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SINGAPORE

Annual Report 2007

Of World-ClassExcellence

COSCO Corporat ion (Singapore) L imited

Our vision is to become one of the world

leaders in ship repair, ship building and marine

engineering. This drives all our endeavours

and our mission to build a value-driven world-

class enterprise that maximises growth and

quality earnings, provides excellent value-added

services that satisfy a global customer base, and

creates sustainable returns for our equity holders.

020406

1012

18202834

38505455566062

Inside COSCO and Corporate Citizenship Human Resource and Corporate Social Responsibility

Financial Statements

Directors’ ReportStatement by DirectorsIndependent Auditors’ ReportConsolidated Income Statement Balance SheetsConsolidated Statement of Changes in Equity Consolidated Cash Flow Statement Notes to the Financial StatementsFive-Year Summary Shareholding Statistics Notice of Annual General Meeting Proxy Form for Annual General Meeting Notes for Proxy Form

64

6975767778798183145146148

CO

NTE

NTS

COSCO Overview

Corporate Profile and StructureFinancial HighlightsSignificant Events 2007

Key Messages

Chairman’s Message Vice Chairman and President’s Message

Operations Review

Our Strengths and CapabilitiesShip Repair, Ship Building & Marine EngineeringDry Bulk Shipping and Shipping Agency Group Financial Review

Corporate Governance and Transparency

Corporate Governance Board of Directors Key Management Corporate InformationInvestor Relations COSCO in the NewsRisk Management

Investor Relations Contacts

COSCO Corporation (Singapore) LimitedMr. Li Jian Xiong, Vice PresidentTel: (65) 6885 0886Fax: (65) 6336 9006Email: [email protected]

SPIN Capital Asia (Investor Relations Consultant)Mr. Michael Tan / Ms. Dawn SooTel: (65) 6227 7790 / (65) 9742 2800Email: [email protected]

Over the years, COSCO Corporation (Singapore) Limited had taken bold strides

towards these goals. In 2007, we delivered yet again on value creation with

the fourth straight year of record earnings, while the repute of our customers

and their satisfaction with our performance bear testament to our capabilities

to take on higher value-added projects. As we excel in these areas, we place

the interests of our equity holders as first and foremost, and uphold the integrity

of our business. In more ways than one, we have risen to the challenge, as an

enterprise that is of world-class excellence.

COSCO Corporation (Singapore) Limited (“COSCO” or the “Company”) has the largest Ship Repair, Ship Building & Marine Engineering operation 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 has achieved significant progress in growing its Ship Repair, Ship Building & Marine Engineering capacity and capabilities. The completion of its acquisition of a 51% stake in one of the largest shipyards in China, COSCO Shipyard Group (“COSCO Shipyard”), on 1 January 2005 had propelled COSCO into the premier league in the ship repair industry. COSCO is poised to continue in its dynamic growth momentum for further breakthrough in its core businesses and global coverage. COSCO has an equity market capitalisation of S$12.9 billion as of 31 December 2007. The Company is a component stock of the Straits Times Index (since 1 March 2004), constituent of the London benchmark FTSE All-World Asia Pacific Index (since 19 March 2004) and MSCI Singapore (since 1 June 2005). The Company has been included as a component stock of Prime Partners China Index and Nomura Asia-Pacific Major Index in October 2006 and June 2007 respectively.

02

COSCO Overview

COSCO Corporation (Singapore) Limited - Annual Report 2007

Corporate Profileand Structure

COSCO Shipyard Group Co., Ltd

COSCO Engineering Pte Ltd

COSCO Marine Engineering (Singapore) Pte Ltd90%

51%

Ship Repair, Ship Building & Marine Engineering

COSCO (Dalian) Shipyard Co., Ltd

COSCO (Nantong) Shipyard Co., Ltd

COSCO (Zhoushan) Shipyard Co., Ltd

COSCO (Guangdong) Shipyard Co., Ltd

COSCO (Shanghai) Shipyard Co., Ltd

COSCO (Tianjin) Shipyard Co., Ltd

COSCO (Xiamen) Shipyard Co., Ltd

COSCO (Lianyungang) Shipyard Co., Ltd

100%

75.0%

95.0%

90.0%

51.0%

60.0%

58.7%

50.0%

39.1%

50.0%

03

COSCO Overview

Dry Bulk Shipping

Cos Fair Shipping Pte Ltd

Cos Glory Shipping Inc.

Hanbo Shipping Limited

Sanbo Shipping Limited

Cos Knight Shipping Maritime Inc.

Cos Lucky Shipping Maritime Inc.

Cos Orchid Shipping Pte Ltd

Cos Prosperity Shipping Pte Ltd

Costar Agencies (M) Sdn. Bhd.

CNF Shipping Agencies Pte Ltd

CNF Shipping (M) Sdn. Bhd.

COSLINK (M) Sdn. Bhd. (effective interest 82.6%)

Harington Property Pte Ltd

COSTAR Shipping Pte LtdCOSCO (Singapore) Pte Ltd


100% 70%

70%

100%

COSCO CORPORATION (SINGAPORE) LIMITED

18.0%

Note:

This chart only includes major subsidiaries of COSCO Corporation (Singapore) Limited

Shipping Agency & Others

04

Revenue by Activities (%)

Turnover

Operating Profit before Tax

Share of Profit of Associated Companies

Taxation

Profit from Ordinary Activities

Minority Interest

Net Profit Attributable to Equity Holders of the Company

5-Year Profit and Loss Accounts

92

13

15

3

25

1

24

2003S$’m

116

35

31

1

65

1

64

2004S$’m

873

225

1

19

207

47

160

2005S$’m

1,215

301

1

23

279

74

205

2006S$’m

2,262

497

1

19

479

142

337

2007S$’m

Number of Shares (million)

Basic Earnings per Share (cents) *

Dividend per Share (cents)

Dividend Cover (times)

Net Tangible Assets per Share (cents) *

Gearing Ratio (net of cash)(times)

Return on Equity (%)

Return on Assets (%)

Other Key Statistics

898.2#

1.4

1.0#

2.7

12.4

0.5

10.7

4.3

2003

1,085.1#

3.0

2.0#

2.9

14.7

0.2

22.3

11.8

2004

1,098.8#

7.4

2.0#

3.6

23.2

0.5

38.1

11.4

2005

2,214.0

9.3

4.0

2.3

29.8

0.2

34.5

10.9

2006

2,237.7

15.1

7.0

2.1

41.2

Nil

41.8

8.5

2007

* Basic Earnings per share and Net Tangible Assets per share have been adjusted to account for the bonus shares issued in 2004 and sub-division of one ordinary share

of $0.20 each into two ordinary shares of $0.10 each in 2006

# Based on shares of 20-cents par value each

Return on equity is calculated as Net Profit Attributable to Equity Holders of the Company divided by average shareholders’ equity

89.8%

1.0%

9.2%


Dry Bulk Shipping

Shipping Agency & Others

Financial Highlights

COSCO Overview


05

500

400

300

200

100

0

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

2003 2004 2005 2006 2007

2464

160205

337

1400

1200

1000

800

600

400

200

0

Net Assets (S$’m)

274324

695

920

1,303

3000

2500

2000

1500

1000

500

0

Turnover (S$’m)

92 116

8731,215

2,262

64%

42%

86%

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

1.4

75%

1.0#

3.02.0#

7.4

2.0#

9.3

4.0

15.1

7.062%

2003 2004 2005 2006 2007

2003 2004 2005 2006 2007

2003 2004 2005 2006 2007

#Dividends per Share (cents)

Basic Earnings per Share (cents)

Based on shares of 20-cents par value each

Dividends per Share

Basic Earnings per Share

COSCO Overview

18

15

12

9

6

3

0


COSCO Overview

06

Significant Events 2007

January

COSCO (Zhoushan) Shipyard was incorporated as a wholly-owned subsidiary of COSCO Shipyard (Group).

COSCO Shipyard won its first semi-submersible vessel building contract and 57,000 dwt bulk carriers building contract.

February

COSCO Shipyard was awarded its first contract to build four 30,000 dwt MPP Heavy Lift Vessels (HLV).

March

COSCO Shipyard won its first Jack-up Rig and Cylindrical Rig building contracts.

April

Commissioned a new 80,000 dwt Panamax-size dry dock facility at COSCO Zhoushan.

June

COSCO Shipyard delivered pontoons for two semi-submersible rigs well ahead of schedule.

COSCO Shipyard won its first contract to build four car carriers.

Commissioned a new 300,000 dwt VLCC-size docking facility at COSCO Zhoushan.

COSCO was included as a component stock in the Nomura Asia-Pacific Major Index.


COSCO Overview

07

July

COSCO Shipyard won a contract to convert 10 Very Large Crude Carrier (VLCC) to Very Large Ore Carrier (VLOC).

August

COSCO Shipyard continued to win bulk carriers building and conversion contract.

September

COSCO Shipyard won its first contract to build 80,000 dwt and 92,500 dwt bulk carriers.

October

COSCO was awarded “SIAS Most Transparent Company Award”.

November

COSCO won the best performance award of Global Chinese Corporation. This independent award was organised by the Hong Kong-based media Yazhou Zhoukan. It evaluated 1,000 Chinese Corporations in the world based on their consecutive annual performance since 2004. COSCO is the only Singapore-based corporation awarded at this event.

COSCO was awarded “Golden Brand Award 2007” by the International Brand Summit.

COSCO Zhoushan Shipyard was nominated as 2007 Lloyd’s List Asia Shiprepair Award finalist.

December

COSCO Shipyard formed JV with COSCO Lianyungang Shipyard Co., Ltd to expand ship repair & conversion and offshore capacity.


World-class shipyards that never sleep

A strategic focus on high value projects run in tandem with the

capacity boost at our shipyards. Abuzz with round the clock

activity, it is full steam ahead at COSCO’s shipyards.

Dear Shareholders

2007 - A YEAR OF EXCELLENCE

Financial year ended 31 December 2007 (FY2007) has been a year of excellence for everyone at COSCO Corporation (Singapore) Limited. Buoyed by strong contributions from our ship repair, ship building and marine engineering operations, I am pleased to announce that we have turned in a set of sterling results for the year. As we move up the value chain to focus on high-yield projects, our revenue correspondingly rose 86% and we recorded a 64% higher full year earnings of S$336.6 million. On the back of our robust performance, earnings per share rose by 62% to 15.02 cents.

This also marks the fourth straight year of record earnings for the Company, three years since we purchased a 51% stake in the China-based COSCO Shipyard Group to strategically move into the shipyard business. As a sign of our appreciation to our shareholders for the support, the Board of Directors is pleased to recommend an ordinary dividend of 4 cents per ordinary share and a special dividend of 3 cents for FY2007. This translates to a total dividend of 7 cents per ordinary share, a 75% increase over FY2006 dividends payout.

INDuSTRY OuTLOOK AND PROSPECTS

Our FY2007 performance offered a glimpse into an even more robust market outlook for the industry in the coming year. In January 2008, the price of crude oil reached a historic high at uS$100 (S$143) a barrel as booming economic expansion in countries such as China and India added to the rising global demand for oil and spurred investments into the exploration and production sectors.

According to industry watchers, utilisation rates have been hovering close to 100% worldwide and across rig types, a phenomenon that has persisted since 2006. Despite this, orders for old oil rigs to be refurbished so they can be re-used are not showing any sign of tapering off.

At COSCO, we remain sanguine about the future. Global trade growth coupled with China’s surging commodities imports are boosting demand for ships. As global orders flow in, they expand the pool of business opportunities for those in the ship repair, ship building and marine engineering sector in the region. Therefore, we can anticipate more orders in these areas. COSCO shipyards have orders to be delivered beyond 2010. This is a boon for us, as we still have capacity to meet the growing demand at our six shipyards in China, all located near the high-traffic shipping routes along China’s seaboard.

2008 - STARTING ON A HIGH NOTE

We would like to take this opportunity to welcome Mr Ang Swee Tian, who came on board on 13 November 2007. We look forward to working together to further strengthen our Board.

On behalf of the Board of Directors, I would like to express my gratitude to all shareholders, customers and business associates for the trust and support over the years. To our staff, thank you for your dedication, professionalism and contributions made to our Company. Our excellent financial results are expected to continue with its buoyant performance in the current year. We look forward to contribute significantly with a continued high growth performance and uphold standards of world-class excellence in all aspects of our businesses.

Chairman’sMessage

Key Messages

10 COSCO Corporation (Singapore) Limited - Annual Report 2007

“Our excellent financial

results are expected to

continue with its buoyant

performance in the current

year. We look forward to

contribute significantly with

a continued high growth

performance and uphold

standards of world-class

excellence in all aspects of

our businesses.”

CAPTAIN WEI JIA FUChairman

Key Messages

11COSCO Corporation (Singapore) Limited - Annual Report 2007

Vice Chairman andPresident’s Message

Key Messages

12

Dear Shareholders

HIGHLIGHTS OF FY2007

COSCO posted a 64% hike in profit to a record S$336.6 million, as turnover surged 86% to S$2.26 billion. The strong performance for the year ended 31 December 2007 came as our shipyard group repaired and converted more ships and began building vessels and rigs for the strong offshore marine sector.

We started the year with the announcement of our maiden oil rig and new building & conversion contracts valued at uS$200 million (S$310 million) and uS$250 million (S$385 million) respectively. Two months later, we scored another first, by winning a uS$170 million (S$243 million) drilling rig contract from Sevan Drilling, a subsidiary of Norwegian-listed Sevan Marine.

These are significant breakthroughs for our shipyard group. For instance, the Sevan contract, in addition to being our first drilling rig project, raised our order book 18% to uS$1.1 billion (S$1.57 billion) and raised our new contract wins to uS$1,272 million (S$1,820 million), in just the first quarter of 2007. More significantly, it shows the confidence customers have in our technical competence and project management capabilities.

Our contracts have been sealed with world-renowed global industry players. As we advance our shipyard competencies and enlarge our marine engineering base to include a broad range of high-value work, such as rig building, ship building and VLCC (Very Large Crude Carrier) conversions, we are heartened by the substantial progress made in diversifying our customer base of world-class corporations.

I am also pleased to highlight that in additional to proving our competency in the construction of 80,000 dwt and 92,500 dwt vessels, our focus on 57,000 dwt vessels also met with high demand from global customers. This not only solidifies our position and track record in the ship building arena, but also strengthens our resolve to forge ahead in building this part of our business.

FOCuSING ON STRATEGIC DIRECTION

Putting into action our intent to grow our shipyard business and in preparation for our foray into the lucrative offshore rig market, our shipyard group has been building up offshore and new building expertise over the past two years. Initially, we undertook sub-contract fabrication work to raise our standards, capability and capacity to take on more technically demanding projects.


JI HAI SHENGVice Chairman and President

Key Messages

13

“Over the past year,

the types of orders and

the significance of our

customers have become

testament to the high

engineering and technical

skills of our shipyard

group. We will continue

to drive top line growth

by charting our move

into the higher value

offshore marine

engineering

projects.”


Key Messages

14

Over the past year, the types of orders and the significance of our customers have become testament to the high precision engineering and technical skills of our shipyard group. We will continue to drive top line growth by charting our move into the higher value offshore marine engineering projects. Our shipyards are placing their priority on oil related businesses, followed by ship repair and conversions; therefore, presently we do not plan to extend into a fuller range of new building.

In ship repairs, bulk carrier repairs generally have a lower profit margin compared with other repairs. Corresponding to our focus to move into higher margin businesses, we might consider to divest other businesses to focus our energy and resources on the higher margin shipyard business.

SuSTAINING FuTuRE GROWTH

We have identified future growth drivers for COSCO. The aim for our China-based shipyard subsidiaries is to build up the areas of new building and offshore marine engineering, which includes offshore rig building, and for these two businesses to contribute 30% each, to total revenue by 2010. The traditional area of ship repair and conversion will eventually comprise 40% of the shipyard group’s revenue.

Driven by rising energy demand and new shipping regulations, we expect more high yielding orders for our shipyard group. Such contracts will give us greater confidence in executing technically complex and demanding projects. Furthermore, with new facilities and significant capacity increases coming on stream, we can make further inroads into the niche markets of offshore marine engineering work. Going forward, our shipyards will continue to build new special purpose vessels designed to meet the specific needs of our customers.

“We have identified future growth drivers for COSCO. The aim for our China-based shipyard subsidiaries is to build up the areas of new building and offshore marine engineering, which includes offshore rig building, and for these two businesses to contribute 30% each, to total revenue by 2010.”


Key Messages

15

“We started the year with the announcement of our maiden oil rig and new building & conversion contracts valued at US$200 million (S$310 million) and US$250 million (S$385 million) respectively.”


ACHIEVING WORLD-CLASS EXCELLENCE

It is my pleasure to share that during the year, the Company received the “Global Chinese Business 1000 – Best Business Performance Company” award in the Singapore region from Hong Kong-based Yazhou Zhoukan. COSCO was also ranked by the DP Information Group, Singapore’s leading credit and business information bureau, as the “Best Singapore-Listed China Company” at the Times Awards 2007.

More importantly, our commitment extends beyond operational and financial excellence to achieving high standards in corporate governance. In October 2007, we received another fillip when we won the award for most transparent company in the foreign listings category at the SIAS Investors Choice Awards, organised by the Securities Investors Association (Singapore). This is an encouragement and recognition for our efforts to always keep in

mind the interests of our shareholders. As we continue to focus on growing our business and increasing shareholder value, we stay committed to communicating effectively, clearly, fairly and concisely in a timely manner, to facilitate well-informed investment decisions.

On this note, I would like to thank my fellow board members, colleagues and staff of COSCO, who have made it possible for us to accomplish so much over the past year. To our customers, business partners and shareholders, we appreciate your unstinting support and together, let us look forward to more good years.

A class act in performance and expertise

Exemplifying excellence in capabilities, from ship repairs to marine

engineering and new ship buildings, we have shown our mettle in

executing technically complex and demanding projects.

Commencement of work

Keel laying ceremony

Construction work in progress

16 November 2007

Floating, Storage and Offloading Vessel (FSO)

Our Strengths and Capabilities

We are a major ship repair, ship building and marine engineering company. Headquartered in Singapore, we have three main business units namely, Ship Repair, Ship Building & Marine Engineering, Dry Bulk Shipping and Shipping Agency.

18

Operations Review


19

Operations Review

Dry Bulk Shipping and Others

Offshore Marine Engineering FDPSO | FSO | Jack-Up | Semi-Submersible Rig

SEVAN 650 GM4000 Super M2

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

Double-Hull VLCC En-longation Semi-Submersible Vessel

Ship New Building Bulk Carrier | HLV | Car Carrier

57,000 dwt Bulk Carrier 80,000 dwt Bulk Carrier 30,000 dwt HLV



Operations Review

20

57,000 dwt Bulk Carrier keel laying


We offer Ship Repair, Ship Building & Marine Engineering services through

our two subsidiaries: 51% owned COSCO Shipyard is one of China’s

largest Ship Repair, Ship Building & Marine Engineering groups and 90%

owned COSCO Marine Engineering (Singapore) Pte Ltd which offers

onsite and onboard engineering and repairs in Jurong, Singapore.

Operations Review


22

Operations Review

Our Major Shipyards

NantongFloating dock x 2 (80,000 dwt and 150,000 dwt)

Quay x 4 (total 979 m)

Workshop x 11 (total 24,031 sq m)

Total Capacity – 230,000 dwtutilised Land Area - 414,000 sq m

WorkshopWorkshop

Floating DockFloating Dock

Platform Platform PlatformPlatform

No.3 Quay No.2 Quay No.1 Quay

No.4 Quay


Dalian

Workshop

No.2 Quay

No.4 Quay

No.1 Quay

Floating Dock

Floating Dock

Workshop

Workshop

Dry Dock

Floating dock x 2 (180,000 dwt and 300,000 dwt)

Dry dock x 1 (80,000 dwt)

Quay x 10 (total 3.3 km)


Total Capacity - 560,000 dwtutilised Land Area - 770,000 sq m

No.3 Quay

No.9 Quay

No.7 Quay

No.5 Quay

No.6 Quay

No.8 Quay

No.10 Quay

DALIAN

LIANYuNGANG

NANTONGSHANGHAIZHOuSHAN

GuANGDONG

Zhoushan

23

Operations Review

Shanghai

Floating Dock No.1 Quay No.2 Quay

No.2 Quay No.4 Quay

No.5 Quay

No.6 Quay No.7 Quay

Workshop

Workshop


Dry dock x 3(80,000 dwt, 230,000 dwt and 300,000 dwt)

Quay x 5 (total 1.4 km)

Workshop x 10 (total 123,751 sqm)

Total Capacity - 710,000 dwtutilised Land Area - 1,000,000 sq m

Floating dock x 1 (35,000 dwt)



Total Capacity - 35,000 dwtutilised Land Area - 47,000 sq m

Guangdong

No.1 Quay No.2 Quay No.3 Quay No.4 Quay

Floating Dock

Floating Dock

Floating dock x 2 (80,000 dwt and 150,000 dwt)

Quay x 4 (915 m)


Total Capacity - 230,000 dwtutilised Land Area -147,700 sq m

LianyungangFloating dock x 1 (80,000 dwt)


Total Capacity - 80,000 dwt

Workshop Workshop

Workshop Workshop

Workshop

No.1 Quay No.2 Quay No.3 Quay

Floating Dock

No.3 Dry Dock

No.1 Dry Dock

No.2 Dry Dock

OVERVIEW AND OuTLOOK

COSCO holds a 51% stake in the COSCO Shipyard Group (“COSCO Shipyard”), with a stable of five China-based shipyards strategically situated along major coastal cities, including Nantong, Dalian, Zhoushan, Guangzhou and Shanghai. On 29 December 2007, it announced that the sixth shipyard, a 60% joint venture shipyard located at Lianyungang would be added to the group. Over the past year, the shipyard group has been riding high on a wave of strong demand for new ships and yard services.

China’s reputation as an emerging global ship repair hub offers tremendous growth potential for COSCO. While over 20,000 ships call at Chinese ports each year, less than 2,000 ships can be repaired in the yards as there is insufficient capacity to meet the demand. Being a major player in the industry and with potential competitors facing high barriers of entry, COSCO is well-positioned to harness the business opportunities.

As the shipyard group secures a slew of offshore marine engineering projects in FY2007, the three key yards in Nantong, Dalian and Zhoushan will continue to undertake projects such as rig building.

Despite having only embarked on its ship building ventures in the first half of the year, the advances it has made in its nascent ship building business has been massive and accelerating.

DELIVERING A STRONG ORDER BOOK AND PERFORMANCE

The combination of quality and technical capability, efficiency and cost advantages has enabled COSCO to win and profitably execute some large, sophisticated projects. In the year under review, its shipyard operations saw a boom in orders for new builds, conversions and repairs. As of 31 December 2007, the Company’s order book stood at a total of uS$6.5 billion (S$9.3 billion), comprising ship building and ship conversion contracts from ship owners in Germany, Taiwan, Greece, Turkey, Liberia, India and the uSA.

Efforts to beef up capabilities to meet the demand for the high-yield marine engineering and conversion work have shown results. Revenue from the Ship Repair, Ship Building & Marine Engineering business improved 97% to S$2,032 million in FY2007, accounting for 90% of COSCO’s turnover for the year.

As of 31 December 2007, the Company’s order book stood at a total of US$6.5 billion (S$9.3 billion), comprising ship building and ship conversion contracts from ship owners in Germany, Taiwan, Greece, Turkey, Liberia, India and the USA.

Operations Review


A SIGNIFICANT YEAR

COSCO, through its China-based shipyard subsidiaries, has been winning more orders to repair and convert vessels that give high quality margins. Consequently, the Company’s key shipyards in Zhoushan, Dalian and Nantong have been concentrating on the new areas of ship new building and offshore marine engineering. Compared with shipyards in Singapore, COSCO shipyard’s net repair margins for FY2007 were higher.

In 2007, COSCO Shipyard Group sealed several landmark deals, mostly notably the first new building contract of six bulk carriers and a semi-submersible vessel worth over uS$250 million (S$385 million) and uS$200 million (S$310 million) respectively. Scheduled for delivery in 2010, the GM4000 semi-submersible oil rig will be built at the Zhoushan Shipyard for Norwegian-based

Marine Accurate Well ASA (Maracc) for use on the Norwegian Continental Shelf when completed.

COSCO Nantong Shipyard also signed a uS$34.6 million (S$49.5 million) contract in the same month to convert a cable-laying vessel into a pipe layer, while COSCO Dalian Shipyard inked a uS$16.1 million (S$23 million) contract to lengthen a dredger.

In February, the shipyard group won a four-vessel order worth uS$185.2 million (S$287 million) from Chinese-Polish Joint Stock Co. Work on building the 30,000 dwt vessels commenced in mid 2007 with target delivery dates between March 2009 and April 2010.

In March, COSCO Shipyard Group won its first Jack-up rig and Cylindrical rig building contracts valued at uS$124 million

Types of Vessels Repaired in FY2007 by Revenue

Operations Review


Bulk Carriers - 67%

Tankers - 12%

Container Ships - 11%

Chemical Ships - 5%

Others - 5%

Operations Review

(S$192 million) and uS$170 million (S$263 million) respectively. Equipped with three thrusters and heavy lift cranes, the Jack-up is a self-elevating rig designed for 325 feet water depth. The Cylindrical rig on the other hand, is a drilling unit based on the SEVAN 650 design. The rig, to be deployed by Petrobras in the Gulf of Mexico, has oil storage capacity of 150,000 barrels and can drill wells up to 40,000 feet deep at water depths of up to 12,500 feet. Both projects have commenced with works carried out at the Nantong Shipyard and all of the other offshore marine projects are also progressing on schedule.

The shipyard group added another five new contracts in July worth a total of uS$563 million (S$853 million). Four of the deals are conversion of VLCC (Very Large Crude Carrier) to VLOC (Very Large Ore Carrier), while the other is for eight bulk carriers. The projects have commenced in 2008 with work carried out at the yards in Zhoushan, Dalian and Nantong. Progressive deliveries of the VLCC conversions are expected by the third quarter of 2008, while the bulk carriers will be delivered progressively from May 2009 to March 2010.

Reinforcing the shipyard group’s exceptional progress were ship building and conversion contracts totaling uS$708.1 million (S$1,012 million) secured in August. The ship building contracts

were inked with customers from Greece, Turkey and Liberia, whereas the conversion contracts were with from the uSA, Taiwan and India.

