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STEADFAST AND RESILIENTCOSCO Corporation (Singapore) Limited Annual Report 2011
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4COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
STEADFAST& RESILIENT
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1COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
At COSCO, long-term resilient and sustainable growth has always been our
overarching objective. Building on our core businesses, diversied expertise
and global coverage, we have established a track record o ocusedachievement.
Now, amid the uncertainties in our global operating environment, we have
urther drawn on our fexibility, responsiveness and expanding expertise to
successully meet the challenges that have come our way.
With this knowledge, we remain condent in our abilities, and certain in our
sustainable way orward.
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2COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
CONTENTS
COSCO OVERVIEW
3 Corporate Prole
4 Corporate Structure
6 Financial Highlights
8 Major Developments
10 Our Major Shipyards
11 Major Deliveries in 2011
KEY MESSAGES
14 Message rom the Chairman
18 Interview with Vice Chairman and President
OPERATIONS AND FINANCIALREVIEW
25 Ship Repair, Ship Building and
Oshore Marine Engineering
28 Dry Bulk Shipping & Others
30 Group Financial Review
CORPORATE GOVERNANCE ANDTRANSPARENCY
32 Corporate Governance
49 Corporate Inormation
50 Board o Directors
56 Key Management58 Investor Relations
60 Risk Management
INSIDE COSCO AND CORPORATECITIZENSHIP
65 Research and Development
66 Human Resources and Workplace Saety
68 Corporate Social Responsibility
FINANCIAL STATEMENTS
70 Directors’ Report75 Statement by Directors
76 Independent Auditor’s Report
77 Consolidated Income Statement
78 Consolidated Statement o Comprehensive Income
79 Balance Sheets
80 Consolidated Statement o Changes in Equity
81 Consolidated Statement o Cash Flows
83 Notes to the Financial Statements
151 Five-Year Summary
152 Shareholding Statistics
154 Notice o Annual General Meeting
Proxy Form or Annual General Meeting
Notes or Proxy Form
INVESTOR RELATIONS CONTACTS
COSCO Corporation (Singapore) Limited
Mr Li Jian Xiong, Vice President
Mr Wang Hui, General Manager, Investor Relations Tel: (65) 6885 0888
Fax: (65) 6336 9006
Email: [email protected]
SPIN Capital Asia (Investor Relations Consultant)
Mr Michael Tan
Tel: (65) 6227 7790
Email: [email protected]
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3COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
CORPORATE
PROFILE
“A diversified marine conglomerate providing Ship
Repair and Conversion, Ship Building and Offshore
Marine Engineering solutions.”
COSCO Corporation (Singapore) Limited (“COSCOCorporation” or the “Group”) has one o the largest
ship repair, ship building and oshore marine
engineering operations in China. A diversied group
with activities also in dry bulk shipping and other
sectors, it is the SGX Mainboard-listed subsidiary o
China Ocean Shipping (Group) Company (“COSCO
Group”), China’s largest shipping group and one o
the top shipping conglomerates in the world.
COSCO Corporation has achieved signicant
progress in growing its ship repair, ship buildingand oshore marine engineering capacity and
capabilities. The completion o its acquisition o a
51% stake in one o the largest shipyards in China,
COSCO Shipyard Group (“COSCO Shipyard”), on
1 January 2005 propelled COSCO Corporation into
the premier league in the shipyard industry. With
comprehensive eorts over past years, COSCOCorporation has transormed rom a ship repair and
conversion business to a multi-unctional marine
conglomerate with capabilities to build new ships
and oshore marine engineering vessels.
COSCO Corporation is committed to long-term
growth through its core businesses and global
coverage. Since January 2009, we have been part
o the FTSE ST China Index, and rom July 2009, we
were also included in the FTSE ST China Top Index,
both o which were created to refect the increasingrepresentation o China-based companies in the
Singapore stock market. Among other indexes, we
are also a component stock o the Morgan Stanley
Capital International Singapore which eatures some
o the most promising, widely-traded and investible
Asian companies outside Japan.
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4COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
CORPORATESTRUCTURE
Ship Repair,Ship Building & Offshore MarineEngineering
90% COSCO Marine Engineering
(Singapore) Pte Ltd
50% COSCO (Nantong) Shipyard
Co., Ltd
39% COSCO (Dalian) Shipyard Co., Ltd
51% COSCO Shipyard Group Co., Ltd
100% COSCO Engineering Pte Ltd
100% COSCO (Zhoushan) Shipyard Co., Ltd
95% COSCO (Shanghai) Shipyard Co., Ltd
75% COSCO (Guangdong) Shipyard Co., Ltd
60% COSCO (Lianyungang) Shipyard Co., Ltd
60% COSCO (Qidong) Oshore Co., Ltd
59% COSCO (Dalian) Shipyard Co., Ltd
50% COSCO (Nantong) Shipyard Co., Ltd
51% COSCO (Xiamen) Shipyard Co., Ltd
90% COSCO (Tianjin) Shipyard Co., Ltd
60% COSCO (Nantong) Ocean Shipyard Co., Ltd
75% COSCO Dalian Rikky Ocean Engineering Co., Ltd
51% Zhongyuan Sea-Land Engineering Co., Ltd
60% COSCO Shipyard Total Automation Co., Ltd
30% Diesel Marine Dalian Ltd
30% Diesel Marine International (Nantong) Co., Ltd
30% DMI (Guangzhou) Ltd
40% Tru-Marine Cosco (Tianjin) Engineering Co., Ltd
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5COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
Dry Bulk Shipping & Others
100% COSCO (Singapore) Pte Ltd
100% Harington Property Pte Ltd
100% Cos Fair Shipping Pte Ltd
100% Cos Glory Shipping Inc
100% Hanbo Shipping Limited
100% Sanbo Shipping Limited
100% Cos Knight Shipping Maritime Inc.
100% Cos Lucky Shipping Maritime Inc.
100% Cos Orchid Shipping Pte Ltd
100% Cos Prosperity Shipping Pte Ltd
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6COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
FINANCIALHIGHLIGHTS
Turnover (S$’m)
20112010200920082007
2 ,
2 6 2
3 ,
4 7 6
2 ,
8 9 9
3 ,
8 6 1
4 ,
1 6 3
Net Profit Attributableto Euity Holders(S$’m)
20112010200920082007
3 3 7
3 0 3
1 1 0
2 4 9
1 4 0
Net Assets(S$’m)
1 ,
3 0 3
1 ,
6 0 9
1 ,
6 1 1
1 ,
7 9 4
2 ,
0 0 0
Revenue by Activities(%)
Construction81%#
Renderingof Services
19%*
* Comprise o ship repair and marine engineering
income, time charter revenue and shipping
agency income
# Construction revenue rom Ship Building and
marine engineering
20112010200920082007
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7COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
5YEAR PROFIT AND LOSS ACCOUNTS (S$’m)
Turnover
Operating Prot beore Tax
Share o Prot/(Loss) o Associated Companies
Income Tax Expense
Net Prot
Non-Controlling Interests
Net Prot Attributable to Equity Holders o the Company
OTHER KEY STATISTICSNumber o Shares (m)
Basic Earnings per Share (cents)
Dividend per Share (cents)
Dividend Cover (times)
Net Tangible Assets per Share (cents)
Net Assets Value per Share (cents)
Gearing Ratio (net o cash)(times)
Return on Equity (%)
Return on Assets (%)
2007
2,262
497
1
19
479
142
337
20072,237.7
15.1
7.0
2.1
41.6
42.0
cash
41.8
11.5
2008
3,476
451
1
32
420
117
303
20082,239.2
13.5
7.0
1.9
50.7
51.1
cash
29.0
5.6
2009
2,899
179
0
41
138
28
110
20092,239.2
4.9
3.0
1.6
48.0
48.4
cash
9.9
1.7
2010
3,861
402
0
43
359
110
249
20102,239.2
11.1
4.0
2.8
53.1
53.5
0.1
21.8
4.0
2011
4,163
286
1
74
213
73
140
20112,239.2
6.2
3.0
2.1
57.7
58.1
0.4
11.2
2.1
Dividend per Share (cents)
and Basic Earnings per Share (cents)
Basic Earnings per
Share (cents)
Dividend per Share
(cents)
20112010200920082007
15
12
9
6
3
0
18
15.1
13.5
4.9
11.1
6.2
7.07.0
3.0 3.0
4.0
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8COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
Major DEvelopments
Current Developments1 Sevan Driller II (Sevan Brasil)
2 GM4000
3 Octabuoy
4 Drillship
1
1
4
Deliveries in 20111 M.V. Scotian Express
New build 92,500 dwt bulk carrier
2 M.V. Chipolbrok Cosmos
New build 30,000 dwt multipurpose heavy lit carrier
3 MPI Discovery
Windmill turbine installation vessel
4 M.V. Diane
New build 79,200 dwt bulk carrier
5 M.V. Recife Knutsen
Shuttle tanker
6 M.V. COSCO Tengfei
5,000 units car carrier
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9COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
2 3 42 3
2 3
5 6
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10COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
OUR MAJOR SHIPYARDSThrough COSCO Shipyard Group, COSCOCorporation owns and operates seven major
shipyards strategically located along China’s
coastline.
Zhoushan
Dalian
Lianyungang
Guangdong
Qidong
Nantong
Shanghai
80,000
–
200,000
–
–
80,000400,000230,000
–
990,000
180,000300,000
80,000
–
150,00080,000
35,000
–
80,000150,000
1,055,000
Oshore/ Shipbuilding/ Repair
Repair
Oshore
Oshore/ Repair
Repair
Shipbuilding/ Repair
Shipbuilding/ Repair
Dalian
Lianyungang
Qidong
Nantong
Shanghai
Zhoushan
Guangdong
Total
Capabilities Dry dock
(dwt)
Floating
dock(dwt)
Shipyard
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11COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
MAJOR DELIVERIESIN 2011
Name o Vessel
COSCO Dalian Shipyard
M.V. Christine Star
M.V. Mega Star
M.V. Voge Enterprise
M.V. Anastasia K
M.V. Sher-e Punjab
M.V. Silverstar
M.V. Harmony Star
M.V. Veenus
M.V. Scotian Express
M.V. Diane
M.V. Common Calypso
M.V. Common Spirit
M.V. Radiant Jewel
M.V. Kraszewski
M.V. Gujarat
M.V. Common Venture
M.V. Chipolbrok Cosmos
COSCO Zhoushan Shipyard
M.V. Almeria
M.V. COSCO Shengshi
M.V. Jag RishiM.V. Pisti
M.V. STX Pride
M.V. STX Queen
M.V. COSCO Tengei
M.V. Jag Rani
M.V. Soa
M.V. Aviona
M.V. Pos Tansanit
M.V. STX Rapido
M.V. STX Spirit
M.V. Pos Topas
COSCO Guangdong Shipyard
M.V. Agria
M.V. Marine King
M.V. Lia
M.V. Wuxing 6
M.V. APJ Jai
M.V. HuaHeng 166
M.V. HuaHeng 167
M.V. Georgianna Bo
COSCO Nantong Shipyard
MPI Adventure
M.V. Fortaleza Knutsen
M.V. Recie Knutsen
M.V. Dan Sabia
MPI Discovery
Project Details
New build 57,000 dwt bulk carrier
New build 80,000 dwt bulk carrier
New build 80,000 dwt bulk carrier
New build 80,000 dwt bulk carrier
New build 80,000 dwt bulk carrier
New build 80,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 80,000 dwt bulk carrier
New build 92,500 dwt bulk carrier
New build 79,200 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
FPSO (conversion rom VLCC)
New build 30,000 dwt multipurpose heavy lit carrier
New build 80,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 30,000 dwt multipurpose heavy lit carrier
New build 57,000 dwt bulk carrier
5,000 units car carrier
New build 57,000 dwt bulk carrierNew build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
5,000 units car carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 92,500 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 80,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
Windmill turbine installation vessel (WTIV)
105,000 dwt shuttle tanker
105,000 dwt shuttle tanker
59,000 dwt shuttle tanker
Windmill turbine installation vessel (WTIV)
Delivered In
January 2011
February 2011
February 2011
April 2011
May 2011
June 2011
June 2011
August 2011
September 2011
September 2011
September 2011
October 2011
October 2011
November 2011
November 2011
November 2011
December 2011
January 2011
February 2011
March 2011 April 2011
May 2011
May 2011
June 2011
July 2011
July 2011
August 2011
October 2011
October 2011
October 2011
December 2011
January 2011
January 2011
April 2011
June 2011
June 2011
July 2011
October 2011
November 2011
March 2011
April 2011
August 2011
September 2011
November 2011
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12COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
PoweringForward
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13COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
Leveraging on Our StrengthsWe are one o China’s leading marine group, with strengths
in ship repair, ship building and, oshore marine engineering.
Coupled with our global clientele and a growing pool o
proessional partners, we are able to meet the cutting-edge
needs o our evolving industry.
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14COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
MESSAGE FROMthe CHAIRMAN
DEAR SHAREHOLDERS,
I am pleased to present COSCO Corporation’s
annual report or Financial Year 2011.
The past year has been a time o much change in our
business environment. Assuming the chairmanship
o our Group since January 2012, I am aware that
our corporation continues to operate in a time o
uncertainty.
However, I am also encouraged by the transormation
and the resultant solid oundation we have laid
as a diversied, proessional oshore and marine
engineering group with enhanced capabilities or a
wide range o repair, conversion and construction
services.
The results o our journey o transormation are
evident in the Company’s perormance in 2011. We
delivered 43 vessels during the year under review,
including 34 bulk carriers, three shuttle tankers,
two heavy lit carriers, two car carriers, and two
windmill turbine installation vessels. Our reputation
or delivery and excellence in quality management
has once again enabled us to secure growth and
provide valued-added solutions to customers.
DELIVERING RESULTS IN A
CHALLENGING MARKET
Despite the overhang o the slow US economyand the European debt crisis, COSCO Corporation
delivered commendable revenue o S$4.2 billion
or the year, an increase o 7.8 per cent rom 2010.
The ship repair, ship building and oshore marine
engineering businesses, contributed to 98.4 per
cent o the Group’s turnover.
Net prot attributable to shareholders decreased
by 43.9 per cent to S$139.7 million, mainly due
to lower dry bulk shipping income as a result o
lower BDI and higher operational cost in shipyard
business, resulting in earnings per share booked at
6.2 cents at the end o the year, compared to 11.1
cents or the previous year.
MA ZE HUA Chairman
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15COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
Net asset value per ordinary share at 31 December
2011 was 58.1 cents, compared with 53.5 cents or
the previous year.
Throughout the year, the Group steadastly
maintained ocus on its strength to develop the
business rom a wider capability base and remained
resilient in the ace o higher costs and a more
challenging operating environment.
COSCO’s transormation over the past ew years
has instilled in our people a better understanding
o our core strengths and capabilities and greater
recognition o the Group’s value proposition in
the rapidly changing and increasingly competitive
market landscape. This will help to urther solidiy our
resolve to continue strengthening our capabilities
and bolster our resilience going orward.
MARKET OUTLOOK AND BUSINESSPROSPECTS
The world economy in general has aced very mixed
sentiments since the latter part o 2011, in the
light o the Eurozone sovereign debt crisis and the
uncertain US economic recovery.
The International Monetary Fund (IMF) in a World
Economic Outlook Update in January 2012 said
the global economy was “threatened by intensiying
strains in the Euro area and ragilities elsewhere.” It
cut its orecast or global economic growth or 2012
to 3.25 per cent rom the 4 per cent predicted last
September, attributing it to “continuing problems in
the Eurozone.”
IMF expects advanced economies to grow at just
1.5 per cent in 2012-2013, a downward revision
o 0.75 percentage points compared to last
September’s projection. For the emerging and
developing economies in 2012-2013, IMF predicts
5.75 per cent growth compared to 6.75 per cent in
2010-2011.
There has also been a global oversupply o bulk
carriers, which has weighed heavily on overall
marine market conditions. Although the Baltic DryIndex had risen marginally to 1,738 points by the
end o 2011 rom 1,621 points at the beginning o
the year, it has sotened rom January 2012. On 6
February 2012, the BDI reached a 26-year low o
647 points.
At our production base in PRC, cost pressures
impacted our bottom line in the year under review
and are expected to continue into the next scal
year, as infation coupled with the rising Yuan against
the US Dollar make steel and other materials we
require more costly.
COSCO’s transformation over the past few years has instilled
in our people a better understanding of our core strengths
and capabilities and greater recognition of the Group’s
value proposition in the rapidly changing and increasingly
competitive market landscape.
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16COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
We are pleased that we have made the transition
rom a dedicated ship repair and conversion
company to a larger diversied enterprise that
included capabilities in ship building and oshore
marine engineering services with the versatility
and fexibility to oer a wide range o construction
capabilities.
There is a Chinese saying: “A crisis is an opportunity
riding the dangerous wind”. Experienced
businessmen and managers are well aware that
there are opportunities even in challenging times.
With our transormation and expansion o our
shipyards, we have now a wider range o production
acilities and expertise to oer our customers.
We have established an excellent reputation or
delivering marine vessels and structures including
high quality and reliable oshore drilling equipment
and support vessels.
The expansion o our capabilities into the oshore
marine segment has put us in a very good position
to tap the active drill ship and oshore platorm
markets. We understand that utilisation o the
global feet o drilling vessels reached 80.8 per cent
in December 2011 compared to 73.3 per cent a
year ago.
The International Energy Agency (IEA) in its 2011
edition o the World Energy Outlook has said
that “growth, prosperity and rising population will
inevitably push up energy needs over the coming
decades”. IEA projected primary energy demand to
increase by about 33 per cent between 2010 and
2035, with 90 per cent o the growth in non-OECD
economies.
REMAINING STEADFAST IN UNCERTAIN
TIMES
We have a disciplined and hardworking team,
including experienced production personnel in
China. With comprehensive acilities and skilled
resources, COSCO Corporation has the resilience
to support continued growth in the years ahead.
Going orward, we will remain steadast in our
marketing and development eorts, aiming to win
new customers with our expertise and technologyin ship repair, conversion and construction. We will,
at the same time, ocus our sights on expanding
urther into the oshore marine market, oering our
proven capability to build reliable and ecient drill
ships and platorms.
We will also continue to manage our business
in a prudent manner by ocusing on increasing
productivity and operational eciency, with
emphasis on innovation and lean management.
Notwithstanding the mixed market sentiment, we have
been successful in securing new orders. Our order book at
31 December 2011 stood at US$6.1 billion with progressive
deliveries up till 2014.
CHAIRMAN’S
STATEMENT
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17COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
To build greater resilience into our operation, we will
continue to enhance our expertise and acilities or
oshore marine engineering services to reinorce
the oundation we have built to ensure long-term
sustainable growth in this segment o the market.
On the ship building ront, we will pursue what
we have been doing successully: maintaining our
delivery record while continuing to urther upgrade
our yards’ capabilities and expertise.
Notwithstanding the mixed market sentiment, we
have been successul in securing new orders. Our
order book at 31 December 2011 stood at US$6.1
billion with progressive deliveries up till 2014. The
new orders received in FY2011 amounting to US$
2.0 billion include three sel-erecting tender drilling
rigs, two LeTourneau Workhorse class jack-up drill
rigs, two Sevan 650 drilling units, two 82,000 dwt
bulk carriers, our special purpose carriers, one
semisubmersible barge and one Octabuoy topside
module, a testimony to our continued success in
the oshore marine engineering market.
DELIVERING SHAREHOLDER VALUE
I wish to highlight that despite moderate growth in
FY2011, the Group is well-positioned and prudently
managed to consolidate our strategic position in the
market. Our team will continue to work harder to
deliver value in spite o the uncertain market outlook.
With our strong oundation in ship repair, conversion
and construction services and oshore marineengineering, we believe we have the capabilities to
remain competitive.
While we approach FY2012 with caution and
determination, we believe it is imperative to practise
a disciplined approach to management. By doing
so, the leadership team can continue to productively
drive the commercial and operational excellence
that has enabled us to succeed all these years.
I am pleased to announce that the Group is
proposing a dividend o 3.0 cents per share to be
approved at the upcoming Annual General Meeting.
On behal o the Board, I would like to take this
opportunity to thank all shareholders or their loyal
support.
In conclusion, I would like to thank the Board o
Directors and the management and sta or their
contribution in the past year and look orward to
their continued support in the years ahead. I would
also like to record my deep appreciation to Mr Liu
Guo Yuan, who stepped down as Chairman at the
beginning o 2012, or his stewardship during the
year under review.
I look orward to meeting our shareholders at the
Group’s orthcoming Annual General Meeting.
MA ZE HUA
Chairman
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18COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
INTERVIEW WITH VICE CHAIRMAN
AND PRESIDENT1. YOU WERE APPOINTED AS VICE
CHAIRMAN AND PRESIDENT IN
NOVEMBER 2011. PLEASE TELL US MORE
ABOUT YOUR BACKGROUND AND YOUR
VISION FOR THE GROUP.
Beore my appointment as the Vice-Chairman
and President or COSCO Corporation Singapore,
I worked as a captain and held several senior
managerial positions within China Ocean Shipping
Group. I believe my background and experience
have equipped me with the necessary management
knowledge and understanding o the business to
help the Group move orward condently in the
years ahead.
As President, I will look into how we can urther
optimise our resources to achieve higher yields,
building on the strong oundation we have
established. At the same time, we will have to
reinorce our risk management programme and
corporate governance eorts to attain a higher
standard o accountability within the organisation. I
believe this is the way to ensure sustainability or the
Group going orward.
2. WHAT ARE THE ESSENTIAL FACTORS
THAT WILL ENABLE THE GROUP TO
ACHIEVE SUSTAINABLE GROWTH?
We already have most o the essential ingredients
or sustainable growth. Our transormation over the
last ew years has enabled us to provide a more
comprehensive range o services, including oshore
marine engineering. As a result o the expansion
o our ship repair and conversion capability into
the oshore marine eld, we have acquired the
technology, skills competency, proessional
management and the necessary inrastructure to
position ourselves or a sustainable uture.
CAPTAIN WU ZI HENGVice Chairman and President
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19COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
On top o this, we must continue to seek new talents
to bolster our proessional workorce, by putting the
right people in the right places. By having more
qualied and experienced proessionals, we can
raise the bar on our technological innovation eorts
to urther improve and develop new products to
meet the needs o our customers around the world.
3. WHAT WERE THE SIGNIFICANT
HIGHLIGHTS OF THE COMPANY’SPERFORMANCE IN 2011?
The most signicant was that we delivered 43
vessels during the year under review, including 34
bulk carriers, two car carriers, two wind turbine
installation vessels, three shuttle tankers, and two
heavy lit carriers.
Another notable highlight was our success in
securing new orders. We secured new orders
amounting to US$2 billion during the year in review
managed to build our order book, which at the
end o December 2011 stood at US$6.1 billion.
Furthermore, we also achieved new improvements
in cost control by shortening the average timing o
our ship building.
We believe our journey o transormation in recent
years has bolstered our oundation in this business,
especially with our diversication into the oshore
marine engineering sector. We have also continuedto secure orders or new drill vessels and other
oshore products.
Moving orward, our Group is better equipped with
more know-how, capabilities and acilities to serve
our customers. We have built greater resilience into
our operations and instilled greater condence in
our workers to remain steadast and proessional in
the ace o the uncertain market outlook.
4. WHAT HAVE BEEN THE MOST
SIGNIFICANT ACHIEVEMENTS SO FAR?
One o the most signicant achievements has
been the successul three-phase transormation
o the Group. Over a short span o ve years, we
have evolved rom our early days as a ship repair
company to a marine conglomerate providing not
only ship repair, but also comprehensive marine
solutions, which include ship conversion, ship
building and marine engineering. It normally takes a
shipyard more than ten years to achieve this.
During the diversication journey, we enhanced our
capabilities or the conversion o VLCC to VLOC
and FPSO, and at the same time established strong
competency in building bulk carriers, car carriers,
heavy lit vessels, wind turbine installation vessels,
shuttle tankers and other ship types. We have
successully built the Sevan Driller, the world’s rst
cylindrical oil drilling rig, and delivered the Super M2,
a jack-up rig, amongst other new products.
Throughout our journey o transormation, our
operations have constantly improved year ater
year, enabling us to better service our pool o global
customers.
5. WHAT HAS THE GROUP GAINED FROM
THE TRANSFORMATION?
The most transormative lesson rom the
diversication exercise is the importance o
understanding the market and the ability to seize
opportunities arising rom the rapid changes in
the dry bulk shipping and ship building industry at
the right time. Between 2006 and 2007, demand
rom ship owners rose sharply but there was a
serious shortage in ship building capabilities then.
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20COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
Furthermore, with oil prices constantly on the rise,
international market demand or oil drilling platorms
had increased steadily. By making the decision
at that time to enter the ship building and marine
engineering sector, we were able to successully
transorm our business within a short period o time.
At the same time, we had also built our capability
or oshore marine engineering services in the China
market beore other companies entered this space.
I believe this rst-mover advantage has put us in
an excellent position over other similar companies
in China. Our marine engineering business is still in
its inancy and the prospects or the uture are very
promising.
6. WHAT IS THE GROUP DOING TO BUILD
GREATER RESILIENCE?
In order to build greater resilience, we will urther
improve the management o our innovative,
technical and production resources, as well as our
human capital. We would also have to provide or
a culture o fexibility in the organisation to allow
or communication at all levels and swit decision-
making.
We will step up our eorts in technological innovation
to maintain a leading edge in the industry so that
we can continually provide value-added services
and comprehensive marine equipment constructionsolutions to our clients.
The COSCO Group has seven major shipyards with
the capabilities and acilities that can be deployed in
a fexible and dynamic way to handle construction
o dierent classes o marine vessels and drill ships
according to market demand. The dynamic supply
chain is our key strength and it can be urther
reinorced with greater fexibility in communication
and decision-making to allow or rapid response
to customer requirements and ensure long-term
sustainability o our business.
I have earlier mentioned the importance o talent
development and I believe that by having the right
people in key management positions overseeing a
well-trained and skilled resource pool we will always
have the critical competitive advantage.
7. WHAT ARE THE PROSPECTS IN THE
OFFSHORE MARINE ENGINEERING
SEGMENT, PARTICULARLY FOR THE
DRILLSHIP AND OFFSHORE JACK-UPMARKET IN THE SHORT TO MEDIUM-
TERM?
We believe that the prospects or this segment
o the business remain promising. Global oil
companies have made announcements to increase
their budgets or oshore exploration. The daily
rates or jack-up vessels and semi-submersible
platorms have been rising, which is encouraging or
the oshore marine engineering market. In addition,
we expect rising demand or foating production
installations such as FPSO, wind turbine installation
vessels and oshore vessels.
Looking ahead, we will increase our research and
development eorts in deepwater and the ultra
deepwater products.
We will also continue to invest in new equipment
and widen our skill base in the oshore marine
engineering area. By doing so, we will be able tomeet the evolving demands o our energy industry
customers and stand to benet rom our association,
especially when the world economy recovers.
INTERVIEW WITH VICE CHAIRMAN
AND PRESIDENT
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21COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
8. WHAT IS YOUR VIEW ON THE DRY
BULK SHIPPING BUSINESS GOING
FORWARD?
Most o the world’s major shipping companies
have reported lower prot or loss or FY2011, and
projections or the shipping business have not been
encouraging so ar. On 6th February this year, the
BDI ell to its lowest in 26 years. Although the bulk
shipping market has been expected to recover,
we do not oresee a strong up-tick because o the
continuing over-supply o new ships. In 2011, total
global delivery o new-built dry bulk carriers reached
a record high o 96 million tons and this year, the
capacity likely to be delivered could reach 70 million
tons. As more new-built bulk carriers are being
delivered against the backdrop o slow shipping
demand, the recovery o the dry bulk market will
continue to be anaemic. With the shipping market
outlook remaining bleak, we expect our dry bulk
shipping business to be more challenging in 2012.
9. DO YOU THINK THAT THE GROUP’S
OPERATING COSTS WILL CONTINUE TO
RISE?
In the long-term, our Group’s business will continue
to ace upward cost pressures. And with interest
rates or the RMB expected to remain high, we
oresee the resultant higher production costs will
continue to aect our prot margin.
10. WHAT MEASURES HAVE THE GROUP
TAKEN TO IMPROVE COMPETITIVENESS
IN THE FUTURE?
We have been making determined eorts to control
our costs, the bulk o which is rom materials and
labour. With our lean management approach, we
have over the years urther optimised our material
utilisation improved labour productivity, and on-time
delivery, and will continue to do so. Furthermore,
our shipyards have also been enhancing the
management o their acilities and outsourcing to
improve production eciency and control costs.
Another important area is risk management, where
we have successully put in place a comprehensive
programme to constantly monitor, review and
improve processes and control systems to eliminate
and minimise unnecessary disruption o and
negative impact on our business.
In the longer term, our sustainability will depend
on how well we continue to innovate and adapt
ourselves to the changing market landscape. With
a strong emphasis on technical innovation, we aim
to develop our capability to produce better and
higher yield products, urther raise our productivity
and quality standards, and enhance our delivery
eciency.
11. WHAT IS THE COMPANY’S DIRECTION
FOR FY2012?
Going orward, we will continue to emphasis lean
management, as we ace increasing cost pressures
at our production base in China where infation
and a stronger Yuan can be expected to continue
aecting our bottom line. We will put in eorts on all
ronts, in particular, the oshore marine engineering
market where prospects are more encouraging.
On the whole, we will continue to upgrade ouracilities and manpower skills, improve our core
competencies and raise productivity, urther
reinorcing the strong oundation we have
established in the ship building and oshore marine
engineering sectors.
CAPTAIN WU ZI HENG
Vice Chairman and President
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22COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
EXPANDING OUR
FOOTPRINT
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23COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
Continuous innovation the key to success
We are currently one o the largest marine engineering group in PRC with14 outstanding oshore marine projects on our order book. However, as
a relatively new entrant, we expect to incur higher costs in scaling the
“learning curve” or new product types in the oshore marine engineering
sector.
Oshore marine engineering represents an expanding pillar o growth.
Progressively, we will increase expertise and capabilities to reach out to a
broader customer base, thus strengthening our oundation or long-termgrowth in this developing market segment.
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24COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
OPERATION HIGHLIGHTS
Successfully delivered 34 bulk carriers, 2 windmillturbine installation vessels, 2 multipurpose heavy lift carriers, 2 5,000 units car carriers and 3shuttle tankers.
New orders received in 2011 amounted to US$2.0billion include 2 82,000 dwt bulk carriers, 4 specialpurpose carriers, 3 selferecting tender drillingrigs, 2 jackup drilling rigs, 2 Sevan 650 drillingunits, 1 semisubmersible barge and 1 Octabuoy topside module.
Will continue to focus on deliveries, upgradingof shipyards capabilities and efficiencies, andmonitor costs.
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Operations andFinancial Review
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25COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
OVERVIEW
COSCO’s position as a leading marine conglomerate
is anchored by its advanced capabilities in ship
building, ship repair and conversion, and oshore
marine engineering, bolstered by its seven modern
shipyards. Owned by COSCO Shipyard Group,a subsidiary o COSCO Corporation, these seven
shipyards are strategically located along China’s
coastline, rom Guangdong in the south to Nantong,
Zhoushan, Shanghai, Lianyungang, and Qidong
along the central coast, to Dalian in the north.
Ship Repair, Ship Building and Offshore Marine
Engineering
Over the year in review, our shipyards successullydelivered 43 vessels, some o new vessel types
which are a testament to our growing specialised
skills. On the shipyard development ront, we
completed the construction o Phase 1 o our
newest shipyard. Located in Qidong, this state-
o-the-art shipyard specialises in oshore marine
engineering.
During FY2011, the ship repair, ship building and
oshore marine engineering segment remained
our largest revenue contributor, composing 98.4%
o group revenue. Turnover rom these shipyard
operations saw a rise o 10.1% to $4.1 billion in
2011, on the back o higher progressive revenue
recognition o the Group’s marine engineering
projects which oset lower revenue contribution
rom ship repair and conversion.
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26COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1OPERATIONS AND
FINANCIAL REVIEW
STRENGTH IN SHIP BUILDINGFY2011 was a productive year in one o our core
business areas o ship building. With increasing
prociency, the Group successully completed
delivery o 34 bulk carriers, 2 windmill turbine
installation vessels, 3 shuttle tankers, 2 multipurpose
heavy lit carriers, and 2 (5,000 units) car carriers.
One o the largest bulk carriers we built was the
92,500 DWT “Scotian Express”. Measuring about
229 metres in length and 38 metres in breadth, it
was delivered in September 2011 to our European
owner.
Leveraging on our expanded capabilities, we
completed 2 new-build 30,000 DWT heavy lit
carriers, namely “Kraszewski” and “Chipolbrok
Cosmos” in November and December 2011
respectively. This ollows the 3 heavy lit carriers we
delivered in the previous nancial year. In addition,
expanding into the new area o car carriers, we
successully delivered 2 over the past year. All
in, these engineering achievements bolster our
widening range o capabilities and position us well
to secure diverse projects going orward.
PROGRESS IN OFFSHORE MARINEENGINEERING
We are developing expertise in the oshore marine
engineering area with successul deliveries o
technologically-advanced vessels and the securing
o multiple new contracts over the year in review.
Representing yet another milestone in oshore
marine engineering, we completed delivery o
2 windmill turbine installation vessels, the MPI
“Adventure” in March 2011 and the MPI “Discovery”
in October 2011, to our European buyer. Thesevessels are designed to transport, lit and install
wind turbines and their oundations. Key eatures on
the “MPI Adventure” include a 1,000 tonne capacity
main crane, a 50 tonne capacity auxiliary crane,
accommodation capacity or 112 persons and an
ability to jack with 6,000 tonnes o cargo on board.
