Financial Statements

Transcription

ORMATION
TION TRAN
RANSFOR
9 Temasek Boulevard #07-00
Suntec Tower Two Singapore 038989
Telephone: 68850888 Fascimile: 63369006
w w w . c o s c o . c o m . s g
COSCO Corporation (Singapore) Limited
A JOURNEY OF
N TRANS
NSFORM
RMATION
2009 Annual Report
TWO YEARS AGO, WE EMBARKED ON A JOURNEY OF
CHANGE; TRANSFORMING FROM A SHIP REPAIR AND
CONVERSION COMPANY TO A LARGER ENTERPRISE THAT
INCLUDED CAPABILITIES IN SHIP BUILDING AND OFFSHORE
MARINE ENGINEERING.
DURING THIS TIME, WE HAVE REMAINED RESOLUTE
AND RESILIENT, BUILDING ON OUR BUSINESS MODEL
WHILE MANAGING THE CHALLENGES THAT HAVE COME
OUR WAY.
IN 2009, WE ACQUIRED NEW SKILLS, AND ENHANCED
WORK PROCESSES; WE SAW THE BUILDING OF NEW
SHIPS AND COMPLEX SHIP CONVERSIONS, AS WELL
AS THE COMPLETION OF OUR FIRST DEEP-SEA OIL RIG,
THE SEVAN DRILLER. STAYING THE COURSE, THESE
MEASURED STEPS LAY THE FOUNDATION FOR LONG -TERM
SUSTAINABLE GROWTH.
AT COSCO, WE BELIEVE IN RESILIENCE, DETERMINATION
AND STRENGTH. THESE VALUES HAVE SEEN US THROUGH
THE TROUGH, AND IT WILL SEE US THROUGH THE FUTURE.
IN OUR JOURNEY OF
TRANSFORMATION,
WE TAKE PROGRESSIVE
AND NECESSARY STEPS
TO REALISE
OUR VISION
AS ONE OF
THE WORLD
LEADERS IN
SHIP REPAIR,
SHIP BUILDING
AND OFFSHORE
MARINE
ENGINEERING
Converted by COSCO Dalian Shipyard, FPSO Cidade de Santos MV20 is one of
the world’s largest floating production, storage and offloading vessels (“FPSO”).
The FPSO was converted from the VLCC FSO Bateau and has a storage capacity
of approximately 700,000 barrels. The gas processed in the FPSO will be delivered
through an 18 -inch gas pipeline to merge with a larger pipeline to shore. The FPSO
measures 334 metres long and 51 metres wide.
Contents
7
8
10
12
COSCO OVERVIEW
Corporate Profile
Corporate Structure
Financial Highlights
Major Achievements
18
22
KEY MESSAGES
Chairman’s Message
Vice Chairman and President’s Message
40
42
OPERATIONS REVIEW
Strengths and Capabilities
Our Major Shipyards
Business Overview
Ship Repair, Ship Building and
Offshore Marine Engineering
Dry Bulk Shipping & Others
Group Financial Review
48
63
64
70
72
76
CORPORATE GOVERNANCE
AND TRANSPARENCY
Corporate Governance
Corporate Information
Board of Directors
Key Management
Investor Relations
Risk Management
30
32
34
36
INVESTOR RELATIONS CONTACTS
Mr Li Jian Xiong, Vice President
Tel: (65) 6885 0886
Fax: (65) 6336 9006
Email: [email protected]
84
86
88
90
93
99
100
101
102
103
104
106
108
170
171
173
INSIDE COSCO
AND CORPORATE CITIZENSHIP
Research and Development
Human Resources
Workplace Safety
Corporate Social Responsibility
FINANCIAL STATEMENTS
Directors’ Report
Statement by Directors
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Balance Sheets
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Five-Year Summary
Shareholding Statistics
Notice of Annual General Meeting
Proxy Form for Annual General Meeting
Notes for Proxy Form
SPIN Capital Asia (Investor Relations Consultant)
Mr Michael Tan
Tel: (65) 6227 7790
Email: [email protected]
COSCO Overview
Corporate Profile
Corporate
Profile
COSCO Corporation (Singapore) Limited (“COSCO Corporation” or
the “Group”) has one of the largest Ship Repair, Ship Building and Offshore
Marine Engineering operations in China. A diversified group with activities
also in Dry Bulk Shipping, Shipping Agency and other sectors, it is the SGX
Mainboard-listed subsidiary of China Ocean Shipping (Group) Company
(“COSCO Group”), China’s largest shipping group and one of the top
shipping conglomerates in the world.
COSCO Corporation has achieved significant progress in growing its
Ship Repair, Ship Building and Offshore Marine Engineering capacity and
capabilities. The completion of its acquisition of a 51% stake in one of the
largest shipyards in China, COSCO Shipyard Group (“COSCO Shipyard”),
on 1 January 2005 propelled COSCO Corporation into the premier league
in the ship repair industry.
COSCO Corporation is committed to long-term growth through its core
businesses and global coverage. In October 2006, COSCO Corporation
was rated as a component stock of Prime Partners China Index - the first
index that tracks the performance of China enterprises listed on the SGX.
Since January 2009, we have been part of the FTSE ST China Index, and
from July 2009, we were also included in the FTSE ST China Top Index,
both of which were created to reflect the increasing representation of
China-based companies in the Singapore stock market. Among other
indexes, we are also a component stock of the Morgan Stanley Capital
International World Index as well as the SGX Morgan Stanley Capital
International Asia Apex 50 Index Futures which feature some of the most
promising, widely-traded and investible Asian companies outside Japan.
2009 Annual Report
COSCO OVERVIEW
Corporate Structure
Corporate
Structure
Ship Repair, Ship Building &
COSCO Marine Engineering
(Singapore) Pte Ltd
90%
• COSCO Engineering Pte Ltd COSCO (Nantong) Shipyard Co., Ltd
50%
COSCO (Dalian) Shipyard Co., Ltd
39.1%
COSCO Shipyard Group Co., Ltd
51.0%
• COSCO (Nantong) Shipyard Co., Ltd • COSCO (Qidong) Offshore Co., Ltd
•
•
•
•
•
•
•
•
•
•
•
•
•
Incorporated in January 2009
COSCO (Dalian) Shipyard Co., Ltd
COSCO (Guangdong) Shipyard Co., Ltd
COSCO (Lianyungang) Shipyard Co., Ltd
COSCO (Xiamen) Shipyard Co., Ltd
COSCO (Shanghai) Shipyard Co., Ltd
COSCO (Tianjin) Shipyard Co., Ltd
COSCO (Zhoushan) Shipyard Co., Ltd
COSCO (Nantong) Ocean Shipyard Co., Ltd
COSCO Dalian Rikky Ocean Engineering Co., Ltd
Zhongyuan Sea-Land Engineering Co., Ltd
COSCO Shipyard Total Automation Co., Ltd
Diesel Marine Dalian Ltd
Diesel Marine International (Nantong) Co., Ltd
Dry Bulk Shipping
COSCO (Singapore) Pte Ltd
•
•
•
•
•
•
•
•
Shipping Agency & Others
100%
Cos Fair Shipping Pte Ltd
Cos Glory Shipping Inc
Hanbo Shipping Limited
Sanbo Shipping Limited
Cos Knight Shipping Maritime Inc.
Cos Lucky Shipping Maritime Inc.
Cos Orchid Shipping Pte Ltd
Cos Prosperity Shipping Pte Ltd
COSTAR Shipping Pte Ltd
70%
• Costar Agencies (M) Sdn Bhd
• CNF Shipping Agencies Pte Ltd
• CNF Shipping (M) Sdn Bhd
18%
COSLINK (M) Sdn Bhd
70%
Harington Property Pte Ltd
100%
2009 Annual Report
10
COSCO OVERVIEW
Financial Highlights
Financial
Highlights
Turnover
Revenue
by Activities (%)
(S$’m)
2009
2,899
2008
3,476
2,262
2007
1,215
2006
873
2005
Net Profit Attributable
to Equity Holders (S$’m)
110
2009
95%
Ship Repair, Ship Building &
205
2006
160
2005
Net Assets
Dry Bulk Shipping
Shipping Agency
and Others
337
2007
4%
1%
303
2008
(S$’m)
2009
1,611
2008
1,609
1,303
2007
920
2006
2005
695
11
5-Year Profit and Loss Accounts (S$’m)
2005
2006
2007
2008
2009
Turnover
873
1,215
2,262
3,476
2,899
Operating Profit before Tax
225
301
497
451
179
Share of Profit of Associated Companies
Taxation
Profit from Ordinary Activities
Minority Interest
Net Profit attributable to Equity Holders of the Company
Other Key Statistics
Number of Shares (m)
1
1
1
1
0
19
23
19
32
41
207
279
479
420
138
47
74
142
117
28
160
205
337
303
110
2005
2006
2007
2008
2009
2,214.0
2,237.7
2,239.2
2,239.2
1,098.8#
Basic Earnings per Share (cents)
7.4
9.3
15.1
13.5
4.9
Dividend per Share (cents)
2.0
4.0
7.0
7.0
3.0
3.6
2.3
2.1
1.9
1.6
Net Tangible Assets per Share (cents)
23.2
29.8
41.6
50.7
48.0
Net Assets Value per Share (cents)*
23.6
30.3
42.0
51.1
48.4
*
Dividend Cover (times)
*
0.5
0.2
cash
cash
cash
Return on Equity (%)
38.1
34.5
41.8
29.0
9.9
Return on Assets (%)
16.5
12.5
11.5
5.6
1.7
Gearing Ratio (net of cash)(times)
* Basic earnings per share, net tangible assets per share and net assets value per share have been adjusted to account for the sub-division of one ordinary share
of $0.20 each into two ordinary shares of $0.10 each in 2006
# Based on shares of 20 cents par value each
Dividends per Share (cents) and Basic Earnings per Share (cents)
3.0
2009
4.9
7.0
2008
7.0
2007
4.0
2006
2005
13.5
2.0
15.1
9.3
Dividends per share (cents)
7.4
Basic earnings per share (cents)
2009 Annual Report
12
COSCO OVERVIEW
Major Achievements
Major
Achievements
SEVAN DRILLER
Commencing construction
of steel structure at 13.4m
Steel structure at length
below 28.5m
Successful lifting of drilling
base module
M.V. APJ KAIS
350 POB ACCOMMODATION
AND WORK BARGE
M.V. YUAN SHUN HAI
M.V. BALABAN
M.V. CAESAR
M.V. JIN ZHOU HAI
13
Official naming
ceremony of platform
Platform towed by Nantong COSCO
Shipyard, passing by Nantong Sutong
Bridge in the process
Platform successfully docked at
Qidong Offshore Shipyard Base
M.V. CHANG SHUN II
M.V. INGRID
M.V. ADAM ASNYK
M.V. YUAN AN HAI
M.V. ZHOU SHAN HAI
2009 Annual Report
WE REMAIN
STRONG AND STEADY
Group-wide, we have adopted a structured procedure
management system in the fabrication of vessels.
TO PRODUCE
SIGNIFICANT
OUTCOMES
The Sevan Driller, the world’s first cylindrical drilling
unit, will operate initially in the Campos basin at
water depths of about 2,000 metres. The rig is
capable of drilling wells up to 12,000 metres deep
in water depths of 3,700 metres. It is dynamically
positioned with its own propellers, which receives
GPS positioning signals. The rig is also able to operate
in temperatures below 20 degrees Centigrade. It has
a payload of more than 15,000 metric tons and
a storage capacity of about 150,000 barrels of oil.
18
KEY MESSAGES
Chairman’s
Message
A Journey of Transformation
Dear Shareholders,
2009 has been a year of challenge. As one of the leading industry players, with
widespread operations in the region, we were affected by the volatile global
economic environment. The world recession in 2009 exacerbated the challenges
in our journey of transformation into a ship repair and conversion, ship building
and offshore marine engineering group. Nevertheless, we remain committed to
our long-term strategic goal of enhancing our capabilities and diversifying into
complementary businesses for sustainable growth.
During the year in review, we booked group revenue of $2.9 billion which was
a 17% decrease over revenue for FY2008. Net profit attributable to equity
holders of the company was $110.1 million, a decrease of 64% compared with
corresponding net profit of $302.6 million over FY2008. Earnings per Share was
4.9 cents, a decrease of 64% compared with 13.5 cents over FY2008. Despite
the challenges experienced in 2009, we successfully navigated through the high
waves to remain profitable. Focusing on our business strategy and execution, we
achieved operational milestones that will pave our way forward.
Against this background, the Group is proposing dividends of 3 cents per share
to be approved at our Annual General Meeting on 20 April 2010.
Milestones on our Journey
In 2009, we underscored our comprehensive development strategy by expanding
our existing shipyard capacity and further developing our capabilities with a
wider range of increasingly sophisticated engineering achievements. This resulted
in a more broad-based group revenue composition with substantial contributions
from a wider pool of business segments.
During the year in review, we further enhanced our expertise in the areas of ship
repair and conversion and strengthened our ship building and offshore marine
engineering capabilities by delivering a total of 11 new vessels. For 2010 up till
January, we successfully delivered an additional five bulk carriers, underscoring
our executional momentum and engineering expertise.
Of significance, we completed the construction of the Sevan Driller in FY2009.
A landmark in offshore marine engineering, this deep-sea driller is the world’s
first cylindrical drilling unit.
19
We remain
committed to
our long-term
strategic goal of
diversifying our
capabilities and so
adding more ballast
to our businesses.
2009 Annual Report
20
KEY MESSAGES
Chairman’s
Message
These are just a few of the operational
highlights for the year in review
and delineate the distance we have
travelled in transforming into a multiskilled ship repair and conversion,
ship building and offshore marine
engineering conglomerate.
With the completion of each new
project, we undertake a thorough
project review and distill the lessons
learned and skills acquired. This
structured process will accelerate our
corporate transformation as we go
forward. We believe these measured
steps taken initially will lay a solid
foundation for substantive growth in
the future.
Strategy for Challenging
Times
To cope with difficult circumstances
in 2009, we took measures to better
manage our costs, improve efficiencies
and intensify our management
processes. We also undertook decisive
actions to preserve our assets as we
navigated this environment, building
our diversified portfolio of businesses
and increasing the Group’s resilience
in the face of market uncertainties.
We will continue with these measures
as we enter 2010. Recent economic
news at the start of the new year
suggests that the global economy
should remain on its recovery path,
albeit with a measure of uncertainty.
The International Monetary Fund in
January 2010, for example, forecasts
a recovery in the global economy
in 2010, with growth approximately
3.9%. Expansion is projected to be
uneven, with emerging economies
growing faster than developed
economies. Indeed, the European
Union, United States of America
and Japan face significant corporate
and sovereign debt, as well as high
unemployment. Given these divergent
macro-economic developments, our
operating environment gives us cause
for caution.
Within our industry, prospects for
offshore marine engineering remain
positive with fundamental demand
for oil and energy from emerging
economies. However, the ship building
sector is undergoing a slow recovery
and the dry bulk shipping and shipping
agency sectors face challenges. While
the Baltic Dry Index (“BDI”), a
measure of commodity shipping costs,
has been improving since the low
levels reached in early 2009, freight
rates may yet remain volatile as any
rise driven by global demand for bulk
21
commodities may be moderated by
the increased supply of new bulk
carriers.
We believe our transformative
journey to a diversified ship repair,
ship building, and offshore marine
engineering group is the right,
forward-looking strategy. Our
wide-ranging and integrated
capabilities position us well with
a broader revenue base to weather
economic volatility while enabling
us to benefit from global economic
recovery.
With effect from 22 March 2010,
COSCO Corporation would no
longer be a constituent stock of
the Straits Times Index (“STI”).
We remain confident that our
strategies are sound and our market
capitalisation will fully reflect and
vindicate the success of our yards.
Corporate Leadership
Moving forward, we aim to sustain
our operational and executional
momentum, enhance our skills and
develop our leadership in the maritime
sphere.
to charities and foundations both
in Singapore and China. We are
also cognisant of our impact on the
environment and have established
pro-environment corporate policies
such as recycling and minimal wastage
in all operations, and the inclusion of
environmentally-friendly features for
all new buildings.
Conclusion
Through the bracing environment
of 2009, we have emerged stronger
and are confident of our ability to
create greater long-term value. With
determination, our continual efforts
to transform our Group will prepare
us well for the future.
On behalf of the Board, I would like
to thank our directors, management
and staff for their advice and efforts
over the past year. Last but not least,
the Board is also grateful to our loyal
shareholders. We look forward to
your continued support in the year
ahead.
Li Jian Hong
Chairman
As a corporate leader, we are aware
of our social responsibilities and
have maintained our commitment
2009 Annual Report
22
KEY MESSAGES
Vice Chairman and
President’s Message
Dear Shareholders,
At the start of the year in review, COSCO Corporation was affected by the
global economic recession. The operating environment improved after the
first quarter but was nonetheless challenging during the year, with global trade,
shipping and commerce impacted. Economic recovery was only seen towards
year-end. To cope with these challenges, COSCO Corporation continues to
take the decisive actions necessary to increase competitiveness and grow its
competencies to deliver world-class projects in ship repair and conversion, ship
building and offshore marine engineering.
COSCO Corporation’s strength and stability lie in its commitment to operating
the Group as effectively as possible, while identifying and funding long-term
growth initiatives. We remain focused in developing our core business strategies
and processes, spurring innovation and generating long-term sustainable growth
in order to produce consistent, stable value for our shareholders and customers.
Our people are dedicated to finding new ways to best accommodate our
customers’ needs by increasing efficiencies, reducing costs and meeting exacting
standards.
At COSCO Corporation, we experienced achievements and challenges during
the year in review, resulting in group revenue declining by 17% to $2.9 billion
from $3.5 billion in FY2008. Net profit attributable to equity holders of the
company were booked at $110.1 million, a decrease of 64% from $$302.6 million
in the previous year. As of 31 December 2009, net assets were $1.6 billion while
cash and cash equivalents were $1.5 billion.
Highlights of the Year
During the year, we saw the successful deliveries of 11 new-build vessels
comprising eight bulk carriers, a heavy lift carrier, an accommodation and work
barge and an offshore driller.
All three of our shipyards with ship building capabilities – Dalian, Guangdong
and Zhoushan – delivered new bulk carriers. Carrying that momentum into the
new year, we have delivered an additional five bulk carriers in January 2010.
23
We have undertaken more sophisticated
engineering projects while further expanding
our shipyard capacity.
2009 Annual Report
24
KEY MESSAGES
Vice Chairman and
President’s Message
In the area of ship repair and
conversion, we completed the
conversion of the world’s largest
FPSO vessel, the FPSO Cidade de
Santos MV20. We also won a contract
in May 2009 to convert an 18 year
old VLCC tanker, “MT Sunrise IV”
to an FPSO vessel for Mitsui Ocean
Development & Engineering Co., Ltd.
For offshore marine engineering,
the highlight for the year was our
successful completion of the Sevan
Driller. The world’s first cylindrical
drilling unit, this rig is capable of
drilling oil wells up to 12,000 metres
deep in waters of up to 3,700 metres.
It has an internal oil storage capacity
of 150,000 barrels of oil and is selfpropelled.
In addition, we further expanded
our shipyard capacity with the
commencement of work on a
one million square metre shipyard
specialising in marine engineering
operations at Qidong, Jiangsu, China.
Scheduled to be completed in 2011,
the Qidong shipyard is located
120 kilometres from COSCO’s
Nantong shipyard. Such proximity
will realise production synergies and
optimise resources for the building of
oil rigs and repair, conversion
and construction of a diversity of
complex offshore marine projects.
I am heartened to witness the
achievement of such milestones during
the year, and do believe that our
strategy of diversifying into a marine
conglomerate is on track.
Order Book
We recorded an order book for newbuilds and major conversion projects
of US$5.6 billion as of 31 December
2009 with progressive deliveries up
to 2012. Together with our ship repair
activities, these orders will further
strengthen our revenue base in the
years ahead and keep our shipyards
busy.
Dry Bulk Shipping and
Shipping Agency
In FY2009, dry bulk shipping revenue
decreased by 48% to $132.9 million
as long-term charters were renewed
at lower rates for a shorter-term.
The outlook here is uncertain as
while recovering Baltic Dry Index
(“BDI”) rates may push up commodity
transportation costs, any such
increase in freight rates may be
dampened by the increased supply of
new bulk carriers.
25
A Progressive Culture
COSCO’s corporate management
philosophy is to be progressive and
flexible, focusing on prudence and
long-term goals.
To enhance our long-term
competitiveness, our Group will
continue to focus on upgrading our
shipyards in order to undertake more
lucrative operations and specialised
services. While we have a geographical
advantage with modern shipyards
strategically located along China’s
coastline, including a new shipyard
in Qidong which will serve as our
offshore marine engineering hub,
we will only be able to fully leverage
on this advantage if we can provide
a wide spectrum of specialised ship
repair and conversion, ship building
and offshore marine engineering
services at international standards.
As such, we make concerted efforts
to upgrade the skills of our workforce
through training courses and industrial
attachments.
To maintain a long-term competitive
edge, innovation must lie at the
core of our growth strategy. To that
end, we have put in place an active
Research and Development team.
Comprising 1,300 individuals drawn
from China, Korea and Singapore, our
Research and Development team has
successfully registered nine patents
with the State Intellectual Property
Office of China.
To galvanise the development of
our group strategy, we established a
Strategic Development Committee
in July 2009. Comprised primarily of
directors, the Committee aims to
develop, evaluate and monitor long
and short-term strategic goals.
Ultimately, our vision at COSCO
Corporation is to build a value-driven,
world-class enterprise providing valueadded services for a global customer
base, thereby generating sustainable
long-term shareholder value.
Staying the Course
an operating superstructure that will
stand the test of time.
At this juncture, I would like to thank
Chairman Li for his guidance during
the year and fellow directors,
management and staff for their
unwavering dedication and
professionalism. We have achieved
so much because of the continued
support of our parent company and
the wider COSCO group. Without
a doubt, our valued shareholders and
business partners have also enabled
us to come this far. These are bracing
times, but we will emerge stronger.
Jiang Li Jun
Vice Chairman and President
The road ahead is clear. Despite
the volatility of the modern global
economy, we will stay the course,
proceeding with vigilance and
determination. I remain confident of
our specialised capabilities and assured
of our increasingly wide scope of ship
repair and conversion, ship building,
and offshore marine engineering
services. These cornerstones of our
business are being set in place and
will enable the solid construction of
2009 Annual Report
WE ARE A
COMPANY IN
TRANSFORMATION
As we transform into a multi-faceted
maritime group, we will continue to
place a premium on teamwork.
TO BECOME
STRONGER AND
BETTER IN WHAT
WE DO
M. V. CAESAR, classified by Lloyd’s, is 17 metres high, 30 metres wide, and 210
metres long. Its living quarters can accommodate approximately 220 persons. The
conversion involved the building of steel fabrications, the installation of pipeline-laying
facilities, building of cable systems, upgrading of the navigation system and conversion
of the vessel’s function from the laying of cables to the pipelines. The vessel, equipped
with highly sophisticated 3rd generation DP system and five propellers, can operate
in areas of 3,000 metres under the sea, and is capable of laying pipelines with a
diametre of over 1.2 metres. The vessel was converted by COSCO Nantong Shipyard
for Helix Energy Solution Group.
30
OPERATIONS REVIEW
Strengths and Capabilities
Strengths and
Capabilities
Ship Repair and Conversion
Ship Building
Oil Tanker Conversion | Single to Double Hull
Conversion
Heavy Lift Vessel | Bulk Carrier
| Car Carrier
31
Dry Bulk Shipping and Others
FDPSO | FSO | Jack-Up | Semi-Submersible Rig
2009 Annual Report
32
OPERATIONS REVIEW
Our Major Shipyards
Our Major
Shipyards
Dalian
Lianyungang
Nantong
Qidong
Shanghai
Zhoushan
Guangdong
33
Floating dock x 2
(180,000 dwt and
300,000 dwt)
Dry dock x 1
(80,000 dwt)
Quay x 14
(total 3.7 km)
Workshop x 10
(total 143,418 sq m)
Slideway x 2
(265m x 114m and 269m x 100m)
Total Capacity
560,000 dwt
Floating dock x 1
(80,000 dwt)
Quay x 3
(total 660 m)
Workshop x 4
(total 22,809 sq m)
Floating dock x 2
(80,000 dwt and
150,000 dwt)
Quay x 4
(total 968 km)
Workshop x 11
(total 33,419 sq m)
Slideway x 1
(214m x 35m)
Total Capacity
80,000 dwt
Total Capacity
230,000 dwt
Dry dock x 1
(200,000 dwt)
Quay x 1
(total 400 m)
Slideway x 1
(350m x 110m)
Floating dock x 1
(35,000 dwt)
Quay x 2
(total 280 m)
Workshop x 11
(total 4,759 sq m)
Total Capacity
200,000 dwt
Total Capacity
35,000 dwt
Dry dock x 3
(80,000 dwt,
230,000 dwt and
400,000 dwt)
Quay x 7
(total 1,742 m)
Workshop x 13
(total 253,664 sqm)
Slideway x 2
(250m x 45m and 250m x 45m)
Total Capacity
710,000 dwt
Floating dock x 2
(80,000 dwt and
150,000 dwt)
Quay x 6
(total 1,195m)
Workshop x 9
(total 38,454 sq m)
Slideway x 2
(125.7m x 35m,
435m x 40m and
435m x 40m)
Total Capacity
230,000 dwt
2009 Annual Report
34
OPERATIONS REVIEW
Business Overview
Business
Overview
Year in Review
During FY2009, COSCO Corporation
booked a revenue of $2.9 billion. This
was a decline of 17% in revenue from
$3.5 billion in FY2008.
Net profit attributable to equity
holders of the company decreased
to S$110.1 million mainly because of
the lower revenue contributions from
ship repair and conversion as well as
offshore marine engineering projects,
coupled with higher operational costs.
Revenue for our shipyard operations,
comprising of ship repair and
conversion, ship building and offshore
marine engineering, decreased by
14% year-on-year from $3.2 billion
in FY2008 to $2.8 billion in FY2009.
This remained our largest segment,
comprising 95% of group revenue.
Dry bulk shipping performance saw a
decrease of 48% to $132.9 million yearon-year with the expiry of long-term
contracts and the securing of new,
shorter-term ones at lower rates. The
Baltic Dry Index (“BDI”), a measure of
commodity shipping costs, recovered
from a low of 772 points in early 2009
to reach 3,005 points at year-end. By
comparison, the BDI average for 2008
was 6,390 points. Dry bulk shipping,
shipping agency and others accounted
for 5% of group revenue during FY2009.
Showcasing Diverse
Strengths
Building on its core strengths of
ship repair and conversion, COSCO
has diversified into ship building and
offshore marine engineering. During
the year in review, we further enhanced
our ship repair and conversion, ship
building and offshore marine engineering
capabilities by delivering 11 new vessels
comprising eight bulk carriers, one
heavy lift ship, one accommodation and
work barge and one offshore driller.
Moving into 2010, we completed five
bulk carriers in January.
Additionally, we are enlarging our
Group’s total shipyard capacity with
the development of new facilities at
Qidong in China’s Jiangsu province for
the construction of oil rigs and other
related offshore marine engineering
projects. This specialised offshore
marine engineering yard comprises an
area of one million square metres and
includes heavy lift cranes, a marine
engineering slideway with a length of
1,200 metres and workshops, among
35
others. Commencing operations in late
February 2009, the development of
the yard is expected to be completed
in 2011. Its proximity to Nantong
shipyard will bolster group operational
synergies.
Creating Sustainability
and Efficiency
With our increasing expertise and
experience in the areas of ship building,
ship repair and conversion and offshore
marine engineering, as well as our
continued presence in the dry bulk
and shipping agency sectors, COSCO
Corporation is well-positioned to
offer wide-ranging integrated services
to a wider pool of customers, while
realising operational efficiencies.
Technological improvements and cost
advantages in land and labour over
other international players will further
augment our competitiveness. This will,
in sum, promote sustainable, long-term
growth for the Group.
To enhance COSCO Corporation’s
long-term competitiveness, we will
continue to focus on upgrading our
shipyard capabilities, efficiencies and
productivity. At the same time, the
Group will continue to exercise both
financial and operational prudence
and incorporate sound management
practices to drive productivity across
the board.
With lingering global economic
uncertainties, COSCO Corporation
is cautious about the future and will
maintain corporate stability, focus
on enhancing internal execution
capabilities and boost productivity.
In sum, business operations in 2010 will
require continued strategic vision and
dedicated effort. The Group is certain
that with vigilance and resilience, it will
forge a steady path.
In FY2009,
we completed
the construction
of 11 new vessels
comprising
eight bulk carriers,
one heavy lift ship,
one accommodation
and work barge and
one offshore driller.
Looking Ahead
COSCO Corporation will continue
to adopt flexible growth strategies to
best manage the effects of the changing
economic landscape on our business.
2009 Annual Report
36
OPERATIONS REVIEW
Business Overview
Business Segment
Overview
COSCO Shipyard Group, the
51% owned subsidiary of COSCO
Corporation, has seven major shipyards
in China, located in Dalian, Nantong,
Zhoushan, Guangdong, Shanghai,
Lianyungang, and Qidong. Strategically
situated along China’s coastline, these
shipyards provide an extensive array
of modern and customisable marinerelated capabilities in new ship building,
Name of Vessel
ship repair and conversion, and
offshore marine engineering vessels.
This segment remained our biggest
revenue contributor in FY2009.
Reaching New Milestones
Over the course of the year, we
delivered a total of eight new-build
bulk carriers, one heavy lift vessel,
one accommodation barge and the
Sevan Driller.
Project Details
Delivered On
COSCO Dalian Shipyard
M.V. Chang Shun II
New-build 57,000 dwt bulk carrier
29 September 2009
M.V. Ingrid
29 September 2009
M.V. Jin Zhou Hai
1 December 2009
M.V. Adam Asnyk
New-build 30,000 dwt multipurpose heavy lift carrier
14 December 2009
COSCO Zhoushan Shipyard
M.V.Yuan Shun Hai
31 August 2009
M.V. Zhou Shan Hai New-build 57,000 dwt bulk carrier
21 October 2009
M.V.Yuan An Hai
28 December 2009
COSCO Guangdong Shipyard
M.V. APJ KAIS
29 April 2009
M.V. Balaban
26 November 2009
350 POB
New-build accommodation & work barge
Sevan Driller
New-build deep-sea drilling & storing vessel
24 November 2009
M.V. Caesar
Pipeline-laying vessel (Conversion)
30 November 2009
COSCO Nantong Shipyard
6 May 2009
37
Seizing Opportunities
In April 2009, COSCO Guangdong
delivered its first new-build ship – a
57,000 dwt bulk carrier christened
“M.V. APJ KAIS”. In terms of tonnage
capacity, it is the largest ever bulk
carrier built in Southern China.
Measuring 190 metres in length,
32.3 metres in breadth, and
19 metres in height, it has a draft
of 12.8 metres and a navigation
speed of 14.2 knots.
In May 2009, the Group secured
a major contract to convert an 18
year old Very Large Crude Carrier
(“VLCC”) tanker, to a Floating,
Production, Storage and Offloading
(“FPSO”) vessel. To be carried out
at the COSCO Dalian Shipyard, the
conversion contract will involve repair
and conversion to an FPSO vessel,
and include topside integration and
commissioning. The vessel is expected
to be completed and delivered in 2010,
for deployment in Petrobras’ Tupi Oil
Field, near Brazil in depths between
2,200 to 2,500 metres.
November 2009 of “M.V. Caesar”
from the laying of underwater
cables to underwater pipelines.
Bought by American company Helix
Energy Solution Group, the vessel
is equipped with a sophisticated
3rd generation DP system and five
propellers, operates in depths of
3,000 metres and is capable of laying
pipelines with a diametre of over
1.2 metres.
In December 2009, the Group
completed the construction and
delivery of two ships. At 57,000
dwt, the 190-metre “M.V. Jin Zhou
Hai” was delivered to a subsidiary
of China COSCO Holdings Co., Ltd.
Meanwhile, a 200 metre long, 30,000
dwt multi-purpose heavy lift carrier,
the “M.V. Adam Asnyk” was delivered
to Chipolbrok, a joint venture
between the Chinese and Polish
governments.
These achievements reflect positively
on COSCO Corporation’s increasing
expertise in ship building, ship repair
and conversion.