In September, another slew of contracts worth uS$724.36 million (S$1,090 million) from German, Taiwanese and Greek ship owners were sealed. The contracts are to build 16 bulk carriers that range in price from uS$38.5 million (S$57.8 million) to uS$49.54 million (S$74.31 million) each. The carriers are targetted to be delivered between March 2010 and July 2011.

The biggest batch of contracts worth uS$1.34 billion (S$2.013 billion) was inked in October to construct 29 bulk carriers slated for delivery between October 2009 and December 2011. Work will be undertaken at the Dalian and Guangdong shipyards.

BOOSTING CAPACITY

In a strategic move to further strengthen ship repair, marine engineering and ship building capacity, the shipyard group expanded its capacity to 1.73 million dwt at the end of FY2007, 28% more than that at the start of the year.

26

Types of Jobs by Revenue in FY2007


Ship Repair - 38%

Conversion - 34%

New Building - 16%

Offshore - 10%

Others - 2%

Operations Review

A key focus is the COSCO Shipyard (Group) Co., Ltd - Zhoushan Branch, which became a fully-owned subsidiary of the shipyard group on 1 January 2007. The principal activities of the new company, known as COSCO (Zhoushan) Shipyard Co., Ltd, will be on ship repair, marine engineering and ship building.

As such, the shipyard group has embarked on Zhoushan Shipyard Phase III. Overall, Phase III expansion will increase total docking capacity by 57% from the current 1.73 million dwt to 2.73 million dwt. This involves an expansion of 1 million sq m of land with three new berths and three dry docks.

Over the year, an 80,000 dwt (280m by 40m) Panamax-size dry dock was completed and commenced operations on 19 March and a new 300,000 dwt (460m by 65m) VLCC-size dry dock was completed on 18 June, 15 days ahead of schedule, at COSCO Zhoushan.

27

Types of Flags Repaired in FY2007 by Revenue


Foreign Flag - 92%

Chinese Flag - 8%

28

Dry Bulk Shippingand Shipping Agency

Operations Review

29

26

24

25

3027

28

COuNTRIES:

1. Conakry (Guinea)2. Lagos (Nigeria)3. Hamburg (Germany)4. Cape Town (South Africa)5. Ventspils (Latvia)6. Odessa (ukraine)7. Suez Canal (Egypt)8. Aqaba (Jordan)9. Novorossivsk (Russia)10. Aden (Yemen)11. Mumbai (India)12. Singapore13. Bangkok (Thailand)14. Penang (Malaysia)15. Shanghai (China)16. Hong Kong (China)17. Albany (Australia)

18. Lianyungang (China)19. Taichung (China)20. Onahama (Japan)21. Nagoya (Japan)22. Tokyo (Japan)23. Gladstone (Australia)24. Portland (uSA)25. Los Angeles (uSA)26. New Orleans (uSA)27. Panama Canal28. Antofagasta (Chile)29. Seven Island (Canada)30. Maracaibo (Venezuela)31. Santos (Brazil)

Global Dry Bulk Shipping Network


29

The Dry Bulk Shipping sector of our business is managed by our wholly-

owned subsidiary, COSCO (Singapore) Pte Ltd. Operating a fleet of 12 dry

bulk carriers, with combined carrying capacity of 698,306 dwt, COSCO

(Singapore) transports dry bulk cargo such as iron ore, coal, steel, cement

and fertiliser along international routes from major ports in China, the uSA,

Europe, South America and South Africa.

Operations Review

1 2

4

10

87

96

53

11

14

12

13

17

23

1916

1518 21

22

20

31


Operations Review

Handymax

M.V. Cos Bonny

M.V. Cos Cherry

M.V. Cos Glory

M.V. Cos Fair

M.V. Cos Knight

M.V. Cos Lucky

M.V. Cos Orchid

M.V. Cos Prosperity

Total Handymax Capacity

Name of Vessel

46,864

46,860

46,680

46,689

52,353

52,395

55,539

55,550

402,930

Capacity(dwt)

Age(Years)

11

11

8

8

5

4

1

1

Panamax

M.V. Cos Intrepid

M.V. Cos Joy

M.V. Cos Ju Da

M.V. Cos Hai Huang Xing

Total Panamax Capacity

Grand Total Capacity

Average

Name of Vessel

74,119

74,073

73,603

73,581

295,376

698,306

58,000

Capacity(dwt)

Age(Years)

6

6

3

3

5.5

OVERVIEW AND OuTLOOK

COSCO’s Dry Bulk Shipping business is managed by the Company’s wholly-owned subsidiary, COSCO (Singapore) Pte Ltd. After COSCO (Singapore) went through a rationalisation exercise in 2006, it now has a fleet of 12 vessels, with an average age of 5.5 years and total capacity of close to 700,000 dwt. These carriers transport dry bulk cargo such as iron ore, coal, steel, cement and fertiliser along international shipping routes

from major ports in China, the uSA, Europe, South America and South Africa.

COSCO (Singapore) also charters its vessels to other ship owners, which mainly comprise large and established international shipping companies based in Germany, Norway, Denmark, Greece, Switzerland, the uK and the uSA, among other countries.

30

Dry BulkShipping


Operations Review

The fleet has been certified to have met the most stringent of international quality and safety standards, having obtained the ISO9002 certification - awarded only to companies that have shown a consistent and unparalleled commitment to quality. Furthermore, the Company has received the united Coast Guards’ “Quality 21: Certificate of Eligibility”, which is widely recognised as the most rigorous and prestigious award in the international shipping industry. The certification enables marine vessels to enter uS waters for two years without the need for uS Coast Guard clearance.

MAINTAINING STATuS QuO

With a firmer Baltic Dry Index, which reached 11,000 points since its recovery in 2006, our turnover from the Dry Bulk Shipping business generate a modest growth of 40% to S$207.9 million in FY2007 from S$148.1 million in FY2006. As of end of 2007, COSCO has no intention to increase its dry bulk fleet size.

Average BDI


10,000

8,000

6,000

4,000

2,000

Dec Mar Jun Sep Dec Mar Jun Sep Dec

2005 - 3,371

2006 - 3,180

2007 - 7,070

2005 2006 2007

Operations Review

32

Costar Shipping has the capabilities to transport almost all types of containers, including Out-of-Gauge (OOG) containers, general purpose units (GP), reefer containers and hazardous containers, from over 1,300 ports in more than 160 countries.

Overview and OutlOOk

the entire COSCO fleet of vessels calling at Singapore is solely represented by COSCO’s 70%-owned COStar Shipping Pte ltd. COStar Shipping canvasses for cargo from existing and potential clients and maximises the tonnage capacity of COSCO’s vessels transiting through Singapore.

COStar Shipping also provides comprehensive agency services for full containers and breakbulk cargo. the services include document preparation, collection of freight, cargo operation, vessel husbanding, customs declaration, port authority coordination, administration and settlement of cargo claims, transshipment management, bunkering services and container handling.

COStar Shipping’s business mainly stems from containerisation services for COSCO Container lines’ customers. Costar Shipping has the capabilities to transport almost all types of containers, including Out-of-Gauge (OOG) containers, general

purpose units (GP), reefer containers and hazardous containers, from over 1,300 ports in more than 160 countries. in addition, COStar Shipping offers value-added services, for instance, recommending trucking, freight forwarding, stuffing, container depot, and warehouse and storage services.

in Malaysia, COSlink (M) Sdn. Bhd. serves as the general shipping agent for COSCO’s entire fleet of vessels that call at Malaysian ports and provides a similar range of services as COStar Shipping in Singapore.

COSCO has, over the years, sustained strong relationships with a diverse clientele that includes key international corporations. in response to the high demand for global shipping logistics services, COSCO’s fleets continue to maximise their tonnage capacity and to capitalise on the positive market demand, COSCO focuses on delivering cost-efficient, high-quality and value-added services.

Continuing to attract more growth opportunities remains one of COSCO’s key priorities. in the pipeline are plans to boost

ShippingAgency


Operations Review

33

marketing and promotion efforts and leverage on the network of agents and industry partners worldwide to reach a wider customer base.

With favorable trade conditions in the areas COSCO operate and a slew of business prospects, among other factors, COSCO is confident that the shipping agency services will remain in top form.

ACHIEVING STABILITY

In FY2007, the shipping agency handled approximately 600 vessels mainly COSCO’s fleet of vessels. The performance of the shipping agency business has been relatively stable over the past four years. In FY2007, the Shipping Agency business turned in profit before tax of S$7.4 million, on the back of S$21.2 million in turnover, an increase of 12% from S$18.9 million in FY2006.

In FY2007, the Shipping Agency business turned in profit before tax of S$7.4 million, on the back of S$21.2 million in turnover, an increase of 12% from S$18.9 million in FY2006.


Group Financial Review

34

OVERVIEW

The COSCO group of companies achieved a sterling set of results for the year with turnover and profits surpassing the previous year’s performance. With a burgeoning order book, turnover increased 86% to S$2.26 billion, exceeding the S$1.21 billion recorded in FY2006. Furthermore, backed by strong expansion across the major revenue segments, net profit attributable to equity holders climbed to a record S$336.6 million, or 15.02 cents a share for the year ended 31 December 2007, from S$205.4 million or 9.27 cents a share, the year before.

Since COSCO acquired 51% of COSCO Shipyard on 1 January 2005, the financial statements of COSCO Shipyard had been consolidated under the COSCO group of companies. The successful expansion and focus on the shipyard business contributed significantly to the financial results and set the stage for COSCO to harness the huge growth potential and business opportunities the ship repair and conversion industry brings.

TuRNOVER

Spurred on by the strong contributions from the Ship Repair, Ship Building & Marine Engineering and Dry Bulk Shipping businesses COSCO registered a record turnover in FY2007.

Turnover rose 86% to S$2.26 billion in FY2007 from S$1.21 billion the previous year. With the successful expansion drive to boost the Ship Repair, Ship Building & Marine Engineering business, the segment recorded an exceptional S$2.03 billion contribution in FY2007, compared to S$1.03 billion in FY2006.

In terms of revenue contribution, Ship Repair, Ship Building & Marine Engineering , which made up 90% of turnover, rose 97% to S$2.03 billion. Dry Bulk Shipping accounted for 9%, while Shipping Agency accounted for the remaining 1%.

PROFITABILITY

Gross profit rose 62.1% to S$610.2 million in FY2007 from S$377.6 million in FY2006, backed by a higher turnover. Gross profit margin was lower at 27.0% in FY2007 compared with 31% achieved in FY2006 as the Company changed its revenue mix by focusing on ship repair, marine engineering and new building.

There was no exceptional gain in FY2007, compared to an exceptional gain of S$24.1 million in FY2006, which stemmed mainly from the disposal of four old dry bulk carriers. Distribution and administrative costs rose in line with the expanding ship repair and marine engineering business volume.

In all, net profit attributable to equity holders was lifted by the robust offshore marine engineering business and rose 64% to S$336.6 million in FY2007 from S$205.4 million in FY2006.

CASH FLOWS

Strong cash surplus of S$1,586.8 million was generated from operating activities in FY2007, a significant increase from S$385.3 million in FY2006. This is due to profitability of the various business segments and advance deposits collected from shipbuilding contracts.

Net cash used in investing activities of S$447.5 million was recorded, compared with S$250.7 million in FY2006. This was due to substantial resources deployed during the year to expand and upgrade shipyard facilities and capitalise on China’s rise as the ship repair hub of the world.

Net cash used in financing activities increased to S$334 million in FY2007 from S$19.9 million in FY2006.

The result was an improvement in cash and cash equivalents to S$1,078.6 million as of 31 December 2007 from S$273.6 million as of 31 December 2006.

Turnover(S$’m)

FY2006 FY2007

1,215.5

2,261.7

Gross Profit(S$’m)

FY2006 FY2007

377.6

610.2

Operations Review


NET GEARING

As COSCO forges ahead on an expansion growth path, all its plans are supported by sound financial management. As COSCO continues to grow and generate good cash surpluses for repayment of loans, COSCO’s gearing ratio decreased to 0.18 times as of 31 December 2007, from 1.18 times as of 31 December 2002, the year COSCO embarked on its restructuring exercise.

FINANCIAL RESOuRCES

In addition to sustaining good financial results, COSCO places equal emphasis on strengthening the close relationships nurtured over the years with local and international bankers. As a result, COSCO enjoys dependable financial support in the form of borrowings and secured credit facilities, which facilitate the funding of new investments and other capital requirements. COSCO is rigorous in meeting payments and honouring loan obligations.

CORPORATE TAX

The effective tax rate in FY2007 decreased from 7.6% to 3.9% due to tax incentive rebates from the PRC tax authorities relating to purchase of property, plant and equipment made in the PRC for ship repair, ship building and marine engineering operations. Lower effective tax rate is also attributable to the exemption of shipping income under the “Approved International Shipping” scheme (applicable for a 10-year period with effect from August 2003), and preferential income tax rates enjoyed by COSCO’s shipyards.

EARNINGS PER SHARE

The successful restructuring drive which started in FY2002 continued to be the basis of COSCO’s success. The Company is encouraged by the consistent earnings growth achieved over the past six years. Earnings per share rose steadily from 0.3 cents in FY2002 to 15.02 cents in FY2007. More significantly, the quality earnings were generated from the Company’s core businesses. COSCO will continue to deliver sustainable quality earnings and enhance equity holders’ value.

DIVIDENDS AND DIVIDEND COVER

Consistent with the aim of rewarding equity holders for their continued support, the Board of Directors have proposed a first and final exempt (one tier) ordinary dividend of 4 cents per ordinary share (2006: 2.5 cents per ordinary share) and a special dividend of 3 cents per ordinary share (2006: 1.5 cents per ordinary share). This represents an increase of 75% over FY2006. The dividend payout, amounting to S$156.6 million (2006: S$89.3 million), based on the number of shares issued on 31 December 2007, is subject to equity holders’ approval at the Annual General Meeting scheduled on 15 April 2008.

NET ASSET VALuE PER SHARE

Based on strong profits registered for the year, net asset value per ordinary share increased to 42.00 cents in FY2007 from 30.26 cents in FY2006. This is another indication of the Company’s ability to enhance returns for equity holders.

SHARE CAPITAL

COSCO’s share capital increased from S$239.9 million at the beginning FY2007 to S$266.9 million at the close of the year on the issue of new shares upon conversion of employees’ share options.

EQuITY HOLDERS FuNDS

In line with the Company’s growth, equity holders’ funds leaped to S$939.9 million as of 31 December 2007 from S$670.1 million at the start of the year.

RETuRN ON EQuITY HOLDERS’ FuNDS

COSCO yielded a 41.8% return on average equity holders’ funds for FY2007, up from 34.5% for FY2006.

35

Earnings per Share(cents)

FY2006 FY2007

9.27

15.02

Operations Review

Cash Flow from Operating Activities(S$’m)

FY2006 FY2007

385.5

1,586.8


Our vision as our beacon

Our vision guides us to keep on course and leads the way to

stellar results for the world to see. We define excellence in terms of

performance, reliability and responsibility, core qualities that enable us

to raise our potential to even greater heights.

Corporate Governance

COSCO Corporation (Singapore) Limited (“COSCO Corporation” or “the Company”) believes that governance is not an exercise in compliance nor is it a higher form of management. The Company believes that governance has a clear objective: ensuring the pursuit of the Company’s purpose. The Board’s activities are focused on this task: ensuring the pursuit of the Company’s purpose and this task is discharged by the board through undertaking such activities as are necessary for the effective promotion of long-term shareholder interest.

COSCO Corporation is committed to good corporate governance and adheres to the principles and guidelines set out in the new Code of Corporate Governance 2005 (“Code 2005”).

A. BOARD MATTERS

Principle 1: The Board’s Conduct of Affairs

As a company, COSCO CORPORATION recognises the importance of good governance and that it is a discrete task from management. Clarity of roles is key to our approach. Policies and processes depend on the people who operate them. Governance requires distinct skills and processes. Governance is overseen by the COSCO Corporation Board, while management is delegated to the Group President and Executive Directors. Our Board exercises judgement in carrying out its work in policy-making, in monitoring executive action and in its active consideration of Group strategy. The Board’s judgements seek to maximise the expected value of shareholders’ interest in the Company, rather than eliminate the possibility of any adverse outcomes.

The Board oversees the business affairs of the Company and is collectively responsible for its success. The principal functions of the Board apart from its statutory responsibilities are to:

set values and standards of the Company and ensure that obligations to shareholders and others are understood and met;

provide entrepreneurial leadership, approve the strategic and financial objectives, corporate policies and authorisation matrix of the Company;

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;

review management performance;

approve the nominations to the Board of Directors and appointment of key management, as may be recommended by the Nominating Committee;

assume responsibility for corporate governance framework of the Company.

To facilitate effective management, certain functions of the Board have been delegated to various Board committees, namely Audit, Nominating, Remuneration and Enterprise Risk Management Committees. Further information regarding the details of the terms of reference of the respective Board committees are set out in the later part of the Report.



a)

b)

c)

d) e)

f)



Principle 2: Board Composition and Guidance

The Board of Directors comprises eleven Directors with eight Non-Executive Directors (of which four are independent) and three Executive Directors. The Directors’ academic and professional qualifications are set out on pages 52 and 53 of this Annual Report.

The efficiency and effectiveness of the Board are of paramount importance. Our Board’s size is necessary to allow sufficient Executive Director representation to cover the breadth of the Group’s business activities and sufficient Non-Executive Independent Director representation to reflect the scale and complexity of COSCO Corporation and to staff our Board committees. A board of this size allows orderly succession planning for key roles.

The current size of the Board is appropriate and will facilitate effective decision making. The Board will continue to review the size of the Board on an ongoing basis. As a team, the Board collectively provides core competencies in the areas of accounting, finance, business and management experience, as well as industry knowledge.

Directors also receive regular updates on relevant new laws and regulations, and evolving commercial risks and business conditions from the Company’s relevant advisors. Newly appointed directors are provided with background information about the Company and the Group. Occasional visits are arranged for Non-Executive Directors to acquaint them with important operations overseas.

The Board conducts regular scheduled meetings on quarterly basis. Ad-hoc meetings are convened when circumstances require. 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:

Wei Jia Fu

Ji Hai Sheng

Li Jian Hong

Sun Yue Ying

Min Jian Guo

Ma Gui Chuan (1)

Wang Xing Ru

Tom Yee Lat Shing

Wang Kai Yuen

Er Kwong Wah

Ang Swee Tian (2)

Lu Cheng Gang (Alternate to Wei Jia Fu)

Li Jian Xiong (Alternate to Li Jian Hong)

Ye Bin Lin (Alternate to Sun Yue Ying)

Liu De Tian (Alternate to Wang Xing Ru)

Name

5

7

5

5

4

7

5

7

6

7

NA

6

6

7

6

Board

Number of Meetings held: 7

NA

NA

NA

NA

NA

NA

NA

8

8

8

NA

NA

NA

NA

NA

Audit Committee


NA

2

NA

NA

NA

NA

NA

2

2

2

NA

NA

NA

NA

NA

Nominating Committee


NA

2

NA

NA

NA

NA

NA

3

3

3

NA

NA

NA

NA

NA

Remuneration Committee


Number of Meetings

Attended

Number of Meetings

Attended

Number of Meetings

Attended

Number of Meetings

Attended

NA: Not Applicable

Note:

(1) Ma Gui Chuan was appointed on 10 January 2007

(2) Ang Swee Tian was appointed on 13 November 2007.



Principle 3: Chairman and Chief Executive Officer

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 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.

Principle 4: Board Membership

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

The Nominating Committee (“NC”) reviews and assesses candidates for directorship before making recommendations to the Board. The NC takes into consideration the skills and experience required and the existing composition of the Board and strives to ensure that the Board has an appropriate balance of independent directors as well as directors with the right profile of expertise, skills, attributes and abilities when recommending new directors to the Board.

The process for the appointment of new directors begins with the NC, together with the Chairman and Vice Chairman of the Company, conducting a needs analysis and identifying the critical requirement in terms of expertise and skills that are needed in the context of the strengths and weaknesses of the existing Board. The NC then defines a profile for the new director to serve as a brief for recruitment. When a candidate has been endorsed by the NC, the NC will then make a recommendation to the Board for the approval of his appointment.

The NC assesses and recommends to the Board whether retiring directors are suitable for re-nomination for re-election. In evaluating a director’s contribution and performance for the purpose of re-nomination, the NC takes into consideration a variety of factors such as attendance, preparedness, participation and candour.

In accordance with the provisions of the Articles, one-third of the Directors retire by rotation and subject themselves to re-election at every Annual General Meeting (“AGM”) of the Company. The President who is a member of the Board must also subject himself to retirement by rotation and re-election by the Shareholders. New directors who were appointed by the Board during the year will hold office only until the next AGM and will be eligible for re-election.

NOMINATING COMMITTEE

The Nominating Committee (“NC”) comprises five Directors, majority of whom, including the Chairman is independent. The NC members are:

Dr. Wang Kai Yuen (Chairman) (Non-Executive and Independent)Mr. Ji Hai Sheng (Executive)Mr. Tom Yee Lat Shing (Non-Executive and Independent)Mr. Er Kwong Wah (Non-Executive and Independent)Mr. Ang Swee Tian (Non-Executive and Independent; appointed on 13 November 2007)

The principal functions of the NC are to:

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;

evaluate the effectiveness of the Board as a whole and assess the contribution by each Director, to the effectiveness of the Board;

determine annually whether or not a Director is independent; and

make recommendations to the Board on re-appointment of Board and Board committee members.

a)

b)

c)

d)



During the financial year the NC held two meetings. The NC met and determined the independence of the Directors is in line with the undertakings described in the Code 2005. It also reviewed the composition of the Board and the Board Committees in relation to the needs of the Group.

The NC is of the opinion that the Board is able to exercise objective judgement on corporate affairs independently and no individual or small group of individuals dominates the Board’s decision making process.

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

Principle 5: Board Performance

A formal assessment process is in the place to asses the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board. The NC uses objective and appropriate quantitative and qualitative criteria to assess the performance of the Board as a whole and the contribution of each Director to the effectiveness of the Board. Assessment parameters include evaluation of the Board’s access to information, risk management, accountability, the Board’s performance in relation to discharging its principle functions, communication with management and stakeholders, the business performance of the Company, the quality of Board processes, the attendance records of the Directors at Board and Committee meetings and the level of participation at such meetings.

The evaluation of the Board is conducted annually. As part of the process, the Directors will complete appraisal forms which are collated by the Company Secretary. The Company Secretary will then reviews the results of the appraisal and present the results to the Chairman of the NC who will then present a report to the Board.

An individual assessment of each Director is also undertaken annually. The process of the assessment is through self-assessment where each Director will complete appraisal forms which are collated by the Company Secretary. The Company Secretary consolidated the appraisal forms and presented the results to the Chairman of the NC who will then present a report to the Board.

Principle 6: Assess to Information

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 Board committee meetings and is responsible for ensuring that Board procedures are followed. Together with the other management staff of the Company, the Company Secretary is also responsible for compliance with the SGX-ST Listing Manual and all other applicable rules and regulations. All Board members also have separate and independent access to the senior management of the Company and the Group.

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

B. REMUNERATION MATTERS

Principle 7: Procedures for Developing Remuneration Policies

The Remuneration Committee (“RC”) meets yearly to discuss the performance assessment of the Executive Directors as well as to discuss the level of emoluments to pay. The recommendations are forwarded to the Board for approval of the remuneration of the Executive Director. The Committee 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 Committee and are submitted for endorsement by the Board. Directors’ fees are subjected to approval by shareholders at the AGM.

All the members of the RC are Non-Executive, Independent Directors except for Mr. Ji Hai Sheng, who is the Vice Chairman and President of the Company. The RC is of the view that Mr. Ji’s presence 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.

Principle 8: Level and Mix of Remuneration

In setting the remuneration packages of the Executive Directors, the Remuneration Committee (“RC”) takes into account the respective performance of the Group and the individual. In its deliberation, the RC takes into consideration, remuneration packages and employment conditions within the industry and benchmarked against comparable companies.

Non-Executive Independent Directors are paid a basic fee and an additional fee for serving on any of the committees. The Chairman of each of these committees is compensated for his additional responsibilities. Such fees are approves by the shareholders of the Company as a lump sum payment at the AGM of the Company.

REMuNERATION COMMITTEE

The Remuneration Committee (“RC”) comprises five Directors, majority of whom including the Chairman is independent. The RC members are as follows:

Mr. Er Kwong Wah (Chairman) (Non-Executive and Independent)Mr. Ji Hai Sheng (Executive)Mr. Tom Yee Lat Shing (Non-Executive and lndependent)Dr. Wang Kai Yuen (Non-Executive and lndependent)Mr. Ang Swee Tian (Non-Executive and Independent, appointed on 13 November 2007)

The principal functions of the RC are to:

recommend to the Board base salary level, benefits and incentive programs, and identify components of salary which can best be used to focus management staff on achieving corporate objectives;

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;

review, on annual basis, the compensation package of the Company’s Directors and senior management personnel and determine appropriate adjustments; and

administer the COSCO Group Employees’ Share Option Scheme 2002.

The Company currently adopts a remuneration policy for staff consisting of a fixed component and a variable component. The fixed component is in the form of a base/ fixed salary. The variable component is in the form of a variable bonus that is linked to the Company and individual performance. Another element of the variable component is the grant of share options under the COSCO Group Employees’ Share Option Scheme 2002.

Information on the COSCO Group Employees’ Share Option Scheme 2002 such as size of grants, exercise price of options that were granted as well as outstanding and vesting period of options are set out on pages 72, 73 and 74 of the Annual Report.

The RC held three meetings during the financial year.

a)

b)

c)

d)



Principle 9: Disclosure on Remuneration

DIRECTORS’ AND KEY EXECuTIVES’ REMuNERATION

The Directors’ and key executives’ remuneration table for the financial year ended 31 December 2007 is as follows:

Executive Director in the Band of S$1,250,000 to S$1,500,000

Ji Hai Sheng

Executive Directors in the Band of S$750,000 to below S$1,000,000

Min Jian Guo

Ma Gui Chuan

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

Wang Xing Ru

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

Wei Jia Fu

Li Jian Hong

Sun Yue Ying

Independent Directors in the Band below S$500,000

Tom Yee Lat Shing

Wang Kai Yuen

Er Kwong Wah

*Ang Swee Tian

Executives in the Band of S$1,000,000 to below S$1,250,000

Li Jian Xiong

Ye Bin Lin

Liu De Tian

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

Lu Cheng Gang

Teo Chuan Teck

0%

0%

0%

0%

0%

0%

0%

20.57%

19.18%

19.18%

0%

0%

0%

0%

0%

0%

Fees

17.60%

22.64%

25.98%

24.04%

0%

0%

0%

0%

0%

0%

0%

18.70%

19.08%

14.96%

0%

20.23%

Salary

28.36%

20.43%

4.42%

0%

0%

0%

0%

0%

0%

0%

0%

24.99%

25.50%

26.58%

24.97%

20.95%

Bonus Other Benefits

4.56%

3.89%

6.30%

0%

0%

0%

0%

0%

0%

0%

0%

3.61%

1.65%

4.64%

0%

1.67%

49.48%

53.04%

63.30%

75.96%

100%

100%

100%

79.43%

80.82%

80.82%

0%

52.70%

53.77%

53.82%

75.03%

57.15%

Benefits fromStock Option

100%

100%

100%

100%

100%

100%

100%

100%

100%

100%

0%

100%

100%

100%

100%

100%

Total

* Mr. Ang Swee Tian was appointed on 13 November 2007.



