SBI OFFSHORE LIMITED LEADING ASIA S INTEGRATED OFFSHORE EQUIPMENT PROVIDER

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1 SBI OFFSHORE LIMITED ASIA S LEADING INTEGRATED OFFSHORE EQUIPMENT PROVIDER ANNUAL REPORT 2009

2 OUR MISSION: TO BECOME ASIA S LEADING INTEGRATED PROVIDER OF OFFSHORE EQUIPMENT CONTENTS Company Profile Financial Highlights Executive Chairman and CEO s Message Board of Directors Key Management Corporate Information Corporate Governance Financial Statements Statistics of Shareholdings Notice of Annual General Meeting Notice of Book Closure Proxy Form SBI Offshore Limited (the Company ) was listed on Catalist of the Singapore Exchange Securities Trading Limited ( SGX-ST ) on 11 November The initial public offering of the Company was sponsored by PrimePartners Corporate Finance Pte. Ltd. (the Sponsor ). This annual report has been prepared by the Company and its contents have been reviewed by the Sponsor for compliance with the relevant rules of the SGX-ST. The Sponsor has not independently verified the contents of this annual report. This annual report has not been examined or approved by the SGX-ST and the SGX- ST assumes no responsibility for the contents of this annual report, including the correctness of any of the statements or opinions made or reports contained in this annual report. The contact person for the Sponsor is Mr Mark Liew, Managing Director, Corporate Finance, at 1 Raffles Place, #30-03 OUB Centre, Singapore , telephone (65)

3 DESIGN INNOVATE INTEGRATE

4 02 COMPANY PROFILE Established since 1994, Singapore home-grown SBI Offshore Limited ( SBI Offshore ) is primarily engaged in the marketing and distribution of offshore equipment to shipyards and builders of jack-up rigs, semi-submersibles, drillships, and mobile offshore production platforms in Asia. We have since carved a niche as a significant player in the offshore equipment market and currently represent major offshore equipment original equipment manufacturers ( OEMs ) in the world, including Aker Solutions (Norway), Wilhelmsen Marine Engineering (Norway), Sea Reef LLC (USA) and Jiangyin Neptune Marine Appliances Co., Ltd (People s Republic of China ( PRC )). Our customers include Jurong Shipyard, PPL Shipyard, Sembawang Shipyard, Cosco Nantong Shipyard Co., Ltd, CNOOC (China National Offshore Oil Corporation), China Merchants Heavy Industry (Shenzhen) Co., Yantai Raffles Offshore Ltd and Jutal Engineering Co., Ltd. Our marketing and distribution network currently encompasses Singapore, the PRC, Malaysia, Indonesia, Vietnam and the Philippines. We had in December 2010 completed the transfer of our production operations to Jiangyin PRC, to enable us to offer contract engineering services to equipment OEMs. This initiative will propel SBI Offshore up the value chain expand our value-added one-stop solutions to both customers and equipment OEM principals and thus, generate additional revenue streams.

5 SBI OFFSHORE LIMITED ANNUAL REPORT 2009 FINANCIAL HIGHLIGHT 03 US$ 000 FY2008 FY2009 Change (%) Revenue 8,279 12, Gross Profit 2,431 4, Gross Profit Margin (%) 29.4% 34.4% 5ppt Profit Before Tax 2,020 2, Profit After Tax 1,641 1, EPS (cents) * N.A. Current Assets 6,692 9, Total Assets 7,608 12, Current Liabilities 4,811 4,134 (14.1) Total Liabilities 5,272 5, Net Assets 2,336 6, Equity 2,342 6, NTA per share (cents) * * Based on Post-Placement Shares of 110,680,100 Revenue (US$ 000) Gross Profit (US$ 000) 14,000 12,000 10,000 8,000 6,000 4,000 2, ,279 FY ,195 FY2009 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, ,431 FY2008 4,196 FY2009

6 DELIVERING WORLD-CLASS MARINE ENGINEERING SOLUTIONS We represent some of the largest and recognised rig equipment OEMs in the world. Coupled with our tireless and continuous efforts of providing solutions for our customers in the offshore and marine industry; we have since carved out a niche position as a significant supplier in the offshore equipment market since our establishment in Our marketing value proposition lies in our ability to bridge principals, largely from Europe and the United States, with shipyards and other offshore players in the Asia-Pacific region -- primarily in Singapore, China, Korea, Malaysia, Indonesia, Thailand and Vietnam; delivering quality at competitive pricing to our clients.

