KS Energy Services Limited · An offshore jackup rig. About KS Energy Services Limited Chairman’s Message to Shareholders ... equipment and services business in KS Energy was still

A N N U A L R E P O R T 2 0 0 7

KS Energy Services Limited

AN INTEGRATED OILFIELD EQUIPMENT

AND SERVICES SUPPLY HUB

C O N T E N T S

An offshore jackup rig.

About KS Energy Services Limited

Chairman’s Message to Shareholders

Operation & Financial Review

Financial Highlights

Corporate Data Board of Directors Key Executives Group Structure

1 2 8 18

22 24 30 34

A Globally Accredited and Integrated Oil & Gas Services Provider

KS Energy Services Limited (“KS Energy”) is a leading one-stop energy services provider to

the global oil & gas (“O&G”), marine and petrochemical industries. The shares of KS Energy

are traded on the main board of the Singapore Exchange.

The core activities of KS Energy are in the distribution and capital equipment charter and

services. For its distribution business, KS Energy ranks as one of the leading distributors

of oil and gas equipment, spare parts, consumables and industrial products in the region.

Together with Aqua-Terra Supply Co., Limited (“Aqua-Terra” or “ATS”) and SSH Corporation

Ltd (“SSH”), the KS Energy Group distributes more than 60,000 oil and gas related

products comprising more than 140 international brands of products.

Following the acquisition of Atlantic Oilfi eld Services Ltd (“AOS”) in May 2007, KS Energy

now has the capability to supply, as well as operate capital equipment, including onshore

and offshore rigs. Integrating the twin capabilities of AOS and KS Energy, the Group

now has the ability to provide a full suite of services directly to the oil & gas companies,

tendering for high value and high margin projects. Currently, KS Energy has a fl eet of 20

capital assets. Headquartered in Singapore, it has a geographical reach spanning South

East Asia, China, the Middle East, the North Sea, Europe and the USA.

For more information, please visit our website: www.ksenergy.com.sg

Together with AOS, KS Energy has the

ability to support the drilling needs of its customers from the oil & gas industry.

KS Energy Services Limited • Annual Report 2007 | 1

ABOUT KS ENERGY SERVICES LIMITED

Dear Shareholders,

It is my pleasure to once again, present a set of good results for KS Energy Services Limited (“KS Energy” or the “Group”).

Supported by the strong demand for equipment and services in the oil and gas industry, all our business units reported strong growth in FY2007. Our revenues increased by 36.4% from $295.1 million to $402.7 million and our net profi t after tax rose 45.2% from $54.9 million to $79.8 million at the close of the fi nancial year.

In recognition of our strong performance, the Board recommends a fi nal dividend of 3.0 cents per ordinary share, subject to the approval of the shareholders at the forthcoming Annual General Meeting. When approved, this will take our gross dividend to 9.0 cents per share for the full 2007 fi nancial year, representing an increase of 38.5% from the gross dividend of 6.5 cents per share paid in the previous fi nancial year.

2 | Annual Report 2007 • KS Energy Services Limited

Chairman’s Message to Shareholders

“ The active energy industry globally

and the increasing demand from

the region’s oil & gas industry are

paving the way for the arrival of an

integrated oil & gas equipment and

services provider.”

Our Group’s core distribution business, representing many reputable brands well known to the oil & gas industry, has strong growth potentials. On the other hand, the drilling equipment and services business in KS Energy was still in a formative stage. However, this is a platform for us to move into the drilling equipment time charter business and provide direct services to the oil & gas companies. Supported by Singapore’s strong reputation in the global oil & gas industry and the rapidly growing energy demand from the booming regional economies, all the key elements are in place for the drilling equipment and services business to succeed and fl ourish.

To achieve our mission, it is imperative for us to expand the role and the focus of the drilling equipment and services business of our Group. This is a major challenge! This segment of our business is not only capital intensive, but it also requires that the management and operational

STRUCTURING FOR GROWTH

Increased economic development and rising standards of living across Asia are continuing to fuel the region’s energy demand. To meet these demands, countries with rich energy resources are expediting their exploration and production of hydrocarbons. The active energy industry globally and the increasing demand from the region’s oil & gas industry are paving the way for the arrival of an integrated oil & gas equipment and services provider.

When we acquired our equity interests in KS Energy, we aspire to create an unique integrated oil & gas equipment supply and services company. Headquartered in Singapore, the region’s oil & gas hub, KS Energy was the perfect choice. It is an initial platform, but it has the basic infrastructure necessary for the development of a fully integrated oil & gas equipment and services group.


We provide onshore and offshore drilling, rig management and support services to the oil & gas industry globally.


personnel, equipment and processes be accredited and qualifi ed to meet international technical, health, safety and environmental standards.

Last year, we acquired Atlantic Oilfi eld Services (“AOS”), which subsequently became our wholly owned subsidiary. AOS is a specialised oil & gas equipment supply and services company providing onshore and offshore drilling, rig accommodation and support services to the oil & gas industry around the world.

The top ten management members of AOS bring with them more than 200 years of combined experience in the oil & gas industry. AOS has brought new capabilities and new knowledge into KS Energy. By integrating the twin capabilities of KS Energy and AOS, we now have the ability to offer a full range of services, move up the value chain and directly participate in tenders and projects in the oil & gas industry.

FUTURE PROSPECTS

This year was a major turning point in the history of KS Energy. It was an exciting time for all of us as we move the Group onto a new platform upon which we will build its future growth. Together, we have expanded our business from distribution and equipment trading to drilling equipment time charter and the provision of management services to the oil & gas industry.

With the dedicated efforts from our team and the strong support from our partners, we have achieved this


quantum leap. Today, we have scaled the barriers and thrust KS Energy into the integrated drilling services, capital equipment supply and drilling services business.

Into the new fi nancial year, our distribution and capital equipment and services business will continue to benefi t from the strong demand in the oil & gas industry. Further integration of the capabilities of all the companies under the KS Group will provide and place the Group in a strong position to tap into new opportunities in the oil & gas equipment supply and services sector.

AOS will continue to obtain drilling rig chartering and management contracts for our capital equipment and services business. By integrating our efforts, we expect that the contribution from the capital equipment charter and services business will continue to grow, and in the process help enhance and contribute to the overall performance of the Group.

On the business front, having identifi ed and defi ned our role in the oil & gas industry, we will proceed to review and rationalize the quality of the capital equipment in our fl eet. This will enable us to stay focused in our core business, which is to provide equipment, services and project management for exploration and production of the global oil & gas industry.

IN APPRECIATION

The Group’s achievements this year would not have been possible without the loyal support and hard work from our management and staff who are central to the roles they play in ensuring the reputation and the success of KS Energy.

I would like to pay tribute to them and recognize their contributions and commitment in the past year. Together we will continue in our mission to help KS Energy scale new heights.

I also convey my gratitude to our customers, bankers and business associates without whom we would not have been able to achieve our goals.

Finally, to all our shareholders, I thank you for your steadfast support and unwavering confi dence in KS Energy.

I look forward to your support as the Group moves on to a new stage of development and I am confi dent that with your continuing support, we will be able to grow KS Energy into a World Class Integrated Oil & Gas Supply Services company.

Kris Taenar Wiluan Chairman & Chief Executive Offi cer

Following the acquisition of AOS in FY2007, KS Energy now has the ability to provide a full suite of

services, including offshore accommodation, on and offshore drilling and oilfi eld support services,

directly to customers in the oil & gas industry.

DRILLING & SERVICES

OPERATION REVIEW

Surrounded by the strong demand in the oil & gas industry, all our business segments reported improved earnings. Revenues rose 36.4% from $295.1 million to $402.7 million and net profi t after tax rose from $54.9 million to $79.8 million, representing an increase of 45.2%. The highlights during the year include:

• Acquisition of Atlantic Oilfi eld Services (“AOS”), a specialized oilfi eld services company providing onshore and offshore drilling, accommodation and support services to the oil & gas industry. AOS has a well-established presence in the Middle East and the North Sea.

• Expansion of our fl eet of capital equipment, including

the commissioning of a new rig and acquisition of several land and jackup rigs.

• Our subsidiary, Aqua-Terra Supply Co. Limited (“Aqua-Terra”), completed its acquisition of two new subsidiaries - Raymonds Supply Co., Ltd (“RSC”) and Fischer Engineering Pte Ltd (“FEPL”).

DISTRIBUTION

Compared to the previous fi nancial year, our distribution business reported a 45.8% increase in revenue for FY2007 amid strong demand from the region’s oil &

gas industry. Revenue contributions from our distribution business rose from $203.7 million (FY2006) to $297.1 million in FY2007. The improvement in our distribution business is also attributable to the higher contributions from our subsidiary, Aqua-Terra Supply Co., Ltd. In FY2007, Aqua-Terra consolidated the results of two newly acquired subsidiaries – RSC and FEPL and higher profi t contributions from its associate company, SSH Corporation Ltd.

Aggregating the distribution capabilities within the KS Energy Group, our offerings have increased to more than 60,000 line items, and this number is still growing. Going forward, our distribution business will continue to benefi t from strong demand in the oil & gas, marine and petrochemical industries. To augment our organic growth, we will also be looking to acquire businesses with niche competencies that can value add to our current distribution capabilities.

CAPITAL EQUIPMENT AND SERVICES

Acquisition and fl eet expansion in FY2007 also kept our capital equipment and services unit occupied. During the year, we added three jackup and three land rigs to our fl eet. By the close of FY2007, we have 20 capital assets in our fl eet and three management contracts.

In June 2007, we completed the acquisition of AOS, a specialized oilfi eld services company providing onshore


Operation & Financial Review


and offshore drilling accommodation and support services to the oil & gas industry. Operating from Dubai, AOS has a well-established presence in the Middle East and the North Sea. Following the completion of this acquisition, we began our integration of AOS and KS Energy. By combining their twin capabilities, the enlarged KS Energy group of companies now has a full suite of services to move up the value chain. Supported by the international accreditations and the qualifi cations for health and safety standards from AOS, we can now tender directly for high value and high margin projects in the oil & gas industry.

Having enhanced our capabilities, we took steps to review our business strategy for our capital equipment and services unit. Together with our colleagues from AOS, we redefi ned and redeveloped our plans for this business. To begin, we will focus our resources on supporting our customers’ drilling requirements on land, shallow and medium water depths. At the same time, we will review

and rationalise the capital assets that are currently in our fl eet to ensure that our assets complement our business strategy. Non-core assets will be set aside for divestment and the resources released will be deployed to purchase better quality assets that can support future contracts and strengthen our core asset base.

AOS will continue to pursue more rig chartering and management contracts for our capital equipment and services business. Notwithstanding the strong demand globally for both shallow water and deep water drilling, we will adopt a disciplined and strategic approach to grow our business. Asset acquisitions will comply with pre-defi ned criteria. We will look to deploy our capital assets for longer term contracts to mitigate the effects of charter rates volatility. Operating with this nimble yet powerful business model, we expect to see increasing contributions from our capital equipment charter and services business.

An aerial view of an offshore platform rig.

Our jackup rigs cater to customers’ needs for drilling in shallow to medium

water depths. Presently the Group is growing our fl eet of jackup rigs to

undertake drilling activities in the shallow to medium water depth.

There are 5 jackup rigs in the KS Energy fl eet comprising:

• Yusong, a 300-feet jackup rig operating in China.

• Atlantic Rotterdam, a 250-feet jackup rig operating in the North Sea.

• KS MedStar-1, a 300-feet jackup rig and targeted for delivery in 2008.

• Super M2, a new 300-feet jackup rig under construction and targeted for

delivery in end of 2009.

• KS Venture, a 250-feet jackup rig to be upgraded or divested.

JACKUP RIGS

As at 31 December 2007

In FY2007, revenue contribution from our capital equipment and services business increased by 15.5% rising from $91.4 million to $105.6 million. Operating profi t, which amounted to $27.9 million, accounted for 57.1% of our total operation profi t this year. We secured a landrig charter contract for drilling in Pakistan at the beginning of the third quarter of FY2007 and drilling operations for this contract is expected to commence in the fi rst quarter of FY2008. Towards the end of the year, we saw the delay of the fi nalisation of certain charter contracts under negotiation into the new fi nancial year. These delays temporarily affected the contributions from some capital equipment in our fl eet.

PROSPECTS IN THE NEW FINANCIAL YEAR

The buoyant outlook for the oil & gas industry will continue to spur market demand that will in turn support the growth of our distribution and capital equipment businesses in FY2008. We expect to see further integration of the twin capabilities of KS Energy and AOS. The acquisition of AOS facilitated our expansion into drilling and related services, moving us up the value chain. Into the new fi nancial year, AOS will continue to pursue more rig chartering and management contracts for our capital equipment and services business. We expect capital equipment charter and services to continue to increase its contribution to the Group’s overall performance. On the business front, we are rationalising and improving the quality of our existing fl eet. This will enable us to focus on our core business, which is to provide capital equipment and project management for drilling and related services. Plans are underway to divest non-core assets. Resources will thereafter, be redeployed to strengthen our core asset base.

We expect our results for FY2008 to be profi table.

FINANCIAL REVIEW Revenue The oil & gas and marine industries remained strong, supporting demand for our products and services. The Group’s revenue rose to $402.7 million from $295.1 million (FY2006), representing an increase of $107.6 million (36.4%). The Group’s distribution business continued to be its key revenue contributor, accounting for approximately 73.8% (FY2007: $297.1 million, FY2006: $203.7 million) of the Group’s total revenue. The balance of 26.2% (FY2007: $105.6 million, FY2006: $91.4 million) comprises contribution from the capital equipment and services business. The overall increase in the revenue is primarily attributable to stronger market demand, expansion of our internal distribution capabilities, contributions from business acquisitions and increased contribution from capital equipment business. Profi tabilityGross profi t grew by 56.4% (FY2007: $119.2 million, FY2006: $76.2 million). The year saw improvement in the Group’s profi tability as gross profi t margin rose from 25.8% (FY2006) to 29.6%. The higher gross margin was mainly due to higher margins earned by our capital equipment and services business. In FY2007, other operating income contributed $49.3 million (FY2006: $23.1 million). This increase of $26.2 million was due mainly to profi ts arising from the divestment of our investments in shares of a public listed company. This divestment is in line with our strategy to divest non-core assets to fund future growth. Operating expenses were higher in FY2007 due to the higher level of business activities, the consolidation of the accounts of our wholly owned subsidiary, AOS and the consolidation by Aqua-Terra of the accounts of its newly acquired subsidiaries. Consequently, administrative

12 | Annual Report 2006 • KS Energy Services Limited12 | Annual Report 2007 • KS Energy Services Limited

and distribution expenses reported a cumulative 61.6% increase, rising from $32.0 million (FY2006) to $51.7 million in FY2007. Other operating expenses reported an increase of 320.8% this year, rising from $4.5 million (FY2006) to $18.9 million in FY2007. This $14.4 million increase was mainly due to higher amortization of intangibles, which rose by $5.2 million, due to the acquisition of AOS and acquisitions of two new subsidiary companies by Aqua-Terra; a $5.8 million increase in depreciation due to the acquisition of another jackup rig & a vessel; $1.4 million increase in doubtful debt provision due to the higher level of business activities in FY2007; and an offset of $0.6 million in FY2006 arising from an exceptional gain due to a fi xed asset disposal. Finance costs rose by $13.0 million (621.2%), from $2.1 million (FY2006) to $15.1 million (FY2007). This increase was mainly due to interests incurred on loans obtained for the AOS acquisition ($4.3 million), interest incurred by AOS ($3.3 million), imputed interest for the convertible bond, assuming no conversion at maturity ($2.3 million) and our subscription of the Aqua-Terra rights issues ($0.6 million). Net profi t after tax in FY2007 rose from $54.9 million (FY2006) to $79.8 million (FY2007). Of this amount, net profi t attributable to equity holders amounted to $73.8 million (FY2006: $50.7 million).

BALANCE SHEET REVIEW

The higher level of activities seen this year also expanded the Group’s balance sheet. As at 31 December 2007, total assets amounted to $774.6 million (FY2006: $322.3 million), total liabilities stood at $533.0 million (FY2006: $143.2 million) and we have a balance of $241.6 million (FY2006: $179.1 million) in total equity. Salient details in the Group’s balance sheet as at 31 December 2007 include: InventoriesInventories rose by $146.7 million from $47.5 million (FY2006) to $194.2 million (FY2007). This was due to our inventory holding of a jackup rig, three land rigs and one fl oating warehouse vessel, as part of our efforts to build up of our fl eet of capital assets. Trade receivables Trade receivables saw an increase of $68.8 million, rising from $68.6 million (FY2006) to $137.4 million (FY2007). This was mainly due to the consolidation of trade receivables from AOS, increase in Aqua-Terra’s trade receivables from their newly acquired subsidiaries and increased business activities during the year. Other current assetsOther current assets were higher by $46.3 million, increasing from $36.4 million (FY2006) to $82.7 million

Launch of the KS Titan I in November 2007


(FY2007). This was mainly due to deposit of $15.7 million for a jackup rig and consolidation of a recoverable from a former subsidiary of AOS ($21.2 million) and advances to jointly controlled entities. Property, plant and equipmentProperty, plant and equipment rose by $120.2 million from $7.9 million (FY2006) to $128.1 million (FY2007) due primarily to the inclusion of a jackup rig from the acquisition of AOS. Intangible assetsIntangible assets, comprising goodwill and intangibles arising mainly from the acquisition of AOS and the acquisition of RSC and FEPL by Aqua-Terra, rose by $22.9 million from $6.5 million (FY2006) to $29.4 million (FY2007). Trade and other payablesTrade and other payables rose by $70.2 million, from $72.5 million (FY2006) to $142.7 million (FY2007). This was mainly attributable to the higher levels of trade and other payables at Aqua-Terra ($40.7 million) and the consolidation of the trade and other payables in AOS in FY2007 ($23.7 million). Borrowings The Group’s expansionary efforts during the year to step up its activities in capital equipment chartering, drilling and management services gave rise to higher funding needs. Among the assets acquired in the year were land rigs, jackup rigs and the 100% equity in AOS. The latter owns an operating jackup rig and operates several ongoing management contracts. Expansion needs, partly fulfi lled by borrowings, resulted in a $309.3 million increase in borrowings, which rose from $51.3 million (FY2006) to $360.6 million (FY2007). The Group’s additional borrowings comprise a convertible loan of $96.9 million; loan of $89.3 million relating to our

acquisition of AOS, consolidation of a $44.2 million loan in the accounts of AOS, borrowings of $32.0 million for the purchase of treasury shares; loan of $21.8 million relating to the subscription of Aqua-Terra rights issue. The balance are loans incurred for the acquisition of capital equipment. As at 31 December 2007, the gearing of the Group stood at 1.41 times (net borrowings / equity attributable to equity holders). Shareholders’ equity In FY2007, the increase in equity augmented the Group’s funding and working capital needs. Shareholders’ equity rose from $159.3 million (FY2006) to $195.2 million (FY2007) due to issuance of new shares to strategic investors and profi t generated in the year.

CASH FLOW STATEMENT REVIEW

Cash Flow from Operating Activities Net cash outfl ow was $103.9 million. This was mainly due to higher inventory funding requirement, as the Group expanded its fl eet. Cash Flow from Investing ActivitiesNet cash outfl ow was $97.6 million. This was mainly due to the acquisition of AOS and other investments offsetted by proceeds from sale of other investments. Cash Flow from Financing ActivitiesNet cash infl ow amounted to $230.1 million. This was due mainly to $95.7 million proceeds from the convertible bond, $48.2 million from the issuance of new shares, $20.3 million proceeds from the Aqua-Terra rights issue, and a net loan increase of $121.8 million. As a result, cash and cash equivalents rose from $46.0 million (FY2006) to $85.0 million (FY2007), and unpledgedcash and cash equivalent amounted to $73.5 million.

Pipes of different dimensions are distributed by SSH, an associate company of Aqua-Terra.


Our liftboats are known as self propelled self-elevating platform. They serve

as a multi-purpose platform to support offshore production and undertake

multi-purpose offshore services and activities in the shallow to medium

water depth.

There are 3 liftboats in the KS Energy fl eet comprising:

• Dixie Patriot, a 280-feet leg liftboat equipped with 2 sets of 200T crane

• Titan 1, a 280-feet leg liftboat equipped with 2 sets of 200T crane

• Titan 2, a 280-feet leg liftboat equipped with 2 sets of 200T crane

LIFTBOATS


Financial Highlights

Our subsidiary Aqua-Terra provides integrated supply services to the marine industry.

FINANCIAL HIGHLIGHTS

2007 2006 2005 2004 2003

$’000 $’000 $’000 $’000 $’000

Revenue 402,700 295,132 269,081 95,253 67,564

Profi t before Tax 92,933 64,906 41,538 18,938 7,308

Net Profi t after Tax 79,759 54,923 37,094 16,683 6.503

Net Profi t attributable to Equity Holders 73,757 50,702 33,604 16,271 6,503

Key Balance Sheet Indicators

Shareholders’ Fund 195,181 159,256 109,482 48,411 37,427

Total Assets 774,591 322,327 242,554 131,474 76,888

Total Liabilities 532,974 143,206 117,098 79,461 39,461

Performance Indicators

Earnings Per Share (cents/share)* 31.27 21.30 14.11 6.83 2.73

Net Asset Value (cents/share)* 81.2 67.10 46.00 20.33 15.71

Financial Ratios

ROE(%) 37.8 31.8 30.7 37.9 20.8

ROA(%) 9.5 15.7 13.9 15.6 9.1

Current Ratio (times) 1.63 1.59 1.77 1.62 2.05

Net Gearing (times) 1.41 0.03 Net Cash Net Cash 0.29

* The comparative fi gures have been adjusted for new share placements and bonus share issues for the period up to 31 December 2007.



Revenue Trend (S$ Million)

67.695.3

269.1295.1

402.7

2003 2004 2005 2006 2007

CAGR = 56%

A view of the working deck on an offshore drilling rig.

