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RISING TO THE CHALLENGE
Annual Report 2008
Investor Relations Contacts
COSCO Corporation (Singapore) LimitedMr Li Jian Xiong, Vice PresidentTel: (65) 6885 0886Fax: (65) 6336 9006Email: [email protected]
SPIN Capital Asia (Investor Relations Consultant)Mr Michael Tan / Ms Dawn SooTel: (65) 6227 7790 / (65) 9742 2800Email: [email protected]
Wisdom
CourageCredence
Integrity
Rising to the challengewith the spirit of enterprise
Since its inception, COSCO Corporation’s fundamental
values have remained strong and steadfast. It is this
spirit that takes COSCO Corporation to the heights of
world-class excellence.
Now, even as challenges loom, we stand strong and
undaunted. The spirit of enterprise has taken us this
far and we trust that it will not only tide us through the
storm but take us further.
After all, there is no greater challenge than to emerge
victorious in this unprecedented financial crisis.
COSCO OVERVIEW02 Corporate Profile04 Corporate Structure06 Financial Highlights08 Significant Events
KEY MESSAGES14 Chairman’s Message18 Vice Chairman and President’s Message
OPERATIONS REVIEW24 Our Strengths and Capabilities26 Our Major Shipyards28 Business Overview32 Ship Repair, Ship Building, Offshore Marine Engineering 34 Dry Bulk Shipping36 Shipping Agency38 Group Financial Review
CORPORATE GOVERNANCE AND TRANSPARENCY42 Corporate Governance58 Board of Directors64 Key Management66 Organisation Structure67 Corporate Information68 Investor Relations72 Risk Management
INSIDE COSCO AND CORPORATE CITIZENSHIP78 Research and Development80 Human Resources 82 Workplace Safety84 Corporate Social Responsibility
FINANCIAL STATEMENTS86 Directors’ Report92 Statement by Directors93 Independent Auditor’s Report94 Consolidated Income Statement95 Balance Sheets96 Consolidated Statement of Changes in Equity98 Consolidated Cash Flow Statement100 Notes to the Financial Statements166 Five-Year Summary167 Shareholding Statistics169 Notice of Annual General Meeting Proxy Form for Annual General Meeting Notes for Proxy Form
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COSCO Corporation (Singapore) Limited (“COSCO Corporation” or the “Group”) has one of the largest Ship Repair, Ship Building and Marine Engineering operations in China. A diversified group with activities also in Dry Bulk Shipping, Shipping Agency and other sectors, it is the SGX Mainboard-listed subsidiary of China Ocean Shipping (Group) Company (“COSCO Group”), China’s largest shipping group and one of the top shipping conglomerates in the world.
COSCO Corporation has achieved significant progress in growing its Ship Repair, Ship Building and Marine Engineering capacity and capabilities. The completion of its acquisition of a 51% stake in one of the largest shipyards in China, COSCO Shipyard Group (“COSCO Shipyard”), on 1 January 2005 had propelled COSCO Corporation into the premier league in the ship repair industry.
Corporate Profile
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Annual Report 2008
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COSCO Corporation is poised to continue in its dynamic growth momentum for further breakthrough in its core businesses and global coverage. COSCO Corporation is a component stock in the Straits Times Index, which comprised of the 30 largest listed companies in terms of market capitalisation in Singapore. In October 2006, COSCO Corporation was rated as a component stock of Prime Partners China Index - the first index that tracks the performance of China enterprises listed on the SGX. Since January 2008, we have been part of the FTSE ST China Index, and from July 2008, we were also included in the FTSE ST China Top Index, both of which were created to reflect the increasing representation of China-based companies in the Singapore stock market. Among other indexes, we are also a component stock of the Morgan Stanley Capital International World Index as well as the SGX Morgan Stanley Capital International Asia Apex 50 Index Futures which feature some of the most promising, widely-traded and investible Asian companies outside Japan.
Corporate Structure
COSLINK (M) Sdn. Bhd.
18.0%
04
Annual Report 2008
COSCO (Singapore) Pte Ltd
Cos Fair Shipping Pte Ltd
Cos Glory Shipping Inc.
Hanbo Shipping Limited
Sanbo Shipping Limited
Cos Knight Shipping Maritime Inc.
Cos Lucky Shipping Maritime Inc.
Cos Orchid Shipping Pte Ltd
Cos Prosperity Shipping Pte Ltd
Dry Bulk Shipping
100%Shipping Agency & Others
70%
COSTAR Shipping Pte Ltd
70%
COSCO Corporation (Singapore) Limited
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Harington Property Pte Ltd
Note:
This chart only includes major subsidiaries of COSCO Corporation (Singapore) Limited
Ship Repair, Ship Building & Marine Engineering
Shipping Agency And Others
Dry Bulk Shipping
05
100%
COSCO (Dalian) Shipyard Co., Ltd
COSCO (Nantong) Shipyard Co., Ltd
COSCO (Zhoushan) Shipyard Co., Ltd
COSCO (Guangdong) Shipyard Co., Ltd
COSCO (Shanghai) Shipyard Co., Ltd
COSCO (Tianjin) Shipyard Co., Ltd
COSCO (Xiamen) Shipyard Co., Ltd
COSCO (Lianyungang) Shipyard Co., Ltd
100%
75.0%
95.0%
90.0%
51.0%
60.0%
58.7%
50.0%
COSCO Shipyard Group Co., Ltd51%COSCO Marine
Engineering (Singapore) Pte Ltd
90%
Ship Repair, Ship Building
& Marine Engineering
92%
7%1%
Ship Repair, Ship Building & Marine Engineering
Dry Bulk Shipping
Revenue By Activities (%)
Shipping Agency and Others
Financial Highlights
Net Profit Attributable to Equity Holders(S$’m)
2008
2007
2006
2005
2004
337
205
160
64
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Annual Report 2008
Net Assets(S$’m)
2008
2007
2006
2005
2004
1,303
920
695
324
1,609
Turnover(S$’m) 2008
2007
2006
2005
2004
2,262
1,215
873
116
3,476
303
Dividends per Share (cents) and Basic Earnings per Share (cents)
Dividends per share (cents)
Basic earnings per share (cents)
# Based on shares of 20 cents par value each
5-Year Profit and Loss Accounts
2008
Turnover
Operating Profit before Tax
Share of Profit of Associated Companies
Taxation
Profit from Ordinary Activities
Minority Interest
Net Profit attributable to Equity Holders of the Company
2004
S$’m
116
35
31
1
65
1
64
2005
S$’m
873
225
1
19
207
47
160
2006
S$’m
1,215
301
1
23
279
74
205
2007
S$’m
2,262
497
1
19
479
142
337
2008
S$’m
* Basic earnings per share and net tangible assets per share have been adjusted to account for the bonus shares issued in 2004 and sub-division of one ordinary share of $0.20 each into two ordinary shares of $0.10 each in 2006 # Based on shares of 20 cents par value each
##
#
Other Key Statistics
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2008
2007
2006
2005
2004
15.1
9.3
7.4
3.02.0#
2.0
4.0
7.0
13.5
3,476
451
1
32
420
117
303
7.0
2004
1,085.1
3.0
2.0
2.9
14.7
14.8
0.2
21.6
11.6
2005
1,098.8
7.4
2.0
3.6
23.2
23.6
0.5
38.1
16.5
2006
2,214.0
9.3
4.0
2.3
29.8
30.3
0.2
34.5
12.5
2007
2,237.7
15.1
7.0
2.1
41.6
42.0
cash
41.8
11.5
Number of Shares (m)
Basic Earnings per Share (cents) *
Dividend per Share (cents)
Dividend Cover (times)
Net Tangible Assets (cents) *
Net Assets Value per Share (cents)
Gearing Ratio (net of cash)(times)
Return on Equity (%)
Return on Assets (%)
2,239.2
13.5
7.0
1.9
50.7
51.1
cash
29.0
5.6
Significant Events
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January 2008
Signed an agreement with the local government of Jiangsu to begin construction of a marine engineering base in Qidong Industrial Park, Jiangsu.
Began expansion work on COSCO Nantong offshore construction base.
Won US$422m worth of conversion and tanker building projects.
Implemented CIMS ship building management system to refine our project management model.
Celebrated the opening of our subsidiary COSCO Lianyungang, Jiangsu province.
March 2008
• •
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COSCO Corporation, together with the rest of the COSCO Group donated to the Zhoushan Buddhist Association for the construction of “Liu Heng Zhong Yuan” Primary School.
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Annual Report 2008
Implemented a series of measures to encourage “green” and sustainable development.
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April 2008
May 2008
Won high-value offshore & tanker building contracts totaling US$292m.
Commenced our “Clarity” campaign to standardise and protect our production capabilities through adoption of the TnPM management model.
Held our first Safety Quiz to promote a further strengthening of our emphasis on workplace safety.
The Shipping Logistics Department of COSCO Zhoushan Shipyard and the floating dock Ocean II of our Guangdong shipyard both won the national “Workers’ Pioneer” award.
COSCO Shipyard’s Managing Director Mr Wang Xing Ru was awarded the prestigious National Labour Day’s Labour Medal.
• •
• •
• •
Celebrated the commencement of our first training programme for fresh graduates with an Opening Ceremony in Dalian.
Significant Events
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July 2008
September 2008
Commenced operation of COSCO’s design centre – “COSCO-KOMAC”.
Implemented a new organisation structure comprising a reseach & development unit within the Ship Repair and Building department.
Set up a new Quality Control centre and an Inventory Control Department.
Won high value ship building and conversion contracts amounting to about US$256m.
• •
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Annual Report 2008
Completed and delivered COSCO’s first offshore newbuilding product 350,000 bbl JVPC FSO – “FSO Rang Dong MV - 17” at Zhoushan.
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November 2008
December 2008
Completed conversion of “Apollo Shoju” – one of the world’s largest FPSO.
Independently designed, constructed, and delivered one of the world’s largest floating dock of 120,000 tonne lifting capacity to a Korean customer.
Achieved a breakthrough in technology – the dock does not use anchors, and is able to operate like a semi-submersible barge carrying out underwater work.
• •
Completed multi-functional offshore rig FDPSO – MPF1000 at Dalian. This FDPSO was built using breaking on-ground ship building technology.
•
者不惑
Wisdom… is rising to the test
智
WISDOMOVER THE YEARS, OUTSTANDING LEADERS HAVE LED
COSCO CORPORATION SUCCESSFULLY TOWARDS THE ACCOMPLISHMENT OF ITS GOALS. THIS YEAR, COSCO CORPORATION WELCOMES A NEW LEADER WHO WILL DIRECT THE GROUP TO GREATER GLORY.
Chairman’s Message
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With steadfast
management, we
sailed the COSCO
ship on an even
keel...
Annual Report 2008
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2008 — A Year of Strength
2008 was an extraordinary year for COSCO Corporation. With steadfast management, we sailed the COSCO ship on an even keel amidst challenging economic conditions.
For the year under review, we booked a strong increase of revenues by 54% to $3.5 billion. Gross profit grew 3% to $630.1 million in FY2008 while net profit attributable to equity holders was booked at $302.6 million, a decrease of 10%, year on year, due to allowance for impairment of trade and other receivables made in light of the adverse global economic climate and the higher costs incurred in ship building and offshore marine engineering projects. Earnings per share (diluted) amounted to 13.50 cents per share. I am pleased to report that the Board has recommended a first and final dividend of 7.0 cents for the FY2008 which comprises ordinary dividend of 4.0 cents per share and a special dividend of 3.0 cents per ordinary share. We have strived to maintain the same dividend payout despite the challenges in the
current economic climate as we firmly believe the future prospects for COSCO Corporation remain bright and are confident of our strong financial position. Meanwhile, our shares continue to be one of the most liquid actively traded counters on the local bourse, which is a testimony of shareholder interest.
MilestonesIn FY2008, we showed operational agility and strategic acumen that underscored our development during the year. We expanded our shipyard capacity, further established a solid presence in offshore marine engineering, progressing to more technically sophisticated marine engineering projects, such as Sevan 650 ordered by Norwegian marine company Sevan Marine ASA. In July, we successfully delivered our first FSO project to a Japanese customer whose expectations on the technical and commercial standards of the unit were both met by our shipyard. These milestones of the past year are a true reflection of our innate strength and capabilities that will enable our Group’s further expansion.
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Chairman’s Message
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Co-ordinated Government Efforts On the wider horizon, in the face of gloomy economic news, various major financial institutions and corporations are being bailed out by their national governments to prevent their respective economies from further deterioration. The Baltic Dry Index (BDI), a measurement of global freight rates and a leading economic indicator of global economic prospects, elicits signs of recovery from a precipitous low last December. Meanwhile, the Chinese, Japanese, European, and American governments have passed large fiscal stimulus packages. The US Administration recently enacted in February 2009 a record US$787 billion stimulus package aimed at reviving the American economy. It is reassuring that the governments of all major economies are keenly aware that co-ordinated, concrete efforts are essential to adequately address the weakened world economy.
Sustainable Development in COSCODespite the challenging external environment, I
remain confident in the healthy, sustainable and sound development of all business sectors of COSCO Corporation and in particular, I foresee that our shipyards will remain busy. As at 31 December 2008, our order book stands at US$7.3 billion with progressive deliveries to the first half of 2012.
Financially, we remain strong, with a healthy balance sheet of increased assets and sizeable cash position. The moderating business climate might actually create attractive opportunities for strategic restructuring. We firmly believe in the importance of creating and nurturing competitive advantages and understand that effective strategic positioning will anchor our business and secure our future.
The long term outlook for our business remains bright. Our COSCO Shipyard Group, which oversees six major shipyards in China, is operating at a brisk pace and has reinforced its strong commitment to steer our business forward.
Financially, we remain strong, with a
healthy balance sheet of increased assets
and sizeable cash position.
Annual Report 2008
According to the International Energy Agency (IEA) World Energy Outlook 2008 report, energy demands for oil are projected to grow as economic giants China, India, Brazil, Mexico and other populous countries continue their long term development trajectory.
These developments augur well for our offshore marine engineering activities, as there will be demand for oil rigs to tap new, far flung sources of oil. Shipping, likewise, will continue to play a vital role in the infrastructure of the global economy and commerce. In consequence, the demand for new ships and ship repair will also continue.
ConclusionCOSCO Corporation continues to enjoy the confidence and support of the wider COSCO Group in general and the parent company in particular. In meeting the challenges ahead, COSCO Corporation would be able to call on the formidable resources of the COSCO Group. This
is a distinct and competitive advantage in today’s environment.
On behalf of the Board of Directors, I welcome on board Mr Jiang Li Jun as our new Vice Chairman and President. With his 34 years of experience in the shipping industry and over 10 years of experience in the management of listed companies, we look forward to his wise and capable leadership.
Finally, I would like to thank the directors for their devotion and advice and I applaud the outstanding efforts made by our staff. To our loyal shareholders, my heartfelt gratitude for your confidence and continued support. Though we are unsure how long this global recession will last, I assure you that together, we will rise to the challenges ahead.
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Li Jian Hong
Chairman
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Highlights of FY2008For the year in review, COSCO Corporation booked a net profit attributable to equity holders of $302.6 million on the back of $3.5 billion in record revenue, an increase of 54% over FY2007. Compared with the year before, diluted earnings decreased by 10% to 13.5 cents per share while our net asset value grew 21.7% to 51.1 cents per share.
Our revenues grew during the year with a steady fulfillment of our order book. The largest business segment of ship repair, ship building and marine engineering business saw a robust surge of 57% from revenues of $2.0 billion in FY2007 to $3.2 billion in FY2008.
The offshore marine engineering division has been growing steadily. Indeed, the progress made to the building of SEVAN 650, a complex cylindrical shaped drilling unit for deep water oil exploration and drilling, is not only a testament to our growing technical expertise but also signals the widening revenue streams we have strategically engineered.
On 17 July 2008, we marked a milestone by successfully delivering on schedule our first offshore marine project, a Floating, Storage and Offloading (FSO) vessel. This was from our Zhoushan shipyard to a Japanese customer.
Meanwhile, on 20 November 2008, COSCO Corporation delivered one of the world’s largest floating dock of 120,000 tonne lifting capacity to a Korean client. This highly specialised dock does not use anchors, and is able to operate as a semi-submersible barge carrying out underwater work.
Present Challenges, Strategic MovesMoving into 2009, we expect operating conditions to be overall challenging in this uncertain global economic environment. We will expend greater efforts in developing more ship repair and conversion projects as well as to tap opportunities in the offshore engineering sector.
Our focus on fulfilling our existing orders remains a top priority. With a robust order book of US$7.3 billion, our shipyards will remain busy with progressive deliveries to the first half of 2012.
Vice Chairman andPresident’s Message
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Annual Report 2008
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With our establishment in the lucrative area of offshore marine engineering, we are positioning ourselves strategically for growth.
With our establishment in the lucrative area of offshore marine engineering, we have positioned ourselves strategically for growth. A key milestone was reached in November 2008, when we completed conversion of one of the world’s largest FPSO. Going forward, we envision offshore marine engineering to be a growing contributor to our business, further solidifying and widening our revenue base.
Engineering Sustained GrowthWhat has started as a subprime crisis in the US has impacted the global financial system and affected almost every business in the world. Ours is no exception. In times of crisis, all industries undergo a period of consolidation where, through a natural process of elimination, the strongest and fittest survive. At COSCO Corporation, we are endowed with a solid order book, technological expertise, experienced management and a reliable name that signifies excellence. With these strengths, we have the ability, capacity and capability to emerge from this period better, stronger and more resilient than ever before.
The Right AttitudeOur strategy to sustain growth begins with a focus on careful, conscientious management to counteract the adverse effects of a gloomy macro outlook. We believe through prudent management, technological
upgrades, research & development and human resources development, we will reinforce our strengths while paving the way for future growth.
Therefore, despite a challenging economic environment, we intend to do our best to retain staff through retraining and re-deployment. We will also keep operating costs at an optimal low and invest in technological upgrades to increase operating efficiency.
Upgrades and ImprovementsWe are increasing our expertise, adopting the block-building technique and importing other expert knowledge from abroad to further develop technological advantages. We are also upgrading our docking capabilities to cater to more offshore marine engineering projects. By improving existing building facilities, we are able to undertake high value conversion jobs.
Securing the FutureUnder my management, we will endeavor to increase our marketing outreach to widen our client pool and improve client retention rates. COSCO Corporation, as a leading enterprise, believes in the importance of corporate governance and disclosure, and as such, we will continue to engage our directors, shareholders and investors.
Vice Chairman andPresident’s Message
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We are increasing our expertise, adopting the block-building technique and importing other expert knowledge from abroad to further develop technological advantages.
Annual Report 2008
When I took over as President of COSCO Corporation, I initiated several schemes to strengthen our business. One of these was the establishment of a strategic task force tasked with developing strategies to catalyse improvements and spur competitiveness.
This is part of my vision to lift our capabilities and ensure COSCO Corporation remains one of the leaders in our industry. Our vision at COSCO Corporation is to build a value-driven world-class enterprise providing value-added services that meet the requirements of a global customer base and create sustainable returns for our shareholders.
At COSCO Corporation, we see clear opportunities to move forward, even as today’s economic uncertainties are posing challenges to many businesses. The current environment, in my view, will differentiate companies that are prepared not only to weather economic down cycles, but also to take advantage of opportunities that arise from it. With its solid financial foundation and robust track record, COSCO Corporation will emerge stronger and focused in its quest for excellence.
We will meet the challenges ahead, assured of the support of parent company in particular and the
wider COSCO Group in general. We will do whatever it takes to see us through the difficult period ahead.
When the clouds have cleared and confidence returns, having endured the rigours of the recession, COSCO Corporation will emerge fitter and stronger, ready to pursue its vision of being one of the top global companies in the industry.
AcknowledgementsIn closing, on behalf of the management, I would like to extend our deepest and most heartfelt gratitude to Captain Wei Jia Fu for steering the company to new corporate heights. I would also like to thank all shareholders, customers and partners for their support and confidence. We look forward to your continued partnership in the years ahead.
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Jiang Li Jun
Vice-Chairman and Pres ident
COURAGECOSCO CORPORATION COURAGEOUSLY TAKES ON EVERY CHALLENGE THAT COMES ITS WAY. THIS COURAGE IS CONSTANTLY STRENGTHENED THROUGH EFFECTIVE TRAINING PROGRAMMES THAT BOOST INDIVIDUAL CAPABILITIES AND DEVELOP THE ORGANISATION IN A HOLISTIC MANNER.
Courage… is advancing in the face of challenges
者不惧
Courage… is advancing in the face of challenges
勇
Our Strengths andCapabilities
Headquartered in Singapore, COSCO Corporation has three main
business units: Ship Repair, Ship Building & Marine Engineering, Dry
Bulk Shipping and Shipping Agency. The Group is one of China’s
leading ship repair, ship building and offshore marine engineering
companies.
Ship Repair and ConversionOil Tanker Conversion | Single to Double Hull Conversion
Ship BuildingHLV | Bulk Carrier | Car Carrier
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Annual Report 2008
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Offshore Marine EngineeringFDPSO | FSO | Jack-Up | Semi-Submersible Rig
Dry Bulk Shipping and Others
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Floating dock x 2 (180,000 dwt and 300,000 dwt)Dry dock x 1 (80,000 dwt)Quay x 14 (total 3.7 km)Workshop x 8 (total 89,587 sq m)
Total Capacity - 560,000 dwt
DALiAn
LiAnYUnGAnG
nAnTOnG
SHAnGHAiZHOUSHAn
GUAnGDOnG
Our Major Shipyards
Floating dock x 2 (80,000 dwt and 150,000 dwt)Quay x 5 (915 m)
Workshop x 5 (total 37,341 sq m)
Total Capacity - 230,000 dwt
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Annual Report 2008
Floating dock x 1 (80,000 dwt)
Quay x 3 (total 660 m)
Workshop x 3 (total 19,146 sq m)
Total Capacity - 80,000 dwt
Dry dock x 3(80,000 dwt, 230,000 dwt and 400,000 dwt)
Quay x 6 (total 1.4 km)
Workshop x 12 (total 232,670 sqm)
Total Capacity - 710,000 dwt
Floating dock x 1 (35,000 dwt)
Quay x 2 (total 280 m)
Workshop x 11 (total 4,759 sq m)
Total Capacity - 35,000 dwt
Floating dock x 2 (80,000 dwt and 150,000 dwt)
Quay x 5
(total 1.2 km)
Workshop x 11(total 33,419 sq m)
Total Capacity – 230,000 dwt
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Business Overview
Year in ReviewIn FY2008, the Group reported a record turnover amounting to S$3.5 billion, an impressive increase of 54% increase over FY2007. The rise in turnover was driven by expansion across its biggest business segment of ship repair, ship building and marine engineering operations which contributed 92% to total group turnover.
The combination of quality, technical capability and efficiency that has enabled COSCO Corporation to win and execute several significant projects in 2008 in ship building, ship conversion and offshore engineering for world-renowned companies led to an unprecedented growth in turnover which leaped 57% to $3.2 billion in 2008.
As at 31 December 2008, our order book stood at US$7.3 billion comprising of ship building, ship
conversion and marine engineering contracts secured from major maritime players in Germany, Taiwan, Greece, USA and India.
The growth in our top line performance was boosted further with contributions from the bulk shipping and other segments which saw turnover increasing to $280.3 million, an increase of 22% in FY2008.
Despite the strong performance, net profit attributable to shareholders ended lower at $302.6 million. This was mainly due to allowance made for impairment of trade and other receivables and the higher costs incurred in ship building and offshore marine engineering projects due to expanded activities. During the year, high steel prices, driven by strong demand from all sectors, prevailed and while efforts were made to secure competitive pricing for raw materials, the strong demand for steel drove up the average purchasing
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Headquartered in Singapore, COSCO Corporation has three main
business units: Ship Repair, Ship Building & Marine Engineering,
Dry Bulk Shipping and Shipping Agency. The Group is one of
China’s leading ship repair, ship building and offshore marine
engineering companies.
The foundation for the sustainable success of COSCO Corporation
is formed by strong positions on its key businesses in ship repairs
and conversion, ship building and offshore marine engineering and
a balanced portfolio in its other marine-related businesses.
29
costs. Coupled with an increase in out-sourcing and sub-contracting costs and tighter pre-delivery inspection procedures imposed by ship owners, cost of sales was up 72% in FY2008.
Managing Operational EfficienciesThe foundation for the sustainable success of COSCO Corporation is formed by strong positions on its key businesses in ship repairs and conversion, ship building and offshore marine engineering and a balanced portfolio in its other marine-related businesses. This will allow the Group to partially offset turbulence in individual markets and businesses and to minimise risk.
With the increasing expertise in ship building and offshore marine engineering in our Chinese shipyards, expanded facilities and capabilities, and the adoption of best practices and standards, we are optimising operational efficiencies and streamlining procedures.
Strong Leadership COSCO Corporation and its China-based shipyard subsidiaries, have built up a strong reputation for
delivering technically complex and demanding projects in the past year. Significant projects delivered include its first FSO project to a Japanese customer by COSCO Zhoushan Shipyard in July 2008.
COSCO Corporation is widely regarded as one of the recognised global leaders in the specialised field of ship repairs and conversions. Our credence is enhanced further with our recent foray into the technically demanding offshore marine engineering business. Our ability to secure and deliver puts us in an enviable position in the global arena. Not resting on our laurel, COSCO Corporation intends to continue to accelerate the pace of change, through the adopting of new technology platforms, expanded facilities and new best practices to serve an ever expanding universe of customers and industry categories.
Sustained Investment in Offshore Marine EngineeringIn 2007 and early 2008, the rise in oil prices increased demand for offshore marine engineering business. This was followed by a down cycle in oil prices. Although oil
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prices have hit a whole year low in 4Q of 2008, the Group has continued to invest in expanding its offshore marine engineering capacity in order to benefit from the longer term opportunities. The tumble in oil prices has seen a reduction in expenditure for oil exploration. However, in the long run, it is expected that demand for rigs will persist as long term global energy demand continues to increase. The International Energy Agency forecasts that world energy demand will grow at 1.6% per annum until 2030. There is a need for continued investment in oilfields to meet this demand. Fossil fuel will continue to be the main source of energy consumption for the world in the foreseeable future.
Changing OutlookThe International Monetary Fund has predicted that global economic expansion will slow to 0.5% in 2009
from 3.7% in 2008. Coupled with fast deteriorating economic conditions due to a rapid slowdown in global trade, volatile steel prices and crumbling financial and oil markets, COSCO Corporation is now seeing more volatility and uncertainty in the securing of new orders.
In November 2008, the Chinese government unveiled a 4 trillion yuan (S$864.4 billion) fiscal stimulus package and the Chinese central bank recently cut interest rates five times. The Chinese government has also increased the export tax rebate for a wide range of industries, slashed the housing transaction tax, and expanded subsidies to the agriculture sector. In addition, the Chinese government has increased credit for small and medium-sized enterprises. This could indirectly benefit COSCO Corporation as the boost to infrastructure projects likely means increased shipping requirements driven by rising commodity imports.
Business Overview
Given the current malaise, the Group does not anticipate substantial growth in our order book in 2009. While the market outlook for 2009 remains tenuous, the Group has taken steps to strengthen its businesses and to remain resilient in these difficult times. Our earlier efforts in developing niches in various aspects of the marine industry including ship repair and conversions, new ship building and offshore marine engineering will allow us to build sustainability and further growth. Our continued presence in the dry bulk and shipping agency businesses will help to broaden our earning base.
We will further optimise our capacity in the various shipyards in China and cost structures. In combination with the successful implementation of our growth strategy, COSCO Corporation will continue to evaluate and develop appropriate tactical strategies to cope with the changing economic landscape.
With an order book standing at US$7.3 billion as at 31 December 2008, our shipyards will be kept busy to first half 2012, barring any unforeseen circumstances.
We expect that the second half of 2009 will see an increasing number of consolidations in China’s shipyard industry. Strong Chinese government support for shipyard operations could translate to opportunities for the Group to acquire other niche industry players through mergers and acquisitions.
2009 is shaping out to be a difficult year, but we are confident that we can overcome the difficulties as we have the right approach to rise to the challenges. Our record of accelerated growth through diverse revenue streams in the past years has created a sound and sustainable base for future earnings. The broadening of our businesses and the strengthening of our expertise will help us ride out the economic storm.
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COSCO Shipyard Group, the 51% owned subsidiary of COSCO Corporation, has six major shipyards in China - Dalian, Lianyungang, Nantong, Shanghai, Zhoushan and Guangdong. Occupying a coastline that extends across the whole eastern seaboard of China, the shipyards are critical engines of growth for the COSCO Corporation in its quest for excellence in the global arena.
COSCO Shipyard Group provides an extensive array of innovative and customised ship repair, ship building and marine engineering services which include new ship building, conversion, construction of barges and oil rigs as well as the repair of ships and oil rigs.
In the past year, our shipyards were busy with projects relating to ship repair, ship building and offshore marine engineering. Turnover in this business segment amounted to S$3.2 billion which represented 92% of the total revenue in 2008.
Exceptional progress in securing ship building and conversion contracts were seen during the year. We
marked a milestone on 17 July 2008 by successfully delivering on schedule our first offshore marine project, a Floating Storage and Offloading (FSO) vessel. This was from our Zhoushan shipyard to a Japanese customer.
In October 2008, our 51% owned COSCO Shipyard Group (CSG) clinched ship building contracts totaling RMB1 billion (S$220.2 million). They were awarded by two Chinese ship owners for the building of three 57,000 dwt bulk carriers. Two of the vessels will be fabricated at COSCO Guangdong Shipyard and one at COSCO Dalian Shipyard for progressive delivery in 2010-2011.
During the same month, CSG also signed an offshore contract with a Dutch customer to construct two windmill turbine installation vessels. The two units will be fabricated in COSCO Nantong Shipyard and are scheduled to be delivered separately in 2010 and 2011.
Meanwhile, on 20 November 2008, COSCO Corporation delivered one of the world’s largest floating dock with a lifting capacity of 120,000 tons to a Korean customer.
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Business Segment
Ship Repair, Ship Building, Offshore Marine Engineering
Types of Vessels Repaired in FY2008 by Revenue
Bulk Carriers 74%
Others 8%
Chemical Ships 1%
Container Ships 9%
Tankers 8%
2008
This highly specialised dock does not use anchors, and is able to operate as a semi-submersible barge carrying out underwater work.
To cope with the increased demand, the shipyard group continued to expand its capacity from 1.73 million dwt in FY2007 to 1.85 million dwt in FY2008.
We also expanded capacity in Nantong. On 16 January 2008, CSG inked an agreement with the Jiangsu Qidong Municipal Government to commence the expansion work on COSCO Corporation’s offshore construction base in Qidong Shipyard. The new yard is located at the entrance of Yangtze River and covers an area of 1 million square meters along 2km of coastline. It will focus on offshore projects including the construction of oil & gas related equipment such as semi-submersible rigs, jack-up rigs and other floaters.
Over the past year, the Group has matured as a global provider of specialised ship repair, ship building and offshore marine engineering services and particularly, at an important time for the industry. We have excellent
facilities in six strategic locations in China, offering a wide array of repairs, conversion and building services. As we have grown, we have attracted excellent talent and technical expertise, while gaining valuable experience along the way. Being able to work with the leading shipowners and oil companies affords us a unique opportunity to stay current with trends and develop best practices. Our customer base with more than 400 shipping companies spanning over 140 countries, including countries such as Greece, Germany, Norway, Denmark, the UK, the USA and Japan is a testament to our tenacity and determination to succeed in an increasingly competitive climate.
COSCO Corporation will emerge from the uncertainty and challenges of 2009 as a focused and strong contender with a clear vision. The Group’s shipyards are well equipped, and with an engaged and experienced operation and management team at helm, we have every confidence in delivering across all core competencies. With a strong financial foundation, the Group will move forward with certainty and confidence.
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Revenue contribution from Ship Repair, Ship Building and Offshore Marine Engineering
FY2008
20%
Conversion37%
New Building
Offshore20%
ShipRepair
23%
Business Segment
COSCO Corporation’s Dry Bulk Shipping business is managed by the Company’s wholly-owned subsidiary, COSCO (Singapore) Pte Ltd.
COSCO (Singapore)’s dry bulk shipping fleet transports cargo along the main trading sea routes from China to major ports in the US, Europe, South America and South Africa via Singapore. The company has a fleet of 12 dry bulk carriers, with a combined carrying capacity of 698,306 dwt. The carriers transport dry bulk cargo such as iron ore, coal, steel, cement and fertiliser.
The ships are also chartered out to other ship owners and operators. The customer base is made up of major shipping companies based in countries such as Germany, Norway, Denmark, Greece, Switzerland, the UK and the USA.
The fleet has been certified to meet the most stringent of international quality and safety standards, having
obtained the ISO9002 certification – awarded only to companies that have shown a consistent and unparalleled commitment to quality.
Year in ReviewThe dry bulk shipping business did well in FY2008, due to higher charter-hire rates secured in the first half of 2008 when the Baltic Dry Index (BDI) was at an all-time high. Turnover from the dry bulk shipping business rose by 24% from $207.9 million in 2007 to $257.4 million in FY2008, making up 7% of the Group‘s revenue for the year.
Market Outlook2008 has underlined the cyclical nature of the shipping industry, in particular the fluctuations of the BDI. The BDI, a measure of shipping costs for commodities, fell as weaker economic growth cut demand for steel and the raw materials used to make it. In December
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Dry Bulk Shipping
24
2526
27
3128
4
21
10
7
6 93
8
20
222118
5
1519
16
1314
11
12
1723
30
2008, the BDI fell to 663 points, a decline of 94% from a record in May 2008. A 30% cut in global production of steel, combined with frozen credit markets and new vessels entering the market, has caused shipping rates to collapse. The slowdown has been devastating for raw materials suppliers to the steel industry. The steep fall in freight rates is expected to impact COSCO Corporation’s dry bulk shipping business.
The economic crisis has devastated global trade, causing ship demand to fall. Demand for dry bulk ships from major steel-producing countries like China and Brazil, has shrunk. The dry cargo market has been badly hit due to huge cutbacks in industrial production and a lack of liquidity in the banking sector.
