BUILDING FOR THE FUTURECOSCO Corporation (Singapore) LimitedAnnual Report 2010
WE BEHOLD OUR PAST WITH PRIDE THE PATH WE TOOK
THE FOUNDATION WE LAID
TO CREATE A PLATFORM FOR SUSTAINABLE
GROWTHTHUS BRINGING US
CLOSER TO THE FUTURE WE ENVISION
WITH CONFIDENCE AND PASSION
010204081011
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232628
324950566064
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748081828384858688
153
154156
COSCO OVERVIEW Corporate ProfileCorporate StructureFinancial HighlightsMajor Developments Major Deliveries in 2010Our Major Shipyards
KEY MESSAGESChairman’s StatementInterview with Vice Chairman and President
OPERATIONS AND FINANCIAL REVIEWShip Repair, Ship Building and Offshore Marine Engineering Dry Bulk Shipping & OthersGroup Financial Review
CORPORATE GOVERNANCE AND TRANSPARENCYCorporate Governance Corporate Information Board of DirectorsKey ManagementInvestor RelationsRisk Management
INSIDE COSCO AND CORPORATE CITIZENSHIPResearch and DevelopmentHuman Resources and Workplace SafetyCorporate Social Responsibility
FINANCIAL STATEMENTSDirectors’ ReportStatement by DirectorsIndependent Auditor’s ReportConsolidated Income StatementConsolidated Statement of Comprehensive IncomeBalance Sheets Consolidated Statement of Changes in EquityConsolidated Cash Flow StatementNotes to the Financial StatementsFive-Year Summary
Shareholding StatisticsNotice of Annual General MeetingProxy Form for Annual General MeetingNotes for Proxy Form
COSCO Corporation (Singapore) Limited Mr Li Jian Xiong, Vice PresidentMr Wang Hui, General Manager, Investor Relations Tel: (65) 6885 0888 Fax: (65) 6336 9006 Email: [email protected]
SPIN Capital Asia (Investor Relations Consultant) Mr Michael Tan Tel: (65) 6227 7790 Email: [email protected]
INVESTOR RELATIONS CONTACTS
CONTENTS
COSCO Corporation (Singapore) Limited
(“COSCO Corporation” or the “Group”) has
one of the largest Ship Repair, Ship Building
and Offshore Marine Engineering operations
in China. A diversified group with activities
also in Dry Bulk Shipping, Shipping Agency
and other sectors, it is the SGX Mainboard-
listed subsidiary of China Ocean Shipping
(Group) Company (“COSCO Group”), China’s
largest shipping group and one of the top
shipping conglomerates in the world.
COSCO Corporation has achieved significant
progress in growing its Ship Repair, Ship
Building and Offshore Marine Engineering
capacity and capabilities. The completion of
its acquisition of a 51% stake in one of the
largest shipyards in China, COSCO Shipyard
Group (“COSCO Shipyard”), on 1 January
2005 propelled COSCO Corporation into the
premier league in the ship repair industry.
COSCO Corporation is committed to long-
term growth through its core businesses and
global coverage. In October 2006, COSCO
Corporation was rated as a component
stock of Prime Partners China Index - the
first index that tracks the performance of
China enterprises listed on the SGX. Since
January 2009, we have been part of the
FTSE ST China Index, and from July 2009,
we were also included in the FTSE ST China
Top Index, both of which were created to
reflect the increasing representation of China-
based companies in the Singapore stock
market. Among other indexes, we are also
a component stock of the Morgan Stanley
Capital International World Index as well as
the SGX Morgan Stanley Capital International
Asia Apex 50 Index Futures which feature
some of the most promising, widely-traded
and investible Asian companies outside
Japan.
CORPORATE PROFILE
Annual Report 2010
01
“A diversified marine conglomerate providing Ship Repair and Conversion,
Ship Building and Offshore Marine Engineering solutions.”
Dry Bulk Shipping
COSCO (Singapore) Pte Ltd100%
Shipping Agency & Others
COSLINK (M) Sdn Bhd
COSTAR Shipping Pte Ltd70% Costar Agencies (M) Sdn Bhd
CNF Shipping (M) Sdn Bhd
••
18%
70%
Harington Property Pte Ltd100%
COSCOOVERVIEW
02
CORPORATE STRUCTURE
100%
60%
Ship Repair, Ship Building & Offshore Marine Engineering
COSCO Shipyard Group Co., Ltd
COSCO Marine Engineering (Singapore) Pte Ltd
COSCO (Nantong) Shipyard Co., Ltd
COSCO (Qidong) Offshore Co., Ltd
COSCO (Dalian) Shipyard Co., Ltd
COSCO (Guangdong) Shipyard Co., Ltd
COSCO (Lianyungang) Shipyard Co., Ltd
COSCO (Xiamen) Shipyard Co., Ltd
COSCO (Shanghai) Shipyard Co., Ltd
COSCO (Tianjin) Shipyard Co., Ltd
COSCO (Zhoushan) Shipyard Co., Ltd
COSCO (Nantong) Ocean Shipyard Co., Ltd
COSCO Dalian Rikky Ocean Engineering Co., Ltd
Zhongyuan Sea-Land Engineering Co., Ltd
COSCO Shipyard Total Automation Co., Ltd
Diesel Marine Dalian Ltd
Diesel Marine International (Nantong) Co., Ltd
DMI (Guangzhou) Ltd
Tru-Marine Cosco (Tianjin) Engineering Co., Ltd
•••••••••••••••••
COSCO Engineering Pte Ltd •90%
COSCO (Nantong) Shipyard Co., Ltd50%
COSCO (Dalian) Shipyard Co., Ltd39%
51%
Cos Fair Shipping Pte Ltd
Cos Glory Shipping Inc
Hanbo Shipping Limited
Sanbo Shipping Limited
Cos Knight Shipping Maritime Inc.
Cos Lucky Shipping Maritime Inc.
Cos Orchid Shipping Pte Ltd
Cos Prosperity Shipping Pte Ltd
••••••••
03Annual Report 2010
50%
60%
59%
75%
60%
51%
95%
90%
100%
60%
75%
51%
60%
30%
30%
30%
40%
100%
100%
CNF Shipping Agencies Pte Ltd•100%
249
FINANCIAL HIGHLIGHTS
Turnover(S$’m)
Net Profit Attributable to Equity Holders(S$’m)
Net Assets(S$’m)
04
Revenue by Activities (%)
SHIP REPAIR, SHIP BUILDING & OFFSHORE MARINE ENGINEERING
DRY BULK SHIPPING
SHIPPING AGENCY AND OTHERS
96.3% 0.4%
3.3%
2,89
9
2,26
2
1,21
5
3,47
6
0
500
1,000
1,500
2,000
2,500
3,000
0
50
100
150
200
250
300
337
205
303
0
300
600
900
1,200
1,500
1,30
3
920
1,60
9
1,61
1
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
3,86
1
110
1,79
4
3,500
3501,800
COSCOOVERVIEW
4,000
4.0
11.1
* Basic earnings per share, net tangible assets per share and net assets value per share have been adjusted to account for the sub-division of one ordinary share of $0.20 each into two ordinary shares of $0.10 each in 2006
Dividends per Share (cents)
and Basic Earnings per Share (cents)
05Annual Report 2010
5-YEAR PROFIT AND LOSS ACCOUNTS (S$’m)
Turnover
Operating Profit before Tax
Share of Profit/(Loss) of Associated Companies
Taxation
Profit from Ordinary Activities
Non-Controlling Interests
Net Profit Attributable to Equity Holders of the Company
OTHER KEY STATISTICS
Number of Shares (m)
Basic Earnings per Share (cents)*
Dividend per Share (cents)
Dividend Cover (times)
Net Tangible Assets per Share (cents)*
Net Assets Value per Share (cents)*
Gearing Ratio (net of cash)(times)
Return on Equity (%)
Return on Assets (%)
2006
1,215
301
1
23
279
74
205
2006
2,214.0
9.3
4.0
2.3
29.8
30.3
0.2
34.5
12.5
2007
2,262
497
1
19
479
142
337
2007
2,237.7
15.1
7.0
2.1
41.6
42.0
cash
41.8
11.5
2008
3,476
451
1
32
420
117
303
2008
2,239.2
13.5
7.0
1.9
50.7
51.1
cash
29.0
5.6
2009
2,899
179
0
41
138
28
110
2009
2,239.2
4.9
3.0
1.6
48.0
48.4
cash
9.9
1.7
2010
3,861
402
0
43
359
110
249
2010
2,239.2
11.1
4.0
2.8
53.1
53.5
0.1
21.8
4.0
2006 2007 2008 2009 2010
Dividends per Share (cents)Basic Earnings per Share (cents)
0
3
6
9
12
15
15.1
9.3
4.0
7.0
13.5
7.0
4.9
3.0
The GM4000 is a semi submersible vessel designed for well intervention services including a wide range of capabilities like through tubing rotatory drilling and coiled tubing drilling. It is a purpose-built well intervention unit capable of operating on the Norwegian Continental Shelf all year round.
the foundationOur diversified repertoire of marine engineering, ship building, ship repair and conversion services enables the Group to support an increasingly demanding and varied international clientele.
VITAL MARINE SOLUTIONS FOR ALL
08
MAJOR DEVELOPMENTS
Deliveries in 2010
COSCOOVERVIEW
Current Developments
1
4 5
M.V. ParandowskiNew build 30,000 dwt multi-purpose heavy lift vessel
M.V. Scandinavian ExpressNew build 92,500 dwt bulk carrier
M.V. Mairini New build 80,000 dwt bulk carrier
M.V. Magda PNew build 57,000 dwt bulk carrier
2
5
4
3
1
1
Super M2Jack-up rig
09Annual Report 2010
2 3
6
Octabuoy
GM4000
Car Carrier
DrillshipWind Turbine Installation Vessel
Sevan Driller II (Sevan Brasil)2
6
3
54
1
2
3
4
5
10COSCOOVERVIEW
MAJOR DELIVERIES IN 2010
Name of Vessel
M.V. Ocean Garnet
M.V. Vlazakis 1
M.V. Scandinavian Express
M.V. Pu Lan Hai
M.V. Banos A
M.V. RBD Ocean of Joy
M.V. Chang Shan Hai
FPSO Cidade De Angra Dos Reis MV22
M.V. Mairini
M.V. Georgios P
M.V. Magda P
M.V. Chipolbrok Star
M.V. Parandowski
M.V. Newlead Tomi
M.V. Shinyo Ayush
M.V. Chipolbrok Galaxy
M.V. Dai Shan Hai
M.V. Shun Xin
M.V. Ince Kastamonu
M.V. Ince Karadeniz
M.V. Quan Shan Hai
HBIS Sunrise
M.V. Asia
M.V. Ince Akdeniz
M.V. Fantastic
M.V. Amazing
M.V. Milos
M.V. SIFNOS
M.V. Arizona
M.V. Flag Alexandros
M.V. Annabo
M.V. Toxotis
M.V. Christos Theo
M.V. Perth 1
M.V. Ioannis Theo
M.V. Almyros
M.V. Er Nazire
Super M2
Project Details
New build 92,500 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 92,500 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 92,500 dwt bulk carrier
New build 57,000 dwt bulk carrier
Conversion from VLCC to FPSO
New build 80,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 30,000 dwt multi-purpose heavy lift carrier
New build 30,000 dwt multi-purpose heavy lift carrier
New build 80,000 dwt bulk carrier
New build 80,000 dwt bulk carrier
New build 30,000 dwt multi-purpose heavy lift carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
VLCC to VLOC Conversion
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build 57,000 dwt bulk carrier
New build jack-up rig
Delivered In
January 2010
January 2010
February 2010
March 2010
May 2010
June 2010
June 2010
August 2010
September 2010
September 2010
October 2010
October 2010
November 2010
December 2010
December 2010
December 2010
January 2010
April 2010
April 2010
May 2010
May 2010
May 2010
June 2010
June 2010
August 2010
August 2010
October 2010
November 2010
December 2010
January 2010
January 2010
April 2010
June 2010
August 2010
August 2010
October 2010
December 2010
June 2010
COSCO Guangdong Shipyard
COSCO Nantong Shipyard
COSCO Dalian Shipyard
COSCO Zhoushan Shipyard
Dalian
Lianyungang
NantongQidongShanghai
Zhoushan
Guangdong
11Annual Report 2010
OUR MAJOR SHIPYARDS
Through COSCO Shipyard Group, COSCO Corporation owns and operates seven major shipyards strategically located along China’s coastline.
The Super M2 jack-up rig delivered by COSCO (Nantong) Shipyard Co., Ltd has an operating capability (at a water-depth of 91 metres) to provide supporting services to offshore drilling rigs and other marine engineering facilities.
the pathSTRENGTHENING MOMENTUM IN MEETING THE GROWING NEEDS FOR OFFSHORE MARINE ENGINEERING EXPERTISEMeeting the burgeoning global demand for energy, we constantly seek to advance our capabilities to create a new paradigm in our offerings, and to enhance our operational efficiency and productivity in Ship Building, Ship Repair and Conversion and Offshore Marine Engineering.
KEY MESSAGES
14
CHAIRMAN’S STATEMENT
Completing our transformation to a
diversified marine conglomerate, we
are at a completely new level. Where
previously our main business was
ship repair and conversion services,
now our integrated and upgraded
operations allow us to offer an array of
leading-edge ship building, ship repair
and conversion as well as offshore
marine engineering services. We are,
in a sense, a new entity.
I believe this fundamental paradigm
shift opens up new opportunities we
have never had before and will enable
us to take COSCO further and higher
in the long run. I am excited to take
over the reins from the capable hands
of previous Chairman Li Jian Hong.
Under his leadership, he has steered
us through some difficult waters and
we have no doubt emerged the better.
For these reasons — strategic focus,
solid growth and transformation
despite economic uncertainty — I am
encouraged and positive for our future.
We have a proven strategy for growth
and the experience at all levels to take
us further. We will certainly be prudent,
as we have been, but we will also
capitalise on the new opportunities
that we now are able to bid for.
Building on a Solid BaseOur base is solid, with a robust and
productive 2010 and progressive
deliveries of 35 vessels and our
maiden jack-up rig. Throughout,
continued skills-upgrading in offshore
marine engineering, and the securing
of significant contracts attest to our
operational expertise and reputation.
Leveraging on our developing
expertise, we continued to secure
orders over the year.
To reiterate, what was especially
encouraging was the fact that these
positive developments occurred
despite a backdrop of economic
uncertainty. While the developed
economies exhibited continued
hangover effects from the global
financial crisis of 2009, with the US and
Dear Shareholders,
It is with much pleasure that I present to you our annual report for Financial Year 2010. Taking over the reins of COSCO Corporation recently in September 2010, I am pleased to say that not only has our corporate ship been steady and on course, it has moved full steam ahead!
Japan mired in weak, low-employment
growth and Europe suffering from
protracted sovereign debt problems,
Asia showed marked resilience with
strong recovery and growth in major
economies such as China, Indonesia
and India.
Maintaining Focus, Delivering ResultsOperating in such challenging
conditions, we focused on our goals
of improving efficiencies, diversifying
capabilities, and leveraging on our
strengths, concluding the year with
expanded revenue of $3.9 billion, a
33.2% increase from $2.9 billion in
FY2009. Net profits attributable to
equity holders grew 126.1% to $248.8
million from $110.1 million in FY2009.
On a per share basis, earnings per
ordinary share grew from 4.9 cents
in FY2009 to 11.1 cents per ordinary
share. Net asset value per ordinary
share as of 31 December 2010 was
53.5 cents, compared with 48.4 cents
as of 31 December 2009. With this
strong base, our Group is proposing
a dividend of 4.0 cents per share to
be approved at the upcoming Annual
General Meeting. This amounts to
a dividend payout ratio of 36.0%.
However, I believe numbers tell only
part of the story — there’s more. To an
enterprise like COSCO Corporation,
our transformative experience has
been nothing short of extraordinary,
and puts us in prime position to add
truly long-term operational value to our
enterprise.
Outlook and StrategyLooking ahead to Financial Year
2011, the world economy seems
headed for crosswinds. According
to the International Monetary Fund
(IMF), in a World Economic Outlook
report dated 25 January 2011, the
global economy will likely experience
continued recovery from the global
financial crisis but in a “two-track”
pathway. Developed economies will
be stymied by prolonged weak growth
and bloated public finances while Asia
15Annual Report 2010
Liu Guo YuanChairman
experiences relatively more brisk growth,
albeit with ensuing inflation risks. The
IMF projects the world economy to grow
by 4.5% for 2011.
Closer to our base, the spectre of high
inflation, especially in China, is a scenario
we will have to manage. Over 2010, the
Chinese Yuan rose about 3% against
the US Dollar. The Chinese government
is managing China’s over-heating
economy and continued high inflation
with restrictive economic policies such
as central bank rate hikes, increased
bank reserve ratio requirements intended
to curb the money supply, as well as
property market-dampening measures
to stem the exuberant real estate
market. With potential labour shortages
and increases in raw material prices
including that of steel, there remains
possible pressure on our operating
margins. We will continue to monitor the
situation closely.
Building for the Future with Foresight and VigilanceDespite the forecasted uncertainties in
our operating environment, we can be
assured of the significant progress we
have already made in our development
as a marine conglomerate and confident
of our particular position in the marine
services industry. With our increasing
expertise, we have managed to
secure orders of US$6.1 billion as of
31 December 2010 with progressive
deliveries up to 2013.
Looking ahead, the dry bulk shipping
market faces continual challenges, with
the slow growth in global shipping and
oversupply of new bulk carriers likely
dampening future orders for dry bulk
ship building, which currently comprise
the majority of our shipbuilding work.
We will have to actively manage our
diversification strategy and secure more
orders for a wider range of ship building
and marine engineering projects.
KEY MESSAGES
16
CHAIRMAN’S STATEMENT
On an upbeat note, the Offshore & Marine
industry is experiencing an upcycle, with
more demand for new ships and vessels
such as drill ships and other specialised
support vessels used in offshore marine
engineering. There is also increased
demand for oil rigs, driven, as it were, by
the fundamental need for energy from
large emergent economies. We aim to
optimise our offerings and capitalise on
this uptrend. Internally, within COSCO
Corporation, we have management
structures in place, especially in the
areas of strategy and risk, to anticipate
industry trends, drive group-wide
initiatives and respond to developments
as they unfold.
Focused, Prudent and PositiveAs we enter a new year, uncertainties
remain. We maintain our cautious
outlook and keep our focus, building for
the future with expanded capabilities.
I believe we must be focused but also
positive, despite an uncertain economic
outlook. We have achieved so much
and will continue to make progressive
improvements. Certainly we have the
capability to achieve even more.
At this juncture, on behalf of the Board,
I would like to thank our directors,
management and staff for their wise
counsel and contributions over the year.
I would like to also specially thank the
previous Chairman Mr Li Jian Hong,
for his contributions. Last but not least,
gratitude must be extended to our loyal
shareholders. I look forward to meeting
you all at our upcoming Annual General
Meeting.
Liu Guo Yuan
Chairman
17Annual Report 2010
18
INTERVIEW WITH VICE CHAIRMAN AND PRESIDENT
Driving Growth in 2010
1. What was the operating environment like for COSCO in 2010?
First and foremost, I would like to
thank our management and staff
for their efforts over the past year. It
has truly been rewarding to see the
fruits of our endeavours. Over 2010,
we experienced continual challenges
from an uncertain global economy.
Weak, low-employment economic
growth coupled with high public debt
stifled the developed economies while
developing economies recovered
strongly from the global recession.
Notwithstanding the challenges
in the operating environment, we
have successfully completed the
construction of a large number of
vessels as well as secure additional
orders. As at 31 December 2010, our
order book was US$6.1 billion with
progressive deliveries up to 2013,
which will keep our shipyards busy.
One of the major operational highlights
we had over 2010 was our developing
expertise. With our sharpened skills,
we increased efficiency, shortened our
average dry bulk carrier construction
period from 18 months in 2009 to
15 months in 2010 and enhanced
productivity. We ended the year
with the delivery of a record 32 bulk
carriers. In addition, our COSCO
Dalian shipyard completed 3 multi-
purpose heavy lift vessels while
COSCO Nantong shipyard delivered
our milestone self jack-up engineering
platform, the Super M2 jack-up rig.
In the area of dry bulk shipping,
shipping rates remained weak in 2010,
affected by the abundance of new bulk
carriers in the global market.
Key Corporate Values: Strategic Focus, Steadfast Determination
2. From just ship repair, you now offer a wide range of marine services including offshore marine engineering, ship repair and ship building. What are the reasons for your transformation to a diversified ship repair & marine engineering and shipping group?
Transforming a large corporate entity
such as COSCO to a diversified marine
services group has been challenging,
especially amidst the volatility prevalent
in the global economy these few years.
We have been able to rise to these
challenges because of two factors:
strategic management focused on
KEY MESSAGES
long-term goals and an integrated,
dedicated workforce. COSCO had
already grown into a major shipyard
group, with a strength primarily in ship
repair. We had reached a milestone
and were keen to take the group to
new directions.
After a group-wide review, we decided
that, moving ahead, our broad,
long-term objective was to advance
the group forward to be a broadly
diversified marine services group,
capable not only of undertaking ship
repair and ship conversion, but also
ship building and offshore marine
engineering. In this way, we would be
able to capitalise on the full potential
of the marine services sector and the
burgeoning demand for shipping and
offshore oil and gas. Our ultimate goal,
in sum, was to offer an enhanced
value proposition and take COSCO to
an entirely new level.
With that goal in mind, we engaged
our staff around these objectives,
and further developed them with the
necessary skills to achieve those
ends. Externally, we embarked on an
ambitious marketing plan to expand
our presence and reach a wider base
of prospective customers.
The results have been promising
with turnover for Financial Year 2010
growing 33.2% to $3.9 billion while net
profits attributable to equity holders
increased 126.1% to $248.8 million.
This was achieved through a 35.2%
year-on-year increase in turnover to
$3.7 billion from shipyard operations
with higher contributions from the
ship building and marine engineering
projects. Meanwhile, turnover from the
dry bulk shipping business decreased
3.2% year-on-year to $128.6 million
due to lower charter rates. On a group-
wide basis, the shipyard business was
the largest revenue contributor, making
up 96.3% of Group turnover.
Our net assets at financial year-end
are $1.8 billion while cash and cash
equivalents at 31 December 2010
amount to $0.9 billion, giving us
financial confidence and we believe
these achievements are a reflection of
our long-term vision and resolve.
Jiang Li JunVice Chairman and President
19Annual Report 2010
20
Growing our Capabilities
3. In the Ship Repair, Ship Building and Offshore Marine Engineering sectors, what were the important benefits the Group has derived from its work here?
To improve our capabilities, we
have been seeking opportunities
to undertake new and increasingly
complex projects. In fact, many have
been successfully completed and
delivered, especially over the past
year. These have in turn bolstered our
level of expertise and reputation and,
in a virtuous circle, have enabled us to
secure even larger projects.
For example, in August 2010, we
completed yet another ship conversion,
this time of a Very Large Crude
Carrier (VLCC), to an FPSO (Floating,
Production, Storage and Offloading)
vessel. Named the FPSO Cidade De
Angra Dos Reis MV22, this vessel is
able to process up to 100,000 barrels
of oil daily as well as 5 million cubic
metres of gas.
Building on our successful construction
of the heavy lift carrier “Adam Asnyk”
in 2009, we completed a larger heavy
lift carrier, the 30,000 ton “Chipolbrok
Star”. This carrier, which comes
equipped with two 320 ton cranes
with a maximum haulage capacity of
640 tons, serves multiple roles as bulk
carrier, container ship and heavy lift
vessel.
On top of this, we leveraged on our
successful completion of the Sevan
Driller in 2009 with an Engineering,
Procurement, Construction and
Installation (“EPCI”) contract for the
Sevan Driller II, a deepwater DP3 semi-
submersible drilling rig. It has been
renamed “Sevan Brasil”. I am proud
to say COSCO is one of the leading
ship builders in China to have secured
a full EPCI contract for such a rig. In
sum, all these developments put us in
prime position to grow in the way we
had envisioned.
4. What distinguishes you from your competitors?
Our vision, determination and strong
foundations have enabled us to
weather the storms in our operating
environment over the past four
capricious years. Additionally, it
has given us the ability to devise an
expanded business model and the
energy to undertake the necessary
changes.
5. What did you learn from the recent global financial crisis?
Focusing on our strategic goals of
diversifying our offerings and thus
income streams, despite all the market
volatility surrounding us. Also, the
importance of risk management and
maintaining a strong balance sheet.
These key lessons will position us well
especially in an operating environment
marked by shorter economic cycles,
volatile capital flows and uneven global
growth.
6. Are you putting any of these lessons into practice? Definitely! We maintain management
structures for risk and strategy and
meet regularly to discuss, develop and
co-ordinate activities and plans. In
July 2009, we established a Strategic
Development Committee. Comprising
directors, this Committee will catalyse
the development and evaluation of
Group strategy.
In the area of risk management, we
have a dedicated Enterprise Risk
Management Committee (“ERMC”)
which meets every quarter to review
and manage Group-wide risks: internal,
external, execution and financial.
Under this ERMC, we manage risks on
a regular basis.
INTERVIEW WITH VICE CHAIRMAN AND PRESIDENT
KEY MESSAGES
Outlook and Strategy
7. What is the Group’s outlook for the Baltic Dry Index and how will it impact your dry bulk ship building business?
The BDI started 2010 at 3,140 points
and ended it much lower at 1,773
points, with the year’s average at
2,752 points. Any further rebound
may remain subdued in light of the
abundant supply of new bulk carriers
globally. In fact, there has been a
gradual increase in the global supply
of bulk carriers over recent years.
As such, while we have been able to
secure about US$1 billion worth of
new contracts for bulk carriers over
2010, we remain cautious about our
outlook for bulk carrier ship building.
The global oversupply in dry bulk
carriers could impact demand for ship
building services with subsequent
pricing pressures and weakened order
flow for new bulk carriers. In the area
of dry bulk ship chartering, we are
decreasing our dry bulk shipping fleet
from 12 to 10 carriers in early 2011, not
renewing the leases for two charter-in
Panamax vessels. This is in order to
streamline our focus on ship building
and offshore marine engineering.
8. Since dry bulk carriers comprise the bulk of your ship building contracts, what strategies have you planned to minimise any negative effects?
To mitigate business risk, we intend
to further diversify our range of
projects and enhance our skills and
capabilities as we move forward. We
have managed to grow our offshore
marine engineering business with the
successful completion of the semi-
submersible oil rig “Sevan Driller” in
2009 and the jack-up oil rig “Super
M2” in 2010. During the year in review,
we also secured a contract worth
more than US$500 million contract to
construct another semi-submersible
oil rig named the “Sevan Brasil”. Aside
from oil rigs, we are actively developing
other offshore marine engineering
vessels such as the “GM4000” and the
“Octabuoy”, both are semi-submersible
offshore vessels, and an offshore
wind turbine installation vessel. Last
but not least, we have completed
construction of Phase One of our new
Qidong shipyard which specialises in
offshore marine engineering. Already
in operation, it will elevate our diverse
capabilities even higher.
9. What are your group’s priorities looking ahead?
We have achieved much in
the direction we have taken.
Looking ahead, we are cautious
about the operating environment
and will continue to monitor it
closely. Nonetheless, our strategic
development as a leading diversified
marine services group is a definite
positive. Building on this, our chief
priorities will be to leverage on our
increasing strengths in diversified
marine services, maintaining our
focus on deliveries and upgrading our
capabilities and facilities.
21Annual Report 2010
Achieved strong growth against a challenging backdrop as business, industry and private demand conditions remain uncertain.
Successfully delivered 32 bulk carriers, 3 multi-purpose heavy lift vessels and 1 jack-up rig in 2010.
New orders received in 2010 totalling more than US$2.1 billion include 31 bulk carriers, 1 deepwater drillship, 1 Sevan drilling rig, 1 wind turbine installation vessel and 2 deck barges. An order book of US$6.1 billion as at 31 December 2010 with progressive deliveries up to 2013.
OPERATIONAL HIGHLIGHTS
OPERATIONS AND FINANCIAL REVIEW
22
Annual Report 2010
23
SHIP REPAIR, SHIP BUILDING AND OFFSHORE MARINE ENGINEERING
OverviewCOSCO Shipyard Group, the 51%
owned subsidiary of COSCO
Corporation, has seven major shipyards
in China, located in Dalian, Nantong,
Zhoushan, Guangdong, Shanghai,
Lianyungang, and Qidong. Strategically
situated along China’s coastline,
these shipyards provide an extensive
array of advanced capabilities in ship
building, ship repair and conversion,
and offshore marine engineering.
This segment remained our biggest
revenue contributor in FY2010, making
up 96.3% of group revenue. Turnover
from shipyard operations recorded a
35.2% rise to $3.7 billion in 2010, due
to higher revenue contributions from
ship building and marine engineering
projects.
Creating New MilestonesOver the course of the year, we
delivered a total of 32 new-build bulk
carriers – 8 by COSCO Guangdong
shipyard, 12 by COSCO Dalian
shipyard and 12 by COSCO Zhoushan
shipyard. Also notably, COSCO
Nantong shipyard delivered one jack-
up rig, “Super M2”, in June 2010 and
COSCO Dalian shipyard delivered 3
multi-purpose heavy lift vessels in the
second half of 2010.
Gaining Expertise in Ship Repair and Ship BuildingAs a testament of our developing
expertise and reputation, we
managed to secure larger contracts
and complete fabrication of more
sophisticated vessels in 2010. New
orders received in 2010 totaling
more than US$2.1 billion include 31
bulk carriers, 1 deepwater drillship,
1 deepwater DP3 semi-submersible
Sevan drilling rig, 1 wind turbine
installation vessel and 2 deck barges.
In June 2010, COSCO Nantong
shipyard delivered 1 jack-up rig Super
M2 and COSCO Dalian shipyard
delivered 3 multi-purpose heavy lift
vessels in the second half of the year.
The Group will continue to focus on
deliveries while it upgrades its shipyard
capabilities to improve operational
efficiency and productivity.
COSCO Corporation’s abilities in ship
conversion were further boosted with
the successful conversion in August
2010 of “FPSO Cidade De Angra Dos
Reis MV22” from a VLCC. Purchased
by MODEC Offshore Production
Systems (Singapore) Pte Ltd, it is able
to process up to 100,000 barrels of oil
per day and 5 million cubic metres of
gas.
In 2010, the Group also completed the
construction and delivery of 3 multi-
purpose heavy lift carriers, namely
“Chipolbrok Star”, “Parandowski” and
“Chipolbrok Galaxy”.
Essentially similar to the “Adam Asnyk”
delivered in 2009, the “Chipolbrok Star”
has more compartments, a complex
piping system and a multi-function role
of bulk carrier, container ship, multi-
purpose vessel and heavy lift vessel. It
is capable of accommodating different
ocean-going cargoes with its large
tonnage, powerful lifting capacity, high
speed, highly automated integration
and flexible loading capability. Such
engineering milestones augment our
capabilities and bolster our reputation,
positioning us strategically as a leading
diversified marine conglomerate.
Gaining Momentum in Offshore Marine EngineeringThe month of June 2010 saw COSCO
Nantong shipyard deliver its first jack-
up rig. Named “Super M2”, the new-
build jack-up rig measures 8 metres
high, 56 metres wide and 73 metres
long. This unique vessel is purpose-
built and optimised for both light and
heavy well intervention, giving offshore
operators new options when they need
to pull tubing and re-enter oil and gas
wells in depth to 100 metres.
During the year, the Group continued
to ink landmark contracts. Following
the successful delivery of our first
Sevan Driller in 2009, we managed to
secure an engineering, procurement,
construction and installation (“EPCI”)
contract worth more than US$500
million for the Sevan Driller II, a
deepwater DP3 semi-submersible
drilling rig now named the “Sevan
Brasil”. It will be the second deepwater
DP3 semi-submersible drilling rig to
be undertaken by COSCO. With this
OPERATIONS AND FINANCIAL REVIEW
24
contract, COSCO Shipyard Group is
one of the leading shipyards in China
to have secured a full EPCI contract
to construct a deepwater DP3 semi-
submersible drilling rig. We are proud
of this achievement and our teams of
marine engineers, R&D professionals
and managers stand ready to
contribute to this seminal project. Our
Group looks towards participating
and leveraging on this market-leading
project experience.
During the same month, we signed a
contract valued over US$130 million
with a European shipowner to build a
vessel specially designed for installing
offshore wind turbines. The jack-up
vessel will be able to carry 8 to 10
wind turbines at any time and operate
at water depths of up to 45 metres.
Alternative energy systems and
alternative energy offshore exploration
is really one of the ways our industry is
developing and with this venture, we
are strategically placed to capitalise on
growth in this area as well.
In summary, we have made significant
progress in our ship repair and
conversion, ship building and offshore
marine engineering sector. Looking
ahead, we shall continue to develop
our strengths and solidify our position
as a leading solution provider for
diverse marine needs.
Annual Report 2010
25
Revenue Contribution from Ship Repair, Ship Building and Offshore Marine Engineering
52%
Ship Conversion10%Ship Building
Marine Engineering25%
Ship Repair13%
Types of Vessels Repaired in FY2010 by Revenue
Tankers 6%
Container Ships 11%
Chemical Ships 7%
Others 9%
Bulk Carriers 67%
Dry Bulk Shipping
OverviewManaged by COSCO (Singapore)
Pte Ltd – the Group’s wholly-owned
subsidiary - our dry bulk shipping
business currently comprises a fleet
of 10 dry bulk carriers that make up
a total carrying capacity of 550,978
dwt. Plying the main trading routes,
these carriers transport cargo such
as iron ore, coal, steel, cement and
fertiliser to major ports of the world.
Our dry bulk carriers are chartered out
to other ship owners and operators,
serving COSCO’s strong clientele
base of shipping companies from
Germany, Norway, Denmark, Greece,
Switzerland, UK, USA amongst
others.
By upholding strict international quality
and safety standards, COSCO’s fleet
has been awarded with an ISO9002
certification, which recognises
companies for a consistently high
commitment to quality.
Highlights of the YearTurnover from the Group’s dry bulk
shipping business decreased 3.2%
over the year to $128.6 million due
to lower charter rates strategically
secured at the point of charter
renewals. The business of dry bulk
shipping, shipping agency and others
contributed to 3.7% of the Group’s
total revenue.
The Baltic Dry Index (“BDI”), a measure
of shipping costs for commodities,
started the year at 3,140 points and
ended the year at a much lower 1,773
points, with the yearly average standing
at 2,752 points. In view of ongoing
concerns about the global economy
as well as the abundant supply of
new ships in the market, any rebound
in the BDI may remain subdued. An
increased supply of vessels will also
heighten industry competition and
likely pose a challenge to COSCO’s
dry bulk shipping segment.
26
DRY BULK SHIPPING AND OTHERS
OPERATIONS AND FINANCIAL REVIEW
Annual Report 2010
27
Nonetheless, the Group will continue
to build upon the strengths of our
businesses and derive synergies from
it to support our dry bulk shipping
business.
