KEPPEL CORPORATION LIMITED

Transcription

1 KEPPEL CORPORATION LIMITED Co. Reg. No N (Incorporated in the Republic of Singapore) FULL YEAR 2013 FINANCIAL STATEMENTS & DIVIDEND ANNOUNCEMENT TABLE OF CONTENTS Paragraph Description Page CHIEF EXECUTIVE OFFICER S ADDRESS I - VI FINANCIAL STATEMENTS & DIVIDEND ANNOUNCEMENT GROUP PROFIT AND LOSS ACCOUNT 1 2 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 4 3 BALANCE SHEETS 6 4 STATEMENTS OF CHANGES IN EQUITY 9 5 CONSOLIDATED STATEMENT OF CASH FLOWS 14 6 AUDIT 17 7 AUDITORS REPORT 17 8 ACCOUNTING POLICIES 17 9 CHANGES IN THE ACCOUNTING POLICIES REVIEW OF GROUP PERFORMANCE VARIANCE FROM FORECAST STATEMENT PROSPECTS DIVIDEND SEGMENT ANALYSIS REVIEW OF SEGMENT PERFORMANCE INTERESTED PERSON TRANSACTIONS REPORT OF PERSONS OCCUPYING MANAGERIAL POSITIONS WHO ARE RELATED TO A DIRECTOR, CHIEF EXECUTIVE OFFICER OR SUBSTANTIAL SHAREHOLDER 26

2 KEPPEL CORPORATION LIMITED ADDRESS BY MR LOH CHIN HUA, CHIEF EXECUTIVE OFFICER, KEPPEL CORPORATION FULL-YEAR ENDED 31 DECEMBER Good evening to all of you present here and those joining us over the web. May I wish you all a Prosperous and Happy Lunar New Year! As the new CEO of Keppel Corporation, I am taking on the stewardship of a Keppel today which is enjoying a strong balance sheet, with a passionate and motivated group of Keppelites, and the support and confidence from customers globally for our quality products and services. 2 I am privileged to build on the solid foundations laid by my predecessors. The bar has been set high. Our history has seen each generation of Keppelites pick up the baton and continue to improve, and strive for greater heights. This generation will be no different. Clarity of Focus 3 Before I go to our results briefing, allow me first to say a few words on our strategic direction and intent. First and foremost, to reiterate, Keppel will continue to stay the course on its multi-business strategy. This has worked well for us. We will stay focused on our three core businesses of Offshore & Marine, Infrastructure and Property. The macro trends we have followed on serving the energy needs of the world and sustainable urbanisation remain relevant for us to continue to ride on them. 4 We will stay focused on our core businesses and on what we do well in, even as we continue to explore new opportunities in close adjacencies. We will remain watchful not to be overtaken by technology, competition or shifting markets. Nor, will we compromise in our commitment to incident-free, quality and timely execution of our projects, whilst continually challenging ourselves to further improve efficiencies and raise productivity. 5 To do this, we must continue to attract and retain the best talent possible. In this respect, we will bolster our bench strength, nurturing and developing our talents to take on fresh challenges and expanded roles. 6 Yet another area of focus for us will be on investing strategically in R&D. We will continue to collaborate with our customers, industry partners and leading universities to offer cutting-edge solutions. Such investments in R&D and close collaboration with customers to come up with innovative solutions have established KEPPEL O&M as a global leader in jackups and semisubmersibles. 7 And as a conglomerate, we are acutely mindful to deploy our capital to earn the best risk-adjusted returns. We will adopt a capital-constrained mindset in choosing projects, critically weighing all opportunities available. Recycling of capital is another area that we will continue to pursue. It is vital for Keppel to continue to Chief Executive Officer s Remarks, I

3 exercise financial discipline and maintain a strong balance sheet so that we can have the agility to seize any opportunities in our key businesses. A Gradual Global Recovery 8 Now let s look at the world at large. Most of 2013 was fraught with uncertainties and anxieties mainly over the impact of the US QE tapering began on a brighter note with the World Bank projecting an increase in global growth from 2.4% to 3.2% this year. Sentiments are also buoyed with the US sustained creation of jobs, lowering of unemployment, and firming of housing prices. All these factors contributed to US Federal Reserve announcing a gradual wind down of its bond purchases. This was largely well received by the market, but at the same time signals the advent of higher global interest rates. 9 Over in Europe, while recovery was patchy, the situation had turned for the better over the past year. The fiscal situations and trade balances in many EU member states have improved, and unemployment has been stabilised or lowered. But inflation remains perilously low, presenting a risk of deflation. Whether the Eurozone will transit definitively out of the doldrums remains to be seen, though generally the risks seem to be receding. 10 Meanwhile, China had a new leadership team, and the Third Plenum ushered in what promised to be a bold and momentous process of economic restructuring, that would result in more sustainable growth, less reliance on investment-driven growth, and with the market playing a central role. It will take several years for the situation to unfold, and full impact of restructuring to be felt, but China could potentially once again reshape the competitive landscape for many companies. Amidst this transition, China achieved a modest 7.7% GDP growth last year, and growth is expected to continue to be moderate in Singapore s 2013 GDP is healthy at 3.7% and is in line with the government s earlier revised growth forecast of between 3.5% and 4%. 12 Despite the seeming glimmer of silver linings in the global economy, the global landscape continues to be shifting, and 2014 will be uncertain and challenging. However, come what may, Keppel is prepared for whatever lies ahead. Performance Highlights 13 Against the volatility in 2013, I am pleased to announce that Keppel Corporation has performed creditably. Excluding revaluations, our Net Profit was $1.4 billion and our Return on Equity was 14.9%. Economic Value Added was $939 million for the year. Including revaluations, impairments and divestments, Net Profit for the year was $1.85 billion and Return on Equity was 19.5%. I will leave the details to our Acting CFO, Mr Paul Tan, who will run them through later for you. 14 Whilst Net Profit for 2013 is 26% lower than for 2012, the prior year s numbers were boosted by the completion and recognition of lumpy profits from sale of units at Chief Executive Officer s Remarks, II

