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BUILDING FOR THE FUTURECOSCO Corporation (Singapore) LimitedAnnual Report 2010

WE BEHOLD OUR PAST WITH PRIDE THE PATH WE TOOK

THE FOUNDATION WE LAID

TO CREATE A PLATFORM FOR SUSTAINABLE

GROWTHTHUS BRINGING US

CLOSER TO THE FUTURE WE ENVISION

WITH CONFIDENCE AND PASSION

010204081011

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232628

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COSCO OVERVIEW Corporate ProfileCorporate StructureFinancial HighlightsMajor Developments Major Deliveries in 2010Our Major Shipyards

KEY MESSAGESChairman’s StatementInterview with Vice Chairman and President

OPERATIONS AND FINANCIAL REVIEWShip Repair, Ship Building and Offshore Marine Engineering Dry Bulk Shipping & OthersGroup Financial Review

CORPORATE GOVERNANCE AND TRANSPARENCYCorporate Governance Corporate Information Board of DirectorsKey ManagementInvestor RelationsRisk Management

INSIDE COSCO AND CORPORATE CITIZENSHIPResearch and DevelopmentHuman Resources and 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

COSCO Corporation (Singapore) Limited Mr Li Jian Xiong, Vice PresidentMr Wang Hui, General Manager, Investor Relations Tel: (65) 6885 0888 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

CONTENTS

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.

CORPORATE PROFILE

Annual Report 2010

01

“A diversified marine conglomerate providing Ship Repair and Conversion,

Ship Building and Offshore Marine Engineering solutions.”

Dry Bulk Shipping

COSCO (Singapore) Pte Ltd100%

Shipping Agency & Others

COSLINK (M) Sdn Bhd

COSTAR Shipping Pte Ltd70% Costar Agencies (M) Sdn Bhd

CNF Shipping (M) Sdn Bhd

••

18%

70%

Harington Property Pte Ltd100%

COSCOOVERVIEW

02

CORPORATE STRUCTURE

100%

60%

Ship Repair, Ship Building & Offshore Marine Engineering

COSCO Shipyard Group Co., Ltd

COSCO Marine Engineering (Singapore) Pte Ltd

COSCO (Nantong) Shipyard Co., Ltd

COSCO (Qidong) Offshore Co., Ltd

COSCO (Dalian) Shipyard Co., Ltd

COSCO (Guangdong) Shipyard Co., Ltd

COSCO (Lianyungang) Shipyard Co., Ltd

COSCO (Xiamen) Shipyard Co., Ltd

COSCO (Shanghai) Shipyard Co., Ltd

COSCO (Tianjin) Shipyard Co., Ltd

COSCO (Zhoushan) Shipyard Co., Ltd

COSCO (Nantong) Ocean Shipyard Co., Ltd

COSCO Dalian Rikky Ocean Engineering Co., Ltd

Zhongyuan Sea-Land Engineering Co., Ltd

COSCO Shipyard Total Automation Co., Ltd

Diesel Marine Dalian Ltd

Diesel Marine International (Nantong) Co., Ltd

DMI (Guangzhou) Ltd

Tru-Marine Cosco (Tianjin) Engineering Co., Ltd

•••••••••••••••••

COSCO Engineering Pte Ltd •90%

COSCO (Nantong) Shipyard Co., Ltd50%

COSCO (Dalian) Shipyard Co., Ltd39%

51%

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

••••••••

03Annual Report 2010

50%

60%

59%

75%

60%

51%

95%

90%

100%

60%

75%

51%

60%

30%

30%

30%

40%

100%

100%

CNF Shipping Agencies Pte Ltd•100%

249

FINANCIAL HIGHLIGHTS

Turnover(S$’m)

Net Profit Attributable to Equity Holders(S$’m)

Net Assets(S$’m)

04

Revenue by Activities (%)

SHIP REPAIR, SHIP BUILDING & OFFSHORE MARINE ENGINEERING

DRY BULK SHIPPING

SHIPPING AGENCY AND OTHERS

96.3% 0.4%

3.3%

2,89

9

2,26

2

1,21

5

3,47

6

0

500

1,000

1,500

2,000

2,500

3,000

0

50

100

150

200

250

300

337

205

303

0

300

600

900

1,200

1,500

1,30

3

920

1,60

9

1,61

1

2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010

3,86

1

110

1,79

4

3,500

3501,800

COSCOOVERVIEW

4,000

4.0

11.1

* 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

Dividends per Share (cents)

and Basic Earnings per Share (cents)


5-YEAR PROFIT AND LOSS ACCOUNTS (S$’m)

Turnover

Operating Profit before Tax

Share of Profit/(Loss) of Associated Companies

Taxation

Profit from Ordinary Activities

Non-Controlling Interests

Net Profit Attributable to Equity Holders of the Company

OTHER KEY STATISTICS

Number of Shares (m)

Basic Earnings per Share (cents)*

Dividend per Share (cents)

Dividend Cover (times)

Net Tangible Assets per Share (cents)*

Net Assets Value per Share (cents)*

Gearing Ratio (net of cash)(times)

Return on Equity (%)

Return on Assets (%)

2006

1,215

301

1

23

279

74

205

2006

2,214.0

9.3

4.0

2.3

29.8

30.3

0.2

34.5

12.5

2007

2,262

497

1

19

479

142

337

2007

2,237.7

15.1

7.0

2.1

41.6

42.0

cash

41.8

11.5

2008

3,476

451

1

32

420

117

303

2008

2,239.2

13.5

7.0

1.9

50.7

51.1

cash

29.0

5.6

2009

2,899

179

0

41

138

28

110

2009

2,239.2

4.9

3.0

1.6

48.0

48.4

cash

9.9

1.7

2010

3,861

402

0

43

359

110

249

2010

2,239.2

11.1

4.0

2.8

53.1

53.5

0.1

21.8

4.0

2006 2007 2008 2009 2010

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

0

3

6

9

12

15

15.1

9.3

4.0

7.0

13.5

7.0

4.9

3.0

The GM4000 is a semi submersible vessel designed for well intervention services including a wide range of capabilities like through tubing rotatory drilling and coiled tubing drilling. It is a purpose-built well intervention unit capable of operating on the Norwegian Continental Shelf all year round.

the foundationOur diversified repertoire of marine engineering, ship building, ship repair and conversion services enables the Group to support an increasingly demanding and varied international clientele.

VITAL MARINE SOLUTIONS FOR ALL

08

MAJOR DEVELOPMENTS

Deliveries in 2010

COSCOOVERVIEW

Current Developments

1

4 5

M.V. ParandowskiNew build 30,000 dwt multi-purpose heavy lift vessel

M.V. Scandinavian ExpressNew build 92,500 dwt bulk carrier

M.V. Mairini New build 80,000 dwt bulk carrier

M.V. Magda PNew build 57,000 dwt bulk carrier

2

5

4

3

1

1

Super M2Jack-up rig


2 3

6

Octabuoy

GM4000

Car Carrier

DrillshipWind Turbine Installation Vessel

Sevan Driller II (Sevan Brasil)2

6

3

54

1

2

3

4

5

10COSCOOVERVIEW

MAJOR DELIVERIES IN 2010

Name of Vessel

M.V. Ocean Garnet

M.V. Vlazakis 1

M.V. Scandinavian Express

M.V. Pu Lan Hai

M.V. Banos A

M.V. RBD Ocean of Joy

M.V. Chang Shan Hai

FPSO Cidade De Angra Dos Reis MV22

M.V. Mairini

M.V. Georgios P

M.V. Magda P

M.V. Chipolbrok Star

M.V. Parandowski

M.V. Newlead Tomi

M.V. Shinyo Ayush

M.V. Chipolbrok Galaxy

M.V. Dai Shan Hai

M.V. Shun Xin

M.V. Ince Kastamonu

M.V. Ince Karadeniz

M.V. Quan Shan Hai

HBIS Sunrise

M.V. Asia

M.V. Ince Akdeniz

M.V. Fantastic

M.V. Amazing

M.V. Milos

M.V. SIFNOS

M.V. Arizona

M.V. Flag Alexandros

M.V. Annabo

M.V. Toxotis

M.V. Christos Theo

M.V. Perth 1

M.V. Ioannis Theo

M.V. Almyros

M.V. Er Nazire

Super M2

Project Details

New build 92,500 dwt bulk carrier







Conversion from VLCC to FPSO




New build 30,000 dwt multi-purpose heavy lift carrier










VLCC to VLOC Conversion
















New build jack-up rig

Delivered In

January 2010

January 2010

February 2010

March 2010

May 2010

June 2010

June 2010

August 2010

September 2010

September 2010

October 2010

October 2010

November 2010

December 2010

December 2010

December 2010

January 2010

April 2010

April 2010

May 2010

May 2010

May 2010

June 2010

June 2010

August 2010

August 2010

October 2010

November 2010

December 2010

January 2010

January 2010

April 2010

June 2010

August 2010

August 2010

October 2010

December 2010

June 2010

COSCO Guangdong Shipyard

COSCO Nantong Shipyard

COSCO Dalian Shipyard

COSCO Zhoushan Shipyard

Dalian

Lianyungang

NantongQidongShanghai

Zhoushan

Guangdong


OUR MAJOR SHIPYARDS

Through COSCO Shipyard Group, COSCO Corporation owns and operates seven major shipyards strategically located along China’s coastline.

The Super M2 jack-up rig delivered by COSCO (Nantong) Shipyard Co., Ltd has an operating capability (at a water-depth of 91 metres) to provide supporting services to offshore drilling rigs and other marine engineering facilities.

the pathSTRENGTHENING MOMENTUM IN MEETING THE GROWING NEEDS FOR OFFSHORE MARINE ENGINEERING EXPERTISEMeeting the burgeoning global demand for energy, we constantly seek to advance our capabilities to create a new paradigm in our offerings, and to enhance our operational efficiency and productivity in Ship Building, Ship Repair and Conversion and Offshore Marine Engineering.

KEY MESSAGES

14

CHAIRMAN’S STATEMENT

Completing our transformation to a

diversified marine conglomerate, we

are at a completely new level. Where

previously our main business was

ship repair and conversion services,

now our integrated and upgraded

operations allow us to offer an array of

leading-edge ship building, ship repair

and conversion as well as offshore

marine engineering services. We are,

in a sense, a new entity.

I believe this fundamental paradigm

shift opens up new opportunities we

have never had before and will enable

us to take COSCO further and higher

in the long run. I am excited to take

over the reins from the capable hands

of previous Chairman Li Jian Hong.

Under his leadership, he has steered

us through some difficult waters and

we have no doubt emerged the better.

For these reasons — strategic focus,

solid growth and transformation

despite economic uncertainty — I am

encouraged and positive for our future.

We have a proven strategy for growth

and the experience at all levels to take

us further. We will certainly be prudent,

as we have been, but we will also

capitalise on the new opportunities

that we now are able to bid for.

Building on a Solid BaseOur base is solid, with a robust and

productive 2010 and progressive

deliveries of 35 vessels and our

maiden jack-up rig. Throughout,

continued skills-upgrading in offshore

marine engineering, and the securing

of significant contracts attest to our

operational expertise and reputation.

Leveraging on our developing

expertise, we continued to secure

orders over the year.

To reiterate, what was especially

encouraging was the fact that these

positive developments occurred

despite a backdrop of economic

uncertainty. While the developed

economies exhibited continued

hangover effects from the global

financial crisis of 2009, with the US and

Dear Shareholders,

It is with much pleasure that I present to you our annual report for Financial Year 2010. Taking over the reins of COSCO Corporation recently in September 2010, I am pleased to say that not only has our corporate ship been steady and on course, it has moved full steam ahead!

Japan mired in weak, low-employment

growth and Europe suffering from

protracted sovereign debt problems,

Asia showed marked resilience with

strong recovery and growth in major

economies such as China, Indonesia

and India.

Maintaining Focus, Delivering ResultsOperating in such challenging

conditions, we focused on our goals

of improving efficiencies, diversifying

capabilities, and leveraging on our

strengths, concluding the year with

expanded revenue of $3.9 billion, a

33.2% increase from $2.9 billion in

FY2009. Net profits attributable to

equity holders grew 126.1% to $248.8

million from $110.1 million in FY2009.

On a per share basis, earnings per

ordinary share grew from 4.9 cents

in FY2009 to 11.1 cents per ordinary

share. Net asset value per ordinary

share as of 31 December 2010 was

53.5 cents, compared with 48.4 cents

as of 31 December 2009. With this

strong base, our Group is proposing

a dividend of 4.0 cents per share to

be approved at the upcoming Annual

General Meeting. This amounts to

a dividend payout ratio of 36.0%.

However, I believe numbers tell only

part of the story — there’s more. To an

enterprise like COSCO Corporation,

our transformative experience has

been nothing short of extraordinary,

and puts us in prime position to add

truly long-term operational value to our

enterprise.

Outlook and StrategyLooking ahead to Financial Year

2011, the world economy seems

headed for crosswinds. According

to the International Monetary Fund

(IMF), in a World Economic Outlook

report dated 25 January 2011, the

global economy will likely experience

continued recovery from the global

financial crisis but in a “two-track”

pathway. Developed economies will

be stymied by prolonged weak growth

and bloated public finances while Asia


Liu Guo YuanChairman

experiences relatively more brisk growth,

albeit with ensuing inflation risks. The

IMF projects the world economy to grow

by 4.5% for 2011.

Closer to our base, the spectre of high

inflation, especially in China, is a scenario

we will have to manage. Over 2010, the

Chinese Yuan rose about 3% against

the US Dollar. The Chinese government

is managing China’s over-heating

economy and continued high inflation

with restrictive economic policies such

as central bank rate hikes, increased

bank reserve ratio requirements intended

to curb the money supply, as well as

property market-dampening measures

to stem the exuberant real estate

market. With potential labour shortages

and increases in raw material prices

including that of steel, there remains

possible pressure on our operating

margins. We will continue to monitor the

situation closely.

Building for the Future with Foresight and VigilanceDespite the forecasted uncertainties in

our operating environment, we can be

assured of the significant progress we

have already made in our development

as a marine conglomerate and confident

of our particular position in the marine

services industry. With our increasing

expertise, we have managed to

secure orders of US$6.1 billion as of

31 December 2010 with progressive

deliveries up to 2013.

Looking ahead, the dry bulk shipping

market faces continual challenges, with

the slow growth in global shipping and

oversupply of new bulk carriers likely

dampening future orders for dry bulk

ship building, which currently comprise

the majority of our shipbuilding work.

We will have to actively manage our

diversification strategy and secure more

orders for a wider range of ship building

and marine engineering projects.

KEY MESSAGES

16

CHAIRMAN’S STATEMENT

On an upbeat note, the Offshore & Marine

industry is experiencing an upcycle, with

more demand for new ships and vessels

such as drill ships and other specialised

support vessels used in offshore marine

engineering. There is also increased

demand for oil rigs, driven, as it were, by

the fundamental need for energy from

large emergent economies. We aim to

optimise our offerings and capitalise on

this uptrend. Internally, within COSCO

Corporation, we have management

structures in place, especially in the

areas of strategy and risk, to anticipate

industry trends, drive group-wide

initiatives and respond to developments

as they unfold.

Focused, Prudent and PositiveAs we enter a new year, uncertainties

remain. We maintain our cautious

outlook and keep our focus, building for

the future with expanded capabilities.

I believe we must be focused but also

positive, despite an uncertain economic

outlook. We have achieved so much

and will continue to make progressive

improvements. Certainly we have the

capability to achieve even more.

At this juncture, on behalf of the Board,

I would like to thank our directors,

management and staff for their wise

counsel and contributions over the year.

I would like to also specially thank the

previous Chairman Mr Li Jian Hong,

for his contributions. Last but not least,

gratitude must be extended to our loyal

shareholders. I look forward to meeting

you all at our upcoming Annual General

Meeting.

Liu Guo Yuan

Chairman


18

INTERVIEW WITH VICE CHAIRMAN AND PRESIDENT

Driving Growth in 2010

1. What was the operating environment like for COSCO in 2010?

First and foremost, I would like to

thank our management and staff

for their efforts over the past year. It

has truly been rewarding to see the

fruits of our endeavours. Over 2010,

we experienced continual challenges

from an uncertain global economy.

Weak, low-employment economic

growth coupled with high public debt

stifled the developed economies while

developing economies recovered

strongly from the global recession.

Notwithstanding the challenges

in the operating environment, we

have successfully completed the

construction of a large number of

vessels as well as secure additional

orders. As at 31 December 2010, our

order book was US$6.1 billion with

progressive deliveries up to 2013,

which will keep our shipyards busy.

One of the major operational highlights

we had over 2010 was our developing

expertise. With our sharpened skills,

we increased efficiency, shortened our

average dry bulk carrier construction

period from 18 months in 2009 to

15 months in 2010 and enhanced

productivity. We ended the year

with the delivery of a record 32 bulk

carriers. In addition, our COSCO

Dalian shipyard completed 3 multi-

purpose heavy lift vessels while

COSCO Nantong shipyard delivered

our milestone self jack-up engineering

platform, the Super M2 jack-up rig.

In the area of dry bulk shipping,

shipping rates remained weak in 2010,

affected by the abundance of new bulk

carriers in the global market.

Key Corporate Values: Strategic Focus, Steadfast Determination

2. From just ship repair, you now offer a wide range of marine services including offshore marine engineering, ship repair and ship building. What are the reasons for your transformation to a diversified ship repair & marine engineering and shipping group?

Transforming a large corporate entity

such as COSCO to a diversified marine

services group has been challenging,

especially amidst the volatility prevalent

in the global economy these few years.

We have been able to rise to these

challenges because of two factors:

strategic management focused on

KEY MESSAGES

long-term goals and an integrated,

dedicated workforce. COSCO had

already grown into a major shipyard

group, with a strength primarily in ship

repair. We had reached a milestone

and were keen to take the group to

new directions.

After a group-wide review, we decided

that, moving ahead, our broad,

long-term objective was to advance

the group forward to be a broadly

diversified marine services group,

capable not only of undertaking ship

repair and ship conversion, but also

ship building and offshore marine

engineering. In this way, we would be

able to capitalise on the full potential

of the marine services sector and the

burgeoning demand for shipping and

offshore oil and gas. Our ultimate goal,

in sum, was to offer an enhanced

value proposition and take COSCO to

an entirely new level.

With that goal in mind, we engaged

our staff around these objectives,

and further developed them with the

necessary skills to achieve those

ends. Externally, we embarked on an

ambitious marketing plan to expand

our presence and reach a wider base

of prospective customers.

The results have been promising

with turnover for Financial Year 2010

growing 33.2% to $3.9 billion while net

profits attributable to equity holders

increased 126.1% to $248.8 million.

This was achieved through a 35.2%

year-on-year increase in turnover to

$3.7 billion from shipyard operations

with higher contributions from the

ship building and marine engineering

projects. Meanwhile, turnover from the

dry bulk shipping business decreased

3.2% year-on-year to $128.6 million

due to lower charter rates. On a group-

wide basis, the shipyard business was

the largest revenue contributor, making

up 96.3% of Group turnover.

Our net assets at financial year-end

are $1.8 billion while cash and cash

equivalents at 31 December 2010

amount to $0.9 billion, giving us

financial confidence and we believe

these achievements are a reflection of

our long-term vision and resolve.

Jiang Li JunVice Chairman and President


20

Growing our Capabilities

3. In the Ship Repair, Ship Building and Offshore Marine Engineering sectors, what were the important benefits the Group has derived from its work here?

To improve our capabilities, we

have been seeking opportunities

to undertake new and increasingly

complex projects. In fact, many have

been successfully completed and

delivered, especially over the past

year. These have in turn bolstered our

level of expertise and reputation and,

in a virtuous circle, have enabled us to

secure even larger projects.

For example, in August 2010, we

completed yet another ship conversion,

this time of a Very Large Crude

Carrier (VLCC), to an FPSO (Floating,

Production, Storage and Offloading)

vessel. Named the FPSO Cidade De

Angra Dos Reis MV22, this vessel is

able to process up to 100,000 barrels

of oil daily as well as 5 million cubic

metres of gas.

Building on our successful construction

of the heavy lift carrier “Adam Asnyk”

in 2009, we completed a larger heavy

lift carrier, the 30,000 ton “Chipolbrok

Star”. This carrier, which comes

equipped with two 320 ton cranes

with a maximum haulage capacity of

640 tons, serves multiple roles as bulk

carrier, container ship and heavy lift

vessel.

On top of this, we leveraged on our

successful completion of the Sevan

Driller in 2009 with an Engineering,

Procurement, Construction and

Installation (“EPCI”) contract for the

Sevan Driller II, a deepwater DP3 semi-

submersible drilling rig. It has been

renamed “Sevan Brasil”. I am proud

to say COSCO is one of the leading

ship builders in China to have secured

a full EPCI contract for such a rig. In

sum, all these developments put us in

prime position to grow in the way we

had envisioned.

