w w w . c o s c o . c o m . s g · Mr Li Jian Xiong, Vice President Tel: (65) 6885 0886 Fax: (65) 6336 9006 ... Harington Property Pte Ltd 100%. 1,303 920 695 1,609 337 205 160 303

9 Temasek Boulevard #07-00 Suntec Tower Two Singapore 038989

Telephone: 68850888 Fascimile: 63369006

w w w . c o s c o . c o m . s g

TRANSFORMATIONTRANSTRANSFORMATION

TRANSFORM

2009 Annual Report

TRANS FORM ATION

A JOURNEY OFCOSCO Corporation (Singapore) Limited

TRANSFORMATIONTRANS

TRANSFORM

TWO YEARS AGO, WE EMBARKED ON A JOURNEY OF

CHANGE; TRANSFORMING FROM A SHIP REPAIR AND

CONVERSION COMPANY TO A LARGER ENTERPRISE THAT

INCLUDED CAPABILITIES IN SHIP BUILDING AND OFFSHORE

MARINE ENGINEERING.

DURING THIS TIME, WE HAVE REMAINED RESOLUTE

AND RESILIENT, BUILDING ON OUR BUSINESS MODEL

WHILE MANAGING THE CHALLENGES THAT HAVE COME

OUR WAY.

IN 2009, WE ACQUIRED NEW SKILLS, AND ENHANCED

WORK PROCESSES; WE SAW THE BUILDING OF NEW

SHIPS AND COMPLEX SHIP CONVERSIONS, AS WELL

AS THE COMPLETION OF OUR FIRST DEEP-SEA OIL RIG,

THE SEVAN DRILLER. STAYING THE COURSE, THESE

MEASURED STEPS LAY THE FOUNDATION FOR LONG-TERM

SUSTAINABLE GROWTH.

AT COSCO, WE BELIEVE IN RESILIENCE, DETERMINATION

AND STRENGTH. THESE VALUES HAVE SEEN US THROUGH

THE TROUGH, AND IT WILL SEE US THROUGH THE FUTURE.

IN OUR JOURNEY OF TRANSFORMATION,

WE TAKE PROGRESSIVE AND NECESSARY STEPS

TO REALISE OUR VISION AS ONE OF THE WORLD LEADERS IN SHIP REPAIR, SHIP BUILDINGAND OFFSHORE MARINE ENGINEERING

Converted by COSCO Dalian Shipyard, FPSO Cidade de Santos MV20 is one of the world’s largest floating production, storage and offloading vessels (“FPSO”). The FPSO was converted from the VLCC FSO Bateau and has a storage capacity of approximately 700,000 barrels. The gas processed in the FPSO will be delivered through an 18-inch gas pipeline to merge with a larger pipeline to shore. The FPSO measures 334 metres long and 51 metres wide.

COSCO OVERVIEW Corporate ProfileCorporate StructureFinancial Highlights Major Achievements

KEY MESSAGESChairman’s MessageVice Chairman and President’s Message

OPERATIONS REVIEWStrengths and Capabilities Our Major ShipyardsBusiness OverviewShip Repair, Ship Building and Offshore Marine Engineering Dry Bulk Shipping & Others Group Financial Review

CORPORATE GOVERNANCE AND TRANSPARENCYCorporate GovernanceCorporate InformationBoard of DirectorsKey ManagementInvestor RelationsRisk Management

INSIDE COSCO AND CORPORATE CITIZENSHIPResearch and DevelopmentHuman Resources Workplace SafetyCorporate Social Responsibility

FINANCIAL STATEMENTSDirectors’ ReportStatement by DirectorsIndependent Auditor’s ReportConsolidated Income StatementConsolidated Statement of Comprehensive IncomeBalance Sheets Consolidated Statement of Changes in EquityConsolidated Cash Flow StatementNotes to the Financial StatementsFive-Year Summary

Shareholding StatisticsNotice of Annual General MeetingProxy Form for Annual General MeetingNotes for Proxy Form

78

1012

1822

30323436

4042

486364707276

Contents

84868890

9399

100101102103104106108170

171173

COSCO Corporation (Singapore) Limited Mr Li Jian Xiong, Vice President Tel: (65) 6885 0886 Fax: (65) 6336 9006 Email: [email protected]

SPIN Capital Asia (Investor Relations Consultant) Mr Michael Tan Tel: (65) 6227 7790 Email: [email protected]

INVESTOR RELATIONS CONTACTS

COSCO OverviewCorporate Profile

7

COSCO Corporation (Singapore) Limited (“COSCO Corporation” or the “Group”) has one of the largest Ship Repair, Ship Building and Offshore 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 Offshore 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 propelled COSCO Corporation into the premier league in the ship repair industry.

COSCO Corporation is committed to long-term growth through its core businesses and global coverage. 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 2009, we have been part of the FTSE ST China Index, and from July 2009, 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.

CorporateProfile

2009 Annual ReportCOSCO Corporation (Singapore) Limited

COSCO OVERVIEWCorporate Structure

8

Ship Repair, Ship Building & Offshore Marine Engineering

CorporateStructure

COSCO Shipyard Group Co., Ltd

COSCO Marine Engineering (Singapore) Pte Ltd

COSCO (Nantong) Shipyard Co., Ltd COSCO (Qidong) Offshore Co., Ltd Incorporated in January 2009COSCO (Dalian) Shipyard Co., LtdCOSCO (Guangdong) Shipyard Co., LtdCOSCO (Lianyungang) Shipyard Co., LtdCOSCO (Xiamen) Shipyard Co., LtdCOSCO (Shanghai) Shipyard Co., LtdCOSCO (Tianjin) Shipyard Co., LtdCOSCO (Zhoushan) Shipyard Co., LtdCOSCO (Nantong) Ocean Shipyard Co., LtdCOSCO Dalian Rikky Ocean Engineering Co., LtdZhongyuan Sea-Land Engineering Co., LtdCOSCO Shipyard Total Automation Co., LtdDiesel Marine Dalian LtdDiesel Marine International (Nantong) Co., Ltd

••

•••••••••••••

COSCO Engineering Pte Ltd •

90%

COSCO (Nantong) Shipyard Co., Ltd 50%

COSCO (Dalian) Shipyard Co., Ltd 39.1%

51.0%

9

Shipping Agency & Others


Dry Bulk Shipping

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

••••••••

COSCO (Singapore) Pte Ltd

COSLINK (M) Sdn Bhd

COSTAR Shipping Pte Ltd100% 70%

Costar Agencies (M) Sdn Bhd CNF Shipping Agencies Pte Ltd

CNF Shipping (M) Sdn Bhd

•••

18%

70%

Harington Property Pte Ltd 100%

1,303

920

695

1,609

337

205

160

303

2,262

1,215

873

3,476

Financial Highlights10

2,899

110

1,611

COSCO OVERVIEW

Turnover

FinancialHighlights

(S$’m)

Net Profit Attributable to Equity Holders

2009

2008

2007

2006

2005

(S$’m)

2009

2008

2007

2006

2005

Net Assets(S$’m)

2009

2008

2007

2006

2005

Revenue by Activities (%)

95%

4%

1%

Ship Repair, Ship Building & Offshore Marine Engineering

Dry Bulk Shipping

Shipping Agency and Others

15.1

9.3

7.42.0

4.0

7.0

13.57.0

11

Dividends per Share (cents) and Basic Earnings per Share (cents)

Dividends per share (cents)

Basic earnings per share (cents)

3.04.9


5-Year Profit and Loss Accounts (S$’m) 2005 2006 2007 2008 2009

Turnover 873 1,215 2,262 3,476 2,899

Operating Profit before Tax 225 301 497 451 179

Share of Profit of Associated Companies 1 1 1 1 0

Taxation 19 23 19 32 41

Profit from Ordinary Activities 207 279 479 420 138

Minority Interest 47 74 142 117 28

Net Profit attributable to Equity Holders of the Company 160 205 337 303 110

Other Key Statistics 2005 2006 2007 2008 2009

Number of Shares (m) 1,098.8# 2,214.0 2,237.7 2,239.2 2,239.2

Basic Earnings per Share (cents)* 7.4 9.3 15.1 13.5 4.9

Dividend per Share (cents) 2.0 4.0 7.0 7.0 3.0

Dividend Cover (times) 3.6 2.3 2.1 1.9 1.6

Net Tangible Assets per Share (cents)* 23.2 29.8 41.6 50.7 48.0

Net Assets Value per Share (cents)* 23.6 30.3 42.0 51.1 48.4

Gearing Ratio (net of cash)(times) 0.5 0.2 cash cash cash

Return on Equity (%) 38.1 34.5 41.8 29.0 9.9

Return on Assets (%) 16.5 12.5 11.5 5.6 1.7

* Basic earnings per share, net tangible assets per share and net assets value per share have been adjusted to account for the 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

2009

2008

2007

2006

2005

Major Achievements12 COSCO OVERVIEW

MajorAchievements

M.V. APJ KAIS

Steel structure at length below 28.5m

Commencing construction of steel structure at 13.4m

Successful lifting of drilling base module

SEVAN DRILLER

350 POB ACCOMMODATION AND WORK BARGE

M.V. YUAN SHUN HAI

M.V. BALABAN M.V. CAESAR M.V. JIN ZHOU HAI

13


Platform towed by Nantong COSCO Shipyard, passing by Nantong Sutong Bridge in the process

Platform successfully docked at Qidong Offshore Shipyard Base

M.V. CHANG SHUN II M.V. ZHOU SHAN HAI

M.V. ADAM ASNYK M.V. YUAN AN HAI

M.V. INGRID

Official naming ceremony of platform

WE REMAIN STRONG AND STEADY

Group-wide, we have adopted a structured procedure management system in the fabrication of vessels.

TO PRODUCE SIGNIFICANT OUTCOMES

The Sevan Driller, the world’s first cylindrical drilling unit, will operate initially in the Campos basin at water depths of about 2,000 metres. The rig is capable of drilling wells up to 12,000 metres deep in water depths of 3,700 metres. It is dynamically positioned with its own propellers, which receives GPS positioning signals. The rig is also able to operate in temperatures below 20 degrees Centigrade. It has a payload of more than 15,000 metric tons and a storage capacity of about 150,000 barrels of oil.

Chairman’s Message

Dear Shareholders,

2009 has been a year of challenge. As one of the leading industry players, with widespread operations in the region, we were affected by the volatile global economic environment. The world recession in 2009 exacerbated the challenges in our journey of transformation into a ship repair and conversion, ship building and offshore marine engineering group. Nevertheless, we remain committed to our long-term strategic goal of enhancing our capabilities and diversifying into complementary businesses for sustainable growth.

During the year in review, we booked group revenue of $2.9 billion which was a 17% decrease over revenue for FY2008. Net profit attributable to equity holders of the company was $110.1 million, a decrease of 64% compared with corresponding net profit of $302.6 million over FY2008. Earnings per Share was 4.9 cents, a decrease of 64% compared with 13.5 cents over FY2008. Despite the challenges experienced in 2009, we successfully navigated through the high waves to remain profitable. Focusing on our business strategy and execution, we achieved operational milestones that will pave our way forward.

Against this background, the Group is proposing dividends of 3 cents per share to be approved at our Annual General Meeting on 20 April 2010.

Milestones on our Journey

In 2009, we underscored our comprehensive development strategy by expanding our existing shipyard capacity and further developing our capabilities with a wider range of increasingly sophisticated engineering achievements. This resulted in a more broad-based group revenue composition with substantial contributions from a wider pool of business segments.

During the year in review, we further enhanced our expertise in the areas of ship repair and conversion and strengthened our ship building and offshore marine engineering capabilities by delivering a total of 11 new vessels. For 2010 up till January, we successfully delivered an additional five bulk carriers, underscoring our executional momentum and engineering expertise.

Of significance, we completed the construction of the Sevan Driller in FY2009. A landmark in offshore marine engineering, this deep-sea driller is the world’s first cylindrical drilling unit.

Chairman’sMessage

KEY MESSAGES18

A Journey of Transformation

We remain committed to our long-term strategic goal of diversifying our capabilities and so adding more ballast to our businesses.

19


Chairman’sMessage

These are just a few of the operational highlights for the year in review and delineate the distance we have travelled in transforming into a multi-skilled ship repair and conversion, ship building and offshore marine engineering conglomerate.

With the completion of each new project, we undertake a thorough project review and distill the lessons learned and skills acquired. This structured process will accelerate our corporate transformation as we go forward. We believe these measured steps taken initially will lay a solid foundation for substantive growth in the future.

Strategy for Challenging Times

To cope with difficult circumstances in 2009, we took measures to better manage our costs, improve efficiencies and intensify our management processes. We also undertook decisive actions to preserve our assets as we navigated this environment, building our diversified portfolio of businesses and increasing the Group’s resilience in the face of market uncertainties.

We will continue with these measures as we enter 2010. Recent economic

news at the start of the new year suggests that the global economy should remain on its recovery path, albeit with a measure of uncertainty. The International Monetary Fund in January 2010, for example, forecasts a recovery in the global economy in 2010, with growth approximately 3.9%. Expansion is projected to be uneven, with emerging economies growing faster than developed economies. Indeed, the European Union, United States of America and Japan face significant corporate and sovereign debt, as well as high unemployment. Given these divergent macro-economic developments, our operating environment gives us cause for caution.

Within our industry, prospects for offshore marine engineering remain positive with fundamental demand for oil and energy from emerging economies. However, the ship building sector is undergoing a slow recovery and the dry bulk shipping and shipping agency sectors face challenges. While the Baltic Dry Index (“BDI”), a measure of commodity shipping costs, has been improving since the low levels reached in early 2009, freight rates may yet remain volatile as any rise driven by global demand for bulk

Chairman’s MessageKEY MESSAGES20

21

commodities may be moderated by the increased supply of new bulk carriers.

We believe our transformative journey to a diversified ship repair, ship building, and offshore marine engineering group is the right, forward-looking strategy. Our wide-ranging and integrated capabilities position us well with a broader revenue base to weather economic volatility while enabling us to benefit from global economic recovery.

With effect from 22 March 2010, COSCO Corporation would no longer be a constituent stock of the Straits Times Index (“STI”). We remain confident that our strategies are sound and our market capitalisation will fully reflect and vindicate the success of our yards.

Corporate Leadership

Moving forward, we aim to sustain our operational and executional momentum, enhance our skills and develop our leadership in the maritime sphere.

As a corporate leader, we are aware of our social responsibilities and have maintained our commitment

to charities and foundations both in Singapore and China. We are also cognisant of our impact on the environment and have established pro-environment corporate policies such as recycling and minimal wastage in all operations, and the inclusion of environmentally-friendly features for all new buildings.

Conclusion

Through the bracing environment of 2009, we have emerged stronger and are confident of our ability to create greater long-term value. With determination, our continual efforts to transform our Group will prepare us well for the future.

On behalf of the Board, I would like to thank our directors, management and staff for their advice and efforts over the past year. Last but not least, the Board is also grateful to our loyal shareholders. We look forward to your continued support in the year ahead.

Li Jian HongChairman


Dear Shareholders,

At the start of the year in review, COSCO Corporation was affected by the global economic recession. The operating environment improved after the first quarter but was nonetheless challenging during the year, with global trade, shipping and commerce impacted. Economic recovery was only seen towards year-end. To cope with these challenges, COSCO Corporation continues to take the decisive actions necessary to increase competitiveness and grow its competencies to deliver world-class projects in ship repair and conversion, ship building and offshore marine engineering.

COSCO Corporation’s strength and stability lie in its commitment to operating the Group as effectively as possible, while identifying and funding long-term growth initiatives. We remain focused in developing our core business strategies and processes, spurring innovation and generating long-term sustainable growth in order to produce consistent, stable value for our shareholders and customers. Our people are dedicated to finding new ways to best accommodate our customers’ needs by increasing efficiencies, reducing costs and meeting exacting standards.

At COSCO Corporation, we experienced achievements and challenges during the year in review, resulting in group revenue declining by 17% to $2.9 billion from $3.5 billion in FY2008. Net profit attributable to equity holders of the company were booked at $110.1 million, a decrease of 64% from $$302.6 million in the previous year. As of 31 December 2009, net assets were $1.6 billion while cash and cash equivalents were $1.5 billion.

Highlights of the Year

During the year, we saw the successful deliveries of 11 new-build vessels comprising eight bulk carriers, a heavy lift carrier, an accommodation and work barge and an offshore driller.

All three of our shipyards with ship building capabilities – Dalian, Guangdong and Zhoushan – delivered new bulk carriers. Carrying that momentum into the new year, we have delivered an additional five bulk carriers in January 2010.

Vice Chairman and President’s Message

Vice Chairman andPresident’s Message

KEY MESSAGES22

We have undertaken more sophisticated engineering projects while further expanding our shipyard capacity.


23

Vice Chairman andPresident’s Message

In the area of ship repair and conversion, we completed the conversion of the world’s largest FPSO vessel, the FPSO Cidade de Santos MV20. We also won a contract in May 2009 to convert an 18 year old VLCC tanker, “MT Sunrise IV” to an FPSO vessel for Mitsui Ocean Development & Engineering Co., Ltd.

For offshore marine engineering, the highlight for the year was our successful completion of the Sevan Driller. The world’s first cylindrical drilling unit, this rig is capable of drilling oil wells up to 12,000 metres deep in waters of up to 3,700 metres. It has an internal oil storage capacity of 150,000 barrels of oil and is self-propelled.

In addition, we further expanded our shipyard capacity with the commencement of work on a one million square metre shipyard specialising in marine engineering operations at Qidong, Jiangsu, China.

Scheduled to be completed in 2011, the Qidong shipyard is located 120 kilometres from COSCO’s Nantong shipyard. Such proximity will realise production synergies and optimise resources for the building of oil rigs and repair, conversion

and construction of a diversity of complex offshore marine projects.

I am heartened to witness the achievement of such milestones during the year, and do believe that our strategy of diversifying into a marine conglomerate is on track.

Order Book

We recorded an order book for new-builds and major conversion projects of US$5.6 billion as of 31 December 2009 with progressive deliveries up to 2012. Together with our ship repair activities, these orders will further strengthen our revenue base in the years ahead and keep our shipyards busy.

Dry Bulk Shipping and Shipping Agency

In FY2009, dry bulk shipping revenue decreased by 48% to $132.9 million as long-term charters were renewed at lower rates for a shorter-term. The outlook here is uncertain as while recovering Baltic Dry Index (“BDI”) rates may push up commodity transportation costs, any such increase in freight rates may be dampened by the increased supply of new bulk carriers.

Vice Chairman and President’s MessageKEY MESSAGES24

A Progressive Culture

COSCO’s corporate management philosophy is to be progressive and flexible, focusing on prudence and long-term goals.

To enhance our long-term competitiveness, our Group will continue to focus on upgrading our shipyards in order to undertake more lucrative operations and specialised services. While we have a geographical advantage with modern shipyards strategically located along China’s coastline, including a new shipyard in Qidong which will serve as our offshore marine engineering hub, we will only be able to fully leverage on this advantage if we can provide a wide spectrum of specialised ship repair and conversion, ship building and offshore marine engineering services at international standards. As such, we make concerted efforts to upgrade the skills of our workforce through training courses and industrial attachments.

To maintain a long-term competitive edge, innovation must lie at the core of our growth strategy. To that end, we have put in place an active Research and Development team. Comprising 1,300 individuals drawn


an operating superstructure that will stand the test of time.

At this juncture, I would like to thank Chairman Li for his guidance during the year and fellow directors, management and staff for their unwavering dedication and professionalism. We have achieved so much because of the continued support of our parent company and the wider COSCO group. Without a doubt, our valued shareholders and business partners have also enabled us to come this far. These are bracing times, but we will emerge stronger.

Jiang Li Jun Vice Chairman and President

from China, Korea and Singapore, our Research and Development team has successfully registered nine patents with the State Intellectual Property Office of China.

To galvanise the development of our group strategy, we established a Strategic Development Committee in July 2009. Comprised primarily of directors, the Committee aims to develop, evaluate and monitor long and short-term strategic goals.