SEGMENTAL REVENUE & RESULTS

FY2007 FY2006 Change

DistributionRevenue 297.1 203.7 +45.9%

Segmental Results 21.0 19.2 +9.4%

Capital Equipment & ServicesRevenue 105.6 91.4 +15.5%

Segmental Results 27.9 27.2 +2.6%

6.5

16.3

33.6

50.7

73.8

2003 2004 2005 2006 2007

CAGR = 84%

Profi t Attributable To Equity Holders (S$ Million)

Shareholders’ Fund (S$ Million)

37.448.4

109.5

159.3

195.2

2003 2004 2005 2006 2007

CAGR = 51%


BOARD OF DIRECTORS

KRIS TAENAR WILUAN Executive Chairman & Chief Executive Offi cer

TAN FUH GIH Executive Director

WOO PENG KONG Executive Director & Chief Operating Offi cer

GOH BOON CHYE Executive Director (Finance & Admin)

DR ADAM PAUL BRUNET Executive Director

LIM HO SENG Independent Director

LEE BENG CHENG, BILLY Independent Director

WONG MENG YENG Independent Director

SHEIKH FAISAL F.J. AL-THANI Independent Director

KOH SOO KEONG Non-Executive & Non-Independent Director

AUDIT COMMITTEE

LIM HO SENG Chairman

WONG MENG YENG

LEE BENG CHENG, BILLY

NOMINATING COMMITTEE

WONG MENG YENG Chairman

LEE BENG CHENG, BILLY

KRIS TAENAR WILUAN

REMUNERATION COMMITTEE

LEE BENG CHENG, BILLY Chairman

WONG MENG YENG

LIM HO SENG

COMPANY SECRETARIES

LAWRENCE KWAN

LIN MOI HEYANG

REGISTERED OFFICE

No 4 Tuas Avenue 5 Jurong Singapore 639331

Tel: (65) 6415 0808

Fax: (65) 6898 4418

Website: www.ksenergy.com.sg

Company Registration No: 198300104G

REGISTRAR & SHARE TRANSFER OFFICE

Tricor Barbinder Share Registration Services

(a division of Tricor Singapore Pte Ltd)

8 Cross Street #11-00 PWC Building Singapore 048424

AUDITORS

KPMG

Certifi ed Public Accountants

16 Raffl es Quay #22-00 Hong Leong Building Singapore 048581

Partner-in-charge: TAN HUAY LIM

Year of appointment: 2005

PRINCIPAL BANKERS

ABN AMBRO Bank N.V.

Arab Banking Corporation

Bank of China

Citibank, NA.

ING Bank N.V.

KBC Bank N.V.

Maybank Group

Natixis

Oversea-Chinese Banking Corporation Limited

Standard Chartered Bank

The Development Bank of Singapore Limited

The Hong Kong & Shanghai Banking Corporation Limited

United Overseas Bank Limited

Corporate Data

A land drilling rig.


KRIS TAENAR WILUANExecutive Chairman & Chief Executive Offi cer

Board of Directors

TAN FUH GIHExecutive Director

WOO PENG KONGExecutive Director &

Chief Operating Offi cer

GOH BOON CHYEExecutive Director (Finance & Admin)

DR ADAM PAUL BRUNETExecutive Director

LIM HO SENGIndependent Director

WONG MENG YENGIndependent Director

LEE BENG CHENG, BILLYIndependent Director

SHEIKH FAISAL F.J. AL–THANIIndependent Director


KRIS TAENAR WILUANExecutive Chairman & Chief Executive Offi cer

Mr Wiluan is the founder of the Citramas Group, whose business activities include oilfi eld equipment manufacturing, shipping and logistics, drilling services, infrastructure development comprising port, ferry terminals and telephone companies, and the hotel and leisure industry. Under the umbrella of the Citramas Group is the Indonesian public listed PT Citra Tubindo Tbk, a manufacturer of tubular products for the oil & gas industry whose shares are quoted on the Jakarta and Surabaya Stock Exchanges, and 35 other subsidiary companies who activities span different parts of ASEAN. The Citramas Group provides employment to more than 2000 employees across the region.

The President of the Citramas Group, Mr Wiluan is also the President and CEO of PT Citra Tubindo Tbk, and the Chairman of PT Citra Bonang, a Jakarta based industrial chemicals and food distribution group of companies with more than 50 branches throughout Indonesia.

TAN FUH GIHExecutive Director

Mr Tan joined the Group in 1978 and was instrumental in the Group’s expansion into the oil & gas industry in the 1980s. Mr Tan is the founder of the Projects Division which handles all the projects based procurement & supply to the oil & gas major players. Currently, Mr Tan is the President of Oil & Gas Division. He is responsible for the marketing and business development of the Oil & Gas Division and is also involved in the liaison with strategic partners & key customers. Mr Tan graduated with a Bachelor of Commerce (Honours) degree from Nanyang University and he also holds a MBA from the National University of Singapore.

WOO PENG KONGExecutive Director & Chief Operating Offi cer

Mr Woo joined the Group in 2004 when the GlobalTech group of companies, which he co-founded in 2002, became its subsidiaries. Appointed subsequently as Chief Operating Offi cer of the Group, he takes charge of the business operations and leads the high-valued capital equipment projects for the Group. An engineer by profession, Mr Woo has more than 25 years of experience in the oil & gas and marine industry, assuming diversifi ed senior managerial roles in engineering, sales & marketing, new business start-up and joint-ventures with particular expertise in business operations and fi nancial

management. Mr Woo holds a First Class Honours Bachelor Degree in Mechanical Engineering from the University of Singapore and a Certifi ed Diploma in Accounting & Finance from the Chartered Association of Certifi ed Accountants.

GOH BOON CHYEExecutive Director (Finance & Admin)

Mr Goh joined the Group in 1999, is currently the Executive Director responsible for fi nance and administration. He is also responsible to grow the Group’s core businesses in new markets around the world. Mr Goh was the Chief Financial Offi cer in 1999. On 29 November 2002, Mr Goh held the post of Chief Operating Offi cer. During our restructure in 2006, Mr Goh was appointed the Chief Business Development Offi cer on 16 February 2006. Prior to 1998, Mr Goh held the post of Financial Controller in Parker Hannifi n Pte Ltd and Motorola Electronics Pte Ltd. Mr Goh graduated from the University of Singapore in 1976 with a Bachelor of Accountancy Degree and is a Certifi ed Accountant by profession. He also holds a MBA from Oklahoma City University. Mr Goh is a fellow of the Singapore Institute of Certifi ed Public Accountants and the Association of Chartered Certifi ed Accountants of United Kingdom.

DR ADAM PAUL BRUNETExecutive Director

Dr Brunet is presently the Technical Director and Vice President of Manufacturing & Engineering of PT Citra Tubindo Tbk (“Tubindo”). He plays a crucial role of overseeing the manufacturing processes, engineering and business development as well as procurement and marketing functions of Tubindo and its group of companies. Dr Brunet, a postgraduate from Oxford University, is also an established academic who specializes in Operations Management. Through strategic alliances and joint ventures, Dr Brunet has over the last two decades capitalized on Tubindo’s engineering capabilities to develop new technologies, products and services transforming the company into an export driven entity with 75% of product being shipped overseas to major companies in the global oil and gas industry. His major contributions in the early 1980s included the development of Tubindo’s key technologies in threading and heat-treating casing and tubing. In 2003, he established a new intellectual properties subsidiary to develop the market for technologies associated with Tubindo’s established manufacturing operations. Since 2006, Dr Brunet has acted as an Executive Director in KS Energy focusing on the Capital Equipment Division and the group’s businesses and projects in Indonesia.


LIM HO SENGIndependent Director

Mr Lim is an Independent Director and Chairman of the Audit Committee and a member of the Remuneration Committee of the Group. He was appointed our Independent Non Executive Director on 1 September 2005. He is the Chairman of Baker Technology Ltd and Sim Siang Choon Ltd and sits on the Board of several other public companies listed on the Stock Exchange of Singapore. He was the former Chief Executive Offi cer of NTUC Fairprice Cooperative Ltd. Mr Lim is a Fellow of the Institute of Certifi ed Public Accountants Singapore, the Institute of Certifi ed Pubic Accountants Australia and the Association of Chartered Certifi ed Accountants of United Kingdom. He is also a Fellow of the Institute of Chartered Secretaries & Administrators and the Singapore Institute of Directors.

LEE BENG CHENG, BILLYIndependent Director

Mr Lee has extensive experience in the oil & gas and marine industries, having worked in the oil refi ning and petrochemical sectors, offshore drilling rig and platform construction including drilling several oil & gas wells both onshore and offshore in Asia. He held senior positions in several public-listed and private entities in the hydrocarbon industry in Singapore, Malaysia and China including Vice Chairman of the listed Shenzhen-Chiwan Petroleun Supply Base, Chairman of Singapore Offshore Petroleum Supply Base, President of Sembawang Marine & Logistics Ltd (formerly known as Sembawang Maritime Ltd), Managing Director of Hong Kong listed Promet Petroleum Ltd. Mr Lee holds a First Class Honours degree in Mechanical Engineering and a Master of Science (with distinction) from Leeds University, UK. He is also member of the Singapore Institute of Management, the Institute of Engineers Singapore and the Singapore Institute of Directors.

WONG MENG YENGIndependent Director

Mr Wong has been an advocate and solicitor in Singapore since 1984 of which the last 18 years were spent as a corporate lawyer. He is currently a director of Alliance LLC, a law corporation he co-founded and an Independent Director of several companies listed on the Singapore Exchange. Mr Wong graduated from the National University of Singapore in 1983 with a Bachelor of Laws (Honours) degree.

SHEIKH FAISAL F.J. AL–THANIIndependent Director

Sheikh Al-Thani was appointed an Independent Director of the Group on 20 January 2006. He has over 20 years of working experience in the oil & gas industry in Qatar. He started his career in 1987 with state-owned Qatar Petroleum and spent more than a decade working there before being seconded to Arco Qatar, British Petroleum and Anadarko Qatar Energy Co., LLC as Deputy General Manager and Qatar Petroleum’s.representaive in the said companies. In March of 2008, he assumed the position of Sr. Director and Head of Business Develoment in the Middle East for Maersk Oil Qatar as seconded by Qatar Petroleum. Sheikh Al-Thani is the Chairman of both Naama Real Estate Company and Qatar National Export Import Company. He is a prolifi c author and has published numerous books on risk management and trends in the oil & gas industry in the Middle East. He is also the current Chairman of the Society of Petroleum Engineers International - Qatar Section and the Chairman and founding member of the local Qatar Society of Petroleum Engineers (QSPE), as well as a Board Member of the Qatar Supreme Education Council. Sheikh Al-Thani, a Fulbright scholar, completed his fi rst degree in Petroleum Engineering at the University of Tulsa, Oklahoma followed by a Masters in Project Management at the University of Bath as well as a PhD in Project Finance at Leeds University, UK.

KOH SOO KEONGNon-Executive & Non-Independent Director

Mr Koh was appointed as a Non-Executive & Non-Independent Director on 1 Mar 2008. Mr Koh was, until April 2007, the Chief Executive Offi cer and President of Toll Asia Pte Ltd, formerly SembCorp Logistics Ltd (SembLog) which was acquired by Toll in May 2006. Currently, he is the Managing Director of EcoSave Pte Ltd. With over 20 years of experience in the logistics industry, he has helmed SembLog and its preceding companies since 1986. He is a board member of three publicly listed companies and the Deputy Chairman of the Agri-Food and Veterinary Authority of Singapore. He holds a Bachelor of Engineering (Honours), a Master of Business Administration and a Postgraduate Diploma in Business Law from the University of Singapore (now known as the National University of Singapore). He was awarded the Singapore Public Service Commission (PSC) Scholarship in 1971 and a PSC MBA Scholarship in 1983.

Jack-up Drilling Rig


Our land rigs cater to customers’ needs for exploration

and drilling services in depth rating from 4000 to 5000

meters. Both the trailer-mounted type and skid-mounted

drilling land rig can achieve good drilling performance.

There are 6 land rigs in the KS Energy fl eets comprising:

• KS Challenger 1 (1300hp)



• KS Discoverer 1 (1500hp)



O l d i t t t ’ d f l ti

LAND RIGS


LEONG KOK HOChief Financial Offi cer

Mr Leong joined the Group in 2002, has almost 20 years of experience as an accounting professional. He started his career as an auditor with Coopers and Lybrand and involved in audits of the banks, shipping and distributions companies. Thereafter, he held accounting positions in various industries such as oil & gas equipment & personnel service provider, ship building company, engineering company and manufacturing.

Mr Leong also has regional exposure in the China and Myanmar environment. In China, he worked for Kerry Group’s of companies, dealing with edible oil refi nery and packing plants. The company is also distributing one of the market-leader of consumer edible brand in China. He has also experience working in coaster city and inland city in China. During his work in Myanmar, he had experience dealing and supporting oil exploration companies at that time.

Mr Leong is the Chief Financial Offi cer of the Company and is responsible for the running of the accounting and fi nance matters. He also holds several directorship of the subsidiaries and joint ventures of KS Energy. Mr Leong graduated from National University of Singapore in 1988 with an Accountancy Degree and obtained his MBA with University of Southern Queensland in 1999. He is a FCPA with the Institute of Certifi ed Public Accountants of Singapore.

DIANA LENGDirector of Corporate Planning

Ms Leng was appointed Director of Corporate Planning in September 2007. She is responsible for Group Corporate Planning, M&A and fi nance-related activities. Ms Leng brings with her considerable experience in Banking and Finance having worked with ING Bank N.V. (ING) for seven years. She held several positions at ING in the Netherlands, Poland and most recently in Singapore. Her last position was as Director of Business Management responsible for the development and implementation of business strategies for the Corporate Lending Group in Asia. Prior to that, she was Vice President of Commodity Finance, handling the origination, structuring and execution of transactions as well as the provision of fi nance solutions to clients in the Oil & Gas sector. Ms Leng holds a Master of Business Administration (with Distinction) from Universiteit Maastricht in the Netherlands.

JOHN O’LEARYVice Chairman of Atlantic Oilfi eld Services Ltd

Mr O’Leary is CEO of Strand Energy, a Dubai based company specializing in business development in the oil & gas industry. Prior to commencing Strand Energy, Mr. O’Leary was a partner in Pareto Offshore ASA, a consultancy fi rm based in Oslo, Norway. Prior to commencing with Pareto Offshore in November 2004, Mr O’Leary was President of Pride International Inc., a Houston-based onshore and offshore drilling contractor. He joined Pride in 1997 as Vice President-Worldwide Marketing when Pride International acquired his former company, Forasol-Foramer, a Paris-based drilling contractor that specialized in deep offshore drilling and international land drilling. He commenced his professional career in the oil business in 1979 with the Irish National Petroleum Corporation, where he was responsible for crude oil trading and downstream product distribution.

He joined French oil company Total in 1980 and worked as a drilling engineer. In 1985, he joined Forasol-Foramer and served as manager for joint ventures and business development. He was appointed to the managing board of Forasol-Foramer in 1990 and was responsible for worldwide marketing and business development.

Mr O’Leary received an Honors BE in civil engineering from University College, Cork, Ireland in 1977. He holds two post-graduates degrees, one in fi nance from Trinity College, Dublin and one in petroleum engineering from the French Petroleum Institute in Paris.

Mr O’Leary served as a Director of the International Association of Drilling Contractors (IADC) and as IADC Regional Vice President-International. He is a former member of the Board of Trustees of Awty International School in Houston. He is a member of the Supervisory Board of Huisman Itrec, a Dutch company specializing in equipment design and manufacturing for the offshore industry and of Jumbo Shipping a company specializing in specialized heavy lift transport. Mr O’Leary provides consultancy advice to clients in the energy business on business development and growth strategies.

FRANS PLAGGENBURGChief Executive Offi cer of Atlantic Oilfi eld Services Ltd

As part of the acquisition of AOS, Mr Plaggenburg joined the Group in May 2007 as Chief Executive Offi cer and, together with his team of oilfi eld professionals, is overall responsible for the management and development of AOS. Mr Plaggenburg holds a Mechanical Engineering degree from Amsterdam university and completed his thesis at the French Petroleum Institute (IFP) in

Key Executives


Paris. He has worked with reputable drilling contractors such as Forasol/Foramer, Schlumberger Sedco-Forex and Pride International in a variety of managerial positions worldwide. Mr Plaggenburg is a co-founder of Atlantic Marine Oilfi eld Services before the company was listed on the Oslo stock exchange in 2006 and acquired by KS Energy in 2007.

ALFRED SCHWEGLERExecutive Director & Vice President of Human Resource of Atlantic Oilfi eld Services

Mr Schwegler joined the Company in 2007, is currently the Executive Director and as VP responsible for Human Resources. Mr Schwegler holds a Mechanical Engineering degree from Amsterdam. Mr Schwegler served in various capacities worldwide with reputable drilling contractors such as Forasol/Foramer and ENSCO. Mr Schwegler is a co-founder of Atlantic Marine Oilfi eld Services before the company was listed on the Oslo stock exchange in 2006 and acquired by KS Energy in 2007.

ONG ENG SENGVice President of Oil & Gas Division

Mr Ong joined the Group on the 1st January 2008. He has a wealth of more than 30 years of working experience and exposure in the Marine & Offshore Industries, involving in new building, repairing, conversion and reactivation of marine vessels; VLCC tankers and Offshore Mobile Drilling Units. He started his meaningful career in the Marine sector as a Planning Engineer and progressively he held several key Managerial positions, in local major yards.

He traveled globally on business marketing trips and has also acquired valuable overseas working exposure, a total of about 6 years of overseas working experience in Yokohama (Japan), Oslo (Norway), Perth (Australia) and Shanghai (China).

During the last 6 years, he shifted his career to Offshore Oil & Gas sector by working closely with Norwegian Drilling Groups of Companies.

Mr Ong acquired his academic qualifi cations through sponsorships and scholarships of local major yards; a Diploma in Ship Construction from Singapore Polytechnics, a Diploma in Management Studies from the Singapore Institute of Management and a Master Degree in Business Administration from the Oklahoma City University.

RICHARD LINGVice President of Corporate Finance

Mr Ling joined the Group in May 2007. He is responsible for corporate fi nance matters of our company. He has more than 10 years of experience in mergers & acquisitions and venture capital industries. Mr Ling graduated with an honours degree in Building in 1990 and a Master of Business Administration from the National University of Singapore in 1997.

JIANG YANGeneral Manager of Projects Division

Mr Jiang joined the Group in 2002. He is in charge of technical sales and sales support for the oil & gas and marine industries. He has more than 22 years of experience in the marketing and research work in the marine industry. Later, he extended his coverage to the oil & gas industry. He graduated from Naval Engineering Institute, PRC with a Bachelor Degree of Engineering and holds a MBA degree from University of Leicester, UK.

TAN WEI MINManaging Director of KS Flow Control Pte Ltd

Mr Tan joined the Group in 1994 and started the Valves division. In year 2000, Mr Tan secured the master stocking distribution agency from Velan Valves for South East Asia region. Velan Valves is a world’s leading manufacturer of industrial valves for the petrochemical, oil & gas industry. Since then, KS Energy has become one of the leading valves specialists in the region. Subsequently, Mr Tan has taken over the Projects Division, which handles all project based procurement and supply to major oil & gas players. Mr Tan graduated from the Kingston University in the United Kingdom with a Bachelor of Science (Honours) Degree in Information Technology.

RAYMOND NEO KOK KIANExecutive Director of KS Flow Control Pte Ltd

Mr Neo joined the Group in 1983. He has more than 24 years of experience in the hydraulic equipment, instrumentation, spares and parts trading business. He was instrumental in building up the Group’s business, agencies & marketing network.


Distribution services is one of the core businesses of the KS Energy

Group. Together with Aqua-Terra and SSH, the KS Energy group distributes

more than 60,000 line items for the oil & gas, petrochemical, marine and

infrastructure industries in Singapore and the surrounding Asian countries.

DISTRIBUTION

KS ENERGY SERVICES LIMITED

AS AT 31ST DECEMBER 2007

Group Structure

28.4% SSH Corporation Ltd*

54.8% Aqua-Terra Supply Co. Limited*

70% GlobalTech System Engineering Pte Ltd

80% GlobalTech Offshore & Marine Pte Ltd

100% GlobalTech Group Pte Ltd

100% KS Flow Control Pte Ltd

20% SCE Controls & Engineering Pte Ltd

100% KS Equipment (Shanghai) Ltd

DISTRIBUTION


* Listed on SGX Main Board

100% KS Oilfi eld Support (AP) Ltd

100% KS Oilfi eld Support Ltd

100% KS Oilfi eld Services Ltd

100% KS Offshore Marine Services Inc

100% Sphinx Frontier Ltd

100% Atlantic Oilfi eld Services Ltd

100% Atlantic Marine Services Denmark BV

100% Atlantic Marine Services (Cyprus) Group Ltd

100% Atlantic Marine Services BV

100% Atlantic Marine Services Pakistan BV

100% KS Discovery Ltd

100% Harta Holding Pte Ltd

100% Harta Offshore & Marine Services Pte Ltd

25% MMEER Dixie Patriot LLC

100% KS Venture Pte Ltd

100% KS Oil Rig Services Inc

100% KS Discovery (HK) Ltd

100% KS Land Rig Services (HK) Ltd

50% Global Oilfi eld Services Pte Ltd

70% KT Lion Oilfi eld Services Limited

50% KSAM2 Petrodrill Offshore Inc

50% Casadilla Group Pte Ltd

50% Blue Ocean Explorer Ltd

50% BR Offshore Services Limited

50% Girdnal Oilfi eld Services Inc

50% Yakki International Pte Ltd

50% New Strong Group Limited

50% United Oilfi eld Services Pte Ltd

20% M.E.I. Engineers Pte Ltd

CAPITAL EQUIPMENT AND SERVICES

FINANCIAL CONTENTS

Corporate Governance Statement Directors’ Report

Statement by Directors

Independent Auditors’ Report

Consolidated Income Statement

Notes to the Financial Statements

Balance Sheets

Statistics of Shareholders

Consolidated statement of changes in equity

Notice of Annual General Meeting

Consolidated cash fl ow statement

Proxy Form

37 44 47 48

49

55

50

106

51

108

53


KS Energy Services Limited (“KS Energy”) is committed to maintaining good standards of corporate conduct in line with the principles and guidelines set out in the new Code of Corporate Governance 2005 (“Code 2005”).

BOARD OF DIRECTORS

Principle 1: Board’s Conduct of its Affairs

The Board’s primary role is to protect and enhance long-term shareholders’ value. It sets the overall strategic direction of the Company and supervises the management of the Company (the “Management”). It is also responsible for the overall corporate governance of the Company including setting its strategic direction, establishing goals for the Management and monitoring the achievement of these goals.

The principal functions of the Board apart from its statutory responsibilities are to:

a) set values and standards of the Company and ensure that obligations to shareholders and others are understood and met;

b) provide entrepreneurial leadership, approve the strategic and fi nancial objectives, corporate policies and authorisation matrix of the Company;

c) oversee the processes for risk management, fi nancial reporting and compliance and evaluate the adequacy of internal controls; approve annual budget, key operational matters, major acquisition and divestment proposals, major funding proposals of the Company;

d) review management performance; e) approve the nominations to the Board of Directors and appointment of key management, as may be recommended by

the Nominating Committee; andf) assume responsibility for corporate governance framework of the Company.

