CONVERGENCE - Investis Digital

Annual Report 08Topaz Energy and Marine Ltd.

CONVERGENCE

About The Cover

The 2008 Annual Report cover represents the convergence of the many successful and well-known businesses within Topaz Energy and Marine Ltd., into a new and consolidated corporate identity. The business structure realignment undertaken during 2008, and in the process of being implemented during 2009, will see Topaz operating through two Strategic Divisions: Topaz Marine and Topaz Engineering.

The Topaz Marine Division is the umbrella for the offshore support vessel heavyweights Nico Middle East, Doha Marine Services, Topaz Marine Saudi Arabia, BUE Caspian (Azerbaijan and Turkmenistan) and BUE Kazakh. Under the Topaz Engineering Division exists major oil & gas fabricator Adyard Abu Dhabi and well known Ship Repairer Nico International.

This convergence enables our Strategic Business Units to build on their market leadership, and catapults the new entities, Topaz Marine and Topaz Engineering, onto the global stage.

“ Convergence of the many successful and well-known businesses within Topaz ”

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Topaz Jebel Ali setting out to sea

Financial Highlights

Topaz reported record results for 2008 for the eighth consecutive year. Revenue increased from USD 301 million to USD 419 million and EBITDA grew from USD 77 million to USD 111 million, an increase of 39% and 43% respectively.

All Figures in USD millions

2006 2007 2008 2006 2007 2008 2006 2007 2008

Topaz 2008 Property Plant & Equipment Breakup

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Topaz Jumeirah, a 5,150 BHP Anchor Handling Tug Supply Vessel

Topaz Energy and Marine Ltd. is today one of the world’s leading marine services and oil & gas fabrication com-panies with over 35 year of experience in the Middle East. Topaz is a wholly owned subsidiary of Renaissance Services SAOG, a publicly traded company on the Muscat Securities Market. Operating throughout the Middle East and the Caspian with vessel operations in North Africa and S.E. Asia, Topaz employs over 6,000 people.

About Topaz

Countries Topaz Operates in Topaz Offices

The Topaz AHTS pulling a rig into position0504 Sunset over offshore installations >

Financial HighlightsAbout Topaz ContentsBoard of DirectorsChairman’s ReportCEO’s ReportHealth, Safety & EnvironmentA Decade of GrowthConvergenceTopaz MarineTopaz EngineeringKey ClientsCorporate TeamConsolidated Financial Statements 2008Corporate Governance ReportIndependent Auditors’ Report on Financial StatementsConsolidated Income StatementsConsolidated Balance SheetConsolidated Statement of Cash FlowsConsolidated Statement of Changes in EquityNotes to the Consolidated Financial StatementsCorporate Directory

Auditors KPMGPrincipal Bankers Arab African International Bank . Bank of Scotland . Barclays Bank PLC . BNP Paribas Calyon Crédit Agricole CIB . DVB Bank . Emirates NBD . First Gulf Bank . HSBC Bank Middle East Limited Lloyds TSB . Mashreq Bank . National Bank of Fujairah . National Bank of Umm Al Quwain Ltd. Qatar National Bank . Royal Bank of Scotland . Standard Chartered BankPrincipal Legal Advisors Clyde & Co . HBJ Gately Wareing LLP

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CONTENTS

Topaz Energy and Marine Ltd. Corporate Office: PO Box 12068, Dubai, United Arab EmiratesPhone: +971 4 339 1351 Fax: +971 4 339 1352 Email: [email protected] www.topazworld.com

0706 < Crane at work at Topaz’s Abu Dhabi facility

BOARD OF DIRECTORS

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An offshore drilling structure on D Island, Kazakhstan Launching of the ‘Express 19’

On behalf of the Board of Directors, it gives me great pleasure to present to you the audited accounts for Topaz Energy and Marine Ltd. for the twelve-month period ending 31 December 2008.

In 2008, Topaz has achieved record results for the eighth consecutive year. Yet 2008 has ended with the world falling into the deepest global economic recession since the Great Depression of the 1930’s. In my statement for Topaz’s holding company; Renaissance Services SAOG, I have in great detail recognized the risks and unpredictable challenges that lie ahead and carefully considered the strength and level of resilience of our Company in the face of such difficult times. Therefore, in my statement for Topaz, I will focus on Topaz’s 2008 results and what makes Topaz so well equipped to ride out what may be the worst financial storm of our generation.

The pleasing result of our continued focus on Topaz’s values-driven operating model is yet another year of growth and record financial performance. An EBITDA of USD 111 million has recorded growth of 43% compared to 2007. We have strong and dependable cash-flows sufficient to exceed all our obligations and financing for immediate growth needs is already secured at affordable costs.

The Topaz balance sheet, with total Shareholders’ funds of USD 310 million, is well positioned to support future growth plans. The gearing of 1.11 confirms the strong capital structure of the company. This positive performance, coupled with important new secure contract gains during the year, provides Topaz with a visible growth path even in this most turbulent global economic environment.

The Auditors have issued an unqualified report and the Board of Directors is pleased to recommend the accounts for approval.

Whilst no economy will be immune to the global economic turmoil, we believe strongly in the capacity of our principal markets of the wider Middle East and the Caspian to cope, emerge and prosper. We also believe in our company and its assets and, above all, we believe in the people who run it at every level of the organization.

Over 2007-08 the company has made investments of USD 378 million, primarily in the modernizing and enlargement of the OSV fleet. The nature of the investments already made, the financial support already in place, the long-term tenure of secure contracts with blue-chip Clients and the continued vibrancy of the specific markets in which we serve, means that Topaz’s growth path is already secure and in place through 2009-11.

I would like to thank my fellow Board Members for the continuous vigilance and strengthening of the corporate governance of our company. We have a Board peopled by strong, independent non-executive Directors who are experts in finance and other fields relevant to our success and progress. I would like to thank our experienced and capable management and people throughout the group for their successful dedication to safety, operational excellence, prudent financial management and implementation of quality-based management systems and best practices. In thanking these people, I am able to confirm to all stakeholders that the good governance of Topaz is sound and is in good hands.

2008 has been a year of excellent growth and record achievement. Going into 2009 we do not underestimate the challenges of the recession and are taking all prudent measures necessary to avert its dangers. At the same time, we find our businesses in good health with the best possible chance to continue their growth through these tough times. We have the right businesses, with the right Customers, in the right markets. We have the right assets and, above all, we have the right people.

CHAIRMAN’S REPORT

Samir J. Fancy Chairman 1110

It is a great privilege to write my first report as CEO of Topaz Energy and Marine Ltd. We began 2008 by setting ourselves high goals that were based firmly on the Group’s strong historic year on year performance and an excellent 2007 result. I am therefore pleased to report that in 2008, Topaz Energy and Marine has delivered its best result so far in its history, despite the global downturn experienced during the latter half of 2008.

Being advantageously positioned across the GCC and the Caspian Sea grants Topaz the opportunity to capitalize upon the strategic importance of these geographies to the global hydrocarbon markets. Further vertical and horizontal expansions across Topaz’s operating territories have been made during the year through acquisitions and organic growth, and Topaz is well positioned for a strong 2009.

An early success in 2008 was the acquisition of Doha Marine Services, the second largest offshore vessel operator in Qatar. With the addition of 14 vessels to our fleet, Topaz’s global fleet now stands at 96 vessels and places us within the top ten Offshore Support Vessel operators worldwide.

The synergies within and between our businesses have created the recognition that there is a both an opportunity, and a need, for the company to redefine its structure, and thereby, establish the foundations for sustainable and accelerated growth. Topaz has therefore developed a new business architecture which is built upon the natural synergies of aligned core capabilities and resources, intended to bring us closer to our markets and to our Customers.

The Topaz business units BUE Caspian, BUE Kazakhstan, Nico Middle East and Doha Marine Services will from 2009 operate under the banner of the Topaz Marine division. Adyard Abu Dhabi and Nico International will operate under the banner of the Topaz Engineering division.

With this transformation, Topaz Marine and Topaz Engineering now constitute formidable strategic divisions, with the requisite size, scale and resources to become global leaders in their respective industries.

Topaz Marine: the Group’s offshore support vessel owning and operating division has performed exceptionally well and accounts for nearly 70% of the Group’s profit. The growth of the division’s profit is a healthy 66% year on year. Through the strength of its fleet and its experienced management team operating to international standards, Topaz Marine has been able to secure long term contracts with large oil companies primarily in the field development and production phases. This provides steady cash flowsthat are reflected in this year’s strong financial results.

The diversity, high specifications and low age of its fleet and the highest quality mariners are Topaz Marine’s prime competitive advantages along with its impressive track record of performance, health and safety management. To continue to secure business in a competitive market, Topaz will further develop its fleet renewal and diversification program and put into place strong business and operating systems. An unrelenting emphasis on HSE will ensure that Topaz meets and exceeds the most stringent health and safety requirements of its valued Clients.

In the GCC, the acquisition of Doha Marine Services (DMS) and the development of a joint venture in the Kingdom of Saudi Arabia during the year have further strengthened Topaz Marine’s standing in the GCC market as a whole. Both the Saudi and Qatari markets are expected to be key growth sectors on account of their vast hydrocarbon resources and the related offshore exploration and production activities.

Looking to the North, the land-locked nature of the Caspian Sea creates significant barriers to entry for new competitors. Topaz will look to consolidate its leading position in the Caspian arena and fully capitalize upon the large tender awards that are expected over the next three years in the region.

Topaz Engineering: the Group’s engineering, fabrication and ship building division (heretofore known as Adyard and Nico International) has grown its revenues by 45% in 2008 and is currently further expanding its capabilities and its geographical reach. It has been the division’s stated goal to be awarded high value, complex engineering contracts and that has to a large extent been realized during the year.

With 70% of the world’s hydrocarbons shipped through the GCC, Topaz Engineering will be looking to grow its market share and profitability. The strong results of 2008 can only be repeated in the current market climate by maintaining its strong relationship with blue chip Clients globally, as well as expanding its dry docking and ship repair activities in the Caspian.

No doubt 2009 will be a year of great challenges, but it is how we respond to those challenges that will set us apart as an organization. Even in a global economy hit by recession, we see numerous business opportunities, and we will take advantage of those opportunities. In 2009 we expect to raise the standards for health & safety, and maintain an unparalleled focus on customer satisfaction. Today, our reach and impact are greater than ever, and we have entered 2009 with high ambitions to be at the forefront of our industry.

I would like to extend my sincere gratitude to all of the Topaz Group’s 6,000 employees. Without their hard work, commitment and willingness to continually improve and develop, the record breaking performance of Topaz Energy and Marine in 2008 could not have been achieved.

It is with great humility and a sense of purpose that we look forward to making 2009 another year of growth and development for our Group. I have great confidence in the strength of our portfolio and our people. We are all committed to creating value for our Clients and shareholders through dynamic, innovative leadership, integrity, and empowered people operating in a safe environment. With this value commitment, and encouraged by our achievements and resilience so far, we are confident that tough situations don’t last; tough people do.

CEO’S REPORT

Fazel A. FazelbhoyCEO 1312

HEALTH, SAFETY & ENVIRONMENT

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The Topaz Group’s commitment to Health, Safety and Environment (HSE) is firm and unwavering. As a company employing 6,000 staff operating across diverse geographies and in almost always arduous conditions, the protection of our employees and the environment is paramount. Topaz and its strategic business units work consciously and diligently to continuously improve the health and safety standards of the organization. During the year, Topaz has expanded its HSE training program across all of its strategic business units. In 2008, the Group has increased its HSE training by 11% compared to 2007. Topaz places great importance on monitoring and reporting HSE issues. Monitoring and interpreting our HSE record are the cornerstones for identifying actions for continuous improvement. This HSE improvement program has led to Topaz’s lost time injury frequency being the best ever achieved since Group-wide reporting began.

Topaz has expanded into several new geographies during the year and is looking to put its best practices into play to bring these areas up to its high standards.

A considerable honor bestowed upon Topaz was the award presented to the Master & Crew of the Emergency Recovery and Response Vessel (ERRV) M.V. Baki, part of Topaz’s Caspian Sea fleet. A full

evacuation of all 211 staff onboard a BP offshore platform was successfully carried out in November in record time. In recognition of their flawless execution of the complex and potentially dangerous mission, one of the largest offshore platform evacuations ever undertaken, the Master & Crew was honored with the prestigious BP President’s Award.

