Sembcorp Marine

CIRCULAR DATED 7 AUGUST 2006

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to the contents herein or as to the course of action you should take, you should consult your stockbroker, bank manager, solicitor, accountant or other professional adviser immediately.

If you have sold all your shares in SembCorp Marine Ltd, you should immediately forward this Circular and the attached Proxy Form to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale was effected for onward transmission to the purchaser or transferee.

The Singapore Exchange Securities Trading Limited assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed in this Circular.

SEMBCORP MARINE LTD (Incorporated in the Republic of Singapore) (Company Registration No.: 196300098Z)

CIRCULAR TO SHAREHOLDERS

in relation to

THE PROPOSED ACQUISITION OF 110,400,000 ORDINARY SHARES IN THE ISSUED SHARE CAPITAL OF COSCO CORPORATION (SINGAPORE) LIMITED FOR AN AGGREGATE CONSIDERATION OF S$120,336,000

Independent Financial Adviser to the Non-Interested Directors of SembCorp Marine Ltd

(Incorporated in the Republic of Singapore) (Company Registration No.: 200105040N)

IMPORTANT DATES AND TIMES

Last date and time for lodgment of Proxy Form : 21 August 2006 at 11.00 a.m.

Date and time of Extraordinary General Meeting : 23 August 2006 at 11.00 a.m.

Place of Extraordinary General Meeting : 29 Tanjong Kling Road Singapore 628054 TABLE OF CONTENTS

DEFINITIONS...... 3

1. INTRODUCTION ...... 6

2. CHAPTER 9 OF THE LISTING MANUAL ...... 7

3. THE PROPOSED ACQUISITION ...... 9

4. INFORMATION ON COSCO ...... 9

5. RATIONALE FOR THE ACQUISITION ...... 12

6. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION ...... 12

7. OPINION OF THE INDEPENDENT FINANCIAL ADVISER ...... 13

8. DISCLOSURE OF SHAREHOLDINGS...... 14

9. AUDIT COMMITTEE’S STATEMENT ...... 15

10. DIRECTORS’ RECOMMENDATION ...... 15

11. SHAREHOLDERS WHO WILL ABSTAIN FROM VOTING ...... 15

12. EXTRAORDINARY GENERAL MEETING ...... 16

13. ACTION TO BE TAKEN BY SHAREHOLDERS...... 16

14. LITIGATION ...... 16

15. CONSENT ...... 16

16. DOCUMENTS FOR INSPECTION ...... 16

17. DIRECTORS’ RESPONSIBILITY STATEMENT ...... 17

APPENDIX I ...... 18

NOTICE OF EXTRAORDINARY GENERAL MEETING ...... 35

PROXY FORM

2 DEFINITIONS

The following definitions shall apply throughout unless otherwise stated in this Circular:-

Companies “Cosco” : Cosco Corporation (Singapore) Limited

“Cosco Group” : Cosco and its subsidiaries

“SCI” : SembCorp Industries Ltd

“SCM” or “Company” : SembCorp Marine Ltd

“SCM Group” : SCM and its subsidiaries

“SIPL” : Seletar Investments Pte Ltd

“Stirling Coleman” : Stirling Coleman Capital Limited, being the independent financial adviser to the Non- Interested Directors in connection with the Acquisition

“Temasek” : Temasek Holdings (Private) Limited

General “Acquisition” : the proposed acquisition of 110,400,000 ordinary shares, representing approximately 5%, in the issued share capital of Cosco from SIPL

“Audit Committee” : the audit committee of the Company as at the date of this Circular, comprising Mr Tan Tew Han, Mr Ajaib Haridass and Mr Ron Foo Siang Guan.

“Business Day” : a day (other than a Saturday, Sunday or gazetted public holiday in Singapore) on which commercial banks are open for business in Singapore

“CDP” : The Central Depository (Pte) Limited

“Companies Act” : Companies Act, Chapter 50 of Singapore

“Completion” : completion of the Acquisition, as defined in the Sale and Purchase Agreement

“Controlling Shareholder” : a person who:

(a) holds directly or indirectly 15% or more of the nominal amount of all voting Shares in the Company (unless the SGX-ST determines that such a person is not a Controlling Shareholder of the Company); or

(b) in fact exercises control over the Company

“Cosco Shares” : 110,400,000 ordinary shares in the capital of Cosco, which are the subject of the Acquisition

“Directors” : the directors of the Company as at the date of this Circular

3 DEFINITIONS

“EGM” : the extraordinary general meeting of the Company to be convened, notice of which is given on page 35 of this Circular

“FY” : financial year ended or ending 31 December, as the case may be

“Latest Practicable Date” : 31 July 2006, being the latest practicable date prior to the printing of this Circular

“Listing Manual” : the Listing Manual of the SGX-ST

“Minority Shareholders” : Shareholders who are not, in relation to the Acquisition, interested persons as defined under Chapter 9 of the Listing Manual

“Non-Interested Directors” : the Directors who are not, whether directly or indirectly, interested in the Acquisition

“Notice of EGM” : the notice of EGM as set out on page 35 of this Circular

“NTA” : net tangible assets

“Ordinary Resolution” : the ordinary resolution as set out in the Notice of EGM

“Proxy Form” : proxy form in respect of the EGM as set out in this Circular

“Purchase Consideration” : S$120,336,000, being the aggregate purchase consideration for the Acquisition pursuant to the Sale and Purchase Agreement

“Sale and Purchase Agreement” : the conditional sale and purchase agreement entered into between the Company and SIPL for the acquisition of SIPL’s entire shareholding interest in Cosco

“Securities Account” : securities account maintained by a Depositor with the CDP but not including securities sub-accounts maintained with a Depository Agent

“SGX-ST” : Singapore Exchange Securities Trading Limited

“Shares” : the ordinary shares in the capital of the Company

“Shareholders” : registered holders of Shares except that where the registered holder is the CDP, the term “Shareholders” shall, in relation to such Shares and where the context admits, mean the persons named as the Depositors in the Depository Register maintained by the CDP and into whose Securities Accounts those Shares are credited

“Threshold 2” : 5% of the latest audited consolidated NTA of the SCM Group

4 DEFINITIONS

“S$” or “$” and “cents” : Singapore dollars and cents respectively, the lawful currency of the Republic of Singapore

“%” : per centum or percentage

The terms “Depositor” and “Depository Register” shall have the meanings ascribed to them respectively by Section 130A of the Companies Act.

The term “subsidiary” shall have the meaning ascribed to it by Section 5 of the Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa and words importing the masculine gender shall, where applicable, include the feminine and neuter genders and vice versa. Words importing persons shall include corporations.

Any reference in this Circular to “Rule” or “Chapter” is a reference to the relevant Rule or Chapter in the Listing Manual as for the time being.

Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the Companies Act or any modification thereof and used in this Circular shall have the meaning assigned to it under the Companies Act.

Any reference to a time of day in this Circular shall be a reference to Singapore time unless otherwise stated.

5 LETTER TO SHAREHOLDERS

SEMBCORP MARINE LTD (Incorporated in Singapore) (Company Registration No.: 196300098Z)

Directors Registered Office Goh Geok Ling (Chairman) 29 Tanjong Kling Road Tan Kwi Kin (Group President & CEO) Singapore 628054 Tan Pheng Hock Kiyotaka Matsuzawa Tan Tew Han Ajaib Haridass Tang Kin Fei Ron Foo Siang Guan Joseph Kwok Sin Kin Wong Weng Sun (Alternate Director to Tan Kwi Kin) Hirohiko Sakurai (Alternate Director to Kiyotaka Matsuzawa)

7 August 2006

To: The Shareholders of the Company

Dear Sir/Madam

1. INTRODUCTION On 22 May 2006, the Directors of the Company announced that the Company had entered into the Sale and Purchase Agreement with SIPL to acquire SIPL’s entire shareholding interest, comprising 110,400,000 ordinary shares and representing approximately 5% of the issued share capital of Cosco for a cash consideration of S$120,336,000.

The Acquisition constitutes an interested person transaction within the meaning of Chapter 9 of the Listing Manual. The aggregate Purchase Consideration payable for the Cosco Shares represents approximately 11.3% of the latest audited consolidated NTA of the SCM Group of approximately S$1,061,944,000 as at 31 December 2005. In accordance with Chapter 9 of the Listing Manual, the Acquisition is subject to the approval of Shareholders at an EGM to be convened.

Stirling Coleman has been appointed to advise the Non-Interested Directors on whether the terms and conditions of the Acquisition are on normal commercial terms and are not prejudicial to the interests of the Company and its Minority Shareholders. Stirling Coleman’s letter to the Non-Interested Directors is set out in Appendix I of this Circular.

The SGX-ST assumes no responsibility for the correctness of any statements made or reports contained or opinions expressed in this Circular.

The purpose of this Circular is to provide Shareholders with the relevant information pertaining to the Acquisition, inter alia, information on Cosco, the rationale for, and the proforma financial effects and terms and conditions of, the Acquisition, as well as to seek Shareholders’ approval for the Acquisition at the Company’s EGM to be held on 23 August 2006.

6 LETTER TO SHAREHOLDERS

2. CHAPTER 9 OF THE LISTING MANUAL 2.1 Shareholders’ Approval Under Chapter 9 of the Listing Manual (“Chapter 9”), where a listed company or any of its subsidiaries or associated companies that are entities at risk (as defined in Section 2.2(b) below) proposes to enter into a transaction with its interested persons, shareholders’ approval and/or an immediate announcement is required in respect of that transaction if its value is equal to or exceeds certain financial thresholds. In particular, shareholders’ approval (in addition to an immediate announcement) is required where:-

(a) the value of such transaction equals to or exceeds Threshold 2; or

(b) the value of such transaction with interested persons when aggregated with the values of other transactions previously entered into with the same interested person in the same financial year, equals to or exceeds Threshold 2. However, a transaction which has been approved by shareholders, or is the subject of aggregation with another transaction that has been approved by shareholders, need not be included in any subsequent aggregation.

For the purposes of aggregation, interested person transactions below S$100,000 each are to be excluded.

