

Timely and Fair DisclosureThe Group continued to make disclosures on an immediate basis as required under the SGX-ST Listing Manual, or as soon as possible where immediate disclosure was not practicable. The quarterly results for financial year 2009 were released on a timely basis, within 45 days of the end of the relevant quarter.

Regular briefings and meetings for analysts and the media were held on dates coinciding with the release of the Group’s second quarter and full-year results. During these briefings, senior management members from the business units were present to discuss the performance of the company and the outlook of the industry.

Materials and press releases were all disseminated via SGXNet and made available simultaneously on the corporate website at www.sembcorpmarine.com.sg to ensure timely and fair disclosure. To cope with the increasing number of investor relations queries received electronically, the Group revamped its corporate website in 2009, enabling investors to obtain more information.

Diverse Shareholder BaseAn analysis of Sembcorp Marine’s share register showed that besides Sembcorp Industries as a major shareholder, institutional investors made up about 30.5 per cent of the total shareholding followed by retail shareholders and others at 7.3 per cent as at December 2009. The institutional investors were well distributed across more than 28 cities in the United States of America, Europe, United Kingdom, Canada, Australia, New Zealand, Japan, Hong Kong, Malaysia and Singapore.

Such diversity would enhance liquidity and mitigate over-concentration risk. The management would continue to engage existing shareholders, as well as attract potential new investors.

Retail Investors EventTo reach out to retail investors and the general public, Sembcorp Marine participated in the inaugural Asian Investment Conference and Exhibition 2009 organised by the Securities Investors Association of Singapore in July 2009. Targeted at retail mass affluent and high-net-worth investors both from

Fund managers visiting the shipyard.


2009 Investor Relations Calendar

Q1 Q2 Q3 Q4

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•

Announcement of full-year 2008 results with press and analysts briefing at the corporate office at 29 Tanjong Kling Road, Singapore Post-results luncheon meeting with fund managers organised by UBS SecuritiesParticipation in DBS Vickers Pulse of Asia Conference in SingaporeParticipation in BNP Paribas Conference in SingaporeTour of shipyard organised by DBS VickersLuncheon meeting organised by OCBC Securities

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•

•

•

•

•

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Announcement of first-quarter 2009 results by conference callPost-results luncheon meeting with fund managers organised by CIMB SecuritiesPost-results meeting organised by BNP ParibasParticipation in overseas conference with JP Morgan in New York and LondonParticipation in one-day non-deal roadshow with DBS Vickers in LondonParticipation in CLSA Conference in SingaporeParticipation in BNP Paribas Conference in SingaporeParticipation in Merrill Lynch Conference in SingaporeShipyard tour hosted by Nomura SecuritiesParticipation in Macquarie Investors’ Conference46th Annual General Meeting & Extraordinary General Meeting on 17 April 2009

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Announcement of first-half 2009 results with press and analysts briefingPost-results luncheon meeting with fund managers organised by DBS SecuritiesParticipation in non-deal roadshow with CLSA in Hong KongParticipation in DBS Vickers Conference in SingaporeParticipation in Nomura Conference in SingaporeParticipation in HSBC Conference in SingaporeParticipation in BNP Paribas Conference in SingaporeParticipation in non-deal roadshow with Nomura in EuropeParticipation in non-deal roadshow with CLSA in Hong KongShipyard visit and tour organised by Bank of America Securities-Merrill Lynch and Credit AgricoleParticipation in SIAS Investors’ Conference & Exhibition in Singapore

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Announcement of third-quarter 2009 results with press and analysts briefingUnveiling of the New Yard Facility to the press and analystsPost-results luncheon for fund managers organised by UOB Kay HianParticipation in Morgan Stanley Conference in SingaporeParticipation in CIMB Conference in SingaporeParticipation in non-deal roadshow with Citigroup in Hong Kong and Tokyo

Singapore and the region, the two-day conference and exhibition allowed listed companies and investors to connect and interact.

Through its participation and presence at the exhibition, Sembcorp Marine had the opportunity to understand the sentiments among investors and members of the public, respond to their queries and discuss the Group’s business and operations.

Student OutreachSembcorp Marine played host to almost 40 Singapore Management University undergraduates and exchange students who were keen to learn more about investor relations as part of their corporate communications curriculum during a visit in September 2009. The students had the opportunity to gain insights into Sembcorp Marine’s strategic approach in reaching out to the investor and media communities and other stakeholders. The visitors were also brought on a yard tour to enhance their understanding of the Group’s marine and offshore engineering operations.

Accolades for Corporate Governance and TransparencySembcorp Marine’s efforts to uphold high standards of corporate governance and transparency were recognised through several awards during the year.

Best Corporate Governance Award•Sembcorp Marine was awarded the Best Corporate Governance Award at the ninth annual Investor Relations Magazine South East Asia Conference & Awards held in December 2009 at the Singapore

Investor Relations & Communications

Exchange in Singapore. The award benchmarked its investor relations efforts in disclosure and engagement of shareholders against the best practices in the region.

An independent survey conducted by Thomson Reuters Extel Surveys of buy-side analysts, sell-side analysts and portfolio managers determined the award winners. This year’s survey was expanded to include responses from global investors covering Asian stocks, and not just those based in Asia.

Certificate of Excellence for Best Investor Relations•IR Magazine also recognised Sembcorp Marine with a Certificate of Excellence under the Best Investor Relations for a Corporate Transaction category at the annual Investor Relations Magazine South East Asia Conference & Awards.

Most Transparent Company Award•At the 10th Investors’ Choice Awards organised by the Securities Investors Association of Singapore in October 2009, Sembcorp Marine was honoured for its continuous commitment in upholding high standards of corporate transparency. The Group was accorded the Most Transparent Company (Non-electronics Manufacturing category) Runner-up Award in recognition of the company’s open communication and voluntary disclosure to shareholders.

Students from SMU learning more about investor relations.

Sembcorp Marine’s booth at the Asian Investment Conference and Exhibition 2009.

Statistics of Shareholdings as at 3 March 2010 Share CapitalIssued and Fully Paid Up Capital : S$443,346,487.10Number of Issued Shares : 2,071,371,470Number of Shareholders : 19,389Class of Shares and Voting Rights : Ordinary shares with equal voting rights

Shareholding Held in Hands of PublicBased on information available to the Company as at 3 March 2010, 37.83% of the issued ordinary shares of the Company (excluding ordinary shares held in treasury) is held in the hands of the public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with.

Substantial Shareholders

Substantial ShareholdersNumber of Shares

Direct Interest %1 Deemed Interest %1

Sembcorp Industries Ltd (SCI) 1,265,370,764 61.25 – –

Temasek Holdings (Private) Limited – – 1,269,354,715 2 61.44

List of 20 Largest Registered Shareholders

No. Name No. of Shares %**1 Sembcorp Industries Ltd 1,265,370,764 61.25

2 Citibank Nominees S'pore Pte Ltd 267,487,800 12.95

3 DBS Nominees Pte Ltd 85,175,100 4.12

4 HSBC (Singapore) Nominees Pte Ltd 83,344,007 4.03

5 DBSN Services Pte Ltd 61,556,890 2.98

6 United Overseas Bank Nominees 30,655,898 1.48

7 Raffles Nominees (Pte) Ltd 27,527,575 1.33

8 Tan Kwi Kin 7,090,711 0.34

9 BNP Paribas Secs Svcs S'pore 6,133,753 0.30

10 IHI Marine Co., Ltd. 4,000,000 0.19

11 OCBC Nominees Singapore 3,516,700 0.17

12 Macquarie Capital Securities 3,147,594 0.15

13 DB Nominees (S) Pte Ltd 3,102,086 0.15

14 Morgan Stanley Asia (S'pore) 2,965,680 0.14

15 Phillip Securities Pte Ltd 2,963,950 0.14

16 UOB Kay Hian Pte Ltd 2,951,400 0.14

17 BNP Paribas Nominees S'pore Pte Ltd 2,889,801 0.14

18 Royal Bank of Canada (Asia) Ltd 2,810,000 0.14

19 OCBC Securities Pte Ltd 2,496,013 0.12

20 Merrill Lynch (S'pore) Pte Ltd 2,340,868 0.11

Total 1,867,526,590 90.37

Location of Shareholders

Location of Shareholders

No. of Shareholders % No. of

Shares %

Singapore 18,801 96.97 2,055,960,176 99.26

Malaysia 310 1.60 4,420,470 0.21

Hong Kong 35 0.18 355,000 0.02

Japan 7 0.04 5,869,000 0.28

US 24 0.12 133,600 0.01

UK 16 0.08 221,600 0.01

Europe 3 0.02 6,200 0.00

Australia/New Zealand 73 0.38 1,213,800 0.06

Others 120 0.62 3,191,624 0.15

Total 19,389 100.00 2,071,371,470 100.00

Distribution of Shareholdings

Size of Shareholders

No. of Shareholders % No. of

Shares %

1 – 999 591 3.05 264,523 0.01

1,000 – 10,000 15,387 79.36 58,816,976 2.84

10,001 – 1,000,000 3,382 17.44 127,792,028 6.17

1,000,001 and above 29 0.15 1,884,497,943 90.98

Total 19,389 100.00 2,071,371,470 100.00

@ Ordinary shares purchased and held as treasury shares by the Company will have no voting rights.

Notes

1 Based on 2,071,371,470 Shares in issue (and disregarding 5,320,458 Shares held in treasury) as of the Latest Practicable Date.

2 Temasek is deemed to be interested in the 1,265,370,764 Shares held by SCI and 3,983,951 Shares held by companies in the Temasek group.

** The percentage of issued ordinary shares is calculated based on the number of issued ordinary shares of the Company as at 3 March 2010 excluding 5,320,458 ordinary shares held as treasury shares as at 3 March 2010.


Shareholders’ Information


Financial Calendar Corporate Directory

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

Public Accountants and Certified Public Accountants

Singapore

Audit Partner : Tan Wah Yeow

(appointed during the financial year ended

31 December 2008)

Principal BankersDBS Bank Ltd

Oversea-Chinese Banking Corporation Limited

Standard Chartered Bank

The Hongkong and Shanghai Banking Corporation 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 Office Building.


Corporate Structureas at 8 March 2010


Awards & Accolades

BEST NEW BUILDING YARD AWARDWinner: Jurong Shipyard

Award by Marine BizTV to Jurong Shipyard for its marine and offshore new building capabilities, health, safety, security and environment standards as well as contributions to the region’s reputation and growth.

NATIONAL SAFETY & SECURITY WATCH GROUP AWARD (Cluster Award Category)Recipient: Jurong Shipyard

Recognition by the Singapore Police Force and the Singapore Civil Defence Force for proactive and concerted efforts in partnering the Home Team to uphold high standards of safety and security within the community.

COMMUNITY CHEST AWARDOutstanding SHARE Award: Sembawang Shipyard

Award by the Community Chest of Singapore for continuous contributions from year 1999 to 2008.

SHARE Corporate Gold Award: Sembawang Shipyard

Recognition for employees’ contributions towards SHARE donations and the company’s commitment in matching contributions dollar for dollar.

WORKPLACE SAFETY & HEALTH AWARDSWSH Performance Award

Silver Award: SMOE

Award by the Ministry of Manpower for workplace safety and health excellence through the implementation of comprehensive and effective safety and health management systems.

Safety & Health Award Recognition for Projects Award

Jurong Shipyard: Joides Resolution; MT. ARC; Ocean Valor (Ex-PetroRig II)

Sembawang Shipyard: ARV 1; FPSO Aoka Mizu

SMOE: CPOC Project MUDA CPP Platform; FPSO Hai Yang Shi You 117

Recognition by the Ministry of Manpower for excellent safety performance in marine and offshore projects.

WSH INNOVATION AWARD FOR MARINE INDUSTRYASMI WSH Innovation Award

Gold Award: Jurong Shipyard (LIFE Team), Sembawang Shipyard (Hull Team B), PPL Shipyard (Rig-2 Team)

Silver Award: Jurong Shipyard (HP 3 Team)

Bronze Award: Sembawang Shipyard (Team Rocket)

Award by the Association of Singapore Marine Industries for innovative inventions that enhance workplace safety and health as well as productivity.

SINGAPORE INTERNATIONAL 10013th ranking: Sembcorp Marine

Ranking by highest overseas revenue in DP Information Group’s 2009 Singapore 100 Ranking, supported by IE Singapore and SPRING Singapore.

IR MAGAZINE SEA AWARDSBest Corporate Governance Award

Winner: Sembcorp Marine

Award by IR Magazine in association with Singapore Exchange and Investor Relations Professionals Association of Singapore for excellence in corporate governance.

SIAS INVESTORS’ CHOICE AWARDS

Most Transparent Company Award (Non-Electronics Manufacturing)

Runner-up: Sembcorp Marine

Recognition by the Securities Investors Association of Singapore for upholding high standards of corporate governance and transparency.

ARTS SUPPORTER AWARD Recipient: Sembcorp Marine

Recognition by the National Arts Council for contribution towards the development of Singapore’s arts community.

SEATRADE ASIA AWARDS Offshore Yard Award

Winner: Jurong Shipyard

Finalist: PPL Shipyard

Award to Jurong Shipyard for its strong track record and proven turnkey capabilities in offshore conversion and innovative rig construction.

Recognition of PPL Shipyard for its rig building and design expertise.

Corporate Social Responsibility Award

Finalist: Sembcorp Marine

Recognition for commitment to corporate social responsibility and corporate citizenry in workplace safety and health, community care, the arts and education as well as environmental causes.

SME FASTEST GROWING 5035th ranking: PPL Shipyard

Ranking by three-year compounded annual growth rate in DP Information Group’s 2009 SME Fastest Growing 50 ranking, supported by IE Singapore and SPRING Singapore.


Financial ReviewSembcorp Marine delivered

record performance in 2009

amid challenging operating

environment that prevailed

during the year. Group

profit after tax and minority

interests (PATMI) in 2009

was $700 million compared

to $430 million in 2008.

TurnoverThe Group achieved a record turnover of $5.7 billion for the financial year 2009. The 13 per cent increase from $5.1 billion in 2008 was due to higher progressive recognition of rig building projects.

EarningsThe Group’s 2009 PATMI achieved a strong growth of 63 per cent to $700 million from $430 million in 2008, mainly due to better operational efficiency, execution of repeat rig orders and higher operating margins from rig building projects.

Financial PositionTotal capital employed as at 31 December 2009 was $2.0 billion comprising shareholders’ funds of $1.9 billion and minority interests of $76 million. The Group’s shareholders’ fund increased by 43 per cent to $1.9 billion in 2009 from $1.3 billion in 2008. Minority interest of the Group increased from $42 million to $76 million in 2009.

The increase in Other long-term investments was mainly due to the mark-to-market adjustments of quoted equity shares in Cosco Corporation (S) Ltd. Inventories and work-in-progress increased and Progress billings in excess of work-in progress decreased significantly due mainly to increase in rig building, offshore and conversion projects.Trade receivables and Trade payables decreased significantly due mainly to timing of receipts and repayment respectively. Interest-bearing borrowings decreased significantly due to the repayment of borrowings.

Shareholder ReturnsThe Group’s return on equity stood at 44 percent and earnings per share was 34 cents in 2009.

Subject to approval by shareholders of Sembcorp Marine at the forthcoming Annual General Meeting, a final one-tier tax-exempt dividend of 10 cents per share comprising a final ordinary dividend of 6 cents plus a special dividend of 4 cents per share has been proposed. Together with the interim one-tier tax-exempt dividend of 5 cents per share, total dividend for the financial year ended 31 December 2009 would be 15 cents per share.

Economic Value AddedIn 2009, the Group generated a 81% improvement in economic value added (EVA) of $608 million due to an increase in operating profit.

Value Added and Productivity DataIn 2009, the total value added by the Group was $1.4 billion. This was distributed to employees in salaries, wages and benefits of $482 million, to government in income and other taxes of $167 million and to providers of capital in interest and dividends of $232 million, leaving the balance of $605 million, reinvested in business.

Financial Review Aerial view of Sembawang Shipyard.


For the year ($’000) 2009 2008 % Change

Group Income StatementTurnover 5,724,742 5,063,948 13

Profit

EBITDA 937,602 572,544 64

Operating Profit 862,354 501,837 72

Profit Before Tax 907,635 544,958 67

Attributable Profit 700,118 429,918 63

Group Balance Sheet

Total Assets 4,687,548 4,611,817 2

Total Liabilities 2,727,140 3,251,858 (16)

Net Tangible Assets 1,877,943 1,311,858 43

Shareholders’ Funds 1,884,070 1,317,985 43

Minority Interests 76,338 41,974 82

Capital Employed 1,960,408 1,359,959 44

Fixed Deposits, Bank Balances & Cash 1,978,548 2,054,032 (4)

Interest-bearing Borrowings (20,000) (222,238) (91)

Net Cash 1,958,548 1,831,794 7

Economic Value Added (EVA)NOPAT 782,220 472,772 65

Capital Charge 120,233 117,109 3

EVA (100%) 661,987 355,663 86

EVA Attributable to Ordinary Shareholders 608,099 336,497 81

Financial RatiosEarnings Per Share (EPS)

Basic (cents) 34.02 20.83 63

Diluted (cents) 33.93 20.72 64

Dividend Per Share

One-tier Tax Exempt (cents) 15.00 11.00 36

Net Assets Value per share (cents) 91.27 64.11 42

Net Tangible Assets per share (cents) 90.97 63.81 43

Return on Turnover (%) 12.23 8.49 44

Return on Total Assets (%) 15.06 9.48 59

Return on Equity (%) 43.73 28.68 52

Financial ReviewGROUP FINANCIAL HIGHLIGHTS GROUP FIVE-YEAR PERFORMANCE REVIEW

2006Group turnover increased by 67 per cent from $2.12

billion to $3.55 billion with growth mainly attributable

to the rig building and ship repair businesses.

Group operating profit increased by 83 per cent from

$124.5 million in 2005 to $228.2 million in 2006. Group

pre-tax profit also climbed by 95 per cent from $159.9

million to $310.9 million. This improvement was

attributable mainly to higher operating margins from

the rig building and ship repair businesses, gain on

disposal of investments as well as better contribution

from associates. Group attributable profit increased

by 96 per cent from $121.4 million to $238.4 million.

Excluding the non-operating items of $20.5 million,

Group attributable profit rose by 83 per cent to

$217.8 million.

2005Group turnover registered a high at $2.12 billion, an

increase of 56 per cent attributable to growth across

all business segments, in particular the offshore

conversion and rig building segments.

Group operating profit increased by 34 per cent to

$124.5 million, while Group pre-tax profit grew by

41 per cent to $159.9 million. The increase was mainly

due to better operating profit and contribution from

the associate acquired during the year. Group tax

charge was higher in 2005 mainly resulting from a $4.2

million write-back of prior years’ tax over-provision,

arising from a 2 per cent reduction in corporate income

tax rate in 2004. Excluding the prior year tax provisions,

Group attributable profit in 2005 actually increased

by 36 per cent from $89.9 million to $122.0 million.

Semi-submersible rigs under construction in Jurong Shipyard.


Group operating profit increased by 44 per cent from $349.0 million in 2007 to $501.8 million in 2008 while Group pre-tax profit rose 49 per cent from $364.7 million in 2007 to $545.0 million in 2008. The increase was attributable to the higher revenue and operating margin from rig building and ship repair businesses, offset by the lower contributions from Cosco Shipyard Group.

Group attributable profit increased by 78 per cent from $241.0 million to $429.9 million in 2008. Excluding the one-off charge of $43.7 million arising from the commercial settlement with BNP Paribas of foreign exchange transactions in 2008, Group attributable profit at $473.7 million was 31 per cent higher than the attributable profit in 2007.

2009Group turnover rose 13 per cent to $5.72 billion in 2009 from $5.06 billion in 2008 driven mainly by the rig building sector.

Group operating profit increased by 72 per cent from $501.8 million in 2008 to $862.4 million in 2009 mainly due to better operational efficiency and execution of repeat rig orders. Group pre-tax profit increased by 67 per cent from $545.0 million in 2008 to $907.6 million in 2009, attributable mainly to the higher operating margin from rig building projects.

Group attributable profit increased by 63 per cent to $700.1 million in 2009 from $429.9 million in 2008.

2007Group turnover for 2007 increased by 27 per cent from $3.55 billion in 2006 to $4.51 billion in 2007 with growth mainly from the rig building, ship repair, offshore and conversion businesses.

Group operating profit increased by 53 per cent from $228.2 million in 2006 to $349.0 million in 2007. Group pre-tax profit increased by 17 per cent from $310.9 million in 2006 to $364.7 million in 2007. The increase was mainly attributable to higher turnover and operating margin from rig building and ship repair businesses, better contribution from associates, and gain on sale of other long-term equity investment amounting to $229.7 million. This was offset by the $308.2 million charged to the income statement arising from the Unauthorised Transactions and its related expenses (“the Charge”). Excluding the effect arising from the Unauthorised Transactions, pre-tax profit increased 117 per cent to $673.0 million.

Notwithstanding the Charge of $308.2 million to the fourth quarter 2007 income statement, the Group reported an increase in net profit from $238.4 million in 2006 to $241.0 million in 2007. Excluding the Charge and non-operating items, Group attributable profit increased by 66 per cent to $362.3 million.

2008Group turnover grew by 12 per cent from $4.51 billion in 2007 to $5.06 billion in 2008 driven mainly by rig building, ship conversion & offshore and ship repair businesses.

GROUP FIVE-YEAR FINANCIAL SUMMARY

Financial ReviewGROUP FIVE-YEAR PERFORMANCE REVIEW

For the year 2005 2006 2007 2008 2009($’000) ($’000) ($’000) ($’000) ($’000)

Turnover 2,119,279 3,545,049 4,513,123 5,063,948 5,724,742

Operating Profit 124,549 228,233 349,029 501,837 862,354 Profit Before Tax 159,855 310,871 364,721 544,958 907,635 PATMI 121,398 238,388 240,989 429,918 700,118

Dividend - Interim 28,880 40,867 73,783 102,906 103,124 Dividend - Final 81,495 142,483 106,353 123,542 123,857 Dividend - Final Special - - - - 82,572

Dividend - Total 110,375 183,350 180,136 226,448 309,553

Group Balance SheetProperty, Plant and Equipment 579,584 679,024 675,585 697,702 678,361 Associates & Joint ventures 106,880 147,255 205,502 269,609 267,774 Other Long Term Investments 77,931 346,987 689,554 138,376 165,783 Other Long Term Assets 68,628 69,583 45,990 70,611 57,789 Current Assets 1,493,114 2,186,652 2,846,216 3,435,519 3,517,841 Current Liabilities (982,871) (1,690,896) (2,397,423) (3,111,640) (2,635,282)Long Term Liabilities (227,569) (368,382) (359,708) (140,218) (91,858)

1,115,697 1,370,223 1,705,716 1,359,959 1,960,408

Share Capital 145,036 418,631 442,549 443,347 443,347

Capital, Foreign Currency Translation and Other Reserves 318,271 209,093 502,173 (81,359) 22,515

Retained Profits 602,238 710,615 735,338 955,997 1,418,208 Minority Interests 50,152 31,884 25,656 41,974 76,338

1,115,697 1,370,223 1,705,716 1,359,959 1,960,408

Per ShareEPS - basic (cents) 6.03* 11.71* 11.72 20.83 34.02 EPS - diluted (cents) 5.89* 11.42* 11.63 20.72 33.93 Net Tangible Assets (cents) 52.30* 64.64* 80.76 63.81 90.97 Net Assets Value (cents) 52.48* 65.30* 81.13 64.11 91.27

Financial RatiosReturn on Equity (%) 11.93 19.83 15.97 28.68 43.73 Return on Total Assets (%) 5.80 8.28 6.11 9.48 15.06 Operating Profit/Equity (%) 12.24 18.99 23.13 33.48 53.86 Current Ratio (times) 1.52 1.29 1.19 1.10 1.33 Net Gearing (times) Net cash Net cash Net cash Net cash Net cash Dividend Cover (times) 1.10 1.30 1.34 1.90 2.26

* Adjusted for two bonus shares for every five existing ordinary shares.

A LNG vessel in Sembawang Shipyard for repairs.


Financial Review

A chemical tanker after repairs at Jurong Shipyard.


2005 2006 2007 2008 2009$’000 $’000 $’000 $’000 $’000

Turnover 2,119,279 3,545,049 4,513,123 5,063,948 5,724,742

Less: Bought In Materials (1,734,961) (2,957,566) (3,722,062) (3,993,848) (4,297,115)

Gross Value Added From Operations 384,318 587,483 791,061 1,070,100 1,427,627

Investment, Interest & Other Income 42,917 79,514 292,629 67,140 67,222

Share Of Associates’ Results 12,313 40,923 74,075 56,995 17,549

Share Of Joint Ventures’ Results 1,011 3,441 7,718 8,305 7,850

Other Non-Operating Expenses (12,409) (30,792) (20,143) (78,108) (31,836)

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

428,150 680,569 842,418 1,080,683 1,488,412

Distribution:

To Employees : Salaries, Wages & Benefits

216,533 299,052 379,897 429,895 482,128

To Government : Income & Other Taxes 41,888 73,880 130,198 111,677 166,809

To Providers of Capital :

Interest Paid on Borrowings 4,785 10,549 13,692 11,370 5,329

Dividends 98,036 122,362 216,266 209,259 226,666

Retained in Business :

Depreciation and Amortisation 37,766 45,514 66,353 70,592 75,248

Retained Profits 23,362 116,026 24,723 220,659 473,452

Minority Interests 4,186 10,143 10,738 21,324 56,647

Non-Production Costs 1,594 3,043 551 5,907 2,133

Total Distribution 428,150 680,569 842,418 1,080,683 1,488,412

Average Number of Employees 6,241 7,592 9,570 10,330 9,515

Employment Costs 216,533 299,052 379,897 429,895 482,128

Value Added Per Employee 61.58 77.38 82.66 103.59 150.04

Employment Cost Per Employee 34.70 39.39 39.70 41.62 50.67

Value Added Per Employment Costs 1.77 1.96 2.08 2.49 2.96

Value Added Per Dollar Investment in 0.66 0.87 1.17 1.53 2.10

Property, Plant and Equipment

Value Added Per Dollar Turnover 0.18 0.17 0.18 0.21 0.25

Financial ReviewVALUE ADDED STATEMENT


2009 2008$’000 $’000

Net Operating Profit Before Tax 882,236 479,658

Adjust for:Share of Associates and Joint Ventures' Results 25,399 65,300 Interest Expenses 7,997 13,066 Others 21,984 13,360

Adjusted Profit Before Interest and Tax 937,616 571,384

Cash Operating Taxes (Note 1) (155,396) (98,612)

NOPAT 782,220 472,772

Average Capital Employed (Note 2) 1,908,465 1,951,809

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

Capital Charge 120,233 117,109

EVA 661,987 355,663

Less: Minority Share of EVA 53,888 19,166

EVA Attributable to Ordinary Shareholders 608,099 336,497

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 / impaired and present value of operating leases.

Note 3: The Weighted Average Cost of Capital is calculated in accordance with Sembcorp Group EVA Policy as follows:i) Cost of Equity using Capital Asset Pricing Model with market risk premium at 6.0% (2008: 6.0%);ii) Risk-free rate of 2.08% (2008: 2.74%) based on yield-to-maturity of Singapore Government 10 years Bonds;iii) Ungeared beta 0.7 (2008: 0.6) based on Sembcorp Industries risk categorisation; andiv) Cost of Debt rate at 4.98% (2008: 3.53%) using 5-year Singapore Dollar Swap Offered rate plus 300 basis point.