Notable is also that two of Topaz’s strategic business units; Nico International and Nico Middle East Ltd., were presented with safety awards granted by a Dubai Government entity (PCFC) and Lloyd’s List respectively. The awards reflect the importance of, and emphasis on, HSE in the Topaz Group.

“ the protection of our employees and our environment is paramount ”

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ERRV M.V. Baki; the Master & Crew of which received the BP President’s Award

Topaz Energy and Marine Ltd. HSE Statistics

2007 14,712,618

5,000 1

24 1.63

Total manhours workedEmployeesFatalitiesNumber of LTIsLTIF

2008 19,220,885

6,000 -

21 1.09

Change +31%+20%

--12%-36%

LTIF; Lost Time Injury Frequency is a measure of the number of incidents that resulted in one or more days away from work. It is normalised on the basis of one million manhours worked.

A DECADE OF GROWTH

16 17‘Express 19’ an aluminium vessel under constructionin the Topaz Ship Building facility in Fujairah

All Figures in USD 000’s

CONVERGENCE

Topaz Marine Azerbaijan

Topaz Marine Kazakhstan

Topaz Marine MENA

Topaz Fabrication & Construction

Topaz Maintenance Services

Topaz Marine Repair

Topaz Ship Building

now constitute formidable strategic divisions, each with the requisite scale and resources to become global leaders in their respective industries. This strategic initiative has enabled us to extend our range of services across all our operating territories from the GCC to the Caspian.

The realignment of our business structure reflects the aspiration of Topaz Energy and Marine to deliver enhanced value addition for our shareholders, our Clients, and the community of employees who will deliver our growth.

With our new corporate structure as a foundation, we move forward with the resolve to continuously improve our service and strengthen our stakeholders’ trust in our organization. We are confident that our strategic realignment will enable us to meet and surpass our targets for 2009 and beyond.

Several of Topaz’s strategic business units have grown dramatically over the course of the last ten years and continue to do so today. Others are new ventures that aim to fill an identified gap in the market and have yet to fulfill their immense potential. The businesses have established related capabilities and share similar core competencies and customer bases, while operating in diverse locations. The growth of Topaz’s capacity and capabilities in all areas has created the recognition that there is a both an opportunity, and a need, for the company to redefine its structure, and thereby, establish the foundations for sustainable and accelerated growth. Topaz has therefore developed a new business architecture, which is built on natural synergies, aligned core capabilities, facilities and resources. Topaz Energy and Marine Ltd. will now operate through two divisions: Topaz Marine and Topaz Engineering. The divisions comprise solid, well performing strategic business units that have consistently exceeded their targets and produced exceptional value for their shareholders. With this convergence, Topaz Marine and Topaz Engineering

“built on natural synergies, aligned core capabilities, facilities and resources”

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The AHTS vessels Islay and Jura under tow in the Caspian Sea

The top section and the crane of the Mobile Offshore Production Unit in LIWA 1, Abu Dhabi

TOPAZ MARINE

Roy Donaldson . COO Topaz Marine“ Having secured substantial long-term contracts with oil majors, a significant portion of Topaz Marine’s revenue and profits for 2009 is already guaranteed. ”

Richard Steel . GM Topaz Marine Azerbaijan

“ Through our excellent long-term working relationship with blue chip Clients in the Caspian, we are well placed and confident of our ability to perform in these difficult times. ”

Ron Clark . GM Topaz Marine MENA

“ Qatar and Saudi Arabia’s continued growth in offshore hydrocarbon exploration, development and production will make them key markets for Topaz. ”

The Group’s offshore support vessel owning and operating division, Topaz Marine, provides supply and support services to the offshore oil & gas industry. Its 96 vessels support major offshore projects in the regions in which it operates with anchor handling vessels, survey vessels, platform supply vessels and specialized ice class vessels among many others. Topaz Marine’s offshore vessel operation ranks within the top-ten largest offshore fleet vessel owners and operators in the world.

Topaz Marine has substantial operations throughout the Middle East and the Caspian with additional vessel operations in North Africa and S.E. Asia. The Middle East hub of operations is Dubai from where the fleets of the Topaz Marine units; Nico Middle East, Doha Marine Services and Topaz Marine Saudi Arabia are being deployed. In the Caspian arena, Topaz Marine units: BUE Caspian, BUE Kazakh and BUE Turkmenistan operate a diverse fleet across the Caspian Sea supporting offshore development and production.

The Topaz Marine division derives the vast majority of its revenue from secure medium to long term contracts with major oil heavyweights such as BP, Agip KCO, Saipem and Total. 3% of Topaz’s fleet is deployed in support of hydrocarbon exploration, 77% in support of field development and 20% in support of oil & gas production.

Topaz acquired Doha Marine Services (DMS); a Qatar based Offshore Vessel Company at a cost of USD 124m in May 2008. DMS operates a fleet of 14 vessels including two vessels under Joint Venture with Jaya Holdings of Singapore. The acquisition of DMS helped create a strong foot hold in the growing Qatar market and DMS now forms an integral part of the Topaz Marine MENA fleet.

Further expansions include JV agreements with Saudi and Azeri partners for joint vessel ownership to extend Topaz’s geographical reach and provide marine support services in new and growing markets.

Topaz Marine will in 2009 operate through three strategic business units; Topaz Marine Azerbaijan, Topaz Marine Kazakhstan and Topaz Marine MENA.

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•

•

During 2008, Topaz Marine’s strategic business units have won several noteworthy medium to long-term contracts with oil majors. The contracts have contributed to a significant portion of Topaz’s revenues over the medium term being secured.

Topaz Marine Azerbaijan owns and operates a fleet of 18 vessels in Azerbaijan and Turkmenistan comprising primarily Anchor Handling Tugs (AHTS), DP 2 Platform Supply Vessels (PSV) and Emergency Recovery and Response Vessels (ERRV) focusing above all on serving the main operator in Azerbaijan, BP.

Topaz Marine Kazakhstan operates in excess of 45 vessels, providing the services of its ice breakers, survey vessels, tugs, barges, crew boats and ERRV’s in support of the offshore projects of the Kashagan field for principally Agip KCO and Saipem.

Topaz Marine MENA operates approximately 30 vessels throughout its vast geographical coverage area of UAE, Qatar, KSA, North Africa and S.E. Asia. The diverse fleet features cable layers, survey vessels, work boats and numerous AHTS and PSV’s. The major Clients of Topaz Marine MENA include blue-chip names such as Total, Dolphin Energy, Occidental and Dubai Petroleum Company.

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Central Azeri production & drilling quarters in the Caspian Sea

TEAM Siam; a DP 2 Maintenance Support barge

Richard Ayling * . GM Topaz Marine Kazakhstan

“ For Topaz, the vast hydrocarbon resources in the Kashagan field and the related offshore activities create great opportunities. ”

TOPAZ MARINE

* Joined in 2009

Jagdeep Makkar . GM Finance - Topaz Marine

“ Being fortunate enough to work with mainly blue chip Clients, our comfort with regard to counter-party risk is relatively high. ”

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TEAM Oman laying cables in a Holland windfarm The Ice Breaker Tug- ‘BUE Ili’ making its way through the frozen Caspian Sea

TOPAZ ENGINEERING

The Group’s engineering division, Topaz Engineering, provides Fabrication & Construction, Marine Repair, Ship Building and Maintenance Services. Its client list demonstrates a healthy diversity with global shipping lines, oil & gas majors and regionally based Clients all being represented. Topaz’s subsidiary companies, Adyard Abu Dhabi LLC and Nico International, form the foundation upon which the Engineering division continues to grow and produce excellent results for the Group. Each of these two Engineering businesses has established capabilities in marine repair, ship building, and both onshore and offshore fabrication. They both share similar core competencies and customer bases, while operating in diverse locations. Both have strong reputations in their local (UAE) markets; and are expanding into the Caspian and wider Arabian Gulf regions.

Adyard, operating from its 200,000 sqm facility in Abu Dhabi provides total engineering solutions to the oil & gas sector. From design engineering, fabrication installation and start-up, to operations and maintenance, Adyard’s offshore and onshore engineering capabilities include process modules and skids, pressure vessels, fabrication of heavy structures, rig refurbishment, site construction, maintenance services and project management. In 2008, Adyard has further developed its capabilities

in executing technically sophisticated oil & gas projects involving modules for FPSOs, LNG loading modules, jackets/ topsides etc. The 12,000 tonne Mobile Offshore Production Unit (MOPU) currently under construction in Adyard’s LIWA 1 yard is a prime example of the type of large-scale, complex engineering projects that Adyard is capable of executing. Adyard is ISO 9001:2000 certified as well as ASME – U, U2, S, PP and R, and API 2B.

Nico International, with operations in Dubai, Fujairah, Salalah, Bautino and Baku is recognized as the regional leader in ship repair services. Its capabilities include major conversion and refurbishment works, engine reconditioning, turbocharger overhaul, boiler services (through a JV with Doosan Babcock), automation and instrumentation, fuel injection services, transmission, marine gearbox overhauls and building specialized aluminum and steel catamaran and mono hull vessels catering to the growing offshore vessel market in the GCC and the Caspian. Nico is ISO 9001:2000, ISO 14001 and ISO 18001 certified, which has contributed to its longevity in a competitive environment and its customer complaint frequency remaining below one percent.

The highly entrepreneurial management team of Topaz Engineering has commissioned expansions of premises in both Nico International and Adyard to further develop its capacities and capabilities.

Jim Masterton . COO Topaz Engineering“ The expansion of Topaz Engineering’s capabilities and capacity during 2008 has primed us for an exciting future.”

John McFadyen . GM Topaz Marine Repair

“ Our success will depend on maintaining strong relationships with blue chip Clients globally, as well as expanding our dry docking and ship repair activities in key markets. ”

Jay Daga . GM Finance - Topaz Engineering

“ In response to the turbulent financial environment we have taken the necessary steps to mitigate the possible impact on our bottom line. ”

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Section of a power generation module being fabricated in the Abu Dhabi facility of Topaz Engineering

Welder at Topaz’s Fujairah facility

TOPAZ ENGINEERING

Topaz Fabrication & Construction: Operating out of facilities in Abu Dhabi (Adyard) and Fujairah (Nico International Hydrospace Fujairah), the Fabrication and Construction business is engaged in offshore and onshore construction across the UAE and for global clients in the oil & gas, utilities and ports industries.

Topaz Marine Repair: The Marine Repair unit is engaged in a comprehensive range of deep sea fleet and local fleet marine repairs in the Gulf and Caspian regions. Dry-docking facilities are available in Abu Dhabi, Fujairah and Bautino, Kazakhstan. The Kazakhstan operation, Mangistau Oblast Boat Yard (MOBY) is set up through a JV between Nico International, Kazmortransflot and Balykshi (Caspian Services Inc). The Marine Repair unit also offers repair and refurbishment services for offshore rig operators in the Arabian Gulf.

Topaz Ship Building: The Ship Building unit builds catamaran and mono hull vessels both in aluminum and steel. This business operates out of Fujairah (Nico Craft) and Abu Dhabi (Adyard). Its capabilities include building of dredgers, AHTS, work boats, passenger ferries, fast patrol boats etc.

Topaz Maintenance Services: Headquartered in Abu Dhabi (Adyard), the Maintenance Services unit provides maintenance and shutdown support services to the oil and gas and other related industries. Supported by state-of-the-art workshops in Mussafah, experienced teams of service engineers and technicians support clients in the process, production, storage and distribution industry as well as in the other industrial segments including power and utilities.

Going forward, Topaz Engineering will operate in four business verticals:

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The impressive 12,000 tonne Mobile Offshore and Production Unit (MOPU)

The 200 tonne capacity Marine Travelift in the Fujairah facility of Topaz Engineering

* Start-up

*

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An Aluminium vessel being fabricated in Fujairah

KEY CLIENTS

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CORPORATE TEAM

Pramod Balakrishnan . Chief Financial Officer

“ Emphasis on transparency, implementation of best practices, prudent financial management and of course the support of our bankers and other stakeholders is the key to Topaz’s success. ”

Fazel A. Fazelbhoy . Chief Executive Officer

“ Tough situations don’t last; tough people do. ”

Leon Mendonsa . General Manager - Human Resources

“ We provide fantastic opportunities to our employees from more than 37 countries, making us a preferred employer and allowing us to attract the best talent. ”

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Eight Pig launcher-receiver skid constructed by Topaz Engineering in Abu Dhabi BUE Tulpar on a fire fighting exercise

Carl G. Rolaston . Chief Strategic Officer

“ Topaz is strategically positioned in the potential high growth and stable regions of the GCC and the Caspian Sea which is paramount to our long term performance. ”

Corporate Governance Report

Company’s Philosophy

Corporate Governance at Topaz Energy and Marine Ltd. commits the Company towards the attainment of high levels of transpar-ency, accountability and business propriety with the ultimate object of increasing long term value for shareholders while guarding the needs and interests of major stakeholders long term value.