4. What distinguishes you from your competitors?

Our vision, determination and strong

foundations have enabled us to

weather the storms in our operating

environment over the past four

capricious years. Additionally, it

has given us the ability to devise an

expanded business model and the

energy to undertake the necessary

changes.

5. What did you learn from the recent global financial crisis?

Focusing on our strategic goals of

diversifying our offerings and thus

income streams, despite all the market

volatility surrounding us. Also, the

importance of risk management and

maintaining a strong balance sheet.

These key lessons will position us well

especially in an operating environment

marked by shorter economic cycles,

volatile capital flows and uneven global

growth.

6. Are you putting any of these lessons into practice? Definitely! We maintain management

structures for risk and strategy and

meet regularly to discuss, develop and

co-ordinate activities and plans. In

July 2009, we established a Strategic

Development Committee. Comprising

directors, this Committee will catalyse

the development and evaluation of

Group strategy.

In the area of risk management, we

have a dedicated Enterprise Risk

Management Committee (“ERMC”)

which meets every quarter to review

and manage Group-wide risks: internal,

external, execution and financial.

Under this ERMC, we manage risks on

a regular basis.

INTERVIEW WITH VICE CHAIRMAN AND PRESIDENT

KEY MESSAGES

Outlook and Strategy

7. What is the Group’s outlook for the Baltic Dry Index and how will it impact your dry bulk ship building business?

The BDI started 2010 at 3,140 points

and ended it much lower at 1,773

points, with the year’s average at

2,752 points. Any further rebound

may remain subdued in light of the

abundant supply of new bulk carriers

globally. In fact, there has been a

gradual increase in the global supply

of bulk carriers over recent years.

As such, while we have been able to

secure about US$1 billion worth of

new contracts for bulk carriers over

2010, we remain cautious about our

outlook for bulk carrier ship building.

The global oversupply in dry bulk

carriers could impact demand for ship

building services with subsequent

pricing pressures and weakened order

flow for new bulk carriers. In the area

of dry bulk ship chartering, we are

decreasing our dry bulk shipping fleet

from 12 to 10 carriers in early 2011, not

renewing the leases for two charter-in

Panamax vessels. This is in order to

streamline our focus on ship building

and offshore marine engineering.

8. Since dry bulk carriers comprise the bulk of your ship building contracts, what strategies have you planned to minimise any negative effects?

To mitigate business risk, we intend

to further diversify our range of

projects and enhance our skills and

capabilities as we move forward. We

have managed to grow our offshore

marine engineering business with the

successful completion of the semi-

submersible oil rig “Sevan Driller” in

2009 and the jack-up oil rig “Super

M2” in 2010. During the year in review,

we also secured a contract worth

more than US$500 million contract to

construct another semi-submersible

oil rig named the “Sevan Brasil”. Aside

from oil rigs, we are actively developing

other offshore marine engineering

vessels such as the “GM4000” and the

“Octabuoy”, both are semi-submersible

offshore vessels, and an offshore

wind turbine installation vessel. Last

but not least, we have completed

construction of Phase One of our new

Qidong shipyard which specialises in

offshore marine engineering. Already

in operation, it will elevate our diverse

capabilities even higher.

9. What are your group’s priorities looking ahead?

We have achieved much in

the direction we have taken.

Looking ahead, we are cautious

about the operating environment

and will continue to monitor it

closely. Nonetheless, our strategic

development as a leading diversified

marine services group is a definite

positive. Building on this, our chief

priorities will be to leverage on our

increasing strengths in diversified

marine services, maintaining our

focus on deliveries and upgrading our

capabilities and facilities.


Achieved strong growth against a challenging backdrop as business, industry and private demand conditions remain uncertain.

Successfully delivered 32 bulk carriers, 3 multi-purpose heavy lift vessels and 1 jack-up rig in 2010.

New orders received in 2010 totalling more than US$2.1 billion include 31 bulk carriers, 1 deepwater drillship, 1 Sevan drilling rig, 1 wind turbine installation vessel and 2 deck barges. An order book of US$6.1 billion as at 31 December 2010 with progressive deliveries up to 2013.

OPERATIONAL HIGHLIGHTS

OPERATIONS AND FINANCIAL REVIEW

22

Annual Report 2010

23

SHIP REPAIR, SHIP BUILDING AND OFFSHORE MARINE ENGINEERING

OverviewCOSCO 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 advanced capabilities in ship

building, ship repair and conversion,

and offshore marine engineering.

This segment remained our biggest

revenue contributor in FY2010, making

up 96.3% of group revenue. Turnover

from shipyard operations recorded a

35.2% rise to $3.7 billion in 2010, due

to higher revenue contributions from


projects.

Creating New MilestonesOver the course of the year, we

delivered a total of 32 new-build bulk

carriers – 8 by COSCO Guangdong

shipyard, 12 by COSCO Dalian

shipyard and 12 by COSCO Zhoushan

shipyard. Also notably, COSCO

Nantong shipyard delivered one jack-

up rig, “Super M2”, in June 2010 and

COSCO Dalian shipyard delivered 3

multi-purpose heavy lift vessels in the

second half of 2010.

Gaining Expertise in Ship Repair and Ship BuildingAs a testament of our developing

expertise and reputation, we

managed to secure larger contracts

and complete fabrication of more

sophisticated vessels in 2010. New

orders received in 2010 totaling

more than US$2.1 billion include 31

bulk carriers, 1 deepwater drillship,

1 deepwater DP3 semi-submersible

Sevan drilling rig, 1 wind turbine

installation vessel and 2 deck barges.

In June 2010, COSCO Nantong

shipyard delivered 1 jack-up rig Super

M2 and COSCO Dalian shipyard

delivered 3 multi-purpose heavy lift

vessels in the second half of the year.

The Group will continue to focus on

deliveries while it upgrades its shipyard

capabilities to improve operational

efficiency and productivity.

COSCO Corporation’s abilities in ship

conversion were further boosted with

the successful conversion in August

2010 of “FPSO Cidade De Angra Dos

Reis MV22” from a VLCC. Purchased

by MODEC Offshore Production

Systems (Singapore) Pte Ltd, it is able

to process up to 100,000 barrels of oil

per day and 5 million cubic metres of

gas.

In 2010, the Group also completed the

construction and delivery of 3 multi-

purpose heavy lift carriers, namely

“Chipolbrok Star”, “Parandowski” and

“Chipolbrok Galaxy”.

Essentially similar to the “Adam Asnyk”

delivered in 2009, the “Chipolbrok Star”

has more compartments, a complex

piping system and a multi-function role

of bulk carrier, container ship, multi-

purpose vessel and heavy lift vessel. It

is capable of accommodating different

ocean-going cargoes with its large

tonnage, powerful lifting capacity, high

speed, highly automated integration

and flexible loading capability. Such

engineering milestones augment our

capabilities and bolster our reputation,

positioning us strategically as a leading

diversified marine conglomerate.

Gaining Momentum in Offshore Marine EngineeringThe month of June 2010 saw COSCO

Nantong shipyard deliver its first jack-

up rig. Named “Super M2”, the new-

build jack-up rig measures 8 metres

high, 56 metres wide and 73 metres

long. This unique vessel is purpose-

built and optimised for both light and

heavy well intervention, giving offshore

operators new options when they need

to pull tubing and re-enter oil and gas

wells in depth to 100 metres.

During the year, the Group continued

to ink landmark contracts. Following

the successful delivery of our first

Sevan Driller in 2009, we managed to

secure an engineering, procurement,

construction and installation (“EPCI”)

contract worth more than US$500

million for the Sevan Driller II, a

deepwater DP3 semi-submersible

drilling rig now named the “Sevan

Brasil”. It will be the second deepwater

DP3 semi-submersible drilling rig to

be undertaken by COSCO. With this


24

contract, COSCO Shipyard Group is

one of the leading shipyards in China

to have secured a full EPCI contract

to construct a deepwater DP3 semi-

submersible drilling rig. We are proud

of this achievement and our teams of

marine engineers, R&D professionals

and managers stand ready to

contribute to this seminal project. Our

Group looks towards participating

and leveraging on this market-leading

project experience.

During the same month, we signed a

contract valued over US$130 million

with a European shipowner to build a

vessel specially designed for installing

offshore wind turbines. The jack-up

vessel will be able to carry 8 to 10

wind turbines at any time and operate

at water depths of up to 45 metres.

Alternative energy systems and

alternative energy offshore exploration

is really one of the ways our industry is

developing and with this venture, we

are strategically placed to capitalise on

growth in this area as well.

In summary, we have made significant

progress in our ship repair and

conversion, ship building and offshore

marine engineering sector. Looking

ahead, we shall continue to develop

our strengths and solidify our position

as a leading solution provider for

diverse marine needs.

Annual Report 2010

25

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

52%

Ship Conversion10%Ship Building

Marine Engineering25%

Ship Repair13%

Types of Vessels Repaired in FY2010 by Revenue

Tankers 6%

Container Ships 11%

Chemical Ships 7%

Others 9%

Bulk Carriers 67%

Dry Bulk Shipping

OverviewManaged by COSCO (Singapore)

Pte Ltd – the Group’s wholly-owned

subsidiary - our dry bulk shipping

business currently comprises a fleet

of 10 dry bulk carriers that make up

a total carrying capacity of 550,978

dwt. Plying the main trading routes,

these carriers transport cargo such

as iron ore, coal, steel, cement and

fertiliser to major ports of the world.

Our dry bulk carriers are chartered out

to other ship owners and operators,

serving COSCO’s strong clientele

base of shipping companies from

Germany, Norway, Denmark, Greece,

Switzerland, UK, USA amongst

others.

By upholding strict international quality

and safety standards, COSCO’s fleet

has been awarded with an ISO9002

certification, which recognises

companies for a consistently high

commitment to quality.

Highlights of the YearTurnover from the Group’s dry bulk

shipping business decreased 3.2%

over the year to $128.6 million due

to lower charter rates strategically

secured at the point of charter

renewals. The business of dry bulk

shipping, shipping agency and others

contributed to 3.7% of the Group’s

total revenue.

The Baltic Dry Index (“BDI”), a measure

of shipping costs for commodities,

started the year at 3,140 points and

ended the year at a much lower 1,773

points, with the yearly average standing

at 2,752 points. In view of ongoing

concerns about the global economy

as well as the abundant supply of

new ships in the market, any rebound

in the BDI may remain subdued. An

increased supply of vessels will also

heighten industry competition and

likely pose a challenge to COSCO’s

dry bulk shipping segment.

26

DRY BULK SHIPPING AND OTHERS


Annual Report 2010

27

Nonetheless, the Group will continue

to build upon the strengths of our

businesses and derive synergies from

it to support our dry bulk shipping

business.

Shipping Agency

OverviewCOSCO’s shipping agency arm is

managed by subsidiaries of COSCO

Corporation, namely COSTAR

Shipping Pte Ltd and COSLINK

(M) Sdn Bhd. Providing mainly

containerisation services for COSCO

Container Lines and its customers,

COSTAR Shipping provides a wide

array 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

1,000 customers in more than 50

countries.

Since its beginnings in 1989, COSTAR

Shipping canvasses for cargo from

clients to fully maximise tonnage

capacity of COSCO’s ships, as well

as the ships of our clients transiting

through Singapore. Our business also

provides extensive agency services for

full container, break-bulks and other

value-added services.

In Malaysia, COSLINK (M) Sdn. Bhd.

serves as the general shipping agent

for the fleet of COSCO Group’s vessels

that call at Malaysian ports, offering a

range of services similar to COSTAR

Shipping in Singapore.

Towards the end of 2010, the

Company entered into separate

conditional sale and purchase

agreements with Freightworld Pte Ltd,

an indirect wholly-owned subsidiary

of China COSCO Holdings Company

Limited. The Company will sell its

whole 700,001 shares in COSTAR

Shipping Pte Ltd – representing

approximately 70% of the issued share

capital of COSTAR; and 1,400,000

shares in COSLINK (M) Sdn Bhd

– representing approximately 70% of

the issued share capital of COSLINK

to Freightworld.

28

GROUPFINANCIAL REVIEW

OverviewThe Group concluded the year with

a 33.2% increase in Group turnover

to $3.9 billion in FY2010 while net

profit attributable to equity holders

of the Company increased 126.1%

to $248.8 million. The increase in

turnover was mainly due to higher

revenue contributions from ship

building and marine engineering

projects. The increase in net profit

attributable to equity holders of the

Company was attributable to higher

profit contributions from ship building

and marine engineering projects and

dry bulk shipping.

TurnoverTurnover from shipyard operations

increased 35.2% to $3.7 billion

in FY2010 due to higher revenue

contributions from ship building and

marine engineering projects. The

Group delivered 32 bulk carriers in

FY2010. COSCO Dalian and COSCO

Zhoushan shipyards delivered 12

bulk carriers each while COSCO

Guangdong shipyard delivered the

remaining 8 bulk carriers. Also notably,

COSCO Nantong shipyard delivered 1

jack-up rig, “SUPER M2”, in June 2010

and COSCO Dalian shipyard delivered

3 multi-purpose heavy lift vessels in

the second half of 2010.

Turnover from dry bulk shipping

business decreased 3.2% to $128.6

million in FY2010 due to lower charter

rates. The Baltic Dry Index (BDI),

a measure of shipping costs for

commodities, started the year 2010 at

3,140 points but ended the year much

lower at 1,773 points, averaging 2,752

points for the whole of 2010.

Shipyard business remained the

biggest revenue contributor, forming

96.3% of Group turnover in FY2010.

Dry bulk shipping, shipping agency

and others accounted for the remaining

3.7%.

ProfitabilityGross profit increased 60.0% from

$297.6 million in FY2009 to $476.1

million in FY2010 on greater cost

efficiencies in dry bulk shipping and

higher profit contributions from ship

building and marine engineering

business on turnover rise.

Other income comprised gain from the

sale of scrap materials, compensation

received from customers, interest

income from bank deposits, foreign

currency exchange gain and net

fair value gain on forward currency

contracts. Other income increased

21.8% to $178.3 million in FY2010

mainly due to the higher sales value of

scrap materials and foreign currency

exchange gain.

Distribution costs rose 18.3% in line

with the expanding business volume

and rising cost environment. The

11.6% decrease in administrative costs

to $160.2 million was mainly due to net

reversal of impairment of trade and

other receivables of $31.2 million in

FY2010 as compared to $11.4 million

in FY2009.

Interest expense remained largely

unchanged at $42.1 million in FY2010

as the effects of higher interest rates

were offset by reduced borrowings.

Income tax expense increased by

only 6.1% mainly due to higher profit

contributions from certain subsidiaries

in the People’s Republic of China

(PRC) partially offset by higher tax-

exempt shipping profits.

Non-controlling interests increased

due to higher contributions from the

Group’s PRC subsidiaries involved in

ship repair, ship building and marine

engineering operations.



As a result of the above, net profit

attributable to equity holders of the

Company increased 126.1% from

$110.1 million in FY2009 to $248.8

million in FY2010.

Balance Sheet and Cash Flow(31 December 2010 vs 31 December

2009)

Cash and cash equivalents decreased

from $1.5 billion to $867.2 million mainly

due to cash used in dividend payment,

purchases of new property, plant and

equipment, repayment of borrowings

and less advances received from

customers.

Trade and other receivables increased

$573.5 million from $1.5 billion to

$2.0 billion mainly due to increase

in advances paid to suppliers from

$679.2 million to $858.8 million and

increase in construction contracts

due from customers for ship building

and marine engineering projects from

$249.5 million to $565.8 million in line

with the expanding business.

Property, plant and equipment

decreased from $2.3 billion to $2.2

billion despite facility expansions of the

major shipyards of COSCO Shipyard

Group Co., Ltd (CSG) mainly due to

depreciation.

Trade and other payables decreased

from $3.6 billion to $3.1 billion as

less advances were received from

customers (from $1.8 billion to $1.2

billion) due to completion of some of the


contracts.

Share CapitalCOSCO’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.

EquityEquity rose by $114.6 million to $1.2

billion as at 31 December 2010 due

to the transfer of FY2010 profits to

retained earnings, partially offset by

the payment of dividends in May 2010.

Return on Equity was 21.8%.

GearingTotal bank borrowings decreased

from $1.1 billion to $992.2 million

due to repayment of bank loans

procured for business operations and

the expansion of the Group’s major

shipyards. The Group had a gearing

(net of cash) position of $125.0 million

at the end of FY2010.

Earnings Per ShareOn a fully diluted basis, earnings per

share increased from 4.9 cents in

FY2009 to 11.1 cents in FY2010.

Dividends Per ShareTo reward shareholders for their loyalty,

the Board of Directors has proposed a

first and final exempt dividend of 4.0

cents. The dividend payout will amount

to $89.6 million (FY2009: $67.2 million)

while Dividend Cover was 2.8.

Net Asset Value Per ShareIn line with capacity and facility

expansion, the net asset value

per share of COSCO Corporation

increased by 10.6% from 48.4 cents

per share at 31 December 2009 to

53.5 cents per share at 31 December

2010.

COSCO Corporation’s abilities in ship conversion were further boosted with the successful conversion in August 2010 of “FPSO Cidade De Angra Dos Reis MV22” from a VLCC. Purchased by MODEC Offshore Production Systems (Singapore) Pte Ltd, it is able to process up to 100,000 barrels of oil per day and 5 million cubic metres of gas.

The modern marine industry is characterised by rapid developments and changing needs. With that in mind, we have transformed our range of marine services to respond with added swiftness and tactical acumen. This lays the platform for sustainable growth.

WITH OUR DIVERSE GROWTH DYNAMICS, WE CHART OUR COURSE

COSCO Corporation (Singapore) Limited (“COSCO Corporation” or “the Company”) and its subsidiaries (together, the “Group”) believes that good governance is acknowledged to be essential for the success of any organisation and is now more important than ever. The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the Company.

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

Governance is overseen by the COSCO Corporation Board whilst management is delegated to the Group President and Executive Directors. The Board oversees the business affairs of the Company and is collectively responsible for its success. All directors make decisions objectively in the best interests of the Company and have exercise due diligence and independent judgement in so doing.

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.

The schedule of all Board, Board committee meetings for the next calendar year is planned in advance, in consultation with the directors. During this financial year the Board held five meetings and had on eight occasions used circular resolutions in writing to sanction certain decisions.

32

CORPORATEGORVERNANCE

CORPORATE GOVERNANCEAND TRANSPARENCY

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

CommitteeNominatingCommittee

RemunerationCommittee

Enterprise RiskManagementCommittee

StrategicDevelopmentCommittee

Number ofMeetings held: 5



Number ofMeeting held: 1


Number ofMeeting held: 1

Number ofMeetingsAttended






Liu Guo Yuan1 1 NA NA NA NA NALi Jian Hong2 3 NA NA NA NA NAJiang Li Jun 5 NA 2 1 3 1Zhang Liang3 2 NA NA NA NA NAWang Hai Min4 1 NA NA NA NA NASun Yue Ying5 2 NA NA NA NA NAMa Zhi Hong6 1 NA NA NA NA NAMa Gui Chuan 4 NA NA NA NA NAWang Xing Ru7 4 NA NA NA 2 NATom Yee Lat Shing 5 8 2 1 4 1Wang Kai Yuen 5 8 2 1 4 1Er Kwong Wah 5 8 2 1 4 1Ang Swee Tian 5 8 2 1 4 1Li Jian Xiong(Alternate to Liu Guo Yuan) 5 NA NA NA NA 1Lu Cheng Gang(Alternate to Wang Hai Min ) 5 NA NA NA NA NAYe Bin Lin(Alternate to Ma Zhi Hong) 5 NA NA NA 4 NALiu De Tian8 (Alternate to Wang Xing Ru) 5 NA NA NA 0 NA

NA: Not Applicable

1 Mr Liu Guo Yuan was appointed Director and Chairman of the Board on 1 September 20102 Mr Li Jian Hong resigned his Directorship and Chair of the Board on 1 September 20103 Mr Zhang Liang resigned his Directorship on 2 August 20104 Mr Wang Hai Min was appointed Director on 2 August 20105 Mdm Sun Yue Ying resigned her Directorship on 2 August 20106 Mr Ma Zhi Hong was appointed Director on 2 August 20107 Mr Wang Xing Ru was appointed as a member of the Enterprise Risk Management Committee on 12 July 2010.8 Mr Liu De Tian was appointed as a member of the Enterprise Risk Management Committee on 12 July 2010.


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

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 50 to 55 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.