2.2 Definitions under Chapter 9 (a) the term “approved exchange” means a stock exchange that has rules which safeguard the interests of shareholders against interested person transactions according to similar principles to Chapter 9;

(b) the term “entity at risk” means:-

(i) the listed company;

(ii) a subsidiary of the listed company that is not listed on the SGX-ST or an approved exchange; or

(iii) an associated company of the listed group that is not listed on the SGX-ST or an approved exchange, provided that the listed group, or the listed group and its interested person(s) has control over the associated company;

(i) in relation to any director, chief executive officer, or controlling shareholder (being an individual) means (i) his immediate family; (ii) the trustees of any trust of which he or his immediate family is a beneficiary or, in the case of a discretionary trust, is a discretionary object; and (iii) any company in which he and his immediate family together (directly or indirectly) have an interest of 30% or more; and

(ii) in relation to a controlling shareholder (being a company) means any other company which is its subsidiary or holding company or is a subsidiary of such holding company or one in the equity of which it and/or such other company or companies taken together (directly or indirectly) have an interest of 30% or more; and

(d) an “interested person” is defined as a director, chief executive officer or controlling shareholder of the listed company or an associate of any such director, chief executive officer or controlling shareholder.

(e) an “interested person transaction” means a transaction between an entity at risk and an interested person.

7 LETTER TO SHAREHOLDERS

2.3 Information on the Interested Person Transaction and Threshold 2 Transaction Test As at the Latest Practicable Date, SCI is a Controlling Shareholder of the Company, holding 900,231,260 Shares representing 61.83% of the issued and paid-up share capital of the Company. SCI’s holding company is Temasek, which has direct and deemed interest of 50.16% in SCI. SIPL is a wholly-owned subsidiary of Temasek. By definition therefore, SCI, SIPL, and Temasek are interested persons within the meaning of Chapter 9.

Accordingly, the Acquisition constitutes an interested person transaction within the meaning of Chapter 9.

The value of the Acquisition to which the Company is considered at risk is S$120,336,000 or 11.3% of the SCM Group’s latest audited consolidated NTA of S$1,061,944,000 as at 31 December 2005. In accordance with Chapter 9, the Acquisition, which value is more than 5% of the latest audited consolidated NTA of the SCM Group and hence exceeds Threshold 2, is subject to the approval of Shareholders.

2.4 Other Transactions with Interested Persons during FY 2005 Aggregate value of all interested person transactions conducted under general shareholders’ mandate pursuant to Rule 920 (excluding transactions less ($’000)

Transaction for the Sales of Goods and Services Keppel Corporation Ltd and its associates 39,628 Neptune Orient Lines Ltd and its associates 1,543 SembCorp Industries Limited and its associates 3,272 PSA International Pte Ltd and its associates 2,191

Transaction for the Purchase of Goods and Services SembCorp Industries Limited and its associates 23,718

Management and Support Services SembCorp Industries Limited 250

Total Interested Person Transactions 70,602

Treasury Transactions - Placement of Funds with - as at 31 December SembCorp Industries Limited and its associates 8,319

Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than $100,000 and transactions conducted under general shareholders’ mandate pursuant to Rule 920) ($’000)

Transaction for the Purchase of Goods and Services Neptune Orient Lines Ltd and its associates 1,700

Disposal of Investment SembCorp Logistics Ltd 2,498

8 LETTER TO SHAREHOLDERS

3. THE PROPOSED ACQUISITION 3.1 Sale and Purchase of the Cosco Shares Under the Sale and Purchase Agreement, the Company agreed to buy the Cosco Shares representing approximately 5% of Cosco’s issued share capital as at the date of the Sale and Purchase Agreement, held by SIPL.

The Cosco Shares will be sold free from all and any claims, charges, liens, equities and other encumbrances and together with all rights attached thereto as at the completion of the Acquisition.

3.2 Purchase Consideration The Purchase Consideration for the Acquisition has been agreed by the parties to be S$120,336,000 and was determined on a willing-buyer-willing-seller basis taking into account, amongst other factors, the market price of the Cosco Shares. The closing price of the Cosco Shares on 19 May 2006, being the last market day prior to the Announcement Date was $1.33 per share.

The Board of Directors is of the opinion that the Purchase Consideration for the Acquisition is fair and reasonable and has been arrived at on an arms length basis.

Pursuant to the Sale and Purchase Agreement, the Purchase Consideration is to be satisfied in cash, which will be funded through the Company’s own internal resources.

3.3 Conditions Precedent The Acquisition is conditional upon, inter alia:

(a) the approval of Shareholders for the transaction contemplated under the Sale and Purchase Agreement being obtained at a general meeting of the Company to be convened; and

(b) The warranties of SIPL contained in the Sale and Purchase Agreement being true in all material respects on and as of the date of completion of the Acquisition with the same force and effect as though made on and as of the completion date.

In the event that the condition in Section 3.3(a) is not fulfilled by 31 August 2006 (or such other date as the Company and SIPL may agree in writing), the Company and SIPL shall not be bound to proceed with the sale and purchase of the Cosco Shares and the Sale and Purchase Agreement shall ipso facto cease and determine, and neither party shall have any claim against the other for costs, damages, compensation or otherwise save as provided in the Sale and Purchase Agreement.

4. INFORMATION ON COSCO This section is based on publicly available information on Cosco 4.1 Background Cosco was incorporated in Singapore and is listed on the SGX-ST. As at the Latest Practicable Date, Cosco has an issued and paid-up share capital of S$238,367,376.71 divided into 2,210,829,954 Cosco Shares.

Cosco has an equity market capitalization of S$2.4 billion as at 31 December 2005 and is a blue chip component stock of the Straits Times Index (since 1 March 2004), constituent of the London benchmark FTSE All-World Asia Pacfic (Ex-Japan) Index (since 18 March 2004) and MSCI Singapore (since 1 June 2005).

9 LETTER TO SHAREHOLDERS

4.2 Business Overview Cosco is a subsidiary of China Ocean Shipping Group Companies (“COSCO China”), headquartered in Beijing. It is the largest Ship Repair & Marine Engineering and Shipping group in China. Headquartered in Singapore, Cosco has three main business units, namely, Ship Repair and Marine Engineering, Dry Bulk Shipping and Shipping Agency.

On 1 January 2005, Cosco acquired a 51% stake of COSCO Shipyard Group (“CSG”) which has five major shipyards strategically located in the most important sites along China’s seaboard in Dalian, Nantong, Zhoushan, Guangzhou and Shanghai. CSG has, amongst others, the two largest Cape-size floating docks and four Panamax-size docks in China which provide ship repair, ship conversion and jumboisation, newbuilds and repair services. CSG currently has a total docking capacity of 1.20 million dwt. Cosco also provides onboard engineering and repairs in Singapore through its 90% owned COSCO Marine Engineering (Singapore) Pte Ltd.

CSG delivered strong maiden contributions to Cosco, accounting for 80% of Cosco’s turnover and 60% of Cosco’s operating profit for FY2005.

4.3 Directors As at the Latest Practicable Date, the board of directors of Cosco comprises:

(a) Captain Wei Jia Fu (Chairman and Non-Executive Director) Capt. Wei President and CEO of Cosco, has headed the China Ocean Shipping (Group) Company (COSCO) since November 1998. Prior to that, he was in charge of COSCO’s asset operations and management as a senior executive in many COSCO subsidiaries in China and abroad. During his tenure as the President of COSCO (Singapore) Ltd, he turned it into a public listed company in 1993, marking COSCO’s entrance into the international capital market.

With over ten years of seafaring experience as a captain and a PhD in ship and ocean structural design and manufacture and a master’s in shipping, Capt. Wei has a wealth of knowledge in international shipping management and operations. Capt. Wei is also a member of the Panama Canal Authority Advisory Board, the International Advisory Council of PSA Corporation and the China Shipowners’ Association, as well as the chairman for the China Shipowners Mutual Assurance Association, the China Federation of Industrial Economics and China Group Companies Promotion Association, among others.

(b) Mr Ji Hai Sheng (Vice-Chairman, President and Executive Director) Mr. Ji has been the President of both Cosco and COSCO Holdings (S) Pte Ltd since November 2000. He has been appointed as the Vice Chairman of Cosco with effect from 14 February 2006. A graduate from the Sichuan Institute of Foreign Languages, Mr. Ji was employed at China Ocean Shipping Company in 1975, specialising in Container Operation and Management. From 1983 to 1988, he was appointed the Company Representative in the United States. Subsequently, Mr. Ji was posted to COSCO Beijing as Director of Sino-European (Container Service) and Deputy General Manager (Freight Service Department). In 1992, Mr. Ji became the Managing Director of COSCO-HIT Terminals (Hong Kong) Ltd and Assistant President of COSCO (Hong Kong) Group Company. He proceeded to become the Deputy Managing Director of COSCO Container Lines in Beijing four years later. From 1998 to 2000, Mr. Ji was appointed Managing Director of the Asia Pacific Regional Headquarters of COSCO Container Lines.

10 LETTER TO SHAREHOLDERS

(c) Mr Min Jian Guo (Vice President and Executive Director) Mr. Min has been Vice President of Cosco since April, 2006. He was appointed Manager at China Road Transportation Company in December, 1968 and was subsequently appointed as Deputy General Manager in November, 2004. Subsequently Mr. Min became the Deputy General Manager at COSCO International Freight Co. Ltd. He proceeded to become Deputy General Manager at China Ocean Shipping Agency in September 2000. In the past four year, i.e. since January 2002 he has been the Deputy General Manager at COSCO Logistic Co. Ltd.

(d) Mr Li Jian Hong (Non-Executive Director) Mr. Li is the Executive Vice President of COSCO China. He had been the Assistant to the President and Chief Economist of COSCO China, General Manager of COSCO Industry Company, General Manager of COSCO Real Estate Development Company and the Director of Nantong Shipyard. He is also the Chairman of China International Marine Containers (Group) Ltd. Mr. Li has over 20 years of experience in corporate management and over 10 years of experience in shipping enterprise management. He has extensive experience in capital market and assets management. Mr. Li graduated from the University of East London in the United Kingdom with a Master of Business Administration degree and holds a Master of Economic Management degree from Jilin University, China. He is a senior economist.

