Contents · Richard Hale, OBE Deputy Chairman Wong Weng Sun President and CEO Tan Kwi Kin Tan Pheng Hock Ajaib Haridass Tang Kin Fei Ron Foo Siang Guan Joseph Kwok Sin Kin (Retired

From Vision to Reality 4 Sembcorp Marine Annual Report 2010

93

General Information 94

Directors’ Report 95

Statement by Directors 118

Independent Auditors’ Report 119

Balance Sheets 121

Income Statements 122

Statements of Comprehensive Income 123

Consolidated Statement of Changes in Equity 124

Statement of Changes in Equity 128

Consolidated Cash Flow Statement 130

Notes to the Financial Statements 132

Supplementary Information 196

Major Properties 198

Notice of Annual General Meeting 199

Proxy Form 203

Contents

94

General Information

DirectorsGoh Geok Ling ChairmanRichard Hale, OBE Deputy Chairman Wong Weng Sun President and CEO Tan Kwi Kin Tan Pheng HockAjaib HaridassTang Kin FeiRon Foo Siang Guan Joseph Kwok Sin Kin (Retired on 20 April 2010) Ngiam Joke Mui Lim Ah DooKoh Chiap Khiong (Appointed on 1 July 2010 as alternate director to Ngiam Joke Mui)

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)


95

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 2010.

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

Goh Geok Ling ChairmanRichard Hale, OBE Deputy ChairmanWong Weng Sun President and CEOTan Kwi KinTan Pheng HockAjaib HaridassTang Kin FeiRon Foo Siang Guan Ngiam Joke Mui Lim Ah DooKoh Chiap Khiong (Appointed on 1 July 2010 as alternate director to Ngiam Joke Mui)

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 are held

Description of interests

Exercise period

Shareholdings registered in the name of director,

spouse or infant children

Other shareholdings in which the director is deemed

to have an interest

At beginning of the year

/ date of appointment

At endof the year

At 21/01/2011



At end of the year

At 21/01/2011

Goh Geok LingSembcorp Marine Ltd Ordinary shares – 13,347 127,694 127,694 – – –

Options to subscribe for ordinary shares

- at $2.38 per share 03/10/2007 to 02/10/2011

196,000 106,000 106,000 – – –

Conditional award of30,800 restricted shares to be delivered after 2008 (Note 4a)

– 26,693 13,346 13,346 – – –

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

– 0 to 33,000 22,000 22,000 – – –


– 0 to 43,500 0 to 43,500 0 to 43,500 – – –

Directors’ Report

96



Exercise period




to have an interest



At end of the year

At 21/01/2011



At end of the year

At 21/01/2011

Goh Geok Ling (cont’d)Sembcorp Marine Ltd(cont’d)

Conditional award of 20,500 restricted shares to be delivered in 2011 (Note 7)

– – 20,500 20,500 – – –

Sembcorp Industries Ltd

Ordinary shares – 327,630 440,136 440,136 47,000 47,000 47,000


- at $2.37 per share 02/07/2006 to 01/07/2010

26,250 – – – – –

- at $2.36 per share 22/11/2006 to 21/11/2010

26,250 – – – – –

- at $2.52 per share 10/06/2007 to 09/06/2011

70,000 17,500 17,500 – – –

Conditional award of 13,982 restricted shares to be delivered after 2008 (Note 4b)

– 6,058 3,028 3,028 – – –


– 0 to 20,550 8,950 8,950 – – –


– 0 to 20,550 0 to 20,550 0 to 20,550 – – –


– – 13,700 13,700 – – –

Richard Hale, OBESembcorp Marine Ltd Conditional award of

22,000 restricted shares to be delivered after 2010 (Note 6a)

– 0 to 33,000 0 to 33,000 0 to 33,000 – – –


– – 14,700 14,700 – – –


Ordinary shares – 238,760 309,324 309,324 – – –


- at $2.37 per share 02/07/2006 to 01/07/2010

26,250 – – – – –

Directors’ Report


97



Exercise period




to have an interest



At end of the year

At 21/01/2011



At end of the year

At 21/01/2011

Richard Hale, OBE (cont’d)Sembcorp Industries Ltd (cont’d)


- at $2.36 per share 22/11/2006 to 21/11/2010

35,000 – – – – –

- at $2.52 per share 10/06/2007 to 09/06/2011

140,000 140,000 140,000 – – –

Conditional award of 17,350 restricted shares to be delivered after 2008 (Note 4c)

– 7,518 3,758 3,758 – – –


– 0 to 25,500 11,106 11,106 – – –


– 0 to 25,500 0 to 25,500 0 to 25,500 – – –


– – 17,000 17,000 – – –

Wong Weng SunSembcorp Marine Ltd Ordinary shares – 1,115,040 1,403,502 1,403,502 – – –


- at $0.71 per share 09/08/2004 to 08/08/2013

57,750 57,750 57,750 – – –

- at $0.74 per share 11/08/2005 to 10/08/2014

126,000 126,000 126,000 – – –

- at $2.11 per share 12/08/2006 to 11/08/2015

350,000 350,000 350,000 – – –

- at $2.38 per share 03/10/2007 to 02/10/2016

175,000 175,000 175,000 – – –

Conditional award of 175,000 performance shares to be delivered after 2009 (Note 1a)

– 0 to 262,500 – – – – –


– 0 to 187,500 0 to 187,500 0 to 187,500 – – –

Conditional award of 150,000 performance shares to be delivered after 2011 (Note 2b)

– 0 to 225,000 0 to 225,000 0 to 225,000 – – –

Directors’ Report

98

Directors’ Report



Exercise period




to have an interest



At end of the year

At 21/01/2011



At endof the year

At 21/01/2011

Wong Weng Sun (cont’d)

Sembcorp Marine Ltd (cont’d)

Conditional award of 250,000 performance shares to be delivered after 2012 (Note 2c)

– – 0 to 375,000 0 to 375,000 – – –


– 16,128 – – – – –

Conditional award of 70,000 restricted shares to be delivered after 2008 (Note 4d)

– 60,666 30,332 30,332 – – –


– 0 to 75,000 50,000 50,000 – – –


– 0 to 112,500 0 to 112,500 0 to 112,500 – – –


– – 0 to 150,000 0 to 150,000 – – –


Ordinary shares – 37,500 79,000 79,000 – – –


- at $0.78 per share 03/06/2004 to 02/06/2013

1,250 – – – – –

- at $0.93 per share 19/11/2004 to 18/11/2013

1,250 – – – – –

- at $0.99 per share 18/05/2005 to 17/05/2014

2,500 – – – – –

- at $1.16 per share 23/11/2005 to 22/11/2014

7,500 – – – – –

- at $2.37 per share 02/07/2006 to 01/07/2015

7,500 – – – – –

- at $2.36 per share 22/11/2006 to 21/11/2015

7,500 – – – – –

- at $2.52 per share 10/06/2007 to 09/06/2016

14,000 – – – – –


99

Directors’ Report



Exercise period




to have an interest



At end of the year

At 21/01/2011



At end of the year

At 21/01/2011

Tan Kwi Kin

Sembcorp Marine Ltd Ordinary shares – 6,570,711 7,873,010 7,873,010 – – –


- at $0.71 per share 09/08/2004 to 08/08/2013

520,000 – – – – –

- at $0.74 per share 11/08/2005 to 10/08/2014

980,000 780,000 780,000 – – –

- at $2.11 per share 12/08/2006 to 11/08/2015

980,000 980,000 980,000 – – –

- at $2.38 per share 03/10/2007 to 02/10/2016

420,000 420,000 420,000 – – –


– 0 to 525,000 – – – – –


– 0 to 375,000 0 to 375,000 0 to 375,000 – – –


– 37,632 – – – – –

Conditional award of 140,000 restricted shares to be delivered after 2008 (Note 4e)

– 121,333 60,666 60,666 – – –

Conditional award of 100,000 restricted shares to be delivered after 2009 (Note 5e)

– 0 to 150,000 100,000 100,000 – – –


– – 6,400 6,400 – – –


Ordinary shares – 127,750 174,625 174,625 – – –


- at $1.16 per share 23/11/2005 to 22/11/2014

3,125 – – – – –

- at $2.37 per share 02/07/2006 to 01/07/2015

9,375 – – – – –

- at $2.36 per share 22/11/2006 to 21/11/2015

9,375 – – – – –

- at $2.52 per share 10/06/2007 to 09/06/2016

25,000 – – – – –

100

Directors’ Report



Exercise period




to have an interest



At end of the year

At 21/01/2011



At end of the year

At 21/01/2011

Tan Pheng Hock

Sembcorp Marine Ltd Ordinary shares – 303,870 328,490 340,740 – – –


- at $2.38 per share 03/10/2007 to 02/10/2011

24,500 12,250 – – – –

Conditional award of 14,700 restricted shares to be delivered after 2008 (Note 4f)

– 12,740 6,370 6,370 – – –


– 0 to 18,000 12,000 12,000 – – –


– 0 to 18,000 0 to 18,000 0 to 18,000 – – –


– – 8,300 8,300 – – –

Ajaib Haridass



- at $2.38 per share 03/10/2007 to 02/10/2011

70,000 35,000 – – – –

Conditional award of 28,700 restricted shares to be delivered after 2008 (Note 4g)

– 24,873 12,436 12,436 – – –

Conditional award of 19,000 restricted shares to be delivered after 2009 (Note 5g)

– 0 to 28,500 19,000 19,000 – – –


– 0 to 28,500 0 to 28,500 0 to 28,500 – – –


– – 12,800 12,800 – – –


101

Directors’ Report



Exercise period




to have an interest



At end of the year

At 21/01/2011



At end of the year

At 21/01/2011

Tang Kin Fei



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

7,000 – – – – –

- at $2.38 per share 03/10/2007 to 02/10/2011

73,500 24,500 – – – –

Conditional award of 18,900 restricted shares to be delivered after 2008 (Note 4h)

– 16,380 8,190 8,190 – – –


– 0 to 18,000 12,000 12,000 – – –


– 0 to 25,500 0 to 25,500 0 to 25,500 – – –


– – 11,500 11,500 – – –


Ordinary shares – 2,782,084 3,024,405 3,024,405 – – –


- at $2.37 per share 02/07/2006 to 01/07/2015

150,000 150,000 150,000 – – –

- at $2.36 per share 22/11/2006 to 21/11/2015

150,000 150,000 150,000 – – –

- at $2.52 per share 10/06/2007 to 09/06/2016

300,000 300,000 300,000 – – –


– 0 to 612,360 – – – – –


– 0 to 600,000 0 to 600,000 0 to 600,000 – – –


– 0 to 600,000 0 to 600,000 0 to 600,000 – – –

102

Directors’ Report



Exercise period




to have an interest



At end of the year

At 21/01/2011



At end of the year

At 21/01/2011

Tang Kin Fei (cont’d)

Sembcorp Industries Ltd (cont’d)


– – 0 to 600,000 0 to 600,000 – – –


– 30,414 – – – – –

Conditional award of 128,596 restricted shares to be delivered after 2008 (Note 4i)

– 55,724 27,861 27,861 – – –

Conditional award of 126,000 restricted shares to be delivered after 2009 (Note 5h)

– 0 to 189,000 82,320 82,320 – – –


– 0 to 189,000 0 to 189,000 0 to 189,000 – – –


– – 0 to 189,000 0 to 189,000 – – –

Sembcorp Financial Services Pte Ltd

Fixed Rate Notes issued under the $1.5 Billion Multicurrency Medium Term Note Programme (Note 8) :

- Due 2014 – Principal Amount:

$500,000

Principal Amount:

$500,000

Principal Amount:

$500,000

– – –

- Due 2020 – – Principal Amount:

$500,000

Principal Amount:

$500,000

– – –

Ron Foo Siang Guan

Sembcorp Marine Ltd Ordinary shares – 36,494 60,488 60,488 28,000 28,000 28,000


- at $2.38 per share 03/10/2007 to 02/10/2011

14,000 7,000 7,000 – – –

Conditional award of 19,600 restricted shares to be delivered after 2008 (Note 4j)

– 16,986 8,492 8,492 – – –


103

Directors’ Report



Exercise period




to have an interest



At end of the year

At 21/01/2011



At end of the year

At 21/01/2011

Ron Foo Siang Guan (cont’d)

Sembcorp Marine Ltd (cont’d)

Conditional award of 17,000 restricted shares to be delivered after 2009 (Note 5i)

– 0 to 25,500 17,000 17,000 – – –


– 0 to 25,500 0 to 25,500 0 to 25,500 – – –


– – 11,500 11,500 – – –


Ordinary shares – 52,820 52,820 52,820 – – –

Ngiam Joke Mui



- at $2.38 per share 03/10/2007 to 02/10/2016

14,000 7,000 7,000 – – –

Conditional award of 9,000 restricted shares to be delivered after 2009 (Note 5j)

– 0 to 13,500 9,000 9,000 – – –


– 0 to 13,500 0 to 13,500 0 to 13,500 – – –


– – 6,400 6,400 – – –


Ordinary shares – 720,626 1,005,294 1,005,294 – – –


- at $2.37 per share 02/07/2006 to 01/07/2015

62,500 – – – – –

- at $2.36 per share 22/11/2006 to 21/11/2015

62,500 – – – – –

- at $2.52 per share 10/06/2007 to 09/06/2016

93,750 – – – – –

104



Exercise period




to have an interest



At end of the year

At 21/01/2011



At end of the year

At 21/01/2011

Ngiam Joke Mui (cont’d)

Sembcorp Industries Ltd (cont’d)

Conditional award of 81,648 performance shares to be delivered after 2009 (Note 1d)

– 0 to 122,472 – – – – –


– 0 to 120,000 0 to 100,000 0 to 100,000 – – –


– 0 to 120,000 0 to 60,000 0 to 60,000 – – –


– – 0 to 20,000 0 to 20,000 – – –


– 12,673 – – – – –

Conditional award of 53,582 restricted shares to be delivered after 2008 (Note 4k)

– 23,218 – – – – –

Conditional award of 52,500 restricted shares to be delivered after 2009 (Note 5k)

– 0 to 78,750 – – – – –


– 0 to 78,750 0 to 59,063 0 to 59,063 – – –


– – 0 to 19,687 0 to 19,687 – – –

Sembcorp Financial Services Pte Ltd

Fixed / Floating Rate Notes issued under the $1.5 Billion Multicurrency Medium Term Note Programme Due 2020 (Note 8)

– – Principal Amount:

$250,000

Principal Amount:

$250,000

– – –

Directors’ Report


105

Directors’ Report



Exercise period




to have an interest



At end of the year

At 21/01/2011



At end of the year

At 21/01/2011

Lim Ah Doo

Sembcorp Marine Ltd Conditional award of 9,000 restricted shares to be delivered after 2010 (Note 6a)

– 0 to 13,500 0 to 13,500 0 to 13,500 – – –


– – 11,500 11,500 – – –


Ordinary shares – 9,768 9,768 9,768 – – –

Koh Chiap Khiong


Ordinary shares – 13,067 13,067 13,067 – – –


– 0 to 75,000 0 to 75,000 0 to 75,000 – – –


– 0 to 75,000 0 to 75,000 0 to 75,000 – – –

Conditional award of 40,000 restricted shares to be delivered after 2009 (Note 5l)

– 26,133 26,133 26,133 – – –


– 0 to 47,250 0 to 47,250 0 to 47,250 – – –


– 0 to 47,250 0 to 47,250 0 to 47,250 – – –

106

Directors’ Report

Note 1: The actual number delivered will depend on the achievement of set targets over a 3-year period from 2007 to 2009. Achievement of targets below threshold 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, 217,000 shares were released on 12 March 2010.