4 Reflections, something that we had cautioned will not be repeated in The net contribution to the bottom line in 2012 from sale of units at Reflections as well as disposal of an equity investment amounted to over $650 million. 15 Operating net profit for 2013 has been encouraging despite the uncertainties. Keppel Land and Keppel T&T reported stronger earning numbers for the year. Keppel O&M contributed about the same Net Profit as 2012 and was able to improve its operating margins for the year to 14.7% from 13.5% the year before. Operating businesses in Keppel Infrastructure Division performed creditably. However, the EPC contracts in Doha North and Runcorn continue to face challenges, and we had to take additional provisions at the year end. We are deeply disappointed on the need for the additional provisions. Whilst we believe they are necessary and adequate at this time, we cannot be certain until the projects are completed. The claims process for Doha North and the Domestic Solid Waste Management Centre are expected to be protracted and their outcome will also have an impact. The encouraging news is that Runcorn Phase 1 is substantially completed and will be going through commissioning, while the construction of Runcorn Phase 2 should also be substantially completed in the second half of this year. Doha North is ready to take in sewage for final commissioning before the targeted handover of the treatment works later in the year. 16 The Board of Directors will be proposing a final dividend of 30.0 cents per share, making a total distribution of 49.5 cents per share to shareholders for the whole year. This includes the interim dividend of about 19.5 cents per share, comprising a cash dividend of 10 cents per share and a dividend in specie of Keppel REIT units equivalent to 9.5 cents per share distributed in August last year. Offshore & Marine 17 Now I shall go through our key businesses. For Keppel Offshore & Marine, our teams had an extremely busy year in 2013, aggressively pursuing new contracts while working hard at delivering a record number of 22 rigs on time, within budget and safely. 18 In total, Keppel O&M secured about $7 billion of new contracts for the year from new and repeat customers. Our net orderbook stands at about $14.2 billion as at end December 2013, with earnings visibility extending into Let me highlight some significant milestones for us in this business. During the year, Keppel FELS secured contracts from Mexican drilling company, Grupo R, to build five KFELS B Class jackup rigs worth over US$1 billion for delivery progressively from 2Q 2015 to 4Q Over the years, Keppel O&M has been working hard for a foothold in the offshore and marine industry in Mexico. This led us to an MOU last year with PEMEX to jointly develop, own and operate a yard facility in Mexico, the first phase of which is to support the construction of six KFELS B Class jackup rigs. Chief Executive Officer s Remarks, III

5 21 This MOU reinforces our Near Market, Near Customer strategy and places us in a strong position to capture opportunities not only from the potential in Mexico but also from the continued growth in the Gulf of Mexico. Through our partnership with PEMEX, we will be able to tap each other s technological expertise and know-how to provide comprehensive, world-class solutions for the market there. 22 Keppel FELS closed the year strongly with an order from Transocean to build five KFELS Super B Class jackup rigs for US$1.1 billion, with deliveries from 1Q 2016 to 3Q In addition, Transocean has options to build another five similar rigs with Keppel FELS. Focusing on Execution & Delivery 23 Last year, Keppel FELS delivered 21 of the 22 rigs we handed over globally to our customers. This record number of deliveries was achieved with the investment in new technology and equipment, optimisation of our building processes, as well as leveraging of our satellite yards in the region. 24 Through the integration of our regional network of yards, we have not only reaped efficiencies but also equipped our satellite yards to take on higher value offshore work, garnering the confidence of our customers. 25 During the year, we completed the expansion of Keppel Nantong Heavy Industries in China to focus on construction of offshore structures. Growing Technology Expertise 26 We will continue to differentiate ourselves, not just with safe, quality and ontime delivery but with the application of innovation and technology. Currently, we have a suite of 30 proprietary products. To fortify our leadership position, we will be partnering trend-setting customers as well as universities to sharpen our technology know-how for innovative solutions in new offshore frontiers. 27 As an example, our decision to proceed with the construction of the new Keppel Can Do drillship, which was developed in close consultation with our customers, major oil companies and vendors, is a step towards meeting the needs in the industry for vessels capable of performing development and completion drilling in addition to exploration drilling. In our design, we have incorporated a generous functional deck space, 70% more spacious, to allow for the installation of third party equipment invariably required for development and completion drilling. In addition, our drillship has a double blowout preventer stack that fulfils post-macondo safety standards. Since the launch of our design last year, we have received encouraging response from the market. 28 In R&D, Keppel and the National University of Singapore have recently announced the collaboration with the National Research Foundation to set up the Keppel-NUS Corporate Laboratory to pursue three main research thrusts, Future Chief Executive Officer s Remarks, IV