The Company is committed to adopting the best practices of Corporate Governance and fully complies with the guidelines on Cor-porate Governance as practiced by its parent, Renaissance Services SAOG, a publicly traded company on the Oman Stock Exchange.

Board of Directors

The Board is responsible for ensuring that the Company is managed in a manner that protects and enhances the interests of its shareholders taking account of the interests of employees, Customers, suppliers and the local community.

The Board is responsible for the Company’s corporate governance which includes:

• Determining the strategic direction of the company, reviewing operational plans and measuring performance against approved strategies and plans.• Adopting operating budgets at the commencement of each financial year and monitoring progress on a regular basis against budget by key performance indicators.•

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As at year-end 2008, the Company had eight Directors all of whom are independent. The composition of the Board conforms to the policy of appointing Directors with an appropriate range of backgrounds, skills and experience.

As a wholly owned subsidiary of Renaissance Services SAOG, Topaz Board meetings are held under the auspices of the Renais-sance Board which comprise seven of the eight Topaz Board Directors. The Renaissance Board met four times in 2008. The dates of the Board meetings were: January 6, February 20, June 19 and October 15, 2008.

NAME OF DIRECTOR POSITION

Samir J. Fancy* Ali Bin Hassan Sulaiman* Yeshwant Desai* Sunder George* Rishi Ajit Khimji* H.H. Sayyid Tarik Bin Shabib Bin Taimur* Colin Rutherford* Maj. Gen. Saif Abdullah Ali Al-Shafar

* Renaissance Services SAOG Board Directors

In order to facilitate good governance the following information, amongst others, is provided to the Board:

• Review of operating plans of business, capital budgets and updates.• Quarterly results of the Company and its business segments.• Quarterly performance on Health, Safety, Security and Environment (“HSSE”).• Reports of fatal, serious accidents or dangerous occurrences.• Minutes of the Audit and Management Committee Meetings.• Issues involving possible public or product liability claims of substantial nature.• Any significant industrial relations problems; policies/procedures as are deemed important to place before the Board and• Related party transactions.

Consolidated Financial Statements 2008Corporate Governance ReportIndependent Auditors’ Report on Financial StatementsConsolidated income statementsConsolidated balance sheetConsolidated statement of cash flowConsolidated statement of changes in equityNotes to the consolidated financial statements

33363839404142

Ensuring that policies and compliance procedures are in place. These include internal controls, environment and risk manage-ment and compliance in public reporting. The Board also ensures that the Company and its officers act legally, ethically and responsibly in all matters.Monitoring and overseeing the Company’s financial position and determining satisfactory arrangements are in place for auditing the Company’s financial affairs.

ChairmanVice Chairman

DirectorDirectorDirectorDirectorDirectorDirector

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Company Secretary

The Board appoints a secretary at the meetings and the secretary records minutes of everyBoard meeting whereby decisions are noted and action items are identified.

The Company has an induction program for Directors, which covers the business environment and the Company’s businesses as well as specific corporate governance elements (e.g. code of conduct and confidentiality).

There have been no materially significant related party transactions, pecuniary transactions or relationships between the Com-pany and its Directors that may have potential conflict of interest of the Company at large.

The Company formally documents specific “Related Party Transaction Procedures” to comply with the Corporate Governance guidelines. The procedure defines the categories and approval and the related party transactions.

Specific related party transactions conducted during the year are disclosed and prior approval is taken where necessary.

The Compensation Committee

Mr. Yeshwant Desai DirectorMr. Colin Rutherford Director

The Compensation Committee was formed as a Board Committee to lay-down and update the parameters for assessment and compensation of key personnel, undertake their performance assessment and report to the Board on the compensation & personnel policies.

The philosophy for the remuneration is “to attract and retain high quality staff at all levels and motivate them towards exceptional performance”.

The remuneration package of Executives is made up of the basic salary, the annual bonus and additional allowances and pre-requisites. Senior Management contracts are open-ended with a 3-6 months notice period. The contracts are governed by local Labor Law provisions.

Audit Committee Members

Mr. Yeshwant Desai Mr. Sunder George Mr. Ali Hassan Sulaiman

The Board has set up an Audit Committee. The Committee comprises of 3 non-executive directors. The Audit Committee Chair-man is Mr. Yeshwant Desai.

The Committee monitors internal control policies and procedures designed to safeguard the Company’s assets and ensure the integrity of financial reporting.

The main responsibilities of the Audit Committee are as follows:

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The Company employs two full time internal auditors in compliance with the corporate governance guidelines.

Audit and Internal Control

The Audit Committee has reviewed, on behalf of the Board, the effectiveness of internal controls by meeting the internal auditors, reviewing the internal audit reports and recommendations and meeting the external auditor, reviewing the audit findings report and the management letter.

The present audit firm KPMG provides audit and assurance services to the Company. In accordance with the Corporate Gover-nance Code, the services of KPMG are not used where a conflict of interest might occur.

Profile of the Statutory Auditor

KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. KPMG operates in 148 countries and has more than 113,000 professionals working in member firms around the world. KPMG’s presence in the UAE dates from 1973. With over 700 professional staff and 23 partners, KPMG operates from offices in Dubai, Abu Dhabi and Sharjah. KPMG also works closely with other KPMG offices throughout the region and across the world.

Company Status

Topaz Energy and Marine Ltd. is a wholly owned subsidiary of Renaissance Services SAOG, a publically traded company on the Oman Stock Exchange. As a wholly owned subsidiary of a public company, Topaz adheres to the corporate governance standards of a public company.

DirectorDirectorDirector

Reviewing the annual audited financial statements and the Auditor’s Report on the financial statements prior to submission to the Board for approval;Reviewing and approving the interim financial statements prior to public release and filing;Reviewing the scope of external and internal audits;Reviewing and discussing accounting and reporting policies and changes in accounting principles;Assessing the effectiveness of the Company’s internal control systems and procedures and the process for identifying principal business risks;Reviewing compliance with the Code of Conduct;Meeting with the internal and external auditors independently of management of the Company;Periodic review and approval related party transactions.

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OpinionIn our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as of 31 December 2008 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with International Financial Reporting Standards.

Report on Other Legal and Regulatory RequirementsWe also confirm that in our opinion proper books of account have been kept by Topaz Energy and Marine Limited in accordance with the provisions of the Offshore Companies Regulations 2003 pursuant to Laws No. 1 and 4 of 2001 concerning the formation of offshore companies in the Jebel Ali Free Zone. We have obtained all the information and explanations which we required for the purpose of our audit and, to the best of our knowledge and belief, no violations of the Offshore Companies Regulations or of the articles of association of Topaz Energy and Marine Limited have occurred during the year ended 31 December 2008 which would have had a material effect on the business of Topaz Energy and Marine Limited or on its financial position.

Date: 22 February 2009

Dubai

INDEPENDENT AUDITORS’ REPORT TO THE SHAREHOLDERS OFTOPAZ ENERGY AND MARINE LIMITED

Report on the Financial StatementsWe have audited the accompanying consolidated financial statements of Topaz Energy and Marine Limited (“the Company”) and its subsidiaries (collectively referred to as “the Group”), which comprise the consolidated balance sheet as at 31 December 2008 and the consolidated income statement, consolidated cash flow statement and consolidated statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. The corresponding figures presented are based on financial statements of the Group as at and for the year ended 31 December 2007, which were audited by another auditor whose report dated 20 February 2008, expressed an unqualified opinion on those statements.

Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards and the applicable provisions of the Offshore Companies Regulations 2003 pur-suant to Law No. 1 and 4 of 2001 concerning the formation of offshore companies in the Jebel Ali Free Zone. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ ResponsibilityOur responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstate-ment.

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

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

37 36

510,936 318,817 37,511 29,829 549 2,415 2,203 - 899 - 3,053 4,167

555,151 355,228

7,687 4,674 13,322 16,127 154,320 86,748 1,560 1,655 25,629 32,083 202,518 141,287 757,669 496,515

161,323 127,323 27,157 - 1,816 883 446 528 66,600 45,140 18,832 - 276,174 173,874 33,312 11,175 309,486 185,049

223,959 130,837 12,781 18,632 - 8,125 - 263 6,717 5,254 16,927 9,873 260,384 172,984 119,857 90,112 3,672 - 55,455 31,681 5,405 2,258 - 2,500 263 380 1,220 244 - 6,500 1,927 4,807 187,799 138,482 448,183 311,466

757,669 496,515

Consolidated income statementfor the year ended 31 December 2008

Consolidated balance sheetas at 31 December 2008

Revenue Direct costs

GROSS PROFIT

Other income

Finance costs

Administrative expenses Amortisation of intangible assets

Gain on disposal of investment in an associate

Share of results of associates

PROFIT BEFORE INCOME TAX

Income tax

PROFIT FOR THE YEAR

Attributable to: - Equity holders of the company - Minority interest PROFIT FOR THE YEAR

418,817

(291,766

127,051

6,142

(21,370

(57,970

(217

677

658

54,971

(8,124

46,847

41,2255,622

46,847

301,045

(215,181

85,864

7,322

(11,988

(45,372

(215

-

892

36,503

(7,920

28,583

26,5662,017

28,583

2007USD’000

2008USD’000

7

8

9

13

14

14

10

11

Notes

ASSETSNon-current assetsProperty, plant and equipmentIntangible assetsInvestment in associatesInvestment in a jointly controlled entityLong term receivablesDeferred tax

Current assetsInventoriesWork in progressAccounts receivable and prepaymentsDue from related partiesBank balances and cash

TOTAL ASSETS

EQUITY AND LIABILITIESEquityShare capitalShare capital subscribed but not allottedStatutory reserveTranslation reserveRetained earningsProposed dividend

Total equity attributable to equity holders of the CompanyMinority interest

Total equity

Non-current liabilitiesTerm loansObligations under Ijarah-fil-ThimmaLoan due to holding companyFinance lease obligationsEmployees’ end of service benefitsAccounts payable and accruals

Current liabilitiesAccounts payable and accrualsBank overdraftsTerm loansObligations under Ijarah-fil-ThimmaLoan due to holding companyFinance lease obligationsDue to related partiesDividend payableIncome tax payable

Total liabilities

TOTAL EQUITY AND LIABILITIES

The consolidated financial statements were authorised for issue in accordance with a resolution of the directors on 22 February 2009.

2008USD’000

2007USD’000

Notes

12 13 14 5

32

15 16 17 30 18

19 20 21 22

23 (a)

24 25 26 27 28 29

29 18 24 25 26 27 3023 (b) 10

) )

) )

) )

) )

) )

The independent auditors’ report is set out on page 36.The attached notes 1 to 39 form part of these consolidated financial statements.