Shipping Agency
OverviewCOSCO’s shipping agency arm is
managed by subsidiaries of COSCO
Corporation, namely COSTAR
Shipping Pte Ltd and COSLINK
(M) Sdn Bhd. Providing mainly
containerisation services for COSCO
Container Lines and its customers,
COSTAR Shipping provides a wide
array of shipping agency services for
all types of containers, including Out-
of-Gauge (OOG) containers, General
Purpose (GP) units, reefer containers
and hazardous containers from over
1,000 customers in more than 50
countries.
Since its beginnings in 1989, COSTAR
Shipping canvasses for cargo from
clients to fully maximise tonnage
capacity of COSCO’s ships, as well
as the ships of our clients transiting
through Singapore. Our business also
provides extensive agency services for
full container, break-bulks and other
value-added services.
In Malaysia, COSLINK (M) Sdn. Bhd.
serves as the general shipping agent
for the fleet of COSCO Group’s vessels
that call at Malaysian ports, offering a
range of services similar to COSTAR
Shipping in Singapore.
Towards the end of 2010, the
Company entered into separate
conditional sale and purchase
agreements with Freightworld Pte Ltd,
an indirect wholly-owned subsidiary
of China COSCO Holdings Company
Limited. The Company will sell its
whole 700,001 shares in COSTAR
Shipping Pte Ltd – representing
approximately 70% of the issued share
capital of COSTAR; and 1,400,000
shares in COSLINK (M) Sdn Bhd
– representing approximately 70% of
the issued share capital of COSLINK
to Freightworld.
28
GROUPFINANCIAL REVIEW
OverviewThe Group concluded the year with
a 33.2% increase in Group turnover
to $3.9 billion in FY2010 while net
profit attributable to equity holders
of the Company increased 126.1%
to $248.8 million. The increase in
turnover was mainly due to higher
revenue contributions from ship
building and marine engineering
projects. The increase in net profit
attributable to equity holders of the
Company was attributable to higher
profit contributions from ship building
and marine engineering projects and
dry bulk shipping.
TurnoverTurnover from shipyard operations
increased 35.2% to $3.7 billion
in FY2010 due to higher revenue
contributions from ship building and
marine engineering projects. The
Group delivered 32 bulk carriers in
FY2010. COSCO Dalian and COSCO
Zhoushan shipyards delivered 12
bulk carriers each while COSCO
Guangdong shipyard delivered the
remaining 8 bulk carriers. Also notably,
COSCO Nantong shipyard delivered 1
jack-up rig, “SUPER M2”, in June 2010
and COSCO Dalian shipyard delivered
3 multi-purpose heavy lift vessels in
the second half of 2010.
Turnover from dry bulk shipping
business decreased 3.2% to $128.6
million in FY2010 due to lower charter
rates. The Baltic Dry Index (BDI),
a measure of shipping costs for
commodities, started the year 2010 at
3,140 points but ended the year much
lower at 1,773 points, averaging 2,752
points for the whole of 2010.
Shipyard business remained the
biggest revenue contributor, forming
96.3% of Group turnover in FY2010.
Dry bulk shipping, shipping agency
and others accounted for the remaining
3.7%.
ProfitabilityGross profit increased 60.0% from
$297.6 million in FY2009 to $476.1
million in FY2010 on greater cost
efficiencies in dry bulk shipping and
higher profit contributions from ship
building and marine engineering
business on turnover rise.
Other income comprised gain from the
sale of scrap materials, compensation
received from customers, interest
income from bank deposits, foreign
currency exchange gain and net
fair value gain on forward currency
contracts. Other income increased
21.8% to $178.3 million in FY2010
mainly due to the higher sales value of
scrap materials and foreign currency
exchange gain.
Distribution costs rose 18.3% in line
with the expanding business volume
and rising cost environment. The
11.6% decrease in administrative costs
to $160.2 million was mainly due to net
reversal of impairment of trade and
other receivables of $31.2 million in
FY2010 as compared to $11.4 million
in FY2009.
Interest expense remained largely
unchanged at $42.1 million in FY2010
as the effects of higher interest rates
were offset by reduced borrowings.
Income tax expense increased by
only 6.1% mainly due to higher profit
contributions from certain subsidiaries
in the People’s Republic of China
(PRC) partially offset by higher tax-
exempt shipping profits.
Non-controlling interests increased
due to higher contributions from the
Group’s PRC subsidiaries involved in
ship repair, ship building and marine
engineering operations.
OPERATIONS AND FINANCIAL REVIEW
29Annual Report 2010
As a result of the above, net profit
attributable to equity holders of the
Company increased 126.1% from
$110.1 million in FY2009 to $248.8
million in FY2010.
Balance Sheet and Cash Flow(31 December 2010 vs 31 December
2009)
Cash and cash equivalents decreased
from $1.5 billion to $867.2 million mainly
due to cash used in dividend payment,
purchases of new property, plant and
equipment, repayment of borrowings
and less advances received from
customers.
Trade and other receivables increased
$573.5 million from $1.5 billion to
$2.0 billion mainly due to increase
in advances paid to suppliers from
$679.2 million to $858.8 million and
increase in construction contracts
due from customers for ship building
and marine engineering projects from
$249.5 million to $565.8 million in line
with the expanding business.
Property, plant and equipment
decreased from $2.3 billion to $2.2
billion despite facility expansions of the
major shipyards of COSCO Shipyard
Group Co., Ltd (CSG) mainly due to
depreciation.
Trade and other payables decreased
from $3.6 billion to $3.1 billion as
less advances were received from
customers (from $1.8 billion to $1.2
billion) due to completion of some of the
ship building and marine engineering
contracts.
Share CapitalCOSCO’s share capital remained
unchanged at $270.6 million. There
was no new issue and allotment of
shares under the COSCO Corporation
Employees’ Share Option Scheme
2002.
EquityEquity rose by $114.6 million to $1.2
billion as at 31 December 2010 due
to the transfer of FY2010 profits to
retained earnings, partially offset by
the payment of dividends in May 2010.
Return on Equity was 21.8%.
GearingTotal bank borrowings decreased
from $1.1 billion to $992.2 million
due to repayment of bank loans
procured for business operations and
the expansion of the Group’s major
shipyards. The Group had a gearing
(net of cash) position of $125.0 million
at the end of FY2010.
Earnings Per ShareOn a fully diluted basis, earnings per
share increased from 4.9 cents in
FY2009 to 11.1 cents in FY2010.
Dividends Per ShareTo reward shareholders for their loyalty,
the Board of Directors has proposed a
first and final exempt dividend of 4.0
cents. The dividend payout will amount
to $89.6 million (FY2009: $67.2 million)
while Dividend Cover was 2.8.
Net Asset Value Per ShareIn line with capacity and facility
expansion, the net asset value
per share of COSCO Corporation
increased by 10.6% from 48.4 cents
per share at 31 December 2009 to
53.5 cents per share at 31 December
2010.
COSCO Corporation’s abilities in ship conversion were further boosted with the successful conversion in August 2010 of “FPSO Cidade De Angra Dos Reis MV22” from a VLCC. Purchased by MODEC Offshore Production Systems (Singapore) Pte Ltd, it is able to process up to 100,000 barrels of oil per day and 5 million cubic metres of gas.
The modern marine industry is characterised by rapid developments and changing needs. With that in mind, we have transformed our range of marine services to respond with added swiftness and tactical acumen. This lays the platform for sustainable growth.
WITH OUR DIVERSE GROWTH DYNAMICS, WE CHART OUR COURSE
COSCO Corporation (Singapore) Limited (“COSCO Corporation” or “the Company”) and its subsidiaries (together, the “Group”) believes that good governance is acknowledged to be essential for the success of any organisation and is now more important than ever. The purpose of corporate governance is to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the Company.
At COSCO Corporation the Board of Directors, guided by the Singapore Code of Corporate Governance 2005 (the “Code 2005”) issued by the Singapore Council on Corporate Disclosure and Governance, remains committed to the principles of good corporate governance and to achieving high standards of business integrity, ethics and professionalism across all its activities. The Company has applied, and complied with, the principles and guidelines set out in the Code 2005.
A. BOARD MATTERS
THE BOARD’S CONDUCT OF AFFAIRS
PRINCIPLE 1
Governance is overseen by the COSCO Corporation Board whilst management is delegated to the Group President and Executive Directors. The Board oversees the business affairs of the Company and is collectively responsible for its success. All directors make decisions objectively in the best interests of the Company and have exercise due diligence and independent judgement in so doing.
The principal functions of the Board apart from its statutory responsibilities are to:
a) set values and standards of the Company and ensure that obligations to shareholders and others are understood and met;
b) provide entrepreneurial leadership; approve the strategic and financial objectives, corporate policies and authorisation matrix of the Company;
c) oversee the processes for risk management, financial reporting and compliance and evaluate the adequacy of internal controls; approve annual budget, key operational matters, major acquisition and divestment proposals, major funding proposals of the Company;
d) review management performance;
e) approve the nominations to the Board of Directors and appointment of key management, as may be recommended by the Nominating Committee; and
f) assume responsibility for corporate governance framework of the Company.
To facilitate effective management, certain functions of the Board have been delegated to various Board committees, namely Audit, Nominating, Remuneration, Enterprise Risk Management and Strategic Development Committees.
The schedule of all Board, Board committee meetings for the next calendar year is planned in advance, in consultation with the directors. During this financial year the Board held five meetings and had on eight occasions used circular resolutions in writing to sanction certain decisions.
32
CORPORATEGORVERNANCE
CORPORATE GOVERNANCEAND TRANSPARENCY
The Company’s Articles of Association (the “Articles”) provides for Board meetings to be conducted by way of telephone and video conferencing. The attendance of the Directors at meetings of the Board and Board committees as well as number of such meetings is set out in the table below:
Attendance at Board and Board Committees’ Meetings
Name BoardAudit
CommitteeNominatingCommittee
RemunerationCommittee
Enterprise RiskManagementCommittee
StrategicDevelopmentCommittee
Number ofMeetings held: 5
Number ofMeetings held: 8
Number ofMeetings held: 2
Number ofMeeting held: 1
Number ofMeetings held: 4
Number ofMeeting held: 1
Number ofMeetingsAttended
Number ofMeetingsAttended
Number ofMeetingsAttended
Number ofMeetingsAttended
Number ofMeetingsAttended
Number ofMeetingsAttended
Liu Guo Yuan1 1 NA NA NA NA NALi Jian Hong2 3 NA NA NA NA NAJiang Li Jun 5 NA 2 1 3 1Zhang Liang3 2 NA NA NA NA NAWang Hai Min4 1 NA NA NA NA NASun Yue Ying5 2 NA NA NA NA NAMa Zhi Hong6 1 NA NA NA NA NAMa Gui Chuan 4 NA NA NA NA NAWang Xing Ru7 4 NA NA NA 2 NATom Yee Lat Shing 5 8 2 1 4 1Wang Kai Yuen 5 8 2 1 4 1Er Kwong Wah 5 8 2 1 4 1Ang Swee Tian 5 8 2 1 4 1Li Jian Xiong(Alternate to Liu Guo Yuan) 5 NA NA NA NA 1Lu Cheng Gang(Alternate to Wang Hai Min ) 5 NA NA NA NA NAYe Bin Lin(Alternate to Ma Zhi Hong) 5 NA NA NA 4 NALiu De Tian8 (Alternate to Wang Xing Ru) 5 NA NA NA 0 NA
NA: Not Applicable
1 Mr Liu Guo Yuan was appointed Director and Chairman of the Board on 1 September 20102 Mr Li Jian Hong resigned his Directorship and Chair of the Board on 1 September 20103 Mr Zhang Liang resigned his Directorship on 2 August 20104 Mr Wang Hai Min was appointed Director on 2 August 20105 Mdm Sun Yue Ying resigned her Directorship on 2 August 20106 Mr Ma Zhi Hong was appointed Director on 2 August 20107 Mr Wang Xing Ru was appointed as a member of the Enterprise Risk Management Committee on 12 July 2010.8 Mr Liu De Tian was appointed as a member of the Enterprise Risk Management Committee on 12 July 2010.
33Annual Report 2010
Whilst the Board has delegated the day to day management of the Group to the Group President and Executives, there are matters reserved for the Board by which the Board oversees control of the Group’s affairs. Some of the matters reserved for the Board and Board’s approval are:
• the recommendations of the Strategic Development Committee;• the Group’s long term objectives and commercial strategy;• the making of any decision to cease to operate all or any material part of the business of the Group or to extend the
Group’s activities into new business;• the consideration of any proposal to merge or amalgamate the Company with any other company;• the approval of any acquisition of any investment, asset or business by the Company or any of its subsidiaries which
would involve the commencement of an activity of a substantially different nature or character to any activity from time to time carried on by the Company or any of its subsidiaries;
• changes relating to the Group’s capital structure including changing the amount or currency of the Company’s authorised share capital, reduction of capital, share issues (except under employee share options plan);
• the approval of and ensuring the maintenance of internal controls and risk management procedures for the Company and its subsidiaries;
• approving the Company’s Audited Financial Statement and other appropriate statements for inclusion in the Company’s Annual Report and the issue of the Annual Report;
• the issue and filing of statutory or regulatory statements, the quarterly, half yearly and full year reports;• determining and approving any significant change to the accounting policies or practices of the Company, and of the
Company and its subsidiaries;• the recommendation of the payment of any dividend by the Company or any exercise of the powers of the Board in
relation to reserves or capitalisation of profit;• appointments or removals from the Company’s Board of Directors (following receipt of recommendations by the
Nominating Committee) and the appointment or removal of the Company Secretary;• changes to the structure, size and composition of the Board, following receipt of recommendations from the
Nominating Committee;• in the case of any conflict of interest which the Board, after being appropriately advised, considers to be material, as
to whether such conflict should be authorised and, if so, authorise such conflict upon such terms and conditions as the Board considers appropriate;
• determining the remuneration policy for senior executives of the Company (following receipt of recommendations by the Remuneration Committee);
• undertaking a review annually of its own performance, that of its committees and the contribution by each director to the effectiveness of the Board; and
• any matter required to be considered or approved by the Board as a matter of law or regulation.
BOARD COMPOSITION AND GUIDANCE
PRINCIPLE 2
The Board has ten (10) members: two (2) Executive Directors, four (4) Non-Executive Directors and four (4) Non-Executive Independent Directors. The composition of the Board is as follows and the Directors’ academic and professional qualifications are set out on pages 50 to 55 of this Annual Report. No individual or group of individuals dominates the Board’s decision-making. Collectively, the Non-Executive Directors and Non-Executive Independent Directors bring a wide range of experience and expertise as they all currently occupy or have occupied senior positions in industry and public life, and as such each contributes significant weight to Board decisions. None of the non-executive independent directors has any relationship with the Company, its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director’s independent business judgment with a view to the best interests of the Company.
34
CORPORATEGORVERNANCE
CORPORATE GOVERNANCEAND TRANSPARENCY
Board of Directors
Liu Guo Yuan Chairman and Non-Independent and Non-Executive DirectorJiang Li Jun Vice Chairman, President and Non-Independent Executive DirectorMa Gui Chuan Non-Independent and Executive DirectorWang Hai Min Non-Independent and Non-Executive DirectorWang Xing Ru Non-Independent and Non-Executive DirectorMa Zhi Hong Non-Independent and Non-Executive DirectorTom Yee Lat Shing Non-Executive Independent DirectorWang Kai Yuen Non-Executive Independent DirectorEr Kwong Wah Non-Executive Independent DirectorAng Swee Tian Non-Executive Independent Director
Changes to the Board during the financial year 2010 are as follow:
Sun Yue Ying resigned on 2 August 2010 her appointment as Non-Independent and Non-Executive Director.
Zhang Liang resigned on 2 August 2010 his appointment as Non-Independent and Non-Executive Director.
Ma Zhi Hong was appointed on 2 August 2010 as a Non-Independent and Non-Executive Director.
Wang Hai Min was appointed on 2 August 2010 as a Non-Independent and Non-Executive Director.
Li Jian Hong resigned on 1 September 2010 his appointment as Chairman and Non-Independent and Non-Executive Director.
Liu Guo Yuan was appointed on 1 September 2010 as Chairman and Non-Independent and Non-Executive Director.
Our Board’s size is necessary to allow sufficient Non-Executive Director and Non-Executive Independent Director representation to cover the breadth and complexity of the Group’s business activities and to staff our Board committees. A board of this size allows orderly succession planning for key roles.
The current size of the Board is appropriate and will facilitate effective decision making. The Board will continue to review the size of the Board on an ongoing basis. As a team, the Board collectively provides core competencies in the areas of accounting, finance, business and management experience, as well as industry knowledge.
Directors are provided with regular updates on relevant new laws and regulations, and evolving commercial risks and business conditions from the Company’s relevant advisors. Newly appointed directors are provided with background information about the Company and the Group. Annual visits are arranged for Non-Executive Independent Directors to acquaint them with important operations overseas.
35Annual Report 2010
STRATEGIC DEVELOPMENT COMMITTEE
The Strategic Development Committee (“SDC”) comprising six (6) Directors; the majority is independent non-executive directors. The SDC members are:
Jiang Li Jun (Chairman) (Non-Independent Executive)Liu Guo Yuan1 (Non-Independent Non-Executive)Li Jian Hong2 (Non-Independent Non-Executive)Tom Yee Lat Shing (Non-Executive Independent)Wang Kai Yuen (Non-Executive Independent)Er Kwong Wah (Non-Executive Independent)Ang Swee Tian (Non-Executive Independent)
Note:1 Liu Guo Yuan was appointed a member of the Strategic Development Committee on 3 March 20112 Li Jian Hong resigned on 1 September 2010 as Chairman, Non-Independent and Non-Executive Director
The SDC assists the Board in fulfilling its responsibilities for developing, evaluating and monitoring the Company’s long and short-term strategic goals. The SDC operates at the Board level but shall not assume the Board’s governance accountability or to make final strategic decisions. The SDC acts solely to address and develop current and future strategy-related issues. The SDC has the responsibility for creating and driving the Company’s strategy development and planning and Management takes responsibility for implementing the Company’s strategy(ies) after the SDC received approval from the full Board and/or other relevant board committees.
The SDC have the following authority and responsibilities:
a) Review and develop Company Strategy(ies): Meet with Management periodically to review, develop and evaluate the Company’s evaluation and implementation of its business strategy;
b) Provide Resource Support: Support the Board or Management in the valuation and/or refining of the Company’s strategic plans;
c) Assess Progress: Review and assess the status of implementation of the Company’s business strategy and whether the results are consistent with the goals of the strategic plan as adopted by the Board; and
d) Recommend Improvements: Recommend areas of improvement and provide feedback to the Board and Management regarding the overall success of the business strategy.
The SDC met once in the financial year of 2010.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
PRINCIPLE 3
The roles of Chairman and the President are undertaken by separate persons so as to create a clear division of responsibilities and maintain an effective oversight. The Chairman and the President are not related to each other.
The Chairman is responsible for the workings of the Board, ensuring the integrity and effectiveness of its governance process. In his absence, his appointed alternate and/or the President would act on his behalf.
The President is the most senior executive in the Company and has full executive responsibilities over the business directions and operational decisions of the Group. He works closely with the Board to implement the policies set by the Board to realise the Group’s vision.
36
CORPORATEGORVERNANCE
CORPORATE GOVERNANCEAND TRANSPARENCY
BOARD MEMBERSHIP
PRINCIPLE 4
Recommendations for nominations of new directors and retirement of directors are made by the Nominating Committee (“NC”) and considered by the Board as a whole.
The NC reviews and assesses candidates for directorship before making recommendations to the Board. The NC takes into consideration the skills and experience required and the existing composition of the Board and strives to ensure that the Board has an appropriate balance of independent directors as well as directors with the right profile of expertise, skills, attributes and abilities when recommending new directors to the Board.
The process for the appointment of new directors begins with the NC, together with the Chairman and Vice Chairman of the Company, conducting a needs analysis and identifying the critical requirement in terms of expertise and skills that are needed in the context of the strengths and weaknesses of the existing Board. When a candidate has been endorsed by the NC, the NC will then make a recommendation to the Board for the approval of his appointment.
The NC assesses and recommends to the Board whether retiring directors are suitable for re-nomination for re-election. In evaluating a director’s contribution and performance for the purpose of re-nomination, the NC takes into consideration a variety of factors such as attendance, preparedness, participation and candour.
In accordance with the provisions of the Articles, one-third of the Directors retire by rotation and subjects themselves to re-election at every Annual General Meeting (“AGM”) of the Company. The President who is a member of the Board must also subject himself to retirement by rotation and re-election by the Shareholders. New directors who were appointed by the Board during the year will hold office only until the next AGM and will be eligible for re-election.
The dates of initial appointment and last re-election/re-appointment of each of the Directors of the current Board are set out below:
Director PositionDate of InitialAppointment
Date of LastRe-election
Liu Guo Yuan Chairman, Non-Independent and Non-Executive 1.9.2010 n.a.Jiang Li Jun Vice Chairman, President and Non-Independent Executive 7.8.2008 20.4.2009Ma Gui Chuan Non-Independent Executive 10.1.2007 20.4.2010Wang Hai Min Non-Independent and Non-Executive 2.8.2010 n.a.Wang Xing Ru Non-Independent and Non-Executive 14.2.2006 15.4.2008Ma Zhi Hong Non-Independent and Non-Executive 2.8.2010 n.a.Tom Yee Lat Shing Non-Executive Independent 16.11.1993 20.4.2010Wang Kai Yuen Non-Executive Independent 2.5.2001 20.4.2009Er Kwong Wah Non-Executive Independent 20.12.2002 20.4.2010Ang Swee Tian Non-Executive Independent 13.11.2007 20.4.2010Li Jian Xiong Alternate to Liu Guo Yuan 1.9.2010 n.a.Lu Cheng Gang Alternate to Wang Hai Min 2.8.2010 n.a.Ye Bin Lin Alternate to Ma Zhi Hong 2.8.2010 n.a.Liu De Tian Alternate to Wang Xing Ru 14.2.2006 n.a.
37Annual Report 2010
NOMINATING COMMITTEE
The Nominating Committee (“NC”) comprising five Directors, majority of whom, including the Chairman is independent. The NC members are:
Wang Kai Yuen (Chairman) (Non-Executive Independent)Jiang Li Jun (Non-Independent Executive)Tom Yee Lat Shing (Non-Executive Independent)Er Kwong Wah (Non-Executive Independent)Ang Swee Tian (Non-Executive Independent)
The principal functions of the NC are to:
a) identify, review and recommend candidates for appointment as Directors of the Company and appointment to the Board committees as well as to senior management positions in the Company;
b) evaluate the effectiveness of the Board as a whole and assess the contribution by each Director, to the effectiveness of the Board;
c) determine annually whether or not a Director is independent; and
d) make recommendations to the Board on re-appointment of Board and Board committee members.
During the financial year the NC held two meetings. The NC met to review the nominations for the appointments of those directors that were appointed during the financial year for recommendation to the Board to approve the appointments. In arriving at their decisions on the new appointments, the NC took into consideration the incumbents’ academic qualifications, experience, their individual field of expertise and their potential contributions to the effectiveness of the Board. The NC also met and determined the independence of the Directors is in line with the undertakings described in the Code 2005. It also reviewed the composition of the Board and the Board Committees in relation to the needs of the Group.
The NC is of the opinion that the Board is able to exercise objective judgment on corporate affairs independently and no individual or small group of individuals dominates the Board’s decision making process.
The NC assesses and recommends to the Board whether retiring Directors are suitable for re-election. The NC considers that the multiple board representations held presently by some Directors do not impede their respective performance in carrying out their duties to the Company.
Tom Yee Lat Shing, who is over the age of 70 years, will have to retire at the forthcoming Annual General Meeting pursuant to Section 153 (6) of the Companies Act, Cap. 50. The assessment of Tom Yee Lat Shing’s reappointment and his independence were given particular consideration by the NC as he has now served on the Board for more than 17 years. The NC believes that due to his strength of character, experience and knowledge, Tom Yee Lat Shing continues to be highly effective as an independent non-executive director. He provides objective and rigorous challenges to, and engages in constructive debate with, the board and the committees on which he sits. Tom Yee Lat Shing also brings a wealth of useful and relevant experience both in his position as an independent non-executive director and as the Chairman of the Audit Committee.
Accordingly, the NC has recommended and the Board has endorsed the re-appointment of Tom Yee Lat Shing by shareholders at the annual general meeting. The NC and the Board believe that it is in the shareholders’ best interests for Tom Yee Lat Shing to be reappointed as an independent non-executive director.
38
CORPORATEGORVERNANCE
CORPORATE GOVERNANCEAND TRANSPARENCY
BOARD PERFORMANCE
PRINCIPLE 5
A formal assessment process is in place to assess the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board. The NC uses objective and appropriate quantitative and qualitative criteria to assess the performance of the Board as a whole and the contribution of each Director to the effectiveness of the Board. Assessment parameters include evaluation of the Board’s access to information, risk management, accountability, the Board’s performance in relation to discharging its principal functions, communication with management and stakeholders, the business performance of the Company, the quality of Board processes, the attendance records of the Directors at Board and Committee meetings and the level of participation at such meetings.
The evaluation of the Board is conducted annually. As part of the process, the Directors will complete appraisal forms which are collated by the Company Secretary. The Company Secretary will then review the results of the appraisal and present the results to the Chairman of the NC who will then present a report to the Board.
An individual assessment of each Director is also undertaken annually. The process of the assessment is through self-assessment where each Director will complete appraisal forms which are collated by the Company Secretary. The Company Secretary consolidates the appraisal forms and presents the results to the Chairman of the NC who will then present a report to the Board.
ACCESS TO INFORMATION PRINCIPLE 6
The Board is provided with management information pertaining to such areas as detailed divisional performance, variance analysis, budget, forecast, funding positions and cash flow projections of the Group, to help them carry out their responsibilities effectively. In addition, all relevant information on material events and transactions are circulated to Directors as and when they arise.
All Board members have separate and independent access to the advice and services of the Company Secretary. The Company Secretary attends Board and most of the Board committees meetings and is responsible for ensuring that Board procedures are followed. With the assistance of the management staff of the Company, the Company Secretary is also responsible for compliance with the SGX-ST Listing Manual and all other applicable rules and regulations. The appointment and the removal of the Company Secretary are subject to the Board’s approval.
All Board members also have separate and independent access to the senior management of the Company and the Group.
Board members are aware that they, whether as a group or individually, in the furtherance of their duties, can take independent professional advice, if necessary, at the Company’s expense.
B. REMUNERATION MATTERS
PROCEDURES FOR DEVELOPING REMUNERATION POLICIES
PRINCIPLE 7
The Remuneration Committee (“RC”) meets yearly to discuss the performance assessment of the Executive Directors as well as to discuss the level of emoluments to pay.
39Annual Report 2010
The recommendations for approval of the remuneration of the Executive Directors are forwarded to the Board. The RC also reviews and approves the remuneration of senior management, as well as the total annual increment and variable bonus for employees.
Directors’ fees are recommended by the RC and are submitted for endorsement by the Board. Directors’ fees are subjected to approval by shareholders at the AGM.
All the members of the RC are Non-Executive, Independent Directors except for Mr Jiang Li Jun the Vice Chairman and President. The RC is of the view that the presence of Mr Jiang Li Jun would help the RC by providing intimate knowledge of the remuneration policies in the industry the Company is in. No Director is involved in deciding his own remuneration.
LEVEL AND MIX OF REMUNERATION
PRINCIPLE 8
In setting the remuneration packages of the Executive Directors, the RC takes into account the respective performance of the Group and the individual. In its deliberation, the RC takes into consideration, remuneration packages and employment conditions within the industry and benchmarked against comparable companies.
Non-Executive Independent Directors are paid a basic fee and an additional fee for serving on any of the committees. The Chairman of each of these committees is compensated for his additional responsibilities. Such fees are approved by the shareholders of the Company as a lump sum payment at the AGM of the Company.
REMUNERATION COMMITTEE
The RC comprising five Directors, majority of whom including the Chairman is independent. The RC members are as follows:
Er Kwong Wah (Chairman) (Non-Executive Independent)Jiang Li Jun (Non-Independent Executive)Tom Yee Lat Shing (Non-Executive lndependent)Wang Kai Yuen (Non-Executive lndependent)Ang Swee Tian (Non-Executive Independent)
The principal functions of the RC are to:
a) recommend to the Board base salary level, benefits and incentive programmes, and identify components of salary which can best be used to focus management staff on achieving corporate objectives;
b) approve the structure of compensation programme (including but not limited to Directors’ fees, salaries, allowances, bonuses, options and benefits in kind) for the Directors and senior management to ensure that the programme is competitive and sufficient to attract, retain and motivate senior management of the required quality to run the Company successfully;
c) review, on annual basis, the compensation package of the Company’s Directors and senior management personnel and determine appropriate adjustments; and
d) administer the COSCO Group Employees’ Share Option Scheme 2002.
The Company currently adopts a remuneration policy for staff consisting of a fixed component and a variable component. The fixed component is in the form of a base/fixed salary. The variable component is in the form of a variable bonus that is linked to the Company and individual performance. Another element of the variable component is the grant of share options under the COSCO Group Employees’ Share Option Scheme 2002.
40
CORPORATEGORVERNANCE
CORPORATE GOVERNANCEAND TRANSPARENCY
Information on the COSCO Group Employees’ Share Option Scheme 2002 such as size of grants, exercise price of options that were granted as well as outstanding and vesting period of options are set out on pages 76, 77 and 78 of the Annual Report.
The RC held one meeting during the financial year and had on four occasions used circular resolutions in writing to resolve certain decisions which are then recommended to the Board. The issues deliberated at the meeting and through the circular resolutions in writing included reviewing the termination of options granted, extension of exercise period of options granted, the bonus payments to senior management and the compensation programme for the Directors and senior management.
DISCLOSURE ON REMUNERATION
PRINCIPLE 9
DIRECTORS’ AND KEY EXECUTIVES’ REMUNERATION
The Directors’ and key executives’ remuneration table for the financial year ended 31 December 2010 is as follows:
Fees Salary BonusOther
Benefits
Amortisation of Stock Options
Expenses Total
41Annual Report 2010
Non-Independent Executive Directors in the Band of S$500,000 to S$750,000Jiang Li JunMa Gui Chuan
Non-Independent and Non-Executive Director in the Band of S$500,000 to S$750,000Liu De Tian Note 1
Non-Independent and Non-Executive Directors in the Band of below S$500,000 Wang Xing Ru Note 1
Ma Zhi HongLu Cheng Gang
Independent Directors in the Band of below S$500,000Tom Yee Lat ShingWang Kai YuenEr Kwong WahAng Swee Tian
Executives in the Band of below S$500,000 Ye Bin LinLi Jian XiongWong Meng Yun
Note 1: The salary, bonus and other benefits of the incumbent directors are paid by the subsidiaries.
0%0%
0%
0%0%0%
100%100%100%100%
0%0%0%
41.82%47.83%
26.89%
89.00%89.00%
0%
0%0%0%0%
46.83%47.83%54.44%
41.40%38.53%
66.03%
6.79%6.79%100%
0%0%0%0%
37.50%38.31%38.19%
16.78%13.64%
7.08%
4.21%4.21%
0%
0%0%0%0%
15.67%13.86%7.37%
0%0%
0%
0%0%0%
0%0%0%0%
0%0%0%
100%100%
100%
100%100%100%
100%100%100%100%
100%100%100%
No employee of the Company and its subsidiary companies was an immediate family member of a Director and whose remuneration exceeded S$150,000 during the financial year ended 31 December 2010.
Executives’ Remuneration
The Company adopts a remuneration strategy that supports a pay-for-performance philosophy. Executives participate in an annual performance review process that assesses the individual’s performance and contributions.
The remuneration structure for the Group President and other key executives consists of the following components:
Salary
Fixed pay comprises basic salary and the Company’s contribution towards the Singapore Central Provident Fund where applicable.
Bonus
Bonus is paid based on the Company’s and individual’s performance.
Other Benefits
Other benefits comprise of usage of Company’s car and other benefits-in-kind.
Stock Option
Share options are granted to align staff’s interests with that of shareholders’. These options are granted with reference to the desired remuneration structure target and valued based on the Binomial Valuation Model. Details of the share option scheme can be found in the “Directors Report” section of the Annual Report.
C. ACCOUNTABILITY AND AUDIT ACCOUNTABILITY
ACCOUNTABILITY
PRINCIPLE 10
The Board has overall responsibility to shareholders for ensuring that the Group is well managed and guided by its strategic objectives. In presenting the Group’s annual and quarterly financial results to shareholders, the Board aims to provide shareholders with a balanced and understandable assessment of the Group’s performance, position and prospects. Management provides the Board with management accounts and other financial statements on a quarterly basis.
AUDIT COMMITTEE
PRINCIPLE 11
The Audit Committee (“AC”) comprising all Non-Executive Independent Directors are as follows:
Tom Yee Lat Shing (Chairman) (Non-Executive Independent)Wang Kai Yuen (Non-Executive Independent)Er Kwong Wah (Non-Executive Independent)Ang Swee Tian (Non-Executive Independent)
42
CORPORATEGORVERNANCE
CORPORATE GOVERNANCEAND TRANSPARENCY
The AC performs the following functions:
a) reviews with the external auditors, their audit plan, evaluation of the accounting controls, audit reports and any matters which the external auditors wish to discuss;
b) reviews with the internal auditors, their audit plan, the adequacy of the internal audit procedures and their evaluation of the effectiveness of the overall internal control systems, including financial, operational and compliance controls and risk management;
c) reviews the quarterly and annual financial statements, including announcements to shareholders and the SGX-ST prior to submission to the Board so as to ensure the integrity of the Company’s financial statements;
d) reviews any significant findings and recommendations of the external and internal auditors and related management response and assistance given by the management to auditors;
e) reviews interested person transactions to ensure that internal control procedures approved by the shareholders are adhered to; and
f) conducts annual review of the independence and objectivity of the external auditors, including the volume of non-audit services provided by the external auditors, to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors before confirming their re-nomination.
The AC and the Board of Directors, with the assistance of internal audit and external audit, reviews the effectiveness of the key internal controls, including financial, operational and compliance controls, and risk management on an on-going basis. There are formal procedures in place for both the internal and external auditors to report independently their findings and recommendations to the AC.
The AC has full access to, and cooperation from the Management including internal and external auditors, and has full discretion to invite any Director or executive officer to attend its meetings. The AC has also expressed power to investigate any matter brought to its attention, within its terms of reference, with the power to retain professional advice at the Company’s expense.
The Group recognises the importance of the internal audit function which, being independent of Management is one of the principal means by which the AC is able to carry out its responsibilities effectively. The Company has its own Internal Audit function in addition to having Messrs Deloitte & Touche Enterprise Risk Services Pte Ltd as the internal auditors of the Group.
The internal auditors, the in-house and out-sourced incumbents plan their internal audit schedules in consultation with Management and submit their respective plan to the AC for approval. The Internal Auditors, the in-house and outsourced incumbents, report directly to the AC.
The AC conducts regular meetings scheduled on a quarterly basis. Apart from the quarterly meetings, the AC meets with the external and internal auditors, without the presence of the management at least once a year. Ad-hoc meetings may be carried out from time to time, as circumstances require. The AC held nine meetings during the financial year.
The AC, having reviewed the non-audit services provided by the external auditors, PricewaterhouseCoopers LLP, to the Group, is satisfied with the independence and objectivity of the external auditors and recommends to the Board of Directors the nomination of the external auditors for re-appointment.
