SBI Annual Report 2011 - Leveraging on strengths

7/29/2019 SBI Annual Report 2011 - Leveraging on strengths

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SBI Offshore Limited

LEVERAGING ON

ANNUAL REPORT 2011

STRENGTHS


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CONTENTSCompany Prole

Executive Chairman and CEOs Message

Financial Perormance and Operational Review

Board o Directors

Key Management

Group Structure

Corporate InormationCorporate Governance

Report o the Directors

Independent Auditors Report

Consolidated Statement o Comprehensive Income

Statement o Financial Position

Statements o Changes in Equity

Consolidated Statement o Cash Flows

Notes to the Financial Statements

Statistics o ShareholdingsNotice o Annual General Meeting

Proxy Form

01

02

05

08

10

11

1213

23

27

29

30

31

34

36

8486

This annual report has been prepared by the Company and its contents have been reviewed by PrimePartners Corporate Finance Pte. Ltd.(the Sponsor) or compliance with the relevant rules o the Singapore Exchange Securities Trading Limited (the SGX-ST). The Sponsorhas not independently veried the contents o this annual report.

This annual report has not been examined or approved by the SGX-ST and the SGX-ST assumes no respons ibi lit y o r the contents o thisannual repor t, including the correc tness o any o t he statements or opinions made or reports contained in this annual report.

The contact person o r the Sponsor is Mr Mark Liew, Managing Di rector, Corporate Finance, at 20 Cecil Street, #21-02 Equity Plaza,Singapore 049705, telephone (65) 6229 8088.


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SBI OFFSHORE LIMITEDANNUAL REPORT 2011

01

Established since 1994, Singapore home-grown SBI Oshore Limited (SBI Oshore) was primarily engaged

in the marketing and distribution o equipment to shipyards and builders o jack-up rigs, semi-submersibles,drillships, and mobile oshore production units in Asia.

Since our listing on the Catalist Board o the Singapore Exchange in November 2009, we have ormed subsidiaries

in Singapore and the United States o America (USA), namely Sea Ree Oshore Pte Ltd and Sea Ree International

Inc. (Sea Ree), ocusing on designing oshore equipment packages and also a joint-venture HS Oshore

Pte Ltd (HS Oshore) with Hong Kong Stock Exchange-listed Honghua Group Limited (Honghua Group) o

the Peoples Republic o China (the PRC). SBI Oshore has recently established a business alliance with RBV

Energy Ltd (RBV Energy) o the United Kingdom through RBV Energy (Singapore) Pte Ltd (RBV Singapore).

This collaboration, which leverages on RBV Energys experience and brand name in supplying piping and subsea

equipment and SBI Oshores strong Asian marketing network and contract engineering capabilities, will help SBI

Oshore to move up the value chain in the oshore and marine sector.

With these alliances we can now oer integrated equipment solutions to the oshore oil and gas industry in Asia,

while working with major oshore equipment Original Equipment Manuacturers (OEMs) such as Aker Solutions.

Our customer base currently includes most o the leading owners and builders o mobile oshore drilling and

production units in the world. Our marketing and distribution network encompasses Singapore, the PRC, USA,

Brazil, Norway, Malaysia, Indonesia, the Philippines and Vietnam.

Norway Sales

USA Sales,

ENG, MFG, MRO

Brazil Sales,

MFG, MROSingapore Sales,

ENG, MFG, MRO

China Sales,

MFG, MRO

* MFG Manuacturing* MRO Maintenance, Repair and Overhaul* ENG Engineering


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02

Dear Shareholders,On behal o the Board o Directors (the Board), I am pleased topresent the Annual Report or SBI Oshore Limited (SBI Oshoreor the Group) or the nancial year ended 31 December 2011

(FY2011).

This report is signicant on several ronts. It marks the secondyear o our dedicated eorts to build up an engineering andcommercial team and specic capabilities, an endeavour whichhas included acquisitions, joint-ventures and alliances acrossthe globe. With these skill sets now in pace, we have harvestedthe rst ruits o our strategy, with signicant orders secured justater FY2011, as activities in the oshore oil and gas engineeringsector picked up.

FY2011 Financial ReviewFor FY2011, our net prot attributable to shareholders increased72.9% to US$0.26 million compared to nancial year ended 31

December 2010 (FY2010), on revenue o US$7.1 million andUS$9.3 million, respectively. Gross prot increased by 10.0%rom US$3.42 million in FY2010 to US$3.77 million in FY2011,mainly due to higher commission income, although distributionsales declined. Despite lower revenue, the Group recorded ahigher gross prot margin o 52.9% in FY2011 compared to36.7% in FY2010.

O signicance, we were able to streamline the activities otwo subsidiaries Sea Ree Oshore Pte. Ltd. and Sea ReeInternational Inc. (Sea Ree) as we disengaged rom non-core product lines since the middle o FY2011. These non-coreproduct lines contributed signicantly to Sea Rees FY2011 loss

o US$1.4 million. As we have now reduced Sea Rees monthlyxed salaries and overheads to US$70,000 per month, we expectthese expenses to be suciently covered by engineering revenues

rom the orders we have received. We continue to ocus oureorts on turning around our China acilities, which lost US$0.6million in FY2011. While there should be more subcontractingactivities rom the orders we received, greater eorts will be madeto attract subcontracting work directly rom international oshoreand marine (O&M) original equipment manuacturers (OEMs).

Group earnings per share rose to 0.22 cent per share or FY2011compared to 0.12 per share a year earlier. The Groups workingcapital position has also improved.

Signifcant Operational Developments in FY2011In June 2011, we ormed a joint-venture with Honghua GroupLimited (Honghua), a leading global land drilling rig manuacturer

based in the Peoples Republic o China (the PRC) and listedon the Hong Kong Stock Exchange. HS Oshore Pte. Ltd.,70%-owned by Honghua and 30% owned by SBI Oshore,oers large-scale contract manuacturing services to the globalO&M industry. It leverages on the ormers production acilitiesand expertise in land rigs and SBIs knowledge o oshore drillingequipment and marketing network.

In October 2011, Sea Ree secured an order or a BOP (Blow-Out Preventer) transporter rom a major American drillingcontractor, which is upgrading one o the older drilling rigs in itsfeet. Subsequent to the rst order, the same client awarded usan order or a BOP crane. With more older rigs being upgraded

The signifcant orders we secured in early

2012 vindicate our eorts in building up a

strong commercial and engineering team

and in orging business alliances and joint-

ventures with established international

equipment OEMs. We now have a viable

value proposition to carve a niche orourselves in the international oshore and

marine industry.


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due to increasing oshore saety standards, we oresee morebusiness or Sea Ree. With design engineering work carriedout in Houston, United States o America (USA) and actualequipment abrication and assembly work done in Asia, thisacilitates timely delivery to yards in Asia perorming the entire rig

upgrade project.

Similarly, International Maritime Organisations recent InternationalConvention or the Saety o Live at Sea (SOLAS) requirementshave called or new hooks and larger lieboats. We believe thatthe rig upgrade market will benet our deck machinery andload handling systems (under Sea Ree brand name) as wellas lieboats and davits (under SBI and NPT brand names). Wehave already been approached by several clients to supplyreplacement hooks, lieboats and davits.

During November 2011, we ormed a 50:50 joint venturecompany, RBV Energy (Singapore) Pte. Ltd. (RBV Singapore),with RBV Energy Ltd o the United Kingdom. RBV Singapore willmarket and sell piping and subsea equipment in Asia, USA andBrazil.

Signifcant Orders Secured Subsequent To The Year

EndAs at end-February 2012, the Groups order book had risensignicantly to approximately US$41 million, ater winning US$35million worth o new orders since the start o January 2012rom major rig builders in Asia and leading international drillingcontractors. The new orders vindicate our eorts in building upstrong commercial and engineering team and orging alliancesand joint-ventures with established international equipmentOEMs. The orders are expected to have a positive impact on the

Groups nancial perormance or the nancial year ending 31December 2012 (FY2012).

