Extracted from Annual Report 2009

Introduction

TThe Financial Year 2009 ("FY09") was another outstanding year for the CH Offshore Group. The Group continues to improve its financial performance despite the many challenges posed by the recent global financial upheavals, low oil prices and the deluge of newbuilds. Profit after tax rose to US$56.2 million, a 41.7% increase over previous Financial Year 2008 ("FY08") of US$39.7 million.

On behalf of the Board, it gives me great pleasure to present the Annual Report and the Audited Financial Statements of the Group for the Financial Year ended June 30, 2009.

Financial Review

The Group's profit after tax rose 41.7% on the back of a 59.5% increase in revenue. Revenue rose to US$68.8 million for FY09 from US$43.1 million for FY08. The higher profit was due to higher revenue generated, marginally lower operating costs and lower administrative expenses.

The higher revenue was due to contributions from four 12,240 BHP anchor-handling tug supply ("AHTS") vessels delivered between March 2008 and November 2008. These vessels were immediately deployed to their respective job locations and commenced their charter. Operating costs to revenue for FY09 remained marginally low at 21.9% compared with 33% for FY08. Administrative expenses decreased 15.5% to US$3.3 million from US$3.9 million due to an on-going effort to reduce costs.

During the financial year the Group sold the remaining four 1980s built AHTS vessels. This together with the disposal of investment in an associated company contributed a one-off gain of US$11.5 million.

Fleet Activities

In September and November 2008, the Group took delivery of another two 12,240 BHP AHTS vessels which were promptly leased to our Australian client. The remaining two sister vessels currently under construction in Japan are scheduled for delivery in December 2009 and February 2010.

The Group sold the remaining four 1980s built AHTS vessels to third parties during the financial year. With the complete disposal of all 1980s built AHTS vessels and the delivery of six out of eight new 12,240 BHP AHTS vessels, the Group now owns and operates a modern fleet of AHTS vessels with an average age of about 3 years old as of January 2009.

The Group already has a strong presence in South East Asia and the Middle East. In 2007, the Group leased one 12,240 BHP AHTS vessel to our Australian client. By December 2008, we have three 12,240 BHP AHTS vessels operating in Australia. In March and May 2008, the Group extended its geographical reach to Latin America with the deployment of two 12,240 BHP AHTS vessels. The Group will continue with this strategy of extending its market reach.

Dividend

In March 2009, the Company paid an interim taxexempt dividend of 0.5 SGD cents per ordinary share. In view of the uncertainty in the recovery of the global economy, the current subdued industry outlook and the substantial capital commitments of the Group, the directors are of the opinion that it is prudent to preserve cash. As such, the directors are proposing a final tax-exempt dividend of 1.5 SGD cents per ordinary share. This will bring the total, paid and proposed dividend to 2.0 SGD cents per ordinary share which will amount to approximately S$14.1 million (equivalent to US$9.87 million). The dividend payout for the Financial Year ended June 30, 2008 was at 2.0 SGD cents per ordinary share.

Outlook and Prospects

The offshore support vessel ("OSV") sector has moved from one extreme to the other, from a protracted boom period during the last 2 years to today's precarious conditions, with a weakened global economy.

Current weak demand and low oil prices, investment cutbacks by national and international oil companies, oversupply of vessels are growing concerns. This unbalanced supply-demand situation will put pressure on charter rates and vessel utilisation.

The Group will continue to cut cost, raise efficiency, be alert to risks, better manage cash flow, and seize new opportunities.

Appreciation

We would like to place on record our appreciation to Mr Peh Kwee Chim, Encik Shah Hakim Bin Zain and Encik Aminuddin Yusof Lana for their invaluable counsel and contributions as Directors. Mr Peh Kwee Chim and Encik Shah Hakim Bin Zain had retired at the last Annual General Meeting held on 24 October 2008. Encik Aminuddin Yusof Lana had resigned as Director on 31 July 2009.

Acknowledgements

On behalf of the board, I wish to extend our appreciation to our dedicated staff and management team for another outstanding year especially during such challenging times. I like to thank our shareholders for their support; our clients and business partners for their trust and commitment; and all our Board members for their invaluable guidance and insights.

Tan Sri Datuk Asmat Bin Kamaludin

Non-Executive Chairman
18 August 2009