As for those subsidiaries that were not audited by PricewaterhouseCoopers LLP, the Board and the AC are satisfied that the appointments would not compromise the standard and effectiveness of the audit of the Group.
43Annual Report 2010
Whistle-blowing Policy
The Company has in place a whistle-blowing policy and arrangements by which staff may, in confidence, raise concerns about possible corporate improprieties in matters of financial reporting or other matters. To ensure independent investigation of such matters and for appropriate follow-up action, all whistle-blowing reports are to be sent to the internal audit function. The Chairman of the Audit Committee and the Vice Chairman of the Board will be informed immediately of all whistle-blowing reports received. Details of the whistle-blowing policy and arrangements are given to all staff for their easy reference. New staff is briefed on these during the orientation programme.
INTERNAL CONTROLS
PRINCIPLE 12
The Group maintains a system of internal controls for all companies within the Group, but recognises that no internal control system will preclude all errors and irregularities. The system is designed to manage rather than to eliminate the risk of failure to achieve business objectives. The controls are to provide reasonable, but not absolute, assurance to safeguard shareholders’ investments and the Group’s assets.
The Group’s key internal controls include:
• establishment of risk management policies and systems;• establishments of policies and approval limits for key financial and operational matters, and issues reserved for the
Board;• documents of key processes and procedures;• segregation of incompatible functions which give rise to a risk of errors or irregularities not being promptly detected;
maintenance of proper accounting records;• safeguarding of assets;• ensuring compliance with appropriate legislation and regulations; and• engaging qualified and experience persons to take charge of important functions.
Operational risk management measures implemented by the Group include the implementation of safety, security and internal control measures and taking up appropriate insurance coverage.
Details of the Group’s financial risk management measures are outlined in Note 35 to the Financial Statements.
Based on internal controls established by the Group, work performed by the internal and external auditors, and reviews conducted by the Audit Committee and the Enterprise Management Risk Committee, the Board is of the opinion that the Group has adequate internal controls.
ENTERPRISE RISK MANAGEMENT COMMITTEE
The Enterprise Risk Management Committee (“ERMC”) comprising six Directors, the majority of whom including the Chairman is independent. The ERMC members are:
Ang Swee Tian (Chairman) (Non-Executive Independent)Jiang Li Jun (Non-Independent Executive)Tom Yee Lat Shing (Non-Executive Independent)Wang Kai Yuen (Non-Executive Independent)Er Kwong Wah (Non-Executive Independent)Wang Xing Ru (Non-Independent and Non-Executive) (Appointed on 12 July 2010)Ye Bin Lin (Alternate Director) Liu De Tian (Alternate Director) (Appointed on 12 July 2010)
44
CORPORATEGORVERNANCE
CORPORATE GOVERNANCEAND TRANSPARENCY
The ERMC assists the Board in fulfilling its oversight responsibilities on risk management. The responsibilities of the ERMC would include the following:
• reviews the overall risk management system and process and makes recommendations on changes as and when considered appropriate;
• reviews the Group’s risk policies, guidelines and limits; and• reviews periodically the Group’s material risk exposures and evaluates the adequacy and effectiveness of the
mitigating measures implemented by management.
The ERMC has delegated the day-to-day management of risk within the Group to the Risk Management Committee (“RMC”) of each of its operating subsidiaries. The RMC of each of the subsidiaries comprises senior management staff of each division within the operating subsidiaries.
The ERMC held four meetings during the year at which discussions were held on the existing risk management structure, the key risk exposures of the Group and the action plan to mitigate such risks.
COSCO Shipyard Group continues to have a comprehensive strategic agreement with a leading Chinese insurance institution to strengthen its risk management system and to enhance its operational structure. The said insurance institution has established a team to provide the Group with different facades of insurance for domestic and international trades; setting up a standardised claims and liabilities system; the evaluation of ship owners’ credit ratings, the tracking of ship owners’ risk; and the evaluation of countries’ credit ratings. The Company believes all these efforts are to help the Group to move towards the establishment of an all-encompassing risk management system.
During the financial year the ERMC has engaged the services of Deloitte & Touche Enterprise Risk Services Pte Ltd to provide the following services:
• Review the Group’s Risk Management Existing Policies and Procedures• Review and document risk management practices employed at the Group• Review risk tolerance and limits being in use across the Group• Review the risk reports generated and used by the Group• Identify key areas or risk factors not covered by existing risk management practices• Review existing risk management practices against industry practices• Identify and customise risk management best practices for the Group• Review and recommend appropriate risk management policies and procedures• Review and recommend appropriate risk management reporting package and processes• Training for senior management of the Company and its key subsidiaries
Deloitte & Touche Enterprise Risk Services Pte Ltd had performed a strategic risk profiling in the Group’s major subsidiaries and this has been successfully completed in 2010. As the Group’s enterprise risk management programme is a long-term initiative that calls for commitment and inputs from various stakeholders, a phased implementation of the enterprise risk management policies with guidance from Deloitte & Touche Enterprise Risk Services Pte Ltd are planned to be carried out in a systematic manner coupled with constant education and training of local management staff and risk owners.
INTERNAL AUDIT
PRINCIPLE 13 The internal audit function’s primary line of reporting is to the Chairman of the Audit Committee. Internal Audit is an independent function within the Company. Internal Audit reports directly to the AC and administratively to the President. The Company has also appointed Messrs. Deloitte & Touche Enterprise Risk Services Pte Ltd as the internal auditors of the Group. Based on its review, the Audit Committee believes that the internal auditors, both the in-house and the outsourced internal auditors, are independent and have the appropriate standing to perform its function effectively and objectively.
45Annual Report 2010
D. COMMUNICATION WITH SHAREHOLDERS
REGULAR, EFFECTIVE AND FAIR COMMUNICATION
PRINCIPLE 14
COSCO Corporation strives for timeliness and transparency in its disclosures to the shareholders and the public. All information on the Company’s new initiatives will be first disseminated via SGXNET followed by a news release, where appropriate. The Company currently holds media and analyst briefings upon the release of its quarterly financial results. Management regularly receives visiting fund managers to provide them an insight to the Company’s business and developments, as well as to better understand and address their concerns. In addition to the media and analyst briefings, the Company has taken part in various road shows.
The Company does not practise selective disclosure. Price-sensitive information is first publicly released via SGXNET, either before the Company meets with any group of investors or analysts or simultaneously with such meetings. Results and annual reports are announced or issued within the period prescribed by the SGX-ST.
GREATER SHAREHOLDER PARTICIPATION
PRINCIPLE 15
COSCO Corporation encourages shareholders to participate actively in general meetings. At general meetings of the Company, shareholders are given the opportunity to express their views and ask questions regarding the Company and the Group.
The Company’s Articles of Association allow a shareholder entitled to attend and vote to appoint a proxy who need not be a shareholder of the Company to attend and vote at the meetings.
The Board members and chairpersons of the Audit, Nominating, Remuneration, Enterprise Risk Management and Strategic Development Committees are present and available to address shareholders’ questions at general meetings. The external auditors are also present to address shareholders’ queries relating to the conduct of the audit and the preparation of the auditor’s report.
E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY
The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions with the China Ocean Shipping (Group) Company and its associates, which are covered by a Shareholders’ Mandate approved at each general meeting.
The AC reviews the Shareholders’ Mandate at regular intervals, and is satisfied that the review procedures for IPTs and the reviews to be made periodically by the AC in relation thereto are adequate to ensure that the IPTs will be transacted on normal terms and will not be prejudicial to the interests of the Company and its minority shareholders.
46
CORPORATEGORVERNANCE
CORPORATE GOVERNANCEAND TRANSPARENCY
47Annual Report 2010
Name of Interested Person
Aggregate value of all interested person
transactions during the financial period under review
(excluding transactions less than $100,000 and transactions conducted
under shareholders’ mandate pursuant to Rule 920)
Aggregate value of all interested person
transactions conducted under shareholders’ mandate
pursuant to Rule 920 (excluding transactions less
than $100,000)
Between Subsidiaries and:
Chimbusco (S) Pte LtdChimbusco Dalian BranchChimbusco Guangzhou BranchChimbusco Lianyungang BranchChimbusco Shanghai BranchChimbusco Zhoushan BranchCosbulk International Trading Co., LtdCosco (Cayman) Mercury Co., LtdCosco (HK) Shipping Co., LtdCosco Bulk Carrier Co., LtdCosco Bulk Carrier Holdings (Cayman) LimitedCosco Container Lines Co., LtdCosco Finance Co., LtdCosco International Trade LtdCosco Jiangsu International Freight Co.Cosco Nantong Steel Co., LtdCosco Shanghai Ship Management Co., LtdCosco Shipping Co., LtdDalian Ocean Shipping CompanyDalian Yuan Chang Shipping Co., LtdFreightworld Pte LtdGuangzhou Ocean Shipping CompanyNantong Chimbusco Marine BunkerNantong Cosco Ship Equipment CompanyNantong Yuantong Container Warehouse and Transportation Co., LtdQingdao Manning Co-operation LtdQingdao Ocean Shipping CompanyShanghai Cosco-Shokuyu Shipping CompanyShanghai Ocean Crew Co., LtdShanghai Ocean International Trading Co., LtdShanghai Ocean Shipping CompanyShenzhen Ocean Shipping CompanyTianjin Tianhui Shipping & Enterprise Co., LtdTianjin Yuanhua Shipping Co., LtdTosco Keymax International Ship Management Co., LtdXiamen Ocean Shipping CompanyYuanTong Marine Service Co.Total
S$’000
--------------------
11,650---
-------------
11,650
S$’000
52810,5046,994
969441
7,708808242
3,97212,63713,86610,408
453,925101433
19,3984,754
1382,940
959 -
25,2722,0096,513
4322,3261,984
1215,277
5736,404
6902,071
380150925101
606,953
E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY (continued)
As At 31/12/2010 As At 31/12/2009S$’000 S$’000
Balances placed with a fellow subsidiary, Cosco Finance Co., Ltd:- Cash at bank 85,045 168,493- Short-term bank deposits 388,500 616,031
473,545 784,524
F. DEALING IN SECURITIES
In line with Chapter 12 Rule 1207(18) of the Listing Manual of SGX-ST on dealings in securities, the Company has adopted an internal compliance code which mirrors substantially the provisions of the said rule to provide guidance to its Directors and officers in relation to dealings in its securities.
The Company’s Code prohibits securities dealings by the Directors and employees while in possession of price-sensitive information. The Company issues regular circulars to its Directors, principal officers and relevant officers who have access to unpublished material price-sensitive information to remind them of the aforementioned prohibition and to remind them of the requirement to report their dealings in shares of the Company. The Directors and employees are also prohibited from dealing in the securities of the Company during the period commencing two weeks before the announcement of financial results of the Company for each of the first, second and third quarters of its financial year or one month before the financial year, as the case may be, and ending on the date of the announcement of the relevant results.
48
CORPORATEGORVERNANCE
CORPORATE GOVERNANCEAND TRANSPARENCY
E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY (continued)
49Annual Report 2010
CORPORATEINFORMATION
Audit CommitteeTom Yee Lat Shing ChairmanWang Kai YuenEr Kwong WahAng Swee Tian
Remuneration CommitteeEr Kwong Wah ChairmanJiang Li JunTom Yee Lat ShingWang Kai YuenAng Swee Tian
Nominating CommitteeWang Kai Yuen ChairmanJiang Li JunTom Yee Lat ShingEr Kwong WahAng Swee Tian
Enterprise Risk Management CommitteeAng Swee Tian ChairmanJiang Li JunTom Yee Lat ShingWang Kai YuenEr Kwong WahYe Bin LinWang Xing Ru (Appointed on 12 July 2010)Liu De Tian (Appointed on 12 July 2010)
Strategic Development CommitteeJiang Li Jun ChairmanLiu Guo Yuan (Appointed on 3 March 2011)Tom Yee Lat ShingWang Kai YuenEr Kwong WahAng Swee Tian
Registered Office and Business Contact Information9 Temasek Boulevard#07-00 Suntec Tower TwoSingapore 038989Telephone: 6885 0888Fascimile: 6336 9006Website: www.cosco.com.sg
Company Registration Number196100159G
AuditorsPricewaterhouseCoopers LLP8 Cross Street #17-00PWC BuildingSingapore 048424Partner-in-charge:Tham Tuck Seng (since FY2007)
Company SecretariesLawrence KwanLow Siew Tian
Share Registrar and Share Transfer OfficeTricor Barbinder Share Registration Services (A division of Tricor Singapore Pte Ltd)8 Cross Street #11- 00PWC BuildingSingapore 048424Telephone: 6236 3333Facsimile: 6236 4399
Board of DirectorsLiu Guo Yuan Chairman and Non-Independent and Non-Executive DirectorJiang Li Jun Vice Chairman, President and Non-Independent Executive DirectorMa Gui Chuan Non-Independent Executive DirectorWang Hai Min Non-Independent and Non-Executive DirectorWang Xing Ru Non-Independent and Non-Executive DirectorMa Zhi Hong Non-Independent and Non-Executive DirectorTom Yee Lat Shing Non-Executive Independent DirectorWang Kai Yuen Non-Executive Independent DirectorEr Kwong Wah Non-Executive Independent DirectorAng Swee Tian Non-Executive Independent Director
Ang Swee Tian, Tom Yee Lat Shing, Wang Hai Min, Liu Guo Yuan, Wang Kai Yuen, Ma Gui Chuan, Er Kwong Wah,
Jiang Li Jun, Wang Xing Ru and Ma Zhi Hong
CORPORATE GOVERNANCEAND TRANSPARENCY
50
BOARD OF DIRECTORS
From left to right:
Annual Report 2010
Liu Guo Yuan
Chairman, Non-Independent and
Non-Executive Director
Mr Liu Guo Yuan has been appointed as the Chairman, Non-
Independent and Non-Executive Director of the Company
in place of Mr Li Jian Hong with effect from 1 September
2010.
Mr Liu Guo Yuan, born in 1951, started his career in 1975.
Currently, Mr Liu is General Counsel/Chief Legal Officer of
COSCO Group head office and China COSCO Holdings
Company Ltd. He is also a certified senior economist and an
arbitrator of the China Arbitration commission.
In 1975, Mr Liu graduated from Beijing Foreign Languages
Institute and joined COSCO H.Q. as a fleet operation planner
in the shipping department. From 1980 to 1982, he studied
and acquired master degree (LLM) in the Law School of
University of Washington Seattle U.S.A. Since 1982, he
had worked as manager, director and deputy managing
director in departments of Shipping, Law & Policy Research,
Administration, Corporate Planning & Strategy. In early
1990s, he was promoted as the Senior Commercial Director
of COSCO H.Q.
In 1993 he became the deputy managing director of COSCO
Tianjin. From 1998 to 2000, he was vice president and
president of COSCO Europe.
From 2000 to 2008, Mr Liu was nominated separately the
Executive Vice-Chairman & President of COSCO (Hong
Kong) Group Ltd., the Executive Vice Chairman of COSCO
International Holdings Ltd (HKEX 517), Executive Director &
Vice Chairman of COSCO Pacific Ltd. (HKEX 1199), a Non-
Executive Director of China COSCO Holdings Company Ltd
(HKEX 1919) and a Non-executive director of the Chong Hing
Bank Ltd (HKEX 1111), Chairman and Executive Director
of COSCO (H.K.) Shipping Co., Ltd. Etc. Mr Liu was also
nominated by the HKSAR Government member of Hong
Kong Port Development Council, the Hong Kong Maritime
Industry Council, the Hong Kong LOGSCOUNCIL, and an
Investment Promotion Ambassador (IPA) He was the Vice
Chairman of Hong Kong Shipowners’ Association, Vice
Chairman of the Hong Kong Chinese Enterprises Association
as well as a Council member of the Hong Kong General
Chamber of Commerce and the Hong Kong Management
Association. On July 1st 2007, Mr Liu was appointed by
HKSAR Chief Executive as the Justice of Peace (JP).
Jiang Li JunVice Chairman, President and
Non-Independent Executive Director
Mr Jiang Li Jun was appointed as Vice Chairman and
President of COSCO Corporation (Singapore) Limited in
2008. Mr Jiang joined COSCO as an accountant upon his
graduation in December 1974. He has held various positions
within the COSCO Group, including accounting manager
of COSCO (Group) Company, SINOTASHIP, Chung Ling
Shipping (Japan) Co., Ltd, Yick Fung Shipping (HK) Co., Ltd.,
Deputy General Manager of Florence Container (HK) Co.,
Ltd and COSCO Pacific Co., Ltd (a public listed Company in
Hong Kong), and Chief Executive Officer of COSCO Shipping
Co., Ltd (a public listed Company in Shanghai ‘A’ shares).
Mr Jiang had also been the head of Finance Department
and Deputy General Manager of Operation Department of
COSCO Japan Co., Ltd, General Manager of COSUZ Co.,
Ltd as well as Deputy Chief Financial Officer of COSCO
Container Lines Ltd.
Mr Jiang holds an MBA degree from the University of
Shanghai. He has extensive experience in the management
of listed companies and corporate financial management.
51
Ma Gui ChuanNon-Independent Executive Director
Mr Ma Gui Chuan was elected as Non-Independent Executive
Director on 10 January 2007. He joined the COSCO Group in
1978 and was appointed the Chairman of the Union of COSCO
Group in 1998. Currently, he is the Chairman of COSCO
Holdings (S) Pte Ltd. He was involved in the management of
the Qingdao Ocean Shipping Company for many years and
became the person-in-charge of Qingdao Ocean Shipping
Mariner’s College in 1994. From 2001 to 2003, he was a
standing member of CPC Committee and Deputy Mayor of
Yinchuan, Ningxia. In 2003, Mr Ma was elected an executive
committee member of the 14th national representatives
congress of All-China Federation of Trade Unions. He had
nearly 30 years of experience in the shipping industry and
extensive experience in ship and crew management.
Mr Ma graduated from Dalian Maritime University majoring
in engineering management and from Capital University of
Economics and Business with postgraduate qualifications in
business administration.
Wang Hai MinNon-Independent and Non-Executive Director
Mr Wang Hai Min has been appointed as a Non-Independent
Non-Executive Director of the Company in place of Mr Zhang
Liang with effect from 2 August 2010.
Mr Wang Hai Min, born in July 1972, graduated from
Shanghai Fudan University with a MBA degree. He joined
COSCO Container Lines in July 1995 and worked in this
company until January 2010. Over these years, Mr Wang
had worked in different positions of staff, assistant manager,
deputy manager, manager, senior manager and department
head with growing responsibilities on cooperated shipping
services and strategic planning. From June 2006 to January
2010, he was the general manager of the strategic planning
department. In January 2010, Mr Wang was transferred to
Beijing and became the general manager of transportation
division in COSCO Group head office.
Wang Xing RuNon-Independent and Non-Executive Director
Mr Wang Xing Ru was appointed as a Non-Independent and
Non-Executive Director of COSCO Corporation (Singapore)
Limited in February 2006. He has been the Managing Director
of COSCO Shipyard Group Ltd since 2001. Prior to that, Mr
Wang was Executive Director of COSCO Co-Development
(Tianjin) Co., Ltd and Vice President of COSCO Industry
Co. Mr Wang was elected as President of the ship repair
branch of China Shipbuilding Industry Association, and Vice
President of China Shipbuilding Industry Association in 2006.
Mr Wang was awarded “the leading persons of China’s ship
repair and ship-breaking industry” in 2007, and was awarded
“National Medal for Labor Day” by All-China Federation of
Trade Unions. Mr Wang graduated from Shandong Industrial
University in 1991, majoring in machinery manufacturing. Mr
Wang holds a Master of Engineering degree. He has a wealth
of professional experience in shipyard business and assets
operation. He is a senior engineer.
Ma Zhi HongNon-Independent and Non-Executive Director
Mr Ma Zhi Hong has been appointed as a Non-Independent
Non-Executive Director of the Company in place of Mdm Sun
Yue Ying with effect from 2 August 2010.
Mr Ma Zhi Hong, born in March 1957, graduated from Dalian
Maritime University with a doctorate degree. He joined
COSCO in July 1979. Over the past 30 and more years, Mr Ma
has worked as an engineer on-board ships, chief engineering
superintendent of COSCO Container Lines, deputy director
of COSCO Bulk, assistant president of COSCO Group head
office, vice president of COSCO Hong Kong and deputy
managing director of COSCO Shipyard Group.
52CORPORATE GOVERNANCEAND TRANSPARENCY
BOARD OF DIRECTORS
Ma Gui ChuanNon-Independent Executive Director
Mr Ma Gui Chuan was elected as Non-Independent Executive
Director on 10 January 2007. He joined the COSCO Group in
1978 and was appointed the Chairman of the Union of COSCO
Group in 1998. Currently, he is the Chairman of COSCO
Holdings (S) Pte Ltd. He was involved in the management of
the Qingdao Ocean Shipping Company for many years and
became the person-in-charge of Qingdao Ocean Shipping
Mariner’s College in 1994. From 2001 to 2003, he was a
standing member of CPC Committee and Deputy Mayor of
Yinchuan, Ningxia. In 2003, Mr Ma was elected an executive
committee member of the 14th national representatives
congress of All-China Federation of Trade Unions. He had
nearly 30 years of experience in the shipping industry and
extensive experience in ship and crew management.
Mr Ma graduated from Dalian Maritime University majoring
in engineering management and from Capital University of
Economics and Business with postgraduate qualifications in
business administration.
Wang Hai MinNon-Independent and Non-Executive Director
Mr Wang Hai Min has been appointed as a Non-Independent
Non-Executive Director of the Company in place of Mr Zhang
Liang with effect from 2 August 2010.
Mr Wang Hai Min, born in July 1972, graduated from
Shanghai Fudan University with a MBA degree. He joined
COSCO Container Lines in July 1995 and worked in this
company until January 2010. Over these years, Mr Wang
had worked in different positions of staff, assistant manager,
deputy manager, manager, senior manager and department
head with growing responsibilities on cooperated shipping
services and strategic planning. From June 2006 to January
2010, he was the general manager of the strategic planning
department. In January 2010, Mr Wang was transferred to
Beijing and became the general manager of transportation
division in COSCO Group head office.
Wang Xing RuNon-Independent and Non-Executive Director
Mr Wang Xing Ru was appointed as a Non-Independent and
Non-Executive Director of COSCO Corporation (Singapore)
Limited in February 2006. He has been the Managing Director
of COSCO Shipyard Group Ltd since 2001. Prior to that, Mr
Wang was Executive Director of COSCO Co-Development
(Tianjin) Co., Ltd and Vice President of COSCO Industry
Co. Mr Wang was elected as President of the ship repair
branch of China Shipbuilding Industry Association, and Vice
President of China Shipbuilding Industry Association in 2006.
Mr Wang was awarded “the leading persons of China’s ship
repair and ship-breaking industry” in 2007, and was awarded
“National Medal for Labor Day” by All-China Federation of
Trade Unions. Mr Wang graduated from Shandong Industrial
University in 1991, majoring in machinery manufacturing. Mr
Wang holds a Master of Engineering degree. He has a wealth
of professional experience in shipyard business and assets
operation. He is a senior engineer.
Ma Zhi HongNon-Independent and Non-Executive Director
Mr Ma Zhi Hong has been appointed as a Non-Independent
Non-Executive Director of the Company in place of Mdm Sun
Yue Ying with effect from 2 August 2010.
Mr Ma Zhi Hong, born in March 1957, graduated from Dalian
Maritime University with a doctorate degree. He joined
COSCO in July 1979. Over the past 30 and more years, Mr Ma
has worked as an engineer on-board ships, chief engineering
superintendent of COSCO Container Lines, deputy director
of COSCO Bulk, assistant president of COSCO Group head
office, vice president of COSCO Hong Kong and deputy
managing director of COSCO Shipyard Group.
Annual Report 2010
53
Er Kwong WahNon-Executive Independent Director
Mr Er Kwong Wah was appointed as an Independent
Director on 20 December 2002. He chairs the Remuneration
Committee and is a member of the Audit, Nominating,
Enterprise Risk Management and Strategic Development
Committee. A Colombo Plan and Bank of Tokyo Scholar,
Mr Er obtained a first class honours degree in Electrical
Engineering at the University of Toronto, Canada, in 1970
and an MBA from the Manchester Business School of the
University of Manchester, UK in 1978.
Mr Er spent 27 years in the Singapore Civil Service and served
in various departments including the Ministry of Defense,
Public Service Commission, Ministry of Finance, Ministry of
Education and Ministry of Community Development. He was
Permanent Secretary in the Ministry of Education from 1987-
1994, and then in the Ministry of Community Development
until his retirement in 1998.
Currently, he is an Executive Director of the East Asia
Institute of Management, as well as an Independent Director
on the Boards of several public listed companies such as
Unidux Electronics Ltd, Firstlink Investment Corporation
Ltd, Hartawan Holdings Ltd, China Sky Chemical Fiber Co.,
Ltd, China Essence Group Ltd, China Oilfield Technology
Services Group Ltd, Eucon Holding Ltd and Van Der Horst
energy Ltd.
For his outstanding service in the Government and in the
community, Mr Er was awarded the PPA(E) or Public
Administration Medal (Gold), the BBM (Public Service Star)
and the PBM (Public Service Medal). In 1991, the Government
of France conferred him a National Honour with the award of
Commandeur dans l’Ordre des Palmes Academiques.
Ang Swee TianNon-Executive Independent Director
Mr Ang Swee Tian is a Non-Executive and Independent
Director of COSCO Corporation (Singapore) Limited. He
chairs the Enterprise Risk Management Committee and
is a member of the Audit, Remuneration, Nominating and
Strategic Development Committees.
Mr Ang was the President of Singapore Exchange Ltd
(“SGX”) from 1999 to 2005 during which he played an
active role in successfully promoting SGX as a preferred
listing and capital raising venue for Chinese enterprises.
Mr Ang also played a pivotal role in establishing Asia’s first
financial futures exchange, the Singapore International
Monetary Exchange (“SIMEX”) in Singapore in 1984 and was
instrumental to establishing SGX AsiaClear which started
offering OTC clearing facility in 2006. Following his retirement
in January 2006, Mr Ang served as Senior Adviser to SGX
until December 2007.
In March 2007, Mr Ang became the first person from an
Asian Exchange to be inducted into the Futures Industry
Association’s Futures Hall of Fame which was established
to honour and recognise outstanding individuals for their
contributions to the global futures and options industry.
Mr Ang graduated from Nanyang University of Singapore with
a First-Class Honours Degree in Accountancy in 1970. He
was conferred a Master Degree in Business Administration
with distinction by the Northwestern University in 1973.
Tom Yee Lat ShingNon-Executive Independent Director
Mr Tom Yee Lat Shing was appointed to the Board on 15
December 1993. He is a Non-Executive and Independent
Director and was last re-elected as Director on 20 April 2010.
He is Chairman of the Company’s Audit Committee and
member of the Nominating, Enterprise Risk Management,
Remuneration and Strategic Development Committees. Mr
Yee is a Certified Public Accountant and was a partner of an
international public accounting firm from 1974 to 1989. He has
more than 35 years of experience in the field of accounting
and auditing and extensive experience in handling major
audit assignments of public listed and private companies
in various industries, including insurance, manufacturing
and retailing. He is currently a consultant. Mr Yee sits on
the boards of several Singapore listed companies. He is a
fellow member of the Institute of Chartered Accountants
in Australia, CPA (Australia), Institute of Certified Public
Accountants Singapore and an associate member of the
Institute of Chartered Secretaries and Administrators. He
is also a council member of the Institute of Certified Public
Accountants Singapore.
Wang Kai YuenNon-Executive Independent Director
Dr Wang Kai Yuen was appointed as an Independent Director
on 2 May 2001. He chairs the Nominating Committee and
is a member of the Audit, Enterprise Risk Management,
Remuneration and Strategic Development Committee. Dr
Wang served as a Member of Parliament for the Bukit Timah
Constituency from December 1984 till April 2006. He was
the Chairman of Feedback Unit from 2002 till his retirement
from politics. He retired as the Centre Manager of Fuji Xerox
Singapore Software Centre in Dec 2009. Dr Wang also holds
directorships at ComfortDelgro Group Ltd, CAO (Singapore)
Corporation Ltd, Asian Micro Holdings Ltd, Ezion Holdings
Ltd, Xpress Holdings Ltd, Matex International Ltd, and
others. He graduated from the University of Singapore with
a First Class Honours degree in Electrical and Electronics
engineering.
Dr Wang holds a Master of Science in Electrical Engineering,
a Master of Science in Industrial Engineering and a PhD in
Engineering from Stanford University, USA. He received a
Friend of Labour Award in 1988 for his contributions to the
Singapore labour movement.
54CORPORATE GOVERNANCEAND TRANSPARENCY
BOARD OF DIRECTORS
Er Kwong WahNon-Executive Independent Director
Mr Er Kwong Wah was appointed as an Independent
Director on 20 December 2002. He chairs the Remuneration
Committee and is a member of the Audit, Nominating,
Enterprise Risk Management and Strategic Development
Committee. A Colombo Plan and Bank of Tokyo Scholar,
Mr Er obtained a first class honours degree in Electrical
Engineering at the University of Toronto, Canada, in 1970
and an MBA from the Manchester Business School of the
University of Manchester, UK in 1978.
Mr Er spent 27 years in the Singapore Civil Service and served
in various departments including the Ministry of Defense,
Public Service Commission, Ministry of Finance, Ministry of
Education and Ministry of Community Development. He was
Permanent Secretary in the Ministry of Education from 1987-
1994, and then in the Ministry of Community Development
until his retirement in 1998.
Currently, he is an Executive Director of the East Asia
Institute of Management, as well as an Independent Director
on the Boards of several public listed companies such as
Unidux Electronics Ltd, Firstlink Investment Corporation
Ltd, Hartawan Holdings Ltd, China Sky Chemical Fiber Co.,
Ltd, China Essence Group Ltd, China Oilfield Technology
Services Group Ltd, Eucon Holding Ltd and Van Der Horst
energy Ltd.
For his outstanding service in the Government and in the
community, Mr Er was awarded the PPA(E) or Public
Administration Medal (Gold), the BBM (Public Service Star)
and the PBM (Public Service Medal). In 1991, the Government
of France conferred him a National Honour with the award of
Commandeur dans l’Ordre des Palmes Academiques.
Ang Swee TianNon-Executive Independent Director
Mr Ang Swee Tian is a Non-Executive and Independent
Director of COSCO Corporation (Singapore) Limited. He
chairs the Enterprise Risk Management Committee and
is a member of the Audit, Remuneration, Nominating and
Strategic Development Committees.
Mr Ang was the President of Singapore Exchange Ltd
(“SGX”) from 1999 to 2005 during which he played an
active role in successfully promoting SGX as a preferred
listing and capital raising venue for Chinese enterprises.
Mr Ang also played a pivotal role in establishing Asia’s first
financial futures exchange, the Singapore International
Monetary Exchange (“SIMEX”) in Singapore in 1984 and was
instrumental to establishing SGX AsiaClear which started
offering OTC clearing facility in 2006. Following his retirement
in January 2006, Mr Ang served as Senior Adviser to SGX
until December 2007.
In March 2007, Mr Ang became the first person from an
Asian Exchange to be inducted into the Futures Industry
Association’s Futures Hall of Fame which was established
to honour and recognise outstanding individuals for their
contributions to the global futures and options industry.
Mr Ang graduated from Nanyang University of Singapore with
a First-Class Honours Degree in Accountancy in 1970. He
was conferred a Master Degree in Business Administration
with distinction by the Northwestern University in 1973.
Tom Yee Lat ShingNon-Executive Independent Director
Mr Tom Yee Lat Shing was appointed to the Board on 15
December 1993. He is a Non-Executive and Independent
Director and was last re-elected as Director on 20 April 2010.
He is Chairman of the Company’s Audit Committee and
member of the Nominating, Enterprise Risk Management,
Remuneration and Strategic Development Committees. Mr
Yee is a Certified Public Accountant and was a partner of an
international public accounting firm from 1974 to 1989. He has
more than 35 years of experience in the field of accounting
and auditing and extensive experience in handling major
audit assignments of public listed and private companies
in various industries, including insurance, manufacturing
and retailing. He is currently a consultant. Mr Yee sits on
the boards of several Singapore listed companies. He is a
fellow member of the Institute of Chartered Accountants
in Australia, CPA (Australia), Institute of Certified Public
Accountants Singapore and an associate member of the
Institute of Chartered Secretaries and Administrators. He
is also a council member of the Institute of Certified Public
Accountants Singapore.
Wang Kai YuenNon-Executive Independent Director
Dr Wang Kai Yuen was appointed as an Independent Director
on 2 May 2001. He chairs the Nominating Committee and
is a member of the Audit, Enterprise Risk Management,
Remuneration and Strategic Development Committee. Dr
Wang served as a Member of Parliament for the Bukit Timah
Constituency from December 1984 till April 2006. He was
the Chairman of Feedback Unit from 2002 till his retirement
from politics. He retired as the Centre Manager of Fuji Xerox
Singapore Software Centre in Dec 2009. Dr Wang also holds
directorships at ComfortDelgro Group Ltd, CAO (Singapore)
Corporation Ltd, Asian Micro Holdings Ltd, Ezion Holdings
Ltd, Xpress Holdings Ltd, Matex International Ltd, and
others. He graduated from the University of Singapore with
a First Class Honours degree in Electrical and Electronics
engineering.
Dr Wang holds a Master of Science in Electrical Engineering,
a Master of Science in Industrial Engineering and a PhD in
Engineering from Stanford University, USA. He received a
Friend of Labour Award in 1988 for his contributions to the
Singapore labour movement.
Annual Report 2010
55
KEY MANAGEMENT
56CORPORATE GOVERNANCEAND TRANSPARENCY
Wong Meng Yun, Li Jian Xiong, Jiang Li Jun and Ye Bin LinFrom left to right:
Jiang Li JunVice Chairman, President,
and Non-Independent Executive Director
Mr Jiang Li Jun was appointed as Vice Chairman and
President of COSCO Corporation (Singapore) Limited in
2008. Mr Jiang joined COSCO as an accountant upon his
graduation in December 1974. He has held various positions
within the COSCO Group, including accounting manager
of COSCO (Group) Company, SINOTASHIP, Chung Ling
Shipping (Japan) Co., Ltd, Yick Fung Shipping (HK) Co., Ltd.,
Deputy General Manager of Florence Container (HK) Co.,
Ltd and COSCO Pacific Co., Ltd (a public listed Company in
Hong Kong), and Chief Executive Officer of COSCO Shipping
Co., Ltd (a public listed Company in Shanghai ‘A’ shares).
Mr Jiang had also been the head of Finance Department
and Deputy General Manager of Operation Department of
COSCO Japan Co., Ltd, General Manager of COSUZ Co., Ltd
as well as Deputy Chief Financial Officer of COSCO Container
Lines Ltd.
Mr Jiang holds an MBA degree from the University of
Shanghai. He has extensive experience in the management
of listed companies and corporate financial management.
Li Jian XiongVice President
Mr Li Jian Xiong has rich knowledge and experience in
shipping management and business operation. From 1997
to 2001, Mr Li served as Deputy Managing Director of HK
Yu Hang Investment Ltd; Managing Director of COSCO
Container Service Ltd; Deputy General Manager of COSCO
Pacific Ltd (Listed Company in HK) and Deputy Managing
Director of COSCO Pacific (China) Investment Co., Ltd. He
also served as the Vice Chairman of Zhangjiagang Win
Hanverky Container Terminals Co. Ltd. and the director of
various COSCO subsidiary companies in China.