Business Outlook and Strategic UpdateOur portolio o products and brands is now airly well recognisedin the industry, and has helped our Group to move up the valuechain, as evinced by the resh orders outlined above. As we ocuson our commitment to our customers to deliver a quality productat competitive pricing and with shorter delivery lead time, webelieve that the new orders will result in repeat orders rom ourcustomers. Hence, we expect our product development andmarketing costs as a percentage o revenues to decline.

Our orward strategy will be underpinned by two major

developments. First, we are seeing new orders or drillships andsemi-submersibles in early FY2012, driven by orders rom Brazil.The tight oshore oil and gas equipment supply market oersopportunities or our various joint-ventures to oer contractengineering services at competitive prices and shorter deliverylead times. With a sizeable portolio o OEM product lines, we arecondent o achieving urther sales. Sea Ree recently securedtwo initial orders, worth approximately US$1.3 million, rom aleading international drilling contractor and has also receivedenquiries rom other contractors or equipment replacements orupgrades.

We are on the look-out or more strategic tie-ups and/oracquisitions o equipment OEMs in Europe and USA, as weseek to broaden our product oerings to our strong networko customers in Asia as well as to leverage o our lower costmanuacturing capabilities and shorter delivery lead time

compared to equipment assembled in Europe or USA. As SBIOshore adds signicant value in terms o our marketing networkas well as being a low-cost manuacturing base in Asia, we expectsuch strategic tie-ups and/or acquisitions to benet both parties.

Beyond Singapore, the PRC and Vietnam, the Group has alsobeen pre-qualied by the our major Korean yards and hasreceived several purchase enquiries or potentially signicantorders.

Second, the Group is now well-positioned to oer its own turnkeyequipment solution to owners and operators o tender rigs andlitboats. We are able to oer technical competence, competitivepricing and shorter delivery schedules at a time when customerswant more fexible, customised and competitively priced vesseldesigns than that oered by traditional jack-up drilling rigs. Thishas led to rising demand or tender rigs or development drillingin shallow-water marginal elds; and or litboats or well work-over, well servicing and maintenance as well as installation ooshore wind arms. This niche has thus ar been neglected bythe major equipment players which have been busy with largerpackages or drillships, semi-submersibles and jack-ups. TheGroup believes it is uniquely positioned to ll this niche and isnow working with well-known international rig/vessel designhouses to develop a complete rig/vessel design and equipmentpackage (at an aordable price) which has enormous potentialin ASEAN, China, West Arica and Middle East shallow waters.

In summary, the bright prospects in the O&M industry coupledwith successul implementation o our strategy to oercompetitively priced equipment, designed and engineered inEurope or USA but abricated and assembled in Asia, we expectto grow in strength in FY2012.

DividendTo reward shareholders, the Board o Directors has proposeda rst and nal dividend o 0.2 Singapore cent per share,representing 71.1% o net prot attributable to the owners o theCompany or FY2011. This is consistent with last nancial yearsdividend o 0.2 Singapore cent per share.

AcknowledgementsIt has been a hectic and exciting year as we orged aheadon building up our capabilities, widening our network andaggressively marketing to existing and new customers. Theresults have started to show. Beyond the numbers, we nowhave a viable value proposition to carve a niche or ourselvesin the O&M industry. So many people our management andsta, customers, partners and principals have contributedsignicantly. To all o them and you, our valued shareholder, weowe a debt o gratitude or your aith and trust in the Company.

Jonathan HuiExecutive Chairman and CEO


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04

STRONG PARTNERSHIP

LEVERAGING ON

2011 has seen us orming powerul alliances and joint ventures with

RBV Energy and Honghua Group Limited. This strategic eort willenhance our design and build capability signifcantly, add breadth

and depth to our product oerings in the oshore and marine sector,

and deliversuperior returns orour stakeholders in the coming years.


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05

Revenue and Gross ProftThe Groups revenue or FY2011 decreased by 23.7%,

rom US$9.34 million in FY2010 to US$7.12 million in

FY2011 due to a decline in distribution sales. As a

result o higher commission income, gross prot orthe Group increased by 10.0% rom US$3.42 million

in FY2010 to US$3.77 million in FY2011. Overall

gross prot margin has improved to 52.9% in FY2011

as compared to 36.7% in FY2010.

ExpensesFor FY2011, total general and administrative

expenses amounted to US$3.77 million, an increase

o 6.4% rom US$3.54 million. This was primarily due

to an increase in operating cost o the Groups design

and engineering subsidiaries, Sea Ree Oshore Pte

Ltd (SOPL) and Sea Ree International Inc. (SRI),

amounting to approximately US$0.13 million.

Depreciation expense increased by 22.3% to

US$0.38 million in FY2011 rom US$0.31 million in

FY2010 due to the purchase o additional xed assets

as manuacturing activities increased. Finance cost

or FY2011 surged to US$0.14 million, an increase

o 70.5% rom US$0.08 million in FY2010 due to

additional bank borrowings to take advantage o

lower borrowing rates.

Proft Beore and Ater TaxAter taking into account all expenses together with

share o results o an associate and joint ventures, the

Groups prot beore income tax increased by 129.9%

rom US$0.20 million in FY2010 to US$0.46 millionin FY2011. The Groups prot ater tax increased by

72.9% rom US$0.15 million in FY2010 to US$0.26

million in FY2011.

Financial PositionNon-current assets increased rom US$9.30 million

as at 31 December 2010 to US$9.43 million as at

31 December 2011, mainly due to the purchase

o additional xed assets by Jiangyin SBI Oshore

Equipment Co. Ltd (JSBI) and investment in joint

ventures (JV).

Current assets decreased rom US$5.34 million as

at 31 December 2010 to US$3.63 million as at 31

December 2011 mainly due to the property held or

sale by JSBI as at 31 December 2010, which was

sold during FY2011 (the Property), as well as the

decrease in trade and other receivables due to lower

distribution sales.


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06

Current liabilities decreased to US$3.51 million as at

31 December 2011 rom US$5.35 million as at 31

December 2010. This was mainly attributed to the ull

settlement o a nance lease and a mortgage loan, and

also due to the repayment o bank borrowings and

amount owing to Jiangyin Neptune Marine ApplianceCo. Ltd (NPT).

The increase in capital and reserves rom US$9.29

million as at 31 December 2010 to US$9.55 million as

at 31 December 2011 was mainly due to the prots

rom FY2011, partially oset by dividends declared in

FY2010 and paid out in FY2011.

The Group had positive working capital o approximately

US$119,000 as at 31 December 2011 compared to a

negative working capital o approximately US$10,000as at 31 December 2010.

Cash FlowThe Group reported a net decrease in cash and cash

equivalents (net o xed deposits pledged) o US$0.28

million rom US$1.61 million as at 31 December 2010

to US$1.33 million as at 31 December 2011.

Net cash rom operating activities, which amounted

to US$0.72 million in FY2011, was mainly due to the

decrease in trade and other receivables as well as

payments to vendors which led to a decrease in trade

and other payables.

Net cash used in investing activities, which amounted

to US$0.50 million, was mainly due to the purchase o

xed assets as well as investment in JV.

Net cash fow used in nancing activities, which

amounted to US$0.51 million, was mainly due to

repayment o bank borrowings and dividends declared

or FY2010 which was paid out in FY2011.

Dividend

To reward shareholders, the Board o Directors hasproposed a rst and nal dividend o 0.2 Singapore

cent per share, representing 71.1% o the net prot or

FY2011.This is consistent with FY2010s dividend o

0.2 Singapore cent per share.


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07

FOOTING IN CHINA

STRENGTHENING OUR

Through progressive acility enhancement and upgrade, our Jiangyin

plant is in a stronger position to take on more contract manuacturingopportunities rom the international O&M industry.