Another cornerstone achievement or the year
was our completion o the hull or Phase 1 o the
Octabuoy, a semi-submersible production platorm
or ATP Oil & Gas (UK) Limited. It is designed or
the Cheviot eld in the UK North Sea. Following
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27COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
TYPES OF VESSELS REPAIRED IN FY2011
BY NUMBER OF VESSELS
SHIPYARD REVENUE BY TYPE OF JOBS
the successul delivery o Phase 1, we have sincecommenced work on Phase 2, which is to construct
the topside module by the second hal o 2013. The
order or Phase 2, valued at US$114 million, was
secured in May 2011.
CURRENT DEVELOPMENTS
With our broadening base o specialised skills and
project experience, we managed to secure new
orders amounting to US$2.0 billion over FY2011.
These included orders or 2 82,000 DWT bulk
carriers, 4 special purpose carriers, 3 sel-erectingtender drilling rigs, 2 jack-up drilling rigs, 2 Sevan
650 drilling units, 1 semi-submersible barge and the
aorementioned Octabuoy topside module. As at 31
December 2011, the Group’s order book stood at
US$6.1 billion with progressive deliveries up till rst
hal 2014. This order book is subject to revision rom
new orders or order cancellations that may arise.
In the burgeoning eld o oshore marine engineering,
we have also made signicant progress in business
development. One o our seminal new orders is a
US$356 million contract to build 2 jack-up drillingrigs based on the LeTourneau Workhorse® Class
design. Secured in May 2011, the contract is with
KS Drilling Pte Ltd, a subsidiary o KS Energy Limited
(ormerly known as KS Energy Services Limited) The
rigs will be built to ABS classication, with notation
A1, Sel-Elevating Drilling Unit, HAB+.
When completed, these rigs will be one o the
world’s deepest drilling rigs with a drilling depth o up
to 35,000 t., capable o operating in 400 t. water
depth and with accommodation or 150 persons. These standard-setting rigs eature an ofine stand
building capability to handle drill pipes eciently
and are equipped with a capacity hook-load o 2
million pounds. Such eatures will boost overall rig
perormance and productivity.
During the year, we secured new business with
Seadrill, a leading oshore deepwater drilling
company listed on the New York and Oslo Stock
Exchange. Comprising a total o three contracts,
two o them are to construct 2 sel-erecting tender
Ship Repair12%
Bulk Carriers65%
Tankers8% Chemical Ships
8%
Others
8%
ContainersShips11%
Ship Building49%
Ship Conversion6%
MarineEngineering
33%
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28COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1OPERATIONS AND
FINANCIAL REVIEW
drilling rigs valued at over US$130 million, excludingowner-urnished drilling equipment. The 2 units
are scheduled or delivery in rst quarter and third
quarter 2013 respectively. The third contract is to
develop another similar rig valued at US$66 million,
excluding owner-urnished drilling equipment.
Last but not least, building on our successul
delivery o our rst oshore marine engineering
project, the deepwater Sevan Driller in 2009,
we have garnered 2 turn-key EPC (Engineering,
Procurement and Construction) contracts with
the Sevan Drilling Rig V and Sevan Drilling Rig VI
companies to undertake EPC and installation or
delivery o 2 drilling units based on the Sevan 650
design. Priced at approximately US$525 million
each, there is an option to order another 2 units.
In conclusion, we have moved orward in ship
repair and conversion, ship building and oshore
marine engineering. We will continue to ocus
on deliveries while upgrading our shipyards and
containing costs.
Dry Bulk Shipping andOthers
DRY BULK SHIPPING
COSCO’s dry bulk shipping business currently
comprises a feet o 10 dry bulk carriers with a total
carrying capacity o 550,978 DWT. Plying the main
global trading routes, these carriers transport cargo
such as iron ore, coal, steel, cement and ertiliser
to major ports throughout the world. Our dry bulk
carriers are chartered out to other ship owners and
operators, and serve our large client base o shipping
companies rom Germany, Norway, Denmark,
Greece, Switzerland, UK, USA and others.
COSCO’s feet maintains strict international quality
and saety standards and has been awarded
ISO9002 certication. This award is a refection o its
commitment to high standards o quality and saety.
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29COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
The Group’s dry bulk shipping and other businesses
saw a 52.9% decrease in turnover to $66.8 million
in FY2011, rom $128.6 million the year beore. This
was due to lower charter rates, in tandem with a
lacklustre global shipping market. The dry bulk
shipping business contributed 1.6% o the Group’s
turnover during the year in review.
The Baltic Dry Index, a measure o shipping costs
or commodities, started the year at 1,698 points
and ended the year at 1,738 points, with the year’s
average being 1,548 points, which is a 43.8%
decrease rom the 2010 average BDI o 2,758
points. With current weak economic undamentals
worldwide, as well as the abundant global supply
o new carriers, any rebound may be short-lived or
moderate. In the same light, the global oversupply
o dry bulk carriers will likely pose challenges orour dry bulk shipping business. The Group will
nonetheless build on our strengths in this segment
as well as our other businesses to derive synergies
going orward.
The Baltic Dry Index, a measure of shipping costs for
commodities, started the year at 1,698 points and ended the
year at 1,738 points, with the year’s average being 1,548 points,
which is a 43.8% decrease from the 2010 average BDI of 2,758
points.
SHIPPING AGENCY
In May 2011, we completed the sale o 700,001
shares in Costar representing approximately 70% o
the issued share capital o Costar; and 1,400,000
shares in Coslink representing approximately 70% o
the issued share capital o Coslink, to Freightworld
Pte Ltd. This eectively represents our exit rom the
shipping agency business.
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30COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
Group FinancialReview
OVERVIEW
Group turnover increased by 7.8% in FY2011 to
$4.2 billion while net prot attributable to equity
holders o the Company decreased by 43.9% to
$139.7 million.
The increase in turnover was mainly due to higher
revenue contributions rom ship building and marine
engineering projects. The lower net prot attributable
to equity holders o the Company was mainly due to
lower prot contributions rom dry bulk shipping and
the higher costs incurred in shipyard operations.
TURNOVER
Turnover rom shipyard operations increased
10.1% to $4.1 billion in FY2011 due to higher
revenue contributions rom ship building and marine
engineering projects. The Group delivered 34
bulk carriers in FY2011. COSCO Dalian shipyard
delivered 14 bulk carriers, COSCO Zhoushan
shipyard delivered 12 bulk carriers while COSCO
Guangdong shipyard delivered 8 bulk carriers.
Also notably, COSCO Nantong shipyard delivered
2 windmill turbine installation vessels and 3 shuttle
tankers, while COSCO Dalian shipyard delivered 2
heavy lit vessels and COSCO Zhousan shipyard
delivered 2 car carriers in 2011.
Turnover rom dry bulk shipping and other businesses
decreased 52.9% to $66.8 million in FY2011 mainly
due to lower charter rates. The Baltic Dry Index(BDI), a measure o shipping costs or commodities,
started the year 2011 at 1,698 points and ended the
year at 1,738 points, with the year’s average being
1,548 points, which is a 43.8% decrease rom the
2010 average BDI o 2,758 points.
Shipyard business remained the biggest revenue
contributor, orming 98.4% o Group turnover in
FY2011. Dry bulk shipping and others accounted
or the remaining 1.6%.
PROFITABILITY
Gross prot decreased 20.0% rom $476.1 million
in FY2010 to $380.8 million in FY2011 mainly due
to lower dry bulk shipping income as a result o
lower BDI and higher operational costs in shipyard
business.
The higher shipyard operational costs included
expected losses o $150.4 million (FY2010: $64.8
million) on construction contracts which was mainly
due to the impact o higher costs o raw materials
and labor and, additionally, “learning curve” costs
or oshore marine engineering projects involving
new product types.
Other income comprised mainly gain rom the
sale o scrap materials, compensation received
rom customers, interest income, oreign currency
exchange gain and net air value gain on orward
currency contracts. Other income increased 22.6%
to $218.6 million in FY2011 mainly due to higher
interest income, an increase in currency exchange
gain and one-o net gain on disposal o subsidiaries.
Distribution costs rose 27.6% in line with new
orders secured and rising costs. The 26.0%
increase in administrative costs to $201.9 million
was mainly due to lower reversal o impairment
o trade and other receivables o $1.1 million in
2011 as compared to $31.2 million in 2010 and
allowance or inventory write-down. The allowanceor inventory write-down o $18.1 million in 2011
included an amount o $14.6 million due to the
continuation o work on a cancelled shipbuilding
contract or which construction o the vessel had
already been in progress (and or which the net
compensation received rom the customer o $15.2
million has been included in other income).
Interest expense increased by 10.9% to $46.7
million in 2011 is mainly due to additional bank
borrowings to und shipyard operations.
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31COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
The increase in income tax expense by 71.6% to
$74.2 million in 2011 was mainly due to lower tax
exempt shipping prots and deerred tax benet
recognized. Under the recently approved local
tax incentive scheme granted to some o the
subsidiaries o COSCO Shipyard Group Co., Ltd
(“CSG”), the concessionary tax rate was reduced to
15.0% rom 22.0%.
As a result o the above, net prot attributable to
equity holders o the Company decreased 43.9%
rom $248.8 million in FY2010 to $139.7 million in
FY2011.
BALANCE SHEET AND CASH FLOW
(31 December 2011 vs 31 December 2010)
Cash and cash equivalents increased rom $867.2
million to $1.6 billion mainly due to net cash
provided by more bank borrowings procured to
nance shipyard operating activities.
Trade and other receivables remained relatively
unchanged at $2.0 billion. Advances paid to
suppliers decreased marginally rom $858.8 million
to $804.8 million.
Property, plant and equipment increased by $204.1
million to $2.4 billion mainly due to the expansion in
shipyard acilities.
Trade and other payables decreased $447.2 million
to $2.7 billion mainly due to decrease in advances
received rom customers (rom $1.2 billion to $465.3
million), partially oset by increase in trade payables
and other accruals or operating expenses.
Total borrowings increased rom $992.2 million to
$2.2 billion due to additional unding procured or
business operations.
SHARE CAPITAL
COSCO’s share capital remained unchanged
at $270.6 million. There was no new issue and
allotment o shares under the COSCO Corporation
Employees’ Share Option Scheme 2002.
EqUITY
Equity rose by $102.6 million to $1.3 billion as at
31 December 2011 due to the transer o FY2011
prots to retained earnings, partially oset by the
payment o dividends in May 2011.
Return on Equity was 11.2%.
NET GEARING
Total bank borrowings increased rom $992.2 million
to $2.2 billion due to additional unding procured or
business operations. The Group had a net gearing
position o $581.1 million at the end o FY2011.
EARNINGS PER SHARE
On a ully diluted basis, earnings per share
decreased rom 11.1 cents in FY2010 to 6.2 cents
in FY2011.
DIVIDENDS PER SHARE
To reward shareholders or their loyalty, the Board
o Directors has proposed a rst and nal exempt
dividend o 3.0 cents. The dividend payout will
amount to $67.2 million (FY2010: $89.6 million)
while Dividend Cover was 2.1.
NET ASSET VALUE PER SHARE
In line with capacity and acility expansion, the
net asset value per share o COSCO Corporation
increased by 8.6% rom 53.5 cents per share at
31 December 2010 to 58.1 cents per share at 31
December 2011.
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CorporateGovernance
32COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
COSCO Corporation (Singapore) Limited (“COSCO Corporation” or “the Company”) and its subsidiaries (together, the“Group”) believes that good governance is acknowledged to be essential or the success o any organisation and is nowmore important than ever. The purpose o corporate governance is to acilitate eective, entrepreneurial and prudentmanagement that can deliver the long-term success o the Company.
At COSCO Corporation the Board o Directors, guided by the Singapore Code o Corporate Governance 2005 (the “Code2005”) issued by the Singapore Council on Corporate Disclosure and Governance, remains committed to the principles o good corporate governance and to achieving high standards o business integrity, ethics and proessionalism across all itsactivities. The Company has applied, and complied with, the principles and guidelines set out in the Code 2005.
A. BOARD MATTERS
THE BOARD’S CONDUCT OF AFFAIRS
Principle 1
Governance is overseen by the COSCO Corporation Board whilst management is delegated to the Group Presidentand Executive Directors. The Board oversees the business aairs o the Company and is collectively responsible or itssuccess. All directors make decisions objectively in the best interests o the Company and have exercise due diligence andindependent judgment in so doing.
The principal unctions o the Board apart rom its statutory responsibilities are to:
a) set values and standards o the Company and ensure that obligations to shareholders and others are understoodand met;
b) provide entrepreneurial leadership; approve the strategic and inancial objectives, corporate policies andauthorisation matrix o the Company;
c) oversee the processes or risk management, nancial reporting and compliance and evaluate the adequacy o internal controls; approve annual budget, key operational matters, major acquisition and divestment proposals,major unding proposals o the Company;
d) review management perormance;
e) approve the nominations to the Board and appointment o key management, as may be recommended by theNominating Committee; and
) assume responsibility or corporate governance ramework o the Company.
To acilitate eective management, certain unctions o the Board have been delegated to various Board committees,namely Audit, Nominating, Remuneration, Enterprise Risk Management and Strategic Development Committees.
The schedule o all Board, Board committee meetings or the next calendar year is planned in advance, in consultation withthe directors. During this nancial year, the Board held ve meetings and had on various occasions used circular resolutionsin writing to sanction certain decisions.
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33COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
Attendance at Board and Committees’ Meetings
Name
Board
Committee
Audit Nominating RemunerationEnterprise RiskManagement
StrategicDevelopment
Number o Meetings held:
5 7 1 2 3 1Number o Meetings Attended
Ma Ze Hua 1 NA NA NA NA NA NA
Liu Guo Yuan 2 4 NA NA NA NA 1
Wu Zi Heng 3 NA NA NA NA NA NA
Jiang Li Jun 4 5 NA 1 1 3 1
Liu Lian An 5 NA NA NA NA NA NA
Wang Hai Min 4 NA NA NA NA NA
Wang Yu Hang 6 2 NA NA NA NA NA
Ma Zhi Hong 3 NA NA NA NA NA
Ma Gui Chuan 7 4 NA NA NA NA NA
Wang Xing Ru 8 1 NA NA NA 0 NA
Tom Yee Lat Shing 5 7 1 2 3 1
Wang Kai Yuen 5 7 1 2 3 1
Er Kwong Wah 5 7 1 2 3 1
Ang Swee Tian 5 7 1 2 3 1
Li Jian Xiong 9
(Alternate to Liu Guo Yuan/ Ma Ze Hua) 5 NA NA NA NA NA
Lu Cheng Gang(Alternate to Wang Hai Min) 5 NA NA NA NA NA
Ye Bin Lin (Alternate toMa Zhi Hong) 5 NA NA NA 3 NA
Liu De Tian 10
(Alternate to Wang Xing Ru/ Wang Yu Hang) 3 NA NA NA 2 NA
Notes:1 Mr Ma Ze Hua was appointed as Chairman, Non-Independent and Non-Executive Director and a member o the Strategic Development Committee on
6 January 2012.2 Mr Liu Guo Yuan resigned as Chairman, Non-Independent and Non-Executive Director and a member o the Strategic Development Committee on 6
January 2012.3 Mr Wu Zi Heng was appointed as Executive Director on 5 November 2011 and assumed the position o Vice Chairman and President on 22 November
2011. He was also appointed as a member o the Remuneration Committee, Nominating Committee and Enterprise Risk Management Committee aswell as Chairman o the Strategic Development Committee o the Company on 22 November 2011.
4 Mr Jiang Li Jun relinquished his position as President and was re-designated rom Executive Director to Non-Executive Director on 22 November 2011.He also ceased to be a member o the Remuneration Committee, Nominating Committee, Enterprise Risk Management Committee and StrategicDevelopment Committee o the Company on 22 November 2011. Presently, he is a Non-Executive Director and Vice Chairman o the Company.
5 Mr Liu Lian An was appointed as Non-Independent Executive Director on 20 February 2012.6 Mr Wang Yu Hang was appointed as Non-Independent and Non-Executive Director on 14 July 2011. He was also appointed as a member o the
Enterprise Risk Management Committee on 2 November 2011.7
Mr Ma Gui Chuan resigned as Non-Independent Executive Director on 1 November 2011.8 Mr Wang Xing Ru resigned as Non-Independent and Non-Executive Director and ceased to be a member o the Enterprise Risk ManagementCommittee on 14 July 2011.
9 Mr Li Jian Xiong ceased to be Alternate Director o Mr Liu Guo Yuan on 6 January 2012 and was appointed to be Alternate Director o Mr Ma Ze Huaon 6 January 2012.
10 Mr Liu De Tian ceased to be Alternate Director o Mr Wang Xing Ru on 14 July 2011 and was appointed to be Alternate Director o Mr Wang Yu Hangon 14 July 2011.
NA - Not Applicable
The Company’s Articles o Association (the “Articles”) provides or Board meetings to be conducted by way o telephoneand video conerencing. The attendance o the Directors at meetings o the Board and Board committees or year 2011 aswell as number o such meetings is set out in the table below:
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CorporateGovernance
34COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
Whilst the Board has delegated the day to day management o the Group to the Group President and Executive Directors,there are matters reserved or the Board by which the Board oversees control o the Group’s aairs. Some o the mattersreserved or the Board’s approval are:
l the recommendations o the Strategic Development Committee;
l the Group’s long term objectives and commercial strategy;
l the making o any decision to cease to operate all or any material part o the business o the Group or to extend theGroup’s activities into new business;
l the consideration o any proposal to merge or amalgamate the Company with any other company;
l the approval o any acquisition o any investment, asset or business by the Company or any o its subsidiaries which
would involve the commencement o an activity o a substantially dierent nature or character to any activity romtime to time carried on by the Company or any o its subsidiaries;
l changes relating to the Group’s capital structure including changing the amount or currency o the Company’sauthorised share capital, reduction o capital, share issues (except under employee share options plan);
l the approval o and ensuring the maintenance o internal controls and risk management procedures or theCompany and its subsidiaries;
l approving the Company’s Audited Financial Statement and other appropriate statements or inclusion in theCompany’s Annual Report and the issue o the Annual Report;
l the issue and ling o statutory or regulatory statements, the quarterly, hal yearly and ull year reports;
l determining and approving any signicant change to the accounting policies or practices o the Company, and o the Company and its subsidiaries;
l the recommendation o the payment o any dividend by the Company or any exercise o the powers o the Board inrelation to reserves or capitalisation o prot;
l appointments or removals rom the Company’s Board o Directors (ollowing receipt o recommendations by theNominating Committee) and the appointment or removal o the Company Secretary;
l changes to the structure, size and composition o the Board, ollowing receipt o recommendations rom theNominating Committee;
l in the case o any confict o interest which the Board, ater being appropriately advised, considers to be material, asto whether such confict should be authorised and, i so, authorise such confict upon such terms and conditions asthe Board considers appropriate;
l determining the remuneration policy or senior executives o the Company (ollowing receipt o recommendations bythe Remuneration Committee);
l undertaking a review annually o its own perormance, that o its committees and the contribution by each directorto the eectiveness o the Board; and
l any matter required to be considered or approved by the Board as a matter o law or regulation.
BOARD COMPOSITION AND GUIDANCE
Principle 2
The Board has eleven (11) members: two (2) Executive Directors, ve (5) Non-Executive Directors and our (4) Non-Executive Independent Directors. The composition o the Board is as ollows and the Directors’ academic and proessionalqualications are set out on pages 52 to 55 o this Annual Report. No individual or group o individuals dominates theBoard’s decision-making. Collectively, the Non-Executive Directors and Non-Executive Independent Directors bring a widerange o experience and expertise as they all currently occupy or have occupied senior positions in industry and public lie,and as such, each contributes signicant weight to Board decisions. None o the non-executive independent directors hasany relationship with the Company, its related companies or its ocers that could interere, or be reasonably perceivedto interere, with the exercise o the director’s independent business judgment with a view to the best interests o the
Company.
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35COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
BOARD OF DIRECTORS
Ma Ze Hua Chairman and Non-Independent and Non-Executive Director
Wu Zi Heng Vice Chairman, President and Non-Independent Executive Director
Jiang Li Jun Vice Chairman and Non-Independent Non-Executive Director
Liu Lian An Non-Independent Executive Director
Wang Hai Min Non-Independent and Non-Executive Director
Wang Yu Hang Non-Independent and Non-Executive Director
Ma Zhi Hong Non-Independent and Non-Executive Director
Tom Yee Lat Shing Non-Executive Independent Director
Wang Kai Yuen Non-Executive Independent Director
Er Kwong Wah Non-Executive Independent Director
Ang Swee Tian Non-Executive Independent Director
Changes to the Board are as ollow:
l Mr Liu Lian An was appointed as Non-Independent Executive Director on 20 February 2012.
l Mr Liu Guo Yuan resigned as Chairman and Non-Independent and Non-Executive Director on 6 January 2012.
l Mr Ma Ze Hua was appointed as Chairman and Non-Independent and Non-Executive Director on 6 January 2012.
l Mr Wu Zi Heng was appointed as Executive Director on 5 November 2011 and assumed the position o ViceChairman and President on 22 November 2011.
l Mr Jiang Li Jun relinquished his position as President and was re-designated rom Executive Director to Non-Executive Director on 22 November 2011. Presently, he is a Non-Executive Director and Vice Chairman o theCompany
l Mr Ma Gui Chuan resigned as Non-Independent Executive Director on 1 November 2011.
l Mr Wang Yu Hang was appointed as Non-Independent and Non-Executive Director on 14 July 2011.
l Mr Wang Xing Ru resigned as Non-Independent and Non-Executive Director on 14 July 2011.
Our Board’s size is necessary to allow sucient Non-Executive Director and Non-Executive Independent Directorrepresentation to cover the breadth and complexity o the Group’s business activities and to sta our Board committees. Aboard o this size allows orderly succession planning or key roles.
The current size o the Board is appropriate and will acilitate eective decision making. The Board will continue to reviewthe size o the Board on an ongoing basis. As a team, the Board collectively provides core competencies in the areas o accounting, nance, business and management experience, as well as industry knowledge.
Directors are provided with regular updates on relevant new laws and regulations, and evolving commercial risks andbusiness conditions rom the Company’s relevant advisors. Newly appointed directors are provided with backgroundinormation about the Company and the Group. Annual visits are arranged or Non-Executive Directors to acquaint themwith important operations overseas.
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CorporateGovernance
36COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
STRATEGIC DEVELOPMENT COMMITTEE
The Strategic Development Committee (“SDC”) comprises six (6) Directors; the majority is independent non-executivedirectors. The SDC members are:
Wu Zi Heng 1 (Chairman)(Non-Independent Executive)
Ma Ze Hua 2 (Non-Independent Non- Executive)
Tom Yee Lat Shing (Non-Executive Independent)
Wang Kai Yuen (Non-Executive Independent)
Er Kwong Wah (Non-Executive Independent)
Ang Swee Tian (Non-Executive Independent)
Notes:
1 Mr Wu Zi Heng was appointed as Chairman o SDC on 22 November 2011.2 Mr Ma Ze Hua was appointed as member o SDC on 6 January 2012.
The SDC assists the Board in ullling its responsibilities or developing, evaluating and monitoring the Company’s longand short-term strategic goals. The SDC operates at the Board level but shall not assume the Board’s governanceaccountability or to make nal strategic decisions. The SDC acts solely to address and develop current and uture strategy-related issues. The SDC has the responsibility or creating and driving the Company’s strategy development and planningand Management takes responsibility or implementing the Company’s strategy(ies) ater the SDC received approval romthe Board.
The SDC have the ollowing authority and responsibilities:
a) Review and develop Company Strategy(ies): Meet with Management periodically to review, develop and evaluate theCompany’s evaluation and implementation o its business strategy;
b) Provide Resource Support: Support the Board or Management in the evaluation and/or rening o the Company’sstrategic plans;
c) Assess Progress: Review and assess the status o implementation o the Company’s business strategy and whetherthe results are consistent with the goals o the strategic plan as adopted by the Board; and
d) Recommend Improvements: Recommend areas o improvement and provide eedback to the Board andManagement regarding the overall success o the business strategy.
The SDC met once in the nancial year o 2011.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Principle 3
The roles o Chairman and the President are undertaken by separate persons so as to create a clear division o responsibilities and maintain an eective oversight. The Chairman and the President are not related to each other.
The Chairman is responsible or the workings o the Board, ensuring the integrity and eectiveness o its governanceprocess. In his absence, his appointed alternate would act on his behal.
The President is the most senior executive in the Company and has ull executive responsibilit ies over the businessdirections and operational decisions o the Group. He works closely with the Board to implement the policies set by the
Board to realise the Group’s vision.
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37COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
BOARD MEMBERSHIP
Principle 4
Recommendations or nominations o new directors and retirement o directors are made by the Nominating Committeeand considered by the Board as a whole.
The Nominating Committee (“NC”) reviews and assesses candidates or directorship beore making recommendations tothe Board. The NC takes into consideration the skills and experience required and the existing composition o the Boardand strives to ensure that the Board has an appropriate balance o independent directors as well as directors with the rightprole o expertise, skills, attributes and abilities when recommending new directors to the Board.
The process or the appointment o new directors begins with the NC, together with the Chairman and Vice Chairman o the Company, conducting a needs analysis and identiying the critical requirement in terms o expertise and skills that areneeded in the context o the strengths and weaknesses o the existing Board. When a candidate has been endorsed by theNC, the NC will then make a recommendation to the Board or the approval o his appointment.
The NC assesses and recommends to the Board whether retiring directors are suitable or re-nomination or re-election. Inevaluating a director’s contribution and perormance or the purpose o re-nomination, the NC takes into consideration avariety o actors such as attendance, preparedness, participation and candour.
In accordance with the provisions o the Articles, one-third o the Directors retire by rotation and subjects themselves to re-election at every Annual General Meeting (“AGM”) o the Company. New directors who were appointed by the Board duringthe year will hold oce only until the next AGM and will be eligible or re-election.
The dates o initial appointment and last re-election/re-appointment o each o the Directors o the current Board are set outbelow:
Director PositionDate of Initial Appointment
Date of LastReelection
Ma Ze Hua Chairman, Non-Independent and Non-Executive 6.1.2012 n.a.
Wu Zi Heng Vice Chairman, President and Non-Independent Executive 5.11.2011 n.a.
Jiang Li Jun Vice Chairman and Non-Independent Non-Executive 7.8.2008 20.4.2009
Liu Lian An Non-Independent and Executive 20.2.2012 n.a.
Wang Hai Min Non-Independent and Non-Executive 2.8.2010 20.4.2011
Wang Yu Hang Non-Independent and Non-Executive 14. 7.2011 n.a.
Ma Zhi Hong Non-Independent and Non-Executive 2.8.2010 20.4.2011
Tom Yee Lat Shing Non-Executive Independent 16.11.1993 20.4.2011
Wang Kai Yuen Non-Executive Independent 2.5.2001 20.4.2011
Er Kwong Wah Non-Executive Independent 20.12.2002 20.4.2010
Ang Swee Tian Non-Executive Independent 13.11.2007 20.4.2010
Lu Cheng Gang Alternate to Wang Hai Min 2.8.2010 n.a.
Ye Bin Lin Alternate to Ma Zhi Hong 2.8.2010 n.a.
Liu De Tian Alternate to Wang Yu Hang 14.7.2011 n.a.
Li Jian Xiong Alternate to Ma Ze Hua 6.1.2012 n.a.
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CorporateGovernance
38COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
NOMINATING COMMITTEE
The NC comprises ve Directors, majority o whom, including the Chairman is independent. The NC members are:
Wang Kai Yuen (Chairman) (Non-Executive Independent)
Wu Zi Heng * (Non-Independent Executive)
Tom Yee Lat Shing (Non-Executive Independent)
Er Kwong Wah (Non-Executive Independent)
Ang Swee Tian (Non-Executive Independent) Note:
* Mr Wu Zi Heng was appointed as Member o NC on 22 November 2011.
The principal unctions o the NC are to:
a) identiy, review and recommend candidates or appointment as Directors o the Company and appointment to theBoard committees as well as to senior management positions in the Company;
b) evaluate the eectiveness o the Board as a whole and assess the contribution by each Director, to the eectivenesso the Board;
c) determine annually whether or not a Director is independent; and
d) make recommendations to the Board on re-appointment o Board and Board committee members.
During the nancial year, the NC held one meeting and had on various occasions used circular resolutions in writingto resolve certain decisions which are then recommended to the Board. The NC had reviewed the nominations or theappointments o those directors that were appointed during the nancial year or recommendation to the Board to approvethe appointments. In arriving at their decisions on the new appointments, the NC took into consideration the incumbents’academic qualications, experience, their individual eld o expertise and their potential contributions to the eectiveness o the Board. The NC also met and determined the independence o the Directors is in line with the undertakings describedin the Code 2005. It also reviewed the composition o the Board and the Board Committees in relation to the needs o theGroup.
The NC is o the opinion that the Board is able to exercise objective judgment on corporate aairs independently and noindividual or small group o individuals dominates the Board’s decision making process.
The NC assesses and recommends to the Board whether retiring Directors are suitable or re-election. The NC considers
that the multiple board representations held presently by some Directors do not impede their respective perormance incarrying out their duties to the Company.
Tom Yee Lat Shing, who is over the age o 70 years, will have to retire at the orthcoming Annual General Meeting pursuantto Section 153 (6) o the Companies Act, Cap. 50. The assessment o Tom Yee Lat Shing’s reappointment and hisindependence were given particular consideration by the NC as he has now served on the Board or more than 18 years. The NC believes that due to his strength o character, experience and knowledge, Tom Yee Lat Shing continues to behighly eective as an independent non-executive director. He provides objective and rigorous challenges to, and engages inconstructive debate with, the board and the committees on which he sits. Tom Yee Lat Shing also brings a wealth o useuland relevant experience both in his position as an independent non-executive director and as the Chairman o the AuditCommittee.
Accordingly, the NC has recommended and the Board has endorsed the re-appointment o Tom Yee Lat Shing byshareholders at the annual general meeting.
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39COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
BOARD PERFORMANCE
Principle 5
A ormal assessment process is in place to assess the eectiveness o the Board as a whole and the contribution by eachDirector to the eectiveness o the Board. The NC uses objective and appropriate quantitative and qualitative criteria toassess the perormance o the Board as a whole and the contribution o each Director to the eectiveness o the Board. Assessment parameters include evaluation o the Board’s access to inormation, risk management, accountability, theBoard’s perormance in relation to discharging its principal unctions, communication with management and stakeholders,the business perormance o the Company, the quality o Board processes, the attendance records o the Directors atBoard and Committee meetings and the level o participation at such meetings.
The evaluation o the Board is conducted annually. As part o the process, the Directors will complete appraisal orms whichare collated by the Company Secretary. The Company Secretary will then review the results o the appraisal and present theresults to the Chairman o the NC who will then present a report to the Board.
An individual assessment o each Director is also undertaken annually. The process o the assessment is through sel-assessment where each Director will complete appraisal orms which are collated by the Company Secretary. TheCompany Secretary consolidates the appraisal orms and presents the results to the Chairman o the NC who will thenpresent a report to the Board.
ACCESS TO INFORMATION
Principle 6
The Board is provided with relevant management inormation regularly to help them carry out their responsibilities eectively.In addition, all relevant inormation 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 o the Company Secretary. TheCompany Secretary attends Board and most o the Board committees meetings and is responsible or ensuring that Boardprocedures are ollowed. With the assistance o the management sta o the Company, the Company Secretary is alsoresponsible or compliance with the SGX-ST Listing Manual and all other applicable rules and regulations. The appointmentand the removal o the Company Secretary are subject to the Board’s approval.
All Board members also have separate and independent access to the senior management o the Company and the Group.
Board members are aware that they, whether as a group or individually, in the urtherance o their duties, can takeindependent proessional advice, i necessary, at the Company’s expense.
B. REMUNERATION MATTERS
PROCEDURES FOR DEVELOPING REMUNERATION POLICIES
Principle 7
The Remuneration Committee (“RC”) meets to discuss the perormance assessment o the Executive Directors as well as todiscuss the level o emoluments to pay.
The recommendations or approval o the remuneration o the Executive Directors are orwarded to the Board. The RC alsoreviews and approves the remuneration o senior management.
Directors’ ees are recommended by the RC and are submitted or endorsement by the Board. Directors’ ees aresubjected to approval by shareholders at the AGM.
All the members o the RC are Non-Executive, Independent Directors except or Mr Wu Zi Heng, the Vice Chairman andPresident.
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CorporateGovernance
40COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
LEVEL AND MIX OF REMUNERATION
Principle 8
In reviewing the remuneration packages o the Executive Directors, the RC takes into account the respective perormanceo the Group and the individual. In its deliberation, the RC takes into consideration, remuneration packages andemployment conditions within the industry and benchmarked against comparable companies.
Non-Executive Independent Directors are paid a basic ee and an additional ee or serving on any o the committees. TheChairman o each o these committees is compensated or his additional responsibilities. Such ees are approved by theshareholders o the Company as a lump sum payment at the AGM o the Company.
REMUNERATION COMMITTEE
The RC comprises ve Directors, majority o whom including the Chairman is independent. The RC members are asollows:
Er Kwong Wah (Chairman) (Non-Executive Independent)
Wu Zi Heng * (Non-Independent Executive)
Tom Yee Lat Shing (Non-Executive Independent)
Wang Kai Yuen (Non-Executive Independent)
Ang Swee Tian (Non-Executive Independent)
Note:
* Mr Wu Zi Heng was appointed as member o RC on 22 November 2011.
The principal unctions o the RC are to:
a) recommend to the Board base salary level, benets and incentive programmes, and identiy components o salarywhich can best be used to ocus management sta on achieving corporate objectives;
b) approve the structure o compensation programme (including but not limited to Directors’ ees, salaries, allowances,bonuses, options and benets in kind) or the Directors and senior management to ensure that the programmeis competitive and sucient to attract, retain and motivate senior management o the required quality to run theCompany successully;
c) review, on annual basis, the compensation package o the Company’s Directors and senior management personneland determine appropriate adjustments; and
d) administer the COSCO Group Employees’ Share Option Scheme 2002.