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8 06 EXECUTIVE CHAIRMAN AND CEO S MESSAGE DEAR VALUED SHAREHOLDERS, On behalf of the Board of Directors (the Board ), I am pleased to deliver the annual report of SBI Offshore Limited ( SBI Offshore or the Group ) ( FY2009 ). FY2009 has been a defining year for SBI Offshore Limited ( SBI Offshore or the Group ) as we achieved new milestones in financial performance despite a significant slowdown in new orders for our customers (principally the shipyards building mobile drilling and production units in Asia). This reflected the success of our business and marketing strategies, which has allowed us to establish customer loyalty and goodwill, which in turn generated customer referrals for our portfolio of products and services. On 11 November 2009, SBI Offshore was listed successfully on Catalist, the sponsor-supervised board of the Singapore Exchange Securities Trading Limited (the IPO ). The IPO, which raised approximately S$4.3 million in net proceeds, marks a dramatic new chapter in the history of SBI Offshore as our higher profile will allow us to better position ourselves for new business opportunities and to tap the capital market for future expansion both geographically and in core competencies. A Review of FY2009 For FY2009, the Group s net profit rose 20.3% to US$2.0 million from US$1.7 million for FY2008, on the back of revenue of US$12.2 million and US$8.3 million, respectively. The encouraging growth in top- and bottom-line was mainly driven by our marketing and distribution business, which was boosted by higher sales of pipes and fittings from our China customers and higher commission revenue from our two key principals, Aker Solutions ASA and ABB Mijo AS. Our net profit of US$2.0 million includes IPO expenses of US$0.43 million as well as increase in staff costs amounting to US$0.39 million. Reflecting the increased revenue and higher profits, fully diluted earnings per share, based on the post-ipo share capital of

9 SBI OFFSHORE LIMITED ANNUAL REPORT FY2009 was a defining year for SBI Offshore as we entered a new phase of growth Mr. Jonathan Hui Executive Chairman & CEO, SBI Offshore Limited 110,680,100 shares, rose to 1.80 US cents in FY2009, from 1.49 US cents a year earlier. Net asset value per share was 6.12 US cents as at 31 December 2009, up from 2.12 US cents a year ago. In line with the higher revenue, cost of sales for FY2009 rose 36.8% to US$8.0 million from US$5.8 million a year ago. Gross profit rose significantly, by 72.6%, to US$4.2 million in FY2009 from US$2.4 million a year ago, mainly due to higher commission revenue. IPO expenses of approximately US$0.43 million, together with an increase in salaries of approximately US$0.39 million paid to new employees and remuneration to Directors as the Group expanded its scale of operations, contributed to the increase in general and administrative expenses by 284.5% to US$1.86 million from US$0.48 million in FY2008. As at 31 December 2009, non-current assets increased to US$3.23 million from US$0.92 million a year ago, largely due to purchases of fixed assets for our new contract engineering business segment and investment in our associated company, Jiangyin Neptune Marine Appliance Co., Ltd, in March Non-current liabilities increased to US$1.37 million from US$0.46, mainly due to increased bank borrowings. Current assets increased to US$9.13 million from US$6.69 million a year ago, mainly due to an increase in cash and cash equivalents to US$2.23 million arising from net proceeds from the IPO. Current liabilities reduced to US$4.13 million from US$4.81 million a year ago, partially due to the repayment of preference shares worth US$2.08 million. Appointment of Catalist Sponsor In compliance with the listing requirements on the Catalist, in November 2009, the Group appointed PrimePartners Corporate Finance Pte. Ltd. as our continuing sponsor, who will perform a supervisory role to ensure that corporate actions and public documents of the Group are in compliance with listing rules and regulations. Dividends In view of the Group s performance in FY2009, the Board of Directors has recommended a final dividend of 0.2 Singapore cents per share to be paid to shareholders. This final dividend follows an interim dividend of 0.2 Singapore cents, which was paid to shareholders on 12 January Outlook Contract Engineering Business to Grow Substantially The IPO marked a major milestone in our 15-year history. Although we have been a leading provider of OEM equipment to the offshore industry, we see the recent

10 08 EXECUTIVE CHAIRMAN AND CEO S MESSAGE industry slowdown as a window of opportunity to work more closely with our principals and suppliers in order to provide more competitively priced products and services to our customers. With the acquisition of related assets and business of a davit manufacturing facility in Jiangyin, Jiangsu Province, China in January 2010, we are now able to offer our principals contract engineering services in Asia which will serve to reduce production and transportation costs and delivery lead times compared to the United States or Europe. This will place us in a strong position to secure more orders due to our competitive pricing and shorter delivery lead times, with production conducted close to the customers yards. In addition, subsequent to FY2009, the Group had in March 2010 entered into a joint-venture agreement with Houstonbased design and engineering company Sea Reef LLC. The joint venture, in which SBI Offshore will take a 60% stake, combines Sea Reef s expertise in the design and engineering of offshore cranes, winches and deck equipments with our established marketing networks and contract engineering capabilities. The joint venture will position us to capitalise on the growing trend to outsource manufacturing of major offshore equipment to Asian regions. With the above growth plans, we expect our contract engineering business, which will offer higher margins, to contribute to 60% of our revenues in 2011 compared to 5% in As China aims to be the world s largest shipbuilder, it will favour suppliers who build their equipment in the country. We aim to be a leading supporter of China s ambitious shipbuilding plans as currently, we have distribution rights for equipment that make up at least 30% of the total cost of any new mobile offshore drilling unit. Geographic Expansion of our Marketing and Distribution Business We are also expanding our marketing and distribution business geographically to emerging offshore markets such as Vietnam and Brazil. We believe that our long experience and specialisation in offshore equipment will be appreciated

