Cosco Ar2011

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STEADFAST AND RESILIENTCOSCO Corporation (Singapore) Limited Annual Report 2011

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4COSCO Corporation (Singapore) Limited

Ann ua l Rep ort 201 1

STEADFAST& RESILIENT

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An nual Rep ort 2011

At COSCO, long-term resilient and sustainable growth has always been our

overarching objective. Building on our core businesses, diversied expertise

and global coverage, we have established a track record o ocusedachievement.

Now, amid the uncertainties in our global operating environment, we have

urther drawn on our fexibility, responsiveness and expanding expertise to

successully meet the challenges that have come our way.

With this knowledge, we remain condent in our abilities, and certain in our

sustainable way orward.

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CONTENTS

COSCO OVERVIEW

3 Corporate Prole

4 Corporate Structure

6 Financial Highlights

8 Major Developments

10 Our Major Shipyards

11 Major Deliveries in 2011

KEY MESSAGES

14 Message rom the Chairman

18 Interview with Vice Chairman and President

OPERATIONS AND FINANCIALREVIEW

25 Ship Repair, Ship Building and

Oshore Marine Engineering

28 Dry Bulk Shipping & Others

30 Group Financial Review

CORPORATE GOVERNANCE ANDTRANSPARENCY

32 Corporate Governance

49 Corporate Inormation

50 Board o Directors

56 Key Management58 Investor Relations

60 Risk Management

INSIDE COSCO AND CORPORATECITIZENSHIP

65 Research and Development

66 Human Resources and Workplace Saety

68 Corporate Social Responsibility

FINANCIAL STATEMENTS

70 Directors’ Report75 Statement by Directors

76 Independent Auditor’s Report

77 Consolidated Income Statement

78 Consolidated Statement o Comprehensive Income

79 Balance Sheets

80 Consolidated Statement o Changes in Equity

81 Consolidated Statement o Cash Flows

83 Notes to the Financial Statements

151 Five-Year Summary

152 Shareholding Statistics

154 Notice o Annual General Meeting

Proxy Form or Annual General Meeting

Notes or Proxy Form

INVESTOR RELATIONS CONTACTS

COSCO Corporation (Singapore) Limited

Mr Li Jian Xiong, Vice President

Mr Wang Hui, General Manager, Investor Relations Tel: (65) 6885 0888

Fax: (65) 6336 9006

Email: [email protected]

SPIN Capital Asia (Investor Relations Consultant)

Mr Michael Tan

Tel: (65) 6227 7790

Email: [email protected]

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CORPORATE

PROFILE

“A diversified marine conglomerate providing Ship

Repair and Conversion, Ship Building and Offshore

Marine Engineering solutions.”

COSCO Corporation (Singapore) Limited (“COSCOCorporation” or the “Group”) has one o the largest

ship repair, ship building and oshore marine

engineering operations in China. A diversied group

with activities also in dry bulk shipping and other

sectors, it is the SGX Mainboard-listed subsidiary o

China Ocean Shipping (Group) Company (“COSCO

Group”), China’s largest shipping group and one o

the top shipping conglomerates in the world.

COSCO Corporation has achieved signicant

progress in growing its ship repair, ship buildingand oshore marine engineering capacity and

capabilities. The completion o its acquisition o a

51% stake in one o the largest shipyards in China,

COSCO Shipyard Group (“COSCO Shipyard”), on

1 January 2005 propelled COSCO Corporation into

the premier league in the shipyard industry. With

comprehensive eorts over past years, COSCOCorporation has transormed rom a ship repair and

conversion business to a multi-unctional marine

conglomerate with capabilities to build new ships

and oshore marine engineering vessels.

COSCO Corporation is committed to long-term

growth through its core businesses and global

coverage. Since January 2009, we have been part

o the FTSE ST China Index, and rom July 2009, we

were also included in the FTSE ST China Top Index,

both o which were created to refect the increasingrepresentation o China-based companies in the

Singapore stock market. Among other indexes, we

are also a component stock o the Morgan Stanley

Capital International Singapore which eatures some

o the most promising, widely-traded and investible

Asian companies outside Japan.

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CORPORATESTRUCTURE

Ship Repair,Ship Building & Offshore MarineEngineering

90% COSCO Marine Engineering

(Singapore) Pte Ltd

50% COSCO (Nantong) Shipyard

Co., Ltd

39% COSCO (Dalian) Shipyard Co., Ltd

51% COSCO Shipyard Group Co., Ltd

100% COSCO Engineering Pte Ltd

100% COSCO (Zhoushan) Shipyard Co., Ltd

95% COSCO (Shanghai) Shipyard Co., Ltd

75% COSCO (Guangdong) Shipyard Co., Ltd

60% COSCO (Lianyungang) Shipyard Co., Ltd

60% COSCO (Qidong) Oshore Co., Ltd

59% COSCO (Dalian) Shipyard Co., Ltd

50% COSCO (Nantong) Shipyard Co., Ltd

51% COSCO (Xiamen) Shipyard Co., Ltd

90% COSCO (Tianjin) Shipyard Co., Ltd

60% COSCO (Nantong) Ocean Shipyard Co., Ltd

75% COSCO Dalian Rikky Ocean Engineering Co., Ltd

51% Zhongyuan Sea-Land Engineering Co., Ltd

60% COSCO Shipyard Total Automation Co., Ltd

30% Diesel Marine Dalian Ltd

30% Diesel Marine International (Nantong) Co., Ltd

30% DMI (Guangzhou) Ltd

40% Tru-Marine Cosco (Tianjin) Engineering Co., Ltd

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Dry Bulk Shipping & Others

100% COSCO (Singapore) Pte Ltd

100% Harington Property Pte Ltd

100% Cos Fair Shipping Pte Ltd

100% Cos Glory Shipping Inc

100% Hanbo Shipping Limited

100% Sanbo Shipping Limited

100% Cos Knight Shipping Maritime Inc.

100% Cos Lucky Shipping Maritime Inc.

100% Cos Orchid Shipping Pte Ltd

100% Cos Prosperity Shipping Pte Ltd

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FINANCIALHIGHLIGHTS

Turnover (S$’m)

20112010200920082007

2 ,

2 6 2

3 ,

4 7 6

2 ,

8 9 9

3 ,

8 6 1

4 ,

1 6 3

Net Profit Attributableto Euity Holders(S$’m)

20112010200920082007

3 3 7

3 0 3

1 1 0

2 4 9

1 4 0

Net Assets(S$’m)

1 ,

3 0 3

1 ,

6 0 9

1 ,

6 1 1

1 ,

7 9 4

2 ,

0 0 0

Revenue by Activities(%)

Construction81%#

Renderingof Services

19%*

* Comprise o ship repair and marine engineering

income, time charter revenue and shipping

agency income

# Construction revenue rom Ship Building and

marine engineering

20112010200920082007

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5YEAR PROFIT AND LOSS ACCOUNTS (S$’m)

Turnover

Operating Prot beore Tax

Share o Prot/(Loss) o Associated Companies

Income Tax Expense

Net Prot

Non-Controlling Interests

Net Prot Attributable to Equity Holders o the Company

OTHER KEY STATISTICSNumber o Shares (m)

Basic Earnings per Share (cents)

Dividend per Share (cents)

Dividend Cover (times)

Net Tangible Assets per Share (cents)

Net Assets Value per Share (cents)

Gearing Ratio (net o cash)(times)

Return on Equity (%)

Return on Assets (%)

2007

2,262

497

1

19

479

142

337

20072,237.7

15.1

7.0

2.1

41.6

42.0

cash

41.8

11.5

2008

3,476

451

1

32

420

117

303

20082,239.2

13.5

7.0

1.9

50.7

51.1

cash

29.0

5.6

2009

2,899

179

0

41

138

28

110

20092,239.2

4.9

3.0

1.6

48.0

48.4

cash

9.9

1.7

2010

3,861

402

0

43

359

110

249

20102,239.2

11.1

4.0

2.8

53.1

53.5

0.1

21.8

4.0

2011

4,163

286

1

74

213

73

140

20112,239.2

6.2

3.0

2.1

57.7

58.1

0.4

11.2

2.1

Dividend per Share (cents)

and Basic Earnings per Share (cents)

Basic Earnings per

Share (cents)

Dividend per Share

(cents)

20112010200920082007

15

12

9

6

3

0

18

15.1

13.5

4.9

11.1

6.2

7.07.0

3.0 3.0

4.0

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Major DEvelopments

Current Developments1 Sevan Driller II (Sevan Brasil)

2 GM4000

3 Octabuoy

4 Drillship

1

1

4

Deliveries in 20111 M.V. Scotian Express

New build 92,500 dwt bulk carrier

2 M.V. Chipolbrok Cosmos

New build 30,000 dwt multipurpose heavy lit carrier

3 MPI Discovery

Windmill turbine installation vessel

4 M.V. Diane


5 M.V. Recife Knutsen

Shuttle tanker

6 M.V. COSCO Tengfei

5,000 units car carrier

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2 3 42 3

2 3

5 6

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OUR MAJOR SHIPYARDSThrough COSCO Shipyard Group, COSCOCorporation owns and operates seven major

shipyards strategically located along China’s

coastline.

Zhoushan

Dalian

Lianyungang

Guangdong

Qidong

Nantong

Shanghai

80,000

–

200,000

–

–

80,000400,000230,000

–

990,000

180,000300,000

80,000

–

150,00080,000

35,000

–

80,000150,000

1,055,000

Oshore/ Shipbuilding/ Repair

Repair

Oshore

Oshore/ Repair

Repair

Shipbuilding/ Repair

Shipbuilding/ Repair

Dalian

Lianyungang

Qidong

Nantong

Shanghai

Zhoushan

Guangdong

Total

Capabilities Dry dock

(dwt)

Floating

dock(dwt)

Shipyard

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MAJOR DELIVERIESIN 2011

Name o Vessel

COSCO Dalian Shipyard

M.V. Christine Star

M.V. Mega Star

M.V. Voge Enterprise

M.V. Anastasia K

M.V. Sher-e Punjab

M.V. Silverstar

M.V. Harmony Star

M.V. Veenus

M.V. Scotian Express

M.V. Diane

M.V. Common Calypso

M.V. Common Spirit

M.V. Radiant Jewel

M.V. Kraszewski

M.V. Gujarat

M.V. Common Venture

M.V. Chipolbrok Cosmos

COSCO Zhoushan Shipyard

M.V. Almeria

M.V. COSCO Shengshi

M.V. Jag RishiM.V. Pisti

M.V. STX Pride

M.V. STX Queen

M.V. COSCO Tengei

M.V. Jag Rani

M.V. Soa

M.V. Aviona

M.V. Pos Tansanit

M.V. STX Rapido

M.V. STX Spirit

M.V. Pos Topas

COSCO Guangdong Shipyard

M.V. Agria

M.V. Marine King

M.V. Lia

M.V. Wuxing 6

M.V. APJ Jai

M.V. HuaHeng 166

M.V. HuaHeng 167

M.V. Georgianna Bo

COSCO Nantong Shipyard

MPI Adventure

M.V. Fortaleza Knutsen

M.V. Recie Knutsen

M.V. Dan Sabia

MPI Discovery

Project Details













FPSO (conversion rom VLCC)







New build 57,000 dwt bulk carrierNew build 57,000 dwt bulk carrier



















Windmill turbine installation vessel (WTIV)

105,000 dwt shuttle tanker



Windmill turbine installation vessel (WTIV)

Delivered In

January 2011

February 2011

February 2011

April 2011

May 2011

June 2011

June 2011

August 2011

September 2011

September 2011

September 2011

October 2011

October 2011

November 2011

November 2011

November 2011

December 2011

January 2011

February 2011

March 2011 April 2011

May 2011

May 2011

June 2011

July 2011

July 2011

August 2011

October 2011

October 2011

October 2011

December 2011

January 2011

January 2011

April 2011

June 2011

June 2011

July 2011

October 2011

November 2011

March 2011

April 2011

August 2011

September 2011

November 2011

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PoweringForward

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Leveraging on Our StrengthsWe are one o China’s leading marine group, with strengths

in ship repair, ship building and, oshore marine engineering.

Coupled with our global clientele and a growing pool o

proessional partners, we are able to meet the cutting-edge

needs o our evolving industry.

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MESSAGE FROMthe CHAIRMAN

DEAR SHAREHOLDERS,

I am pleased to present COSCO Corporation’s

annual report or Financial Year 2011.

The past year has been a time o much change in our

business environment. Assuming the chairmanship

o our Group since January 2012, I am aware that

our corporation continues to operate in a time o

uncertainty.

However, I am also encouraged by the transormation

and the resultant solid oundation we have laid

as a diversied, proessional oshore and marine

engineering group with enhanced capabilities or a

wide range o repair, conversion and construction

services.

The results o our journey o transormation are

evident in the Company’s perormance in 2011. We

delivered 43 vessels during the year under review,

including 34 bulk carriers, three shuttle tankers,

two heavy lit carriers, two car carriers, and two

windmill turbine installation vessels. Our reputation

or delivery and excellence in quality management

has once again enabled us to secure growth and

provide valued-added solutions to customers.

DELIVERING RESULTS IN A

CHALLENGING MARKET

Despite the overhang o the slow US economyand the European debt crisis, COSCO Corporation

delivered commendable revenue o S$4.2 billion

or the year, an increase o 7.8 per cent rom 2010.

The ship repair, ship building and oshore marine

engineering businesses, contributed to 98.4 per

cent o the Group’s turnover.

Net prot attributable to shareholders decreased

by 43.9 per cent to S$139.7 million, mainly due

to lower dry bulk shipping income as a result o

lower BDI and higher operational cost in shipyard

business, resulting in earnings per share booked at

6.2 cents at the end o the year, compared to 11.1

cents or the previous year.

MA ZE HUA Chairman

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Net asset value per ordinary share at 31 December

2011 was 58.1 cents, compared with 53.5 cents or

the previous year.

Throughout the year, the Group steadastly

maintained ocus on its strength to develop the

business rom a wider capability base and remained

resilient in the ace o higher costs and a more

challenging operating environment.

COSCO’s transormation over the past ew years

has instilled in our people a better understanding

o our core strengths and capabilities and greater

recognition o the Group’s value proposition in

the rapidly changing and increasingly competitive

market landscape. This will help to urther solidiy our

resolve to continue strengthening our capabilities

and bolster our resilience going orward.