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 2007.

Executives’ Remuneration

The Company adopts a remuneration strategy that supports a pay-for-performance philosophy. Executives participate in an annual performance review process that assesses the individual’s performance and contributions.

The remuneration structure for the Group President and other key executives consists of the following components:

Salary

Fixed pay comprises basic salary and Annual Wage supplement (AWS) and the Company’s contribution towards the Singapore Central Provident Fund where applicable.

Bonus

Bonus is paid based on the Company’s and individual’s performance.

Other Benefits

Other benefits comprise of usage of Company’s car and club membership.

Benefits From Stock Option

Share options are granted to align staff’s interests with that of shareholders’. These options are granted with reference to the desired remuneration structure target and valued based on the Binomial Valuation Model. Details of the share option scheme can be found in the “Directors Report” section of the Annual Report.

C. ACCOUNTABILITY AND AUDIT

Principle 10: Accountability

The Board has overall responsibility to shareholders for ensuring that the Group is well managed and guided by its strategic objectives. In presenting the Group’s annual and quarterly financial results to shareholders, the Board aims to provide shareholders with a balance and understandable assessment of the Group’s performance, position and prospects. Management provides the Board with management accounts and other financial statements on a monthly basis.

Principle 11: Audit Committee

The Audit Committee (“AC”) comprises the following:

Mr. Tom Yee Lat Shing (Chairman) (Non-Executive and Independent)Dr. Wang Kai Yuen (Non-Executive and Independent)Mr. Er Kwong Wah (Non-Executive and Independent)Mr. Ang Swee Tian (Non-Executive and Independent, appointed on 13 November 2007)



The AC performs the following functions:

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;

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;

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;

reviews any significant findings and recommendations of the external and internal auditors and related management response and assistance given by the management to auditors;

reviews interested person transactions to ensure that internal control procedures approved by the shareholders are adhered to; and

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 and executive officer to attend its meetings. The AC has also express power to investigate any matter brought to its attention, within its terms of reference, with the power to retain professional advice at the Company’s expense.

The Group recognises the importance of the internal audit function which, being independent of Management is one of the principal means by which the AC is able to carry out its responsibilities effectively. Messrs Deloitte & Touche Enterprise Risk Services Pte Ltd are the internal auditors of the Group.

The internal auditor plans its internal audit schedules in consultation with Management and submits its plan to the AC for approval. The Internal Auditors report directly to the AC.

The AC conducts regular meetings scheduled on 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 8 meetings during the financial year.

The AC, having reviewed the non-audit services provided by the external auditors to the Group, is satisfied with the independence and objectivity of the external auditors and recommends to the Board of Directors, the nomination of the external auditors for re-appointment.

Whistle-blowing Policy

The Company has in place a whistle-blowing policy and arrangements by which staff may, in confidence, raise concerns about possible corporate improprieties in matters of financial reporting or other matters. To ensure independent investigation of such matters and for appropriate follow up action, all whistle-blowing reports are to be sent to the internal audit function. The Chairman of the Audit Committee and the Vice-Chairman of the Board will be informed immediately of all whistle-blowing reports received. Details of the whistle-blowing policy and arrangements are given to all staff for their easy reference. New staff are briefed on these during the orientation programme.

a)

b)

c)

d)

e)

f)

Principle 12: Internal Controls

The Group maintains a system of internal controls for all companies within the Group, but recognises that no internal control system will preclude all errors and irregularities. The system is designed to manage rather than to eliminate the risk of failure to achieve business objectives. The controls are to provide reasonable, but not absolute, assurance to safeguard shareholders’ investments and the Group’s assets.

The Group’s key internal controls include:

establishment of risk management policies and systems;

establishments of policies and approval limits for key financial and operational matters, and issues reserved for the Board;

documents of key processes and procedures;

segregation of incompatible functions which give rise to a risk of errors or irregularities not being promptly detected;

maintenance of proper accounting records;

safeguarding of assets;

ensuring compliance with appropriate legislation and regulations; and

engaging qualified and experience persons to take charge of important functions.

Operational risks management measures implemented by the Group include the implementation of safety, security and internal control measures and taking up appropriate insurance coverage.

Details of the Group’s financial risks management measures are outlined in Note 36 to the Financial Statements.

Based on internal controls established by the Group, work performed by the internal and external auditors, and reviews conducted by the Audit Committee and the Management Risk Committee, the Board is of the opinion that the Group has adequate internal controls.

ENTERPRISE RISK MANAGEMENT COMMITTEE

The Enterprise Risk Management Committee (“ERMC”) comprises five Directors, the majority of whom including the Chairman is independent. The ERMC members are:

Mr. Ang Swee Tian (Chairman) (Non-Executive and independent)Mr. Ji Hai Sheng (Executive)Mr. Tom Yee Lat Shing (Non-Executive and independent)Dr. Wang Kai Yuen (Non-Executive and independent)Mr. Er Kwong Wah (Non-Executive and independent)

The Committee assists the Board in fulfilling its oversight responsibilities on risk management. The responsibilities of the Committee 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 was established on 28 February 2008.



Principle 13: Internal Audit

The internal audit function’s primary line of reporting is to the Chairman of the Audit Committee. Messrs. Deloitte & Touche Enterprise Risk Services Pte Ltd is the internal auditors of the Group. Based on its review, the Audit Committee believes that the internal auditors are independent and has the appropriate standing to perform its function effectively and objectively.

D. COMMUNICATION WITH SHAREHOLDERS

Principle 14: Communication with Shareholders

COSCO Corporation strives for timeliness and transparency in its disclosures to the shareholders and the public. All information on the Company’s new initiatives will be first disseminated via SGXNET followed by a news release, where appropriate. The Company currently holds media and analyst briefing upon the release of its quarterly financial results. Management regularly receives visiting fund managers and shareholders 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.

COSCO Corporation in 2007 won the award for the most transparent company in the foreign listings category at the SIAS Investors Choice Awards organised by the Securities Investors Association (Singapore).

The Company does not practice selective disclosure. Price-sensitive information is first publicly released via SGXNET, either before the Company meets with any group of investors or analyst or simultaneously with such meetings. Results and annual reports are announced or issued within the period prescribed by the SGX-ST.

Principle 15: Greater Shareholders Participation

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

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

The Board members and chairpersons of the Audit, Nominating, Remuneration and Enterprise Risk Management Committees are present and available to address shareholders’ questions at general meetings. The external auditors are also present to address shareholders’ queries relating to the conduct of the audit and the preparation and conduct of the auditor’s report.

E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY

The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions with the China Ocean Shipping (Group) Company and its associates, which are covered by a Shareholders’ Mandate approved at each general meeting.

The AC reviews the Shareholders’ Mandate at regular intervals, and is satisfied that the review procedures for IPTs and the reviews to be made periodically by the AC in relation thereto are adequate to ensure that the IPTs will be transacted on normal terms and will not be prejudicial to the interests of the Company and its minority shareholders.



Name of Interested Person Aggregate value of all interested person

transaction during the financial period

under review (excluding transactions

less than $100,000 and transactions

conducted under shareholders’

mandate pursuant to Rule 920)

Aggregate value of all interested

person transactions conducted under

shareholders’ mandate pursuant to

Rule 920 (excluding transactions less

than $100,000)

Between Subsidiaries and:

Chimbusco (S) Pte Ltd

Chimbusco Dalian Branch

Chimbusco Guangzhou Branch

China-Japan International Ferry Co., Ltd

Cosco (Cayman) Mercury Co., Ltd

Cosco (HK) Shipping Co., Ltd

Cosco Bulk Carrier Co., Ltd.

Cosco Container Lines Co., Ltd

Cosco Finance Co., Ltd

Cosco Nantong Steel Co., Ltd

Cosco Network (Beijing) Ltd

Cosco Shanghai Container Shipping Agency Co., Ltd

Cosco Shanghai Ship Management Co., Ltd

Cosco Shipping Co., Ltd

Cosco Wallem Ship Management Co., Ltd

Dalian Ocean Shipping Company

Dalian Yuan Chang Shipping Co., Ltd

Guangzhou Ocean Shipping Company

Nantong Chimbusco Marine Bunker

Nantong Cosco Ship Equipment Company

Qingdao Manning Co-operation Ltd

Qingdao Ocean Shipping Company

Shanghai Ocean Crew Co., Ltd

Shanghai Ocean Shipping Company

Shanghai Pan-Asia Shipping Company

Shengzhen Ocean Shipping Company

Tosco Keymas International Ship Management Ltd

Xiamen Ocean Shipping Company

Total NIL



S$’000 S$’000

2,161

8,905

1,332

112

566

17,472

34,642

17,751

276

2,653

1,538

348

6,827

932

4,073

2,438

168

16,155

2,078

2,097

3,899

36,999

7,798

6,944

234

4,817

3,642

1,155

188,012



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.

Capt. Wei Jia Fu Chairman and Non-Executive Director

Ji Hai Sheng Vice Chairman, President and

Executive Director

Li Jian Hong Non-Executive Director

Board of Directors


50

Ma Gui Chuan Executive Director

Wang Xing Ru Non-Executive Director

Tom Yee Lat Shing Non-Executive Independent Director


Mdm. Sun Yue Ying Non-Executive Director

Min Jian Guo Vice President and Executive Director


51

Dr. Wang Kai Yuen Non-Executive Independent Director

Er Kwong Wah Non-Executive Independent Director

Ang Swee Tian Non-Executive Independent Director



52

Capt. Wei Jia Fu Chairman and Non-Executive Director

Capt. Wei is currently the President of COSCO Group. He is also the Chairman of China COSCO Holdings Co., Ltd., COSCO Pacific Ltd., COSCO International Holdings Limited, COSCO (Hong Kong) Group Limited, COSCO Container Lines Co., Ltd., Boao COSCO Co., Ltd., COSCO Finance Co., Ltd., COSCO Pacific Investment Holdings Limited; Vice Chairman of China Merchants Bank Co., Ltd.; Honorary Chairman of Beijing Highlander Digital Record Tech. Co., Ltd. Captain Wei is concurrently the Chairman of the China Shipowners’ Association, China Shipowners’ Mutual Assurance Association, China Group Companies Promotion Association, China Federation of Industrial Economics, China Association of Trade in Services; Director of the Board of Boao Forum for Asia; international advisor for Panama Canal Authority; Member of the International Committee for Distinguished Shipping Personages under the American Bureau of Shipping (ABS); commissioner of National Guidance Commission of MBA Education; Honorary Dean of School of Economic Management at Shanghai Maritime university; Honorary Dean and part-time Professor of School of Navigation at Wuhan university of Technology. Captain Wei joined COSCO Group in 1967 and has successively held the posts of Captain for ocean ships, General Manager of Chinese-Tanzanian Joint Shipping Company, President of COSCO Holdings (Singapore) Pte. Ltd., General Manager of Tianjin Ocean Shipping Company and COSCO Bulk Carrier Co., Ltd., etc. Captain Wei obtained his Doctorate Degree from Tianjin university, Master Degree in Transportation Planning and Management from Dalian Maritime university. He is a Senior Engineer with vast experience in international shipping management and capital operation.

Ji Hai Sheng Vice Chairman, President and Executive Director

Mr. Ji has been the President of both COSCO Corporation (S) Ltd and COSCO Holdings (S) Pte Ltd since November 2000. He has been appointed as the Vice Chairman of COSCO effective from 14 February 2006. A graduate from the Sichuan Institute of Foreign Languages, Mr. Ji was employed at China Ocean Shipping Company in 1975, specialising in Container Operation and Management. From 1983 to 1988, he was appointed the Company Representative in the united States. Subsequently, Mr. Ji was posted to COSCO Beijing as Director of Sino-European (Container Service) and Deputy General Manager (Freight Service Department). In 1992, Mr. Ji became the Managing Director of COSCO-HIT Terminals (Hong Kong) Ltd and Assistant President of COSCO (Hong Kong) Group Company. He proceeded to become the Deputy Managing Director of COSCO Container Lines in Beijing four years later. From 1998 to 2000, Mr. Ji was appointed Managing Director of the Asia Pacific Regional Headquarters of COSCO Container Lines.

Li Jian Hong Non-Executive Director

Mr. Li is currently the Vice President of COSCO Group. He is also the Chairman of COSCO Shipyard Group Co., Ltd., COSCO International Ship Trading Co., Ltd., Dalian COSCO Shipbuilding Industry Co., Ltd.; Vice Chairman of China International Marine Containers (Group) Co., Ltd., Sino-Ocean Land Holdings Limited, Suzhou Industrial Park Co., Ltd., Nantong COSCO KHI Ship Engineering Co., Ltd.; Non-Executive Director of China COSCO Holdings Co., Ltd.; Executive Director of COSCO Pacific Ltd., Director of COSCO International Holdings Limited, COSCO Logistics Co., Ltd., Boao COSCO Co., Ltd. and COSCO Pacific Investment Holdings Limited. Mr. Li is concurrently the Vice Chairman of the Chinese Society of Naval Architects and Marine Engineers and China Association of the National Shipbuilding Industry. Mr. Li joined the COSCO Group in 1989, and has successively held the posts of Factory Director of COSCO (Nantong) Shipyard, General Manager of COSCO Industry Co., Ltd. and COSCO Real Estate Development Co., Ltd.; Assistant to the President and Chief Economist of COSCO Group. Mr. Li obtained his Master Degrees in Business Administration from university of East London, England and in Economic Management from Jilin university respectively. He is a Senior Economist with vast experience in business management and capital operation.

Mdm. Sun Yue Ying Non-Executive Director

Mdm. Sun is currently the Chief Financial Officer of COSCO Group. She is also the Chairman of COSCO (Cayman) Fortune Holding Co., Ltd., COSCO (Cayman) Venus Co., Ltd. and COSCO Line (Cayman) Ltd.; Vice Chairman of COSCO Finance Co., Ltd.; Non-Executive Director of China COSCO Holdings Co., Ltd.; Executive Director of COSCO Pacific Ltd., Director of COSCO Container Lines Co., Ltd., COSCO Logistics Co., Ltd., COSCO Bulk Carrier Co., Ltd., Qingdao Ocean Shipping Co., Ltd., Nantong COSCO KHI Ship Engineering Co., Ltd., China Merchants Bank Co., Ltd., China Merchants Securities Co., Ltd., ICBC Credit Suisse Asset Management Co., Ltd., Dalian COSCO Shipbuilding Industry Co., Ltd., COSCO Pacific Investment Holdings Limited and COSCO (Hong Kong) Group Ltd., and Supervisor of COSCO Japan Co., Ltd. Mdm. Sun joined COSCO Group in 1982 and has successfully held the posts of Deputy Director of the Finance Department of Tianjin Ocean Shipping Company, Manager of the General Affairs Department of COSCO Japan Co., Ltd., General Manager and Deputy Chief Accountant of the Finance Department of COSCO Group. Mdm. Sun has extensive experience in finance and corporate financial management.


Mr. Min joined COSCO Holdings (S) Pte Ltd as the Vice President on 5 April 2006, responsible for the personnel aspects of the Company as well as in charge of a few subsidiaries and agency units under the Company. Before his arrival to Singapore, Mr. Min was based in Beijing, China as Deputy Managing Director of COSCO Logistics Co., Ltd in January 2002. Prior to that, he had been appointed as the Deputy General Manager of China Ocean Shipping Agency head offi ce from September 2000 to December 2001, the Vice General Manager of COSCO International Freight Company from September 1995 to September 2000, and Deputy General Manager in China Road Transportation Company from November 1994 to September 1995. Mr. Min has extensive experience in the international freight forwarding and strategic management of modern logistics. He was conferred his master’s degree by Capital university of Economics and Business. Mr. Min was awarded the “Golden Anchor Prize” by China Seaman’s Association in September 2002.



53

Ma Gui Chuan Executive Director

Mr. Ma was elected as Executive Director on 10 January 2007. He joined COSCO Group in 1978 and was the Chairman of the union of COSCO in 1998. Currently he is the Chairman of COSCO Holdings (S) Pte Ltd. He had been involved in the management of the Qingdao Ocean Shipping Company for many years and became the person-incharge of Qingdao Ocean Mariner’s College in 1994. From 2001 to 2003, he was a standing member of C & C 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. With 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 Capital university of Economics and Business in postgraduate studies in administration business.

Wang Xing Ru Non-Executive Director

Mr. Wang was appointed as a Non-Executive Director of COSCO Corporation in February 2006. He has been the General Manager of COSCO Shipyard Group Ltd. since 2001. Prior to that, Mr. Wang was Executive Director of COSCO Co-Developement (Tianjin) Co., Ltd & Vice President of COSCO Industry Co. A graduate from Engineering School of Shandong university, Mr. Wang has a Master of Engineering in 1991. He has a wealth of experience in ship-repair business and assets management.

Tom Yee Lat Shing Non-Executive Independent Director

Mr. Yee was appointed to the Board on 15 December 1993. He is a Non-Executive and Independent Director and was last re-elected as Director on 18 April 2007. He is Chairman of the Company’s Audit Committee and member of the Nominating and Remuneration Committees. Mr. Yee is a Certified Public Accountant and was a partner of an international public accounting firm from 1974 to 1989. He has more than 35 years of experience in the field of accounting and auditing and extensive experience in handling major audit assignments of public listed an private companies in various industries, including insurance, manufacturing and retailing. He is currently a consultant. Mr. Yee also sits on the boards of several listed companies, and is a fellow member of the Institute of Chartered Accountants in Australia, CPA (Australia), FCPA (Singapore), associate member of the Institute of Chartered Secretaries and Administrators, and Council Member of the Institute of Certified Public Accountants of Singapore.

Dr. Wang Kai Yuen Non-Executive Independent Director

Dr. Wang was appointed as an Independent Director on 2 May 2001. He chairs the Nominating Committee and is a member of the Audit Committee and the Remuneration Committee. Dr. Wang served as a Member of Parliament for the Bukit Timah Constituency from December 1984 till April 2006. He was the Chairman of Feedback unit from 2002 till his retirement from politics. He is currently the Center Manager of Fuji Xerox Singapore Software Centre. In that capacity, he has built up the software centre and assisted in the establishment of similar centres in uK, India, China, Brazil and Ireland. Dr. Wang also holds directorships at ComfortDelgro Group Ltd, Asian Micro Holdings Ltd, Nylect Technology, Xpress Holdings Ltd, China Lifestyle Foods and Beverages, Matex International, and others. He graduated from the National university of Singapore with a degree in Bachelor Engineering, First Class Honours in Electrical and Electronics in 1972. Dr. Wang holds a Master of Science in Electrical Engineering, a Master of Science in Industrial Engineering and a PhD in Engineering from Stanford university, uS. He received a Friends of Labour Award in 1988 for his contributions to the Singapore labour movement.

Er Kwong Wah Non-Executive Independent Director

Mr. Er is an Independent Director of COSCO Corporation (Singapore) Limited. A Colombo Plan and Bank of Tokyo Scholar, he 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, university of Manchester in 1978. A former Permanent Secretary in the Singapore Civil Service, he had served in various ministries before his retirement. He is currently the Chairman of the Toa Payoh Central Citizens Consultative Committee and a member of the Bishan-Toa Payoh Town Council.

Ang Swee Tian Non-Executive Independent Director

Mr. Ang was appointed to the Board on 13 November 2007. He is a Non-Executive and Independent Director of COSCO Corporation (Singapore) Limited. He is also a member of the Audit Committee, Nominating Committee and Remuneration Committee of COSCO Corporation (Singapore) limited. Mr. Ang graduated from the Nanyang university in 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. After his return from the States, Mr. Ang served in several departments in the Monetary Authority of Singapore (MAS). He was the Head of the Money Market Division in the Banking Department in 1976/1977 and was the Deputy Insurance Commissioner in the Insurance Commissioner’s Department. Mr. Ang played a pivotal role in placing Singapore on the world map as home to Asia’s first financial futures exchange. under his stalwart leadership as the Chief Executive Officer, Mr. Ang helped establish the Singapore International Monetary Exchange (SIMEX) in 1984 and built it into a well-respected futures exchange. Mr. Ang’s illustrious career included the successful merger of SIMEX with Stock Exchange of Singapore (SES) in 1999 which became the internationally recognised Singapore Exchange (SGX) of today. He served as the President of SGX from 1999 to 2005 during which he played an active role in successfully promoting SGX as a preferred listing and capital-raising venue for Chinese enterprises. He was also instrumental in establishing SGX AsiaClear which started offering the OTC clearing facility in 2006. On his retirement in January 2006, Mr. Ang took on a new role as Senior Advisor to SGX until December 2007. In March 2007, Mr. Ang became the first from an Asian Exchange to be inducted into the Futures Industry Association (“FIA”) Futures Hall of Fame which was established to honour and give recognition to outstanding individuals for their contributions to the futures and options industry.


KeyManagement

Seated, from left:

Ji Hai Sheng Vice Chairman, President and Executive Director


Standing, from left:

Ye Bin Lin Finance Director

Teo Chuan Teck Financial Controller

Li Jian Xiong Vice President



Corporate Information

55


BOARD OF DIRECTORS

Chairman:Captain Wei Jia Fu Chairman and Non-Executive Director

(Alternate: Mr. Lu Cheng Gang)

Vice Chairman:Mr. Ji Hai Sheng Vice Chairman, President and Executive Director

Directors:Mr. Li Jian Hong Non-Executive Director

(Alternate: Mr. Li Jian Xiong)

Madam Sun Yue Ying Non-Executive Director

(Alternate: Mr. Ye Bin Lin)

Mr. Min Jian Guo Vice President and Executive Director

Mr. Ma Gui Chuan Executive Director

Mr. Wang Xing Ru Non-Executive Director

(Alternate: Mr. Liu De Tian)

Independent Directors:Mr. Tom Yee Lat ShingDr. Wang Kai YuenMr. Er Kwong WahMr. Ang Swee Tian

AuDIT COMMITTEE

Mr. Tom Yee Lat Shing (Chairman)

Dr. Wang Kai YuenMr. Er Kwong WahMr. Ang Swee Tian

REMuNERATION COMMITTEE

Mr. Er Kwong Wah (Chairman)

Mr. Ji Hai ShengMr. Tom Yee Lat ShingDr. Wang Kai YuenMr. Ang Swee Tian

NOMINATING COMMITTEE

Dr. Wang Kai Yuen (Chairman)

Mr. Ji Hai ShengMr. Tom Yee Lat ShingMr. Er Kwong WahMr. Ang Swee Tian

ENTERPRISE RISK MANAGEMENT COMMITTEE

Mr. Ang Swee Tian (Chairman)

Mr. Ji Hai ShengMr. Tom Yee Lat ShingDr. Wang Kai YuenMr. Er Kwong Wah

REGISTERED OFFICE AND BuSINESS CONTACT INFORMATION

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

COMPANY REGISTRATION NuMBER

196100159G

AuDITORS

PricewaterhouseCoopers8 Cross Street #17-00PWC BuildingSingapore 048424

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

COMPANY SECRETARY

Mr. Lawrence KwanMs. Lin Moi Heyang

SHARE REGISTRAR AND SHARE TRANSFER OFFICE

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

PRINICPAL BANKERS

Bank of China4 Battery RoadBank of China BuildingSingapore 049908

united Overseas Bank Limited80 Raffles PlaceuOB PlazaSingapore 048624


InvestorRelations

FY2006 full-year financial results announcement

Annual General Meeting

1st quarter financial results announcement

Dividend books closure date

Payment of first and final dividend

2nd quarter financial results announcement

3rd quarter financial results announcement

FY2007 full-year financial results announcement

12 February 2007

18 April 2007

30 April 2007

15 May 2007

7 May 2007

1 June 2007

31 October 2007

21 February 2008

Activities Date

COSCO holds a deep-rooted commitment to the interests of its stakeholders and the key fundamentals of leadership and governance, stakeholder relations and performance reporting are firmly entrenched in its business practices. It is COSCO’s intent to create and enhance business value as well as establish long-term relationships built on trust and understanding. As such, COSCO’s commitment to achieving excellence in creating value extends to fostering good investor relations. The belief in maintaining a high level of transparency as well as keeping in mind the interests of its shareholders at all times, permeates the entire organisation.

Over the past year, COSCO has been a star performer. Its value more than tripled over 2007, making it the Morgan Stanley Capital International World Index’s third best performer, amongst the Index’s 1,862 members. While the exceptional performance of COSCO’s operations, to a certain extent, drove the robust performance of its share value, good investor relations initiatives also contributed to COSCO’s success, by helping investors understand the Company better.

While the Company places utmost importance on generating shareholder value, it also espouses transparency that comes with effective, clear, concise and timely communications, which



Financial Calendar


57

Stock Price per Share

Percentage Change in Share Price

Number of Issued Shares

Percentage Change in Market Capitalisation

52-week Price Range

Average Daily Trading Volume

S$2.34

2,213,974,954

Opening on3 January 2007

147%

149.7%

S$2.34 - S$8.20

10.49 million

S$5.78

2,237,664,954

At close on31 December 2007

Source:Bloomberg and COSCO

21Total overseas roadshows organised in FY2007

facilitate well-informed investment decisions. These are evident and backed by the accolades its stocks have garnered from key indices and fund managers over the years.

Since 1 March 2004, COSCO has been included as a component stock of the Straits Times Index (STI), making it the first Chinese blue chip stock in Singapore. In the same month on 19 March, it was added as a new component stock of the FTSE All-World Asia-Pacific Index. On 1 June 2005, it was selected as a component stock of the Morgan Stanley Far East Index (Ex-Japan) and the Morgan Stanley Composite Index Singapore.

Admitted to the Nomura Asia-Pacific Major Index in June 2007, COSCO was also included as a component stock of Prime Partners China Index, the first index that tracks the performance of Chinese enterprises listed on SGX. From January 2008, COSCO became a part of the new FTSE ST China Index, created to reflect the increasing significant representation of China-based companies in the Singapore stock market.