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08

Mr. Jonathan Hui

Mr. David Tan

Ms. Chen Jiayu

Mr. Wong Kok Hoe

Mr. Chan Lai Thong

Mr. Giang Sovann


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Mr. Jonathan HuiExecutive Chairman and CEO

Mr. Jonathan Hui is our Executive Chairman and Chie ExecutiveOcer, having been appointed on 17 March 2008. He isresponsible or the daily overall management o our Group. Mr.Hui has vast experience in the nancial and business sector.He was an audit senior with Arthur Andersen, United Kingdom

(1980-1983), senior manager with Arthur Andersen, Singapore(1983-1989), Vice-President o Merrill Lynch (1990-1994) andExecutive Research Director o UBS Securities in 1994. Mr. Huiwas also with Asiaborders Capital Pte. Ltd., Singapore (1994-2005), serving as its Chie Executive Ocer responsible orinvestments and management o investee companies. He wasalso a Director at Aviation and Electronics Support Pte. Ltd.Singapore (2001-2003) and was responsible or nance as wellas marketing to the China market. Mr. Hui subsequently co-ounded the Swanlin Asia Group in 2005 and was responsibleor business development and nance. He has a Bachelor oEconomics (Honours) degree rom Leeds University, UnitedKingdom, and is currently a Chartered Accountant and a CertiedPublic Accountant in the Institute o Chartered Accountants in

England and Wales and Institute o Certied Public Accountantso Singapore, respectively.

Mr. David TanExecutive Director

Mr. David Tan is our Executive Director, having been appointedsince 1 July 1997. He is responsible or securing agencycontracts rom Aker MH o Norway to market its range odrilling equipment in Asia, including Singapore, China, Vietnam,Thailand, Indonesia and Malaysia. He ounded the Companyin 1994, when the company was involved in the trading oequipment and supplies related to the oshore industry. Priorto SBI Oshores listing, he was responsible or securingseveral agency agreements rom various companies such asWilhelmsen Callenberg or HVAC Systems, Jiangyin Neptuneor lieboats and davits and Aker Solutions (Malaysia) or marinedrilling risers. From 1973 to 1987, Mr. Tan was a manager in therig-building commercial department o Keppel FELS Limitedand was involved in cost estimations and marketing o rig-building services. Subsequently, he was the manager o SeaScan International where he was involved in the procuremento equipment and accessories or the ship building and/or shiprepairing activities o Keppel Group. He was also the businessmanager o Aker MH or the China market rom 2007 to 2008.

Ms. Chen Jiayu

Alternate Director to David Tan

Ms. Chen Jiayu is our Customer Support Director and AlternateDirector to David Tan. She was appointed as alternate Director toDavid Tan on 18 July 2008. From 2007 to 2009, Ms. Chen wasour Executive Director and was responsible or operational,human resources and nance matters.

Mr. Giang SovannLead Independent Director

Mr. Giang Sovann is our Lead Independent Director and was rstappointed on 28 September 2009. He graduated with a Bacheloro Administration degree with Great Distinction rom University oRegina, Canada, and qualied as a Chartered Accountant withthe Canadian Institute o Chartered Accountants. He is also a

Certied Public Accountant with the Institute o Certied PublicAccountants o Singapore and a member o the SingaporeInstitute o Directors. Mr. Giang started his career as a publicaccountant in Canada and has extensive and diversiedpublic accounting practice experience with a big-4 rm in bothCanada and Singapore. With more than 30 years o nancialand operational management experience, he has served assenior executive o a MNC aerospace company, a regionalconglomerate with diversied business interests, a large publicentity and a number o Singapore listed companies. Mr. Giangis currently the Executive Director o the Singapore Institute oDirectors and sits on the Organizing Committee o the SingaporeCorporate Awards and co-organizes the Best Managed BoardAward.

Mr. Chan Lai ThongIndependent Director

Mr. Chan Lai Thong is our Independent Director, having beenappointed on 28 September 2009. Mr. Chan has about 30years o international marketing and business developmentexperience in several industries, particularly in the oshore andmarine industry. He has lived and operated in various parts o theworld such as in Southeast Asia, Middle East, Australia, EasternEurope, Central Asia and China. He is currently a Director oseveral private companies including Weatherock China Ltd,Chongqing Panxin Industry Company Ltd, Sichuan BangkokInvestment Company Ltd, ANC Holdings Pte Ltd and SaudiMTD Capital Company Ltd. Prior to that, he was with the KeppelGroup and was a Group General Manager in both KeppelCorporation Ltd and Keppel Oshore & Marine Ltd. While withKeppel, Mr. Chan helped develop the markets in SoutheastAsia, Middle East, Bulgaria, Azerbaijan and Kazakhstan. Mr.Chan graduated rom the National University o Singapore witha Bachelor o Science (Honours) in 1980 and holds Diplomasin Administrative Management, Marketing Management andMarketing rom Institute o Administrative Management (UnitedKingdom), Ngee Ann Polytechnic and Institute o Marketing(United Kingdom), respectively.

Mr. Wong Kok Hoe

Independent Director

Mr. Wong Kok Hoe is our Independent Director, having beenappointed on 28 September 2009. Mr. Wong is the GroupChie Operating Ocer o the Centurion Group. The Group hasinterests in und management, private equity investments andproperty development and investments. Prior to this, he was apartner in a local advocates and solicitors rm. He has morethan 18 years o experience in legal practice and his main areaso practice were corporate law, corporate nance, mergersand acquisitions and venture capital. He is also a director ovarious public listed companies in Singapore. Mr. Wong holds aBachelor o Laws (Honours) degree rom the National Universityo Singapore.


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Chen JiayuCustomer Support Director

Chen Jiayu is our Customer Support Director and

alternate Director to David Tan. Please reer to sectionentitled Board o Directors or urther details.

M.Shariuz ZamanEngineering Director

M.Shariuz Zaman is our Engineering Director,responsible or equipment design and engineering. Hehas more than 20 years o experience in the design andengineering o marine, onshore and oshore projects.He has worked with Oil States Skagit Smatco asEngineering Manager and with NOV Amclyde as Project

Engineer. He holds a Bachelor o Science in MechanicalEngineering rom Michigan Tech University.

Loh Chua Meng, RickGeneral Manager

Loh Chua Meng, Rick is our General Manager,appointed on 3 October 2011, responsible oroverseeing the Companys operations and providescustomer support or any technical or commercial bidsmade by our Company. Prior to joining us, he was aGeneral Manager o Oshore Construction Services PteLtd responsible or projects management. Loh ChuaMeng, Rick graduated with a Bachelor in MechanicalEngineering (1st Class Honours) rom University oStrathclyde, United Kingdom.

Tay Sin Tor, CliveGeneral Manager, QAHSE and Technical

Tay Sin Tor, Clive is our General Manager o QAHSE and

Technical, responsible or overseeing the Companysquality, project management and technical support. Priorto joining us, he was a General Manager o KTL LoganPte Ltd responsible or technical support and managingthe quality control. Tay Sin Tor, Clive graduated with aBachelor in Mechanical Engineering.

Tan Seow CheeFinance Manager

Tan Seow Chee is our Finance Manager, responsible orthe nancial management and internal controls o our

Group. Prior to joining us in 2009, she was an accountantwith Pacic Radiance Ltd and Jaya Holdings Ltd. TanSeow Chee graduated with a Bachelor in Commerce(Accounting and Marketing) degree rom Curtin Universityo Technology, Australia, and is qualied as a certiedpractising accountant and certied public accountant inAustralia and Singapore respectively.


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11

SBI GROUP

Design / Manuacturing / Project

SBI/Sea Ree

Production Facility

Jiangyin SBI SBI Oshore

Distribution

HP choke &kill Maniold,Pipeline & Fittings

Fluid TranserSystems & Hoses

Sea Ree

International

Total SolutionPackage

Sea Ree M.R.O.(Houston/ Singapore)

Deck

Equipment &Load Handling

Systems

Maintenance,

Repair,Over-haulServices

Jack-upMulti-Support

Vessel

AKER DrillingEquipment Package

Oshore Equipment(Manuacturing)

Lieboats & Davits(NPT)

TenderRigs


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BOARD OF DIRECTORSJonathan HuiExecutive Chairman and Chie Executive Ofcer

David Tan (Alternate Director: Chen Jiayu)Executive Director

Giang SovannLead Independent Director

Chan Lai ThongIndependent Director

Wong Kok Hoe

Independent Director

AUDIT COMMITTEEGiang Sovann (Chairman)Chan Lai ThongWong Kok Hoe

NOMINATING COMMITTEE

Wong Kok Hoe (Chairman)Jonathan HuiGiang Sovann

REMUNERATION COMMITTEEChan Lai Thong (Chairman)Giang SovannWong Kok Hoe

COMPANY SECRETARIESTan Seow Chee, Certied Public AccountantChan Lai Yin, ACIS

REGISTERED OFFICE31 International Business Park#05-05 Creative ResourceSingapore 609921Tel: +65 6848 1033Fax: +65 6848 1011Website: www.sbioshore.com