Topaz Energy and Marine Limited and its subsidiaries Topaz Energy and Marine Limited and its subsidiaries

3938

2008 2007 Notes USD’000 USD’000CASH FLOWS FROM OPERATING ACTIVITIES Profit for the year 46,847 28,583Adjustments for: Share of profit from associates 14 (658) (892)Gain on disposal of investment in an associate 14 (677) - Depreciation 12 33,951 28,129Amortisation of intangible assets 13 217 215Profit on disposal of property, plant and equipment 8 (2,184) (3,327) Provision for employees’ end of service benefits 28 2,389 1,778 Finance costs 9 14,316 10,571Income tax expenses 10 8,124 7,920 102,325 72,977Working capital changes: Change in inventories (2,787) (1,662)Change in work in progress 2,805 (8,273)Change in accounts receivable and prepayments (34,606) (17,538)Change in due from related parties 95 (322)Change in accounts payable and accruals 27,485 34,453Change in due to related parties 513 (161) Cash generated from operations 95,830 79,474Finance costs 9 (14,316) (10,571)Employees’ end of service benefits paid 28 (1,000) (548)Income tax paid (9,894) (12,210) Net cash flows from operating activities 70,620 56,145 CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property, plant and equipment 12 (125,822) (101,702)Acquisition of subsidiary, net of cash acquired 6 (115,151) -Proceeds from disposal of property, plant and equipment 8,006 10,005Advance/deposit for vessels (22,046) -Dividend received from associates 14 - 2,638Proceeds from disposal of investment in an associate 14 3,119 - Investment in a jointly controlled entity 5 (2,203) - Acquisition of intangible assets 13 (108) - Dividend paid (6,500) - Net cash used in investing activities (260,705) (89,059)

CASH FLOWS FROM FINANCING ACTIVITIESCapital introduced 34,000 32,983 Funds introduced by minority 16,872 7,795Dividend paid to minority (358) - Term loans drawn 158,952 32,653Repayment of term loans (42,056) (29,423)Repayment of capital element of finance lease (380) (363)Obligations under Ijarah-fil-Thimma (2,704) 20,890Repayment of loan to holding company (2,500) (2,500)Share capital subscribed but not allotted 19,032 - Advance payment for lease of land (899) - Net cash flows from financing activities 179,959 62,035

(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (10,126) 29,121

Cash and cash equivalents at 1 January 32,083 2,962 CASH AND CASH EQUIVALENTS AT 31 DECEMBER 18 21,957 32,083

Consolidated statement of cash flowsfor the year ended 31 december 2008

Topaz Energy and Marine Limited and its subsidiaries


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40 41

Topaz Energy and Marine Limited and its subsidiariesNotes to the consolidated financial statements


1. REPORTING ENTITY

Topaz Energy and Marine Limited (“the Company”) is a limited liability company incorporated on 9 May 2005 in accordance with the Offshore Companies Regulations 2003 of Jebel Ali Free Zone Authority. The address of the registered office of the Company is P.O. Box 9275, Dubai, United Arab Emirates. The ultimate holding company is Renaissance Services SAOG, (“the Holding Company”) a joint stock company incorporated in the Sultanate of Oman.

The consolidated financial statements of the Company as at and for the year ended 31 December 2008 comprises the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) and the Company’s interest in as-sociates and jointly controlled entities. The principal activities of the Group are marine vessel charter, provision of ship repair and fabrication and maintenance services for the oil and gas industry.

2. SUBSIDIARIES, ASSOCIATES AND JOINTLY CONTROLLED ENTITIES

Registered percentage shareholdingCompany Country of 2008 2007 Principal activities incorporation

A) Subsidiary of Topaz and Energy and Marine Limited

Topaz Holdings Limited United Arab Emirates 100% - Investment company Nico Middle East Limited Bermuda 100% 100% Charter of marine vessels ship repair, oil and gas construction & fabrication B) Subsidiaries of Nico Middle East Limited

Nico World II Limited Vanuatu 100% 100% Charter of marine vesselsNico World S.A Panama 100% 100% Charter of marine vesselsNico Far East PTE Limited Singapore 100% 100% Charter of marine vesselsTEAM I Limited Vanuatu 100% 100% Charter of marine vesselsTEAM II Limited St.Vincent 100% 100% Charter of marine vesselsTEAM III Limited St.Vincent 100% 100% Charter of marine vesselsTEAM IV Limited St.Vincent 100% 100% Charter of marine vesselsTEAM V Limited St.Vincent 100% 100% Charter of marine vesselsTEAM VI Limited St.Vincent 100% 100% Charter of marine vesselsTEAM VII Limited St.Vincent 100% 100% Charter of marine vesselsTEAM VIII Limited St.Vincent 100% 100% Charter of marine vesselsTEAM IX Limited St.Vincent 100% 100% Charter of marine vesselsTEAM X Limited St.Vincent 100% 100% Charter of marine vesselsTEAM XII Limited St. Vincent 100% - Charter of marine vessels TEAM XIII Limited St. Vincent 100% - Charter of marine vesselsTEAM XIV Limited St. Vincent 100% - Charter of marine vesselsTEAM XV Limited St. Vincent 100% - Charter of marine vesselsTEAM XVI Limited St. Vincent 100% - Charter of marine vesselsTEAM XVII Limited St. Vincent 100% - Charter of marine vessels TEAM XVIII Limited St. Vincent 100% - Charter of marine vesselsTEAM XIX Limited St. Vincent 100% - Charter of marine vesselsBue Marine Limited United Kingdom 100% 100% Charter of marine vessels Adyard Abu Dhabi LLC ( “Adyard” ) United Arab Emirates 49% 49% Offshore and onshore [refer note 2 (a)] projects and fabrication Dart Automation Inc. Panama 100% 100% Marine and onshore automationNico Craft LLC United Arab Emirate - - Boat building [refer note 2 (b)] Topaz BUE Limited United Arab Emirate 100% 100% Charter of marine vessels

2. SUBSIDIARIES, ASSOCIATES AND JOINTLY CONTROLLED ENTITIES (continued)

B) Subsidiaries of Nico Middle East Limited (continued)

Nico International Limited United Arab Emirates 100% 100% Charter of marine vessels, ship repair and fabricationNico International LLC Sultanate of Oman 100% 100% Ship repair[refer note 2 (c)] Kyran Holdings Ltd. St. Vincent 100% 100% EngineeringTopaz Doha Holdings I Ltd. St. Vincent 100% 100% Charter of marine vesselsTopaz Doha Holdings II Ltd. St. Vincent 100% 100% Charter of marine vesselsCaspian Fortress Limited St. Vincent 50% 50% Charter of marine vessels[refer note 2 (d)] Caspian Pride Limited St. Vincent 50% 50% Charter of marine vessels[refer note 2 (d)] Caspian Baki Limited St. Vincent 50% 50% Charter of marine vessels[refer note 2 (d)] Caspian Citadel Limited St. Vincent 50% 50% Charter of marine vessels [refer note 2 (d)] Caspian Gala Limited St. Vincent 50% - Charter of marine vessels [refer note 2 (d)] Caspian Server Ltd St. Vincent 50% - Charter of marine vessels[refer note 2 (d)]Caspian Breeze Ltd St.Vincent 50% - Charter of marine vessels[refer note 2 (d)]

C) Subsidiaries of BUE Marine Limited

BUE Caspian Limited Scotland 100% 100% Vessel management[refer note 2 (e)]BUE Kazakhstan Limited Scotland 100% 100% Vessel managementBUE Cygnet Limited Scotland 100% 100% Vessel managemenBUE Bulkers Limited Scotland 100% 100% Vessel managementBUE Shipping Ltd Scotland 100% 100% Vessel managementRoosalka Shipping Ltd Scotland 100% 100% Vessel managementBUE Aktau LLP Kazakhstan 100% 100% Vessel managementBUE Bautino LLP Kazakhstan 100% 100% Vessel managementBH PSV Limited Cayman Islands 100% 100% Dormant companyBH Jura Limited Cayman Islands 100% 100% Dormant companyBH Standby Limited Cayman Islands 100% 100% Dormant companyRoosalka Shipping Limited Cayman Islands 100% 100% Dormant companyBH Bulkers Limited Cayman Islands 100% 100% Vessel managementBH Islay Limited Cayman Islands 100% 100% Dormant companyBUE Kyran Limited Scotland 100% - Vessel managementBUE Marine Turkmenistan Scotland 100% - Vessel managementLimited [refer note 2 (e)] XT Shipping Limited Scotland 100% - Vessel managementBUE Kashagan Limited Cayman Islands 100% - Vessel managementBUE Maritime Service Limited Scotland 100% - Vessel management

4342




D) Subsidiary of Topaz Doha Holdings II Limited

Doha Marine Services WLL State of Qatar 100% - Vessel management[refer note 2 (h)]

E) Associates

Darium Thai Offshore Limited Thailand 49% 49% Charter of marine vessels

F) Jointly controlled entity

Nico Doosan Babcock United Arab Emirates 50% 50% Marine boiler repair(previously known as Nico Mitsui Babcock) [refer note 2 (g)]

Mangistau Oblast Boat yard LLP Kazakhstan 50% - Marine repair, fabrication (refer note 5) and boat building

DMS Jaya Marine WLL Qatar 51% - Charter of marine vessels

Jaya DMS Marine Pte Ltd Singapore 50% - Charter of marine vessels

(a) In addition to 49% ownership interest in Adyard, the Group has a beneficial interest in a further 33.48 % (2007: 33.48%) share-holding in Adyard. The Group also has the power to govern the financial and operating policies of Adyard under the terms of an agreement with the other shareholders of Adyard. Accordingly, Adyard has been dealt with as a subsidiary in these consolidated financial statements. Also, in addition to its interest in the results of operations arising from its interest in Adyard, as disclosed above, the Group is entitled to a further share in the profits of Adyard, in the form of management fees, calculated as a percentage of the profit for the year.

(b) Nico Craft LLC, incorporated in the UAE, has been dealt with as a wholly owned subsidiary, in these consolidated financial statements, as the Group has the power to govern the financial and operating policies of Nico Craft LLC under a management agreement with the shareholders of Nico Craft LLC. The shareholders of Nico Craft LLC, through an agreement, have assigned the rights to the results of operations, assets and liabilities in Nico Craft LLC to the Group. The Group does not have any share-holding in Nico Craft LLC.

(c) Nico International LLC, incorporated in the Sultanate of Oman, has been dealt with as a wholly owned subsidiary, in these consolidated financial statements, as the Group has the power to govern operating and financial policies of the Company, under a management agreement. The partners, as per the management agreement, have assigned the rights to the results of operations, assets and liabilities in Nico International LLC to the Group. Under a separate agreement, the partners have waived their rights to the net assets of the Company in favour of Nico Middle East Limited. Accordingly, Nico Middle East Limited is deemed as the immediate holding company and the financial results and position of the Company are consolidated in the financial statements of Nico Middle East Limited.

(d) Caspian Fortress Limited, Caspian Pride Limited, Caspian Baki Limited, Caspian Citadel Limited, Caspian Gala Limited, Cas-pian Server Limited and Caspian Breeze Limited, have been dealt with as subsidiaries as the Group has the power to govern the financial and operating policies of these subsidiaries under management agreements with the shareholders of these subsidiaries.

(e) BUE Caspian Limited also owns the entire issued share capital of BUE Maritime Services Limited and BUE Marine Turkmeni-stan Limited, companies incorporated and registered in Scotland.

(f) One of the Group’s subsidiaries operates in the Azeri region through an alliance agreement with KMNF, the marine shipping arm of the Azeri state oil company. Under the Alliance agreement, responsibilities have been allocated between KMNF, BUE and the Alliance. The Group accounts for its own assets and liabilities and for the costs and revenues on transactions that it enters into with the Alliance.


(g) Nico Doosan Babcock is an unincorporated jointly controlled entity and is operating under the trade license of the Company’s Dubai Branch.

(h) During the year, the Group acquired 49% interest in Doha Marine Service WLL (“DMS”), an entity incorporated in the state of Qatar. In addition to 49% ownership interest in DMS, the Group has a beneficial interest in further 51% in DMS. Accordingly the Group also has power to govern the financial and operating policies of DMS, and therefore, DMS has been dealt as a subsidiary in these consolidated financial statements.

3. BASIS OF PREPARATION Statement of complianceThe consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and the applicable provisions of the Offshore Companies Regulations 2003 of Jebel Ali Free Zone Authority.

Basis of measurementThe consolidated financial statements are prepared under the historical cost convention modified to include the revaluation of property, plant and equipment and the measurement at fair value of derivative financial instruments.

Functional currency and presentation currencyThe consolidated financial statements are presented in United States Dollars (“USD”) which is the Group’s functional currency rather than in the currency of the Company’s country of incorporation as a significant proportion of the transactions of the Group enterprises are undertaken in USD. All financial information presented in USD has been rounded to the nearest thousand, unless otherwise stated.

Use of estimates and judgmentsThe preparation of consolidated financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected.

In particular, information about significant areas of estimation uncertainty and critical judgment in applying accounting policies that have the most significant effect on the ammount recognized in the consolidated financial statements are sdescribed in note 39.

4. SIGNIFICANT ACCOUNTING POLICIESThe accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements, and have been applied consistently by the Group entities.

Basis of consolidationThe consolidated financial statements include the financial statements of the Company and each of the entities that it controls (the Group – see note 2) together with its interest in associates and jointly controlled entities referred to in note 2.

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and op-erating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial state-ments from the date that control commences until the date that control ceases. The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group.

A jointly controlled operation is a joint venture carried on by each venturer using its own assets in pursuit of the joint operations. The consolidated financial statements include the assets that the Group controls and the liabilities that it incurs in the course of pursu-ing the joint operation, and the expenses that the Group incurs and its share of the income that it earns from the joint operation.

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity.