(b) For this period, 434,000 shares were released on 12 March 2010.

(c) For this period, 142,884 shares were released on 10 March 2010.

(d) For this period, 28,577 shares were released on 10 March 2010.

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 threshold 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 2008 to 2010

(b) Period from 2009 to 2011

(c) Period from 2010 to 2012

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 threshold 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, 16,128 shares (final release of 1/3 of the 48,384 shares) were released under the award on 12 March 2010. The 1st and 2nd release of 16,128 shares each have been released in 2008 and 2009 respectively.

(b) For this period, 37,632 shares (final release of 1/3 of the 112,896 shares) were released under the award on 12 March 2010. The 1st and 2nd release of 37,632 shares each have been released in 2008 and 2009 respectively.

(c) For this period, 30,414 shares (final release of 1/3 of the 91,246 shares) were released under the award on 10 March 2010. The 1st and 2nd release of 30,416 shares each have been released in 2008 and 2009 respectively.

(d) For this period, 12,673 shares (final release of 1/3 of the 38,019 shares) were released under the award on 10 March 2010. The 1st and 2nd release of 12,673 shares each have been released in 2008 and 2009 respectively.


(a) For this period, 13,347 shares (2nd release of 1/3 of the 40,040 shares) were released under the award on 12 March 2010 and the remaining 13,346 shares will be vested in year 2011. The 1st release of 13,347 shares has been released on 30 March 2009.

(b) For this period, 3,030 shares (2nd release of 1/3 of the 9,088 shares) were released under the award on 10 March 2010 and the remaining 3,028 shares will be vested in year 2011. The 1st release of 3,030 shares has been released on 27 March 2009.

(c) For this period, 3,760 shares (2nd release of 1/3 of the 11,278 shares) were released under the award on 10 March 2010 and the remaining 3,758 shares will be vested in year 2011. The 1st release of 3,760 shares has been released on 27 March 2009.

(d) For this period, 30,334 shares (2nd release of 1/3 of the 91,000 shares) were released under the award on 12 March 2010 and the remaining 30,332 shares will be vested in year 2011. The 1st release of 30,334 shares has been released on 30 March 2009.

(e) For this period, 60,667 shares (2nd release of 1/3 of the 182,000 shares) were released under the award on 12 March 2010 and the remaining 60,666 shares will be vested in year 2011. The 1st release of 60,667 shares has been released on 30 March 2009.

(f) For this period, 6,370 shares (2nd release of 1/3 of the 19,110 shares) were released under the award on 12 March 2010 and the remaining 6,370 shares will be vested in year 2011. The 1st release of 6,370 shares has been released on 30 March 2009.

(g) For this period, 12,437 shares (2nd release of 1/3 of the 37,310 shares) were released under the award on 12 March 2010 and the remaining 12,436 shares will be vested in year 2011. The 1st release of 12,437 shares has been released on 30 March 2009.

(h) For this period, 8,190 shares (2nd release of 1/3 of the 24,570 shares) were released under the award on 12 March 2010 and the remaining 8,190 shares will be vested in year 2011. The 1st release of 8,190 shares has been released on 30 March 2009.

(i) For this period, 27,863 shares (2nd release of 1/3 of the 83,587 shares) were released under the award on 10 March 2010 and the remaining 27,861 shares will be vested in year 2011. The 1st release of 27,863 shares has been released on 27 March 2009.

(j) For this period, 8,494 shares (2nd release of 1/3 of the 25,480 shares) were released under the award on 12 March 2010 and the remaining 8,492 shares will be vested in year 2011. The 1st release of 8,494 shares has been released on 30 March 2009.

(k) For this period, 11,610 shares (2nd release of 1/3 of the 34,828 shares) were released under the award on 10 March 2010 and the remaining 11,608 shares were released on 1 July 2010.* The 1st release of 11,610 shares has been released on 27 March 2009.


107

Directors’ Report


(a) For this period, 11,000 shares (1/3 of the 33,000 shares) were released under the award on 12 March 2010 and the remaining 22,000 shares will be vested in year 2011/2012.

(b) For this period, 4,476 shares (1/3 of the 13,426 shares) were released under the award on 10 March 2010 and the remaining 8,950 shares will be vested in year 2011/2012.

(c) For this period, 5,554 shares (1/3 of the 16,660 shares) were released under the award on 10 March 2010 and the remaining 11,106 shares will be vested in year 2011/2012.

(d) For this period, 25,000 shares (1/3 of the 75,000 shares) were released under the award on 12 March 2010 and the remaining 50,000 shares will be vested in year 2011/2012.

(e) For this period, 50,000 shares (1/3 of the 150,000 shares) were released under the award on 12 March 2010 and the remaining 100,000 shares will be vested in year 2011/2012.

(f) For this period, 6,000 shares (1/3 of the 18,000 shares) were released under the award on 12 March 2010 and the remaining 12,000 shares will be vested in year 2011/2012.

(g) For this period, 9,500 shares (1/3 of the 28,500 shares) were released under the award on 12 March 2010 and the remaining 19,000 shares will be vested in year 2011/2012.

(h) For this period, 41,160 shares (1/3 of the 123,480 shares) were released under the award on 10 March 2010 and the remaining 82,320 shares will be vested in year 2011/2012.

(i) For this period, 8,500 shares (1/3 of the 25,500 shares) were released under the award on 12 March 2010 and the remaining 17,000 shares will be vested in year 2011/2012.

(j) For this period, 4,500 shares (1/3 of the 13,500 shares) were released under the award on 12 March 2010 and the remaining 9,000 shares will be vested in year 2011/2012.

(k) For this period, 17,150 shares (1/3 of the 51,450 shares) were released under the award on 10 March 2010 and the remaining 34,300 shares were released on 1 July 2010.*

(l) For this period, 13,067 shares (1/3 of the 39,200 shares) were released under the award on 10 March 2010 and the remaining 26,133 shares will be vested in year 2011/2012.

Note 6: 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 threshold 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 2009 to 2010

(b) Period from 2010 to 2011

Note 7: Shares granted will be vested 1 year from the date of grant.

Note 8: Fixed Rate Notes and Floating Rate Notes issued under the $1.5 Billion Multicurrency Medium Term Note Programme of Sembcorp Financial Services Pte Ltd, a related company of Sembcorp Industries Group.

* This arose as a result of retirement.

108

Directors’ Report

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 of the financial year, or date of appointment, if later, or at the end of the financial year.

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 25 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 ChairmanTan Pheng HockJoseph Kwok Sin Kin (Retired on 20 April 2010)Tang Kin Fei (Appointed on 20 April 2010)

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.


109

Directors’ Report

The Company designates Sembcorp Industries Ltd as the Parent Group.

During the year, the Share Plans expired and the new Share Plans comprising Performance Share Plan (SCM PSP 2010) and Restricted Stock Plan (SCM RSP 2010) (collectively referred to as the New Share Plans) were approved and adopted by the share holders at an Extraordinary General Meeting of the Company held on 20 April 2010. The Share Option Plan was not replaced. The New Share Plans are proposed to increase the Company’s flexibility and effectiveness in its continuing efforts to reward, retain and motivate employees to achieve superior performance. The New Share Plans will strengthen the Company’s competitiveness in attracting and retaining talented key senior management and senior executives. The SCM RSP 2010 is intended to apply to a broad base of senior executives as well as to the non-executive directors, while the SCM PSP 2010 is intended to apply to a select group of key senior management. Generally, it is envisaged that the range of performance targets to be set under the SCM RSP 2010 and the SCM PSP 2010 will be different, with the latter emphasising stretched or strategic targets aimed at sustaining longer term growth. The New Share Plans will provide incentives to high performing key senior management and senior executives to excel in their performance and encourage greater dedication and loyalty to the Company. Through the New Share Plans, the Company will be able to motivate key senior management and senior executives to continue to strive for the Group’s long-term shareholder value. In addition, the New Share Plans aim to foster a greater ownership culture within the Group which align the interests of Participants with the interests of Shareholders, and to improve performance and achieve sustainable growth for the Company in the changing business environment. The New Share Plans use methods fairly common among major local and multinational companies to incentivise and motivate key senior management and senior executives to achieve pre-determined targets which create and enhance economic value for Shareholders. The Company believes that the New Share Plans will be effective tools in motivating key senior management and senior executives to strive to deliver long-term shareholder value. While the New Share Plans cater principally to Group Executives, it is recognised that there are other persons who can make significant contributions to the Group through their close working relationship with the Group. Such persons include employees of associates over which the Company has operational control. A Participant’s Awards under the New Share Plans will be determined at the sole discretion of the Committee. In considering an Award to be granted to a Participant, the Committee may take into account, inter alia, the Participant’s performance during the relevant period, and his capability, entrepreneurship, scope of responsibility and skill set. As at 31 December 2010, no new shares were granted under the New Share Plans. All shares granted during the year were awarded under the Share Plans approved and adopted by the shareholders at an Extraordinary General Meeting of the Company held on 31 May 2000. Other information regarding the Share Plan is as follows:

110

Directors’ Report

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 2010 and 2009, all options were either settled by the issuance of treasury shares or by the issuance of new 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.


111

Directors’ ReportSe

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112

Directors’ Report

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 2010 were as follows:

Option participantsAggregate

options granted

Aggregate options

cancelled/lapsed/

not accepted

Aggregate options

exercised

Aggregate options

outstanding

Directors of the Company

Goh Geok Ling 196,000 – (90,000) 106,000

Wong Weng Sun 1,208,500 – (499,750) 708,750

Tan Kwi Kin 6,900,000 – (4,720,000) 2,180,000

Tan Pheng Hock 269,500 – (257,250) 12,250

Ajaib Haridass 403,000 – (368,000) 35,000

Tang Kin Fei 124,000 – (99,500) 24,500

Ron Foo Siang Guan 28,000 – (21,000) 7,000

Ngiam Joke Mui 122,000 – (115,000) 7,000

Former Directors of the Company 7,424,300 – (7,417,300) 7,000

Other executives 115,977,395 (13,945,191) (93,638,730) 8,393,474

At 31 December 2010 132,652,695 (13,945,191) (107,226,530) 11,480,974

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 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.


113

Directors’ Report

Sembcorp Marine Performance Share Plan (cont’d)

From 2009 onwards, 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 2010 to 2012 will be vested to the senior management participants only if the restricted shares for the performance period 2011 to 2012 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 2010 were as follows:

Performance Shares participants

Conditional performance

shares awarded

during the year

Aggregate conditional

performance shares

awarded


performance shares

released


performance shares lapsed

Additional performance

shares awarded

arising from targets met

during the year


performance shares

outstandingDirectors of the Company

- Wong Weng Sun 250,000 1,155,000 (600,600) (71,400) 42,000 525,000

- Tan Kwi Kin – 3,100,000 (2,329,900) (604,100) 84,000 250,000

Former alternate director of the Company

– 800,000 (461,000) (339,000) – –

Key management and executives of the Group

385,000 2,682,500 (1,418,200) (178,500) 109,200 1,195,000

At 31 December 2010 635,000 7,737,500 (4,809,700) (1,193,000) 235,200 1,970,000

With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2007 to 2009, a total of 1,215,200 (2009: 411,600) performance shares were released via the issuance of treasury shares.

In 2010, there were additional 235,200 (2009: nil) 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 2010, was 1,970,000 (2009: 2,315,000). Based on the multiplying factor, the actual release of the awards could range from zero to a maximum of 2,955,000 (2009: of 3,472,500) performance shares.

114

Directors’ Report

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 Earnings Before Interest and Taxes for awards granted in 2010.

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.

There is no performance condition for the conditional award of the restricted shares granted to non-executive directors in 2010. Shares granted will be vested 1 year from the date of grant.


115

Sembcorp Marine Restricted Stock Plan (cont’d)

The details of restricted shares of the Company awarded since commencement of the Restricted Stock Plan up to 31 December 2010 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


Goh Geok Ling 20,500 111,540 – 11,000 (37,694) 84,846

Richard Hale, OBE 14,700 36,700 – – – 36,700

Wong Weng Sun 100,000 364,384 – 25,000 (134,052) 255,332

Tan Kwi Kin 6,400 401,296 – 50,000 (284,230) 167,066

Tan Pheng Hock 8,300 51,410 – 6,000 (18,740) 38,670

Ajaib Haridass 12,800 88,110 – 9,500 (34,374) 63,236

Tang Kin Fei 11,500 65,070 – 6,000 (22,380) 48,690

Ron Foo Siang Guan 11,500 70,980 – 8,500 (25,488) 53,992

Ngiam Joke Mui 6,400 24,400 – 4,500 (4,500) 24,400

Lim Ah Doo 11,500 20,500 – – – 20,500

Former Directors of the Company – 126,480 (24,805) 20,000 (109,675) 12,000

Other executives 3,290,600 16,698,278 (1,006,651) 1,534,750 (6,651,506) 10,574,871

At 31 December 2010 3,494,200 18,059,148 (1,031,456) 1,675,250 (7,322,639) 11,380,303

With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2008 to 2009, a total of 1,791,238 restricted shares were released. For awards in relation to the performance period 2007 to 2008, a total of 1,561,953 (2009: 1,956,117) restricted shares were released in 2010. For awards in relation to the performance period 2006 to 2007, a total of 575,764 (2009: 729,439) restricted shares were released in 2010. The restricted shares were either released via the issuance of treasury shares or the issuance of new shares.

In 2010, additional 1,675,250 (2009: 1,182,233) restricted shares were awarded for the over-achievement of the performance targets for the performance period 2008 to 2009 (2009: 2007 to 2008).

Directors’ Report

116

Sembcorp Marine Restricted Stock Plan (cont’d)

The total number of restricted shares outstanding, including awards achieved but not released, as at 31 December 2010, was 11,380,303 (2009: 10,406,962). Of this, the total number of restricted shares in awards granted conditionally and representing 100% of targets to be achieved, but not released was 6,615,930 (2009: 6,709,730). Based on the multiplying factor, the actual release of the awards could range from zero to a maximum of 9,923,895 (2009: 10,064,595) 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 2008 to 2009 (2009: 2007 to 2008), a total of $3,785,714 (2009: $1,678,905), equivalent to 1,030,600 (2009: 1,203,602) notional restricted shares, were paid.

A total of 1,234,400 (2009: 1,130,050) notional restricted shares were awarded on 19 April 2010 (2009: 13 April 2009) 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 2010, was 2,149,950 (2009: 1,928,700). 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 3,224,925 (2009: 2,893,050).

Directors’ Report


117

Directors’ Report

Audit Committee

The members of the Audit Committee during the year and at the date of this report are:

Lim Ah Doo ChairmanRichard Hale, OBERon Foo Siang Guan

The Audit Committee held six 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 and its Terms of Reference.

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;

• interested person transactions (as defined in Chapter 9 of the SGX Listing Manual);

• internal audit plans and internal audit reports; and

• whistle-blowers’ disclosures.