SHARE REGISTRARTricor Barbinder Share Registration Services

80 Robinson Road#02-00Singapore 068898

AUDITORSBDO LLPPublic Accountants and Certied PublicAccountants21 Merchant Road#05-01 Royal Merukh S.E.A BuildingSingapore 058267

Partner-in-charge: Khoo Gaik Suan(First appointed or the nancial yearended 31 December 2011)

PRINCIPAL BANKERDBS Bank Ltd.6 Shenton WayDBS Building Tower OneSingapore 068809

Hong Leong Finance Limited16 Rafes Quay#01-05 Hong Leong BuildingSingapore 048581

SPONSORPrimePartners Corporate Finance Pte. Ltd.20 Cecil Street#21-02 Equity PlazaSingapore 049705


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Corporate Governance

SBI OFFSHORE LIMITED

ANNUAL REPORT 201113

The Board of Directors of the Company (the Board) is committed to its policy of managing the affairs of SBI Offshore Limited(the Company) and its subsidiaries (the Group) with transparency, integrity and accountability by ensuring that soundframework of best corporate practices is in place at all level of the Groups business. The Board aspires to discharge itsprincipal responsibility towards protecting and enhancing long-term shareholders value and investors interest.

Pursuant to Rule 710 of the Listing Manual Section B: Rules of Catalist of the Singapore Exchange Securities TradingLimited (the SGX-ST) (the Rules of Catalist), the Board is pleased to outline below the manner the Group has appliedthe principles of the Code of Corporate Governance 2005 (the Code) during the financial year ended 31 December 2011(FY2011), except where otherwise stated. The Company has complied with the principles of the Code where appropriate.

PRINCIPLE 1: THE BOARDS CONDUCT OF AFFAIRS

SBI Offshore Limited is directed by an effective Board to lead and control the Company. The Board is entrusted with theresponsibility for the overall management of the business and corporate affairs of the Group. The Board works closely andmonitors the performance of management. The Board oversees processes for evaluating the adequacy of internal controls,risk management, financial reporting and compliance, and satisfies itself as to the adequacy of such processes. The Boardis also responsible for considering sustainability issues relating to the environment and social factors as part of the strategicdirection of the Group. All Directors objectively make decisions in the best interests of the Company.

The Board meets quarterly. Additional Board meetings are also held at such other times as and when required to address anyspecific significant matters that may arise. The general agenda of the meeting includes discussion over matters arising fromtime to time, financial results of the Group and any other issues requiring the Boards deliberation and approval. The agendafor each Board meeting is circulated to all the Directors for their perusal prior to the convening of each meeting to enableDirectors to obtain further clarification / explanation prior to the meeting to ensure smooth proceeding of each meeting. Theproceedings and resolutions reached at each Board meeting are minuted and signed by the Chairman of the meeting. BesidesBoard meetings, the Board exercises control on matters that require Boards deliberation and approval through the circulationof Directors resolution(s).

The Articles of Association of the Company provide for Directors to convene Board meetings by teleconferencing orvideoconferencing when a physical Board meeting is not possible. Timely communication with the members of the Board canbe achieved through electronic means.

The Board has identified, matters reserved for its approval and the Board reserved matters had been formalised in writing.This would provide clear directions to Management on matters that must be approved by the Board. List of matters, withoutlimitation that require its approval are:

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; and

Appointment 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 ofthese Board Committees has its own clearly defined terms of reference and its actions are reported regularly to and monitoredby the Board.


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New appointments to the Board will be briefed by management on the Groups business operations and governance practicesto ensure that new Directors have an insight of the Group. Upon appointment, the Director will also be provided with formalletters, setting out their duties and obligations.

Directors are informed of development relevant to the Group including changes in laws and regulations that impact theGroups operations and have access to all information concerning the Group. They are also encouraged to attend workshopsand seminars to enhance their skills and knowledge.

The Board meets quarterly and whenever necessary. The attendance of the Directors at every Board and Board Committeesmeetings held during FY2011 are presented below. Minutes of all Board Committees and Board meetings are circulated tomembers for review and confirmation. These minutes could also enable Directors to be kept abreast of matters discussed atsuch meetings:

Board AC NC RC

Directors No. of

meetings

held while

a member

No. of

meetings

attended

No. of

meetings

held while

a member

No. of

meetings

attended

No. of

meetings

held while

a member

No. of

meetings

attended

No. of

meetings

held while

a member

No. of

meetings

attendedJonathan Hui 4 4 1 1

David Tan 4 4

Chen Jiayu

(Alternate Director to

David Tan) 4 0

Giang Sovann 4 4 5 5 1 1 1 1

Chan Lai Thong 4 4 5 5 1 1

Wong Kok Hoe 4 4 5 5 1 1 1 1

PRINCIPLE 2: BOARD COMPOSITION AND GUIDANCE

The Board currently comprises two Executive Directors, three Independent Non-Executive Directors and an Alternate Director.

The Board members as at the date of this report are:

Jonathan Hui Choon Ho, Executive Chairman and Chief Executive OfficerDavid Tan Woo Thian, Executive DirectorChen Jiayu, Alternate Director to David TanGiang Sovann, Lead Non-Executive Independent DirectorChan Lai Thong, Independent Non-Executive DirectorWong Kok Hoe, Independent Non-Executive Director

The criteria for independence are determined based on the definition as provided in the Code. There is an independenceelement on the Board, given that half of the Board are Independent Directors. The Board considers an Independent Directoras 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 Directors independent judgement with the view to the best interest of theCompany and the Group. The Company has satisfied the requirement of the Code of at least one third of the Board comprisesIndependent Directors.

The Independent Directors have confirmed that they do not have any relationship with the Company or its related companies,its substantial shareholders, or its officers that could interfere, or be reasonably perceived to interfere, with the exercise ofthe Directors independent business judgement with a view to the best interests of the Company and Group. The NC hasreviewed and determined that the said Directors are independent.


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The Board comprises business leaders and professionals with industry and financial backgrounds and its composition enablesmanagement to benefit from a diverse and objective external perspective on issues raised before the Board. The Board willconstantly examine its size annually with a view of determining its impact on its effectiveness. The Board, taking into accountthe nature of operations of the Group, considers its current size to be adequate for effective decision-making and believes that

the experience, skills and expertise of the Board members in areas such as accounting, legal and business would contributeto the Groups objective.

Non-Executive Directors monitor and review the performance of management and meet regularly without the presence ofmanagement.The NC is of the view that the current Board comprises persons who as a group provide capabilities required for the Boardto be effective. These include audit, finance, banking, accounting and legal with entrepreneurial and management experience,industry experience and familiarity with regulatory requirement and risk management. Profiles of the Directors are set out onpages 8 to 9 of this Annual Report.

PRINCIPLE 3: EXECUTIVE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Mr Jonathan Hui Choon Ho is both the Executive Chairman and Chief Executive Officer (CEO) of the Company.

The Executive Chairman is responsible for the daily overall management of the Group and ensures that the Groups businessare 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 theGroups 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; and

e. Assist in ensuring compliance with the Groups guidelines on corporate governance.

The Executive Chairman executes decisions taken by the Board and is responsible for the conduct of the Groups dailybusiness operations.

Although the roles of Executive Chairman of the Board and CEO are not separated, the Board is of the view that there aresufficient safeguards and checks to ensure that the process of decision making by the Board is independent and basedon collective decisions without any individual or group of individuals exercising any considerable concentration of power orinfluence and there is accountability for good corporate governance. All the Board Committees are chaired by IndependentDirectors and half of the Board consist of Independent Directors.