Ultimately, our vision at COSCO Corporation is to build a value-driven, world-class enterprise providing value-added services for a global customer base, thereby generating sustainable long-term shareholder value.

Staying the Course

The road ahead is clear. Despite the volatility of the modern global economy, we will stay the course, proceeding with vigilance and determination. I remain confident of our specialised capabilities and assured of our increasingly wide scope of ship repair and conversion, ship building, and offshore marine engineering services. These cornerstones of our business are being set in place and will enable the solid construction of

25

WE ARE A COMPANY IN

TRANSFORMATION

As we transform into a multi-faceted maritime group, we will continue to place a premium on teamwork.

TO BECOME STRONGER AND BETTER IN WHAT WE DO

M. V. CAESAR, classified by Lloyd’s, is 17 metres high, 30 metres wide, and 210 metres long. Its living quarters can accommodate approximately 220 persons. The conversion involved the building of steel fabrications, the installation of pipeline-laying facilities, building of cable systems, upgrading of the navigation system and conversion of the vessel’s function from the laying of cables to the pipelines. The vessel, equipped with highly sophisticated 3rd generation DP system and five propellers, can operate in areas of 3,000 metres under the sea, and is capable of laying pipelines with a diametre of over 1.2 metres. The vessel was converted by COSCO Nantong Shipyard for Helix Energy Solution Group.

TO BECOME STRONGER AND BETTER IN WHAT WE DO

Strengths andCapabilities

Strengths and CapabilitiesOPERATIONS REVIEW

Ship Repair and ConversionOil Tanker Conversion | Single to Double Hull Conversion

Ship BuildingHeavy Lift Vessel | Bulk Carrier | Car Carrier

30

Offshore Marine EngineeringFDPSO | FSO | Jack-Up | Semi-Submersible Rig

Dry Bulk Shipping and Others


31

Our MajorShipyards

Our Major ShipyardsOPERATIONS REVIEW

Dalian

Lianyungang

Nantong

Shanghai

Zhoushan

Guangdong

Qidong

32


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 10 (total 143,418 sq m) Slideway x 2 (265m x 114m and 269m x 100m)

Total Capacity 560,000 dwt

Floating dock x 1 (80,000 dwt)Quay x 3 (total 660 m)Workshop x 4 (total 22,809 sq m)


Floating dock x 1 (35,000 dwt)Quay x 2 (total 280 m)Workshop x 11 (total 4,759 sq m)

Total Capacity35,000 dwt

Dry dock x 3(80,000 dwt, 230,000 dwt and 400,000 dwt)Quay x 7 (total 1,742 m)

Workshop x 13 (total 253,664 sqm) Slideway x 2 (250m x 45m and 250m x 45m)


Floating dock x 2 (80,000 dwt and 150,000 dwt)Quay x 6 (total 1,195m)Workshop x 9 (total 38,454 sq m)

Slideway x 2 (125.7m x 35m,435m x 40m and 435m x 40m)


33

Floating dock x 2 (80,000 dwt and 150,000 dwt)Quay x 4 (total 968 km)Workshop x 11(total 33,419 sq m) Slideway x 1 (214m x 35m)


Dry dock x 1 (200,000 dwt)Quay x 1 (total 400 m) Slideway x 1 (350m x 110m)


OPERATIONS REVIEW

BusinessOverview

Business Overview

was 6,390 points. Dry bulk shipping, shipping agency and others accounted for 5% of group revenue during FY2009.

Showcasing Diverse Strengths

Building on its core strengths of ship repair and conversion, COSCO has diversified into ship building and offshore marine engineering. During the year in review, we further enhanced our ship repair and conversion, ship building and offshore marine engineering capabilities by delivering 11 new vessels comprising eight bulk carriers, one heavy lift ship, one accommodation and work barge and one offshore driller. Moving into 2010, we completed five bulk carriers in January.

Additionally, we are enlarging our Group’s total shipyard capacity with the development of new facilities at Qidong in China’s Jiangsu province for the construction of oil rigs and other related offshore marine engineering projects. This specialised offshore marine engineering yard comprises an area of one million square metres and includes heavy lift cranes, a marine engineering slideway with a length of 1,200 metres and workshops, among

Year in Review

During FY2009, COSCO Corporation booked a revenue of $2.9 billion. This was a decline of 17% in revenue from $3.5 billion in FY2008.

Net profit attributable to equity holders of the company decreased to S$110.1 million mainly because of the lower revenue contributions from ship repair and conversion as well as offshore marine engineering projects, coupled with higher operational costs.

Revenue for our shipyard operations, comprising of ship repair and conversion, ship building and offshore marine engineering, decreased by 14% year-on-year from $3.2 billion in FY2008 to $2.8 billion in FY2009. This remained our largest segment, comprising 95% of group revenue.

Dry bulk shipping performance saw a decrease of 48% to $132.9 million year-on-year with the expiry of long-term contracts and the securing of new, shorter-term ones at lower rates. The Baltic Dry Index (“BDI”), a measure of commodity shipping costs, recovered from a low of 772 points in early 2009 to reach 3,005 points at year-end. By comparison, the BDI average for 2008

34


others. Commencing operations in late February 2009, the development of the yard is expected to be completed in 2011. Its proximity to Nantong shipyard will bolster group operational synergies.

Creating Sustainability and Efficiency

With our increasing expertise and experience in the areas of ship building, ship repair and conversion and offshore marine engineering, as well as our continued presence in the dry bulk and shipping agency sectors, COSCO Corporation is well-positioned to offer wide-ranging integrated services to a wider pool of customers, while realising operational efficiencies. Technological improvements and cost advantages in land and labour over other international players will further augment our competitiveness. This will, in sum, promote sustainable, long-term growth for the Group.

Looking Ahead

COSCO Corporation will continue to adopt flexible growth strategies to best manage the effects of the changing economic landscape on our business.

In FY2009, we completed the construction of 11 new vessels comprising eight bulk carriers, one heavy lift ship, one accommodation and work barge and one offshore driller.

To enhance COSCO Corporation’s long-term competitiveness, we will continue to focus on upgrading our shipyard capabilities, efficiencies and productivity. At the same time, the Group will continue to exercise both financial and operational prudence and incorporate sound management practices to drive productivity across the board.

With lingering global economic uncertainties, COSCO Corporation is cautious about the future and will maintain corporate stability, focus on enhancing internal execution capabilities and boost productivity.

In sum, business operations in 2010 will require continued strategic vision and dedicated effort. The Group is certain that with vigilance and resilience, it will forge a steady path.

35

OPERATIONS REVIEWBusiness Overview

Ship Repair, Ship Building and

Business Segment

Overview

COSCO Shipyard Group, the 51% owned subsidiary of COSCO Corporation, has seven major shipyards in China, located in Dalian, Nantong, Zhoushan, Guangdong, Shanghai, Lianyungang, and Qidong. Strategically situated along China’s coastline, these shipyards provide an extensive array of modern and customisable marine-related capabilities in new ship building,

ship repair and conversion, and offshore marine engineering vessels. This segment remained our biggest revenue contributor in FY2009.

Reaching New Milestones

Over the course of the year, we delivered a total of eight new-build bulk carriers, one heavy lift vessel, one accommodation barge and the Sevan Driller.

Offshore Marine Engineering

Name of Vessel Project Details Delivered On

COSCO Dalian Shipyard

M.V. Chang Shun II New-build 57,000 dwt bulk carrier 29 September 2009

M.V. Ingrid New-build 57,000 dwt bulk carrier 29 September 2009

M.V. Jin Zhou Hai New-build 57,000 dwt bulk carrier 1 December 2009

M.V. Adam Asnyk New-build 30,000 dwt multipurpose heavy lift carrier 14 December 2009

COSCO Zhoushan Shipyard

M.V. Yuan Shun Hai New-build 57,000 dwt bulk carrier 31 August 2009

M.V. Zhou Shan Hai New-build 57,000 dwt bulk carrier 21 October 2009

M.V. Yuan An Hai New-build 57,000 dwt bulk carrier 28 December 2009

COSCO Guangdong Shipyard

M.V. APJ KAIS New-build 57,000 dwt bulk carrier 29 April 2009

M.V. Balaban New-build 57,000 dwt bulk carrier 26 November 2009

COSCO Nantong Shipyard

350 POB New-build accommodation & work barge 6 May 2009

Sevan Driller New-build deep-sea drilling & storing vessel 24 November 2009

M.V. Caesar Pipeline-laying vessel (Conversion) 30 November 2009

36


Seizing Opportunities

In April 2009, COSCO Guangdong delivered its first new-build ship – a 57,000 dwt bulk carrier christened “M.V. APJ KAIS”. In terms of tonnage capacity, it is the largest ever bulk carrier built in Southern China. Measuring 190 metres in length, 32.3 metres in breadth, and 19 metres in height, it has a draft of 12.8 metres and a navigation speed of 14.2 knots.

In May 2009, the Group secured a major contract to convert an 18 year old Very Large Crude Carrier (“VLCC”) tanker, to a Floating, Production, Storage and Offloading (“FPSO”) vessel. To be carried out at the COSCO Dalian Shipyard, the conversion contract will involve repair and conversion to an FPSO vessel, and include topside integration and commissioning. The vessel is expected to be completed and delivered in 2010, for deployment in Petrobras’ Tupi Oil Field, near Brazil in depths between 2,200 to 2,500 metres.

COSCO Corporation’s abilities in ship conversion were further employed in the successful conversion in

Revenue contribution from Ship Repair, Ship Building and Offshore Marine Engineering

45%Conversion

22%New Building

Offshore16%

Ship Repair17%

Types of Vessels Repaired in FY2009 by Revenue

Oil Tankers 6%

Container Vessels 9%

Chemical Vessels 9%Others

8%

Dry Bulk Carriers 68%

November 2009 of “M.V. Caesar” from the laying of underwater cables to underwater pipelines. Bought by American company Helix Energy Solution Group, the vessel is equipped with a sophisticated 3rd generation DP system and five propellers, operates in depths of 3,000 metres and is capable of laying pipelines with a diametre of over 1.2 metres.

In December 2009, the Group completed the construction and delivery of two ships. At 57,000 dwt, the 190-metre “M.V. Jin Zhou Hai” was delivered to a subsidiary of China COSCO Holdings Co., Ltd. Meanwhile, a 200 metre long, 30,000 dwt multi-purpose heavy lift carrier, the “M.V. Adam Asnyk” was delivered to Chipolbrok, a joint venture between the Chinese and Polish governments.

These achievements reflect positively on COSCO Corporation’s increasing expertise in ship building, ship repair and conversion.

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Business Segment

38

Ship Repair, Ship Building andOffshore Marine Engineering

Offshore Marine Engineering Highlights

The month of May saw COSCO Nantong deliver its first accommodation and work barge. Named “Nunce”, the new-build accommodation and work barge encompasses a living area refurbished to 4-star hotel standards. It can accommodate 350 persons, as well as a tankage for diesel and drinking water.

A key highlight of the offshore marine engineering sector in FY2009 was COSCO Nantong’s delivery of the Sevan Driller in November to Norwegian client Sevan Marine ASA. This self-propelled rig is the world’s first cylindrical drilling unit, and is slated to commence a six-year contract with Petrobras SA in the Santos Basin off the Brazilian coastline. Incorporating state-of-the-art drilling technology, the rig is capable of drilling wells up to 12,000 metres deep in water depths of 3,700 metres. It is fitted with its own propellers, receives GPS signals, and has a payload of more than 15,000 metric tonnes with a storage capacity of about 150,000 barrels of oil.

Offshore Marine Hub in Qidong

To better facilitate the construction of oil rigs, COSCO Shipyard Group has secured utilisation rights to a piece of land in Qidong, Jiangsu Province. This was secured through COSCO (Qidong) Offshore Co., Ltd (“COSCO Qidong”), a joint venture company between COSCO Shipyard Group (60%), and the Qidong State-owned Assets Investment Holdings Co., Ltd. (40%). COSCO Qidong was incorporated with a registered and paid-up capital of RMB500 million.

Located near COSCO Nantong, COSCO Qidong shipyard’s proximity will optimise resources and realise production synergies for the building of oil rigs and repair, conversion and construction of offshore marine equipment.

Adapting to the Climate

Nonetheless, the year also saw order cancellations and rescheduling of vessel deliveries. Several ships that were scheduled to be delivered at their original delivery dates were deferred following the requests of, and after negotiations with ship owners.


Located near COSCO Nantong, COSCO Qidong shipyard’s proximity will optimise resources and realise production synergies in offshore marine engineering.

39

Outlook and Prospects

As of 31 December 2009, the Group has an order book of US$5.6 billion with progressive deliveries up to 2012, which is expected to keep our shipyards busy. This order book is subject to revision from any cancellation or new orders that may arise.

We started off 2010 with five more deliveries of bulk carriers as of end-January. The Group will continue to focus on the delivery of more vessels in 2010. However, we expect the external business environment to remain challenging and economic recovery to be uncertain.


Dry Bulk Shipping& Others

Business Segment

Overview

Dry Bulk Shipping

Our dry bulk shipping business is managed by the Group’s wholly-owned subsidiary, COSCO (Singapore) Pte Ltd. We currently have a fleet of 12 dry bulk carriers with a combined carrying capacity of 698,306 dwt which transport cargo such as iron ore, coal, steel, cement and fertiliser along the main trading routes among major ports of the world in China, the USA, Europe, South America and South Africa. These ships are chartered out to other ship owners and operators, with a customer base made up of major shipping companies based in countries such as Germany, Norway, Denmark, Greece, Switzerland, the UK and the USA.

COSCO Corporation’s fleet meets the most stringent international quality and safety standards, and has been awarded with an ISO9002 certification, given to companies that show a consistent and unparalleled commitment to quality.

Highlights of the Year

This year, revenue from dry bulk shipping amounted to $132.9 million, a decrease of 48% as compared to the previous year as long-term charters expired and were subsequently renewed at lower rates for a shorter-term.

The Baltic Dry Index (“BDI”), a measure of commodity shipping costs, recovered from a low of 772 points in early 2009 to 3,005 points at year-end. By comparison, the BDI average for 2008 was 6,390 points. Dry bulk shipping, shipping agency and others accounted for 5% of group revenue during FY2009.

Outlook and Prospects

The outlook here is uncertain. While recovering BDI rates may push commodity transportation costs higher, any increase in freight rates may be moderated by the supply of new bulk carriers.

We recognise that this early stage of global recovery has its uncertainties and the Group will do its best to mitigate risks and better manage economic volatility.

40


Managed by COSCO (Singapore) Pte Ltd, our dry bulk carrier business comprises a fleet of 12 dry bulk carriers with a combined carrying capacity of 698,306 dwt, transporting cargo globally.

Shipping Agency

Our shipping agency arm is managed by subsidiaries of COSCO Corporation, namely COSTAR Shipping Pte Ltd and COSLINK (M) Sdn Bhd. Their main business is containerisation services for COSCO Container Lines’ customers. COSTAR Shipping provides an extensive range of shipping agency services for all types of containers, including Out-of-Gauge (OOG) containers, General Purpose (GP) units, reefer containers and hazardous containers from over 1,300 customers in more than 169 countries.

Established in Singapore in 1989, COSTAR Shipping canvasses for cargo from existing and potential clients, so as to maximise the tonnage capacity being loaded on COSCO Group’s ships as well as the ships of our clients passing through Singapore.

It also provides extensive agency services for full container and break-bulks, including document preparation of bills of lading and delivery orders, collection of freight, cargo operation, vessel husbanding, customs declaration, port authority

co-ordination, administration and settlement of cargo claims, trans-shipment management, bunkering services and container handling.

COSTAR Shipping also offers value-added services such as 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 fleet of vessels that call at Malaysian ports. It provides a similar range of services as COSTAR Shipping in Singapore.

Performance and outlook

During the year in review, Shipping Agency business moderated with the lacklustre shipping environment. With the nascent recovery in the world economy, seaborne trade and freight volumes should increase. However, freight rates may be moderated with the abundance of cargo ships.

We will also continue stringent and frequent cost management, reducing variable and fixed costs as well as monitoring expenses with periodic evaluation plans.

41

OPERATIONS REVIEW

Group FinancialReview

Profitability

Gross profit slid 53% from $630.1 million in FY2008 to $297.6 million in FY2009 on lower dry bulk shipping charter rates and lower profit contributions from ship repair, ship building and offshore marine engineering business weighed down by higher operational costs and a thorny business climate.

Other income comprised gain from the disposal of scrap materials, government grants, interest income and net fair value loss on forward currency contracts. Other income fell 30% to $146.3 million in FY2009 mainly due to the lower sales value of scrap materials.

Distribution and administrative expenses fell 31% and 43% respectively on lower turnover. The net reversal of impairment of trade and other receivables of $11.4 million in FY2009 compared to a net allowance for impairment of trade and other receivables of $61.3 million in FY2008 also led to the decrease in administrative expenses. Interest expense increased by $33.1 million to $41.9 million in FY2009 as the Group took on additional bank borrowings to fund shipyard expansion.

FY2009. COSCO Dalian and COSCO Zhoushan shipyards delivered three bulk carriers each while COSCO Guangdong shipyard delivered two bulk carriers. COSCO Nantong delivered the Sevan Driller, the world’s first cylindrical drilling unit and a self-propelled rig, in November 2009. In addition, COSCO Nantong and COSCO Dalian delivered an accommodation barge in May 2009 and a heavy lift carrier in December 2009 respectively.

Turnover from dry bulk shipping business slipped 48% to $132.9 million in FY2009 as expired long-term contracts were leased on short-term basis at new lower rates during the year. The Baltic Dry Index (“BDI”), a measure of shipping costs for commodities, picked up from a low of 772 points at the beginning of 2009 to 3,005 points at the end of 2009 with the year’s average of 2,600 points. By comparison, the BDI average for 2008 was 6,390 points.

Shipyard business remained the biggest revenue contributor, forming 95% of Group turnover in FY2009. Dry bulk shipping and shipping agency and others accounted for the remaining 5%.

Overview

The Group ended a challenging year for the global shipping industry with a 17% decrease in Group turnover to $2.9 billion in FY2009 while net profit attributable to equity holders of the Company declined by 64% to $110.1 million. The drop in turnover was due mainly to lower revenue contributions from ship repair, ship conversion and offshore marine engineering projects and reduced shipping revenue. The fall in net profit attributable to equity holders of the Company was attributable to higher operating costs and the global economic downturn which impacted performances of all key operations.

Turnover

Group turnover fell 17% from $3.5 billion in FY2008 to $2.9 billion in FY2009 on lower revenue across all segments precipitated by the global financial crisis.

Turnover from shipyard operations dipped 14% to $2.8 billion in FY2009 as ship repair and conversion projects were adversely affected by the global economic meltdown. The Group delivered eight bulk carriers in

Group Financial Review42


Income tax expense increased due to lower tax-exempt shipping profit and higher tax rates for certain subsidiaries in the People’s Republic of China (“PRC”).

Minority interests decreased due to lower contributions from the Group’s PRC subsidiaries involved in ship repair, ship building and offshore marine engineering operations.

As a result of the above, net profit attributable to equity holders of the Company decreased 64% from $302.6 million in FY2008 to $110.1 million in FY2009.

Balance Sheet and Cash Flow (31 December 2009 vs 31 December 2008)

Cash and cash equivalents decreased from $1.9 billion to $1.5 billion mainly due to cash used in dividend payment, purchases of new property, plant and equipment, and less advances received from customers.

Trade and other receivables fell $117.9 million from $1.6 billion to $1.5 billion mainly due to decrease in advances paid to suppliers from $743.1 million to $679.2 million.

Property, plant and equipment increased from $2.1 billion to $2.3 billion due to the ongoing facilities expansion of the Group’s major shipyards in the PRC.

Trade and other payables decreased from $4.4 billion to $3.6 billion as less advances were received from customers (from $2.8 billion to $1.8 billion) due to completion of some of the shipbuilding contracts, and refunds to customers for cancelled shipbuilding contracts.

