leveraging strengths building synergy · engineering solutions. our 11 strategically located...

29 Tanjong Kling Road

Singapore 628054

Tel: (65) 6265 1766

Fax: (65) 6261 0738 / 6265 0201

Website: www.sembcorpmarine.com.sg

Company Reg. No: 196300098Z

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LEVERAGING STRENGTHSBUILDING SYNERGY

Installation, integration andcommissioning in Mauá Jurong.

Completion of marine hullconversion in Singapore.

Our home-based shipyards

provide complementary facilities

and capabilities within the Group.

Our ownership of propietary designs in

container vessels and deepwater jack-up rigs

expanded and strengthened our earnings base.

The know-how and experience gained put

us at the forefront of building sophisticated

semi-submersible rigs.

Singapore

Brazil

Our interest in the Cosco Shipyard

Group established our strategic

presence along the entire length

of China's coast for future growth.China

SembCorp Marine's businessesare conducted globally through11 strategically located shipyardsin three strategic hubs ofSingapore, China and Brazil.Operating as distinct brandnames, each shipyard focuseson its areas of expertise andmarket niches and forms part ofSembCorp Marine's global hubstrategy to provide clients withthe most innovative marineengineering solutions andservices worldwide.

SembCorp Marine Shipyards -Strategically located toserve customers worldwide.

Singapore

China

PPL Shipyard(Singapore)

Karimun Sembawang Shipyard(Indonesia) Sembawang Shipyard

(Singapore)

Jurong SML Shipyard(Singapore)

Jurong Shipyard(Singapore)

Mauá Jurong Shipyard(Brazil)

BrazilBrazil

Singapore

China

Cosco (Dalian) Shipyard(China)

Cosco (Nantong) Shipyard(China)

Cosco (Guangzhou) Shipyard(China)

Cosco (Shanghai) Shipyard(China)

Cosco (Zhoushan) Shipyard(China)

INTEGRITY

We believe in and perform our duties with honesty,

dedication and responsibility. We value loyalty,

trustworthiness, reliability and openness as essential

personal attributes in our corporate culture.

HEALTH, SAFETY, SECURITY &

ENVIRONMENTAL PRESERVATION

We are committed to continuously promote a safe

and healthy work environment for our customers,

employees, contractors and the community. We take

responsibility for our own safety and of others both on

and off the job.

INNOVATIVENESS

We believe that innovation and creativity are crucial to

stay ahead of the competition and bring about better

efficiency in the organisation. We secure industry

leadership through constant innovative technological and

engineering solutions and encouraging entrepreneurship.

QUALITY

We constantly and consciously strive to achieve world-

class quality standard in everything we do for our

customers, to improve our quality of life and to add value

for our shareholders. We believe in continuous

improvement and enhancing our competencies to meet

rapid global changes.

CORPORATE PROFILE

We aim to be the world leader in ship repair, ship conversion and offshore engineering,providing innovative solutions that exceed customers’ expectations. While anchoringourselves for future growth and global expansion, we continue to commit ourselvesto fulfilling the changing needs and aspirations of our employees.

PEOPLE-CENTREDNESS

We respect and value every individual regardless of his

or her position in our organisation. We provide equal

opportunities and a conducive environment for employees

to attain their full potential. We reward all employees fairly,

benchmarking their performance to best practices. We

believe in building a learning organisation for our people

to acquire knowledge and skills to achieve professionalism.

TEAMWORK

We are committed to working together and having

trust in one another to achieve common organisational

goals and results. We believe in promoting closer

relationship and developing team spirit among our people

to encourage speedy and open communication and to

care for each other.

CUSTOMER SERVICE

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

provide innovative solutions that add value to our

customers and to build lasting relationships with our

customers based on trust and shared purpose.

COMMUNITY RESPONSIBILITY

We view our business as being an integral part of society.

We are committed to being a responsible corporate

citizen, both locally and globally, contributing to community

improvements and creating a caring organisation.

SembCorp Marine serves global customers by delivering a full spectrum ofintegrated ship repair, shipbuilding, ship conversion, rig building and offshoreengineering solutions.

Our 11 strategically located shipyards are centred round three main engineeringhubs: Singapore, China and Brazil. Working in synergy, these shipyards havecomplementary facilities and capabilities allowing them to provide integrated andcustomised solutions from design and conceptualisation through to commissioningand delivery.

Committed to the highest standards of quality, safety and reliability, SembCorpMarine is the hub of choice for all marine engineering needs.

CORPORATE VISION

CORE VALUES

Core Expertise& Capabilities

Ship Repair• Tankers – ULCC, VLCC• Chemical tankers• Gas carriers – LNG, LPG• Container vessels• Bulk carriers• Dredgers• Navy vessels• Passenger vessels• Drilling tenders• Supply vessels• Derrick barges

Specialised Conversion• Tanker to lightering vessel• Cargo vessel to container vessel• Power barge conversion• Cargo vessel to livestock carrier• Pipe-laying barge conversion• Jumboisation and dejumboisation

Rig Building• Design and construction of jack-

up rigs• Construction of 5th generation

dynamic positioning semi-submersible rigs

• Construction of workover rigs

Ship ConversionOffshore Conversion• Ship-shaped: Tankers to Floating

Production Storage Offloading (FPSO) units and Floating Storage and Offloading (FSO) units

• Rig-shaped : Derrick crane semi-submersible to Floating Production Unit (FPU)

Shipbuilding• Proprietary design and construction of 1,078

TEU to 2,600 TEU container vessels• 11,500 dwt product/chemical tankers• 37,000 dwt bulk carriers• 9,650 dwt cable laying and repair vessels• Tin bucket dredgers• Ice-breaking tugs• Ocean-going tugs• Multi-purpose cargo vessels• Ro-ro vessels• 14,000 dwt Freedom class vessels• 90,000 dwt tankers

S H I P R E P A I R

S H I P B U I L D I N G

S H I P C O N V E R S I O N

R I G B U I L D I N G

O F F S H O R E E N G I N E E R I N G

Offshore Engineering• Repair and upgrade of jack-up

drilling rigs• Repair and upgrade of semi-

submersible rigs fordeep-water drilling

• Fabrication, installation and commissioning of topside production modules

Letter toShareholders

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L E V E R A G I N G S T R E N G T H S . B U I L D I N G S Y N E R G Y .

Dear Shareholders

The year ending December 31, 2004 was a record yearfor SembCorp Marine. We scored a number of firsts inour financial performance, dividend payment and contractssecured.

Financial Performance

Net profit for 2004 reached a record high at $95.0 millionfor the year in review, an increase of 21 per cent from$78.5 million in 2003. Excluding exceptional items, netprofit grew by 26.9 per cent to $98.1 million as comparedwith $77.3 million for 2003.

Group turnover was also at its highest at $1,362.8 million,a growth of 27.6 per cent from $1,068.0 million in 2003.This growth was driven mainly by increased revenue fromboth the ship conversion and ship repair sectors. Theshipbuilding and rig building sectors, however, registereddeclines as most projects were pending take-up or in theearly stages of production in 2004.

Group operating profit registered an increase of 26.3 percent from $74.3 million in 2003 to $93.9 million in 2004.Group pre-tax profit showed an increase of 19.8 per centto $114.0 million in 2004, compared with $95.2 millionin 2003.

Net asset value per share was 67.9 cents as comparedwith 65.3 cents per share in 2003. Earnings per sharewere 6.68 cents, while return on equity was 10.0 percent.

Record Dividend Payout

In tandem with rising earnings and the record performancefor 2004, the Board of Directors is recommending a finalgross dividend of 1.0 cents per share and a specialdividend of 5.0 cents per share, totalling up to 6.0 centsper share. Together with the interim gross dividendpayment of 1.5 cents per share, our total gross dividend

payment for 2004 will be 7.5 cents per share. The dividendpayout ratio at 90.1 per cent takes into account corporatetax rate of 20 per cent. This will be the highest dividendpayout in SembCorp Marine’s history as testimony to ourunwavering commitment to distribute value to ourshareholders.

Business Review

Ship RepairIn 2004, we experienced improved performance from ourship repair sector. Revenue for this sector increased by$110.7 million from $345.5 million in 2003 to $456.2 millionin 2004, marking a 32.0 per cent year-on-year growth.Although the number of vessels repaired was reducedfrom 341 in 2003 to 313 in 2004, the average value pervessel increased from $1.01 million in 2003 to $1.46million in 2004. This increase was attributed mainly to

several high-value FPSO-upgrading and bottom-damaged bulk carrier jobs undertaken during the year.

FSU and FPSO upgrading and tankers accounted for46 per cent of ship repair revenue. In 2004, contributionfrom bulk carrier repairs registered a significant increase

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Associates’ ContributionsOur strategy to grow our marine and offshore businesspaid off when our associated companies, Cosco (Dalian)Shipyard in China and Mauà Jurong in Brazil providedsteady and growing contributions of $6.95 million and$6.06 million before tax respectively in 2004. Thiscompared favourably with $3.02 million and $1.64 millionrespectively in 2003.

Strategy for Sustained Growth

Growing our China HubIn our efforts to expand our marine business, we firstjoined forces with the Cosco Group in 2001 by taking an

to 24 per cent, compared with 3 per cent in 2003. Thefavourable freight rates, delivery schedules coupled withChina’s strong demand for goods contributed to thisincrease. Gas carriers and container vessels accountedfor 8 per cent each of total repair followed by others at6 per cent, Navy vessels contributed 3 per cent, dredgers3 per cent and cargo vessels 2 per cent.

ShipbuildingShipbuilding contributed $81.1 million, or 6 per cent, tototal revenue in 2004. This was $26.2 million, or24.4 per cent, lower than that achieved in 2003.The decline was attributed to the lower take-up rate forshipbuilding as most shipbuilding projects that weresecured in 2003 and 2004 were still in the earlystages of production. Only one unit of the 2,500 TEUcontainer ship was delivered in the last quarter of 2004together with one unit of patrol boat and two units of3,200 hp tug boats. Work-in-progress, however, comprisedeight units of 2,600 TEU container ships with deliveriesscheduled from second quarter 2005 to third quarter2007 and two units of 4,950 dwt tankers due for deliveryin the second quarter of 2006.

Ship Conversion and OffshoreOur ship conversion and offshore sector registeredthe highest increased contribution, at 45 per centof total revenue or $615 million in 2004. This was $224million, or 57.3 per cent, higher than in 2003.This improvement was due to the major progressivecompletion of the P-50 marine conversion in Singaporeand the take-up of the P-50 topside fabrication works inthe last quarter of 2004 in Brazil.

equity stake in Cosco Dalian in China. Based on oursuccessful partnership, we subsequently signed anagreement with China Ocean Shipping Co. (COSCO) inJuly 2004 to take a 30 per cent stake in the enlargedCosco Shipyard Group of ship repair yards. These includeDalian, Nantong, Shanghai, Zhoushan and Guangzhou.All these yards are strategically located across the entirelength of China’s coast, offering ship owners a networkof high-quality marine engineering services.

Leveraging Complementary Overseas FacilitiesOur global hub strategy seeks to build a network ofoverseas facilities to serve our customers globally. It beganin 2001 when we ventured into Brazil with a 35 per cent

Work-in-progress carr ied forward from 2004comprised the Erha FPSO project and the FPSO ModecVenture 11 to be delivered in the first quarter of 2005.The US$628 mill ion P-54 EPIC turnkey FPSOconversion contract that was secured in June 2004will contribute significantly to performances in 2005and 2006.

RigbuildingRevenue contribution from our rigbuilding sectorregistered a decline by $17 million from $135 million in2003 to $118 million in 2004. Only one unit of jack-uprig was delivered in 2004. Another two units ofsemi-submersibles rigs were in advanced stages ofproduction with delivery due in the first quarter of 2005.The progressive take-up of the five units of jack-ups thatwere secured in 2004 and early 2005 is expected totake effect in 2005 and 2006, with deliveries due from thesecond quarter of 2006 to the second quarter of 2007.


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Of similar success was our 2,600 TEU proprietary designcontainer ship which saw six units ordered by majorshipping lines Wan Hai Lines and two units by ReedereiF Laeisz in 2004. In total, eight units of such containervessels are currently undergoing varying stages ofproduction in the shipyard.

Building Strategic Customer AlliancesWe continue to grow and capture ship repair market sharethrough strategic alliances with customers. We secureda breakthrough long-term ship LNG refit contract withNorth West Shelf, a consortium based in Australia. Qualityand faster turnaround time are key considerations forsuch customers. The long-term strategic alliances withour customers will provide us with a steady baseload andenable us to improve our systems and cost structures toserve our customers better. We aim to increase ourcontributions from such alliances to 50 per cent from thecurrent 29 per cent of total ship repair revenue.

equity stake in Mauà Jurong, a shipyard in Brazil. Thisstrategic hub in Brazil so far has made steady contributions.Our presence in Brazil has provided us the use of overseasfacilities to complement and supplement our Singaporeshipyards for the FPSO and FSO offshore conversionsfor the mutual benefits of both parties.

Developing Proprietary DesignsTo differentiate ourselves and to grow our business, wehave developed and marketed our proprietary designs indeepwater jack-up rigs and the 2,600 TEU containervessels. The continued ownership of proprietary designsallows us to expand our earnings base.

Our launch of the proprietary Baker Marine Pacific Class375 deep drilling offshore jack-up rig design since early2004 has gained the confidence and acceptance fromowners in addition to attracting new building orders. Todate, we have secured five rig-building orders, and weare expecting more to come.

Tan Kwi KinPresident & CEO

March 1, 2005

Outlook for 2005

In 2004, we secured a total of $2.1 billion worth of newcontracts with deliveries from 2005 to 2007. Thiswas a record high in new contract amount for SembCorpMarine, as compared with $757 million in 2003. Our orderbook as at December 31, 2004 for shipbuilding, shipconversion and rig building remained strong at $2.3 billioncompared to $1.1 billion as at December 31, 2003.This comprised shipbuilding at $487 million, shipconversion and offshore at $1.21 billion and rig buildingat $589 million.

Based on the new contracts secured and the scheduledcompletion of projects, the Group expects a higheroperating profit for 2005. We also expect highercontribution from China in 2005 when our investment inthe Cosco Shipyard Group will take effect.

The ship repair market is expected to remain buoyantamidst the competitive environment and favourable freightrates for all categories of vessels. For shipbuilding, thereis continual demand for our proprietary 2,600 TEUcontainer ships. Market fundamentals for floatingproduction storage offloading (FPSO) and floating storageoffloading (FSO) vessels also remain strong. Due to theglobal ageing rig fleet, demand for the upgrading andbuilding of rigs is further expected to continue to meetthe robust growth in the oil and gas sector.

Against this market scenario, we expect to grow ourshipbuilding, ship conversion and offshore businessesby 15 per cent in 2005.

Board and Management

On behalf of the Board of Directors, I would like to placeon record our heartfelt condolences to the wife and familymembers of the late Chairman, Mr Wong Kok Siew, forthe loss of a capable and excellent man who has beenvery instrumental in steering SembCorp Marine’s overseasgrowth and expansion through the hub strategy.

Mr Wong’s selfless dedication, commitment, vision andleadership over the past five years at the helm hastransformed SembCorp Marine into a global companywith a network of eleven strategically located shipyardsin Singapore, China and Brazil.

Mr Naoteru Tsuda, a board member representingIshikawajima-Harima Heavy Industry Co. (IHI) of Japansince May 2002 stepped down as a board member in2004. We would like to thank him for his dedicatedservices and many contributions to the Board.

Finally, the Board would like to thank all our valued clientsand business associates for their continuous support.Our appreciation also goes to our employees whose hardwork, dedication and loyalty have contributed to ourachievements in the past year. Finally, we would like tothank all our shareholders for their continued interest andsupport for the SembCorp Marine Group.

At AGlance

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Group Financial Highlights

For the year (S$'000) 2004 2003 % Change

Group Profit & Loss AccountTurnover 1,362,764 1,067,986 27.60Profits

EBITDA 131,372 109,604 19.86Operating Profit 93,853 74,308 26.30Profit Before Tax 114,009 95,186 19.77Attributable Profit 95,002 78,540 20.96

Group Balance SheetTotal Assets 1,859,365 1,525,115 21.92Total Liabilities 856,655 583,242 46.88Net Tangible Assets 959,334 917,298 4.58

Shareholders' Funds 968,900 927,127 4.51Minority Interests 33,810 14,746 129.28Capital Employed 1,002,710 941,873 6.46

Cash and Cash Equivalent 469,484 202,786 131.52Borrowings (149,645) (101,029) 48.12Net Cash 319,839 101,757 214.32

Financial RatiosEarnings Per Share (EPS)

EPS, before tax (cents) 8.02 6.72 19.35EPS, after tax (cents) 6.68 5.55 20.36

Dividend Per ShareNet dividend (cents) 6.00 3.97 51.13Gross dividend (cents) 7.50 5.00 50.00

Net Assets Value per share (cents) 67.87 65.29 3.95Net Tangible Assets per share (cents) 67.20 64.60 4.02

Return on Turnover (%) 6.97 7.35 (5.17)Return on Total Assets (%) 5.61 5.21 7.68Return on Equity (%) 10.02 8.41 19.14

At AGlance

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Group Quarterly Results

2004 (S$’000) 1Q 2Q 3Q 4Q Total

Turnover 245,005 330,833 389,981 396,945 1,362,764Operating Profit 18,298 25,558 31,695 18,302 93,853EBITDA 27,443 34,470 40,952 28,507 131,372Profit before Tax 22,860 31,959 30,281 28,909 114,009Attributable Profit 21,200 27,096 21,784 24,922 95,002

Earnings per share (cents) - Year-to-date 1.49 3.40 4.93 6.68Earnings per share (cents) - In Quarter 1.49 1.91 1.53 1.75 6.68

2003 (S$’000) 1Q 2Q 3Q 4Q Total

Turnover 195,449 294,356 339,211 238,970 1,067,986Operating Profit 17,777 22,967 17,809 15,755 74,308EBITDA 25,915 31,336 27,040 25,313 109,604Profit before Tax 23,725 27,166 24,374 19,921 95,186Attributable Profit 18,508 21,610 18,930 19,492 78,540

Earnings per share (cents) - Year-to-date 1.31 2.84 4.17 5.55Earnings per share (cents) - In Quarter 1.31 1.53 1.33 1.38 5.55

330.8

390.0

396.9

245.0

$'m

400

350

300

250

200

150

100

50

0

4Q

3Q

2Q

1Q

2004 Quarte

rly Turnover C

ontributio

ns

294.4

339.2239.0

195.4

$'m

400

350

300

250

200

150

100

50

0

4Q

3Q

2Q

1Q

2003 Quarte

rly Turnover C

ontributio

ns

4Q

3Q

2Q

1Q

2004 Quarte

rly Profit

Before Tax

and Attributable Profit

$'m

35

30

25

20

15

10

5

0

22.9

21.2

32.0

27.1

30.3

21.8

28.9

24.9

Profit before Ta

x

Attributable Profit

4Q

3Q

2Q

1Q

2003 Quarte

rly Profit

Before Tax

and Attributable Profit

$'m

35

30

25

20

15

10

5

0

23.7

18.5

27.2

21.6

18.9

19.919.5

Profit before Ta

x

Attributable Profit

24.4

25.6

31.7

18.3

18.3

4Q

3Q

2Q

1Q

2004 Quarte

rly O

perating Profit

$'m

35

30

25

20

15

10

5

0 23.017.8

15.8

17.8

4Q

3Q

2Q

1Q

2003 Quarte

rly O

perating Profit

$'m

35

30

25

20

15

10

5

0

At AGlance

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Corporate Directory

Registered Office

29 Tanjong Kling Road, Singapore 628054Telephone : (65) 6265 1766Fax : (65) 6265 0201/(65) 6261 0738Website : www.sembcorpmarine.com.sgE-mail : [email protected]

Share Registrar

Kon Choon Kooi Pte Ltd47 Hill Street, #06-02Chinese Chamber of Commerce & Industry BuildingSingapore 179365

Auditor

Ernst & YoungCertified Public AccountantsSingaporeAudit Partner: Daniel Soh(Appointed during financial year ended 31 December2003)

Bankers

Bank of America NT & SACitibank Singapore LtdDBS Bank LtdThe Hongkong and Shanghai Banking Corporation LimitedOversea-Chinese Banking Corporation LimitedStandard Chartered BankSumitomo Mitsui Banking CorporationMizuho Corporate Bank LtdUnited Overseas Bank Limited

Share Listing

SembCorp Marine’s shares are listed on the SingaporeExchange Securities Trading Limited

Company Secretary

Ms Kwong Sook May

Financial Calendar

Financial Year 2004

Financial Year 2005

2004 Jan Feb Mar Apr May Jun Jul Aug Sept Oct Nov Dec

Feb 5May 4

Aug 2Oct 29

Aug 31

May 18

Apr 13

Apr 28


Feb 7Apr 27

Aug 127 Oct

May 18

Apr 6

Apr 21

Financial YearAnnouncement ofResults & Dividends2004 Full YearQuarter 1, 2005Quarter 2, 2005Quarter 3, 20052004 Final DividendPaymentDelivery ofAnnual ReportAnnual General Meeting/Extraordinary General Meeting

Financial YearAnnouncement ofResults & Dividends2003 Full YearQuarter 1, 2004Quarter 2, 2004Quarter 3, 20042004 Interim DividendPayment2003 Final DividendPaymentDelivery ofAnnual ReportAnnual GeneralMeeting

At AGlance

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55%

Jurong

Clavon

Pte Ltd

53.8%

JPL

Industries

Pte Ltd

50%

Jurong

Marine

Services

Pte Ltd

100%

BulkTrade

Pte Ltd

100%

30%

35%

100%

Jurong

Shipyard

Pte Ltd

85%

PPL

Shipyard

Pte Ltd

100%

Jurong

SML

Pte Ltd

100%

Sembawang

Shipyard

Pte Ltd

70%

JPL

Services

Pte Ltd

100%

Jurong

Marine

Contractors

Pte Ltd

100%

Jurong

Machinery

& Automation

Pte Ltd

100%

Jurong

Integrated

Services

Pte Ltd

SembCorp

MarineLtd

P.T. Karimun

Sembawang

Shipyard

(Indonesia)

Cosco

Shipyard

Group

(China)

Mauá

Jurong SA

(Brazil)

Singapore Shipyard

Overseas Shipyard

Supporting Companies

CorporateStructure(as at March 12, 2005)

Finance & Administratio

n

Wee Sing Guan, Chief Financial Officer

[email protected]

Tan Cheng Tat, Vice President

Low Siew Lian, Asst General Manager

Corporate Development

Ng Thiam Poh, Senior Vice President

[email protected]

Investor Relatio

ns &

Communications

Judy Han, Senior Vice President

[email protected]

At AGlance

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OrganisationStructure(as at March 12, 2005)

Board of Directors

President : Tan Kwi Kin

Dy President : Wong Weng Sun

Heng Chiang Gnee

Cosco Shipyard Group

(China)

Deputy General Manager: L

iu Chin Peng

Email: [email protected]

.cn

Jurong Integrated Services

Executive Director : Chang King


Shipyards (Overseas)

Shipyards (Singapore)

Supporting Companies

Jurong Machinery &

Automation

Executive Director : Chew Yam Poey


JPL Services

Director : Yu Ching Ong

Email: jpl_se

[email protected]

Jurong Marine Contra

ctors

Executive Director : Wong Peng Kin


P.T. Karim

un Sembawang

Shipyard (Indonesia)

General Manager: W

ong Yu Liong


Sembawang Shipyard

Chairman : H

eng Chiang Gnee

Managing Director : Ong Poh Kwee

Executive Director : Wong Lee Lin

Asst General Mgr (B

usiness) : K. K. W

ee

Asst Gen Mgr (Operations) : N

eo Choon Gee


Jurong SML

Chairman : Ta

n Kwi Kin

Alternate Chairman : Yu Ching Ong

Executive Director : Freddie Woo

Email: smlsm

[email protected]

PPL Shipyard

Chairman : Ta

n Kwi Kin

Dy Chairman : D

r Benety Chang

Managing Director : Ong Tian Khiam


Jurong Shipyard

Chairman : Ta

n Kwi Kin

Managing Director : Wong Weng Sun

Executive Director : Lee Yeok Hoon

Senior General M

gr (Offsh

ore) : Don Lee

Asst GM (Ship Repair) : Tey C

hin Tiong


[email protected]

Mauá Jurong SA (Brazil)

Director & CEO : Chan Nai Eng

Email: [email protected] S

upport Group

Internal Audit

Say Chiou Mei, Asst

Vice President

[email protected]

Human Resource

Wong Peng Kin, Group Director

[email protected]

Kevin Choong, Asst General Manager

Koh Guat Siew, Asst General Manager

Marketing

Chua Teck Lian

Senior Vice President, Marketing

[email protected]

Don Lee Fook Kang


Ong Tian Khiam


Engineering

Seow Tan Hong, Senior Vice President

[email protected]

Legal

Tan Yah Sze, Asst Vice President

[email protected]

At AGlance

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Significant Events

• Acquisition of 30 per cent equity stake in CoscoShipyard Group by SembCorp Marine, subject toapproval from the regulatory authority of the People’sRepublic of China

• Appointment of Mr Wong Weng Sun as DeputyPresident of SembCorp Marine

August• Announcement of second quarter 2004 financial results• Presentation of three scholarships under NTU Marine

and Offshore Engineering Undergraduate ScholarshipProgramme by Jurong Shipyard and SembawangShipyard

• National Day Observance Ceremony with BG (NS) GeorgeYeo, Minister of Trade and Industry, as guest-of-honour

January• Formation of 82 per cent owned subsidiary Kristiansand

Drilling by Sembawang Shipyard (S) Pte Ltd and SkeieGroup AS Norway’s Deep Drilling 1 as a vehicle for aUS$110 million rig-building contract

• Delivery of two high-speed patrol boats, KP Balamand KP Murai, by Jurong SML to the IndonesiaPolice

• Long Service Award presentation to 104 employeesin Jurong Shipyard

• Donation of $12,300 to 57 needy students residing inthe Marsiling Constituency as part of SembCorpMarine’s School Book Assistance Grant (SchoolBAG)Scheme

• Presentation of SHARE Programme Gold Award foryear 2004 to Sembawang Shipyard

February• Announcement of full-year 2003 financial results• Presentation of Provisional Statement of Compliance

of a Port Facility to Jurong SML and SembawangShipyard

March• Delivery of GSF Constellation II, one of the world’s

most advanced jack-up rigs, by PPL Shipyard toGlobalSantaFe Corporation

• Signing of long-term Favoured Customer Contractbetween Sembawang Shipyard and Taiwan MaritimeTransport to provide drydocking facilities to thecompany’s diversified fleet of 40 ships

• Presentation of Merit Award at the 30th Annual ReportAwards Ceremony for SembCorp Marine’s 2002 AnnualReport

• Presentation of Provisional Statement of Complianceof a Port Facility to Jurong Shipyard

• Participation in Asia Pacific Maritime Exhibition 2004held at the Singapore Expo

• Participation by Jurong Shipyard in SPRING Singapore’s‘Singapore Innovation Award Winners ExperienceSharing Session’

• Participation by Jurong Shipyard in the NationalUniversity of Singapore’s ‘FPSO Research Forum’

• Participation in Choice Engineering @Careers 2004

April• Christening and delivery of Jascon 5, a dynamic

positioning class 3 pipelay, construction andaccommodation barge by Sembawang Shipyard toSea Trucks Group

May• Award of US$117.6 million contract for the construction

of one unit of Baker Marine Pacific Class 375 jack-uprig to PPL Shipyard by Mosbarron Ltd

• Successful assembly of GlobalSantaFe DevelopmentDriller II, a fifth-generation dynamic positioning semi-submersible drilling rig, by Jurong Shipyard

• Announcement of first quarter 2004 financial results.

June• Award of US$628 million P-54 FPSO EPC contract by

Petrobras Netherlands BV to Jurong Shipyard for theconversion of a VLCC tanker to a floating productionstorage offloading (FPSO) platform

• Presentation of $23,450 in Bursary Awards to 31students by Sembawang Shipyard

• Participation in Posidonia 2004 ‘The Heart of Shipping’Exhibition in Piraeus, Greece

• Participation in Singapore’s 37th National Day Parade• Sembawang Shipyard signed a long-term Favoured

Customer Contract with Tecto Belgium N.V. (TECTO)and Franceship, Belgium

September• Launch of the $500,000,000 Multicurrency Multi-Issuer

Debt Issuance Programme by SembCorp Marine• Participation in MARTECH 2004 at the Singapore Polytechnic• Participation in the Marine and Offshore Industry Promotion

and Exhibition at the National University of Singapore

October• Award of long-term LNG refit contract to Sembawang

Shipyard and Jurong Shipyard by Australia’s North WestShelf Shipping

• Delivery of Petrobras 43 by Mauá Jurong in Brazil toKellogg Brown and Root Halliburton

• Joint participation by Jurong Shipyard and Mauá Jurongin the Rio Oil & Gas Exhibition in Rio de Janeiro in Brazil

• Naming ceremony of GlobalSantaFe DevelopmentDriller I at Jurong Shipyard

• Visit by BG (NS) George Yeo, Minister for Trade andIndustry, to Mauá Jurong shipyard in Brazil

July• Completion of marine hull conversion on FPSO P-50

by Jurong Shipyard for Petrobras Netherlands BV• Formation of 40 per cent owned joint-venture company,

Cosco Shipyard Jurong Clavon, by subsidiary JurongClavon and Cosco Shipyard Group

At AGlance

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Awards & Accolades

Singapore H.E.A.L.T.H. Awards 2004Gold Award: Jurong ShipyardSilver Awards: Sembawang Shipyard and JurongSMLPresented by Health Promotion Board to companies witheffective and comprehensive initiatives in place to promoteemployees’ health and wellness.

National Infocomm Award: Sembawang ShipyardPresented by Infocomm Development Authority ofSingapore for the Most Innovative Use of InfocommTechnologies (Private Sector)

30th Annual Report Awards 2003Merit Award: SembCorp MarinePresented by Institute of Public Accountants of Singapore,Securities Investors Association, Institute of Management,Singapore Institute of Directors, Singapore Exchange andBusiness Times to listed companies whose annual reportshave achieved a high standard of excellence and disclosurebeyond the minimum regulatory requirements.

Annual Safety Performance Awards Ceremony 2004Silver Awards: Jurong Shipyard (3) and SembawangShipyard (1)Merit Awards: Jurong Shipyard (5) and SembawangShipyard (10)Awarded by the Ministry of Manpower (Occupational Safetyand Health Training Department) in recognition of soundmanagement systems and good safety performance.

• Presentation of National Infocomm Award 2004 toSembawang Shipyard for the Most Innovative Use ofInfocomm Technologies (Private Sector) by InfocommDevelopment Authority of Singapore

• Naming ceremony of GlobalSantaFe DevelopmentDriller II at Jurong Shipyard

• Christening ceremony for FPSO Modec Venture 11 atJurong Shipyard

• Award of $143 million shipbuilding contract to JurongShipyard for the construction of two units 2,646 TEUcontainer vessels for Wan Hai Lines

• Award of US$32 million shipbuilding contract to JurongSML by Kuwait Oil Tanker Company S.A.K. for theconstruction of two units of 4,950 dwt tankers

• Award of US$131 million rig building contract to JurongShipyard by Petrojack AS of Norway

• Approval of business licence by the People’s Republicof China’s regulatory authority for SembCorp Marine’s30 per cent stake in the registered capital of CoscoShipyard Group

• Contribution of $152,350 to needy students underSembCorp Marine’s School Book Assistance GrantScheme

• Donation of $306,530.40 by employees andsubcontractors of SembCorp Marine Group to the RedCross International’s Tidal Wave Asia Fund for familiesaffected by the tsunami disaster

International Ship and Port Facility SecurityProvisional Statement of Certification : JurongShipyard, Sembawang Shipyard and Jurong SMLAwarded by Maritime Port Authority to shipyards withcomprehensive security measures in line with IMO’sinternational code for the security of ship and port facilities

Partner in Organisation Excellence Award 2004:Jurong ShipyardPresented by SPRING Singapore to companies that madesignificant contributions towards organisation andinnovation excellence

IDEA Awards : Jurong Shipyard (5), SembawangShipyard (2)Presented by SembCorp Industries to individuals or groupswithin the SembCorp Industries Group who had successfullyimplemented creative and innovative ideas at work

Community Chest of Singapore AwardsCorporate Bronze Award: Sembawang Shipyard5-Year Outstanding Share Award: Sembawang ShipyardBronze Award presented for $50,000 fund-raising activities,while 5-Year Outstanding Share Award presented inrecognition of sustained participation rate at platinumlevel for five consecutive years

November• Award of US$84 million shipbuilding contract to Jurong

Shipyard to construct two units of 2,600 TEU containervessels for Reederei F Laiesz

• Approval by the regulatory authority of the People’sRepublic of China for SembCorp Marine’s 30 per centacquisition of Cosco Shipyard Group

• Presentation ceremony for Green Wave EnvironmentalCare Competition Awards with Mr TharmanShanmugaratnam, Minister of Education, as guest-of-honour

• Christening ceremony for FPSO Baobab Ivoirien MV10at Jurong Shipyard

• Announcement of third-quarter 2004 financial results

December• Christening and delivery of Theodor Storm, a 2,500

TEU container vessel, by Jurong Shipyard to ReedereiKarl Schlüter

• Blessing ceremony for FPSO Sendje Berge by JurongShipyard

• Christening and delivery of PW Tekun and PW Tegap,45-ton bollard pull harbour tug boats, by Jurong SMLto Pacific Workboats

NTUC May Day 2004Gold Award: Jurong ShipyardPresented by National Trades Union Congress tocompanies for their continuing commitment towards goodunion-management relations, employee welfare, trainingand development.

Corporate Governance& Transparency

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Name of Director Position held Date of first Date of last Nature ofon the Board appointment re-election Appointment

to the Board as Director

Wong Kok Siew Chairman May 20, 1998 April 28, 2004 Non-Executive/(deceased) Non-Independent

Tan Kwi Kin President & CEO April 1, 1990 April 17, 2003 Executive/Non-Independent

Tan Pheng Hock Director April 16, 2001 April 28, 2004 Non-Executive/Non-Independent

Kiyotaka Matsuzawa Director September 30, 2001 May 30, 2002 Non-Executive/Independent

Low Sin Leng Director November 14, 2002 April 17, 2003 Non-Executive/Non-Independent

Tan Tew Han Director April 17, 2003 April 28, 2004 Non-Executive/Independent

Ajaib Haridass Director October 31, 2003 April 28, 2004 Non-Executive/Independent

Haruo Kubota Director July 15, 2004 N/A Non-Executive/Independent

Heng Chiang Gnee Alternate Director April 6, 2001 N/A Executive/Non-Independent

Corporate Governance Report

Overview

SembCorp Marine’s corporate governance principles arebuilt on the core values of integrity and commitment.They reflect our strong belief in protecting and enhancingshareholder value in a sustainable way. We firmly believethat the professionalism, integrity and commitment of ourBoard members and employees of the Group, supportedby a sound system of policies, practices and internalcontrols are the success elements that will enable us topreserve long-term value and returns for our shareholders.

This report outlines SembCorp Marine’s corporategovernance processes and activities for the financial year.

Board of Directors

Effective Board To Lead and Effect Controls

The key roles of the Board include:

• Providing entrepreneurial leadership and directions ofthe Group

• Ensuring prudent and effective controls• Setting values and standards to ensure obligations to

shareholders are met• Overseeing the proper conduct of the Group’s business

The Board schedules four meetings a year to review anddiscuss reports by management on the performance of

the Group, its plans and prospects. Additional boardmeetings are also held to deal with ad-hoc matters ofsignificance as well as immediate issues facing the Group.A total of four board meetings were held in the year andwe achieved an average of 87.5 per cent Boardattendances in the year.

The Board has adopted a set of internal controls that setsout approval limits for capital expenditure, investmentsand divestments, bank borrowings and cheque signatories’arrangements at board level. Approval sub-limits are alsoprovided at management levels to facilitate operationalefficiency.

To give effect to the efficient discharge of its responsibilitiesand to provide independent oversight of Management,the Board has established a number of Board Committees,including the Audit Committee and Executive Resources& Compensation Committee and Nominating Committee.These key committees are made up of independent ornon-executive directors. Other ad-hoc committees canbe formed from time to time to look into specific areaswhen the need arises.

Membership in the different committees is carefullymanaged to ensure that there is equitable distribution ofresponsibilities among board members, to maximisethe effectiveness of the board and foster activeparticipation and contribution from board members.Diversity of experiences and appropriate skills arealso considered.

Strong and Independent Board Exercising ObjectiveJudgement

The Board comprises eight directors and one alternatedirector of whom seven are non-executive directors.The Board’s Chairman was Mr Wong Kok Siew until hisdemise in February 2005. The executive director isTan Kwi Kin who is also the President and CEO ofSembCorp Mar ine. Mr Heng Chiang Gnee,alternate director to Tan Kwi Kin, is the Deputy President.

Membership of the Board is diverse, comprising businessleaders, professionals with financial backgrounds,a practising lawyer and members of the public sector.Profiles of the directors are found on pages 36 to 38 ofthis Annual Report. The Board is favourably composedof a majority of non-executive directors, independent ofmanagement and independent in terms of character andjudgement. This enables the Management to benefit froman external and objective perspective on issues that arebrought before the Board.

The Board considers non-executive director,Ajaib Haridass, an independent non-executive director,although he has a relationship with the Group by virtueof his position as a managing partner of Haridass Ho,which renders professional services to the Group.Notwithstanding this relationship, the Board assesseshim as an independent director due to his manifest abilityto exercise strong independent judgement in hisdeliberations in the interests of the Group.

Formal Appointment and Re-election of Directors

SembCorp Marine believes that all directors shouldbe submitted for re-election at regular intervals, subjectto continued satisfactory performance. The President,while also a Board member, is also subject toretirement and re-election by shareholders as partof board renewal. Nominations and election of Boardmembers are the prerogatives and proper rights of allshareholders and the Board ensures the planned andprogressive refreshing of its members.

The Company’s Articles of Association require one-thirdof directors to retire and subject themselves to re-electionby shareholders at every Annual General Meeting(one-third rotation rule). In other words, no director staysin office for more than three years without being re-electedby shareholders.

INTEGRITY

We believe in and perform our duties withhonesty, dedication and responsibility.We value loyalty, trustworthiness,reliability and openness as essentialpersonal attributes in our corporateculture.


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In addition, a newly-appointed director will submit himselffor retirement and election at the Annual General Meetingimmediately following his appointment. Thereafter, he issubject to the one-third rotation rule.

The Board does not believe it is possible to compile alist of criteria that are appropriate to characterise, in allcircumstances, whether a non-executive director isindependent. It is the approach and attitude of each non-executive director that is critical. The Board aims fordiversity of knowledge and experience among its membersin relation to the various businesses of the Group and theinternational nature of the Group. The Board through thedelegation of its authority to the Nominating Committee,has used its best efforts to ensure that directorsappointed to the Board possess the background,experience and knowledge in technology, business,finance and management skills critical to the Group’sbusinesses and that each director with his specialcontribution brings to the Board an independent andobjective perspective to enable balanced and well-considered decisions to be made.