Overcapacity remains a problem for dry bulk carriers. We are concerned that the structural overcapacity in the
dry bulk market today combined with the weak global economic conditions will continue to put pressure on this market. We expect, however, that the overcapacity will be mitigated by the large orders for scrapping old vessels in 2009.
Prospects and Future PlansIn FY2008, COSCO Corporation’s dry bulk shipping business continued to bring in healthy revenue due to high charter rates and prudent operating style. However, in the first half of 2009, a majority of the ship’s contracts will be under review for renewal of lease. The Group expects that the BDI will rebound moderately in the near term as Chinese buyers start to purchase iron ore from Australia and Brazil with ships thus needed to bring the iron ore from more distant suppliers to China. This may mitigate the drop in charter rates.
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1. Conakry (Guinea)2. Lagos (Nigeria)3. Hamburg (Germany)4. Cape Town (South Africa)5. Ventspils (Latvia)6. Odessa (Ukraine)7. Suez Canal (Egypt)8. Aqaba (Jordan)
9. Novorossivsk (Russia)10. Aden (Yemen)11. Mumbai (India)12. Singapore13. Bangkok (Thailand)14. Penang (Malaysia)15. Shanghai (China)16. Hong Kong (China)
17. Albany (Australia)18. Lianyungang (China)19. Taichung (China)20. Onahama (Japan)21. Nagoya (Japan)22. Tokyo (Japan)23. Gladstone (Australia)24. Portland (USA)
25. Los Angeles (USA)26. New Orleans (USA)27. Panama Canal28. Antofagasta (Chile)29. Seven Island (Canada)30. Maracaibo (Venezuela)31. Santos (Brazil)
Global Dry Bulk Shipping Network
COUNTRIES:
COSTAR Shipping Pte Ltd, a 70%
owned subsidiary of COSCO, is the
shipping agent of the wider COSCO
Group.
Established in Singapore in 1989,
COSTAR Shipping canvasses for cargo
from both existing and potential
clients, so as to maximise the
tonnage capacity being loaded on
the COSCO Group’s ships that pass
through Singapore.
Business Segment
Shipping Agency
COSTAR Shipping provides extensive agency services for full container and break-bulks, which include document preparation of bills of lading and delivery orders, collection of freight, cargo operation, vessel husbanding, customs declaration, port authority coordination, administration and settlement of cargo claims, transhipment management, bunkering services and container handling.
COSTAR Shipping’s business mainly stems from containerisation services for COSCO Container Lines’ customers. Costar Shipping has the capabilities to transport almost all types of containers, including Out-of-Gauge (OOG) containers, general purpose units (GP), reefer containers and hazardous containers from over 1,300 ports in more than 160 countries.
36
In addition, COSTAR Shipping offers value-added services, for instance, recommending trucking, freight forwarding, stuffing, container depot, and warehouse and storage services.
In Malaysia, COSLINK (M) Sdn. Bhd. serves as the general shipping agent for the wider COSCO Group’s entire fleet of vessels that call at Malaysian ports and provides a similar range of services as COSTAR Shipping in Singapore.
Year in ReviewTurnover from the shipping agency business contributed about 1% to the total turnover of the Group. The shipping agency business handled approximately 600 vessels during the year and income derived from this business segment has remained relatively stable for the past years.
Prospects and OutlookThe contribution from the shipping agency business does not form a significant part of the Group’s turnover and profits. Whilst the shipping agency business is expected to remain profitable in the coming year, it will continue to leverage on its network of agents and industry partners worldwide to grow its customer base and improve performance.
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OverviewThe Group turnover in FY2008 grew by 54% to $3.5 billion while net profit attributable to equity holders declined by 10% to $302.6 million. The Group saw an increase in turnover due to revenue expansion across all business segments, driven primarily by its largest business segment, the ship repair, ship building and marine engineering segment, as well as its dry bulk shipping business. The decline in net profit attributable to equity holders was mainly due to allowance for impairment of trade and other receivables and the higher costs incurred in ship building and offshore marine engineering projects.
TurnoverGroup turnover increased by 54% in FY2008 was underpinned by growth across all key business segments. Our largest business segment of ship repair, ship building and marine engineering operations expanded by 57% to $3.2 billion, due to a strong ship conversion, ship building, and offshore marine engineering project order book.
During the year, the Group made significant inroads into the offshore marine engineering field, securing significant orders and successfully delivering, on schedule in July 2008, its first offshore marine project - a Floating, Storage and Offloading (FSO) vessel from its Zhoushan shipyard to a Japanese customer.
Dry bulk shipping turnover grew by 24% to $257.4 million in FY2008 due to higher charter rates locked in on a one-plus-one year basis on charter renewal in the first half of 2008. These results were registered amidst an extremely volatile Baltic Dry Index (BDI). During the year in review, the BDI, a measure of shipping costs for commodities, reached an all-time high of 11,793 points in May 2008 before plunging steeply to a 22-year low of 663 points in December 2008. This economic indicator highlighted the sheer precariousness of business activity during the year, and underlines our steady navigation through its ebbs and flows.
Ship repair, ship building and marine engineering business represented the bulk of the Group turnover with 92% contribution in 2008 while dry bulk shipping constituted 7% and shipping agency and others accounted for the remaining 1% of Group turnover.
ProfitabilityGross profit edged up by 3% from $610.2 million in FY2007 to $630.1 million in FY2008 on the back of a 54% increase in turnover which more than offset the
higher operational costs in ship building and offshore marine engineering business.
The higher operational costs which include expected losses of $89.0 million recognised on construction contracts was mainly due to:
Other miscellaneous gains increased by 87% from $111.2 million in FY2007 to $207.9 million in FY2008 due mainly to higher income from sale of scrap materials, higher interest income from the higher bank deposits and foreign exchange gain.
Distribution and administrative costs rose in line with increasing business volume as well as allowance for impairment of trade and other receivables of $61.3 million. These provisions are made in light of the adverse global economic climate, the deteriorating market conditions facing the shipping industry in the fourth quarter of 2008, and requests for payment delays by several ship owners.
Bank interest rates were generally lower during FY2008 and there were lower borrowings during the year, thus resulting in a decrease in interest expense. The bulk of borrowings was made towards end 2008.
Higher income tax expense was due to higher tax rates in the PRC subsidiaries in FY2008 as compared to FY2007.
Minority interests decreased due to lower contributions from the Company’s PRC subsidiaries involved in ship repair, ship building and marine engineering operations.
Group net profit attributable to equity holders of the Company stood at $302.6 million which is a decrease of 10% from the $336.6 million in FY2007.
Group Financial Review
38
Annual Report 2008
the substantial increase in steel prices from the time of contracting the projects and the time that the orders for the steel required for the construction of these vessels were placed;
higher ancillary out-sourcing and sub-contracting costs;
tighter pre-delivery inspection procedures imposed by ship owners facing current unfavorable market conditions; and
additional operational and development costs incurred due to the unwillingness of some residents to vacate their properties originally planned for acquisitions by the Group for shipbuilding purposes.
(i)
(ii)
(iii)
(iv)
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The return on shareholders’ fund decreased to 29.0% in FY2008 from 41.8% in FY2007.
Balance Sheet and Cash Flow(31 December 2008 vs 31 December 2007)Cash and cash equivalents increased from $1.1 billion to $1.9 billion mainly due to more advances received from customers as the Group continued to secure more ship building contracts.
The increases in Trade and other receivables, Inventories and Construction contract work-in-progress were mainly due to the increase in volume of ship repair, ship building and marine engineering businesses. Trade and other receivables include advances paid to suppliers of $743.1 million. This compares with $376.8 million in FY2007.
With the ongoing expansion of our facilities and major shipyards in the PRC, our fixed assets of property, plant and equipment increased from $1.5 billion to $2.1 billion.
Trade and other payables which include advances received from customers of $2.8 billion (FY2007: $1.3 billion), rose from $2.4 billion to $4.4 billion as more advances were collected from customers.
Share Capital COSCO’s share capital increased from $266.9 million to $270.6 million. This was due to the issue and allotment of shares under the COSCO Corporation Employees’ Share Option Scheme 2002.
Total Shareholders’ EquityShareholder’s equity rose from $939.9 million to $1.1 billion mainly due to the transfer of FY2008 profits to retained earnings and increase in currency translation reserves. Return on Equity was 29.0%
Net Gearing Total borrowings increased from $176.4 million to $656.6 million due to additional funding procured for business operations and the expansion of the Group’s major shipyards. The Group had a positive net cash position of $1.2 billion at the end of FY2008.
Earnings Per ShareOn a fully diluted basis, with profits moderating, earnings per share decreased from 15.02 cents in FY2007 to 13.50 cents in FY2008.
Dividends Per ShareTo reward shareholders for their loyalty, the Board of Directors has proposed a first and final exempt dividend of 7.0 cents comprising of ordinary dividend of 4.0 cents per ordinary share and a special dividend of 3.0 cents per ordinary share. The dividend declared in FY2008 is equivalent to the dividend paid in FY2007, underscoring our commitment to shareholders. The dividend payout will amount to $156.7 million (FY2007: $156.7 million) while Dividend Cover was 1.9.
Net Asset Value per ShareIn line with capacity and facility expansion, the net asset value per share of COSCO Corporation increased by 21.7% from 42.0 cents per share at 31 December 2007 to 51.1 cents per share at 31 December 2008.
Turnover
(S$’m)
2008
2007
2,26
2Cash Flow from Operating Activities
(S$’m)
2007
1,59
8
2008
Gross Profit
(S$’m)
2007
610
2008
Diluted Earnings per Share
(cents per share)
2007
15.0
2
2008
39
3,47
6
630 13
.50
1,07
4
INTEGRITY IN THE WORLD OF BUSINESS, CORPORATE GOVERNANCE IS NOT AN EXERCISE IN COMPLIANCE; IT IS A HIGHER FORM OF MANAGEMENT THAT CLEARLY EXHIBITS COSCO CORPORATION’S INTEGRITY.
THIS EXPLICIT CLARITY IN CORPORATE GOVERNANCE IS WHAT COSCO CORPORATION IS CONSISTENTLY FOCUSED ON, IN ORDER TO ENSURE THE EFFECTIVE PROMOTION OF LONG-TERM SHAREHOLDER INTEREST.
者不虞
Integrity… is exhibiting explicit clarity
诚
Corporate Governance
COSCO Corporation (Singapore) Limited (“COSCO Corporation” or “the Company”) believes that governance is not an exercise in compliance nor is it a higher form of management. The Company believes that governance has a clear objective: ensuring the pursuit of the Company’s purpose.
The Board’s activities are focused on this task: ensuring the pursuit of the Company’s purpose and this task is discharged by the Board through undertaking such activities as are necessary for the effective promotion of long-term shareholder interest.
COSCO Corporation remains committed to the principles of good corporate governance and to achieving high standards of business integrity, ethics and professionalism across all its activities. The Company has applied, and complied with, the principles and guidelines set out in the Code of Corporate Governance 2005 (“Code 2005”).
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Annual Report 2008
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A. BOARD MATTERS
THE BOARD’S CONDUCT OF AFFAIRS
Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board.
As a company, COSCO CORPORATION recognises the importance of good governance and that it is a discrete task from Management. Clarity of roles is key to our approach. Policies and processes depend on the people who operate them.Governance requires distinct skills and processes. Governance is overseen by the COSCO Corporation Board, while Management is delegated to the Group President and Executive Directors. Our Board exercises judgement in carrying out its work in policy-making, in monitoring executive action and in its active consideration of Group strategy. The Board’s judgements seek to maximise the expected value of shareholders’ interest in the Company, rather than eliminate the possibility of any adverse outcomes.
The Board oversees the business affairs of the Company and is collectively responsible for its success. The principal functions of the Board apart from its statutory responsibilities are to:
a) set values and standards of the Company and ensure that obligations to shareholders and others are understood and met;
b) provide entrepreneurial leadership, approve the strategic and financial objectives, corporate policies and authorisation matrix of the Company;
c) oversee the processes for risk management, financial reporting and compliance and evaluate the adequacy of internal controls; approve annual budget, key operational matters, major acquisition and divestment proposals, major funding proposals of the Company;
d) review management performance;
e) approve the nominations to the Board of Directors and appointment of key management, as may be recommended by the Nominating Committee;
f) assume responsibility for corporate governance framework of the Company.
To facilitate effective management, certain functions of the Board have been delegated to various Board committees, namely Audit, Nominating, Remuneration and Enterprise Risk Management Committees. Further information regarding the details of the terms of reference of the respective Board committees are set out in the later part of the Report.
The Board conducts regular scheduled meetings on quarterly basis. Ad-hoc meetings are convened when circumstances required. The Company’s Articles of Association (the “Articles”) provides for Board meetings to be conducted by way of telephone and video conferencing. The attendance of the Directors at meetings of the Board and Board committees as well as number of such meetings is set out in the table below:
Attendance at Board and Board Committees’ Meetings
Name BoardAudit
CommitteeNominating Committee
Remuneration Committee
Enterprise Risk Management Committee
Number of Meetingsheld: 6
Number of Meetings held: 9
Number of Meetingsheld: 2
Number of Meetings held: 5
Number of Meetingsheld: 2
Number of Meetings Attended
Number of Meetings Attended
Number of Meetings Attended
Number of Meetings Attended
Number of Meetings Attended
Wei Jia Fu Note 1 4 NA NA NA NA
Li Jian Hong Note 2 6 NA NA NA NA
Jiang Li Jun Note 3 1 NA 1 2 1
Zhang Liang Note 4 1 NA NA NA NA
Sun Yue Ying 6 NA NA NA NA
Corporate Governance
44
Annual Report 2008
Name BoardAudit
CommitteeNominating Committee
Remuneration Committee
Enterprise Risk Management Committee
Number of Meetingsheld: 6
Number of Meetings held: 9
Number of Meetingsheld: 2
Number of Meetings held: 5
Number of Meetingsheld: 2
Number of Meetings Attended
Number of Meetings Attended
Number of Meetings Attended
Number of Meetings Attended
Number of Meetings Attended
Ji Hai Sheng Note 5 5 NA 1 2 1
Min Jian Guo 6 NA NA NA NA
Ma Gui Chuan 6 NA NA NA NA
Wang Xing Ru 6 NA NA NA NA
Tom Yee Lat Shing 5 9 2 5 2
Wang Kai Yuen 6 7 2 5 2
Er Kwong Wah 5 9 2 5 2
Ang Swee Tian 5 9 2 4 2
Li Jian Xiong (Alternate to Li Jian Hong) 6 NA NA NA NA
Lu Cheng Gang Note 6 (Alternate to Wei Jia Fu) 4 NA NA NA NA
Lu Cheng Gang Note 7 (Alternate to Zhang Liang ) 1 NA NA NA NA
Ye Bin Lin (Alternate to Sun Yue Ying) 6 NA NA NA NA
Liu De Tian (Alternate to Wang Xing Ru) 6 NA NA NA NA
NA: Not Applicable
Note:
1. Wei Jia Fu resigned on 22 July 2008.
2. Li Jian Hong was appointed the Chairman of the Company on 22 July 2008.
3. Jiang Li Jun was appointed on 7 August 2008.
4. Zhang Liang was appointed on 15 October 2008.
5. Ji Hai Sheng resigned on 7 August 2008.
6. Lu Cheng Gang (Alternate to Wei Jia Fu) ceased on 22 July 2008.
7. Lu Cheng Gang (Alternate to Zhang Liang) was appointed on 15 October 2008.
Whilst the Board has delegated the day to day management of the Group to the Group President and Executives, there are matters referred for the Board by which the Board oversees control of the Group’s affairs. Some of the matters referred to the Board and Board’s approval are:
- the Group’s long term objectives and commercial strategy;
- the making of any decision to cease to operate all or any material part of the business of the Group or to extend the Group’s activities into new business;
- the consideration of any proposal to merge or amalgamate the Company with any other company;
- the approval of any acquisition of any investment, asset or business by the Company or any of its subsidiaries which would involve the commencement of an activity of a substantially different nature or character to any activity from time to time carried on by the Company or any of its subsidiaries;
- changes relating to the Group’s capital structure including changing the amount or currency of the Company’s authorised share capital, reduction of capital, share issues (except under employee share option plan);
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- the approval of and ensuring the maintenance of internal controls and risk management procedures for the Company and its subsidiaries;
- approving the Company’s Audited Financial Statement and other appropriate statements for inclusion in the Company’s Annual Report and the issue of the Annual Report;
- the issue and filing of statutory or regulatory statements, the quarterly, half yearly and full year reports;
- determining and approving any significant change to the accounting policies or practices of the Company, and of the Company and its subsidiaries;
- the recommendation of the payment of any dividend by the Company or any exercise of the powers of the Board in relation to reserves or capitalisation of profit;
- appointments or removals from the Company’s Board of Directors (following receipt of recommendations by the Nominating Committee) and the appointment or removal of the Company Secretary;
- changes to the structure, size and composition of the Board, following receipt of recommendations from the Nominating Committee;
- in the case of any conflict of interest which the Board, after being appropriately advised, considers to be material, as to whether such conflict should be authorised and, if so, authorise such conflict upon such terms and conditions as the Board considers appropriate;
- determining the remuneration policy for senior executives of the Company (following receipt of recommendations by the Remuneration Committee);
- undertaking a review annually of its own performance, that of its committees and the contribution by each director to the effectiveness of the Board;
- any matter required to be considered or approved by the Board as a matter of law or regulation.
BOARD COMPOSITION AND GUIDANCE
Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.
The Board has eleven (11) members: three (3) Non-Independent Executive Directors, four (4) Non-Independent and Non-Executive Directors and four (4) Non-Executive Independent Directors. The composition of the Board is as follows and the Directors’ academic and professional qualifications are set out on pages 58 and 63 of this Annual Report. No individual or group of individuals dominates the Board’s decision-making. Collectively, the Non-Executive Directors and Non-Executive Independent Directors bring a wide range of experience and expertise as they all currently occupy or have occupied senior positions in industry and public life, and as such each contributes significant weight to Board decisions. None of the non-executive independent directors has any relationship with the Company, its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director’s independent business judgement with a view to the best interests of the Company.
BOARD OF DIRECTORS
Li Jian Hong - Chairman and Non-Independent and Non-Executive Director
Jiang Li Jun - Vice Chairman, President and Non-Independent Executive Director
Zhang Liang - Non-Independent and Non-Executive Director
Sun Yue Ying - Non-Independent and Non-Executive Director
Min Jian Guo - Vice President and Non-Independent Executive Director
Ma Gui Chuan - Non-Independent Executive Director
Wang Xing Ru - Non-Independent and Non-Executive Director
Tom Yee Lat Shing - Non-Executive Independent Director
Wang Kai Yuen - Non-Executive Independent Director
Er Kwong Wah - Non-Executive Independent Director
Ang Swee Tian - Non-Executive Independent Director
46
Corporate Governance
Annual Report 2008
Changes to the Board during the financial year 2008 are as follows:
Wei Jia Fu resigned on 22 July 2008 as Chairman and Non-Executive Director
Li Jian Hong appointed on 22 July 2008 as Chairman
Jiang Li Jun appointed on 7 August 2008 as Vice Chairman, President and Non-Independent Executive Director
Ji Hai Sheng resigned on 7 August 2008 as Vice Chairman, President and Non-Independent Executive Director
Zhang Liang appointed on 15 October 2008 as Non-Independent and Non-Executive Director
Lu Cheng Gang ceased on 22 July 2008 as Alternate to Capt Wei Jia Fu
Lu Cheng Gang appointed on 15 October 2008 as Alternate to Zhang Liang
The efficiency and effectiveness of the Board are of paramount importance. Our Board’s size is necessary to allow sufficient Executive Director representation to cover the breadth of the Group’s business activities and sufficient Non-Executive Independent Director representation to reflect the scale and complexity of COSCO Corporation and to staff our Board committees. A Board of this size allows orderly succession planning for key roles.
The current size of the Board is appropriate and will facilitate effective decision making. The Board will continue to review the size of the Board on an ongoing basis. As a team, the Board collectively provides core competencies in the areas of accounting, finance, business and management experience, as well as industry knowledge.
Directors also receive regular updates on relevant new laws and regulations, and evolving commercial risks and business conditions from the Company’s relevant advisors. Newly appointed directors are provided with background information about the Company and the Group. Occasional visits are arranged for Non-Executive Directors to acquaint them with important operations overseas.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Principle 3: There should be a clear division of responsibilities at the top of the company – the working of the Board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.
The roles of Chairman and the President are undertaken by separate persons so as to create a clear division of responsibilities and maintain an effective oversight. The Chairman and the President are not related to each other.The Chairman is responsible for the workings of the Board, ensuring the integrity and effectiveness of its governance process. In his absence, his appointed alternate and/or the President would act on his behalf.
The President is the most senior executive in the Company and has full executive responsibilities over the business directions and operational decisions of the Group. He works closely with the Board to implement the policies set by the Board to realise the Group’s vision.
BOARD MEMBERSHIP
Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board
Recommendations for nominations of new directors and retirement of directors are made by the Nominating Committee and considered by the Board as a whole.
The Nominating Committee (“NC”) reviews and assesses candidates for directorship before making recommendations to the Board. The NC takes into consideration the skills and experience required and the existing composition of the Board and strives to ensure that the Board has an appropriate balance of independent directors as well as directors with the right profile of expertise, skills, attributes and abilities when recommending new directors to the Board.
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The process for the appointment of new directors begins with the NC, together with the Chairman and Vice Chairman of the Company, conducting a needs analysis and identifying the critical requirement in terms of expertise and skills that are needed in the context of the strengths and weaknesses of the existing Board. The NC then defines a profile for the new director to serve as a brief for recruitment. When a candidate has been endorsed by the NC, the NC will then make a recommendation to the Board for the approval of his appointment.
The NC assesses and recommends to the Board whether retiring directors are suitable for re-nomination for re-election. In evaluating a director’s contribution and performance for the purpose of re-nomination, the NC takes into consideration a variety of factors such as attendance, preparedness, participation and candour.
In accordance with the provisions of the Articles, one-third of the Directors retire by rotation and subject themselves to re-election at every Annual General Meeting (“AGM”) of the Company. The President who is a member of the Board must also subject himself to retirement by rotation and re-election by the Shareholders. New directors who were appointed by the Board during the year will hold office only until the next AGM and will be eligible for re-election.
The dates of initial appointment and last re-election/reappointment of each of the Directors are set out below:
Director PositionDate of Initial Appointment
Date of LastRe-election
Li Jian Hong Chairman, Non-Independent and Non-Executive 20.12.2002 18.04.2006
Jiang Li Jun Vice Chairman, President and Non-Independent Executive
07.08.2008 n.a
Zhang Liang Non-Independent and Non-Executive 15.10.2008 n.a.
Sun Yue Ying Non-Independent and Non-Executive 12.06.2000 15.04.2008
Min Jian Guo Vice President and Non-Independent Executive 19.04.2006 18.04.2007
Ma Gui Chuan Non-Independent Executive 10.01.2007 18.04.2007
Wang Xing Ru Non-Independent and Non-Executive 14.2.2006 15.04.2008
Tom Yee Lat Shing Non-Executive Independent 16.11.1993 15.04.2008
Wang Kai Yuen Non-Executive Independent 02.05.2001 18.04.2006
Er Kwong Wah Non-Executive Independent 20.12.2002 18.04.2007
Ang Swee Tian Non-Executive Independent 13.11.2007 15.04.2008
Li Jian Xiong Alternate to Li Jian Hong 20.12.2002 n.a
Lu Cheng Gang Alternate to Zhang Liang 15.10.2008 n.a
Ye Bin Lin Alternate to Sun Yue Ying 20.12.2002 n.a
Liu De Tian Alternate to Wang Xing Ru 14.02.2006 n.a.
NOMINATING COMMITTEE
The Nominating Committee (“NC”) comprises five Directors, majority of whom, including the Chairman is independent. The NC members are:
Wang Kai Yuen (Chairman) (Non-Executive Independent)
Jiang Li Jun (Non-Independent Executive) (Appointed on 7 August 2008)
Ji Hai Sheng (Non-Independent Executive) (Resigned on 7 August 2008)
Tom Yee Lat Shing (Non-Executive Independent)
Er Kwong Wah (Non-Executive Independent)
Ang Swee Tian (Non-Executive Independent)
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The principal functions of the NC are to:
a) identify, review and recommend candidates for appointment as Directors of the Company and appointment to the Board committees as well as to senior management positions in the Company;
b) evaluate the effectiveness of the Board as a whole and assess the contribution by each Director, to the effectiveness of the Board;
c) determine annually whether or not a Director is independent; and
d) make recommendations to the Board on re-appointment of Board and Board committee members.
During the financial year the NC held two meetings. The NC met to review the nominations for the appointments of those directors that were appointed during the financial year for recommendation to the Board to approve the appointments. In arriving to their decisions on the new appointments, the NC took into consideration the incumbents’ academic qualifications, experience, their individual field of expertise and their potential contributions to the effectiveness of the Board. The NC also met and determined the independence of the Directors is in line with the undertakings described in the Code 2005. It also reviewed the composition of the Board and the Board Committees in relation to the needs of the Group.
The NC is of the opinion that the Board is able to exercise objective judgement on corporate affairs independently and no individual or small group of individuals dominates the Board’s decision making process.
The NC assesses and recommends to the Board whether retiring Directors are suitable for re-election. The NC considers that the multiple Board representations held presently by some Directors do not impede their respective performance in carrying out their duties to the Company.
BOARD PERFORMANCE
Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.
A formal assessment process is in place to assess the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board. The NC uses objective and appropriate quantitative and qualitative criteria to assess the performance of the Board as a whole and the contribution of each Director to the effectiveness of the Board. Assessment parameters include evaluation of the Board’s access to information, risk management, accountability, the Board’s performance in relation to discharging its principle functions, communication with management and stakeholders, the business performance of the Company, the quality of Board processes, the attendance records of the Directors at Board and Committee meetings and the level of participation at such meetings.
The evaluation of the Board is conducted annually. As part of the process, the Directors will complete appraisal forms which are collated by the Company Secretary. The Company Secretary will then reviews the results of the appraisal and present the results to the Chairman of the NC who will then present a report to the Board.
An individual assessment of each Director is also undertaken annually. The process of the assessment is through self-assessment where each Director will complete appraisal forms which are collated by the Company Secretary. The Company Secretary consolidated the appraisal forms and presented the results to the Chairman of the NC who will then present a report to the Board.
ACCESS TO INFORMATION
Principle 6: In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis.
The Board is provided with management information pertaining to such areas as detailed divisional performance, variance analysis, budget, forecast, funding positions and cash flow projections of the Group, to help them carry out their responsibilities effectively. In addition, all relevant information on material events and transactions are circulated to Directors as and when they arise.
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All Board members have separate and independent access to the advice and services of the Company Secretary. The Company Secretary attends Board and Board committee meetings and is responsible for ensuring that Board procedures are followed. Together with the other management staff of the Company, the Company Secretary is also responsible for compliance with the SGX-ST Listing Manual and all other applicable rules and regulations. All Board members also have separate and independent access to the senior management of the Company and the Group. Board members are aware that they, whether as a group or individually, in the furtherance of their duties, can take independent professional advice, if necessary, at the Company’s expense.
B. REMUNERATION MATTERS
PROCEDURES FOR DEVELOPING REMUNERATION POLICIES
Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.
The Remuneration Committee (“RC”) meets yearly to discuss the performance assessment of the Executive Directors as well as to discuss the level of emoluments to pay. The recommendations are forwarded to the Board for approval of the remuneration of the Executive Directors. The RC also reviews and approves the remuneration of senior management, as well as the total annual increment and variable bonus for employees.
Directors’ fees are recommended by the RC and are submitted for endorsement by the Board. Directors’ fees are subjected to approval by shareholders at the AGM.
All the members of the RC are Non-Executive Independent Directors except for Mr Ji Hai Sheng, the then Vice Chairman and President of the Company who had retired on 7 August 2008 and Mr Jiang Li Jun the current Vice Chairman and President. The RC is of the view that the presence then of Mr Ji and now Mr Jiang would help the RC by providing intimate knowledge of the remuneration policies in the industry the Company is in. No Director is involved in deciding his own remuneration.
LEVEL AND MIX OF REMUNERATION
Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors’ remuneration should be structured as to link rewards to corporate and individual performance.
In setting the remuneration packages of the Executive Directors, the Remuneration Committee (“RC”) takes into account the respective performance of the Group and the individual. In its deliberation, the RC takes into consideration, remuneration packages and employment conditions within the industry and benchmarked against comparable companies.
Non-Executive Independent Directors are paid a basic fee and an additional fee for serving on any of the committees. The Chairman of the Audit Committee is compensated for the added responsibilities as the Chairman of the Audit Committee. Such fees are approved by the shareholders of the Company as a lump sum payment at the AGM of the Company.
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REMUNERATION COMMITTEE
The Remuneration Committee (“RC”) comprises five Directors, majority of whom including the Chairman is independent. The RC members are as follows:
Er Kwong Wah (Chairman) (Non-Executive Independent)
Jiang Li Jun (Non-Independent Executive) (Appointed on 7 August 2008)
Ji Hai Sheng (Non-Independent Executive) (Resigned on 7 August 2008)
Tom Yee Lat Shing (Non-Executive lndependent)
Wang Kai Yuen (Non-Executive lndependent)
Ang Swee Tian (Non-Executive Independent)
The principal functions of the RC are to:
a) recommend to the Board base salary level, benefits and incentive programs, and identify components of salary which can best be used to focus management staff on achieving corporate objectives;
b) approve the structure of compensation programme (including but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefits in kind) for the Directors and senior management to ensure that the programme is competitive and sufficient to attract, retain and motivate senior management of the required quality to run the Company successfully;
c) review, on annual basis, the compensation package of the Company’s Directors and senior management personnel and determine appropriate adjustments; and
d) administer the COSCO Group Employees’ Share Option Scheme 2002.
The Company currently adopts a remuneration policy for staff consisting of a fixed component and a variable component. The fixed component is in the form of a base/fixed salary. The variable component is in the form of a variable bonus that is linked to the Company and individual performance. Another element of the variable component is the grant of share options under the COSCO Group Employees’ Share Option Scheme 2002.
Information on the COSCO Group Employees’ Share Option Scheme 2002 such as size of grants, exercise price of options that were granted as well as outstanding and vesting period of options are set out on pages 89, 90 and 91 of the Annual Report.
The RC held five meetings during the financial year. The issues deliberated at these five meetings included reviewing the termination of options granted, extension of exercise period of options granted, the bonus payments to senior management and the compensation programme for the Directors and senior management.
DISCLOSURE ON REMUNERATION
Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance.
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DIRECTORS’ AND KEY EXECUTIVES’ REMUNERATION
The Directors’ and key executives’ remuneration table for the financial year ended 31 December 2008 is as follows:
Fees Salary BonusOther
Benefits
Benefitsfrom Stock
Options TotalNon-Independent
Executive Directors in the Band of
S$1,250,000 to S$1,500,000
Ma Gui Chuan 0% 18.14% 26.53% 6.25% 49.08% 100%Min Jian Guo 0% 18.64% 26.62% 6.25% 48.49% 100%Non-Independent
Executive Director in the Band of
S$750,000 to below S$1,000,000
Ji Hai Sheng Note 1 0% 21.81% 61.76% 9.02% 7.41% 100%Non-Independent and Non-Executive Directors in the Band of S$750,000 to
below S$1,000,000
Wang Xing Ru 0% 8.03% 16.80% 0.59% 74.58% 100%Lu Cheng Gang 0% 0% 24.58% 0% 75.42% 100%Liu De Tian 0% 16.53% 12.59% 5.32% 65.56% 100%Non-Independent
Executive Director in the Band of below
S$500,000
Jiang Li Jun 0% 49.44% 26.04% 24.52% 0% 100%Independent Directors in the Band below
S$500,000
Tom Yee Lat Shing 18.58% 0% 0% 0% 81.42% 100%Wang Kai Yuen 17.30% 0% 0% 0% 82.70% 100%Er Kwong Wah 17.30% 0% 0% 0% 82.70% 100%Ang Swee Tian 100.00% 0% 0% 0% 0% 100%Executives in the Band of S$1,000,000 to
below S$1,250,000
Ye Bin Lin 0% 16.95% 26.70% 4.71% 51.64% 100%Li Jian Xiong 0% 16.64% 26.22% 6.43% 50.71% 100%Executives in the Band below S$500,000
Wong Meng Yun Note 2 0% 67.77% 19.77% 12.46% 0% 100%Teo Chuan Teck Note 3 0% 24.52% 33.89% 16.12% 25.47% 100%
Note:
1. Ji Hai Sheng resigned on 7 August 2008.
2. Wong Meng Yun was appointed on 1 July 2008.
3. Teo Chuan Teck resigned on 31 March 2008.
4. Wei Jia Fu, Li Jian Hong, Zhang Liang and Sun Yue Ying were not paid any fees, salary, bonus, other benefits and benefits from stock options for the financial year ended 31 December 2008.
No employee of the company and its subsidiary companies was an immediate family member of a Director and whose remuneration exceeded S$150,000 during the financial year ended 31 December 2008.
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EXECUTIVES’ REMUNERATION
The Company adopts a remuneration strategy that supports a pay-for-performance philosophy. Executives participate in an annual performance review process that assesses the individual’s performance and contributions.
The remuneration structure for the Group President and other key executives consists of the following components:
Salary Fixed pay comprises basic salary and Annual Wage supplement (AWS) and the Company’s contribution towards the Singapore Central Provident Fund where applicable.
Bonus Bonus is paid based on the Company’s and individual’s performance.
Other Benefits Other benefits comprise of usage of Company’s car and club membership.
Benefits From Stock Option Share options are granted to align staff’s interests with that of shareholders. These options are granted with reference to the desired remuneration structure target and valued based on the Binomial Valuation Model. Details of the share option scheme can be found in the “Directors Report” section of the Annual Report.