11 SBI OFFSHORE LIMITED ANNUAL REPORT by up-and-coming yards in these countries which are looking to build mobile drilling and production units for the first time. There is no room for equipment failure or delayed delivery as the daily charter rates for such units are very high. Our ability to offer contract engineering services has also helped us secure new distributorships as offshore equipment OEMs recognise our-value added services. In recent months, we have added specialised hoses, drag chains and personnel transporters to our product portfolio. We expect to continue to grow the revenues in our marketing and distribution business as we see signs of new orders for our customers. Recent Developments In March 2010, the Group s manufacturing facility in Jiangyin, Jiangsu Province, People s Republic of China was audited by Aker MH AS ( MH ), one of the world s largest provider of drilling equipment packages, and is now qualified as a supplier to MH. We believe that the Group s manufacturing facility is the only one in China audited by MH and qualified to be its supplier of drilling equipment. SBI will be commencing discussions with MH over big structural equipment types that can be fabricated and assembled in the Group s manufacturing facility in China, including derricks, BOP handling equipment, cranes, catwalk machines etc. Appreciation Our achievements in the year under review would not have been possible without the strong support of our customers, principals, business partners, banks, and the concerted efforts of our directors as well as management and staff. I would like to take this opportunity to express my appreciation to all who have helped us in one way or another, especially in preparation for and during our IPO. To our advisers, consultants, professionals, bankers, investors, we say a big thank you. Moving forward, we also welcome new shareholders to the Group and look forward to your continued support. Jonathan Hui Executive Chairman and CEO

12 ENGINEERING OUR FUTURE TODAY We will also be offering contract fabrication and assembly services to equipment OEMs. This initiative will propel SBI Offshore up the value chain -- expand our value-added one-stop solutions to both customers and equipment OEM principals and thus, potential additional revenue streams.

13 Our manufacturing facility in Jiangyin is equipped with Asia s tallest test tower of free-fall lifeboats.

14 12 BOARD OF DIRECTORS Mr. Jonathan Hui Executive Chairman and CEO Mr. Jonathan Hui is our Executive Chairman and Chief Executive Officer, having been appointed on 17 March He is responsible for the daily overall management of our Group. Mr. Hui has vast experience in the financial and business sector. He was an audit senior with Arthur Andersen, United Kingdom ( ), senior manager with Arthur Andersen, Singapore ( ), Vice- President of Merrill Lynch ( ) and Executive Research Director of UBS Securities in Mr. Hui was also with Asiaborders Capital Pte. Ltd., Singapore ( ), serving as its Chief Executive Officer responsible for investments and management of investee companies. He was also a Director at Aviation and Electronics Support Pte. Ltd. Singapore ( ) and was responsible for finance as well as marketing to the China market. Mr. Hui subsequently co-founded the Swanlin Asia Group in 2005 and was responsible for business development and finance. He has a Bachelor of Economics (Honours) degree from Leeds University, United Kingdom, and is currently a Chartered Accountant and a Certified Public Accountant in the Institute of Chartered Accountants in England and Wales and Institute of Certified Public Accountants of Singapore, respectively. Mr. David Tan Executive Director Mr. David Tan is our Executive Director, having been appointed since 1 July He is responsible for securing agency contracts from Aker MH of Norway to market its range of drilling equipment in Asia, including Singapore, China, Vietnam, Thailand, Indonesia and Malaysia. He founded the Company in 1994, when the company was involved in the trading of equipment and supplies related to the offshore industry. Prior to SBI Offshore s listing, he was responsible for securing several agency agreements from various companies such as Wilhelmsen Callenberg for HVAC Systems, Jiangyin Neptune for lifeboats and davits and Aker Solutions (Malaysia) for marine drilling risers. From 1973 to 1987, Mr. Tan was a manager in the rig-building commercial department of Keppel FELS Limited and was involved in cost estimations and marketing of rig-building services. Subsequently, he was the manager of Sea Scan International where he was involved in the procurement of equipment and accessories for the shipbuilding and/or ship repairing activities of Keppel Group. He was also the business manager of Aker MH for the China market from 2007 to 2008.

15 SBI OFFSHORE LIMITED ANNUAL REPORT Ms. Chen Jiayu Alternate Director to David Tan Ms. Chen Jiayu is our Customer Support Director and Alternate Director to David Tan. She was appointed as alternate Director to David Tan on 18 July From 2007 to 2009, Ms. Chen was our Executive Director and was responsible for operational, human resources and finance matters. Mr. Giang Sovann Lead Independent Director Mr. Giang Sovann is our Lead Independent Director, having been appointed on 28 September He started his career as a public accountant with Arthur Young, Canada & Singapore and was promoted to senior audit manager. With more than 30 years of financial and business management experience, he was the Finance Director and General Manager of Dowty Aerospace, Executive Director and Regional Financial Controller of Golden Polindo Industries Group, Chief Financial Officer of the Singapore Island Country Club, Innovalues Limited and Sunmoon Food Company Limited. He is currently the Executive Director of the Singapore Institute of Directors. Mr. Giang graduated with a Bachelor of Administration degree with great distinction from University of Regina, Canada, and was qualified as a Chartered Accountant with the Canadian Institute of Chartered Accountants. He is also a Certified Public Accountant with the Institute of Certified Public Accountants of Singapore and a member of the Singapore Institute of Directors.