MARKET OUTLOOK AND BUSINESSPROSPECTS

The world economy in general has aced very mixed

sentiments since the latter part o 2011, in the

light o the Eurozone sovereign debt crisis and the

uncertain US economic recovery.

The International Monetary Fund (IMF) in a World

Economic Outlook Update in January 2012 said

the global economy was “threatened by intensiying

strains in the Euro area and ragilities elsewhere.” It

cut its orecast or global economic growth or 2012

to 3.25 per cent rom the 4 per cent predicted last

September, attributing it to “continuing problems in

the Eurozone.”

IMF expects advanced economies to grow at just

1.5 per cent in 2012-2013, a downward revision

o 0.75 percentage points compared to last

September’s projection. For the emerging and

developing economies in 2012-2013, IMF predicts

5.75 per cent growth compared to 6.75 per cent in

2010-2011.

There has also been a global oversupply o bulk

carriers, which has weighed heavily on overall

marine market conditions. Although the Baltic DryIndex had risen marginally to 1,738 points by the

end o 2011 rom 1,621 points at the beginning o

the year, it has sotened rom January 2012. On 6

February 2012, the BDI reached a 26-year low o

647 points.

At our production base in PRC, cost pressures

impacted our bottom line in the year under review

and are expected to continue into the next scal

year, as infation coupled with the rising Yuan against

the US Dollar make steel and other materials we

require more costly.

COSCO’s transformation over the past few years has instilled

in our people a better understanding of our core strengths

and capabilities and greater recognition of the Group’s

value proposition in the rapidly changing and increasingly

competitive market landscape.

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We are pleased that we have made the transition

rom a dedicated ship repair and conversion

company to a larger diversied enterprise that

included capabilities in ship building and oshore

marine engineering services with the versatility

and fexibility to oer a wide range o construction

capabilities.

There is a Chinese saying: “A crisis is an opportunity

riding the dangerous wind”. Experienced

businessmen and managers are well aware that

there are opportunities even in challenging times.

With our transormation and expansion o our

shipyards, we have now a wider range o production

acilities and expertise to oer our customers.

We have established an excellent reputation or

delivering marine vessels and structures including

high quality and reliable oshore drilling equipment

and support vessels.

The expansion o our capabilities into the oshore

marine segment has put us in a very good position

to tap the active drill ship and oshore platorm

markets. We understand that utilisation o the

global feet o drilling vessels reached 80.8 per cent

in December 2011 compared to 73.3 per cent a

year ago.

The International Energy Agency (IEA) in its 2011

edition o the World Energy Outlook has said

that “growth, prosperity and rising population will

inevitably push up energy needs over the coming

decades”. IEA projected primary energy demand to

increase by about 33 per cent between 2010 and

2035, with 90 per cent o the growth in non-OECD

economies.

REMAINING STEADFAST IN UNCERTAIN

TIMES

We have a disciplined and hardworking team,

including experienced production personnel in

China. With comprehensive acilities and skilled

resources, COSCO Corporation has the resilience

to support continued growth in the years ahead.

Going orward, we will remain steadast in our

marketing and development eorts, aiming to win

new customers with our expertise and technologyin ship repair, conversion and construction. We will,

at the same time, ocus our sights on expanding

urther into the oshore marine market, oering our

proven capability to build reliable and ecient drill

ships and platorms.

We will also continue to manage our business

in a prudent manner by ocusing on increasing

productivity and operational eciency, with

emphasis on innovation and lean management.

Notwithstanding the mixed market sentiment, we have

been successful in securing new orders. Our order book at

31 December 2011 stood at US$6.1 billion with progressive

deliveries up till 2014.

CHAIRMAN’S

STATEMENT

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To build greater resilience into our operation, we will

continue to enhance our expertise and acilities or

oshore marine engineering services to reinorce

the oundation we have built to ensure long-term

sustainable growth in this segment o the market.

On the ship building ront, we will pursue what

we have been doing successully: maintaining our

delivery record while continuing to urther upgrade

our yards’ capabilities and expertise.

Notwithstanding the mixed market sentiment, we

have been successul in securing new orders. Our

order book at 31 December 2011 stood at US$6.1

billion with progressive deliveries up till 2014. The

new orders received in FY2011 amounting to US$

2.0 billion include three sel-erecting tender drilling

rigs, two LeTourneau Workhorse class jack-up drill

rigs, two Sevan 650 drilling units, two 82,000 dwt

bulk carriers, our special purpose carriers, one

semisubmersible barge and one Octabuoy topside

module, a testimony to our continued success in

the oshore marine engineering market.

DELIVERING SHAREHOLDER VALUE

I wish to highlight that despite moderate growth in

FY2011, the Group is well-positioned and prudently

managed to consolidate our strategic position in the

market. Our team will continue to work harder to

deliver value in spite o the uncertain market outlook.

With our strong oundation in ship repair, conversion

and construction services and oshore marineengineering, we believe we have the capabilities to

remain competitive.

While we approach FY2012 with caution and

determination, we believe it is imperative to practise

a disciplined approach to management. By doing

so, the leadership team can continue to productively

drive the commercial and operational excellence

that has enabled us to succeed all these years.

I am pleased to announce that the Group is

proposing a dividend o 3.0 cents per share to be

approved at the upcoming Annual General Meeting.

On behal o the Board, I would like to take this

opportunity to thank all shareholders or their loyal

support.

In conclusion, I would like to thank the Board o

Directors and the management and sta or their

contribution in the past year and look orward to

their continued support in the years ahead. I would

also like to record my deep appreciation to Mr Liu

Guo Yuan, who stepped down as Chairman at the

beginning o 2012, or his stewardship during the

year under review.

I look orward to meeting our shareholders at the

Group’s orthcoming Annual General Meeting.

MA ZE HUA

Chairman

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INTERVIEW WITH VICE CHAIRMAN

AND PRESIDENT1. YOU WERE APPOINTED AS VICE

CHAIRMAN AND PRESIDENT IN

NOVEMBER 2011. PLEASE TELL US MORE

ABOUT YOUR BACKGROUND AND YOUR

VISION FOR THE GROUP.

Beore my appointment as the Vice-Chairman

and President or COSCO Corporation Singapore,

I worked as a captain and held several senior

managerial positions within China Ocean Shipping

Group. I believe my background and experience

have equipped me with the necessary management

knowledge and understanding o the business to

help the Group move orward condently in the

years ahead.

As President, I will look into how we can urther

optimise our resources to achieve higher yields,

building on the strong oundation we have

established. At the same time, we will have to

reinorce our risk management programme and

corporate governance eorts to attain a higher

standard o accountability within the organisation. I

believe this is the way to ensure sustainability or the

Group going orward.

2. WHAT ARE THE ESSENTIAL FACTORS

THAT WILL ENABLE THE GROUP TO

ACHIEVE SUSTAINABLE GROWTH?

We already have most o the essential ingredients

or sustainable growth. Our transormation over the

last ew years has enabled us to provide a more

comprehensive range o services, including oshore

marine engineering. As a result o the expansion

o our ship repair and conversion capability into

the oshore marine eld, we have acquired the

technology, skills competency, proessional

management and the necessary inrastructure to

position ourselves or a sustainable uture.

CAPTAIN WU ZI HENGVice Chairman and President

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On top o this, we must continue to seek new talents

to bolster our proessional workorce, by putting the

right people in the right places. By having more

qualied and experienced proessionals, we can

raise the bar on our technological innovation eorts

to urther improve and develop new products to

meet the needs o our customers around the world.

3. WHAT WERE THE SIGNIFICANT

HIGHLIGHTS OF THE COMPANY’SPERFORMANCE IN 2011?

The most signicant was that we delivered 43

vessels during the year under review, including 34

bulk carriers, two car carriers, two wind turbine

installation vessels, three shuttle tankers, and two

heavy lit carriers.

Another notable highlight was our success in

securing new orders. We secured new orders

amounting to US$2 billion during the year in review

managed to build our order book, which at the

end o December 2011 stood at US$6.1 billion.

Furthermore, we also achieved new improvements

in cost control by shortening the average timing o

our ship building.

We believe our journey o transormation in recent

years has bolstered our oundation in this business,

especially with our diversication into the oshore

marine engineering sector. We have also continuedto secure orders or new drill vessels and other

oshore products.

Moving orward, our Group is better equipped with

more know-how, capabilities and acilities to serve

our customers. We have built greater resilience into

our operations and instilled greater condence in

our workers to remain steadast and proessional in

the ace o the uncertain market outlook.

4. WHAT HAVE BEEN THE MOST

SIGNIFICANT ACHIEVEMENTS SO FAR?

One o the most signicant achievements has

been the successul three-phase transormation

o the Group. Over a short span o ve years, we

have evolved rom our early days as a ship repair

company to a marine conglomerate providing not

only ship repair, but also comprehensive marine

solutions, which include ship conversion, ship

building and marine engineering. It normally takes a

shipyard more than ten years to achieve this.

During the diversication journey, we enhanced our

capabilities or the conversion o VLCC to VLOC

and FPSO, and at the same time established strong

competency in building bulk carriers, car carriers,

heavy lit vessels, wind turbine installation vessels,

shuttle tankers and other ship types. We have

successully built the Sevan Driller, the world’s rst

cylindrical oil drilling rig, and delivered the Super M2,

a jack-up rig, amongst other new products.

Throughout our journey o transormation, our

operations have constantly improved year ater

year, enabling us to better service our pool o global

customers.

5. WHAT HAS THE GROUP GAINED FROM

THE TRANSFORMATION?

The most transormative lesson rom the

diversication exercise is the importance o

understanding the market and the ability to seize

opportunities arising rom the rapid changes in

the dry bulk shipping and ship building industry at

the right time. Between 2006 and 2007, demand

rom ship owners rose sharply but there was a

serious shortage in ship building capabilities then.

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Furthermore, with oil prices constantly on the rise,

international market demand or oil drilling platorms

had increased steadily. By making the decision

at that time to enter the ship building and marine

engineering sector, we were able to successully

transorm our business within a short period o time.

At the same time, we had also built our capability

or oshore marine engineering services in the China

market beore other companies entered this space.

I believe this rst-mover advantage has put us in

an excellent position over other similar companies

in China. Our marine engineering business is still in

its inancy and the prospects or the uture are very

promising.

6. WHAT IS THE GROUP DOING TO BUILD

GREATER RESILIENCE?

In order to build greater resilience, we will urther

improve the management o our innovative,

technical and production resources, as well as our

human capital. We would also have to provide or

a culture o fexibility in the organisation to allow

or communication at all levels and swit decision-

making.

We will step up our eorts in technological innovation

to maintain a leading edge in the industry so that

we can continually provide value-added services

and comprehensive marine equipment constructionsolutions to our clients.

The COSCO Group has seven major shipyards with

the capabilities and acilities that can be deployed in

a fexible and dynamic way to handle construction

o dierent classes o marine vessels and drill ships

according to market demand. The dynamic supply

chain is our key strength and it can be urther

reinorced with greater fexibility in communication

and decision-making to allow or rapid response

to customer requirements and ensure long-term

sustainability o our business.

I have earlier mentioned the importance o talent

development and I believe that by having the right

people in key management positions overseeing a

well-trained and skilled resource pool we will always

have the critical competitive advantage.

7. WHAT ARE THE PROSPECTS IN THE

OFFSHORE MARINE ENGINEERING

SEGMENT, PARTICULARLY FOR THE

DRILLSHIP AND OFFSHORE JACK-UPMARKET IN THE SHORT TO MEDIUM-

TERM?

We believe that the prospects or this segment

o the business remain promising. Global oil

companies have made announcements to increase

their budgets or oshore exploration. The daily

rates or jack-up vessels and semi-submersible

platorms have been rising, which is encouraging or

the oshore marine engineering market. In addition,

we expect rising demand or foating production

installations such as FPSO, wind turbine installation

vessels and oshore vessels.

Looking ahead, we will increase our research and

development eorts in deepwater and the ultra

deepwater products.

We will also continue to invest in new equipment

and widen our skill base in the oshore marine

engineering area. By doing so, we will be able tomeet the evolving demands o our energy industry

customers and stand to benet rom our association,

especially when the world economy recovers.

INTERVIEW WITH VICE CHAIRMAN

AND PRESIDENT

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8. WHAT IS YOUR VIEW ON THE DRY

BULK SHIPPING BUSINESS GOING

FORWARD?

Most o the world’s major shipping companies

have reported lower prot or loss or FY2011, and

projections or the shipping business have not been

encouraging so ar. On 6th February this year, the

BDI ell to its lowest in 26 years. Although the bulk

shipping market has been expected to recover,

we do not oresee a strong up-tick because o the

continuing over-supply o new ships. In 2011, total

global delivery o new-built dry bulk carriers reached

a record high o 96 million tons and this year, the

capacity likely to be delivered could reach 70 million

tons. As more new-built bulk carriers are being

delivered against the backdrop o slow shipping

demand, the recovery o the dry bulk market will

continue to be anaemic. With the shipping market

outlook remaining bleak, we expect our dry bulk

shipping business to be more challenging in 2012.

9. DO YOU THINK THAT THE GROUP’S

OPERATING COSTS WILL CONTINUE TO

RISE?

In the long-term, our Group’s business will continue

to ace upward cost pressures. And with interest

rates or the RMB expected to remain high, we

oresee the resultant higher production costs will

continue to aect our prot margin.

10. WHAT MEASURES HAVE THE GROUP

TAKEN TO IMPROVE COMPETITIVENESS

IN THE FUTURE?

We have been making determined eorts to control

our costs, the bulk o which is rom materials and

labour. With our lean management approach, we

have over the years urther optimised our material

utilisation improved labour productivity, and on-time

delivery, and will continue to do so. Furthermore,

our shipyards have also been enhancing the

management o their acilities and outsourcing to

improve production eciency and control costs.

Another important area is risk management, where

we have successully put in place a comprehensive

programme to constantly monitor, review and

improve processes and control systems to eliminate

and minimise unnecessary disruption o and

negative impact on our business.

In the longer term, our sustainability will depend

on how well we continue to innovate and adapt

ourselves to the changing market landscape. With

a strong emphasis on technical innovation, we aim

to develop our capability to produce better and

higher yield products, urther raise our productivity

and quality standards, and enhance our delivery

eciency.