(e) Mdm Sun Yue Ying (Non-Executive Director) Mdm. Sun joined COSCO China in 1982, and became its Chief Financial Officer in December 2000 and a Party Committee Member of COSCO China in April 2004. Prior to that, she was the Deputy Director of the Financial Department of COSCO Tianjin, the Financial Director of COSCO Japan, the General Manager of the Finance & Capital Division of the COSCO China, and the Deputy Chief Financial Officer of COSCO China. A 1982 maritime accounting graduate from the Shanghai Maritime University, Mdm. Sun has years of professional experience in corporate accounting, assets-operating and financing.

(f) Mr Tom Yee Lat Shing (Non-Executive and Independent Director) Mr. Yee was appointed to the Board on 15 December 1993. He is a Non-Executive and Independent Director and was last re-elected as Director on 24 February 2003. He is Chairman of the Company’s Audit Committee and member of the Nominating and Remuneration Committees. Mr. Yee is a Certified Public Accountant and was a partner of an international public accounting firm from 1974 to 1989. He has more than 35 years of experience in the field of accounting and auditing and extensive experience in handling major audit assignments of public listed an private companies in various industries, including insurance, manufacturing and retailing. He is currently a consultant. Mr. Yee also sits on the boards of several listed companies, and is a fellow member of the Institute of Chartered Accountants in Australia, CPA (Australia), CPA (Singapore), associate member of the Institute of Chartered Secretaries and Administrators, and Council Member of CPA (Australia) – Singapore Division and the Institute of Certified Public Accountants of Singapore.

(g) Dr Wang Kai Yuen (Non-Executive and Independent Director) Dr Wang was appointed as an Independent Director of Cosco Corporation on 02 May 2001. Dr Wang chairs the Nominating Committee and is a member of Audit and Remuneration Committee. Dr Wang has been a Member of Parliament for the Bukit Timah Constituency since December 1984. He has been the Chairman of Feedback Unit since 2002. From Nov 2005, he became the Chairman, Aids Business Alliance, an initiative of Health Promotion Board to promote awareness of HIV/AIDS in the workplace. He is currently the Managing Director of Xerox Singapore Software Centre. In that capacity, he has built up the software centre and assisted in the establishment of similar centres in UK, India, China, Brazil and Ireland. Dr Wang also holds directorships

11 LETTER TO SHAREHOLDERS

at ComfortDelgro Group Ltd, Asian Micro Holdings Ltd, Nylect Technology, Xpress Holdings Ltd, Hiap Hoe Ltd, Matex International, and others. He graduated from the National University of Singapore with a degree in Bachelor of Engineering with First Class honours in Electrical and Electronics in 1972. Dr Wang holds a Master of Science in Electrical Engineering and a PhD in Engineering from Stanford University, United States of America.

(h) Mr Er Kwong Wah (Non-Executive and Independent Director) Mr Er is an independent director of Cosco. A Colombo Plan and Bank of Tokyo Scholar, he obtained a First Class honours degree in Electrical Engineering at the University of Toronto, Canada, in 1970 and an MBA from the Manchester Business School, University of Manchester in 1978. He is a Board Member of the National Environment Agency, and Chairman of its Audit Committee. A former Permanent Secretary in the Singapore Civil Service, he had served in various ministries before his retirement. He is currently the Chairman of the Toa Payoh Central Citizens Consultative Committee and a member of the Bishan-Toa Payoh Town Council.

(i) Mr Wang Xing Ru (Non-Executive Director) Mr. Wang was appointed a Non-Executive Director of Cosco Corporation in February 2006. He has been president of CSG since 2001. Prior to that, Mr. Wang was Executive Director of Cosco Co-Development (Tianjin) Co. Ltd & Vice President of Cosco Industry Co. A graduate from Engineering School of Shandong University, Mr. Wang has a Master of Engineering in 1991. He has a wealth of experience in ship-repair business and assets management.

5. RATIONALE FOR THE ACQUISITION Both the Company and Cosco are strategic partners with equity interests in CSG in China. The Company holds a 30% equity stake in CSG while Cosco holds 51% of CSG. Cosco also has a direct equity interest of 50% in Cosco Nantong and 39% in Cosco Dalian.

The investment in Cosco is in line with the Company’s strategy to grow its marine and offshore business in Singapore and China. The strategic tie-up with Cosco and CSG would enable the Company to enhance and increase its capacity to take on more offshore projects by leveraging on the facilities and strengths of its partners. This would result in a “win-win” situation for all parties.

CSG is a leading ship repair and conversion group in China. It owns five major shipyards that are strategically located in the key coastal cities stretching from Dalian in the north, Nantong, Shanghai and Zhoushan in the centre, to Guangzhou in the south. These shipyards provide ship owners with an effective network of marine engineering services across the entire length of China’s coast.

The Company currently owns 70,000,000 shares in Cosco. With the Acquisition, the Company’s shareholding in Cosco will increase from 3.17% of the issued share capital of Cosco to 8.17% of the issued share capital of Cosco.

6. FINANCIAL EFFECTS OF THE PROPOSED ACQUISITION The following financial effects are shown for illustrative purposes only and do not necessarily reflect the actual future financial position and prospects of the SCM Group after the Acquisition.

12 LETTER TO SHAREHOLDERS

6.1 Share Capital As at the Latest Practicable Date, the Company has an issued and paid-up share capital of 1,456,023,265.

6.2 NTA The financial effect of the Acquisition on the NTA per Share of the SCM Group based on the Proforma Financial Information (assuming that the Acquisition had taken place on 31 December 2005) is as follows:-

As at 31 December 2005 Before the Acquisition After the Acquisition

NTA (S$’000) 1,061,944 1,100,805 NTA per Share (cents) 73.22 75.90

6.3 Earnings per Share (“EPS”) The financial effect of the Acquisition on the EPS of the SCM Group based on the Proforma Financial Information (assuming that the Acquisition had taken place on 1 January 2005) is as follows:-

For the Year Ended 31 December 2005 Before the Acquisition After the Acquisition

Net profit after tax attributable to 121,398 121,680 Shareholders (S$’000) Basic EPS (cents) 8.45 8.47 Fully diluted EPS (cents) 8.25 8.26

6.4 Gearing The SCM Group will be using its internal resources to fund the Acquisition, and will be in net cash position after the Acquisition.

7. OPINION OF THE INDEPENDENT FINANCIAL ADVISER Pursuant to Chapter 9 of the Listing Manual, Stirling Coleman has been appointed as an independent financial adviser to the Non-Interested Directors to advise them on whether the Acquisition is on normal commercial terms and whether it is prejudicial to the interests of the Company and its Minority Shareholders. A copy of their letter of advice to the Non-Interested Directors is set out on page 18 of this Circular. Shareholders are advised to read Stirling Coleman’s letter of advice carefully.

Taking into consideration the factors set out in its letter, Stirling Coleman is of the view that the terms of the Acquisition are on normal commercial terms and are not prejudicial to the interests of the Company and its Minority Shareholders.

Accordingly, Stirling Coleman has advised the Non-Interested Directors to recommend that Shareholders approve the Acquisition and vote in favour of the Ordinary Resolution to be proposed at the EGM, notice of which is set out on page 35 of this Circular.

13 LETTER TO SHAREHOLDERS

8. DISCLOSURE OF SHAREHOLDINGS 8.1 Directors’ Interests As at the Latest Practicable Date, the interests of the Directors in the Shares as recorded in the Register of Directors’ Shareholdings maintained by the Company are set out below:

No. of Shares comprised in Direct Interests Deemed Interests Directors outstanding No. of %(1) No. of %(1) share options/awards Shares Shares

Goh Geok Ling – – – – – Tan Kwi Kin 3,880,000(5) 3,091,200 0.21 – – Tan Pheng Hock 175,000 20,000 NM(2) – – Kiyotaka Matsuzawa 365,000 – – – – Tan Tew Han 347,000 18,000 NM(2) – – Ajaib Haridass 197,500 32,500 NM(2) – – Tang Kin Fei 20,000 – – – – Ron Foo Siang Guan – – – 30,000(3) NM(2) Joseph Kwok Sin Kin – – – 50,000(4) NM(2) Wong Weng Sun 991,500(6) 92,500 NM(2) –– (Alternate Director to Tan Kwi Kin) Hirohiko Sakurai – – – – – (Alternate Director to Kiyotaka Matsuzawa)

Note: - (1) Based on the issued share capital of the Company of 1,456,023,265 Shares as at the Latest Practicable Date.

(2) Not Meaningful.

(3) Ron Foo Siang Guan is deemed to be interested in the 30,000 Shares held by his spouse and a company in which he has a deemed interest of 20% or more.

(4) Joseph Kwok Sin Kin is deemed to be interested in the 50,000 Shares held by Citibank Nominees Singapore Pte Ltd.

(5) Of the 3,880,000 Shares: (a) 3,200,000 Shares are comprised in options granted to Tan Kwi Kin pursuant to the SembCorp Marine Share Option Plan;

(b) 380,000 Shares are comprised in conditional awards granted to Tan Kwi Kin, subject to performance targets set over a three (3) year period from 2004 to 2006. No Shares will be released should targets be achieved at below 80% of the targets set and up to twice the number of Shares will be released should targets be achieved at up to 200% of the targets set; and

(c) 300,000 Shares are comprised in conditional awards granted to Tan Kwi Kin, subject to performance targets set over a three (3) year period from 2005 to 2007. The actual number of Shares to be released depends on the threshold ranging from 0% to 150% of the original award.

(6) Of the 991,500 Shares: (a) 766,500 Shares are comprised in options granted to Wong Weng Sun pursuant to the SembCorp Marine Share Option Plan; and

(b) 225,000 Shares are comprised in conditional awards granted to Wong Weng Sun, subject to performance targets set over a three (3) year period from 2005 to 2007. The actual number of Shares to be released depends on the threshold ranging from 0% to 150% of the original award.