16 14 BOARD OF DIRECTORS Mr. Chan Lai Thong Independent Director Mr. Chan Lai Thong is our Independent Director, having been appointed on 28 September Mr. Chan has about 30 years of international marketing and business development experience in several industries, particularly in the offshore and marine industry. He has lived and operated in various parts of the world such as in Southeast Asia, Middle East, Australia, Eastern Europe, Central Asia and China. He is currently a Director of several private companies including Weatherock China Ltd, Chongqing Panxin Industry Company Ltd, and Sichuan Bangkok Investment Company Ltd. Prior to that, he was with the Keppel Group and was a Group General Manager in both Keppel Corporation Ltd and Keppel Offshore & Marine Ltd. While with Keppel, Mr. Chan helped develop the markets in Southeast Asia, Middle East, Bulgaria, Azerbaijan and Kazakhstan. Mr. Chan graduated from the National University of Singapore with a Bachelor of Science (Honours) in 1980 and holds Diplomas in Administrative Management, Marketing Management and Marketing from Institute of Administrative Management (United Kingdom), Ngee Ann Polytechnic and Institute of Marketing (United Kingdom), respectively. Mr. Wong Kok Hoe Independent Director Mr. Wong Kok Hoe is our Independent Director, having been appointed on 28 September Mr. Wong is the Group Chief Operating Officer of the Centurion Group. The Group has interests in fund management, private equity investments and property development and investments. Prior to this, he was a partner in a local advocates and solicitors firm. He has more than 18 years of experience in legal practice and his main areas of practice were corporate law, corporate finance, mergers and acquisitions and venture capital. He is also a director of various public listed companies in Singapore. Mr. Wong holds a Bachelor of Laws (Honours) degree from the National University of Singapore.

17 SBI OFFSHORE LIMITED ANNUAL REPORT 2009 KEY MANAGEMENT 15 Chen Jiayu Customer Support Director Chen Jiayu is our Customer Support Director and alternate Director to David Tan. Please refer to section entitled Board of Directors for further details. Chng Tien Hsiang, Jeremy General Manager, Marketing Chng Tien Hsiang, Jeremy is our General Manager, Marketing and has been with our Company since March He is responsible for the sales of our Company s product and services within Asia and provides customer support for any technical or commercial bids made by our Company. He is also responsible for marketing our products to various companies and shipyards and acts as the liaison between our customers and our suppliers. Chng Tien Hsiang, Jeremy graduated with a Diploma in Computer Science and Information Systems from the Singapore Polytechnic in 1996 and a Bachelor in Computer Science and Information Systems (2nd Upper Honours) from the University of Salford, United Kingdom. Choong Jun Yuan Program Manager Choong Jun Yuan is our Program Manager and has been with our Company since June He is responsible for managing the fabrication and assembly of offshore equipment, as well as sales of our Company s product and services within Asia. Prior with SBI, he was the project manager with Regional Marine and Engineering Services and operation manager with Coruweld Engineering. Choong Jun Yuan holds a Diploma in Mechanical Engineering from Singapore Polytechnic. Tan Seow Chee Finance Manager Tan Seow Chee is our Finance Manager, responsible for the financial management and internal controls of our Group. Prior to joining us in 2009, she was an accountant with Pacific Radiance Ltd and Jaya Holdings Ltd. Tan Seow Chee graduated with a Bachelor in Commerce (Accounting and Marketing) degree from Curtin University of Technology, Australia, and is qualified as a certified practising accountant and certified public accountant in Australia and Singapore respectively.

18 16 CORPORATE INFORMATION BOARD OF DIRECTORS Jonathan Hui (Executive Chairman and Chief Executive Officer) David Tan (Alternate Director: Chen Jiayu) (Executive Director) Giang Sovann (Lead Independent Director) Chan Lai Thong (Independent Director) Wong Kok Hoe (Independent Director) AUDIT COMMITTEE Giang Sovann (Chairman) Chan Lai Thong Wong Kok Hoe NOMINATING COMMITTEE Wong Kok Hoe (Chairman) Jonathan Hui Giang Sovann REMUNERATION COMMITTEE Chan Lai Thong (Chairman) Giang Sovann Wong Kok Hoe COMPANY SECRETARIES Tan Seow Chee, Certified Public Accountant Chan Lai Yin, ACIS REGISTERED OFFICE 31 International Business Park #05-05 Creative Resource Singapore Tel: Fax: Website: SHARE REGISTRAR Tricor Barbinder Share Registration Services 8 Cross Street #11-00 PWC Building Singapore AUDITORS BDO LLP Public Accountants and Certified Public Accountants 19 Keppel Road #02-01 Jit Poh Building Singapore Partner-in-charge: Leong Hon Mun Peter (Appointed since the financial year ended 31 December 2009) PRINCIPAL BANKER DBS Bank Ltd. 6 Shenton Way DBS Building Tower One Singapore SPONSOR PrimePartners Corporate Finance Pte. Ltd. 1 Raffles Place #30-03 OUB Centre Singapore