(2008: 5-year Singapore Dollar Swap Offered rate plus 55 basis point)

ECONOMIC VALUE ADDED

Financial Review

• Simple ship repair• Vessel size less than 40,000 dwt• Building of barges, tugs, water boats

• Repair of LNG & LPG tankers• Chemical tankers• C.O.W. (crude oil washing) and IGS (Inert Gas System) installations

• Vessels size increased – over 40,000 dwt • Repair of VLCCs, bulk carriers • Steelwork renewals• 1st VLCC: the 210,822 dwt Bulford

1970 – 1975 1976 – 19941963 – 1969

• Building of standard IHI design vessels• Construction of 14,000 dwt Freedom Class vessel• 1st vessel, Neptune Ruby

• Construction of 90,000 dwt tankers• Building of IHI design vessels• Construction of tugs, barges and product tankers

• Jumboisation • Reconstruction of tankers• Conversion of general cargo to container vessel• Reefer ship conversion

Shipbuilding

Ship Conversion & Offshore

Ship Repair

• Replacement of engine bedplates• Gas tankers, passenger vessels & navy vessels• Repair of double-hull VLCCs

• Fabrication of topsides production modules• JVs with SMOE on mega FPSO

• Proprietary design of container vessels : 1,078 to 2,600 TEUs• Design and construction of 1,078 TEUs container vessels• Design and construction of 2,600 TEUs container vessels

Rig Building

• FPSO, FSO and FPU conversions• EPIC (Engineering, Procurement, Installation & � Commissioning) FPSO conversion

• Construction of Friede & Goldman Ex-D 5th Generation semi-submersibles• Proprietary design of Baker Marine Pacific Class (BMC) 375 Deep Drilling Jack-up rig

• Repair of war-damaged tankers• Repair of passenger vessels• Repair of navy vessels

• Niche shipbuilding• Construction of 37,000 dwt bulk carriers & � product tankers• Design & construction of 830 TEU container vessel

• Specialised conversion – power barge conversion – tanker to lightering vessel• Offshore conversion – Conversion of tanker to FPSO – Conversion of tanker to FSO

• Repair and upgrades of jack-ups• Repair and upgrades of semi-submersibles

1995 – 2000 2001 – 2005 2006 & Beyond

• Design and construction of BMC 375 Deep Drilling Jack-up rig• Construction of 6th Generation Friede & Goldman Ex-D (DP) semi-submersible rigs

• JVs with SMOE on mega FPSOs and topsides production modules• Drillship upgrading

• LPG FPSO conversion• Specialised FPSO conversions• Heavy Lift Derrick Pipelay vessel

• LNG tankers• Container vessels• FPSO upgradings• Offshore upgradings

• Building of customised and specialised vessels• Design and construction of 2,600 TEUs container vessels

Offshore Production

Offshore Engineering

• Fixed Production Platforms• Floating Production Facilities : FPSO, FPU, TLPs, SPARS

Strong Business Models: Our Transformation

Focus on growing marine & offshore businesses:• Ship Repair

• Shipbuilding

• Ship Conversion

• Rig Building

• Offshore Platforms & Floating Production Facilities




Significant Events

Strike-steel of Rock Dumper project by Sembawang Shipyard for Dredging, Environmental and Marine Engineering •(DEME) Group.

Strike-steel of PPL Pacific Class 375 jack-up rig (P2029) by PPL Shipyard for Sinopec International (Hong Kong) Co. •

Launch of Green Wave Environmental Care Project 2009 and presentation of awards to 2008 winners.•

JANUARY

Delivery and sail-away of COSL Confidence, a PPL Pacific Class 375 jack-up rig, more than 4.5 months ahead •of schedule by PPL Shipyard to China Oilfield Services Limited.

Strike-steel of West Capricorn, the fourth 6• th generation Friede & Goldman ExD-design semi-submersible rig built by Jurong Shipyard for Seadrill.

Announcement of full-year 2008 financial results.•

FEBRUARY

Strike-steel of PPL Pacific Class 375 jack-up rig •(P2025) by PPL Shipyard for Egyptian Offshore Drilling Company.

Acquisition of the remaining 30 per cent interest in •JPL Corporation by Sembcorp Marine to streamline operations and shareholding structure.

Participation •by Sembawang Shipyard at Seatrade Cruise Convention, in Miami, United States.

MARCH

Award of US$247.3 million contract by SeaDragon Offshore to Jurong •Shipyard to construct, outfit, furnish, equip, test and complete a Moss Maritime ultra-deepwater semi-submersible drilling rig from a bare-deck hull.

Delivery and sail-away of Tunu North compression and manifold platforms •engineering, procurement, construction, transportation, installation, hook-up and commissioning project by SMOE to Total Indonesia.

Keel-laying of PPL Pacific Class 375 jack-up rig (P2023) by PPL Shipyard for •Egyptian Offshore Drilling Company.

Signing of Favoured Customer Contract •between BG LNG Services of United States and Sembawang Shipyard.

46• th Annual General Meeting and Extraordinary General Meeting.

Participation in a local maritime exhibition •and conference by Sea Asia Singapore.

APRIL

Award of $230 million Gajah Baru •Project by Premier Oil Natuna Sea B.V. to P.T. SMOE Indonesia in consortium with Saipem Indonesia for the engineering, construction and commissioning of two offshore platforms.

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

MAY

Delivery of Ocean Courage (Ex-PetroRig I), an ultra-deepwater 6• th generation newbuild Friede & Goldman ExD-design semi-submersible rig, by Jurong Shipyard to Diamond Offshore Drilling.

Delivery of Sapphire •Driller, the second PPL Pacific Class 375 jack-up rig by PPL Shipyard for Vantage Drilling Company, three months ahead of schedule.

Participation in Nor •Shipping 2009, a key exhibition for the European shipping and maritime community, in Lillestrøm, Norway.

JUNE

Leadership renewal at Sembcorp Marine, with Mr Wong Weng Sun •appointed as President & Chief Executive Officer and Mr Tan Kwi Kin appointed as Senior Advisor.Announcement of first quarter 2009 financial results.•Participation in the Offshore Technology Conference 2009, one of the •world’s largest oil and gas events, in Houston, United States.


Significant EventsJULY

Award of approximately $160 million contract by MODEC Offshore Production Systems (Singapore) to Jurong •Shipyard to convert a Very Large Crude Carrier into a Floating Production Storage Offloading (FPSO) vessel to be named FPSO Kwame Nkrumah MV21.Launching of a heavy-lift jack-up barge built by Jurong Shipyard for Aramco Overseas Company B.V.•Announcement of first-half 2009 financial results•Participation in the National Day Parade 2009.•

AUGUST

Delivery of Noble Danny Adkins, a Bingo 9000 design ultra-•deepwater dynamic positioning (DP3) semi-submersible drilling rig converted from a bare-deck hull, by Jurong Shipyard to Noble Drilling.

Delivery of Aquamarine Driller, the third PPL Pacific Class 375 •jack-up rig by PPL Shipyard for Vantage Drilling Company, two months ahead of schedule.

Strike-steel of Friede •& Goldman ExD Millennium design semi-submersible rig (11-1096) by Jurong Shipyard for Atwood Oceanics Pacific.

SEPTEMBER

Award of a second US$237.3 million rig order to Jurong Shipyard by •SeaDragon Offshore Limited to construct, outfit, furnish, equip, test and complete a Moss Maritime ultra-deepwater semi-submersible drilling rig from a bare-deck hull. Delivery and sail-away of •the Muda Production Central Processing Platform, one of the world’s heaviest topsides at 18,000 metric tonnes, by SMOE to Carigali-PTTEPI Operating Company.Participation in Asian •Investment Conference and Exhibition organised by Securities Investors Association of Singapore.

OCTOBER

Signing of a joint-venture partnership between Sembawang Shipyard and Kakinada Seaports to establish a new •marine and offshore facility on India’s east coast. Signing of three Favoured Customer Contracts by Sembmarine Kakinada with Transocean Offshore International •Ventures Limited (India), Aban Offshore Limited and Marcas. Announcement of third-quarter 2009 financial results.•Announcement of Sembcorp Marine’s New Integrated Yard Facility and award of turnkey construction contract for •the Phase 1 yard development to Zhen Hua Engineering.

NOVEMBER

Delivery of Topaz •Driller, the fourth PPL Pacific Class 375 jack-up rig by PPL Shipyard for Vantage Drilling Company.

Naming of Sneferu •(P2022) and Setty (P2028), two units of PPL Pacific Class 375 jack-up rigs, by PPL Shipyard for Egyptian Drilling Company.

Sale of jack-up rig Ex-West Elara by PPL Shipyard to Vietsopetro by PPL Shipyard after acquisition from Seadrill Limited. •

Keel-laying of Friede & Goldman ExD Millennium design semi-submersible rig (11-1096) by Jurong Shipyard for •Atwood Oceanics Pacific.

DECEMBER

Delivery of Ocean Valor (Ex-PetroRig II), a newbuild ultra-deepwater 6• th generation Friede & Goldman ExD-design semi-submersible rig, by Jurong Shipyard to Diamond Offshore Drilling.

Naming of Noble Jim Day, the second ultra-deepwater rig built up from a bare-deck hull, by Jurong Shipyard for •Noble Drilling.

Naming of Neptune •Explorer, a drillship upgrading project, by Sembawang Shipyard for Neptune Marine Oil & Gas.

Strike-steel of Gajah Baru •Project by P.T. SMOE Indonesia for Premier Oil Natuna Sea B.V.


Sembcorp Marine recorded

a solid year of strong

operational growth in 2009,

despite the challenging

operating environment

brought about by the

global financial crisis and

the declining oil prices at

the close of 2008.

Operations ReviewTurnover for the Group grew 13 per cent to $5.7 billion in 2009 from

$5.1 billion in 2008, driven by strong growth in rig building activities. The

highest revenue contribution came from rig building at 64 per cent of

total revenue followed by ship conversion & offshore at 23 per cent, ship

repair at 12 per cent and others at 1 per cent.

Rig BuildingThe rig building segment generated the highest revenue growth of 28

per cent from $2.8 billion in 2008 to $3.6 billion in 2009. The increase

in rig building turnover was due to two units of jack-up rigs and a

semi-submersible unit achieving initial 20 per cent revenue recognition in

4Q 2009 as well as the resumption of revenue recognition for the jack-up

rig sold to Vietsopetro.

The execution of rig projects secured in prior years kept Sembcorp

Marine’s yards busy throughout the year. The Group’s focus on timely

project execution and delivering on promise bore results, with a total of

four jack-up rig units and three semi-submersible rigs delivered either

ahead or on schedule to their respective owners.

During the year, four units of the Pacific Class 375 proprietary design

jack-up rigs were delivered by PPL Shipyard. This comprised the COSL

Confidence to China Oilfield Services and Aquamarine Driller, Sapphire

Driller and Topaz Driller to Vantage Drilling.

Jurong Shipyard delivered three ultra-deepwater dynamic positioning semi-submersible drilling rigs in 2009.

These included 6th generation Friede and Goldman ExD design units Ocean Courage (Ex-PetroRig I) in June

and Ocean Valor (Ex-PetroRig II) in October to new owner Diamond Offshore Services as well as Noble Danny

Adkins, a Bingo 9000 design rig built up from a bare-deck hull, to Noble Drilling in September.

COSL Confidence Aquamarine Driller Sapphire Driller Topaz Driller

Ocean Valor Noble Danny Adkins



continue in order to replenish declining oil and gas

reserves and to increase production to meet growing

energy demand.

World Economic OutlookAccording to the International Monetary Fund (IMF),

the global recovery is off to a stronger start than

anticipated earlier but is proceeding at different

speeds in the various regions. Following the deepest

global downturn in recent history, economic growth

solidified and broadened to advanced economies in

the second half of 2009. In 2010, world output is

expected to rise by 4 per cent. This is 2 per cent

higher than predicted by the IMF’s World Economic

Outlook in October 2009. In most advanced

economies, the recovery is expected to remain

sluggish by past standards. By contrast, many

emerging and developing economies expect higher

growth and activity, buoyed mainly by internal

demand.

Driving the global rebound has been the extraordinary

amount of policy stimulus. The monetary policies have

been highly expansionary, with interest rates down to

record lows in most advanced and in many emerging

economies. Fiscal policies have also provided major

stimulus in response to the deep downturn.

A total of 282 vessels called at Sembcorp Marine’s

yards for repairs in 2009, representing a 5 per cent

increase from 269 in 2008. The average value per

vessel, at $2.50 million, was 15 per cent lower than

that of 2008. The vessel mix comprised tankers at 34

per cent, LNG/LPG gas carriers at 18 per cent, drillship

and FPSO upgrading at 13 per cent, passenger ships

at 5 per cent, containerships and bulk carriers at

8 per cent each, cargo ships at 3 per cent and other

vessels at 11 per cent.

In particular, the Group affirmed its world number-one

status in highly specialised LNG repairs. It secured

21 LNG projects in 2009, an improvement over its

record of 17 LNG carriers in 2008.

Market Outlook and Underlying Market DriversThe year ahead sees increasing confidence as the

global economy shows signs of recovery. This

recovery is expected to occur at different speeds

across regions, with Asia taking the lead. The

demand for energy is also expected to grow. The

fundamentals for the offshore oil and gas sector

remain intact with prices of oil stabilising within

the range of US$70 to US$80 a barrel. In addition,

the long-term fundamentals driving deepwater

exploration and production activities are expected to

Ship conversion and offshoreTurnover for the ship conversion and offshore sector

registered a slight 1 per cent dip at $1.3 billion in 2009

as compared with $1.4 billion in 2008. This was the

result of lower revenue recognition from the sector

as compared with the fourth quarter of 2008 in which

there was variation order settlement for a turnkey

conversion project.

During the year, SMOE successfully delivered on

schedule two offshore platforms contracted by

TOTAL Indonesia for the Tunu North field in April and

the CPOC Muda production platform integrated deck

ordered by Carigali-PTTEPI Operating Company in

July.

Ship repairRevenue for the ship-repair sector fell by 11 per cent

from $795 million in 2008 to $706 million in 2009, as

ship owners and shipping companies were impacted

by less buoyant levels of seaborne trading arising

from a slowdown in global trade volumes.

Nonetheless, Sembcorp Marine’s yards received

strong support and a steady base-load of projects

from alliance and Favoured Customer Contract (FCC)

partners and regular customers, which accounted

for 83 per cent of ship repair revenue in 2009.

The Group’s stable of FCC partners grew with the

addition of BG LNG Services, which committed the

repair, refurbishment and upgrading of its fleet of

LNG carriers trading in the Far East to Sembawang

Shipyard. Transocean Offshore International Ventures

India, Aban Offshore and Marcas also signed FCC

contracts to repair their fleets of vessels and rigs

trading or operating in India with Sembmarine

Kakinda, the Group’s Indian joint-venture yard.

CPOC Muda Production Platform.

LNG carrier repairs.



Output in the advanced economies is expected

to expand by 2 per cent in 2010, following a sharp

decline in output in 2009. According to the IMF, the

recovery in advanced economies will be weak by

historical standards, with real output remaining below

its pre-crisis level until late 2011.

However, growth in emerging and developing

economies is expected to rise to about 6 per cent

in 2010, following a modest 2 per cent increase in

2009. In 2011, output is projected to accelerate

further. Stronger economic frameworks and swift

policy responses have helped many emerging

economies to cushion the impact of the

unprecedented external shock and quickly re-attract

capital flows.

Significant RisksThe reversal of the confidence crisis and the

reduction in uncertainty may continue to foster a

stronger-than-expected improvement in financial

market sentiment and prompt a larger-than-expected

rebound in capital inflows, trade and private demand.

New policy initiatives in the United States to reduce

unemployment could provide a further impetus to

both its domestic and global growth.

On the downside, a key risk is that a premature

and incoherent exit from supportive policies may

undermine global growth and its rebalancing. Another

important risk is that impaired financial systems and

housing markets or rising unemployment in key

advanced economies may hold back the recovery

in household spending. Also, rising concerns

about worsening budgetary positions and fiscal

sustainability could unsettle financial markets and

stifle the recovery by raising the cost of borrowing for

households and companies. Another downside risk

is that the rallying commodity prices may constrain

the recovery in advanced economies.

Global oil demand to regain positive growth in 2010

The International Energy Agency (IEA), in its latest

report, has forecast global oil demand to increase

from 50,000 bpd for 2009 to 170,000 bpd for 2010

on the back of stronger economic projections by the

IMF.

Over the longer term, energy demand is widely

expected to continue to grow. The IEA sees world

primary energy demand in its reference scenario

growing by 40 per cent by 2030. As fossil fuels are

expected to satisfy 77 per cent of the incremental

demand, oil demand is projected to grow from about

85 mb/d today to 105 mb/d in 2030.

The energy demand growth will be driven primarily

by Asian consumers. China and India are expected

to account for 53 per cent of the increase in primary

energy demand over the next 20 years.

The Singapore EconomyThe deterioration in the global economy resulted in

Singapore’s economy contracting by 2.0 per cent in

2009, albeit at a lesser amount than predicted a year

before. The $20.5 million budget stimulus package

– the Resilience Package – and other extraordinary

measures announced in the 2009 Budget to help

businesses, stimulate bank lending and save jobs

had helped Singapore ride the severe recession and

avoid lasting damage to the economy.

Following recommendations by the Economic

Strategies Committee, the 2010 Budget introduced

a number of tax changes to gear Singapore on a

sustainable growth path over the next five to 10

years. New measures were announced to grow

Singapore’s productivity, to support the growth of

more globally competitive Singapore companies and

to help raise the real income of its citizens.

The Ministry of Trade and Industry expects the

Singapore economy to grow by 4.5 to 6.5 per cent

in 2010.

2008 2009 Projections 2010 Projections 2011

World Output 3.0 -0.8 3.9 4.3

Advanced economies 0.5 -3.2 2.1 2.4

United States 0.4 -2.5 2.7 2.4

Euro area 0.6 -3.9 1.9 1.6

Japan -1.2 -5.3 1.7 2.2

Emerging and developing economies 6.1 2.1 6.0 6.3

Africa 5.2 1.9 4.3 5.3

Developing Asia 7.9 6.5 8.4 8.4

China 9.6 8.7 10.0 9.7

India 7.3 5.6 7.7 7.8

ASEAN 4.7 1.3 4.7 5.3

Middle East 5.3 2.2 4.5 4.8

Western Hemisphere 4.2 -2.3 3.7 3.8

Brazil 5.1 0.4 4.7 5.7

Mexico 1.3 -6.8 4.0 4.7

Source: International Monetary Fund

Overview of World Economic Outlook Projections



Another recent survey by Barclays Capital on 387 producers indicated that global spending on exploration and production would rise by 11 per cent to US$439 billion in 2010, reversing the drop in 2009. In this survey, companies were projecting their spending based on a crude oil price of US$70.16 per barrel, up from the US$50.18 used in a previous survey issued in June 2009. In addition, Barclays Capital reported that about 45 per cent of the companies surveyed expected to spend a greater share of their capital expenditures on exploration and production in 2010.

Production floater orders have resumedFive production floaters have been ordered since July 2009, ending a dry period that began in mid-2008 and extended through mid-2009.

The number of potential floater projects in the planning cycle continues to grow. There are 170 projects currently in the bidding, design or planning stage that potentially require a floating production or storage system. This is a net increase of 10 projects over a July report by International Maritime Associates.

Brazil is the most active region for future projects with 34 potential floater projects in the planning cycle. Next is West Africa with 30 projects, followed by South East Asia with 26 projects, the Gulf of Mexico with 25 projects and Northern Europe with 19 projects.

Oil prices have climbed to the US$70 to US$80 rangeThough far below the overheated price level in mid-

2008, spot crude prices have recovered to a relatively

robust level. After hitting a low of about US$30 at

the end of December 2008, spot prices for crude

have returned to the US$70 to US$80 range, which is

about 55 per cent of the peak reached in July 2008.

While there are marginal projects that require higher

prices to justify proceeding with development,

expected crude prices at the US$70+ level should

provide the economic basis for a significant number

of project starts. Petrobras in its report stated that

its pre-salt discoveries are viable at crude prices of

US$45 per barrel.

Exploration and production spending set for a rebound in 2010The 52 oil companies covered in a spending update

conducted by DnBNor predicted a 9 per cent increase

in exploration and production spending for 2010.

There is potential upside to the 2010 spending as

the oil price has reached higher levels and the world

economy is recovering. Driving this growth are the

national oil companies who are maintaining their

aggressive spending plans.



Forging the FutureTo stay at the industry

forefront, Sembcorp Marine

continued its strategic

thrust of forging long-term

expansion plans, fostering

win-win alliances and

sharpening its competitive

edge to gear up for the

future.

Staying Globally CompetitiveSembcorp Marine adopts a multi-prong strategy to further enhance its leading edge as a globally competitive company. Continual investments are made to scale up productivity and operational efficiency through infrastructural expansion, facilities upgrading as well as investing in R&D and innovation.

Integrated New Yard Facility

To position Sembcorp Marine for sustainable growth, plans are underway to develop a modern, work-efficient and state-of-the-art integrated New Yard Facility – the first of its kind in Singapore – that will strengthen the Group’s competitive advantage.

The 206-hectare New Yard Facility will ensure that the Group is well-poised to respond to the anticipated growth in dock capacity demand and the increase in offshore oil and gas activities, spurred by the projected increase in seaborne and oil trades in Asia.

This leading-edge project will harness the Group’s more than 47 years of experience while deploying some of the industry’s latest technology and revolutionary layouts optimised for work-effectiveness. Besides serving a wide range of vessels including very large crude carriers (VLCCs), new generations of mega containerships, LNG/LPG carriers and passenger ships, it will be geared to meet the requirements of vessels complying with new global regulatory and environmental standards.

Located at Tuas View Extension in the west of Singapore, the integrated design takes into account work flow efficiency, resource optimisation, cost-structure, market potential and future competition. The New Yard Facility will enable the Group to benefit from economies of scale through greater operational synergy, production efficiency and critical mass. This will translate to enhanced services, faster turnaround and more cost-competitive solutions for customers.

Forging the Future

Award of Phase 1 turnkey construction contract for the integrated New Yard Facility.

Artist’s impression of Sembcorp Marine’s New Yard Phase 1 Development.


Forging the Future

The project is expected to be developed in three phases over a period of 16 years. The preliminary projection of $750 million to develop the first phase will be funded through a combination of debt and internal funds generated from operations of existing shipyards.

The turnkey construction contract for the design and construction of the first phase -- which includes the design and construction of four VLCC-sized dry docks, quays, piers and other ancillary works -- has been awarded to Zhen Hua (S) Engineering. Construction for this phase commenced in

by Sembmarine Kakinada, a joint venture between Sembawang Shipyard and Kakinada Seaports. Sembawang Shipyard, which holds an initial 19.9 per cent share in the joint venture, has an option to increase the stake to 40 per cent.

Located strategically on the east coast of India between Vishakhapatnam and Chennai Port, the yard will enable the Group to serve drilling units and merchant vessels plying one of the world’s key oil and gas exploration locations.

The facility, which began immediate first phase operations, will be developed within the next three to five years into a one-stop integrated offshore facility catering to the repair and newbuilding of offshore vessels and ships, riser and equipment repairs, as well as modules fabrication.

Strategic Brazil PresenceIn line with its global hub strategy, Sembcorp Marine further reinforced its presence in Brazil with the establishment of a new shipyard Estaleiro Jurong Aracruz to cater directly to one of the fastest growing offshore oil and gas exploration and production markets in the world.

The 82.5-hectare shipyard with 1.6 km of coastline will be strategically located in the Municipal of Aracruz in the State of Espirito Santo, the second largest producer of oil in Brazil. The site is situated close to the offshore Espirito Santo Basin, one of the recently discovered giant pre-salt oil basins offshore Brazil,

December 2009 and is scheduled for completion by May 2013.

Upon achieving commercial operations for the first phase, Sembcorp Marine’s operations in Pulau Samulun will be relocated to the New Yard Facility. The remaining two phases are expected to be developed over a period of 12 years.

The Asian FootholdSembcorp Marine continued its strategic expansion into new growth markets with the establishment of a marine and offshore facility in India to be operated

making it an ideal location to support the country’s oil and gas activities.

Engineering design for the new shipyard has commenced, with development and construction works to be undertaken in stages.

On completion, the shipyard will be equipped with state-of-the-art facilities, including a drydock, slipways, berthing quays and ancillary steel and piping facilities. It will be capable of drillships construction, building of semi-submersible rigs, undertaking FPSO integration, fabrication of topside modules and PSVs construction, in addition to the traditional activities of drilling rig repairs, ship repairs and modification works.

Long-term PartnershipsThe mutually beneficial long-term partnerships that Sembcorp Marine’s yards have built with their customers are important pillars in sustaining the Group’s business success.

To earn customer trust and confidence, the yards are committed to delivering on their promises and achieving high quality standards as well as health, safety, security and environmental excellence.

Sembawang Shipyard continued to strengthen its foothold as a leading provider of LNG vessel repair services when it secured a Favoured Customer Contract from BG LNG Services, United States. BG LNG Services is the exclusive partner of Energy Market Authority of Singapore to supply up to 3 million tonnes per annum of liquefied natural gas to Singapore for a period of up to 20 years. The contract covers ship repair, refurbishment, upgrading and related marine services for the company’s fleet of LNG carriers. The yard also successfully cultivated two new LNG customers in 2009 – Oman LNG Shipmanagement and China LNG Shipmanagement.

Sembmarine Kakinada marked an auspicious start with the award of three Favoured Customer Contracts. One of these is to support the offshore drilling units of Transocean Offshore International Ventures Limited (India). The others are with Aban

Features of Integrated New Yard Facility

Docking and berthing facilities optimised with an improved dock and quay ratio to ensure effective ✔utilisation and a faster turnaround.

Total dock capacity increased by 62 per cent to 3,075,000 dwt across 11 docks. ✔

A centralised and efficient layout that minimises logistical resource movement and redundancy through ✔the effective and efficient deployment of labour and resources.

Integrated facilities and utilities coupled with state-of-the-art production technology to ensure lower ✔production costs and to increase flexibility in cross-deployment and multi-tasking of workers, leading to improved workforce productivity and quality of work.

Enhanced production systems and processes to ensure integrated capabilities to handle complex and ✔sizable tasks efficiently.

The modern and work-efficient New Yard Facility will be situated at Tuas View Extension.

Celebrating the Sembmarine Kakinada partnership in India.


workers’ exposure to potential hazards such as pinch points or boats toppling.

The third gold award went to the Claminator, a device invented by PPL Shipyard’s RIG-2 team to clamp the various sections of the jack-up rig’s legs during the fabrication, joining and straightening process. The innovation replaced the traditional welding and grinding processes, effectively reducing risks such as fire hazards.

Jurong Shipyard’s HP3 team clinched a silver award with the Guardrail Locking Device, which effectively secured guardrails around manholes and access openings to minimise the risk of falling. The invention also eliminated the need for hot work traditionally used in the erection of conventional railings.

The Coupling Extractor, developed by Sembawang Shipyard’s Team Rocket, clinched a bronze award for enabling the effective and efficient removal of couplings from motor shafts and pumps without the use of hot work.

Offshore Limited, Asia’s largest private drilling company, to repair and upgrade its drilling units, and with Marcas, which includes the world’s largest ship-management company V Ships, to repair its fleet of vessels trading to India.

Investing in Productivity & InnovationIn making the next leap in productivity, investments were made to bolster the Group’s operational capabilities and work efficiency for enhanced competitiveness.

Operational Improvements•The Group’s yards enlarged their operational capacity and capabilities through facility developments and equipment additions during the year.

Jurong Shipyard installed a new workshop to centralise its mechanical, electrical and machining work processes for greater efficiency and synergy. The convergence of these work processes at one location has resulted in an estimated 30% increase in productivity levels. The yard also reinforced its equipment capacity with the purchase of two new 300-tonne cranes.

Over at Sembawang Shipyard, three new hull fabrication shops were added, doubling the yard’s overall sheltered fabrication area to 23000 m2. In

ensuring better service to customers, the yard set up the Aquarius, a new complex for superintendents.