11. WHAT IS THE COMPANY’S DIRECTION

FOR FY2012?

Going orward, we will continue to emphasis lean

management, as we ace increasing cost pressures

at our production base in China where infation

and a stronger Yuan can be expected to continue

aecting our bottom line. We will put in eorts on all

ronts, in particular, the oshore marine engineering

market where prospects are more encouraging.

On the whole, we will continue to upgrade ouracilities and manpower skills, improve our core

competencies and raise productivity, urther

reinorcing the strong oundation we have

established in the ship building and oshore marine

engineering sectors.

CAPTAIN WU ZI HENG

Vice Chairman and President

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EXPANDING OUR

FOOTPRINT

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Continuous innovation the key to success

We are currently one o the largest marine engineering group in PRC with14 outstanding oshore marine projects on our order book. However, as

a relatively new entrant, we expect to incur higher costs in scaling the

“learning curve” or new product types in the oshore marine engineering

sector.

Oshore marine engineering represents an expanding pillar o growth.

Progressively, we will increase expertise and capabilities to reach out to a

broader customer base, thus strengthening our oundation or long-termgrowth in this developing market segment.

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OPERATION HIGHLIGHTS

Successfully delivered 34 bulk carriers, 2 windmillturbine installation vessels, 2 multipurpose heavy lift carriers, 2 5,000 units car carriers and 3shuttle tankers.

New orders received in 2011 amounted to US$2.0billion include 2 82,000 dwt bulk carriers, 4 specialpurpose carriers, 3 selferecting tender drillingrigs, 2 jackup drilling rigs, 2 Sevan 650 drillingunits, 1 semisubmersible barge and 1 Octabuoy topside module.

Will continue to focus on deliveries, upgradingof shipyards capabilities and efficiencies, andmonitor costs.

>

>

>

Operations andFinancial Review

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OVERVIEW

COSCO’s position as a leading marine conglomerate

is anchored by its advanced capabilities in ship

building, ship repair and conversion, and oshore

marine engineering, bolstered by its seven modern

shipyards. Owned by COSCO Shipyard Group,a subsidiary o COSCO Corporation, these seven

shipyards are strategically located along China’s

coastline, rom Guangdong in the south to Nantong,

Zhoushan, Shanghai, Lianyungang, and Qidong

along the central coast, to Dalian in the north.

Ship Repair, Ship Building and Offshore Marine

Engineering

Over the year in review, our shipyards successullydelivered 43 vessels, some o new vessel types

which are a testament to our growing specialised

skills. On the shipyard development ront, we

completed the construction o Phase 1 o our

newest shipyard. Located in Qidong, this state-

o-the-art shipyard specialises in oshore marine

engineering.

During FY2011, the ship repair, ship building and

oshore marine engineering segment remained

our largest revenue contributor, composing 98.4%

o group revenue. Turnover rom these shipyard

operations saw a rise o 10.1% to $4.1 billion in

2011, on the back o higher progressive revenue

recognition o the Group’s marine engineering

projects which oset lower revenue contribution

rom ship repair and conversion.

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Ann ua l Rep ort 201 1OPERATIONS AND

FINANCIAL REVIEW

STRENGTH IN SHIP BUILDINGFY2011 was a productive year in one o our core

business areas o ship building. With increasing

prociency, the Group successully completed

delivery o 34 bulk carriers, 2 windmill turbine

installation vessels, 3 shuttle tankers, 2 multipurpose

heavy lit carriers, and 2 (5,000 units) car carriers.

One o the largest bulk carriers we built was the

92,500 DWT “Scotian Express”. Measuring about

229 metres in length and 38 metres in breadth, it

was delivered in September 2011 to our European

owner.

Leveraging on our expanded capabilities, we

completed 2 new-build 30,000 DWT heavy lit

carriers, namely “Kraszewski” and “Chipolbrok

Cosmos” in November and December 2011

respectively. This ollows the 3 heavy lit carriers we

delivered in the previous nancial year. In addition,

expanding into the new area o car carriers, we

successully delivered 2 over the past year. All

in, these engineering achievements bolster our

widening range o capabilities and position us well

to secure diverse projects going orward.

PROGRESS IN OFFSHORE MARINEENGINEERING

We are developing expertise in the oshore marine

engineering area with successul deliveries o

technologically-advanced vessels and the securing

o multiple new contracts over the year in review.

Representing yet another milestone in oshore

marine engineering, we completed delivery o

2 windmill turbine installation vessels, the MPI

“Adventure” in March 2011 and the MPI “Discovery”

in October 2011, to our European buyer. Thesevessels are designed to transport, lit and install

wind turbines and their oundations. Key eatures on

the “MPI Adventure” include a 1,000 tonne capacity

main crane, a 50 tonne capacity auxiliary crane,

accommodation capacity or 112 persons and an

ability to jack with 6,000 tonnes o cargo on board.

Another cornerstone achievement or the year

was our completion o the hull or Phase 1 o the

Octabuoy, a semi-submersible production platorm

or ATP Oil & Gas (UK) Limited. It is designed or

the Cheviot eld in the UK North Sea. Following

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TYPES OF VESSELS REPAIRED IN FY2011

BY NUMBER OF VESSELS

SHIPYARD REVENUE BY TYPE OF JOBS

the successul delivery o Phase 1, we have sincecommenced work on Phase 2, which is to construct

the topside module by the second hal o 2013. The

order or Phase 2, valued at US$114 million, was

secured in May 2011.

CURRENT DEVELOPMENTS

With our broadening base o specialised skills and

project experience, we managed to secure new

orders amounting to US$2.0 billion over FY2011.

These included orders or 2 82,000 DWT bulk

carriers, 4 special purpose carriers, 3 sel-erectingtender drilling rigs, 2 jack-up drilling rigs, 2 Sevan

650 drilling units, 1 semi-submersible barge and the

aorementioned Octabuoy topside module. As at 31

December 2011, the Group’s order book stood at

US$6.1 billion with progressive deliveries up till rst

hal 2014. This order book is subject to revision rom

new orders or order cancellations that may arise.

In the burgeoning eld o oshore marine engineering,

we have also made signicant progress in business

development. One o our seminal new orders is a

US$356 million contract to build 2 jack-up drillingrigs based on the LeTourneau Workhorse® Class

design. Secured in May 2011, the contract is with

KS Drilling Pte Ltd, a subsidiary o KS Energy Limited

(ormerly known as KS Energy Services Limited) The

rigs will be built to ABS classication, with notation

A1, Sel-Elevating Drilling Unit, HAB+.

When completed, these rigs will be one o the

world’s deepest drilling rigs with a drilling depth o up

to 35,000 t., capable o operating in 400 t. water

depth and with accommodation or 150 persons. These standard-setting rigs eature an ofine stand

building capability to handle drill pipes eciently

and are equipped with a capacity hook-load o 2

million pounds. Such eatures will boost overall rig

perormance and productivity.

During the year, we secured new business with

Seadrill, a leading oshore deepwater drilling

company listed on the New York and Oslo Stock

Exchange. Comprising a total o three contracts,

two o them are to construct 2 sel-erecting tender

Ship Repair12%

Bulk Carriers65%

Tankers8% Chemical Ships

8%

Others

8%

ContainersShips11%

Ship Building49%

Ship Conversion6%

MarineEngineering

33%

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Ann ua l Rep ort 201 1OPERATIONS AND

FINANCIAL REVIEW

drilling rigs valued at over US$130 million, excludingowner-urnished drilling equipment. The 2 units

are scheduled or delivery in rst quarter and third

quarter 2013 respectively. The third contract is to

develop another similar rig valued at US$66 million,

excluding owner-urnished drilling equipment.

Last but not least, building on our successul

delivery o our rst oshore marine engineering

project, the deepwater Sevan Driller in 2009,

we have garnered 2 turn-key EPC (Engineering,

Procurement and Construction) contracts with

the Sevan Drilling Rig V and Sevan Drilling Rig VI

companies to undertake EPC and installation or

delivery o 2 drilling units based on the Sevan 650

design. Priced at approximately US$525 million

each, there is an option to order another 2 units.

In conclusion, we have moved orward in ship

repair and conversion, ship building and oshore

marine engineering. We will continue to ocus

on deliveries while upgrading our shipyards and

containing costs.

Dry Bulk Shipping andOthers

DRY BULK SHIPPING

COSCO’s dry bulk shipping business currently

comprises a feet o 10 dry bulk carriers with a total

carrying capacity o 550,978 DWT. Plying the main

global trading routes, these carriers transport cargo

such as iron ore, coal, steel, cement and ertiliser

to major ports throughout the world. Our dry bulk

carriers are chartered out to other ship owners and

operators, and serve our large client base o shipping

companies rom Germany, Norway, Denmark,

Greece, Switzerland, UK, USA and others.

COSCO’s feet maintains strict international quality

and saety standards and has been awarded

ISO9002 certication. This award is a refection o its

commitment to high standards o quality and saety.

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The Group’s dry bulk shipping and other businesses

saw a 52.9% decrease in turnover to $66.8 million

in FY2011, rom $128.6 million the year beore. This

was due to lower charter rates, in tandem with a

lacklustre global shipping market. The dry bulk

shipping business contributed 1.6% o the Group’s

turnover during the year in review.

The Baltic Dry Index, a measure o shipping costs

or commodities, started the year at 1,698 points

and ended the year at 1,738 points, with the year’s

average being 1,548 points, which is a 43.8%

decrease rom the 2010 average BDI o 2,758

points. With current weak economic undamentals

worldwide, as well as the abundant global supply

o new carriers, any rebound may be short-lived or

moderate. In the same light, the global oversupply

o dry bulk carriers will likely pose challenges orour dry bulk shipping business. The Group will

nonetheless build on our strengths in this segment

as well as our other businesses to derive synergies

going orward.

The Baltic Dry Index, a measure of shipping costs for

commodities, started the year at 1,698 points and ended the

year at 1,738 points, with the year’s average being 1,548 points,

which is a 43.8% decrease from the 2010 average BDI of 2,758

points.

SHIPPING AGENCY

In May 2011, we completed the sale o 700,001

shares in Costar representing approximately 70% o

the issued share capital o Costar; and 1,400,000

shares in Coslink representing approximately 70% o

the issued share capital o Coslink, to Freightworld

Pte Ltd. This eectively represents our exit rom the

shipping agency business.

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Group FinancialReview

OVERVIEW

Group turnover increased by 7.8% in FY2011 to

$4.2 billion while net prot attributable to equity

holders o the Company decreased by 43.9% to

$139.7 million.

The increase in turnover was mainly due to higher

revenue contributions rom ship building and marine

engineering projects. The lower net prot attributable

to equity holders o the Company was mainly due to

lower prot contributions rom dry bulk shipping and

the higher costs incurred in shipyard operations.

TURNOVER

Turnover rom shipyard operations increased

10.1% to $4.1 billion in FY2011 due to higher

revenue contributions rom ship building and marine

engineering projects. The Group delivered 34

bulk carriers in FY2011. COSCO Dalian shipyard

delivered 14 bulk carriers, COSCO Zhoushan

shipyard delivered 12 bulk carriers while COSCO

Guangdong shipyard delivered 8 bulk carriers.

Also notably, COSCO Nantong shipyard delivered

2 windmill turbine installation vessels and 3 shuttle

tankers, while COSCO Dalian shipyard delivered 2

heavy lit vessels and COSCO Zhousan shipyard

delivered 2 car carriers in 2011.

Turnover rom dry bulk shipping and other businesses

decreased 52.9% to $66.8 million in FY2011 mainly

due to lower charter rates. The Baltic Dry Index(BDI), a measure o shipping costs or commodities,

started the year 2011 at 1,698 points and ended the

year at 1,738 points, with the year’s average being

1,548 points, which is a 43.8% decrease rom the

2010 average BDI o 2,758 points.

Shipyard business remained the biggest revenue

contributor, orming 98.4% o Group turnover in

FY2011. Dry bulk shipping and others accounted

or the remaining 1.6%.

PROFITABILITY

Gross prot decreased 20.0% rom $476.1 million

in FY2010 to $380.8 million in FY2011 mainly due

to lower dry bulk shipping income as a result o

lower BDI and higher operational costs in shipyard

business.

The higher shipyard operational costs included

expected losses o $150.4 million (FY2010: $64.8

million) on construction contracts which was mainly

due to the impact o higher costs o raw materials

and labor and, additionally, “learning curve” costs

or oshore marine engineering projects involving

new product types.

Other income comprised mainly gain rom the

sale o scrap materials, compensation received

rom customers, interest income, oreign currency

exchange gain and net air value gain on orward

currency contracts. Other income increased 22.6%

to $218.6 million in FY2011 mainly due to higher

interest income, an increase in currency exchange

gain and one-o net gain on disposal o subsidiaries.

Distribution costs rose 27.6% in line with new

orders secured and rising costs. The 26.0%

increase in administrative costs to $201.9 million

was mainly due to lower reversal o impairment

o trade and other receivables o $1.1 million in

2011 as compared to $31.2 million in 2010 and

allowance or inventory write-down. The allowanceor inventory write-down o $18.1 million in 2011

included an amount o $14.6 million due to the

continuation o work on a cancelled shipbuilding

contract or which construction o the vessel had

already been in progress (and or which the net

compensation received rom the customer o $15.2

million has been included in other income).

Interest expense increased by 10.9% to $46.7

million in 2011 is mainly due to additional bank

borrowings to und shipyard operations.

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The increase in income tax expense by 71.6% to

$74.2 million in 2011 was mainly due to lower tax

exempt shipping prots and deerred tax benet

recognized. Under the recently approved local

tax incentive scheme granted to some o the

subsidiaries o COSCO Shipyard Group Co., Ltd

(“CSG”), the concessionary tax rate was reduced to

15.0% rom 22.0%.

As a result o the above, net prot attributable to

equity holders o the Company decreased 43.9%

rom $248.8 million in FY2010 to $139.7 million in

FY2011.

BALANCE SHEET AND CASH FLOW

(31 December 2011 vs 31 December 2010)

Cash and cash equivalents increased rom $867.2

million to $1.6 billion mainly due to net cash

provided by more bank borrowings procured to

nance shipyard operating activities.

Trade and other receivables remained relatively

unchanged at $2.0 billion. Advances paid to

suppliers decreased marginally rom $858.8 million

to $804.8 million.