Share Capital

COSCO’s share capital remained unchanged at $270.6 million. There was no new issue and allotment of shares under the COSCO Corporation Employees’ Share Option Scheme 2002.

Total Shareholders’ Equity

Shareholder’s equity remained almost unchanged at $1.1 billion as at 31st December 2009 after the payment of dividends in May 2009. Return on Equity was 10%

Net Gearing

Total bank borrowings increased from $656.6 million to $1.1 billion 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 $434.0 million at the end of FY2009.

Earnings Per Share

On a fully diluted basis, with profit moderating, earnings per share decreased from 13.5 cents in FY2008 to 4.9 cents in FY2009.

Dividends Per Share

To reward shareholders for their loyalty, the Board of Directors has proposed a first and final exempt dividend of 3.0 cents. The dividend payout will amount to $67.2 million (FY2008: $156.7 million) while Dividend Cover was 1.6.

Net Asset Value Per Share

In line with capacity and facility expansion, the net asset value per share of COSCO Corporation decreased by 5% from 51.1 cents per share at 31 December 2008 to 48.4 cents per share at 31 December 2009.

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WE ARE LEARNING AND IMPROVING EVERYDAY

We established a Strategic Development Committee in July 2009 with the aim of developing, evaluating and monitoring short and long-term strategic goals.

WE ARE LEARNING AND IMPROVING EVERYDAY

WE WORK AS ONE AND ACHIEVE AS ONE

Teamwork, Collaboration, Integrity It is an emblem of COSCO throughout all our offices.

CORPORATE GOVERNANCE AND TRANSPARENCYCorporate Governance

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CorporateGovernanceCOSCO Corporation (Singapore) Limited (“COSCO Corporation” or “the Company”) and its subsidiaries (together, the “Group”) believes that establishing good corporate governance practices is key to provide the foundation for a well-managed and efficient organisation. Corporate governance is not an exercise in compliance nor is it a higher form of management. Corporate governance has a clear objective: ensuring the pursuit of the Group’s purpose.

The Board’s activities are focused on this task: ensuring the pursuit of the Group’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.

At COSCO Corporation the Board of Directors, guided by the Singapore Code of Corporate Governance 2005 (the “Code 2005”) issued by the Singapore Council on Corporate Disclosure and Governance, 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 2005.

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 the 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 and Management is delegated to the Group President and Executive Directors. Our Board exercises judgment in carrying out its work in policy-making, in monitoring executive action and in its active consideration of Group strategy. The Board’s judgments seek to maximize 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; and

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, Enterprise Risk Management and Strategic Development Committees. Further information regarding the details of the terms of reference of the respective Board committees is set out in the later part of the Report.


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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

Strategic Development Committee

Number of Meetings held: 5


Number of Meeting held: 1




Number of Meetings Attended


Number of Meeting

Attended

Number of Meeting

Attended



Li Jian Hong 3 NA NA NA NA NA Note 3

Sun Yue Ying 4 NA NA NA NA NAZhang Liang 4 NA NA NA NA NAJiang Li Jun 5 NA 1 1 4 1Min Jian Guo Note 1 4 NA NA NA NA NAMa Gui Chuan 5 NA NA NA NA NAWang Xing Ru 4 NA NA NA NA NATom Yee Lat Shing 5 9 1 1 5 1Wang Kai Yuen 5 9 1 1 5 1Er Kwong Wah 5 9 1 1 5 1Ang Swee Tian 5 9 1 1 5 1Lu Cheng Gang (Alternate to Zhang Liang ) 5 NA NA NA NA NAYe Bin Lin Note 2

(Alternate to Sun Yue Ying) 5 NA NA NA 4 NALiu De Tian (Alternate to Wang Xing Ru) 5 NA NA NA NA NALi Jian Xiong(Alternate to Li Jian Hong) 5 NA NA NA NA 1

NA: Not Applicable

Note:

1. Min Jian Guo resigned on 30 September 2009.2. Ye Bin Lin was co-opted and appointed as a member of the Enterprise Risk Management Committee on 2 March 2009.3. The alternate director to Mr Li Jian Hong, Mr Li Jian Xiong, attended the Strategic Development Committee Meeting on behalf of Mr Li Jian Hong.


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GovernanceCorporate

Whilst the Board has delegated the day to day management of the Group to the Group President and Executives, there are matters reserved for the Board by which the Board oversees control of the Group’s affairs. Some of the matters reserved for the Board and Board’s approval are:

- the recommendations of the Strategic Development Committee; - 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 options plan); - 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; and - 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 judgment 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 ten (10) members: two (2) Executive Directors, four (4) 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 64 to 69 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 judgment with a view to the best interests of the Company.


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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 Sun Yue Ying Non-Independent and Non-Executive Director Zhang Liang Non-Independent and Non-Executive Director Wang Xing Ru Non-Independent and Non-Executive Director Ma Gui Chuan Non-Independent and 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

Change to the Board during the financial year 2009 is as follows:

Min Jian Guo resigned on 30 September 2009 as Vice President and Non-Independent Executive Director.

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. Annual visits are arranged for Non-Executive Directors to acquaint them with important operations overseas.

STRATEGIC DEVELOPMENT COMMITTEE

The Strategic Development Committee (“SDC”) comprises six (6) Directors, the majority of who is independent non-executive directors was established on 23 July 2009. The SDC members are:

Jiang Li Jun (Chairman) (Non-Independent Executive) Li Jian Hong (Non-Independent Non-Executive) Tom Yee Lat Shing (Non-Executive Independent) Wang Kai Yuen (Non-Executive Independent) Er Kwong Wah (Non-Executive Independent) Ang Swee Tian (Non-Executive Independent)

The SDC assists the Board in fulfilling its responsibilities for developing, evaluating and monitoring the Company’s long and short-term strategic goals. The SDC operates at the Board level but shall not assume the Board’s governance accountability or to make final strategic decisions. The SDC acts solely to address and develop current and future strategy-related issues. The SDC has the responsibility for creating and driving the Company’s strategy development and planning and Management takes responsibility for implementing the Company’s strategy(ies) after the SDC received approval from the full Board and/or other relevant board committees.


Corporate

52

GovernanceThe SDC have the following authority and responsibilities:

(a) Review and develop Company Strategy(ies): Meet with Management periodically to review, develop and evaluate the Company’s evaluation and implementation of its business strategy.

(b) Provide Resource Support: Support the Board or Management in the valuation and/or refining of the Company’s strategic plans.

(c) Assess Progress: Review and assess the status of implementation of the Company’s business strategy and whether the results are consistent with the goals of the strategic plan as adopted by the Board.

(d) Recommend Improvements: Recommend areas of improvement and provide feedback to the Board and Management regarding the overall success of the business strategy.

The SDC has met once in the financial year of 2009.

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.

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 subjects 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.


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The dates of initial appointment and last re-election/re-appointment of each of the Directors are set out below:

Director Position Date of Initial Appointment

Date of Last

Re-election

Li Jian Hong* Chairman, Non-Independent and Non-Executive 20.12.2002 20.4.2009Jiang Li Jun Vice Chairman, President and Non-Independent Executive 7.8.2008 20.4.2009Sun Yue Ying Non-Executive 12.6.2000 15.4.2008Zhang Liang Non-Executive 15.10.2008 20.4.2009Ma Gui Chuan Executive 10.1.2007 18.4.2007Wang Xing Ru Non-Executive 14.2.2006 15.4.2008Tom Yee Lat Shing Non-Executive Independent 16.11.1993 20.4.2009Wang Kai Yuen Non-Executive Independent 2.5.2001 20.4.2009Er Kwong Wah Non-Executive Independent 20.12.2002 18.4.2007Ang Swee Tian Non-Executive Independent 13.11.2007 15.4.2008Lu Cheng Gang Alternate to Zhang Liang 15.10.2008 n.a. Ye Bin Lin Alternate to Sun Yue Ying 20.12.2002 n.aLiu De Tian Alternate to Wang Xing Ru 14.2.2006 n.aLi Jian Xiong Alternate to Li Jian Hong 20.12.2002 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) Tom Yee Lat Shing (Non-Executive Independent) Er Kwong Wah (Non-Executive Independent) Ang Swee Tian (Non-Executive Independent)

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 one meeting. 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 at 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 judgment on corporate affairs independently and no individual or small group of individuals dominates the Board’s decision making process.


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CorporateGovernanceThe 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.

The assessment of Tom Yee Lat Shing’s independence was given particular consideration by the NC as he has now served on the Board for more than 16 years.

The NC believes that due to his strength of character, experience and knowledge, Tom Yee Lat Shing continues to be highly effective as an independent non-executive director. He provides objective and rigorous challenges to, and engages in constructive debate with, the board and the committees on which he sits. Tom Yee Lat Shing also brings a wealth of useful and relevant experience both in his position as an independent non-executive director and as the Chairman of the Audit Committee.

Accordingly, the NC has recommended and the Board has endorsed the re-appointment of Tom Yee Lat Shing by shareholders at the annual general meeting. The NC and the Board believe that it is in the shareholders’ best interests for Tom Yee Lat Shing to be re-appointed as an independent non-executive director.

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 principal 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 review 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 consolidates the appraisal forms and presents 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 fulfill 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.

All Board members have separate and independent access to the advice and services of the Company Secretary. The Company Secretary attends Board and most of the Board committees 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.


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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 Director. 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 Jiang Li Jun the Vice Chairman and President The RC is of the view that the presence of Mr Jiang Li Jun 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 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 each of these committees is compensated for his additional responsibilities. Such fees are approved by the shareholders of the Company as a lump sum payment at the AGM of the Company.

REMUNERATION COMMITTEE

The 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) Tom Yee Lat Shing (Non-Executive lndependent) Wang Kai Yuen (Non-Executive lndependent) Ang Swee Tian (Non-Executive Independent)


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CorporateGovernanceThe principal functions of the RC are to:

a) recommend to the Board base salary level, benefits and incentive programmes, 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 96 and 97 of the Annual Report.

The RC held one meeting during the financial year. The issues deliberated at this meeting 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.

DIRECTORS’ AND KEY EXECUTIVES’ REMUNERATION

The Directors’ and key executives’ remuneration table for the financial year ended 31 December 2009 is as follows:

Fees Salary BonusOther

Benefits

Amortisation of Stock Options

Expenses

Total

Non-Independent and Non-Executive Director in the Band of S$1,000,000 to below S$1,250,000

Liu De Tian Note 1 0% 15.31% 69.19 % 4.52% 10.98% 100%

Non-Independent Executive Directors in the Band of S$750,000 to S$1,000,000

Ma Gui Chuan 0% 28.61% 46.97% 10.15% 14.27% 100%Min Jian Guo (Resigned on 30 September 2009) 0% 21.34% 58.90% 6.11% 13.65% 100%

Non-Independent Executive Director in the Band of S$500,000 to S$750,000

Jiang Li Jun 0% 41.08% 44.69 % 14.23% 0% 100%


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Fees Salary BonusOther

Benefits

Amortisation of Stock Options

ExpensesTotal

Non-Independent and Non-Executive Directors in the Band of below S$500,000

Lu Cheng Gang 0% 0% 62.67 % 0% 37.33% 100%Wang Xing Ru Note 1 0% 19.44% 48.35% 0.57% 31.64% 100%

Independent Directors in the Band of below S$500,000

Tom Yee Lat Shing 55.30% 0% 0% 0% 44.70% 100%Wang Kai Yuen 53.14% 0% 0% 0% 46.86% 100%Er Kwong Wah 53.14% 0% 0% 0% 46.86% 100%Ang Swee Tian 100% 0% 0% 0% 0% 100%

Executives in the Band of S$500,000 to below S$750,000

Ye Bin Lin 0% 30.16% 46.05% 6.84% 16.95% 100%Li Jian Xiong 0% 29.76% 45.44% 8.07% 16.73% 100%

Executives in the Band of below S$500,000

Wong Meng Yun 0% 51.62% 41.43% 6.95% 0% 100%

Note 1: The salary, bonus and other benefits of the incumbent directors are paid by the subsidiaries.

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 2009.

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 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 other benefits-in-kind.

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.


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CorporateGovernanceC. 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 balanced and understandable assessment of the Group’s performance, position and prospects. Management provides the Board with management accounts and other financial statements on a quarterly 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;

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 risk management on an on-going 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 or executive officer to attend its meetings. The AC has also expressed 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 outsourced incumbents, report directly to the AC.


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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 internal audit function. 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 is briefed on these during the orientation programme.

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 risk 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 risk management measures are outlined in Note 36 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) Tom Yee Lat Shing (Non-Executive and Independent) Wang Kai Yuen (Non-Executive Independent) Er Kwong Wah (Non-Executive Independent) Ye Bin Lin (Chief Financial Officer) *

* Ye Bin Lin was co-opted and appointed as a member of the Enterprise Risk Management Committee on 2 March 2009.


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CorporateGovernanceThe 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.

The ERMC held five 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.

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 has established 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.

During the financial year the ERMC has engaged the services of Deloitte & Touche Enterprise Risk Services Pte Ltd to provide the following services:

- Review the Group’s Risk Management Existing Policies and Procedures - Review and document risk management practices employed at the Group - Review risk tolerance and limits being in use across the Group - Review the risk reports generated and used by the Group. - Identify key areas or risk factors not covered by existing risk management practices - Review existing risk management practices against industry practices - Indentify and customise risk management best practices for the Group - Review and recommend appropriate risk management policies and procedures - Review and recommend appropriate risk management reporting package and processes - Training for senior management of the Company and its key subsidiaries.

INTERNAL AUDIT

Principle 13: The company should establish an internal audit function that is independent of the activities it 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 outsourced 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 briefings upon the release of its quarterly financial results. Management regularly receives visiting fund managers to provide them an insight to 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 analysts or simultaneously with such meetings. Results and annual reports are announced or issued within the period prescribed by the SGX-ST.


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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 Article of Association allow a shareholder entitled to attend and vote to appoint a proxy who need not 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 conduct of the audit and the preparation of the auditor’s report.

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 transactions 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 interestedperson 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 - 455Chimbusco Dalian Branch - 10,384Chimbusco Guangzhou Branch - 1,941Chimbusco Lianyungang Branch - 315Chimbusco Zhoushan Branch - 106China Ocean Shipping (Group) Company - 149Cosco (Cayman) Mercury Co., Ltd - 2,168Cosco (HK) Shipping Co., Ltd - 19,460Cosco Bulk Carrier Co., Ltd - 69,365Cosco Bulk Carrier Holdings (Cayman) Limited - 98,534Cosco Container Lines Co., Ltd - 11,030Cosco International Ship Trading Co., Ltd - 974Cosco Finance Co., Ltd - 400,565Cosco Logistics (Nantong) - 653Cosco Nantong Steel Co., Ltd 17,990 8,790Cosco Shanghai Ship Management Co., Ltd - 1,451Cosco Shipping Co., Ltd - 416Cosco Southern Asphalt Shipping Co., Ltd - 146Cosco Wallem Ship Management Co., Ltd - 170

CORPORATE GOVERNANCE AND TRANSPARENCYCorporate Governance and Corporate Information

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CorporateGovernance

Name of Interested Person

Aggregate value of all interested person transactions 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 interestedperson transactions conducted under shareholders’ mandate

pursuant to Rule 920 (excluding transactions

less than $100,000)

S$’000 S$’000

(continued)Cosco Ship (Qingdao) Co., Ltd - 426Dalian Haven Automation Co., Ltd - 343Dalian Ocean Shipping Company - 910Dalian Yuan Chang Shipping Co., Ltd - 948Guangzhou Ocean Shipping Company - 27,503Nantong Chimbusco Marine Bunker - 656Nantong Cosco Khi Ship Engineering Co., Ltd - 240Nantong Cosco Ship Equipment Company - 5,064Nantong Yuantong Container Warehouse and Transportation Co., Ltd - 133Qingdao Manning Co-operation Ltd - 2,483Qingdao Ocean Shipping Company - 10,739Shanghai Ocean Crew Co., Ltd - 4,864Shanghai Ocean International Trading Co., Ltd - 2,505Shanghai Ocean Shipping Company - 7,435Shanghai Pan-asia Shipping Company - 900Shenzhen Ocean Shipping Company - 423Xiamen Ocean Shipping Company - 1,486Yuantong Marine Service Co. - 894Total 17,990 695,024

As At 31/12/2009 As At 31/12/2008S$’000 S$’000

Balances placed with a fellow subsidiary, Cosco Finance Co., Ltd :- Cash balances 168,493 10,064- Short-term deposits 616,031 567,868

784,524 577,932

F. DEALING IN SECURITIESIn 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.


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CorporateInformationBoard 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 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 Committee

Tom Yee Lat Shing Chairman Wang Kai Yuen Er Kwong Wah Ang Swee Tian

Remuneration Committee

Er Kwong Wah Chairman Jiang Li Jun Tom Yee Lat Shing Wang Kai Yuen Ang Swee Tian

Nominating Committee

Wang Kai Yuen Chairman Jiang Li Jun Tom Yee Lat Shing Er Kwong Wah Ang Swee Tian

Enterprise Risk Management Committee

Ang Swee Tian Chairman Jiang Li Jun Tom Yee Lat Shing Wang Kai Yuen Er Kwong Wah Ye Bin Lin

Strategic Development

Committee

Jiang Li Jun Chairman Li Jian Hong Tom Yee Lat Shing Wang Kai Yuen Er Kwong Wah Ang Swee Tian

Registered Office and Business Contact Information

9 Temasek Boulevard #07-00 Suntec Tower Two Singapore 038989 Telephone: 68850888 Fascimile: 63369006 Website: www.cosco.com.sg

Company Registration Number

196100159G

Auditors

PricewaterhouseCoopers LLP 8 Cross Street #17-00 PWC Building Singapore 048424

Partner-in-charge: Mr Tham Tuck Seng (since FY2007)

Company Secretaries

Mr Lawrence Kwan Ms Lin Moi Heyang

Share Registrar and Share Transfer Office

Tricor Barbinder Share Registration Services (A division of Tricor Singapore Pte Ltd) 8 Cross Street #11- 00 PWC Building Singapore 048424 Telephone: 62363333 Facsimile: 62364399

Board ofDirectors

CORPORATE GOVERNANCE AND TRANSPARENCYBoard 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 ExecutiveDirector

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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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 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.

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 ofDirectors


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 and Vice President of COSCO Industry Co. Mr Wang was elected as President of the ship repair branch of China Shipbuilding Industry Association, and Vice President of China Shipbuilding Industry Association in 2006. Mr Wang was awarded “the leading persons of China’s ship repair and ship-breaking industry” in 2007, and was awarded “National Medal for Labor Day” by All-China Federation of Trade Unions. Mr Wang graduated from Shandong Industrial University in 1991, majoring in machinery manufacturing. Mr Wang holds a Master of Engineering degree. He has a wealth of professional experience in shipyard business and assets operation. He is a senior engineer.

Tom Yee Lat ShingNon-Executive Independent Director

Mr Tom Yee Lat Shing 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 sits on the boards of several Singapore listed companies. He is a fellow member of the Institute of Chartered Accountants in Australia, CPA (Australia), Institute of Certified Public Accountants Singapore and an associate member of the Institute of Chartered Secretaries and Administrators. He is also a council member of the Institute of Certified Public Accountants Singapore.

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Board ofDirectors


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 retired as the Centre Manager of Fuji Xerox Singapore Software Centre in Dec 2009. 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, USA. He received a Friend of Labour Award in 1988 for his contributions to the Singapore labour movement.

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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 chairs the Enterprise Risk Management Committee and is a member of the Audit, Remuneration and Nominating Committees. Mr Ang was the President of Singapore Exchange Ltd (“SGX”) from 1999 to 2005 during which he played an active role in successfully promoting SGX as a preferred listing and capital raising venue for Chinese enterprises. Mr Ang also played a pivotal role in establishing Asia’s first financial futures exchange, the Singapore International Monetary Exchange (“SIMEX”) in Singapore in 1984 and was instrumental to establishing SGX AsiaClear which started offering OTC clearing facility in 2006. Following his retirement in January 2006, Mr Ang served as Senior Adviser to SGX until December 2007.