R&D and Innovation •Sembcorp Marine continued to leverage innovation to differentiate and distinguish itself from the competition. The Group’s research and development efforts have resulted in proprietary designs and critical components for rigs and ships as well as innovative engineering, construction and operational processes that further enhanced work efficiency, resource utilisation, cost-competitiveness and workplace safety and health standards.

Most notably, they have encompassed product developments such as the well-received Pacific Class 375 jack-up rig design by PPL Shipyard and the Jubilee Class 2,646 TEU containership design by Jurong Shipyard. They also covered operational innovations like the Group’s proprietary Load-out and Mating in Dock and Transverse Skidding methods of accelerating the construction of deep-drilling semi-submersibles.

The spirit of innovation is also evident in the Group’s daily operations as employees and contactor partners actively seek ways to innovate their work processes for improved productivity and operational efficiency as well as improved cost-savings and better HSSE performance.

Shopfloor innovations developed by personnel from Sembcorp Marine’s yards also won industry acclaim when they garnered five awards – three gold, one silver and one bronze – at the Association of Singapore Marine Industries Workplace Safety and Health Innovation Convention in 2009.

The Super Trolley, which won the gold award, was developed by Jurong Shipyard’s LIFE team to move large and heavy cable drums with greater ease. Besides increasing work effectiveness and efficiency, the innovation minimised the usage of cranes during the process leading to improved safety on the job.

Another gold-winning innovation was the High Definition Lifeboat and Rescue Boat Cradle conceived by the Hull Team B from Sembawang Shipyard. The gadget worked by automatically locking onto the hull to secure the lifeboats during use. This reduced

Forging the Future

Company Contract Type

BHP Billiton Limited Alliance

BP Shipping Limited

Chevron Shipping LLC

Jo Tankers AS

NOL Shipping

Shell International Trading & Shipping Company

Alaska Tanker Company FCC

ASP Holdings Ltd

BG LNG Services, LLC

Bocimar Shipmanagement

BW Gas ASA

Camillo Eitzen ASA

Euronav Shipmanagement

Exmar Shipmanagement

Kumiai Senpaku

Marcas Services SA

Northwest Shelf Shipping

Polar Tankers Inc.

TMT Ltd

Transocean Eastern Pte Ltd

Aban Offshore Limited FCC (Kakinada)

Marcas Services SA

Transocean Offshore InternationalVentures Limited (India)

Nor Offshore Docking & Maintenance

Police Coast Guard

PSA Marine

Republic of Singapore Navy New LST Maintenance

Alliance and FCC vessels form 83% of the Group’s repair business in 2009.

Equipment additions to boost operational capabilities.

High Definition Lifeboat and Rescue Boat Cradle.

Guardrail Locking Device.


Corporate and Social Responsibility

Sembcorp Marine sought to

raise the bar in workplace

safety and health (WSH),

as part of the Group’s

everyday culture, to

meet its commitment to

employees, customers and

stakeholders.

Certifications of ExcellenceAchieving high standards of excellence helped the Group to gain the confidence and trust of customers and stakeholders. Sembcorp Marine’s yards continually benchmarked themselves against the best international standards and practices through leading classification societies to deliver added value to their customers.

Commendable Safety AchievementsThe National Workplace Safety and Health Awards 2009 recognised Sembcorp Marine’s yards – Jurong Shipyard, Sembawang Shipyard and SMOE – for upholding high standards of workplace safety and health (see page 51). The awards were organised by the WSH Council and supported by the Ministry of Manpower.

Commendable safety milestones were achieved by Sembcorp Marine’s yards for various marine and offshore engineering projects – a reflection of the comprehensive safety and risk management systems in place.

Jurong Shipyard recorded more than 4.1 million man-hours without lost-time incident (LTI) for newbuild ultra-deepwater semi-submersible rig Ocean Valor (Ex-PetroRig II) and more than 2.7 million LTI-free man-hours for Joides Resolution, a drillship upgrading and life extension project. Sembawang Shipyard was recognised for attaining more than 2 million man-hours without LTI for the FPSO conversion of Aoka Mizu and more than 1.1 million LTI-free man-hours for the ARV 1, a passenger / car ferry to accommodation repair vessel project. SMOE also performed well with the MUDA Production Platform project, which accomplished more than 4.5 million man-hours without LTI.

Workplace Safety & Health

Shipyards Quality Safety Environment

Jurong Shipyard

ISO 9001:2000 ABS Quality Evaluations Inc. 2007 Recertification

OHSAS 18001:2007 ABS Quality Evaluations Inc 2008 Recertification

–

Sembawang Shipyard

ISO 9001:2008 Det Norske Veritas 2008 Recertification

OHSAS 18001:2007 Det Norske Veritas 2008 Recertification


Det Norske Veritas International Safety Rating System (ISRS) - Level 9 Det Norske Veritas

PPL Shipyard ISO 9001:2000 ABS Quality Evaluations Inc 2008 Recertification

OHSAS 18001:2007 ABS Quality Evaluations Inc 2009 Certification

–

SMOE ISO 9001:2008 Lloyd’s Register Quality Assurance Ltd 2009 Recertification

OHSAS 18001:2007 Det Norske Veritas 2007 Recertification


Jurong SML ISO 9001:2008 ABS Quality Evaluations Inc 2009 Recertification

OHSAS 18001:2007 ABS Quality Evaluations Inc 2007 Recertification

–

Sponsorship and participation in

National Day Parade 2009.


PPL Shipyard was affirmed for its commitment to safety when it received accolades from customers Egyptian Offshore Drilling Company (EODC) and Vantage Drilling Company for achieving more than one million incident-free man-hours respectively for the P2023 and Aquamarine Driller jack-up building projects.

Project Supervisor Mr Salleh Bin Kasban from Jurong Shipyard was among 10 outstanding individuals honoured with the National WSH Award for Supervisors in recognition of his exemplary performance and valuable contribution towards workplace safety and health excellence.

Safety Performance in 2009Sembcorp Marine’s accumulative frequency rate (AFR), which measures the number of considerable accidents per million man-hours, improved to 0.57 in 2009 from 0.71 the previous year. The accumulative severity rate (ASR), which signals the number of man-days lost per million man-hours, however, stood at 237.12 compared to 67.01 in 2008.

The Group is determined to continuously enhance its safety management framework to further raise safety standards for proactive incident prevention and risk management.

National and Industry Promotion Sembcorp Marine was a main sponsor of the National Workplace Safety and Health Campaign in April 2009. Its aim was to contribute to the national effort to elevate occupational safety and health standards in Singapore. Spanning three months, the national campaign promoted workplace safety and health excellence across industries in Singapore.

The Group’s subsidiaries Jurong Shipyard and Sembawang Shipyard were also pioneering partners in the development of a new series of trade-specific training modules under the WSH for Marine Industry Workplace Skills Qualifications framework in collaboration with the WSH Council’s Marine Industry Committee, the Singapore Workforce Development Authority, and the Association of Singapore Marine Industries. These marine industry WSH competency standards training programmes provide a practical and effective way for marine trade workers to be trained and certified for improved performance and enhanced safety on the job.

Safety CultureTo integrate safety into all aspects of its operations, Sembcorp Marine adopted a multi-pronged strategy to promote greater safety consciousness among employees and contractor partners within its yards.

Sembcorp Marine’s yards continued to implement the REV (Review, Evaluate, Validate) programme, which involved regular safety audits, risk assessments, evaluation of health, safety and environmental compliance as well as comprehensive safety inspections onboard and at project sites. Each yard executed a quarterly safety programme with themes including working at height, working in confined spaces and proper equipment handling.

Another important focus was to encourage an interdependent safety culture where contractor partners took ownership of safety. As bizSAFE partners under the WSH Council’s bizSAFE programme, Sembcorp Marine’s yards maintained their commitment to helping contractor partners enhance their occupational safety and health capabilities and advance towards international safety standards certification. The yards and their contractor partners also jointly organised bizSAFE task force teams to ascertain and rectify at-risk behaviours for pro-active incident prevention.

To ensure that best safety practices were followed and potential hazards promptly identified, the yards prepared risk assessment checklists covering more than 500 work activities for employees and contractor partners to review before commencing work.

Campaigns and ConventionsSembcorp Marine’s annual Workplace Safety and Health Campaign effectively reached out to highlight the importance of pro-active incident prevention and constant vigilance among employees, contractors and stakeholders. The 2009 campaign, which involved all subsidiary yards within the Group, was launched by Mr Hawazi Daipi, Senior Parliamentary Secretary for Manpower and Health, at Jurong Shipyard in March 2009. With the theme “Make Each Step a Safer Step”, the campaign aimed to further enhance collective awareness among personnel to be mindful of safety at every stage of their work.

Workplace Safety & Health

Viewing exhibits on display during the launch of Sembcorp Marine’s “Make Each Step a Safer Step” safety campaign 2009.


Workplace Safety & Healthsafety education publications were launched in 2009. These included the safety commemorative book “Our People, Our Innovation: The Sembcorp Marine WSH Experience” which documented and highlighted outstanding workplace safety and health innovations for adoption and adaptation around the various yards.

A Safety DVD on “Hand & Finger Injuries Prevention”, complete with pre- and post-video questionnaires, was launched during the year to ensure consistent and correct training across the Group. PPL Shipyard also launched an Employee HSE Handbook for all staff.

Vigilance in SecuritySembcorp Marine’s yards, which are ISPS (International Code for the Security of Ships and Port Facilities) compliant, continued to be vigilant in identifying, pre-empting and responding to potential security threats to protect business operations and safeguard the well-being of employees and stakeholders.

Stringent entry controls, including the usage of advanced RFID and biometric authentication systems, were in place for the efficient tracking of vehicular movement and human traffic inflow to prevent unauthorised access. Round-the-clock patrols and surveillance were also conducted by the yards’ security teams to guard against any security breaches.

Emergency PreparednessAs part of Sembcorp Marine’s business contingency planning, a series of emergency response drills were held during the year to prepare personnel to handle a variety of crisis scenarios, ranging from firefighting and confined space evacuation to rescue at height and environment-related hazards. These were held in workshops, offices as well as onboard vessels and rigs across the yards.

Sembcorp Marine’s yards also combined forces with security partners such as the Singapore Police Force and the Singapore Civil Defence in upholding safety and security in and around the community. During the year, the yards participated in joint intelligence networking activities and emergency evacuation exercises together with national agencies to further improve their security capabilities.

Sembawang Shipyard held a three-day “Safety Starts With Me” WSH Carnival for 2009 to inspire a pro-active safety-oriented mindset among employees and contractor partners. The yard also launched a “Safety Starts with Me” Accountability Campaign, which adapted and brought the National Safety Campaign theme of individual ownership closer to the workplace, as well as a two-month Hand and Finger Injury Campaign that targeted high-risk sectors.

In encouraging active contribution towards workplace improvements, WSH Innovation Conventions are held yearly for innovation teams to showcase projects that contribute towards safety, quality and productivity enhancements.

Communication and EducationTo reach out effectively to employees and contractor partners, key safety messages are conveyed in different languages and through multiple channels, such as public address system announcements, posters and banners, safety briefings and daily tool box meetings.

All staff and subcontractor personnel continued to undergo safety induction programmes and specialised trade-specific training before starting work to equip them with essential knowledge on the proper usage of personal protective equipment, safe working procedures and incident prevention guidelines. At some yards, new workers have to pass a safety competency practical test before work commencement.

To guide employees and contractor partners on best practices and safe working procedures, several

People Development & Training

2009 2008

Category No. of employees % No. of

employees %

Management 3083 33.6% 3105 30.1%

Non management staff 727 7.9% 757 7.3%

Workers 5370 58.5% 6456 62.6%

Total 9180 100% 10318 100%

Sembcorp Marine sought

to be an employer of choice

by bringing out the best in

its people and building their

capabilities for the Group’s

continued competitiveness

and progress.

Human Resource Strategy People are the cornerstones of Sembcorp Marine’s success. Over the years, the Group has been able to effectively harness human capital to sharpen its competitive edge in the industry.

Sembcorp Marine’s human resource (HR) strategy and systems are aligned with the company’s vision, mission and core values. With “Building a Professional Team” as the strategic focus, the Group’s HR work teams, comprising representatives from various subsidiaries, channelled their efforts on three key thrusts:

1) To recruit and retain right employees 2) To enhance employee competency and resilience 3) To build employee engagement

Talent StrengthSembcorp Marine saw a streamlining of its employee strength to 9,180 from the previous year.

“Safety Starts With Me” WSH Carnival in Sembawang Shipyard.

Building a strong team through continuous training and upgrading.


People Development & Training

Talent RecruitmentThe Group utilised a variety of recruitment methods

to ensure that the yards would be staffed by a diverse

pool of multi-talented individuals. These included job

fairs, on a community and national level, and career

talks in education institutes held throughout the year.

Scholarship awards have been another way to

identify and groom high-performing individuals with

leadership potential. In 2009, the Group awarded

a total of 23 scholarships across a wide variety of

sectors and levels. The year saw 36 scholars joining

the Group to build their careers after completing their studies.

Talent DevelopmentSembcorp Marine continued to develop leaders internally through structured training, fast-track supervisory skills and mentorship programmes, which provided opportunities for employees to grow and excel.

Under structured training programmes, groups of high-potential employees are identified and groomed to develop their strengths further. In 2009, a total of

306 management staff were sent for various training courses, team workshops and seminars that covered topics such as communication, language, relationship management and project planning.

The Group also has in place a series of Super V programmes to prime Singaporeans and PRs for supervisory positions to expand and enhance its talent force. The initiatives under the Super V scheme combine structured training with on-the-job learning to fast-track the development of recruits without marine-related qualifications into supervisors with specific skill sets. Since 2005, a total of 302 supervisors have undergone Super V training.

In another area, emphasis was given to mentorship in 2009 with the focus on knowledge transfer, succession planning, and enhancing team cohesiveness in the workplace. Spanning the Group’s five yards, a formalised and structured one-year mentorship initiative was introduced to deepen the level of information exchange among staff.

Talent RetentionThe Group presented its talented and loyal employees with appropriate rewards and incentives, as part of its employee engagement and retention strategy.

Recognition and rewards were accorded to staff who showed exemplary performance or made significant contributions to innovation, safety, quality and teamwork. In addition, 449 long-service employees were appreciated for the vital role they played in the transfer of critical knowledge for sustainable growth and business success.

The Group also believes that encouraging teamwork and close bonds would generate a stronger sense of belonging and identity with the organisation. In this respect, several Group-wide activities – such as the inaugural Sembcorp Marine Charity Walk and the Group Bowling Tournament – strengthened employee relationships in 2009. Closer bonding was also fostered among employees and partners via social and recreational events, such as Jurong Shipyard’s Retro Nite as well as SMOE’s Batam retreat for employees and family day organised with its customer MUDA.

Strong Union-Management Cooperation The Group’s management and union continued its symbiotic synergy in working together to ensure employees’ welfare and well-being. Among the many projects both union and management cooperated in during the year were the National Day Observance Ceremony, the SchoolBAG scheme and bursary awards as well as corporate recreational and social events.

Group Mentoring Programme.

Training in progress.

National Day Observance 2009.


Workplace Health PromotionCommitment to Employee CareIn valuing its people, Sembcorp Marine takes care of the total well-being of its workforce through comprehensive workplace health programmes that spur them towards healthy and active living. This was done by encouraging the adoption of healthy lifestyle habits and good work-life balance to prevent the onset of illnesses.

Awards for Workplace Health PromotionHaving won national recognition for their continuous commitment to workplace health promotion, the Group’s yards kept up their pro-active efforts in advancing health and wellness among employees in 2009. During the Health Promotion Board’s National HEALTH (Helping Employees Achieve Life-time Health) Awards held earlier in 2008, Jurong Shipyard and Jurong SML were accorded the prestigious Platinum HEALTH Award, while Sembawang Shipyard bagged the Gold HEALTH Award.

Active LifestylesSembcorp Marine’s yards organised a variety of workplace health exercise programmes, including tai-chi, hip-hop aerobics, belly dancing, pilates and yoga, to cater to a wide range of interests. To make fitness accessible, Jurong Shipyard upgraded its gymnasium during the year and provided staff personal training sessions at subsidised rates.

To motivate employees to be more active, mass exercises were held regularly throughout the Group’s yards. During the year, Jurong Shipyard stepped up its ACTIVE (All Companies Together in Various Exercises) Day programme from a yearly activity to a monthly event, for employees to engage in a low-impact, half-hour workout on the first Monday of each month before commencing work.

As a healthy workforce

would lead to higher

morale and positive returns,

Sembcorp Marine was

committed to providing

holistic workplace health

programmes to help

employees achieve total

wellness.

To help employees overcome obesity, Jurong Shipyard and Jurong SML supported groups of employees in the “Lose To Win Challenge”, a 12-week programme organised by the Health Promotion Board which aimed to help participants lose weight the healthy way. The programme involved twice-weekly boot-camp style fitness sessions and a series of nutritional education activities to impart the skills and knowledge to achieve a trimmer and healthier body.

The Group’s yards also organised several nature walks to locations such as the Bukit Timah Nature Reserve, Sungei Buloh Wetland Reserve and the Southern Ridges during the year. Employees were also sponsored for participating in sporting events like the National Runway Cycling & Skating, Run Singapore Charity event, Mizuno Wave Run, Sheares Bridge Run & Army Half Marathon, and Standard Chartered Marathon.

Employees and partners also enjoyed opportunities to keep fit while building closer bonds during sporting and recreational competitions, which were organised for sports such as bowling, soccer, futsal, badminton, table tennis, basketball, sepak takraw, volleyball and pool.

Healthy MindsSeveral workshops and talks on dietary nutrition, stress management techniques, workplace ergonomics, osteoporosis prevention and good mental health were organised for employees. To promote well-rounded healthy lifestyles, PPL

Shipyard further integrated these talks into monthly lunch events in its health outreach efforts.

Support was provided to employees who wished to stub out the smoking habit in the form of Smoking Cessation programmes. Through these sessions, participants received professional consultation and expert guidance on achieving their goal of a smoke-free life.

In a bid to promote the importance of a vitamin-rich diet, employees across the Group received two servings of fruits each during Fruits Day. Other healthy eating initiatives within the Group included Jurong Shipyard’s provision of fruits and healthy snacks during workplace health programmes, PPL’s Shipyard’s distribution of vegetables to encourage consumption of more greens, as well as Jurong SML’s Healthy Sandwich Day.

Ensuring a healthy and stress-free mindset was another component of the Group’s workplace health programme. This was done through workshops on stress management, family wellness, effective parenting and financial management, which imparted important life skills for employees to excel in their professional and personal lives.

Chronic Disease Prevention and ManagementThe yards also offered free annual health screenings to enable early detection, intervention and treatment of employees at high-risk of contracting illnesses such as diabetes, high blood pressure, stroke, hypertension and high cholesterol. Showing its care for retired employees, Jurong Shipyard offered a Chronic Disease Medical Plan to subsidise 80 per cent of their medical treatment expenses for chronic ailments.

Revolutionising Diabetes CareTaking a revolutionary approach in caring for its employees, Jurong Shipyard was among the first in Singapore to pioneer a series of innovative programmes to make diabetes intervention, management and education more convenient, Monthly ACTIVE Day mass exercise.

Encouraging active living through various outdoor activities.


Workplace Health Promotion

effective and cost-efficient. Working in collaboration with Jurong Medical Centre, Jurong Shipyard developed two innovative initiatives – the Diabetes Programme @ Workplace and the Diabetes Champion Programme – to deliver diabetes care to employees in an effective and intuitive way.

Diabetes Programme @ Workplace• With the Diabetes Programme @ Workplace,

personnel can enjoy the convenience of bi-monthly diabetes health checks at the workplace without having to spend hours travelling to or waiting at polyclinics and hospitals. During these health assessments, a specialist nursing team tested diabetic employees for their blood sugar and blood pressure levels, body mass index as well as eye and leg health. Diabetes education was also incorporated where participants learnt about effective diabetes intervention, management and treatment.

Diabetes Champion Programme• The Diabetes Champion Programme was another

strategic healthcare initiative launched by Jurong Shipyard to groom diabetic employees, who showed improvements in their health, into ‘champions’ – to serve as mentors and role models in motivating effective diabetes management among their peers.

These new diabetes initiatives have generated impressive results, with the percentage of

participants achieving optimal control of their blood sugar and blood pressure improving 18.3% and 33.1% respectively from March to December 2009. Employees also took the initiative to form a Diabetes Support Group to spur one another on towards better health and wellness. Support group members also utilised online networking platforms such as Facebook to facilitate further sharing and learning beyond the workplace.

Emergency Preparedness against Virus OutbreaksSembcorp Marine and its yards responded swiftly to safeguard operations against the outbreak of Influenza A (H1N1) by setting in motion stringent precautionary measures and rallying the support of employees, customers, subcontractors and stakeholders in their effective implementation.

Contributions to the CommunityBelieving in active

corporate citizenry,

the Sembcorp Marine

Group continued to

uphold the core values of

community care and social

responsibility to make a

positive difference in its

contribution to society.

Youths and EducationRecognising the importance of education, Sembcorp Marine supported children and youths in their educational pursuits and all-round development. These efforts would allow them to develop their talent and fulfil their potential.

The Group further increased its commitment towards community care and education with a contribution of $350,000 during the year. This comprised $300,000 in grants by Sembcorp Marine to student recipients under its annual SchoolBAG (School Book Assistance Grant) programme and $50,000 contributed by the Group’s employees through a Charity Walk in aid of two student help groups, Students Care Service (Yishun Centre) and ACE @ Boon Lay.

The SchoolBAG scheme, which was first implemented in 2001, is a financial assistance programme which helps needy students from low-income families to manage the costs of their basic education expenses, such as school textbooks, uniforms and stationery items. This year saw a record number of 1,505 recipients benefiting from Sembcorp Marine’s contribution, as compared to 1,492 students the previous year.

Diabetes Programme @ Workplace health checks.

Safeguarding against H1N1 with the support of stakeholders.

All smiles during Sembcorp Marine’s School Book Assistance Grant (SchoolBAG) ceremony.

These emergency response and preventive measures, already in place since 2003, included daily temperature checks, control of overseas travel to affected countries, strict access control into the yards, in-depth communication and education and the stepping up of environmental management. To help boost immunity against the prevalent flu virus, H1N1 and flu vaccinations were offered by the yards to employees who were more susceptible to the disease.

The yards also carried out regular fumigation and spot checks to prevent the formation of mosquito-breeding hotspots and prevent the spread of mosquito-borne diseases.


Contributions to the Community

In addition, the inaugural Charity Walk 2009 saw employees raise funds of $50,000 through the sale of event t-shirts and goodie bags. Proceeds from the Charity Walk were channelled equally to two student help groups – Yishun Students Care Service Centre and ACE @ Boon Lay.

To identify and groom high-potential talents through their educational journey, the Group awarded 23 scholarships to university, polytechnic and Institute

of Technical Education students. It also sponsored

academic prizes for students with exceptional

results at educational institutes such as the

Singapore Maritime Academy. Bursaries were also

given to children of employees who required financial

support and with good academic performance. In this

respect, Sembawang Shipyard disbursed $43,350

in bursary grants to 48 recipients with the aim of

motivating them to excel in their studies.

Community Care and DevelopmentThe Group further supported the Community Chest’s

Give a Hand! Pledge Card, the Singapore Children

Society’s Walk for Our Children, the Breast Cancer

Foundation’s Pink Ribbon and the charity-driven Run

Singapore.

The Yishun Students Care Service Centre also received

sponsorship funding and volunteer assistance from

Sembawang Shipyard. A long-time partner of the

centre, the yard was an active supporter of the

centre’s newly launched “EMIT!” (Excite, Motivate,

Interest and Transmit) Programme, an initiative

spearheaded in conjunction with the 2010 Youth

Olympic Games which aimed to instill sports and

life skills in youths. The yard also lent a hand in the

organisation of youth engagement events, such

as the centre’s Puzzleton competition and annual

Christmas party.

National Unity and Community BondingIn a declaration of national pride and allegiance,

Sembcorp Marine proudly sponsored and

participated in the 2009 National Day Parade

celebrations held for the third consecutive year at

the Marina Bay Floating Platform, which was built by

the Group in 2007.

The Group’s employees also volunteered their

participation actively in the NDP parade and

ceremony marching segment. Participants also

shared their moment of pride with spectators

beyond the parade grounds during a 3.2-km city march-past which brought them past key Singapore landmarks.

To strengthen links with the community, the Group and its yards sponsored and supported various meaningful community projects, including

the Canberra Recreational Club Family Day, Sembawang Community Club’s Gala Dinner and

Having fun at the inaugural Sembcorp Marine Charity Walk.

Sembawang Shipyard provides bursaries for its employees’ children.

City march-past by Sembcorp Marine’s contingent during NDP 2009.

Engaging children and youths in the community.


Contributions to the Communitythe Geylang Serai Hari Raya festive light-up. Festivals such as Hari Raya, Chinese New Year, Deepavali and Christmas were also celebrated with employees and partners to promote greater bonding across

different cultures.

Going GreenTo ensure a sustainable

future for the next

generation, Sembcorp

Marine focused on

doing its part for planet

earth through promoting

environmental awareness

and care, adopting

eco-friendlier operations

and investing constantly

in research and innovation

to develop green

technologies. Green AwarenessSembcorp Marine actively promotes environmental awareness through the annual Green Wave Environmental Care Project organised by subsidiary Sembawang Shipyard with the strong support of its alliance partners Shell Trading and BP Shipping.

In 2009, the Green Wave Competition ran successfully for the eighth year and drew a record number of 292 project entries from more than 1000 students. The contest was aimed at engaging the young generation to take ownership of environmental protection and contribute innovative ideas to effect positive changes for sustainable development. Top teams of the competition were awarded attractive cash prizes of up to $10,000, with winners of the junior college and tertiary categories offered local and overseas development attachments at Shell, BP and their affiliate companies as well as Sembawang Shipyard.

Industry OutreachSembcorp Marine extended its support to various

partners to further strengthen the industry’s

collaborative links for sustainable growth. During

the year, Sembcorp Marine together with its

subsidiaries and representatives made their

presence felt at events such as the Offshore

Technology Conference 2009 and Seatrade Cruise

Convention in the United States, Nor Shipping 2009

in Norway as well as Sea Asia 2009 in Singapore.

The Group further pledged its commitment to

fostering closer trade links with Latin America by

being the strategic sponsor of the Latin Asia Business

Forum 2009. The event was a networking platform

to encourage business and investment between

Asia and Latin America.

It also sponsored the Asian Maritime Law

Conference, an event organised by the Maritime

Law Association of Singapore on legal trends in the

global industry, and the Society of Naval Architects

and Marine Engineers Singapore Golf Tournament.

Sponsorship of BossaCucaNova’s debut Singapore concert.

Nor Shipping 2009.

Support for the ArtsTo demonstrate its commitment to nurturing the

arts in Singapore, the Group lent its support to

various cultural groups and art projects. These

included sponsoring the debut Singapore concert of

BossaCucaNova, a renowned Brazilian band of new-

generation Bossa Nova artistes, and contributing to

the Singapore Chinese Orchestra.

For its efforts, Sembcorp Marine was presented the Arts Supporter Award conferred by the National Arts Council for making a difference to the arts scene in Singapore.

Student participants of the Green Wave Competition showcasing their projects.

Launch of the Green Wave Environmental Care Competition 2010.


Going Green

Sembcorp Marine’s subsidiary JPL Industries also showed its strong support for the green movement by sponsoring the Semakau Run. This fund-raising charity run was organised by the National Environment Agency and Mediacorp with the support of Clean & Green Singapore in aid of beneficiaries such as the Singapore Environment Council and the Singapore Institute of International Affairs Haze Programme.

Green OperationsConscious about the environmental impact of their operations, Sembcorp Marine’s yards sought to adopt greener production techniques in their daily course of work. These included practices such as environmentally controlled indoor painting as well as enclosed blasting and hydroblasting.