C. ACCOUNTABILITY AND AUDIT
ACCOUNTABILITY
Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects
The Board has overall responsibility to shareholders for ensuring that the Group is well managed and guided by its strategic objectives. In presenting the Group’s annual and quarterly financial results to shareholders, the Board aims to provide shareholders with a balance and understandable assessment of the Group’s performance, position and prospects. Management provides the Board with management accounts and other financial statements on a periodical basis.
AUDIT COMMITTEE
Principle 11: The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly set out its authority and duties.
The Audit Committee (“AC”) comprises the following:
Tom Yee Lat Shing (Chairman) (Non-Executive Independent)
Wang Kai Yuen (Non-Executive Independent)
Er Kwong Wah (Non-Executive Independent)
Ang Swee Tian (Non-Executive Independent)
The AC performs the following functions:
a) reviews with the external auditors, their audit plan, evaluation of the accounting controls, audit reports and any matters which the external auditors wish to discuss;
b) reviews with the internal auditors, their audit plan, the adequacy of the internal audit procedures and their evaluation of the effectiveness of the overall internal control systems, including financial, operational and compliance controls and risk management;
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c) reviews the quarterly and annual financial statements, including announcements to shareholders and the SGX-ST prior to submission to the Board so as to ensure the integrity of the Company’s financial statements;
d) reviews any significant findings and recommendations of the external and internal auditors and related management response and assistance given by the management to auditors;
e) reviews interested person transactions to ensure that internal control procedures approved by the shareholders are adhered to; and
f) conducts annual review of the independence and objectivity of the external auditors, including the volume of non-audit services provided by the external auditors, to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors before confirming their re-nomination.
The AC and the Board of Directors, with the assistance of internal audit and external audit, reviews the effectiveness of the key internal controls, including financial, operational and compliance controls, and financial risk management on an ongoing basis. There are formal procedures in place for both the internal and external auditors to report independently their findings and recommendations to the AC.
The AC has full access to, and cooperation from the Management including internal and external auditors, and has full discretion to invite any Director and executive officer to attend its meetings. The AC has also express power to investigate any matter brought to its attention, within its terms of reference, with the power to retain professional advice at the Company’s expense.
The Group recognises the importance of the internal audit function which, being independent of Management is one of the principal means by which the AC is able to carry out its responsibilities effectively. The Company has its own Internal Audit function in addition to having Messrs Deloitte & Touche Enterprise Risk Services Pte Ltd as the internal auditors of the Group.
The internal auditors, the in-house and out-sourced incumbents plan their internal audit schedules in consultation with Management and submit their respective plan to the AC for approval. The Internal Auditors, the in-house and out-sourced incumbents, report directly to the AC.
The AC conducts regular meetings scheduled on a quarterly basis. Apart from the quarterly meetings, the AC meets with the external and internal auditors, without the presence of the management at least once a year. Ad-hoc meetings may be carried out from time to time, as circumstances require. The AC held nine meetings during the financial year.
The AC, having reviewed the non-audit services provided by the external auditors, PricewaterhouseCoopers LLP, to the Group, is satisfied with the independence and objectivity of the external auditors and recommends to the Board of Directors, the nomination of the external auditors for re-appointment.
Whistle-blowing Policy The Company has in place a whistle-blowing policy and arrangements by which staff may, in confidence, raise concerns about possible corporate improprieties in matters of financial reporting or other matters. To ensure independent investigation of such matters and for appropriate follow up action, all whistle-blowing reports are to be sent to the designated officers. The Chairman of the Audit Committee and the Vice-Chairman of the Board will be informed immediately of all whistle-blowing reports received. Details of the whistle-blowing policy and arrangements are given to all staff for their easy reference. New staff are briefed on these during the orientation programme.
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INTERNAL CONTROLS
Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets.
The Group maintains a system of internal controls for all companies within the Group, but recognises that no internal control system will preclude all errors and irregularities. The system is designed to manage rather than to eliminate the risk of failure to achieve business objectives. The controls are to provide reasonable, but not absolute, assurance to safeguard shareholders’ investments and the Group’s assets.
The Group’s key internal controls include:
- establishment of risk management policies and systems;
- establishments of policies and approval limits for key financial and operational matters, and issues reserved for the Board; documents of key processes and procedures;
- segregation of incompatible functions which give rise to a risk of errors or irregularities not being promptly detected; maintenance of proper accounting records;
- safeguarding of assets;
- ensuring compliance with appropriate legislation and regulations; and
- engaging qualified and experience persons to take charge of important functions.
Operational risks management measures implemented by the Group include the implementation of safety, security and internal control measures and taking up appropriate insurance coverage.
Details of the Group’s financial risks management measures are outlined in Note 35 to the Financial Statements.
Based on internal controls established by the Group, work performed by the internal and external auditors, and reviews conducted by the Audit Committee and the Management Risk Committee, the Board is of the opinion that the Group has adequate internal controls.
ENTERPRISE RISK MANAGEMENT COMMITTEE
The Enterprise Risk Management Committee (“ERMC”) comprises five Directors, the majority of whom including the Chairman is independent. The ERMC members are:
Ang Swee Tian (Chairman) (Non-Executive Independent)
Jiang Li Jun (Non-Independent Executive) (Appointed on 7 August 2008)
Ji Hai Sheng (Non-Independent Executive) (Resigned on 7 August 2008)
Tom Yee Lat Shing (Non-Executive Independent)
Wang Kai Yuen (Non-Executive Independent)
Er Kwong Wah (Non-Executive Independent)
The ERMC assists the Board in fulfilling its oversight responsibilities on risk management. The responsibilities of the ERMC would include the following:
- reviews the overall risk management system and process and makes recommendations on changes as and when considered appropriate
- reviews the Group’s risk policies, guidelines and limits; and
- reviews periodically the Group’s material risk exposures and evaluates the adequacy and effectiveness of the mitigating measures implemented by management.
Established on 28 Feb 2008, the ERMC held two meetings during the year at which discussions were held on the existing risk management structure, the key risk exposures of the Group and the action plan to mitigate such risks.
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In its continuous endeavours to address and mitigate its operational risks, COSCO Shipyard Group has entered into a comprehensive strategic agreement with a leading Chinese insurance institution to strengthen its risk management system and to enhance its operational structure. The said insurance institution will establish a team to provide the Group with different facades of insurance for domestic and international trades; setting up a standardised claims and liabilities system; the evaluation of ship owners’ credit ratings, the tracking of ship owners’ risk; and the evaluation of countries’ credit ratings. The Company believes all these efforts are to help the Group to move towards the establishment of an all-encompassing risk management system.
INTERNAL AUDIT
Principle 13: The company should establish an internal audit function that is independent of the activities its audits.
The internal audit function’s primary line of reporting is to the Chairman of the Audit Committee. In addition to having an in-house Internal Audit function, the Company has also appointed Messrs Deloitte & Touche Enterprise Risk Services Pte Ltd as the internal auditors of the Group. Based on its review, the Audit Committee believes that the internal auditors, both the in-house and the out-sourced internal auditors, are independent and have the appropriate standing to perform its function effectively and objectively.
D. COMMUNICATION WITH SHAREHOLDERS
Principle 14: Companies should engage in regular, effective and fair communication with shareholders
COSCO Corporation strives for timeliness and transparency in its disclosures to the shareholders and the public. All information on the Company’s new initiatives will be first disseminated via SGXNET followed by a news release, where appropriate. The Company currently holds media and analyst briefing upon the release of its financial results. Management regularly receives visiting fund managers and institutional shareholders to receive feedback from them on the Company’s business and developments, as well as to better understand and address their concerns. In addition to the media and analyst briefings, the Company has taken part in various road shows.
The Company does not practise selective disclosure. Price-sensitive information is first publicly released via SGXNET, either before the Company meets with any group of investors or analyst or simultaneously with such meetings.Results and annual reports are announced or issued within the period prescribed by the SGX-ST.
Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company.
COSCO Corporation encourages shareholders to participate actively in general meetings. At general meetings of the Company, shareholders are given the opportunity to express their views and ask questions regarding the Company and the Group.
The Company’s Articles of Association allow a shareholder entitled to attend and vote to appoint a proxy who need not to be a shareholder of the Company to attend and vote at the meetings.
The Board members and Chairpersons of the Audit, Nominating, Remuneration and Enterprise Risk Management Committees are present and available to address shareholders’ questions at general meetings. The external auditors are also present to address shareholders’ queries relating to the Auditor’s Report and the conduct of the audit.
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E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY
The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions with the China Ocean Shipping (Group) Company and its associates, which are covered by a Shareholders’ Mandate approved at each general meeting.
The AC reviews the Shareholders’ Mandate at regular intervals, and is satisfied that the review procedures for IPTs and the reviews to be made periodically by the AC in relation thereto are adequate to ensure that the IPTs will be transacted on normal terms and will not be prejudicial to the interests of the Company and its minority shareholders.
Name of Interested Person
Aggregate value of all interested person transaction
during the financial period under review (excluding transactions less than
$100,000 and transactions conducted under
shareholders’ mandate pursuant to Rule 920)
Aggregate value of all interested person
transactions conducted under shareholders’ mandate
pursuant to Rule 920 (excluding transactions less
than $100,000)
S$’000 S$’000
Between Subsidiaries and:
Chimbusco (S) Pte Ltd 875
Chimbusco Dalian Branch 10,565
Chimbusco Guangzhou Branch 3,074
Chimbusco Lianyungang Branch 1,069
COSCO (Cayman) Mercury Co., Ltd 1,199
COSCO (HK) Investment & Development Co., Ltd 435
COSCO (HK) Shipping Co., Ltd 125,525
COSCO Air Service Dalian Ltd 213
COSCO Bulk Carrier Co., Ltd 219,703
COSCO Bulk Carrier Holdings (Cayman) Limited 45,809
COSCO Container Lines Co., Ltd 14,242
COSCO Logistics (Nantong) 112
COSCO Finance Co., Ltd 773,305
COSCO Nantong Steel Co., Ltd 7,013
COSCO Network (Beijing) Ltd 361
COSCO Shanghai Container Shipping Agency Co., Ltd 1,113
COSCO Shanghai Ship Management Co., Ltd 22,958
COSCO Shipping Co., Ltd 1,683
Dalian Ocean Shipping Company 409
Dalian Yuan Chang Shipping Co., Ltd 2,415
Guangzhou Ocean Shipping Company 68,419
Han Yuan Technical Service Centre 427
Lianyungang Ocean Shipping Company 807
Nantong Chimbusco Marine Bunker 2,784
Nantong COSCO Khi Ship Engineering Co., Ltd 309
Nantong COSCO Ship Equipment Company 7,161
Qingdao Manning Co-operation Ltd 2,407
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Name of Interested Person
Aggregate value of all interested person transaction
during the financial period under review (excluding transactions less than
$100,000 and transactions conducted under
shareholders’ mandate pursuant to Rule 920)
Aggregate value of all interested person
transactions conducted under shareholders’ mandate
pursuant to Rule 920 (excluding transactions less
than $100,000)
S$’000 S$’000
Between Subsidiaries and:
Qingdao Ocean Shipping Company 56,936
Shanghai Ocean Crew Co., Ltd 4,787
Shanghai Ocean Shipping Company 10,321
Shanghai Puyuan Shipping Co., Ltd 1,031
Shengzhen Ocean Shipping Company 3,430
Tianjin Tianhui Shipping & Enterprise Co., Ltd 3,144
Tianjin Yuanhua Shipping Co., Ltd 3,628
Tosco Keymax International Ship Management Co., Ltd 19,481
Xiamen Ocean Shipping Company 1,985
Total NIL 1,419,135
F. DEALING IN SECURITIES
In line with Chapter 12 Rule 1207(18) of the Listing Manual of SGX-ST on dealings in securities, the Company has adopted an internal compliance code which mirrors substantially the provisions of the said rule to provide guidance to its Directors and officers in relation to dealings in its securities.
The Company’s Code prohibits securities dealings by the Directors and employees while in possession of price-sensitive information. The Company issues regular circulars to its Directors, principal officers and relevant officers who have access to unpublished material price-sensitive information to remind them of the aforementioned prohibition and to remind them of the requirement to report their dealings in shares of the Company. The Directors and employees are also prohibited from dealing in the securities of the Company during the period commencing two weeks before the announcement of financial results of the Company for each of the first, second and third quarters of its financial year or one month before the financial year, as the case may be, and ending on the date of the announcement of the relevant results.
Board of Directors
Li Jian Hong Chairman, Non-Independent and Non-Executive Director
Mr Li Jian Hong is currently the Chairman and Non-Independent and Non-Executive Director of COSCO Corporation (Singapore) Limited, Executive Vice President, Chief Risk Officer and Chief Information Officer of COSCO (Group) Company. He is also the Chairman of COSCO Shipyard Group Co., Ltd., COSCO International Ship Trading Co., Ltd., Dalian COSCO Shipbuilding Industry Co., Ltd. and Sino-Ocean Land Holdings Ltd; Vice Chairman of China International Marine Containers (Group) Co., Ltd., Suzhou Industrial Park Co., Ltd., Nantong COSCO KHI Ship Engineering Co., Ltd.; Non-Executive Director of China COSCO Holdings Co., Ltd. and COSCO International Holdings Limited; Executive Director of COSCO Pacific Ltd. Mr Li is concurrently the Vice Chairman of China Association of the National Shipbuilding Industry and Vice President of China Association of the National Shipbuilding Industry. Mr Li joined the COSCO Group in 1989, and has successively held the posts of Factory Director of COSCO (Nantong) Shipyard, General Manager of COSCO Industry Co., Ltd. and COSCO Real Estate Development Co., Ltd., Assistant to the President and Chief Economist of COSCO Group. Mr Li obtained his Master’ Degrees in Business Administration from University of East London, England and in Economic Management from Jilin University respectively. He is a Senior Economist with vast experience in business management and capital operation.
Jiang Li JunVice Chairman, President and Non-Independent Executive
Director
Mr Jiang Li Jun was appointed as Vice Chairman and President of COSCO Corporation (Singapore) Limited in 2008. Mr Jiang joined COSCO as an accountant upon his graduation in December 1974. He has held various positions within the COSCO Group, including accounting manager of COSCO (Group) Company, SINOTASHIP, Chung Ling Shipping (Japan) Co., Ltd, Yick Fung Shipping (HK) Co., Ltd., Deputy General Manager of Florence Container (HK) Co., Ltd and COSCO Pacific Co., Ltd (a public listed Company in Hong Kong), and Chief Executive Officer of COSCO Shipping Co., Ltd (a public listed Company in Shanghai ‘A’ shares).
Mr Jiang had also been the head of Finance Department and Deputy General Manager of Operation Department of COSCO Japan Co., Ltd, General Manager of COSUZ Co., Ltd as well as Deputy Chief Financial Officer of COSCO Container Lines Ltd.
Mr Jiang holds an MBA degree from the University of Shanghai. He has extensive experience in the management of listed companies and corporate financial management.
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Annual Report 2008
Zhang LiangNon-Independent and Non-Executive Director
Mr Zhang Liang, is currently a Non-Independent and Non-Executive Director of COSCO Corporation (Singapore) Limited, and Executive Vice President of COSCO (Group) Company. He is also the Chairman of COSCO Bulk Carrier Co., Ltd, Qingdao Ocean Shipping Co., Ltd. and Shenzhen Ocean Shipping Co., Ltd., and the Chairman of COSCO (H.K.) Shipping Co., Ltd. Mr Zhang Liang joined COSCO Group in 1977. He was appointed as Executive Vice President of COSCO Group in 2006 and was also the Chief Legal Advisor of COSCO Group between 2006 and 2008. He has successively held the positions of Marine Superintendent, Director of Personnel Department, Assistant to General Manager, Deputy General Manager (cum Safety & Quality Manager) of Tianjin Ocean Shipping Company, Deputy General Manager of COSCO Bulk Carrier Co., Ltd., General Manager of Tianjin Ocean Shipping Company and General Manager of COSCO Bulk Carrier Co., Ltd. Mr Zhang graduated from Dalian Maritime University, where he majored in ship navigation, and he also holds a Master’s degree in Transport Planning & Management from Shanghai Maritime University and a Doctor’s degree in Enterprise Management from Nankai University. He is a senior engineer.
Mdm Sun Yue Ying
Non-Independent and Non-Executive Director
Mdm Sun Yue Ying is currently a Non-Independent and Non-Executive Director of COSCO Corporation (Singapore) Limited and the Chief Financial Officer of COSCO (Group) Company. She is also the Chairman of COSCO Finance Co., Ltd. and COSCO (Cayman) Fortune Holding Co., Ltd.; Non-Executive Director of China COSCO Holdings Co., Ltd.; Executive Director of COSCO Pacific Ltd and Director of China Merchants Bank Co., Ltd.
Mdm Sun joined COSCO Group in 1982. She was appointed as CFO of COSCO Group in 2000, and has successfully held the posts of Deputy Director of the Finance Department of Tianjin Ocean Shipping Company, Finance Director of COSCO Japan Co., Ltd., General Manager of the Finance Department and Deputy CFO of the COSCO Group. Mdm Sun has extensive experience in finance and corporate financial management. Mdm Sun graduated from Shanghai Maritime University majoring in Finance and Accounting for Shipping Industry. She is a Certified Public Accountant and senior accountant.
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Board of Directors
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Min Jian GuoVice President and Non-Independent Executive Director
Mr Min Jian Guo joined COSCO Corporation (Singapore) Limited as the Vice President on 5 April 2006. He was responsible for the personnel aspects of the Company as well as in charge of a few subsidiaries and agency units under the Company. Before his arrival in Singapore, Mr Min was based in Beijing, China as Deputy Managing Director of COSCO Logistics Co., Ltd. Prior to that, he was the Deputy General Manager of China Ocean Shipping Agency head office from September 2000 to December 2001, the Deputy General Manager of COSCO International Freight Forwarding Company from September 1995 to September 2000, and Deputy General Manager in China Road Transportation Company from November 1994 to September 1995. Mr Min has extensive experience in international freight forwarding and strategic management of modern logistics. He was conferred a Master degree by Capital University of Economics and Business. Mr Min was awarded the “Golden Anchor Prize” by the China Seaman’s Association in September 2002.
Ma Gui Chuan
Non-Independent Executive Director
Mr Ma Gui Chuan was elected as Non-Independent Executive Director on 10 January 2007. He joined the COSCO Group in 1978 and was appointed the Chairman of the Union of COSCO Group in 1998. Currently, he is the Chairman of COSCO Holdings (S) Pte Ltd. He was involved in the management of the Qingdao Ocean Shipping Company for many years and became the person-in charge of Qingdao Ocean Mariner’s College in 1994. From 2001 to 2003, he was a standing member of CPC Committee and Deputy Mayor of Yinchuan, Ningxia. In 2003, Mr Ma was elected an executive committee member of the 14th national representatives congress of All-China Federation of Trade Unions. He had nearly 30 years of experience in the shipping industry and extensive experience in ship and crew management. Mr Ma graduated from Dalian Maritime University majoring in engineering management and from Capital University of Economics and Business with postgraduate qualifications in business administration.
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Wang Xing Ru
Non-Independent and Non-Executive Director
Mr Wang Xing Ru was appointed as a Non-Independent and Non-Executive Director of COSCO Corporation (Singapore) Limited in February 2006. He has been the Managing Director of COSCO Shipyard Group Ltd. 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 holds a Master of Engineering degree. He has a wealth of experience in shipyard business and assets operation.
Board of Directors
Tom Yee Lat ShingNon-Executive Independent Director
Mr Tom 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 18 April 2008. He is Chairman of the Company’s Audit Committee and member of the Nominating, Enterprise Risk Management 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 and 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), FCPA (Singapore), associate member of the Institute of Chartered Secretaries and Administrators, and Council Member of the Institute of Certified Public Accountants of Singapore.
Dr Wang Kai YuenNon-Executive Independent Director
Dr Wang Kai Yuen was appointed as an Independent Director on 2 May 2001. He chairs the Nominating Committee and is a member of the Audit, Enterprise Risk Management, and the Remuneration Committee. Dr Wang served as a Member of Parliament for the Bukit Timah Constituency from December 1984 till April 2006. He was the Chairman of Feedback Unit from 2002 till his retirement from politics. He is currently the Centre Manager of Fuji Xerox Singapore Software Centre. In that capacity, he has built up the software centre and assisted in the establishment of similar centres in the UK, India, China, Brazil and Ireland. Dr Wang also holds directorships at ComfortDelgro Group Ltd, CAO (Singapore) Corporation Ltd, Asian Micro Holdings Ltd, Ezion Holdings Ltd, Xpress Holdings Ltd, China Lifestyle Foods and Beverages Ltd, Matex International Ltd, and others. He graduated from the University of Singapore with a First Class Honours degree in Electrical and Electronics engineering.
Dr Wang holds a Master of Science in Electrical Engineering, a Master of Science in Industrial Engineering and a PhD in Engineering from Stanford University, US. He received a Friend of Labour Award in 1988 for his contributions to the Singapore labour movement.
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Annual Report 2008
Er Kwong WahNon-Executive Independent Director
Mr Er Kwong Wah is a Non-Executive and Independent Director of COSCO Corporation (Singapore) Limited. A Colombo Plan and Bank of Tokyo Scholar, Mr Er 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 of the University of Manchester, UK in 1978.
Mr Er spent 27 years in the Singapore Civil Service and served in various departments including the Ministry of Defense, Public Service Commission, Ministry of Finance, Ministry of Education and Ministry of Community Development. He was Permanent Secretary in the Ministry of Education from 1987-1994, and in the Ministry of Community Development until his retirement in 1998.
Currently, he is an Executive Director of the East Asia Institute of Management, as well as, an Independent Director on the Boards of several public listed companies such as Unidux Electronics Ltd, Firstlink Investment Corporation Ltd, Hartawan Holdings Ltd, China Sky Chemical Fiber Co., Ltd, China Essence Group Ltd and Sun East Group Ltd.
He is Chairman of the Toa Payoh Central Citizens Consultative Committee and a Member of the Bishan-Toa Payoh Town Council. For his outstanding service in the Government and in the community, Mr Er was awarded the PPA(E) or Public Administration Medal (Gold) and the PBM (Public Service Medal). In 1991, the Government of France conferred him a National Honour with the award of Commandeur dans l’Ordre
des Palmes Academiques.
Ang Swee TianNon-Executive Independent Director
Mr Ang Swee Tian is a Non-Executive and Independent Director of COSCO Corporation (Singapore) Limited. He graduated from the Nanyang University in Singapore with a First-Class Honours Degree in Accountancy in 1970 and was conferred a Masters Degree in Business Administration with distinction by the Northwestern University in 1973. Upon his return from the United States, Mr Ang served in several departments in the Monetary Authority of Singapore (MAS). He was the Head of the Money Market Division in the Banking Department in 1976/1977 and was the Deputy Insurance Commissioner in the Insurance Commissioner’s Department. Mr Ang later became the Chief Executive Officer of the Singapore International Monetary Exchange (SIMEX) in 1984.
Mr Ang’s illustrious career included the successful merger of SIMEX with Stock Exchange of Singapore (SES) in 1999 which became the internationally recognised Singapore Exchange (SGX) of today. He served as the President of SGX from 1999 to 2005.
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Key Management
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Jiang Li JunVice Chairman, President, and Non-Independent Executive
Director
Mr Jiang Li Jun was appointed as Vice Chairman and President of COSCO Corporation (Singapore) Limited in 2008. Mr Jiang joined COSCO as an accountant upon his graduation in December 1974. He has held various positions within the COSCO Group, including accounting manager of COSCO (Group) Company, SINOTASHIP, Chung Ling Shipping (Japan) Co., Ltd, Yick Fung Shipping (HK) Co., Ltd., Deputy General Manager of Florence Container (HK) Co., Ltd and COSCO Pacific Co., Ltd (a public listed Company in Hong Kong), and Chief Executive Officer of COSCO Shipping Co., Ltd (a public listed Company in Shanghai ‘A’ shares).
Mr Jiang had also been the head of Finance Department and Deputy General Manager of Operation Department of COSCO Japan Co., Ltd, General Manager of COSUZ Co., Ltd as well as Deputy Chief Financial Officer of COSCO Container Lines Ltd.
Mr Jiang holds an MBA degree from the University of Shanghai. He has extensive experience in the management of listed companies and corporate financial management.
Min Jian Guo
Vice President and Non-Independent Executive Director
Mr Min Jian Guo joined COSCO Corporation (Singapore) Limited as the Vice President on 5 April 2006, responsible for the personnel aspects of the Company as well as in charge of a few subsidiaries and agency units under the Company. Before his arrival to Singapore, Mr Min was based in Beijing, China as Deputy Managing Director of COSCO Logistics Co., Ltd in January 2002. Prior to that, he had been appointed as the Deputy General Manager of China Ocean Shipping Agency head office from September 2000 to December 2001, the Deputy General Manager of COSCO International Freight Forwarding Company from September 1995 to September 2000, and Deputy General Manager in China Road Transportation Company from November 1994 to September 1995. Mr Min has extensive experience in the international freight forwarding and strategic management of modern logistics. He was conferred his master’s degree by Capital University of Economics and Business. Mr Min was awarded the “Golden Anchor Prize” by China Seaman’s Association in September 2002.
from left:
Jiang Li Jun Vice Chairman, President and Non-Independent Executive Director
Min Jian Guo Vice President and Non-Independent Executive Director
Annual Report 2008
from left:
Ye Bin Lin Chief Financial Officer
Li Jian Xiong Vice President
Wong Meng Yun Financial Controller
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Ye Bin Lin Chief Financal Officer
Mr Ye Bin Lin has extensive experience in finance and corporate financial management. From 1993 to 1998, Mr Ye was the finance manager of accounting department of COSCO Container Lines Co., Ltd. From 1998 to 2001, he was the general financial manager of COSCO Germany Shipping Agencies GMBH.
Mr Ye joined COSCO Corporation (S) Ltd (formerly known as COSCO Investment (S) Ltd) as finance director in August 2001 and was re-designated Chief Financial Officer of the company on 14 April 2008.
Li Jian XiongVice President
Mr Li Jian Xiong has rich knowledge and many years in shipping management and business operation. From 1997 to 2000, Mr Li served as Managing Director of COSCO Container Service Ltd; Deputy General Manager of COSCO Pacific Ltd (Listed Company in HK) and Deputy Managing Director of COSCO Pacific (China) Investment Co., Ltd. Mr Li joined COSCO Corporation (S) Ltd (formerly known as COSCO Investment (S) Ltd) in April 2001 as Vice President. Mr Li graduated from Qiandao Ocean Shipping Mariners College with a Bachelors Degree of Navigation and received his MBA from Shanghai JiaoTong University.
Wong Meng YunFinancial Controller
Mr Wong Meng Yun has more than 25 years of working experience in financial management, corporate finance, internal & external audit and treasury management of which the last 12 years were in a senior regional management position with a leading US listed software company.
Mr Wong graduated from the University of Singapore with a Bachelor of Accountancy and is a Fellow of the Association of Chartered Certified Accountants, CPA Australia, the Institute of Certified Public Accountants of Singapore and the Singapore Institute of Arbitrators. He is a Certified Treasury Professional (CTP) with the Association for Financial Professionals, a Certified Internal Auditor (CIA) and a Certified Financial Services Auditor (CFSA) with the Institute of Internal Auditors, a Certified Information Systems Auditor (CISA) and a Certified Information Security Manager (CISM) with the Information Systems Audit and Control Association (ISACA).
Organisation Structure
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Vice Chairman & President
Financial Controller
Vice President
Chief Financial Officer
Investor Relations
Department
Finance Department
Strategic Development Department
Administration Department
Internal-Audit Department
COSCO Corporation (Singapore) Limited
Annual Report 2008
Board of DirectorsLi Jian Hong Chairman and Non-Independent and Non-Executive Director
Jiang Li Jun Vice Chairman, President and Non-Independent Executive Director
Zhang Liang Non-Independent and Non-Executive Director
Sun Yue Ying Non-Independent and Non-Executive Director
Min Jian Guo Vice President and Non-Independent Executive Director
Ma Gui Chuan Non-Independent Executive Director
Wang Xing Ru Non-Independent and Non-Executive Director
Tom Yee Lat Shing Non-Executive Independent Director
Wang Kai Yuen Non-Executive Independent Director
Er Kwong Wah Non-Executive Independent Director
Ang Swee Tian Non-Executive Independent Director
Audit CommitteeTom Yee Lat Shing Chairman
Wang Kai Yuen Er Kwong Wah
Ang Swee Tian
Remuneration CommitteeEr Kwong Wah Chairman
Jiang Li Jun (Appointed on 7 August 2008)
Tom Yee Lat Shing Wang Kai Yuen Ang Swee Tian
Nominating CommitteeWang Kai Yuen Chairman
Jiang Li Jun (Appointed on 7 August 2008)
Tom Yee Lat Shing Er Kwong Wah Ang Swee Tian
Enterprise Risk Management CommitteeAng Swee Tian Chairman
Jiang Li Jun (Appointed on 7 August 2008)
Tom Yee Lat Shing Wang Kai Yuen
Er Kwong Wah Ye Bin Lin (Appointed on 1 March 2009)
Registered Office and Business Contact Information9 Temasek Boulevard#07-00 Suntec Tower TwoSingapore 038989Telephone: 68850888Fascimile: 63369006Website: www.cosco.com.sg
Company Registration Number196100159G
AuditorsPricewaterhouseCoopers LLP8 Cross Street #17-00PWC BuildingSingapore 048424Partner-in-charge:Mr Tham Tuck Seng (since FY2007)
Company SecretariesMr Lawrence KwanMs Lin Moi Heyang
Share Registrar and Share Transfer OfficeTricor Barbinder Share Registration Services(A division of Tricor Singapore Pte Ltd)8 Cross Street #11-00PWC BuildingSingapore 048424Telephone: 62363333Facsimile: 62364399
Principal BankersBank of China4 Battery RoadBank of China BuildingSingapore 049908
United Overseas Bank Limited80 Raffles PlaceUOB PlazaSingapore 048624
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Corporate Information
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Investor Relations
At COSCO, creating value is at the heart of what we do. Whether it is ship building or ship repair or oil rig construction, we look for unique ways to value-add, recognising that that is the key to creating long, sustainable and profitable relationships.
As such, we understand the importance of investor relations in shareholder value creation and recognise the integral role strong investor relations plays in our overall corporate development strategy. Our investor relations commitment is expressed through a belief in strong and accountable leadership, effective corporate governance, regular performance reporting and clear and timely investor communications.
We believe our active investor relations engagement has contributed to a large investor following on the Singapore
Exchange, where we are one of the most widely traded, liquid stocks. COSCO is also a component stock in the Straits Times Index, comprised of the 30 largest companies in terms of market capitalisation. Since January 2008, we had been a part of the FTSE ST China Index, and from July 2008, we were also included in the FTSE ST China Top Index, both of which were created to reflect the increasing representation of China-based companies in the Singapore stock market and to offer investors simple vehicles in which to tap into the range of highly liquid, locally-listed China companies. Among other indices, we are also a component stock of the Morgan Stanley Capital International World Index as well as the SGX Morgan Stanley Capital International Asia Apex 50 Index Futures which feature some of the most promising, widely traded and investable Asian companies outside Japan.
FY2007 full-year financial results announcement
Annual General Meeting
1st quarter financial results announcement
2nd quarter financial results announcement
3rd quarter financial results announcement
FY2008 full-year financial results announcement
21 February 2008
15 April 2008
30 April 2008
4 August 2008
30 October 2008
23 February 2009
Date
Financial Calendar
Activities
Total overseas roadshows organised in FY2008 15
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Company
Daniel Ong
Glenford Tan
Lim Siew Khee
Low Horng Han
Caroline Maes
Haider Ali
Janice Chua
Kevin Chong
Serene Lim
Ying Jian Chan
Rohan Suppiah
Ashwin Sanketh
Melinda Baxter
Praveen Choudhary
Lisa Lee
Kelly Chia
Stella Tan
Cheryl Lee
Esther Sim
AmFraser Securities Pte Ltd
BNP Paribas
CIMB-GK Research
Citi Investment
CLSA
Credit Suisse
DBS Vickers
Deutsche Securities Asia
DMG & Partners
JP Morgan
Kim Eng Securities
Macquarie Capital Securities
Merrill Lynch
Morgan Stanley
Nomura Securities
OCBC
Phillip Securities
UBS
UOB Kayhian
Email AddressName
Analyst name list
Total investor conferences attended and analyst
briefings organised in FY2008 223
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Investor Relations
IR and Communications ActivitiesTimely and pertinent disclosures are part and parcel of our investor relations programme. We work with the media and the investment community to discuss and disseminate information to the public. Material announcements we have undertaken include contracts won, quarterly results, growth strategies and operational outlook. We undertake this communications process through media interviews and news reports across a variety of platforms such as newswires, print, broadcast, investor meetings and roadshows, and dialogue with minority shareholders at Annual General Meetings and Extraordinary General Meetings, our website as well as the SGX website.
IR AwardsIn 2008, we were awarded the Certificate of Excellence for the IR Magazine Awards 2008 South East Asia, in association with Investor Relations Professionals Association (Singapore) (IRPAS) and Singapore Exchange.
We also clinched the Fastest 50 growing certification 2008, certified by DP Information Group. The leading Hong Kong business magazine Yazhou Zhoukan also conferred on COSCO an award for the World’s 1000 Best China Companies.
3500
3000
2500
2000
1500
6.00
5.00
4.00
3.00
2.00
1.00
Jan 31 Feb 29 Mar 31 Apr 30 May 30 Jun 30 Jul 31 Aug 31 Sep 30 Oct 31 Non 30 Dec 31
1000
900
800
700
600
500
400
STI IndexMSCI Asia APEX 50COSCO Share Price
Legend:
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FY 2008
Source: Bloomberg and COSCO
Yazhou Zhoukan
Named as one of the Top 10 Enterprises of 2008 (Singapore)
by Yazhou Zhoukan
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In 2009, we were also awarded the Singapore 1000 award from DP Information Group, Singapore’s leading credit & business information bureau. The rankings use the audited results of over 8,000 companies incorporated in Singapore and ranks them according to their sales, profit and return on equity performance.
These awards recognise our efforts in corporate governance and disclosure, regular communications and investor engagement. We will continue to improve upon these achievements, regardless of the operational scenario or economic environment.