In March 2007, Mr Ang became the first person from an Asian Exchange to be inducted into the Futures Industry Association’s Futures Hall of Fame which was established to honour and recognise outstanding individuals for their contributions to the global futures and options industry.

Mr Ang graduated from Nanyang University of Singapore with a First-Class Honours Degree in Accountancy in 1970. He was conferred a Master Degree in Business Administration with distinction by the Northwestern University in 1973.

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KeyManagement

CORPORATE GOVERNANCE AND TRANSPARENCYKey Management

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.

Li Jian XiongVice President

Mr Li Jian Xiong has rich knowledge and experience in shipping management and business operation. From 1997 to 2001, Mr Li served as Deputy Managing Director of HK Yu Hang Investment Ltd; 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. He also served as the Vice Chairman of Zhangjiagang Win Hanverky Container Terminals Co. Ltd. and the director of various COSCO subsidiary companies in China.

Mr Li joined COSCO Corporation (S) Ltd (formerlyknown as COSCO Investment (S) Ltd) in April 2001 as Vice President. In 2009, he became the director of Singapore Investors’ Association. He is currently also the director of COSCO Marine (S) Ltd.

Mr Li graduated from Qiandao Ocean Shipping Mariners’ College and received his MBA from Shanghai Jiao Tong University.

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Ye Bin LinChief Financial 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.

Wong Meng YunFinancial Controller

Mr Wong Meng Yun has more than 25 years of diversified experience in financial management, corporate finance, internal & external audit and treasury management of which 12 years were in a senior regional management position with a leading US-listed software company prior to his joining the Group in July 2008.

He 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, the Chartered Institute of Arbitrators, the Institute of Arbitrators & Mediators Australia 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, as well as, a Certified Information Systems Auditor (CISA) and a Certified Information Security Manager (CISM) with the Information Systems Audit and Control Association (ISACA).

71

Investor Relations

Investor

At COSCO Corporation, we believe sound investor relations is a cornerstone in building long-term shareholder value and recognise the importance it 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.

Our active investor relations engagement has generated strong interest in our stock. As a testament to the shareholder interest in our stock, we have been included in the FTSE ST China Index since January 2008, and in the FTSE China Top Index since July 2008. Both these indexes were created to reflect the increasing representation of China-based companies on the Singapore stock market and offer investors simple vehicles through which they could tap into the potential of highly liquid, locally-listed China companies. 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.

IR and Communications Activities

With our company’s stock being widely traded and included in many indexes, we understand the importance of timely and pertinent corporate disclosure. We work with the media and the investment community to discuss, elaborate and disseminate information to the public. Over the year in review, we undertook announcements covering contracts won, quarterly results, growth strategies, operational commentaries and our operational outlook. We engage in this communications process through media interviews and news reports on a variety of media platforms such as newswires, print, broadcast, investor meetings and roadshows, and dialogue with shareholders at Annual General Meetings.

Relations

CORPORATE GOVERNANCE AND TRANSPARENCY72


Over FY2009, we engaged about 800 members of COSCO’s investment community through various investor relations programmes

Date Event

7 January DBS 2009 Pulse of Asia

21 January BNP Paribas Asean Corporate Day

10 February Merrill Lynch (HK) Singapore Malaysia Investment Forum

23 February FY08 Results Briefing

27 March UOB Luncheon Briefing

15 April FY2008 AGM

7 May 1QFY09 Results Briefing

8 May Merrill Lynch Asia Stars 2009

28 June DBS 2009 Pulse of Asia

7 July Nomura Securities Convention

3 August 1HY09 Results Briefing

4 August Daiwa Securities Luncheon Briefing

6-9 September DBS Investor Roadshow in USA

10-11 September HK Daiwa Securities Briefing

25 September “Marine Money” Singapore Briefing

14-15 October Citibank China Investment Briefing

3 November 3QFY09 Results Briefing

4 November Norges Bank Investment Management Briefing

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Major Investor Relations Events in 2009

Investor Relations

InvestorRelations

CORPORATE GOVERNANCE AND TRANSPARENCY

Jan Feb Mar Apr May Jun Jul Aug

FY2009

STIIndex

COS SPEquity

MSCISingaporeSep Oct

1400

1600

1800

2000

2200

2400

2600

2800

3000 1700

1600

1500

1400

1300

1200

1100

1000

900

800

1.50

1.40

1.30

1.10

1.00

0.90

0.80

0.70

Nov Dec

STI Index Last Price (R1)COSCO SP Equity Last Price (R2)

MSCI Singapore - Last Price (R3)

2897.621.19

1630.76

2897.62 1630.76

1.19

Our active investor relations engagement has generated strong interest

74


Active, Regular Engagement

During the year in review, we participated in about 35 analyst meetings. Our Investor Relations activities included meetings with fund managers and shareholders, results briefings for every financial quarter, and investment briefings. In various IR events over FY2009, we engaged about a total of 800 key members of COSCO Corporation’s investment community by meeting and networking with them. In addition, the Annual General Meeting held in April 2009 was attended by over 300 shareholders.

IR Awards 2009

On 17 July 2009, COSCO Corporation received the “Top 50 Fastest Growing Enterprises in Singapore” award from the prestigious rating agency DP Information Group. DP Information Group is Singapore’s leading credit and business information bureau. Mr Li Jian Xiong, Vice President of COSCO Corporation represented the Group to receive this award from the Senior Minister of State for Foreign Affairs Dr Balaji Sadasivan. DP Information

Group ranked these companies as the top 50 fastest-growing companies based on the Compound Annual Growth Rate (“CAGR”) of their operating income over the past three years.

COSCO Corporation was also awarded a “Most Transparent Company Award” in the overseas company category by SIAS at the “SIAS 10th Anniversary Celebration and Investors’ Choice Award Presentation”, held in Singapore on 8 October 2009. The prize was presented by the President of SGX, Mr Hsieh Fu Hua to Mr Li Jian Xiong.

These awards recognise our efforts in corporate governance and disclosure, regular communications and investor engagement. We will continue to build on our investor relations standards and achievements as an integral part of our corporate development.

SIAS Investor’s Choice AwardAwarded the Most Transparent Company Award 2009

Singapore1000 AwardAwarded the Fastest 50 growing certification 2009, certified by DP Information Group

2009 Singapore 20 Largest Enterprise Honorary Award Yazhou Zhoukan Global Chinese Entrepreneur Award 1000

75

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, provides 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 with Enterprise Risk Management Committee, Audit Committee and 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 board and proposals to update the Group risks are provided to the Audit Committee 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,

Risk Management

Risk

Risk factors

Introduction

The Group, like all businesses, is exposed to a variety of risks and uncertainties which can 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 process

The 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 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 Group 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 subsidiary is asked to carry out a self assessment exercise which requires all operating units to confirm compliance with Group

Management

CORPORATE GOVERNANCE AND TRANSPARENCY76

Principal risks and uncertainties


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 risks

The 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 risks

The 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, for example 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 is highly competitive. The Group competes with other multinational corporations which also have significant financial resources.

Customer demand

Customer 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.

The Group is also exposed to counterparty risk from customers that could result in financial losses should those counterparties become unable to meet their obligations to the Group.

Raw materials

The 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.

The Group manages this risk through constant monitoring of the markets in which it operates and continuous review of capital expenditure programmes to ensure they reflect market conditions. A continuous focus on operating expenditure is also an important method of mitigating this risk.

The Group has developed uniform processes and procedures with applications such as SAP to manage procurement of raw materials. The Group also has developed strategic alliances with certain selected major steel mills to have twelve (12) months fixed price steel supply to mitigate risks in raw material price movements.

77

a number of other provinces and materially adversely impact the performance or financial condition of the Group.

Operational performance

and project delivery

Failure to meet production targets can result in increased unit costs, which are pronounced at operations with higher levels of fixed costs. Unit costs may exceed forecasts, adversely affecting performance and the results of operations.

Failure to meet project delivery times and costs could have a negative effect on operational performance and lead to increased costs or reductions in revenue and profitability.

A number of strategies have been implemented to mitigate these risks including management oversight of operating performance and project delivery through regular executive management briefings, increased effectiveness of procurement initiatives to reduce unit costs and improve delivery of projects.

Employees

The Group depends on the continued contributions of its executive officers and employees, both individually and as a group. While the Group reviews

Risk Management

Risk

2. Internal risks

Internal risks are those arising from factors primarily within the Group’s control, including from the Group’s structure and processes.

Information technology

infrastructure

The 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 interdependence

The Group’s operations in individual provinces are increasingly dependent for 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

Management

CORPORATE GOVERNANCE AND TRANSPARENCY

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 meets its business needs. Any failure to do so may impact the Group’s performance.

The ability to recruit, develop and retain appropriate skills for the Group is made difficult by competition for skilled labour. The failure to retain skilled employees or to recruit new staff may lead to increased costs, interruptions to existing operations and delay in new projects.

A number of strategies are implemented to mitigate this risk including attention to an appropriate suite of reward and benefit structures and ongoing refinement of the Group as an attractive employee proposition.

Managing cost of wages through outsourcing

Ship repair is a labour-intensive industry and an increase in wages will have a significant impact on the Group. The Group had been encountering increases in labour cost. Other than

78


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 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 risks

Executive risks arise from the implementation of the Group’s strategy and its change and investments programmes, which aim to enhance long term shareowner value.

Investments, acquisition and disposals

Risks 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 realise the anticipate 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 identified 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 risks

The Group is exposed to market risks such as interest rate and exchange rate risks arising from its international business.

Managing currency fluctuations

The 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 hedging 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 engaged the guidance of the holding company in managing its foreign exchange risk exposure. The holding company has an experienced Treasury operations team who are responsible for managing the funding requirements and liquidity risk.

A detailed disclosure of the Group’s financial risks can be found in the Notes to the Financial Statements on pages 155 to 163.

79

SUCCESS IS NOT A DESTINATION

IT IS A JOURNEY

AND VERY OFTEN THE JOURNEY ITSELF IS THE REWARD

COSCO Guangdong Shipyard completed its first new build ship, a 57,000 dwt bulk carrier M.V. APJ KAIS. The christening ceremony for the ship was held at COSCO Guangdong on 17 April 2009.

This is the largest ever bulk carrier in tonnage capacity built in southern China, measuring 190 metres long, 32.3 metres wide and 19 metres high. The M.V. APJ KAIS has a draft of 12.8 metres and a navigation speed of 14.2 knots.

INSIDE COSCO AND CORPORATE CITIZENSHIPResearch and Development

Research andDevelopment

At COSCO, we seek constant progress in Research and Development (“R&D”). We believe that with innovation, we are in better position to fuel our growth through:

a. Greater efficiency, b. Increased productivity, and c. Higher quality standards.

Constant improvements in our technological capabilities not only provide us with a competitive advantage for the present, but also create sustainable growth for the future.

R&D in 2009

The year 2009 saw COSCO’s R&D team grow in strength. With over 1,300 competent individuals, it includes more than 40 professionals from Singapore and Korea in the areas of ship repair, ship conversion, shipbuilding and offshore marine engineering.

In addition, COSCO has established collaborations with reputable institutions and companies to accelerate design and technological improvements.

We remain committed to technological innovation as it is the bedrock of the company’s growth. Presently, COSCO has a total of nine

patent applications that have been officially registered and are recognised by the State Intellectual Property Office of China.

Aligned for the Future

Collaborations with renowned ship design firms are a key pillar in our research and development strategy. These mutually beneficial partnerships contribute to our pursuit of global standards.

Our long-term partnership with KOMAC has been rewarding. As one of the leading shipping companies in Korea, KOMAC brings up-to-date expertise and extensive experience to the various operational divisions of the shipyards.

Our partnership with the Dalian Maritime University has also enabled the establishment of the National Engineering Research Centre. The centre specialises in maritime engineering and scientific innovation.

During the year, we undertook technological research on the design and construction of the ultra-large 300,000 dwt offshore drydock in Dalian and the conversion of the highly sophisticated FPSO, the Cidade de Santos MV20. Our research project on offshore platform assembly also

A key driving force steering COSCO’s growth

84


managed to secure funding from the Enterprise Technology Centre in Liaoning Province.

Ship Building

Our collaboration with KOMAC has reaped substantial results thus far. The design plans of the Panamax vessels and Aphra-type product tanker have been completed, and the development plans for the Handymax vessels have also been officially approved. These innovative designs offer notable improvements in linear aerodynamics, ship structure and interior ship design.

COSCO signed several strategic agreements with ship classification societies from Norway, the United Kingdom, the USA and China. Not only does this facilitate strict adherence to ship building standards, it also keeps us ahead of technological trends and ever-changing industry standards and requirements.

Offshore Marine Engineering

Through collaborations with companies such as NEPTUN in Germany, GM in Norway and F&G in the USA, we have successfully developed the designs of key vessel types like the 3000TEU containership

Collaborations with renowned

ship design firms are a key pillar

in our research and development

strategy. These mutually beneficial

partnerships contribute to our pursuit of global

standards.

and the semi-submersible oil rig. These vessels integrate the latest in design and technology, amalgamating COSCO Corporation’s high standards with the enhanced technology and breakthrough designs of KOMAC.

During the year, we, together with other key partners, made technological improvements in the lifting system of the self-propelled jack-up rig.

Moreover, successful delivery of the Sevan Driller oil rig and the ongoing construction of SUPER M2 jack-up rig, GM4000, Octabuoy and other offshore drilling units have raised our standards to unprecedented levels and reflect our strong commitment to elevate design innovation and technical capabilities.

Advancing Forward

As we conclude a rewarding year in R&D, we look forward to greater advancements in the near future. Strategic and mutually beneficial collaborations will continue to be established as we seek to expand our operational areas and strengthen research. This consistent progress will keep our R&D efforts on track and continually yield growing returns on R&D investment.

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INSIDE COSCO AND CORPORATE CITIZENSHIPHuman Resources

A Broad Perspective

Human capital is COSCO’s most valuable asset. Our ability to attract, develop, train and retain our staff has been the key engine of COSCO’s success and will remain the driving force for future growth. We employ various approaches to strengthen the workforce. This includes recruitment, training, a succession scheme and a reward scheme.

At COSCO, we recruit talents through an attractive reward and remuneration scheme and continually develop them through a performance and appraisal system that guides staff to structure and achieve their personal goals. As a market leader, we recognise the importance of talent retention for the long-term growth of the Company and to achieve that end, we strongly emphasise education and training. This in turn profiles us as a choice employer.

In addition, COSCO has established a succession scheme, where promising employees are identified and groomed for senior management positions. This scheme is a key component of our human resource strategy because as our future corporate leaders, they will greatly influence the Company’s direction.

Recruitment and Training

In today’s knowledge economy, human capital is a crucial factor in COSCO’s value-driven, world-class enterprise. With our robust and diversified talent pool, we are able to maximise growth by leveraging on opportunities.

We consistently boost the strength of our team through active recruitment of top graduates from leading Chinese universities annually. In fact, a total of over 1,000 fresh university graduates were recruited during the year. These recruits undergo management trainee courses which groom and fully equip them for their upcoming management roles.

New employees undergo relevant training courses, lasting from one to three months. Technical staff are also required to pass a course before commencing work and are given annual assessments to ensure maintenance of their requisite services and skills.

Employees are sent for training in areas such as international standards and safety measures, technical, engineering and management skills. COSCO believes that continuous learning is a fundamental building block of growth. As such, we have

HumanResourcesA valuable asset for long-term advantage

86


established a management succession programme to groom promising younger staff for senior management roles and also offer higher learning opportunities to middle management personnel. Senior management staff have opportunities to learn from other industry experts when they are posted to other countries with established maritime industries.

Maximising Resources

In FY2009, COSCO established a comprehensive, centralised human resource management system. This will enable more efficient allocation of manpower throughout the whole group, enhancing productivity. Group-wide, we have adopted a lean management structure which includes a procedure management system in the fabrication of vessels.

Reward and Retention

Various schemes have been implemented at COSCO to cultivate staff loyalty and bring out the fullest potential of every individual. One instance is the performance and achievement appraisal system which aims to link work goals with personal career development and remuneration.

At COSCO, we recruit talents

through an attractive reward

and remuneration scheme and

continually develop them through

a performance and appraisal

system that guides staff to structure and achieve their

personal goals.

The annual “Model Employee Reward” scheme is another staff-motivation scheme that rewards the best performing employee from each subsidiary with a trip to one of the Company’s overseas subsidiaries. More than just an incentive trip, it provides recipients opportunities to experience the work culture in other COSCO companies. We give rewards and recognition to our marine crew for the safe operation of our ships. Incentives take the form of family holidays and others. From October 2009, crew who had worked for 10 months or more will also receive one-off performance increments of 3-6% of their salary.

To promote cohesiveness, skills-based competitions are held frequently among the shipyards. These competitions improve skills and initiative among our staff.

Outlook

2010 remains a challenging year for the shipping industry. Our two main tasks ahead will be the management of contract workers and the maintenance of harmony and stability among our contract and in-house workforce, thereby enhancing the quality of work and the performance of all shipyards.

87

INSIDE COSCO AND CORPORATE CITIZENSHIPWorkplace Safety

WorkplaceSafety

A “Safety-First” Culture

We believe in the importance of a strong safety culture in the workplace, which is why we have established and maintained safe working environments in all COSCO companies.

We require our staff to undergo workplace safety training courses. These courses are specially designed to educate staff about potential workplace dangers and the necessary safety precautions. Further tests are administered to ensure a level of proficiency and understanding. Our resultant strong safety track record over the last eight years is a testament to our efforts in this area. Going forward, we will reinforce training and supervision of safety standards to create a working culture that advocates an all-encompassing focus on work safety.

2009 in Review

In FY2009, we placed greater emphasis on workplace safety in two areas – the repair and conversion of oil tankers, and high-density work locations. These were highlighted because of the large damaging effects of faulty oil tankers, and the higher propensity for injuries and accidents in areas of dense human traffic.

We also focused on the proper maintenance and use of heavy equipment as deviation from such safety standards has serious consequences. The pro-active

measures produced positive results and reduced the total number of accidents by 18%.

Other authorities have recognised our efforts as well. In 2009, COSCO ships made more than 220 trips globally and successfully passed port inspections at various international locations more than 30 times.

On a separate note, during the same period, COSCO ships made a total of 21 trips through the Gulf of Aden, a pirate-infested zone, without any problems. We attribute this partly to our policy of enforcing round-the-clock surveillance by the crew on every ship, and ensuring guidance, tracking and supervision by onshore marine management at all times.

Environmental Safety

We value the environment and have always sought to do our best for environmental protection, keenly aware that environmental safety is part of overall workplace safety. We aim to not only minimise waste, but also to minimise the negative effects of waste disposal, particularly through efficient wastewater and waste gas treatment. This is done proactively through facility and equipment upgrades.

A Safety Committee at the COSCO Shipyard Group (“CSG”) level was also established in 2009. This committee conducts frequent site visits at all our shipyards to ensure adherence to safety requirements and standards. Equipment and tools in COSCO shipyards are also checked and maintained at least once a month. This keeps our facilities healthy and up-to-date. Furthermore, we also conduct forums and training courses to ensure that employees understand the importance of workplace safety. This reduces the possibilities of workplace accidents and allows us to maintain sound operational efficiency.

Setting the Standards

To maintain high safety standards at COSCO shipyards, we constantly reinforce safety awareness levels through education and training. Training includes mandatory hour-long sessions every week to keep our staff updated on the latest safety rules

We believe in the importance of a

strong safety culture in the workplace, which is why we have established and maintained

safe working environments in all

COSCO companies.

Engendering a strong safety culture in the workplace

88


and regulations. They are also given guidance and live demonstrations on safety precautions, and will be assessed at the end of the courses to ascertain adequate competency and proficiency.

We also implemented the grading of the safety management officers’ course. To date, 145 safety management officers have taken part in the examinations. This information allows safety officers to further monitor and manage the safety of their individual shipyards.