To facilitate effective management, certain functions of the Board have been delegated to various Board Committees, namely Audit, Nominating and Remuneration Committees. Each Board Committee has the authority to examine particular issue and report back to the Board with their recommendations. The ultimate responsibility for the fi nal decision on all matters, however, lies with the Board. Further information regarding the functions of the respective Board Committees are set out in the later part of the Report.

The Board conducts regular scheduled meetings on quarterly basis. Ad-hoc meetings are convened when circumstances require. The Company’s Articles of Association (the “Articles”) provide for Board meetings to be conducted by way of telephone and video conferencing.

The attendance of the Directors at meetings of the Board and Board committees as well as number of such meetings during the fi nancial year is set out in the table below:

Board Nominating Committee Audit Committee Remuneration

Committee

Name of DirectorNo. of

Meetings Held

AttendanceNo. of

Meetings Held

AttendanceNo. of

Meetings Held

AttendanceNo. of

Meetings Held

Attendance

Mr Kris Taenar Wiluan 5 5 2 2 - - - -

Mr Tan Fuh Gih 5 3 - - - - - -

Mr Woo Peng Kong 5 5 - - - - - -Mr Goh Boon Chye * 4 4 - - - - - -Dr Adam Paul Brunet 5 4 - - - - - -Mr Lim Ho Seng 5 5 - - 5 5 2 2Mr Lee Beng Cheng, Billy 5 5 2 2 5 5 2 2Mr Wong Meng Yeng 5 5 2 2 5 5 2 2Sheikh Faisal F.J. Althani 5 1 - - - - - -

* Mr Goh Boon Chye was appointed on 16 January 2007.

Corporate Governance Statement


Principle 2: Board Composition and Balance

The Board of Directors comprises the following:

Executive Directors

Mr. Kris Taenar WiluanMr. Tan Fuh GihMr. Woo Peng KongMr. Goh Boon Chye (Appointed on 16 January 2007)Dr. Adam Paul Brunet

Non-Executive and Non-Independent DirectorMr. Koh Soo Keong (Appointed on 1 March 2008)

Non-Executive and Independent DirectorsMr. Lim Ho SengMr. Lee Beng Cheng, BillyMr. Wong Meng YengSheikh Faisal F.J. Althani

There is an independent element on the Board with four independent directors out of ten directors of the Company.

The current size of the Board is appropriate for the facilitation of effective decision making. The Board will continue to review the size of the Board on an ongoing basis. As a team, the Board collectively provides core competencies in the areas of oil and gas industry knowledge, legal, accounting, fi nance, business and management experience. The key information of the Board members is set out on pages 24, 25 and 26 of the Annual Report.

The duties and responsibilities of the executive directors are clearly set out in their service agreements and the duties and responsibilities of the non-executive directors are clearly set out in Engagement Letter.

The Directors are responsible for their own training needs and report to the Company. Each director is entitled a certain budget for their training needs, to keep abreast with the latest developments such as updates on the relevant laws and regulations, changes in technology and industrial practice relating to the Company’s business.

The Company has orientation programmes for all newly appointed directors to ensure that they are familiar with the Company’s senior management, culture, business and governance practices. No orientation was carried out in FY2007 as there was no new director.

The Directors who have submitted for re-election at the forthcoming Annual General Meeting of the Company (“AGM”) are Mr Lim Ho Seng, Mr Lee Beng Cheng, Billy and Mr Koh Soo Keong. Their profi les are shown on page 26 of the Annual Report.

Principle 3: Chairman and CEO

The Board is of the opinion that there is an independent element on the Board to enable independent exercise of objective judgement on corporate affairs of the Group and that there is a good balance of power and authority. As such, there is no need for the role of the Chairman and the CEO to be separated.

The Group’s Executive Chairman and Chief Executive Offi cer (“CEO”), Mr Kris Taenar Wiluan plays an instrumental role in developing the business of the Group and provides the Group with strong leadership and vision. He is responsible for the operational and strategic policies of the Group. The Group’s Executive Chairman also has the responsibilities of setting the meeting agenda of the board meetings, leading the other Board members, promoting high standards of corporate governance and maintaining effective communication with shareholders of the Company.



He also bears responsibility for the workings of the Board and ensures that board meetings are held when necessary. He reviews most board papers before they are presented to the Board and ensures that board members are provided with complete, adequate and timely information. As a general rule, board papers are sent to directors in advance in order for directors to be adequately prepared for the meeting. Management staff who can provide additional insight into the matters to be discussed, are invited as and when necessary, to attend at the relevant time during the board meetings.

The fi ve Executive Directors are responsible for the day-to-day operations of the Company. There is clear division of responsibilities between the Executive Chairman and the Executive Directors.

The Executive Chairman and CEO’s performance and appointment to the Board is reviewed periodically by the Nominating Committee (“NC”) and his remuneration package is reviewed by the Remuneration Committee (“RC”).

Principle 6: Access to InformationPrincipal 10: Accountability

Board members are provided with management information with background and explanatory notes pertaining to such areas e.g. budget, forecast, the funding positions and quarterly fi nancial statements of the Group, to help them carry out their responsibilities effectively. In addition, all relevant information on material events and transactions are circulated to directors as and when they arise.

All Board members have separate and independent access to the advice and services of the Company Secretary. The appointment and the removal of the Company Secretary is a matter reserved for the Board.

Under the direction of the Executive Chairman, the Company Secretary’s responsibilities include ensuring that:

(i) board procedures are followed;(ii) compliance with applicable requirements of the Companies Act and listing rules of the SGX are complied with; and(iii) good information fl ows within the Board and its committees and between senior management and non-executive

directors.

All Board members also have separate and independent access to the senior management of the Company and the Group. All Board members are aware that they, whether as a group or individually, in the furtherance of their duties, can take independent professional advice, if necessary, at the Company’s expense.

BOARD COMMITTEES

Nominating Committee

Principle 4: Board Membership

The Nominating Committee comprises the following:

Mr. Wong Meng Yeng (Chairman and Independent Director)Mr. Lee Beng Cheng, Billy (Independent Director)Mr. Kris Taenar Wiluan (Executive Director)

The functions of the NC include the following:

a) identify, review and recommend candidates for appointment as Directors of the Company and appointment to the Board committee as well as to senior management positions in the Company;

b) evaluate the effectiveness of the Board as a whole and assess the contribution by each Director, to the effectiveness of the Board;

c) determine annually whether or not a Director is independent; andd) make recommendations to the Board on the re-appointment or re-election of the Directors to the Board.



During the year, the NC met, reviewed and determined the independence of the Directors.

In accordance with the provisions of the Articles, one-third of the Directors retire by rotation and subject themselves to re-election at every AGM. New Directors who were appointed by the Board will submit themselves for re-election at the following AGM.

Principle 5: Board Performance

The NC uses objective and appropriate quantitative and qualitative criteria to assess the performance of individual directors, and the Board as a whole. Assessment parameters include the attendance records of the directors at Board or Committee meetings, the level of participation at such meetings, the quality of Board processes and the business performance of the Group.

The Board is of the opinion that the Directors are able to exercise objective judgement on corporate affairs independently and no individual or small group of individuals dominates the Board’s decision making process.

The NC assesses whether retiring directors are suitable for re-election and makes recommendation accordingly. The NC considers that the multiple board representations held presently by some Directors do not impede their respective performance in carrying out their duties to the Company.

Audit Committee

Principle 11: Audit CommitteePrinciple 12: Internal ControlsPrinciple 13: Internal Audit

The Audit Committee comprises the following:

Mr. Lim Ho Seng (Chairman and Independent Director)Mr. Lee Beng Cheng, Billy (Independent Director)Mr. Wong Meng Yeng (Independent Director)

The AC performs the following functions:

a) reviews with the external auditors, their audit plan, evaluation of the accounting controls, audit reports and any matters which the external auditors wish to discuss;

b) reviews with the internal auditors, their audit plan, the adequacy of the internal audit procedures and their evaluation of the effectiveness of the overall internal control systems, including fi nancial, operational and compliance controls and risk management;

c) reviews the interim and annual fi nancial statements, including announcements to shareholders and the SGX-ST prior to submission to the Board so as to ensure the integrity of the Company’s fi nancial statements;

d) reviews any signifi cant fi ndings and recommendations of the external and internal auditors and related management response and assistance given by the management to auditors;

e) reviews interested person transactions to ensure that internal control procedures approved by the shareholders are adhered to; and

f) conducts annual review of the independence and objectivity of the external auditors, including the volume of non-audit services provided by the external auditors, to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors before confi rming their re-nomination.

The Group maintains a system of internal controls for all companies within the Group, but recognises that no internal control system will preclude all errors and irregularities. The system is designed to manage rather than to eliminate the risk of failure to achieve business objectives. The controls are to provide reasonable, but not absolute, assurance to safeguard shareholders’ investments and the Group’s assets.



The AC and the Board of Directors, with the assistance of internal audit, review the effectiveness of the key internal controls, including fi nancial, operational and compliance controls, and risk management on an on-going basis. There are procedures in place for both the internal and external auditors to report independently their fi ndings and recommendations to the AC.

The Company has a whistle blowing policy. This policy provides well-defi ned and accessible channels in the Group through which employees may raise concerns about improper conduct within the Group.

The AC has full access to, and cooperation from the Management including internal and external auditors, and has full discretion to invite any director and executive offi cer to attend its meetings. The AC has also express power to investigate any matter brought to its attention, within its terms of reference, with the power to retain professional advice at the Company’s expense.

The Group recognises the importance of the internal audit function which, being independent of Management is one of the principal means by which the AC is able to carry out its responsibilities effectively. Messrs BDO Raffl es Consultants Pte Ltd is the internal auditors of the Group.

Based on its review, the AC believes that the internal auditor is independent and has the appropriate standing to perform its function effectively. The internal auditor plans its internal audit schedules in consultation with Management and submits its plan to the AC for approval. The Internal Auditors report directly to the Chairman of the AC.

The AC conducts regular meetings scheduled on quarterly basis, including but not limited to telephone conferencing. Apart from the quarterly meetings, the AC meets with the external and internal auditors, without the presence of the management at least once a year. Ad-hoc meetings may be carried out from time to time, as circumstances require.

The AC, having reviewed the non-audit services provided by the external auditors to the Group, is satisfi ed with the independence and objectivity of the external auditors and recommends to the Board of Directors, the nomination of the external auditors for re-appointment.

Remuneration Committee

Principle 7: Procedures for Developing Remuneration PoliciesPrinciple 8: Level and Mix of RemunerationPrinciple 9: Disclosure on Remuneration

The Remuneration Committee comprises the following:

Mr. Lee Beng Cheng, Billy (Chairman and Independent Director)Mr. Lim Ho Seng (Independent Director)Mr. Wong Meng Yeng (Independent Director)

The functions of the RC include the following:

a) recommending to the Board base salary level, benefi ts and incentive programs, and identify components of salary which can best be used to focus management staff on achieving corporate objectives;

b) approving the structure of compensation programme (including but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefi ts in kind) for the Directors and senior management to ensure that the programme is competitive and suffi cient to attract, retain and motivate senior management of the required quality to run the Company successfully; and

c) reviewing, on annual basis, the compensation packages of the Company’s Directors and senior management personnel and determining appropriate adjustments.

The Company currently adopts a remuneration policy for staff consisting of a fi xed component and a variable component. The fi xed component is in the form of a base/ fi xed salary. The variable component is in the form of a variable bonus that is linked to the Company and Group and individual performance.



Disclosure on Directors’ Remuneration

In setting the remuneration packages of the Executive Directors, the RC takes into account the respective performances of the Group and the individual. In its deliberation, the RC takes into consideration, remuneration packages and employment conditions within the industry and benchmarked against comparable companies.

Non-Executive Directors are paid a basic fee and an additional fee for serving on any of the committees. The Chairman of each of these committees is compensated for his additional responsibilities. Such fees are approved by the shareholders of the Company as a lump sum payment at the AGM of the Company.

The Directors did not participate in any decision concerning their own remuneration.

Directors of the Company receiving remuneration during the fi nancial year:

Breakdown of the directors’ remunerationSalary & CPF

(%)Fee(%)

Bonus & CPF(%)

Other Benefi ts(%)

Total(%)

$1,000,000 to below $1,250,000Mr Kris Taenar Wiluan 37 - 63 - 100Mr Tan Fuh Gih 30 - 70 - 100$500,000 to below $750,000Mr Woo Peng Kong 34 - 66 - 100Mr Goh Boon Chye Note 1 40 - 51 9 100$250,000 to below $500,000Dr Adam Paul Brunet 48 - 52 - 100Below $250,000Mr Chew Thiam Keng Note 2 100 - - - 100Mr Lim Ho Seng - 100 - - 100Mr Lee Beng Cheng, Billy - 100 - - 100Mr Wong Meng Yeng - 100 - - 100Sheikh Faisal F.J. Althani - 100 - - 100

Note 1: Mr Goh Boon Chye was appointed as an Executive Director on 16 January 2007. Note 2: Mr Chew Thiam Keng stepped down as Managing Director on 1 February 2007 and retired as a Non-Executive Director on 20 April 2007.

The remuneration of the top 5 executives who are not Directors of the Company, fall within the remuneration band of $250,000 to below 500,000. Amongst the top 5 executives, one of them is an immediate family member of an Executive Director.

COMMUNICATION WITH SHAREHOLDERS

Principle 14: Communication with ShareholdersPrinciple 15: Greater Shareholder Participation

The Company strives for timeliness and transparency in its disclosures to the shareholders and the public. All information on the Company’s new initiatives will be fi rst disseminated via SGXNET followed by a news release, where appropriate. The Company currently holds media and analyst briefi ng upon the release of its half year and full year fi nancial results.

The Company does not practise selective disclosure. Price-sensitive information is fi rst publicly released via SGXNET, either before the Company meets with any group of investors or analysts or simultaneously with such meetings. Results and annual reports are announced or issued within the period prescribed by the SGX-ST.



The Company regularly updates its corporate website at www.ksenergy.com.sg through which shareholders will be able to access information on the Group. The website provides a business profi le, corporate announcements, press releases and other information of the Group.

At general meetings of the Company, shareholders are given the opportunity to express their views and ask questions regarding the Company and the Group. The Chairpersons of the Board Committees, external auditors and key management staff are invited to attend the AGMs of the Company.

The Board may from time to time review the provisions of the existing Articles of the Company to ensure they are in line with the good corporate governance practices as recommended by the Code. If the Board thinks fi t, it may propose any necessary amendments to the same to the shareholders for approval.

DEALINGS IN SECURITIES

Directors and employees of the Company are prohibited from dealing in the securities of the Company while in possession of price-sensitive information. The Company issues regular circulars to its Directors, principal offi cers and relevant offi cers who have access to unpublished material price-sensitive information to remind them of the aforementioned prohibition and of the requirement to report their dealings in shares of the Company. The Directors and employees are also prohibited from dealing in the securities of the Company during the period commencing one month before the announcement of the Company’s fi nancial statements for the half year or fi nancial year, as the case may be, and ending on the date of the announcement of the relevant results.

MATERIAL CONTRACTS

There are no material contracts made by the Company and its subsidiaries involving the interest of the chief executive offi cer, each director or controlling shareholder, either still subsisting at the end of the fi nancial year or if not then subsisting, entered into since the end of the previous fi nancial year.

INTERESTED PERSON TRANSACTIONS

The Group has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the Audit Committee and that the transactions are on an arms’ length basis.

The aggregate value of the interested person transactions entered during the fi nancial year under review is as follows:

Name of Interested Person Aggregate value of all interested person transactions during the fi nancial year under review (excluding transactions less than $100,000 and transactions

conducted under shareholders’ mandate pursuant to Rule 920)

Aggregate value of all interested person transactions conducted under

shareholders’ mandate pursuant to Rule 920 (excluding transactions less than

$100,000)

2007$

2006$

2007$

2006$

Kim Seng Holdings Pte Ltd- Tan Fuh Gih

814,356 676,924 – –

PT Citra Tubindo Engineering- Kris Taenar Wiluan

3,322,000 – – –



We are pleased to submit this annual report to the members of the Company, together with the audited fi nancial statements for the fi nancial year ended 31 December 2007.

Directors

The directors in offi ce at the date of this report are as follows:

Kris Taenar Wiluan Tan Fuh Gih Woo Peng Kong Goh Boon Chye (Appointed on 16 January 2007)Adam Paul Brunet Lim Ho Seng Lee Beng Cheng, Billy Wong Meng Yeng Sheikh Faisal F.J. Althani Koh Soo Keong (Appointed on 1 March 2008)

Directors’ interests

According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the “Act”), particulars of interests of directors who held offi ce at the end of the fi nancial year (including those held by their spouses and infant children) in shares, debentures, warrants and share options in the Company and in related corporations (other than wholly-owned subsidiaries) are as follows: Direct Deemed Holdings at Holdings at Holdings at Holdings atName of director and corporation the beginning of the end of the beginning of the end ofin which interests are held the year the year the year the year The Company Ordinary shares fully paid Kris Taenar Wiluan – – 51,516,000 54,216,000Tan Fuh Gih – – 22,689,600 22,689,600Adam Paul Brunet 4,764,000 4,764,000 – – Sheikh Faisal F. J. Althani 100,000 100,000 – –

By virtue of Section 7 of the Act, Kris Taenar Wiluan is deemed to have interests in the shares of the Company and all its subsidiaries at the beginning and at the end of the fi nancial year. Except as disclosed in this report, no director who held offi ce at the end of the fi nancial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning or at the end of the fi nancial year.

There were no changes in any of the above-mentioned interests between the end of the fi nancial year and 21 January 2008.

Neither at the end of, nor at any time during the fi nancial 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 benefi ts by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Except as disclosed in note 25 to the accompanying fi nancial statements, since the end of the last fi nancial year, no director has received or become entitled to receive a benefi t by reason of a contract made by the Company or a related corporation with the director, or with a fi rm of which he is a member, or with a company in which he has a substantial fi nancial interest.

YEAR ENDED 31 DECEMBER 2007

Directors’ Report


Share options

During the fi nancial year, there were:

(i) no options granted by the Company or its subsidiaries to any person to take up unissued shares in the Company or its subsidiaries; and

(ii) no shares issued by virtue of any exercise of options to take up unissued shares of the Company or its subsidiaries.

As at the end of the fi nancial year, there were no unissued shares of the Company or its subsidiaries under option.

Audit Committee

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

Lim Ho Seng (Chairman and Independent Director)Lee Beng Cheng, Billy (Independent Director)Wong Meng Yeng (Independent Director)

The Audit Committee performs the functions specifi ed in Section 201B of the Act, the SGX Listing Manual and the Code of Corporate Governance.

The Audit Committee held fi ve meetings since the last directors’ report. In performing its functions, the Audit Committee met with the Company’s external 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 also reviewed the following:

assistance provided by the Company’s offi cers to the external auditors;

interim fi nancial information and annual fi nancial statements of the Group and the Company prior to their submission to the directors of the Company for adoption; and

interested person transactions (as defi ned in Chapter 9 of the SGX Listing Manual).

The Audit Committee has full access to 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 offi cer 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 reviewed the independence of the external auditors as required under Section 206(1A) of the Act and determined that the external auditors were independent in carrying out their audit of the fi nancial statements of the Group and the Company.

The Audit Committee is satisfi ed with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the auditors, KPMG, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

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


Directors’ Report


On behalf of the Board of Directors

_________________________________Kris Taenar WiluanDirector

_________________________________Goh Boon ChyeDirector

Singapore17 March 2008


Directors’ Report


In our opinion:

(a) the fi nancial statements set out on pages 49 to 105 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 2007 and the results, changes in equity and cash fl ows 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 fi nancial statements for issue.

On behalf of the Board of Directors

_________________________________Kris Taenar WiluanDirector

_________________________________Goh Boon ChyeDirector


Statement by Directors


We have audited the accompanying fi nancial statements of KS Energy Services Limited (the “Company”) and its subsidiaries (the “Group”), which comprise the balance sheets of the Group and the Company as at 31 December 2007, the income statement, statement of changes in equity and cash fl ow statement of the Group for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes, as set out on pages 49 to 105.

Directors’ responsibility for the fi nancial statements

The Company’s directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

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

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

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

Opinion

In our opinion:

(a) the consolidated fi nancial statements of the Group and the balance sheet 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 2007 and the results, changes in equity and cash fl ows of the Group for the year ended on that date; and

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

KPMGCertifi ed Public Accountants


TO THE MEMBERS OF THE COMPANY KS ENERGY SERVICES LIMITED

Independent auditors’ report


Group Notes 2007 2006

$’000 $’000

Revenue 3 402,700 295,132

Cost of sales (283,510) (218,912)

Gross profi t 119,190 76,220

Other operating income 49,329 23,077

Distribution costs (22,839) (21,056)

Administrative expenses (28,889) (10,964)

Other operating expenses (18,899) (4,491)

Profi t from operations 4 97,892 62,786

Finance costs 5 (15,110) (2,095)

Share of results of associates (net of tax) 4,993 1,078

Share of results of jointly controlled entities (net of tax) 13 5,158 3,137

Profi t before income tax 92,933 64,906

Income tax expense 6 (13,174) (9,983)

Profi t for the year 79,759 54,923

Attributable to: Equity holders of the Company 73,757 50,702

Minority interests 6,002 4,221


Earnings per share: Basic (cents) 7 31.27 21.30

Diluted (cents) 7 31.25 21.30

The accompanying notes form an integral part of these fi nancial statements.