6 Systems, Future Yards and Future Resources in order to maintain our position as a global leader in the offshore & marine industry. Infrastructure 29 In our waste-to-energy business, I have reported on our ongoing challenges to complete our EPC contracts both in Doha and Runcorn. Whilst the financial results are disappointing, our teams have worked hard under challenging conditions to deliver on these projects. When completed, these should be quality infrastructure assets our customers would be proud of. Our focus is to complete the projects and minimise the loss to the Group. The performance of these EPC projects is also not in keeping with the Group s enviable record for quality project execution. Lessons have been learnt. We will continue to build, own and operate infrastructure projects in areas where we have strong technical knowledge and deep understanding of the markets and key value chains. 30 Meanwhile, Keppel Merlimau Cogen s new 800MW power generation facility was completed ahead of schedule. It is now fully operational and has boosted the overall efficiency of the power plant. 31 To sharpen focus and enhance resource efficiencies, we restructured Keppel Energy and Keppel Integrated Engineering in May last year to become Keppel Infrastructure with Dr TG Ong as its Chief Executive. Since then, the new entity has been busy building up its strengths in the power and gas business, tightening operations of the WTE projects and growing its portfolio of related technology solutions. 32 During the year, Keppel T&T was active in growing its quality data centre portfolio, adding and offering more capacity in Singapore, Ireland and the Netherlands. Demand for data centre services remains strong in key markets and Keppel is positioned to reap more benefits from this trend through expansion of this business. 33 By now, the market is aware that Keppel T&T is exploring the setting up of a data centre real estate investment trust to be listed on the Singapore Exchange. We will make the appropriate announcement should there be any material development on this front. 34 Keppel T&T will continue to build its reputation as a choice provider for highquality, reliable logistics and distribution services in China. Last year, its subsidiary, Keppel Logistics (Foshan) acquired a 60% stake in Foshan Sanshui Port Development Co, making it its third port project in China. Its logistics and distribution hubs in Anhui, Jilin and Tianjin would be fully operational by next year. Property 35 In Property, despite the tightening measures in Singapore and China, Keppel Land sold over 4,400 homes, mostly in China, almost twice the number we sold in Chief Executive Officer s Remarks, V

7 2012. The cooling markets also presented good opportunities, which were seized by Keppel Land in the form of two residential sites for landed homes in China and another prime residential site in Tiong Bahru in Singapore. 36 In the year, Keppel Land also entered into a strategic partnership with China Vanke to jointly develop properties in Singapore and China, the first being The Glades, a condominium at Tanah Merah, Singapore where Vanke acquired a 30% stake. 37 Building on our strength in developing and managing commercial buildings, Keppel Land China together with Alpha Investment Partners acquired an 80% stake in Life Jinqiao, a mixed-use development in Shanghai, China. Today, Keppel Land has in its expanding commercial portfolio, under development and recently acquired, more than 650,000 sq m of GFA in key growth cities in China, Indonesia and Vietnam. 38 Last November, Keppel Land completed the divestment of its stake in Jakarta Garden City to recycle capital into other attractive opportunities in Indonesia, focusing on Jakarta. Earlier this week, Keppel Land announced the acquisition of a well-located 3-ha site in West Jakarta where it will develop more than 1,200 apartments and 60 ancillary shophouses. The first phase of these homes is slated for launch next year was also an active year for our property fund management units whose combined assets under management now amount to some $17.7 billion. Keppel REIT did well to attain 100% occupancy across its office buildings in Singapore, while acquiring stakes in two prime office developments in Melbourne and Perth. Alpha raised over US$1.65 billion for the Alpha Asia Macro Trends Fund II, exceeding well above its target of US$1 billion. 40 We will continue to harness our expertise in developing and managing homes, offices, and mixed-use properties to enhance our value proposition, as well as further improve the quality and performance of our assets. Configured for Growth 41 As I had said at the start of this address, 2014 will be another challenging year. However, despite the uncertainties, I am confident that the strength of the Group, with all its components configured into a cohesive and optimal whole, lends itself for sustainable growth and value creation. We will act decisively to seize opportunities with prudent financial discipline and rigorous innovation. 42 I shall now let Paul Tan, our Acting CFO, to take you through a review of the Group s financial performance. Thank you. Chief Executive Officer s Remarks, VI

8 KEPPEL CORPORATION LIMITED Full Year 2013 Financial Statements & Dividend Announcement UNAUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2013 The Directors of Keppel Corporation Limited advise the following unaudited results of the Group for the year ended 31 December GROUP PROFIT AND LOSS ACCOUNT for the year ended 31 December Note /- % Revenue 12,380,419 13,964, Materials & subcontract costs (i) (8,603,659) (9,506,893) -9.5 Staff costs (ii) (1,668,237) (1,578,749) +5.7 Depreciation & amortisation (242,292) (210,512) Other operating income/(expenses) (iii) 268,138 (47,512) NM Operating profit 2,134,369 2,621, Investment income 14,033 6, Interest income (iv) 144, , Interest expenses (v) (124,718) (134,933) -7.6 Share of results of associated companies (vi) 625, , Profit before tax 2,793,740 3,256, Taxation 1b (397,366) (500,619) Profit for the year 2,396,374 2,755, Attributable to: Shareholders of the Company 1,845,792 2,237, Non-controlling interests 550, , ,396,374 2,755, Earnings per ordinary share - basic cts cts diluted cts cts NM - Not Meaningful Keppel Corporation Limited, Page 1 of 26