COSCO believes that timely and useful disclosures are to its advantage. It works with the media and the investment community to disseminate information to the public at large. The practices it has established include providing timely disclosure of contracts won, making prompt announcements of quarterly results and giving as much detailed information as possible. These are achieved through various media, such as media interviews, news reports in print or on television or news wires, dialogues with investors and minority shareholders during the Company’s AGMs and EGMs, the Company’s homepage and the SGX website.

In FY2007, it organised roadshows, including in Europe, the uS and other parts of the world and held regular meetings and dialogues to brief analysts and investors, in addition to yard tours, to give them a first-hand update of developments taking place. Going a step further, the contact details of key management and investor relations are made known to the media, so that they can contact the relevant personnel for information or clarification when the need arises.


Source:Bloomberg and COSCO

8.00

7.00

6.00

5.00

4.00

3.00

2.00

In FY2007, the Company participated in more than 100 international and local investment promotional conferences. We take these opportunities to share updates about the Company.


58

230Total investor conference and analyst briefing organised in FY2007

The Company received the “Global Chinese Business 1000 – Best Business Performance Company” award in the Singapore region from Hong Kong-based Yazhou Zhoukan. On 4 October 2007, COSCO also won the award for most transparent company in the foreign listings category at the SIAS Investors Choice Awards, organised by the Securities Investors Association (Singapore). The winner was selected from nominations received from investment analysts, heads of research, fund managers and journalists.

This achievement is testimony to the Company’s success in achieving best practices in corporate governance and disclosure. Winning the award means that it has met the stringent standards

for timeliness, substantiality and clarity of its news releases, ease of media access, frequency of corporate results, availability of segmented information and the quality of its communication channels, such as the website.

COSCO will continue with these good practices and strive to better improve its investor relations efforts and to set a good corporate example.


Total participants in FY2007(comprising of analysts and shareholders)

Jan DecFeb Mar Apr May Jun Jul Aug Sep Oct Nov

3,800

3,600

3,500

3,400

3,200

3,000

3,118

Legend:

STI Index

COSCO Share Price CO

SC

O S

hare Price

STI

Inde

x

FY2007

Janice Chua

Lim Siew Khee

Rohan Suppiah

Lisa Lee

Mark Tan

Winnifred Heap

Praveen K Choudhary

Cheryl Lee

Stanley Tan

Stella Tan

Haider Ali

Caroline Maes

Daniel Ong

DBS Vickers

CIMB

Kim Eng Securities

Nomura Securities

uOB Kay Hian

JPMorgan

Morgan Stanley

uBS

BNP Paribas Securities

Phillip Securities

Credit Suisse

CLSA Asia Pacific

Amfraser Security

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

Not Available

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

[email protected]

Company Email AddressAnalyst

COSCO is well followed by the above reputable analysts. Please note that any opinions, estimates or forecasts regarding COSCO’s performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of COSCO or its management.



Analyst Coverage

COSCO in the News





Singapore Press Holdings LimitedThe EdgeYoung Times

Source:

RiskManagementWe are an enterprise with more than 40 years of experience in the industry. Within the Group, we have put in place a risk management system that adheres strictly to approved policies from the Board of Directors.

OVERVIEW

COSCO is a name that has an established track record backed by over 40 years in the industry. Within the companies under COSCO, there is a risk management system in place that ensures procedures adhere strictly to approved policies from the Board of Directors.

MANAGING INVESTMENTS

The Company studies the outlook for any investment beyond the next five years. Research is also conducted to study the feasibility of and verify that any proposed expansion plan meets the Company’s timeline for generating returns. Since 2005, COSCO’s shipyard group has been expanding its business activities. Prior to embarking on the new area of ship repair, ship building and marine engineering, it underwent a large-scale shipyard upgrading. This was conducted in preparation for the expansion as COSCO consciously takes measures to prevent overstretching its resources on projects it undertakes.

The current utilisation of COSCO’s shipyards is full; similar to other competing shipyards in China. This exemplifies the current situation in the Chinese market where demand exceeds supply. As such, it is conservative to put COSCO’s estimate of its annual production growth at 25%.

Oil prices have, to a large extent, repercussions on the offshore oil and gas industry. For example, a fall in oil prices to below uS$40 per barrel (S$57) will affect the exploration and development activities of petroleum companies. However, oil prices have hit uS$100 per barrel (S$143) in January 2008 and based on an objective analysis, oil prices are not expected to plunge in the short-term. Therefore, petroleum companies are likely to continue to push exploration for new oil fields. In addition, ageing oil rigs worldwide will consequently increase the market’s demand for new marine engineering services.

Moreover, as robust economic activities and burgeoning global trades with China are sustained, more merchant ships are calling at Chinese ports and supporting a strong demand for COSCO’s services in ship repair, building and marine engineering.



MANAGING CuRRENCY FLuCTuATIONS

COSCO has established a management system to address financial risks. Fluctuations in currency rates are closely monitored in the industry COSCO operates in. The Company employs simple forward hedging on a systematic approach to mitigate risks.

COSCO does not engage in speculative foreign exchange investments. Strict compliance controls are in place with a risk management committee in Singapore that ensures procedures are adhered to and management decisions are not made unilaterally. COSCO monitors its foreign currency exchange risks closely and where appropriate, enters into forward currency contracts to manage the currency exposure.

MANAGING COST OF RAW MATERIALS

COSCO’s exposure to risks that relate to the cost of raw materials pertains particularly to steel. However, such expense is limited as usage of steel is not high. A third of the steel that is used is pre-ordered at pre-determined prices. The remaining two thirds are purchased one to two months in advance. This is due to differing requirements for the ship repair and ship building industries, where the time period required for ship repair is generally short. Even if a project involves ship conversion, it takes between four to six months. If there is any increase in material cost, the Company can adjust charges to customers accordingly.

MANAGING COST OF WAGES

Ship repair is a labour-intensive industry and an increase in wages will have a significant impact on the Company. COSCO had, in the past, encountered an increase in labour cost in China, particularly Guangzhou and Shenzhen. During the peak periods, COSCO shipyards employ about 40,000 workers. In a move to reduce the impact of rising labour costs, COSCO adopts a contract hiring system. Other than retaining only about 6,000 permanent staff on the payroll, unskilled manpower is hired on a contractual basis and paid according to projects undertaken. This system decreases the fixed wage costs incurred each year.



Inside COSCO and Corporate Citizenship

Human Resource and Corporate Social Responsibility

The Company has established various schemes to build loyalty and harness the full potential of its people. Therefore, its performance and achievement appraisal system links work-related goals with personal career development and remuneration.

HUMAN RESOURCE

OVERVIEW

COSCO Shipyard operates in a labour-intensive industry, where employees play a crucial role to the performance of the Company. The Company’s core competitive advantage lies in China’s relatively lower labor cost. While labour cost can account for 70% of the total operating cost in developed countries, it constitutes about 40% at COSCO.

The Company does not take this competitive advantage for granted. It understands the need to continuously upgrade the skills of its workforce in order to meet the increasing demands of customers. It is also a necessity to enhance the productivity and efficiency of its workers to sustain growth and profitability, in addition to creating greater value for the shareholders.

At COSCO, the Company takes a four-prong approach to strengthen the manpower capabilities, namely recruitment, training, a succession scheme and a reward scheme. COSCO aims to attract and retain talents through an attractive reward scheme, while placing a great emphasis on education and training to motivate the workforce.

RECRuITMENT AND TRAINING

In line with COSCO’s new offshore rig building focus, the Company has been hiring experienced technical staff from shipyards in Japan, Korea as well as Singapore to boost manpower capabilities for its China-based shipyards. In order for the shipyard group to make the key transition from repairing and converting vessels to undertaking more sophisticated and lucrative new building projects for the offshore oil and gas sector, it is necessary to hire the external expertise, especially in offshore marine engineering. In FY2007, COSCO Shipyard hired 36 engineers and senior technicians from abroad.

Furthermore, following COSCO’s strategy of injecting new blood into the Company and to generate fresh ideas, COSCO recruits top graduates from leading Chinese universities yearly and train them to take on management roles.



Internal courses are conducted as part of ongoing training to improve the skills and knowledge of its staff. New employees attend a compulsory training course, which lasts from one to three months, where they acquire the necessary skills to perform their jobs. Technical staff must fulfill the course requirements before they can work on board a ship, with annual assessments conducted to ascertain the work standards of all employees.

The Company conducts training for its staff in China as well as on-the-job-training carried out in Singapore. Striking a collaborative partnership with Singapore’s SembCorp Marine, which has a 30% stake in the COSCO Shipyard Group, personnel from the shipyard group also underwent training at SembMarine’s PPL Shipyard. The close cooperation with SembCorp and PPL helps the shipyard group to speed up its move into the new areas of offshore marine engineering. Areas of training cover international standards and safety measures, as well as technical, engineering and management skills. The Company also engages experts in the marine engineering field from Singapore, Japan and Korea to beef up the shipyard’s skills and competencies in the area.

COSCO invests in the Company’s next generation of leaders, by providing opportunities for middle management staff to further their studies in institutes of higher learning such as the Nanyang Technological University in Singapore. Senior management from key departments is also posted to countries such as Norway, which have a long history in the marine industry, to learn from the experts.

The Company believes that the success of an enterprise depends largely on the calibre of its leaders. Employees who show potential are identified and tested by putting them through rigorous tasks. Those who prove themselves are recommended for senior management positions. This succession scheme helps groom able employees to become future leaders of the Company.

REwARd ANd RETENTION

The Company has established various schemes to build loyalty and harness the full potential of its people. Therefore, its performance and achievement appraisal system links work-related goals with personal career development and remuneration.

Under COSCO’s annual “Model Employee Reward” scheme, the Company picks the best-performing employees from its subsidiaries and arranges for them to visit the Company’s overseas subsidiaries. Other than being an incentive trip for the employees, the visits are also an opportunity for them to experience the work cultures of other COSCO companies.

The shipyards also hold a variety of competitions to inculcate the spirit of embracing challenges as well as enhance interaction among workers. For motivating the senior management and experienced employees, the Company offers them share options.

wORKPLACE SAFETy

COSCO places great emphasis on workplace safety as part of staff welfare. The Company’s three core businesses adhere to the highest safety standards that have been established internationally. Besides equipping staff with the latest technical skills, they are also made aware of the importance of safety. Through demonstrations, training and supervision, employees are educated on the potential hazards and taught safety measures to prevent accidents from occurring. Specifically, courses on safety form the bulk of the mandatory training for new employees.

At COSCO’s five shipyards, an internal safety audit team performs regular as well as random checks to ensure they meet all safety requirements at all times. COSCO has obtained the ISO9002


certification and the uS Coast Guard 21st Century Vessel Quality Certification for its impeccable safety records in shipping. The latter is the highest standard achievable and it enables COSCO’s vessels to enter uS waters without prior approval from the authorities within two years of receiving the certification.

COSCO’s safety culture is aimed at eliminating all accidents. Safety is of utmost importance in its operations and COSCO stands firm in the belief that a healthy and safe working environment is as important as environmental protection, operational efficiency, customer service and profitability. It deems health and safety as related and the Company encourages all employees to take part in activities that promote healthy living.

The Company has in place a comprehensive healthcare programme for employees. under staff welfare, employees are entitled to benefits such as annual health checks, medical insurance, dental treatment and immunisation against influenza. Medical staff is also on-board each of the Company’s vessels and on-site medical facilities are available at all shipyards.

CORPORATE SOCIAL RESPONSIBILITY

OVERVIEW

COSCO is a responsible corporate citizen with businesses worldwide. The Company believes it has a responsibility to make the world a more conducive place to live, preserve the environment and improve the community’s living standards. COSCO’s core value is to be responsible to society at large. The Company is committed to enhancing the welfare of the community and adopting practices that keep environmental damage to a minimum.

ENVIRONMENTAL RESPONSIBILITY

As a public listed company, COSCO’s primary objective is to generate profits for its shareholders. However, besides achieving profit targets, the Company constantly strives to ensure that the environment is protected. COSCO complies with international and local environmental legislations when carrying out its operations. Through the use of technology and managing work procedures, the Company seeks to improve its environmental protection measures and minimises any harm to the environment.

In collaboration with the government and environmental organisations, COSCO reviews environmental policies and issues related to the Company. Company policies and work processes are also continually assessed through internal and external audits. These ensure that the Company is up-to-date with the latest environmental protection standards.


66

COSCO is a responsible corporate citizen with businesses worldwide. The Company believes it has a responsibility to make the world a more conducive place to live, preserve the environment and improve the community’s living standards.


With regard to materials usage, the Company’s stringent selection criteria and design ensure minimal environmental damage. Wastage is also kept to a minimum by attempts to optimise material consumption. In terms of operations, COSCO’s employees adhere to stringent ISO safety procedures. The Company enforces rigorous environmental safety standards that not only meet but exceed international standards. These have been internationally certified and truly reflect the Company’s commitment to pollution control and upholding environmental safety standards.

COnTrIbuTIOnS TO SOCIeTy

being a socially responsible corporate entity, COSCO puts in practice its belief in giving back to the society. As a Chinese enterprise that is publicly listed in Singapore, the Company has generously made monetary contributions and actively supported charity events in both China and Singapore. Over the past year, COSCO has played an active role in charitable activities.

In China, COSCO has sponsored schemes to lift communities out of poverty as well as educational development programmes and relief aid. Other than monetary contributions, the Company also lent a hand in manpower support when it appointed local assistant governors in China, in response to the government’s call for support.

Since COSCO built its success in Singapore, it gives back to the business community by sharing its experience with other Chinese enterprises operating in Singapore. COSCO’s Vice-Chairman and President Mr Ji Hai Sheng is also the Chairman of the Chinese enterprises Association (CeA). Through seminars on corporate governance, Mr Ji encourages Chinese firms that are listed in Singapore to be more transparent, at the same time espouse good corporate governance practices to safeguard the interests of shareholders.




68

6975767778798183145146148

CO

NTE

NTS

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



Directors’ ReportFor The Financial Year Ended 31 December 2007

69COSCO Corporation (Singapore) Limited – Annual Report 2007

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 2007 and the balance sheet of the Company at 31 December 2007.

DIRECTORS

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

Wei Jia Fu

Ji Hai Sheng

Li Jian Hong

Sun Yue Ying

Min Jian Guo

Ma Gui Chuan

Wang Xing Ru

Tom Yee Lat Shing

Wang Kai Yuen

Er Kwong Wah

Ang Swee Tian (appointed on 13 November 2007)

Li Jian Xiong (alternate to Li Jian Hong)

Ye Bin Lin (alternate to Sun Yue Ying)

Liu De Tian (alternate to Wang Xing Ru)

Lu Cheng Gang (alternate to Wei Jia Fu)

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 72, 73 and 74 of this

report.

DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES

(a) According to the register of directors’ shareholdings, none of the directors holding offi ce at the end of the fi nancial

year had any interest in the shares or debentures of the Company or its related corporations, except as follows:

Holdings registered in name of

director or nominee

Holdings in whicha director is deemedto have an interest

At31.12.2007

At

1.1.2007

or date of

appointment,

if later

At31.12.2007

At

1.1.2007

or date of

appointment,

if later

The Company (Number of ordinary shares)

Wei Jia Fu 1,900,000 1,900,000 – –

Li Jian Hong 1,300,000 1,300,000 – –

Sun Yue Ying 1,400,000 1,400,000 – –

Ji Hai Sheng 1,155,000 1,200,000 – –

Wang Xing Ru 395,000 50,000 – –

Tom Yee Lat Shing 1,100,000 1,100,000 – –



70 COSCO Corporation (Singapore) Limited – Annual Report 2007

DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)

(a) (continued)

Holdings registered in name of

director or nominee

Holdings in whicha director is deemedto have an interest

At31.12.2007

At

1.1.2007

or date of

appointment,

if later

At31.12.2007

At

1.1.2007

or date of

appointment,

if later

The Company (Number of ordinary shares)

Wang Kai Yuen – 1,000,000 500,000 –

Er Kwong Wah 600,000 800,000 – 24,000

Li Jian Xiong 1,000,000 1,200,000 – –

Ye Bin Lin 600,000 700,000 – –

Liu De Tian 153,000 100,000 120,000 –

Lu Cheng Gang – – 50,000 40,000

Ang Swee Tian – – 5,000 5,000

Number of unissued ordinary shares

under option held by director

At 31.12.2007

At

1.1.2007

or date of

appointment,

if later

Related corporationsCOSCO International Holdings Limited - Share Option Scheme

Wei Jia Fu 3,000,000 3,000,000

Li Jian Hong 3,000,000 3,000,000

COSCO Pacifi c Limited - 2003 Share Option Scheme

Wei Jia Fu 1,000,000 1,400,000

Li Jian Hong 1,000,000 1,300,000

Sun Yue Ying 1,000,000 1,300,000

Lu Cheng Gang – 100,000

China COSCO Holdings Company Limited - Share Appreciation Rights Plan

Wei Jia Fu 2,460,000 1,800,000

Li Jian Hong 1,630,000 1,200,000

Sun Yue Ying 1,680,000 1,200,000

Ma Gui Chuan – 1,200,000




DIRECTORS’ INTERESTS IN SHARES OR DEBENTURES (continued)

(b) According to the register of directors’ shareholdings, certain directors holding offi ce at the end of the fi nancial year

had interests in the options to subscribe for ordinary shares of the Company granted pursuant to the Cosco Group

Employees’ Share Option Scheme 2002 as set out below and under “Share Options” on pages 72, 73 and 74 of

this report.

Number of unissued ordinary shares under option held by

directorAt

31.12.2007At

1.1.2007

2005 OptionsLi Jian Xiong – 200,000

Number of unissued ordinary shares under option held by

director

At31.12.2007

At

1.1.2007

or date of

appointment,

if later

2006 OptionsWei Jia Fu 1,100,000 1,100,000

Ji Hai Sheng – 900,000

Li Jian Hong 700,000 700,000

Sun Yue Ying 700,000 700,000

Wang Xing Ru – 700,000

Tom Yee Lat Shing – 300,000

Wang Kai Yuen – 300,000

Er Kwong Wah – 300,000

Li Jian Xiong – 700,000

Ye Bin Lin – 700,000

Liu De Tian – 700,000

Lu Cheng Gang 700,000 700,000

2007 OptionsJi Hai Sheng 900,000 –

Min Jian Guo 700,000 –

Ma Gui Chuan 700,000 –

Wang Xing Ru 700,000 –

Tom Yee Lat Shing 300,000 –

Wang Kai Yuen 300,000 –

Er Kwong Wah 300,000 –

Li Jian Xiong 700,000 –

Ye Bin Lin 700,000 –

Liu De Tian 700,000 –

Lu Cheng Gang 700,000 –

(c) The directors’ interest in the ordinary shares and convertible securities of the Company as at 21 January 2008 were

the same as those as at 31 December 2007.




DIRECTORS’ CONTRACTUAL BENEFITS

Since the end of the previous fi nancial year, no director has received or become entitled to receive a benefi t by reason of

a contract made by the Company or a related corporation with the director or with a fi rm of which he is a member or with

a company in which he has a substantial fi nancial interest, except as disclosed in the accompanying fi nancial statements

and in this report, and except that certain directors have employment relationships with the ultimate holding corporation or

related corporations, and have received remuneration in those capacities.

Share options

(a) Cosco Group Employees’ Share Option Scheme 2002

The Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”) was approved by members of the

Company at an Extraordinary General Meeting on 8 May 2002.

Under the Scheme 2002, share options to subscribe for the ordinary shares of the Company are granted to

directors, key management personnel and employees. The exercise price of the granted options is determined

at the average of the closing prices of the Company’s ordinary shares as quoted on the Singapore Exchange for

the fi ve market days immediately preceding the date of the grant. The options may be exercised in full or in part

in respect of 1,000 shares or a multiple thereof, on the payment of the exercise price. The Group has no legal or

constructive obligation to repurchase or settle the options in cash.

Options issued to directors and employees who have been in the service of the Company, subsidiary or controlled

associated company, or the holding company for at least one year on or prior to the date of the grant, may be

exercised twelve months after the date of grant but before the end of one hundred and twenty months. For

employees and directors who are in the service of the controlled associated company and non-executive directors,

the options shall expire at the end of sixty months. Options issued at a discount to market price, may only be

exercised two years after the date of the grant.


associated company, or the holding company for at least six months but less than one year on or prior to the date

of grant, may be exercised twenty-four months after the date of the grant but before the end of one hundred and

twenty months. For employees and directors who are in the service of the controlled associated company and

non-executive directors, the options shall expire at the end of sixty months. Options issued at a discount to market

price, may only be exercised three years after the date of the grant.

Particulars of the options granted pursuant to the Scheme 2002 in 2004, 2005 and 2006 known as “2004 Options”,

“2005 Options” and “2006 Options” respectively were set out in the Directors’ Report for the fi nancial years ended

31 December 2004, 31 December 2005 and 31 December 2006 respectively.

On 5 February 2007, options to subscribe for 16,270,000 ordinary shares of the Company at an exercise price

of $2.48 per ordinary share were granted pursuant to the Scheme 2002 (“2007 Options”). The 2007 Options are

exercisable from 5 February 2008 and expire on 4 February 2017. The total fair value of the 2007 Options granted

was estimated to be $0.82 using the Binomial Valuation ModeI.

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

Er Kwong Wah (Chairman)

Ji Hai Sheng

Wang Kai Yuen

Tom Yee Lat Shing

Ang Swee Tian (appointed on 13 November 2007)




Share options (continued)

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

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

Number of unissued ordinary shares of the Company under option

Granted infi nancial year

ended

Aggregategranted since

commencementof Scheme

2002 to

Aggregateexercised since commencement

of Scheme 2002 to

Aggregateoutstanding

as atName of directors 31.12.2007 31.12.2007 31.12.2007 31.12.2007

Directors of the Company

Wei Jia Fu – 4,800,000 3,700,000 1,100,000

Ji Hai Sheng 900,000 5,000,000 4,100,000 900,000

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

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

Min Jian Guo 700,000 700,000 – 700,000

Ma Gui Chuan 700,000 700,000 – 700,000

Wang Xing Ru 700,000 2,300,000 1,600,000 700,000

Tom Yee Lat Shing 300,000 1,900,000 1,600,000 300,000

Wang Kai Yuen 300,000 1,900,000 1,600,000 300,000

Er Kwong Wah 300,000 1,900,000 1,600,000 300,000

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

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

Liu De Tian 700,000 3,700,000 3,000,000 700,000

Lu Cheng Gang 700,000 1,400,000 – 1,400,000

6,700,000 38,800,000 28,900,000 9,900,000

No options have been granted to controlling shareholders (as defi ned in the Listing Manual of the SGX-ST) of the

Company or their associates (as defi ned in the Listing Manual of the SGX-ST).

No option has been granted at a discount during the fi nancial year.

During the fi nancial year, 23,690,000 shares of the Company were allotted and issued by virtue of the exercise of

options to take up unissued shares of the Company. There were no unissued shares of the subsidiaries under

option at the end of the fi nancial year.





(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 toScheme 2002

Numberof unissued

ordinary shares

at1.1.2007

Numberissued

during the fi nancial

year

Numberexercisedduring the fi nancial

year

Numbercancelled/

lapsedduring thefi nancial

year

Numberof unissued

ordinary shares

at31.12.2007

Exerciseprice Exercise period

’000 ’000 ’000 ’000 ’000 $

2004 Options 260 – (260) – – 0.3675 24.5.2005 – 23.5.2014

2005 Options 4,750 – (4,750) – – 0.807 6.4.2006 – 5.4.2015

2006 Options 22,750 – (18,680) – 4,070 1.23 21.2.2007 – 20.2.2016

2007 Options – 16,270 – – 16,270 2.48 5.2.2008 – 4.2.2017

27,760 16,270 (23,690) – 20,340

INDEPENDENT AUDITOR

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

On behalf of the directors

JI HAI SHENG MIN JIAN GUODirector Director

28 February 2008


Statement by DirectorsFor The Financial Year Ended 31 December 2007


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 77

to 144 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group at 31

December 2007, 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

JI HAI SHENG MIN JIAN GUODirector Director

28 February 2008


Independent Auditors’ ReportTo The Members of COSCO Corporation (Singapore) LimitedFor The Financial Year Ended 31 December 2007


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

its subsidiaries (the “Group”) set out on pages 77 to 144, which comprise the balance sheets of the Company and of the

Group as at 31 December 2007, and the consolidated income statement, the consolidated statement of changes in equity

and the consolidated cash fl ow statement of the Group for the fi nancial year then ended, and a summary of signifi cant

accounting policies and other explanatory notes.

Directors’ Responsibility for the Financial Statements

The Company’s directors are responsible for the preparation and fair presentation of these fi nancial statements in

accordance with the provisions of the Singapore Companies Act (Cap. 50) (the “Act”) and Singapore Financial Reporting

Standards. This responsibility includes designing, implementing and maintaining internal control relevant to the preparation

and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting

and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditor’s Responsibility

Our responsibility is to express an audit opinion on these fi nancial statements based on our audit. We conducted our audit

in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements

and plan and perform the audit to obtain reasonable assurance as to whether the fi nancial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial

statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material

misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation and fair presentation of the fi nancial statements in order to

design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies

used and the reasonableness of accounting estimates made by directors, as well as evaluating the overall presentation of

the fi nancial statements.

We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion,

(a) the balance sheet of the Company and the consolidated fi nancial statements of the Group are properly drawn up in

accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair

view of the state of affairs of the Company and of the Group as at 31 December 2007, and the results, changes in

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

(b) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries

incorporated in Singapore of which we are the auditor, have been properly kept in accordance with the provisions of

the Act.