14 LETTER TO SHAREHOLDERS

8.2 Substantial Shareholders’ Interests As at the Latest Practicable Date, the interests of the Substantial Shareholders in the Shares as recorded in the Register of the Substantial Shareholders maintained by the Company are set out below:

Direct Interest Deemed Interest Total Interest

Name of No. of Shares % No. of Shares % No. of Shares % Substantial Shareholder

SembCorp 900,231,260 61.83 – – 900,231,260 61.83 Industries Ltd

Temasek Holdings – – 902,174,260 61.96 902,174,260 61.96 (Private) Limited(1)

The Capital Group – – 74,047,000 5.09 74,047,000 5.09 Companies, Inc.(2)

Note: - (1) Temasek Holdings (Private) Limited is deemed to be interested in the 900,231,260 Shares held by SembCorp Industries Ltd as well as the balance of 1,943,000 Shares held by its other subsidiaries.

(2) The Capital Group Companies, Inc is deemed to be interested in the 74,047,000 Shares held by Raffles Nominees Pte Ltd and DBS Nominees Pte Ltd.

9. AUDIT COMMITTEE’S STATEMENT The members of the Audit Committee, namely Mr Tan Tew Han, Mr Ajaib Haridass and Mr Ron Foo Siang Guan have reviewed the terms of the Acquisition and the advice of Stirling Coleman and are of the view that the terms of the Acquisition are on normal commercial terms and are not prejudicial to the interests of the Company and its Minority Shareholders.

10. DIRECTORS’ RECOMMENDATION 10.1 Acquisition The Non-Interested Directors, having considered the basis of the Purchase Consideration, the rationale for the Acquisition and the advice of Stirling Coleman in respect of the Acquisition, are of the view that the Purchase Consideration payable is fair and reasonable and that the Acquisition is on normal commercial terms and is not prejudicial to the interests of the Company and its Minority Shareholders. Accordingly, the Non-Interested Directors recommend that the Shareholders vote in favour of the Ordinary Resolution set out in the Notice of EGM on page 35 of this Circular.

The Non-Interested Directors further recommend that any individual Shareholder who may require specific advice to consult his stockbroker, bank manager, accountant or other professional adviser.

11. SHAREHOLDERS WHO WILL ABSTAIN FROM VOTING Rule 919 of the Listing Manual requires that interested persons must not vote on any shareholders’ resolution in respect of any interested person transactions. Accordingly, Temasek, SIPL and SCI, being interested persons, shall abstain, and have undertaken to ensure that their respective associates will abstain, from voting at the EGM in respect of the Ordinary Resolution relating to the Acquisition.

15 LETTER TO SHAREHOLDERS

Temasek, SIPL and SCI and their respective associates shall also not accept nominations as proxy unless Shareholders appointing them as proxies by giving specific instructions in the relevant proxy forms on the manner in which they wish their votes to be cast for the Ordinary Resolution relating to the Acquisition.

12. EXTRAORDINARY GENERAL MEETING The EGM, notice of which is set out on page 35 of this Circular will be held at 29 Tanjong Kling Road, Singapore 628054 on 23 August 2006 at 11.00 a.m. for the purpose of considering and, if thought fit, passing the Ordinary Resolution, with or without modifications, set out in the Notice of EGM.

13. ACTION TO BE TAKEN BY SHAREHOLDERS If a Shareholder is unable to attend the EGM and wishes to appoint a proxy to attend and vote on his behalf, he should complete, sign and return the attached Proxy Form in accordance with the instructions printed thereon as soon as possible and, in any event, so as to arrive at 30 Hill Street #05-04 Singapore 179360 not later than 11.00 a.m. on 21 August 2006.

Completion and return of the Proxy Form by a Shareholder will not prevent him from attending and voting at the EGM if he so wishes. In such event, the relevant Proxy Form will be deemed to be revoked.

14. LITIGATION Neither the Company, nor its subsidiaries are engaged in any ongoing litigation as plaintiff or defendant in respect of any claims or amounts which are material in the context of the financial position or the business of the Company or its subsidiaries and the Directors have no knowledge of any proceedings which are pending or threatened against the Company or its subsidiaries or of any facts likely to give rise to any litigation, claims or proceedings which might materially affect the financial position or the business of the Company or its subsidiaries.

15. CONSENT Stirling Coleman has all given and have not withdrawn its written consent to the issue of this Circular with the inclusion herein of and references to its name in the form and context in which it appears in this Circular.

16. DOCUMENTS FOR INSPECTION Copies of the following documents may be inspected at the Company’s registered office at 29 Tanjong Kling Road, Singapore 628054 during usual business hours on any weekday from the date of this Circular up to the date of the EGM:

(a) the Financial Statements of the Company for FY2005;

(b) the Sale and Purchase Agreement dated 19 May 2006 entered into between the Company and SIPL; and

16 LETTER TO SHAREHOLDERS

17. DIRECTORS’ RESPONSIBILITY STATEMENT The Directors (including those who have delegated detailed supervision of this Circular) have taken all reasonable care to ensure that the facts stated and all opinions expressed in this Circular (other than the ‘Information on Cosco’ in Section 4 above and the advice of Stirling Coleman as set out in Appendix 1 herein) are fair and accurate and that no material facts have been omitted from this Circular which would make any statement in this Circular misleading in any material respect, and they collectively and individually accept full responsibility accordingly. Where any information has been extracted from published or otherwise publicly available sources, the sole responsibility of the Directors has been to ensure through reasonable enquiries that such information is accurately extracted from such sources or, as the case may be, reflected or reproduced in this Circular.

Yours faithfully For and on behalf of the Board of Directors SembCorp Marine Ltd

Goh Geok Ling Chairman

17 APPENDIX I

LETTER FROM STIRLING COLEMAN CAPITAL LIMITED TO THE NON-INTERESTED DIRECTORS

STIRLING COLEMAN CAPITAL LIMITED (Company Registration No. 200105040N) 4 Shenton Way #07-03 SGX Centre 2 Singapore 068807

7 August 2006

To: The Non-Interested Directors SembCorp Marine Ltd

Dear Sirs

THE PROPOSED ACQUISITION OF 110,400,000 ORDINARY SHARES IN THE ISSUED SHARE CAPITAL OF COSCO CORPORATION (SINGAPORE) LIMITED FOR AN AGGREGATE CONSIDERATION OF S$120,336,000

1. INTRODUCTION This letter has been prepared for inclusion in a circular to Shareholders dated 7 August 2006 in connection with the Acquisition. Except where the context otherwise requires, the definitions used in the Circular shall apply throughout this letter.

On 22 May 2006 (“Announcement Date”), the Directors of the Company announced that the Company had entered into the Sale and Purchase Agreement with SIPL to acquire SIPL’s entire shareholding interest, comprising 110,400,000 ordinary shares and representing 5% of the issued share capital of Cosco for a cash consideration of S$120,336,000.

As at the Latest Practicable Date, SCI is a Controlling Shareholder of the Company, holding 900,231,260 Shares representing 61.83% of the issued and paid-up share capital of the Company. SCI’s holding company is Temasek, which has direct and deemed interest of 50.16% in SCI. SIPL is a wholly-owned subsidiary of Temasek. By definition therefore, SCI, SIPL and Temasek are interested persons within the meaning of Chapter 9. The value of the Acquisition exceeds 5% of the latest audited consolidated NTA of the SCM Group as at 31 December 2005. Accordingly, the Acquisition exceeds Threshold 2.

Temasek, SIPL and SCI, being interested persons, shall abstain, and have undertaken to ensure that their respective associates will abstain, from voting at the EGM in respect of the Ordinary Resolution relating to the Acquisition.

18 APPENDIX I

2. TERMS OF REFERENCE Stirling Coleman has been appointed to advise the Non-Interested Directors on whether the financial terms of the Acquisition are on normal commercial terms and are not prejudicial to the interests of the Company and the Minority Shareholders.

We were not involved in any aspect of the negotiations pertaining to the Acquisition, nor were we involved in the deliberations leading up to the decision by the Board of Directors to enter into the Acquisition, and we do not, by this letter or otherwise, advise or form any judgment on the merits of the Acquisition other than to form an opinion, as to whether the financial terms of the Acquisition as highlighted in the Sale and Purchase Agreement, being an interested person transaction, are on normal commercial terms and are not prejudicial to the interests of the Company and the Minority Shareholders. We have confined our evaluation to the financial terms of the Acquisition and our terms of reference do not require us to evaluate or comment on the risks and/or commercial merits of the Acquisition or the future prospects of the Company or the SCM Group, including whether the Acquisition is commercially desirable or justifiable, and we have not made such evaluation or comment. Such evaluation or comment, if any, remains the responsibility of the Directors and the management of the Company, although we may draw upon their views or make such comments in respect thereof (to the extent deemed necessary or appropriate by us) in arriving at our opinion as set out in this letter. Accordingly, it is not within our scope to conduct a comprehensive independent review of the business, operations or financial condition of the Cosco Group.

It is not within our terms of reference to compare the relative merits of the Acquisition vis-à-vis any alternative transaction previously considered by the SCM Group or transactions that the SCM Group may consider in the future, and such comparison and consideration remain the responsibility of the Directors.

We have not conducted a physical inspection of the properties or facilities of the Cosco Group and have not made an independent evaluation or appraisal of the assets and liabilities (including without limitation, real property, machinery and equipment) of the Company or of the SCM Group or the Cosco Group and we have not been furnished with any such evaluation or appraisal.

No financial or profit forecasts, business plans or management accounts of the Cosco Group have been furnished to us. In formulating our opinion and recommendation, we have relied to a considerable extent on the information set out in the Sale and Purchase Agreement, Circular, other public information collated by us and the information, representations, opinions, facts and statements provided to us, whether written or verbal, by the SCM Group and its other professional advisers. We have relied upon and assumed the accuracy without having independently verified such information provided or any representation or assurance made by them, whether written or verbal, and accordingly no representation or warranty, expressed or implied, is made by us as to the accuracy, completeness or adequacy of such information, representation or assurance nor do we undertake or accept responsibility for any of the same.

The information which we relied on were based upon market, economic, industry, monetary and other conditions prevailing as at the Latest Practicable Date and may change significantly over a relatively short period of time. Accordingly, we do not express an opinion herein as to the prices at which the Shares of the Company or the Cosco Shares may trade upon completion of the Acquisition or the future performance of the Company or the SCM Group.