For good corporate governance, Mr Giang Sovann has been appointed Lead Non-Executive Independent Director and he shall

be available to shareholders where they have concerns and for which contact through the normal channels of the ExecutiveChairman 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 of the NC, are independent:

Wong Kok Hoe - Chairman, Independent Non-Executive DirectorGiang Sovann - Member, Independent Non-Executive DirectorJonathan Hui Choon Ho - Member, Executive Chairman and CEO


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The NC is scheduled to meet at least once a year. Its role is to establish an objective and transparent process for theappointment, re-appointment or resignation of members of the Board and of the various Board Committees, as well as toevaluate and assess the effectiveness of the Board as a whole, and the effectiveness and contribution of each Director to theBoard.

For new appointments, the NC will take into consideration the current Board size and its mix and determine if the candidatesbackground, experience and knowledge in technology, business or finance management skills will bolster the corecompetencies of the Board. The selected candidate must also be a person of integrity and be prepared to commit time andattention to the Companys 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 servicesof a new director with particular skills, the NC, in consultation with the Board, determines the selection criteria and selectscandidates 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 memberwill not take part in determining his own re-nomination or independence. During the financial year, the NC had reviewed anddetermined that Mr Giang Sovann, Mr Chan Lai Thong and Mr Wong Kok Hoe are independent.

Under the provisions of Article 99 of the Companys Articles of Association, newly appointed directors are required to holdoffice until the next annual general meeting (AGM) and at least one third of the Directors to retire by rotation at every AGM. Aretiring Director is eligible for re-election by the shareholders of the Company at the AGM.

The NC recommended to the Board the re-election of Mr Giang Sovann and Mr Wong Kok Hoe, who are due for retirementat the AGM. The Board has accepted the recommendation of the NC. Mr Giang Sovann will upon re-election, remain as theChairman of AC and member of NC and RC. Mr Wong Kok Hoe will upon re-election, remain as Chairman of NC and memberof AC and RC. They will be considered independent for the purposes of Rule 704(7) of the Rules of Catalist. In making therecommendation, the NC had considered the Directors overall contribution and performance.

Name ofDirectors

Date of firstappointment

Date of lastre-election

Nature ofAppointment

Membershipof BoardCommittee

Directorship/chairmanshipboth present and thoseheld over the preceding

three years in other listedcompany

JonathanHui Choon Ho

17 March2008

20 April 2011 Chief ExecutiveOfficer/ ExecutiveChairman

Member of NC None

David TanWoo Thian

1 July 1997 23 April 2010 ExecutiveDirector

None None

Chen Jiayu(Alternate Directorto David Tan)

18 July 2008 18 May 2009 CustomerSupport Director

None None

Giang Sovann 28 September2009

23 April 2010 Lead Non-Executive

IndependentDirector

Chairman ofAC, Member of

NC and RC

None

Chan Lai Thong 28 September2009

20 April 2011 IndependentNon-ExecutiveDirector

Chairmanof RC andMember of AC

None

Wong Kok Hoe 28 September2009

23 April 2010 IndependentNon-ExecutiveDirector

Chairman ofNC, Memberof AC and RC

1.Lifebrandz Ltd.2.Hartawan Holdings Limited3.Centurion Corporation

Limited4.CFM Holdings Limited


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PRINCIPLE 5: BOARD PERFORMANCE

The Board has a formal process for assessing the effectiveness of the Board as a whole with objective performance criteria.The NC decides on how the Boards performance is to be evaluated and propose objective performance criteria, subject to

the Boards approval. Such performance criteria allowed comparison with industry peers and addressed how the Board hasenhanced long-term shareholders value. The Board has also conducted an assessment of the functions and effectiveness ofthe Board as a whole and the contribution from each Director to the effectiveness of the Board. Each member of the NC shallabstain 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 effectcontinuing improvements on Board processes. The NC has looked into the comments and suggestions raised during theevaluation process.

The NC has assessed the current Boards performance to-date and is of the view that the performance of the Board asa whole has been satisfactory. Although some of the Board members have multiple board representations, the NC issatisfied that sufficient time and attention has been given by the Directors to the Group. Furthermore, such multiple boardrepresentations will widen the experience of the Board and provide it with a broader perspective.

PRINCIPLE 6: ACCESS TO INFORMATION

The Board is provided with complete, adequate and timely information to enable them to fulfill their duties and responsibilities.Detailed board papers and related materials will be prepared for each Board Meeting. Management reports with the necessaryinformation including but not limited to financial reports are provided to the Directors in a timely manner to enable them tomake informed decisions.

The Directors have separate and independent access to the Groups senior management and the Company Secretary at alltimes. The Company Secretary will be present at all Board and Board Committees meetings to ensure that they are conductedin accordance with Articles of Association of the Company, applicable rules and regulations, and the provisions in the Rules ofCatalist are complied with. The appointment or removal of the Company Secretary is a matter for the Board as a whole.

The Directors, whether individually or as a group, if the furtherance of their duties require professional advice, may engageindependent professional at the Companys expense to obtain advice and enable Directors to discharge their duties withadequate knowledge on the matters being deliberated, if necessary. The cost of such professional advice will be borne by theCompany.

PRINCIPLE 7: PROCEDURES FOR DEVELOPING REMUNERATION POLICIES

The RC comprises the following members, all of whom, including the Chairman of the RC, are independent:

Chan Lai Thong Chairman, Independent Non-Executive DirectorGiang Sovann Member, Independent Non-Executive DirectorWong 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 specificremuneration packages awarded to attract, retain and motivate Executive Directors, the CEO and key officers withoutbeing excessive, and thereby maximise shareholders value. The recommendations should cover all aspects ofremuneration, including but not limited to Directors 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 asindividual incumbent; and

To administer the Companys Employees Share Option Scheme or any long-term incentive scheme.

The RC may obtain independent external legal and other professional advice as it deems necessary on the Companysrecommendation matters and expenses of such advice shall be borne by the Company.


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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 similarcompanies and has taken into consideration the Groups 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 aredetermined by the Board, appropriate to the level of their contribution and attendance at meetings, taking into accountfactors such as the effort and time spent and the responsibilities of the Independent Directors. The fees are recommended toshareholders for approval at AGM. Except as disclosed, the Independent Directors do not receive any other remuneration fromthe Company.

The Company had entered into service agreements with the two Executive Directors, Mr Jonathan Hui and Mr David Tan on1 August 2009 for a period of five years with effect from the date of admission of the 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 fixedcomponent 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 ofthe Board. No Director is involved in deciding their own remuneration package. Directors fees are paid after approval byshareholders at the AGM.

PRINCIPLE 9: DISCLOSURE ON REMUNERATION

The remuneration packages of Directors and top key executives of the Group for FY2011 are as follows:

Salary Bonus Others Fees Total

% % % % %

Directors

Below S$250,000

Executive Directors:

Jonathan Hui 93 4 3 0 100

David Tan 81 3 16 0 100

Chen Jiayu (Alternate Director to David Tan)

Independent Directors:

Giang Sovann 100 100

Chan Lai Thong 100 100

Wong Kok Hoe 100 100

Key Executives

Below S$250,000

Loh Chua Meng, Rick 91 0 9 0 100

Tay Sin Tor, Clive 83 7 10 0 100

Chen Jiayu 84 7 9 0 100

Tan Seow Chee 92 8 0 0 100Further information on the Directors and key executives are found on pages 8 to 10 of this report.

Immediate family members of a Director or CEO

The Company does not have any employee who is an immediate family member of the Directors or the CEO and whoseremuneration exceeds S$150,000 during FY2011.


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Share option scheme

The SBI Offshore Employee Share Option Scheme (the Share Option Scheme) was established on 28 September 2009.The RC administers the Share Option Scheme based on the rules of the Share Option Scheme and determines participation

eligibility, option offers and share allocation and attend to matters that may be required in connection with the Share OptionScheme.

Information on the options granted under the Share Option Scheme to participants is as follows:

Options granted to

Options grantedduring the financialyear under review

Aggregate optionsgranted sincecommencement ofscheme to the endof financial yearunder review

Aggregate optionslapsed sincecommencement ofscheme to the endof financial yearunder review

Aggregate optionsoutstanding as atend of financialyear under review

Employees Nil 200,000 200,000 Nil

No options were granted since the commencement of the Share Option Scheme to Directors of the Company, controllingshareholders of the Company and their associates; and employees of its subsidiaries during the financial year under reviewand up to the date of this report.