Consolidated income statement


Group Company Notes 2007 2006 2007 2006

$’000 $’000 $’000 $’000

Current assets Cash and cash equivalents 8 85,025 46,015 38,119 16,291Amounts due from subsidiaries 9 – – 102,578 25,851Trade receivables 10 137,381 68,593 11,848 23,974Inventories 11 194,240 47,546 – 19,610Other current assets 12 82,739 36,353 27,354 3,790

499,385 198,507 179,899 89,516

Non-current assets Available-for-sale equity securities 28,454 43,462 28,339 43,462Associates and jointly controlled entities 13 84,522 60,658 31,729 19,170Subsidiaries 14 – – 181,620 11,447Property, plant and equipment 15 128,070 7,891 282 890Intangible assets 16 29,400 6,515 – –Other non-current assets 17 4,760 5,294 301 301

275,206 123,820 242,271 75,270

Total assets 774,591 322,327 422,170 164,786

Current liabilities Trade and other payables 18 142,670 72,474 8,315 12,557Amounts due to subsidiaries 19 – – 4,994 1,807Provision for current tax 19,739 11,491 12,132 7,482Borrowings 20 144,878 41,272 79,470 1,618

307,287 125,237 104,911 23,464

Non-current liabilities Trade and other payables 18 5,587 7,800 – –Amounts due to subsidiaries 19 – – 37,298 37,558Borrowings 20 215,718 9,989 176,311 273Deferred tax liabilities 21 4,382 180 3,437 –

225,687 17,969 217,046 37,831

Total liabilities 532,974 143,206 321,957 61,295

Net assets 241,617 179,121 100,213 103,491

Equity attributable to equity holders of the Company Share capital 22 75,941 27,771 75,941 27,771Convertible notes–equity component 23 959 – 959 –Treasury shares 23 (34,510) – (34,510) –Foreign currency translation reserve 23 (13,476) (2,170) – –Fair value reserve 23 18,388 41,438 18,388 41,438Accumulated profi ts 147,879 92,217 39,435 34,282

195,181 159,256 100,213 103,491Minority interests 46,436 19,865 – –

Total equity 241,617 179,121 100,213 103,491


AS AT 31 DECEMBER 2007

Balance sheets


Tota

l

Fo

reig

n

at

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utab

le

cu

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Fai

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to e

qui

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1 Ja

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whi

ch fo

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n

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ign

oper

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– –

(2,0

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– –

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– (2

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ava

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– –

– 30

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–

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–

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disp

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of

av

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sale

inve

stm

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–

– –

(12,

376)

–

(12,

376)

–

(12,

376)

Net

inco

me

and

exp

ense

rec

og

nise

d d

irect

ly in

eq

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–

– (2

,087

) 17

,800

–

15,7

13

– 15

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Pro

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r th

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– –

– –

50,7

02

50,7

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4,22

1 54

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or

the

year

–

– (2

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50

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66

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4,

221

70,6

36

Rep

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and

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– –

– (2

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) –

(2,1

68)

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– –

–

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at 2

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Spe

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fi na

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f 0.6

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53)

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(953

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terim

div

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– –

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–

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– (6

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Acq

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tere

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– –

– –

–

–

(652

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(652

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–

– –

– –

–

At

31 D

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6 27

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–

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92,2

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159,

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19,8

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179,

121

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fi na

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To

tal

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utab

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–

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inve

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oper

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ns

– –

– (1

1,30

6)

– –

(11,

306)

(4

2)

(11,

348)

Cha

nge

in fa

ir va

lue

of a

vaila

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inve

stm

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–

– –

– 19

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–

19,4

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– 19

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Tran

sfer

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to in

com

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ent o

n di

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f

avai

labl

e-fo

r-sa

le in

vest

men

ts

– –

– –

(42,

463)

–

(42,

463)

–

(42,

463)

Net

exp

ense

rec

og

nise

d d

irect

ly in

eq

uity

–

– –

(11,

306)

(2

3,05

0)

– (3

4,35

6)

(42)

(3

4,39

8)P

rofi t

for

the

year

–

– –

– –

73,7

57

73,7

57

6,00

2 79

,759

Tota

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com

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d e

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se f

or

the

year

–

– –

(11,

306)

(2

3,05

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73,7

57

39,4

01

5,96

0 45

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Rep

urch

ase

of s

hare

s –

– (3

4,51

0)

– –

– (3

4,51

0)

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4,51

0)Is

sue

of n

ew s

hare

s 48

,170

–

– –

– –

48,1

70

– 48

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Rec

ogni

tion

of e

quity

com

pone

nt o

f con

vert

ible

bond

s, n

et o

f tax

–

959

– –

– –

959

– 95

9Fi

nal o

ne-t

ier

tax

exem

pt d

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end

paid

of 1

.8 c

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per

shar

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resp

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f 200

6 –

– –

– –

(4,2

63)

(4,2

63)

– (4

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)In

terim

one

-tie

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x ex

empt

div

iden

d pa

id

of

3.0

cen

ts p

er s

hare

–

– –

– –

(6,9

16)

(6,9

16)

– (6

,916

)S

peci

al in

terim

one

-tie

r ta

x ex

empt

div

iden

d pa

id

of

3.0

cen

ts p

er s

hare

–

– –

– –

(6,9

16)

(6,9

16)

– (6

,916

)A

cqui

sitio

n of

sub

sidi

arie

s –

– –

– –

– –

1,46

7 1,

467

Div

iden

ds p

aid

to m

inor

ity in

tere

st

– –

– –

– –

– (1

,193

) (1

,193

)C

apita

l con

trib

utio

ns b

y m

inor

ity s

hare

hold

ers

of

a s

ubsi

diar

y –

– –

– –

– –

20,3

37

20,3

37

At

31 D

ecem

ber

200

7 75

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95

9 (3

4,51

0)

(13,

476)

18

,388

14

7,87

9 19

5,18

1 46

,436

24

1,61

7

The

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form

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fi na

ncia

l sta

tem

ents

.





Group 2007 2006

$’000 $’000

Operating activities Profi t before income tax 92,933 64,906Adjustments for: Amortisation of intangible assets 5,164 –Depreciation of property, plant and equipment 7,691 1,882Plant and equipment written off 3 –Dividend income from available-for-sale equity securities (1,052) (1,153)Gain on disposal of property, plant and equipment (15) (652)Gain on dilution of interest in a jointly controlled entity – (790)Loss/(Gain) on disposal of interest in a jointly controlled entity 16 (783)Gain on disposal of available-for-sale equity securities (42,938) (17,364)Loss on disposal of interest in an associate – 667Interest income (3,850) (2,799)Interest expense 12,730 2,095Amortisation of discount on convertible notes 2,291 –Amortisation of transaction costs incurred in connection with the issue of convertible notes 89 –Negative goodwill arising from additional shares in jointly controlled entity (50) –Share of results of associates (4,993) (1,078)Share of results of jointly controlled entities (5,158) (3,137)

Operating profi t before changes in working capital 62,861 41,794 Changes in working capital: Inventories (129,373) (4,523)Trade receivables (49,293) (18,260)Other current assets (24,017) (1,193)Trade and other payables 42,272 (12,189)

Cash (used in)/generated from operations (97,550) 5,629Income taxes paid (6,374) (4,076)

Cash fl ows from operating activities (103,924) 1,553





Group Note 2007 2006

$’000 $’000

Investing activities Dividends received from available-for-sale equity securities 1,052 1,153Dividends received from associate 1,525 –Interest received 4,949 2,723Payments for purchase of property, plant and equipment (12,547) (2,085)Proceeds from disposal of property, plant and equipment 194 4,984Net cash outfl ow on acquisitions of subsidiaries and minority interest 24 (118,249) (1,665)Payments for investments in associates (65) (41,768)Payments for investments in jointly controlled entities (8,250) (3,986)Proceeds from disposal of interest in a jointly controlled entity – 1,580Proceeds from disposal of interest in an associate 191 1,742Payments for acquisition of available-for-sale equity securities (6,211) –Proceeds from disposal of available-for-sale equity securities 45,568 20,083Advances to a joint venture partner and jointly controlled entities (5,763) (32,573)

Cash fl ows from investing activities (97,606) (49,812)

Financing activitiesBills payable to banks 20,573 (336)Dividends paid to shareholders of the Company (18,095) (14,465)Dividends paid to minority shareholders of subsidiaries (1,193) –Interest paid (15,222) (1,786)(Repayment of)/Proceeds from fi nance lease liabilities (254) 12Proceeds from bank loans 553,042 60,753Repayment of bank loans (431,193) (30,380)Deposits pledged (7,286) –Proceeds from convertible bond, net 95,730 –Proceeds from issue of new shares 48,170 –Payments for repurchase of shares (34,510) (2,168)Payments for share issue expenses – (8)Proceeds from issue of new shares by a subsidiary to minority shareholders 20,337 –

Cash fl ows from fi nancing activities 230,099 11,622

Net increase/(decrease) in cash and cash equivalents 28,569 (36,637)Cash and cash equivalents at beginning of the year 46,015 83,111Effect of exchange rate fl uctuations on cash held in foreign currencies (1,128) (459)

Cash and cash equivalents at end of the year 8 73,456 46,015




These notes form an integral part of the fi nancial statements.

The fi nancial statements were authorised for issue by the Board of Directors on 17 March 2008.

1 Domicile and activities

KS Energy Services Limited (the “Company”) is incorporated in the Republic of Singapore and has its registered offi ce at No. 4, Tuas Avenue 5, Singapore 639331.

The principal activities of the Company are those of trading in hydraulic products, instrumentation and equipment for the shipbuilding, marine and oil and gas industries, commission agents, trading in hardware products and oilfi eld equipment, and investment holding. The principal activities of the subsidiaries are set out in note 14 to the fi nancial statements.

The consolidated fi nancial statements relate to the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interests in associates and jointly controlled entities.

2 Summary of signifi cant accounting policies

2.1 Basis of preparation

The fi nancial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

The fi nancial statements have been prepared on the historical cost basis except for certain fi nancial assets and fi nancial liabilities which are stated at fair value.

The preparation of fi nancial statements requires management to make judgments, 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.

In particular, information about signifi cant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most signifi cant effect on the amount recognised in the fi nancial statements is described in the following notes:

Note 10 – assessment of the recoverability of trade and other receivables Note 11 – assessment of the allowance for inventory obsolescence or slow-moving stocks or for any shortfall in

net realisable value of inventories Note 15 – assumptions of recoverable amounts relating to impairment of property, plant and equipment Note 16 – assumptions of recoverable amounts relating to goodwill impairment Note 24 – allocation of the Group’s purchase price for subsidiaries acquired during the year to identifi able assets

and liabilities

In 2007, the Group adopted the following new/revised FRS and Interpretations (“INT FRS”) which are relevant to its operations:

FRS 107 Financial Instruments: Disclosures Amendments to FRS 1 Presentation of Financial Statements Capital Disclosures INT FRS 109 Reassessment of Embedded Derivatives INT FRS 110 Interim Financial Reporting and Impairment

The change in accounting policies due to the adoption of the above new/revised FRS and INT FRS did not give rise to any adjustments to the opening balances of accumulated profi ts of the prior and current periods or to changes in comparatives.




2 Summary of signifi cant accounting policies (cont’d)

2.1 Basis of preparation (cont’d)

Except for the above changes, the accounting policies set out below have been applied consistently by the Group. The accounting policies used by the Group have been applied consistently to all periods presented in these fi nancial statements.

2.2 Consolidation

Business combinations

Business combinations are accounted for under the purchase method. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition.

The excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the cost of acquisition is credited to the consolidated income statement in the period of the acquisition.

Acquisitions from entities under common control

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for at historical cost to the controlling shareholder and presented as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose, comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group’s controlling shareholder’s consolidated fi nancial statements. The components of equity of the acquired entities are added to the same components within Group equity except that any share capital of the acquired entities is recognised as part of capital reserve. Any difference between the cash paid for the acquisition and net assets acquired is recognised directly in equity.

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the fi nancial and operating policies of an entity so as to obtain benefi ts from its activities. In assessing control, potential voting rights that are presently exercisable are taken into consideration. The fi nancial statements of subsidiaries are included in the consolidated fi nancial statements from the date that control commences until the date that control ceases.

Associates and jointly controlled entities (equity accounted investees)

Associates are entities in which the Group has signifi cant infl uence, but not control, over their fi nancial and operating policies. Signifi cant infl uence is presumed to exist when the Group holds between 20% and 50% of the voting power of another entity. Jointly controlled entities are entities over whose activities the Group has joint control, established by contractual agreements and requiring unanimous consent for strategic fi nancial and operating decisions.

Associates and jointly controlled entities (collectively referred to as “equity accounted investees”) are accounted for using the equity method. The consolidated fi nancial statements include the Group’s share of the income, expenses and equity movements of associates and jointly controlled entities, after adjustments to align their accounting policies with those of the Group, from the date that signifi cant infl uence or joint control commences until the date that signifi cant infl uence or joint control ceases.

When the Group’s share of losses in an associate or a jointly controlled entity exceeds its interest in the investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.





2.2 Consolidation (cont’d)

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated fi nancial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Accounting for subsidiaries, associates and jointly controlled entities by the Company

Investments in subsidiaries, associates and jointly controlled entities are stated in the Company’s balance sheet at cost less accumulated impairment losses.

2.3 Functional and presentation currency

Items included in the consolidated fi nancial statements of each entity in the Group are measured using the currency that best refl ects the economic substance of the underlying transactions, events and conditions relevant to that entity (the “functional currency”). The consolidated fi nancial statements are presented in Singapore dollars. As sales and purchases are denominated primarily in Singapore dollars and receipts from operations are usually retained in Singapore dollars, the directors are of the opinion that the Singapore dollar refl ects the economic substance of the underlying events and circumstances relevant to the Company. All fi nancial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated.

2.4 Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated to the functional currencies of the respective entities in the Group at the exchange rates on the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional currency at the exchange rates on that date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rates on the dates that the fair value was determined.

Foreign exchange differences arising on retranslation are recognised in the income statement except for differences arising on the retranslation of monetary items that in substance form part of the Group’s net investment in foreign operations (see below) and available-for-sale equity instruments (see note 2.7).

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on the acquisition of foreign operations, are translated to Singapore dollars for consolidation at the exchange rates on the balance sheet date. The income and expenses of foreign operations (none of which has the currency of a hyperinfl ationary economy as its functional currency) are translated to Singapore dollars at the exchange rates on the dates of the transactions.

Foreign exchange differences are recognised in the foreign currency translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the foreign currency translation reserve is transferred to the income statement.

Net investment in foreign operations

Exchange differences arising from monetary items that in substance form part of the Company’s net investment in foreign operations are recognised in the Company’s income statement. Such exchange differences are reclassifi ed to equity in the consolidated fi nancial statements. When the net investment is disposed of, the cumulative amount in equity is transferred to the consolidated income statement as an adjustment to the profi t or loss arising on disposal.





2.5 Property, plant and equipment

Owned assets

Items of property, plant and equipment are stated at cost 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 and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use, and the cost of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

Leased assets

Leases of assets in which the Group assumes substantially all the risks and rewards of ownership are classifi ed as fi nance leases. Upon initial recognition, property, plant and equipment acquired through fi nance 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 stated at cost less accumulated depreciation and impairment losses. Leased assets are depreciated over the shorter of the lease term and their useful lives.

Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefi ts embodied within the part will fl ow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.

Depreciation

No depreciation is provided on assets under construction. Depreciation on other property, plant and equipment is provided on a straight-line basis over the estimated useful lives (or lease term, if shorter) of each part of an item of property, plant and equipment as follows:

Leasehold properties Remaining lease termPlant and machinery 5 to 10 yearsRigs 15 yearsMotor vehicles 5 to 7 yearsOffi ce equipment 3 to 7 yearsRenovation, furniture and fi ttings 3 to 10 years

Dry docking is considered a separate component of the rig and is separately depreciated over the period between dry

dockings, or from acquisition until the next dry docking.

The depreciation method, useful lives and residual values are reassessed, and adjusted as appropriate, at each balance sheet date.





2.6 Intangible assets

Goodwill

Goodwill and negative goodwill arise on the acquisition of subsidiaries, associates and jointly controlled entities. Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognised immediately in the consolidated income statement.

Acquisitions occurring between 1 January 2001 and 1 January 2005

Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifi able assets and liabilities of the acquiree.

Goodwill arising on the acquisition of subsidiaries is presented in intangible assets. Goodwill arising on the acquisition of associates and jointly controlled entities is presented together with investments in associates and jointly controlled entities.

Goodwill was stated at cost from the date of initial recognition and amortised over its estimated useful life of 20 years. On 1 January 2006, the Group discontinued amortisation of this goodwill. This remaining goodwill balance is subject to testing for impairment, as described in note 2.10.

Negative goodwill was derecognised by crediting accumulated profi t on 1 January 2005.

Acquisitions on or after 1 January 2005

Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities of the acquiree.

Goodwill arising on the acquisition of subsidiaries is presented in intangible assets. Goodwill arising on the acquisition of associates and jointly controlled entities is presented together with investments in associates and jointly controlled entities.

Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested for impairment as described in note 2.10. Negative goodwill is recognised immediately in the income statement.

Acquisitions of minority interests

Goodwill arising on the acquisition of a minority interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the net assets acquired at the date of exchange.

Other intangible assets

Other intangible assets that are acquired by the Group, which have fi nite useful lives, are measured at cost less accumulated amortisation and impairment losses. Other intangible assets are amortised in the income statement on a straight-line basis over 1 to 20 years, from the date on which they are available for use.

2.7 Financial instruments

Non-derivative fi nancial instruments

Non–derivative fi nancial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.





2.7 Financial instruments (cont’d)

Non-derivative fi nancial instruments are recognised initially at fair value plus, for instruments not at fair value through profi t or loss, any directly attributable transaction costs. Subsequent to initial recognition, non-derivative fi nancial instruments are measured as described below.

A fi nancial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash fl ows from the fi nancial assets expire or if the Group transfers the fi nancial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. Regular way purchases and sales of fi nancial assets are accounted for at trade date, i.e. the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specifi ed in the contract expire or are discharged or cancelled.

Cash and cash equivalents comprise cash balances and bank deposits. Bank overdrafts that are repayable on demand and that form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the cash fl ow statement.

Financial assets at fair value through profi t or loss

An instrument is classifi ed as at fair value through profi t or loss if it is held principally for the purpose of selling in the short term or is designated as such upon initial recognition. Financial instruments are designated as at fair value through profi t or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value in accordance with the Group’s documented risk management and investment strategies. Upon initial recognition, attributable transaction costs are recognised in the income statement when incurred. Financial instruments at fair value through profi t or loss are measured at fair value and changes therein are recognised in the income statement.

Held-to-maturity investments

If the Group has the positive intent and ability to hold debt securities to maturity, they are classifi ed as held-to-maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment losses.

Available-for-sale fi nancial assets

The Group’s investments in certain equity securities are classifi ed as available-for-sale fi nancial assets if they are not classifi ed in any of the other categories. Subsequent to initial recognition, they are measured at fair value and changes therein, other than for impairment losses, and foreign exchange gains and losses on available-for-sale monetary items, are recognised directly in equity. When an available-for-sale fi nancial asset is derecognised, the cumulative gain or loss in equity is transferred to the income statement.

Inter-company loans

Loans to subsidiaries

In the Company’s fi nancial statements, low-interest and interest-free inter-company loans to subsidiaries are recognised initially at fair value. The difference between the fair value and the loan amount at inception is recognised as additional investments in subsidiaries in the Company’s fi nancial statements. Subsequent to initial recognition, these loans are measured at amortised cost less impairment losses. The unwinding of the difference is recognised as interest income in the Company’s income statement over the expected repayment period of the loans using the effective interest method.






Loans from subsidiaries

In the Company’s fi nancial statements, low-interest and interest-free inter-company loans from subsidiaries are recognised initially at fair value. The difference between the fair value and the loan amount at inception is recognised as distributions from subsidiaries in the Company’s fi nancial statements. Subsequent to initial recognition, these loans are measured at amortised cost. The unwinding of the difference is recognised as interest expense in the Company’s income statement over the expected repayment period of the loans using the effective interest method.

Other non-derivative fi nancial instruments

Other non-derivative fi nancial assets are stated at amortised cost using the effective interest method, less any impairment losses except for quasi-equity loans receivable from associates and jointly controlled entities, which are stated at cost less accumulated impairment losses.

Non-derivative fi nancial liabilities are stated at amortised cost using the effective interest method.

Derivative fi nancial instruments

The Group holds derivative fi nancial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related; a separate instrument with the same terms as the embedded derivative would meet the defi nition of a derivative; and the combined instrument is not measured at fair value through profi t or loss.

Derivatives are recognised initially at fair value, and attributable transaction costs are recognised in the income statement when incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are accounted for as described below.

Economic hedges

Hedge accounting is not applied to derivative instruments that economically hedge monetary assets and liabilities denominated in foreign currencies. Changes in the fair value of such derivatives are recognised in the income statement as part of foreign currency gains and losses.

Separable embedded derivatives

Changes in the fair value of separable embedded derivatives are recognised immediately in the income statement.

Intra-group fi nancial guarantees

Financial guarantees are fi nancial instruments issued by the Company that requires the issuer to make specifi ed payments to reimburse the holder for the loss it incurs because a specifi ed debtor fails to meet payment when due in accordance with the original or modifi ed terms of a debt instrument.

Intra-group fi nancial guarantees are accounted for in the Company’s fi nancial statements as insurance contracts. A provision is recognised based on the Company’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.






Third party fi nancial guarantees

Third party fi nancial guarantees are recognised initially at fair value and are classifi ed as fi nancial liabilities. Subsequent to initial measurement, the fi nancial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When fi nancial guarantees are terminated before their original expiry date, the carrying amount of the fi nancial guarantees is transferred to the income statement.

2.8 Club memberships

Club memberships are stated at cost less accumulated impairment losses.

2.9 Inventories

Inventories held for trading

Inventories are stated at the lower of cost and net realisable value. The cost of inventories is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. A write down on cost is made when the cost is not recoverable or if the selling prices have declined below cost.

Contract work-in-progress

Contract work-in-progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profi t recognised to date less allowance for foreseeable losses and progress billings. Cost includes all expenditure related directly to specifi c projects and an allocation of fi xed and variable overheads incurred in the Group’s contract activities based on normal operating capacity.

When it is probable that total contract costs will exceed total contract revenue, an allowance for foreseeable losses is recognised as an expense in the income statement immediately.

Contract work-in-progress is presented as part of inventories in the balance sheet. If payments received from customers exceed the income recognised, the difference is presented as part of trade and other payables in the balance sheet.

2.10 Impairment

Financial assets

A fi nancial asset is assessed at each balance sheet date to determine whether there is any objective evidence that it is impaired. A fi nancial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash fl ows of that asset.

An impairment loss in respect of a fi nancial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash fl ows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale fi nancial asset is calculated by reference to its current fair value.

Individually signifi cant fi nancial assets are tested for impairment on an individual basis. The remaining fi nancial assets are assessed collectively in groups that share similar credit risk characteristics.





2.10 Impairment (cont’d)

Impairment losses in respect of fi nancial assets measured at amortised cost are recognised in the income statement. When a decline in the fair value of an available-for-sale fi nancial asset has been recognised directly in equity and there is objective evidence that the value of the fi nancial asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the income statement even though the fi nancial asset has not been derecognised. The amount of the cumulative loss that is recognised in the income statement is the difference between the acquisition cost and current fair value, less any impairment loss on that fi nancial asset previously recognised in the income statement.

An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For fi nancial assets measured at amortised cost, the reversal is recognised in the income statement. For available-for-sale fi nancial assets that are equity securities, the reversal is recognised directly in equity.