The Company currently adopts a remuneration policy or sta consisting o a xed component and a variable component. The xed component is in the orm o a base/ xed salary. The variable component is in the orm o a variable bonus that islinked to the Company and individual perormance. Another element o the variable component is the grant o share optionsunder the COSCO Group Employees’ Share Option Scheme 2002.
Inormation on the COSCO Group Employees’ Share Option Scheme 2002 such as size o grants, exercise price o optionsthat were granted as well as outstanding and vesting period o options are set out on pages 72 to 74 o the Annual Report.
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41COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
During the nancial year, the RC held two meetings. The issues deliberated at the meeting and through the circularresolutions in writing included reviewing the termination o options granted, extension o exercise period o options granted,the bonus payments to senior management and the compensation programme or the Directors and senior management.
DISCLOSURE ON REMUNERATION
Principle 9
DIRECTORS’ AND KEY EXECUTIVES’ REMUNERATION
The Directors’ and key executives’ remuneration table or the nancial year ended 31 December 2011 is as ollows:
Fees Salary BonusOther
Benefits Total
Non-Independent Non-Executive Directors in the Band o S$750,000 to S$1,000,000
Jiang Li Jun 0% 28% 57% 15% 100%
Liu De Tian * 0% 18% 74% 8% 100%
Non-Independent Executive Director in the Band o S$500,000 to S$750,000
Ma Gui Chuan 0% 33% 48% 19% 100%
Non-Independent Executive Director in the Band o below S$500,000
Wu Zi Heng 0% 65% 18% 17% 100%
Non-Independent Non-Executive Directors in the Band o below S$500,000
Lu Cheng Gang 0% 0% 100% 0% 100%
Wang Yu Hang * 0% 33% 65% 2% 100%
Wang Xing Ru * 0% 33% 65% 2% 100%
Ma Zhi Hong 0% 33% 65% 2% 100%
Independent Directors in the Band o below S$500,000
Tom Yee Lat Shing 100% 0% 0% 0% 100%
Wang Kai Yuen 100% 0% 0% 0% 100%
Er Kwong Wah 100% 0% 0% 0% 100%
Ang Swee Tian 100% 0% 0% 0% 100%
Executives in the Band o S$500,000 to S$750,000
Ye Bin Lin 0% 33% 49% 18% 100%
Li Jian Xiong 0% 33% 50% 17% 100%
Executive in the Band o below S$500,000
Wong Meng Yun 0% 39% 53% 8% 100%
Note:
* The salary, bonus and other benets o the incumbent directors are paid by the subsidiaries.
No employee o the Company and its subsidiary companies was an immediate amily member o a Director and whoseremuneration exceeded S$150,000 during the nancial year ended 31 December 2011.
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CorporateGovernance
42COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
EXECUTIVES’ REMUNERATION
The Company adopts a remuneration strategy that supports a pay-or-perormance philosophy. Executives participate in anannual perormance review process that assesses the individual’s perormance and contributions.
The remuneration structure or the Group President and other key executives consists o the ollowing components:
SALARY
Fixed pay comprises basic salary and the Company’s contribution towards the Singapore Central Provident Fund whereapplicable.
BONUS
Bonus is paid based on the Company’s and individual’s perormance.
OTHER BENEFITS
Other benets comprise o usage o Company’s car and other benets-in-kind.
STOCK OPTION
Share options are granted to align sta’s interests with that o shareholders’. These options are granted with reerence tothe desired remuneration structure target and valued based on the Binomial Valuation Model. Details o the share optionscheme can be ound in the “Directors’ Report” section o the Annual Report.
C. ACCOUNTABILITY AND AUDIT ACCOUNTABILITY
ACCOUNTABILITY
Principle 10
The Board has overall responsibility to shareholders or ensuring that the Group is well managed and guided by itsstrategic objectives. In presenting the Group’s annual and quarterly nancial results to shareholders, the Board aims toprovide shareholders with a balanced and understandable assessment o the Group’s perormance, position and prospects.Management provides the Board with management accounts and other nancial statements on a quarterly basis.
AUDIT COMMITTEE
Principle 11
The Audit Committee (“AC”) comprises the ollowing:
Tom Yee Lat Shing (Chairman) (Non-Executive Independent)
Wang Kai Yuen (Non-Executive Independent)
Er Kwong Wah (Non-Executive Independent)
Ang Swee Tian (Non-Executive Independent)
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43COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
The AC perorms the ollowing unctions:
a) reviews with the external auditors, their audit plan, evaluation o the accounting controls, audit reports and anymatters which the external auditors wish to discuss;
b) reviews with the internal auditors, their audit plan, the adequacy o the internal audit procedures and their evaluationo the eectiveness o the overall internal control systems, including nancial, operational and compliance controlsand risk management;
c) reviews the quarterly and annual nancial statements, including announcements to shareholders and the SGX-STprior to submission to the Board so as to ensure the integrity o the Company’s nancial statements;
d) reviews any signicant ndings and recommendations o the external and internal auditors and related managementresponse and assistance given by the management to auditors;
e) reviews interested person transactions to ensure that internal control procedures approved by the shareholders areadhered to; and
) conducts annual review o the independence and objectivity o the external auditors, including the volume o non-audit services provided by the external auditors, to satisy itsel that the nature and extent o such services will notprejudice the independence and objectivity o the external auditors beore conrming their re-nomination.
The AC and the Board o Directors, with the assistance o internal and external auditors, reviews the eectiveness o thekey internal controls, including nancial, operational and compliance controls, and risk management on an on-going basis. There are ormal procedures in place or both the internal and external auditors to report independently their ndings and
recommendations to the AC.
The Company complies with Rules 712 and 715 o the Listing Manual o the Singapore Exchange Securities TradingLimited in relation to auditing rms.
The AC has ull access to, and cooperation rom the Management including internal and external auditors, and has ulldiscretion to invite any Director or executive ocer to attend its meetings. The AC has also expressed power to investigateany matter brought to its attention, within its terms o reerence, with the power to retain proessional advice at theCompany’s expense.
The Group recognises the importance o the internal audit unction which, being independent o Management is one o theprincipal means by which the AC is able to carry out its responsibilities eectively. The Company has its own Internal Auditunction in addition to having Messrs Deloitte & Touche Enterprise Risk Services Pte. Ltd. as the internal auditors o theGroup.
The internal auditors plan their internal audit schedules in consultation with Management and submit their respective plansto the AC or approval. The Internal Auditors report directly to the AC.
The AC conducts regular meetings scheduled on a quarterly basis. Apart rom the quarterly meetings, the AC meets withthe external and internal auditors, without the presence o the management at least once a year. Ad-hoc meetings may becarried out rom time to time, as circumstances require. The AC held seven meetings during the nancial year.
The AC, having reviewed the non-audit services provided by the external auditors, PricewaterhouseCoopers LLP, tothe Group, is satised with the independence and objectivity o the external auditors and recommends to the Board o Directors, the nomination o the external auditors or re-appointment.
The amount o ees paid to auditors, or audit and non-audit services, or the nancial year ended 31 December 2011, isS$1,300,000 and S$300,000 respectively.
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CorporateGovernance
44COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
Whistleblowing Policy
The Company has in place a whistle-blowing policy and arrangements by which sta may, in condence, raise concernsabout possible corporate improprieties in matters o inancial reporting or other matters. To ensure independentinvestigation o such matters and or appropriate ollow-up action, all whistle-blowing reports are to be sent to the internalaudit unction. The Chairman o the AC and the Vice Chairman o the Board will be inormed immediately o all whistle-blowing reports received. Details o the whistle-blowing policy and arrangements are given to all sta or their easyreerence. New sta is brieed on these during the orientation programme.
INTERNAL CONTROLS
Principle 12
The Group maintains a robust and eective system o internal controls, addressing nancial, operational and compliancerisks, or all companies within the Group, but recognises that no internal control system will preclude all errors andirregularities. The system is designed to manage rather than to eliminate the risk o ailure to achieve business objectives. The controls are to provide reasonable, but not absolute, assurance to saeguard shareholders’ investments and theGroup’s assets.
The Group’s key internal controls include:
l establishment o risk management policies and systems;
l establishments o policies and approval limits or key nancial and operational matters, and issues reserved or theBoard;
l
documents o key processes and procedures;l segregation o incompatible unctions which give rise to a risk o errors or irregularities not being promptly detected;
maintenance o proper accounting records;
l saeguarding o assets;
l ensuring compliance with appropriate legislation and regulations; and
l engaging qualied and experience persons to take charge o important unctions.
Operational risk management measures implemented by the Group include the implementation o saety, security andinternal control measures and taking up appropriate insurance coverage.
Details o the Group’s nancial risk management measures are outlined on pages 135 to 144 in the Notes to the FinancialStatements.
Based on the work perormed by the internal and external auditors, the Board with the concurrence o AC and EnterpriseRisk Management Committee, are o the view that Company’s ramework o internal controls in relation to the nancial,operational and compliance risks is adequate to provide reasonable assurance o the integrity and eectiveness o theCompany in saeguarding its assets and shareholders’ value. This ramework serves to provide reasonable assuranceagainst material misrepresentation or loss.
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45COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
ENTERPRISE RISK MANAGEMENT COMMITTEE
The Enterprise Risk Management Committee (“ERMC”) comprises eight members, the majority is Directors and theChairman is independent. The ERMC members are:
Ang Swee Tian (Chairman) (Non-Executive Independent)
Wu Zi Heng 1 (Non-Independent Executive)
Wang Yu Hang 2 (Managing Director o COSCO Shipyard Group Co., Ltd)
Tom Yee Lat Shing (Non-Executive Independent)
Wang Kai Yuen (Non-Executive Independent)
Er Kwong Wah (Non-Executive Independent) Ye Bin Lin (Chie Financial Ocer)
Liu De Tian (Managing Director o COSCO (Singapore) Pte Ltd)
Notes: -
1 Mr Wu Zi Heng was appointed as a member o the ERMC on 22 November 2011.2 Mr Wang Yu Hang was appointed as a member o the ERMC on 2 November 2011.
The ERMC assists the Board in ullling its oversight responsibilities on risk management. The responsibilities o the ERMCwould include the ollowing:
l reviews the overall risk management system and process and makes recommendations on changes as and whenconsidered appropriate;
l reviews the Group’s risk policies, guidelines and limits; and
l reviews periodically the Group’s material risk exposures and evaluates the adequacy and eectiveness o themitigating measures implemented by management.
The ERMC has delegated the day-to-day management o risk within the Group to the Risk Management Committee(“RMC”) o each o its operating subsidiaries. The RMC o each o the subsidiaries comprises senior management sta o each division within the operating subsidiaries.
The ERMC held three meetings during the year at which discussions were held on the existing risk management structure,the key risk exposures o the Group and the action plan to mitigate such risks.
COSCO Shipyard Group continues to have a comprehensive strategic agreement with a leading Chinese insuranceinstitution to strengthen its risk management system and to enhance its operational structure. The said insurance institution
has established a team to provide the Group with dierent acades o insurance or domestic and international trades;setting up a standardised claims and liabilities system; the evaluation o ship owners’ credit ratings, the tracking o shipowners’ risk; and the evaluation o countries’ credit ratings. The Company believes all these eorts are to help the Group tomove towards the establishment o an all-encompassing risk management system.
INTERNAL AUDIT
Principle 13 The internal audit unction’s primary line o reporting is to the Chairman o the AC. Internal Audit is an independent unctionwithin the Company. Internal Auditors report directly to the AC and administratively to the President. The Company hasalso appointed Messrs. Deloitte & Touche Enterprise Risk Services Pte. Ltd. as the internal auditors o the Group. Basedon its review, the AC believes that the internal auditors, are independent and have the appropriate standing to perorm theirunctions eectively and objectively.
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CorporateGovernance
46COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
D. COMMUNICATION WITH SHAREHOLDERS
REGULAR, EFFECTIVE AND FAIR COMMUNICATION
Principle 14
COSCO Corporation strives or timeliness and transparency in its disclosures to the shareholders and the public. Allinormation on the Company’s new initiatives will be rst disseminated via SGXNet ollowed by a news release, whereappropriate. The Company currently holds media and analyst briengs upon the release o its quarterly nancial results.Management regularly receives visiting und managers to provide them an insight to the Company’s business anddevelopments, as well as to better understand and address their concerns. In addition to the media and analyst briengs,
the Company has taken part in various road shows.
The Company does not practise selective disclosure. Price-sensitive inormation is rst publicly released via SGXNet, eitherbeore the Company meets with any group o investors or analysts or simultaneously with such meetings. Results andannual reports are announced or issued within the period prescribed by the SGX-ST.
GREATER SHAREHOLDER PARTICIPATION
Principle 15
COSCO Corporation encourages shareholders to participate actively in general meetings. At general meetings o theCompany, shareholders are given the opportunity to express their views and ask questions regarding the Company and theGroup.
The Company’s Articles o Association allow a shareholder entitled to attend and vote to appoint a proxy who need not bea shareholder o the Company to attend and vote at the meetings.
The Board members and chairpersons o the Audit, Nominating, Remuneration, Enterprise Risk Management and StrategicDevelopment Committees are present and available to address shareholders’ questions at general meetings. The externalauditors are also present to address shareholders’ queries relating to the conduct o the audit and the preparation o theauditor’s report.
E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY
The Company has adopted an internal policy in respect o any transactions with interested persons and has set out theprocedures or review and approval o 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 satised that the review procedures or IPTs and thereviews to be made periodically by the AC in relation thereto are adequate to ensure that the IPTs will be transacted onnormal terms and will not be prejudicial to the interests o the Company and its minority shareholders.
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47COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
Name of interested person
Aggregate valueof all interested
person transactionduring the financial
period under review excludingtransactions lessthan $100,000 and
transactionsconducted under
shareholders’mandate pursuant to
Rule 920
Aggregate value of all
interested persontransactions
conducted under shareholders’
mandate pursuantto Rule 920excluding
transactions lessthan $100,000
S$’000 S$’000
Between Subsidiaries and:
Chimbusco Dalian Branch – 11,767Chimbusco Guangzhou Branch – 6,395Chimbusco Lianyungang Branch – 1,258
Chimbusco Shipping Co., Ltd – 198Chimbusco Zhoushan Branch – 12,022
Cosco (HK) Investment & Development Co., Ltd – 117Cosco (HK) Shipping Co., Ltd – 4,571Cosco Bulk Carrier Co., Ltd – 6,967Cosco Container Lines Co., Ltd – 6,370
Cosco Finance Co., Ltd – 914,981Cosco International Ship Trading Co., Ltd – 957Cosco International Trade Ltd – 356
Cosco Jiangsu International Freight Co., Ltd – 899Cosco Logistics (Nantong) – 454
Cosco Nantong Steel Co., Ltd 2,712 8,541Cosco Petroleum Pte Ltd – 403Cosco Shanghai Ship Management Co., Ltd – 7,483
Cosco Shipping Co., Ltd – 210
Dalian Ocean Shipping Company – 204Guangzhou Ocean Shipping Company – 6,502
Lianyungang Ocean Shipping Company – 1,750Nantong Chimbusco Marine Bunker – 3,592Nantong Cosco Khi Ship Engineering Co., Ltd – 529
Nantong Cosco Ship Equipment Company – 5,903Nantong Yuantong Container Warehouse and Transportation Co., Ltd – 232Qingdao Manning Co-operation Ltd – 2,572
Qingdao Ocean Shipping Company – 538Shanghai Ocean Crew Co., Ltd – 4,685Shanghai Ocean Industrial Corporation – 2,160
Shanghai Pan-Asia Shipping Company – 542
Shenzhen Ocean Shipping Company – 440 Tosco Keymax International Ship Management Co., Ltd – 194
Total 2,712 1,013,792
E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY (continued)
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48COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY (continued)
As at31/12/2011
As at31/12/2010
S$’000 S$’000
Balances placed with a ellow subsidiary, Cosco Finance Co., Ltd :
- Cash at bank 409,222 85,045
- Short-term bank deposits 765,759 388,500
1,174,981 473,545
F. DEALING IN SECURITIES
In line with Chapter 12 Rule 1207(19) o the Listing Manual o SGX-ST on dealings in securities, the Company has adoptedan internal compliance code which mirrors substantially the provisions o the said rule to provide guidance to its Directorsand ocers in relation to dealings in its securities.
The Company’s Code prohibits securities dealings by the Directors and employees while in possession o price-sensitiveinormation. The Company issues regular circulars to its Directors, principal ocers and relevant ocers who have accessto unpublished material price-sensitive inormation to remind them o the aorementioned prohibition and to remind themo the requirement to report their dealings in shares o the Company. The Directors and employees are also prohibitedrom dealing in the securities o the Company during the period commencing two weeks beore the announcement o
nancial results o the Company or each o the rst, second and third quarters o its nancial year or one month beore theannouncement o the Company’s ull year nancial statements.
CorporateGovernance
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49COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
CorporateInformation
BOARD OF DIRECTORSMa Ze Hua Chairman and Non-Independent
Non-Executive Director( Appointed on 6 January 2012)
Wu Zi Heng* Vice Chairman, President andNon-Independent Executive Director
Jiang Li Jun** Vice Chairman and Non-IndependentNon-Executive Director
Liu Lian An Non-Independent Executive Director( Appointed on 20 February 2012)
Wang Hai Min Non-Independent Non-Executive DirectorWang Yu Hang Non-Independent Non-Executive Director
( Appointed on 14 July 2011)Ma Zhi Hong Non-Independent Non-Executive Director Tom Yee Lat Shing Non-Executive Independent DirectorWang Kai Yuen Non-Executive Independent DirectorEr Kwong Wah Non-Executive Independent Director Ang Swee Tian Non-Executive Independent Director
Notes:
* Wu Zi Heng was appointed as Executive Director on 5 November
2011 and assumed the position o Vice Chairman and President
on 22 November 2011.
** Jiang Li Jun relinquished his position as President and was re-
designated rom Executive Director to Non-Executive Director on
22 November 2011.
ALTERNATE DIRECTORSLi Jian Xiong Alternate to Ma Ze Hua( Appointed on 6 January 2012)
Lu Cheng Gang Alternate to Wang Hai MinLiu De Tian Alternate to Wang Yu Hang
( Appointed on 14 July 2011) Ye Bin Lin Alternate to Ma Zhi Hong
Wang Xing Ru (Resigned on 14 July 2011)Ma Gui Chuan (Resigned on 1 November 2011)Liu Guo Yuan (Resigned on 6 January 2012)
AUDIT COMMITTEE Tom Yee Lat Shing Chairman
Wang Kai Yuen
Er Kwong Wah Ang Swee Tian
REMUNERATION COMMITTEEEr Kwong Wah Chairman
Wu Zi Heng ( Appointed on 22 November 2011) Tom Yee Lat ShingWang Kai Yuen Ang Swee Tian
NOMINATING COMMITTEEWang Kai Yuen Chairman
Wu Zi Heng ( Appointed on 22 November 2011) Tom Yee Lat ShingEr Kwong Wah
Ang Swee Tian
ENTERPRISE RISK MANAGEMENT COMMITTEE Ang Swee Tian Chairman
Wu Zi Heng ( Appointed on 22 November 2011) Tom Yee Lat ShingWang Kai YuenEr Kwong WahWang Yu Hang ( Appointed on 2 November 2011) Ye Bin LinLiu De Tian
STRATEGIC DEVELOPMENT COMMITTEEWu Zi Heng Chairman
( Appointed on 22 November 2011)Ma Ze Hua ( Appointed on 6 January 2012) Tom Yee Lat ShingWang Kai YuenEr Kwong Wah Ang Swee Tian
REGISTERED OFFICE AND BUSINESS CONTACTINFORMATION9 Temasek Boulevard#07-00 Suntec Tower TwoSingapore 038989 Telephone: 6885 0888Fascimile: 6336 9006Website: www.cosco.com.sg
COMPANY REGISTRATION NUMBER 196100159G
AUDITORSPricewaterhouseCoopers LLP8 Cross Street #17-00PWC BuildingSingapore 048424Partner-in-charge: Tham Tuck Seng (since FY2007)
COMPANY SECRETARIES Teo Meng KeongLow Siew Tian
SHARE REGISTRAR AND SHARE TRANSFER OFFICE Tricor Barbinder Share Registration Services(A division o Tricor Singapore Pte Ltd)80 Robinson Road#02-00Singapore 068898 Telephone: 6236 3333Facsimile: 6236 4399
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50COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
WANG HAI MINNon-Independent andNon-Executive Director
BOARD OFDIRECTORS
MA ZE HUA Chairman, Non-Independentand Non-Executive Director
WU ZI HENG Vice Chairman, Presidentand Non-IndependentExecutive Director
JIANG LI JUN Vice Chairman andNon-Independent andNon-Executive Director
LIU LIAN ANNon-IndependentExecutive Director
WANG YU HANGNon-Independent andNon-Executive Director
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51COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
ER KWONG WAHNon-Executive IndependentDirector
TOM YEE LAT SHINGNon-Executive IndependentDirector
ANG SWEE TIANNon-Executive IndependentDirector
WANG KAI YUENNon-Executive IndependentDirector
MA ZHI HONGNon-Independent andNon-Executive Director
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52COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1BOARD OF DIRECTORS
MR MA ZE HUA
Chairman and Non-Independent Non-Executive
Director
Mr Ma Ze Hua was appointed as the Chairman,
Non-Independent and Non-Executive Director o
the Company in place o Mr Liu Guo Yuan with
eect rom 6 January 2012.
Mr Ma was born in January 1953. He started his
career with China Ocean Shipping Company in July
1977.
Mr Ma had held various senior positions throughout
his career, including General Manager o Shipping
Division with China Ocean Shipping Company,
President o COSCO (UK) Ltd., General Manager o
the Development Division and Assistant President o
China Ocean Shipping (Group) Company, President
o COSCO America Inc., Deputy General Managero COSCO Guangzhou, General Manager and
Secretary o Party Committee o COSCO Qingdao,
Executive Vice President o China Ocean Shipping
(Group) Company, Executive Vice President and
Secretary o Party Committee o China Shipping
(Group) Company.
In August 2011, Mr Ma became the Director,
President and Deputy Secretary o Party Committee
o China Ocean Shipping (Group) Company and
Executive Director and Vice Chairman o ChinaCOSCO Holdings Company Ltd.
Mr Ma has extensive experiences in managing
shipping companies both at China and abroad.
Mr Ma graduated rom Shanghai Maritime University
with a Master’s degree in ocean shipping and
international law. He is also a qualied senior
economist.
CAPTAIN WU ZI HENG
Vice Chairman, President and Non-Independent
Executive Director
Captain Wu Zi Heng was appointed Vice Chairman,
President and Non-Independent Executive Director
o the Company in November 2011.
Born in October 1956, Captain Wu started his
proessional career in July 1975. He graduated
rom Dalian Maritime University with a master’s
degree and is a senior engineer. From September
1978 to August 1982, Captain Wu studied marine
navigation in Dalian Maritime University. He is also
the Vice Chairman o China Institute o Navigation
and an expert on work saety, as accredited by
China’s State Administration o Work Saety.
Captain Wu brings to his current role almost two
decades o directorship experience in variousunctions within the COSCO Group as well as rom
other organisations. Prior to his current appointment,
rom July 2008 to November 2011, Captain Wu was
Deputy Managing Director o China Ocean Shipping
Tally Company. From December 2002 to March
2008, Captain Wu was Chairman o the National
Committee o Chinese Seamen & Construction
Workers Union. He was Director o COSCO Group
Head Oce Research and Development Center
rom September 1999 to December 2002 and
Deputy Managing Director o COSCO Xiamen romDecember 1995 to September 1999.
Prior to that, rom November 1993 to December
1995, Captain Wu helped lead COSCO Xiamen as
Assistant Managing Director and as Deputy Director
o the executive oce and passenger shipping
department. Captain Wu started his career in
COSCO Guangzhou as a deck ocer and was a
ship’s master until November 1993.
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53COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
MR JIANG LI JUN
Vice Chairman and Non-Independent Non-
Executive Director
Mr Jiang joined China Ocean Shipping Company
Corporation upon his graduation in December
1974. He has held various senior positions with
established organisations, including Finance
Manager o SINOTASHIP, Chung Ling Shipping
(Japan) Co., Ltd, Yick Fung Shipping (HK) Co., Ltd.,
Deputy General Manager o Florence Container (HK)
Co., Ltd and COSCO Pacic Co., Ltd. Mr Jiang had
also been the head o Finance Department and
Deputy General Manager o Operation Department
o COSCO Japan Co., Ltd, General Manager o
COSUZ Co., Ltd as well as Deputy Chie Financial
Ocer o COSCO Container Lines Ltd. He was also
the Chie Executive Ocer o COSCO Shipping
Co., Ltd, Executive Director, Vice Chairman and
President o COSCO Corporation (Singapore)Limited and Director and President o COSCO
Holdings (Singapore) Company Ltd.
Mr Jiang is presently the President, Managing
Director and Executive Director o China COSCO
Holdings Company Ltd.
Mr Jiang holds an MBA degree rom the University
o Shanghai. He has extensive experience in the
management o listed companies and corporate
nancial management.
MR LIU LIAN AN
Non-Independent Executive Director
Mr Liu Lian An was appointed Executive Director on
20 February 2012. Currently, he is also Chairman o
COSCO Holdings (Singapore) Pte. Ltd.
Born in 1956, Mr Liu graduated rom Dalian Maritime
University with a Bachelor’s degree in 1982.
Mr Liu joined COSCO Tianjin in 1982. Over the
past years, he has worked as Manager o Shipping
Department and Vice General Manager o COSCO
Corporation (Singapore) Ltd., Vice General Manager
and General Manager o Shipping Department and
then Vice General Manager o COSCO BULK,
and then General Manager o China COSCO Bulk
Division.
MR WANG HAI MIN
Non-Independent Non-Executive Director
Mr Wang Hai Min has been appointed as a Non-
Independent Non-Executive Director o the
Company with eect rom 2 August 2010.
Mr Wang Hai Min, born in July 1972, graduated
rom Shanghai Fudan University with a MBA degree.
He joined COSCO Container Lines in July 1995
and worked in this company until January 2010.Over these years, Mr Wang had worked in dierent
positions o sta, assistant manager, deputy
manager, manager, senior manager and department
head with growing responsibilities on cooperated
shipping services and strategic planning. From
June 2006 to January 2010, he was the general
manager o the strategic planning department. In
January 2010, Mr Wang was transerred to Beijing
and became the general manager o transportation
division in COSCO Group head oce.
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54COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1BOARD OF DIRECTORS
MR WANG YU HANG
Non-Independent Non-Executive Director
Mr Wang Yu Hang was appointed as a Non-
Independent Non-Executive Director o the
Company in place o Mr Wang Xing Ru with eect
rom 14 July 2011.
Born in October 1961, Mr Wang is a senior
engineer with a bachelor’s degree. From September1979 to September 1983, Mr Wang studied in
marine engineering department o Dalian Maritime
University and started his career in Tianjin Ocean
Shipping Company (COSCO Tianjin) ater
graduation. Mr Wang joined COSCO Group head
oce in June 1987 and held various positions
including deputy general manager o business
development department, deputy general manager
o human resources department, general manager
o supervision department and general manager o
human resources department. From February 2000
to June 2011, Mr Wang was the vice president in
COSCO America, deputy managing director and
managing director in COSCO Shipbuilding Industry
Co. Mr Wang became managing director o COSCO
Shipyard Group Co. Ltd. in June 2011.
MR MA ZHI HONG
Non-Independent Non-Executive Director
Mr Ma Zhi Hong has been appointed as a Non-
Independent Non-Executive Director o the
Company with eect rom 2 August 2010.
Mr Ma Zhi Hong, born in March 1957, graduated
rom Dalian Maritime University with a doctorate
degree. He joined COSCO in July 1979. Over the
past 30 and more years, Mr Ma has worked as
an engineer on-board ships, chie engineering
superintendent o COSCO Container Lines, deputy
director o COSCO Bulk, assistant president o
COSCO Group head oce, vice president o
COSCO Hong Kong and deputy managing director
o COSCO Shipyard Group.
MR TOM YEE LAT SHING
Non-Executive Independent Director
Mr Tom Yee Lat Shing was appointed to the Board
on 15 December 1993. He is a Non-Executive
and Independent Director and was last re-elected
as Director on 20 April 2011. He is Chairman o
the Company’s Audit Committee and member o
the Nominating, Enterprise Risk Management,
Remuneration and Strategic DevelopmentCommittees. Mr Yee is a Certied Public
Accountant and was a partner o an international
public accounting rm rom 1974 to 1989. He has
more than 35 years o experience in the eld o
accounting and auditing and extensive experience
in handling major audit assignments o public
listed and private companies in various industries,
including insurance, manuacturing and retailing. He
is currently a consultant. Mr Yee sits on the boards
o several Singapore listed companies. He is a ellow
member o the Institute o Chartered Accountants in
Australia, CPA (Australia) and Institute o Certied
Public Accountants Singapore and an associate
member o the Institute o Chartered Secretaries
and Administrators. He is also a ellow member o
the Singapore Institute o Directors.
DR WANG KAI YUEN
Non-Executive Independent Director
Dr Wang Kai Yuen was appointed as an
Independent Director on 2 May 2001. He chairs
the Nominating Committee and is a member o the
Audit, Enterprise Risk Management, Remuneration
and Strategic Development Committee. Dr Wang
served as a Member o Parliament or the Bukit
Timah Constituency rom December 1984 till April
2006. He was the Chairman o Feedback Unit rom
2002 till his retirement rom politics. He retired as the
Centre Manager o Fuji Xerox Singapore Sotware
Centre in December 2009. Dr Wang also holds
directorships at ComortDelgro Group Ltd, CAO
(Singapore) Corporation Ltd, Asian Micro Holdings
Ltd, Ezion Holdings Ltd, Xpress Holdings Ltd, Matex
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55COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
International Ltd, and others. He graduated rom the
University o Singapore with a First Class Honours
degree in Electrical and Electronics engineering.
Dr Wang holds a Master o Science in Electrical
Engineering, a Master o Science in Industrial
Engineering and a PhD in Engineering rom Stanord
University, USA. He received a Friend o Labour
Award in 1988 or his contributions to the Singapore
labour movement.
MR ER KWONG WAH
Non-Executive Independent Director
Mr Er Kwong Wah was appointed as an Independent
Director on 20 December 2002. He chairs the
Remuneration Committee and is a member o the
Audit, Nominating, Enterprise Risk Management
and Strategic Development Committee. A Colombo
Plan and Bank o Tokyo Scholar, Mr Er obtained a
rst class honours degree in Electrical Engineering
at the University o Toronto, Canada, in 1970 and an
MBA rom the Manchester Business School o the
University o Manchester, UK in 1978.
Mr Er spent 27 years in the Singapore Civil Service
and served in various departments including the
Ministry o Deence, Public Service Commission,
Ministry o Finance, Ministry o Education and
Ministry o Community Development. He wasPermanent Secretary in the Ministry o Education
rom 1987-1994, and then in the Ministry o
Community Development until his retirement in
1998.
Currently, he is an Executive Director o the East Asia
Institute o Management, as well as an Independent
Director on the Boards o several public listed
companies such as Unidux Electronics Ltd, Firstlink
Investment Corporation Ltd, Hartawan Holdings Ltd,
China Essence Group Ltd, China Oileld Technology
Services Group Ltd, Eucon Holding Ltd and Van Der
Horst Energy Ltd.
For his outstanding service in the Government and
in the community, Mr Er was awarded the PPA(E) or
Public Administration Medal (Gold), the BBM (Public
Service Star) and the PBM (Public Service Medal).
In 1991, the Government o France conerred him
a National Honour with the award o Commandeur
dans l’Ordre des Palmes Academiques.
MR ANG SWEE TIANNon-Executive Independent Director
Mr Ang Swee Tian is a Non-Executive and
Independent Director o COSCO Corporation
(Singapore) Limited. He chairs the Enterprise Risk
Management Committee and is a member o the
Audit, Remuneration, Nominating and Strategic
Development Committees.
Mr Ang was the President o Singapore Exchange
Ltd (“SGX”) rom 1999 to 2005 during which he
played an active role in successully promoting SGX
as a preerred listing and capital raising venue or
Chinese enterprises. Mr Ang also played a pivotal
role in establishing Asia’s rst nancial utures
exchange, the Singapore International Monetary
Exchange (“SIMEX”) in Singapore in 1984 and
was instrumental to establishing SGX AsiaClear
which started oering OTC clearing acility in 2006.
Following his retirement in January 2006, Mr Ang
served as Senior Adviser to SGX until December2007.
In March 2007, Mr Ang became the rst person
rom an Asian Exchange to be inducted into the
Futures Industry Association’s Futures Hall o Fame
which was established to honour and recognise
outstanding individuals or their contributions to
the global utures and options industry. Mr Ang
graduated rom Nanyang University o Singapore
with a First-Class Honours Degree in Accountancy
in 1970. He was conerred a Master Degree in
Business Administration with distinction by the
Northwestern University in 1973.
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56COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
KEY MANAGEMENT
CAPTAIN WU ZI HENG
Vice Chairman, President and Non-Independent
Executive Director
Captain Wu Zi Heng was appointed Vice Chairman,
President and Non-Independent Executive Director
o the Company in November 2011.
Captain Wu brings to his current role almost two
decades o directorship experience in various
unctions within the COSCO Group as well as rom
other organisations. Prior to his current appointment,
rom July 2008 to November 2011, Captain Wu was
Deputy Managing Director o China Ocean Shipping
Tally Company. From December 2002 to March
2008, Captain Wu was Chairman o the National
Committee o Chinese Seamen & Construction
Workers Union. He was Director o COSCO Group
Head Oce Research and Development Centerrom September 1999 to December 2002 and
Deputy Managing Director o COSCO Xiamen rom
December 1995 to September 1999.
Prior to that, rom November 1993 to December
1995, Captain Wu helped lead COSCO Xiamen as
Assistant Managing Director and as Deputy Director
o the executive oce and passenger shipping
department. Captain Wu started his career in
COSCO Guangzhou as a deck ocer and was a
ship’s master until November 1993.