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

Singapore25 February 2011

118

In our opinion:

(a) the financial statements set out on pages 121 to 195 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 2010 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


Statement by Directors


119

Independent Auditors’ Report

Report on the financial statements

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 as at 31 December 2010, the income statements, statements of comprehensive income and statements of changes in equity of the Group and of the Company, and statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 121 to 195.

Management’s responsibility for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards, and for 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.

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 about 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 judgment, 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 of the financial statements that give a true and fair view 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.

Independent Auditors’ Report Members of the CompanySembcorp Marine Ltd

120

Opinion

In our opinion, 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 2010 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.

Report on other legal and regulatory requirements

In our opinion, 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


121

Group CompanyNote 2010 2009 2010 2009

$’000 $’000 $’000 $’000Non-current assetsProperty, plant and equipment 4 681,948 678,361 120,892 107,584Investment properties 5 – – 44,616 51,360Investments in subsidiaries 6 – – 482,616 629,076Investments in associates and joint ventures 7 306,956 267,774 107,369 107,369Other long term investments 8 286,856 165,783 195,561 113,377Long term trade receivables 9 10,845 14,701 10,832 14,505Other long term receivables 10 54,525 36,733 59,573 65,702Intangible assets 11 6,127 6,127 122 122Deferred tax assets 12 47 47 – – Derivative financial assets 13 31,714 181 – –

1,379,018 1,169,707 1,021,581 1,089,095

Current assetsInventories and work-in-progress 14 750,749 1,252,500 – – Trade receivables 9 153,397 228,881 17,903 30,404Other receivables, deposits and prepayments 10 40,104 55,308 8,381 9,142Derivative financial assets 13 40,805 2,604 – – Bank balances, fixed deposits and cash 15 2,915,097 1,978,548 169,011 15,846

3,900,152 3,517,841 195,295 55,392

Current liabilitiesTrade payables 16 1,453,815 1,565,550 43,023 33,117Other payables 17 8,429 26,682 60,481 45,561Provisions 18 55,383 60,601 – – Progress billings in excess of work-in-progress 14 645,704 696,031 – – Derivative financial liabilities 13 101 21,200 – – Provision for taxation 277,341 253,218 1,993 1,017Interest-bearing borrowings 19 8,000 12,000 – –

2,448,773 2,635,282 105,497 79,695

Net current assets/(liabilities) 1,451,379 882,559 89,798 (24,303)

Non-current liabilitiesDeferred tax liabilities 12 103,909 66,748 43,842 34,873Derivative financial liabilities 13 – 10,912 – – Other long term payables 17 8,804 – – 32,987Interest-bearing borrowings 19 – 8,000 – – Other provisions 20 30,758 6,198 27,895 2,895

143,471 91,858 71,737 70,755

2,686,926 1,960,408 1,039,642 994,037

Equity attributable to shareholders of the CompanyShare capital 21 456,561 443,347 456,561 443,347Reserves 22 2,142,842 1,440,723 583,081 550,690

2,599,403 1,884,070 1,039,642 994,037

Non-controlling interests 87,523 76,338 – –

Total equity 2,686,926 1,960,408 1,039,642 994,037

Balance Sheets As at 31 December 2010

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

122


$’000 $’000 $’000 $’000

Turnover 24 4,554,863 5,724,742 64,326 52,063

Cost of sales (3,426,068) (4,738,692) (31,620) (17,450)

Gross profit 1,128,795 986,050 32,706 34,613

Other operating income 20,534 21,811 73 94

Other operating expenses (44,730) (4,230) (343) (110)

General and administrative expenses (162,035) (141,277) (35,173) (34,693)

Operating profit/(loss) 25 942,564 862,354 (2,737) (96)

Finance income 26 32,179 36,607 251,852 256,407

Finance costs 27 (7,134) (5,329) – (3,316)

Foreign exchange transactions 28 52,640 – – –

Non-operating income 29 – 368 5,265 1,625

Non-operating expenses 29 – (11,764) – –

Share of results of associates and joint ventures 30 57,639 25,399 – –

Profit before income tax 1,077,888 907,635 254,380 254,620

Income tax (expense)/credit 31 (184,009) (150,870) 426 606

Profit for the year 893,879 756,765 254,806 255,226

Attributable to:

Shareholders of the Company 860,266 700,118 254,806 255,226

Non-controlling interests 32 33,613 56,647 – –


Earnings per share (cents) 33

Basic 41.55 34.02

Diluted 41.43 33.93

Income StatementsYear ended 31 December 2010



123


$’000 $’000 $’000 $’000


Foreign currency translation differences (39,254) (30,161) – –

Net fair value changes of cash flow hedges 68,839 52,593 – –

Net fair value changes of cash flow hedges transferred to income statement

– 8,581 – –

Net fair value changes of available-for-sale financial assets

101,099 22,125 70,868 13,639

Net fair value changes of available-for-sale financial assets transferred to income statement on impairment

– 11,764 – –

Other comprehensive income for the year, net of income tax 23 130,684 64,902 70,868 13,639

Total comprehensive income for the year 1,024,563 821,667 325,674 268,865

Attributable to:

Shareholders of the Company 996,164 767,586 325,674 268,865

Non-controlling interests 28,399 54,081 – –

Total comprehensive income for the year 1,024,563 821,667 325,674 268,865

Statements of Comprehensive IncomeYear ended 31 December 2010


124

Consolidated Statement of Changes in EquityYear ended 31 December 2010

Attr

ibut

able

to s

hare

hold

ers

of th

e C

ompa

ny

Shar

eca

pita

l

Res

erve

fo

r ow

n sh

ares

Cap

ital

rese

rves

Fore

ign

curr

ency

tr

ansl

atio

n re

serv

e

Shar

e-ba

sed

com

pens

atio

n re

serv

eH

edgi

ng

rese

rve

Fair

valu

e re

serv

eR

even

ue

rese

rve

Tota

l

Non

-co

ntro

lling

in

tere

sts

Tota

leq

uity

Gro

up$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

At 1

Jan

uary

201

044

3,34

7(2

5,44

9)25

,325

(30,

474)

7,17

6(1

4,01

6)59

,953

1,41

8,20

81,

884,

070

76,3

381,

960,

408

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

rPr

ofit f

or th

e ye

ar–

–

–

––

–

–

860,

266

860,

266

33,6

1389

3,87

9

Oth

er c

ompr

ehen

sive

inco

me

Fore

ign

curr

ency

tran

slat

ion

diffe

renc

es–

–

–

(34,

673)

–

–

–

–

(34,

673)

(4,5

81)

(39,

254)

Effe

ctiv

e po

rtio

n of

cha

nges

in

fair

valu

e of

cas

h flo

w

hedg

es, n

et o

f tax

––

–

–

–

69

,472

–

–

69,4

72(6

33)

68,8

39

Net

cha

nge

in fa

ir va

lue

of

avai

labl

e-fo

r-sal

e fin

anci

al

asse

ts, n

et o

f tax

––

–

–

–

–

10

1,09

9–

10

1,09

9–

10

1,09

9

Tran

sfer

from

reve

nue

rese

rve

to

capi

tal r

eser

ves

––

24

9

–

–

–

–

(249

)–

–

–

Tota

l oth

er c

ompr

ehen

sive

in

com

e–

–

249

(3

4,67

3)–

69

,472

101,

099

(249

) 13

5,89

8(5

,214

)13

0,68

4

Tota

l com

preh

ensi

ve in

com

e fo

r th

e ye

ar–

–

249

(3

4,67

3)–

69

,472

101,

099

860,

017

996,

164

28,3

991,

024,

563

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of t

hese

fina

ncia

l sta

tem

ents

.


125


Attr

ibut

able

to s

hare

hold

ers

of th

e C

ompa

ny

Shar

eca

pita

l

Res

erve

fo

r ow

n sh

ares

Cap

ital

rese

rves

Fore

ign

curr

ency

tr

ansl

atio

n re

serv

e

Shar

e-ba

sed

com

pens

atio

n re

serv

eH

edgi

ng

rese

rve

Fair

valu

e re

serv

eR

even

ue

rese

rve

Tota

l

Non

-co

ntro

lling

in

tere

sts

Tota

leq

uity

Gro

up$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

Tran

sact

ions

with

ow

ners

, re

cord

ed d

irect

ly in

equ

ityC

ontr

ibut

ions

by

and

dist

ribut

ions

to o

wne

rsIs

sue

of n

ew s

hare

s13

,214

–

–

–

(592

)–

–

–

12

,622

–

12,6

22

Issu

e of

trea

sury

sha

res

–

25,4

49–

–

(2

2,20

1)–

–

–

3,

248

–

3,24

8

Div

iden

ds p

aid

to

- C

ompa

ny’s

sha

reho

lder

s (N

ote

34)

–

–

–

–

–

–

–

(311

,271

) (3

11,2

71)

–

(311

,271

)

- no

n-co

ntro

lling

inte

rest

s–

–

–

–

–

–

–

–

–

(1

6,49

6)(1

6,49

6)

Shar

e-ba

sed

paym

ent

trans

actio

ns

–

–

–

–

14,5

70–

–

–

14

,570

–

14,5

70

Rea

lisat

ion

of re

serv

e up

on

liqui

datio

n of

a s

ubsi

diar

y–

–

–

–

–

–

–

–

–

(7

18)

(718

)

Tota

l con

tribu

tions

by

and

dist

ribut

ions

to o

wne

rs13

,214

25,4

49–

–

(8

,223

)–

–

(3

11,2

71)

(280

,831

)(1

7,21

4)

(298

,045

)

At 3

1 D

ecem

ber 2

010

456,

561

–

25,5

74(6

5,14

7)(1

,047

)55

,456

161,

052

1,96

6,95

42,

599,

403

87,5

232,

686,

926

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of t

hese

fina

ncia

l sta

tem

ents

.

126


Attr

ibut

able

to s

hare

hold

ers

of th

e C

ompa

ny

Shar

eca

pita

l

Res

erve

fo

r ow

n sh

ares

Cap

ital

rese

rves

Fore

ign

curr

ency

tr

ansl

atio

n re

serv

e

Shar

e-ba

sed

com

pens

atio

n re

serv

eH

edgi

ng

rese

rve

Fair

valu

e re

serv

eR

even

ue

rese

rve

Tota

l

Non

-co

ntro

lling

in

tere

sts

Tota

leq

uity

Gro

up$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

At 1

Jan

uary

200

944

3,34

7(5

5,85

5)14

,084

(3,1

43)

12,0

49(7

4,55

8)26

,064

955,

997

1,31

7,98

541

,974

1,35

9,95

9

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

rPr

ofit f

or th

e ye

ar–

–

–

–

– –

–

700,

118

700,

118

56,6

4775

6,76

5

Oth

er c

ompr

ehen

sive

inco

me

Fore

ign

curr

ency

tran

slat

ion

diffe

renc

es–

–

–

(26,

963)

– –

–

–

(26,

963)

(3,1

98)

(30,

161)

Effe

ctiv

e po

rtio

n of

cha

nges

in

fair

valu

e of

cas

h flo

w

hedg

es, n

et o

f tax

–

–

– –

–

51,9

61–

–

51,9

6163

252

,593

Net

cha

nge

in fa

ir va

lue

of c

ash

flow

hed

ges

trans

ferr

ed to

in

com

e st

atem

ent,

net o

f ta

x

–

–

– –

–

8,58

1–

–

8,58

1–

8,

581

Net

cha

nge

in fa

ir va

lue

of

avai

labl

e-fo

r-sal

e fin

anci

al

asse

ts, n

et o

f tax

–

–

– –

–

–

22,1

25–

22

,125

–

22,1

25

Net

cha

nge

in fa

ir va

lue

of

avai

labl

e-fo

r-sal

e fin

anci

al

asse

ts tr

ansf

erre

d to

inco

me

stat

emen

t on

impa

irmen

t, ne

t of

tax

–

–

– –

–

–

11,7

64–

11

,764

–

11,7

64

Tran

sfer

from

reve

nue

rese

rve

to c

apita

l res

erve

s–

–

11

,241

–

– –

–

(11,

241)

–

–

–

Tota

l oth

er c

ompr

ehen

sive

in

com

e–

–

11

,241

(2

6,96

3)–

60,5

4233

,889

(11,

241)

67,4

68(2

,566

)64

,902

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r–

–

11

,241

(2

6,96

3)–

60,5

4233

,889

688,

877

767,

586

54,0

8182

1,66

7

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of t

hese

fina

ncia

l sta

tem

ents

.


127


Attr

ibut

able

to s

hare

hold

ers

of th

e C

ompa

ny

Shar

eca

pita

l

Res

erve

fo

r ow

n sh

ares

Cap

ital

rese

rves

Fore

ign

curr

ency

tr

ansl

atio

n re

serv

e

Shar

e-ba

sed

com

pens

atio

n re

serv

eH

edgi

ng

rese

rve

Fair

valu

e re

serv

eR

even

ue

rese

rve

Tota

l

Non

-co

ntro

lling

in

tere

sts

Tota

leq

uity

Gro

up$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

Tran

sact

ions

with

ow

ners

, re

cord

ed d

irect

ly in

equ

ityC

ontr

ibut

ions

by

and

dist

ribut

ions

to o

wne

rsIs

sue

of tr

easu

ry s

hare

s–

30

,406

–

–

(20,

318)

–

–

–

10,0

88–

10

,088

Div

iden

ds p

aid

to

- C

ompa

ny’s

sha

reho

lder

s (N

ote

34)

–

–

–

–

–

–

–

(226

,666

)(2

26,6

66)

–(2

26,6

66)

- no

n-co

ntro

lling

inte

rest

s–

–

–

–

–

–

–

–

–

(5

,991

)(5

,991

)

Shar

e-ba

sed

paym

ent

trans

actio

ns

–

–

–

–

15,4

45–

–

–

15

,445

–

15

,445

Rea

lisat

ion

of re

serv

e up

on

liqui

datio

n of

a s

ubsi

diar

y–

–

–

(3

68)

–

–

–

–

(368

) –

(3

68)

Tota

l con

tribu

tions

by

and

dist

ribut

ions

to o

wne

rs–

30

,406

–

(368

)(4

,873

)–

–

(2

26,6

66)

(201

,501

)(5

,991

)(2

07,4

92)

Cha

nges

in o

wne

rshi

p in

tere

sts

in s

ubsi

diar

ies

that

do

not r

esul

t in

a lo

ss

of c

ontr

olA

cqui

sitio

n of

non

-con

trolli

ng

inte

rest

–

–

–

–

–

–

–

–

–

(13,

726)

(13,

726)

Tota

l cha

nges

in o

wne

rshi

p in

tere

sts

in s

ubsi

diar

ies

–

–

–

–

–

–

–

–

–

(13,

726)

(13,

726)

Tota

l tra

nsac

tions

with

ow

ners

–

30,4

06–

(3

68)

(4,8

73)

–

–

(226

,666

)(2

01,5

01)

(19,

717)

(221

,218

)

At 3

1 D

ecem

ber 2

009

443,

347

(25,

449)

25,3

25(3

0,47

4)7,

176

(14,

016)

59,9

531,

418,

208

1,88

4,07

076

,338

1,96

0,40

8

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of t

hese

fina

ncia

l sta

tem

ents

.