34



Board of Directors

Liu Guo Yuan Chairman and Non-Independent and Non-Executive DirectorJiang Li Jun Vice Chairman, President and Non-Independent Executive DirectorMa Gui Chuan Non-Independent and Executive DirectorWang Hai Min Non-Independent and Non-Executive DirectorWang Xing Ru Non-Independent and Non-Executive DirectorMa Zhi Hong Non-Independent and Non-Executive DirectorTom Yee Lat Shing Non-Executive Independent DirectorWang Kai Yuen Non-Executive Independent DirectorEr Kwong Wah Non-Executive Independent DirectorAng Swee Tian Non-Executive Independent Director

Changes to the Board during the financial year 2010 are as follow:

Sun Yue Ying resigned on 2 August 2010 her appointment as Non-Independent and Non-Executive Director.

Zhang Liang resigned on 2 August 2010 his appointment as Non-Independent and Non-Executive Director.

Ma Zhi Hong was appointed on 2 August 2010 as a Non-Independent and Non-Executive Director.

Wang Hai Min was appointed on 2 August 2010 as a Non-Independent and Non-Executive Director.

Li Jian Hong resigned on 1 September 2010 his appointment as Chairman and Non-Independent and Non-Executive Director.

Liu Guo Yuan was appointed on 1 September 2010 as Chairman and Non-Independent and Non-Executive Director.

Our Board’s size is necessary to allow sufficient Non-Executive Director and Non-Executive Independent Director representation to cover the breadth and complexity of the Group’s business activities 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 are provided with 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 Independent Directors to acquaint them with important operations overseas.


STRATEGIC DEVELOPMENT COMMITTEE

The Strategic Development Committee (“SDC”) comprising six (6) Directors; the majority is independent non-executive directors. The SDC members are:

Jiang Li Jun (Chairman) (Non-Independent Executive)Liu Guo Yuan1 (Non-Independent Non-Executive)Li Jian Hong2 (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)

Note:1 Liu Guo Yuan was appointed a member of the Strategic Development Committee on 3 March 20112 Li Jian Hong resigned on 1 September 2010 as Chairman, Non-Independent and Non-Executive Director

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.

The 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; and

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 met once in the financial year of 2010.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

PRINCIPLE 3

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.

36



BOARD MEMBERSHIP

PRINCIPLE 4

Recommendations for nominations of new directors and retirement of directors are made by the Nominating Committee (“NC”) and considered by the Board as a whole.

The 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. 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.

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

Director PositionDate of InitialAppointment

Date of LastRe-election

Liu Guo Yuan Chairman, Non-Independent and Non-Executive 1.9.2010 n.a.Jiang Li Jun Vice Chairman, President and Non-Independent Executive 7.8.2008 20.4.2009Ma Gui Chuan Non-Independent Executive 10.1.2007 20.4.2010Wang Hai Min Non-Independent and Non-Executive 2.8.2010 n.a.Wang Xing Ru Non-Independent and Non-Executive 14.2.2006 15.4.2008Ma Zhi Hong Non-Independent and Non-Executive 2.8.2010 n.a.Tom Yee Lat Shing Non-Executive Independent 16.11.1993 20.4.2010Wang Kai Yuen Non-Executive Independent 2.5.2001 20.4.2009Er Kwong Wah Non-Executive Independent 20.12.2002 20.4.2010Ang Swee Tian Non-Executive Independent 13.11.2007 20.4.2010Li Jian Xiong Alternate to Liu Guo Yuan 1.9.2010 n.a.Lu Cheng Gang Alternate to Wang Hai Min 2.8.2010 n.a.Ye Bin Lin Alternate to Ma Zhi Hong 2.8.2010 n.a.Liu De Tian Alternate to Wang Xing Ru 14.2.2006 n.a.


NOMINATING COMMITTEE

The Nominating Committee (“NC”) comprising 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 two meetings. The NC met to review the nominations for the appointments of those directors that were appointed during the financial year for recommendation to the Board to approve the appointments. In arriving 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.

The NC assesses and recommends to the Board whether retiring Directors are suitable for re-election. The NC considers that the multiple board representations held presently by some Directors do not impede their respective performance in carrying out their duties to the Company.

Tom Yee Lat Shing, who is over the age of 70 years, will have to retire at the forthcoming Annual General Meeting pursuant to Section 153 (6) of the Companies Act, Cap. 50. The assessment of Tom Yee Lat Shing’s reappointment and his independence were given particular consideration by the NC as he has now served on the Board for more than 17 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 reappointed as an independent non-executive director.

38



BOARD PERFORMANCE

PRINCIPLE 5

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

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. With the assistance of the 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. The appointment and the removal of the Company Secretary are subject to the Board’s approval.

All Board members also have separate and independent access to the senior management of the Company and the Group.

Board members are aware that they, whether as a group or individually, in the furtherance of their duties, can take independent professional advice, if necessary, at the Company’s expense.

B. REMUNERATION MATTERS

PROCEDURES FOR DEVELOPING REMUNERATION POLICIES

PRINCIPLE 7

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 for approval of the remuneration of the Executive Directors are forwarded to the Board. 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

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 comprising 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)

The 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.

40



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 76, 77 and 78 of the Annual Report.

The RC held one meeting during the financial year and had on four occasions used circular resolutions in writing to resolve certain decisions which are then recommended to the Board. The issues deliberated at the meeting and through the circular resolutions in writing 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

DIRECTORS’ AND KEY EXECUTIVES’ REMUNERATION

The Directors’ and key executives’ remuneration table for the financial year ended 31 December 2010 is as follows:

Fees Salary BonusOther

Benefits

Amortisation of Stock Options

Expenses Total


Non-Independent Executive Directors in the Band of S$500,000 to S$750,000Jiang Li JunMa Gui Chuan

Non-Independent and Non-Executive Director in the Band of S$500,000 to S$750,000Liu De Tian Note 1

Non-Independent and Non-Executive Directors in the Band of below S$500,000 Wang Xing Ru Note 1

Ma Zhi HongLu Cheng Gang

Independent Directors in the Band of below S$500,000Tom Yee Lat ShingWang Kai YuenEr Kwong WahAng Swee Tian

Executives in the Band of below S$500,000 Ye Bin LinLi Jian XiongWong Meng Yun

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

0%0%

0%

0%0%0%

100%100%100%100%

0%0%0%

41.82%47.83%

26.89%

89.00%89.00%

0%

0%0%0%0%

46.83%47.83%54.44%

41.40%38.53%

66.03%

6.79%6.79%100%

0%0%0%0%

37.50%38.31%38.19%

16.78%13.64%

7.08%

4.21%4.21%

0%

0%0%0%0%

15.67%13.86%7.37%

0%0%

0%

0%0%0%

0%0%0%0%

0%0%0%

100%100%

100%

100%100%100%

100%100%100%100%

100%100%100%

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 2010.

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.

C. ACCOUNTABILITY AND AUDIT ACCOUNTABILITY

ACCOUNTABILITY

PRINCIPLE 10

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 Audit Committee (“AC”) comprising all Non-Executive Independent Directors are as follows:

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)

42



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.

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.

As for those subsidiaries that were not audited by PricewaterhouseCoopers LLP, the Board and the AC are satisfied that the appointments would not compromise the standard and effectiveness of the audit of the Group.


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 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 35 to the Financial Statements.

Based on internal controls established by the Group, work performed by the internal and external auditors, and reviews conducted by the Audit Committee and the Enterprise 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”) comprising six 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 Independent)Wang Kai Yuen (Non-Executive Independent)Er Kwong Wah (Non-Executive Independent)Wang Xing Ru (Non-Independent and Non-Executive) (Appointed on 12 July 2010)Ye Bin Lin (Alternate Director) Liu De Tian (Alternate Director) (Appointed on 12 July 2010)

44



The ERMC assists the Board in fulfilling its oversight responsibilities on risk management. The responsibilities of the ERMC would include the following:

• reviews the overall risk management system and process and makes recommendations on changes as and when considered appropriate;

• reviews the Group’s risk policies, guidelines and limits; and• reviews periodically the Group’s material risk exposures and evaluates the adequacy and effectiveness of the

mitigating measures implemented by management.

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 ERMC held four 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.

COSCO Shipyard Group continues to have 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• Identify 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

Deloitte & Touche Enterprise Risk Services Pte Ltd had performed a strategic risk profiling in the Group’s major subsidiaries and this has been successfully completed in 2010. As the Group’s enterprise risk management programme is a long-term initiative that calls for commitment and inputs from various stakeholders, a phased implementation of the enterprise risk management policies with guidance from Deloitte & Touche Enterprise Risk Services Pte Ltd are planned to be carried out in a systematic manner coupled with constant education and training of local management staff and risk owners.

INTERNAL AUDIT

PRINCIPLE 13 The internal audit function’s primary line of reporting is to the Chairman of the Audit Committee. Internal Audit is an independent function within the Company. Internal Audit reports directly to the AC and administratively to the President. 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

REGULAR, EFFECTIVE AND FAIR COMMUNICATION

PRINCIPLE 14

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.

GREATER SHAREHOLDER PARTICIPATION

PRINCIPLE 15

COSCO Corporation encourages shareholders to participate actively in general meetings. At general meetings of the Company, shareholders are given the opportunity to express their views and ask questions regarding the Company and the Group.

The Company’s Articles of Association allow a shareholder entitled to attend and vote to appoint a proxy who need not be a shareholder of the Company to attend and vote at the meetings.

The Board members and chairpersons of the Audit, Nominating, Remuneration, Enterprise Risk Management and Strategic Development 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.

46




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 interested person

transactions conducted under shareholders’ mandate

pursuant to Rule 920 (excluding transactions less

than $100,000)

Between Subsidiaries and:

Chimbusco (S) Pte LtdChimbusco Dalian BranchChimbusco Guangzhou BranchChimbusco Lianyungang BranchChimbusco Shanghai BranchChimbusco Zhoushan BranchCosbulk International Trading Co., LtdCosco (Cayman) Mercury Co., LtdCosco (HK) Shipping Co., LtdCosco Bulk Carrier Co., LtdCosco Bulk Carrier Holdings (Cayman) LimitedCosco Container Lines Co., LtdCosco Finance Co., LtdCosco International Trade LtdCosco Jiangsu International Freight Co.Cosco Nantong Steel Co., LtdCosco Shanghai Ship Management Co., LtdCosco Shipping Co., LtdDalian Ocean Shipping CompanyDalian Yuan Chang Shipping Co., LtdFreightworld Pte LtdGuangzhou Ocean Shipping CompanyNantong Chimbusco Marine BunkerNantong Cosco Ship Equipment CompanyNantong Yuantong Container Warehouse and Transportation Co., LtdQingdao Manning Co-operation LtdQingdao Ocean Shipping CompanyShanghai Cosco-Shokuyu Shipping CompanyShanghai Ocean Crew Co., LtdShanghai Ocean International Trading Co., LtdShanghai Ocean Shipping CompanyShenzhen Ocean Shipping CompanyTianjin Tianhui Shipping & Enterprise Co., LtdTianjin Yuanhua Shipping Co., LtdTosco Keymax International Ship Management Co., LtdXiamen Ocean Shipping CompanyYuanTong Marine Service Co.Total

S$’000

--------------------

11,650---

-------------

11,650

S$’000

52810,5046,994

969441

7,708808242

3,97212,63713,86610,408

453,925101433

19,3984,754

1382,940

959 -

25,2722,0096,513

4322,3261,984

1215,277

5736,404

6902,071

380150925101

606,953

E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY (continued)

As At 31/12/2010 As At 31/12/2009S$’000 S$’000

Balances placed with a fellow subsidiary, Cosco Finance Co., Ltd:- Cash at bank 85,045 168,493- Short-term bank deposits 388,500 616,031

473,545 784,524

F. DEALING IN SECURITIES

In line with Chapter 12 Rule 1207(18) of the Listing Manual of SGX-ST on dealings in securities, the Company has adopted an internal compliance code which mirrors substantially the provisions of the said rule to provide guidance to its Directors and officers in relation to dealings in its securities.

The Company’s Code prohibits securities dealings by the Directors and employees while in possession of price-sensitive information. The Company issues regular circulars to its Directors, principal officers and relevant officers who have access to unpublished material price-sensitive information to remind them of the aforementioned prohibition and to remind them of the requirement to report their dealings in shares of the Company. The Directors and employees are also prohibited from dealing in the securities of the Company during the period commencing two weeks before the announcement of financial results of the Company for each of the first, second and third quarters of its financial year or one month before the financial year, as the case may be, and ending on the date of the announcement of the relevant results.

48



E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY (continued)


CORPORATEINFORMATION

Audit CommitteeTom Yee Lat Shing ChairmanWang Kai YuenEr Kwong WahAng Swee Tian

Remuneration CommitteeEr Kwong Wah ChairmanJiang Li JunTom Yee Lat ShingWang Kai YuenAng Swee Tian

Nominating CommitteeWang Kai Yuen ChairmanJiang Li JunTom Yee Lat ShingEr Kwong WahAng Swee Tian

Enterprise Risk Management CommitteeAng Swee Tian ChairmanJiang Li JunTom Yee Lat ShingWang Kai YuenEr Kwong WahYe Bin LinWang Xing Ru (Appointed on 12 July 2010)Liu De Tian (Appointed on 12 July 2010)

Strategic Development CommitteeJiang Li Jun ChairmanLiu Guo Yuan (Appointed on 3 March 2011)Tom Yee Lat ShingWang Kai YuenEr Kwong WahAng Swee Tian

Registered Office and Business Contact Information9 Temasek Boulevard#07-00 Suntec Tower TwoSingapore 038989Telephone: 6885 0888Fascimile: 6336 9006Website: www.cosco.com.sg

Company Registration Number196100159G

AuditorsPricewaterhouseCoopers LLP8 Cross Street #17-00PWC BuildingSingapore 048424Partner-in-charge:Tham Tuck Seng (since FY2007)

Company SecretariesLawrence KwanLow Siew Tian

Share Registrar and Share Transfer OfficeTricor Barbinder Share Registration Services (A division of Tricor Singapore Pte Ltd)8 Cross Street #11- 00PWC BuildingSingapore 048424Telephone: 6236 3333Facsimile: 6236 4399

Board of DirectorsLiu Guo Yuan Chairman and Non-Independent and Non-Executive DirectorJiang Li Jun Vice Chairman, President and Non-Independent Executive DirectorMa Gui Chuan Non-Independent Executive DirectorWang Hai Min Non-Independent and Non-Executive DirectorWang Xing Ru Non-Independent and Non-Executive DirectorMa Zhi Hong Non-Independent and Non-Executive DirectorTom Yee Lat Shing Non-Executive Independent DirectorWang Kai Yuen Non-Executive Independent DirectorEr Kwong Wah Non-Executive Independent DirectorAng Swee Tian Non-Executive Independent Director

Ang Swee Tian, Tom Yee Lat Shing, Wang Hai Min, Liu Guo Yuan, Wang Kai Yuen, Ma Gui Chuan, Er Kwong Wah,

Jiang Li Jun, Wang Xing Ru and Ma Zhi Hong


50

BOARD OF DIRECTORS

From left to right:

Annual Report 2010

Liu Guo Yuan

Chairman, Non-Independent and

Non-Executive Director

Mr Liu Guo Yuan has been appointed as the Chairman, Non-

Independent and Non-Executive Director of the Company

in place of Mr Li Jian Hong with effect from 1 September

2010.

Mr Liu Guo Yuan, born in 1951, started his career in 1975.

Currently, Mr Liu is General Counsel/Chief Legal Officer of

COSCO Group head office and China COSCO Holdings

Company Ltd. He is also a certified senior economist and an

arbitrator of the China Arbitration commission.

In 1975, Mr Liu graduated from Beijing Foreign Languages

Institute and joined COSCO H.Q. as a fleet operation planner

in the shipping department. From 1980 to 1982, he studied

and acquired master degree (LLM) in the Law School of

University of Washington Seattle U.S.A. Since 1982, he

had worked as manager, director and deputy managing

director in departments of Shipping, Law & Policy Research,

Administration, Corporate Planning & Strategy. In early

1990s, he was promoted as the Senior Commercial Director

of COSCO H.Q.

In 1993 he became the deputy managing director of COSCO

Tianjin. From 1998 to 2000, he was vice president and

president of COSCO Europe.

From 2000 to 2008, Mr Liu was nominated separately the

Executive Vice-Chairman & President of COSCO (Hong

Kong) Group Ltd., the Executive Vice Chairman of COSCO

International Holdings Ltd (HKEX 517), Executive Director &

Vice Chairman of COSCO Pacific Ltd. (HKEX 1199), a Non-

Executive Director of China COSCO Holdings Company Ltd

(HKEX 1919) and a Non-executive director of the Chong Hing

Bank Ltd (HKEX 1111), Chairman and Executive Director

of COSCO (H.K.) Shipping Co., Ltd. Etc. Mr Liu was also

nominated by the HKSAR Government member of Hong

Kong Port Development Council, the Hong Kong Maritime

Industry Council, the Hong Kong LOGSCOUNCIL, and an

Investment Promotion Ambassador (IPA) He was the Vice

Chairman of Hong Kong Shipowners’ Association, Vice

Chairman of the Hong Kong Chinese Enterprises Association

as well as a Council member of the Hong Kong General

Chamber of Commerce and the Hong Kong Management

Association. On July 1st 2007, Mr Liu was appointed by

HKSAR Chief Executive as the Justice of Peace (JP).

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.

51

Ma Gui ChuanNon-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 Shipping

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.

Wang Hai MinNon-Independent and Non-Executive Director

Mr Wang Hai Min has been appointed as a Non-Independent

Non-Executive Director of the Company in place of Mr Zhang

Liang with effect from 2 August 2010.

Mr Wang Hai Min, born in July 1972, graduated from

Shanghai Fudan University with a MBA degree. He joined

COSCO Container Lines in July 1995 and worked in this

company until January 2010. Over these years, Mr Wang

had worked in different positions of staff, assistant manager,

deputy manager, manager, senior manager and department

head with growing responsibilities on cooperated shipping

services and strategic planning. From June 2006 to January

2010, he was the general manager of the strategic planning

department. In January 2010, Mr Wang was transferred to

Beijing and became the general manager of transportation

division in COSCO Group head office.

Wang Xing RuNon-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.

Ma Zhi HongNon-Independent and Non-Executive Director

Mr Ma Zhi Hong has been appointed as a Non-Independent

Non-Executive Director of the Company in place of Mdm Sun

Yue Ying with effect from 2 August 2010.

Mr Ma Zhi Hong, born in March 1957, graduated from Dalian

Maritime University with a doctorate degree. He joined

COSCO in July 1979. Over the past 30 and more years, Mr Ma

has worked as an engineer on-board ships, chief engineering

superintendent of COSCO Container Lines, deputy director

of COSCO Bulk, assistant president of COSCO Group head

office, vice president of COSCO Hong Kong and deputy

managing director of COSCO Shipyard Group.

52CORPORATE GOVERNANCEAND TRANSPARENCY

BOARD OF DIRECTORS

Ma Gui ChuanNon-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 Shipping

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.

Wang Hai MinNon-Independent and Non-Executive Director

Mr Wang Hai Min has been appointed as a Non-Independent

Non-Executive Director of the Company in place of Mr Zhang

Liang with effect from 2 August 2010.

Mr Wang Hai Min, born in July 1972, graduated from

Shanghai Fudan University with a MBA degree. He joined

COSCO Container Lines in July 1995 and worked in this

company until January 2010. Over these years, Mr Wang

had worked in different positions of staff, assistant manager,

deputy manager, manager, senior manager and department

head with growing responsibilities on cooperated shipping

services and strategic planning. From June 2006 to January

2010, he was the general manager of the strategic planning

department. In January 2010, Mr Wang was transferred to

Beijing and became the general manager of transportation

division in COSCO Group head office.

Wang Xing RuNon-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.

Ma Zhi HongNon-Independent and Non-Executive Director

Mr Ma Zhi Hong has been appointed as a Non-Independent

Non-Executive Director of the Company in place of Mdm Sun

Yue Ying with effect from 2 August 2010.

Mr Ma Zhi Hong, born in March 1957, graduated from Dalian

Maritime University with a doctorate degree. He joined

COSCO in July 1979. Over the past 30 and more years, Mr Ma

has worked as an engineer on-board ships, chief engineering

superintendent of COSCO Container Lines, deputy director

of COSCO Bulk, assistant president of COSCO Group head

office, vice president of COSCO Hong Kong and deputy

managing director of COSCO Shipyard Group.