Captain Wu Zi HengVice Chairman, President
and Non-Independent
Executive Director
Mr Li Jian XiongVice President
Mr Ye Bin LinChie Financial Ofcer
Mr Wong Meng YunFinancial Controller
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57COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
Born in October 1956, Captain Wu started his
proessional career in July 1975. He graduated
rom Dalian Maritime University with a master’s
degree and is a senior engineer. From September
1978 to August 1982, Captain Wu studied marine
navigation in Dalian Maritime University. He is also
the Vice Chairman o China Institute o Navigation
and an expert on work saety, as accredited by
China’s State Administration o Work Saety.
MR LI JIAN XIONG
Vice President
Mr Li Jian Xiong has rich knowledge and experience
in shipping management and business operation.
From 1996 to 2000, Mr Li served as Deputy
Managing Director o Crestway Terminal Holdings
Ltd, Deputy Managing Director o HK Yu Hang
Investment Ltd; Managing Director o COSCO
Container Service Ltd; Deputy General Manager
o COSCO Pacic Ltd (Listed Company in HK)
and Deputy Managing Director o COSCO Pacic
(China) Investment Co., Ltd. He also served as
the Vice Chairman o Zhangjiagang Win Hanverky
Container Terminals Co. Ltd. and the director o
various COSCO subsidiary companies in China.
Mr Li joined COSCO Corporation (Singapore) Limited
in April 2001 as Vice President. In 2009, he became
the director o Investor Relations Proessionals Association (Singapore) (IRPAS). He is currently also
the director o COSCO Marine (Singapore) Ltd.
Mr Li graduated rom Qingdao Ocean Shipping
Mariners’ College and received his MBA rom
Shanghai Jiao Tong University.
MR YE BIN LIN
Chie Financial Ofcer
Mr Ye Bin Lin has extensive experience in nance
and corporate nancial management. From 1993 to
1998, Mr Ye was the nance manager o accounting
department o COSCO Container Lines Co., Ltd.
From 1998 to 2001, he was the general nancial
manager o COSCO Germany Shipping Agencies
GMBH.
Mr Ye joined COSCO Corporation (Singapore) Ltd.
as nance director in August 2001 and was re-
designated Chie Financial Ocer o the Company
on 14 April 2008.
MR WONG MENG YUN
Financial Controller
Mr Wong Meng Yun has more than 25 years o
proessional and leadership experience in nancial
management, corporate nance, internal & external
audit and treasury management o which 12 years
were in a senior regional management position with
a leading US-listed sotware company prior to his
joining the Group in July 2008.
He graduated rom the University o Singapore with
a Bachelor o Accountancy and is a Fellow o the
Association o Chartered Certied Accountants,CPA Australia, the Institute o Certied Public
Accountants o Singapore, the Chartered Institute
o Arbitrators, the Institute o Arbitrators & Mediators
Australia and the Singapore Institute o Arbitrators.
He is a Certied Treasury Proessional (CTP) with the
Association or Financial Proessionals, a Certied
Internal Auditor (CIA) and a Certied Financial
Services Auditor (CFSA) with the Institute o Internal
Auditors, as well as, a Certied Inormation Systems
Auditor (CISA) and a Certied Inormation Security
Manager (CISM) with the Inormation Systems Audit
and Control Association (ISACA).
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58COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
INVESTOR RELATIONS
As a leading, global marine conglomerate, COSCO
Corporation recognises Investor Relations (IR) as
an essential component o its strategy to develop
as a reputable corporate entity. Leveraging
on strong and accountable leadership, we
practice eective corporate governance, regular
perormance reporting and clear and timely investor
communications. In this regard, we strive to provide
requent and substantive corporate disclosure
through an active investor relations programme.
With a sound business model, signicant market
presence and regular investor relations engagement,
we have generated strong interest in our company.
As a testament to widespread shareholder interest,
we have been included in the FTSE ST China Index
since January 2009, and in the FTSE China Top
Index since July 2009. These indexes were created
to refect the increasing representation o China-
based companies on the Singapore stock market
and oer investors simple vehicles through which
they can participate in the potential growth o highly
liquid, locally-listed China companies. Among other
indexes, we are a component stock o the Morgan
Stanley Capital International Singapore, which
eatures some o the most promising, widely-traded
and investible Asian companies outside Japan.
BROAD AND FREqUENT ENGAGEMENT
As a dynamic organisation with a widely-traded
stock, we understand the importance o timely
and pertinent corporate disclosure. Over FY2011,
we made announcements covering newly secured
contracts, quarterly results, growth strategies,
operational commentaries and developments and
our business outlook.
We meet regularly with the investment communityo shareholders, stock brokerages, bank and other
nancial institutions to clariy and explain current
corporate developments. We also engage the media
and the general public through media interviews and
news reports on a variety o media platorms such
as newswires, print, broadcast, investor meetings
and roadshows, and dialogue with shareholders at
Annual General Meetings.
Over Financial Year 2011, we participated in various
analyst meetings and investor conerences. At these
sessions, we interact with research analysts, und
managers and stockbrokers. We also conduct
results briengs every nancial quarter, where we
get to meet analysts. In FY2011, we engaged all
o our COSCO Corporation senior management
in meetings and events with the investment
community. In addition, over 300 shareholders
attended our Annual General Meeting in April 2011.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
FY2011
3300
3200
3100
3000
3000
2800
2700
2600
2500
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
0,800
0.875
1800
1700
1600
1500
14001410.01002546.35
Last Price
COS SP Equity (R1) 0.875 -.010
FSSTI Index (L1) 2646.35 -26.43
MXSG Index (R2) 1410.0100 -14.0699
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59COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
ANALYST COVERAGE
Company Name of Analyst
BNP Paribas Brenda Lee
CIMB Siew Khee, Lim
CITI Horng Han, Low
Si Xian, Goh
CLSA Caroline Maes
Credit Suisse Gerald Wong
Daiwa Clement Chen
DBS Vickers Janice Chua
Pei Hwa, Ho
Deutsche Bank Kevin ChongGoldman Sachs Miang Chuen Koh
HSBC Tarun Bhatnagar
Neel Sinha
IIFL Li, Zuo
JP Morgan Ajay Mirchandani
Kim Eng Securities Rohan Suppiah
Macquarie Capital Shuwei Quek
Merrill Lynch Wei Lee, Chong
Morgan Stanley Sophie Loh
Andy Meng
Nomura Securities Lisa Lee
Phillip Securities Nicholas Low Kim Chye
Standard Chartered Wai Mun, Leong
UBS Cheryl Lee
UOB Kay Hian Nancy Wei
IR AWARDS 2011
COSCO Corporation was recognised or the third
time or its corporate transparency by the Securities
Investors Association o Singapore (“SIAS”). In 2011,
COSCO Corporation was runner-up in the “Most
Transparent Company Award”, overseas company
category, at the “SIAS 12th Investors’ Choice Award
2011”, held on 27 October 2011.
This award, as well as other accolades, underscoresour continuous eorts in corporate governance and
disclosure, regular communications and investor
engagement. Looking orward, we intend to continue
actively engaging the investment community while
enhancing our corporate disclosure standards,
understanding the importance o investor relations
in generating long-term, sustainable shareholder
value.
MAJOR INVESTOR RELATIONS EVENTS
IN 2011
10 – 11 January DB Access China Conerence
2011
12 January DBS Pulse o Asia Conerence
2011
18 January BNP Paribas Seeding ASEAN
Growth Conerence
22 February FY2010 Results Brieng
11 – 12 April CITI Hong Kong Roadshow
14 April CITI Brieng
20 April FY2010 Annual General Meeting
6 May 1QFY11 Results Brieng
9 May DBS Vickers Brieng
12 May CLSA Corporate Access Forum
23 – 27 May DBS Vickers USA Conerence
and Roadshow
30 June HSBC Inaugural ASEAN
Conerence
6 July DBS Vickers Pulse o AsiaConerence
1 August 2QFY11 Results Brieng
2 August DAIWA Brieng
3 August BNP Paribas Corporate Day
Conerence
18 August UBS Hong Kong Conerence
6 September UBS ASEAN Conerence 2011
27 October Awarded SIAS Investors’ Choice
Award
2 November 3QFY11 Results Brieng
15 November Morgan Stanley Asia Pacic
Summit 2011
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60COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
RISK MANAGEMENT
RISK FACTORS
INTRODUCTION
The Group has established a risk management
process, which is constantly being reviewed
and updated by its Enterprise Risk Management
Committee (“ERMC”), to ensure its relevance in
the ever changing business environment. The
risk management process is aiming to identiying
the risk actors that may have a material impact
on the Group’s operation, and to manage them
appropriately.
The material risk actors identied by the Group’s
risk management process are set out below. Each
o these could have a material and adverse impact
on the Group, including its business, nancial
condition, results o operation and prospect. These
risk actors have been divided into our categories:
external; internal; execution and nancial.
RISK MANAGEMENT PROCESS
The Group’s process or identiying and managing
risk is set by the Board through the ERMC. The
ERMC has delegated the day-to-day management
o risk within the Group to the Risk Management
Committee (“RMC”) o each o its operating
subsidiaries and each RMC comprises senior
management sta o the respective division within
the operating subsidiaries.
The ERMC also engages Deloitte & Touche
Enterprise Risk Services Pte Ltd to perorm strategic
risk proling in the Group’s major subsidiaries. As
the Group’s enterprise risk management program
is a long-term initiative that calls or commitment
and inputs rom various stakeholders, the enterprise
risk management policies have been implemented
in phase with guidance rom Deloitte & Touche
Enterprise Risk Services Pte Ltd in a systematic
manner and coupled with constant education and
training o local management sta and risk owners.
The Board currently conducts periodical reviews
o the risks and it identies the key risks or the
year ahead. As part o this review, operational and
strategic risks are proposed as key risks by the
RMC, based on inputs rom regions, unction heads
and business leaders. The risk actors set out below
refect the key risks identied. Each o the key risks
is assigned to the Chairman o the RMC at the
operating subsidiaries who proposes a level o risk
the Group is willing to take and develops appropriate
action plans to mitigate the risks. All risk mitigation
plans are reviewed and agreed by the Board.
Once risk mitigation plans are agreed, each
operating subsidiary is asked to carry out a sel
assessment exercise which requires all operating
units to conrm compliance with the Group’s policies
and also to conrm that key operational controls are
in place and working eectively. The results o this
exercise, together with a review o specic plans
or strategic risks, enable the Board to conrm that
the business has a sound risk-based ramework o
internal controls.
The Group Auditors, internal and external, provide
independent reassurance that the standard o risk
management, compliance and control meets the
needs o the business. Group Audit status reports
are discussed with ERMC, Audit Committee and
Board on a regular basis. The Board also recognises
that the risks acing the business may sometimeschange over short time periods. Every quarter, each
operating subsidiary provides an update on new
and emerging risks to the Board and reports to
update the Group’s risks are provided to the ERMC,
Audit Committee and the Board.
The Board concurred with the opinion o its sub-
committees, i.e. Audit Committee and ERMC, o the
adequacy o the internal controls system (o which
risk management is one o its crucial segments) to
addressing its nancial, operational and compliance
risks.
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61COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
It is not possible and practical to identiy and
anticipate every risk that may impact the Group.
While the Group’s risk management process
attempts to identiy and manage (where possible)
the key risks it aces, no such process can totally
eliminate risks or guarantee that every risk is
identied, or, that it is possible, economically viable,
or prudent to manage such risks.
Consequently, there can never be an absolute
assurance against the Group ailing to achieve its
objectives or a material loss arising. Some material
risks may not be known, others, even though
currently deemed as immaterial, could become
material and new risks may also emerge.
The Board arms its overall responsibility on risk
management and to review the adequacy and
integrity o the system on an annual basis.
1. EXTERNAL RISKS
The Group is subject to a number o external risks.
The Group denes external risks as those that stem
rom actors which are mainly outside o its control.
These risks will oten arise rom the nature o the
Group and the industry in which it operates.
GLOBAL ECONOMIC DOWNTURN AND
UNCERTAINTIES
The global capital and credit markets have recently
been experiencing periods o extreme volatility anddisruption. The global economic uncertainties,
concerns over recession, infation or defation,
energy costs, geopolitical issues, commodity
prices and the availability and cost o credit, have
contributed to unprecedented levels o market
volatility and diminished expectations or the global
economy and the capital and consumer markets.
These actors, combined with others, precipitated a
severe global economic downturn, the ull extent o
which remains to be seen.
The Group is susceptible to the cyclical world-wide
demand and pricing in its industries, which are
highly dependent upon global economic condition.
The uncertainties are likely to result in a decrease in
the overall demand or vessels and risks o deault
by the ship-owners in taking delivery o the vessels
upon completion.
LEGAL, REGULATORY, POLITICAL AND
SOCIETAL RISKS The Group is at risk rom signicant and rapid
change in the legal systems, regulatory controls,
custom and practices in the regions in which it
operates.
Political uncertainties, regime change and change
in society, including increased scrutiny o the
Group, its businesses or its industry, or example by
governmental and non governmental organisations
or the media may result in, or increase the rate o,
material legal and regulatory change, and changes
to custom and practices. These aect a wide range
o areas and are expected to have material and
adverse impacts on the perormance and nancial
condition o the Group i they are not pre-empted
appropriately.
COMPETITION
The ship building, ship repair, oshore marine
engineering and dry bulk shipping industries
are highly competitive. The primary bases orcompetition in the ship repair, ship building and
oshore marine engineering industries are matching
o the customers’ demands with the capabilities
and capacity o a shipyard, the type and quality
o vessel, price, delivery schedule / availability and
type o equipment.
The Group expects to ace increased competition
rom existing competitors and new entrants into
these industries in the uture. In the event that
the Group is unable to continually upgrade its
shipyard capabilities, the Group’s business, nancial
condition, results o operation and prospect may be
adversely aected.
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62COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
RISK MANAGEMENT
Being a relatively new entrant in the oshore
marine engineering industry, the Group is expected
to incur higher costs as it scales the “learning
curve” in its oshore marine engineering projects
on new product types. The Group might ace sti
competition, especially under this era o global
uncertainties whereby some players have adopted
price cutting strategy in order to secure new order
books.
Increased competition in the markets have caused
contract values o new ship building contracts to
deteriorate and these poised adverse impact to the
Group’s perormance and nancial condition.
CUSTOMER DEMAND
Customer demand or the Group’s services and
expertise is expected to increase to a higher level
o expectation. The Group expects greater scrutiny
by customers beore they take delivery o vessels.
This will, inadvertently, increase the cost o building
the vessel. A ailure to recover higher costs could
materially and adversely impact the Group’s
perormance.
The Group has introduced enhanced modern
shipbuilding management system sotware to better
manage and to mitigate the risks o late ship-built
delivery and quality. A “COSCO Shipyard CIMS
System Maintenance and Operation Regulation” has
been developed and updated to ensure commonpractices, smooth and stable operation throughout
the various shipyard subsidiaries.
The Group is also exposed to counterparty risk
rom customers that could result in nancial losses
should those counterparties become unable to
meet their obligations to the Group.
FLUCTUATIONS IN THE BALTIC DRY
INDEX (“BDI”)
The BDI is a benchmark o the dry bulk shipping
industry and is an indication o the price o moving
major raw materials by sea. It is generally recognised
as an economic indicator o the movement o the
volume o global trade.
An increase in the BDI is generally considered
to indicate an increase in demand or dry bulk
shipping, whereas a decrease in the BDI is generally
considered to indicate a decrease in demand or dry
bulk shipping, and the capital expenditures o dry
bulk shipping companies are usually driven mainly
by the BDI outlook.
Currently, the dry bulk shipping industry is
experiencing excess capacity leading to lower
charter rates. The fuctuations in the BDI result in an
uncertain outlook or the dry bulk shipping industry,
which typically has an impact on vessel owners’
willingness to place new orders or bulk carrier
vessels, which in turn aects the Group’s services
and products.
RAW MATERIALS
The Group depends upon the availability, quality
and cost o steel and steel-plates rom around the
world, which exposes it to price, quality and supply
fuctuations. Although the Group will take measures
to protect against the short-term impacts o these
fuctuations and o the concentration o supply,
there is no guarantee that these will be eective.
A ailure to recover higher costs o shortalls in
availability could materially and adversely aect the
Group’s perormance.
The Group manages this risk through constant
monitoring o the markets in which it operatesand continuous review o capital expenditure
programs to ensure they refect market conditions.
A continuous ocus on operating expenditure is also
an important method o mitigating this risk.
The Group has developed uniorm processes
and procedures with applications such as SAP
to manage procurement o raw materials. The
Group also has developed strategic alliances with
certain selected major steel mills and other leading
companies on the purchase o steel supply, bunker,
marine valves, boilers, engines and other related
equipments to mitigate risks in such supplies.
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63COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
2. INTERNAL RISKS
Internal risks are those arising rom actors primarily
within the Group’s control, including rom the Group
structure and processes.
INFORMATION TECHNOLOGY
INFRASTRUCTURE
The Group depends on accurate, timely inormation
and numerical data rom key sotware application to
aid day-to-day business and decision making. Any
disruption caused by ailings in these systems, o
underlying equipment or o communication networks
could delay or otherwise impact the Group’s day-
to-day business and decision making and have
materially eects on the Group’s perormance.
OPERATIONAL PERFORMANCE AND
PROJECT DELIVERY
Failure to meet production targets can result in
increased unit costs, which are pronounced at
operations with higher levels o xed costs. Unit
costs may exceed orecasts, adversely aecting
perormance and the results o operations.
Failure to meet project delivery times and costs could
have a negative eect on operational perormance
and lead to increased costs or reductions in revenue
and protability.
A number o strategies have been implemented
to mitigate these risks including managementoversight o operating perormance and project
delivery through regular executive management
briengs, increased eectiveness o procurement
initiatives to reduce unit costs and improve delivery
o projects.
The Group has also established an enterprise
technology standards system under the guidance o
Singaporean and South Korean experts to enhance
the basic design and detailed design o ships and
marine engineering products.
EMPLOYEES
The Group depends on the continued contributions
o its executive ocers and employees, both
individually and as a group. While the Group reviews
its people policies on a regular basis and invests
signicant resources in training and development
and recognising individuals with high potential,
there can be no guarantee that it will be able to
attract, develop and retain these individuals at an
appropriate cost and ensure that the capabilities
o the Group’s employees meets its business
needs. Any ailure to do so may aect the Group’s
perormance.
The ability to recruit, develop and retain appropriate
skills or the Group is made dicult by competition
or skilled labor. The ailure to retain skilled employees
or to recruit new sta may lead to increased costs,
interruptions to existing operations and delay in new
projects.
A number o strategies are implemented to mitigate
this risk including attention to an appropriate suite
o reward and benet structures and ongoing
renement o the Group as an attractive employee
proposition.
MANAGING COST OF WAGES THROUGH
OUTSOURCING
Ship repair is a labor-intensive industry and an
increase in wages will have a signicant impact on theGroup. The Group had been encountering increases
in labor cost. Other than having a permanent work
orce o skilled employees on the payroll, the Group
has adopted a contract hiring system, unskilled
manpower is hired on a contractual basis and paid
according to projects undertaken. While the Group
has beneted rom the decrease in xed costs, it is
a risk rom ailure by these third parties to deliver
on their contractual commitments, which may
adversely impact its’ reputation and perormance.
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64COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
3. EXECUTION RISKS
Execution risks arise rom the implementation o the
Group’s strategy and its change and investments
program, which aim to enhance long term
shareholders’ value.
INVESTMENT, ACqUISITION AND
DISPOSALS
Risks inherent in the investments, acquisition and
disposals may have an adverse impact on the
Group’s business or nancial results.
From time to time, the Group may make investments,
acquisitions and disposals o businesses. While
these are careully, planned, the rationale or
them may be based on incorrect assumptions or
conclusions and they may not realise the anticipated
or unintended eects. Additionally, while the Group
seeks protection, or example through warranties
and indemnities, signicant liabilities may not be
identied in due diligence or come to light ater the
warranty or indemnity periods. These actors may
materially and adversely impact the perormance or
nancial condition o the Group.
4. FINANCIAL RISKS
The Group is exposed to market risks such as
interest rate and exchange rate risks arising rom
its international business. The PRC government
has recently imposed stringent lending guidelines
to commercial banks intended to cool its propertymarket down. However, these new lending
guidelines have caused the borrowing costs o
businesses to surge across the board.
At the same time, the fuctuations o value o
Renminbi against the US dollar and other major
currencies have also poised uncertainties to the
Group’s operations.
MANAGING CURRENCY FLUCTUATION
The main nancial risks acing the Group are
fuctuations in oreign currency, interest rate risk,
availability o nancing to meet the Group’s needs
and deault by counterparties and customers. Any
o these nancial risks may materially and adversely
impact the Group’s business, nancial condition,
results o operation and prospect.
The Group has established a management system
to address nancial risks. Fluctuations in currency
exchange rates are closely monitored. The Group
at its discretion may employ simple orward hedging
on a systematic approach to meet its nancial
obligations and oreign and local currencies needs.
The Group does not engage in speculative oreign
investments. Strict compliance controls are in place
to ensure that procedures are adhered to and
management decisions are not made unilaterally.
The Group also engaged the guidance o the holding
company in managing its oreign exchange risk
exposure. The holding company has an experienced
Treasury operations team responsible or managing
the unding requirements and liquidity risks.
A detailed disclosure o the Group’s nancial risks
can be ound on pages 135 to 144 in the Notes to
the Financial Statements.
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65COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
RESEARCH & DEVELOPMENT
Behind every product and service we oer is a
commitment to be a part o technological innovation
through adaptation o leading technologies. Fortied
by our Research and Development, COSCO visualises
a dynamic uture that can be spurred through our
quest or greater eciency, enhanced productivity,
and higher quality standards.
With a commitment towards innovation, we lay an
important oundation that drives our technological
progress and anchors our competitive advantage
now and in the uture.
2011 IN REVIEW
COSCO’s R&D team encompasses more than 1,400
competent individuals who are technically skilled,
specialising in research and specic areas such as
ship repair, ship conversion, ship building and oshore
marine engineering.
COSCO Shipyard delivered two 5,000 units car
carriers, namely COSCO Shengshi and COSCO
Tengei in February and June 2011 respectively. This
project was jointly designed by COSCO Shipyard and
the Shanghai Design Institute, and registered with NK
Class.
In August 2011, COSCO Shipyard brought to ruition
two in-house designed 59,000 DWT shuttle tankers,
built or the Danish owner Lauritzen Tankers A/S and
named "Dan Cisne" and "Dan Sabia". The Panamax-sized vessels are double-hulled DP co-shuttle tankers,
and comply with the saety requirements o both the
Danish Maritime Authority and the Brazilian national
oil company "Petrobras Campos Basin Oshore”.
They are designed to have better maneuverability in
providing crude oil transer services between FPSO,
FSO, oil platorms, and onshore oil acilities. COSCO
Shipyard owns all the independent intellectual
property rights o their basic, detailed and production
designs.
During the year, the National Copyright Administration
o the PRC issued the copyright registration certicate
or the SAP Production & Design Integration V1.0
(reerred to as S-PDI system) to COSCO. This unique
system was established by our group's own R&D
department in a project which lasted two and a hal
years and cost a total o 110 person-months. The
S-PDI system is based on the SAP ERP platorm, and
brings the integration advantages o the SAP system
into ull play. It has achieved integration management
o the whole process o ship building production.
The successul registration o the inormation
management system, the creation o world class ship
styles and other initiatives attest to COSCO’s growing
R&D capabilities.
PARTNERSHIPS FOR GROWTH
Collaborations with prominent institutions have always
been a key pillar o our research and development
strategy. The year 2011 saw us reach a strategic
agreement with Hunan Valin Xiangtan Iron & Steel
Co., Ltd, a large Chinese steel maker, to develop and
produce high-grade steel or marine and oshore
use. This strategic cooperation agreement will enable
both partners to strengthen their capabilities, work
together to develop innovative ships, and improve their
management skills.
The year in review also paved the way or a collaborative
agreement between the COSCO Shipyard Group and
Fleet Management Limited (FLEET). For many years,
COSCO has successully cooperated with FLEET onship repair and ship building projects. In all o these
projects, both companies were deeply involved at
each stage o the construction, not only on quality
improvement issues but also in various other technical
aspects such as the introduction o next generation
equipment or systems on the vessels, improved
environmentally-riendly designs and enhanced saety
and energy eciency or vessels.
LOOKING AHEAD
2011 has been truly rewarding in R&D and we will
urther build on this platorm, investing in all our R&D
eorts to lead us to long-term and sustainable growth.
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66COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
HUMAN RESOURCES & WORKPLACE SAFETY
HUMAN RESOURCES
PEOPLE FIRST
In our pursuit o excellence, COSCO places
PEOPLE at the core o our HR strategy. We
understand that it is through people that the Group
is able to transorm and realise its vision. We have
structured programmes to develop this most vital
o resources. In the areas o recruitment, training,
compensation and benets, as well as incentives,
we have established an important multi-aceted
oundation that anchors our growth.
One o the most important aspects is our
remuneration and reward scheme where promising
sta are recruited and constantly developed through
a competitive perormance and appraisal system.
This helps sta systematically progress in their
career and personal goals.
RECRUITMENT AND TRAINING
As a leading, world-class enterprise, we recognise
that human capital is one o the most essential
elements in optimising progress. Along these lines,
we have a pro-active recruitment and training
programme. Every year, more than 1,000 resh
graduates are actively recruited rom renowned
Chinese universities. These top graduates are
subjected to management training courses in
preparation or their management positions in
the uture. Technical stas are required to pass acourse beore commencing work and are assessed
annually to ensure their skills meet the necessary
standards.
At COSCO, continuous learning is a undamental
building block o growth. Our employees undergo
training to comply with international standards and
saety measures, as well as undertake courses in
technical, engineering and management skills. Over
2011, COSCO Shipyard Materials Centre began
an E-procurement Platorm training course. Sta
rom the Materials Centre o the Group, Inormation
Centre, and representatives rom the materials
sector o each subsidiary were given the opportunity
to attend this course.
REWARD AND RETENTION
Recognising eort and achievement and inculcating
loyalty are important objectives at COSCO. We instill
this in various ways, one o which is the perormance
and achievement appraisal system that aligns
work goals with personal career development
and remuneration. Another example is the “Model
Employee Reward” scheme which gives best-
perorming employees a chance to visit one o the
Group’s overseas subsidiaries. Apart rom being an
incentive trip, it is an opportunity to experience the
work culture in a oreign environment.
LOOKING FORWARD
As we move ahead, COSCO will continue to
eectively manage our workorce. Both contract and
in-house workers will be given priority and benets.
This will enable us to achieve optimum growth.
WORKPLACE SAFETY
A SAFE AND SECURE ENVIRONMENT
Workplace saety goes hand in hand with human
resource management. Towards that end, we
require our sta to undergo workplace saety training
courses specially designed to inorm and educate
workers about potential workplace dangers and the
necessary precautions. Tests are also administeredto ensure a undamental level o prociency and
understanding.
During 2011, COSCO Nantong shipyard produced
a workplace saety manual or ship operations and
oshore marine engineering, circulating it to all
workplace saety inspectors and managers. With a
clear set o guidelines, COSCO has maintained a
commendable saety record over the last decade.
We will continue to abide by these guidelines and
strengthen these measures to promote a secure
work environment.
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67COSCO Corporation (Singapore) Limited
An nual Rep ort 2011
ENVIRONMENTAL SAFETY
We always aim to do our best to protect the
environment as we believe that environmental saety
is a part o overall workplace saety. With a goal o
reducing environmental degradation, we proactively
saeguard our environment through regular acility
and equipment upgrades.
The Saety Committee established in 2009 continues
to conduct requent site visits to all shipyards to
ensure that saety requirements are adhered to.
Equipment and tools are also checked and sent or
scheduled monthly maintenance.
SAFETY STANDARDS ESSENTIAL
To maintain and raise saety awareness levels,
we undertake regular education and training.
Compulsory training sessions are conducted
every week, discussing the latest saety rules
and regulations. The training sessions include
live demonstrations o saety measures and
an assessment test to evaluate participants’
competencies and prociencies.
In addition, we have implemented a grading system
in the saety management ocers’ course, giving
saety ocers a urther means to monitor and
manage the saety o their individual shipyards.
COSCO also engages external parties to appraise
various departments in COSCO, checking the
standards at the Group and awarding certicationsin the areas o work environment quality and
workplace saety.
MEDICAL BENEFITS
At COSCO, we believe that medical benets
complement our attention to workplace saety.
Towards that end, we have established an all-
inclusive network o supporting operations which
include on-site medical acilities at all shipyards.
Among other things, we also conduct annual
health checks, provide medical insurance, dental
treatment and immunisation against infuenza. We
recognise that a healthy workorce is essential to
the productivity and perormance o our corporation
and strive to provide a well-tended, supportive
environment.
2012: TARGETS AND MEASURES
COSCO will continue to emphasise and improve
on workplace saety going orward. The new
equipment brought into our yards entails the need
to educate our workers on the relevant usage
techniques, saety procedures and regulations. All
o this is implemented through thorough training
sessions and programmes, underlining our “saety
rst” culture. We will also retain our reward scheme
to encourage workplace saety and deter hazardous
on-site behaviour.
In addition, we will institute short-term, on-board
stints or maintenance sta in order to improve
the operational oversight and workplace saety
management skills o ship management. Their
responsibilities include the prevention o piracy,
smuggling, pollution, re, collision, personal injury
and typhoon disaster management.
COSCO Shipyards’ management has maintained
an overall good record in the areas o saety, security
and stability. Looking ahead, we will strive to better
our ship tracking, monitoring and inspection
operations, as well as improve inormation exchange
among all onshore and oshore departments
and all crew on our vessels. This will acilitate aholistic understanding o operational procedures,
thus reducing the risk o workplace incidents and
enabling greater operational eciency.
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68COSCO Corporation (Singapore) Limited
Ann ua l Rep ort 201 1
CORPORATESOCIAL RESPONSIBILITY
OVERVIEWMore than enhancing our capabilities as an enterprise,
COSCO believes that achieving sustainable growth
and corporate development is partaking in a
process to integrate social, environmental, ethical
and human rights concerns into our business
operations and core strategy in close collaboration
with our stakeholders. Enhancing the visibility o
our Corporate Social Responsibility activities, we
disseminate good practices in a way that benets
all stakeholders including shareholders, businesspartners, employees, customers and suppliers.
SOCIAL CONTRIBUTIONSWith the goal o ostering positive relationships
within the communities in which we operate
in, COSCO engages in a myriad o activities to
address appropriately local needs and encourages
employees to play an active role in their communities.
SINGAPOREIn Singapore, COSCO continues to support the
Yellow Ribbon Project or the th year running. This
project is a campaign established to encourage
employment or ex-convicts and engage the
community to give ex-oenders a second chance.
This gesture may be simple, but it is in support o
a worthy cause. Through this programme, many
ex-oenders were successully integrated back into
society.
CHINA As part o COSCO’s continued commitment
towards contributing to the next generation, the
COSCO Group o companies in China has been
actively engaged in campaigns oering substantialsupport to education. This year, COSCO Zhoushan
Shipyard, through its Youth League Committee,
organised a social activity called “Transer Youth
Love, Warm Tibetan Herdsman” which aims to
support the education o needy students in the
remote area o Tibet.
Under this campaign, the general cadre, sta
and league members helped the less ortunate
by donating more than 1200 pieces o clothing,
schoolbags and stationery to Liuheng COSCO
Primary School through the “Charity Donation Day”
undraising drive.
On another note, COSCO Nantong Shipyard’s Trade
Union and Youth League Committee launched a
social campaign called “Blue Ocean Plan - Love
Tibet”. Blue Ocean Plan is a part o the “Love Tibet”
campaign which comprises three parts “Seagull,
Seashell and Dolphin” intending to build a long-term
donation system helping needy children. With the
aim o improving Tibetans’ literacy levels, this project
acquired and donated books, schoolbags, stationery,
and teaching materials to needy students along with
clothing, books and toys contributed by the COSCOsta.
Aside rom our local contributions, COSCO
Corporation has been involved in giving to the less
ortunate communities in China through the COSCO
Charity Foundation – the rst non-public oundation
initiated by state-owned enterprises. The oundation
manages COSCO’s charity works and social projects
within China in areas such as disaster relie, poverty
aid, medical aid and educational support. The unding
or this charity comes rom COSCO subsidiaries.
ENVIRONMENTAL AWARENESSCOSCO recognises the importance o preserving the
natural environment in order to create a sustainable
society or our uture generations. COSCO is committed
to achieving this goal by seeking to combine ongoing
innovation in environmental technology coupled with
environmentally sound business practices. In support
o this commitment, COSCO Shipyard launched a
creative design campaign named the “Green Ship
o the Future” which encourages both proessional
technical sta and production management personnel
o COSCO to develop innovative, eco-riendly ideas
or uture ship designs.
All design work had to ully integrate environmentally-
riendly, economic eatures ensuring workplace
saety and health and promoting energy and water
conservation, recycling and waste minimisation.
CONCLUSIONUpholding high standards in Corporate Social
Responsibility within the Group is a long-standing
commitment by COSCO. Our community projects,
environmental protection eorts and involvement
with charities are our way o giving back to the wider
community which has ultimately enabled us to grow as
a leading corporation. Looking ahead, we will continue
our social involvement and support the strengthening
o community ties.
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FINANCIAL
CONTENTS
FINANCIAL STATEMENTS
70 Directors’ Report
75 Statement by Directors
76 Independent Auditor’s Report
77 Consolidated Income Statement
78 Consolidated Statement of Comprehensive Income
79 Balance Sheets
80 Consolidated Statement of Changes in Equity
81 Consolidated Statement of Cash Flows
83 Notes to the Financial Statements
151 Five-Year Summary
152 Shareholding Statistics
154 Notice of Annual General Meeting
Proxy Form for Annual General Meeting
Notes for Proxy Form
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Directors’ ReportFor The Financial Year Ended 31 December 2011
70COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
The directors present their report to the members together with the audited financial statements of the Group for thefinancial year ended 31 December 2011 and the balance sheet of the Company as at 31 December 2011.