Our Boards are periodically renewed to ensure strongand sound leadership at the Board level to enable arefreshing of talent as well as encourage dynamics of anindependent and balanced Board composition.

Clear Division of Responsibilities at the Top

There is a clear separation of the roles and responsibilitiesbetween the Chairman and the President. The lateChairman Mr Wong Kok Siew and Mr Tan Kwi Kin werenot related to each other.

The Chairman, who is a non-executive, is responsible forthe leadership of the Board, ensuring its effectiveness onall aspects of its role and setting its agenda. He actsindependently in the best interests of the Group andshareholders. The President is charged with the executiveresponsibility of running the Group’s business.The Chairman facilitates the contribution of non-executive

directors in particular and ensures constructive relationsbetween executive and non-executive directors. He alsoensures that the members of the Board work togetherwith the Management in constructive debate on variousmatters, including strategic issues and operational issues.

Board Performance and Conduct of i tsAffairs

To ensure that directors are well equipped and trained,Management addresses directors’ training needs. Newly-appointed directors are given briefings by the Management,and facility visits to the premises are arranged to enablethem to acquire an understanding of the Group, itsbusiness activities and its strategic directions. One suchin-depth orientation programme and facility visit wasconducted on July 30, 2004 for an Independent Director.

Changes to regulations and accounting standards aremonitored closely by Management. To keep pace withregulatory changes, where these changes have an importantbearing on the Group’s or directors’ disclosure obligations,directors are briefed either during board meetings or atspecially-convened sessions, such as trainings and seminarsconducted by external professionals.

Where necessary, further external advice and consultants’services are made available to our directors beforeimportant decisions are made by the Board. All the issuesare actively debated by the Board and properly recorded.

Informal reviews of a Board’s performance areundertaken on a continual basis by the NominatingCommittee with inputs from the other Board membersand the President. The Board is constantly reviewed toensure strong, independent and sound leadership for thecontinued success of the business of the Group.

Full Access to Information and Resources forDirectors

Management provides adequate and timely informationto the Board on Board affairs and issues that require the

Board’s decision as well as on-going reports relating tooperational and financial performance of the Group.Where a physical Board meeting is not possible, timelycommunication with members of the Board is effectedthrough electronic means, which include electronic mail,teleconferencing and videoconferencing. Alternatively,Management will arrange to personally meet and briefeach director before seeking the Board’s approval.

The Board has separate and independent access to thePresident, members of senior management and the CompanySecretary at all times. The Board also has access toindependent professional advice where appropriate.

Likewise, the Audit Committee must also meet the externaland internal auditors separately at least once a year,without the presence of the President and other seniormanagement members, in order to have free and unfilteredaccess to information that it may require.

The Company Secretary assists the Chairman with thepreparation of meetings’ agenda, attends and preparesminutes of board proceedings, ensuring goodinformation flows within the Board and its Committees.She assists the Board on the compliance issues to theMemorandum and Articles of Association, requirementsof the Companies Act and the Singapore ExchangeSecurities Trading Limited. She is also the primarychannel of communication between SembCorp Marineand the Singapore Exchange Securities Trading Limited,the Accounting and Corporate Regulatory Authorityand shareholders.

namely Tan Tew Han as Chairman, Ajaib Haridass and HaruoKubota as members. During the year underreview, the Committee held five meetings. All membersparticipated actively at these meetings.

The main responsibility of the Audit Committee is toreview with the external auditor, internal auditor andManagement, the Group’s general policies andcontrol procedures, interested persons transactions,as well as any matters or issues that affect theperformance of the Group. The Committee reviews thequarterly, half-yearly and annual results announcements aswell as the financial statements of the Group and Companybefore they are submitted to the Board for approval. It alsorecommends the appointment of the Company’s externalauditors.

The Audit Committee meets with the external and internalAuditors, without the presence of Management, at leastonce a year to review the cooperation and assistance givenby Management to them.

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

The Executive Resource & Compensation Committee

The Executive Resource & Compensation Committee ischaired by Wong Kok Siew (deceased), and its membersare Tan Tew Han and Ajaib Haridass. It oversees executivecompensation and development with the aim of buildingcapable and committed senior management through focusedmanagement and progressive policies that can attract,motivate and retain talented executives to meet the currentand future needs of the Group.

The Committee reviews and approves remuneration andpromotion of key executives as well as to decide on issuespertaining to their development and succession. Hence, italso establishes guidelines on share options and other long-

Board Committees

The Company has three board committees: (a) Audit Committee; (b) Executive Resource & Compensation Committee; (c) Nominating Committee

The Audit Committee

The Audit Committee comprises three independent directors,


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term incentives plans and approves the grant of suchincentives to key executives. The underlying philosophy isto motivate executives to maximise operating and financialperformance and shareholder value. On an annual basis,the Committee conducts a succession planning review ofthe President, all his direct reports, and selected key positionsin SembCorp Marine. Potential internal and externalcandidates for succession are reviewed for different timehorizons of immediate, medium-term and longer-term needs.

The Committee further reviews the remuneration of its non-executive directors, executive director and senior executives,as well as major human resource management andcompensation policies and practices for the rest of theGroup. While the Committee’s Chairman was not regardedas independent within the context of the definition of“independence” in the Code, he was a non-executive directorindependent of Management with a clear separation of hisrole from Management in deliberations of the Committee.

The Committee also has access to expert professionaladvice on human resource matters whenever there is a need

to consult externally. In its deliberations, it takes intoconsideration industry practices and norms in compensation.The President is not present during the discussions relatingto his own compensation, terms and conditions of service,and the review of his performance.

The Committee meets among its members without thepresence of Management, at least once a year. For the yearin review, it held three meetings and achieved full attendance.

Nominating Committee

The Nominating Committee is chaired by Wong Kok Siew(deceased), and its members are Tan Tew Han and AjaibHaridass.

The primary purpose of the this Committee is to supportand advise the Company, its unlisted subsidiaries and, whereapplicable, unlisted associated companies by nominatingsuitable candidates who are best able to discharge theirresponsibilities as directors. This means evaluating thebalance of skills, knowledge and experience of these boardsand assessing the candidates for their regard for the lawand the high standards of governance practised by theGroup. Appointments to these boards are made on meritand against objective criteria. The Nominating Committeealso takes care to ensure that appointees have enoughtime available to devote to their directorship roles.

Communication with Shareholders

Regular, Effective and Equal Treatment of Shareholders

We believe that our shareholders must be given a fair andaccurate view on the affairs of our company on an ongoingbasis. As co-owners of SembCorp Marine, they are entitledto timely and complete information on financial data, materialdevelopments as well as an understanding of our businessdirections and prospects.

All SembCorp Marine’s price-sensitive information is disseminatedpublicly so as to be available to all shareholders at the sametime and not on a selective basis. Financial and otherperformance data is given for the Group as well as by businessunits or divisions, where appropriate. This will allow ourshareholders better insight into the earnings drivers withinSembCorp Marine.

During the release of earnings results, the announcement isfirst released by MASNET onto the SGX website. Thereaftera briefing or teleconference by Management is held for themedia and analysts. All materials used at the briefing will beavailable on SGXNET as well as the Company website atwww.sembcorpmarine.com.sg

Following any release of earnings or price-sensitive developments,our investor relations staff are available by email or telephoneto answer questions from shareholders and the media as longas the information requested does not conflict with the rulesof fair disclosure set by the Singapore Exchange SecuritiesTrading Limited.

Greater Shareholder Participation at General Meetings

The Group recognises that good corporate governance requiresactive participation of shareholders in the decision-making atthe general meetings of shareholders. SembCorp Marineencourages shareholder participation at general meetings.Information on meetings of shareholders are made throughnotices published in the newspaper and reports or circularssent to all shareholders. If any shareholder is unable to attend,he or she is allowed to appoint up to two proxies to vote on

his or her behalf at the meeting through proxy forms sent inadvance.

The Chairman, President as well as the Chairman of the AuditCommittee would be present together with the Chief FinancialOfficer, the Company Secretary and our external auditors toanswer questions raised by shareholders. Minutes of shareholdermeetings are available on request by registered shareholders.

For further details on SembCorp Marine communications withits shareholders, see the “Investor Relations” section of theAnnual Report.

Dealings in Securities

SembCorp Marine has adopted a Code of Compliance onDealing in Securities, which prohibit dealings in the Company’ssecurities by its officers during the period commencing twoweeks prior to the announcement of the quarterly results.Directors and executives are also expected to observe insider-trading laws at all times even when dealing in securities withinthe permitted trading period.

Interested Person Transactions

Shareholders have adopted a shareholders mandaterelating to interested person transactions of the Group.The mandate sets out the levels and procedures toobtain approval for such transactions. Informationregarding the mandate is available on the Company’swebsite at www.sembcorpmarine.com.sg. All strategicbusiness units are required to be familiar with the mandateand report any such transactions to the Company’s FinanceDepartment, which keeps a register of the Company’sinterested person transactions. Information on interestedperson transactions for 2004 is found in page 181.

Internal Control and Audit

A Sound and Independent System of Internal Controland Audit

The internal audit function of the Company is supported byBoard Composition and Committees

Board of Directors

Audit Committee

Executive Resource & Compensation Committee

Nominating Committee

Chairman

Tan Tew Han

Chairman

Wong Kok Siew

(deceased)

Chairman

Wong Kok Siew

(deceased)

Chairman

Wong Kok Siew

(deceased)

Members

Ajaib Haridass

Haruo Kubota

Members

Tan Tew Han

Ajaib Haridass

Members

Tan Tew Han

Ajaib Haridass

Tan Tew Han

Ajaib Haridass

Haruo Kubota

Heng Chiang Gnee

(Alternate Director)

DirectorsTan Kwi KinTan Pheng Hock

K. MatsuzawaLow Sin Leng


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Type of Appointment The Company $

(i) Board of Directors- Basic fee 25,000- Chairman’s allowance 35,000- Vice Chairman’s allowance 20,000

(ii) Audit Committee- Chairman’s allowance 20,000- Members’ allowance 10,000

(iii) Executive Resource &Compensation Committee /Nominating Committee- Chairman’s allowance 15,000- Members’ allowance 10,000

Notes:

Mr Tan Kwi Kin, as an executive director, does not receive director’s fee

Competitive Rates to Encourage and Retain KeyExecutives

SembCorp Marine adopts an incentive compensation plan forkey executives tied to the creation of economic-value-add aswell as to attainment of individual performance goals.An individual’s incentive compensation is linked to the economic-value-add created by the Company and its subsidiaries.

A “bonus bank” is used to hold incentive compensation creditedin any year. Typically, one-third of the available balance is paidout in cash each year, with the balance being carried forwardto the following year. Such carried-forward balances of thebonus bank may either be reduced or increased in future,based on the yearly economic-value-add performance of theGroup and subsidiary.

The Board has decided not to prepare a separate remunerationreport as most of the information is found in the directors’report. We have indicated in this Report where the informationrequired to be disclosed can be found.

Rather than set out the names of the top key executives whoare not also directors of the Company, we have shown thenumber of key employees in remuneration bands of S$250,000from S$100,000. This should give a macro perspective of theremuneration pattern in the Company, while maintaining theconfidentiality of staff remuneration matters.

Remuneration Band for Key Executives

Board/Committees Board CommitteesBoard Audit ERCC NC

No. of meetings held 4 5 3 -Directors Number of Meetings AttendedWong Kok Siew (deceased) 4 NA 3 NATan Kwi Kin 4 NA 3 NATan Pheng Hock 4 NA NA NAKiyotaka Matsuzawa 3 3 of 4 NA NA(Resigned as Audit Committee member on September 15, 2004)

Low Sin Leng 3 NA NA NATan Tew Han 4 5 3 NAAjaib Haridass 4 5 3 NAHaruo Kubota 2 of 2 1 of 1 NA NA(Appointed Director on July 15, 2004 and Audit Committeemember on September 15, 2004)

Naoteru Tsuda 0 of 2 NA NA NA(Resigned as Director on July 15, 2004)

Remuneration Band No. of Employees$250,000 to $499,999 7$100,000 to $249,999 -

As new risks emerge and risk impacts change, SembCorpMarine would continuously review the programme implementedto stay ahead in risk mitigation and prevention plans.An Enterprise Risk Management Audit programme would alsobe designed and conducted to ensure effective compliance ofrisk control and monitoring.

Competitive Remuneration Report

Adequate, Not Excessive Directors’ Remuneration ofDirectors

The President, as executive director, does not receive director’sfees. He is a lead member of Management. His compensationconsists of his salary, allowances, bonuses, performance shareawards conditional upon his meeting certain performancetargets (details are available on page 180 of the Annual Report)and options. Details on share options granted and its fair valueare available on pages 127 to 129 and page 180 of the AnnualReport, respectively.

Non-executive directors have remuneration packages thatconsist of a directors’ fee component according to theCompany’s Directors’ Fee policy, an attendance fee componentand a share options component according to the Company’sEmployee Share Option Plan. The Directors’ Fee policy is basedon a scale of fees divided into basic retainer fees as directorand additional fees for attendance and service on boardcommittees (details are available on page 32 of the AnnualReport). Details on share options granted and its fair value areavailable on pages 127 to 129 and page 180 of the AnnualReport, respectively.

The basis of allocation of the number of share options takesinto account a director’s contributions and additionalresponsibilities at board committees. The report on directors’remuneration is found on page 180 of the Annual Report.We believe that our directors are adequately compensated andin line with market norms.

The directors’ remuneration for 2004 is $337,000($332,332 in 2003) and is derived using the following rates:

the Internal Audit Department, which reports on audit mattersdirectly to the Audit Committee Chairman and administrativelyto the President. This department plans its internal audit schedulesin consultation with, but independent of Management, and itsplan is submitted to the Audit Committee for approval at thebeginning of each year.

To ensure that the internal audits continue to be performed bycompetent professionals, the Internal Audit Department continuesto recruit and employ suitably qualified staff. The internal auditfunction provided by the department continues to meet withthe standards set by the Institute of Internal Auditors.

Enterprise Risk Management

Our Enterprise Risk Management programme developed arisk management framework comprising guidelines andworksheets. This framework was rolled out to our majorshipyards, where they were undergoing different phases ofimplementation at year-end. Sembawang Shipyard hadintegrated the Enterprise Risk Management programme intothe management system and was in the final stage of developingthe various risk treatment measures. Jurong Shipyard hadidentified its key processes and related key risks and wasassessing the risk impact and developing the risk treatmentmeasures. PPL Shipyard had also identified its key processes,focusing on the project and contract management, and was atthe stage of assessing the related risks and developing policiesand procedures for risk treatment measures.

The Enterprise Risk Management programme sought toidentify, assess, review and develop existing or new risks in thebusiness processes. During the year, special focus was placedon HSSE (health, safety, security and environment) and projectmanagement. Key risks for the two processes were identifiedand assessed, and existing safety and project managementpolicies and procedures were reviewed to assess their adequacy.From there, steps were taken to minimise the risk impact.While HSSE would always be an area of concern in the marineindustry, project management was also deemed important inallowing the Group to deliver according to contract terms andmanage costs amidst rising material costs and fluctuatingforeign exchange.


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Board of Directors

The late Mr Wong had been a director sinceMay 20, 1998 and had served as Chairmanof SembCorp Marine since June 1999 untilhis demise on February 16, 2005. He wasalso the Deputy Chairman and ChiefExecutive Officer of SembCorp Industries.From 1989 to 1995, he was President ofSingapore Technologies IndustrialCorporation and then Chairman of thecompany until its merger with SembawangCorporation to form SembCorp Industriesin October 1998. Mr Wong was also theChairman (non-executive) of NomuraSingapore and was executive Chairman ofNomura from 1995 to 1998. He was alsothe Chairman of International EnterpriseSingapore (formerly known as the TradeDevelopment Board of Singapore) sinceAugust 2002. Other directorships in publiclisted companies included SembCorpLogistics, BIL International, British AmericanTobacco (London), Camerlin Group andRSH Limited. Mr Wong graduated fromMcGill University in Canada in 1970 with aBachelor of Engineering (Distinction) undera Colombo Plan Scholarship and also heldan MBA from McMaster University, Canada.

Wong Kok SiewChairman (deceased)

Mr Tan Kwi Kin, currently the President andChief Executive Officer of SembCorp Marine,has been a director of the Board sinceApril 1, 1990. Mr Tan has 39 years of workingexperience in Jurong Shipyard having startedhis career in 1966 as a Junior Engineer inthe Design Department. He was promotedto Manager in charge of Production Controlin 1977 and General Manager in 1981. In1990, he was appointed Managing Director.When Sembawang Shipyard merged withJurong Shipyard in 1997, Mr Tan wasappointed President of the JurongShipyard group of companies. Following arestructuring and a name change inNovember 1999, Mr Tan became thePresident and Chief Executive Officer ofSembCorp Marine and Chairman of JurongShipyard. His also chairs the boards of PPLShipyard, JPL Corporation, JurongIntegrated Services and Jurong Machineryand Automation. Mr Tan graduated fromTokyo University, Japan, in 1965 with aBachelor of Engineering (Mechanical).

Tan Kwi KinPresident

Mr Tan Pheng Hock was appointed a directoron April 16, 2001. Currently, he is thePresident and Chief Executive Officer ofSingapore Technologies Engineering. Duringhis 16 years of shipyard experience withSingapore Technologies Marine, he led thecomputerisation of the company’s processesand operations and the building of ashipyard. Prior to his current appointment,he held several key appointments includingExecutive Vice President of SingaporeTechnologies Marine and President ofSingapore Technologies Kinetics. His otherboard appointments are with SingaporeTechnologies Kinetics, SingaporeTechnologies Electronics, SingaporeTechnologies Aerospace and SingaporeTechnologies Marine. Mr Tan graduated witha Bachelor of Marine Engineering (First Class)from the University of Surrey under aColombo Plan Scholarship. He further holdsa Masters of Science in Management fromStanford University and has attended theAdvanced Management Program at HarvardUniversity in 1999.

Tan Pheng HockDirector

Mr Kiyotaka Matsuzawa has been a directorof SembCorp Marine since September 30,2001. He has had a distinguished career inIHI where he was the former GeneralManager of Ships & Offshore Department.He is presently the Managing Director of IHIMarine United Inc. Japan prior to his previousposition as Managing Director of IHI MarineEngineering (Singapore) since July 2001.In 1978, he was assigned to IHI’s Braziliansubsidiary company ISHIBRAS as theGeneral Manager for eight years where heinitiated and promoted ship exports fromBrazil to clients worldwide under the BrazilianGovernment Promotion Program. MrMatsuzawa graduated from HitotsubashiUniversity, Japan with a Bachelor ofEconomics. He also holds a Diploma inBusiness Administration from the FederalUniversity of Bahia, Brazil.

Kiyotaka MatsuzawaDirector

Ms Low Sin Leng was appointed a directoron November 14, 2002. She is currentlythe Senior Executive Director at the CEO’soffice of SembCorp Industries andconcurrently the Executive Chairman ofSembCorp Parks Holdings and SembCorpParks Management and Chairman ofSemHotel Management. She is alsoChairman of Pacific Internet, DeputyChairman of SembCorp Utilities and Directorof Singapore Computer Systems. From2000 to 2004, Ms Low was the Group ChiefOperating Officer of SembCorp Industriesand from 1995 to 2000, the Executive VicePresident of Singapore Power. Between1975 and 1995, she held several key seniorpositions in the civil service. As a PresidentScholar, Ms Low graduated with a Bachelorof Engineering (First Class Honours) fromthe University of Alberta, Canada. She furtherholds a Master of Business andAdministration (High Distinction) degree fromthe Catholic University of Leuven, Belgiumand has attended the AdvancedManagement Program at the HarvardBusiness School in 1994.

Low Sin LengDirector

Mr Tan Tew Han was appointed a directorof SembCorp Marine on April 17, 2003. Hebrought with him an impressive 25 years ofbanking experience. He held several seniorpositions in Citibank, Banque Paribas, Bankof America, International Bank of Singaporeand Overseas Union Bank. Prior to hisretirement in 2001, he had been the ExecutiveVice President and Head of InvestmentBanking and Corporate Finance Division inOUB since 1993. His other boardappointments include his appointmentsat PanPac Media Group, ST AssetManagement and Full Apex (Holdings).Mr Tan graduated from the University ofSingapore with a Bachelor of Science(Honours) in 1970 and obtained an MBA in1978 from the University of British Columbia,Canada.

Tan Tew HanDirector


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Ajaib HaridassDirector

Haruo KubotaDirector

Heng Chiang GneeAlternate Director

Mr Ajaib Haridass was appointed a directoron October 31, 2003. He set up the legalfirm, Haridass Ho & Partners in 1985 wherehe is now the Managing Partner. He bringswith him more than 28 years of legalexperience specialising in all admiraltymatters, both litigious and non-litigious,including ship sale and purchase and theirfinancing aspects, marine insurance andgeneral commercial and banking litigation.Mr Haridass sits as an arbitrator andmediator, as an accredited mediator of theSingapore Mediation Centre. He is also amember of the Advisory Committee of theSingapore Chamber of Maritime Arbitrationand President of the Maritime LawAssociation of Singapore. He is a referee ofthe Small Claims Tribunal and a mediatorat the Criminal Relational Disputes. He isalso a Commissioner for Oaths, a NotaryPublic and a Justice of Peace. Mr Haridassgraduated from the University of Londonwith a Bachelor of Law (Honours) and wascalled to the English Bar at the MiddleTemple in 1975. He was admitted as anAdvocate & Solicitor of the Supreme Courtof Singapore in 1976.

Mr Haruo Kubota was appointed a directorof SembCorp Marine on July 15, 2004.He is currently the Managing Director of IHIMarine Engineering (Singapore). From 2002to 2004, Mr Kubota was General Managerof IHI Marine Co. Ltd with a portfolio coveringthe sales headquarters of an affiliatecompany. Prior to this, he was the GeneralManager of the Ship Design Department atKure Shipyard for five years since 1997,responsible for all design activities. He startedhis career with Ishikawajima-Harima HeavyIndustries Co. Ltd (IHI) in 1972. Mr Kubotagraduated from Tohoku University with aBachelor of Mechanical Engineering in 1972.

Mr Heng Chiang Gnee was appointed asan alternate director on April 6, 2001.Currently, he is the Deputy President ofSembCorp Marine and Chairman ofSembawang Shipyard. Prior to this,Mr Heng was involved with businessdevelopment and project management inSembawang Shipyard. His previousemployment with the Singapore TechnologiesGroup involved businesses coveringshipbuilding, ship repairing, ordnance, aircraftengine manufacturing and lifestyleentertainment. He is also the President ofthe Association of the Singapore MarineIndustries and Chairman of the Shipbuildingand Offshore Engineering AdvisoryCommittee of Ngee Ann Polytechnic.Mr Heng graduated from the University ofNewcastle-Upon-Tyne, United Kingdom,with a Bachelor of Marine Engineering (FirstClass). He also obtained a Master of Science(Management) from the Sloan School ofManagement, Massachusetts Institute ofTechnology, United States, and attended theHarvard University’s Advanced ManagementProgram.

Ong Tian Khiam

Wong Weng Sun


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Key Management Profile

Mr Wong has been the Deputy Presidentof SembCorp Marine since July 2004 andthe Managing Director of Jurong Shipyard.From January 2000 to June 2004, he wasJurong Shipyard’s Executive Director.He joined the company in 1988 as anengineer and was later appointed GeneralManager in charge of project management.Mr Wong graduated from the UniversityTechnology of Malaysia in 1986 with aBachelor of Mechanical Engineering (Marine).He also obtained a Master in BusinessAdministration degree from Oklahoma CityUniversity in the United States in 1994.

Mr Ong has been the Managing Director ofPPL Shipyard since November 1997.Prior to that, he held positions as DeputyManaging Director and Managing Director inSembawang Maritime and SembawangBethlehem respectively. He was also theManaging Director in charge of thedevelopment of Karimun Shipyard.When Mr Ong graduated from the Universityof Singapore with a Bachelor in MechanicalEngineering in 1969, he joined SembawangShipyard as a Graduate Management Trainee.He then moved on to hold several positionsat Far East Levingston Shipbuilding between1970 and 1978 and at Promet Private Limitedbetween 1978 and 1989 before rejoining theGroup.

Tan Kwi KinPresident & CEO

Heng Chiang GneeDeputy President

Wong Weng SunDeputy PresidentManaging Director, Jurong Shipyard

Wee Sing GuanChief Financial Officer

Wong Peng KinDirector(Group Human Resource)

Lee Yeok HoonExecutive DirectorJurong Shipyard

Ong Poh KweeManaging DirectorSembawang Shipyard

Wong Lee LinExecutive DirectorSembawang Shipyard

Ong Tian KhiamManaging DirectorPPL Shipyard

Mr Wee has been the Chief Financial Officerof SembCorp Marine since February 2000.He first joined the company as anaccountant in 1974 and later held theposition of Financial Controller beforeassuming his current appointment. Mr Weegraduated from Nanyang University in 1972with a Bachelor of Commerce.

Wee Sing Guan

Mr Wong has been a Director of GroupHuman Resource at SembCorp Marine sinceJuly 2004. From February 2000 to June2004, he was the Senior Vice President ofHuman Resources. He joined the companyin 1970 as an officer in the PersonnelDepartment. Mr Wong graduated from theUniversity of Singapore with a Bachelor ofBusiness Administration (Hons) in 1970.

Wong Peng Kin

Mr Lee has been the Executive Director ofJurong Shipyard since July 2004.From February 2000 to June 2004, he wasthe General Manager in charge of productionin Jurong Shipyard. He joined the companyin 1970 as a Design Engineer aftergraduating from Singapore Polytechnic witha Diploma in Mechanical Engineering.

Lee Yeok Hoon

Mr Ong has been the Managing Directorof Sembawang Shipyard since July 2004.He formerly held the positions of ExecutiveDirector of Sembawang Shipyard andGeneral Manager and the ManagingDirector of Karimun Sembawang Shipyard.He joined the company in 1987 as anengineer, the same year he graduatedfrom the University of Newcastle-Upon-Tyne, United Kingdom, with a Bachelorof Marine Engineering.

Ong Poh Kwee

Ms Wong has been the Executive Directorof Sembawang Shipyard since July 2004.Prior to that, she was the General Managerat Sembawang Shipyard since January 2002.Ms Wong graduated from the University ofSingapore with a Bachelor of Social Sciences(Hons) in 1974 and joined the company asan officer in 1975.

Wong Lee Lin

Mr Tan Kwi Kin is the President and CEOof SembCorp Marine and a Director ofSembCorp Marine Board.(Mr Tan’s profile can be found on page 36)

Tan Kwi Kin

Mr Heng Chiang Gnee is the DeputyPresident of SembCorp Marine andan Alternate Director of SembCorpMarine Board.(Mr Heng’s profile can be found on page 38)

Heng Chiang Gnee


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Investor Relations

SembCorp Marine continued to strengthen investorconfidence by promoting greater corporate transparency,timely announcement, Board independence, exemplaryboard practices and active communication with keystakeholders. Our commitment to investor relationshipsoften extends beyond regulatory requirements.

We also invited the analysts, press media and investorsto christening ceremonies for the benefit of understandingthe nature of the business, touring the vessels, interactingwith management and listening to the customers’ viewson the outlook of the industry.

Communication with Shareholders

Our investor relations programme continued to be animportant and integral part of our commitment to highstandards of corporate governance. As such, our senior

Shareholder Participation at Company Meetings

Encouraging the full participation of shareholders at ourAnnual General Meeting, we arranged for buses to transportshareholders from a convenient MRT station to our registeredoffice at 29 Tanjong Kling Road. We believed that the holdingof the meeting at our registered office would offer shareholdersthe opportunity to visit the shipyard and acquire hands-onknowledge of our shipyard operations. At the same time,they would be able to interact with the Chairman, the Boardof Directors and senior managers within the SembCorpMarine Group of shipyards. With the convenience oftransportation, attendance to the Annual General Meeting

Investor Relations Calendar

Nov15 - 19

May 18

Aug 5SolomanSmith

Sept 15GK Goh

Dec 9Tour of Rig

Jun 22CLSA


Feb 5Media &AnalystsBriefing

May 4(Masnet)

Aug 2Media &AnalystsBriefing

Oct 29(Masnet)

Dec 6UBS

April 13

April 28

YearAll

saw an increase in turnout of 180 persons in 2004,compared to 100 in 2003.

Recognition for High Standard of Disclosure

For effective, full and prompt disclosure to stakeholders,SembCorp Marine’s 2002 Annual Report received a MeritAward at the 30th Annual Report Awards held on March

11, 2004.

The Annual Report Awards is a yearly competition aimedat encouraging a wider scope of disclosures beyond theminimum regulatory requirements. The Merit Award wasaccorded to our annual report for its high standards ofexcellence in voluntary disclosure, attractive presentationand comprehensive information. Out of 498 eligiblecompanies listed on the Singapore Exchange as ofSeptember 30, 2003, SembCorp Marine was among 36companies shortlisted, eventually chosen as one of 15mainboard-listed companies to win the award after astringent selection process.

Before the restructuring and a name change, the Group,then known as Jurong Shipyard, had received the GrandAward in 1995 for winning the Best Annual Report Awardsfor three consecutive years in a row, and the Meritoriousand Best Annual Report Award in 1993 under the single-industry category.

Aug 31

Apr 12Tour of Yard

Nov 30Christening

2003 Full YearResultsMedia & AnalystsBriefing1Q 2004 ResultsAnnouncementvia Masnet2Q 2004 ResultsAnnouncementMedia & AnalystsBriefing3Q 2004 ResultsAnnouncementvia MasnetInterim DividendPaymentFinal DividendPayment (2003)Delivery ofAnnual ReportAnnual GeneralMeetingRegular MeetingsLuncheonMeetings withFund ManagersRoad Show(in Europe)FamiliarisationTours

management played an active role in conducting regularmeetings with shareholders and investors.

In addition to the briefing and presentation meetingsheld as part of the mandatory reporting cycle,regular meetings were held at the requests of the analysts,investors and fund managers, both local and foreign.The President, Deputy Presidents, Chief Financial Officer,the Vice President of Finance and the Senior VicePresident of Investor Relations personally attended tothese meetings.

In order to help the analysts and investors to get a betterunderstanding of the nature of our business, weorganised periodic site tours of our shipyard facilities.


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Shareholders’ InformationStatistics of Shareholdings as at March 12, 2005

* till March 15, 2005.

Share CapitalAuthorised Share Capital : $500,000,000Issued and Fully Paid-up Capital : $143,420,280Number of Shareholders : 4,300Class Shares : Ordinary Share of $0.10 each with equal voting rights

Shareholding Held in Hands of PublicBased on information available to the Company as at March 12, 2005, 37.23% of the issued ordinary shares of the Company is held bythe public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with.

Substantial Shareholders

Notes:(1)

Temasek Holdings (Private) Limited is deemed to be interested in the 900,231,261 Shares held by SembCorp Industries as well as the balance of 1,943,000 Shares held by its other subsidiaries.

List of 20 Largest Registered Shareholders

Location No. of % No. of Shares %Holders

Singapore 4,169 96.95 1,368,221,700 95.40

Malaysia 53 1.23 2,247,850 0.16

Hong Kong 12 0.28 275,000 0.02

Japan 3 0.07 60,130,000 4.19

USA 7 0.16 48,000 0.00

UK 4 0.09 49,000 0.00

Europe 1 0.03 10,000 0.00

Australia/ 19 0.44 501,000 0.04New Zealand

Others 32 0.74 2,720,250 0.19

Grand Total 4,300 100.00 1,434,202,800 100.00

Direct Interest Deemed Interest

Substantial Shareholders Number of Shares % Number of Shares %

SembCorp Industries Ltd 900,231,260 62.77 - -

Temasek Holdings (Private) Limited - - 902,174,260 (1) 62.90

No. Name Shareholdings %

1 SembCorp Industries Ltd 900,231,260 62.77

2 DBS Nominees Pte Ltd 160,357,339 11.18

3 Raffles Nominees Pte Ltd 83,784,368 5.84

4 IHI Marine United Inc 60,000,000 4.18

5 Citibank Nominees Singapore Pte Ltd 54,346,507 3.79

6 HSBC (Singapore) Nominees Pte Ltd 46,660,876 3.25

7 United Overseas Bank Nominees Pte Ltd 31,281,300 2.18

8 DB Nominees (S) Pte Ltd 3,576,000 0.25

9 OCBC Nominees Singapore Pte Ltd 3,090,000 0.22

10 Morgan Stanley Asia (S'pore) Sec Pte Ltd 2,948,950 0.21

11 Seapac Investment Pte Ltd 2,480,000 0.17

12 Capital Intelligence Limited 1,850,000 0.13

13 Merrill Lynch (Singapore) Pte Ltd 1,564,503 0.11

14 Tan Kwi Kin 1,118,000 0.08

15 OCBC Securities Private Ltd 959,000 0.07

16 G K Goh Stockbrokers Pte Ltd 935,387 0.07

17 Lucy Chee 900,000 0.06

18 Phillip Securities Pte Ltd 852,640 0.06

19 Heng Chiang Gnee 813,000 0.06

20 UOB Kay Hian Pte Ltd 798,000 0.06

Total: 1,358,547,130 94.72

Shareholders Location Distribution

Shareholders Distribution

Size of Holdings No. of % No. of Shares %Holders

1 - 999 49 1.14 19,691 0.00

1,000 - 10,000 3,047 70.86 18,034,994 1.26

10,001 - 1,000,000 1,190 27.67 62,929,012 4.39

1,000,001 and above 14 0.33 1,353,219,103 94.35

Grand Total 4,300 100.00 1,434,202,800 100.00

Share Prices and Monthly Volumes

Turnover

High

Low

ST index

280

270

260

250

240

230

220

210

200

190

180

170

160

150

140

130

120

110

100

90

80

70

60

50

40

30

20

10

0

Turn

over

(milli

on)

Share Price / ST Index

5.5

5.0

4.5

4.0

3.5

3.0

2.5

2.0

1.5

1.0

0.5

0J F M A M J J A S O N D‘00

J F M A M J J A S O N D‘01




J F M*‘05

Investor Data

2000 2001 2002 2003 2004

Earnings per share (cents) 5.72 5.89 6.54 5.55 6.68

Gross Dividend per share (cents) 6.44 6.50 6.50 5.00 7.50

Net Dividend per share (cents) 4.84 5.03 5.07 3.97 6.00

Share price ($)

High 0.83 0.96 1.10 1.06 1.36

Low 0.63 0.63 0.79 0.88 0.865

Close 0.70 0.70 0.905 0.96 1.36

Turnover

Volume (Million share) 256.80 326.20 782.53 346.20 278.1

Value ($million) 184.50 266.80 731.90 338.21 285.2

Average P/E 12.70 14.10 16.40 14.50 17.80

Net Tangible Assets per share 63.72 64.41 65.65 64.60 67.20(cents)

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Group Five-Year Performance

The SembCorp Marine Group achieved record compounded annual growth rate (CAGR) inturnover and attributable profits (PATMI) for the five year period from 2000 and 2004.

Group turnover recorded a CAGR of 16 per cent from $0.76 billion in 2000 to $1.36 billion in 2004.Group PATMI, excluding exceptional items reached a record high of $98.0 million while ROEimproved 19 per cent to 10 per cent.

Economic Value Added (EVA) attributable to Shareholders, excluding unusual items, was $12.2million.

The Board of SembCorp Marine is proposing a final and special dividend of 6.0 cents per share(less income tax), making a total annual dividend of 7.5 cents per share (less income tax). Thisdividend payout ratio at 90 per cent is the highest dividend payout in SembCorp Marine s historyand is testimony to our unwavering commitment to distribute value to our shareholders.

For the year 2000 2001 2002 2003 2004($ 000) ($ 000) ($ 000) ($ 000) ($ 000)

Turnover 763,008 854,461 1,011,512 1,067,986 1,362,764Operating Profit 79,159 84,496 89,883 74,308 93,853Profit Before Tax 96,075 103,392 116,291 95,186 114,009PATMI Before EI 79,848 81,218 85,445 77,265 98,068PATMI After EI 79,848 82,419 92,098 78,540 95,002

Dividend — Interim 23,386 15,917 16,507 16,584 17,067Dividend — Final 44,175 54,963 55,159 39,814 68,525

Dividend — Total 67,561 70,880 71,666 56,398 85,592

Group Balance SheetFixed Assets 411,997 429,914 447,886 452,720 460,020Associated Companies & JV 80,604 104,627 101,778 58,700 67,487Other Investments 99,485 98,992 92,759 71,776 23,853Other Long Term Assets 126,099 168,273 203,913 172,254 88,071Current Assets 609,393 633,293 642,219 769,665 1,219,934Current Liabilities (369,030) (446,859) (492,123) (531,173) (651,692)Long Term Liabilities (58,197) (56,977) (46,128) (52,069) (204,963)

900,351 931,263 950,304 941,873 1,002,710

Issued Capital 139,518 140,614 141,432 142,005 142,761Capital & Foreign Currency Translation Reserves 254,678 263,332 257,049 236,741 239,637Retained Profits 495,236 517,299 541,527 548,381 586,502Minority Interests 10,919 10,018 10,296 14,746 33,810

900,351 931,263 950,304 941,873 1,002,710

Per Share Data (cents)EPS — Before Tax 6.89 7.39 8.26 6.72 8.02EPS — After Tax After EI 5.72 5.89 6.54 5.55 6.68Net Tangible Assets 63.72 64.41 65.65 64.60 67.20Net Asset Value 63.75 65.52 66.46 65.29 67.87

Financial RatiosReturn on Equity 9.07 9.10 9.90 8.41 10.02Return on Total Assets 5.92 5.97 6.30 5.21 5.61Operating Margin (%) 10.4 9.9 8.9 7.0 6.9Operating Profit/Equity (%) 9.0 9.3 9.7 8.0 9.9Current Ratio 1.65 1.42 1.30 1.45 1.87Gearing Ratio 0.9% 2.8% 2.9% 10.9% 15.4%Dividend Cover 1.18 1.16 1.29 1.39 1.11

Group Five-Year Financial Summary

2000In 2000, SembCorp Marine reported a 2 per cent growth inPATMI to $79.8 million despite a 17 per cent decline in turnoverto $763.0 million. The lower turnover was the result of thedeconsolidation of an associated company when it became apublic listed company in March 2000 coupled with the lowerrevenue contribution from our ship repair business due to strongcompetition from both local and regional shipyards.

2001Revenue increased 12 per cent to $854.5 million due to animprovement in ship repair activities. Our PATMI increased 3per cent to $82.4 million. The improvement in profitability camefrom an increase in ship repair volume and the maiden contributionfrom our new associated companies in Brazil and PPL Shipyard.