128

Statement of Changes in EquityYear ended 31 December 2010

Attr

ibut

able

to s

hare

hold

ers

of th

e C

ompa

ny

Shar

eca

pita

lR

eser

ve fo

r ow

n sh

ares

Cap

ital

rese

rve

Shar

e-ba

sed

com

pens

atio

n re

serv

eFa

ir va

lue

rese

rve

Rev

enue

re

serv

eTo

tal

Com

pany

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0

At 1

Jan

uary

201

044

3,34

7(2

5,44

9)96

08,

009

56,5

3251

0,63

899

4,03

7

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r

Profi

t for

the

year

–

–

–

–

–

254,

806

254,

806

Oth

er c

ompr

ehen

sive

inco

me

Net

cha

nge

in fa

ir va

lue

of a

vaila

ble-

for-s

ale

finan

cial

ass

ets,

net

of t

ax–

–

–

–

70

,868

–

70

,868

Tota

l oth

er c

ompr

ehen

sive

inco

me

–

–

–

–

70,8

68–

70

,868

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r–

–

–

–

70

,868

254,

806

325,

674

Tran

sact

ions

with

ow

ners

, rec

orde

d di

rect

ly in

equ

ityC

ontr

ibut

ions

by

and

dist

ribut

ions

to

owne

rsIs

sue

of n

ew s

hare

s13

,214

–

–

(592

)–

–

12

,622

Issu

e of

trea

sury

sha

res

–

25,4

49–

(2

1,46

9)–

–

3,

980

Div

iden

ds p

aid

to C

ompa

ny’s

sha

reho

lder

s (N

ote

34)

–

–

–

–

–

(311

,271

)(3

11,2

71)

Shar

e-ba

sed

paym

ent:

- ch

arge

d to

inco

me

stat

emen

t–

–

–

3,

056

–

–

3,05

6

- is

sued

to e

mpl

oyee

s of

sub

sidi

arie

s–

–

–

11

,544

–

–

11,5

44

Tota

l con

tribu

tions

by

the

dist

ribut

ors

and

trans

actio

ns w

ith o

wne

rs13

,214

25

,449

–

(7,4

61)

–

(311

,271

)(2

80,0

69)

At 3

1 D

ecem

ber 2

010

456,

561

–

960

548

127,

400

454,

173

1,03

9,64

2

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of t

hese

fina

ncia

l sta

tem

ents

.


129

Statement of Changes in EquityYear ended 31 December 2010

Attr

ibut

able

to s

hare

hold

ers

of th

e C

ompa

ny

Shar

eca

pita

lR

eser

ve fo

r ow

n sh

ares

Cap

ital

rese

rve

Shar

e-ba

sed

com

pens

atio

n re

serv

eFa

ir va

lue

rese

rve

Rev

enue

re

serv

eTo

tal

Com

pany

$’00

0$’

000

$’00

0$’

000

$’00

0$’

000

$’00

0

At 1

Jan

uary

200

944

3,34

7(5

5,85

5)96

012

,378

42,8

9348

2,07

892

5,80

1

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r

Profi

t for

the

year

–

–

–

–

–

255,

226

255,

226

Oth

er c

ompr

ehen

sive

inco

me

Net

cha

nge

in fa

ir va

lue

of a

vaila

ble-

for-s

ale

finan

cial

ass

ets,

net

of t

ax–

–

–

–

13

,639

–

13,6

39

Tota

l oth

er c

ompr

ehen

sive

inco

me

–

–

–

–

13,6

39–

13

,639

Tota

l com

preh

ensi

ve in

com

e fo

r the

yea

r–

–

–

–

13

,639

255,

226

268,

865

Tran

sact

ions

with

ow

ners

, rec

orde

d di

rect

ly in

equ

ityC

ontr

ibut

ions

by

and

dist

ribut

ions

to

owne

rsIs

sue

of tr

easu

ry s

hare

s–

30

,406

–

(20,

371)

–

–

10,0

35

Div

iden

ds p

aid

to C

ompa

ny’s

sha

reho

lder

s (N

ote

34)

–

–

–

–

–

(226

,666

)(2

26,6

66)

Shar

e-ba

sed

paym

ent:

- ch

arge

d to

inco

me

stat

emen

t–

–

–

3,

253

–

–

3,25

3

- is

sued

to e

mpl

oyee

s of

sub

sidi

arie

s–

–

–

12

,749

–

–

12,7

49

Tota

l con

tribu

tions

by

the

dist

ribut

ors

and

trans

actio

ns w

ith o

wne

rs–

30

,406

–

(4,3

69)

–

(226

,666

)(2

00,6

29)

At 3

1 D

ecem

ber 2

009

443,

347

(25,

449)

960

8,00

956

,532

510,

638

994,

037

The

acco

mpa

nyin

g no

tes

form

an

inte

gral

par

t of t

hese

fina

ncia

l sta

tem

ents

.

130

2010 2009$’000 $’000

Cash Flows from Operating Activities

Operating profit 942,564 862,354

Adjustments for:

Gain on disposal of property, plant and equipment, net (1,923) (150)

Share-based payment expenses 22,993 17,858

Amortisation – 55

Fair value adjustment of hedging instruments (6,613) (3,160)

Depreciation of property, plant and equipment 83,197 75,193

Impairment loss on property, plant and equipment 3,950 6,145

Property, plant and equipment written off 332 2,459

Negative goodwill – (298)

Operating income before reinvestment in working capital 1,044,500 960,456

Inventories and work-in-progress 451,424 (688,670)

Trade and other receivables 76,900 265,074

Trade and other payables (152,409) (81,392)

Cash generated from operations 1,420,415 455,468

Investment and interest income received 32,070 36,986

Income taxes paid (144,717) (57,869)

Interest paid (2,870) (7,046)

Net cash inflow from operating activities 1,304,898 427,539

Net receipt from bank relating to foreign exchange transactions 52,640 –

1,357,538 427,539

Cash Flows from Investing Activities

Investment in joint venture (1,166) –

Purchase of property, plant and equipment (73,150) (66,994)

Purchase of other investment (1,994) (32)

Dividend from associate 48 12,842

Acquisition of non-controlling interest – (13,428)

Cash paid to non-controlling interest upon liquidation of a subsidiary (542) –

Proceeds from sale of property, plant and equipment 4,492 7,052

Net cash outflow from investing activities (72,312) (60,560)

Consolidated Cash Flow StatementYear ended 31 December 2010



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Consolidated Cash Flow StatementYear ended 31 December 2010

Note 2010 2009$’000 $’000

Cash Flows from Financing Activities

Dividends paid to shareholders of the Company (311,271) (226,666)

Dividends paid to non-controlling interests of subsidiaries (16,496) (5,991)

Proceeds from share options exercised 16,391 10,035

Payments on finance leases – (3,758)

Repayment of borrowings (14,224) (647,873)

Proceeds from borrowings 2,224 445,580

Net cash outflow from financing activities (323,376) (428,673)

Net increase/(decrease) in cash and cash equivalents 961,850 (61,694)

Cash and cash equivalents at beginning of year 1,978,548 2,054,032

Effect of exchange rate changes on balances held in foreign currency (25,301) (13,790)

Cash and cash equivalents at end of year 15 2,915,097 1,978,548


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These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 25 February 2011.

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 2010 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 preparationThe 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 2010, the Group adopted the new or amended FRS that are mandatory for application from that date. Changes to the Group’s accounting policies have been made as required, in accordance with the transitional provisions in the respective FRS.

The adoption of these new or amended FRS did not result in substantial changes to the Group’s and Company’s accounting policies and had no material effect on the amounts reported for the current or prior financial years except as disclosed below. The accounting policies used by the Group have been applied consistently to all periods presented in these financial statements.

(i) FRS 103 (revised 2009) Business Combinations

The Group applies FRS 103 (revised 2009) Business Combinations, which became effective for annual periods beginning on or after 1 July 2009. The revised accounting policy on business combinations is set out in Note 3.1.

As the changes have been implemented prospectively, no adjustments were necessary to any of the amounts previously recognised in the financial statements.

Notes to the Financial StatementsYear ended 31 December 2010


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(ii) FRS 27 (revised 2009) Consolidated and Separate Financial Statements

The Group applies FRS 27 (revised 2009) Consolidated and Separate Financial Statements, which became effective for annual periods beginning on or after 1 July 2009. The revisions to FRS 27 principally changed the accounting for acquisitions of non-controlling interests. The revised accounting policies on changes in ownership interest that results in a loss of control and the accounting policy on changes in ownership interests that do not result in loss of control are set out in Note 3.1.

As the changes have been implemented prospectively, no adjustments were necessary to any of the amounts previously recognised in the financial statements and this has no impact to earnings per share.

3 Significant accounting policies

3.1 Basis of Consolidation

Business combinations

Acquisitions on or after 1 January 2010

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in the income statement.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in the income statement.

Acquisitions prior to 1 January 2010

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.

Acquisition of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based on a proportionate amount of the fair value of net assets of the subsidiary. Prior to 1 January 2010, goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction.


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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 financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Non-controlling interest are that part of the net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and balance sheet. Total comprehensive income or losses is attributed to the non-controlling interests based on their respective interests in a subsidiary even if this results in the non-controlling interests having a deficit balance.

Loss of control

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in the income statement. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

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. Significant influence is presumed to exist when the Group holds between 20% and 50% of the voting power of 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.

Joint ventures

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



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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 from unaudited management financial statements made up mainly to the end of the accounting year to 31 December.

Associates and joint ventures in the Company’s financial statements

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

Transactions eliminated on consolidation

All 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.

Accounting policies of subsidiaries, associates and joint ventures

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

Functional and presentation currency

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).

Foreign currency transactions and balances

Transactions in foreign currencies are translated into the functional currency at foreign exchange rates ruling at the dates of the transactions. At each reporting 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.


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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.

Foreign operations

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.

• 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.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to the income statement as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to the income statement.

3.3 Property, plant and equipment

Owned assets

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 productions 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.

Revaluation surplus

Any increase in revaluation is credited to the revaluation reserve unless it offsets a previous decrease in values 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.



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Subsequent expenditure

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.

Provision for restoration costs

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:

Leasehold land 45 years or lease period of 3 to 30 yearsBuildings 45 years or lease period of 3 to 30 yearsQuays and dry docks 60 years or lease period of 6 to 22 yearsPlant, 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 freehold land or 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.

Investment properties

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


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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 lease period of 15 to 16 years. 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 fair value of the consideration transferred; plus• the recognised amount of any non-controlling interests in the acquiree; plus if the business combination is achieved

in stages, the fair value of the existing equity interest in the acquire; less• the net amount recognised (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in the income statement.

Goodwill is stated at cost less accumulated impairment losses. Goodwill on acquisition of associates and joint ventures is included in investments in associates and joint ventures, respectively.

Acquisition of non-controlling interest

Goodwill arising from the acquisition of non-controlling 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 Note 3.11.

Negative goodwill

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.



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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 financial assets are acquired. Management determines the classification of its financial assets 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.

Financial assets at fair value through profit or loss

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.

Loans and receivables

Loans and receivables 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 plus any directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method, less impairment losses. Receivables with a short duration are not discounted.

Available-for-sale financial assets

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.


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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, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults 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 to determine whether there is 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; attributable transaction costs are recognised in the income statement as incurred. 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:



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Fair value hedges

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.

Cash flow hedges

Where a derivative financial instrument is designated as a hedge of the variability in cash flows attributable to a particular risk associated with 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.


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3.9 Government grants

Government grants

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.

Jobs Credit Scheme

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 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.

Calculation of recoverable amount

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 CGU exceeds its recoverable amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of CGUs 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.



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Reversals of impairment

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.

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

Defined contribution plans

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-term employee benefits

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.

Staff retirement benefits

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.


144

Equity and equity-related compensation benefits

Share Option Plan

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.



145

Cash-related compensation benefits


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

When entities within the Group are lessors of a finance lease

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.

When entities within the Group are lessees of a finance lease

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.

When entities within the Group are lessees of an operating lease

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.


146

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.

Income on goods sold and services rendered

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.

Rental income

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.

Dividend and interest income

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

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

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.



147

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 contractsFinancial 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.


148

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149


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150


Docks, launches, cranes and marine

vessels

Plant,machineryand tools Others Total

Company $’000 $’000 $’000 $’000Cost or valuation

Balance 1 January 2009

At cost 138,709 7,609 3,325 149,643

At valuation 25,152 – – 25,152

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

Additions – – 482 482

Balance at 31 December 2009 163,861 7,609 3,807 175,277

Balance at 1 January 2010

At cost 138,709 7,609 3,807 150,125

At valuation 25,152 – – 25,152

163,861 7,609 3,807 175,277

Additions 25,000 – 83 25,083

Disposals – – (59) (59)


Balance at 31 December 2010

At cost 163,709 7,609 3,831 175,149

At valuation 25,152 – – 25,152

188,861 7,609 3,831 200,301

Accumulated depreciation

Balance at 1 January 2009 54,951 6,511 1,801 63,263

Depreciation for the year 3,740 86 604 4,430


Depreciation for the year 11,068 75 632 11,775

Disposals – – (59) (59)


Carrying amounts

At 1 January 2009 108,910 1,098 1,524 111,532

At 31 December 2009 105,170 1,012 1,402 107,584

At 31 December 2010 119,102 937 853 120,892


151


(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 Company2010 2009$’000 $’000

Docks 3,782 5,078

The re-valued net book value of the docks is $6,390,000 (2009: $8,581,000).

(b) Others comprise motor vehicles, furniture and office equipment, utilities and fittings and computer equipment.

5 Investment propertiesCompany

2010 2009$’000 $’000

Cost

Balance at 1 January 95,862 95,862

Write-offs (501) –

Balance at 31 December 95,361 95,862

Accumulated depreciationBalance at 1 January 44,502 41,825

Depreciation for the year 6,616 2,677

Write-offs (373) –


Carrying amounts 44,616 51,360

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:

Company2010 2009$’000 $’000

Rental income (33,458) (18,365)

Operating expenses arising from rental of investment properties 31,800 17,444

152


6 Investments in subsidiaries

Company2010 2009$’000 $’000

Unquoted shares, at cost 497,867 644,327

Allowance for impairment loss (15,251) (15,251)

482,616 629,076

Details of the Company’s subsidiaries are set out in Note 43.

7 Investments in associates and joint venturesGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

AssociatesUnquoted shares, at cost 111,688 111,688 107,369 107,369

Share of net post-acquisition reserves 163,087 128,433 – –

274,775 240,121 107,369 107,369

Joint venturesUnquoted shares, at cost 2,056 890 – –

Share of net post-acquisition reserves 30,125 26,763 – –

32,181 27,653 – –

306,956 267,774 107,369 107,369

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:

Group2010 2009$’000 $’000

Combined results of associates:

Turnover 3,744,525 2,675,974

Profit before income tax 180,214 135,841

Income tax expense (33,001) (34,111)

Profit for the year 147,213 101,730

Combined assets and liabilities of associates

Non-current assets 2,213,607 2,179,431

Current assets 3,327,327 3,434,499

Current liabilities (3,632,989) (3,355,332)

Non-current liabilities (545,423) (1,092,311)

Net assets 1,362,522 1,166,287


153


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:

Group2010 2009$’000 $’000

The Group’s share of combined results of joint ventures:Turnover 14,464 16,326

Profit before income tax 3,989 7,850

Income tax expense (627) (632)

Profit for the year 3,362 7,218

The Group’s share of combined assets and liabilities of joint ventures:

Non-current assets 92,540 58,468

Current assets 9,263 11,234

Current liabilities (17,005) (4,422)

Non-current liabilities (52,617) (37,627)

Net assets 32,181 27,653

8 Other long term investments Group Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Available-for-sale financial assetsQuoted equity securities, at fair value 285,089 163,997 193,884 111,704

Unquoted non-equity securities, at fair value 347 343 347 343

Unquoted equity securities, at cost 1,408 1,408 1,330 1,330

Financial assets at fair value through profit or loss

Quoted equity securities, at fair value 12 35 – –

286,856 165,783 195,561 113,377

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.