Annual Report 2010

53

Er Kwong WahNon-Executive Independent Director

Mr Er Kwong Wah was appointed as an Independent

Director on 20 December 2002. He chairs the Remuneration

Committee and is a member of the Audit, Nominating,

Enterprise Risk Management and Strategic Development

Committee. 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 then 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, China Oilfield Technology

Services Group Ltd, Eucon Holding Ltd and Van Der Horst

energy Ltd.

For his outstanding service in the Government and in the

community, Mr Er was awarded the PPA(E) or Public

Administration Medal (Gold), the BBM (Public Service Star)

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, Nominating and

Strategic Development 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.

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 20 April 2010.

He is Chairman of the Company’s Audit Committee and

member of the Nominating, Enterprise Risk Management,

Remuneration and Strategic Development 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.

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,

Remuneration and Strategic Development 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, 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.


BOARD OF DIRECTORS

Er Kwong WahNon-Executive Independent Director

Mr Er Kwong Wah was appointed as an Independent

Director on 20 December 2002. He chairs the Remuneration

Committee and is a member of the Audit, Nominating,

Enterprise Risk Management and Strategic Development

Committee. 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 then 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, China Oilfield Technology

Services Group Ltd, Eucon Holding Ltd and Van Der Horst

energy Ltd.

For his outstanding service in the Government and in the

community, Mr Er was awarded the PPA(E) or Public

Administration Medal (Gold), the BBM (Public Service Star)

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, Nominating and

Strategic Development 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.

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 20 April 2010.

He is Chairman of the Company’s Audit Committee and

member of the Nominating, Enterprise Risk Management,

Remuneration and Strategic Development 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.

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,

Remuneration and Strategic Development 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, 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.

Annual Report 2010

55

KEY MANAGEMENT


Wong Meng Yun, Li Jian Xiong, Jiang Li Jun and Ye Bin LinFrom left to right:

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. in April 2001 as

Vice President. In 2009, he became the director of Investor

Relations Professionals Association (Singapore) (IRPAS). He

is currently also the director of COSCO Marine (S) Ltd.

Mr Li graduated from Qingdao Ocean Shipping Mariners’

College and received his MBA from Shanghai Jiao Tong

University.

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. 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 professional

and leadership 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).

Annual Report 2010

57

Artist’s impression of COSCO Qidong shipyard which specialises in offshore marine engineering.

WE ARE CLOSER TO THE FUTURE WE ENVISIONWith our wide offerings, we have a solid foundation for long-term expansion. The value we are creating will enable us to realise our vision to be a diversified marine conglomerate providing Ship Repair and Conversion, Ship Building and Offshore Marine Engineering.

INVESTOR RELATIONS

At COSCO Corporation, Investor

Relations (IR) is a key component of

our strategy to develop as a global

marine conglomerate and a leading

corporate entity. Building on our

strong and accountable leadership,

we practice effective corporate

governance, regular performance

reporting and clear and timely investor

communications. In this regard,

we strive to provide frequent and

substantive corporate disclosure

through an active investor relations

programme.

Our pro-active investor relations

engagement has generated strong

interest in our stock. As a testament

to widespread shareholder interest,

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

can participate in the potential growth

of highly liquid, locally-listed China

companies.

Active EngagementAs a widely traded stock included

in many indexes, we understand

the importance of timely and

pertinent corporate disclosure. Over

the year in review, we undertook

announcements covering contracts

won, quarterly results, growth

strategies, operational commentaries

and our business outlook. We

frequently interact with the investment

community of shareholders, stock

brokerages, banks and other financial

institutions to discuss, elaborate

and disseminate information about

COSCO Corporation. We also engage

the media and the general public

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.

During the year in review, we have

held many meetings with investors.

Our investor relations activities also

include meetings with fund managers

and shareholders, results briefings for

every financial quarter, and investment

briefings. Over FY2010, we engaged

all senior management members of

COSCO Corporation through various

meetings and events. In addition,

over 300 shareholders attended our

Annual General Meeting in April 2010.


Annual Report 2010

61

Analyst

Ajay Mirchandani

Alfred Low

Alex Goh

Cheryl Lee

Chua Jen-Ai

Chong Wee Lee

Gerald Wong

Ho Pei Hwa

Janice Chua

Kevin Chong

Lim Siew Khee

Lisa Lee

Low Horng Han

Low Pei Han

Nancy Wei

Neel Sinha

Rohan Suppiah

Company

JP Morgan

Phillip Securities

AmResearch

UBS

CLSA

Merrill Lynch

Credit Suisse

DBS Vickers

DBS Vickers

Deutsche Bank

CIMB

Nomura Securities

CITI

OCBC Research

UOB Kay Hian

HSBC

Kim Eng Securities

INVESTOR RELATIONS


Major IR Events in 2010

Date

13 January

22 February

10 – 11 March

20 April

23 April

6 May

10 – 11 May

19 – 20 May

24 – 25 May

7 July

2 August

3 August

11 August

19 – 20 August

1 – 2 September

29 September

5 October

20 – 22 October

3 November

4 November

9 – 10 November

16 – 18 November

Event

DBS Vickers Pulse of Asia Conference 2010

FY2009 results briefing

DAIWA Securities investor conference

FY2009 Annual General Meeting

DBS Vickers Hong Kong investor briefing

1QFY10 results briefing

Deustche Bank investor conference

Bank of America Merrill Lynch investor conference

DBS Vickers investor conference

DBS Vickers investor conference


Bank of America Merrill Lynch briefing

CITI investor conference

CLSA investor conference

UBS investor conference

DAIWA investor conference

Awarded SIAS Investors’ Choice Award

CITI investor conference


DBS Vickers briefing

Morgan Stanley investor conference

DAIWA investor conference


IR Awards 2010For the 2nd consecutive year, the Securities

Investors Association of Singapore selected

COSCO Corporation as the “Most Transparent

Company” in the overseas company category

at its “SIAS 11th Investors’ Choice Award

2010”, held in Singapore on 5 October 2010.

This award, as well as other previous

accolades, recognise our continuous efforts

in corporate governance and disclosure,

regular communications and investor

engagement. Looking forward, we intend to

continue active investor relations and further

improve our standards, understanding its

integral importance in generating long-term

sustainable shareholder value.

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

1.200

1.400

1.600

1.800

2.000

2.200

3300

3200

2.140

3190.04

3100

3000

2900

2800

2700

2600 1450

1500

1550

1600

1650

1700

1750

1800

1850

1762.52

FY2010

Last PriceCOS SP Equity [R1] 2.140 +.010FSSTI Index [R2] 319004 -22.42MXSG Index [R3] 1762.52 -14.65

RISK MANAGEMENT

Risk factors

IntroductionThe 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 processThe Group’s process for identifying

and managing risk is set by the

Board through the Enterprise Risk

Management Committee (“ERMC”).

The ERMC has delegated the day-

to-day management of risk within

the Group to the Risk Management

Committee (“RMC”) of each of

its operating subsidiaries. The

RMC of each of the subsidiaries

comprises senior management staff

of each division within the operating

subsidiaries.

The ERMC also engages the services

of Deloitte & Touche Enterprise

Risk Services Pte Ltd to perform

strategic risk profiling in the Group’s

major subsidiaries and this has been

successfully completed in 2010. As the

Group’s enterprise risk management

program is a long-term initiative that

calls for commitment and inputs

from various stakeholders, a phased

implementation of the enterprise risk

management policies with guidance

from Deloitte & Touche Enterprise

Risk Services Pte Ltd are planned to

be carried out in a systematic manner

coupled with constant education and

training of local management staff and

risk owners.

The Board currently conducts

periodical reviews 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

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

reassurance 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,

economically viable, or prudent to

manage such risks. Consequently,

there can never be an absolute

assurance against the Group failing to

achieve its objectives or a material loss

arising.

1. External risksThe Group is subject to a number

of external risks. The Group defines

external risks as those that stem from

factors which are mainly outside of its

control. These risks will often arise

from the nature of the Group and the

industry in which it operates.

Legal, regulatory, political and societal risksThe Group is at risk from significant

and rapid change in the legal systems,

regulatory controls, and custom and

practices in the regions in which it

operates. These affect a wide range

of areas. Accordingly, changes to, or

violation of, these systems, controls

or practices could increase costs and

have material and adverse impacts

on the reputation, performance and

financial condition of the Group.

Political developments and changes

in society, including increased

scrutiny of the Group, its businesses

or its industry, 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.

CompetitionIncreased 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 demandCustomer demand for the Group’s

services and expertise is expected

to increase to a higher level of

expectation. The Group expects

greater scrutiny by customers before

they take delivery of vessels. This will,

inadvertently, increase the cost of

building the vessels. A failure to recover

higher costs could materially adversely

impact the Group’s performance.

The Group has introduced enhanced

modern shipbuilding management

systems software to better manage

and to mitigate the risks of late ship-

built delivery and quality. A “COSCO

Shipyard CIMS System Maintenance

and Operation Regulation” is being

developed to ensure common

practices, smooth and stable operation

throughout the various shipyard

subsidiaries.

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 materialsThe Group depends upon the

availability, quality and cost of steel and

steel-plates from around the world,

which exposes it to price, quality and

supply fluctuations. Although the

Group will take measures to protect

against the short-term impact of these

fluctuations and of the concentration

of supply, there is no guarantee that

these will be effective. A failure to

recover higher costs or shortfalls in

availability could materially adversely

impact the Group’s performance.

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 and other leading

companies on the purchase of steel

supply, bunker, marine valves, boilers,

engines and other related equipments

to mitigate risks in such supplies.


RISK MANAGEMENT

66

2. Internal risksInternal risks are those arising from

factors primarily within the Group’s

control, including from the Group’s

structure and processes.

Information technology infrastructureThe Group depends on accurate,

timely information and numerical data

from key software applications to aid

day-to-day business and decision-

making. Any disruption caused by

failings in these systems, of underlying

equipment or of communication

networks could delay or otherwise

impact the Group’s day-to-day

business and decision making and

have materially effects on the Group’s

performance.

Operation interdependenceThe Group’s operations in individual

provinces are increasingly dependent

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 a number

of other provinces and materially

adversely impact the performance or

financial condition of the Group.

Operational performance and project deliveryFailure 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.

The Group has also established an

enterprise technology standards

system under the guidance of

Singaporean and South Korean

experts to enhance the basic design

and detailed design of ships and

marine engineering products.

EmployeesThe Group depends on the continued

contributions of its executive officers

and employees, both individually and

as a group. While the Group reviews its

people policies on a regular basis and

invests significant resources in training

and development and recognising

and encouraging individuals with high

potential, there can be no guarantee

that it will be able to attract, develop

and retain these individuals at an

appropriate cost and ensure that the

capabilities of the Group’s employees

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 outsourcingShip 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 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 risksExecutive 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 disposalsRisks inherent in the investments,

acquisition and disposals may have

an adverse impact on the Group’s

business or financial results.

From time to time the Group may

make investments, acquisitions and

disposals of businesses. While these

are carefully planned, the rationale

for them may be based on incorrect

assumptions or conclusions and they

may not 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 risksThe Group is exposed to market risks

such as interest rate and exchange

rate risks arising from its international

business.

Managing currency fluctuationsThe main financial risks facing the

Group are fluctuations in foreign

currency, interest rate risk, availability

of financing to meet the Group’s needs

and default by counterparties and

customers. Any of these financial risks

may materially adversely impact the

performance or financial condition of

the Group.

The Group has established a

management system to address

financial risks. Fluctuations in currency

exchange rates are closely monitored.

The Group at its discretion may

employ 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 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 139 to 147.


RESEARCH AND DEVELOPMENT

COSCO believes in being at the forefront

of technological change. In fact, constant

technological innovation has always

been the driving force behind our quest

for:

a. Greater efficiency,

b. Enhanced productivity, and

c. Higher quality standards

We believe innovation holds the key to

our future success. Through constant

renewal and refining of our technological

capabilities, we will be positioned with a

competitive advantage for the present

and engender sustainable growth for

the future.

Year in ReviewThe year 2010 saw COSCO reaping

the fruits of our labour as we gained

national recognition for our R&D efforts.

COSCO Shipyard Group’s Technical

Centre received national recognition

from the PRC National Development and

Reform Commission (NDRC), Finance

Ministry and other relevant government

agencies.

Our R&D team comprises more than

1,000 technicians and researchers with

400 professionals in the areas of ship

repair, ship conversion, shipbuilding and

offshore marine engineering.

Our R&D team has successfully

registered thirteen patents with the State

Intellectual Property Office of China.

With high standards and dynamic

drive, our R&D team has made major

breakthroughs in contributions to the

techniques and processes employed

in vessel construction including the

construction of jack-up rigs and a series

of shuttle tankers.

Projects carried out with our R&D input

also include the Super M2 jack-up rig,

GM4000 semi-submersible platform,

the wind turbine installation jack-up

vessel, the Dalian Developer (the first

deepwater drillship to be built in China)

and the Sevan Driller (the world’s first

cylindrical drilling unit), which are major

and important contracts in the Chinese

offshore marine engineering market. Our

R&D team is also currently involved in the

construction of the Octabuoy Production

Platform and the second Sevan Driller.

In August 2010, we commenced the

construction of the DP3 deepwater

drillship. When completed, it will be

able to drill wells in oilfields with high

efficiency and safety, even in harsh

environments and at ultra-deep water

depths up to 10,000 ft with drilling

depths exceeding 35,000 ft. Its variable

deck load capacity of 25,000 tons and

68INSIDE COSCO AND CORPORATE CITIZENSHIP

1,000,000 BBL cargo storage capacity

will be the highest of any drillship ever

built. This engineering achievement

attests to our growing offshore marine

engineering capabilities.

Strategic PartnershipsCollaborations with reputable institutions

and companies to accelerate design and

technological improvements have always

been crucial to the company’s growth.

In 2010, COSCO Shipyard inked a

strategic cooperation agreement

with Harbin Engineering University to

develop new products, technology

and techniques, and conduct strategic

research and technical communication

through the hiring of professors as

advisors, conducting academic

seminars and establishing information

exchange systems. The university will

also assist COSCO Shipyard to set up a

post-doctoral centre where experts will

be able to carry out research work. This

co-operation provides COSCO Shipyard

with an important springboard for the

mastering of new core technologies, and

the training of an advanced research and

development team.

The establishment of the COSCO-

KOMAC (CK) Design Centre in 2008,

has created a win-win strategy for both

companies, especially in the areas of

technology improvement and market

expansion, as KOMAC brings cutting-

edge expertise and extensive experience

to the various operational divisions of

the shipyards, realising its vision to be a

world-class ship design centre.

In the offshore sector, COSCO Technical

Centre continually partners with World-

Class design consultancy companies

such as GustoMSC, F&G, Moss

Maritime, and GVA to jointly develop

the latest generation of jack-up rigs,

semi-submersibles, drillships, FPSOs

and wind turbine installation jack-up

vessels.

Moving ForwardLooking forward, we aim to strengthen

research not only internally but through

strategic alliances. Our direction for

R&D remains clear. We seek to create

original technology, bringing product

design development, scientific research,

quality assessment, new technical

development and more under the roof of

COSCO Shipyard Technical Center. This

will further complement our growth and

maturity as an integrated ship repair, ship

building and offshore marine engineering

industry player.


HUMAN RESOURCES AND WORKPLACE SAFETY

Human Resources

OverviewAt COSCO, we value our people.

They are vital in our pursuit of greater

growth today and in the future. We

have accordingly employed various

approaches such as recruitment,

training and a reward scheme to

strengthen the workforce.

Talents are recruited through a

competitive reward and remuneration

scheme, and are constantly developed

through a performance and appraisal

system to help staff progress in

their personal goals and career

advancement. Aside from attracting

new talent, it is equally important for

the group to educate and train our

people as an investment for long-term

growth.

Recruitment and Training As a value-driven, world-class

enterprise, we recognise that human

capital is an important component

in optimising growth. Our team is

constantly strengthened through

active recruitment of top graduates

from leading Chinese universities.

Annually, more than 1,000 fresh

graduates are recruited. They then

undergo management trainee courses

which prepare them for their future

management roles. Technical staff are

trained and required to pass a course

prior to work commencement. They

are then assessed annually to ensure

that their skills meet the necessary

standards.

In line with our belief that continuous

learning is a fundamental building block

of growth, our employees undergo

training for international standards

and safety measures, technical,

engineering and management skills.

Reward and RetentionTo inculcate staff loyalty and bring out

their best, COSCO has introduced

various schemes including the

performance and achievement

appraisal system which seeks to

align work goals with personal career

development and remuneration.

Another scheme is the “Model

Employee Reward” scheme. In

past years, some best-performing

employees have been awarded with a

trip to one of the Company’s overseas

subsidiaries. Aside from being an

incentive trip, it gives the recipient an

opportunity to experience the work

culture in a foreign environment.

Skill-based competitions are also

held frequently to enhance skills and

cultivate initiative.

Outlook In the year ahead, COSCO will continue

its effective management of contract

workers and maintain harmony and

stability for both our contract and

in-house workforce. This will ensure

that we are able to achieve optimal

performance.

Workplace Safety

OverviewAt COSCO, a strong safety culture

in the workplace is of paramount

importance. We require our staff to

undergo workplace safety training

courses specially designed to educate

staff about potential workplace dangers

and the necessary safety precautions.

Tests are also administered to ensure

a fundamental degree of proficiency

and understanding.

With these procedures in place, we

have maintained a consistent safety

track record over the last decade, and

will continue to promote an adherence

to these standards to foster and

maintain a work culture that places

high regard on workplace safety.

The Year in Review The year 2010 saw the continued

emphasis on workplace safety with

the development and introduction of

new and improved scaffolding for use

in shipbuilding projects. Equipped to

boost efficiency and encourage better

safety standards, the scaffolding also

reduces manpower needs and is more

environmentally-friendly.


Operational SafetyOperational safety is important to

us. As such, we consider it essential

to undertake regular facility and

equipment upgrades as well as

establish efficient waste disposal

methods.

The Safety Committee established in

2009 continues to conduct frequent

site visits to all our shipyards to

ensure that safety requirements and

standards are strictly adhered to.

Equipment and tools are also checked

and sent for scheduled maintenance

at least once a month to ensure they

are in optimum working condition.

In addition, forums and staff training

are just as important in establishing

a safety-first attitude, thus reducing

the risk of workplace incidents

and enabling greater operational

efficiency.

Reinforcing Safety StandardsEducation and training to raise safety

awareness levels is imperative in

COSCO’s pursuit of high safety

standards. These include mandatory

hour-long training sessions every

week to update our staff on the

updated safety rules and regulations.

The training sessions include live

demonstrations on safety measures,

and comprise an assessment at

the end of the course to evaluate

the employees’ competency and

proficiency on the subject.

A grading system has also been put

in place for the safety management

officers’ course, allowing safety

officers to further monitor and

manage the safety of their respective

shipyards. In addition, appraisals are

done by external parties on various

departments in COSCO. These

appraisals examine and certify the

quality of the work environment and

work safety.

Medical BenefitsTo complement the stringent rules

and regulations for workplace safety,

COSCO has in place an all-inclusive

network of supporting operations

which include on-site medical facilities

at all shipyards. Annual health

checks, medical insurance, dental

treatment and immunisation against

influenza are some of the many health

benefits provided for by COSCO, and

contribute to the continual well-being

of our employees. A healthy workforce

is essential to the productivity of a

global enterprise, and COSCO will

strive to ensure that its people are well

cared for.

2011: Actions and Goals2011 will see COSCO continue its

pursuit of zero accidents and fatalities.

With new equipment regularly brought

into our facilities, there is a need to

introduce necessary expertise and

safety management measures. This will

be done through training programmes,

which uphold a “safety-first” mentality.

We will retain our reward scheme to

encourage safety and deter hazardous

behaviour in the workplace.

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.

COSCO Shipyards’ management has

maintained a good track record in the

past few years in the provision of safety,

security and stability. Moving forward,

we will enhance our ship tracking,

monitoring and inspection operations,

as well as information exchange among

all onshore and offshore departments

and all crew on our vessels. This will

facilitate a holistic understanding of

operational procedures and help us to

formulate comprehensive and effective

workplace safety measures.


CORPORATE SOCIAL RESPONSIBILITY

OverviewCOSCO Corporation believes that

an enterprise pursuing sustainable

corporate development should not

only focus on increasing operating

profit but also establish a socially

responsible corporate culture. This

will pave the way for long-term

development of the enterprise as

well as catalyse our contributions

to society, the environment and the

economy. In this way, the corporation

benefits all stakeholders including

shareholders, business partners,

employees, customers and suppliers.

SingaporeCOSCO 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 four

years. This gesture may be simple,

but it has nevertheless inspired many

ex-offenders to re-integrate back to

society.