In particular, Sembawang Shipyard and SMOE integrated stringent environmental management systems into their everyday operations in bench-marking to international standards and best practices in line with their ISO 14001 certifications. The Group’s yards also worked together with customers to jointly implement eco-friendly production processes that were work-efficient and environmentally sustainable. To optimise operations and avoid wastage, resource-efficient work methods that conserve energy, water and materials were employed in line with the 3Rs (Reduce-Reuse-Recycle) strategy.

Green technologies were also used by Sembawang Shipyard in the construction of its new superintendent complex to optimise the use of natural lighting, interior air quality and energy-efficient airconditioning systems.

Green EducationGreen education via a variety of channels, such as campaigns and on-site signages, encouraged

employees and partners to take greater ownership and responsibility for environmental care and protection.

Continuous efforts were made to educate management and employees from across the Group and its yards on the importance of being environmentally responsible in their operations – from the office environment to the workshop setting. Regular briefings were held during the year to impart best environmental care practices and to instill a green culture among personnel.

Good housekeeping was another key aspect of environmental management practised by Sembcorp Marine’s yards. Employees and contractor partners from the Group organised a Housekeeping Day once every week to ensure that work spaces were clean and tidy for the safety of all personnel and for greater work effectiveness.

Several yards also made it a point to tackle environ-mental issues in their emergency preparedness programmes, with several drills conducted in 2009 to prepare personnel to manage situations such as oil pollution, chemical spills and radiation leakage.

Green ResearchSembcorp Marine remained committed to furthering the green cause in the field of marine and offshore technology. The Group’s subsidiary company Sembcorp Marine Technology is working on a joint research and development project with Ngee Ann Polytechnic’s Centre of Innovation, Marine and Offshore Technology, SIF Agrotechnology Asia and Memiontec in the development of a chemical-free ballast water management system. The objective of the research is to devise a safe and eco-friendly way of treating and neutralising micro-organisms present in ballast water onboard ships to minimise the potential impact on native ecology when ballast water is discharged into the environment.

The Group also works in close partnership with the Maritime and Port Authority of Singapore to support the research, development and test-bedding of clean energy technologies and applications in the maritime industry so as to further enhance Singapore’s leading status as a world-class international maritime hub of choice.

JPL Industries sponsored the Semakau Run 2009.

102 General Information

103 Directors’ Report

123 Statement by Directors

124 Independent Auditors’ Report

126 Balance Sheets

128 Income Statements

129 Statements of Comprehensive Income

130 Consolidated Statement of Changes in Equity

134 Statement of Changes in Equity

136 Consolidated Cash Flow Statement

138 Notes to the Financial Statements

200 Supplementary Information

202 Major Properties

203 Notice of Annual General Meeting

207 Proxy Form

C O N T E N T S


DirectorsGoh Geok Ling ChairmanRichard Hale, OBE Deputy Chairman Wong Weng Sun President and CEO (Appointed on 1 May 2009)Tan Kwi Kin Tan Pheng HockTan Tew Han (Resigned on 24 February 2009)Ajaib HaridassTang Kin FeiRon Foo Siang Guan Joseph Kwok Sin Kin Ngiam Joke Mui Lim Ah Doo

Joint Company SecretariesTan Yah Sze Kwong Sook May

RegistrarKCK Corpserve Pte Ltd333 North Bridge Road#08-00 KH Kea BuildingSingapore 188721

Registered Office29 Tanjong Kling RoadSingapore 628054

AuditorsKPMG LLPAudit PartnerTan Wah Yeow (Appointed since 2008)

We are pleased to submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 31 December 2009.

DirectorsThe directors in office at the date of this report are as follows:

Goh Geok Ling ChairmanRichard Hale, OBE Deputy Chairman Wong Weng Sun President and CEOTan Kwi Kin Tan Pheng HockAjaib HaridassTang Kin FeiRon Foo Siang Guan Joseph Kwok Sin Kin Ngiam Joke Mui Lim Ah Doo

Directors’ interests in shares, share options and debenturesAccording to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50 (the Act), particulars of interests of directors who held office at the end of the financial year (including those held by their spouses and infant children) in shares, debentures, warrants and share options in the Company and in related corporations are as follows:

Name of Director and corporation in which interests held Description of interests Exercise period

Shareholdingsregistered in the

name of director, spouseor infant children

Other shareholdings in which the director is deemed to

have an interest

At beginning of the year

At end of the year


At end of the year

Goh Geok Ling

Sembcorp Marine Ltd Ordinary shares – – 13,347 – –

Options to subscribe for ordinary shares

- at $2.38 per share 03/10/2007 to 02/10/2011 196,000 196,000 – –

Conditional award of 30,800 restricted shares to be delivered after 2008 (Note 4a) – 0 to 40,040 26,693 – –

Conditional award of 22,000 restricted shares to be delivered after 2009 (Note 5a) – 0 to 33,000 0 to 33,000 – –

General Information Directors’ Report





Other shareholdings in which the Director is deemed to

have an interest


At end of the year


At end of the year

Goh Geok Ling

Sembcorp Marine Ltd(cont’d)

Conditional award of 29,000 restricted shares to be delivered after 2010 (Note 5b) – – 0 to 43,500 – –

Sembcorp Industries Ltd Ordinary shares – 299,600 327,630 47,000 47,000


- at $0.99 per share 18/05/2005 to 17/05/2009 12,500 – – –

- at $1.16 per share 23/11/2005 to 22/11/2009 12,500 – – –

- at $2.37 per share 02/07/2006 to 01/07/2010 26,250 26,250 – –

- at $2.36 per share 22/11/2006 to 21/11/2010 26,250 26,250 – –

- at $2.52 per share 10/06/2007 to 09/06/2011 70,000 70,000 – –

Conditional award of 13,982 restricted shares to be delivered after 2008 (Note 4b) – 0 to 18,177 6,058 – –



Richard Hale, OBE

Sembcorp Marine Ltd Conditional award of 22,000 restricted shares to be delivered after 2010 (Note 5b) – – 0 to 33,000 – –

Sembcorp Industries Ltd Ordinary shares – 182,500 238,760 – –


- at $0.99 per share 18/05/2005 to 17/05/2009 26,250 – – –

- at $1.16 per share 23/11/2005 to 22/11/2009 26,250 – – –





have an interestAt beginning of

the yearAt end

of the yearAt beginning

of the yearAt end

of the yearRichard Hale, OBE

Sembcorp Industries Ltd (cont’d)


- at $2.37 per share 02/07/2006 to 01/07/2010 26,250 26,250 – –

- at $2.36 per share 22/11/2006 to 21/11/2010 35,000 35,000 – –

- at $2.52 per share 10/06/2007 to 09/06/2011 140,000 140,000 – –

Conditional award of 17,350 restricted shares to be delivered after 2008 (Note 4c) – 0 to 22,555 7,518 – –



Directors’ Report Directors’ Report

Wong Weng Sun

Sembcorp Marine Ltd Ordinary shares – 999,978 1,115,040 – –


- at $0.71 per share 09/08/2004 to 08/08/2013 57,750 57,750 – –

- at $0.74 per share 11/08/2005 to 10/08/2014 126,000 126,000 – –

- at $2.11 per share 12/08/2006 to 11/08/2015 350,000 350,000 – –

- at $2.38 per share 03/10/2007 to 02/10/2016 175,000 175,000 – –

Conditional award of 140,000 performance shares to be delivered after 2008 (Note 1d) – 0 to 210,000 – – –

Conditional award of 175,000 performance shares to be delivered after 2009 (Note 2a) – 0 to 262,500 0 to 262,500 – –

Conditional award of 125,000 performance shares to be delivered after 2010 (Note 2b) – 0 to 187,500 0 to 187,500 – –


Tan Kwi Kin

Sembcorp Marine Ltd Ordinary shares – 6,300,912 6,570,711 – –






have an interest


At end of the year


At end of the year





have an interest


At end of the year


At end of the year

Wong Weng Sun


Conditional award of 150,000 performance shares to be delivered after 2011 (Note 2c) – – 0 to 225,000 – –

Conditional award of 37,800 restricted shares to be delivered after 2007 (Note 3d) – 32,256 16,128 – –

Conditional award of 70,000 restricted shares to be delivered after 2008 (Note 4k) – 0 to 91,000 60,666 – –





- at $0.78 per share 03/06/2004 to 02/06/2013 1,250 1,250 – –

- at $0.93 per share 19/11/2004 to 18/11/2013 1,250 1,250 – –

- at $0.99 per share 18/05/2005 to 17/05/2014 2,500 2,500 – –

- at $1.16 per share 23/11/2005 to 22/11/2014 7,500 7,500 – –

- at $2.37 per share 02/07/2006 to 01/07/2015 7,500 7,500 – –

- at $2.36 per share 22/11/2006 to 21/11/2015 7,500 7,500 – –

- at $2.52 per share 10/06/2007 to 09/06/2016 14,000 14,000 – –

Tan Kwi Kin



- at $0.71 per share 09/08/2004 to 08/08/2013 520,000 520,000 – –

- at $0.74 per share 11/08/2005 to 10/08/2014 980,000 980,000 – –

- at $2.11 per share 12/08/2006 to 11/08/2015 980,000 980,000 – –

- at $2.38 per share 03/10/2007 to 02/10/2016 420,000 420,000 – –

Conditional award of 350,000 performance shares to be delivered after 2008 (Note 1a) – 0 to 525,000 – – –Conditional award of 350,000 performance shares to be delivered after 2009 (Note 2a) – 0 to 525,000 0 to 525,000 – –Conditional award of 250,000 performance shares to be delivered after 2010 (Note 2b) – 0 to 375,000 0 to 375,000 – –Conditional award of 88,200 restricted shares to be delivered after 2007 (Note 3a) – 75,264 37,632 – –Conditional award of 140,000 restricted shares to be delivered after 2008 (Note 4d) – 0 to 182,000 121,333 – –Conditional award of 100,000 restricted shares to be delivered after 2009 (Note 5a) – 0 to 150,000 0 to 150,000 – –

Sembcorp Industries Ltd Ordinary shares – 127,750 127,750 – –Options to subscribe for ordinary shares – –

- at $1.16 per share 23/11/2005 to 22/11/2014 3,125 3,125 – –

- at $2.37 per share 02/07/2006 to 01/07/2015 9,375 9,375 – –

- at $2.36 per share 22/11/2006 to 21/11/2015 9,375 9,375 – –

- at $2.52 per share 10/06/2007 to 09/06/2016 25,000 25,000 – –


Tan Pheng Hock

Sembcorp Marine Ltd Ordinary shares – 273,000 303,870 – –


- at $2.11 per share 12/08/2006 to 11/08/2010 12,250 – – –

- at $2.38 per share 03/10/2007 to 02/10/2011 36,750 24,500 – –

Conditional award of 14,700 restricted shares to be delivered after 2008 (Note 4e) – 0 to 19,110 12,740 – –



Ajaib Haridass



- at $2.11 per share 12/08/2006 to 11/08/2010 35,000 – – –

- at $2.38 per share 03/10/2007 to 02/10/2011 105,000 70,000 – –

Conditional award of 28,700 restricted shares to be delivered after 2008 (Note 4f) – 0 to 37,310 24,873 – –



Tang Kin Fei







have an interest


At end of the year


At end of the year





have an interest


At end of the year


At end of the year

Tang Kin Fei



- at $2.11 per share 12/08/2006 to 11/08/2010 7,000 7,000 – –

- at $2.38 per share 03/10/2007 to 02/10/2011 73,500 73,500 – –

Conditional award of 18,900 restricted shares to be delivered after 2008 (Note 4g) – 0 to 24,570 16,380 – –



Sembcorp Industries Ltd Ordinary shares – 2,354,011 2,782,084 – –


- at $0.99 per share 18/05/2005 to 17/05/2014 50,000 – – –

- at $1.16 per share 23/11/2005 to 22/11/2014 50,000 – – –

- at $2.37 per share 02/07/2006 to 01/07/2015 150,000 150,000 – –

- at $2.36 per share 22/11/2006 to 21/11/2015 150,000 150,000 – –

- at $2.52 per share 10/06/2007 to 09/06/2016 300,000 300,000 – –

Conditional award of 428,244 restricted shares to be delivered after 2008 (Note 1b) – 0 to 642,366 – – –

Conditional award of 408,240 performance shares to be delivered after 2009 (Note 2a) – 0 to 612,360 0 to 612,360 – –

Conditional award of 400,000 performance shares to be delivered after 2010 (Note 2b) – 0 to 600,000 0 to 600,000 – –


Tang Kin Fei


Conditional award of 400,000 performance shares to be delivered after 2011 (Note 2c) – – 0 to 600,000 – –

Conditional award of 70,189 restricted shares to be delivered after 2007 (Note 3b) – 60,830 30,414 – –

Conditional award of 128,596 restricted shares to be delivered after 2008 (Note 4h) – 0 to 167,175 55,724 – –



Sembcorp Financial Services Pte Ltd

Fixed Rate Notes due 2014 issued under Medium Term Note Programme (Note 6) – –

Principal Amount: $500,000 – –

Ron Foo Siang Guan

Sembcorp Marine Ltd Ordinary shares – 17,000 32,494 20,000 20,000


- at $2.38 per share 03/10/2007 to 02/10/2011 21,000 14,000 – –

Conditional award of 19,600 restricted shares to be delivered after 2008 (Note 4i) – 0 to 25,480 16,986 – –




Joseph Kwok Sin Kin

Sembcorp Marine Ltd Ordinary shares – 77,000* 92,190* – –


- at $2.38 per share 03/10/2007 to 02/10/2011 21,000 14,000 – –

Conditional award of 18,900 restricted shares to be delivered after 2008 (Note 4g) – 0 to 24,570 16,380 – –



Ngiam Joke Mui



- at $2.11 per share 12/08/2006 to 11/08/2015 10,500 – – –

- at $2.38 per share 03/10/2007 to 02/10/2016 21,000 14,000 – –





- at $0.99 per share 18/05/2005 to 17/05/2014 31,250 – – –

- at $1.16 per share 23/11/2005 to 22/11/2014 31,250 – – –






have an interest


At end of the year


At end of the year





have an interest


At end of the year


At end of the year


Ngiam Joke Mui



- at $2.37 per share 02/07/2006 to 01/07/2015 62,500 62,500 – –

- at $2.36 per share 22/11/2006 to 21/11/2015 62,500 62,500 – –

- at $2.52 per share 10/06/2007 to 09/06/2016 93,750 93,750 – –

Conditional award of 85,649 performance shares to be delivered after 2008 (Note 1c) – 0 to 128,474 – – –Conditional award of 81,648 performance shares to be delivered after 2009 (Note 2a) – 0 to 122,472 0 to 122,472 – –Conditional award of 80,000 performance shares to be delivered after 2010 (Note 2b) – 0 to 120,000 0 to 120,000 – –Conditional award of 80,000 performance shares to be delivered after 2011 (Note 2c) – – 0 to 120,000 – –Conditional award of 29,245 restricted shares to be delivered after 2007 (Note 3c) – 25,346 12,673 – –Conditional award of 53,582 restricted shares to be delivered after 2008 (Note 4j) – 0 to 69,657 23,218 – –Conditional award of 52,500 restricted shares to be delivered after 2009 (Note 5a) – 0 to 78,750 0 to 78,750 – –Conditional award of 52,500 restricted shares to be delivered after 2010 (Note 5b) – – 0 to 78,750 – –

Lim Ah Doo

Sembcorp Marine Ltd Conditional award of 9,000 restricted shares to be delivered after 2010 (Note 5b) – – 0 to 13,500 – –


Note 1: The actual number delivered will depend on the achievement of set targets over a 3-year period from 2006 to 2008. Achievement of targets below targets level will mean 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 could be delivered.(a) For this period, 171,500 shares were released on 30 March 2009.(b) For this period, 269,794 shares were released on 27 March 2009.(c) For this period, 53,959 shares were released on 27 March 2009.(d) For this period, 68,600 shares were released on 30 March 2009.

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 will mean 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 could be delivered.(a) Period from 2007 to 2009(b) Period from 2008 to 2010(c) Period from 2009 to 2011

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 level will 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 could be delivered. (a) For this period, 37,632 shares (2nd release of 1/3 of the 112,896 shares) were released under the award on 30 March 2009 and the remaining 37,632

shares will be vested in year 2010. The 1st release of 37,632 shares has been released on 24 March 2008.(b) For this period, 30,416 shares (2nd release of 1/3 of the 91,246 shares) were released under the award on 27 March 2009 and the remaining 30,414

shares will be vested in year 2010. The 1st release of 30,416 shares has been released on 28 March 2008.(c) For this period, 12,673 shares (2nd release of 1/3 of the 38,019 shares) were released under the award on 27 March 2009 and the remaining 12,673

shares will be vested in year 2010. The 1st release of 12,673 shares has been released on 28 March 2008.(d) For this period, 16,128 shares (2nd release of 1/3 of the 48,384 shares) were released under the award on 30 March 2009 and the remaining 16,128

shares will be vested in year 2010. The 1st release of 16,128 shares has been released on 24 March 2008.

Note 4: The actual number to be released will depend on the achievement of set targets over a 2-year period from 2007 to 2008. Achievement of targets below targets level will 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 could be delivered. (a) For this period, 13,347 shares (1/3 of the 40,040 shares) were released under the award on 30 March 2009 and the remaining 26,693 shares will

be vested in year 2010/2011.(b) For this period, 3,030 shares (1/3 of the 9,088 shares) were released under the award on 27 March 2009 and the remaining 6,058 shares will be

vested in year 2010/2011.(c) For this period, 3,760 shares (1/3 of the 11,278 shares) were released under the award on 27 March 2009 and the remaining 7,518 shares will be

vested in year 2010/2011.(d) For this period, 60,667 shares (1/3 of the 182,000 shares) were released under the award on 30 March 2009 and the 121,333 remaining shares will

be vested in year 2010/2011.(e) For this period, 6,370 shares (1/3 of the 19,110 shares) were released under the award on 30 March 2009 and the remaining 12,740 shares will be

vested in year 2010/2011.(f) For this period, 12,437 shares (1/3 of the 37,310 shares) were released under the award on 30 March 2009 and the remaining 24,873 shares will

be vested in year 2010/2011.(g) For this period, 8,190 shares (1/3 of the 24,570 shares) were released under the award on 30 March 2009 and the remaining 16,380 shares will be

vested in year 2010/2011.(h) For this period, 27,863 shares (1/3 of the 83,587 shares) were released under the award on 27 March 2009 and the remaining 55,724 shares will

be vested in year 2010/2011.(i) For this period, 8,494 shares (1/3 of the 25,480 shares) were released under the award on 30 March 2009 and the remaining 16,986 shares will be

vested in year 2010/2011.(j) For this period, 11,610 shares (1/3 of the 34,828 shares) were released under the award on 27 March 2009 and the remaining 23,218 shares will

be vested in year 2010/2011.(k) For this period, 30,334 shares (1/3 of the 91,000 shares) were released under the award on 30 March 2009 and the remaining 60,666 shares will

be vested in year 2010/2011.

Note 5: 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 targets below targets level will mean no restricted shares will be delivered, while achievement up to 150% will mean up to 1.5 times the number of conditional restricted shares awarded could be delivered. (a) Period from 2008 to 2009(b) Period from 2009 to 2010

Note 6: Fixed Rate Notes Due 2014 issued under the Medium Term Note Programme of Sembcorp Financial Services Pte Ltd, a related company of Sembcorp Industries Group.

* Held by Citibank Nominees.






have an interest


At end of the year


At end of the year


Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures or share options of the Company, or of related corporations, either at the beginning 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 financial year and 21 January 2010.

Except as disclosed under the “Share-based Incentive Plans” section of this report, neither at the end of, nor at any time during the financial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Since the end of the last financial year, no director has received or become entitled to receive, a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except:

(a) As disclosed in Note 26 to the financial statements on the payment of professional fees to a firm in which Mr Ajaib Haridass, a Director of the Company, is a member;

(b) As disclosed in Note 38 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, Share Plans) were approved and adopted by the shareholders at an Extraordinary General Meeting of the Company held on 31 May 2000 and modified at the 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 Committee responsible 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

The Share Option Plan and Restricted Stock Plan are the incentive schemes for directors and employees of the Company and its subsidiaries (the Group) whereas the Performance Share Plan is aimed primarily at key executives of the Group.

The Share Plans are intended to attract, retain and incentivise participants to higher standards of performance and encourage greater dedication and loyalty by enabling the Company to give recognition to past contributions and services; as well as motivating participants 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, and certain categories of persons who can make significant contributions through their close working relationship with the Group, such as employees of the Company’s Parent Group and non-executive directors and employees of the Company’s associates, are given an opportunity to participate in the equity of the Company. From 2007 onwards, no share options were granted as share options were entirely replaced with restricted shares of an equivalent fair value.

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 targets that 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-charge provided 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-determined targets have been achieved. Awards granted under the Restricted Stock Plan vest only after satisfactory completion of time-based service conditions, or where the award is performance related, after a further period of service beyond the performance target completion date. No minimum vesting period is prescribed under the Restricted Stock Plan and the length of the vesting period in 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 Company for transfer to the employees or cash in lieu of the shares.



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 by reason of ill health, injury or disability, redundancy, retirement at or after the legal retirement age, retirement before the legal retirement age, death, etc, or any other event approved by the Committee, may be allowed by the Committee to retain their unexercised Options. The Committee may determine the number of shares comprised in that Option which may be exercised and the period during which such Option shall be exercisable, being a period not later than the expiry of the Exercise Period in respect of that Option. Such Option may be exercised at any time notwithstanding that the date of exercise of such Option falls 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 market price in respect of options granted at the time of grant. Market price is the volume-weighted average price for the shares on the Singapore Exchange Limited (Singapore Exchange) over the 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) After the first 12 months of lock-out period, the Group imposed a further vesting of 4 years for managers and above for retention purposes.

(iii) In 2009, all options were settled by the issuance of treasury shares.

(iv) The options granted expire after 5 years for non-executive directors and employees of the Company’s associates, and 10 years for the employees of Group and Parent Group.

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Sembcorp Marine Share Option Plan (cont’d)

The details of options of the Company granted/exercised since commencement of the Scheme up to 31 December 2009 were as follows:

Option participants Aggregate options granted

Aggregate options

cancelled/lapsed/

not accepted

Aggregate options

exercised

Aggregate options

outstanding

Directors of the CompanyGoh Geok Ling 196,000 – – 196,000Wong Weng Sun 1,208,500 – (499,750) 708,750Tan Kwi Kin 6,900,000 – (4,000,000) 2,900,000Tan Pheng Hock 269,500 – (245,000) 24,500Ajaib Haridass 403,000 – (333,000) 70,000Tang Kin Fei 124,000 – (43,500) 80,500Ron Foo Siang Guan 28,000 – (14,000) 14,000Joseph Kwok Sin Kin 28,000 – (14,000) 14,000Ngiam Joke Mui 122,000 – (108,000) 14,000

Former Directors of the Company 7,396,300 – (6,993,800) 402,500

Other executives 115,977,395 (13,657,896) (86,505,581) 15,813,918

132,652,695 (13,657,896) (98,756,631) 20,238,168

Since the commencement of the Share Option Plan, no options have been granted to the controlling shareholders of the Company or 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 participate in 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 corporate objectives at the start of each rolling three-year performance qualifying period. A specific number of performance shares shall be awarded at the end of the three-year performance cycle depending on the extent of the achievement of the performance conditions established at the onset.

The performance levels were calibrated based on Wealth Added and Total Shareholder Return. A minimum of threshold performance must be achieved to trigger an Achievement Factor, which in turn determines the number of shares to be finally awarded. Performance shares to be delivered will range between 0% to 150% of the conditional performance shares awarded.

In 2009, the Performance Share Plan was enhanced to create alignment between senior management and other employees at the time of vesting by introducing a plan trigger. Under this trigger mechanism, the performance shares for the performance period 2009 to 2011 will be vested to the senior management participants only if the restricted shares for the performance period 2010 to 2011 are vested, subject to the achievement of the performance conditions for the respective performance periods.

Sembcorp Marine Performance Share Plan (cont’d)

Senior management participants are required to hold a minimum percentage of the shares released to them under the Performance Share 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 in the event of a shortfall, they have a two calendar year period to meet the minimum percentage requirement.

The details of performance shares of the Company awarded since commencement of the Performance Share Plan up to 31 December 2009 were as follows:

Performance Shares participants

Conditional performance

shares awarded during the year

Aggregate conditional

performance shares awarded


performance shares released


performance shares lapsed


performance shares

outstanding

Director of the Company- Wong Weng Sun 150,000 905,000 (383,600) (71,400) 450,000- Tan Kwi Kin – 3,100,000 (1,895,900) (604,100) 600,000

Former alternate director of the Company

– 800,000 (461,000) (339,000) –

Key management and executives of the Group

395,000 2,297,500 (854,000) (178,500) 1,265,000

At 31 December 2009 545,000 7,102,500 (3,594,500) (1,193,000) 2,315,000

With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2006 to 2008, a total of 411,600 (2008: 1,627,500) performance shares were released via the issuance of treasury shares.

In 2008, there were additional 542,500 performance shares awarded for over-achievement of the performance targets.

The total number of performance shares in awards granted conditionally and representing 100% of targets to be achieved, but not released as at 31 December 2009, was 2,315,000 (2008: 2,610,000). Based on the multiplying factor, the actual release of the awards could range from zero to a maximum of 3,472,500 (2008: 3,915,000) performance shares.

Sembcorp Marine Restricted Stock Plan

Under the Restricted Stock Plan, the awards granted conditional on performance targets are set based on corporate objectives at the start of each rolling two-year performance qualifying period. The performance criteria for the restricted shares are calibrated based on Return on Equity and Total Shareholder Return for awards granted before 2009 and Return on Equity and Earnings Before Interest and Taxes for awards granted in 2009.

A minimum threshold performance must be achieved to trigger an Achievement Factor, which in turn determines the number of shares to be finally awarded. Based on the criteria, restricted shares to be delivered will range from 0% to 150% of the conditional restricted shares awarded.



Sembcorp Marine Restricted Stock Plan (cont’d)

The managerial participants of the Group will be awarded restricted shares under the Restricted Stock Plan, while the 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 the Sembcorp Marine Challenge Bonus.

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

Senior management participants are required to hold a minimum percentage of the shares released to them under the Restricted Stock 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 in the event of a shortfall, they have a two calendar year period to meet the minimum percentage requirement.

The details of restricted shares of the Company awarded since commencement of the Restricted Stock Plan up to 31 December 2009 were as follows:

Restricted Shares participants

Conditional restricted

shares awarded

during the year

Aggregate conditional restricted

shares awarded

Aggregateconditional restricted

shares lapsed

Additional restricted

shares awarded

arising from targets met during the

year


shares released


shares outstanding

Directors of the Company

Goh Geok Ling 29,000 81,800 – 9,240 (13,347) 77,693

Richard Hale, OBE 22,000 22,000 – – – 22,000

Wong Weng Sun 75,000 243,384 – 21,000 (62,590) 201,794

Tan Kwi Kin – 352,896 – 42,000 (135,931) 258,965

Tan Pheng Hock 12,000 38,700 – 4,410 (6,370) 36,740

Ajaib Haridass 19,000 66,700 – 8,610 (12,437) 62,873

Tang Kin Fei 17,000 47,900 – 5,670 (8,190) 45,380

Ron Foo Siang Guan 17,000 53,600 – 5,880 (8,494) 50,986

Joseph Kwok Sin Kin 12,000 42,900 – 5,670 (8,190) 40,380

Ngiam Joke Mui 9,000 18,000 – – – 18,000

Lim Ah Doo 9,000 9,000 – – – 9,000Former Directors of the

Company – 69,300 (1,680) 8,610 (48,230) 28,000Other executives 3,205,330 12,336,535 (762,622) 1,071,143 (3,089,905) 9,555,151

3,426,330 13,382,715 (764,302) 1,182,233 (3,393,684) 10,406,962

Sembcorp Marine Restricted Stock Plan (cont’d)

With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2007 to 2008, a total of 1,956,117 restricted shares were released via the issuance of treasury shares. For awards in relation to the performance period 2006 to 2007, a total of 729,439 (2008: 708,128) restricted shares were released in 2009.