Property, plant and equipment increased by $204.1

million to $2.4 billion mainly due to the expansion in

shipyard acilities.

Trade and other payables decreased $447.2 million

to $2.7 billion mainly due to decrease in advances

received rom customers (rom $1.2 billion to $465.3

million), partially oset by increase in trade payables

and other accruals or operating expenses.

Total borrowings increased rom $992.2 million to

$2.2 billion due to additional unding procured or

business operations.

SHARE CAPITAL

COSCO’s share capital remained unchanged

at $270.6 million. There was no new issue and

allotment o shares under the COSCO Corporation

Employees’ Share Option Scheme 2002.

EqUITY

Equity rose by $102.6 million to $1.3 billion as at

31 December 2011 due to the transer o FY2011

prots to retained earnings, partially oset by the

payment o dividends in May 2011.

Return on Equity was 11.2%.

NET GEARING

Total bank borrowings increased rom $992.2 million

to $2.2 billion due to additional unding procured or

business operations. The Group had a net gearing

position o $581.1 million at the end o FY2011.

EARNINGS PER SHARE

On a ully diluted basis, earnings per share

decreased rom 11.1 cents in FY2010 to 6.2 cents

in FY2011.

DIVIDENDS PER SHARE

To reward shareholders or their loyalty, the Board

o Directors has proposed a rst and nal exempt

dividend o 3.0 cents. The dividend payout will

amount to $67.2 million (FY2010: $89.6 million)

while Dividend Cover was 2.1.

NET ASSET VALUE PER SHARE

In line with capacity and acility expansion, the

net asset value per share o COSCO Corporation

increased by 8.6% rom 53.5 cents per share at

31 December 2010 to 58.1 cents per share at 31

December 2011.

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CorporateGovernance



COSCO Corporation (Singapore) Limited (“COSCO Corporation” or “the Company”) and its subsidiaries (together, the“Group”) believes that good governance is acknowledged to be essential or the success o any organisation and is nowmore important than ever. The purpose o corporate governance is to acilitate eective, entrepreneurial and prudentmanagement that can deliver the long-term success o the Company.

At COSCO Corporation the Board o Directors, guided by the Singapore Code o Corporate Governance 2005 (the “Code2005”) issued by the Singapore Council on Corporate Disclosure and Governance, remains committed to the principles o good corporate governance and to achieving high standards o business integrity, ethics and proessionalism across all itsactivities. The Company has applied, and complied with, the principles and guidelines set out in the Code 2005.

A. BOARD MATTERS

THE BOARD’S CONDUCT OF AFFAIRS

Principle 1

Governance is overseen by the COSCO Corporation Board whilst management is delegated to the Group Presidentand Executive Directors. The Board oversees the business aairs o the Company and is collectively responsible or itssuccess. All directors make decisions objectively in the best interests o the Company and have exercise due diligence andindependent judgment in so doing.

The principal unctions o the Board apart rom its statutory responsibilities are to:

a) set values and standards o the Company and ensure that obligations to shareholders and others are understoodand met;

b) provide entrepreneurial leadership; approve the strategic and inancial objectives, corporate policies andauthorisation matrix o the Company;

c) oversee the processes or risk management, nancial reporting and compliance and evaluate the adequacy o internal controls; approve annual budget, key operational matters, major acquisition and divestment proposals,major unding proposals o the Company;

d) review management perormance;

e) approve the nominations to the Board and appointment o key management, as may be recommended by theNominating Committee; and

) assume responsibility or corporate governance ramework o the Company.

To acilitate eective management, certain unctions o the Board have been delegated to various Board committees,namely Audit, Nominating, Remuneration, Enterprise Risk Management and Strategic Development Committees.

The schedule o all Board, Board committee meetings or the next calendar year is planned in advance, in consultation withthe directors. During this nancial year, the Board held ve meetings and had on various occasions used circular resolutionsin writing to sanction certain decisions.

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Attendance at Board and Committees’ Meetings

Name

Board

Committee

Audit Nominating RemunerationEnterprise RiskManagement

StrategicDevelopment

Number o Meetings held:

5 7 1 2 3 1Number o Meetings Attended

Ma Ze Hua 1 NA NA NA NA NA NA

Liu Guo Yuan 2 4 NA NA NA NA 1

Wu Zi Heng 3 NA NA NA NA NA NA

Jiang Li Jun 4 5 NA 1 1 3 1

Liu Lian An 5 NA NA NA NA NA NA

Wang Hai Min 4 NA NA NA NA NA

Wang Yu Hang 6 2 NA NA NA NA NA

Ma Zhi Hong 3 NA NA NA NA NA

Ma Gui Chuan 7 4 NA NA NA NA NA

Wang Xing Ru 8 1 NA NA NA 0 NA

Tom Yee Lat Shing 5 7 1 2 3 1

Wang Kai Yuen 5 7 1 2 3 1

Er Kwong Wah 5 7 1 2 3 1

Ang Swee Tian 5 7 1 2 3 1

Li Jian Xiong 9

(Alternate to Liu Guo Yuan/ Ma Ze Hua) 5 NA NA NA NA NA

Lu Cheng Gang(Alternate to Wang Hai Min) 5 NA NA NA NA NA

Ye Bin Lin (Alternate toMa Zhi Hong) 5 NA NA NA 3 NA

Liu De Tian 10

(Alternate to Wang Xing Ru/ Wang Yu Hang) 3 NA NA NA 2 NA

Notes:1 Mr Ma Ze Hua was appointed as Chairman, Non-Independent and Non-Executive Director and a member o the Strategic Development Committee on

6 January 2012.2 Mr Liu Guo Yuan resigned as Chairman, Non-Independent and Non-Executive Director and a member o the Strategic Development Committee on 6

January 2012.3 Mr Wu Zi Heng was appointed as Executive Director on 5 November 2011 and assumed the position o Vice Chairman and President on 22 November

2011. He was also appointed as a member o the Remuneration Committee, Nominating Committee and Enterprise Risk Management Committee aswell as Chairman o the Strategic Development Committee o the Company on 22 November 2011.

4 Mr Jiang Li Jun relinquished his position as President and was re-designated rom Executive Director to Non-Executive Director on 22 November 2011.He also ceased to be a member o the Remuneration Committee, Nominating Committee, Enterprise Risk Management Committee and StrategicDevelopment Committee o the Company on 22 November 2011. Presently, he is a Non-Executive Director and Vice Chairman o the Company.

5 Mr Liu Lian An was appointed as Non-Independent Executive Director on 20 February 2012.6 Mr Wang Yu Hang was appointed as Non-Independent and Non-Executive Director on 14 July 2011. He was also appointed as a member o the

Enterprise Risk Management Committee on 2 November 2011.7

Mr Ma Gui Chuan resigned as Non-Independent Executive Director on 1 November 2011.8 Mr Wang Xing Ru resigned as Non-Independent and Non-Executive Director and ceased to be a member o the Enterprise Risk ManagementCommittee on 14 July 2011.

9 Mr Li Jian Xiong ceased to be Alternate Director o Mr Liu Guo Yuan on 6 January 2012 and was appointed to be Alternate Director o Mr Ma Ze Huaon 6 January 2012.

10 Mr Liu De Tian ceased to be Alternate Director o Mr Wang Xing Ru on 14 July 2011 and was appointed to be Alternate Director o Mr Wang Yu Hangon 14 July 2011.

NA - Not Applicable

The Company’s Articles o Association (the “Articles”) provides or Board meetings to be conducted by way o telephoneand video conerencing. The attendance o the Directors at meetings o the Board and Board committees or year 2011 aswell as number o such meetings is set out in the table below:

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CorporateGovernance



Whilst the Board has delegated the day to day management o the Group to the Group President and Executive Directors,there are matters reserved or the Board by which the Board oversees control o the Group’s aairs. Some o the mattersreserved or the Board’s approval are:

l the recommendations o the Strategic Development Committee;

l the Group’s long term objectives and commercial strategy;

l the making o any decision to cease to operate all or any material part o the business o the Group or to extend theGroup’s activities into new business;

l the consideration o any proposal to merge or amalgamate the Company with any other company;

l the approval o any acquisition o any investment, asset or business by the Company or any o its subsidiaries which

would involve the commencement o an activity o a substantially dierent nature or character to any activity romtime to time carried on by the Company or any o its subsidiaries;

l changes relating to the Group’s capital structure including changing the amount or currency o the Company’sauthorised share capital, reduction o capital, share issues (except under employee share options plan);

l the approval o and ensuring the maintenance o internal controls and risk management procedures or theCompany and its subsidiaries;

l approving the Company’s Audited Financial Statement and other appropriate statements or inclusion in theCompany’s Annual Report and the issue o the Annual Report;

l the issue and ling o statutory or regulatory statements, the quarterly, hal yearly and ull year reports;

l determining and approving any signicant change to the accounting policies or practices o the Company, and o the Company and its subsidiaries;

l the recommendation o the payment o any dividend by the Company or any exercise o the powers o the Board inrelation to reserves or capitalisation o prot;

l appointments or removals rom the Company’s Board o Directors (ollowing receipt o recommendations by theNominating Committee) and the appointment or removal o the Company Secretary;

l changes to the structure, size and composition o the Board, ollowing receipt o recommendations rom theNominating Committee;

l in the case o any confict o interest which the Board, ater being appropriately advised, considers to be material, asto whether such confict should be authorised and, i so, authorise such confict upon such terms and conditions asthe Board considers appropriate;

l determining the remuneration policy or senior executives o the Company (ollowing receipt o recommendations bythe Remuneration Committee);

l undertaking a review annually o its own perormance, that o its committees and the contribution by each directorto the eectiveness o the Board; and

l any matter required to be considered or approved by the Board as a matter o law or regulation.

BOARD COMPOSITION AND GUIDANCE

Principle 2

The Board has eleven (11) members: two (2) Executive Directors, ve (5) Non-Executive Directors and our (4) Non-Executive Independent Directors. The composition o the Board is as ollows and the Directors’ academic and proessionalqualications are set out on pages 52 to 55 o this Annual Report. No individual or group o individuals dominates theBoard’s decision-making. Collectively, the Non-Executive Directors and Non-Executive Independent Directors bring a widerange o experience and expertise as they all currently occupy or have occupied senior positions in industry and public lie,and as such, each contributes signicant weight to Board decisions. None o the non-executive independent directors hasany relationship with the Company, its related companies or its ocers that could interere, or be reasonably perceivedto interere, with the exercise o the director’s independent business judgment with a view to the best interests o the

Company.

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BOARD OF DIRECTORS

Ma Ze Hua Chairman and Non-Independent and Non-Executive Director

Wu Zi Heng Vice Chairman, President and Non-Independent Executive Director

Jiang Li Jun Vice Chairman and Non-Independent Non-Executive Director

Liu Lian An Non-Independent Executive Director

Wang Hai Min Non-Independent and Non-Executive Director

Wang Yu Hang Non-Independent and Non-Executive Director

Ma Zhi Hong Non-Independent and Non-Executive Director

Tom Yee Lat Shing Non-Executive Independent Director

Wang Kai Yuen Non-Executive Independent Director

Er Kwong Wah Non-Executive Independent Director

Ang Swee Tian Non-Executive Independent Director

Changes to the Board are as ollow:

l Mr Liu Lian An was appointed as Non-Independent Executive Director on 20 February 2012.

l Mr Liu Guo Yuan resigned as Chairman and Non-Independent and Non-Executive Director on 6 January 2012.

l Mr Ma Ze Hua was appointed as Chairman and Non-Independent and Non-Executive Director on 6 January 2012.

l Mr Wu Zi Heng was appointed as Executive Director on 5 November 2011 and assumed the position o ViceChairman and President on 22 November 2011.

l Mr Jiang Li Jun relinquished his position as President and was re-designated rom Executive Director to Non-Executive Director on 22 November 2011. Presently, he is a Non-Executive Director and Vice Chairman o theCompany

l Mr Ma Gui Chuan resigned as Non-Independent Executive Director on 1 November 2011.

l Mr Wang Yu Hang was appointed as Non-Independent and Non-Executive Director on 14 July 2011.

l Mr Wang Xing Ru resigned as Non-Independent and Non-Executive Director on 14 July 2011.

Our Board’s size is necessary to allow sucient Non-Executive Director and Non-Executive Independent Directorrepresentation to cover the breadth and complexity o the Group’s business activities and to sta our Board committees. Aboard o this size allows orderly succession planning or key roles.

The current size o the Board is appropriate and will acilitate eective decision making. The Board will continue to reviewthe size o the Board on an ongoing basis. As a team, the Board collectively provides core competencies in the areas o accounting, nance, business and management experience, as well as industry knowledge.

Directors are provided with regular updates on relevant new laws and regulations, and evolving commercial risks andbusiness conditions rom the Company’s relevant advisors. Newly appointed directors are provided with backgroundinormation about the Company and the Group. Annual visits are arranged or Non-Executive Directors to acquaint themwith important operations overseas.

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STRATEGIC DEVELOPMENT COMMITTEE

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

Wu Zi Heng 1 (Chairman)(Non-Independent Executive)

Ma Ze Hua 2 (Non-Independent Non- Executive)

Tom Yee Lat Shing (Non-Executive Independent)

Wang Kai Yuen (Non-Executive Independent)

Er Kwong Wah (Non-Executive Independent)

Ang Swee Tian (Non-Executive Independent)

Notes:

1 Mr Wu Zi Heng was appointed as Chairman o SDC on 22 November 2011.2 Mr Ma Ze Hua was appointed as member o SDC on 6 January 2012.

The SDC assists the Board in ullling its responsibilities or developing, evaluating and monitoring the Company’s longand short-term strategic goals. The SDC operates at the Board level but shall not assume the Board’s governanceaccountability or to make nal strategic decisions. The SDC acts solely to address and develop current and uture strategy-related issues. The SDC has the responsibility or creating and driving the Company’s strategy development and planningand Management takes responsibility or implementing the Company’s strategy(ies) ater the SDC received approval romthe Board.

The SDC have the ollowing authority and responsibilities:

a) Review and develop Company Strategy(ies): Meet with Management periodically to review, develop and evaluate theCompany’s evaluation and implementation o its business strategy;

b) Provide Resource Support: Support the Board or Management in the evaluation and/or rening o the Company’sstrategic plans;

c) Assess Progress: Review and assess the status o implementation o the Company’s business strategy and whetherthe results are consistent with the goals o the strategic plan as adopted by the Board; and

d) Recommend Improvements: Recommend areas o improvement and provide eedback to the Board andManagement regarding the overall success o the business strategy.