ChinaBesides contributing locally, COSCO

Corporation is also a long-time donor

to COSCO Charity Foundation - the

first non-public foundation initiated

by state-owned enterprises. This

foundation manages COSCO Group’s

social projects and charity work

within China for disaster relief, poverty

aid, medical aid and educational

support. Regular contributions by

COSCO subsidiaries have enabled the

foundation to assist its employees and

the society.

Environmental AwarenessProtecting the environment remains

one of the important tasks within

the Group. This year, in support of

environmental protection in the area of

ship repair propagated by the Green

Expo in 2010, its subsidiary Shanghai

Shipyard adopted environmentally-

protective operating techniques for

rust removal utilising a high pressure

water jet instead of traditional sand

blasting, improving the surrounding

air quality. COSCO also continues

to implement the International Safety

Management Code (“ISMC”) within

the Group, establishing a uniform

pollution prevention management

system. We will continue to employ

environmentally-friendly technologies

and ensure minimal wastage through

innovative “green” design and

recycling.

ConclusionCOSCO remains committed to

high standards of Corporate Social

Responsibility practices within the

Group, being active in community

projects, environmental protection

and charities. As the global economy

gradually recovers, we will continue to

conduct our business operations in a

way that ensures the health, welfare and

safety of our employees, customers,

communities and ecological system.


Directors’ Report

Statement by Directors

Independent Auditor’s Report

Consolidated Income Statement

Consolidated Statement of Comprehensive Income

Balance Sheets

Consolidated Statement of Changes in Equity

Consolidated Cash Flow Statement

Notes to the Financial Statements

Five-Year Summary

Shareholding Statistics

Notice of Annual General Meeting

Proxy Form for Annual General Meeting

Notes for Proxy Form

748081828384858688

153154156

FINANCIAL STATEMENTS

DIRECTORS’ REPORT

74COSCO Corporation (Singapore) Limited

For the Financial Year Ended 31 December 2010

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 2010 and the balance sheet of the Company as at 31 December 2010.

Directors

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

Liu Guo Yuan (appointed on 1 September 2010)

Jiang Li Jun

Ma Gui Chuan

Wang Hai Min (appointed on 2 August 2010)

Wang Xing Ru

Ma Zhi Hong (appointed on 2 August 2010)

Tom Yee Lat Shing

Wang Kai Yuen

Er Kwong Wah

Ang Swee Tian

Li Jian Xiong (alternate director to Liu Guo Yuan, appointed on 1 September 2010)

Lu Cheng Gang (alternate director to Wang Hai Min, appointed on 2 August 2010)

Ye Bin Lin (alternate director to Ma Zhi Hong, appointed on 2 August 2010)

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 76, 77 and 78 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

At31.12.2010

At

1.1.2010

or date of

appointment,

if later

At31.12.2010

At

1.1.2010

or date of

appointment,

if later

The Company

Wang Xing Ru 1,067,000 1,067,000 – –

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


DIRECTORS’ REPORTFor the Financial Year Ended 31 December 2010

Directors’ interests in shares or debentures (continued)

(a) (continued)

Number of unissued ordinary shares under option held

by director

At31.12.2010

At

1.1.2010

or date of

appointment,

if later

Related corporations

COSCO International Holdings Limited

- Share Option Scheme

Liu Guo Yuan 2,300,000 2,300,000

Ma Zhi Hong 1,600,000 1,600,000

China COSCO Holdings Company Limited

- Share Appreciation Rights Plan

Lu Cheng Gang 265,000 265,000

(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 76, 77 and 78 of this

report.

Number of unissued ordinary shares under option held by

director

At31.12.2010

At

1.1.2010

or date of

appointment,

if later

2006 Options

Lu Cheng Gang 700,000 700,000

2007 Options

Ma 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

DIRECTORS’ REPORT



Directors’ interests in shares or debentures (continued)

(b) (continued)

Number of unissued ordinary shares under option held by

director

At31.12.2010

At

1.1.2010

or date of

appointment,

if later

2008 Options

Ma 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 2011 were the

same as those as at 31 December 2010.

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.



Share options (continued)

(a) Cosco Group Employees’ Share Option Scheme 2002 (continued)

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.


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

Details of the options granted to directors of the Company are as follows:

Aggregategranted since

commencementof Scheme

2002 to

Aggregateexercised sincecommencement

of Scheme2002 to

Aggregateoutstanding

as atName of directors 31.12.2010 31.12.2010 31.12.2010

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

26,900,000 16,600,000 10,300,000

DIRECTORS’ REPORT




(a) Cosco Group Employees’ Share Option Scheme 2002 (continued)

No options have been granted to controlling shareholders of the Company or their associates (as defi ned in the Listing

Manual of the Singapore Exchange Securities Trading Limited).

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 during the fi nancial year. 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 at1.1.2010

Numbercancelled/

lapsedduring thefi nancial

year

Numberof unissued

ordinary shares at

31.12.2010Exercise

price Exercise period ’000 ’000 ’000 $

2006 Options (i) 2,780 – 2,780 1.23 21.2.2007 – 20.2.2016

2007 Options (ii) 12,770 (1,800) 10,970 2.48 5.2.2008 – 4.2.2017

2008 Options (iii) 19,430 (2,230) 17,200 2.95 24.3.2009 – 23.3.2018

34,980 (4,030) 30,950

(i) For non-executive directors, the exercise period shall be 21.2.2007 to 20.2.2011.

(ii) For non-executive directors, the exercise period shall be 5.2.2008 to 4.2.2012.

(iii) For non-executive directors, the exercise period shall be 24.3.2009 to 23.3.2013.



Independent auditor

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

On behalf of the directors

JIANG LI JUNDirector

MA GUI CHUANDirector

3 March 2011

STATEMENT BY DIRECTORS



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 82 to

152 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 2010, 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 JUNDirector

MA GUI CHUANDirector

3 March 2011


INDEPENDENT AUDITOR’S REPORTTo the Members of Cosco Corporation (Singapore) Limited For the Financial Year Ended 31 December 2010

Report on the Financial Statements

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

subsidiaries (the “Group”) set out on pages 82 to 152, which comprise the consolidated balance sheet of the Group and

the balance sheet of the Company as at 31 December 2010, 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 information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of fi nancial statements that give a true and fair view in accordance with

the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devising

and maintaining a system of internal accounting controls suffi cient to provide a reasonable assurance that assets are

safeguarded against loss from unauthorised use or disposition, that 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.

Auditor’s Responsibility

Our responsibility is to express an 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 about 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 controls relevant to the entity’s preparation of fi nancial statements that give a true and fair view 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 controls. 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, the consolidated fi nancial statements of the Group and the balance sheet of the Company 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 Group and of the Company as at 31 December 2010, and the results, changes in equity

and cash fl ows of the Group for the fi nancial year ended on that date.

Report on other Legal and Regulatory Requirements

In our opinion, 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 auditors, have been properly kept in accordance with the provisions of the

Act.

PricewaterhouseCoopers LLP

Public Accountants and Certifi ed Public Accountants

Singapore, 3 March 2011

CONSOLIDATED INCOME STATEMENT



Note 2010 2009

$’000 $’000

Sales 4 3,861,445 2,899,004

Cost of sales (3,385,358) (2,601,406)

Gross profi t 476,087 297,598

Other income (net) 7 178,253 146,314

Expenses

- Distribution (50,172) (42,420)

- Administrative (160,164) (181,250)

- Finance 8 (42,131) (41,904)

Share of (loss)/profi t of associated companies 20 (27) 214

Profi t before income tax 401,846 178,552

Income tax expense 9(a) (43,240) (40,758)

Net profi t 358,606 137,794

Profi t attributable to:

Equity holders of the Company 248,837 110,080

Non-controlling interests 109,769 27,714

358,606 137,794

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

- Basic 11.11 4.92

- Diluted 11.11 4.92

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


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the Financial Year Ended 31 December 2010

Note 2010 2009

$’000 $’000

Net profi t 358,606 137,794

Other comprehensive (loss)/income:

Financial assets, available-for-sale

- Net fair value (loss)/gain 32(b)(v) (279) 371

Currency translation differences arising from consolidation 32(b)(iii) (100,144) (27,480)

Other comprehensive loss, net of tax (100,423) (27,109)

Total comprehensive income for the year 258,183 110,685

Total comprehensive income attributable to:

Equity holders of the Company 181,752 93,345


258,183 110,685


BALANCE SHEETS


As at 31 December 2010

The Group The Company

Note

2010$’000

2009

$’000

2010$’000

2009

$’000

ASSETSCurrent assetsCash and cash equivalents 11(a) 867,201 1,549,175 116,957 134,511

Forward currency contracts 12 – 944 – –

Trade and other receivables 13 1,976,663 1,452,240 2,895 236

Inventories 14 518,035 677,568 – –

Construction contract work-in-progress 15 182,728 199,385 – –

Other current assets 16 4,155 6,573 205 220

3,548,782 3,885,885 120,057 134,967

Non-current assetsTrade and other receivables 17 49,089 – – 64,285

Financial assets, available-for-sale 18 3,434 4,034 – –

Club memberships 19 557 492 172 156

Investments in associated companies 20 3,569 1,922 – –

Investments in subsidiaries 21 – – 374,037 290,813

Investment properties 22 14,619 11,786 – –

Property, plant and equipment 23 2,207,952 2,349,098 650 775

Intangible assets 24 9,468 9,525 – –

Deferred expenditure 25 3,169 1,061 – –

Deferred income tax assets 30 212,703 158,523 – –

2,504,560 2,536,441 374,859 356,029

Total assets 6,053,342 6,422,326 494,916 490,996

LIABILITIESCurrent liabilitiesForward currency contracts 12 – 14,448 – –

Trade and other payables 26 3,144,533 3,559,006 17,620 16,767

Current income tax liabilities 9(b) 72,766 84,136 245 549

Borrowings 27 555,148 176,262 – –

Provisions for other liabilities 29 45,049 36,436 – –

3,817,496 3,870,288 17,865 17,316

Non-current liabilitiesBorrowings 27 437,065 938,946 – –

Deferred income tax liabilities 30 4,304 2,400 4,056 2,198

441,369 941,346 4,056 2,198

Total liabilities 4,258,865 4,811,634 21,921 19,514

NET ASSETS 1,794,477 1,610,692 472,995 471,482

EQUITYCapital and reserves attributable to equity holders of the CompanyShare capital 31 270,608 270,608 270,608 270,608

Statutory and other reserves 32 103,950 174,030 45,105 45,105

Retained earnings 824,059 639,404 157,282 155,769

1,198,617 1,084,042 472,995 471,482

Non-controlling interests 595,860 526,650 – –

Total equity 1,794,477 1,610,692 472,995 471,482



CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the Financial Year Ended 31 December 2010

Attributable to equity holders of the Company

Note

Share capital

Statutoryand otherreserves

Retainedearnings Total

Non-controllinginterests

Totalequity

$’000 $’000 $’000 $’000 $’000 $’000

2010

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

Total comprehensive income for the year – (67,085) 248,837 181,752 76,431 258,183

Disposal of subsidiaries 11(b) – – – – (6,057) (6,057)

Dividend declared by subsidiaries to

non-controlling interests of subsidiaries – – – – (1,164) (1,164)

Dividend for 2009 33 – – (67,177) (67,177) – (67,177)

Transfer from asset revaluation reserve

to retained earnings 32(b)(iv) – (3,218) 3,218 – – –

Transfer from retained earnings to

statutory reserves 32(b)(ii) – 223 (223) – – –

End of fi nancial year 270,608 103,950 824,059 1,198,617 595,860 1,794,477

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 32(b)(i) – 3,240 – 3,240 – 3,240

Non-controlling interests share of interest

in a newly incorporated subsidiary – – – – 8,404 8,404

Non-controlling interests share of increase

in registered capital of subsidiaries – – – – 37,455 37,455

Decrease in non-controlling interests of

a subsidiary – – – – (12) (12)

Dividend declared by subsidiaries to

non-controlling interests of subsidiaries – – – – (1,500) (1,500)

Dividend for 2008 33 – – (156,747) (156,747) – (156,747)

Transfer from asset revaluation reserve

to retained earnings 32(b)(iv) – (3,218) 3,218 – – –

Transfer from retained earnings to

statutory reserves 32(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


CONSOLIDATED CASH FLOW STATEMENT



Note

2010$’000

2009

$’000

Cash fl ows from operating activities

Net profi t 358,606 137,794

Adjustments for:

- Income tax expense 43,240 40,758

- Depreciation and amortisation 168,426 153,416

- Net reversal of impairment of trade and other receivables (31,241) (11,375)

- Write-off for inventory obsolescence and inventory write-down 572 4,236

- Loss on disposal of a transferable club membership – 4

- (Reversal of impairment)/impairment in value of transferable club

memberships (16) 32

- Net (gain)/loss on disposal of property, plant and equipment (743) 351

- Expected losses recognised on construction contracts 64,822 578

- Write-off for property, plant and equipment 136 40

- Employees share option expenses – 3,240

- Net fair value (gain)/loss on forward currency contracts (13,253) 15,625

- Share of loss/(profi t) from associated companies 27 (214)

- Negative goodwill – (12)

- Dividend income (20) (314)

- Interest expense (fi nancing) 42,131 41,904

- Interest income from bank deposits (investing) (13,882) (32,781)

618,805 353,282

Changes in working capital:

- Inventories and construction contract work-in-progress 171,920 234,555

- Trade and other receivables (552,397) 121,453

- Trade and other payables (469,060) (850,141)

- Other current assets 2,418 13,219

- Deferred expenditure (2,193) (1,061)

- Provisions for other liabilities 8,613 16,280

- Exchange differences 66,029 30,489

Cash used in operations (155,865) (81,924)

Income tax paid (109,234) (82,444)

Net cash used in operating activities (265,099) (164,368)



CONSOLIDATED CASH FLOW STATEMENTFor the Financial Year Ended 31 December 2010

Note

2010$’000

2009

$’000

Cash fl ows from investing activities

Purchase of property, plant and equipment (176,105) (469,924)

Proceeds from disposal of property, plant and equipment 11,200 12,319

Purchase of investment properties (10) –

Purchase of a transferable club membership (61) (101)

Proceeds from disposal of a transferable club membership – 45

Net cash outfl ows on disposal of subsidiaries 11(b) (3,950) –

Dividends received 648 764

Interest received from bank deposits 20,022 40,922

Net cash used in investing activities (148,256) (415,975)

Cash fl ows from fi nancing activities

Proceeds from borrowings 838,819 799,875

Repayments of borrowings (899,945) (328,273)

Repayments of fi nance lease liabilities (17) (18)

Non-controlling interests contribution for the equity interest in a newly

incorporated subsidiary – 8,404

Proceeds from non-controlling interests for increase in registered capital

of subsidiaries – 37,455

Decrease in bank deposits pledged 266 10,929

Interest paid (41,750) (41,536)

Dividends paid to equity holders of the Company (67,177) (156,747)

Dividends paid to non-controlling interests of subsidiaries (2,499) (34,356)

Net cash (used in)/provided by fi nancing activities (172,303) 295,733

Net decrease in cash and cash equivalents (585,658) (284,610)

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

Effects of currency translation on cash and cash equivalents (96,050) (35,602)

Cash and cash equivalents at end of fi nancial year 11(a) 863,913 1,545,621


NOTES TO THE FINANCIAL STATEMENTS



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 21 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 2010

On 1 January 2010, 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 27 (revised) Consolidated and Separate Financial Statements

FRS 103 (revised) Business Combinations

Amendments to FRS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items

The adoption of the above new or amended FRS and INT FRS did not result in substantial changes to the Group’s

and Company’s accounting policies and had no material effect on the amounts reported for the current or prior

fi nancial years.

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.


NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010

2. Signifi cant accounting policies (continued)

2.2 Revenue recognition (continued)

The Group recognises revenue when the amount of revenue and related cost can be reliably measured, when it is

probable that the collectibility of the related receivables is reasonably assured and when the specifi c criteria for each

of the Group’s activities are met as follows:

(a) Rendering of services

(i) Shipping

Revenue from time charter is recognised on 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 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 the products have been delivered to the customer,

the customer has accepted the products and collectibility of the related receivables is reasonably assured.

(d) Interest income

Interest income is recognised on 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

(i) Consolidation

Subsidiaries are entities (including special purpose entities) over which the Group has power to govern

the fi nancial and operating policies so as to obtain benefi ts from its activities, generally accompanied by

a shareholding giving rise to a 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. 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.

Non-controlling 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 equity holders of the

Company. They are shown separately in the consolidated statement of comprehensive income,

statement of changes in equity and balance sheet. Total comprehensive income is attributed to the

non-controlling interests based on their respective interests in a subsidiary, even if this results in the

non-controlling interests having a defi cit balance.

(ii) Acquisition of businesses

The acquisition method of accounting is used to account for business combinations by the Group.

The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets

transferred, the liabilities incurred and the equity interests issued by the Group. The consideration

transferred also includes the fair value of any contingent consideration arrangement and the fair value

of any pre-existing equity interest in the subsidiary.

Acquisition-related costs are expensed as incurred.

Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination

are, with limited exceptions, measured initially at their fair values at the acquisition date.

On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the

acquiree at the date of acquisition either at fair value or at the non-controlling interest’s proportionate

share of the acquiree’s net identifi able assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree

and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of

the net identifi able assets acquired is recorded as goodwill. Please refer to the paragraph “Intangible

assets - Goodwill” for the subsequent accounting policy on goodwill.




2.3 Group accounting (continued)

(a) Subsidiaries (continued)

(iii) Disposals of subsidiaries or businesses

When a change in the Company’s ownership interest in a subsidiary results in a loss of control over the

subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts

recognised in other comprehensive income in respect of that entity are also reclassifi ed to the income

statement or transferred directly to retained earnings if required by a specifi c Standard.

Any retained interest in the entity is remeasured at fair value. The difference between the carrying

amount of the retained investment at the date when control is lost and its fair value is recognised in the

income statement.

Please refer to the paragraph “Investments in subsidiaries and associated companies” for the

accounting policy on investments in subsidiaries.

(b) Transactions with non-controlling interests

Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control over the

subsidiary are accounted for as transactions with equity owners of the Group. Any difference between the

change in the carrying amounts of the non-controlling interest and the fair value of the consideration paid or

received is recognised in a separate reserve within equity attributable to the equity holders of the Company.

(c) Associated companies

Associated companies are entities over which the Group has signifi cant infl uence, but not control, generally

accompanied by a shareholding giving rise to voting rights of 20% and above but not exceeding 50%.

Investments in associated companies are accounted for in the consolidated fi nancial statements using the

equity method of accounting less impairment losses, if any.

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. Goodwill on associated companies represents the

excess of the cost of acquisition of the associate over the Group’s share of the fair value of the identifi able net

assets of the associate and is included in the carrying amount of the investments.

In applying the equity method of accounting, the Group’s share of its associated companies’ post-acquisition

profi ts or losses are recognised in the income statement and its share of post-acquisition other comprehensive

income is recognised in other comprehensive income. These post-acquisition movements and distributions

received from the associated companies 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. The accounting policies of associated

companies have been changed where necessary to ensure consistency with the accounting policies adopted

by the Group.

Gains and losses arising from partial disposals or dilutions in investments in associated companies are

recognised in the income statement.





2.3 Group accounting (continued)

(c) Associated companies (continued)

Investments in associated companies are derecognised when the Group loses signifi cant infl uence. Any

retained interest in the entity is remeasured at its fair value. The difference between the carrying amount of the

retained investment at the date when signifi cant infl uence is lost and its fair value is 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.

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.

(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.




2.4 Property, plant and equipment (continued)

(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 50 years

Leasehold land and buildings 10 - 50 years

Offi ce renovations, furniture, fi xtures and equipment 3 - 5 years

Plant, machinery and equipment 3 - 10 years

Motor vehicles 5 - 10 years

Motor vessels 20 years

Docks and quays 30 years

No depreciation is provided for construction-in-progress.

On 1 January 2010, the estimated useful life of motor vessels was changed from 15 years to 20 years which is

considered to be economically more realistic. The change in accounting policy has been applied prospectively

subsequent to that date. Accordingly, the adoption of the change in accounting estimate has no effect in

prior years. The effect on the fi nancial year ended 31 December 2010 is to decrease depreciation expense by

$12,849,000 and increase the carrying amount of motor vessels by $12,849,000.

The residual values, estimated useful lives and depreciation method of property, plant and equipment are

reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised

in the income statement when the changes arise.

(c) Subsequent expenditure

Subsequent expenditure relating to property, plant and equipment that has already been recognised is added

to the carrying amount of the asset only when it is probable that future economic benefi ts associated with the

item will fl ow to the Group and the cost of the item can be measured reliably. All other repair and maintenance

expenses are recognised in the income statement when incurred.