9 NOTES TO GROUP PROFIT AND LOSS ACCOUNT 1a. Pre-tax profit of the Group is arrived at after charging/(crediting) the following: Note /- % Share-based payment expenses 55,362 49, Profit on sale of fixed assets (vii) (3,865) (16,689) Profit on sale of investments (viii) (537) (150,441) Provision/(write-back) - Stocks & work-in-progress - Doubtful debts (ix) 4,173 2,255 (4,579) (28,151) NM NM Bad debts written off >500.0 Stocks written off Fair value (gain)/ loss - Investments - Forward contracts - Financial derivatives (x) (9,350) 15,474 (9,877) (9,682) 48,327 1, NM Foreign exchange (gain) / loss (xi) (23,881) 34,341 NM Gain on disposal of subsidiaries (xii) (307,726) (30,004) >500.0 Gain on disposal of associated company (xiii) (3,120) NM Write-back of impairment of associated company (xiv) (2,818) (7,673) Fair value gain on investment properties (xv) (156,284) (172,101) -9.2 Write-back of provision for restructuring of operations and others (xvi) (43,088) (12,000) NM - Not Meaningful Note: (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) Materials & subcontract costs decreased mainly as a result of lower revenue from the Offshore & Marine Division and Property Division. Staff costs increased due mainly to higher manpower cost in the Offshore & Marine Division and Property Division, partly offset by lower manpower cost in Infrastructure Division. Other operating income in 2013 relates mainly to foreign exchange gain in 2013 compared to foreign exchange loss in 2012 (Note (xi)), higher gain on disposal of subsidiaries (Note (xii)), higher write-back of provision for restructuring of operations and others (Note (xvi)), partly offset by lower fair value gain on investment properties (Note (xv)) and provision of doubtful debts in 2013 compared to write-back of provision for doubtful debts in 2012 (Note (ix)). Interest income decreased largely due to lower bank deposits during the year and deconsolidation of Keppel REIT with effect from 31 August Lower interest expense was mainly attributable to higher capitalisation of interest expense and deconsolidation of Keppel REIT with effect from 31 August Share of profits of associated companies was higher due mainly to higher profits from associated companies in the Offshore & Marine Division and Property Division. Profit on sale of fixed assets in the current year was largely attributable to disposal of tugs in the Offshore & Marine Division. Lower profit on sale of investments was largely due to fewer disposals of equity investments in Provision for doubtful debts in the current year was due to unrecoverable receivables from delinquent customers. In 2012, there was recovery of receivables due from delinquent customers. Keppel Corporation Limited, Page 2 of 26

10 (x) (xi) (xii) (xiii) (xiv) (xv) (xvi) Hedging differential on forward exchange contracts was due to elapse of time and fluctuations in interest rates. Foreign exchange gain mainly arose from the revaluation of assets denominated in United States dollar, which appreciated against Singapore dollar. The foreign exchange loss in the prior year was mainly due to the depreciation of United States dollar against Singapore dollar. Gain on disposal of subsidiaries in 2013 arose from the divestment of a subsidiary, Montfort Development Pte Ltd, which has a 50% indirect interest in Hotel Sedona Manado in Indonesia, the deconsolidation of Keppel REIT due to loss of control and the divestment of 51% interests in PT Mitra Sindo Sukses ( PTMSS ) and PT Mitra Sindo Makmur ( PTMSM ), while the gain in 2012 was largely attributable to partial divestment of interest in Saigon Centre Phases 1 and 2 by the Property Division. The gain on disposal of associated company in the prior year arose from divestment of PT Purosani Sri Persada by the Property Division. The write-back in 2013 was related to write-back of impairment for an associated company in the Infrastructure Division. The lower fair value gain on investment properties was largely attributable to lower fair value gain on the portfolio of investment properties in Singapore. The write-back in 2013 was mainly in relation to the reversal of provision following the finalisation of the sale of power barge in the Infrastructure Division and write-back of provision in the Offshore & Marine Division. 1b. Taxation expenses were lower because of decreased profit, higher divestment gains not subjected to tax and write-back of tax following finalisation of prior year s tax assessment. 1c. Earnings per ordinary share /-% Earnings per ordinary share of the Group based on net profit attributable to shareholders:- (i) Based on weighted average number of shares cts cts Weighted average number of shares ( 000) 1,805,198 1,792, (ii) On a fully diluted basis cts cts Adjusted weighted average number of shares ( 000) 1,823,236 1,810, d. Breakdown of sales /-% First Half Sales reported for first half year 5,834,607 7,747, Operating profit after tax before deducting non-controlling interests reported for first half year 846,628 1,421, Second Half Sales reported for second half year 6,545,812 6,217, Operating profit after tax before deducting non-controlling interests reported for second half year 1,549,746 1,333, e. There was no extraordinary item during the year. Keppel Corporation Limited, Page 3 of 26

11 2. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the year ended 31 December Note /- % Profit for the year 2,396,374 2,755, Items that may be reclassified subsequently to profit & loss account: Available-for-sale assets - Fair value changes arising during the year (i) 13,552 30, Realised and transferred to profit & loss account (ii) 28 (49,948) NM Cash flow hedges - Fair value changes arising during the year, net of tax (iii) (204,730) 217,394 NM - Realised and transferred to profit & loss account (iv) 7,468 (2,377) NM Foreign exchange translation - Exchange differences arising during the year (v) 73,628 (312,556) NM - Realised and transferred to profit & loss account (vi) 37,876 (1,378) NM Share of other comprehensive income of associated companies - Available-for-sale assets (5,847) 1,539 NM - Cash flow hedges (2,152) (5,751) Foreign exchange translation 2,881 (16,755) NM Items that will not be reclassified to profit & loss account: Share of other comprehensive income of associated companies - Revaluation surplus 14,479 NM Other comprehensive income for the year, net of tax (77,296) (124,663) Total comprehensive income for the year 2,319,078 2,630, Attributable to: Shareholders of the Company 1,721,456 2,200, Non-controlling interests 597, , NM - Not Meaningful 2,319,078 2,630, Note: (i) (ii) Fair value changes were attributable to movements in quoted prices of available-for-sale assets. These represented fair value changes on available-for-sale assets, which were transferred to profit & loss account upon realisation. Keppel Corporation Limited, Page 4 of 26

12 (iii) (iv) (v) (vi) Fair value differences were due mainly to the hedging differential on forward exchange contracts, which were largely entered to hedge exposures against United States dollar. The fair value loss noted in the current year was as a result of the hedge rate being lower than the spot rate and the fair value gain for the prior year was due to the hedge rate being higher than the spot rate. These represented cash flow hedges, which were transferred to profit & loss account upon realisation. These exchange differences arose from the translation of financial statements of foreign operations whose functional currencies are different from that of the Group s presentation currency as well as from the translation of foreign currency loans that form part of the Group s net investment in foreign operations. The translation gains for 2013 arose largely from strengthening of foreign currencies, such as United States dollar, Renminbi and Euro against the Singapore dollar, while the translation losses for 2012 arose largely from weakening of United States dollar, Renminbi, Brazilian Real and Euro against the Singapore dollar. These represented exchange differences, which were transferred to profit & loss upon disposal of subsidiaries. Keppel Corporation Limited, Page 5 of 26