IR Magazine Awards 2008 South East Asia
Awarded Certificate of Excellence for the IR Magazine Awards 2008 South East Asia,
in association with Investor Relations Professionals
Association (Singapore) (IRPAS), and Singapore Exchange.
Fastest 50 growing certification 2008
Awarded the Fastest 50 growing certification 2008, certified by DP Information
Group
Singapore1000 Award
Awarded the Singapore 1000 award from DP Information Group, Singapore’s leading
credit & business information bureau.
Total participants in FY2008 (comprising of analysts and shareholders) 3,261
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IntroductionThe Group, like all businesses, is exposed to a number of risks which may have material and adverse effects on its reputation, performance and financial condition. It is not possible to identify or anticipate every risk that may affect the Group. Some material risks may not be known, others, currently deemed as immaterial, could become material and new risks may emerge.
The Group’s risk management process is described below. It aims to identify the risk factors that may have a material impact on the Group, and to manage them appropriately.
The material risk factors identified by the Group’s risk management process are set out below. Each of these could have a material and adverse effect on the Group, including on its reputation, performance and financial condition. They have been divided into four categories: external risks; internal risks; execution risks; and financial risks.
Risk Management ProcessThe Group’s process for identifying and managing risk is set by the Board through the ENTERPRISE RISK MANAGEMENT COMMITTEE (“ERMC”). The ERMC has delegated the day-to-day management of risk within the Group to the Risk Management Committee (“RMC”) of each of its operating subsidiaries. The RMC of each of the subsidiaries comprises senior management staff of each division within the operating subsidiaries.
The Board currently conducts an annual review of the Group’s risks, during which it identifies the key risks for the year ahead. As part of this review, operational and strategic risks are proposed as key risks by the RMC, based on inputs from regions, function heads and business leaders. The risk factors set out below reflect the key risks identified as part of this process.
Each of the key risks is assigned to the Chairman of the RMC at the operating subsidiaries who proposes a level of risk the subsidiary is willing to take and develops an appropriate plan of action to mitigate the risk. All risk mitigation plans are reviewed, challenged and agreed by the Board.
Once risk mitigation plans are agreed, each operating subsidiaries is asked to carry out a self assessment exercise which requires all operating units to confirm compliance with Group policies and also to confirm that key operational controls are in place and working effectively. The results of this exercise, together with a review of specific plans for strategic risks, enable the Board to confirm that the business has a sound risk-based framework of internal control.
The Group auditors, internal and external, provide independent re-assurance that the standard of risk management, compliance and control meets the needs of the business, and this includes an evaluation of the accuracy and completeness of the self assessment exercises. Group audit status reports are discussed
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with the Enterprise Risk Management Committee, the Audit Committee and the Board on a regular basis. The Board also recognises that the risks facing the business may sometimes change over short time periods. Every quarter each operating subsidiary provides an update on new and emerging risks to the ERMC and the Board and proposals to update the Group risks are provided to the ERMC and the Board.
While the Group’s risk management process attempts to identify and manage (where possible) the key risks it faces, no such process can totally eliminate risk or guarantee that every risk is identified, or that it is possible, economically viable, or prudent to manage such risks. Consequently, there can never be an absolute assurance against the Group failing to achieve its objectives or a material loss arising.
1. External RisksThe Group is subject to a number of external risks. The Group defines external risks as those that stem from factors which are mainly outside of its control. These risks will often arise from the nature of the Group and the industry in which it operates.
Legal, Regulatory, Political and Societal RisksThe Group is at risk from significant and rapid change in the legal systems, regulatory controls, and custom and practices in the regions in which it operates. These affect a wide range of areas. Accordingly, changes to,
or violation of, these systems, controls or practices could increase costs and have material and adverse impacts on the reputation, performance and financial condition of the Group.
Political developments and changes in society, including increased scrutiny of the Group, its businesses or its industry, by non-governmental organisations or the media, may result in, or increase the rate of, material, legal and regulatory change, and changes to custom and practices.
Competition Increased competition in the markets in which it operates may materially adversely impact the Group’s performance and financial condition. The ship building and ship repair and shipping industry are highly competitive. The Group competes with other multinational corporations which also have significant financial resources.
Customer DemandCustomer demand for the Group’s services and expertise is expected to increase to a higher level of expectation. The Group expects greater scrutiny by customers before they take delivery of vessels. This will, inadvertently, increase the cost of building the vessels. A failure to recover higher costs could materially adversely impact the Group’s performance.
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Raw MaterialsThe Group depends upon the availability, quality and cost of steel and steel-plates from around the world, which exposes it to price, quality and supply fluctuations. Although the Group will take measures to protect against the short-term impact of these fluctuations and of the concentration of supply, there is no guarantee that these will be effective. A failure to recover higher costs or shortfalls in availability could materially adversely impact the Group’s performance.
2. Internal RisksInternal risks are those arising from factors primarily within the Group’s control, including those from the Group’s structure and processes.
Information Technology InfrastructureThe Group depends on accurate, timely information and numerical data from key software applications to aid day-to-day business and decision-making. Any disruption caused by failings in these systems, of underlying equipment or of communication networks could delay or otherwise impact the Group’s day-to-day business and decision-making and have materially effects on the Group’s performance.
Operation InterdependenceThe Group’s operations in individual provinces are increasingly dependent on the proper functioning of their business on other parts of the Group’s in terms of
raw material and product supply, sales and marketing programme development, technology, funding and support services. Any underperformance or failure to control the Group’s operations in one province properly could therefore impact the Group’s businesses in a number of other provinces and materially adversely impact the performance or financial condition of the Group.
EmployeesThe Group depends on the continued contributions of its executive officers and employees, both individually and as a group. While the Group reviews its people policies on a regular basis and invests significant resources in training and development and recognising and encouraging individuals with high potential, there can be no guarantee that it will be able to attract, develop and retain these individuals at an appropriate cost and ensure that the capabilities of the Group’s employees meet its business needs. Any failure to do so may impact the Group’s performance.
Managing Cost of Wages Through OutsourcingShip repair is a labour-intensive industry and an increase in wages will have a significant impact on the Group. The Group has been encountering increases in labour cost in particular in Guangdong. Other than having a permanent work force of skilled employees on the payroll, the Group has adopted a contract hiring system. Under the contract hiring system, unskilled
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manpower is hired on a contractual basis and paid according to projects undertaken. While the Group has benefitted from the decrease in fixed wage costs, it is at risk from failures by these third parties to deliver on their contractual commitments, which may adversely impact its reputation and performance.
3. Execution RisksExecutive risks arise from the implementation of the Group’s strategy and its change and investments programmes, which aim to enhance long-term shareholder value.
Investments, Acquisition and DisposalsRisks inherent in the investments, acquisition and disposals may have an adverse impact on the Group’s business or financial results.
From time to time, the Group may make investments, acquisitions and disposals of businesses. While these are carefully planned, the rationale for them may be based on incorrect assumptions or conclusions and they may not realised the anticipated benefits or there may be other unanticipated or unintended effects. Additionally, while the Group seeks protection, for example through warranties and indemnities, significant liabilities may not be indentified in due diligence or come to light after the warranty or indemnity periods. These factors may materially adversely impact the performance or financial condition of the Group.
4. Financial RisksThe Group is exposed to market risks such as interest rate and exchange rate risks arising from its international business.
Managing Currency FluctuationsThe main financial risks facing the Group are fluctuations in foreign currency, interest rate risk, availability of financing to meet the Group’s needs and default by counterparties and customers. Any of these financial risks may materially adversely impact the performance or financial condition of the Group.
The Group has established a management system to address financial risks. Fluctuations in currency exchange rates are closely monitored. The Group employs simple forward currency contracts on a systematic approach to meet its financial obligations and foreign and local currencies needs.
The Group does not engage in speculative foreign investments. Strict compliance controls are in place to ensure that procedures are adhered to and management decisions are not made unilaterally.
The Group also engages the guidance of the holding company in managing its foreign exchange risks exposure.
A detailed disclosure of the Group’s financial risks can be found in the Notes to the Financial Statements on pages 150 to 158.
者不疑
Credence… is being credible and reliable
信
CREDENCEEXPERTISE AND EXPERIENCE ARE VITAL IN
BUSINESS, BUT STRONG PRINCIPLES AND ETHICS COUNT FOR MUCH MORE BECAUSE WITH THEM,
COMES GREATER CREDENCE.
THIS CREDENCE HAS ESTABLISHED COSCO AS A RELIABLE ENTITY IN THE INDUSTRY,
AND HAS OPENED OUR DOORS TO FURTHER OPPORTUNITIES AND GROWTH.
Credence… is being credible and reliable
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Innovation is the driving force behind our quest to: a. Increase efficiencyb. Enhance productivityc. Improve quality
Innovation holds the key to our future successes. Through constant renewal and refining of our technological capabilities, we are equipping ourselves with a potent competitive edge that will create enduring value for our customers and shareholders.
2008 in ReviewIn 2008, we expanded our Reseach and Development (R & D) departments in China to comprise a highly qualified team of over 400 experts across six companies in the fields of ship building, marine engineering, and ship repair and conversion.
The areas of research included ship conversion, hull design, marine engineering products and software development. United by a common goal that is directed at improving our project management capabilities, increasing dock turnover rates, reducing material costs, and minimising fuel consumption, our R & D team is essential in sustaining our future progress.
The Big PictureOur plans for 2009 include an upgrade of existing systems to apply precision management and block construction methods to the ship building process.
We will also acquire technologically advanced ship building equipment and paint installation techniques to enhance existing ship building, ship repair and ship conversion processes.
To promote better and more efficient project management, we are committed to the developing of new software, sophisticated marine engineering products, and improved building technology.
Ship Repair and ConversionIn 2009, we are applying the latest of construction design technology to two “super-sized” floating docks, each with a capacity of up to 130,000 tonnes. We are also moving ahead with the conversion and re-fitting of our Cui Hua Shan dock. Other focuses include the upgrading of our FPSO conversion technology and the acquisition of block construction methods, all of which are improvements that will undeniably facilitate greater operational efficiency.
Research and Development
Innovation: A beacon of light directing our growth
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Ship BuildingIn 2008, as a testament to COSCO’s technological capabilities, we won the Second Prize at the annual awards organised by CSNAME for our engineering design and construction of a floating dock that caters to 30,000-tonne vessels.
COSCO Corporation, on our own accord, has developed detailed engineering design for two shuttle tankers, each of capacity 105,000 DWT. Our international collaboration with SEVAN Marine and F&G has resulted in the completion of the detailed engineering design and production design for the world’s first cylindrical FDPSO and a jack-up drilling platform Super M2.
Working with Shanghai Merchant Ship Design & Research Institute, COSCO Corporation has finalised the detailed engineering design and production design of a 5,000 Pure Car Truck Carrier (5000PCTC), a 57,000 DWT dry bulk carrier, and a 30,000 DWT heavy lift vessel.
Marine EngineeringIn 2008, we won the contract to construct SEVAN 650 - one of the most advanced oil rigs in the world capable of an oil storage capacity of 150,000 barrels and an ability to drill wells of up to 40,000 feet deep at water
depths of up to 10,000 feet. Its technically challenging cylindrical design requires us to further improve and refine our building methods in 2009 to ensure on-time delivery and completion of the project.
We will also be focusing our efforts on the conceptualisation of an octagonal rig, as well as conduct more research into developing stronger marine engineering equipment that will withstand more extreme weather conditions.
Software DevelopmentWe are extending our research into developing better and more efficient software that will enable us to reduce dock periods, enhance turnover times, and improve project management capabilities.
Looking Ahead To ensure the effectiveness of our R & D efforts, we will work towards better communication and collaboration between our various units. We will also continue to expand our areas of research to create a more comprehensive network of coverage and seek all-round improvements. Furthermore, we will be closely monitoring our expenditure to constantly improve our return on R & D investment.
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“At COSCO Corporation, we believe that people are one of our most valuable assets. it is our conviction that when we have dedicated, motivated and skilful staff, we will not only provide excellent service and products, we will also retain our pool of expertise which, above cost, coverage and location, is our ultimate long-term advantage.”
Overview At COSCO Corporation, we believe that people are one of our most valuable assets. It is our conviction that when we have dedicated, motivated and skilful staff, we will not only provide excellent service and products, we will also retain our pool of expertise which, above cost, coverage and location, is our ultimate long-term advantage. COSCO Corporation has various approaches to strengthen its workforce, namely recruitment, training, a succession scheme and a reward scheme.
We recruit and retain talent through an attractive reward and remuneration scheme which is based on a performance and appraisal system that helps staff structure and achieve their personal career goals. Indeed, our emphasis on education and training also encourages potential recruits to see COSCO Corporation as an employer of choice.
Our succession scheme plays an important part in our human resource strategy. COSCO Corporation knows that the leaders at the helm will affect the destiny of the ship. Thus, the company actively identifies employees who show good potential, tests their acumen and stretches their experiences. Through this process, promising employees are recommended and groomed for senior management positions.
Recruitment and TrainingCOSCO Corporation is made of talented people that are dedicated to creating a value-driven world-class enterprise which maximises growth and leverages opportunities. We have a rich pool of strong and diverse talent, and are dedicated to developing this talent as we grow our business.
To supplement our existing talent pool, the Group actively recruits top graduates from leading Chinese universities yearly, grooming them for management positions.
Human Resources
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These management trainees undergo internal courses that prepare them for their roles. All new employees undergo a compulsory training course, which lasts from one to three months. Technical staff is required to pass a course before they assume their work duties. They are also assessed annually to maintain their requisite services and skills standards.
COSCO Corporation partners SembCorp Marine, which has a 30% stake in COSCO Shipyard Group, to develop staff capabilities. We send staff to SembCorp Marine’s PPL Shipyard to undergo training in areas such as international standards and safety measures, technical, engineering and management skills. In fact, we have been leveraging on our strategic ties with Sembcorp Marine to spearhead our offshore rig building business. COSCO Corporation also draws on the expertise of external experts from the marine engineering industry, drawn from locations such as Singapore, Japan and Korea.
Middle management at the Group is given opportunities to attend institutes of higher learning. Senior management from key departments are also given the opportunity to learn from other industry experts when they are posted to countries like Norway, which has a successful maritime industry.
Reward and RetentionCOSCO Corporation has various schemes that seek to inculcate staff loyalty and cultivate the full potential of all our employees. One such system is the performance and achievement appraisal system which aims to link work goals with personal career development and remuneration.
Another staff motivator is our annual “Model Employee Reward” scheme where the best performing employee from each subsidiary is rewarded with a trip to the Company’s overseas subsidiaries. Besides being an incentive trip for the employees, these visits also provide opportunities to experience the work culture in other COSCO companies.
Other schemes include competitions which are held among the different shipyards to promote a can-do, optimistic spirit while creating opportunities for bonding. To motivate senior management and experienced employees, COSCO Corporation gives share options.
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Workplace Safety
OverviewThe Group is greatly aware of the need to establish and maintain safe working environments throughout our subsidiaries. Work safety is a priority, and we are pleased to report a progressively improving safety track record over the last seven years. In 2009, we are going to continue to focus our efforts on demonstrating, training and supervising to create a working culture distinguished by an across-the-board focus on work safety.
Apart from equipping our staff with the latest technical skills, new employees undergo compulsory training courses specially designed to alert them to the potential dangers at the workplace and safety precautions, after which further tests are administered to ensure a level of proficiency and understanding.
Concrete Action, Attainable GoalsThe objective of our programme in 2009 strives to totally eliminate the occurrence of serious fire hazards, explosions, collisions, and accidents at the work place such as leakages of dangerous substances that lead to environment pollution and chemical poisoning.
We are protecting our workers through education and training and our goal is to achieve zero serious accidents among our workers.
We have identified the tankers repair area and areas of high worker density as our focus zones. While applying an thorough approach to the implementation of safety guidelines throughout our organisation, the above mentioned areas of our operation are of particular interest to us, and we have paid special attention to reduce the impact of accidents within these zones.
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Apart from the emphasis on our staff’s safety, we are also focused on the physical environment in our areas of operation. We seek to minimise environmental damage through procedures designed to facilitate safe discharge of waste gases, waters, and other dangerous materials.
Creating Awareness 2009 marks the year in which the Group is advancing with its implementation of a system of evaluation for its safety practices to further improve its safety record.
With zero fatalities and accidents as our ultimate goal, the Group has formed a Safety Committee of experts tasked with raising safety standards through a comprehensive safety monitoring system.
At the Group’s five shipyards, the Safety Committee conducts spot checks on working practices to ensure safety standards are upheld.
We are going to reinforce the level of safety awareness through education and training. Concrete actions we have implemented include a mandatory hour-long lesson on safety once every week to update our staff on the latest safety rules and regulations. Live demonstrations of safety procedures are conducted at the workplace regularly and workers are required to undergo mandatory training for specialised skill sets to upgrade their skills.
Upon completion of their training courses, workers are tested on their comprehension – this testing ensures we are on track with inculcating the right safety values within our organisation.
Enhancing Efficiency through Better Workplace SafetyThe Group believes that workplace safety is integral in sustaining operational efficiency and long term profitability. The Group has in place a comprehensive network of supporting operators to complement its focus on work safety. These include on site medical facilities that are available at all shipyards. Other staff benefits include annual health checks, medical insurance, dental treatment, and immunization against influenza.
OverviewAs a responsible corporate citizen with a global presence, the Group is committed to making a positive contribution that benefits communities within and beyond the regions of our operations. While lending a helping hand to communities in need, the Group is also dedicated to protecting and sustaining the physical environments of our earth.
Social and Education Contributions
Singapore
In Singapore, we support the Yellow Ribbon project – a foundation and fund established to pool together resources and to create jobs for ex-convicts to help them re-integrate with society. Our contributions include a $10,000 donation annually for the past two years, as well as involvement in the charity golf and gala dinner event. This active participation to a good social cause reflects the Group’s social responsiveness, while our donations are gestures of goodwill directed at assisting the communities we operate in.
China
COSCO Corporation has lent support through social and educational contributions to the COSCO Charity Foundation - the first non-public funding foundation initiated by state-owned enterprises.
The foundation was created in 2005 to manage COSCO Group’s social projects, and has been involved in charity work within China for disaster-relief, poverty-aid, medical-aid and education support.
Contributions to the foundation by COSCO subsidiaries have increased year on year since its conception, enabling the foundation to react in swift response to worthy causes such as a 10-million-Renminbi donation to the Sichuan earthquake disaster zone.
In sync with its goal of improving educational facilities, the foundation furthered its involvement in school projects in March 2008 when it made a RMB8 million donation to the Zhoushan Buddhist Association towards the building of Liu Heng Zhong Yuan Primary School.
Environmental AwarenessCOSCO Corporation’s aim of operating a viable business and generating profits for our shareholders is conducted with the environment in mind. To minimise environmental impact, we have introduced to all our subsidiaries the International Safety Management Code (ISMC) to establish an uniform pollution prevention management system.
Our systems call for regular reviews of our environmental policies and working procedures, allowing us to constantly improve our environmental standards. Furthermore, internal and external audits ensure we keep abreast with the latest environmental protection measures. Internally, we have created strict operational processes to eliminate the discharge of environmentally harmful wastes and chemicals.
To promote environmental sustainability, we will continue striving towards adapting environmentally-friendly technologies and ensure minimal wastage through design and recycling.
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Corporate Social Responsibility
Contents
85
86 Directors’ Report
92 Statement by Directors
93 Independent Auditor’s Report
94 Consolidated Income Statement
95 Balance Sheets
96 Consolidated Statement of Changes in Equity
98 Consolidated Cash Flow Statement
100 Notes to the Financial Statements
166 Five-Year Summary
167 Shareholding Statistics
169 Notice of Annual General Meeting
Proxy Form for Annual General Meeting
Notes for Proxy Form
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Directors’ Report
Annual Report 2008
For the Financial Year Ended 31 December 2008
The directors present their report to the members together with the audited fi nancial statements of the Group
for the fi nancial year ended 31 December 2008 and the balance sheet of the Company as at 31 December
2008.
Directors
The directors of the Company in offi ce at the date of this report are as follows:
Li Jian Hong
Jiang Li Jun (appointed on 7 August 2008)
Zhang Liang (appointed on 15 October 2008)
Sun Yue Ying
Min Jian Guo
Ma Gui Chuan
Wang Xing Ru
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Li Jian Xiong (alternate director to Li Jian Hong)
Lu Cheng Gang (alternate director to Zhang Liang, appointed on 15 October 2008)
Ye Bin Lin (alternate director to Sun Yue Ying)
Liu De Tian (alternate director to Wang Xing Ru)
Arrangements to enable directors to acquire shares and debentures
Neither at the end of nor at any time during the fi nancial year was the Company a party to any arrangement
whose object was to enable the directors of the Company to acquire benefi ts by means of the acquisition of
shares in, or debentures of, the Company or any other body corporate, other than as disclosed under “Share
Options” on pages 89, 90 and 91 of this report.
Directors’ interests in shares or debentures
(a) According to the register of directors’ shareholdings, none of the directors holding offi ce at the
end of the fi nancial year had any interest in the shares or debentures of the Company or its related
corporations, except as follows:
Holdings registered in name of
director or nominee
Holdings in whicha director is deemedto have an interest
At31.12.2008
At
1.1.2008
or date of
appointment,
if later
At31.12.2008
At
1.1.2008
or date of
appointment,
if later
The Company
(Number of ordinary shares)
Li Jian Hong 1,300,000 1,300,000 – –
Sun Yue Ying 1,400,000 1,400,000 – –
Wang Xing Ru 467,000 395,000 – –
Tom Yee Lat Shing 1,400,000 1,100,000 – –
Wang Kai Yuen 900,000 – 1,000,000 500,000
Er Kwong Wah 650,000 600,000 – –
Ang Swee Tian 130,000 – 5,000 5,000
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Directors’ ReportFor the Financial Year Ended 31 December 2008
Directors’ interests in shares or debentures (continued)
(a) (continued)
Holdings registered in name of
director or nominee
Holdings in whicha director is deemedto have an interest
At31.12.2008
At
1.1.2008
or date of
appointment,
if later
At31.12.2008
At
1.1.2008
or date of
appointment,
if later
The Company
(Number of ordinary shares)
Li Jian Xiong 1,000,000 1,000,000 – –
Lu Cheng Gang – – 50,000 50,000
Ye Bin Lin 600,000 600,000 – –
Liu De Tian 153,000 153,000 120,000 120,000
Number of unissued ordinary shares
under optionheld by director
At 31.12.2008
At
1.1.2008
or date of
appointment,
if later
Related corporations
COSCO International Holdings Limited
– Share Option Scheme
Li Jian Hong 1,200,000 3,000,000
COSCO Pacifi c Limited
– 2003 Share Option Scheme
Li Jian Hong 1,000,000 1,000,000
Sun Yue Ying 1,000,000 1,000,000
China COSCO Holdings Company Limited
– Share Appreciation Rights Plan
Li Jian Hong 1,630,000 1,630,000
Zhang Liang 580,000 580,000
Sun Yue Ying 1,630,000 1,680,000
Lu Cheng Gang 265,000 265,000
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Directors’ Report
Annual Report 2008
For the Financial Year Ended 31 December 2008
Directors’ interests in shares or debentures (continued)
(b) According to the register of directors’ shareholdings, certain directors holding offi ce at the end of the
fi nancial year had interests in the options to subscribe for ordinary shares of the Company granted
pursuant to the Cosco Group Employees’ Share Option Scheme 2002 as set out below and under
“Share Options” on pages 89, 90 and 91 of this report.
Number of unissuedordinary shares underoption held by director
At31.12.2008
At
1.1.2008
or date of
appointment,
if later
2006 Options
Li Jian Hong 700,000 700,000
Sun Yue Ying 700,000 700,000
Lu Cheng Gang 700,000 700,000
2007 Options
Min Jian Guo 700,000 700,000
Ma Gui Chuan 700,000 700,000
Wang Xing Ru 700,000 700,000
Tom Yee Lat Shing – 300,000
Wang Kai Yuen – 300,000
Er Kwong Wah 300,000 300,000
Li Jian Xiong 700,000 700,000
Lu Cheng Gang 700,000 700,000
Ye Bin Lin 700,000 700,000
Liu De Tian 700,000 700,000
2008 Options
Min Jian Guo 700,000 –
Ma Gui Chuan 700,000 –
Wang Xing Ru 700,000 –
Tom Yee Lat Shing 300,000 –
Wang Kai Yuen 300,000 –
Er Kwong Wah 300,000 –
Li Jian Xiong 700,000 –
Lu Cheng Gang 700,000 –
Ye Bin Lin 700,000 –
Liu De Tian 700,000 –
(c) The directors’ interest in the ordinary shares and share options of the Company as at
21 January 2009 were the same as those as at 31 December 2008.
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Directors’ ReportFor the Financial Year Ended 31 December 2008
Directors’ contractual benefi ts
Since the end of the previous fi nancial year, no director has received or become entitled to receive a
benefi t by reason of a contract made by the Company or a related corporation with the director or with a
fi rm of which he is a member or with a company in which he has a substantial fi nancial interest, except as
disclosed in the accompanying fi nancial statements and in this report, and except that certain directors have
employment relationships with the ultimate holding corporation or related corporations, and have received
remuneration in those capacities.
Share options
(a) Cosco Group Employees’ Share Option Scheme 2002
The Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”) was approved by
members of the Company at an Extraordinary General Meeting on 8 May 2002.
Under the Scheme 2002, share options to subscribe for the ordinary shares of the Company are
granted to directors, key management personnel and employees. The exercise price of the granted
options is determined at the average of the closing prices of the Company’s ordinary shares as quoted
on the Singapore Exchange for the fi ve market days immediately preceding the date of the grant. The
options may be exercised in full or in part in respect of 1,000 shares or a multiple thereof, on the
payment of the exercise price. The Group has no legal or constructive obligation to repurchase or
settle the options in cash.
Options issued to directors and employees who have been in the service of the Company, subsidiary
or controlled associated company, or the holding company for at least one year on or prior to the
date of the grant, may be exercised twelve months after the date of grant but before the end of one
hundred and twenty months. For employees and directors who are in the service of the controlled
associated company and non-executive directors, the options shall expire at the end of sixty months.
Options issued at a discount to market price, may only be exercised two years after the date of the
grant.
Options issued to directors and employees who have been in the service of the Company, subsidiary
or controlled associated company, or the holding company for at least six months but less than one
year on or prior to the date of grant, may be exercised twenty-four months after the date of the grant
but before the end of one hundred and twenty months. For employees and directors who are in the
service of the controlled associated company and non-executive directors, the options shall expire at
the end of sixty months. Options issued at a discount to market price, may only be exercised three
years after the date of the grant.
Particulars of the options granted pursuant to the Scheme 2002 in 2006 and 2007 known as “2006
Options” and “2007 Options” respectively were set out in the Directors’ Report for the fi nancial years
ended 31 December 2006 and 31 December 2007 respectively.
On 24 March 2008, options to subscribe for 21,300,000 ordinary shares of the Company at an
exercise price of $2.95 per ordinary share were granted pursuant to the Scheme 2002 (“2008
Options”). The 2008 Options are exercisable from 24 March 2009 and expire on 23 March 2013 for
non-executive directors and 23 March 2018 for executive directors and employees. The fair value of
the 2008 Options granted was estimated to be $0.97 per share option using the Binomial Valuation
ModeI.
The Remuneration Committee administering the Scheme 2002 comprises the following directors:
Er Kwong Wah (Chairman)
Jiang Li Jun (appointed on 7 August 2008)
Wang Kai Yuen
Tom Yee Lat Shing
Ang Swee Tian
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Directors’ Report
Annual Report 2008
For the Financial Year Ended 31 December 2008
Share options (continued)
(a) Cosco Group Employees’ Share Option Scheme 2002 (continued)
Details of the options granted to directors of the Company are as follows:
Number of unissued ordinary shares of the Company under option
Granted infi nancial year
ended
Aggregategranted since
commencementof Scheme
2002 to
Aggregateexercised since commencement
of Scheme 2002 to
Aggregateoutstanding
as atName of directors 31.12.2008 31.12.2008 31.12.2008 31.12.2008
Directors of the Company
Li Jian Hong – 3,200,000 2,500,000 700,000
Sun Yue Ying – 3,300,000 2,600,000 700,000
Min Jian Guo 700,000 1,400,000 – 1,400,000
Ma Gui Chuan 700,000 1,400,000 – 1,400,000
Wang Xing Ru 700,000 3,000,000 1,600,000 1,400,000
Tom Yee Lat Shing 300,000 2,200,000 1,900,000 300,000
Wang Kai Yuen 300,000 2,200,000 1,900,000 300,000
Er Kwong Wah 300,000 2,200,000 1,600,000 600,000
Li Jian Xiong 700,000 4,700,000 3,300,000 1,400,000
Lu Cheng Gang 700,000 2,100,000 – 2,100,000
Ye Bin Lin 700,000 4,700,000 3,300,000 1,400,000
Liu De Tian 700,000 4,400,000 3,000,000 1,400,000
5,800,000 34,800,000 21,700,000 13,100,000
No option has been granted to controlling shareholders (as defi ned in the Listing Manual of the SGX-
ST) of the Company or their associates (as defi ned in the Listing Manual of the SGX-ST).
No option has been granted at a discount during the fi nancial year.
No participant under the Scheme 2002 has received 5% or more of the total number of shares under
option available under the Scheme 2002.
During the fi nancial year, 1,580,000 shares of the Company were allotted and issued by virtue of the
exercise of options to take up unissued shares of the Company. There were no unissued shares of
the subsidiaries under option at the end of the fi nancial year.
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Directors’ ReportFor the Financial Year Ended 31 December 2008
Share options (continued)
(b) Share options outstanding
The number of unissued ordinary shares of the Company under option in relation to the Scheme 2002
outstanding at the end of the fi nancial year was as follows:
Options relating to Scheme 2002
Numberof unissued
ordinary shares
at1.1.2008
Numberissued
during the fi nancial
year
Numberexercisedduring the fi nancial
year
Numbercancelled/
lapsedduring thefi nancial
year
Numberof unissued
ordinary shares
at31.12.2008
Exerciseprice Exercise period
‘000 ‘000 ‘000 ‘000 ‘000 $
2006 Options 4,070 – (130) (1,100) 2,840 1.23 21.2.2007 – 20.2.2016
2007 Options 16,270 – (1,450) (400) 14,420 2.48 5.2.2008 – 4.2.2017
2008 Options – 21,300 – (1,260) 20,040 2.95 24.3.2009 – 23.3.2018
20,340 21,300 (1,580) (2,760) 37,300
Independent Auditor
The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-
appointment.
On behalf of the directors
JIANG LI JUN MIN JIAN GUODirector Director
2 March 2009
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Statement by Directors
Annual Report 2008
For the Financial Year Ended 31 December 2008
In the opinion of the directors,
(a) the balance sheet of the Company and the consolidated fi nancial statements of the Group as set
out on pages 94 to 165 are drawn up so as to give a true and fair view of the state of affairs of the
Company and of the Group as at 31 December 2008, and of the results of the business, changes in
equity and cash fl ows of the Group for the fi nancial year then ended; and
(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to
pay its debts as and when they fall due.
On behalf of the directors
JIANG LI JUN MIN JIAN GUODirector Director
2 March 2009
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Independent Auditor’s ReportTo the Members of Cosco Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2008
We have audited the accompanying fi nancial statements of Cosco Corporation (Singapore) Limited (the
“Company”) and its subsidiaries (the “Group”) set out on pages 94 to 165, which comprise the balance
sheets of the Company and of the Group as at 31 December 2008, and the consolidated income statement,
the consolidated statement of changes in equity and the consolidated cash fl ow statement of the Group for
the fi nancial year then ended, and a summary of signifi cant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these fi nancial statements in
accordance with the provisions of the Singapore Companies Act (Cap. 50) (the “Act”) and Singapore Financial
Reporting Standards. This responsibility includes:
(a) devising and maintaining a system of internal accounting control suffi cient to provide a reasonable
assurance that assets are safeguarded against loss from unauthorised use or disposition; and
transactions are properly authorised and that they are recorded as necessary to permit the preparation
of true and fair profi t and loss accounts and balance sheets and to maintain accountability of assets;
(b) selecting and applying appropriate accounting policies; and
(c) making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an audit opinion on these fi nancial statements based on our audit. We
conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that
we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to
whether the fi nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the fi nancial statements. The procedures selected depend on the auditor’s judgement, including the
assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error.
In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation
and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s
internal control. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our
audit opinion.
Opinion
In our opinion,
(a) the balance sheet of the Company and the consolidated fi nancial statements of the Group are
properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting
Standards so as to give a true and fair view of the state of affairs of the Company and of the Group as
at 31 December 2008, and the results, changes in equity and cash fl ows of the Group for the fi nancial
year ended on that date; and
(b) the accounting and other records required by the Act to be kept by the Company and by those
subsidiaries incorporated in Singapore of which we are the auditor, have been properly kept in
accordance with the provisions of the Act.
PricewaterhouseCoopers LLP
Public Accountants and Certifi ed Public Accountants
Singapore, 2 March 2009
94
Consolidated Income Statement
Annual Report 2008
For the Financial Year Ended 31 December 2008
Notes 2008 2007
$’000 $’000
Sales 4 3,476,009 2,261,700
Cost of sales (2,845,875) (1,651,507)
Gross profi t 630,134 610,193
Other income (net) 7 207,942 111,204
Expenses
– Distribution (61,642) (64,713)
– Administrative (316,855) (147,704)
– Finance 8 (8,834) (11,444)
Share of profi t of associated companies 21 643 537
Profi t before income tax 451,388 498,073
Income tax expense 9 (31,620) (19,512)
Net profi t 419,768 478,561
Attributable to:
Equity holders of the Company 302,588 336,568
Minority interests 117,180 141,993
419,768 478,561
Earnings per share for profi t attributable to equity holders of the Company
(expressed in cents per share) 10
– Basic 13.51 15.09
– Diluted 13.50 15.02
The accompanying notes form an integral part of these fi nancial statements.