19 SBI OFFSHORE LIMITED ANNUAL REPORT 2009 CORPORATE GOVERNANCE 17 SBI Offshore Limited (the Company ) was admitted to the Official List of SGX-Catalist on 11 November The Board of Directors of the Company (the Board ) is committed to its policy of managing the affairs of the Group with transparency, integrity and accountability by ensuring that sound framework of best corporate practices is in place at all level of the Group s business. The Board acknowledges its principal responsibility towards protecting and enhancing long-term shareholders value and investors interest. The Board is pleased to confirm that the Company has complied with the principles of the Code of Corporate Governance 2005 (the Code ) and would like to outline the manner the Group has applied the principles as set out in the Code, except where otherwise stated. PRINCIPLE 1: THE BOARD S CONDUCT OF AFFAIRS SBI Offshore Limited is directed by an effective Board to lead and control the Company. The Board is entrusted with the responsibility for the overall management of the business and corporate affairs of the Group. The Board works closely with management. All Directors objectively make decisions in the interest of the Company. The Board meets at least twice annually. Additional meetings are also held at such other times as and when required to address any specific significant matters that may arise. The general agenda of the meeting includes discussion over matters arising from time to time, financial results of the Group and any other issues requiring the Board s deliberation and approval. The agenda for each Board meeting is circulated to all the Directors for their perusal prior to the convening of each meeting to enable Directors to obtain further clarification / explanation prior to the meeting to ensure smooth proceeding of each meeting. The proceeding and resolutions reached at each Board meeting are minuted and signed by the Chairman of the meeting. Besides Board meetings, the Board exercises control on specific matters that require Board s deliberation and approval through the circulation of directors resolution(s). The Articles of Association of the Company provide for directors to convene meetings by teleconferencing or videoconferencing when a physical board meeting is not possible. Timely communication with the members of the Board can be achieved through electronic means. The Board has identified, without limitation, the following matters that require its approval: Approval of periodic financial results announcements and annual audited financial statements; Declaration of dividends and other returns to shareholders; Major corporate policies on key areas of operation; Corporate or financial restructuring and share issuances; Mergers and acquisitions; Material acquisitions and disposals; Approval of transactions involving interested person transactions; Appointments of new Directors. To improve management efficiency, certain functions have been delegated to committees, namely, the Audit Committee ( AC ), the Nominating Committee ( NC ) and the Remuneration Committee ( RC ) (collectively, the Board Committees ). Each of these Board Committees has its own clearly defined terms of reference and its actions are reported regularly to and monitored by the Board. New appointments to the Board will be briefed by management on the Group s business operations and governance practices to ensure that new Directors have an insight of the Group. Directors are informed of development relevant to the Group including changes in laws and regulations that impact the Group s operations. Directors also have access to all information concerning the Group. They are encouraged to attend workshops and seminars to enhance their skills and knowledge.

20 18 CORPORATE GOVERNANCE The attendance of the Directors at meetings of the Board and Board Committees held since the listing of the Company up to the end of the financial year under review are set out as follows: Directors No. of meetings held while a member Board AC NC RC No. of No. of No. of No. of meetings No. of meetings No. of meetings meetings held while meetings held while meetings held while attended a member attended a member attended a member No. of meetings attended Jonathan Hui David Tan Chen Jiayu (Alternate Director to David Tan) 3 1 (1) Giang Sovann 3 2 (2) Chan Lai Thong 3 2 (3) Wong Kok Hoe 3 2 (4) Notes: (1) Ms Chen Jiayu had resigned as Director with effect from 14 August 2009 and has attended 1 Board meeting prior to her resignation. (2) Mr Giang Sovann had been appointed as Director with effect from 28 September (3) Mr Chan Lai Thong had been appointed as Director with effect from 28 September (4) Mr Wong Kok Hoe had been appointed as Director with effect from 28 September PRINCIPLE 2: BOARD COMPOSITION AND GUIDANCE The Board currently comprises two Executive Directors and three Independent Directors. The Board members as at the date of this report are : Jonathan Hui, Executive Chairman and Chief Executive Officer David Tan, Executive Director (Alternate Director : Chen Jiayu) Giang Sovann, Lead Independent Non-Executive Director Chan Lai Thong, Independent Non-Executive Director Wong Kok Hoe, Independent Non-Executive Director The criteria for independence are determined based on the definition as provided in the Code. The Board considers an independent director as one who has no relationship with the Group, its related companies or its officers that could interfere, or be reasonably perceived to interfere with the exercise of the director s independent judgement with the view to the best interest of the Company and the Group. There is a strong and independent element on the Board whereby at least one third of the Board comprises Independent Directors. The Independent Directors have confirmed that they do not have any relationship with the Company or its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Directors independent business judgment with a view to the best interests of the Company. The Nominating Committee has reviewed and determined that the said Directors are independent. The Board comprises business leaders and professionals with industry and financial backgrounds and its composition enables management to benefit from a diverse and objective external perspective on issues raised before the Board. The Board will constantly examine its size with a view to determining its impact on its effectiveness. The Board, taking into account the nature of operations of the Group, considers its current size to be adequate for effective decision-making. The Nominating Committee is of the view that the current Board comprises persons who as a group provide capabilities required for the Board to be effective. Profiles of the Directors are set out on pages 12 to 14 of this report.