2002SembCorp Marine revenue hit a high of $1.012 billion, 18 percent higher than that achieved in 2001. The improvement wasdue mainly to increased revenue from new building and shipconversion projects.

Group pre-tax profit rose to a record $116.3 million. Exceptionalitems contributed $6.7 million, while the associated companiesand joint venture contributed $6.1 million. Group PATMI includingexceptional items grew by 12 per cent to $92.1 million.

20032003 was a record year for the SembCorp Marine Group.Despite the difficult operating environment, Group revenueattained a record high of $1.068 billion, 6 per cent higher than2002 s $1.012 billion. This was attributable mainly to volumeincreases in ship conversion and new building projects, whichmore than offset the decline in ship repair revenue. Our shiprepair business was affected by the Severe Acute Respiratory

Syndrome (SARS) outbreak in the region during the first half ofthe year as well as the postponement of vessel repairs as aresult of high freight rates.

Group PATMI including exceptional items declined 15 per centto $78.5 million, compared to $92.1 million in 2002. The declinewas mainly due to subdued performance in ship repair as wellas lower exceptional gains of $1.3 million, compared to $6.7million in 2002.

If exceptional items and the effect of prior year tax over-provisionwere excluded, the Group s PATMI would have declined by just8 per cent from $80.8 million in 2002 to $74.0 million in 2003.

20042004 was a record year for SembCorp Marine again. Groupturnover was at its record of $1.36 billion, a growth of 28 percent from $1.07 billion in 2003. This growth was driven mainlyby increased revenue from both the ship conversion and shiprepair sectors. The ship building and rig building sectors recordeddeclines as most of the projects were pending take-up or in theearly stages of production as at end of 2004.

Group operating profit increased 26 per cent from $74.3 millionin FY 2003 to $93.9 million in FY 2004. Group pre-tax profitincreased 20 per cent from $95.2 million in FY 2003 to $114.0million in FY 2004. The increase was attributed to improvementsin the ship conversion and ship repair sectors as well as fromincreased contributions from a joint venture and associatedcompanies.

Net profit for 2004 reached a record high of $95.0 million, anincrease of 21 per cent from $78.5 million in 2003. Excludingexceptional items, net profit grew by 27 per cent to $98.1 millionas compared to $77.3 million in 2003.

FinancialReview

FinancialReview

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Shareholders’ Returns

Return on Equity, EVA, Dividends and Earnings perSharesThe return on equity (ROE) improved 19 per cent to 10.0 percent in 2004 as a result of the record profit achieved for theyear under review.

Economic Value Added (EVA) attributable to Shareholders,excluding unusual item, was $12.2 million.

The Board of Directors of SembCorp Marine is proposing a finaland special dividend of 6.0 cents per share (less income tax),making a total annual dividend of 7.5 cents per share (lessincome tax). This dividend payout ratio at 90 per cent will bethe highest dividend payout in SembCorp Marine s history andtestimony to our unwavering commitment to distribute valueto our shareholders.

The recommended 2004 dividend took into consideration theGroup s present cashflow position, positive cashflow generatedfrom operations and projected capital requirement. Paymentof the final proposed dividend is subject to the approval ofshareholders of the Company at the forthcoming Annual GeneralMeeting.

To maximize shareholders value, management will continue itspolicy of paying high level of final dividends to return excesscash generation from operations where possible, as long as thecash is not required for investments in the future. Some cashresources will be required for set up of new facilities andcapabilities to expand the existing operations and any potentialmergers and acquisitions.

74.3

93.9

79.2

84.5

89.9

2004

Turnover and O

perating Profit

2003

2002

2001

2000

763

854

1012

1068

Operating Profit

Turnover

$ m

160

140

120

100

80

60

40

20

0$ m

1,600

1,400

1,200

1,000

800

600

400

200

0

2001

103.4

81.2

2004

2003

2002

2000

Profit before Tax, P

ATMI before EI

and PATMI afte

r EI

$’m

140

120

100

80

60

40

20

0

96.1

Profit before ta

x

PATMI before EI

PATMI after E

I

79.879.8

116.3

85.4

82.4

95.2

77.392.1

114.0

98.095.0

78.5

2004

2003

2002

2001

2000

19.4 12.2

(27.3)

Economic Value Added (EVA)

8.948.40

8.30

EVA atributable to

Shareholders (excl E

I)

Weighted Average Cost of C

apital

$ m

20

10

0

-10

-20

-30%

10

5

0

(0.4)(9.2)

5.40

6.20

2001

2004

2003

2002

2000

Earning Per Share

EPS - before ta

x

EPS - afte

r tax a

fter E

I

6.89

5.72

7.39

5.89

8.26

6.54

6.72

5.55

8.02

6.68

cents

90

80

70

60

50

40

30

20

10

0

8.41

10.02

9.07

9.10

9.90

2004

Return On Equity

and

Return On Total A

ssets

%

12

10

8

6

4

2

0

2003

2002

2001

2000

5.92

5.97

6.305.21

5.61

Return On Equity

Return On Total A

ssets

7.0

6.9

10.4

9.9

2004

Operating Profit

Margin

%

12

10

8

6

4

2

0

2003

2002

2001

2000

9.0

9.3

9.78.0

9.9

Operating Profit Margin

Operating Profit/Equity

8.9

1363

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Cash Flow

The consolidated statement of cash flows of the Group for the year end 2004 is summarised below:

2004 2003$’million $’million

Cash flow from operating activities

Operating profit 94 74

Depreciation, amortisation and non-cash items 30 31

Operating income before reinvestment in working capital 124 105

Working capital changes 95 (22)

Net interest received and payment of income tax (1) (24)

Net cash provided by operating activities 218 59

Cash flow from investing activities 39 (16)

Dividend paid to shareholders of the company and subsidiary companies (57) (72)

Cash flow from other financing activities 121 68

Cash flow from financing activities 64 (4)

Free cash flow 321 39

FinancialReview

Operating Activities

During the year, the Group continues to generate healthy cashflow from operations. This amounted to $124 million beforechanges in working capital. Working capital reduced by $95million mainly due to completion of a few major projects in ourcore business of ship repair, rig building and ship conversion.After accounting for interest and income tax payments, net cashfrom operating activities amounted to $218 million.

Investing Activities

Net cash generated from investing activities amounted to $39million mainly from the divestment of bonds and collection ofproceeds from disposal of fixed assets and divestment of BohaiSembawang Shipyard. During the year, the Company acquiredan additional 5 per cent interest in Jurong Clavon Group, makingit a 55 per cent owned subsidiary company of the Group. TheGroup also purchased additional fixed assets of $89 millionmainly for its core business of ship and rig repairing, buildingand conversion.

Dividend Paid

Dividend paid to the Company s shareholders amounted to $57million or 5.0 cents per share in 2004. This included the finaland special dividend of 3.5 cents per share in respect of thefinancial year ended 2003 and an interim dividend of 1.5 centsper share for 2004.

The Directors are recommending a final dividend of 6.0 centsper share in respect of the financial year ended 2004 and aninterim dividend of 1.5 cents per share for 2004. The totaldividend for the financial year ended 2004 will be a record 7.5cents per share. The dividend payout ratio at 90 per cent willbe the highest dividend payout in SembCorp Marine s historyand testimony to reward to reward our shareholders.

68.5

17.1

39.8

16.6

55.2

16.5

55.0

15.9

44.2

23.4

2004

Total Dividend, N

et

2003

2002

2001

2000

Interim

Final

$ m

100

90

80

70

60

50

40

30

20

10

0

2001

2004

2003

2002

2000

Gross Dividend vs Net Dividend

Gross Divid

end

Net Divid

end

cents

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0

6.44

4.84

6.50

5.03

6.50

5.07

5.00

3.97

7.50

6.00

5.00

1.00

0.75

0.75

3.19

1.50

0.75

1.00

2.50

0.750.751.00

0.750.751.00

4.00

0.750.751.00

4.00

2004

Dividend Payout Record

2003

2002

2001

2000

Interim Divid

end

Interim Special

Final

Final Special

Dividend Payout R

atio

%

100

90

80

70

60

50

40

30

20

10

0

cents

9.0

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0

84.3

85.8

77.8

71.7

90.1

2001

2004

2003

2002

2000

Net Cash/ (B

orrowings)

Cash & Fixed Deposits

Net Cash

199190

5731

162

135

203

102

469

320

$’m

600

500

400

300

200

100

0

52

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53

FinancialReview

Simplified Group Financial Position

Financial Position

The financial position of the Group continues to be strong. Thechange in financial position between the two years reflect theGroup s efforts in divesting its non-core assets and investing inits core business of ship and rig repair, building and conversion.Acquisition of additional 5 per cent in Jurong Clavon Group sbusiness and capital expenditure in operational assets mainlyfor increasing our steel production capability to support our coremarine business. The Group also divested its non-core investmentin Chenab (NOL) bond.

Working capital of the Group increased in line with the higheractivities of the core business. Total assets of the Group increased22 per cent from $1.53 billion to $1.86 billion.

Capital Employed

Total capital employed as at December 31, 2004 was $1.0 billioncomprising shareholders funds of $969 million and minorityinterests of $34 million. The Group shareholders fund increasedby 4 per cent

Minority interests of the Group were increased from $15 millionto $34 million in 2004. This was principally due to new equityshares issued to the minority interest of Kristiansand Drilling PteLtd, our 82 per cent subsidiary company that owns thefirst Baker Marine Pacific Class 375 Deep DrillingOffshore Jack-up Rig.

2001

2004

2003

2002

2000

Net Asset V

alue and

Net Tangible Assets Per S

hare

Net Asse

t Value

Net Tangible Asse

ts

63.7563.72

65.5264.41

66.46

65.65

65.2964.60

67.87

67.20

cents

90

80

70

60

50

40

30

20

10

0

Borrowings

Gross debts of the Group as at December 31, 2004 comprisedof a five-year 3 per cent fixed rate medium term note amountingto $150 million. After deducting cash and cash equivalent of$470 million, the Group is in a net cash position of $320 million.

Financial Resources

The Group maintains sufficient cash and cash equivalent, internalgenerated cash flow and the availability of funding resourcesthrough an adequate amount of committed credit facilities. Amixture of short-term money market borrowings and mediumterm loans was obtained to fund working capital requirement,capital expenditure and investments. Due to the dynamic natureof the business, the Group maintains flexibility in funding byensuring that ample working capital lines are available at anyone time.

633.3

168.3

429.999.0

104.6

642.2

203.9

447.992.8

101.8

769.7

172.3

452.771.8

58.7

$ m

2000

1800

1600

1400

1200

1000

800

600

400

200

0

1,219.9

88.1

460.023.9

67.5

609.4

126.1

412.099.5

80.6

Assets

Current A

ssets

Other Long Te

rm Asse

ts

Other Investm

ents

Associated Companies &

JVs

Fixed Asse

ts

2004

2003

2002

2001

2000

Liabilities - T

otal Liabilit

ies

Current L

iabilities

Long Term

Liabilitirs

205.0

651.7

52.1

531.2

46.1

492.1

57.0

446.9

58.2

369.0

$ m

90

80

70

60

50

40

30

20

10

0

2004

2003

2002

2001

2000

33.8

586.5

239.6

142.8

14.7

142.0

236.7

141.4

257.0

541.5

140.6

263.3

517.3

254.7

139.5

495.2

2004

Shareholders Fund

2003

2000

Issued Capital

Capital and Foreign Currency T

ranslatio

n Reserves

Retained Profits

Minority In

terest

Return on Equity

9.07

9.10

9.908.41

10.02

$’m

1200

1000

800

600

400

200

0%

12

10

8

6

4

2

0

2002

2001

10.0

548.4

10.3

10.9

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Value Added Statement & Productivity Ratios2000 2001 2002 2003 2004$ 000 $ 000 $ 000 $ 000 $ 000

Turnover 763,008 854,461 1,011,512 1,067,986 1,362,764Less : Bought In Materials (529,161) (594,907) (731,489) (802,765) (1,062,339)

Gross Value Added From Operation 233,847 259,554 280,023 265,221 300,425

Investment, Interest & Other Income 42,872 40,031 54,604 38,936 49,654Share of Assoc Companies Results (7,162) (1,707) 5,819 7,930 12,208Share of Joint Ventures Results 371 (30) 243 73 1,070Other Non-operating Expenses (578) (4,049) (21,490) (5,327) (14,307)

269,350 293,799 319,199 306,833 349,050DistributionTo Employees : Salaries, Wages & Benefits 135,518 151,822 157,048 165,360 180,833To Government : Income & Other Taxes 25,042 27,090 27,418 21,836 21,844To Providers of Capital : Interest Paid on Borrowings 1,329 291 822 2,663 2,822 Dividends 62,364 60,356 71,470 71,842 56,881Retained in Business : Depreciation and Amortisation 27,280 29,117 33,462 35,294 37,497 Retained Profits 17,414 22,389 20,627 6,699 38,121 Minority Interests (4,820) (1,892) 1,110 (316) 3,017Non-production Costs 5,223 4,626 7,242 3,455 8,035

Total Distribution 269,350 293,799 319,199 306,833 349,050

Average Number of Employees 4,774 4,737 5,272 5,302 5,572

PRODUCTIVITY RATIOSValue Added Per Employee 48.98 54.79 53.12 50.02 53.92Employment Cost Per Employee 28.39 32.05 29.79 31.19 32.45Value Added Per Employment Costs 1.73 1.71 1.78 1.60 1.66Value Added Per Dollar Investment in Fixed Assets 0.57 0.60 0.63 0.59 0.65Value Added Per Dollar Turnover 0.31 0.30 0.28 0.25 0.22

FinancialReview

Statement of Computation of Economic Value Added2004 2003

$ 000 $ 000

Net Profit Before Tax 100,731 87,183Adjust for:

Share of Results of Associated Companies’ and Joint Ventures 13,278 8,003Interest Expense 6,871 5,350Others (7,653) (841)

Adjusted Profit Before Interest and Tax 113,227 99,695

Cash Operating Taxes (Note 1) (18,775) (13,569)

NOPAT 94,452 86,126

Average Capital Employed (Note 2) 1,300,373 1,182,964Weighted Average Cost of Capital (Note 3) 6.2% 5.4%

Capital Charge 80,623 63,880

Group EVA 13,829 22,246

Less: Minority Share of EVA 1,201 (1,055)

Group EVA Attributable to Ordinary Shareholders 12,628 23,301

Unusual Items (UI) Gains (Note 4) 434 3,913

Group EVA Attributable to Shareholders (exclude UI) 12,194 19,388

55

Note 1 : The reported current tax is adjusted for the statutory tax impact of interest expense (@22%).

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

Note 3: The Weighted Average Cost of Capital is calculated in accordance with SembCorp Industries Ltd Group EVA Policy as follows:i) Cost of Equity using Capital Asset Pricing Model with market risk premium at 6.0% (2003: 6.0%)ii) Risk-free rate of 3.78% (2003: 2.78%) based on yield-to-maturity of Singapore Government 10 years Bonds;iii) Ungeared beta 0.5 (2003: 0.5) based on SembCorp Industries risk categorisation; andiv) Cost of Debt rate at 3.70% (2003: 2.68%) using 5-year Singapore Dollar Swap Offered rate plus 75 basis point. (2003: 5-year Singapore

Dollar Swap Offered rate plus 75 basis point)

Note 4: Unusual Items (UI) refer to divestment of subsidiary, associated companies and joint ventures, long-term investments and disposal of majorfixed assets.

2001

2004

2003

2002

2000

Productivity

Ratios

Value Added

Per $ Employm

ent Costs

Per $ In

vestment in

Fixed Asse

ts

Per $ Tu

rnover

1.73

0.57

0.31

1.71

0.60

0.30

1.78

0.63

0.28

1.60

0.59

0.25

1.66

0.65

0.22

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0

2001

2004

2003

2002

2000

Distributio

n of Value Added

Distributio

n to Employee

Distributio

n to Provid

ers of C

apital

Distributio

n to Government

Value Added Per Employee

135.5

63.7

25.0

151.8

60.6

27.1

157.1

72.3

27.4

165.4

74.5

21.8

180.8

59.7

21.8

$ m

200

180

160

140

120

100

80

60

40

20

0

$’000

60

50

40

30

20

10

0

49.0

54.8

53.150.0

53.9

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57

FinancialReview

Risk Management

1. Operational Risk

The Group operates in 10 countries with assets and activitiesspreading across Asia Pacific and Brazil. As part of the Group splan to grow its business internationally, the Group will continueto focus on increasing its operating activities and presence inBrazil, Greater China and Middle East.

The Group expects that as part of its business strategy, thepercentage of its overseas sourced assets and customers willincrease moving forward, thereby achieving the effect of greatergeographical diversification. Likewise, a broader base of majorcustomers will reduce the risk of customer concentration.

2. Investment Risk

The Group seeks to grow its businesses through three fronts:¥ organic growth of its existing capabilities;¥ development of new capabilities, as well as¥ acquisition of business entities or operating assets

Investment activities, ranging from identification of targets to theconduct of due diligence exercise, are supported by a dedicatedteam of experienced managers and augmented by externalprofessionals for specialized services. The business proposalsare guided by a given set of internal investment criteria, evaluatedby senior management before seeking final Board of Directorsapproval.

3. Treasury & Financial Risk

The Group has in place an established treasury policy andguidelines for managing treasury and financial risks. The treasurypolicy seeks to optimize the Group s cost of capital, minimizethe adverse effects of fluctuations in currency and interest rateson income and ensure sufficient funds are available to meetfinancial obligations and operational needs.

The Groups treasury activities are centrally managed in Singapore.As a policy, the Group does not undertake speculative positionsfor trading purposes.

4. Interest Rate Risk

The Group s policy is to maintain an efficient optimal interest coststructure using a mix of fixed and variable rate debts whereworking capital is financed by variable rate loans while long terminvestments are financed by fixed rate loans. Surplus funds areplaced with reputable banks.

The Group obtained additional funding through bank borrowingsand leasing arrangements. The Group s policy is to obtain themost favourable interest rate available without increasing itsforeign currency exposure. During the year, the Group issued a$150 million 5-year fixed rate notes at an interest rate of 3 percent per annum for the purpose of refinancing existing short termborrowings and financing working capital requirement of theGroup.

5. Foreign Exchange Risk

The Group incurs foreign exchange risk on purchases that aredenominated in various currencies other than Singapore dollars,primarily the US dollar and Japanese Yen. To minimize exposureon foreign currency risks, the Group usually arrange for naturalhedging by matching costs in the same currency as salescollections.

6. Derivative Financial Instrument Risk

The Group also utilizes forward exchange contracts with maturitiesof less than twelve months to hedge foreign currency denominatedfinancial assets, liabilities and firm commitments. Under thisarrangement, increases or decreases in the Group s foreigncurrency denominated financial assets, liabilities and firmcommitments partially offset gains and losses on the hedginginstruments. The Group only uses foreign currency forwardcontracts for hedging purposes.

7. Liquidity Risk

To manage liquidity risks the Group monitors its net operatingcash flow, maintains a level of cash and cash equivalents andsecured committed funding facilities from financial institutions.In assessing the adequacy of these facilities, managementreviews working capital requirements so as to mitigate theeffects of fluctuations in cash flows. Short term funding isobtained from overdraft facilities and bank loans.

During the year, the Group established a $500 millionMulticurrency Multi-issue Debt Issuance Programme. The netproceeds arising from the issue of Notes under this programmewill be used for the purpose of refinancing existing short termborrowings and financing working capital requirement of theGroup.

8. Credit Risk

The Group has no significant concentration of credit risk withany single counter party and monitors its exposure to creditrisks arising from sales to customers on an on-going basiswhere credit evaluations are done on customers that requirecredit. The Group only deals with pre-approved counterpartieswith good credit rating and imposes a cap on the amount tobe transacted with any counterparty so as to reduce theconcentration of risk.

Cash term, advance payment and letters of credit or bankguarantees are required for customers of lower credit standing.

1. Interest Rate

The Group s cash and cash equivalents are largely invested infixed deposits. Movement in interest rates will have significantimpacts on the interest and investment income for the Group.Based on the cash and cash equivalents of the Group of $469million at end of 2004, a one percentage point movement in theeffective fixed deposit interest rate is estimated to result in anannual $4.69 million change in interest income for the Group.

2. Gross Profit Margin

Based on FY 2004 turnover of $1.36 billion, a one percentagepoint movement in the gross profit margin of the Group will leadto a $13.6 million change in gross profit for the Group. Thereare many different programmes undertaken across the Groupto smoothen out specific project fluctuations.

3. Others

Other risk factors that will have an impact on turnover and netprofits tends to be sector specific, hence it is not practical toperform sensitivity analysis in such an instance.

Accounting PoliciesThe Group significant accounting policies are presented in Note2 in the Notes to the Financial Statements (pages 141 to 147).The Group has applied the same accounting policies andmethods of computation in the financial statements for thecurrent reporting year compared with the audited financialstatements as at 31 December 2003, except for the earlyadoption, with effect from FY 2004, of the following new andrevised Singapore Financial Reporting Standards (FRS) issuedin July 2004 by the Council on Corporate Disclosure andGovernance (CCDG):

FRS 103 Business CombinationsRevised FRS 36 Impairment of AssetsRevised FRS 38 Intangible Assets

The financial statement were prepared in accordance with theSingapore Financial Reporting Standards as required by theCompanies Act.

Sensitivity Analysis

Market Review& Outlook

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59

Global Economy

The global economic growth of 5.0 per cent in 2004 wasthe highest in 30 years, the result of a strong growth inindustrial countries and an exceptionally rapid expansionin merging markets, notably China. The expansion wasstrongest in the first half of the year and eased graduallyin the second half. Looking ahead, the global economywould seem to be somewhat weaker with further oil-pricevolatility of particular concern.

Consensus forecasts indicated a global economic growthof 4.2 per cent in 2005, a slowing down over 2004 sperformance affecting all regions. The strongest impactwould be felt in Japan, which achieved a high growth of3.9 per cent in 2004 slowing down to 1.5 per cent in 2005.In USA, growth was predicted to be 3.5 per cent in 2005,down from 4.4 per cent in 2004. The Chinese growthrate was also expected to decline from 9.3 to 8.0 percent. In the European Union, only a moderate declinewas expected, from an already modest 2004 level.

Oil prices rose 35 per cent from 2003 to 2004.Several macro-economic models concluded that a $10oil price increase would reduce global economic growthby some 0.6 per cent.

The Marine Industry

Like the Singapore economy, the marine industry wasalso grew strongly in 2004 as against 2003.

One-stop Maritime Hub

Singapore continued to be a leading one-stop maritimehub, having emerged over the past four decades as theworld s premier ship repair, ship conversion and offshorecentre. The island nation was home to the worlds busiestport in terms of shipping tonnage, the world s second-busiest transshipment port (80 per cent of container trafficin Singapore was for transshipment), the worlds top bunkeringport, a key shipbuilding and repair centre, a single mostimportant jack-up rig construction and floating productionstorage offloading (FPSO) conversion centre. It was alsohome to the seventh-largest merchant fleet in the world.The maritime centre contributed an estimated 6 per cent toSingapores GDP and employed more than 50,000 workers.

The three main sectors in Singapore s marine industrywere ship repair and conversion, shipbuilding and theoffshore engineering sectors. The supporting sectorswere marine equipment manufacturers, suppliers andstockists of marine-related products and services,

Continuous Supply of Engineering &Productive Work Force

The increase in the volume of activities in the industryalso saw a corresponding increase in the number ofpeople employed in the marine industry. The talent pooland the retention of skills across the various disciplinesin engineering and production continued to enhanceSingapore s reputation in delivering projects successfully.Many companies thus stepped up their recruitment effortsduring the year to augment existing manpower to workon new projects secured. The total manpower in themarine industry stood at 34,977 in 2003 and in 2004,it increased by 8% to 37,716.

The Singapore Economy

The Singapore economy rebounded by 8.4 per cent in2004, after a SARS-afflicted 2003 when growth struggledto hit 1.4 per cent. In the final quarter of 2004, growthwas revised upwards to 6.5 per cent from the advancedestimate of 5.4 per cent due to the better-than-expectedperformance by the biomedical cluster in December.Economic growth momentum in the fourth quarter alsoimproved as real GDP expanded by 7.9 per cent on anannualised quarter-on-quarter basis.

Source : Consensus Forecasts and IMF

2003 2004 2005(E)

USA 3.0 4.4 3.6Japan 2.5 2.9 1.1EU 1.1 2.3 2.0Developing countries 6.1 6.6 5.9Africa 4.3 4.5 5.4China 9.3 9.4 8.2India 8.2 6.2 6.6Other Asia 5.0 5.5 5.2Middle East & Turkey 6.0 5.1 4.8L. America 1.8 4.6 3.6C. and E. Europe 4.5 5.9 4.8Russia 7.3 7.3 6.6World 3.9 5.0 4.3

specialised contractors, classification societies, marinesupport companies and labour suppliers.

Over the years, the marine industry had gradually evolvedfrom a largely ship repair and shipbuilding centre into a world-class industry providing high value-added products andservices like specialised ship repairs, conversions of tankersto FPSO platforms, rig building and offshore engineering.In 2003, the marine industry in Singapore achieved a turnoverof $3.8 billion, with $2,293 million (or 60.5 per cent) from shiprepair and conversion, $724 million (19.1 per cent) fromshipbuilding and $775 million (20.4 per cent) from the offshoresector. Preliminary estimates from EDB estimated revenueshowed an increase at $5.0 billion for 2004.

* EDBSource: Association of Marine Industries

Main Indicators of the Singapore Economy

Percentage Change Over Corresponding Period of Previous Year

Sector 2003 2004 1Q 03 2Q 03 3Q 03 4Q 03 1Q 04 2Q 04 3Q 04 4Q 04

Total 1.4 8.4 1.3 -3.8 2.4 5.6 7.9 12.3 7.2 6.5 Manufacturing 2.7 13.9 5.7 -6.0 3.1 8.7 10.2 20.1 11.2 14.1 Construction -9.5 -6.5 -16.5 -9.4 -6.6 -5.1 1.0 -6.4 -11.4 -8.4

Wholesale & Retail 6.7 14.6 5.5 0.6 8.5 12.1 13.7 19.0 15.6 10.7 Hotels & Restaurants -9.9 12.4 -4.5 -29.0 -6.2 -0.5 3.5 40.3 9.2 4.6 Transport & Communications -1.8 9.1 1.3 -10.3 -1.6 3.5 3.7 18.4 9.0 6.3

Financial Services 4.3 6.0 -6.8 5.8 8.0 10.8 16.7 5.2 2.9 0.4 Business Services -1.5 2.2 -1.3 -3.2 0.8 -0.7 2.2 3.0 1.4 2.3

Source: Singapore Department of Statistics

The Singapore Marine Industry Revenue, 1981-2004($ million)

5000

4500

4000

3500

3000

2500

2000

1500

1000

500

0

Offshore ShipbuildingShip Repair & Conversion

2.4 b3.1 b

3.8 b 4.0 b

4.4 b

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04*

5.0 b

Annual Growth in Real GDP


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Comprehensive Health, Safety, Security &Environment System (HSSE)

The comprehensive Health, Safety, Security and Environment(HSSE) management system had become a competitiveadvantage for Singapore against other low-cost centres inthe region. Singapore s marine industry made significantsafety improvement over the last 12 years. The AccidentFrequency Rate and Accident Severity Rate in 2002

SembCorp Marine :Sectorial Performance

Like the marine industry in Singapore, SembCorp Marinesrevenue was derived from four main sectors, namely shiprepair, shipbuilding, ship conversion and offshore and rigbuilding. A leader in marine engineering, we had anestablished global presence with 11 strategically locatedshipyards in Brazil, China, Indonesia and Singapore. Witha combined docking capacity of 2.3 million dead weighttones (dwt), we also maintained the largest ship repair,offshore and marine-related facilities east of the Suez.

SembCorp Marines revenue increased from $1.068 billionto $1.363 billion in 2004, marking an increase of 27.6per cent. For the year, our ship repair revenue increased32 per cent from $345.5 million to $456.2 million in 2004.Shipbuilding revenue, however, declined 24.4 per centfrom $107.3 million to $81.1 million in 2004. The shipconversion and offshore sector saw a significant increaseof 57.3 per cent from $391.0 million to $615.0 million

in 2004. Rig building sector accounted for $118.2 millionof our total revenue, a decline of 12.6 per cent from$135.2 million in 2003. Other businesses comprising bulkvolume purchases recorded an increase of 3.7 per centfrom $89.0 million in 2003 to $92.3 million in 2004.

surpassed the targets set for the industry by the AdvisoryCommittee on Occupational Safety and Health in theshipbuilding and ship-repairing industry. In 2003, theindustry reported an Accident Frequency Rate of 3.4 andAccident Severity Rate of 453. The Accident FrequencyRate and Accident Severity Rate for 2004 stood at 2.97and 830 respectively. Health, safety, security and theenvironment would continue to be key areas of focus forthe marine industry in Singapore.

61

Sector FY2004 FY2003 ChangeS$m S$m %

Ship Repair 456.2 345.5 32.0Shipbuilding 81.1 107.3 (24.4)Ship Conversion/Offshore 615.0 391.0 57.3Rig Building 118.2 135.2 (12.6)Others 92.3 89.0 3.7Total 1,362.8 1,068.0 27.6

Ship Conversion/Offshoreregistered strongest growth at57% as compared with 2003

Ship Conversion/Offshore

Ship RepairOthersRig BuildingShipbuilding

2004

Turnover by Segments200310%

37%

13%

8%

32%

Ship Conversion/Offshore

Ship RepairOthersRig BuildingShipbuilding

2003

Turnover by Segments2004

6%

45%

9%

7%

33%

Marine Industry Employment 1990 - 2004(No. of persons)

* estimated

40,000

38,000

36,000

34,000

32,000

30,000

28,000

26,000

24,000

22,000

20,000

26,39327,719 27,360

23,581

25,62226,933 27,262 26,940

31,810 30,71630,067

34,871

37,447

34,977

37,716

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04*

16

14

12

10

8

6

4

2

0

Source: Ministry of Manpower

Accident Frequency & Severity Rates 1991 - 2004

Frequency Rates

Severity Rates

2400

2100

1800

1500

1200

900

600

300

0

14.213.2

12.5

9.68.8

7.97.3

6.15.1

3.84.1 3.1

3.4

1,8981,958

1,765

2,174

707 940840

708 680552

724

394

453

No. of Accidents Per MillionMan-hours Worked

No. of Man-days Lost PerMillion Man-hours Worked

91 92 93 94 95 96 97 98 99 00 01 02 03 04

2.97

830

Source: Ministry of Manpower


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63

By vessel types, tanker repairs — the mainstay in our shiprepair sector and FPSO upgrading accounted for 46 percent in 2004 as compared with 50 per cent for tankers

This trend would continue into the future as evidencedby the signing of Favoured Customer Contracts withTaiwan Marine Transport, TECTO (Belgium) and NorthWest Shelf in Australia.

Other existing exclusive alliance partners maintainedby Jurong Shipyard and Sembawang Shipyardincluded ChevronTexaco Shipping in USA, KumiaiSempaku in Japan, NOL Shipping in Singapore,P.T. Humpuss Intermoda in Indonesia, Shell Shippingand BP Shipping in UK, Jo Tankers, V Ships and AlaskaTanker Co.

Apart from the baseload orderbook these customersprovided, our partnerships enabled both the ship owneras well as our shipyards to develop and improve on oursystems and cost structures, and helped us to serve ourcustomers better.

Market Outlook for Ship Repair SectorThe year 2004 would most likely be remembered for decadesas the most profitable year for shipowners. For the secondconsecutive year, sharp upturns were recorded in almostall market segments, in utilisation rates, freight rates,newbuilding prices and secondhand prices.

SembCorp Marine : Ship Repair Sector

By sector contributions, ship repair accounted for 33 percent of our total revenue in 2004, at $456.2 million.The ship repair sector had rebounded strongly by 32.0per cent, boosted by increased volume and higher-valuerepairs, particularly for repairs on bulk carriers,LNG tankers and upgrading of FPSO. Strong freight ratesacross the vessel type further fuelled migration of vesselsto Singapore as reliable and quick turnaround time hadbecome a more critical factor.

The number of vessels repaired in 2004 declined from341 to 313 in 2004. However, the value per vesselincreased from $1.01 million to $1.46 million in 2004.

Strong growth attributable toour ability to secure some high

value FPSO upgrading andbottom-damaged repair jobs

Type FY2004 FY2003

Alliance Partners 29% 20%Regulars 54% 62%Sub-total 83% 82%Others 17% 18%Grand Total 100% 100%

in 2003. Bulk carriers accounted for 24 per cent of shiprepair followed by container vessels at 8 per cent andgas tankers at 8 per cent. Navy vessels accounted for3 per cent, dredgers at 3 per cent, cargo vessels at 2per cent and others at 6 per cent.

We maintained our efforts to foster strategic allianceswith our customers. Our long-term strategic alliances withcustomers continued to provide us with the baseloadorder book, which saw an increase from 20 per cent oftotal ship repair revenue in 2003 to 29 per cent in 2004.

Strategic Alliance with Customer

ChevronTexaco ShippingKumiai SenpakuNOL ShippingP.T. Humpuss IntermodaShell International (UK)BP Shipping (UK)BHP BillitonJO TankersTESMA (Norway)Alaska Tanker Co (USA)V Ships (Monaco)Taiwan Marine TransportTECTO B. V. (Belgium)North West Shelf(Australia)

Your Effective 1989 1998 1999 2000 2002 2003 2004

Description FY2004 FY2003 % Change

Revenue contributions ($m) 456.2 345.5 32No. of vessels 313 341 (8)Average valueper vessel ($m) 1.46 1.01 45

2003

Vessel Types2003

TankerContainerBulk CarrierLPG/LNG

15%

50%

6%

4%

10%

3%

7%

5%

CargoNavyOthersPassenger

2004

Vessel Types2004

TankerContainerBulk CarrierLPG/LNGCargo

8%

37%

6%

9%

2%

24%

8%

3%

3%

NavyOthersDredgerFPSOUpgrading


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SembCorp Marine : Shipbuilding Sector

Shipbuilding contributed $81.1 million or 6 per cent ofour total revenue in 2004, a decline of 24.4 per cent from$107.3 million in 2003. A total of three vessels weredelivered in 2004. This comprised one unit of the fastboat for DML Overseas, two units of 3,200 hp tugs forPacific Workboats and the second unit of the 2,500 TEUcontainer vessel, Theodor Storm, to German shippingcompany, Reederei Karl Schl ter.

Work-in-progress for shipbuilding from 2004 carriedforward to 2005 comprised two units of 3,200 hp tugsfor Pacific Workboats and four units of 2,600 TEU containervessels for Wan Hai Lines.

Order BookSembCorp Marine had been focusing on marketing itsown proprietary design in container ship, in particular the2,600 TEU series of container vessels. In 2004, we securedshipbuilding contracts worth a total of $335 million. Thiscomprised two contracts for the design and constructionof two units of 2,646 TEU container vessels for Wan HaiLines with deliveries scheduled from the second quarterto third quarter of 2007. The contract with Reederei FLaeisz called for the construction of two units of 2,600TEU container vessels with deliveries scheduled from thefirst quarter to third quarter of 2006. Another contractsecured in December 2004 involved the construction oftwo units of 4,950 dwt tankers for Kuwait Tanker Companywith deliveries in the second quarter of 2006.

Market Outlook for the Shipbuilding SectorRecord high earnings led to strong ordering activity inthe shipbuilding industry in 2004. The year in review wasa record year for shipyards with orders exceeding theirbest expectations. World Shipbuilding Output would beexpected to climb to a new record level of 68.5 millioncompensated gross tons (cgt), an increase of 3 millioncgt from the previous year.


No. of vessels 4(3)* 4(3)* -deliveredNo. of vessels (WIP) 12 4 200Percentage

completion ($m) 81 107 (24)

Project DeliveryName/Type Customer Schedule

2 units3,200 hp tugs Pacific Workboats 1Q 20052 units 2,600 2Q & 3QTEU container Wan Hai Lines 20052 units 2,600 4Q 2005 &TEU container Wan Hai Lines 2Q 20062 units 2,600 1Q & 3QTEU container Reederei F Laeisz 20062 units 2,646 2Q & 3QTEU container Wan Hai Lines 20072 units 4,950 dwt tanker Kuwait Oil Tanker 2Q 2006

Competitive ChallengesThe ship repair industry in Singapore was expected toremain competitive, with external competition comingfrom lower-cost shipyards around the region to challengethe industry with increased ship repair capacities, lowerprices and improved quality and capabilities. Togetherwith the strong freight rates experienced by tankers, bulkcarriers and container vessels in 2004, the ship repairmarket is expected to remain strong for 2005.

Phase-out Rules by IMODespite the strong freight rates enjoyed by shipowners,classification societies responsible for marine safety wouldnot allow indefinite deferment of repairs. This, togetherwith regulatory requirements by the International MaritimeOrganisation when the phase-out rules kicked in forvessels above 25 years to be phased out by April 2005,would bode well for ship repair yards in the longer term.

Strong Shipping MarketsIncreasing pressure on older tonnage would generallyherald increased scrapping levels, but the current strongshipping markets seemed to encourage owners of olderships to pay out for the costs of docking and passingspecial surveys. As with the tanker fleet, the older bulkcarriers were coming under greater scrutiny. But if themarket held at its current rates for the coming year, repairyards could look forward to more work on older vessels.

Shipbuilding activities willincrease in 2005 & 2006

Singapore Shipyards as Niche PlayersDespite their smaller sizes compared to their North Asiancounterparts, shipbuilding yards in Singapore enjoyed aposition as niche players. They engaged mainly in thebuilding of customised and specialised vessels such asbarges, tugs, supply vessels, pleasure craft and yachts,with fewer container ships, offshore supply vessels, cable-laying ships and tankers. Demand for new builds of offshoresupply vessels would thus be expected to stay strong dueto the ageing fleet. Demand for feeder container vesselswould also remain strong. The filling up of North Asianshipyards order books until 2007 would be expected tobenefit Singapore yards which could offer shorter lead times.

¥ Shipbuilding supported by strongfreight rates

¥ Continual demand for nichemarket in feeder container vessels& offshore supply vessels

On-going projects from 2004 to 2005

( ) * Fast Boats/tugsWIP - Work-in-Progress

Project Name Type Customer

Jascon 5 Dynamic Positioning Class 3Pipe-lay/ Consolidated

Construction Barge ProjectsP-50 Marine Conversion Petrobras

Netherland BVCNOOC 114 FSO Conversion International

AndromedaBerge Sisar LPG Conversion Bergesen

OffshoreTT Nina FPSO Conversion Modec

InternationalSendje Berge FPSO Conversion Bergesen

Offshore


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SembCorp Marine :Ship Conversion and Offshore Sector

Our ship conversion and offshore sector accounted for$615.0 million or 45 per cent of our total revenue in 2004.A total of six projects were completed during the year. Wedelivered the Jascon 5, a Dynamic Positioning Class 3 pipe-lay/construction barge to owner Consolidated Projects. Wealso completed the marine conversion on Petrobras 50 inSingapore for Petrobras Netherlands BV. Other projectscompleted during the year included FSO conversion onCNOOC 114 for International Andromeda, LPG conversionon Berge Sisar for Bergesen Offshore, FPSO conversion onTT Nina for Modec International and Sendje Berge FPSOfor Bergesen Offshore.