PricewaterhouseCoopers

Certifi ed Public Accountants

Singapore, 28 February 2008


Consolidated Income StatementFor The Financial Year Ended 31 December 2007


Notes 2007 2006

$’000 $’000

Sales 5 2,261,700 1,215,469

Cost of sales (1,651,507) (837,846)

Gross profi t 610,193 377,623

Other income (net)

– Miscellaneous 8 111,204 52,048

– Exceptional gain 9 – 24,136

Expenses

– Distribution (64,713) (37,199)

– Administrative (147,704) (96,968)

– Finance 10 (11,444) (17,944)

Share of profi t of associated companies 22 537 600

Profi t before income tax 498,073 302,296

Income tax expense 11 (19,512) (22,981)

Net profi t 478,561 279,315

Attributable to:Equity holders of the Company 336,568 205,353

Minority interests 141,993 73,962

478,561 279,315

Earnings per share for profi t attributable to equity holdersof the Company

(expressed in cents per share) 12

– Basic 15.09 9.30

– Diluted 15.02 9.27

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


Balance SheetsAs at 31 December 2007


The Group The CompanyNotes 2007

$’0002006

$’000

2007$’000

2006

$’000

ASSETSCurrent assetsCash and cash equivalents 13 1,082,794 277,868 108,604 25,687Forward currency contracts 14 33,523 472 – –Trade and other receivables 15 828,075 267,229 733 9,415Inventories 16 443,328 183,493 – –Construction contract work-in-progress 17 43,132 18,064 – –Trading properties 18 977 800 – –

2,431,829 747,926 109,337 35,102

Non-current assetsForward currency contracts 14 8,778 45 – –Trade and other receivables 19 – – 65,868 70,361Financial assets, available-for-sale 20 3,067 2,208 – –Club memberships 21 479 412 236 175Investments in associated companies 22 1,794 2,227 – 400Investments in subsidiaries 23 – – 284,399 256,259Investment properties 24 11,472 11,350 – –Property, plant and equipment 25 1,478,453 1,110,179 932 582Intangible assets 26 9,302 9,319 – –Deferred income tax assets 31 21,996 – – –

1,535,341 1,135,740 351,435 327,777

Total assets 3,967,170 1,883,666 460,772 362,879

LIABILITIESCurrent liabilitiesTrade and other payables 27 2,416,393 529,707 7,021 5,846Current income tax liabilities 11 24,040 11,891 969 293Borrowings 28 111,528 128,246 – –Provisions for other liabilities 30 5,064 6,309 – –

2,557,025 676,153 7,990 6,139

Non-current liabilitiesForward currency contracts 14 42,264 – – –Borrowings 28 64,910 283,806 – –Provisions for other liabilities 30 65 3,571 65 76Deferred income tax liabilities 31 152 189 – –

107,391 287,566 65 76

Total liabilities 2,664,416 963,719 8,055 6,215

NET ASSETS 1,302,754 919,947 452,717 356,664

EQUITYCapital and reserves attributable to equity holders of the CompanyShare capital 32 266,852 239,947 266,852 239,947Statutory and other reserves 33 82,806 70,855 24,554 11,931Retained earnings 590,249 359,256 161,311 104,786

939,907 670,058 452,717 356,664Minority interests 362,847 249,889 – –

Total equity 1,302,754 919,947 452,717 356,664



Consolidated Statement of Changes in EquityFor The Financial Year Ended 31 December 2007


Attributable to equity holders of the Company

NotesShare capital

Statutoryand otherreserves

Retainedearnings

Minorityinterests

Totalequity

$’000 $’000 $’000 $’000 $’000

2007Beginning of fi nancial year 239,947 70,855 359,256 249,889 919,947

Currency translation differences 33(b)(iii) – (16,899) – 17 (16,882)

Net loss recognised directly in equity – (16,899) – 17 (16,882)

Net profi t – – 336,568 141,993 478,561

Total recognised (loss)/gains – (16,899) 336,568 142,010 461,679Employee share option scheme:

– value of director and employee services 33(b)(i) – 12,623 – – 12,623

– issue of shares 32 26,905 – – – 26,905

Minorities’ share of increase in registered

capital of a subsidiary – – – 27,036 27,036

Increase in minorities’ interest of a

subsidiary – – – 2,527 2,527

Dividend declared by subsidiaries to

minority shareholders of subsidiaries – – – (58,615) (58,615)

Dividend for 2006 34 – – (89,348) – (89,348)

Revaluation and currency translation

reserves realised on dilution of interests

in subsidiary

33(b)(iii),

(iv) – (383) 383 – –

Transfer from retained earnings to

translation reserve 33(b)(iii) – 440 (440) – –

Transfer from asset revaluation reserve

to retained earnings 33(b)(iv) – (3,217) 3,217 – –

Transfer from retained earnings to statutory

reserve 33(b)(ii) – 19,387 (19,387) – –

End of fi nancial year 266,852 82,806 590,249 362,847 1,302,754



Consolidated Statement of Changes in EquityFor The Financial Year Ended 31 December 2007


Attributable to equity holders of the Company

NotesShare capital

Statutoryand otherreserves

Retainedearnings

Minorityinterests

Totalequity

$’000 $’000 $’000 $’000 $’000

2006Beginning of fi nancial year 228,587 60,634 230,484 175,744 695,449

Currency translation differences 33(b)(iii) – (28,841) – (8,588) (37,429)

Net loss recognised directly in equity – (28,841) – (8,588) (37,429)

Net profi t – – 205,353 73,962 279,315

Total recognised (loss)/gains – (28,841) 205,353 65,374 241,886Employee share option scheme:

– value of director and employee services 33(b)(i) – 6,622 – – 6,622

– issue of shares 32 11,360 – – – 11,360

Minorities’ share of increase in registered

capital of a subsidiary – – – 46,132 46,132

Dividend declared by subsidiaries to

minority shareholders of subsidiaries – – – (37,361) (37,361)

Dividend for 2005 34 – – (44,141) – (44,141)


translation reserve 33(b)(iii) – 757 (757) – –

Transfer from asset revaluation reserve

to retained earnings 33(b)(iv) – (3,233) 3,233 – –


statutory reserve 33(b)(ii) – 34,916 (34,916) – –

End of fi nancial year 239,947 70,855 359,256 249,889 919,947



Consolidated Cash Flow StatementFor The Financial Year Ended 31 December 2007


Note 2007$’000

2006

$’000

Cash fl ows from operating activitiesNet profi t 478,561 279,315

Adjustments for:

– Income tax expense 19,512 22,981

– Depreciation 80,585 61,738

– Reversal of impairment in value of transferable

club memberships (62) (34)

– Net loss/(gain) on disposal of property, plant and equipment 2,347 (24,136)

– Property, plant and equipment written off 135 315

– Gain on dilution of interests in a subsidiary (1,613) –

– Gain on disposal of fi nancial assets, available-for-sale (7) –

– Employees share option expenses 12,623 6,622

– Net fair value loss/(gain) on forward currency contracts 483 (524)

– Share of profi t from associated companies (537) (600)

– Dividend income (586) (208)

– Interest expense (fi nancing) 11,444 17,944

– Interest income (investing) (14,030) (6,158)

588,855 357,255

Changes in working capital:

– Inventories and construction contract work-in-progress (284,903) (93,565)

– Trade and other receivables (560,598) (116,281)

– Trade and other payables 1,885,617 246,403

– Trading properties (177) 18,470

– Provisions for other liabilities (4,751) 1,595

– Exchange differences (7,726) (10,013)

Cash generated from operations 1,616,317 403,864

Income tax paid (29,475) (18,541)

Net cash provided by operating activities 1,586,842 385,323

Cash fl ows from investing activitiesProceeds from liquidation of an associated company 423 695

Purchase of property, plant and equipment (471,330) (313,445)

Proceeds from disposal of property, plant and equipment 9,350 55,552

Purchase of transferable club memberships (11) (7)

Purchase of fi nancial assets, available-for-sale (975) –

Proceeds from disposal of fi nancial assets, available-for-sale 127 –

Dividends received 983 340

Interest received 13,934 6,141

Net cash used in investing activities (447,499) (250,724)



Consolidated Cash Flow StatementFor The Financial Year Ended 31 December 2007


Note 2007$’000

2006

$’000

Cash fl ows from fi nancing activitiesProceeds from issuance of ordinary shares 26,905 11,360

Proceeds from borrowings 1,800 189,231

Repayments of borrowings (231,788) (166,369)

Repayments of fi nance lease liabilities (31) (50)

Proceeds from minority shareholders for increase in registered

capital of a subsidiary – 14,261

Decrease/(Increase) in cash collateral 99 (2,730)

Interest paid (12,648) (16,941)

Dividends paid to shareholders of the Company (89,348) (44,141)

Dividends paid to minority shareholders of subsidiaries (29,307) (4,502)

Net cash used in fi nancing activities (334,318) (19,881)

Net increase in cash and cash equivalents 805,025 114,718

Cash and cash equivalents at beginning of fi nancial year 13 273,561 158,843

Cash and cash equivalents at end of fi nancial year 13 1,078,586 273,561



Notes To The Financial StatementsFor The Financial Year Ended 31 December 2007


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 City Tower 2, 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 23 to the fi nancial statements.

2. SIGNIFICANT 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. The areas involving higher degree of judgement or complexity, or areas where assumptions and

estimates are signifi cant to the fi nancial statements, are disclosed in Note 4.

Interpretations and amendments to published standards effective in 2007

On 1 January 2007, 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:

Amendments to FRS 1 Presentation of Financial Statements – Capital Disclosures

FRS 40 Investment Property

FRS 107 Financial Instruments: Disclosures

INT FRS 110 Interim Financial Reporting and Impairment

The adoption of the above FRS or INT FRS did not result in any substantial changes to the Group’s accounting

policies nor any signifi cant impact on these fi nancial statements, except for the adoption of FRS 40, of which the

effects are disclosed in Note 3. FRS 107 and the complementary amended FRS 1 introduce new disclosures relating

to fi nancial instruments and capital respectively.

2.2 Revenue recognition

Revenue for the Group comprises 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, net of value-added tax, rebates and discounts, and after eliminating sales within the Group.




2. SIGNIFICANT ACCOUNTING POLICIES (continued)

2.2 Revenue recognition (continued)

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

that future economic benefi ts will fl ow to the entity and when the specifi c criteria for each of the Group’s activities

are matched as follows:

(a) Rendering of services

(i) Shipping

Revenue from time charter is recognised over the period of the time charter agreement on an accrual

basis. Any losses arising from time charters are provided for in full as soon as they are anticipated.

Booking commissions, agency and transhipment fees are recognised upon the rendering of services

to vessels.

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 anticipated losses

on contracts in progress. Please refer to the paragraph “construction contracts” for the accounting

policy on revenue from construction contracts.

(b) Rental income

Rental income from operating leases on trading properties, investment properties and property, plant and

equipment is recognised on the straight-line basis over the lease term.

(c) Sale of scrap materials

Revenue from sale of scrap materials is recognised when a Group entity has delivered the products to the

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

assured.

(d) Interest income

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

(e) Dividend income

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





2.3 Group accounting

(a) Subsidiaries

Subsidiaries are entities over which the Group has power to govern the fi nancial and operating policies,

generally accompanying by a shareholding giving rise to the majority of the voting rights. The existence and

effect of potential voting rights that are currently exercisable or convertible are considered when assessing

whether the Group controls another entity.

The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an

acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred

or assumed at the dates of exchange, plus costs directly attributable to the acquisition. Identifi able assets

acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at

their fair values on the date of acquisition, irrespective of the extent of minority interest. Please refer to the

paragraph “Intangible assets – Goodwill” for the accounting policy on goodwill on acquisition of subsidiaries.

Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-

consolidated from the date on which control ceases.

In preparing the consolidated financial statements, transactions, balances and unrealised gains on

transactions between group entities are eliminated. Unrealised losses are also eliminated but are considered

an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed

where necessary to ensure consistency with the policies adopted by the Group.

Minority interests are that part of the net results of operations and of net assets of a subsidiary attributable

to the interests which are not owned directly or indirectly by the Group. They are measured at the minorities’

share of fair value of subsidiaries’ identifi able assets and liabilities at the date of acquisition by the Group and

the minorities’ share of changes in equity since the date of acquisition, except when the minorities’ share

of losses in a subsidiary exceeds its interests in the equity of that subsidiary. In such cases, the excess

and further losses applicable to the minorities are attributed to the equity holders of the Company, unless

the minorities have a binding obligation to, and are able to, make good the losses. When that subsidiary

subsequently reports profi ts, the profi ts applicable to the minority interests are attributed to the equity

holders of the Company until the minorities’ share of losses previously absorbed by the equity holders of the

Company are fully recovered.

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

policy on investments in subsidiaries in the separate fi nancial statements of the Company.

(b) Transactions with minority interests

The Group applies a policy of treating transactions with minority interests as transactions with parties external

to the Group. Disposals to minority interests result in gains and losses for the Group that are recognised in

the income statement. Purchases from minority interests result in goodwill, being the difference between any

consideration paid and the Group’s incremental share of the carrying value of identifi able net assets of the

subsidiary.

(c) Associated companies

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

accompanied by a shareholding giving rise to between and including 20% and 50% of the voting rights.

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

equity method of accounting. Investments in associated companies in the consolidated balance sheet

include goodwill (net of any accumulated impairment losses) identifi ed on acquisition. Please refer to the

paragraph “Intangible assets – Goodwill” for the Group’s accounting policy on goodwill.





2.3 Group accounting (continued)

(c) Associated companies (continued)

Investments in associated companies are initially recognised at cost. The cost of an acquisition is measured

at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of

exchange, plus costs directly attributable to the acquisition.

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

profi ts or losses is recognised in the income statement and its share of post-acquisition movements in

reserves is recognised in equity directly. These post-acquisition movements are adjusted against the

carrying amount of the investment. When the Group’s share of losses in an associated company equals or

exceeds its interest in the associated company, including any other unsecured non-current receivables, the

Group does not recognise further losses, unless it has obligations or has made payments on behalf of the

associated company.

Unrealised gains on transactions between the Group and its associated companies are eliminated to the

extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the

transaction provides evidence of an impairment of the asset transferred. Accounting policies of associated

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

by the Group.

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

policy on investments in associated companies in the separate fi nancial statements of the Company.

2.4 Property, plant and equipment

(a) Measurement

(i) Land and buildings

Land and buildings are initially recognised at cost. Freehold land is subsequently carried at cost less

accumulated impairment losses. Buildings and leasehold land are subsequently carried at the cost

less accumulated depreciation and accumulated impairment losses.

(ii) Motor vessels

Cost of motor vessels includes actual interest incurred on borrowings used to fi nance the motor

vessels while under construction and other direct relevant expenditure incurred in bringing the vessels

into operation. For this purpose, the interest rate applied to funds provided for constructing the motor

vessels is arrived at by reference to the actual rate payable on borrowings for construction purposes.

The capitalisation of interest charges will cease upon the completion and delivery of the motor

vessels.

(iii) Other property, plant and equipment

All other items of property, plant and equipment are initially recognised at cost and subsequently

carried at cost less accumulated depreciation and accumulated impairment losses.





2.4 Property, plant and equipment (continued)

(a) Measurement (continued)

(iv) Components of costs

The cost of an item of property, plant and equipment initially recognised includes its purchase price

and any cost that is directly attributable to bringing the asset to the location and condition necessary

for it to be capable of operating in the manner intended by management. The projected cost of

dismantlement, removal or restoration is also recognised as part of the cost of property, plant and

equipment if the obligation for the dismantlement, removal or restoration is incurred as a consequence

of either acquiring or using the asset for purposes other than to produce inventories.

(b) Depreciation

Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculated

using the straight-line method to allocate their depreciable amounts over their estimated useful lives as

follows:

Useful lives

Leasehold land 20 - 50 years

Buildings on freehold and leasehold land 20 - 50 years

Offi ce renovations, furniture, fi xtures and equipment 3 - 10 years

Plant, machinery and equipment 3 - 10 years

Motor vehicles 5 - 10 years

Motor vessels 25 years

Docks and quays 20 - 40 years

No depreciation is provided for construction-in-progress.

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

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

recognised in the income statement when the changes arise.

(c) Subsequent expenditure

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

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

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

maintenance expense is 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

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

identifi able net assets and contingent liabilities of the acquired subsidiaries and associated companies at the date of

acquisition.

Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated

impairment losses.

Goodwill on associated companies is included in the carrying amount of the investments.

Gains and losses on the disposal of subsidiaries and associated companies include the carrying amount of goodwill

relating to the entity sold, except for goodwill arising from acquisitions prior to 1 January 2001. Such goodwill

was adjusted against retained earnings in the year of acquisition and not recognised in the income statement on

disposal.

2.6 Borrowing costs

Borrowing costs are recognised in the income statement using the effective interest method except for those

costs that are directly attributable to borrowings acquired specifi cally for the construction of docks and quays. The

actual borrowing costs incurred during the 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. Such costs are shown as construction

contract work-in-progress on the balance sheet unless it is not probable that such contract costs are recoverable

from the customers, in which case, such costs are recognised as an expense immediately.





2.7 Construction contracts (continued)

At the balance sheet date, the aggregated costs incurred plus recognised profi t (less recognised loss) on each

contract is compared against the progress billings. Where costs incurred plus the recognised profi ts (less recognised

losses) exceed progress billings, the balance is presented as due from customers on construction contracts

within “trade and other receivables”. Where progress billings exceed costs incurred plus recognised profi ts (less

recognised losses), the balance is presented as due to customers on construction contracts within “trade and other

payables”.

Progress billings not yet paid by customers and retentions are included within “trade and other receivables”.

Advances received are included within “trade and other payables”.

2.8 Investment properties

Investment properties include those portions of offi ce buildings that are held for long-term rental yields and/or for

capital appreciation and land under operating leases that are held for long-term capital appreciation or for a currently

indeterminable use.

Investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciation

and accumulated impairment losses. Depreciation is calculated using straight-line method to allocate the depreciable

amounts over the estimated useful lives of 50 years. The residual values, useful lives and depreciation method of

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

revision are included in the income statement when the changes arise.

Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovations

and improvements is capitalised as addition and the carrying amounts of the replaced components are written off to

the income statement. The cost of maintenance, repairs and minor improvement is charged to the income statement

when incurred.

On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is

recognised in the income statement.

2.9 Trading properties

Trading properties are held for sale in the ordinary course of business and are stated at the lower of cost and

estimated net realisable value. Cost of the trading properties comprises its purchase price.

The net realisable value is the estimated selling price in the ordinary course of business, less the cost of completion

and selling expenses.

2.10 Investments in subsidiaries and associated companies

Investments in subsidiaries and associated companies are stated at cost less accumulated impairment losses in the

Company’s balance sheet. On disposal of investments in subsidiaries and associated companies, the difference

between disposal proceeds and the carrying amounts of the investments are recognised in the income statement.





2.11 Impairment of non-fi nancial assets

(a) Goodwill

Goodwill is tested for impairment annually, and whenever there is indication that the goodwill may be

impaired. Goodwill included in the carrying amount of an investment in associated company is tested for

impairment as part of the investment, rather than separately.

For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-

generating-units (“CGU”) expected to benefi t from synergies arising from the business combination.

An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the

recoverable amount of the CGU. Recoverable amount of a CGU is the higher of a CGU’s fair value less cost

to sell and value-in-use.

The total impairment loss of a CGU is allocated fi rst to reduce the carrying amount of goodwill allocated to

the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset

in the CGU.

An impairment loss on goodwill is recognised in the income statement and is not reversed in a subsequent

period.

(b) Intangible assets

Property, plant and equipment

Investments in subsidiaries and associated companies

Intangible assets, property, plant and equipment 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 an asset other than goodwill is increased to its revised recoverable amount, provided

that this amount does not exceed the carrying amount that would have been determined (net of any

accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior

years.

A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless

the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

However, to the extent that an impairment loss on the same revalued asset was previously recognised in the

income statement, a reversal of that impairment is also recognised in the income statement.





2.12 Financial assets

(a) Classifi cation

The Group classifi es its fi nancial assets in the following categories: at fair value through profi t or loss, loans

and receivables, held-to-maturity, and available-for-sale. The classifi cation depends on the purpose for

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

recognition. The designation of fi nancial assets at fair value through profi t or loss is irrevocable.

(i) Financial assets, at fair value through profi t or loss

This category has two sub-categories: fi nancial assets held for trading, and those designated at fair

value through profi t or loss at inception. A fi nancial asset is classifi ed as held for trading if it is acquired

principally for the purpose of selling in the short term. Financial assets designated as at fair value

through profi t or loss at inception are those that are managed and their performances are evaluated

on a fair value basis, in accordance with a documented Group investment strategy. Derivatives are

also categorised as held for trading unless they are designated as hedges. Assets in this category are

presented as current assets if they are either held for trading or are expected to be realised within 12

months after the balance sheet date.

(ii) Loans and receivables

Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are

not quoted in an active market. They are presented as current assets, except for those maturing later

than 12 months after the balance sheet date which are presented as non-current assets. Loans and

receivables are presented as “trade and other receivables” and “cash and cash equivalents” on the

balance sheet.

(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 also transferred to the income statement.





2.12 Financial assets (continued)

(c) Initial measurement

Financial assets are initially recognised at fair value plus transaction costs except for fi nancial assets at fair

value through profi t or loss, which are recognised at fair value. Transaction costs for fi nancial assets at fair

value through profi t and loss are recognised immediately in the income statement.

(d) Subsequent measurement

Financial assets, both available-for-sale and at fair value through profi t or loss are subsequently carried at

fair value. Loans and receivables and fi nancial assets, held-to-maturity are subsequently carried at amortised

cost using the effective interest method.

Changes in the fair value of fi nancial assets, at fair value through profi t or loss, including the effects of

currency translation, interest and dividend, are recognised in the income statement when the changes arise.

Interest and dividend income on fi nancial assets, available-for-sale are recognised separately in the income

statement. Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominated

in foreign currencies are analysed into currency translation differences on the amortised cost of the securities

and other changes; the currency translation differences are recognised in the income statement and the

other changes are recognised in the fair value reserve. Changes in fair values of available-for-sale equity

securities (i.e. non-monetary items) are recognised in the fair value reserve, together with the related currency

translation differences.

(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.





2.12 Financial assets (continued)

(e) Impairment (continued)

(ii) Financial assets, available-for-sale

Signifi cant or prolonged declines in the fair value of the security below its cost and the disappearance

of an active trading market for the security are objective evidence that the security is impaired.

The cumulative loss that was recognised in the fair value reserve is transferred to the income

statement. The cumulative loss is measured as the difference between the acquisition cost (net of any

principal repayments and amortisation) and the current fair value, less any impairment loss previously

recognised in the income statement on debt securities. The impairment losses recognised in the

income statement on equity securities are not reversed through the income statement.

2.13 Financial guarantees

The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries. These guarantees

are fi nancial guarantees as they require the Company to reimburse the banks if the subsidiaries fail to make principal

or interest payments when due in accordance with the terms of their borrowings.

Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s balance

sheet.

Financial guarantees are subsequently amortised to the income statement over the period of the subsidiaries’

borrowings, unless it is probable that the Company will reimburse the bank for an amount higher than the

unamortised amount. In this case, the fi nancial guarantees shall be carried at the expected amount payable to the

bank in the Company’s balance sheet.

Intra-group transactions are eliminated on consolidation.

2.14 Borrowings

Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at

least 12 months after the balance sheet date.

Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised

cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the

income statement over the period of the borrowings using the effective interest method.

2.15 Trade and other payables

Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the

effective interest method.

2.16 Derivative fi nancial instruments and hedging activities

A derivative fi nancial instrument is initially recognised at its fair value on the date the contract is entered into and

is subsequently carried at its fair value. The method of recognising the resulting gain or loss depends on whether

the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group

designates each hedge as either: (a) fair value hedge; or (b) cash fl ow hedge.





2.16 Derivative fi nancial instruments and hedging activities (continued)

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged

items, as well as its risk management objective and strategies for undertaking various hedge transactions. The

Group also documents its assessment, both at hedge inception and on an ongoing basis, of 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 carrying amount of a derivative designated as hedge is presented as a non-current asset or liability if

the remaining expected life of the hedged item is more than 12 months, and as a current asset or liability, if the

remaining expected life of the hedged item is less than 12 months. The fair value of a trading derivative is presented

as current assets or liabilities.

(a) Fair value hedge and cash fl ow hedge

The Group has not designated any derivatives as hedging instruments during the fi nancial year.

(b) Derivatives that are not designated or do not qualify for hedge accounting

Fair value changes on these derivatives are recognised in the income statement when the changes arise.

2.17 Fair value estimation of fi nancial assets and liabilities

The fair values of fi nancial instruments traded in active markets (such as exchange-traded and over-the-counter

securities and derivatives) are based on quoted market prices at the balance sheet date. The quoted market prices

used for fi nancial assets are the current bid prices; the appropriate quoted market prices for fi nancial liabilities are

the current asking prices.

The fair values of fi nancial instruments that are not traded in an active market are determined by using valuation

techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions

existing at each balance sheet date. Where appropriate, quoted market prices or dealer quotes for similar

instruments are used. Valuation techniques, such as discounted cash fl ow analyses, are also used to determine the

fair values of the fi nancial instruments.

The fair values of currency forwards are determined using actively quoted forward exchange rates.

The fair values of current fi nancial assets and liabilities carried at amortised cost approximate their carrying amounts.

2.18 Leases

(a) When the Group is the lessee:

The Group leases certain property, plant and equipment from third parties.

(i) Lessee - Finance leases

Leases of property, plant and equipment where the Group assumes substantially all risks and rewards

incidental to ownership of the leased assets are classifi ed as fi nance leases.

The leased assets and the corresponding lease liabilities (net of fi nance charges) under fi nance leases

are recognised on the balance sheet as property, plant and equipment and borrowings respectively, at

the inception of the leases based on the lower of the fair value of the leased assets and the present

value of the minimum lease payments.





2.18 Leases (continued)

(a) When the Group is the lessee: (continued)

(i) Lessee - Finance leases (continued)

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 a straight-line basis over the period of the lease.

Contingent rents are recognised as an expense in the income statement when incurred.

(b) When the Group is the lessor:

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

properties to non-related parties.

(i) Lessor - Operating leases

Leases of property, plant and equipment, investment properties and trading properties where the

Group retains substantially all risks and rewards incidental to ownership are classifi ed as operating

leases.

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

income statement on the straight-line basis over the lease term.

Initial direct costs incurred by the Group in negotiating and arranging an operating lease are added to

the carrying amount of the leased asset and recognised as an expense in the income statement over

the lease term on the same basis as the lease income.

Contingent rents are recognised as income in the income statement when earned.

2.19 Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted average

method. The cost of fi nished goods and work-in-progress comprises raw materials, direct labour, other direct

costs and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net

realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling

expenses.





2.20 Income taxes

Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered

from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the

balance sheet date.

Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities

and their carrying amounts in the fi nancial statements except when the deferred income tax arises from the initial

recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither

accounting nor taxable profi t or loss at the time of the transaction.

A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries and

associated companies, except where the Group is able to control the timing of the reversal of the temporary

difference and it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred income tax asset is recognised to the extent that it is probable that future taxable profi t will be available

against which the deductible temporary differences and tax losses can be utilised.