154


9 Trade receivables Group Company

Note 2010 2009 2010 2009$’000 $’000 $’000 $’000

Current assetsTrade receivables (a) 155,411 231,900 17,903 30,404

Allowance for doubtful receivables (b) (2,014) (3,019) – –

153,397 228,881 17,903 30,404

Non-current assetsExternal parties 13 196 – –

External lease receivables (c) 10,832 14,505 10,832 14,505

10,845 14,701 10,832 14,505

Loans and receivables 164,242 243,582 28,735 44,909

(a) Current assetsGroup Company

Note 2010 2009 2010 2009$’000 $’000 $’000 $’000

Related companies 75 5,798 – 5,583

Subsidiaries – – 14,220 21,301

Associates and joint ventures 5,398 213 10 –

External parties 146,265 222,369 – –

External lease receivables (c) 3,673 3,520 3,673 3,520

155,411 231,900 17,903 30,404

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 receivablesGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Balance at 1 January 3,019 7,789 – 651

Currency translation difference (4) (4) – –

Allowance made 351 1,857 – –

Allowance written back (1,069) (627) – –

Allowance utilised (283) (5,996) – (651)

Balance at 31 December 2,014 3,019 – –


155


(c) Additional information on finance lease receivables

Group and CompanyMinimum lease

paymentEstimated

residual value

Total gross investment in

lease

Unearned interest income

Present value of minimum

lease payment$’000 $’000 $’000 $’000 $’000

2010Receivable within 1 year 4,218 – 4,218 (545) 3,673

Receivable after 1 year but within 5 years

8,439 3,000 11,439 (607) 10,832

12,657 3,000 15,657 (1,152) 14,505

2009Receivable within 1 year 4,218 – 4,218 (698) 3,520

Receivable 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

Under the terms of the lease agreements, no contingent rents were recognised. Interest rate is 4.25% (2009: 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 and the Company’s maximum exposure to credit risk for loans and receivables at the balance sheet date is as follows:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

By business activityShip and rig repair, building and conversion 230,608 292,643 94,901 119,753

Ship chartering 14,744 15,175 – –

Others 3,348 14,630 – –


Loans and receivables comprise the following: Group Company

Note 2010 2009 2010 2009$’000 $’000 $’000 $’000

Current assetsTrade receivables 153,397 228,881 17,903 30,404

Other receivables and deposits 10 29,933 42,133 6,593 9,142

183,330 271,014 24,496 39,546

Non-current assetsTrade receivables 10,845 14,701 10,832 14,505

Other receivables 10 54,525 36,733 59,573 65,702

65,370 51,434 70,405 80,207

248,700 322,448 94,901 119,753

156


The age analysis of trade and other receivables past due for the Group is as follows:

Gross Impairment Gross Impairment2010 2010 2009 2009$’000 $’000 $’000 $’000

GroupPast due 0 to 3 months 48,537 – 75,769 2

Past due 3 to 6 months 8,310 103 4,035 549

Past due 6 to 12 months 4,517 230 3,850 376

More than 1 year 7,106 1,681 3,923 2,084

68,470 2,014 87,577 3,011

There is no trade and other receivables that is past due for the Company.

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 $’000

Current assetsDeposits and recoverables (a) 28,882 38,146 1,310 896

Non-trade receivables (b) 364 2,902 5,283 8,246

Staff loans (c) 687 1,085 – –


Prepayments 10,171 13,175 1,788 –

40,104 55,308 8,381 9,142

Non-current assetsOther long term receivables (d) 54,525 36,733 59,573 65,702

94,629 92,041 67,954 74,844


157


(a) Deposits and recoverablesGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

GST refundable 21,355 28,540 129 –

Interest receivable 310 212 – –

Recoverables 4,311 4,535 1,059 814

Tax recoverable – 1,705 – –

Withholding tax recoverable 739 750 – –

Sundry deposits 2,167 2,404 122 82

28,882 38,146 1,310 896

Recoverables are stated after deducting allowance for doubtful debts amounting to nil (2009: $97,000).

Withholding tax recoverable arose from the acquisition of subsidiaries in prior years and is guaranteed by the vendor.

(b) Non-trade receivablesGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Non interest-bearingAssociates and joint ventures 364 2,886 – –

Related company – 16 – –

Subsidiaries – – 4,165 7,234

Interest-bearing

Loans to subsidiaries – – 1,118 1,012

364 2,902 5,283 8,246

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.

Loans to subsidiaries are unsecured, bear interest at fixed rate of 2.27% (2009: 2.27% to 3.1%) per annum and are to be settled in cash.

(c) Staff loans

Staff loans bear interest at 3.0% (2009: 3.0%) per annum.

158


(d) Other long term receivablesGroup Company

Note 2010 2009 2010 2009$’000 $’000 $’000 $’000

Non interest-bearingLoans to subsidiaries – – 58,748 63,743Loans and advances to joint ventures 15,228 15,175 – –

Interest-bearingLoans to subsidiary – – 825 1,959Loan to joint venture 39,172 21,359 – – Staff loans (c) 125 199 – –


Interest-bearing loans to subsidiary are unsecured, and to be settled in cash.

Loan to a joint venture of $39,172,000 (2009: $21,359,000) bears weighted-average interest rate of 0.56% (2009: 1.01%) per annum. The settlement of all loans and advances to joint ventures and non interest-bearing loans to subsidiaries 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.

11 Intangible assetsGroup Company

Note 2010 2009 2010 2009$’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 consolidationGroup

2010 2009$’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:Group

2010 2009$’000 $’000

Ship and rig repair, building and conversion 4,917 4,917

Others 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 (2009: $653,000) for the Group and $468,000 (2009: $468,000) for the Company.


159


12

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160


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 2010 2009 2010 2009

$’000 $’000 $’000 $’000

Deferred tax assets (47) (47) – –

Deferred tax liabilities 103,909 66,748 43,842 34,873

103,862 66,701 43,842 34,873

Deferred tax assets not recognised in respect of the following items:Group

2010 2009$’000 $’000

Unutilised tax losses and capital and investment allowances unlikely to be utilised

(1,423) (2,064)

Others (3,163) (3,214)

(4,586) (5,278)

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 liabilities2010 2009

Group Notional amount

Assets/(Liabilities)

Notional amount

Assets/(Liabilities)

$’000 $’000 $’000 $’000

Forward foreign currency contracts:Bought contracts 1,768,566 72,519 1,671,896 (28,800)

Interest rate swap 8,000 (101) 20,000 (527)

Balance at 31 December 1,776,566 72,418 1,691,896 (29,327)

Comprises:

Current derivative financial assets 1,020,624 40,805 98,206 2,604

Non-current derivative financial assets 747,942 31,714 5,405 181

Current derivative financial liabilities 8,000 (101) 916,822 (21,200)Non-current derivative financial liabilities – – 671,463 (10,912)

1,776,566 72,418 1,691,896 (29,327)

As at 31 December 2010, the settlement dates on open derivative contracts ranged between 1 to 27 months (2009: 1 to 31 months). The fixed interest rate on the interest rate swap is 3.93% (2009: 3.93%) per annum and is used to hedge the interest rate risk arising from the term loan as disclosed in Note 19 (a).


161


Details of the forward foreign currency contracts and foreign exchange swap contracts are as follows:

Group2010 2009$’000 $’000

Contracts to deliver USD and receive SGD 1,766,081 1,624,126

Contracts to deliver USD and receive EUR – 5,011

Contracts to deliver EUR and receive SGD 2,485 42,759

1,768,566 1,671,896

14 Inventories and work-in-progressGroup

Note 2010 2009$’000 $’000

Materials (a) 19,203 25,330

Finished goods (a) 1,978 2,498

Work-in-progress (b) 729,568 1,224,672

750,749 1,252,500

(a) Materials and finished goods are stated after deducting allowance for inventories obsolescence of:Group

2010 2009$’000 $’000

Allowance for inventories obsolescence:Balance at 1 January 4,137 4,132

Charge for the year 329 189

Write-back for the year (1,250) (184)


Materials 2,908 3,823

Finished goods 308 314

3,216 4,137

(b) Work-in-progressGroup

2010 2009$’000 $’000

Costs and attributable profits less allowance for foreseeable losses 4,293,600 6,341,128

Progress billings (4,209,736) (5,812,487)

83,864 528,641

Comprising:

Work-in-progress 729,568 1,224,672

Progress billings in excess of work-in-progress (645,704) (696,031)

83,864 528,641

162


15 Bank balances, fixed deposits and cash

Bank balances, fixed deposits and cash comprise:Group Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Fixed deposits 2,452,496 1,638,158 155,337 –

Bank balances and cash 462,601 340,390 13,674 15,846Cash and cash equivalents in the cash

flow statement2,915,097 1,978,548 169,011 15,846

Fixed deposits of the Group placed with financial institutions have maturity periods ranging from 3 days to 185 days (2009: 4 days to 97 days) from the financial year-end and interest rates ranging from 0.01% to 1.6% (2009: 0.03% to 1.3%) per annum, which are also the effective interest rates.

16 Trade payablesGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Associates and joint ventures 3,834 2,103 – –

Immediate holding company 268 250 268 250

Related companies 133 114 – 17

External parties 1,449,580 1,563,083 42,755 32,850

1,453,815 1,565,550 43,023 33,117

All the amounts due to associates, joint ventures, immediate holding company and related companies are interest-free, unsecured, repayable on demand and to be settled in cash.

17 Other payables Group Company

Note 2010 2009 2010 2009$’000 $’000 $’000 $’000

Current payablesDeposits received 2,104 1,992 26 26

GST payables 455 3,704 – 233

Non-trade payables (a) 5,467 20,986 60,455 45,302

Interest payable 403 – – –

8,429 26,682 60,481 45,561

Non-current payables

Non-trade payables 8,804 – – –

Non-trade payables to a subsidiary (b) – – – 32,987

8,804 – – 32,987

17,233 26,682 60,481 78,548


163


Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

(a) Non-trade payablesSubsidiaries – – 60,372 45,219

Related company 63 11,789 – –

External parties 5,404 9,197 83 83

5,467 20,986 60,455 45,302

The non-trade payables to subsidiaries and a related company are unsecured, interest-free, repayable on demand and to be settled in cash.

(b) Non-trade payables to a subsidiary

The non-trade payables to a 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 Note Group

2010 2009$’000 $’000

Provision for retirement gratuities (a) 479 480

Provision for warranty (b) 54,904 60,121

55,383 60,601

(a) Provision for retirement gratuities

Balance at 1 January 480 470

Charge to income statement 90 62

Utilised during the year (481) (448)

Reclassification 20 390 396

Balance at 31 December 479 480

(b) Provision for warranty


Currency translation differences (1,050) (239)

(Write-back)/charge to income statement (4,167) 22,642


164


19 Interest-bearing borrowingsGroup

Note 2010 2009$’000 $’000

Current liabilitiesTerm loan (a) 8,000 12,000

8,000 12,000

Non-current liabilitiesTerm loan (a) – 8,000

– 8,000

Total interest-bearing borrowings 8,000 20,000

(a) 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% (2009: 3.93%) per annum. The term loan is secured by a corporate guarantee from a subsidiary.

(b) 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. In 2010, 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 Notes are redeemable at par.

There were no outstanding medium term notes as at 31 December 2010.

20 Other provisionsGroup Company

Note 2010 2009 2010 2009$’000 $’000 $’000 $’000

Provision for retirement gratuities (a) 1,110 1,500 – –

Provision for restoration of property, plant and equipment

(b) 29,648 4,698 27,895 2,895

30,758 6,198 27,895 2,895


165


(a) Provision for retirement gratuitiesNote Group

2010 2009$’000 $’000


Reclassification 18 (390) (396)


(b) Provision for restoration of property, plant and equipmentGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Balance at 1 January 4,698 4,727 2,895 2,895

Currency translation differences (50) (29) – –

Provision made 25,000 – 25,000 –

Balance at 31 December 29,648 4,698 27,895 2,895

21 Share capital Group and Company

No. of ordinary shares2010 2009

Issued and fully paid, with no par value:Balance at 1 January 2,071,371,470 2,071,371,470

Exercise of share options 6,531,509 –

Balance at 31 December 2,077,902,979 2,071,371,470

The Company reissued 7,082,545 (2009: 8,461,822) treasury shares during the year pursuant to its share based incentive plans (Note 35). As at 31 December 2010, the Company did not hold any treasury shares (2009: 7,082,545).

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.

166


22 Reserves

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

DistributableReserve for own shares (1) – (25,449) – (25,449)

Revenue reserve 1,966,954 1,418,208 454,173 510,638

Non-distributableForeign currency translation reserve (2) (65,147) (30,474) – –

Share-based compensation reserve (3) (1,047) 7,176 548 8,009

Fair value reserve (4) 161,052 59,953 127,400 56,532

Hedging reserve(5) 55,456 (14,016) – –

Other capital reserves (6) 25,574 25,325 960 960

2,142,842 1,440,723 583,081 550,690

(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 increase 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) Included in other capital reserves are asset revaluation reserve of $960,000 (2009: $960,000) for both the Group and Company and transfers from revenue reserve in accordance with the regulations of the foreign jurisdiction in which some of the Group’s subsidiaries and associates operate.


167

23 Other comprehensive income

Tax effects relating to each component of other comprehensive income are set out below:

2010 2009Before

taxTax

expense Net of taxBefore

taxTax

expense Net of tax$’000 $’000 $’000 $’000 $’000 $’000

GroupTranslation differences (39,254) – (39,254) (30,161) – (30,161)

Fair value changes of available-for-sale financial assets

119,091 (17,992) 101,099 27,374 (5,249) 22,125

Fair value changes of available-for-sale financial assets transferred to the income statement on impairment

– – – 11,764 – 11,764

Fair value changes of cash flow hedges

83,065 (14,226) 68,839 64,334 (11,741) 52,593

Fair value changes of cash flow hedges transferred to the income statement

– – – 10,465 (1,884) 8,581

Other comprehensive income 162,902 (32,218) 130,684 83,776 (18,874) 64,902

CompanyFair value changes of available-for-

sale financial assets 82,173 (11,305) 70,868 16,029 (2,390) 13,639

Other comprehensive income 82,173 (11,305) 70,868 16,029 (2,390) 13,639

24 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.