COSCO organises company events and activities that centre on issues of workplace safety. An oratorical contest took place recently with “workplace safety” as the subject of speech, pitching staff members against each other in a battle of knowledge and wit. This activity brought to light the staff’s strong understanding of workplace safety.

In addition, appraisals by external parties are done on various departments in COSCO. These checks examine the standards at the Company and award certifications in the areas of quality, working environment and workplace safety.

2010: Objectives and Actions

We will continue our pursuit of zero accidents and fatalities. In line with our transformation, new expertise and equipment was brought in along

with the recent entry into the offshore marine engineering sector. There was hence a need to enhance our safety management, through the implementation of new safety measures and initiation of new training programmes.

Training programmes will continue to be a vital route by which we instil a “safety-first” mentality among workers, and increase awareness of high-danger zones in the workplace. Aside from that, we will further emphasise the reward and punishment scheme within the COSCO shipyards.

Going forward, we will also be instituting short-term on-board stints for maintenance staff, in order to improve the operational oversight and workplace safety management skills of ship management. Specifically, their responsibilities include the prevention of piracy, smuggling, pollution, fire, collision, personal injury and typhoon disaster management. Over the past two years, marine management crew maintained a good track record in the provision of security and stability.

We will also strengthen ship tracking, monitoring and inspection, as well as information exchange among all onshore and offshore departments and all crew on our vessels, in order to facilitate a more holistic understanding of operational procedures and devise more comprehensive and effective workplace safety measures.

Medical Benefits, Higher Efficiency

At COSCO, workplace safety in and of itself is paramount, but we also understand that workplace safety is the key to sustaining operational efficiency and increasing long-term profitability. Adherence to safety rules and regulations enables staff to foster a greater understanding of their responsibilities and in so doing, increase work efficiency and productivity.

To complement work safety measures, we have in place a comprehensive network of supporting operations which include on-site medical facilities at all shipyards. Benefits like annual health checks, medical insurance, dental treatment and immunisation against influenza are some of the measures provided for the well-being of employees.

Aside from the productive benefits of a safe and healthy workforce, we understand that a workforce that is well taken care of and provided for will be happy and dedicated. This is a goal we strive for as a leading global company.

89

INSIDE COSCO AND CORPORATE CITIZENSHIPCorporate Social Responsibility

Overview

As a global company with a strong awareness of Corporate Social Responsibility (“CSR”), we understand the impact we have on the lives and livelihoods of many people and the environments we operate in. We are, as such, committed to improving the communities we work with and protecting the important eco-systems that sustain our operations. Over the year in review, we have been involved in a range of CSR programmes, endeavouring to improve the lives of those less fortunate and enhance our shared living environment.

Social and Educational Contributions

Singapore

This year, the Group made a donation to the Tsao Foundation in support of the An Le Fund. They did this through the IMC Charity Golf Tournament. This donation allowed the foundation to support the home medical care services for the needy elderly. The Group also donated to the Community Chest during the World Gourmet Summit Charity Dinner 2009. Besides these donations, COSCO has always been a strong

supporter of the Yellow Ribbon project – a fund established to create jobs for ex-convicts and engage the community in giving ex-offenders a second chance. COSCO has donated annually for the past three years. This gesture may be simple, but it has nevertheless inspired many ex-offenders to re-integrate back to society.

China

Not only contributing locally, COSCO Corporation has also been involved with needy communities in China by contributing regularly to the COSCO Charity Foundation - the first non-public foundation initiated by state-owned enterprises. This foundation manages COSCO Group’s social projects, and has been involved in charity work within China for disaster-relief, poverty aid, medical aid and educational support.

Contributions to the foundation by COSCO subsidiaries have increased year-on-year since its inception, enabling the foundation to widen its reach beyond its employees to the wider society. In September 2009, its subsidiary Zhoushan Shipyard also helped the less fortunate by donating to Liu Heng Charitable Branch through the “donation-a-day” fund-raising drive.

Corporate SocialResponsibility

90


Environmental Awareness

COSCO believes in inculcating social responsibility in its management and operational processes. All the Group’s new buildings have adopted environmentally-friendly designs. It also implemented at all its subsidiaries the International Safety Management Code (“ISMC”), establishing a uniform pollution prevention management system. In projects such as the construction of its subsidiary, Nantong Shipyard, COSCO placed a premium on environmental protection.

We undertake regular reviews of our environmental policies and working procedures, with the aim of constantly improving our environmental standards. Moreover, internal and external audits ensure that we keep abreast of the latest environmental protection measures and standards.

In line with the goal of environmental sustainability, we will continue adopting environmentally-friendly technologies and ensure minimal wastage through innovative “green” design and recycling.

Over the year in review,

we have been involved in a

range of CSR programmes,

endeavouring to improve the lives of those less fortunate

and enhance our shared living

environment.

Conclusion

At COSCO, we believe in conducting our business operations in a way that ensures the health, welfare and safety of our employees, customers, communities in which we operate in and our ecological system. Despite the challenging operating conditions during the year in review, we remain fully committed to our social programmes as an active corporate citizen and look forward to contributing greater resources in the year ahead.

91

Directors’ ReportStatement by DirectorsIndependent Auditor’s ReportConsolidated Income StatementConsolidated Statement of Comprehensive IncomeBalance SheetsConsolidated Statement of Changes in EquityConsolidated Cash Flow StatementNotes to the Financial StatementsFive-Year SummaryShareholding StatisticsNotice of Annual General MeetingProxy Form for Annual General MeetingNotes for Proxy Form

9399

100101102103104106108170171173

Contents

93

Directors’ ReportFor the Financial Year Ended 31 December 2009


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 2009 and the balance sheet of the Company as at 31 December 2009.

Directors

The directors of the Company in offi ce at the date of this report are as follows:

Li Jian Hong

Jiang Li Jun

Zhang Liang

Sun Yue Ying

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)

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 96 and 97 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:

Number of ordinary shares registered in name of director or nominee

Number of ordinary shares in which a director is

deemed to have an interest

At31.12.2009

At

1.1.2009

or date of

appointment,

if later

At31.12.2009

At

1.1.2009

or date of

appointment,

if later

The Company Li Jian Hong 1,300,000 1,300,000 – –

Sun Yue Ying 1,400,000 1,400,000 – –

Directors’ ReportFINANCIAL STATEMENTS94

For the Financial Year Ended 31 December 2009

Directors’ interests in shares or debentures (continued)

(a) (continued)

Number of ordinary shares registered in name of director or nominee

Number of ordinary shares in which a director is

deemed to have an interest

At31.12.2009

At

1.1.2009

or date of

appointment,

if later

At31.12.2009

At

1.1.2009

or date of

appointment,

if later

The Company Wang Xing Ru 1,067,000 467,000 – –

Tom Yee Lat Shing 1,400,000 1,400,000 – –

Wang Kai Yuen 900,000 900,000 1,000,000 1,000,000

Er Kwong Wah 650,000 650,000 – –

Ang Swee Tian 130,000 130,000 5,000 5,000

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 unissuedordinary shares under option held by director

At31.12.2009

At

1.1.2009

or date of

appointment,

if later

Related corporationsCOSCO International Holdings Limited - Share Option Scheme

Li Jian Hong 1,200,000 1,200,000

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 1,630,000

Lu Cheng Gang 265,000 265,000

95



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 96 and 97 of this report.

Number of unissued ordinary shares underoption held by director

At31.12.2009

At

1.1.2009

or date of

appointment,

if later

2006 OptionsLi Jian Hong 700,000 700,000

Sun Yue Ying 700,000 700,000

Lu Cheng Gang 700,000 700,000

2007 OptionsMa Gui Chuan 700,000 700,000

Wang Xing Ru 700,000 700,000

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 OptionsMa Gui Chuan 700,000 700,000

Wang Xing Ru 700,000 700,000

Tom Yee Lat Shing 300,000 300,000

Wang Kai Yuen 300,000 300,000

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

(c) The directors’ interests in the ordinary shares and share options of the Company as at 21 January 2010 were the same as those

as at 31 December 2009.

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 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 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 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 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, 2007 and 2008 known as “2006 Options”, “2007

Options” and “2008 Options” respectively were set out in the Directors’ Report for the fi nancial years ended 31 December

2006, 31 December 2007 and 31 December 2008 respectively.

The Remuneration Committee administering the Scheme 2002 comprises the following directors:

Er Kwong Wah (Chairman)

Jiang Li Jun

Wang Kai Yuen

Tom Yee Lat Shing

Ang Swee Tian

97



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 sharesof the Company under option

Name of directors

Aggregategranted since

commencementof Scheme

2002 to31.12.2009

Aggregateexercised since

commencementof Scheme

2002 to31.12.2009

Aggregateoutstanding

as at31.12.2009

Li Jian Hong 3,200,000 2,500,000 700,000

Sun Yue Ying 3,300,000 2,600,000 700,000

Ma Gui Chuan 1,400,000 – 1,400,000

Wang Xing Ru 3,000,000 1,600,000 1,400,000

Tom Yee Lat Shing 2,200,000 1,900,000 300,000

Wang Kai Yuen 2,200,000 1,900,000 300,000

Er Kwong Wah 2,200,000 1,600,000 600,000

Li Jian Xiong 4,700,000 3,300,000 1,400,000

Lu Cheng Gang 2,100,000 – 2,100,000

Ye Bin Lin 4,700,000 3,300,000 1,400,000

Liu De Tian 4,400,000 3,000,000 1,400,000

33,400,000 21,700,000 11,700,000

No options have 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 options have been granted 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.

There were no shares of the Company 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.

(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

at1.1.2009

Numberexercisedduring the fi nancial

year

Numbercancelled/

lapsedduring thefi nancial

year

Numberof unissued

ordinary shares

at31.12.2009

Exerciseprice Exercise period

’000 ’000 ’000 ’000 $

2006 Options 2,840 – (60) 2,780 1.23 21.2.2007 - 20.2.2016

2007 Options 14,420 – (1,650) 12,770 2.48 5.2.2008 - 4.2.2017

2008 Options 20,040 – (610) 19,430 2.95 24.3.2009 - 23.3.2018

37,300 – (2,320) 34,980



Independent auditor

The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.

On behalf of the directors

JIANG LI JUN MA GUI CHUANDirector Director

3 March 2010

99

Statement by DirectorsFor the Financial Year Ended 31 December 2009


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 101 to 169 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 2009,

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 MA GUI CHUANDirector Director

3 March 2010

FINANCIAL STATEMENTS100

Independent Auditor’s ReportTo the Members of Cosco Corporation (Singapore) Limited For the Financial Year Ended 31 December 2009

We have audited the accompanying fi nancial statements of Cosco Corporation (Singapore) Limited (the “Company”) and its subsidiaries

(the “Group”) set out on pages 101 to 169, which comprise the balance sheets of the Company and of the Group as at 31 December

2009, and the consolidated income statement, the consolidated statement of comprehensive income, 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 2009, 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, 3 March 2010

101

Consolidated Income StatementFor the Financial Year Ended 31 December 2009


Notes 2009 2008

$’000 $’000

Sales 4 2,899,004 3,476,009

Cost of sales (2,601,406) (2,845,875)

Gross profi t 297,598 630,134

Other income (net) 7 146,314 207,942

Expenses

- Distribution (42,420) (61,642)

- Administrative (181,250) (316,855)

- Finance 8 (41,904) (8,834)

Share of profi t of associated companies 21 214 643

Profi t before income tax 178,552 451,388

Income tax expense 9 (40,758) (31,620)

Net profi t 137,794 419,768

Attributable to:

Equity holders of the Company 110,080 302,588

Minority interests 27,714 117,180

137,794 419,768

Earnings per share for profi t attributable to equity holders of the Company (expressed in cents per share) 10

- Basic 4.92 13.51

- Diluted 4.92 13.50

The accompanying notes form an integral part of these fi nancial statements.


Consolidated Statement of Comprehensive IncomeFor the Financial Year Ended 31 December 2009

Notes 2009 2008

$’000 $’000

Net profi t 137,794 419,768

Other comprehensive income:

Financial assets, available-for-sale

- Net fair value gains 33(b)(v) 371 263

Currency translation differences arising from consolidation 33(b)(iii) (27,480) 65,375

Other comprehensive (loss)/income, net of tax (27,109) 65,638

Total comprehensive income for the year 110,685 485,406

Total comprehensive income attributable to:

Equity holders of the Company 93,345 339,968

Minority interests 17,340 145,438

110,685 485,406


103

Balance SheetsAs at 31 December 2009


The Group The CompanyNotes 2009

$’0002008

$’000

2009$’000

2008

$’000

ASSETSCurrent assetsCash and cash equivalents 11 1,549,175 1,880,316 134,511 130,823

Forward currency contracts 12 944 10,063 – –

Trade and other receivables 13 1,452,240 1,570,108 236 80,596

Inventories 14 677,568 945,601 – –

Construction contract work-in-progress 15 199,385 170,143 – –

Trading property 16 – – – –

Other current assets 17 6,573 19,792 220 175

3,885,885 4,596,023 134,967 211,594

Non-current assetsForward currency contracts 12 – 1,441 – –

Trade and other receivables 18 – – 64,285 65,594

Financial assets, available-for-sale 19 4,034 3,630 – –

Club memberships 20 492 473 156 236

Investments in associated companies 21 1,922 2,577 – –

Investments in subsidiaries 22 – – 290,813 289,968

Investment properties 23 11,786 12,217 – –

Property, plant and equipment 24 2,349,098 2,081,950 775 896

Intangible assets 25 9,525 9,546 – –

Deferred expenditure 26 1,061 – – –

Deferred income tax assets 31 158,523 91,417 – –

2,536,441 2,203,251 356,029 356,694

Total assets 6,422,326 6,799,274 490,996 568,288

LIABILITIESCurrent liabilitiesForward currency contracts 12 14,448 3,506 – –

Trade and other payables 27 3,559,006 4,441,900 16,767 14,871

Current income tax liabilities 9 84,136 61,348 549 4,885

Borrowings 28 176,262 45,278 – –

Provisions for other liabilities 30 36,436 20,156 – –

3,870,288 4,572,188 17,316 19,756

Non-current liabilitiesForward currency contracts 12 – 6,375 – –

Borrowings 28 938,946 611,364 – –

Deferred income tax liabilities 31 2,400 180 2,198 –

941,346 617,919 2,198 –

Total liabilities 4,811,634 5,190,107 19,514 19,756

NET ASSETS 1,610,692 1,609,167 471,482 548,532

EQUITYCapital and reserves attributable to equity holders of the CompanyShare capital 32 270,608 270,608 270,608 270,608

Statutory and other reserves 33 174,030 167,904 45,105 41,865

Retained earnings 639,404 705,692 155,769 236,059

1,084,042 1,144,204 471,482 548,532

Minority interests 526,650 464,963 – –

Total equity 1,610,692 1,609,167 471,482 548,532



Consolidated Statement of Changes in EquityFor the Financial Year Ended 31 December 2009

Attributable to equity holders of the Company

Notes

Share capital

Statutoryand otherreserves

Retainedearnings Total

Minorityinterests

Totalequity

$’000 $’000 $’000 $’000 $’000 $’000

2009

Beginning of fi nancial year 270,608 167,904 705,692 1,144,204 464,963 1,609,167

Total comprehensive income for the year – (16,735) 110,080 93,345 17,340 110,685

Employee share option scheme:

- Value of director and employee

services 33(b)(i) – 3,240 – 3,240 – 3,240

Minority’s share of interest in a newly

incorporated subsidiary – – – – 8,404 8,404

Minorities’ share of increase in registered

capital of subsidiaries – – – – 37,455 37,455

Decrease in minority’s interest of a

subsidiary – – – – (12) (12)

Dividend declared by subsidiaries to

minority shareholders of subsidiaries – – – – (1,500) (1,500)

Dividend for 2008 34 – – (156,747) (156,747) – (156,747)

Transfer from asset revaluation reserve

to retained earnings 33(b)(iv) – (3,218) 3,218 – – –

Transfer from retained earnings to

statutory reserves 33(b)(ii) – 22,839 (22,839) – – –

End of fi nancial year 270,608 174,030 639,404 1,084,042 526,650 1,610,692


105

Consolidated Statement of Changes in EquityFor the Financial Year Ended 31 December 2009


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

Total comprehensive income for the year – 37,380 302,588 339,968 145,438 485,406


- Value of director and employee

services 33(b)(i) – 17,311 – 17,311 – 17,311

- Issue of shares 32 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 34 – – (156,738) (156,738) – (156,738)

Transfer from asset revaluation reserve

to retained earnings 33(b)(iv) – (3,218) 3,218 – – –

Transfer from retained earnings to

statutory reserves 33(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



Consolidated Cash Flow StatementFor the Financial Year Ended 31 December 2009

Note 2009$’000

2008

$’000

Cash fl ows from operating activities

Net profi t 137,794 419,768

Adjustments for:

- Income tax expense 40,758 31,620

- Depreciation of property, plant and equipment and investment properties 153,416 120,767

- Net (reversal of)/allowance for impairment of trade and other receivables (11,375) 61,283

- Write-off for inventory obsolescence and inventory write-down 4,236 20,907

- Loss on disposal of a transferable club membership 4 –

- Impairment in value of transferable club memberships 32 4

- Net loss/(gain) on disposal of property, plant and equipment 351 (1,638)

- Expected losses recognised on construction contracts 578 89,048

- Write-off for property, plant and equipment 40 2,257

- Employees share option expenses 3,240 17,311

- Net fair value loss/(gain) on forward currency contracts 15,625 (1,526)

- Share of profi t from associated companies (214) (643)

- Negative goodwill (12) –

- Dividend income (314) (1,171)

- Interest expense (fi nancing) 41,904 8,834

- Interest income from deposits (investing) (32,781) (34,355)

353,282 732,466

Changes in working capital:

- Inventories and construction contract work-in-progress 234,555 (650,191)

- Trade and other receivables 121,453 (791,547)

- Trade and other payables (850,141) 1,898,403

- Trading property – 977

- Other current assets 13,219 (12,829)

- Deferred expenditure (1,061) –

- Provisions for other liabilities 16,280 15,027

- Exchange differences 30,489 (53,689)

Cash (used in)/generated from operations (81,924) 1,138,617

Income tax paid (82,444) (64,654)

Net cash (used in)/provided by operating activities (164,368) 1,073,963


107

Consolidated Cash Flow StatementFor the Financial Year Ended 31 December 2009


Note 2009$’000

2008

$’000

Cash fl ows from investing activities

Purchase of property, plant and equipment (469,924) (664,583)

Proceeds from disposal of property, plant and equipment 12,319 14,694

Purchase of a transferable club membership (101) –

Proceeds from disposal of a transferable club membership 45 –

Purchase of investment properties – (1,063)

Dividends received 764 1,171

Interest received from deposits 40,922 15,650

Net cash used in investing activities (415,975) (634,131)

Cash fl ows from fi nancing activities

Proceeds from issuance of ordinary shares – 3,756

Proceeds from borrowings 799,875 609,514

Repayments of borrowings (328,273) (129,081)

Repayments of fi nance lease liabilities (18) (22)

Minority shareholder’s contribution for the equity interest in a newly incorporated

subsidiary 8,404 14,206

Proceeds from minority shareholders for increase in registered capital of subsidiaries 37,455 –

Decrease/(increase) in deposits pledged 10,929 (10,275)

Interest paid (41,536) (8,534)

Dividends paid to shareholders of the Company (156,747) (156,738)

Dividends paid to minority shareholders of subsidiaries (34,356) (21,492)

Net cash provided by fi nancing activities 295,733 301,334

Net (decrease)/increase in cash and cash equivalents (284,610) 741,166

Cash and cash equivalents at beginning of fi nancial year 1,865,833 1,078,586

Effects of currency translation on cash and cash equivalents (35,602) 46,081

Cash and cash equivalents at end of fi nancial year 11 1,545,621 1,865,833



Notes to the Financial StatementsFor the Financial Year Ended 31 December 2009

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 2009

On 1 January 2009, 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:

FRS 1 (revised) Presentation of fi nancial statements (effective from 1 January 2009). The revised standard prohibits the

presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in

equity. All non-owner changes in equity are shown in a performance statement, but entities can choose whether to

present one performance statement (the statement of comprehensive income) or two statements (the income statement

and statement of comprehensive income). The Group has chosen to adopt the latter alternative. Where comparative

information is restated or reclassifi ed, a restated balance sheet is required to be presented as at the beginning

comparative period. There is no restatement of the balance sheet as at 1 January 2008 in the current fi nancial year.