Directors
The directors of the Company in office at the date of this report are as follows:
Ma Ze Hua (appointed on 6 January 2012)Wu Zi Heng (appointed on 5 November 2011)Jiang Li Jun (redesignated as Non-Executive Director on 22 November 2011)Wang Hai MinMa Zhi HongWang Yu Hang (appointed on 14 July 2011)
Liu Lian An (appointed on 20 February 2012) Tom Yee Lat ShingWang Kai YuenEr Kwong Wah Ang Swee TianLi Jian Xiong (alternate director to Ma Ze Hua)Lu Cheng Gang (alternate director to Wang Hai Min) Ye Bin Lin (alternate director to Ma Zhi Hong)Liu De Tian (alternate director to Wang Yu Hang)
Arrangements to enable directors to acquire shares and debentures
Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objectwas to enable the directors of the Company to acquire benefits 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 thisreport.
Directors’ interests in shares or debentures
(a) According to the register of directors’ shareholdings, none of the directors holding office at the end of the financialyear had any interest in the shares or debentures of the Company or its related corporations, except as follows:
Number of ordinaryshares registered
in name of
director or nominee
Number of ordinaryshares in which
a director is deemed
to have an interest
At
31.12.2011
At1.1.2011or date of
appointment,if later
At
31.12.2011
At1.1.2011or date of
appointment,if later
The Company
Tom Yee Lat Shing 1,400,000 1,400,000 – –
Wang Kai Yuen 900,000 900,000 1,000,000 1,000,000
Er Kwong Wah 650,000 650,000 – –
Ang Swee Tian 130,000 130,000 5,000 5,000
Li Jian Xiong 1,000,000 1,000,000 – –
Lu Cheng Gang – – 50,000 50,000
Ye Bin Lin 600,000 600,000 – –
Liu De Tian 153,000 153,000 120,000 120,000
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71COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Directors’ ReportFor The Financial Year Ended 31 December 2011
Directors’ interests in shares or debentures (continued)
(a) (continued)
Number of unissued ordinary
shares under options held
by director
At
31.12.2011
At1.1.2011or date of
appointment,if later
Related corporationsCOSCO International Holdings Limited
- Share Option Scheme
Ma Zhi Hong 1,600,000 1,600,000
China COSCO Holdings Company Limited
- Share Appreciation Rights Plan
Lu Cheng Gang 265,000 265,000
(b) According to the register of directors’ shareholdings, certain directors holding office at the end of the financial yearhad interests in the options to subscribe for ordinary shares of the Company granted pursuant to the Cosco GroupEmployees’ 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 director
At
31.12.2011
At1.1.2011or date of
appointment,if later
2006 Options
Lu Cheng Gang – 700,000
2007 Options
Er Kwong Wah 300,000 300,000
Li Jian Xiong 700,000 700,000
Lu Cheng Gang 700,000 700,000
Ye Bin Lin 700,000 700,000
Liu De Tian 700,000 700,000
2008 Options
Tom Yee Lat Shing 300,000 300,000
Wang Kai Yuen 300,000 300,000
Er Kwong Wah 300,000 300,000
Li Jian Xiong 700,000 700,000
Lu Cheng Gang 700,000 700,000
Ye Bin Lin 700,000 700,000
Liu De Tian 700,000 700,000
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Directors’ ReportFor The Financial Year Ended 31 December 2011
72COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
Directors’ interests in shares or debentures (continued)
(c) The directors’ interests in the ordinary shares and share options of the Company as at 21 January 2012 were thesame as those as at 31 December 2011.
Directors’ contractual benefits
Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or witha company in which he has a substantial financial interest, except as disclosed in the accompanying financial statementsand in this report, and except that certain directors have employment relationships with the ultimate holding corporation orrelated 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 theCompany 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 todirectors, key management personnel and employees. The exercise price of the granted options is determinedat the average of the closing prices of the Company’s ordinary shares as quoted on the Singapore Exchange forthe five 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 orconstructive obligation to repurchase or settle the options in cash.
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated
company, or the holding company for at least one year on or prior to the date of the grant, may be exercised twelvemonths after the date of grant but before the end of one hundred and twenty months. For employees and directorswho are in the service of the associated company and non-executive directors, the options shall expire at the end of sixty months. Options issued at a discount to market price, may only be exercised two years after the date of thegrant.
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated
company, or the holding company for at least six months but less than one year on or prior to the date of grant,may be exercised twenty-four months after the date of the grant but before the end of one hundred and twenty
months. For employees and directors who are in the service of the associated company and non-executivedirectors, the options shall expire at the end of sixty months. Options issued at a discount to market price, may onlybe exercised three years after the date of the grant.
Particulars of the options granted pursuant to the Scheme 2002 in 2006, 2007 and 2008 known as “2006 Options”,
“2007 Options” and “2008 Options” respectively were set out in the Directors’ Report for the financial years ended31 December 2006, 31 December 2007 and 31 December 2008 respectively.
The Remuneration Committee administering the Scheme 2002 comprises the following directors:
Er Kwong Wah (Chairman)Wu Zi HengTom Yee Lat Shing
Wang Kai YuenAng Swee Tian
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73COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Directors’ ReportFor The Financial Year Ended 31 December 2011
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:
Aggregate
granted since
commencement
of Scheme
2002 to
Aggregate
exercised since
commencement
of Scheme
2002 to
Aggregate
lapsed since
commencement
of Scheme
2002 to
Aggregate
outstanding
as at
Name of directors 31.12.2011 31.12.2011 31.12.2011 31.12.2011
Tom Yee Lat Shing 2,200,000 1,900,000 – 300,000Wang Kai Yuen 2,200,000 1,900,000 – 300,000
Er Kwong Wah 2,200,000 1,600,000 – 600,000
Li Jian Xiong 4,700,000 3,300,000 – 1,400,000
Lu Cheng Gang 2,100,000 – 700,000 1,400,000
Ye Bin Lin 4,700,000 3,300,000 – 1,400,000
Liu De Tian 4,400,000 3,000,000 – 1,400,000
22,500,000 15,000,000 700,000 6,800,000
No options have been granted to controlling shareholders of the Company or their associates (as defined in theListing Manual of the Singapore Exchange Securities Trading Limited).
No options have been granted during the financial year.
No participant under the Scheme 2002 has received 5% or more of the total number of shares under optionavailable under the Scheme 2002.
There were no shares of the Company allotted and issued by virtue of the exercise of options to take up unissuedshares of the Company during the financial year. There were no unissued shares of the subsidiaries under option atthe end of the financial year.
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Directors’ ReportFor The Financial Year Ended 31 December 2011
74COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
Share options (continued)
(b) Share options outstanding
The number of unissued ordinary shares of the Company under option in relation to the Scheme 2002 outstanding
at the end of the financial year was as follows:
Options relating to
Scheme 2002
Number
of unissued
ordinary
shares at
1.1.2011
Number
lapsed
during the
financial
year
Number
of unissued
ordinary
shares at
31.12.2011
Exercise
price Exercise period
’000 ’000 ’000 $
2006 Options 2,780 (2,100) 680 1.23 21.2.2007 – 20.2.2016
2007 Options (i) 10,970 (420) 10,550 2.48 5.2.2008 – 4.2.2017
2008 Options (ii) 17,200 (120) 17,080 2.95 24.3.2009 – 23.3.2018
30,950 (2,640) 28,310
(i) For non-executive directors, the exercise period shall be 5.2.2008 to 4.2.2012.
(ii) For non-executive directors, the exercise period shall be 24.3.2009 to 23.3.2013.
Independent auditor
The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.
On behalf of the directors
WU ZI HENG
Director
TOM YEE LAT SHING
Director
2 March 2012
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75COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Statement by DirectorsFor The Financial Year Ended 31 December 2011
In the opinion of the directors,
(a) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 77to 150 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group asat 31 December 2011, and of the results of the business, changes in equity and cash flows of the Group for thefinancial 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
WU ZI HENG
Director
TOM YEE LAT SHING
Director
2 March 2012
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Independent Auditor’s ReportTo The Members of Cosco Corporation (Singapore) Limited
For The Financial Year Ended 31 December 2011
76COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
Report on the Financial Statements
We have audited the accompanying financial statements of Cosco Corporation (Singapore) Limited (the “Company”) and itssubsidiaries (the “Group”) set out on pages 77 to 150, which comprise the consolidated balance sheet of the Group andbalance sheet of the Company as at 31 December 2011, the consolidated income statement, the consolidated statementof comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flowsof the Group for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance withthe provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devisingand maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are
safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that theyare recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and tomaintain accountability of assets.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit inaccordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether the financial statements are free from materialmisstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation of financial statements that give a true and fair view in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated financial statements of the Group and the balance sheet of the Company are properlydrawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a trueand fair view of the state of affairs of the Group and of the Company as at 31 December 2011, and the results, changes inequity and cash flows of the Group for the financial year ended on that date.
Report on other Legal and Regulatory Requirements
In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiariesincorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act.
PricewaterhouseCoopers LLPPublic Accountants and Certified Public Accountants
Singapore, 2 March 2012
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77COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Consolidated Income StatementFor The Financial Year Ended 31 December 2011
Note 2011 2010$’000 $’000
Sales 4 4,162,921 3,861,445
Cost of sales (3,782,127) (3,385,358)
Gross profit 380,794 476,087
Other income (net) 7 218,626 178,253
Expenses
- Distribution (64,004) (50,172)
- Administrative (201,861) (160,164)
- Finance 8 (46,713) (42,131)
Share of profit/(loss) of associated companies 20 717 (27)
Profit before income tax 287,559 401,846
Income tax expense 9(a) (74,195) (43,240)
Net profit 213,364 358,606
Profit attributable to:
Equity holders of the Company 139,671 248,837
Non-controlling interests 73,693 109,769
213,364 358,606
Earnings per share for profit attributable to equity holders of
the Company
(expressed in cents per share) 10
- Basic 6.24 11.11
- Diluted 6.24 11.11
The accompanying notes form an integral part of these financial statements.
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Consolidated Statement of Comprehensive IncomeFor The Financial Year Ended 31 December 2011
78COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
Note 2011 2010$’000 $’000
Net profit 213,364 358,606
Other comprehensive income/(loss):
Available-for-sale financial assets
- Net fair value loss 32(b)(v) (52) (279)
Currency translation differences arising from consolidation 32(b)(iii) 92,314 (100,144)
Reclassification of currency translation reserves on disposal of subsidiaries 32(b)(iii) 233 –
Other comprehensive income/(loss), net of tax 92,495 (100,423)
Total comprehensive income for the year 305,859 258,183
Total comprehensive income attributable to:
Equity holders of the Company 192,186 181,752
Non-controlling interests 113,673 76,431
305,859 258,183
The accompanying notes form an integral part of these financial statements.
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79COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Balance Sheets As at 31 December 2011
The Group The CompanyNote 2011
$’000
2010$’000
2011
$’000
2010$’000
ASSETS
Current assets
Cash and cash equivalents 11(a) 1,585,268 867,201 125,851 116,957
Forward currency contracts 12 4,728 – – –
Trade and other receivables 13 2,010,450 1,976,663 4,476 2,895
Inventories 14 491,484 518,035 – –
Construction contract work-in-progress 15 148,098 182,728 – –
Other current assets 16 6,935 4,155 192 205
4,246,963 3,548,782 130,519 120,057
Non-current assets
Trade and other receivables 17 63,867 49,089 – –
Available-for-sale financial assets 18 4,407 3,434 – –
Club memberships 19 390 557 172 172
Investments in associated companies 20 4,102 3,569 – –
Investments in subsidiaries 21 – – 369,666 374,037
Investment properties 22 14,405 14,619 – –
Property, plant and equipment 23 2,412,126 2,207,952 924 650
Intangible assets 24 9,526 9,468 – –
Deferred expenditure 25 3,211 3,169 – –
Deferred income tax assets 30 241,513 212,703 – –
2,753,547 2,504,560 370,762 374,859
Total assets 7,000,510 6,053,342 501,281 494,916
LIABILITIES
Current liabilities
Forward currency contracts 12 4,728 – – –
Trade and other payables 26 2,697,294 3,144,533 18,236 17,620
Current income tax liabilities 9(b) 66,460 72,766 372 245
Borrowings 27 1,668,322 555,148 – –
Provisions for other liabilities 29 59,430 45,049 – –
4,496,234 3,817,496 18,608 17,865
Non-current liabilities
Borrowings 27 498,090 437,065 – –
Deferred income tax liabilities 30 5,712 4,304 5,582 4,056
503,802 441,369 5,582 4,056
Total liabilities 5,000,036 4,258,865 24,190 21,921
NET ASSETS 2,000,474 1,794,477 477,091 472,995
EQUITY
Capital and reserves attributable to
equity holders of the Company
Share capital 31 270,608 270,608 270,608 270,608
Statutory and other reserves 32 181,320 103,950 45,105 45,105
Retained earnings 849,305 824,059 161,378 157,2821,301,233 1,198,617 477,091 472,995
Non-controlling interests 699,241 595,860 – –
Total equity 2,000,474 1,794,477 477,091 472,995
The accompanying notes form an integral part of these financial statements.
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Consolidated Statement of Changes In Equity For The Financial Year Ended 31 December 2011
80COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
Attributable to equityholders of the Company
NoteShare
capital
Statutory
and other
reserves
Retained
earnings Total
Non-
controlling
interests
Total
equity
$’000 $’000 $’000 $’000 $’000 $’000
2011
Beginning of financial year 270,608 103,950 824,059 1,198,617 595,860 1,794,477
Total comprehensive income for the year – 52,515 139,671 192,186 113,673 305,859
Disposal of subsidiaries 11(b)(i) – – – – (1,093) (1,093)
Dividend declared by subsidiaries to
non-controlling interests of subsidiaries – – – – (9,199) (9,199)Dividend for 2010 33 – – (89,570) (89,570) – (89,570)
Transfer from asset revaluation reserveto retained earnings 32(b)(iv) – (3,218) 3,218 – – –
Transfer from retained earnings tostatutory reserves 32(b)(ii) – 28,073 (28,073) – – –
End of financial year 270,608 181,320 849,305 1,301,233 699,241 2,000,474
2010
Beginning of financial year 270,608 174,030 639,404 1,084,042 526,650 1,610,692
Total comprehensive income for the year – (67,085) 248,837 181,752 76,431 258,183
Disposal of subsidiaries 11(b)(ii) – – – – (6,057) (6,057)
Dividend declared by subsidiaries tonon-controlling interests of subsidiaries – – – – (1,164) (1,164)
Dividend for 2009 33 – – (67,177) (67,177) – (67,177)
Transfer from asset revaluation reserveto retained earnings 32(b)(iv) – (3,218) 3,218 – – –
Transfer from retained earnings tostatutory reserves 32(b)(ii) – 223 (223) – – –
End of financial year 270,608 103,950 824,059 1,198,617 595,860 1,794,477
The accompanying notes form an integral part of these financial statements.
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81COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Consolidated Statement of cash FlowsFor The Financial Year Ended 31 December 2011
Note 2011$’000
2010$’000
Cash flows from operating activities
Net profit 213,364 358,606
Adjustments for:
- Income tax expense 74,195 43,240
- Depreciation and amortisation 164,088 168,426
- Net reversal of impairment of trade and other receivables (1,140) (31,241)
- Allowance for inventory write-down 18,144 572
- Reversal of impairment in value of transferable club memberships – (16)
- Net gain on disposal of property, plant and equipment (105) (743)
- Expected losses recognised on construction contracts 150,377 64,822
- Write-off for property, plant and equipment 249 136
- Gain on disposal of subsidiaries (9,261) –
- Net fair value gain on forward currency contracts – (13,253)
- Share of (profit)/loss from associated companies (717) 27
- Dividend income (2) (20)
- Finance expenses 46,713 42,131
- Interest income (28,548) (13,882)
627,357 618,805
Changes in working capital:
- Inventories and construction contract work-in-progress 43,037 171,920
- Trade and other receivables (59,307) (552,397)
- Trade and other payables (572,730) (469,060)
- Other current assets (2,780) 2,418
- Deferred expenditure – (2,193)
- Provisions for other liabilities 14,381 8,613
- Exchange differences 2,361 66,029
Cash generated from/(used in) operations 52,319 (155,865)
Income tax paid (103,978) (109,234)
Net cash used in operating activities (51,659) (265,099)
The accompanying notes form an integral part of these financial statements.
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Consolidated Statement of cash FlowsFor The Financial Year Ended 31 December 2011
82COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
Note 2011$’000
2010$’000
Cash flows from investing activities
Purchase of property, plant and equipment (257,898) (176,105)
Proceeds from disposal of property, plant and equipment 1,638 11,200
Purchase of investment properties (3) (10)
Purchase of a transferable club membership – (61)
Purchase of available-for-sale financial assets (824) –
Net cash outflow on disposal of subsidiaries 11(b) (3,957) (3,950)
Dividends received 119 648
Interest received 25,831 20,022
Net cash used in investing activities (235,094) (148,256)
Cash flows from financing activities
Proceeds from borrowings 2,033,907 838,819
Repayments of borrowings (918,576) (899,945)
Repayments of finance lease liabilities (3) (17)
Decrease in bank deposits pledged 1,761 266
Interest paid (43,683) (41,750)
Dividends paid to equity holders of the Company (89,570) (67,177)
Dividends paid to non-controlling interests of subsidiaries (7,116) (2,499)
Net cash provided by/(used in) financing activities 976,720 (172,303)
Net increase/(decrease) in cash and cash equivalents 689,967 (585,658)
Cash and cash equivalents at beginning of financial year 863,913 1,545,621
Effects of currency translation on cash and cash equivalents 30,168 (96,050)
Cash and cash equivalents at end of financial year 11(a) 1,584,048 863,913
The accompanying notes form an integral part of these financial statements.
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83COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
1. General information
Cosco Corporation (Singapore) Limited (the “Company”) is incorporated and domiciled in Singapore. The address of its registered office is 9 Temasek Boulevard, #07-00 Suntec Tower Two, Singapore 038989.
The Company is listed on the Singapore Exchange.
The principal activities of the Company are those of investment holding and provision of management services to thesubsidiaries. The principal activities of its subsidiaries are set out in Note 21 to the financial statements.
2. Significant accounting policies
2.1 Basis of preparation
These financial statements have been prepared in accordance with Singapore Financial Reporting Standards(“FRS”). The financial statements have been prepared under the historical cost convention, except as disclosed inthe accounting policies below.
The preparation of financial statements in conformity with FRS requires management to exercise its judgement in theprocess of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimatesand assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are significant to the financial statements, are disclosed in Note 3.
As at 31 December 2011, the Group’s current liabilities exceed its current assets by $249,271,000 (2010:$268,714,000). The directors expect that the Group will be able to meet its liabilities as and when they fall due onthe basis of the undrawn committed credit facilities.
Interpretations and amendments to published standards effective in 2011
On 1 January 2011, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that aremandatory 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 adoption of these new or amended FRS and INT FRS did not result in substantial changes to the Group’s andCompany’s accounting policies and had no material effect on the amounts reported for the current or prior financial
years.
2.2 Revenue recognition
Revenue comprises the fair value of the consideration received or receivable for the ship repair, ship buildingand marine engineering income, rental income, time charter revenue, shipping agency income and sale of scrapmaterials in the ordinary course of the Group’s activities. Revenue is presented net of value-added tax, rebates anddiscounts, and after eliminating revenue within the Group.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
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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, when it is
probable that the collectibility of the related receivables is reasonably assured and when the specific criteria for eachof the Group’s activities are met as follows:
(a) Rendering of services
(i) 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 outfitting components is recognised on the percentage-of-completion method based on progress of the contract work, where the outcome of the contractcan be estimated reliably. If the contract covers a number of projects and the cost and revenue of such individual projects can be identified within the terms of the overall contract, each such projectis treated as a separate contract. Provision is made in full where applicable for expected losses oncontracts in progress. Please refer to the paragraph “Construction contracts” for the accounting
policy on revenue from construction contracts for ship building and marine related activities.
(ii) Shipping
Revenue from time charter is recognised on the straight-line basis over the period of the time charteragreement. Any losses arising from time charters are provided for in full as soon as they are expected.
Booking commissions, agency and transhipment fees are recognised upon the rendering of servicesto customers.
Revenue from freight forwarding, transport agency and feeder services are recognised when theservice is rendered.
(b) Rental income
Rental income from operating leases on investment properties and property, plant and equipment isrecognised on the straight-line basis over the lease term.
(c) Sale of scrap materials
Revenue from sale of scrap materials is recognised when the products have been delivered to the customer,the customer has accepted the products and collectibility of the related receivables is reasonably assured.
(d) Interest income
Interest income is recognised on the time-proportion basis using the effective interest method.
(e) Dividend income
Dividend income is recognised when the right to receive payment is established.
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85COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
2. Significant accounting policies (continued)
2.3 Group accounting
(a) Subsidiaries
(i) Consolidation
Subsidiaries are entities (including special purpose entities) over which the Group has powerto govern the financial and operating policies so as to obtain benefits from its activities, generallyaccompanied by a shareholding giving rise to a majority of the voting rights. The existence and effectof potential voting rights that are currently exercisable or convertible are considered when assessing
whether the Group controls another entity. Subsidiaries are consolidated from the date on which
control is transferred to the Group. They are de-consolidated from the date on which control ceases.
In preparing the consolidated financial statements, transactions, balances and unrealised gains ontransactions between group entities are eliminated. Unrealised losses are also eliminated but areconsidered an impairment indicator of the asset transferred. Accounting policies of subsidiaries havebeen changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests are that part of the net results of operations and of net assets of a subsidiaryattributable to the interests which are not owned directly or indirectly by the equity holders of theCompany. They are shown separately in the consolidated income statement, the consolidatedstatement of comprehensive income, statement of changes in equity and balance sheet. Totalcomprehensive income is attributed to the non-controlling interests based on their respective interestsin a subsidiary, even if this results in the non-controlling interests having a deficit balance.
(ii) Acquisitions
The acquisition method of accounting is used to account for business combinations by the Group.
The consideration transferred for the acquisition of a subsidiary or business comprises the fair valueof the assets transferred, the liabilities incurred and the equity interests issued by the Group. Theconsideration transferred also includes the fair value of any contingent consideration arrangement and
the fair value of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination
are, with limited exceptions, measured initially at their fair values at the acquisition date.
On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in theacquiree at the date of acquisition either at fair value or at the non-controlling interest’s proportionateshare of the acquiree’s net identifiable assets.
The excess of (i) the consideration transferred, the amount of any non-controll ing interest in theacquiree and the acquisition-date fair value of any previous equity interest in the acquiree over (ii) thefair value of the net identifiable assets acquired is recorded as goodwill. Please refer to the paragraph“Intangible assets - Goodwill on acquisitions” for the subsequent accounting policy on goodwill.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
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2. Significant accounting policies (continued)
2.3 Group accounting (continued)
(a) Subsidiaries (continued)
(iii) Disposals
When a change in the Group ownership interest in a subsidiary results in a loss of control overthe subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts previously recognised in other comprehensive income in respect of that entity are alsoreclassified to the income statement or transferred directly to retained earnings if required by a
specific Standard.
Any retained equity interest in the entity is remeasured at fair value. The difference between thecarrying amount of the retained interest at the date when control is lost and its fair value is recognisedin the income statement.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the
accounting policy on investments in subsidiaries in the separate financial statements of the Company.
(b) Transactions with non-controlling interests
Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control over thesubsidiary are accounted for as transactions with equity owners of the Company. Any difference between thechange in the carrying amounts of the non-controlling interest and the fair value of the consideration paid or
received is recognised within equity attributable to the equity holders of the Company.
(c) Associated companies
Associated companies are entities over which the Group has significant influence, but not control, generallyaccompanied by a shareholding giving rise to voting rights of 20% and above but not exceeding 50%.Investments in associated companies are accounted for in the consolidated financial statements using theequity method of accounting less impairment losses, if any.
(i) Acquisitions
Investments in associated companies are initially recognised at cost. The cost of an acquisitionis measured at the fair value of the assets given, equity instruments issued or liabilities incurred or
assumed at the date of exchange, plus costs directly attributable to the acquisition. Goodwill onassociated companies represents the excess of the cost of acquisition of the associate over the
Group’s share of the fair value of the identifiable net assets of the associate and is included in thecarrying amount of the investments.
(ii) Equity method of accounting
In applying the equity method of accounting, the Group’s share of its associated companies’ post-acquisition profits or losses are recognised in the income statement and its share of post-acquisition
other comprehensive income is recognised in other comprehensive income. These post-acquisitionmovements and distributions received from the associated companies are adjusted against thecarrying amount of the investments. When the Group’s share of losses in an associated companyequals 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 madepayments on behalf of the associated company.
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87COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
2. Significant accounting policies (continued)
2.3 Group accounting (continued)
(c) Associated companies (continued)
(ii) Equity method of accounting (continued)
Unrealised gains on transactions between the Group and its associated companies are eliminated tothe extent of the Group’s interest in the associated companies. Unrealised losses are also eliminatedunless the transaction provides evidence of an impairment of the asset transferred. The accountingpolicies of associated companies have been changed where necessary to ensure consistency with
the accounting policies adopted by the Group.
(iii) Disposals
Investments in associated companies are derecognised when the Group loses significant influence. Any retained interest in the entity is remeasured at its fair value. The difference between the carryingamount of the retained interest at the date when significant influence is lost and its fair value is
recognised in the income statement.
Gains and losses arising from partial disposals or dilutions in investments in associated companies inwhich significant influence is retained are recognised in the income statement.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for theaccounting policy on investments in associated companies in the separate financial 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 lessaccumulated impairment losses. Buildings and leasehold land are subsequently carried at cost lessaccumulated depreciation and accumulated impairment losses.
(ii) Motor vessels
Motor vessels are initially recognised at cost and subsequently carried at cost less accumulated
depreciation and accumulated impairment losses.
The cost of motor vessels includes actual interest incurred on borrowings used to finance the motorvessels while under construction and other direct relevant expenditure incurred in bringing the vesselsinto operation. For this purpose, the interest rate applied to funds provided for constructing the motorvessels 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 motorvessels.
(iii) Other property, plant and equipment
All other items of property, plant and equipment are initially recognised at cost and subsequentlycarried at cost less accumulated depreciation and accumulated impairment losses.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
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2. Significant accounting policies (continued)
2.4 Property, plant and equipment (continued)
(a) Measurement (continued)
(iv) Components of costs
The cost of an item of property, plant and equipment initially recognised includes its purchaseprice and any cost that is directly attributable to bringing the asset to the location and conditionnecessary for it to be capable of operating in the manner intended by management. Cost alsoincludes borrowing costs that are directly attributable to the acquisition, construction or production
of a qualifying asset (Note 2.6). The projected cost of dismantlement, removal or restoration
is also recognised as part of the cost of property, plant and equipment if the obligation for thedismantlement, removal or restoration is incurred as a consequence of either acquiring the asset orusing the asset for purpose other than to produce inventories.
(b) Depreciation
Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculatedusing the straight-line method to allocate their depreciable amounts over their estimated useful lives asfollows:
Useful lives
Buildings on freehold land 50 years
Leasehold land and buildings 10 - 50 yearsOffice renovations, furniture, fixtures and equipment 3 - 5 years
Plant, machinery and equipment 3 - 10 years
Motor vehicles 5 - 10 years
Motor vessels 20 years
Docks and quays 30 years
No depreciation is provided for construction-in-progress.
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 arerecognised in the income statement when the changes arise.
(c) Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has already been recognised isadded to the carrying amount of the asset only when it is probable that future economic benefits associated
with the item will flow to the Group and the cost of the item can be measured reliably. All other repair andmaintenance expenses are recognised in the income statement when incurred.
The motor vessels are subject to overhauls at regular intervals. The inherent components of the initialoverhaul are determined based on the estimated costs of the next overhaul and are separately depreciatedover a period of 2½ years in order to reflect 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 andits carrying amount is recognised in the income statement.
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89COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
2. Significant accounting policies (continued)
2.5 Intangible assets
Goodwill on acquisitions
Goodwill on acquisitions of subsidiaries and businesses on or after 1 January 2010 represents the excess of (i) theconsideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fairvalue of any previous equity interest in the acquiree over (ii) the fair value of the net identifiable assets acquired.
Goodwill on acquisition of subsidiaries and businesses prior to 1 January 2010 and on acquisition of joint venturesand associated companies represents the excess of the cost of the acquisition over the fair value of the Group’s
share of the net identifiable assets acquired.
Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulatedimpairment 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 goodwillrelating to the entity sold, except for goodwill arising from acquisitions prior to 1 January 2001. Such goodwillwas adjusted against retained profits in the year of acquisition and is not recognised in the income statement ondisposal.
2.6 Borrowing costs
Borrowing costs are recognised in the income statement using the effective interest method except for those coststhat are directly attributable to borrowings acquired specifically for the construction of motor vessels, docks andquays. The actual borrowing costs incurred during the construction period less any investment income on temporaryinvestments of these borrowings, are capitalised in the cost of the docks and quays.
2.7 Construction contracts
A construction contract is a contract specifically 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 theirultimate 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 arerecognised 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 cannotbe estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to berecoverable. When it is probable that total contract costs will exceed total contract revenue, the expected loss isrecognised as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contractwork 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 isprobable 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 financial year in connection with future activity on a contract are excluded from costsincurred to date when determining the stage of completion of a contract. Such costs are shown as “constructioncontract work-in-progress” on the balance sheet unless it is not probable that such contract costs are recoverablefrom the customers, in which case, such costs are recognised as an expense immediately.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
90COSCO Corporation (Singapore) Limited
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2. Significant accounting policies (continued)
2.7 Construction contracts (continued)
At the balance sheet date, the cumulative costs incurred plus recognised profits (less recognised losses) on eachcontract is compared against the progress billings. Where cumulative costs incurred plus the recognised profits(less recognised losses) exceed progress billings, the balance is presented as due from customers on constructioncontracts within “trade and other receivables”. Where progress billings exceed cumulative costs incurred plusrecognised profits (less recognised losses), the balance is presented as due to customers on construction contractswithin “trade and other payables”.
Progress billings not yet paid by customers and retentions by customers are included within “trade and otherreceivables”. Advances received are included within “trade and other payables”.
2.8 Investment properties
Investment properties include those portions of office buildings that are held for long-term rental yields and/or forcapital appreciation.
Investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciationand accumulated impairment losses. Depreciation is calculated using the straight-line method to allocatethe depreciable amounts over the estimated useful lives of 10 to 50 years. The residual values, useful lives anddepreciation method of investment properties are reviewed, and adjusted as appropriate, at each balance sheetdate. 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 renovationsand improvements is capitalised and the carrying amounts of the replaced components are recognised in theincome statement. The cost of maintenance, repairs and minor improvements is recognised in the income statementwhen incurred.
On disposal of an investment property, the difference between the disposal proceeds and the carrying amount isrecognised in the income statement.
2.9 Investments in subsidiaries and associated companies
Investments in subsidiaries and associated companies are carried at cost less accumulated impairment losses inthe Company’s balance sheet. On disposal of investments in subsidiaries and associated companies, the differencebetween disposal proceeds and the carrying amounts of the investments are recognised in the income statement.
2.10 Impairment of non-financial assets
(a) Goodwill
Goodwill recognised separately as an intangible asset is tested for impairment annually, and whenever thereis indication that the goodwill may be impaired. Goodwill included in the carrying amount of an investment inassociated company is tested for impairment as part of the investment, rather than separately.
For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating unit (“CGU”) expected to benefit from synergies arising from the business combination.
An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds therecoverable amount of the CGU. The recoverable amount of a CGU is the higher of a CGU’s fair value lesscost to sell and value-in-use.
The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated tothe CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each assetin the CGU.
An impairment loss on goodwill is recognised as an expense and is not reversed in a subsequent period.
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91COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
2. Significant accounting policies (continued)
2.10 Impairment of non-financial assets (continued)
(b) Property, plant and equipment
Investment properties
Investments in subsidiaries and associated companies
Property, plant and equipment, investment properties and investments in subsidiaries and associatedcompanies are tested for impairment whenever there is any objective evidence or indication that these assetsmay be impaired.
For the purpose of impairment testing, 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 cashinflows that are largely independent of those from other assets. If this is the case, the recoverable amount isdetermined 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 carryingamount 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 inthe income statement unless the asset is carried at revalued amount, in which case, such impairment loss istreated as a revaluation decrease.
An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a changein the estimates used to determine the asset’s recoverable amount since the last impairment loss was
recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided thatthis amount does not exceed the carrying amount that would have been determined (net of any accumulatedamortisation 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, unlessthe 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 as anexpense, a reversal of that impairment is also credited to the income statement.
2.11 Financial assets
(a) Classification
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loansand receivables, held-to-maturity, and available-for-sale. The classification depends on the nature of the
asset and the purpose for which the assets were acquired. Management determines the classification of itsfinancial assets at initial recognition and in the case of assets classified as held-to-maturity, re-evaluates thisdesignation at each balance sheet date.
(i) Financial assets at fair value through profit or loss
This category has two sub-categories: fi nancial assets held for trading, and those designatedat fair value through profit or loss at inception. A financial asset is classified as held for trading if it
is acquired principally for the purpose of selling in the short term. Financial assets designated asat fair value through profit or loss at inception are those that are managed and their performancesare 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 inthis category are presented as current assets if they are either held for trading or are expected to berealised within 12 months after the balance sheet date.
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92COSCO Corporation (Singapore) Limited
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2. Significant accounting policies (continued)
2.11 Financial assets (continued)
(a) Classification (continued)
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. They are presented as current assets, except for those expectedto be realised later than 12 months after the balance sheet date which are presented as non-currentassets. Loans and receivables are presented as “trade and other receivables” and “cash and cash
equivalents”.