The motor vessels are subject to overhauls at regular intervals. The inherent components of the initial

overhaul are determined based on the estimated costs of the next overhaul and are separately depreciated

over a period of 2½ 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.





2.5 Intangible assets

Goodwill on acquisitions

Goodwill on acquisitions of subsidiaries on or after 1 January 2010 represents the excess of the consideration

transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any

previous equity interest in the acquiree over the fair value of the net identifi able assets acquired.

Goodwill on acquisition of subsidiaries prior to 1 January 2010 and on acquisition of joint ventures and associated

companies represents the excess of the cost of the acquisition over the fair value of the Group’s share of the net

identifi able assets acquired.

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.




2.7 Construction contracts (continued)

At the balance sheet date, the cumulative costs incurred plus recognised profi ts (less recognised losses) 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 10 to 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 recognised in

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 Investments in subsidiaries and associated companies

Investments in subsidiaries and associated companies are carried 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.

2.10 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.





2.10 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.

2.11 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.




2.11 Financial assets (continued)

(a) Classifi cation (continued)

(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 2.9).

(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 or loss are recognised immediately as expenses.

(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.





2.11 Financial assets (continued)

(d) Subsequent measurement (continued)

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 other comprehensive income. Changes in fair values of available-for-sale equity

securities (i.e. non-monetary items) are recognised in other comprehensive income, together with the related

currency translation differences.

(e) Impairment

The Group assesses at each balance sheet date whether there is objective evidence that a fi nancial asset or a

group of fi nancial assets is impaired and recognises an allowance for impairment when such evidence exists.

(i) Loans and receivables/Financial assets, held-to-maturity

Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy, and default

or signifi cant delay in payments are objective evidence that these fi nancial assets are impaired.

The carrying amount of these assets is reduced through the use of an impairment allowance

account which is calculated as the difference between the carrying amount and the present value of

estimated future cash fl ows, discounted at the original effective interest rate. When the asset becomes

uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts

previously written off are recognised against the same line item in the income statement.

The allowance for impairment loss account is reduced through the income statement in a subsequent

period when the amount of impairment loss decreases and the related decrease can be objectively

measured. The carrying amount of the asset previously impaired is increased to the extent that the

new carrying amount does not exceed the amortised cost, had no impairment been recognised in prior

periods.

(ii) Financial assets, available-for-sale

In addition to the objective evidence of impairment described in Note 2.11(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.




2.12 Financial guarantees

The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries and third parties

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.

2.13 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.

2.14 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.

2.15 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.





2.16 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.

2.17 Leases

(a) When the Group is the lessee:

The Group leases certain property, plant and equipment from non-related 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.




2.17 Leases (continued)

(b) When the Group is the lessor:

The Group leases certain items of property, plant and equipment and investment properties to non-related

parties.

(i) Lessor - Operating leases

Leases of property, plant and equipment and investment properties where the Group retains

substantially all risks and rewards incidental to ownership are classifi ed as operating leases.

Rental income from operating leases (net of any incentives given to lessees) is recognised in the income

statement on 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.

2.18 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.

2.19 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.





2.19 Income taxes (continued)

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.

2.20 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.

2.21 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.

(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 options 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.




2.22 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 Dollars, which is the functional currency of the Company.

(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

resulting 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.

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.

2.23 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.

2.24 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.





2.25 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.

2.26 Dividends to Company’s shareholders

Dividends to Company’s shareholders are recognised when the dividends are approved for payment.

2.27 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.

If the actual fi nal outcome (on the judgement areas) differs by 10% from the management’s estimates, the

Group would need to:

- increase the income tax liability by $6,559,000, if unfavourable; or

- decrease the income tax liability by $6,559,000, 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 $270,862,000.



3. Critical accounting estimates, assumptions and judgements (continued)

(b) Construction contracts (continued)

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 $251,365,000.

(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 Group2010 2009

$’000 $’000

Rendering of services

- Ship repair and marine engineering income 886,568 1,069,681

- Time charter revenue 128,605 132,894

- Shipping agency income 12,615 14,184

Construction revenue

- Ship building and marine engineering 2,832,915 1,681,362

Others 742 883

Total sales 3,861,445 2,899,004




5. Expenses by nature

The Group2010 2009

$’000 $’000

Raw materials, fi nished goods, consumables and other overheads 2,036,572 1,221,161

Changes in inventories and construction contract work-in-progress 131,824 213,631

Net reversal of impairment of trade and other receivables (31,241) (11,375)

Expected losses recognised on construction contracts 64,822 578

Depreciation and amortisation 168,426 153,416

Director and employee compensation (Note 6) 317,330 347,314

Sub-contractor expenses 616,942 595,471

Write-off for inventory obsolescence and inventory write-down 572 4,236

Write-off for property, plant and equipment 136 40

Rental expense on operating leases 69,886 82,678

Repairs and maintenance 22,489 33,518

Non-audit service fees paid/payable to auditor of the Company 77 154

Commission 39,917 30,087

Crew overheads 13,682 10,771

Vessel overheads 8,421 13,062

Other expenses 135,839 130,334

Total cost of sales, distribution and administrative expenses 3,595,694 2,825,076

6. Director and employee compensation

The Group2010 2009

$’000 $’000

Wages, salaries and staff benefi ts 287,577 317,218

Employer’s contribution to defi ned contribution plans including Central

Provident Fund 29,468 26,591

Share option expenses [Note 32(b)(i)] – 3,240

Directors’ fees of the Company 285 265

317,330 347,314



7. Other income (net)

The Group2010 2009

$’000 $’000

Rental income 2,564 1,594

Dividend income 20 314

Currency exchange gain - net 25,655 15,715

Interest income from bank deposits 13,882 32,781

Reversal of impairment/(impairment) in value of transferable club memberships 16 (32)

Net fair value gain/(loss) on forward currency contracts 13,253 (15,625)

Net gain/(loss) on disposal of property, plant and equipment 743 (351)

Negative goodwill – 12

Compensation received from customers 15,055 15,263

Government grants 4,038 21,382

Sundry income 12,743 8,119

Sale of scrap materials 90,284 67,142

178,253 146,314

Included in the Group’s sundry income is Jobs Credit Scheme of $85,000 (2009: $407,000). The Jobs Credit

Scheme is a cash grant introduced in the Singapore Budget 2009 to help businesses preserve jobs in the economic

downturn. The amount an employer can receive depends on the fulfi lment of certain conditions under the scheme.

The Jobs Credit Scheme ceased on 30 June 2010.

8. Finance expenses

The Group2010 2009

$’000 $’000

Interest expense

- Bank borrowings and bills payable 44,564 46,347

- Finance lease liabilities 3 3

Total interest expense 44,567 46,350

Less: Amount capitalised in construction of property,

plant and equipment [Note 23(c)] (2,436) (4,446)

Finance expenses recognised in the income statement 42,131 41,904

Borrowing costs on fi nancing were capitalised at a rate of 3.71% (2009: 4.35%) per annum.




9. Income taxes

(a) Income tax expense

The Group2010 2009

$’000 $’000

Tax expense attributable to profi t is made up of:

Current income tax

- Singapore 442 894

- Foreign 131,484 103,092

131,926 103,986

Deferred income tax (Note 30)

- Singapore (3) (12)

- Foreign (66,338) (72,602)

(66,341) (72,614)

65,585 31,372

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

- Current income tax

- Singapore (763) (566)

- Foreign (24,480) 6,686

(25,243) 6,120

- Deferred income tax (Note 30)

- Foreign 2,898 3,266

43,240 40,758



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 Group2010 2009

$’000 $’000

Profi t before tax and share of (loss)/profi t of associated companies 401,873 178,338

Tax calculated at a tax rate of 17% (2009: 17%) 68,318 30,317

Effects of:

- Change in tax rate (14,669) (21,713)

- Different tax rates in other countries 22,631 13,496

- Singapore stepped income exemption (170) (131)

- Exemption of shipping profi ts under Approved International Shipping

Scheme and Section 13A of Singapore Income Tax Act (7,074) (9,153)

- Profi ts exempted from tax (6,808) (1,327)

- Income not subject to tax (5,160) (120)

- Expenses not deductible for tax purposes 8,894 21,396

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

- Utilisation of previously unrecognised deferred tax asset (383) (246)

- Deferred tax asset not recognised – 295

- Others 6 23

Tax charge 65,585 31,372

(b) Movements in current income tax liabilities

The Group The Company2010 2009 2010 2009

$’000 $’000 $’000 $’000

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

Currency translation differences (8,680) (4,874) – –

Disposal of subsidiaries (139) – – –

Income tax paid (109,234) (82,444) (819) (3,938)

Tax expense on profi t for the current

fi nancial year 131,926 103,986 1,050 97

(Over)/under provision in prior fi nancial years (25,243) 6,120 (535) (495)

End of fi nancial year 72,766 84,136 245 549




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.

2010 2009

Net profi t attributable to equity holders of the Company ($’000) 248,837 110,080

Weighted average number of ordinary shares outstanding for basic

earnings per share (’000) 2,239,245 2,239,245

Basic earnings per share (cents per share) 11.11 4.92

(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 are calculated as follows:

2010 2009

Net profi t attributable to equity holders of the Company ($’000) 248,837 110,080

Weighted average number of ordinary shares outstanding for basic

earnings per share (’000) 2,239,245 2,239,245

Adjustment for

- share options (’000) 658 –

Weighted average number of ordinary shares outstanding for

diluted earnings per share (’000) 2,239,903 2,239,245

Diluted earnings per share (cents per share) 11.11 4.92

For 2009, the outstanding share options did 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 that

fi nancial year.



11. Cash and cash equivalents

(a) Cash and cash equivalents at the end of the fi nancial year comprise the following:


$’000 $’000 $’000 $’000

Cash at bank and on hand 261,309 463,810 14,361 3,393

Short-term bank deposits 605,892 1,085,365 102,596 131,118

867,201 1,549,175 116,957 134,511

Cash at bank and short-term bank deposits include an amount of $473,545,000 (2009: $784,524,000) 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 Group2010 2009

$’000 $’000

Cash and bank balances (as above) 867,201 1,549,175

Less: Bank deposits pledged (Note 27) (3,288) (3,554)

Cash and cash equivalents per consolidated cash fl ow statement 863,913 1,545,621

Cash and bank balances and short-term bank deposits of the Group to the extent of $3,288,000 (2009:

$3,554,000) were pledged as security for the following:

(i) long-term bank loans (Note 27) obtained to fi nance the purchases of certain motor vessels;

(ii) trade fi nance facilities; and

(iii) the issuance of banker’s guarantees in favour of third parties.




11. Cash and cash equivalents (continued)

(b) Disposal of subsidiaries

On 30 December 2010, the Company’s 51%-owned subsidiary, Cosco Shipyard Group Co., Ltd (“CSG”) has

ceased to have management control over Diesel Marine Dalian Ltd and Diesel Marine International (Nantong)

Co., Ltd, being companies in which CSG has an equity interest of 30% each. As a result of this cessation of

control, the assets and liabilities of these two companies were deconsolidated from the fi nancial statements of

the Group. The effects of the disposal on the cash fl ows of the Group were:

The Group $’000

Carrying amounts of assets and liabilities disposed

Cash and cash equivalents (3,950)

Inventories (3,698)

Trade and other receivables (5,810)

Property, plant and equipment (Note 23) (6,337)

Total assets (19,795)

Trade and other payables 11,003

Current income tax liabilities (Note 9) 139

Total liabilities 11,142

Net assets derecognised (8,653)

Less: Non-controlling interests 6,057

Net assets disposed (2,596)

The aggregate cash fl ows arising from the disposal of Diesel Marine Dalian Ltd and Diesel Marine International

(Nantong) Co., Ltd were:

The Group $’000

Net assets disposed (as above) 2,596

Reclassifi cation to investment in associated companies (Note 20) (2,596)

Cash proceeds from disposal –

Less: Cash and cash equivalents in subsidiaries disposed (3,950)

Net cash outfl ow on disposal (3,950)



12. Forward currency contracts

The Group2010 2009

$’000 $’000

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

Fair value gain/(loss) included in income statement 13,253 (15,625)

Currency translation differences 251 498

End of fi nancial year – (13,504)

Analysed as:

The Group

Contract Fair valuenotionalamount Assets Liabilities

Netassets

$’000 $’000 $’000 $’000

2010

Non-hedging instruments

- Forward currency contracts - current – – – –

2009

Non-hedging instruments

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




13. Trade and other receivables - current


$’000 $’000 $’000 $’000

Trade receivables:

- Non-related parties 388,841 434,984 – –

- Fellow subsidiaries

(see note (i) below) 114,600 78,663 – –

- Associated companies 2,502 – – –

- A subsidiary – – 131 131

505,943 513,647 131 131

Less: Allowance for impairment of receivables -

non-related parties (17,553) (51,036) – –

Trade receivables - net 488,390 462,611 131 131

Construction contracts due from customers

(Note 15):


- Fellow subsidiaries 20,346 94,827 – –

565,797 249,531 – –

Other receivables:

- Non-related parties 56,126 48,887 109 105

- Ultimate holding corporation 23 – – –

- A fellow subsidiary 4,488 10,675 – –

60,637 59,562 109 105

Less: Allowance for impairment of other

receivables - non-related parties (792) (831) – –

Other receivables - net 59,845 58,731 109 105

Advances paid to suppliers 858,775 679,201 – –

Staff advances 1,222 1,357 – –

Dividend receivable from

- Subsidiaries – – 2,655 –

- Associated companies 2,634 809 – –

Total 1,976,663 1,452,240 2,895 236

(i) A subsidiary of the Group has factored trade receivables with carrying amounts of $45,283,000 (2009: nil) to a bank in

exchange for cash during the fi nancial year ended 31 December 2010. The transaction has been accounted for as a

collateralised borrowing as the bank has full recourse to the subsidiary in the event of default by the debtors (Note 27).



14. Inventories

The Group2010 2009

$’000 $’000

Raw materials 429,816 602,391

Work-in-progress 46,014 72,273

Finished goods 42,205 2,904

518,035 677,568

The cost of inventories recognised as an expense and included in “cost of sales” amounted to $3,322,337,000 (2009:

$2,525,714,000).

15. Construction contract work-in-progress

The Group2010 2009

$’000 $’000

Beginning of fi nancial year 199,385 170,143

Contract costs incurred during the fi nancial year 2,566,433 1,789,167

Contract expenses recognised in the income statement during the fi nancial year (2,572,134) (1,755,283)

Currency translation differences (10,956) (4,642)

End of fi nancial year 182,728 199,385

Aggregate costs incurred and profi ts recognised (less losses recognised)

to date on uncompleted construction contracts 2,616,896 1,937,692

Less: Progress billings (2,448,845) (2,177,092)

Currency translation differences (6,424) 8,162

161,627 (231,238)

Analysed as:

Due from customers on construction contracts (Note 13) 565,797 249,531

Due to customers on construction contracts (Note 26) (404,170) (480,769)

161,627 (231,238)

Advances received on construction contracts (Note 26) 1,122,503 1,747,029

16. Other current assets


$’000 $’000 $’000 $’000

Deposits 1,687 1,980 7 9

Prepayments 2,468 4,593 198 211

4,155 6,573 205 220




17. Trade and other receivables - non-current


$’000 $’000 $’000 $’000

Trade receivables:

- Non-related parties (i) 72,739 – – –

Less: Current portion (34,507) – – –

38,232 – – –

Other receivables:

- A non-related party (ii) 10,857 – – –

Loans to a subsidiary (iii) – – – 64,285

49,089 – – 64,285

(i) As at 31 December 2010, the total trade receivables of $39,690,000 are secured, interest-free and with monthly instalment

payments that will be repayable in full by 2012. The remaining balance of $33,049,000 are unsecured, interest-bearing at 7%

per annum and with quarterly instalment payments that will be repayable in full by 2015.

As at 31 December 2010, the fair values of the non-current trade receivables approximated its carrying amounts, determined

from the cash fl ow analyses discounted at market borrowing rates of 3.40% which the directors expected to be available to

the Group.

(ii) Other receivables from a non-related party are unsecured and interest-free.

As at 31 December 2010, the fair values of the non-current other receivables approximated its carrying amounts, determined

from the cash fl ow analyses discounted at market borrowing rates of 3.40% which the directors expected to be available to

the Group.

(iii) The loans to a subsidiary were interest-free, unsecured and had no fi xed terms of repayment. In 2010, the full amount of

$64,285,000 was capitalised as investment in a subsidiary.

18. Financial assets, available-for-sale

The Group2010 2009

$’000 $’000


Currency translation differences (211) (91)

Fair value (loss)/gain recognised in equity [Note 32(b)(v)] (389) 495




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

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

The Group2010 2009

$’000 $’000

Quoted equity shares in a corporation, at fair value 530 958

Unquoted equity shares in corporations, at cost

- A fellow subsidiary 1,943 2,058

- A non-related party 961 1,018

2,904 3,076

3,434 4,034

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.

19. Club memberships


$’000 $’000 $’000 $’000

Transferable club memberships, at cost 937 879 428 428

Currency translation differences (13) (2) – –

Allowance for impairment in value of club

memberships (367) (385) (256) (272)

557 492 172 156

20. Investments in associated companies

The Group2010 2009

$’000 $’000



Reclassifi cation from investment in subsidiaries [Note 11(b)] 2,596 –

Share of (loss)/profi t after tax (27) 214

Dividends declared, net of tax (696) (837)


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

- Assets 29,638 11,008

- Liabilities 18,141 5,036

- Revenue 24,052 9,286

- Net (loss)/profi t (207) 602




20. Investments in associated companies (continued)

Details of associated companies are set out below:

Name of associated companies Principal activities

Country ofincorporation/

business

% ofpaid-up

capital held bysubsidiaries

2010 %

2009

%

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


PRC 40 40

Diesel Marine International

(Nantong) Co., Ltd (i) and (ii)

Overhaul and spare-parts


PRC 30 –

Diesel Marine Dalian Ltd (i) and (ii) Overhaul and spare-parts


PRC 30 –

(i) Audited by RSM China Certifi ed Public Accountants, PRC.

(ii) See Note 11(b).

21. Investments in subsidiaries

The Company2010 2009

$’000 $’000

Unquoted equity shares


Additions 82,664 –

393,535 310,871

Accumulated impairment losses (19,498) (20,058)


Movements in accumulated impairment losses are as follows:

2010 2009

$’000 $’000


Reversal of impairment charge (560) (845)




21. Investments in subsidiaries (continued)

Details of the subsidiaries are set out below:

Name of subsidiaries

Principalactivities


businessCost of

investment

% of paid-up capital held by

The Company Subsidiaries2010 2009 2010 2009 2010 2009

$’000 $’000 % % % %

Cosco

(Singapore)

Pte Ltd (i)

Ship owning, ship

chartering and

investment

holding

Singapore 87,664 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 Co.,

Ltd (v) and (vi)

Ship repair and

marine

engineering

PRC 24,670 24,670 50 50 50 50

Cosco (Dalian)

Shipyard Co.,

Ltd (v) and (vi)

Ship repair, ship

building and

marine

engineering

PRC 30,296 30,296 39 39 59 59






Principalactivities


businessCost of

investment



$’000 $’000 % % % %

Cosco

(Guangdong)

Shipyard Co.,

Ltd (v) and (vi)

Ship repair and

ship building

PRC – – – – 75 75

Cosco

(Zhoushan)

Shipyard Co.,

Ltd (v) and (vi)

Ship repair, ship

building and

marine engineering

PRC – – – – 100 100

Cosco (Xiamen)

Shipyard

Co., Ltd (v)

Ship repair PRC – – – – 51 51

Cosco

(Shanghai)

Shipyard

Co., Ltd (v)


Cosco (Tianjin)

Shipyard

Co., Ltd (v)


Cosco

(Lianyungang)

Shipyard Co.,

Ltd (v) and (vi)


Cosco (Qidong)

Offshore Co.,

Ltd (v)

Offshore marine

engineering

PRC – – – – 60 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), (v) and (vii)

Overhaul and

spare-parts

replacement

and repair

PRC – – – – – 30





Principalactivities


businessCost of

investment



$’000 $’000 % % % %

Diesel Marine

International

(Nantong)

Co., Ltd (iii), (v)

and (vii)

Overhaul and

spare-parts

replacement

and repair

PRC – – – – – 30

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






Principalactivities


businessCost of

investment



$’000 $’000 % % % %

Cos Prosperity

Shipping Pte

Ltd (i)

Ship owning

and ship

chartering

Singapore/

Worldwide

– – – – 100 100

Cos Knight

Shipping

Maritime Inc. (i)

Ship owning

and ship

chartering

Panama/

Worldwide

– – – – 100 100

Cos Lucky

Shipping

Maritime Inc. (i)

Ship owning

and ship

chartering

Panama/

Worldwide

– – – – 100 100

Costar

Agencies (M)

Sdn. Bhd. (iv)

Shipping agent Malaysia – – – – 100 100

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)

Ship repairing,

marine

engineering,

container repairs

and services,

fabrication works

services and

production of

marine outfi tting

components

Singapore – – – – 100 100

393,535 310,871

(i) Audited by PricewaterhouseCoopers LLP, Singapore.