Associates are accounted for using the equity method (equity accounted investees) and are recognised initially at cost. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Group’s share of the income and expenses and equity movements of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are elimi-nated in preparing the consolidated financial statements.

4544



4. SIGNIFICANT ACCOUNTING POLICIES (continued)

Basis of consolidation (continued)Minority interest represents the portion of profit or loss and net assets not held by the Group and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. Acquisitions of minority interest are accounted for using the parent entity extension method, whereby the difference between the consideration and the book value of the share of the net assets acquired is recognised as goodwill.

Financial instrumentsNon-derivative financial instrumentsNon-derivative financial instruments comprise accounts and other receivables, bank balances and cash, accounts and other pay-ables, loans and borrowings from banks and balances with related parties.

Non-derivative financial instruments are recognized initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured at amortized cost using the effective interest method less any impairment losses.

A financial instrument is recognized if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognized if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognized if the Group’s obligations specified in the contract expire or are discharged or can-celled. Derivative financial instrumentsThe Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Derivatives are recognised initially at fair value; attributable transaction costs are recognised in consolidated income statement when incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Cash flow hedgesChanges in the fair value of the derivative hedging instrument designated as a cash flow hedge are recognised directly in equity to the extent that the hedge is effective. To the extent that the hedge is ineffective, changes in fair value are recognised in the consolidated income statement. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in equity remains there until the fore-cast transaction occurs. In other cases the amount recognised in equity is transferred to the consolidated income statement in the same period that the hedged item affects profit or loss.

Other non-trading derivativesWhen a derivative financial instrument is not held for trading, and is not designated in a qualifying hedge relationship, all changes in its fair value are recognised immediately in the consolidated income statement.

Foreign currency (i) Foreign currency transactionsTransactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments dur-ing the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the period. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Foreign currency differences arising on retranslation are rec-ognised in profit or loss or qualifying cash flow hedges, which are recognised directly in equity (see (iii) below

(ii) Foreign operations The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to USD at exchange rates at the reporting date. The income and expenses of foreign operations are translated to USD at ex-change rates at the dates of the transactions.

Foreign currency differences are recognised directly in equity in the foreign currency translation reserve (FCTR). When a foreign operation is disposed of, in part or in full, the relevant amount in the FCTR is transferred to profit or loss.

Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a foreign opera-tion and are recognised directly in equity in the FCTR.


Property, plant and equipmentProperty, plant and equipment are stated at cost or valuation less accumulated depreciation and any impairment in value. Cost of marine vessels includes registration costs and major maintenance and dry-docking costs incurred at the time of acquisition and significant rebuild expenditure incurred during the life of the asset.

Depreciation is provided on a straight-line basis at rates calculated to write off the cost or valuation, less any estimated residual value, of each asset, excluding vessels under construction, over its expected useful life as follows:

Life in years

Buildings 5 to 15Plant, machinery, furniture, fixtures and office equipment 3 to 15 Marine vessels revalued (from the date of latest revaluation) 10 Marine vessels acquired 15 to 25 Expenditure on marine vessel dry docking (included as a component of marine vessels) 3 Jetty and land development 25Floating dock 25 Motor vehicles 3

Capital work in progress is not depreciated. Assets in the course of construction are depreciated from the date that the related as-sets are ready for commercial use. Depreciation method, useful lives and residual values are reviewed at each reporting date.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indi-cate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use.

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately is capi-talised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property, plant and equipment. All other expenditure is recogn-ised in the consolidated income statement as the expense is incurred.

Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from dis-posal with the carrying amount of property, plant and equipment, and are recognised net within “other income” in profit or loss. When revalued assets are sold, the amounts included in the revaluation surplus reserve are transferred to retained earnings.

Dry docking costsThe expenditure incurred on vessel dry docking, a component of property, plant and equipment, is amortised over the period from the date of dry docking, to the date on which the management estimates that the next dry docking is due.

Vessel refurbishment costs

Leased assetsCosts incurred in advance of charter to refurbish vessels under long term charter agreements are capitalised within property, plant and equipment in line with the use of the refurbished vessel. Where there is an obligation to incur future restoration costs under charter agreements which would not meet the criteria for capitalisation within property, plant and equipment, the costs are accrued over the period to the next vessel re-fit to match the use of the vessel and the period over which the economic benefits of its use are realised.

Owned assetsCost incurred to refurbish owned assets are capitalised within property, plant and equipment and then depreciated over the shorter of the estimated economic life of the related refurbishment or the remaining life of the vessel.

GoodwillGoodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree at the date of acquisition. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

4746




Goodwill (continued)For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units, or groups of cash-generating units, that are expected to benefit from the synergies of the combination, irrespective of whether other assets and liabilities of the Group are assigned to those units or groups of units. Each unit or group of units to which the goodwill is so allocated:

• represents the lowest level within the Group at which the goodwill is monitored for internal management purposes; and

• is not larger than a segment based on either the Group’s primary or the Group’s secondary reporting format determined in accordance with IAS 14 Segment Reporting.

Impairment is determined by assessing the recoverable amount of the cash-generating unit (group of cash-generating units), to which the goodwill relates. Where the recoverable amount of the cash-generating unit (group of cash-generating units) is less than the carrying amount, an impairment loss is recognized in the consolidated income statement. An impairment loss in respect of goodwill is not reversed. Where goodwill forms part of a cash-generating unit (group of cash-generating units) and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is mea-sured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Other intangible assetsOther intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.

Computer software costs represent expenditure incurred on implementing an ERP solution for the Group. Amortisation is charged on a straight line basis over a period of five years, from the date of completion.

InventoriesInventories are stated at the lower of cost and net realisable value after making due allowance for any obsolete or slow moving items. Costs are those expenses incurred in bringing each product to its present location and condition on a weighted average basis. Net realisable value is based on estimated selling price less any further costs expected to be incurred to completion and disposal.

Work in progressWork in progress comprises:(i) Direct costs plus attributable profit less provision for foreseeable losses, if any; less(ii) Progress payments received or receivable.

On those contracts where (ii) exceeds (i), the excess is shown as progress billings in excess of work in progress.

Impairment Financial assetsA financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. All impairment losses are recognized in the consolidated income statement. An impairment loss is reversed if the reversal can be related objec-tively to an event occurring after the impairment loss was recognized. Non-financial assets (other than goodwill)The carrying amounts of the Group’s non-financial assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. An impairment loss is recognized if the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognized in the consolidated income statement. The recoverable amount of an asset or its cash generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of time value of money and risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”).


Employees’ end of service benefitsThe Group provides end of service benefits to its employees. The entitlement to these benefits is based upon the employees’ salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment.

Retirement benefit costsPayments to defined contribution retirement benefit schemes are charged as an expense as they fall due. Payments made to state-managed retirement benefit schemes are dealt with as payments to defined contribution schemes where the Group’s obliga-tions under the schemes are equivalent to those arising in a defined contribution retirement benefit scheme.

ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and able to be reliably measured.

Revenue recognition

Ship repair and oil and gas servicesRevenue comprises amounts derived from ship repair, provision of mechanical, electrical and instrumentation services, fabrica-tion and maintenance services, turbocharger services and marine boiler repairs. Revenue is recognised under the percentage of completion method and is stated net of discounts and allowances. Where the outcome of a contract can be assessed with reasonable certainty, a prudent estimate of attributable profit is recognised in the consolidated income statement. Full provision is immediately made for all known or expected losses on individual contracts, when such losses are foreseen.

Marine charterRevenue comprises operating lease rent from charter of marine vessels, revenue from provision of on-board accommodation, catering services and sale of fuel and other consumables.

Lease rent income is recognised on a straight line basis over the period of the lease. Revenue from provision of on- board ac-commodation and catering services is recognised over the period of hire of such accommodation while revenue from sale of fuel and other consumables is recognised when delivered.

Leases

Group as a lesseeFinance leases, which transfer to the Group substantially all the risks and benefits incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged in the consolidated income state-ment. Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Operating lease payments are recognised as an expense in the consolidated income statement on a straight-line basis over the lease term.

Group as a lessorLeases where the Group does not transfer substantially all the risks and benefits of ownership of the asset are classified as operat-ing leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as lease rental income. Contingent rents are recognised as revenue in the period in which they are earned.

Finance income and expensesFinance income comprises interest income on funds invested. Interest income is recognized in the consolidated income statement as it accrues, using the effective interest rate method. Finance expense comprises interest expense on borrowings. All borrowing costs are recognized in the consolidated income state-ment using the effective interest rate method. However, borrowing costs that are directly attributable to the acquisition or construc-tion of property, plant and equipment are capitalized as part of the cost of that asset. Capitalization of borrowing costs ceases when substantially all the activities necessary to prepare the asset for its intended use or sale are complete.

DividendDividend income is recognised on the date that the Group’s right to receive payment is established.

4948




Income tax

Current tax Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Deferred tax Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the bal-ance sheet date.

Deferred income tax assets are recognised for all deductible temporary differences and carry-forward of unused tax assets and unused tax losses to the extent that it is probable that taxable profit will be available against which the deductible temporary dif-ferences and the carry-forward of unused tax assets and unused tax losses can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

Ijarah-fil-ThimmaIjara-fil-Thimma is an agreement whereby the Group as a lessee, leases the asset from banks and financial institutions for a speci-fied rental over a specific period. The duration of the lease, as well as the basis for rental, are set and agreed in advance. The risks and benefits incidental to ownership of the leased item are transferred to the Group. The Group capitalises the leased item at the inception of the lease at the fair value of the leased property or, if lower, at the present value of minimum lease payments. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest over the remaining balance of the liability. Finance charges are reflected in the consolidated income statement.

Capitalised lease assets are depreciated over the shorter of the estimated useful life of the asset or the lease term.

New standards and interpretations not yet adoptedA number of new standards, amendments to standards and interpretations are not yet effective for the year ended 31 December 2008, and have not been applied in preparing these consolidated financial statements. These standards and interpretations are not likely to have any significant impact on the consolidation financial statements of the Group in the period of their initial application.

(a) Revised IAS 23 Borrowing Costs: Presently, Group’s policy is to capitalise borrowing costs directly attributable to the acquisi-tion, construction or production of a qualifying asset as part of the cost of that asset. The revised IAS 23 will become mandatory for the Group’s 2009 consolidated financial statements.

(b) Revised IAS 1 Presentation of Financial Statements (2007) which becomes mandatory for the Group’s 2009 consolidated financial statements, introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners.

(c) Amendments to IAS 32 Financial Instruments: Presentation and IAS 1 Presentation of Financial Statements – Puttable Finan-cial Instruments and Obligations Arising on Liquidation requires puttable instruments, and instruments which become mandatory for the Group’s 2009 consolidated financial statements.

(d) Revised IFRS 3 Business Combinations (2008)

(e) Amended IAS 27 Consolidated and Separate Financial Statements (2008) which become mandatory for the Group’s 2010 consolidated financial statements.

5. INVESTMENT IN A JOINTLY CONTROLLED ENTITY Investment in jointly controlled entity represents an investment made by the Group in Mangistau Oblast Boat yard LLP. The Group entered into a Participants Agreement on 18 April 2008. As at the balance sheet date the jointly controlled entity has not yet com-menced operations and accordingly this investment has been stated at cost.

6. BUSINESS COMBINATION

Acquisition of Doha Marine Services WLL

On 8 May 2008, the Group acquired 100% of the shares of Doha Marine Services Limited, an unlisted company based in Qatar involved in Marine Chartering.

The fair value of identifiable assets and liabilities of Doha Marine Services Limited acquired at that date were as follows –

2008 USD’000

Propert, plant & equipment 106,070 Inventories 226 Trade receivables & prepayments 10,920 Bank balances and cash 12,785 Total assets 130,001Accounts payables & accruals 9,314 Taxation 5 Loan from partners 463 Employees end of service benefits 74

Total liabilities 9,856

Fair value of net assets 120,145Goodwill arising on acquisition (refer note 13) 7,791

Cash out flow on acquisition 127,936

2008 USD’000 Net cash acquired with the subsidiary 12,785Cash paid (127,936 Net cash outflow (115,151

The amount paid for the acquisition includes an amount of USD 12 million deposited in an escrow account.

From the date of acquisition, Doha Marine Services Limited has contributed USD 4,441 thousand to the net profit and USD 24,807 thousand to the revenue of the Group. If the combination had taken place at the beginning of the year, the profit contribu-tion to the Group would have been USD 6,221 thousand and revenue from continuing operations would have been USD 40,125 thousand.