The SDC met once in the nancial year o 2011.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Principle 3

The roles o Chairman and the President are undertaken by separate persons so as to create a clear division o responsibilities and maintain an eective oversight. The Chairman and the President are not related to each other.

The Chairman is responsible or the workings o the Board, ensuring the integrity and eectiveness o its governanceprocess. In his absence, his appointed alternate would act on his behal.

The President is the most senior executive in the Company and has ull executive responsibilit ies over the businessdirections and operational decisions o the Group. He works closely with the Board to implement the policies set by the

Board to realise the Group’s vision.

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BOARD MEMBERSHIP

Principle 4

Recommendations or nominations o new directors and retirement o directors are made by the Nominating Committeeand considered by the Board as a whole.

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

The process or the appointment o new directors begins with the NC, together with the Chairman and Vice Chairman o the Company, conducting a needs analysis and identiying the critical requirement in terms o expertise and skills that areneeded in the context o the strengths and weaknesses o the existing Board. When a candidate has been endorsed by theNC, the NC will then make a recommendation to the Board or the approval o his appointment.

The NC assesses and recommends to the Board whether retiring directors are suitable or re-nomination or re-election. Inevaluating a director’s contribution and perormance or the purpose o re-nomination, the NC takes into consideration avariety o actors such as attendance, preparedness, participation and candour.

In accordance with the provisions o the Articles, one-third o the Directors retire by rotation and subjects themselves to re-election at every Annual General Meeting (“AGM”) o the Company. New directors who were appointed by the Board duringthe year will hold oce only until the next AGM and will be eligible or re-election.

The dates o initial appointment and last re-election/re-appointment o each o the Directors o the current Board are set outbelow:

Director PositionDate of Initial Appointment

Date of LastReelection

Ma Ze Hua Chairman, Non-Independent and Non-Executive 6.1.2012 n.a.

Wu Zi Heng Vice Chairman, President and Non-Independent Executive 5.11.2011 n.a.

Jiang Li Jun Vice Chairman and Non-Independent Non-Executive 7.8.2008 20.4.2009

Liu Lian An Non-Independent and Executive 20.2.2012 n.a.

Wang Hai Min Non-Independent and Non-Executive 2.8.2010 20.4.2011

Wang Yu Hang Non-Independent and Non-Executive 14. 7.2011 n.a.

Ma Zhi Hong Non-Independent and Non-Executive 2.8.2010 20.4.2011

Tom Yee Lat Shing Non-Executive Independent 16.11.1993 20.4.2011

Wang Kai Yuen Non-Executive Independent 2.5.2001 20.4.2011

Er Kwong Wah Non-Executive Independent 20.12.2002 20.4.2010

Ang Swee Tian Non-Executive Independent 13.11.2007 20.4.2010

Lu Cheng Gang Alternate to Wang Hai Min 2.8.2010 n.a.

Ye Bin Lin Alternate to Ma Zhi Hong 2.8.2010 n.a.

Liu De Tian Alternate to Wang Yu Hang 14.7.2011 n.a.

Li Jian Xiong Alternate to Ma Ze Hua 6.1.2012 n.a.

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NOMINATING COMMITTEE

The NC comprises ve Directors, majority o whom, including the Chairman is independent. The NC members are:

Wang Kai Yuen (Chairman) (Non-Executive Independent)

Wu Zi Heng * (Non-Independent Executive)



Ang Swee Tian (Non-Executive Independent) Note:

* Mr Wu Zi Heng was appointed as Member o NC on 22 November 2011.

The principal unctions o the NC are to:

a) identiy, review and recommend candidates or appointment as Directors o the Company and appointment to theBoard committees as well as to senior management positions in the Company;

b) evaluate the eectiveness o the Board as a whole and assess the contribution by each Director, to the eectivenesso the Board;

c) determine annually whether or not a Director is independent; and

d) make recommendations to the Board on re-appointment o Board and Board committee members.

During the nancial year, the NC held one meeting and had on various occasions used circular resolutions in writingto resolve certain decisions which are then recommended to the Board. The NC had reviewed the nominations or theappointments o those directors that were appointed during the nancial year or recommendation to the Board to approvethe appointments. In arriving at their decisions on the new appointments, the NC took into consideration the incumbents’academic qualications, experience, their individual eld o expertise and their potential contributions to the eectiveness o the Board. The NC also met and determined the independence o the Directors is in line with the undertakings describedin the Code 2005. It also reviewed the composition o the Board and the Board Committees in relation to the needs o theGroup.

The NC is o the opinion that the Board is able to exercise objective judgment on corporate aairs independently and noindividual or small group o individuals dominates the Board’s decision making process.

The NC assesses and recommends to the Board whether retiring Directors are suitable or re-election. The NC considers

that the multiple board representations held presently by some Directors do not impede their respective perormance incarrying out their duties to the Company.

Tom Yee Lat Shing, who is over the age o 70 years, will have to retire at the orthcoming Annual General Meeting pursuantto Section 153 (6) o the Companies Act, Cap. 50. The assessment o Tom Yee Lat Shing’s reappointment and hisindependence were given particular consideration by the NC as he has now served on the Board or more than 18 years. The NC believes that due to his strength o character, experience and knowledge, Tom Yee Lat Shing continues to behighly eective as an independent non-executive director. He provides objective and rigorous challenges to, and engages inconstructive debate with, the board and the committees on which he sits. Tom Yee Lat Shing also brings a wealth o useuland relevant experience both in his position as an independent non-executive director and as the Chairman o the AuditCommittee.

Accordingly, the NC has recommended and the Board has endorsed the re-appointment o Tom Yee Lat Shing byshareholders at the annual general meeting.

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BOARD PERFORMANCE

Principle 5

A ormal assessment process is in place to assess the eectiveness o the Board as a whole and the contribution by eachDirector to the eectiveness o the Board. The NC uses objective and appropriate quantitative and qualitative criteria toassess the perormance o the Board as a whole and the contribution o each Director to the eectiveness o the Board. Assessment parameters include evaluation o the Board’s access to inormation, risk management, accountability, theBoard’s perormance in relation to discharging its principal unctions, communication with management and stakeholders,the business perormance o the Company, the quality o Board processes, the attendance records o the Directors atBoard and Committee meetings and the level o participation at such meetings.

The evaluation o the Board is conducted annually. As part o the process, the Directors will complete appraisal orms whichare collated by the Company Secretary. The Company Secretary will then review the results o the appraisal and present theresults to the Chairman o the NC who will then present a report to the Board.

An individual assessment o each Director is also undertaken annually. The process o the assessment is through sel-assessment where each Director will complete appraisal orms which are collated by the Company Secretary. TheCompany Secretary consolidates the appraisal orms and presents the results to the Chairman o the NC who will thenpresent a report to the Board.

ACCESS TO INFORMATION

Principle 6

The Board is provided with relevant management inormation regularly to help them carry out their responsibilities eectively.In addition, all relevant inormation on material events and transactions are circulated to Directors as and when they arise.

All Board members have separate and independent access to the advice and services o the Company Secretary. TheCompany Secretary attends Board and most o the Board committees meetings and is responsible or ensuring that Boardprocedures are ollowed. With the assistance o the management sta o the Company, the Company Secretary is alsoresponsible or compliance with the SGX-ST Listing Manual and all other applicable rules and regulations. The appointmentand the removal o the Company Secretary are subject to the Board’s approval.

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

Board members are aware that they, whether as a group or individually, in the urtherance o their duties, can takeindependent proessional advice, i necessary, at the Company’s expense.

B. REMUNERATION MATTERS

PROCEDURES FOR DEVELOPING REMUNERATION POLICIES

Principle 7

The Remuneration Committee (“RC”) meets to discuss the perormance assessment o the Executive Directors as well as todiscuss the level o emoluments to pay.

The recommendations or approval o the remuneration o the Executive Directors are orwarded to the Board. The RC alsoreviews and approves the remuneration o senior management.

Directors’ ees are recommended by the RC and are submitted or endorsement by the Board. Directors’ ees aresubjected to approval by shareholders at the AGM.

All the members o the RC are Non-Executive, Independent Directors except or Mr Wu Zi Heng, the Vice Chairman andPresident.

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LEVEL AND MIX OF REMUNERATION

Principle 8

In reviewing the remuneration packages o the Executive Directors, the RC takes into account the respective perormanceo the Group and the individual. In its deliberation, the RC takes into consideration, remuneration packages andemployment conditions within the industry and benchmarked against comparable companies.

Non-Executive Independent Directors are paid a basic ee and an additional ee or serving on any o the committees. TheChairman o each o these committees is compensated or his additional responsibilities. Such ees are approved by theshareholders o the Company as a lump sum payment at the AGM o the Company.

REMUNERATION COMMITTEE

The RC comprises ve Directors, majority o whom including the Chairman is independent. The RC members are asollows:

Er Kwong Wah (Chairman) (Non-Executive Independent)

Wu Zi Heng * (Non-Independent Executive)




Note:

* Mr Wu Zi Heng was appointed as member o RC on 22 November 2011.

The principal unctions o the RC are to:

a) recommend to the Board base salary level, benets and incentive programmes, and identiy components o salarywhich can best be used to ocus management sta on achieving corporate objectives;

b) approve the structure o compensation programme (including but not limited to Directors’ ees, salaries, allowances,bonuses, options and benets in kind) or the Directors and senior management to ensure that the programmeis competitive and sucient to attract, retain and motivate senior management o the required quality to run theCompany successully;

c) review, on annual basis, the compensation package o the Company’s Directors and senior management personneland determine appropriate adjustments; and

d) administer the COSCO Group Employees’ Share Option Scheme 2002.

The Company currently adopts a remuneration policy or sta consisting o a xed component and a variable component. The xed component is in the orm o a base/ xed salary. The variable component is in the orm o a variable bonus that islinked to the Company and individual perormance. Another element o the variable component is the grant o share optionsunder the COSCO Group Employees’ Share Option Scheme 2002.

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

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During the nancial year, the RC held two meetings. The issues deliberated at the meeting and through the circularresolutions in writing included reviewing the termination o options granted, extension o exercise period o options granted,the bonus payments to senior management and the compensation programme or the Directors and senior management.

DISCLOSURE ON REMUNERATION

Principle 9

DIRECTORS’ AND KEY EXECUTIVES’ REMUNERATION

The Directors’ and key executives’ remuneration table or the nancial year ended 31 December 2011 is as ollows:

Fees Salary BonusOther

Benefits Total

Non-Independent Non-Executive Directors in the Band o S$750,000 to S$1,000,000

Jiang Li Jun 0% 28% 57% 15% 100%

Liu De Tian * 0% 18% 74% 8% 100%

Non-Independent Executive Director in the Band o S$500,000 to S$750,000

Ma Gui Chuan 0% 33% 48% 19% 100%

Non-Independent Executive Director in the Band o below S$500,000

Wu Zi Heng 0% 65% 18% 17% 100%

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

Lu Cheng Gang 0% 0% 100% 0% 100%

Wang Yu Hang * 0% 33% 65% 2% 100%

Wang Xing Ru * 0% 33% 65% 2% 100%

Ma Zhi Hong 0% 33% 65% 2% 100%

Independent Directors in the Band o below S$500,000

Tom Yee Lat Shing 100% 0% 0% 0% 100%

Wang Kai Yuen 100% 0% 0% 0% 100%

Er Kwong Wah 100% 0% 0% 0% 100%

Ang Swee Tian 100% 0% 0% 0% 100%

Executives in the Band o S$500,000 to S$750,000

Ye Bin Lin 0% 33% 49% 18% 100%

Li Jian Xiong 0% 33% 50% 17% 100%

Executive in the Band o below S$500,000

Wong Meng Yun 0% 39% 53% 8% 100%

Note:

* The salary, bonus and other benets o the incumbent directors are paid by the subsidiaries.

No employee o the Company and its subsidiary companies was an immediate amily member o a Director and whoseremuneration exceeded S$150,000 during the nancial year ended 31 December 2011.

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EXECUTIVES’ REMUNERATION

The Company adopts a remuneration strategy that supports a pay-or-perormance philosophy. Executives participate in anannual perormance review process that assesses the individual’s perormance and contributions.

The remuneration structure or the Group President and other key executives consists o the ollowing components:

SALARY

Fixed pay comprises basic salary and the Company’s contribution towards the Singapore Central Provident Fund whereapplicable.

BONUS

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

OTHER BENEFITS

Other benets comprise o usage o Company’s car and other benets-in-kind.

STOCK OPTION

Share options are granted to align sta’s interests with that o shareholders’. These options are granted with reerence tothe desired remuneration structure target and valued based on the Binomial Valuation Model. Details o the share optionscheme can be ound in the “Directors’ Report” section o the Annual Report.

C. ACCOUNTABILITY AND AUDIT ACCOUNTABILITY

ACCOUNTABILITY

Principle 10

The Board has overall responsibility to shareholders or ensuring that the Group is well managed and guided by itsstrategic objectives. In presenting the Group’s annual and quarterly nancial results to shareholders, the Board aims toprovide shareholders with a balanced and understandable assessment o the Group’s perormance, position and prospects.Management provides the Board with management accounts and other nancial statements on a quarterly basis.

AUDIT COMMITTEE

Principle 11

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

Tom Yee Lat Shing (Chairman) (Non-Executive Independent)




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The AC perorms the ollowing unctions:

a) reviews with the external auditors, their audit plan, evaluation o the accounting controls, audit reports and anymatters which the external auditors wish to discuss;

b) reviews with the internal auditors, their audit plan, the adequacy o the internal audit procedures and their evaluationo the eectiveness o the overall internal control systems, including nancial, operational and compliance controlsand risk management;

c) reviews the quarterly and annual nancial statements, including announcements to shareholders and the SGX-STprior to submission to the Board so as to ensure the integrity o the Company’s nancial statements;

d) reviews any signicant ndings and recommendations o the external and internal auditors and related managementresponse and assistance given by the management to auditors;

e) reviews interested person transactions to ensure that internal control procedures approved by the shareholders areadhered to; and

) conducts annual review o the independence and objectivity o the external auditors, including the volume o non-audit services provided by the external auditors, to satisy itsel that the nature and extent o such services will notprejudice the independence and objectivity o the external auditors beore conrming their re-nomination.