Types of Vessels Repaired in
FY2009 by Revenue
Dry Bulk Carriers
68%
Oil
Tankers
6%
Container
Vessels
9%
Others
8%
Chemical
Vessels
9%
Revenue contribution from
New Building
45%
Conversion
22%
Offshore
16%
Ship Repair
17%
COSCO Corporation’s abilities in ship
conversion were further employed
in the successful conversion in
2009 Annual Report
38
OPERATIONS REVIEW
Business Overview
Business Segment
Offshore Marine
Engineering Highlights
Offshore Marine Hub
in Qidong
The month of May saw COSCO
Nantong deliver its first
accommodation and work barge.
Named “Nunce”, the new-build
accommodation and work barge
encompasses a living area refurbished
to 4-star hotel standards. It can
accommodate 350 persons, as well
as a tankage for diesel and drinking
water.
To better facilitate the construction of
oil rigs, COSCO Shipyard Group has
secured utilisation rights to a piece of
land in Qidong, Jiangsu Province. This
was secured through COSCO (Qidong)
Offshore Co., Ltd (“COSCO Qidong”),
a joint venture company between
COSCO Shipyard Group (60%),
and the Qidong State-owned Assets
Investment Holdings Co., Ltd. (40%).
COSCO Qidong was incorporated
with a registered and paid-up capital
of RMB500 million.
A key highlight of the offshore
marine engineering sector in FY2009
was COSCO Nantong’s delivery
of the Sevan Driller in November
to Norwegian client Sevan Marine
ASA. This self-propelled rig is the
world’s first cylindrical drilling unit,
and is slated to commence a six-year
contract with Petrobras SA in the
Santos Basin off the Brazilian coastline.
Incorporating state-of-the-art drilling
technology, the rig is capable of drilling
wells up to 12,000 metres deep in
water depths of 3,700 metres. It is
fitted with its own propellers, receives
GPS signals, and has a payload of more
than 15,000 metric tonnes with a
storage capacity of about 150,000
barrels of oil.
Located near COSCO Nantong,
COSCO Qidong shipyard’s proximity
will optimise resources and realise
production synergies for the building
of oil rigs and repair, conversion
and construction of offshore marine
equipment.
Adapting to the Climate
Nonetheless, the year also saw order
cancellations and rescheduling of vessel
deliveries. Several ships that were
scheduled to be delivered at their
original delivery dates were deferred
following the requests of, and after
negotiations with ship owners.
39
Outlook and Prospects
As of 31 December 2009, the Group
has an order book of US$5.6 billion
with progressive deliveries up to
2012, which is expected to keep
our shipyards busy. This order
book is subject to revision from any
cancellation or new orders that may
arise.
We started off 2010 with five more
deliveries of bulk carriers as of endJanuary. The Group will continue
to focus on the delivery of more
vessels in 2010. However, we expect
the external business environment
to remain challenging and economic
recovery to be uncertain.
Located near
COSCO Nantong,
COSCO Qidong
shipyard’s proximity
will optimise
resources and
realise production
synergies in
offshore marine
engineering.
2009 Annual Report
40
OPERATIONS REVIEW
Business Overview
Business Segment
Dry Bulk Shipping
& Others
Overview
Highlights of the Year
Dry Bulk Shipping
This year, revenue from dry bulk
shipping amounted to $132.9 million,
a decrease of 48% as compared to the
previous year as long-term charters
expired and were subsequently
renewed at lower rates for a shorterterm.
Our dry bulk shipping business is
managed by the Group’s wholly-owned
subsidiary, COSCO (Singapore) Pte
Ltd. We currently have a fleet of 12
dry bulk carriers with a combined
carrying capacity of 698,306 dwt
which transport cargo such as iron
ore, coal, steel, cement and fertiliser
along the main trading routes among
major ports of the world in China,
the USA, Europe, South America
and South Africa. These ships are
chartered out to other ship owners
and operators, with a customer
base made up of major shipping
companies based in countries such as
Germany, Norway, Denmark, Greece,
Switzerland, the UK and the USA.
COSCO Corporation’s fleet meets
the most stringent international
quality and safety standards, and
has been awarded with an ISO9002
certification, given to companies that
show a consistent and unparalleled
commitment to quality.
The Baltic Dry Index (“BDI”), a
measure of commodity shipping costs,
recovered from a low of 772 points in
early 2009 to 3,005 points at yearend. By comparison, the BDI average
for 2008 was 6,390 points. Dry bulk
shipping, shipping agency and others
accounted for 5%
of group revenue during FY2009.
Outlook and Prospects
The outlook here is uncertain.
While recovering BDI rates may
push commodity transportation costs
higher, any increase in freight rates
may be moderated by the supply of
new bulk carriers.
We recognise that this early stage
of global recovery has its uncertainties
and the Group will do its best to
mitigate risks and better manage
economic volatility.
41
Shipping Agency
Our shipping agency arm is
managed by subsidiaries of COSCO
Corporation, namely COSTAR
Shipping Pte Ltd and COSLINK (M)
Sdn Bhd. Their main business is
containerisation services for COSCO
Container Lines’ customers. COSTAR
Shipping provides an extensive range
of shipping agency services for all
types of containers, including
Out-of-Gauge (OOG) containers,
General Purpose (GP) units, reefer
containers and hazardous containers
from over 1,300 customers in more
than 169 countries.
Established in Singapore in 1989,
COSTAR Shipping canvasses for
cargo from existing and potential
clients, so as to maximise the tonnage
capacity being loaded on COSCO
Group’s ships as well as the ships of
our clients passing through Singapore.
It also provides extensive agency
services for full container and
break-bulks, including document
preparation of bills of lading and
delivery orders, collection of freight,
cargo operation, vessel husbanding,
customs declaration, port authority
co-ordination, administration and
settlement of cargo claims, transshipment management, bunkering
services and container handling.
COSTAR Shipping also offers valueadded services such as recommending
trucking, freight forwarding, stuffing,
container depot and warehouse and
storage services.
In Malaysia, COSLINK (M) Sdn. Bhd.
serves as the general shipping agent
for the wider COSCO Group’s fleet
of vessels that call at Malaysian ports.
It provides a similar range of services
as COSTAR Shipping in Singapore.
Performance and outlook
During the year in review, Shipping
Agency business moderated with the
lacklustre shipping environment. With
the nascent recovery in the world
economy, seaborne trade and freight
volumes should increase. However,
freight rates may be moderated with
the abundance of cargo ships.
Managed by
COSCO
(Singapore) Pte
Ltd, our dry bulk
carrier business
comprises a
fleet of 12 dry
bulk carriers
with a combined
carrying capacity
of 698,306 dwt,
transporting
cargo globally.
We will also continue stringent and
frequent cost management, reducing
variable and fixed costs as well as
monitoring expenses with periodic
evaluation plans.
2009 Annual Report
42
OPERATIONS REVIEW
Group Financial Review
Group Financial
Review
Overview
The Group ended a challenging year
for the global shipping industry with
a 17% decrease in Group turnover to
$2.9 billion in FY2009 while net profit
attributable to equity holders of the
Company declined by 64% to $110.1
million. The drop in turnover was due
mainly to lower revenue contributions
from ship repair, ship conversion and
offshore marine engineering projects
and reduced shipping revenue.
The fall in net profit attributable to
equity holders of the Company was
attributable to higher operating costs
and the global economic downturn
which impacted performances
of all key operations.
FY2009. COSCO Dalian and COSCO
Zhoushan shipyards delivered three
bulk carriers each while COSCO
Guangdong shipyard delivered two
bulk carriers. COSCO Nantong
delivered the Sevan Driller, the
world’s first cylindrical drilling unit
and a self-propelled rig, in November
2009. In addition, COSCO Nantong
and COSCO Dalian delivered an
accommodation barge in May 2009
and a heavy lift carrier in December
2009 respectively.
Group turnover fell 17% from $3.5
billion in FY2008 to $2.9 billion in
FY2009 on lower revenue across all
segments precipitated by the global
financial crisis.
Turnover from dry bulk shipping
business slipped 48% to $132.9 million
in FY2009 as expired long-term
contracts were leased on short-term
basis at new lower rates during the
year. The Baltic Dry Index (“BDI”),
a measure of shipping costs for
commodities, picked up from a low of
772 points at the beginning of 2009 to
3,005 points at the end of 2009 with
the year’s average of 2,600 points. By
comparison, the BDI average for 2008
was 6,390 points.
Turnover from shipyard operations
dipped 14% to $2.8 billion in FY2009
as ship repair and conversion projects
were adversely affected by the global
economic meltdown. The Group
delivered eight bulk carriers in
Shipyard business remained the
biggest revenue contributor,
forming 95% of Group turnover
in FY2009. Dry bulk shipping and
shipping agency and others accounted
for the remaining 5%.
Turnover
Profitability
Gross profit slid 53% from $630.1
million in FY2008 to $297.6 million
in FY2009 on lower dry bulk
shipping charter rates and lower
profit contributions from ship repair,
ship building and offshore marine
engineering business weighed down by
higher operational costs and a thorny
business climate.
Other income comprised gain from
the disposal of scrap materials,
government grants, interest income
and net fair value loss on forward
currency contracts. Other income
fell 30% to $146.3 million in FY2009
mainly due to the lower sales value of
scrap materials.
Distribution and administrative
expenses fell 31% and 43% respectively
on lower turnover. The net reversal
of impairment of trade and other
receivables of $11.4 million in FY2009
compared to a net allowance for
impairment of trade and other
receivables of $61.3 million in
FY2008 also led to the decrease in
administrative expenses. Interest
expense increased by $33.1 million to
$41.9 million in FY2009 as the Group
took on additional bank borrowings to
fund shipyard expansion.
43
Income tax expense increased due
to lower tax-exempt shipping profit
and higher tax rates for certain
subsidiaries in the People’s Republic of
China (“PRC”).
Property, plant and equipment
increased from $2.1 billion to
$2.3 billion due to the ongoing
facilities expansion of the Group’s
major shipyards in the PRC.
Minority interests decreased due
to lower contributions from the
Group’s PRC subsidiaries involved in
ship repair, ship building and offshore
marine engineering operations.
Trade and other payables decreased
from $4.4 billion to $3.6 billion as
less advances were received from
customers (from $2.8 billion to $1.8
billion) due to completion of some
of the shipbuilding contracts, and
refunds to customers for cancelled
shipbuilding contracts.
As a result of the above, net profit
attributable to equity holders of the
Company decreased 64% from
$302.6 million in FY2008 to $110.1
million in FY2009.
Balance Sheet
and Cash Flow
(31 December 2009 vs 31 December 2008)
Cash and cash equivalents decreased
from $1.9 billion to $1.5 billion mainly
due to cash used in dividend payment,
purchases of new property, plant and
equipment, and less advances received
from customers.
Trade and other receivables fell $117.9
million from $1.6 billion to $1.5 billion
mainly due to decrease in advances
paid to suppliers from $743.1 million
to $679.2 million.
Share Capital
COSCO’s share capital remained
unchanged at $270.6 million. There
was no new issue and allotment
of shares under the COSCO
Corporation Employees’ Share Option
Scheme 2002.
Total Shareholders’ Equity
Shareholder’s equity remained almost
unchanged at $1.1 billion as at 31st
December 2009 after the payment
of dividends in May 2009. Return on
Equity was 10%
Net Gearing
Total bank borrowings increased
from $656.6 million to $1.1 billion due
to additional funding procured for
business operations and the expansion
of the Group’s major shipyards. The
Group had a positive net cash position
of $434.0 million at the end of FY2009.
Earnings Per Share
On a fully diluted basis, with profit
moderating, earnings per share
decreased from 13.5 cents in FY2008
to 4.9 cents in FY2009.
Dividends Per Share
To reward shareholders for their
loyalty, the Board of Directors has
proposed a first and final exempt
dividend of 3.0 cents. The dividend
payout will amount to $67.2 million
(FY2008: $156.7 million) while
Dividend Cover was 1.6.
Net Asset Value Per Share
In line with capacity and facility
expansion, the net asset value per
share of COSCO Corporation
decreased by 5% from 51.1 cents per
share at 31 December 2008 to 48.4
cents per share at 31 December 2009.
2009 Annual Report
WE ARE LEARNING
AND IMPROVING
EVERYDAY
We established a Strategic
Development Committee in July
2009 with the aim of developing,
evaluating and monitoring short
and long-term strategic goals.
WE WORK
AS ONE AND
ACHIEVE
AS ONE
Teamwork, Collaboration, Integrity
It is an emblem of COSCO
throughout all our offices.
48
CORPORATE GOVERNANCE AND TRANSPARENCY
Corporate
Governance
COSCO Corporation (Singapore) Limited (“COSCO Corporation” or “the Company”) and its subsidiaries (together, the “Group”)
believes that establishing good corporate governance practices is key to provide the foundation for a well-managed and efficient
organisation. Corporate governance is not an exercise in compliance nor is it a higher form of management. Corporate governance has
a clear objective: ensuring the pursuit of the Group’s purpose.
The Board’s activities are focused on this task: ensuring the pursuit of the Group’s purpose and this task is discharged by the board
through undertaking such activities as are necessary for the effective promotion of long-term shareholder interest.
At COSCO Corporation the Board of Directors, guided by the Singapore Code of Corporate Governance 2005 (the “Code 2005”)
issued by the Singapore Council on Corporate Disclosure and Governance, remains committed to the principles of good corporate
governance and to achieving high standards of business integrity, ethics and professionalism across all its activities. The Company has
applied, and complied with, the principles and guidelines set out in the Code 2005.
A. BOARD MATTERS
THE BOARD’S CONDUCT OF AFFAIRS
Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is
collectively responsible for the success of the company. The Board works with Management to achieve this and the
Management remains accountable to the Board.
As a company, COSCO CORPORATION recognises the importance of good governance and that it is a discrete task from
Management. Clarity of roles is the key to our approach. Policies and processes depend on the people who operate them. Governance
requires distinct skills and processes. Governance is overseen by the COSCO Corporation Board and Management is delegated to
the Group President and Executive Directors. Our Board exercises judgment in carrying out its work in policy-making, in monitoring
executive action and in its active consideration of Group strategy. The Board’s judgments seek to maximize the expected value of
shareholders’ interest in the Company, rather than eliminate the possibility of any adverse outcomes.
The Board oversees the business affairs of the Company and is collectively responsible for its success. The principal functions of the
Board apart from its statutory responsibilities are to:
a)
set values and standards of the Company and ensure that obligations to shareholders and others are understood and met;
b)
provide entrepreneurial leadership; approve the strategic and financial objectives, corporate policies and authorisation matrix of
the Company;
c)
oversee the processes for risk management, financial reporting and compliance and evaluate the adequacy of internal controls;
approve annual budget, key operational matters, major acquisition and divestment proposals, major funding proposals of the
Company;
d)
review management performance;
e)
approve the nominations to the Board of Directors and appointment of key management, as may be recommended by the
Nominating Committee; and
f)
assume responsibility for corporate governance framework of the Company.
To facilitate effective management, certain functions of the Board have been delegated to various Board committees, namely Audit,
Nominating, Remuneration, Enterprise Risk Management and Strategic Development Committees. Further information regarding the
details of the terms of reference of the respective Board committees is set out in the later part of the Report.
49
The Board conducts regular scheduled meetings on quarterly basis. Ad-hoc meetings are convened when circumstances required.
The Company’s Articles of Association (the “Articles”) provides for Board meetings to be conducted by way of telephone and video
conferencing. The attendance of the Directors at meetings of the Board and Board committees as well as number of such meetings is set
out in the table below:
Attendance at Board and Board Committees’ Meetings
Name
Li Jian Hong
Sun Yue Ying
Zhang Liang
Jiang Li Jun
Min Jian Guo Note 1
Ma Gui Chuan
Wang Xing Ru
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Lu Cheng Gang
(Alternate to
Zhang Liang )
Ye Bin Lin Note 2
(Alternate to
Sun Yue Ying)
Liu De Tian
(Alternate to
Wang Xing Ru)
Li Jian Xiong
(Alternate to
Li Jian Hong)
Board
Audit
Committee
Nominating
Committee
Remuneration
Committee
Number of
Meetings held: 5
Number of
Meetings
Attended
Number of
Meetings held: 9
Number of
Meetings
Attended
Number of
Meeting held: 1
Number of
Meeting
Attended
Number of
Meeting held: 1
Number of
Meeting
Attended
Enterprise Risk
Management
Committee
Number of
Meetings held: 5
Number of
Meetings
Attended
Strategic
Development
Committee
Number of
Meeting held: 1
Number of
Meetings
Attended
3
4
4
5
4
5
4
5
5
5
5
NA
NA
NA
NA
NA
NA
NA
9
9
9
9
NA
NA
NA
1
NA
NA
NA
1
1
1
1
NA
NA
NA
1
NA
NA
NA
1
1
1
1
NA
NA
NA
4
NA
NA
NA
5
5
5
5
NA Note 3
NA
NA
1
NA
NA
NA
1
1
1
1
5
NA
NA
NA
NA
NA
5
NA
NA
NA
4
NA
5
NA
NA
NA
NA
NA
5
NA
NA
NA
NA
1
NA: Not Applicable
Note:
1. 2. 3. Min Jian Guo resigned on 30 September 2009.
Ye Bin Lin was co-opted and appointed as a member of the Enterprise Risk Management Committee on 2 March 2009.
The alternate director to Mr Li Jian Hong, Mr Li Jian Xiong, attended the Strategic Development Committee Meeting on behalf of Mr Li Jian Hong.
2009 Annual Report
50
Corporate
Governance
Whilst the Board has delegated the day to day management of the Group to the Group President and Executives, there are matters
reserved for the Board by which the Board oversees control of the Group’s affairs. Some of the matters reserved for the Board and
Board’s approval are:
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
the recommendations of the Strategic Development Committee;
the Group’s long term objectives and commercial strategy;
the making of any decision to cease to operate all or any material part of the business of the Group or to extend the Group’s
activities into new business;
the consideration of any proposal to merge or amalgamate the Company with any other company;
the approval of any acquisition of any investment, asset or business by the Company or any of its subsidiaries which would involve
the commencement of an activity of a substantially different nature or character to any activity from time to time carried on by the
Company or any of its subsidiaries;
changes relating to the Group’s capital structure including changing the amount or currency of the Company’s authorised share
capital, reduction of capital, share issues (except under employee share options plan);
the approval of and ensuring the maintenance of internal controls and risk management procedures for the Company
and its subsidiaries;
approving the Company’s Audited Financial Statement and other appropriate statements for inclusion in the Company’s Annual
Report and the issue of the Annual Report;
the issue and filing of statutory or regulatory statements, the quarterly, half yearly and full year reports;
determining and approving any significant change to the accounting policies or practices of the Company, and of the Company
and its subsidiaries;
the recommendation of the payment of any dividend by the Company or any exercise of the powers of the Board in relation to
reserves or capitalisation of profit;
appointments or removals from the Company’s Board of Directors (following receipt of recommendations by the Nominating
Committee) and the appointment or removal of the Company Secretary;
changes to the structure, size and composition of the Board, following receipt of recommendations from the Nominating Committee;
in the case of any conflict of interest which the Board, after being appropriately advised, considers to be material, as to whether such
conflict should be authorised and, if so, authorise such conflict upon such terms and conditions as the Board considers appropriate;
determining the remuneration policy for senior executives of the Company (following receipt of recommendations by the
Remuneration Committee;
undertaking a review annually of its own performance, that of its committees and the contribution by each director to the
effectiveness of the Board; and
any matter required to be considered or approved by the Board as a matter of law or regulation.
BOARD COMPOSITION AND GUIDANCE
Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgment on
corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed
to dominate the Board’s decision making.
The Board has ten (10) members: two (2) Executive Directors, four (4) Non-Executive Directors and four (4) Non-Executive Independent
Directors. The composition of the Board is as follows and the Directors’ academic and professional qualifications are set out on pages 64
to 69 of this Annual Report. No individual or group of individuals dominates the Board’s decision-making. Collectively, the Non-Executive
Directors and Non-Executive Independent Directors bring a wide range of experience and expertise as they all currently occupy or have
occupied senior positions in industry and public life, and as such each contributes significant weight to Board decisions. None of the nonexecutive independent directors has any relationship with the Company, its related companies or its officers that could interfere, or
be reasonably perceived to interfere, with the exercise of the director’s independent business judgment with a view to the best interests
of the Company.
51
Board of Directors
Li Jian Hong Jiang Li Jun Sun Yue Ying Zhang Liang Wang Xing Ru Ma Gui Chuan Tom Yee Lat Shing Wang Kai Yuen
Er Kwong Wah Ang Swee Tian Chairman and Non-Independent and Non-Executive Director
Vice Chairman, President and Non-Independent Executive Director
Non-Independent and Non-Executive Director
Non-Independent and Executive Director
Non-Executive Independent Director
Change to the Board during the financial year 2009 is as follows:
Min Jian Guo resigned on 30 September 2009 as Vice President and Non-Independent Executive Director.
The efficiency and effectiveness of the Board are of paramount importance. Our Board’s size is necessary to allow sufficient Executive
Director representation to cover the breadth of the Group’s business activities and sufficient Non-Executive Independent Director
representation to reflect the scale and complexity of COSCO Corporation and to staff our Board committees. A board of this size
allows orderly succession planning for key roles.
The current size of the Board is appropriate and will facilitate effective decision making. The Board will continue to review the size
of the Board on an ongoing basis. As a team, the Board collectively provides core competencies in the areas of accounting, finance,
business and management experience, as well as industry knowledge.
Directors also receive regular updates on relevant new laws and regulations, and evolving commercial risks and business conditions
from the Company’s relevant advisors. Newly appointed directors are provided with background information about the Company and
the Group. Annual visits are arranged for Non-Executive Directors to acquaint them with important operations overseas.
STRATEGIC DEVELOPMENT COMMITTEE
The Strategic Development Committee (“SDC”) comprises six (6) Directors, the majority of who is independent non-executive
directors was established on 23 July 2009. The SDC members are:
Jiang Li Jun
Li Jian Hong
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian (Chairman) (Non-Independent Executive)
(Non-Independent Non-Executive)
(Non-Executive Independent)
The SDC assists the Board in fulfilling its responsibilities for developing, evaluating and monitoring the Company’s long and shortterm strategic goals. The SDC operates at the Board level but shall not assume the Board’s governance accountability or to make
final strategic decisions. The SDC acts solely to address and develop current and future strategy-related issues. The SDC has the
responsibility for creating and driving the Company’s strategy development and planning and Management takes responsibility for
implementing the Company’s strategy(ies) after the SDC received approval from the full Board and/or other relevant board committees.
2009 Annual Report
52
Corporate
Governance
The SDC have the following authority and responsibilities:
(a)
Review and develop Company Strategy(ies): Meet with Management periodically to review, develop and evaluate the Company’s
evaluation and implementation of its business strategy.
(b)
Provide Resource Support: Support the Board or Management in the valuation and/or refining of the Company’s strategic plans.
(c)
Assess Progress: Review and assess the status of implementation of the Company’s business strategy and whether the results
are consistent with the goals of the strategic plan as adopted by the Board.
(d)
Recommend Improvements: Recommend areas of improvement and provide feedback to the Board and Management regarding
the overall success of the business strategy.
The SDC has met once in the financial year of 2009.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
Principle 3: There should be a clear division of responsibilities at the top of the company – the working of the Board and
the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no
one individual represents a considerable concentration of power.
The roles of Chairman and the President are undertaken by separate persons so as to create a clear division of responsibilities and
maintain an effective oversight. The Chairman and the President are not related to each other.
The Chairman is responsible for the workings of the Board, ensuring the integrity and effectiveness of its governance process. In his
absence, his appointed alternate and/or the President would act on his behalf.
The President is the most senior executive in the Company and has full executive responsibilities over the business directions and
operational decisions of the Group. He works closely with the Board to implement the policies set by the Board to realise the Group’s
vision.
BOARD MEMBERSHIP
Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.
Recommendations for nominations of new directors and retirement of directors are made by the Nominating Committee and
considered by the Board as a whole.
The Nominating Committee (“NC”) reviews and assesses candidates for directorship before making recommendations to the Board.
The NC takes into consideration the skills and experience required and the existing composition of the Board and strives to ensure that
the Board has an appropriate balance of independent directors as well as directors with the right profile of expertise, skills, attributes
and abilities when recommending new directors to the Board.
The process for the appointment of new directors begins with the NC, together with the Chairman and Vice Chairman of the Company,
conducting a needs analysis and identifying the critical requirement in terms of expertise and skills that are needed in the context of the
strengths and weaknesses of the existing Board. The NC then defines a profile for the new director to serve as a brief for recruitment.
When a candidate has been endorsed by the NC, the NC will then make a recommendation to the Board for the approval of his
appointment.
The NC assesses and recommends to the Board whether retiring directors are suitable for re-nomination for re-election. In evaluating
a director’s contribution and performance for the purpose of re-nomination, the NC takes into consideration a variety of factors such
as attendance, preparedness, participation and candour.
In accordance with the provisions of the Articles, one-third of the Directors retire by rotation and subjects themselves to re-election
at every Annual General Meeting (“AGM”) of the Company. The President who is a member of the Board must also subject himself to
retirement by rotation and re-election by the Shareholders. New directors who were appointed by the Board during the year will hold
office only until the next AGM and will be eligible for re-election.
53
The dates of initial appointment and last re-election/re-appointment of each of the Directors are set out below:
Director
Li Jian Hong*
Jiang Li Jun
Sun Yue Ying
Zhang Liang
Ma Gui Chuan
Wang Xing Ru
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Lu Cheng Gang
Ye Bin Lin
Liu De Tian
Li Jian Xiong
Position
Chairman, Non-Independent and Non-Executive
Vice Chairman, President and Non-Independent Executive
Non-Executive
Non-Executive
Executive
Non-Executive
Non-Executive Independent
Alternate to Zhang Liang
Alternate to Sun Yue Ying
Alternate to Wang Xing Ru
Alternate to Li Jian Hong
Date of Initial
Appointment
Date
of Last
Re-election
20.12.2002
7.8.2008
12.6.2000
15.10.2008
10.1.2007
14.2.2006
16.11.1993
2.5.2001
20.12.2002
13.11.2007
15.10.2008
20.12.2002
14.2.2006
20.12.2002
20.4.2009
20.4.2009
15.4.2008
20.4.2009
18.4.2007
15.4.2008
20.4.2009
20.4.2009
18.4.2007
15.4.2008
n.a.
n.a
n.a
n.a
NOMINATING COMMITTEE
The Nominating Committee (“NC”) comprises five Directors, majority of whom, including the Chairman is independent. The NC
members are:
Wang Kai Yuen (Chairman) (Non-Executive Independent)
Jiang Li Jun (Non-Independent Executive)
Tom Yee Lat Shing (Non-Executive Independent)
Er Kwong Wah (Non-Executive Independent)
Ang Swee Tian (Non-Executive Independent)
The principal functions of the NC are to:
a)
identify, review and recommend candidates for appointment as Directors of the Company and appointment to the Board
committees as well as to senior management positions in the Company;
b)
evaluate the effectiveness of the Board as a whole and assess the contribution by each Director, to the effectiveness of the
Board;
c)
determine annually whether or not a Director is independent; and
d)
make recommendations to the Board on re-appointment of Board and Board committee members.
During the financial year the NC held one meeting. The NC met to review the nominations for the appointments of those directors that
were appointed during the financial year for recommendation to the Board to approve the appointments. In arriving at their decisions
on the new appointments, the NC took into consideration the incumbents’ academic qualifications, experience, their individual field of
expertise and their potential contributions to the effectiveness of the Board. The NC also met and determined the independence of
the Directors is in line with the undertakings described in the Code 2005. It also reviewed the composition of the Board and the Board
Committees in relation to the needs of the Group.
The NC is of the opinion that the Board is able to exercise objective judgment on corporate affairs independently and no individual or
small group of individuals dominates the Board’s decision making process.
2009 Annual Report
54
Corporate
Governance
The NC assesses and recommends to the Board whether retiring Directors are suitable for re-election. The NC considers that the
multiple board representations held presently by some Directors do not impede their respective performance in carrying out their
duties to the Company.
The assessment of Tom Yee Lat Shing’s independence was given particular consideration by the NC as he has now served on the Board
for more than 16 years.
The NC believes that due to his strength of character, experience and knowledge, Tom Yee Lat Shing continues to be highly effective
as an independent non-executive director. He provides objective and rigorous challenges to, and engages in constructive debate with,
the board and the committees on which he sits. Tom Yee Lat Shing also brings a wealth of useful and relevant experience both in his
position as an independent non-executive director and as the Chairman of the Audit Committee.
Accordingly, the NC has recommended and the Board has endorsed the re-appointment of Tom Yee Lat Shing by shareholders at the
annual general meeting. The NC and the Board believe that it is in the shareholders’ best interests for Tom Yee Lat Shing to be reappointed as an independent non-executive director.
BOARD PERFORMANCE
Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the
contribution by each director to the effectiveness of the Board.
A formal assessment process is in place to assess the effectiveness of the Board as a whole and the contribution by each Director to
the effectiveness of the Board. The NC uses objective and appropriate quantitative and qualitative criteria to assess the performance
of the Board as a whole and the contribution of each Director to the effectiveness of the Board. Assessment parameters include
evaluation of the Board’s access to information, risk management, accountability, the Board’s performance in relation to discharging its
principal functions, communication with management and stakeholders, the business performance of the Company, the quality of Board
processes, the attendance records of the Directors at Board and Committee meetings and the level of participation at such meetings.
The evaluation of the Board is conducted annually. As part of the process, the Directors will complete appraisal forms which are
collated by the Company Secretary. The Company Secretary will then review the results of the appraisal and present the results to the
Chairman of the NC who will then present a report to the Board.
An individual assessment of each Director is also undertaken annually. The process of the assessment is through self-assessment where
each Director will complete appraisal forms which are collated by the Company Secretary. The Company Secretary consolidates the
appraisal forms and presents the results to the Chairman of the NC who will then present a report to the Board.
ACCESS TO INFORMATION
Principle 6: In order to fulfill their responsibilities, Board members should be provided with complete,
adequate and timely information prior to board meetings and on an on-going basis.
The Board is provided with management information pertaining to such areas as detailed divisional performance, variance analysis,
budget, forecast, funding positions and cash flow projections of the Group, to help them carry out their responsibilities effectively.
In addition, all relevant information on material events and transactions are circulated to Directors as and when they arise.
All Board members have separate and independent access to the advice and services of the Company Secretary. The Company
Secretary attends Board and most of the Board committees meetings and is responsible for ensuring that Board procedures are
followed. Together with the other management staff of the Company, the Company Secretary is also responsible for compliance with
the SGX-ST Listing Manual and all other applicable rules and regulations. All Board members also have separate and independent access
to the senior management of the Company and the Group.
Board members are aware that they, whether as a group or individually, in the furtherance of their duties, can take independent
professional advice, if necessary, at the Company’s expense.
55
B. REMUNERATION MATTERS
PROCEDURES FOR DEVELOPING REMUNERATION POLICIES
Principle 7: There should be a formal and transparent procedure for developing policy on executive
remuneration and for fixing the remuneration packages of individual directors. No director should be
involved in deciding his own remuneration.
The Remuneration Committee (“RC”) meets yearly to discuss the performance assessment of the Executive Directors as well as to
discuss the level of emoluments to pay. The recommendations are forwarded to the Board for approval of the remuneration of the
Executive Director. The RC also reviews and approves the remuneration of senior management, as well as the total annual increment
and variable bonus for employees.
Directors’ fees are recommended by the RC and are submitted for endorsement by the Board. Directors’ fees are subjected to approval
by shareholders at the AGM.
All the members of the RC are Non-Executive, Independent Directors except for Mr Jiang Li Jun the Vice Chairman and President
The RC is of the view that the presence of Mr Jiang Li Jun would help the RC by providing intimate knowledge of the remuneration
policies in the industry the Company is in. No Director is involved in deciding his own remuneration.
LEVEL AND MIX OF REMUNERATION
Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors
needed to run the Company successfully but companies should avoid paying more than is necessary for
this purpose. A significant proportion of executive directors’ remuneration should be structured as to link
rewards to corporate and individual performance.
In setting the remuneration packages of the Executive Directors, the RC takes into account the respective performance of the Group
and the individual. In its deliberation, the RC takes into consideration, remuneration packages and employment conditions within the
industry and benchmarked against comparable companies.
Non-Executive Independent Directors are paid a basic fee and an additional fee for serving on any of the committees. The Chairman of
each of these committees is compensated for his additional responsibilities. Such fees are approved by the shareholders of the Company
as a lump sum payment at the AGM of the Company.