On 19 March 2012 (Grant Date), the Company has offered to grant options of 3,000,000 shares pursuant to the ShareOption Scheme to an employee. The exercise price of option granted is $0.21 which was the average of the last dealt pricesfor the shares on Catalist for a period of five consecutive trading days immediately preceding the Grant Date. The optionshave an initial vesting period of 5 years and the validity period of the options is from 19 March 2013 to 19 March 2022.

PRINCIPLE 10: ACCOUNTABILITY

The Board is accountable to the shareholders while the Management is accountable to the Board. The Boards primary roleis to disseminate information on the Groups performance, position and prospects through the half-year and full-year resultsannouncements and annual reports and where appropriate, press releases and media and analyst briefings. The management

provides the Board with understandable and detailed information of the Groups performance, position and prospects on aquarterly basis.

PRINCIPLE 11: AUDIT COMMITTEE

The AC currently comprises the following members, all of whom, including the Chairman are Independent Non-ExecutiveDirectors:

Giang Sovann Chairman, Independent Non-Executive DirectorChan Lai Thong Member, Independent Non-Executive DirectorWong Kok Hoe Member, Independent Non-Executive Director

Two of the members have expertise or experience in accounting or related financial management and the Board considers thatthe 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 Groupssystem of risk management, compliance and internal controls;

Review the co-operation given by management to the external auditors and internal auditors, and discuss problemsand concerns, if any, rising from the interim and final audits;

Review the independence of the external auditors annually, recommend the appointment of the auditors and their levelof audit fees;


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Review the adequacy of the Companys internal controls and effectiveness of the internal audit function;

Review the Groups half-year and full-year results announcements prior to its recommendations to the Board forapproval; and

Review interested person transactions (if any) falling within the scope of Chapter 9 of the Rules of Catalist.

The AC has explicit authority by the Board to investigate any matter within its terms of reference. All employees shall bedirected to co-operate as requested by the members of the AC. The AC has full and unlimited/unrestricted access to allinformation and documents/resources as well as to the internal and external auditors and senior management of the Companyand the Group which are required to perform its duties. All audit findings and recommendations put up by the internal and theexternal auditors were forwarded to the AC. Significant issues were discussed during the meetings. The AC is authorised bythe Board at the expense of the Company to obtain external legal or other independent professional advice and to secure theattendance of outsiders with relevant experience and expertise if it considers this necessary. The AC has reasonable resourcesto enable it to discharge its functions properly.

During the financial year, the AC has reviewed the scope and quality of the audits and the independence and objectivity of theexternal auditors as well as the cost effectiveness. The AC is satisfied that the Companys auditors are able to meet the audit

requirements and statutory obligation of the Company. The AC has recommended Messrs BDO LLP (the External Auditors)for re-appointment as external auditors of the Company at the forthcoming AGM. The fees payable to the External Auditors isset out on page 53 of this Annual Report.

There was no non-audit fee paid to the External Auditors. The AC meets with both the internal and external auditors withoutthe presence of the Companys management at least once a year.

The Company has a Singapore incorporated subsidiary which is not audited by the External Auditors. The Board and theCommittee are satisfied that the appointment of different auditing firm would not compromise the standard and effectivenessof the Companys audit. The Company confirms that it is in compliance with Rules 712 and 716 of the Rules of Catalist. TheCompany has engaged suitable auditor for its foreign-incorporated subsidiaries and associate company.

The Company has formulated the guidelines for a whistle-blowing policy to provide a channel for employees of the Group toreport in good faith and in confidence, without fear of reprisals, concerns about possible improprieties in financial reportingand other matters. The objective of the policy is to ensure that there is independent investigation of such matters and thatappropriate follow up actions will be taken. Employees could approach the AC Chairman directly on any concerns that theymay have. Matters raised may be investigated by management, internal audit and the AC. This policy will be reviewed, prior tothe 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 Groups assets. TheCompanys External Auditors during their statutory audit, will consider the system of internal controls relevant to theCompanys preparation of financial statements and internal control weaknesses noted during their audit are reported tothe AC. The Board and the AC also work with the External Auditors on their recommendations and institute and executerelevant controls with a view to managing business risks. The Board regularly reviews the Groups businesses and operationalactivities to identify areas of significant business risks as well as appropriate measures to control and mitigate these risks. The

Management reviews significant control policies and procedures and highlights all significant matters to the Directors and theAC.

The Board believes that, in the absence of any evidence to the contrary, the system of internal controls maintained by theCompanys management throughout the financial year up to the date of this report is adequate to meet the needs of theCompany in its current business environment. The system of internal controls provide reasonable, but not absolute assuranceagainst material financial misstatements or loss, and include the safeguarding of assets, the maintenance of proper accountingrecords, the reliability of financial information, compliance with appropriate legislation, regulations and best practices, and theidentification and containment of business risks. The Board, however, recognises that no cost effective system of internalcontrols could preclude all errors and irregularities. The internal control system is designed to manage rather than eliminate allrisk of failure to achieve business objectives.


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The Board through the AC, reviews the adequacy of the Groups risk management framework and internal controls, with theassistance of the auditors, to ensure that robust risk management and internal controls in place. These include assessment ofthe key risks relating to financial, operational and compliance matters. The AC guides management to check and ensure theadequacy of the internal controls.

Based on information provided by the External and Internal Auditors on the system of internal controls, the Board, with theconcurrence of the AC, has assessed the internal controls and is of the opinion that there are adequate internal controls inplace within the Group addressing financial, operational and compliance risks. The adequacy of the internal controls wouldprovide reasonable assurance of integrity, effectiveness in safeguarding its assets and shareholders value.

PRINCIPLE 13: INTERNAL AUDIT

The Company had appointed the external professional consulting firm, Wensen Consulting Asia (S) Pte Ltd. (the InternalAuditors), as the internal auditor to review the adequacy and integrity of the Groups internal control system. The InternalAuditors meet the standard for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors. TheInternal Auditor reports directly to the AC Chairman.

The scope of the internal audit is:

- to review the effectiveness of the Groups 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.

The AC had reviewed with the Internal Auditors their audit plan and their evaluation of the system of internal controls, theiraudit findings and managements 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 for FY2011. The AC issatisfied that the internal audit is adequately resourced and has the appropriate standing within the Group.

PRINCIPLE 14: COMMUNICATION WITH SHAREHOLDERS

The Board is mindful of its obligations to provide timely disclosure of material information to shareholders. Shareholders arekept abreast of all important developments concerning the Group through regular and timely dissemination of informationvia SGXNET announcements, press releases, annual reports, and various other announcements made during the year. TheCompany continually updates its corporate website at http://www.sbioffshore.com through which shareholders will be able toaccess information of the Group.

The Articles of Association of the Company allow shareholders of the Company the right to appoint proxies to attend and voteon their behalf on the shareholders meetings.

All shareholders of the Company will receive the annual report and notice of AGM. The Board regards the annual generalmeeting as the main forum where dialogue with shareholders can be effectively conducted. The Executive Chairman andchairperson of the Board Committees together with the External Auditors attend the annual general meeting and are availableto answer questions from shareholders. Shareholders are encouraged to attend the annual general meeting of the Companyto ensure a high level of accountability and to stay informed of the Companys strategy and goals. Minutes of general meetings

include substantial and relevant queries or comments from shareholders relating to the agenda of the meeting and responsesfrom the Board and Management. These minutes would be available to shareholders upon their request.

The Company ensures that there are separate resolutions at general meetings on each distinct issue.


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DEALINGS IN SECURITIES

The Group has adopted an internal code of conduct to provide guidance to its officers including Directors, managementstaff and employees (collectively, Officers) with regard to dealings in the Companys securities. The Code prohibits dealing

in the Companys 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 Companys securities on short-term considerations and during the periodcommencing one month before the announcement of the Groups half-year and full-year results and ending on the date ofthe announcement of the results. The Officers are also required to adhere to any other relevant regulations with regard to theirsecurities transactions.

INTERESTED PERSON TRANSACTIONS (IPT)

All IPT will be documented and submitted periodically to the AC for their review to ensure that such transactions are carriedout on an arms length basis and on normal commercial terms and are not prejudicial to the interests of the Company.