7. REVENUE 2008 2007 USD’000 USD’000

Vessel chartering 191,566 146,887Adyard 137,268 84,678Nico International and its subsidiaries & associates 89,983 69,480

418,817 301,045

5150

)

)



8. OTHER INCOME 2008 2007 USD’000 USD’000 Profit on disposal of property, plant and equipment 2,184 3,327Gain from settlement of derivative fincancial instruments 593 3,028 Sale of scrap 874 - Excess provision for insurance claim written back 819 368Commission income 100 -Miscellaneous income 1,572 599

6,142 7,322

9. FINANCE COSTS

2008 2007 USD’000 USD’000

Interest expense 15,803 12,233Interest income (1,487) (1,662)

Net interest expense 14,316 10,571Provision for derivative used for hedging (refer note 36) 7,054 1,417

21,370 11,988

10. INCOME TAX

Tax expense relates to corporation tax payable on the profits earned by the subsidiaries, as adjusted in accordance with the taxa-tion laws and regulations in United Kingdom, Singapore and Qatar on remittances from the subsidiaries and the associates, as follows:

2008 2007 USD’000 USD’000Current taxation Foreign tax 6,896 9,138Corporation tax 113 29 Total current tax 7,009 9,167 Deferred taxCurrent year 362 1,871Prior year 753 (3,118)

Total deferred tax 1,115 (1,247)

Tax expense for the year 8,124 7,920

Tax liabilities 1,927 4,807

UK Corporation tax is calculated at 30% of the estimated assessable profit for the financial period. Taxation for other jurisdictionsis calculated at the rates prevailing in the respective jurisdictions.

10. INCOME TAX (continued)

The charge for the period can be reconciled to the profits of the Group attributable to entities in the United Kingdom, Singapore and Qatar as follows: 2008 2007 USD’000 USD’000

Profit before income tax 51,037 35,880 Less: Profit from non taxable jurisdictions (30,646) (19,752

Taxable profit included in the profit for the year 20,391 16,128

Tax at the applicable average rate of 30% (2007: 30%) 4,276 4,867Tax effect of expenses that are not deductible in determining taxable profit 142 235Effect of different tax rates of subsidiaries operating in other jurisdictions 2,957 5,337Tax effect of allowances for tax - 298Non corporation tax items - 21Prior year movement on deferred tax 753 (3,118Others (4) 280

Tax expense for the year 8,124 7,920

In some jurisdiction, the tax returns for certain years have not been reviewed by the tax authorities. However, the Group’s man-agement is satisfied that adequate provisions have been made for potential tax contingencies.

11.PROFIT FOR THE YEAR

The profit for the year is stated after charging: 2008 2007 USD’000 USD’000

Staff costs 105,925 87,726

Rental-operating leases 23,053 27,183

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13. INTANGIBLE ASSETS (continued)

Carrying amount of goodwill at 31 December allocated to each of the cash-generating units:

2008 2007 USD’000 USD’000Carrying amount of goodwill:Nico Middle East Limited Unit 10,494 10,494BUE Marine Limited Unit 18,383 18,383Fujairah Marine Services Unit 674 674Doha Marine Services Unit (see note 6) 7,791 -

37,342 29,551

The recoverable amount of each cash-generating unit is determined based on a value in use calculation, using cash flow projec-tions based on financial budgets approved by senior management. The key assumptions of the value in use calculations are those regarding discount rates, growth rates and expected changes to selling prices and direct costs during the period. Management estimates discount rates that reflect current market assessments of the time value of money and the risks specific to each cash-generating unit. The growth rates are based on management estimates having regard to industry growth rates. Changes in selling prices and direct costs are based on past practices and expectations of future changes in the market.

Sensitivity to changes in assumptions:With regard to the assessment of value in use of the cash generating units, management believes that no reasonably possible change in any of the key assumptions would cause the carrying value of the unit to materially exceed its recoverable amount.

For the year ended 31 December 2008, there have been no events or changes in circumstances to indicate that the carrying val-ues of goodwill of the above four cash-generating units may be impaired.

14. INVESTMENT IN ASSOCIATES

Investments in associate represents the 49% (2007:49%) interest held by the Group in Darium Thai Offshore Limited (DTOL), a company incorporated in Thailand.

DTOL is involved in the charter of marine vessels, provision of on-board accommodation and catering services and sale of fuel and other consumables.

Movements in the investment in associates are set out below:

2008 2007 USD’000 USD’000 At 1 January 2,415 3,948Share of profit 658 892Exchange (loss)/ gain transferred to translation reserve (82) 213Disposal of interest in an associate (2,442) -Dividend received - (2,638

At 31 December 549 2,415

During the current year, the Group has sold its entire interest in Mezon Stainless Steel FZCO for a consideration of USD 3,119 thousand. The effective date of sale was 30 June 2008. A gain of USD 677 thousand, being difference between the proceeds on sale of investment and the carrying amount of investment at the effective date of sale, has been recognised in the consolidated income statement.

12. PROPERTY, PLANT AND EQUIPMENT (continued)

Marine vessels with a net book value of USD 382,892 thousand (2007: USD 209,098 thousand) and plant and machinery with a net book value of USD 14,061 thousand (2007: USD 6,808 thousand) are pledged against bank loans obtained. Buildings with a net book value of USD 4,676 thousand (2007: USD 2,796 thousand) are pledged against bank overdrafts.

The net carrying value of marine vessels includes an amount of USD 263 thousand (2007: USD 622 thousand) in respect of as-sets held under finance leases.

Certain vessels are subject to commercial agreements with a third party whereby that third party has a call option to purchase each of the relevant vessels owned by the Group at a price related to the US dollar borrowing remaining outstanding against those vessels. The Group has not been notified of any intention to exercise such a call option and consequently the call option and associated implications are not reflected in these consolidated financial statements.

The depreciation charge has been allocated in the consolidated income statement as follows:

2008 2007 USD’000 USD’000

Cost of sales 31,731 26,572Administrative expenses 2,220 1,557

33,951 28,129

13. INTANGIBLE ASSETS

2008 2007 Computer Computer Goodwill software Total Goodwill software Total USD’000 USD’000 USD’000 USD’000 USD’000 USD’000

At 1 January 29,551 278 29,829 29,551 493 30,044Additions 7,791 108 7,899 - - -Amortization - (217) (217) - (215) (215

At 31 December 37,342 169 37,511 29,551 278 29,829

Cost (gross carrying amount) 37,342 1,180 38,522 29,551 1,071 30,622Accumulated amortisation - (1,011) (1,011) - (793) (793

Net carrying amount 37,342 169 37,511 29,551 278 29,829

Goodwill comprises:

a) goodwill relating to Nico Middle East Limited taken over from TEAM SAOG as at 1 January 2005.

b) goodwill arising from the acquisition of BUE Marine Limited with effect from 1 July 2005.

c) goodwill arising from the excess of the cost of acquisition over the fair value of identifiable assets of Marine and Industrial Division of Fujairah Marine Services acquired by the Fujairah Branch of the Company with effect from 1 January 2005.

d) goodwill arising from the acquisition of Doha Marine Services WLL with effect from 8 May 2008.

Goodwill has been allocated to four individual cash-generating units for impairment testing as follows:

• Nico Middle East Limited,• BUE Marine cash-generating unit; and• Fujairah Marine Services cash-generating unit.• Doha Marine Services cash-generating unit

5756

)

)

)



14. INVESTMENT IN ASSOCIATES (continued)

During the previous year, the shareholders of DTOL resolved to dissolve the company and the dissolution was registered with the Ministry of Commerce on 24 August 2007. 2008 2007 USD’000 USD’000

Share of associates’ balance sheet:Current assets 550 4,632Non current assets - 218Current liabilities (1) (612Non current liabilities - (1,823 Net assets 549 2,415

Share of associates’ revenues and results:

Revenues 5 3,736 Result 5 892

15. INVENTORIES 2008 2007 USD’000 USD’000

Stores, spares and consumables 9,120 5,992Provision for slow moving inventories (1,433) (1,318

7,687 4,674

16. WORK IN PROGRESS 2008 2007 USD’000 USD’000

Costs incurred on contracts in progress 209,153 121,914Attributable profits less recognised losses 4,912 4,025

214,065 125,939Progress billings (200,743) (109,812

13,322 16,127

17. ACCOUNTS RECEIVABLE AND PREPAYMENTS 2008 2007 USD’000 USD’000

Trade accounts receivable 96,308 67,177Provision for doubtful receivable (4,179) (8,712

92,129 58,465VAT recoverable 9,868 8,277Prepaid expenses 7,709 4,570Advance to suppliers 28,874 2,890Insurance claims 38 -Accrued income 359 67Retention receivable 5,597 -Other receivables 9,746 12,479 154,320 86,748

17. ACCOUNTS RECEIVABLE AND PREPAYMENTS (continued)

As at 31 December 2008, trade receivables at nominal value of USD 4,179 thousand (2007: USD 8,712 thousand) were impaired. Movements in the allowance for impairment of receivables were as follows:

2008 2007 USD’000 USD’000

At 1 January 8,712 8,225On acquisition of DMS 1,398 -Charge for the year 1,334 1,305Amounts written off (7,168) (741Unused amounts reversed (97) (77

At 31 December 4,179 8,712

2008

2007

In fixed deposit accountsIn call accountsIn current accountsCash on hand

Bank overdrafts

Cash and cash equivalents

Unimpaired receivables are expected, on the basis of past experience, to be fully recoverable. It is not the practice of the Group to obtain collateral over receivables and the vast majority are, therefore, unsecured.

18. CASH AND CASH EQUIVALENTS

Cash and cash equivalents included in the consolidated cash flow statement include the following balance sheet amounts:

Fixed deposits and call accounts are placed with commercial banks in the U.A.E. These are denominated in United Arab Emirates Dirhams and United States Dollars, short term in nature and carry interest rate ranging between 3% to 5.5%.

Bank overdrafts as at the year end relates to overdraft balances of BUE Marine Ltd. and carry interest rate ranging between 6% to 7%.

As at 31 December, the ageing of unimpaired trade receivables is as follows:

Neither past due nor impairedUSD’000

62,920

32,710

TotalUSD’000

92,129

58,465

<30 daysUSD’000

14,206

14,610

30 -60 daysUSD’000

6,730

4,923

60 - 90 daysUSD’000

3,208

2,218

90 - 120 daysUSD’000

1,628

2,314

2008USD’000

7,8442,127

15,394264

25,629 (3,672

21,957

2007USD’000

14,363435

17,058227

32,083-

32,083

>120 daysUSD’000

3,437

1,690

Past due but not impaired

5958

))

)

)

)

))

)



19. SHARE CAPITAL

Authorised7,350,000 shares of AED 100 each (2007: 7,350,000 shares of AED 100 each)

Issued and fully paid 5,920,556 shares of AED 100 each (2007: 4,672,756 shares of AED 100 each)

2008USD’000

200,273

161,323

2007USD’000

200,273

127,323

20. SHARE CAPITAL SUBSCRIBED BUT NOT ALLOTTED

During the year, the holding company has advanced an amount of USD 27,157 thousand towards a proposed increase in the share capital of the Company. This is subject to completion of necessary legal formalities.

21. STATUTORY RESERVE

As required by the Commercial Companies Law of 1984 (as amended) of the United Arab Emirates and the Articles of Association of subsidiaries in the United Arab Emirates, 10% of the profit for the year is required to be transferred to statutory reserve. Accordingly, the subsidiaries have transferred USD 933 thousand (2007: USD 570 thousand) to statutory reserve during the year. The subsidiaries may resolve to discontinue such annual transfers when the reserve totals 50% of the paid up capital of the individual entities being consolidated.

22. TRANSLATION RESERVE The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations.

23 (a) . PROPOSED DIVIDEND

During the year 2008, dividend of USD 18,832 thousand at USD 3.18 per share (2007: Nil) is proposed by the Board of Directors.

23 (b) . DIVIDEND PAYABLE

During the year 2008, dividend of USD Nil (2007: USD 6,500 thousand at USD 1.39 per share) was approved by the shareholders.