FRS 23 (revised) Borrowing costs (effective from 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.

FRS 108 Operating segments (effective from 1 January 2009) replaces FRS 14 Segment reporting, and requires a

‘management approach’, under which segment information is presented on the same basis as that used for internal

reporting purposes. Segment revenue, segment profi ts and segment assets are also measured on a basis that is consistent

with internal reporting.

Amendment to FRS 24 Related party disclosures (effective from 1 January 2011). The Group has early adopted the

amendment to FRS 24. The amendment introduces an exemption from all of the disclosure requirements of FRS 24 for

transactions among government-related entities and the government. Those disclosures are replaced with a requirement

to disclose the name of the government and the nature of their relationship, the nature and amount of any individually-

signifi cant transactions, and the extent of any collectively-signifi cant transactions qualitatively or quantitatively. It also

clarifi es and simplifi es the defi nition of a related party.

109



2. Signifi cant accounting policies (continued)

2.1 Basis of preparation (continued)

Interpretations and amendments to published standards effective in 2009 (continued)

Amendment to FRS 107 Improving disclosures about fi nancial statements (effective from 1 January 2009). The amendment

requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires

disclosure of fair value measurements by level of a fair value measurement hierarchy (see Note 36(e)). The adoption

of the amendment results in additional disclosures but does not have an impact on the accounting policies and

measurement bases adopted by the Group.

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.

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 the 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.




2.2 Revenue recognition (continued)

(d) Interest income

Interest income is recognised on the time-proportion basis using the effective interest method.

(e) Dividend income

Dividend income is recognised when the right to receive payment is established.

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.

111




2.3 Group accounting (continued)

(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.

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 profi ts 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.




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 that are directly

attributable to the acquisition, construction or production of a qualifying asset (Note 2.6). 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.

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.

(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.

113




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, the goodwill of which 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.

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, the costs of which 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 the 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.

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 unit

(“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.

115




2.11 Impairment of non-fi nancial assets (continued)

(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.

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 nature of the asset and the purpose

for which the assets were acquired. Management determines the classifi cation of its fi nancial assets at initial recognition.

(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).




2.12 Financial assets (continued)

(a) Classifi cation (continued)

(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.

(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 fi nancial 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.

117




2.12 Financial assets (continued)

(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.

(ii) Financial assets, available-for-sale

In addition to the objective evidence of impairment described in Note 2.12(e)(i), a signifi cant or prolonged

decline in the fair value of an equity security below its cost is considered as an indicator that the available-for-

sale fi nancial asset is impaired.

If any evidence of impairment exists, 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. 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 and third party for services

provided to a subsidiary. These guarantees are fi nancial guarantees as they require the Company to reimburse the banks and

third parties if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of their

borrowings or payment for services when due, respectively.

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.

2.14 Borrowings

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.

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.




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.

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 forward currency contracts 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.

119




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.

(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 the 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 property to non-

related parties.

(i) Lessor - Operating leases

Leases of property, plant and equipment, investment properties and trading property 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 the 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 the estimated costs of completion and 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.

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 (“PRC”)

on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions

have been paid.

121




2.22 Employee compensation (continued)

(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.

(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.

(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 reporting date;

(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.




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 reporting date. For

acquisitions prior to 1 January 2005, the exchange rates at the dates of acquisition are used.

2.24 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the key management whose

members are responsible for allocating resources and assessing performance of the operating segments.

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.

2.28 Government grants

Grants from the government are recognised as a receivable at their fair value when there is reasonable assurance that the grant

will be received and the Group will comply with all the attached conditions.

Government grants receivable are recognised as income over the periods necessary to match them with the related costs which

they are intended to compensate, on a systematic basis. Government grants relating to expenses are shown separately as other

income.

Government grants relating to assets are deducted against the carrying amount of the assets.

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. 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.

123



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 $3,137,000, if unfavourable; or

- decrease the income tax liability by $3,137,000, 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 $203,168,000.

If the contract costs to be incurred increase/decrease by 10% from management’s estimates, the Group’s cost of sales

will increase/decrease by $201,636,000.

(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 regularly. Signifi cant fi nancial diffi culties 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.

Any changes in the net present values of estimated cash fl ows from management’s estimates for all past due receivables,

will not result in any signifi cant impact to the Group’s allowance for impairment.



4. Revenue

The Group2009 2008

$’000 $’000

Rendering of services

- Ship repair and marine engineering income 1,069,681 1,918,183

- Time charter revenue 132,894 257,396

- Shipping agency income 14,184 19,150

Construction revenue

- Ship building and marine engineering 1,681,362 1,277,561

Others 883 3,719

Total sales 2,899,004 3,476,009

5. Expenses by nature

The Group2009 2008

$’000 $’000

Raw materials, fi nished goods, consumables and other overheads 1,221,161 2,352,711

Changes in inventories and construction contract work-in-progress 213,631 (506,892)

Net (reversal of)/allowance for impairment of trade and other receivables (11,375) 61,283

Expected losses recognised on construction contracts 578 89,048

Depreciation of property, plant and equipment and investment properties 153,416 120,767

Director and employee compensation (Note 6) 347,314 300,310

Sub-contractor expenses 595,471 493,909

Write-off for inventory obsolescence and inventory write-down 4,236 20,907

Write-off for property, plant and equipment 40 2,257

Rental expense on operating leases 82,678 97,321

Repairs and maintenance 33,518 30,520

Non-audit service fees paid/payable to auditor of the Company 154 134

Commission 30,087 49,254

Crew overheads 10,771 12,929

Vessel overheads 13,062 14,066

Other expenses 130,334 85,848

Total cost of sales, distribution and administrative expenses 2,825,076 3,224,372

125



6. Director and employee compensation

The Group2009 2008

$’000 $’000

Wages, salaries and staff benefi ts 317,218 260,763

Employer’s contribution to defi ned contribution plans including Central Provident Fund 26,591 22,011

Share option expenses [Note 33(b)(i)] 3,240 17,311

Directors’ fees of the Company 265 225

347,314 300,310

7. Other income (net)

The Group2009 2008$’000 $’000

Rental income 1,594 2,333

Dividend income 314 1,171

Currency exchange gain - net 15,715 26,678

Interest income from deposits 32,781 34,355

Impairment in value of transferable club memberships (32) (4)

Net fair value (loss)/gain on forward currency contracts (15,625) 1,526

Net (loss)/gain on disposal of property, plant and equipment (351) 1,638

Negative goodwill 12 –

Compensation received from customers 15,263 11,767

Government grants 21,382 –

Sundry income 8,119 6,211

Sale of scrap materials 67,142 122,267

146,314 207,942

Included in the Group’s sundry income is Jobs Credit Scheme. The Jobs Credit Scheme is a cash grant introduced in the Singapore Budget 2009 to help businesses preserve jobs in the economic downturn. The Jobs Credit grants have been paid to eligible employers in 2009 in four payments.



8. Finance expenses

The Group2009$’000

2008

$’000

Interest expense

- Bank borrowings and bills payable 46,347 9,088

- Finance lease liabilities 3 3

Total interest expense 46,350 9,091

Less: Amount capitalised in construction of property, plant and equipment [Note 24(c)] (4,446) (257)

Finance expenses recognised in the income statement 41,904 8,834

Borrowing costs on fi nancing were capitalised at a rate of 4.35% (2008: 4.90%) per annum.

9. Income taxes

(a) Income tax expense

The Group2009 2008

$’000 $’000

Tax expense attributable to profi t is made up of:

Current income tax

- Singapore 894 1,947

- Foreign 103,092 113,126

103,986 115,073

Deferred income tax (Note 31)

- Singapore (12) 4

- Foreign (72,602) (47,370)

(72,614) (47,366)

31,372 67,707

Under/(over) provision in prior fi nancial years:

- Current income tax

- Singapore (566) 171

- Foreign 6,686 (18,007)

6,120 (17,836)

- Deferred income tax (Note 31)

- Foreign 3,266 (18,251)

40,758 31,620

127



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 as

explained below:

The Group2009 2008

$’000 $’000

Profi t before tax and share of profi t of associated companies 178,338 450,745

Tax calculated at a tax rate of 17% (2008: 18%) 30,317 81,134

Effects of:

- Change in tax rate (21,713) (3,781)

- Different tax rates in other countries 13,496 12,282

- Singapore stepped income exemption (131) (135)

- Exemption of shipping profi ts under Approved International Shipping Scheme and

Section 13A of Singapore Income Tax Act (9,153) (18,767)

- Profi ts exempted from tax (1,327) (15,505)

- Income not subject to tax (120) (1,791)

- Expenses not deductible for tax purposes 21,396 15,663

- Tax incentive rebates from the People’s Republic of China (1,465) (833)

- Utilisation of previously unrecognised deferred tax asset (246) (563)

- Deferred tax asset not recognised 295 3

- Others 23 –

Tax charge 31,372 67,707

During the fi nancial year, the Singapore corporate tax rate was reduced from 18% to 17% for the year of assessment

2010 and onwards.

(b) Movements in current income tax liabilities

The Group The Company2009 2008 2009 2008

$’000 $’000 $’000 $’000

Beginning of fi nancial year 61,348 24,040 4,885 969

Currency translation differences (4,874) 4,725 – –

Income tax (paid)/refunded (82,444) (64,654) (3,938) 431

Tax expense on profi t for the current fi nancial year 103,986 115,073 97 4,794

Under/(over) provision in prior fi nancial years 6,120 (17,836) (495) (1,309)

End of fi nancial year 84,136 61,348 549 4,885



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 Group2009 2008

Net profi t attributable to equity holders of the Company ($’000) 110,080 302,588

Weighted average number of ordinary shares outstanding for basic earnings

per share (’000) 2,239,245 2,238,951

Basic earnings per share (cents per share) 4.92 13.51

(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 Group2009 2008

Net profi t attributable to equity holders of the Company ($’000) 110,080 302,588

Weighted average number of ordinary shares outstanding for basic earnings

per share (’000) 2,239,245 2,238,951

Adjustments for

- share options (’000) – 2,879

Weighted average number of ordinary shares outstanding for diluted earnings

per share (’000) 2,239,245 2,241,830

Diluted earnings per share (cents per share) 4.92 13.50

For 2009, the outstanding share options do not have any dilutive effect on the earnings per share as the exercise prices

for the outstanding share options were higher than the average market price during the fi nancial year.

11. Cash and cash equivalents


$’000 $’000 $’000 $’000

Cash at bank and on hand 463,810 597,746 3,393 3,338

Short-term bank deposits 1,085,365 1,282,570 131,118 127,485

1,549,175 1,880,316 134,511 130,823

129



11. Cash and cash equivalents (continued)

Cash at bank and short-term bank deposits included an amount of $784,524,000 (2008: $577,932,000) 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 Group2009 2008

$’000 $’000

Cash and bank balances (as above) 1,549,175 1,880,316

Less: Bank deposits pledged (Note 28) (3,554) (14,483)

Cash and cash equivalents per consolidated cash fl ow statement 1,545,621 1,865,833

Cash and bank balances and short-term bank deposits of the Group to the extent of $3,554,000 (2008: $14,483,000) were

pledged as security for the following:

(i) long-term bank loans (Note 28) 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.

12. Forward currency contracts

The Group2009 2008

$’000 $’000

Beginning of fi nancial year 1,623 37

Fair value (loss)/gain included in income statement (15,625) 1,526

Currency translation differences 498 60

End of fi nancial year (13,504) 1,623

Analysed as:

The Group Contractnotionalamount

Fair value

Assets Liabilities Net assets$’000 $’000 $’000 $’000

2009

Non-hedging instruments

- Forward currency contracts - current 223,944 944 (14,448) (13,504)

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)



13. Trade and other receivables - current


$’000 $’000 $’000 $’000

Trade receivables:

- Non-related parties 434,984 600,702 – –

- Fellow subsidiaries 78,663 45,014 – –

- Subsidiaries – – 131 261

- Related party corporations – 1 – –

513,647 645,717 131 261

Less: Allowance for impairment of receivables

- non-related parties (51,036) (50,021) – –

Trade receivables - net 462,611 595,696 131 261

Construction contracts due from customers (Note 15):



249,531 181,934 – –

Less: Allowance for impairment of construction contract

due from customers

- non-related parties – (19,162) – –

Construction contracts due from customers - net 249,531 162,772 – –

Other receivables:

- Non-related parties 48,887 47,767 105 178

- A fellow subsidiary 10,675 18,784 – –

- A subsidiary – – – 21

59,562 66,551 105 199

Less: Allowance for impairment of other receivables

- non-related parties (831) – – –

Other receivables - net 58,731 66,551 105 199

Advances paid to suppliers 679,201 743,055 – –

Staff loans and advances (see note (i) below) 1,357 1,574 – –

Dividend receivable from

- Subsidiaries – – – 80,136

- Associated companies 809 460 – –

Total 1,452,240 1,570,108 236 80,596

(i) Staff loans are made under an approved staff loan scheme.

Impairment loss on trade receivables and construction contracts due from customers amounted to $51,036,000 (2008:

$50,021,000) and Nil (2008: $19,162,000) respectively. These were recognised as expenses and included in “Administrative

expenses”.

131



14. Inventories

The Group2009 2008

$’000 $’000

Raw materials 602,391 826,077

Work-in-progress 72,273 116,356

Finished goods 2,904 3,168

677,568 945,601

The cost of inventories recognised as an expense and included in “cost of sales” amounted to $2,525,714,000 (2008:

$2,660,650,000).

15. Construction contract work-in-progress

The Group2009 2008

$’000 $’000

Beginning of fi nancial year 170,143 43,132

Contract costs incurred during the fi nancial year 1,789,167 1,370,440

Contract expenses recognised in the income statement during the fi nancial year (1,755,283) (1,250,676)

Currency translation differences (4,642) 7,247

End of fi nancial year 199,385 170,143

Aggregate costs incurred and profi ts recognised (less losses recognised) to date on

uncompleted construction contracts 1,937,692 1,362,381

Less: Progress billings (2,177,092) (1,508,594)

Currency translation differences 8,162 (5,436)

(231,238) (151,649)

Analysed as:

Due from customers on construction contracts (Note 13) 249,531 181,934

Due to customers on construction contracts (Note 27) (480,769) (333,583)

(231,238) (151,649)

Advances received on construction contracts (Note 27) 1,747,029 2,671,852



16. Trading property

The Group2009 2008

$’000 $’000

Cost

Beginning of fi nancial year – 977

Disposal – (977)

End of fi nancial year – –

Accumulated impairment losses

Beginning and end of fi nancial year – –

Net book value – –

17. Other current assets


$’000 $’000 $’000 $’000

Deposits 1,980 10,322 9 14

Prepayments 4,593 9,470 211 161

6,573 19,792 220 175

18. Trade and other receivables - non-current

The Company2009 2008

$’000 $’000

Loans to a subsidiary (i) 64,285 65,594

(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 $64,285,000 (2008: $65,594,000) 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 Group2009 2008

$’000 $’000


Currency translation differences (91) 212

Fair value gain recognised in equity [Note 33(b)(v)] 495 351


133



19. Financial assets, available-for-sale (continued)

At the balance sheet date, fi nancial assets, available-for-sale include the following:

The Group2009 2008

$’000 $’000

Quoted equity shares in a corporation, at fair value 958 490

Unquoted equity shares in corporations, at cost

- Fellow subsidiary 2,058 2,101

- Non-related party 1,018 1,039

3,076 3,140

4,034 3,630

The directors do not anticipate that the carrying amounts of these unquoted equity investments will deviate signifi cantly from

their fair values on the basis that these unquoted equity shares in corporations are in positive net tangible assets position.

20. Club memberships


$’000 $’000 $’000 $’000

Transferable club memberships, at cost 879 829 428 477

Currency translation differences (2) (2) – –

Allowance for impairment in value of club memberships (385) (354) (272) (241)

492 473 156 236

21. Investments in associated companies

The Group2009 2008

$’000 $’000



Share of profi ts after tax 214 643

Dividend declared, net of tax (837) –


The summarised fi nancial information of associated companies are as follows:

- Assets 11,008 10,232

- Liabilities 5,036 2,076

- Revenue 9,286 8,357

- Net profi t 602 2,010



21. Investments in associated companies (continued)

Details of associated companies are set out below:

Name of associated companies Principal activities

Country ofincorporation/

business

% of paid-upcapital held by

subsidiaries

2009 2008

% %

DMI (Guangzhou) 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.

22. Investments in subsidiaries


$’000 $’000

Unquoted equity shares


Accumulated impairment losses (20,058) (20,903)


Movements in accumulated impairment losses are as follows:

2009 2008

$’000 $’000


Reversal of impairment charge (845) (5,569)


135



22. Investments in subsidiaries (continued)

Details of the subsidiaries are set out below:

Name of subsidiariesPrincipalactivities


business Cost of investment

% of paid-up capital held by

The Company Subsidiaries

2009 2008 2009 2008 2009 2008$’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

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


Ship repair and

marine

engineering

PRC 24,670 24,670 50 50 50 50









2009 2008 2009 2008 2009 2008$’000 $’000 % % % %

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


Ship repair and

ship building

PRC – – – – 75 75

Cosco (Zhoushan) Shipyard


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)


Cosco (Tianjin) Shipyard

Co., Ltd (v)


Cosco (Lianyungang) Shipyard

Co., Ltd (v)


Cosco (Qidong) Offshore

Co., Ltd (v)

Offshore marine

engineering

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 75

Diesel Marine Dalian Ltd

(iii) and (v)

Overhaul and

spare-parts

replacement

and repair

PRC – – – – 30 30

Diesel Marine International

(Nantong) Co., Ltd (iii) and (v)

Overhaul and

spare-parts

replacement

and repair

PRC – – – – 30 30

137









2009 2008 2009 2008 2009 2008

$’000 $’000 % % % %

Cosco (Nantong) Ocean

Shipyard Co., Ltd (v) (formerly

known as Cosco

Clavon Shipyard Co., Ltd)

Ship repair and

corrosion

control

PRC – – – – 60 60

Zhongyuan Sea-Land

Engineering Co., Ltd (v)


Cosco Shipyard Total

Automation Co., Ltd (v)

Design,

manufacture,

sale and technical

service relating

to vessels

and industrial

instruments

PRC – – – – 60 60

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

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









2009 2008 2009 2008 2009 2008$’000 $’000 % % % %

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

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) Deemed to be a subsidiary as the Group has the power to govern the fi nancial and operating policies of the entity.

(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.