In 2009, additional 1,182,233 (2008: 477,893) restricted shares were awarded for the over-achievement of the performance targets for the performance period 2007 to 2008.

The total number of restricted shares outstanding, including awards achieved but not released, as at 31 December 2009, was 10,406,962 (2008: 8,762,851). Of this, the total number of restricted shares in awards granted conditionally and representing 100% of targets to be achieved, but not released was 6,709,730 (2008: 7,422,586). Based on the multiplying factor, the actual release of the awards could range from zero to a maximum of 10,064,595 (2008: 10,339,522) restricted shares.

Sembcorp Marine Challenge Bonus

With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2007 to 2008, a total of $1,678,905, equivalent to 1,203,602 notional restricted shares, were paid.

A total of 1,130,050 (2008: 957,400) notional restricted shares were awarded on 13 April 2009 (2008: 7 April 2008) for the Sembcorp Marine Challenge Bonus.

The total number of notional restricted shares in awards for the Sembcorp Marine Challenge Bonus granted conditionally and representing 100% of targets to be achieved, but not released as at 31 December 2009, was 1,928,700 (2008: 1,866,248). Based on the multiplying factor, the number of notional restricted shares to be converted into the funding pool could range from zero to a maximum of 2,893,050 (2008: 2,606,642).



Audit Committee

The members of the Audit Committee during the year and at the date of this report are:

Lim Ah Doo (Chairman)Richard Hale, OBERon Foo Siang Guan

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

The Audit Committee performs the functions specified in Section 201B of the Act, the SGX Listing Manual 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;• quarterly financial information and annual 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 SGX Listing Manual).

The Audit Committee has full access to the management and is given the resources required for it to discharge its functions. It has full authority and the discretion to invite any director or executive officer to attend its meetings. The Audit Committee also recommends 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 the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming Annual General 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

WONG WENG SUNDirector

Singapore22 February 2010

In our opinion:

(a) the financial statements set out on pages 126 to 199 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and the results and changes in equity of the Group and of the Company and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial 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 and when 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

WONG WENG SUNDirector


Directors’ Report Statement by Directors


We have audited the accompanying financial statements of Sembcorp Marine Ltd (the Company) and its subsidiaries (the Group), which comprise the balance sheets of the Group and the Company at 31 December 2009, the income statements, statements of comprehensive income and statements of changes in equity of the Group and of the Company, and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages 126 to 199.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of 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 assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain 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 accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the 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 the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, 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, statement of comprehensive income and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and the results 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 in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

KPMG LLPPublic Accountants andCertified Public Accountants


Independent Auditors’ Report Independent Auditors’ ReportMembers of the Company Sembcorp Marine Ltd

Members of the Company Sembcorp Marine Ltd


Group Company

Note 2009 2008 2009 2008$’000 $’000 $’000 $’000

Non-current assets

Property, plant and equipment 4 678,361 697,702 107,584 111,532

Investment properties 5 – – 51,360 54,037

Investments in subsidiaries 6 – – 629,076 620,252

Investments in associates and joint ventures 7 267,774 269,609 107,369 107,369

Other long term investments 8 165,783 138,376 113,377 97,317

Long term trade receivables 9 14,701 18,025 14,505 18,025

Other long term receivables 10 36,733 37,023 65,702 73,944

Intangible assets 11 6,127 6,127 122 122

Deferred tax assets 12 47 9,436 – –

Derivative financial assets 13 181 – – –

1,169,707 1,176,298 1,089,095 1,082,598

Current assets

Inventories and work-in-progress 14 1,252,500 834,789 – –

Trade receivables 9 228,881 480,396 30,404 16,123

Other receivables, deposits and prepayments 10 55,308 66,302 9,142 166,846

Derivative financial assets 13 2,604 – – –

Bank balances, fixed deposits and cash 15 1,978,548 2,054,032 15,846 12,454

3,517,841 3,435,519 55,392 195,423

Current liabilities

Trade payables 16 1,565,550 1,638,812 33,117 18,843

Other payables 17 26,682 26,869 45,561 113,103

Provisions 18 60,601 38,188 – – Progress billings in excess of work-in- progress

14 696,031 966,990 – –

Interest-bearing borrowings 19 12,000 202,238 – 149,945

Derivative financial liabilities 13 21,200 71,394 – –

Provision for taxation 253,218 167,149 1,017 422

2,635,282 3,111,640 79,695 282,313

Net current assets/(liabilities) 882,559 323,879 (24,303) (86,890)

Group Company

Note 2009 2008 2009 2008$’000 $’000 $’000 $’000

Non-current liabilities

Interest-bearing borrowings 19 8,000 20,000 – –

Derivative financial liabilities 13 10,912 49,731 – –

Deferred tax liabilities 12 66,748 61,261 34,873 34,163

Other long term payables 17 – 2,603 32,987 32,849

Other provisions 21 6,198 6,623 2,895 2,895

91,858 140,218 70,755 69,907

1,960,408 1,359,959 994,037 925,801

Equity attributable to shareholders of the Company

Share capital 22 443,347 443,347 443,347 443,347

Reserves 23 1,440,723 874,638 550,690 482,454

1,884,070 1,317,985 994,037 925,801

Minority interests 76,338 41,974 – –

Total equity 1,960,408 1,359,959 994,037 925,801

Balance Sheets Balance Sheets

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

as at 31 December 2009 as at 31 December 2009


Group Company

Note 2009 2008 2009 2008$’000 $’000 $’000 $’000

Turnover 25 5,724,742 5,063,948 52,063 33,372

Cost of sales (4,738,692) (4,408,772) (17,450) (17,808)

Gross profit 986,050 655,176 34,613 15,564

Other operating income 21,811 19,638 94 46

Other operating expenses (4,230) (54,129) (110) (959)

General and administrative expenses (141,277) (118,848) (34,693) (16,896)

Operating profit/(loss) 26 862,354 501,837 (96) (2,245)

Finance income 27 36,607 32,940 256,407 150,995

Finance costs 28 (5,329) (11,370) (3,316) (4,512)

Foreign exchange transactions 29 – (43,749) – –

Non-operating income 30 368 – 1,625 –

Non-operating expenses 30 (11,764) – – –

Share of results of associates and joint ventures 31 25,399 65,300 – –

Profit before income tax 907,635 544,958 254,620 144,238

Income tax (expense)/credit 32 (150,870) (93,716) 606 640

Profit for the year 756,765 451,242 255,226 144,878

Attributable to:

Shareholders of the Company 700,118 429,918 255,226 144,878



Earnings per share (cents) 33

Basic 34.02 20.83

Diluted 33.93 20.72

Statements of Comprehensive Income

Group Company

Note 2009 2008 2009 2008$’000 $’000 $’000 $’000


Other comprehensive income/(expense)

Foreign currency translation differences (30,161) 15,343 – –

Net fair value changes of cash flow hedges 52,593 (65,977) – –

Net fair value changes of cash flow hedges transferred to income statement 8,581 (8,581) – –

Net fair value changes of available-for-sale financial assets 22,125 (452,961) 13,639 (277,227)

Net fair value changes of available-for-sale financial assets transferred to income statement on impairment

11,764 – – –

Other comprehensive income/(expense) for the year, net of income tax 24 64,902 (512,176) 13,639 (277,227)

Total comprehensive income/(expense) for the year 821,667 (60,934) 268,865 (132,349)

Attributable to:

Shareholders of the Company 767,586 (82,440) 268,865 (132,349)


Total comprehensive income/(expense) for the year 821,667 (60,934) 268,865 (132,349)

Income Statements


Year Ended 31 December 2009 Year Ended 31 December 2009


Consolidated Statement of Changes in Equity

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944

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–

30,4

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ote

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–

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–

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(226

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15,4

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15

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–

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30

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–

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Consolidated Statement of Changes in Equity

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– 15

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15,1

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– 10

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ote

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– (2

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– 12

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5,99

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317,

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Consolidated Statement of Changes in EquityConsolidated Statement of Changes in Equity

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– 13

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13,6

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34)

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– (2

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3,25

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253

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12,7

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960

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956

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Note 2009 2008$’000 $’000

Cash Flows from Operating Activities

Operating profit 862,354 501,837

Adjustments for:

Gain on disposal of property, plant and equipment, net (150) (822)

Share-based payment expenses 17,858 19,484

Amortisation 55 1,577

Fair value adjustment of hedging instruments (3,160) 42,375

Depreciation of property, plant and equipment 75,193 69,130

Impairment loss on property, plant and equipment 6,145 –

Property, plant and equipment written off 2,459 701

Negative goodwill (298) –

Operating income before reinvestment in working capital 960,456 634,282

Inventories and work-in-progress (688,670) 1,128,302

Trade and other receivables 265,074 (32,123)

Trade and other payables (95,182) 302,112

Cash generated from operations 441,678 2,032,573

Investment and interest income received 36,986 32,504

Income taxes paid (57,869) (42,613)

Interest paid (7,046) (12,069)

Net cash inflow from operating activities 413,749 2,010,395

Net payment to banks relating to foreign exchange transactions – (93,452)

413,749 1,916,943

Cash Flows from Investing Activities

Investment in associates and joint ventures – (250)

Purchase of property, plant and equipment (a) (66,994) (96,924)

Purchase of other investment (32) –

Capital contribution by minority shareholders – 529

Dividends from associates 12,842 10,478

Acquisition of minority interest (13,428) –

Proceeds from:

- disposal of property, plant and equipment 7,052 1,141

- sale of other long term investments – 22

Net cash outflow from investing activities (60,560) (85,004)

Note 2009 2008$’000 $’000

Cash Flows from Financing Activities

Dividends paid:

- by the Company (226,666) (209,259)

- to minority shareholders (5,991) (5,822)

Proceeds from issue of treasury shares by the Company 10,035 11,713

Payments on finance leases (3,758) (1,761)

Repayment of borrowings (647,873) (837,531)

Proceeds from borrowings 445,580 618,021

Purchase of treasury shares – (93,745)

Net cash outflow from financing activities (428,673) (518,384)

Net (decrease)/increase in cash and cash equivalents (75,484) 1,313,555

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

Cash and cash equivalents at end of year 15 1,978,548 2,054,032

(a) In 2008, the Group acquired property, plant and equipment with an aggregate cost of $99,798,000 of which $2,874,000 was acquired by means of finance leases.

Consolidated Cash Flow Statement Consolidated Cash Flow Statement




Notes to the Financial StatementsYear Ended 31 December 2009



These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 22 February 2010.

1 Domicile and Activities

Sembcorp Marine Ltd (the Company) is a company incorporated in the Republic of Singapore. The address of the Company’s registered office is 29 Tanjong Kling Road, Singapore 628054.

The financial statements of the Company as at and for the year ended 31 December 2009 comprise the Company and its subsidiaries (together referred to as the Group and individually as Group entities) and the Group’s interest in associates and joint ventures.

The principal activities of the Company are the provision of management services and investment holding. The principal activities of the subsidiaries, associates and joint ventures are stated in Note 43.

2 Basis of preparation

2.1 Basis of preparation

The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (FRS).

The financial statements are presented in Singapore dollars, which is the Company’s functional currency. All financial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated. They are prepared on the historical cost basis except where otherwise described in the accounting policies below.

The preparation of the financial statements in conformity with FRS requires management to make judgements, estimates and 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.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised 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 policies that have the most significant effect on the amount recognised in the financial statements are discussed in Note 42.

With effect from 1 January 2009, the Group adopted the following new or amended FRS which are relevant to the Group’s operations:

FRS 1 (revised 2008) Presentation of Financial Statements FRS 23 Borrowing CostsAmendments to FRS 107 Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments FRS 108 Operating SegmentsImprovements to FRS 2008

(i) Determinationandpresentationofoperatingsegments

From 1 January 2009, the Group determines and presents operating segments based on the information that is provided to the Chief Executive Officer (CEO), who is the Group’s chief operating decision maker. This change in accounting policy is due to the adoption of FRS 108 Operating Segments. Previously, operating segments were determined and presented in accordance with FRS 14 Segment Reporting. The new accounting policy in respect of operating segment disclosures is presented as follows:

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. An operating segment’s operating results are reviewed regularly by the CEO to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property, plant and equipment, and intangible assets other than goodwill.

(ii) Presentationoffinancialstatements

The Group applies revised FRS 1 Presentation of Financial Statements (2008), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income.

Comparative information has been re-presented so that it also is in conformity with the revised standard. Since the change in accounting policy only impacts presentation, there is no impact on earnings per share.

(iii) Financialinstruments:Disclosures

The Group applies the amendments to FRS 107 Financial Instruments: Disclosures, which became effective as of 1 January 2009. As a result, the Group discloses how the fair value of their financial instruments is measured using the “three-level hierarchy” and provides additional disclosures about the relative reliability of the fair value measurements.

FRS 107 does not require comparative information to be restated. Since the change in accounting policy only impacts presentation and disclosure, there is no impact on earnings per share.

The adoption of the above FRS and INT FRS did not result in substantial changes to the Group’s accounting policies. The accounting policies set out below have been applied consistently by the Group. The accounting policies used by the Group have been applied consistently to all periods presented in these financial statements.

3 Significant accounting policies

3.1 Basis of 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 its activities.

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

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

All business combinations are accounted for using the purchase method. Under the purchase method, the cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.





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

Associates

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

The existence and effect of potential voting rights that are presently exercisable or presently convertible are considered when 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 date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds the carrying amount of the associate (including any other unsecured receivables, that in substance, form part of the Group’s net investment in the associate), recognition of further losses is discontinued unless the Group has incurred obligations or made payments on its behalf to satisfy obligations of the associate that the Group has guaranteed or otherwise committed on behalf of.

Where the audited financial statements are not available, the share of results is arrived at from unaudited management financial statements made up mainly to the end of the accounting year to 31 December.

JointVentures

Joint ventures are those enterprises whose activities the Group has joint control over, established by contractual agreement 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 considered when 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, from the 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 a line-by-line basis.

Where the audited financial statements are not available, the share of results is arrived at from unaudited management financial statements made up mainly to the end of the accounting year to 31 December.

AssociatesandJointVenturesintheCompany’sFinancialStatements

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

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

TransactionsEliminatedonConsolidation

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 the Group’s interest in the enterprise. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

AccountingPoliciesofSubsidiaries,AssociatesandJointVentures

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

3.2 Foreign currencies

FunctionalandPresentationCurrency

Items included in the financial statements of each company in the Group are measured using the currency of the primary economic environment in which the company operates (the functional currency).

ForeignCurrencyTransactionsandBalances

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

• Foreign currency monetary items are translated into the functional currency using foreign exchange rates ruling at that date.

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

Foreign exchange differences arising from the settlement or from translation of monetary items are recognised in the income statement except for exchange differences arising from monetary items that form part of the Group’s net investment in foreign subsidiaries, which are recognised in the Company’s income statement and reclassified to foreign currency translation reserve in the consolidated financial statements. Such exchange differences are released to 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 are recognised directly in equity when non-monetary items’ gains or losses are recognised directly in equity. Conversely, when non-monetary items’ gains or losses are recognised directly in the income statement, foreign exchange differences arising from these items are recognised directly in the income statement.

ForeignOperations

The results and financial positions of foreign operations (none of which have the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation 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 foreign exchange 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 statement as part of the gain or loss on disposal.

3.3 Property, plant and equipment

Ownedassets

Property, plant and equipment are stated at cost or valuation less accumulated depreciation and impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the asset.

The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads.

Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment.





Revaluationsurplus

Any increase in revaluation is credited to the revaluation reserve unless it offsets a previous decrease in value recognised in the income statement. A decrease in value is recognised in the income statement where it exceeds the increase previously recognised in the valuation surplus of the same asset.

Subsequentexpenditure

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

Disposals

Gains or losses arising from the retirement or disposal of property, plant and equipment are determined as the difference between the estimated net disposal proceeds and the carrying amount of the asset and are recognised in the income statement on the date of retirement or disposal.

For property, plant and equipment carried at revalued amounts, any related revaluation surplus is transferred from the revaluation reserve to revenue reserve and is not taken into account in arriving at the gain or loss on disposal.

Provisionforrestorationcosts

A provision is recognised for the costs expected to be incurred to dismantle, remove and restore the asset upon expiry of the lease agreement. The estimated costs form part of the cost of the property, plant and equipment and are depreciated over the useful life of the asset.

Depreciation

Depreciation is calculated using the straight-line method to allocate the cost less its residual values so as to write off items of property, plant and equipment over their estimated useful lives. Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of an item is depreciated separately. The estimated useful lives are as follows:

Freehold and leasehold land and buildings 45 years or remaining period of leaseQuays and dry docks 60 years or remaining period of lease Plant, machinery and tools 3 to 15 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 assets’ depreciation method, useful lives and residual values are reviewed, if not insignificant, annually, and adjusted if appropriate.

No depreciation is provided on construction-in-progress. Fully depreciated assets are retained in the financial statements until they are no longer in use and no further charge for depreciation is made in respect of these assets.

Investmentproperties

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

Investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. Depreciation is recognised in the income statement on a straight-line basis over the estimated useful lives ranging from 45 to 60 years, or the remaining period of lease. The assets’ depreciation method, useful lives and residual values of investment properties are reviewed, if not insignificant, annually and adjusted if appropriate.

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

On disposal of an investment property, the difference between the estimated net disposal proceeds and the carrying amount of the asset is recognised in the income statement.

3.4 Intangible assets

Goodwill

Goodwill represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets, liabilities and contingent liabilities acquired. Goodwill is stated at cost less accumulated impairment losses. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates and joint ventures is included in investments in associates and joint ventures.

Acquisitionsofminorityinterest

Goodwill arising from the acquisition of a minority interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the net assets acquired at the date of exchange.

Goodwill is tested for impairment on an annual basis in accordance with 3.11.

Negativegoodwill

Negative goodwill arising on acquisition represents the excess of the net fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities acquired over the cost of acquisition and are credited to income statement in the period of acquisition.

Fair values assigned to the identifiable assets, liabilities and contingent liabilities can be estimated provisionally in the initial accounting for a business combination. The Group will recognise adjustments to those provisional fair values upon finalising the fair values within twelve months from the acquisition date (the measurement period). The corresponding adjustment, if any, will be made by restating the previously reported goodwill or negative goodwill. After the measurement period, any adjustments to the goodwill will be recognised in the income statement in the year in which the adjustments are identified.

3.5 Financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

The Group classifies its financial assets in the following categories: financial assets at fair value through profit or loss, loans and receivables, or available-for-sale financial assets, as appropriate.





The classification depends on the purpose for which the investments are acquired. Management determines the classification of its investments at initial recognition and re-evaluates this designation at every reporting date. The designation of financial assets at fair value through profit or loss is irrevocable.

Financialassetsatfairvaluethroughprofitorloss

A financial asset is classified in this category if the Group manages such assets and makes purchase and sale decisions based on their fair value. Derivative financial instruments are also classified as ‘financial assets at fair value through profit or loss’ unless they are designated as effective hedging instruments. Upon initial recognition, attributable transaction costs are recognised in the income statement when incurred. Assets in this category are classified as current assets and are stated at fair value, with any resultant gain or loss recognised in the income statement.

Loansandreceivables

Loans and receivable are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a debtor with no intention of trading the receivable. They are included in current assets, except for maturities greater than 12 months after the balance sheet date for which they are classified as non-current assets. Loans and receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less impairment losses. Receivables with a short duration are not discounted.

Available-for-salefinancialassets

Other financial assets held by the Group that are either designated in this category or not classified in any other category, are classified as being available-for-sale. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance sheet date. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses (see note 3.6) and foreign currency differences on available-for-sale monetary items (see note 3.2), are recognised in other comprehensive income and presented within equity in the fair value reserve. When an investment is derecognised, the cumulative gain or loss in other comprehensive income is transferred to income statement.

Financial assets classified as available-for-sale are recognised by the Group on the date it receives the financial asset and derecognised on the date it delivers the financial asset. Other financial assets are derecognised when the rights to receive cash flows from the investments have expired or all risks and rewards of ownership have been substantially transferred.

3.6 Impairment of financial assets

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flow of that asset that can be estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, indications that a debtor or issuer will enter bankruptcy or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost are considerations of objective evidence of impairment.

The Group considers evidence of impairment for receivables at both a specific asset and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

In assessing collective impairment, the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in income statement and reflected in an allowance against receivables. Interest on the impaired asset continues to be recognised through the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through income statement.

Impairment losses on available-for-sale investment securities are recognised by transferring the cumulative loss that has been recognised in other comprehensive income, and presented in the fair value reserve in equity, to income statement. The cumulative loss that is removed from other comprehensive income and recognised in income statement is the difference between the acquisition cost, net of any principal payment and amortisation, and the current fair value, less any impairment loss previously recognised in income statement. Changes in impairment attributable to time value are reflected as a component of interest income. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income and presented within equity in the fair value reserve.

3.7 Derivative financial instruments

Derivative financial instruments are used to manage exposures to foreign exchange and interest rate risks arising from operational, financing and investment activities. Derivative financial instruments are not used for trading purposes. However, derivatives that do not qualify for hedge accounting are accounted for as trading instruments.

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

Fairvaluehedges

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

Cashflowhedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised directly in equity. The ineffective part of any gain or loss is recognised immediately in the income statement. When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial liability, or the forecast transaction for a non-financial asset or non-financial liability becomes a firm commitment for which fair value hedge accounting is applied, the associated cumulative gain or loss is removed from equity and included in the initial cost or other carrying amount of the non-financial asset or liability. If a hedge of a forecast transaction subsequently results in the recognition of a financial asset or financial liability, the associated gains and losses that were recognised directly in equity are reclassified into the income statement in the same period or periods 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 hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs. If the hedged transaction is no longer expected to take place, the cumulative unrealised gain or loss recognised in equity is recognised immediately in the income statement.





3.8 Inventories and work-in-progress

Inventories consist mainly of steel and other materials used for ship and rig repair, building and conversion and are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition.

Work-in-progress represents the gross unbilled amount expected to be collected from customers for contract work completed to date. This comprises mainly uncompleted ship and rig repair, building and conversion jobs. It is measured at cost plus profit recognised to date less progress billings and recognised losses. Cost includes materials, direct labour, sub-contractors’ costs and an appropriate allocation of fixed and variable production overheads. Allowance is 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 exceed the profit recognised, the difference is presented as progress billings in excess of work-in-progress on the balance sheet.

Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the estimated costs necessary to make the sale.

When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised.

The amount of any allowance for write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the write-down or loss occurs. The amount of any reversal of any allowance for write-down of inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount of inventories recognised as an expense in the period in which the reversal occurs.

3.9 Government grants

Governmentgrants

Government grants are recognised initially as deferred income at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Grants that compensate the Group, for expenses incurred are recognised in income statement as other income on a systematic basis in the same periods in which the expenses are recognised. Grants that compensate the Group for the cost of an asset are recognised in income statement on a systematic basis over the useful life of the asset.

JobsCreditScheme

Cash grants received from the government in relation to the Jobs Credit Scheme are recognised upon receipt. Such grants are provided to defray the wage costs incurred by the Company and are offset against staff costs in the financial statements.

3.10 Cash and cash equivalents

Cash and cash equivalents comprise cash balances and bank deposits.

3.11 Impairment of non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time.

Calculationofrecoverableamount

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or cash-generating unit. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the cash-generating unit, or CGU). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment is tested reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

Reversalsofimpairment

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the assets’ carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

3.12 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 liabilities. Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.

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

Gains and losses are recognised in the income statement when the liabilities are derecognised when the obligation under the liability is discharged or cancelled or has expired.

3.13 Employee benefits

Definedcontributionplans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.

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

Short-termemployeebenefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related employment service is provided.





The amount expected to be paid are accrued when the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

Staffretirementbenefits

Retirement benefits payable to certain categories of employees upon their retirement are provided for in the financial statements based on their entitlement under the staff benefit plan or, in respect of unionised employees who joined on 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 have earned in return for their service in current and prior periods. The obligation is calculated using projected salary increases and is discounted to its present value, and the fair value of any related assets is deducted.

Equityandequity-relatedcompensationbenefits

Employee stock options

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

The proceeds received net of any directly attributable transaction costs are credited to reserve for own shares when the options are exercised and treasury shares are issued, or credited to share capital when new shares are issued.

Performance Share Plan

The fair value of equity-related compensation is measured using the Monte Carlo simulation method as at the date of the grant. The method involves projecting future outcomes using statistical distributions of key random variables including 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 is charged to the income statement with a corresponding increase in equity on a basis that fairly reflects the manner in which the benefits will accrue to the employee under the plan over the service period to which the performance period 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 Monte Carlo simulation method as at the date of the grant. The method involves projecting future outcomes using statistical distributions of key random variables including share prices and the volatility of returns. This model takes into the account 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 the performance criteria relates 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 that fairly reflects the manner in which the benefits will accrue irrespective of whether this performance condition is satisfied.

At balance sheet date, the Group revises its estimates of the number of performance-based restricted stocks that the employees are expected to receive based on the achieving of non-market performance conditions and the number of shares ultimately given. It recognises the impact of the revision of the original estimates in employee expense and a 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 stocks granted to employees of its subsidiaries is recognised as an increase in the cost of the Company’s investment in subsidiaries, with a corresponding increase in equity over the vesting period.

Cash-relatedcompensationbenefits


The Group recognises a liability and an expense for bonuses and profit-sharing, based on a formula that takes into consideration the share price of the Company. The Group recognises a provision when it is contractually obliged to pay or 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 the service period to which the performance criteria relates and the period during which the employees become unconditionally entitled to the bonus. The liability takes into account the probability of achieving the performance conditions 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 at the date of settlement, with any changes in fair value recognised in the income statement for the period.

3.14 Provisions

A provision is recognised when there is a legal or constructive obligation as a result of a past event, the obligation can be reliably estimated and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

3.15 Leases

WhenentitieswithintheGrouparelessorsofafinancelease

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

WhenentitieswithintheGrouparelesseesofafinancelease

Leased assets in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, property, plant and equipment acquired through finance leases are capitalised at the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. Leased assets are depreciated over the shorter of the lease term and their useful lives.

Lease payments are apportioned between finance expense and reduction of the lease liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

WhenentitieswithintheGrouparelesseesofanoperatinglease

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





3.16 Revenue recognition

Revenue from ship and rig repair, building, conversion and offshore 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 percentage of completion is assessed by reference to the ratio of costs incurred to-date to the estimated total costs for each contract, with due consideration given to the inclusion of 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 contract costs incurred that can probably be recovered and contract costs are recognised as an expense in the period in which they are incurred.

Incomeongoodssoldandservicesrendered

Income on goods sold is recognised when the significant risks and rewards by ownership have been transferred to the buyer. Revenue on other service work is recognised when the work is completed.

Rentalincome

Charter hire income is taken to the income statement on an accrual basis over the charter hire period. Rental income receivable under operating leases is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are recognised as a reduction of rental income over the lease term on a straight-line basis. Contingent rentals are recognised as income in the accounting period in which they are earned.

Dividendandinterestincome

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.

3.17 Income tax expense

Income tax expense comprises current and deferred tax. Income tax expense is recognised in the income statement except 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 or receivable on the taxable income for the year, using tax rates enacted or substantively enacted 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 carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries, associates and joint ventures to the extent that it is probable that they will not reverse in the foreseeable future. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets 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 against which the temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

3.18 Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares and share options are deducted against the share capital account, net of any tax effects.

Where the Company’s ordinary shares are repurchased (treasury shares), the consideration paid, including any directly attributable incremental costs, net of any tax effects, is deducted from equity attributable to the Company’s equity holders and presented as “reserve for own shares” within equity, until they are cancelled, sold or reissued.

When treasury shares are cancelled, the cost of treasury shares is deducted against the share capital account, if the shares are purchased out of capital of the Company, or against the accumulated profits of the Company, if the shares are purchased out of profits of the Company.