On-going projects carried over from 2004 to 2005 included:

¥ Conversion of the Erha FPSO from Bouygues OffshoreSA for Esso Exploration and Production Nigeria. The projectinvolved a partnership between Sembawang Shipyard andSembawang Marine Offshore and Engineering, a divisionof SembCorp Utilities. Sembawang Shipyard wouldundertake installation and commissioning. The topsidefacilities would have a total weight of 22,000 metric tonswith processing facilities capable of an initial productioncapacity of 165,000 barrels of oil per day. Delivery wasscheduled for the first quarter of 2005.

¥ Topside modules integration and commissioning workson the P-50. Work commenced in Ma a Jurong in Brazil.The project was scheduled for completion in the secondquarter of 2005.

¥ Conversion of M. T. Fairway, a 149,685 dwt VLCC to anFPSO (to be renamed Modec Venture 11) at Jurong Shipyard.The FPSO Modec Venture 11, scheduled for delivery in firstquarter 2005 would have a processing capacity of 100,000barrels of oil per day and storage capacity of 930,000barrels of oil per day. Scheduled for completion in January2005, the FPSO would be deployed at Santos Mutineer-Exeter field development, off Western Australia.

Order BooksFPSO conversion and offshore contracts that were securedin the second half of 2004 and as at March 2005 were:

¥ Conversion of the VLCC Bar o De Mau into an FPSOP-54 for Petrobras Netherlands BV. The US$628 millionFPSO EPC (Engineering, Procurement and Construction)turnkey conversion project entailed converting the 280,000dwt VLCC Bar o De Mau to an FPSO to be renamedPetrobras 54. To be completed in 38 months, the P-54FPSO EPC conversion turnkey project would be undertakenby Jurong Shipyard and Mau Jurong in Brazil. Work inthe FPSO conversion commenced in August 2004 withthe marine conversion scheduled for completion in the firstquarter of 2005. Concurrently, Mau Jurong would fabricatethe topside and compressor modules in Brazil with

Market Outlook for the Ship Conversion &Offshore SectorThe fundamentals driving the floating-production sector remainedpositive. With global demand for oil continuing to grow at anexceptionally strong pace, the price of crude had soared overthe past several months while natural gas prices had remainedstrong and exploration and productivity continued to grow.

Projects Completed & Delivered in FY2004

Stronger conversion/offshore due tomajor progressive completion of

P-50 FPSO marine conversion project& P-50 Topside fabrication in 2H 2004


No. of vessels completed 6 7 (14)

No. of vessels (WIP) 5 5 -Percentage

completion ($m) 615 391 57

WIP - Work-in-Progress

completion scheduled in the first quarter of 2006.Integration and commissioning of the topsides andcompressor modules on the P-54 were scheduled forcompletion in the second quarter of 2007. The completedP-54 FPSO would be expected to operate for 25 yearswithout drydocking in the Roncador Field, Campos Basin,offshore Brazil.

¥ Fabrication and integration of topsides for a new buildfloating production storage offloading (FPSO) vessel fora major oil development in Bohai Bay for ConocoPhillipsChina Inc. Estimated at more than US$200 million, theproject undertaken by Sembawang Shipyard in partnershipwith SMOE Pte Ltd, the offshore engineering unit ofSembCorp Industries was scheduled for completion inmid-2008. Both partners would execute the project undera 50:50 joint venture arrangement.

¥ Sembawang Shipyard in partnership with HuismanSpecial Lifting Equipment B.V. secured a US$150 millioncontract from SapuraCrest Petroleum Berhad, Malaysiato design and construct a self-propelled DP2 HeavyliftDerrick Pipelay Vessel. The contract required the completeengineering, construction, outfitting and commissioningof a 8,000T new-built hull into a self-propelled DP2heavylift pipelay vessel with a 330-men accommodation,and equipped with a Huisman 3000 st heavy lift craneand a S-lay pipelay system. The vessel, scheduled for

delivery in the fourth quarter of 2006, would be executedon a 50:50 partnership˚ with Huisman.

˚¥ Jurong Shipyard secured a US$50 million contract from

Houston-based Atlantia Offshore for the fabrication ofAtlantia’s new deep draft semi-submersible hull designfor the Independence Hub gas-processing platform in theultra deep waters of the Gulf of Mexico. The semi-submersible hull, measuring 232 feet in length and widthand 160 feet in height will be built by Jurong Shipyardunder a very fast track schedule that entailed some 10,000metric tonnes of steel fabrication, installation of large marinesystems, hull electrical and instrument equipment, systemsfabrication and erection of hull marine piping systems.Work commenced in February 2005 with delivery scheduledin the first quarter of 2006.

˚Total order book for ship conversion and offshore as atDecember 31, 2004 stood at $1.212 billion exclusive of thenew contracts secured in 2005.

Project Name Type Customer Delivery ScheduleErha FPSO Topsides installation and commissioning Bouygues Offshore for 1Q 2005

Esso Exploration & ProductionModec Venture 11 FPSO conversion Modec 1Q 2005P-50 Topsides integration & commissioning Petrobras Netherlands BV 2Q 2005P-54 Marine conversion Petrobras Netherlands BV 1Q 2006P-54 Topsides fabrication Petrobras Netherlands BV 2Q 2006P-54 Compressor Modules Petrobras Netherlands BV 2Q 2006P-54 Integration & Commissioning Petrobras Netherlands BV 2Q 2007ConocoPhillips Topsides integration & commissioning ConocoPhillips China 2Q 2007Topsides JV with SMOESapuraCrest Project Heavy Lift Derrick Pipelay vessel SapuraCrest Petroleum 4Q 2006Atlantia project Fabrication of new deep Atlantia Offshore 1Q 2006

draft semi-submersible hull

On-going projects carried forward from 2004 to 2005 andnew projects secured in 2004 and 2005 (as at March 12, 2005)


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Strong Oil and Gas PricesAnother contributing factor to the strong fundamentals wasthe continued strength of the oil and gas prices.The price of WTI crude had soared above US$50 per barrel.These figures are a far cry from the prices that existed a yearago. Various industry experts have been recently attemptingtheir prognosis of whether these high crude prices are a shortterm aberration or are here to stay. One group of forecasterswho are said to have correctly predicted the oil bust of the1980s are quoted as saying they believe history will not repeatitself, at least not for now. They say no bust this time andare projecting prices to remain at least above $35 per barrel,with one of the three predicting crude will first get to $70.Another industry analyst believes high oil prices are inevitablefor the rest of the decade. He sees WTI crude settling in therange of $49 to $54 per barrel by 2010.

Rising Exploration & Production SpendingWorldwide exploration and production spending wouldcontinue to rise in 2005, fuelled by record earnings from highoil and gas prices. Spending would be expected to climb 5.7per cent from $167.3 billion in 2004 to $176.8 billion in 2005,

Floating Production Units Planned or Under StudyThere are now 168 floating production systems in operationor available worldwide. FPSO vessels comprise about 60percent of this total, production semis 23 percent, tensionleg platforms 11 percent and production spars 7 percent.The number of production units in operation has more thantripled over the past ten years. Another 79 floating storagevessels (without production capability) are now operating,four of which are used for LPG storage. Projects currentlyin the bidding, design or planning stage would generate arequirement for 85 additional production floaters.

West Africa is the leading area, with an identified potentialrequirement for 22 production floaters. The Gulf of Mexicois in second place, with a potential requirement for 16production floaters. In third place is Southeast Asia with 14potential floaters, followed by Brazil with 12 floaters, Australiawith 11 floaters, Europe six floaters, China two floaters andCanada and Venezuela with one unit each. Of the total floaters,30 are currently in the bidding or final design stage, 55 arein the longer-term planning stage.

In terms of near-term projects in bidding or final design, WestAfrica is the clear leader, with eight floaters at this stage.

Southeast Asia is second with six floaters, followed by Australiawith five floaters, Brazil with four floaters, Northern Europewith three floaters, the Gulf of Mexico with two floaters andChina and Venezuela with one floater each.

In terms of projects in the longer-term planning stage,the Gulf of Mexico and West Africa are tied for first place with14 floaters each, Southeast Asia in third place with nine floaters,followed by Brazil with eight, Australia with six, Northern Europewith three, and Canada and China with one each.

Global oil demand growing at a fast paceAn IEA report expected global oil demand to increase 3.4 percent from 79.7 mb/d in 2003 to 82.4 mb/d in 2004. Continuedgrowth was expected in 2005 but at a lower rate of 1.7 percent as a result of the high oil prices. Driving the increase indemand for oil was the strong economic growth in China andIndia. Consumption of oil in China grew 11 per cent in 2003,14.6 per cent in 2004 and an expected 5.6 per cent in 2005.

The long-term outlook was very bullish. According to the IEA,primary world energy demand was projected to increase 59per cent over the next 25 years and 85 per cent of theincreased demand will be satisfied by fossil fuels. The agencyexpected global demand for oil to grow to 121 mb/d by 2030,

an increase of 47 per cent over current oil consumption. Tomeet this demand, 25 years from now, the world would needto be producing an additional 39 mb/d of oil. Natural gasconsumption was also projected to double by 2030. Satisfyingthis growth in oil and gas demand would be a formidablechallenge — one that would create opportunities for the offshoresector, including opportunities for floating-production systems.

hot on the heels of a 20.5 per cent increase in 2004. However,it could be expected to be even higher if oil and gas pricesstayed near current levels, according to an industry surveyconducted by investment bank Lehman Brothers.

Global Oil Demand(Millions of b/d)

86

84

82

80

78

76

74

72

70

75.476.2

76.877.9

79.7

82.4

83.8

+ 2.3%

+ 3.4%

+ 1.7%

99 00 01 02 03 04 05

Worldwide Exploration & Production Spending

2002 2003 2004E 2005E

Million USD

200

180

160

140

120

100

80

60

40

20

0

US Canada International Total

<3000’ water depth

No. of units

24

22

20

18

16

14

12

10

8

6

4

2

0

1

5

10

6

12

4

8

4

2

5

7

10

1

62 1 1

Gulf of Mexico W. Africa SE Asia Brazil Australia N.Europe China Canada Other

Ultra-Deepwater >5000’Deepwater 3000’ - 5000’Source: Lehman Brothers E & P Spending Survey Source: International Marine Associates, Inc.

Source: IEA, Oil Market Report

Floating Production Systems are Planned or Under Study as at November 2004


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SembCorp Marine : Rig Building Sector

The rig building sector contributed $118.2 million or 9per cent of our total revenue in 2004. We delivered oneunit of jack-up, the Constellation II under PPL Shipyard(associated company previously) to GlobalSantaFe in thefirst half of 2004.


No. of Rigs delivered 1(1) 1(1) -

No. of Rigs (WIP) 5(2) 3(1) 67Percentage

completion ($m) 118 135 (13)

WIP - Work-in-Progress( ) PPL Shipyard

Project Name/Type Customer Delivery Schedule

Development Driller I GlobalSantaFe 1Q 2005

Development Driller II - option 2 :expiry mid-05 GlobalSantaFe 1Q 2005

1st unit Jack-up Kristiansand Drilling 2Q 2006

2nd unit Jack-up Wilpower, subsidiary of Awilco Offshore ASA 1Q 2007

3rd unit Jack-up Petrojack AS 2Q 2007

4th unit Jack-up Apexindo 1Q 2007

5th unit Jack-up Deep Drilling Invest 2Q 2007

6th unit Jack-up Wilsuperior, subsidiary of Awilco Offshore ASA 2Q 2007

Project Name Type Customer

Constellation II* Jack-up GlobalSantaFe

* PPL Shipyard

Market Outlook for the Rig SectorThe prospects for rig-building and related servicesremain positive. Offshore exploration and productionhad been moving towards deeper waters and deeperreservoirs that would require a new generation ofdeep-well drilling rigs to replace existing ageingdrilling fleet. The current fleet of drilling rigs had beenrapidly ageing, with most jack-ups now at 21 years oldand semi-submersibles at 20 years old. The orderbook for newbuildings stood at 20 units at the start of2005, of which 18 were jack-ups and two were semi-submersibles for the competitive market. New jack-upswould certainly be needed not only to replace an ageingfleet, but to meet the increasing demands for morepowerful and automated equipment that would reducecosts and improve safety. In addition, existing fleetwould require repairs and upgrading.Completed in FY2004

¥ Construction of a Baker Marine Pacific Class 375 deep-drilling offshore jack-up rig for Deep Drilling Invest,a wholly owned subsidiary of Sinvest ASA of Norway.PPL Shipyard secured the US$119.6 million in February2005. Construction of the jack-up rig would be expectedto commence in the second quarter of 2005 with deliveryscheduled in the second quarter of 2007.

¥ Construction of a Baker Marine Pacific Class 375 deep-drilling offshore jack-up rig for Wilsuperior Ltd, a subsidiaryof Awilco offshore ASA. PPL Shipyard secured theUS $121 million contract in March 2005 with constructioncommencing in third quarter 2005 and delivery scheduledin the second quarter of 2007.

Order book for the rig building sector as at December 31,2004 stood at $589 million, excluding new contracts securedin 2005.

Projects carried forward from 2004 to 2005 included thefollowing:

¥ Construction of two units of Friede & Goldman ExD-designed deepwater semi-submersible drilling rigs forGlobalSantaFe International, the largest drillingcontractor in the world. These two units of dynamicpositioning semi-submersibles, currently underconstruction in Jurong Shipyard, would be capable ofdrilling at 7,500 feet of water. The two units would bedue for delivery in the first quarter of 2005.

Order BookSince the launch of the Baker Marine Pacific Class 375jack-up rig design in January 2004, we secured a totalof six new orders for jack-ups:

¥ Construction of one unit of Baker Marine Pacific Class375 deep-drilling offshore jack-up for KristiansandDrilling in PPL Shipyard. Work commenced in thesecond quarter of 2004 with delivery scheduled in thesecond quarter of 2006.

¥ Construction of a Baker Marine Pacific Class 375 jack-up rig for Mosbarron, a subsidiary of Awilco Offshore ASAof Norway, Work on the new US$117.6 million rigcommenced in PPL Shipyard in the third quarter of 2004with delivery scheduled in the first quarter of 2007.

¥ Construction of a Baker Marine Pacific Class 375 deep-drilling offshore jack-up rig for Petrojack AS Norway. Afterthe US$131 million contract was signed in December2004, work commenced in the first quarter of 2005 withdelivery scheduled in the second quarter of 2007. PetrojackAS also had options to build two more similar jack-ups.

¥ Construction of a Baker Marine Pacific Class 375 deep-drilling offshore jack-up rig for PT Apexindo PratamaDuta Tbk, the largest Indonesian oil & gas drilling company.The US$133.7 million was secured in February 2005.Construction of the jack-up would be expected tocommence in the first quarter of 2005 with deliveryscheduled in January 2007.

Rig Fleet by Year of Building (as at March 12, 2005)

No. of units

90

80

70

60

50

40

30

20

10

0

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10

Source: Rigzone

SembCorp Marine :Summary of Order Book

Record contracts secured in 2004New contracts secured by SembCorp Marine in 2004 wereat a record high at $2.1 billion with deliveries and completionfrom 2005 to 2007. The order book as at December 31,2004 for shipbuilding, ship conversion and rig building stoodat $2.3 billion as compared with $1.1 billion as at December31, 2003.

Based on the new contracts secured and the scheduledcompletion of projects, SembCorp Marine expects a higheroperating profit in 2005.

Summary of Shipbuilding, Ship Conversion, Rig Building and Offshore Projects Schedule(exclusive of ship repair & options)


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Month Value Details(S$m)

December $143 2 units 2,646 TEU container shipsfor Wan Hai Lines

$52 2 units 4,950 dwt tankers for Kuwait Oil Tanker Co SAK

$215 1 unit Baker Pacific Class 375Jack-up Rig forPetrojack AS of Norway

November $140 2 units 2,600 TEU container ships for Reederei F. Laeisz of Germany

June $1,068 P-54 FPSO EPC Turnkey conversion project for Petrobras

Netherlands BVMay $193 1 unit Baker Pacific Class 375

Jack-up Rig for Mosbarron LtdJanuary $186 1 unit Baker Pacific Class

375 Jack-up Rig for Kristiansand Drilling Pte Ltd

Jan-Jun $58 Others-CNOOC114, Berge Sisar, Yoyo LPG

Contracts Secured in 2004

Sector Contract Value ($m) BalanceShipbuilding 555 487Ship Conversion 1,982 1,212and OffshoreRig Building 589 589Total 3,126 2,288

Total Order Book as at December 31, 2004(exclusive of ship repair)

Month Value Details(S$m)

January $217 1 unit Baker Marine Pacific Class 375 Jack-up rig for PT ApexindoFebruary $161 Fabrication & integration of topsides for new build FPSO for ConocoPhillips China

$123 Design and construction of a Self-Propelled DP2 Heavy Lift Derrick Pipelay vessel for SapuraCrest Petroleum Berhad

$ 82 Fabrication of a deep draft semi-submersible hull for Atlantia Offshore$194 1 unit Baker Marine Pacific Class 375 Jack-up rig for Deep Drilling Invest

March $196 1 unit Baker Marine Pacific Class 375 Jack-up rig for Wilsuperior, a subsidiary of Awilco Offshore ASA

Contracts Secured in 2005 (as at March 12, 2005)

00 01 02 03 04 05

Rig Building Shipbuilding

Summary of Contracts Secured(2000 to 2004 & March 2005)

S$’000

2200

2000

1800

1600

1400

1200

1000

800

600

400

200

0

Conversion/offshore

2005 2006 2007 2008

Shipbuilding

1st unit 2,600 TEU container (Wan Hai Lines)

2nd unit 2,600 TEU container (Wan Hai Lines)

3rd unit 2,600 TEU container (Wan Hai Lines)

4th unit 2,600 TEU container (Wan Hai Lines)



1st unit 2,600 TEU container (Reederei F Laeisz)

2nd unit 2,600 TEU container (Reederei F Laeisz)

1st unit 4,950 dwt tanker (Kuwait Tanker)

2nd unit 4,950 dwt tanker (Kuwait Tanker)

Ship Conversion & Offshore

P-54 marine conversion

P-54 Topside Fabrication

P-54 Compressor Modules

P-54 Integration & Commisioning

ConocoPhillips Topsides

Heavy Lift Derrick Pipelay Vessel

Atlantia Project

Rig Building

1st Jack-up (Kristiansand Drilling)

2nd Jack-up (Wilpower)

3rd Jack-up (Petrojack)

4th Jack-up (Apexindo)

5th Jack-up (Deep Drilling Invest)

6th Jack-up (Wilsuperior)

Cosco (Dalian) Shipyard¥ 3 docks

¥ 340,000 dwt capacity

Cosco (Nantong) Shipyard¥ 2 docks


Cosco (Shanghai) Shipyard¥ 1 dock

¥30,000 dwt capacity

Cosco (Guangzhou) Shipyard¥ 1 dock


Cosco (Zhoushan) Shipyard¥ 1 dock


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CORPORATE VISION

We aim to be the world leader in ship repair,ship conversion and offshore engineering,providing innovative solutions that exceedcustomers expectations. While anchoringourselves for future growth and globalexpansion, we continue to commit ourselvesto fulfilling the changing needs andaspirations of our employees.

While we continue to focus on strengthening our home-based shipyards on delivering consistently superb qualityand timely delivery, we are mindful of the need to growour business globally. Our global hub strategy in thethree strategic locations of Singapore, China and Brazilthus provides our global clients the value-added, integratedand customised services through complementary facilitiesand capabilities within the Group and in the internationalnetwork of facilities within the hub.

Partnership in Growth

Having held a 20 per cent stake in Cosco Dalianin China since 2001, we further strengthened ourfoothold in the important and fast-growing China marketwith a new deal that would allow us to establish ourpresence in the strategic locations along the entire lengthof China s coast.

In this latest development, SembCorp Marine signed anagreement with China Ocean Shipping Co. (COSCO)to acquire a 30 per cent equity stake in the enlargedcapital of Cosco Shipyard Group in July 2004. The CoscoShipyard Group is one of the country s leading shiprepair and conversion players, with five major shipyards inthe key coastal cities of Dalian in the north, Nantong,Shanghai and Zhoushan in the centre, and Guangzhou inthe south. With their strategic locations, these shipyardseffectively provide ship owners with a network of marineengineering services across the entire length of China scoast. Three of the shipyards — Dalian, Nantong andGuangzhou — are already among the top ten largest shiprepair yards in China.

Taking a stake in the enlarged Cosco Shipyard Groupthus placed us in good stead to partake in the fastestgrowing marine industry of China. It also allowed us tobuild our presence across China at strategic points alongthe entire length of China s coast within the shortestperiod. The Shanghai port has consistently been rankedthird in the world with 14.6 million TEU in 2004, 11.28million TEU in 2003 and 10.61 million TEU in 2002. Othergrowing ports include the Shenzhen port in the south,with 13.7 million TEU in 2004 and 10.61 million TEU in2003, as well as the Qingdao and Tianjin ports in thenorth. In general, the growth in these ports will have adirect influence on the growth in the ship repair market,which has seen an annual growth of 13 per cent for thelast three years.

The partnership will be a win-win situation as both COSCOand SembCorp Marine can leverage each others strengthsto grow. It also lays the groundwork for both companiesto explore joint investment opportunities outside Chinain the future.

Similarly, in July 2004, our subsidiary Jurong Clavonjoined forces with Cosco Shipyard Group in forming anassociated company to extend and expand its range ofsupport services in the areas of corrosion controlconsultancy, staging, copper slag processing and trading,blasting and painting services to the shipyards in China.

Growing OurMarine Business

Complementary Overseas Facilities

The acquisition of a 35 per cent stake in Mau Jurong in2001 has since added a strategic overseas hub with facilitiesthat complement those of our Singapore shipyards. This wasrecently demonstrated in Jurong Shipyards ability to combineits immense experience in floating production storage offloading(FPSO) conversions with the complementary overseas facilitiesin Brazil to execute the P-43 and P-50 FPSO conversionprojects.

The P-43 arrived at Mau Jurong in Brazil in the thirdquarter of 2003 for topsides integration and commissioningafter its successful marine hull conversion operation atJurong Shipyard in Singapore. Due to the smooth progressmade at both Jurong Shipyard and Mau Jurong, which alsofabricated the topsides production modules, the entireconversion operation was completed on schedule to thecustomers satisfaction. Upon delivery, the P-43 attained itsfirst significant milestone on December 21, 2004 when itachieved first oil at the Barracuda fields in the Campos Basinoffshore Brazil.

Similarly, the marine hull conversion for the P-50 FPSO wascompleted at Jurong Shipyard in Singapore in June 2004and arrived in Mau Jurong in Brazil in September 2004where it would undergo the topsides phase of its conversion,with delivery scheduled in the third quarter of 2005.

Leveraging such strengths and experiences, Jurong Shipyardwas further able to secure a major US$628 million FPSOEPC turnkey conversion contract from Petrobras NetherlandsBV to convert the VLCC Bar o De Mau into the P-54 FPSOin June 2004. To be completed in 38 months, this conversionturnkey project would again be undertaken by Jurong Shipyardand Mau Jurong in Brazil. On completion, the P-54 wouldbe one of the largest converted FPSO units in the world,capable of full-capacity oil production and treatment at 180,000bpd, gas compression capability at 6,000,000 m3/d andwater injection capability at 39,000 m3/d. To be installed atwater depth of 1,315 meters, the P-54 FPSO is expected tooperate for 25 years without any drydocking in the RoncadorField, Campos Basin, offshore Brazil.

CoscoShipyard Group

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Strategic Alliances with Customers

To grow our ship repair business, SembCorp Marine sshipyards placed huge emphasis on expanding thepool of all iance partners as these provided astream of resilient and recurring repair work. Ourlong-term strategic alliances with customers continuedto provide us with the baseload order book, which in2004 accounted for 29 per cent of our ship repair revenue.Together with our regular customers, they accounted for83 per cent of our total ship repair revenue in 2004.

Further efforts to foster strategic alliances resultedin the signing of three significant long-term contractsin 2004. In March 2004, we signed a new FavouredCustomer Contract with Taiwan Marine Transport.This was Sembawang Shipyard s first such contractwith an Asian company. Under the contact, Taiwan MarineTransport would commit the retrofitting and drydockingof its owned vessels to Sembawang Shipyard forthe foreseeable future. Currently, Taiwan Marine Transportowns 40 ships comprising bulk carriers, VLCCs, carcarriers, ro-ro ships, wood chip carriers and LNG ships.

Then in August 2004, another long-term FavouredCustomer Contract was signed with Tecto Belgium N.V.and Franceship, Belgium. This contract committed theretrofitting and drydocking of 60 vessels owned byExmar, Bocimar and Euronav — and managed by Tectoand Franceship — to Sembawang Shipyard for theforeseeable future.

In October, we further secured a long-term shipdrydocking and refit contract from North WestShelf Shipping Service Company of Australia. Underthe contract, North West Shelf Shipping ServiceCompany committed the retrofitting and drydockingof all liquefied natural gas (LNG) carriers it managedto Sembawang Shipyard and Jurong Shipyard for afive-year term, with an option for extension into anevergreen contract.

This milestone contract was the first time that amajor LNG consortium had committed itself to along-term maintenance and refit contract in theregion, reinforcing our Group s leadership position inhighly specialised LNG refits. At a time when

Singapore was prepar ingitself to be a major hub andplayer in the LNG sector,the selection of SembCorpMarine as a refit partner wasalso a great boost to theSingapore marine industry.

The signing of the long-termcontract also committed thetwo partners to cooperating inthe area of ship repair andrelated services with the keyobjective of achieving short- andlong-term mutually compatiblegoals in health, safety andenvironment; quality; timelydelivery; cost, and technologyadvancement.

Leveraging on ComplementaryOverseas Facilities

830 TEU

1078 TEU

2500 TEU

2600 TEU

FeaturesLOA : 213.00mLBP : 202.10mBeam : 32.20mDepth : 16.50mService Speed : abt 22.30 kts

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Intellectual Properties forSustainable Growth

As part of our strategy for sustainable growth,we constantly seek to move up the technologyvalue chain by developing intellectual proprieties indesigns and solutions in container ships andjack-up rigs.

The design of the 2,600 TEU container ship isproprietary to Jurong Shipyard. The shipyardembarked on the design and construction of theseries vessels in 1997, starting initially with the 830TEU series container vessels. It then built on itsexperience to construct the 1,078 TEU series andsubsequently the 2,500 TEU and 2,600 TEUseries. Each of the container vessels willhave 400 reefers and with an ability to carrytwo-tier high cubes in every cargo hold tocope with owner s increasing demands inregional trade routes. The container vesselsare designed to have a high speed of22.7 knots wi th h igh homogeneouscontainer intake of more than 1960 TEU at14 ton per TEU.

Since the launch of the series containervessels, Jurong Shipyard had delivered fourunits of the 830 TEU series container ship,six units of the 1,078 TEU containerships andtwo units of the 2,500 TEU containerships.Similarly, the design of the 2,600 TEUcontainer series was well-received bycustomers. Currently, the shipyard is buildingtwo units of 2,600 TEU containerships forReederei F Laeisz , four units of the 2,600TEU containerships and two units of 2,646TEU containerships for Wan Hai Lines.

Correspondingly in rig building, we startedmarketing the Baker Marine Pacific Class375 (BMC Pacific) Deep Drilling Offshore

Jack-Up Rig in early 2004. The BMC Pacific 375Deep Drilling Offshore Jack-Up Rig is a proprietarydesign developed and owned by Baker Marine,a wholly owned subsidiary of PPL Shipyard. Thejack-up rig is equipped with a drilling package thatwill enable it to drill high pressure and high temperaturewells at 30,000 feet while operating in 375 feet of water.It includes accommodation facilities for 120 men.

With these innovative features, the company hasbeen successful in securing a total of six jack-up rigs.It is an endorsement of the confidence that customershave in the design and capability of the BMC Pacific375 design.

Proprietary Design in Container Ship¥ From 830 TEU to 2600 TEU

Innovation &Technology

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Safety Innovation at the Workplace

Continuous safety improvement and workplaceenhancement have become part of the corporate cultureat Jurong and Sembawang Shipyards. At the annualSafety Innovation Team at Workplace Convention, eightteams of employees, subsidiary personnel and sub-contractors participated in contributing the following ideasfor improving productivity, safety, health and environmentat the workplace.

Wireless Working Lamp —The Wireless Working Lamp isa portable, battery-operateddevice that eliminates the needfor wires, extension boxes andsockets. It is a safer alternativeto the traditional wire-and-socket lamp, which poses anelectrocution hazard and results

in messy coils of wire strewn about the work area.Built with a six-volt, nine-watt florescent tube, theinnovation also shines brighter than traditional lamps.

Invisible Falling Guard — The Invisible FallingGuard uses laser equipment instead of a measuring tapefor measurement during cell guides installationand container testing. This new method minimises therisk of falling as workers no longer have to scalescaffoldings for manual measurements. Readings arenow digitally captured by a laser distance meter, alaser receiver and a laser leveling machine, resulting ingreater productivity and accuracy.

Cable Strip-T-Ease — The Cable Strip-T-Easeeliminates injuries from stripping cables. It replaces thetraditional and more dangerous use of penknives for cablestripping for glanding and termination jobs. CableStrip-T-Ease is an easy-to-use tool that is capable ofmaking both circular and linear cuts in cables ofdiameters ranging from 10 to 50mm. SembawangShipyard has successfully patented the invention,which is a two-time gold award winner at theMarine Industry s Loss Control Convention and theMinistry of Manpower s Safety Innovation TeamConvention in 2002.

Portable Valve Grinding Device — The PortableValve Grinding Device accelerates the valveoverhauling process. Conventionally, most valveshad to be overhauled by machines in the workshop asmanual filing using grinding paste and sand paperwas too labourious and time-consuming. However,transporting the valves to the workshop posedsafety hazards to workers. The new device nowgives workers the flexibil ity of performing theoverhauling on the spot, without having to remove thevalves from the pipeline. Easy to use and assemble,this portable device aligns automatically and doesnot require leveling adjustment, resulting in significantreduction of process down-time and substantialcost-savings of about 70 per cent.

Versatile Flaring Device — The Versatile FlaringDevice improves the pipe flaring process as a moreeffective way to the traditional brazing sleevemethod that was prone to overheating and theformation of air pockets, resulting in leakages andsleeve failure. With this portable, lightweight andversatile segment type flare device, only one endof the flare joint needs to be brazed, in contrast totwo ends of the sleeve joint as in the previousmethod. The usage of this new device has led toimproved quality, less safety hazards and greaterefficiency. With flaring work completed within ashorter time frame of about three to five minutes, it hasreaped estimated cost savings of around 65.8per cent. This innovation has been tested andapproved by ABS Class for safe use onboard vessels.

Mobile RFID Solutions forEnhanced Port Security

Jurong Shipyard deployed more than 60 Tungsten“ Chandhelds from palmOne, Inc., combined withMobile Radio Frequency Identification (RFID) Solutionsin 2004 as part of its effort to improve port securityat the shipyard. This move comes after JurongShipyards two successful implementations of palmOne“handheld solutions — its SMART time system in 2001,to keep track of employees and subcontractors entryand exit time at the shipyard; and SMART safe in 2003,a behaviour-based safety system aimed at enhancingworkplace safety practices.

An enhancement of the existing SMART time system,the Tungsten C handheld is connected to the cardreader, replacing the old Palm IIc handheld.The system records the date and time of each employeesdaily attendance by identifying a unique identificationnumber on the employee s card. The date from thehandheld is captured and transmitted via theshipyard s wi-fi network to the database server. At theback-end, the administrator can programme a completeschedule of activities — ranging from time-specific

operation status changes, network connection ordisconnection — to transact date transfer, backupand reset. Risk of information loss is minimised withdata being backed-up in SD cards inserted into everypalmOne handheld.

Each employee is issued an RFID pass card containingpersonal data and a photograph. The employee onlyneeds to flash the employee cards at the SMART timePlus for time attendance. By using wi-fi technology instead

of infra-red, SMART time Plus improved datatransfer rate by tenfold and also proved to be morereliable. Security officers use the Mobile Reader withpalmOne handheld and SMART check software toverify the employee s card before being allowedto board a ship. The solution accelerates the personnelvalidation, tracking and recording process by 41/2 hoursper day, resulting in manpower savings of about$43,200 a year.

The result for Jurong Shipyard has been improvedport security, enhanced productivity and quality ofwork, and a reduction of voluminous paperwork.Everyday, Jurong Shipyard has about 6,000

As part of our strategy for sustainable growth,we continued to differentiate ourselves in new products,innovative processes, better services, superb quality,timely delivery as well as new and specializedcapabilities. This commitment is embodied in ourcore value of Innovativeness where we believeinnovation and creativity are crucial to securingindustry leadership.

INNOVATIVENESS

We believe that innovation andcreativity are crucial to stay ahead ofthe competition and bring about betterefficiency in the organisation. Wesecure industry leadership throughconstant innovative technological andengineering solutions and encouragingentrepreneurship.

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employees and contract workers entering and exitingits 65 hectares facility and more than 20 shipsdocked at the shipyard at any one time. With suchhigh human and vehicle traffic, the necessity of astrong port security management system isimperative especially as Jurong Shipyard has alreadycertified International Ship & Port Facility-compliant.

Award-Winning Alliance e-Collaboration Portal

Sembawang Shipyard was awarded the NationalInfocomm Award 2004 for The Most Innovative Useof Infocomm Technology (Private Sector) in October2004. The shipyard is the first company in the marineindustry to win this prestigious bi-annual national accoladethat recognises innovative use of information technologyby businesses.

Its winning Alliance e-Collaboration Portal was animportant tool developed jointly with its alliance partner,Shell International Trading and Shipping Co Ltd (STASCo),to provide direct communication and information linksfor continual improvement in documenting, trending anddiagnosis. The portal is a web-based applicationand provides a comprehensive one-stop location for allrefit information pertaining to alliance partners.

The active involvement and participation of the alliancecommunity is crucial to the success of the portal. Keypersonnel from the shipyard and alliance partners areappointed at various points of the refit process to providethe latest updates to this community. Examples of suchinformation include the Project Manager s Officeupdate of the latest project schedules and planninginformation; the Document Control Centre compilationof the refit vessel s Dimension Inspection Charts andTechnical Reports; and the Alliance Stores frequentupdates on the movement and arrival of the alliancepartners spares housed at the shipyard location. Thisinformation comes together to provide a comprehensiveone-stop location for all refit information pertaining to thealliance partners.

Since the official launch of the Alliance Portal withSTASCo in London in September 2002, the portal hasraised the company s service level up several notches. Ithas become an easy access point for key planninginformation and progressive reports to be made availableto the Alliance partners at various stages of the vesselrefit at the shipyard.

Receiving the award is recognition of SembawangShipyard s relentless effort to drive its e-Thrustand to build a Management Information SystemsFramework to transform business. More importantly,the award shows that useful innovations can be birthedfrom joint development projects with our customers.

Record-Breaking Successthrough Process Innovation

Jurong Shipyard achieved yet another record-breakingfeat when it performed the heaviest skidding weightand the fastest rig-mating time in the region withthe Development Driller II, the second newbuild semi-submersible owned by GlobalSantaFe Corporation.

The Development Driller II, a Friede and GoldmanExD-designed fifth-generation dynamic-positioningdeepwater semi-submersible rig, was successfullyassembled by the shipyard within record time.Leveraging the experience and know-how gained fromthe first submersible constructed, the shipyardincreased the total skidding weight to 17,600 tons,600 tons heavier than the previous operation. The 14,600ton upper hull, built on a 3,000 ton skid truss wasoutfitted with more equipment and installations such asanchor winches and cement units. Despite the heavierload, the skidding was completed an hour ahead ofits earlier record.

With the repeat success of its proprietary load-out andmating-in-dock technique, Jurong Shipyard has positioneditself as an innovator in the niche building of sophisticatedsemi-submersible oil rigs.

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Manpower

PEOPLE CENTREDNESS

We respect and value every individualregardless of his or her position inour organisation. We provide equalopportunities and a conducive environmentfor employees to attain their full potential.We reward all employees fairly,benchmarking their performance to bestpractices. We believe in building alearning organisation for our people toacquire knowledge and skills to achieveprofessionalism.

The SembCorp Marine Group has a strong and competentworkforce to stay at the forefront in this competitive industry.Our success rests on the quality and capability of our humancapital. That is why we take great lengths to attract andretain skilled and competent people to join our team.In addition, we constantly upgrade the competence of ouremployees as well as embark on a continuous process tosource and employ well-trained and competent personnelto drive the Group forward in its mission. As at December31, 2004, our manpower strength stood at 5,722 employees.

Training & Development

Skills CompetencySembCorp Marine has long surpassed the standards ofproviding just basic training. To stay ahead of competition,we concentrate our training programmes on skillscompetencies training.

Employees are evaluated on their core and non-corecompetencies required for their jobs. An individual trainingplan will be drawn up to focus on honing their corecompetencies, ensuring that the competency level isconstantly being raised. With greater involvement in thisaspect, staff demonstrated more commitment andmotivation towards training and development, as they

work together with the human resource department toidentify training needs and priorities.

Quality SupervisorsAnother initiative to recruit and develop supervisors is theTRAC scheme developed in conjunction with theNational Trades Union Congress. The scheme addresses

the needs of Singaporeans with supervisory potentialwho may not have the requisite training and qualificationsfor the marine industry. It allows these supervisorypotentials to develop skills in the company and assistin boosting our front-line supervisors strength.

Scholarship ProgrammesTo nurture capable young talents for Singapore s marineindustry, SembCorp Marine offered four undergraduatescholarships worth $10,000 each to promising final-yearMechanical and Production Engineering students fromNanyang Technological University. The scholarshipawarded was part of a new Association of SingaporeMarine Industries Marine & Offshore UndergraduateScholarship Programme.

SembCorp Marine further granted a total of 11 Associationof Marine Industries scholarships to engineering studentsfrom Singapore Polytechnic and Ngee Ann Polytechnicin 2004. Those with outstanding potential were selectedfor sponsorship in engineering degree courses at theUniversity of Strathcylde in United Kingdom, National

ThePeople

Category No. of Employees PercentageManagement 1,624 28Support Staff 424 8Production Workers 3,674 64Total 5,722 100

Degree & above

DiplomaGCE "A" Level

GCE "O" Level

Trade Certificate

Others

2003

Educational Level200328%

42%

11% 7% 2%

10%

2003

Length of Service200326%

32%

13% 20%

9%

Less than 1 year

1 to 3 years4 to 6 years7 to 9 years10 years & above

Degree & above

DiplomaGCE "A" Level

GCE "O" Level

Trade Certificate

Others

2004

Educational Level200430%

40%

12%8% 2%

8%

2004

Length of Service200424%

15%

16%

16%

29%

Less than 1 year

1 to 3 years4 to 6 years7 to 9 years10 years & above

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University of Singapore and Nanyang TechnologicalUniversity. These bonded scholars would serve theirbonds upon graduation of their studies.