Term loan, at LIBOR plus 1.15% repayable by July 2009Vehicle finance loan, at a fixed rate of 4.5% p.a. repayable by October 2010Vehicle finance loan, at a fixed rate of 6.5% p.a. repayable by November 2009Term loan, at LIBOR plus 1.2% repayable by October 2009Term loan, at EIBOR plus 2% repayable by March 2010Equipment finance loan, at EIBOR plus 2.5% repayable by January 2009Term loan, at EIBOR plus 2% repayable by December 2011Term loan, at LIBOR plus 1.10% repayable by July 2011Term loan, at LIBOR plus 1.25% repayable by December 2013Term loan, at LIBOR plus 1.25% repayable by March 2010Term loan, at LIBOR plus 1.1% repayable by June 2015Term loan, at 5.87% repayable by August 2014Term loan, at 5.9% repayable by March 2015Term loan, at 5.9% repayable by March 2015Term loan, at 7.37% repayable by September 2012Term loan, at 5.75% repayable by June 2012 Term loan, at 4.5% repayable by August 2009Term loan, at LIBOR plus 1.10% repayable by February 2011Term loan, at LIBOR plus 1.03% repayable by October 2016Term loan, at LIBOR plus 0.75% repayable by March 2015Term loan, at LIBOR plus 2% repayable by March 2013Vehicle finance loan, at 4.65% p.a. repayable by April 2010Equipment finance loan, at EIBOR plus 2.5% repayable by September 2012Equipment finance loan, at EIBOR plus 2.5% repayable by August 2009Equipment finance loan, at EIBOR plus 2.5% repayable by June 2012Term loan, at EIBOR plus 3.25% repayable by September 2011Term loan, at LIBOR plus 1.10% repayable by October 2016Term loan, at LIBOR plus 0.75% repayable by June 2015Term loan, at LIBOR plus 2.50% repayable by March 2013Term loan, at DIBOR plus 3.50% repayable by April 2013Term loan, at EIBOR plus 3.25% repayable by Novemeber 2011 Term loan, at EIBOR plus 3.25% repayable by March 2012Term loan, at LIBOR plus 1.35% repayable by April 2013Term loan, at LIBOR plus 1.00% repayable by July 2013Term loan, at LIBOR plus 0.35% repayable by January 2017Term loan, at LIBOR plus 1.75% repayable by January 2009Short term Loan at 3 months LIBOR plus 1.10%Short term Loan at 3 months LIBOR plus 1.20%

Current portion

Non-current portion

24. TERM LOANS

The term loans are secured by a first preferred mortgage over selective assets of the Group, the assignment of ma-rine vessel insurance policies, and in the event of default, the assignment of the marine vessel charter lease income.The equipment finance loan is secured against plant and machinery acquired with the proceeds of the loan.

2007USD’000

2,006646249

1,969903

41,0795,831

23,3338,926

13,6009,855

16,04716,04711,1802,7611,6811,393

14,3288,750 1,280

19 2,413

377 191 475

17,175 -----------

162,518(31,681130,837

2008USD’000

674426109844502

-808

4,27618,000

4,94011,9008,377

13,80813,808

9,0992,136

804995

12,7367,8121,088

131,896

159161349

15,2258,1241,7992,799

931665

91,0004,116

25,3054,7304,0005,000

279,414(55,455223,959

) )

6160



24. TERM LOANS (continued)

The term and equipment finance loans are repayable as follows:

The borrowing arrangements include undertakings to comply with various covenants like Senior Interest Cover, Current ratio, Debt to EBITDA ratio, Gearing ratio and Equity Ratio including an undertaking to maintain a minimum net worth which, at no time, shall be less than US$ 150 million.

Net worth has been defined to mean the aggregate of the amount paid up on the issued share capital of the Group and the amount standing to the credit of the reserves (including any share premium accounts or capital redemption reserve but excluding revalu-ation reserve) and retained earnings.

25. OBLIGATIONS UNDER IJARAH-FIL-THIMMA

26. LOAN DUE TO HOLDING COMPANY

Due within one yearDue between two to five yearsDue after five years

Amounts payable under Ijarah-fil-Thimma:Due within one yearDue between two to five yearsDue after five years

Current portion

Non-current portion

Term loan, at LIBOR plus 1.75% repayable by January 2011Current portion

Non-current portion

The loan is repayable as follows:

Due within one yearDue between two to five years

2008USD’000

55,455190,41433,545

279,414

2008USD’000

5,40512,781

-

18,186(5,405

12,781

2008USD’000

--

-

--

-

2007USD’000

31,68193,33537,502

162,518

2007USD’000

2,258 9,034 9,598

20,890 (2,258

18,632

2007USD’000

10,625(2,500

8,125

2,5008,125

10,625

Total lease payment outstanding as at 31 DecemberLess: Due within one year (disclosed as current liabilities)

Long term lease obligations

CurrentTrade payablesAccrued expensesAdvances from customersDeferred incomePayment on account of mobilisationRetentionProvision for derivative used for hedging (refer note 36)Other payables

Non-currentDeferred incomeAdvances from customersPayment on account of mobilisationProvision for derivative used for hedging (refer note 36)

Provision as at 1 JanuaryOn acquisition of DMSProvided during the yearEnd of service benefits paidTransfer (to)/from related party

Provision as at 31 December

27. FINANCE LEASE OBLIGATIONS

29. ACCOUNTS PAYABLE AND ACCRUALS

28. EMPLOYEES’ END OF SERVICE BENEFITS

Movements in the provision recognised in the consolidated balance sheet are as follows:

2008USD’000

263(263

-

2008USD’000

39,54726,21822,047

1,0001,5531,3361,881

26,275

119,857

2,904-

7,4326,591

16,927

2008USD’000

5,25474

2,389(938

(62

6,717

2007USD’000

643(380

263

2007USD’000

28,69432,03811,7721,000

--

1,41715,191

90,112

3,9045,969

--

9,873

2007USD’000

4,024-

1,778(548

-

5,254

The Ijrah-fil-Thimma balances represents funds advanced to the Group by the bank under an Islamic financing scheme. The Ijrah-fil-Thimma is payable in quarterly installments of USD 1,351 thousand each and carries a profit rate of LIBOR plus 1.2% p.a.

6362

) )

)

)

))

)

)



30. RELATED PARTY TRANSACTIONS

Related parties represent associated companies, major shareholders, directors and key management personnel of the Group, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Group’s management.

Transactions with related parties included in the consolidated income statement are as follows:

Compensation of key management personnelThe remuneration of directors and other members of key management during the year was as follows:

Associated companiesOther related parties

20072008

PurchasesUSD’000

-284

284

PurchasesUSD’000

8885

173

RevenueUSD’000

-9,149

9,149

RevenueUSD’000

-9,711

9,711

Short term benefitsEmployees’ end of service benefits

Due from related partiesMermaid Offshore Services Ltd.Doosan Babcock Energy Ltd.Tawoos LLCMangistau Oblast Boat Yard LLP

Due to related partiesRennaissance Services SAOGImtac Technologies LLC Tawoos LLCUnited Media Services LLCMermaid Safety Services Ltd.Doosan Babcock Energy Ltd.Jaya Holdings LimitedLoan from partners

2008USD’000

1,886117

2,003

2008USD’000

549-

75936

1,560

2008USD’000

2----

418337463

1,220

2007USD’000

1,26783

1,350

2007USD’000

1,169486

--

1,655

2007USD’000

185222211 4 ---

244

The deferred tax balance at 31 December 2008 comprises capital allowances in excess of depreciation of USD 2,960 thousand (2007: USD 4,047 thousand) and short term timing differences of USD 92,092 (2007: USD 120,192).

The subsidiaries of BUE Marine Limited have entered into cross guarantees with the Company’s bank and other providers of loan finance in respect of the borrowings of BUE Marine Limited. At 31 December 2008, the total contingent liability in respect of these guarantees was USD 153,095 thousand (2007: USD 94,249 thousand) secured by a bond and floating charge over the assets of BUE Marine Limited and its subsidiaries.

The Group’s share of income, expenses, assets and liabilities in the jointly controlled entities described in note 2 at 31 Decem-ber are set out below:

Current assetsCurrent liabilities

Net assets

RevenueCost of salesAdministrative expensesFinance costTax

Profit for the year

The above does not include the Group’s proportionate share of assets and liabilities of Mangistau Oblast Boat Yard LLP (MOBY) since MOBY has not yet commenced operation and is therefore being carried at cost in these financial statements. (Also refer note 5)

At 1 January Deferred tax expense/(income)

At 31 December

Letters of creditLetters of guarantee

31. INVESTMENTS IN JOINTLY CONTROLLED ENTITIES

32. DEFERRED TAX ASSET

33. CONTINGENCIES

Contingent liabilities

2008USD’000

6,406(2,285

4,121

6,910(4,606

(757(89(65

1,393

2007USD’000

4,514(3,290

1,224

6,190(5,152

(340--

698

2008USD’000

4,167(1,114

3,053

2008USD’000

2,66844,800

47,468

2007USD’000

2,9201,247

4,167

2007USD’000

1,97620,963

22,939

6564

)

))))

)

)

))



33. CONTINGENCIES (continued)

Litigation

In December 2005, the Group entered into a contract with a customer to undertake cleaning and repair work on a vessel. In 2007, the customer filed proceedings against the Group in the Court of First Instance in Abu Dhabi with claims for damages for failure to complete the work promptly. The Group denies liability for these claims and has filed both a statement of defense to the claim and a counter-claim for costs against the customer. In the opinion of management, it is unlikely that any material liability will arise in respect of this matter. Accordingly, no provision has been made in these financial statements relating to these claims.

34. NON-CANCELLABLE LEASES

a) Operating leases - receivable

The Group leases its marine vessels under operating leases. The leases typically run for a period of ten years and are renewable for similar periods after the expiry date. The lease rental is usually renewed to reflect market rentals. Future minimum lease rentals receivable under non-cancellable operating leases are as follows as of 31 December:

b) Operating leases - payable

The Group has future minimum lease payments under non-cancellable operating leases for marine vessels with payments as follows:

c) Finance lease commitments

The Group has entered into non-cancellable finance lease commitments with monthly rentals payable as follows:

Within one yearBetween one and five yearsMore than five years

Within one yearBetween one and five yearsMore than five years

Within one year After one year but not more than five years

2008USD’000

140,627287,780151,467

579,874

2007USD’000

114,764185,188

85,003

384,955

2008USD’000

37,44498,03645,352

180,832

Present value of minimum

lease payments2008

USD’000

263-

263

Present value of minimum

lease payments2007

USD’000

380263

643

2007USD’000

15,73419,368

4,502

39,604

36. DERIVATIVE FINANCIAL INSTRUMENTS

The table below shows the positive and negative fair values of derivative financial instruments, which are equivalent to the market values, together with the notional amounts analysed by the term to maturity. The notional amount is the amount of a derivative’s underlying asset, reference rate or index and is the basis upon which changes in the value of derivatives are measured.The notional amounts indicate the volume of transactions outstanding at year end and are neither indicative of the market risk nor credit risk.

31 December 2008:

The term loan facilities of the Group bear interest at US LIBOR plus applicable margins (refer note 24). In accordance with the financing documents, the Group has fixed the rate of interest through Interest Rate Swap Agreements (“IRS”) amounting to approximately USD 55 million (2007: Nil) at a fixed interest rate of 3.95% per annum, excluding margin, USD 17 million (2007: USD 20.15 million) at a fixed margin of 4.89% per annum, excluding margin, USD 1 million (2007: USD 2.3 million) at a fixed margin of 2.94% per annum, excluding margin, and an amount of USD 50 million (2007: Nil) at the rate of 4.40% per annum excluding margin. At 31 December 2008, the US LIBOR was approximately 1.75% per annum (31 December 2007: 4.3%), whereas the Group has fixed interest at 3.95%, 4.89%, 2.94% and 4.40% per annum. Accordingly, the gap between US LIBOR and fixed rate under IRS was approximately 2.2%, 3.14%, 1.19% and 2.03% (2007: 0.59%) per annum.