REMUNERATION COMMITTEE
The RC comprises five Directors, majority of whom including the Chairman is independent. The RC members are as follows:
Er Kwong Wah (Chairman) (Non-Executive Independent)
Tom Yee Lat Shing (Non-Executive lndependent)
Wang Kai Yuen (Non-Executive lndependent)
2009 Annual Report
56
Corporate
Governance
The principal functions of the RC are to:
a) recommend to the Board base salary level, benefits and incentive programmes, and identify components of salary which can best
be used to focus management staff on achieving corporate objectives;
b) approve the structure of compensation programme (including but not limited to Directors’ fees, salaries, allowances, bonuses,
options and benefits in kind) for the Directors and senior management to ensure that the programme is competitive and
sufficient to attract, retain and motivate senior management of the required quality to run the Company successfully;
c)
review, on annual basis, the compensation package of the Company’s Directors and senior management personnel and
determine appropriate adjustments; and
d)
administer the COSCO Group Employees’ Share Option Scheme 2002.
The Company currently adopts a remuneration policy for staff consisting of a fixed component and a variable component. The fixed
component is in the form of a base/ fixed salary. The variable component is in the form of a variable bonus that is linked to the Company
and individual performance. Another element of the variable component is the grant of share options under the COSCO Group
Employees’ Share Option Scheme 2002.
Information on the COSCO Group Employees’ Share Option Scheme 2002 such as size of grants, exercise price of options that were
granted as well as outstanding and vesting period of options are set out on pages 96 and 97 of the Annual Report.
The RC held one meeting during the financial year. The issues deliberated at this meeting included reviewing the termination of options
granted, extension of exercise period of options granted, the bonus payments to senior management and the compensation programme
for the Directors and senior management.
DISCLOSURE ON REMUNERATION
Principle 9: Each company should provide clear disclosure of its remuneration policy, level and mix of
remuneration, and the procedure for setting remuneration in the Company’s annual report. It should
provide disclosure in relation to its remuneration policies to enable investors to understand the link
between remuneration paid to directors and key executives, and performance.
DIRECTORS’ AND KEY EXECUTIVES’ REMUNERATION
The Directors’ and key executives’ remuneration table for the financial year ended 31 December 2009 is as follows:
Fees
Salary
Bonus
Other
Benefits
Amortisation of
Stock Options
Expenses
Total
0%
15.31%
69.19 %
4.52%
10.98%
100%
0%
0%
28.61%
21.34%
46.97%
58.90%
10.15%
6.11%
14.27%
13.65%
100%
100%
0%
41.08%
44.69 %
14.23%
0%
100%
Non-Independent and Non-Executive Director in the Band of
S$1,000,000 to below S$1,250,000
Liu De Tian Note 1
Non-Independent Executive Directors in the Band of
S$750,000 to S$1,000,000
Ma Gui Chuan
Min Jian Guo (Resigned on 30 September 2009)
Non-Independent Executive Director in the Band of
S$500,000 to S$750,000
Jiang Li Jun
57
Fees
Salary
Bonus
Other
Benefits
Amortisation of
Stock Options
Expenses
Total
0%
0%
0%
19.44%
62.67 %
48.35%
0%
0.57%
37.33%
31.64%
100%
100%
55.30%
53.14%
53.14%
100%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
44.70%
46.86%
46.86%
0%
100%
100%
100%
100%
0%
0%
30.16%
29.76%
46.05%
45.44%
6.84%
8.07%
16.95%
16.73%
100%
100%
0%
51.62%
41.43%
6.95%
0%
100%
Non-Independent and Non-Executive Directors in the Band of
below S$500,000
Lu Cheng Gang
Wang Xing Ru Note 1
Independent Directors in the Band of below S$500,000
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Executives in the Band of S$500,000 to below S$750,000
Ye Bin Lin
Li Jian Xiong
Executives in the Band of below S$500,000
Wong Meng Yun
Note 1:
The salary, bonus and other benefits of the incumbent directors are paid by the subsidiaries.
No employee of the Company and its subsidiary companies was an immediate family member of a Director and whose remuneration
exceeded S$150,000 during the financial year ended 31 December 2009.
Executives’ Remuneration
The Company adopts a remuneration strategy that supports a pay-for-performance philosophy. Executives participate in an annual
performance review process that assesses the individual’s performance and contributions.
The remuneration structure for the Group President and other key executives consists of the following components:
Salary
Fixed pay comprises basic salary and the Company’s contribution towards the Singapore Central Provident Fund where applicable.
Bonus
Bonus is paid based on the Company’s and individual’s performance.
Other Benefits
Other benefits comprise of usage of Company’s car and other benefits-in-kind.
Stock Option
Share options are granted to align staff’s interests with that of shareholders’. These options are granted with reference to the desired
remuneration structure target and valued based on the Binomial Valuation Model. Details of the share option scheme can be found in
the “Directors Report” section of the Annual Report.
2009 Annual Report
58
Corporate
Governance
C. ACCOUNTABILITY AND AUDIT
ACCOUNTABILITY
Principle 10: The Board should present a balanced and understandable assessment of the Company’s
performance, position and prospects.
The Board has overall responsibility to shareholders for ensuring that the Group is well managed and guided by its strategic objectives.
In presenting the Group’s annual and quarterly financial results to shareholders, the Board aims to provide shareholders with a balanced
and understandable assessment of the Group’s performance, position and prospects. Management provides the Board with management
accounts and other financial statements on a quarterly basis.
AUDIT COMMITTEE
Principle 11: The Board should establish an Audit Committee (“AC”) with written terms of reference which
clearly set out its authority and duties.
The Audit Committee (“AC”) comprises the following:
Tom Yee Lat Shing (Chairman) (Non-Executive Independent)
Wang Kai Yuen (Non-Executive Independent)
The AC performs the following functions:
a)
reviews with the external auditors, their audit plan, evaluation of the accounting controls, audit reports and any matters which
the external auditors wish to discuss;
b) reviews with the internal auditors, their audit plan, the adequacy of the internal audit procedures and their evaluation of
the effectiveness of the overall internal control systems, including financial, operational and compliance controls and risk
management;
c) reviews the quarterly and annual financial statements, including announcements to shareholders and the SGX-ST prior to
submission to the Board so as to ensure the integrity of the Company’s financial statements;
d)
reviews any significant findings and recommendations of the external and internal auditors and related management response
and assistance given by the management to auditors;
e)
reviews interested person transactions to ensure that internal control procedures approved by the shareholders are adhered to;
and
f) conducts annual review of the independence and objectivity of the external auditors, including the volume of non-audit services
provided by the external auditors, to satisfy itself that the nature and extent of such services will not prejudice the independence
and objectivity of the external auditors before confirming their re-nomination.
The AC and the Board of Directors, with the assistance of internal audit and external audit, reviews the effectiveness of the key
internal controls, including financial, operational and compliance controls, and risk management on an on-going basis. There are formal
procedures in place for both the internal and external auditors to report independently their findings and recommendations to the AC.
The AC has full access to, and cooperation from the Management including internal and external auditors, and has full discretion to
invite any Director or executive officer to attend its meetings. The AC has also expressed power to investigate any matter brought to
its attention, within its terms of reference, with the power to retain professional advice at the Company’s expense.
The Group recognises the importance of the internal audit function which, being independent of Management is one of the principal
means by which the AC is able to carry out its responsibilities effectively. The Company has its own Internal Audit function in addition
to having Messrs Deloitte & Touche Enterprise Risk Services Pte Ltd as the internal auditors of the Group.
The internal auditors, the in-house and out-sourced incumbents plan their internal audit schedules in consultation with Management and
submit their respective plan to the AC for approval. The Internal Auditors, the in-house and outsourced incumbents, report directly to
the AC.
59
The AC conducts regular meetings scheduled on a quarterly basis. Apart from the quarterly meetings, the AC meets with the external
and internal auditors, without the presence of the management at least once a year. Ad-hoc meetings may be carried out from time to
time, as circumstances require. The AC held nine meetings during the financial year.
The AC, having reviewed the non-audit services provided by the external auditors, PricewaterhouseCoopers LLP, to the Group, is
satisfied with the independence and objectivity of the external auditors and recommends to the Board of Directors, the nomination of the
external auditors for re-appointment.
Whistle-blowing Policy
The Company has in place a whistle-blowing policy and arrangements by which staff may, in confidence, raise concerns about possible
corporate improprieties in matters of financial reporting or other matters. To ensure independent investigation of such matters and
for appropriate follow-up action, all whistle-blowing reports are to be sent to the internal audit function. The Chairman of the Audit
Committee and the Vice Chairman of the Board will be informed immediately of all whistle-blowing reports received. Details of the
whistle-blowing policy and arrangements are given to all staff for their easy reference. New staff is briefed on these during the orientation
programme.
INTERNAL CONTROLS
Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to
safeguard the shareholders’ investments and the company’s assets.
The Group maintains a system of internal controls for all companies within the Group, but recognises that no internal control system
will preclude all errors and irregularities. The system is designed to manage rather than to eliminate the risk of failure to achieve business
objectives. The controls are to provide reasonable, but not absolute, assurance to safeguard shareholders’ investments and the Group’s
assets.
The Group’s key internal controls include:
-
-
-
-
-
-
establishment of risk management policies and systems;
establishments of policies and approval limits for key financial and operational matters, and issues reserved for the Board;
documents of key processes and procedures;
segregation of incompatible functions which give rise to a risk of errors or irregularities not being promptly detected; maintenance
of proper accounting records;
safeguarding of assets;
ensuring compliance with appropriate legislation and regulations; and
engaging qualified and experience persons to take charge of important functions.
Operational risk management measures implemented by the Group include the implementation of safety, security and internal control
measures and taking up appropriate insurance coverage.
Details of the Group’s financial risk management measures are outlined in Note 36 to the Financial Statements.
Based on internal controls established by the Group, work performed by the internal and external auditors, and reviews conducted by the
Audit Committee and the Management Risk Committee, the Board is of the opinion that the Group has adequate internal controls.
ENTERPRISE RISK MANAGEMENT COMMITTEE
The Enterprise Risk Management Committee (“ERMC”) comprises five Directors, the majority of whom including the Chairman is
independent. The ERMC members are:
Ang Swee Tian (Chairman) (Non-Executive Independent)
Tom Yee Lat Shing (Non-Executive and Independent)
Wang Kai Yuen (Non-Executive Independent)
Ye Bin Lin (Chief Financial Officer) *
* Ye Bin Lin was co-opted and appointed as a member of the Enterprise Risk Management Committee on 2 March 2009.
2009 Annual Report
60
Corporate
Governance
The ERMC assists the Board in fulfilling its oversight responsibilities on risk management. The responsibilities of the ERMC would
include the following:
-
-
-
reviews the overall risk management system and process and makes recommendations on changes as and when
considered appropriate
reviews the Group’s risk policies, guidelines and limits; and
reviews periodically the Group’s material risk exposures and evaluates the adequacy and effectiveness of the mitigating
measures implemented by management.
The ERMC held five meetings during the year at which discussions were held on the existing risk management structure, the key risk
exposures of the Group and the action plan to mitigate such risks.
In its continuous endeavours to address and mitigate its operational risks, COSCO Shipyard Group has entered into a comprehensive
strategic agreement with a leading Chinese insurance institution to strengthen its risk management system and to enhance its
operational structure. The said insurance institution has established a team to provide the Group with different facades of insurance for
domestic and international trades; setting up a standardised claims and liabilities system; the evaluation of ship owners’ credit ratings,
the tracking of ship owners’ risk; and the evaluation of countries’ credit ratings. The Company believes all these efforts are to help the
Group to move towards the establishment of an all-encompassing risk management system.
During the financial year the ERMC has engaged the services of Deloitte & Touche Enterprise Risk Services Pte Ltd to provide the
following services:
-
-
-
-
-
-
-
-
-
-
Review the Group’s Risk Management Existing Policies and Procedures
Review and document risk management practices employed at the Group
Review risk tolerance and limits being in use across the Group
Review the risk reports generated and used by the Group.
Identify key areas or risk factors not covered by existing risk management practices
Review existing risk management practices against industry practices
Indentify and customise risk management best practices for the Group
Review and recommend appropriate risk management policies and procedures
Review and recommend appropriate risk management reporting package and processes
Training for senior management of the Company and its key subsidiaries.
INTERNAL AUDIT
Principle 13: The company should establish an internal audit function that is independent of the activities it audits.
The internal audit function’s primary line of reporting is to the Chairman of the Audit Committee. In addition to having an in-house
Internal Audit function, the Company has also appointed Messrs. Deloitte & Touche Enterprise Risk Services Pte Ltd as the internal
auditors of the Group. Based on its review, the Audit Committee believes that the internal auditors, both the in-house and the
outsourced internal auditors, are independent and have the appropriate standing to perform its function effectively and objectively.
D. COMMUNICATION WITH SHAREHOLDERS
Principle 14: Companies should engage in regular, effective and fair communication with shareholders
COSCO Corporation strives for timeliness and transparency in its disclosures to the shareholders and the public. All information on
the Company’s new initiatives will be first disseminated via SGXNET followed by a news release, where appropriate. The Company
currently holds media and analyst briefings upon the release of its quarterly financial results. Management regularly receives visiting fund
managers to provide them an insight to the Company’s business and developments, as well as to better understand and address their
concerns. In addition to the media and analyst briefings, the Company has taken part in various road shows.
The Company does not practise selective disclosure. Price-sensitive information is first publicly released via SGXNET, either before
the Company meets with any group of investors or analysts or simultaneously with such meetings. Results and annual reports are
announced or issued within the period prescribed by the SGX-ST.
61
Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow
shareholders the opportunity to communicate their views on various matters affecting the company.
COSCO Corporation encourages shareholders to participate actively in general meetings. At general meetings of the Company,
shareholders are given the opportunity to express their views and ask questions regarding the Company and the Group.
The Company’s Article of Association allow a shareholder entitled to attend and vote to appoint a proxy who need not be a
shareholder of the Company to attend and vote at the meetings.
The Board members and chairpersons of the Audit, Nominating, Remuneration and Enterprise Risk Management Committees are
present and available to address shareholders’ questions at general meetings. The external auditors are also present to address
shareholders’ queries relating to the conduct of the audit and the preparation of the auditor’s report.
E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY
The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures
for review and approval of the Company’s interested person transactions with the China Ocean Shipping (Group) Company and its
associates, which are covered by a Shareholders’ Mandate approved at each general meeting.
The AC reviews the Shareholders’ Mandate at regular intervals, and is satisfied that the review procedures for IPTs and the reviews to
be made periodically by the AC in relation thereto are adequate to ensure that the IPTs will be transacted on normal terms and will not
be prejudicial to the interests of the Company and its minority shareholders.
Name of Interested Person
Between Subsidiaries and:
Chimbusco (S) Pte Ltd
Chimbusco Dalian Branch
Chimbusco Guangzhou Branch
Chimbusco Lianyungang Branch
Chimbusco Zhoushan Branch
China Ocean Shipping (Group) Company
Cosco (Cayman) Mercury Co., Ltd
Cosco (HK) Shipping Co., Ltd
Cosco Bulk Carrier Co., Ltd
Cosco Bulk Carrier Holdings (Cayman) Limited
Cosco Container Lines Co., Ltd
Cosco International Ship Trading Co., Ltd
Cosco Finance Co., Ltd
Cosco Logistics (Nantong)
Cosco Nantong Steel Co., Ltd
Cosco Shanghai Ship Management Co., Ltd
Cosco Shipping Co., Ltd
Cosco Southern Asphalt Shipping Co., Ltd
Cosco Wallem Ship Management Co., Ltd
Aggregate value of all interested
person transactions during the
financial period under review
(excluding transactions less
than $100,000 and transactions
conducted under shareholders’
mandate pursuant to Rule 920)
S$’000
17,990
-
person transactions conducted
under shareholders’ mandate
pursuant to Rule 920
(excluding transactions
less than $100,000)
S$’000
455
10,384
1,941
315
106
149
2,168
19,460
69,365
98,534
11,030
974
400,565
653
8,790
1,451
416
146
170
2009 Annual Report
62
Corporate Governance and Corporate Information
Corporate
Governance
Name of Interested Person
(continued)
Cosco Ship (Qingdao) Co., Ltd
Dalian Haven Automation Co., Ltd
Dalian Ocean Shipping Company
Dalian Yuan Chang Shipping Co., Ltd
Guangzhou Ocean Shipping Company
Nantong Chimbusco Marine Bunker
Nantong Cosco Khi Ship Engineering Co., Ltd
Nantong Cosco Ship Equipment Company
Nantong Yuantong Container Warehouse
and Transportation Co., Ltd
Qingdao Manning Co-operation Ltd
Qingdao Ocean Shipping Company
Shanghai Ocean Crew Co., Ltd
Shanghai Ocean International Trading Co., Ltd
Shanghai Ocean Shipping Company
Shanghai Pan-asia Shipping Company
Shenzhen Ocean Shipping Company
Xiamen Ocean Shipping Company
Yuantong Marine Service Co.
Total
Balances placed with a fellow subsidiary,
Cosco Finance Co., Ltd :
- Cash balances
- Short-term deposits
person transactions during the
financial period under review
(excluding transactions less
than $100,000 and transactions
conducted under shareholders’
mandate pursuant to Rule 920)
S$’000
person transactions conducted
under shareholders’ mandate
pursuant to Rule 920
(excluding transactions
less than $100,000)
S$’000
-
426
343
910
948
27,503
656
240
5,064
17,990
133
2,483
10,739
4,864
2,505
7,435
900
423
1,486
894
695,024
As At 31/12/2009
S$’000
As At 31/12/2008
S$’000
168,493
616,031
784,524
10,064
567,868
577,932
F. DEALING IN SECURITIES
In line with Chapter 12 Rule 1207(18) of the Listing Manual of SGX-ST on dealings in securities, the Company has adopted an internal
compliance code which mirrors substantially the provisions of the said rule to provide guidance to its Directors and officers in relation
to dealings in its securities.
The Company’s Code prohibits securities dealings by the Directors and employees while in possession of price-sensitive information.
The Company issues regular circulars to its Directors, principal officers and relevant officers who have access to unpublished material
price-sensitive information to remind them of the aforementioned prohibition and to remind them of the requirement to report their
dealings in shares of the Company. The Directors and employees are also prohibited from dealing in the securities of the Company
during the period commencing two weeks before the announcement of financial results of the Company for each of the first, second
and third quarters of its financial year or one month before the financial year, as the case may be, and ending on the date of the
announcement of the relevant results.
63
Corporate
Information
Board of Directors
Li Jian Hong
Jiang Li Jun
Zhang Liang
Sun Yue Ying
Ma Gui Chuan
Wang Xing Ru Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Chairman and Non-Independent and Non-Executive Director
Vice Chairman, President and Non-Independent Executive Director
Non-Independent Executive Director
Audit Committee
Strategic Development
Committee
Tom Yee Lat Shing Chairman
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Remuneration Committee
Er Kwong Wah Chairman
Jiang Li Jun
Tom Yee Lat Shing
Wang Kai Yuen
Ang Swee Tian
Nominating Committee
Wang Kai Yuen Chairman
Jiang Li Jun
Tom Yee Lat Shing
Er Kwong Wah
Ang Swee Tian
Enterprise Risk Management
Committee
Ang Swee Tian Chairman
Jiang Li Jun
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ye Bin Lin
Jiang Li Jun Chairman
Li Jian Hong
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Registered Office and
Business Contact Information
9 Temasek Boulevard
#07-00 Suntec Tower Two
Singapore 038989
Telephone: 68850888
Fascimile: 63369006
Website: www.cosco.com.sg
Company Secretaries
Mr Lawrence Kwan
Ms Lin Moi Heyang
Share Registrar and Share
Transfer Office
Tricor Barbinder Share Registration
Services (A division of Tricor
Singapore Pte Ltd)
8 Cross Street #11- 00
PWC Building
Singapore 048424
Telephone: 62363333
Facsimile: 62364399
Company Registration Number
196100159G
Auditors
PricewaterhouseCoopers LLP
8 Cross Street #17-00
PWC Building
Singapore 048424
Partner-in-charge:
Mr Tham Tuck Seng (since FY2007)
2009 Annual Report
64
Board of Directors
Board of
Directors
Li Jian Hong
Jiang Li Jun
Chairman, Non-Independent and Non-Executive Director
Vice Chairman, President and Non-Independent Executive
Director
Mr Li Jian Hong is currently the Chairman and NonIndependent and Non-Executive Director of COSCO
Corporation (Singapore) Limited, Executive Vice President,
Chief Risk Officer and Chief Information Officer of
COSCO (Group) Company. He is also the Chairman of
COSCO Shipyard Group Co., Ltd., COSCO International
Ship Trading Co., Ltd., Dalian COSCO Shipbuilding Industry
Co., Ltd. and Sino-Ocean Land Holdings Ltd; Vice Chairman
of China International Marine Containers (Group) Co.,
Ltd., Suzhou Industrial Park Co., Ltd., Nantong COSCO
KHI Ship Engineering Co., Ltd.; Non-Executive Director
of China COSCO Holdings Co., Ltd. and COSCO
International Holdings Limited; Executive Director of
COSCO Pacific Ltd.
Mr Li is concurrently the Vice Chairman of China
Association of the National Shipbuilding Industry and Vice
President of China Association of the National Shipbuilding
Industry. Mr Li joined the COSCO Group in 1989, and has
successively held the posts of Factory Director of COSCO
(Nantong) Shipyard, General Manager of COSCO Industry
Co., Ltd. and COSCO Real Estate Development Co., Ltd.,
Assistant to the President and Chief Economist of COSCO
Group. Mr Li obtained his Master’ Degrees in Business
Administration from University of East London, England and
in Economic Management from Jilin University respectively.
He is a Senior Economist with vast experience in business
management and capital operation.
Mr Jiang Li Jun was appointed as Vice Chairman and
President of COSCO Corporation (Singapore) Limited in
2008. Mr Jiang joined COSCO as an accountant upon his
graduation in December 1974. He has held various positions
within the COSCO Group, including accounting manager
of COSCO (Group) Company, SINOTASHIP, Chung Ling
Shipping (Japan) Co., Ltd, Yick Fung Shipping (HK) Co., Ltd.,
Deputy General Manager of Florence Container (HK) Co.,
Ltd and COSCO Pacific Co., Ltd (a public listed Company
in Hong Kong), and Chief Executive Officer of COSCO
Shipping Co., Ltd (a public listed Company in Shanghai ‘A’
shares).
Mr Jiang had also been the head of Finance Department
and Deputy General Manager of Operation Department of
COSCO Japan Co., Ltd, General Manager of COSUZ Co.,
Ltd as well as Deputy Chief Financial Officer of COSCO
Container Lines Ltd.
Mr Jiang holds an MBA degree from the University of
Shanghai. He has extensive experience in the management
of listed companies and corporate financial management.
65
Zhang Liang
Sun Yue Ying
Mr Zhang Liang, is currently a Non-Independent and
Non-Executive Director of COSCO Corporation
(Singapore) Limited, and Executive Vice President of
COSCO (Group) Company. He is also the Chairman
of COSCO Bulk Carrier Co., Ltd, Qingdao Ocean Shipping
Co., Ltd. and Shenzhen Ocean Shipping Co., Ltd., and
the Chairman of COSCO (H.K.) Shipping Co., Ltd.
Mr Zhang joined COSCO Group in 1977. He was appointed
as Executive Vice President of COSCO Group in 2006
and was also the Chief Legal Advisor of COSCO Group
between 2006 and 2008. He has successively held the
positions of Marine Superintendent, Director of Personnel
Department, Assistant to General Manager, Deputy
General Manager (cum Safety & Quality Manager) of Tianjin
Ocean Shipping Company, Deputy General Manager of
COSCO Bulk Carrier Co., Ltd., General Manager of Tianjin
Ocean Shipping Company and General Manager of COSCO
Bulk Carrier Co., Ltd. Mr Zhang graduated from Dalian
Maritime University, where he majored in ship navigation,
and he also holds a Master’s degree in Transport Planning
& Management from Shanghai Maritime University and a
Doctor’s degree in Enterprise Management from Nankai
University. He is a senior engineer.
Mdm Sun Yue Ying is currently a Non-Independent
and Non-Executive Director of COSCO Corporation
(Singapore) Limited and the Chief Financial Officer of
COSCO (Group) Company. She is also the Chairman of
COSCO Finance Co., Ltd. and COSCO (Cayman) Fortune
Holding Co., Ltd.; Non-Executive Director of China
COSCO Holdings Co., Ltd.; Executive Director of COSCO
Pacific Ltd and Director of China Merchants Bank Co., Ltd.
Mdm Sun joined COSCO Group in 1982. She was
appointed as CFO of COSCO Group in 2000, and has
successfully held the posts of Deputy Director of the
Finance Department of Tianjin Ocean Shipping Company,
Finance Director of COSCO Japan Co., Ltd., General
Manager of the Finance Department and Deputy CFO of
the COSCO Group. Mdm Sun has extensive experience
in finance and corporate financial management. Mdm Sun
graduated from Shanghai Maritime University majoring
in Finance and Accounting for Shipping Industry. She is a
Certified Public Accountant and senior accountant.
2009 Annual Report
66
Board of Directors
Board of
Directors
Ma Gui Chuan
Mr Ma Gui Chuan was elected as Non-Independent
Executive Director on 10 January 2007. He joined the
COSCO Group in 1978 and was appointed the Chairman
of the Union of COSCO Group in 1998. Currently, he is
the Chairman of COSCO Holdings (S) Pte Ltd. He was
involved in the management of the Qingdao Ocean Shipping
Company for many years and became the person-in charge
of Qingdao Ocean Mariner’s College in 1994. From 2001
to 2003, he was a standing member of CPC Committee
and Deputy Mayor of Yinchuan, Ningxia. In 2003, Mr Ma
was elected an executive committee member of the 14th
national representatives congress of All-China Federation
of Trade Unions. He had nearly 30 years of experience in
the shipping industry and extensive experience in ship and
crew management.
Mr Ma graduated from Dalian Maritime University majoring
in engineering management and from Capital University of
Economics and Business with postgraduate qualifications in
business administration.
67
Wang Xing Ru
Tom Yee Lat Shing
Mr Wang Xing Ru was appointed as a Non-Independent
and Non-Executive Director of COSCO Corporation
(Singapore) Limited in February 2006. He has been the
Managing Director of COSCO Shipyard Group Ltd. since
2001. Prior to that, Mr Wang was Executive Director
of COSCO Co-Development (Tianjin) Co., Ltd and
Vice President of COSCO Industry Co. Mr Wang was
elected as President of the ship repair branch of China
Shipbuilding Industry Association, and Vice President of
China Shipbuilding Industry Association in 2006. Mr Wang
was awarded “the leading persons of China’s ship repair and
ship-breaking industry” in 2007, and was awarded “National
Medal for Labor Day” by All-China Federation of Trade
Unions. Mr Wang graduated from Shandong Industrial
University in 1991, majoring in machinery manufacturing.
Mr Wang holds a Master of Engineering degree. He has a
wealth of professional experience in shipyard business and
assets operation. He is a senior engineer.
Mr Tom Yee Lat Shing was appointed to the Board on
15 December 1993. He is a Non-Executive and Independent
Director and was last re-elected as Director on 18
April 2008. He is Chairman of the Company’s Audit
Committee and member of the Nominating, Enterprise
Risk Management and Remuneration Committees. Mr
Yee is a Certified Public Accountant and was a partner
of an international public accounting firm from 1974 to
1989. He has more than 35 years of experience in the
field of accounting and auditing and extensive experience
in handling major audit assignments of public listed
and private companies in various industries, including
insurance, manufacturing and retailing. He is currently a
consultant. Mr Yee sits on the boards of several Singapore
listed companies. He is a fellow member of the Institute
of Chartered Accountants in Australia, CPA (Australia),
Institute of Certified Public Accountants Singapore and an
associate member of the Institute of Chartered Secretaries
and Administrators. He is also a council member of the
Institute of Certified Public Accountants Singapore.
2009 Annual Report
68
Board of Directors
Board of
Directors
Wang Kai Yuen
Dr Wang Kai Yuen was appointed as an Independent
Director on 2 May 2001. He chairs the Nominating
Committee and is a member of the Audit, Enterprise
Risk Management, and the Remuneration Committee. Dr
Wang served as a Member of Parliament for the Bukit
Timah Constituency from December 1984 till April 2006.
He was the Chairman of Feedback Unit from 2002 till
his retirement from politics. He retired as the Centre
Manager of Fuji Xerox Singapore Software Centre in Dec
2009. Dr Wang also holds directorships at ComfortDelgro
Group Ltd, CAO (Singapore) Corporation Ltd, Asian
Micro Holdings Ltd, Ezion Holdings Ltd, Xpress Holdings
Ltd, China Lifestyle Foods and Beverages Ltd, Matex
International Ltd, and others. He graduated from the
University of Singapore with a First Class Honours degree
in Electrical and Electronics engineering.
Dr Wang holds a Master of Science in Electrical
Engineering, a Master of Science in Industrial Engineering
and a PhD in Engineering from Stanford University, USA.
He received a Friend of Labour Award in 1988 for his
contributions to the Singapore labour movement.
69
Er Kwong Wah
Ang Swee Tian
Mr Er Kwong Wah is a Non-Executive and Independent
Director of COSCO Corporation (Singapore) Limited.
A Colombo Plan and Bank of Tokyo Scholar, Mr Er obtained
a first class honours degree in Electrical Engineering at
the University of Toronto, Canada, in 1970 and an MBA
from the Manchester Business School of the University of
Manchester, UK in 1978.
Mr Ang Swee Tian is a Non-Executive and Independent
Director of COSCO Corporation (Singapore) Limited.
He chairs the Enterprise Risk Management Committee and
is a member of the Audit, Remuneration and Nominating
Committees.
Mr Er spent 27 years in the Singapore Civil Service and
served in various departments including the Ministry
of Defense, Public Service Commission, Ministry of
Finance, Ministry of Education and Ministry of Community
Development. He was Permanent Secretary in the Ministry
of Education from 1987-1994, and in the Ministry of
Community Development until his retirement in 1998.
Currently, he is an Executive Director of the East Asia
Institute of Management, as well as an Independent
Director on the Boards of several public listed companies
such as Unidux Electronics Ltd, Firstlink Investment
Corporation Ltd, Hartawan Holdings Ltd, China Sky
Chemical Fiber Co., Ltd, China Essence Group Ltd and Sun
East Group Ltd.
He is Chairman of the Toa Payoh Central Citizens
Consultative Committee and a Member of the Bishan-Toa
Payoh Town Council. For his outstanding service in the
Government and in the community, Mr Er was awarded
the PPA(E) or Public Administration Medal (Gold) and the
PBM (Public Service Medal). In 1991, the Government of
France conferred him a National Honour with the award of
Commandeur dans l’Ordre des Palmes Academiques.
Mr Ang was the President of Singapore Exchange Ltd
(“SGX”) from 1999 to 2005 during which he played an
active role in successfully promoting SGX as a preferred
listing and capital raising venue for Chinese enterprises.
Mr Ang also played a pivotal role in establishing Asia’s first
financial futures exchange, the Singapore International
Monetary Exchange (“SIMEX”) in Singapore in 1984 and
was instrumental to establishing SGX AsiaClear which
started offering OTC clearing facility in 2006. Following
his retirement in January 2006, Mr Ang served as Senior
Adviser to SGX until December 2007.
In March 2007, Mr Ang became the first person from an
Asian Exchange to be inducted into the Futures Industry
Association’s Futures Hall of Fame which was established
to honour and recognise outstanding individuals for their
contributions to the global futures and options industry.
Mr Ang graduated from Nanyang University of Singapore
with a First-Class Honours Degree in Accountancy in
1970. He was conferred a Master Degree in Business
Administration with distinction by the Northwestern
University in 1973.
2009 Annual Report
70
Key Management
Key
Management
Jiang Li Jun
Vice Chairman, President, and
Li Jian Xiong
Mr Jiang Li Jun was appointed as Vice Chairman and
President of COSCO Corporation (Singapore) Limited in
2008. Mr Jiang joined COSCO as an accountant upon his
graduation in December 1974. He has held various positions
within the COSCO Group, including accounting manager
of COSCO (Group) Company, SINOTASHIP, Chung Ling
Shipping (Japan) Co., Ltd, Yick Fung Shipping (HK) Co., Ltd.,
Deputy General Manager of Florence Container (HK) Co.,
Ltd and COSCO Pacific Co., Ltd (a public listed Company
in Hong Kong), and Chief Executive Officer of COSCO
Shipping Co., Ltd (a public listed Company in Shanghai ‘A’
shares).
Mr Li Jian Xiong has rich knowledge and experience in
shipping management and business operation. From 1997
to 2001, Mr Li served as Deputy Managing Director of HK
Yu Hang Investment Ltd; Managing Director of COSCO
Container Service Ltd; Deputy General Manager of
COSCO Pacific Ltd (Listed Company in HK) and Deputy
Managing Director of COSCO Pacific (China) Investment
Co., Ltd. He also served as the Vice Chairman of
Zhangjiagang Win Hanverky Container Terminals Co. Ltd.
and the director of various COSCO subsidiary companies
in China.