Non-fi nancial assets

The carrying amounts of the Group’s non-fi nancial assets, other than inventories, are reviewed at each balance sheet date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. For goodwill, the recoverable amount is estimated at each balance sheet date, and as and when indicators of impairment are identifi ed.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. A cash-generating unit is the smallest identifi able asset group that generates cash fl ows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement unless it reverses a previous revaluation, credited to equity, in which case it is charged to equity. Impairment losses recognised in respect of cash-generating units are allocated fi rst to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

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 fl ows are discounted to their present value using a pre-tax discount rate that refl ects current market assessment of the time value of money and the risks specifi c to the asset or cash-generating unit.

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 balance sheet 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 asset’s 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. Reversals of impairment losses are recognised in the income statement.

2.11 Employee benefi ts

Defi ned contribution plans

Obligations for contributions to defi ned contribution pension plans are recognised as an expense in the income statement as incurred.

Short-term benefi ts

Short-term employee benefi t obligations are measured on an undiscounted basis and are expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus or profi t-sharing plans if 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.





2.12 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outfl ow of economic benefi ts will be required to settle the obligation. Provisions are determined by discounting the expected future cash fl ows at a pre-tax rate that refl ects current market assessments of the time value of money and the risks specifi c to the liability.

2.13 Income tax

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 on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous periods.

Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities for fi nancial 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 profi t, and differences relating to investments in subsidiaries and jointly controlled entities to the extent that they probably 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 balance sheet 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 profi ts will be available against which the temporary differences can be utilised. Deferred tax assets are reviewed at each balance sheet date and are reduced to the extent that it is no longer probable that the related tax benefi t will be realised.

2.14 Share capital

Ordinary shares are classifi ed as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity.

Where share capital recognised as equity is repurchased (treasury shares), the amount of the consideration paid, including directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Where such shares are subsequently reissued, sold or cancelled, the consideration received is recognised as a change in equity. No gain or loss is recognised in the income statement.

Compound fi nancial instruments

Compound fi nancial instruments issued comprise convertible notes that can be converted to share capital at the option of the holder, and the number of shares issued does not vary with changes in their fair value.

The liability component of a compound fi nancial instrument is recognised initially at the fair value of a similar liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound fi nancial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of compound fi nancial instruments is measured at amortised cost using the effective interest method. The equity component of a compound fi nancial instrument is not remeasured subsequent to initial recognition.





2.14 Share capital (cont’d)

Interest, dividend and losses and gains relating to the fi nancial liability are recognised in the income statement. Distributions to equity holders are recognised against equity, net of any tax benefi t.

2.15 Revenue recognition

Sale of goods

Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is recognised when the signifi cant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably.

Transfers of risk and rewards vary depending on the individual terms of the contract of sales.

Rendering of services

Revenue from rendering of services is recognised when the related services have been rendered.

Revenue from day rate based compensation for drilling operations are recognised based upon contracted day rates and the number of operating days during the period in which the services are rendered.

The mobilisation fees are recognised over the estimated duration of the drilling contract. Incremental cost of mobilisation is deferred and recognised over the estimated duration of the drilling contracts. To the extent that cost exceeds revenue to be recognised, it is expensed as incurred.

Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for services provided in the normal course of business, net of discounts and sales related taxes.

Contract revenue

When the outcome of a construction contract can be estimated reliably, contract revenue and costs are recognised in the income statement using the percentage of completion method, measured by the proportion of costs incurred to-date to the estimated total costs for each contract. Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and can be measured reliably.

When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable and contract costs are recognised in the income statement as an expense in the period in which they are incurred.

Commission income

When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commission earned by the Group.

Commission relates to the sale of products in which the Group acts as an agent in the transaction rather than as the principal. In distinguishing between an agent and a principal, management considers the following factors:

Whether the Group takes title of the goods and has responsibility in respect of the goods sold. Whether the Group collects the revenue from the fi nal customer and whether the credit risk is borne by the

supplier of the goods. Whether the Group can vary the selling prices set by the supplier by more than one percent.





2.15 Revenue recognition (cont’d)

Rental income from operating leases

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 an integral part of the total rental income to be received. Contingent rentals are recognised as income in the period in which they are earned.

Interest income

Interest income is recognised on an accrual basis using the effective interest method.

Dividend income

Dividend income is recognised when the right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

2.16 Lease payments

Payments made under operating 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. Contingent rentals are charged to the income statement in the period in which they are incurred.

Minimum lease payments made under fi nance leases are apportioned between fi nance expense and reduction of the lease liability. The fi nance 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. Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confi rmed.

2.17 Finance costs

All borrowing costs are recognised in the income statement using the effective interest method, 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 be prepared for its intended use or sale.

3 Revenue Group 2007 2006

$’000 $’000

Sale of goods 304,957 242,676Rendering of services 62,043 13,692Contract revenue 10,824 18,558Commission income 2,676 2,209Rental income 22,200 17,997

402,700 295,132




4 Profi t from operations

The following items have been included in arriving at profi t from operations: Group 2007 2006

$’000 $’000

Allowance for/(Reversal of) impairment loss on trade receivables 1,010 (435)Bad trade debts written off 35 43Cost of inventories recognised as an expense 226,670 158,481Allowance for/(Write-back) of inventories obsolescence 151 (198)Depreciation of property, plant and equipment 7,691 1,882Negative goodwill arising from additional shares in jointly controlled entity (50) –Plant and equipment written off 3 –Amortisation of intangible assets 5,164 –Dividend income from available-for-sale equity securities (1,052) (1,153)Foreign exchange gain (1,724) (167)Gain on disposal of property, plant and equipment (15) (652)Gain on dilution of interest in a jointly controlled entity – (790)Loss/(Gain) on disposal of interest in a jointly controlled entity 16 (783)Gain on disposal of available-for-sale equity securities* (42,938) (17,364)Loss on disposal of interest in an associate – 667Interest income (3,850) (2,799)Non-audit fees paid and payable to: - auditors of the Company 570 118- other auditors 19 2Operating lease expense 10,955 10,996Staff costs 33,249 21,492Contributions to defi ned contribution plans, included in staff costs 2,078 1,674

*The gain on disposal of available-for-sale equity securities is arrived at after deducting directors’ remuneration of $1,121,000 (2006: $495,000), being their attributable efforts relating to the disposal.

5 Finance costs Group 2007 2006

$’000 $’000

Recognised in the income statement Interest expense on: - Bank overdrafts 1 4- Finance lease liabilities 65 78- Bills payable to banks 731 616- Bank loans 11,792 1,149- Trade and other payables 141 222- Amortisation of discount on convertible notes 2,291 –- Amortisation of transaction costs incurred in connection with the issue of convertible notes 89 –- Others – 26

Finance costs 15,110 2,095




6 Income tax expense Group Note 2007 2006

$’000 $’000

Current tax expense Current year 13,407 9,933 Deferred tax expense Origination and reversal of temporary differences 21 (233) 50

Income tax expense 13,174 9,983

Reconciliation of effective tax rate Profi t before income tax 92,933 64,906Share of results of associates and jointly controlled entities (net of tax) (10,151) (4,215)

Profi t before income tax excluding share of results of associates and jointly controlled entities 82,782 60,691

Tax calculated using Singapore tax rate of 18% (2006: 20%) 14,901 12,138Effect of different tax rates in other countries (692) (860)Income not subject to tax (7,279) (3,872)Expenses not deductible for tax purposes 6,387 2,802Unrecognised tax losses 41 29Foreign tax credit (net) (184) (254)

13,174 9,983

7 Earnings per share Group 2007 2006

$’000 $’000Basic earnings per share is based on:

(a) Profi t attributable to ordinary shareholders 73,757 50,702

No. of No. of shares shares

(’000) (’000) (b) Number of ordinary shares in issue at beginning of the year 237,295 198,480 Effect of new shares issued 5,652 – Effect of own shares repurchased and cancelled – (95) Effect of own shares repurchased (7,090) – Effect of bonus shares issued – 39,696

Weighted average number of ordinary shares 235,857 238,081

Basic earnings per share (cents) 31.27 21.30




7 Earnings per share (cont’d) Group 2007 2006

$’000 $’000 Diluted earnings per share is based on:

(a) Profi t attributable to ordinary shareholders 73,757 50,702

For the purpose of calculating the diluted earnings per share, the weighted average number of ordinary shares in issue

is adjusted to take into account the contingently issuable shares with the potential ordinary shares weighted for the period outstanding. The effect of the issue of potential ordinary shares on the weighted average number of ordinary shares in issue is as follows:

No. of No. of shares shares

(’000) (’000)

(b) Weighted average number of shares issued, used in the calculation of basic earnings per share 235,857 238,081 Potential ordinary shares issuable under warrants 198 –

Weighted average number of ordinary shares and potential shares assuming full conversion 236,055 238,081 Diluted earnings per share (cents) 31.25 21.30

As at 31 December 2007, the Group has a contractual obligation to convert nine non-listed and non-transferable warrants into 9,000,000 new ordinary shares in the share capital of the Company at $3.084 each for cash commencing on 11 May 2008 and expiring on 11 May 2012.

An option to convert a fi ve-year $96,795,000 zero-coupon convertible note into 23,900,000 shares, expiring on 8 August 2012 was not included in the computation of diluted earnings per share because the convertible note was anti-dilutive.

8 Cash and cash equivalents Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000

Cash and bank balances 48,267 29,795 9,374 4,729Fixed deposits with banks 36,758 16,220 28,745 11,562

85,025 46,015 38,119 16,291

Deposits pledged (11,569) –

Cash and cash equivalents in the cash fl ow statement 73,456 46,015

Included in fi xed deposits with banks is an amount of $7,286,000 (2006: $Nil) that is required to be maintained with the bank during the term of the unsecured bank loan facility as disclosed in note 20. The loan facility is repayable within 3 months, and has been repaid in March 2008.

The deposit pledged of US$2,974,000 ($4,283,000) (2006: $Nil) relates to the performance bond provided by the Group to a charteree of a rig owned by a subsidiary, to provide assurance that the Group would fulfi l its contractual obligations under the charter contract. The performance bond was issued by a bank and the Group placed the equivalent amount in a restricted account at the bank.

The weighted average effective interest rates per annum relating to cash and cash equivalents at the balance sheet date for the Group and the Company are 2.67% (2006: 3.65%) and 2.39% (2006: 3.41%) respectively. Interest rates reprice at intervals of one to three months.




9 Amounts due from subsidiaries Company 2007 2006

$’000 $’000

Trade – 1,240 Non-trade 103,641 25,654Allowance for doubtful receivables (1,063) (1,043)

102,578 24,611

102,578 25,851

The amounts due from subsidiaries, which are mainly denominated in United States dollars, are unsecured and repayable on demand. These amounts bear interests ranging from 3.5% - 10% per annum except for an amount of $21,372,000 (2006: $20,352,000) which is interest-free.

10 Trade receivables Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000 Trade receivables – Third parties 127,303 59,750 1,295 14,538Impairment losses (2,800) (1,929) (152) (482)

124,503 57,821 1,143 14,056 Trade receivables: - A company in which a director of the Company has substantial fi nancial interest 27 47 – 47- Associates 111 8 – –- Jointly controlled entities 12,740 10,717 10,705 9,871

137,381 68,593 11,848 23,974

Trade receivables denominated in currencies other than the Company’s functional currency relate mainly to those denominated in United States dollars.

Concentration of credit risk relating to trade receivables is limited due to the Group’s many varied customers. These customers are internationally dispersed, engage in a wide spectrum of oil rig operations, manufacturing and distribution activities and sell in a variety of end markets. The Group’s historical experience in the collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group’s trade receivables.

The maximum exposure to credit risk for trade receivables at the balance sheet date (by type of customer) is:

Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000

Distribution business customers 94,299 47,352 93 9,544Capital equipment business customers 43,082 21,241 11,755 14,430

137,381 68,593 11,848 23,974

The Group’s top three most signifi cant customers account for $39,070,000 (2006: $21,833,000) of the trade receivables

carrying amount at 31 December 2007.




10 Trade receivables (cont’d)

Impairment losses

The ageing of trade receivables at the balance sheet date is: 2007 2006 Impairment Impairment Gross loss Gross loss

$’000 $’000 $’000 $’000GroupNot past due 55,288 – 27,358 –Past due 0 - 30 days 24,237 – 12,730 –Past due 31 - 120 days 28,532 (38) 24,030 –Past due more than 120 days 32,124 (2,762) 6,404 (1,929)

140,181 (2,800) 70,522 (1,929)

Company Not past due 95 – 12,763 –Past due 0 - 30 days 183 – 3,032 –Past due 31 - 120 days 824 – 5,692 –Past due more than 120 days 10,898 (152) 2,969 (482)

12,000 (152) 24,456 (482)

The change in impairment loss in respect of trade receivables during the year is as follows:

Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000

At 1 January 1,929 2,482 482 847Translation difference (139) (118) (29) –Impairment loss recognised/(reversed) (note 4) 1,010 (435) (301) (365)

At 31 December 2,800 1,929 152 482

Based on historical default rates, the Group believes that no impairment allowance is necessary in respect of trade

receivables not past due or past due up to 120 days. These receivables are mainly arising from customers that have a good record with the Group.

11 Inventories Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000

Finished goods 65,193 44,558 – 19,404Work-in-progress 129,047 2,988 – 206

194,240 47,546 – 19,610

Inventories are stated after allowance.




11 Inventories (cont’d) Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000

At 1 January (2,123) (2,632) (1,212) (1,005)Translation difference (176) 5 – –(Allowance for)/Write back of inventories obsolescence (note 4) (151) 198 (66) (207)Provision utilised 294 306 – –Transfer to subsidiary – – 1,095 –

(2,156) (2,123) (183) (1,212)

In 2007, inventories recognised in cost of sales amounted to $226,670,000 (2006: $158,481,000).

A review is made periodically of inventory for excess inventory, obsolescence and declines in net realisable value below cost and an allowance is recorded against the inventory balance for any such declines. These reviews require management to estimate future demand for the products. In any case, the realisable value represents the best estimate of the recoverable amount and is based on the most reliable evidence available at the balance sheet date and inherently involves estimates regarding the future expected realisable value. The benchmarks for determining the amount of allowance or write-down include ageing analysis, technical assessment and subsequent events. In general, such an evaluation process requires signifi cant judgment and materially affects the carrying amount of inventories at the balance sheet date. Possible changes in these estimates could result in revisions to the valuation of inventory. The amount at the balance sheet date was $194,240,000 (2006: $47,546,000).

The allowance for inventories obsolescence is due to an estimated decrease in net realisable value. The allowance for inventories obsolescence is included in other operating expenses.

12 Other current assets Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000

Non-trade amounts due from: - Associate 24 – 19 –- Jointly controlled entities 16,690 20,977 9,025 2,502- Other related parties 805 – – –- A company in which a director of a subsidiary has substantial fi nancial interests 913 859 – –Other deposits and prepayments 25,139 12,079 16,748 784Recoverables 21,188 – – –Advances to a joint venture partner 4,200 – – –Advances to suppliers 1,842 – – –Value-added tax recoverable 4,142 739 – –Other receivables 7,796 1,699 1,562 504

82,739 36,353 27,354 3,790

The non-trade amounts due from jointly controlled entities, which are denominated in United States dollars, are unsecured and repayable on demand. These amounts are interest-free except for an amount of $1,238,000 (2006: $4,635,000) which bears interest at 6.5% (2006: 6.5%) per annum.




12 Other current assets (cont’d)

The amounts due from a company in which a director of a subsidiary has substantial fi nancial interests are unsecured, interest-free and repayable on demand.

Recoverables of $21.2 million (2006: $Nil) relate to rig upgrading expenditures owing by a former subsidiary of Atlantic Oilfi eld Services Ltd (“AOS”). These amounts were subsequently assigned to an external party as part of the acquisition of AOS by the Group during the year (refer to note 24 for details of acquisition of AOS). The amount is interest-free, unsecured and repayable on demand.

The advances of $4.2 million (2006: $Nil) granted to a joint venture partner by a subsidiary is mainly for the purpose of repairing the subsidiary’s vessel. The advances bear interest at 10% per annum and are to be repaid in accordance to the repayment scheme agreed between both parties.

13 Associates and jointly controlled entities Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000 Investments in associates: - Quoted 45,964 41,575 – –- Unquoted 6,472 1,531 349 556Impairment losses (158) (158) (158) (158)

52,278 42,948 191 398

Investments in jointly controlled entities 6,378 2,534 5,672 3,596Loans to jointly controlled entities 25,866 15,176 25,866 15,176

32,244 17,710 31,538 18,772

84,522 60,658 31,729 19,170

Quoted shares in an associate, at fair value 58,712 35,838 – –

The loans to jointly controlled entities, which are mainly denominated in United States dollars, are unsecured and

interest-free, and settlement is neither planned nor likely to occur in the foreseeable future. These loans form part of the Company’s net investment in the jointly controlled entities.

Details of the associates and jointly controlled entities are as follows: OwnershipName of associates / jointly Country of interest heldcontrolled entities Principal activities incorporation by the Group 2007 2006

% %Associates SSH Corporation Ltd Trading and dealing in industrial Singapore 28.40 28.40 materials, general hardware, welding and cutting equipment and related products M.E.I. Engineers Pte. Ltd. Provision of consultancy services, Singapore 20 20 engineering design and procurement services




13 Associates and jointly controlled entities (cont’d)

OwnershipName of associates / jointly Country of interest heldcontrolled entities Principal activities incorporation by the Group 2007 2006

% %Associates

SCE Controls & Engineering Trading, marketing and installation of Singapore 20 20Pte. Ltd. valves and equipment Genesis Express Pte. Ltd. Logistics, transportation and freight Singapore 30 33.33 forwarding Jambi Supply Base Pte Ltd Supply of oil and gas equipment, Singapore 45 45 consumables and provision of engineering services

Fyns-Kran (Asia) Pte. Ltd. Distribution and supply of marine and Singapore 40 – offshore equipment, products and services to customers with activities requiring deliveries in the South East Asian region

MMEER Dixie Patriot, LLC Ownership and charter of an offshore rig United States 25 – of America Jointly controlled entities Harta Offshore & Marine Ownership and charter of a vessel Singapore – 50Services Pte. Ltd.* United Oilfi eld Services Pte. Ltd. Lease of equipment and machinery Singapore 50 50 Global Oilfi eld Services Pte. Ltd. Provision of procurement and project Singapore 50 50 management services Casadilla Group Pte. Ltd. Ownership and charter of an offshore rig Singapore 50 50

Yakki International Pte. Ltd. Ownership and charter of an offshore rig Singapore 50 50 BR Offshore Services Limited Provision of offshore leasing business Malaysia 50 50 New Strong Group Limited Carrying out offshore and rig services British Virgin Islands 50 50 Blue Ocean Explorer Ltd Ownership and charter of a vessel British Virgin Islands 50 50 KT Lion Oilfi eld Services Provision of rig and oilfi eld related British Virgin Islands 70 70Limited** services

KSAM2 Petrodrill Offshore Inc. Carrying out offshore rig services British Virgin Islands 50 – Forest Green Enterprise Inactive British Virgin Islands 50 –





OwnershipName of associates / jointly Country of interest heldcontrolled entities Principal activities incorporation by the Group 2007 2006

% %Jointly controlled entities

Girdnal Oilfi eld Services Inc. Ownership and charter of land rigs United States 50 50 of America Aqua Terra Middle East Management and operation of an Qatar 49 49 integrated offshore supply base Aqua-Terra Australia Pty Ltd Supplier of equipment to the oil, gas, Australia 50 – marine and mining industries

* On 7 September 2007, the Company’s wholly-owned subsidiary, Harta Holding Pte. Ltd., acquired the remaining

50% equity interests or 125,000 ordinary shares in a former jointly controlled entity, Harta Offshore & Marine Services Pte. Ltd., from Cooper’s Mechanical Oilfi eld Services Pte Ltd. Accordingly, this investment has been reclassifi ed to “subsidiaries” (refer to note 14) in the Company’s balance sheet as at 31 December 2007. Refer to note 24 for further details of the acquisition.

** Although the Group owns more than half of the voting power of the entity, it does not control the entity as it does not have the power to cast the majority of votes at meetings of the board of directors, which has control of the entity. Consequently, the Group does not consolidate its investment in the entity as a subsidiary.

Deloitte & Touche, Singapore is the auditor of the Group’s signifi cant associate, SSH Corporation Ltd, whose shares are listed on the Singapore Exchange Limited (“SGX”). For this purpose, an associated company is considered signifi cant as defi ned under the SGX Listing Manual if the Group’s share of its net tangible assets represents 20% or more of the Group’s consolidated net tangible assets, or if the Group’s share of its pre-tax profi ts accounts for 20% or more of the Group’s consolidated pre-tax profi ts.

Summarised fi nancial information of the associates, not adjusted for the percentage of ownership held by the Group, is as follows:

Group 2007 2006

$’000 $’000

Assets and liabilities Total assets 217,118 126,938

Total liabilities (93,696) (44,706)

Results Revenue 209,968 44,356

Profi t after tax 17,030 4,867

Investments in associates include goodwill of $5,203,000 (2006: $4,803,000). On 3 November 2006, the Group acquired a 28.4% equity interest in an associate, SSH Corporation Ltd. The goodwill of $4,803,000 was determined on a provisional basis as at 31 December 2006. During the year, the Group completed the allocation of the purchase price to its share of associate’s assets and liabilities, and recognised an increase of $400,000 to the provisional goodwill.





The aggregate amounts of assets and liabilities of the jointly controlled entities as at the balance sheet dates, not adjusted for the percentage of ownership held by the Group, are as follows:

Group 2007 2006

$’000 $’000Assets and liabilities Non-current assets 135,772 110,722Current assets 94,670 35,372

Total assets 230,442 146,094

Non-current liabilities (107,736) (82,671)Current liabilities (97,562) (57,151)

Total liabilities (205,298) (139,822)

The Group’s share of assets and liabilities of the jointly controlled entities has not been disclosed as such assets and

liabilities cannot be allocated to the Group on a reasonable basis given that the Group’s profi t-sharing ratios in certain jointly controlled entities are variable and are different from the proportion of ownership interest held by the Group in those jointly controlled entities.