The recipients were picked after going through a stringentselection and interview process based on academicexcellence and outstanding co-curricular activities record.Upon graduation, the students would be required to servebonds in the respective shipyards.

In addition to the numerous sponsorships andscholarships, SembCorp Marine also participated in theSingapore Confederation of Industries scholarshipprogramme. This scholarship programme would pay upto a total of $250,000 for their studies in establishedoverseas universities.

International TalentThe Group maintained a constant lookout for capableforeign talent who could add value and contribute theirexpertise to our projects. Our team now includes engineersfrom China, Myanmar, Bulgaria, Malaysia, India,Bangladesh, Bol iv ia, Ta iwan and Austra l ia .

Re-training of Workers for the Marine IndustryTo encourage more Singaporeans to join the marine industry,SembCorp Marines shipyards participated in the Place nTrain Marine Re-Skilling for Employment Programme, to re-train displaced local workers from other industries.

Under the programme, jointly initiated by the Associationof Singapore Marine Industries and the WorkforceDevelopment Agency, selected candidates would undergo

skills training in one of the five tracks — marine generalwelding, marine mechanics, marine pipe fitting, marinesteel fitting and marine electrical technology.

The programme began with a job fair-cum-selection andrecruitment exercise held at the South West CommunityDevelopment Council. From the 110 people attending theexercise, 48 candidates were selected for the programme.These selected candidates were assigned to the variousshipyards for employment and two months of full-time marinetrade skills training. Jurong Shipyards first batch of candidatesstarted their eight-week training in June 2004.

Union Relations

Union-Management PartnershipOur management continued to work in partnership withthe Union in developing and maintaining harmoniousindustrial relations at all times. With no industrial disputes,SembCorp Marine s yards enjoy good rapport with theirrespective unions to advance employees welfare andwell-being. These close working relationships have allowedthe Group to achieve higher job satisfaction for the unionmembers and better productivity.

A collective agreement was signed on February 26, 2004to incorporate the Wage Reform recommendations ofthe National Wages Council, which involved setting aside10 per cent of the wages as the Monthly VariableComponent. A productivity-related performance rewardsystem also replaced the previous seniority-basedincrement system.

May Day 2004 Gold AwardIn recognition of its commitment towards good union-management relations and employee welfare, trainingand development, Jurong Shipyard was presented thePlaque of Commendation (Gold) awarded by the NationalTrades Union Congress in April 2004. With a shared visionof promoting employee welfare, Jurong Shipyard hadbeen working closely with the branch union since itsinception under the Pioneer Industries Employees Unionin 1969.

Over the years, Jurong Shipyards management had beenactively supporting union activities through monetarycontributions and community welfare projects,including co-sponsoring of the union s specialwelfare fund. The strong synergy was furtherdemonstrated when the management provided twopermanent union offices within its premises to givemembers easy access.

Employee Care

People-Centred ProgrammesTo develop employees to their full potential, SembCorpMarine organised numerous courses ranging fromtradesmen skills-based training to personal enrichmentcourses. Beyond professional development, the companyalso encouraged employees to lead healthy and activelifestyles through its Workplace Health Programme.This commitment to employees health earned thecompany the Singapore Health Award (Gold) in 2004 andSilver for four consecutive years from 2000 to 2003.

Beyond the organisational level, Jurong Shipyard playedan active role in supporting the nation and the community.To this end, it enthusiastically respondedto National Trades Union Congress manyefforts for job redesign and job matchingto aid the unemployed public, as well ashosted educational visits for union leadersto update them on developments inshipyard operations.

Festivities for Foreign EmployeesA Lunar New Year luncheon was speciallyorganised for about 300 employees andworkers from China. For the Muslim andIndian foreign workforce, the shipyardalso held Deepa-Raya luncheons forthem. These festive luncheons providedan ideal platform for interaction, furtherreinforcing the relationship betweenmanagement, union and the workers.

Awards for Outstanding Employeesand SubcontractorsEmployees who contributed to innovation and safetyat the workplace were recognised at the NationalDay Observance Ceremony held in August 2004.The Innovation Award went to the ManagementInformation Systems and Human Resource departmentsfor devising a portable RFID handheld reader tospeed up identity checks for workers entering theshipyard or boarding vessels. This innovative inventionhelped to accelerate tracking and recording processby 4.5 hours per day, resulting in manpower savingsof about $43,200 a year. Other awards were alsopresented to the top three Safety Innovation Teamsfor their innovative inventions during the ceremony.

Long Service RecognitionFor their years of loyal and dedicated service to thecompany, 301 employees were recognised during theLong Service Awards ceremony held in January 2004.As a token of appreciation, these employees who haveserved the company for 10, 15, 25, 30, 35 and 40 yearsreceived gold coins and varying cash amounts dependingon their on length of service.

ThePeople

Corporate Enhancement& Community Care

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Industry Promotion

The Heart of Shipping : Posidonia 2004 Exhibition

Jurong Shipyard and Sembawang Shipyard showcasedtheir globalised marine engineering capabilities on the

international stage during the Posidonia 2004The Heart of Shipping Exhibition in June 2004 in the

Greek port city of Piraeus.

This biennial exhibition was one of the largest andmost publicised shows in the marine industry. Itdrew a total of 16,400 visitors from diverse sectorsin the shipping industry, including ship owners, shipbrokers, shipbuilders, equipment and machinerymanufacturers as well as service providers fromabout 80 countries. The exhibition was officiallyopened by Greece s Prime Minister Mr CostasKaramanlis and attracted many dignitaries includingEuropean ministers involved in shipping, transportationand commercial activities.

Our shipyards were part of the 30-memberSingapore delegation led by the Maritime andPort Authority and coordinated by the Association ofSingapore Marine Industries to promote Singaporeas a shipping hub of choice. The exhibition providednumerous opportunities for both yards to expandtheir networks, forge new alliances and cementexisting ties with partners from Greece and aroundthe world.

Asia Pacific Maritime Exhibition 2004

Further strengthening industry links and the promotionof the marine industry, SembCorp Marine s group ofshipyards took part in the Asia Pacific Maritime Exhibitionheld at the Singapore Expo. The exhibition, officiated byGuest-of-Honour Mr Yeo Cheow Tong, Minister forTransport saw more than 3,800 visitors from the variousmaritime sectors attending. Serving as a platform fornetworking, the event provided the shipyards with theopportunities to promote their capabilities and networkwith key players in the marine industry.

Oil & Gas Show in Brazil

SembCorp Marine s Jurong Shipyard and Mau Jurongjointly participated at the 12th Rio Oil and Gas Exhibitionand Conference held in Rio de Janeiro, Brazil inOctober 2004 to showcase their offshore capabilities.

Recognising our responsibilities as a good corporatecorporate citizen and to be a truly successful company,we have a strong commitment to improving the worldaround us. We view business as being an integral partof society and are committed, both locally and globally,to contributing to community improvements, and tocreating a caring organisation.

COMMUNITY RESPONSIBILITY

We view business as being an integralpart of society. We are committed to bea responsible corporate citizen, bothlocally and globally contributing tocommunity improvements, and to createa caring organisation.

To further maritime excellence in the industry,SembCorp Marine sponsored MARTECH 2004,a biennial international conference and exhibitionheld at the Singapore Polytechnic in Singapore. Jointlyorganised by the Maritime and Port Authority ofSingapore and the Singapore Maritime Academy,MARTECH 2004 themed Towards Maritime Excellence— Challenges on the Horizon sought to promotethe advancement of maritime education, training,research and development. The event provided ampleopportunities for marine industry players such asshipbuilders, ship repairers, ship owners, shipmanagers, charterers, underwriters, naval architects andmaritime professionals to network and build relationships.Delegates also benefited from the cross-fertilisationof knowledge and ideas throughout the variousconferences held over three days.

Towards Maritime Excellence : Martech 2004

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FPSO Research Forum

A leader in floating production storage offloading (FPSO)conversions, Jurong Shipyard shared its offshore conversioninsights during an FPSO Research Forum organised bythe National University of Singapore Engineering Faculty inMarch 2004. The yard presented to the research communityon its experience with the unique and innovativehydroblasting processes that allowed for greater efficiencyand faster delivery schedules. The forum, a bi-yearly eventinitiated in 1998, aimed to promote knowledge sharingamong those in the marine industry, including oil companies,operators, contractors, yards, research and academicinstitutes and safety authorities.


Community Care

SchoolBAG Scheme

As a demonstration of its care and concern for thecommunity, SembCorp Marine contributed $152,350 ingrants to 742 needy students under its SchoolBAG (SchoolBook Assistance Grant) scheme in 2004.

The SchoolBAG scheme is an initiative under SembCorpMarine s Community Responsibility and Care Programmeto alleviate the financial burden of low-income householdswith schooling children. The grants aim to help familieswith a combined income of less than $1,250 to defraythe cost of purchasing school text books, uniforms andstationery items at the start of the academic year.

For the second consecutive year, SembCorp Marine incollaboration with the Ministry of Education identified atotal of 61 schools in close proximity to Jurong Shipyardand Sembawang Shipyard for participation in theprogramme. The scheme is also open to children ofemployees within the group.

Youth Outreach

Choice Engineering @ Careers 2004

As part of an on-going drive to boost its talent pool, SembCorpMarine took part in Choice Engineering@Careers 2004Exhibition in March 2004 at the Suntec City ConventionCentre. The exhibition held over four days saw a steady flowof visitors who came by to view the exhibits, make enquiriesand submit applications. Response to the event was goodwith a total of 1.385 applications received from interestedjob-seekers.

Industry Promotion to Students

To draw new blood and generate greater interesttowards the marine sector, SembCorp Marineparticipated in the marine and offshore industrypromotion and exhibition at the National University ofSingapore in September 2004. To give the studentsa better understanding of the marine industry,SembCorp Marine was represented by ExecutiveDirector of Sembawang Shipyard Wong Lee Lin andfive other speakers when they spoke on the group sbusiness operations, the job opportunities andsharing their work experiences within the industry to anaudience of 200 university, polytechnic and secondaryschool students.

Insights on Innovation

SembCorp Marine s Jurong Shipyard shared itsdistinctive approach to innovation during a SingaporeInnovation Award Winners Experience SharingSession organised by SPRING Singapore in March2004. The shipyard, one of the seven organisations onthe sharing panel, had won the Singapore Innovationof the Year 2003 Award conferred by SPRINGSingapore for its innovative load-out and mating-in-dockrig-building technique.

Student Visits

Various student groups visitedJurong and SembawangShipyards during the year to beexposed to the challenges of themarine industry. Jurong Shipyardplayed host to students fromAnderson Secondary School andPei Cai Secondary School whenthey visited and toured theshipyard.

A group of Masters Studentsfrom the National University ofSingapore s Civil Engineering Department also visitedJurong shipyard for hands-on and insightful informationon the shipyard s offshore conversion capabilities. Thevisits proved to be a fruitful and eye-opening experiencefor many students, who gained new insights into themarine engineering industry and knowledge of the vastopportunities available in this fast-growing sector.

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Promoting the Arts

Brazilian Cheer

An active supporter of the arts, SembCorp Marinesponsored Braz i l ian music ian Gi lberto Gi l sperformance at the Esplanade Concert Hall in 2004.Hailed as an inspiration and legend for his role inrevolutionising Brazilian music and culture, Gilberto Gil,who is also Brazil s Minister for Culture, delivered hissignature Brazilian samba, bossa nova and baiaotunes melded with elements of reggae, rock, funkand jazz during the 90-minute concert. Apart fromsharing Brazilian music and culture, the occasion

provided an excellent platform for the strengthening offriendships between staff and their Brazilian counterparts.

Local Talent Support

To promote Singapore s local talents multi-culturallandscape, we supported the People s AssociationCultural Talents fund raising gala concert held atthe National University of Singapore Cultural Centre.The support would help local artistes continue toshare the rich and special multi-cultural heritage withother Singaporeans.

Tsunami Relief Efforts

To help to ease the pain and suffering of tsunami disastervictims, SembCorp Marine and its subsidiaries translatedcompassion into action by raising $306,530.40 towardsthe tsunami relief efforts.

Responding to the call, employees and subcontractorsfrom SembCorp Marine s group of shipyards togetherwith the Jurong Shipyard employees union, rallied togetherand donated generously towards the cause. All donationswere forwarded to the Red Cross International s TidalWave Asia Relief Fund.

Jurong Shipyard and its subcontractors also extendedhelp and support to 78 foreign workers whosefamilies had been affected by the tsunami in India bypresenting return air tickets, cash allowances and leaveof absence.

Donation for Safety Milestone Achieved

To mark the safety milestone of 500,000 manhours withoutloss-time injuries for the Mutineer-Exeter developmentFPSO conversion project, Jurong Shipyard together withModec Inc and Santos Ltd made a $5,000 donation tothe beneficiaries of METTS Welfare Association in July2004.

Community Chest Awards

Sembawang Shipyard received the Corporate BronzeAward and the 5-Year Outstanding SHARE Award fromthe Community Chest of Singapore in October 2004. TheCorporate Bronze Award was awarded in recognition ofits contribution of at least $50,000 raised from the variousactivities organised in conjunction with the shipyard scelebration of its 35th Anniversary in 2004. The 5-YearOutstanding SHARE Award was presented to the shipyardin recognition of its sustained participation rate at platinumlevel for five consecutive years.

Health, Safety,Security & Environment

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HEALTH, SAFETY, SECURITY ANDENVIRONMENT PRESERVATION

We are committed to continuously promotea safe and healthy work environment forour customers, employees, contractorsand the community. We take responsibilityfor our own safety and of others both onand off the job.

Health & Employee Wellness

Adopting a holistic approach towards health promotion,SembCorp Marines yards initiated a series of programmesthroughout the year, through the company s WorkplaceHealth Promotion (WHP) Committee. A series of activitieswas aimed at creating awareness and promoting employeehealth and wellness - from prevention programmes tofitness workouts. The Committee aimed to encourage Education & Prevention

Weight Management ProgrammeTo help overweight employees fight the bulge and keep healthy,a weight management programme was initiated over a spanof four months. The programme was targeted at employeesidentified with a body mass Index of above 28 during a routinehealth screening exercise conducted in-house by the MedicalCentre. Through talks and workshops conducted also bydoctors and health professionals from Alexandra Hospital,employees learnt to prepare healthy foods and make lifestylechoices to achieve a fitter and slimmer physique.

Workplace ExerciseBesides the daily morning exercise, employees also tookpart in a fun-filled boxercise session. Other programmesorganised included a seven-week workplace yoga foremployees. These programmes offered employees theconvenience of keeping fit at the workplace and to developa well-balanced body and mind.

employees to exercise regularly and to lead a well-balancedhealthy lifestyle.

Gold Honours at Singapore HEALTH AwardsIn October 2004, Jurong Shipyard became one of thefirst shipyards in Singapore to earn Gold honours duringat the HEALTH. (Helping Employees Achieve LifetimeHealth) Awards organised by the Health Promotion Board.The award gave national recognition to organisations witheffective workplace health promotion programmes toencourage healthy living and active lifestyles amongemployees. The shipyard had been a Silver Award recipientfor the past four consecutive years since its participationin the programme in 2000.

Sembawang Shipyard and Jurong SML were bothaccorded the Silver HEALTH Award in 2004 in recognitionof their health promotion efforts. Both yards had beenconsistent in their drives to advocate healthy living amongemployees. Both yards had been receiving the SilverAward consecutively for the past three years.

Sporting HighlightsEmployees within the SembCorp Marine group had arolling good time during a friendly bowling competitionorganised by the Jurong Shipyard Recreation Club inOctober 2004. Our employees also joined othercompanies within the Temasek Group for a marathon runaround Bedok Reservoir. By December 2004, teams ofemployees and subcontractors competed in a soccerfriendly match.

Talks & CoursesEmployees from SembCorp Marines yards gained insightsinto health enhancement and disease prevention throughvarious talks and courses organised by subsidiary yardsduring the year. A First Aid Course and Colorectal CancerAwareness Talks were organised to equip employees withskills and knowledge for maintaining health and wellness.

Health Screening for PreventionWith employees welfare in mind, a series of healthscreenings were held in Jurong Shipyard in July 2004.During this annual health exercise, employees had tocomplete a lifestyle survey and undergo various checksto determine their blood pressure, body mass index aswell as glucose and cholesterol levels. In the follow-upa month later, employees each received a comprehensivereport on the findings, complete with practical advice onimproving their current state of health.

Jurong Shipyard also organised a series of chest X-rayscreenings in October 2004 in conjunction with the SATAat various locations in the shipyard.

TEAMWORK

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


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Fitness Fun at SentosaExercise can be fun, especially when in good company.With this message, employees and their families headeddown to Sentosa for fitness fun during the launch of theNational Healthy Lifestyle Campaign in September 2004.Joining some 12,000 Singaporeans, our participantsenjoyed their time of exercise and bonding during the1.8-kilometre walk-a-jog and the 30-minute Get FitSingapore workout.


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Safety

Safety Practices

Safety-first at all times continued to be our corporatepolicy as safety performances were constantly used asa proxy indicator of a shipyard s productivity. The year inreview saw the Group pushing ahead in its efforts toensure safe practices, procedures and equipment,enhancing confidence and work satisfaction amongemployees and subcontractors.

At an operational level, each shipyard was responsiblefor managing its respective ISO, safety and environmentalissues and initiatives.

Safety Performance

The year 2004 saw a total of 106 loss-time injury casesin Jurong Shipyard, a 24.7 per cent increase from 85 in2003. Overall Accident Frequency Rate based on therecordable cases stood at 3.2 accidents per million man-

hours worked. However, the Pulau Samulun locationachieved a Frequency Rate of 2.45 in 2004, which wasbetter than the 2.8 target rate was set by the AdvisoryCommittee in Accident Prevention in Shipbuilding & ShipRepairing Industries by the Ministry of Manpower.

Emergency Response

Upholding the motto of Always Ready and on Guard ,Jurong Shipyard conducted a total of 35 fire andevacuation drills in 2004 to fine tune its fire-fighting andevacuation system. Of these, 26 were conducted onboard vessels and eight at the workshops and offices.One bomb threat evacuation drill was also held duringthe year to familiarise all direct employees andsubcontractors — including ship crew, security guardsand utilities personnel - with emergency preparednesson board vessels.

Shipyards ISO 14001 ISO 9001 OHSAS 18001Certification Certification Certification/Others

Jurong Shipyard - 1995 ABS Quality 2002 ABS QualityEvaluation Inc Evaluation Inc2003 : Recertification 2003 : Recertification

Sembawang 2002 Det Norske Veritas 1996 Det Norske Veritas International SafetyShipyard 2003 : Recertification 2003 : Recertification Rating System by Det Norske Veritas.

2004 : ISO 14001 2004 Improved fromEnvironment Management ISO9001:2000 Level 8 to Level 9System recertification Recertification

Jurong SML/SML - 1994 -Shipyard Det Norske Veritas

2003 Recertification

PPL Shipyard - 2004 ABS Quality -

Jurong Marine 2003* -Contractors - Certification International

Similarly, Sembawang Shipyard, together with theSingapore Civil Defence Force, also conducted annualFire and Rescue Exercises to ensure a smoothinterface between both critical parties, and to equip allpersonnel with the required knowledge and skills tohandle emergency situations. One such exercise was onboard the vessel St Andrews 114 held jointly with ownerCNOOC.

Safety Workshops

Safety workshops to unveil our Group Safety Action Planwere conducted at group level for senior managementstaff within our shipyards. Senior management alsopresented on safe work practices of specific various yardactivities, such as hot work and spray painting. Participantsalso shared best practices in structuring safety and stabilityduring shipbuilding, ship repair, ship conversion and rigbuilding operations.

* previously ISO 9002: 1994

Frequency Rates (Jurong Marine Contractors)Per million man-hours

5.00

4.00

3.00

2.00

1.00

0.00

4.28

2.99

2.582.34

2.622.78

2.21

97 98 99 00 01 02 03 04

3.20

Frequency Rates (Jurong Shipyard)Per million man-hours

6.00

5.00

4.00

3.00

2.00

1.00

0.00

5.19

3.88

3.152.70

2.992.70

2.903.20

97 98 99 00 01 02 03 04

Frequency Rates (Sembawang Shipyard)Per million man-hours

5.00

4.00

3.00

2.00

1.00

0.00

4.70

4.30

3.10

4.10

2.99 2.90

4.30

97 98 99 00 01 02 03 04

2.47

For 2005, a pervasive security presence of the local PoliceAuthority on joint patrols together with the shipyard ssecurity personnel would be implemented. This wouldhelp to create an efficient and effective information networkinvolving employees and subcontractors.

Surveillance & Enforcement

To ensure strict compliance with safety rules andregulations, Jurong Shipyard s safety task force stepped

up surveillance with more frequentinspections in 2004 as compared with2003. The yard further refined its behaviour-based safety programme to conduct morefocused observations on particular daysand times when accidents most frequentlyoccurred. Plans are currently underway to

increase the observer pool from the previous ratio of1:100 to 1:300.


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Security

International Code for the Securityof Ships and Port Facilities

Jurong Shipyard, Sembawang Shipyard and Jurong SMLreceived the Provisional Statement of Compliance of a PortFacility for meeting the IMO s International Code for theSecurity of Ships and Port Facilities between February andMarch 2004. This achievement was made in advance ofthe Maritime Port Authority s April 2004 deadline forcompliance.

The Code, which was a new IMO regulation implementedto enhance maritime security, recognised the comprehensivesecurity measures within our group of shipyards. With theobjective of detecting security threats and taking preventivemeasures against security incidents affecting ships and portfacilities, the Code required ships crew and ports to traintheir staff and develop comprehensive audited security plansand procedures to counter security threats.

In compliance with the code, our shipyards had put in placea comprehensive security plans to enhance the security ofthe yards. Such intensified security efforts included stringentaccess control, closer monitoring of port facilities and tightersupervision of cargo handling to guard against possiblethreats to maritime security. Access to shipyards byemployees and subcontractors was now controlled byphoto identification as well as an electronic system thatvalidated workers information.

Shipyard Security Watch Group

Jurong Shipyard held the Shipyard Watch Groupcum Anti-terrorism seminar in November 2004 at the

Red Helmet Programme

The Corrective Work Programme, or the Red HelmetProgramme, was implemented in the shipyard in March2004 to educate injured workers on potential safetyhazards. As part of the programme, such workers woulddon red helmets and follow a safety supervisor on hisrounds with the objective of spotting potential hazards.Each hazard spotted would earn points and a worker hadto chalk up to 3,000 points before he could resume hisnormal duties.

Portable Gas Detector

In an effort to enhance confined space safety,Jurong Shipyard purchased 250 sets of portable gasdetectors for use by various contractors and the sections.With more detectors available, the frequency of periodicgas checking, especially where hot works were carried

Shipyard Recognised Date of Award ofSecurity Organisation Certification

Jurong SML Control Risk Group February 26, 2004

SML Shipyard Control Risk Group February 26, 2004

Sembawang Shipyard CISCO Singapore February 27, 2004

Jurong Shipyard CISCO Singapore March 12, 2004

Jurong Police Division Headquarters. The initiativefostered closer cooperation among the shipyards andJurong West NPC in an effort to step up efforts againstterrorism and maintain a high level of vigilance. Some ofthese measures included joint security patrols by yardpersonnel and the police as well as more effective andefficient information sharing.

out, was increased from once every eight hours to onceevery six hours daily. The yard also conducted a trainingcourse to educate employees and subcontractors on theproper use of the portable gas detection equipment. Asan additional precaution against fire and explosion, theyard also introduced the use of an oxygen short piece inJuly 2004. The oxygen short piece, connecting the hoseto the gas manifold outlet, must be disconnected wheneverthe working area was left unattended.


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Environmental Care

Student Outreach

Sembawang Shipyard organised a milestone awardunder its Green Wave Environmental Care Project.A total of 21 awards were presented to the winning teamsat the ceremony held in November 2004 graced byMr Tharman Shanmugaratnam, Minister for Education.

The 1st Prize in the tertiary category is jointly sponsoredby Shell Trading and includes a one-month workattachment to Shell Trading. The 1st Prize in the JT/ITE/CIcategory is jointly sponsored by BP Shipping and includesa one-month work attachment to BP Singapore. Winnersof the top prizes at the JC/ITE/CI and tertiary levels wouldalso be offered attachments at Sembawang Shipyard.

Launched in January 2003, Sembawang Shipyard sGreen Wave Environmental Care Project had been

promoting the innovative use of advanced technologiesin environmental protection and improvement to students.

Waste Management

JPL Industries, a subsidiary of SembCorp Marine,continued to recycle some 300,000 tonnes of copperslag every year that would otherwise have to be disposed.This move sought to conserve natural resources andextend the life of Singapore s only landfill.

health hazards, the shipyard conducted dust-mask fittest training for a total of 910 participants duringthe year. The shipyards also carried out regularmonitoring of noise levels within workshops andonboard vessels to ensure that sound levels werekept within acceptable limits.

5S Housekeeping

For better workplace management, Jurong Shipyardand Sembawang Shipyard continued to adopt the5S Housekeeping approach, a Japanese systembased on the acronyms: Seri, Seiton, Seiso, Seiketsuand Shitsuke (sorting, arranging, cleaning, maintainingand self-discipline). As an incentive for employees andsubcontractors to maintain good housekeeping standards,the 5S Housekeeping Awards were presented to deservingsections and stores.

Filter Cleaner

The Filter Cleaner minimises environmental pollution duringfilter cleaning of the CNC machine s fume extractor byensuring the proper disposal of ferrous dust. The inventioneffectively cleans the filters using compressed air whilecontaining ferrous dust, which is discharged via an airrelieve outlet to an open water tank. This inventionsignificantly reduces the workers ferrous dust exposureand potential respiratory problems.

Sembawang Shipyard developed an extensive wastesegregation and recycling programme centred on anon-site recycling compound. Its housekeepingcommittee continued to keep waste disposal costslow with centralised bays for general waste, emptyoil drums and used anodes as well as anti-crow bins topromote housekeeping. The yard also adopted amore systematic approach including disseminatingbulletins to educate employees on proper disposaland housekeeping practices, conducting regularzone inspections around the yard and onboard vesselsand implementing a fine chit system to subcontractorswith poor housekeeping performances.

Environmental Safety

To educate employees and subcontractors onproper protective measures against environmental

Spotlight on Activitieswithin the Group

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Among the most technologically advanced drillingrigs in the world, the Friede and Goldman ExD-designeddeepwater drilling rigs were engineered to meet therequirements of drilling in the challenging deepwater arena,with the ability to drill in water depths of up to and beyond7,500 feet. Due for delivery in the first quarter of 2005,both rigs will be deployed to the US Gulf of Mexico forexploration and developmental works. Development DrillerI will be on a two-year charter to BHP Billiton Petroleum(Americas) Inc, while sister rig Development Driller II willbe on a three-year charter to British Petroleum for itsAtlantis Field development.

Jurong Shipyard accomplished a major milestone in rigbuilding with the fast-track construction of DevelopmentDriller I and II, the yard s first pair of ultra-deepwater semi-submersible drilling rigs for Global SantaFe Corporation.

The rigs accelerated pace of construction was achievedthrough the yard s breakthrough load-out and mating-in-dock technique involving the simultaneous constructionand subsequent skidding and mating of the upper andlower hulls. Through this innovative, worlds first technique,the shipyard was able to accelerate the rig buildingprocess, while meeting high quality and safety standards.

2004 was a busy and memorable year for theSembCorp Marine Group of Shipyards. We spotlightthe main activities within the group.

A Milestone Achievement- Christening of Development Driller II

Jurong Shipyard witnessed the successful sail-away ofFPSO Baobab Ivoirien MV10 (Ex-Nina) on December 13,2004. This marked the shipyard s nineth offshore deliveryfor Modec Group after a smooth 15-month conversionoperation.

The contract to convert the 357,000 dwt ULCC T.T. Ninainto an FPSO, renamed Baobab Ivoirien MV10, wasawarded to Jurong Shipyard by Modec International LLC.Upon its arrival in August 2003, the yard began shipconversion, module integration and life extension works,comprising the fabrication and installation of helideck,cargo and ballast tank and deck piping system, turretintegration and commissioning, 2,000 MT of deck andbottom steel renewal as well as blasting and paintingof all cargo oil tanks and water ballast tanks.

With the total commitment on the project teamsto safety, health and environment, the shipyardcompleted the conversion within the scheduledtimeframe and achieved a commendable safetyperformance of three million manhours withoutloss-time injuries.

FPSO Baobab Ivoirien MV10

The FPSO will be installed in 970m water depth at theBaobab Field, making it one of the deepest water FPSOsin the world. Designed for ease of future in-situ expansionof topside capacity, the FPSO was equipped with anexternal SOFEC turret mooring system capable ofsupporting six original risers and four future risers plusumbilicals. It has a storage capacity of 2,000,000barrels of oil/day and 75 million cubic feet ofnatural gas as well as a water injection of100,000 bopd. The Baobab Field isexpected to be online in April 2005.

FPSO Modec Venture 11

FPSO Modec Venture 11, Jurong Shipyards tenth offshoreconversion, was officially named on December 9, 2004

in a ceremony held atthe shipyard. The

naming of Modec

Venture 11 was officiated by Lady Sponsor Mrs CatherineEllice-Flint, wife of Mr John Ellice-Flint, Managing Directorof Australian oil and gas company Santos Ltd.

On delivery, the Modec-operated FPSO will be deployedto the Mutineer Exeter Fields, about 150km north ofDampier, Western Australia, for development works, withfirst oil targeted in the first quarter of 2005. Measuring258m x 46m x 23.9m, the FPSO would be moored onsite in water depths of 165m to receive oil from each fieldvia a sub-sea production system. Designed with a SOFECinternal disconnectable turret, the FPSO is capable ofstoring 930,000 barrels of oil and producing 100,000barrels of oil/day, with provision for gross liquid throughputof up to 140,000 barrels of liquid/day.

Spotlight on Activitieswithin the Group

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Sendje Berge

Owned by Bergesen Offshore dy AS, the FPSOcalled at Jurong Shipyard for an upgrading operation toenhance its production strength and storage capacity.Highlights of the upgrading included the installationof an oil fiscal metering module, a cargo tank ventingsystem, a sub-sea control system, new 7MWTurbogenerator and HV Generator as well as theupgrading of its turbine. The operation also encompassedthe installation, hook-up and interconnection of gascompression and gas dehydration modules and life

extension works to increase the vessels life for an additionalfour to eight years without drydocking.

Measuring 349m x 52m x 27m, the 274,333 dwt SendjeBerge will operate in the Okwori Field in the Gulf of Guineaoffshore Nigeria in water depths of approximately 140m.The upgraded FPSO has a storage capacity of 2,000,000bbl, with a production capacity of 60,000 bopd, an oilcapacity of 38,000 bopd and a gas injection rate of 55mmscfd.

Theodor Storm

Theodor Storm, a 2,500 TEU containership, wasdelivered on schedule to owner Reederei Karl Schl terin December 2004. It was the second containershipnewbuilding from Jurong Shipyard s latest containervessel series, following sister ship, Thomas Mann,which was delivered in October 2003. Theodor Stormis a high-performance vessel built according to adesign developed and owned by Jurong Shipyard.Designed with 400 reefer containers, the 213m x32.2m x 16.5m containership is capable of highcontainer intake at fast speed, with a total stowagecapacity of 2,586 TEU, comprising 1,628 on deckand 958 TEU in the cargo holds.

Sembawang Shipyard achieved yet another majormilestone in the area of offshore conversion whenit successfully completed the sophisticated conversionof Jascon 5 to a newly outfitted and commissioned

Offshore DynamicPositioning Class 3

Pipelay, Construction andAccommodation barge.

Jascon 5 was built toAmer ican Bureau Sh ipp ing

Classification rules with notation ABS +A1 Barge + PAS + DPS2 Pipelay . It is operated

by Offshore Contractors and owned by theNigerian based Sea Trucks Group.

Major work carried out by the shipyard includedthe installation of specialised equipment includingthe SAS pipe laying equipment, KongsbergSimrad Dynamic Positioning System, a pipleystinger and A frame. Additionally, the shipyard

installed a Huisman heavy lift crane that can revolvewith a full load of 800 tonne and a TTS/Norlift 25

tonne capacity pedestal crane that will enable theJascon 5 to handle all pipeloading and general duties.

The newly completed Jascon 5 left the shipyard in April2004 for its first assignment in the Middle East and willbe deployed worldwide by the Sea Trucks Group.

Jascon 5

Contents

General Information 110

Report of the Directors 111

Statement by Directors 131

Auditors’ Report to the Members of SembCorp Marine Ltd 132

Profit and Loss Accounts 133

Balance Sheets 134

Statement of Changes in Equity 136

Consolidated Statement of Cash Flows 138

Notes to the Financial Statements 141

Supplementary Information 180

Major Properties 182

Notice of Annual General Meeting 185

Proxy Form 187

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111110

The Directors present their report to the members together with the audited financial statements of the Company and of theGroup for the year ended 31 December 2004.