Deferred income tax is measured:

(i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the

deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or

substantively enacted by the balance sheet date; and

(ii) based on the tax consequence that will follow from the manner in which the Group expects, at the balance

sheet date, to recover or settle the carrying amounts of its assets and liabilities.

Current and deferred income tax are recognised as income or expense in the income statement for the period,

except to the extent that the tax arises from a business combination or a transaction which is recognised directly in

equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition.

2.21 Provisions

Provisions for warranty and other liabilities are recognised when the Group has a present legal or constructive

obligation as a result of past events, it is more likely than not that an outfl ow of resources will be required to settle

the obligation and the amount has been reliably estimated.

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.

2.22 Employee compensation

(a) Defi ned contribution plans

Defi ned contribution plans are post-employment benefi t plans under which the Group pays fi xed contributions

into separate entities such as the Central Provident Fund and social security plans in the People’s Republic

of China (the “PRC”) on a mandatory, contractual or voluntary basis. The Group has no further payment

obligations once the contributions have been paid. The Group’s contributions are recognised as employee

compensation expense when they are due, unless they can be capitalised as an asset.





2.22 Employee compensation (continued)

(b) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made

for the estimated liability for annual leave as a result of services rendered by employees up to the balance

sheet date.

(c) Share-based compensation

The Group operates an equity-settled, share-based compensation plan. The fair value of the employee

services received in exchange for the grant of the options is recognised as an expense in the income

statement with a corresponding increase in the share option reserve over the vesting period. The total

amount to be recognised over the vesting period is determined by reference to the fair value of the options

granted on the date of the grant. Non-market vesting conditions are included in the estimation of the number

of shares under option that are expected to become exercisable on the vesting date. At each balance sheet

date, the Group revises its estimates of the number of shares under option that are expected to become

exercisable on the vesting date and recognises the impact of the revision of the estimates in the income

statement, with a corresponding adjustment to the share option reserve over the remaining vesting period.

When the options are exercised, the proceeds received (net of transaction costs) are credited to share capital

account when new ordinary shares are issued.

2.23 Currency translation

(a) Functional and presentation currency

Items included in the fi nancial statements of each entity in the Group are measured using the currency of

the primary economic environment in which the entity operates (the “functional currency”). The consolidated

fi nancial statements are presented in Singapore Dollar, which is the Company’s functional currency.

(b) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated into

the functional currency using the exchange rates at the dates of the transactions. Currency translation

differences from the settlement of such transactions and from the translation of monetary assets and liabilities

denominated in foreign currencies at the closing rates at the balance sheet date are recognised in the income

statement, unless they arise from borrowings in foreign currencies, other currency instruments designated

and qualifying as net investment hedges and net investment in foreign operations. Those currency translation

differences are recognised in the currency translation reserve in the consolidated fi nancial statements and

transferred to the income statement as part of the gain or loss on disposal of the foreign operation.

Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange

rates at the date when the fair values are determined.





2.23 Currency translation (continued)

(c) Translation of Group entities’ fi nancial statements

The results and financial position of all the Group entities (none of which has the currency of a

hyperinfl ationary economy) that have a functional currency different from the presentation currency are

translated into the presentation currency as follows:

(i) Assets and liabilities are translated at the closing exchange rates at the date of the balance sheet;

(ii) Income and expenses are translated at average exchange rates (unless the average is not a

reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates,

in which case income and expenses are translated using the exchange rates at the dates of the

transactions); and

(iii) All resulting currency translation differences are recognised in the currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January

2005 are treated as assets and liabilities of the foreign operations and translated at the closing rates at the

date of the balance sheet. For acquisitions prior to 1 January 2005, the exchange rates at the dates of

acquisition are used.

2.24 Segment reporting

A business segment is a distinguishable component of the Group engaged in providing products or services that

are subject to risks and returns that are different from those of other business segments. A geographical segment

is a distinguishable component of the Group engaged in providing products or services within a particular economic

environment that is subject to risks and returns that are different from those of segments operating in other

economic environments.

2.25 Cash and cash equivalents

For the purpose of presentation in the consolidated cash fl ow statement, cash and cash equivalents include cash on

hand, deposits with fi nancial institutions and bank overdrafts and exclude pledged deposits with fi nancial institutions.

Bank overdrafts are presented as current borrowings on the balance sheet date.

2.26 Share capital

Ordinary shares are classifi ed as equity. Incremental costs directly attributable to the issuance of new ordinary shares

are deducted against the share capital account.

2.27 Dividends to Company’s shareholders

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




3. EFFECTS ON FINANCIAL STATEMENTS ON ADOPTION OF NEW FRS

The Group has adopted FRS 40 Investment Property on 1 January 2007, which is the effective date of the Standard.

The effects on adoption are set out below.

The Group had previously accounted for its investment properties under FRS 16 Property, Plant and Equipment.

Consequently, these investment properties leased out to non-related parties have been reclassifi ed to investment

properties on transition to FRS 40 on 1 January 2007.

The effects to the balance sheet were accounted for retrospectively and are as follows:

Increase/(decrease) As at

31.12.2007 31.12.2006 1.1.2006$’000 $’000 $’000

Consolidated balance sheet:

Investment properties 11,472 11,350 11,703

Property, plant and equipment (11,472) (11,350) (11,703)

For the fi nancial year ended 31 December

2007 2006

$’000 $’000

Consolidated income statement:

Depreciation of investment properties 354 353

Depreciation of property, plant and equipment (354) (353)

There is no effect on net profi t for the fi nancial year ended 31 December 2007 and 31 December 2006 as the

Group has elected to adopt the cost model method to measure its investment properties in accordance with the

requirements of FRS 16 Property, Plant and Equipment.

4. 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

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 amounts 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 $4,223,000, if unfavourable; or

– decrease the income tax liability by $4,223,000, if favourable.




4. CRITICAL ACCOUNTING ESTIMATES, ASSUMPTIONS AND JUDGEMENTS (continued)

(b) Construction contracts

The Group uses the percentage-of-completion method to account for its contract revenue where it is

probable that contract costs are recoverable. 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,

as well as the recoverability of the contracts.

If the estimated total contract revenue increase/decrease by 10% from management’s estimates, the Group’s

revenue will increase/decrease by $50,415,000.

(c) Useful life of property, plant and equipment

The management of the Group determines the estimated useful life and related depreciation expense for

the property, plant and equipment. The management of the Group estimates useful life 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 life and related depreciation expense could change signifi cantly as a result of the changes

in these factors.

(d) Estimated residual value of the motor vessels and machineries

The management of the Group determines the residual value for its motor vessels and machineries. This

estimate is based on the current scrap values of steel in an active market at each measurement date since

the management decides to dispose the fully depreciated motor vessels and machineries as scrap steel. The

depreciation expense will increase where the residual value is less than previously estimated value.

5. REVENUE

The Group2007 2006

$’000 $’000

Ship repair and marine engineering income 1,527,883 1,010,895

Construction revenue-ship building and marine engineering 504,151 18,308

Sale of trading properties – 18,600

Rental income from investment and leasehold properties 625 670

Time charter revenue 207,836 148,080

Shipping agency income 21,205 18,916

Total sales 2,261,700 1,215,469




6. EXPENSES BY NATURE

The Group2007 2006

$’000 $’000

Raw materials, fi nished goods, consumables and other overheads 1,206,120 437,664

Change in inventories and construction contract work-in-progress (285,667) (99,615)

(Reversal of)/Allowance for impairment of trade and other receivables (95) 225

Depreciation of property, plant & equipment and investment properties 80,585 61,738

Total depreciation and impairment 80,490 61,963

Freight forwarding expenses 1,074 985

Director and employee compensation 253,986 170,750

Sub-contractor expenses 400,541 247,254

Write-off for inventory obsolescence 173 4

Rental expense on operating leases 79,905 41,450

Transportation and travelling expenses 7,701 6,096

Director and entertainment expenses 8,508 6,883

Repairs and maintenance 20,187 14,807

Non audit service fees paid/payable to auditor of the Company 50 49

Commission 56,075 29,045

Cost of sales - trading properties - 18,600

Crew overheads 11,329 10,366

Vessel overheads 13,849 10,959

Vessel insurance 2,328 2,141

Other expenses 7,275 12,612

Total cost of sales, distribution, administrative and other operating expenses 1,863,924 972,013

7. DIRECTOR AND EMPLOYEE COMPENSATION

The Group2007 2006

$’000 $’000

Wages, salaries and staff benefi ts 220,414 149,328

Employer’s contribution to defi ned contribution plans

including Central Provident Fund 20,769 14,645

Share option expenses 12,623 6,622

Directors’ fees of the Company 180 155

253,986 170,750




8. OTHER INCOME (NET) – MISCELLANEOUS GAINS/(LOSS)

The Group2007 2006

$’000 $’000

Rental income 2,179 1,588

Dividend income 586 208

Insurance claims 1,431 727

Currency exchange gain/(loss) – net 18,060 (4,684)

Interest income from bank deposits 14,030 6,158

Reversal of impairment in value of transferable club memberships 62 34

Reversal of impairment in value of trading property 177 130

Net fair value (loss)/gain on forward currency contracts not qualifying as hedges (483) 524

Net loss on disposal of property, plant and equipment (2,347) –

Gain on dilution of interests in a subsidiary 1,613 –

Gain on disposal of fi nancial assets, available–for–sale 7 –

Sundry income 9,871 3,882

Sale of scrap materials 66,018 43,481

111,204 52,048

9. OTHER INCOME (NET) – EXCEPTIONAL GAIN

The Group2007 2006

$’000 $’000

Net gain on disposal of property, plant and equipment – 24,136

10. FINANCE EXPENSES

The Group2007$’000

2006

$’000

Interest expense

– Bank borrowings and bills payable 11,701 17,291

– Loans from a related corporation 281 645

– Finance lease liabilities 6 8

Total interest expense 11,988 17,944

Less: Amount capitalised in construction of docks and quays

(Note 25 (c)) (544) –

Finance expenses recognised in the income statement 11,444 17,944




11. INCOME TAXES

(a) Income tax expense

The Group2007 2006

$’000 $’000

Tax expense attributable to profi t is made up of:

Current income tax

– Singapore 2,856 2,024

– Foreign 50,399 28,081

53,255 30,105

Deferred income tax (Note 31)

– Singapore (39) (16)

– Foreign (10,987) –

(11,026) (16)

42,229 30,089

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

– Current income tax

– Singapore (161) 43

– Foreign (11,470) (7,151)

(11,631) (7,108)

– Deferred income tax (Note 31)

– Foreign (11,086) –

19,512 22,981




11. INCOME TAXES (continued)

(a) Income tax expense (continued)

The tax expense on profi t differs from the amount that would arise using the Singapore standard rate of

income tax is as explained below:

The Group2007 2006

$’000 $’000

Profi t before tax and share of profi t of associated companies 497,536 301,696

Tax calculated at a tax rate of 18% (2006: 20%) 89,556 60,339

Effects of:

– Change in tax rate 4,450 –

– Different tax rates in other countries (15,844) (12,618)

– Singapore stepped income exemption (107) (63)

– Exemption of shipping profi ts under Approved International

Shipping Scheme and Section 13A of Singapore

Income Tax Act (12,553) (11,631)

– Profi ts exempted from tax (27,970) (14,910)

– Income not subject to tax 1,588 (3,080)

– Expenses not deductible for tax purposes 15,915 12,188

– Tax incentive rebates from the People’s Republic of China (12,635) –

– Utilisation of previously unrecognised deferred tax asset (176) (141)

– Deferred tax asset not recognised 5 5

Tax charge 42,229 30,089

On 15 February 2007, the Singapore Second Minister for Finance announced a reduction in the corporate

tax rate from 20% to 18% and various tax incentives for the year of assessment 2008 and onwards.

(b) Movements in current income tax liabilities

The Group The Company2007 2006 2007 2006

$’000 $’000 $’000 $’000

Beginning of fi nancial year 11,891 7,435 293 201

Income tax (paid)/refunded (29,475) (18,541) 1,523 (33)

Tax expense on profi t for the current

fi nancial year 53,255 30,105 713 125

Over provision in preceding

fi nancial years (11,631) (7,108) (1,560) –

End of fi nancial year 24,040 11,891 969 293




12. EARNINGS PER SHARE

(a) Basic earnings per share

Basic earnings per share is calculated by dividing the net profi t attributable to equity holders of the Company

by the weighted average number of ordinary shares outstanding during the fi nancial year.

The Group2007 2006

Net profi t attributable to equity holders of the Company ($’000) 336,568 205,353

Weighted average number of ordinary shares outstanding for

basic earnings per share (‘000) 2,231,022 2,208,145

Basic earnings per share (cents per share) 15.09 9.30

(b) Diluted earnings per share

For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares

outstanding is adjusted for the effects of all dilutive potential ordinary shares arising from share options.

For share options, the weighted average number of shares on issue has been adjusted as if all dilutive

share options were exercised. The number of shares that could have been issued upon the exercise of

all dilutive share options less the number of shares that could have been issued at fair value (determined

as the Company’s average share price for the fi nancial year) for the same total proceeds is added to the

denominator as the number of shares issued for no consideration. No adjustment is made to the net profi t.

Diluted earnings per share attributable to equity holders of the Company is calculated as follows:

The Group2007 2006

Net profi t attributable to equity holders of the Company ($’000) 336,568 205,353


basic earnings per share (‘000) 2,231,022 2,208,145

Adjustments for

– share options (‘000) 9,371 6,205


diluted earnings per share (‘000) 2,240,393 2,214,350

Diluted earnings per share (cents per share) 15.02 9.27




13. CASH AND CASH EQUIVALENTS


$’000 $’000 $’000 $’000

Cash at bank and on hand 651,358 110,533 6,199 4,116

Short-term bank deposits 431,436 167,335 102,405 21,571

1,082,794 277,868 108,604 25,687

For the purpose of presenting the consolidated cash fl ow statement, the consolidated cash and cash equivalents

comprise the following:

The Group2007 2006

$’000 $’000

Cash and bank balances (as above) 1,082,794 277,868

Less: Bank deposits pledged (4,208) (4,307)

Cash and cash equivalents per consolidated cash fl ow statement 1,078,586 273,561

Cash and bank balances and bank deposits of the Group to the extent of $4,208,000 (2006: $4,307,000) were

pledged as security for the following:

(i) long-term bank loans (Note 28) obtained to fi nance the purchases of certain motor vessels;

(ii) trade fi nance facilities; and

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




14. FORWARD CURRENCY CONTRACTS


$’000 $’000 $’000 $’000

Beginning of fi nancial year 517 – – –

Fair value (loss)/gain

– Included in income statement (483) 524 – –

Currency translation differences 3 (7) – –

End of fi nancial year 37 517 – –

Analysed as:

The Group The Company Contract/ Contract/Notional Fair value Notional Fair valueAmount Assets Liabilities Amount Assets Liabilities$’000 $’000 $’000 $’000 $’000 $’000

2007Non-hedging instruments

– Forward currency contracts 2,638,087 42,301 (42,264) – – –Less: Current portion (33,523) – – –

Non-current portion 8,778 (42,264) – –

2006Non-hedging instruments

– Forward currency contracts 92,274 517 – – – –

Less: Current portion (472) – – –

Non-current portion 45 – – –




15. TRADE AND OTHER RECEIVABLES - CURRENT


$’000 $’000 $’000 $’000

Trade receivables:

– non-related parties 366,809 197,432 – –

– related corporations 23,376 22,266 – –

– subsidiaries – – 324 384

– related party corporations (Note 38(c)) 61 1,449 – –

390,246 221,147 324 384

Less: Allowance for impairment of receivables

– non-related parties (5,320) (5,447) – –

Trade receivables – net 384,926 215,700 324 384

Construction contracts:

– Due from customers (Note 17) 17,402 3,076 – –

Other receivables:

– non-related parties 39,429 10,373 206 66

– related corporations – 7 – –

– subsidiaries – – 23 8,775

39,429 10,380 229 8,841

Advances paid to suppliers 376,819 33,347 – –

Deposits 2,285 957 7 39

Prepayments 4,678 2,002 173 151

Staff loans and advances (see note (i) below) 2,104 1,486 – –

Dividend receivable from an associated

company 432 281 – –

Total 828,075 267,229 733 9,415

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

16. INVENTORIES


$’000 $’000 $’000 $’000

Raw materials 332,575 68,126 – –

Work-in-progress 107,687 111,980 – –

Finished goods 3,066 3,387 – –

443,328 183,493 – –

The cost of inventories recognised as expense and included in “cost of sales” amounted to $1,552,438,000 (2006:

$742,365,000).




17. CONSTRUCTION CONTRACT WORK-IN-PROGRESS

The Group2007 2006

$’000 $’000

Beginning of fi nancial year 18,064 –

Contract costs incurred during the fi nancial year 472,556 34,174

Contract expenses recognised in the income statement during the fi nancial year (447,421) (15,867)

Currency translation differences (67) (243)

End of fi nancial year 43,132 18,064

Aggregate contract costs recognised and recognised profi ts

(less recognised losses) to date 445,146 18,064

Less: Progress billings (764,068) (15,190)

Currency translation differences 1,158 202

(317,764) 3,076

Analysed as:

Due from customers on construction contracts (Note 15) 17,402 3,076

Due to customers on construction contracts (Note 27) (335,166) –

(317,764) 3,076

Advances received on construction contracts (Note 27) 1,151,158 61,741

18. TRADING PROPERTIES

The Group2007 2006

$’000 $’000

Cost

Beginning of fi nancial year 977 32,085

Disposal – (31,108)

End of fi nancial year 977 977

Accumulated impairment losses

Beginning of fi nancial year 177 12,815

Reversal of impairment (177) (130)

Disposal – (12,508)

End of fi nancial year – 177

Cost/Net realisable value 977 800




18. TRADING PROPERTIES (continued)

The Group’s trading property as at 31 December 2007 is set out below:

Address Held by Title Description Grossfl oor area(Square metres)

Grangeford Apartment,

Leonie Hill Road

Harington Property

Pte Ltd

99 years leasehold

commencing 1974

1 unit of service

apartment

109

This trading property is stated at the lower of cost and net realisable value, representing the open market value

determined on an annual basis by an independent professional valuer. During the fi nancial year, the Group reversed

$177,000 (2006: $130,000) of the accumulated impairment made in prior years, based on the increase in open

market value of this property.

19. TRADE AND OTHER RECEIVABLES - NON-CURRENT


$’000 $’000 $’000 $’000

Loans to subsidiaries (i) – – 65,868 70,361

(i) The loans to subsidiaries are interest-free, unsecured and have no fi xed terms of repayment but substantial

repayments are not expected within the next twelve months from the balance sheet date. The loan amount

of $65,868,000 (2006: $70,361,000) due from a wholly-owned subsidiary is interest-free. The amount of

$65,868,000 (2006: $70,361,000) is deemed by the Company as part of its net investment in a subsidiary.

The carrying amounts of non-current trade and other receivables approximated their fair values.

20. FINANCIAL ASSETS, AVAILABLE-FOR-SALE


$’000 $’000 $’000 $’000

Beginning of fi nancial year 2,208 2,304 – –


Additions 975 – – –

Disposals (120) – – –

End of fi nancial year 3,067 2,208 – –

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


$’000 $’000 $’000 $’000

Unquoted equity shares in corporations,

at cost – People’s Republic of China 3,067 2,208 – –

The directors are of the view that it is not practicable to determine with suffi cient reliability the fair value of the

unquoted equity investments. However, the directors do not anticipate that the carrying amounts of these unquoted

equity investments will deviate signifi cantly from their fair values.




21. CLUB MEMBERSHIPS


$’000 $’000 $’000 $’000

Transferable club memberships, at cost 841 838 482 482

Currency translation differences (7) (7) – –

Allowance for impairment in value of club

memberships (355) (419) (246) (307)

479 412 236 175

22. INVESTMENTS IN ASSOCIATED COMPANIES


$’000 $’000 $’000 $’000

Equity investment, at cost – 400

Beginning of fi nancial year 2,227 2,813

Currency translation differences 3 (75)

Distribution of surplus cash on liquidation of an

associated company (423) (695)

Share of profi ts after tax 537 600

Dividends received, net of tax (550) (416)


The summarised fi nancial information of

associated companies are as follows:

– Assets 8,040 8,088

– Liabilities 2,338 1,383

– Revenue 8,799 9,694

– Net profi t 1,686 1,814




22. 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 bythe Company

% ofpaid-up

capital held bysubsidiaries

2007 %

2006

%

2007 %

2006

%

Cosem Pte Ltd (i) Investment holding Singapore – 50 – –

Cosco Container Depot

Pte Ltd (i)

Container depot

service agent

Singapore – 40 – –

DMI (Guangzhou) Ltd (ii) Overhaul and spare-

parts replacement &

repair

People’s

Republic

of China

(“PRC”)

– – 30 30

Tru-Marine Cosco (Tianjin)

Engineering Co Ltd (ii)

Overhaul and spare-

parts replacement &

repair

PRC – – 40 40

(i) Liquidated during the fi nancial year.

(ii) Audited by BDO Reanda Certifi ed Public Accountants, PRC.

23. INVESTMENTS IN SUBSIDIARIES

The Company2007 2006

$’000 $’000

Unquoted equity shares


Increase in investment in a subsidiary 28,140 48,015

310,871 282,731

Accumulated impairment losses (26,472) (26,472)





23. INVESTMENTS IN SUBSIDIARIES (continued)

The subsidiaries are set as below:

Country ofName of Principal incorporation/ % of paid–up capital held bysubsidiaries activities business Cost of investment The Company Subsidiaries

2007 2006 2007 2006 2007 2006

$’000 $’000 % % % %

Cosco

(Singapore)

Pte Ltd (i)

Ship owning,

ship chartering

and investment

holding

Singapore 5,000 5,000 100 100 – –

Cosco Marine

Engineering

(Singapore) Pte

Ltd (i)

Ship repairing,

marine

engineering,

container repairs

and services,

fabrication works

services and

production of

marine outfi tting

components

Singapore 2,242 2,242 90 90 – –

Harington

Property

Pte Ltd (i)

Trading and

investing in

properties,

provide property

management

services and

investment holding

Singapore 52,701 52,701 100 100 – –

Coslink (M)

Sdn. Bhd. (ii)

Shipping agency

and related

activities

Malaysia 771 771 70 70 18 18

Costar Shipping

Pte Ltd (i)

Shipping agents

and investment

holding

Singapore 4,018 4,018 70 70 – –

Cosco Shipyard

Group Co., Ltd

(v) and (vi)

Investment holding

and marine

engineering

People’s

Republic

of China

(“PRC”)

191,173 163,033 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 40 59 60






2007 2006 2007 2006 2007 2006

$’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 –

Cosco (Xiamen)

Shipyard

Co., Ltd (v)

Ship repair PRC – – – – 51 51

Cosco

(Shanghai)

Shipyard

Co., Ltd (v)


Cosco (Tianjin)

Shipyard

Co., Ltd (v)


Dalian Cosco

Rikky Ocean

Engineering

Co., Ltd (v)

Overhaul, repair,

commissioning

and spare-parts

replacement of

governor,

turbocharger

and engine fuel

system

PRC – – – – 60 60

Diesel Marine

Dalian Limited

(v) and (vii)

Overhaul and

spare-parts

replacement

and repair

PRC – – – – 30 30

Diesel Marine

International

Limited

(Nantong)

(v) and (vii)

Overhaul and

spare-parts

replacement and

repair

PRC – – – – 30 30






2007 2006 2007 2006 2007 2006

$’000 $’000 % % % %

Cosco Shipyard

Jurong Clavon

Co., Ltd (v)

Tank coating PRC – – – – 60 60

Zhongyuan

Sea–Land

Engineering

Co., Ltd (v)

and (vii)


Cosco

Shipyard Total

Automation Co.,

Ltd (v)

Design,

manufacture, sale

and technical

service relating

to vessels

and industrial

instruments

PRC – – – – 60 60

Marlene

International

Ltd (iii) and (viii)

Dormant British

Virgin Islands

– – 100 100 – –

Serene Sky

Shipping Inc. (i)

and (ix)

Ship owning

and ship

chartering

Liberia/

Worldwide

– – – – – 100

Dynamism

Shipping

Corporation

S.A. (i) and (ix)

Ship owning and

ship chartering

Panama/

Worldwide

– – – – – 100

Cos Fair Shipping

Pte Ltd (i)

Ship owning and

ship chartering

Singapore/

Worldwide

– – – – 100 100

Cos Glory

Shipping Inc. (i)

Ship owning and

ship chartering

Panama/

Worldwide

– – – – 100 100

Cos Knight

Shipping

Inc. (i)

Ship owning

and ship

chartering

Panama/

Worldwide

– – – – 100 100

Cos Lucky

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





Country ofName of Principal incorporation/ % of paid-up capital held bysubsidiaries activities business Cost of investment The Company Subsidiaries

2007 2006 2007 2006 2007 2006

$’000 $’000 % % % %

Sanbo Shipping

Limited (ii)

Ship owning

and ship

chartering

Hong Kong/

Worldwide

– – – – 100 100

Cos Orchid

Shipping Pte

Ltd (i)

Ship owning and

ship chartering

Singapore/

Worldwide

– – – – 100 100

Cos Prosperity

Shipping Pte

Ltd (i)

Ship owning and

ship chartering

Singapore/

Worldwide

– – – – 100 100

Cos Knight

Shipping Maritime

Inc. (i)

Ship owning

and ship

chartering

Panama/

Worldwide

– – – – 100 100

Cos Lucky

Shipping

Maritime Inc. (i)

Ship owning

and ship

chartering

Panama/

Worldwide

– – – – 100 100

Costar Agencies

(M) Sdn. Bhd. (iv)

Shipping agent Malaysia – – – – 100 100

CNF Shipping

(M) Sdn. Bhd. (iv)

Shipping agent Malaysia – – – – 60 60

CNF Shipping

Agencies

Pte Ltd (i)

Vessel chartering,

feedering, freight

forwarders,

transport agents,

warehousing

and other related

services

Singapore – – – – 100 100

Cosco

Engineering

Pte Ltd (i)

Provision of

support services

to shipping

companies

Singapore – – – – 100 100

310,871 282,731

(i) Audited by PricewaterhouseCoopers, Singapore.

(ii) Audited by PricewaterhouseCoopers fi rms outside Singapore.

(iii) Not required by the law of the country of its incorporation to be audited. The company has not commenced operations

since the date of incorporation. The cost of investment is less than $1,000.

(iv) Audited by Deloitte KassimChan, Malaysia.