Mr Jiang had also been the head of Finance Department
and Deputy General Manager of Operation Department of
COSCO Japan Co., Ltd, General Manager of COSUZ Co.,
Ltd as well as Deputy Chief Financial Officer of COSCO
Container Lines Ltd.
Mr Jiang holds an MBA degree from the University of
Shanghai. He has extensive experience in the management
of listed companies and corporate financial management.
Vice President
Mr Li joined COSCO Corporation (S) Ltd (formerly
known as COSCO Investment (S) Ltd) in April 2001
as Vice President. In 2009, he became the director of
Singapore Investors’ Association. He is currently also the
director of COSCO Marine (S) Ltd.
Mr Li graduated from Qiandao Ocean Shipping Mariners’
College and received his MBA from Shanghai Jiao Tong
University.
71
Ye Bin Lin
Wong Meng Yun
Chief Financial Officer
Financial Controller
Mr Ye Bin Lin has extensive experience in finance and
corporate financial management. From 1993 to 1998, Mr
Ye was the finance manager of accounting department of
COSCO Container Lines Co., Ltd. From 1998 to 2001, he
was the general financial manager of COSCO Germany
Shipping Agencies GMBH.
Mr Wong Meng Yun has more than 25 years of diversified
experience in financial management, corporate finance,
internal & external audit and treasury management of which
12 years were in a senior regional management position
with a leading US -listed software company prior to his
joining the Group in July 2008.
Mr Ye joined COSCO Corporation (S) Ltd (formerly
known as COSCO Investment (S) Ltd) as finance director in
August 2001 and was re-designated Chief Financial Officer
of the company on 14 April 2008.
He graduated from the University of Singapore with a
Bachelor of Accountancy and is a Fellow of the Association
of Chartered Certified Accountants, CPA Australia, the
Institute of Certified Public Accountants of Singapore,
the Chartered Institute of Arbitrators, the Institute of
Arbitrators & Mediators Australia and the Singapore
Institute of Arbitrators.
He is a Certified Treasury Professional (CTP) with the
Association for Financial Professionals, a Certified Internal
Auditor (CIA) and a Certified Financial Services Auditor
(CFSA) with the Institute of Internal Auditors, as well
as, a Certified Information Systems Auditor (CISA) and
a Certified Information Security Manager (CISM) with
the Information Systems Audit and Control Association
(ISACA).
2009 Annual Report
72
Investor Relations
Investor
Relations
At COSCO Corporation, we
believe sound investor relations is
a cornerstone in building long-term
shareholder value and recognise the
importance it plays in our overall
corporate development strategy. Our
investor relations commitment is
expressed through a belief in strong
and accountable leadership, effective
corporate governance, regular
performance reporting and clear and
timely investor communications.
Our active investor relations
engagement has generated strong
interest in our stock. As a testament
to the shareholder interest in our
stock, we have been included in the
FTSE ST China Index since January
2008, and in the FTSE China Top
Index since July 2008. Both these
indexes were created to reflect the
increasing representation of Chinabased companies on the Singapore
stock market and offer investors
simple vehicles through which they
could tap into the potential of highly
liquid, locally-listed China companies.
Among other indexes, we are also
a component stock of the Morgan
Stanley Capital International World
Index as well as the SGX Morgan
Stanley Capital International Asia
Apex 50 Index Futures which feature
some of the most promising, widelytraded and investible Asian companies
outside Japan.
IR and Communications
Activities
With our company’s stock being
widely traded and included in
many indexes, we understand the
importance of timely and pertinent
corporate disclosure. We work
with the media and the investment
community to discuss, elaborate
and disseminate information to the
public. Over the year in review, we
undertook announcements covering
contracts won, quarterly results,
growth strategies, operational
commentaries and our operational
outlook. We engage in this
communications process through
media interviews and news reports
on a variety of media platforms
such as newswires, print, broadcast,
investor meetings and roadshows, and
dialogue with shareholders at Annual
General Meetings.
73
Major Investor Relations Events in 2009
Date
Event
7 January
DBS 2009 Pulse of Asia
21 January
BNP Paribas Asean Corporate Day
10 February
Merrill Lynch (HK) Singapore Malaysia Investment Forum
23 February
FY08 Results Briefing
27 March
UOB Luncheon Briefing
15 April
FY2008 AGM
7 May
1QFY09 Results Briefing
8 May
Merrill Lynch Asia Stars 2009
28 June
7 July
DBS 2009 Pulse of Asia
Nomura Securities Convention
3 August
1HY09 Results Briefing
4 August
Daiwa Securities Luncheon Briefing
6-9 September
10-11 September
Over FY2009,
we engaged
about 800
members of
COSCO’s
investment
community
through various
investor relations
programmes
DBS Investor Roadshow in USA
HK Daiwa Securities Briefing
25 September
“Marine Money” Singapore Briefing
14-15 October
Citibank China Investment Briefing
3 November
3QFY09 Results Briefing
4 November
Norges Bank Investment Management Briefing
2009 Annual Report
74
Investor Relations
Investor
Relations
3000
1.50
1630.76
2897.62
2800
2600
1700
1.40
1.30
1600
1500
1400
2400
1.19
1300
1.10
2200
1200
1.00
2000
1100
0.90
STI Index Last Price (R1)
COSCO SP Equity Last Price (R2)
MSCI Singapore - Last Price (R3)
1800
2897.62
1.19
1630.76
1000
0.80
900
1600
0.70
1400
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
FY2009
Our active investor relations engagement
has generated strong interest
Oct
Nov
Dec
STI
Index
800
COS SP MSCI
Equity
Singapore
75
Active, Regular Engagement
During the year in review, we
participated in about 35 analyst
meetings. Our Investor Relations
activities included meetings with
fund managers and shareholders,
results briefings for every financial
quarter, and investment briefings.
In various IR events over FY2009,
we engaged about a total of 800 key
members of COSCO Corporation’s
investment community by meeting and
networking with them. In addition,
the Annual General Meeting held in
April 2009 was attended by over 300
shareholders.
IR Awards 2009
On 17 July 2009, COSCO Corporation
received the “Top 50 Fastest Growing
Enterprises in Singapore” award from
the prestigious rating agency DP
Information Group. DP Information
Group is Singapore’s leading credit and
business information bureau. Mr Li
Jian Xiong, Vice President of COSCO
Corporation represented the Group
to receive this award from the Senior
Minister of State for Foreign Affairs
Dr Balaji Sadasivan. DP Information
Group ranked these companies as
the top 50 fastest-growing companies
based on the Compound Annual
Growth Rate (“CAGR”) of their
operating income over the past three
years.
COSCO Corporation was also
awarded a “Most Transparent
Company Award” in the overseas
company category by SIAS at the
“SIAS 10th Anniversary Celebration
and Investors’ Choice Award
Presentation”, held in Singapore
on 8 October 2009. The prize was
presented by the President of SGX,
Mr Hsieh Fu Hua to Mr Li Jian Xiong.
These awards recognise our efforts in
corporate governance and disclosure,
regular communications and investor
engagement. We will continue to build
on our investor relations standards
and achievements as an integral part of
our corporate development.
SIAS Investor’s Choice Award
Awarded the Most Transparent
Company Award 2009
Singapore1000 Award
Awarded the Fastest 50 growing
certification 2009, certified by DP
Information Group
2009 Singapore 20 Largest
Enterprise Honorary Award
Yazhou Zhoukan Global Chinese
Entrepreneur Award 1000
2009 Annual Report
76
Risk Management
Risk
Management
Principal risks and uncertainties
Risk factors
Introduction
The Group, like all businesses, is
exposed to a variety of risks and
uncertainties which can have material
and adverse effects on its reputation,
performance and financial condition. It
is not possible to identify or anticipate
every risk that may affect the Group.
Some material risks may not be
known, others, currently deemed as
immaterial, could become material and
new risks may emerge.
The Group’s risk management process
is described below. It aims to identify
the risk factors that may have a
material impact on the Group, and to
manage them appropriately.
The material risk factors identified by
the Group’s risk management process
are set out below. Each of these could
have a material and adverse effect on
the Group, including on its reputation,
performance and financial condition.
They have been divided into four
categories: external risks; internal
risks; execution risks; and financial
risks.
Risk management process
The Group’s process for identifying
and managing risk is set by the
Board through the Enterprise Risk
Management Committee (“ERMC”).
The ERMC has delegated the dayto-day management of risk within
the Group to the Risk Management
Committee (“RMC”) of each of
its operating subsidiaries. The
RMC of each of the subsidiaries
comprises senior management staff
of each division within the operating
subsidiaries.
The Board currently conducts an
annual review of the Group risks,
during which it identifies the key risks
for the year ahead. As part of this
review, operational and strategic risks
are proposed as key risks by the RMC,
based on inputs from regions, function
heads and business leaders. The Risk
Factors set out below reflect the key
risks identified as part of this process.
Each of the key risks is assigned to the
Chairman of the RMC at the operating
subsidiaries who proposes a level of
risk the Group is willing to take and
develops an appropriate plan of action
to mitigate the risk. All risk mitigation
plans are reviewed, challenged and
agreed by the Board.
Once risk mitigation plans are agreed,
each operating subsidiary is asked to
carry out a self assessment exercise
which requires all operating units
to confirm compliance with Group
policies and also to confirm that key
operational controls are in place and
working effectively. The results of this
exercise, together with a review of
specific plans for strategic risks, enable
the Board to confirm that the business
has a sound risk-based framework of
internal control.
The Group Auditors, internal and
external, provides independent reassurance that the standard of risk
management, compliance and control
meets the needs of the business,
and this includes an evaluation of the
accuracy and completeness of the
self assessment exercises. Group
Audit status reports are discussed
with Enterprise Risk Management
Committee, Audit Committee and
Board on a regular basis. The board
also recognises that the risks facing
the business may sometimes change
over short time periods. Every quarter
each operating subsidiary provides an
update on new and emerging risks to
the board and proposals to update the
Group risks are provided to the Audit
Committee and the Board.
While the Group’s risk management
process attempts to identify and
manage (where possible) the key risks
it faces, no such process can totally
eliminate risk or guarantee that every
risk is identified, or that it is possible,
77
economically viable, or prudent to
manage such risks. Consequently,
there can never be an absolute
assurance against the Group failing to
achieve its objectives or a material loss
arising.
1. External risks
The Group is subject to a number
of external risks. The Group defines
external risks as those that stem from
factors which are mainly outside of its
control. These risks will often arise
from the nature of the Group and the
industry in which it operates.
Legal, regulatory, political
and societal risks
The Group is at risk from significant
and rapid change in the legal systems,
regulatory controls, and custom and
practices in the regions in which it
operates. These affect a wide range
of areas. Accordingly, changes to, or
violation of, these systems, controls
or practices could increase costs and
have material and adverse impacts
on the reputation, performance and
financial condition of the Group.
Political developments and changes in
society, including increased scrutiny
of the Group, its businesses or
its industry, for example by nongovernmental organisations or the
media, may result in, or increase the
rate of, material legal and regulatory
change, and changes to custom and
practices.
Competition
Increased competition in the markets
in which it operates may materially
adversely impact the Group’s
performance and financial condition.
The ship-building and ship repair and
shipping industry is highly competitive.
The Group competes with other
multinational corporations which also
have significant financial resources.
Customer demand
Customer demand for the Group’s
services and expertise is expected
to increase to a higher level of
expectation. The Group expects
greater scrutiny by customers before
they take delivery of vessels. This
will, inadvertently, increase the cost
of building the vessels. A failure to
recover higher costs could materially
adversely impact the Group’s
performance.
The Group is also exposed to
counterparty risk from customers
that could result in financial losses
should those counterparties become
unable to meet their obligations to the
Group.
Raw materials
The Group depends upon the
availability, quality and cost of steel and
steel-plates from around the world,
which exposes it to price, quality
and supply fluctuations. Although the
Group will take measures to protect
against the short-term impact of these
fluctuations and of the concentration
of supply there is no guarantee that
these will be effective. A failure to
recover higher costs or shortfalls in
availability could materially adversely
impact the Group’s performance.
The Group manages this risk through
constant monitoring of the markets
in which it operates and continuous
review of capital expenditure
programmes to ensure they reflect
market conditions. A continuous focus
on operating expenditure is also an
important method of mitigating this
risk.
The Group has developed uniform
processes and procedures with
applications such as SAP to manage
procurement of raw materials. The
Group also has developed strategic
alliances with certain selected major
steel mills to have twelve (12) months
fixed price steel supply to mitigate
risks in raw material price movements.
2009 Annual Report
78
Risk Management
Risk
Management
2. Internal risks
Internal risks are those arising from
factors primarily within the Group’s
control, including from the Group’s
structure and processes.
Information technology
infrastructure
The Group depends on accurate,
timely information and numerical data
from key software applications to
aid day-to-day business and decisionmaking. Any disruption caused by
failings in these systems, of underlying
equipment or of communication
networks could delay or otherwise
impact the Group’s day-to-day
business and decision making and
have materially effects on the Group’s
performance.
Operation interdependence
The Group’s operations in individual
provinces are increasingly dependent
for the proper functioning of their
business on other parts of the
Group’s in terms of raw material and
product supply, sales and marketing
programme development, technology,
funding and support services. Any
underperformance or failure to
control the Group’s operations in one
province properly could therefore
impact the Group’s businesses in
a number of other provinces and
materially adversely impact the
performance or financial condition of
the Group.
Operational performance
and project delivery
Failure to meet production targets
can result in increased unit costs,
which are pronounced at operations
with higher levels of fixed costs. Unit
costs may exceed forecasts, adversely
affecting performance and the results
of operations.
Failure to meet project delivery times
and costs could have a negative effect
on operational performance and lead
to increased costs or reductions in
revenue and profitability.
A number of strategies have been
implemented to mitigate these risks
including management oversight of
operating performance and project
delivery through regular executive
management briefings, increased
effectiveness of procurement
initiatives to reduce unit costs and
improve delivery of projects.
Employees
The Group depends on the continued
contributions of its executive officers
and employees, both individually and
as a group. While the Group reviews
its people policies on a regular basis
and invests significant resources
in training and development and
recognising and encouraging individuals
with high potential, there can be
no guarantee that it will be able to
attract, develop and retain these
individuals at an appropriate cost and
ensure that the capabilities of the
Group’s employees meets its business
needs. Any failure to do so may impact
the Group’s performance.
The ability to recruit, develop and
retain appropriate skills for the Group
is made difficult by competition for
skilled labour. The failure to retain
skilled employees or to recruit new
staff may lead to increased costs,
interruptions to existing operations
and delay in new projects.
A number of strategies are
implemented to mitigate this risk
including attention to an appropriate
suite of reward and benefit structures
and ongoing refinement of the Group
as an attractive employee proposition.
Managing cost of wages
through outsourcing
Ship repair is a labour-intensive
industry and an increase in wages will
have a significant impact on the Group.
The Group had been encountering
increases in labour cost. Other than
79
having a permanent work force of
skilled employees on the payroll,
the Group has adopted a contract
hiring system. Under the contract
hiring system, unskilled manpower is
hired on a contractual basis and paid
according to projects undertaken.
While the Group has benefitted
from the decrease in fixed wage
costs, it is at risk from failures by
these third parties to deliver on their
contractual commitments, which may
adversely impact its reputation and
performance.
3. Execution risks
Executive risks arise from the
implementation of the Group’s
strategy and its change and
investments programmes, which aim
to enhance long term shareowner
value.
Investments, acquisition
and disposals
Risks inherent in the investments,
acquisition and disposals may have
an adverse impact on the Group’s
business or financial results.
From time to time the Group may
make investments, acquisitions and
disposals of businesses. While these
are carefully planned, the rationale
for them may be based on incorrect
assumptions or conclusions and they
may not realise the anticipate benefits
or there may be other unanticipated
or unintended effects. Additionally,
while the Group seeks protection,
for example through warranties and
indemnities, significant liabilities may
not be identified in due diligence or
come to light after the warranty or
indemnity periods. These factors
may materially adversely impact the
performance or financial condition of
the Group.
4. Financial risks
The Group is exposed to market risks
such as interest rate and exchange
rate risks arising from its international
business.
Managing currency
fluctuations
The main financial risks facing the
Group are fluctuations in foreign
currency, interest rate risk, availability
of financing to meet the Group’s
needs and default by counterparties
and customers. Any of these financial
risks may materially adversely impact
the performance or financial condition
of the Group.
exchange rates are closely monitored.
The Group employs simple forward
hedging on a systematic approach
to meet its financial obligations and
foreign and local currencies needs.
The Group does not engage in
speculative foreign investments. Strict
compliance controls are in place to
ensure that procedures are adhered
to and management decisions are not
made unilaterally.
The Group also engaged the guidance
of the holding company in managing its
foreign exchange risk exposure. The
holding company has an experienced
Treasury operations team who are
responsible for managing the funding
requirements and liquidity risk.
A detailed disclosure of the Group’s
financial risks can be found in the
Notes to the Financial Statements on
pages 155 to 163.
The Group has established a
management system to address
financial risks. Fluctuations in currency
2009 Annual Report
SUCCESS IS NOT
A DESTINATION
IT IS A
JOURNEY
AND VERY OFTEN
THE JOURNEY ITSELF
IS THE REWARD
COSCO Guangdong Shipyard completed its first new build ship, a 57,000 dwt bulk
carrier M.V. APJ KAIS. The christening ceremony for the ship was held at COSCO
Guangdong on 17 April 2009.
This is the largest ever bulk carrier in tonnage capacity built in southern China,
measuring 190 metres long, 32.3 metres wide and 19 metres high. The M.V. APJ
KAIS has a draft of 12.8 metres and a navigation speed of 14.2 knots.
84
INSIDE COSCO AND CORPORATE CITIZENSHIP
Research and Development
Research and
Development
A key driving force steering COSCO’s growth
At COSCO, we seek constant
progress in Research and
Development (“R&D”). We believe
that with innovation, we are in better
position to fuel our growth through:
a. Greater efficiency,
b. Increased productivity, and
c. Higher quality standards.
Constant improvements in our
technological capabilities not only
provide us with a competitive
advantage for the present, but also
create sustainable growth for the
future.
R&D in 2009
The year 2009 saw COSCO’s R&D
team grow in strength. With over
1,300 competent individuals, it
includes more than 40 professionals
from Singapore and Korea in the
areas of ship repair, ship conversion,
shipbuilding and offshore marine
engineering.
In addition, COSCO has established
collaborations with reputable
institutions and companies to
accelerate design and technological
improvements.
We remain committed to
technological innovation as it is the
bedrock of the company’s growth.
Presently, COSCO has a total of nine
patent applications that have been
officially registered and are recognised
by the State Intellectual Property
Office of China.
Aligned for the Future
Collaborations with renowned ship
design firms are a key pillar in our
research and development strategy.
These mutually beneficial partnerships
contribute to our pursuit of global
standards.
Our long-term partnership with
KOMAC has been rewarding. As one
of the leading shipping companies in
Korea, KOMAC brings up-to-date
expertise and extensive experience to
the various operational divisions of the
shipyards.
Our partnership with the Dalian
Maritime University has also enabled
the establishment of the National
Engineering Research Centre.
The centre specialises in maritime
engineering and scientific innovation.
During the year, we undertook
technological research on the design
and construction of the ultra-large
300,000 dwt offshore drydock in
Dalian and the conversion of the highly
sophisticated FPSO, the Cidade de
Santos MV20. Our research project
on offshore platform assembly also
85
Collaborations
with renowned
ship design firms
are a key pillar
in our research
and development
strategy. These
mutually beneficial
partnerships
contribute to our
pursuit of global
standards.
managed to secure funding from the
Enterprise Technology Centre in
Liaoning Province.
Ship Building
Our collaboration with KOMAC has
reaped substantial results thus far. The
design plans of the Panamax vessels
and Aphra-type product tanker have
been completed, and the development
plans for the Handymax vessels have
also been officially approved. These
innovative designs offer notable
improvements in linear aerodynamics,
ship structure and interior ship design.
COSCO signed several strategic
agreements with ship classification
societies from Norway, the United
Kingdom, the USA and China.
Not only does this facilitate strict
adherence to ship building standards,
it also keeps us ahead of technological
trends and ever-changing industry
standards and requirements.
Offshore Marine
Engineering
Through collaborations with
companies such as NEPTUN in
Germany, GM in Norway and F&G
in the USA, we have successfully
developed the designs of key vessel
types like the 3000TEU containership
and the semi-submersible oil rig. These
vessels integrate the latest in design
and technology, amalgamating COSCO
Corporation’s high standards with the
enhanced technology and breakthrough
designs of KOMAC.
During the year, we, together with
other key partners, made technological
improvements in the lifting system of the
self-propelled jack-up rig.
Moreover, successful delivery of the
Sevan Driller oil rig and the ongoing
construction of SUPER M2 jack-up rig,
GM4000, Octabuoy and other offshore
drilling units have raised our standards
to unprecedented levels and reflect our
strong commitment to elevate design
innovation and technical capabilities.
Advancing Forward
As we conclude a rewarding year in
R&D, we look forward to greater
advancements in the near future.
Strategic and mutually beneficial
collaborations will continue to be
established as we seek to expand
our operational areas and strengthen
research. This consistent progress will
keep our R&D efforts on track and
continually yield growing returns on
R&D investment.
2009 Annual Report
86
Human Resources
Human
Resources
A valuable asset for long-term advantage
A Broad Perspective
Recruitment and Training
Human capital is COSCO’s most
valuable asset. Our ability to attract,
develop, train and retain our staff
has been the key engine of COSCO’s
success and will remain the driving
force for future growth. We employ
various approaches to strengthen the
workforce. This includes recruitment,
training, a succession scheme and a
reward scheme.
In today’s knowledge economy, human
capital is a crucial factor in COSCO’s
value-driven, world-class enterprise.
With our robust and diversified talent
pool, we are able to maximise growth
by leveraging on opportunities.
At COSCO, we recruit talents
through an attractive reward and
remuneration scheme and continually
develop them through a performance
and appraisal system that guides
staff to structure and achieve their
personal goals. As a market leader,
we recognise the importance of talent
retention for the long-term growth of
the Company and to achieve that end,
we strongly emphasise education and
training. This in turn profiles us as a
choice employer.
In addition, COSCO has established a
succession scheme, where promising
employees are identified and groomed
for senior management positions. This
scheme is a key component of our
human resource strategy because as
our future corporate leaders, they
will greatly influence the Company’s
direction.
We consistently boost the strength of
our team through active recruitment
of top graduates from leading Chinese
universities annually. In fact, a total of
over 1,000 fresh university graduates
were recruited during the year. These
recruits undergo management trainee
courses which groom and fully equip
them for their upcoming management
roles.
New employees undergo relevant
training courses, lasting from one
to three months. Technical staff
are also required to pass a course
before commencing work and are
given annual assessments to ensure
maintenance of their requisite services
and skills.
Employees are sent for training in
areas such as international standards
and safety measures, technical,
engineering and management skills.
COSCO believes that continuous
learning is a fundamental building
block of growth. As such, we have
87
At COSCO,
we recruit talents
through an
attractive reward
and remuneration
scheme and
continually develop
them through
a performance
and appraisal
system that guides
staff to structure
and achieve their
personal goals.
established a management succession
programme to groom promising
younger staff for senior management
roles and also offer higher learning
opportunities to middle management
personnel. Senior management staff
have opportunities to learn from other
industry experts when they are posted
to other countries with established
maritime industries.
Maximising Resources
In FY2009, COSCO established a
comprehensive, centralised human
resource management system. This
will enable more efficient allocation
of manpower throughout the whole
group, enhancing productivity.
Group-wide, we have adopted a lean
management structure which includes
a procedure management system in
the fabrication of vessels.
The annual “Model Employee
Reward” scheme is another staffmotivation scheme that rewards the
best performing employee from each
subsidiary with a trip to one of the
Company’s overseas subsidiaries. More
than just an incentive trip, it provides
recipients opportunities to experience
the work culture in other COSCO
companies. We give rewards and
recognition to our marine crew for the
safe operation of our ships. Incentives
take the form of family holidays and
others. From October 2009, crew who
had worked for 10 months or more
will also receive one-off performance
increments of 3-6% of their salary.
To promote cohesiveness, skills-based
competitions are held frequently among
the shipyards. These competitions
improve skills and initiative among our
staff.
Reward and Retention
Outlook
Various schemes have been
implemented at COSCO to cultivate
staff loyalty and bring out the
fullest potential of every individual.
One instance is the performance
and achievement appraisal system
which aims to link work goals with
personal career development and
remuneration.
2010 remains a challenging year for
the shipping industry. Our two main
tasks ahead will be the management of
contract workers and the maintenance
of harmony and stability among our
contract and in-house workforce,
thereby enhancing the quality of work
and the performance of all shipyards.
2009 Annual Report
88
Workplace Safety
Workplace
Safety
Engendering a strong safety culture in the workplace
A “Safety-First” Culture
We believe in the importance of a
strong safety culture in the workplace,
which is why we have established and
maintained safe working environments
in all COSCO companies.
We require our staff to undergo
workplace safety training courses.
These courses are specially designed
to educate staff about potential
workplace dangers and the necessary
safety precautions. Further tests are
administered to ensure a level of
proficiency and understanding. Our
resultant strong safety track record
over the last eight years is a testament
to our efforts in this area. Going
forward, we will reinforce training
and supervision of safety standards
to create a working culture that
advocates an all-encompassing focus
on work safety.
2009 in Review
In FY2009, we placed greater
emphasis on workplace safety in two
areas – the repair and conversion of
oil tankers, and high-density work
locations. These were highlighted
because of the large damaging effects
of faulty oil tankers, and the higher
propensity for injuries and accidents
in areas of dense human traffic.
We also focused on the proper
maintenance and use of heavy
equipment as deviation from
such safety standards has serious
consequences. The pro-active
We believe in the
importance of a
strong safety culture
in the workplace,
which is why we
have established
and maintained
safe working
environments in all
COSCO companies.
measures produced positive results
and reduced the total number of
accidents by 18%.
Other authorities have recognised our
efforts as well. In 2009, COSCO ships
made more than 220 trips globally and
successfully passed port inspections at
various international locations more
than 30 times.
On a separate note, during the same
period, COSCO ships made a total
of 21 trips through the Gulf of Aden,
a pirate-infested zone, without any
problems. We attribute this partly
to our policy of enforcing roundthe-clock surveillance by the crew
on every ship, and ensuring guidance,
tracking and supervision by onshore
marine management at all times.
Environmental Safety
We value the environment and have
always sought to do our best for
environmental protection, keenly
aware that environmental safety is part
of overall workplace safety. We aim to
not only minimise waste, but also to
minimise the negative effects of waste
disposal, particularly through efficient
wastewater and waste gas treatment.
This is done proactively through
facility and equipment upgrades.
A Safety Committee at the COSCO
Shipyard Group (“CSG”) level was also
established in 2009. This committee
conducts frequent site visits at all our
shipyards to ensure adherence to
safety requirements and standards.
Equipment and tools in COSCO
shipyards are also checked and
maintained at least once a month. This
keeps our facilities healthy and up-todate. Furthermore, we also conduct
forums and training courses to ensure
that employees understand the
importance of workplace safety. This
reduces the possibilities of workplace
accidents and allows us to maintain
sound operational efficiency.
Setting the Standards
To maintain high safety standards at
COSCO shipyards, we constantly
reinforce safety awareness levels
through education and training.
Training includes mandatory hourlong sessions every week to keep our
staff updated on the latest safety rules
89
and regulations. They are also given
guidance and live demonstrations
on safety precautions, and will be
assessed at the end of the courses to
ascertain adequate competency and
proficiency.
We also implemented the grading
of the safety management officers’
course. To date, 145 safety
management officers have taken part
in the examinations. This information
allows safety officers to further
monitor and manage the safety of their
individual shipyards.
COSCO organises company events
and activities that centre on issues
of workplace safety. An oratorical
contest took place recently with
“workplace safety” as the subject of
speech, pitching staff members against
each other in a battle of knowledge
and wit. This activity brought to light
the staff’s strong understanding of
workplace safety.
In addition, appraisals by external
parties are done on various
departments in COSCO. These
checks examine the standards at the
Company and award certifications
in the areas of quality, working
environment and workplace safety.
2010: Objectives
and Actions
We will continue our pursuit of zero
accidents and fatalities. In line with
our transformation, new expertise
and equipment was brought in along
with the recent entry into the
offshore marine engineering sector.
There was hence a need to enhance
our safety management, through
the implementation of new safety
measures and initiation of new training
programmes.
Training programmes will continue
to be a vital route by which we instil
a “safety-first” mentality among
workers, and increase awareness of
high-danger zones in the workplace.
Aside from that, we will further
emphasise the reward and punishment
scheme within the COSCO shipyards.
Going forward, we will also be
instituting short-term on-board stints
for maintenance staff, in order to
improve the operational oversight and
workplace safety management skills
of ship management. Specifically, their
responsibilities include the prevention
of piracy, smuggling, pollution, fire,
collision, personal injury and typhoon
disaster management. Over the past
two years, marine management crew
maintained a good track record in the
provision of security and stability.
We will also strengthen ship
tracking, monitoring and inspection,
as well as information exchange
among all onshore and offshore
departments and all crew on our
vessels, in order to facilitate a
more holistic understanding of
operational procedures and devise
more comprehensive and effective
workplace safety measures.
Medical Benefits,
Higher Efficiency
At COSCO, workplace safety in and
of itself is paramount, but we also
understand that workplace safety
is the key to sustaining operational
efficiency and increasing long-term
profitability. Adherence to safety
rules and regulations enables staff
to foster a greater understanding
of their responsibilities and in so
doing, increase work efficiency and
productivity.
To complement work safety measures,
we have in place a comprehensive
network of supporting operations
which include on-site medical facilities
at all shipyards. Benefits like annual
health checks, medical insurance,
dental treatment and immunisation
against influenza are some of the
measures provided for the well-being
of employees.
Aside from the productive benefits
of a safe and healthy workforce, we
understand that a workforce that is
well taken care of and provided for
will be happy and dedicated. This is a
goal we strive for as a leading global
company.
2009 Annual Report
90
Corporate Social Responsibility
Corporate Social
Responsibility
Overview
As a global company with a strong
awareness of Corporate Social
Responsibility (“CSR”), we understand
the impact we have on the lives and
livelihoods of many people and the
environments we operate in.
We are, as such, committed to
improving the communities we work
with and protecting the important
eco-systems that sustain our
operations. Over the year in review,
we have been involved in a range
of CSR programmes, endeavouring
to improve the lives of those less
fortunate and enhance our shared
living environment.
Social and Educational
Contributions
Singapore
This year, the Group made a donation
to the Tsao Foundation in support
of the An Le Fund. They did this
through the IMC Charity Golf
Tournament. This donation allowed
the foundation to support the home
medical care services for the needy
elderly. The Group also donated to
the Community Chest during the
World Gourmet Summit Charity
Dinner 2009. Besides these donations,
COSCO has always been a strong
supporter of the Yellow Ribbon
project – a fund established to create
jobs for ex-convicts and engage the
community in giving ex-offenders a
second chance. COSCO has donated
annually for the past three years.
This gesture may be simple, but it
has nevertheless inspired many exoffenders to re-integrate back to
society.
China
Not only contributing locally, COSCO
Corporation has also been involved
with needy communities in China by
contributing regularly to the COSCO
Charity Foundation - the first nonpublic foundation initiated by stateowned enterprises. This foundation
manages COSCO Group’s social
projects, and has been involved in
charity work within China for disasterrelief, poverty aid, medical aid and
educational support.
Contributions to the foundation by
COSCO subsidiaries have increased
year-on-year since its inception,
enabling the foundation to widen its
reach beyond its employees to the
wider society. In September 2009, its
subsidiary Zhoushan Shipyard also
helped the less fortunate by donating
to Liu Heng Charitable Branch
through the “donation-a-day” fundraising drive.
91
Over the year
in review,
we have been
involved in a
range of CSR
programmes,
endeavouring to
improve the lives of
those less fortunate
and enhance
our shared living
environment.
Environmental Awareness
Conclusion
COSCO believes in inculcating social
responsibility in its management
and operational processes. All the
Group’s new buildings have adopted
environmentally-friendly designs. It
also implemented at all its subsidiaries
the International Safety Management
Code (“ISMC”), establishing a uniform
pollution prevention management
system. In projects such as the
construction of its subsidiary, Nantong
Shipyard, COSCO placed a premium
on environmental protection.