Capital expenditure commitment:Purchase of property, plant and equipment

35. COMMITMENTS

2008USD’000

158,031

2007USD’000

79,192

Interest rate swapsForward foreign exchange contracts

Total

Interest rate swapsForward foreign exchange contractsForeign exchange options

Total

Notional amounts by term to maturity

Notional amounts by term to maturity

Negative Fair ValueUSD’000

8,546141

8,687

Negative Fair ValueUSD’000

1,256596

-

1,852

Over 1 Year to5 years

USD’000

110,905-

110,905

Over 1 Year to5 years

USD’000

65,611--

65,611

NationalAmount

TotalUSD’000

115,05239,635

154,687

NationalAmount

TotalUSD’000

85,61185,509

7,000

178,120

Positive Fair ValueUSD’000

-216

216

Positive Fair ValueUSD’000

3833

364

435

Within 1 Year

USD’000

4,14739,635

43,782

Within 1 Year

USD’000

20,00085,509

7,000

112,509

31 December 2007:

6766



36. DERIVATIVE FINANCIAL INSTRUMENTS (continued)

Based on the interest rates gap, over the life of the IRS, the indicative losses were assessed at approximately USD 8.47 million (2007: USD 1.41 million) by the counter parties to IRS. In case the Group terminates the IRS at 31 December 2008, it may incur losses to the extent of approximately USD 8.47 million (2007: USD 1.41 million). Consequently, in order to comply with International Accounting Standard 39 “Financial Instruments: Recognition and Measurement” fair value of the hedge instruments’ indicative losses in the amount of approximately USD 8.47 million (2007: USD 1.41 million) has been recorded under accounts payables & accruals (refer note 29) and the net impact for the year amounting to USD 7.05 million (2007: USD 1.41 million) has been recorded under finance costs (refer note 9).

37. RISK MANAGEMENT

The Group’s principal financial liabilities, other than derivatives, comprise bank loans and overdrafts, finance leases and trade payables and balances due to related parties. The main purpose of these financial liabilities is to raise finance for the Group’s operations. The Group has various financial assets such as trade receivables and cash and short-term deposits, which arise directly from its operations.

The Group also enters into derivative transactions, primarily interest rate swaps and forward currency contracts. The purpose is to manage the interest rate and currency risks arising from the Group’s operations and its sources of finance.

It is, and has been throughout the current year and previous year policy of the Group that no trading in derivatives shall be undertaken.

The main risks arising from the Group’s financial instruments are cash flow interest rate risk, liquidity risk, foreign currency risk and credit risk. The Board of Directors reviews and agrees policies for managing each of these risks which are summarized below:

Interest rate risk

The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating interest rates.

The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debts. The Group’s policy is to keep between 40% and 70% of its borrowings at fixed rates of interest. To manage this, the Group enters into interest rate swaps, in which the Group agrees to exchange, at specified intervals, the difference between fixed and variable rate interest amounts calculated by reference to an agreed-upon notional principal amount. These swaps are designated to hedge underlying debt obligations. At 31 December 2008, after taking into account the effect of interest rate swaps, approximately 58% of the Group’s borrowings are at a fixed rate of interest (2007: 77%).

Interest rate risk table

The following table demonstrates the sensitivity to a reasonably possible change in interest rates, with all other variables held constant, of the Group’s profit before tax (through the impact on floating rate borrowings). There is no impact on the Group’s equity.

2008

2007

Increase/decrease

in basis points

+15-10

+15-10

Effect on profit for the year

(350233

(190127

37. RISK MANAGEMENT (continued)

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counter party to a financial instrument fails to meet its contractual obligations and arises principally from the Group’s receivables from customers.

The Group seeks to limit its credit risk with respect to customers by setting credit limits for individual customers and monitoring outstanding receivables.

The Group’s ten largest customers account for 47% of outstanding accounts receivable at 31 December 2008 (2007: 46 %).

With respect to credit risk arising from the other financial assets of the Group, including cash and cash equivalents, and derivative instruments with positive values, the Group’s exposure to credit risk arises from default of the counterparty, with a maximum exposure equal to the carrying amount of these instruments.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group limits its liquidity risk by ensuring bank facilities are available. The Group’s credit terms require the amounts to be paid within 90 days from the date of invoice. Accounts payable are normally settled within 90 days of the date of purchase.

The table below summarises the maturity profile of the Group’s financial liabilities at 31 December 2008, based on contractual undiscounted payments.

At 31 December 2008

Accounts payablesTerm loansIjarah financingFinance leasesBank overdrafts

Total

Accounts payablesTerm loansLoan due to holding companyIjairah financingFinance leases

Total

Contractual cash flows USD’000

(39,547)

(315,616) (20,066)

(269) (3,697)

(379,195)

Contractual cash flows USD’000

(28,694)

(197,823) (13,009) (24,687)

(688)

(264,901)

1 to 5 years USD’000

- (170,364)

(14,539) - -

(184,903)

1 to 5 years USD’000

- (117,603) (10,400) (10,840)

(299)

(139,142)

>5 years USD’000

- (88,470)

- - -

(88,470)

>5 years USD’000

- (47,252)

- (11,518)

-

(58,770)

Less than3 months USD’000

(30,802) (9,644) (1,361)

(66) (3,697)

(45,570)

Less than3 months USD’000

(21,520)

(8,049) (636) (572)

(96)

(30,873)

Carrying amount

USD’000

39,547 279,414

18,186 263

3,672

341,082

Carrying amount

USD’000

28,694 162,518

10,625 20,890

643

223,370

3 to 12 months USD’000

(8,745) (47,138)

(4,166) (203)

-

(60,252)

3 to 12 months USD’000

(7,174) (24,919)

(1,973) (1,757)

(293)

(36,116)

At 31 December 2007

6968

)

)



37. RISK MANAGEMENT (continued)

Currency riskTrade accounts payable includes amounts of USD 5,794 thousand (2007: USD 5,290 thousand) due in foreign currencies, mainly Euros, Pounds Sterling, Omani Rials and Qatari Rial.

The table below indicates the Group’s foreign currency exposure at 31 December, as a result of its monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the USD currency rate against the foreign currencies, with all other variables held constant, on the income statement (due to the fair value of currency sensitive monetary assets and liabilities).

Effect on profit before tax Increase/ decrease in respective currency rate to the USD’000 2008 +5% -5 EUR (79) 79MNT (90) 90KZT (28) 28GBP (37) 37

2007 +5% -5

EUR (84) 84MNT (55) 55KZT (31) 31GBP (28) 28

Capital managementThe primary objective of the Group’s capital management is to ensure that it maintains a healthy capital ratio in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the year ended 31 December 2008 and 31 December 2007.

The Group monitors capital using a gearing ratio, which is net debt, divided by total capital plus net debt. The Group’s policy is to keep the gearing ratio between 55% and 70%. The Group includes within net debt, interest bearing loans and borrowings, trade and other payables, less cash and cash equivalents. Capital represents capital and reserves.

2008 2007 USD’000 USD’000 Interest bearing loans and borrowings 301,535 194,676Trade and other payables 136,784 99,985Less: Cash and short term deposits (25,629) (32,083

Net debt 412,690 262,578

Equity 276,174 173,874Net realised gains reserve (446) (528

Total capital 275,728 173,346

Capital and net debt 688,418 435,924

Gearing ratio 60 60

38. FAIR VALUES OF FINANCIAL INSTRUMENTS

Financial instruments comprise financial assets and financial liabilities.

Financial assets consist of cash and bank balances, investment and accounts and other receivables. Financial liabilities consist of bank overdrafts, term loans, loans due to holding company, finance leases and payables.

The fair value of derivatives is set out in note 36. The fair values of trade and other financial instruments are not materially different from their carrying values.

39. KEY SOURCES OF ESTIMATION UNCERTAINTY

Estimation uncertainty The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash-generating units to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash-generating unit and also to choose a suitable discount rate in order to calculate the present value of those cash flows. The carrying amount of goodwill at 31 December 2008 was USD 37,342 thousand (2007: USD 29,551 thousand). More details are given in note 13.

Impairment of accounts receivableAn estimate of the collectible amount of trade accounts receivable is made when collection of the full amount is no longer probable. For individually significant amounts, this estimation is performed on an individual basis. Amounts which are not individually significant, but which are past due, are assessed collectively and a provision applied according to the length of time past due, based on historical recovery rates.

At the balance sheet date, gross trade accounts receivable were USD 102,933 thousand (2007: USD 67,177 thousand) and the provision for doubtful debts was USD 10,804 thousand (2007: USD 8,712 thousand). Any difference between the amounts actually collected in future periods and the amounts expected will be recognised in the consolidated income statement.

Impairment of inventoriesInventories are held at the lower of cost and net realizable value. When inventories become old or obsolete, an estimate is made of their net realizable value. For individually significant amounts this estimation is performed on an individual basis. Amounts which are not individually significant, but which are old or obsolete, are assessed collectively and a provision applied according to the inventory type and the degree of ageing or obsolescence, based on historical selling prices.

At the balance sheet date, gross inventories were USD 9,119 thousand (2007: USD 5,992 thousand) with provisions for old and obsolete inventories of USD 1,433 thousand (2007: USD 1,318 thousand). Any difference between the amounts actually realised in future periods and the amounts expected will be recognised in the consolidated income statement.

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CORPORATE DIRECTORY

Topaz EngineeringAttn: Chief Operating Officer P.O. Box 7604Abu Dhabi, UAETe: +971 2 554 77 22Fax: +971 2 554 67 67E-mail: [email protected]

Topaz Fabrication & Construction

Attn: General ManagerLocation 1P.O. Box 7604Abu Dhabi, UAETel: +971 2 554 77 22Fax: +971 2 554 67 67E-mail: [email protected]

Topaz Marine Repair

Attn: General ManagerLocation 1P.O. Box 12068Dubai, UAETel: +971 4 338 21 35Fax: +971 4 338 18 32Email: [email protected]

Location 4Gurban Khalilov Street 31st Entrance, 3rd FloorYasamal DistrictBaku, AzerbaijanAZ1006Tel: +994 124 9787 67Fax: +994 124 9725 96E-Mail: [email protected]

Topaz Ship BuildingAttn: General ManagerLocation 1P.O. Box 2825 Port of FujairahFujairah, UAETel: +971 9 222 84 24Fax: +971 9 222 87 46Email: [email protected]

Topaz Maintenance ServicesAttn: General ManagerP.O. Box 7604Abu Dhabi, UAETel: +971 2 554 77 22Fax: +971 2 554 67 67E-mail: [email protected]

Location 2P.O. Box 2825 Port of FujairahFujairah, UAETel: +971 9 222 84 24Fax: +971 9 222 87 46Email: [email protected]

Location 2P.O. Box 2825 Port of FujairahFujairah, UAETel: +971 9 222 84 24Fax: +971 9 222 87 46Email: [email protected]

Location 5P.O. Box 345, PC 217Salalah, Sultanate of OmanTel/Fax: +968 2321 90 76Email: [email protected]

Location 2P.O. Box 7604Abu Dhabi, UAETel: +971 2 554 77 22Fax: +971 2 554 67 67E-mail: [email protected]

Location 3P.O. Box 7604Abu Dhabi, UAETel: +971 2 554 77 22Fax: +971 2 554 67 67E-mail: [email protected]

Location 2Topaz Marine QatarP.O Box 37102, 4th FloorFaisaliyah BuildingSuhaim Bin Hamad StreetAl Saad Area, Doha State of QatarTe: +974 447 94 72Fax: +974 447 94 72E-Mail: [email protected]

Location 3Topaz Marine Saudi ArabiaAl-Subeaei Towers, 15th FloorKing Abdulaziz StreetP.O. Box 3831, Alkhobar 31952 Saudi ArabiaTel: +966 3 882 64 56Fax: +966 3 882 65 66

Topaz Energy & Marine Ltd.P.O. Box 12068, Dubai, UAETel: +971 4 339 13 51Fax: +971 4 339 13 52Email: [email protected]

Topaz MarineAttn: Chief Operating OfficerP.O. Box 12068, Dubai, UAETel: +971 4 339 13 51Fax: +971 4 339 13 52Email: [email protected]

Topaz Marine MENA

Attn: General ManagerLocation 1Topaz Marine UAEP.O Box 261005, Building 33Oilfields Supply CentreJebel Ali Free Zone,Dubai, UAETel: +971 4 883 29 29 Fax: +971 4 883 29 59E-Mail : [email protected]

Topaz Marine Azerbaijan

Attn: General ManagerGurban Khalilov Street 31st Entrance, 3rd FloorYasamal DistrictBaku, AzerbaijanAZ1006Tel: +994 124 97 87 67Fax: +994 124 97 25 96E-Mail: [email protected]

Topaz Marine Turkmenistan

Attn: General ManagerIndependent Hotel, Office 1, BerzengeeAshagabad, TurkmenistanTel/ Fax: + 993 1248 87 04

Topaz Marine Kazakhstan

Attn: General ManagerTamshaly Building 58, Office 6 Microdistrict 14, Aktau, KazakhstanTel: +00 7 3292 4282 72Fax: +00 7 3292 4282 77E-Mail: [email protected]

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Annual Report 08Topaz Energy and Marine Ltd.

CONVERGENCE - Investis Digital

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