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Services rendered to external parties: Ship and rig repair, building and conversion 4,537,483 5,705,156 – –

Others 3,131 1,774 – –

Services rendered to subsidiaries:

Rental income – – 33,458 18,365

Management fee – – 30,868 33,698

Sale of goods to external parties 14,249 17,812 – –

4,554,863 5,724,742 64,326 52,063


168

25 Operating profit/(loss)

Operating profit/(loss) is stated after charging/(crediting):

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Professional fees paid to a firm in which a director is a member

130 165 119 125

Fees paid/payable to auditors of the Company:

Audit fees 466 459 68 65

Non-audit fees 35 26 – 5

Foreign currency exchange loss 43,577 3,458 198 21

Gain on disposal of property, plant and equipment, net

(1,923) (150) – –

Impairment loss on property, plant and equipment

3,950 6,145 – –

Property, plant and equipment written off 332 2,459 – –

Investment properties written off – – 128 –

Negative goodwill – (298) – –

Fair value adjustment on hedging instruments (6,613) (3,160) – –

Operating lease expenses 18,173 14,539 9,857 7,923

Staff costs 481,267 482,128 28,657 32,037

Staff costs, which include Directors’ remuneration for the year, are as follows:

Salaries and bonus 408,442 418,197 23,826 27,238

Government grants - Jobs Credit Scheme (2,327) (11,875) (24) (117)

Defined contribution plan 21,176 20,164 173 172

Share-based compensation 22,993 17,858 3,110 3,266

Directors’ fee:

Directors of the Company 1,460 1,423 1,171 1,157

Other employee benefits 29,523 36,361 401 321

481,267 482,128 28,657 32,037



169

26 Finance incomeGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Net dividend from:

Unquoted subsidiaries – – 248,868 235,000

Unquoted associates – – 48 12,077

Quoted equity shares 3,384 7,801 2,142 4,902

3,384 7,801 251,058 251,979

Interest income from:

Subsidiary – – 51 3,535

Trade receivables 18,705 22,666 702 845

Fixed deposits and bank balances 9,913 6,051 41 47

Related companies 6 88 – –

Joint venture 171 – – –

Others – 1 – 1

28,795 28,806 794 4,428

32,179 36,607 251,852 256,407

27 Finance costsGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Finance costs:

Borrowings 571 5,803 – 3,316

Facility fee 4,258 – – –

Commitment fee 2,731 – – –

Interest rate swap - fair value through profit and loss (426) (474) – –

7,134 5,329 – 3,316

28 Foreign exchange transactions

The Company’s subsidiary, Jurong Shipyard Pte Ltd (“JSPL”) has reached an agreement, strictly on a commercial basis with Societe Generale (“SG”) for a full and final amicable settlement of the disputed foreign exchange transactions.

Arising from this settlement, SG had made a payment of US$40 million ($52.64 million) to JSPL on the basis that there is no admission of liability by either party and $52.64 million had been recognised in the consolidated income statement.


170

29 Non-operating income/expensesGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Non-operating income: Surplus on return of capital from a

subsidiary – – 5,040 –

Gain on disposal of subsidiaries – – 225 1,625

Gain on liquidation of subsidiary – 368 – –

– 368 5,265 1,625

Non-operating expenses:

Impairment of other investments – 11,764 – –

30 Share of results of associates and joint venturesGroup

Note 2010 2009$’000 $’000

Share of profit for the year 57,639 25,399

Share of taxation for the year 31 (10,787) (6,103)

46,852 19,296

31 Income tax expense/(credit)Group Company

Note 2010 2009 2010 2009$’000 $’000 $’000 $’000

Current tax expenseCurrent year 171,974 151,088 2,339 1,019

(Over)/underprovided in prior years (4,006) (2,526) (429) 55

167,968 148,562 1,910 1,074

Deferred tax expenseMovement in temporary differences 2,538 (578) (2,335) (722)

Under/(overprovided) in prior years 2,716 (474) (1) 305

Reduction in tax rate – (2,743) – (1,263)

5,254 (3,795) (2,336) (1,680)

Share of income tax of associates and joint ventures 30 10,787 6,103 – –

Total income tax expense/(credit) 184,009 150,870 (426) (606)



171

Reconciliation of effective tax rate Group Company

2010 2009 2010 2009$’000 $’000 $’000 $’000


Total income tax expense/(credit) 184,009 150,870 (426) (606)

Share of results of associates and joint ventures (57,639) (25,399) – –

Profit before share of results of associates and joint ventures and income tax expense 1,020,249 882,236 254,380 254,620

Tax calculated using Singapore tax rate of 17% (2009: 17%) 173,442 149,980 43,245 43,285

Exempt income, capital gains and tax incentives/ concessions (6,101) (6,669) (45,084) (43,784)

Effect of changes in tax rate – (2,743) – (1,263)

Effect of different tax rate in foreign jurisdictions 4,991 1,795 – –

Effect on utilisation of deferred tax assets not previously recognised (1,258) (3,369) – –

Non deductible expenses 8,841 8,402 1,843 796

Foreign exchange transactions* (8,949) – – –

(Over)/under provision in respect of prior years (1,290) (3,000) (430) 360

Deferred tax assets not recognised 570 2,167 – –

Others 2,976 (1,796) – –

Share of taxation of associates and joint ventures 10,787 6,103 – –

184,009 150,870 (426) (606)

As at 31 December 2010, certain subsidiaries have unutilised tax losses and capital and investment allowances of $6,589,000 (2009: $9,118,000) and other temporary differences of $17,775,000 (2009: $17,065,000) 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 Group has brought the amount of $52,640,000 arising from the foreign exchange transactions (Note 28) to tax in the revised tax return for year ended 31 December 2007 (Year of Assessment 2008) and therefore not taxable in the current year (Year of Assessment 2011). The amount is separately disclosed, pending Inland Revenue Authority of Singapore’s confirmation that the net losses arising from the foreign exchange transactions will be allowed. The tax return for the financial year ended 31 December 2007 and 2008 (Year of Assessment 2008 and 2009 respectively) had been prepared on the same basis.


172

32 Non-controlling interests

On 15 May 2010, the Company commenced proceedings in the High Court of Singapore against PPL Holdings Pte Ltd and its wholly owned subsidiary, E-Interface Holdings Limited to seek the transfer the remaining 15 per cent of the shares in PPL Shipyard Pte Ltd (“PPLS”) to the Company. Pending the outcome of the Court’s decision, the Group has continued to consolidate its 85 per cent interest in PPLS and separately accounted for the 15 per cent as a "non-controlling interest".

33 Earnings per share

(a) Basic earnings per share (EPS) is calculated by dividing the profit attributable to shareholders after deducting non-controlling interests of $860,266,000 (2009: $700,118,000) by the weighted average number of ordinary shares in issue during the year of 2,070,638,122 (2009: 2,058,239,106).

(b) Diluted EPS is calculated after adjusting for those shares not yet exercised under the Sembcorp Marine Share Option Plan as follows:

Group2010 2009$’000 $’000

Profit attributable to shareholders of the Company 860,266 700,118

No. of shares No. of shares

Weighted average number of ordinary shares in issue during the year 2,070,638,122 2,058,239,106

Effect of dilutive share options 5,995,000 5,425,000

Weighted average number of ordinary shares outstanding used in the calculation of diluted EPS 2,076,633,122 2,063,664,106

(c) Basic and diluted EPS are as follows:Cents Cents

Basic EPS 41.55 34.02

Diluted EPS 41.43 33.93



173

34 Dividends

The proposed net dividend of $644,150,000 (2009: $206,429,000) represents a final one-tier tax-exempt dividend of 6.00 cents per share (2009: final one-tier tax-exempt dividend of 6.00 cents per share) and a special one-tier tax-exempt dividend of 25.00 cents per share (2009: special one-tier tax-exempt dividend of 4.00 cents per share).

Group and Company2010 2009$’000 $’000

Dividends paid

Interim one-tier tax-exempt dividend of 5.00 cents per share (2009: 5.00 cents per share)

103,795 103,124

2009 final one-tier tax-exempt dividend of 6.00 cents per share (2009: 2008 final one-tier tax-exempt dividend of 6.00 cents per share)

124,486 123,542

2009 special one-tier tax-exempt dividend of 4.00 cents per share 82,990 –

311,271 226,666

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 Share Plans expired and the new Share Plans comprising Performance Share Plan (SCM PSP 2010) and Restricted Share Plan (SCM RSP 2010) were approved and adopted by the shareholders at an Extraordinary General Meeting of the Company held on 20 April 2010. The Share Option Plan was not replaced.

During the year, the Group has charged to the income statement the fair value of the awards at grant date made under the Share Plans:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Share Option Plan 281 1,024 52 185

Performance Share Plan 1,880 2,105 1,062 1,286

Restricted Stock Plan 12,430 12,465 1,942 1,782

Sembcorp Marine Challenge Bonus 8,417 2,413 54 13

23,008 18,007 3,110 3,266


174

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175

(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 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.

From 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 2010 to 2012 will be vested to the senior management participants only if the restricted shares for the performance period 2011 to 2012 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 2010 were as follows:

Performance Shares participants

Conditional performance

shares awarded

during the year


performance shares

awarded


performance shares

released


performance shares lapsed

Additional performance

shares awarded


year


performance shares

outstanding


- Wong Weng Sun 250,000 1,155,000 (600,600) (71,400) 42,000 525,000

- Tan Kwi Kin – 3,100,000 (2,329,900) (604,100) 84,000 250,000

Former alternate director of the Company

– 800,000 (461,000) (339,000) – –

Key management and executives of the Group

385,000 2,682,500 (1,418,200) (178,500) 109,200 1,195,000

At 31 December 2010 635,000 7,737,500 (4,809,700) (1,193,000) 235,200 1,970,000

With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2007 to 2009, a total of 1,215,200 (2009: 411,600) performance shares were released via the issuance of treasury shares.

In 2010, there were additional 235,200 (2009: nil) performance shares awarded for over-achievement of the performance targets.


176

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 2010, was 1,970,000 (2009: 2,315,000). Based on the multiplying factor, the actual release of the awards could range from zero to a maximum of 2,955,000 (2009: 3,472,500) 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 19 April 2010 13 April 2009

Fair value at measurement date $3.62 $2.28

Assumptions under the Monte Carlo model

Share price $4.36 $2.26

Expected volatility:

Sembcorp Marine Ltd 31.8% 50.3%

Morgan Stanley Capital International (“MSCI”) AC Asia Pacific excluding Japan Industrials Index

21.4% 33.9%

Correlation with MSCI 79.5% 76.2%

Risk-free interest rate 0.7% 0.7%

Expected dividend 3.4% 5.3%

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 Earnings Before Interest and Taxes for awards granted in 2010.

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



177

can be sold off, but in the event of a shortfall, they have a two calendar year period to meet the minimum percentage requirement.

There is no performance condition for the conditional award of the restricted shares granted to non-executive directors in 2010. Shares granted will be vested 1 year from the date of grant.

The details of restricted shares of the Company awarded since commencement of the Restricted Stock Plan up to 31 December 2010 were as follows:

Restricted Shares participants

Conditional restricted

shares awarded

during the year


shares awarded

Aggregateconditional restricted

shares lapsed

Additional restricted

shares awarded


year


shares released


shares outstanding


Goh Geok Ling 20,500 111,540 – 11,000 (37,694) 84,846

Richard Hale, OBE 14,700 36,700 – – – 36,700

Wong Weng Sun 100,000 364,384 – 25,000 (134,052) 255,332

Tan Kwi Kin 6,400 401,296 – 50,000 (284,230) 167,066

Tan Pheng Hock 8,300 51,410 – 6,000 (18,740) 38,670

Ajaib Haridass 12,800 88,110 – 9,500 (34,374) 63,236

Tang Kin Fei 11,500 65,070 – 6,000 (22,380) 48,690

Ron Foo Siang Guan 11,500 70,980 – 8,500 (25,488) 53,992

Ngiam Joke Mui 6,400 24,400 – 4,500 (4,500) 24,400

Lim Ah Doo 11,500 20,500 – – – 20,500

Former Directors of the Company

– 126,480 (24,805) 20,000 (109,675) 12,000

Other executives 3,290,600 16,698,278 (1,006,651) 1,534,750 (6,651,506) 10,574,871

At 31 December 2010 3,494,200 18,059,148 (1,031,456) 1,675,250 (7,322,639) 11,380,303

With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2008 to 2009, a total of 1,791,238 restricted shares were released. For awards in relation to the performance period 2007 to 2008, a total of 1,561,953 (2009: 1,956,117) restricted shares were released in 2010. For awards in relation to the performance period 2006 to 2007, a total of 575,764 (2009: 729,439) restricted shares were released in 2010. The restricted shares were either released via the issuance of treasury shares or the issuance of new shares.

In 2010, additional 1,675,250 (2009: 1,182,233) restricted shares were awarded for the over-achievement of the performance targets for the performance period 2008 to 2009 (2009: 2007 to 2008).

The total number of restricted shares outstanding, including awards achieved but not released, as at 31 December 2010, was 11,380,303 (2009: 10,406,962). Of this, the total number of restricted shares in awards granted conditionally and representing 100% of targets to be achieved, but not released was 6,615,930 (2009: 6,709,730). Based on the multiplying factor, the actual release of the awards could range from zero to a maximum of 9,923,895 (2009: 10,064,595) restricted shares.


178


With the Committee’s approval on the achievement factor for the achievement of the performance targets for the performance period 2008 to 2009 (2009: 2007 to 2008), a total of $3,785,714 (2009: $1,678,905), equivalent to 1,030,600 (2009: 1,203,602) notional restricted shares, were paid.

A total of 1,234,400 (2009: 1,130,050) notional restricted shares were awarded on 19 April 2010 (2009: 13 April 2009) 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 2010, was 2,149,950 (2009: 1,928,700). 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 3,224,925 (2009: 2,893,050).

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 19 April 2010 13 April 2009

Fair value at measurement date $2.62 $1.98

Assumptions under the Monte Carlo model

Share price $4.36 $2.26

Expected volatility:

Sembcorp Marine Ltd 31.8% 50.3%

Risk-free interest rate 0.5% - 0.8% 0.4% - 1.0%

Expected dividend 3.4% 5.3%

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 liabilitiesCompany

2010 2009$’000 $’000

Unsecured corporate guarantees granted in respect of:

Performance of subsidiaries 3,382,157 3,513,769



179

37 CommitmentsGroup Company

2010 2009 2010 2009$’000 $’000 $’000 $’000

Commitments not provided for in the financial statements are as follows:

(a) Approved capital commitment:

Approved capital expenditure commitment 511,302 443,781 – – Uncalled capital and commitment

on investments – 45,543 – 45,543

511,302 489,324 – 45,543

(b) Minimum lease rental payable in respect of land and buildings:

Within 1 year 15,189 10,556 9,811 5,126

After 1 year but within 5 years 50,570 15,240 35,029 –

After 5 years 298,915 238,640 70,874 –

364,674 264,436 115,714 5,126

(c) Share of joint ventures’ approved and contracted capital commitments 20,286 34,811 – –

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 Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Immediate holding companyManagement fee payable 250 250 250 250

Related companiesSales 1,859 1,817 – –

Purchases 38,789 59,293 – –

Others 4 49 – –

Associates and joint venturesSales 2,366 524 – –

Purchases 8,679 4,531 – – Sale of property, plant and equipment 3,400 – – –

Others 30 593 – –


180

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 of the Company, Managing Director of PPL Shipyard Pte Ltd, Managing Director of SMOE Pte Ltd and Executive Director of Jurong SML 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 is as follows:Group

2010 2009$’000 $’000

Directors’ fees and remuneration 8,739 6,673

Other key management personnel remuneration 7,356 3,690

16,095 10,363

Fair value of share-based compensation 2,446 2,972

Remuneration includes salary (which includes allowances, fees and other emoluments) and bonuses.

In addition to the above, the Company provides medical benefits to all employees including key management personnel.