13 3. BALANCE SHEETS as at 31 December G r o u p C o m p a n y Share capital 1,205,877 1,123,590 1,205,877 1,123,590 Reserves 8,495,304 8,122,362 4,489,022 4,581,934 Share capital & reserves 9,701,181 9,245,952 5,694,899 5,705,524 Non-controlling interests 3,987,682 4,332,174 Capital employed 13,688,863 13,578,126 5,694,899 5,705,524 Represented by: Fixed assets 3,798,279 3,337, Investment properties 2,187,858 5,423,060 Subsidiaries 5,094,452 4,933,380 Associated companies 5,482,173 5,266,602 Investments 264, ,380 Long term assets 278, , Intangibles 86, ,608 12,098,212 14,537,572 5,095,552 4,934,107 Current assets Stocks & work-in-progress in excess of related billings 8,994,726 7,660,898 Amounts due from: - subsidiaries 3,465,513 2,655,295 - associated companies 1,037, ,737 9,430 1,719 Debtors 1,915,747 1,839,085 33, ,737 Short term investments 445, ,107 Bank balances, deposits & cash 5,564,656 4,055,176 2,466 3,773 17,957,408 14,669,003 3,511,213 2,818,524 Current liabilities Creditors 5,409,197 5,465, , ,872 Billings on work-in-progress in excess of related costs 2,714,983 1,619,475 Provisions 163, ,169 Amounts due to: - subsidiaries 951, ,206 - associated companies 71,699 63,495 3 Term loans 516,665 1,005, ,838 Taxation 465, ,862 19,575 21,097 Bank overdrafts 473 9,342,007 9,064,221 1,406, ,175 Net current assets 8,615,401 5,604,782 2,104,280 2,276,349 Non-current liabilities Term loans 6,582,861 6,202,345 1,500,000 1,500,000 Deferred taxation 441, ,883 4,933 4,932 7,024,750 6,564,228 1,504,933 1,504,932 Net assets 13,688,863 13,578,126 5,694,899 5,705,524 Group net debt 1,535,343 3,152,723 n.a. n.a. Group net gearing ratio 0.11x 0.23x n.a. n.a. Keppel Corporation Limited, Page 6 of 26

14 NOTES TO BALANCE SHEETS 3a. Group s borrowings and debt securities (i) Amount repayable in one year or less, or on demand Secured As at As at Unsecured Secured Unsecured 198, , , ,723 (ii) Amount repayable after one year Secured As at As at Unsecured Secured Unsecured 741,725 5,841,136 1,219,852 4,982,493 (iii) Details of any collateral Certain subsidiaries of the Company pledged their assets in order to obtain loans from financial institutions. The Group has mortgaged certain properties and assets of up to an aggregate amount of $2,895,304,000 (31 December 2012: $3,104,674,000) to banks for loan facilities. 3b. Net asset value Group Company /-% /-% Net asset value per ordinary share * $5.37 $ $3.15 $ Net tangible asset per ordinary share * $5.32 $ $3.15 $ * Based on share capital of 1,807,970,459 ordinary shares as at the end of the financial year (31 December 2012: 1,797,607,004 ordinary shares). Keppel Corporation Limited, Page 7 of 26

15 3c. Balance sheet analysis Group shareholders funds increased from $9.25 billion at 31 December 2012 to $9.70 billion at 31 December The increase was mainly attributable to retained profits for 2013 and foreign exchange translation gains, partially offset by fair value loss on cash flow hedges, payment of final dividend and distribution of dividend in specie of Keppel REIT units for 2012, as well as payment of interim dividend and distribution of dividend in specie of Keppel REIT units for the half year ended 30 June Group total assets of $30.06 billion at 31 December 2013 were $0.85 billion or 2.9% higher than the previous year end. Increase in fixed assets was largely due to capital expenditure for the expansion of Keppel Merlimau Cogen power plant, acquisition of an industrial building by Infrastructure Division for development of a new data centre and other operational capex. Deconsolidation of Keppel REIT due to loss of control caused a reduction in investment properties. Higher stocks & work-in-progress were due to land acquisition costs and development expenditure incurred for projects in the Property Division, partly offset by lower work-in-progress for the Offshore & Marine Division. Group total liabilities were $16.37 billion at 31 December 2013 as compared to $15.63 billion as at 31 December Lower level of term loans was mainly a result of the deconsolidation of Keppel REIT, partly offset by additional bank borrowings taken up for working capital requirements, operational capital expenditure and acquisitions. Decrease in creditors was attributable mainly to deconsolidation of Keppel REIT partially offset by the purchase consideration payable in relation to the acquisition of a residential site in Sheshan area in Shanghai by Property Division. Group net debt of $1.54 billion is $1.61 billion lower than that as at 31 December 2012 due mainly to the deconsolidation of Keppel REIT, partly offset by capital expenditure, investment in associated companies and dividend payment. Keppel Corporation Limited, Page 8 of 26