(iii) Held-to-maturity financial assets
Held-to-maturi ty fi nancial assets are non-derivative fi nancial assets with fi xed or determinablepayments and fixed maturities that the Group’s management has the positive intention and abilityto hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity
financial assets, the whole category would be tainted and reclassified as available-for-sale. They arepresented as non-current assets, except for those maturing within 12 months after the balance sheetdate which are presented as current assets. The Group currently does not have any held-to-maturityfinancial assets.
(iv) Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category ornot classified in any of the other categories. They are presented as non-current assets unless theinvestment matures or management intends to dispose of the assets within 12 months after thebalance sheet date.
(b) Recognition and derecognition
Regular way purchases and sales of financial 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 flows from the financial assets haveexpired or have been transferred and the Group has transferred substantially all risks and rewardsof ownership. On disposal of a financial asset, the difference between the carrying amount and the sale
proceeds is recognised in the income statement. Any amount in other comprehensive income relating to thatasset is reclassified to the income statement.
Trade receivables that are factored out to banks and other financial institutions with recourse to the Groupare not derecognised until the recourse period has expired and the risks and rewards of the receivableshave been fully transferred. The corresponding cash received from the financial institutions is recorded asborrowings.
(c) Initial measurement
Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fairvalue through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fairvalue through profit or loss are recognised immediately as expenses.
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93COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
2. Significant accounting policies (continued)
2.11 Financial assets (continued)
(d) Subsequent measurement
Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequentlycarried at fair value. Loans and receivables and held-to-maturity financial assets are subsequently carried atamortised cost using the effective interest method.
Changes in the fair value of financial assets at fair value through profit or loss including the effects of currencytranslation, interest and dividends, are recognised in the income statement when the changes arise.
Interest and dividend income on available-for-sale financial assets are recognised separately in the incomestatement. Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominatedin foreign currencies are analysed into currency translation differences on the amortised cost of the securitiesand other changes; the currency translation differences are recognised in the income statement and theother changes are recognised in other comprehensive income and accumulated in the fair value reserve.Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in
other comprehensive income and accumulated in the fair value reserve, together with the related currencytranslation differences.
(e) Impairment
The Group assesses at each balance sheet date whether there is objective evidence that a financial assetor a group of financial assets is impaired and recognises an allowance for impairment when such evidence
exists.
(i) Loans and receivables/Held-to-maturity financial assets
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, anddefault or significant delay in payments are objective evidence that these financial 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 estimatedfuture cash fl ows, discounted at the original effective interest rate. When the asset becomesuncollectible, it is written off against the allowance account. Subsequent recoveries of amountspreviously written off are recognised against the same line item in the income statement.
The impairment allowance is reduced through the income statement in a subsequent period whenthe 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 carryingamount does not exceed the amortised cost had no impairment been recognised in prior periods.
(ii) Available-for-sale financial assets
In addition to the objective evidence of impairment described in Note 2.11(e)(i), a significant orprolonged decline in the fair value of an equity security below its cost is considered as an indicator
that the available-for-sale financial asset is impaired.
If any evidence of impairment exists, the cumulative loss that was recognised in other comprehensiveincome is reclassified 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 currentfair value, less any impairment loss previously recognised as an expense. The impairment lossesrecognised as an expense on equity securities are not reversed through the income statement.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
94COSCO Corporation (Singapore) Limited
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2. Significant accounting policies (continued)
2.11 Financial assets (continued)
(f) Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is alegally enforceable right to offset and there is an intention to settle on a net basis or realise the asset andsettle the liability simultaneously.
2.12 Financial guarantees
The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries and third parties
for services provided to a subsidiary. These guarantees are financial guarantees as they require the Company toreimburse the banks and third parties if the subsidiaries fail to make principal or interest payments when due inaccordance with the terms of their borrowings or payment for services when due, respectively.
Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s balancesheet.
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 theunamortised amount. In this case, the financial guarantees shall be carried at the expected amount payable to thebank in the Company’s balance sheet.
Intra-group transactions are eliminated on consolidation.
2.13 Borrowings
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for atleast 12 months after the balance sheet date, in which case they are presented as non-current liabilities.
Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortisedcost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the effective interest method.
2.14 Trade and other payables
Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of
financial year which are unpaid. They are classified as current liabilities if payment is due within one year or less (or inthe normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using theeffective interest method.
2.15 Derivative financial instruments and hedging activities
A derivative financial instrument is initially recognised at its fair value on the date the contract is entered into andis 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 Groupdesignates each hedge as fair value hedge.
Fair value changes on derivatives that are not designated or do not qualify for hedge accounting are recognised inthe income statement when the changes arise.
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95COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
2. Significant accounting policies (continued)
2.15 Derivative financial instruments and hedging activities (continued)
The Group documents at the inception of the transaction the relationship between hedging instruments and
hedged items, as well as its risk management objective and strategies for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, on whether thederivatives designated as hedging instruments are highly effective in offsetting changes in fair values or cash flows of the hedged items.
The carrying amount of a derivative designated as a 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 a current asset or liability.
Fair value hedge
The Group has entered into currency forwards that are fair value hedges for currency risk arising from its firmcommitments for sales denominated in foreign currencies (“hedged item”). The fair value changes on the hedged
item resulting from currency risk are recognised in income statement. The fair value changes on the effective portionof currency forwards designated as fair value hedges are recognised in income statement within the same lineitem as the fair value changes from the hedged item. The fair value changes on the ineffective portion of currencyforwards are recognised separately in income statement.
2.16 Fair value estimation of financial assets and liabilities
The fair values of financial instruments traded in active markets (such as exchange-traded and over-the-countersecurities and derivatives) are based on quoted market prices at the balance sheet date. The quoted market pricesused for financial assets are the current bid prices; the appropriate quoted market prices for financial liabilities arethe current asking prices.
The fair values of financial instruments that are not traded in an active market are determined by using valuationtechniques. The Group uses a variety of methods and makes assumptions that are based on market conditionsexisting at each balance sheet date. Where appropriate, quoted market prices or dealer quotes for similar
instruments are used. Valuation techniques, such as discounted cash flow analyses, are also used to determine thefair values of the financial instruments.
The fair values of forward currency contracts are determined using actively quoted forward exchange rates.
The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.
2.17 Leases
(a) When the Group is the lessee:
The Group leases certain property, plant and equipment from non-related parties.
(i) Lessee - Finance leases
Leases of property, plant and equipment where the Group assumes substantially all risks and rewardsincidental to ownership of the leased assets are classified as finance leases.
The leased assets and the corresponding lease liabilities (net of finance charges) under finance leasesare recognised on the balance sheet as property, plant and equipment and borrowings respectively, atthe inception of the leases based on the lower of the fair value of the leased assets and the presentvalue of the minimum lease payments.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
96COSCO Corporation (Singapore) Limited
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2. Significant accounting policies (continued)
2.17 Leases (continued)
(a) When the Group is the lessee: (continued )
(i) Lessee - Finance leases (continued)
Each lease payment is apportioned between the finance expense and the reduction of theoutstanding lease liability. The finance expense is recognised in the income statement on a basis thatreflects a constant periodic rate of interest on the finance lease liability.
(ii) Lessee - Operating leases
Leases of property, plant and equipment where substantially all risks and rewards incidental toownership are retained by the lessors are classified as operating leases. Payments made underoperating leases (net of any incentives received from the lessors) are recognised in the incomestatement on the straight-line basis over the lease term.
Contingent rents are recognised as an expense in the income statement when incurred.
(b) When the Group is the lessor:
The Group leases certain items of property, plant and equipment and investment properties to non-relatedparties.
(i) Lessor - Operating leases
Leases of property, plant and equipment and investment properties where the Group retainssubstantially all risks and rewards incidental to ownership are classified as operating leases. Rentalincome from operating leases (net of any incentives given to lessees) is recognised in the incomestatement on the straight-line basis over the lease term.
Initial direct costs incurred by the Group in negotiating and arranging operating leases are added to
the carrying amount of the leased asset and recognised as an expense in the income statement overthe lease term on the same basis as the lease income.
Contingent rents are recognised as income in the income statement when earned.
2.18 Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted averagemethod. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other directcosts and related production overheads (based on normal operating capacity) but excludes borrowing costs.Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and applicable variable selling expenses.
2.19 Income taxes
Current income tax for current and prior periods is recognised at the amount expected to be paid to or recoveredfrom the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by thebalance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilitiesand their carrying amounts in the financial statements except when the deferred income tax arises from the initialrecognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither
accounting nor taxable profit or loss at the time of the transaction.
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97COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
2. Significant accounting policies (continued)
2.19 Income taxes (continued)
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 temporarydifference 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 profit will be availableagainst 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 thedeferred income tax liability is settled, based on tax rates and tax laws that have been enacted orsubstantively 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 balancesheet date, to recover or settle the carrying amounts of its assets and liabilities, except for investment
properties. Investment property measured at fair value is presumed to be recovered entirely through sale.
Current and deferred income tax are recognised as income or expense in the income statement, except to theextent that the tax arises from a business combination or a transaction which is recognised directly in equity.Deferred tax arising from a business combination is adjusted against goodwill on acquisition.
2.20 Provisions
Provisions for warranty and other liabilities are recognised when the Group has a present legal or constructiveobligation as a result of past events; it is more likely than not that an outflow of resources will be required to settlethe obligation; and the amount has been reliably estimated. Provisions are not recognised for future operatinglosses.
The Group recognises the estimated liability to repair or replace products still under warranty at the balance sheetdate. 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 theobligation using a pre-tax discount rate that reflects the current market assessment of the time value of money andthe risks specific to the obligation. The increase in the provision due to the passage of time is recognised in the
income statement as finance expense.
Changes in the estimated timing or amount of the expenditure or discount rate are recognised in the incomestatement when the changes arise.
2.21 Employee compensation
Employee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset.
(a) Defined contribution plans
Defined contribution plans are post-employment benefit plans under which the Group pays fixedcontributions into separate entities such as the Central Provident Fund and social security plans in the
People’s Republic of China (“PRC”) on a mandatory, contractual or voluntary basis. The Group has no furtherpayment obligations once the contributions have been paid.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
98COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
2. Significant accounting policies (continued)
2.21 Employee compensation (continued)
(b) Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is madefor the estimated liability for annual leave as a result of services rendered by employees up to the balancesheet 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 incomestatement with a corresponding increase in the share option reserve over the vesting period. The totalamount to be recognised over the vesting period is determined by reference to the fair value of theoptions 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 eachbalance sheet date, the Group revises its estimates of the number of shares under options that are expected
to become exercisable on the vesting date and recognises the impact of the revision of the estimates in theincome statement, with a corresponding adjustment to the share option reserve over the remaining vestingperiod.
When the options are exercised, the proceeds received (net of transaction costs) are credited to share capitalaccount when new ordinary shares are issued.
2.22 Currency translation
(a) Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency of theprimary economic environment in which the entity operates (“functional currency”). The financial statementsare presented in Singapore Dollars, which is the functional currency of the Company.
(b) Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”) are translated intothe functional currency using the exchange rates at the dates of the transactions. Currency translationdifferences resulting from the settlement of such transactions and from the translation of monetary assets
and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognisedin the income statement. However, in the consolidated financial statements, currency translation differences
arising from borrowings in foreign currencies and other currency instruments designated and qualifying as netinvestment hedges and net investment in foreign operations, are recognised in other comprehensive incomeand accumulated in the currency translation reserve.
When a foreign operation is disposed of or any borrowings forming part of the net investment of the foreignoperation are repaid, a proportionate share of the accumulated translation differences is reclassified to profitor loss, as part of the gain or loss on disposal.
All foreign exchange gains and losses impacting profit or loss are presented in the income statement within“other income (net)”.
Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates atthe date when the fair values are determined.
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99COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
2. Significant accounting policies (continued)
2.22 Currency translation (continued)
(c) Translation of Group entities’ financial statements
The results and financial position of all the Group entities (none of which has the currency of ahyperinflationary economy) that have a functional currency different from the presentation currency aretranslated into the presentation currency as follows:
(i) Assets and liabilities are translated at the closing exchange rates at the reporting date;
(ii) Income and expenses are translated at average exchange rates (unless the average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates,in which case, income and expenses are translated using the exchange rates at the dates of thetransactions); and
(iii) All resulting currency translation differences are recognised in other comprehensive income andaccumulated in the currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets andliabilities of the foreign operations and translated at the closing rates at the reporting date.
2.23 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the key
management whose members are responsible for allocating resources and assessing performance of the operatingsegments.
2.24 Cash and cash equivalents
For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includecash on hand, deposits with financial institutions which are subject to an insignificant risk of change in value andbank overdrafts and exclude pledged deposits with financial institutions. Bank overdrafts are presented as current
borrowings on the balance sheet.
2.25 Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary
shares are deducted against the share capital account.
2.26 Dividends to Company’s shareholders
Dividends to Company’s shareholders are recognised when the dividends are approved for payment.
2.27 Government grants
Grants from the government are recognised as a receivable at their fair value when there is reasonable assurancethat the grant will be received and the Group will comply with all the attached conditions.
Government grants receivable are recognised as income over the periods necessary to match them with the relatedcosts which they are intended to compensate, on a systematic basis. Government grants relating to expenses are
shown separately as other income.
Government grants relating to assets are deducted against the carrying amount of the assets.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
100COSCO Corporation (Singapore) Limited
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3. Critical accounting estimates, assumptions and judgements
Estimates, assumptions and judgements are continually evaluated and are based on historical experience and otherfactors, 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, managementapplies the statutory tax rate of the tax jurisdictions in which the subsidiaries operate in and is required toestimate 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 determinationis 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 final tax outcome of these
matters is different from the amount that were initially recorded, such differences will impact the income taxand deferred income tax provisions in the period in which such determination is made.
As management believes that the tax positions are sustainable, the Group has not recognised any additionaltax liability on these uncertain tax positions. The maximum exposure of these uncertain tax positions, notrecognised in these financial statements is $6,832,000.
(b) Construction contracts
The Group uses the percentage-of-completion method to account for its contract revenue. The stage of completion is measured by reference to the completion of a physical proportion of the contract work.
Significant judgement is required in determining the stage of completion, the estimated total contract costs,
the estimated completion dates, as well as the recoverability of the contracts.
If the stage of completion increases/decreases by 10% from management’s estimates, the Group’srevenue will increase/decrease by $625,794,000 and the Group’s cost of sales will increase/decrease by$588,061,000.
If the total contract costs to be incurred increase/decrease by 10% from management’s estimates, theGroup’s cost of sales will increase/decrease by $313,339,000.
(c) Useful life of property, plant and equipment
The management of the Group determines the estimated useful lives and related depreciation expense forthe property, plant and equipment. The management of the Group estimates useful lives of the property,
plant and equipment by reference to expected usage of the property, plant and equipment, expected repairand maintenance, and technical or commercial obsolescence arising from changes or improvements in
the market. The useful lives and related depreciation expense could change significantly as a result of thechanges in these factors.
(d) Impairment of receivables
Management reviews its receivables for objective evidence of impairment regularly. Significant financialdifficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significantdelay in payments are considered objective evidence that a receivable is impaired. In determining this,
management makes judgement as to whether there is observable data indicating that there has been asignificant change in the payment ability of the debtor, or whether there have been significant changes withadverse effect in the technological, market, economic or legal environment in which the debtor operates.
Where there is objective evidence of impairment, management makes judgements as to whether animpairment loss should be recorded in the income statement. In determining this, management usesestimates based on historical loss experience for assets with similar credit risk characteristics. The
methodology and assumptions used for estimating both the amount and timing of future cash flows arereviewed regularly to reduce any differences between the estimated loss and actual loss experience.
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101COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
3. Critical accounting estimates, assumptions and judgements (continued)
(d) Impairment of receivables (continued)
Any changes in the net present values of estimated cash flows from management’s estimates for all past duereceivables, will not result in any significant impact to the Group’s allowance for impairment.
(e) Warranty claims
The provision for warranty is based on estimates from known and expected warranty work and contractualobligation for further work to be performed after completion. The warranty provision could differ from futureclaims. Movements in provision for warranty are detailed in Note 29(b).
4. Revenue
The Group
2011 2010
$’000 $’000
Construction revenue
- Ship building and marine engineering 3,372,402 2,832,915
Rendering of services
- Ship repair and marine engineering income 723,716 886,568
- Time charter revenue 65,995 128,605
- Shipping agency income – 12,615
Others 808 742
Total revenue 4,162,921 3,861,445
5. Expenses by nature
The Group
2011 2010
$’000 $’000
Raw materials, finished goods, consumables and other overheads 2,309,492 2,036,572
Changes in inventories and construction contract work-in-progress 134,461 131,824
Net reversal of impairment of trade and other receivables (1,140) (31,241)
Expected losses recognised on construction contracts 150,377 64,822
Depreciation and amortisation 164,088 168,426
Director and employee compensation (Note 6) 338,033 317,330
Sub-contractor expenses 626,108 616,942
Allowance for inventory write-down 18,144 572
Write-off for property, plant and equipment 249 136
Rental expense on operating leases 58,016 69,886
Repairs and maintenance 35,533 22,489
Non-audit service fees paid/payable to auditor of the Company 300 77
Commission 49,194 39,917Crew overheads 10,324 13,682
Vessel overheads 6,379 8,421
Other expenses 148,434 135,839
Total cost of sales, distribution and administrative expenses 4,047,992 3,595,694
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
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6. Director and employee compensation
The Group
2011 2010
$’000 $’000
Wages, salaries and staff benefits 304,032 287,577
Employer’s contribution to defined contribution plans including CentralProvident Fund 33,696 29,468
Directors’ fees of the Company 305 285
338,033 317,330
7. Other income (net)
The Group
2011 2010
$’000 $’000
Rental income 3,095 2,564
Dividend income 2 20
Currency exchange gain - net 50,606 25,655
Interest income 28,548 13,882
Reversal of impairment in value of transferable club memberships – 16
Net fair value gain on forward currency contracts – 13,253
Net gain on disposal of property, plant and equipment 105 743
Gain on disposal of subsidiaries (Note 11(b)(i)) 9,261 –
Compensation received from customers 15,981 15,055
Government grants 5,574 4,038
Sundry income 10,256 12,743
Sale of scrap materials 95,198 90,284
218,626 178,253
8. Finance expenses
The Group
2011
$’000
2010$’000
Interest expense
- Bank borrowings and bills payable 46,552 44,564
- Loan from a fellow subsidiary 160 –
- Finance lease liabilities 1 3
Total interest expense 46,713 44,567
Less: Amount capitalised in construction of property, plant and equipment
(Note 23(c)) – (2,436)
Finance expenses recognised in the income statement 46,713 42,131
Borrowing costs on financing were capitalised at a rate of nil (2010: 3.71%) per annum.
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103COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
9. Income taxes
(a) Income tax expense
The Group
2011 2010
$’000 $’000
Tax expense attributable to profit is made up of:
Current income tax
- Singapore 551 442
- Foreign 124,610 131,484
125,161 131,926
Deferred income tax (Note 30)
- Singapore – (3)
- Foreign (23,844) (66,338)
(23,844) (66,341)
101,317 65,585
(Over)/under provision in prior financial years:
- Current income tax
- Singapore 55 (763)
- Foreign (37,194) (24,480)
(37,139) (25,243)- Deferred income tax (Note 30)
- Foreign 10,017 2,898
74,195 43,240
The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax as explained below:
The Group
2011 2010
$’000 $’000
Profit before tax and share of profit/(loss) of associated companies 286,842 401,873
Tax calculated at a tax rate of 17% (2010: 17%) 48,763 68,318
Effects of:
- Change in tax rate in other countries 36,068 (14,669)
- Different tax rates in other countries 16,726 22,631
- Singapore stepped income exemption (130) (170)
- Exemption of shipping profits under Approved International ShippingScheme and Section 13A of Singapore Income Tax Act (2,229) (7,074)
- Profits exempted from tax (3,189) (6,808)
- Income not subject to tax (2,035) (5,160)
- Expenses not deductible for tax purposes 8,396 8,894- Utilisation of previously unrecognised deferred tax asset (3,298) (383)
- Deferred tax asset not recognised 1,822 –
- Others 423 6
Tax charge 101,317 65,585
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
104COSCO Corporation (Singapore) Limited
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9. Income taxes (continued) (b) Movements in current income tax liabilities
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Beginning of financial year 72,766 84,136 245 549
Currency translation differences 9,833 (8,680) – –
Disposal of subsidiaries (Note 11(b)) (183) (139) – –
Income tax paid (103,978) (109,234) (1,718) (819)
Tax expense on profit for the currentfinancial year 125,161 131,926 1,901 1,050
Over provision in prior financial years (37,139) (25,243) (56) (535)
End of financial year 66,460 72,766 372 245
(c) The tax credit relating to each component of other comprehensive income is as follows:
2011 2010
Before
Tax
Tax
credit
After
Tax
Before Tax
Taxcredit
After Tax
$’000 $’000 $’000 $’000 $’000 $’000
Fair value loss on available-for-sale financial assets (53) 1 (52) (389) 110 (279)
Currency translationdifferences arising fromconsolidation 92,314 – 92,314 (100,144) – (100,144)
Reclassification of currencytranslation reserves ondisposal of subsidiaries 233 – 233 – – –
Other comprehensive
income/(loss) 92,494 1 92,495 (100,533) 110 (100,423)
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105COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
10. Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company
by the weighted average number of ordinary shares outstanding during the financial year.
2011 2010
Net profit attributable to equity holders of the Company ($’000) 139,671 248,837
Weighted average number of ordinary shares outstanding for basicearnings per share (’000) 2,239,245 2,239,245
Basic earnings per share (cents per share) 6.24 11.11
(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 dilutiveshare 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 (determinedas the Company’s average share price for the financial year) for the same total proceeds is added to thedenominator as the number of shares issued for no consideration. No adjustment is made to the net profit.
Diluted earnings per share attributable to equity holders of the Company is calculated as follows:
2011 2010
Net profit attributable to equity holders of the Company ($’000) 139,671 248,837
Weighted average number of ordinary shares outstanding for basicearnings per share (’000) 2,239,245 2,239,245
Adjustment for
- share options (’000) 160 658
Weighted average number of ordinary shares outstanding for dilutedearnings per share (’000) 2,239,405 2,239,903
Diluted earnings per share (cents per share) 6.24 11.11
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
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11. Cash and cash equivalents
(a) Cash and cash equivalents at the end of the financial year comprise the following:
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Cash at bank and on hand 603,948 261,309 5,796 14,361
Short-term bank deposits 981,320 605,892 120,055 102,596
1,585,268 867,201 125,851 116,957
Cash at bank and short-term bank deposits include an amount of $1,174,981,000 (2010: $473,545,000)placed with a fellow subsidiary, Cosco Finance Co., Ltd.
For the purpose of presenting the consolidated statement of cash flows, the consolidated cash and cashequivalents comprise the following:
The Group
2011 2010
$’000 $’000
Cash and bank balances (as above) 1,585,268 867,201
Less: Bank deposits pledged (Note 27) (1,220) (3,288)
Cash and cash equivalents per consolidated statement of cash flows 1,584,048 863,913
In 2011, cash and bank balances and short-term bank deposits of the Group to the extent of $1,220,000
were pledged as security for trade finance facilities.
In 2010, cash and bank balances and short-term bank deposits of the Group to the extent of $3,288,000were pledged as security for the following:
(i) long-term bank loans (Note 27) obtained to finance the purchases of certain motor vessels;
(ii) trade finance facilities; and
(iii) the issuance of banker’s guarantees in favour of third parties.
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107COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
11. Cash and cash equivalents (continued)
(b) Disposal of subsidiaries
(i) On 20 May 2011, the Company disposed of its entire interest in Costar Shipping Pte Ltd and Coslink(M) Sdn Bhd for a cash consideration of $11,650,000. The effects of the disposal on the cash flowsof the Group were:
The Group
$’000
Carrying amounts of assets and liabilities disposed
Cash and cash equivalents (15,914)
Club memberships (169)
Trade and other receivables (15,086)
Property, plant and equipment (Note 23) (2,854)
Total assets (34,023)
Trade and other payables 30,558
Current income tax liabilities (Note 9) 183
Deferred tax liabilities (Note 30) 33
Total liabilities 30,774
Net assets derecognised (3,249)
Less: Non-controlling interests 1,093
Net assets disposed (2,156)
The aggregate cash flows arising from the disposal of Costar Shipping Pte Ltd and Coslink (M) SdnBhd were:
The Group
$’000
Net assets disposed (as above) 2,156
Reclassification of currency translation reserve (Note 32(b)(iii)) 233
Gain on disposal (Note 7) 9,261
Cash proceeds from disposal 11,650
Less: Cash and cash equivalents in subsidiaries disposed (15,914)
Add: Bank deposits pledged by subsidiaries disposed 307
Net cash outflow on disposal (3,957)
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
108COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
11. Cash and cash equivalents (continued)
(b) Disposal of subsidiaries (continued)
(ii) On 30 December 2010, the Company’s 51%-owned subsidiary, Cosco Shipyard Group Co., Ltd
(“CSG”) has ceased to have control over Diesel Marine Dalian Ltd and Diesel Marine International(Nantong) Co., Ltd, being companies in which CSG has an equity interest of 30% each. As a resultof this cessation of control, the assets and liabilities of these two companies were deconsolidatedfrom the financial statements of the Group. The effects of the disposal on the cash flows of the Groupwere:
The Group
$’000
Carrying amounts of assets and liabilities disposed
Cash and cash equivalents (3,950)
Inventories (3,698)
Trade and other receivables (5,810)
Property, plant and equipment (Note 23) (6,337)
Total assets (19,795)
Trade and other payables 11,003
Current income tax liabilities (Note 9) 139
Total liabilities 11,142
Net assets derecognised (8,653)
Less: Non-controlling interests 6,057
Net assets disposed (2,596)
The aggregate cash flows arising from the disposal of Diesel Marine Dalian Ltd and Diesel MarineInternational (Nantong) Co., Ltd were:
The Group
$’000
Net assets disposed (as above) 2,596
Reclassification to investment in associated companies (Note 20) (2,596)Cash proceeds from disposal –
Less: Cash and cash equivalents in subsidiaries disposed (3,950)
Net cash outflow on disposal (3,950)
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109COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
12. Forward currency contracts
The Group
Contract Fair value
notional
amount Assets Liabilities Net assets
$’000 $’000 $’000 $’000
2011
Derivatives held for hedging
Fair-value hedges
- Forward currency contracts - current 161,167 4,728 (4,728) –
Non-hedging instruments- Forward currency contracts – – – –
2010
Derivatives held for hedging
Fair-value hedges
- Forward currency contracts - current – – – –
Non-hedging instruments
- Forward currency contracts – – – –
The forward currency contracts are transacted to hedge for currency risk arising from the Group’s commitments for
sales denominated in foreign currencies.
Fair value gains/(losses) on the above fair value hedges are recognised in the profit and loss as follows:
The Group
2011 2010
$’000 $’000
Hedged item: Firm commitments (4,728) –
Hedging instrument: Forward currency contracts 4,728 –
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
110COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
13. Trade and other receivables - current
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Trade receivables:
- Non-related parties (i) 335,065 388,841 – –
- Fellow subsidiaries 90,239 114,600 – –
- Associated companies – 2,502 – –
- A subsidiary – – – 131
425,304 505,943 – 131
Less: Allowance for impairment of receivables -non-related parties (13,647) (17,553) – –
Trade receivables - net 411,657 488,390 – 131
Construction contracts due fromcustomers (Note 15):
- Non-related parties 755,421 545,451 – –
- Fellow subsidiaries – 20,346 – –
755,421 565,797 – –
Other receivables:
- Non-related parties 28,728 56,126 6 109
- Ultimate holding corporation (iv) – 23 – –
- Fellow subsidiaries (ii) 7,266 4,488 9 –
- Associated companies (iii) 1,098 – – –
- A subsidiary – – 67 –
37,092 60,637 82 109
Less: Allowance for impairment of otherreceivables- non-related parties (2,706) (792) – –
Other receivables - net 34,386 59,845 82 109
Advances paid to suppliers 804,755 858,775 – –
Staff advances 1,110 1,222 – –
Dividend receivable from
- Subsidiaries – – 4,394 2,655
- Associated companies 3,121 2,634 – –
Total 2,010,450 1,976,663 4,476 2,895
(i) Certain subsidiaries of the Group have factored trade receivables with carrying amounts of $328,756,000 (2010:$45,283,000) to banks in exchange for cash during the financial year ended 31 December 2011. The transactions havebeen accounted for as collateralised borrowings as the banks have full recourse to the subsidiaries in the event of default bythe debtors (Note 27).
(ii) Other receivables due from fellow subsidiaries are unsecured, interest-free and repayable on demand.
(iii) Other receivables due from associated companies are unsecured, interest-bearing at 6.65% per annum and repayable ondemand.
(iv) In 2010, other receivables due from ultimate holding corporation were unsecured, interest-free and repayable on demand.
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111COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
14. Inventories
The Group
2011 2010
$’000 $’000
Raw materials 360,273 429,816
Work-in-progress 86,027 46,014
Finished goods 45,184 42,205
491,484 518,035
The cost of inventories recognised as an expense and included in “cost of sales” amounted to $3,672,894,000
(2010: $3,322,337,000).
15. Construction contract work-in-progress
The Group
2011 2010
$’000 $’000
Beginning of financial year 182,728 199,385
Contract costs incurred during the financial year 2,927,243 2,566,433
Contract expenses recognised in the income statement during the financial year (2,970,114) (2,572,134)
Currency translation differences 8,241 (10,956)End of financial year 148,098 182,728
Aggregate costs incurred and profits recognised (less losses recognised) to date on
uncompleted construction contracts 3,160,935 2,616,896
Less: Progress billings (2,854,686) (2,448,845)
Currency translation differences 19,629 (6,424)
325,878 161,627
Analysed as:
Due from customers on construction contracts (Note 13) 755,421 565,797
Due to customers on construction contracts (Note 26) (429,543) (404,170)
325,878 161,627
Advances received on construction contracts (Note 26) 412,314 1,122,503
16. Other current assets
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Deposits 1,552 1,687 11 7
Prepayments 5,383 2,468 181 1986,935 4,155 192 205
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
112COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
17. Trade and other receivables - non-current
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Trade receivables:
- Non-related parties (i) 75,717 72,739 – –
Less: Current portion (23,360) (34,507) – –
52,357 38,232 – –
Other receivables:
- A non-related party (ii) 11,510 10,857 – –
63,867 49,089 – –
(i) As at 31 December 2011, trade receivables amounting to $74,197,000 are unsecured, bearing interest ranging from 3% to7% per annum with quarterly instalment payments that will be repayable in full by 2016. The remaining trade receivablesamounting to $1,520,000 are unsecured, interest-free and will be repayable in full by 2013. The fair values of the non-current trade receivables approximated its carrying amounts, determined from cash flow analyses discounted at marketborrowing rates of 2.83% per annum which the directors expected to be available to the Group.
As at 31 December 2010, trade receivables amounting to $33,049,000 are unsecured, bearing interest at 7% per annumwith quarterly instalment payments that will be repayable in full by 2015. The remaining trade receivables amounting to$39,690,000 are secured, interest-free and with monthly instalment payments that will be repayable in full by 2012. Thefair values of the non-current trade receivables approximated its carrying amounts, determined from the cash flow analysesdiscounted at market borrowing rates of 3.40% per annum which the directors expected to be available to the Group.
(ii) Other receivables from a non-related party are unsecured and interest-free.
As at 31 December 2011, the fair values of the non-current other receivables are unlikely to be materially different from itscarrying amounts, determined from cash flow analyses discounted at market borrowing rates of 5.31% per annum (2010:3.40% per annum) which the directors expected to be available to the Group.
18. Available-for-sale financial assets
The Group
2011 2010
$’000 $’000
Beginning of financial year 3,434 4,034
Currency translation differences 202 (211)
Additions 824 –
Fair value loss recognised in equity (Note 32(b)(v)) (53) (389)
End of financial year 4,407 3,434
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113COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
18. Available-for-sale financial assets (continued)
At the balance sheet date, available-for-sale financial assets include the following:
The Group
2011 2010
$’000 $’000
Quoted equity shares in a corporation, at fair value 505 530
Unquoted equity shares in corporations, at cost
- A fellow subsidiary 2,883 1,943
- A non-related party 1,019 961
3,902 2,904
4,407 3,434
The directors do not anticipate that the carrying amounts of these unquoted equity investments will deviatesignificantly from their fair values on the basis that these unquoted equity shares in corporations are in positive nettangible assets position.
19. Club memberships
The Group The Company
2011 2010 2011 2010$’000 $’000 $’000 $’000
Transferable club memberships, at cost 671 937 428 428
Currency translation differences 2 (13) – –
Allowance for impairment in value of clubmemberships (283) (367) (256) (256)
390 557 172 172
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
114COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
20. Investments in associated companies
The Group
2011 2010
$’000 $’000
Beginning of financial year 3,569 1,922
Currency translation differences 235 (226)
Reclassification from investment in subsidiaries(Note 11(b)(ii)) – 2,596
Share of profit/(loss) after tax 717 (27)
Dividends declared, net of tax (419) (696)
End of financial year 4,102 3,569
The summarised financial information of associated companies, not adjusted for theproportion of ownership interest held by the Group, is as follows:
- Assets 36,338 29,638
- Liabilities 22,904 18,141
- Revenue 25,396 24,052
- Net profit/(loss) 2,283 (207)
Details of associated companies are set out below:
Name of
associated companies Principal activities
Country of
incorporation/
business
% ofpaid-up
capital held by
subsidiaries
2011
%
2010%
DMI (Guangzhou) Ltd (i) Overhaul and spare-parts replacement andrepair
People’sRepublicof China(“PRC”)
30 30
Tru-Marine Cosco (Tianjin)Engineering Co., Ltd (i)
Overhaul and spare-parts replacement andrepair
PRC 40 40
Diesel Marine International(Nantong) Co., Ltd (i) and (ii)
Overhaul and spare-parts replacement andrepair
PRC 30 30
Diesel Marine Dalian Ltd (i)and (ii)
Overhaul and spare-parts replacement andrepair
PRC 30 30
(i) Audited by RSM China Certified Public Accountants, PRC.