We have also relied upon the responsibility statement of the Directors (including those who may have delegated detailed supervision of the Circular) that they have taken all reasonable care to ensure that the facts stated and all opinions expressed in the Circular (other than the ‘Information on Cosco’ in section 4 of the Circular and this letter) are fair and accurate and that no material facts have been omitted from the Circular which would make any statement in the

19 APPENDIX I

Circular misleading in any material respect, and they collectively and individually accept full responsibility accordingly. Where any information has been extracted from published or otherwise publicly available sources, the sole responsibility of the Directors has been to ensure through reasonable enquiries that such information is accurately extracted from such sources or, as the case my be, reflected or reproduced in the Circular.

In rendering our services, we have not considered the specific investment objectives, financial situation, tax position, tax status, risk profiles or particular needs and constraints or circumstances of any individual Shareholder. As each Shareholder would have different investment objectives and profiles, we would advise you to recommend that any individual Shareholder who may require specific advice in the context of his specific investment objectives or portfolio should consult his stockbroker, bank manager, solicitor, accountant, tax adviser or other professional adviser immediately.

The Company has been separately advised by its own advisers in the preparation of the Circular (other than this letter). We have had no role or involvement and have not provided any advice, financial or otherwise, whatsoever in the preparation, review and verification of the Circular (other than this letter). Accordingly, we take no responsibility for and express no views, expressed or implied, on the contents of the Circular (other than this letter).

Our recommendation in respect of the Acquisition, as set out in section 7 of the Circular, should be considered in the context of the entirety of this letter and the Circular.

3. TERMS AND CONDITIONS OF THE ACQUISITION As set out in section 3 of the Circular and based solely upon the Circular, we note the following principal terms and conditions:-

3.1 Purchase Consideration The Purchase Consideration for the Acquisition has been agreed by the parties to be S$120,336,000 and was determined on a willing-buyer-willing-seller basis taking into account, amongst other factors, the market price of the Cosco Shares. The closing price of the Cosco Shares on 19 May 2006, being the last market day prior to the Announcement Date was $1.33 per share.

The Board of Directors is of the opinion that the Purchase Consideration for the Acquisition is fair and reasonable and has been arrived at on an arms length basis.

Pursuant to the Sale and Purchase Agreement, the Purchase Consideration is to be satisfied in cash, which will be funded through the Company’s own internal resources.

We note that the Purchase Consideration implies:-

(a) a premium of approximately 373.91% over the audited book NTA per share of Cosco Group of approximately $0.23 as at 31 December 2005, adjusted for the sub-division of shares of S$0.20 each to shares of S$0.10 each on 17 January 2006;

(b) a PE of approximately 14.83 times, based on the audited net profit after tax of Cosco Group as at 31 December 2005; and

(c) a discount of 18.05% to the closing price of Cosco Shares of $1.33 on 19 May 2006, being the last market day prior to the Announcement Date.

As at the Latest Practicable Date, the share price of Cosco Shares was $1.53.

20 APPENDIX I

3.2 Conditions Precedent The Acquisition is conditional upon, inter alia:-

(a) the approval of Shareholders for the transaction contemplated under the Sale and Purchase Agreement being obtained at a general meeting of the Company to be convened; and

In the event that the condition in Clause 3.2(a) is not fulfilled by 31 August 2006 (or such other date as the Company and SIPL may agree in writing), the Company and SIPL shall not be bound to proceed with the sale and purchase of the Cosco Shares and the Sale and Purchase Agreement shall ipso facto cease and determine, and neither party shall have any claim against the other for costs, damages, compensation or otherwise save as provided in the Sale and Purchase Agreement.

4. INFORMATION ON COSCO 4.1 Background Salient information on Cosco relating to, inter alia, the background, business overview and Directors of Cosco, are set out in section 4 of the Circular. We recommend that the Non- Interested Directors advise the Shareholders to read those pages of the Circular carefully.

4.2 Financial information In addition, in reviewing the latest results announcement of Cosco for the second quarter period ended 30 June 2006, we have extracted the following information which in our view will provide a useful indication of the financial performance of the Cosco Group in the second quarter and the current financial year ending 31 December 2006:-

(a) Financial performance of the Cosco Group “Overview The Group achieved another quarter of high turnover and net profit in Q2 2006 on the back of strong growth in its core Ship Repair & Marine Engineering business.

Net profit attributable to equity holders rose 30% to $51.0m on turnover of $265.3m in Q2 2006. Compared to 1H 2005, net profit attributable to equity holders jumped 36% to $88.6m on turnover of $532.9m in 1H 2006.

Turnover Group turnover increased 25.9% from $210.7m in Q2 2005 to $265.3m in Q2 2006 fuelled by successful expansion of the Group’s Ship Repair & Marine Engineering business. Compared to 1H 2005, Group turnover jumped 42.0% to $532.9m in 1H 2006.

Ship Repair & Marine Engineering turnover expanded 30.3% to $223.8m in Q2 2006 as the Group continued to deliver more high-value ship repair & conversion and offshore marine engineering projects.

This was further boosted by upgrades to the Group’s shipyard facilities to meet rising demand. In Q4 2005, the Group added a 300,000 dwt floating dock at Dalian which had begun contributing to Group earnings during the period. The better utilisation of the deployment of the 80,000 dwt floating dock from Cosco Dalian Shipyard to Cosco Guangzhou Shipyard had also contributed to an improvement in earnings during the period.

21 APPENDIX I

Dry Bulk Shipping turnover increased 7.6% to $36.8m in Q2 2006. The improvement was mainly due to contributions from two additional vessels which joined the fleet in February and March 2006.

Profitability Gross profit rose 20% from $71.4m in Q2 2005 to $85.4m in Q2 2006 on the back of higher turnover. Gross profit margins were lower at 32.2% compared to 33.9% in Q2 2005 owing to a change in the margin mix. The softening of charter-hire rates in bulk shipping was mitigated by higher gross margin repairs of ship repair business.

Net margin improved from 24.6% in Q2 2005 to 26.4% in Q2 2006. Higher margin was attributed by the ship repair business through higher yield projects, skills enhancement and efficiency.

Exceptional gain comprised $6.0m from the sale of MV Cos Angel, one of the four ships slated for disposal, which was delivered to the buyer on 3 June 2006.

Distribution and administrative costs increased in line with the rising volume of repair business handled. Finance cost increased due to higher interest rates and more borrowings by COSCO Shipyard.

The effective tax rate in Q2 2006 of 5.3% was much lower compared with 9.6% in Q2 2005. The lower effective rate was attributed to a tax refund by the PRC tax authority and tax exemptions on shipping income.

Overall Group net profit attributable to equity holders of the Company rose 30.0% in Q2 2006 to $51.0m on robust contributions from the ship repair business, and an one-off exceptional gain of $6.0m from the sale of a ship in June 2006. Against 1H 2005, net profit attributable to equity holders jumped 36.0% to $88.6m in 1H 2006.”

(b) Commentary by the company of the significant trends and competitive conditions of the industry in which the Cosco Group operates and any know factors or events that may affect the group in the next reporting period and the next 12 months

“Leveraging on COSCO Shipyard Group’s (“CSG”) leading position in China, its successful track record in delivering technically demanding specialised offshore marine engineering work, as well as the substantial shipyard capacity upgrades underway, the Group expects to attract more complex, high-value Ship Repair & Marine Engineering contracts from the robust oil & gas industry going forward.

The high-yield ship repair, conversion and offshore marine engineering projects secured during 1H 2006 amounting to $400m (US$250m) had exceeded those secured in the whole of FY 2005, underscoring the Group’s capabilities in the highly specialised offshore business. Works on these projects secured in 1H 2006 are still in progress with some of them expected to be completed in Q3 2006.

To cope with the rapidly rising demand for offshore marine engineering work, the Group’s shipyards have been undergoing massive facility and infrastructure upgrades. In June 2006, Zhoushan Shipyard completed its doubling of dry dock capacity from 150,000 dwt to 300,000 dwt to handle two panamax vessels concurrently. This new capacity will add to Group earnings in 2H 2006 and increase the total docking capacity of CSG by 12.5% from 1.2m dwt to the current 1.35m dwt.

22 APPENDIX I

Further upgrading work remains on track. At Zhoushan, one new 80,000 dwt dry dock is scheduled for completion by end of 2006 and another new 300,000 dwt dry dock is expected to be ready by middle of 2007. Two new berths are being constructed in Zhoushan and are expected to be ready by the time the above dry docks are operational. At Dalian, a 23,000 sq metre warehouse and a slipway are under construction on a 280,000 sq metre developed land. These infrastructures are targeted for completion by the end of 2006. By end of 2006 and middle of 2007, the Group’s shipyard docking capacity will further increase to 1.43m dwt and 1.73m dwt respectively.

These new capacities will allow the Group to further penetrate into the niche markets of high-value offshore marine engineering work such as new buildings and conversion of oil-related facilities like rigs and FPSO/FSO, special purpose ships such as pipe/cable layers, heavy lift vessels, tugs and barges. These higher yield contracts will further strengthen the Group’s order book and returns.

The ship repair business has identified a requirement of S$178 million (RMB900 million) for the above capacity expansion up to middle of 2007. The shareholders of CSG will inject RMB750 million progressively from 2H 2006 to 1H 2007, as previously announced on 9 January 2006. The balance will be funded through bank borrowings by CSG.

The capital contribution of RMB383 million (S$76 million) by the Company will be funded through internally generated funds.

Barring unforeseen circumstances, the Group is confident that FY 2006’s performance will be better than FY 2005.”

The full announcement of Cosco can be accessed at the SGX-ST website (http://info.sgx.com/webcorannc.nsf/NewSitemap?openview). Minority Shareholders are urged to read the announcement carefully.

5. RATIONALE FOR THE ACQUISITION The Company currently owns 70,000,000 shares in Cosco. With the Acquisition, the Company’s shareholding in Cosco will increase from 70,000,000 (3.17% of the issued share capital of Cosco) to 180,400,000 (8.17% of the issued share capital of Cosco). Accordingly, the Company will become a substantial shareholder of Cosco after the Acquisition.

Both the Company and Cosco are strategic partners with equity interests in CSG in China. The Company holds a 30% equity stake in CSG while Cosco holds 51% of CSG. Cosco also has a direct equity interest of 50% in Cosco Nantong and 39% in Cosco Dalian.