16 4. STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 4a. Statement of changes in equity of the Group Share Capital $'000 Attributable to owners of the Company Foreign Exchange Capital Revenue Translation Reserves Reserves Account $'000 $'000 $'000 Share Capital & Reserves $'000 Noncontrolling Interests $'000 Capital Employed $' As at 1 January 1,123, ,263 7,815,216 (375,117) 9,245,952 4,332,174 13,578,126 Total comprehensive income for the year Profit for the year 1,845,792 1,845, ,582 2,396,374 Other comprehensive income * (192,887) 68,551 (124,336) 47,040 (77,296) Total comprehensive income for the year (192,887) 1,845,792 68,551 1,721, ,622 2,319,078 Transactions with owners, recognised directly in equity Contributions by and distributions to owners Dividends paid (1,356,523) (1,356,523) (1,356,523) Share-based payment 52,813 52,813 1,610 54,423 Transfer of statutory, capital and other reserves to revenue reserves 1,102 (1,102) Dividend paid to non-controlling shareholders (174,629) (174,629) Cash subscribed by non-controlling shareholders 65,348 65,348 Shares issued 82,287 (42,538) 39,749 39,749 Other adjustments (1,069) (1,069) Total contributions by and distributions to owners 82,287 11,377 (1,357,625) (1,263,961) (108,740) (1,372,701) Changes in ownership interests in subsidiaries Acquisition of subsidiaries 23,535 23,535 Acquisition of additional interest in subsidiaries (2,266) (2,266) (259) (2,525) Disposal of interest in subsidiaries (859,713) (859,713) Disposal of interest in subsidiaries without loss of control 3,063 3,063 Total change in ownership interests in subsidiaries (2,266) (2,266) (833,374) (835,640) Total transactions with owners 82,287 11,377 (1,359,891) (1,266,227) (942,114) (2,208,341) As at 31 December 1,205, ,753 8,301,117 (306,566) 9,701,181 3,987,682 13,688,863 * Details of other comprehensive income have been included in the consolidated statement of comprehensive income. Keppel Corporation Limited, Page 9 of 26

17 4a. Statement of changes in equity of the Group (cont d) Share Capital Attributable to owners of the Company Capital Reserves Revenue Reserves Foreign Exchange Translation Account Share Capital & Reserves Noncontrolling Interests Capital Employed 2012 As at 1 January 1,016, ,357 6,358,404 (135,498) 7,699,375 4,061,920 11,761,295 Total comprehensive income for the year Profit for the year 2,237,299 2,237, ,349 2,755,648 Other comprehensive income * 202,369 (239,619) (37,250) (87,413) (124,663) Total comprehensive income for the year 202,369 2,237,299 (239,619) 2,200, ,936 2,630,985 Transactions with owners, recognised directly in equity Contributions by and distributions to owners Dividend paid (789,456) (789,456) (789,456) Share-based payment 47,237 47,237 2,221 49,458 Transfer of statutory, capital and other reserves to revenue reserves 122 (122) Dividend paid to non-controlling shareholders (211,912) (211,912) Cash subscribed by non-controlling shareholders 85,325 85,325 Shares issued 107,478 (25,050) 82,428 82,428 Other adjustments Total contributions by and distributions to owners 107,478 22,309 (789,436) (659,649) (123,993) (783,642) Changes in ownership interests in subsidiaries Acquisition of subsidiaries 225, ,401 Acquisition of additional interest in subsidiaries (2,772) 8,949 6,177 (230,572) (224,395) Disposal of interest in subsidiaries with loss of control (31,518) (31,518) Total change in ownership interests in subsidiaries (2,772) 8,949 6,177 (36,689) (30,512) Total transactions with owners 107,478 19,537 (780,487) (653,472) (160,682) (814,154) As at 31 December 1,123, ,263 7,815,216 (375,117) 9,245,952 4,332,174 13,578,126 * Details of other comprehensive income have been included in the consolidated statement of comprehensive income. Keppel Corporation Limited, Page 10 of 26

18 4b. Statement of changes in equity of the Company Share Capital Capital Reserves Revenue Reserves Total 2013 As at 1 January 1,123, ,396 4,401,538 5,705,524 Profit / Total comprehensive income for the year 1,255,575 1,255,575 Transactions with owners, recognised directly in equity Dividend paid (1,356,523) (1,356,523) Share-based payment 50,574 50,574 Shares issued 82,287 (42,538) 39,749 Total transactions with owners 82,287 8,036 (1,356,523) (1,266,200) As at 31 December 1,205, ,432 4,300,590 5,694, As at 1 January 1,016, ,496 4,031,956 5,209,564 Profit / Total comprehensive income for the year 1,158,896 1,158,896 Transactions with owners, recognised directly in equity Dividend paid (789,456) (789,456) Share-based payment 43,950 43,950 Shares issued 107,478 (25,050) 82,428 Other adjustments Total transactions with owners 107,478 18,900 (789,314) (662,936) As at 31 December 1,123, ,396 4,401,538 5,705,524 Keppel Corporation Limited, Page 11 of 26