21 SBI OFFSHORE LIMITED ANNUAL REPORT 2009 CORPORATE GOVERNANCE 19 PRINCIPLE 3: EXECUTIVE CHAIRMAN AND CHIEF EXECUTIVE OFFICER Jonathan Hui assumed the role of Executive Chairman and Chief Executive Officer ( CEO ) of the Company on 17 March The Executive Chairman is responsible for the daily overall management of the Group and ensures that the Group s business are kept distinct, increasing the accountability and capacity of the Board for independent decision making. The Executive Chairman shall: a. Schedule meetings that enable the Board to perform its duties responsibly while not interfering with the flow of the Group s operations; b. Review meeting agenda; c. Exercise control over quality, quantity and timeliness of the flow of information between management and the Board; d. Ensure effective communication with shareholders; e. Assist in ensuring compliance with the Group s guidelines on corporate governance. The Executive Chairman executes decisions taken by the Board and is responsible for the conduct of the Group s daily business operations. Although the roles of Executive Chairman of the Board and CEO are not separated, the Board is of the view that there are sufficient safeguards and checks to ensure that the process of decision making by the Board is independent and based on collective decisions without any individual or group of individuals exercising any considerable concentration of power or influence and there is accountability for good corporate governance. All the Board committees are chaired by Independent Directors and half of the Board consists of Independent Directors. For good corporate governance, Mr Giang Sovann had been appointed as the Lead Non-Executive Independent Director. As the Lead Independent Non-Executive Director, he shall be available to the shareholders where they have concerns which contact through the normal channels of the Executive Chairman and CEO has failed to resolve or for which such contact is inappropriate. PRINCIPLE 4: BOARD MEMBERSHIP The NC comprises the following members, the majority of whom, including the Chairman, are independent: Wong Kok Hoe - Chairman, Independent Non-Executive Director Giang Sovann Member, Independent Non-Executive Director Jonathan Hui - Member, Executive Chairman and CEO The NC is scheduled to meet at least once a year. Its role is to establish an objective and transparent process for the appointment or re-appointment of members of the Board and of the various Board Committees, as well as to evaluate and assess the effectiveness of the Board as a whole, and the contribution of each Director to its effectiveness. For new appointments, the NC will take into consideration the current Board size and its mix and determine if the candidate s background, experience and knowledge in technology, business or finance management skills will bolster the core competencies of the Board. The selected candidate must also be a person of integrity and be prepared to commit time and attention to the Company s affairs, especially if he is serving on multiple boards. Where a vacancy arises under any circumstances, or where it is considered that the Board would benefit from the services of a new director with particular skills, the NC, in consultation with the Board, determines the selection criteria and selects candidates with the appropriate expertise and experience for the position. The NC is also charged with the responsibility of determining annually whether a director is independent. Each NC member will not take part in determining his own re-nomination or independence. During the financial year, the NC had reviewed and determined that Mr Giang Sovann, Mr Chan Lai Thong and Mr Wong Kok Hoe are independent.

22 20 CORPORATE GOVERNANCE The Company s Articles of Association requires newly appointed directors to hold office until the next Annual General Meeting ( AGM ) and at least one third of the Directors to retire by rotation at every AGM. The NC recommended to the Board the re-election of Mr David Tan, Mr Giang Sovann, Mr Chan Lai Thong and Mr Wong Kok Hoe, who are due for retirement at the forthcoming AGM. In making the recommendation, the NC had considered the Directors overall contributions and performance. Since the Company s listing on 11 November 2009 until the end of financial year under review, the NC had met once. PRINCIPLE 5: BOARD PERFORMANCE The NC decides on how the Board s performance is to be evaluated and proposes objective performance criteria, subject to the Board s approval, which addresses how the Directors have enhanced long-term shareholders value. The Board has also implemented a process to be carried out by the NC for assessing the effectiveness of the Board as a whole and for assessing the contribution from each individual Director to the effectiveness of the Board. Each member of the NC shall abstain from voting on any resolution in respect of the assessment of his performance or re-election as a Director. The results of the evaluation process will be used by the NC, in consultation with the Chairman of the Board, to effect continuing improvements on Board processes. The NC is of the view that the performance of the Board as a whole was satisfactory. Although some of the Board members have multiple board representations, the NC is satisfied that sufficient time and attention has been given by the Directors to the Group. PRINCIPLE 6: ACCESS TO INFORMATION The Board is provided with adequate and timely information to enable it to fulfill its responsibilities. Management reports with the necessary information including but not limited to financial reports are provided to the Directors to enable them to make informed decisions. The Directors have separate and independent access to the Group s senior management and the Company Secretary at all times. A Company Secretary will be present at all Board meetings to ensure that they are conducted in accordance with the Articles of Association of the Company, applicable rules and regulations, and the provisions in the Listing Manual Section B: Rules of Catalist (the Rules of Catalist ) of the Singapore Exchange Securities Trading Limited ( SGX-ST ) are complied with. The Directors, whether individually or as a group, may engage independent professional at the Company s expense to obtain advice and enable Directors to discharge their duties with adequate knowledge on the matters being deliberated. The cost of such professional advice will be borne by the Company. PRINCIPLE 7: PROCEDURES FOR DEVELOPING REMUNERATION POLICIES The RC comprises the following members, all of whom, including the Chairman, are independent: Chan Lai Thong Chairman, Independent Non-Executive Director Giang Sovann Member, Independent Non-Executive Director Wong Kok Hoe Member, Independent Non- Executive Director The RC is scheduled to meet at least once a year. The responsibilities of the RC include: To review and recommend to the Board a framework of remuneration and determine the appropriateness of specific remuneration packages awarded to attract, retain and motivate Executive Directors, the Chief Executive Officer ( CEO ) and key officers. The recommendations should cover all aspects of remuneration, including but not limited to director s fees, salaries, allowances, bonuses, options ;and benefits in kind; To review the proportion of such remuneration that should be linked to performance of the Company as well as individual incumbent; To administer the Employees Share Option Scheme or any long-term incentive scheme.