The Directors are of the view that the investment in Cosco is in line with the Company’s strategy to grow its marine and offshore business in Singapore and China. The strategic tie-up with Cosco and CSG would enable the Company to enhance and increase its capacity to take on more offshore projects by leveraging on the facilities and strengths of its partners. This would result in a “win-win” situation for all parties.

23 APPENDIX I

In the announcement by the Company on 22 May 2006, Mr Tan Kwi Kin, SCM Group President and CEO said, “Our strategic tie-up with Cosco Corporation and the Cosco Shipyard Group would enable us to enhance and increase our capacity to take on offshore projects. We are leveraging on the facilities and strengths of our partners.”

This strategic alliance between the Company and Cosco was also bore out by a recent transaction between the Company and CSG. In an announcement dated 16 April 2006, Cosco announced that “Cosco Dalian Shipyard has been awarded a US$31 million contract by SembCorp Marine’s Jurong Shipyard to construct the lower pontoons for two units of the semisubmersible rigs. Mr. Wong Weng Sun, President and COO of SembCorp Marine said, “We have selected Cosco Dalian Shipyard as our partner in our rig building programme, leveraging on the facilities and strengths of the two groups. It will be a win-win situation for all parties.”

Although the Company sold 4,600,000 shares in Cosco in September 2005 at a price of $2.55 per share, raising sale proceeds of $11.73 million, we understand from the management of the Company that the sale proceeds were substantially reinvested into CSG as capital injection for CSG’s expansion in China.

We also noted the Company’s positive comments in its announcement of its second quarter results for the period ended 30 June 2006 as follows:-

“Ship repair demand remains strong especially in the specialised market of LNG/LPG gas tankers, container vessels and rig repairs.

Market fundamentals for Floating Production Storage Offloading (FPSO) vessels and Floating Storage Offloading (FSO) vessels continue to strengthen, driven by high oil prices and increase in worldwide exploration and production activities.

Fundamentals for the rig building sector remain strong attributable to high worldwide utilization levels, unprecedented high charter rates as well as an aging rig fleet.”

From the above, it appears that there may be further synergistic opportunities between the Company and the Cosco Group.

6. FINANCIAL ASSESSMENT OF THE ACQUISITION In assessing the financial terms of the Acquisition, we have taken into account the following factors, which we consider will have a bearing on our assessment:-

(i) Share price performance and market liquidity of Cosco;

(ii) NTA of Cosco;

(iii) Price earnings ratio (“PER”) of Cosco;

(iv) EV/EBITDA multiple of Cosco i.e. enterprise value (“EV”) to historical earnings before net interest, taxes, depreciation and amortisation but after share of associates’ income (“EBITDA”); and

(v) financial effects of the Acquisition.

These factors are discussed in greater detail in the ensuing paragraphs.

24 APPENDIX I

6.1 Share Price Performance and Market Liquidity of Cosco We set out below a chart on the price movement of Cosco Shares from 23 May 2005 being the date 12 months preceding the Announcement Date to the Latest Practicable Date:-

Cosco Share Price and Volume Traded falling 12 months preceding the Announcement Date to the Latest Practicable Date

1.8 60000000 1.6 50000000 1.4

S$ 1.2 40000000 1 30000000 0.8 0.6 20000000 hare Price in in Price hare Volume Traded Volume S 0.4 10000000 0.2 0 0

5 005 005 005 005 005 005 006 006 006 006 006 006 006 /2 /2005 3 8 0/2 /15/2 1/2/20063 /27/2 /24/2 5/2 6/20/27/1 8 9/12/2 11/7/212/5/2 1/ 2/27/23 4 5/22/26/19/27/17/2 10/10/200

Cosco - Share Volume Traded Cosco - Share Price

Source: Bloomberg

We set out below the Purchase Consideration per Cosco Share against the volume-weighted average prices (“VWAP”) of the Cosco Shares and analysis of the average daily trading volume and liquidity of the Cosco Shares:-

Premium/ (Discount) of Average Purchase Daily Average Consideration Highest Lowest Trading Daily VWAP to the VWAP Share Share Volume Equity Share per Share Price Price (million of Turnover (S$) (%) (S$) (S$) Shares) (S$ million)

Prior to Announcement Date 12-month 1.168 (6.68) 1.450 0.815 10.52 12.28 9-month 1.215 (10.29) 1.450 1.050 9.37 11.38 6-month 1.217 (10.44) 1.450 1.060 9.60 11.69 3-month 1.277 (14.64) 1.450 1.180 8.93 11.40 2-month 1.312 (16.92) 1.450 1.200 10.25 13.45 1-month 1.379 (20.96) 1.450 1.240 10.89 15.01 Market day prior to the Announcement Date (1) 1.330 (18.05) 1.360 1.290 8.67 11.55

25 APPENDIX I

After the Announcement Date Market day immediately after the Announcement Date (2) 1.250 (12.80) 1.340 1.240 9.14 11.61 From the market day immediately after the Announcement Date up to and including the Latest Practicable Date 1.303 (16.35) 1.540 1.190 8.06 10.50 Latest Practicable Date (3) 1.530 (28.76) 1.540 1.520 13.83 21.17

Source: Bloomberg

Notes:- (1) This is the closing price of the Cosco Shares as at 19 May 2006, being the market day prior to the Announcement Date. (2) This is the closing price of the Cosco Shares as at 22 May 2006, being the market day immediately after the release of the announcement. The announcement was made in the morning before share trading commenced on 22 May 2006.

(3) This is the closing price of the Cosco Shares as at Latest Practicable Date.

Based on the above, we note that:-

(i) For the various periods between 23 May 2005 and the Latest Practicable Date stated above, trading in the Cosco Shares had occurred on all market days with an average daily equity turnover of S$10.50 million to S$21.17 million (representing 0.40% to 0.80% of the market capitalisation of Cosco) and an average daily trading volume of 8.06 million Cosco Shares to 13.83 million Cosco Shares (representing 1.02% to 1.74% of the free float in the Cosco Shares). As such, we observed that there is generally sufficient liquidity in the Cosco Shares to regard the transacted prices of the Cosco Shares on the SGX-ST to be reflective of their market value;

(ii) The Purchase Consideration of S$1.09 per Cosco Share represents a discount of approximately 6.68%, 10.29%, 10.44%, 14.64%, 16.92%, 20.96% to the VWAP of the Cosco Shares respectively for the 12-month, 9-month, 6-month, 3-month, 2-month, and 1-month periods preceding the Announcement Date;

(iii) The Purchase Consideration of S$1.09 per Cosco Share represents a discount of 24.83% and a premium of 33.74% to the highest and lowest price of the Cosco Shares respectively for the 12-month period preceding the Announcement Date;

(iv) The Purchase Consideration of S$1.09 per Cosco Share represents a discount of approximately 18.05% to the closing price of the Cosco Shares on 19 May 2006 (being the market day prior to the Announcement Date);

(v) The Purchase Consideration of S$1.09 per Cosco Share represents a discount of approximately 12.80% of the Cosco Shares on 22 May 2006 (being the market day immediately after the release of the announcement);

26 APPENDIX I

(vi) The Purchase Consideration of S$1.09 per Cosco Share represents a discount of approximately 16.35% over the VWAP of the Cosco Shares for the period commencing from 22 May 2006, being the market day immediately after the release of the announcement, up to the Latest Practicable Date; and

(vii) The Purchase Consideration of S$1.09 per Cosco Share represents a discount of approximately 28.76% over the last transacted market price of the Cosco Shares as at the Latest Practicable Date.

We would like to highlight selected announcements relating to Cosco during the 12-month period preceding the Announcement Date up to the Latest Practicable Date below:-

No. Date of Announcement Nature of announcement 1 11th July 2005 Early delivery of second vessel 2 18th July 2005 Announcement of the second quarter 2005 results 3 1st August 2005 Sub-contract work agreement signed by Cosco (Nantong) Shipyard Co. Ltd 4 2nd August 2005 Second quarter financial statement and dividend announcement 5 16th August 2005 Sale of M.V. Cos Hero 6 Cosco Shipyard Group Co Ltd secures three conversion contracts valued at US$14 million 7 25th October 2005 300,000 DWT floating dock in operation 8 7th November 2005 Third quarter financial statement and dividend announcement 9 24th November 2005 The proposed sub-division of each ordinary share of S$0.20 each in the capital of Cosco Corporation (Singapore) Limited into two ordinary shares of S$0.10 each 10 29th November 2005 Sale of properties by Harington Property Pte Ltd 11 21st December 2005 Press release: Two high value contracts totaling US$16.5 million 12 9th January 2006 Increase in registered capital of principal subsidiary, Cosco Shipyard (Group) Co., Ltd 13 23rd January 2006 Press release: A good start to 2006: Cosco secures four contracts totaling US$12.95 million 14 13th February 2006 Full year financial statement and dividend announcement 15 23rd February 2006 Cosco expands bulk carrier fleet to 15 vessels 16 27th February 2006 Three high value contracts totaling US$21.8 million Sale of properties by Harington Property Pte Ltd 17 28th March 2006 Sale of four motor vessels News release: Bulk carrier fleet rationalization exercise: Sold 4 ageing ships and took delivery of new ship 18 17th April 2006 Press release: String of high value contracts totaling US$92.4 million 19 19th April 2006 Changes in the composition of the Board 20 2nd May 2006 First quarter financial statement and dividend announcement 21 8th May 2006 Sale of four motor vessels 22 31st May 2006 Press release: Several high value contracts totaling US$114.7 million Changes to the composition of the audit committee 23 31st July 2006 Second quarter financial statements and dividend announcement Press release: Expanding order book and capacity

27 APPENDIX I

We have also considered the relative performance of Cosco Shares as compared to the Singapore Equities index (“SGX-ST All Index”) and the Singapore Transport/Storage/Comm Equity Index (“SGX-ST Tran/Stor/Com Index”), a capitalisation-weighted index of all the stocks traded on the SGX-ST’s transportation, storage, and communication sector, and have set out a chart on the relative performance of the Cosco Share price against the SGX-ST All Index and the SGX-ST Tran/Stor/Com Index during the 12 months preceding the Announcement Date.