Other summarised fi nancial information of the jointly controlled entities, adjusted for the percentage of ownership held by the Group, is as follows:

Group 2007 2006

$’000 $’000Results Revenue 15,401 15,309Expenses (10,243) (12,172)

Profi t after tax 5,158 3,137

Contingent liabilities incurred directly by the Group (1) 44,461 35,940 Capital commitments in relation to interest in jointly controlled entities 360 385 Group’s share of jointly controlled entities’ capital commitments 107,677 54,946

(1) The contingent liabilities incurred directly by the Group relate to the fi nancial guarantees issued to certain banks by the Group in respect of banking facilities granted to certain jointly controlled entities. Included in these contingent liabilities are the following:

(a) The Company issued a fi nancial guarantee to a bank in respect of banking facilities granted to an associate of a jointly controlled entity amounting to $Nil (US$Nil) (2006: $7,700,000 or US$5,000,000). The banking facilities have been fully paid at 31 December 2007.

(b) The Company issued a fi nancial guarantee to a bank in respect of banking facilities granted to a jointly controlled entity amounting to $12,096,000 or US$8,400,000 (2006: $12,936,000 or US$8,400,000), of which the amount utilised at the balance sheet date was $7,938,000 or US$5,513,000 (2006: $11,724,020 or US$7,613,000). In addition, a subsidiary of the Company, which leases certain equipment from the aforesaid jointly controlled entity, entered into an assignment agreement with the bank pursuant to which the following rights, title and interest of the subsidiary were assigned to the bank as security for the banking facilities granted to the jointly controlled entity:





(i) all earnings of the subsidiary arising from the sublease of a leased offshore rig and related equipment to a third party;

(ii) all rights, title and interest of the subsidiary to and in the above-mentioned sublease of the leased offshore rig and related equipment to a third party;

(iii) all sums owing to the subsidiary from any party in connection with the above-mentioned leased offshore rig and related equipment;

(iv) all monies held in the subsidiary’s escrow accounts with the bank; (v) a fi xed charge over all the rights, title and interest of the subsidiary as set out in sub-paragraphs

(i) to (iv) above; and (vi) all sums owing to the subsidiary from the jointly controlled entity shall be subordinated to the

banking facilities granted to the jointly controlled entity and if the bank so requires, such sums owing to the subsidiary from the jointly controlled entity shall be collected by the subsidiary and paid to the bank.

(c) The Company issued a fi nancial guarantee to a bank in respect of banking facilities granted to a jointly controlled entity amounting to $21,600,000 or US$15,000,000 (2006: $4,620,000 or US$3,000,000), of which the amount utilised at the balance sheet date was $19,310,000 or US$13,410,000 (2006: $1,434,000 or US$932,000). The Company and the joint venture shareholders shall maintain their respective 50% ownership each in the jointly controlled entity.

(d) The Company issued fi nancial guarantees to banks in respect of banking facilities granted to jointly controlled entities amounting to $39,232,000 (2006: $15,562,000), of which the amounts utilised at the balance sheet date were $17,213,000 (2006: $15,082,000).

14 Subsidiaries Company 2007 2006

$’000 $’000 Quoted shares, at cost 27,787 3,420Unquoted shares, at cost 154,591 8,826Impairment losses (758) (799)

181,620 11,447

Quoted shares, at fair value 90,416 49,376

Details of the subsidiaries are as follows: Ownership Country of interest heldName of subsidiaries Principal activities incorporation by the Group 2007 2006

% %Held by the Company Aqua-Terra Supply Co. Limited Trading in tools and equipment for the Singapore 54.81 54.81 marine and oil and gas industries KS Venture Pte. Ltd. Investment holding Singapore 100 100(formerly known as Atlantic Esbjerg Holding Pte. Ltd.)




14 Subsidiaries (cont’d) Ownership Country of interest heldName of subsidiaries Principal activities incorporation by the Group 2007 2006

% %Held by the Company Globaltech Group Pte. Ltd. Investment holding Singapore 100 100 Harta Holding Pte. Ltd. Investment holding Singapore 100 100 Kim Seng Hardware & Inactive Singapore 100 100Oilfi eld Supply Pte. Ltd. S&E Tech Pte. Ltd. Assembly and trading of electrical Singapore 100 100 engineering goods, electronics appliances and heavy equipment KS Flow Control Pte. Ltd. Trading and supply of instrumentation Singapore 100 – and valves; and industrial products for the oil and gas, marine and shipbuilding industries S&E Cumford (Thailand) Ltd Distribution of electric motors, Thailand 100 100 machinery, electronics equipment and chemicals KS Oilfi eld Support Ltd. Provision of marketing services and Mauritius 100 100 project-based procurement services KS Oilfi eld Services Ltd. Provision of oilfi eld support and Mauritius 100 100 consultancy services Sphinx Frontier Ltd. Investment holding British Virgin Islands 100 – KS Offshore Marine Investment holding British Virgin Islands 100 –Services Inc. KS Oil Rig Services Inc. Ownership and leasing of equipment British Virgin Islands 100 – KS Discovery Ltd. Ownership and chartering of rigs British Virgin Islands 100 – and provision of services to the oil and gas industry

KS Land Rig Services (HK) Ownership and chartering of land Hong Kong 100 –Limited rigs and provision of services to the oil and gas industry KS Discovery (HK) Ltd Ownership and chartering jack up rigs Hong Kong 100 – and provision of services for oil and gas industry KS Oilfi eld Support Carrying out offshore rig services, Hong Kong 100 100(Asia Pacifi c) Limited marketing and consultancy services and leasing of equipment to the oil and gas industry




14 Subsidiaries (cont’d) Ownership Country of interest heldName of subsidiaries Principal activities incorporation by the Group 2007 2006 % %Held by the Company

KS Energy Services Inactive Vietnam – 100Workshop Ltd. KS Equipment (Shanghai) Ltd. Trading in hydraulic products People’s Republic 100 100 of China Held by subsidiaries Harta Offshore & Marine Ownership and charter of a vessel Singapore 100 –Services Pte. Ltd.* MarineHub Pte. Ltd. Trading of marine-related products and Singapore 100 100 provision of marine-related services Orient Marine Pte. Ltd. Trading of spare parts and provision Singapore 100 100 of ship-handling services to vessels Starbeam Technology Pte. Ltd. Testing and certifi cation for related Singapore 100 100 marine, offshore and construction products

MH Global Pte. Ltd. Building of ships and tankers Singapore 100 –

Aqua-Terra Oilfi eld Equipment Trading of tools and equipment for the Singapore 100 –& Services Pte. Ltd. marine, oil and gas industries Aqua-Terra Global Pte. Ltd. Trading of tools and equipment for the Singapore 100 – marine, oil and gas industries

Aqua-Terra Logistics Pte. Ltd. Provision of value-added logistics Singapore 100 – Globaltech Systems Engineering Design, engineering, fabrication and Singapore 70 70Pte. Ltd. system integration and trading of engineering products for the marine, oil & gas, power generation and chemical industries

Globaltech Offshore & Marine Supplying and servicing Singapore 80 80Pte. Ltd. industrial/marine hoses, fi ttings and related products

Fischer Engineering Pte. Ltd. Repair and supply of turbocharges Singapore 70 – Amos International (S) Pte. Ltd. Shipping chandlers and general traders Singapore 51 51 Amos Solutions Pte. Ltd. Business of shipping and freight Singapore 51 51 forwarding agents and the provision of collection and delivery services S&E Cumford Sdn. Bhd. Inactive Malaysia 100 100 PT MH Global Indonesia Fabrication and sale of wire ropes Indonesia 99 – and provision of testing services





% %Held by subsidiaries

Atlantic Esbjerg Limited Inactive Mauritius 100 100 Aqua-Terra Supply (Shanghai) Supplies of consumables, spare parts People’s Republic – 100Co. Ltd. and equipment, and providing rigging of China and related services to the oil and gas, marine and related industries

Aqua-Terra Offshore Facilitating the use of bonded People’s Republic 100 100(Shanghai) Co. Ltd. warehouse and business of China transactions within the Wai Gao Qiao Free Trade Zone Aqua-Terra Supply (Tianjin) Sale and supply of consumables & People’s Republic 100 –Oilfi eld Equipment Trading equipment, provision of rigging and of ChinaCo Ltd related services to the oil and gas industries in the PRC, especially in the Bohai region Raymonds Supply (Shanghai) International trading, transit trading, People’s Republic 100 –Co., Ltd. trading at bonded warehouse area, of China trading with import and export companies in PRC with legal license, simplifi ed processing and business consultancy Sure Link Transportation Transportation and forwarding services People’s Republic 100 –Limited of China

Raymonds Supply Co Limited Trading of metalware and provision of Hong Kong 75 – transportation services Atlantic Oilfi eld Services Ltd. To provide rig rental, rig management Bermuda 100 – and support services for the oil and gas industry Atlantic Marine Services To provide rig management and support Cyprus 100 –(Cyprus) Group Ltd. services for the oil and gas industry Atlantic Marine Services To develop business prospects in the Netherlands 100 –Denmark BV onshore/offshore/marine industry, to manage accommodation-platforms





% %Held by subsidiaries

Atlantic Marine Services BV To develop business prospects in the Netherlands 100 – onshore/offshore/marine industry, to manage accommodation-platforms Atlantic Marine Services To develop business prospects in the Netherlands 100 –Pakistan BV onshore/offshore/marine industry, to manage accommodation-platforms

KPMG Singapore is the auditor of all Singapore-incorporated subsidiaries except that RSM Chio Lim is the auditor of a signifi cant Singapore-incorporated subsidiary, Aqua-Terra Supply Co. Limited, whose shares are listed on the SGX. Another member fi rm of KPMG International, KPMG Hague is the auditor of a signifi cant foreign-incorporated subsidiary Atlantic Oilfi eld Services Ltd. The other subsidiaries are not considered signifi cant. For this purpose, a subsidiary is considered signifi cant as defi ned under the SGX Listing Manual if its net tangible assets represent 20% or more of the Group’s consolidated net tangible assets, or if its pre-tax profi ts account for 20% or more of the Group’s consolidated pre-tax profi ts.

15 Property, plant and equipment Renovation, Plant furniture Leasehold and Motor Offi ce and properties machinery Rigs vehicles equipment fi ttings Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000Group Cost At 1 January 2006 3,507 10,139 – 2,412 3,717 1,522 21,297Additions – 391 – 602 678 414 2,085Assets acquired in business combinations (note 24) – 141 – 608 – 21 770Disposals – (5,407) – (165) (72) (26) (5,670)Translation differences – (457) – – (3) – (460)

At 31 December 2006 3,507 4,807 – 3,457 4,320 1,931 18,022

At 1 January 2007 3,507 4,807 – 3,457 4,320 1,931 18,022Additions 110 10,540 – 180 1,074 643 12,547Assets acquired in business combinations (note 24) – 56 122,064 64 331 154 122,669Write off – – – – (300) (159) (459)Disposals – (252) – (289) (8) – (549)Translation differences – (712) (6,864) (4) (17) 15 (7,582)

At 31 December 2007 3,617 14,439 115,200 3,408 5,400 2,584 144,648




15 Property, plant and equipment (cont’d) Renovation, Plant furniture Leasehold and Motor Offi ce and properties machinery Rigs vehicles equipment fi ttings Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000Group Accumulated depreciation and impairment losses At 1 January 2006 1,549 4,068 – 1,257 2,675 870 10,419Depreciation charge for the year 52 458 – 385 753 234 1,882Disposals – (1,865) – (110) (56) (20) (2,051)Translation differences – (117) – – (2) – (119)

At 31 December 2006 1,601 2,544 – 1,532 3,370 1,084 10,131

At 1 January 2007 1,601 2,544 – 1,532 3,370 1,084 10,131Depreciation charge for the year 115 1,118 4,977 500 721 260 7,691Write off – – – – (297) (159) (456)Disposals – (247) – (118) (5) – (370)Translation differences – (295) (107) – (16) – (418)

At 31 December 2007 1,716 3,120 4,870 1,914 3,773 1,185 16,578

Carrying amount At 1 January 2006 1,958 6,071 – 1,155 1,042 652 10,878

At 31 December 2006 1,906 2,263 – 1,925 950 847 7,891

At 31 December 2007 1,901 11,319 110,330 1,494 1,627 1,399 128,070

Renovation, furniture Plant and Motor Offi ce and machinery vehicles equipment fi ttings Total

$’000 $’000 $’000 $’000 $’000 Company

Cost At 1 January 2006 1,344 1,207 792 735 4,078Additions – 54 48 1 103Disposals (436) – (30) (25) (491)

At 31 December 2006 908 1,261 810 711 3,690

At 1 January 2007 908 1,261 810 711 3,690Additions – – 81 99 180Disposals (908) (866) (333) (750) (2,857)

At 31 December 2007 – 395 558 60 1,013




15 Property, plant and equipment (cont’d) Renovation, furniture Plant and Motor Offi ce and machinery vehicles equipment fi ttings Total

$’000 $’000 $’000 $’000 $’000 Company

Accumulated depreciation and impairment losses At 1 January 2006 1,261 607 481 512 2,861Depreciation charge for the year 20 178 157 69 424Disposals (435) – (30) (20) (485)

At 31 December 2006 846 785 608 561 2,800

At 1 January 2007 846 785 608 561 2,800Depreciation charge for the year 7 106 140 15 268Disposals (853) (644) (297) (543) (2,337)

At 31 December 2007 – 247 451 33 731

Carrying amount At 1 January 2006 83 600 311 223 1,217

At 31 December 2006 62 476 202 150 890

At 31 December 2007 – 148 107 27 282

The rigs comprise a signifi cant portion of the Group’s assets. The carrying amounts of the Group’s rigs were $110,330,000 as at 31 December 2007 (2006: $Nil). The Group evaluates, amongst other factors, the business outlook of the rigs and related equipment, including factors such as steel value, technological development, laws and regulation applicable to the assets, and changes in economic and market conditions. Indicators of possible impairment include extended periods of idle time and/or inability to contract specifi c assets or groups of assets, such as a specifi c type of drilling rig, or assets in a specifi c geographical region.

The Group’s rig and vessel have been pledged to banks as securities for loans. Refer to note 20 for details of the securities over the rig and vessel.

The carrying amount of property, plant and equipment held by the Group and the Company under fi nance leases amounted to $1,580,000 (2006: $2,454,000) and $38,000 (2006: $67,000) respectively.

The depreciation charge of the Group is recognised in the following line items of the consolidated income statement:

2007 2006

$’000 $’000

Cost of sales 782 –Other operating expenses 6,909 1,882

7,691 1,882




16 Intangible assets Other intangible Note Goodwill assets Total

$’000 $’000 $’000Cost At 1 January 2006 5,734 – 5,734Acquisition through business combinations 24 54 – 54Acquisition of minority interest 727 – 727

At 31 December 2006 6,515 – 6,515

At 1 January 2007 6,515 – 6,515Acquisition through business combinations 24 15,807 13,250 29,057Translation differences (647) (556) (1,203)

At 31 December 2007 21,675 12,694 34,369

Accumulated amortisation At 1 January 2007 – – –Amortisation charge during the year – 5,164 5,164Translation differences – (195) (195)

At 31 December 2007 – 4,969 4,969

Carrying amount At 1 January 2006 5,734 – 5,734

At 31 December 2006 6,515 – 6,515

At 31 December 2007 21,675 7,725 29,400

Other intangible assets comprise mainly pre-acquisition customer contracts, trade name and licences and permits.

Impairment testing for cash-generating units containing goodwill

For the purpose of impairment testing, goodwill is allocated to the Group’s cash-generating units (“CGU”) in its distribution and capital equipment businesses, Aqua-Terra Supply Co. Limited and Atlantic Oilfi eld Services Ltd. respectively.

The aggregate carrying amounts of goodwill allocated to each unit are as follows: 2007 2006

$’000 $’000 Distribution business 7,080 6,515Capital equipment business 14,595 –

21,675 6,515

The recoverable amount of each CGU was determined based on its value in use. Value in use was determined by discounting the future cash fl ows generated from the continuing use of the CGU and was based on the following key assumptions:




16 Intangible assets (cont’d)

Distribution business

Cash fl ows were projected based on actual operating results and the fi nancial budgets approved by management for fi ve years.

Cash fl ows for the fi ve–year period were extrapolated using the industry growth forecast rate of 10% (2006: 10%), and not exceeding the average long-term growth rate for the industry in which the CGU operates.

Pre-tax discount rates of 10.6% (2006: 9.0% to 11.6%) were applied in determining the recoverable amounts of the CGUs. The discount rates were estimated based on the relevant industry average weighted average cost of capital.

A capital charge of 8% was applied in determining the cash fl ows that are generated by the CGU’s intangible assets, other than goodwill.

Capital equipment business

Cash fl ows were projected based on actual operating results and the fi nancial budgets approved by management ranging from ten months to fi ve years.

Cash fl ows for the ten months to fi ve–year period were extrapolated using a constant growth rate of 5% (2006: Nil), and not exceeding the average long-term growth rate for the industry in which the CGU operates.

Pre-tax discount rates of 16% (2006: Nil) were applied in determining the recoverable amounts of the CGUs. The discount rates were estimated based on the relevant industry average weighted average cost of capital.

A capital charge of 8% was applied in determining the cash fl ows that are generated by the CGU’s intangible assets, other than goodwill.

The values assigned to the key assumptions represent management’s assessment of future trends in the Group’s distribution and capital equipment businesses and are based on both external sources and internal sources (historical data).

At the balance sheet date, based on the key assumptions, management believes that the recoverable amount of goodwill exceeds its carrying amount.

The amortisation charge of other intangible assets is recognised in other operating expenses in the consolidated income statement.

17 Other non-current assets Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000 Non-trade amount due from jointly controlled entity 4,432 4,966 – –Club memberships 328 328 301 301

4,760 5,294 301 301

The amount due from the jointly controlled entity, which is denominated in United States dollars, is unsecured, bears interest at 6.5% per annum, and is repayable within 5 years. This amount is subordinated to a bank for banking facilities granted to the jointly controlled entity as disclosed in note 13.




18 Trade and other payables Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000Current Trade payables: - Third parties 83,605 30,659 1,391 7,004- Associate 195 19 – –Amounts due to jointly controlled entity - Trade 1,109 6,086 – –- Non-trade 8,399 – – –Amounts due to a company in which a director of a subsidiary has substantial fi nancial interests:- Trade 6,987 1,907 – –- Non-trade 1,447 3,536 4 –Accrued operating expenses 23,296 13,070 6,246 5,175Deposits and advances received from customers 12,932 13,105 – –Other payables 4,700 4,092 674 378

142,670 72,474 8,315 12,557

Non-current Amounts due to a company in which a director of a subsidiary has substantial fi nancial interests: - Trade – 959 – –- Non-trade – 592 – –Deposits and advances received from customers – 3,465 – –Accrued operating lease expense 5,587 2,784 – –

5,587 7,800 – –

Total trade and other payables 148,257 80,274 8,315 12,557

The amounts due to a company in which a director of a subsidiary has substantial fi nancial interests are unsecured, interest-free and repayable on demand.

The non-trade amounts due to a jointly controlled entity are unsecured, interest-free and repayable on demand.

Trade and other payables denominated in currencies other than the Company’s functional currency relate mainly to those denominated in United States dollars.

19 Amounts due to subsidiaries Company 2007 2006

$’000 $’000Non-trade payables: - Current 4,994 1,807- Non-current 37,298 37,558

42,292 39,365

The amounts due to subsidiaries, which are mainly denominated in United States dollars, are unsecured and the non-current portion is repayable within 5 years. These amounts are interest-free except for an amount of $11,297,000 (2006: $11,617,000) which bears interest at 1% (2006: 1%) per annum.




20 Borrowings Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000 Current Bills payable to banks (unsecured) 27,516 6,943 8,947 601Secured bank loan 56,160 30,000 31,680 –Unsecured bank loans 60,986 3,960 38,836 1,000Finance lease liabilities 216 369 7 17

144,878 41,272 79,470 1,618

Non-current Secured bank loans 112,033 – 79,355 –Unsecured bank loans 5,767 8,990 – 250Convertible bonds 96,940 – 96,940 –Finance lease liabilities 978 999 16 23

215,718 9,989 176,311 273

Total borrowings 360,596 51,261 255,781 1,891

Securities

Secured bank loans

Included in the secured bank loans of the Group are as follows:

(i) an amount of $21.8 million (2006: $Nil) secured by 64,125,000 ordinary shares in a subsidiary, Aqua-Terra Supply Co. Limited.

(ii) $89.2 million (2006: $Nil) secured by a pledge on all of the ordinary shares in a subsidiary, Sphinx Frontier Ltd, a wholly owned subsidiary which owns Atlantic Oilfi eld Services Ltd (“AOS”), a charge over the Company’s interest in the subsidiary’s accounts, a pledge over 100% of AOS’s issued share capital and an assignment by a subsidiary, KS Oilfi eld Support (Asia Pacifi c) Limited’s interest in a marketing agreement with a former subsidiary of AOS.

(iii) $44.2 million (2006: $Nil) secured by a fi rst priority mortgage over the subsidiary, AOS’s rig with a carrying value of $110,330,000 (2006: $Nil), an assignment by AOS of insurances with respect to the jackup rig, an assignment of its accommodation vessel management contract and other management contracts, a charge of shares in AOS’s subsidiary, Atlantic Marine Services (Cyprus) Group Limited, and a charge over the collection account and escrow account created pursuant to the facility.

(iv) $13 million (2006: $Nil) secured by a subsidiary’s vessel with a carrying value of $16.8 million (2006: $Nil).

(v) The secured bank loan of $30 million as at 31 December 2006 was secured on the Group’s ownership interest in an associate, SSH Corporation Ltd, with a carrying amount of $41,575,000 as at 31 December 2006. The amount was fully repaid during the year ended 31 December 2007.

Finance lease liabilities The secured fi nance lease liabilities relate to hire purchase liabilities secured on certain motor vehicles and offi ce

equipment of the Group and the Company.