Mr Li joined COSCO Corporation (S) Ltd. in April 2001 as
Vice President. In 2009, he became the director of Investor
Relations Professionals Association (Singapore) (IRPAS). He
is currently also the director of COSCO Marine (S) Ltd.
Mr Li graduated from Qingdao Ocean Shipping Mariners’
College and received his MBA from Shanghai Jiao Tong
University.
Ye Bin LinChief Financial Officer
Mr Ye Bin Lin has extensive experience in finance and
corporate financial management. From 1993 to 1998, Mr
Ye was the finance manager of accounting department of
COSCO Container Lines Co., Ltd. From 1998 to 2001, he was
the general financial manager of COSCO Germany Shipping
Agencies GMBH.
Mr Ye joined COSCO Corporation (S) Ltd. as finance director
in August 2001 and was re-designated Chief Financial Officer
of the company on 14 April 2008.
Wong Meng YunFinancial Controller
Mr Wong Meng Yun has more than 25 years of professional
and leadership experience in financial management, corporate
finance, internal & external audit and treasury management
of which 12 years were in a senior regional management
position with a leading US-listed software company prior to
his joining the Group in July 2008.
He graduated from the University of Singapore with a
Bachelor of Accountancy and is a Fellow of the Association of
Chartered Certified Accountants, CPA Australia, the Institute
of Certified Public Accountants of Singapore, the Chartered
Institute of Arbitrators, the Institute of Arbitrators & Mediators
Australia and the Singapore Institute of Arbitrators.
He is a Certified Treasury Professional (CTP) with the
Association for Financial Professionals, a Certified Internal
Auditor (CIA) and a Certified Financial Services Auditor
(CFSA) with the Institute of Internal Auditors, as well as, a
Certified Information Systems Auditor (CISA) and a Certified
Information Security Manager (CISM) with the Information
Systems Audit and Control Association (ISACA).
Annual Report 2010
57
Artist’s impression of COSCO Qidong shipyard which specialises in offshore marine engineering.
WE ARE CLOSER TO THE FUTURE WE ENVISIONWith our wide offerings, we have a solid foundation for long-term expansion. The value we are creating will enable us to realise our vision to be a diversified marine conglomerate providing Ship Repair and Conversion, Ship Building and Offshore Marine Engineering.
INVESTOR RELATIONS
At COSCO Corporation, Investor
Relations (IR) is a key component of
our strategy to develop as a global
marine conglomerate and a leading
corporate entity. Building on our
strong and accountable leadership,
we practice effective corporate
governance, regular performance
reporting and clear and timely investor
communications. In this regard,
we strive to provide frequent and
substantive corporate disclosure
through an active investor relations
programme.
Our pro-active investor relations
engagement has generated strong
interest in our stock. As a testament
to widespread shareholder interest,
we have been included in the FTSE
ST China Index since January
2008, and in the FTSE China Top
Index since July 2008. Both these
indexes were created to reflect the
increasing representation of China-
based companies on the Singapore
stock market and offer investors
simple vehicles through which they
can participate in the potential growth
of highly liquid, locally-listed China
companies.
Active EngagementAs a widely traded stock included
in many indexes, we understand
the importance of timely and
pertinent corporate disclosure. Over
the year in review, we undertook
announcements covering contracts
won, quarterly results, growth
strategies, operational commentaries
and our business outlook. We
frequently interact with the investment
community of shareholders, stock
brokerages, banks and other financial
institutions to discuss, elaborate
and disseminate information about
COSCO Corporation. We also engage
the media and the general public
through media interviews and news
reports on a variety of media platforms
such as newswires, print, broadcast,
investor meetings and roadshows, and
dialogue with shareholders at Annual
General Meetings.
During the year in review, we have
held many meetings with investors.
Our investor relations activities also
include meetings with fund managers
and shareholders, results briefings for
every financial quarter, and investment
briefings. Over FY2010, we engaged
all senior management members of
COSCO Corporation through various
meetings and events. In addition,
over 300 shareholders attended our
Annual General Meeting in April 2010.
60CORPORATE GOVERNANCEAND TRANSPARENCY
Annual Report 2010
61
Analyst
Ajay Mirchandani
Alfred Low
Alex Goh
Cheryl Lee
Chua Jen-Ai
Chong Wee Lee
Gerald Wong
Ho Pei Hwa
Janice Chua
Kevin Chong
Lim Siew Khee
Lisa Lee
Low Horng Han
Low Pei Han
Nancy Wei
Neel Sinha
Rohan Suppiah
Company
JP Morgan
Phillip Securities
AmResearch
UBS
CLSA
Merrill Lynch
Credit Suisse
DBS Vickers
DBS Vickers
Deutsche Bank
CIMB
Nomura Securities
CITI
OCBC Research
UOB Kay Hian
HSBC
Kim Eng Securities
INVESTOR RELATIONS
62CORPORATE GOVERNANCEAND TRANSPARENCY
Major IR Events in 2010
Date
13 January
22 February
10 – 11 March
20 April
23 April
6 May
10 – 11 May
19 – 20 May
24 – 25 May
7 July
2 August
3 August
11 August
19 – 20 August
1 – 2 September
29 September
5 October
20 – 22 October
3 November
4 November
9 – 10 November
16 – 18 November
Event
DBS Vickers Pulse of Asia Conference 2010
FY2009 results briefing
DAIWA Securities investor conference
FY2009 Annual General Meeting
DBS Vickers Hong Kong investor briefing
1QFY10 results briefing
Deustche Bank investor conference
Bank of America Merrill Lynch investor conference
DBS Vickers investor conference
DBS Vickers investor conference
2QFY10 results briefing
Bank of America Merrill Lynch briefing
CITI investor conference
CLSA investor conference
UBS investor conference
DAIWA investor conference
Awarded SIAS Investors’ Choice Award
CITI investor conference
3QFY10 results briefing
DBS Vickers briefing
Morgan Stanley investor conference
DAIWA investor conference
63Annual Report 2010
IR Awards 2010For the 2nd consecutive year, the Securities
Investors Association of Singapore selected
COSCO Corporation as the “Most Transparent
Company” in the overseas company category
at its “SIAS 11th Investors’ Choice Award
2010”, held in Singapore on 5 October 2010.
This award, as well as other previous
accolades, recognise our continuous efforts
in corporate governance and disclosure,
regular communications and investor
engagement. Looking forward, we intend to
continue active investor relations and further
improve our standards, understanding its
integral importance in generating long-term
sustainable shareholder value.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1.200
1.400
1.600
1.800
2.000
2.200
3300
3200
2.140
3190.04
3100
3000
2900
2800
2700
2600 1450
1500
1550
1600
1650
1700
1750
1800
1850
1762.52
FY2010
Last PriceCOS SP Equity [R1] 2.140 +.010FSSTI Index [R2] 319004 -22.42MXSG Index [R3] 1762.52 -14.65
RISK MANAGEMENT
Risk factors
IntroductionThe Group, like all businesses, is
exposed to a variety of risks and
uncertainties which can have material
and adverse effects on its reputation,
performance and financial condition. It
is not possible to identify or anticipate
every risk that may affect the Group.
Some material risks may not be
known, others, currently deemed as
immaterial, could become material
and new risks may emerge.
The Group’s risk management
process is described below. It aims to
identify the risk factors that may have
a material impact on the Group, and to
manage them appropriately.
The material risk factors identified by
the Group’s risk management process
are set out below. Each of these could
have a material and adverse effect on
the Group, including on its reputation,
performance and financial condition.
They have been divided into four
categories: external risks; internal
risks; execution risks; and financial
risks.
Risk management processThe Group’s process for identifying
and managing risk is set by the
Board through the Enterprise Risk
Management Committee (“ERMC”).
The ERMC has delegated the day-
to-day management of risk within
the Group to the Risk Management
Committee (“RMC”) of each of
its operating subsidiaries. The
RMC of each of the subsidiaries
comprises senior management staff
of each division within the operating
subsidiaries.
The ERMC also engages the services
of Deloitte & Touche Enterprise
Risk Services Pte Ltd to perform
strategic risk profiling in the Group’s
major subsidiaries and this has been
successfully completed in 2010. As the
Group’s enterprise risk management
program is a long-term initiative that
calls for commitment and inputs
from various stakeholders, a phased
implementation of the enterprise risk
management policies with guidance
from Deloitte & Touche Enterprise
Risk Services Pte Ltd are planned to
be carried out in a systematic manner
coupled with constant education and
training of local management staff and
risk owners.
The Board currently conducts
periodical reviews of the Group risks,
during which it identifies the key risks
for the year ahead. As part of this
review, operational and strategic risks
are proposed as key risks by the RMC,
based on inputs from regions, function
heads and business leaders. The Risk
Factors set out below reflect the key
risks identified as part of this process.
Each of the key risks is assigned to the
Chairman of the RMC at the operating
subsidiaries who proposes a level of
risk the Group is willing to take and
develops an appropriate plan of action
to mitigate the risk. All risk mitigation
plans are reviewed, challenged and
agreed by the Board.
Once risk mitigation plans are agreed,
each operating subsidiary is asked to
carry out a self assessment exercise
which requires all operating units
to confirm compliance with Group
policies and also to confirm that key
operational controls are in place and
working effectively. The results of this
exercise, together with a review of
specific plans for strategic risks, enable
the Board to confirm that the business
has a sound risk-based framework of
internal control.
The Group Auditors, internal and
external, provides independent
reassurance that the standard of risk
management, compliance and control
meets the needs of the business,
and this includes an evaluation of the
accuracy and completeness of the
self assessment exercises. Group
Audit status reports are discussed
with Enterprise Risk Management
Committee, Audit Committee and
Board on a regular basis. The Board
also recognises that the risks facing
the business may sometimes change
over short time periods. Every quarter
each operating subsidiary provides an
update on new and emerging risks to
the board and proposals to update the
Group risks are provided to the Audit
Committee and the Board.
64CORPORATE GOVERNANCEAND TRANSPARENCY
While the Group’s risk management
process attempts to identify and
manage (where possible) the key risks
it faces, no such process can totally
eliminate risk or guarantee that every
risk is identified, or that it is possible,
economically viable, or prudent to
manage such risks. Consequently,
there can never be an absolute
assurance against the Group failing to
achieve its objectives or a material loss
arising.
1. External risksThe Group is subject to a number
of external risks. The Group defines
external risks as those that stem from
factors which are mainly outside of its
control. These risks will often arise
from the nature of the Group and the
industry in which it operates.
Legal, regulatory, political and societal risksThe Group is at risk from significant
and rapid change in the legal systems,
regulatory controls, and custom and
practices in the regions in which it
operates. These affect a wide range
of areas. Accordingly, changes to, or
violation of, these systems, controls
or practices could increase costs and
have material and adverse impacts
on the reputation, performance and
financial condition of the Group.
Political developments and changes
in society, including increased
scrutiny of the Group, its businesses
or its industry, for example by non
governmental organisations or the
media may result in, or increase the
rate of, material legal and regulatory
change, and changes to custom and
practices.
CompetitionIncreased competition in the markets
in which it operates may materially
adversely impact the Group’s
performance and financial condition.
The ship building and ship repair and
shipping industry is highly competitive.
The Group competes with other
multinational corporations which also
have significant financial resources.
Customer demandCustomer demand for the Group’s
services and expertise is expected
to increase to a higher level of
expectation. The Group expects
greater scrutiny by customers before
they take delivery of vessels. This will,
inadvertently, increase the cost of
building the vessels. A failure to recover
higher costs could materially adversely
impact the Group’s performance.
The Group has introduced enhanced
modern shipbuilding management
systems software to better manage
and to mitigate the risks of late ship-
built delivery and quality. A “COSCO
Shipyard CIMS System Maintenance
and Operation Regulation” is being
developed to ensure common
practices, smooth and stable operation
throughout the various shipyard
subsidiaries.
The Group is also exposed to
counterparty risk from customers that
could result in financial losses should
those counterparties become unable
to meet their obligations to the Group.
Raw materialsThe Group depends upon the
availability, quality and cost of steel and
steel-plates from around the world,
which exposes it to price, quality and
supply fluctuations. Although the
Group will take measures to protect
against the short-term impact of these
fluctuations and of the concentration
of supply, there is no guarantee that
these will be effective. A failure to
recover higher costs or shortfalls in
availability could materially adversely
impact the Group’s performance.
The Group manages this risk through
constant monitoring of the markets
in which it operates and continuous
review of capital expenditure
programmes to ensure they reflect
market conditions. A continuous focus
on operating expenditure is also an
important method of mitigating this
risk.
The Group has developed uniform
processes and procedures with
applications such as SAP to manage
procurement of raw materials. The
Group also has developed strategic
alliances with certain selected
major steel mills and other leading
companies on the purchase of steel
supply, bunker, marine valves, boilers,
engines and other related equipments
to mitigate risks in such supplies.
65Annual Report 2010
RISK MANAGEMENT
66
2. Internal risksInternal risks are those arising from
factors primarily within the Group’s
control, including from the Group’s
structure and processes.
Information technology infrastructureThe Group depends on accurate,
timely information and numerical data
from key software applications to aid
day-to-day business and decision-
making. Any disruption caused by
failings in these systems, of underlying
equipment or of communication
networks could delay or otherwise
impact the Group’s day-to-day
business and decision making and
have materially effects on the Group’s
performance.
Operation interdependenceThe Group’s operations in individual
provinces are increasingly dependent
for the proper functioning of their
business on other parts of the
Group’s in terms of raw material and
product supply, sales and marketing
programme development, technology,
funding and support services. Any
underperformance or failure to control
the Group’s operations in one province
properly could therefore impact the
Group’s businesses in a number
of other provinces and materially
adversely impact the performance or
financial condition of the Group.
Operational performance and project deliveryFailure to meet production targets can
result in increased unit costs, which
are pronounced at operations with
higher levels of fixed costs. Unit costs
may exceed forecasts, adversely
affecting performance and the results
of operations.
Failure to meet project delivery times
and costs could have a negative effect
on operational performance and lead
to increased costs or reductions in
revenue and profitability.
A number of strategies have been
implemented to mitigate these risks
including management oversight of
operating performance and project
delivery through regular executive
management briefings, increased
effectiveness of procurement initiatives
to reduce unit costs and improve
delivery of projects.
The Group has also established an
enterprise technology standards
system under the guidance of
Singaporean and South Korean
experts to enhance the basic design
and detailed design of ships and
marine engineering products.
EmployeesThe Group depends on the continued
contributions of its executive officers
and employees, both individually and
as a group. While the Group reviews its
people policies on a regular basis and
invests significant resources in training
and development and recognising
and encouraging individuals with high
potential, there can be no guarantee
that it will be able to attract, develop
and retain these individuals at an
appropriate cost and ensure that the
capabilities of the Group’s employees
meets its business needs. Any failure
to do so may impact the Group’s
performance.
The ability to recruit, develop and
retain appropriate skills for the Group
is made difficult by competition for
skilled labour. The failure to retain
skilled employees or to recruit new
staff may lead to increased costs,
interruptions to existing operations
and delay in new projects.
A number of strategies are
implemented to mitigate this risk
including attention to an appropriate
suite of reward and benefit structures
and ongoing refinement of the Group
as an attractive employee proposition.
CORPORATE GOVERNANCEAND TRANSPARENCY
Managing cost of wages through outsourcingShip repair is a labour-intensive
industry and an increase in wages
will have a significant impact on
the Group. The Group had been
encountering increases in labour
cost. Other than having a permanent
work force of skilled employees on
the payroll, the Group has adopted
a contract hiring system. Under the
contract hiring system, unskilled
manpower is hired on a contractual
basis and paid according to projects
undertaken. While the Group has
benefitted from the decrease in fixed
wage costs, it is at risk from failures by
these third parties to deliver on their
contractual commitments, which may
adversely impact its reputation and
performance.
3. Execution risksExecutive risks arise from the
implementation of the Group’s strategy
and its change and investments
programmes, which aim to enhance
long term shareowner value.
Investments, acquisition and disposalsRisks inherent in the investments,
acquisition and disposals may have
an adverse impact on the Group’s
business or financial results.
From time to time the Group may
make investments, acquisitions and
disposals of businesses. While these
are carefully planned, the rationale
for them may be based on incorrect
assumptions or conclusions and they
may not realise the anticipate benefits
or there may be other unanticipated
or unintended effects. Additionally,
while the Group seeks protection,
for example through warranties and
indemnities, significant liabilities may
not be identified in due diligence or
come to light after the warranty or
indemnity periods. These factors
may materially adversely impact the
performance or financial condition of
the Group.
4. Financial risksThe Group is exposed to market risks
such as interest rate and exchange
rate risks arising from its international
business.
Managing currency fluctuationsThe main financial risks facing the
Group are fluctuations in foreign
currency, interest rate risk, availability
of financing to meet the Group’s needs
and default by counterparties and
customers. Any of these financial risks
may materially adversely impact the
performance or financial condition of
the Group.
The Group has established a
management system to address
financial risks. Fluctuations in currency
exchange rates are closely monitored.
The Group at its discretion may
employ simple forward hedging on
a systematic approach to meet its
financial obligations and foreign and
local currencies needs.
The Group does not engage in
speculative foreign investments. Strict
compliance controls are in place to
ensure that procedures are adhered
to and management decisions are not
made unilaterally.
The Group also engaged the guidance
of the holding company in managing
its foreign exchange risk exposure. The
holding company has an experienced
Treasury operations team responsible
for managing the funding requirements
and liquidity risk.
A detailed disclosure of the Group’s
financial risks can be found in the
Notes to the Financial Statements on
pages 139 to 147.
67Annual Report 2010
RESEARCH AND DEVELOPMENT
COSCO believes in being at the forefront
of technological change. In fact, constant
technological innovation has always
been the driving force behind our quest
for:
a. Greater efficiency,
b. Enhanced productivity, and
c. Higher quality standards
We believe innovation holds the key to
our future success. Through constant
renewal and refining of our technological
capabilities, we will be positioned with a
competitive advantage for the present
and engender sustainable growth for
the future.
Year in ReviewThe year 2010 saw COSCO reaping
the fruits of our labour as we gained
national recognition for our R&D efforts.
COSCO Shipyard Group’s Technical
Centre received national recognition
from the PRC National Development and
Reform Commission (NDRC), Finance
Ministry and other relevant government
agencies.
Our R&D team comprises more than
1,000 technicians and researchers with
400 professionals in the areas of ship
repair, ship conversion, shipbuilding and
offshore marine engineering.
Our R&D team has successfully
registered thirteen patents with the State
Intellectual Property Office of China.
With high standards and dynamic
drive, our R&D team has made major
breakthroughs in contributions to the
techniques and processes employed
in vessel construction including the
construction of jack-up rigs and a series
of shuttle tankers.
Projects carried out with our R&D input
also include the Super M2 jack-up rig,
GM4000 semi-submersible platform,
the wind turbine installation jack-up
vessel, the Dalian Developer (the first
deepwater drillship to be built in China)
and the Sevan Driller (the world’s first
cylindrical drilling unit), which are major
and important contracts in the Chinese
offshore marine engineering market. Our
R&D team is also currently involved in the
construction of the Octabuoy Production
Platform and the second Sevan Driller.
In August 2010, we commenced the
construction of the DP3 deepwater
drillship. When completed, it will be
able to drill wells in oilfields with high
efficiency and safety, even in harsh
environments and at ultra-deep water
depths up to 10,000 ft with drilling
depths exceeding 35,000 ft. Its variable
deck load capacity of 25,000 tons and
68INSIDE COSCO AND CORPORATE CITIZENSHIP
1,000,000 BBL cargo storage capacity
will be the highest of any drillship ever
built. This engineering achievement
attests to our growing offshore marine
engineering capabilities.
Strategic PartnershipsCollaborations with reputable institutions
and companies to accelerate design and
technological improvements have always
been crucial to the company’s growth.
In 2010, COSCO Shipyard inked a
strategic cooperation agreement
with Harbin Engineering University to
develop new products, technology
and techniques, and conduct strategic
research and technical communication
through the hiring of professors as
advisors, conducting academic
seminars and establishing information
exchange systems. The university will
also assist COSCO Shipyard to set up a
post-doctoral centre where experts will
be able to carry out research work. This
co-operation provides COSCO Shipyard
with an important springboard for the
mastering of new core technologies, and
the training of an advanced research and
development team.
The establishment of the COSCO-
KOMAC (CK) Design Centre in 2008,
has created a win-win strategy for both
companies, especially in the areas of
technology improvement and market
expansion, as KOMAC brings cutting-
edge expertise and extensive experience
to the various operational divisions of
the shipyards, realising its vision to be a
world-class ship design centre.
In the offshore sector, COSCO Technical
Centre continually partners with World-
Class design consultancy companies
such as GustoMSC, F&G, Moss
Maritime, and GVA to jointly develop
the latest generation of jack-up rigs,
semi-submersibles, drillships, FPSOs
and wind turbine installation jack-up
vessels.
Moving ForwardLooking forward, we aim to strengthen
research not only internally but through
strategic alliances. Our direction for
R&D remains clear. We seek to create
original technology, bringing product
design development, scientific research,
quality assessment, new technical
development and more under the roof of
COSCO Shipyard Technical Center. This
will further complement our growth and
maturity as an integrated ship repair, ship
building and offshore marine engineering
industry player.
69Annual Report 2010
HUMAN RESOURCES AND WORKPLACE SAFETY
Human Resources
OverviewAt COSCO, we value our people.
They are vital in our pursuit of greater
growth today and in the future. We
have accordingly employed various
approaches such as recruitment,
training and a reward scheme to
strengthen the workforce.
Talents are recruited through a
competitive reward and remuneration
scheme, and are constantly developed
through a performance and appraisal
system to help staff progress in
their personal goals and career
advancement. Aside from attracting
new talent, it is equally important for
the group to educate and train our
people as an investment for long-term
growth.
Recruitment and Training As a value-driven, world-class
enterprise, we recognise that human
capital is an important component
in optimising growth. Our team is
constantly strengthened through
active recruitment of top graduates
from leading Chinese universities.
Annually, more than 1,000 fresh
graduates are recruited. They then
undergo management trainee courses
which prepare them for their future
management roles. Technical staff are
trained and required to pass a course
prior to work commencement. They
are then assessed annually to ensure
that their skills meet the necessary
standards.
In line with our belief that continuous
learning is a fundamental building block
of growth, our employees undergo
training for international standards
and safety measures, technical,
engineering and management skills.
Reward and RetentionTo inculcate staff loyalty and bring out
their best, COSCO has introduced
various schemes including the
performance and achievement
appraisal system which seeks to
align work goals with personal career
development and remuneration.
Another scheme is the “Model
Employee Reward” scheme. In
past years, some best-performing
employees have been awarded with a
trip to one of the Company’s overseas
subsidiaries. Aside from being an
incentive trip, it gives the recipient an
opportunity to experience the work
culture in a foreign environment.
Skill-based competitions are also
held frequently to enhance skills and
cultivate initiative.
Outlook In the year ahead, COSCO will continue
its effective management of contract
workers and maintain harmony and
stability for both our contract and
in-house workforce. This will ensure
that we are able to achieve optimal
performance.
Workplace Safety
OverviewAt COSCO, a strong safety culture
in the workplace is of paramount
importance. We require our staff to
undergo workplace safety training
courses specially designed to educate
staff about potential workplace dangers
and the necessary safety precautions.
Tests are also administered to ensure
a fundamental degree of proficiency
and understanding.
With these procedures in place, we
have maintained a consistent safety
track record over the last decade, and
will continue to promote an adherence
to these standards to foster and
maintain a work culture that places
high regard on workplace safety.
The Year in Review The year 2010 saw the continued
emphasis on workplace safety with
the development and introduction of
new and improved scaffolding for use
in shipbuilding projects. Equipped to
boost efficiency and encourage better
safety standards, the scaffolding also
reduces manpower needs and is more
environmentally-friendly.
70INSIDE COSCO AND CORPORATE CITIZENSHIP
Operational SafetyOperational safety is important to
us. As such, we consider it essential
to undertake regular facility and
equipment upgrades as well as
establish efficient waste disposal
methods.
The Safety Committee established in
2009 continues to conduct frequent
site visits to all our shipyards to
ensure that safety requirements and
standards are strictly adhered to.
Equipment and tools are also checked
and sent for scheduled maintenance
at least once a month to ensure they
are in optimum working condition.
In addition, forums and staff training
are just as important in establishing
a safety-first attitude, thus reducing
the risk of workplace incidents
and enabling greater operational
efficiency.
Reinforcing Safety StandardsEducation and training to raise safety
awareness levels is imperative in
COSCO’s pursuit of high safety
standards. These include mandatory
hour-long training sessions every
week to update our staff on the
updated safety rules and regulations.
The training sessions include live
demonstrations on safety measures,
and comprise an assessment at
the end of the course to evaluate
the employees’ competency and
proficiency on the subject.
A grading system has also been put
in place for the safety management
officers’ course, allowing safety
officers to further monitor and
manage the safety of their respective
shipyards. In addition, appraisals are
done by external parties on various
departments in COSCO. These
appraisals examine and certify the
quality of the work environment and
work safety.
Medical BenefitsTo complement the stringent rules
and regulations for workplace safety,
COSCO has in place an all-inclusive
network of supporting operations
which include on-site medical facilities
at all shipyards. Annual health
checks, medical insurance, dental
treatment and immunisation against
influenza are some of the many health
benefits provided for by COSCO, and
contribute to the continual well-being
of our employees. A healthy workforce
is essential to the productivity of a
global enterprise, and COSCO will
strive to ensure that its people are well
cared for.
2011: Actions and Goals2011 will see COSCO continue its
pursuit of zero accidents and fatalities.
With new equipment regularly brought
into our facilities, there is a need to
introduce necessary expertise and
safety management measures. This will
be done through training programmes,
which uphold a “safety-first” mentality.
We will retain our reward scheme to
encourage safety and deter hazardous
behaviour in the workplace.
We will also be instituting short-term
on-board stints for maintenance
staff, in order to improve the
operational oversight and workplace
safety management skills of ship
management. Specifically, their
responsibilities include the prevention
of piracy, smuggling, pollution, fire,
collision, personal injury and typhoon
disaster management.
COSCO Shipyards’ management has
maintained a good track record in the
past few years in the provision of safety,
security and stability. Moving forward,
we will enhance our ship tracking,
monitoring and inspection operations,
as well as information exchange among
all onshore and offshore departments
and all crew on our vessels. This will
facilitate a holistic understanding of
operational procedures and help us to
formulate comprehensive and effective
workplace safety measures.
71Annual Report 2010
CORPORATE SOCIAL RESPONSIBILITY
OverviewCOSCO Corporation believes that
an enterprise pursuing sustainable
corporate development should not
only focus on increasing operating
profit but also establish a socially
responsible corporate culture. This
will pave the way for long-term
development of the enterprise as
well as catalyse our contributions
to society, the environment and the
economy. In this way, the corporation
benefits all stakeholders including
shareholders, business partners,
employees, customers and suppliers.
SingaporeCOSCO has always been a strong
supporter of the Yellow Ribbon
project – a fund established to create
jobs for ex-convicts and engage the
community in giving ex-offenders
a second chance. COSCO has
donated annually for the past four
years. This gesture may be simple,
but it has nevertheless inspired many
ex-offenders to re-integrate back to
society.
ChinaBesides contributing locally, COSCO
Corporation is also a long-time donor
to COSCO Charity Foundation - the
first non-public foundation initiated
by state-owned enterprises. This
foundation manages COSCO Group’s
social projects and charity work
within China for disaster relief, poverty
aid, medical aid and educational
support. Regular contributions by
COSCO subsidiaries have enabled the
foundation to assist its employees and
the society.
Environmental AwarenessProtecting the environment remains
one of the important tasks within
the Group. This year, in support of
environmental protection in the area of
ship repair propagated by the Green
Expo in 2010, its subsidiary Shanghai
Shipyard adopted environmentally-
protective operating techniques for
rust removal utilising a high pressure
water jet instead of traditional sand
blasting, improving the surrounding
air quality. COSCO also continues
to implement the International Safety
Management Code (“ISMC”) within
the Group, establishing a uniform
pollution prevention management
system. We will continue to employ
environmentally-friendly technologies
and ensure minimal wastage through
innovative “green” design and
recycling.
ConclusionCOSCO remains committed to
high standards of Corporate Social
Responsibility practices within the
Group, being active in community
projects, environmental protection
and charities. As the global economy
gradually recovers, we will continue to
conduct our business operations in a
way that ensures the health, welfare and
safety of our employees, customers,
communities and ecological system.
72INSIDE COSCO AND CORPORATE CITIZENSHIP
Directors’ Report
Statement by Directors
Independent Auditor’s Report
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Balance Sheets
Consolidated Statement of Changes in Equity
Consolidated Cash Flow Statement
Notes to the Financial Statements
Five-Year Summary
Shareholding Statistics
Notice of Annual General Meeting
Proxy Form for Annual General Meeting
Notes for Proxy Form
748081828384858688
153154156
FINANCIAL STATEMENTS
DIRECTORS’ REPORT
74COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
The directors present their report to the members together with the audited fi nancial statements of the Group for the fi nancial
year ended 31 December 2010 and the balance sheet of the Company as at 31 December 2010.
Directors
The directors of the Company in offi ce at the date of this report are as follows:
Liu Guo Yuan (appointed on 1 September 2010)
Jiang Li Jun
Ma Gui Chuan
Wang Hai Min (appointed on 2 August 2010)
Wang Xing Ru
Ma Zhi Hong (appointed on 2 August 2010)
Tom Yee Lat Shing
Wang Kai Yuen
Er Kwong Wah
Ang Swee Tian
Li Jian Xiong (alternate director to Liu Guo Yuan, appointed on 1 September 2010)
Lu Cheng Gang (alternate director to Wang Hai Min, appointed on 2 August 2010)
Ye Bin Lin (alternate director to Ma Zhi Hong, appointed on 2 August 2010)
Liu De Tian (alternate director to Wang Xing Ru)
Arrangements to enable directors to acquire shares and debentures
Neither at the end of nor at any time during the fi nancial year was the Company a party to any arrangement whose object
was to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares in, or debentures of,
the Company or any other body corporate, other than as disclosed under “Share options” on pages 76, 77 and 78 of this
report.
Directors’ interests in shares or debentures
(a) According to the register of directors’ shareholdings, none of the directors holding offi ce at the end of the fi nancial
year had any interest in the shares or debentures of the Company or its related corporations, except as follows:
Number of ordinary shares registered in name of director or nominee
Number of ordinary shares in which a director is deemed
to have an interest
At31.12.2010
At
1.1.2010
or date of
appointment,
if later
At31.12.2010
At
1.1.2010
or date of
appointment,
if later
The Company
Wang Xing Ru 1,067,000 1,067,000 – –
Tom Yee Lat Shing 1,400,000 1,400,000 – –
Wang Kai Yuen 900,000 900,000 1,000,000 1,000,000
Er Kwong Wah 650,000 650,000 – –
Ang Swee Tian 130,000 130,000 5,000 5,000
Li Jian Xiong 1,000,000 1,000,000 – –
Lu Cheng Gang – – 50,000 50,000
Ye Bin Lin 600,000 600,000 – –
Liu De Tian 153,000 153,000 120,000 120,000
75Annual Report 2010
DIRECTORS’ REPORTFor the Financial Year Ended 31 December 2010
Directors’ interests in shares or debentures (continued)
(a) (continued)
Number of unissued ordinary shares under option held
by director
At31.12.2010
At
1.1.2010
or date of
appointment,
if later
Related corporations
COSCO International Holdings Limited
- Share Option Scheme
Liu Guo Yuan 2,300,000 2,300,000
Ma Zhi Hong 1,600,000 1,600,000
China COSCO Holdings Company Limited
- Share Appreciation Rights Plan
Lu Cheng Gang 265,000 265,000
(b) According to the register of directors’ shareholdings, certain directors holding offi ce at the end of the fi nancial year
had interests in the options to subscribe for ordinary shares of the Company granted pursuant to the Cosco Group
Employees’ Share Option Scheme 2002 as set out below and under “Share options” on pages 76, 77 and 78 of this
report.
Number of unissued ordinary shares under option held by
director
At31.12.2010
At
1.1.2010
or date of
appointment,
if later
2006 Options
Lu Cheng Gang 700,000 700,000
2007 Options
Ma Gui Chuan 700,000 700,000
Wang Xing Ru 700,000 700,000
Er Kwong Wah 300,000 300,000
Li Jian Xiong 700,000 700,000
Lu Cheng Gang 700,000 700,000
Ye Bin Lin 700,000 700,000
Liu De Tian 700,000 700,000
DIRECTORS’ REPORT
76COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
Directors’ interests in shares or debentures (continued)
(b) (continued)
Number of unissued ordinary shares under option held by
director
At31.12.2010
At
1.1.2010
or date of
appointment,
if later
2008 Options
Ma Gui Chuan 700,000 700,000
Wang Xing Ru 700,000 700,000
Tom Yee Lat Shing 300,000 300,000
Wang Kai Yuen 300,000 300,000
Er Kwong Wah 300,000 300,000
Li Jian Xiong 700,000 700,000
Lu Cheng Gang 700,000 700,000
Ye Bin Lin 700,000 700,000
Liu De Tian 700,000 700,000
(c) The directors’ interests in the ordinary shares and share options of the Company as at 21 January 2011 were the
same as those as at 31 December 2010.
Directors’ contractual benefi ts
Since the end of the previous fi nancial year, no director has received or become entitled to receive a benefi t by reason of a
contract made by the Company or a related corporation with the director or with a fi rm of which he is a member or with a
company in which he has a substantial fi nancial interest, except as disclosed in the accompanying fi nancial statements and
in this report, and except that certain directors have employment relationships with the ultimate holding corporation or related
corporations, and have received remuneration in those capacities.
Share options
(a) Cosco Group Employees’ Share Option Scheme 2002
The Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”) was approved by members of the
Company at an Extraordinary General Meeting on 8 May 2002.
Under the Scheme 2002, share options to subscribe for the ordinary shares of the Company are granted to directors,
key management personnel and employees. The exercise price of the granted options is determined at the average
of the closing prices of the Company’s ordinary shares as quoted on the Singapore Exchange for the fi ve market
days immediately preceding the date of the grant. The options may be exercised in full or in part in respect of 1,000
shares or a multiple thereof, on the payment of the exercise price. The Group has no legal or constructive obligation
to repurchase or settle the options in cash.
77Annual Report 2010
DIRECTORS’ REPORTFor the Financial Year Ended 31 December 2010
Share options (continued)
(a) Cosco Group Employees’ Share Option Scheme 2002 (continued)
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated
company, or the holding company for at least one year on or prior to the date of the grant, may be exercised twelve
months after the date of grant but before the end of one hundred and twenty months. For employees and directors
who are in the service of the associated company and non-executive directors, the options shall expire at the end
of sixty months. Options issued at a discount to market price, may only be exercised two years after the date of the
grant.
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated
company, or the holding company for at least six months but less than one year on or prior to the date of grant, may
be exercised twenty-four months after the date of the grant but before the end of one hundred and twenty months.