19 4c. Share capital Issued share capital and treasury shares Number of shares As at 1 January ,797,607,004 Issue of shares under share option scheme 4,814,550 Issue of shares under restricted share plan and performance share plan 5,021,413 As at 30 September ,807,442,967 Issue of shares under share option scheme 521,200 Issue of shares under restricted share plan and performance share plan 6,292 As at 31 December ,807,970,459 As at 31 December 2013, the Company is not holding any treasury shares (31 December 2012: Nil). No sales, transfers, disposal, cancellation and/or use of treasury shares took place during the year ended 31 December Share options As at 31 December 2013, there were unexercised options for 24,832,315 of unissued ordinary shares (31 December 2012: 30,314,565 ordinary shares) under the KCL Share Options Scheme. Unexercised options for 146,500 of unissued ordinary shares were cancelled during the year ended 31 December 2013 (31 December 2012: 145,200). KCL Performance Share Plan ( KCL PSP ) As at 31 December 2013, the number of contingent shares granted but not released were 2,304,755 (31 December 2012: 2,129,314) for KCL PSP. Based on the achievement factor, the actual release of the awards in ordinary shares of the Company could range from zero to a maximum of 3,457,133 under KCL PSP. KCL Restricted Share Plan ( KCL RSP ) As at 31 December 2013, the number of contingent shares granted but not released was 4,383,491 (31 December 2012: 4,103,656). Based on the achievement factor, the actual release of the awards in ordinary shares of the Company could range from zero to a maximum of 4,383,491 under KCL RSP. As at 31 December 2013, the number of awards released but not vested was 4,040,616 (31 December 2012: 3,955,446) for KCL RSP. The movements in the number of shares under KCL RSP and KCL PSP are as follows: Contingent awards: Date of Grant At KCL PSP Contingent awards granted Number of shares Adjustment upon Other release Released Cancelled adjustments At , ,100 (1,092,100) ,000 22, , ,314 26, , ,000 29, ,772 2,129, , ,100 (1,092,100) 78,441 2,304,755 KCL RSP ,103,656 (4,075,068) (28,588) ,300,500 (67,906) 150,897 4,383,491 4,103,656 4,300,500 (4,075,068) (96,494) 150,897 4,383,491 Keppel Corporation Limited, Page 12 of 26

20 4c. Share capital (cont d) Awards released but not vested: Number of shares Date of Grant At Released Vested Cancelled KCL PSP Other adjustments At ,092,100 (1,092,100) KCL RSP 1,092,100 (1,092,100) ,278,035 (1,248,335) (715) (28,985) ,677,411 (1,323,161) (13,559) (6,758) 1,333, ,075,068 (1,364,109) (54,312) 50,036 2,706,683 3,955,446 4,075,068 (3,935,605) (68,586) 14,293 4,040,616 4d. Capital reserves 2013 Group Company Share option reserve 208, , , ,396 Fair value reserve 192, ,662 Hedging reserve 1, ,546 Bonus issue by subsidiaries 40,000 40,000 Others 59,001 57, , , , ,396 Keppel Corporation Limited, Page 13 of 26

21 5. CONSOLIDATED STATEMENT OF CASH FLOWS for the year ended 31 December Note OPERATING ACTIVITIES Operating profit 2,134,369 2,621,175 Adjustments: Depreciation and amortisation 242, ,512 Share-based payment expenses 55,362 49,882 Profit on sale of fixed assets (3,865) (16,689) Gain on disposal of subsidiaries (307,726) (30,004) Gain on disposal of associated companies (3,120) Write-back of impairment of associated companies (2,818) (7,673) Write-back of provision for restructuring of operations and others (43,088) (12,000) Fair value gain on investment properties (156,285) (172,101) Operational cash flow before changes in working capital 1,918,241 2,639,982 Working capital changes: Stocks & work-in-progress (2,046) (855,588) Debtors (442,710) (80,579) Creditors (147,562) (398,236) Investments (60,219) 226,530 Intangibles (769) (1,369) Advances to associated companies (107,618) (298,399) Translation of foreign subsidiaries 27,299 (40,209) 1,184,616 1,192,132 Interest received 145, ,189 Interest paid (120,080) (120,847) Income taxes paid, net of refunds received (584,931) (224,907) Net cash from operating activities 624,663 1,006,567 INVESTING ACTIVITIES Acquisition of subsidiaries 5a (103,555) (116,265) Acquisition and further investment in associated companies (472,791) (371,002) Acquisition of fixed assets and investment properties (936,060) (835,974) Disposal of subsidiaries 5b 534,062 56,621 Return of capital and disposal of associated companies 4,645 Proceeds from disposal of fixed assets 33,088 35,248 Dividends received from investments and associated companies 267, ,344 Net cash used in investing activities (677,865) (1,069,383) FINANCING ACTIVITIES Proceeds from share issues 39,749 82,428 Proceeds from non-controlling shareholders of subsidiaries 65,348 15,125 Proceeds from disposal of interest in a subsidiary without loss of control 5c 135,513 Proceeds from term loans 5,154,702 2,859,518 Repayment of term loans (3,024,586) (528,790) Acquisition of additional shares in subsidiaries (149,427) Dividend paid to shareholders of the Company (668,506) (789,456) Dividend paid to non-controlling shareholders of subsidiaries (174,629) (211,912) Net cash from financing activities 1,527,591 1,277,486 Net increase in cash and cash equivalents 1,474,389 1,214,670 Cash and cash equivalents as at 1 January 4,055,176 3,020,454 Effect of exchange rate changes on the balance of cash held in foreign currencies 34,618 (179,948) Cash and cash equivalents as at 31 December 5d 5,564,183 4,055,176 Keppel Corporation Limited, Page 14 of 26

22 NOTES TO CONSOLIDATED STATEMENT OF CASH FLOWS 5a. Acquisition of subsidiaries and businesses During the financial year, the fair values of net assets of subsidiaries and businesses acquired were as follows: Fixed assets 67, ,998 Investment properties 133, ,409 Stocks & work-in-progress 325, ,551 Debtors 1,681 2,017 Bank balances and cash 6,775 33,059 Shareholders' loans (122,911) (142,489) Creditors (5,562) (314,268) Bank borrowings (50,607) Current and deferred taxation (51,472) (141,198) Total identifiable net assets at fair value 304, ,079 Non-controlling interest measured at noncontrolling interests' proportionate share of the net assets (23,535) (225,401) Amount previously accounted for as associated companies (45,498) (10,546) Net assets acquired 235, ,132 Assumption of shareholders' loans 122, ,489 Total purchase consideration 358, ,621 Less: Advance payment made in prior year (207,930) Less: Deferred payments (247,779) (64,367) Less: Bank balances and cash acquired (6,775) (33,059) Cash flow on acquisition 103, ,265 Significant acquisitions during the year include the acquisition of remaining 50% interest in Parksville, 100% interest in Shanghai Jinju Real Estate Development Co. Ltd ( Shanghai Jinju ), which owns a residential site in Sheshan, Songjiang District in Shanghai for development of landed homes and 60% interest in a river port in Sanshui, Guangdong Province. In the prior year, the Group acquired an interest in Aether Pte Ltd, which indirectly owns 51% interest in Beijing Aether Property Development Ltd. The Group also acquired additional 36% interest in Kingsdale Group and 100% interest in Chengdu Shengshi Jingwei Real Estate Investment Co Ltd. Keppel Corporation Limited, Page 15 of 26