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Balance SheetsAs at 31 December 2008
The Group The Company
Notes 2008$’000
2007
$’000
2008$’000
2007
$’000
ASSETSCurrent assetsCash and cash equivalents 11 1,880,316 1,082,794 130,823 108,604
Forward currency contracts 12 10,063 33,523 – –
Trade and other receivables 13 1,570,108 821,112 80,596 553
Inventories 14 945,601 443,328 – –
Construction contract work-in-progress 15 170,143 43,132 – –
Trading property 16 – 977 – –
Other current assets 17 19,792 6,963 175 180
4,596,023 2,431,829 211,594 109,337
Non-current assetsForward currency contracts 12 1,441 8,778 – –
Trade and other receivables 18 – – 65,594 65,868
Financial assets, available-for-sale 19 3,630 3,067 – –
Club memberships 20 473 479 236 236
Investments in associated companies 21 2,577 1,794 – –
Investments in subsidiaries 22 – – 289,968 284,399
Investment properties 23 12,217 11,472 – –
Property, plant and equipment 24 2,081,950 1,478,453 896 932
Intangible assets 25 9,546 9,302 – –
Deferred income tax assets 30 91,417 21,996 – –
2,203,251 1,535,341 356,694 351,435
Total assets 6,799,274 3,967,170 568,288 460,772
LIABILITIESCurrent liabilitiesForward currency contracts 12 3,506 – – –
Trade and other payables 26 4,441,900 2,416,393 14,871 7,021
Current income tax liabilities 9 61,348 24,040 4,885 969
Borrowings 27 45,278 111,528 – –
Provisions for other liabilities 29 20,156 5,064 – –
4,572,188 2,557,025 19,756 7,990
Non-current liabilitiesForward currency contracts 12 6,375 42,264 – –
Borrowings 27 611,364 64,910 – –
Provisions for other liabilities 29 – 65 – 65
Deferred income tax liabilities 30 180 152 – –
617,919 107,391 – 65
Total liabilities 5,190,107 2,664,416 19,756 8,055
NET ASSETS 1,609,167 1,302,754 548,532 452,717
EQUITYCapital and reserves attributable to equity holders of the CompanyShare capital 31 270,608 266,852 270,608 266,852
Statutory and other reserves 32 167,904 82,806 41,865 24,554
Retained earnings 705,692 590,249 236,059 161,311
1,144,204 939,907 548,532 452,717
Minority interests 464,963 362,847 – –
Total equity 1,609,167 1,302,754 548,532 452,717
The accompanying notes form an integral part of these fi nancial statements.
96
Consolidated Statement of Changes in Equity
Annual Report 2008
For the Financial Year Ended 31 December 2008
Attributable to equity holders of the Company
Notes
Share capital
Statutoryand otherreserves
Retainedearnings Total
Minorityinterests
Totalequity
$’000 $’000 $’000 $’000 $’000 $’000
2008
Beginning of fi nancial year 266,852 82,806 590,249 939,907 362,847 1,302,754
Fair value changes for fi nancial
asset, available-for-sale 32(b)(v) – 134 – 134 129 263
Currency translation differences 32(b)(iii) – 37,246 – 37,246 28,129 65,375
Net gain recognised directly in
equity – 37,380 – 37,380 28,258 65,638
Net profi t – – 302,588 302,588 117,180 419,768
Total recognised gains – 37,380 302,588 339,968 145,438 485,406
Employee share option scheme:
– Value of director and employee
services 32(b)(i) – 17,311 – 17,311 – 17,311
– Issue of shares 31 3,756 – – 3,756 – 3,756
Minority’s share of interest in a
newly incorporated subsidiary – – – – 14,206 14,206
Increase in minority’s interest of a
subsidiary – – – – 186 186
Dividend declared by subsidiaries to
minority shareholders of
subsidiaries – – – – (57,714) (57,714)
Dividend for 2007 33 – – (156,738) (156,738) – (156,738)
Transfer from asset revaluation
reserve to retained earnings 32(b)(iv) – (3,218) 3,218 – – –
Transfer from retained earnings to
statutory reserve 32(b)(ii) – 33,625 (33,625) – – –
End of fi nancial year 270,608 167,904 705,692 1,144,204 464,963 1,609,167
The accompanying notes form an integral part of these fi nancial statements.
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Consolidated Statement of Changes in EquityFor the Financial Year Ended 31 December 2008
Attributable to equity holders of the Company
Notes
Share capital
Statutoryand otherreserves
Retainedearnings Total
Minorityinterests
Totalequity
$’000 $’000 $’000 $’000 $’000 $’000
2007
Beginning of fi nancial year 239,947 70,855 359,256 670,058 249,889 919,947
Currency translation differences 32(b)(iii) – (16,899) – (16,899) 17 (16,882)
Net loss recognised directly in
equity – (16,899) – (16,899) 17 (16,882)
Net profi t – – 336,568 336,568 141,993 478,561
Total recognised (loss)/gains – (16,899) 336,568 319,669 142,010 461,679
Employee share option scheme:
– Value of director and employee
services 32(b)(i) – 12,623 – 12,623 – 12,623
– Issue of shares 31 26,905 – – 26,905 – 26,905
Minorities’ share of increase in
registered capital of a subsidiary – – – – 27,036 27,036
Increase in minority’s interest of a
subsidiary – – – – 2,527 2,527
Dividend declared by subsidiaries to
minority shareholders of
subsidiaries – – – – (58,615) (58,615)
Dividend for 2006 33 – – (89,348) (89,348) – (89,348)
Revaluation and currency translation
reserves realised on dilution of
interests in subsidiary
32(b)(iii),
(iv) – (383) 383 – – –
Transfer from retained earnings to
translation reserve 32(b)(iii) – 440 (440) – – –
Transfer from asset revaluation
reserve to retained earnings 32(b)(iv) – (3,217) 3,217 – – –
Transfer from retained earnings to
statutory reserve 32(b)(ii) – 19,387 (19,387) – – –
End of fi nancial year 266,852 82,806 590,249 939,907 362,847 1,302,754
The accompanying notes form an integral part of these fi nancial statements.
98
Consolidated Cash Flow Statement
Annual Report 2008
For the Financial Year Ended 31 December 2008
Note 2008$’000
2007
$’000
Cash fl ows from operating activities
Net profi t 419,768 478,561
Adjustments for:
– Income tax expense 31,620 19,512
– Depreciation of property, plant and equipment and investment
properties 120,767 80,585
– Allowance for/(reversal of) impairment of trade and other
receivables 61,283 (95)
– Write-off for inventory obsolescence and inventory
write-down 20,907 173
– Impairment/(reversal of impairment) in value of transferable
club memberships 4 (62)
– Net (gain)/loss on disposal of property, plant and equipment (1,638) 2,347
– Expected losses recognised on construction contracts 89,048 –
– Property, plant and equipment written off 2,257 135
– Gain on dilution of interests in a subsidiary – (1,613)
– Gain on disposal of fi nancial assets, available-for-sale – (7)
– Employees share option expenses 17,311 12,623
– Net fair value (gain)/loss on forward currency contracts (1,526) 483
– Share of profi t from associated companies (643) (537)
– Dividend income (1,171) (586)
– Interest expense (fi nancing) 8,834 11,444
– Interest income (investing) (34,355) (14,030)
732,466 588,933
Changes in working capital:
– Inventories and construction contract work-in-progress (650,191) (285,076)
– Trade and other receivables (791,547) (556,499)
– Trade and other payables 1,898,403 1,885,617
– Trading properties 977 (177)
– Other current assets (12,829) (4,004)
– Provisions for other liabilities 15,027 (4,751)
– Exchange differences (58,414) 3,598
Cash generated from operations 1,133,892 1,627,641
Income tax paid (59,929) (29,475)
Net cash provided by operating activities 1,073,963 1,598,166
The accompanying notes form an integral part of these fi nancial statements.
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Consolidated Cash Flow StatementFor the Financial Year Ended 31 December 2008
Note 2008$’000
2007
$’000
Cash fl ows from investing activities
Proceeds from liquidation of an associated company – 423
Purchase of property, plant and equipment (664,583) (471,330)
Proceeds from disposal of property, plant and equipment 14,694 9,350
Purchase of transferable club memberships – (11)
Purchase of fi nancial assets, available-for-sale – (975)
Purchase of investment properties (1,063) –
Proceeds from disposal of fi nancial assets, available-for-sale – 127
Dividends received 1,171 983
Interest received 15,650 13,934
Net cash used in investing activities (634,131) (447,499)
Cash fl ows from fi nancing activities
Proceeds from issuance of ordinary shares 3,756 26,905
Proceeds from borrowings 609,514 1,800
Repayments of borrowings (129,081) (231,788)
Repayments of fi nance lease liabilities (22) (31)
Proceeds from minority shareholders for increase in registered
capital of a subsidiary 14,206 –
Increase in cash collateral (10,275) 99
Interest paid (8,534) (12,648)
Dividends paid to shareholders of the Company (156,738) (89,348)
Dividends paid to minority shareholders of subsidiaries (21,492) (29,307)
Net cash provided by/(used in) fi nancing activities 301,334 (334,318)
Net increase in cash and cash equivalents 741,166 816,349
Cash and cash equivalents at beginning of fi nancial year 1,078,586 273,561
Effects of currency translation on cash and cash equivalents 46,081 (11,324)
Cash and cash equivalents at end of fi nancial year 11 1,865,833 1,078,586
The accompanying notes form an integral part of these fi nancial statements.
100
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
These notes form an integral part of and should be read in conjunction with the accompanying fi nancial
statements.
1. General information
Cosco Corporation (Singapore) Limited (the “Company”) is incorporated and domiciled in Singapore.
The address of its registered offi ce is 9 Temasek Boulevard, #07-00 Suntec Tower Two, Singapore
038989.
The Company is listed on the Singapore Exchange.
The principal activities of the Company are those of investment holding and provision of management
services to the subsidiaries. The principal activities of its subsidiaries are set out in Note 22 to the
fi nancial statements.
2. Signifi cant accounting policies
2.1 Basis of preparation
These fi nancial statements have been prepared in accordance with Singapore Financial Reporting
Standards (“FRS”). The fi nancial statements have been prepared under the historical cost convention,
except as disclosed in the accounting policies below.
The preparation of fi nancial statements in conformity with FRS requires management to exercise
its judgement in the process of applying the Group’s accounting policies. It also requires the use of
certain critical accounting estimates and assumptions. Areas involving a higher degree of judgement
or complexity, or areas where assumptions and estimates are signifi cant to the fi nancial statements,
are disclosed in Note 3.
Interpretations and amendments to published standards effective in 2008
On 1 January 2008, the Group adopted the new or amended FRS and Interpretations to FRS (“INT
FRS”) that are mandatory for application from that date. Changes to the Group’s accounting policies
have been made as required, in accordance with the transitional provisions in the respective FRS and
INT FRS.
The following are the new or amended FRS and INT FRS that are relevant to the Group:
INT FRS 111 Group and Treasury Share Transactions
In addition, amendments to FRS 39 – Financial Instruments: Recognition and Measurement and FRS
107 – Financial Instruments: Disclosures – Reclassifi cation of Financial Assets, were adopted by the
Company with effect from 1 July 2008.
The adoption of the above amended FRS and INT FRS did not result in any substantial changes to the
Group’s accounting policies nor any signifi cant impact on these fi nancial statements.
2.2 Revenue recognition
Sales comprise the fair value of the consideration received or receivable for the ship repair, ship
building and marine engineering income, rental income, time charter revenue, shipping agency income
and sale of scrap materials in the ordinary course of the Group’s activities. Sales are presented net of
value-added tax, rebates and discounts, and after eliminating sales within the Group.
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.2 Revenue recognition (continued)
The Group recognises revenue when the amount of revenue and related cost can be reliably
measured, when it is probable that the collectibility of the related receivables is reasonably assured
and when the specifi c criteria for each of the Group’s activities are met as follows:
(a) Rendering of services
(i) Shipping
Revenue from time charter is recognised on a straight-line basis over the period of the
time charter agreement. Any losses arising from time charters are provided for in full
as soon as they are expected.
Booking commissions, agency and transhipment fees are recognised upon the rendering
of services to customers.
Revenue from freight forwarding, transport agency and feeder services are recognised
when the service is rendered.
(ii) Ship repair, ship building and marine related activities
Revenue from ship repair, ship building, marine engineering, container repairs and
services, fabrication work services and production of marine outfi tting components is
recognised on the percentage-of-completion method based on progress of the contract
work, where the outcome of the contract can be estimated reliably. If the contract
covers a number of projects and the cost and revenue of such individual projects can
be identifi ed within the terms of the overall contract, each such project is treated as a
separate contract. Provision is made in full where applicable for expected losses on
contracts in progress. Please refer to the paragraph “Construction contracts” for the
accounting policy on revenue from construction contracts for ship building and marine
related activities.
(b) Rental income
Rental income from operating leases on trading property, investment properties and property,
plant and equipment is recognised on the straight-line basis over the lease term.
(c) Sale of scrap materials
Revenue from sale of scrap materials is recognised when a Group entity has delivered the
products to the customer, the customer has accepted the products and collectibility of the
related receivables is reasonably assured.
(d) Interest income
Interest income is recognised on a time-proportion basis using the effective interest method.
(e) Dividend income
Dividend income is recognised when the right to receive payment is established.
102
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.3 Group accounting
(a) Subsidiaries
Subsidiaries are entities over which the Group has power to govern the fi nancial and operating
policies, generally accompanied by a shareholding giving rise to the majority of the voting
rights. The existence and effect of potential voting rights that are currently exercisable or
convertible are considered when assessing whether the Group controls another entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries. The
cost of an acquisition is measured as the fair value of the assets given, equity instruments
issued or liabilities incurred or assumed at the dates of exchange, plus costs directly
attributable to the acquisition. Identifi able assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values on the
date of acquisition, irrespective of the extent of minority interest. Please refer to the paragraph
“Intangible assets – Goodwill” for the accounting policy on goodwill on acquisition of
subsidiaries.
Subsidiaries are consolidated from the date on which control is transferred to the Group. They
are de-consolidated from the date on which control ceases.
In preparing the consolidated fi nancial statements, transactions, balances and unrealised gains
on transactions between group entities are eliminated. Unrealised losses are also eliminated
but are considered an impairment indicator of the asset transferred. Accounting policies of
subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Minority interests are that part of the net results of operations and of net assets of a subsidiary
attributable to the interests which are not owned directly or indirectly by the Group. They are
measured at the minorities’ share of fair value of subsidiaries’ identifi able assets and liabilities
at the date of acquisition by the Group and the minorities’ share of changes in equity since
the date of acquisition, except when the minorities’ share of losses in a subsidiary exceeds
its interests in the equity of that subsidiary. In such cases, the excess and further losses
applicable to the minorities are attributed to the equity holders of the Company, unless the
minorities have a binding obligation to, and are able to, make good the losses. When that
subsidiary subsequently reports profi ts, the profi ts applicable to the minority interests are
attributed to the equity holders of the Company until the minorities’ share of losses previously
absorbed by the equity holders of the Company are fully recovered.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the
accounting policy on investments in subsidiaries in the separate fi nancial statements of the
Company.
(b) Transactions with minority interests
The Group applies a policy of treating transactions with minority interests as transactions with
parties external to the Group. Disposals to minority interests result in gains and losses for the
Group that are recognised in the income statement. Purchases from minority interests result
in goodwill, being the difference between any consideration paid and the Group’s incremental
share of the carrying value of identifi able net assets of the subsidiary.
(c) Associated companies
Associated companies are entities over which the Group has signifi cant infl uence, but not
control, and generally accompanied by a shareholding giving rise to between and including
20% and 50% of the voting rights. Investments in associated companies are accounted for in
the consolidated fi nancial statements using the equity method of accounting less impairment
losses.
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.3 Group accounting (continued)
(c) Associated companies (continued)
Investments in associated companies are initially recognised at cost. The cost of an acquisition
is measured at the fair value of the assets given, equity instruments issued or liabilities incurred
or assumed at the date of exchange, plus costs directly attributable to the acquisition.
In applying the equity method of accounting, the Group’s share of its associated companies’
post-acquisition profits or losses is recognised in the income statement and its share
of post-acquisition movements in reserves is recognised in equity directly. These post-
acquisition movements are adjusted against the carrying amount of the investment. When
the Group’s share of losses in an associated company equals or exceeds its interest in the
associated company, including any other unsecured non-current receivables, the Group does
not recognise further losses, unless it has obligations or has made payments on behalf of the
associated company.
Unrealised gains on transactions between the Group and its associated companies are
eliminated to the extent of the Group’s interest in the associated companies. Unrealised
losses are also eliminated unless the transaction provides evidence of an impairment of the
asset transferred. Accounting policies of associated companies have been changed where
necessary to ensure consistency with the accounting policies adopted by the Group.
Dilution gains and losses arising from investments in associated companies are recognised in
the income statement.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the
accounting policy on investments in associated companies in the separate fi nancial statements
of the Company.
2.4 Property, plant and equipment
(a) Measurement
(i) Land and buildings
Land and buildings are initially recognised at cost. Freehold land is subsequently
carried at cost less accumulated impairment losses. Buildings and leasehold land
are subsequently carried at cost less accumulated depreciation and accumulated
impairment losses.
(ii) Motor vessels
Motor vessels are initially recognised at cost and subsequently carried at cost less
accumulated depreciation and accumulated impairment losses.
The cost of motor vessels includes actual interest incurred on borrowings used to
fi nance the motor vessels while under construction and other direct relevant expenditure
incurred in bringing the vessels into operation. For this purpose, the interest rate applied
to funds provided for constructing the motor vessels is arrived at by reference to the
actual rate payable on borrowings for construction purposes. The capitalisation of
interest charges will cease upon the completion and delivery of the motor vessels.
(iii) Other property, plant and equipment
All other items of property, plant and equipment are initially recognised at cost
and subsequently carried at cost less accumulated depreciation and accumulated
impairment losses.
104
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.4 Property, plant and equipment (continued)
(a) Measurement (continued)
(iv) Components of costs
The cost of an item of property, plant and equipment initially recognised includes
its purchase price and any cost that is directly attributable to bringing the asset to
the location and condition necessary for it to be capable of operating in the manner
intended by management. Cost also includes borrowing costs. The projected cost of
dismantlement, removal or restoration is also recognised as part of the cost of property,
plant and equipment if the obligation for the dismantlement, removal or restoration is
incurred as a consequence of either acquiring or using the asset for purposes other
than to produce inventories.
(b) Depreciation
Freehold land is not depreciated. Depreciation on other items of property, plant and equipment
is calculated using the straight-line method to allocate their depreciable amounts over their
estimated useful lives as follows:
Useful lives
Buildings on freehold land 20 - 50 years
Leasehold land and buildings 10 - 50 years
Offi ce renovations, furniture, fi xtures and equipment 3 - 10 years
Plant, machinery and equipment 3 - 10 years
Motor vehicles 5 - 10 years
Motor vessels 15 years
Docks and quays 30 years
No depreciation is provided for construction-in-progress.
On 1 January 2008, the estimated useful life of motor vessels was changed from 25 years to
15 years which is considered to be economically more realistic. The change in accounting
estimate has been applied prospectively subsequently to that date. Accordingly, the adopting
of the change in new estimate has no effect in prior years. The effect on the fi nancial year
ended 31 December 2008 is to increase depreciation expense by $15,373,000 and decrease
the carrying amount of motor vessels by $15,373,000.
The residual values, estimated useful lives and depreciation method of property, plant and
equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects
of any revision are recognised in the income statement when the changes arise.
(c) Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has already been
recognised is added to the carrying amount of the asset only when it is probable that future
economic benefi ts associated with the item will fl ow to the Group and the cost of the item can
be measured reliably. All other repair and maintenance expenses are recognised in the income
statement when incurred.
The motor vessels are subject to overhauls at regular intervals. The inherent components of
the initial overhaul are determined based on the estimated costs of the next overhaul and are
separately depreciated over a period of 21/2 years in order to refl ect the estimated intervals
between two overhauls. The costs of the overhauls subsequently incurred are capitalised as
additions and the carrying amounts of the replaced components are written off to the income
statement.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.4 Property, plant and equipment (continued)
(d) Disposal
On disposal of an item of property, plant and equipment, the difference between the disposal
proceeds and its carrying amount is recognised in the income statement.
2.5 Intangible assets
Goodwill on acquisitions
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of
the identifi able assets, liabilities and contingent liabilities of the acquired subsidiaries and associated
companies at the date of acquisition.
Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less
accumulated impairment losses.
Goodwill on associated companies is included in the carrying amount of the investments.
Gains and losses on the disposal of subsidiaries and associated companies include the carrying
amount of goodwill relating to the entity sold, except for goodwill arising from acquisitions prior to 1
January 2001. Such goodwill was adjusted against retained earnings in the year of acquisition and not
recognised in the income statement on disposal.
2.6 Borrowing costs
Borrowing costs are recognised in the income statement using the effective interest method except
for those costs that are directly attributable to borrowings acquired specifi cally for the construction of
motor vessels, docks and quays. The actual borrowing costs incurred during the construction period
less any investment income on temporary investments of these borrowings, are capitalised in the cost
of the docks and quays.
2.7 Construction contracts
A construction contract is a contract specifi cally negotiated for the construction of an asset or
a combination of assets that are closely interrelated or interdependent in terms of their design,
technology and functions or their ultimate purpose or use.
Contract costs are recognised when incurred.
When the outcome of a construction contract can be estimated reliably, contract revenue and contract
costs are recognised as revenue and expenses respectively by reference to the stage of completion
of the contract activity at the balance sheet date (“percentage-of-completion method”). When the
outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to
the extent of contract costs incurred that are likely to be recoverable. When it is probable that total
contract costs will exceed total contract revenue, the expected loss is recognised as an expense
immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in
the contract work and claims that can be measured reliably. A variation or a claim is recognised as
contract revenue when it is probable that the customer will approve the variation or negotiations have
reached an advanced stage such that it is probable that the customer will accept the claim.
106
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.7 Construction contracts (continued)
The stage of completion is measured by reference to the completion of a physical proportion of the
contract work. Costs incurred during the fi nancial year in connection with future activity on a contract
are excluded from costs incurred to date when determining the stage of completion of a contract.
Such costs are shown as construction contract work-in-progress on the balance sheet unless it is not
probable that such contract costs are recoverable from the customers, in which case, such costs are
recognised as an expense immediately.
At the balance sheet date, the aggregated costs incurred plus recognised profi t (less recognised loss)
on each contract is compared against the progress billings. Where costs incurred plus the recognised
profi ts (less recognised losses) exceed progress billings, the balance is presented as due from
customers on construction contracts within “trade and other receivables”. Where progress billings
exceed costs incurred plus recognised profi ts (less recognised losses), the balance is presented as
due to customers on construction contracts within “trade and other payables”.
Progress billings not yet paid by customers and retentions are included within “trade and other
receivables”. Advances received are included within “trade and other payables”.
2.8 Investment properties
Investment properties include those portions of offi ce buildings that are held for long-term rental yields
and/or for capital appreciation.
Investment properties are initially recognised at cost and subsequently carried at cost less
accumulated depreciation and accumulated impairment losses. Depreciation is calculated using a
straight-line method to allocate the depreciable amounts over the estimated useful lives of 50 years.
The residual values, useful lives and depreciation method of investment properties are reviewed, and
adjusted as appropriate, at each balance sheet date. The effects of any revision are included in the
income statement when the changes arise.
Investment properties are subject to renovations or improvements at regular intervals. The cost of
major renovations and improvements is capitalised as addition and the carrying amounts of the
replaced components are written off to the income statement. The cost of maintenance, repairs and
minor improvements is charged to the income statement when incurred.
On disposal of an investment property, the difference between the disposal proceeds and the carrying
amount is recognised in the income statement.
2.9 Trading property
Trading property is held for sale in the ordinary course of business and is stated at the lower of cost
and estimated net realisable value. Cost of the trading property comprises its purchase price.
The net realisable value is the estimated selling price in the ordinary course of business, less the cost
of completion and selling expenses.
2.10 Investments in subsidiaries and associated companies
Investments in subsidiaries and associated companies are stated at cost less accumulated impairment
losses in the Company’s balance sheet. On disposal of investments in subsidiaries and associated
companies, the difference between disposal proceeds and the carrying amounts of the investments
are recognised in the income statement.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.11 Impairment of non-fi nancial assets
(a) Goodwill
Goodwill is tested for impairment annually, and whenever there is indication that the goodwill
may be impaired. Goodwill included in the carrying amount of an investment in associated
company is tested for impairment as part of the investment, rather than separately.
For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s
cash-generating-units (“CGU”) expected to benefi t from synergies arising from the business
combination.
An impairment loss is recognised when the carrying amount of a CGU, including the goodwill,
exceeds the recoverable amount of the CGU. The recoverable amount of a CGU is the higher
of a CGU’s fair value less cost to sell and value-in-use.
The total impairment loss of a CGU is allocated fi rst to reduce the carrying amount of goodwill
allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the
carrying amount of each asset in the CGU.
An impairment loss on goodwill is recognised in the income statement and is not reversed in a
subsequent period.
(b) Property, plant and equipment
Investment properties
Investments in subsidiaries and associated companies
Property, plant and equipment, investment properties and investments in subsidiaries and
associated companies are tested for impairment whenever there is any objective evidence or
indication that these assets may be impaired.
For the purpose of impairment testing of these assets, the recoverable amount (i.e. the higher
of the fair value less cost to sell and the value-in-use) is determined on an individual asset
basis unless the asset does not generate cash fl ows that are largely independent of those from
other assets. If this is the case, the recoverable amount is determined for the CGU to which
the asset belongs.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying
amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount is recognised as an
impairment loss in the income statement unless the asset is carried at revalued amount, in
which case, such impairment loss is treated as a revaluation decrease.
An impairment loss for an asset other than goodwill is reversed if, and only if, there has been
a change in the estimates used to determine the asset’s recoverable amount since the last
impairment loss was recognised. The carrying amount of this asset is increased to its revised
recoverable amount, provided that this amount does not exceed the carrying amount that
would have been determined (net of any accumulated amortisation or depreciation) had no
impairment loss been recognised for the asset in prior years.
A reversal of impairment loss for an asset other than goodwill is recognised in the income
statement, unless the asset is carried at revalued amount, in which case, such reversal
is treated as a revaluation increase. However, to the extent that an impairment loss on the
same revalued asset was previously recognised in the income statement, a reversal of that
impairment is also recognised in the income statement.
108
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.12 Financial assets
(a) Classifi cation
The Group classifi es its fi nancial assets in the following categories: at fair value through profi t
or loss, loans and receivables, held-to-maturity, and available-for-sale. The classifi cation
depends on the purpose for which the assets were acquired. Management determines the
classifi cation of its fi nancial assets at initial recognition. The designation of fi nancial assets at
fair value through profi t or loss is irrevocable.
(i) Financial assets, at fair value through profi t or loss
This category has two sub-categories: fi nancial assets held for trading, and those
designated at fair value through profi t or loss at inception. A fi nancial asset is classifi ed
as held for trading if it is acquired principally for the purpose of selling in the short
term. Financial assets designated as at fair value through profi t or loss at inception
are those that are managed and their performances are evaluated on a fair value
basis, in accordance with a documented Group investment strategy. Derivatives are
also categorised as held for trading unless they are designated as hedges. Assets in
this category are presented as current assets if they are either held for trading or are
expected to be realised within 12 months after the balance sheet date.
(ii) Loans and receivables
Loans and receivables are non-derivative fi nancial assets with fi xed or determinable
payments that are not quoted in an active market. They are presented as current
assets, except for those maturing later than 12 months after the balance sheet date
which are presented as non-current assets. Loans and receivables include “trade and
other receivables” and “cash and cash equivalents” except for non-current interest-free
receivables from a subsidiary which have been accounted for in accordance with the
accounting policy on investments in subsidiaries and associated companies (Note 2.10).
(iii) Financial assets, held-to-maturity
Financial assets, held-to-maturity are non-derivative fi nancial assets with fi xed or
determinable payments and fi xed maturities that the Group’s management has the
positive intention and ability to hold to maturity. If the Group were to sell other than an
insignifi cant amount of held-to-maturity fi nancial assets, the whole category would be
tainted and reclassifi ed as available-for-sale. They are presented as non-current assets,
except for those maturing within 12 months after the balance sheet date which are
presented as current assets. The Group currently does not have any held-to-maturity
fi nancial assets.
(iv) Financial assets, available-for-sale
Financial assets, available-for-sale are non-derivatives that are either designated in this
category or not classifi ed in any of the other categories. They are presented as non-
current assets unless management intends to dispose of the assets within 12 months
after the balance sheet date.
(b) Recognition and derecognition
Regular way purchases and sales of fi nancial assets are recognised on trade-date – the date
on which the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash fl ows from the fi nancial
assets have expired or have been transferred and the Group has transferred substantially all
risks and rewards of ownership. On disposal of a fi nancial asset, the difference between the
carrying amount and the sale proceeds is recognised in the income statement. Any amount in
the fair value reserve relating to that asset is transferred to the income statement.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.12 Financial assets (continued)
(c) Initial measurement
Financial assets are initially recognised at fair value plus transaction costs except for fi nancial
assets at fair value through profi t or loss, which are recognised at fair value. Transaction costs
for fi nancial assets at fair value through profi t and loss are recognised immediately in the
income statement.
(d) Subsequent measurement
Financial assets, both available-for-sale and at fair value through profi t or loss are subsequently
carried at fair value. Loans and receivables and financial assets, held-to-maturity are
subsequently carried at amortised cost using the effective interest method.
Changes in the fair value of fi nancial assets, at fair value through profi t or loss, including the
effects of currency translation, interest and dividend, are recognised in the income statement
when the changes arise.
Interest and dividend income on fi nancial assets, available-for-sale are recognised separately
in the income statement. Changes in the fair values of available-for-sale debt securities (i.e.
monetary items) denominated in foreign currencies are analysed into currency translation
differences on the amortised cost of the securities and other changes; the currency translation
differences are recognised in the income statement and the other changes are recognised in
the fair value reserve. Changes in fair values of available-for-sale equity securities (i.e. non-
monetary items) are recognised in the fair value reserve, together with the related currency
translation differences.
(e) Impairment
The Group assesses at each balance sheet date whether there is objective evidence that
a fi nancial asset or a group of fi nancial assets is impaired and recognises an allowance for
impairment when such evidence exists.
(i) Loans and receivables / Financial assets, held-to-maturity
Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter
bankruptcy, and default or signifi cant delay in payments are objective evidence that
these fi nancial assets are impaired.
The carrying amount of these assets is reduced through the use of an impairment
allowance account which is calculated as the difference between the carrying amount
and the present value of estimated future cash fl ows, discounted at the original
effective interest rate. When the asset becomes uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously written off are
recognised against the same line item in the income statement.
The allowance for impairment loss account is reduced through the income statement
in a subsequent period when the amount of impairment loss decreases and the related
decrease can be objectively measured. The carrying amount of the asset previously
impaired is increased to the extent that the new carrying amount does not exceed the
amortised cost, had no impairment been recognised in prior periods.
110
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.12 Financial assets (continued)
(e) Impairment (continued)
(ii) Financial assets, available-for-sale
Signifi cant or prolonged declines in the fair value of the security below its cost and the
disappearance of an active trading market for the security are objective evidences that
the security is impaired.
The cumulative loss that was recognised in the fair value reserve is transferred to the
income statement. The cumulative loss is measured as the difference between the
acquisition cost (net of any principal repayments and amortisation) and the current
fair value, less any impairment loss previously recognised in the income statement on
debt securities. The impairment losses recognised in the income statement on equity
securities are not reversed through the income statement.
2.13 Financial guarantees
The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries.
These guarantees are fi nancial guarantees as they require the Company to reimburse the banks if the
subsidiaries fail to make principal or interest payments when due in accordance with the terms of their
borrowings.
Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s
balance sheet.
Financial guarantees are subsequently amortised to the income statement over the period of the
subsidiaries’ borrowings, unless it is probable that the Company will reimburse the bank for an
amount higher than the unamortised amount. In this case, the fi nancial guarantees shall be carried at
the expected amount payable to the bank in the Company’s balance sheet.
Intra-group transactions are eliminated on consolidation.
2.14 Borrowings
Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at
amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the period of the borrowings using the effective
interest method.
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer
settlement for at least 12 months after the balance sheet date.
2.15 Trade and other payables
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised
cost using the effective interest method.
2.16 Derivative fi nancial instruments and hedging activities
A derivative fi nancial instrument is initially recognised at its fair value on the date the contract is
entered into and is subsequently carried at its fair value. The method of recognising the resulting gain
or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature
of the item being hedged.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.16 Derivative fi nancial instruments and hedging activities (continued)
The Group documents at the inception of the transaction the relationship between hedging instruments
and hedged items, as well as its risk management objective and strategies for undertaking various
hedge transactions. The Group also documents its assessment, both at hedge inception and on an
ongoing basis, on whether the derivatives designated as hedging instruments are highly effective in
offsetting changes in fair values or cash fl ows of the hedged items.
The Group designates each hedge as either (a) fair value hedge; or (b) cash fl ow hedge.
(a) Fair value hedge and cash fl ow hedge
The Group has not designated any derivatives as hedging instruments during the fi nancial year.
(b) Derivatives that are not designated or do not qualify for hedge accounting
Fair value changes on these derivatives are recognised in the income statement when the
changes arise.
2.17 Fair value estimation of fi nancial assets and liabilities
The fair values of fi nancial instruments traded in active markets (such as exchange-traded and over-
the-counter securities and derivatives) are based on quoted market prices at the balance sheet date.
The quoted market prices used for fi nancial assets are the current bid prices; the appropriate quoted
market prices for fi nancial liabilities are the current ask prices.
The fair values of fi nancial instruments that are not traded in an active market are determined by using
valuation techniques. The Group uses a variety of methods and makes assumptions that are based
on market conditions existing at each balance sheet date. Where appropriate, quoted market prices
or dealer quotes for similar instruments are used. Valuation techniques, such as discounted cash fl ow
analyses, are also used to determine the fair values of the fi nancial instruments.
The fair values of currency forwards are determined using actively quoted forward exchange rates.