For employees and directors who are in the service of the associated company and non-executive directors, the
options shall expire at the end of sixty months. Options issued at a discount to market price, may only be exercised
three years after the date of the grant.
Particulars of the options granted pursuant to the Scheme 2002 in 2006, 2007 and 2008 known as “2006 Options”,
“2007 Options” and “2008 Options” respectively were set out in the Directors’ Report for the fi nancial years ended 31
December 2006, 31 December 2007 and 31 December 2008 respectively.
The Remuneration Committee administering the Scheme 2002 comprises the following directors:
Er Kwong Wah (Chairman)
Jiang Li Jun
Wang Kai Yuen
Tom Yee Lat Shing
Ang Swee Tian
Details of the options granted to directors of the Company are as follows:
Aggregategranted since
commencementof Scheme
2002 to
Aggregateexercised sincecommencement
of Scheme2002 to
Aggregateoutstanding
as atName of directors 31.12.2010 31.12.2010 31.12.2010
Ma Gui Chuan 1,400,000 – 1,400,000
Wang Xing Ru 3,000,000 1,600,000 1,400,000
Tom Yee Lat Shing 2,200,000 1,900,000 300,000
Wang Kai Yuen 2,200,000 1,900,000 300,000
Er Kwong Wah 2,200,000 1,600,000 600,000
Li Jian Xiong 4,700,000 3,300,000 1,400,000
Lu Cheng Gang 2,100,000 – 2,100,000
Ye Bin Lin 4,700,000 3,300,000 1,400,000
Liu De Tian 4,400,000 3,000,000 1,400,000
26,900,000 16,600,000 10,300,000
DIRECTORS’ REPORT
78COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
Share options (continued)
(a) Cosco Group Employees’ Share Option Scheme 2002 (continued)
No options have been granted to controlling shareholders of the Company or their associates (as defi ned in the Listing
Manual of the Singapore Exchange Securities Trading Limited).
No options have been granted during the fi nancial year.
No participant under the Scheme 2002 has received 5% or more of the total number of shares under option available
under the Scheme 2002.
There were no shares of the Company allotted and issued by virtue of the exercise of options to take up unissued
shares of the Company during the fi nancial year. There were no unissued shares of the subsidiaries under option at
the end of the fi nancial year.
(b) Share options outstanding
The number of unissued ordinary shares of the Company under option in relation to the Scheme 2002 outstanding at
the end of the fi nancial year was as follows:
Options relating to Scheme 2002
Numberof unissued
ordinary shares at1.1.2010
Numbercancelled/
lapsedduring thefi nancial
year
Numberof unissued
ordinary shares at
31.12.2010Exercise
price Exercise period ’000 ’000 ’000 $
2006 Options (i) 2,780 – 2,780 1.23 21.2.2007 – 20.2.2016
2007 Options (ii) 12,770 (1,800) 10,970 2.48 5.2.2008 – 4.2.2017
2008 Options (iii) 19,430 (2,230) 17,200 2.95 24.3.2009 – 23.3.2018
34,980 (4,030) 30,950
(i) For non-executive directors, the exercise period shall be 21.2.2007 to 20.2.2011.
(ii) For non-executive directors, the exercise period shall be 5.2.2008 to 4.2.2012.
(iii) For non-executive directors, the exercise period shall be 24.3.2009 to 23.3.2013.
79Annual Report 2010
DIRECTORS’ REPORTFor the Financial Year Ended 31 December 2010
Independent auditor
The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.
On behalf of the directors
JIANG LI JUNDirector
MA GUI CHUANDirector
3 March 2011
STATEMENT BY DIRECTORS
80COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
In the opinion of the directors,
(a) the balance sheet of the Company and the consolidated fi nancial statements of the Group as set out on pages 82 to
152 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31
December 2010, and of the results of the business, changes in equity and cash fl ows of the Group for the fi nancial
year then ended; and
(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts
as and when they fall due.
On behalf of the directors
JIANG LI JUNDirector
MA GUI CHUANDirector
3 March 2011
81Annual Report 2010
INDEPENDENT AUDITOR’S REPORTTo the Members of Cosco Corporation (Singapore) Limited For the Financial Year Ended 31 December 2010
Report on the Financial Statements
We have audited the accompanying fi nancial statements of Cosco Corporation (Singapore) Limited (the “Company”) and its
subsidiaries (the “Group”) set out on pages 82 to 152, which comprise the consolidated balance sheet of the Group and
the balance sheet of the Company as at 31 December 2010, and the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash fl ow
statement of the Group for the fi nancial year then ended, and a summary of signifi cant accounting policies and other
explanatory information.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of fi nancial statements that give a true and fair view in accordance with
the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devising
and maintaining a system of internal accounting controls suffi cient to provide a reasonable assurance that assets are
safeguarded against loss from unauthorised use or disposition, that transactions are properly authorised and that they are
recorded as necessary to permit the preparation of true and fair profi t and loss accounts and balance sheets and to maintain
accountability of assets.
Auditor’s Responsibility
Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in
accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material
misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial
statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material
misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal controls relevant to the entity’s preparation of fi nancial statements that give a true and fair view in order
to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies
used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the fi nancial statements.
We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the consolidated fi nancial statements of the Group and the balance sheet of the Company are properly drawn
up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair
view of the state of affairs of the Group and of the Company as at 31 December 2010, and the results, changes in equity
and cash fl ows of the Group for the fi nancial year ended on that date.
Report on other Legal and Regulatory Requirements
In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries
incorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the
Act.
PricewaterhouseCoopers LLP
Public Accountants and Certifi ed Public Accountants
Singapore, 3 March 2011
CONSOLIDATED INCOME STATEMENT
82COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
Note 2010 2009
$’000 $’000
Sales 4 3,861,445 2,899,004
Cost of sales (3,385,358) (2,601,406)
Gross profi t 476,087 297,598
Other income (net) 7 178,253 146,314
Expenses
- Distribution (50,172) (42,420)
- Administrative (160,164) (181,250)
- Finance 8 (42,131) (41,904)
Share of (loss)/profi t of associated companies 20 (27) 214
Profi t before income tax 401,846 178,552
Income tax expense 9(a) (43,240) (40,758)
Net profi t 358,606 137,794
Profi t attributable to:
Equity holders of the Company 248,837 110,080
Non-controlling interests 109,769 27,714
358,606 137,794
Earnings per share for profi t attributable to equity holders of the Company (expressed in cents per share) 10
- Basic 11.11 4.92
- Diluted 11.11 4.92
The accompanying notes form an integral part of these fi nancial statements.
83Annual Report 2010
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the Financial Year Ended 31 December 2010
Note 2010 2009
$’000 $’000
Net profi t 358,606 137,794
Other comprehensive (loss)/income:
Financial assets, available-for-sale
- Net fair value (loss)/gain 32(b)(v) (279) 371
Currency translation differences arising from consolidation 32(b)(iii) (100,144) (27,480)
Other comprehensive loss, net of tax (100,423) (27,109)
Total comprehensive income for the year 258,183 110,685
Total comprehensive income attributable to:
Equity holders of the Company 181,752 93,345
Non-controlling interests 76,431 17,340
258,183 110,685
The accompanying notes form an integral part of these fi nancial statements.
BALANCE SHEETS
84COSCO Corporation (Singapore) Limited
As at 31 December 2010
The Group The Company
Note
2010$’000
2009
$’000
2010$’000
2009
$’000
ASSETSCurrent assetsCash and cash equivalents 11(a) 867,201 1,549,175 116,957 134,511
Forward currency contracts 12 – 944 – –
Trade and other receivables 13 1,976,663 1,452,240 2,895 236
Inventories 14 518,035 677,568 – –
Construction contract work-in-progress 15 182,728 199,385 – –
Other current assets 16 4,155 6,573 205 220
3,548,782 3,885,885 120,057 134,967
Non-current assetsTrade and other receivables 17 49,089 – – 64,285
Financial assets, available-for-sale 18 3,434 4,034 – –
Club memberships 19 557 492 172 156
Investments in associated companies 20 3,569 1,922 – –
Investments in subsidiaries 21 – – 374,037 290,813
Investment properties 22 14,619 11,786 – –
Property, plant and equipment 23 2,207,952 2,349,098 650 775
Intangible assets 24 9,468 9,525 – –
Deferred expenditure 25 3,169 1,061 – –
Deferred income tax assets 30 212,703 158,523 – –
2,504,560 2,536,441 374,859 356,029
Total assets 6,053,342 6,422,326 494,916 490,996
LIABILITIESCurrent liabilitiesForward currency contracts 12 – 14,448 – –
Trade and other payables 26 3,144,533 3,559,006 17,620 16,767
Current income tax liabilities 9(b) 72,766 84,136 245 549
Borrowings 27 555,148 176,262 – –
Provisions for other liabilities 29 45,049 36,436 – –
3,817,496 3,870,288 17,865 17,316
Non-current liabilitiesBorrowings 27 437,065 938,946 – –
Deferred income tax liabilities 30 4,304 2,400 4,056 2,198
441,369 941,346 4,056 2,198
Total liabilities 4,258,865 4,811,634 21,921 19,514
NET ASSETS 1,794,477 1,610,692 472,995 471,482
EQUITYCapital and reserves attributable to equity holders of the CompanyShare capital 31 270,608 270,608 270,608 270,608
Statutory and other reserves 32 103,950 174,030 45,105 45,105
Retained earnings 824,059 639,404 157,282 155,769
1,198,617 1,084,042 472,995 471,482
Non-controlling interests 595,860 526,650 – –
Total equity 1,794,477 1,610,692 472,995 471,482
The accompanying notes form an integral part of these fi nancial statements.
85Annual Report 2010
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the Financial Year Ended 31 December 2010
Attributable to equity holders of the Company
Note
Share capital
Statutoryand otherreserves
Retainedearnings Total
Non-controllinginterests
Totalequity
$’000 $’000 $’000 $’000 $’000 $’000
2010
Beginning of fi nancial year 270,608 174,030 639,404 1,084,042 526,650 1,610,692
Total comprehensive income for the year – (67,085) 248,837 181,752 76,431 258,183
Disposal of subsidiaries 11(b) – – – – (6,057) (6,057)
Dividend declared by subsidiaries to
non-controlling interests of subsidiaries – – – – (1,164) (1,164)
Dividend for 2009 33 – – (67,177) (67,177) – (67,177)
Transfer from asset revaluation reserve
to retained earnings 32(b)(iv) – (3,218) 3,218 – – –
Transfer from retained earnings to
statutory reserves 32(b)(ii) – 223 (223) – – –
End of fi nancial year 270,608 103,950 824,059 1,198,617 595,860 1,794,477
2009
Beginning of fi nancial year 270,608 167,904 705,692 1,144,204 464,963 1,609,167
Total comprehensive income for the year – (16,735) 110,080 93,345 17,340 110,685
Employee share option scheme:
- Value of director and employee services 32(b)(i) – 3,240 – 3,240 – 3,240
Non-controlling interests share of interest
in a newly incorporated subsidiary – – – – 8,404 8,404
Non-controlling interests share of increase
in registered capital of subsidiaries – – – – 37,455 37,455
Decrease in non-controlling interests of
a subsidiary – – – – (12) (12)
Dividend declared by subsidiaries to
non-controlling interests of subsidiaries – – – – (1,500) (1,500)
Dividend for 2008 33 – – (156,747) (156,747) – (156,747)
Transfer from asset revaluation reserve
to retained earnings 32(b)(iv) – (3,218) 3,218 – – –
Transfer from retained earnings to
statutory reserves 32(b)(ii) – 22,839 (22,839) – – –
End of fi nancial year 270,608 174,030 639,404 1,084,042 526,650 1,610,692
The accompanying notes form an integral part of these fi nancial statements.
CONSOLIDATED CASH FLOW STATEMENT
86COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
Note
2010$’000
2009
$’000
Cash fl ows from operating activities
Net profi t 358,606 137,794
Adjustments for:
- Income tax expense 43,240 40,758
- Depreciation and amortisation 168,426 153,416
- Net reversal of impairment of trade and other receivables (31,241) (11,375)
- Write-off for inventory obsolescence and inventory write-down 572 4,236
- Loss on disposal of a transferable club membership – 4
- (Reversal of impairment)/impairment in value of transferable club
memberships (16) 32
- Net (gain)/loss on disposal of property, plant and equipment (743) 351
- Expected losses recognised on construction contracts 64,822 578
- Write-off for property, plant and equipment 136 40
- Employees share option expenses – 3,240
- Net fair value (gain)/loss on forward currency contracts (13,253) 15,625
- Share of loss/(profi t) from associated companies 27 (214)
- Negative goodwill – (12)
- Dividend income (20) (314)
- Interest expense (fi nancing) 42,131 41,904
- Interest income from bank deposits (investing) (13,882) (32,781)
618,805 353,282
Changes in working capital:
- Inventories and construction contract work-in-progress 171,920 234,555
- Trade and other receivables (552,397) 121,453
- Trade and other payables (469,060) (850,141)
- Other current assets 2,418 13,219
- Deferred expenditure (2,193) (1,061)
- Provisions for other liabilities 8,613 16,280
- Exchange differences 66,029 30,489
Cash used in operations (155,865) (81,924)
Income tax paid (109,234) (82,444)
Net cash used in operating activities (265,099) (164,368)
The accompanying notes form an integral part of these fi nancial statements.
87Annual Report 2010
CONSOLIDATED CASH FLOW STATEMENTFor the Financial Year Ended 31 December 2010
Note
2010$’000
2009
$’000
Cash fl ows from investing activities
Purchase of property, plant and equipment (176,105) (469,924)
Proceeds from disposal of property, plant and equipment 11,200 12,319
Purchase of investment properties (10) –
Purchase of a transferable club membership (61) (101)
Proceeds from disposal of a transferable club membership – 45
Net cash outfl ows on disposal of subsidiaries 11(b) (3,950) –
Dividends received 648 764
Interest received from bank deposits 20,022 40,922
Net cash used in investing activities (148,256) (415,975)
Cash fl ows from fi nancing activities
Proceeds from borrowings 838,819 799,875
Repayments of borrowings (899,945) (328,273)
Repayments of fi nance lease liabilities (17) (18)
Non-controlling interests contribution for the equity interest in a newly
incorporated subsidiary – 8,404
Proceeds from non-controlling interests for increase in registered capital
of subsidiaries – 37,455
Decrease in bank deposits pledged 266 10,929
Interest paid (41,750) (41,536)
Dividends paid to equity holders of the Company (67,177) (156,747)
Dividends paid to non-controlling interests of subsidiaries (2,499) (34,356)
Net cash (used in)/provided by fi nancing activities (172,303) 295,733
Net decrease in cash and cash equivalents (585,658) (284,610)
Cash and cash equivalents at beginning of fi nancial year 1,545,621 1,865,833
Effects of currency translation on cash and cash equivalents (96,050) (35,602)
Cash and cash equivalents at end of fi nancial year 11(a) 863,913 1,545,621
The accompanying notes form an integral part of these fi nancial statements.
NOTES TO THE FINANCIAL STATEMENTS
88COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
These notes form an integral part of and should be read in conjunction with the accompanying fi nancial statements.
1. General information
Cosco Corporation (Singapore) Limited (the “Company”) is incorporated and domiciled in Singapore. The address of
its registered offi ce is 9 Temasek Boulevard, #07-00 Suntec Tower Two, Singapore 038989.
The Company is listed on the Singapore Exchange.
The principal activities of the Company are those of investment holding and provision of management services to the
subsidiaries. The principal activities of its subsidiaries are set out in Note 21 to the fi nancial statements.
2. Signifi cant accounting policies
2.1 Basis of preparation
These fi nancial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).
The fi nancial statements have been prepared under the historical cost convention, except as disclosed in the
accounting policies below.
The preparation of fi nancial statements in conformity with FRS requires management to exercise its judgement in the
process of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates
and assumptions. Areas involving a higher degree of judgement or complexity, or areas where assumptions and
estimates are signifi cant to the fi nancial statements, are disclosed in Note 3.
Interpretations and amendments to published standards effective in 2010
On 1 January 2010, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are
mandatory for application from that date. Changes to the Group’s accounting policies have been made as required, in
accordance with the transitional provisions in the respective FRS and INT FRS.
The following are the new or amended FRS and INT FRS that are relevant to the Group:
FRS 27 (revised) Consolidated and Separate Financial Statements
FRS 103 (revised) Business Combinations
Amendments to FRS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items
The adoption of the above new or amended FRS and INT FRS did not result in substantial changes to the Group’s
and Company’s accounting policies and had no material effect on the amounts reported for the current or prior
fi nancial years.
2.2 Revenue recognition
Sales comprise the fair value of the consideration received or receivable for the ship repair, ship building and marine
engineering income, rental income, time charter revenue, shipping agency income and sale of scrap materials in the
ordinary course of the Group’s activities. Sales are presented net of value-added tax, rebates and discounts, and after
eliminating sales within the Group.
89Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.2 Revenue recognition (continued)
The Group recognises revenue when the amount of revenue and related cost can be reliably measured, when it is
probable that the collectibility of the related receivables is reasonably assured and when the specifi c criteria for each
of the Group’s activities are met as follows:
(a) Rendering of services
(i) Shipping
Revenue from time charter is recognised on the straight-line basis over the period of the time charter
agreement. Any losses arising from time charters are provided for in full as soon as they are expected.
Booking commissions, agency and transhipment fees are recognised upon the rendering of services to
customers.
Revenue from freight forwarding, transport agency and feeder services are recognised when the service
is rendered.
(ii) Ship repair, ship building and marine related activities
Revenue from ship repair, ship building, marine engineering, container repairs and services, fabrication
work services and production of marine outfi tting components is recognised on the percentage-of-
completion method based on progress of the contract work, where the outcome of the contract can
be estimated reliably. If the contract covers a number of projects and the cost and revenue of such
individual projects can be identifi ed within the terms of the overall contract, each such project is treated
as a separate contract. Provision is made in full where applicable for expected losses on contracts in
progress. Please refer to the paragraph “Construction contracts” for the accounting policy on revenue
from construction contracts for ship building and marine related activities.
(b) Rental income
Rental income from operating leases on investment properties and property, plant and equipment is recognised
on the straight-line basis over the lease term.
(c) Sale of scrap materials
Revenue from sale of scrap materials is recognised when the products have been delivered to the customer,
the customer has accepted the products and collectibility of the related receivables is reasonably assured.
(d) Interest income
Interest income is recognised on the time-proportion basis using the effective interest method.
(e) Dividend income
Dividend income is recognised when the right to receive payment is established.
NOTES TO THE FINANCIAL STATEMENTS
90COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.3 Group accounting
(a) Subsidiaries
(i) Consolidation
Subsidiaries are entities (including special purpose entities) over which the Group has power to govern
the fi nancial and operating policies so as to obtain benefi ts from its activities, generally accompanied by
a shareholding giving rise to a majority of the voting rights. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when assessing whether the Group
controls another entity. Subsidiaries are consolidated from the date on which control is transferred to
the Group. They are de-consolidated from the date on which control ceases.
In preparing the consolidated fi nancial statements, transactions, balances and unrealised gains
on transactions between group entities are eliminated. Unrealised losses are also eliminated but are
considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have
been changed where necessary to ensure consistency with the policies adopted by the Group.
Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary
attributable to the interests which are not owned directly or indirectly by the equity holders of the
Company. They are shown separately in the consolidated statement of comprehensive income,
statement of changes in equity and balance sheet. Total comprehensive income is attributed to the
non-controlling interests based on their respective interests in a subsidiary, even if this results in the
non-controlling interests having a defi cit balance.
(ii) Acquisition of businesses
The acquisition method of accounting is used to account for business combinations by the Group.
The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets
transferred, the liabilities incurred and the equity interests issued by the Group. The consideration
transferred also includes the fair value of any contingent consideration arrangement and the fair value
of any pre-existing equity interest in the subsidiary.
Acquisition-related costs are expensed as incurred.
Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination
are, with limited exceptions, measured initially at their fair values at the acquisition date.
On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the
acquiree at the date of acquisition either at fair value or at the non-controlling interest’s proportionate
share of the acquiree’s net identifi able assets.
The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree
and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of
the net identifi able assets acquired is recorded as goodwill. Please refer to the paragraph “Intangible
assets - Goodwill” for the subsequent accounting policy on goodwill.
91Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.3 Group accounting (continued)
(a) Subsidiaries (continued)
(iii) Disposals of subsidiaries or businesses
When a change in the Company’s ownership interest in a subsidiary results in a loss of control over the
subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts
recognised in other comprehensive income in respect of that entity are also reclassifi ed to the income
statement or transferred directly to retained earnings if required by a specifi c Standard.
Any retained interest in the entity is remeasured at fair value. The difference between the carrying
amount of the retained investment at the date when control is lost and its fair value is recognised in the
income statement.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the
accounting policy on investments in subsidiaries.
(b) Transactions with non-controlling interests
Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control over the
subsidiary are accounted for as transactions with equity owners of the Group. Any difference between the
change in the carrying amounts of the non-controlling interest and the fair value of the consideration paid or
received is recognised in a separate reserve within equity attributable to the equity holders of the Company.
(c) Associated companies
Associated companies are entities over which the Group has signifi cant infl uence, but not control, generally
accompanied by a shareholding giving rise to voting rights of 20% and above but not exceeding 50%.
Investments in associated companies are accounted for in the consolidated fi nancial statements using the
equity method of accounting less impairment losses, if any.
Investments in associated companies are initially recognised at cost. The cost of an acquisition is measured
at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of
exchange, plus costs directly attributable to the acquisition. Goodwill on associated companies represents the
excess of the cost of acquisition of the associate over the Group’s share of the fair value of the identifi able net
assets of the associate and is included in the carrying amount of the investments.
In applying the equity method of accounting, the Group’s share of its associated companies’ post-acquisition
profi ts or losses are recognised in the income statement and its share of post-acquisition other comprehensive
income is recognised in other comprehensive income. These post-acquisition movements and distributions
received from the associated companies are adjusted against the carrying amount of the investment. When the
Group’s share of losses in an associated company equals or exceeds its interest in the associated company,
including any other unsecured non-current receivables, the Group does not recognise further losses, unless it
has obligations or has made payments on behalf of the associated company.
Unrealised gains on transactions between the Group and its associated companies are eliminated to the
extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the
transaction provides evidence of an impairment of the asset transferred. The accounting policies of associated
companies have been changed where necessary to ensure consistency with the accounting policies adopted
by the Group.
Gains and losses arising from partial disposals or dilutions in investments in associated companies are
recognised in the income statement.
NOTES TO THE FINANCIAL STATEMENTS
92COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.3 Group accounting (continued)
(c) Associated companies (continued)
Investments in associated companies are derecognised when the Group loses signifi cant infl uence. Any
retained interest in the entity is remeasured at its fair value. The difference between the carrying amount of the
retained investment at the date when signifi cant infl uence is lost and its fair value is recognised in the income
statement.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the accounting
policy on investments in associated companies.
2.4 Property, plant and equipment
(a) Measurement
(i) Land and buildings
Land and buildings are initially recognised at cost. Freehold land is subsequently carried at cost less
accumulated impairment losses. Buildings and leasehold land are subsequently carried at cost less
accumulated depreciation and accumulated impairment losses.
(ii) Motor vessels
Motor vessels are initially recognised at cost and subsequently carried at cost less accumulated
depreciation and accumulated impairment losses.
The cost of motor vessels includes actual interest incurred on borrowings used to fi nance the motor
vessels while under construction and other direct relevant expenditure incurred in bringing the vessels
into operation. For this purpose, the interest rate applied to funds provided for constructing the motor
vessels is arrived at by reference to the actual rate payable on borrowings for construction purposes.
The capitalisation of interest charges will cease upon the completion and delivery of the motor vessels.
(iii) Other property, plant and equipment
All other items of property, plant and equipment are initially recognised at cost and subsequently carried
at cost less accumulated depreciation and accumulated impairment losses.
(iv) Components of costs
The cost of an item of property, plant and equipment initially recognised includes its purchase price
and any cost that is directly attributable to bringing the asset to the location and condition necessary
for it to be capable of operating in the manner intended by management. Cost also includes borrowing
costs that are directly attributable to the acquisition, construction or production of a qualifying asset
(Note 2.6). The projected cost of dismantlement, removal or restoration is also recognised as part of
the cost of property, plant and equipment if the obligation for the dismantlement, removal or restoration
is incurred as a consequence of either acquiring or using the asset for purposes other than to produce
inventories.
93Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.4 Property, plant and equipment (continued)
(b) Depreciation
Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculated
using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:
Useful lives
Buildings on freehold land 50 years
Leasehold land and buildings 10 - 50 years
Offi ce renovations, furniture, fi xtures and equipment 3 - 5 years
Plant, machinery and equipment 3 - 10 years
Motor vehicles 5 - 10 years
Motor vessels 20 years
Docks and quays 30 years
No depreciation is provided for construction-in-progress.
On 1 January 2010, the estimated useful life of motor vessels was changed from 15 years to 20 years which is
considered to be economically more realistic. The change in accounting policy has been applied prospectively
subsequent to that date. Accordingly, the adoption of the change in accounting estimate has no effect in
prior years. The effect on the fi nancial year ended 31 December 2010 is to decrease depreciation expense by
$12,849,000 and increase the carrying amount of motor vessels by $12,849,000.
The residual values, estimated useful lives and depreciation method of property, plant and equipment are
reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised
in the income statement when the changes arise.
(c) Subsequent expenditure
Subsequent expenditure relating to property, plant and equipment that has already been recognised is added
to the carrying amount of the asset only when it is probable that future economic benefi ts associated with the
item will fl ow to the Group and the cost of the item can be measured reliably. All other repair and maintenance
expenses are recognised in the income statement when incurred.
The motor vessels are subject to overhauls at regular intervals. The inherent components of the initial
overhaul are determined based on the estimated costs of the next overhaul and are separately depreciated
over a period of 2½ years in order to refl ect the estimated intervals between two overhauls. The costs of
the overhauls subsequently incurred are capitalised as additions and the carrying amounts of the replaced
components are written off to the income statement.
(d) Disposal
On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its
carrying amount is recognised in the income statement.
NOTES TO THE FINANCIAL STATEMENTS
94COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.5 Intangible assets
Goodwill on acquisitions
Goodwill on acquisitions of subsidiaries on or after 1 January 2010 represents the excess of the consideration
transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any
previous equity interest in the acquiree over the fair value of the net identifi able assets acquired.
Goodwill on acquisition of subsidiaries prior to 1 January 2010 and on acquisition of joint ventures and associated
companies represents the excess of the cost of the acquisition over the fair value of the Group’s share of the net
identifi able assets acquired.
Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated
impairment losses.
Goodwill on associated companies is included in the carrying amount of the investments.
Gains and losses on the disposal of subsidiaries and associated companies include the carrying amount of goodwill
relating to the entity sold, except for goodwill arising from acquisitions prior to 1 January 2001, the goodwill of which
was adjusted against retained earnings in the year of acquisition and not recognised in the income statement on
disposal.
2.6 Borrowing costs
Borrowing costs are recognised in the income statement using the effective interest method except for those costs
that are directly attributable to borrowings acquired specifi cally for the construction of motor vessels, docks and
quays. The actual borrowing costs incurred during the construction period less any investment income on temporary
investments of these borrowings, are capitalised in the cost of the docks and quays.
2.7 Construction contracts
A construction contract is a contract specifi cally negotiated for the construction of an asset or a combination of assets
that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate
purpose or use.
Contract costs are recognised when incurred.
When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are
recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at
the balance sheet date (“percentage-of-completion method”). When the outcome of a construction contract cannot
be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be
recoverable. When it is probable that total contract costs will exceed total contract revenue, the expected loss is
recognised as an expense immediately.
Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract work
and claims that can be measured reliably. A variation or a claim is recognised as contract revenue when it is probable
that the customer will approve the variation or negotiations have reached an advanced stage such that it is probable
that the customer will accept the claim.
The stage of completion is measured by reference to the completion of a physical proportion of the contract
work. Costs incurred during the fi nancial year in connection with future activity on a contract are excluded from
costs incurred to date when determining the stage of completion of a contract, the costs of which are shown as
construction contract work-in-progress on the balance sheet unless it is not probable that such contract costs are
recoverable from the customers, in which case, such costs are recognised as an expense immediately.
95Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.7 Construction contracts (continued)
At the balance sheet date, the cumulative costs incurred plus recognised profi ts (less recognised losses) on each
contract is compared against the progress billings. Where costs incurred plus the recognised profi ts (less recognised
losses) exceed progress billings, the balance is presented as due from customers on construction contracts within
“trade and other receivables”. Where progress billings exceed costs incurred plus recognised profi ts (less recognised
losses), the balance is presented as due to customers on construction contracts within “trade and other payables”.
Progress billings not yet paid by customers and retentions are included within “trade and other receivables”. Advances
received are included within “trade and other payables”.
2.8 Investment properties
Investment properties include those portions of offi ce buildings that are held for long-term rental yields and/or for
capital appreciation.
Investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciation
and accumulated impairment losses. Depreciation is calculated using the straight-line method to allocate the
depreciable amounts over the estimated useful lives of 10 to 50 years. The residual values, useful lives and
depreciation method of investment properties are reviewed, and adjusted as appropriate, at each balance sheet date.
The effects of any revision are included in the income statement when the changes arise.
Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovations
and improvements is capitalised as addition and the carrying amounts of the replaced components are recognised in
the income statement. The cost of maintenance, repairs and minor improvements is charged to the income statement
when incurred.
On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is
recognised in the income statement.
2.9 Investments in subsidiaries and associated companies
Investments in subsidiaries and associated companies are carried at cost less accumulated impairment losses in
the Company’s balance sheet. On disposal of investments in subsidiaries and associated companies, the difference
between disposal proceeds and the carrying amounts of the investments are recognised in the income statement.
2.10 Impairment of non-fi nancial assets
(a) Goodwill
Goodwill is tested for impairment annually, and whenever there is indication that the goodwill may be impaired.
Goodwill included in the carrying amount of an investment in associated company is tested for impairment as
part of the investment, rather than separately.
For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating
unit (“CGU”) expected to benefi t from synergies arising from the business combination.
An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the
recoverable amount of the CGU. The recoverable amount of a CGU is the higher of a CGU’s fair value less
cost to sell and value-in-use.
The total impairment loss of a CGU is allocated fi rst to reduce the carrying amount of goodwill allocated to the
CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in
the CGU.
An impairment loss on goodwill is recognised in the income statement and is not reversed in a subsequent
period.
NOTES TO THE FINANCIAL STATEMENTS
96COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.10 Impairment of non-fi nancial assets (continued)
(b) Property, plant and equipment
Investment properties
Investments in subsidiaries and associated companies
Property, plant and equipment, investment properties and investments in subsidiaries and associated
companies are tested for impairment whenever there is any objective evidence or indication that these assets
may be impaired.
For the purpose of impairment testing of these assets, the recoverable amount (i.e. the higher of the fair value
less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not
generate cash fl ows that are largely independent of those from other assets. If this is the case, the recoverable
amount is determined for the CGU to which the asset belongs.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying
amount of the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount is recognised as an impairment loss in
the income statement unless the asset is carried at revalued amount, in which case, such impairment loss is
treated as a revaluation decrease.
An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the
estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.
The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount
does not exceed the carrying amount that would have been determined (net of any accumulated amortisation
or depreciation) had no impairment loss been recognised for the asset in prior years.
A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless
the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.
However, to the extent that an impairment loss on the same revalued asset was previously recognised in the
income statement, a reversal of that impairment is also recognised in the income statement.
2.11 Financial assets
(a) Classifi cation
The Group classifi es its fi nancial assets in the following categories: at fair value through profi t or loss, loans
and receivables, held-to-maturity, and available-for-sale. The classifi cation depends on the nature of the asset
and the purpose for which the assets were acquired. Management determines the classifi cation of its fi nancial
assets at initial recognition.
(i) Financial assets, at fair value through profi t or loss
This category has two sub-categories: fi nancial assets held for trading, and those designated at fair
value through profi t or loss at inception. A fi nancial asset is classifi ed as held for trading if it is acquired
principally for the purpose of selling in the short term. Financial assets designated as at fair value
through profi t or loss at inception are those that are managed and their performances are evaluated
on a fair value basis, in accordance with a documented Group investment strategy. Derivatives are
also categorised as held for trading unless they are designated as hedges. Assets in this category are
presented as current assets if they are either held for trading or are expected to be realised within 12
months after the balance sheet date.
97Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.11 Financial assets (continued)
(a) Classifi cation (continued)
(ii) Loans and receivables
Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that are
not quoted in an active market. They are presented as current assets, except for those maturing later
than 12 months after the balance sheet date which are presented as non-current assets. Loans and
receivables include “trade and other receivables” and “cash and cash equivalents” except for non-
current interest-free receivables from a subsidiary which have been accounted for in accordance with
the accounting policy on investments in subsidiaries and associated companies (Note 2.9).
(iii) Financial assets, held-to-maturity
Financial assets, held-to-maturity are non-derivative fi nancial assets with fi xed or determinable
payments and fi xed maturities that the Group’s management has the positive intention and ability to
hold to maturity. If the Group were to sell other than an insignifi cant amount of held-to-maturity fi nancial
assets, the whole category would be tainted and reclassifi ed as available-for-sale. They are presented
as non-current assets, except for those maturing within 12 months after the balance sheet date which
are presented as current assets. The Group currently does not have any held-to-maturity fi nancial
assets.
(iv) Financial assets, available-for-sale
Financial assets, available-for-sale are non-derivatives that are either designated in this category or not
classifi ed in any of the other categories. They are presented as non-current assets unless management
intends to dispose of the assets within 12 months after the balance sheet date.
(b) Recognition and derecognition
Regular way purchases and sales of fi nancial assets are recognised on trade-date - the date on which the
Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash fl ows from the fi nancial assets have expired
or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On
disposal of a fi nancial asset, the difference between the carrying amount and the sale proceeds is recognised
in the income statement. Any amount in the fair value reserve relating to that asset is transferred to the income
statement.
(c) Initial measurement
Financial assets are initially recognised at fair value plus transaction costs except for fi nancial assets at fair
value through profi t or loss, which are recognised at fair value. Transaction costs for fi nancial assets at fair
value through profi t or loss are recognised immediately as expenses.
(d) Subsequent measurement
Financial assets, both available-for-sale and at fair value through profi t or loss are subsequently carried at fair
value. Loans and receivables and fi nancial assets, held-to-maturity are subsequently carried at amortised cost
using the effective interest method.
Changes in the fair value of fi nancial assets, at fair value through profi t or loss, including the effects of currency
translation, interest and dividend, are recognised in the income statement when the changes arise.
NOTES TO THE FINANCIAL STATEMENTS
98COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.11 Financial assets (continued)
(d) Subsequent measurement (continued)
Interest and dividend income on fi nancial assets, available-for-sale are recognised separately in the income
statement. Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominated
in foreign currencies are analysed into currency translation differences on the amortised cost of the securities
and other changes; the currency translation differences are recognised in the income statement and the other
changes are recognised in other comprehensive income. Changes in fair values of available-for-sale equity
securities (i.e. non-monetary items) are recognised in other comprehensive income, together with the related
currency translation differences.