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

Tan Kwi Kin PresidentTan Pheng HockKiyotaka MatsuzawaLow Sin LengTan Tew HanAjaib HaridassHaruo Kubota (Appointed on 15 July 2004)Heng Chiang Gnee (Alternate to Tan Kwi Kin)

Arrangements to enable Directors to acquire shares and debenturesOther than the SembCorp Marine Share Plans, neither at the end of the financial year, nor at any time during the financialyear was the Company a party to any arrangement whose object is to enable the Directors of the Company to acquirebenefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

Directors’ interests in shares, share options and debenturesThe following Directors who held office at the end of the financial year had, according to the register required to be keptunder Section 164 of the Companies Act, an interest in shares or debentures of the ultimate holding company, TemasekHoldings (Private) Limited or any other related corporations as stated below:

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

At beginning At end of At beginning At end ofof the year the year of the year the year

Wong Kok Siew (deceased)SembCorp Marine Ordinary shares of - 212,500 350,000 - -Ltd $0.10 each

Options to subscribefor ordinary shares of$0.10 each- at $0.70 per share 8/9/2001 150,000 75,000 - -

to7/9/2005

- at $0.66 per share 28/9/2002 187,500 125,000 - -to

27/9/2006- at $0.90 per share 8/11/2003 250,000 250,000 - -

to7/11/2007

- at $0.99 per share 9/8/2004 250,000 250,000 - -to

8/8/2008- at $1.04 per share 11/8/2005 - 250,000 - -

to10/8/2009

Report ofthe DirectorsSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

DirectorsWong Kok Siew (deceased) ChairmanTan Kwi Kin PresidentTan Pheng HockKiyotaka MatsuzawaLow Sin LengTan Tew HanAjaib HaridassHaruo Kubota (Appointed on 15 July 2004)Heng Chiang Gnee (Alternate to Tan Kwi Kin)Naoteru Tsuda (Resigned on 15 July 2004)

SecretaryKwong Sook May

RegistrarKon Choon Kooi Pte Ltd47 Hill Street #06-02Chinese Chamber of Commerce & Industry BuildingSingapore 179365

Registered Office29 Tanjong Kling RoadSingapore 628054

AuditorsErnst & YoungAudit PartnerDaniel Soh (with effect from 2003)

GeneralInformationSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

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113112



Wong Kok Siew (deceased)SembCorp Conditional award of - - 0 to 800,000 - -Industries Ltd 400,000 performance (Note 4)

shares to be deliveredafter 2006Conditional award of - 600,000 400,000 - -1,000,000 restricted (Note 5) (Note 5)shares

SembCorp Ordinary shares par - - 140,000 - -Logistics Ltd value $0.25 each

fully paid

Options to subscribefor ordinary sharesof $0.25 each- at $2.50375 29/6/2001 80,000 80,000 - -

per share to28/6/2005

- at $1.8375 16/5/2002 120,000 30,000 - -per share to

15/5/2006- at $2.01 per share 28/2/2003 200,000 200,000 - -

to27/2/2007

- at $1.50 per share 6/2/2004 200,000 150,000 - -to

5/2/2008- at $1.97 per share 11/2/2005 - 200,000 - -

to10/2/2009

Singapore Food Ordinary shares - 180,000 310,000 - -Industries Limited of $0.05 each

Options to subscribefor ordinary sharesof $0.05- at $0.55 per share 24/8/2001 100,000 - - -

to23/8/2005

- at $0.78 per share 30/10/2001 100,000 100,000 - -to

30/6/2006- at $0.69 per share 28/7/2002 120,000 90,000 - -

to7/1/2005




Wong Kok Siew (deceased)SembCorp Ordinary shares of - 836,446 1,341,446 - -Industries Ltd $0.25 each

Options to subscribefor ordinary shares of$0.25 each- at $2.26 per share 20/5/2001 500,000 500,000 - -

to19/5/2009

- at $1.99 per share 27/6/2001 500,000 500,000 - -to

26/6/2010- at $1.55 per share 20/4/2002 500,000 500,000 - -

to19/4/2011

- at $1.59 per share 8/5/2003 400,000 400,000 - -to

7/5/2012- at $0.98 per share 18/10/2003 400,000 200,000 - -

to17/10/2012

- at $1.14 per share 3/6/2004 400,000 400,000 - -to

2/6/2013- at $1.29 per share 19/11/2004 400,000 400,000 - -

to18/11/2013

- at $1.35 per share 18/5/2005 - 400,000 - -to

17/5/2014- at $1.52 per share 23/11/2005 - 400,000 - -

to22/11/2014

Conditional award of - 0 to 600,000 - - -300,000 performance (Note 1) (Note 1)shares to be deliveredafter 2003Conditional award of - 0 to 800,000 0 to 800,000 - -400,000 performance (Note 2) (Note 2)shares to be deliveredafter 2004Conditional award of - 0 to 800,000 0 to 800,000 - -400,000 performance (Note 3) (Note 3)shares to be deliveredafter 2005


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

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Tan Kwi KinSembCorp Marine Conditional award of - 0 to 760,000 0 to 760,000 - -Ltd 380,000 performance (Note 2) (Note 2)

shares to be deliveredafter 2004Conditional award of - 0 to 760,000 0 to 760,000 - -380,000 performance (Note 3) (Note 3)shares to be deliveredafter 2005Conditional award of - - 0 to 760,000 - -380,000 performance (Note 4)shares to be deliveredafter 2006

SembCorp Ordinary shares - - 6,250 - -Industries Ltd of $0.25 each

Options to subscribefor ordinary sharesof $0.25 each- at $1.99 per share 27/6/2001 25,000 25,000 - -

to26/6/2010

- at $1.55 per share 20/4/2002 25,000 25,000 - -to

19/4/2011- at $1.59 per share 8/5/2003 12,500 12,500 - -

to7/5/2012

- at $0.98 per share 18/10/2003 12,500 6,250 - -to

17/10/2012- at $1.14 per share 3/6/2004 12,500 12,500 - -

to2/6/2013

- at $1.29 per share 19/11/2004 12,500 12,500 - -to

18/11/2013- at $1.35 per share 18/5/2005 - 12,500 - -

to17/5/2014

- at $1.52 per share 23/11/2005 - 12,500 - -to

22/11/2014





Wong Kok Siew (deceased)Singapore Food Options to subscribeIndustries Limited for ordinary shares

of $0.10 each- at $0.78 per share 9/8/2003 120,000 120,000 - -

to7/1/2005

Singapore Ordinary shares - 25,137 25,137 - -Technologies of $0.10 eachEngineering Ltd

Raffles Holdings Ordinary shares - 10,000 10,000 - -Limited of $0.32 each

Singapore Tele- Ordinary shares - 1,880 1,746 1,540 1,430communications Ltd of $0.15 each

Telechoice Ordinary shares - - 70,000 - -International Limited of $0.02 each

Tan Kwi KinSembCorp Marine Ordinary shares - 950,000 1,118,000 - -Ltd of $0.10 each


to7/9/2010

- at $0.66 per share 28/9/2002 800,000 800,000 - -to

27/9/2011- at $0.90 per share 8/11/2003 800,000 800,000 - -

to7/11/2012

- at $0.99 per share 9/8/2004 800,000 800,000 - -to

8/8/2013- at $1.04 per share 11/8/2005 - 700,000 - -

to10/8/2014

Conditional award of - 0 to 760,000 - - -380,000 performance (Note 1) (Note 1)shares to be deliveredafter 2003



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Tan Pheng HockSingapore - at $2.72 per share 20/2/2002 225,000 225,000 - -Technologies toEngineering Ltd 19/2/2011

- at $2.68 per share 11/8/2002 227,500 227,500 - -to

10/8/2011- at $2.29 per share 8/2/2003 175,000 175,000 - -

to7/2/2012

- at $1.92 per share 13/8/2003 175,000 175,000 - -to

12/8/2012- at $1.79 per share 7/2/2004 200,000 200,000 - -

to6/2/2013

- at $1.86 per share 12/8/2004 200,000 200,000 - -to

11/8/2013- at $2.09 per share 10/2/2005 - 200,000 - -

to9/2/2014

- at $2.12 per share 11/8/2005 - 200,000 - -to

10/8/2014

Conditional award of - 0 to 300,000 - - -150,000 performance (Note 1) (Note 1)shares to be deliveredafter 2003Conditional award of - 0 to 400,000 0 to 400,000 - -200,000 performance (Note 2) (Note 2)shares to be deliveredafter 2004Conditional award of - 0 to 500,000 0 to 500,000 - -250,000 performance (Note 3) (Note 3)shares to be deliveredafter 2005Conditional award of - - 0 to 500,000 - -250,000 performance (Note 4)shares to be deliveredafter 2006


Vertex Technology Ordinary shares - - - 5 units 5 unitsFund (II) Ltd of US$1.00 each




Tan Kwi KinSingapore Ordinary shares - 17,180 17,180 - -Technologies of $0.10 eachEngineering Ltd


Singapore Tele- Ordinary shares - 200 190 200 190communications Ltd of $0.15 each

StarHub Ltd Ordinary shares - - 10,000 - -of $0.40 each

Tan Pheng HockSembCorp Marine Options to subscribeLtd for ordinary shares


to27/9/2006

- at $0.90 per share 8/11/2003 40,000 40,000 - -to

7/11/2007- at $0.99 per share 9/8/2004 50,000 50,000 - -

to8/8/2008

- at $1.04 per share 11/8/2005 - 50,000 - -to

10/8/2009

Singapore Ordinary shares - 73,864 73,864 - -Technologies of $0.10 eachEngineering Ltd


to7/8/2008

- at $1.418 per share 10/2/2001 400,000 400,000 - -to

9/2/2009- at $2.00 per share 11/8/2001 5,000 5,000 - -

to10/8/2009

- at $2.26 per share 10/2/2002 400,000 400,000 - -to

9/2/2010



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Low Sin LengSembCorp Ordinary shares - 100,000 365,000 - -Industries Ltd of $0.25 each


t019/4/2011

- at $1.59 per share 8/5/2003 250,000 250,000 - -to

7/5/2012- at $0.98 per share 18/10/2003 250,000 125,000 - -

to17/10/2012

- at $1.14 per share 3/6/2004 200,000 150,000 - -to

2/6/2013- at $1.29 per share 19/11/2004 150,000 112,500 - -

to18/11/2013

- at $1.35 per share 18/5/2005 - 125,000 - -to

17/5/2014- at $1.52 per share 23/11/2005 - 125,000 - -

to22/11/2014

Conditional award of - 0 to 300,000 - - -150,000 performance (Note 1) (Note 1)shares to be deliveredafter 2003Conditional award of - 0 to 300,000 0 to 300,000 - -150,000 performance (Note 2) (Note 2)shares to be deliveredafter 2004Conditional award of - 0 to 300,000 0 to 300,000 - -150,000 performance (Note 3) (Note 3)shares to be deliveredafter 2005Conditional award of - - 0 to 200,000 - -100,000 performance (Note 4)shares to be deliveredafter 2006




Tan Pheng HockSingapore Tele- Ordinary shares - 2,020 1,880 1,740 1,620communications Ltd of $0.15 each

Chartered Ordinary shares - 7,000 7,000 - -Semiconductor of $0.26 eachManufacturing Ltd



Kiyotaka MatsuzawaSembCorp Marine Options to subscribeLtd for ordinary shares


to7/11/2007

- at $0.99 per share 9/8/2004 130,000 130,000 - -to

8/8/2008- at $1.04 per share 11/8/2005 - 100,000 - -

to10/8/2009

Low Sin LengSembCorp Marine Ordinary shares - 12,500 75,000 - -Ltd of $0.10 each


to27/9/2011

- at $0.90 per share 8/11/2003 50,000 25,000 - -to

7/11/2012- at $0.99 per share 9/8/2004 50,000 37,500 - -

to8/8/2008

- at $1.04 per share 11/8/2005 - 50,000 - -to

10/8/2009



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Tan Tew HanSembCorp Marine Options to subscribeLtd for ordinary shares


to8/8/2008

- at $1.04 per share 11/8/2005 - 150,000 - -to

10/8/2009

Singapore Ordinary shares - - - 4,000 4,000Technologies of $0.10 eachEngineering Ltd

Chartered Ordinary shares - 13,000 13,000 7,000 7,000Semiconductor of $0.26 eachManufacturing Ltd

CapitaLand Limited Ordinary shares - - - 4,000 4,000of $1.00 each

Singapore Airlines Ordinary shares - 17,000 17,000 3,000 3,000Ltd of $0.50 each


Singapore Airport Ordinary shares - - - 1,000 1,000Terminal Services Ltd of $0.10 each

SMRT Corporation Ordinary shares - 100,000 25,000 34,000 34,000Ltd of $0.10 each

Raffles Holdings Ordinary shares - - - 1,000 1,000Limited of $0.32 each

Neptune Orient Ordinary shares - 22,468 2,468 - -Lines Limited of $1.00 each

Ajaib HaridassSembCorp Marine Options to subscribeLtd for ordinary shares

of $0.10 each- at $1.04 per share 11/8/2005 - 130,000 - -

to10/8/2009

SembCorp Ordinary shares - 50,000 50,000 - -Industries Ltd of $0.25 each




Low Sin LengSembCorp Ordinary shares - - 45,000 - -Logistics Ltd of $0.25 each


to15/5/2011

- at $2.01 per share 28/2/2003 20,000 10,000 - -to

27/2/2012- at $1.50 per share 6/2/2004 20,000 15,000 - -

to5/2/2013

- at $1.97 per share 11/2/2005 - 20,000 - -to

10/2/2014


CapitaLand Ordinary shares - 2,000 2,000 - -Limited of $1.00 each

Singapore Options to subscribeComputer for ordinary sharesSystems Limited of $0.25 each

- at $1.55 per share 8/3/2003 5,000 5,000 - -to

7/3/2007- at $0.86 per share 22/2/2004 - 5,000 - -

to21/2/2008

- at $0.84 per share 30/4/2005 - 5,000 - -to

29/4/2009

Singapore Airlines Ordinary shares - 3,000 3,000 4,000 4,000Ltd of $0.50 each





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Heng Chiang GneeSembCorp Marine Conditional award of - 0 to 400,000 0 to 400,000 - -Ltd 200,000 performance (Note 3) (Note 3)

shares to be deliveredafter 2005Conditional award of - - 0 to 400,000 - -200,000 performance (Note 4)shares to be deliveredafter 2006

SembCorp Ordinary shares - - 8,500 12,715 12,715Industries Ltd of $0.25 each

Options to subscribe forordinary sharesof $0.25 each- at $1.99 per share 27/6/2001 12,000 12,000 - -

to26/6/2010

- at $1.55 per share 20/4/2002 12,000 12,000 - -to

19/4/2011- at $1.59 per share 8/5/2003 7,000 7,000 - -

to7/5/2012

- at $0.98 per share 18/10/2003 7,000 3,500 - -to

17/10/2012- at $1.14 per share 3/6/2004 10,000 7,500 - -

to2/6/2013

- at $1.29 per share 19/11/2004 10,000 7,500 - -to

18/11/2013- at $1.35 per share 18/5/2005 - 10,000 - -

to17/5/2014

- at $1.52 per share 23/11/2005 - 10,000 - -to

22/11/2014

SembCorp Ordinary shares - - - 10,000 10,000Logistics Ltd of $0.25 each


Chartered Ordinary shares - 5,000 5,000 - -Semiconductor of $0.26 eachManufacturing Ltd




Ajaib HaridassChartered Ordinary shares - - 10,000 10,000 10,000Semiconductor of $0.26 eachManufacturing Ltd

Singapore Tele- Ordinary shares - 200 190 200 190communications Ltd of $0.15 each

Haruo Kubota#

SembCorp Marine Options to subscribeLtd for ordinary shares

of $0.10 each- at $1.04 per share 11/8/2005 - 30,000 - -

to10/8/2009

Heng Chiang GneeSembCorp Marine Ordinary shares - 725,000 813,000 - -Ltd of $0.10 each


to7/9/2010

- at $0.66 per share 28/9/2002 375,000 375,000 - -to

27/9/2011- at $0.90 per share 8/11/2003 500,000 500,000 - -

to7/11/2012

- at $0.99 per share 9/8/2004 500,000 500,000 - -to

8/8/2013- at $1.04 per share 11/8/2005 - 400,000 - -

to10/8/2014

Conditional award of - 0 to 400,000 - - -200,000 performance (Note 1) (Note 1)shares to be deliveredafter 2003Conditional award of - 0 to 400,000 0 to 400,000 - -200,000 performance (Note 2) (Note 2)shares to be deliveredafter 2004



# At date of appointment of Director

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Directors’ contractual benefitsExcept as disclosed in Note 4 to the financial statements on the payment of professional fees to a firm in which Mr AjaibHaridass, a Director of the Company, is a member, since the end of the previous financial year, no Director of the Companyhas received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporationwith the Director, or with a firm of which the Director is a member, or with a company in which the Director has a substantialfinancial interest.

Share PlansThe Company’s Share Option Plan, Performance Share Plan and Restricted Stock Plan (collectively, the “Share Plans”) wereapproved and adopted by the shareholders at an Extraordinary General Meeting of the Company held on 31 May 2000.

The Executive Resource and Compensation Committee (the “Committee”) of the Company has been designated as theCommittee responsible for the administration of the Share Plans. The Committee comprises the following members, all ofwhom are directors:Wong Kok Siew (deceased) ChairmanTan Tew HanAjaib Haridass

The Share Option Plan is the incentive scheme for directors and employees of the Company and its subsidiaries (the “Group”)whereas the Performance Share Plan and Restricted Stock Plan are aimed primarily at key executives of the Group.

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

Under the rules of the Share Option Plan, participants who ceased to be employed by the Group, Parent Group or AssociatedCompany by reason of ill health, injury or disability, redundancy, retirement at or after the legal retirement age, retirementbefore the legal retirement age, death, etc, or any other event approved by the Committee, may be allowed by the Committeeto retain their unexercised Options. The Committee may determine the number of Shares comprised in that Option whichmay be exercised and the period during which such Option shall be exercisable, being a period not later than the expiry ofthe Exercise Period in respect of that Option. Such Option may be exercised at any time notwithstanding that the date ofexercise of such Option falls on a date prior to the first day of the Exercise Period in respect of such Option.

The Company designates SembCorp Industries Limited as the Parent Group.

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

Awards granted under the Performance Share Plan are released at the end of the performance period only when the pre-determined targets have been achieved. There are no vesting periods beyond the performance achievement periods.Awards granted under the Restricted Stock Plan vest only after satisfactory completion of time-based service conditions, orwhere the award is performance related, after a further period of service beyond the performance target completion date.No minimum vesting period is prescribed under the Restricted Plan and the length of the vesting period in respect of eachaward will be determined on a case-by-case basis. Performance-based restricted awards differ from awards granted underthe Performance Plan in that an extended vesting period is imposed beyond the performance target completion date.

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




Heng Chiang GneeRaffles Holdings Ordinary shares - 6,000 6,000 - -Limited of $0.32 each

Singapore Computer Ordinary shares - 3,000 3,000 - -Systems Limited of $0.25 each


Singapore Tele- Ordinary shares - 200 190 - -communications Ltd of $0.15 each

Neptune Orient Ordinary shares - - - 15,000 -Lines Limited of $1.00 each

Note 1: The actual number delivered will depend on the achievement of set targets over a 3 year period as indicated below. Achievementof target below 80% level will mean no performance shares will be delivered, while achievement up to 200% will mean up to twicethe number of conditional performance shares awarded could be delivered.

(a) Period from 2001 to 2003*(b) Period from 2002 to 2004(c) Period from 2003 to 2005(d) Period from 2004 to 2006

* For this period, 105,000 new SembCorp Industries shares were awarded to Wong Kok Siew (deceased) and the balance ofthe conditional awards has thus lapsed.

For this period, 167,200 new SembCorp Marine shares were awarded to Tan Kwi Kin and the balance of the conditionalawards has thus lapsed.

For this period, no new Singapore Technologies Engineering share was awarded to Tan Pheng Hock and the conditional awardhas thus lapsed.

For this period, 52,500 new SembCorp Industries shares were awarded to Low Sin Leng and the balance of the conditionalawards has thus lapsed.

For this period, 88,000 new SembCorp Marine shares were awarded to Heng Chiang Gnee and the balance of the conditionalawards has thus lapsed.

Note 2: 1,000,000 SembCorp Industries shares are comprised in conditional award of restricted stocks granted to Wong Kok Siew(deceased) pursuant to the SembCorp Industries Restricted Stock Plan subject to completion of the vesting period referred tobelow and Wong Kok Siew (deceased) continuing to be in the employment of the SembCorp Industries Group at the time of thevesting. Of the 1,000,000 SembCorp Industries Shares:

(i) 200,000 SembCorp Industries shares have been vested on 20 August 2002;(ii) 200,000 SembCorp Industries shares have been vested on 20 August 2003;(iii) 200,000 SembCorp Industries shares have been vested on 20 August 2004;(iv) 200,000 SembCorp Industries shares will vest on 20 August 2005; and(v) 200,000 SembCorp Industries shares will vest on 20 August 2006;

All share options and remaining restricted stocks are vested with effect from 16 February 2005 as approved by the ExecutiveResource and Compensation Committee.

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

There were no changes in the Directors’ interests in the Company between the end of the financial year and 21 January 2005.



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The fair values of options of the Company granted at the date of the grant are estimated using the Black-Scholes Option-pricing model are as follows:

Option period Number of shares Exercise price Fair value of options(both dates inclusive) options granted at date of grant

11 Aug 2005 to 10 Aug 2009 630,000 $1.04 $0.1111 Aug 2005 to 10 Aug 2014 15,538,000 $1.04 $0.11

The details of options of the Company granted during the year and granted/exercised since commencement of the Schemeto 31 December 2004 were as follows:

Options Aggregate Aggregate options Aggregate Aggregategranted during options cancelled/lapsed/ options options

Option participants the year granted not accepted exercised outstanding

Directors of the CompanyWong Kok Siew (deceased) 250,000 1,300,000 - (350,000) 950,000Tan Kwi Kin 700,000 4,900,000 - (1,050,000) 3,850,000Tan Pheng Hock 50,000 160,000 - - 160,000Kiyotaka Matsuzawa 100,000 330,000 - - 330,000Low Sin Leng 50,000 200,000 - (75,000) 125,000Tan Tew Han 150,000 225,000 - - 225,000Ajaib Haridass 130,000 130,000 - - 130,000Haruo Kubota 30,000 30,000 - - 30,000Heng Chiang Gnee 400,000 3,000,000 - (925,000) 2,075,000(alternate to Tan Kwi Kin)

Former directors - 1,120,000 - (820,000) 300,000of the Company

Other ExecutivesGroup 14,025,000 83,304,300 (6,949,400) (28,752,000) 47,602,900

Parent Group 153,000 883,000 (101,000) (229,250) 552,750

Non-executive director 130,000 670,000 - (247,500) 422,500of Parent Group

16,168,000 96,252,300 (7,050,400) (32,448,750) 56,753,150

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

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

Save as disclosed, there were no other unissued shares of the Company or its subsidiary companies under options as at theend of the financial year.


Other information regarding the Share Option Plan is as follows:(i) The exercise price of the options can be set at a discount to the market price not exceeding 20% of the market price

in respect of options granted at the time of grant.

(ii) The options can be exercised 12 months after the grant for market price options and 24 months for discountedoptions. Further vesting period for the exercise of the options may be set.

(iii) The options granted expire after 5 years for non-executive directors, associates employees and 10 years for theemployees of Group and parent Group.

SembCorp Marine Share Option PlanAt the end of the financial year, details of the options granted under the Option Plan on unissued shares of $0.10 each of theCompany are as follows:

SembCorp Marine LtdOrdinary shares of $0.10 each

1999 2000 2001 2002 2003 2004Options Options Options Options Options Options

Date options granted 10 Mar 1999 8 Sep 2000 27 Sep 2001 7 Nov 2002 8 Aug 2003 10 Aug 2004Option exercise period:From 10 Mar 2001 8 Sep 2001 28 Sep 2002 8 Nov 2003 9 Aug 2004 11 Aug 2005To 9 Mar 2004 7 Sep 2010 27 Sep 2011 7 Nov 2012 8 Aug 2013 10 Aug 2014Number of holders at 31 December 2004 - 469 833 1,003 1,025 1,149Exercise price per option $0.65 $0.70 $0.66 $0.90 $0.99 $1.04

’000 ’000 ’000 ’000 ’000 ’000Number of options outstanding:At 1 January 2004 404 8,523 10,218 15,199 15,450 -Options exercised (72) (3,003) (2,496) (1,608) (378) -Options granted - - - - - 16,168Options granted - - - - - (116) but not acceptedOptions cancelled (332) (89) (170) (406) (471) (68)

At 31 December 2004 - 5,431 7,552 13,185 14,601 15,984

Share Plans (cont’d)


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The total number of performance shares in awards granted conditionally and representing 100% of targets achieved, butnot released as at end 2004, was 1,740,000. Based on the multiplying factor, the actual release of the awards could rangefrom zero to a maximum of 3,480,000 performance shares.

In accordance with the accounting policy of the Group, during the current financial year, the Group has provided $420,000(2003: $831,000) in respect of performance shares based on the market values of the shares at reporting date.

SembCorp Marine Restricted Stock Plan

Under the Restricted Plan, awards granted vest only after the satisfactory completion of time-based service conditions orwhere the award is performance-related, after a further period of service beyond the performance target completion date(performance-based restricted awards). No minimum vesting period is prescribed under the Restricted Plan and the lengthof the vesting period in respect of each award will be determined on a case-by-case basis. Performance-based restrictedawards differ from awards granted under the Performance Plan in that an extended vesting period is imposed beyond theperformance target completion date.

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

No awards have been granted under the Restricted Plan during the year.

No participants, other than those disclosed under the directors’ interests in share options, received 5% or more of the totalnumber of options available.

Audit CommitteeThe Audit Committee comprises 3 independent non-executive directors, one of whom is also the Chairman of the Committee.The members of the Audit Committee at the date of this report are:Tan Tew Han ChairmanAjaib HaridassHaruo Kubota (appointed on 15 September 2004)

The Audit Committee has held 5 meetings since the last directors’ report. In performing its functions, the Audit Committeemet with the Company’s external and internal auditors to discuss the scope of their work, the results of their examinationand evaluation of the Company’s internal accounting control system.

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

The Audit Committee also reviewed the following:• assistance provided by the Company’s officers to the internal and external auditors;• financial statements of the Group and the Company prior to their submission to the directors of the Company for

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


Proforma financial effect under Financial Reporting Standards (“FRS”) 102 Shares Based Payment

Under FRS 102 Share Based Payment effective in 2005, fair value has to be determined for share options granted and willbe charged to profit and loss account beginning 1 January 2005. Strictly for information purposes only, the proformaconsolidated profit after taxation and minority interests and the earnings per share for 2004 would have been as follows hadthe Company and its subsidiary companies accounted for the fair value of the options granted under FRS 102.

2004$’000

Profit after taxation and minority interests:- As reported 95,002- Proforma 94,081

2004Cents

Earnings per share (in cents) :- As reported 6.68- Proforma 6.62

Diluted earnings per share (in cents) :- As reported 6.65- Proforma 6.59

These proforma amounts may not be representative of future disclosures as the estimated fair value of share options areonly determined in respect of options granted after 22 November 2002 (transitional provisions under FRS 102) and which isamortised over the vesting period.

SembCorp Marine Performance Share Plan

Under the Performance Share Plan, the awards granted conditional on performance targets are set based on medium-termcorporate objectives at the start of each rolling three-year performance qualifying period. The final number of shares givenwill depend on the level of achievement of those targets over the three-year performance period. A specific number ofperformance shares shall be released by the Committee to the recipient at the end of the performance period provided theminimum level of targets achieved is not less than 80% of the targets set.

Recipients who do not meet at least 80% of the targets set at the end of the performance period will not be granted theperformance shares. If the achievement of the targets exceeds 100%, more performance shares than the original awardcould be delivered up to a maximum of 200% of the original award.

During the year, a total of 255,200 performance shares was released by the Committee to the participants for the performanceperiod 2001 to 2003.

The details of performance shares of the Company awarded since commencement of the Performance Plan were as follows:

Conditional Aggregate Aggregate Aggregate AggregateShares Conditional Conditional Conditional Conditional

Performance Shares Awarded Shares Shares Shares SharesParticipants during the year Awarded Released Lapsed Outstanding

Director of the CompanyTan Kwi Kin 380,000 1,520,000 167,200 212,800 1,140,000Heng Chiang Gnee 200,000 800,000 88,000 112,000 600,000

580,000 2,320,000 255,200 324,800 1,740,000

SembCorp Marine Ltd (cont’d)


Sem

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131130

We, Tan Kwi Kin and Tan Tew Han, being two of the Directors of SembCorp Marine Ltd, do hereby state that, in the opinionof the Directors:

(i) the accompanying balance sheets, profit and loss accounts, statements of changes in equity of the Company andthe Group and consolidated cash flow statement together with notes thereto are drawn up so as to give a true andfair view of the state of affairs of the Company and of the Group as at 31 December 2004, and of the results of thebusiness, changes in equity of the Company and of the Group and cash flows of the Group for the year ended onthat date; and

(ii) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its debtsas and when they fall due.

On behalf of the Board,

TAN KWI KINPresident

TAN TEW HANDirector

Singapore18 February 2005

Statementby DirectorsSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

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

The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended tothe Board of Directors that the auditors, Ernst & Young, be nominated for re-appointment as auditors at the forthcomingAnnual General Meeting of the Company.

AuditorsErnst & Young have expressed their willingness to accept re-appointment as auditors.

On behalf of the Board,

TAN KWI KINPresident

TAN TEW HANDirector


Audit Commitee (cont’d)


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133132

Profit andLoss AccountsSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

for the year ended 31 December 2004

Note Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Turnover 3 1,362,764 1,067,986 22,621 20,060

Cost of sales (1,242,400) (963,082) (15,627) (14,856)

Gross profit 120,364 104,904 6,994 5,204

Other operating income 21,120 12,344 748 5,776

General and administrative expenses (47,631) (42,940) (7,088) (2,797)

Operating profit 4 93,853 74,308 654 8,183

Dividend and net interest income 5 9,944 11,600 76,482 86,402

Exceptional items 6 (3,066) 1,275 (13,216) 2,569

Share of results of associated companies and joint ventures 7 13,278 8,003 - -

Profit before taxation 114,009 95,186 63,920 97,154

Taxation 8 (15,990) (16,961) (9,406) (17,485)

Profit after taxation 98,019 78,225 54,514 79,669

Minority interests (3,017) 315 - -

Profit attributable to members of the Company 95,002 78,540 54,514 79,669

Earnings per share (cents) 9

Basic 6.68 5.55

Diluted 6.65 5.52

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

We have audited the accompanying financial statements of SembCorp Marine Ltd (the “Company”) and its subsidiarycompanies (the “Group”) set out on pages 133 to 179 for the year ended 31 December 2004. These financial statementsare the responsibility of the Company’s Directors. Our responsibility is to express an opinion on these financial statementsbased on our audit.

We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan andperform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well asevaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion,

(a) the consolidated financial statements of the Group and the profit and loss account, balance sheet and statements ofchanges in equity of the Company are properly drawn up in accordance with the provisions of the Companies Act,Cap. 50 (the “Act”) and Singapore Financial Reporting Standards so as to give a true and fair view of the state ofaffairs of the Company and of the Group as at 31 December 2004, the results and changes in equity of the Companyand of the Group and cash flows of the Group for the financial year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company and by the subsidiary companiesincorporated in Singapore, of which we are the auditors, have been properly kept in accordance with the provisionsof the Act.

ERNST & YOUNGCertified Public Accountants


Auditors’ Report to the Membersof SembCorp Marine LtdSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

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135134

BalanceSheetsSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

as at 31 December 2004


Total assets less current liabilities 1,207,673 993,942 984,586 832,440

Non-current liabilities

Borrowings 22 149,645 - 149,645 -

Deferred taxation 23 47,980 47,678 28,137 31,781

Hire purchase creditors 24 333 1,165 - -

Other provisions 25 7,005 3,226 2,895 -

Total non-current liabilities 204,963 52,069 180,677 31,781

1,002,710 941,873 803,909 800,659

Capital and reserves

Share capital 26 142,761 142,005 142,761 142,005

Reserves 27 826,139 785,122 661,148 658,654

968,900 927,127 803,909 800,659

Minority interests 33,810 14,746 - -

1,002,710 941,873 803,909 800,659


BalanceSheetsSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

as at 31 December 2004


Non-current assets

Fixed assets 10 460,020 452,720 176,449 178,693

Subsidiary companies 11 - - 490,852 350,499

Associated companies and joint venture 12 67,487 58,700 26,387 27,026

Other long term investments 13 23,853 71,776 19,227 67,965

Long term trade debtors 14 83,249 168,639 56,000 66,786

Goodwill on consolidation 15 3,352 3,615 - -

Deferred tax assets 23 1,470 - - -

Total non-current assets 639,431 755,450 768,915 690,969

Current assets

Stocks and work-in-progress 16 390,940 255,972 - -

Trade debtors 14 267,237 210,455 70,798 81,440

Other debtors 17 39,081 100,452 53,073 90,479

Asset held for sale 17(d) 53,192 - - -

Fixed deposits 18 361,164 152,753 70,893 1,336

Bank and cash balances 108,320 50,033 29,561 4,746

Total current assets 1,219,934 769,665 224,325 178,001

Current liabilities

Trade creditors 19 474,643 373,425 6,067 5,335

Other creditors and provisions 20 24,358 21,343 2,244 1,195

Progress billings in excess of work-in-progress 21 136,414 19,572 - -

Borrowings 22 - 101,029 - 30,000

Provision for taxation 16,277 15,804 343 -

Total current liabilities 651,692 531,173 8,654 36,530

Net current assets 568,242 238,492 215,671 141,471

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Statements ofChanges in EquitySEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES


Statements ofChanges in EquitySEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES


Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Issued capital - ordinary shares (1)

Balance at 1 January

1,420,051,880 (2003: 1,414,322,980) shares 142,005 141,432 142,005 141,432 of $0.10 each

Issue of 7,555,750 (2003: 5,729,400) shares 756 573 756 573 of $0.10 each upon exercise of share options

Balance at 31 December

1,427,607,630 (2003: 1,420,051,880) shares 142,761 142,005 142,761 142,005 of $0.10 each

Revenue reserve

Balance at 1 January 548,381 541,527 419,744 411,916

Profit for the year 95,002 78,540 54,514 79,669

Dividends on ordinary shares Note 28(b) (56,881) (71,841) (56,881) (71,841)

Transfer from other capital reserve upon - 155 - - redemption of redeemable convertible loan stock

Balance at 31 December 586,502 548,381 417,377 419,744

Foreign currency translation reserve

Balance at 1 January (2,566) 4,595 - -

Realisation upon disposal of joint venture - (5,310) - -

Translation differences for the year (1,851) (1,851) - -

Balance at 31 December (4,417) (2,566) - -

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Share premium account

Balance at 1 January 237,950 234,471 237,950 234,471

Premium on shares issued on 4,861 3,479 4,861 3,479 exercise of share options


Asset revaluation reserve

Balance at 1 January and 31 December 960 960 960 960

Other capital reserves

Balance at 1 January 397 17,023 - -

Transfer to the profit and loss account upon - (16,471) - - disposal of other long term investment

Write off by an associated company (114) - - -

Transfer to revenue reserve upon redemption - (155) - - of redeemable convertible loan stock

Balance at 31 December 283 397 - -

Total shareholders’ equity 968,900 927,127 803,909 800,659

Net change in equity from non-owner (1,965) (1,851) - -

sources excluding net profits

(1) The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinaryshares carry one vote per share without restriction.


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Consolidated Statementof Cash FlowsSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES


2004 2003$’000 $’000

Net increase in cash and cash equivalents 321,077 39,227Cash and cash equivalents at beginning of year 148,407 109,180

Cash and cash equivalents at end of year (Note 31) 469,484 148,407

The acquisitions of the following subsidiary companies have been shown as a single item:

Name of subsidiary companies Effective interest acquired Effective dates

Jurong Clavon Pte Ltd and its subsidiary companies 5% 1 January 2004PPL Shipyard Pte Ltd and its subsidiary companies 35% 1 July 2003

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

subsidiary companies2004 2003$’000 $’000

Fixed assets 4,976 8,881Other long term investment 1 3,700Stocks and work-in-progress 7,450 34,260Debtors 18,454 26,227Bank and cash balances 456 11,267Bank overdrafts, unsecured (722) (1,174)Bank loans - (7,652)Creditors (22,861) (40,398)Current taxation (310) (642)Deferred taxation (102) (335)

Net assets acquired 7,342 34,134Minority interests (3,304) (5,120)Amount taken up as associated company (3,671) (17,067)Goodwill on acquisition 27 2,753

Purchase consideration paid 394 14,700

The acquisition subsidiary companies, net of cash is represented by:2004 2003

$’000 $’000

Cash paid (394) (14,700)Less: Bank and cash balances acquired 456 11,267Add: Bank overdrafts, unsecured acquired (722) (1,174)

Net cash outflow (660) (4,607)



2004 2003$’000 $’000

Cash flow from operating activitiesOperating profit 93,853 74,308Adjustments for:Gain on disposal of fixed assets (7,681) (4,735)Amortisation of goodwill on consolidation of subsidiary companies - 1,260Amortisation of redeemable convertible loan stock discount - 91Amortisation of borrowing costs 20 -Goodwill on consolidation written-off 292 -Depreciation of fixed assets 37,499 33,945Fixed assets written-off 12 7

Operating income before reinvestment in working capital 123,995 104,876(Increase)/decrease in stocks and work-in-progress (10,676) 24,686Decrease in debtors 74,344 4,936Increase in asset held for sale (53,192) -Increase/(decrease) in creditors 85,927 (51,420)

Cash generated from operations 220,398 83,078Investment and interest income received 13,565 13,865Income taxes paid (14,034) (34,695)Interest paid (1,655) (2,654)

Net cash provided by operating activities 218,274 59,594

Cash flow from investing activitiesAcquisition of subsidiary companies (660) (4,607)Investment in associated company and joint venture (1,309) (250)Purchase of fixed assets (88,552) (32,627)Purchase of other long term investments (14,314) (1,641)Capital refund from associated companies - 510Dividends from associated companies 5,185 3,440Proceeds from disposal of fixed assets 57,572 471Proceeds from disposal of associated companies and joint venture 21,443 7,349Proceeds from sale of other long term investments 59,302 11,290Proceed from repayment of bond principal 720 -

Net cash provided by/(used in) investing activities 39,387 (16,065)

Cash flow from financing activitiesDividends paid- by the Company (56,881) (71,841)- to minority shareholders (402) (241)Proceeds on issue of new shares- by the Company 5,617 4,052- to minority shareholders 13,508 -(Repayment of)/additional short term bank loan (101,029) 65,577Proceeds from issue of medium term note 149,625 -Repayment to hire purchase creditors (1,401) (729)Fixed deposit pledged discharged/(pledged) with a bank for banking facilities 54,379 (1,120)

Net cash provided by/(used in) financing activities 63,416 (4,302)

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The effect of the acquisitions of subsidiary companies on the financial position of the Group at 31 December and its resultsfor the year is shown below:

2004 2003$’000 $’000

Contribution to the Group for the period:

Turnover 1,614 80,192

Profit/(loss) before taxation 2,122 (7,381)

Goodwill written off/amortisation (29) (276)

Profit/(loss) before taxation 2,093 (7,657)

Taxation (486) 888

Profit/(loss) after taxation 1,607 (6,769)

Minority interests (736) 974

871 (5,795)

Total assets at 31 December 29,694 78,519

Total liabilities at 31 December 21,655 50,931


1. GeneralThe Company is a limited liability company incorporated in the Republic of Singapore. Its immediate holding companyis SembCorp Industries Ltd and the ultimate holding company is Temasek Holdings (Private) Limited. Both holdingcompanies are incorporated in the Republic of Singapore. Related companies and related parties in these financialstatements refers to subsidiary and associated companies of SembCorp Industries Ltd and Temasek Holdings(Private) Limited respectively.

The registered office and principal place of business of the Company is located at 29 Tanjong Kling Road,Singapore 628054.

The principal activities of the Company are provision of management services and investment holding. The principalactivities of subsidiary companies and associated companies are stated in Note 37. There have been no significantchanges in the nature of these activities of the Company and its subsidiary companies during the year.

2. Significant accounting policies(a) Basis of preparation of financial statements

The financial statements are presented in Singapore dollars. The financial statements have been prepared inaccordance with Singapore Financial Reporting Standards (“FRS”) as required by the Companies Act.

The financial statements have been prepared under the historical cost basis modified by the revaluation ofcertain fixed assets. The accounting policies have been consistently applied with those used in the previous year,except for the change in accounting policy outlined in paragraph (e) below.

(b) Principles of consolidationThe accounting year of the Company and all its subsidiary companies ends on 31 December and the consolidatedfinancial statements incorporate the financial statements of the Company and all its subsidiary companies afterthe elimination of all material intercompany transactions. The equity and net profit attributable to majorityshareholders’ interests are shown separately in the consolidated balance sheet and consolidated profit and lossaccount, respectively. The results of subsidiary companies acquired or disposed of during the year are includedin or excluded from the Group results from the respective dates of acquisition or disposal, as applicable.

Goodwill arising on acquisition which represents the excess of the cost of acquisition over the fair value of theGroup’s share of the identifiable net assets acquired is accounted on the basis outlined in paragraph (e) below.

The consolidated financial statements are prepared using uniform accounting policies for like transactions andother events in similar circumstances.

Assets, liabilities and results of the overseas subsidiary companies are translated into Singapore dollars on thebasis outlined in paragraph (s) below.

(c) Subsidiary companiesShares in subsidiary companies are stated at cost and allowance is made for impairment in value. Dividendincome is accrued on the basis of dividends declared.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The costof an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilitiesincurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Any excess of thecost of acquisition over the fair values of the identifiable net assets acquired is recognised as goodwill. Anydeficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount onacquisition) is credited to profit and loss in the period of acquisition. The interest of minority shareholders isstated at the minority’s proportion of the fair values of the assets and liabilities recognized. Subsequently, anylosses applicable to the minority interest in excess of the minority interest are allocated against the interests ofthe parent.

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Notes to theFinancial StatementsSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

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The effects of the early adoption of FRS 103 are as follows:a. there is no restatement to the Group’s opening revenue reserve as at 1 January 2004, as there is no

adjustment for previously recognised negative goodwill;b. elimination of a potential goodwill amortisation of $4,494,000 in the financial year 2004 Group Profit &

Loss Account, offset byc. goodwill written off of subsidiary companies amounting to $292,000.

GoodwillGoodwill arising on acquisition represents the excess of the cost of acquisition over the fair value of the Group’sshare of the identifiable assets and liabilities acquired. Goodwill on acquisitions of subsidiary companies is includedin intangible assets. Goodwill on acquisition of associated companies is included in investments in associatedcompanies.

Goodwill is stated at cost and allowance is made for impairment in value.

Negative GoodwillNegative goodwill arising on acquisition represents the excess of the net fair value of the Group’s share of theidentifiable net assets acquired over the cost of acquisition.

The early adoption of FRS 103 requires that if at the acquisition date, the Group’s interest in the net fair value ofthose items acquired exceeds the cost of acquisition, the identification and measurement of the acquiree’sidentifiable assets, liabilities and contingent liabilities and the measurement of the cost of acquisition are reassessed.Any excess remaining after the reassessment are recognised by the Group in the profit and loss account.

Previously before the adoption of FRS 103, to the extent that negative goodwill relates to an expectation of futurelosses and expenses, that are identified in the plan of acquisition and can be measured reliably, but which havenot yet been recognised, it is recognised in the profit and loss account when the future losses and expenses arerecognised. Any remaining negative goodwill, but not exceeding the fair values of the non-monetary assetsacquired, is recognised in the profit and loss account over the weighted average useful life of those assets thatare depreciable or amortisable. Negative goodwill in excess of the fair values of the non-monetary assets acquiredis recognised immediately in the profit and loss account.

(f) Revenue recognitionRevenue from ship and rig repair, building and conversion are recognised on the percentage of completionmethod in proportion to the stage of completion, provided the work is at least 20% completed and the outcomeof the contract can be reliably estimated. The percentage of completion is measured by reference to the percentageof costs incurred to-date to the estimated total costs for each contract, with due consideration made to includeonly those costs that reflect works performed.

Income on goods sold and other services rendered is recognised on completion of delivery. Charter hire incomeis taken to the profit and loss account on an accrual basis over the charter hire period.