The Company does not have a general shareholders mandate for recurrent interested person transactions.

The Company confirms that there were no IPT which fall within the ambit of the disclosure requirements under Chapter 9 of

the Rules of Catalist during FY2011.

MATERIAL CONTRACTS

Save for the service agreements between the Executive Directors and the Company and the supplemental agreement enteredinto between the Company, the Executive Directors, Mr Jonathan Hui and Mr David Tan and The Enterprise Fund Limited inrelation to the redemption of outstanding preference shares, there were no material contracts entered into by the Companyand its subsidiaries involving the interest of the controlling shareholder or Director, which are either still subsisting at the end ofFY2011 or if not then subsisting, entered into since the end of the previous financial year.

NON-SPONSOR FEE

No fees relating to non-sponsorship activities were paid to the Companys Sponsor, PrimePartners Corporate Finance Pte.Ltd. for the financial year under review.


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Report of the Directors



The Directors of the Company present their report to the members together with the audited financial statements of the Groupfor the financial year ended 31 December 2011 and the statement of financial position of the Company as at 31 December2011 and the statement of changes in equity of the Company for the financial year ended 31 December 2011.

1. Directors

The Directors of the Company at the date of this report are as follows:

Jonathan Hui

David Tan

Giang Sovann

Chan Lai Thong

Wong Kok Hoe

Chen Jiayu (Alternate director to David Tan)

2. Arrangements to enable Directors to acquire shares or debentures

Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whoseobject is to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in, ordebentures of, the Company or any other body corporate.

3. Directors interests in shares or debentures

According to the Register of Directors shareholdings kept by the Company for the purposes of Section 164 of theSingapore Companies Act, Chapter 50 (the Act), none of the Directors holding office at the end of the financial yearhad any interest in the shares, debentures and share options of the Company and its related corporations except asdetailed below:

Shareholdings registered Shareholdings in which Directors

in the name of Directors are deemed to have an interest

Balance as at1 January 2011

Balance as at31 December

2011Balance as at

1 January 2011

Balance as at31 December

2011

Number of ordinary shares

Company

Jonathan Hui 34,000,000 22,704,000 11,000,000 21,444,000

David Tan 45,000,000 45,900,000

Giang Sovann 10,000 10,000

Chan Lai Thong 10,000 10,000

Wong Kok Hoe 10,000 10,000

By virtue of Section 7 of the Act, Jonathan Hui and David Tan are deemed to have an interest in all the subsidiaries ofthe Company at the beginning and end of the financial year.

In accordance with the continuing listing requirements of the Singapore Exchange Securities Trading Limited (SGX-ST), the Directors of the Company state that, according to the Register of Directors shareholdings, the Directorsinterests as at 21 January 2012 in the shares of the Company have not changed from those disclosed as at 31December 2011.


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4. Directors contractual benefits

Since the end of the previous financial year, no Director of the Company has received or become entitled to receivea benefit which is required to be disclosed under Section 201(8) of the Act by reason of a contract made by the

Company or by a related corporation with the Director of the Company, or with a firm of which he is a member, or witha company in which he has a substantial financial interest, except for salaries, bonuses and other benefits as disclosedin the financial statements.

5. Share options

The Company has a share option scheme under the SBI Offshore Employee Share Option Scheme (the Scheme).The Scheme is administered by the Remuneration Committee. The Scheme was approved and adopted at anextraordinary general meeting of the Shareholders on 23 April 2010.

Options are exercisable at price based on the average of the last done prices for the shares of the Company on theSGX-ST for the five market days preceding the date of grant. The Remuneration Committee may at its discretion fixthe exercise price at a discount not exceeding 20% to the above price. If the options remain unexercised after the firstanniversary of the day granted until the tenth anniversary, the options will expire. Options are forfeited if the employeesleave the Company before the options vest.

On 12 March 2010 (grant date), 250,000 share options were granted to eligible participants of the Exercise Priceof S$0.194, an average price based on the last done prices of shares for the five market days preceding the dateof grant, of which 200,000 options were granted to General Manager of Sales, Mr Jeremy Chng Tien Siang and50,000 options were granted to Program Manager, Mr Choong Jun Yuan, who are not controlling shareholders or theirassociates. The options have initial vesting period of 5 years with exercise period expiring at the end of 10 years fromgrant date. No participant under the Scheme has received 5% or more of the total number of shares under optionavailable under the Scheme.

There were no shares issued during the financial year by virtue of the exercise of options to take up unissued shares ofthe Company or its subsidiaries.

In the previous financial year, Mr Choong Jun Yuan had resigned and 50,000 share options granted were forfeited. On20 August 2011, Mr Jeremy Chng Tien Siang has resigned and 200,000 share options granted were forfeited. At theend of the financial year, there were no share options outstanding under the Scheme.

6. Audit Committee

The Audit Committee comprises the following members who, including the Chairman, are all Independent Non-Executive Directors of the Company. The members of the Audit Committee during the financial year and at the date ofthis report are:

Giang Sovann (Chairman)Chan Lai Thong

Wong Kok Hoe

The Audit Committee performs the functions specified in Section 201B of the Act, the SGX Listing Manual andthe Code of Corporate Governance. In performing its functions, the Audit Committee reviewed the audit plans andthe overall scope of examination by the external auditors of the Company. The Audit Committee also reviewed theindependence of the external auditors of the Company and the nature and extent of the non-audit services provided bythe external auditors.


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6. Audit Committee (Continued)

The Audit Committee also reviewed the assistance provided by the Companys officers to the internal and externalauditors, the statement of financial position and statement of changes in equity of the Company and the consolidated

financial statements of the Group prior to their submission to the Directors of the Company for adoption and reviewedthe interested person transactions as defined in Chapter 9 of the Rules of Catalist of SGX-ST.

The Audit Committee has full access to and has the co-operation of the management and has been given theresources required for it to discharge its function properly. It has also full authority and discretion to invite any Directoror executive officer to attend its meetings. The Audit Committee also recommends the appointment of the externalauditors and reviews the level of audit and non-audit fees.

The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommendedto the Board of Directors the nomination of BDO LLP, for re-appointment as auditors of the Company at theforthcoming Annual General Meeting.

7. Auditors

The auditors, BDO LLP, have expressed their willingness to accept re-appointment.

On behalf of the Board of Directors

Jonathan Hui Chen JiayuDirector Alternate Director of David Tan

Singapore30 March 2012


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Statement by Directors



In the opinion of the Board of Directors,

(a) the consolidated financial statements of the Group and the statement of financial position and statement of changes inequity of the Company together with the notes thereon are properly drawn up so as to give a true and fair view of the

state of affairs of the Group and of the Company as at 31 December 2011, and of the results, changes in equity andcash flows of the Group and changes in equity of the Company for the financial year ended on that date; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts asand when they fall due.

On behalf of the Board of Directors

Jonathan Hui Chen JiayuDirector Alternate Director of David Tan

Singapore30 March 2012


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To the Members of SBI Offshore Limited




Report on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of SBI Offshore Limited (the Company) and itssubsidiaries (the Group), which comprise the statements of financial position of the Group and of the Company as at 31

December 2011, the consolidated statement of comprehensive income, statement of changes in equity of the Group andof the Company and consolidated statement of cash flows for the financial year then ended, and a summary of significantaccounting policies and other explanatory information.

Managements Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation of consolidated financial statements that give a true and fair view inaccordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial ReportingStandards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonableassurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properlyauthorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts andbalance sheets and to maintain accountability of assets.

Auditors Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted ouraudit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirementsand plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidatedfinancial statements. The procedures selected depend on the auditors judgement, including the assessment of the risksof material misstatement of the consolidated financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entitys preparation of consolidated financial statementsthat give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the

purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as wellas evaluating the overall presentation of the consolidated financial statements.

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

Opinion

In our opinion, the consolidated financial statements of the Group and the statement of financial position and statementof changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and SingaporeFinancial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at31 December 2011 and the results, changes in equity and cash flows of the Group and changes in equity of the Company forthe financial year ended on that date.


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To the Members of SBI Offshore Limited




Report on Other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company have been properly kept inaccordance with the provisions of the Act.