The Group 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.



181

(a) Business segmentsShip &

rig repair, building,

conversion and offshore

Ship chartering Others Eliminations Total

$’000 $’000 $’000 $’000 $’0002010TurnoverSales to external parties 4,537,483 – 17,380 – 4,554,863

Inter-segment sales – – 82,119 (82,119) –

Total 4,537,483 – 99,499 (82,119) 4,554,863

ResultsSegment results 941,777 (223) 1,010 – 942,564

Finance income 32,148 – 31 – 32,179

Finance costs (7,134) – – – (7,134)

Foreign exchange transactions 52,640 – – – 52,640

Share of results of associates and joint ventures

53,417 4,179 43 – 57,639

Profit before income tax expense 1,072,848 3,956 1,084 – 1,077,888

Income tax expense (183,671) (104) (234) – (184,009)

Profit for the year 889,177 3,852 850 – 893,879

AssetsSegment assets 4,907,346 14,807 50,014 – 4,972,167

Investments in associates and joint ventures

275,473 30,961 522 – 306,956

Deferred tax assets – – 47 – 47

Total assets 5,182,819 45,768 50,583 – 5,279,170

LiabilitiesSegment liabilities 2,197,672 5 13,317 – 2,210,994

Deferred tax liabilities 103,354 – 555 – 103,909

Provision for taxation 276,465 – 876 – 277,341

Total liabilities 2,577,491 5 14,748 – 2,592,244

Capital expenditure 102,181 – 18 – 102,199

Significant non-cash itemDepreciation 82,028 – 1,169 – 83,197


182

Ship & rig repair, building,

conversion and offshore

Ship chartering Others Eliminations Total

$’000 $’000 $’000 $’000 $’0002009TurnoverSales to external parties 5,705,156 – 19,586 – 5,724,742

Inter-segment sales – – 125,584 (125,584) –

Total 5,705,156 – 145,170 (125,584) 5,724,742

ResultsSegment results 856,801 (145) 5,698 – 862,354

Finance income 36,586 – 21 – 36,607

Finance costs (5,329) – – – (5,329)

Non-operating income 368 – – – 368

Non-operating expenses (11,764) – – – (11,764)

Share of results of associates and joint ventures

17,503 7,856 40 – 25,399

Profit before income tax expense 894,165 7,711 5,759 – 907,635

Income tax expense (149,425) (632) (813) – (150,870)

Profit for the year 744,740 7,079 4,946 – 756,765

AssetsSegment assets 4,352,194 15,496 50,332 – 4,418,022

Investments in associates and joint ventures

239,831 27,411 532 – 267,774

Deferred tax assets – – 47 – 47

Tax recoverable 1,705 – – – 1,705

Total assets 4,593,730 42,907 50,911 – 4,687,548

LiabilitiesSegment liabilities 2,393,503 10 13,661 – 2,407,174

Deferred tax liabilities 66,201 – 547 – 66,748

Provision for taxation 251,317 525 1,376 – 253,218

Total liabilities 2,711,021 535 15,584 – 2,727,140

Capital expenditure 66,981 – 13,473 – 80,454

Significant non-cash itemsDepreciation 73,965 – 1,228 – 75,193

Amortisation 55 – – – 55



183

(b) Geographical segments

The Group operates in 8 (2009: 6) 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

2010

Revenue from external customers 601,387 922,635 2,072,609 958,232 4,554,863

Segment assets 4,808,118 150,231 3,644 10,174 4,972,167

Total assets 4,839,648 425,704 3,644 10,174 5,279,170

Capital expenditure 93,021 8,021 – 1,157 102,199

2009

Revenue from external customers 574,053 2,236,593 2,166,215 747,881 5,724,742

Segment assets 4,269,369 140,966 – 7,687 4,418,022

Total assets 4,299,064 380,797 – 7,687 4,687,548

Capital expenditure 74,085 6,276 – 93 80,454


184

(c) Reconciliation of reportable segment revenues, profit, assets and liabilities and other material items:

Group2010 2009$’000 $’000

RevenuesTotal revenue for reportable segments 4,537,483 5,705,156

Other revenue 99,499 145,170

Elimination of inter-segment revenue (82,119) (125,584)

Consolidated revenue 4,554,863 5,724,742

ProfitTotal profit for reportable segments 1,076,804 901,876

Other profit 1,084 5,759

Consolidated profit before income tax 1,077,888 907,635

AssetsTotal assets for reportable segments 5,228,587 4,636,637

Other assets 50,583 50,911

Consolidated total assets 5,279,170 4,687,548

LiabilitiesTotal liabilities for reportable segments 2,577,496 2,711,556

Other liabilities 14,748 15,584

Consolidated total liabilities 2,592,244 2,727,140

Reportable segment totals Adjustments

Consolidated totals

$’000 $’000 $’000Other material items 2010Finance income (32,148) (31) (32,179)

Finance costs 7,134 – 7,134

Depreciation and amortisation 82,028 1,169 83,197

Impairment losses of property, plant and equipment 3,950 – 3,950

Capital expenditure 102,181 18 102,199

Other material items 2009Finance income (36,586) (21) (36,607)

Finance costs 5,329 – 5,329

Depreciation and amortisation 74,020 1,228 75,248

Impairment losses of property, plant and equipment 6,145 – 6,145

Capital expenditure 66,981 13,473 80,454



185

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.


186

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 2010Financial assetsBank balances, fixed deposits and cash 32,473 358,200 65,301 8,603 464,577

Trade and other receivables 12,837 45,610 578 2,999 62,024

Other investments – – – 46,705 46,705

45,310 403,810 65,879 58,307 573,306

Financial liabilitiesTrade and other payables (83,387) (79,030) (19,104) (12,412) (193,933)

(83,387) (79,030) (19,104) (12,412) (193,933)

Net financial (liabilities)/assets (38,077) 324,780 46,775 45,895 379,373

Forward foreign currency contracts* 111,000 1,577,110 (2,485) – 1,685,625

Net exposure 72,923 1,901,890 44,290 45,895 2,064,998

At 31 December 2009Financial assetsBank balances, fixed deposits and cash 61,058 154,211 106,000 12,294 333,563

Trade and other receivables 18,980 66,158 507 985 86,630

Other investments – – – 28,438 28,438

80,038 220,369 106,507 41,717 448,631

Financial liabilitiesTrade 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

Forward foreign currency contracts* 247,148 1,265,772 (37,476) – 1,475,444

Net exposure 150,134 1,310,211 7,338 31,676 1,499,359

Company USD Others Total$’000 $’000 $’000

At 31 December 2010Financial assetsBank balances, fixed deposits and cash 1,029 – 1,029

Other investments – 44,084 44,084

Net financial assets 1,029 44,084 45,113

At 31 December 2009Financial assetsBank balances, fixed deposits and cash 549 – 549

Other investments – 28,403 28,403

Net financial assets 549 28,403 28,952


* Forward foreign currency contracts are entered to hedge future forecasted transactions.


187

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 before income tax 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 2009.

Group Company

EquityProfit before income tax Equity

Profit before income tax

2010 2009 2010 2009 2010 2009 2010 2009$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

USD (132,756) (110,110) 30,244 (1,641) – – 103 55

EUR (169) (3,500) 4,634 5,058 – – – –

SGD (9,213) (20,513) (9,808) (9,701) – – – –

Others 3,660 2,354 182 334 3,659 2,357 – –

(138,478) (131,769) 25,252 (5,950) 3,659 2,357 103 55

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 $2,915,097,000 (2009: $1,978,548,000), it is estimated that a one percentage point increase in interest rate would increase the Group’s profit before taxation by approximately $29,151,000 (2009: $19,785,000). The analysis is performed on the same basis for 2009.

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.


188

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 flowsCarrying amount

Contractual cash flow

Less than 1 year

Between 1 and 5 years

Group $’000 $’000 $’000 $’0002010Derivative financial liabilitiesInterest rate swaps (101) (101) (101) –

Derivative financial assetsForward foreign currency contracts

- Inflow 72,519 1,768,567 1,020,625 747,942

- Outflow – (1,696,048) (979,820) (716,228)

Non-derivative financial liabilitiesTrade and other payables (1,467,556) (1,467,556) (1,459,631) (7,925)

Interest-bearing borrowings (8,000) (8,117) (8,117) –

(1,403,138) (1,403,255) (1,427,044) 23,789

2009Derivative 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)

Company2010Non-derivative financial liabilities

Trade and other payables (103,478) (103,478) (103,478) –

2009Non-derivative financial liabilities

Trade and other payables (111,639) (111,639) (111,639) –

* Excludes deposits and advance payment from customers.



189

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 income tax and equity will increase by:

Group Company2010 2009 2010 2009$’000 $’000 $’000 $’000

Equity 28,509 16,400 19,388 11,170

Profit before income tax 1 4 – –

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 2009 and assumes that all other variables remain constant.

Estimation of fair values

FRS 107 establishes a fair value hierarchy that prioritises 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.


190

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 at the balance sheet date. 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 using: Level 1 Level 2 Level 3 Total

Group $’000 $’000 $’000 $’000At 31 December 2010Available-for-sale financial assets 285,089 347 – 285,436

Financial assets designated at fair value through profit or loss 12 – – 12

Derivatives financial assets – 72,519 – 72,519

285,101 72,866 – 357,967

Derivatives financial liabilities – (101) – (101)

Total 285,101 72,765 – 357,866

At 31 December 2009Available-for-sale financial assets 163,997 343 – 164,340

Financial assets designated at fair value through profit or loss 35 – – 35

Derivatives financial assets – 2,785 – 2,785

164,032 3,128 – 167,160

Derivatives financial liabilities – (32,112) – (32,112)

Total 164,032 (28,984) – 135,048

CompanyAt 31 December 2010

Available-for-sale financial assets 193,884 347 – 194,231

At 31 December 2009

Available-for-sale financial assets 111,704 343 – 112,047



191

41 Capital management

The Group aims to maintain a sound 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 non-controlling 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 2010.

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 2010 was $681,948,000 (2009: $678,361,000). 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.


192

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 2010 was $277,341,000 (2009: $253,218,000). The carrying amounts of the Group’s deferred tax assets and liabilities at 31 December 2010 were $47,000 (2009: $47,000) and $103,909,000 (2009: $66,748,000) 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 Group2010 2009

% %SubsidiariesBulk Trade Pte Ltd Singapore Bulk trading 100 100

Dolphin Shipping Company Private Limited Singapore Ship owning and chartering 100 100

JPL Corporation Pte Ltd Singapore Under liquidation 100 100

JPL Industries Pte Ltd # Singapore Processing and distribution of copper slag 85.8 85.8

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 (Note 32) 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

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



193

Name of company




% %AssociatesCosco Shipyard Group Co Ltd ** People’s

Republic of 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 LimitedDolphin Workboats Pte Ltd Singapore Ship owning and charter 50 50

Pacific Workboats Pte Ltd ** Singapore Ship leasing and marine surveying services 50 50

Subsidiary of JPL Corporation Pte LtdJPL Services Pte Ltd Singapore Under liquidation 100 100

Subsidiary of JPL Industries Pte LtdJPL Concrete Products Pte Ltd Singapore Production of concrete products 85.8 85.8

Subsidiaries and joint venture of Jurong Shipyard Pte LtdEstaleiro Jurong Aracruz Ltda * Brazil Render services for engineering,

construction, assembling, installation, maintenance, conservation, conversion, modernisation and repairs of vessels, FPSOs and any other floating structures

100 –

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 do Brasil Prestacao de Servicos Ltda * Brazil Render services for engineering, construction, assembling, installation, maintenance, conservation, conversion, modernisation and repairs of equipment, machinery, systems, piping, structures and accessories in the marine and offshore fields

100 –

Jurong Marine Contractors Private Limited Singapore Provision of contract services 100 100

Jurong Netherlands B.V. *** Netherlands Investment holding 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


194

Name of company




% %Subsidiaries of PPL Shipyard Pte LtdBaker 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 and joint venture of Sembawang Shipyard Pte LtdSembawang Shipyard Project Services Pte Ltd Singapore Marine services and rental of premises 100 100

Sembawang Shipyard (S) Pte Ltd ## Singapore Investment holding 100 100

Sembawang Shipyard Services Pte Ltd Singapore Marine services 100 100

Sembmarine Kakinada Limited ** India Ship repair, conversion, building and related activities

19.9 –

SES Engineering (M) Sdn Bhd * Malaysia Fabrication of metal structures 100 100

SES Marine Services (Pte) Ltd Singapore Marine services 100 100

Subsidiaries of Sembcorp Holdings, LLCSabine Offshore Services Inc *** United States

of AmericaInactive 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 LtdHQSM Engineering Pte Ltd ** Singapore Engineering, procurement and construction

for oil and gas related business49 49

PT SMOE Indonesia* Indonesia Engineering, construction and fabrication of offshore structures

90 90

SCE Pte Ltd Singapore Liquidated – 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, JPL Industries Pte Ltd, a subsidiary of JPL Corporation Pte Ltd, was transferred to the Company.

## During the year, Sembawang Shipyard (S) Pte Ltd, a wholly owned subsidiary of the Company, was transferred to Sembawang Shipyard Pte Ltd.



195

44 New or Revised Accounting Standards and Interpretations

Below are the mandatory standards, amendments and interpretations to existing standards that have been published, and are relevant for the Group’s accounting period beginning on or after 1 January 2011 or later periods and which the Group has not early adopted:

Amendments to FRS 24 – Related party disclosures Amendments to FRS 32 Financial instruments: Presentation – classification of rights issuesAmendments to INT FRS 114 – Prepayments of a minimum funding requirement INT FRS 119 Extinguishing financial liabilities with equity instrumentsImprovements to FRSs 2010

The management anticipates that the adoption of the above FRSs, INT FRS, amendments and improvements to FRS in the future periods will not have a material impact on the financial statements of the Group and of the Company in the period of their initial adoption, except for the amendments to FRS 24 – Related party disclosures.

The amendments to FRS 24 will become effective for the Group’s financial statements for the year ending 31 December 2011. The amendment simplifies the disclosure requirements for government-related entities. It also clarifies and simplifies the definition of a related party. However, the revised definition of a related party will also mean that some entities will have more related parties and will be required to make additional disclosures.

Management is currently considering the revised definition to determine whether any additional disclosures will be required.