At COSCO, we believe in conducting
our business operations in a way
that ensures the health, welfare and
safety of our employees, customers,
communities in which we operate in
and our ecological system. Despite the
challenging operating conditions during
the year in review, we remain fully
committed to our social programmes
as an active corporate citizen and
look forward to contributing greater
resources in the year ahead.
We undertake regular reviews of our
environmental policies and working
procedures, with the aim of constantly
improving our environmental
standards. Moreover, internal and
external audits ensure that we keep
abreast of the latest environmental
protection measures and standards.
In line with the goal of environmental
sustainability, we will continue
adopting environmentally-friendly
technologies and ensure minimal
wastage through innovative “green”
design and recycling.
2009 Annual Report
Contents
93
99
100
101
102
103
104
106
108
170
171
173
Directors’ Report
Balance Sheets
Five-Year Summary
Proxy Form for Annual General Meeting
Notes for Proxy Form
93
Directors’ Report
For the Financial Year Ended 31 December 2009
The directors present their report to the members together with the audited financial statements of the Group for the financial year
ended 31 December 2009 and the balance sheet of the Company as at 31 December 2009.
Directors
The directors of the Company in office at the date of this report are as follows:
Li Jian Hong
Jiang Li Jun
Zhang Liang
Sun Yue Ying
Ma Gui Chuan
Wang Xing Ru
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Li Jian Xiong
Lu Cheng Gang
Ye Bin Lin
Liu De Tian
(alternate
(alternate
(alternate
(alternate
director
director
director
director
to Li Jian Hong)
to Zhang Liang)
to Sun Yue Ying)
to Wang Xing Ru)
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 object was 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 96 and 97 of this report.
Directors’ interests in shares or debentures
(a)
According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any
interest in the shares or debentures of the Company or its related corporations, except as follows:
Number of ordinary shares
registered in name of
director or nominee
At
1.1.2009
or date of
At
appointment,
31.12.2009
if later
The Company
Li Jian Hong
Sun Yue Ying
1,300,000
1,400,000
1,300,000
1,400,000
in which a director is
deemed to have an interest
At
1.1.2009
or date of
At
appointment,
31.12.2009
if later
–
–
–
–
2009 Annual Report
94
Directors’ Report
Directors’ interests in shares or debentures (continued)
(a)
(continued)
The Company
Wang Xing Ru
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Li Jian Xiong
Lu Cheng Gang
Ye Bin Lin
Liu De Tian
registered in name of
director or nominee
in which a director is
deemed to have an interest
At
31.12.2009
At
1.1.2009
or date of
appointment,
if later
At
31.12.2009
At
1.1.2009
or date of
appointment,
if later
1,067,000
1,400,000
900,000
650,000
130,000
1,000,000
–
600,000
153,000
467,000
1,400,000
900,000
650,000
130,000
1,000,000
–
600,000
153,000
–
–
1,000,000
–
5,000
–
50,000
–
120,000
–
–
1,000,000
–
5,000
–
50,000
–
120,000
Number of unissued
ordinary shares under
option held by director
At
31.12.2009
At
1.1.2009
or date of
appointment,
if later
Related corporations
COSCO International Holdings Limited
- Share Option Scheme
Li Jian Hong
1,200,000
1,200,000
COSCO Pacific Limited
- 2003 Share Option Scheme
Li Jian Hong
Sun Yue Ying
1,000,000
1,000,000
1,000,000
1,000,000
China COSCO Holdings Company Limited
- Share Appreciation Rights Plan
Li Jian Hong
Zhang Liang
Sun Yue Ying
Lu Cheng Gang
1,630,000
580,000
1,630,000
265,000
1,630,000
580,000
1,630,000
265,000
95
Directors’ Report
Directors’ interests in shares or debentures (continued)
(b)
According to the register of directors’ shareholdings, certain directors holding office at the end of the financial year had interests
in the options to subscribe for ordinary shares of the Company granted pursuant to the Cosco Group Employees’ Share Option
Scheme 2002 as set out below and under “Share Options” on pages 96 and 97 of this report.
Number of unissued
ordinary shares under
option held by director
(c)
At
31.12.2009
At
1.1.2009
or date of
appointment,
if later
2006 Options
Li Jian Hong
Sun Yue Ying
Lu Cheng Gang
700,000
700,000
700,000
700,000
700,000
700,000
2007 Options
Ma Gui Chuan
Wang Xing Ru
Er Kwong Wah
Li Jian Xiong
Lu Cheng Gang
Ye Bin Lin
Liu De Tian
700,000
700,000
300,000
700,000
700,000
700,000
700,000
700,000
700,000
300,000
700,000
700,000
700,000
700,000
2008 Options
Ma Gui Chuan
Wang Xing Ru
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Li Jian Xiong
Lu Cheng Gang
Ye Bin Lin
Liu De Tian
700,000
700,000
300,000
300,000
300,000
700,000
700,000
700,000
700,000
700,000
700,000
300,000
300,000
300,000
700,000
700,000
700,000
700,000
The directors’ interests in the ordinary shares and share options of the Company as at 21 January 2010 were the same as those
as at 31 December 2009.
Directors’ contractual 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 with a company in which
he has a substantial financial interest, except as disclosed in the accompanying financial statements and in this report, and except that
certain directors have employment relationships with the ultimate holding corporation or related corporations, and have received
remuneration in those capacities.
2009 Annual Report
96
Directors’ Report
Share options
(a)
Cosco Group Employees’ Share Option Scheme 2002
The Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”) was approved by members of the Company at
an Extraordinary General Meeting on 8 May 2002.
Under the Scheme 2002, share options to subscribe for the ordinary shares of the Company are granted to directors, key
management personnel and employees. The exercise price of the granted options is determined at the average of the closing
prices of the Company’s ordinary shares as quoted on the Singapore Exchange for the 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 or constructive obligation to repurchase or settle the options in cash.
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated company,
or the holding company for at least one year on or prior to the date of the grant, may be exercised twelve months after the
date of grant but before the end of one hundred and twenty months. For employees and directors who are in the service of
the associated company and non-executive directors, the options shall expire at the end of sixty months. Options issued at a
discount to market price, may only be exercised two years after the date of the grant.
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated company, or
the holding company for at least six months but less than one year on or prior to the date of grant, may be exercised twentyfour months after the date of the grant but before the end of one hundred and twenty months. For employees and directors
who are in the service of the associated company and non-executive directors, the options shall expire at the end of sixty
months. Options issued at a discount to market price, may only be exercised three years after the date of the grant.
Particulars of the options granted pursuant to the Scheme 2002 in 2006, 2007 and 2008 known as “2006 Options”, “2007
Options” and “2008 Options” respectively were set out in the Directors’ Report for the financial years ended 31 December
2006, 31 December 2007 and 31 December 2008 respectively.
The Remuneration Committee administering the Scheme 2002 comprises the following directors:
Er Kwong Wah
Jiang Li Jun
Wang Kai Yuen
Tom Yee Lat Shing
Ang Swee Tian
(Chairman)
97
Directors’ Report
Share options (continued)
(a)
Cosco Group Employees’ Share Option Scheme 2002 (continued)
Details of the options granted to directors of the Company are as follows:
Number of unissued ordinary shares
of the Company under option
Aggregate
Aggregate
granted since
exercised since
commencement commencement
of Scheme
of Scheme
2002 to
2002 to
31.12.2009
31.12.2009
Name of directors
Li Jian Hong
Sun Yue Ying
Ma Gui Chuan
Wang Xing Ru
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Li Jian Xiong
Lu Cheng Gang
Ye Bin Lin
Liu De Tian
Aggregate
outstanding
as at
31.12.2009
3,200,000
3,300,000
1,400,000
3,000,000
2,200,000
2,200,000
2,200,000
4,700,000
2,100,000
4,700,000
4,400,000
2,500,000
2,600,000
–
1,600,000
1,900,000
1,900,000
1,600,000
3,300,000
–
3,300,000
3,000,000
700,000
700,000
1,400,000
1,400,000
300,000
300,000
600,000
1,400,000
2,100,000
1,400,000
1,400,000
33,400,000
21,700,000
11,700,000
No options have been granted to controlling shareholders (as defined in the Listing Manual of the SGX-ST) of the Company or
their associates (as defined in the Listing Manual of the SGX-ST).
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 option available under the
Scheme 2002.
There were no shares of the Company allotted and issued by virtue of the exercise of options to take up unissued shares of the
Company. There were no unissued shares of the subsidiaries under option at the end of the financial year.
(b)
Share options outstanding
The number of unissued ordinary shares of the Company under option in relation to the Scheme 2002 outstanding at the end
of the financial year was as follows:
Options
relating to
Scheme 2002
Number
of unissued
ordinary
shares
at
1.1.2009
Number
exercised
during the
financial
year
Number
cancelled/
lapsed
during the
financial
year
Number
of unissued
ordinary
shares
at
31.12.2009
Exercise
price
’000
’000
’000
’000
$
Exercise period
2006 Options
2,840
–
(60)
2,780
2007 Options
14,420
–
(1,650)
12,770
1.23
2.48
21.2.2007 - 20.2.2016
5.2.2008 - 4.2.2017
2008 Options
20,040
–
(610)
19,430
2.95
24.3.2009 - 23.3.2018
37,300
–
(2,320)
34,980
2009 Annual Report
98
Directors’ Report
Independent auditor
The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.
On behalf of the directors
JIANG LI JUN
Director
3 March 2010
MA GUI CHUAN
Director
99
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 101 to 169 are
drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2009,
and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended; and
(b)
at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and
when they fall due.
On behalf of the directors
JIANG LI JUN
Director
MA GUI CHUAN
Director
3 March 2010
2009 Annual Report
100
To the Members of Cosco Corporation (Singapore) Limited For the Financial Year Ended 31 December 2009
We have audited the accompanying financial statements of Cosco Corporation (Singapore) Limited (the “Company”) and its subsidiaries
(the “Group”) set out on pages 101 to 169, which comprise the balance sheets of the Company and of the Group as at 31 December
2009, and the consolidated income statement, the consolidated statement of comprehensive income, the consolidated statement of
changes in equity and the consolidated cash flow statement of the Group for the financial year then ended, and a summary of significant
accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of
the Singapore Companies Act (Cap. 50) (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes:
(a)
devising and maintaining a system of internal accounting control sufficient to provide a reasonable assurance that assets are
safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are
recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain
accountability of assets;
(b)
selecting and applying appropriate accounting policies; and
(c)
making accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an audit opinion on these financial statements based on our audit. We conducted our audit in
accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance as to whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements.
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 auditor considers internal control relevant
to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
management, as well as evaluating the overall presentation of the 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,
(a)
the balance sheet of the Company and the consolidated financial statements of the Group are properly drawn up in accordance
with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of
affairs of the Company and of the Group as at 31 December 2009, and the results, changes in equity and cash flows of the
Group for the financial year ended on that date; and
(b)
the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in
Singapore of which we are the auditor, have been properly kept in accordance with the provisions of the Act.
PricewaterhouseCoopers LLP
Public Accountants and Certified Public Accountants
Singapore, 3 March 2010
101
Sales
Notes
2009
$’000
2008
$’000
4
2,899,004
3,476,009
(2,601,406)
(2,845,875)
Cost of sales
Gross profit
Other income (net)
7
297,598
630,134
146,314
207,942
(42,420)
(61,642)
(181,250)
(316,855)
(41,904)
(8,834)
Expenses
- Distribution
- Administrative
- Finance
8
Share of profit of associated companies
21
Profit before income tax
Income tax expense
9
214
643
178,552
451,388
(40,758)
(31,620)
137,794
419,768
110,080
302,588
27,714
117,180
137,794
419,768
- Basic
4.92
13.51
- Diluted
4.92
13.50
Net profit
Attributable to:
Equity holders of the Company
Minority interests
Earnings per share for profit attributable to equity holders of
the Company
(expressed in cents per share)
10
The accompanying notes form an integral part of these financial statements.
2009 Annual Report
102
Notes
Net profit
2009
$’000
2008
$’000
137,794
419,768
371
263
Other comprehensive income:
Financial assets, available-for-sale
- Net fair value gains
33(b)(v)
Currency translation differences arising from consolidation
33(b)(iii)
(27,480)
65,375
Other comprehensive (loss)/income, net of tax
(27,109)
65,638
Total comprehensive income for the year
110,685
485,406
93,345
339,968
17,340
145,438
110,685
485,406
Total comprehensive income attributable to:
Equity holders of the Company
Minority interests
103
Balance Sheets
As at 31 December 2009
Notes
The Group
2009
2008
$’000
$’000
The Company
2009
2008
$’000
$’000
ASSETS
Current assets
Cash and cash equivalents
Forward currency contracts
Trade and other receivables
Inventories
Construction contract work-in-progress
Trading property
Other current assets
11
12
13
14
15
16
17
1,549,175
944
1,452,240
677,568
199,385
–
6,573
3,885,885
1,880,316
10,063
1,570,108
945,601
170,143
–
19,792
4,596,023
134,511
–
236
–
–
–
220
134,967
130,823
–
80,596
–
–
–
175
211,594
Non-current assets
Club memberships
Investments in associated companies
Investments in subsidiaries
Investment properties
Intangible assets
Deferred expenditure
Deferred income tax assets
12
18
19
20
21
22
23
24
25
26
31
–
–
4,034
492
1,922
–
11,786
2,349,098
9,525
1,061
158,523
2,536,441
1,441
–
3,630
473
2,577
–
12,217
2,081,950
9,546
–
91,417
2,203,251
–
64,285
–
156
–
290,813
–
775
–
–
–
356,029
–
65,594
–
236
–
289,968
–
896
–
–
–
356,694
6,422,326
6,799,274
490,996
568,288
Total assets
LIABILITIES
Current liabilities
Trade and other payables
Current income tax liabilities
Borrowings
Provisions for other liabilities
12
27
9
28
30
14,448
3,559,006
84,136
176,262
36,436
3,870,288
3,506
4,441,900
61,348
45,278
20,156
4,572,188
–
16,767
549
–
–
17,316
–
14,871
4,885
–
–
19,756
Non-current liabilities
Borrowings
Deferred income tax liabilities
12
28
31
–
938,946
2,400
941,346
6,375
611,364
180
617,919
–
–
2,198
2,198
–
–
–
–
Total liabilities
4,811,634
5,190,107
19,514
19,756
NET ASSETS
1,610,692
1,609,167
471,482
548,532
270,608
174,030
639,404
1,084,042
526,650
1,610,692
270,608
167,904
705,692
1,144,204
464,963
1,609,167
270,608
45,105
155,769
471,482
–
471,482
270,608
41,865
236,059
548,532
–
548,532
EQUITY
Capital and reserves attributable to equity
holders of the Company
Share capital
Statutory and other reserves
Retained earnings
Minority interests
Total equity
32
33
2009 Annual Report
104
Notes
Share
capital
$’000
Attributable to equity
Statutory
and other Retained
reserves
earnings
$’000
$’000
Total
$’000
Minority
interests
$’000
Total
equity
$’000
705,692
1,144,204
464,963
1,609,167
110,080
93,345
17,340
110,685
2009
Beginning of financial year
270,608
167,904
–
(16,735)
–
3,240
–
3,240
–
3,240
Minority’s share of interest in a newly
incorporated subsidiary
–
–
–
–
8,404
8,404
Minorities’ share of increase in registered
capital of subsidiaries
–
–
–
–
37,455
37,455
Decrease in minority’s interest of a
subsidiary
–
–
–
–
(12)
(12)
Dividend declared by subsidiaries to
minority shareholders of subsidiaries
–
–
–
–
(1,500)
(1,500)
–
Employee share option scheme:
- Value of director and employee
services
Dividend for 2008
33(b)(i)
34
–
Transfer from asset revaluation reserve
to retained earnings
33(b)(iv)
–
(3,218)
3,218
–
–
–
Transfer from retained earnings to
statutory reserves
33(b)(ii)
–
22,839
(22,839)
–
–
–
270,608
174,030
1,084,042
526,650
1,610,692
End of financial year
(156,747)
639,404
(156,747)
–
(156,747)
105
Notes
Share
capital
$’000
Attributable to equity
Statutory
and other Retained
reserves
earnings
$’000
$’000
Total
$’000
Minority
interests
$’000
Total
equity
$’000
2008
266,852
82,806
590,249
939,907
362,847
1,302,754
–
37,380
302,588
339,968
145,438
485,406
–
17,311
–
17,311
–
17,311
3,756
–
–
3,756
–
3,756
Minority’s share of interest in a newly
incorporated subsidiary
–
–
–
–
14,206
14,206
Increase in minority’s interest of a
subsidiary
–
–
–
–
186
186
Dividend declared by subsidiaries to
minority shareholders of subsidiaries
–
–
–
–
34
–
–
Transfer from asset revaluation reserve
to retained earnings
33(b)(iv)
–
Transfer from retained earnings to
statutory reserves
33(b)(ii)
- Value of director and employee
services
- Issue of shares
32
Dividend for 2007
33(b)(i)
(3,218)
–
33,625
270,608
167,904
(156,738)
(156,738)
3,218
–
(33,625)
705,692
(57,714)
–
(57,714)
(156,738)
–
–
–
–
–
1,144,204
464,963
1,609,167
2009 Annual Report
106
Note
2009
$’000
2008
$’000
137,794
419,768
Cash flows from operating activities
Net profit
Adjustments for:
- Income tax expense
40,758
31,620
- Depreciation of property, plant and equipment and investment properties
153,416
120,767
- Net (reversal of)/allowance for impairment of trade and other receivables
(11,375)
61,283
4,236
20,907
4
–
- Write-off for inventory obsolescence and inventory write-down
- Loss on disposal of a transferable club membership
- Impairment in value of transferable club memberships
32
4
- Net loss/(gain) on disposal of property, plant and equipment
351
(1,638)
- Expected losses recognised on construction contracts
578
89,048
- Write-off for property, plant and equipment
- Employees share option expenses
- Net fair value loss/(gain) on forward currency contracts
- Share of profit from associated companies
40
2,257
3,240
17,311
15,625
(1,526)
(214)
- Negative goodwill
(12)
- Dividend income
(314)
- Interest expense (financing)
(643)
–
(1,171)
41,904
8,834
(32,781)
(34,355)
353,282
732,466
- Inventories and construction contract work-in-progress
234,555
(650,191)
- Trade and other receivables
121,453
(791,547)
- Interest income from deposits (investing)
Changes in working capital:
- Trade and other payables
(850,141)
- Trading property
–
- Other current assets
13,219
1,898,403
977
(12,829)
- Deferred expenditure
(1,061)
- Provisions for other liabilities
16,280
15,027
- Exchange differences
30,489
(53,689)
Cash (used in)/generated from operations
(81,924)
Income tax paid
(82,444)
Net cash (used in)/provided by operating activities
(164,368)
–
1,138,617
(64,654)
1,073,963
107
Note
2009
$’000
2008
$’000
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Purchase of a transferable club membership
Proceeds from disposal of a transferable club membership
Purchase of investment properties
(469,924)
(664,583)
12,319
14,694
(101)
–
45
–
–
Dividends received
Interest received from deposits
Net cash used in investing activities
(1,063)
764
1,171
40,922
15,650
(415,975)
(634,131)
Cash flows from financing activities
Proceeds from issuance of ordinary shares
–
3,756
Proceeds from borrowings
799,875
609,514
Repayments of borrowings
(328,273)
(129,081)
(18)
(22)
Repayments of finance lease liabilities
Minority shareholder’s contribution for the equity interest in a newly incorporated
subsidiary
Proceeds from minority shareholders for increase in registered capital of subsidiaries
Decrease/(increase) in deposits pledged
Interest paid
Dividends paid to shareholders of the Company
8,404
14,206
37,455
–
10,929
(10,275)
(41,536)
(8,534)
(156,747)
(156,738)
Dividends paid to minority shareholders of subsidiaries
(34,356)
(21,492)
Net cash provided by financing activities
295,733
301,334
(284,610)
741,166
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at beginning of financial year
1,865,833
Effects of currency translation on cash and cash equivalents
Cash and cash equivalents at end of financial year
(35,602)
11
1,545,621
1,078,586
46,081
1,865,833
2009 Annual Report
108
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 the
subsidiaries. The principal activities of its subsidiaries are set out in Note 22 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 in the accounting policies below.
The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of
applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. Areas
involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial
statements, are disclosed in Note 3.
Interpretations and amendments to published standards effective in 2009
On 1 January 2009, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are mandatory
for application from that date. Changes to the Group’s accounting policies have been made as required, in accordance with the
transitional provisions in the respective FRS and INT FRS.
The following are the new or amended FRS and INT FRS that are relevant to the Group:
FRS 1 (revised) Presentation of financial statements (effective from 1 January 2009). The revised standard prohibits the
presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in
equity. All non-owner changes in equity are shown in a performance statement, but entities can choose whether to
present one performance statement (the statement of comprehensive income) or two statements (the income statement
and statement of comprehensive income). The Group has chosen to adopt the latter alternative. Where comparative
information is restated or reclassified, a restated balance sheet is required to be presented as at the beginning
comparative period. There is no restatement of the balance sheet as at 1 January 2008 in the current financial year.
FRS 23 (revised) Borrowing costs (effective from 1 January 2009). The revised standard removes the option to recognise
immediately as an expense borrowing costs that are attributable to qualifying assets, except for those borrowing costs
on qualifying assets that are measured at fair value or inventories that are manufactured or produced in large quantities
on a repetitive basis.
FRS 108 Operating segments (effective from 1 January 2009) replaces FRS 14 Segment reporting, and requires a
‘management approach’, under which segment information is presented on the same basis as that used for internal
reporting purposes. Segment revenue, segment profits and segment assets are also measured on a basis that is consistent
with internal reporting.
Amendment to FRS 24 Related party disclosures (effective from 1 January 2011). The Group has early adopted the
amendment to FRS 24. The amendment introduces an exemption from all of the disclosure requirements of FRS 24 for
transactions among government-related entities and the government. Those disclosures are replaced with a requirement
to disclose the name of the government and the nature of their relationship, the nature and amount of any individuallysignificant transactions, and the extent of any collectively-significant transactions qualitatively or quantitatively. It also
clarifies and simplifies the definition of a related party.
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2.
Significant accounting policies (continued)
2.1
Basis of preparation (continued)
Interpretations and amendments to published standards effective in 2009 (continued)
Amendment to FRS 107 Improving disclosures about financial statements (effective from 1 January 2009). The amendment
requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires
disclosure of fair value measurements by level of a fair value measurement hierarchy (see Note 36(e)). The adoption
of the amendment results in additional disclosures but does not have an impact on the accounting policies and
measurement bases adopted by the Group.
The adoption of the above amended FRS and INT FRS did not result in any substantial changes to the Group’s accounting
policies nor any significant impact on these financial statements.
2.2
Revenue recognition
Sales comprise the fair value of the consideration received or receivable for the ship repair, ship building and marine engineering
income, rental income, time charter revenue, shipping agency income and sale of scrap materials in the ordinary course of the
Group’s activities. Sales are presented net of value-added tax, rebates and discounts, and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue and related cost can be reliably measured, when it is probable that
the collectibility of the related receivables is reasonably assured and when the specific criteria for each of the Group’s activities
are met as follows:
(a)
Rendering of services
(i)
Shipping
Revenue from time charter is recognised on the straight-line basis over the period of the time charter agreement.
Any losses arising from time charters are provided for in full as soon as they are expected.
Booking commissions, agency and transhipment fees are recognised upon the rendering of services to customers.
Revenue from freight forwarding, transport agency and feeder services are recognised when the service is
rendered.
(ii)
Ship repair, ship building and marine related activities
Revenue from ship repair, ship building, marine engineering, container repairs and services, fabrication work
services and production of marine outfitting components is recognised on the percentage-of-completion method
based on progress of the contract work, where the outcome of the contract can be estimated reliably. If the
contract covers a number of projects and the cost and revenue of such individual projects can be identified
within the terms of the overall contract, each such project is treated as a separate contract. Provision is made in
full where applicable for expected losses on contracts in progress. Please refer to the paragraph “Construction
contracts” for the accounting policy on revenue from construction contracts for ship building and marine related
activities.
(b)
Rental income
Rental income from operating leases on trading property, investment properties and property, plant and equipment is
recognised on the straight-line basis over the lease term.
(c)
Sale of scrap materials
Revenue from sale of scrap materials is recognised when a Group entity has delivered the products to the customer, the
customer has accepted the products and collectibility of the related receivables is reasonably assured.
2009 Annual Report
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2.2
Revenue recognition (continued)
(d)
Interest income
Interest income is recognised on the time-proportion basis using the effective interest method.
(e)
Dividend income
Dividend income is recognised when the right to receive payment is established.
2.3
Group accounting
(a)
Subsidiaries
Subsidiaries are entities over which the Group has power to govern the financial and operating policies, generally
accompanied by a shareholding giving rise to the majority of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when assessing whether the Group controls another
entity.
The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is
measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the dates
of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition,
irrespective of the extent of minority interest. Please refer to the paragraph “Intangible assets – Goodwill” for the
accounting policy on goodwill on acquisition of subsidiaries.
Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from
the date on which control ceases.
In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between
group entities are eliminated. Unrealised losses are also eliminated but are considered an impairment indicator of the
asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the
policies adopted by the Group.
Minority interests are that part of the net results of operations and of net assets of a subsidiary attributable to the
interests which are not owned directly or indirectly by the Group. They are measured at the minorities’ share of fair
value of subsidiaries’ identifiable assets and liabilities at the date of acquisition by the Group and the minorities’ share
of changes in equity since the date of acquisition, except when the minorities’ share of losses in a subsidiary exceeds
its interests in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minorities are
attributed to the equity holders of the Company, unless the minorities have a binding obligation to, and are able to, make
good the losses. When that subsidiary subsequently reports profits, the profits applicable to the minority interests are
attributed to the equity holders of the Company until the minorities’ share of losses previously absorbed by the equity
holders of the Company are fully recovered.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the accounting policy on
investments in subsidiaries in the separate financial statements of the Company.
(b)
Transactions with minority interests
The Group applies a policy of treating transactions with minority interests as transactions with parties external to
the Group. Disposals to minority interests result in gains and losses for the Group that are recognised in the income
statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and
the Group’s incremental share of the carrying value of identifiable net assets of the subsidiary.
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2.3
Group accounting (continued)
(c)
Associated companies
Associated companies are entities over which the Group has significant influence, but not control, and generally
accompanied by a shareholding giving rise to between and including 20% and 50% of the voting rights. Investments in
associated companies are accounted for in the consolidated financial statements using the equity method of accounting
less impairment losses.
Investments in associated companies are initially recognised at cost. The cost of an acquisition is measured at the fair
value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs
directly attributable to the acquisition.
In applying the equity method of accounting, the Group’s share of its associated companies’ post-acquisition profits or
losses is recognised in the income statement and its share of post-acquisition movements in reserves is recognised in
equity directly. These post-acquisition movements are adjusted against the carrying amount of the investment. When the
Group’s share of losses in an associated company equals or exceeds its interest in the associated company, including any
other unsecured non-current receivables, the Group does not recognise further losses, unless it has obligations or has
made payments on behalf of the associated company.
Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the
Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Accounting policies of associated companies have been changed
where necessary to ensure consistency with the accounting policies adopted by the Group.
Dilution gains and losses arising from investments in associated companies are recognised in the income statement.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the accounting policy on
investments in associated companies in the separate financial statements of the Company.
2.4
(a)
Measurement
(i)
Land and buildings
Land and buildings are initially recognised at cost. Freehold land is subsequently carried at cost less accumulated
impairment losses. Buildings and leasehold land are subsequently carried at cost less accumulated depreciation
and accumulated impairment losses.
(ii)
Motor vessels
Motor vessels are initially recognised at cost and subsequently carried at cost less accumulated depreciation and
accumulated impairment losses.
The cost of motor vessels includes actual interest incurred on borrowings used to finance the motor vessels
while under construction and other direct relevant expenditure incurred in bringing the vessels into operation.
For this purpose, the interest rate applied to funds provided for constructing the motor vessels is arrived at
by reference to the actual rate payable on borrowings for construction purposes. The capitalisation of interest
charges will cease upon the completion and delivery of the motor vessels.
(iii)
Other property, plant and equipment
All other items of property, plant and equipment are initially recognised at cost and subsequently carried at cost
less accumulated depreciation and accumulated impairment losses.
2009 Annual Report
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2.
2.4
Property, plant and equipment (continued)
(a)
Measurement (continued)
(iv)
Components of costs
The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost
that is directly attributable to bringing the asset to the location and condition necessary for it to be capable
of operating in the manner intended by management. Cost also includes borrowing costs that are directly
attributable to the acquisition, construction or production of a qualifying asset (Note 2.6). The projected cost of
dismantlement, removal or restoration is also recognised as part of the cost of property, plant and equipment if
the obligation for the dismantlement, removal or restoration is incurred as a consequence of either acquiring or
using the asset for purposes other than to produce inventories.
(b)
Depreciation
Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculated using the
straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:
Useful lives
Buildings on freehold land
Leasehold land and buildings
Office renovations, furniture, fixtures and equipment
Plant, machinery and equipment
Motor vehicles
Motor vessels
Docks and quays
20 - 50 years
10 - 50 years
3 - 10 years
3 - 10 years
5 - 10 years
15 years
30 years
No depreciation is provided for construction-in-progress.
The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and
adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in the income statement
when the changes arise.
(c)
Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the
carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised
in the income statement when incurred.
The motor vessels are subject to overhauls at regular intervals. The inherent components of the initial overhaul are
determined based on the estimated costs of the next overhaul and are separately depreciated over a period of 21/2 years
in order to 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 and its carrying
amount is recognised in the income statement.
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2.
2.5
Intangible assets
Goodwill on acquisitions
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable assets,
liabilities and contingent liabilities of the acquired subsidiaries and associated companies at the date of acquisition.
Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated impairment losses.
Goodwill on associated companies is included in the carrying amount of the investments.
Gains and losses on the disposal of subsidiaries and associated companies include the carrying amount of goodwill relating to
the entity sold, except for goodwill arising from acquisitions prior to 1 January 2001, the goodwill of which was adjusted against
retained earnings in the year of acquisition and not recognised in the income statement on disposal.
2.6
Borrowing costs
Borrowing costs are recognised in the income statement using the effective interest method except for those costs that are
directly attributable to borrowings acquired specifically for the construction of motor vessels, docks and quays. The actual
borrowing costs incurred during the construction period less any investment income on temporary investments of these
borrowings, are capitalised in the cost of the docks and quays.
2.7
Construction contracts
A construction contract is a contract 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 their ultimate purpose or use.
Contract costs are recognised when incurred.
When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised
as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date
(“percentage-of-completion method”). When the outcome of a construction contract cannot be estimated reliably, contract
revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. When it is probable that total
contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract work and claims
that can be measured reliably. A variation or a claim is recognised as contract revenue when it is probable that the customer
will approve the variation or negotiations have reached an advanced stage such that it is probable that the customer will accept
the claim.
The stage of completion is measured by reference to the completion of a physical proportion of the contract work. Costs
incurred during the financial year in connection with future activity on a contract are excluded from costs incurred to date when
determining the stage of completion of a contract, the costs of which are shown as construction contract work-in-progress on
the balance sheet unless it is not probable that such contract costs are recoverable from the customers, in which case, such
costs are recognised as an expense immediately.
At the balance sheet date, the aggregated costs incurred plus recognised profit (less recognised loss) on each contract
is compared against the progress billings. Where costs incurred plus the recognised profits (less recognised losses) exceed
progress billings, the balance is presented as due from customers on construction contracts within “trade and other receivables”.
Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is presented as due
to customers on construction contracts within “trade and other payables”.
Progress billings not yet paid by customers and retentions are included within “trade and other receivables”. Advances received
are included within “trade and other payables”.
2009 Annual Report
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2.
2.8
Investment properties include those portions of office buildings that are held for long-term rental yields and/or for capital
appreciation.
Investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciation and
accumulated impairment losses. Depreciation is calculated using the straight-line method to allocate the depreciable amounts
over the estimated useful lives of 50 years. The residual values, useful lives and depreciation method of investment properties
are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are included in the income
statement when the changes arise.
Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovations and
improvements is capitalised as addition and the carrying amounts of the replaced components are written off to the income
statement. The cost of maintenance, repairs and minor improvements is charged to the income statement when incurred.
On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is recognised in
the income statement.
2.9
Trading property
Trading property is held for sale in the ordinary course of business and is stated at the lower of cost and estimated net
realisable value. Cost of the trading property comprises its purchase price.
The net realisable value is the estimated selling price in the ordinary course of business, less the cost of completion and selling
expenses.