23 SBI OFFSHORE LIMITED ANNUAL REPORT 2009 CORPORATE GOVERNANCE 21 The RC may obtain independent advice as it deems necessary on the Company s recommendation matters and expenses of such advice shall be borne by the Company. PRINCIPLE 8: LEVEL AND MIX OF REMUNERATION As part of its review, the RC ensures that the remuneration packages are comparable within the industry and with similar companies and has taken into consideration the Group s relative performance and the performance of individual Directors. The Independent Directors do not have service agreements with the Company. They are paid directors fees, which are determined by the Board based on their contribution, taking into account factors such as the effort, time spent and the responsibilities of the Independent Directors. The directors fees are subject to approval by the shareholders at each AGM. Except as disclosed, the Independent Directors do not receive any other remuneration from the Company. The Company had entered into service agreements with the two Executive Directors, Mr Jonathan Hui and Mr David Tan on 1 August 2009 for a period of five years with effect from the date of admission of our Company to the Official List of the SGX-Catalist. The Company adopts a remuneration policy that comprises a fixed component as well as a variable component. The fixed component is in a form of base salary and benefits while the variable component is pegged to the performance of the Group. All revisions to the remuneration packages for Directors and key executives are subject to the review and approval of the Board. No Director is involved in the deliberation of his own remuneration package. PRINCIPLE 9: DISCLOSURE ON REMUNERATION Breakdown of remuneration packages of Directors and top key executives of the Group for the financial year ended 31 December 2009 is as follows: Salary Bonus Others Fees Total % % % % % Directors Below S$250,000 Executive Directors: Jonathan Hui David Tan Chen Jiayu (Alternate Director to David Tan) Independent Directors: Giang Sovann Chan Lai Thong Wong Kok Hoe Key Executives Below S$250,000 Chng Tien Hsiang, Jeremy Choong Jun Yuan Chen Jiayu Tan Seow Chee Further information on the Directors and key executives are found on pages 12 to 15 of this report. Immediate family members of a Director or a CEO The Company does not have any employee who is an immediate family member of the Directors or the CEO and whose remuneration exceeds S$150,000 during the financial year ended 31 December 2009.

24 22 CORPORATE GOVERNANCE Share option scheme The SBI Offshore Employee Share Option Scheme ( Share Option Scheme ) was established on 28 September The RC administers the Share Option Scheme based on the rules of the Share Option Scheme and determine participation eligibility, options offers and share allocation and attend to matters that may be required in connection with the Share Option Scheme. There were no share options granted during the financial year ended 31 December On 12 March 2010, the Company has offered to grant options pursuant to the Share Option Scheme. Information on the options granted under the Share Option Scheme to participants are as follow: Options granted to Options granted to current date Aggregate options granted since commencement of scheme to current date Aggregate options exercised since commencement of scheme to current date Aggregate options outstanding as at current date Employees 250, , ,000 No options were granted since the commencement of the Share Option Scheme to Directors of the Company, controlling shareholders of the Company and their associates and employees of its subsidiaries during the financial year under review and up to current date. PRINCIPLE 10: ACCOUNTABILITY The Board is accountable to shareholders and disseminates information on the Group s performance, position and prospects through the half-year and full-year results announcements and the annual reports. The management provides the Board with understandable and detailed information of the Group s performance, position and prospects for the discharge of its duties. PRINCIPLE 11: AUDIT COMMITTEE The AC currently comprises the following members, all of whom are Independent Non-Executive Directors: Giang Sovann Chairman, Independent Non-Executive Director Chan Lai Thong Member, Independent Non-Executive Director Wong Kok Hoe Member, Independent Non-Executive Director Two of the members have accounting or related financial management expertise and the Board considers that the members are appropriately qualified to discharge the responsibilities of the AC. The main functions of the AC include: Review the overall scope of examination of the external auditors, the audit plan and their evaluation of the Group s system of risk management, compliance and internal controls; Review the co-operation given by management to the external auditors and internal auditors, and discuss problems and concerns, if any, rising from the interim and final audits; Review the independence of the external auditors, recommend the appointment of the auditors and their level of audit fees; Review the adequacy of the Company s internal controls and effectiveness of the internal audit function; Review the Group s half-year and full-year results announcements prior to its recommendations to the Board for approval; Review interested person transactions falling within the scope of Chapter 9 of the Rules of Catalist of SGX-ST.