(ii) See Note 11(b)(ii).
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115COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
21. Investments in subsidiaries
The Company
2011 2010
$’000 $’000
Unquoted equity shares
Beginning of financial year 393,535 310,871
Additions – 82,664
Disposals (4,789) –
388,746 393,535
Accumulated impairment losses (19,080) (19,498)
End of financial year 369,666 374,037
Movements in accumulated impairment losses are as follows:
2011 2010
$’000 $’000
Beginning of financial year 19,498 20,058
Reversal of impairment charge (418) (560)
End of financial year 19,080 19,498
Details of the subsidiaries are set out below:
Name ofsubsidiaries
Principalactivities
Country ofincorporation/
businessCost of
investment
% of paid-up capital held by
The Company Subsidiaries
2011 2010 2011 2010 2011 2010
$’000 $’000 % % % %
Cosco(Singapore)Pte Ltd (i)
Ship owning, shipchartering andinvestment holding
Singapore 87,664 87,664 100 100 – –
Cosco MarineEngineering(Singapore)
Pte Ltd (i)
Ship repairing,marine engineering,container repairs
and services,fabrication worksservices andproduction of marineoutfitting components
Singapore 2,242 2,242 90 90 – –
Harington PropertyPte Ltd (i)
Trading and investingin properties, provideproperty managementservices andinvestment holding
Singapore 52,701 52,701 100 100 – –
Coslink (M)Sdn. Bhd. (ii),(vi)
Shipping agency andrelated activities
Malaysia – 771 – 70 – 18
Costar Shipping
Pte Ltd (i), (vi)
Shipping agent
and investmentholding
Singapore – 4,018 – 70 – –
Cosco ShipyardGroup Co., Ltd(iv) and (v)
Investment holding People’sRepublic of
China (“PRC”)
191,173 191,173 51 51 – –
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
116COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
21. Investments in subsidiaries (continued)
Name ofsubsidiaries
Principalactivities
Country ofincorporation/
businessCost of
investment
% of paid-up capital held by
The Company Subsidiaries
2011 2010 2011 2010 2011 2010
$’000 $’000 % % % %
Cosco (Nantong)Shipyard Co., Ltd(iv) and (v)
Ship repair andmarine engineering
PRC 24,670 24,670 50 50 50 50
Cosco (Dalian)Shipyard Co., Ltd
(iv) and (v)
Ship repair, shipbuilding and marine
engineering
PRC 30,296 30,296 39 39 59 59
Cosco (Guangdong)Shipyard Co., Ltd(iv) and (v)
Ship repair and shipbuilding
PRC – – – – 75 75
Cosco (Zhoushan)Shipyard Co., Ltd(iv) and (v)
Ship repair, shipbuilding and marineengineering
PRC – – – – 100 100
Cosco (Xiamen)Shipyard Co., Ltd (iv)
Ship repair PRC – – – – 51 51
Cosco (Shanghai)Shipyard Co., Ltd (iv)
Ship repair PRC – – – – 95 95
Cosco (Tianjin)Shipyard Co., Ltd (iv)
Ship repair PRC – – – – 90 90
Cosco (Lianyungang)Shipyard Co., Ltd (iv)
Ship repair PRC – – – – 60 60
Cosco (Qidong)Offshore Co., Ltd(iv) and (v)
Offshore marineengineering
PRC – – – – 60 60
Cosco Dalian RikkyOcean EngineeringCo., Ltd (iv)
Overhaul, repair,commissioningand spare-partsreplacement of governor,turbocharger andengine fuel system
PRC – – – – 75 75
Cosco (Nantong)Ocean ShipyardCo., Ltd (iv)
Ship repair andcorrosion control
PRC – – – – 60 60
Zhongyuan Sea-Land EngineeringCo., Ltd (iv)
Ship repair PRC – – – – 51 51
Cosco Shipyard Total AutomationCo., Ltd (iv)
Design, manufacture,sale and technicalservice relating tovessels and industrialinstruments
PRC – – – – 60 60
Cos Fair ShippingPte Ltd (i)
Ship owning and shipchartering
Singapore/ Worldwide
– – – – 100 100
Cos GloryShipping Inc. (i)
Ship owning and shipchartering
Panama/ Worldwide
– – – – 100 100
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117COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
21. Investments in subsidiaries (continued)
Name ofsubsidiaries
Principalactivities
Country ofincorporation/
businessCost of
investment
% of paid-up capital held by
The Company Subsidiaries
2011 2010 2011 2010 2011 2010
$’000 $’000 % % % %
Hanbo ShippingLimited (ii)
Ship owning and shipchartering
Hong Kong/ Worldwide
– – – – 100 100
Sanbo ShippingLimited (ii)
Ship owning and shipchartering
Hong Kong/ Worldwide
– – – – 100 100
Cos OrchidShipping Pte Ltd (i)
Ship owning and shipchartering
Singapore/ Worldwide
– – – – 100 100
Cos ProsperityShipping Pte Ltd (i)
Ship owning and shipchartering
Singapore/ Worldwide
– – – – 100 100
Cos Knight ShippingMaritime Inc. (i)
Ship owning and shipchartering
Panama/ Worldwide
– – – – 100 100
Cos Lucky ShippingMaritime Inc. (i)
Ship owning and shipchartering
Panama/ Worldwide
– – – – 100 100
Costar Agencies (M)Sdn. Bhd. (iii), (vi)
Shipping agent Malaysia – – – – – 100
CNF Shipping (M)Sdn. Bhd. (iii), (vi) Shipping agent Malaysia – – – – – 60
CNF Shipping AgenciesPte Ltd (i), (vi)
Vessel chartering,feedering, freightforwarders, transportagent, warehousingand other relatedservices
Singapore – – – – – 100
CoscoEngineeringPte Ltd (i)
Ship repairing, marineengineering, containerrepairs and services,fabrication worksservices and
production of marineoutfitting components
Singapore – – – – 100 100
388,746 393,535
(i) Audited by PricewaterhouseCoopers LLP, Singapore.
(ii) Audited by PricewaterhouseCoopers firms outside Singapore.
(iii) Audited by Deloitte KassimChan, Malaysia.
(iv) Audited by RSM China Certified Public Accountants, PRC.
(v) Audited by PricewaterhouseCoopers LLP, Singapore and firms outside Singapore for the purposes of preparation of consolidated financial statements.
(vi) See Note 11(b)(i)
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
118COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
22. Investment properties
The Group
2011 2010
$’000 $’000
Cost
Beginning of financial year 19,258 15,804
Currency translation differences 337 (121)
Additions 3 10
Reclassification from property, plant and equipment (Note 23) – 3,565
End of financial year 19,598 19,258
Accumulated depreciation and accumulated impairment losses
Beginning of financial year 4,639 4,018
Currency translation differences 52 (27)
Depreciation charge 502 471
Reclassification from property, plant and equipment (Note 23) – 177
End of financial year 5,193 4,639
Net book value 14,405 14,619
Fair values 22,642 19,806
Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses as theGroup has elected to adopt the cost model method to measure its investment properties.
Fair values of the investment properties as at the balance sheet date are stated based on independent professionalvaluations using the direct comparison method.
Investment properties are leased to fellow subsidiaries and non-related parties under operating leases.
The following amounts are recognised in the income statement:
The Group
2011 2010
$’000 $’000
Rental income 1,292 1,372
Direct operating expenses arising from investment properties that generatedrental income 681 769
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119COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
23. Property, plant and equipment
The Group
Freeholdlandand
buildings$’000
Leaseholdlandand
buildings$’000
Officerenovations,
furniture,fixtures
andequipment
$’000
Plant,machinery
andequipment
$’000
Motorvehicles
$’000
Motorvessels$’000
Docks andquays$’000
Construction-in-progress
$’000Total$’000
2011
Cost
Beginning of financial year 3,044 883,699 47,687 805,247 44,517 280,857 797,302 59,074 2,921,427
Currency translation
differences – 52,049 2,683 48,336 2,485 2,877 47,946 3,550 159,926
Additions – 8,753 2,568 4,480 2,187 3,312 – 236,598 257,898
Disposals – (403) (423) (3,778) (1,680) (3,360) – (368) (10,012)
Disposal of
subsidiaries
(Note 11(b)(i)) (3,044) – (2,080) – (1,177) – – – (6,301)
Reclassification – 39,359 2,957 81,268 1,440 – 84,042 (209,066) –
End of financial year – 983,457 53,392 935,553 47,772 283,686 929,290 89,788 3,322,938
Accumulateddepreciation
Beginning of
financial year 944 107,021 30,481 249,089 28,458 134,707 162,775 – 713,475
Currency translation
differences – 8,085 2,142 19,913 1,986 1,792 11,593 – 45,511
Depreciation charge – 31,888 7,543 78,247 5,884 11,773 28,168 – 163,503
Disposals – (186) (422) (2,870) (1,430) (3,322) – – (8,230)
Disposal of
subsidiaries
(Note 11(b)(i)) (944) – (1,985) – (518) – – – (3,447)
Reclassification – (2,268) – 34 (34) – 2,268 – –
End of financial year – 144,540 37,759 344,413 34,346 144,950 204,804 – 910,812
Net book value
End of financialyear – 838,917 15,633 5 91,140 13,426 1 38,736 724,486 89,788 2,412,126
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
120COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
23. Property, plant and equipment (continued)
The Group
Freeholdland andbuildings
$’000
Leaseholdland andbuildings
$’000
Officerenovations,
furniture,fixtures andequipment
$’000
Plant,machinery
andequipment
$’000
Motorvehicles
$’000
Motorvessels$’000
Docks andquays$’000
Construction-in-progress
$’000Total$’000
2010
Cost
Beginning of
financial year 3,044 820,315 46,096 794,641 45,878 307,210 783,701 149,790 2,950,675
Currency translation
differences – (44,904) (2,398) (44,254) (2,376) (26,613) (43,920) (8,384) (172,849)
Additions – 12,133 2,971 4,327 593 1,614 – 154,467 176,105
Disposals – (79) (322) (13,044) (1,326) (1,354) – (3,673) (19,798)
Disposal of
subsidiaries
(Note 11(b)(ii)) – (4,646) (333) (3,536) (470) – – (156) (9,141)
Reclassification – 100,880 1,673 67,113 2,218 – 57,521 (232,970) (3,565)
End of financial year 3,044 883,699 47,687 805,247 44,517 280,857 797,302 59,074 2,921,427
Accumulated
depreciation
Beginning of
financial year 883 78,713 23,529 195,409 24,692 134,363 143,988 – 601,577
Currency translation
differences – (5,407) (1,493) (13,694) (1,524) (12,530) (9,138) – (43,786)
Depreciation charge 61 33,481 9,030 76,411 6,777 14,168 27,942 – 167,870
Disposals – (10) (261) (6,560) (1,080) (1,294) – – (9,205)
Disposal of
subsidiaries
(Note 11(b)(ii)) – (258) (250) (1,889) (407) – – – (2,804)
Reclassification – 502 (74) (588) – – (17) – (177)
End of financial year 944 107,021 30,481 249,089 28,458 134,707 162,775 – 713,475
Net book value
End of financial year 2,100 776,678 17,206 556,158 16,059 146,150 634,527 59,074 2,207,952
(a) The carrying amount of motor vehicles held under finance leases at 31 December 2011 amounted to nil (2010: $32,000)
(Note 27).
(b) As at the balance sheet date, the net book values of motor vessels of the Group amounting to $28,940,000 (2010:
$67,825,000) are mortgaged to banks to secure long-term bank borrowings and bank facilities (Note 27).
(c) Borrowing costs of nil (2010: $2,436,000) which arise mainly due to financing for the construction of docks and quays, are
capitalised during the financial year (Note 8).
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121COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
23. Property, plant and equipment (continued)
The Company
Office
renovations,
furniture,
fixtures and
equipment
Motor
vehicles Total
$’000 $’000 $’000
2011
Cost
Beginning of financial year 558 1,128 1,686
Additions 8 608 616
Disposals (13) (524) (537)
End of financial year 553 1,212 1,765
Accumulated depreciation
Beginning of financial year 531 505 1,036
Depreciation charge 17 116 133
Disposals (13) (315) (328)
End of financial year 535 306 841
Net book value
End of financial year 18 906 924
2010
Cost
Beginning of financial year 551 1,128 1,679
Additions 7 – 7
End of financial year 558 1,128 1,686
Accumulated depreciation
Beginning of financial year 512 392 904
Depreciation charge 19 113 132
End of financial year 531 505 1,036
Net book value
End of financial year 27 623 650
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
122COSCO Corporation (Singapore) Limited
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24. Intangible assets
The Group
2011 2010
$’000 $’000
Goodwill arising on consolidation 9,526 9,468
Cost
Beginning of financial year 9,468 9,525
Currency translation differences 58 (57)
End of financial year 9,526 9,468
Net book value 9,526 9,468
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (“CGU”), identified as the subsidiaries in the People’s
Republic of China (“PRC”) according to country of operation and business segments. The business segment refersto ship repair, ship building and marine engineering activities.
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cashflow projections based on the existing capacity of the CGU. Cash flows beyond 2011 are extrapolated using theestimated growth rate stated below. The growth rate does not exceed the long-term average growth rate for shiprepair business in the PRC in which the CGU operates.
Key assumptions used for value-in-use calculations:
2011 2010
Growth rate1 3.30% 4.50%
Discount rate 2 5.31% 2.27%
1 Weighted average growth rate used to extrapolate cash flows beyond the budget period2 Pre-tax discount rate applied to the pre-tax cash flow projections
These assumptions were used for the analysis of the CGU within the business segment. Management determinedbudgeted 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 waspre-tax and reflected specific risks relating to the relevant segments.
The impairment test has revealed that the recoverable amount of the CGU is higher than its carrying amount.
Hence, there is no impairment charge recognised for the financial years ended 31 December 2011 and 31December 2010.
In addition, a decrease in the growth rate by 1% would not result in any impairment charge for both financial years.
25. Deferred expenditure
Deferred expenditure relates to rental prepaid for leasehold land on operating leases and is amortised on the
straight-line basis over the lease period.
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123COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
26. Trade and other payables
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Trade payables:
- Non-related parties 637,724 532,907 – –
- Associated companies 2,180 2,057 – –
- Fellow subsidiaries 25,821 42,913 – –
665,725 577,877 – –
Construction contracts: Advances received (Note 15):- Non-related parties 412,314 1,122,503 – –
Due to customers (Note 15):
- Non-related parties 429,543 404,170 – –
841,857 1,526,673 – –
Advances from non-related parties 52,952 33,927 – –
Non-trade payables:- Ultimate holding corporation – 680 – –
- A subsidiary – – 15,000 15,000
- A fellow subsidiary – – 11 –
– 680 15,011 15,000
Deposits received 13,656 12,218 – –
Other accruals for operating expenses 1,118,304 991,000 3,225 2,620
Dividend payable to non-controlling interests of subsidiaries 4,800 2,158 – –
Total 2,697,294 3,144,533 18,236 17,620
The non-trade balances payable to ultimate holding corporation, subsidiary and a fellow subsidiary are unsecured,
interest-free and are repayable on demand.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
124COSCO Corporation (Singapore) Limited
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27. Borrowings
The Group
2011 2010
$’000 $’000
Current
Bank borrowings (unsecured) 1,367,186 410,280
Bank borrowings (secured) 231,026 47,337
Bills payable 70,110 97,528
Finance lease liabilities (Note 28) – 3
1,668,322 555,148
Non-current
Bank borrowings (unsecured) 398,888 427,743
Bank borrowings (secured) 99,202 9,322
498,090 437,065
Total borrowings 2,166,412 992,213
The exposure of the borrowings of the Group to interest rate changes and the contractual repricing dates at thebalance sheet dates are as follows:
The Group
2011 2010
$’000 $’000
Less than 1 year 1,668,322 555,148
1 – 5 years 435,281 380,732
Over 5 years 62,809 56,333
2,166,412 992,213
Bank borrowings (unsecured) include an amount of $5,766,000 (2010: Nil) from a fellow subsidiary, Cosco FinanceCo., Ltd.
(a) Security granted
At the balance sheet date, total borrowings include secured liabilities of $330,228,000 (2010: $56,662,000)for the Group. Secured bank borrowings are secured by:
(i) the Group’s motor vessels (Note 23)
(ii) certain bank deposits (Note 11(a))
(iii) certain trade receivables (Note 13)
In 2010, finance lease liabilities of the Group were secured by the rights to the leased motor vehicles, which
would revert to the lessor in the event of default by the Group (Note 23). The finance lease liabilities havebeen fully repaid during the year.
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125COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
27. Borrowings (continued)
(b) Fair values of non-current borrowings
At the balance sheet date, the carrying amounts of non-current borrowings approximated their fair values.
The fair values were determined from cash flow analyses, discounted at the market borrowing rates whichthe directors expected to be available to the Group as follows:
2011 2010
SGD USD RMB EUR SGD USD RMB EUR
Bank borrowings – 2.83% 5.31% 5.27% – 2.79% 3.71% –
Finance lease liabilities – – – – 4.91% – – –
28. Finance lease liabilities
The Group
2011 2010
$’000 $’000
Minimum lease payments due:
- Not later than one year – 4
– 4Less: Future finance charges – (1)
Present value of finance lease liabilities – 3
The present values of finance lease liabilities are analysed as follows:- Not later than one year (Note 27) – 3
– 3
29. Provisions for other liabilities
The Group
2011 2010
$’000 $’000
Provision for off hire claim on hire income (Note (a)) 3,840 7,043
Provision for warranties (Note (b)) 46,440 38,006
Legal claims (Note (c)) 9,150 –
59,430 45,049
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
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29. Provisions for other liabilities (continued)
(a) Movements in provision for off hire claim on hire income were as follows:
The Group
2011 2010
$’000 $’000
Beginning of financial year 7,043 14,242
Provision made during the financial year 1,585 1,715
Provision utilised during the financial year (4,916) (7,572)
Currency translation differences 128 (1,342)
End of financial year 3,840 7,043
Provision for off hire claim on hire income is in respect of refund to be made to customers for period in whichthe motor vessels are not available for use.
(b) Movements in provision for warranties were as follows:
The Group
2011 2010
$’000 $’000
Beginning of financial year 38,006 22,194
Provision made during the financial year 11,329 21,289
Provision utilised during the financial year (5,907) (2,819)
Currency translation differences 3,012 (2,658)
End of financial year 46,440 38,006
The Group gives one to two-year warranties on certain ship building and marine engineering contractsand undertakes to repair or rectify defects that fail to perform satisfactorily. A provision is recognised at the
balance sheet date for expected warranty claims based on an estimate by technical engineers and pastexperience of the possible repairs and rectifications.
(c) Legal claims
The provision for legal claims is in respect of certain legal claims brought against the Group by customers,and is expected to be utilised.
Movement in provision for legal claims is as follows:
The Group
2011 2010
$’000 $’000
Beginning of financial year – –
Currency translation difference 550 –
Provision made 8,600 –
End of financial year 9,150 –
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127COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
30. Deferred income taxes Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current incometax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscalauthority. The amounts, determined after appropriate offsetting, are shown on the balance sheets as follows:
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Deferred income tax assets:
- to be recovered within one year 231,087 207,444 – –
- to be recovered after one year 10,426 5,259 – –
241,513 212,703 – –
Deferred income tax liabilities:
- to be settled after one year 5,712 4,304 5,582 4,056
5,712 4,304 5,582 4,056
Deferred income tax assets are recognised for tax losses, capital allowances, provisions and accruals carried
forward to the extent that realisation of the related tax benefits through future taxable profits is probable. TheGroup has unrecognised tax losses of $7,288,000 (2010: $13,192,000) for which no deferred tax asset has beenrecognised at the balance sheet date which can be carried forward and used to offset against future taxableincome subject to meeting certain statutory requirements by those companies with unrecognised tax losses in theirrespective countries of incorporation.
The movements in the deferred income tax account, net were as follows:
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Beginning of financial year (208,399) (156,123) 4,056 2,198
Change in tax rate 36,068 (14,669) – –
Currency translation differences (13,541) 11,277 215 (112)
Disposal of subsidiaries (Note 11(b)) (33) – – –
Deferred tax (credited)/charged to income
statement (49,895) (48,774) 1,311 1,970Deferred tax credited to equity (Note 32(b)(v)) (1) (110) – –
End of financial year (235,801) (208,399) 5,582 4,056
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
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30. Deferred income taxes (continued) The movements in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) during the financial year were as follows:
The Group
Deferred income tax liabilities 2011 2010
$’000 $’000
Accelerated tax depreciation
Beginning of financial year 163 166
Credited to income statement – (3)
Disposal of subsidiaries (33) –
End of financial year 130 163
Fair value gain
Beginning of financial year 91 208
Currency translation differences 5 (7)
Credited to equity (Note 32(b)(v)) (1) (110)
End of financial year 95 91
Undistributed profits of foreign subsidiaries
Beginning of financial year 4,056 2,198
Currency translation differences 215 (112)
Charged to income statement 1,311 1,970
End of financial year 5,582 4,056
Total
Beginning of financial year 4,310 2,572
Currency translation differences 220 (119)
Disposal of subsidiaries (33) –
Charged to income statement 1,311 1,967
Credited to equity (1) (110)
End of financial year 5,807 4,310
Reconciliation of total deferred income tax liabilities after appropriate offsettingfrom the same tax jurisdiction is as follows:
Total deferred income tax liabilities 5,807 4,310
Offsetting of deferred income tax assets from the same tax jurisdiction (95) (6)
Total deferred income tax liabilities after appropriate offsetting from the sametax jurisdiction 5,712 4,304
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129COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
30. Deferred income taxes (continued)
The Group
Deferred income tax assets 2011 2010
$’000 $’000
Provisions and accruals
Beginning of financial year (212,709) (158,695)
Change in tax rate 36,068 (14,669)
Currency translation differences (13,761) 11,396
Credited to income statement (51,206) (50,741)
End of financial year (241,608) (212,709)
Reconciliation of total deferred income tax assets after appropriate offsettingfrom the same tax jurisdiction is as follows:
Total deferred income tax assets (241,608) (212,709)
Offsetting of deferred income tax liabilities from the same tax jurisdiction 95 6
Total deferred income tax assets after appropriate offsetting from the sametax jurisdiction (241,513) (212,703)
The Company
Deferred income tax liabilities 2011 2010
$’000 $’000
Undistributed profits of foreign subsidiariesBeginning of financial year 4,056 2,198
Currency translation differences 215 (112)
Charged to income statement 1,311 1,970
End of financial year 5,582 4,056
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
130COSCO Corporation (Singapore) Limited
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31. Share capital
Issued share capital
No. of
ordinary
shares Amount
’000 $’000
2011
Beginning and end of financial year 2,239,245 270,608
2010
Beginning and end of financial year 2,239,245 270,608
All issued shares are fully paid. There is no par value for these ordinary shares.
There were no shares issued in 2011 and 2010.
Share options
Under the Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”), share options are granted todirectors, key management and employees. The exercise price of the granted options is equal to the average of theclosing prices of the Company’s ordinary shares on the Singapore Exchange for the five 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 multiplethereof, 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 constructiveobligation 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 associatedcompany, 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 directorswho are in the service of the associated company and non-executive directors, the options shall expire at the end of sixty months. Options issued at a discount to market price, may only be exercised two years after the date of grant.
Options issued to directors and employees who have been in the service of the Company, subsidiary or associatedcompany, or the holding company for at least six months but less than one year on or prior to the date of grant,may be exercised twenty-four months after the date of grant but before the end of one hundred and twenty months.
For employees and directors who are in the service of the associated company and non-executive directors, the
options shall expire at the end of sixty months. Options issued at a discount to market price, may only be exercisedthree years after the date of grant.
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131COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
31. Share capital (continued)
Share options (continued)
Movements in the number of unissued ordinary shares under option at the end of the financial year and theirexercise prices are as follows:
The Group and the Company
Financial year ended 31 December 2011
Number of ordinary shares
under option outstanding
Options relating
to Scheme 2002
Beginning
of financial
year
Lapsedduring
financial
year
End of
financial
year
Exercise
price Exercise period
’000 ’000 ’000 $
2006 Options (i) 2,780 (2,100) 680 1.23 21.2.2007 – 20.2.2016
2007 Options (ii) 10,970 (420) 10,550 2.48 5.2.2008 – 4.2.2017
2008 Options (iii) 17,200 (120) 17,080 2.95 24.3.2009 – 23.3.2018
30,950 (2,640) 28,310
Financial year ended 31 December 2010
Number of ordinary shares
under option outstanding
Options relating
to Scheme 2002
Beginning
of financial
year
Lapsed
during
financial
year
End of
financial
year
Exercise
price Exercise period
’000 ’000 ’000 $
2006 Options (i) 2,780 – 2,780 1.23 21.2.2007 – 20.2.2016
2007 Options (ii) 12,770 (1,800) 10,970 2.48 5.2.2008 – 4.2.2017
2008 Options (iii) 19,430 (2,230) 17,200 2.95 24.3.2009 – 23.3.2018
34,980 (4,030) 30,950
(i) For non-executive directors, the exercise period shall be 21.2.2007 to 20.2.2011.
(ii) For non-executive directors, the exercise period shall be 5.2.2008 to 4.2.2012.
(iii) For non-executive directors, the exercise period shall be 24.3.2009 to 23.3.2013.
Out of the outstanding options on 28,310,000 shares (2010: 30,950,000), options on 28,310,000 shares (2010:30,950,000) are exercisable. There was no share option issued in 2011 and 2010. There were also no shares of
the Company allotted and issued by virtue of the exercise of options to take up unissued shares of the Company in2011 and 2010.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
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32. Statutory and other reserves
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
(a) Composition:
Share option reserve 44,578 44,578 44,578 44,578
Statutory reserve 165,445 137,372 – –
Currency translation reserve (38,262) (90,804) – –
Asset revaluation reserve 9,336 12,554 – –
Fair value reserve 154 181 – –Realised surplus on long-terminvestment 69 69 527 527
181,320 103,950 45,105 45,105
(b) Movements:
(i) Share option reserve
Beginning and end of financial year 44,578 44,578 44,578 44,578
The Group
2011 2010
$’000 $’000
(ii) Statutory reserve
Beginning of financial year 137,372 137,149
Transfer from retained earnings 28,073 223
End of financial year 165,445 137,372
(iii) Currency translation reserve
Beginning of financial year (90,804) (23,861)
Net currency translation differences
of financial statements of foreignsubsidiaries and associated
companies 92,314 (100,144)
Reclassification of currencytranslation reserve on disposalof subsidiaries 233 –
Non-controlling interests (40,005) 33,201
End of financial year (38,262) (90,804)
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
32. Statutory and other reserves (continued)
The Group
2011 2010
$’000 $’000
(b) Movements: (continued)
(iv) Asset revaluation reserve
Beginning of financial year 12,554 15,772
Revaluation reserve transferred to retained earnings (3,218) (3,218)
End of financial year 9,336 12,554
(v) Fair value reserve
Beginning of financial year 181 323
Fair value changes for available-for-sale financial asset (53) (389)
Deferred tax credited to equity (Note 30) 1 110
Non-controlling interests 25 137
End of financial year 154 181
Statutory reserve represents the amount set aside in compliance with the local laws in the PRC where thesubsidiaries of the Group reside.
Statutory and other reserves are non-distributable.
33. Dividends
The Group and
Company
2011 2010
$’000 $’000
Ordinary dividends paid
Final tax-exempt one-tier dividend paid in respect of the previous financial year
of 4.0 cents (2010: 3.0 cents) per ordinary share 89,570 67,177
At the Annual General Meeting scheduled on 20 April 2012, a first and final tax-exempt one-tier dividend of 3 centsper ordinary share (2010: first and final tax-exempt one-tier dividend of 4 cents per ordinary share) amounting to atotal of $67,177,000 (2010: $89,570,000), based on the number of shares issued as of 31 December 2011, will berecommended. These financial statements do not reflect the dividends recommended for the financial year ended 31December 2011, which will be accounted for in equity as an appropriation of retained earnings in the financial yearending 31 December 2012.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
134COSCO Corporation (Singapore) Limited
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34. Commitments
(a) Capital commitments
Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements
are as follows:
The Group
2011 2010
$’000 $’000
Property, plant and equipment 82,608 102,537
(b) Operating lease commitments – where the Group is a lessee
The Group leases various office premises, docks, quays and motor vessels under non-cancellable operatinglease 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 thebalance sheet date but not recognised as liabilities, are as follows:
The Group
2011 2010
$’000 $’000
Not later than 1 year 25,112 19,271
Later than 1 year but not later than 5 years 47,986 42,690
Later than 5 years 101,111 66,245
174,209 128,206
(c) Operating lease commitments – where the Group is a lessor
The Group leases out certain items of property, plant and equipment and investment properties to non-related parties under non-cancellable operating leases.
The future minimum lease receivables under non-cancellable operating leases contracted for at the balancesheet date but not recognised as receivables, are analysed as follows:
The Group2011 2010
$’000 $’000
Not later than 1 year 21,068 28,664
Later than 1 year but not later than 5 years 9,781 1,189
30,849 29,853
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
35. Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate riskand price risk), credit risk and liquidity risk.
Risk management is carried out under policies approved by the Board of Directors. The Board approves guidelinesfor overall risk management, as well as policies covering these specific areas.
(a) Market risk
(i) Currency risk
Currency risks arise from transactions denominated in currencies other than the respective functionalcurrencies of the entities in the Group.
The Group monitors its foreign currency exchange risks closely and where appropriate, enters intoforward currency contracts to manage the currency exposure.
In addition, the Group has certain investments in foreign operations, whose net assets are exposed tocurrency translation risk. Currency exposure to the net assets of the Group’s foreign operations in thePeople’s Republic of China is managed primarily through borrowings denominated in RMB.
The Group’s currency exposure based on the information available to key management is as follows:
SGD USD RMB Others* Total
$’000 $’000 $’000 $’000 $’000
At 31 December 2011
Financial assets
Cash and cash equivalents andavailable-for-sale financial assets 42,834 429,910 1,029,859 87,072 1,589,675
Trade and other receivables,excluding advances paid tosuppliers 3,894 1,041,330 217,421 6,917 1,269,562
Receivables from subsidiaries – – 4,394 – 4,394
Other financial assets 80 – 1,472 – 1,552
46,808 1,471,240 1,253,146 93,989 2,865,183
Financial liabilities
Borrowings – 1,421,594 718,794 26,024 2,166,412
Payables by subsidiaries – – 4,394 – 4,394
Other financial liabilities 6,243 90,384 1,718,176 672 1,815,475
6,243 1,511,978 2,441,364 26,696 3,986,281
Net financial assets/(liabilities) 40,565 (40,738) (1,188,218) 67,293 (1,121,098)
Less: Net financial assets/(liabilities)denominated in the respectiveentities’ functional currencies (40,173) (88,617) 1,188,223 –
Add: Firm commitments and highly
probable forecast transactionsin foreign currencies – 2,920,443 – 50,173
Less: Currency forwards – (161,167) – –
Currency exposure 392 2,629,921 5 117,466
* Others mainly include Euro, Japanese Yen and Malaysian Ringgit.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
136COSCO Corporation (Singapore) Limited
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35. Financial risk management (continued)
(a) Market risk (continued)
(i) Currency risk (continued)
SGD USD RMB Others* Total
$’000 $’000 $’000 $’000 $’000
At 31 December 2010
Financial assets
Cash and cash equivalents and
available-for-sale financial assets 74,475 308,646 462,625 24,889 870,635 Trade and other receivables,
excluding advances paid tosuppliers 15,415 864,332 229,860 57,370 1,166,977
Receivables from subsidiaries – – 2,655 – 2,655
Other financial assets 284 – 1,365 38 1,687
90,174 1,172,978 696,505 82,297 2,041,954
Financial liabilities
Borrowings 3 281,099 711,111 – 992,213
Payables to subsidiaries – – 2,655 – 2,655
Other financial liabilities 16,192 80,158 1,490,298 4,328 1,590,97616,195 361,257 2,204,064 4,328 2,585,844
Net financial assets/(liabilities) 73,979 811,721 (1,507,559) 77,969 (543,890)
Less: Net financial assets/(liabilities)denominated in the respectiveentities’ functional currencies (73,628) (108,500) 1,507,562 (2,298)
Add: Firm commitments and highlyprobable forecast transactionsin foreign currencies – 3,143,108 – 72,709
Currency exposure 351 3,846,329 3 148,380
* Others mainly include Euro, Japanese Yen and Malaysian Ringgit.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
35. Financial risk management (continued)
(a) Market risk (continued)
(i) Currency risk (continued)
The Company’s currency exposure based on the information available to key management is asfollows:
2011 2010
SGD USD RMB Total SGD USD RMB Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets
Cash and cash equivalents 36,662 89,189 – 125,851 63,535 53,422 – 116,957
Trade and other receivables 81 12 4,394 4,487 237 10 2,655 2,902
36,743 89,201 4,394 130,338 63,772 53,432 2,655 119,859
Financial liabilities
Borrowings – – – – – – – –
Other financial liabilities 17,981 255 – 18,236 17,620 – – 17,620
17,981 255 – 18,236 17,620 – – 17,620
Net financial assets 18,762 88,946 4,394 112,102 46,152 53,432 2,655 102,239
Less: Net financial assets
denominated in theentity’s functional
currency (18,762) – – (46,152) – –
Currency exposure – 88,946 4,394 – 53,432 2,655
If the USD changes against the SGD and RMB by 500 basis points (2010: 500 basis points) with allother variables including tax rate being held constant, the effects arising from the net financial assetposition will be as follows:
2011 2010
Increase/(decrease)
Profit
after tax
Profitafter tax
$’000 $’000
The Group
USD against SGD
- strengthened 2,832 1,412
- weakened (2,832) (1,412)
USD against RMB
- strengthened (1,339) 3,840
- weakened 1,339 (3,840)
The Company
USD against SGD
- strengthened 2,847 1,728
- weakened (2,847) (1,728)
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139COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
35. Financial risk management (continued)
(b) Credit risk (continued)
Other than the above-mentioned, the Group and Company do not hold any other collateral. The maximumexposure to credit risk for each class of financial instruments is the carrying amount of that class of financialinstruments presented on the balance sheet, except as follows:
The Company
2011 2010
$’000 $’000
Corporate guarantees provided to banks on subsidiaries’ loans 1,111 15,939
Corporate guarantees provided to third parties for services provided toa subsidiary – 156
1,111 16,095
The Group’s and Company’s major classes of financial assets are bank deposits and trade receivables.