2.10
Investments in subsidiaries and associated companies
Investments in subsidiaries and associated companies are stated at cost less accumulated impairment losses in the Company’s
balance sheet. On disposal of investments in subsidiaries and associated companies, the difference between disposal proceeds
and the carrying amounts of the investments are recognised in the income statement.
2.11
Impairment of non-financial assets
(a)
Goodwill
Goodwill is tested for impairment annually, and whenever there is indication that the goodwill may be impaired. Goodwill
included in the carrying amount of an investment in associated company is tested for impairment as part of the
investment, rather than separately.
For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating unit
(“CGU”) expected to benefit from synergies arising from the business combination.
An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable
amount of the CGU. The recoverable amount of a CGU is the higher of a CGU’s fair value less cost to sell and value-inuse.
The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU
and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU.
An impairment loss on goodwill is recognised in the income statement and is not reversed in a subsequent period.
115
2.
2.11
Impairment of non-financial assets (continued)
(b)
Investments in subsidiaries and associated companies
Property, plant and equipment, investment properties and investments in subsidiaries and associated companies are
tested for impairment whenever there is any objective evidence or indication that these assets may be impaired.
For the purpose of impairment testing of these assets, the recoverable amount (i.e. the higher of the fair value less cost
to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows
that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the
CGU to which the asset belongs.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of
the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount is recognised as an impairment loss in the income
statement unless the asset is carried at revalued amount, in which case, such impairment loss is treated as a revaluation
decrease.
An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates
used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount
of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying
amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss
been recognised for the asset in prior years.
A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless the asset is
carried at revalued amount, in which case, such reversal is treated as a revaluation increase. However, to the extent that
an impairment loss on the same revalued asset was previously recognised in the income statement, a reversal of that
impairment is also recognised in the income statement.
2.12
Financial assets
(a)
Classification
The Group classifies its financial assets in the following categories: at fair value through profit or loss, loans and
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 its financial assets at initial recognition.
(i)
Financial assets, at fair value through profit or loss
This category has two sub-categories: financial assets held for trading, and those designated at 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 as at fair value through profit or loss at inception
are those that are managed and their performances are evaluated on a fair value basis, in accordance with a
documented Group investment strategy. Derivatives are also categorised as held for trading unless they are
designated as hedges. Assets in this category are presented as current assets if they are either held for trading or
are expected to be realised within 12 months after the balance sheet date.
(ii)
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted
in an active market. They are presented as current assets, except for those maturing later than 12 months after
the balance sheet date which are presented as non-current assets. Loans and receivables include “trade and other
receivables” and “cash and cash equivalents” except for non-current interest-free receivables from a subsidiary
which have been accounted for in accordance with the accounting policy on investments in subsidiaries and
associated companies (Note 2.10).
2009 Annual Report
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2.
2.12
Financial assets (continued)
(a)
Classification (continued)
(iii)
Financial assets, held-to-maturity
Financial assets, held-to-maturity are non-derivative financial assets with fixed or determinable payments and fixed
maturities that the Group’s management has the positive intention and ability to hold to maturity. If the Group
were to sell other than an insignificant amount of held-to-maturity financial assets, the whole category would be
tainted and reclassified as available-for-sale. They are presented as non-current assets, except for those maturing
within 12 months after the balance sheet date which are presented as current assets. The Group currently does
not have any held-to-maturity financial assets.
(iv)
Financial assets, available-for-sale are non-derivatives that are either designated in this category or not classified
in any of the other categories. They are presented as non-current assets unless management intends to dispose
of the assets within 12 months after the balance sheet date.
(b)
Recognition and derecognition
Regular way purchases and sales of 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 have expired or have
been transferred and the Group has transferred substantially all risks and rewards of 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 the fair value reserve relating to that asset is transferred to the income statement.
(c)
Initial measurement
Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fair value through
profit or loss, which are recognised at fair value. Transaction costs for financial assets at fair value through profit and loss
are recognised immediately in the income statement.
(d)
Subsequent measurement
Financial assets, both available-for-sale and at fair value through profit or loss are subsequently carried at fair value.
Loans and receivables and financial assets, held-to-maturity are subsequently carried at amortised cost using the effective
interest method.
Changes in the fair value of financial assets, at fair value through profit or loss, including the effects of currency
translation, interest and dividend, are recognised in the income statement when the changes arise.
Interest and dividend income on financial assets, available-for-sale are recognised separately in the income statement.
Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies are
analysed into currency translation differences on the amortised cost of the securities and other changes; the currency
translation differences are recognised in the income statement and the other changes are recognised in the fair value
reserve. Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in the fair
value reserve, together with the related currency translation differences.
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2.
2.12
Financial assets (continued)
(e)
Impairment
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of
financial assets is impaired and recognises an allowance for impairment when such evidence exists.
(i)
Loans and receivables/Financial assets, held-to-maturity
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default 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 estimated future cash flows,
discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against
the allowance account. Subsequent recoveries of amounts previously written off are recognised against the same
line item in the income statement.
The allowance for impairment loss account is reduced through the income statement in a subsequent period
when the amount of impairment loss decreases and the related decrease can be objectively measured. The
carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does
not exceed the amortised cost, had no impairment been recognised in prior periods.
(ii)
In addition to the objective evidence of impairment described in Note 2.12(e)(i), a significant or prolonged
decline in the fair value of an equity security below its cost is considered as an indicator that the available-forsale financial asset is impaired.
If any evidence of impairment exists, the cumulative loss that was recognised in the fair value reserve is
transferred to the income statement. The cumulative loss is measured as the difference between the acquisition
cost (net of any principal repayments and amortisation) and the current fair value, less any impairment loss
previously recognised in the income statement. The impairment losses recognised in the income statement on
equity securities are not reversed through the income statement.
2.13
Financial guarantees
The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries and third party for services
provided to a subsidiary. These guarantees are financial guarantees as they require the Company to reimburse the banks and
third parties if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of their
borrowings or payment for services when due, respectively.
Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s balance sheet.
Financial guarantees are subsequently amortised to the income statement over the period of the subsidiaries’ borrowings, unless
it is probable that the Company will reimburse the bank for an amount higher than the unamortised amount. In this case, the
financial guarantees shall be carried at the expected amount payable to the bank in the Company’s balance sheet.
2.14
Borrowings
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12
months after the balance sheet date.
Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any
difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement
over the period of the borrowings using the effective interest method.
2009 Annual Report
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2.
2.15
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective
interest method.
2.16
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 and is
subsequently carried at its fair value. The method of recognising the resulting gain or loss depends on whether the derivative is
designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategies for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, on whether the derivatives designated as hedging instruments are
highly effective in offsetting changes in fair values or cash flows of the hedged items.
The Group designates each hedge as either (a) fair value hedge; or (b) cash flow hedge.
(a)
Fair value hedge and cash flow hedge
The Group has not designated any derivatives as hedging instruments during the financial year.
(b)
Derivatives that are not designated or do not qualify for hedge accounting
Fair value changes on these derivatives are recognised in the income statement when the changes arise.
2.17
Fair value estimation of financial assets and liabilities
The fair values of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and
derivatives) are based on quoted market prices at the balance sheet date. The quoted market prices used for financial assets are
the current bid prices; the appropriate quoted market prices for financial liabilities are the current ask prices.
The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The
Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet
date. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation techniques, such as
discounted cash flow analyses, are also used to determine the fair 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.
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2.18
Leases
(a)
When the Group is the lessee:
The Group leases certain property, plant and equipment from third parties.
(i)
Lessee - Finance leases
Leases of property, plant and equipment where the Group assumes substantially all risks and rewards incidental
to ownership of the leased assets are classified as finance leases.
The leased assets and the corresponding lease liabilities (net of finance charges) under finance leases are
recognised on the balance sheet as property, plant and equipment and borrowings respectively, at the inception
of the leases based on the lower of the fair value of the leased assets and the present value of the minimum
lease payments.
Each lease payment is apportioned between the finance expense and the reduction of the outstanding lease
liability. The finance expense is recognised in the income statement on a basis that reflects 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 to ownership are
retained by the lessors are classified as operating leases. Payments made under operating leases (net of any
incentives received from the lessors) are recognised in the income statement on the straight-line basis over the
period of the lease.
Contingent rents are recognised as an expense in the income statement when incurred.
(b)
When the Group is the lessor:
The Group leases certain items of property, plant and equipment, investment properties and trading property to nonrelated parties.
(i)
Lessor - Operating leases
Leases of property, plant and equipment, investment properties and trading property where the Group retains
substantially all risks and rewards incidental to ownership are classified as operating leases.
Rental income from operating leases (net of any incentives given to lessees) is recognised in the income
statement on the straight-line basis over the lease term.
Initial direct costs incurred by the Group in negotiating and arranging an operating lease are added to the
carrying amount of the leased asset and recognised as an expense in the income statement over the lease term
on the same basis as the lease income.
Contingent rents are recognised as income in the income statement when earned.
2.19
Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted average method. The
cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production
overheads (based on normal operating capacity) but excludes borrowing costs. Net realisable value is the estimated selling price
in the ordinary course of business, less the estimated costs of completion and applicable variable selling expenses.
2009 Annual Report
120
2.
2.20
Income taxes
Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the
tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill
or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or
loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries and associated
companies, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable
that the temporary difference will not reverse in the foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against
which the deductible temporary differences and tax losses can be utilised.
Deferred income tax is measured:
(i)
at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted by the
balance sheet date; and
(ii)
based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date,
to recover or settle the carrying amounts of its assets and liabilities.
Current and deferred income tax are recognised as income or expense in the income statement for the period, except to the
extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax
arising from a business combination is adjusted against goodwill on acquisition.
2.21
Provisions
Provisions for warranty and other liabilities are recognised when the Group has a present legal or constructive obligation as
a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the
amount has been reliably estimated. Provisions are not recognised for future operating losses.
The Group recognises the estimated liability to repair or replace products still under warranty at the balance sheet date.
This provision is calculated based on estimates by technical engineers and historical experience of the level of repairs and
replacements.
Other provisions are measured at the present value of the expenditure expected to be required to settle the obligation using
a pre-tax discount rate that reflects the current market assessment of the time value of money and the 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 income statement when
the changes arise.
2.22
Employee compensation
(a)
Defined contribution plans
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into
separate entities such as the Central Provident Fund and social security plans in the People’s Republic of China (“PRC”)
on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions
have been paid.
121
2.
2.22
Employee compensation (continued)
(b)
Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the
estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.
(c)
Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services received
in exchange for the grant of the options is recognised as an expense in the income statement with a corresponding
increase in the share option reserve over the vesting period. The total amount to be recognised over the vesting
period is determined by reference to the fair value of the options granted on the date of the grant. Non-market vesting
conditions are included in the estimation of the number of shares under option that are expected to become exercisable
on the vesting date. At each balance sheet date, the Group revises its estimates of the number of shares under option
that are expected to become exercisable on the vesting date and recognises the impact of the revision of the estimates
in the income statement, with a corresponding adjustment to the share option reserve over the remaining vesting period.
When the options are exercised, the proceeds received (net of transaction costs) are credited to share capital account
when new ordinary shares are issued.
2.23
Currency translation
(a)
Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are
presented in Singapore Dollar.
(b)
Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional
currency using the exchange rates at the dates of the transactions. Currency translation differences from the settlement
of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the
closing rates at the balance sheet date are recognised in the income statement, unless they arise from borrowings in
foreign currencies, other currency instruments designated and qualifying as net investment hedges and net investment
in foreign operations. Those currency translation differences are recognised in the currency translation reserve in the
consolidated financial statements and transferred to the income statement as part of the gain or loss on disposal of the
foreign operation.
Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the
date when the fair values are determined.
(c)
Translation of Group entities’ financial statements
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary
economy) that have a functional currency different from the presentation currency are translated into the presentation
currency as follows:
(i)
Assets and liabilities are translated at the closing exchange rates at the reporting date;
(ii)
Income and expenses are translated at average exchange rates (unless the average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case, income and
expenses are translated using the exchange rates at the dates of the transactions); and
(iii)
All resulting currency translation differences are recognised in the currency translation reserve.
2009 Annual Report
122
2.
2.23
Currency translation (continued)
(c)
Translation of Group entities’ financial statements (continued)
Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are
treated as assets and liabilities of the foreign operations and translated at the closing rates at the reporting date. For
acquisitions prior to 1 January 2005, the exchange rates at the dates of acquisition are used.
2.24
Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the key management whose
members are responsible for allocating resources and assessing performance of the operating segments.
2.25
For the purpose of presentation in the consolidated cash flow statement, cash and cash equivalents include cash on hand,
deposits with financial institutions which are subject to an insignificant risk of change in value and bank overdrafts and exclude
pledged deposits with financial institutions. Bank overdrafts are presented as current borrowings on the balance sheet.
2.26
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.
2.27
Dividends to Company’s shareholders
Dividends to Company’s shareholders are recognised when the dividends are approved for payment.
2.28
Government grants
Grants from the government are recognised as a receivable at their fair value when there is reasonable assurance that the grant
will be received and the Group will comply with all the attached conditions.
Government grants receivable are recognised as income over the periods necessary to match them with the related costs which
they are intended to compensate, on a systematic basis. Government grants relating to expenses are shown separately as other
income.
Government grants relating to assets are deducted against the carrying amount of the assets.
3.
Critical accounting estimates, assumptions and judgements
Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances.
(a)
Uncertain tax positions
The Group is subject to income taxes in numerous jurisdictions. In determining the tax liabilities, management applies the
statutory tax rate of the tax jurisdictions in which the subsidiaries operate in and is required to estimate the amount of
capital allowances and the deductibility of certain expenses (“uncertain tax positions”) at each tax jurisdiction. There are
many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of
business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes
will be due. Where the final tax outcome of these matters is different from the amount that were initially recorded, such
differences will impact the income tax and deferred income tax provisions in the period in which such determination is
made.
123
3.
Critical accounting estimates, assumptions and judgements (continued)
(a)
Uncertain tax positions (continued)
If the actual final outcome (on the judgement areas) differs by 10% from the management’s estimates, the Group would
need to:
(b)
-
increase the income tax liability by $3,137,000, if unfavourable; or
-
decrease the income tax liability by $3,137,000, if favourable.
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 estimated total contract revenue increases/decreases by 10% from management’s estimates, the Group’s revenue
will increase/decrease by $203,168,000.
If the contract costs to be incurred increase/decrease by 10% from management’s estimates, the Group’s cost of sales
will increase/decrease by $201,636,000.
(c)
Useful life of property, plant and equipment
The management of the Group determines the estimated useful lives and related depreciation expense for the property,
plant and equipment. The management of the Group estimates useful lives of the property, plant and equipment by
reference to expected usage of the property, plant and equipment, expected repair and maintenance, and technical or
commercial obsolescence arising from changes or improvements in the market. The useful lives and related depreciation
expense could change significantly as a result of the changes in these factors.
(d)
Impairment of receivables
Management reviews its receivables for objective evidence of impairment regularly. Significant financial difficulties of the
debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in payments are considered
objective evidence that a receivable is impaired. In determining this, management makes judgement as to whether there is
observable data indicating that there has been a significant change in the payment ability of the debtor, or whether there
have been significant changes with adverse effect in the technological, market, economic or legal environment in which
the debtor operates.
Where there is objective evidence of impairment, management makes judgements as to whether an impairment loss
should be recorded in the income statement. In determining this, management uses estimates based on historical loss
experience for assets with similar credit risk characteristics. The methodology and assumptions used for estimating both
the amount and timing of future cash flows are reviewed regularly to reduce any differences between the estimated loss
and actual loss experience.
Any changes in the net present values of estimated cash flows from management’s estimates for all past due receivables,
will not result in any significant impact to the Group’s allowance for impairment.
2009 Annual Report
124
4.
Revenue
The Group
2009
2008
$’000
$’000
Rendering of services
- Ship repair and marine engineering income
- Time charter revenue
- Shipping agency income
1,069,681
1,918,183
132,894
257,396
14,184
19,150
1,681,362
1,277,561
883
3,719
2,899,004
3,476,009
Construction revenue
- Ship building and marine engineering
Others
Total sales
5.
Expenses by nature
The Group
2009
2008
$’000
$’000
Raw materials, finished goods, consumables and other overheads
1,221,161
2,352,711
Changes in inventories and construction contract work-in-progress
213,631
(506,892)
Net (reversal of)/allowance for impairment of trade and other receivables
(11,375)
61,283
Expected losses recognised on construction contracts
578
89,048
Depreciation of property, plant and equipment and investment properties
153,416
120,767
Director and employee compensation (Note 6)
347,314
300,310
Sub-contractor expenses
595,471
493,909
4,236
20,907
40
2,257
Rental expense on operating leases
82,678
97,321
Repairs and maintenance
33,518
30,520
154
134
Commission
30,087
49,254
Crew overheads
10,771
12,929
Vessel overheads
13,062
14,066
Write-off for inventory obsolescence and inventory write-down
Write-off for property, plant and equipment
Non-audit service fees paid/payable to auditor of the Company
Other expenses
Total cost of sales, distribution and administrative expenses
130,334
85,848
2,825,076
3,224,372
125
6.
Director and employee compensation
The Group
2009
2008
$’000
$’000
Wages, salaries and staff benefits
Employer’s contribution to defined contribution plans including Central Provident Fund
Share option expenses [Note 33(b)(i)]
Directors’ fees of the Company
7.
317,218
260,763
26,591
22,011
3,240
17,311
265
225
347,314
300,310
Other income (net)
The Group
2009
2008
$’000
$’000
Rental income
1,594
2,333
314
1,171
Currency exchange gain - net
15,715
26,678
Interest income from deposits
32,781
34,355
Dividend income
Impairment in value of transferable club memberships
Net fair value (loss)/gain on forward currency contracts
Net (loss)/gain on disposal of property, plant and equipment
Negative goodwill
(32)
(4)
(15,625)
1,526
(351)
1,638
12
–
Compensation received from customers
15,263
11,767
Government grants
21,382
–
8,119
6,211
67,142
122,267
146,314
207,942
Sundry income
Sale of scrap materials
Included in the Group’s sundry income is Jobs Credit Scheme. The Jobs Credit Scheme is a cash grant introduced in the
Singapore Budget 2009 to help businesses preserve jobs in the economic downturn. The Jobs Credit grants have been paid to
eligible employers in 2009 in four payments.
2009 Annual Report
126
8.
Finance expenses
The Group
2009
2008
$’000
$’000
Interest expense
- Bank borrowings and bills payable
46,347
9,088
3
3
Total interest expense
46,350
9,091
Less: Amount capitalised in construction of property, plant and equipment [Note 24(c)]
(4,446)
Finance expenses recognised in the income statement
41,904
- Finance lease liabilities
(257)
8,834
Borrowing costs on financing were capitalised at a rate of 4.35% (2008: 4.90%) per annum.
9.
Income taxes
(a)
Income tax expense
The Group
2009
2008
$’000
$’000
Tax expense attributable to profit is made up of:
Current income tax
- Singapore
- Foreign
894
1,947
103,092
113,126
103,986
115,073
Deferred income tax (Note 31)
- Singapore
- Foreign
(12)
4
(72,602)
(47,370)
(72,614)
(47,366)
31,372
67,707
Under/(over) provision in prior financial years:
- Current income tax
- Singapore
- Foreign
(566)
171
6,686
(18,007)
6,120
(17,836)
3,266
(18,251)
40,758
31,620
- Deferred income tax (Note 31)
- Foreign
127
9.
Income taxes (continued)
(a)
Income tax expense (continued)
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
2009
2008
$’000
$’000
Profit before tax and share of profit of associated companies
Tax calculated at a tax rate of 17% (2008: 18%)
178,338
450,745
30,317
81,134
(21,713)
(3,781)
13,496
12,282
Effects of:
- Change in tax rate
- Different tax rates in other countries
(131)
(135)
- Exemption of shipping profits under Approved International Shipping Scheme and
Section 13A of Singapore Income Tax Act
- Singapore stepped income exemption
(9,153)
(18,767)
- Profits exempted from tax
(1,327)
(15,505)
- Income not subject to tax
(120)
(1,791)
- Expenses not deductible for tax purposes
21,396
- Tax incentive rebates from the People’s Republic of China
(1,465)
(833)
(246)
(563)
- Utilisation of previously unrecognised deferred tax asset
- Deferred tax asset not recognised
15,663
295
- Others
Tax charge
3
23
–
31,372
67,707
During the financial year, the Singapore corporate tax rate was reduced from 18% to 17% for the year of assessment
2010 and onwards.
(b)
Movements in current income tax liabilities
The Group
2009
2008
$’000
$’000
The Company
2009
2008
$’000
$’000
61,348
24,040
4,885
969
Currency translation differences
(4,874)
4,725
–
–
Income tax (paid)/refunded
(82,444)
(64,654)
Tax expense on profit for the current financial year
103,986
Under/(over) provision in prior financial years
(3,938)
431
115,073
97
4,794
6,120
(17,836)
(495)
(1,309)
84,136
61,348
549
4,885
2009 Annual Report
128
10.
Earnings per share
(a)
Basic earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the
weighted average number of ordinary shares outstanding during the financial year.
The Group
2009
2008
Net profit attributable to equity holders of the Company ($’000)
Weighted average number of ordinary shares outstanding for basic earnings
per share (’000)
Basic earnings per share (cents per share)
(b)
110,080
302,588
2,239,245
2,238,951
4.92
13.51
Diluted earnings per share
For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares outstanding is
adjusted for the effects of all dilutive potential ordinary shares arising from share options.
For share options, the weighted average number of shares on issue has been adjusted as if all dilutive share options
were exercised. The number of shares that could have been issued upon the exercise of all dilutive share options less
the number of shares that could have been issued at fair value (determined as the Company’s average share price for
the financial year) for the same total proceeds is added to the denominator as the number of shares issued for no
consideration. No adjustment is made to the net profit.
Diluted earnings per share attributable to equity holders of the Company is calculated as follows:
The Group
2009
2008
Net profit attributable to equity holders of the Company ($’000)
Weighted average number of ordinary shares outstanding for basic earnings
per share (’000)
110,080
302,588
2,239,245
2,238,951
–
2,879
2,239,245
2,241,830
4.92
13.50
Adjustments for
- share options (’000)
Weighted average number of ordinary shares outstanding for diluted earnings
per share (’000)
Diluted earnings per share (cents per share)
For 2009, the outstanding share options do not have any dilutive effect on the earnings per share as the exercise prices
for the outstanding share options were higher than the average market price during the financial year.
11.
The Group
2009
2008
$’000
$’000
Cash at bank and on hand
Short-term bank deposits
The Company
2009
2008
$’000
$’000
463,810
597,746
3,393
3,338
1,085,365
1,282,570
131,118
127,485
1,549,175
1,880,316
134,511
130,823
129
11.
Cash and cash equivalents (continued)
Cash at bank and short-term bank deposits included an amount of $784,524,000 (2008: $577,932,000) placed with a fellow
subsidiary, Cosco Finance Co., Ltd.
For the purpose of presenting the consolidated cash flow statement, the consolidated cash and cash equivalents comprise the
following:
The Group
2009
2008
$’000
$’000
Cash and bank balances (as above)
1,549,175
Less: Bank deposits pledged (Note 28)
(3,554)
Cash and cash equivalents per consolidated cash flow statement
1,545,621
1,880,316
(14,483)
1,865,833
Cash and bank balances and short-term bank deposits of the Group to the extent of $3,554,000 (2008: $14,483,000) were
pledged as security for the following:
12.
(i)
long-term bank loans (Note 28) 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.
The Group
2009
2008
$’000
$’000
1,623
Fair value (loss)/gain included in income statement
(15,625)
37
1,526
498
(13,504)
60
1,623
Analysed as:
Contract
notional
amount
$’000
The Group
Fair value
Assets
$’000
Liabilities
$’000
Net assets
$’000
944
(14,448)
(13,504)
2009
Non-hedging instruments
- Forward currency contracts - current
223,944
2008
Non-hedging instruments
11,504
(9,881)
Less: Current portion
- Forward currency contracts
1,665,754
(10,063)
3,506
Non-current portion
1,441
(6,375)
1,623
2009 Annual Report
130
13.
Trade and other receivables - current
The Group
2009
2008
$’000
$’000
The Company
2009
2008
$’000
$’000
Trade receivables:
- Non-related parties
434,984
600,702
–
–
- Fellow subsidiaries
78,663
45,014
–
–
–
–
131
261
- Subsidiaries
- Related party corporations
–
1
–
–
513,647
645,717
131
261
Less: Allowance for impairment of receivables
- non-related parties
(51,036)
(50,021)
–
–
Trade receivables - net
462,611
595,696
131
261
154,704
110,017
–
–
94,827
71,917
–
–
249,531
181,934
–
–
(19,162)
–
–
249,531
162,772
–
–
48,887
47,767
105
178
- A fellow subsidiary
10,675
18,784
–
–
–
–
–
21
59,562
66,551
105
199
–
–
–
58,731
66,551
105
199
679,201
743,055
–
–
1,357
1,574
–
–
–
–
–
80,136
Construction contracts due from customers (Note 15):
Less: Allowance for impairment of construction contract
due from customers
Construction contracts due from customers - net
–
Other receivables:
- A subsidiary
Less: Allowance for impairment of other receivables
Other receivables - net
Advances paid to suppliers
Staff loans and advances (see note (i) below)
(831)
Dividend receivable from
- Subsidiaries
- Associated companies
Total
(i)
809
460
–
–
1,452,240
1,570,108
236
80,596
Staff loans are made under an approved staff loan scheme.
Impairment loss on trade receivables and construction contracts due from customers amounted to $51,036,000 (2008:
$50,021,000) and Nil (2008: $19,162,000) respectively. These were recognised as expenses and included in “Administrative
expenses”.
131
14.
Inventories
The Group
2009
2008
$’000
$’000
Raw materials
Work-in-progress
Finished goods
602,391
826,077
72,273
116,356
2,904
3,168
677,568
945,601
The cost of inventories recognised as an expense and included in “cost of sales” amounted to $2,525,714,000 (2008:
$2,660,650,000).
15.
Construction contract work-in-progress
The Group
2009
2008
$’000
$’000
Contract costs incurred during the financial year
Contract expenses recognised in the income statement during the financial year
Aggregate costs incurred and profits recognised (less losses recognised) to date on
uncompleted construction contracts
Less: Progress billings
170,143
43,132
1,789,167
1,370,440
(1,755,283)
(1,250,676)
(4,642)
7,247
199,385
170,143
1,937,692
1,362,381
(2,177,092)
(1,508,594)
8,162
(5,436)
(231,238)
(151,649)
249,531
181,934
(480,769)
(333,583)
(231,238)
(151,649)
Analysed as:
Due from customers on construction contracts (Note 13)
Due to customers on construction contracts (Note 27)
Advances received on construction contracts (Note 27)
1,747,029
2,671,852
2009 Annual Report
132
16.
Trading property
The Group
2009
2008
$’000
$’000
Cost
–
977
Disposal
–
(977)
–
–
Beginning and end of financial year
–
–
Net book value
–
–
Accumulated impairment losses
17.
Other current assets
The Group
2009
2008
$’000
$’000
18.
The Company
2009
2008
$’000
$’000
Deposits
1,980
10,322
9
14
Prepayments
4,593
9,470
211
161
6,573
19,792
220
175
Trade and other receivables - non-current
The Company
2009
2008
$’000
$’000
Loans to a subsidiary (i)
(i)
19.
64,285
65,594
The loans to a subsidiary are interest-free, unsecured and have no fixed terms of repayment. Substantial repayments are not expected
within the next twelve months from the balance sheet date. The full amount of $64,285,000 (2008: $65,594,000) is deemed by the
Company as part of its net investment in a subsidiary and carried at cost.
The Group
2009
2008
$’000
$’000
3,630
3,067
(91)
212
Fair value gain recognised in equity [Note 33(b)(v)]
495
351
4,034
3,630
133
19.
Financial assets, available-for-sale (continued)
At the balance sheet date, financial assets, available-for-sale include the following:
The Group
2009
2008
$’000
$’000
Quoted equity shares in a corporation, at fair value
958
490
- Fellow subsidiary
2,058
2,101
- Non-related party
1,018
1,039
3,076
3,140
4,034
3,630
Unquoted equity shares in corporations, at cost
The directors do not anticipate that the carrying amounts of these unquoted equity investments will deviate significantly from
their fair values on the basis that these unquoted equity shares in corporations are in positive net tangible assets position.
20.
Club memberships
The Group
2009
2008
$’000
$’000
Transferable club memberships, at cost
Allowance for impairment in value of club memberships
21.
879
829
The Company
2009
2008
$’000
$’000
428
477
–
–
(2)
(2)
(385)
(354)
(272)
(241)
492
473
156
236
The Group
2009
2008
$’000
$’000
Share of profits after tax
Dividend declared, net of tax
2,577
1,794
(32)
140
214
643
(837)
–
1,922
2,577
11,008
10,232
- Liabilities
5,036
2,076
- Revenue
9,286
8,357
602
2,010
The summarised financial information of associated companies are as follows:
- Assets
- Net profit
2009 Annual Report
134
21.
Investments in associated companies (continued)
Details of associated companies are set out below:
Name of associated companies
% of paid-up
capital held by
subsidiaries
2009
%
2008
%
DMI (Guangzhou) Ltd (i)
Overhaul and spare-parts
replacement and repair
People’s Republic
of China (“PRC”)
30
30
Tru-Marine Cosco (Tianjin) Engineering
Co., Ltd (i)
Overhaul and spare-parts
replacement and repair
PRC
40
40
(i)
22.
Principal activities
Country of
incorporation/
business
Audited by RSM China Certified Public Accountants, PRC.
Investments in subsidiaries
The Company
2009
2008
$’000
$’000
Unquoted equity shares
310,871
310,871
Accumulated impairment losses
(20,058)
(20,903)
290,813
289,968
2009
$’000
2008
$’000
20,903
26,472
Movements in accumulated impairment losses are as follows:
Reversal of impairment charge
(845)
20,058
(5,569)
20,903
135
22.
Investments in subsidiaries (continued)
Details of the subsidiaries are set out below:
Name of subsidiaries
Principal
activities
Country of
incorporation/
business
% of paid-up capital held by
Cost of investment
2009
$’000
2008
$’000
The Company
2009
%
Subsidiaries
2008
%
2009
%
2008
%
Cosco (Singapore) Pte Ltd (i)
Ship owning,
ship chartering
and investment
holding
Singapore
5,000
5,000
100
100
–
–
Cosco Marine Engineering
(Singapore) Pte Ltd (i)
Ship repairing,
marine
engineering,
container repairs
and services,
fabrication
works services
and production
of marine
outfitting
components
Singapore
2,242
2,242
90
90
–
–
Harington Property Pte Ltd (i)
Trading and
investing in
properties,
provide property
management
services and
investment
holding
Singapore
52,701
52,701
100
100
–
–
Coslink (M) Sdn. Bhd. (ii)
Shipping agency
and related
activities
Malaysia
771
771
70
70
18
18
Costar Shipping Pte Ltd (i)
Shipping agent
and investment
holding
Singapore
4,018
4,018
70
70
–
–
Cosco Shipyard Group
Co., Ltd (v) and (vi)
Investment
holding
People’s
Republic
of China
(“PRC”)
191,173
191,173
51
51
–
–
Cosco (Nantong) Shipyard
Ship repair and
marine
engineering
PRC
24,670
24,670
50
50
50
50
2009 Annual Report
136
22.
Principal
activities
Country of
incorporation/
business
Cost of investment
2009
$’000
2008
$’000
The Company
2009
%
Subsidiaries
2008
%
2009
%
2008
%
Cosco (Dalian) Shipyard Co.,
Ltd (v) and (vi)
Ship repair,
ship building
and marine
engineering
PRC
30,296
30,296
39
39
59
59
Cosco (Guangdong) Shipyard
Ship repair and
ship building
PRC
–
–
–
–
75
75
Cosco (Zhoushan) Shipyard
Ship repair,
ship building
and marine
engineering
PRC
–
–
–
–
100
100
Cosco (Xiamen) Shipyard
Co., Ltd (v)
Ship repair
PRC
–
–
–
–
51
51
Cosco (Shanghai) Shipyard
Co., Ltd (v)
Ship repair
PRC
–
–
–
–
95
95
Cosco (Tianjin) Shipyard
Co., Ltd (v)
Ship repair
PRC
–
–
–
–
90
90
Cosco (Lianyungang) Shipyard
Co., Ltd (v)
Ship repair
PRC
–
–
–
–
60
60
Cosco (Qidong) Offshore
Co., Ltd (v)
Offshore marine
engineering
PRC
–
–
–
–
60
–
Cosco Dalian Rikky Ocean
Engineering Co., Ltd (v)
Overhaul, repair,
commissioning
and spare-parts
replacement
of governor,
turbocharger
and engine fuel
system
PRC
–
–
–
–
75
75
Diesel Marine Dalian Ltd
(iii) and (v)
Overhaul and
spare-parts
replacement
and repair
PRC
–
–
–
–
30
30
Diesel Marine International
(Nantong) Co., Ltd (iii) and (v)
Overhaul and
spare-parts
replacement
and repair
PRC
–
–
–
–
30
30
137
22.