(g) Fixed assetsFixed assets are stated at cost or valuation less accumulated depreciation. The cost of an asset comprises itspurchase price and any directly attributable costs of bringing the asset to working condition for its intended use.Expenditure for additions, improvements and renewals are capitalised and expenditure for maintenance andrepairs are charged to the profit and loss account. When assets are sold or retired, their cost and accumulateddepreciation are removed from the financial statements and any gain or loss resulting from their disposal isincluded in the profit and loss account.

Where fixed assets are revalued, any surplus on revaluation is credited to the asset revaluation reserve. A decreasein net carrying amount arising on revaluation of fixed assets is charged to the profit and loss account to theextent that it exceeds any surplus held in reserve relating to previous revaluation of the same class of assets.

(d) Associated companies and joint venturesAn associated company is defined as a company, not being a subsidiary company, in which the Group has a longterm interest of not less than 20% nor more than 50% of the equity and in whose financial and operating policydecisions the Group exercises significant influence.

A joint venture, not being a subsidiary or associated company, is one in which the Group has a long term interestand contractual arrangement whereby parties in the joint venture undertake an economic activity whose operationaland financial affairs are subject to the joint control of the Group and the contractual parties.

The Group’s share of the results of associated companies and joint ventures that are jointly controlled entities areincluded in the consolidated profit and loss account under the equity method. The Group’s share of post-acquisitionreserves of associated companies and joint ventures that are jointly controlled entities are included in the investmentsin associated companies and joint ventures, respectively, in the consolidated balance sheet. Where the auditedfinancial statements are not available, the share of results is arrived at from unaudited management financialstatements made up mainly to the end of the accounting year to 31 December. Goodwill arising on acquisitionwhich represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiablenet assets acquired is accounted on the basis outlined in paragraph (e) below.

When the Group’s share of losses exceeds the carrying amount of the investment, the investment is reported atnil value and recognition of losses is discontinued except to the extent of the Group’s commitments.

For joint ventures that involves jointly controlled operations or assets, the proportionate share in these jointventures’ individual income, expenses, assets and liabilities are included in financial statements of the Group withitems of a similar nature on a line by line basis.

Shares in associated companies and joint ventures are stated in the Company’s balance sheet at cost andallowance is made for impairment in value.

Dividend income is accrued on the basis of dividends declared.

(e) Goodwill on ConsolidationOn 1 July 2004, the Council on Corporate Disclosure and Governance issued Financial Reporting Standard(“FRS”) 103 Business Combinations, revised FRS 36 Impairment of Assets and revised FRS 38 Intangible Assets.Accordingly, FRS 22 Business Combinations was withdrawn.

These standards are to be applied to the accounting for business combinations for annual periods beginning onor after 1 July 2004. However, early adoption of these standards is permitted and must be applied prospectivelyfrom the same date.

The Group has decided to early adopt FRS 103, revised FRS 36 and revised FRS 38. The standards are appliedon a prospective basis effective 1 January 2004.

The early adoption of FRS 103 has not resulted in any prior year adjustments. The carrying value of goodwillbrought forward from the previous year are accounted for as costs and tested for impairment annually.

The early adoption of FRS 103, revised FRS 36 and revised FRS 38 resulted in a change in the accountingtreatment for goodwill. FRS 103 requires goodwill acquired in a business combination to be measured at costless any accumulated impairment losses. Goodwill shall no longer be amortised, instead, impairment is testedannually, or more frequently if events or changes in circumstances indicate that the goodwill might be impaired.The replaced FRS 22 required acquired goodwill to be systematically amortised over its useful life, and includeda rebuttable presumption that its useful life could not exceed twenty years from initial recognition.

2. Significant accounting policies (cont’d)

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(n) Employee benefitsDefined contribution planThe Group’s companies in Singapore make contributions to the state pension scheme, the Central ProvidentFund, as required by Singapore law. Contributions to this fund are recognised as compensation expense in thesame period as the employment that gives rise to the contribution.

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

Employee Stock OptionThe Group has an employee share incentive plan for the granting of non-transferable share options. Nocompensation cost or obligations are recognised. When the options are exercised, equity is increased by theamount of the proceeds received.

Retirement gratuityRetirement benefits payable to certain categories of employees upon their retirement are provided for in thefinancial statements based on their entitlement under the staff benefit plan or, in respect of unionised employeeswho joined on or before 31 December 1988, based on an agreement with the Union.

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

Performance share planAn initial estimate is made for the cost of compensation under the Group’s performance share plan based on thenumber of shares expected to be awarded at the end of the performance period, valued at market price at thedate of the grant of the award. The cost is charged to the profit and loss account on a basis that fairly reflects themanner in which the benefits will accrue to the employee under the plan over the service period to which theperformance criteria relate.

At each reporting date, the compensation cost is remeasured based on the latest estimate of the number ofshares that will be awarded considering the performance criteria and the market price of the shares at thereporting date. Any increase or decrease in compensation cost over the previous estimate is recorded in theprofit and loss account for that reporting period.

The final measure of compensation cost is based on the number of shares ultimately awarded and the marketprice at the date the performance criteria are met.

Restricted stock planAn initial estimate is made for the cost of compensation under the Group’s restricted stock plan based on thenumbers of shares expected to be awarded upon satisfactory completion of time-based service condition,valued at market price at the date of the grant of the award. The cost is charged to the profit and loss account ona basis that fairly reflects the manner in which the benefits will accrue to the employee under the plan over theservice period to which the performance criteria relate.

At each reporting date, the compensation cost for remaining shares to be released under the restricted stockplan in remeasured based on the market price of shares at the reporting date. Any increase or decrease incompensation cost over the previous estimate is recorded in the profit and loss account for that reporting period.

(h) DepreciationDepreciation is calculated on the straight-line method to write off the cost or valuation of fixed assets over theirestimated useful lives. No depreciation is provided on freehold land. The estimated useful lives of fixed assets areas follows:Freehold and leasehold buildings 45 years or remaining period of leaseQuays and dry docks 60 years or remaining period of leasePlant, machinery and tools 3 to 10 yearsMotor vessels, launches, cranes and floating docks 3 to 20 yearsMotor vehicles 3 to 5 yearsFurniture and office equipment 3 to 5 yearsUtilities and fittings 30 yearsComputer equipment 1 to 5 years

Fully depreciated assets are retained in the financial statements until they are no longer in use and no furthercharge for depreciation is made in respect of these assets.

(i) InvestmentsInvestments held on a long-term basis are stated at average cost. Provision is made for impairment in value.

Dividend income is recognised in the profit and loss account upon actual receipt. Interest income is accrued onthe day-to-day basis.

(j) Stocks and work-in-progressStocks consist mainly of steel and other materials used for ship and rig repair, building and conversion and arestated at the lower of cost and net realisable value. Cost is principally determined on the weighted averagemethod. Allowance is made for all deteriorated, obsolete and slow-moving items.

Work-in-progress comprises mainly uncompleted ship and rig repair, building and conversion jobs. It is stated atthe lower of cost and net realisable value. Cost includes materials, direct labour, sub-contractors’ costs andappropriate allocation of fixed and variable production overheads. Allowance is made for anticipated losses, ifany, on work-in-progress when the possibility of loss is ascertained.

(k) Trade and other debtorsTrade and other debtors, including related companies and related parties, on normal trade terms, are recognisedand carried at original invoiced amount less an allowance for any uncollectible amounts. An estimate for doubtfuldebts is made when collection of the full amount is no longer probable. Bad debts are written off as incurred.

(l) Trade and other creditorsLiabilities for trade and other creditors, including related companies and related parties, on normal trade terms,are carried at cost which is the fair value of the consideration to be paid in the future of goods and servicesreceived, whether or not billed to the Group.

(m) Finance leases and hire purchase assetsFinance leases are those leasing agreements including hire purchases that give rights approximating to ownership.Assets financed under such leases are treated as if they had been purchased outright at the present value of theminimum lease payments during the periods of leases and the corresponding leasing commitments are shownas obligations to the lessor. Depreciation of the relevant assets is provided for as in paragraph (h) above. Leasepayments are treated as consisting of capital and interest elements and the interest is amortised on the reducingbalance basis over each lease term and charged to the profit and loss account.


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(r) Deferred taxationDeferred taxation is provided, using the liability method, on all temporary differences at the balance sheet datebetween the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.Deferred tax assets and liabilities are measured using the tax rates expected to apply to taxable income in theyears on which those temporary differences are expected to be recovered or settled based on the tax ratesenacted or substantively enacted at the balance sheet date.

Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in subsidiarycompanies, associated companies and joint ventures, except where the timing of reversal of the temporarydifference can be controlled and it is probable that the temporary differences will not reverse in the foreseeablefuture.

Deferred tax assets are recognised for all deductible temporary differences, carry- forward of unused tax assetsand unused tax losses, to the extent that it is probable that taxable profit will be available against which thedeductible temporary differences, carry-forward of unused tax assets and unused tax losses can be utilised.

Current tax and deferred tax are charged or credited directly to equity if the tax relates to items that are creditedor charged, in the same or different period, directly to equity.

(s) Foreign currenciesForeign currency transactions are recorded in Singapore dollars at rates of exchange approximating those rulingat transaction dates. Foreign currency monetary assets and liabilities are translated at rates ruling at the balancesheet date. All exchange differences are dealt with in the profit and loss account.

For inclusion in the consolidated financial statements, all assets and liabilities of the foreign subsidiary companies,associated companies and joint ventures are translated into Singapore dollars at the exchange rates ruling at thebalance sheet date and the results of foreign subsidiary companies, associated companies and joint venturesare translated into Singapore dollars at the average exchange rates. Exchange differences due to such currencytranslations are included in the foreign currency translation reserve.

(t) Cash and cash equivalentsCash and cash equivalents consist of cash at bank and in hand and fixed deposits less bank overdrafts butexclude secured fixed deposits and bank overdrafts which are used for financing activities.

(u) Derivative financial instrumentsDerivative financial instruments are used to manage exposure to foreign exchange risks arising from operational,financing and investment activities. Derivative financial instruments are not used for trading purposes. Gains andlosses from forward exchange contracts used to hedge anticipated future currency transactions are deferreduntil the forecasted transaction occurs. Where the hedged item is a recognised asset or liability, it is translated atthe contracted forward rates.

(o) BorrowingsInterest bearing loansInterest bearing loans are initially recognised at cost and subsequently measured at amortised cost using theeffective interest rate method. The difference between net proceeds and redemption value being recognised inthe profit and loss account in the period over the life of the borrowings.

Redeemable convertible loan stockThe components of the loan stock are split using the incremental method, where the value of the equity componentis the difference between the total proceeds at the date of issue and the present value of a similar liabilityinstrument without conversion right.

The equity component of the loan is included in the redeemable convertible loan stock reserve. The financialcomponent is initially recognised at fair value and subsequently at amortised cost. Amortised cost is calculatedby taking into account the discounts on settlement. The discount is amortised over the life of the redeemableconvertible loan stock and charged directly to the profit and loss account.

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

(q) ImpairmentThe carrying amounts of the Group’s assets, other than stocks and work-in-progress, are reviewed at eachbalance sheet date to determine whether there is any indication of impairment. If any such indication exists, theasset’s recoverable amount is estimated.

An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceedsits recoverable amount. All impairment losses are recognised in the profit and loss account.

Calculation of recoverable amountThe recoverable amount is the greater of the asset’s net selling price and value in use. In assessing value in use,the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflectscurrent market assessments of the time value of money and the risks specific to the asset. For an asset that doesnot generate cash inflows largely independent of those from other assets, the recoverable amount is determinedfor the cash-generating unit to which the asset belongs.

Reversal of impairment lossAn impairment loss is reversed if there has been a change in the estimates used to determine the recoverableamount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed thecarrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss hadbeen recognised. A reversal of an impairment loss in respect of land and buildings carried at revalued amount isrecognised in the same way as a revaluation increase. All other reversals of impairment are recognised in theprofit and loss account.

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


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5. Dividend & net interest incomeGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Gross dividend:Unquoted subsidiary companies - - 62,615 78,495Unquoted associated companies - - 7,490 533Quoted equity shares 408 7 408 7Unquoted equity shares 712 90 648 90

1,120 97 71,161 79,125

Interest income:Subsidiary company - - 1,026 -Related parties 2,568 2,740 2,251 2,405Unquoted bonds 2,989 4,346 2,989 4,346Trade debtors 2,632 4,738 737 940Fixed deposits 2,915 1,972 182 44Loan to related companies 233 104 - -Others 309 266 59 138

11,646 14,166 7,244 7,873

Interest expense:Redeemable convertible loan stock - (1,760) - -Subsidiary companies - - (28) (189)Related company (20) (19) - -Bank borrowings (2,802) (884) (1,895) (407)

(2,822) (2,663) (1,923) (596)

9,944 11,600 76,482 86,402

6. Exceptional itemsGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Gain/(loss) on disposal of:Joint venture company, Note (a) 3,444 1,951 - -Long term equity investments, Note (a) 1,990 337 1,990 1,744Long term unquoted bond (5,000) - (5,000) -

434 2,288 (3,010) 1,744

Impairment lossFixed assets, Note (b) (3,500) (2,113) - -Subsidiary company - - (9,866) -

(3,500) (2,113) (9,866) -

3. TurnoverTurnover represents sales from the various activities described in Note 1 and Note 37, including the revenue recognisedon contracts relating to the ship and rig repair, building and conversion which are at least 20% completed.

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Services renderedShip & rig repair, building 1,315,086 1,016,839 - - and conversionShip chartering 12,798 19,618 - -Rental income - - 16,369 15,499Management fee - - 6,252 4,561Others 10,789 6,483 - -

Sale of goods 24,091 25,046 - -

1,362,764 1,067,986 22,621 20,060

4. Operating profitOperating profit is stated after charging/(crediting):

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Directors’ remuneration -Directors of the Company 1,497 1,390 1,497 1,390Other directors of subsidiary companies 3,417 2,129 - -

Directors’ fee -Directors of the Company 337 332 337 332Other directors of subsidiary companies 17 17 - -

Professional fees paid to a firm in whicha Director is a member 116 10 67 10

Foreign currency exchange loss/(gain) 1,822 3,342 2,642 (1,077)Gain on disposal of fixed assets (7,681) (4,735) (26) (4,625)Rental expenses 21,515 19,353 6,998 7,200Auditors’ remuneration -

Auditors of the CompanyStatutory audit 475 464 72 73Other services 52 31 40 27

Other auditors of subsidiary companiesStatutory audit 36 52 - -

As at 31 December 2003, the Group and Company had 5,722 and 18 (2003: 5,469 and 14) employees respectively.Staff costs, which include Directors’ remuneration for the year, amounted to $182,477,000 (2003: $166,470,000)and $4,865,000 (2003: $3,565,000) for the Group and Company, respectively. Central Provident Fund contributionswhich amounted to $9,407,000 (2003: $8,843,000) and $54,000 (2003: $79,000) for the Group and Company,respectively, were included as part of staff costs for the year.

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8. TaxationGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

In respect of profit for the year:Current taxation 15,338 15,569 12,595 19,637Deferred taxation 3,200 4,814 (755) (200)

18,538 20,383 11,840 19,437

(Over)/under provision in respect of prior years:

Current taxation 273 (3,022) 455 (1,732)Deferred taxation (4,473) (246) (2,889) (220)

(4,200) (3,268) (2,434) (1,952)

Share of taxation of associated companies and joint venture 1,652 (154) - -

15,990 16,961 9,406 17,485

The Group and the Company have exempt profits amounting to approximately $132,134,000 (2003: $127,800,000)and $29,368,000 (2003: 26,200,000), respectively. Of this amount, $96,411,000 (2003: $106,700,000) for theGroup has been agreed with the Comptroller of Income Tax.

As at 31 December 2004, certain subsidiary companies have unutilised tax losses of $71,754,000 (2003: $60,886,000)and capital allowances of $6,670,000 (2003: $16,283,000), available for set-off against future taxable income subjectto the provisions of the Income Tax Act and agreement by the Comptroller of Income Tax.

The unutilised tax losses and capital allowance in a subsidiary company amounting $52,827,000 (2003: $40,818,000)will expire between 2004 to 2009 (2003: 2003 to 2008).

The amounts of tax losses and capital allowances previously carried forward at the beginning of the year and whichhave been utilised in the year to arrive at the computation of tax liabilities for the year are not significant.

6. Exceptional items (cont’d)

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Write-back/(provision) for impairment in value of:

Other long term equity investments - 1,391 - 1,391Other long term non-equity investments - (291) - (201)Loan to an associated company - - (340) (365)

- 1,100 (340) 825

(3,066) 1,275 (13,216) 2,569

(a) Gain on disposal is stated after consideration of realisation of other capital reserves and foreign currency translationreserve as follows:

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Foreign currency translation reserveJoint venture company - 5,310 - -

Other capital reserveOther long term equity investments - 16,471 - -

(b) Due to the continued difficult operating environment in Karimun, the impairment loss for fixed assets in the “Ship andrig repair, building and conversion” business segment of $3.5 million (2003: $2 million) represents the write-down ofcertain fixed assets to their recoverable amount. The recoverable amount was determined based on the value-in-use at the cash generating unit level. In determining the value-in-use at the cash generating unit level, the cashflowswere discounted at rate of 6% per annum on a pre-tax basis.

7. Share of results of associated companies and joint venturesGroup

2004 2003$’000 $’000

Share of net profit for the year 13,278 11,111Amortisation of goodwill on acquisition of an associated company - (3,108)

13,278 8,003

Share of taxation (1,652) 154

11,626 8,157

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10. Fixed assetsDocks,quays,

launches,Land and Building cranes and Plant,

Short term Construction- marine machineryGroup Freehold leasehold in-progress vessels and tools Others Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000

Cost or valuationBalance at 1 January 2004At cost 4,387 132,061 1,258 455,351 183,922 34,660 811,639At valuation - - - 25,152 - - 25,152

4,387 132,061 1,258 480,503 183,922 34,660 836,791

Currency re-alignment (136) - - - (12) (19) (167)Additions 5 3,997 63,328 7,227 11,660 2,335 88,552Acquisition of subsidiary companies 137 3,091 - 79 9,080 612 12,999Reclassifications - (3,361) - 19,101 (19,904) 4,164 -Transfers - 1,469 (2,018) - 549 - -Disposals - - - (54,750) (966) (927) (56,643)Write-off - - - (2,130) (196) (436) (2,762)

At 31 December 2004 4,393 137,257 62,568 450,030 184,133 40,389 878,770

Balance at 31 December 2004At cost 4,393 137,257 62,568 424,878 184,133 40,389 853,618At valuation - - - 25,152 - - 25,152

4,393 137,257 62,568 450,030 184,133 40,389 878,770

Accumulated depreciation/ impairment lossAt 1 January 2004 467 57,058 - 171,828 123,523 31,195 384,071Currency re-alignment (14) - - - (12) (19) (45)Charge for the year 74 3,756 - 16,829 14,076 2,764 37,499Acquisition of subsidiary companies - 703 - 8 6,816 496 8,023Reclassifications (44) (443) - 12,399 (14,203) 2,291 -Disposals - - - (9,761) (934) (853) (11,548)Write-off - - - (2,130) (186) (434) (2,750)Impairment loss - 1,350 - 1,202 931 17 3,500

At 31 December 2004 483 62,424 - 190,375 130,011 35,457 418,750

Charge for 2003 85 3,163 - 15,698 12,147 2,852 33,945

Net book valueAt 31 December 2004 3,910 74,833 62,568 259,655 54,122 4,932 460,020

At 31 December 2003 3,920 75,003 1,258 308,675 60,399 3,465 452,720

8. Taxation (cont’d)

A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax ratefor the years ended 31 December was as follows:

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Tax at 20% (2003: 22%) 20,146 19,180 12,784 21,374Exempt income, capital gains and tax incentives (4,636) (3,884) (3,708) (2,252)Effect of different tax rate in foreign jurisdiction 1,382 241 - -Effect on tax losses utilised (425) (445) - -Non deducible expenses 1,939 1,268 2,803 315Effect on changes in tax rates (4,345) - (2,889) -Under/(over) provision in respect of prior years 145 (3,268) 455 (1,952)Deferred tax assets not recognised 44 3,905 - -Others 88 118 (39) -

Effective tax 14,338 17,115 9,406 17,485

Share of taxation of associated companies and joint venture 1,652 (154) - -

15,990 16,961 9,406 17,485

9. Earnings per share(a) Basic earnings per share (“EPS”) is calculated by dividing the profit attributable to shareholders after deducting

minority interests of $95,002,000 (2003: $78,540,000) by the weighted average number of ordinary shares inissue during the year of 1,421,361,495 (2003: 1,415,768,518).

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

Group2004 2003

Weighted average number of ordinary shares in issue during the year 1,421,361,495 1,415,768,518Effects of dilutive share options 6,561,000 7,034,000

Weighted average number of ordinary shares outstanding used in the 1,427,922,495 1,422,802,518 calculation of diluted EPS

(c) The basic and diluted EPS are as follows:Group

2004 2003Cents Cents

Basic EPS 6.68 5.55Diluted EPS 6.65 5.52

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11. Subsidiary companiesCompany

2004 2003$’000 $’000

Unquoted shares, at cost 267,919 267,325Allowance for impairment in value (15,251) (5,385)

252,668 261,940

Loans to subsidiary companies 238,184 88,559

490,852 350,499

Allowance for impairment in value of a subsidiary companyBalance at 1 January 5,385 5,385Charge for the year 9,866 -

Balance at 31 December 15,251 5,385

The loans to subsidiary companies are unsecured, interest free and is not expected to be repaid within the nexttwelve months.

The Company’s subsidiary companies are set out in Note 37.

12. Associated companies and joint venture

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Associated companiesUnquoted shares, at cost 20,592 19,491 18,331 18,531Share of net post-acquisition profits 20,580 22,254 - -Goodwill on acquisition, Note (a) 6,214 6,214 - -

47,386 47,959 18,331 18,531

Loans and advances to associated companies, Note (b) 10,630 10,630 8,056 8,495

58,016 58,589 26,387 27,026

Joint ventureUnquoted shares, at cost 250 250 - -Share of net post-acquisition reserves 931 (139) - -

1,181 111 - -

Loans and advances to joint venture company, Note (c) 8,290 - - -

9,471 111 - -

67,487 58,700 26,387 27,026

10. Fixed assets (cont’d)

Docks,quays,

launches,Land and Building cranes and Plant,

Short term marine machineryCompany Freehold leasehold vessels and tools Others Total

$’000 $’000 $’000 $’000 $’000 $’000

Cost or valuationBalance at 1 January 2004At cost 1,553 43,984 177,883 4,023 677 228,120At valuation - - 25,152 - - 25,152

1,553 43,984 203,035 4,023 677 253,272Additions - 2,195 900 - 57 3,152Reclassifications - (3,342) - 3,342 - -

At 31 December 2004 1,553 42,837 203,935 7,365 734 256,424

Balance at 31 December 2004At cost 1,553 42,837 178,783 7,365 734 231,272At valuation - - 25,152 - - 25,152

1,553 42,837 203,935 7,365 734 256,424

Accumulated depreciationAt 1 January 2004 132 17,734 53,795 2,359 559 74,579Charge for the year 35 1,012 3,435 858 56 5,396Reclassifications - (446) - 446 - -

At 31 December 2004 167 18,300 57,230 3,663 615 79,975

Charge for 2003 44 965 3,382 133 45 4,569

Net book valueAt 31 December 2004 1,386 24,537 146,705 3,702 119 176,449

At 31 December 2003 1,421 26,250 149,240 1,664 118 178,693

(a) Docks and quays are stated at Directors’ valuation of 1973 of $25,152,000 with subsequent additions stated at cost. Ifthe following re-valued assets of the Group and Company have been included in the financial statements at cost lessaccumulated depreciation, the net written down value would have been:

Group and Company2004 2003$’000 $’000

Docks and quays 6,493 6,741

The re-valued net book value of docks and quays is $10,973,000 (2003: $11,392,000).

(b) Net book value of fixed assets acquired under hire purchase agreements as at balance sheet date amounted to $1,873,000(2003: $2,954,000) in respect of the Group only.

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

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13. Other long term investments

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Quoted equity securities, Note (a) 16,547 4,483 15,749 4,483Unquoted bonds, at cost, Note (b) - 60,000 - 60,000Unquoted equity securities, at cost, Note (c) 6,872 6,855 3,109 3,109Unquoted non-equity securities, Note (d) 247 247 247 247Club memberships, Note (e) 187 191 122 126

23,853 71,776 19,227 67,965

Market value of club memberships 187 191 122 126

Market value of quoted securities 46,604 8,409 45,796 8,409

(a) Quoted equity securities are stated at cost and after deducting allowance for impairment in value analysed asfollows:

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Balance at 1 January - 1,391 - 1,391Write-back for the year - (1,391) - (1,391)

Balance at 31 December - - - -

(b) In 2003, the Group held unquoted bonds which expire in 2009. The bonds’ effective interest rate is 7.25% perannum up to February 2004, and from March 2004 to 2009, 7.50% per annum.

The unquoted bonds was disposed during the year.

(c) Included in unquoted equity securities is investment in unquoted Class B redeemable preference shares of SabineIndustries Inc., a former joint venture held by a subsidiary company. These shares have no voting rights and areredeemable on demand. The holders are entitled to receive quarterly cumulative dividends at the rate of 12% (2003:12%) per annum. On redemption, the preference shares will be converted into a promissory note that will bearinterest at 6% (2003: 6%) per annum.

(d) The indicative fair value of the unquoted non-equity securities at 31 December 2004 was $335,000 (2003: $338,000).Unquoted non-equity securities are stated at cost and after deducting allowance for impairment in value of $1,753,000(2003: $1,753,000) analysed as follows:

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Balance at 1 January and 31 December 1,753 1,753 1,753 1,753

12. Associated companies and joint venture (con’t)

(a) Goodwill on acquisitionGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

CostBalance at 1 January and 31 December 15,982 15,982 - -

Accumulated amortisationBalance at 1 January 9,768 6,660 - -Charge for the year - 3,108 - -

Balance at 31 December 9,768 9,768 - -

Net book value 6,214 6,214 - -

(b) Loans and advances to associated companies

Loans and advances to associated companies are stated after deducting provision for impairment in value of$2,574,000 (2003: $2,134,000).

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Balance at 1 January - - 2,134 1,769Charge for the year - - 440 365

Balance at 31 December - - 2,574 2,134

The loans and advances to associated companies are unsecured, interest free and is not expected to be repaidwithin the next twelve months.

The Group’s associated companies are set out in Note 37.

The Group’s share of results and balance sheet of the joint venture are as follows:

Group2004 2003$’000 $’000

Results of the joint ventures:Revenue 1,878 5,897Expenses (808) (5,824)

Profit before taxation 1,070 73

Balance sheet of the joint venture:Non-current assets 8,363 1,325Current assets 1,817 382Current liabilities (886) (1,596)Non-current liabilities (8,113) -

Net assets 1,181 111

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With the exception of $4,177,000 (2003: $4,597,000) and $2,305,000 (2003 : $4,597,000) respectively for theGroup and Company, all the debts due from external parties are interest-bearing with interest rates for the Groupand the Company ranging from 2.4% to 6% (2003: 2.4% to 6%) per annum and 4.375% to 6% (2003: 4.375%to 6%) respectively.

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

(c) Lease receivablesRelated companies 5,390 5,169 4,271 4,094External parties - 190 - -

Total under “Current assets”, Note (a) 5,390 5,359 4,271 4,094

Related companies under 51,437 56,827 46,060 50,331 “Long term trade debtors”, Note (b)

Under the terms of the lease agreements, no contingent rents are recognised. Interest rates for the Group and theCompany ranged from 4% to 4.25% (2003: 4% to 18%) per annum and 4% (2003: 4%) per annum respectively.These lease receivables relate to the leases of marine vessels which the lessees have the option to purchase themarine vessels during the term of the leases. Additional information on lease receivables are set out in paragraph (d).

(d) Additional information on lease receivables:

Minimum Estimated Total gross Unearned Present valueGroup lease residual investment interest of minimum2004 payment value in lease income lease payment

$’000 $’000 $’000 $’000 $’000

Receivable within 1 year 7,686 - 7,686 (2,296) 5,390Receivable after 1 year but within 5 years 28,030 3,000 31,030 (6,632) 24,398Receivable after 5 years 25,313 4,500 29,813 (2,774) 27,039

61,029 7,500 68,529 (11,702) 56,827

2003Receivable within 1 year 7,887 - 7,887 (2,528) 5,359Receivable after 1 year but within 5 years 29,389 3,000 32,389 (7,663) 24,726Receivable after 5 years 31,642 4,500 36,142 (4,041) 32,101

68,918 7,500 76,418 (14,232) 62,186

Company2004Receivable within 1 year 6,328 - 6,328 (2,057) 4,271Receivable after 1 year but within 5 years 25,313 - 25,313 (6,292) 19,021Receivable after 5 years 25,313 4,500 29,813 (2,774) 27,039

56,954 4,500 61,454 (11,123) 50,331

2003Receivable within 1 year 6,328 - 6,328 (2,234) 4,094Receivable after 1 year but within 5 years 25,313 - 25,313 (7,083) 18,230Receivable after 5 years 31,642 4,500 36,142 (4,041) 32,101

63,283 4,500 67,783 (13,358) 54,425

13. Other long term investments (cont’d)

(e) Club memberships are stated at cost and after deducting provision for impairment in value of $653,000 (2003:$649,000) for the Group and $468,000 (2003: $464,000) for the Company analysed as follows:

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Balance at 1 January 649 358 464 263Charge for the year 4 291 4 201

Balance at 31 December 653 649 468 464

14. Trade debtorsGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Trade debtors under “Current assets”, Note (a) 276,011 221,891 71,449 82,091Less: Allowance for doubtful debts (8,774) (11,436) (651) (651)

267,237 210,455 70,798 81,440

Long term trade debtors, Note (b) 83,249 168,639 56,000 66,786

350,486 379,094 126,798 148,226

(a) Current assetsAssociated companies 428 7,138 9 -Related companies 11,271 6,724 202 -Related parties 444 979 - -Subsidiary companies - - 59,948 70,820Joint venture company - 724 - -External parties 258,478 200,967 7,019 7,177Lease receivables, Note (c) 5,390 5,359 4,271 4,094

276,011 221,891 71,449 82,091

Allowance for external party doubtful debtsBalance at 1 January 11,436 16,421 651 6,413Write-back for the year (1,415) (1,811) - (2,681)Bad debts written off (1,247) (3,177) - (3,081)Acquisition of subsidiary company - 3 - -

8,774 11,436 651 651

Bad debts written off directly to profit and loss account 415 72 - -

(b) Long term trade debtorsExternal parties 31,812 111,812 9,940 16,455Lease receivables from related companies, Note (c) 51,437 56,827 46,060 50,331

83,249 168,639 56,000 66,786

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Group2004 2003$’000 $’000

(b) Work-in-progressCosts and attributable profits less allowance for foreseeable losses 1,453,779 931,034Less: Progress billings (1,128,548) (692,862)

325,231 238,172

(c) Analysis of allowance for foreseeable losses:Balance at 1 January 282 300Charge to profit and loss account - 282Amount written off - (300)

Balance at 31 December 282 282

17. Other debtorsGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Deposits and recoverables, Note (a) 22,569 51,635 1,108 3,300Non-trade receivables, Note (b) 10,649 42,671 51,913 87,160Prepayments 2,320 2,630 23 -Staff loans, Note (c) 3,543 3,516 29 19

39,081 100,452 53,073 90,479

(a) Deposits and recoverableCash collateral - 3,710 - -GST refundable 15,063 6,087 - -Interest receivable - 799 - 357Recoverable amount 4,311 36,797 216 585Tax recoverable 118 1,529 - 1,410Sundry deposits 3,077 2,713 892 948

22,569 51,635 1,108 3,300

In 2003, the cash collateral pertains to deposits placed with certain insurance companies to obtain performancebonds for construction contracts and bears interest of 0.86% per annum.

In 2003, recoverable amount for the Group includes $31,704,000 in respect of financing provided to a vessel repaired.It carried an interest rate at 4% per annum and this receivable together with the trade receivable of $20,933,000 issecured by the first legal mortgage over the vessel repaired. During the year, these balances were reclassified as“Asset held for Sale’, see Note (d) below.

Recoverable amount for the Group also includes $821,000 (2003: $1,093,000) which bears interest of 4% to 8%(2003: 1.02% to 4%) per annum.

15. Goodwill on consolidationGroup

2004 2003$’000 $’000

CostAt 1 January 5,998 3,245Additions 27 2,753Amount written off (465) -

At 31 December 5,560 5,998

Accumulated amortisation/impairmentAt 1 January 2,383 1,123Charge for the year - 1,260Amount written off (175) -

At 31 December 2,208 2,383

Net book valueAt 31 December 3,352 3,615

Amortisation and impairment of goodwill on consolidation are included in the line “General and administrative expenses”on the profit and loss account.

16. Stocks and work-in-progressGroup

2004 2003$’000 $’000

Cost

Materials, Note (a) 59,189 15,918Finished goods, Note (a) 6,520 1,882Work-in-progress, Note (b) 325,231 238,172

390,940 255,972

(a) Stocks at cost are stated after deducting allowancefor stock obsolescence of:

Materials 705 745Finished goods 167 150

872 895

Analysis of allowance for obsolete stocks:Balance at 1 January 895 746Charge to profit and loss account 108 192Stocks written off (131) (43)

Balance at 31 December 872 895

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20. Other creditors and provisionsGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Accrual for unconsumed leave 5,272 4,566 169 150Deposits received 519 512 26 31GST payables 2,138 1,070 5 92Hire purchase creditors (Note 24) 1,365 1,230 - -Non-trade payables, Note (a) 12,248 10,021 860 922Provisions for warranty, Note (b) 1,632 3,944 - -Interest payable 1,184 - 1,184 -

24,358 21,343 2,244 1,195

(a) Non-trade payablesAssociated companies 183 779 33 33Subsidiary companies - - 1 1Related company 3,504 1,501 - -External parties 8,561 7,741 826 888

12,248 10,021 860 922

With the exception of unsecured interest bearing amounts owing to a related company of $3,504,000(2003: $1,501,000) with interest ranging from 1.29% to 1.37% (2003: 0.4375% to 0.65%) per annum, the othernon-trade amounts payable to the associated and subsidiary companies and related parties are unsecured andinterest free. All amounts are payable on demand.

Group2004 2003$’000 $’000

(b) Provision for warrantyBalance at 1 January 3,944 4,996Writeback to profit and loss account (2,312) (333)Amounts utilised - (719)

Balance at 31 December 1,632 3,944

21. Progress billings in excess of work-in-progressGroup

2004 2003$’000 $’000

Costs and attributable profits 213,983 20,695Less: Progress billings (350,397) (40,267)

Progress billings in excess of work-in-progress (136,414) (19,572)

17. Other debtors (cont’d)

(b) Non-trade receivablesGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Associated companies 1 939 - 938Joint venture - 1,164 - -Related company 10,648 17,773 - -Subsidiary companies - - 51,913 81,426External partiessale of fixed asset - 4,796 - 4,796- sale of a joint venture - 17,999 - -

10,649 42,671 51,913 87,160

All amounts are repayable on demand.

All amounts due from associated and subsidiary companies and joint venture are unsecured and interest-free andcomprise mainly advances and payments on behalf.

The related company balances are interest bearing unsecured fixed deposits which bear interest ranging from 0.22%to 2.405% (2003: 0.335% to 1.03%) per annum. Advances to and payments on behalf of subsidiary companies areunsecured and also interest-free.

The amount due from external party on the sale of a joint venture is repayable in three instalments and will be fullyrepaid by 31 December 2004.

(c) Staff loans bear interest at 3.00% (2003: 3.00%) per annum.

(d) Asset held for saleThe asset held for sale is a vessel which was acquired in June 2004 when the Company exercised its rights asmortgagee to take possession of asset when the owners defaulted on their payment under financing termgranted in respect of the vessel’s repairs. The legal title of this vessel was transferred to a subsidiary companyupon the possession of this vessel.

18. Fixed depositsIn 2003, included in the fixed deposit balances are fixed deposits of $54,379,000 pledged with a bank for bankingfacilities of a subsidiary company. During the year, the pledge on the fixed deposits has been removed.

19. Trade creditorsGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Associated companies 3,032 10,920 - -Immediate holding company 34 995 - 900Related companies 5,930 5,405 145 145Related parties 1,741 823 - -Subsidiary companies - - 21 33External parties 463,906 355,282 5,901 4,257

474,643 373,425 6,067 5,335

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23. Deferred taxationGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Balance at 1 January 47,678 42,775 31,781 32,201(Write-back)/charge for the year (1,270) 4,568 (3,644) (420)Acquisition of subsidiary company 102 335 - -


Deferred taxation recognised arises as a result of:Group Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Deferred tax liabilitiesDifferences in depreciation 48,197 47,584 28,137 31,781Other deferred tax liabilities 4,218 2,741 - -

52,415 50,325 28,137 31,781

Deferred tax assetsAllowance for doubtful debts (803) (1,142) - -Unutilised tax losses, capital allowance and investment allowance likely to be utilised (4,226) (702) - -Employee benefits (775) (710) - -Other deferred tax assets (101) (93) - -

(5,905) (2,647) - -

46,510 47,678 28,137 31,781

Analysed into:Deferred tax asset (1,470) - - -Deferred tax liability 47,980 47,678 28,137 31,781

46,510 47,678 28,137 31,781

Deferred taxation not recognised as a result of:Group

2004 2003$’000 $’000

Deferred tax (assets)/liabilitiesDifferences in depreciation - 263Doubtful debts (1,046) (1,087)Unutilised tax losses, capital allowance and investment allowance likely to be utilised (16,812) (17,002)Other deferred tax liabilities - 7

(17,858) (17,819)

Deferred tax assets have not been recognised because it is not probable that future taxable profit will be availableagainst which the subsidiary companies can utilise the benefit therefrom.

22. BorrowingsGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Non-current LiabilitiesMedium term notes, unsecured, due after 1 year but within 5 years, Note (a) 149,645 - 149,645 -

Current LiabilitiesBank loans, unsecured, Note (b) - 101,029 - 30,000

Total borrowings 149,645 101,029 149,645 30,000

(a) During the year, the Company established a $500,000,000 Multicurrency Multi-issuer Debt Issurance Programme(the “MTN”) pursuant to which the Company, together with its subsidiaries Jurong Shipyard Pte Ltd and SembawangShipyard Pte Ltd (“Issuing Subsidiary Companies”), may from time to time issue the Notes (as defined below). Theobligations of Issuing Subsidiary Companies under the Notes will be fully guaranteed by the Company.

Under the MTN, the Company or any of the Issuing Subsidiary Companies may from time to time issue notes inseries or tranches in Singapore dollars and/or any other currency.

The terms for the 1st series of $150,000,000 5-year fixed rate notes issued by the Company on 27 September2004, is redeemable at par on 26 September 2009 and bears fixed interest rate of 3.0% per annum and is listedon the Singapore Exchange Securities Trading Limited and will be cleared through the Central Depository(Pte) Ltd.