(e) Impairment
The Group assesses at each balance sheet date whether there is objective evidence that a fi nancial asset or a
group of fi nancial assets is impaired and recognises an allowance for impairment when such evidence exists.
(i) Loans and receivables/Financial assets, held-to-maturity
Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy, and default
or signifi cant delay in payments are objective evidence that these fi nancial assets are impaired.
The carrying amount of these assets is reduced through the use of an impairment allowance
account which is calculated as the difference between the carrying amount and the present value of
estimated future cash fl ows, discounted at the original effective interest rate. When the asset becomes
uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts
previously written off are recognised against the same line item in the income statement.
The allowance for impairment loss account is reduced through the income statement in a subsequent
period when the amount of impairment loss decreases and the related decrease can be objectively
measured. The carrying amount of the asset previously impaired is increased to the extent that the
new carrying amount does not exceed the amortised cost, had no impairment been recognised in prior
periods.
(ii) Financial assets, available-for-sale
In addition to the objective evidence of impairment described in Note 2.11(e)(i), a signifi cant or
prolonged decline in the fair value of an equity security below its cost is considered as an indicator that
the available-for-sale fi nancial asset is impaired.
If any evidence of impairment exists, the cumulative loss that was recognised in the fair value reserve
is transferred to the income statement. The cumulative loss is measured as the difference between the
acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any
impairment loss previously recognised in the income statement. The impairment losses recognised in
the income statement on equity securities are not reversed through the income statement.
99Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.12 Financial guarantees
The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries and third parties
for services provided to a subsidiary. These guarantees are fi nancial guarantees as they require the Company to
reimburse the banks and third parties if the subsidiaries fail to make principal or interest payments when due in
accordance with the terms of their borrowings or payment for services when due, respectively.
Financial guarantees are initially recognised at their fair values plus transaction costs in the Company’s balance sheet.
Financial guarantees are subsequently amortised to the income statement over the period of the subsidiaries’
borrowings, unless it is probable that the Company will reimburse the bank for an amount higher than the unamortised
amount. In this case, the fi nancial guarantees shall be carried at the expected amount payable to the bank in the
Company’s balance sheet.
2.13 Borrowings
Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at
least 12 months after the balance sheet date.
Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost.
Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective interest method.
2.14 Trade and other payables
Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the
effective interest method.
2.15 Derivative fi nancial instruments and hedging activities
A derivative fi nancial instrument is initially recognised at its fair value on the date the contract is entered into and is
subsequently carried at its fair value. The method of recognising the resulting gain or loss depends on whether the
derivative is designated as a hedging instrument, and if so, the nature of the item being hedged.
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged
items, as well as its risk management objective and strategies for undertaking various hedge transactions. The
Group also documents its assessment, both at hedge inception and on an ongoing basis, on whether the derivatives
designated as hedging instruments are highly effective in offsetting changes in fair values or cash fl ows of the hedged
items.
The Group designates each hedge as either (a) fair value hedge; or (b) cash fl ow hedge.
(a) Fair value hedge and cash fl ow hedge
The Group has not designated any derivatives as hedging instruments during the fi nancial year.
(b) Derivatives that are not designated or do not qualify for hedge accounting
Fair value changes on these derivatives are recognised in the income statement when the changes arise.
NOTES TO THE FINANCIAL STATEMENTS
100COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.16 Fair value estimation of fi nancial assets and liabilities
The fair values of fi nancial instruments traded in active markets (such as exchange-traded and over-the-counter
securities and derivatives) are based on quoted market prices at the balance sheet date. The quoted market prices
used for fi nancial assets are the current bid prices; the appropriate quoted market prices for fi nancial liabilities are the
current ask prices.
The fair values of fi nancial instruments that are not traded in an active market are determined by using valuation
techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions
existing at each balance sheet date. Where appropriate, quoted market prices or dealer quotes for similar instruments
are used. Valuation techniques, such as discounted cash fl ow analyses, are also used to determine the fair values of
the fi nancial instruments.
The fair values of forward currency contracts are determined using actively quoted forward exchange rates.
The fair values of current fi nancial assets and liabilities carried at amortised cost approximate their carrying amounts.
2.17 Leases
(a) When the Group is the lessee:
The Group leases certain property, plant and equipment from non-related parties.
(i) Lessee - Finance leases
Leases of property, plant and equipment where the Group assumes substantially all risks and rewards
incidental to ownership of the leased assets are classifi ed as fi nance leases.
The leased assets and the corresponding lease liabilities (net of fi nance charges) under fi nance leases
are recognised on the balance sheet as property, plant and equipment and borrowings respectively, at
the inception of the leases based on the lower of the fair value of the leased assets and the present
value of the minimum lease payments.
Each lease payment is apportioned between the fi nance expense and the reduction of the outstanding
lease liability. The fi nance expense is recognised in the income statement on a basis that refl ects a
constant periodic rate of interest on the fi nance lease liability.
(ii) Lessee - Operating leases
Leases of property, plant and equipment where substantially all risks and rewards incidental to
ownership are retained by the lessors are classifi ed as operating leases. Payments made under
operating leases (net of any incentives received from the lessors) are recognised in the income
statement on the straight-line basis over the period of the lease.
Contingent rents are recognised as an expense in the income statement when incurred.
101Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.17 Leases (continued)
(b) When the Group is the lessor:
The Group leases certain items of property, plant and equipment and investment properties to non-related
parties.
(i) Lessor - Operating leases
Leases of property, plant and equipment and investment properties where the Group retains
substantially all risks and rewards incidental to ownership are classifi ed as operating leases.
Rental income from operating leases (net of any incentives given to lessees) is recognised in the income
statement on the straight-line basis over the lease term.
Initial direct costs incurred by the Group in negotiating and arranging an operating lease are added to
the carrying amount of the leased asset and recognised as an expense in the income statement over
the lease term on the same basis as the lease income.
Contingent rents are recognised as income in the income statement when earned.
2.18 Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted average
method. The cost of fi nished goods and work-in-progress comprises raw materials, direct labour, other direct costs
and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net realisable
value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and
applicable variable selling expenses.
2.19 Income taxes
Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered
from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the
balance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities
and their carrying amounts in the fi nancial statements except when the deferred income tax arises from the initial
recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither
accounting nor taxable profi t or loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries and
associated companies, except where the Group is able to control the timing of the reversal of the temporary difference
and it is probable that the temporary difference will not reverse in the foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that future taxable profi t will be available
against which the deductible temporary differences and tax losses can be utilised.
Deferred income tax is measured:
(i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the
deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantively
enacted by the balance sheet date; and
(ii) based on the tax consequence that will follow from the manner in which the Group expects, at the balance
sheet date, to recover or settle the carrying amounts of its assets and liabilities.
NOTES TO THE FINANCIAL STATEMENTS
102COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.19 Income taxes (continued)
Current and deferred income tax are recognised as income or expense in the income statement for the period, except
to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity.
Deferred tax arising from a business combination is adjusted against goodwill on acquisition.
2.20 Provisions
Provisions for warranty and other liabilities are recognised when the Group has a present legal or constructive
obligation as a result of past events; it is more likely than not that an outfl ow of resources will be required to settle the
obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
The Group recognises the estimated liability to repair or replace products still under warranty at the balance sheet
date. This provision is calculated based on estimates by technical engineers and historical experience of the level of
repairs and replacements.
Other provisions are measured at the present value of the expenditure expected to be required to settle the obligation
using a pre-tax discount rate that refl ects the current market assessment of the time value of money and the risks
specifi c to the obligation. The increase in the provision due to the passage of time is recognised in the income
statement as fi nance expense.
Changes in the estimated timing or amount of the expenditure or discount rate are recognised in the income
statement when the changes arise.
2.21 Employee compensation
(a) Defi ned contribution plans
Defi ned contribution plans are post-employment benefi t plans under which the Group pays fi xed contributions
into separate entities such as the Central Provident Fund and social security plans in the People’s Republic of
China (“PRC”) on a mandatory, contractual or voluntary basis. The Group has no further payment obligations
once the contributions have been paid.
(b) Employee leave entitlements
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for
the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet
date.
(c) Share-based compensation
The Group operates an equity-settled, share-based compensation plan. The fair value of the employee services
received in exchange for the grant of the options is recognised as an expense in the income statement with a
corresponding increase in the share option reserve over the vesting period. The total amount to be recognised
over the vesting period is determined by reference to the fair value of the options granted on the date of the
grant. Non-market vesting conditions are included in the estimation of the number of shares under option
that are expected to become exercisable on the vesting date. At each balance sheet date, the Group revises
its estimates of the number of shares under options that are expected to become exercisable on the vesting
date and recognises the impact of the revision of the estimates in the income statement, with a corresponding
adjustment to the share option reserve over the remaining vesting period.
When the options are exercised, the proceeds received (net of transaction costs) are credited to share capital
account when new ordinary shares are issued.
103Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.22 Currency translation
(a) Functional and presentation currency
Items included in the fi nancial statements of each entity in the Group are measured using the currency of
the primary economic environment in which the entity operates (the “functional currency”). The consolidated
fi nancial statements are presented in Singapore Dollars, which is the functional currency of the Company.
(b) Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”) are translated into the
functional currency using the exchange rates at the dates of the transactions. Currency translation differences
resulting from the settlement of such transactions and from the translation of monetary assets and liabilities
denominated in foreign currencies at the closing rates at the balance sheet date are recognised in the income
statement, unless they arise from borrowings in foreign currencies, other currency instruments designated
and qualifying as net investment hedges and net investment in foreign operations. Those currency translation
differences are recognised in the currency translation reserve in the consolidated fi nancial statements and
transferred to the income statement as part of the gain or loss on disposal of the foreign operation.
Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange
rates at the date when the fair values are determined.
(c) Translation of Group entities’ fi nancial statements
The results and fi nancial position of all the Group entities (none of which has the currency of a hyperinfl ationary
economy) that have a functional currency different from the presentation currency are translated into the
presentation currency as follows:
(i) Assets and liabilities are translated at the closing exchange rates at the reporting date;
(ii) Income and expenses are translated at average exchange rates (unless the average is not a reasonable
approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case,
income and expenses are translated using the exchange rates at the dates of the transactions); and
(iii) All resulting currency translation differences are recognised in the currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005
are treated as assets and liabilities of the foreign operations and translated at the closing rates at the reporting
date. For acquisitions prior to 1 January 2005, the exchange rates at the dates of acquisition are used.
2.23 Segment reporting
Operating segments are reported in a manner consistent with the internal reporting provided to the key management
whose members are responsible for allocating resources and assessing performance of the operating segments.
2.24 Cash and cash equivalents
For the purpose of presentation in the consolidated cash fl ow statement, cash and cash equivalents include cash
on hand, deposits with fi nancial institutions which are subject to an insignifi cant risk of change in value and bank
overdrafts and exclude pledged deposits with fi nancial institutions. Bank overdrafts are presented as current
borrowings on the balance sheet.
NOTES TO THE FINANCIAL STATEMENTS
104COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
2. Signifi cant accounting policies (continued)
2.25 Share capital
Ordinary shares are classifi ed as equity. Incremental costs directly attributable to the issuance of new ordinary shares
are deducted against the share capital account.
2.26 Dividends to Company’s shareholders
Dividends to Company’s shareholders are recognised when the dividends are approved for payment.
2.27 Government grants
Grants from the government are recognised as a receivable at their fair value when there is reasonable assurance that
the grant will be received and the Group will comply with all the attached conditions.
Government grants receivable are recognised as income over the periods necessary to match them with the related
costs which they are intended to compensate, on a systematic basis. Government grants relating to expenses are
shown separately as other income.
Government grants relating to assets are deducted against the carrying amount of the assets.
3. Critical accounting estimates, assumptions and judgements
Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other
factors, including expectations of future events that are believed to be reasonable under the circumstances.
(a) Uncertain tax positions
The Group is subject to income taxes in numerous jurisdictions. In determining the tax liabilities, management
applies the statutory tax rate of the tax jurisdictions in which the subsidiaries operate in and is required to
estimate the amount of capital allowances and the deductibility of certain expenses (“uncertain tax positions”)
at each tax jurisdiction. There are many transactions and calculations for which the ultimate tax determination
is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit
issues based on estimates of whether additional taxes will be due. Where the fi nal tax outcome of these
matters is different from the amount that were initially recorded, such differences will impact the income tax
and deferred income tax provisions in the period in which such determination is made.
If the actual fi nal outcome (on the judgement areas) differs by 10% from the management’s estimates, the
Group would need to:
- increase the income tax liability by $6,559,000, if unfavourable; or
- decrease the income tax liability by $6,559,000, if favourable.
(b) Construction contracts
The Group uses the percentage-of-completion method to account for its contract revenue. The stage of
completion is measured by reference to the completion of a physical proportion of the contract work.
Signifi cant judgement is required in determining the stage of completion, the estimated total contract costs,
the estimated completion dates, as well as the recoverability of the contracts.
If the estimated total contract revenue increases/decreases by 10% from management’s estimates, the Group’s
revenue will increase/decrease by $270,862,000.
105Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
3. Critical accounting estimates, assumptions and judgements (continued)
(b) Construction contracts (continued)
If the contract costs to be incurred increase/decrease by 10% from management’s estimates, the Group’s cost
of sales will increase/decrease by $251,365,000.
(c) Useful life of property, plant and equipment
The management of the Group determines the estimated useful lives and related depreciation expense for
the property, plant and equipment. The management of the Group estimates useful lives of the property, plant
and equipment by reference to expected usage of the property, plant and equipment, expected repair and
maintenance, and technical or commercial obsolescence arising from changes or improvements in the market.
The useful lives and related depreciation expense could change signifi cantly as a result of the changes in these
factors.
(d) Impairment of receivables
Management reviews its receivables for objective evidence of impairment regularly. Signifi cant fi nancial
diffi culties of the debtor, the probability that the debtor will enter bankruptcy, and default or signifi cant delay
in payments are considered objective evidence that a receivable is impaired. In determining this, management
makes judgement as to whether there is observable data indicating that there has been a signifi cant change
in the payment ability of the debtor, or whether there have been signifi cant changes with adverse effect in the
technological, market, economic or legal environment in which the debtor operates.
Where there is objective evidence of impairment, management makes judgements as to whether an
impairment loss should be recorded in the income statement. In determining this, management uses estimates
based on historical loss experience for assets with similar credit risk characteristics. The methodology and
assumptions used for estimating both the amount and timing of future cash fl ows are reviewed regularly to
reduce any differences between the estimated loss and actual loss experience.
Any changes in the net present values of estimated cash fl ows from management’s estimates for all past due
receivables, will not result in any signifi cant impact to the Group’s allowance for impairment.
4. Revenue
The Group2010 2009
$’000 $’000
Rendering of services
- Ship repair and marine engineering income 886,568 1,069,681
- Time charter revenue 128,605 132,894
- Shipping agency income 12,615 14,184
Construction revenue
- Ship building and marine engineering 2,832,915 1,681,362
Others 742 883
Total sales 3,861,445 2,899,004
NOTES TO THE FINANCIAL STATEMENTS
106COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
5. Expenses by nature
The Group2010 2009
$’000 $’000
Raw materials, fi nished goods, consumables and other overheads 2,036,572 1,221,161
Changes in inventories and construction contract work-in-progress 131,824 213,631
Net reversal of impairment of trade and other receivables (31,241) (11,375)
Expected losses recognised on construction contracts 64,822 578
Depreciation and amortisation 168,426 153,416
Director and employee compensation (Note 6) 317,330 347,314
Sub-contractor expenses 616,942 595,471
Write-off for inventory obsolescence and inventory write-down 572 4,236
Write-off for property, plant and equipment 136 40
Rental expense on operating leases 69,886 82,678
Repairs and maintenance 22,489 33,518
Non-audit service fees paid/payable to auditor of the Company 77 154
Commission 39,917 30,087
Crew overheads 13,682 10,771
Vessel overheads 8,421 13,062
Other expenses 135,839 130,334
Total cost of sales, distribution and administrative expenses 3,595,694 2,825,076
6. Director and employee compensation
The Group2010 2009
$’000 $’000
Wages, salaries and staff benefi ts 287,577 317,218
Employer’s contribution to defi ned contribution plans including Central
Provident Fund 29,468 26,591
Share option expenses [Note 32(b)(i)] – 3,240
Directors’ fees of the Company 285 265
317,330 347,314
107Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
7. Other income (net)
The Group2010 2009
$’000 $’000
Rental income 2,564 1,594
Dividend income 20 314
Currency exchange gain - net 25,655 15,715
Interest income from bank deposits 13,882 32,781
Reversal of impairment/(impairment) in value of transferable club memberships 16 (32)
Net fair value gain/(loss) on forward currency contracts 13,253 (15,625)
Net gain/(loss) on disposal of property, plant and equipment 743 (351)
Negative goodwill – 12
Compensation received from customers 15,055 15,263
Government grants 4,038 21,382
Sundry income 12,743 8,119
Sale of scrap materials 90,284 67,142
178,253 146,314
Included in the Group’s sundry income is Jobs Credit Scheme of $85,000 (2009: $407,000). The Jobs Credit
Scheme is a cash grant introduced in the Singapore Budget 2009 to help businesses preserve jobs in the economic
downturn. The amount an employer can receive depends on the fulfi lment of certain conditions under the scheme.
The Jobs Credit Scheme ceased on 30 June 2010.
8. Finance expenses
The Group2010 2009
$’000 $’000
Interest expense
- Bank borrowings and bills payable 44,564 46,347
- Finance lease liabilities 3 3
Total interest expense 44,567 46,350
Less: Amount capitalised in construction of property,
plant and equipment [Note 23(c)] (2,436) (4,446)
Finance expenses recognised in the income statement 42,131 41,904
Borrowing costs on fi nancing were capitalised at a rate of 3.71% (2009: 4.35%) per annum.
NOTES TO THE FINANCIAL STATEMENTS
108COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
9. Income taxes
(a) Income tax expense
The Group2010 2009
$’000 $’000
Tax expense attributable to profi t is made up of:
Current income tax
- Singapore 442 894
- Foreign 131,484 103,092
131,926 103,986
Deferred income tax (Note 30)
- Singapore (3) (12)
- Foreign (66,338) (72,602)
(66,341) (72,614)
65,585 31,372
(Over)/Under provision in prior fi nancial years:
- Current income tax
- Singapore (763) (566)
- Foreign (24,480) 6,686
(25,243) 6,120
- Deferred income tax (Note 30)
- Foreign 2,898 3,266
43,240 40,758
109Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
9. Income taxes (continued)
(a) Income tax expense (continued)
The tax expense on profi t differs from the amount that would arise using the Singapore standard rate of
income tax as explained below:
The Group2010 2009
$’000 $’000
Profi t before tax and share of (loss)/profi t of associated companies 401,873 178,338
Tax calculated at a tax rate of 17% (2009: 17%) 68,318 30,317
Effects of:
- Change in tax rate (14,669) (21,713)
- Different tax rates in other countries 22,631 13,496
- Singapore stepped income exemption (170) (131)
- Exemption of shipping profi ts under Approved International Shipping
Scheme and Section 13A of Singapore Income Tax Act (7,074) (9,153)
- Profi ts exempted from tax (6,808) (1,327)
- Income not subject to tax (5,160) (120)
- Expenses not deductible for tax purposes 8,894 21,396
- Tax incentive rebates from the People’s Republic of China – (1,465)
- Utilisation of previously unrecognised deferred tax asset (383) (246)
- Deferred tax asset not recognised – 295
- Others 6 23
Tax charge 65,585 31,372
(b) Movements in current income tax liabilities
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Beginning of fi nancial year 84,136 61,348 549 4,885
Currency translation differences (8,680) (4,874) – –
Disposal of subsidiaries (139) – – –
Income tax paid (109,234) (82,444) (819) (3,938)
Tax expense on profi t for the current
fi nancial year 131,926 103,986 1,050 97
(Over)/under provision in prior fi nancial years (25,243) 6,120 (535) (495)
End of fi nancial year 72,766 84,136 245 549
NOTES TO THE FINANCIAL STATEMENTS
110COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
10. Earnings per share
(a) Basic earnings per share
Basic earnings per share is calculated by dividing the net profi t attributable to equity holders of the Company
by the weighted average number of ordinary shares outstanding during the fi nancial year.
2010 2009
Net profi t attributable to equity holders of the Company ($’000) 248,837 110,080
Weighted average number of ordinary shares outstanding for basic
earnings per share (’000) 2,239,245 2,239,245
Basic earnings per share (cents per share) 11.11 4.92
(b) Diluted earnings per share
For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares
outstanding is adjusted for the effects of all dilutive potential ordinary shares arising from share options.
For share options, the weighted average number of shares on issue has been adjusted as if all dilutive
share options were exercised. The number of shares that could have been issued upon the exercise of all
dilutive share options less the number of shares that could have been issued at fair value (determined as the
Company’s average share price for the fi nancial year) for the same total proceeds is added to the denominator
as the number of shares issued for no consideration. No adjustment is made to the net profi t.
Diluted earnings per share attributable to equity holders of the Company are calculated as follows:
2010 2009
Net profi t attributable to equity holders of the Company ($’000) 248,837 110,080
Weighted average number of ordinary shares outstanding for basic
earnings per share (’000) 2,239,245 2,239,245
Adjustment for
- share options (’000) 658 –
Weighted average number of ordinary shares outstanding for
diluted earnings per share (’000) 2,239,903 2,239,245
Diluted earnings per share (cents per share) 11.11 4.92
For 2009, the outstanding share options did not have any dilutive effect on the earnings per share as the
exercise prices for the outstanding share options were higher than the average market price during that
fi nancial year.
111Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
11. Cash and cash equivalents
(a) Cash and cash equivalents at the end of the fi nancial year comprise the following:
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Cash at bank and on hand 261,309 463,810 14,361 3,393
Short-term bank deposits 605,892 1,085,365 102,596 131,118
867,201 1,549,175 116,957 134,511
Cash at bank and short-term bank deposits include an amount of $473,545,000 (2009: $784,524,000) placed
with a fellow subsidiary, Cosco Finance Co., Ltd.
For the purpose of presenting the consolidated cash fl ow statement, the consolidated cash and cash
equivalents comprise the following:
The Group2010 2009
$’000 $’000
Cash and bank balances (as above) 867,201 1,549,175
Less: Bank deposits pledged (Note 27) (3,288) (3,554)
Cash and cash equivalents per consolidated cash fl ow statement 863,913 1,545,621
Cash and bank balances and short-term bank deposits of the Group to the extent of $3,288,000 (2009:
$3,554,000) were pledged as security for the following:
(i) long-term bank loans (Note 27) obtained to fi nance the purchases of certain motor vessels;
(ii) trade fi nance facilities; and
(iii) the issuance of banker’s guarantees in favour of third parties.
NOTES TO THE FINANCIAL STATEMENTS
112COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
11. Cash and cash equivalents (continued)
(b) Disposal of subsidiaries
On 30 December 2010, the Company’s 51%-owned subsidiary, Cosco Shipyard Group Co., Ltd (“CSG”) has
ceased to have management control over Diesel Marine Dalian Ltd and Diesel Marine International (Nantong)
Co., Ltd, being companies in which CSG has an equity interest of 30% each. As a result of this cessation of
control, the assets and liabilities of these two companies were deconsolidated from the fi nancial statements of
the Group. The effects of the disposal on the cash fl ows of the Group were:
The Group $’000
Carrying amounts of assets and liabilities disposed
Cash and cash equivalents (3,950)
Inventories (3,698)
Trade and other receivables (5,810)
Property, plant and equipment (Note 23) (6,337)
Total assets (19,795)
Trade and other payables 11,003
Current income tax liabilities (Note 9) 139
Total liabilities 11,142
Net assets derecognised (8,653)
Less: Non-controlling interests 6,057
Net assets disposed (2,596)
The aggregate cash fl ows arising from the disposal of Diesel Marine Dalian Ltd and Diesel Marine International
(Nantong) Co., Ltd were:
The Group $’000
Net assets disposed (as above) 2,596
Reclassifi cation to investment in associated companies (Note 20) (2,596)
Cash proceeds from disposal –
Less: Cash and cash equivalents in subsidiaries disposed (3,950)
Net cash outfl ow on disposal (3,950)
113Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
12. Forward currency contracts
The Group2010 2009
$’000 $’000
Beginning of fi nancial year (13,504) 1,623
Fair value gain/(loss) included in income statement 13,253 (15,625)
Currency translation differences 251 498
End of fi nancial year – (13,504)
Analysed as:
The Group
Contract Fair valuenotionalamount Assets Liabilities
Netassets
$’000 $’000 $’000 $’000
2010
Non-hedging instruments
- Forward currency contracts - current – – – –
2009
Non-hedging instruments
- Forward currency contracts - current 223,944 944 (14,448) (13,504)
NOTES TO THE FINANCIAL STATEMENTS
114COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
13. Trade and other receivables - current
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Trade receivables:
- Non-related parties 388,841 434,984 – –
- Fellow subsidiaries
(see note (i) below) 114,600 78,663 – –
- Associated companies 2,502 – – –
- A subsidiary – – 131 131
505,943 513,647 131 131
Less: Allowance for impairment of receivables -
non-related parties (17,553) (51,036) – –
Trade receivables - net 488,390 462,611 131 131
Construction contracts due from customers
(Note 15):
- Non-related parties 545,451 154,704 – –
- Fellow subsidiaries 20,346 94,827 – –
565,797 249,531 – –
Other receivables:
- Non-related parties 56,126 48,887 109 105
- Ultimate holding corporation 23 – – –
- A fellow subsidiary 4,488 10,675 – –
60,637 59,562 109 105
Less: Allowance for impairment of other
receivables - non-related parties (792) (831) – –
Other receivables - net 59,845 58,731 109 105
Advances paid to suppliers 858,775 679,201 – –
Staff advances 1,222 1,357 – –
Dividend receivable from
- Subsidiaries – – 2,655 –
- Associated companies 2,634 809 – –
Total 1,976,663 1,452,240 2,895 236
(i) A subsidiary of the Group has factored trade receivables with carrying amounts of $45,283,000 (2009: nil) to a bank in
exchange for cash during the fi nancial year ended 31 December 2010. The transaction has been accounted for as a
collateralised borrowing as the bank has full recourse to the subsidiary in the event of default by the debtors (Note 27).
115Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
14. Inventories
The Group2010 2009
$’000 $’000
Raw materials 429,816 602,391
Work-in-progress 46,014 72,273
Finished goods 42,205 2,904
518,035 677,568
The cost of inventories recognised as an expense and included in “cost of sales” amounted to $3,322,337,000 (2009:
$2,525,714,000).
15. Construction contract work-in-progress
The Group2010 2009
$’000 $’000
Beginning of fi nancial year 199,385 170,143
Contract costs incurred during the fi nancial year 2,566,433 1,789,167
Contract expenses recognised in the income statement during the fi nancial year (2,572,134) (1,755,283)
Currency translation differences (10,956) (4,642)
End of fi nancial year 182,728 199,385
Aggregate costs incurred and profi ts recognised (less losses recognised)
to date on uncompleted construction contracts 2,616,896 1,937,692
Less: Progress billings (2,448,845) (2,177,092)
Currency translation differences (6,424) 8,162
161,627 (231,238)
Analysed as:
Due from customers on construction contracts (Note 13) 565,797 249,531
Due to customers on construction contracts (Note 26) (404,170) (480,769)
161,627 (231,238)
Advances received on construction contracts (Note 26) 1,122,503 1,747,029
16. Other current assets
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Deposits 1,687 1,980 7 9
Prepayments 2,468 4,593 198 211
4,155 6,573 205 220
NOTES TO THE FINANCIAL STATEMENTS
116COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
17. Trade and other receivables - non-current
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Trade receivables:
- Non-related parties (i) 72,739 – – –
Less: Current portion (34,507) – – –
38,232 – – –
Other receivables:
- A non-related party (ii) 10,857 – – –
Loans to a subsidiary (iii) – – – 64,285
49,089 – – 64,285
(i) As at 31 December 2010, the total trade receivables of $39,690,000 are secured, interest-free and with monthly instalment
payments that will be repayable in full by 2012. The remaining balance of $33,049,000 are unsecured, interest-bearing at 7%
per annum and with quarterly instalment payments that will be repayable in full by 2015.
As at 31 December 2010, the fair values of the non-current trade receivables approximated its carrying amounts, determined
from the cash fl ow analyses discounted at market borrowing rates of 3.40% which the directors expected to be available to
the Group.
(ii) Other receivables from a non-related party are unsecured and interest-free.
As at 31 December 2010, the fair values of the non-current other receivables approximated its carrying amounts, determined
from the cash fl ow analyses discounted at market borrowing rates of 3.40% which the directors expected to be available to
the Group.
(iii) The loans to a subsidiary were interest-free, unsecured and had no fi xed terms of repayment. In 2010, the full amount of
$64,285,000 was capitalised as investment in a subsidiary.
18. Financial assets, available-for-sale
The Group2010 2009
$’000 $’000
Beginning of fi nancial year 4,034 3,630
Currency translation differences (211) (91)
Fair value (loss)/gain recognised in equity [Note 32(b)(v)] (389) 495
End of fi nancial year 3,434 4,034
117Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
18. Financial assets, available-for-sale (continued)
At the balance sheet date, fi nancial assets, available-for-sale include the following:
The Group2010 2009
$’000 $’000
Quoted equity shares in a corporation, at fair value 530 958
Unquoted equity shares in corporations, at cost
- A fellow subsidiary 1,943 2,058
- A non-related party 961 1,018
2,904 3,076
3,434 4,034
The directors do not anticipate that the carrying amounts of these unquoted equity investments will deviate
signifi cantly from their fair values on the basis that these unquoted equity shares in corporations are in positive net
tangible assets position.
19. Club memberships
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Transferable club memberships, at cost 937 879 428 428
Currency translation differences (13) (2) – –
Allowance for impairment in value of club
memberships (367) (385) (256) (272)
557 492 172 156
20. Investments in associated companies
The Group2010 2009
$’000 $’000
Beginning of fi nancial year 1,922 2,577
Currency translation differences (226) (32)
Reclassifi cation from investment in subsidiaries [Note 11(b)] 2,596 –
Share of (loss)/profi t after tax (27) 214
Dividends declared, net of tax (696) (837)
End of fi nancial year 3,569 1,922
The summarised fi nancial information of associated companies are as follows:
- Assets 29,638 11,008
- Liabilities 18,141 5,036
- Revenue 24,052 9,286
- Net (loss)/profi t (207) 602
NOTES TO THE FINANCIAL STATEMENTS
118COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
20. Investments in associated companies (continued)
Details of associated companies are set out below:
Name of associated companies Principal activities
Country ofincorporation/
business
% ofpaid-up
capital held bysubsidiaries
2010 %
2009
%
DMI (Guangzhou) Ltd (i) Overhaul and spare-parts
replacement and repair
People’s Republic
of China (“PRC”)
30 30
Tru-Marine Cosco (Tianjin)
Engineering Co., Ltd (i)
Overhaul and spare- parts
replacement and repair
PRC 40 40
Diesel Marine International
(Nantong) Co., Ltd (i) and (ii)
Overhaul and spare-parts
replacement and repair
PRC 30 –
Diesel Marine Dalian Ltd (i) and (ii) Overhaul and spare-parts
replacement and repair
PRC 30 –
(i) Audited by RSM China Certifi ed Public Accountants, PRC.
(ii) See Note 11(b).
21. Investments in subsidiaries
The Company2010 2009
$’000 $’000
Unquoted equity shares
Beginning of fi nancial year 310,871 310,871
Additions 82,664 –
393,535 310,871
Accumulated impairment losses (19,498) (20,058)
End of fi nancial year 374,037 290,813
Movements in accumulated impairment losses are as follows:
2010 2009
$’000 $’000
Beginning of fi nancial year 20,058 20,903
Reversal of impairment charge (560) (845)
End of fi nancial year 19,498 20,058
119Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
21. Investments in subsidiaries (continued)
Details of the subsidiaries are set out below:
Name of subsidiaries
Principalactivities
Country ofincorporation/
businessCost of
investment
% of paid-up capital held by
The Company Subsidiaries2010 2009 2010 2009 2010 2009
$’000 $’000 % % % %
Cosco
(Singapore)
Pte Ltd (i)
Ship owning, ship
chartering and
investment
holding
Singapore 87,664 5,000 100 100 – –
Cosco Marine
Engineering
(Singapore)
Pte Ltd (i)
Ship repairing,
marine
engineering,
container repairs
and services,
fabrication works
services and
production of
marine
outfi tting
components
Singapore 2,242 2,242 90 90 – –
Harington
Property
Pte Ltd (i)
Trading and
investing in
properties,
provide property
management
services and
investment
holding
Singapore 52,701 52,701 100 100 – –
Coslink (M)
Sdn. Bhd. (ii)
Shipping
agency and
related activities
Malaysia 771 771 70 70 18 18
Costar
Shipping
Pte Ltd (i)
Shipping agent
and investment
holding
Singapore 4,018 4,018 70 70 – –
Cosco Shipyard
Group Co., Ltd
(v) and (vi)
Investment
holding
People’s
Republic of
China (“PRC”)
191,173 191,173 51 51 – –
Cosco (Nantong)
Shipyard Co.,
Ltd (v) and (vi)
Ship repair and
marine
engineering
PRC 24,670 24,670 50 50 50 50
Cosco (Dalian)
Shipyard Co.,
Ltd (v) and (vi)
Ship repair, ship
building and
marine
engineering
PRC 30,296 30,296 39 39 59 59
NOTES TO THE FINANCIAL STATEMENTS
120COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
21. Investments in subsidiaries (continued)
Name of subsidiaries
Principalactivities
Country ofincorporation/
businessCost of
investment
% of paid-up capital held by
The Company Subsidiaries2010 2009 2010 2009 2010 2009
$’000 $’000 % % % %
Cosco
(Guangdong)
Shipyard Co.,
Ltd (v) and (vi)
Ship repair and
ship building
PRC – – – – 75 75
Cosco
(Zhoushan)
Shipyard Co.,
Ltd (v) and (vi)
Ship repair, ship
building and
marine engineering
PRC – – – – 100 100
Cosco (Xiamen)
Shipyard
Co., Ltd (v)
Ship repair PRC – – – – 51 51
Cosco
(Shanghai)
Shipyard
Co., Ltd (v)
Ship repair PRC – – – – 95 95
Cosco (Tianjin)
Shipyard
Co., Ltd (v)
Ship repair PRC – – – – 90 90
Cosco
(Lianyungang)
Shipyard Co.,
Ltd (v) and (vi)
Ship repair PRC – – – – 60 60
Cosco (Qidong)
Offshore Co.,
Ltd (v)
Offshore marine
engineering
PRC – – – – 60 60
Cosco Dalian
Rikky Ocean
Engineering
Co., Ltd (v)
Overhaul, repair,
commissioning
and spare-parts
replacement of
governor,
turbocharger
and engine fuel
system
PRC – – – – 75 75
Diesel Marine
Dalian Ltd
(iii), (v) and (vii)
Overhaul and
spare-parts
replacement
and repair
PRC – – – – – 30
121Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
21. Investments in subsidiaries (continued)
Name of subsidiaries
Principalactivities
Country ofincorporation/
businessCost of
investment
% of paid-up capital held by
The Company Subsidiaries2010 2009 2010 2009 2010 2009
$’000 $’000 % % % %
Diesel Marine
International
(Nantong)
Co., Ltd (iii), (v)
and (vii)
Overhaul and
spare-parts
replacement
and repair
PRC – – – – – 30
Cosco (Nantong)
Ocean Shipyard
Co., Ltd (v)
(formerly known
as Cosco Clavon
Shipyard
Co., Ltd)
Ship repair and
corrosion
control
PRC – – – – 60 60
Zhongyuan
Sea-Land
Engineering
Co., Ltd (v)
Ship repair PRC – – – – 51 51
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
NOTES TO THE FINANCIAL STATEMENTS
122COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
21. Investments in subsidiaries (continued)
Name of subsidiaries
Principalactivities
Country ofincorporation/
businessCost of
investment
% of paid-up capital held by
The Company Subsidiaries2010 2009 2010 2009 2010 2009
$’000 $’000 % % % %
Cos Prosperity
Shipping Pte
Ltd (i)
Ship owning
and ship
chartering
Singapore/
Worldwide
– – – – 100 100
Cos Knight
Shipping
Maritime Inc. (i)
Ship owning
and ship
chartering
Panama/
Worldwide
– – – – 100 100
Cos Lucky
Shipping
Maritime Inc. (i)
Ship owning
and ship
chartering
Panama/
Worldwide
– – – – 100 100
Costar
Agencies (M)
Sdn. Bhd. (iv)
Shipping agent Malaysia – – – – 100 100
CNF Shipping
(M) Sdn. Bhd.