Principal
activities
Country of
incorporation/
business
Cost of investment
The Company
Subsidiaries
2009
2008
2009
2008
2009
2008
$’000
$’000
%
%
%
%
Cosco (Nantong) Ocean
Shipyard Co., Ltd (v) (formerly
known as Cosco
Clavon Shipyard Co., Ltd)
Ship repair and
corrosion
control
PRC
–
–
–
–
60
60
Zhongyuan Sea-Land
Engineering Co., Ltd (v)
Ship repair
PRC
–
–
–
–
51
50
Cosco Shipyard Total
Automation Co., Ltd (v)
Design,
manufacture,
sale and technical
service relating
to vessels
and industrial
instruments
PRC
–
–
–
–
60
60
Cos Fair Shipping Pte Ltd (i)
Ship owning
and ship
chartering
Singapore/
Worldwide
–
–
–
–
100
100
Cos Glory Shipping Inc. (i)
Ship owning
and ship
chartering
Panama/
Worldwide
–
–
–
–
100
100
Hanbo Shipping Limited (ii)
Ship owning
and ship
chartering
Hong Kong/
Worldwide
–
–
–
–
100
100
Sanbo Shipping Limited (ii)
Ship owning
and ship
chartering
Hong Kong/
Worldwide
–
–
–
–
100
100
Cos Orchid Shipping Pte
Ltd (i)
Ship owning
and ship
chartering
Singapore/
Worldwide
–
–
–
–
100
100
Cos Prosperity Shipping Pte
Ltd (i)
Ship owning
and ship
chartering
Singapore/
Worldwide
–
–
–
–
100
100
Cos Knight Shipping Maritime
Inc. (i)
Ship owning
and ship
chartering
Panama/
Worldwide
–
–
–
–
100
100
2009 Annual Report
138
22.
Principal
activities
Country of
incorporation/
business
Cost of investment
2009
$’000
Cos Lucky Shipping Maritime
Inc. (i)
Ship owning
and ship
chartering
Costar Agencies (M)
Sdn. Bhd. (iv)
2008
$’000
The Company
2009
%
Subsidiaries
2008
%
2009
%
2008
%
Panama/
Worldwide
–
–
–
–
100
100
Shipping agent
Malaysia
–
–
–
–
100
100
CNF Shipping (M) Sdn. Bhd. (iv)
Shipping agent
Malaysia
–
–
–
–
60
60
CNF Shipping Agencies Pte
Ltd (i)
Vessel chartering,
feedering, freight
forwarders,
transport agent,
warehousing
and other related
services
Singapore
–
–
–
–
100
100
Cosco Engineering Pte Ltd (i)
Provision of
support services
to shipping
companies
Singapore
–
–
–
–
100
100
310,871
310,871
(i)
Audited by PricewaterhouseCoopers LLP, Singapore.
(ii)
Audited by PricewaterhouseCoopers firms outside Singapore.
(iii)
Deemed to be a subsidiary as the Group has the power to govern the financial and operating policies of the entity.
(iv)
Audited by Deloitte KassimChan, Malaysia.
(v)
Audited by RSM China Certified Public Accountants, PRC.
(vi)
Audited by PricewaterhouseCoopers LLP, Singapore and firms outside Singapore for the purposes of consolidation.
139
23.
The Group
2009
2008
$’000
$’000
Cost
15,849
14,717
(45)
Additions
69
–
1,063
15,804
15,849
3,632
3,245
Accumulated depreciation and accumulated impairment losses
(9)
18
Depreciation charge
395
369
4,018
3,632
Net book value
11,786
12,217
Fair values
14,909
14,159
Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses as the Group has
elected to adopt the cost model method to measure its investment properties.
Fair values of the investment properties as at the balance sheet date are stated based on independent professional valuations
using the direct comparison method.
Investment properties are leased to fellow subsidiaries and non-related parties under operating leases.
The following amounts are recognised in the income statement:
The Group
2009
2008
$’000
$’000
Rental income
Direct operating expenses arising from investment properties that generated rental income
1,151
1,035
540
468
2009 Annual Report
140
24.
The Group
Office
renovations,
Plant,
Freehold Leasehold furniture, machinery
land and land and fixtures and
and
Motor
buildings buildings equipment equipment vehicles
$’000
$’000
$’000
$’000
$’000
2009
Cost
differences
Additions
Disposals
Reclassification
Accumulated depreciation
differences
Depreciation charge
Disposals
Reclassification
Net book value
2008
Cost
differences
Additions
Disposals
Reclassification
differences
Depreciation charge
Disposals
Reclassification
Net book value
Motor
Docks Constructionvessels and quays in-progress
$’000
$’000
$’000
Total
$’000
3,044
480,241
34,011
575,804
40,110
312,369
692,045
416,336
2,553,960
–
–
–
–
3,044
(9,514)
71,344
(1,433)
279,677
820,315
(634)
11,383
(954)
2,290
46,096
(11,773)
28,768
(8,718)
210,560
794,641
(760)
5,181
(1,301)
2,648
45,878
(6,233)
2,489
(1,415)
–
307,210
(14,185)
–
–
105,841
783,701
(8,533)
350,759
(7,756)
(601,016)
149,790
(51,632)
469,924
(21,577)
–
2,950,675
822
61,563
16,548
143,229
19,111
109,109
121,628
–
472,010
–
61
–
–
883
(1,825)
19,684
(714)
5
78,713
(561)
8,293
(753)
2
23,529
(5,035)
62,427
(5,205)
(7)
195,409
(599)
7,102
(922)
–
24,692
(3,197)
29,724
(1,273)
–
134,363
(3,370)
25,730
–
–
143,988
–
–
–
–
–
(14,587)
153,021
(8,867)
–
601,577
2,161
741,602
22,567
599,232
21,186
172,847
639,713
149,790
2,349,098
4,955
309,941
24,959
364,292
29,178
311,927
544,421
228,429
1,818,102
–
–
(1,911)
–
3,044
18,751
69,798
(3,965)
85,716
480,241
1,353
10,908
(2,358)
(851)
34,011
23,513
94,002
(4,707)
98,704
575,804
1,620
8,560
(924)
1,676
40,110
(1,297)
2,950
(1,211)
–
312,369
35,272
13,524
(5,289)
104,117
692,045
14,799
464,841
(2,371)
(289,362)
416,336
94,011
664,583
(22,736)
–
2,553,960
1,231
43,336
11,637
94,927
13,627
81,699
93,192
–
339,649
–
71
(480)
–
822
3,061
16,476
(1,312)
2
61,563
726
6,039
(1,826)
(28)
16,548
7,628
41,937
(1,297)
34
143,229
963
5,196
(667)
(8)
19,111
135
28,254
(979)
–
109,109
6,873
22,425
(862)
–
121,628
–
–
–
–
–
19,386
120,398
(7,423)
–
472,010
2,222
418,678
17,463
432,575
20,999
203,260
570,417
416,336
2,081,950
141
24.
The Group (continued)
(a)
The carrying amount of motor vehicles held under finance leases at 31 December 2009 amounted to $63,000 (2008:
$78,000) (Note 28).
(b)
As at the balance sheet date, the net book values of motor vessels of the Group amounting to $78,547,000 (2008:
$122,374,000) are mortgaged to banks to secure long-term bank borrowings and bank facilities (Note 28).
(c)
Borrowing costs of $4,446,000 (2008: $257,000) which arise mainly due to financing for the construction of docks and
quays, are capitalised during the financial year (Note 8).
(d)
In June 2005, a subsidiary, Cosco (Zhoushan) Shipyard Co., Ltd began construction of workshops and quays etc, in
Zhoushan, People’s Republic of China. However its full rights to the properties (comprising building and land) are subject
to the grant of the land use rights for the land on which the buildings are erected. As at the date of the authorisation
of these financial statements, Cosco (Zhoushan) Shipyard Co., Ltd has obtained construction permission from the Land
Administrative Bureau of Zhoushan city but has yet to receive the land use rights from the authority for 4.5 hectare of
the land.
The management is of the view that the land use rights will be obtained and accordingly, no impairment charge against
the carrying values of the property, plant and equipment and construction-in-progress have been made in these financial
statements.
The Company
Office
renovations,
furniture,
fixtures and
equipment
Motor
vehicles
Total
$’000
$’000
$’000
536
1,128
1,664
15
–
15
551
1,128
1,679
489
279
768
Depreciation charge
23
113
136
512
392
904
39
736
775
2009
Cost
Additions
Net book value
2009 Annual Report
142
24.
The Company (continued)
Office
renovations,
furniture,
fixtures and
equipment
Motor
vehicles
Total
$’000
$’000
$’000
524
1,048
1,572
12
80
92
536
1,128
1,664
2008
Cost
Additions
468
172
640
Depreciation charge
21
107
128
489
279
768
47
849
896
Net book value
25.
Intangible assets
Composition:
The Group
2009
2008
$’000
$’000
Goodwill arising on consolidation
9,525
9,546
Goodwill arising on consolidation
The Group
2009
2008
$’000
$’000
Cost
Increase in interest in a subsidiary
9,546
9,302
–
186
(21)
58
9,525
9,546
Net book value
9,525
9,546
143
25.
Intangible assets (continued)
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGU) identified as the subsidiaries in the People’s Republic of China
(“PRC”), identified according to country of operation and business segment. The business segments refer to ship repair, ship
building and marine engineering activities.
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash flow projections
based on the existing capacity of the CGU. Cash flows beyond 2009 are extrapolated using the estimated growth rate stated
below. The growth rate does not exceed the long-term average growth rate for ship repair business in the PRC in which the
CGU operates.
Key assumptions used for value-in-use calculations:
Growth rate1
Discount rate2
1
2
3.9%
5.2%
Weighted average growth rate used to extrapolate cash flows beyond the budget period
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 determined budgeted gross
margin based on past performance and its expectations of the market development. The weighted average growth rate used was
consistent with the forecasts included in industry reports. The discount rate used was pre-tax and reflected specific risks relating
to the relevant segments.
There is no impairment charge recognised for the financial years ended 31 December 2009 and 31 December 2008.
26.
Deferred expenditure relates to rental prepaid for leasehold land on operating leases and is amortised on the straight-line basis
over the lease period.
2009 Annual Report
144
27.
The Group
2009
2008
$’000
$’000
The Company
2009
2008
$’000
$’000
Trade payables to:
448,979
461,719
–
–
99,717
8,424
–
–
548,696
470,143
–
–
1,703,968
2,513,227
–
–
43,061
158,625
–
–
1,747,029
2,671,852
–
–
480,769
261,828
–
–
Construction contracts - Advances received (Note 15):
Construction contracts - Due to customers (Note 15):
Advances from non-related parties
–
71,755
–
–
480,769
333,583
–
–
2,227,798
3,005,435
–
–
40,658
96,554
–
–
720
735
–
–
–
–
14,000
12,000
720
735
14,000
12,000
Non-trade payables to:
- Ultimate holding corporation
- Subsidiary
Deposits received
Other accruals for operating expenses
Dividend payable to minority shareholders of
subsidiaries
Total
12,765
7,521
–
–
720,856
820,298
2,767
2,871
7,513
41,214
–
–
3,559,006
4,441,900
16,767
14,871
The non-trade balances payable to ultimate holding corporation and a subsidiary are unsecured, interest-free and are repayable
on demand.
145
28.
Borrowings
The Group
2009
2008
$’000
$’000
Current
Bank borrowings (unsecured)
Bank borrowings (secured)
Bills payable
Finance lease liabilities (Note 29)
144,047
14,359
7,244
25,067
24,954
5,834
17
18
176,262
45,278
921,492
586,146
17,451
25,198
Non-current
Bank borrowings (unsecured)
Bank borrowings (secured)
Finance lease liabilities (Note 29)
Total borrowings
3
20
938,946
611,364
1,115,208
656,642
The exposure of the borrowings of the Group to interest rate changes and the contractual repricing dates at the balance sheet
dates are as follows:
The Group
2009
2008
$’000
$’000
Less than 1 year
176,262
45,278
1 - 5 years
802,025
607,130
Over 5 years
136,921
4,234
1,115,208
656,642
(a)
Security granted
At the balance sheet date, total borrowings include secured liabilities of $24,715,000 (2008: $50,303,000) for the Group.
Secured bank borrowings are secured by:
(i)
the Group’s motor vessels (Note 24) and
(ii)
certain bank deposits (Note 11).
Finance lease liabilities of the Group are secured by the rights to the leased motor vehicles, which will revert to the
lessor in the event of default by the Group (Note 24).
2009 Annual Report
146
28.
Borrowings (continued)
(b)
Fair values of non-current borrowings
At the balance sheet date, the carrying amounts of current and non-current borrowings approximated their fair values.
The fair values were determined from cash flow analyses, discounted at the market borrowing rates which the directors
expected to be available to the Group as follows:
The Group
2009
SGD
USD
RMB
SGD
USD
RMB
Bank borrowings
–
3.28%
4.35%
–
4.07%
4.90%
Bills payable
–
–
–
–
–
–
4.91%
–
–
4.91%
–
–
Finance lease liabilities
29.
2008
Finance lease liabilities
The Group
2009
2008
$’000
$’000
Minimum lease payments due:
- Not later than one year
- Later than one year but not later than five years
20
21
4
24
24
45
Less: Future finance charges
(4)
(7)
Present value of finance lease liabilities
20
38
17
18
3
20
20
38
The present values of finance lease liabilities are analysed as follows:
- Not later than one year (Note 28)
- Later than one year but not later than five years (Note 28)
147
30.
Provisions for other liabilities
The Group
2009
2008
$’000
$’000
Provision for off hire claim on hire income [Note (a)]
14,242
Provision for warranties [Note (b)]
22,194
4,931
36,436
20,156
(a)
15,225
Movements in provision for off hire claim on hire income were as follows:
The Group
2009
2008
$’000
$’000
Provision made during the financial year
Provision utilised during the financial year
15,225
4,294
2,537
10,803
(3,129)
(391)
14,242
(36)
164
15,225
Provision for off hire claim on hire income is in respect of refund to be made to customers for period in which the
motor vessels are not available for use.
(b)
Movements in provision for warranties were as follows:
The Group
2009
2008
$’000
$’000
Provision made during the financial year
Provision utilised during the financial year
4,931
770
18,014
3,964
(36)
(715)
22,194
–
197
4,931
The Group gives one to two-year warranties on certain ship repair, ship building and marine engineering contracts and
undertakes to repair or rectify defects that fail to perform satisfactorily. A provision is recognised at the balance sheet
date for expected warranty claims based on an estimate by technical engineers and past experience of the possible
repairs and rectifications.
2009 Annual Report
148
31.
Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets
against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts,
determined after appropriate offsetting, are shown on the balance sheets as follows:
The Group
2009
2008
$’000
$’000
The Company
2009
2008
$’000
$’000
Deferred income tax assets:
- to be recovered within one year
- to be recovered after one year
146,501
71,596
–
–
12,022
19,821
–
–
158,523
91,417
–
–
–
–
–
–
2,400
180
2,198
–
2,400
180
2,198
–
Deferred income tax liabilities:
- to be settled within one year
- to be settled after one year
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. The Group has unrecognised tax
losses of $1,089,000 (2008: $2,371,000) for which no deferred tax asset has been recognised at the balance sheet date which
can be carried forward and used to offset against future taxable income subject to meeting certain statutory requirements by
those companies with unrecognised tax losses in their respective countries of incorporation. The tax losses have no expiry date.
The movements in the deferred income tax account, net were as follows:
The Group
2009
2008
$’000
$’000
The Company
2009
2008
$’000
$’000
(91,237)
(21,844)
–
–
Change in tax rate
(21,713)
(3,781)
–
–
4,338
(3,864)
33
–
(47,635)
(61,836)
2,165
–
–
–
2,198
–
Deferred tax (credited)/charged to income statement
Deferred tax charged to equity [Note 33(b)(v)]
124
(156,123)
88
(91,237)
149
31.
Deferred income taxes (continued)
The movements in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction)
during the financial years were as follows:
The Group
2009
2008
$’000
$’000
Accelerated tax depreciation
180
–
152
(1)
(Credited)/charged to income statement
(14)
29
166
180
91
–
(7)
3
Fair value gain
Charged to equity
124
88
208
91
Others
–
–
33
–
Charged to income statement
2,165
–
2,198
–
271
152
26
2
2,151
29
Total
Charged to income statement
Charged to equity
124
88
2,572
271
2009 Annual Report
150
31.
Deferred income taxes (continued)
Deferred income tax liabilities (continued)
The Group
2009
2008
$’000
$’000
Reconciliation of total deferred income tax liabilities after appropriate offsetting from
the same tax jurisdiction is as follows:
Total deferred income tax liabilities
Offsetting of deferred income tax assets from the same tax jurisdiction
Total deferred income tax liabilities after appropriate offsetting from the same tax
jurisdiction
2,572
(172)
2,400
271
(91)
180
2009
2008
$’000
$’000
(91,508)
(21,996)
Change in tax rate
(21,713)
(3,781)
4,312
(3,866)
Provisions and accruals
Credited to income statement
(49,786)
(61,865)
(158,695)
(91,508)
(158,695)
(91,508)
Reconciliation of total deferred income tax assets after appropriate offsetting from the
same tax jurisdiction is as follows:
Total deferred income tax assets
Offsetting of deferred income tax liabilities from the same tax jurisdiction
Total deferred income tax assets after appropriate offsetting from the same tax jurisdiction
32.
172
(158,523)
91
(91,417)
Share capital
Issued share capital
No. of
ordinary
shares
Amount
’000
$’000
2009
Share issue
2,239,244
270,608
–
–
2,239,244
270,608
2,237,664
266,852
2008
Share issue
1,580
3,756
2,239,244
270,608
151
32.
Share capital (continued)
All issued shares are fully paid. There is no par value for these ordinary shares.
There were no shares issued during 2009. The Company issued the following shares during 2008:
(i)
130,000 ordinary shares at an exercise price of $1.23 each from the exercise of option granted in 2006 under the Cosco
Group Employees’ Share Option Scheme 2002; and
(ii)
1,450,000 ordinary shares at an exercise price of $2.48 each from the exercise of option granted in 2007 under the
Cosco Group Employees’ Share Option Scheme 2002.
Share options
Under the Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”), share options are granted to directors,
key management and employees. The exercise price of the granted options is equal to the average of the closing prices of the
Company’s ordinary shares on the Singapore Exchange for the 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 multiple thereof, on the payment of the exercise price.
The persons to whom the options have been issued have no right to participate by virtue of the options in any share issue of
any other company. The Group has no legal or constructive obligation to repurchase or settle the options in cash.
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated company,
or the holding company for at least one year on or prior to the date of grant, may be exercised twelve months after the
date of grant but before the end of one hundred and twenty months. For employees and directors who are in the service of
the associated company and non-executive directors, the options shall expire at the end of sixty months. Options issued at a
discount to market price, may only be exercised two years after the date of grant.
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated company, or
the holding company for at least six months but less than one year on or prior to the date of grant, may be exercised twentyfour months after the date of grant but before the end of one hundred and twenty months. For employees and directors who
are in the service of the associated company and non-executive directors, the options shall expire at the end of sixty months.
Options issued at a discount to market price, may only be exercised three years after the date of grant.
Movements in the number of unissued ordinary shares under option at the end of the financial year and their exercise prices
were as follows:
The Group and the Company
Financial year ended 31 December 2009
Options
relating to
Scheme 2002
Number of ordinary shares under option outstanding
Granted
Lapsed
Exercised
Beginning
during
during
during
End of
of financial financial
financial
financial
financial
year
year
year
year
year
’000
’000
’000
’000
’000
Exercise
price
$
Exercise period
2006 Options
2,840
–
(60)
–
2,780
1.23
21.2.2007 - 20.2.2016
2007 Options
14,420
–
(1,650)
–
12,770
2.48
5.2.2008 - 4.2.2017
20,040
–
(610)
–
19,430
2.95
24.3.2009 - 23.3.2018
37,300
–
(2,320)
–
34,980
2008 Options
2009 Annual Report
152
32.
Share capital (continued)
Share options (continued)
The Group and the Company (continued)
Number of ordinary shares under option outstanding
Options
relating to
Scheme 2002
Beginning
of financial
year
’000
Granted
during
financial
year
’000
Lapsed
during
financial
year
’000
Exercised
during
financial
year
’000
End of
financial
year
’000
Exercise
price
$
Exercise period
2006 Options
4,070
–
(1,100)
(130)
2,840
1.23
21.2.2007 - 20.2.2016
2007 Options
16,270
–
(400)
(1,450)
14,420
2.48
5.2.2008 - 4.2.2017
2008 Options
–
21,300
(1,260)
20,040
2.95
24.3.2009 - 23.3.2018
20,340
21,300
(2,760)
–
(1,580)
37,300
Out of the outstanding options on 34,980,000 shares (2008: 37,300,000), options on 34,250,000 shares (2008: 15,940,000) are
exercisable. Options exercised in 2008 resulted in 1,580,000 shares being issued at a weighted average share price of $2.38 each.
There was no share option issued during the financial year. There were also no shares of the Company allotted and issued by
virtue of the exercise of options to take up unissued shares of the Company during the financial year.
The fair value of options granted on 24 March 2008 determined using the Binomial Valuation model was $20,661,000. The
significant inputs into the model were share price of $3.27 at grant date, exercise price as shown above, standard deviation of
expected share price returns of 53%, option life shown above and annual risk-free interest rate of 0.99%. This volatility measured
at the standard deviation of expected price returns is based on statistical analysis of daily share prices over the last 2 years.
33.
(a)
The Group
2009
2008
$’000
$’000
The Company
2009
2008
$’000
$’000
Composition:
44,578
41,338
44,578
41,338
Statutory reserve
Share option reserve
137,149
114,310
–
–
Currency translation reserve
(23,861)
(6,937)
–
–
15,772
18,990
–
–
323
134
–
–
69
69
527
527
174,030
167,904
45,105
41,865
Asset revaluation reserve
Fair value reserve
Realised surplus on long-term investment
153
33.
Statutory and other reserves (continued)
(b)
The Group
2009
2008
$’000
$’000
The Company
2009
2008
$’000
$’000
41,338
24,027
41,338
24,027
3,240
17,311
3,240
17,311
44,578
41,338
44,578
41,338
Movements:
(i) Share option reserve
- Value of director and employee services
(Note 6)
During the financial year, share option reserve relating to share options exercised amounted to Nil (2008: $1,222,000).
The Group
2009
2008
$’000
$’000
(ii) Statutory reserve
Transfer from retained earnings
114,310
80,685
22,839
33,625
137,149
114,310
(iii) Currency translation reserve
(6,937)
(44,183)
(27,480)
65,375
Minorities’ interests
10,556
(28,129)
(23,861)
(6,937)
Net currency translation differences of financial statements of foreign subsidiaries
and associated companies
(iv) Asset revaluation reserve
18,990
22,208
Additional depreciation on revalued property, plant and equipment
(3,218)
(3,218)
15,772
18,990
134
–
(v) Fair value reserve
Fair value changes for financial asset, available-for-sale
495
351
Deferred tax charged to equity (Note 31)
(124)
(88)
Minorities’ interests
(182)
(129)
323
134
Statutory reserve represents the amount set aside in compliance with the local laws in the PRC where the subsidiaries
of the Group reside.
Statutory and other reserves are non-distributable.
2009 Annual Report
154
34.
Dividends
The Group and
the Company
2009
2008
$’000
$’000
Ordinary dividends paid
Final tax-exempt one-tier dividend paid in respect of the previous financial year of
4.0 cents (2008: 4.0 cents) per ordinary share
89,570
89,565
Special tax-exempt one-tier dividend paid in respect of the previous financial year of
3.0 cents (2008: 3.0 cents) per ordinary share
67,177
67,173
156,747
156,738
At the Annual General Meeting scheduled on 20 April 2010, a first and final tax-exempt one-tier dividend of 3 cents per ordinary
share (2008: first and final tax-exempt one-tier dividend of 4 cents per ordinary share and a special tax-exempt one-tier dividend
of 3 cents per ordinary share) amounting to a total of $67,177,000 (2008: $156,747,000), based on the number of shares
issued as of 31 December 2009, will be recommended. These financial statements do not reflect these dividends, which will be
accounted for in shareholders’ equity as an appropriation of retained earnings in the financial year ending 31 December 2010.
35.
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
2009
2008
$’000
$’000
Investment in a subsidiary
166,681
339,815
–
63,000
166,681
402,815
On 28 December 2008, a subsidiary, Cosco Shipyard Group Co., Ltd (“Cosco Shipyard Group”), entered into a jointventure agreement with Qidong State-owned Assets Investment Holdings Co., Ltd (“Qidong Investment”) to form a
company known as ‘Cosco (Qidong) Offshore Co., Ltd’ (“Cosco Qidong”). Cosco Qidong has a registered capital of
RMB500,000,000 ($105,000,000) and Cosco Shipyard Group and Qidong Investment each has committed to subscribe
for 60% and 40% respectively in the capital of Cosco Qidong. The principal activities of Cosco Qidong relate to repair,
conversion and construction of offshore marine equipment. In 2009, Cosco Qidong was incorporated with a registered
capital of RMB500,000,000.
(b)
Operating lease commitments – where the Group is a lessee
The Group leases various office premises, docks, quays and motor vessels under non-cancellable operating lease
agreements. The leases have varying terms, escalation clauses and renewal rights.
155
35.
Commitments (continued)
(b)
Operating lease commitments – where the Group is a lessee (continued)
The future aggregate minimum lease payables under non-cancellable operating leases contracted for at the balance sheet
date but not recognised as liabilities, are as follows:
The Group
2009
2008
$’000
$’000
(c)
Not later than 1 year
20,039
30,694
Later than 1 year but not later than 5 years
52,448
69,461
Later than 5 years
63,514
56,762
136,001
156,917
Operating lease commitments – where the Group is a lessor
The Group leases out certain items of property, plant and equipment and investment properties to non-related parties
under non-cancellable operating leases.
The future minimum lease receivables under non-cancellable operating leases contracted for at the balance sheet date
but not recognised as receivables, are analysed as follows:
The Group
2009
2008
$’000
$’000
Not later than 1 year
Later than 1 year but not later than 5 years
36.
45,537
64,489
1,280
71
46,817
64,560
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 risk and price
risk), credit risk and liquidity risk.
Risk management is carried out under policies approved by the Board of Directors. The Board approves guidelines for overall
risk management, as well as policies covering these specific areas.
(a)
Market risk
(i)
Currency risk
Currency risks arise from transactions denominated in currencies other than the respective functional currencies
of the entities in the Group.
The Group monitors its foreign currency exchange risks closely and where appropriate, enters into forward
currency contracts to manage the currency exposure.
In addition, the Company has certain investments in foreign operations, whose net assets are exposed to
currency translation risk. Currency exposure to the net assets of the Group’s foreign operations in the People’s
Republic of China is managed primarily through borrowings denominated in RMB.
2009 Annual Report
156
36.
Financial risk management (continued)
(a)
Market risk (continued)
(i)
Currency risk (continued)
The Group’s currency exposure based on the information available to key management is as follows:
SGD
$’000
USD
$’000
RMB
$’000
Others*
$’000
Total
$’000
At 31 December 2009
Financial assets
Cash and cash equivalents and financial
assets, available-for-sale
100,592
511,419
935,000
6,198
1,553,209
Trade and other receivables, excluding
advances paid to suppliers
13,549
539,395
196,312
23,783
773,039
288
–
1,651
41
1,980
114,429
1,050,814
1,132,963
30,022
2,328,228
20
24,695
1,090,493
–
1,115,208
27,109
141,753
1,131,290
4,640
1,304,792
27,129
166,448
2,221,783
4,640
2,420,000
Net financial assets/(liabilities)
87,300
884,366
(1,088,820)
25,382
Less: Net financial assets/(liabilities)
denominated in the respective
entities’ functional currencies
(87,300)
(63,751)
1,088,813
(2,025)
Other financial assets
Financial liabilities
Borrowings
Other financial liabilities
Add: Firm commitments and highly
probable forecast transactions in
foreign currencies
–
Less: Forward currency contracts
–
Currency exposure
–
*
2,400,461
(223,944)
2,997,132
Others mainly include Euro, Japanese Yen and Malaysian Ringgit.
–
215,624
–
–
(7)
238,981
(91,772)
157
36.
(a)
(i)
SGD
$’000
USD
$’000
RMB
$’000
Others*
$’000
Total
$’000
At 31 December 2008
Financial assets
Cash and cash equivalents and financial
assets, available-for-sale
145,765
356,479
1,378,698
3,004
1,883,946
Trade and other receivables, excluding
advances paid to suppliers
13,564
406,713
485,119
1,793
907,189
192
–
10,092
38
10,322
159,521
763,192
1,873,909
4,835
2,801,457
Other financial assets
Borrowings
Net financial assets/(liabilities)
Less: Net financial assets denominated
in the respective entities’
functional currencies
Add: Firm commitments and highly
probable forecast transactions in
foreign currencies
Less: Forward currency contracts
Currency exposure
*
39
64,623
591,980
–
656,642
29,321
332,748
873,606
119,461
1,355,136
29,360
397,371
1,465,586
119,461
2,011,778
130,161
365,821
408,323
(129,951)
(66,111)
(328,178)
–
–
210
5,171,127
(1,594,855)
3,875,982
(114,626)
(1,886)
–
230,662
–
(70,899)
80,145
789,679
43,251
Others mainly include Euro, Japanese Yen and Malaysian Ringgit.
2009 Annual Report
158
36.
(a)
(i)
The Company’s currency exposure based on the information available to key management is as follows:
SGD
$’000
2009
USD
RMB
$’000
$’000
79,867
54,643
244
64,286
–
80,111 118,929
1
Total
$’000
2008
USD
RMB
$’000
$’000
SGD
$’000
Total
$’000
Financial assets
1
134,511 123,952
64,530
6,870
1
130,823
472
65,596
80,136
146,204
199,041 124,424
72,466
80,137
277,027
Borrowings
Net financial assets
Less: Net financial assets
denominated in the
entity’s functional
currency
Currency exposure
–
–
–
–
–
–
–
–
16,767
–
–
16,767
14,871
–
–
14,871
16,767
–
–
16,767
14,871
–
–
14,871
63,344 118,929
1
182,274 109,553
72,466
80,137
262,156
–
–
72,466
80,137
(63,344)
–
–
– 118,929
1
(109,553)
–
If the USD changes against the SGD and RMB by 500 basis points (2008: 500 basis points) with all other variables
including tax rate being held constant, the effects arising from the net financial asset position will be as follows:
2009
2008
Increase/(decrease)
Profit after tax
Profit after tax
$’000
$’000
Group
USD against SGD
- strengthened
- weakened
1,499
232
(1,499)
(232)
USD against RMB
- strengthened
- weakened
4,347
2,198
(4,347)
(2,198)
Company
USD against SGD
- strengthened
- weakened
3,513
2,527
(3,513)
(2,527)
159
36.
(a)
(ii)
Price risk
The Group is not exposed to any significant equity securities price risk.
(iii)
Cash flow and fair value interest rate risks
Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because
of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument
will fluctuate due to changes in market interest rates. The Group has cash balances placed with reputable banks
and financial institutions which generate interest income for the Group. The Group manages its interest rate risks
by placing such balances on varying maturities and interest rate terms.
The Group’s interest rate risk mainly arises from non-current borrowings. The Group monitors the interest rates
on borrowings closely to ensure that the borrowings are maintained at favourable rates and will use derivative
financial instruments to hedge their exposures when the exposure is significant.
The Group’s borrowings at variable rates on which effective hedges have not been entered into are denominated
mainly in RMB and USD. If the RMB and USD interest rates increase/decrease by 0.5% (2008: 0.5%) with all
other variables including tax rate being held constant, the profit after tax will be lower/higher by $1,998,000
(2008: $125,000) and $56,000 (2008: $168,000) respectively as a result of higher/lower interest expense on these
borrowings.
(b)
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligation resulting in financial loss to the
Group.
Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of
customers who are internationally dispersed. Due to these factors, management believes that no additional credit risk
beyond the amount of allowance for impairment made is inherent in the Group’s and Company’s trade receivables.