139



23. Investment properties

The Group2009 2008

$’000 $’000

Cost



Additions – 1,063


Accumulated depreciation and accumulated impairment losses



Depreciation charge 395 369


Net book value 11,786 12,217

Fair values 14,909 14,159

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 Group2009 2008

$’000 $’000

Rental income 1,151 1,035

Direct operating expenses arising from investment properties that generated rental income 540 468



24. Property, plant and equipment

The Group

Freehold land andbuildings

$’000

Leaseholdland andbuildings

$’000

Offi cerenovations,

furniture,fi xtures andequipment

$’000

Plant,machinery

andequipment

$’000

Motorvehicles

$’000

Motorvessels$’000

Docks and quays

$’000

Construction- in-progress

$’000Total$’000

2009Cost Beginning of fi nancial year 3,044 480,241 34,011 575,804 40,110 312,369 692,045 416,336 2,553,960

Currency translation

differences – (9,514) (634) (11,773) (760) (6,233) (14,185) (8,533) (51,632)

Additions – 71,344 11,383 28,768 5,181 2,489 – 350,759 469,924

Disposals – (1,433) (954) (8,718) (1,301) (1,415) – (7,756) (21,577)

Reclassifi cation – 279,677 2,290 210,560 2,648 – 105,841 (601,016) –

End of fi nancial year 3,044 820,315 46,096 794,641 45,878 307,210 783,701 149,790 2,950,675

Accumulated depreciationBeginning of fi nancial year 822 61,563 16,548 143,229 19,111 109,109 121,628 – 472,010


differences – (1,825) (561) (5,035) (599) (3,197) (3,370) – (14,587)

Depreciation charge 61 19,684 8,293 62,427 7,102 29,724 25,730 – 153,021

Disposals – (714) (753) (5,205) (922) (1,273) – – (8,867)

Reclassifi cation – 5 2 (7) – – – – –

End of fi nancial year 883 78,713 23,529 195,409 24,692 134,363 143,988 – 601,577

Net book value End of fi nancial year 2,161 741,602 22,567 599,232 21,186 172,847 639,713 149,790 2,349,098

2008Cost Beginning of fi nancial year 4,955 309,941 24,959 364,292 29,178 311,927 544,421 228,429 1,818,102


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 depreciationBeginning of fi nancial year 1,231 43,336 11,637 94,927 13,627 81,699 93,192 – 339,649


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

141



24. Property, plant and equipment (continued)

The Group (continued)

(a) The carrying amount of motor vehicles held under fi nance leases at 31 December 2009 amounted to $63,000 (2008:

$78,000) (Note 28).

(b) As at the balance sheet date, the net book values of motor vessels of the Group amounting to $78,547,000 (2008:

$122,374,000) are mortgaged to banks to secure long-term bank borrowings and bank facilities (Note 28).

(c) Borrowing costs of $4,446,000 (2008: $257,000) which arise mainly due to fi nancing for the construction of docks and

quays, are capitalised during the fi nancial year (Note 8).

(d) 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 for 4.5 hectare of

the land.

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,


Motorvehicles Total

$’000 $’000 $’000

2009

Cost

Beginning of fi nancial year 536 1,128 1,664

Additions 15 – 15

End of fi nancial year 551 1,128 1,679

Accumulated depreciation

Beginning of fi nancial year 489 279 768

Depreciation charge 23 113 136

End of fi nancial year 512 392 904

Net book value End of fi nancial year 39 736 775



24. Property, plant and equipment (continued)

The Company (continued)

Offi cerenovations,


Motorvehicles Total

$’000 $’000 $’000

2008

Cost

Beginning of fi nancial year 524 1,048 1,572

Additions 12 80 92

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

End of fi nancial year 489 279 768

Net book value End of fi nancial year 47 849 896

25. Intangible assets

The GroupComposition: 2009 2008

$’000 $’000

Goodwill arising on consolidation 9,525 9,546

Goodwill arising on consolidation

The Group2009 2008

$’000 $’000

Cost


Increase in interest in a subsidiary – 186



Net book value 9,525 9,546

143



25. Intangible assets (continued)

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 2009 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 3.9% Discount rate2 5.2%

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 ected specifi c risks relating

to the relevant segments.

There is no impairment charge recognised for the fi nancial years ended 31 December 2009 and 31 December 2008.

26. Deferred expenditure

Deferred expenditure relates to rental prepaid for leasehold land on operating leases and is amortised on the straight-line basis

over the lease period.



27. Trade and other payables


$’000 $’000 $’000 $’000

Trade payables to:



548,696 470,143 – –

Construction contracts - Advances received (Note 15):

- Non-related parties 1,703,968 2,513,227 – –


1,747,029 2,671,852 – –

Construction contracts - Due to customers (Note 15):


- Fellow subsidiaries – 71,755 – –

480,769 333,583 – –

2,227,798 3,005,435 – –

Advances from non-related parties 40,658 96,554 – –

Non-trade payables to:

- Ultimate holding corporation 720 735 – –

- Subsidiary – – 14,000 12,000

720 735 14,000 12,000

Deposits received 12,765 7,521 – –

Other accruals for operating expenses 720,856 820,298 2,767 2,871

Dividend payable to minority shareholders of

subsidiaries 7,513 41,214 – –

Total 3,559,006 4,441,900 16,767 14,871

The non-trade balances payable to ultimate holding corporation and a subsidiary are unsecured, interest-free and are repayable

on demand.

145



28. Borrowings

The Group2009 2008

$’000 $’000

Current

Bank borrowings (unsecured) 144,047 14,359

Bank borrowings (secured) 7,244 25,067

Bills payable 24,954 5,834

Finance lease liabilities (Note 29) 17 18

176,262 45,278

Non-current

Bank borrowings (unsecured) 921,492 586,146

Bank borrowings (secured) 17,451 25,198

Finance lease liabilities (Note 29) 3 20

938,946 611,364

Total borrowings 1,115,208 656,642

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 Group2009 2008

$’000 $’000

Less than 1 year 176,262 45,278

1 - 5 years 802,025 607,130

Over 5 years 136,921 4,234

1,115,208 656,642

(a) Security granted

At the balance sheet date, total borrowings include secured liabilities of $24,715,000 (2008: $50,303,000) for the Group.

Secured bank borrowings are secured by:

(i) the Group’s motor vessels (Note 24) and

(ii) 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).



28. 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

2009 2008

SGD USD RMB SGD USD RMB

Bank borrowings – 3.28% 4.35% – 4.07% 4.90%

Bills payable – – – – – –

Finance lease liabilities 4.91% – – 4.91% – –

29. Finance lease liabilities

The Group2009 2008

$’000 $’000

Minimum lease payments due:

- Not later than one year 20 21

- Later than one year but not later than fi ve years 4 24

24 45

Less: Future fi nance charges (4) (7)

Present value of fi nance lease liabilities 20 38

The present values of fi nance lease liabilities are analysed as follows:

- Not later than one year (Note 28) 17 18

- Later than one year but not later than fi ve years (Note 28) 3 20

20 38

147



30. Provisions for other liabilities

The Group2009 2008

$’000 $’000

Provision for off hire claim on hire income [Note (a)] 14,242 15,225

Provision for warranties [Note (b)] 22,194 4,931

36,436 20,156

(a) Movements in provision for off hire claim on hire income were as follows:

The Group2009 2008

$’000 $’000


Provision made during the fi nancial year 2,537 10,803

Provision utilised during the fi nancial year (3,129) (36)



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 Group2009 2008

$’000 $’000

Beginning of fi nancial year 4,931 770

Provision made during the fi nancial year 18,014 3,964

Provision utilised during the fi nancial year (36) –



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.



31. 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:


$’000 $’000 $’000 $’000

Deferred income tax assets:

- to be recovered within one year 146,501 71,596 – –

- to be recovered after one year 12,022 19,821 – –

158,523 91,417 – –

Deferred income tax liabilities:

- to be settled within one year – – – –

- to be settled after one year 2,400 180 2,198 –

2,400 180 2,198 –

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 $1,089,000 (2008: $2,371,000) for which no deferred tax asset has been recognised 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, net were as follows:


$’000 $’000 $’000 $’000

Beginning of fi nancial year (91,237) (21,844) – –

Change in tax rate (21,713) (3,781) – –

Currency translation differences 4,338 (3,864) 33 –

Deferred tax (credited)/charged to income statement (47,635) (61,836) 2,165 –

Deferred tax charged to equity [Note 33(b)(v)] 124 88 – –

End of fi nancial year (156,123) (91,237) 2,198 –

149



31. Deferred income taxes (continued)

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:

Deferred income tax liabilities

The Group

2009 2008

$’000 $’000

Accelerated tax depreciation

Beginning of fi nancial year 180 152

Currency translation differences – (1)

(Credited)/charged to income statement (14) 29

End of fi nancial year 166 180

Fair value gain

Beginning of fi nancial year 91 –


Charged to equity 124 88


Others

Beginning of fi nancial year – –

Currency translation differences 33 –

Charged to income statement 2,165 –

End of fi nancial year 2,198 –

Total

Beginning of fi nancial year 271 152

Currency translation differences 26 2

Charged to income statement 2,151 29

Charged to equity 124 88

End of fi nancial year 2,572 271



31. Deferred income taxes (continued)

Deferred income tax liabilities (continued)

The Group

2009 2008

$’000 $’000

Reconciliation of total deferred income tax liabilities after appropriate offsetting from

the same tax jurisdiction is as follows:

Total deferred income tax liabilities 2,572 271

Offsetting of deferred income tax assets from the same tax jurisdiction (172) (91)

Total deferred income tax liabilities after appropriate offsetting from the same tax

jurisdiction 2,400 180

Deferred income tax assets

2009 2008

$’000 $’000

Provisions and accruals

Beginning of fi nancial year (91,508) (21,996)

Change in tax rate (21,713) (3,781)

Currency translation differences 4,312 (3,866)

Credited to income statement (49,786) (61,865)

End of fi nancial year (158,695) (91,508)

Reconciliation of total deferred income tax assets after appropriate offsetting from the

same tax jurisdiction is as follows:

Total deferred income tax assets (158,695) (91,508)

Offsetting of deferred income tax liabilities from the same tax jurisdiction 172 91

Total deferred income tax assets after appropriate offsetting from the same tax jurisdiction (158,523) (91,417)

32. Share capital

Issued share capitalNo. of

ordinary shares Amount’000 $’000

2009

Beginning of fi nancial year 2,239,244 270,608

Share issue – –

End of fi nancial year 2,239,244 270,608

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

151



32. Share capital (continued)

All issued shares are fully paid. There is no par value for these ordinary shares.

There were no shares issued during 2009. The Company issued the following shares during 2008:

(i) 130,000 ordinary shares at an exercise price of $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 ordinary shares at an exercise price of $2.48 each from the exercise of option granted in 2007 under the

Cosco Group Employees’ Share Option Scheme 2002.

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 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 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 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 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.

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 2009


Number of ordinary shares under option outstanding

Beginning of fi nancial

year

Granted during

fi nancialyear

Lapsed during

fi nancialyear

Exercised during

fi nancialyear

End offi nancial

yearExercise

price Exercise period ’000 ’000 ’000 ’000 ’000 $

2006 Options 2,840 – (60) – 2,780 1.23 21.2.2007 - 20.2.2016

2007 Options 14,420 – (1,650) – 12,770 2.48 5.2.2008 - 4.2.2017

2008 Options 20,040 – (610) – 19,430 2.95 24.3.2009 - 23.3.2018

37,300 – (2,320) – 34,980



32. Share capital (continued)

Share options (continued)

The Group and the Company (continued)



Number of ordinary shares under option outstanding

Beginning of fi nancial

year

Granted during

fi nancialyear

Lapsed during

fi nancialyear

Exercised during

fi nancialyear

End offi nancial

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

Out of the outstanding options on 34,980,000 shares (2008: 37,300,000), options on 34,250,000 shares (2008: 15,940,000) are

exercisable. Options exercised in 2008 resulted in 1,580,000 shares being issued at a weighted average share price of $2.38 each.

There was no share option issued during the fi nancial year. There were also no shares of the Company allotted and issued by

virtue of the exercise of options to take up unissued shares of the Company during the fi nancial year.

The fair value of options granted on 24 March 2008 determined using the Binomial Valuation model was $20,661,000. The

signifi cant inputs into the model were share price of $3.27 at grant date, exercise price as shown above, standard deviation of

expected share price returns of 53%, option life shown above and annual risk-free interest rate of 0.99%. 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.

33. Statutory and other reserves


$’000 $’000 $’000 $’000

(a) Composition:

Share option reserve 44,578 41,338 44,578 41,338

Statutory reserve 137,149 114,310 – –

Currency translation reserve (23,861) (6,937) – –

Asset revaluation reserve 15,772 18,990 – –

Fair value reserve 323 134 – –

Realised surplus on long-term investment 69 69 527 527

174,030 167,904 45,105 41,865

153



33. Statutory and other reserves (continued)


$’000 $’000 $’000 $’000

(b) Movements:

(i) Share option reserve

Beginning of fi nancial year 41,338 24,027 41,338 24,027


- Value of director and employee services

(Note 6) 3,240 17,311 3,240 17,311

End of fi nancial year 44,578 41,338 44,578 41,338

During the fi nancial year, share option reserve relating to share options exercised amounted to Nil (2008: $1,222,000).

The Group2009 2008

$’000 $’000

(ii) Statutory reserve


Transfer from retained earnings 22,839 33,625


(iii) Currency translation reserve

Beginning of fi nancial year (6,937) (44,183)

Net currency translation differences of fi nancial statements of foreign subsidiaries

and associated companies (27,480) 65,375

Minorities’ interests 10,556 (28,129)

End of fi nancial year (23,861) (6,937)

(iv) Asset revaluation reserve


Additional depreciation on revalued property, plant and equipment (3,218) (3,218)


(v) Fair value reserve

Beginning of fi nancial year 134 –

Fair value changes for fi nancial asset, available-for-sale 495 351

Deferred tax charged to equity (Note 31) (124) (88)

Minorities’ interests (182) (129)


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.



34. Dividends

The Group and the Company

2009 2008

$’000 $’000

Ordinary dividends paid

Final tax-exempt one-tier dividend paid in respect of the previous fi nancial year of

4.0 cents (2008: 4.0 cents) per ordinary share 89,570 89,565

Special tax-exempt one-tier dividend paid in respect of the previous fi nancial year of

3.0 cents (2008: 3.0 cents) per ordinary share 67,177 67,173

156,747 156,738

At the Annual General Meeting scheduled on 20 April 2010, a fi rst and fi nal tax-exempt one-tier dividend of 3 cents per ordinary

share (2008: fi rst and fi nal tax-exempt one-tier dividend of 4 cents per ordinary share and a special tax-exempt one-tier dividend

of 3 cents per ordinary share) amounting to a total of $67,177,000 (2008: $156,747,000), based on the number of shares

issued as of 31 December 2009, 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 2010.

35. 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 Group2009 2008

$’000 $’000

Property, plant and equipment 166,681 339,815

Investment in a subsidiary – 63,000

166,681 402,815

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) Offshore 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. In 2009, Cosco Qidong was incorporated with a registered

capital of RMB500,000,000.

(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.

155



35. Commitments (continued)

(b) Operating lease commitments – where the Group is a lessee (continued)

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 Group2009 2008

$’000 $’000

Not later than 1 year 20,039 30,694

Later than 1 year but not later than 5 years 52,448 69,461

Later than 5 years 63,514 56,762

136,001 156,917

(c) Operating lease commitments – where the Group is a lessor

The Group leases out certain items of property, plant and equipment and investment properties 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 Group2009 2008

$’000 $’000

Not later than 1 year 45,537 64,489

Later than 1 year but not later than 5 years 1,280 71

46,817 64,560

36. 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 forward

currency contracts 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.



36. 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 Others* Total$’000 $’000 $’000 $’000 $’000

At 31 December 2009

Financial assets

Cash and cash equivalents and fi nancial

assets, available-for-sale 100,592 511,419 935,000 6,198 1,553,209

Trade and other receivables, excluding

advances paid to suppliers 13,549 539,395 196,312 23,783 773,039

Other fi nancial assets 288 – 1,651 41 1,980

114,429 1,050,814 1,132,963 30,022 2,328,228

Financial liabilities

Borrowings 20 24,695 1,090,493 – 1,115,208

Other fi nancial liabilities 27,109 141,753 1,131,290 4,640 1,304,792

27,129 166,448 2,221,783 4,640 2,420,000

Net fi nancial assets/(liabilities) 87,300 884,366 (1,088,820) 25,382 (91,772)

Less: Net fi nancial assets/(liabilities)

denominated in the respective

entities’ functional currencies (87,300) (63,751) 1,088,813 (2,025)

Add: Firm commitments and highly

probable forecast transactions in

foreign currencies – 2,400,461 – 215,624

Less: Forward currency contracts – (223,944) – –

Currency exposure – 2,997,132 (7) 238,981

* Others mainly include Euro, Japanese Yen and Malaysian Ringgit.

157






SGD USD RMB Others* 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


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

* Others mainly include Euro, Japanese Yen and Malaysian Ringgit.






The Company’s currency exposure based on the information available to key management is as follows:

2009 2008

SGD USD RMB Total SGD USD RMB Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Financial assets

Cash and cash equivalents 79,867 54,643 1 134,511 123,952 6,870 1 130,823

Trade and other receivables 244 64,286 – 64,530 472 65,596 80,136 146,204

80,111 118,929 1 199,041 124,424 72,466 80,137 277,027


Borrowings – – – – – – – –

Other fi nancial liabilities 16,767 – – 16,767 14,871 – – 14,871

16,767 – – 16,767 14,871 – – 14,871

Net fi nancial assets 63,344 118,929 1 182,274 109,553 72,466 80,137 262,156

Less: Net fi nancial assets

denominated in the

entity’s functional

currency (63,344) – – (109,553) – –

Currency exposure – 118,929 1 – 72,466 80,137

If the USD changes against the SGD and RMB by 500 basis points (2008: 500 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:

2009 2008

Increase/(decrease) Profi t after tax Profi t after tax

$’000 $’000

Group

USD against SGD

- strengthened 1,499 232

- weakened (1,499) (232)

USD against RMB

- strengthened 4,347 2,198

- weakened (4,347) (2,198)

Company

USD against SGD

- strengthened 3,513 2,527

- weakened (3,513) (2,527)

159





(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 RMB and USD. If the RMB and USD interest rates increase/decrease by 0.5% (2008: 0.5%) with all

other variables including tax rate being held constant, the profi t after tax will be lower/higher by $1,998,000

(2008: $125,000) and $56,000 (2008: $168,000) respectively as a result of higher/lower interest expense on these

borrowings.

(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.

A subsidiary in the Group obtained a pledge of 3 vessels valued at US$9,000,000 (2008: US$9,000,000) to secure its

outstanding trade receivables of US$7,900,000 (2008: US$7,357,000) as at 31 December 2009.

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:


$’000 $’000

Corporate guarantees provided to banks on subsidiaries’ loans 24,695 50,265

Corporate guarantees provided to third parties for services provided to a subsidiary 301 –

24,996 50,265

The Group’s and Company’s major classes of fi nancial assets are bank deposits and trade receivables.




(b) Credit risk (continued)

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 Company

2009 2008 2009 2008

$’000 $’000 $’000 $’000

By business segments

Shipping 20,488 18,047 – –

Ship repair, ship building and marine engineering

activities 691,647 740,417 – –

Others 7 4 131 261

712,142 758,468 131 261

(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 assets 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 Group2009 2008

$’000 $’000

Past due 0 to 3 months 1,137 4,136

Past due 3 to 6 months 36 226

Past due over 6 months 514 1,663

1,687 6,025

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 Group2009 2008

$’000 $’000

Gross amount 51,036 70,187

Less: Allowance for impairment (51,036) (69,183)

– 1,004


Currency translation differences (827) 2,621

Allowance utilised (5,066) (30)

Allowance made (12,235) 61,283

Amount written off (19) (11)


161




(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 2009

Gross-settled forward currency contracts

- Receipts 208,844 – –

- Payments (223,950) – –

Other fi nancial liabilities (1,304,792) – –

Borrowings (222,856) (882,167) (171,176)

At 31 December 2008

Gross-settled forward currency contracts

- 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)

The Company

At 31 December 2009

Other fi nancial liabilities (16,767) – –

Borrowings – – –

Financial guarantee contracts (24,996) – –

At 31 December 2008

Other fi nancial liabilities (14,871) – –

Borrowings – – –




(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 9.9% per

annum for the current fi nancial year ended 31 December 2009 (2008: 29.0%) per annum.

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 2009 and 31 December 2008.

(e) Fair value measurements

Effective 1 January 2009, the Group adopted the amendment to FRS 107 which requires disclosure of fair value

measurements by level of the following fair value measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

(b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly (as prices) or indirectly (derived from prices) (Level 2); and

(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).

The following table presents our assets and liabilities measured at fair value at 31 December 2009.