BDO LLPPublic Accountants andCertified Public Accountants

Singapore

30 March 2012


31/94

For The Year Ended 31 December 2011

Consolidated Statement of Comprehensive Income



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

Note 2011 2010

US$ US$

Revenue 4 7,121,398 9,339,024

Cost of sales (3,355,100) (5,914,747)

Gross profit 3,766,298 3,424,277

Other items of income

Interest income 1,418 787

Other income 5 399,631 201,051

Other items of expense

General and administrative expenses (3,769,722) (3,542,022)

Finance costs 6 (142,372) (83,516)

Share of results of an associate, net of tax 165,783 201,015

Share of results of joint ventures, net of tax 42,420

Profit before income tax 7 463,456 201,592

Income tax expense 8 (206,953) (53,282)

Profit for the financial year 256,503 148,310

Other comprehensive income:

Exchange differences arising from translation of foreign operations, net of taxamounting to US$Nil 207,585 168,386

Reclassification of foreign currency translation reserves on disposal ofa subsidiary (3,154)

Total comprehensive income for the financial year 464,088 313,542

Profit attributable to:

Owners of the parent 267,550 135,110

Non-controlling interests (11,047) 13,200

256,503 148,310

Total comprehensive income attributable to:

Owners of the parent 470,912 297,187

Non-controlling interests (6,824) 16,355

464,088 313,542

Earnings per share (in cents) 9

- Basic 0.22 0.12

- Diluted 0.22 0.12


32/94

As at 31st December 2011

Statements of Financial Position




Group Company

Note 2011 2010 2011 2010

US$ US$ US$ US$

Non-current assets

Property, plant and equipment 10 5,263,849 5,717,859 118,980 753,045

Investments in subsidiaries 11 5,880,000 5,880,000

Investment in an associate 12 2,372,838 2,207,055 1,800,000 1,800,000

Investment in joint ventures 13 392,420 350,000

Intangible assets 14 1,405,565 1,378,046

9,434,672 9,302,960 8,148,980 8,433,045

Current assets

Inventories 15 363,150 203,223 35,562 35,562

Property held for sale 16 201,238

Trade and other receivables 17 1,653,283 3,044,556 5,242,292 4,479,394

Cash and cash equivalents 18 1,610,481 1,887,399 1,295,221 1,490,314

3,626,914 5,336,416 6,573,075 6,005,270

Less:

Current liabilities

Trade and other payables 19 2,260,017 3,834,461 1,069,268 2,239,948

Finance lease payables 20 15,084 15,084

Current income tax payable 52,448 7,000 52,448 7,000

Bank borrowings 21 1,195,779 1,489,718 1,195,779 1,489,718

3,508,244 5,346,263 2,317,495 3,751,750

Net current assets/(liabilities) 118,670 (9,847) 4,255,580 2,253,520

Less:

Non-current liabilities

Deferred tax liabilities 22 4,271 4,271 4,271 4,271

Net assets 9,549,071 9,288,842 12,400,289 10,682,294

Equity

Share capital 23 6,397,479 6,397,479 6,397,479 6,397,479

Foreign currency translation reserve 24 368,390 165,028

Share option reserve 25 6,423 6,423

Accumulated profits 2,687,332 2,617,218 6,002,810 4,278,392

Equity attributable to owners of theparent 9,453,201 9,186,148 12,400,289 10,682,294

Non-controlling interests 95,870 102,694

Total equity 9,549,071 9,288,842 12,400,289 10,682,294


33/94

For The Financial Year Ended 31 December 2011

Statements of Changes In Equity



Theaccompanyingnotesform

anintegralpartofthesefinancialstatements.

Note

Share

cap

ita

l

Fore

ign

currency

trans

lation

reserve

Share

op

tion

reserve

Accumu

lated

pro

fits

Equ

ity

a

ttri

bu

table

to

ownerso

f

theparen

t

Non

con

tro

lling

interes

ts

To

tal

equ

ity

Group

US$

US$

US$

US$

US$

US$

US$

Balanceat1January2011

6,397,479

165,028

6,423

2,617,218

9,186,148

102,694

9,288,842

To

talcompre

hens

ive

income

for

the

financ

ial

year

Profitforthefinancialyear

267,550

267,550

(11,047)

256,503

Othercomprehensive

income

Exchangedifferences

arisingfromtranslationof

foreignoperations,netof

taxamountingtoUS$Nil

203,362

203,362

4,223

207,585

Totalcomprehensive

incomeforthefinancial

year

203,362

267,550

470,912

(6,824)

464,088

Transac

tionsw

ith

ownerso

ftheparen

t

recogn

ise

ddirec

tly

in

equ

ity

Shareoptionexpense

25

(6,423)

(6,423)

(6,423)

Dividends

26

(197,436)

(197,436)

(197,436)

Totaltransactionswith

ownersoftheparent

(6,423)

(197,436)

(203,859)

(203,859)

Balanceat31December

2011

6,397,479

368,390

2,687,332

9,453,201

95,870

9,549,071


34/94





Theaccompanyingnotesform

anintegralpartofthesefinancialstatements.

Note

Share

cap

ita

l

Fore

ign

currency

trans

lation

reserve

Share

op

tion

reserve

Accumu

lated

pro

fits

Equ

ity

a

ttri

bu

table

to

ownerso

f

theparen

t

Non

con

tro

lling

in

teres

ts

To

tal

equ

ity

Group

US$

US$

US$

US$

US$

US$

US$

Balanceat1January2010

4,130,211

2,951

2,643,745

6,776,907

86,339

6,863,246

To

talcompre

hens

ive

income

for

the

financ

ial

year

Profitforthefinancialyear

135,110

135,110

13,200

148,310

Othercomprehensive

income

Exchangedifferences

arisingfromtranslationof

foreignoperations,netof

taxamountingtoUS$Nil

165,231

165,231

3,155

168,386

Reclassificationofforeign

currencytranslation

reservesondisposalofa

subsidiary

(3,154)

(3,154)

(3,154)

Totalcomprehensive

incomeforthefinancial

year

162,077

135,110

297,187

16,355

313,542

Transac

tionsw

ith

ownerso

ftheparen

t

recogn

ise

ddirec

tly

in

equ

ity

Issueofshares

23

2,281,808

2,281,808

2,281,808

Shareissueexpenses

23

(14,540)

(14,540)

(14,540)

Shareoptionexpense

25

6,423

6,423

6,423

Dividends

26

(161,637)

(161,637)

(161,637)

Totaltransactionswith

ownersoftheparent

2,267,268

6,423

(161,637)

2,112,054

2,112,054

Balanceat31December

2010

6,397,479

165,028

6,423

2,617,218

9,186,148

102,694

9,288,842


35/94






Company NoteShare

capital

Shareoption

reserveAccumulated

profitsTotal

equity

US$ US$ US$ US$

Balance at 1 January 2011 6,397,479 6,423 4,278,392 10,682,294

Total comprehensive income for thefinancial year

Profit for the financial year 1,921,854 1,921,854

Transactions with owners of the parentrecognised directly in equity

Share option expense 25 (6,423) (6,423)

Dividends 26 (197,436) (197,436)

Total transactions with owners of the parent (6,423) (197,436) (203,859)

Balance at 31 December 2011 6,397,479 6,002,810 12,400,289

Balance at 1 January 2010 4,130,211 2,652,460 6,782,671

Total comprehensive income for thefinancial year

Profit for the financial year 1,787,569 1,787,569

Transactions with owners of the parentrecognised directly in equity

Issue of shares 23 2,281,808 2,281,808

Share issue expenses 23 (14,540) (14,540)

Share option expense 25 6,423 6,423Dividends 26 (161,637) (161,637)

Total transactions with owners of the parent 2,267,268 6,423 (161,637) 2,112,054

Balance at 31 December 2010 6,397,479 6,423 4,278,392 10,682,294


36/94


Consolidated Statement of Cash Flows




Note 2011 2010

US$ US$

(Reclassified)

Operating activities

Profit before income tax 463,456 201,592

Adjustments for:

Amortisation of intangible assets 14 28,132 4,676

Depreciation of property, plant and equipment 10 377,072 308,254

SBI Annual Report 2011 - Leveraging on strengths

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