The AC and the Board o Directors, with the assistance o internal and external auditors, reviews the eectiveness o thekey internal controls, including nancial, operational and compliance controls, and risk management on an on-going basis. There are ormal procedures in place or both the internal and external auditors to report independently their ndings and

recommendations to the AC.

The Company complies with Rules 712 and 715 o the Listing Manual o the Singapore Exchange Securities TradingLimited in relation to auditing rms.

The AC has ull access to, and cooperation rom the Management including internal and external auditors, and has ulldiscretion to invite any Director or executive ocer to attend its meetings. The AC has also expressed power to investigateany matter brought to its attention, within its terms o reerence, with the power to retain proessional advice at theCompany’s expense.

The Group recognises the importance o the internal audit unction which, being independent o Management is one o theprincipal means by which the AC is able to carry out its responsibilities eectively. The Company has its own Internal Auditunction in addition to having Messrs Deloitte & Touche Enterprise Risk Services Pte. Ltd. as the internal auditors o theGroup.

The internal auditors plan their internal audit schedules in consultation with Management and submit their respective plansto the AC or approval. The Internal Auditors report directly to the AC.

The AC conducts regular meetings scheduled on a quarterly basis. Apart rom the quarterly meetings, the AC meets withthe external and internal auditors, without the presence o the management at least once a year. Ad-hoc meetings may becarried out rom time to time, as circumstances require. The AC held seven meetings during the nancial year.

The AC, having reviewed the non-audit services provided by the external auditors, PricewaterhouseCoopers LLP, tothe Group, is satised with the independence and objectivity o the external auditors and recommends to the Board o Directors, the nomination o the external auditors or re-appointment.

The amount o ees paid to auditors, or audit and non-audit services, or the nancial year ended 31 December 2011, isS$1,300,000 and S$300,000 respectively.

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Whistleblowing Policy

The Company has in place a whistle-blowing policy and arrangements by which sta may, in condence, raise concernsabout possible corporate improprieties in matters o inancial reporting or other matters. To ensure independentinvestigation o such matters and or appropriate ollow-up action, all whistle-blowing reports are to be sent to the internalaudit unction. The Chairman o the AC and the Vice Chairman o the Board will be inormed immediately o all whistle-blowing reports received. Details o the whistle-blowing policy and arrangements are given to all sta or their easyreerence. New sta is brieed on these during the orientation programme.

INTERNAL CONTROLS

Principle 12

The Group maintains a robust and eective system o internal controls, addressing nancial, operational and compliancerisks, or all companies within the Group, but recognises that no internal control system will preclude all errors andirregularities. The system is designed to manage rather than to eliminate the risk o ailure to achieve business objectives. The controls are to provide reasonable, but not absolute, assurance to saeguard shareholders’ investments and theGroup’s assets.

The Group’s key internal controls include:

l establishment o risk management policies and systems;

l establishments o policies and approval limits or key nancial and operational matters, and issues reserved or theBoard;

l

documents o key processes and procedures;l segregation o incompatible unctions which give rise to a risk o errors or irregularities not being promptly detected;

maintenance o proper accounting records;

l saeguarding o assets;

l ensuring compliance with appropriate legislation and regulations; and

l engaging qualied and experience persons to take charge o important unctions.

Operational risk management measures implemented by the Group include the implementation o saety, security andinternal control measures and taking up appropriate insurance coverage.

Details o the Group’s nancial risk management measures are outlined on pages 135 to 144 in the Notes to the FinancialStatements.

Based on the work perormed by the internal and external auditors, the Board with the concurrence o AC and EnterpriseRisk Management Committee, are o the view that Company’s ramework o internal controls in relation to the nancial,operational and compliance risks is adequate to provide reasonable assurance o the integrity and eectiveness o theCompany in saeguarding its assets and shareholders’ value. This ramework serves to provide reasonable assuranceagainst material misrepresentation or loss.

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ENTERPRISE RISK MANAGEMENT COMMITTEE

The Enterprise Risk Management Committee (“ERMC”) comprises eight members, the majority is Directors and theChairman is independent. The ERMC members are:

Ang Swee Tian (Chairman) (Non-Executive Independent)

Wu Zi Heng 1 (Non-Independent Executive)

Wang Yu Hang 2 (Managing Director o COSCO Shipyard Group Co., Ltd)



Er Kwong Wah (Non-Executive Independent) Ye Bin Lin (Chie Financial Ocer)

Liu De Tian (Managing Director o COSCO (Singapore) Pte Ltd)

Notes: -

1 Mr Wu Zi Heng was appointed as a member o the ERMC on 22 November 2011.2 Mr Wang Yu Hang was appointed as a member o the ERMC on 2 November 2011.

The ERMC assists the Board in ullling its oversight responsibilities on risk management. The responsibilities o the ERMCwould include the ollowing:

l reviews the overall risk management system and process and makes recommendations on changes as and whenconsidered appropriate;

l reviews the Group’s risk policies, guidelines and limits; and

l reviews periodically the Group’s material risk exposures and evaluates the adequacy and eectiveness o themitigating measures implemented by management.

The ERMC has delegated the day-to-day management o risk within the Group to the Risk Management Committee(“RMC”) o each o its operating subsidiaries. The RMC o each o the subsidiaries comprises senior management sta o each division within the operating subsidiaries.

The ERMC held three meetings during the year at which discussions were held on the existing risk management structure,the key risk exposures o the Group and the action plan to mitigate such risks.

COSCO Shipyard Group continues to have a comprehensive strategic agreement with a leading Chinese insuranceinstitution to strengthen its risk management system and to enhance its operational structure. The said insurance institution

has established a team to provide the Group with dierent acades o insurance or domestic and international trades;setting up a standardised claims and liabilities system; the evaluation o ship owners’ credit ratings, the tracking o shipowners’ risk; and the evaluation o countries’ credit ratings. The Company believes all these eorts are to help the Group tomove towards the establishment o an all-encompassing risk management system.

INTERNAL AUDIT

Principle 13 The internal audit unction’s primary line o reporting is to the Chairman o the AC. Internal Audit is an independent unctionwithin the Company. Internal Auditors report directly to the AC and administratively to the President. The Company hasalso appointed Messrs. Deloitte & Touche Enterprise Risk Services Pte. Ltd. as the internal auditors o the Group. Basedon its review, the AC believes that the internal auditors, are independent and have the appropriate standing to perorm theirunctions eectively and objectively.

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D. COMMUNICATION WITH SHAREHOLDERS

REGULAR, EFFECTIVE AND FAIR COMMUNICATION

Principle 14

COSCO Corporation strives or timeliness and transparency in its disclosures to the shareholders and the public. Allinormation on the Company’s new initiatives will be rst disseminated via SGXNet ollowed by a news release, whereappropriate. The Company currently holds media and analyst briengs upon the release o its quarterly nancial results.Management regularly receives visiting und managers to provide them an insight to the Company’s business anddevelopments, as well as to better understand and address their concerns. In addition to the media and analyst briengs,

the Company has taken part in various road shows.

The Company does not practise selective disclosure. Price-sensitive inormation is rst publicly released via SGXNet, eitherbeore the Company meets with any group o investors or analysts or simultaneously with such meetings. Results andannual reports are announced or issued within the period prescribed by the SGX-ST.

GREATER SHAREHOLDER PARTICIPATION

Principle 15

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

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

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

E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY

The Company has adopted an internal policy in respect o any transactions with interested persons and has set out theprocedures or review and approval o the Company’s interested person transactions with the China Ocean Shipping

(Group) Company and its associates, which are covered by a Shareholders’ Mandate approved at each general meeting.

The AC reviews the Shareholders’ Mandate at regular intervals, and is satised that the review procedures or IPTs and thereviews to be made periodically by the AC in relation thereto are adequate to ensure that the IPTs will be transacted onnormal terms and will not be prejudicial to the interests o the Company and its minority shareholders.

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Name of interested person

Aggregate valueof all interested

person transactionduring the financial

period under review excludingtransactions lessthan $100,000 and

transactionsconducted under

shareholders’mandate pursuant to

Rule 920

Aggregate value of all

interested persontransactions

conducted under shareholders’

mandate pursuantto Rule 920excluding

transactions lessthan $100,000

S$’000 S$’000

Between Subsidiaries and:

Chimbusco Dalian Branch – 11,767Chimbusco Guangzhou Branch – 6,395Chimbusco Lianyungang Branch – 1,258

Chimbusco Shipping Co., Ltd – 198Chimbusco Zhoushan Branch – 12,022

Cosco (HK) Investment & Development Co., Ltd – 117Cosco (HK) Shipping Co., Ltd – 4,571Cosco Bulk Carrier Co., Ltd – 6,967Cosco Container Lines Co., Ltd – 6,370

Cosco Finance Co., Ltd – 914,981Cosco International Ship Trading Co., Ltd – 957Cosco International Trade Ltd – 356

Cosco Jiangsu International Freight Co., Ltd – 899Cosco Logistics (Nantong) – 454

Cosco Nantong Steel Co., Ltd 2,712 8,541Cosco Petroleum Pte Ltd – 403Cosco Shanghai Ship Management Co., Ltd – 7,483

Cosco Shipping Co., Ltd – 210

Dalian Ocean Shipping Company – 204Guangzhou Ocean Shipping Company – 6,502

Lianyungang Ocean Shipping Company – 1,750Nantong Chimbusco Marine Bunker – 3,592Nantong Cosco Khi Ship Engineering Co., Ltd – 529

Nantong Cosco Ship Equipment Company – 5,903Nantong Yuantong Container Warehouse and Transportation Co., Ltd – 232Qingdao Manning Co-operation Ltd – 2,572

Qingdao Ocean Shipping Company – 538Shanghai Ocean Crew Co., Ltd – 4,685Shanghai Ocean Industrial Corporation – 2,160

Shanghai Pan-Asia Shipping Company – 542

Shenzhen Ocean Shipping Company – 440 Tosco Keymax International Ship Management Co., Ltd – 194

Total 2,712 1,013,792

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

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

As at31/12/2011

As at31/12/2010

S$’000 S$’000

Balances placed with a ellow subsidiary, Cosco Finance Co., Ltd :

- Cash at bank 409,222 85,045

- Short-term bank deposits 765,759 388,500

1,174,981 473,545

F. DEALING IN SECURITIES

In line with Chapter 12 Rule 1207(19) o the Listing Manual o SGX-ST on dealings in securities, the Company has adoptedan internal compliance code which mirrors substantially the provisions o the said rule to provide guidance to its Directorsand ocers in relation to dealings in its securities.

The Company’s Code prohibits securities dealings by the Directors and employees while in possession o price-sensitiveinormation. The Company issues regular circulars to its Directors, principal ocers and relevant ocers who have accessto unpublished material price-sensitive inormation to remind them o the aorementioned prohibition and to remind themo the requirement to report their dealings in shares o the Company. The Directors and employees are also prohibitedrom dealing in the securities o the Company during the period commencing two weeks beore the announcement o

nancial results o the Company or each o the rst, second and third quarters o its nancial year or one month beore theannouncement o the Company’s ull year nancial statements.

CorporateGovernance

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CorporateInformation

BOARD OF DIRECTORSMa Ze Hua Chairman and Non-Independent

Non-Executive Director( Appointed on 6 January 2012)

Wu Zi Heng* Vice Chairman, President andNon-Independent Executive Director

Jiang Li Jun** Vice Chairman and Non-IndependentNon-Executive Director

Liu Lian An Non-Independent Executive Director( Appointed on 20 February 2012)

Wang Hai Min Non-Independent Non-Executive DirectorWang Yu Hang Non-Independent Non-Executive Director

( Appointed on 14 July 2011)Ma Zhi Hong Non-Independent Non-Executive Director Tom Yee Lat Shing Non-Executive Independent DirectorWang Kai Yuen Non-Executive Independent DirectorEr Kwong Wah Non-Executive Independent Director Ang Swee Tian Non-Executive Independent Director

Notes:

* Wu Zi Heng was appointed as Executive Director on 5 November

2011 and assumed the position o Vice Chairman and President

on 22 November 2011.

** Jiang Li Jun relinquished his position as President and was re-

designated rom Executive Director to Non-Executive Director on

22 November 2011.

ALTERNATE DIRECTORSLi Jian Xiong Alternate to Ma Ze Hua( Appointed on 6 January 2012)

Lu Cheng Gang Alternate to Wang Hai MinLiu De Tian Alternate to Wang Yu Hang

( Appointed on 14 July 2011) Ye Bin Lin Alternate to Ma Zhi Hong

Wang Xing Ru (Resigned on 14 July 2011)Ma Gui Chuan (Resigned on 1 November 2011)Liu Guo Yuan (Resigned on 6 January 2012)

AUDIT COMMITTEE Tom Yee Lat Shing Chairman

Wang Kai Yuen

Er Kwong Wah Ang Swee Tian

REMUNERATION COMMITTEEEr Kwong Wah Chairman

Wu Zi Heng ( Appointed on 22 November 2011) Tom Yee Lat ShingWang Kai Yuen Ang Swee Tian

NOMINATING COMMITTEEWang Kai Yuen Chairman

Wu Zi Heng ( Appointed on 22 November 2011) Tom Yee Lat ShingEr Kwong Wah

Ang Swee Tian

ENTERPRISE RISK MANAGEMENT COMMITTEE Ang Swee Tian Chairman

Wu Zi Heng ( Appointed on 22 November 2011) Tom Yee Lat ShingWang Kai YuenEr Kwong WahWang Yu Hang ( Appointed on 2 November 2011) Ye Bin LinLiu De Tian

STRATEGIC DEVELOPMENT COMMITTEEWu Zi Heng Chairman

( Appointed on 22 November 2011)Ma Ze Hua ( Appointed on 6 January 2012) Tom Yee Lat ShingWang Kai YuenEr Kwong Wah Ang Swee Tian

REGISTERED OFFICE AND BUSINESS CONTACTINFORMATION9 Temasek Boulevard#07-00 Suntec Tower TwoSingapore 038989 Telephone: 6885 0888Fascimile: 6336 9006Website: www.cosco.com.sg

COMPANY REGISTRATION NUMBER 196100159G

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

COMPANY SECRETARIES Teo Meng KeongLow Siew Tian

SHARE REGISTRAR AND SHARE TRANSFER OFFICE Tricor Barbinder Share Registration Services(A division o Tricor Singapore Pte Ltd)80 Robinson Road#02-00Singapore 068898 Telephone: 6236 3333Facsimile: 6236 4399

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WANG HAI MINNon-Independent andNon-Executive Director

BOARD OFDIRECTORS

MA ZE HUA Chairman, Non-Independentand Non-Executive Director

WU ZI HENG Vice Chairman, Presidentand Non-IndependentExecutive Director

JIANG LI JUN Vice Chairman andNon-Independent andNon-Executive Director

LIU LIAN ANNon-IndependentExecutive Director

WANG YU HANGNon-Independent andNon-Executive Director

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ER KWONG WAHNon-Executive IndependentDirector

TOM YEE LAT SHINGNon-Executive IndependentDirector

ANG SWEE TIANNon-Executive IndependentDirector

WANG KAI YUENNon-Executive IndependentDirector

MA ZHI HONGNon-Independent andNon-Executive Director

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Ann ua l Rep ort 201 1BOARD OF DIRECTORS

MR MA ZE HUA

Chairman and Non-Independent Non-Executive

Director

Mr Ma Ze Hua was appointed as the Chairman,

Non-Independent and Non-Executive Director o

the Company in place o Mr Liu Guo Yuan with

eect rom 6 January 2012.