(v) Audited by BDO Reanda Certifi ed Public Accountants, PRC.

(vi) Audited by PricewaterhouseCoopers, Singapore and fi rms outside Singapore for the purposes of consolidation.

(vii) Deemed to be a subsidiary as the Group controls the entity.

(viii) Commenced members’ voluntary liquidation during the year.

(ix) Liquidated during the year.

* On 1 January 2007, Cosco Shipyard Group - Zhoushan Branch, a branch of the Company’s subsidiary, Cosco Shipyard

Group Co., Ltd (“CSG”), has been incorporated as a new company. The new company is known as Cosco (Zhoushan)

Shipyard Co., Ltd (“Cosco Zhoushan”) and is a wholly-owned subsidiary of CSG. The principal activities of Cosco Zhoushan

relate to ship repair, ship building and marine engineering.

24. INVESTMENT PROPERTIES

The Group2007 2006

$’000 $’000

Cost

Beginning of fi nancial year

– Effect of adopting new standards (Note 3) 14,215 14,215

Currency translation differences 1 –

Reclassifi cation from property, plant and equipment (Note 25) 501 –


Accumulated depreciation and accumulated impairment losses

Beginning of fi nancial year

– Effect of adopting new standards (Note 3) 2,865 2,512


Depreciation charge 354 353

Reclassifi cation from property, plant and equipment (Note 25) 25 –


Net book value 11,472 11,350

Fair values 16,181 10,335

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 property.

Fair values are determined by independent professional valuers.

Investment properties are leased to related corporations and non-related parties under operating leases.




24. INVESTMENT PROPERTIES (continued)

The following amounts are recognised in the income statement:

The Group2007 2006

$’000 $’000

Rental income 675 567

Direct operating expenses arising from investment properties that generated

rental income 179 165

As at the balance sheet date, the net book value of investment properties of the Group amounting to $982,000

(2006: $10,992,000) is mortgaged to banks to secure long-term bank borrowings and bank facilities.

25. PROPERTY, PLANT AND EQUIPMENT

The Group

Freehold land andbuildings

$’000

Leaseholdland andbuildings

$’000

Offi cerenovations,

furniture,fi xtures andequipment

$’000

Plant,machinery

andequipment

$’000

Motorvehicles

$’000

Motorvessels$’000

Docks and quays$’000

Construction– in–progress

$’000Total$’000

2007Cost 4,955 164,870 20,867 215,106 30,978 332,907 428,387 181,787 1,379,857

Currency translation

differences – 57 3 411 (1) (21,261) 654 4 (20,133)

Additions – 101,344 8,365 61,108 5,755 1,320 62,245 235,352 475,489

Disposals – (2,940) (612) (2,283) (598) (1,039) (257) (8,881) (16,610)

Reclassifi cation – 46,610 (3,664) 89,950 (6,956) – 53,392 (179,833) (501)

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

Accumulated depreciation 1,131 33,511 10,728 65,460 10,525 74,631 73,692 – 269,678


differences – (47) (26) (15) (18) (5,393) 42 – (5,457)

Depreciation charge 100 10,688 4,797 29,099 5,238 13,415 16,894 – 80,231

Disposals – (875) (248) (2,210) (476) (954) (15) – (4,778)

Reclassifi cation – 59 (3,614) 2,593 (1,642) – 2,579 – (25)

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

Net book valueEnd of fi nancial year 3,724 266,605 13,322 269,365 15,551 230,228 451,229 228,429 1,478,453




25. 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

Docks and quays$’000

Construction– in–progress

$’000Total$’000

2006Cost 4,955 157,401 18,564 160,713 22,002 405,898 385,546 92,872 1,247,951


differences – (6,264) (686) (6,980) (847) (30,526) (16,882) (4,556) (66,741)

Additions – 6,330 3,592 32,694 11,138 2,045 30,281 227,392 313,472

Disposals – (2,219) (941) (3,977) (2,200) (102,521) (426) (2,541) (114,825)

Reclassifi cation – 9,622 338 32,656 885 58,011 29,868 (131,380) –

End of fi nancial year 4,955 164,870 20,867 215,106 30,978 332,907 428,387 181,787 1,379,857

Accumulated depreciation 1,031 27,437 9,344 56,187 9,279 144,165 62,859 – 310,302


differences – (1,187) (328) (2,609) (386) (11,475) (2,929) – (18,914)

Depreciation charge 100 8,780 2,443 15,387 3,204 18,164 13,307 – 61,385

Disposals – (1,292) (762) (2,965) (1,650) (76,223) (203) – (83,095)

Reclassifi cation – (227) 31 (540) 78 – 658 – –

End of fi nancial year 1,131 33,511 10,728 65,460 10,525 74,631 73,692 – 269,678

Net book valueEnd of fi nancial year 3,824 131,359 10,139 149,646 20,453 258,276 354,695 181,787 1,110,179

(a) Included in the additions in the consolidated fi nancial statements was an amount of $Nil (2006: $27,000) of

motor vehicles that were acquired under fi nance leases, and an amount of $4,159,000 (2006: Nil) relating to

capital contribution from a minority shareholder of a subsidiary, Cosco (Dalian) Shipyard Co., Ltd.

The carrying amount of motor vehicles held under fi nance leases at 31 December 2007 amounted to

$108,000 (2006: $168,000).

(b) As at the balance sheet date, the net book value of leasehold land and buildings and motor vessels of the

Group amounting to $181,743,000 (2006: $244,321,000) is mortgaged to banks to secure long-term bank

borrowings and bank facilities.

(c) Borrowing costs of $544,000 (2006: Nil), which arise on the fi nancing specifi cally entered into for the

construction of docks and quays (2006: Nil), are capitalised during the fi nancial year (Note 10).

(d) In June 2005, a subsidiary, Cosco (Zhoushan) Shipyard Co., Ltd began construction of workshops and quays

etc, in Zhoushan, People’s Republic of China. However its full rights to the properties (comprising building

and land) are subject to the grant of the land use rights for the land on which the buildings are erected. As at

the date of the authorisation of these fi nancial statements, Cosco (Zhoushan) Shipyard Co., Ltd has obtained

construction permission from the Land Administrative Bureau of Zhoushan city but has yet to receive the land

use rights from the authority.

The management is of the view that the land use rights will be obtained and accordingly, no impairment

charge against the carrying values of the property, plant and equipment and construction-in-progress have

been made in these fi nancial statements.




25. PROPERTY, PLANT AND EQUIPMENT (continued)

The Company

Offi cerenovations,


Motorvehicles Total

$’000 $’000 $’000

2007Cost

Beginning of fi nancial year 476 715 1,191

Additions 48 519 567

Disposals – (186) (186)

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

Accumulated depreciation

Beginning of fi nancial year 435 174 609

Depreciation charge 33 105 138

Disposals – (107) (107)

End of fi nancial year 468 172 640

Net book valueEnd of fi nancial year 56 876 932

2006Cost

Beginning of fi nancial year 475 677 1,152

Additions 1 241 242

Disposals – (203) (203)

End of fi nancial year 476 715 1,191

Accumulated depreciation

Beginning of fi nancial year 343 274 617

Depreciation charge 92 70 162

Disposals – (170) (170)

End of fi nancial year 435 174 609

Net book valueEnd of fi nancial year 41 541 582




26. INTANGIBLE ASSETS


$’000 $’000 $’000 $’000

Composition:

Goodwill arising on consolidation (Note (a)) 9,302 9,319 – –

(a) Goodwill arising on consolidation

The Group2007 2006

$’000 $’000

CostBeginning of fi nancial year 9,319 9,357

Dilution of interest in a subsidiary (18) –

Currency translation differences 1 (38)


Net book value 9,302 9,319

Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating-units (CGU) in the People’s Republic of China (“PRC”),

identifi ed according to country of operation and business segment.

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use

cash fl ow projections based on the existing capacity of the CGU. Cash fl ows beyond 2008 are extrapolated

using the estimated growth rates 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 8%

Discount rate2 5.33%

1 Weighted average growth rate used to extrapolate cash fl ows beyond the budget period

2 Pre-tax discount rate applied to the pre-tax cash fl ow projections

These assumptions were used for the analysis of the CGU within the business segment. Management

determined budgeted gross margin based on past performance and its expectations of the market

development. The weighted average growth rate used was consistent with the forecasts included in industry

reports. The discount rate used was pre-tax and refl ect specifi c risks relating to the relevant segments.

There is no impairment charge recognised for the years ended 31 December 2007 and 31 December 2006.




27. TRADE AND OTHER PAYABLES


$’000 $’000 $’000 $’000

Trade payables to:

– Non-related parties 245,192 116,217 – –

– Related corporations 45,340 33,880 – –

290,532 150,097 – –

Construction contracts:

– Advances received (Note 17) 1,151,158 61,741 – –

– Due to customers (Note 17) 335,166 – – –

1,486,324 61,741 – –

Advances from:

– Customers and non-related parties 136,076 118,465 – –

Non-trade payables to:

– Ultimate holding corporation 1 – – –

– Subsidiary – – 5,000 4,169

– Related party corporation (Note 38(c)) – 62 – –

1 62 5,000 4,169

Deposits received 6,663 1,840 – –

Deferred voyage income 1,244 650 – –

Other accruals for operating expenses 492,096 195,667 2,021 1,677

Dividend payable to minority shareholders

of subsidiaries 3,457 1,185 – –

Total 2,416,393 529,707 7,021 5,846

The non-trade balances are unsecured, interest-free and repayable on demand.




28. BORROWINGS


$’000 $’000 $’000 $’000

Current

Bank borrowings (unsecured) 90,760 59,112 – –

Bank borrowings (secured) 19,727 18,593 – –

Loans from a related corporation (unsecured) – 33,496 – –

Bills payable 1,020 17,011 – –

Finance lease liabilities (Note 29) 21 34 – –

111,528 128,246 – –

Non-current

Bank borrowings (unsecured) – 159,601 – –

Bank borrowings (secured) 64,871 124,148 – –

Finance lease liabilities (Note 29) 39 57 – –

64,910 283,806 – –

Total borrowings 176,438 412,052 – –

(a) Security granted

At the balance sheet date, total borrowings include secured liabilities of $84,658,000 (2006: $142,832,000)

for the Group. Secured bank borrowings are secured by:

(i) the Group’s leasehold land and buildings and motor vessels (Note 25);

(ii) the Group’s investment properties (Note 24); and

(iii) bank deposits (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 25).

(b) Fair values of non-current borrowings

At the balance sheet date, the carrying amounts of current and non-current borrowings approximated their

fair values.

The fair values were determined from cash fl ow analyses, discounted at the market borrowing rates which

the directors expected to be available to the Group as follows:

The Group

2007 2006

SGD MYR USD RMB SGD USD RMB

Bank borrowings 3.34% – 5.33% 2.97% 5.25% 6.09% 2.90%

Loans from a related

corporation – – – – – – 4.93%

Bills payable – – – – – – 0.84%

Finance lease liabilities 5.69% 6.82% – – 6.05% – –




29. FINANCE LEASE LIABILITIES

The Group2007 2006

$’000 $’000

Minimum lease payments due:

– not later than one year 24 40

– later than one year but not later than fi ve years 46 67

70 107

Less: Future fi nance charges (10) (16)

Present value of fi nance lease liabilities 60 91

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

– not later than one year (Note 28) 21 34

– later than one year but not later than fi ve years (Note 28) 39 57

60 91

30. PROVISIONS FOR OTHER LIABILITIES


$’000 $’000 $’000 $’000

Current

Provision for off hire claim on

hire income (Note (a)) 4,294 6,309 – –

Provision for warranties (Note (b)) 770 – – –

5,064 6,309 – –

Non-current

Club membership payable 65 76 65 76

Income received in advance – 3,495 – –

65 3,571 65 76

Total 5,129 9,880 65 76

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

The Group2007 2006

$’000 $’000


Provision made during the fi nancial year 2,276 2,439

Provision utilised during the fi nancial year (3,788) –

Currency translation differences (503) (410)





30. PROVISIONS FOR OTHER LIABILITIES (continued)

(b) Movements in provision for warranties were as follows:

The Group2007 2006

$’000 $’000

Beginning of fi nancial year – –

Provision made during the fi nancial year 773 –

Currency translation differences (3) –

End of fi nancial year 770 –

31. DEFERRED INCOME TAXES

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

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

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


$’000 $’000 $’000 $’000

Deferred income tax assets:– to be recovered within one year 20,056 – – –

– to be recovered after one year 1,940 – – –

21,996 – – –

Deferred income tax liabilities:– to be settled within one year – 16 – –

– to be settled after one year 152 173 – –

152 189 – –

Deferred income tax assets are recognised for tax losses and capital allowances 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 $5,437,000 (2006: $6,368,000) which can be carried forward and used to offset against future taxable

income subject to meeting certain statutory requirements by those companies with unrecognised tax losses in their

respective countries of incorporation. The tax losses have no expiry date.

The movements in the deferred income tax account were as follows:


$’000 $’000 $’000 $’000

Beginning of fi nancial year 189 205 – –

Currency translation differences 79 – – –

Deferred tax credited to income statement

(Note 11) (22,112) (16) – –

End of fi nancial year (21,844) 189 – –




31. DEFERRED INCOME TAXES (continued)

The movements in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax

jurisdiction) during the fi nancial years were as follows:

The Group

Deferred income tax liabilities

2007 2006

$’000 $’000

Accelerated tax depreciation

Beginning of fi nancial year 189 205

Credited to income statement (37) (16)

End of fi nancial year 152 189

Deferred income tax assets

2007 2006

$’000 $’000

Provisions and accruals

Beginning of fi nancial year – –


Credited to income statement (22,075) –

End of fi nancial year (21,996) –

32. SHARE CAPITAL

Number of shares Amount

Authorised

share

capital

Issued

share

capital

Authorised

share

capital

Share

capital

Share

premium

Total share capital and

sharepremium

’000 ’000 $’000 $’000 $’000 $’000

2007Beginning of fi nancial year – 2,213,974 – 239,947 – 239,947Share issue – 23,690 – 26,905 – 26,905

End of fi nancial year – 2,237,664 – 266,852 – 266,852

2006Beginning of fi nancial year 2,500,000 2,197,534 250,000 219,753 8,834 228,587Effect of Companies

(Amendment) Act 2005 (2,500,000) – (250,000) 8,834 (8,834) –Share issue – 16,440 – 11,360 – 11,360

End of fi nancial year – 2,213,974 – 239,947 – 239,947




32. SHARE CAPITAL (continued)

Under the Singapore Companies (Amendment) Act 2005 that came into effect on 30 January 2006, the concepts

of par value and authorised share capital were abolished and the amount in the share premium account as at 30

January 2006 became part of the Company’s share capital.

All issued shares are fully paid.

The Company issued the following shares during 2007:

(i) 260,000 (2006: 4,340,000) ordinary shares at an exercise price of $0.3675 (2006: $0.3675) each from the

exercise of option granted in 2004 under the Cosco Group Employees’ Share Option Scheme 2002;

(ii) 4,750,000 (2006: 12,100,000) ordinary shares at an exercise price of $0.807 (2006: $0.807) each from the

exercise of option granted in 2005 under the Cosco Group Employees’ Share Option Scheme 2002; and

(iii) 18,680,000 (2006: Nil) ordinary shares at an exercise price of $1.23 (2006: $1.23) each from the exercise of

option granted in 2006 under the Cosco Group Employees’ Share Option Scheme 2002.

The newly issued shares rank pari passu in all respects with the previously issued shares.

Share options

Under the Cosco 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.


associated company, or the holding company for at least one year on or prior to the date of grant, may be exercised

twelve months after the date of grant but before the end of one hundred and twenty months. For employees and

directors who are in the service of the controlled associated company and non-executive directors, the options shall

expire at the end of sixty months. Options issued at a discount to market price, may only be exercised two years

after the date of grant.


associated company, or the holding company for at least six months but less than one year on or prior to the date

of grant, may be exercised twenty four months after the date of grant but before the end of one hundred and

twenty months. For employees and directors who are in the service of the controlled associated company and

non-executive directors, the options shall expire at the end of sixty months. Options issued at a discount to market

price, may only be exercised three years after the date of grant.

On 5 February 2007, options to subscribe for 16,270,000 ordinary shares of the Company at an exercise price

of $2.48 per ordinary share (“2007 Options”) were granted pursuant to the Scheme 2002. The 2007 Options are

exercisable from 5 February 2008 and expire on 4 February 2017.

Movements in the number of unissued ordinary shares under option at the end of the fi nancial year and their exercise

prices were as follows:




32. SHARE CAPITAL (continued)


The Group and the Company

Financial year ended 31 December 2007

Number of ordinary shares under option outstanding

Options relatingto Scheme 2002

Beginning of the year

Granted during the fi nancial

year

Lapsed during thefi nancial

year

Exercised during the fi nancial

yearEnd of the

yearExercise

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

2004 Options 260 – – (260) – 0.3675 24.5.2005 – 23.5.2014

2005 Options 4,750 – – (4,750) – 0.807 6.4.2006 – 5.4.2015

2006 Options 22,750 – – (18,680) 4,070 1.23 21.2.2007 – 20.2.2016

2007 Options – 16,270 – – 16,270 2.48 5.2.2008 – 4.2.2017

27,760 16,270 – (23,690) 20,340


Number of ordinary shares under option outstanding

Options relatingto Scheme 2002

Beginning of the year

Granted during the fi nancial

year

Lapsed during thefi nancial

year

Exercised during the fi nancial

yearEnd of the

yearExercise

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

2004 Options 4,600 – – (4,340) 260 0.3675 24.5.2005 – 23.5.2014

2005 Options 16,850 – – (12,100) 4,750 0.807 6.4.2006 – 5.4.2015

2006 Options – 23,100 (350) – 22,750 1.23 21.2.2007 – 20.2.2016

21,450 23,100 (350) (16,440) 27,760

Out of the outstanding options on 20,340,000 shares (2006: 27,760,000), options on 3,370,000 shares (2006:

760,000) are exercisable. Options exercised in 2007 resulted in 23,690,000 shares (2006: 16,440,000) being issued

at an average price of $1.14 (2006: $0.69) each.

The fair value of options granted on 5 February 2007 (2006: 21 February 2006) determined using the Binomial

Valuation model was $13,341,000 (2006: $5,775,000). The signifi cant inputs into the model were share price of

$2.83 (2006: $1.20) at grant date, exercise price as shown above, standard deviation of expected share price

returns of 41% (2006: 35%), option life shown above and annual risk-free interest rate of 2.93% (2006: 3.17%). This

volatility measured at the standard deviation of expected price returns is based on statistical analysis of daily share

prices over the last 2 years.




33. STATUTORY AND OTHER RESERVES


$’000 $’000 $’000 $’000

(a) Composition:

Share option reserve 24,027 11,404 24,027 11,404

Statutory reserve 80,685 61,298 – –

Currency translation reserve (44,183) (27,785) – –

Asset revaluation reserve 22,208 25,869 – –

Realised surplus on long-term

investment 69 69 527 527

82,806 70,855 24,554 11,931

(b) Movements:

(i) Share option reserve Beginning of fi nancial year 11,404 4,782 11,404 4,782

Employee share option scheme:

– Value of director and employee

services (Note 7) 12,623 6,622 12,623 6,622

End of fi nancial year 24,027 11,404 24,027 11,404

During the fi nancial year, share option reserve relating to share options exercised amounted to

$9,350,000 (2006: $3,823,000).


$’000 $’000 $’000 $’000

(ii) Statutory reserve Beginning of fi nancial year 61,298 26,382 – –

Transfer from retained earnings 19,387 34,916 – –


(iii) Currency translation reserve Beginning of fi nancial year (27,785) 299 – –

Net currency translation differences

of fi nancial statements of foreign

subsidiaries and associates (16,882) (37,429) – –

Transfer from retained earnings 440 757 – –

Currency translation loss realised

on dilution of interests in a

subsidiary 61 – – –

Minority interests (17) 8,588 – –

End of fi nancial year (44,183) (27,785) – –




33. STATUTORY AND OTHER RESERVES (continued)

(b) Movements: (continued)


$’000 $’000 $’000 $’000

(iv) Asset revaluation reserve Beginning of fi nancial year 25,869 29,102 – –

Additional depreciation on revalued

property, plant and equipment (3,217) (3,233) – –

Revaluation gain realised on dilution

of a subsidiary (444) – – –


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

subsidiaries of the Group reside.

Statutory and other reserves are non-distributable.

34. DIVIDENDS

The Group and The Company

2007 2006

$’000 $’000

Ordinary dividends paid

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

of 2.5 cents (2006: 2.0 cents) per ordinary share 55,843 44,141

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

year of 1.5 cents (2006: Nil) per ordinary share 33,505 –

89,348 44,141

At the Annual General Meeting scheduled on 15 April 2008, a fi nal exempt (one-tier) dividend of 4 cents per ordinary

share (2006: 2.5 cents per ordinary share) and a special exempt (one-tier) dividend of 3 cents per ordinary share

(2006: 1.5 cents) amounting to a total of $156,637,000 (2006: $89,348,000), based on the number of shares issued

as of 31 December 2007, will be recommended. These fi nancial statements do not refl ect these dividends, which

will be accounted for in shareholders' equity as an appropriation of retained earnings in the fi nancial year ending 31

December 2008.




35. COMMITMENTS

(a) Capital commitments

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

are as follows:


$’000 $’000 $’000 $’000

Property, plant and equipment 193,668 97,479 – –

Investment in a subsidiary 21,600 – – –

215,268 97,479 – –

On 29 December 2007, a subsidiary, Cosco Shipyard Group Co., Ltd (“Cosco Shipyard Group”), entered into

an agreement with Jiangsu Lianyungang Port Co. Ltd (“Jiangsu Lianyungang”) to form a company known

as ‘Cosco Lianyungang Shipyard Co., Ltd’ (“Cosco Lianyungang”). Cosco Lianyungang has a registered

capital of RMB180,000,000 (S$36,000,000) and Cosco Shipyard Group and Jiangsu Lianyungang each has

committed to subscribe for 60% and 40% respectively in the capital of Cosco Lianyungang.

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

The Group leases various warehouses 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:


$’000 $’000 $’000 $’000

Not later than 1 year 24,758 27,146 – –

Later than 1 year but not later

than 5 years 22,039 77,555 – –

Later than 5 years 24,362 20,039 – –

71,159 124,740 – –

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

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

property to non-related parties under non-cancellable operating leases.

The future minimum lease receivables under non-cancellable operating leases contracted for at the balance

sheet date but not recognised as receivables, are analysed as follows:


$’000 $’000 $’000 $’000

Not later than 1 year 198,876 73,619 – –

Later than 1 year but not later

than 5 years 26,317 13,926 – –

225,193 87,545 – –




36. FINANCIAL RISK MANAGEMENT

Financial risk factors

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

and price risk), credit risk and liquidity risk.

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

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

(a) Market risk

(i) Currency risk

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

functional currencies of the entities in the Group.

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

currency forwards to manage the currency exposure.

In addition, the Company has certain investments in foreign operations, whose net assets are exposed

to currency translation risk. Currency exposure to the net assets of the Group’s foreign operations in

the People’s Republic of China is managed primarily through borrowings denominated in RMB.

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

SGD USD RMB Other Total$’000 $’000 $’000 $’000 $’000

At 31 December 2007

Financial assetsCash and cash equivalents and fi nancial

assets at fair value through profi t or loss

and available-for-sale 52,360 262,247 734,518 36,736 1,085,861

Trade and other receivables, excluding

amount due from construction contracts,

advances paid to suppliers and

prepayments 14,492 233,395 177,321 3,968 429,176

66,852 495,642 911,839 40,704 1,515,037

Financial liabilitiesBorrowings 857 83,798 91,780 3 176,438

Other fi nancial liabilities 37,224 (62,302) 817,007 5,179 797,108

38,081 21,496 908,787 5,182 973,546

Net fi nancial assets 28,771 474,146 3,052 35,522 541,491

Less: Net fi nancial (assets)/

liabilities denominated in the

respective entities’ functional

currencies (27,416) (31,035) (3,037) (4,204)

Add: Firm commitments and highly

probable forecast transactions

in foreign currencies – 4,455,848 – 121,223

Less: Forward currency contracts – (2,638,087) – –

Currency exposure 1,355 2,260,872 15 152,541




36. FINANCIAL RISK MANAGEMENT (continued)

Financial risk factors (continued)

(a) Market risk (continued)

(i) Currency risk (continued)

SGD USD RMB Other Total$’000 $’000 $’000 $’000 $’000

At 31 December 2006

Financial assetsCash and cash equivalents and

fi nancial assets at fair value

through profi t or loss and

available-for-sale 18,911 178,765 77,826 4,574 280,076

Trade and other receivables,

excluding amount due from

construction contracts, advances

paid to suppliers and prepayments 10,947 123,818 89,834 4,205 228,804

29,858 302,583 167,660 8,779 508,880

Financial liabilitiesBorrowings 1,301 141,531 269,220 – 412,052

Other fi nancial liabilities 24,050 (29,825) 356,185 4,826 355,236

25,351 111,706 625,405 4,826 767,288

Net fi nancial assets/(liabilities) 4,507 190,877 (457,745) 3,953 (258,408)

Less: Net fi nancial (assets)/liabilities

denominated in the respective

entities’ functional currencies (4,314) 14,183 457,745 (3,289)

Add: Firm commitments and highly

probable forecast transactions

in foreign currencies – 273,397 – 19,836

Less: Forward currency contracts – (92,274) – –

Currency exposure 193 386,183 – 20,500







(i) Currency risk (continued)

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

follows:

2007 2006

SGD USD Other Total SGD USD Other Total

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

Financial assetsCash and cash equivalents 28,769 79,833 2 108,604 6,832 18,853 2 25,687

Trade and other receivables 455 65,973 – 66,428 9,245 70,380 – 79,625

29,224 145,806 2 175,032 16,077 89,233 2 105,312

Financial liabilitiesBorrowings – – – – – – – –

Other fi nancial liabilities 7,086 – – 7,086 5,922 – – 5,922

7,086 – – 7,086 5,922 – – 5,922

Net fi nancial assets 22,138 145,806 2 167,946 10,155 89,233 2 99,390

Less: Net fi nancial assets

denominated in the

respective entities’

functional currencies (22,138) – – (22,138) (10,155) – – (10,155)

Currency exposure – 145,806 2 145,808 – 89,233 2 89,235

If the USD change against the SGD and RMB by 100 basis points with all other variables including tax

rate being held constant, the effects arising from the net fi nancial asset position will be as follows:

2007 2006

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

$’000 $’000

Group

USD against SGD

– strengthened 564 131

– weakened (564) (131)

USD against RMB

– strengthened 496 238

– weakened (496) (238)

Company

USD against SGD

– strengthened 1,013 580

– weakened (1,013) (580)







(ii) Price risk

The Group is not exposed to equity securities price risk as the Group does not hold any listed equity

securities.