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

MTN borrowings 150,000 - 150,000 -Capitalised issue expenses (355) - (355) -

Net borrowings 149,645 - 149,645 -

Capitalised issue expensesAmount paid 375 - 375 -Amortised during the year (20) - (20) -

355 - 355 -

(b) In 2003, the details of the unsecured bank loan were as follows:(i) Unsecured bank loan of the Company for $30,000,000 is repayable on 21 January 2004 and bears interest

of 0.98% per annum.

(ii) Unsecured bank loans of a subsidiary company totalling $50,000,000 comprise four loans of $15,000,000,$5,000,000, $5,000,000 and $25,000,000 repayable on 9 January 2004, 15 January 2004, 29 January2004 and 29 January 2004 respectively and bear interest ranging from 0.91% to 0.98% per annum.

The unsecured bank loans of a subsidiary company totalling $8,000,000 comprise three loans of $5,000,000,$1,000,000 and $2,000,000 repayable on 9 January 2004, 9 January 2004 and 16 January 2004 respectivelyand bear interest ranging from 1.58% to 1.62% per annum.

(iii) The unsecured bank loan of a subsidiary company totalling USD7,625,000 is repayable on 30 January 2004and bears interest of 1.519% per annum.

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26. Share capitalGroup and Company

2004 2003$’000 $’000

Authorised:5,000,000,000 ordinary shares of $0.10 each 500,000 500,000

Issued and fully paid up ordinary shares:Balance at 1 January

1,420,051,880 (2003: 1,414,322,480) shares of $0.10 each 142,005 141,432

Issued during the yearExercise of share options of 7,555,750 (2003: 5,729,400) shares of $0.10 each 756 573

Balance at 31 December1,427,607,630 (2003: 1,420,051,880) shares of $0.10 each 142,761 142,005

During the year, other than the issue of new shares upon the exercise of share options under the SembCorp MarineShare Option Plan (the “Plan”) there was no other issue of new shares.

Share options were granted in 2004 (the “2004 Options”) pursuant to the Plan in respect of 16,168,000 unissuedordinary shares of $0.10 each to 1,146 full time executives of the Group, 9 Directors of the Company and 21executives and one non-executive director of the immediate holding company, SembCorp Industries Ltd, who arenot substantial shareholders of the Company. In respect of options granted to executives and non-executive directorof the immediate holding company, a total of 283,000 options were granted during the financial year, making it a totalof 1,553,000 options granted to those executives and non-executive director from the commencement of the Planto the end of the financial year. The 2004 Options are exercisable from 11 August 2005 to 10 August 2014(11 August 2005 to 10 August 2009 for non-executive Directors of the Company) and the exercise price is $1.04 pershare for cash.

24. Hire purchase creditorsPresent value

Minimum Unearned of minimumGroup lease payment interest income lease payment2004 $’000 $’000 $’000

Payable after 1 year but within 5 years 370 (37) 333Payable within 1 year, under “Other creditors and provisions” (Note 20) 1,438 (73) 1,365

1,808 (110) 1,698

2003Payable after 1 year but within 5 years 1,216 (51) 1,165Payable within 1 year, under “Other creditors and provisions” (Note 20) 1,338 (108) 1,230

2,554 (159) 2,395

The hire purchase agreements do not contain any escalation clauses and do not provide for contingent rents. Theimplicit interest rates range from 4.99% to 6.81% (2003: 4.42% to 6.81%) per annum. The net book value of assetsacquired under hire purchase agreements is disclosed in Note 10. Lease terms do not contain restrictions concerningdividend, additional debt or further leasing.

25. Other provisionsGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Provision for retirement gratuities, Note (a) 3,110 3,226 - -Provision for restoration, Note (b) 3,895 - 2,895 -

7,005 3,226 2,895 -

(a) Provision for retirement gratuitiesBalance at 1 January 3,226 3,296 - -Utilised during the year (116) (70) - -

Balance at 31 December3,110 3,226 - -

(b) Provision for restoration of fixed assetsProvision made during the year and balance at 31 December 3,895 - 2,895 -

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28. Dividends(a) The proposed net dividend of $68,525,000 for 2004 (2003: $39,814,000) comprises:

Group and Company2004 2003$’000 $’000

A final dividend of 1.0 cent per share less tax of 20% (2003: 1.0 cent per share less tax of 20%) 11,421 11,375A final special dividend of 5.0 cents per share less tax of 20% (2003: 2.5 cents per share less tax of 20%) 57,104 28,439

68,525 39,814

(b) Dividend paidInterim dividend of 0.75 cents per share less tax of 20% (2003: 0.75 cents per share less tax of 22%) 8,534 8,292Interim special dividend of 0.75 cents per share less tax of 20% (2003: 0.75 cents per share less tax of 22%) 8,533 8,2922003 final dividend of 1.0 cent per share less tax of 20% (2003: 2002 final dividend of 1.0 cent per share less tax of 22%) 11,375 11,0512003 final special dividend of 2.5 cents per share less tax of 20% (2003: 2002 final special dividend of 4.0 cents per share less tax of 22%) 28,439 44,206

56,881 71,841

29. Contingent liabilitiesGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Bankers’ guarantees:- secured by fixed deposits - 54,379 - -- unsecured - 115,879 - -Unsecured guarantees given to others in respect of:- subsidiary companies - - 2,572,978 991,160

30. CommitmentsAt year end, future commitments of the Group are as follows:

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

(a) Approved capital commitment:Amounts approved by Directors but not committed 2,889 154,924 - 153,810Amounts approved and committed 172,580 - 170,080 -

175,469 154,924 170,080 153,810

26. Share capital (cont’d)

The options granted, exercised and cancelled under the Plan during the year and the options outstanding at the end of theyear are as follows:

1999 2000 2001 2002 2003 2004Options Options Options Options Options Options

Date options granted 10 Mar 1999 8 Sep 2000 27 Sep 2001 7 Nov 2002 8 Aug 2003 10 Aug 2004Option exercise period:

From 10 Mar 2001 8 Sep 2001 28 Sep 2002 8 Nov 2003 9 Aug 2004 11 Aug 2005To 9 Mar 2004 7 Sep 2010 27 Sep 2011 7 Nov 2012 8 Aug 2013 10 Aug 2014

Number of holders at 31 December 2004 - 469 833 1,003 1,025 1,149Exercise price per option $0.65 $0.70 $0.66 $0.90 $0.99 $1.04

’000 ’000 ’000 ’000 ’000 ’000

Number of options outstanding:At 1 January 2004 404 8,523 10,218 15,199 15,450 -Options exercised (72) (3,003) (2,496) (1,608) (378) -Options granted - - - - - 16,168Options granted but not accepted - - - - - (116)Options cancelled (332) (89) (170) (406) (471) (68)

At 31 December 2004 - 5,431 7,552 13,185 14,601 15,984

27. ReservesGroup Company

2004 2003 2004 2003$’000 $’000 $’000 $’000

Revenue reserve 586,502 548,381 417,377 419,744Share premium account 242,811 237,950 242,811 237,950Foreign currency translation reserve (4,417) (2,566) - -Asset revaluation reserve 960 960 960 960Other capital reserves 283 397 - -

826,139 785,122 661,148 658,654

Made up of:Distributable 586,502 548,381 417,377 419,744Non-distributable 239,637 236,741 243,771 238,910

826,139 785,122 661,148 658,654

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32. Significant related party transactionsSignificant transactions during the year between the Group and its related parties on terms as agreed between therespective parties and which are not otherwise disclosed in these financial statements consist of:

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Related partiesSale of debt securities 54,280 - 54,280 -

Immediate holding companyManagement fee payable 1,000 900 1,000 900

Related companiesSales 20,397 14,446 - -Purchases 28,604 24,689 - -Rental payable 8,000 8,350 - -

Joint venture and associated companiesSales 1,614 63,240 - -Purchases 190,172 25,147 - -

33. Information by segment on Group operationsBusiness segmentsThe Group has 3 main business segments that are organised and managed separately according to their respectivebusiness activities. The 3 business segments are ship and rig repair, building and conversion, ship chartering andothers. The activities of these business segments are described in Note 1 and Note 37.

Segment accounting policies are the same as the policies described in Note 2 with inter-segment sales and transferscarried out on an arm’s length basis. Segment assets consist primarily of fixed assets, current assets and excludeinterest-bearing assets, inter-segment balances and tax assets. Segment liabilities comprise mainly of operatingliabilities and exclude interest-bearing liabilities, inter-segment balances and tax liabilities.

(a) By business segmentShip & rig repair,

building and Shipconversion chartering Others Eliminations Total

$’000 $’000 $’000 $’000 $’0002004RevenueSales to external parties 1,315,086 12,798 34,880 - 1,362,764Inter-segment sales 230,873 178 140,497 (371,548) -

Consolidated sales1,545,959 12,976 175,377 (371,548) 1,362,764

ResultsSegment results 74,439 12,745 6,669 - 93,853Exceptional items (3,066) - - - (3,066)Investment and interest income 12,285 467 14 - 12,766Interest expenses (2,822) - - - (2,822)Share of results of associated companies & joint ventures 13,113 2,157 (1,992) - 13,278

Profit before taxation 93,949 15,369 4,691 - 114,009Taxation (14,859) (34) (1,097) - (15,990)

Profit after taxation 79,090 15,335 3,594 - 98,019

30. Commitments (cont’d)

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

(b) Foreign currency exchange contracts:Bought contracts 75,962 1,808 - -Sold contracts 294,159 102,908 - -

As at 31 December 2004, the Group had entered into foreign currency forward exchange buy contracts amountingto $75,962,000 (2003: $1,808,000) and foreign currency forward exchange sell contracts amounting to$294,159,000 (2003: $102,908,000). The fair value adjustments of the buy contracts and sell contracts (whichis the difference between the notional principal amounts and market value of the contracts) resulted a net loss of$905,000 (2003: gain of $1,310,000) which was not adjusted in the financial statements.

(c) Minimum lease rental payable to JTC Corporation and a related company in respect of land and buildings:

Group Company2004 2003 2004 2003$’000 $’000 $’000 $’000

Within 1 year 18,768 17,607 7,040 6,637After 1 year but within 5 years 74,098 91,229 38,830 54,057After 5 years 24,766 25,115 5,394 12,618

117,632 133,951 51,264 73,312

The leases do not contain escalation clauses and do not provide for contingent rents. Lease terms do notcontain restrictions on the Group activities concerning dividends, additional debt or further leasing.

Certain leases include renewal options for additional lease period of 10 to 15 years and at rental rates based onprevailing market rates.

31. Cash and cash equivalentsCash and cash equivalents included in the consolidated statement of cash flows comprise:

Group2004 2003$’000 $’000

Fixed deposits, bank and cash balances 469,484 202,786Less: Fixed deposits pledged with a bank for banking facilities of a subsidiary company - (54,379)

469,484 148,407

Fixed deposits placed with financial institutions have maturity periods ranging from 1 day to 39 months(2003: 1 days to 51 months) from the financial year-end. Interest rate of fixed deposits range from 0.25% to 5.12%(2003: 0.25% to 3.9%) per annum, which are also the effective interest rates.

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Ship & rig repair,building and Shipconversion chartering Others Eliminations Total

$’000 $’000 $’000 $’000 $’000

Other segment assets 916,191 54,211 36,452 - 1,006,854Interest-bearing assets 439,831 14,167 4,034 - 458,032Investment in associated companies & joint venture 53,830 580 4,290 - 58,700Tax recoverable 1,411 - 118 - 1,529

Total segment assets 1,411,263 68,958 44,894 - 1,525,115

Other segment liabilities 401,675 3,136 10,024 - 414,835Interest-bearing liabilities 104,925 - - - 104,925Deferred taxation 46,349 136 1,193 - 47,678Provision for taxation 15,036 57 711 - 15,804

Total segment liabilities 567,985 3,329 11,928 - 583,242

(b) By geographical areaThe Group operates in 10 (2003: 10) countries and principally in the Republic of Singapore. Pricing of inter-segment sales and transfers are carried out on an arm’s length basis.

34. Directors’ remunerationThe remuneration of Directors of the Company fell within the following ranges:

2004 2003

$500,000 and above 2 2$250,000 to $499,999 - -Below $250,000 8 10

10 12

The Directors’ remuneration of the Company included an amount of $63,000 (2003: $307,000) relating to taxablebenefit arising from the exercise of share options during the year. This amount has not been charged to the profit andloss account.

35. Financial risk management objectives and policiesThe main risks arising from the Group’s financial instruments are interest rate risk, foreign currency risk, liquidity riskand credit risk. The Board of Directors reviews and agrees policies for managing each of these risks and they aresummarised below:

Credit riskThe Group has no significant concentration of credit risk with any single counter party and monitors its exposure tocredit risks arising from sales to customers on an on-going basis where credit evaluations are done on customersthat require credit. The Group only deals with pre-approved counterparties with good credit rating and imposes acap on the amount to be transacted with any counterparty so as to reduce its concentration of risk.

The carrying amounts of investments, trade and other debtors and cash and cash equivalents represent the Group’smaximum exposure to credit risk.

33. Information by segment on Group operations (cont’d)

Ship & rig repair,building and Shipconversion chartering Others Eliminations Total

$’000 $’000 $’000 $’000 $’000

2004Other informationCapital additions 87,402 - 1,150 - 88,552Depreciation 34,589 1,685 1,225 - 37,499Amortisation 20 - - - 20

Other segment assets 1,228,684 4,838 38,095 - 1,271,617Interest-bearing assets 498,791 10,449 9,433 - 518,673Investment in associated companies & joint venture 55,653 9,625 2,209 - 67,487Deferred tax asset 1,463 - 7 - 1,470Tax recoverable - - 118 - 118

Total segment assets 1,784,591 24,912 49,862 - 1,859,365

Other segment liabilities 617,178 2,262 18,035 - 637,475Interest-bearing liabilities 154,923 - - - 154,923Deferred taxation 46,405 93 1,482 - 47,980Provision for taxation 15,028 114 1,135 - 16,277

Total segment liabilities 833,534 2,469 20,652 - 856,655

2003RevenueSales to external parties 1,016,839 19,618 31,529 - 1,067,986Inter-segment sales 174,377 23 41,388 (215,788) -

Consolidated sales 1,191,216 19,641 72,917 (215,788) 1,067,986

ResultsSegment results 68,143 2,567 3,598 - 74,308Exceptional items 1,478 - (203) - 1,275Investment and interest income 13,438 815 10 - 14,263Interest expenses (826) - (1,837) - (2,663)Share of results of associated companies & joint ventures 6,174 2,344 (515) - 8,003

Profit before taxation 88,407 5,726 1,053 - 95,186Taxation (17,518) (172) 729 - (16,961)

Profit after taxation 70,889 5,554 1,782 - 78,225

Other informationCapital additions 32,494 1 132 - 32,627Depreciation 29,617 2,783 1,545 - 33,945Amortisation 3,996 - 463 - 4,459

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37. Group companiesDetails of the Group’s subsidiary and associated companies are as follows:

Name of Company Principal Percentage of(Country of activities equity held

incorporation) (Place of business) Cost by the Group2004 2003 2004 2003$’000 $’000 % %

Subsidiary companiesBulk Trade Pte Ltd Bulk trading 1,764 1,764 100 100(Singapore) (Singapore)

Dolphin Shipping Ship owning and chartering 500 500 100 100Company Private Limited (Singapore)(Singapore)

JPL Corporation Pte Ltd Investment holding 5,100 5,100 70 70(Singapore) (Singapore)

Jurong Clavon Pte Ltd Engineering work 594 (a) 55 (a)(Singapore) (Singapore)

Jurong Integrated Services Steel fabrication work 5,000 5,000 100 100Pte Ltd (Singapore) (Singapore)

Jurong Machinery and Marine and general 2,000 2,000 100 100Automation Pte Ltd electronic and electrical(Singapore) works (Singapore)

Jurong Marine Contractors Provision of contract 25 25 100 100Private Limited (Singapore) services (Singapore)

Jurong Shipbuilders Investment holding 30,000 30,000 100 100Private Limited (Singapore) (Singapore)

Jurong Shipyard Pte Ltd Ship and rig repair, building, 50,000 50,000 100 100(Singapore) conversion and related

services (Singapore)

Jurong SML Pte Ltd Shipbuilding, ship repair and 28,305 28,305 100 100(Singapore) related services (Singapore)

Karimun Shiprepair and Investment holding 22,565 22,565 100 100Engineering Pte Ltd (Singapore)(Singapore)

PPL Shipyard Pte Ltd Rig building, repair and 30,276 30,276 85 85(Singapore) related services (Singapore)

Sembawang Shipyard Ship repair and related 54,230 54,230 100 100Pte Ltd (Singapore) services (Singapore)

Sembawang Shipyard (S) Investment holding 25,560 25,560 100 100Pte Ltd (Singapore) (Singapore)

SML Shipyard Pte Ltd Ship repair and related 12,000 12,000 100 100(Singapore) services (Singapore)

267,919 267,325

Foreign currency riskThe Group incurs foreign currency risk on purchases that are denominated in a currency other than Singaporedollars, primarily the US dollar. To minimise exposure on foreign currency risks, the Group usually settles suchtransactions within 30 days terms.

The Group also utilises forward exchange contracts with maturities of less than twelve months to hedge foreigncurrency denominated financial assets, liabilities and firm commitments. Under this programme, increases or decreasesin the Group’s foreign currency denominated financial assets, liabilities and firm commitments are partially offset bygains and losses on the hedging instruments. The Group does not use foreign currency forward contracts for tradingpurpose.

Interest rate riskThe Group’s policy is to maintain an efficient optimal interest cost structure using a mix of fixed and variable ratedebts where working capital is financed by variable rate loans while long term investments are financed by fixed rateloans. Surplus funds, if any, are placed with reputable banks and/or investment in bonds.

The Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy is toobtain the most favourable interest rates available without increasing its foreign currency exposure.

Liquidity riskShort-term funding is obtained from overdraft facilities and bank loans.

36. Fair value of financial instrumentsThe following methods and assumptions are used to estimate the fair value of each class of financial instruments forwhich it is practicable to estimate that value:

Cash and cash equivalents, debtors, creditors and short-term borrowingsThe carrying amounts of cash and cash equivalents, debtors and creditors (including related party balances whichare expected to be repaid in accordance with normal credit terms), and short-term borrowings approximate their fairvalues due to the short term nature of these balances.

Related party balancesNo disclosure of fair value is made for related party balances (including associated, related and subsidiary companiesand any other related parties) which are in the nature of loans as it is not practicable to determine their fair values withsufficient reliability since these balances have no fixed terms of repayment although these are not expected to besettled within twelve months from the balance sheet date.

Unquoted equity investments and long term trade debtorsOther than the disclosures made in Note 13 and Note 14, it is not practicable to determine the fair values of theremaining unquoted equity investments held as long term investments and the long term trade debtors carried atcost. In the opinion of the Directors, the expected cash flows from these unquoted equity investments and long-termtrade debtors are believed to be in excess of their carrying amounts.

Hire purchase creditorsThe fair value of the hire purchase creditors is determined by discounting the relevant cash flow using current interestrate for similar instruments at balance sheet date.

There are no significant differences between the fair values and the carrying amounts of the hire purchase creditors.

Unrecognised financial instrumentsThe valuation of financial instruments not recognised in the balance sheet reflects amounts which the Group expects topay or receive to terminate the contracts or replace the contracts at their current market rates at the balance sheet dates.

Other than the disclosure made in Note 30, there are no other unrecognised financial instruments.

35. Financial risk management objectives and policies (cont’d)

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incorporation) (Place of business) by the Group2004 2003

% %

Subsidiary companies of Karimun Shiprepair and Engineering Pte Ltd

P.T. Karimun Sembawang Ship repair and related services 100 100Shipyard * (Indonesia) (Indonesia)

Sinna Services Pte Ltd Ship repair and related services 100 100(Singapore) (Singapore)

Subsidiary companies of PPL Shipyard Pte Ltd

Baker Marine Pte Ltd Rig enhancement and upgrading services, engineering 85 85(Singapore) consultancy and project management, and supply of

rig equipment and parts (Singapore)

Baker Marine Services (HK) Provision of rig designs 85 85Limited * (Hong Kong) (Hong Kong)

Baker Marine Technology Inc. Engineering design, research and development, marketing 85 85(United States of America) *** and client services support centre (United States of America)

Subsidiary and associated companies of Jurong Shipbuilders Private Limited

Jurong Shipping Company Inactive 100 100Private Limited (Singapore) (Singapore)

Jurong Shipping Company Inactive 100 100Beta Pte Ltd (Singapore) (Singapore)

Jurong Shipping Company Inactive 100 100Gamma Pte Ltd (Singapore) (Singapore)

Tridex Investment Inc. *** Investment holding 100 100(British Virgin Islands) (British Virgin Islands)

Oslo Gas I LP *** Ship owning and chartering 33.3 33.3(Republic of Liberia) (Norway)

Oslo Gas II LP *** Ship owning and chartering 33.3 33.3(Republic of Liberia) (Norway)

37. Group companies (cont’d)


incorporation) (Place of business) Cost by the Group2004 2003 2004 2003$’000 $’000 % %

Associated companies

Cosco (Dalian) Shipyard Ship repair and 15,161 15,161 20 20Co. Ltd ** related services(People’s Republic of China) (People’s Republic of China)

Joint Shipyard Investment Investment holding 2,120 2,120 50 50Pte Ltd ** (Singapore) (Singapore)

Joint Shipyard Management Managing dormitories # # 25 25Services Pte Ltd (Singapore) (Singapore)

Jurong Clavon Pte Ltd Engineering work (a) 200 (a) 50(Singapore) (Singapore)

Jurong Marine Services ** Provision of tugging and sea 1,050 1,050 50 50Pte Ltd (Singapore) transportation services

(Singapore)

18,331 18,531

# less than $1,000



% %

Subsidiary and associated companies of Sembawang Shipyard Pte Ltd

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

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

World Adventurer Pte Ltd Marine services 100 100(formerly known as (Singapore)Sembawang ShipyardServices (Pte) Ltd)(Singapore)

OmixAsia.com Pte Ltd E-commence & bulk procurement 30 30(Singapore) (Singapore)

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(b) Sembawang Shipyard (S) Pte Ltd (“SSSPL”) has granted an option to the minority shareholder (the “MinorityShareholder”) of Kristiansand Drilling Pte Ltd (“Kristiansand”) (the “Call Option”) to acquire all (but not some only)the shares of Kristiansand (the “Call Option Shares”) held by SSSPL.

The Call Option shall be exercisable at any time during the period commencing from the Effective Date asdescribed in Shareholders’ Agreement to the date falling 18 months after date of delivery of a jack-up rig whichis owned by Kristiansand.

The exercise price of the Call Option shall be a sum equivalent to the Company’s actual paid in capital plusfinancing costs of LIBOR + 1.5% per annum for the period from Effective Date to date of transfer of the CallOption Shares plus premium of 0% to 12% premium depending on the time the Minority Shareholder Exercisesthe Call Option.

The Minority Shareholder of Kristiansand has also been granted an option (the “Put Option”) to require SSSPL toacquire the Shares of Kristiansand (the “Put Option Shares”) held by them.

The Put Option shall be exercisable at any time during the period commencing from the Effective Date asdescribed in Shareholders’ Agreement to the date falling 9 months after the date of delivery of the rig.

The exercise price for Put Option Shares shall be a sum equivalent to 90% of the Minority Shareholders’ actualpaid in capital on the date of transfer of Put Option Shares.

* Audited by other member firms of Ernst & Young** Audited by other firms*** These companies are not required to be audited under the laws of their country of incorporation

38. Subsequent eventThe Company has injected a net cash consideration of RMB 240 million ($47.5 million) for the 30% equity stake inCosco Shipyard Group (“CSG”) based on the revalued net asset value of CSG. The Company’s existing 20% equitystake in Cosco (Dalian) Shipyard Co Ltd has also been revalued and transferred to the enlarged CSG as part of theconsideration for this 30% equity interest in CSG.

CSG is a leading ship repair and conversion group in People’s Republic of China. It owns five major shipyards thatare strategically located in the key coastal cities of Dalian, Nantong, Shanghai, Zhoushan and Guangzhou.

39. Comparative figuresThe following comparative figures relating to the previous year have been reclassified to conform with the presentationin the current year and to better reflect the nature of the profit and loss items.

Group CompanyAs restated As previously As restated As previously

stated stated$’000 $’000 $’000 $’000

Cost of sales (963,082) (966,068) _ _Other operating income 12,344 19,312 5,776 9,105General and administrative expenses

(42,940) (46,922) (2,797) (6,126)

40. Authorisation of financial statementsThe financial statements of SembCorp Marine Ltd for the year ended 31 December 2004 were authorised for issuein accordance with a resolution of the Directors on 18 February 2005.

37. Group companies (cont’d)



% %

Subsidiary and associated companies of Jurong Shipyard Pte Ltd

Jurong Brazil-Singapore Investment holding 100 100Pte Ltd (Singapore) (Singapore)

Jurong Shipyard Inc. *** Investment holding 35 35(Bahamas) (Bahamas)

Maua Jurong S.A. ** Shipbuilding, ship repair, and conversion 35 35(Brazil) (Brazil)

Subsidiary companies of JPL Corporation Pte Ltd

JPL Services Pte Ltd Equipment rental services and trading in copper slag 70 70(Singapore) (Singapore)

JPL Industries Pte Ltd Processing and distribution of copper slag 53.8 53.8(Singapore) (Singapore)

JPL Concrete Products Production of concrete products 53.8 53.8Pte Ltd (Singapore) (Singapore)

Subsidiary company of Sembawang Shipyard (S) Pte Ltd

Kristiansand Drilling Pte Ltd Rig owning and chartering 81.82 -(Singapore), Note (b) (Singapore)

Subsidiary and associated companies of Jurong Clavon Pte Ltd

Aswell (F.E.) Pte Ltd Dealers in blasting and painting equipment, accessories 55 (a)(Singapore) and consumable materials (Singapore)

Cosco Shipyard Jurong Corrosion control 22 -Clavon Co., Ltd** (People’s Republic of China)(People’s Republic of China)

Joint venture company of Dolphin Shipping Company Private Limited

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

(a) Jurong Clavon Pte Ltd and its subsidiary companies is held by the Group as follows:2004 2003

% %

The Company 55 50

The above transaction does not have a material impact on the results and financial position of the Group.

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A. Directors’ Remuneration

The remuneration of directors of the Company falls within the following ranges:-2004

$500,000 and above 2$250,000 to $499,999 -Below 250,000 8

10

Summary compensation table for the year ended 31 December 2004 (Group):

Names of Director *Salary #Bonus Directors’ Total ^Number of shareFees option granted

$’000 $’000 $’000 $’000 ’000

Wong Kok Siew (deceased) - 37 83 120 250

Tan Kwi Kin 594 348 - 942 700

Tan Pheng Hock - - 29 29 50

Kiyotaka Matsuzawa - - 39 39 100

Naoteru Tsuda - - 15 15 -

Low Sin Leng - 19 29 48 50

Tan Tew Han - - 68 68 150

Ajaib Haridass - - 57 57 130

Haruo Kubota - - 17 17 30

Heng Chiang Gnee 361 201 - 562 400

Company 955 605 337 1,897 1,860

In addition, the following directors were conditionally awarded an aggregate of 1,740,000 performance shares:

Aggregate Conditional Aggregate ConditionalShares Outstanding Shares Released

Tan Kwi Kin 1,140,000 167,200Heng Chiang Gnee 600,000 88,000

1,740,000 255,200

The actual number delivered will depend on the achievement of set targets over a 3-year period from 2002 to 2004, 2003to 2005 and 2004 to 2006. Achievement of targets below 80% level will mean no performance shares will be delivered,while achievement of targets exceeding 100% will mean up to a maximum of 200% of the conditional performance sharescould be delivered. 255,200 performance shares were released to the above directors in 2004 for the performance period2001 to 2003.

* The salary amount shown is inclusive of allowances, CPF, all fees other than directors’ fee, and other emolument.# The bonus amount shown is inclusive of CPF and:(a) the taxable benefit arising from the exercise of share options during the year amounting to $63,000 for the Company. This amount has not been charged

to the profit and loss account.(b) the market value of the 255,200 performance shares of $220,748 awarded during the year.^ Relates to share options granted during the year by the Company.

SupplementaryInformationSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

- 31 December 2004

B. Interested Person TransactionsAggregate value of all transactionsconducted under a shareholders’

mandate pursuant to Rule 920of the SGX Listing Manual2004 2003$’000 $’000

Transaction for the Sales of Goods and ServicesKeppel Corporation Ltd and its associates 221 769Neptune Orient Lines Ltd and its associates 1,890 5,755SembCorp Industries Limited and its associates 6,262 3,241

Transaction for the Purchase of Goods and ServicesKeppel Corporation Ltd and its associates 2,351 2,104Neptune Orient Lines Ltd and its associates 2,310 5,612SembCorp Industries Limited and its associates 23,499 22,946

Management and Support ServicesSembCorp Industries Limited 1,000 900

Total Interested Person Transactions 37,533 41,327

Treasury TransactionsSale of Debt SecuritiesNeptune Orient Lines Ltd 54,280 -

Placement of Funds with/(from) - as at 31 DecemberSembCorp Industries Limited and its associates 10,648 17,773SembCorp Industries Limited and its associates (3,504) (1,501)

SupplementaryInformationSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

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MajorPropertiesSEMBCORP MARINE LTD AND SUBSIDIARY COMPANIES

- As at March 12, 2005

Held by Location Description & Tenure UsageApproximate Land Area

SembCorp Jalan Samulun Land area: 198,098m2 10 years leasehold Ship repairsMarine Building, workshop, 10 years renewal including drydock,

drydocks and quays berthage &workshops

Tanjong Kling Land area: 491,054.57m2 10 years leasehold Ship repairs, shipBuilding, workshop, 10 years renewal conversion,drydocks and quays offshore,

shipbuilding andrig buildingincluding drydock,berthage &workshops

Mendong Spring 9 units of 3-room apartment Freehold Residentialwith built-in area of 99m2 propertiesper unit

Hilton Tower Apartment with Freehold Residentialat Grange Road built-in area of 131m2 properties

P.T. Karimun Karimun Island 150,000m2 30 years leasehold Ship repairing andSembawang Indonesia Building, workshop with option for 20 fabricationShipyard and wharves years plus another

option for 30 years

SES Engineering No. 15 56,348 sq ft Freehold Metal fabricationSdn Bhd Jalan Lambak Workshop and 3-storey workshop

Kawasan office buildingPerindustrianTaman Johor81200 Johor Bahru

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Notice ofAnnual General Meeting(Incorporated in the Republic of Singapore)

NOTICE IS HEREBY GIVEN THAT the 42nd Annual General Meeting of the Company will be held on Thursday,April 21, 2005 at 11.00 a.m. at 29 Tanjong Kling Road, Singapore 628054 to transact the following business:-

Ordinary Business1 To receive and adopt the Directors’ Report and Audited Accounts for the year ended December 31, 2004.2 To approve the payment of a final dividend of 1.0 cents per share less income tax and a special dividend

of 5.0 cents per share less income tax for the year ended December 31, 2004.3 To re-elect Mr Kiyotaka Matsuzawa, who will retire by rotation pursuant to Article 91 of the Company’s

Articles of Association and who, being eligible, will offer himself for re-election.4 To record the retirement of Ms Low Sin Leng, a Director retiring by rotation pursuant to Article 91 of the

Company’s Articles of Association.5 To re-elect the following Directors, each of whom will cease to hold office pursuant to Article 97 of the

Company’s Articles of Association and who, being eligible, will offer themselves for re-election:(a) Haruo Kubota (independent member of the Audit Committee)(b) Lua Cheng Eng

6 To approve the sum of S$337,000 as Directors’ Fees for the year ended December 31, 2004.(2003: S$332,332)

7 To re-appoint Messrs Ernst & Young as Auditors of the Company and authorise the Directors to fix theirremuneration.

Special BusinessTo consider and, if thought fit, to pass the following resolutions which will be proposed as Ordinary Resolutions:-8 That authority be and is hereby given to the Directors of the Company to:

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

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

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

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

provided that:(1) the aggregate number of shares to be issued pursuant to this Resolution (including shares to be

issued in pursuance of Instruments made or granted pursuant to this Resolution) does notexceed 50% of the issued share capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on apro rata basis to shareholders of the Company (including shares to be issued in pursuance ofInstruments made or granted pursuant to this Resolution) does not exceed 20% of the issuedshare capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such manner of calculation as may be prescribed by the Singapore Exchange SecuritiesTrading Limited (“SGX-ST”)) for the purpose of determining the aggregate number of sharesthat may be issued under sub-paragraph (1) above, the percentage of issued share capital shallbe based on the issued share capital of the Company as at the time this Resolution is passed,after adjusting for:

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

(ii) any subsequent consolidation or subdivision of shares;(3) in exercising the authority conferred by this Resolution, the Company shall comply with the

provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliancehas been waived by the SGX-ST) and the Articles of Association for the time being of theCompany; and

Resolution 1Resolution 2

Resolution 3

Resolution 4Resolution 5Resolution 6

Resolution 7

Resolution 8

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Annual Report

2004

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P R O X Y F O R M

IMPORTANT1. For investors who have used their CPF monies to buy SembCorp Marine

Ltd’s shares, this document is forwarded to them at the request of theirCPF Approved Nominees solely FOR INFORMATION ONLY.

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

PR

OX

Y F

OR

M

(INCORPORATED IN THE REPUBLIC OF SINGAPORE)

(Name)

(Address)

Notice ofAnnual General Meeting(Incorporated in the Republic of Singapore)

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

9 That approval be and is hereby given to the Directors to:(a) offer and grant options in accordance with the provisions of the SembCorp Marine Share Option

Plan (the “Share Option Plan”) and/or to grant awards in accordance with the provisions of theSembCorp Marine Performance Share Plan (the “Performance Share Plan”) and/or theSembCorp Marine Restricted Stock Plan (the “Restricted Stock Plan”) (the Share Option Plan,the Performance Share Plan and the Restricted Stock Plan, together the “Share Plans”); and

(b) allot and issue from time to time such number of shares of $0.10 each in the capital of theCompany as may be required to be issued pursuant to the exercise of options under the ShareOption Plan and/or such number of fully paid shares as may be required to be issued pursuantto the vesting of awards under the Performance Share Plan and/or the Restricted Stock Plan,

provided that the aggregate number of shares to be issued pursuant to the Share Plans shall notexceed 15% of the issued share capital of the Company from time to time.

10 To transact any other business.

By Order of the Board

Kwong Sook MayCompany Secretary

April 6, 2005

Explanatory Notes:Resolution 4 – if re-elected, Haruo Kubota will remain as the member of the Audit Committee. Haruo Kubota is an independent Director.

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

Resolution 8 – is to empower the Directors to issue shares in the capital of the Company and to make or grant instruments (such as warrants or debentures)convertible into shares, and to issue shares in pursuance of such instruments, up to an amount not exceeding in total 50% of the issued share capital of theCompany, with a sub-limit of 20% for issues other than on a pro rata basis to shareholders. For the purpose of determining the aggregate number of shares thatmay be issued, the percentage of issued share capital shall be based on the issued share capital of the Company at the time that Resolution 8 is passed, afteradjusting for (a) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which areoutstanding or subsisting at the time that Resolution 8 is passed, and (b) any subsequent consolidation or subdivision of shares.

Resolution 9 - is to empower the Directors to offer and grant options and/or grant awards and to issue shares in the capital of the Company pursuant to theSembCorp Marine Share Option Plan, the SembCorp Marine Performance Share Plan and the SembCorp Marine Restricted Stock Plan (collectively, the“Share Plans”) provided that the aggregate number of shares issued pursuant to the Share Plans shall not exceed 15% of the issued share capital of theCompany for the time being.

Note:A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two (2) proxies to attend and vote onhis behalf and where a member appoints more than one (1) proxy, he shall specify the proportion of his shareholdings to be represented by each proxy. A proxyneed not be a member of the Company. The instrument appointing a proxy or proxies must be lodged at 30 Hill Street #05-04 Singapore 179360 not later than48 hours before the time of the meeting.

Notice of Books Closure and Dividend Payment DateNOTICE IS HEREBY GIVEN that the Register of Members and Share Transfer Books of the Company will be closed from April 29, 2005 to May 3, 2005, bothdates inclusive, for the preparation of dividend warrants.

Duly completed transfers in respect of ordinary shares in the capital of the Company together with all relevant documents of title received by the Company’sShare Registrar, Kon Choon Kooi Pte Ltd, 47 Hill Street #06-02, Chinese Chamber of Commerce & Industry Building Singapore 179365, up to 5 p.m. on April28, 2005 (the “Book Closure Date”) will be registered to determine members’ entitlements to the proposed dividend. Subject as aforesaid, members whosesecurities accounts with The Central Depository (Pte) Limited are credited with ordinary shares in the capital of the Company as at 5.00 p.m. on the BookClosure Date will be entitled to the dividend.

The proposed dividend, if approved at the 42nd Annual General Meeting, will be paid on May 18, 2005.

Resolution 9

I/We of

being a member/members of SEMBCORP MARINE LTD hereby appoint:-

Name Address NRIC/Passport Number Proportion ofShareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies to attend and vote for me/us on my/our behalf and, if necessary, to demand a poll, at the 42nd Annual GeneralMeeting of the Company to be held at 29 Tanjong Kling Road, Singapore 628054 on Thursday, April 21, 2005 at 11.00 a.m. and at anyadjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Resolutions as set out in the Notice of Annual GeneralMeeting. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matter arising at the AnnualGeneral Meeting.)

No. Resolutions For Against

Ordinary Business

1 Adoption of Directors’ Report and Accounts

2 Declaration of Final Dividend and Special Dividend

3 Re-election of Kiyotaka Matsuzawa

4 Re-election of Haruo Kubota

5 Re-election of Lua Cheng Eng

6 Approval of Directors’ Fees

7 Re-appointment of Auditors

Special Business

8 Approval for the renewal of Share Issue Mandate

9 Authority for Directors to grant options and/or grant awards and issue sharesin accordance with SembCorp Marine’s Share Plans

Dated this day of 2005. Total Number of Shares Held

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

Notes:1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter

50 of Singapore), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you haveshares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares enteredagainst your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall bedeemed to relate to all the shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote instead of him. Such proxy need not bea member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to berepresented by each proxy.

4. The instrument appointing a proxy or proxies must be deposited at 30 Hill Street #05-04, Singapore 179360, not less than 48 hours before the time appointed for holding the AnnualGeneral Meeting.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies isexecuted by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised.

6. A corporation which is a member may authorise by a resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Annual GeneralMeeting in accordance with its Articles of Association and Section 179 of the Companies Act, Chapter 50 of Singapore.

General: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 notascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of shares entered in the Depository Register, the Companymay reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48hours before the time appointed for holding the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.

The Company SecretarySembCorp Marine Ltd

c/o 30 Hill Street #05-04Singapore 179360

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