Mr Ma was born in January 1953. He started his

career with China Ocean Shipping Company in July

1977.

Mr Ma had held various senior positions throughout

his career, including General Manager o Shipping

Division with China Ocean Shipping Company,

President o COSCO (UK) Ltd., General Manager o

the Development Division and Assistant President o

China Ocean Shipping (Group) Company, President

o COSCO America Inc., Deputy General Managero COSCO Guangzhou, General Manager and

Secretary o Party Committee o COSCO Qingdao,

Executive Vice President o China Ocean Shipping

(Group) Company, Executive Vice President and

Secretary o Party Committee o China Shipping

(Group) Company.

In August 2011, Mr Ma became the Director,

President and Deputy Secretary o Party Committee

o China Ocean Shipping (Group) Company and

Executive Director and Vice Chairman o ChinaCOSCO Holdings Company Ltd.

Mr Ma has extensive experiences in managing

shipping companies both at China and abroad.

Mr Ma graduated rom Shanghai Maritime University

with a Master’s degree in ocean shipping and

international law. He is also a qualied senior

economist.

CAPTAIN WU ZI HENG

Vice Chairman, President and Non-Independent

Executive Director

Captain Wu Zi Heng was appointed Vice Chairman,

President and Non-Independent Executive Director

o the Company in November 2011.

Born in October 1956, Captain Wu started his

proessional career in July 1975. He graduated

rom Dalian Maritime University with a master’s

degree and is a senior engineer. From September

1978 to August 1982, Captain Wu studied marine

navigation in Dalian Maritime University. He is also

the Vice Chairman o China Institute o Navigation

and an expert on work saety, as accredited by

China’s State Administration o Work Saety.

Captain Wu brings to his current role almost two

decades o directorship experience in variousunctions within the COSCO Group as well as rom

other organisations. Prior to his current appointment,

rom July 2008 to November 2011, Captain Wu was

Deputy Managing Director o China Ocean Shipping

Tally Company. From December 2002 to March

2008, Captain Wu was Chairman o the National

Committee o Chinese Seamen & Construction

Workers Union. He was Director o COSCO Group

Head Oce Research and Development Center

rom September 1999 to December 2002 and

Deputy Managing Director o COSCO Xiamen romDecember 1995 to September 1999.

Prior to that, rom November 1993 to December

1995, Captain Wu helped lead COSCO Xiamen as

Assistant Managing Director and as Deputy Director

o the executive oce and passenger shipping

department. Captain Wu started his career in

COSCO Guangzhou as a deck ocer and was a

ship’s master until November 1993.

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MR JIANG LI JUN

Vice Chairman and Non-Independent Non-

Executive Director

Mr Jiang joined China Ocean Shipping Company

Corporation upon his graduation in December

1974. He has held various senior positions with

established organisations, including Finance

Manager o SINOTASHIP, Chung Ling Shipping

(Japan) Co., Ltd, Yick Fung Shipping (HK) Co., Ltd.,

Deputy General Manager o Florence Container (HK)

Co., Ltd and COSCO Pacic Co., Ltd. Mr Jiang had

also been the head o Finance Department and

Deputy General Manager o Operation Department

o COSCO Japan Co., Ltd, General Manager o

COSUZ Co., Ltd as well as Deputy Chie Financial

Ocer o COSCO Container Lines Ltd. He was also

the Chie Executive Ocer o COSCO Shipping

Co., Ltd, Executive Director, Vice Chairman and

President o COSCO Corporation (Singapore)Limited and Director and President o COSCO

Holdings (Singapore) Company Ltd.

Mr Jiang is presently the President, Managing

Director and Executive Director o China COSCO

Holdings Company Ltd.

Mr Jiang holds an MBA degree rom the University

o Shanghai. He has extensive experience in the

management o listed companies and corporate

nancial management.

MR LIU LIAN AN

Non-Independent Executive Director

Mr Liu Lian An was appointed Executive Director on

20 February 2012. Currently, he is also Chairman o

COSCO Holdings (Singapore) Pte. Ltd.

Born in 1956, Mr Liu graduated rom Dalian Maritime

University with a Bachelor’s degree in 1982.

Mr Liu joined COSCO Tianjin in 1982. Over the

past years, he has worked as Manager o Shipping

Department and Vice General Manager o COSCO

Corporation (Singapore) Ltd., Vice General Manager

and General Manager o Shipping Department and

then Vice General Manager o COSCO BULK,

and then General Manager o China COSCO Bulk

Division.

MR WANG HAI MIN

Non-Independent Non-Executive Director

Mr Wang Hai Min has been appointed as a Non-

Independent Non-Executive Director o the

Company with eect rom 2 August 2010.

Mr Wang Hai Min, born in July 1972, graduated

rom Shanghai Fudan University with a MBA degree.

He joined COSCO Container Lines in July 1995

and worked in this company until January 2010.Over these years, Mr Wang had worked in dierent

positions o sta, assistant manager, deputy

manager, manager, senior manager and department

head with growing responsibilities on cooperated

shipping services and strategic planning. From

June 2006 to January 2010, he was the general

manager o the strategic planning department. In

January 2010, Mr Wang was transerred to Beijing

and became the general manager o transportation

division in COSCO Group head oce.

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Ann ua l Rep ort 201 1BOARD OF DIRECTORS

MR WANG YU HANG


Mr Wang Yu Hang was appointed as a Non-


Company in place o Mr Wang Xing Ru with eect

rom 14 July 2011.

Born in October 1961, Mr Wang is a senior

engineer with a bachelor’s degree. From September1979 to September 1983, Mr Wang studied in

marine engineering department o Dalian Maritime

University and started his career in Tianjin Ocean

Shipping Company (COSCO Tianjin) ater

graduation. Mr Wang joined COSCO Group head

oce in June 1987 and held various positions

including deputy general manager o business

development department, deputy general manager

o human resources department, general manager

o supervision department and general manager o

human resources department. From February 2000

to June 2011, Mr Wang was the vice president in

COSCO America, deputy managing director and

managing director in COSCO Shipbuilding Industry

Co. Mr Wang became managing director o COSCO

Shipyard Group Co. Ltd. in June 2011.

MR MA ZHI HONG


Mr Ma Zhi Hong has been appointed as a Non-


Company with eect rom 2 August 2010.

Mr Ma Zhi Hong, born in March 1957, graduated

rom Dalian Maritime University with a doctorate

degree. He joined COSCO in July 1979. Over the

past 30 and more years, Mr Ma has worked as

an engineer on-board ships, chie engineering

superintendent o COSCO Container Lines, deputy

director o COSCO Bulk, assistant president o

COSCO Group head oce, vice president o

COSCO Hong Kong and deputy managing director

o COSCO Shipyard Group.

MR TOM YEE LAT SHING

Non-Executive Independent Director

Mr Tom Yee Lat Shing was appointed to the Board

on 15 December 1993. He is a Non-Executive

and Independent Director and was last re-elected

as Director on 20 April 2011. He is Chairman o

the Company’s Audit Committee and member o

the Nominating, Enterprise Risk Management,

Remuneration and Strategic DevelopmentCommittees. Mr Yee is a Certied Public

Accountant and was a partner o an international

public accounting rm rom 1974 to 1989. He has

more than 35 years o experience in the eld o

accounting and auditing and extensive experience

in handling major audit assignments o public

listed and private companies in various industries,

including insurance, manuacturing and retailing. He

is currently a consultant. Mr Yee sits on the boards

o several Singapore listed companies. He is a ellow

member o the Institute o Chartered Accountants in

Australia, CPA (Australia) and Institute o Certied

Public Accountants Singapore and an associate

member o the Institute o Chartered Secretaries

and Administrators. He is also a ellow member o

the Singapore Institute o Directors.

DR WANG KAI YUEN


Dr Wang Kai Yuen was appointed as an

Independent Director on 2 May 2001. He chairs

the Nominating Committee and is a member o the

Audit, Enterprise Risk Management, Remuneration

and Strategic Development Committee. Dr Wang

served as a Member o Parliament or the Bukit

Timah Constituency rom December 1984 till April

2006. He was the Chairman o Feedback Unit rom

2002 till his retirement rom politics. He retired as the

Centre Manager o Fuji Xerox Singapore Sotware

Centre in December 2009. Dr Wang also holds

directorships at ComortDelgro Group Ltd, CAO

(Singapore) Corporation Ltd, Asian Micro Holdings

Ltd, Ezion Holdings Ltd, Xpress Holdings Ltd, Matex

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International Ltd, and others. He graduated rom the

University o Singapore with a First Class Honours

degree in Electrical and Electronics engineering.

Dr Wang holds a Master o Science in Electrical

Engineering, a Master o Science in Industrial

Engineering and a PhD in Engineering rom Stanord

University, USA. He received a Friend o Labour

Award in 1988 or his contributions to the Singapore

labour movement.

MR ER KWONG WAH


Mr Er Kwong Wah was appointed as an Independent

Director on 20 December 2002. He chairs the

Remuneration Committee and is a member o the

Audit, Nominating, Enterprise Risk Management

and Strategic Development Committee. A Colombo

Plan and Bank o Tokyo Scholar, Mr Er obtained a

rst class honours degree in Electrical Engineering

at the University o Toronto, Canada, in 1970 and an

MBA rom the Manchester Business School o the

University o Manchester, UK in 1978.

Mr Er spent 27 years in the Singapore Civil Service

and served in various departments including the

Ministry o Deence, Public Service Commission,

Ministry o Finance, Ministry o Education and

Ministry o Community Development. He wasPermanent Secretary in the Ministry o Education

rom 1987-1994, and then in the Ministry o

Community Development until his retirement in

1998.

Currently, he is an Executive Director o the East Asia

Institute o Management, as well as an Independent

Director on the Boards o several public listed

companies such as Unidux Electronics Ltd, Firstlink

Investment Corporation Ltd, Hartawan Holdings Ltd,

China Essence Group Ltd, China Oileld Technology

Services Group Ltd, Eucon Holding Ltd and Van Der

Horst Energy Ltd.

For his outstanding service in the Government and

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

Public Administration Medal (Gold), the BBM (Public

Service Star) and the PBM (Public Service Medal).

In 1991, the Government o France conerred him

a National Honour with the award o Commandeur

dans l’Ordre des Palmes Academiques.

MR ANG SWEE TIANNon-Executive Independent Director

Mr Ang Swee Tian is a Non-Executive and

Independent Director o COSCO Corporation

(Singapore) Limited. He chairs the Enterprise Risk

Management Committee and is a member o the

Audit, Remuneration, Nominating and Strategic

Development Committees.

Mr Ang was the President o Singapore Exchange

Ltd (“SGX”) rom 1999 to 2005 during which he

played an active role in successully promoting SGX

as a preerred listing and capital raising venue or

Chinese enterprises. Mr Ang also played a pivotal

role in establishing Asia’s rst nancial utures

exchange, the Singapore International Monetary

Exchange (“SIMEX”) in Singapore in 1984 and

was instrumental to establishing SGX AsiaClear

which started oering OTC clearing acility in 2006.

Following his retirement in January 2006, Mr Ang

served as Senior Adviser to SGX until December2007.

In March 2007, Mr Ang became the rst person

rom an Asian Exchange to be inducted into the

Futures Industry Association’s Futures Hall o Fame

which was established to honour and recognise

outstanding individuals or their contributions to

the global utures and options industry. Mr Ang

graduated rom Nanyang University o Singapore

with a First-Class Honours Degree in Accountancy

in 1970. He was conerred a Master Degree in

Business Administration with distinction by the

Northwestern University in 1973.

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KEY MANAGEMENT

CAPTAIN WU ZI HENG

Vice Chairman, President and Non-Independent

Executive Director

Captain Wu Zi Heng was appointed Vice Chairman,

President and Non-Independent Executive Director

o the Company in November 2011.

Captain Wu brings to his current role almost two

decades o directorship experience in various

unctions within the COSCO Group as well as rom

other organisations. Prior to his current appointment,

rom July 2008 to November 2011, Captain Wu was

Deputy Managing Director o China Ocean Shipping

Tally Company. From December 2002 to March

2008, Captain Wu was Chairman o the National

Committee o Chinese Seamen & Construction

Workers Union. He was Director o COSCO Group

Head Oce Research and Development Centerrom September 1999 to December 2002 and

Deputy Managing Director o COSCO Xiamen rom

December 1995 to September 1999.

Prior to that, rom November 1993 to December

1995, Captain Wu helped lead COSCO Xiamen as

Assistant Managing Director and as Deputy Director

o the executive oce and passenger shipping

department. Captain Wu started his career in

COSCO Guangzhou as a deck ocer and was a

ship’s master until November 1993.

Captain Wu Zi HengVice Chairman, President

and Non-Independent

Executive Director

Mr Li Jian XiongVice President

Mr Ye Bin LinChie Financial Ofcer

Mr Wong Meng YunFinancial Controller

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Born in October 1956, Captain Wu started his

proessional career in July 1975. He graduated

rom Dalian Maritime University with a master’s

degree and is a senior engineer. From September

1978 to August 1982, Captain Wu studied marine

navigation in Dalian Maritime University. He is also

the Vice Chairman o China Institute o Navigation

and an expert on work saety, as accredited by

China’s State Administration o Work Saety.