23 5b. Disposal of subsidiaries During the financial year, the book values of net assets of subsidiaries disposed were as follows: Fixed assets (9,371) (21,646) Investment properties (3,757,083) (81,710) Investment in associated company (1,941,645) Intangible assets (15,549) Stocks & work-in-progress (123,156) (24,121) Debtors and other assets (122,852) (25,386) Bank balances and cash (91,200) (5,838) Creditors and other liabilities 171,058 40,404 Borrowings 2,424,159 Current and deferred taxation 13,827 14,176 Non-controlling interests deconsolidated 859,713 31,518 (2,592,099) (72,603) Amount accounted for as associated company 1,407,821 44,606 Amount accounted for as amount owing from associated company 222,651 Distribution of dividend in specie 688,017 Net assets disposed of (273,610) (27,997) Net profit on disposal (307,726) (30,004) Realisation of foreign currency translation reserve and capital reserve (43,926) (4,458) Sale proceeds (625,262) (62,459) Less: Bank balances and cash disposed 91,200 5,838 Cash flow on disposal (534,062) (56,621) Significant disposals in the year include the divestment of a subsidiary, Montfort Development Pte Ltd, which has a 50% interest in Hotel Sedona Manado in Indonesia, the deconsolidation of Keppel REIT due to loss of control and the disposal of 51% interest in PTMSS and PTMSM, which jointly developed a township development Jakarta Garden City in Jakarta, Indonesia. In the prior year, the Group completed the divestment of its partial interest in Saigon Centre Phase 1 and 2. 5c. Disposal of interest in a subsidiary without loss of control During the year, the Group disposed of its 30% interest in its subsidiary, Sherwood Development Pte Ltd to Wkdeveloper Sig I Private Limited, a wholly-owned subsidiary company of Vanke Property (Hong Kong) Company Limited. There was no gain or loss arising from this disposal as the 30% interest was sold at its net carrying value. 5d. Cash and cash equivalents Cash and cash equivalents consist of cash on hand and balances with banks. Cash and cash equivalents in the consolidated statement of cash flows comprise the following balance sheet amounts: Bank balances, deposits and cash 5,564,656 4,055,176 Bank overdrafts (473) 5,564,183 4,055,176 Keppel Corporation Limited, Page 16 of 26

24 5e. Cash flow analysis Net cash from operating activities was $625 million compared to that of $1,007 million in the previous year. This was due mainly to higher operational activities in Net cash used in investment activities was $678 million. The Group spent $1,512 million on acquisitions and operational capex. This comprised principally acquisition of an associated company, Equity Rainbow, further investment in associated companies, capital expenditure for the expansion of Keppel Merlimau Cogen power plant, acquisition of interest in Shanghai Jinju, acquisition of a river port and an industrial building by Infrastructure Division for development of a new data centre and other operational capex. Divestment and dividend income totalled $835 million, mainly due to the deconsolidation of Keppel REIT and the divestment of PTMSS and PTMSM. Net cash from financing activities was $1,528 million compared to $1,277 million in the previous year. The net proceeds from loans of $2,130 million were $201 million lower due to lower bank borrowings. Proceeds from non-controlling shareholders of $65 million were $50 million higher. Net increase in cash and cash equivalents of $1,474 million for the current year was $259 million higher than AUDIT The financial statements have not been audited nor reviewed by our auditors. 7. AUDITORS' REPORT Not applicable 8. ACCOUNTING POLICIES Except as disclosed in paragraph 9 below, the Group has applied the same accounting policies and methods of computation in the financial statements for the current financial year compared with those of the audited financial statements as at 31 December CHANGES IN THE ACCOUNTING POLICIES The Group adopted the new/revised FRS that are effective for annual periods beginning on or after 1 January Changes to the Group s accounting policies have been made as required, in accordance with the transitional provisions in the respective FRS. The following are the new or amended FRS that are relevant to the Group: Amendments to FRS 1 Presentation of Items of Other Comprehensive Income Revised FRS 19 Employee Benefits FRS 113 Fair Value Measurement Amendments to FRS 107 Disclosures - Offsetting Financial Assets and Financial Liabilities Improvements to FRSs Amendments to FRS 1 Presentation of Financial Statements - Amendments to FRS 16 Property, Plant and Equipment - Amendments to FRS 32 Financial Instruments: Presentation Keppel Corporation Limited, Page 17 of 26

25 The adoption of the above amended FRS did not have any significant impact on the financial statements of the Group, except for the following: Amendments to FRS 1 Presentation of Items of Other Comprehensive Income The Amendments to FRS 1 change the grouping of items presented in other comprehensive income. Items that can be reclassified to profit or loss at a future point in time will be presented separately from items which will never be reclassified. As the amendments only affect the presentations of items that are already recognised in other comprehensive income, there is no impact on the Group s financial position and financial performance upon adoption of these amendments. FRS 113 Fair Value Measurements FRS 113 provides a single source of guidance for all fair value measurements. FRS 113 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted by FRS. The Group s policy is to revalue its investment properties on an annual basis. Keppel Corporation Limited, Page 18 of 26