20 Borrowings (cont’d)

Terms and debt repayment schedule

Terms and conditions of outstanding loans and borrowings are as follows:

2007 2006 Nominal interest Year of Face Carrying Face Carrying rate maturity value amount value amount

$’000 $’000 $’000 $’000Group Finance lease liabilities 2.2 - 3.5% 2008 - 2014 2,287 1,194 2,133 1,368 Convertible notes Nil 2012 96,795 96,940 – – Secured Bank loans COF + 0.5 - 1.875% 2008 - 2010 184,250 168,193 34,470 30,000 Unsecured Bills payable to banks COF + 1.2 - 1.25% Within one year 27,516 27,516 6,943 6,943 Bank loans COF + 0.5 - 1.875% 2008 - 2009 74,955 66,753 16,400 12,950

385,803 360,596 59,946 51,261

Company Finance lease liabilities 3.63% 2011 70 23 70 40 Convertible notes Nil 2012 96,795 96,940 – – Secured Bank loans COF + 1 - 1.25% 2008 - 2010 117,290 111,035 – – Unsecured Bills payable to banks COF + 1.2 - 1.5% Within one year 8,947 8,947 601 601 Bank loans COF + 1 - 1.25% Within one year 41,586 38,836 3,000 1,250

264,688 255,781 3,671 1,891

The following are the expected contractual undiscounted cash outfl ows of fi nancial liabilities, including interest payments and excluding the impact of netting agreements:

Cash fl ows Within Carrying Contractual Within 1 to 5 More than amount cash fl ows 1 year years 5 years

$’000 $’000 $’000 $’000 $’000

Group 31 December 2007 Variable interest rate loans 234,946 (251,767) (123,123) (128,644) –Finance lease liabilities 1,194 (1,297) (236) (1,012) (49)Bills payable 27,516 (28,020) (28,020) – –Convertible notes 96,940 (126,966) – (126,966) –Trade and other payables 142,670 (142,670) (142,670) – –

503,266 (550,720) (294,049) (256,622) (49)




20 Borrowings (cont’d) Cash fl ows Within Carrying Contractual Within 1 to 5 More than amount cash fl ows 1 year years 5 years

$’000 $’000 $’000 $’000 $’000 Group 31 December 2006 Variable interest rate loans 42,950 (44,511) (35,109) (9,402) –Finance lease liabilities 1,368 (1,636) (429) (1,109) (98)Bills payable 6,943 (7,050) (7,050) – –Trade and other payables 72,474 (72,474) (72,474) – –

123,735 (125,671) (115,062) (10,511) (98) Company 31 December 2007 Variable interest rate loans 149,871 (163,902) (77,356) (86,546) –Finance lease liabilities 23 (27) (8) (19) –Bills payable 8,947 (9,180) (9,180) – –Convertible notes 96,940 (126,966) – (126,966) –Trade and other payables 8,315 (8,315) (8,315) – –

264,096 (308,390) (94,859) (213,531) – 31 December 2006 Variable interest rate loans 1,250 (3,121) (758) (2,363) –Finance lease liabilities 40 (35) (8) (27) –Bills payable 601 (608) (608) – –Trade and other payables 12,557 (12,557) (12,557) – –

14,448 (16,321) (13,931) (2,390) –

Maturity of borrowings (excluding trade and other payables and fi nance lease liabilities)

Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000 Payable: - Within 1 year 144,662 40,903 79,463 1,601- After 1 year but within 5 years 214,740 8,990 176,295 250

Total 359,402 49,893 255,758 1,851

The weighted average effective interest rates per annum relating to borrowings at the balance sheet dates for the Group and the Company are as follows:

Group Company 2007 2006 2007 2006

% % % % Bills payable 5.82 5.95 5.71 6.88Bank loans 5.77 5.11 6.23 5.10

The interest rates for the above bank borrowings reprice at intervals of one to six months.




20 Borrowings (cont’d)

Finance lease liabilities

At the balance sheet dates, the Group and the Company have obligations under fi nance leases that are payable as follows: 2007 2006 Principal Interest Payments Principal Interest Payments

$’000 $’000 $’000 $’000 $’000 $’000Group Payable: - Within 1 year 216 20 236 369 60 429

- After 1 year but within 5 years 932 80 1,012 914 195 1,109- After 5 years 46 3 49 85 13 98

978 83 1,061 999 208 1,207

Total 1,194 103 1,297 1,368 268 1,636

2007 2006 Principal Interest Payments Principal Interest Payments

$’000 $’000 $’000 $’000 $’000 $’000Company Payable: - Within 1 year 7 1 8 17 3 20- After 1 year but within 5 years 16 3 19 23 4 27

Total 23 4 27 40 7 47

Convertible notes Group and Company 2007 2006

$’000 $’000

Proceeds from issue of convertible notes 96,795 –Transaction costs (1,065) –

Net proceeds 95,730 –Amount classifi ed as equity (1,170) –Accreted interest 2,380 –

96,940 –

On 8 August 2007, the Company issued non-listed, and freely tradable and transferable zero coupon convertible notes in a principal amount of $96,795,000. The main terms of the agreement are as follows:

(a) The convertible notes are convertible into approximately 23.9 million shares at an initial conversion price of $4.05.

(b) The convertible notes can be put to the Company for 117.68% on 8 August 2010 and 131.17% on 8 August 2012 (maturity date).

(c) The convertible notes can be mandatorily convertible after 26 months at the option of the Company at a redemption price of 125%.

(d) The yield-to-maturity is 5.5% per annum, calculated on a semi-annual basis.

(e) The convertible notes become repayable on demand if there is a change of control of the Company or a delisting of the Company’s shares. The early redemption amount is the principal plus an amount that would equal a yield of 5.5% per annum, calculated on a semi-annual basis.




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22 Share capital Group and Company 2007 2006 No. of No. of shares shares

(’000) (’000)Fully paid ordinary shares, with no par value: At 1 January 237,295 198,480Issue of new shares 14,500 –Issue of bonus shares – 39,696Repurchase and cancellation of shares – (881)Repurchase of shares (11,308) –

At 31 December 240,487 237,295

As at 31 December 2007, the Company completed the buy-back of 11,308,000 (2006: Nil) ordinary shares, representing 4.7% (31 December 2006: Nil) of the issued share capital on that date, under the terms of the Share Buyback Mandate dated 20 April 2007, approved by shareholders on 20 April 2007. The total consideration for shares bought back on the market is $34,510,000 (2006: $Nil), being an average market price, including incidental cost, of $3.05 (2006: $Nil) per share. The shares bought back under the Shares Buyback Mandate will be held as treasury shares.

During the year, the Company repurchased and cancelled Nil (2006: 881,000) ordinary shares, representing Nil (2006: 0.4%) of its issued share capital, under the terms of the Share Buyback Mandate approved by shareholders at an Extraordinary General Meeting held on 7 August 2006. The total consideration for the shares repurchased from the market was $Nil (2006: $2,168,000), being an average market price, including incidental costs, of $Nil (2006: $2.46) per share.

During the year, the Company issued nine non-listed and non-transferable warrants for no consideration. Each warrant can be converted into 1,000,000 new ordinary shares in the share capital of the Company at $3.084 each for cash commencing on 11 May 2008 and expiring on 11 May 2012.

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.

Capital management

The Board’s policy is to maintain an adequate capital base so as to maintain investor, creditor and market confi dence and to sustain future development of the business. The Board of Directors monitors the return on capital, which the Group defi nes as net operating income divided by total shareholders’ equity excluding minority interest. The Board also monitors the level of dividends to ordinary shareholders.

The Board 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. The Group endeavours to achieve a return in shareholders’ equity of above 20% per annum; in 2007 the return was 37.8% (2006: 31.8%). In comparison, the weighted average interest expense on interest-bearing borrowings (excluding liabilities with imputed interest) was 5.77% (2006: 5.83%).

From time to time, the Company purchases its own shares on the market; the timing of these purchases depends on market prices. Buy and sell decisions are made on a specifi c transaction basis by the Board; the Company does not have a defi ned shares buy-back plan. This amount is classifi ed as a deduction from equity under “Treasury shares”. At 31 December 2007, the Company held 11,308,000 (2006: Nil) of its own uncancelled shares.

There were no changes in the Group’s approach to capital management during the year. The Company and its subsidiaries are not subjected to any externally imposed capital requirements.




23 Reserves

Treasury shares

Treasury shares comprises the cost of the Company’s share held by the Group.

Foreign currency translation reserve

The foreign currency translation reserve comprises foreign exchange differences arising from the translation of the fi nancial statements of foreign operations whose functional currencies are different from that of the Company, as well as from the translation of foreign currency loans which form part of the Group’s net investment in foreign operations.

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value (net of deferred tax effect) of available-for-sale fi nancial assets until such assets are derecognised.

Convertible notes-equity component

The convertible notes-equity component comprises the value of the embedded option to convert the liability component of the convertible notes into equity of the Company as at the date of issue of the convertible notes, which is net of deferred tax effect.

Dividends and capital distribution

On 13 February 2007, the directors approved a distribution to shareholders via capital distribution of 1.8 cents per share (one-tier tax exempt) amounting to $4.3 million.

On 14 August 2007, the directors approved a distribution to shareholders via capital distribution of 6.0 cents per share comprising of a special dividend of 3.0 cents per share (one-tier tax exempt) and an interim dividend of 3.0 cents per share (one-tier tax exempt) amounting to $13.8 million.

Subject to the approval by the shareholders at the next Annual General Meeting, the directors have proposed a total gross dividend of 3.0 cents per share (one-tier tax exempt) amounting to an estimated dividend of $7.2 million (2006: $4.3 million) in respect of the fi nancial year ended 31 December 2007 based on the share capital as at that date.

The proposed dividend has not been included as a liability in the fi nancial statements.

24 Acquisitions and disposal of subsidiaries

Atlantic Oilfi eld Services Ltd (“AOS”)

On 25 May 2007, the Group acquired the entire issued and paid up capital of AOS for a cash consideration of US$82.8 million through a special purpose vehicle, Sphinx Frontier Ltd, a company incorporated in the British Virgin Islands. The principal activities of AOS and its subsidiaries (“AOS group”) are those relating to the owning and operating of onshore and offshore drilling units as well as offshore accommodation rigs. The acquisition of AOS will enhance the Group’s position in providing a complete range of services to the oil and gas industry. AOS group contributed a net profi t of $10,800,000 (US$7,200,000) to the Group’s consolidated net profi t after tax and minority interests for the year ended 31 December 2007.




24 Acquisitions and disposal of subsidiaries (cont’d)

Fischer Engineering Pte Ltd (“Fischer”)

The Group entered into a conditional sale and purchase agreement to acquire 70% of the issued and paid-up capital of Fischer, a company incorporated in Singapore and engaged in the business of overhaul and servicing of turbochargers for the marine industry. The acquisition was completed on 19 April 2007 for a consideration of $3,000,000, satisfi ed in cash. The subsidiary contributed a net profi t of $298,000 to the Group’s consolidated net profi t after tax and minority interests for the year ended 31 December 2007.

Raymonds Supply Co Limited (“Raymonds”)

On 15 May 2007, the Group entered into a sales and purchase agreement to acquire 75% of the issued and paid-up capital of Raymonds, a company incorporated in Hong Kong for a total consideration of HK$15,450,000 (approximately $3,000,000). Raymonds is engaged in the business of supplying parts and consumables to customers in the oil and gas industry, and providing transportation and logistics services within Hong Kong, as well as to and fro the People’s Republic of China. The subsidiary contributed a net profi t of $266,000 to the Group’s consolidated net profi t after tax and minority interests for the year ended 31 December 2007.

Harta Offshore & Marine Services Pte. Ltd. (“HOMS”)

On 7 September 2007, the Company’s wholly-owned subsidiary, Harta Holding Pte. Ltd., acquired the remaining 50% equity interest or 125,000 ordinary shares in a then jointly controlled entity, HOMS, from Cooper’s Mechanical Oilfi eld Services Pte. Ltd. for US$1, satisfi ed in cash. Pursuant to the acquisition, HOMS became a wholly-owned subsidiary of the Group. Accordingly, this investment has been reclassifi ed to “subsidiaries” (refer to note 14) in the Company’s balance sheet. The subsidiary contributed a net loss of $104,000 to the Group’s consolidated net profi t after tax and minority interests for the year ended 31 December 2007. The Group recorded a negative goodwill on consolidation of $50,000, recognised in other operating income in the income statement. The negative goodwill arose from the acquisition being a bargain purchase.

No fair value adjustments were made in respect of the net identifi able assets and liabilities of the acquisition of HOMS at date of acquisition as the net identifi able assets and liabilities were considered insignifi cant.

If the above acquisitions of subsidiaries had occurred on 1 January 2007, Group revenue would have been $427,905,000 and net profi t after tax and minority interests would have been $80,048,000.




24 Acquisitions and disposal of subsidiaries (cont’d)

Acquisition of subsidiaries

The effect of the acquisitions of subsidiaries is set out below: Group Note 2007 2006

$’000 $’000

Property, plant and equipment 15 122,669 770Investment in associate – 29Investment in jointly controlled entities 320 –Club membership – 27Intangible assets 16 13,250 –Inventories 17,321 164Other non-current assets 150 –Deposits pledged 8 4,283 –Trade receivables 19,495 3,210Other current assets 26,997 140Cash and cash equivalents 14,746 96Trade and other payables (27,830) (3,252)Borrowings (70,147) (489)Finance lease liabilities (80) –Provision for current tax (1,308) (37)Deferred tax liabilities 21 (1,108) (8)

Net identifi able assets and liabilities 118,758 650Minority interest (1,467) (322)Amount previously accounted for as jointly controlled entity (53) –

Net assets acquired 117,238 328Negative goodwill on acquisition 4 (50) –Goodwill on acquisition 16 15,807 54

Total consideration for acquisitions of subsidiaries, satisfi ed by cash payment 132,995 382Consideration for acquisition of minority interests, satisfi ed by cash payment – 1,379

Total cash consideration paid 132,995 1,761Cash acquired (14,746) (96)

Net cash outfl ow 118,249 1,665

The pre-acquisition carrying amounts of the assets and liabilities of the acquired businesses were determined based on applicable FRSs immediately before their acquisition. The values of the assets given and liabilities incurred or assumed at the date of exchange, plus costs directly attributable on the dates of acquisition have been assessed by an independent valuer, AV Capital Pte Ltd.

For the year ended 31 December 2007, the fair values to be assigned to the acquisition of AOS and Fischer have been determined only provisionally. Management would recognise any adjustments to the provisional values of the acquired identifi able assets and liabilities, and consequently any adjustments to goodwill (to be adjusted retrospectively from acquisition dates) can be made within twelve months from the acquisition date to refl ect their fair values on the date of acquisition.

The goodwill recognised on the acquisition of subsidiaries is attributable mainly to the anticipated profi tability of the acquired businesses and the synergies expected to be achieved from integrating the acquired businesses into the Group’s existing distribution and capital equipment businesses.

Disposal of subsidiary

On 15 December 2007, the Group disposed of its 100% interest in Aqua-Terra Supply (Shanghai) Co. Ltd. The fair value of assets and liabilities disposed during the year were negligible.




25 Related parties

For the purposes of these fi nancial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise signifi cant infl uence over the party in making fi nancial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common signifi cant infl uence. Related parties may be individuals or other entities.

Other than disclosed elsewhere in the fi nancial statements, the transactions with related parties are as follows:

Key management personnel compensation

Key management personnel are directors and those persons having authority and responsibility for planning, directing and controlling the activities of the Group, directly or indirectly. The amounts stated below for key management compensation are for all the executive directors and other key management personnel. The amounts do not include compensation if any of the key management personnel and directors of the Group received compensation from related corporations outside the group in their capacity as directors and or executives of those related corporations.

Key management personnel compensation is as follows: Group 2007 2006

$’000 $’000

Short-term employee benefi ts 7,122 3,985Post-employment benefi ts 536 201

7,658 4,186

Included in key management personnel compensation is directors’ remuneration of $4,718,000 (2006: $3,231,000).

Other transactions with key management personnel Group 2007 2006

$’000 $’000 Transactions with companies in which a director (2006: two directors) of the Company has substantial fi nancial interests

Sale of goods 188 284Purchase of goods – 88Operating lease expense 1,170 1,033Professional fees 18 – Transactions with companies in which a director of a subsidiary has substantial fi nancial interests Sale of goods 332 –Purchase of goods 347 – Transactions with a fi rm in which a director of the Company is a member Professional fees – 5




25 Related parties (cont’d)

Other related party transactions Group 2007 2006

$’000 $’000 Transactions with jointly controlled entities Sale of goods 1,269 15,580Contract revenue 2,450 9,935Sale of plant and equipment 10,500 4,976Interest income 1,333 985Management fee income 1,077 334Rental income 266 –Operating lease expense 5,088 5,752Purchase of plant and equipment 8,987 –Rendering of services 677 –

Transactions with associates Sale of goods 182 –Purchase of goods 1,177 462Management fee income 10 – Transactions with other related parties Purchase of goods from a company related to a director of a subsidiary – 2,091

26 Financial instruments

Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved.

Risk management policies and systems are reviewed regularly to refl ect changes in market conditions and the Group’s activities. The management continually reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Audit Committee is assisted in its oversight role by Internal Auditors. The Internal Auditors undertake both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk

Credit risk is the potential fi nancial loss resulting from the failure of a customer or counterparty to settle its fi nancial and contractual obligations to the Group, as and when they fall due. Credit risk relating to fi nancial guarantee contracts represents the fi nancial loss that would be recognised upon a default by the parties to which the fi nancial guarantees were issued on behalf of.

The Group has a credit policy in place which establishes credit limits for customers and monitors their balances on an on-going basis. Credit evaluations are performed on all customers requiring credit over a certain amount. Cash and fi xed deposits are placed with banks and fi nancial institutions which are regulated. Investments and transactions involving derivative fi nancial instruments are allowed only with counterparties who have sound credit ratings.

At the balance sheet date, the Group has concentration of credit risk in 3 (2006: 3) major customers representing approximately 28% (2006: 24%) of total trade receivables. The maximum exposure to credit risk is represented by the carrying amount of each fi nancial asset, including derivative fi nancial instruments, in the balance sheet.

Goods are sold subject to retention of title clauses, so that in the event of non-payment, the Group may have a secured claim. The Group does not require collateral in respect of trade and other receivables.




26 Financial instruments (cont’d)

The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specifi c loss component that relates to individually signifi cant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identifi ed. The collective loss allowance is determined based on historical data of payment statistics for similar fi nancial assets.

The allowance account in respect of trade and other receivables is used to record impairment losses unless the Group is satisfi ed that no recovery of the amount owing is possible. At that point, the fi nancial asset is considered irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the impaired fi nancial asset.

Cash and fi xed deposits are placed with banks and approved fi nancial institutions. The Group limits its credit risk exposure in respect of investments by only investing in liquid securities.

Interest rate risk

The Group’s exposure to changes in interest rates relates primarily to its interest-earning fi nancial assets and interest-bearing fi nancial liabilities. Interest rate risk is managed by the Group on an on-going basis with the primary objective of limiting the extent to which net interest expense could be affected by an adverse movement in interest rates.

Sensitivity analysis Profi t or loss Equity 50 bp 50 bp 50 bp 50 bp increase decrease increase decrease

$’000 $’000 $’000 $’000Group 31 December 2007 Variable rate instruments (1,129) 1,129 (1,129) 1,129

31 December 2006 Variable rate instruments (168) 168 (168) 168

Company 31 December 2007 Variable rate instruments (650) 650 (650) 650

31 December 2006 Variable rate instruments 49 (49) 49 (49)

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to fi nance the Group’s operations and to mitigate the effects of fl uctuations in cash fl ows. The Group aims at monitoring fl exibility in funding by keeping committed credit lines available. In this connection, the Group maintains approximately $170 million of undrawn credit with banks that can be drawn down to meet both short-term and long-term fi nancing needs as at 31 December 2007. The Group plans to divest its non-core assets with carrying value of approximately $83 million as at 31 December 2007.

Foreign currency risk

The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in currencies other than the functional currencies of the respective entities in the Group. The currencies giving rise to this risk are primarily the United States dollars and Euro.





The Group hedges receivables and payables denominated in foreign currencies over certain limits. The Group uses forward exchange contracts to hedge its foreign currency risk. Where necessary, the forward exchange contracts are rolled over at maturity at market rates.

In respect of other monetary assets and liabilities held in currencies other than the functional currencies of respective entities, the Group ensures that the net exposure is kept to an acceptable level by buying currencies at spot rates, where necessary, to address short term imbalances.

The following table entails the Group’s and the Company’s exposure at the balance sheet date to currency risk arising from fi nancial assets and liabilities denominated in a currency other than the functional currency of the entity to which they relate.

2007 2006 Singapore US Singapore US dollar dollar Euro dollar dollar Euros

$’000 $’000 $’000 $’000 $’000 $’000 Group Trade and other receivables 4 75,975 12,465 – 28,979 1,914Cash and cash equivalents 576 34,321 1,684 20 4,842 1,607Quasi-equity loans to subsidiaries and jointly controlled entities – 145,682 – – 13,437 –Intercompany balances (5,380) 50,939 – – (14,197) –Financial liabilities – (150,816) (1,510) – (3,675) (594)Trade and other payables (323) (31,329) (6,834) (29) (14,693) (1,462)

Overall net exposure (5,123) 124,772 5,805 (9) 14,693 1,465

Company Trade and other receivables – 37,807 – – 19,426 –Cash and cash equivalents – 25,921 31 – 1,429 1,180Quasi-equity loans to subsidiaries and jointly controlled entities – 145,682 – – 13,437 –Intercompany balances – 50,939 – – (14,197) –Financial liabilities – (136,814) – – (601) –Trade and other payables – (2,388) – – (5,197) (345)

Overall net exposure – 121,147 31 – 14,297 835

Sensitivity analysis

The following table indicates the approximate change in the Group’s profi t after tax and equity in response to a 1% change in the foreign exchange rates to which the Group has signifi cant exposure at the balance sheet date. The sensitivity analysis includes balances between group entities where the denomination of the balances is in a currency other than the functional currencies of the lender or the borrower.

A 1% strengthening of Singapore dollar against the following currencies at the balance sheet date would increase (decrease) equity and profi t or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.




26 Financial instruments (cont’d) Group Company Profi t Profi t Equity or Loss Equity or Loss

$’000 $’000 $’000 $’000

31 December 2007 USD (1,195) 213 – (993)EUR – (48) – –

31 December 2006 USD (107) (10) – (114)EUR – (12) – (7)

A 1% weakening of Singapore dollar against the above currencies would have had the equal but opposite effect on the

above currencies to the amounts shown above, on the basis that all other variables remain constant.

Insurance risk

The Company issues fi nancial guarantees on behalf of its subsidiaries and jointly controlled entities. There are no terms and conditions attached to the fi nancial guarantee contracts that would have a material effect on the amount, timing and certainty of the Company’s future cash fl ows. Estimates of the Company’s obligations arising from fi nancial guarantee contracts may be affected by future events, which cannot be predicted with certainty. The assumptions made may vary from actual experience so that the actual liability may vary considerably from the best estimates.

Sensitivity analysis-equity price risk

The Group is exposed to equity price changes arising from quoted equity investments classifi ed as available-for-sale equity securities. All of the Group’s quoted equity investments are listed on the Singapore Stock Exchange (“SGX”), Jakarta Stock Exchange (“JSE”) or Surabaya Stock Exchange (“SuGX”). A 1% increase or decrease in the underlying equity prices at the reporting date would increase or decrease equity by the following amount:

Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000

Equity 250 435 250 435

This analysis assumes all other variables remain constant.

