O TTO M ARINE L IMITED - Microsoft Internet Explorer - SGX

Transactions and Conflicts of Interests — Past Interested Person Transactions” and “Capitalisation and
Indebtedness”. As at the Latest Practicable Date, the corporate guarantee amounting to S$2.1 million has been
fully discharged.
Save for refund guarantees issued by banks to our customers as disclosed in “— Borrowings — Refund
Guarantees”, the corporate guarantees discussed above and the arbitration disclosed in “Our Business —
Litigation and Arbitration Proceedings”, we presently do not have any other contingent liabilities. Save as
disclosed above, there has not been any material change in our contingent liabilities between 31 December
2007 and the Latest Practicable Date.
On 10 September 2008, we entered into a settlement agreement with the Malaysian company that
commenced the arbitration proceedings against us. See “Our Business — Litigation and Arbitration Proceedings”.
Accordingly, the contingent liability which we have made provision for in relation to the arbitration
proceedings has been extinguished.
Taxes
Profits booked through our Singapore incorporated group companies are subject to Singapore corporate
income tax at the rate of 20.0% for 2005 and 2006 and 18.0% for 2007 while that derived from our ship
chartering business in respect of our Singapore registered vessels is tax exempt pursuant to Section 13A of the
Income Tax Act, Chapter 134 of Singapore. Our subsidiaries PT Batamec and PT Lestari are subject to
Indonesian corporate tax at a rate of between 15.0% and 30.0% depending on the taxable income. Further, as
they are located in Batam, Indonesia which has been classified as a bonded zone, they are currently exempted
from customs duties, import/export taxes and value-added tax. Our subsidiaries Otto Offshore and Otto
Investment, which are incorporated in Labuan, also enjoy preferential tax rates.
We make all of our arrangements for the construction of newbuildings, except certain barges, through our
wholly owned subsidiary Otto Offshore. When we receive an order for a newbuilding from a customer
(including from our Company, for vessels that we intend to keep for our chartering fleet), we enter into a
vessel purchase agreement with the customer through Otto Offshore. Otto Offshore then places a vessel
construction order with PT Batamec, and when the vessel is completed, PT Batamec sells the vessel to Otto
Offshore for further on-sale to the end customer (which could include our Company).
Changes in Accounting Policies
We have not made any significant changes in our accounting policies during the last three financial years
ended 31 December 2007 and for the five months ended 31 May 2008.
Market Risk
We are exposed to various types of market risk in the ordinary course of business, including foreign
exchange risk, credit risk, interest rate risk and liquidity risk. Our risk management strategy aims to minimise
the adverse effects of financial risk to our financial performance.
Foreign Exchange Risk
Our results of operations and financial condition are exposed to transaction and translation risks relating
to foreign currency exchange rates. Our foreign currency exchange risk arises mainly from foreign currencydenominated
sales and purchases. See “— Factors Affecting Our Business, Financial Condition and Results of
Operations — Fluctuations in Foreign Currency Exchange Rates” and “Risk Factors — Risks Relating to Our
Business and Operations — We may be affected by foreign exchange fluctuations”.
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