(iv)
Shipping agent Malaysia – – – – 60 60
CNF Shipping
Agencies
Pte Ltd (i)
Vessel chartering,
feedering, freight
forwarders,
transport agent,
warehousing
and other related
services
Singapore – – – – 100 100
Cosco
Engineering
Pte Ltd (i)
Ship repairing,
marine
engineering,
container repairs
and services,
fabrication works
services and
production of
marine outfi tting
components
Singapore – – – – 100 100
393,535 310,871
(i) Audited by PricewaterhouseCoopers LLP, Singapore.
(ii) Audited by PricewaterhouseCoopers fi rms outside Singapore.
(iii) Deemed to be a subsidiary as the Group had the power to govern the fi nancial and operating policies of the entity.
(iv) Audited by Deloitte KassimChan, Malaysia.
(v) Audited by RSM China Certifi ed Public Accountants, PRC.
(vi) Audited by PricewaterhouseCoopers LLP, Singapore and fi rms outside Singapore for the purposes of consolidation.
(vii) See Note 11(b).
123Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
22. Investment properties
The Group2010 2009
$’000 $’000
Cost
Beginning of fi nancial year 15,804 15,849
Currency translation differences (121) (45)
Additions 10 –
Reclassifi cation from property, plant and equipment (Note 23) 3,565 –
End of fi nancial year 19,258 15,804
Accumulated depreciation and accumulated impairment losses
Beginning of fi nancial year 4,018 3,632
Currency translation differences (27) (9)
Depreciation charge 471 395
Reclassifi cation from property, plant and equipment (Note 23) 177 –
End of fi nancial year 4,639 4,018
Net book value 14,619 11,786
Fair values 19,806 14,909
Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses as the
Group has elected to adopt the cost model method to measure its investment properties.
Fair values of the investment properties as at the balance sheet date are stated based on independent professional
valuations using the direct comparison method.
Investment properties are leased to fellow subsidiaries and non-related parties under operating leases.
The following amounts are recognised in the income statement:
The Group2010 2009
$’000 $’000
Rental income 1,372 1,151
Direct operating expenses arising from investment properties that generated
rental income 769 540
NOTES TO THE FINANCIAL STATEMENTS
124COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
23. Property, plant and equipment
The Group
Freehold land andbuildings
$’000
Leaseholdland andbuildings
$’000
Offi cerenovations,
furniture,fi xtures andequipment
$’000
Plant,machinery
andequipment
$’000
Motorvehicles
$’000
Motorvessels$’000
Docksand
quays$’000
Construction- in-progress
$’000Total$’000
2010
Cost
Beginning of fi nancial year 3,044 820,315 46,096 794,641 45,878 307,210 783,701 149,790 2,950,675
Currency translation
differences – (44,904) (2,398) (44,254) (2,376) (26,613) (43,920) (8,384) (172,849)
Additions – 12,133 2,971 4,327 593 1,614 – 154,467 176,105
Disposals – (79) (322) (13,044) (1,326) (1,354) – (3,673) (19,798)
Disposal of subsidiaries
[Note 11(b)] – (4,646) (333) (3,536) (470) – – (156) (9,141)
Reclassifi cation – 100,880 1,673 67,113 2,218 – 57,521 (232,970) (3,565)
End of fi nancial year 3,044 883,699 47,687 805,247 44,517 280,857 797,302 59,074 2,921,427
Accumulated depreciation
Beginning of fi nancial year 883 78,713 23,529 195,409 24,692 134,363 143,988 – 601,577
Currency translation
differences – (5,407) (1,493) (13,694) (1,524) (12,530) (9,138) – (43,786)
Depreciation charge 61 33,481 9,030 76,411 6,777 14,168 27,942 – 167,870
Disposals – (10) (261) (6,560) (1,080) (1,294) – – (9,205)
Disposal of subsidiaries
[Note 11(b)] – (258) (250) (1,889) (407) – – – (2,804)
Reclassifi cation – 502 (74) (588) – – (17) – (177)
End of fi nancial year 944 107,021 30,481 249,089 28,458 134,707 162,775 – 713,475
Net book value End of fi nancial year 2,100 776,678 17,206 556,158 16,059 146,150 634,527 59,074 2,207,952
125Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
23. Property, plant and equipment (continued)
The Group
Freehold land andbuildings
$’000
Leaseholdland andbuildings
$’000
Offi cerenovations,
furniture,fi xtures andequipment
$’000
Plant,machinery
andequipment
$’000
Motorvehicles
$’000
Motorvessels$’000
Docksand
quays$’000
Construction- in-progress
$’000Total$’000
2009
Cost
Beginning of fi nancial year 3,044 480,241 34,011 575,804 40,110 312,369 692,045 416,336 2,553,960
Currency translation
differences – (9,514) (634) (11,773) (760) (6,233) (14,185) (8,533) (51,632)
Additions – 71,344 11,383 28,768 5,181 2,489 – 350,759 469,924
Disposals – (1,433) (954) (8,718) (1,301) (1,415) – (7,756) (21,577)
Reclassifi cation – 279,677 2,290 210,560 2,648 – 105,841 (601,016) –
End of fi nancial year 3,044 820,315 46,096 794,641 45,878 307,210 783,701 149,790 2,950,675
Accumulated depreciation
Beginning of fi nancial year 822 61,563 16,548 143,229 19,111 109,109 121,628 – 472,010
Currency translation
differences – (1,825) (561) (5,035) (599) (3,197) (3,370) – (14,587)
Depreciation charge 61 19,684 8,293 62,427 7,102 29,724 25,730 – 153,021
Disposals – (714) (753) (5,205) (922) (1,273) – – (8,867)
Reclassifi cation – 5 2 (7) – – – – –
End of fi nancial year 883 78,713 23,529 195,409 24,692 134,363 143,988 – 601,577
Net book value End of fi nancial year 2,161 741,602 22,567 599,232 21,186 172,847 639,713 149,790 2,349,098
(a) The carrying amount of motor vehicles held under fi nance leases at 31 December 2010 amounted to $32,000
(2009: $63,000) (Note 27).
(b) As at the balance sheet date, the net book values of motor vessels of the Group amounting to $67,825,000
(2009: $78,547,000) are mortgaged to banks to secure long-term bank borrowings and bank facilities (Note
27).
(c) Borrowing costs of $2,436,000 (2009: $4,446,000) which arise mainly due to fi nancing for the construction of
docks and quays, are capitalised during the fi nancial year (Note 8).
NOTES TO THE FINANCIAL STATEMENTS
126COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
23. Property, plant and equipment (continued)
The Company
Offi cerenovations,
furniture,fi xtures andequipment
$’000
Motorvehicles
$’000Total$’000
2010
Cost
Beginning of fi nancial year 551 1,128 1,679
Additions 7 – 7
End of fi nancial year 558 1,128 1,686
Accumulated depreciation
Beginning of fi nancial year 512 392 904
Depreciation charge 19 113 132
End of fi nancial year 531 505 1,036
Net book value
End of fi nancial year 27 623 650
2009
Cost
Beginning of fi nancial year 536 1,128 1,664
Additions 15 – 15
End of fi nancial year 551 1,128 1,679
Accumulated depreciation
Beginning of fi nancial year 489 279 768
Depreciation charge 23 113 136
End of fi nancial year 512 392 904
Net book value
End of fi nancial year 39 736 775
127Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
24. Intangible assets
The Group2010 2009
$’000 $’000
Goodwill arising on consolidation 9,468 9,525
Cost
Beginning of fi nancial year 9,525 9,546
Currency translation differences (57) (21)
End of fi nancial year 9,468 9,525
Net book value 9,468 9,525
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (“CGU”), identifi ed as the subsidiaries in the People’s
Republic of China (“PRC”) according to country of operation and business segment. The business segments refer to
ship repair, ship building and marine engineering activities.
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash
fl ow projections based on the existing capacity of the CGU. Cash fl ows beyond 2010 are extrapolated using the
estimated growth rate stated below. The growth rate does not exceed the long-term average growth rate for ship
repair business in the PRC in which the CGU operates.
Key assumptions used for value-in-use calculations:
Growth rate1 4.50%
Discount rate2 2.27%
1 Weighted average growth rate used to extrapolate cash fl ows beyond the budget period
2 Pre-tax discount rate applied to the pre-tax cash fl ow projections
These assumptions were used for the analysis of the CGU within the business segment. Management determined
budgeted gross margin based on past performance and its expectations of the market development. The weighted
average growth rate used was consistent with the forecasts included in industry reports. The discount rate used was
pre-tax and refl ected specifi c risks relating to the relevant segments.
There is no impairment charge recognised for the fi nancial years ended 31 December 2010 and 31 December 2009.
25. Deferred expenditure
Deferred expenditure relates to rental prepaid for leasehold land on operating leases and is amortised on the straight-
line basis over the lease period.
NOTES TO THE FINANCIAL STATEMENTS
128COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
26. Trade and other payables
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Trade payables:
- Non-related parties 532,907 448,979 – –
- Associated companies 2,057 – – –
- Fellow subsidiaries 42,913 99,717 – –
577,877 548,696 – –
Construction contracts - Advances received
(Note 15):
- Non-related parties 1,122,503 1,703,968 – –
- Fellow subsidiaries – 43,061 – –
1,122,503 1,747,029 – –
Construction contracts -
Due to customers (Note 15):
- Non-related parties 404,170 480,769 – –
1,526,673 2,227,798 – –
Advances from non-related parties 33,927 40,658 – –
Non-trade payables:
- Ultimate holding corporation 680 720 – –
- A subsidiary – – 15,000 14,000
680 720 15,000 14,000
Deposits received 12,218 12,765 – –
Other accruals for operating expenses 991,000 720,856 2,620 2,767
Dividend payable to non-controlling interests of
subsidiaries 2,158 7,513 – –
Total 3,144,533 3,559,006 17,620 16,767
The non-trade balances payable to ultimate holding corporation and a subsidiary are unsecured, interest-free and are
repayable on demand.
129Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
27. Borrowings
The Group2010 2009
$’000 $’000
Current
Bank borrowings (unsecured) 410,280 144,047
Bank borrowings (secured) 47,337 7,244
Bills payable 97,528 24,954
Finance lease liabilities (Note 28) 3 17
555,148 176,262
Non-current
Bank borrowings (unsecured) 427,743 921,492
Bank borrowings (secured) 9,322 17,451
Finance lease liabilities (Note 28) – 3
437,065 938,946
Total borrowings 992,213 1,115,208
The exposure of the borrowings of the Group to interest rate changes and the contractual repricing dates at the
balance sheet dates are as follows:
The Group2010 2009
$’000 $’000
Less than 1 year 555,148 176,262
1 – 5 years 380,732 802,025
Over 5 years 56,333 136,921
992,213 1,115,208
(a) Security granted
At the balance sheet date, total borrowings include secured liabilities of $56,662,000 (2009: $24,715,000) for
the Group. Secured bank borrowings are secured by:
(i) the Group’s motor vessels (Note 23)
(ii) certain bank deposits [Note 11(a)]
(iii) certain trade receivables (Note 13)
Finance lease liabilities of the Group are secured by the rights to the leased motor vehicles, which will revert to
the lessor in the event of default by the Group (Note 23).
NOTES TO THE FINANCIAL STATEMENTS
130COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
27. Borrowings (continued)
(b) Fair values of non-current borrowings
At the balance sheet date, the carrying amounts of non-current borrowings approximated their fair values.
The fair values were determined from cash fl ow analyses, discounted at the market borrowing rates which the
directors expected to be available to the Group as follows:
The Group
2010 2009
SGD USD RMB SGD USD RMB
Bank borrowings – 2.79% 3.71% – 3.28% 4.35%
Bills payable – – – – – –
Finance lease liabilities 4.91% – – 4.91% – –
28. Finance lease liabilities
The Group2010 2009
$’000 $’000
Minimum lease payments due:
- Not later than one year 4 20
- Later than one year but not later than fi ve years – 4
4 24
Less: Future fi nance charges (1) (4)
Present value of fi nance lease liabilities 3 20
The present values of fi nance lease liabilities are analysed as follows:
- Not later than one year (Note 27) 3 17
- Later than one year but not later than fi ve years (Note 27) – 3
3 20
29. Provisions for other liabilities
The Group2010 2009
$’000 $’000
Provision for off hire claim on hire income [Note (a)] 7,043 14,242
Provision for warranties [Note (b)] 38,006 22,194
45,049 36,436
131Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
29. Provisions for other liabilities (continued)
(a) Movements in provision for off hire claim on hire income were as follows:
The Group2010 2009
$’000 $’000
Beginning of fi nancial year 14,242 15,225
Provision made during the fi nancial year 1,715 2,537
Provision utilised during the fi nancial year (7,572) (3,129)
Currency translation differences (1,342) (391)
End of fi nancial year 7,043 14,242
Provision for off hire claim on hire income is in respect of refund to be made to customers for period in which
the motor vessels are not available for use.
(b) Movements in provision for warranties were as follows:
The Group2010 2009
$’000 $’000
Beginning of fi nancial year 22,194 4,931
Provision made during the fi nancial year 21,289 18,014
Provision utilised during the fi nancial year (2,819) (36)
Currency translation differences (2,658) (715)
End of fi nancial year 38,006 22,194
The Group gives one to two-year warranties on certain ship building and marine engineering contracts and
undertakes to repair or rectify defects that fail to perform satisfactorily. A provision is recognised at the balance
sheet date for expected warranty claims based on an estimate by technical engineers and past experience of
the possible repairs and rectifi cations.
NOTES TO THE FINANCIAL STATEMENTS
132COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
30. Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income
tax assets against current income tax liabilities and when the deferred income taxes relate to the same fi scal authority.
The amounts, determined after appropriate offsetting, are shown on the balance sheets as follows:
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Deferred income tax assets:
- to be recovered within one year 207,444 146,501 – –
- to be recovered after one year 5,259 12,022 – –
212,703 158,523 – –
Deferred income tax liabilities:
- to be settled within one year – – – –
- to be settled after one year 4,304 2,400 4,056 2,198
4,304 2,400 4,056 2,198
Deferred income tax assets are recognised for tax losses, capital allowances, provisions and accruals carried forward
to the extent that realisation of the related tax benefi ts through future taxable profi ts is probable. The Group has
unrecognised tax losses of Nil (2009: $1,089,000) for which no deferred tax asset has been recognised at the balance
sheet date which can be carried forward and used to offset against future taxable income subject to meeting certain
statutory requirements by those companies with unrecognised tax losses in their respective countries of incorporation.
The tax losses have no expiry date.
The movements in the deferred income tax account, net were as follows:
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Beginning of fi nancial year (156,123) (91,237) 2,198 –
Change in tax rate (14,669) (21,713) – –
Currency translation differences 11,277 4,338 (112) 33
Deferred tax (credited)/charged to income
statement (48,774) (47,635) 1,970 2,165
Deferred tax (credited)/charged to equity
[Note 32(b)(v)] (110) 124 – –
End of fi nancial year (208,399) (156,123) 4,056 2,198
133Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
30. Deferred income taxes (continued)
The movements in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax
jurisdiction) during the fi nancial years were as follows:
Deferred income tax liabilities The Group2010 2009
$’000 $’000
Accelerated tax depreciation
Beginning of fi nancial year 166 180
Credited to income statement (3) (14)
End of fi nancial year 163 166
Fair value gain
Beginning of fi nancial year 208 91
Currency translation differences (7) (7)
(Credited)/charged to equity (110) 124
End of fi nancial year 91 208
Undistributed profi ts of foreign subsidiaries
Beginning of fi nancial year 2,198 –
Currency translation differences (112) 33
Charged to income statement 1,970 2,165
End of fi nancial year 4,056 2,198
Total
Beginning of fi nancial year 2,572 271
Currency translation differences (119) 26
Charged to income statement 1,967 2,151
(Credited)/charged to equity (110) 124
End of fi nancial year 4,310 2,572
Reconciliation of total deferred income tax liabilities after appropriate
offsetting from the same tax jurisdiction is as follows:
Total deferred income tax liabilities 4,310 2,572
Offsetting of deferred income tax assets from the same tax jurisdiction (6) (172)
Total deferred income tax liabilities after appropriate offsetting from the
same tax jurisdiction 4,304 2,400
NOTES TO THE FINANCIAL STATEMENTS
134COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
30. Deferred income taxes (continued)
Deferred income tax assets The Group2010 2009
$’000 $’000
Provisions and accruals
Beginning of fi nancial year (158,695) (91,508)
Change in tax rate (14,669) (21,713)
Currency translation differences 11,396 4,312
Credited to income statement (50,741) (49,786)
End of fi nancial year (212,709) (158,695)
Reconciliation of total deferred income tax assets after appropriate offsetting
from the same tax jurisdiction is as follows:
Total deferred income tax assets (212,709) (158,695)
Offsetting of deferred income tax liabilities from the same tax jurisdiction 6 172
Total deferred income tax assets after appropriate offsetting from the same
tax jurisdiction (212,703) (158,523)
31. Share capital
Issued share capitalNo. of
ordinary shares Amount
’000 $’000
2010
Beginning and end of fi nancial year 2,239,244 270,608
2009
Beginning and end of fi nancial year 2,239,244 270,608
All issued shares are fully paid. There is no par value for these ordinary shares.
There were no shares issued in 2010 and 2009.
Share options
Under the Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”), share options are granted
to directors, key management and employees. The exercise price of the granted options is equal to the average of
the closing prices of the Company’s ordinary shares on the Singapore Exchange for the fi ve market days immediately
preceding the date of grant. The options may be exercised in full or in part in respect of 1,000 shares or a multiple
thereof, on the payment of the exercise price. The persons to whom the options have been issued have no right to
participate by virtue of the options in any share issue of any other company. The Group has no legal or constructive
obligation to repurchase or settle the options in cash.
135Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
31. Share capital (continued)
Share options (continued)
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated
company, or the holding company for at least one year on or prior to the date of grant, may be exercised twelve
months after the date of grant but before the end of one hundred and twenty months. For employees and directors
who are in the service of the associated company and non-executive directors, the options shall expire at the end of
sixty months. Options issued at a discount to market price, may only be exercised two years after the date of grant.
Options issued to directors and employees who have been in the service of the Company, subsidiary or associated
company, or the holding company for at least six months but less than one year on or prior to the date of grant, may
be exercised twenty-four months after the date of grant but before the end of one hundred and twenty months. For
employees and directors who are in the service of the associated company and non-executive directors, the options
shall expire at the end of sixty months. Options issued at a discount to market price, may only be exercised three
years after the date of grant.
Movements in the number of unissued ordinary shares under option at the end of the fi nancial year and their exercise
prices are as follows:
The Group and the Company
Financial year ended 31 December 2010
Number of ordinary shares under option outstanding
Options relating to Scheme 2002
Beginning of fi nancial
year
Lapsed during
fi nancialyear
End offi nancial
yearExercise
price Exercise period ’000 ’000 ’000 $
2006 Options (i) 2,780 – 2,780 1.23 21.2.2007 – 20.2.2016
2007 Options (ii) 12,770 (1,800) 10,970 2.48 5.2.2008 – 4.2.2017
2008 Options (iii) 19,430 (2,230) 17,200 2.95 24.3.2009 – 23.3.2018
34,980 (4,030) 30,950
Financial year ended 31 December 2009
Number of ordinary shares under option outstanding
Options relating to Scheme 2002
Beginning of fi nancial
year
Lapsed during
fi nancialyear
End offi nancial
yearExercise
price Exercise period ’000 ’000 ’000 $
2006 Options (i) 2,840 (60) 2,780 1.23 21.2.2007 – 20.2.2016
2007 Options (ii) 14,420 (1,650) 12,770 2.48 5.2.2008 – 4.2.2017
2008 Options (iii) 20,040 (610) 19,430 2.95 24.3.2009 – 23.3.2018
37,300 (2,320) 34,980
(i) For non-executive directors, the exercise period shall be 21.2.2007 to 20.2.2011.
(ii) For non-executive directors, the exercise period shall be 5.2.2008 to 4.2.2012.
(iii) For non-executive directors, the exercise period shall be 24.3.2009 to 23.3.2013.
NOTES TO THE FINANCIAL STATEMENTS
136COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
31. Share capital (continued)
Share options (continued)
The Group and the Company (continued)
Out of the outstanding options on 30,950,000 shares (2009: 34,980,000), options on 30,950,000 shares (2009:
34,250,000) are exercisable. There was no share option issued in 2010 and 2009. There were also no shares of the
Company allotted and issued by virtue of the exercise of options to take up unissued shares of the Company in 2010
and 2009.
32. Statutory and other reserves
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
(a) Composition:
Share option reserve 44,578 44,578 44,578 44,578
Statutory reserve 137,372 137,149 – –
Currency translation reserve (90,804) (23,861) – –
Asset revaluation reserve 12,554 15,772 – –
Fair value reserve 181 323 – –
Realised surplus on long-term investment 69 69 527 527
103,950 174,030 45,105 45,105
(b) Movements:
(i) Share option reserve
Beginning of fi nancial year 44,578 41,338 44,578 41,338
Employee share option scheme:
- Value of director and employee services
(Note 6) – 3,240 – 3,240
End of fi nancial year 44,578 44,578 44,578 44,578
The Group2010 2009
$’000 $’000
(ii) Statutory reserve
Beginning of fi nancial year 137,149 114,310
Transfer from retained earnings 223 22,839
End of fi nancial year 137,372 137,149
(iii) Currency translation reserve
Beginning of fi nancial year (23,861) (6,937)
Net currency translation differences of fi nancial statements of foreign
subsidiaries and associated companies (100,144) (27,480)
Non-controlling interests 33,201 10,556
End of fi nancial year (90,804) (23,861)
137Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
32. Statutory and other reserves (continued)
The Group2010 2009
$’000 $’000
(b) Movements: (continued)
(iv) Asset revaluation reserve
Beginning of fi nancial year 15,772 18,990
Revaluation reserve transferred to retained earnings (3,218) (3,218)
End of fi nancial year 12,554 15,772
(v) Fair value reserve
Beginning of fi nancial year 323 134
Fair value changes for fi nancial asset, available-for-sale (389) 495
Deferred tax credited/(charged) to equity (Note 30) 110 (124)
Non-controlling interests 137 (182)
End of fi nancial year 181 323
Statutory reserve represents the amount set aside in compliance with the local laws in the PRC where the subsidiaries
of the Group reside.
Statutory and other reserves are non-distributable.
33. Dividends
The Group and the Company
2010 2009
$’000 $’000
Ordinary dividends paid
Final tax-exempt one-tier dividend paid in respect of the previous fi nancial
year of 3.0 cents (2009: 4.0 cents) per ordinary share 67,177 89,570
Special tax-exempt one-tier dividend paid in respect of the previous fi nancial
year of Nil cents (2009: 3.0 cents) per ordinary share – 67,177
67,177 156,747
At the Annual General Meeting scheduled on 20 April 2011, a fi rst and fi nal tax-exempt one-tier dividend of 4 cents
per ordinary share (2009: fi rst and fi nal tax-exempt one-tier dividend of 3 cents per ordinary share) amounting to a
total of $89,570,000 (2009: $67,177,000), based on the number of shares issued as of 31 December 2010, will be
recommended. These fi nancial statements do not refl ect these dividends, which will be accounted for in equity as an
appropriation of retained earnings in the fi nancial year ending 31 December 2011.
NOTES TO THE FINANCIAL STATEMENTS
138COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
34. Commitments
(a) Capital commitments
Capital expenditure contracted for at the balance sheet date but not recognised in the fi nancial statements are
as follows:
The Group2010 2009
$’000 $’000
Property, plant and equipment 102,537 166,681
(b) Operating lease commitments – where the Group is a lessee
The Group leases various offi ce premises, docks, quays and motor vessels under non-cancellable operating
lease agreements. The leases have varying terms, escalation clauses and renewal rights.
The future aggregate minimum lease payables under non-cancellable operating leases contracted for at the
balance sheet date but not recognised as liabilities, are as follows:
The Group2010 2009
$’000 $’000
Not later than 1 year 19,271 20,039
Later than 1 year but not later than 5 years 42,690 52,448
Later than 5 years 66,245 63,514
128,206 136,001
(c) Operating lease commitments – where the Group is a lessor
The Group leases out certain items of property, plant and equipment and investment properties to non-related
parties under non-cancellable operating leases.
The future minimum lease receivables under non-cancellable operating leases contracted for at the balance
sheet date but not recognised as receivables, are analysed as follows:
The Group2010 2009
$’000 $’000
Not later than 1 year 28,664 45,537
Later than 1 year but not later than 5 years 1,189 1,280
29,853 46,817
139Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
35. Financial risk management
Financial risk factors
The Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk, interest rate risk and
price risk), credit risk and liquidity risk.
Risk management is carried out under policies approved by the Board of Directors. The Board approves guidelines for
overall risk management, as well as policies covering these specifi c areas.
(a) Market risk
(i) Currency risk
Currency risks arise from transactions denominated in currencies other than the respective functional
currencies of the entities in the Group.
The Group monitors its foreign currency exchange risks closely and where appropriate, enters into
forward currency contracts to manage the currency exposure.
In addition, the Group has certain investments in foreign operations, whose net assets are exposed to
currency translation risk. Currency exposure to the net assets of the Group’s foreign operations in the
People’s Republic of China is managed primarily through borrowings denominated in RMB.
The Group’s currency exposure based on the information available to key management is as follows:
SGD USD RMB Others* Total$’000 $’000 $’000 $’000 $’000
At 31 December 2010
Financial assets
Cash and cash equivalents and fi nancial
assets, available-for-sale 74,475 308,646 462,625 24,889 870,635
Trade and other receivables, excluding
advances paid to suppliers 15,415 864,332 232,515 57,370 1,169,632
Other fi nancial assets 284 – 1,365 38 1,687
90,174 1,172,978 696,505 82,297 2,041,954
Financial liabilities
Borrowings 3 281,099 711,111 – 992,213
Other fi nancial liabilities 16,192 80,158 1,492,953 4,328 1,593,631
16,195 361,257 2,204,064 4,328 2,585,844
Net fi nancial assets/(liabilities) 73,979 811,721 (1,507,559) 77,969 (543,890)
Less: Net fi nancial assets/(liabilities)
denominated in the respective
entities’ functional currencies (73,628) (108,500) 1,507,562 (2,298)
Add: Firm commitments and highly
probable forecast transactions
in foreign currencies – 3,143,108 – 72,709
Currency exposure 351 3,846,329 3 148,380
* Others mainly include Euro, Japanese Yen and Malaysian Ringgit.
NOTES TO THE FINANCIAL STATEMENTS
140COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
35. Financial risk management (continued)
(a) Market risk (continued)
(i) Currency risk (continued)
SGD USD RMB Others* Total$’000 $’000 $’000 $’000 $’000
At 31 December 2009
Financial assets
Cash and cash equivalents and fi nancial
assets, available-for-sale 100,592 511,419 935,000 6,198 1,553,209
Trade and other receivables, excluding
advances paid to suppliers 13,549 539,395 196,312 23,783 773,039
Other fi nancial assets 288 – 1,651 41 1,980
114,429 1,050,814 1,132,963 30,022 2,328,228
Financial liabilities
Borrowings 20 24,695 1,090,493 – 1,115,208
Other fi nancial liabilities 27,109 141,753 1,131,290 4,640 1,304,792
27,129 166,448 2,221,783 4,640 2,420,000
Net fi nancial assets/(liabilities) 87,300 884,366 (1,088,820) 25,382 (91,772)
Less: Net fi nancial assets/(liabilities)
denominated in the respective
entities’ functional currencies (87,300) (63,751) 1,088,813 (2,025)
Add: Firm commitments and highly
probable forecast transactions
in foreign currencies – 2,400,461 – 215,624
Less: Forward currency contracts – (223,944) – –
Currency exposure – 2,997,132 (7) 238,981
* Others mainly include Euro, Japanese Yen and Malaysian Ringgit.
141Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
35. Financial risk management (continued)
(a) Market risk (continued)
(i) Currency risk (continued)
The Company’s currency exposure based on the information available to key management is as
follows:
2010 2009
SGD USD RMB Total SGD USD RMB Total
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets
Cash and cash equivalents 63,535 53,422 – 116,957 79,867 54,643 1 134,511
Trade and other receivables 237 10 2,655 2,902 244 64,286 – 64,530
63,772 53,432 2,655 119,859 80,111 118,929 1 199,041
Financial liabilities
Borrowings – – – – – – – –
Other fi nancial liabilities 17,620 – – 17,620 16,767 – – 16,767
17,620 – – 17,620 16,767 – – 16,767
Net fi nancial assets 46,152 53,432 2,655 102,239 63,344 118,929 1 182,274
Less: Net fi nancial assets
denominated in the
entity’s functional currency (46,152) – – (63,344) – –
Currency exposure – 53,432 2,655 – 118,929 1
If the USD changes against the SGD and RMB by 500 basis points (2009: 500 basis points) with all
other variables including tax rate being held constant, the effects arising from the net fi nancial asset
position will be as follows:
2010 2009
Increase/(decrease) Profi t
after taxProfi t
after tax
$’000 $’000
The Group
USD against SGD
- strengthened 1,412 1,499
- weakened (1,412) (1,499)
USD against RMB
- strengthened 3,840 4,347
- weakened (3,840) (4,347)
The Company
USD against SGD
- strengthened 1,728 3,513
- weakened (1,728) (3,513)
NOTES TO THE FINANCIAL STATEMENTS
142COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
35. Financial risk management (continued)
(a) Market risk (continued)
(ii) Price risk
The Group is not exposed to any signifi cant equity securities price risk.
(iii) Cash fl ow and fair value interest rate risks
Cash fl ow interest rate risk is the risk that the future cash fl ows of a fi nancial instrument will fl uctuate
because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a
fi nancial instrument will fl uctuate due to changes in market interest rates. The Group has cash balances
placed with reputable banks and fi nancial institutions which generate interest income for the Group.
The Group manages its interest rate risks by placing such balances on varying maturities and interest
rate terms.
The Group’s interest rate risk mainly arises from non-current borrowings. The Group monitors the
interest rates on borrowings closely to ensure that the borrowings are maintained at favourable rates
and will use derivative fi nancial instruments to hedge their exposures when the exposure is signifi cant.
The Group’s borrowings at variable rates on which effective hedges have not been entered into are
denominated mainly in RMB and USD. If the RMB and USD interest rates increase/decrease by 0.5%
(2009: 0.5%) with all other variables including tax rate being held constant, the profi t after tax will be
lower/higher by $872,000 (2009: $1,998,000) and $1,088,000 (2009: $56,000) respectively as a result
of higher/lower interest expense on these borrowings.
(b) Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligation resulting in fi nancial loss
to the Group.
Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of
customers who are internationally dispersed. Due to these factors, management believes that no additional
credit risk beyond the amount of allowance for impairment made is inherent in the Group’s and Company’s
trade receivables.
The Group has no signifi cant concentrations of credit risk. The Group has policies in place to ensure that sales
of products and services are made to customers with an appropriate credit history.
A subsidiary in the Group obtained a pledge of 4 vessels (2009: 3 vessels) valued at US$54,950,000 (2009:
US$9,000,000) to secure its outstanding trade receivables of US$30,852,000 (2009: US$7,900,000) as at 31
December 2010.
Other than the above-mentioned, the Group and Company do not hold any other collateral. The maximum
exposure to credit risk for each class of fi nancial instruments is the carrying amount of that class of fi nancial
instruments presented on the balance sheet, except as follows:
The Company2010 2009
$’000 $’000
Corporate guarantees provided to banks on subsidiaries’ loans 15,939 24,695
Corporate guarantees provided to third parties for services provided
to a subsidiary 156 301
16,095 24,996
143Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
35. Financial risk management (continued)
(b) Credit risk (continued)
The Group’s and Company’s major classes of fi nancial assets are bank deposits and trade receivables.
The credit risk for trade receivables (including amount due from customer on construction contracts) based on
the information provided to key management is as follows:
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
By business segments
Shipping 7,165 8,751 – –
Ship repair, ship building and marine
engineering activities 1,070,615 691,647 – –
Others 14,639 11,744 131 131
1,092,419 712,142 131 131
(i) Financial assets that are neither past due nor impaired
Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-
ratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor
impaired are substantially companies with a good collection track record with the Group.
(ii) Financial assets that are past due and/or impaired
There is no other class of fi nancial assets that is past due and/or impaired except for trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
The Group2010 2009
$’000 $’000
Past due 0 to 3 months 3,274 1,137
Past due 3 to 6 months 23 36
Past due over 6 months 610 514
3,907 1,687
NOTES TO THE FINANCIAL STATEMENTS
144COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
35. Financial risk management (continued)
(b) Credit risk (continued)
(ii) Financial assets that are past due and/or impaired (continued)
The carrying amount of trade receivables individually determined to be impaired and the movement in
the related allowance for impairment are as follows:
The Group2010 2009
$’000 $’000
Gross amount 17,553 51,036
Less: Allowance for impairment (17,553) (51,036)
– –
Beginning of fi nancial year 51,036 69,183
Currency translation differences (1,642) (827)
Allowance utilised (575) (5,066)
Reversal of (31,250) (12,235)
Amount written off (16) (19)
End of fi nancial year 17,553 51,036
(c) Liquidity risk
The Group adopts prudent liquidity risk management by maintaining suffi cient cash and having an adequate
amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature
of the underlying businesses, the Group aims at maintaining fl exibility in funding by keeping committed credit
facilities available.
The table below analyses the maturity profi le of the Group’s and Company’s fi nancial liabilities (including
forward currency contracts) based on contractual undiscounted cash fl ows.