When treasury shares are subsequently sold or reissued pursuant to the Share-based incentive Plans, the cost of the treasury shares is reversed from the reserve for own shares account and the realised gain or loss on sale or reissue, net of any directly attributable incremental transaction costs and related income tax, is recognised as a change in equity of the Company. No gain or loss is recognised in the income statement.

3.19 Finance costs

Interest expense and similar charges expensed in the income statement in the period in which they are as incurred, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to prepare the asset for its intended use or sale are in progress. The interest component of finance lease payments is recognised in the income statement using the effective interest rate method.

3.20 Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees.

3.21 Financial guarantee contracts

Financial guarantee contracts are accounted for as insurance contracts and treated as contingent liabilities until such time as they become probable that the Company will be required to make a payment under the guarantee. A provision is recognised based on the Group’s estimate of the ultimate cost of settling all claims incurred but unpaid at the balance sheet date. The provision is assessed by reviewing individual claims and tested for adequacy by comparing the amount recognised and the amount that would be required to settle the guarantee contract.





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Docks, launches, cranes and

marine vessels

Plant,machineryand tools Others Total

Company $’000 $’000 $’000 $’000Cost or valuationBalance 1 January 2008At 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 2008 163,861 7,609 3,325 174,795

Balance at 1 January 2009At cost 138,709 7,609 3,325 149,643

At valuation 25,152 – – 25,152

163,861 7,609 3,325 174,795Additions – – 482 482


Balance at 31 December 2009At cost 138,709 7,609 3,807 150,125At valuation 25,152 – – 25,152

163,861 7,609 3,807 175,277

Accumulated depreciation

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


Depreciation for the year 3,740 86 604 4,430


Carrying amounts

At 1 January 2008 111,678 1,201 1,544 114,423

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

At 31 December 2009 105,170 1,012 1,402 107,584

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

Group and Company2009 2008$’000 $’000

Docks 5,078 5,501

The re-valued net book value of the docks is $8,581,000 (2008: $9,296,000).

(b) As at 31 December 2008, 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 for the Group. These assets have been fully depreciated as at 31 December 2009.

(c) Others comprise motor vehicles, furniture and office equipment, utilities and fittings and computer equipment.

(d) Change in estimates

During the year ended 31 December 2009, the Group revised its estimates for the useful lives of certain assets within land and buildings, and docks, quays, launches, cranes and marine vessels after conducting an operational review of their useful lives. As a result, there was a change in the expected useful lives of these assets. The effect of these changes on depreciation expense in current and future periods on assets currently held is as follows:

2009 2010 2011 2012 2013 Later$’000 $’000 $’000 $’000 $’000 $’000

Group(Decrease)/increase in depreciation expense and (increase)/decrease in profit before tax

(1,240) 7,031 7,189 8,772 9,116 (31,220)

CompanyIncrease/(decrease) in depreciation expense and decrease/(increase) in profit before tax

1,761 10,567 10,567 10,567 9,953 (43,415)

5 Investment properties

Company2009 2008$’000 $’000

CostBalance at 1 January and 31 December 95,862 95,862

Accumulated depreciationBalance at 1 January 41,825 39,912Depreciation for the year 2,677 1,913Balance at 31 December 44,502 41,825

Carrying amounts 51,360 54,037





The investment properties of the Company are used by the Group in carrying out its principal activities and are accounted for as property, plant and equipment at the Group.

The following amounts are recognised in the income statement:

Company2009 2008$’000 $’000

Rental income (18,365) (18,903)

Operating expenses arising from rental of investment properties 17,444 17,781

6 Investments in subsidiaries

Company2009 2008$’000 $’000

Unquoted shares, at cost 644,327 635,503Allowance for impairment loss (15,251) (15,251)

629,076 620,252

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 43.

7 Investments in associates and joint ventures

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

AssociatesUnquoted shares, at cost 111,688 111,688 107,369 107,369Share of net post-acquisition reserves 128,433 137,486 – –

240,121 249,174 107,369 107,369

Joint venturesUnquoted shares, at cost 890 890 – – Share of net post-acquisition reserves 26,763 19,545 – –

27,653 20,435 – –

267,774 269,609 107,369 107,369

Details of the Group’s associates and joint ventures are set out in Note 43.

Summary financial information for associates, not adjusted for the percentage ownership held by the Group:

Group2009 2008$’000 $’000

Combined results of associates:

Turnover 2,675,974 2,247,798

Profit before income tax 135,841 334,051Income tax expense (34,111) (44,677)

Profit for the year 101,730 289,374

Combined assets and liabilities of associates Non-current assets 2,179,431 1,808,721 Current assets 3,434,499 4,136,631 Current liabilities (3,355,332) (4,207,959) Non-current liabilities (1,092,311) (688,349)

Net assets 1,166,287 1,049,044

The aggregate amounts of each of current assets, non-current assets, current liabilities, non-current liabilities, income and expenses relating to the Group’s interest in joint ventures are as follows:

Group2009 2008$’000 $’000

The Group’s share of combined results of joint ventures:

Turnover 16,326 14,775

Profit before income tax 7,850 8,306Income tax expense (632) (132)

Profit for the year 7,218 8,174

The Group’s share of combined assets and liabilities of joint ventures: Non-current assets 58,468 57,984 Current assets 11,234 6,062 Current liabilities (4,422) (29,847) Non-current liabilities (37,627) (13,764)

Net assets 27,653 20,435





8 Other long term investments

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Available-for-sale financial assetsQuoted equity securities, at fair value 163,997 107,231 111,704 66,283Unquoted non-equity securities, at fair value 343 251 343 251Unquoted equity securities, at cost 1,408 30,861 1,330 30,783

Financial assets at fair value through profit or lossQuoted equity securities, at fair value 35 33 – –

165,783 138,376 113,377 97,317

Unquoted equity securities which have no market prices and whose fair value cannot be reliably measured using valuation techniques are stated at cost less impairment.

9 Trade receivables

Group CompanyNote 2009 2008 2009 2008

$’000 $’000 $’000 $’000Current assetsTrade receivables (a) 231,900 488,185 30,404 16,774Allowance for doubtful receivables (b) (3,019) (7,789) – (651)

228,881 480,396 30,404 16,123

Non-current assetsExternal parties 196 – – – External lease receivables (c) 14,505 18,025 14,505 18,025

14,701 18,025 14,505 18,025

Loans and receivables 243,582 498,421 44,909 34,148

(a) Current assets


$’000 $’000 $’000 $’000

Related companies 5,798 4,802 5,583 4,801Subsidiaries – – 21,301 7,948Associates and joint ventures 213 28 – – External parties 222,369 479,981 – 651External lease receivables (c) 3,520 3,374 3,520 3,374

231,900 488,185 30,404 16,774

Other than lease receivables as explained in Note (c), the remaining balances shown above are interest-free. All the amounts due from related companies, subsidiaries, associates and joint ventures are unsecured, repayable on demand and to be settled in cash.

(b) Allowance for external party doubtful receivables

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Balance at 1 January 7,789 5,309 651 651Currency translation difference (4) (1) – – Allowance made 1,857 5,652 – – Allowance written back (627) (1,301) – – Allowance utilised (5,996) (1,870) (651) –

Balance at 31 December 3,019 7,789 – 651

(c) Additional information on finance lease receivables

Group and Company

Minimum lease

payment

Estimated residual

value

Total gross investment in

lease

Unearned interest income

Present value of minimum

lease payment$’000 $’000 $’000 $’000 $’000

2009Receivable within 1 year 4,218 – 4,218 (698) 3,520Receivable after 1 year but within 5 years 12,657 3,000 15,657 (1,152) 14,505

16,875 3,000 19,875 (1,850) 18,025

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) 21,399

Under the terms of the lease agreements, no contingent rents were recognised. Interest rate was 4.25% (2008: 4.25%) per annum. These lease receivables relate to the leases of marine vessels for which the lessees have 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:

Group2009 2008$’000 $’000

By business activityShip and rig repair, building and conversion 308,896 582,885Ship chartering 15,175 15,431Others 14,668 11,316

338,739 609,632

The age analysis of trade and other receivables past due but not impaired is as follows:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Past due 0 to 3 months 75,767 42,600 – – Past due 3 to 6 months 3,486 12,308 – – Past due 6 to 12 months 3,474 7,220 – – More than 1 year 1,839 22,436 – 47

84,566 84,564 – 47

The allowance account in respect of trade and other receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is considered irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the impaired financial asset.

Based on historical default rates, the Group believes that the amount of impairment allowance made is adequate in respect of trade and other receivables. These receivables are mainly arising by customers that have a good collection track record with the Group.

Trade receivables that are individually determined to be impaired at the balance sheet date relate to receivables that are in significant financial difficulty and have defaulted on payments.

10 Other receivables, deposits and prepayments


$’000 $’000 $’000 $’000Current assetsDeposits and recoverables (a) 38,146 58,039 896 3,103Non-trade receivables (b) 2,902 289 8,246 163,685Prepayments 13,175 6,584 – – Staff loans (c) 1,085 1,390 – 58

55,308 66,302 9,142 166,846

Non-current assetsOther long term receivables (d) 36,733 37,023 65,702 73,944

92,041 103,325 74,844 240,790

(a) Deposits and recoverables

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

GST refundable 28,540 34,047 – – Interest receivable 212 591 – – Recoverables 4,535 9,945 814 1,871Tax recoverable 1,705 1,602 – 937Withholding tax recoverable 750 8,577 – – Sundry deposits 2,404 3,277 82 295

38,146 58,039 896 3,103

Recoverables are stated after deducting allowance for doubtful debts of $97,000 (2008: $97,000).

Withholding tax recoverable arose from the acquisition of subsidiaries in prior years and is guaranteed by the vendor.

(b) Non-trade receivables


$’000 $’000 $’000 $’000Non interest-bearing Associates and joint ventures 2,886 250 – – Related company 16 39 – – Subsidiaries – – 7,234 12,556Interest-bearing Loans to subsidiaries (e) – – 1,012 151,129

2,902 289 8,246 163,685





All non interest-bearing amounts due from associates, joint ventures, related company, subsidiaries and the immediate holding company, which comprise mainly advances and payments on behalf, are unsecured, repayable on demand and to be settled in cash.

(c) Staff loans

Staff loans bear interest at 3.0% (2008: 3.0%) per annum.

(d) Other long term receivables


$’000 $’000 $’000 $’000Non interest-bearing Loans to subsidiaries – – 63,743 70,973 Loans and advances to joint ventures 15,175 15,431 – –

Interest-bearing Loans to subsidiary and joint venture 21,359 21,359 1,959 2,971 Staff loans (c) 199 233 – –

36,733 37,023 65,702 73,944

All non interest-bearing loans and advances to subsidiaries and joint ventures are unsecured, and to be settled in cash. Loan to a joint venture of $21,359,000 (2008: $21,359,000) bears weighted-average interest rate of 1.01% (2008: 1.72%) per annum. The settlement of these remaining 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 subsidiaries

Loan to subsidiaries are unsecured, bore interest at fixed rate of 2.27% to 3.1% (2008: 2.27% to 3.1%) per annum and were settled in cash. Loan to a subsidiary of $149,625,000 (2008: $149,625,000) was repaid in 2009.

11 Intangible assets


$’000 $’000 $’000 $’000

Goodwill on consolidation (a) 5,940 5,940 – – Club memberships (b) 187 187 122 122

6,127 6,127 122 122

(a) Goodwill on consolidation

Group2009 2008$’000 $’000

Balance at 1 January and 31 December 5,940 5,940

Carrying amounts of goodwill allocated to each of the Group’s cash-generating units are as follows:

Group2009 2008$’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 determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management for the next financial year.

(b) Club memberships

Club memberships are stated at cost and after deducting allowance for impairment loss of $653,000 (2008: $653,000) for the Group and $468,000 (2008: $468,000) for the Company.





12

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–

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–

34

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73

Deferred tax liabilities and assets are set off when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxation authority. The amounts determined after appropriate offsetting included in the balance sheet are as follows:

Group CompanyGroup 2009 2008 2009 2008

$’000 $’000 $’000 $’000

Deferred tax assets (47) (9,436) – – Deferred tax liabilities 66,748 61,261 34,873 34,163

66,701 51,825 34,873 34,163

Deferred tax assets not recognised in respect of the following items:

Group2009 2008$’000 $’000

Unutilised tax losses and capital and investment allowances unlikely to be utilised (2,403) (4,486)Others (3,276) (3,195)

(5,679) (7,681)

Deferred tax assets have not been recognised in respect of the above temporary differences in accordance with note 3.17.

13 Derivative financial assets and liabilities

2009 2008

GroupNotional amount

Assets/(Liabilities)

Notional amount

Assets/(Liabilities)

$’000 $’000 $’000 $’000Forward foreign currency contracts: Bought contracts 1,671,896 (28,800) 2,605,128 (120,124)Interest rate swap 20,000 (527) 32,000 (1,001)

Balance at 31 December 1,691,896 (29,327) 2,637,128 (121,125)

Comprises:Current derivative financial assets 98,206 2,604 – – Non-current derivative financial assets 5,405 181 – – Current derivative financial liabilities 916,822 (21,200) 1,950,645 (71,394)Non-current derivative financial liabilities 671,463 (10,912) 686,483 (49,731)

1,691,896 (29,327) 2,637,128 (121,125)

As at 31 December 2009, the settlement dates on open derivative contracts ranged between 1 to 31 months (2008: 1 to 37 months). The fixed interest rate on the interest rate swap is 3.93% (2008: 3.93%) per annum and is used to hedge the interest rate risk arising from the term loan as disclosed in Note 19 (b).





Details of the forward foreign currency contracts and foreign exchange swap contracts are as follows:

Group2009 2008$’000 $’000

Contracts to deliver USD and receive SGD 1,624,126 2,600,926Contracts to deliver USD and receive EUR 5,011 4,202Contracts to deliver EUR and receive SGD 42,759 –

1,671,896 2,605,128

14 Inventories and work-in-progress

GroupNote 2009 2008

$’000 $’000

Materials (a) 25,330 43,668Finished goods (a) 2,498 3,585Work-in-progress (b) 1,224,672 787,536

1,252,500 834,789

(a) Materials and finished goods are stated after deducting allowance for inventories obsolescence of:

Group2009 2008$’000 $’000

Allowance for inventories obsolescence:Balance at 1 January 4,132 2,506Charge for the year 189 1,728Write-back for the year (184) (29)Utilised during the year – (73)

Balance at 31 December 4,137 4,132

Materials 3,823 3,634Finished goods 314 498

4,137 4,132

(b) Work-in-progress

Group2009 2008$’000 $’000

Costs and attributable profits less allowance for foreseeable losses 6,341,128 5,191,916

Progress billings (5,812,487) (5,371,370)

528,641 (179,454)

Comprising: Work-in-progress 1,224,672 787,536 Progress billings in excess of work-in-progress (696,031) (966,990)

528,641 (179,454)

15 Bank balances, fixed deposits and cash

Bank balances, fixed deposits and cash comprise:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Fixed deposits 1,638,158 1,630,147 – – Bank balances and cash 340,390 423,885 15,846 12,454

Cash and cash equivalents in the cash flow statement 1,978,548 2,054,032 15,846 12,454

Fixed deposits of the Group placed with financial institutions have maturity periods ranging from 4 days to 3 months (2008: 2 days to 9 months) from the financial year-end and interest rates ranging from 0.03% to 1.3% (2008: 0.30% to 6.44%) per annum, which are also the effective interest rates.

16 Trade payables

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Associates and joint ventures 2,103 2,105 – – Immediate holding company 250 1,356 250 1,348Related companies 114 1,525 17 – Subsidiaries – – – 17External parties 1,563,083 1,633,826 32,850 17,478

1,565,550 1,638,812 33,117 18,843

All the amounts due to associates, joint ventures, the immediate holding company, related companies and subsidiaries are interest-free, unsecured, repayable on demand and to be settled in cash.





17 Other payables


$’000 $’000 $’000 $’000Current payablesDeposits received 1,992 1,431 26 26GST payables 3,704 2,396 233 492Finance lease liabilities 20 – 1,155 – – Non-trade payables (a) 20,986 20,644 45,302 111,401Interest payable – 1,243 – 1,184

26,682 26,869 45,561 113,103

Non-current payables Finance lease liabilities 20 – 2,603 – – Non-trade payables to subsidiary (b) – – 32,987 32,849

– 2,603 32,987 32,849

26,682 29,472 78,548 145,952

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

(a) Non-trade payablesSubsidiaries – – 45,219 111,311Related company 11,789 11,722 – – External parties 9,197 8,922 83 90

20,986 20,644 45,302 111,401

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 settlement of this amount is neither planned nor likely to occur in the foreseeable future. As this amount is, in substance, a return of capital to the holding company, it is stated at cost.

18 Provisions

GroupNote 2009 2008

$’000 $’000

Provision for retirement gratuities (a) 480 470

Provision for warranty (b) 60,121 37,718

60,601 38,188

(a) Provision for retirement gratuities

Balance at 1 January 470 407Charge to income statement 62 – Utilised during the year (448) (407)Reclassification 21 396 470

Balance at 31 December 480 470

(b) Provision for warranty

Balance at 1 January 37,718 2,797Currency re-alignment (239) 133Charge to income statement 22,642 29,330Reclassification – 5,458

Balance at 31 December 60,121 37,718

19 Interest-bearing borrowings


$’000 $’000 $’000 $’000Current liabilitiesShort term bank loans (a) – 40,293 – – Term loan (b) 12,000 12,000 – – Medium term notes (c) – 149,945 – 149,945

12,000 202,238 – 149,945

Non-current liabilitiesTerm loan (b) 8,000 20,000 – –

8,000 20,000 – –

Total interest-bearing borrowings 20,000 222,238 – 149,945





(a) The unsecured short term bank loans were repaid in 2009.

(b) The term loan is repayable in 60 equal monthly instalments of $1 million each and is to be fully repaid on 30 August 2011. The term loan bears interest at 0.25% per annum above the SWAP rate. An interest rate swap was entered to repay the interest of this loan at a fixed rate of 3.93% (2008: 3.93%) per annum. The term loan is secured by a corporate guarantee from a subsidiary.

(c) In 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 Sembawang Shipyard Pte Ltd (Issuing Subsidiaries), may from time to time issue the Notes (as defined below), subject to availability of funds from the market. The obligations of Issuing Subsidiaries under the Notes are fully guaranteed by the Company. Subsequent to year ended 31 December 2009, the Company increased its current MTN from $500,000,000 to $2,000,000,000 with the inclusion of SMOE Pte Ltd as one of the Issuing Subsidiaries.

Under the MTN, the Company or any of the Issuing Subsidiaries may from time to time issue notes in series or tranches in Singapore dollars or any other currency (the Notes). Such Notes are listed on the Singapore Exchange Securities Trading Limited and are cleared through the Central Depository (Pte) Ltd.

The medium term notes were repaid in 2009.

The outstanding principal amount of the Notes is as follows:

2009 2008$’000 $’000

Group and Company

5-years 3.00% per annum Notes issued on 27/9/2004 and due on 26/9/2009 – 150,000

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

MTN borrowingsCurrent – 150,000 – 150,000Issue expenses – (55) – (55)

– 149,945 – 149,945

Capitalised issue expensesBalance at 1 January 55 170 55 131Amortised during the year (55) (115) (55) (76)

Balance at 31 December – 55 – 55

The Notes are redeemable at par.

20 Finance lease liabilities

The Group has obligations under finance leases that are payable as follows:

2009 2008Payments Interest Principal Payments Interest Principal

$’000 $’000 $’000 $’000 $’000 $’000GroupWithin 1 year – – – 1,304 149 1,155After 1 year but within 5 years – – – 2,953 350 2,603

– – – 4,257 499 3,758

The finance lease agreements do not contain any escalation clauses and do not provide for contingent rents. The implicit interest rate in 2008 was 5.5% per annum. The net book value of assets acquired under hire purchase agreements is disclosed in Note 4. Lease terms do not contain restrictions concerning dividend, additional debt or further leasing.

21 Other provisions


$’000 $’000 $’000 $’000

Provision for retirement gratuities (a) 1,500 1,896 – – Provision for restoration of property, plant and equipment (b) 4,698 4,727 2,895 2,895

6,198 6,623 2,895 2,895

(a) Provision for retirement gratuities

GroupNote 2009 2008

$’000 $’000

Balance at 1 January 1,896 2,366Reclassification 18 (396) (470)Balance at 31 December 1,500 1,896





(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 in foreign operations.

(3) Share-based compensation reserve represents the equity-settled share options, restricted shares and performance shares awarded to employees. The reserve is made up of the cumulative value of services received from employees relating to such awards.

(4) Fair value reserve records the cumulative fair value changes of available-for-sale financial assets until they are derecognised or impaired. The reduction in the fair value 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 hedged transactions 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 the Group’s subsidiaries and associates operate.

24 Other comprehensive income

Tax effects relating to each component of other comprehensive income are set out below:

2009 2008

Before tax Tax expense Net of tax Before tax Tax benefit Net of taxS$’000 S$’000 S$’000 S$’000 S$’000 S$’000

GroupTranslation differences (30,161) – (30,161) 15,343 – 15,343Fair value changes of available- 27,374 (5,249) 22,125 (550,914) 97,953 (452,961) for-sale financial assets

Fair value changes of available- 11,764 – 11,764 – – – for-sale financial assets transferred to the income statement on impairment

Fair value changes of cash flow 64,334 (11,741) 52,593 (80,460) 14,483 (65,977) hedges

Fair value changes of cash flow 10,465 (1,884) 8,581 (10,465) 1,884 (8,581) hedges transferred to the income statementOther comprehensive income/(expense) 83,776 (18,874) 64,902 (626,496) 114,320 (512,176)

CompanyFair value changes of available- for-sale financial assets 16,029 (2,390) 13,639 (338,021) 60,794 (277,227)Other comprehensive income/(expense) 16,029 (2,390) 13,639 (338,021) 60,794 (277,227)

(b) Provision for restoration of property, plant and equipment

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Balance at 1 January 4,727 4,729 2,895 2,895Translation differences (29) (2) – –

Balance at 31 December 4,698 4,727 2,895 2,895

22. Share capital

Group and CompanyNo. of ordinary shares

2009 2008Issued and fully paid, with no par value:Balance at 1 January 2,071,371,470 2,070,855,320Exercise of share options – 516,150

Balance at 31 December 2,071,371,470 2,071,371,470

In 2008, the Company acquired 26,106,000 ordinary shares in the Company through purchases on the Singapore Exchange Securities Trading Limited. The total amount paid to acquire the shares was $93,745,000 and this was presented as a deduction from equity under “reserve for own shares”.

The Company reissued 8,461,822 (2008: 10,561,633) treasury shares during the year pursuant to its share based incentive plans (Note 35). As at 31 December 2009, the Company held 7,082,545 (2008: 15,544,367) treasury shares.

The holders of ordinary shares (excluding treasury shares) are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of the Company. All shares (excluding treasury shares) rank equally with regard to the Company’s residual assets.

23 Reserves

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

DistributableReserve for own shares (1) (25,449) (55,855) (25,449) (55,855)Revenue reserve 1,418,208 955,997 510,638 482,078

Non-distributableForeign currency translation reserve (2) (30,474) (3,143) – – Asset revaluation reserve 960 960 960 960Share-based compensation reserve (3) 7,176 12,049 8,009 12,378Fair value reserve (4) 59,953 26,064 56,532 42,893Hedging reserve(5) (14,016) (74,558) – – Other capital reserves (6) 24,365 13,124 – –

1,440,723 874,638 550,690 482,454





Staff costs, which include Directors’ remuneration for the year, are as follows:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Salaries and bonus 418,197 350,975 27,238 9,017Government grants - Job Credit Scheme (11,875) – (117) – Defined contribution plan 20,164 16,798 172 133Share-based compensation 17,858 19,484 3,266 3,186Directors’ fee: Directors of the Company 1,423 1,066 1,157 1,066 Other directors of subsidiaries – 8 – – Other employee benefits 36,361 41,564 321 387

482,128 429,895 32,037 13,789

27 Finance income

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Net dividend from: Unquoted subsidiaries – – 235,000 129,631 Unquoted associates – – 12,077 10,478 Quoted equity shares 7,801 7,810 4,902 4,910

7,801 7,810 251,979 145,019Interest income from: Subsidiary – – 3,535 4,730 Trade receivables 22,666 906 845 906 Fixed deposits and bank balances 6,051 22,582 47 338 Related companies 88 1,455 – – Others 1 187 1 2

28,806 25,130 4,428 5,976

36,607 32,940 256,407 150,995

25 Turnover

Turnover represents sales from the various activities described in Note 1 and Note 43, including the revenue recognised on contracts relating to ship and rig repair, building, conversion and offshore which are at least 20% completed.

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Services rendered to external parties: Ship and rig repair, building and conversion 5,705,156 5,011,414 – – Others 1,774 2,235 – – Services rendered to subsidiaries: Rental income – – 18,365 18,903 Management fee – – 33,698 14,469Sale of goods to external parties 17,812 50,299 – –

5,724,742 5,063,948 52,063 33,372

26 Operating profit/loss

Operating profit/loss is stated after charging/(crediting):

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Professional fees paid to a firm in 165 134 125 123 which a director is a member

Fees paid/payable to Auditors of the Company: Audit fees 459 459 65 64 Non-audit fees 26 – 5 – Foreign currency exchange loss 3,458 10,371 21 714Gain on disposal of property, plant and equipment, net (150) (822) – – Impairment loss on property, plant and equipment 6,145 – – – Property, plant and equipment written off 2,459 701 – – Negative goodwill (298) – – – Fair value adjustment on hedging instruments (3,160) 42,375 – – Operating lease expenses 14,539 18,164 7,923 9,106

Staff costs 482,128 429,895 32,037 13,789





28 Finance costs

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Finance costs: Borrowings 5,803 11,100 3,316 4,512 Interest rate swap - fair value through profit and loss

(474) 270 – –

5,329 11,370 3,316 4,512

29 Foreign exchange transactions

Arising from the various unauthorised foreign exchange transactions entered into previously by an employee of the Company for the account of a wholly-owned subsidiary, Jurong Shipyard Pte Ltd (JSPL), $43.7 million had been charged to the income statement following the full and final amicable settlement of BNP Paribas’s claim of $73.1 million in 2008, strictly on a commercial basis.

Going forward, JSPL intends to recover the $289.9 million paid to Societe Generale (SG) in 2007 as JSPL’s position is that the underlying transactions with SG are not valid and binding. If JSPL succeeds in doing so, there will be an inflow of funds to be recognised in the financial statements at that relevant point in time.