The fair values of current fi nancial assets and liabilities carried at amortised cost approximate their
carrying amounts.
2.18 Leases
(a) When the Group is the lessee:
The Group leases certain property, plant and equipment from third parties.
(i) Lessee - Finance leases
Leases of property, plant and equipment where the Group assumes substantially all
risks and rewards incidental to ownership of the leased assets are classifi ed as fi nance
leases.
The leased assets and the corresponding lease liabilities (net of fi nance charges) under
fi nance leases are recognised on the balance sheet as property, plant and equipment
and borrowings respectively, at the inception of the leases based on the lower of the fair
value of the leased assets and the present value of the minimum lease payments.
Each lease payment is apportioned between the fi nance expense and the reduction
of the outstanding lease liability. The fi nance expense is recognised in the income
statement on a basis that refl ects a constant periodic rate of interest on the fi nance
lease liability.
112
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.18 Leases (continued)
(a) When the Group is the lessee: (continued)
(ii) Lessee - Operating leases
Leases of property, plant and equipment where substantially all risks and rewards
incidental to ownership are retained by the lessors are classifi ed as operating leases.
Payments made under operating leases (net of any incentives received from the lessors)
are recognised in the income statement on a straight-line basis over the period of the
lease.
Contingent rents are recognised as an expense in the income statement when incurred.
(b) When the Group is the lessor:
The Group leases certain items of property, plant and equipment, investment properties and
trading properties to non-related parties.
(i) Lessor - Operating leases
Leases of property, plant and equipment, investment properties and trading properties
where the Group retains substantially all risks and rewards incidental to ownership are
classifi ed as operating leases.
Rental income from operating leases (net of any incentives given to lessees) is
recognised in the income statement on a straight-line basis over the lease term.
Initial direct costs incurred by the Group in negotiating and arranging an operating lease
are added to the carrying amount of the leased asset and recognised as an expense in
the income statement over the lease term on the same basis as the lease income.
Contingent rents are recognised as income in the income statement when earned.
2.19 Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using the
weighted average method. The cost of fi nished goods and work-in-progress comprises raw materials,
direct labour, other direct costs and related production overheads (based on normal operating
capacity) but excludes borrowing costs. Net realisable value is the estimated selling price in the
ordinary course of business, less applicable variable selling expenses.
2.20 Income taxes
Current income tax for current and prior periods is recognised at the amount expected to be paid
to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or
substantively enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the fi nancial statements except when the deferred
income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is
not a business combination and affects neither accounting nor taxable profi t or loss at the time of the
transaction.
A deferred income tax liability is recognised on temporary differences arising on investments in
subsidiaries and associated companies, except where the Group is able to control the timing of the
reversal of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.20 Income taxes (continued)
A deferred income tax asset is recognised to the extent that it is probable that future taxable profi t will
be available against which the deductible temporary differences and tax losses can be utilised.
Deferred income tax is measured:
(i) at the tax rates that are expected to apply when the related deferred income tax asset is
realised or the deferred income tax liability is settled, based on tax rates and tax laws that have
been enacted or substantively enacted by the balance sheet date; and
(ii) based on the tax consequence that will follow from the manner in which the Group expects, at
the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.
Current and deferred income tax are recognised as income or expense in the income statement for
the period, except to the extent that the tax arises from a business combination or a transaction which
is recognised directly in equity. Deferred tax arising from a business combination is adjusted against
goodwill on acquisition.
2.21 Provisions
Provisions for warranty and other liabilities are recognised when the Group has a present legal or
constructive obligation as a result of past events; it is more likely than not that an outfl ow of resources
will be required to settle the obligation; and the amount has been reliably estimated. Provisions are
not recognised for future operating losses.
The Group recognises the estimated liability to repair or replace products still under warranty at
the balance sheet date. This provision is calculated based on estimates by technical engineers and
historical experience of the level of repairs and replacements.
Other provisions are measured at the present value of the expenditure expected to be required to
settle the obligation using a pre-tax discount rate that refl ects the current market assessment of the
time value of money and the risks specifi c to the obligation. The increase in the provision due to the
passage of time is recognised in the income statement as fi nance expense.
Changes in the estimated timing or amount of the expenditure or discount rate are recognised in the
income statement when the changes arise.
2.22 Employee compensation
(a) Defi ned contribution plans
Defi ned contribution plans are post-employment benefi t plans under which the Group pays
fi xed contributions into separate entities such as the Central Provident Fund and social security
plans in the People’s Republic of China (the “PRC”) on a mandatory, contractual or voluntary
basis. The Group has no further payment obligations once the contributions have been paid.
(b) Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to employees. A
provision is made for the estimated liability for annual leave as a result of services rendered by
employees up to the balance sheet date.
114
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.22 Employee compensation (continued)
(c) Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value of
the employee services received in exchange for the grant of the options is recognised as an
expense in the income statement with a corresponding increase in the share option reserve
over the vesting period. The total amount to be recognised over the vesting period is
determined by reference to the fair value of the options granted on the date of the grant. Non-
market vesting conditions are included in the estimation of the number of shares under option
that are expected to become exercisable on the vesting date. At each balance sheet date, the
Group revises its estimates of the number of shares under option that are expected to become
exercisable on the vesting date and recognises the impact of the revision of the estimates in
the income statement, with a corresponding adjustment to the share option reserve over the
remaining vesting period.
When the options are exercised, the proceeds received (net of transaction costs) are credited
to share capital account when new ordinary shares are issued.
2.23 Currency translation
(a) Functional and presentation currency
Items included in the fi nancial statements of each entity in the Group are measured using the
currency of the primary economic environment in which the entity operates (the “functional
currency”). The consolidated fi nancial statements are presented in Singapore Dollar, which is
the Company’s functional currency.
(b) Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”) are translated
into the functional currency using the exchange rates at the dates of the transactions. Currency
translation differences from the settlement of such transactions and from the translation of
monetary assets and liabilities denominated in foreign currencies at the closing rates at the
balance sheet date are recognised in the income statement, unless they arise from borrowings
in foreign currencies, other currency instruments designated and qualifying as net investment
hedges and net investment in foreign operations. Those currency translation differences are
recognised in the currency translation reserve in the consolidated fi nancial statements and
transferred to the income statement as part of the gain or loss on disposal of the foreign
operation.
Non-monetary items that are measured at fair values in foreign currencies are translated using
the exchange rates at the date when the fair values are determined.
(c) Translation of Group entities’ fi nancial statements
The results and fi nancial position of all the Group entities (none of which has the currency of
a hyperinfl ationary economy) that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
(i) Assets and liabilities are translated at the closing exchange rates at the date of the
balance sheet;
(ii) Income and expenses are translated at average exchange rates (unless the average
is not a reasonable approximation of the cumulative effect of the rates prevailing on
the transaction dates, in which case, income and expenses are translated using the
exchange rates at the dates of the transactions); and
(iii) All resulting currency translation differences are recognised in the currency translation
reserve.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
2. Signifi cant accounting policies (continued)
2.23 Currency translation (continued)
(c) Translation of Group entities’ fi nancial statements (continued)
Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after
1 January 2005 are treated as assets and liabilities of the foreign operations and translated at
the closing rates at the date of the balance sheet. For acquisitions prior to 1 January 2005, the
exchange rates at the dates of acquisition are used.
2.24 Segment reporting
A business segment is a distinguishable component of the Group engaged in providing products or
services that are subject to risks and returns that are different from those of other business segments.
A geographical segment is a distinguishable component of the Group engaged in providing products
or services within a particular economic environment that is subject to risks and returns that are
different from those of segments operating in other economic environments.
2.25 Cash and cash equivalents
For the purpose of presentation in the consolidated cash fl ow statement, cash and cash equivalents
include cash on hand, deposits with fi nancial institutions which are subject to an insignifi cant risk of
change in value and bank overdrafts and exclude pledged deposits with fi nancial institutions. Bank
overdrafts are presented as current borrowings on the balance sheet.
2.26 Share capital
Ordinary shares are classifi ed as equity. Incremental costs directly attributable to the issuance of new
ordinary shares are deducted against the share capital account.
2.27 Dividends to Company’s shareholders
Dividends to Company’s shareholders are recognised when the dividends are approved for payment.
3. Critical accounting estimates, assumptions and judgements
Estimates, assumptions and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances.
(a) Uncertain tax positions
The Group is subject to income taxes in numerous jurisdictions. In determining the tax
liabilities, management applies the statutory tax rate of the tax jurisdictions in which the
subsidiaries operate in and is required to estimate the amount of capital allowances and the
deductibility of certain expenses (“uncertain tax positions”) at each tax jurisdiction. There are
many transactions and calculations for which the ultimate tax determination is uncertain during
the ordinary course of business. The Group recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. The Group is in the process
of applying for preferential tax rates for its certain subsidiaries. Where the fi nal tax outcome
of these matters is different from the amount that were initially recorded, such differences
will impact the income tax and deferred income tax provisions in the period in which such
determination is made.
116
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
3. Critical accounting estimates, assumptions and judgements (continued)
(a) Uncertain tax positions (continued)
If the actual fi nal outcome (on the judgement areas) differs by 10% from the management’s
estimates, the Group would need to:
– increase the income tax liability by $6,771,000, if unfavourable; or
– decrease the income tax liability by $6,771,000, if favourable.
(b) Construction contracts
The Group uses the percentage-of-completion method to account for its contract revenue. The
stage of completion is measured by reference to the completion of a physical proportion of the
contract work.
Signifi cant judgement is required in determining the stage of completion, the estimated total
contract costs, the estimated completion dates, as well as the recoverability of the contracts.
If the estimated total contract revenue increases/decreases by 10% from management’s
estimates, the Group’s revenue will increase/decrease by $127,756,000.
If the contract costs to be incurred increase/decrease by 10% from management’s estimates,
the Group’s profi t will decrease/increase by $133,972,000.
(c) Useful life of property, plant and equipment
The management of the Group determines the estimated useful lives and related depreciation
expense for the property, plant and equipment. The management of the Group estimates useful
lives of the property, plant and equipment by reference to expected usage of the property, plant
and equipment, expected repair and maintenance, and technical or commercial obsolescence
arising from changes or improvements in the market. The useful lives and related depreciation
expense could change signifi cantly as a result of the changes in these factors.
(d) Impairment of receivables
Management reviews its receivables for objective evidence of impairment at least quarterly.
Significant financial difficulties of the debtor, the probability that the debtor will enter
bankruptcy, and default or signifi cant delay in payments are considered objective evidence
that a receivable is impaired. In determining this, management makes judgement as to whether
there is observable data indicating that there has been a signifi cant change in the payment
ability of the debtor, or whether there have been signifi cant changes with adverse effect in the
technological, market, economic or legal environment in which the debtor operates.
Where there is objective evidence of impairment, management makes judgements as to
whether an impairment loss should be recorded in the income statement. In determining this,
management uses estimates based on historical loss experience for assets with similar credit
risk characteristics. The methodology and assumptions used for estimating both the amount
and timing of future cash fl ows are reviewed regularly to reduce any differences between the
estimated loss and actual loss experience.
If the net present values of estimated cash flows increase/decrease by 10% from
management’s estimates for all past due receivables, the Group’s allowance for impairment will
decrease/increase by $603,000 (2007: $782,000).
Fin
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117
Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
4. Revenue
The Group2008 2007
$’000 $’000
Rendering of services
– Ship repair and marine engineering income 1,918,183 1,527,883
– Time charter revenue 257,396 207,836
– Shipping agency income 19,150 21,205
Construction revenue
– Ship building and marine engineering 1,277,561 504,151
Others 3,719 625
Total sales 3,476,009 2,261,700
5. Expenses by nature
The Group2008 2007
$’000 $’000
Raw materials, fi nished goods, consumables and other overheads 2,352,711 1,206,120
Change in inventories and construction contract work-in-progress (506,892) (285,667)
Allowance for/(reversal of) impairment of trade and other receivables 61,283 (95)
Expected losses recognised on construction contracts 89,048 –
Depreciation of property, plant and equipment and investment
properties 120,767 80,585
Director and employee compensation (Note 6) 300,310 253,986
Sub-contractor expenses 493,909 400,541
Write-off for inventory obsolescence and inventory write-down 20,907 173
Write-off for property, plant and equipment 2,257 135
Rental expense on operating leases 97,321 79,905
Repairs and maintenance 30,520 20,187
Non audit service fees paid/payable to auditor of the Company 134 50
Commission 49,254 56,075
Crew overheads 12,929 11,329
Vessel overheads 14,066 13,849
Other expenses 85,848 26,751
Total cost of sales, distribution and administrative expenses 3,224,372 1,863,924
118
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
6. Director and employee compensation
The Group2008 2007
$’000 $’000
Wages, salaries and staff benefi ts 260,763 220,414
Employer’s contribution to defi ned contribution plans including
Central Provident Fund 22,011 20,769
Share option expenses [Note 32(b)(i)] 17,311 12,623
Directors’ fees of the Company 225 180
300,310 253,986
7. Other income (net)
The Group2008 2007
$’000 $’000
Rental income 2,333 2,179
Dividend income 1,171 586
Currency exchange gain - net 26,678 18,060
Interest income from deposits 34,355 14,030
(Impairment)/reversal of impairment in value of transferable
club memberships (4) 62
Reversal of impairment in value of trading property – 177
Net fair value gain/(loss) on forward currency contracts 1,526 (483)
Net gain/(loss) on disposal of property, plant and equipment 1,638 (2,347)
Gain on dilution of interests in a subsidiary – 1,613
Gain on disposal of fi nancial assets, available-for-sale – 7
Sundry income 17,978 11,302
Sale of scrap materials 122,267 66,018
207,942 111,204
8. Finance expenses
The Group2008$’000
2007
$’000
Interest expense
– Bank borrowings and bills payable 9,088 11,701
– Loans from a related corporation – 281
– Finance lease liabilities 3 6
Total interest expense 9,091 11,988
Less: Amount capitalised in construction of property, plant and
equipment [Note 24(d)] (257) (544)
Finance expenses recognised in the income statement 8,834 11,444
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
9. Income taxes
(a) Income tax expense
The Group2008 2007
$’000 $’000
Tax expense attributable to profi t is made up of:
Current income tax
– Singapore 1,947 2,856
– Foreign 113,126 50,399
115,073 53,255
Deferred income tax (Note 30)
– Singapore 4 (39)
– Foreign (47,370) (10,987)
(47,366) (11,026)
67,707 42,229
(Over)/under provision in prior fi nancial years:
– Current income tax
– Singapore 171 (161)
– Foreign (18,007) (11,470)
(17,836) (11,631)
– Deferred income tax (Note 30)
– Foreign (18,251) (11,086)
31,620 19,512
120
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
9. Income taxes (continued)
(a) Income tax expense (continued)
The tax expense on profi t differs from the amount that would arise using the Singapore
standard rate of income tax is as explained below:
The Group2008 2007
$’000 $’000
Profi t before tax and share of profi t of associated companies 450,745 497,536
Tax calculated at a tax rate of 18% 81,134 89,556
Effects of:
– Change in tax rate (3,781) –
– Different tax rates in other countries 12,282 (11,394)
– Singapore stepped income exemption (135) (107)
– Exemption of shipping profi ts under Approved International
Shipping Scheme and Section 13A of Singapore Income
Tax Act (18,767) (12,553)
– Profi ts exempted from tax (15,505) (27,970)
– Income not subject to tax (1,791) (392)
– Expenses not deductible for tax purposes 15,663 17,895
– Tax incentive rebates from the People’s Republic of China (833) (12,635)
– Utilisation of previously unrecognised deferred tax asset (563) (176)
– Deferred tax asset not recognised 3 5
Tax charge 67,707 42,229
(b) Movements in current income tax liabilities
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
Beginning of fi nancial year 24,040 11,891 969 293
Income tax (paid)/refunded (59,929) (29,475) 431 1,523
Tax expense on profi t for the
current fi nancial year 115,073 53,255 4,794 713
Over provision in prior
fi nancial years (17,836) (11,631) (1,309) (1,560)
End of fi nancial year 61,348 24,040 4,885 969
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
10. Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the net profi t attributable to equity holders
of the Company by the weighted average number of ordinary shares outstanding during the
fi nancial year.
The Group2008 2007
Net profi t attributable to equity holders of the Company ($’000) 302,588 336,568
Weighted average number of ordinary shares outstanding
for basic earnings per share (‘000) 2,238,951 2,231,022
Basic earnings per share (cents per share) 13.51 15.09
(b) Diluted earnings per share
For the purpose of calculating diluted earnings per share, the weighted average number of
ordinary shares outstanding is adjusted for the effects of all dilutive potential ordinary shares
arising from share options.
For share options, the weighted average number of shares on issue has been adjusted as if
all dilutive share options were exercised. The number of shares that could have been issued
upon the exercise of all dilutive share options less the number of shares that could have been
issued at fair value (determined as the Company’s average share price for the fi nancial year) for
the same total proceeds is added to the denominator as the number of shares issued for no
consideration. No adjustment is made to the net profi t.
Diluted earnings per share attributable to equity holders of the Company is calculated as
follows:
The Group2008 2007
Net profi t attributable to equity holders of the Company ($’000) 302,588 336,568
Weighted average number of ordinary shares outstanding
for basic earnings per share (‘000) 2,238,951 2,231,022
Adjustments for
– share options (‘000) 2,879 9,371
Weighted average number of ordinary shares outstanding
for diluted earnings per share (‘000) 2,241,830 2,240,393
Diluted earnings per share (cents per share) 13.50 15.02
122
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
11. Cash and cash equivalents
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
Cash at bank and on hand 597,746 651,358 3,338 6,199
Short-term bank deposits 1,282,570 431,436 127,485 102,405
1,880,316 1,082,794 130,823 108,604
Cash at bank and short-term bank deposits included an amount of $577,932,000 (2007: Nil), placed
with a fellow subsidiary, Cosco Finance Co., Ltd.
For the purpose of presenting the consolidated cash fl ow statement, the consolidated cash and cash
equivalents comprise the following:
The Group2008 2007
$’000 $’000
Cash and bank balances (as above) 1,880,316 1,082,794
Less: Bank deposits pledged (Note 27) (14,483) (4,208)
Cash and cash equivalents per consolidated cash fl ow statement 1,865,833 1,078,586
Cash and bank balances and short-term bank deposits of the Group to the extent of $14,483,000
(2007: $4,208,000) were pledged as security for the following:
(i) long-term bank loans (Note 27) obtained to fi nance the purchases of certain motor vessels;
(ii) trade fi nance facilities; and
(iii) the issuance of banker’s guarantees in favour of third parties.
Fin
an
cia
l Sta
tem
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ts
123
Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
12. Forward currency contracts
The Group2008 2007
$’000 $’000
Beginning of fi nancial year 37 517
Fair value gain/(loss) included in income statement 1,526 (483)
Currency translation differences 60 3
End of fi nancial year 1,623 37
Analysed as:
The Group
Contract notional amount
Fair valueAssets Liabilities Net assets
$’000 $’000 $’000 $’000
2008
Non-hedging instruments
– Forward currency contracts 1,665,754 11,504 (9,881) 1,623
Less: Current portion (10,063) 3,506
Non-current portion 1,441 (6,375)
2007
Non-hedging instruments
– Forward currency contracts 2,638,087 42,301 (42,264) 37
Less: Current portion (33,523) –
Non-current portion 8,778 (42,264)
124
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
13. Trade and other receivables - current
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
Trade receivables:
– Non-related parties 600,702 366,809 – –
– Fellow subsidiaries 45,014 23,376 – –
– Subsidiaries – – 261 324
– Related party corporations
[Note 37(c)] 1 61 – –
645,717 390,246 261 324
Less: Allowance for impairment of
receivables
– non-related parties (50,021) (5,320) – –
Trade receivables – net 595,696 384,926 261 324
Construction contracts due
from customers (Note 15):
– Non-related parties 110,017 17,402 – –
– Fellow subsidiaries 71,917 – – –
181,934 17,402 – –
Less: Allowance for impairment
of construction contract due
from customers
– non-related parties (19,162) – – –
Construction contracts due
from customers - net 162,772 17,402 – –
Other receivables:
– Non-related parties 47,767 39,429 178 206
– A fellow subsidiary 18,784 – – –
– A subsidiary – – 21 23
66,551 39,429 199 229
Advances paid to suppliers 743,055 376,819 – –
Staff loans and advances
(see note (i) below) 1,574 2,104 – –
Dividend receivable from
– Subsidiaries – – 80,136 –
– Associated company 460 432 – –
Total 1,570,108 821,112 80,596 553
(i) Staff loans are made under an approved staff loan scheme.
Impairment loss on trade receivables and construction contracts due from customers amounted to
$50,021,000 (2007: $5,320,000) and $19,162,000 (2007: Nil) respectively. These were recognised as
expenses and included in “Administrative Expenses”.
Fin
an
cia
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tem
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125
Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
14. Inventories
The Group2008 2007
$’000 $’000
Raw materials 826,077 332,575
Work-in-progress 116,356 107,687
Finished goods 3,168 3,066
945,601 443,328
The cost of inventories recognised as expense and included in “Cost of sales” amounted to
$2,660,650,000 (2007: $1,552,438,000).
15. Construction contract work-in-progress
The Group2008 2007
$’000 $’000
Beginning of fi nancial year 43,132 18,064
Contract costs incurred during the fi nancial year 1,370,440 472,556
Contract expenses recognised in the income statement during
the fi nancial year (1,250,676) (447,421)
Currency translation differences 7,247 (67)
End of fi nancial year 170,143 43,132
Aggregate costs incurred and profi ts recognised (less losses
recognised) to date on uncompleted construction contracts 1,362,381 445,146
Less: Progress billings (1,508,594) (764,068)
Currency translation differences (5,436) 1,158
(151,649) (317,764)
Analysed as:
Due from customers on construction contracts (Note 13) 181,934 17,402
Due to customers on construction contracts (Note 26) (333,583) (335,166)
(151,649) (317,764)
Advances received on construction contracts (Note 26) 2,671,852 1,151,158
126
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
16. Trading property
The Group2008 2007
$’000 $’000
Cost
Beginning of fi nancial year 977 977
Disposal (977) –
End of fi nancial year – 977
Accumulated impairment losses
Beginning of fi nancial year – 177
Reversal of impairment – (177)
End of fi nancial year – –
Cost – 977
The Group’s trading property as at 31 December 2007 was set out below:
Address Held by Title DescriptionGross
fl oor area(Square metres)
Grangeford Apartment,
Leonie Hill Road
Harington
Property
Pte Ltd
99 years leasehold
commencing 1974
1 unit of
service
apartment
109
This trading property was stated at the lower of cost and net realisable value, representing the open
market value determined on an annual basis by an independent professional valuer. During the
fi nancial year ended 31 December 2007, the Group reversed $177,000 of the accumulated impairment
made in prior years, based on the increase in open market value of this property. The trading property
has been disposed of during the fi nancial year.
17. Other current assets
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
Deposits 10,322 2,285 14 7
Prepayments 9,470 4,678 161 173
19,792 6,963 175 180
Fin
an
cia
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tem
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ts
127
Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
18. Trade and other receivables - non-current
The Company2008 2007
$’000 $’000
Loans to a subsidiary (i) 65,594 65,868
(i) The loans to a subsidiary are interest-free, unsecured and have no fi xed terms of repayment.
Substantial repayments are not expected within the next twelve months from the balance sheet
date. The full amount of $65,594,000 (2007: $65,868,000) is deemed by the Company as part
of its net investment in a subsidiary and carried at cost.
19. Financial assets, available-for-sale
The Group2008 2007
$’000 $’000
Beginning of fi nancial year 3,067 2,208
Currency translation differences 212 4
Additions – 975
Fair value gain recognised in equity [Note 32(b)(v)] 351 –
Disposals – (120)
End of fi nancial year 3,630 3,067
At the balance sheet date, fi nancial assets, available-for-sale include the following:
The Group
2008 2007
$’000 $’000
Quoted equity shares in corporation, at fair value -
People’s Republic of China (“PRC”) 490 –
Unquoted equity shares in corporations, at cost – PRC
- Fellow subsidiary 2,101 1,973
- Non-related party 1,039 1,094
3,140 3,067
3,630 3,067
The directors are of the view that it is not practicable to determine with suffi cient reliability the fair
value of the unquoted equity investments. However, the directors do not anticipate that the carrying
amounts of these unquoted equity investments will deviate signifi cantly from their fair values.
128
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
20. Club memberships
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
Transferable club memberships,
at cost 829 841 477 482
Currency translation differences (2) (7) – –
Allowance for impairment in value of
club memberships (354) (355) (241) (246)
473 479 236 236
21. Investments in associated companies
The Group2008 2007
$’000 $’000
Beginning of fi nancial year 1,794 2,227
Currency translation differences 140 3
Distribution of surplus cash on liquidation of an associated company – (423)
Share of profi ts after tax 643 537
Dividends received, net of tax – (550)
End of fi nancial year 2,577 1,794
The summarised fi nancial information of associated companies are
as follows:
– Assets 10,232 8,040
– Liabilities 2,076 2,338
– Revenue 8,357 8,799
– Net profi t 2,010 1,686
Details of associated companies are set out below:
Name of associated companies Principal activities
Country ofincorporation/
business
% of paid-upcapital held by
subsidiaries 2008
%2007
%
Diesel Marine (Guangzhou)
Co., Ltd (i)
Overhaul and
spare-parts
replacement
and repair
People’s
Republic
of China
(“PRC”)
30 30
Tru-Marine Cosco (Tianjin)
Engineering Co., Ltd (i)
Overhaul and
spare-parts
replacement
and repair
PRC 40 40
(i) Audited by RSM China Certifi ed Public Accountants, PRC.
Fin
an
cia
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tem
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129
Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
22. Investments in subsidiaries
The Company2008 2007
$’000 $’000
Unquoted equity shares
Beginning of fi nancial year 310,871 282,731
Increase in investment in a subsidiary – 28,140
310,871 310,871
Accumulated impairment losses (20,903) (26,472)
End of fi nancial year 289,968 284,399
Movements in accumulated impairment losses are as follows:
2008 2007
$’000 $’000
Beginning of fi nancial year 26,472 26,472
Reversal of impairment charge (5,569) –
End of fi nancial year 20,903 26,472
The subsidiaries are set as below:
Name of subsidiaries Principal activities
Country ofincorporation/
business Cost of investment% of paid–up capital held by
The Company Subsidiaries2008 2007 2008 2007 2008 2007
$’000 $’000 % % % %
Cosco
(Singapore)
Pte Ltd (i)
Ship owning, ship
chartering and
investment holding
Singapore 5,000 5,000 100 100 – –
Cosco Marine
Engineering
(Singapore)
Pte Ltd (i)
Ship repairing,
marine engineering,
container repairs
and services,
fabrication works
services and
production of
marine outfi tting
components
Singapore 2,242 2,242 90 90 – –
Harington
Property
Pte Ltd (i)
Trading and
investing in
properties,
provide property
management
services and
investment holding
Singapore 52,701 52,701 100 100 – –
Coslink (M)
Sdn. Bhd. (ii)
Shipping agency
and related
activities
Malaysia 771 771 70 70 18 18
130
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
22. Investments in subsidiaries (continued)
Name of subsidiaries Principal activities
Country ofincorporation/
business Cost of investment% of paid–up capital held by
The Company Subsidiaries2008 2007 2008 2007 2008 2007
$’000 $’000 % % % %
Costar
Shipping
Pte Ltd (i)
Shipping agent
and investment
holding
Singapore 4,018 4,018 70 70 – –
Cosco
Shipyard
Group
Co., Ltd
(v) and (vi)
Investment
holding
People’s
Republic
of China
(“PRC”)
191,173 191,173 51 51 – –
Cosco
(Nantong)
Shipyard
Co.,Ltd
(v) and (vi)
Ship repair and
marine engineering
PRC 24,670 24,670 50 50 50 50
Cosco
(Dalian)
Shipyard
Co., Ltd
(v) and (vi)
Ship repair, ship
building and marine
engineering
PRC 30,296 30,296 39 39 59 59
Cosco
(Guangdong)
Shipyard
Co., Ltd
(v) and (vi)
Ship repair and
ship building
PRC – – – – 75 75
Cosco
(Zhoushan)
Shipyard
Co., Ltd
(v) and (vi)
Ship repair, ship
building and marine
engineering
PRC – – – – 100 100
Cosco
(Xiamen)
Shipyard
Co., Ltd (v)
Ship repair PRC – – – – 51 51
Cosco
(Shanghai)
Shipyard
Co., Ltd (v)
Ship repair PRC – – – – 95 95
Cosco
(Tianjin)
Shipyard
Co., Ltd (v)
Ship repair PRC – – – – 90 90
Fin
an
cia
l Sta
tem
en
ts
131
Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
22. Investments in subsidiaries (continued)
Name of subsidiaries Principal activities
Country ofincorporation/
business Cost of investment% of paid–up capital held by
The Company Subsidiaries2008 2007 2008 2007 2008 2007
$’000 $’000 % % % %
Cosco
(Lianyungang)
Shipyard
Co., Ltd (v)
Ship repair PRC – – – – 60 –
Cosco (Dalian)
Rikky Ocean
Engineering
Co., Ltd (v)
Overhaul, repair,
commissioning
and spare–parts
replacement of
governor,
turbocharger and
engine fuel system
PRC – – – – 75 60
Diesel Marine
Dalian Co., Ltd
(v) and (vii)
Overhaul and
spare–parts
replacement
and repair
PRC – – – – 30 30
Diesel Marine
International
(Nantong) Co.,
Ltd (v) and (vii)
Overhaul and
spare–parts
replacement
and repair
PRC – – – – 30 30
Cosco Clavon
Shipyard
Co., Ltd (v)
(formerly
known as
Cosco
Shipyard
Jurong Clavon
Co., Ltd)
Corrosion control PRC – – – – 60 60
Zhongyuan
Sea-Land
Engineering
Co., Ltd (v)
and (vii)
Ship repair PRC – – – – 50 50
Cosco
Shipyard Total
Automation
Co., Ltd (v)
Design,
manufacture, sale
and technical
service relating to
vessels and
industrial
instruments
PRC – – – – 60 60
132
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
22. Investments in subsidiaries (continued)
Name of subsidiaries Principal activities
Country ofincorporation/
business Cost of investment% of paid–up capital held by
The Company Subsidiaries2008 2007 2008 2007 2008 2007
$’000 $’000 % % % %
Marlene
International
Ltd (iii) and
(viii)
Dormant British Virgin
Islands
– – – 100 – –
Cos Fair
Shipping
Pte Ltd (i)
Ship owning and
ship chartering
Singapore/
Worldwide
– – – – 100 100
Cos Glory
Shipping
Inc. (i)
Ship owning and
ship chartering
Panama/
Worldwide
– – – – 100 100
Cos Knight
Shipping
Inc. (viii)
Ship owning and
ship chartering
Panama/
Worldwide
– – – – – 100
Cos Lucky
Shipping
Inc. (viii)
Ship owning and
ship chartering
Panama/
Worldwide
– – – – – 100
Hanbo
Shipping
Limited (ii)
Ship owning and
ship chartering
Hong Kong/
Worldwide
– – – – 100 100
Sanbo
Shipping
Limited (ii)
Ship owning and
ship chartering
Hong Kong/
Worldwide
– – – – 100 100
Cos Orchid
Shipping Pte
Ltd (i)
Ship owning and
ship chartering
Singapore/
Worldwide
– – – – 100 100
Cos Prosperity
Shipping Pte
Ltd (i)
Ship owning and
ship chartering
Singapore/
Worldwide
– – – – 100 100
Cos Knight
Shipping
Maritime
Inc. (i)
Ship owning and
ship chartering
Panama/
Worldwide
– – – – 100 100
Cos Lucky
Shipping
Maritime
Inc. (i)
Ship owning and
ship chartering
Panama/
Worldwide
– – – – 100 100
Costar
Agencies (M)
Sdn. Bhd. (iv)
Shipping agent Malaysia – – – – 100 100
Fin
an
cia
l Sta
tem
en
ts
133
Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
22. Investments in subsidiaries (continued)
Name of subsidiaries Principal activities
Country ofincorporation/
business Cost of investment% of paid–up capital held by
The Company Subsidiaries2008 2007 2008 2007 2008 2007
$’000 $’000 % % % %
CNF Shipping
(M) Sdn.
Bhd. (iv)
Shipping agent Malaysia – – – – 60 60
CNF Shipping
Agencies
Pte Ltd (i)
Vessel chartering,
feedering, freight
forwarders,
transport agent,
warehousing
and other related
services
Singapore – – – – 100 100
Cosco
Engineering
Pte Ltd (i)
Provision of
support services
to shipping
companies
Singapore – – – – 100 100
310,871 310,871
(i) Audited by PricewaterhouseCoopers LLP, Singapore.
(ii) Audited by PricewaterhouseCoopers fi rms outside Singapore.
(iii) Not required by the law of the country of its incorporation to be audited. The company has not commenced
operations since the date of incorporation. The cost of investment is less than $1,000.
(iv) Audited by Deloitte KassimChan, Malaysia.
(v) Audited by RSM China Certifi ed Public Accountants, PRC.
(vi) Audited by PricewaterhouseCoopers LLP, Singapore and fi rms outside Singapore for the purposes of
consolidation.
(vii) Deemed to be a subsidiary as the Group controls the entity.
(viii) Liquidated during the fi nancial year.
134
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
23. Investment properties
The Group2008 2007
$’000 $’000
Cost
Beginning of fi nancial year 14,717 14,215
Currency translation differences 69 1
Additions 1,063 –
Reclassifi cation from property, plant and equipment – 501
End of fi nancial year 15,849 14,717
Accumulated depreciation and accumulated impairment losses
Beginning of fi nancial year 3,245 2,865
Currency translation differences 18 1
Depreciation charge 369 354
Reclassifi cation from property, plant and equipment – 25
End of fi nancial year 3,632 3,245
Net book value 12,217 11,472
Fair values 14,159 16,181
Investment properties are stated at cost less accumulated depreciation and accumulated impairment
losses as the Group has elected to adopt the cost model method to measure its investment
properties.