The credit risk for trade receivables (including amount due from customer on construction contracts) based
on the information provided to key management is as follows:
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
By business segments
Shipping 3,876 7,165 – –
Ship repair, ship building and marineengineering activities 1,215,559 1,070,615 – –
Others – 14,639 – 131
1,219,435 1,092,419 – 131
(i) Financial assets that are neither past due nor impaired
Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings assigned by international credit-rating agencies. Trade receivables that are neither past due
nor impaired are substantially companies with a good collection track record with the Group.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
140COSCO Corporation (Singapore) Limited
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35. Financial risk management (continued)
(b) Credit risk (continued)
(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 tradereceivables.
The age analysis of trade receivables past due but not impaired is as follows:
The Group
2011 2010
$’000 $’000
Past due 0 to 3 months 1,373 3,274
Past due 3 to 6 months 1,201 23
Past due over 6 months 1,784 610
4,358 3,907
The carrying amount of trade receivables individually determined to be impaired and the movement inthe related allowance for impairment are as follows:
The Group
2011 2010
$’000 $’000
Gross amount 13,647 17,553
Less: Allowance for impairment (13,647) (17,553)
– –
Beginning of financial year 17,553 51,036
Currency translation differences 749 (1,642)
Allowance utilised (1,752) (575)
Reversal of allowances (2,903) (31,250)
Amount written off – (16)End of financial year 13,647 17,553
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141COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
35. Financial risk management (continued)
(c) Liquidity risk
The Group adopts prudent liquidity risk management by maintaining sufficient cash and having an adequateamount of committed credit facilities and the ability to close out market positions. Due to the dynamic natureof the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed creditfacilities available.
As at 31 December 2011, the Group’s current liabilities exceed its current assets by $249,271,000 (2010:$268,714,000). The directors expect that the Group will be able to meet its liabilities as and when they fall
due on the basis of the undrawn committed credit facilities.
The table below analyses the maturity profile of the Group’s and Company’s financial liabilities (includingforward currency contracts) based on contractual undiscounted cash flows.
Less than
1 year
Between
1 and 5
years
Over
5 years
$’000 $’000 $’000
The Group
At 31 December 2011
Gross-settled forward currency contracts - fair valuehedges
- Receipts 166,017 – –
- Payments (161,289) – –
Other financial liabilities (1,815,475) – –
Borrowings (1,725,180) (489,680) (68,218)
At 31 December 2010
Gross-settled forward currency contracts
- Receipts – – –
- Payments – – –
Other financial liabilities (1,593,631) – –
Borrowings (572,106) (410,910) (61,716)
The Company
At 31 December 2011
Other financial liabilities (18,236) – –
Borrowings – – –
Financial guarantee contracts (1,111) – –
At 31 December 2010
Other financial liabilities (17,620) – –
Financial guarantee contracts (16,095) – –
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
142COSCO Corporation (Singapore) Limited
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35. Financial risk management (continued)
(d) Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a goingconcern and to maintain an optimal capital structure so as to maximise shareholder value. In order tomaintain 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 sellassets to reduce borrowings.
Management monitors capital based on the return on shareholders’ fund. The return on shareholders’ fund
was 11.2% per annum for the current financial year ended 31 December 2011 (2010: 21.8% per annum).
The return on shareholders’ fund is calculated as net profit attributable to equity holders of the Companydivided by average shareholders’ equity.
The Group and the Company are in compliance with all externally imposed capital requirements for thefinancial years ended 31 December 2011 and 31 December 2010.
(e) Fair value measurements
The following table presents assets and liabilities measured at fair value and classified by level of the followingfair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
(b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability,either directly (as prices) or indirectly (derived from prices) (Level 2); and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs)(Level 3).
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143COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
35. Financial risk management (continued)
(e) Fair value measurements (continued)
Level 1 Level 2 Level 3 Total
$’000 $’000 $’000 $’000
The Group
2011
Assets
Available-for-sale financial assets
- Quoted equity shares 505 – – 505- Unquoted equity shares – – 3,902 3,902
Forward currency contracts – 4,728 – 4,728
Total assets 505 4,728 3,902 9,135
Liabilities
Forward currency contracts – 4,728 – 4,728
2010
Assets
Available-for-sale financial assets
- Quoted equity shares 530 – – 530- Unquoted equity shares – – 2,904 2,904
Total assets 530 – 2,904 3,434
Liabilities
Forward currency contracts – – – –
The fair value of financial instruments traded in active markets (such as trading and available-for-salesecurities) is based on quoted market prices at the balance sheet date. The quoted market price used for
financial assets held by the Group is the current bid price. These instruments are included in Level 1.
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makesassumptions that are based on market conditions existing at each balance sheet date. The fair value of forward currency contracts is determined using quoted forward exchange rates at the balance sheet date. These investments are included in Level 2. In infrequent circumstances, where a valuation technique forthese instruments is based on significant unobservable inputs, such instruments are included in Level 3.
Changes in Level 3 financial instruments for the financial year ended 31 December 2011 is disclosed in Note18.
The carrying value less impairment provision of trade receivables and payables are assumed to approximatetheir fair values. The fair value of financial liabilities for disclosure purposes is estimated based on quotedmarket prices or dealer quotes for similar instruments by discounting the future contractual cash flows at the
current market interest rate that is available to the Group for similar financial instruments. The fair value of
current borrowings approximates their carrying amount.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
144COSCO Corporation (Singapore) Limited
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35. Financial risk management (continued)
(f) Financial instruments by category
The carrying amount of different categories of financial instruments is as disclosed on the face of the balance
sheets and in Note 18 to the financial statements, except for the following:
The Group The Company
2011 2010 2011 2010
$’000 $’000 $’000 $’000
Loans and receivables 2,856,382 2,034,178 130,338 119,859
Financial liabilities at amortised cost 3,981,887 2,583,189 18,236 17,620
36. Immediate and ultimate holding corporation
The Company’s immediate and ultimate holding corporation is China Ocean Shipping (Group) Company, registeredin the People’s Republic of China.
37. Related party transactions
(a) The Company is controlled by China Ocean Shipping (Group) Company (“COSCO”), the parent company and
a state-owned enterprise established in the People’s Republic of China (“PRC”).
The Group has adopted the amendment to FRS 24, “Related party disclosures” in 2009. The amendmentintroduces an exemption from all of the disclosure requirements of FRS 24 for transactions amonggovernment-related entities and the government. Those disclosures are replaced with a requirement todisclose the name of the government and the nature of their relationship, the nature and amount of anyindividually-significant transactions, and the extent of any collectively-significant transactions qualitatively orquantitatively. It also clarifies and simplifies the definition of a related party.
COSCO itself is controlled by the PRC government, which also owns a significant portion of the productiveassets in the PRC. In accordance with amendment to FRS 24, other government-related entities and theirsubsidiaries (other than COSCO group companies), directly or indirectly controlled, jointly controlled orsignificantly influenced by the PRC government are also defined as related party corporation of the Group.On that basis, related party corporation include COSCO and its subsidiaries, other government-relatedentities and their subsidiaries directly or indirectly controlled, jointly controlled or significantly influenced by
the PRC government, other entities and corporations in which the Company is able to control or exercisesignificant influence and key management personnel of the Company and COSCO as well as their closefamily members.
The transactions of revenues and expenses in nature conducted with government-related entities werebased on arm’s length transactions.
In addition to the related party information and transactions disclosed elsewhere in the consolidated financialstatements, the following is a summary of significant related party transactions entered into the ordinarycourse of business between the Group and its related parties during the financial year.
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145COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
37. Related party transactions (continued)
(a) (continued)
The Group
2011 2010
$’000 $’000
Revenue
Sales to fellow subsidiaries 38,837 85,759
Sales to associated companies 51 142
Sales to related party corporations – 97
Sale of bunker to a fellow subsidiary 1,351 –Rental income received/receivable from fellow subsidiaries 962 879
Rental income received/receivable from associated companies 19 177
Rental income received/receivable from related party corporations 286 306
Compensation received/receivable from a fellow subsidiary – 3,090
Service income received from ultimate holding corporation 101 85
Service income received from fellow subsidiaries 4,075 3,789
Service income receivable from associated companies 21 –
Interest received/receivable from a fellow subsidiary 12,484 10,711
Expenditure
Purchases from fellow subsidiaries 44,039 37,137
Purchases from associated companies 465 294
Purchases from related party corporations – 44
Purchases of plant and equipment from fellow subsidiaries 2,720 –
Purchases of plant and equipment from an associated company – 1,115
Rental paid/payable to fellow subsidiaries 672 48
Rental paid/payable to a related party corporation 6,301 6,936
Vessel rental paid/payable to a fellow subsidiary 781 6,404
Management fee paid/payable to a related party corporation – 315
Crew wages paid/payable to fellow subsidiaries 7,257 7,603
Sub-contractor costs paid/payable to fellow subsidiaries 15,885 25,551
Sub-contractor costs paid/payable to associated companies 5,029 6,141
Sub-contractor costs paid/payable to a related party corporation 920 1,128
Utilities expenses paid/payable to a related party corporation 1,822 2,444
Service expenses paid/payable to fellow subsidiaries 560 2,797
Service expenses paid/payable to an associated company 1,027 –
Service expenses paid/payable to related party corporations 88 75
Commission paid/payable to a fellow subsidiary 957 33
Interest paid/payable to a fellow subsidiary 160 –
Outstanding balances as at 31 December 2011, arising from sales or purchases of goods and services, areset out in Notes 13 and 26 respectively.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
146COSCO Corporation (Singapore) Limited
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37. Related party transactions (continued) (b) Share options granted to key management
There were no share options granted to key management of the Group during 2011 and 2010. The share
options were given on the same terms and conditions as those offered to other employees of the Company(Note 31). The outstanding number of share options granted to key management of the Group at the end of the financial year was 6,800,000 (2010: 10,300,000).
(c) Key management personnel compensation
Key management personnel compensation is as follows:
The Group2011 2010
$’000 $’000
Salaries and other short-term employee benefits 4,978 3,519
Directors’ fees of the Company 305 285
Employer’s contribution to defined contribution plans including CentralProvident Fund 8 8
5,291 3,812
Included in the above was total compensation to directors of the Company amounting to $4,876,000 (2010:$3,506,000).
38. Segment information
Management has determined the operating segments based on the reports reviewed by the key management that
are used to make strategic decisions.
The key management considers the business from the business segment perspective. The segment in the People’sRepublic of China derives revenue from ship repair, ship building and marine engineering activities. On the otherhand, the segments in Singapore and Malaysia derive revenue from shipping, shipping agency, ship repair andmarine engineering activities.
Other services included within Singapore and Malaysia include shipping agency activities and rental of property; but
these are not included within the reportable operating segments, as they are not included in the reports provided tothe key management. The results of these operations are included in the “all other segments” column.
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147COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
38. Segment information (continued) The segment information provided to the key management for the reportable segments is as follows:
Shipping
Ship repair,
ship building
and marine
engineering
activities
All other
segments
Total for
continuing
operations
$’000 $’000 $’000 $’000
Financial year ended 31 December 2011
The Group
Sales
- External sales 65,995 4,096,118 808 4,162,921
- Inter-segment sales – 745 98,427 99,172
65,995 4,096,863 99,235 4,262,093
Elimination (99,172)
4,162,921
Segment results 33,398 298,372 1,785 333,555
Finance expense (46,713)
Share of profit of associated companies 717
Profit before income tax 287,559
Income tax expense (74,195)Net profit 213,364
Other segment items
Capital expenditure
- property, plant and equipment 3,403 253,873 622 257,898
Depreciation and amortisation 11,875 151,565 648 164,088
Allowance for inventory write-down – 18,144 – 18,144
Net reversal of impairment of trade and otherreceivables – (1,140) – (1,140)
Expected losses recognised on constructioncontracts – 150,377 – 150,377
Segment assets 151,634 5,591,389 26,145 5,769,168
Associated companies 4,102
Short-term bank deposits 981,320
Available-for-sale financial assets 4,407
Deferred income tax assets 241,513
Consolidated total assets 7,000,510
Segment liabilities 16,168 2,742,035 3,249 2,761,452
Borrowings 2,166,412
Current income tax liabilities 66,460
Deferred income tax liabilities 5,712
Consolidated total liabilities 5,000,036
Consolidated net assets 2,000,474
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
148COSCO Corporation (Singapore) Limited
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38. Segment information (continued) The segment information provided to the key management for the reportable segments is as follows: (continued)
Shipping
Ship repair,
ship building
and marine
engineering
activities
All other
segments
Total for
continuing
operations
$’000 $’000 $’000 $’000
Financial year ended 31 December 2010
The Group
Sales
- External sales 128,605 3,719,483 13,357 3,861,445
- Inter-segment sales – 336 64,894 65,230
128,605 3,719,819 78,251 3,926,675
Elimination (65,230)
3,861,445
Segment results 83,417 369,886 (9,299) 444,004
Finance expense (42,131)
Share of loss of associated companies (27)
Profit before income tax 401,846
Income tax expense (43,240)Net profit 358,606
Other segment items
Capital expenditure
- property, plant and equipment 1,624 174,185 296 176,105
Depreciation and amortisation 14,280 153,245 901 168,426
Allowance for inventory write-down – 572 – 572
Net reversal of impairment of trade and otherreceivables – (31,241) – (31,241)
Expected losses recognised on constructioncontracts – 64,822 – 64,822
Segment assets 190,998 4,976,390 60,356 5,227,744
Associated companies 3,569
Short-term bank deposits 605,892
Available-for-sale financial assets 3,434
Deferred income tax assets 212,703
Consolidated total assets 6,053,342
Segment liabilities 23,527 3,132,749 33,306 3,189,582
Borrowings 992,213
Current income tax liabilities 72,766
Deferred income tax liabilities 4,304
Consolidated total liabilities 4,258,865
Consolidated net assets 1,794,477
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149COSCO Corporation (Singapore) Limited
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
38. Segment information (continued) Geographical information
The Group’s business segments operate in three main geographical areas:
People’s Republic of China - the operations in this area are principally in ship repair, ship building and marineengineering activities;
Singapore - the operations in this area are principally in shipping, shipping agency, ship repair and marinerelated activities, rental of property; and
Malaysia - the operations in this area were principally in shipping agency activities.
Sales are based on the country in which the services are rendered to the customer. Non-current assets are shownby the geographical area where the assets are located.
Sales for
continuing operations Non-current assets
2011 2010 2011 2010
$’000 $’000 $’000 $’000
People’s Republic of China 4,084,582 3,711,802 2,589,970 2,330,568
Singapore* 78,339 147,433 163,577 173,903
Malaysia – 2,210 – 89
4,162,921 3,861,445 2,753,547 2,504,560
* The Group’s shipping companies operate in worldwide shipping routes. Hence, it would not be meaningful to allocate salesto any geographical segments for shipping activities.
Revenues of approximately $500,018,000 (2010: Nil) are derived from a single customer. These revenues areattributable to the People’s Republic of China ship repair, ship building and marine engineering activities segment.
39. New or revised accounting standards and interpretations
Below are the mandatory standards, amendments and interpretations to existing standards that have beenpublished, and are relevant for the Group’s accounting periods beginning on or after 1 January 2012 or later periodsand which the Group has not early adopted.
Amendments to FRS 107 Disclosures - Transfers of Financial Assets (effective for annual periods beginningon or after 1 July 2011)
Amendments to FRS 1 Presentation of Financial Statements (effective for annual periods beginning on orafter 1 July 2011)
FRS 19 (revised 2011) Employee Benefits (effective for annual periods beginning on or after 1 July 2013)
FRS 27 (revised 2011) Separate Financial Statements (effective for annual periods beginning on or after 1
July 2013)
FRS 113 Fair Value Measurement (effective for annual periods beginning on or after 1 July 2013)
The management anticipates that the adoption of the above amendments to FRS in the future periods will not havea material impact on the financial statements of the Group and of the Company in the period of their initial adoption.
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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011
150COSCO Corporation (Singapore) Limited
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40. Authorisation of financial statements
These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of Cosco Corporation (Singapore) Limited on 2 March 2012.
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151COSCO Corporation (Singapore) Limited
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Five-Year Summary
Notes 2007 2008 2009 2010 2011$’000 $’000 $’000 $’000 $’000
INCOME STATEMENT
Turnover 2,261,700 3,476,009 2,899,004 3,861,445 4,162,921
Operating profit before taxation 497,536 450,745 178,338 401,873 286,842
Share of (loss)/profit of associated companies 1 537 643 214 (27) 717
Profit before income tax 498,073 451,388 178,552 401,846 287,559
Income tax expense (19,512) (31,620) (40,758) (43,240) (74,195)
Net profit 478,561 419,768 137,794 358,606 213,364
Attributable to:
Equity holders of the company 336,568 302,588 110,080 248,837 139,671
Non-controlling interests 141,993 117,180 27,714 109,769 73,693
Net profit 478,561 419,768 137,794 358,606 213,364
Dividend 2 156,738 156,747 67,177 89,570 67,177
BALANCE SHEET
Share capital 266,852 270,608 270,608 270,608 270,608
Statutory and other reserves 82,806 167,904 174,030 103,950 181,320
Retained earnings 590,249 705,692 639,404 824,059 849,305
Non-controlling interests 362,847 464,963 526,650 595,860 699,241
Total equity 1,302,754 1,609,167 1,610,692 1,794,477 2,000,474
Forward Currency Contracts 8,778 1,441 – – –
Trade and other receivables – – – 49,089 63,867
Financial assets, available-for-sale 3,067 3,630 4,034 3,434 4,407
Club memberships 479 473 492 557 390
Investments in associated companies 1,794 2,577 1,922 3,569 4,102
Investment properties 11,472 12,217 11,786 14,619 14,405
Property, plant and equipment 1,478,453 2,081,950 2,349,098 2,207,952 2,412,126
Intangible assets 9,302 9,546 9,525 9,468 9,526
Deferred income tax assets 21,996 91,417 158,523 212,703 241,513
Deferred expenditure – – 1,061 3,169 3,211
Current assets 2,431,829 4,596,023 3,885,885 3,548,782 4,246,963
Current liabilities (2,557,025) (4,572,188) (3,870,288) (3,817,496) (4,496,234)
Non-current liabilities (107,391) (617,919) (941,346) (441,369) (503,802)
Net Assets 1,302,754 1,609,167 1,610,692 1,794,477 2,000,474
RATIOS
Basic earnings per share (cents) 3 15.1 13.5 4.9 11.1 6.2
Dividend per share (cents) 7.0 7.0 3.0 4.0 3.0
Dividend cover (times) 4 2.1 1.9 1.6 2.8 2.1
Net tangible assets per share (cents) 41.6 50.7 48.0 53.1 57.7
Gearing ratio (Net of Cash) 5 cash cash cash 0.1 0.4
Notes
1. The share of profit of associated companies is net of tax.
2. The dividend for 2011 is calculated based on the number of shares issued as of 31 December 2011. The actual amount payable willbe based on the number of shares issue at book closure date.
3. Basic earnings per share is calculated as net profit attributable to equity holders of the company divided by the weighted averagenumber of ordinary shares issued in the financial year.
4. The dividend cover is calculated as net profit attributable to equity holders of the Company divided by the amount of equity dividend.
5. Gearing ratio is derived by taking total borrowings (net of cash) over the shareholders’ funds.
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Shareholding Statistics As at 6 March 2012
152COSCO Corporation (Singapore) Limited
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STATISTICS OF SHAREHOLDERS AS AT 6 MARCH 2012
Class of Shares – Ordinary shares
Voting Rights – One Vote per share
DISTRIBUTION OF SHAREHOLDERS AS AT 6 MARCH 2012
SIZE OF SHAREHOLDINGS
NO. OF
SHAREHOLDERS % NO. OF SHARES %
1 – 999 103 0.28 37,378 0.00
1,000 – 10,000 26,514 72.03 131,229,588 5.8610,001 – 1,000,000 10,147 27.57 410,043,042 18.31
1,000,001 and above 46 0.12 1,697,934,946 75.83
Total 36,810 100.00 2,239,244,954 100.00
SUBSTANTIAL SHAREHOLDER
DIRECT INTEREST DEEMED INTEREST
NO. NAME
NO. OF SHARES
HELD %
NO. OF SHARES
HELD %
1. China Ocean Shipping (Group)Company Pte Ltd 1,194,565,488 53.35 – –
COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL
Based on information available and to the best knowledge of the Company as at 6 March 2012 approximately 46.38% of the ordinary shares of the Company are held by the public. The Company is therefore in compliance with Rule 723 of theSGX-ST Listing Manual.
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Shareholding Statistics As at 6 March 2012
TWENTY LARGEST SHAREHOLDERS AS AT 6 MARCH 2012
SHAREHOLDER’S NAME NO OF SHARES %
1 CHINA OCEAN SHIPPING (GROUP) COMPANY PTE LTD 1,194,565,488 53.35
2 SEMBCORP MARINE LTD 70,000,000 3.13
3 DBS NOMINEES PTE LTD 61,655,823 2.75
4 CITIBANK NOMINEES SINGAPORE PTE LTD 55,230,973 2.47
5 UNITED OVERSEAS BANK NOMINEES PTE LTD 33,457,518 1.49
6 HSBC (SINGAPORE) NOMINEES PTE LTD 31,154,287 1.39
7 RAFFLES NOMINEES (PTE) LTD 31,038,335 1.39
8 DBSN SERVICES PTE LTD 25,614,305 1.149 SCM INVESTMENT HOLDINGS PTE LTD 21,000,000 0.94
10 SEMBMARINE INVESTMENT PTE LTD 20,400,000 0.91
11 UOB KAY HIAN PTE LTD 18,379,670 0.82
12 BANK OF SINGAPORE NOMINEES PTE LTD 18,200,918 0.81
13 OCBC SECURITIES PRIVATE LTD 12,351,324 0.55
14 PHILLIP SECURITIES PTE LTD 9,403,030 0.42
15 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 8,356,738 0.37
16 HUI SHUNE MING @ HUI SHUN MENG 8,300,000 0.37
17 OCBC NOMINEES SINGAPORE PTE LTD 8,272,369 0.37
18 LIM & TAN SECURITIES PTE LTD 6,035,000 0.2719 MAYBANK KIM ENG SECURITIES PTE LTD 5,445,716 0.24
20 CIMB SECURITIES (SINGAPORE) PTE LTD 5,129,000 0.23
Total 1,643,990,494 73.41
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Notice of Annual General Meeting
154COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at Suntec SingaporeInternational Convention & Exhibition Centre, 1 Raffles Boulevard Suntec City, Singapore 039593, Meeting Room 325-326,Level 3 on Friday, 20 April 2012 at 3:00 p.m. for the purpose of transacting the following businesses:
Ordinary Business:
1. To receive and adopt the Directors’ Report and Audited Financial Statements for the financial yearended 31 December 2011 together with the Auditors’ Report thereon.
(Resolution 1)
2. To approve a First and Final tax-exempt (one-tier) Dividend of S$0.03 per ordinary share for theyear ended 31 December 2011.
(Resolution 2)
3. To approve payment of Directors’ Fees of S$305,000 for the year ended 31 December 2011. (lastyear: S$285,000)
(Resolution 3)
4. To re-elect the following directors, on recommendation of the Nominat ing Committee andendorsement of the Board of Directors, who are retiring in accordance with Article 98 of the Articles of Association of the Company and who, being eligible, offer themselves for re-election:
a. Mr Jiang Li Jun (Resolution 4)
b. Mr Er Kwong Wah (See Explanatory Note 1) (Resolution 5)
5. To re-elect the following directors, on recommendation of the Nominating Committee andendorsement of the Board of Directors, who are retiring in accordance with Article 104 of the Articles of Association of the Company and who, being eligible, offer themselves for re-election:
a. Mr Ma Ze Hua (Resolution 6)
b. Mr Wu Zi Heng (Resolution 7)
c. Mr Liu Lian An (Resolution 8)
d. Mr Wang Yu Hang (Resolution 9)
6. To re-appoint, on recommendation of the Nominating Committee and endorsement of theBoard of Directors, Mr Tom Yee Lat Shing, a Director who will retire under Section 153(6) of theCompanies Act, Cap 50, to hold office from the date of this Annual General Meeting until the next Annual General Meeting of the Company. (See Explanatory Note 2)
(Resolution 10)
7. To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors and to authorise the Directors to
fix their remuneration.
(Resolution 11)
Special Business:
To consider and, if thought fit, to pass the following as Ordinary Resolutions, with or without modifications:
8. General Mandate to authorise the Directors to issue shares or convertible securities: (Resolution 12)
“That pursuant to Section 161 of the Companies Act (Cap 50) and the Listing Manual of theSingapore Exchange Securities Trading Limited (“SGX-ST”) (the “Listing Manual”), authority be andis 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,
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155COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notice of Annual General Meeting
at any time and upon such terms and conditions and for such purposes as the Directors may intheir absolute discretion deem fit provided that :-
(i) the aggregate number of shares and convertible securities that may be issued shall notbe more than 50% of the issued shares in the capital of the Company (calculated inaccordance with (ii) below), of which the aggregate number of shares and convertiblesecurities issued other than on a pro rata basis to existing shareholders must be not morethan 20% of the issued shares in the capital of the Company (calculated in accordancewith (ii) below); and
(ii) for the purpose of determining the aggregate number of shares and convertible securitiesthat may be issued pursuant to (i) above, the percentage of issued share capital shall becalculated based on the issued shares in the capital of the Company at the time of thepassing 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 optionsor vesting of share awards outstanding or subsisting at the time of the passing of thisresolution and (c) any subsequent consolidation or subdivision of shares; and
(iii) unless revoked or varied by ordinary resolution of the shareholders of the Company ingeneral meeting, this resolution shall remain in force until the next Annual General Meetingof the Company or the date by which the next Annual General Meeting of the Company isrequired by law to be held, whichever is earlier”. (See Explanatory Note 3)
9. Authority to allot and issue shares under the Cosco Group Employees’ Share Option Scheme2002 (“Scheme”)
(Resolution 13)
“That approval be and is hereby given to the Directors to allot and issue from time to time suchnumber of shares in the capital of the Company as may be required to be issued pursuant to the
exercise of options granted under the Cosco Group Employees’ Share Option Scheme 2002.”(See Explanatory Note 4)
10. Proposed Renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions (Resolution 14)
(i) “That approval be and is hereby given for the renewal of the mandate for the purposesof Chapter 9 of the Listing Manual, for the Company, its subsidiaries and associatedcompanies or any of them to enter into any of the transactions falling within the typesof Interested Person Transactions, particulars of which are set out in the Appendix A (“Appendix”) to the Annual Report of the Company for the financial year ended 31December 2011 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 willnot be prejudicial to the interests of the Company and its minority shareholders and in
accordance with the review procedures set out in the Appendix;(ii) That the Audit Committee of the Company be and is hereby authorised to take such
actions as it deems proper in respect of such procedures and/or to modify or implementsuch procedures as may be necessary to take into consideration any amendment toChapter 9 of the Listing Manual which may be prescribed by the SGX-ST from time totime;
(iii) That the Directors of the Company be and are hereby authorised to complete and doall such acts and things (including all such documents as may be required) as they mayconsider expedient or necessary or in the interests of the Company to give effect to thisResolution; and
(iv) That the authority conferred by this Resolution shall, unless revoked or varied by theCompany 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)
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Notice of Annual General Meeting
156COSCO Corporation (Singapore) Limited
An nua l Re port 20 11
BY ORDER OF THE BOARD
Teo Meng KeongCompany Secretary
Singapore, 29 March 2012
Explanatory Notes on Business to be transacted
1. Mr Er Kwong Wah will, upon election as a Director, remain as the Chairman of the Remuneration Committee and a member of the
Audit Committee, Nominating Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will
be considered independent for the purpose of Rule 704(8) of the Listing Manual.
2. Mr Tom Yee Lat Shing will, upon re-appointment, remain as the Chairman of the Audit Committee and a member of the Nominating
Committee, Remuneration Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will be
considered independent for the purposes of Rule 704(8) of the Listing Manual.
3. Ordinary Resolution 12 is to empower the Directors of the Company from the date of the above Meeting until the next Annual
General Meeting to issue shares and/or convertible securities in the capital of the Company up to an amount not exceeding in
aggregate 50% of the issued shares in the capital of the Company of which the total number of shares and convertible securities
issued other than on a pro-rata basis to existing shareholders shall not exceed 20% of the issued shares in the capital of the
Company at the time the resolution is passed, for such purposes as they consider would be in the interests of the Company. This
authority will, unless revoked or varied at a general meeting, expire at the next Annual General Meeting of the Company.
4. Ordinary Resolution 13 is to empower the Directors of the Company, from the date of this Meeting until the next Annual GeneralMeeting, to allot and issue shares in the capital of the Company pursuant to the exercise of such options under the Scheme. The
total number of Shares to be offered under the Scheme shall not exceed fifteen (15) per cent of the issued share capital of the
Company on the day preceding any Offer Date at any time and from time to time during the existence of the Scheme.
5. Ordinary Resolution 14 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 defined
in Chapter 9 of the Listing Manual).
The Company’s Audit Committee has confirmed that the methods and procedures for determining the transaction process have
not changed since the last renewal of the Shareholders’ Mandate on 20 April 2011 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 sufficient 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 specifies 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 office of the Company at 9 Temasek Boulevard,
#07-00 Suntec Tower Two, Singapore 038989 not later than 48 hours before the time fixed for holding the Annual General Meeting.
iv. This instrument appointing a proxy or proxies must be under the hand of the appointer or his attorney duly authorised in writing.
Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal
or under the hand of any attorney duly authorised.
v. A corporation which is a member may also authorise by resolution of its directors or other governing body, such person as it thinks
fit to act as its representative at the meeting in accordance with Section 179 of the Companies Act (Cap. 50).
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157COSCO Corporation (Singapore) Limited
An nu al Repo rt 2011
Notice of Annual General Meeting
NOTICE OF BOOKS CLOSURE
NOTICE IS HEREBY GIVEN that, subject to the approval of shareholders to the First and Final Dividend being obtained atthe Annual General Meeting to be held on 20 April 2012, the Transfer Books and the Register of Members of the Companywill be closed on 4 May 2012 for the preparation of dividend warrants for shareholders of ordinary shares registered in thebooks 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, 80 Robinson Road, #02-00, Singapore 068898 up to 5.00p.m. on 3 May 2012 will be entitled to the proposed First and Final Dividend.
Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at 5.00 p.m. on 3May 2012 will be entitled to the proposed First and Final Dividend. Payment of the dividends, if approved by members at
the Annual General Meeting, will be made on 18 May 2012.
BY ORDER OF THE BOARD
Teo Meng KeongCompany Secretary
Singapore, 29 March 2012
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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 Address
NRIC/Passport
Number
Proportion of
Shareholdings (%)
And/or (delete as appropriate)
Name Address
NRIC/Passport
Number
Proportion of
Shareholdings (%)
as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual General
Meeting of the Company to be held at Suntec Singapore International Convention & Exhibition Centre, 1 Raffles Boulevard SuntecCity, Singapore 039593, Meeting Room 325-326, Level 3 on Friday, 20 April 2012 at 3:00 p.m. and at any adjournment thereof.
I/We have indicated with an “X” in the appropriate box against the item how I/we wish my/our proxy/proxies to vote. If no specificdirection as to voting is given or in the event of any item arising not summarised below, my/our proxy/proxies may vote or abstain atthe discretion of my/our proxy/proxies.
No. Resolutions For Against
ORDINARY BUSINESS
1. To receive and adopt the Directors’ Report and Audited Financial Statements for the year ended 31 December2011 together with the Auditors’ Report thereon.
2. To declare a First and Final tax exempt (one-tier) Dividend of S$0.03 per ordinary share for the year ended 31
December 2011.
3. To approve payment of Directors’ Fees.
4. To re-elect Mr Jiang Li Jun, who is retiring under Article 98 of the Articles of Association of the Company.
5. To re-elect Mr Er Kwong Wah, who is retiring under Article 98 of the Articles of Association of the Company.
6. To re-elect Mr Ma Ze Hua, who is retiring under Article 104 of the Articles of Association of the Company.
7. To re-elect Mr Wu Zi Heng, who is retiring under Article 104 of the Articles of Association of the Company.
8. To re-elect Mr Liu Lian An, who is retiring under Article 104 of the Articles of Association of the Company.
9. To re-elect Mr Wang Yu Hang, who is retiring under Article 104 of the Articles of Association of the Company.
10. To re-appoint Mr Tom Yee Lat Shing, who is retiring pursuant to Section 153(6) of the Companies Act, Cap 50.
11. To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors of the Company and to authorise the
Directors to fix their remuneration.
SPECIAL BUSINESS
12. To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Cap 50.
13. To authorise Directors to issue shares pursuant to the Cosco Group Employees’ Share Option Scheme 2002.
14. To approve the renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions.
Dated this day of 2012
Total No. of Shares in No. of Shares
CDP Register
Register of Members
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 theCompany’s shares, this Annual Report is sent to them atthe request of their CPF Approved Nominees solely FORINFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF investors andshall be ineffective for all intents and purposes if used orpurported to be used by them.
3. CPF investors who wish to vote should contact their CPF Approved Nominees.
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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 defined 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 specifies 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 office 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 finds 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 officer 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 certified 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 fit 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 specified 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 certified by The Central
Depository (Pte) Limited to the Company.
First fold
COSCO CORPORATION (SINGAPORE) LIMITED9 Temasek Boulevard, #07-00 Suntec Tower Two,
Singapore 038989
Second fold
Third fold
Apply glue here
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postagestamp
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