Fair values

At 31 December 2007, the carrying amounts of fi nancial assets and fi nancial liabilities approximated their fair values. Estimation of fair values

The following summarises the signifi cant methods and assumptions used in estimating the fair values of fi nancial instruments of the Group.

Investments in equity securities

The fair value of available-for-sale fi nancial assets and quoted investments in subsidiaries and associates is determined by reference to their quoted bid prices at the balance sheet dates. The fair value of quoted investments in subsidiaries and associates is determined for disclosure purposes only.





Convertible notes

The fair value is calculated based on the present value of future principal and interest cash fl ows, discounted at the market rate of interest at the balance sheet date. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option.

Derivatives

The fair value of forward exchange contracts is based on their listed market price, if available. If a listed market price is not available, fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual period to maturity of the contract using a risk-free interest rate (based on government bonds).

The fair value of interest rate swaps is based on broker quotes. These quotes are tested for reasonableness by discounting estimated future cash fl ows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.

Non-derivative fi nancial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash fl ows, discounted at the market rate of interest at the balance sheet dates. For fi nance leases, the market rate of interest is determined by reference to similar lease agreements.

Financial guarantees

The fair value of fi nancial guarantees issued by the Group to third party corporation is estimated by reference to the difference in interest rates, by comparing the actual rates charged by the bank with these guarantees made available, with the estimated rates that the banks would have charged had these guarantees not been available.

Other fi nancial assets and liabilities

The notional amounts of fi nancial 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 fi nancial assets and liabilities are discounted to determine their fair values.

27 Commitments

Capital commitments

At 31 December 2007, the Group has entered into contracts to purchase plant and equipment of $1,969,000 (2006: $1,891,000).

Operating lease commitments

The Group and the Company lease offi ce space and warehouse from a company in which a director of the Company has substantial fi nancial interest under an operating lease.

The Group leases an offshore rig from a third party and certain equipment from a jointly controlled entity under operating leases, and subleases the offshore rig and equipment to another third party under an operating lease. The lease and sublease of the offshore rig and equipment expire in April 2012. Upon expiration of the initial lease period, the lease and sublease of the offshore rig and equipment may be renewed when all terms and conditions are renegotiated and agreed between the respective parties. The rental rates of the lease and sublease of the offshore rig and equipment may be revised on a periodic basis to refl ect market rentals.




27 Commitments (cont’d)

Where the Group and the Company are lessees:

At the balance sheet dates, the Group and the Company have commitments for future minimum lease payments under non-cancellable operating leases as follows:

Group Company 2007 2006 2007 2006

$’000 $’000 $’000 $’000 Within 1 year 9,501 8,956 338 321After 1 year but within 5 years 28,388 33,461 – –After 5 years 1,984 4,757 – –

39,873 47,174 338 321

Where the Group is a lessor:

At the balance sheet dates, the Group has future minimum lease payments receivable under a non-cancellable operating lease as follows:

Group 2007 2006

$’000 $’000

Within 1 year 12,483 14,334After 1 year but within 5 years 39,138 52,315After 5 years – 3,913

51,621 70,562

28 Contingent liabilities (unsecured)

Company

Financial guarantees given to banks to secure banking facilities provided to: 2007 2006

$’000 $’000

- Subsidiaries 106,692 10,700- Associates and jointly controlled entities 72,928 40,820- Third party corporation 6,000 –

185,620 51,520

As at the balance sheet date, $118,791,000 (2006: $37,318,000) was utilised.

The periods in which the fi nancial guarantees will expire are as follows: 2007 2006

$’000 $’000 Within 1 year 19,192 9,472After 1 year but within 5 years 126,928 23,648After 5 years 39,500 18,400

185,620 51,520




29 Segment reporting

Segment information is presented in respect of the Group’s business and geographical segments. The primary format, business segments, is based on the Group’s management and internal reporting structure. Segment results, assets and liabilities include items directly attributable to a segment, as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly investments and related revenue, corporate assets and head offi ce expenses, and income tax assets and liabilities. Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment.

Business segments

The Group comprises the following main business segments:

Distribution: Sale of hydraulic products, hardware products and tools and equipment to the marine and oil and gas industries.

Capital equipment and related services: Provision of capital equipment and related services to the oil and gas industry.

Geographical segments

The businesses of the Group are operated in three principal geographical areas, namely, Singapore, the People’s Republic of China and other Far East and ASEAN countries. 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.

Capital equipment Business segments Distribution and related services Group

2007 2006 2007 2006 2007 2006

$’000 $’000 $’000 $’000 $’000 $’000

Revenue and expenses Revenue from external customers 297,095 203,724 105,605 91,408 402,700 295,132

Segment results 16,891 18,456 21,917 22,812 38,808 41,268

Dividend income 1,052 1,153Gain on disposal of available-for-sale equity securities 42,938 17,364Gain on dilution of interest in a jointly controlled entity – – – 790 – 790(Loss)/Gain on disposal of interest in a jointly controlled entity (16) – – 783 (16) 783Loss on disposal of interest in an associate – (667) – – – (667)Share of results of associates 4,902 1,119 91 (41) 4,993 1,078Share of results of jointly controlled entities (743) 283 5,901 2,854 5,158 3,137

Profi t before income tax 92,933 64,906Income tax expense (13,174) (9,983)





29 Segment reporting (cont’d)

Capital equipment Business segments Distribution and related services Group

2007 2006 2007 2006 2007 2006

$’000 $’000 $’000 $’000 $’000 $’000

Assets and liabilities Segment assets 198,951 102,337 374,384 76,011 573,335 178,348Investments in associates 46,373 42,775 5,905 173 52,278 42,948Investments in jointly controlled entities 25 686 32,219 17,024 32,244 17,710Unallocated assets 116,734 83,321

Total assets 774,591 322,327

Segment liabilities 145,916 83,154 226,239 24,861 372,155 108,015Income tax liabilities 24,121 11,671Unallocated liabilities 136,698 23,520

Total liabilities 532,974 143,206

Other segment information Capital expenditure 1,930 2,006 10,617 79 12,547 2,085Depreciation and amortisation 2,126 1,607 10,729 275 12,855 1,882

Revenue from Geographical segments external customers Segment assets Capital expenditure

2007 2006 2007 2006 2007 2006

$’000 $’000 $’000 $’000 $’000 $’000 Singapore 222,930 129,843 425,624 199,121 10,116 1,150The People’s Republic of China 39,413 39,999 18,284 42,247 199 90Other Far East and ASEAN countries 49,763 54,789 59,202 26,823 250 384Other regions 90,594 70,501 271,481 54,136 1,982 461

Total 402,700 295,132 774,591 322,327 12,547 2,085

30 Subsequent events

Subsequent to 31 December 2007, the following events took place:

(a) On 25 February 2008, the Group increased its cost of investment in a jointly controlled entity, Girdnal Oilfi eld Services, Inc. by US$1,375,000 to US$2,925,000. The equity interests of the Group and the joint venture partner will remain unchanged.

(b) The directors of the Company proposed a one-tier tax exempt fi nal dividend of 3.0 cents per share, amounting to approximately $7.2 million. The proposed fi nal dividend has not been provided for in these fi nancial statements.




31 New accounting standards and interpretations issued but not yet effective for the fi nancial year ended 31 December 2007

The Group has not applied the following accounting standards (including its consequential amendments) and interpretations that have been issued as of the balance sheet date but are not yet effective:

FRS 23 Borrowing Costs FRS 108 Operating Segments INT FRS 111 FRS 102 - Group and Treasury Share Transactions INT FRS 112 Service Concession Arrangements

FRS 23 will become effective for fi nancial statements for the year ending 31 December 2009. FRS 23 removes the option to expense borrowing costs and requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of the asset. The Group’s current policy is consistent with the FRS 23 requirement to capitalise borrowing costs.

FRS 108 will become effective for fi nancial statements for the year ending 31 December 2009. FRS 108, which replaces FRS 14 Segment Reporting, requires identifi cation and reporting of operating segments based on internal reports that are regularly reviewed by the Group’s chief operating decision maker in order to allocate resources to the segment and to assess its performance.

INT FRS 111 will become effective for fi nancial statements for the year ending 31 December 2008, with retrospective application required. INT FRS 111 requires a share-based payment arrangement in which an entity receives goods or services as consideration for its own equity instruments to be accounted for as an equity-settled share-based payment transaction, regardless of how the equity instruments are obtained.

INT FRS 112 will become effective for fi nancial statements for the year ending 31 December 2008. It provides guidance on certain recognition and measurement issues that arise in accounting for public-to-private service concession arrangements.

The initial application of these standards and interpretations are not expected to have any material impact on the Group’s fi nancial statements.

The Group has not considered the impact of the other accounting standards issued after the balance sheet date.




Class of Shares - Ordinary Shares Voting Rights - One Vote per share

DISTRIBUTION OF SHAREHOLDERS BY SIZE OF SHAREHOLDINGS

Size of HoldingsNo. of Ordinary Shareholders

% of Shareholders No. of Shares

% of Shareholding

1 – 999 168 4.54 60,828 0.021,000 – 10,000 3,012 81.32 12,116,791 4.8110,001 – 1,000,000 505 13.63 18,341,390 7.291,000,001 and above 19 0.51 221,276,516 87.88

3,704 100.00 251,795,525 100.00

SUBSTANTIAL SHAREHOLDERS (As shown in the Register of Substantial Shareholders as at 14 March 2008)

Direct Interest Deemed Interests

No. Name No. of shares

held % (1)

No. of sharesheld % (1)

1. Pacifi c One Energy Limited 54,216,000 22.54 - -2. Kim Seng Holdings Pte Ltd 11,049,600 4.59 11,640,000 (2) 4.843. Stark Investment (Hong Kong) Limited - - 13,079,000 (3) 5.434. Kris Taenar Wiluan - - 54,216,000 (4) 22.545. Rija Holdings Limited - - 54,216,000 (4) 22.546. Richard James Wiluan - - 54,216,000 (4) 22.547. Tan Kim Seng - - 22,689,600 (5) 9.438. Tan Hoo Lang - - 22,689,600 (5) 9.439. Tan Fuh Gih - - 22,689,600 (5) 9.4310. Tan Wei Min - - 22,689,600 (5) 9.43

Notes:

(1) Based on 240,487,525 shares issued excluding treasury shares as at 14 March 2008.

(2) Kim Seng Holdings Pte Ltd is deemed interested in the 11,640,000 shares through nominee companies of which 8,640,000 shares held through UBS AG Singapore and 3,000,000 shares held through JP Morgan International Bank Limited.

(3) Stark Investment (Hong Kong) Limited is deemed interested in the 13,079,000 shares held through Merill Lynch International.

(4) Mr. Kris Taenar Wiluan, Rija Holdings Limited and Mr. Richard James Wiluan are deemed interested in the 54,216,000 shares held through Pacifi c One Energy Limited.

(5) Mr. Tan Kim Seng, Mr. Tan Hoo Lang, Mr. Tan Fuh Gih and Mr. Tan Wei Min are deemed interested in the 22,689,600 shares held directly or indirectly by Kim Seng Holdings Pte Ltd due to their shareholdings of 373123, 342029, 342029 and 310935 shares, comprising 24.0%, 22.0%, 22.0% and 20.0%, in Kim Seng Holdings Pte Ltd, respectively.

AS AT 14 MARCH 2008



LIST OF 20 LARGEST SHAREHOLDERS (As shown in the Depository Register as at 14 March 2008)

NAME OF SHAREHOLDER NO. OF SHARES % OF SHARES

1 PACIFIC ONE ENERGY LIMITED 54,216,000 21.532 DBS NOMINEES PTE LTD 43,122,395 17.133 CITIBANK NOMINEES SINGAPORE PTE LTD 37,287,800 14.814 HSBC (SINGAPORE) NOMINEES PTE LTD 15,543,400 6.175 KS ENERGY SERVICES LIMITED – SHARE BUYBACK ACCOUNT 11,308,000 4.496 KIM SENG HOLDINGS PTE LTD 11,049,600 4.397 DBSN SERVICES PTE LTD 10,817,000 4.308 RAFFLES NOMINEES PTE LTD 8,676,457 3.459 UNITED OVERSEAS BANK NOMINEES PTE LTD 6,847,364 2.7210 DB NOMINEES (SINGAPORE) PTE LTD 4,099,000 1.6311 MERRILL LYNCH (SINGAPORE) PTE LTD 3,705,700 1.4712 SUNFIELD PTE LTD 2,500,000 0.9913 MAYBAN NOMINEES (S) PTE LTD 2,232,000 0.8914 OCBC SECURITIES PRIVATE LTD 1,998,328 0.7915 SIM YONG TENG 1,973,940 0.7816 KIM ENG SECURITIES PTE. LTD. 1,692,246 0.6717 MORGAN STANLEY ASIA (SINGAPORE) PTE LTD 1,526,000 0.6118 PHILLIP SECURITIES PTE LTD 1,365,286 0.5419 ING NOMINEES (SINGAPORE) PTE LTD 1,316,000 0.5220 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 613,912 0.24

Total: 221,890,428 88.12

TREASURY SHARES

Ordinary Shares held in Treasury (“Treasury Shares”)Voting Rights – NoneSole Shareholder of 11,308,000 Treasury Shares: KS Energy Services Limited.Percentage of this holding against the total number of issued shares excluding Treasury Shares: 4.7%

COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL

Based on information available and to the best knowledge of the Company as at 14 March 2008, approximately 55.67% of the ordinary shares of the Company are held by the public. The Company is therefore in compliance with Rule 723 of the SGX-ST Listing Manual.

AS AT 14 MARCH 2008



NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at No. 4, Tuas Avenue 5, Singapore 639331 on Friday, 25 April 2008 at 1:30 p.m. for the purpose of transacting the following businesses:

ORDINARY BUSINESS

1. To receive and adopt the Audited Financial Statements of the Company for the fi nancial year ended 31 December 2007 together with the Directors’ Report and the Auditors’ Report thereon. (Resolution 1)

2. To declare a Final Dividend of 3.0 cents per ordinary share (one-tier tax exempt) for the fi nancial year ended 31 December 2007. (Resolution 2)

3. To approve Directors’ Fees of S$235,000 for the fi nancial year ended 31 December 2007. (Resolution 3)

4. (a) To re-elect the following directors who are retiring under Article 91 of the Articles of Association of the Company and have offered themselves for re-election:

(i) Mr. Lim Ho Seng (See Additional Information No. 1) (Resolution 4) (ii) Mr. Lee Beng Cheng, Billy (See Additional Information No. 2) (Resolution 5) (b) To note the retirement of Mr. Tan Fuh Gih (See Additional Information No. 3)

5. To re-elect Mr. Koh Soo Keong, a Director who is retiring under Article 97 of the Articles of Association of the Company and has offered himself for re-election. (Resolution 6)

6. To re-appoint Messrs. KPMG as Auditors and to authorise the Directors to fi x their remuneration. (Resolution 7)

SPECIAL BUSINESS

To consider and, if thought fi t, to pass the following as Ordinary Resolution, with or without modifi cations:

7. Authority to issue shares

“That pursuant to Section 161 of the Companies Act, Cap. 50 and in accordance with Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, approval be and is hereby given to the Directors to issue:-

(a) shares in the Company (whether by way of bonus, rights or otherwise); or

(b) convertible securities; or

(c) additional convertible securities arising from adjustments made to the number of convertible securities previously issued in the event of rights, bonus or capitalisation issues; or

(d) shares arising from the conversion of convertible securities,

at any time and upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fi t provided that :-

(i) the aggregate number of shares and convertible securities that may be issued shall not be more than 50% of the total number of issued shares excluding treasury shares, in the capital of the Company or such other limit as may be prescribed by the Singapore Exchange Securities Trading Ltd (“SGX-ST”) as at the date the general mandate is passed;



(ii) the aggregate number of shares and convertible securities to be issued other than on a pro-rata basis to existing shareholders shall not be more than 20% of the total number of issued shares excluding treasury shares in the capital of the Company or such other limit as may be prescribed by the SGX-ST as at the date the general mandate is passed;

(iii) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraphs (i) and (ii) above, the total number of issued shares excluding treasury shares shall be calculated based on the total number of issued shares excluding treasury shares in the capital of the Company as at the date the general mandate is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or employee stock options in issue as at the date the general mandate is passed and any subsequent bonus issue, consolidation or subdivision of the Company’s shares; and

(iv) unless earlier revoked or varied by the Company in general meeting, such authority shall continue in force until the next Annual General Meeting or the date by which the next Annual General Meeting is required by law to be held, whichever is earlier.” (See Additional Information No. 4) (Resolution 8)

8. To transact any other business which may be properly transacted at an AGM.

BY ORDER OF THE BOARD

Lawrence KwanCompany Secretary

Singapore, 10 April 2008

Notes:

i. A member entitled to attend and vote at this meeting is entitled to appoint not more than two proxies to attend and vote in his stead.

ii. Where a member appoints more than one proxy, the appointments shall be invalid unless he specifi es the proportion of his shareholding to be represented by each proxy.

iii. A proxy need not be a member of the Company.

iv. The instrument appointing a proxy must be deposited at the registered offi ce of the Company at No. 4, Tuas Avenue 5, Singapore 639331 not less than 48 hours before the time appointed for holding the meeting.

ADDITIONAL INFORMATION RELATING TO ITEMS OF ORDINARY AND SPECIAL BUSINESSES

1. Mr. Lim Ho Seng, if re-elected, will remain as Chairman of the Audit Committee and member of the Remuneration Committee; and will be considered independent for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.

2. Mr. Lee Beng Cheng, Billy, if re-elected, will remain as Chairman of the Remuneration Committee and members of Audit Committee and Nominating Committee; and will be considered independent for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.

3. In accordance with Article 91 of the Articles of Association of the Company, Mr. Tan Fuh Gih retires from offi ce. Mr. Tan Fuh Gih is not seeking re-election.

4. Ordinary Resolution 8 is to authorise the Directors of the Company from the date of the above Meeting until the next AGM to issue shares and/or convertible securities in the Company up to an amount not exceeding in aggregate 50 percent of the issued share capital of the Company of which the total number of shares and convertible securities issued other than on a pro-rata basis to existing shareholders shall not exceed 20 percent of the issued share capital of the Company at the time the resolution is passed, for such purposes as they consider would be in the interests of the Company. This authority will, unless revoked or varied at a general meeting, expire at the next AGM of the Company.



NOTICE OF BOOKS CLOSURE

NOTICE IS HEREBY GIVEN that the Transfer of Books and the Depository Register of the Company will be closed on 30 April 2008, for the preparation of dividend warrants for shareholders of ordinary shares registered in the books of the Company. Duly completed registrable transfers of ordinary shares in the capital of the Company (“Shares”) received by the Company’s Share Registrar, Tricor Barbinder Share Registration Services, 8 Cross Street, #11-00, PWC Building, Singapore 048424 up to 5.00 p.m. on 29 April 2008 will be entitled to the proposed dividend.

Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at 5.00 p.m. on 29 April 2008 will be entitled to the proposed dividend. Payment of the dividend if approved by members at the Annual General Meeting, will be made on 12 May 2008.

BY ORDER OF THE BOARD

Lawrence KwanCompany Secretary

Singapore, 10 April 2008



KS ENERGY SERVICES LIMITED(Company No.: 198300104G)(Incorporated in the Republic of Singapore)

Proxy Form

IMPORTANT

1. For investors who have used their CPF monies to buy KS Energy Services Limited shares, the Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

*I/We __________________________________________________________________________________________________ of

__________________________________________________________________________________________________________

being *a member/members of KS Energy Services Limited (the “Company”), hereby appoint

Name Address NRIC/Passport No.

Proportion of shareholdings to be represented by proxy (%)

*and/or

or failing whom the Chairman of the Annual General Meeting as *my/our *proxy/proxies to vote for *me/us on *my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting of the Company to be held at No. 4, Tuas Avenue 5, Singapore 639331 on Friday, 25 April 2008 at 1:30 p.m. and at any adjournment thereof.

*I/we direct *my/our *proxy/proxies to vote for or against the Ordinary Resolutions to be proposed at the Annual General Meeting as indicated with an “X” in the spaces provided hereunder. If no specifi c directions as to voting are given, the *proxy/proxies will vote or abstain from voting at *his/their discretion.

No. Ordinary Resolutions For Against

1. To receive and adopt the Audited Financial Statements of the Company for the fi nancial year ended 31 December 2007 together with the Directors’ Report and the Auditors’ Report thereon.

2. To declare a Final Dividend of 3.0 cents per ordinary share (one-tier tax exempt) for the fi nancial year ended 31 December 2007.

3. To approve Directors’ Fees of S$235,000 for the fi nancial year ended 31 December 2007.

4. To re-elect Mr. Lim Ho Seng.

5. To re-elect Mr Lee Beng Cheng, Billy.

6. To re-elect Mr Koh Soo Keong.

7. To re-appoint Messrs. KPMG as Auditors and to authorise the Directors to fi x their remuneration.

8. To authorise Directors to issue shares.

Dated this __________day of ___________________ 2008

Total Number of Shares Held

Signature(s) of Member(s)/Common Seal

* Delete accordingly

IMPORTANT. Please read notes overleaf

Notes:-

1. A member entitled to attend and vote at the Meeting is entitled to appoint not more than two proxies to attend and vote in his stead. A proxy need not be a member of the Company.

2. Where a member of the Company appoints more than one proxy, the appointments shall be invalid unless he specifi es the proportion of his holding to be represented by each proxy.

3. A member should insert the total number of shares held. If the member has shares entered against his name in the Depository Register (as defi ned in Section 130A of the Companies Act, Chapter 50 of Singapore), he should insert that number of shares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by the member of the Company.

4. The instrument appointing proxy or proxies must be deposited at the registered offi ce of the Company at No. 4, Tuas Avenue 5, Singapore 639331 not later than 48 hours before the time set for the Meeting.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under the hand of its attorney or duly authorised offi cer.

6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certifi ed copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a member of the Company may, in accordance with Section 179 of the Companies Act, Cap. 50 of Singapore, authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the Meeting.

8. 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 specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of members of the Company whose shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against their names in the Depository Register 48 hours before the time appointed for holding the Meeting as certifi ed by The Central Depository (Pte) Limited to the Company.

AFFIXSTAMP

The Company SecretaryKS ENERGY SERVICES LIMITED

No. 4 Tuas Avenue 5Singapore 639331

Co. Reg. No 198300104G

No. 4 Tuas Avenue 5,Jurong, Singapore 639331

Tel: (65) 6415 0808Fax: (65) 6898 4418

Email: [email protected]: www.ksenergy.com.sg

KS ENERGY SERVICES LIMITED

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