(ii) Audited by PricewaterhouseCoopers fi rms outside Singapore.

(iii) Deemed to be a subsidiary as the Group had 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.

(vii) See Note 11(b).



22. Investment properties

The Group2010 2009

$’000 $’000

Cost



Additions 10 –

Reclassifi cation from property, plant and equipment (Note 23) 3,565 –


Accumulated depreciation and accumulated impairment losses



Depreciation charge 471 395

Reclassifi cation from property, plant and equipment (Note 23) 177 –


Net book value 14,619 11,786

Fair values 19,806 14,909

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 Group2010 2009

$’000 $’000

Rental income 1,372 1,151

Direct operating expenses arising from investment properties that generated

rental income 769 540




23. 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

Docksand

quays$’000

Construction- in-progress

$’000Total$’000

2010

Cost

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

Currency translation

differences – (44,904) (2,398) (44,254) (2,376) (26,613) (43,920) (8,384) (172,849)

Additions – 12,133 2,971 4,327 593 1,614 – 154,467 176,105

Disposals – (79) (322) (13,044) (1,326) (1,354) – (3,673) (19,798)

Disposal of subsidiaries

[Note 11(b)] – (4,646) (333) (3,536) (470) – – (156) (9,141)

Reclassifi cation – 100,880 1,673 67,113 2,218 – 57,521 (232,970) (3,565)

End of fi nancial year 3,044 883,699 47,687 805,247 44,517 280,857 797,302 59,074 2,921,427

Accumulated depreciation

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


differences – (5,407) (1,493) (13,694) (1,524) (12,530) (9,138) – (43,786)

Depreciation charge 61 33,481 9,030 76,411 6,777 14,168 27,942 – 167,870

Disposals – (10) (261) (6,560) (1,080) (1,294) – – (9,205)

Disposal of subsidiaries

[Note 11(b)] – (258) (250) (1,889) (407) – – – (2,804)

Reclassifi cation – 502 (74) (588) – – (17) – (177)

End of fi nancial year 944 107,021 30,481 249,089 28,458 134,707 162,775 – 713,475

Net book value End of fi nancial year 2,100 776,678 17,206 556,158 16,059 146,150 634,527 59,074 2,207,952



23. Property, plant and equipment (continued)

The Group

Freehold land andbuildings

$’000

Leaseholdland andbuildings

$’000

Offi cerenovations,


$’000

Plant,machinery

andequipment

$’000

Motorvehicles

$’000

Motorvessels$’000

Docksand

quays$’000

Construction- in-progress

$’000Total$’000

2009

Cost

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


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


Beginning 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

(a) The carrying amount of motor vehicles held under fi nance leases at 31 December 2010 amounted to $32,000

(2009: $63,000) (Note 27).

(b) As at the balance sheet date, the net book values of motor vessels of the Group amounting to $67,825,000

(2009: $78,547,000) are mortgaged to banks to secure long-term bank borrowings and bank facilities (Note

27).

(c) Borrowing costs of $2,436,000 (2009: $4,446,000) which arise mainly due to fi nancing for the construction of

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




23. Property, plant and equipment (continued)

The Company

Offi cerenovations,


$’000

Motorvehicles

$’000Total$’000

2010

Cost

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

Additions 7 – 7

End of fi nancial year 558 1,128 1,686


Beginning of fi nancial year 512 392 904

Depreciation charge 19 113 132

End of fi nancial year 531 505 1,036

Net book value

End of fi nancial year 27 623 650

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


Beginning of fi nancial year 489 279 768

Depreciation charge 23 113 136


Net book value




24. Intangible assets

The Group2010 2009

$’000 $’000

Goodwill arising on consolidation 9,468 9,525

Cost




Net book value 9,468 9,525

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”) 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 2010 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 4.50%

Discount rate2 2.27%

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 2010 and 31 December 2009.

25. 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.




26. Trade and other payables


$’000 $’000 $’000 $’000

Trade payables:


- Associated companies 2,057 – – –

- Fellow subsidiaries 42,913 99,717 – –

577,877 548,696 – –

Construction contracts - Advances received

(Note 15):

- Non-related parties 1,122,503 1,703,968 – –

- Fellow subsidiaries – 43,061 – –

1,122,503 1,747,029 – –

Construction contracts -

Due to customers (Note 15):


1,526,673 2,227,798 – –

Advances from non-related parties 33,927 40,658 – –

Non-trade payables:

- Ultimate holding corporation 680 720 – –

- A subsidiary – – 15,000 14,000

680 720 15,000 14,000

Deposits received 12,218 12,765 – –

Other accruals for operating expenses 991,000 720,856 2,620 2,767

Dividend payable to non-controlling interests of

subsidiaries 2,158 7,513 – –

Total 3,144,533 3,559,006 17,620 16,767

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

repayable on demand.



27. Borrowings

The Group2010 2009

$’000 $’000

Current

Bank borrowings (unsecured) 410,280 144,047

Bank borrowings (secured) 47,337 7,244

Bills payable 97,528 24,954

Finance lease liabilities (Note 28) 3 17

555,148 176,262

Non-current

Bank borrowings (unsecured) 427,743 921,492

Bank borrowings (secured) 9,322 17,451

Finance lease liabilities (Note 28) – 3

437,065 938,946

Total borrowings 992,213 1,115,208

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 Group2010 2009

$’000 $’000

Less than 1 year 555,148 176,262

1 – 5 years 380,732 802,025

Over 5 years 56,333 136,921

992,213 1,115,208

(a) Security granted

At the balance sheet date, total borrowings include secured liabilities of $56,662,000 (2009: $24,715,000) for

the Group. Secured bank borrowings are secured by:

(i) the Group’s motor vessels (Note 23)

(ii) certain bank deposits [Note 11(a)]

(iii) certain trade receivables (Note 13)

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 23).




27. Borrowings (continued)

(b) Fair values of non-current borrowings

At the balance sheet date, the carrying amounts of 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

2010 2009

SGD USD RMB SGD USD RMB

Bank borrowings – 2.79% 3.71% – 3.28% 4.35%

Bills payable – – – – – –

Finance lease liabilities 4.91% – – 4.91% – –

28. Finance lease liabilities

The Group2010 2009

$’000 $’000

Minimum lease payments due:

- Not later than one year 4 20

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

4 24

Less: Future fi nance charges (1) (4)

Present value of fi nance lease liabilities 3 20

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

- Not later than one year (Note 27) 3 17

- Later than one year but not later than fi ve years (Note 27) – 3

3 20

29. Provisions for other liabilities

The Group2010 2009

$’000 $’000

Provision for off hire claim on hire income [Note (a)] 7,043 14,242

Provision for warranties [Note (b)] 38,006 22,194

45,049 36,436



29. Provisions for other liabilities (continued)

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

The Group2010 2009

$’000 $’000


Provision made during the fi nancial year 1,715 2,537

Provision utilised during the fi nancial year (7,572) (3,129)

Currency translation differences (1,342) (391)


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 Group2010 2009

$’000 $’000


Provision made during the fi nancial year 21,289 18,014

Provision utilised during the fi nancial year (2,819) (36)



The Group gives one to two-year warranties on certain ship building and marine engineering contracts and

undertakes to repair or rectify defects that fail to perform satisfactorily. A provision is recognised at the balance

sheet date for expected warranty claims based on an estimate by technical engineers and past experience of

the possible repairs and rectifi cations.




30. Deferred income taxes

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income

tax assets against current income tax liabilities and when the deferred income taxes relate to the same fi scal authority.

The amounts, determined after appropriate offsetting, are shown on the balance sheets as follows:


$’000 $’000 $’000 $’000

Deferred income tax assets:

- to be recovered within one year 207,444 146,501 – –

- to be recovered after one year 5,259 12,022 – –

212,703 158,523 – –

Deferred income tax liabilities:

- to be settled within one year – – – –

- to be settled after one year 4,304 2,400 4,056 2,198

4,304 2,400 4,056 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 Nil (2009: $1,089,000) 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 (156,123) (91,237) 2,198 –

Change in tax rate (14,669) (21,713) – –

Currency translation differences 11,277 4,338 (112) 33

Deferred tax (credited)/charged to income

statement (48,774) (47,635) 1,970 2,165

Deferred tax (credited)/charged to equity

[Note 32(b)(v)] (110) 124 – –

End of fi nancial year (208,399) (156,123) 4,056 2,198



30. 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 Group2010 2009

$’000 $’000

Accelerated tax depreciation

Beginning of fi nancial year 166 180

Credited to income statement (3) (14)

End of fi nancial year 163 166

Fair value gain



(Credited)/charged to equity (110) 124


Undistributed profi ts of foreign subsidiaries

Beginning of fi nancial year 2,198 –

Currency translation differences (112) 33

Charged to income statement 1,970 2,165


Total

Beginning of fi nancial year 2,572 271

Currency translation differences (119) 26

Charged to income statement 1,967 2,151

(Credited)/charged to equity (110) 124


Reconciliation of total deferred income tax liabilities after appropriate

offsetting from the same tax jurisdiction is as follows:

Total deferred income tax liabilities 4,310 2,572

Offsetting of deferred income tax assets from the same tax jurisdiction (6) (172)

Total deferred income tax liabilities after appropriate offsetting from the

same tax jurisdiction 4,304 2,400




30. Deferred income taxes (continued)

Deferred income tax assets The Group2010 2009

$’000 $’000

Provisions and accruals

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

Change in tax rate (14,669) (21,713)

Currency translation differences 11,396 4,312

Credited to income statement (50,741) (49,786)

End of fi nancial year (212,709) (158,695)

Reconciliation of total deferred income tax assets after appropriate offsetting

from the same tax jurisdiction is as follows:

Total deferred income tax assets (212,709) (158,695)

Offsetting of deferred income tax liabilities from the same tax jurisdiction 6 172

Total deferred income tax assets after appropriate offsetting from the same

tax jurisdiction (212,703) (158,523)

31. Share capital

Issued share capitalNo. of

ordinary shares Amount

’000 $’000

2010

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

2009

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

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

There were no shares issued in 2010 and 2009.

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.



31. Share capital (continued)



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.


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 are as follows:

The Group and the Company

Financial year ended 31 December 2010

Number of ordinary shares under option outstanding


Beginning of fi nancial

year

Lapsed during

fi nancialyear

End offi nancial

yearExercise


2006 Options (i) 2,780 – 2,780 1.23 21.2.2007 – 20.2.2016

2007 Options (ii) 12,770 (1,800) 10,970 2.48 5.2.2008 – 4.2.2017

2008 Options (iii) 19,430 (2,230) 17,200 2.95 24.3.2009 – 23.3.2018

34,980 (4,030) 30,950


Number of ordinary shares under option outstanding


Beginning of fi nancial

year

Lapsed during

fi nancialyear

End offi nancial

yearExercise


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

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

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

37,300 (2,320) 34,980

(i) For non-executive directors, the exercise period shall be 21.2.2007 to 20.2.2011.

(ii) For non-executive directors, the exercise period shall be 5.2.2008 to 4.2.2012.

(iii) For non-executive directors, the exercise period shall be 24.3.2009 to 23.3.2013.




31. Share capital (continued)


The Group and the Company (continued)

Out of the outstanding options on 30,950,000 shares (2009: 34,980,000), options on 30,950,000 shares (2009:

34,250,000) are exercisable. There was no share option issued in 2010 and 2009. 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 in 2010

and 2009.

32. Statutory and other reserves


$’000 $’000 $’000 $’000

(a) Composition:

Share option reserve 44,578 44,578 44,578 44,578

Statutory reserve 137,372 137,149 – –

Currency translation reserve (90,804) (23,861) – –

Asset revaluation reserve 12,554 15,772 – –

Fair value reserve 181 323 – –

Realised surplus on long-term investment 69 69 527 527

103,950 174,030 45,105 45,105

(b) Movements:

(i) Share option reserve

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

Employee share option scheme:

- Value of director and employee services

(Note 6) – 3,240 – 3,240

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

The Group2010 2009

$’000 $’000

(ii) Statutory reserve


Transfer from retained earnings 223 22,839


(iii) Currency translation reserve

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

Net currency translation differences of fi nancial statements of foreign

subsidiaries and associated companies (100,144) (27,480)


End of fi nancial year (90,804) (23,861)



32. Statutory and other reserves (continued)

The Group2010 2009

$’000 $’000

(b) Movements: (continued)

(iv) Asset revaluation reserve


Revaluation reserve transferred to retained earnings (3,218) (3,218)


(v) Fair value reserve


Fair value changes for fi nancial asset, available-for-sale (389) 495

Deferred tax credited/(charged) to equity (Note 30) 110 (124)

Non-controlling interests 137 (182)


Statutory reserve represents the amount set aside in compliance with the local laws in the PRC where the subsidiaries

of the Group reside.

Statutory and other reserves are non-distributable.

33. Dividends

The Group and the Company

2010 2009

$’000 $’000

Ordinary dividends paid

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

year of 3.0 cents (2009: 4.0 cents) per ordinary share 67,177 89,570

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

year of Nil cents (2009: 3.0 cents) per ordinary share – 67,177

67,177 156,747

At the Annual General Meeting scheduled on 20 April 2011, a fi rst and fi nal tax-exempt one-tier dividend of 4 cents

per ordinary share (2009: fi rst and fi nal tax-exempt one-tier dividend of 3 cents per ordinary share) amounting to a

total of $89,570,000 (2009: $67,177,000), based on the number of shares issued as of 31 December 2010, will be

recommended. These fi nancial statements do not refl ect these dividends, which will be accounted for in equity as an

appropriation of retained earnings in the fi nancial year ending 31 December 2011.




34. Commitments

(a) Capital commitments

Capital expenditure contracted for at the balance sheet date but not recognised in the fi nancial statements are

as follows:

The Group2010 2009

$’000 $’000

Property, plant and equipment 102,537 166,681

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

The Group leases various offi ce premises, docks, quays and motor vessels under non-cancellable operating

lease agreements. The leases have varying terms, escalation clauses and renewal rights.

The future aggregate minimum lease payables under non-cancellable operating leases contracted for at the

balance sheet date but not recognised as liabilities, are as follows:

The Group2010 2009

$’000 $’000

Not later than 1 year 19,271 20,039

Later than 1 year but not later than 5 years 42,690 52,448

Later than 5 years 66,245 63,514

128,206 136,001

(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 Group2010 2009

$’000 $’000

Not later than 1 year 28,664 45,537

Later than 1 year but not later than 5 years 1,189 1,280

29,853 46,817



35. Financial risk management

Financial risk factors

The Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk, interest rate risk and

price risk), credit risk and liquidity risk.

Risk management is carried out under policies approved by the Board of Directors. The Board approves guidelines for

overall risk management, as well as policies covering these specifi c areas.

(a) Market risk

(i) Currency risk

Currency risks arise from transactions denominated in currencies other than the respective functional

currencies of the entities in the Group.

The Group monitors its foreign currency exchange risks closely and where appropriate, enters into

forward currency contracts to manage the currency exposure.

In addition, the Group 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.

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 2010

Financial assets

Cash and cash equivalents and fi nancial

assets, available-for-sale 74,475 308,646 462,625 24,889 870,635

Trade and other receivables, excluding

advances paid to suppliers 15,415 864,332 232,515 57,370 1,169,632

Other fi nancial assets 284 – 1,365 38 1,687

90,174 1,172,978 696,505 82,297 2,041,954

Financial liabilities

Borrowings 3 281,099 711,111 – 992,213

Other fi nancial liabilities 16,192 80,158 1,492,953 4,328 1,593,631

16,195 361,257 2,204,064 4,328 2,585,844

Net fi nancial assets/(liabilities) 73,979 811,721 (1,507,559) 77,969 (543,890)

Less: Net fi nancial assets/(liabilities)

denominated in the respective

entities’ functional currencies (73,628) (108,500) 1,507,562 (2,298)

Add: Firm commitments and highly

probable forecast transactions

in foreign currencies – 3,143,108 – 72,709

Currency exposure 351 3,846,329 3 148,380

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




35. Financial risk management (continued)

(a) Market risk (continued)

(i) Currency risk (continued)

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


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.





(i) Currency risk (continued)

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

follows:

2010 2009

SGD USD RMB Total SGD USD RMB Total

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

Financial assets

Cash and cash equivalents 63,535 53,422 – 116,957 79,867 54,643 1 134,511

Trade and other receivables 237 10 2,655 2,902 244 64,286 – 64,530

63,772 53,432 2,655 119,859 80,111 118,929 1 199,041


Borrowings – – – – – – – –

Other fi nancial liabilities 17,620 – – 17,620 16,767 – – 16,767

17,620 – – 17,620 16,767 – – 16,767

Net fi nancial assets 46,152 53,432 2,655 102,239 63,344 118,929 1 182,274

Less: Net fi nancial assets

denominated in the

entity’s functional currency (46,152) – – (63,344) – –

Currency exposure – 53,432 2,655 – 118,929 1

If the USD changes against the SGD and RMB by 500 basis points (2009: 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:

2010 2009

Increase/(decrease) Profi t

after taxProfi t

after tax

$’000 $’000

The Group

USD against SGD

- strengthened 1,412 1,499

- weakened (1,412) (1,499)

USD against RMB


- weakened (3,840) (4,347)

The Company

USD against SGD


- weakened (1,728) (3,513)






(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%

(2009: 0.5%) with all other variables including tax rate being held constant, the profi t after tax will be

lower/higher by $872,000 (2009: $1,998,000) and $1,088,000 (2009: $56,000) 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 4 vessels (2009: 3 vessels) valued at US$54,950,000 (2009:

US$9,000,000) to secure its outstanding trade receivables of US$30,852,000 (2009: US$7,900,000) as at 31

December 2010.

Other than the above-mentioned, the Group and Company do not hold any other collateral. The maximum

exposure to credit risk for each class of fi nancial instruments is the carrying amount of that class of fi nancial

instruments presented on the balance sheet, except as follows:

The Company2010 2009

$’000 $’000

Corporate guarantees provided to banks on subsidiaries’ loans 15,939 24,695

Corporate guarantees provided to third parties for services provided

to a subsidiary 156 301

16,095 24,996




(b) Credit risk (continued)

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

The credit risk for trade receivables (including amount due from customer on construction contracts) based on

the information provided to key management is as follows:


$’000 $’000 $’000 $’000

By business segments

Shipping 7,165 8,751 – –

Ship repair, ship building and marine

engineering activities 1,070,615 691,647 – –

Others 14,639 11,744 131 131

1,092,419 712,142 131 131

(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 Group2010 2009

$’000 $’000

Past due 0 to 3 months 3,274 1,137

Past due 3 to 6 months 23 36

Past due over 6 months 610 514

3,907 1,687





(b) Credit risk (continued)

(ii) Financial assets that are past due and/or impaired (continued)

The carrying amount of trade receivables individually determined to be impaired and the movement in

the related allowance for impairment are as follows:

The Group2010 2009

$’000 $’000

Gross amount 17,553 51,036

Less: Allowance for impairment (17,553) (51,036)

– –



Allowance utilised (575) (5,066)

Reversal of (31,250) (12,235)

Amount written off (16) (19)


(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 2010

Gross-settled forward currency contracts

- Receipts – – –

- Payments – – –

Other fi nancial liabilities (1,593,631) – –

Borrowings (572,106) (410,910) (61,716)

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)




(c) Liquidity risk (continued)

Less than 1 year

Between1 and 5 years

Over5 years

$’000 $’000 $’000

The Company

At 31 December 2010

Other fi nancial liabilities (17,620) – –

Borrowings – – –

Financial guarantee contracts (16,095) – –

At 31 December 2009

Other fi nancial liabilities (16,767) – –

Borrowings – – –

Financial guarantee contracts (24,996) – –

(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 21.8% per annum for the current fi nancial year ended 31 December 2010 (2009: 9.9% 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 2010 and 31 December 2009.

(e) Fair value measurements

The following table presents assets and liabilities measured at fair value and classifi ed 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).





(e) Fair value measurements (continued)

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

The Group

2010

Assets

Available-for-sale fi nancial assets

- Quoted equity shares 530 – – 530

- Unquoted equity shares – – 2,904 2,904

Total assets 530 – 2,904 3,434

Liabilities

Forward currency contracts – – – –

2009

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.