The Group has no significant concentrations of credit risk. The Group has policies in place to ensure that sales of
products and services are made to customers with an appropriate credit history.
A subsidiary in the Group obtained a pledge of 3 vessels valued at US$9,000,000 (2008: US$9,000,000) to secure its
outstanding trade receivables of US$7,900,000 (2008: US$7,357,000) as at 31 December 2009.
Other than the above-mentioned, the Group and Company do not hold any other collateral. The maximum exposure to
credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented
on the balance sheet, except as follows:
The Company
2009
2008
$’000
$’000
Corporate guarantees provided to banks on subsidiaries’ loans
24,695
Corporate guarantees provided to third parties for services provided to a subsidiary
50,265
301
–
24,996
50,265
The Group’s and Company’s major classes of financial assets are bank deposits and trade receivables.
2009 Annual Report
160
36.
(b)
Credit risk (continued)
The credit risk for trade receivables (including amount due from customer on construction contracts) based on the
information provided to key management is as follows:
The Group
The Company
2009
$’000
2008
$’000
2009
$’000
2008
$’000
20,488
18,047
–
–
691,647
740,417
–
–
7
4
131
261
712,142
758,468
131
261
By business segments
Shipping
Ship repair, ship building and marine engineering
activities
Others
(i)
Financial assets that are neither past due nor impaired
Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings
assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are
substantially companies with a good collection track record with the Group.
(ii)
Financial assets that are past due and/or impaired
There is no other class of financial assets that is past due and/or impaired except for trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
The Group
2009
2008
$’000
$’000
Past due 0 to 3 months
1,137
4,136
Past due 3 to 6 months
36
226
Past due over 6 months
514
1,663
1,687
6,025
The carrying amount of trade receivables and construction contract due from customers individually determined
to be impaired and the movement in the related allowance for impairment are as follows:
The Group
2009
2008
$’000
$’000
Gross amount
Less: Allowance for impairment
Allowance utilised
Allowance made
Amount written off
51,036
70,187
(51,036)
(69,183)
–
1,004
69,183
5,320
(827)
(5,066)
(12,235)
(19)
51,036
2,621
(30)
61,283
(11)
69,183
161
36.
(c)
Liquidity risk
The Group adopts prudent liquidity risk management by maintaining sufficient cash and having an adequate amount of
committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying
businesses, the Group aims at maintaining flexibility in funding by keeping committed credit facilities available.
The table below analyses the maturity profile of the Group’s and Company’s financial liabilities (including forward
currency contracts) based on contractual undiscounted cash flows.
Less than
1 year
$’000
Between
1 and 5
years
$’000
Over
5 years
$’000
- Receipts
208,844
–
–
- Payments
(223,950)
–
–
The Group
At 31 December 2009
Gross-settled forward currency contracts
Borrowings
(1,304,792)
–
–
(222,856)
(882,167)
(171,176)
- Receipts
1,415,423
213,214
–
- Payments
(1,440,433)
(228,850)
–
(1,355,136)
At 31 December 2008
Gross-settled forward currency contracts
Borrowings
(75,617)
–
(672,521)
–
(4,466)
The Company
At 31 December 2009
Borrowings
Financial guarantee contracts
(16,767)
–
–
–
–
(24,996)
–
–
(14,871)
–
–
–
–
–
At 31 December 2008
Borrowings
–
2009 Annual Report
162
36.
(d)
Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and
to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal
capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares,
buy back issued shares, obtain new borrowings or sell assets to reduce borrowings.
Management monitors capital based on the return on shareholders’ fund. The return on shareholders’ fund was 9.9% per
annum for the current financial year ended 31 December 2009 (2008: 29.0%) per annum.
The return on shareholders’ fund is calculated as net profit attributable to equity holders of the Company divided by
average shareholders’ equity.
The Group and the Company are in compliance with all externally imposed capital requirements for the financial years
ended 31 December 2009 and 31 December 2008.
(e)
Fair value measurements
Effective 1 January 2009, the Group adopted the amendment to FRS 107 which requires disclosure of fair value
measurements by level of the following fair value measurement hierarchy:
(a)
quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
(b)
inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly (as prices) or indirectly (derived from prices) (Level 2); and
(c)
inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
The following table presents our assets and liabilities measured at fair value at 31 December 2009.
Level 1
$’000
Level 2
$’000
Level 3
$’000
Total
$’000
Group
Assets
–
944
–
944
958
–
–
958
–
–
3,076
3,076
958
944
3,076
4,978
Available-for-sale financial assets
- Quoted equity shares
- Unquoted equity shares
Total assets
Liabilities
–
(14,448)
–
(14,448)
The fair value of financial instruments traded in active markets (such as trading and available-for-sale securities) is based
on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group
is the current bid price. These instruments are included in Level 1.
163
36.
(e)
Fair value measurements (continued)
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 makes assumptions that are based
on market conditions existing at each balance sheet date. The fair value of forward currency contracts is determined
using quoted forward exchange rates at the balance sheet date. These investments are included in Level 2. In infrequent
circumstances, where a valuation technique for these instruments is based on significant unobservable inputs, such
instruments are included in Level 3.
During the financial year ended 31 December 2009, there is no change in Level 3 instruments.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair
values. The fair value of financial liabilities for disclosure purposes is estimated based on quoted market 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.
37.
Immediate and ultimate holding corporation
The Company’s immediate and ultimate holding corporation is China Ocean Shipping (Group) Company, registered in the
People’s Republic of China.
38.
Related party transactions
(a)
The Company is controlled by China Ocean Shipping (Group) Company (“COSCO”), the parent company and a stateowned enterprise established in the People’s Republic of China (“PRC”).
COSCO itself is controlled by the PRC government, which also owns a significant portion of the productive assets
in the PRC. In accordance with amendment to FRS 24, “Related party disclosures”, other government-related entities
and their subsidiaries (other than COSCO group companies), directly or indirectly controlled, jointly controlled or
significantly 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-related entities 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 exercise significant influence and key management personnel of
the Company and COSCO as well as their close family members.
The related parties refer to directors of the Company and a director of a subsidiary.
As mentioned in Note 2.1, the Company has early adopted the amendment to FRS 24, which grants exemptions on
certain disclosure requirements for transactions among government-related entities and the government. The transactions
of revenues and expenses in nature conducted with government-related entities were based on arm’s length transactions.
2009 Annual Report
164
38.
Related party transactions (continued)
(a)
(continued)
In addition to the related party information and transactions disclosed elsewhere in the Consolidated Financial
Statements, the following is a summary of significant related party transactions entered into the ordinary course of
business between the Group and its related parties during the year.
The Group
2009
2008
$’000
$’000
Revenue
Sales to fellow subsidiaries
Sales to related party corporations
Rental income received/receivable from fellow subsidiaries
Rental income received/receivable from related parties
Sub-contractor expenses received/receivable from fellow subsidiaries
237,452
567,821
214
101
1,409
1,040
200
213
73
–
19,276
42,976
1,144
2,145
Interest received/receivable from a fellow subsidiary
17,417
24,398
Utilities received/receivable from a fellow subsidiary
–
1
27,094
33,831
47
113
Time charter revenue received/receivable from a fellow subsidiary
Service income received from fellow subsidiaries
Expenditure
Purchases from fellow subsidiaries
Purchases from related party corporations
Purchases of plant and equipment from a fellow subsidiary
Rental paid/payable to fellow subsidiaries
Vessel rental paid/payable to a fellow subsidiary
Management fee paid/payable to a related party corporation
17,990
–
235
1,546
7,435
10,321
320
418
7,347
7,194
14,330
6,914
Utilities expenses paid/payable to a fellow subsidiary
719
1,709
Service expenses paid/payable to fellow subsidiaries
1,988
988
511
34
Crew wages paid/payable to fellow subsidiaries
Sub-contractor costs paid/payable to fellow subsidiaries
Commission paid/payable to a fellow subsidiary
Outstanding balances as at 31 December 2009, arising from sales or purchases of goods and services, are set out in
Notes 13 and 27 respectively.
165
38.
Related party transactions (continued)
(b)
Share options granted to key management
The aggregate number of share options granted to key management of the Group during the financial year was Nil (2008:
5,800,000). The share options were given on the same terms and conditions as those offered to other employees of the
Company (Note 32). The outstanding number of share options granted to key management of the Group at the end of
financial year was 13,100,000 (2008: 13,100,000).
(c)
Key management personnel compensation
Key management personnel compensation is as follows:
The Group
2009
2008
$’000
$’000
Salaries and other short-term employee benefits
Employer’s contribution to defined contribution plans, including Central Provident
Fund
Share option expenses
4,912
4,564
8
15
938
5,184
5,858
9,763
Included in the above was total compensation to directors of the Company amounting to $5,563,000 (2008: $9,509,000).
39.
Segment information
Management has determined the operating segments based on the reports reviewed by the key management that are used to
make strategic decisions.
The key management considers the business from the business segment perspective. The segment in the People’s Republic of
China derives revenue from ship repair, ship building and marine engineering activities. On the other hand, the segments in
Singapore and Malaysia derive revenue from shipping, shipping agency, ship repair and marine engineering activities.
Other services included within Singapore and Malaysia include shipping agency activities and rental of property; but these are not
included within the reportable operating segments, as they are not included in the reports provided to the key management. The
results of these operations are included in the “all other segments” column.
2009 Annual Report
166
39.
Segment information (continued)
The segment information provided to the key management for the reportable segments is as follows:
Shipping
$’000
Ship repair,
ship building
and marine
engineering
activities
$’000
All other
segments
$’000
Total for
continuing
operations
$’000
132,894
2,751,043
15,067
2,899,004
Group
Sales
- External sales
- Inter-segment sales
–
541
94,609
95,150
132,894
2,751,584
109,676
2,994,154
Elimination
(95,150)
2,899,004
Segment results
60,283
170,448
(10,489)
Finance expense
220,242
(41,904)
214
178,552
Income tax expense
(40,758)
Net profit
137,794
Other segment items
Capital expenditure
- property, plant and equipment
2,679
467,129
116
469,924
29,846
122,652
918
153,416
–
4,236
–
4,236
Net reversal of impairment of trade and other receivables
–
(11,375)
–
(11,375)
–
578
–
578
Employees share option expenses
–
–
3,240
3,240
187,456
4,938,525
46,501
5,172,482
Depreciation
Write-off for inventory obsolescence and inventory write
down
Segment assets
1,922
Short-term deposits
1,085,365
4,034
158,523
Consolidated total assets
Segment liabilities
Borrowings
6,422,326
33,237
3,538,500
38,153
3,609,890
1,115,208
84,136
2,400
Consolidated total liabilities
4,811,634
Consolidated net assets
1,610,692
167
39.
The segment information provided to the key management for the reportable segments is as follows: (continued)
Shipping
$’000
Ship repair,
ship building
and marine
engineering
activities
$’000
257,396
3,195,744
22,869
3,476,009
–
393
257,109
257,502
257,396
3,196,137
279,978
3,733,511
All other
segments
$’000
Total for
continuing
operations
$’000
Group
Sales
- External sales
- Inter-segment sales
Elimination
(257,502)
3,476,009
Segment results
167,095
295,613
(3,129)
Finance expense
459,579
(8,834)
643
451,388
Income tax expense
(31,620)
Net profit
419,768
Other segment items
Capital expenditure
- property, plant and equipment
Depreciation
Write-off for inventory obsolescence and inventory write
down
3,037
661,382
164
664,583
28,374
91,444
949
120,767
–
20,907
–
20,907
Net allowance for impairment of trade and other
receivables
–
61,283
–
61,283
–
89,048
–
89,048
Employees share option expense
–
–
17,311
17,311
220,712
5,154,211
44,157
5,419,080
Segment assets
2,577
Short-term deposits
1,282,570
3,630
91,417
Consolidated total assets
Segment liabilities
Borrowings
6,799,274
36,803
4,399,765
35,369
4,471,937
656,642
61,348
180
Consolidated total liabilities
5,190,107
Consolidated net assets
1,609,167
2009 Annual Report
168
39.
Geographical information
The Group’s business segments operate in three main geographical areas:
People’s Republic of China - the operations in this area are principally in ship repair, ship building and marine engineering
activities;
Singapore - the operations in this area are principally in shipping, shipping agency, ship repair and marine related activities,
rental of property; and
Malaysia - the operations in this area are principally in shipping agency activities.
Sales are based on the country in which the services are rendered to the customer. Non-current assets are shown by the
geographical area where the assets are located.
Sales for
continuing operations
2009
2008
$’000
$’000
People’s Republic of China
2,739,236
3,183,983
2,334,473
1,970,810
158,041
288,241
201,860
232,298
1,727
3,785
108
143
2,899,004
3,476,009
2,536,441
2,203,251
Singapore *
Malaysia
*
Non-current assets
2009
2008
$’000
$’000
The Group’s shipping companies operate in worldwide shipping routes. Hence, it would not be meaningful to allocate sales to any
geographical segments for shipping activities.
No single external customer has sales which exceed 10% of the Group’s total sales for the financial years ended 31 December
2009 and 31 December 2008.
40.
New or revised accounting standards and interpretations
Certain new accounting standards, amendments and interpretations to existing accounting standards have been published
and are mandatory for the Group’s accounting periods beginning on or after 1 January 2010 or later periods and which the
Group has not early adopted. The Group’s assessment of the impact of adopting those accounting standards, amendments and
interpretations that are relevant to the Group is set out below:
(a)
Amendments to FRS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items (effective for annual
periods beginning on or after 1 July 2009)
This amendment clarifies how the principles that determine whether a hedged risk or portion of cash flows is eligible
for designation should be applied in particular situations. The Group will apply this amendment from 1 January 2010, but
it is not expected to have a material impact on the financial statements.
(b)
FRS 27 (revised) Consolidated and Separate Financial Statements (effective for annual periods beginning on or after 1 July
2009)
FRS 27 (revised) requires the effects of all transactions with non-controlling interests to be recorded in equity if there
is no change in control and these transactions will no longer result in goodwill or gains and losses. The standard also
specifies the accounting when control is lost. Any remaining interest in the entity is re-measured to fair value, and a gain
or loss is recognised in profit or loss. The Group will apply FRS 27 (revised) prospectively to transactions with minority
interests from 1 January 2010.
169
40.
New or revised accounting standards and interpretations (continued)
(c)
FRS 103 (revised) Business Combinations (effective for annual periods beginning on or after 1 July 2009)
FRS 103 (revised) continues to apply the acquisition method to business combinations, with some significant changes.
For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent
payments classified as debt subsequently re-measured through the income statement. There is a choice on an acquisitionby-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling
interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs should be expensed. The Group
will apply FRS 103 (revised) prospectively to all business combinations from 1 January 2010.
41.
Authorisation of 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 3 March 2010.
2009 Annual Report
170
Five-Year Summary
Notes
INCOME STATEMENT
Turnover
Operating profit before taxation
Income tax expense
Net profit
Attributable to:
Equity holders of the company
Minority interests
Net profit
Dividend
BALANCE SHEET
Share capital
Retained earnings
Minority interests
Total equity
Forward Currency Contracts
Club memberships
Intangible assets
Current assets
Current liabilities
Non-current liabilities
Net Assets
RATIOS
Basic earnings per share (cents)
Dividend per share (cents)
Dividend cover (times)
Net tangible assets per share (cents)
Gearing ratio (Net of Cash)
1
2
3 and 4
5
4
6
2005
2006
2007
2008
2009
$’000
$’000
$’000
$’000
$’000
873,114
225,039
519
225,558
(18,417)
207,141
1,215,469
301,696
600
302,296
(22,981)
279,315
2,261,700
497,536
537
498,073
(19,512)
478,561
3,476,009
450,745
643
451,388
(31,620)
419,768
2,899,004
178,338
214
178,552
(40,758)
137,794
160,494
46,647
207,141
44,141
205,353
73,962
279,315
89,348
336,568
141,993
478,561
156,738
302,588
117,180
419,768
156,747
110,080
27,714
137,794
67,177
228,587
60,634
230,484
175,744
695,449
–
2,304
377
2,813
11,703
937,649
9,357
–
–
438,333
(400,704)
(306,383)
695,449
239,947
70,855
359,256
249,889
919,947
45
2,208
412
2,227
11,350
1,110,179
9,319
–
–
747,926
(676,153)
(287,566)
919,947
7.4
2.0
3.6
23.2
0.5
9.3
4.0
2.3
29.8
0.2
266,852
82,806
590,249
362,847
1,302,754
8,778
3,067
479
1,794
11,472
1,478,453
9,302
21,996
–
2,431,829
(2,557,025)
(107,391)
1,302,754
15.1
7.0
2.1
41.6
cash
270,608
167,904
705,692
464,963
1,609,167
1,441
3,630
473
2,577
12,217
2,081,950
9,546
91,417
–
4,596,023
(4,572,188)
(617,919)
1,609,167
270,608
174,030
639,404
526,650
1,610,692
–
4,034
492
1,922
11,786
2,349,098
9,525
158,523
1,061
3,885,885
(3,870,288)
(941,346)
1,610,692
13.5
7.0
1.9
50.7
cash
4.9
3.0
1.6
48.0
cash
Notes
1.
The share of profit of associated companies is net of tax.
2.
The dividend for 2009 is calculated based on the number of shares issued as of 31 December 2009. The actual amount payable will be based on
the number of shares issue at book closure date.
3.
Basic earnings per share is calculated as net profit attributable to equity holders of the company divided by the weighted average number of
ordinary shares issued in the financial year.
4.
Basic earnings per share and net tangible assets per share have been adjusted to account for the sub-division of one ordinary share into two
ordinary shares in 2006.
5.
The dividend cover is calculated as net profit attributable to equity holders of the Company divided by the amount of equity dividend.
6.
Gearing ratio is derived by taking total borrowings (net of cash) over the shareholders’ funds.
171
As at 8 March 2010
STATISTICS OF SHAREHOLDERS AS AT 8 MARCH 2010
Class of Shares
Voting Rights
-
Ordinary shares
One Vote per share
DISTRIBUTION OF SHAREHOLDERS BY SIZE OF SHAREHOLDINGS
Size of Shareholdings
1 – 999
1,000 – 10,000
10,001 – 1,000,000
1,000,001 and above
Total
No. of
Shareholders
% of Holders
No. of Shares
% of Shares
108
0.31
40,996
0.00
26,570
75.28
125,227,368
5.59
8,575
24.29
336,851,818
15.05
41
0.12
1,777,124,772
79.36
35,294
100.00
2,239,244,954
100.00
SUBSTANTIAL SHAREHOLDERS
No.
Name
Direct Interest
No. of
shares held
%
1.
China Ocean Shipping (Group) Company
1,194,565,488
2.
Temasek Holdings (Pte) Ltd
–
Deemed Interests
No. of
shares held
%
53.35
–
–
111,968,114
–
(1)
5.00
Note:
(1)
Temasek Holdings (Private) Limited is deemed to have an interest in 111,968,114 ordinary shares in which its associated companies have or are
deemed to have an interest.
COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL
Based on information available and to the best knowledge of the Company as at 8 March 2010 approximately 41.21% of the ordinary
shares of the Company are held by the public. The Company is therefore in compliance with Rule 723 of the SGX-ST Listing Manual.
2009 Annual Report
172
SHAREHOLDING STATISTICS
As at 8 March 2010
LIST OF 20 LARGEST SHAREHOLDERS
SHAREHOLDER’S NAME
NO OF SHARES
%
1,194,565,488
53.35
111,016,049
4.96
77,878,410
3.48
1
CHINA OCEAN SHIPPING (GROUP) COMPANY
2
DBSN SERVICES PTE LTD
3
CITIBANK NOMINEES SINGAPORE PTE LTD
4
SEMBCORP MARINE LTD
70,000,000
3.13
5
DBS NOMINEES PTE LTD
49,039,721
2.19
6
UNITED OVERSEAS BANK NOMINEES PTE LTD
41,873,494
1.87
7
HSBC (SINGAPORE) NOMINEES PTE LTD
33,864,668
1.51
8
SCM INVESTMENT HOLDINGS PTE LTD
21,000,000
0.94
9
SEMBMARINE INVESTMENT PTE LTD
20,400,000
0.91
10
RAFFLES NOMINEES (PTE) LTD
19,840,246
0.89
11
UOB KAY HIAN PTE LTD
15,475,500
0.69
12
OCBC SECURITIES PRIVATE LTD
14,762,694
0.66
13
PHILLIP SECURITIES PTE LTD
8,384,379
0.37
14
HUI SHUNE MING @ HUI SHUN MENG
8,000,000
0.36
15
CIMB-GK SECURITIES PTE. LTD.
7,579,000
0.34
16
OCBC NOMINEES SINGAPORE PTE LTD
7,143,819
0.32
17
DB NOMINEES (SINGAPORE) PTE LTD
6,770,486
0.30
18
MERRILL LYNCH (SINGAPORE) PTE LTD
6,351,140
0.28
19
DBS VICKERS SECURITIES (SINGAPORE) PTE LTD .
6,055,738
0.27
20
KIM ENG SECURITIES PTE. LTD.
5,561,000
0.25
1,725,561,832
77.07
Total
173
COSCO CORPORATION (SINGAPORE) LIMITED
(Company No.: 196100159G)
NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at Suntec Singapore International
Convention & Exhibition Centre, 1 Raffles Boulevard Suntec City, Singapore 039593, Meeting Room 325-326, Level 3 on Tuesday, 20 April
2010 at 3:00 p.m. for the purpose of transacting the following businesses:
Ordinary Business:
1.
To receive and adopt the Directors’ Report and Audited Financial Statements for the financial year ended
31 December 2009 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 the year
ended 31 December 2009.
(Resolution 2)
3.
To approve payment of Directors’ Fees of S$265,000 for the year ended 31 December 2009 (2008:
S$234,167).
(Resolution 3)
4.
To re-elect the following directors, on recommendation of the Nominating Committee and endorsement
of the Board of Directors, who are retiring in accordance with Article 98 of the Articles of Association of
the Company and who, being eligible, offer themselves for re-election:
a.
Mr Ma Gui Chuan;
(Resolution 4)
b.
Mdm Sun Yue Ying;
(Resolution 5)
c.
Mr Er Kwong Wah (See Explanatory Note 1)
(Resolution 6)
d.
Mr Ang Swee Tian (See Explanatory Note 2)
(Resolution 7)
5.
To re-appoint, on recommendation of the Nominating Committee and endorsement of the Board of
Directors, Mr Tom Yee Lat Shing, a Director who will retire under Section 153(6) of the Companies
Act, Cap 50, to hold office from the date of this Annual General Meeting until the next Annual General
Meeting of the Company. (See Explanatory Note 3)
(Resolution 8)
6.
To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors and to authorise the Directors to fix
their remuneration.
(Resolution 9)
Special Business
To consider and, if thought fit, to pass the following as Ordinary Resolutions, with or without modifications:
7.
General Mandate to authorise the Directors to issue shares or convertible securities:
(Resolution 10)
“That pursuant to Section 161 of the Companies Act (Cap 50) and the Listing Rules of the Singapore
Exchange Securities Trading Limited (the “Listing Rules”), authority be and is hereby given to the Directors
to allot and issue:(a)
shares in the capital of the Company (whether by way of bonus, rights or otherwise); or
(b)
convertible securities; or
(c)
additional securities issued pursuant to Rule 829 of the Listing Rules; or
(d)
shares arising from the conversion of convertible securities in (b) and (c) above,
at any time and upon such terms and conditions and for such purposes as the Directors may in their
absolute discretion deem fit provided that :COSCO Corporation (Singapore) Limited
2009 Annual Report
174
8.
(i)
the aggregate number of shares and convertible securities that may be issued shall not be more
than 50% of the issued shares in the capital of the Company (calculated in accordance with (ii)
below), of which the aggregate number of shares and convertible securities issued other than on
a pro rata basis to existing shareholders must be not more than 20% of the issued shares in the
capital of the Company (calculated in accordance with (ii) below);
(ii)
for the purpose of determining the aggregate number of shares and convertible securities that may
be issued pursuant to (i) above, the percentage of issued share capital shall be calculated based on
the issued shares in the capital of the Company at the time of the passing of this resolution after
adjusting for (a) new shares arising from the conversion or exercise of any convertible securities;
(b) new shares arising from exercising share options or vesting of share awards outstanding or
subsisting at the time of the passing of this resolution and (c) any subsequent consolidation or
subdivision of shares; and
(iii)
unless revoked or varied by ordinary resolution of the shareholders of the Company in general
meeting, this resolution shall remain in force until the next Annual General Meeting of the
Company or the date by which the next Annual General Meeting of the Company is required by
law to be held, whichever is earlier”. (See Explanatory Note 4)
Authority to allot and issue shares under the Cosco Group Employees’ Share Option Scheme 2002
(“Scheme”)
(Resolution 11)
“That approval be and is hereby given to the Directors to offer and grant options (“Options”) in
accordance with the provisions of the Cosco Group Employees’ Share Option Scheme 2002 (“Scheme”)
and to allot and issue from time to time such number of shares in the capital of the Company as may be
required to be issued pursuant to the exercise of Options granted under the Scheme, provided that the
total number of Shares to be offered under the Scheme shall not in total exceed 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.” (See Explanatory Note 5)
9.
Proposed Renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions
(i)
“That approval be and is hereby given for the renewal of the mandate for the purposes of
Chapter 9 of the Listing Manual of the SGX-ST, for the Company, its subsidiaries and associated
companies or any of them to enter into any of the transactions falling within the types of
Interested Person Transactions, particulars of which are set out in the Appendix A (“Appendix”)
to the Annual Report of the Company for the financial year ended 31 December 2009 with any
party who is of the class of Interested Persons described in the Appendix provided that such
transactions are made on normal commercial terms and will not be prejudicial to the interests
of the Company and its minority shareholders and in accordance with the review procedures set
out in the Appendix;
(ii)
That the Audit Committee of the Company be and is hereby authorised to take such actions as it
deems proper in respect of such procedures and/or to modify or implement such procedures as
may be necessary to take into consideration any amendment to Chapter 9 of the Listing Manual
of the SGX-ST which may be prescribed by the SGX-ST from time to time;
(iii)
That the Directors of the Company be and are hereby authorised to complete and do all such
acts and things (including all such documents as may be required) as they may consider expedient
or necessary or in the interests of the Company to give effect to this Resolution; and
(iv)
That the authority conferred by this Resolution shall, unless revoked or varied by the Company in
general meeting, continue in force until the conclusion of the next Annual General Meeting of the
Company or the date by which the next Annual General Meeting of the Company is required by
law to be held, whichever is earlier.” (See Explanatory Note 6)
BY ORDER OF THE BOARD
Lawrence Kwan
Company Secretary
Singapore, 5 April 2010
(Resolution 12)
175
Explanatory Notes on Business to be transacted
1.
Mr Er Kwong Wah will, upon election as a Director, remain as the Chairman of the Remuneration Committee and a member of the Audit
Committee, Nominating Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will be considered
independent for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.
2.
Mr Ang Swee Tian will, upon election as a Director, remain as the Chairman of the Enterprise Risk Management Committee and a member of the
Audit Committee, Nominating Committee, Remuneration Committee and Strategic Development Committee; and will be considered independent
for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.
3.
Mr Tom Yee Lat Shing will, upon re-appointment, remain as the Chairman of the Audit Committee and a member of the Nominating Committee,
Remuneration Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will be considered independent
for the purposes of Rule 704(8) of the Listing Manual of the SGX-ST.
4.
Ordinary Resolution 10 is to empower the Directors of the Company from the date of the above Meeting until the next Annual General Meeting
to issue shares and/or convertible securities in the capital of the Company up to an amount not exceeding in aggregate 50% of the issued shares
in the capital of the Company of which the total number of shares and convertible securities issued other than on a pro-rata basis to existing
shareholders shall not exceed 20% of the issued shares in the capital of the Company at the time the resolution is passed, for such purposes as
they consider would be in the interests of the Company. This authority will, unless revoked or varied at a general meeting, expire at the next
Annual General Meeting of the Company.
5.
Ordinary Resolution 11 is to empower the Directors of the Company, from the date of this Meeting until the next Annual General Meeting, to
allot and issue shares in the capital of the Company pursuant to the exercise of such options under the Scheme. The total number of Shares to be
offered under the Scheme shall not exceed 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.
6.
Ordinary Resolution 12 is to renew the General Mandate to allow the Company, its subsidiaries and associated companies or any of them to
enter into certain Recurrent Interested Person Transactions with person who are considered “Interested Persons” (as defined in Chapter 9 of the
Listing Manual of the SGX-ST).
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 2009 in respect of transactions described in Section 2.1 of Schedule II of the Appendix;
and since the approval of the additional Shareholders’ Mandate on 17 July 2007 in respect of transactions described in Section 2.2 of Schedule II of
the Appendix; and that the said methods and procedures are 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
City Tower II, 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 authorize 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.
2009 Annual Report
176
NOTICE OF BOOKS CLOSURE
NOTICE IS HEREBY GIVEN that, subject to the approval of shareholders to the First and Final Dividend being obtained at the Annual
General Meeting to be held on 20 April 2010, the Transfer Books and the Register of Members of the Company will be closed on 28
April 2010, for the preparation of dividend warrants for shareholders of ordinary shares registered in the books of the Company.
Duly completed registrable transfers of ordinary shares in the capital of the Company (“Shares”) received by the Company’s Share
Registrar, Tricor Barbinder Share Registration Services, 8 Cross Street, #11-00, PWC Building, Singapore 048424 up to 5.00 p.m. on 27
April 2010 will be entitled to the proposed First and Final Dividend.
Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at 5.00 p.m. on 27 April 2010
will be entitled to the proposed First and Final Dividend. Payment of the dividends, if approved by members at the Annual General
Meeting, will be made on 11 May 2010.
BY ORDER OF THE BOARD
Lawrence Kwan
Company Secretary
Singapore, 5 April 2010
Important:
(Incorporated in the Republic of Singapore)
(Company Registration No.: 196100159G)
1.
For investors who have used their CPF monies to buy the
Company’s shares, this Annual Report is sent to them at
the request of their CPF Approved Nominees solely FOR
INFORMATION ONLY.
2.
This Proxy Form is not valid for use by CPF investors and shall be
ineffective for all intents and purposes if used or purported to be
used by them.
3.
CPF investors who wish to vote should contact their CPF
Approved Nominees.
ANNUAL GENERAL MEETING
PROXY 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 (%)
Address
NRIC/Passport
Number
Proportion of
Shareholdings (%)
And/or (delete as appropriate)
Name
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 Suntec
City, Singapore 039593, Meeting Room 325-326, Level 3 on Tuesday, 20 April 2010 at 3:00 p.m. and at any adjournment thereof.
I/We have indicated with an “X” in the appropriate box against the item how I/we wish my/our proxy/proxies to vote. If no specific
direction as to voting is given or in the event of any item arising not summarised below, my/our proxy/proxies may vote or abstain at
the discretion of my/our proxy/proxies.
No.
Resolutions
For
Against
ORDINARY BUSINESS
1.
To receive and adopt the Directors’ Report and Audited Financial Statements for the year
ended 31 December 2009 together with the Auditors’ Report thereon.
2.
To approve a First and Final Dividend of S$0.03 per ordinary share for the year ended
31 December 2009.
3.
To approve payment of Directors’ Fees.
4.
To re-elect Mr Ma Gui Chuan, who is retiring under Article 98 of the Articles of Association of
the Company.
5.
To re-elect Mdm Sun Yue Ying, who is retiring under Article 98 of the Articles of Association of
the Company.
6.
To re-elect Mr Er Kwong Wah, who is retiring under Article 98 of the Articles of Association of
the Company.
7.
To re-elect Mr Ang Swee Tian, who is retiring under Article 98 of the Articles of Association of
the Company.
8.
To re-appoint Mr Tom Yee Lat Shing, who is retiring pursuant to Section 153(6) of the
Companies Act, Cap 50.
9.
To re-appoint Messrs PricewaterhouseCoopers LLP as Auditors of the Company and to
authorise the Directors to fix their remuneration.
SPECIAL BUSINESS
10.
To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Cap 50.
11.
To authorise Directors to issue shares pursuant to the Cosco Group Employees’ Share Option
Scheme 2002.
12.
To approve the renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions.
Dated this
day of
2010
Total No. of Shares in
CDP Register
Register of Members
Signature of Member(s) or Common Seal
IMPORTANT: Please Read Notes for This Proxy Form.
No. of Shares
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
Please
affix
postage
stamp
9 Temasek Boulevard, #07-00 Suntec Tower Two,
Singapore 038989
Second fold
Third fold
Apply glue here

Financial Statements

Transcription

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