196

Supplementary InformationYear ended 31 December 2010

(Under SGX-ST Listing Manual requirements)A. Directors’ and Key Executives’ Remuneration Earned for the Year

Summary compensation table for the year ended 31 December 2010

Name of Director Salary 1Bonus Earned

Fair value of share-based compensation granted

for the year 2Directors’

Fees 3

Brought Forward Bonus

Bank 4

$’000 $’000 $’000 $’000 $’000Payable by the Company:Goh Geok Ling – – 54 210 –Richard Hale, OBE – – 39 148 –Wong Weng Sun 704 9,101 1,167 – 7,380Tan Kwi Kin 360 – 17 73 2,749Tan Pheng Hock3 – – 22 104 –Lim Ah Doo – – 30 121 –Ajaib Haridass – – 34 136 –Tang Kin Fei3 – – 30 146 –Ron Foo Siang Guan – – 30 126 –Ngiam Joke Mui3 – – 17 75 –Koh Chiap Khiong3 – – – 2 –Joseph Kwok Sin Kin – – – 30 –(retired on 20 April 2010)

Payable by Subsidiaries:Goh Geok Ling – – – 84 –Tan Kwi Kin – – – 70 –Tang Kin Fei3 – – – 79 –Ngiam Joke Mui3 – – – 28 –Koh Chiap Khiong3 – – – 28 –

Name of Key Executive Salary 1Bonus Earned

Fair value of share-based compensation granted

for the year 2Directors’

Fees 3

Brought Forward Bonus

Bank 4

$’000 $’000 $’000 $’000 $’000

Ong Poh Kwee 363 3,042 413 – 3,510Tan Cheng Tat 294 1,332 167 – 388Ho Nee Sin 304 1,409 157 – 426Douglas Tan Ah Hwa 572 1,400 – – –Freddie Woo Fong Wah 174 350 39 – –

Notes:

1. The amount shown is inclusive of basic salary, fixed allowances, AWS and other emoluments.

2. The fair value of the share plans granted for the year is disclosed. The shares granted to key executives are contingent upon meeting performance measures. If these performance measures are not met, the key executive will not be vested with any shares. There is no performance condition for the conditional award of the restricted shares granted to non-executive directors in 2010. Shares granted will be vested 1 year from the date of grant.

3. Director’s fee for Mr Tan Pheng Hock is payable to Singapore Technologies Engineering Ltd. Directors’ fees for Mr Tang Kin Fei and Mr Koh Chiap Khiong are payable to Sembcorp Industries Ltd. Part of the director’s fee for Ms Ngiam Joke Mui is payable to Sembcorp Industries Ltd, for the tenure she had served from 1 January 2010 to 30 June 2010 as an employee of Sembcorp Industries Ltd. Ms Ngiam Joke Mui remains as a director, while Mr Koh Chiap Khiong is the alternate director.

4. The Brought Forward Bonus Bank is the outstanding balance of bonus as at 31 December 2010 (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.

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.


197

Supplementary InformationYear ended 31 December 2010

(Under SGX-ST Listing Manual requirements)B. Interested Person Transactions

Aggregate value of all interested person transactions conducted under a shareholders’

mandate pursuant to Rule 920 of the SGX-ST Listing Manual

2010 2009$’000 $’000

Transaction for the Sales of Goods and ServicesNeptune Orient Lines Ltd and its associates 2,333 –

PSA International Pte Ltd and its associates 2,246 4,495

Transaction for the Purchase of Goods and ServicesPSA International Pte Ltd and its associates 130 –

Sembcorp Industries Limited and its associates 29,758 28,450

Management and Support ServicesSembcorp Industries Limited 250 250

Total Interested Person Transactions 34,717 33,195

198

Major PropertiesAs at 8 March 2011

LocationDescription & Approximate Land Area Tenure Usage

Jurong Shipyard• Jalan Samulun Land area: 198,098m2

Buildings, workshops, drydocks and quays

Leasehold expiringupon relocation to New Yard Facility at Tuas View Extension Phase I (JTC land)

Ship repairs including drydock, berthage & workshops

• Tanjong Kling Road Land area: 491,055m2

Buildings, workshops, drydocks and quays

10 years leasehold 10 years renewal (JTC Land)

Ship repairs, ship conversion, offshore engineering, shipbuilding and rig building including drydock, berthage & workshops

Sembawang Shipyard• Admiralty Road East/Admiralty

Road WestLand area: 860,939m2 Buildings, workshops, docks and quays

22 years leasehold Ship repairs, ship conversion, offshore engineering and rig building including docks, berthage & workshops

PPL Shipyard• Pandan Road Land area: 141,791m2 15 years leasehold

(JTC Land)Rig repairs, upgradings, fabrication and rig building including berthage and workshops

• Pandan Road Land area: 9,182m2 30 years leasehold (JTC Land)

Leg component fabrication

• Tuas Crescent Land area: 57,890m2 5 years leasehold (JTC Land)

Fabrication facilities

Jurong SML• Shipyard Road Land area: 63,300m2

Buildings, workshops, drydocks

6 years leasehold (JTC Land)

Ship repairs and shipbuilding including drydocks, berthage & workshops

• Tuas Road Land area: 59,942m2 Buildings, workshops, docks and quays

14 years leasehold (JTC Land)

Shipbuilding and fabrication including berthage & workshops

P.T. Karimun Sembawang Shipyard• Karimun Island, Indonesia Land area: 307,000m2

Buildings, workshops and wharves

30 years leasehold with option for 20 years plus another option for 30 years

Ship repair and fabrication including berthage and workshops

JPL Industries• Jurong Pier Road Land area: 27,783m2 20 years leasehold

(JTC Land)Copper slag recycling

SES Engineering Sdn Bhd• Perindustrian Taman Johor,

Johor BahruLand area: 5,235m2

Workshop and 3-storey office building

Freehold Metal fabrication workshop

P.T. SMOE• Batam Island, Indonesia Land area: 521,964m2

Workshops, quayside and skidway

30 years leasehold Workshops & fabrication facilities

New Yard Facility• Tuas View Extension Phase I

(under development, completion in 2013)

Land area: 733,104m2

Docks, quays, workshops, buildings and berthage

30 plus 30 years leasehold (JTC land)

Ship repairs, rig repairs & upgrading, ship conversion and offshore activities

Estaleiro Jurong Aracruz• Municipal of Aracruz,

State of Espirito Santo, Brazil (under planning)

Land area: 825,000m2 Slipways, berthing quays, drydock, ancillary steel and piping facilities

Freehold Drillships construction, building of semi-submersible rigs, FPSO integration, fabrication of topside modules, PSVs construction, drilling rig repairs and modification works

Mendon Spring• Pasir Panjang 9 units of 3-room apartment

with built-in area of 99m2 per unit

Freehold Residential properties

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Notice of Annual General MeetingCompany Registration No. 196300098Z(Incorporated in the Republic of Singapore)

Sembcorp Marine Ltd

NOTICE IS HEREBY GIVEN THAT the 48th Annual General Meeting of the Company will be held on Wednesday, April 20, 2011 at 11.00 a.m. at 29 Tanjong Kling Road, Singapore 628054 to transact the following business:-

ORDINARY BUSINESS

1 To receive and adopt the Directors’ Report and Audited Accounts for the year ended December 31, 2010 and the Auditors’ Report thereon.

Resolution 1

2 To declare a final one-tier tax exempt ordinary dividend of 6 cents per ordinary share and a final one-tier tax exempt special dividend of 25 cents per ordinary share for the year ended December 31, 2010.

Resolution 2

3 To re-elect the following directors, each of whom will retire by rotation pursuant to Article 91 of the Company’s Articles of Association and who, being eligible, will offer themselves for re-election:

(a) Mr Ajaib Haridass(b) Mr Tang Kin Fei

Mr Tan Pheng Hock is also retiring under Article 91 of the Company’s Articles of Association, but will not be offering himself for re-election

Resolution 3Resolution 4

4 To re-appoint Mr Richard Hale, OBE (member of the Audit Committee), a Director retiring under Section 153(6) of the Companies Act, Cap. 50, to hold office from the date of this Annual General Meeting until the next Annual General Meeting.

Mr Tan Kwi Kin is also retiring under Section 153(6) of the Companies Act, Cap. 50, but will not be offering himself for re-appointment

Resolution 5

5 To approve the sum of S$1,170,625 as Directors’ Fees for the year ended December 31, 2010. (2009: S$1,157,833)

Resolution 6

6 To re-appoint KPMG LLP as Auditors of the Company and authorise the Directors to fix their remuneration.

Resolution 7

SPECIAL BUSINESS

To consider and, if thought fit, to pass the following resolutions which will be proposed as Ordinary Resolutions:-

7 That authority be and is hereby given to the Directors of the Company to: Resolution 8

(a) (i) issue shares in the capital of the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may, in their absolute discretion deem fit; and

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Sembcorp Marine Ltd

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while this Resolution was in force,

provided that:

(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) does not exceed 50% of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company (including shares to be issued in pursuance of Instruments made or granted pursuant to this Resolution) shall not exceed 5% of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with paragraph (2) below);

(2) (subject to such manner of calculation as may be prescribed by the Singapore Exchange Securities Trading Limited (“SGX-ST”)) for the purpose of determining the aggregate number of shares that may be issued under paragraph (1) above, the percentage of issued shares shall be based on the total number of issued shares in the capital of the Company (excluding treasury shares) at the time this Resolution is passed, after adjusting for:-

(i) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time this Resolution is passed; and

(ii) any subsequent bonus issue or consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and

(4) (unless revoked or varied by the Company in General Meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.

8 That approval be and is hereby given to the Directors to:

(a) grant awards in accordance with the provisions of the Sembcorp Marine Performance Share Plan 2010 (the “Performance Share Plan”) and/or the Sembcorp Marine Restricted Share Plan 2010 (the “Restricted Share Plan”) (the Performance Share Plan and the Restricted Share Plan, together the “Share Plans”); and

Resolution 9

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Sembcorp Marine Ltd

(b) allot and issue from time to time such number of ordinary shares in the capital of the Company as may be required to be delivered pursuant to the vesting of awards under the Share Plans,

provided that:

(i) the aggregate number of (i) new ordinary shares allotted and issued and/or to be allotted and issued, (ii) existing ordinary shares (including shares held in treasury) delivered and/or to be delivered, and (iii) ordinary shares released and/or to be released in the form of cash in lieu of shares, pursuant to the Share Plans, shall not exceed 7% of the total number of issued shares in the capital of the Company (excluding treasury shares) from time to time; and

(ii) the aggregate number of ordinary shares under awards to be granted pursuant to the Share Plans during the period commencing from this Annual General Meeting and ending on the date of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier, shall not exceed 1% of the total number of issued shares in the capital of the Company (excludng treasury shares) from time to time.

9 To transact any other business.

By Order of the Board

Kwong Sook May/Tan Yah SzeJoint Company Secretaries

March 31, 2011

Explanatory Notes:

Resolutions 3 to 5 – Detailed information on these Directors can be found under Board of Directors and Corporate Governance Report in the Annual Report 2010.

Resolution 5 – If re-appointed, Mr Richard Hale, OBE, a non-independent Director, will remain as a member of the Audit Committee.

Statement pursuant to Article 54 of the Articles of Association of the Company:

Resolution 8 - is to empower the Directors to issue shares in the capital of the Company and to make or grant instruments (such as warrants or debentures) convertible into shares, and to issue shares in pursuance of such instruments, up to a number not exceeding 50% of the the total number of issued shares in the capital of the Company excluding treasury shares, of which up to 5% may be issued other than on a pro rata basis to shareholders. The aggregate number of shares which may be issued shall be based on the total number of issued shares in the capital of the Company excluding treasury shares at the time that Resolution 8 is passed, after adjusting for (a) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time that Resolution 8 is passed, and (b) any subsequent bonus issue or consolidation or subdivision of shares.

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Sembcorp Marine Ltd

Resolution 9 – is to empower the Directors to offer and grant awards pursuant to the Sembcorp Marine Performance Share Plan 2010 and the Sembcorp Marine Restricted Share Plan 2010 (collectively, the “Share Plans”) and to issue ordinary shares in the capital of the Company pursuant to the vesting of awards granted pursuant to the Share Plans provided that: (a) the aggregate number of (i) new ordinary shares allotted and issued and/or to be allotted and issued, (ii) existing ordinary shares (including shares held in treasury) delivered and/or to be delivered, and (iii) ordinary shares released and/or to be released in the form of cash in lieu of shares, pursuant to the Share Plans, shall not exceed 7% of the total number of issued shares in the capital of the Company (excluding treasury shares) from time to time; and (b) the aggregate number of ordinary shares under awards to be granted pursuant to the Share Plans during the period commencing from this Annual General Meeting and ending on the date of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier, shall not exceed 1% of the total number of issued shares in the capital of the Company (excluding treasury shares) from time to time. Approval for the adoption of the Share Plans was given by shareholders at an Extraordinary General Meeting of the Company held on April 20, 2010. The grant of awards under the Share Plans will be made in accordance with their respective provisions.

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 that the Register of Members and Share Transfer Books of the Company will be closed on April 29, 2011 to determine the members’ entitlements to the proposed dividend.

Duly completed transfers in respect of ordinary shares in the capital of the Company together with all relevant documents of title received by the Company’s Share Registrar, KCK Corpserve Pte Ltd, 333 North Bridge Road, #08-00 KH KEA Building, Singapore 188721, up to 5.00 p.m. on April 28, 2011 (the “Book Closure Date”) will be registered to determine members’ entitlements to the proposed dividend. Subject as aforesaid, members whose securities accounts with The Central Depository (Pte) Limited are credited with ordinary shares in the capital of the Company as at 5.00 p.m. on the Book Closure Date will be entitled to the proposed dividend.

The proposed dividend, if approved by the members at the 48th Annual General Meeting, will be paid on May 11, 2011.

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Company Registration No. 196300098Z(Incorporated in the Republic of Singapore)

PROXY FORMIMPORTANT

1. For investors who have used their CPF monies to buy shares in the capital of Sembcorp Marine Ltd, the Annual Report to Shareholders dated 31 March 2011 is forwarded to them at the request of their CPF Approved Nominees sent FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by 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/Passport No.)

of (Address)

being a member/members of Sembcorp Marine Ltd, hereby appoint:-

Name Address NRIC/Passport Number Proportion ofShareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies to attend and vote for me/us on my/our behalf and, if necessary, to demand a poll, at the 48th Annual General Meeting of the Company to be held at 29 Tanjong Kling Road, Singapore 628054 on Wednesday, April 20, 2011 at 11.00 a.m. and at any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Resolutions as set out in the Notice of Annual General Meeting. In the absence 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 To adopt the Directors’ Report and Accounts

2 To declare Final Dividend

3 To re-elect Ajaib Haridass

4 To re-elect Tang Kin Fei

5 To re-appoint Richard Hale, OBE

6 To approve Directors’ Fees

7 To re-appoint KPMG LLP as Auditors and to fix their remuneration

Special Business8 To approve Share Issue Mandate

9 To authorize the Directors to grant awards and issue shares under Sembcorp Marine’s Share Plans

Total Number of Shares Held

Signature(s) and/or Common Seal of Member(s) Date IMPORTANT: PLEASE READ NOTES BELOW

Notes:

1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote instead of him. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. The instrument appointing a proxy or proxies must be lodged at the registered office of the Company at 29 Tanjong Kling Road, Singapore 628054 not later than 48 hours before the time appointed for the Annual General Meeting. The sending of a proxy form by a shareholder does not preclude him from attending and voting in person at the Annual General Meeting if he finds that he is able to do so. In such event, the relevant proxy forms will be deemed to be revoked.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised.

6. A corporation which is a member may authorise by a resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Annual General Meeting in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.

7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.

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The Company SecretarySembcorp Marine Ltd29 Tanjong Kling Road

Singapore 628054

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... to REALITY

29 Tanjong Kling Road, Singapore 628054Tel: (65) 6265 1766 Fax: (65) 6261 0738 / 6265 0201Website: www.sembcorpmarine.com.sgCompany Reg. No: 196300098Z

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Documents

Contents · Richard Hale, OBE Deputy Chairman Wong Weng Sun President and CEO Tan Kwi Kin Tan Pheng Hock Ajaib Haridass Tang Kin Fei Ron Foo Siang Guan Joseph Kwok Sin Kin (Retired