Accordingly, the Cosco Share price has out-performed the overall applicable market as reflected by the SGX-ST All Index and SGX-ST Tran/Stor/Com Index over the 12 months preceding the Announcement Date. Its performance reflected Cosco’s good financial performance in FY2005 and positive industry outlook anticipated by the directors of Cosco.

6.2 Relative Valuation Analysis In the evaluation of the Acquisition, we have considered the range of valuation statistics of comparable companies listed on SGX-ST, that are engaged in shipping, shipping-related and onshore business which, in our opinion, are broadly comparable to the core business of Cosco. We have further refined and narrowed our selection to comparable companies taking into consideration, inter alia, other factors such as revenue and market capitalisation (“Selected Comparable Companies”).

We have had discussions with the management of the Company about the suitability and reasonableness of these Selected Comparable Companies acting as a basis for comparison with the core business of Cosco. Relevant information has been extracted from the annual reports and/or public announcements of these Selected Comparable Companies. The accounting policies with respect to the values for which the assets or the revenue and cost are recorded may differ with each of the Selected Comparable Companies. The Non-Interested Directors should note that any comparisons made with respect to the Selected Comparable Companies are only for illustration purposes. The conclusions drawn from such comparisons, therefore, may not necessarily reflect the perceived or implied market valuation of Cosco. The Non-Interested Directors should also note that the comparisons do not take into consideration synergies to be gained from the Acquisition.

Shareholders may wish to note that there may not be any company listed on any relevant stock exchange that is directly comparable to Cosco in terms of, inter alia, size, market capitalisation, diversity of business activities, geographical spread, track record, future prospects, operating and financial leverage, liquidity, risk profile, quality of earnings and accounting policies, listing status and such other relevant criteria. We wish to highlight that it may be difficult to place

28 APPENDIX I reliance on the comparison of valuation statistics for the Selected Comparable Companies as the business of the Selected Comparable Companies, their respective capital structures, growth rates, operating and financial leverage, taxation and accounting policies and that of Cosco may differ. As such, any comparison made herein is necessarily limited and serves only as an illustrative guide to the Minority Shareholders. The list of Selected Comparable Companies is by no means exhaustive.

Details of the Selected Comparable Companies listed on SGX-ST are set out below:-

Market capitalisation as at the Latest Company Practicable Date Business Description (S$ million)

Neptune Orient Lines Ltd 2,592.53 Owns and operates shipping vessels, including participation in ventures related to these activities. Other activities include ship management, engineering and repairs to customers.

Labroy Marine Ltd 1,244.40 Owns and charters livestock carriers, tankers, dry bulk carriers, general cargo vessels, barges, and tug boats, as well as builds sea-going vessels, and provides ship repair services.

Jaya Holdings Ltd 1,003.14 Owns, builds, repairs, manages, and charters ships. Core activities include offshore marine chartering, containerised vessel transportation, and shipbuilding and ship repair.

Keppel Corp Ltd 12,200.55 Core businesses are offshore and marine, infrastructure, property investment and development, telecommunications and transportation, energy, and engineering.

ASL Marine Holdings Ltd 162.17 Operations include shipbuilding, ship repair, and other marine-related services. Other marine-related services include logistic support, general engineering services, and sales and repair of marine equipment.

Pan-United Marine Ltd 257.13 Provides shipping, ship repair, ship building and ship conversion services. Also undertakes heavy engineering projects and technical services.

SembCorp Marine Ltd 4,921.31 Operates ship building, ship owning, ship repair and conversion.

Cosco 3,316.24 Owns and operates ships, and provides shipping agency, marine engineering, ship repair, and container depot services.

Source : Bloomberg

29 APPENDIX I

In our assessment of the Purchase Consideration, we have considered the price to value ratio implied by the Purchase Consideration compared with the Selected Comparable Companies in section 6.2.2.

6.2.1 NTA Based Approach The NTA based approach of valuing a company is based on the aggregate value of all the assets of the company in their existing condition, after deducting the sum of all liabilities and intangible assets of the company. NTA based approach is meaningful as it shows the extent to which the value of each share is backed by tangible assets and would be relevant in the event that the company decides to realise or convert the use of all or most of its assets. It does not necessarily reflect the value of the company as a going concern. The NTA based approach in valuing a company may provide an estimate of the value of a company assuming the hypothetical sale of all its assets over a reasonable period of time at the aggregate value of the assets used in the computation of the NTA, the proceeds of which are used to settle the liabilities, minority interest and obligation of that company with the balance distributed to its shareholders. However, such a hypothetical scenario is assumed to be made without considering factors such as, inter alia, time value of money, market conditions, legal fees, liquidation costs, taxes, contractual obligations and availability of potential buyers, which may otherwise lower the NTA value that can be realised.

Book NTA as reflected in the audited accounts of a company is based on the value of a company’s net assets as determined by accounting procedures and does not necessarily reflect the prevailing market value of the underlying assets. As such, comparisons of companies using their book NTA are affected by differences in their accounting policies, especially depreciation and asset valuation policies.

In assessing the Purchase Consideration in relation to the audited book NTA as at 31 December 2005, we have reviewed the audited balance sheet of Cosco Group as at 31 December 2005 to determine whether there are any assets that are of an intangible nature. We note that there are intangible assets amounting to approximately S$9.36 million recorded as at 31 December 2005. Based on the audited balance sheet of Cosco as at 31 December 2005, the audited consolidated book NTA of Cosco was approximately S$510.35 million.

For illustration purposes only, the Purchase Consideration per Share represents a premium of approximately 373.91% over the audited book NTA per share of Cosco as at 31 December 2005.

6.2.2 Historical Price/Book Comparison Company Price/Book (times)

Neptune Orient Lines Ltd 0.85 Labroy Marine Ltd 4.53 Jaya Holdings Ltd 3.43 Keppel Corp Ltd 3.20 ASL Marine Holdings Ltd 1.81 Pan-United Marine Ltd 2.26 SembCorp Marine Ltd 4.41 Lowest 0.85 Highest 4.53 Simple Average 2.93

Cosco (Implied by the Purchase Consideration and audited book NTA as at 31 December 2005) 4.74

Source : Bloomberg, respective annual reports and announcements

30 APPENDIX I

From the above table, we note that the Price/Book ratio of 4.74 times implied by the Purchase Consideration and the audited book NTA as at 31 December 2005 is higher than the simple average Price/Book ratio of 2.93 times of the Selected Comparable Companies and the Price/Book ratio of the Selected Comparable Companies of between 0.85 times and 4.53 times as at the Latest Practicable Date.

The high Price/Book ratio of Cosco may reflect the premium rating for its dominance in the marine and offshore industry in China, good financial performance in FY2005 and its positive industry outlook anticipated by the directors of Cosco.

6.2.3 Historical PER Comparison The PER approach is an earnings-based relative valuation methodology that takes into account the ratio of the market price per share to earnings per share.

Cosco has recorded an audited consolidated net profit after tax of S$160.49 million for the financial year ended 31 December 2005. Thus, the Purchase Consideration of S$1.09 per Cosco Share implies a PER of 14.83 times, based on Cosco’s earnings per share of 7.35* cents for the financial year ended 31 December 2005.

* Based on earnings per share after the sub-division of shares of S$0.20 each to shares of S$0.10 each on 17 January 2006.

Company PER (times)

Neptune Orient Lines Ltd 2.25 Labroy Marine Ltd 20.85 Jaya Holdings Ltd 8.56 Keppel Corp Ltd 18.74 ASL Marine Holdings Ltd 10.48 Pan-United Marine Ltd 15.49 SembCorp Marine Ltd 35.32 Lowest 2.25 Highest 35.32 Simple Average 15.96

Cosco (Implied by the Purchase Consideration and audited net profit after tax for FY2005) 14.83

Source : Bloomberg, respective annual reports and announcements

From the above table, we note that the PER of 14.83 times implied by the Purchase Consideration and the audited net profit after tax for FY2005 is lower than the simple average PER of 15.96 times of the Selected Comparable Companies as at the Latest Practicable Date, and is within the PER of the Selected Comparable Companies of between 2.25 times and 35.32 times as at the Latest Practicable Date.

31 APPENDIX I

6.2.4 Historical EV/EBITDA Comparison The EV/EBITDA multiple is an earnings-based relative valuation methodology that does not take into account the capital structure of a company as well as its interest, taxation, depreciation and amortisation charges. Therefore, it serves as an illustrative indicator of the current market valuation of the business of a company relative to its pre-tax operating cashflow and performance.

Company EV / EBITDA (times)

Neptune Orient Lines Ltd 1.86 Labroy Marine Ltd 14.38 Jaya Holdings Ltd 23.13 Keppel Corp Ltd 26.03 ASL Marine Holdings Ltd 16.84 Pan-United Marine Ltd 4.02 SembCorp Marine Ltd 29.15 Lowest 1.86 Highest 29.15 Simple Average 16.49

Cosco (Implied by the Purchase Consideration) 10.05

Source : Bloomberg, respective annual reports and announcements

From the above table, we note that Cosco’s EV/EBITDA multiple of 10.05 times as implied by the Purchase Consideration is lower than the simple average multiple of 16.49 times of the Selected Comparable Companies as at the Latest Practicable Date, and is within the EV/EBITDA multiple of the Selected Comparable Companies of between 1.86 times and 29.15 times as at the Latest Practicable Date.

6.2.5 Summary of Relative Valuation Analysis From the above relative valuation analysis, we note that apart from historical Price/Book ratio, the Purchase Consideration compares favourably with those of the Selected Comparable Companies for PER and EV/EBITDA ratios.

6.3 Financial Effects of the Acquisition The proforma financial effects of the Acquisition, as computed by the Company, are set out in section 6 of the Circular. We recommend that the Non-Interested Directors advise the Shareholders to read those pages of the Circular carefully.

A summary of the proforma financial effects of the Acquisition on the share capital, consolidated NTA per Share, consolidated earnings per Share and gearing of the SCM Group with reference to the SCM Group’s latest audited consolidated results for the financial year ended 31 December 2005 is set out herein for illustration purposes only and do not reflect the actual future financial situation of the SCM Group after the Acquisition.

6.3.1 Share capital The Acquisition will not have any effect on the issued and paid-up capital of the Company since the Purchase Consideration will be settled in cash.