Level 1 Level 2 Level 3 Total $’000 $’000 $’000 $’000

Group

Assets

Forward currency contracts – 944 – 944

Available-for-sale fi nancial assets

- Quoted equity shares 958 – – 958

- Unquoted equity shares – – 3,076 3,076

Total assets 958 944 3,076 4,978

Liabilities

Forward currency contracts – (14,448) – (14,448)

The fair value of fi nancial instruments traded in active markets (such as trading and available-for-sale securities) is based

on quoted market prices at the balance sheet date. The quoted market price used for fi nancial assets held by the Group

is the current bid price. These instruments are included in Level 1.

163




(e) Fair value measurements (continued)

The fair value of fi nancial instruments that are not traded in an active market (for example, over-the-counter derivatives)

is 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. The fair value of forward currency contracts is determined

using quoted forward exchange rates at the balance sheet date. These investments are included in Level 2. In infrequent

circumstances, where a valuation technique for these instruments is based on signifi cant unobservable inputs, such

instruments are included in Level 3.

During the fi nancial year ended 31 December 2009, there is no change in Level 3 instruments.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair

values. The fair value of fi nancial liabilities for disclosure purposes is estimated based on quoted market prices or dealer

quotes for similar instruments by discounting the future contractual cash fl ows at the current market interest rate that is

available to the Group for similar fi nancial instruments. The fair value of current borrowings approximates their carrying

amount.

37. 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.

38. Related party transactions

(a) The Company is controlled by China Ocean Shipping (Group) Company (“COSCO”), the parent company and a state-

owned enterprise established in the People’s Republic of China (“PRC”).

COSCO itself is controlled by the PRC government, which also owns a signifi cant portion of the productive assets

in the PRC. In accordance with amendment to FRS 24, “Related party disclosures”, other government-related entities

and their subsidiaries (other than COSCO group companies), directly or indirectly controlled, jointly controlled or

signifi cantly infl uenced by the PRC government are also defi ned as related party corporation of the Group. On that basis,

related party corporation include COSCO and its subsidiaries, other government-related entities and their subsidiaries

directly or indirectly controlled, jointly controlled or signifi cantly infl uenced by the PRC government, other entities and

corporations in which the Company is able to control or exercise signifi cant infl uence and key management personnel of

the Company and COSCO as well as their close family members.

The related parties refer to directors of the Company and a director of a subsidiary.

As mentioned in Note 2.1, the Company has early adopted the amendment to FRS 24, which grants exemptions on

certain disclosure requirements for transactions among government-related entities and the government. The transactions

of revenues and expenses in nature conducted with government-related entities were based on arm’s length transactions.



38. Related party transactions (continued)

(a) (continued)

In addition to the related party information and transactions disclosed elsewhere in the Consolidated Financial

Statements, the following is a summary of signifi cant related party transactions entered into the ordinary course of

business between the Group and its related parties during the year.

The Group2009 2008

$’000 $’000

Revenue

Sales to fellow subsidiaries 237,452 567,821

Sales to related party corporations 214 101

Rental income received/receivable from fellow subsidiaries 1,409 1,040

Rental income received/receivable from related parties 200 213

Sub-contractor expenses received/receivable from fellow subsidiaries 73 –

Time charter revenue received/receivable from a fellow subsidiary 19,276 42,976

Service income received from fellow subsidiaries 1,144 2,145

Interest received/receivable from a fellow subsidiary 17,417 24,398

Utilities received/receivable from a fellow subsidiary – 1

Expenditure

Purchases from fellow subsidiaries 27,094 33,831

Purchases from related party corporations 47 113

Purchases of plant and equipment from a fellow subsidiary 17,990 –

Rental paid/payable to fellow subsidiaries 235 1,546

Vessel rental paid/payable to a fellow subsidiary 7,435 10,321

Management fee paid/payable to a related party corporation 320 418

Crew wages paid/payable to fellow subsidiaries 7,347 7,194

Sub-contractor costs paid/payable to fellow subsidiaries 14,330 6,914

Utilities expenses paid/payable to a fellow subsidiary 719 1,709

Service expenses paid/payable to fellow subsidiaries 1,988 988

Commission paid/payable to a fellow subsidiary 511 34

Outstanding balances as at 31 December 2009, arising from sales or purchases of goods and services, are set out in

Notes 13 and 27 respectively.

165



38. Related party transactions (continued)

(b) 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 Nil (2008:

5,800,000). The share options were given on the same terms and conditions as those offered to other employees of the

Company (Note 32). The outstanding number of share options granted to key management of the Group at the end of

fi nancial year was 13,100,000 (2008: 13,100,000).

(c) Key management personnel compensation

Key management personnel compensation is as follows:

The Group2009 2008

$’000 $’000

Salaries and other short-term employee benefi ts 4,912 4,564

Employer’s contribution to defi ned contribution plans, including Central Provident

Fund 8 15

Share option expenses 938 5,184

5,858 9,763

Included in the above was total compensation to directors of the Company amounting to $5,563,000 (2008: $9,509,000).

39. Segment information

Management has determined the operating segments based on the reports reviewed by the key management that are used to

make strategic decisions.

The key management considers the business from the business segment perspective. The segment in the People’s Republic of

China derives revenue from ship repair, ship building and marine engineering activities. On the other hand, the segments in

Singapore and Malaysia derive revenue from shipping, shipping agency, ship repair and marine engineering activities.

Other services included within Singapore and Malaysia include shipping agency activities and rental of property; but these are not

included within the reportable operating segments, as they are not included in the reports provided to the key management. The

results of these operations are included in the “all other segments” column.



39. Segment information (continued)

The segment information provided to the key management for the reportable segments is as follows:

Shipping

Ship repair,ship buildingand marineengineering

activitiesAll other segments

Total for continuing operations

$’000 $’000 $’000 $’000


Group

Sales

- External sales 132,894 2,751,043 15,067 2,899,004

- Inter-segment sales – 541 94,609 95,150

132,894 2,751,584 109,676 2,994,154

Elimination (95,150)

2,899,004

Segment results 60,283 170,448 (10,489) 220,242

Finance expense (41,904)

Share of profi t of associated companies 214

Profi t before income tax 178,552

Income tax expense (40,758)

Net profi t 137,794

Other segment items

Capital expenditure

- property, plant and equipment 2,679 467,129 116 469,924

Depreciation 29,846 122,652 918 153,416

Write-off for inventory obsolescence and inventory write

down – 4,236 – 4,236

Net reversal of impairment of trade and other receivables – (11,375) – (11,375)

Expected losses recognised on construction contracts – 578 – 578

Employees share option expenses – – 3,240 3,240

Segment assets 187,456 4,938,525 46,501 5,172,482

Associated companies 1,922

Short-term deposits 1,085,365

Financial assets, available-for-sale 4,034

Deferred income tax assets 158,523

Consolidated total assets 6,422,326

Segment liabilities 33,237 3,538,500 38,153 3,609,890

Borrowings 1,115,208

Current income tax liabilities 84,136

Deferred income tax liabilities 2,400

Consolidated total liabilities 4,811,634

Consolidated net assets 1,610,692

167




The segment information provided to the key management for the reportable segments is as follows: (continued)

Shipping

Ship repair,ship buildingand marineengineering

activitiesAll other segments

Total for continuing operations

$’000 $’000 $’000 $’000


Group

Sales

- External sales 257,396 3,195,744 22,869 3,476,009

- Inter-segment sales – 393 257,109 257,502

257,396 3,196,137 279,978 3,733,511

Elimination (257,502)

3,476,009

Segment results 167,095 295,613 (3,129) 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 items

Capital expenditure

- property, plant and equipment 3,037 661,382 164 664,583

Depreciation 28,374 91,444 949 120,767

Write-off for inventory obsolescence and inventory write

down – 20,907 – 20,907

Net 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 220,712 5,154,211 44,157 5,419,080

Associated companies 2,577

Short-term 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 36,803 4,399,765 35,369 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




Geographical information

The Group’s business segments operate in three main geographical areas:

People’s Republic of China - the operations in this area are principally in ship repair, ship building and marine engineering

activities;

Singapore - the operations in this area are principally in shipping, shipping agency, ship repair and marine related activities,

rental of property; and

Malaysia - the operations in this area are principally in shipping agency activities.

Sales are based on the country in which the services are rendered to the customer. Non-current assets are shown by the

geographical area where the assets are located.

Sales for continuing operations Non-current assets2009 2008 2009 2008

$’000 $’000 $’000 $’000

People’s Republic of China 2,739,236 3,183,983 2,334,473 1,970,810

Singapore * 158,041 288,241 201,860 232,298

Malaysia 1,727 3,785 108 143

2,899,004 3,476,009 2,536,441 2,203,251

* 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.

No single external customer has sales which exceed 10% of the Group’s total sales for the fi nancial years ended 31 December

2009 and 31 December 2008.

40. New or revised accounting standards and interpretations

Certain new accounting standards, amendments and interpretations to existing accounting standards have been published

and are mandatory for the Group’s accounting periods beginning on or after 1 January 2010 or later periods and which the

Group has not early adopted. The Group’s assessment of the impact of adopting those accounting standards, amendments and

interpretations that are relevant to the Group is set out below:

(a) Amendments to FRS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items (effective for annual

periods beginning on or after 1 July 2009)

This amendment clarifi es how the principles that determine whether a hedged risk or portion of cash fl ows is eligible

for designation should be applied in particular situations. The Group will apply this amendment from 1 January 2010, but

it is not expected to have a material impact on the fi nancial statements.

(b) FRS 27 (revised) Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 July

2009)

FRS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there

is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also

specifi es the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain

or loss is recognised in profi t or loss. The Group will apply FRS 27 (revised) prospectively to transactions with minority

interests from 1 January 2010.

169



40. New or revised accounting standards and interpretations (continued)

(c) FRS 103 (revised) Business Combinations (effective for annual periods beginning on or after 1 July 2009)

FRS 103 (revised) continues to apply the acquisition method to business combinations, with some signifi cant changes.

For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent

payments classifi ed as debt subsequently re-measured through the income statement. There is a choice on an acquisition-

by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling

interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The Group

will apply FRS 103 (revised) prospectively to all business combinations from 1 January 2010.

41. 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 3 March 2010.

Five-Year Summary


Notes 2005 2006 2007 2008 2009

$’000 $’000 $’000 $’000 $’000

INCOME STATEMENTTurnover 873,114 1,215,469 2,261,700 3,476,009 2,899,004Operating profi t before taxation 225,039 301,696 497,536 450,745 178,338Share of profi t of associated companies 1 519 600 537 643 214Profi t before income tax 225,558 302,296 498,073 451,388 178,552Income tax expense (18,417) (22,981) (19,512) (31,620) (40,758)Net profi t 207,141 279,315 478,561 419,768 137,794Attributable to:

Equity holders of the company 160,494 205,353 336,568 302,588 110,080Minority interests 46,647 73,962 141,993 117,180 27,714Net profi t 207,141 279,315 478,561 419,768 137,794Dividend 2 44,141 89,348 156,738 156,747 67,177BALANCE SHEETShare capital 228,587 239,947 266,852 270,608 270,608Statutory and other reserves 60,634 70,855 82,806 167,904 174,030Retained earnings 230,484 359,256 590,249 705,692 639,404Minority interests 175,744 249,889 362,847 464,963 526,650Total equity 695,449 919,947 1,302,754 1,609,167 1,610,692Forward Currency Contracts – 45 8,778 1,441 –Financial assets, available-for-sale 2,304 2,208 3,067 3,630 4,034Club memberships 377 412 479 473 492Investments in associated companies 2,813 2,227 1,794 2,577 1,922Investment properties 11,703 11,350 11,472 12,217 11,786Property, plant and equipment 937,649 1,110,179 1,478,453 2,081,950 2,349,098Intangible assets 9,357 9,319 9,302 9,546 9,525Deferred income tax assets – – 21,996 91,417 158,523Deferred expenditure – – – – 1,061Current assets 438,333 747,926 2,431,829 4,596,023 3,885,885Current liabilities (400,704) (676,153) (2,557,025) (4,572,188) (3,870,288)Non-current liabilities (306,383) (287,566) (107,391) (617,919) (941,346)Net Assets 695,449 919,947 1,302,754 1,609,167 1,610,692RATIOSBasic earnings per share (cents) 3 and 4 7.4 9.3 15.1 13.5 4.9Dividend per share (cents) 2.0 4.0 7.0 7.0 3.0Dividend cover (times) 5 3.6 2.3 2.1 1.9 1.6Net tangible assets per share (cents) 4 23.2 29.8 41.6 50.7 48.0Gearing ratio (Net of Cash) 6 0.5 0.2 cash cash cash

Notes

1. The share of profi t of associated companies is net of tax.

2. The dividend for 2009 is calculated based on the number of shares issued as of 31 December 2009. 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 sub-division of one ordinary share into two

ordinary shares in 2006.

5. The dividend cover is calculated as net profi t attributable to equity holders of the Company divided by the amount of equity dividend.

6. Gearing ratio is derived by taking total borrowings (net of cash) over the shareholders’ funds.

171

Shareholding StatisticsAs at 8 March 2010


STATISTICS OF SHAREHOLDERS AS AT 8 MARCH 2010

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 – 999 108 0.31 40,996 0.00

1,000 – 10,000 26,570 75.28 125,227,368 5.59

10,001 – 1,000,000 8,575 24.29 336,851,818 15.05

1,000,001 and above 41 0.12 1,777,124,772 79.36

Total 35,294 100.00 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 – – 111,968,114(1) 5.00

Note:

(1) Temasek Holdings (Private) Limited is deemed to have an interest in 111,968,114 ordinary shares in which its associated companies have or are

deemed to have an interest.

COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL

Based on information available and to the best knowledge of the Company as at 8 March 2010 approximately 41.21% 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.

SHAREHOLDING STATISTICS172

Shareholding StatisticsAs at 8 March 2010

LIST OF 20 LARGEST SHAREHOLDERS

SHAREHOLDER’S NAME NO OF SHARES %

1 CHINA OCEAN SHIPPING (GROUP) COMPANY 1,194,565,488 53.35

2 DBSN SERVICES PTE LTD 111,016,049 4.96

3 CITIBANK NOMINEES SINGAPORE PTE LTD 77,878,410 3.48

4 SEMBCORP MARINE LTD 70,000,000 3.13

5 DBS NOMINEES PTE LTD 49,039,721 2.19

6 UNITED OVERSEAS BANK NOMINEES PTE LTD 41,873,494 1.87

7 HSBC (SINGAPORE) NOMINEES PTE LTD 33,864,668 1.51

8 SCM INVESTMENT HOLDINGS PTE LTD 21,000,000 0.94

9 SEMBMARINE INVESTMENT PTE LTD 20,400,000 0.91

10 RAFFLES NOMINEES (PTE) LTD 19,840,246 0.89

11 UOB KAY HIAN PTE LTD 15,475,500 0.69

12 OCBC SECURITIES PRIVATE LTD 14,762,694 0.66

13 PHILLIP SECURITIES PTE LTD 8,384,379 0.37

14 HUI SHUNE MING @ HUI SHUN MENG 8,000,000 0.36

15 CIMB-GK SECURITIES PTE. LTD. 7,579,000 0.34

16 OCBC NOMINEES SINGAPORE PTE LTD 7,143,819 0.32

17 DB NOMINEES (SINGAPORE) PTE LTD 6,770,486 0.30

18 MERRILL LYNCH (SINGAPORE) PTE LTD 6,351,140 0.28

19 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD . 6,055,738 0.27

20 KIM ENG SECURITIES PTE. LTD. 5,561,000 0.25

Total 1,725,561,832 77.07

173

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 Suntec Singapore International

Convention & Exhibition Centre, 1 Raffl es Boulevard Suntec City, Singapore 039593, Meeting Room 325-326, Level 3 on Tuesday, 20 April

2010 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 2009 together with the Auditors’ Report thereon.

2. To approve a First and Final tax-exempt (one-tier) Dividend of S$0.03 per ordinary share for the year

ended 31 December 2009.

3. To approve payment of Directors’ Fees of S$265,000 for the year ended 31 December 2009 (2008:

S$234,167).

4. To re-elect the following directors, on recommendation of the Nominating Committee and endorsement

of the Board of 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 Ma Gui Chuan;

b. Mdm Sun Yue Ying;

c. Mr Er Kwong Wah (See Explanatory Note 1)

d. Mr Ang Swee Tian (See Explanatory Note 2)

5. To re-appoint, on recommendation of the Nominating Committee and endorsement of the Board of

Directors, 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)

6. To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors and to authorise the Directors to fi x

their remuneration.

Special Business

To consider and, if thought fi t, to pass the following as Ordinary Resolutions, with or without modifi cations:

7. General Mandate to authorise the Directors to issue shares or convertible securities:

“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

(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 :-

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)

(Resolution 5)

(Resolution 6)

(Resolution 7)

(Resolution 8)

(Resolution 9)

(Resolution 10)



(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);

(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)

8. Authority to allot and issue shares under the Cosco Group Employees’ Share Option Scheme 2002 (“Scheme”)

“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)

9. Proposed Renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions

(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 2009 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;

(ii) That the Audit Committee of the Company be and is hereby authorised 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 authorised 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 KwanCompany Secretary

Singapore, 5 April 2010

(Resolution 11)

(Resolution 12)

175



Explanatory Notes on Business to be transacted

1. Mr Er Kwong Wah will, upon election as a Director, remain as the Chairman of the Remuneration Committee and a member of the Audit

Committee, Nominating Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will be considered

independent for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.

2. Mr Ang Swee Tian will, upon election as a Director, remain as the Chairman of the Enterprise Risk Management Committee and a member of the

Audit Committee, Nominating Committee, Remuneration Committee and Strategic Development Committee; and will be considered independent

for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.

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, Enterprise Risk Management Committee and Strategic Development Committee; and will be considered independent

for the purposes of Rule 704(8) of the Listing Manual of the SGX-ST.

4. Ordinary Resolution 10 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 11 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 12 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).

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 20 April 2009 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

City Tower II, 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 authorised 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 authorised.

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 being obtained at the Annual

General Meeting to be held on 20 April 2010, the Transfer Books and the Register of Members of the Company will be closed on 28

April 2010, 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 27

April 2010 will be entitled to the proposed First and Final Dividend.

Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at 5.00 p.m. on 27 April 2010

will be entitled to the proposed First and Final Dividend. Payment of the dividends, if approved by members at the Annual General

Meeting, will be made on 11 May 2010.

BY ORDER OF THE BOARD

Lawrence Kwan

Company Secretary

Singapore, 5 April 2010

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 Suntec Singapore International Convention & Exhibition Centre, 1 Raffl es Boulevard Suntec

City, Singapore 039593, Meeting Room 325-326, Level 3 on Tuesday, 20 April 2010 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 2009 together with the Auditors’ Report thereon.

2. To approve a First and Final Dividend of S$0.03 per ordinary share for the year ended

31 December 2009.

3. To approve payment of Directors’ Fees.

4. To re-elect Mr Ma Gui Chuan, who is retiring under Article 98 of the Articles of Association of

the Company.

5. To re-elect Mdm Sun Yue Ying, who is retiring under Article 98 of the Articles of Association of

the Company.

6. To re-elect Mr Er Kwong Wah, who is retiring under Article 98 of the Articles of Association of

the Company.

7. To re-elect Mr Ang Swee Tian, who is retiring under Article 98 of the Articles of Association of

the Company.

8. To re-appoint Mr Tom Yee Lat Shing, who is retiring pursuant to Section 153(6) of the

Companies Act, Cap 50.

9. To re-appoint Messrs PricewaterhouseCoopers LLP as Auditors of the Company and to

authorise the Directors to fi x their remuneration.

SPECIAL BUSINESS

10. To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Cap 50.

11. To authorise Directors to issue shares pursuant to the Cosco Group Employees’ Share Option

Scheme 2002.

12. To approve the renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions.

Dated this day of 2010

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

Second fold

Third fold

Please

affi x

postage

stamp

COSCO CORPORATION (SINGAPORE) LIMITED9 Temasek Boulevard, #07-00 Suntec Tower Two,

Singapore 038989

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