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.

There is no change in Level 3 instruments in 2010 and 2009. The movement in 2010 was due to currency

translation difference.

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.




(f) Financial instruments by category

The carrying amount of different categories of fi nancial instruments is as disclosed on the face of the balance

sheets and in Note 18 to the fi nancial statements, except for the following:


$’000 $’000 $’000 $’000

Loans and receivables 2,034,178 2,322,214 119,859 199,041

Financial liabilities at amortised cost 2,583,189 2,420,000 17,620 16,767

36. Immediate and ultimate holding corporation

The Company’s immediate and ultimate holding corporation is China Ocean Shipping (Group) Company, registered in

the People’s Republic of China.

37. 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”).

The Group has adopted the amendment to FRS 24, "Related party disclosures" in 2009. 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.

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, 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.

The transactions of revenues and expenses in nature conducted with government-related entities were based

on arm’s length transactions.

In addition to the related party information and transactions disclosed elsewhere in the consolidated fi nancial

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 fi nancial year.




37. Related party transactions (continued)

(a) (continued)

The Group2010 2009

$’000 $’000

Revenue

Sales to fellow subsidiaries 85,759 237,452

Sales to associated companies 142 –

Sales to related party corporations 97 214

Rental income received/receivable from fellow subsidiaries 879 1,409

Rental income received/receivable from associated companies 177 –

Rental income received/receivable from related party corporations 306 200

Sub-contractor expenses received/receivable from fellow subsidiaries – 73

Time charter revenue received/receivable from a fellow Subsidiary – 19,276

Compensation received/receivable from a fellow subsidiary 3,090 –

Service income received from ultimate holding corporation 85 –

Service income received from fellow subsidiaries 3,789 1,144

Interest received/receivable from a fellow subsidiary 10,711 17,417

Expenditure

Purchases from fellow subsidiaries 37,137 27,094

Purchases from associated companies 294 –

Purchases from related party corporations 44 47

Purchases of plant and equipment from fellow subsidiaries – 17,990

Purchases of plant and equipment from an associated company 1,115 –

Rental paid/payable to fellow subsidiaries 48 235

Rental paid/payable to a related party corporation 6,936 –

Vessel rental paid/payable to a fellow subsidiary 6,404 7,435

Management fee paid/payable to a related party corporation 315 320

Crew wages paid/payable to fellow subsidiaries 7,603 7,347

Sub-contractor costs paid/payable to fellow subsidiaries 25,551 14,330

Sub-contractor costs paid/payable to associated companies 6,141 –

Sub-contractor costs paid/payable to a related party corporation 1,128 –

Utilities expenses paid/payable to a fellow subsidiary – 719

Utilities expenses paid/payable to a related party corporation 2,444 –

Service expenses paid/payable to fellow subsidiaries 2,797 1,988

Service expenses paid/payable to related party corporations 75 –

Commission paid/payable to a fellow subsidiary 33 511

Outstanding balances as at 31 December 2010, arising from sales or purchases of goods and services, are

set out in Notes 13 and 26 respectively.



37. Related party transactions (continued)

(b) Share options granted to key management

There were no share options granted to key management of the Group during 2010 and 2009. The share

options were given on the same terms and conditions as those offered to other employees of the Company

(Note 31). The outstanding number of share options granted to key management of the Group at the end of

the fi nancial year was 10,300,000 (2009: 13,100,000).

(c) Key management personnel compensation

Key management personnel compensation is as follows:

The Group2010 2009

$’000 $’000

Salaries and other short-term employee benefi ts 3,804 4,912

Employer’s contribution to defi ned contribution plans including

Central Provident Fund 8 8

Share option expenses – 938

3,812 5,858

Included in the above was total compensation to directors of the Company amounting to $3,506,000 (2009:

$5,563,000).

38. 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.




38. 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


The Group

Sales

- External sales 128,605 3,719,483 13,357 3,861,445

- Inter-segment sales – 336 64,894 65,230

128,605 3,719,819 78,251 3,926,675

Elimination (65,230)

3,861,445

Segment results 83,417 369,886 (9,299) 444,004

Finance expense (42,131)

Share of loss of associated companies (27)

Profi t before income tax 401,846

Income tax expense (43,240)

Net profi t 358,606

Other segment items

Capital expenditure

- property, plant and equipment 1,624 174,185 296 176,105

Depreciation and amortisation 14,280 153,245 901 168,426

Write-off for inventory obsolescence and

inventory write-down – 572 – 572

Net reversal of impairment of trade and other

receivables – (31,241) – (31,241)

Expected losses recognised on construction

contracts – 64,822 – 64,822

Segment assets 190,998 4,976,390 60,356 5,227,744

Associated companies 3,569

Short-term bank deposits 605,892

Financial assets, available-for-sale 3,434

Deferred income tax assets 212,703

Consolidated total assets 6,053,342

Segment liabilities 23,527 3,132,749 33,306 3,189,582

Borrowings 992,213

Current income tax liabilities 72,766

Deferred income tax liabilities 4,304

Consolidated total liabilities 4,258,865

Consolidated net assets 1,794,477




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


The 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 and amortisation 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 bank 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





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 assets

2010 2009 2010 2009

$’000 $’000 $’000 $’000

People’s Republic of China 3,711,802 2,739,236 2,330,568 2,334,473

Singapore * 147,433 158,041 173,903 201,860

Malaysia 2,210 1,727 89 108

3,861,445 2,899,004 2,504,560 2,536,441

* 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 2010 and 31 December 2009.

39. New or revised accounting standards and interpretations

Certain new accounting standards, amendments and interpretations to existing standards have been published that

are mandatory for accounting periods beginning on or after 1 January 2011. The management does not expect that

adoption of these accounting standards or interpretations will have a material impact on the fi nancial statements of

the Group and of the Company.

40. Authorisation of fi nancial statements

These fi nancial statements were authorised for issue in accordance with a resolution of the Board of Directors of

Cosco Corporation (Singapore) Limited on 3 March 2011.


FIVE-YEAR SUMMARY

Notes 2006 2007 2008 2009 2010$’000 $’000 $’000 $’000 $’000

INCOME STATEMENTTurnover 1,215,469 2,261,700 3,476,009 2,899,004 3,861,445Operating profi t before taxation 301,696 497,536 450,745 178,338 401,873Share of (loss)/profi t of associated

companies 1 600 537 643 214 (27)Profi t before income tax 302,296 498,073 451,388 178,552 401,846Income tax expense (22,981) (19,512) (31,620) (40,758) (43,240)Net profi t 279,315 478,561 419,768 137,794 358,606Attributable to:

Equity holders of the company 205,353 336,568 302,588 110,080 248,837Non-controlling interests 73,962 141,993 117,180 27,714 109,769Net profi t 279,315 478,561 419,768 137,794 358,606Dividend 2 89,348 156,738 156,747 67,177 89,570

BALANCE SHEETShare capital 239,947 266,852 270,608 270,608 270,608Statutory and other reserves 70,855 82,806 167,904 174,030 103,950Retained earnings 359,256 590,249 705,692 639,404 824,059Non-controlling interests 249,889 362,847 464,963 526,650 595,860Total equity 919,947 1,302,754 1,609,167 1,610,692 1,794,477Forward Currency Contracts 45 8,778 1,441 – –Trade and other receivables – – – – 49,089Financial assets, available-for-sale 2,208 3,067 3,630 4,034 3,434Club memberships 412 479 473 492 557Investments in associated companies 2,227 1,794 2,577 1,922 3,569Investment properties 11,350 11,472 12,217 11,786 14,619Property, plant and equipment 1,110,179 1,478,453 2,081,950 2,349,098 2,207,952Intangible assets 9,319 9,302 9,546 9,525 9,468Deferred income tax assets – 21,996 91,417 158,523 212,703Deferred expenditure – – – 1,061 3,169Current assets 747,926 2,431,829 4,596,023 3,885,885 3,548,782Current liabilities (676,153) (2,557,025) (4,572,188) (3,870,288) (3,817,496)Non-current liabilities (287,566) (107,391) (617,919) (941,346) (441,369)Net Assets 919,947 1,302,754 1,609,167 1,610,692 1,794,477

RATIOSBasic earnings per share (cents) 3 and 4 9.3 15.1 13.5 4.9 11.1Dividend per share (cents) 4.0 7.0 7.0 3.0 4.0Dividend cover (times) 5 2.3 2.1 1.9 1.6 2.8Net tangible assets per share (cents) 4 29.8 41.6 50.7 48.0 53.1Gearing ratio (Net of Cash) 6 0.2 cash cash cash 0.1

Notes

1. The share of profi t of associated companies is net of tax.

2. The dividend for 2010 is calculated based on the number of shares issued as of 31 December 2010. 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.

SHAREHOLDING STATISTICS


As at 4 March 2011

STATISTICS OF SHAREHOLDERS AS AT 4 MARCH 2011

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 - 999 104 0.33 38,547 0.00

1,000 - 10,000 24,072 76.83 110,110,426 4.92

10,001 - 1,000,000 7,110 22.70 287,601,945 12.84

1,000,001 and above 44 0.14 1,841,494,036 82.24

Total 31,330 100.00 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 (Private) Limited – – 118,378,713(1) 5.29

Note:

(1) Temasek Holdings (Private) Limited is deemed to have an interest in 118,378,713 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 4 March 2011 approximately 41.05% 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 STATISTICSAs at 4 March 2011

LIST OF 20 LARGEST SHAREHOLDERS

SHAREHOLDER’S NAME NO OF SHARES %

1 CHINA OCEAN SHIPPING (GROUP) COMPANY 1,194,565,488 53.35

2 CITIBANK NOMINEES SINGAPORE PTE LTD 92,387,618 4.13

3 HSBC (SINGAPORE) NOMINEES PTE LTD 80,175,270 3.58

4 SEMBCORP MARINE LTD 70,000,000 3.13

5 DBS NOMINEES PTE LTD 66,844,048 2.99

6 RAFFLES NOMINEES (PTE) LTD 57,172,596 2.55

7 UNITED OVERSEAS BANK NOMINEES PTE LTD 45,727,842 2.04

8 DBSN SERVICES PTE LTD 40,454,457 1.81

9 SCM INVESTMENT HOLDINGS PTE LTD 21,000,000 0.94

10 SEMBMARINE INVESTMENT PTE LTD 20,400,000 0.91

11 UOB KAY HIAN PTE LTD 17,816,670 0.80

12 OCBC SECURITIES PRIVATE LTD 12,834,530 0.57

13 PHILLIP SECURITIES PTE LTD 12,002,900 0.54

14 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 9,559,738 0.43

15 HUI SHUNE MING @ HUI SHUN MENG 8,000,000 0.36

16 OCBC NOMINEES SINGAPORE PTE LTD 6,485,369 0.29

17 ROYAL BANK OF CANADA (ASIA) LTD 6,327,250 0.28

18 DB NOMINEES (SINGAPORE) PTE LTD 5,753,024 0.26

19 BANK OF SINGAPORE NOMINEES PTE LTD 5,457,754 0.24

20 MERRILL LYNCH (SINGAPORE) PTE LTD 5,161,827 0.23

Total 1,778,126,381 79.43

NOTICE OF ANNUAL GENERAL MEETING


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

Wednesday, 20 April 2011 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 2010 together with the Auditors’ Report thereon.

(Resolution 1)

2. To approve a First and Final tax-exempt (one-tier) Dividend of S$0.04 per ordinary share for the

year ended 31 December 2010.

(Resolution 2)

3. To approve payment of Directors’ Fees of S$285,000 for the year ended 31 December 2010. (last

year: S$265,000)

(Resolution 3)

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 Wang Xing Ru; (Resolution 4)

b. Dr Wang Kai Yuen (See Explanatory Note 1) (Resolution 5)

5. 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 104 of the

Articles of Association of the Company and who, being eligible, offer themselves for re-election:

a. Mr Liu Guo Yuan (Resolution 6)

b. Mr Ma Zhi Hong (Resolution 7)

c. Mr Wang Hai Min (Resolution 8)

6. 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 2)

(Resolution 9)

7. To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors and to authorise the Directors to

fi x their remuneration.

(Resolution 10)

Special Business

To consider and, if thought fi t, to pass the following as Ordinary Resolutions, with or without modifi cations:

8. General Mandate to authorize the Directors to issue shares or convertible securities: (Resolution 11)

“That pursuant to Section 161 of the Companies Act (Cap 50) and the Listing Rules of the

Singapore Exchange Securities Trading Limited (the “Listing Rules”), authority be and is hereby

given to the Directors to allot and issue:-

(a) shares in the capital of the Company (whether by way of bonus, rights or otherwise); or

(b) convertible securities; or

(c) additional securities issued pursuant to Rule 829 of the Listing Rules; or

(d) shares arising from the conversion of convertible securities in (b) and (c) above,



at any time and upon such terms and conditions and for such purposes as the Directors may in

their absolute discretion deem fi t provided that :-

(i) the aggregate number of shares and convertible securities that may be issued shall not

be more than 50% of the issued shares in the capital of the Company (calculated in

accordance with (ii) below), of which the aggregate number of shares and convertible

securities issued other than on a pro rata basis to existing shareholders must be not more

than 20% of the issued shares in the capital of the Company (calculated in accordance with

(ii) below); and

(ii) for the purpose of determining the aggregate number of shares and convertible securities

that may be issued pursuant to (i) above, the percentage of issued share capital shall be

calculated based on the issued shares in the capital of the Company at the time of the

passing of this resolution after adjusting for (a) new shares arising from the conversion or

exercise of any convertible securities; (b) new shares arising from exercising share options

or vesting of share awards outstanding or subsisting at the time of the passing of this

resolution and (c) any subsequent consolidation or subdivision of shares; and

(iii) unless revoked or varied by ordinary resolution of the shareholders of the Company in

general meeting, this resolution shall remain in force until the next Annual General Meeting

of the Company or the date by which the next Annual General Meeting of the Company is

required by law to be held, whichever is earlier”. (See Explanatory Note 3)

9. Authority to allot and issue shares under the Cosco Group Employees’ Share Option Scheme 2002

(“Scheme”)

(Resolution 12)

“That approval be and is hereby given to the Directors to offer and grant options (“Options”) in

accordance with the provisions of the Cosco Group Employees’ Share Option Scheme 2002

(“Scheme”) and to allot and issue from time to time such number of shares in the capital of the

Company as may be required to be issued pursuant to the exercise of Options granted under the

Scheme, provided that the total number of Shares to be offered under the Scheme shall not in total

exceed fi fteen (15) per cent of the issued share capital of the Company on the day preceding any

Offer Date at any time and from time to time during the existence of the Scheme.” (See Explanatory

Note 4)

10. Proposed Renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions (Resolution 13)

(i) “That approval be and is hereby given for the renewal of the mandate for the purposes

of Chapter 9 of the Listing Manual of the SGX-ST, for the Company, its subsidiaries and

associated companies or any of them to enter into any of the transactions falling within the

types of Interested Person Transactions, particulars of which are set out in the Appendix

A (“Appendix”) to the Annual Report of the Company for the fi nancial year ended 31

December 2010 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 authorized to take such actions

as it deems proper in respect of such procedures and/or to modify or implement such

procedures as may be necessary to take into consideration any amendment to Chapter 9

of the Listing Manual of the SGX-ST which may be prescribed by the SGX-ST from time to

time;

(iii) That the Directors of the Company be and are hereby authorized to complete and do

all such acts and things (including all such documents as may be required) as they may

consider expedient or necessary or in the interests of the Company to give effect to this

Resolution; and

(iv) That the authority conferred by this Resolution shall, unless revoked or varied by the

Company in general meeting, continue in force until the conclusion of the next Annual

General Meeting of the Company or the date by which the next Annual General Meeting of

the Company is required by law to be held, whichever is earlier.” (See Explanatory Note 5)



BY ORDER OF THE BOARD

Lawrence Kwan

Company Secretary


Explanatory Notes on Business to be transacted

1. Dr Wang Kai Yuen will, upon election as a Director, remain as the Chairman of the Nominating Committee and a member of the Audit

Committee, Remuneration Committee, 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. 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.

3. Ordinary Resolution 11 is to empower the Directors of the Company from the date of the above Meeting until the next Annual General

Meeting to issue shares and/or convertible securities in the capital of the Company up to an amount not exceeding in aggregate 50%

of the issued shares in the capital of the Company of which the total number of shares and convertible securities issued other than

on a pro-rata basis to existing shareholders shall not exceed 20% of the issued shares in the capital of the Company at the time the

resolution is passed, for such purposes as they consider would be in the interests of the Company. This authority will, unless revoked

or varied at a general meeting, expire at the next Annual General Meeting of the Company.

4. Ordinary Resolution 12 is to empower the Directors of the Company, from the date of this Meeting until the next Annual General

Meeting, to allot and issue shares in the capital of the Company pursuant to the exercise of such options under the Scheme. The

total number of Shares to be offered under the Scheme shall not exceed fi fteen (15) per cent of the issued share capital of the

Company on the day preceding any Offer Date at any time and from time to time during the existence of the Scheme.

5. Ordinary Resolution 13 is to renew the General Mandate to allow the Company, its subsidiaries and associated companies or any of

them to enter into certain Recurrent Interested Person Transactions with person who are considered “Interested Persons” (as defi ned

in Chapter 9 of the Listing Manual of the SGX-ST).

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 2010 in respect of transactions described in Section

2.1 of Schedule II of the Appendix; and since the approval of the additional Shareholders’ Mandate on 17 July 2007 in respect of

transactions described in Section 2.2 of Schedule II of the Appendix; and that the said methods and procedures are suffi cient to

ensure that the Recurrent Interested Person Transactions will be carried out on normal commercial terms and will not be prejudicial to

the interests of the Company and its minority shareholders.

Notes

i. A member of the Company entitled to attend and vote at a meeting is entitled to appoint one or two proxies to attend and vote in his

stead. A proxy need not be a member of the Company.

ii. Where a member appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding

(expressed as a percentage of the whole) to be represented by each proxy.

iii. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 9 Temasek Boulevard,

#07-00 Suntec Tower Two, Singapore 038989 not later than 48 hours before the time fi xed for holding the Annual General Meeting.

iv. This instrument appointing a proxy or proxies must be under the hand of the appointer or his attorney duly authorized in writing.

Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or

under the hand of any attorney duly authorized.

v. A corporation which is a member may also authorize by resolution of its directors or other governing body, such person as it thinks fi t

to act as its representative at the meeting in accordance with Section 179 of the Companies Act, Cap. 50.



NOTICE OF BOOKS CLOSURE

NOTICE IS HEREBY GIVEN that, subject to the approval of shareholders to the First and Final Dividend being obtained at the

Annual General Meeting to be held on 20 April 2011, the Transfer Books and the Register of Members of the Company will

be closed on 5 May 2011 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 4 May 2011 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 4

May 2011 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 19 May 2011.

BY ORDER OF THE BOARD

Lawrence Kwan

Company Secretary


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COSCO CORPORATION (SINGAPORE) LIMITED(Incorporated in the Republic of Singapore)

(Company Registration No.: 196100159G)

ANNUAL GENERAL MEETINGPROXY 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.

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 Wednesday, 20 April 2011 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 2010 together with the Auditors’ Report thereon.

2. To declare a First and Final tax exempt (one-tier) Dividend of S$0.04 per ordinary share for the year ended 31 December 2010.

3. To approve payment of Directors’ Fees.

4. To re-elect Mr Wang Xing Ru, who is retiring under Article 98 of the Articles of Association of the Company.

5. To re-elect Dr Wang Kai Yuen, who is retiring under Article 98 of the Articles of Association of the Company.

6. To re-elect Mr Liu Guo Yuan, who is retiring under Article 104 of the Articles of Association of the Company.

7. To re-elect Mr Ma Zhi Hong, who is retiring under Article 104 of the Articles of Association of the Company.

8. To re-elect Mr Wang Hai Min, who is retiring under Article 104 of the Articles of Association of the Company.

9. To re-appoint Mr Tom Yee Lat Shing, who is retiring pursuant to Section 153(6) of the Companies Act, Cap 50.

10. To re-appoint Messrs PricewaterhouseCoopers LLP as Auditors of the Company and to authorise the Directors to fi x their remuneration.

SPECIAL BUSINESS

11. To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Cap 50.

12. To authorise Directors to issue shares pursuant to the Cosco Group Employees’ Share Option Scheme 2002.

13. To approve the renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions.

Dated this day of 2011

Total No. of Shares in No. of SharesCDP Register

Register of Members

Signature of Member(s) or Common Seal

IMPORTANT: Please Read Notes for This Proxy Form.

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

Apply glue here

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

Telephone: 6885 0888 Fascimile: 6336 9006

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