32 APPENDIX I

6.3.2 NTA Based on the audited consolidated balance sheet of the SCM Group as at 31 December 2005, and assuming that the Acquisition had been completed as at 31 December 2005, the proforma financial effects of the Acquisition on the consolidated NTA of the SCM Group as at 31 December 2005 would have been as follows:-

NTA NTA per Share (S$’000) (cents) Before Acquisition 1,061,944 73.22 After Acquisition 1,100,805 75.90

Based on the above computation, the Company expects to record a gain in NTA resulting from the difference between the net carrying value of the Cosco Shares and the Purchase Consideration. The gain is expected to result in a 1.27% increase in NTA per Share.

6.3.3 Earnings (“EPS”) Assuming that the Acquisition had been completed on 1 January 2005, based on the audited consolidated results of the SCM Group for the financial year ended 31 December 2005, the proforma financial effects of the Acquisition on the consolidated earnings per Share of the SCM Group for the financial year ended 31 December 2005 would have been as follows:-

Earnings Earnings per Share (S$’000) (cents)

Before Acquisition 121,398 8.45 (Basic) 8.25 (Fully diluted)

After Acquisition 121,680 8.47 (Basic) 8.26 (Fully diluted)

Based on the above computation, the Company expects to record a marginal increase in EPS.

6.3.4 Gearing The SCM Group will be using its internal resources to fund the Acquisition, and will be in net cash position after the Acquisition.

7. RECOMMENDATION ON THE ACQUISTION In arriving at our recommendation in respect of the Acquisition, we have taken into account factors summarised below. Shareholders should read the following in conjunction with, and in the context of, the full text of this letter.

a) Having considered the business activities of the Company and the Cosco Group, the Company’s rationale for the Acquisition as stated by the Directors and the positive industry outlook anticipated by both Cosco and the Company, its strategic alliance with the Cosco Group, there may be further synergistic opportunities between the Company and the Cosco Group;

b) The Cosco Share price has out-performed the overall applicable market as reflected by the SGX-ST All Index and SGX-ST Tran/Stor/Com Index over the 12 months preceding the Announcement Date. Its performance reflected Cosco’s good financial performance in FY2005 and positive industry outlook anticipated by the directors of Cosco;

33 APPENDIX I

c) The Purchase Consideration per Cosco Share represents a significant discount of 18.05% to the closing price of Cosco Shares immediately prior to the Announcement;

d) The historical Price/Book ratio of 4.74 times implied by the Purchase Consideration and the audited book NTA as at 31 December 2005 is higher than the Price/Book ratio of the Selected Comparable Companies of between 0.85 times and 4.53 times as at the Latest Practicable Date. The high Price//Book ratio of Cosco Shares may reflect the premium rating for its dominance in the marine and offshore industry in China, good financial performance in FY2005 and positive industry outlook anticipated by the directors of Cosco;

e) The historical PER of 14.83 times implied by the Purchase Consideration based on the audited net profit after tax for FY2005 is lower than the simple average PER of 15.96 times of the Selected Comparable Companies as at the Latest Practicable Date, and is within the PER of the Selected Comparable Companies of between 2.25 times and 35.32 times as at the Latest Practicable Date;

f) The EV/EBITDA multiple of 10.05 times as implied by the Purchase Consideration is lower than the simple average multiple of 16.49 times of the Selected Comparable Companies as at the Latest Practicable Date, and is within the EV / EBITDA multiple of the Selected Comparable Companies of between 1.86 times and 29.15 times as at the Latest Practicable Date;

g) The Acquisition is expected to have a positive impact on the consolidated NTA per Share of the SCM Group, and a marginal gain in the EPS of the SCM Group; and

h) The strong financial performance of Cosco as reported in the second quarter 2006 results announcement and the positive outlook anticipated by the directors of Cosco.

Having regard to the considerations set out above in this letter, Stirling Coleman is of the opinion that, based on available information afore-mentioned as at the Latest Practicable Date, the financial terms of the Acquisition are on normal commercial terms and are not prejudicial to the interests of the Company and its Minority Shareholders. We therefore advise the Non-Interested Directors to recommend the Minority Shareholders to vote in favour of the ordinary resolution relating to the Acquisition.

This letter is addressed to the Non-Interested Directors for their benefit, in connection with and for the purpose of their consideration of the Acquisition, but any recommendation to the Shareholders remain the responsibility of the Non-Interested Directors.

This letter is governed by, and construed in accordance with, the laws of Singapore, and is strictly limited to the matters stated herein and does not imply by implication to any other matter. Nothing herein shall confer or be deemed or is intended to confer any right of benefit to any third party and the Contracts (Rights of Third Parties) Act (Chapter 53B) and any re-enactment thereof shall not apply.

Yours faithfully For and on behalf of STIRLING COLEMAN CAPITAL LIMITED

ANG KAY TIONG LUCY LIM CHIEF EXECUTIVE OFFICER EXECUTIVE DIRECTOR

34 NOTICE OF EXTRAORDINARY GENERAL MEETING

SEMBCORP MARINE LTD (Incorporated in Singapore) (Company Registration No.: 196300098Z)

NOTICE IS HEREBY GIVEN THAT an Extraordinary General Meeting of the Company will be held at 29 Tanjong Kling Road, Singapore 628054 on 23 August 2006 at 11.00 a.m. for the purpose of considering and, if thought fit, passing the following resolution, with or without amendment:

ORDINARY RESOLUTION

That: (a) Pursuant to Chapter 9 of the SGX-ST Listing Manual, approval be and is hereby given for the acquisition by the Company of 110,400,000 ordinary shares in the issued share capital of Cosco Corporation (Singapore) Limited from Seletar Investment Pte Ltd for an aggregate consideration of S$120,336,000; and

(b) the Directors of the Company (or any one of them) be and are hereby authorised to take such steps, make such arrangements, do all such acts and things and exercise such discretion in connection with, relating to or arising from the matters contemplated herein, as they (or he) may from time to time consider necessary, desirable or expedient to give effect to such matters and this Resolution as they (or he) may deem fit.

By Order of the Board

Kwong Sook May (Ms) Company Secretary

Singapore 7 August 2006

IMPORTANT: Please read notes below.

NOTES: 1. A member entitled to attend and vote at the Extraordinary General Meeting is entitled to appoint no more than two proxies to attend and vote on his behalf and such proxy need not be a member of the Company.

2. A member of the Company which is a corporation is entitled to appoint its authorised representative or proxy to vote on its behalf.

3. The instrument appointing a proxy or proxies must be under the hand of its attorney or a duly authorised officer.

4. An instrument of proxy must be lodged at 30 Hill Street #05-04 Singapore 179360 not later than 48 hours before the time appointed for the Extraordinary General Meeting.

35 PROXY FORM

SEMBCORP MARINE LTD IMPORTANT (Incorporated in the Republic of Singapore) 1. For investors who have used their CPF moneys to buy shares in Company Reg. No. 196300098Z the capital of SembCorp Marine Ltd, this Circular is forwarded to them at the request of their CPF Approved Nominees and is sent FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by such CPF investors and EXTRAORDINARY GENERAL MEETING shall be ineffective for all intents and purposes if used or PROXY FORM purported to be used by them.

*I/We (Name)

of (Address)

being a member/members of SembCorp Marine Ltd (the “Company”) hereby appoint:

Name Address NRIC/ Proportion of Passport Number Shareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Extraordinary General Meeting of the Company to be held at 29 Tanjong Kling Road, Singapore 628054 on 23 August 2006 at 11.00 a.m. and at any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Resolution as set out in the Notice of Extraordinary General Meeting. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matter arising at the Extraordinary General Meeting).

For Against

Ordinary Resolution To approve the proposed acquisition by the Company of 110,400,000 ordinary shares in the issued share capital of Cosco Corporation (Singapore) Limited from Seletar Investment Pte Ltd for an aggregate consideration of S$120,336,000.

Dated this day of 2006

Total number of Shares held

Signature(s) of Member(s) or Common Seal

IMPORTANT: PLEASE READ NOTES TO PROXY FORM OVERLEAF.

36 NOTES TO PROXY FORM: 1. Please insert the total number of ordinary shares you hold. If you have ordinary shares entered against your name in the Depository Register (as defined in section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of ordinary shares. If you have ordinary shares registered in your name in the Register of Members, you should insert that number of ordinary shares. If you have ordinary shares entered against your name in the Depository Register as well as ordinary shares registered in your name in the Register of Members, you should insert the aggregate number of such ordinary shares. If you do not insert any number, this Proxy Form shall be deemed to relate to all the ordinary shares held by you.

2. A member of the Company entitled to attend and vote at a Meeting of the Company is entitled to appoint one or two proxies to attend and vote on his behalf. Such proxy need not be a member of the Company.

3. If the Chairman of the Meeting is appointed as proxy, this Proxy Form shall be deemed to confer on him the right to nominate a person to vote on his behalf on a show of hands.

4. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy.

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Please affix postage stamp

THE COMPANY SECRETARY SembCorp Marine Ltd c/o 30 Hill Street #05-04 Singapore179360

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5. This Proxy Form must be deposited at 30 Hill Street #05-04, Singapore 179360, not less than 48 hours before the time set for the Extraordinary General Meeting.

6. This Proxy Form must be under the hand of the appointer or of his attorney duly authorised in writing. A corporation which is a member must execute this Proxy Form either under its seal or under the hand of a director or an officer or attorney duly authorised.

7. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Extraordinary General Meeting, in accordance with section 179 of the Companies Act, Chapter 50 of Singapore.

8. The Company shall be entitled to reject this Proxy Form if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in this Proxy Form. In addition, in the case of a member whose shares are entered in the Depository Register, the Company may reject this Proxy Form if the member, being the appointor, is not shown to have such shares entered against his name in the Depository Register as at 48 hours before the time set for the Extraordinary General Meeting, as certified by The Central Depository (Pte) Limited to the Company.

9. There are no rights of appraisal or similar rights of dissenters.

10. Proxies may be revoked at any time prior to the Extraordinary General Meeting. Proxies are deemed to be revoked if a Shareholder attends and votes at the Extraordinary General Meeting.

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