FINANCIAL STATEMENTS (Full Version) - Sembcorp

Notes to the
Financial Statements
Year Ended December 31, 2008
4. SHARE-BASED INCENTIVE PLANS (cont’d)
c. Restricted Stock Plan (cont’d)
ii. Restricted stocks of a listed subsidiary (cont’d)
A total of 957,400 (2007: 816,250) notional restricted stocks of Sembcorp Marine Ltd’s shares were awarded on
April 7, 2008 for the Challenge Bonus for the performance period 2008 to 2009.
The total number of notional restricted stocks in awards for the Challenge Bonus granted conditionally and
representing 100% of targets to be achieved, but not released as at end 2008, was 1,866,248 (2007: 1,046,458).
Based on the multiplying factor, the number of notional restricted stocks to be converted into the funding
pool could range from zero to a maximum of 2,606,642 (2007: 1,360,396).
Fair value of restricted stocks
The fair values of the restricted stocks are estimated using a Monte Carlo simulation methodology at the grant
dates.
The fair values of restricted stocks granted during the year are as follows:
Fair value of Fair value of
Sembcorp Sembcorp Fair value of Fair value of
Industries Ltd Industries Ltd Sembcorp Sembcorp
Restricted Stocks Restricted Stocks Marine Ltd Marine Ltd
granted on granted on Restricted Stocks Restricted Stocks
April 7, 2008 and April 9, 2007 and granted on granted on
August 1, 2008 August 1, 2007 April 7, 2008 June 12, 2007
5. (DEFICIT) / SURPLUS IN OTHER RESERVES
Group
Company
2008 2007 2008 2007
Note S$’000 S$’000 S$’000 S$’000
Reserve for own shares (a) (34,731) – (34,731) –
Currency translation reserve (b) (121,650) (37,383) – –
Other reserves (c) 114,000 676,831 22,620 23,699
(42,381) 639,448 (12,111) 23,699
a. Reserve for Own Shares
At December 31, 2008, the Company held 8,377,867 (2007: Nil) of its own uncancelled shares as treasury shares.
b. Currency Translation Reserve
The currency translation reserve comprises:
i. foreign exchange differences arising from the translation of the financial statements of foreign operations
whose functional currencies are different from the presentation currency of the Group;
ii.
exchange differences on monetary items which form part of the Group’s net investment in foreign operations;
and
iii. gains or losses on instruments used to hedge the Company’s net investment in foreign operations that are
determined to be effective hedges.
Fair value at measurement date S$3.07 S$4.79 S$3.06 S$4.15
Assumptions under the Monte Carlo model
Share price S$4.26 S$5.50 S$3.77 S$4.78
Expected volatility:
Sembcorp Industries Ltd / Sembcorp Marine Ltd 32.4% 25.5% 30.9% 24.6%
Straits Times Index (“STI”) 15.9% 10.2% 15.9% 10.0%
Correlation with STI 69.7% 49.5% 47.6% 14.1%
Risk-free interest rate 0.9%-1.3% 2.4%-2.6% 0.9%-1.3% 2.4%-2.6%
Expected dividend 4.7% 3.2% 5.0% 4.9%
The expected volatility is based on the historical volatility over the most recent period that is close to the
expected life of the restricted stocks.
During the year, the Group charged S$14,293,000 (2007: S$12,817,000) to the income statement based on the
fair value of restricted stocks at the grant date being expensed over the vesting period.
Fair value of Sembcorp Challenge Bonus
During the year, the Group charged S$7,820,000 (2007: S$1,568,000) to the income statement based on the
market values of the shares at the balance sheet date. The compensation cost for Sembcorp Challenge Bonus
recorded in liabilities amounted to S$9,391,000 (2007: S$1,571,221) as at December 31, 2008. The fair value of
the compensation cost is based on the notional number of restricted stocks awarded for Sembcorp Challenge
Bonus and the market price at the vesting date.
152 Delivering Essential Solutions Sembcorp Industries Annual Report 2008 153