Fair values of the investment properties as at the balance sheet date are stated based on independent
professional valuations using the direct comparison method.
Investment properties are leased to fellow subsidiaries and non-related parties under operating leases.
The following amounts are recognised in the income statement:
The Group2008 2007
$’000 $’000
Rental income 1,035 675
Direct operating expenses arising from investment properties that
generated rental income 468 179
As at 31 December 2007, the net book value of investment properties of the Group amounting to
$982,000 is mortgaged to banks to secure long-term bank borrowings and bank facilities (Note 27).
Fin
an
cia
l Sta
tem
en
ts
135
Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
24. Property, plant and equipment
The Group
Freehold land andbuildings
Leaseholdland andbuildings
Offi cerenovations,
furniture,fi xtures andequipment
Plant,machinery
andequipment
Motorvehicles
Motorvessels
Docks and
quaysConstruction- in–progress Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
2008
Cost 4,955 309,941 24,959 364,292 29,178 311,927 544,421 228,429 1,818,102
Currency
translation
differences – 18,751 1,353 23,513 1,620 (1,297) 35,272 14,799 94,011
Additions – 69,798 10,908 94,002 8,560 2,950 13,524 464,841 664,583
Disposals (1,911) (3,965) (2,358) (4,707) (924) (1,211) (5,289) (2,371) (22,736)
Reclassifi cation – 85,716 (851) 98,704 1,676 – 104,117 (289,362) –
End of fi nancial
year 3,044 480,241 34,011 575,804 40,110 312,369 692,045 416,336 2,553,960
Accumulated
depreciation 1,231 43,336 11,637 94,927 13,627 81,699 93,192 – 339,649
Currency
translation
differences – 3,061 726 7,628 963 135 6,873 – 19,386
Depreciation
charge 71 16,476 6,039 41,937 5,196 28,254 22,425 – 120,398
Disposals (480) (1,312) (1,826) (1,297) (667) (979) (862) – (7,423)
Reclassifi cation – 2 (28) 34 (8) – – – –
End of fi nancial
year 822 61,563 16,548 143,229 19,111 109,109 121,628 – 472,010
Net book value End of fi nancial year 2,222 418,678 17,463 432,575 20,999 203,260 570,417 416,336 2,081,950
136
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
24. Property, plant and equipment (continued)
The Group (continued)
Freehold land andbuildings
Leaseholdland andbuildings
Offi cerenovations,
furniture,fi xtures andequipment
Plant,machinery
andequipment
Motorvehicles
Motorvessels
Docks and
quaysConstruction- in–progress Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
2007
Cost 4,955 164,870 20,867 215,106 30,978 332,907 428,387 181,787 1,379,857
Currency
translation
differences – 57 3 411 (1) (21,261) 654 4 (20,133)
Additions – 101,344 8,365 61,108 5,755 1,320 62,245 235,352 475,489
Disposals – (2,940) (612) (2,283) (598) (1,039) (257) (8,881) (16,610)
Reclassifi cation – 46,610 (3,664) 89,950 (6,956) – 53,392 (179,833) (501)
End of fi nancial
year 4,955 309,941 24,959 364,292 29,178 311,927 544,421 228,429 1,818,102
Accumulated
depreciation 1,131 33,511 10,728 65,460 10,525 74,631 73,692 – 269,678
Currency
translation
differences – (47) (26) (15) (18) (5,393) 42 – (5,457)
Depreciation
charge 100 10,688 4,797 29,099 5,238 13,415 16,894 – 80,231
Disposals – (875) (248) (2,210) (476) (954) (15) – (4,778)
Reclassifi cation – 59 (3,614) 2,593 (1,642) – 2,579 – (25)
End of fi nancial
year 1,231 43,336 11,637 94,927 13,627 81,699 93,192 – 339,649
Net book value End of fi nancial year 3,724 266,605 13,322 269,365 15,551 230,228 451,229 228,429 1,478,453
(a) The carrying amount of motor vehicles held under fi nance leases at 31 December 2008
amounted to $78,000 (2007: $108,000) (Note 27).
(b) Included in the addition in the consolidated fi nancial statements was an amount of Nil (2007:
$4,159,000) of leasehold buildings, quays and machineries relating to capital contribution from
a minority shareholder of a subsidiary, Cosco (Dalian) Shipyard Co., Ltd.
(c) As at the balance sheet date, the net book values of leasehold land and buildings and motor
vessels of the Group amounting to $122,374,000 (2007: $159,532,000) are mortgaged to banks
to secure long-term bank borrowings and bank facilities (Note 27).
(d) Borrowing costs of $257,000 (2007: $544,000), which arise on the fi nancing specifi cally entered
into for the construction of docks and quays, are capitalised during the fi nancial year (Note 8).
Fin
an
cia
l Sta
tem
en
ts
137
Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
24. Property, plant and equipment (continued)
(e) In June 2005, a subsidiary, Cosco (Zhoushan) Shipyard Co., Ltd began construction of
workshops and quays etc, in Zhoushan, People’s Republic of China. However its full rights
to the properties (comprising building and land) are subject to the grant of the land use
rights for the land on which the buildings are erected. As at the date of the authorisation of
these fi nancial statements, Cosco (Zhoushan) Shipyard Co., Ltd has obtained construction
permission from the Land Administrative Bureau of Zhoushan city but has yet to receive the
land use rights from the authority.
The management is of the view that the land use rights will be obtained and accordingly,
no impairment charge against the carrying values of the property, plant and equipment and
construction-in-progress have been made in these fi nancial statements.
The Company
Offi cerenovations,
furniture,fi xtures andequipment
Motorvehicles Total
$’000 $’000 $’000
2008
Cost
Beginning of fi nancial year 524 1,048 1,572
Additions 12 80 92
Disposals – – –
End of fi nancial year 536 1,128 1,664
Accumulated depreciation
Beginning of fi nancial year 468 172 640
Depreciation charge 21 107 128
Disposals – – –
End of fi nancial year 489 279 768
Net book value End of fi nancial year 47 849 896
2007
Cost
Beginning of fi nancial year 476 715 1,191
Additions 48 519 567
Disposals – (186) (186)
End of fi nancial year 524 1,048 1,572
Accumulated depreciation
Beginning of fi nancial year 435 174 609
Depreciation charge 33 105 138
Disposals – (107) (107)
End of fi nancial year 468 172 640
Net book value End of fi nancial year 56 876 932
138
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
25. Intangible assets
The Group2008 2007
$’000 $’000
Composition:
Goodwill arising on consolidation 9,546 9,302
Goodwill arising on consolidation
The Group2008 2007
$’000 $’000
Cost
Beginning of fi nancial year 9,302 9,319
Increase in/(dilution of) interest in a subsidiary 186 (18)
Currency translation differences 58 1
End of fi nancial year 9,546 9,302
Net book value 9,546 9,302
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating-units (CGU) identifi ed as the subsidiaries in
the People’s Republic of China (“PRC”), identifi ed according to country of operation and business
segment. The business segments refer to ship repair, ship building and marine engineering activities.
The recoverable amount of a CGU is determined based on value-in-use calculations. These
calculations use cash fl ow projections based on the existing capacity of the CGU. Cash fl ows beyond
2008 are extrapolated using the estimated growth rate stated below. The growth rate does not exceed
the long-term average growth rate for ship repair business in the PRC in which the CGU operates.
Key assumptions used for value-in-use calculations:
Growth rate1 0.3%
Discount rate2 5.103%
1 Weighted average growth rate used to extrapolate cash fl ows beyond the budget period
2 Pre-tax discount rate applied to the pre-tax cash fl ow projections
These assumptions were used for the analysis of the CGU within the business segment. Management
determined budgeted gross margin based on past performance and its expectations of the market
development. The weighted average growth rate used was consistent with the forecasts included in
industry reports. The discount rate used was pre-tax and refl ect specifi c risks relating to the relevant
segments.
There is no impairment charge recognised for the years ended 31 December 2008 and 31 December
2007.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
26. Trade and other payables
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
Trade payables to:
– Non-related parties 461,719 245,192 – –
– Fellow subsidiaries 8,424 45,340 – –
470,143 290,532 – –
Construction contracts – Advances
received (Note 15):
– Non-related parties 2,513,227 1,151,158 – –
– Fellow subsidiaries 158,625 – – –
2,671,852 1,151,158 – –
Construction contracts – Due to
customers (Note 15):
– Non-related parties 261,828 335,166 – –
– Fellow subsidiaries 71,755 – – –
333,583 335,166 – –
3,005,435 1,486,324 – –
Advances from non-related parties 96,554 136,076 – –
Non-trade payables to:
– Ultimate holding corporation 735 1 – –
– Subsidiary – – 12,000 5,000
735 1 12,000 5,000
Deposits received 7,521 6,663 – –
Deferred voyage income – 1,244 – –
Other accruals for operating expenses 820,298 492,096 2,871 2,021
Dividend payable to minority
shareholders of subsidiaries 41,214 3,457 – –
Total 4,441,900 2,416,393 14,871 7,021
The non-trade balances payable to ultimate holding corporation and a subsidiary are unsecured,
interest-free and are repayable on demand.
140
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
27. Borrowings
The Group2008 2007
$’000 $’000
Current
Bank borrowings (unsecured) 14,359 90,760
Bank borrowings (secured) 25,067 19,727
Bills payable 5,834 1,020
Finance lease liabilities (Note 28) 18 21
45,278 111,528
Non-current
Bank borrowings (unsecured) 586,146 –
Bank borrowings (secured) 25,198 64,871
Finance lease liabilities (Note 28) 20 39
611,364 64,910
Total borrowings 656,642 176,438
The exposure of the borrowings of the Group to interest rate changes and the contractual repricing
dates at the balance sheet dates are as follows:
The Group2008 2007
$’000 $’000
Less than 1 year 45,278 111,528
1 – 5 years 607,130 43,776
Over 5 years 4,234 21,134
656,642 176,438
(a) Security granted
At the balance sheet date, total borrowings include secured liabilities of $50,303,000 (2007:
$84,658,000) for the Group. Secured bank borrowings are secured by:
(i) the Group’s leasehold land and buildings and motor vessels (Note 24);
(ii) the Group’s investment properties (Note 23); and
(iii) certain bank deposits (Note 11).
Finance lease liabilities of the Group are secured by the rights to the leased motor vehicles,
which will revert to the lessor in the event of default by the Group (Note 24).
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
27. Borrowings (continued)
(b) Fair values of non-current borrowings
At the balance sheet date, the carrying amounts of current and non-current borrowings
approximated their fair values.
The fair values were determined from cash fl ow analyses, discounted at the market borrowing
rates which the directors expected to be available to the Group as follows:
The Group
2008 2007
SGD MYR USD RMB SGD MYR USD RMB
Bank borrowings – – 4.07% 4.90% 3.34% – 5.33% 2.97%
Bills payable – – – – – – – –
Finance lease liabilities 4.91% – – – 5.69% 6.82% – –
28. Finance lease liabilities
The Group2008 2007
$’000 $’000
Minimum lease payments due:
– Not later than one year 21 24
– Later than one year but not later than fi ve years 24 46
45 70
Less: Future fi nance charges (7) (10)
Present value of fi nance lease liabilities 38 60
The present values of fi nance lease liabilities are analysed as follows:
– Not later than one year (Note 27) 18 21
– Later than one year but not later than fi ve years (Note 27) 20 39
38 60
29. Provisions for other liabilities
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
Current
Provision for off hire claim on hire
income [Note (a)] 15,225 4,294 – –
Provision for warranties [Note (b)] 4,931 770 – –
20,156 5,064 – –
Non-current
Club membership payable – 65 – 65
Total 20,156 5,129 – 65
142
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
29. Provisions for other liabilities (continued)
(a) Movements in provision for off hire claim on hire income were as follows:
The Group2008 2007
$’000 $’000
Beginning of fi nancial year 4,294 6,309
Provision made during the fi nancial year 10,803 2,276
Provision utilised during the fi nancial year (36) (3,788)
Currency translation differences 164 (503)
End of fi nancial year 15,225 4,294
Provision for off hire claim on hire income is in respect of refund to be made to customers for
period in which the motor vessels are not available for use.
(b) Movements in provision for warranties were as follows:
The Group2008 2007
$’000 $’000
Beginning of fi nancial year 770 –
Provision made during the fi nancial year 3,964 773
Currency translation differences 197 (3)
End of fi nancial year 4,931 770
The Group gives one to two-year warranties on certain ship repair, ship building and
marine engineering contracts and undertakes to repair or rectify defects that fail to perform
satisfactorily. A provision is recognised at the balance sheet date for expected warranty claims
based on an estimate by technical engineers and past experience of the possible repairs and
rectifi cations.
30. Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current income tax assets against current income tax liabilities and when the deferred income taxes
relate to the same fi scal authority. The amounts, determined after appropriate offsetting, are shown on
the balance sheets as follows:
The Group2008 2007
$’000 $’000
Deferred income tax assets:
– To be recovered within one year 71,596 20,056
– To be recovered after one year 19,821 1,940
91,417 21,996
Deferred income tax liabilities:
– To be settled within one year – –
– To be settled after one year 180 152
180 152
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
30. Deferred income taxes (continued)
Deferred income tax assets are recognised for tax losses, capital allowances, provisions and accruals
carried forward to the extent that realisation of the related tax benefi ts through future taxable profi ts
is probable. The Group has unrecognised tax losses of $2,371,000 (2007: $5,437,000) at the balance
sheet date which can be carried forward and used to offset against future taxable income subject
to meeting certain statutory requirements by those companies with unrecognised tax losses in their
respective countries of incorporation. The tax losses have no expiry date.
The movements in the deferred income tax account were as follows:
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
Beginning of fi nancial year (21,844) 189 – –
Change in tax rate (3,781) – – –
Currency translation differences (3,864) 79 – –
Deferred tax credited to income
statement (61,836) (22,112) – –
Deferred tax charged to equity
[Note 32(b)(v)] 88 – – –
End of fi nancial year (91,237) (21,844) – –
The movements in the deferred income tax assets and liabilities (prior to offsetting of balances within
the same tax jurisdiction) during the fi nancial years were as follows:
The Group
Deferred income tax liabilities
2008 2007
$’000 $’000
Accelerated tax depreciation
Beginning of fi nancial year 152 189
Currency translation differences (1) –
Charged/(credited) to income statement 29 (37)
End of fi nancial year 180 152
Fair value gain
Beginning of fi nancial year – –
Currency translation differences 3 –
Charged to equity 88 –
End of fi nancial year 91 –
Total
Beginning of fi nancial year 152 189
Currency translation differences 2 –
Charged/(credited) to income statement 29 (37)
Charged to equity 88 –
End of fi nancial year 271 152
144
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
30. Deferred income taxes (continued)
Deferred income tax assets
2008 2007
$’000 $’000
Provisions and accruals
Beginning of fi nancial year (21,996) –
Change in tax rate (3,781) –
Currency translation differences (3,866) 79
Credited to income statement (61,865) (22,075)
End of fi nancial year (91,508) (21,996)
31. Share capital
Issued share capitalNo. of
ordinary shares Amount
‘000 $’000
2008
Beginning of fi nancial year 2,237,664 266,852
Share issue 1,580 3,756
End of fi nancial year 2,239,244 270,608
2007
Beginning of fi nancial year 2,213,974 239,947
Share issue 23,690 26,905
End of fi nancial year 2,237,664 266,852
All issued shares are fully paid. There is no par value for these ordinary shares.
The Company issued the following shares during 2008:
(i) 130,000 (2007: 18,680,000) ordinary shares at an exercise price of $1.23 (2007: $1.23) each
from the exercise of option granted in 2006 under the Cosco Group Employees’ Share Option
Scheme 2002; and
(ii) 1,450,000 (2007: Nil) ordinary shares at an exercise price of $2.48 (2007: $2.48) each from the
exercise of option granted in 2007 under the Cosco Group Employees’ Share Option Scheme
2002.
The Company also issued the following shares during 2007:
(i) 260,000 ordinary shares at an exercise price of $0.3675 each from the exercise of option
granted in 2004 under the Cosco Group Employees’ Share Option Scheme 2002; and
(ii) 4,750,000 ordinary shares at an exercise price of $0.807 each from the exercise of option
granted in 2005 under the Cosco Group Employees’ Share Option Scheme 2002.
The newly issued shares rank pari passu in all respects with the previously issued shares.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
31. Share capital (continued)
Share options
Under the Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”), share options
are granted to directors, key management and employees. The exercise price of the granted options
is equal to the average of the closing prices of the Company’s ordinary shares on the Singapore
Exchange for the fi ve market days immediately preceding the date of grant. The options may be
exercised in full or in part in respect of 1,000 shares or a multiple thereof, on the payment of the
exercise price. The persons to whom the options have been issued have no right to participate by
virtue of the options in any share issue of any other company. The Group has no legal or constructive
obligation to repurchase or settle the options in cash.
Options issued to directors and employees who have been in the service of the Company, subsidiary
or controlled associated company, or the holding company for at least one year on or prior to the date
of grant, may be exercised twelve months after the date of grant but before the end of one hundred
and twenty months. For employees and directors who are in the service of the controlled associated
company and non-executive directors, the options shall expire at the end of sixty months. Options
issued at a discount to market price, may only be exercised two years after the date of grant.
Options issued to directors and employees who have been in the service of the Company, subsidiary
or controlled associated company, or the holding company for at least six months but less than one
year on or prior to the date of grant, may be exercised twenty four months after the date of grant
but before the end of one hundred and twenty months. For employees and directors who are in the
service of the controlled associated company and non-executive directors, the options shall expire at
the end of sixty months. Options issued at a discount to market price, may only be exercised three
years after the date of grant.
On 24 March 2008, options to subscribe for 21,300,000 ordinary shares of the Company at an
exercise price of $2.95 per ordinary share (“2008 Options”) were granted pursuant to the Scheme
2002. The 2008 Options are exercisable from 24 March 2009 and expire on 23 March 2013 for non-
executive directors and 23 March 2018 for executive directors and employees.
Movements in the number of unissued ordinary shares under option at the end of the fi nancial year
and their exercise prices were as follows:
The Group and the Company
Financial year ended 31 December 2008
Options relating to Scheme 2002
Number of ordinary shares under option outstanding
Beginning of the year
Granted during the fi nancial
year
Lapsed during thefi nancial
year
Exercised during the fi nancial
yearEnd of
the yearExercise
price Exercise period ‘000 ‘000 ‘000 ‘000 ‘000 $
2006 Options 4,070 – (1,100) (130) 2,840 1.23 21.2.2007 – 20.2.2016
2007 Options 16,270 – (400) (1,450) 14,420 2.48 5.2.2008 – 4.2.2017
2008 Options – 21,300 (1,260) – 20,040 2.95 24.3.2009 – 23.3.2018
20,340 21,300 (2,760) (1,580) 37,300
146
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
31. Share capital (continued)
The Group and the Company (continued)
Financial year ended 31 December 2007
Options relating to Scheme 2002
Number of ordinary shares under option outstanding
Beginning of the year
Granted during the fi nancial
year
Lapsed during thefi nancial
year
Exercised during the fi nancial
yearEnd of
the yearExercise
price Exercise period ‘000 ‘000 ‘000 ‘000 ‘000 $
2004 Options 260 – – (260) – 0.3675 24.5.2005 – 23.5.2014
2005 Options 4,750 – – (4,750) – 0.807 6.4.2006 – 5.4.2015
2006 Options 22,750 – – (18,680) 4,070 1.23 21.2.2007 – 20.2.2016
2007 Options – 16,270 – – 16,270 2.48 5.2.2008 – 4.2.2017
27,760 16,270 – (23,690) 20,340
Out of the outstanding options on 37,300,000 shares (2007: 20,340,000), options on 15,940,000
shares (2007: 3,370,000) are exercisable. Options exercised in 2008 resulted in 1,580,000 (2007:
23,690,000) shares being issued at a weighted average share price of $2.38 (2007: $1.14) each.
The fair value of options granted on 24 March 2008 (2007: 5 February 2007) determined using the
Binomial Valuation model was $20,661,000 (2007: $13,341,000). The signifi cant inputs into the
model were share price of $3.27 (2007: $2.83) at grant date, exercise price as shown above, standard
deviation of expected share price returns of 53% (2007: 41%), option life shown above and annual
risk-free interest rate of 0.99% (2007: 2.93%). This volatility measured at the standard deviation of
expected price returns is based on statistical analysis of daily share prices over the last 2 years.
32. Statutory and other reserves
The Group The Company2008 2007 2008 2007$’000 $’000 $’000 $’000
(a) Composition:
Share option reserve 41,338 24,027 41,338 24,027
Statutory reserve 114,310 80,685 – –
Currency translation reserve (6,937) (44,183) – –
Asset revaluation reserve 18,990 22,208 – –
Fair value reserve 134 – – –
Realised surplus on long-term
investment 69 69 527 527
167,904 82,806 41,865 24,554
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
32. Statutory and other reserves (continued)
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
(b) Movements:
(i) Share option reserve
Beginning of fi nancial
year 24,027 11,404 24,027 11,404
Employee share option
scheme:
– Value of director and
employee services
(Note 6) 17,311 12,623 17,311 12,623
End of fi nancial year 41,338 24,027 41,338 24,027
During the fi nancial year, share option reserve relating to share options exercised amounted to
$1,222,000 (2007: $9,350,000).
The Group2008 2007
$’000 $’000
(ii) Statutory reserve
Beginning of fi nancial year 80,685 61,298
Transfer from retained earnings 33,625 19,387
End of fi nancial year 114,310 80,685
(iii) Currency translation reserve
Beginning of fi nancial year (44,183) (27,785)
Net currency translation differences of fi nancial
statements of foreign subsidiaries and associates 65,375 (16,882)
Transfer from retained earnings – 440
Currency translation loss realised on dilution of
interests in a subsidiary – 61
Minorities’ interests (28,129) (17)
End of fi nancial year (6,937) (44,183)
148
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
32. Statutory and other reserves (continued)
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
(b) Movements: (continued)
(iv) Asset revaluation reserve
Beginning of fi nancial
year 22,208 25,869 – –
Additional depreciation
on revalued property,
plant and equipment (3,218) (3,217) – –
Revaluation gain
realised on dilution of
a subsidiary – (444) – –
End of fi nancial year 18,990 22,208 – –
(v) Fair value reserve
Beginning of fi nancial
year – – – –
Fair value changes for
fi nancial asset,
available-for-sale 351 – – –
Deferred tax charged
to equity (Note 30) (88) – – –
Minorities’ interests (129) – – –
End of fi nancial year 134 – – –
Statutory reserve represents the amount set aside in compliance with the local laws in the PRC where
the subsidiaries of the Group reside.
Statutory and other reserves are non-distributable.
33. Dividends
The Group and The Company
2008 2007
$’000 $’000
Ordinary dividends paid
Final exempt dividend paid in respect of the previous fi nancial year
of 4.0 cents (2007: 2.5 cents) per ordinary share 89,565 55,843
Special exempt dividend paid in respect of the previous fi nancial
year of 3.0 cents (2007: 1.5 cents) per ordinary share 67,173 33,505
156,738 89,348
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
33. Dividends (continued)
At the Annual General Meeting scheduled on 20 April 2009, a fi nal exempt dividend of 4 cents
per ordinary share (2007: 4 cents per ordinary share) and a special exempt dividend of 3 cents
per ordinary share (2007: 3 cents per ordinary share) amounting to a total of $156,747,000 (2007:
$156,738,000), based on the number of shares issued as of 31 December 2008, will be recommended.
These fi nancial statements do not refl ect these dividends, which will be accounted for in shareholders'
equity as an appropriation of retained earnings in the fi nancial year ending 31 December 2009.
34. Commitments
(a) Capital commitments
Capital expenditure contracted for at the balance sheet date but not recognised in the fi nancial
statements are as follows:
The Group2008 2007
$’000 $’000
Property, plant and equipment 339,815 193,668
Investment in a subsidiary 63,000 21,600
402,815 215,268
On 28 December 2008, a subsidiary, Cosco Shipyard Group Co., Ltd (“Cosco Shipyard Group”),
entered into a joint-venture agreement with Qidong State-owned Assets Investment Holdings
Co., Ltd (“Qidong Investment”) to form a company known as ‘Cosco (Qidong) Shipyard
Co., Ltd’ (“Cosco Qidong”). Cosco Qidong has a registered capital of RMB500,000,000
($105,000,000) and Cosco Shipyard Group and Qidong Investment each has committed to
subscribe for 60% and 40% respectively in the capital of Cosco Qidong. The principal activities
of Cosco Qidong relate to repair, conversion and construction of offshore marine equipment.
On 29 December 2007, Cosco Shipyard Group, entered into an agreement with Jiangsu
Lianyungang Port Co., Ltd (“Jiangsu Lianyungang”) to form a company known as ‘Cosco
Lianyungang Shipyard Co., Ltd’ (“Cosco Lianyungang”). Cosco Lianyungang has a registered
capital of RMB180,000,000 ($36,000,000) and Cosco Shipyard Group and Jiangsu Lianyungang
each had committed to subscribe for 60% and 40% respectively in the capital of Cosco
Lianyungang. Cosco Lianyungang has issued shares to its shareholders during the fi nancial
year ended 31 December 2008.
(b) Operating lease commitments – where the Group is a lessee
The Group leases various offi ce premises, docks, quays and motor vessels under non-
cancellable operating lease agreements. The leases have varying terms, escalation clauses
and renewal rights.
The future aggregate minimum lease payables under non-cancellable operating leases
contracted for at the balance sheet date but not recognised as liabilities, are as follows:
The Group2008 2007
$’000 $’000
Not later than 1 year 30,694 24,758
Later than 1 year but not later than 5 years 69,461 22,039
Later than 5 years 56,762 24,362
156,917 71,159
150
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
34. Commitments (continued)
(c) Operating lease commitments – where the Group is a lessor
The Group leases out certain items of property, plant and equipment, investment properties
and trading property to non-related parties under non-cancellable operating leases.
The future minimum lease receivables under non-cancellable operating leases contracted for at
the balance sheet date but not recognised as receivables, are analysed as follows:
The Group2008 2007
$’000 $’000
Not later than 1 year 64,489 198,876
Later than 1 year but not later than 5 years 71 26,317
64,560 225,193
35. Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk,
interest rate risk and price risk), credit risk and liquidity risk.
Risk management is carried out under policies approved by the Board of Directors. The Board
approves guidelines for overall risk management, as well as policies covering these specifi c areas.
(a) Market risk
(i) Currency risk
Currency risks arise from transactions denominated in currencies other than the
respective functional currencies of the entities in the Group.
The Group monitors its foreign currency exchange risks closely and where appropriate,
enters into currency forwards to manage the currency exposure.
In addition, the Company has certain investments in foreign operations, whose net
assets are exposed to currency translation risk. Currency exposure to the net assets of
the Group’s foreign operations in the People’s Republic of China is managed primarily
through borrowings denominated in RMB.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
35. Financial risk management (continued)
(a) Market risk (continued)
(i) Currency risk (continued)
The Group’s currency exposure based on the information available to key management
is as follows:
SGD USD RMB Other Total$’000 $’000 $’000 $’000 $’000
At 31 December 2008
Financial assets
Cash and cash equivalents
and fi nancial assets,
available-for-sale 145,765 356,479 1,378,698 3,004 1,883,946
Trade and other receivables,
excluding advances paid
to suppliers 13,564 406,713 485,119 1,793 907,189
Other fi nancial assets 192 – 10,092 38 10,322
159,521 763,192 1,873,909 4,835 2,801,457
Financial liabilities
Borrowings 39 64,623 591,980 – 656,642
Other fi nancial liabilities 29,321 332,748 873,606 119,461 1,355,136
29,360 397,371 1,465,586 119,461 2,011,778
Net fi nancial assets/ (liabilities) 130,161 365,821 408,323 (114,626) 789,679
Less: Net fi nancial
assets denominated
in the respective
entities’ functional
currencies (129,951) (66,111) (328,178) (1,886)
Add: Firm commitments
and highly probable
forecast transactions
in foreign currencies – 5,171,127 – 230,662
Less: Forward currency
contracts – (1,594,855) – (70,899)
Currency exposure 210 3,875,982 80,145 43,251
152
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
35. Financial risk management (continued)
(a) Market risk (continued)
(i) Currency risk (continued)
SGD USD RMB Other Total$’000 $’000 $’000 $’000 $’000
At 31 December 2007
Financial assets
Cash and cash equivalents
and fi nancial assets,
available-for-sale 52,360 262,247 734,518 36,736 1,085,861
Trade and other receivables,
excluding advances paid to
suppliers 14,333 250,797 175,195 3,968 444,293
Other fi nancial assets 159 – 2,126 – 2,285
66,852 513,044 911,839 40,704 1,532,439
Financial liabilities
Borrowings 857 83,798 91,780 3 176,438
Other fi nancial liabilities 37,224 116,171 638,534 5,179 797,108
38,081 199,969 730,314 5,182 973,546
Net fi nancial assets 28,771 313,075 181,525 35,522 558,893
Less: Net fi nancial assets
denominated in the
respective entities’
functional currencies (27,416) (31,035) (181,510) (4,204)
Add: Firm commitments and
highly probable forecast
transactions in foreign
currencies – 4,455,848 – 121,223
Less: Forward currency
contracts – (2,638,087) – –
Currency exposure 1,355 2,099,801 15 152,541
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
35. Financial risk management (continued)
(a) Market risk (continued)
(i) Currency risk (continued)
The Company’s currency exposure based on the information available to key
management is as follows:
2008 2007
SGD USD RMB Total SGD USD Other Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets
Cash and cash
equivalents 123,952 6,870 1 130,823 28,769 79,833 2 108,604
Trade and other
receivables 472 65,596 80,136 146,204 455 65,973 – 66,428
124,424 72,466 80,137 277,027 29,224 145,806 2 175,032
Financial liabilities
Borrowings – – – – – – – –
Other fi nancial
liabilities 14,871 – – 14,871 7,086 – – 7,086
14,871 – – 14,871 7,086 – – 7,086
Net fi nancial assets 109,553 72,466 80,137 262,156 22,138 145,806 2 167,946
Less: Net fi nancial
assets
denominated
in the
respective
entities’
functional
currencies (109,553) – – (22,138) – –
Currency exposure – 72,466 80,137 – 145,806 2
154
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
35. Financial risk management (continued)
(a) Market risk (continued)
(i) Currency risk (continued)
If the USD change against the SGD and RMB by 500 basis points (2007: 100 basis
points) with all other variables including tax rate being held constant, the effects arising
from the net fi nancial asset position will be as follows:
2008 2007
Increase/(decrease) Profi t
after taxProfi t
after tax
$’000 $’000
Group
USD against SGD
– strengthened 232 564
– weakened (232) (564)
USD against RMB
– strengthened 2,198 496
– weakened (2,198) (496)
Company
USD against SGD
– strengthened 2,527 1,013
– weakened (2,527) (1,013)
(ii) Price risk
The Group is not exposed to any signifi cant equity securities price risk.
(iii) Cash fl ow and fair value interest rate risks
Cash fl ow interest rate risk is the risk that the future cash fl ows of a fi nancial instrument
will fl uctuate because of changes in market interest rates. Fair value interest rate
risk is the risk that the value of a fi nancial instrument will fl uctuate due to changes in
market interest rates. The Group has cash balances placed with reputable banks and
fi nancial institutions which generate interest income for the Group. The Group manages
its interest rate risks by placing such balances on varying maturities and interest rate
terms.
The Group’s interest rate risk mainly arises from non-current borrowings. The Group
monitors the interest rates on borrowings closely to ensure that the borrowings are
maintained at favourable rates and will use derivative fi nancial instruments to hedge
their exposures when the exposure is signifi cant.
The Group’s borrowings at variable rates on which effective hedges have not been
entered into are denominated mainly in USD. If the USD interest rates increase/
decrease by 0.5% (2007: 0.5%) with all other variables including tax rate being held
constant, the profi t after tax will be lower/higher by $168,000 (2007: $251,000) as a
result of higher/lower interest expense on these borrowings.
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
35. Financial risk management (continued)
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligation resulting
in fi nancial loss to the Group.
Concentrations of credit risk with respect to trade receivables are limited due to the
Group’s large number of customers who are internationally dispersed. Due to these factors,
management believes that no additional credit risk beyond the amount of allowance for
impairment made is inherent in the Group’s and Company’s trade receivables.
The Group has no signifi cant concentrations of credit risk. The Group has policies in place to
ensure that sales of products and services are made to customers with an appropriate credit
history.
During the year, a subsidiary in the Group obtained a pledge of 3 vessels valued at
US$9,000,000 ($12,903,000) to secure its outstanding trade receivables of US$7,357,000
($10,548,000) as at 31 December 2008.
Other than the above-mentioned, the Group and Company do not hold any other collateral.
The maximum exposure to credit risk for each class of fi nancial instruments is the carrying
amount of that class of fi nancial instruments presented on the balance sheet, except as
follows:
The Company2008 2007
$’000 $’000
Corporate guarantees provided to banks on subsidiaries’ loans 50,265 84,598
The Group’s and Company’s major classes of fi nancial assets are bank deposits and trade
receivables.
The credit risk for trade receivables (including amount due from customer on construction
contracts) based on the information provided to key management is as follows:
The Group The Company2008 2007 2008 2007
$’000 $’000 $’000 $’000
By Business Segments
Shipping 18,047 19,644 – –
Ship repair, ship building and
marine engineering activities 740,417 382,683 – –
Others 4 1 261 324
758,468 402,328 261 324
156
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
35. Financial risk management (continued)
(b) Credit risk (continued)
(i) Financial assets that are neither past due nor impaired
Bank deposits that are neither past due nor impaired are mainly deposits with banks
with high credit-ratings assigned by international credit-rating agencies. Trade
receivables that are neither past due nor impaired are substantially companies with a
good collection track record with the Group.