Less than 1 year
Between1 and 5 years
Over5 years
$’000 $’000 $’000
The Group
At 31 December 2010
Gross-settled forward currency contracts
- Receipts – – –
- Payments – – –
Other fi nancial liabilities (1,593,631) – –
Borrowings (572,106) (410,910) (61,716)
At 31 December 2009
Gross-settled forward currency contracts
- Receipts 208,844 – –
- Payments (223,950) – –
Other fi nancial liabilities (1,304,792) – –
Borrowings (222,856) (882,167) (171,176)
145Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
35. Financial risk management (continued)
(c) Liquidity risk (continued)
Less than 1 year
Between1 and 5 years
Over5 years
$’000 $’000 $’000
The Company
At 31 December 2010
Other fi nancial liabilities (17,620) – –
Borrowings – – –
Financial guarantee contracts (16,095) – –
At 31 December 2009
Other fi nancial liabilities (16,767) – –
Borrowings – – –
Financial guarantee contracts (24,996) – –
(d) Capital risk
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going
concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain
or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital
to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce
borrowings.
Management monitors capital based on the return on shareholders’ fund. The return on shareholders’ fund
was 21.8% per annum for the current fi nancial year ended 31 December 2010 (2009: 9.9% per annum).
The return on shareholders’ fund is calculated as net profi t attributable to equity holders of the Company
divided by average shareholders’ equity.
The Group and the Company are in compliance with all externally imposed capital requirements for the
fi nancial years ended 31 December 2010 and 31 December 2009.
(e) Fair value measurements
The following table presents assets and liabilities measured at fair value and classifi ed by level of the following
fair value measurement hierarchy:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
(b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (as prices) or indirectly (derived from prices) (Level 2); and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs)
(Level 3).
NOTES TO THE FINANCIAL STATEMENTS
146COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
35. Financial risk management (continued)
(e) Fair value measurements (continued)
Level 1 Level 2 Level 3 Total $’000 $’000 $’000 $’000
The Group
2010
Assets
Available-for-sale fi nancial assets
- Quoted equity shares 530 – – 530
- Unquoted equity shares – – 2,904 2,904
Total assets 530 – 2,904 3,434
Liabilities
Forward currency contracts – – – –
2009
Assets
Forward currency contracts – 944 – 944
Available-for-sale fi nancial assets
- Quoted equity shares 958 – – 958
- Unquoted equity shares – – 3,076 3,076
Total assets 958 944 3,076 4,978
Liabilities
Forward currency contracts – (14,448) – (14,448)
The fair value of fi nancial instruments traded in active markets (such as trading and available-for-sale securities)
is based on quoted market prices at the balance sheet date. The quoted market price used for fi nancial assets
held by the Group is the current bid price. These instruments are included in Level 1.
The fair value of fi nancial instruments that are not traded in an active market (for example, over-the-counter
derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes
assumptions that are based on market conditions existing at each balance sheet date. The fair value of
forward currency contracts is determined using quoted forward exchange rates at the balance sheet date.
These investments are included in Level 2. In infrequent circumstances, where a valuation technique for these
instruments is based on signifi cant unobservable inputs, such instruments are included in Level 3.
There is no change in Level 3 instruments in 2010 and 2009. The movement in 2010 was due to currency
translation difference.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate
their fair values. The fair value of fi nancial liabilities for disclosure purposes is estimated based on quoted
market prices or dealer quotes for similar instruments by discounting the future contractual cash fl ows at the
current market interest rate that is available to the Group for similar fi nancial instruments. The fair value of
current borrowings approximates their carrying amount.
147Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
35. Financial risk management (continued)
(f) Financial instruments by category
The carrying amount of different categories of fi nancial instruments is as disclosed on the face of the balance
sheets and in Note 18 to the fi nancial statements, except for the following:
The Group The Company2010 2009 2010 2009
$’000 $’000 $’000 $’000
Loans and receivables 2,034,178 2,322,214 119,859 199,041
Financial liabilities at amortised cost 2,583,189 2,420,000 17,620 16,767
36. Immediate and ultimate holding corporation
The Company’s immediate and ultimate holding corporation is China Ocean Shipping (Group) Company, registered in
the People’s Republic of China.
37. Related party transactions
(a) The Company is controlled by China Ocean Shipping (Group) Company (“COSCO”), the parent company and
a state-owned enterprise established in the People’s Republic of China (“PRC”).
The Group has adopted the amendment to FRS 24, "Related party disclosures" in 2009. The amendment
introduces an exemption from all of the disclosure requirements of FRS 24 for transactions among
government-related entities and the government. Those disclosures are replaced with a requirement to disclose
the name of the government and the nature of their relationship, the nature and amount of any individually-
signifi cant transactions, and the extent of any collectively-signifi cant transactions qualitatively or quantitatively.
It also clarifi es and simplifi es the defi nition of a related party.
COSCO itself is controlled by the PRC government, which also owns a signifi cant portion of the productive
assets in the PRC. In accordance with amendment to FRS 24, other government-related entities and their
subsidiaries (other than COSCO group companies), directly or indirectly controlled, jointly controlled or
signifi cantly infl uenced by the PRC government are also defi ned as related party corporation of the Group. On
that basis, related party corporation include COSCO and its subsidiaries, other government-related entities
and their subsidiaries directly or indirectly controlled, jointly controlled or signifi cantly infl uenced by the PRC
government, other entities and corporations in which the Company is able to control or exercise signifi cant
infl uence and key management personnel of the Company and COSCO as well as their close family members.
The related parties refer to directors of the Company and a director of a subsidiary.
The transactions of revenues and expenses in nature conducted with government-related entities were based
on arm’s length transactions.
In addition to the related party information and transactions disclosed elsewhere in the consolidated fi nancial
statements, the following is a summary of signifi cant related party transactions entered into the ordinary course
of business between the Group and its related parties during the fi nancial year.
NOTES TO THE FINANCIAL STATEMENTS
148COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
37. Related party transactions (continued)
(a) (continued)
The Group2010 2009
$’000 $’000
Revenue
Sales to fellow subsidiaries 85,759 237,452
Sales to associated companies 142 –
Sales to related party corporations 97 214
Rental income received/receivable from fellow subsidiaries 879 1,409
Rental income received/receivable from associated companies 177 –
Rental income received/receivable from related party corporations 306 200
Sub-contractor expenses received/receivable from fellow subsidiaries – 73
Time charter revenue received/receivable from a fellow Subsidiary – 19,276
Compensation received/receivable from a fellow subsidiary 3,090 –
Service income received from ultimate holding corporation 85 –
Service income received from fellow subsidiaries 3,789 1,144
Interest received/receivable from a fellow subsidiary 10,711 17,417
Expenditure
Purchases from fellow subsidiaries 37,137 27,094
Purchases from associated companies 294 –
Purchases from related party corporations 44 47
Purchases of plant and equipment from fellow subsidiaries – 17,990
Purchases of plant and equipment from an associated company 1,115 –
Rental paid/payable to fellow subsidiaries 48 235
Rental paid/payable to a related party corporation 6,936 –
Vessel rental paid/payable to a fellow subsidiary 6,404 7,435
Management fee paid/payable to a related party corporation 315 320
Crew wages paid/payable to fellow subsidiaries 7,603 7,347
Sub-contractor costs paid/payable to fellow subsidiaries 25,551 14,330
Sub-contractor costs paid/payable to associated companies 6,141 –
Sub-contractor costs paid/payable to a related party corporation 1,128 –
Utilities expenses paid/payable to a fellow subsidiary – 719
Utilities expenses paid/payable to a related party corporation 2,444 –
Service expenses paid/payable to fellow subsidiaries 2,797 1,988
Service expenses paid/payable to related party corporations 75 –
Commission paid/payable to a fellow subsidiary 33 511
Outstanding balances as at 31 December 2010, arising from sales or purchases of goods and services, are
set out in Notes 13 and 26 respectively.
149Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
37. Related party transactions (continued)
(b) Share options granted to key management
There were no share options granted to key management of the Group during 2010 and 2009. The share
options were given on the same terms and conditions as those offered to other employees of the Company
(Note 31). The outstanding number of share options granted to key management of the Group at the end of
the fi nancial year was 10,300,000 (2009: 13,100,000).
(c) Key management personnel compensation
Key management personnel compensation is as follows:
The Group2010 2009
$’000 $’000
Salaries and other short-term employee benefi ts 3,804 4,912
Employer’s contribution to defi ned contribution plans including
Central Provident Fund 8 8
Share option expenses – 938
3,812 5,858
Included in the above was total compensation to directors of the Company amounting to $3,506,000 (2009:
$5,563,000).
38. Segment information
Management has determined the operating segments based on the reports reviewed by the key management that
are used to make strategic decisions.
The key management considers the business from the business segment perspective. The segment in the People’s
Republic of China derives revenue from ship repair, ship building and marine engineering activities. On the other
hand, the segments in Singapore and Malaysia derive revenue from shipping, shipping agency, ship repair and marine
engineering activities.
Other services included within Singapore and Malaysia include shipping agency activities and rental of property; but
these are not included within the reportable operating segments, as they are not included in the reports provided to
the key management. The results of these operations are included in the “all other segments” column.
NOTES TO THE FINANCIAL STATEMENTS
150COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
38. Segment information (continued)
The segment information provided to the key management for the reportable segments is as follows:
Shipping
Ship repair,ship buildingand marineengineering
activitiesAll other
segments
Total for continuing operations
$’000 $’000 $’000 $’000
Financial year ended 31 December 2010
The Group
Sales
- External sales 128,605 3,719,483 13,357 3,861,445
- Inter-segment sales – 336 64,894 65,230
128,605 3,719,819 78,251 3,926,675
Elimination (65,230)
3,861,445
Segment results 83,417 369,886 (9,299) 444,004
Finance expense (42,131)
Share of loss of associated companies (27)
Profi t before income tax 401,846
Income tax expense (43,240)
Net profi t 358,606
Other segment items
Capital expenditure
- property, plant and equipment 1,624 174,185 296 176,105
Depreciation and amortisation 14,280 153,245 901 168,426
Write-off for inventory obsolescence and
inventory write-down – 572 – 572
Net reversal of impairment of trade and other
receivables – (31,241) – (31,241)
Expected losses recognised on construction
contracts – 64,822 – 64,822
Segment assets 190,998 4,976,390 60,356 5,227,744
Associated companies 3,569
Short-term bank deposits 605,892
Financial assets, available-for-sale 3,434
Deferred income tax assets 212,703
Consolidated total assets 6,053,342
Segment liabilities 23,527 3,132,749 33,306 3,189,582
Borrowings 992,213
Current income tax liabilities 72,766
Deferred income tax liabilities 4,304
Consolidated total liabilities 4,258,865
Consolidated net assets 1,794,477
151Annual Report 2010
NOTES TO THE FINANCIAL STATEMENTSFor the Financial Year Ended 31 December 2010
38. Segment information (continued)
The segment information provided to the key management for the reportable segments is as follows: (continued)
Shipping
Ship repair,ship buildingand marineengineering
activitiesAll other
segments
Total for continuing operations
$’000 $’000 $’000 $’000
Financial year ended 31 December 2009
The Group
Sales
- External sales 132,894 2,751,043 15,067 2,899,004
- Inter-segment sales – 541 94,609 95,150
132,894 2,751,584 109,676 2,994,154
Elimination (95,150)
2,899,004
Segment results 60,283 170,448 (10,489) 220,242
Finance expense (41,904)
Share of profi t of associated companies 214
Profi t before income tax 178,552
Income tax expense (40,758)
Net profi t 137,794
Other segment items
Capital expenditure
- property, plant and equipment 2,679 467,129 116 469,924
Depreciation and amortisation 29,846 122,652 918 153,416
Write-off for inventory obsolescence and
inventory write-down – 4,236 – 4,236
Net reversal of impairment of trade and other
receivables – (11,375) – (11,375)
Expected losses recognised on construction
contracts – 578 – 578
Employees share option expenses – – 3,240 3,240
Segment assets 187,456 4,938,525 46,501 5,172,482
Associated companies 1,922
Short-term bank deposits 1,085,365
Financial assets, available-for-sale 4,034
Deferred income tax assets 158,523
Consolidated total assets 6,422,326
Segment liabilities 33,237 3,538,500 38,153 3,609,890
Borrowings 1,115,208
Current income tax liabilities 84,136
Deferred income tax liabilities 2,400
Consolidated total liabilities 4,811,634
Consolidated net assets 1,610,692
NOTES TO THE FINANCIAL STATEMENTS
152COSCO Corporation (Singapore) Limited
For the Financial Year Ended 31 December 2010
38. Segment information (continued)
Geographical information
The Group’s business segments operate in three main geographical areas:
People’s Republic of China - the operations in this area are principally in ship repair, ship building and marine
engineering activities;
Singapore - the operations in this area are principally in shipping, shipping agency, ship repair and marine
related activities, rental of property; and
Malaysia - the operations in this area are principally in shipping agency activities.
Sales are based on the country in which the services are rendered to the customer. Non-current assets are shown by
the geographical area where the assets are located.
Sales for continuing operations Non-current assets
2010 2009 2010 2009
$’000 $’000 $’000 $’000
People’s Republic of China 3,711,802 2,739,236 2,330,568 2,334,473
Singapore * 147,433 158,041 173,903 201,860
Malaysia 2,210 1,727 89 108
3,861,445 2,899,004 2,504,560 2,536,441
* The Group’s shipping companies operate in worldwide shipping routes. Hence, it would not be meaningful to allocate sales to
any geographical segments for shipping activities.
No single external customer has sales which exceed 10% of the Group’s total sales for the fi nancial years ended 31
December 2010 and 31 December 2009.
39. New or revised accounting standards and interpretations
Certain new accounting standards, amendments and interpretations to existing standards have been published that
are mandatory for accounting periods beginning on or after 1 January 2011. The management does not expect that
adoption of these accounting standards or interpretations will have a material impact on the fi nancial statements of
the Group and of the Company.
40. Authorisation of fi nancial statements
These fi nancial statements were authorised for issue in accordance with a resolution of the Board of Directors of
Cosco Corporation (Singapore) Limited on 3 March 2011.
153Annual Report 2010
FIVE-YEAR SUMMARY
Notes 2006 2007 2008 2009 2010$’000 $’000 $’000 $’000 $’000
INCOME STATEMENTTurnover 1,215,469 2,261,700 3,476,009 2,899,004 3,861,445Operating profi t before taxation 301,696 497,536 450,745 178,338 401,873Share of (loss)/profi t of associated
companies 1 600 537 643 214 (27)Profi t before income tax 302,296 498,073 451,388 178,552 401,846Income tax expense (22,981) (19,512) (31,620) (40,758) (43,240)Net profi t 279,315 478,561 419,768 137,794 358,606Attributable to:
Equity holders of the company 205,353 336,568 302,588 110,080 248,837Non-controlling interests 73,962 141,993 117,180 27,714 109,769Net profi t 279,315 478,561 419,768 137,794 358,606Dividend 2 89,348 156,738 156,747 67,177 89,570
BALANCE SHEETShare capital 239,947 266,852 270,608 270,608 270,608Statutory and other reserves 70,855 82,806 167,904 174,030 103,950Retained earnings 359,256 590,249 705,692 639,404 824,059Non-controlling interests 249,889 362,847 464,963 526,650 595,860Total equity 919,947 1,302,754 1,609,167 1,610,692 1,794,477Forward Currency Contracts 45 8,778 1,441 – –Trade and other receivables – – – – 49,089Financial assets, available-for-sale 2,208 3,067 3,630 4,034 3,434Club memberships 412 479 473 492 557Investments in associated companies 2,227 1,794 2,577 1,922 3,569Investment properties 11,350 11,472 12,217 11,786 14,619Property, plant and equipment 1,110,179 1,478,453 2,081,950 2,349,098 2,207,952Intangible assets 9,319 9,302 9,546 9,525 9,468Deferred income tax assets – 21,996 91,417 158,523 212,703Deferred expenditure – – – 1,061 3,169Current assets 747,926 2,431,829 4,596,023 3,885,885 3,548,782Current liabilities (676,153) (2,557,025) (4,572,188) (3,870,288) (3,817,496)Non-current liabilities (287,566) (107,391) (617,919) (941,346) (441,369)Net Assets 919,947 1,302,754 1,609,167 1,610,692 1,794,477
RATIOSBasic earnings per share (cents) 3 and 4 9.3 15.1 13.5 4.9 11.1Dividend per share (cents) 4.0 7.0 7.0 3.0 4.0Dividend cover (times) 5 2.3 2.1 1.9 1.6 2.8Net tangible assets per share (cents) 4 29.8 41.6 50.7 48.0 53.1Gearing ratio (Net of Cash) 6 0.2 cash cash cash 0.1
Notes
1. The share of profi t of associated companies is net of tax.
2. The dividend for 2010 is calculated based on the number of shares issued as of 31 December 2010. The actual amount payable will
be based on the number of shares issue at book closure date.
3. Basic earnings per share is calculated as net profi t attributable to equity holders of the company divided by the weighted average
number of ordinary shares issued in the fi nancial year.
4. Basic earnings per share and net tangible assets per share have been adjusted to account for the sub-division of one ordinary share
into two ordinary shares in 2006.
5. The dividend cover is calculated as net profi t attributable to equity holders of the Company divided by the amount of equity dividend.
6. Gearing ratio is derived by taking total borrowings (net of cash) over the shareholders’ funds.
SHAREHOLDING STATISTICS
154COSCO Corporation (Singapore) Limited
As at 4 March 2011
STATISTICS OF SHAREHOLDERS AS AT 4 MARCH 2011
Class of Shares - Ordinary shares
Voting Rights - One Vote per share
DISTRIBUTION OF SHAREHOLDERS BY SIZE OF SHAREHOLDINGS
Size Of ShareholdingsNo. of
Shareholders % of Holders No. of Shares % of Shares
1 - 999 104 0.33 38,547 0.00
1,000 - 10,000 24,072 76.83 110,110,426 4.92
10,001 - 1,000,000 7,110 22.70 287,601,945 12.84
1,000,001 and above 44 0.14 1,841,494,036 82.24
Total 31,330 100.00 2,239,244,954 100.00
SUBSTANTIAL SHAREHOLDERS
Direct Interest Deemed Interests
No. Name No. of shares
held %No. of shares
held %
1. China Ocean Shipping (Group) Company 1,194,565,488 53.35 – –
2. Temasek Holdings (Private) Limited – – 118,378,713(1) 5.29
Note:
(1) Temasek Holdings (Private) Limited is deemed to have an interest in 118,378,713 ordinary shares in which its associated companies
have or are deemed to have an interest.
COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL
Based on information available and to the best knowledge of the Company as at 4 March 2011 approximately 41.05% of the
ordinary shares of the Company are held by the public. The Company is therefore in compliance with Rule 723 of the SGX-
ST Listing Manual.
155Annual Report 2010
SHAREHOLDING STATISTICSAs at 4 March 2011
LIST OF 20 LARGEST SHAREHOLDERS
SHAREHOLDER’S NAME NO OF SHARES %
1 CHINA OCEAN SHIPPING (GROUP) COMPANY 1,194,565,488 53.35
2 CITIBANK NOMINEES SINGAPORE PTE LTD 92,387,618 4.13
3 HSBC (SINGAPORE) NOMINEES PTE LTD 80,175,270 3.58
4 SEMBCORP MARINE LTD 70,000,000 3.13
5 DBS NOMINEES PTE LTD 66,844,048 2.99
6 RAFFLES NOMINEES (PTE) LTD 57,172,596 2.55
7 UNITED OVERSEAS BANK NOMINEES PTE LTD 45,727,842 2.04
8 DBSN SERVICES PTE LTD 40,454,457 1.81
9 SCM INVESTMENT HOLDINGS PTE LTD 21,000,000 0.94
10 SEMBMARINE INVESTMENT PTE LTD 20,400,000 0.91
11 UOB KAY HIAN PTE LTD 17,816,670 0.80
12 OCBC SECURITIES PRIVATE LTD 12,834,530 0.57
13 PHILLIP SECURITIES PTE LTD 12,002,900 0.54
14 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 9,559,738 0.43
15 HUI SHUNE MING @ HUI SHUN MENG 8,000,000 0.36
16 OCBC NOMINEES SINGAPORE PTE LTD 6,485,369 0.29
17 ROYAL BANK OF CANADA (ASIA) LTD 6,327,250 0.28
18 DB NOMINEES (SINGAPORE) PTE LTD 5,753,024 0.26
19 BANK OF SINGAPORE NOMINEES PTE LTD 5,457,754 0.24
20 MERRILL LYNCH (SINGAPORE) PTE LTD 5,161,827 0.23
Total 1,778,126,381 79.43
NOTICE OF ANNUAL GENERAL MEETING
156COSCO Corporation (Singapore) Limited
NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at Suntec Singapore International
Convention & Exhibition Centre, 1 Raffl es Boulevard Suntec City, Singapore 039593, Meeting Room 325-326, Level 3 on
Wednesday, 20 April 2011 at 3:00 p.m. for the purpose of transacting the following businesses:
Ordinary Business:
1. To receive and adopt the Directors’ Report and Audited Financial Statements for the fi nancial year
ended 31 December 2010 together with the Auditors’ Report thereon.
(Resolution 1)
2. To approve a First and Final tax-exempt (one-tier) Dividend of S$0.04 per ordinary share for the
year ended 31 December 2010.
(Resolution 2)
3. To approve payment of Directors’ Fees of S$285,000 for the year ended 31 December 2010. (last
year: S$265,000)
(Resolution 3)
4. To re-elect the following directors, on recommendation of the Nominating Committee and
endorsement of the Board of Directors, who are retiring in accordance with Article 98 of the Articles
of Association of the Company and who, being eligible, offer themselves for re-election:
a. Mr Wang Xing Ru; (Resolution 4)
b. Dr Wang Kai Yuen (See Explanatory Note 1) (Resolution 5)
5. To re-elect the following directors, on recommendation of the Nominating Committee and
endorsement of the Board of Directors, who are retiring in accordance with Article 104 of the
Articles of Association of the Company and who, being eligible, offer themselves for re-election:
a. Mr Liu Guo Yuan (Resolution 6)
b. Mr Ma Zhi Hong (Resolution 7)
c. Mr Wang Hai Min (Resolution 8)
6. To re-appoint, on recommendation of the Nominating Committee and endorsement of the Board of
Directors, Mr Tom Yee Lat Shing, a Director who will retire under Section 153(6) of the Companies
Act, Cap 50, to hold offi ce from the date of this Annual General Meeting until the next Annual
General Meeting of the Company. (See Explanatory Note 2)
(Resolution 9)
7. To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors and to authorise the Directors to
fi x their remuneration.
(Resolution 10)
Special Business
To consider and, if thought fi t, to pass the following as Ordinary Resolutions, with or without modifi cations:
8. General Mandate to authorize the Directors to issue shares or convertible securities: (Resolution 11)
“That pursuant to Section 161 of the Companies Act (Cap 50) and the Listing Rules of the
Singapore Exchange Securities Trading Limited (the “Listing Rules”), authority be and is hereby
given to the Directors to allot and issue:-
(a) shares in the capital of the Company (whether by way of bonus, rights or otherwise); or
(b) convertible securities; or
(c) additional securities issued pursuant to Rule 829 of the Listing Rules; or
(d) shares arising from the conversion of convertible securities in (b) and (c) above,
157Annual Report 2010
NOTICE OF ANNUAL GENERAL MEETING
at any time and upon such terms and conditions and for such purposes as the Directors may in
their absolute discretion deem fi t provided that :-
(i) the aggregate number of shares and convertible securities that may be issued shall not
be more than 50% of the issued shares in the capital of the Company (calculated in
accordance with (ii) below), of which the aggregate number of shares and convertible
securities issued other than on a pro rata basis to existing shareholders must be not more
than 20% of the issued shares in the capital of the Company (calculated in accordance with
(ii) below); and
(ii) for the purpose of determining the aggregate number of shares and convertible securities
that may be issued pursuant to (i) above, the percentage of issued share capital shall be
calculated based on the issued shares in the capital of the Company at the time of the
passing of this resolution after adjusting for (a) new shares arising from the conversion or
exercise of any convertible securities; (b) new shares arising from exercising share options
or vesting of share awards outstanding or subsisting at the time of the passing of this
resolution and (c) any subsequent consolidation or subdivision of shares; and
(iii) unless revoked or varied by ordinary resolution of the shareholders of the Company in
general meeting, this resolution shall remain in force until the next Annual General Meeting
of the Company or the date by which the next Annual General Meeting of the Company is
required by law to be held, whichever is earlier”. (See Explanatory Note 3)
9. Authority to allot and issue shares under the Cosco Group Employees’ Share Option Scheme 2002
(“Scheme”)
(Resolution 12)
“That approval be and is hereby given to the Directors to offer and grant options (“Options”) in
accordance with the provisions of the Cosco Group Employees’ Share Option Scheme 2002
(“Scheme”) and to allot and issue from time to time such number of shares in the capital of the
Company as may be required to be issued pursuant to the exercise of Options granted under the
Scheme, provided that the total number of Shares to be offered under the Scheme shall not in total
exceed fi fteen (15) per cent of the issued share capital of the Company on the day preceding any
Offer Date at any time and from time to time during the existence of the Scheme.” (See Explanatory
Note 4)
10. Proposed Renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions (Resolution 13)
(i) “That approval be and is hereby given for the renewal of the mandate for the purposes
of Chapter 9 of the Listing Manual of the SGX-ST, for the Company, its subsidiaries and
associated companies or any of them to enter into any of the transactions falling within the
types of Interested Person Transactions, particulars of which are set out in the Appendix
A (“Appendix”) to the Annual Report of the Company for the fi nancial year ended 31
December 2010 with any party who is of the class of Interested Persons described in the
Appendix provided that such transactions are made on normal commercial terms and will
not be prejudicial to the interests of the Company and its minority shareholders and in
accordance with the review procedures set out in the Appendix;
(ii) That the Audit Committee of the Company be and is hereby authorized to take such actions
as it deems proper in respect of such procedures and/or to modify or implement such
procedures as may be necessary to take into consideration any amendment to Chapter 9
of the Listing Manual of the SGX-ST which may be prescribed by the SGX-ST from time to
time;
(iii) That the Directors of the Company be and are hereby authorized to complete and do
all such acts and things (including all such documents as may be required) as they may
consider expedient or necessary or in the interests of the Company to give effect to this
Resolution; and
(iv) That the authority conferred by this Resolution shall, unless revoked or varied by the
Company in general meeting, continue in force until the conclusion of the next Annual
General Meeting of the Company or the date by which the next Annual General Meeting of
the Company is required by law to be held, whichever is earlier.” (See Explanatory Note 5)
NOTICE OF ANNUAL GENERAL MEETING
158COSCO Corporation (Singapore) Limited
BY ORDER OF THE BOARD
Lawrence Kwan
Company Secretary
Singapore, 23 March 2011
Explanatory Notes on Business to be transacted
1. Dr Wang Kai Yuen will, upon election as a Director, remain as the Chairman of the Nominating Committee and a member of the Audit
Committee, Remuneration Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will be
considered independent for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.
2. Mr. Tom Yee Lat Shing will, upon re-appointment, remain as the Chairman of the Audit Committee and a member of the Nominating
Committee, Remuneration Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will be
considered independent for the purposes of Rule 704(8) of the Listing Manual of the SGX-ST.
3. Ordinary Resolution 11 is to empower the Directors of the Company from the date of the above Meeting until the next Annual General
Meeting to issue shares and/or convertible securities in the capital of the Company up to an amount not exceeding in aggregate 50%
of the issued shares in the capital of the Company of which the total number of shares and convertible securities issued other than
on a pro-rata basis to existing shareholders shall not exceed 20% of the issued shares in the capital of the Company at the time the
resolution is passed, for such purposes as they consider would be in the interests of the Company. This authority will, unless revoked
or varied at a general meeting, expire at the next Annual General Meeting of the Company.
4. Ordinary Resolution 12 is to empower the Directors of the Company, from the date of this Meeting until the next Annual General
Meeting, to allot and issue shares in the capital of the Company pursuant to the exercise of such options under the Scheme. The
total number of Shares to be offered under the Scheme shall not exceed fi fteen (15) per cent of the issued share capital of the
Company on the day preceding any Offer Date at any time and from time to time during the existence of the Scheme.
5. Ordinary Resolution 13 is to renew the General Mandate to allow the Company, its subsidiaries and associated companies or any of
them to enter into certain Recurrent Interested Person Transactions with person who are considered “Interested Persons” (as defi ned
in Chapter 9 of the Listing Manual of the SGX-ST).
The Company’s Audit Committee has confi rmed that the methods and procedures for determining the transaction process have
not changed since the last renewal of the Shareholders’ Mandate on 20 April 2010 in respect of transactions described in Section
2.1 of Schedule II of the Appendix; and since the approval of the additional Shareholders’ Mandate on 17 July 2007 in respect of
transactions described in Section 2.2 of Schedule II of the Appendix; and that the said methods and procedures are suffi cient to
ensure that the Recurrent Interested Person Transactions will be carried out on normal commercial terms and will not be prejudicial to
the interests of the Company and its minority shareholders.
Notes
i. A member of the Company entitled to attend and vote at a meeting is entitled to appoint one or two proxies to attend and vote in his
stead. A proxy need not be a member of the Company.
ii. Where a member appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding
(expressed as a percentage of the whole) to be represented by each proxy.
iii. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 9 Temasek Boulevard,
#07-00 Suntec Tower Two, Singapore 038989 not later than 48 hours before the time fi xed for holding the Annual General Meeting.
iv. This instrument appointing a proxy or proxies must be under the hand of the appointer or his attorney duly authorized in writing.
Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or
under the hand of any attorney duly authorized.
v. A corporation which is a member may also authorize by resolution of its directors or other governing body, such person as it thinks fi t
to act as its representative at the meeting in accordance with Section 179 of the Companies Act, Cap. 50.
159Annual Report 2010
NOTICE OF ANNUAL GENERAL MEETING
NOTICE OF BOOKS CLOSURE
NOTICE IS HEREBY GIVEN that, subject to the approval of shareholders to the First and Final Dividend being obtained at the
Annual General Meeting to be held on 20 April 2011, the Transfer Books and the Register of Members of the Company will
be closed on 5 May 2011 for the preparation of dividend warrants for shareholders of ordinary shares registered in the books
of the Company.
Duly completed registrable transfers of ordinary shares in the capital of the Company (“Shares”) received by the Company’s
Share Registrar, Tricor Barbinder Share Registration Services, 8 Cross Street, #11-00, PWC Building, Singapore 048424 up
to 5.00 p.m. on 4 May 2011 will be entitled to the proposed First and Final Dividend.
Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at 5.00 p.m. on 4
May 2011 will be entitled to the proposed First and Final Dividend. Payment of the dividends, if approved by members at the
Annual General Meeting, will be made on 19 May 2011.
BY ORDER OF THE BOARD
Lawrence Kwan
Company Secretary
Singapore, 23 March 2011
This page has been intentionally left blank
COSCO CORPORATION (SINGAPORE) LIMITED(Incorporated in the Republic of Singapore)
(Company Registration No.: 196100159G)
ANNUAL GENERAL MEETINGPROXY FORM
Important:
1. For investors who have used their CPF monies to buy the
Company’s shares, this Annual Report is sent to them at
the request of their CPF Approved Nominees solely FOR
INFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF investors and
shall be ineffective for all intents and purposes if used or
purported to be used by them.
3. CPF investors who wish to vote should contact their CPF
Approved Nominees.
I/We NRIC/Passport No.
of
being a member of Cosco Corporation (Singapore) Limited (the “Company”), hereby appoint
Name AddressNRIC/Passport
NumberProportion of
Shareholdings (%)
And/or (delete as appropriate)
Name AddressNRIC/Passport
NumberProportion of
Shareholdings (%)
as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual
General Meeting of the Company to be held at Suntec Singapore International Convention & Exhibition Centre, 1 Raffl es
Boulevard Suntec City, Singapore 039593, Meeting Room 325-326, Level 3 on Wednesday, 20 April 2011 at 3:00 p.m. and
at any adjournment thereof.
I/We have indicated with an “X” in the appropriate box against the item how I/we wish my/our proxy/proxies to vote. If no
specifi c direction as to voting is given or in the event of any item arising not summarised below, my/our proxy/proxies may
vote or abstain at the discretion of my/our proxy/proxies.
No. Resolutions For Against
ORDINARY BUSINESS
1. To receive and adopt the Directors’ Report and Audited Financial Statements for the year ended 31 December 2010 together with the Auditors’ Report thereon.
2. To declare a First and Final tax exempt (one-tier) Dividend of S$0.04 per ordinary share for the year ended 31 December 2010.
3. To approve payment of Directors’ Fees.
4. To re-elect Mr Wang Xing Ru, who is retiring under Article 98 of the Articles of Association of the Company.
5. To re-elect Dr Wang Kai Yuen, who is retiring under Article 98 of the Articles of Association of the Company.
6. To re-elect Mr Liu Guo Yuan, who is retiring under Article 104 of the Articles of Association of the Company.
7. To re-elect Mr Ma Zhi Hong, who is retiring under Article 104 of the Articles of Association of the Company.
8. To re-elect Mr Wang Hai Min, who is retiring under Article 104 of the Articles of Association of the Company.
9. To re-appoint Mr Tom Yee Lat Shing, who is retiring pursuant to Section 153(6) of the Companies Act, Cap 50.
10. To re-appoint Messrs PricewaterhouseCoopers LLP as Auditors of the Company and to authorise the Directors to fi x their remuneration.
SPECIAL BUSINESS
11. To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Cap 50.
12. To authorise Directors to issue shares pursuant to the Cosco Group Employees’ Share Option Scheme 2002.
13. To approve the renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions.
Dated this day of 2011
Total No. of Shares in No. of SharesCDP Register
Register of Members
Signature of Member(s) or Common Seal
IMPORTANT: Please Read Notes for This Proxy Form.
NOTES:
1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defi ned in section 130A of the
Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you
should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of
Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of
Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.
2. A Shareholder of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote on his behalf.
Such proxy need not be a Member of the Company.
3. Where a Shareholder appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding (expressed as a percentage of the
whole) to be represented by each proxy.
4. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 9 Temasek Boulevard, #07-00 Suntec Tower Two,
Singapore 038989 not less than 48 hours before the time set for holding the annual general meeting. The sending of a Proxy Form by a Shareholder does not
preclude him from attending and voting in person at the annual general meeting if he fi nds that he is able to do so. In such event, the relevant Proxy Forms will be
deemed to be revoked.
5. The instrument appointing a proxy or proxies must be under the hand of the appointer or of his attorney duly authorised in writing. Where the instrument appointing a
proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of a director or an offi cer or attorney duly authorised.
6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointer by an attorney, the power of attorney (or other authority) or a duly certifi ed
copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.
7. A corporation which is a Shareholder may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the
annual general meeting, in accordance with section 179 of the Companies Act, Chapter 50 of Singapore.
8. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions
of the appointer are not ascertainable from the instructions of the appointer specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of a
Shareholder whose Shares are entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the Shareholder,
being the appointer, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the annual
general meeting, as certifi ed by The Central Depository (Pte) Limited to the Company.
First fold
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COSCO CORPORATION (SINGAPORE) LIMITED9 Temasek Boulevard, #07-00 Suntec Tower Two,
Singapore 038989
Apply glue here
9 Temasek Boulevard #07-00 Suntec Tower Two Singapore 038989
Telephone: 6885 0888 Fascimile: 6336 9006
w w w . c o s c o . c o m . s g