30 Non-operating income/expenses

Group2009 2008$’000 $’000

Non-operating income:

Gain on liquidation of subsidiary 368 –

Non-operating expenses:

Impairment of other investments (11,764) –

31 Share of results of associates and joint ventures

GroupNote 2009 2008

$’000 $’000

Share of profit for the year 25,399 65,300Share of taxation for the year 32 (6,103) (1,822)

19,296 63,478

32 Income tax expense/(credit)

Group Company

Note 2009 2008 2009 2008

$’000 $’000 $’000 $’000

Current tax expense

Current year 151,088 95,682 1,019 –

(Over)/underprovided in prior years (2,526) (1,244) 55 253

148,562 94,438 1,074 253

Deferred tax expense

Movement in temporary differences (578) 2,540 (722) (870)

Overprovided in prior years (474) (5,084) 305 (23)

Reduction in tax rate (2,743) – (1,263) –

(3,795) (2,544) (1,680) (893)

Share of income tax of associates and joint ventures 31 6,103 1,822 – –

Total income tax expense/(credit) 150,870 93,716 (606) (640)

Reconciliation of effective tax rate Group Company

2009 2008 2009 2008$’000 $’000 $’000 $’000

Profit for the year 756,765 451,242 255,226 144,878Total income tax expense/(credit) 150,870 93,716 (606) (640)

Share of results of associates and joint ventures (25,399) (65,300) – – Profit before share of results of associates and

joint ventures and income tax expense 882,236 479,658 254,620 144,238

Tax calculated using Singapore tax rate of 17% (2008: 18%) 149,980 86,338 43,285 25,963Exempt income, capital gains and tax incentives/concessions (6,669) (5,381) (43,784) (27,654)

Effect of changes in tax rate (2,743) – (1,263) – Effect of different tax rate in foreign jurisdictions 1,795 3,547 – – Effect on utilisation of deferred tax assets not previously (3,369) (4,947) – – recognised

Non deductible expenses 8,402 8,047 796 821Foreign exchange transactions and related professional fees* – 8,561 – – (Over)/Under provision in respect of prior years (3,000) (6,328) 360 230Deferred tax assets not recognised 2,167 2,900 – – Others (1,796) (843) – – Share of taxation of associates and joint ventures 6,103 1,822 – –

150,870 93,716 (606) (640)





As at 31 December 2009, certain subsidiaries have unutilised tax losses of $1,549,000 (2008: $17,985,000) and other temporary differences of $14,587,000 (2008: $10,161,000) available for set-off against future taxable income subject 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 $1,233,000 (2008: $4,312,000) will expire between 2010 to 2011 (2008: 2009 to 2011). The amounts of tax losses and capital allowances previously carried forward at the beginning of the year and which have been utilised in the year to arrive at the computation of tax liabilities for the year are as disclosed above.

* The Group is claiming a tax deduction for an amount of $8,561,000, calculated at 18% in the previous year’s tax return arising from the foreign exchange transactions (Note 29). The amounts are separately disclosed pending the Inland Revenue Authority of Singapore’s confirmation that the deduction will be allowed. The tax return for financial year ended 31 December 2008 (Year of Assessment 2009) had been prepared on this basis.

The Singapore corporate tax rate has been reduced from 18% to 17% with effect from the financial year ended 31 December 2009.

33 Earnings per share

(a) Basic earnings per share (EPS) is calculated by dividing the profit attributable to shareholders after deducting minority interests of $700,118,000 (2008: $429,918,000) by the weighted average number of ordinary shares in issue during the year of 2,058,239,106 (2008: 2,064,292,229).

(b) Diluted EPS is calculated after adjusting for those shares not yet exercised under the Sembcorp Marine Share Option Plan as follows:

Group2009 2008$’000 $’000

Profit attributable to shareholders of the Company 700,118 429,918

No. of shares No. of shares

Weighted average number of ordinary shares in issue during the year 2,058,239,106 2,064,292,229

Effect of dilutive share options 5,425,000 10,250,000

Weighted average number of ordinary shares outstanding used in

the calculation of diluted EPS 2,063,664,106 2,074,542,229

(c) Basic and diluted EPS are as follows:

Cents Cents

Basic EPS 34.02 20.83Diluted EPS 33.93 20.72

34 Dividends

The proposed net dividend of $206,429,000 (2008: $123,350,000) represents a final one-tier tax-exempt dividend of 6.00 cents per share (2008: final one-tier tax-exempt dividend of 6.00 cents per share) and a special one-tier tax-exempt dividend of 4.00 cents per share (2008: Nil).

Group and Company2009 2008$’000 $’000

Dividends paidInterim one-tier tax-exempt dividend of 5.00 cents per share 103,124 102,906(2008: 5.00 cents per share)

2008 final one-tier tax-exempt dividend of 6.00 cents per share 123,542 106,353(2008: 2007 final one-tier tax-exempt dividend of 5.16 cents per share)

226,666 209,259

35 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 on 31 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 the Share Plans at grant date:-

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Share Option Plan 1,024 2,320 185 418Performance Share Plan 2,105 2,130 1,286 1,399Restricted Stock Plan 12,465 7,959 1,782 1,333Sembcorp Marine Challenge Bonus 2,413 7,034 13 36

18,007 19,443 3,266 3,186





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(b) Performance Share Plan

Under the Performance Share Plan, the awards granted conditional on performance targets are set based on medium-term corporate objectives at the start of each rolling three-year performance qualifying period. A specific number of performance shares shall be awarded at the end of the three-year performance cycle depending on the extent of the achievement of the performance conditions established at the onset.

The performance levels were calibrated based on Wealth Added and Total Shareholder Return. A minimum of threshold performance must be achieved to trigger an Achievement Factor, which in turn determines the number of shares to be finally awarded. Performance shares to be delivered will range between 0% to 150% of the conditional performance shares awarded.

In 2009, the Performance Share Plan was enhanced to create alignment between senior management and other employees at the time of vesting by introducing a plan trigger. Under this trigger mechanism, the performance shares for the performance period 2009 to 2011 will be vested to the senior management participants only if the restricted shares for the performance period 2010 to 2011 are vested, subject to the achievement of the performance conditions for the respective performance periods.

Senior management participants are required to hold a minimum percentage of the shares released to them under the Performance Share 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 in the event of a shortfall, they have a two calendar year period to meet the minimum percentage requirement.

The details of performance shares of the Company awarded since commencement of the Performance Share Plan up to 31 December 2009 were as follows:

Performance Shares participants

Conditional performance

shares awarded

during the year


performance shares

awarded


performance shares

released


performance shares lapsed


performance shares

outstanding

Director of the Company- Wong Weng Sun 150,000 905,000 (383,600) (71,400) 450,000- Tan Kwi Kin – 3,100,000 (1,895,900) (604,100) 600,000

Former alternate director of the Company – 800,000 (461,000) (339,000) –

Key management and executives of the Group 395,000 2,297,500 (854,000) (178,500) 1,265,000

At 31 December 2009 545,000 7,102,500 (3,594,500) (1,193,000) 2,315,000

With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2006 to 2008, a total of 411,600 (2008: 1,627,500) performance shares were released via the issuance of treasury shares.

In 2008, there were additional 542,500 performance shares awarded for over-achievement of the performance targets.

The total number of performance shares in awards granted conditionally and representing 100% of targets to be achieved, but not released as at 31 December 2009, was 2,315,000 (2008: 2,610,000). Based on the multiplying factor, the actual release of the awards could range from zero to a maximum of 3,472,500 (2008: 3,915,000) performance shares.





Fair value of Performance Shares

The fair values of the performance shares are estimated using a Monte Carlo simulation methodology at the grant dates.

The fair values of performance shares granted during the year are as follows:

Date of grant 13 April 2009 7 April 2008

Fair value at measurement date $2.28 $2.65

Assumptions under the Monte Carlo model

Share price $2.26 $3.77

Expected volatility:

Sembcorp Marine Ltd 50.3% 30.9%

Morgan Stanley Capital International (MSCI) AC Asia 33.9% 21.9%

Pacific excluding Japan Industrials Index

Correlation with MSCI 76.2% 61.3%

Risk-free interest rate 0.7% 1.1%

Expected dividend 5.3% 5.0%

The expected volatility is based on the historical volatility over the most recent period that is close to the expected life of the performance shares.

(c) Restricted Stock Plan

Under the Restricted Stock Plan, the awards granted conditional on performance targets are set based on corporate objectives at the start of each rolling two-year performance qualifying period. The performance criteria for the restricted shares are calibrated based on Return on Equity and Total Shareholder Return for awards granted before 2009 and Return on Equity and Earnings Before Interest and Taxes for awards granted in 2009.

A minimum threshold performance must be achieved to trigger an Achievement Factor, which in turn determines the number of shares to be finally awarded. Based on the criteria, restricted shares to be delivered will range from 0% to 150% of the conditional restricted shares awarded.

The managerial participants of the Group will be awarded restricted shares under the Restricted Stock Plan, while the 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 the Sembcorp Marine Challenge Bonus.

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

Senior management participants are required to hold a minimum percentage of the shares released to them under the Restricted Stock 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 in the event of a shortfall, they have a two calendar year period to meet the minimum percentage requirement.

The details of restricted shares of the Company awarded since commencement of the Restricted Stock Plan up to 31 December 2009 were as follows:

Restricted Shares participants

Conditional restricted

shares awarded

during the year


shares awarded

Aggregateconditional restricted

shares lapsed

Additional restricted

shares awarded

arising from targets met during the

year


shares released


shares outstanding

Directors of the Company

Goh Geok Ling 29,000 81,800 – 9,240 (13,347) 77,693

Richard Hale, OBE 22,000 22,000 – – – 22,000

Wong Weng Sun 75,000 243,384 – 21,000 (62,590) 201,794

Tan Kwi Kin – 352,896 – 42,000 (135,931) 258,965

Tan Pheng Hock 12,000 38,700 – 4,410 (6,370) 36,740

Ajaib Haridass 19,000 66,700 – 8,610 (12,437) 62,873

Tang Kin Fei 17,000 47,900 – 5,670 (8,190) 45,380

Ron Foo Siang Guan 17,000 53,600 – 5,880 (8,494) 50,986

Joseph Kwok Sin Kin 12,000 42,900 – 5,670 (8,190) 40,380

Ngiam Joke Mui 9,000 18,000 – – – 18,000

Lim Ah Doo 9,000 9,000 – – – 9,000Former Directors of the

Company– 69,300 (1,680) 8,610 (48,230) 28,000

Other executives 3,205,330 12,336,535 (762,622) 1,071,143 (3,089,905) 9,555,151

3,426,330 13,382,715 (764,302) 1,182,233 (3,393,684) 10,406,962

With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2007 to 2008, a total of 1,956,117 restricted shares were released via the issuance of treasury shares. For awards in relation to the performance period 2006 to 2007, a total of 729,439 (2008: 708,128) restricted shares were released in 2009.

In 2009, additional 1,182,233 (2008: 477,893) restricted shares were awarded for the over-achievement of the performance targets for the performance period 2007 to 2008.

The total number of restricted shares outstanding, including awards achieved but not released, as at 31 December 2009, was 10,406,962 (2008: 8,762,851). Of this, the total number of restricted shares in awards granted conditionally and representing 100% of targets to be achieved, but not released was 6,709,730 (2008: 7,422,586). Based on the multiplying factor, the actual release of the awards could range from zero to a maximum of 10,064,595 (2008: 10,339,522) restricted shares.






With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2007 to 2008, a total of $1,678,905, equivalent to 1,203,602 notional restricted shares, were paid.

A total of 1,130,050 (2008: 957,400) notional restricted shares were awarded on 13 April 2009 (2008: 7 April 2008) for the Sembcorp Marine Challenge Bonus.

The total number of notional restricted shares in awards for the Sembcorp Marine Challenge Bonus granted conditionally and representing 100% of targets to be achieved, but not released as at 31 December 2009, was 1,928,700 (2008: 1,866,248). Based on the multiplying factor, the number of notional restricted shares to be converted into the funding pool could range from zero to a maximum of 2,893,050 (2008: 2,606,642).

Fair value of Restricted Shares

The fair values of the restricted shares are estimated using a Monte Carlo simulation methodology at the grant dates.

The fair values of restricted shares granted during the year are as follows:

Date of grant 13 April 2009 7 April 2008Fair value at measurement date $1.98 $3.06

Assumptions under the Monte Carlo modelShare price $2.26 $3.77Expected volatility: Sembcorp Marine Ltd 50.3% 30.9% Straits Times Index n.a. 15.9%Correlation vs Straits Times Index n.a. 47.6%Risk-free interest rate 0.4% - 1.0% 0.9% - 1.3%Expected dividend 5.3% 5.0%

The expected volatility is based on the historical volatility over the most recent period that is close to the expected life of the restricted shares.

Fair value of Sembcorp Marine Challenge Bonus

The fair value of the compensation cost is based on the notional number of restricted shares awarded for the Sembcorp Marine Challenge Bonus and the market price at the vesting date.

36 Contingent liabilities

Company2009 2008$’000 $’000

Unsecured corporate guarantees granted in respect of:

Performance of subsidiaries 3,513,769 4,561,725

37 Commitments

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Commitments not provided for in the financial statements are as follows:(a) Approved capital commitment: Approved capital expenditure and - Committed 443,781 799 – – - Not contracted 4,610 5,006 – – Uncalled capital and commitment on investments 45,543 47,150 45,543 47,150

493,934 52,955 45,543 47,150(b) Minimum lease rental payable in respect of land and buildings: Within 1 year 10,556 13,186 5,126 8,109 After 1 year but within 5 years 15,240 20,795 – 5,071 After 5 years 238,640 21,609 – –

264,436 55,590 5,126 13,180

The leases do not provide for contingent rents and lease terms do not contain restrictions on the Group activities concerning dividends, additional debt or further leasing. Certain leases contain escalation clauses to reflect market rentals.

Certain leases include renewal options for additional lease period of 10 to 30 years and at rental rates based on prevailing market rates.

38 Related parties

Significant transactions during the year between the Group and its related parties on terms as agreed between the respective parties and which are not otherwise disclosed elsewhere in these financial statements consist of:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Immediate holding companyManagement fee payable 250 250 250 250

Related companiesSales 1,817 3,009 – – Purchases 59,293 38,561 – – Others 49 1,023 – –

Associates and joint venturesSales 524 191 – – Purchases 4,531 21,542 – –

Others 593 – – –





Compensation of key management personnel

Directors of the Company, President & Chief Executive Officer/Managing Director of Jurong Shipyard Pte Ltd, Deputy President/Managing Director of Sembawang Shipyard Pte Ltd, Chief Financial Officer, Managing Director of PPL Shipyard Pte Ltd, Managing Director of SMOE Pte Ltd and Executive Director of Jurong SML Pte Ltd (2008: Directors of the Company, President & Chief Operating Officer/Managing Director of Jurong Shipyard Pte Ltd, Deputy President/Managing Director of Sembawang Shipyard Pte Ltd, Chief Financial Officer, Managing Director of PPL Shipyard Pte Ltd and Managing Director of SMOE Pte Ltd) are considered to be key management personnel. They have the authority and responsibility for planning, directing and controlling the activities of the Group.

The key management personnel compensation are as follows:

Group2009 2008$’000 $’000

Directors’ fees and remuneration 6,673 2,338Other key management personnel remuneration 3,690 2,672

10,363 5,010

Fair value of share-based compensation 2,972 2,921

Remuneration includes salary (which includes allowances, fees and other emoluments) and bonus (which includes AWS, discretionary bonus, performance targets bonus, performance shares and restricted shares released during the year). In addition to the above, the Company provides medical benefits to all employees including key management personnel.

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 and Group performance goals for its key executives. A “bonus bank” is used to hold incentive compensation credited in any year. Typically, one-third of the available balance is paid out in cash each year, with the balance being carried forward to the following year. The balances of the bonus bank in future will be adjusted by the yearly EVA performance of the Group and its subsidiaries and the payouts made from the bonus bank.

The fair value of share-based compensation relates to share options, performance shares and restricted shares granted that were charged to the income statement.

39 Operating segments

(a) Business segments

The Group has two reportable segments, which are the Group’s strategic business units. The strategic business units are managed separately because of their different business activities. The two reportable segments are (i) ship and rig repair, building and conversion and (ii) ship chartering.

The accounting policies are described in Note 2. Inter-segment sales and transfers are 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 operating liabilities and exclude inter-segment balances. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group’s CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.

Other operations include bulk trading in marine engineering related products; provision of harbour tug services to port users; collection and treatment of used copper slag, and the processing and distribution of copper slag for blast cleaning purposes.

Ship

and

rig

repa

ir, b

uild

ing,

co

nver

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and

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Ship

cha

rter

ing

Oth

ers

Tota

l

2009

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19,5

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,534

5,72

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125,

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125,

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36,5

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,917

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–

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–

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(1,3

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(75,

193)

(69,

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Amor

tisat

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Reportable segment

totalsAdjustments Consolidated

totals

$’000 $’000 $’000Other material items 2009Finance income (36,586) (21) (36,607)Finance costs 5,329 – 5,329Depreciation and amortisation 74,020 1,228 75,248Impairment losses of property, plant and equipment 6,145 – 6,145

Capital expenditure 66,981 13,473 80,454

Other material items 2008Finance income (32,917) (23) (32,940)Finance costs 11,370 – 11,370Depreciation and amortisation 69,370 1,337 70,707

Capital expenditure 95,259 4,789 100,048

40 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 and they are summarised below:

Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group manages credit risk arising from sales to customers through a stringent credit evaluation process and regular monitoring thereafter. The management of credit risk is on an aggregate basis by including all existing relationships with a particular customer or related entities of the same corporate organisation. There is no significant 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 values represent 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 credit risk exposure in respect of investments by only investing in liquid securities and only with counterparties that have a sound credit rating.

Foreign currency risk

The Group incurs foreign currency risk on sales and purchases that are denominated in a currency other than the Singapore dollar, primarily the United States dollar (USD) and the Euro (EUR). To minimise exposure on foreign currency risks, the Group usually settles such transactions within 30 day terms.

The Group also utilises forward foreign currency contracts to hedge foreign currency denominated financial assets, liabilities and firm commitments. Under this programme, increases or decreases in the Group’s foreign currency denominated financial assets, liabilities and firm commitments are partially offset by gains and losses on the hedging instruments. The Group does not use forward foreign currency contracts for trading purpose.

(b) Geographical segments

The Group operates in 6 (2008: 7) countries and principally in the Republic of Singapore. Pricing of inter-segment sales 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 geographical location of customers. Segment assets are based on the geographical location of the assets.

Singapore Rest of Asia Europe Others Total$’000 $’000 $’000 $’000 $’000

2009

Revenue from external customers 574,053 2,236,593 2,166,215 747,881 5,724,742

Total segment assets 4,299,064 380,797 – 7,687 4,687,548

Capital expenditure 74,085 6,276 – 93 80,454

2008

Revenue from external customers 1,269,577 1,889,064 1,595,358 309,949 5,063,948

Total segment assets 4,238,607 363,683 – 9,527 4,611,817

Capital expenditure 83,406 16,556 – 86 100,048

(c) Reconciliation of reportable segment revenues, profits or loss, assets and liabilities and other material items:

Group2009 2008$’000 $’000

RevenuesTotal revenue for reportable segments 5,705,156 5,011,414Other revenue 145,170 333,878Elimination of inter-segment revenue (125,584) (281,344)

Consolidated revenue 5,724,742 5,063,948

Profit or lossTotal profit for reportable segments 901,876 535,414Other profit 5,759 9,544

Consolidated profit before income tax 907,635 544,958

AssetsTotal assets for reportable segments 4,636,637 4,562,408Other assets 50,911 49,409

Consolidated total assets 4,687,548 4,611,817

LiabilitiesTotal liabilities for reportable segments 2,711,556 3,233,469Other liabilities 15,584 18,389

Consolidated total liabilities 2,727,140 3,251,858





Sensitivity analysis

A 10% strengthening of the following currencies against the functional currencies of the Company and its subsidiaries at the balance sheet date for the Group’s and Company’s monetary items, including forward foreign exchange contracts, would have increased/(decreased) equity and profit and loss by the amounts shown below. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2008.

Group CompanyEquity Profit and loss Equity Profit and loss

2009 2008 2009 2008 2009 2008 2009 2008$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

USD 68,434 (158,484) (1,641) 45,937 – – 55 101EUR (3,500) – 5,058 5,865 – – – – SGD (20,513) – (793) 63,393 – – – – Others 2,354 199 334 904 2,357 13 – –

46,775 (158,285) 2,958 116,099 2,357 13 55 101

A 10% weakening of the above currencies against the functional currencies of the Company and its subsidiaries at the balance sheet date would have equal but opposite effects on the above currencies to the amounts shown above, on the basis that all other variables remain constant.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will 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 rate debts, where working capital is financed mainly by variable rate loans while long term investments are financed mainly by fixed rate loans. To manage this mix in a cost-efficient manner, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specific intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge underlying debt obligations. After taking into account the effect of an interest rate swap, the Group’s borrowings are substantially at 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 is to obtain the most favourable interest rates available without increasing its foreign currency exposure.


Based on the cash and cash equivalents for the Group of $1,978,548,000 (2008: $2,054,032,000), it is estimated that a one percentage point increase in interest rate would increase the Group’s profit before taxation by approximately $19,785,000 (2008: $20,540,000). The analysis is performed on the same basis for 2008.

Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. Short term funding is obtained from overdraft facilities and bank borrowings. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

The Group’s and Company’s foreign currency exposures are as follows:

Group SGD USD EUR Others Total $’000 $’000 $’000 $’000 $’000At 31 December 2009Financial assetsBank balances, fixed deposits and cash 61,058 154,211 106,000 12,294 333,563Trade and other receivables 18,980 66,158 507 985 86,630Other investments – – – 28,438 28,438

80,038 220,369 106,507 41,717 448,631

Financial liabilities

Trade and other payables (177,052) (175,930) (61,693) (10,041) (424,716)

(177,052) (175,930) (61,693) (10,041) (424,716)

Net financial (liabilities)/assets (97,014) 44,439 44,814 31,676 23,915

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) (358,176)Interest-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

Company USD Others Total$’000 $’000 $’000

At 31 December 2009Financial assetsBank balances, fixed deposits and cash 549 – 549Other investments – 28,403 28,403

Net financial assets 549 28,403 28,952

At 31 December 2008Financial assetsBank balances, fixed deposits and cash 357 – 357Trade and other receivables 651 – 651Other investments – 132 132

Net financial assets 1,008 132 1,140





The table below analyses the maturity profile of the Group’s and Company’s financial liabilities (including derivative financial liabilities) based on contractual undiscounted cash flows.

Cash flows

Carrying amount

Contractual cash flow

Less than 1 year

Between 1 and 5 years

Group $’000 $’000 $’000 $’0002009Derivative financial liabilitiesInterest rate swaps (527) (527) (527) – Forward foreign currency contracts- Inflow – 1,568,285 896,822 671,463- Outflow (31,585) (1,599,870) (917,495) (682,375)

Derivative financial assetsForward foreign currency contracts- Inflow 2,785 103,611 98,206 5,405- Outflow – (100,826) (95,602) (5,224)

Non-derivative financial liabilitiesTrade and other payables (1,589,919) (1,589,919) (1,589,919) – Interest-bearing borrowings (20,000) (20,686) (12,569) (8,117)

(1,639,246) (1,639,932) (1,621,084) (18,848)

2008Derivative 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 (1,661,521) (1,661,521) (1,661,521) – Interest-bearing borrowings (225,996) (232,757) (209,240) (23,517)

(2,008,642) (2,015,403) (1,942,155) (73,248)

Company2009Non-derivative financial liabilities

Trade and other payables (111,639) (111,639) (111,639) –

2008Non-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) – * Excludes deposits and advance payment from customers.

Market Risk

Market price risk is the risk that the fair value of future cash flows of the Group’s financial instruments will fluctuate because of changes in market prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investments held. The Group manages the risk of unfavourable changes by cautious review of the investments before investing and continuous monitoring of the performance of investments held and assessing market risk relevant to which the investments operate.


If prices for equity securities increase by 10% with all other variables being held constant, the profit before tax and equity will increase by:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Equity 16,400 10,723 11,170 6,628Profit and loss 4 3 – –

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 2008 and assumes that all other variables remain constant.

Estimation of fair values

As discussed in Note 2, effective 1 January 2009, the Group adopted FRS 107 Financial Instruments: Disclosures. FRS 107 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The three levels of the fair value input hierarchy defined by FRS 107 are as follows:

• Level 1 – Fair values are measured based on quoted prices (unadjusted) from active markets for identical financial instruments.

• Level 2 – Fair values are measured using inputs, other than those used for Level 1, that are observable for the financial instruments either directly (prices) or indirectly (derived from prices).

• Level 3 – Fair values are measured using inputs which are not based on observable market data (unobservable input).

Securities

The fair value of financial assets at fair value through profit or loss, and available-for-sale financial assets, is based on quoted market prices (bid price) at the balance sheet date without any deduction for transaction costs. If the market for a quoted financial asset is not active, and for unquoted financial assets, the Group establishes fair value by using valuation techniques.

Derivatives

Forward exchange contracts are either marked to market using listed market prices at the balance sheet date or, if a listed market price is not available, the fair value is estimated by discounting the difference between the contractual forward price and the current spot rate.

The fair value of interest rate swaps, based on current interest rates curves, is the estimated amount that the Group is expected to receive or pay to terminate the swap with the swap counterparties at the balance sheet date.





Non-derivative financial liabilities

Fair values are calculated based on discounted expected future principal and interest cash flows at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

Other financial assets and liabilities

The carrying amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and cash equivalents, and trade and other payables) are assumed to approximate their fair values because of the short period to maturity. All other financial assets and liabilities are discounted to determine their fair values.

Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market-related rate for a similar instrument at the balance sheet date. Where other pricing models are used, inputs are based on market-related data at the balance sheet date.

Fair value hierarchy

The following table sets forth by level within the fair value hierarchy our financial assets and liabilities that were accounted for fair value on a recurring basis as of 31 December 2009. These financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgement, and may affect the valuation of assets and liabilities and their placement within the fair value hierarchy levels.

Fair value measurement at 31 December 2009 using: Level 1 Level 2 Level 3 Total

Group $’000 $’000 $’000 $’000Available-for-sale financial assets 163,997 343 – 164,340Financial assets designated at fair value through profit or

loss 35 – – 35

Derivatives financial assets – 2,785 – 2,785164,032 3,128 – 167,160

Derivatives financial liabilities – (32,112) – (32,112)

Total 164,032 (28,984) – 135,048

CompanyAvailable-for-sale financial assets 111,704 343 – 112,047

41 Capital management

The Group aims to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business, while at the same time maintaining an appropriate dividend policy to reward shareholders. The Group monitors Economic Value Added attributable to shareholders, which the Group defines as net operating profit after tax less capital charge excluding minority interests. The Group also monitors the level of dividends to ordinary shareholders.

The Group seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position. Capital is defined as equity attributable to 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, goodwill and other intangible assets) ratio of not more than 1.75. This externally imposed capital requirement has been complied with at each quarter in the financial year ended 31 December 2009.

42 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 and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, 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 date that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Revenue recognition

The Group has recognised revenue on construction contract, ship and rig repair, building and conversion based on the percentage of completion method in proportion to the stage of completion. The percentage of completion is assessed by reference to surveys of work performed. Significant judgement is required in determining the appropriate stage of completion and estimating a reasonable contribution margin for revenue and costs recognition.

Provisions

The provision for warranty is based on estimates from known and expected warranty work and contractual obligation for further work to be performed after completion. The warranty expense incurred could be higher or lower than the provision made. Movements in provision for warranty are detailed in Note 18.

Depreciation of property, plant and equipment

Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these property, plant and equipment to be within 1 to 60 years. The carrying amount of the Group’s property, plant and equipment at 31 December 2009 was $678,361,000 (2008: $697,702,000). Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual 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 determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s provision for taxation at 31 December 2009 was $253,218,000 (2008: $167,149,000). The carrying amounts of the Group’s deferred tax assets and liabilities at 31 December 2009 were $47,000 (2008: $9,436,000) and $66,748,000 (2008: $61,261,000) respectively.