25 SBI OFFSHORE LIMITED ANNUAL REPORT 2009 CORPORATE GOVERNANCE 23 The AC has explicit authority by the Board to investigate any matter within its terms of reference. All employees shall be directed to co-operate as requested by the members of the AC. The AC has full and unlimited/unrestricted access to all information and documents/resources as well as to the internal and external auditors and senior management of the Company and the Group which are required to perform its duties. The AC is authorised by the Board at the expense of the Company to obtain outside legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary. The AC, having reviewed the scope and value of the non-audit services provided to the Group by the external auditors, is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors. The AC is satisfied with the level of co-operation rendered by management to the external auditors and the adequacy of the scope and quality of their audit. The AC has nominated the external auditors, Messrs BDO LLP for re-appointment as external auditors of the Company at the forthcoming AGM. The AC met with the external auditors without the presence of the Company s management at least once a year. The Group had appointed different auditors for its overseas subsidiary. The Board and the AC are satisfied that the appointment of difference auditors for its overseas subsidiary would not compromise the standard and effectiveness of the audit of the Group. The Company has established a whistle-blowing policy to provide a channel for employees of the Group to report in good faith and in confidence, without fear of reprisals, concerns about possible improprieties in financial reporting and other matters. The objective of the policy is to ensure that there is independent investigation of such matters and that appropriate follow up actions will be taken. Any concern arise, employees could approach the AC Chairman directly. Matters raised may be investigated by management, internal audit and AC. This Policy will be reviewed, prior to the start of each calendar year, by the Board of Directors so as to ensure the continuing effectiveness of the same. PRINCIPLE 12: INTERNAL CONTROLS The Group has in place a system of internal controls to safeguard shareholders investment and the Group s assets. The Company s external auditors during their statutory audit, will review the effectiveness of the Company s material internal controls annually. Material non-compliance and internal control weaknesses noted during their audit and the auditors recommendations are reported to the AC. The Board and the AC also work with the external auditors on their recommendations and institute and execute relevant controls with a view to manage business risks. The Board regularly reviews the Group s business and operational activities to identify areas of significant business risks as well as appropriate measures to control and mitigate these risks. The Board believes that the system of internal controls maintained by the Company s management throughout the financial year is adequate to meet the needs of the Company. The system of internal controls provide reasonable, but not absolute assurance against material financial misstatements or loss, and include the safeguarding of assets, the maintenance of proper accounting records, the reliability of financial information, compliance with appropriate legislation, regulations and best practices, and the identification and containment of business risk. The Board, however, recognises that no cost effective system of internal controls could preclude all errors and irregularities. The internal control system is designed to manage rather than eliminate all risk of failure to achieve business objectives. PRINCIPLE 13: INTERNAL AUDIT The Company had appointed the external professional consulting firm, Wensen Consulting Asia (S) Pte Ltd. as the internal auditor to review the adequacy and integrity of the Group s internal control system. The internal auditors meet the standard for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors. The internal auditor reports directly to the AC. The scope of the internal audit is: - to review the effectiveness of the Group s material internal controls; - to provide assurance that key business and operational risks are identified and managed; - to determine that internal controls are in place and functioning as intended; and - to evaluate that operations are conducted in an effective and efficient manner.

26 24 CORPORATE GOVERNANCE The AC will review with the internal auditors their audit plan and their evaluation of the system of internal controls, their audit findings and management s processes to those findings, the effectiveness of material internal controls, including financial, operational and compliance controls and overall risk management of the Company and the Group. The AC is satisfied that the internal audit is adequately resourced and has the appropriate standing within the Group. PRINCIPLES 14 AND 15 : COMMUNICATION WITH SHAREHOLDERS The Board is mindful of its obligations to provide timely disclosure of material information to shareholders. Shareholders are kept abreast of all important developments concerning the Group through regular and timely dissemination of information via SGXNET announcements, press releases, annual reports, and various other announcements made during the year. The Company continually updates its corporate website at through which shareholders will be able to access information of the Group. All shareholders of the Company will receive the Company s annual report and notice of AGM. The Board regards the AGM as the main forum where dialogue with shareholders can be effectively conducted. The Executive Chairman and chairperson of the Board Committee attend the AGM and are available to answer questions from shareholders at the AGM. External auditors are also present to assist Directors in addressing any relevant queries from shareholders. Shareholders are encouraged to attend the AGM of the Company to ensure a high level of accountability and to stay informed of the Company s strategy and goals. The Articles of Association of the Company allow members of the Company to appoint proxies to attend and vote on their behalf. DEALINGS IN SECURITIES The Group has adopted an internal code of conduct to provide guidance to its officers including Directors, management staff and employees ( Officers ) with regard to dealings in the Company s securities. The code prohibits dealing in the Company s securities by the Officers of the Group while in possession of unpublished price-sensitive information. The Officers of the Group should not deal in the Company s securities on shortterm considerations and during the period commencing one month before the announcement of the Company s half-year and full-year results and ending on the date of the announcement of the results. The Officers are also required to adhere to any other relevant regulations with regard to their securities transactions. INTERESTED PERSON TRANSACTIONS ( IPT ) All interested person transactions will be documented and submitted periodically to the AC for their review to ensure that such transactions are carried out on an arm s length basis and on normal commercial terms and are not prejudicial to the Company. The Company confirms that all there were no significant IPT which fall within the ambit of the disclosure requirements under Chapter 9 of the Rules of Catalist during the financial year ended 31 December MATERIAL CONTRACTS Save for the service agreements between the Executive Directors and the Company and the supplemental agreement entered into between the Company and Enterprise Fund in relation to the redemption of outstanding preference shares, there were no material contracts entered into by the Company and its subsidiaries involving the interest of the substantial shareholder or director, which are either subsisting at the end of the financial year or, if not then subsisting, entered into since the end of the previous financial year. NON-AUDIT FEES The nature of non-audit services that were rendered by the Group s auditors, Messrs BDO LLP, and tax agent, Smalley Consulting Services to the Group and their related fees for the financial year ended 31 December 2009 were as follows : Fees for tax advisory services rendered to the Group S$ 1,200 Fees for Accountant s Report pertaining to the Company s listing S$180,000