(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. As the Group has

no signifi cant interest-bearing assets, the Group’s income and operating cash fl ows are substantially

independent of changes in market interest rates.

The Group’s interest rate risk mainly arises from non-current borrowings. The Group monitors the

interest rates on borrowings closely to ensure that the borrowings are maintained at favourable rates

and will use derivative fi nancial instruments to hedge their exposures when the exposure is signifi cant.

The Group’s borrowings at variable rates on which effective hedges have not been entered into,

are denominated mainly in USD and RMB. If the USD and RMB interest rates increase/decrease by

0.50% (2006: 0.50%) with all other variables including tax rate being held constant, the profi t after tax

will be lower/higher by $251,000 (2006: $515,000) and Nil (2006: $167,000) 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.

As the Group and Company does not hold any 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 Company2007 2006

$’000 $’000

Corporate guarantees provided to banks on subsidiaries’ loans 84,598 142,741

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






(b) Credit risk (continued)

The credit risk for trade receivables based on the information provided to key management is as follows:


$’000 $’000 $’000 $’000

By geographical areas

Asia 237,505 131,068 324 384

Europe 80,704 73,121 – –

United States 41,008 2,255 – –

Middle East 7,711 260 – –

Others 17,998 8,996 – –

384,926 215,700 324 384

(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:


$’000 $’000 $’000 $’000

Past due 0 to 3 months 6,034 19,133 – –

Past due 3 to 6 months 721 1,802 – –

Past due over 6 months 1,068 1,439 – –

7,823 22,374 – –






(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:


$’000 $’000 $’000 $’000

Gross amount 11,662 8,491 – –

Less: Allowance for impairment (5,320) (5,447) – –

6,342 3,044 – –

Beginning of fi nancial year 5,447 6,109 – –


(Reversal of)/Allowance made (95) 225 – –

Allowance utilised (35) (624) – –

Amount written off (4) (2)


(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 2007Gross-settled currency forwards

– Receipts 1,078,973 1,411,068 –– Payments (1,093,397) (1,547,542) –Other fi nancial liabilities (797,108) – –Borrowings (117,965) (50,783) (24,731)

(929,497) (187,257) (24,731)






(c) Liquidity risk (continued)

Less than 1 year

Between1 and 5 years

Over5 years

$’000 $’000 $’000

The Group

At 31 December 2006Gross-settled currency forwards

– Receipts 61,285 30,018 –

– Payments (61,544) (30,772) –

Other fi nancial liabilities (355,236) – –

Borrowings (142,790) (277,794) (31,573)

(498,285) (278,548) (31,573)

The Company

At 31 December 2007Other fi nancial liabilities (7,086) – –Borrowings – – –

(7,086) – –

At 31 December 2006Other fi nancial liabilities (5,922) – –

Borrowings – – –

(5,922) – –

(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 41.8% for the current fi nancial year ended 31 December 2007 (2006: 34.5%).

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 2007 and 2006.




37. IMMEDIATE AND ULTIMATE HOLDING CORPORATION

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

in the People’s Republic of China.

38. RELATED PARTY TRANSACTIONS

(a) In addition to the information disclosed elsewhere in the fi nancial statements, the following transactions took

place between the Group and related parties at terms agreed between the parties:

The Group2007 2006

$’000 $’000

Revenue

Sales to related corporations 155,870 53,171

Sales to a related party corporation 26,586 7,670

Vessels sales to a related corporation – 56,167

Rental income received/receivable from related corporations 685 658

Rental income received/receivable from related parties 227 147

Time charter revenue received/receivable from a related corporation 9,346 16,249

Service income received from related corporations 936 1,165

Interest received/receivable from a related corporation 4 55

Commission received/receivable from a related corporation – 75

Expenditure

Purchases from related corporations 23,489 19,813

Purchases from related party corporations 243 365

Rental paid/payable to related corporations 1,368 1,865

Vessel rental paid/payable to a related corporation 7,095 7,328

Management fee paid/payable to a related party corporation 461 377

Crew wages paid/payable to related corporations 11,698 5,816

Ship construction costs paid/payable to a related corporation – 3,350

Subcontract costs paid/payable to related corporations 1,714 6

Utilities expenses paid/payable to related corporations 1,450 1,618

Service expenses paid/payable to related corporations 1,790 281

Service expenses paid/payable to related party corporations 154 254

Interest paid/payable to a related corporation 281 645

Commission paid/payable to related corporations 22 –

Outstanding balances as at 31 December 2007, arising from sales or purchase of goods and services, are

set out in Notes 15 and 27 respectively.




38. RELATED PARTY TRANSACTIONS (continued)

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

(c) Related party corporations

Related party corporations are corporations with common shareholders, other than the holding corporation,

subsidiaries, fellow subsidiaries and associated companies, and/or in which the directors of the Company

and/or other directors of subsidiaries or shareholders of the holding corporation and/or shareholders of the

subsidiaries have signifi cant infl uence or control.

(d) Share options granted to key management

The aggregate number of share options granted to key management of the Group during the fi nancial year

was 7,250,000 (2006: 9,000,000). The share options were given on the same terms and conditions as those

offered to other employees of the Company (Note 32). The outstanding number of share options granted to

key management of the Group at the end of fi nancial year was 10,450,000 (2006: 9,200,000).

(e) Key management personnel compensation

Key management personnel compensation is as follows:

The Group2007 2006

$’000 $’000

Salaries and other short-term employee benefi ts 3,734 2,782

Employer’s contribution to defi ned contribution plans, including

Central Provident Fund 14 14

Share option expenses 5,623 2,155

9,371 4,951

Included in the above was total compensation to directors of the Company amounting to $8,615,000 (2006:

$4,540,000).




39. SEGMENT INFORMATION

Primary reporting format – business segments

Shipping

Ship repair,ship buildingand marineengineering

activities

Rental of property

and property trading

Investment holding Group

$’000 $’000 $’000 $’000 $’000

Financial year ended31 December 2007

Sales

– External sales 229,041 2,032,034 625 – 2,261,700

– Inter-segment sales 33 808 489 170,368 171,698

229,074 2,032,842 1,114 170,368 2,433,398

Elimination (171,698)

2,261,700

Segment results 121,771 296,108 180 (20,283) 397,776

Other gains (net) – miscellaneous 111,204

Finance expense (11,444)

Share of profi t of associated

companies 537

Profi t before income tax 498,073

Income tax expense (19,512)

Net profi t 478,561

Other segment itemsCapital expenditure

– property, plant and equipment 1,365 473,548 9 567 475,489

Depreciation 13,954 65,950 544 137 80,585

Write-down of inventories – 173 – – 173

Segment assets 288,075 3,139,612 21,834 7,753 3,457,274

Associated companies 1,794

Short-term bank deposits 431,436

Forward currency contracts 42,301

Financial assets, available-for-sale 3,067

Intangible assets 9,302

Deferred income tax assets 21,996

Consolidated total assets 3,967,170

Segment liabilities 75,929 2,343,293 213 2,087 2,421,522

Forward currency contracts 42,264

Borrowings 176,438

Current income tax liabilities 24,040

Deferred income tax liabilities 152

Consolidated total liabilities 2,664,416

Consolidated net assets 1,302,754




39. SEGMENT INFORMATION (continued)

Primary reporting format – business segments (continued)

Shipping

Ship repair,ship buildingand marineengineering

activities

Rental of property

and property trading

Investment holding Group

$’000 $’000 $’000 $’000 $’000


Sales

– External sales 166,996 1,029,203 19,270 – 1,215,469

– Inter-segment sales 19 766 467 91,303 92,555

167,015 1,029,969 19,737 91,303 1,308,024

Elimination (92,555)

1,215,469

Segment results 85,876 170,670 75 (13,165) 243,456

Other gains (net) – miscellaneous 52,048

Other gains (net) – exceptional gain 24,136

Finance expense (17,944)

Share of profi t of associated

companies – 532 – 68 600

Profi t before income tax 302,296

Income tax expense (22,981)

Net profi t 279,315

Other segment itemsCapital expenditure

– property, plant and equipment 46,266 266,963 – 243 313,472

Depreciation 18,850 42,174 551 163 61,738

Write-down of inventories – 4 – – 4

Segment assets 314,007 1,360,540 22,385 5,128 1,702,060

Associated companies – 1,804 – 423 2,227

Short-term bank deposits 167,335

Forward currency contracts 517

Financial assets, available-for-sale 2,208

Intangible assets 9,319

Consolidated total assets 1,883,666

Segment liabilities 66,524 471,431 210 1,422 539,587

Borrowings 412,052

Current income tax liabilities 11,891

Deferred income tax liabilities 189

Consolidated total liabilities 963,719

Consolidated net assets 919,947




39. SEGMENT INFORMATION (continued)

Primary reporting format – business segments (continued)

The division of the Group’s results, assets and liabilities into activities has been ascertained by reference to direct

identifi cation of assets, liabilities and revenue/cost centres.

Inter-segment transactions are recorded at their transacted price which is generally at fair value. Segment assets

consist primarily of trading properties, property, plant and equipment, inventories, receivables and operating cash

and exclude deferred income tax assets, short-term bank deposits, forward currency contracts and fi nancial

investments. Segment liabilities comprise operating liabilities and exclude items such as current and deferred tax

liabilities, borrowings and forward currency contracts. Capital expenditure comprises additions to property, plant and

equipment and intangible assets, including those acquired through business combinations.

Secondary reporting format – geographical segments

The Group’s business segments operate in two main geographical areas:

People’s Republic of China – the operations in this area are principally in ship repair, ship building and marine

engineering activities; and

Singapore and Malaysia – the Company is headquartered in Singapore and has operations in Singapore.

The operations in Singapore and Malaysia are principally in shipping, ship repair and marine engineering

activities, rental of property and investment holding.

With the exception of the People’s Republic of China and Singapore and Malaysia, no other individual country

contributed more than 10% of consolidated sales and assets. Sales are based on the country in which the services

are rendered to the customer. Total assets and capital expenditure are shown by the geographical area where the

assets are located.

Sales Total assets Capital expenditure2007 2006 2007 2006 2007 2006

$’000 $’000 $’000 $’000 $’000 $’000

People’s Republic

of China 2,024,370 1,023,459 3,390,587 1,366,272 473,263 266,889

Singapore and

Malaysia * 237,330 192,010 576,583 517,394 2,226 46,583

2,261,700 1,215,469 3,967,170 1,883,666 475,489 313,472

* 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.

40. EVENTS OCCURRING AFTER BALANCE SHEET DATE

On 16 January 2008, the Group announced that through its subsidiary, Cosco (Nantong) Shipyard Co., Ltd, it had

acquired the land use right for a piece of land with an area of 2 million square metres at Qidong, Jiangsu province.




41. NEW OR REVISED ACCOUNTING STANDARDS AND INTERPRETATIONS

Certain new standards, amendments and interpretations to existing standards have been published and they are

mandatory for the Group’s accounting periods beginning on or after 1 January 2008 or later periods which the

Group has not early adopted. The Group’s assessment of the impact of adopting those standards, amendments

and interpretations that are relevant to the Group is set out below:

(a) INT FRS 111 Group and Treasury Share Transactions (effective for annual periods beginning on or after 1

March 2007)

The Group adopted INT FRS 111 on 1 January 2008. INT FRS 111 clarifi es that the arrangement where an

entity receives goods or services as consideration for its own equity-instruments shall be accounted for as

an equity-settled share-based payment (“SBP”) transaction, regardless of how the equity instruments needed

are obtained. It also provides guidance on whether group SBP arrangements shall be classifi ed as equity-

settled or cash-settled SBP arrangements.

The Group operates an employee share option scheme and issues new shares to settle the obligations

arising from the plans. As the Group has been recognising those share option grants as equity-settled and

does not operate any other SBP group arrangements, INT FRS 111 does not have any impact to the Group.

(b) FRS 108 Operating Segments (effective for annual periods beginning on or after 1 January 2009)

FRS 108 supersedes FRS 14 Segment Reporting and requires the Group to report the fi nancial performance

of its operating segments based on the information used internally by management for evaluating segment

performance and deciding on allocation of resources. Such information may be different from the information

included in the fi nancial statements, and the basis of its preparation and reconciliation to the amounts

recognised in the fi nancial statements shall be disclosed.

The Group will apply FRS 108 from 1 January 2009 and provide comparative information that conforms to

the requirements of FRS 108. The Group expects the new operating segments to be different from business

segments currently disclosed and expects more information to be disclosed under FRS 108.

(c) Revised FRS 23 Borrowing Costs (effective for annual periods beginning on or after 1 January 2009)

The revised standard removes the option to recognise immediately as an expense borrowing costs that are

attributable to qualifying assets, except for those borrowing costs on qualifying assets that are measured at

fair value or inventories that are manufactured or produced in large quantities on a repetitive basis.

The Group will apply the revised FRS 23 from 1 January 2009. As the Group has been capitalising the

relevant borrowing costs, the revised standard is not expected to have any impact to the Group.

42. 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 28 February 2008.

Five-Year Summary


Notes 2003 2004 2005 2006 2007$’000 $’000 $’000 $’000 $’000

INCOME STATEMENTTurnover 91,942 116,346 873,114 1,215,469 2,261,700

Operating profi t before taxation 13,002 35,276 225,039 301,696 497,536Share of profi t of associated companies 1 14,655 31,107 519 600 537

Profi t before income tax 27,657 66,383 225,558 302,296 498,073Income tax expense (2,573) (1,393) (18,417) (22,981) (19,512)

Net profi t 25,084 64,990 207,141 279,315 478,561

Attributable to:

Equity holders of the company 24,222 64,159 160,494 205,353 336,568Minority interests 862 831 46,647 73,962 141,993

Net profi t 25,084 64,990 207,141 279,315 478,561

Gross dividend 2 9,038 21,854 44,141 89,348 156,637Net dividend 2 7,230 21,854 44,141 89,348 156,637

BALANCE SHEETShare capital and share premium 206,620 217,039 228,587 239,947 266,852Statutory and other reserves (1,127) (8,315) 60,634 70,855 82,806Retained earnings 65,801 113,204 230,484 359,256 590,249Minority interests 2,637 1,636 175,744 249,889 362,847

Total equity 273,931 323,564 695,449 919,947 1,302,754

Forward Currency Contracts – – – 45 8,778Non-trade receivables 1,064 830 – – –Financial assets, available for sale 120 120 2,304 2,208 3,067Club memberships 437 383 377 412 479Investments in associated companies 69,810 83,168 2,813 2,227 1,794Investment properties 42,291 11,640 11,703 11,350 11,472Property, plant and equipment 340,758 309,654 937,649 1,110,179 1,478,453Intangible assets – – 9,357 9,319 9,302Deferred income tax assets 201 – – – 21,996Deferred expenditure – 847 – – –Current assets 109,211 137,417 438,333 747,926 2,431,829Current liabilities (101,294) (80,335) (400,704) (676,153) (2,557,025)Non-current liabilities (188,667) (140,160) (306,383) (287,566) (107,391)

Net Assets 273,931 323,564 695,449 919,947 1,302,754

RATIOSBasic earnings per share (cents) 3 and 4 1.4 3.0 7.4 9.3 15.1Dividend per share (cents) 5 1.0 2.0 2.0 4.0 7.0Dividend cover (times) 6 2.7 2.9 3.6 2.3 2.1Net tangible assets per share (cents) 4 12.4 14.7 23.2 29.8 41.2Gearing ratio (Net of Cash) 7 0.5 0.2 0.5 0.2 –

Notes

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

2. The dividend for 2007 is calculated based on the number of shares issued as of 31 December 2007. The actual amount payable will

be based on the number of shares issue at book closure date.

3. Basic earnings per share is calculated as net profi t attributable to equity holders of the company divided by the weighted average

number of ordinary shares issued in the fi nancial year.

4. Basic earnings per share and net tangible assets per share have been adjusted to account for the bonus shares issued in 2004 and

the sub-division of one ordinary share into two ordinary shares in 2006.

5. Dividend per share for 2002 to 2004 are based on shares of 20 cents par value each.

6. The dividend cover is calculated as net profi t attributable to equity holders of the Company divided by the amount of equity dividend.

7. Gearing ratio is derived by taking total borrowings (net of cash) over the shareholders’ funds.

Shareholding Statistics


STATISTICS OF SHAREHOLDERS AS AT 5 MARCH 2008

Class of Shares – Ordinary shares

Voting Rights – One Vote per share

DISTRIBUTION OF SHAREHOLDERS BY SIZE OF SHAREHOLDINGS

Size of HoldingsNo. of Ordinary Shareholders % of Holders No. of Shares % of Shares

1 – 999 101 0.61 40,752 0

1,000 – 10,000 13,984 84.73 48,691,685 2.18

10,001 – 1,000,000 2,385 14.45 102,600,318 4.58

1,000,001 and above 34 0.21 2,086,882,199 93.24

16,504 100.00 2,238,214,954 100.00

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 53.37 – –

2. Temasek Holdings (Pte) Ltd – – 125,123,818* 5.59

Note:

* Temasek Holdings (Pte) Ltd is deemed interested in the 125,123,818 shares held through its subsidiaries and associated companies.

COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL

Based on information available and to the best knowledge of the Company as at 5 March 2008 approximately 35.39% 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 Statistics


LIST OF 20 LARGEST SHAREHOLDERS

SHAREHOLDER’S NAME NO OF SHARES %

1 CHINA OCEAN SHIPPING (GROUP) COMPANY PTE LTD 1,194,565,488 53.37

2 DBS NOMINEES PTE LTD 237,835,344 10.63

3 HSBC (SINGAPORE) NOMINEES PTE LTD 165,540,815 7.40

4 CITIBANK NOMINEES SINGAPORE PTE LTD 96,337,343 4.30

5 DBSN SERVICES PTE LTD 84,164,601 3.76

6 SEMBCORP MARINE LTD 70,000,000 3.13

7 UNITED OVERSEAS BANK NOMINEES PTE LTD 51,763,366 2.31

8 RAFFLES NOMINEES PTE LTD 48,735,093 2.18

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

10 SEMBMARINE INVESTMENT PTE LTD 20,400,000 0.91

11 DB NOMINEES (SINGAPORE) PTE LTD 12,577,025 0.56

12 HUI SHUNE MING @ HUI SHUN MENG 8,300,000 0.37

13 OCBC SECURITIES PRIVATE LTD 8,207,124 0.37

14 MORGAN STANLEY ASIA (SINGAPORE) SECURITIES PTE LTD 7,290,498 0.33

15 MERRILL LYNCH (SINGAPORE) PTE LTD 7,142,323 0.32

16 UOB KAY HIAN PTE LTD 5,765,400 0.26

17 MARK BOWDEN 4,800,000 0.21

18 TM ASIA LIFE SINGAPORE LTD-PAR FUND 4,512,000 0.20

19 PHILLIP SECURITIES PTE LTD 4,408,631 0.20

20 ROYAL BANK OF CANADA (ASIA) LTD 4,203,250 0.19

Total 2,057,548,301 91.94

Notice of Annual General Meeting


COSCO CORPORATION (SINGAPORE) LIMITED(Company No.: 196100159G)

NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at Marina Mandarin Singapore,

Level 1, Taurus & Leo Room, 6 Raffl es Boulevard, Marina Square, Singapore 039594 on Tuesday, 15 April 2008 at 11.00

a.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 2007 and the Auditors’ Report thereon.

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

ended 31 December 2007 as recommended by the Directors.

3. To declare a Special Dividend of S$0.03 per ordinary share (one-tier tax) for the year ended 31

December 2007 as recommended by the Directors.

4. To approve payment of Directors’ Fees of S$170,000 for the year ended 31 December 2007.

5. To re-elect the following Directors who are retiring under Article 98 of the Articles of Association

of the Company and have offered themselves for re-election:

a. Mr Ji Hai Sheng

b. Mdm Sun Yue Ying

c. Mr Wang Xing Ru

6. To re-elect Mr Ang Swee Tian who is retiring under Article 84 of the Articles of Association of

the Company and has offered himself for re-election. (See Explanatory Note 1)

7. To consider and if thought fi t, to pass the following resolution:

“That pursuant to Section 153(6) of the Companies Act, Cap. 50, Mr Tom Yee Lat Shing be

and is hereby re-appointed as a Director of the Company to hold offi ce until the next Annual

General Meeting.” (See Explanatory Note 2 )

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

fi x their remuneration.

9. To transact any other ordinary business which may properly be transacted at an Annual

General Meeting.

(Resolution 1)

(Resolution 2)

(Resolution 3)

(Resolution 4)

(Resolution 5)

(Resolution 6)

(Resolution 7)

(Resolution 8)

(Resolution 9)

(Resolution 10)



Special Business

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

10. General Mandate to authorise the Directors to issue shares or convertible securities:

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

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

given to the Directors to allot and issue:-

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

(b) convertible securities; or

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

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

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

in their absolute discretion deem fi t provided that :-

(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)

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

2002 (“Scheme”)

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

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

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

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

under the Scheme, provided that the aggregate number of shares to be issued pursuant to

the Scheme shall not in total exceed fi fteen (15) per cent of the issued share capital of the

Company from time to time.” (See Explanatory Note 4)

(Resolution 11)

(Resolution 12)



(Resolution 13)12. Proposed Renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions

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

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

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

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

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

year ended 31 December 2007 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

Singapore, 24 March 2008

Explanatory Notes on Business to be transacted

1. Mr Ang Swee Tian, if re-elected, will remain as the Chairman of Enterprise Risk Management Committee and a member of the Audit,

Nominating and Remuneration Committees; 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, if re-appointed, will remain as the Chairman of the Audit Committee and a member of the Nominating,

Remuneration and Enterprise Risk Management Committees; 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 percent 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 percent 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 not

exceeding in total fi fteen (15) per cent of the issued share capital of the Company from time to time.

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 18 April 2007 in respect of transactions described in Section

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

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

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

to the interests of the Company and its minority shareholders.

Notes

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

his stead. A proxy need not be a member of the Company.

ii. Where a member appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding

(expressed as a percentage of the whole) to be represented by each proxy.

iii. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 9 Temasek Boulevard,

#07-00 Suntec City Tower II, Singapore 038989 not later than 48 hours before the time fi xed for holding the Annual General Meeting.

iv. This instrument appointing a proxy or proxies must be under the hand of the appointer or his attorney duly 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 the Transfer of Books and the Register of Members of the Company will be closed on

24 April 2008, 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 23 April 2008 will be entitled to the proposed First and Final Dividend and the Special Dividend.

Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at 5.00 p.m. on 23

April 2008 will be entitled to the proposed First and Final Dividend and the Special Dividend. Payment of the dividends, if

approved by members at the Annual General Meeting, will be made on 7 May 2008.

BY ORDER OF THE BOARD

Lawrence Kwan

Company Secretary

Singapore, 24 March 2008

This page has been intentionally left blank.

COSCO CORPORATION (SINGAPORE) LIMITED(Incorporated in the Republic of Singapore)

(Company Registration No.: 196100159G)

ANNUAL GENERAL MEETINGPROXY FORM

I/We NRIC/Passport No.

of

being a member of Cosco Corporation (Singapore) Limited (the “Company”), hereby appoint

Name AddressNRIC/Passport

NumberProportion of

Shareholdings (%)

And/or (delete as appropriate)

Name AddressNRIC/Passport

NumberProportion of

Shareholdings (%)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the

Annual General Meeting of the Company to be held at Marina Mandarin Singapore, Level 1, Taurus & Leo Room, 6 Raffl es

Boulevard, Marina Square, Singapore 039594 on Tuesday, 15 April 2008 at 11.00 a.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 consider the Audited Financial Statements and Reports for the year ended

31 December 2007.

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

31 December 2007.

3. To declare a Special Dividend of S$0.03 per ordinary share (one-tier tax) for the year ended

31 December 2007.

4. To approve payment of Directors’ Fees.

5. To re-elect Mr Ji Hai Sheng, who is retiring under Article 98 of the Articles of Association of the Company.

6. To re-elect Mdm Sun Yue Ying, who is retiring under Article 98 of the Articles of Association of the Company.

7. To re-elect Mr Wang Xing Ru, who is retiring under Article 98 of the Articles of Association of the Company.

8. To re-elect Mr Ang Swee Tian, who is retiring under Article 84 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 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 2008

Signature of Member(s) or Common Seal

IMPORTANT: Please Read Notes for This Proxy Form.

Important:1. For investors who have used their CPF monies to buy the

Company’s shares, this Annual Report is sent to them at

the request of their CPF Approved Nominees solely FOR

INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall

be ineffective for all intents and purposes if used or purported

to be used by them.

3. CPF investors who wish to vote should contact their CPF

Approved Nominees.

Total No. of Shares in No. of Shares

CDP Register

Register of Members

NOTES:

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as

defi ned in section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have

Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares entered

against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the

aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of

Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by

you.

2. A Shareholder of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to

attend and vote on his behalf. Such proxy need not be a Member of the Company.

3. Where a Shareholder appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding

(expressed as a percentage of the whole) to be represented by each proxy.

4. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 9 Temasek Boulevard,

#07-00 Suntec Tower Two, Singapore 038989 not less than 48 hours before the time set for holding the annual general meeting.

The sending of a Proxy Form by a Shareholder does not preclude him from attending and voting in person at the annual general

meeting if he fi nds that he is able to do so. In such event, the relevant Proxy Forms will be deemed to be revoked.

5. The instrument appointing a proxy or proxies must be under the hand of the appointer or of his attorney duly authorised in writing.

Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under

the hand of a director or an offi cer or attorney duly authorised.

6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointer by an attorney, the power of attorney (or

other authority) or a duly certifi ed copy thereof must (failing previous registration with the Company) be lodged with the instrument of

proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a Shareholder may authorise by resolution of its directors or other governing body such person as it thinks

fi t to act as its representative at the annual general meeting, in accordance with section 179 of the Companies Act, Chapter 50 of

Singapore.

8. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or

illegible or where the true intentions of the appointer are not ascertainable from the instructions of the appointer specifi ed in the

instrument appointing a proxy or proxies. In addition, in the case of a Shareholder whose Shares are entered in the Depository

Register, the Company may reject any instrument appointing a proxy or proxies lodged if the Shareholder, being the appointer, is not

shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the

annual general meeting, as certifi ed by The Central Depository (Pte) Limited to the Company.

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