43 Group companies

Details of the Group’s subsidiaries, associates and joint ventures are as follows:

Name of company

Place of incorporationand business Principal activities

Effective equity held

by the Group2009 2008

% %

Subsidiaries

Bulk 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 100 70

Jurong Integrated Services Pte Ltd Singapore Steel fabrication work 100 100

Jurong Machinery and Automation Pte Ltd Singapore Marine and general electronic and electrical works 100 100

Jurong Marine Services Pte Ltd Singapore Provision of tugging and sea transportation services 100 100

Jurong Shipbuilders Private Limited Singapore Investment holding 100 100

Jurong Shipyard Pte Ltd Singapore Ship and rig repair, building, conversion and related services

100 100

Jurong SML Pte Ltd Singapore Shipbuilding, ship repair and related services 100 100

Karimun Shiprepair and Engineering Pte Ltd Singapore Investment holding 100 100

PPL Shipyard Pte Ltd Singapore Rig building, repair and related services 85 85

SCM Investment Holdings Pte Ltd Singapore Investment holding 100 100

Sembawang Shipyard Pte Ltd Singapore Ship repair and related services 100 100

Sembawang Shipyard (S) Pte Ltd Singapore Investment holding 100 100

Sembcorp Holdings, LLC*** United States of America

Investment holding 100 100

Sembcorp Marine Technology Pte Ltd Singapore Research & development in offshore and marine technology

100 100

SembMarine Investment Pte Ltd Singapore Investment holding 100 100

SembMarine (Middle East) Pte Ltd Singapore Investment holding 60 60

SML Shipyard Pte Ltd Singapore Ship repair and related services 100 100

SMOE Pte Ltd Singapore Engineering, construction and fabrication of offshore structures

100 100

Associates

Cosco Shipyard Group Co Ltd** People’s Republicof China

Ship repair and related services 30 30

Joint Shipyard Management Services Pte Ltd Singapore Managing dormitories 32 32

Joint ventures of Dolphin Shipping Company Private Limited

Dolphin Workboats Pte Ltd Singapore Ship owning and charter 50 50

Pacific Workboats Pte Ltd** Singapore Ship leasing and marine surveying services 50 50

Name of company



by the Group2009 2008

% %

Subsidiaries of JPL Corporation Pte Ltd

JPL Concrete Products Pte Ltd Singapore Production of concrete products 85.8 60.1

JPL Industries Pte Ltd Singapore Processing and distribution of copper slag 85.8 60.1

JPL Services Pte Ltd Singapore Equipment rental services and trading in copper slag 100 70

Subsidiary of Jurong Shipbuilders Pte Ltd

Tridex Investment Inc.*** British Virgin Islands

Liquidated – 100

Subsidiaries and joint venture of Jurong Shipyard Pte Ltd

Jurong Autoblast Services Pte Ltd Singapore Surface preparation of steel plates, structures and marine engineering services

100 100

Jurong Brazil-Singapore Pte Ltd Singapore Investment holding 100 100

Jurong Marine Contractors Private Limited# Singapore Provision of contract services 100 100

Marine Housing Services Pte Ltd** Singapore Provision of dormitory housing services 50 50

Shanghai Jurong Marine Engineering & Technology Co Ltd**

People’s Republic of

China

Research and development of technologies for civil ships and equipment for oceanics industries and provision of related technical consultation services

70 70

Subsidiary of Karimun Shiprepair and Engineering Pte Ltd

P.T. Karimun Sembawang Shipyard* Indonesia Ship repair and related services 100 100

Subsidiaries of PPL Shipyard Pte Ltd

Baker Marine Pte Ltd Singapore Rig enhancement and upgrading services, engineering consultancy and project management, and supply of rig equipment and parts

85 85

Baker Marine Services (HK) Limited* Hong Kong Provision of rig designs 85 85

Baker Marine Technology Inc.*** United States of America

Engineering design, research and development, marketing and client services support centre

85 85

Subsidiaries of Sembawang Shipyard Pte Ltd

Sembawang Project Services Pte Ltd Singapore Building of rigs, vessels and specialised marine equipment

100 100

Sembawang Shipyard Services Pte Ltd (previously known as World Adventurer Pte Ltd)

Singapore Marine services 100 100

SES Engineering (M) Sdn Bhd* Malaysia Fabrication of metal structures 100 100

SES Marine Services (Pte) Ltd Singapore Marine services 100 100





44 New or Revised Accounting Standards and Interpretations

The Group has not applied the following accounting standards (including their consequential amendments) and interpretations that have been issued as of the balance sheet date but are not yet effective:

Amendment to FRS 32 Financial Instruments: Presentation – Classification of Rights Issues

Amendments to FRS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items

Amendments to FRS 102 Share-based Payment – Group cash-settled share-based payment transactions

FRS 103 (revised) Business Combinations and FRS 27 (revised) Separate and Consolidated Financial Statements

Improvements to FRSs 2009

INT FRS 117 Distributions of Non-cash Assets to Owners

The amendments to FRS 39 on eligible hedged items will become effective for the Group’s financial statements for the year ending 31 December 2010. The amendments clarify how the principles that determine whether a hedged risk or portion of cash flows is eligible for designation should be applied in 2 particular situations: (i) the designation of a one-sided risk in a hedged item; and (ii) the designation of inflation in particular situations. The Group is in the process of assessing the impact of these amendments.

Subsidiaries of Sembcorp Holdings, LLC

Sabine Offshore Services Inc*** United States of America

Inactive 100 100

Sembcorp-Sabine Industries Inc*** United States of America

Investment holding 100 100

Sembcorp-Sabine Shipyard Inc*** United States of America

Rig and vessel enhancement and upgrading services

100 100

Subsidiaries and associates of SMOE Pte Ltd

HQSM Engineering Pte Ltd** Singapore Engineering, procurement and construction for oil and gas related business

49 49

PT SMOE Indonesia* Indonesia Engineering, construction and fabrication of offshore structures

90 90

SCE Pte Ltd Singapore Under liquidation – 51

Shenzhen Chiwan Offshore Petroleum Equipment Repair & Manufacture Co. Ltd**

People’s Republic of China

Equipment inspection, repair and maintenance services for oil reconnoiter and exploitation in South China Sea

35 35

Straits Offshore Pte Ltd Singapore Offshore oil and gas production facilities, manufacturing

100 100

Straits Overseas Pte Ltd Singapore Engineering, construction and fabrication of offshore structures

100 100

* Audited by other member firms of KPMG LLP** Audited by other firms*** These companies are not required to be audited under the laws of their country of incorporation# During the year, Jurong Marine Contractors Private Limited, a wholly owned subsidiary of the Company, was transferred to Jurong Shipyard Pte Ltd.

The amendments to FRS 102 on group cash-settled share-based payment transactions will become effective for the Group’s financial statements for the year ending 31 December 2010. The amendments require an entity receiving goods or services in either an equity-settled or a cash-settled share-based payment transaction to account for the transaction in its separate or individual financial statements. The Group is in the process of assessing the impact of these amendments.

FRS 103 (revised) and FRS 27 (revised) will become effective for the Group’s financial statements for the year ending 31 December 2010. FRS 103 (revised) introduces significant changes to the accounting for business combinations both at the acquisition date and post acquisition, and requires greater use of fair values. The revised FRS 103 will be applied prospectively and therefore there will be no impact on prior periods in the Group’s financial statements for the year ending 31 December 2010. FRS 27 (revised) requires accounting for changes in ownership interests by the Group in a subsidiary, while maintaining control, to be recognised as an equity transaction. When the Group loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in income statement. The Group is in the process of assessing the impact of these amendments.

Improvements to FRSs 2009 will become effective for the Group’s financial statements for the year ending 31 December 2010 for amendments relating to:

• FRS 102 Share-based payment

• FRS 38 Intangible assets

• INT FRS 109 Reassessment of embedded derivatives

• INT FRS 116 Hedges of a net investment in a foreign operation

Improvements to FRSs 2009 will become effective for the Group’s financial statements for the year ending 31 December 2011 for amendments relating to:

• FRS 1 Presentation of financial statements

• FRS 7 Statement of cash flows

• FRS 17 Leases

• FRS 36 Impairment of assets

• FRS 39 Financial Instruments: Recognition and measurement

• FRS 105 Non-current assets held for sale and discontinued operations

• FRS 108 Operating segments

Improvements to FRSs 2009 contain amendments to numerous accounting standards that result in accounting changes for presentation, recognition or measurement and disclosure purposes. The Group is in the process of assessing the impact of these amendments.

The initial application of these standards (including their consequential amendments) and interpretations is not expected to have any material impact on the Group’s financial statements. The Group has not considered the impact of accounting standards issued after the balance sheet date.

45 Subsequent Event

One of the Company’s wholly-owned subsidiaries, Jurong Shipyard Pte Ltd (JSPL) through Estaleiro Jurong Aracruz Ltda, a Brazilian incorporated subsidiary of JSPL, acquired a freehold land in the State of Espirito Santo in Brazil to develop into a shipyard. Jurong do Brasil Prestacao de Services Ltda, another Brazilian incorporated subsidiary of JSPL will undertake marine and offshore services in Brazil.

Name of company



by the Group

2009 2008

% %


Supplementary Information Supplementary Information

(A) Directors’ and Key Executives’ Remuneration Earned for the Year

Summary compensation table for the year ended 31 December 2009

Name of Director Salary (1) Bonus Earned (2)

Fair Value of share-based compensation granted for

the year (4)

Directors’ Fees (5)

Brought Forward Bonus

Bank(3)

$’000 $’000 $’000 $’000 $’000

PayablebytheCompany:Goh Geok Ling - - 57 205 -Richard Hale, OBE - - 43 145 -Wong Weng Sun 600 8,370 490 - 2,771Tan Kwi Kin 510 - - 45 5,498Tan Pheng Hock5 - - 24 98 -Lim Ah Doo - - 18 110 -Tan Tew Han - - - 17 -Ajaib Haridass - - 38 127 -Tang Kin Fei5 - - 34 118 -Ron Foo Siang Guan - - 34 119 -Joseph Kwok Sin Kin - - 24 103 -Ngiam Joke Mui5 - - 18 71 -

PayablebySubsidiaries:Goh Geok Ling - - - 84 -Tan Kwi Kin - - - 47 -Tang Kin Fei5 - - - 79 -Ngiam Joke Mui5 - - - 55 -

Name of Key Executive Salary (1) Bonus Earned (2)

Fair Value of share-based compensation granted for

the year (4)

Directors’ Fees (5)

Brought Forward Bonus

Bank(3)

$’000 $’000 $’000 $’000 $’000

Ong Poh Kwee 350 3,515 273 - 1,797Tan Cheng Tat 287 1,217 128 - -Ho Nee Sin 298 1,338 118 - -Douglas Tan Ah Hwa 534 1,900 - - -Freddie Woo Fong Wah 172 250 25 - -

Notes:1. The amount shown is inclusive of basic salary, fixed allowances, AWS and other emoluments.2. With effect from this financial year ending 31 December 2009, rather than disclosing the bonus paid in the year for the previous year’s performance, the Bonus Earned

during the financial year is shown.3. The Brought Forward Bonus Bank is the outstanding balance of Bonus as at 31 December 2009 (excluding the Bonus Earned during the financial year). Typically, one-

third of the accumulated Bonus comprising Bonus Earned in the financial year and the Brought Forward Bonus is paid out in cash each year, with the balance being carried forward to the following year. The balances of the bonus bank in future will be adjusted by the yearly EVA performance of the Group and its subsidiaries and the payouts made from the bonus bank.

4. Previously taxable income from share-based compensation is shown. With effect from this financial year ending 31 December 2009, the fair value of the share plans granted for the year is disclosed. The shares granted are contingent upon meeting performance measures. If these performance measures are not met, the key executive will not be vested with any shares.

5. 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 are payable to Sembcorp Industries Ltd.

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.

Year ended 31 December 2009 Year ended 31 December 2009

(B) Interested Person Transactions

Aggregate value of all transactions conducted under a shareholders’ mandate pursuant to

Rule 920 of the SGX Listing Manual

2009 2008$’000 $’000

Transaction for the Sales of Goods and ServicesNeptune Orient Lines Ltd and its associates - 10,152PSA International Pte Ltd and its associates 4,495 2,853

Transaction for the Purchase of Goods and ServicesPSA International Pte Ltd and its associates - 4,780Sembcorp Industries Limited and its associates 28,450 34,574

Management and Support ServicesSembcorp Industries Limited 250 250

Total Interested Person Transactions 33,195 52,609


Major Properties

Location Description & Approximate Land Area Tenure Usage

Jurong Shipyard• JalanSamulun Landarea:198,098m2

Buildings,workshops,drydocksandquays

LeaseholdexpiringuponrelocationtoNewYardFacilityatTuasViewExtensionPhaseI(JTCland)

Shiprepairsincludingdrydock,berthage&workshops

• TanjongKlingRoad Landarea:491,054.57m2

Buildings,workshops,drydocksandquays

10yearsleasehold10yearsrenewal(JTCLand)

Shiprepairs,shipconversion,offshoreengineering,shipbuildingandrigbuildingincludingdrydock,berthage&workshops

Sembawang Shipyard• AdmiraltyRoadEast/AdmiraltyRoad

WestLandarea:860,939m2Buildings,workshops,docksandquays

22yearsleasehold Shiprepairs,shipconversion,offshoreengineeringandrigbuildingincludingdocks,berthage&workshops

PPL Shipyard• PandanRoad Landarea:141,791m2 15yearsleasehold

(JTCLand)Rigrepairs,upgradings,fabricationandrigbuildingincludingberthageandworkshops

• PandanRoad Landarea:9,182m2 30yearsleasehold(JTCLand)

Legcomponentfabrication

• TuasCrescent Landarea:57,890m2 5yearsleasehold(JTCLand)

Fabricationfacilities

Jurong SML• ShipyardRoad Landarea:63,300m2

Buildings,workshops,drydocks

6yearsleasehold(JTCLand)

Shiprepairsandshipbuildingincludingdrydocks,berthage&workshops

• TuasRoad Landarea:59,942m2Buildings,workshops,docksandquays

14yearsleasehold(JTCLand)

Shipbuildingandfabricationincludingberthage&workshops

P.T. Karimun Sembawang Shipyard• KarimunIslandIndonesia Landarea:307,000m2

Buildings,workshopsandwharves

30yearsleaseholdwithoptionfor20yearsplusanotheroptionfor30years

Shiprepairandfabricationincludingberthageandworkshops

JPL Industries• JurongPierRoad Landarea:27,783m2 20yearsleasehold

(JTCLand)Copperslagrecycling

SES Engineering Sdn Bhd• No.15JalanLambakKawasan

PerindustrianTamanJohor81200JohorBahru

Landarea:5,235m2

Workshopand3-storeyofficebuilding

Freehold Metalfabricationworkshop

P.T. SMOE• BatamIslandIndonesia Landarea:521,964m2

Workshops,quaysideandskidway30yearsleasehold Workshops&fabricationfacilities

New Yard Facility• TuasViewExtensionPhaseIunder

developmentwithcompletionin2013Landarea:733,104m2

Docks,quays,workshops,buildingsandberthage

30plus30yearsleasehold(JTCland)

Shiprepairs,rigrepairs&upgrading,shipconversionandoffshoreactivities

Estaleiro Jurong Aracruz• MunicipalofAracruzEspiritoSanto

StateBrazil(Underplanning)Landarea:825,000m2Slipways,berthingquays,drydock,ancillarysteelandpipingfacilities

Freehold Drillshipsconstruction,buildingofsemi-submersiblerigs,FPSOintegration,fabricationoftopsidemodules,PSVsconstruction,drillingrigrepairsandmodificationworks

Mendong Spring• PasirPanjang 9unitsof3-roomapartmentwith

built-inareaof99m2perunitFreehold Residentialproperties

As at 8 March 2010

NOTICE IS HEREBY GIVEN THATthe47thAnnualGeneralMeetingoftheCompanywillbeheldonTuesday,April20,2010at11.00a.m.at29TanjongKlingRoad,Singapore628054totransactthefollowingbusiness:-

ORDINARY BUSINESS

1 ToreceiveandadopttheDirectors’ReportandAuditedAccountsfortheyearendedDecember31,2009andtheAuditorsReportthereon.

Resolution1

2 Todeclareafinalone-tiertaxexemptordinarydividendof6centsperordinaryshareandafinalone-tiertaxexemptspecialdividendof4centsperordinarysharefortheyearendedDecember31,2009.

Resolution2

3 Tore-electthefollowingdirectors,eachofwhomwillretirebyrotationpursuanttoArticle91oftheCompany’sArticlesofAssociationandwho,beingeligible,willofferthemselvesforre-election:

(a) MdmNgiamJokeMui(b) MrRonFooSiangGuan

Mr Joseph Kwok Sin Kin is also retiring under Article 91 of the Company’s Articles of Association, but will not be offering himself for re-election

Resolution3Resolution4

4 Tore-electMrWongWengSunwhowillceasetoholdofficepursuanttoArticle97oftheCompany’sArticlesofAssociationandwho,beingeligible,willofferhimselfforre-election.

Resolution5

5 To re-appoint the following Directors, each of whom will retire under Section 153(6) of theCompaniesAct,Cap.50,toholdofficefromthedateofthisAnnualGeneralMeetinguntilthenextAnnualGeneralMeeting:

(a) MrTanKwiKin(b) MrRichardHale,OBE (member of the Audit Committee)

Resolution6Resolution7

6 ToapprovethesumofS$1,157,833asDirectors’FeesfortheyearendedDecember31,2009.(2008:S$1,066,649)

Resolution8

7 To re-appoint KPMG LLP as Auditors of the Company and authorise the Directors to fix theirremuneration.

Resolution9

SPECIAL BUSINESS

Toconsiderand,ifthoughtfit,topassthefollowingresolutionswhichwillbeproposedasOrdinaryResolutions:-

8 ThatauthoritybeandisherebygiventotheDirectorsoftheCompanyto: Resolution10

(a) (i) issuesharesinthecapitaloftheCompany(“shares”)whetherbywayofrights,bonusorotherwise;and/or

(ii) makeorgrantoffers,agreementsoroptions(collectively,“Instruments”)thatmightorwouldrequiresharestobeissued,includingbutnotlimitedtothecreationandissueof(aswellasadjustmentsto)warrants,debenturesorotherinstrumentsconvertibleintoshares,

Company Registration No. 196300098Z(Incorporated in the Republic of Singapore)

Notice of Annual General MeetingSembcorp Marine Ltd


atanytimeanduponsuchtermsandconditionsandforsuchpurposesandtosuchpersonsastheDirectorsmay,intheirabsolutediscretiondeemfit;and

(b) (notwithstandingtheauthorityconferredbythisResolutionmayhaveceasedtobeinforce)issueshares inpursuanceofany Instrumentmadeorgrantedby theDirectorswhile thisResolutionwasinforce,

provided that:

(1) theaggregatenumberofsharestobeissuedpursuanttothisResolution(includingsharestobeissuedinpursuanceofInstrumentsmadeorgrantedpursuanttothisResolution):

(A) bywayofrenounceablerightsissuesonapro ratabasistoshareholdersoftheCompany(“Renounceable Rights Issues”) shall not exceed 100% of the total number ofissuedsharesinthecapitaloftheCompanyexcludingtreasuryshares(ascalculatedinaccordancewithparagraph(3)below);and

(B) otherwisethanbywayofRenounceableRights Issues (“Other Share Issues”)shallnotexceed50%of the totalnumberof issuedshares in thecapitalof theCompanyexcluding treasuryshares (ascalculated inaccordancewithparagraph (3)below),ofwhichtheaggregatenumberofsharestobeissuedotherthanonapro ratabasistoshareholdersoftheCompanyshallnotexceed5%ofthetotalnumberofissuedsharesinthecapitaloftheCompanyexcludingtreasuryshares(ascalculatedinaccordancewithparagraph(3)below);

(2) theRenounceableRightsIssuesandOtherShareIssuesshallnot,inaggregate,exceed100%ofthetotalnumberofissuedsharesinthecapitaloftheCompanyexcludingtreasuryshares(ascalculatedinaccordancewithparagraph(3)below);

(3) (subject to such manner of calculation as may be prescribed by the Singapore ExchangeSecuritiesTradingLimited(“SGX-ST”))forthepurposeofdeterminingtheaggregatenumberofshares thatmaybe issuedunderparagraphs (1)(A)and (1)(B)above, thepercentageofissued shares shall be based on the total number of issued shares in the capital of theCompany(excludingtreasuryshares)atthetimethisResolutionispassed,afteradjustingfor:-

(i) newsharesarisingfromtheconversionorexerciseofanyconvertiblesecuritiesorshareoptionsorvestingofshareawardswhichareoutstandingorsubsistingatthetimethisResolutionispassed;and

(ii) anysubsequentbonusissueorconsolidationorsubdivisionofshares;



(4) in exercising the authority conferred by this Resolution, the Company shall comply withtheprovisionsoftheListingManualoftheSGX-STforthetimebeinginforce(unlesssuchcompliancehasbeenwaivedby theSGX-ST)and theArticlesofAssociation for the timebeingoftheCompany;and

(5) (unlessrevokedorvariedbytheCompanyinGeneralMeeting)theauthorityconferredbythisResolutionshallcontinueinforceuntiltheconclusionofthenextAnnualGeneralMeetingoftheCompanyorthedatebywhichthenextAnnualGeneralMeetingoftheCompanyisrequiredbylawtobeheld,whicheveristheearlier.

9 Totransactanyotherbusiness.

ByOrderoftheBoard

KwongSookMay/TanYahSzeJointCompanySecretaries

March25,2010

Explanatory Notes:

Resolutions3to7–DetailedinformationontheseDirectorscanbefoundunderBoardofDirectorsandCorporateGovernanceReportintheAnnualReport2009.

Resolution7–Ifre-appointed,MrRichardHale,OBE,anon-independentDirector,willremainasamemberoftheAuditCommittee

Statement pursuant to Article 54 of the Articles of Association of the Company:

Resolution10-istoempowertheDirectorstoissuesharesinthecapitaloftheCompanyandtomakeorgrantinstruments(suchaswarrantsordebentures)convertibleintoshares,andtoissuesharesinpursuanceofsuchinstruments,uptoanumbernotexceeding(i)100%forRenounceableRightsIssuesand(ii)50%forOtherShareIssues,ofwhichupto5%maybeissuedotherthanonapro ratabasistoshareholders,provided that thetotalnumberofshareswhichmaybeissuedpursuantto(i)and(ii)shallnotexceed100%oftheissuedsharesinthecapitaloftheCompanyexcludingtreasuryshares.TheaggregatenumberofshareswhichmaybeissuedshallbebasedonthetotalnumberofissuedsharesinthecapitaloftheCompany(excludingtreasuryshares)atthetimethatResolution10ispassed,afteradjustingfor(a)newsharesarisingfromtheconversionorexerciseofanyconvertiblesecuritiesorshareoptionsorvestingofshareawardswhichareoutstandingorsubsistingatthetimethatResolution10ispassed,and(b)anysubsequentbonusissueorconsolidationorsubdivisionofshares.





PROXY FORMIMPORTANT

1. For investors who have used their CPF moneys to buy shares in the capital of Sembcorp Marine Ltd, the Annual Report to Shareholders dated 25 March 2010 is forwarded to them at the request of their CPF Approved Nominees and is sent FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by such CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF Investors who wish to vote should contact their CPF Approved Nominees.

I/We (Name) (NRIC/PassportNo.)

of (Address)

beingamember/membersofSembcorpMarineLtd,herebyappoint:-

Name Address NRIC/PassportNumber ProportionofShareholdings(%)

and/or(deleteasappropriate)

asmy/ourproxy/proxiestoattendandtovoteforme/usonmy/ourbehalfand,ifnecessary,todemandapoll,atthe47thAnnualGeneralMeetingoftheCompanytobeheldat29TanjongKlingRoad,Singapore628054onTuesday,April20,2010at11.00a.m.andatanyadjournmentthereof.

(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 of specific 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.)

No. Resolutions For Against

Ordinary Business

1 ToadopttheDirectors’ReportandAccounts

2 TodeclareFinalDividend

3 Tore-electNgiamJokeMui

4 Tore-electRonFooSiangGuan

5 Tore-electWongWengSun

6 Tore-appontTanKwiKin

7 Tore-appointRichardHale,OBE

8 ToapproveDirectors’Fees

9 Tore-appointKPMGLLPasAuditorsandtofixtheirremuneration

Special Business

10 ToapproveShareIssueMandate

Total Number of Shares Held

Signature(s)and/orCommonSealofMember(s) Date

IMPORTANT:PLEASEREADNOTESOVERLEAF

NOTES:

1. PleaseinsertthetotalnumberofSharesheldbyyou.IfyouhaveSharesenteredagainstyournameintheDepositoryRegister(asdefinedinSection130AoftheCompaniesAct,Chapter50ofSingapore),youshouldinsertthatnumberofShares.IfyouhaveSharesregisteredinyournameintheRegisterofMembers,youshouldinsertthatnumberofShares.IfyouhaveSharesenteredagainstyournameintheDepositoryRegisterandSharesregisteredinyournameintheRegisterofMembers,youshouldinserttheaggregatenumberofSharesenteredagainstyournameintheDepositoryRegisterandregisteredinyournameintheRegisterofMembers.Ifnonumberisinserted,theinstrumentappointingaproxyorproxiesshallbedeemedtorelatetoalltheSharesheldbyyou.

2. AmemberoftheCompanyentitledtoattendandvoteatameetingoftheCompanyisentitledtoappointoneortwoproxiestoattendandvoteinsteadofhim.AproxyneednotbeamemberoftheCompany.

3. Whereamemberappointstwoproxies,theappointmentsshallbeinvalidunlesshespecifiestheproportionofhisholding(expressedasapercentageofthewhole)toberepresentedbyeachproxy.

4. TheinstrumentappointingaproxyorproxiesmustbelodgedattheregisteredofficeoftheCompanyat29TanjongKlingRoad,Singapore628054notlaterthan48hoursbeforethetimeoftheAnnualGeneralMeeting.

5. Theinstrumentappointingaproxyorproxiesmustbeunderthehandoftheappointororofhisattorneydulyauthorisedinwriting.Wheretheinstrumentappointingaproxyorproxiesisexecutedbyacorporation,itmustbeexecutedeitherunderitssealorunderthehandofanofficerorattorneydulyauthorised.

6. AcorporationwhichisamembermayauthorisebyresolutionofitsdirectorsorothergoverningbodysuchpersonasitthinksfittoactasitsrepresentativeattheAnnualGeneralMeeting,inaccordancewithSection179oftheCompaniesAct,Chapter50ofSingapore.

7. TheCompanyshallbeentitledtorejecttheinstrumentappointingaproxyorproxiesifitisincomplete,improperlycompletedorillegibleorwherethetrueintentionsoftheappointorarenotascertainablefromtheinstructionsoftheappointorspecifiedintheinstrumentappointingaproxyorproxies.Inaddition,inthecaseofmemberswhoseSharesareenteredagainsttheirnamesintheDepositoryRegister,theCompanymayrejectanyinstrumentappointingaproxyorproxieslodgedifsuchmembersarenotshowntohaveSharesenteredagainsttheirnamesintheDepositoryRegister48hoursbeforethetimeappointedforholdingtheAnnualGeneralMeeting,ascertifiedbyTheCentralDepository(Pte)LimitedtotheCompany.

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 his stead. 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 later than 48 hours before the time of the Annual General Meeting.

NOTICE OF BOOKS CLOSURE AND DIVIDEND PAYMENT DATE

NOTICE IS HEREBY GIVEN thattheRegisterofMembersandShareTransferBooksoftheCompanywillbeclosedonApril27,2010todeterminethemembers’entitlementstotheproposeddividend.

DulycompletedtransfersinrespectofordinarysharesinthecapitaloftheCompanytogetherwithallrelevantdocumentsoftitlereceivedbytheCompany’sShareRegistrar,KCKCorpservePteLtd,333NorthBridgeRoad,#08-00KHKEABuilding,Singapore188721,upto5p.m.onApril26,2010(the“BookClosureDate”)willberegisteredtodeterminemembers’entitlementstotheproposeddividend.Subjectasaforesaid,memberswhosesecuritiesaccountswithTheCentralDepository(Pte)LimitedarecreditedwithordinarysharesinthecapitaloftheCompanyasat5.00p.m.ontheBookClosureDatewillbeentitledtotheproposeddividend.

Theproposeddividend,ifapprovedbythemembersatthe47thAnnualGeneralMeeting,willbepaidonMay10,2010.




The Company SecretarySembcorp Marine Ltd29 Tanjong Kling Road

Singapore 628054

AffixPostageStamp

Documents

ANNUAL REPORT 2009 - Sembcorp Marine...Year-to-date 4.41 10.62 17.45 20.83 Earnings per share (cents) In-quarter 4.41 6.21 6.83 3.38 20.83 Corporate Stewardship Aerial view of Jurong