(ii) Financial assets that are past due and/or impaired
There is no other class of fi nancial asset that is past due and/or impaired except for
trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
The Group2008 2007
$’000 $’000
Past due 0 to 3 months 4,136 6,034
Past due 3 to 6 months 226 721
Past due over 6 months 1,663 1,068
6,025 7,823
The carrying amount of trade receivables and construction contract due from customers
individually determined to be impaired and the movement in the related allowance for
impairment are as follows:
The Group2008 2007
$’000 $’000
Gross amount 70,187 11,662
Less: Allowance for impairment (69,183) (5,320)
1,004 6,342
Beginning of fi nancial year 5,320 5,447
Currency translation differences 2,621 7
Allowance utilised (30) (35)
Allowance made/(reversal of) 61,283 (95)
Amount written off (11) (4)
End of fi nancial year 69,183 5,320
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
35. Financial risk management (continued)
(c) Liquidity risk
The Group adopts prudent liquidity risk management by maintaining suffi cient cash and having
an adequate amount of committed credit facilities and the ability to close out market positions.
Due to the dynamic nature of the underlying businesses, the Group aims at maintaining
fl exibility in funding by keeping committed credit facilities available.
The table below analyses the maturity profi le of the Group’s and Company’s fi nancial liabilities
(including forward currency contracts) based on contractual undiscounted cash fl ows.
Less than 1 year
Between1 and 5 years
Over5 years
$’000 $’000 $’000
The Group
At 31 December 2008
Gross-settled currency forwards
– Receipts 1,415,423 213,214 –
– Payments (1,440,433) (228,850) –
Other fi nancial liabilities (1,355,136) – –
Borrowings (75,617) (672,521) (4,466)
(1,455,763) (688,157) (4,466)
At 31 December 2007
Gross-settled currency forwards
– Receipts 1,078,973 1,411,068 –
– Payments (1,093,397) (1,547,542) –
Other fi nancial liabilities (797,108) – –
Borrowings (117,965) (50,783) (24,731)
(929,497) (187,257) (24,731)
The Company
At 31 December 2008
Other fi nancial liabilities (14,871) – –
Borrowings – – –
(14,871) – –
At 31 December 2007
Other fi nancial liabilities (7,086) – –
Borrowings – – –
(7,086) – –
158
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
35. Financial risk management (continued)
(d) Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue
as a going concern and to maintain an optimal capital structure so as to maximise shareholder
value. In order to maintain or achieve an optimal capital structure, the Group may adjust the
amount of dividend payment, return capital to shareholders, issue new shares, buy back issued
shares, obtain new borrowings or sell assets to reduce borrowings.
Management monitors capital based on the return on shareholders’ fund. The return on
shareholders’ fund was 29.0% for the current fi nancial year ended 31 December 2008 (2007:
41.8%).
The return on shareholders’ fund is calculated as net profi t attributable to equity holders of the
Company divided by average shareholders’ equity.
The Group and the Company are in compliance with all externally imposed capital requirements
for the fi nancial years ended 31 December 2008 and 2007.
36. Immediate and ultimate holding corporation
The Company’s immediate and ultimate holding corporation is China Ocean Shipping (Group)
Company, registered in the People’s Republic of China.
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
37. Related party transactions
(a) In addition to the information disclosed elsewhere in the fi nancial statements, the following
transactions took place between the Group and related parties at terms agreed between the
parties:
The Group2008 2007
$’000 $’000
Revenue
Sales to fellow subsidiaries 567,821 155,870
Sales to a related party corporation 101 26,586
Rental income received/receivable from fellow subsidiaries 1,040 685
Rental income received/receivable from related parties 213 227
Time charter revenue received/receivable from a fellow
subsidiary 42,976 9,346
Service income received from fellow subsidiaries 2,145 936
Interest received/receivable from a fellow subsidiary 24,398 4
Utilities received/receivable from a fellow subsidiary 1 –
Expenditure
Purchases from fellow subsidiaries 33,831 23,489
Purchases from related party corporations 113 243
Rental paid/payable to fellow subsidiaries 1,546 1,368
Vessel rental paid/payable to a fellow subsidiary 10,321 7,095
Management fee paid/payable to a related party corporation 418 461
Crew wages paid/payable to fellow subsidiaries 7,194 11,698
Subcontract costs paid/payable to fellow subsidiaries 6,914 1,714
Utilities expenses paid/payable to fellow subsidiaries 1,709 1,450
Service expenses paid/payable to fellow subsidiaries 988 1,790
Service expenses paid/payable to related party corporations – 154
Interest paid/payable to a fellow subsidiary – 281
Commission paid/payable to a fellow subsidiary 34 22
Outstanding balances as at 31 December 2008, arising from sales or purchases of goods and
services, are set out in Notes 13 and 26 respectively.
160
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
37. Related party transactions (continued)
(b) The related parties refer to directors of the Company and a director of a subsidiary.
(c) Related party corporations
Related party corporations are corporations with common shareholders, other than the holding
corporation, subsidiaries, fellow subsidiaries and associated companies, and/or in which the
directors of the Company and/or other directors of subsidiaries or shareholders of the holding
corporation and/or shareholders of the subsidiaries have signifi cant infl uence or control.
(d) Share options granted to key management
The aggregate number of share options granted to key management of the Group during the
fi nancial year was 5,800,000 (2007: 7,250,000). The share options were given on the same
terms and conditions as those offered to other employees of the Company (Note 31). The
outstanding number of share options granted to key management of the Group at the end of
fi nancial year was 13,000,000 (2007: 10,450,000).
(e) Key management personnel compensation
Key management personnel compensation is as follows:
The Group2008 2007
$’000 $’000
Salaries and other short-term employee benefi ts 4,564 3,734
Employer’s contribution to defi ned contribution plans, including
Central Provident Fund 15 14
Share option expenses 5,184 5,623
9,763 9,371
Included in the above was total compensation to directors of the Company amounting to
$9,509,000 (2007: $8,615,000).
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
38. Segment information
Primary reporting format – business segments
Shipping
Ship repair,ship buildingand marineengineering
activities Others Group$’000 $’000 $’000 $’000
Financial year ended 31 December 2008Sales
– External sales 276,546 3,195,744 3,719 3,476,009
– Inter-segment sales 62 393 257,047 257,502
276,608 3,196,137 260,766 3,733,511
Elimination (257,502)
3,476,009
Segment results 174,293 295,613 (10,327) 459,579
Finance expense (8,834)
Share of profi t of associated companies 643
Profi t before income tax 451,388
Income tax expense (31,620)
Net profi t 419,768
Other segment itemsCapital expenditure
– property, plant and equipment 3,110 661,382 91 664,583
Depreciation 28,673 91,444 650 120,767
Write-off for inventory obsolescence
and inventory write down – 20,907 – 20,907
Allowance for impairment of trade
and other receivables – 61,283 – 61,283
Expected losses recognised on
construction contracts – 89,048 – 89,048
Employees share option expense – – 17,311 17,311
Segment assets 240,141 5,154,211 24,728 5,419,080
Associated companies 2,577
Short-term bank deposits 1,282,570
Financial assets, available-for-sale 3,630
Deferred income tax assets 91,417
Consolidated total assets 6,799,274
Segment liabilities 69,045 4,399,765 3,127 4,471,937
Borrowings 656,642
Current income tax liabilities 61,348
Deferred income tax liabilities 180
Consolidated total liabilities 5,190,107
Consolidated net assets 1,609,167
162
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
38. Segment information (continued)
Primary reporting format – business segments (continued)
Shipping
Ship repair,ship buildingand marineengineering
activities Others Group$’000 $’000 $’000 $’000
Financial year ended 31 December 2007Sales
– External sales 229,041 2,032,034 625 2,261,700
– Inter-segment sales 33 808 170,857 171,698
229,074 2,032,842 171,482 2,433,398
Elimination (171,698)
2,261,700
Segment results 138,408 401,775 (31,203) 508,980
Finance expense (11,444)
Share of profi t of associated companies 537
Profi t before income tax 498,073
Income tax expense (19,512)
Net profi t 478,561
Other segment itemsCapital expenditure
– property, plant and equipment 1,365 473,548 576 475,489
Depreciation 13,954 65,950 681 80,585
Write-off for inventory obsolescence
and inventory write-down – 173 – 173
Reversal of impairment of trade
and other receivables – (95) – (95)
Employees share option expense – – 12,623 12,623
Segment assets 288,075 3,191,215 29,587 3,508,877
Associated companies 1,794
Short-term bank deposits 431,436
Financial assets, available-for-sale 3,067
Deferred income tax assets 21,996
Consolidated total assets 3,967,170
Segment liabilities 75,929 2,385,557 2,300 2,463,786
Borrowings 176,438
Current income tax liabilities 24,040
Deferred income tax liabilities 152
Consolidated total liabilities 2,664,416
Consolidated net assets 1,302,754
The division of the Group’s results, assets and liabilities into activities has been ascertained by
reference to direct identifi cation of assets, liabilities and revenue/cost centres.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
38. Segment information (continued)
Primary reporting format – business segments (continued)
Inter-segment transactions are recorded at their transacted price which is generally at fair value.
Segment assets consist primarily of trading properties, property, plant and equipment, inventories,
receivables and operating cash and exclude deferred income tax assets, short-term bank deposits,
forward currency contracts and fi nancial investments. Segment liabilities comprise operating liabilities
and exclude items such as current and deferred tax liabilities, borrowings and forward currency
contracts. Capital expenditure comprises additions to property, plant and equipment and intangible
assets, including those acquired through business combinations.
Secondary reporting format – geographical segments
The Group’s business segments operate in two main geographical areas:
People’s Republic of China - the operations in this area are principally in ship repair, ship
building and marine engineering activities; and
Singapore and Malaysia - the Company is headquartered in Singapore and has operations in
Singapore. The operations in Singapore and Malaysia are principally in shipping, ship repair
and marine engineering activities, rental of property and investment holding.
Sales are based on the country in which the services are rendered to the customer. Total assets and
capital expenditure are shown by the geographical area where the assets are located.
Sales Total assets Capital expenditure2008 2007 2008 2007 2008 2007
$’000 $’000 $’000 $’000 $’000 $’000
People’s Republic
of China 3,183,983 2,024,370 6,235,668 3,390,587 661,150 473,263
Singapore and
Malaysia * 292,026 237,330 563,606 576,583 3,433 2,226
3,476,009 2,261,700 6,799,274 3,967,170 664,583 475,489
* The Group’s shipping companies operate in worldwide shipping routes. Hence, it would not be meaningful
to allocate sales to any geographical segments for shipping activities.
164
Notes to the Financial Statements
Annual Report 2008
For the Financial Year Ended 31 December 2008
39. New or revised accounting standards and interpretations
Certain new standards, amendments and interpretations to existing standards have been published
and are mandatory for the Group’s accounting periods beginning on or after 1 January 2009 or
later periods and which the Group has not early adopted. The Group’s assessment of the impact of
adopting those standards, amendments and interpretations that are relevant to the Group is set out
below:
(a) FRS 1(R) Presentation of Financial Statements (effective for annual periods beginning on or
after 1 January 2009)
The revised standard requires:
All changes in equity arising from transactions with owners in their capacity as owners
to be presented separately from components of comprehensive income;
Components of comprehensive income not to be included in statement of changes in
equity;
Items of income and expenses and components of other comprehensive income can
be presented either in a single statement of comprehensive income with subtotals,
or in two separate statements (a separate statement of profi t and loss followed by a
statement of comprehensive income);
Presentation of restated balance sheet as at the beginning of the comparative period
when entities make restatements or reclassifi cations of comparative information.
The revisions also include changes in the titles of some of the financial statements primary
statements.
The Group will apply the revised standard from 1 January 2009 and provide comparative information
that conforms to the requirements of the revised standard. The key impact of the application
of the revised standard is the presentation of an additional primary statement, the statement of
comprehensive income.
(b) FRS 108 Operating Segments (effective for annual periods beginning on or after 1 January
2009)
FRS 108 supersedes FRS 14 Segment Reporting and requires the Group to report the
fi nancial performance of its operating segments based on the information used internally by
management for evaluating segment performance and deciding on allocation of resources.
Such information may be different from the information included in the fi nancial statements,
and the basis of its preparation and reconciliation to the amounts recognised in the fi nancial
statements shall be disclosed.
The Group will apply FRS 108 from 1 January 2009 and provide comparative information that
conforms to the requirements of FRS 108. The Group expects the new operating segments to
be different from business segments currently disclosed and expects more information to be
disclosed under FRS 108.
(c) Revised FRS 23 Borrowing Costs (effective for annual periods beginning on or after 1 January
2009)
The revised standard removes the option to recognise immediately as an expense borrowing
costs that are attributable to qualifying assets, except for those borrowing costs on qualifying
assets that are measured at fair value or inventories that are manufactured or produced in large
quantities on a repetitive basis.
The Group will apply the revised FRS 23 from 1 January 2009. As the Group has been
capitalising the relevant borrowing costs, the revised standard is not expected to have any
impact to the Group.
Fin
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Notes to the Financial StatementsFor the Financial Year Ended 31 December 2008
40. Authorisation of fi nancial statements
These fi nancial statements were authorised for issue in accordance with a resolution of the Board of
Directors of Cosco Corporation (Singapore) Limited on 2 March 2009.
166
Five-Year Summary
Annual Report 2008
Notes 2004 2005 2006 2007 2008
$’000 $’000 $’000 $’000 $’000INCOME STATEMENTTurnover 116,346 873,114 1,215,469 2,261,700 3,476,009Operating profi t before taxation 35,276 225,039 301,696 497,536 450,745Share of profi t of associated companies 1 31,107 519 600 537 643Profi t before income tax 66,383 225,558 302,296 498,073 451,388Income tax expense (1,393) (18,417) (22,981) (19,512) (31,620)Net profi t 64,990 207,141 279,315 478,561 419,768
Attributable to:
Equity holders of the company 64,159 160,494 205,353 336,568 302,588Minority interests 831 46,647 73,962 141,993 117,180Net profi t 64,990 207,141 279,315 478,561 419,768Dividend 2 21,854 44,141 89,348 156,738 156,747
BALANCE SHEETShare capital 217,039 228,587 239,947 266,852 270,608Statutory and other reserves (8,315) 60,634 70,855 82,806 167,904Retained earnings 113,204 230,484 359,256 590,249 705,692Minority interests 1,636 175,744 249,889 362,847 464,963Total equity 323,564 695,449 919,947 1,302,754 1,609,167Forward Currency Contracts – – 45 8,778 1,441Non-trade receivables 830 – – – –Financial assets, available for sale 120 2,304 2,208 3,067 3,630Club memberships 383 377 412 479 473Investments in associated companies 83,168 2,813 2,227 1,794 2,577Investment properties 11,640 11,703 11,350 11,472 12,217Property, plant and equipment 309,654 937,649 1,110,179 1,478,453 2,081,950Intangible assets – 9,357 9,319 9,302 9,546Deferred income tax assets – – – 21,996 91,417Deferred expenditure 847 – – – –Current assets 137,417 438,333 747,926 2,431,829 4,596,023Current liabilities (80,335) (400,704) (676,153) (2,557,025) (4,572,188)Non-current liabilities (140,160) (306,383) (287,566) (107,391) (617,919)Net Assets 323,564 695,449 919,947 1,302,754 1,609,167
RATIOSBasic earnings per share (cents) 3 and 4 3.0 7.4 9.3 15.1 13.5Dividend per share (cents) 5 2.0 2.0 4.0 7.0 7.0Dividend cover (times) 6 2.9 3.6 2.3 2.1 1.9Net tangible assets per share (cents) 4 14.7 23.2 29.8 41.6 50.7Gearing ratio (Net of Cash) 7 0.2 0.5 0.2 cash cash
Notes
1. The share of profi t of associated companies is net of tax.
2. The dividend for 2008 is calculated based on the number of shares issued as of 31 December 2008. The actual
amount payable will be based on the number of shares issue at book closure date.
3. Basic earnings per share is calculated as net profi t attributable to equity holders of the company divided by the
weighted average number of ordinary shares issued in the fi nancial year.
4. Basic earnings per share and net tangible assets per share have been adjusted to account for the bonus shares
issued in 2004 and the sub-division of one ordinary share into two ordinary shares in 2006.
5. Dividend per share for 2004 is based on shares of 20 cents par value each.
6. The dividend cover is calculated as net profi t attributable to equity holders of the Company divided by the amount
of equity dividend.
7. Gearing ratio is derived by taking total borrowings (net of cash) over the shareholders’ funds.
Fin
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Shareholding StatisticsAs at 5 March 2009
STATISTICS OF SHAREHOLDERS AS AT 5 MARCH 2009
Class of Shares – Ordinary shares
Voting Rights – One Vote per share
DISTRIBUTION OF SHAREHOLDERS BY SIZE OF SHAREHOLDINGS
Size of ShareholdingsNo. of
Shareholders % of Holders No. of Shares % of Shares
1 – 999 101 0.32 40,592 0.01
1,000 – 10,000 24,350 76.63 108,678,118 4.85
10,001 – 1,000,000 7,291 22.94 279,737,155 12.49
1,000,001 and above 35 0.11 1,850,789,089 82.65
Total 31,777 100.00 2,239,244,954 100.00
SUBSTANTIAL SHAREHOLDERS
Direct Interest Deemed Interests
No. Name No. of
shares held %No. of
shares held %
1. China Ocean Shipping (Group) Company 1,194,565,488 53.35 – –
2. Temasek Holdings (Pte) Ltd – – 112,244,117* 5.01
* Temasek Holdings (Pte) Ltd is deemed interested in the 112,244,117 shares held by its associated companies.
COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL
Based on information available and to the best knowledge of the Company as at 5 March 2009 approximately
41.23% of the ordinary shares of the Company are held by the public. The Company is therefore in
compliance with Rule 723 of the SGX-ST Listing Manual.
168
Shareholding Statistics
Annual Report 2008
As at 5 March 2009
LIST OF 20 LARGEST SHAREHOLDERS
SHAREHOLDER’S NAME NO OF SHARES %
1 CHINA OCEAN SHIPPING (GROUP) COMPANY 1,194,565,488 53.35
2 UNITED OVERSEAS BANK NOMINEES PTE LTD 125,978,785 5.63
3 DBS NOMINEES PTE LTD 104,018,833 4.65
4 CITIBANK NOMINEES SINGAPORE PTE LTD 70,808,861 3.16
5 SEMBCORP MARINE LTD 70,000,000 3.13
6 HSBC (SINGAPORE) NOMINEES PTE LTD 65,347,063 2.92
7 DBSN SERVICES PTE LTD 30,817,295 1.38
8 DB NOMINEES (SINGAPORE) PTE LTD 22,132,013 0.99
9 SCM INVESTMENT HOLDINGS PTE LTD 21,000,000 0.94
10 SEMBMARINE INVESTMENT PTE LTD 20,400,000 0.91
11 RAFFLES NOMINEES PTE LTD 20,301,927 0.91
12 OCBC SECURITIES PRIVATE LTD 13,122,524 0.59
13 PHILLIP SECURITIES PTE LTD 9,549,400 0.43
14 UOB KAY HIAN PTE LTD 8,768,692 0.39
15 MERRILL LYNCH (SINGAPORE) PTE LTD 8,414,455 0.38
16 MORGAN STANLEY ASIA (SINGAPORE) SECURITIES PTE LTD 8,157,486 0.36
17 HUI SHUNE MING @ HUI SHUN MENG 8,150,000 0.36
18 ING NOMINEES (SINGAPORE) PTE LTD 5,511,977 0.25
19 CIMB-GK SECURITIES PTE. LTD. 5,127,040 0.23
20 OCBC NOMINEES SINGAPORE PTE LTD 4,621,019 0.21
Total 1,816,792,858 81.17
Fin
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Notice of Annual General Meeting
COSCO CORPORATION (SINGAPORE) LIMITED(Company No.: 196100159G)
NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at Laguna
National Golf & Country Club, 11, Laguna Golf Green, Level 3, Eagle Ballroom, Singapore 488047 on Monday,
20 April 2009 at 3.00 p.m. for the purpose of transacting the following businesses:
Ordinary Business:
1. To receive and adopt the Directors’ Report and Audited Financial Statements for
the fi nancial year ended 31 December 2008 together with the Auditor’s Report
thereon.
(Resolution 1)
2. To declare a First and Final Dividend of S$0.04 per ordinary share for the year
ended 31 December 2008.
(Resolution 2)
3. To declare a Special Dividend of S$0.03 per ordinary share for the year ended
31 December 2008.
(Resolution 3)
4. To approve payment of Directors’ Fees of S$234,167 for the year ended
31 December 2008.
(Resolution 4)
5. To re-elect the following directors who are retiring in accordance with Article
98 of the Articles of Association of the Company and who, being eligible, offer
themselves for re-election:
a. Mr Li Jian Hong (Resolution 5)
b. Dr Wang Kai Yuen (See Explanatory Note 1) (Resolution 6)
6. To re-elect the following directors who are retiring in accordance with Article
104 of the Articles of Association of the Company and who, being eligible, offer
themselves for re-election:
a. Mr Jiang Li Jun (See Explanatory Note 2) (Resolution 7)
b. Mr Zhang Liang (Resolution 8)
7. To re-appoint Mr Tom Yee Lat Shing, a Director who will retire under Section
153(6) of the Companies Act, Cap 50, to hold offi ce from the date of this Annual
General Meeting until the next Annual General Meeting of the Company.
(See Explanatory Note 3)
(Resolution 9)
8. To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors and to authorise
the Directors to fi x their remuneration.
(Resolution 10)
Special Business
To consider and, if thought fi t, to pass the following as Ordinary Resolutions, with or without modifi cations:
9. General Mandate to authorize the Directors to issue shares or convertible
securities:
(Resolution 11)
“That pursuant to Section 161 of the Companies Act (Cap 50) and the Listing
Rules of the Singapore Exchange Securities Trading Limited (the “Listing Rules”),
authority be and is hereby given to the Directors to allot and issue:-
(a) shares in the capital of the Company (whether by way of bonus, rights or
otherwise); or
170
Notice of Annual General Meeting
Annual Report 2008
(b) convertible securities; or
(c) additional securities issued pursuant to Rule 829 of the Listing Rules; or
(d) shares arising from the conversion of convertible securities in (b) and (c)
above,
at any time and upon such terms and conditions and for such purposes as the
Directors may in their absolute discretion deem fi t provided that :-
(i) the aggregate number of shares and convertible securities that may be
issued shall not be more than 50% of the issued shares in the capital
of the Company (calculated in accordance with (ii) below), of which the
aggregate number of shares and convertible securities issued other than
on a pro rata basis to existing shareholders must be not more than 20% of
the issued shares in the capital of the Company (calculated in accordance
with (ii) below); and
(ii) for the purpose of determining the aggregate number of shares and
convertible securities that may be issued pursuant to (i) above, the
percentage of issued share capital shall be calculated based on the issued
shares in the capital of the Company at the time of the passing of this
resolution after adjusting for (a) new shares arising from the conversion or
exercise of any convertible securities; (b) new shares arising from exercising
share options or vesting of share awards outstanding or subsisting at the
time of the passing of this resolution and (c) any subsequent consolidation
or subdivision of shares; and
(iii) unless revoked or varied by ordinary resolution of the shareholders of the
Company in general meeting, this resolution shall remain in force until the
next Annual General Meeting of the Company or the date by which the
next Annual General Meeting of the Company is required by law to be
held, whichever is earlier”. (See Explanatory Note 4)
10. Authority to allot and issue shares under the Cosco Group Employees’ Share
Option Scheme 2002 (“Scheme”)
(Resolution 12)
“That approval be and is hereby given to the Directors to offer and grant options
(“Options”) in accordance with the provisions of the Cosco Group Employees’
Share Option Scheme 2002 (“Scheme”) and to allot and issue from time to time
such number of shares in the capital of the Company as may be required to be
issued pursuant to the exercise of Options granted under the Scheme, provided
that the total number of Shares to be offered under the Scheme shall not in total
exceed fi fteen (15) per cent of the issued share capital of the Company on the day
preceding any Offer Date at any time and from time to time during the existence
of the Scheme.” (See Explanatory Note 5)
11. Proposed Renewal of Shareholders’ Mandate for Recurrent Interested Person
Transactions
(Resolution 13)
(i) “That approval be and is hereby given for the renewal of the mandate for
the purposes of Chapter 9 of the Listing Manual of the SGX-ST, for the
Company, its subsidiaries and associated companies or any of them to
enter into any of the transactions falling within the types of Interested
Person Transactions, particulars of which are set out in the Appendix A
(“Appendix”) to the Annual Report of the Company for the fi nancial year
ended 31 December 2008 with any party who is of the class of Interested
Persons described in the Appendix provided that such transactions
are made on normal commercial terms and will not be prejudicial to the
interests of the Company and its minority shareholders and in accordance
with the review procedures set out in the Appendix;
Fin
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171
Notice of Annual General Meeting
(ii) That the Audit Committee of the Company be and is hereby authorized to
take such actions as it deems proper in respect of such procedures and/or
to modify or implement such procedures as may be necessary to take into
consideration any amendment to Chapter 9 of the Listing Manual of the
SGX-ST which may be prescribed by the SGX-ST from time to time;
(iii) That the Directors of the Company be and are hereby authorized to
complete and do all such acts and things (including all such documents
as may be required) as they may consider expedient or necessary or in the
interests of the Company to give effect to this Resolution; and
(iv) That the authority conferred by this Resolution shall, unless revoked or
varied by the Company in general meeting, continue in force until the
conclusion of the next Annual General Meeting of the Company or the date
by which the next Annual General Meeting of the Company is required by
law to be held, whichever is earlier.” (See Explanatory Note 6)
BY ORDER OF THE BOARD
Lawrence Kwan
Company Secretary
Singapore, 3 April 2009
Explanatory Notes on Business to be transacted
1. Dr Wang Kai Yuen will, upon election as a Director, remain as the Chairman of the Nominating Committee and a
member of the Audit Committee, Remuneration Committee and Enterprise Risk Management Committee; and will
be considered independent for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.
2. Mr Jiang Li Jun will, upon election as a Director, remain as a member of the Nominating Committee, Remuneration
Committee and Enterprise Risk Management Committee.
3. Mr. Tom Yee Lat Shing will, upon re-appointment, remain as the Chairman of the Audit Committee and a member
of the Nominating Committee, Remuneration Committee and Enterprise Risk Management Committee; and will be
considered independent for the purposes of Rule 704(8) of the Listing Manual of the SGX-ST.
4. Ordinary Resolution 11 is to empower the Directors of the Company from the date of the above Meeting until the
next Annual General Meeting to issue shares and/or convertible securities in the capital of the Company up to
an amount not exceeding in aggregate 50% of the issued shares in the capital of the Company of which the total
number of shares and convertible securities issued other than on a pro-rata basis to existing shareholders shall
not exceed 20% of the issued shares in the capital of the Company at the time the resolution is passed, for such
purposes as they consider would be in the interests of the Company. This authority will, unless revoked or varied at
a general meeting, expire at the next Annual General Meeting of the Company.
5. Ordinary Resolution 12 is to empower the Directors of the Company, from the date of this Meeting until the next
Annual General Meeting, to allot and issue shares in the capital of the Company pursuant to the exercise of such
options under the Scheme. The total number of Shares to be offered under the Scheme shall not exceed fi fteen (15)
per cent of the issued share capital of the Company on the day preceding any Offer Date at any time and from time
to time during the existence of the Scheme.
6. Ordinary Resolution 13 is to renew the General Mandate to allow the Company, its subsidiaries and associated
companies or any of them to enter into certain Recurrent Interested Person Transactions with person who are
considered “Interested Persons” (as defi ned in Chapter 9 of the Listing Manual of the SGX-ST).
172
Notice of Annual General Meeting
Annual Report 2008
The Company’s Audit Committee has confi rmed that the methods and procedures for determining the transaction
process have not changed since the last renewal of the Shareholders’ Mandate on 15 April 2008 in respect
of transactions described in Section 2.1 of Schedule II of the Appendix; and since the approval of the additional
Shareholders’ Mandate on 17 July 2007 in respect of transactions described in Section 2.2 of Schedule II of the
Appendix; and that the said methods and procedures are suffi cient to ensure that the Recurrent Interested Person
Transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of the
Company and its minority shareholders.
Notes
i. A member of the Company entitled to attend and vote at a meeting is entitled to appoint one or two proxies to
attend and vote in his stead. A proxy need not be a member of the Company.
ii. Where a member appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his
shareholding (expressed as a percentage of the whole) to be represented by each proxy.
iii. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 9
Temasek Boulevard, #07-00 Suntec Tower Two, Singapore 038989 not later than 48 hours before the time fi xed for
holding the Annual General Meeting.
iv. This instrument appointing a proxy or proxies must be under the hand of the appointer or his attorney duly
authorized in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be
executed either under its common seal or under the hand of any attorney duly authorized.
v. A corporation which is a member may also authorize by resolution of its directors or other governing body, such
person as it thinks fi t to act as its representative at the meeting in accordance with Section 179 of the Companies
Act, Cap. 50.
NOTICE OF BOOKS CLOSURE
NOTICE IS HEREBY GIVEN that, subject to the approval of shareholders to the First and Final Dividend and
the Special Dividend being obtained at the Annual General Meeting to be held on 20 April 2009, the Transfer
of Books and the Register of Members of the Company will be closed on 4 May 2009 and 5 May 2009,
for the preparation of dividend warrants for shareholders of ordinary shares registered in the books of the
Company.
Duly completed registrable transfers of ordinary shares in the capital of the Company (“Shares”) received by
the Company’s Share Registrar, Tricor Barbinder Share Registration Services, 8 Cross Street, #11-00, PWC
Building, Singapore 048424 up to 5.00 p.m. on 30 April 2009 will be entitled to the proposed First and Final
Dividend and the Special Dividend.
Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at
5.00 p.m. on 30 April 2009 will be entitled to the proposed First and Final Dividend and the Special Dividend.
Payment of the dividends, if approved by members at the Annual General Meeting, will be made on 15 May
2009.
BY ORDER OF THE BOARD
Lawrence Kwan
Company Secretary
Singapore, 3 April 2009
COSCO CORPORATION (SINGAPORE) LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No.: 196100159G)
ANNUAL GENERAL MEETINGPROXY FORM
I/We NRIC/Passport No.
of
being a member of Cosco Corporation (Singapore) Limited (the “Company”), hereby appoint
Name AddressNRIC/Passport
NumberProportion of
Shareholdings (%)
And/or (delete as appropriate)
Name AddressNRIC/Passport
NumberProportion of
Shareholdings (%)
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
Annual General Meeting of the Company to be held at Laguna National Golf & Country Club, 11, Laguna Golf Green,
Level 3, Eagle Ballroom, Singapore 488047 on Monday, 20 April 2009 at 3.00 p.m. and at any adjournment thereof.
I/We have indicated with an “X” in the appropriate box against the item how I/we wish my/our proxy/proxies to vote.
If no specifi c direction as to voting is given or in the event of any item arising not summarised below, my/our proxy/
proxies may vote or abstain at the discretion of my/our proxy/proxies.
No. Resolutions For Against
ORDINARY BUSINESS
1.To receive and adopt the Directors’ Report and Audited Financial Statements for the year ended 31 December 2008 together with the Auditor’s Report thereon.
2.To declare a fi rst and fi nal dividend of S$0.04 per ordinary share for the year ended 31 December 2008.
3.To declare a special dividend of S$0.03 per ordinary share for the year ended 31 December 2008.
4. To approve payment of Directors’ Fees.
5.To re-elect Mr Li Jian Hong, who is retiring under Article 98 of the Articles of Association of the Company.
6.To re-elect Dr Wang Kai Yuen, who is retiring under Article 98 of the Articles of Association of the Company.
7.To re-elect Mr Jiang Li Jun, who is retiring under Article 104 of the Articles of Association of the Company.
8.To re-elect Mr Zhang Liang, who is retiring under Article 104 of the Articles of Association of the Company.
9.To re-appoint Mr Tom Yee Lat Shing, who is retiring pursuant to Section 153(6) of the Companies Act, Cap 50.
10.To re-appoint Messrs PricewaterhouseCoopers LLP as Auditors of the Company and to authorise the Directors to fi x their remuneration.
SPECIAL BUSINESS
11.To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Cap 50.
12.To authorise Directors to issue shares pursuant to the Cosco Group Employees’ Share Option Scheme 2002.
13.To approve the renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions.
Dated this day of 2009
Signature of Member(s) or Common Seal
IMPORTANT: Please Read Notes for This Proxy Form.
Important:1. For investors who have used their CPF monies to buy the
Company’s shares, this Annual Report is sent to them at
the request of their CPF Approved Nominees solely FOR INFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF investors and
shall be ineffective for all intents and purposes if used or
purported to be used by them.
3. CPF investors who wish to vote should contact their CPF
Approved Nominees.
Total No. of Shares in No. of Shares
CDP Register
Register of Members
NOTES:
1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defi ned in section 130A of the
Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you
should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register
of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register
of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.
2. A Shareholder 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. Where a Shareholder appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding (expressed as a percentage of
the whole) to be represented by each proxy.
4. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 9 Temasek Boulevard, #07-00 Suntec Tower Two,
Singapore 038989 not less than 48 hours before the time set for holding the annual general meeting. The sending of a Proxy Form by a Shareholder does not
preclude him from attending and voting in person at the annual general meeting if he fi nds that he is able to do so. In such event, the relevant Proxy Forms will be
deemed to be revoked.
5. The instrument appointing a proxy or proxies must be under the hand of the appointer or of his attorney duly authorised in writing. Where the instrument appointing
a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of a director or an offi cer or attorney duly authorised.
6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointer by an attorney, the power of attorney (or other authority) or a duly certifi ed
copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.
7. A corporation which is a Shareholder may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at
the annual general meeting, in accordance with section 179 of the Companies Act, Chapter 50 of Singapore.
8. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions
of the appointer are not ascertainable from the instructions of the appointer specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of a
Shareholder whose Shares are entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the Shareholder,
being the appointer, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the
annual general meeting, as certifi ed by The Central Depository (Pte) Limited to the Company.
First fold
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affi x
postage
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COSCO CORPORATION (SINGAPORE) LIMITED9 Temasek Boulevard, #07-00 Suntec Tower Two,
Singapore 038989
Apply glue here
9 Temasek Boulevard #07-00
Suntec Tower Two
Singapore 038989
Telephone: 68850888
Fascimile: 63369006
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