MR LI JIAN XIONG

Vice President

Mr Li Jian Xiong has rich knowledge and experience

in shipping management and business operation.

From 1996 to 2000, Mr Li served as Deputy

Managing Director o Crestway Terminal Holdings

Ltd, Deputy Managing Director o HK Yu Hang

Investment Ltd; Managing Director o COSCO

Container Service Ltd; Deputy General Manager

o COSCO Pacic Ltd (Listed Company in HK)

and Deputy Managing Director o COSCO Pacic

(China) Investment Co., Ltd. He also served as

the Vice Chairman o Zhangjiagang Win Hanverky

Container Terminals Co. Ltd. and the director o

various COSCO subsidiary companies in China.

Mr Li joined COSCO Corporation (Singapore) Limited

in April 2001 as Vice President. In 2009, he became

the director o Investor Relations Proessionals Association (Singapore) (IRPAS). He is currently also

the director o COSCO Marine (Singapore) Ltd.

Mr Li graduated rom Qingdao Ocean Shipping

Mariners’ College and received his MBA rom

Shanghai Jiao Tong University.

MR YE BIN LIN

Chie Financial Ofcer

Mr Ye Bin Lin has extensive experience in nance

and corporate nancial management. From 1993 to

1998, Mr Ye was the nance manager o accounting

department o COSCO Container Lines Co., Ltd.

From 1998 to 2001, he was the general nancial

manager o COSCO Germany Shipping Agencies

GMBH.

Mr Ye joined COSCO Corporation (Singapore) Ltd.

as nance director in August 2001 and was re-

designated Chie Financial Ocer o the Company

on 14 April 2008.

MR WONG MENG YUN

Financial Controller

Mr Wong Meng Yun has more than 25 years o

proessional and leadership experience in nancial

management, corporate nance, internal & external

audit and treasury management o which 12 years

were in a senior regional management position with

a leading US-listed sotware company prior to his

joining the Group in July 2008.

He graduated rom the University o Singapore with

a Bachelor o Accountancy and is a Fellow o the

Association o Chartered Certied Accountants,CPA Australia, the Institute o Certied Public

Accountants o Singapore, the Chartered Institute

o Arbitrators, the Institute o Arbitrators & Mediators

Australia and the Singapore Institute o Arbitrators.

He is a Certied Treasury Proessional (CTP) with the

Association or Financial Proessionals, a Certied

Internal Auditor (CIA) and a Certied Financial

Services Auditor (CFSA) with the Institute o Internal

Auditors, as well as, a Certied Inormation Systems

Auditor (CISA) and a Certied Inormation Security

Manager (CISM) with the Inormation Systems Audit

and Control Association (ISACA).

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INVESTOR RELATIONS

As a leading, global marine conglomerate, COSCO

Corporation recognises Investor Relations (IR) as

an essential component o its strategy to develop

as a reputable corporate entity. Leveraging

on strong and accountable leadership, we

practice eective corporate governance, regular

perormance reporting and clear and timely investor

communications. In this regard, we strive to provide

requent and substantive corporate disclosure

through an active investor relations programme.

With a sound business model, signicant market

presence and regular investor relations engagement,

we have generated strong interest in our company.

As a testament to widespread shareholder interest,

we have been included in the FTSE ST China Index

since January 2009, and in the FTSE China Top

Index since July 2009. These indexes were created

to refect the increasing representation o China-

based companies on the Singapore stock market

and oer investors simple vehicles through which

they can participate in the potential growth o highly

liquid, locally-listed China companies. Among other

indexes, we are a component stock o the Morgan

Stanley Capital International Singapore, which

eatures some o the most promising, widely-traded

and investible Asian companies outside Japan.

BROAD AND FREqUENT ENGAGEMENT

As a dynamic organisation with a widely-traded

stock, we understand the importance o timely

and pertinent corporate disclosure. Over FY2011,

we made announcements covering newly secured

contracts, quarterly results, growth strategies,

operational commentaries and developments and

our business outlook.

We meet regularly with the investment communityo shareholders, stock brokerages, bank and other

nancial institutions to clariy and explain current

corporate developments. We also engage the media

and the general public through media interviews and

news reports on a variety o media platorms such

as newswires, print, broadcast, investor meetings

and roadshows, and dialogue with shareholders at

Annual General Meetings.

Over Financial Year 2011, we participated in various

analyst meetings and investor conerences. At these

sessions, we interact with research analysts, und

managers and stockbrokers. We also conduct

results briengs every nancial quarter, where we

get to meet analysts. In FY2011, we engaged all

o our COSCO Corporation senior management

in meetings and events with the investment

community. In addition, over 300 shareholders

attended our Annual General Meeting in April 2011.

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

FY2011

3300

3200

3100

3000

3000

2800

2700

2600

2500

2,400

2,200

2,000

1,800

1,600

1,400

1,200

1,000

0,800

0.875

1800

1700

1600

1500

14001410.01002546.35

Last Price

COS SP Equity (R1) 0.875 -.010

FSSTI Index (L1) 2646.35 -26.43

MXSG Index (R2) 1410.0100 -14.0699

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ANALYST COVERAGE

Company Name of Analyst

BNP Paribas Brenda Lee

CIMB Siew Khee, Lim

CITI Horng Han, Low

Si Xian, Goh

CLSA Caroline Maes

Credit Suisse Gerald Wong

Daiwa Clement Chen

DBS Vickers Janice Chua

Pei Hwa, Ho

Deutsche Bank Kevin ChongGoldman Sachs Miang Chuen Koh

HSBC Tarun Bhatnagar

Neel Sinha

IIFL Li, Zuo

JP Morgan Ajay Mirchandani

Kim Eng Securities Rohan Suppiah

Macquarie Capital Shuwei Quek

Merrill Lynch Wei Lee, Chong

Morgan Stanley Sophie Loh

Andy Meng

Nomura Securities Lisa Lee

Phillip Securities Nicholas Low Kim Chye

Standard Chartered Wai Mun, Leong

UBS Cheryl Lee

UOB Kay Hian Nancy Wei

IR AWARDS 2011

COSCO Corporation was recognised or the third

time or its corporate transparency by the Securities

Investors Association o Singapore (“SIAS”). In 2011,

COSCO Corporation was runner-up in the “Most

Transparent Company Award”, overseas company

category, at the “SIAS 12th Investors’ Choice Award

2011”, held on 27 October 2011.

This award, as well as other accolades, underscoresour continuous eorts in corporate governance and

disclosure, regular communications and investor

engagement. Looking orward, we intend to continue

actively engaging the investment community while

enhancing our corporate disclosure standards,

understanding the importance o investor relations

in generating long-term, sustainable shareholder

value.

MAJOR INVESTOR RELATIONS EVENTS

IN 2011

10 – 11 January DB Access China Conerence

2011

12 January DBS Pulse o Asia Conerence

2011

18 January BNP Paribas Seeding ASEAN

Growth Conerence

22 February FY2010 Results Brieng

11 – 12 April CITI Hong Kong Roadshow

14 April CITI Brieng

20 April FY2010 Annual General Meeting

6 May 1QFY11 Results Brieng

9 May DBS Vickers Brieng

12 May CLSA Corporate Access Forum

23 – 27 May DBS Vickers USA Conerence

and Roadshow

30 June HSBC Inaugural ASEAN

Conerence

6 July DBS Vickers Pulse o AsiaConerence

1 August 2QFY11 Results Brieng

2 August DAIWA Brieng

3 August BNP Paribas Corporate Day

Conerence

18 August UBS Hong Kong Conerence

6 September UBS ASEAN Conerence 2011

27 October Awarded SIAS Investors’ Choice

Award

2 November 3QFY11 Results Brieng

15 November Morgan Stanley Asia Pacic

Summit 2011

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RISK MANAGEMENT

RISK FACTORS

INTRODUCTION

The Group has established a risk management

process, which is constantly being reviewed

and updated by its Enterprise Risk Management

Committee (“ERMC”), to ensure its relevance in

the ever changing business environment. The

risk management process is aiming to identiying

the risk actors that may have a material impact

on the Group’s operation, and to manage them

appropriately.

The material risk actors identied by the Group’s

risk management process are set out below. Each

o these could have a material and adverse impact

on the Group, including its business, nancial

condition, results o operation and prospect. These

risk actors have been divided into our categories:

external; internal; execution and nancial.

RISK MANAGEMENT PROCESS

The Group’s process or identiying and managing

risk is set by the Board through the ERMC. The

ERMC has delegated the day-to-day management

o risk within the Group to the Risk Management

Committee (“RMC”) o each o its operating

subsidiaries and each RMC comprises senior

management sta o the respective division within

the operating subsidiaries.

The ERMC also engages Deloitte & Touche

Enterprise Risk Services Pte Ltd to perorm strategic

risk proling in the Group’s major subsidiaries. As

the Group’s enterprise risk management program

is a long-term initiative that calls or commitment

and inputs rom various stakeholders, the enterprise

risk management policies have been implemented

in phase with guidance rom Deloitte & Touche

Enterprise Risk Services Pte Ltd in a systematic

manner and coupled with constant education and

training o local management sta and risk owners.

The Board currently conducts periodical reviews

o the risks and it identies the key risks or the

year ahead. As part o this review, operational and

strategic risks are proposed as key risks by the

RMC, based on inputs rom regions, unction heads

and business leaders. The risk actors set out below

refect the key risks identied. Each o the key risks

is assigned to the Chairman o the RMC at the

operating subsidiaries who proposes a level o risk

the Group is willing to take and develops appropriate

action plans to mitigate the risks. All risk mitigation

plans are reviewed and agreed by the Board.

Once risk mitigation plans are agreed, each

operating subsidiary is asked to carry out a sel

assessment exercise which requires all operating

units to conrm compliance with the Group’s policies

and also to conrm that key operational controls are

in place and working eectively. The results o this

exercise, together with a review o specic plans

or strategic risks, enable the Board to conrm that

the business has a sound risk-based ramework o

internal controls.

The Group Auditors, internal and external, provide

independent reassurance that the standard o risk

management, compliance and control meets the

needs o the business. Group Audit status reports

are discussed with ERMC, Audit Committee and

Board on a regular basis. The Board also recognises

that the risks acing the business may sometimeschange over short time periods. Every quarter, each

operating subsidiary provides an update on new

and emerging risks to the Board and reports to

update the Group’s risks are provided to the ERMC,

Audit Committee and the Board.

The Board concurred with the opinion o its sub-

committees, i.e. Audit Committee and ERMC, o the

adequacy o the internal controls system (o which

risk management is one o its crucial segments) to

addressing its nancial, operational and compliance

risks.

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It is not possible and practical to identiy and

anticipate every risk that may impact the Group.

While the Group’s risk management process

attempts to identiy and manage (where possible)

the key risks it aces, no such process can totally

eliminate risks or guarantee that every risk is

identied, or, that it is possible, economically viable,

or prudent to manage such risks.

Consequently, there can never be an absolute

assurance against the Group ailing to achieve its

objectives or a material loss arising. Some material

risks may not be known, others, even though

currently deemed as immaterial, could become

material and new risks may also emerge.

The Board arms its overall responsibility on risk

management and to review the adequacy and

integrity o the system on an annual basis.

1. EXTERNAL RISKS

The Group is subject to a number o external risks.

The Group denes external risks as those that stem

rom actors which are mainly outside o its control.

These risks will oten arise rom the nature o the

Group and the industry in which it operates.

GLOBAL ECONOMIC DOWNTURN AND

UNCERTAINTIES

The global capital and credit markets have recently

been experiencing periods o extreme volatility anddisruption. The global economic uncertainties,

concerns over recession, infation or defation,

energy costs, geopolitical issues, commodity

prices and the availability and cost o credit, have

contributed to unprecedented levels o market

volatility and diminished expectations or the global

economy and the capital and consumer markets.

These actors, combined with others, precipitated a

severe global economic downturn, the ull extent o

which remains to be seen.

The Group is susceptible to the cyclical world-wide

demand and pricing in its industries, which are

highly dependent upon global economic condition.

The uncertainties are likely to result in a decrease in

the overall demand or vessels and risks o deault

by the ship-owners in taking delivery o the vessels

upon completion.

LEGAL, REGULATORY, POLITICAL AND

SOCIETAL RISKS The Group is at risk rom signicant and rapid

change in the legal systems, regulatory controls,

custom and practices in the regions in which it

operates.

Political uncertainties, regime change and change

in society, including increased scrutiny o the

Group, its businesses or its industry, or example by

governmental and non governmental organisations

or the media may result in, or increase the rate o,

material legal and regulatory change, and changes

to custom and practices. These aect a wide range

o areas and are expected to have material and

adverse impacts on the perormance and nancial

condition o the Group i they are not pre-empted

appropriately.

COMPETITION

The ship building, ship repair, oshore marine

engineering and dry bulk shipping industries

are highly competitive. The primary bases orcompetition in the ship repair, ship building and

oshore marine engineering industries are matching

o the customers’ demands with the capabilities

and capacity o a shipyard, the type and quality

o vessel, price, delivery schedule / availability and

type o equipment.

The Group expects to ace increased competition

rom existing competitors and new entrants into

these industries in the uture. In the event that

the Group is unable to continually upgrade its

shipyard capabilities, the Group’s business, nancial

condition, results o operation and prospect may be

adversely aected.

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RISK MANAGEMENT

Being a relatively new entrant in the oshore

marine engineering industry, the Group is expected

to incur higher costs as it scales the “learning

curve” in its oshore marine engineering projects

on new product types. The Group might ace sti

competition, especially under this era o global

uncertainties whereby some players have adopted

price cutting strategy in order to secure new order

books.

Increased competition in the markets have caused

contract values o new ship building contracts to

deteriorate and these poised adverse impact to the

Group’s perormance and nancial condition.

CUSTOMER DEMAND

Customer demand or the Group’s services and

expertise is expected to increase to a higher level

o expectation. The Group expects greater scrutiny

by customers beore they take delivery o vessels.

This will, inadvertently, increase the cost o building

the vessel. A ailure to recover higher costs could

materially and adversely impact the Group’s

perormance.

The Group has introduced enhanced modern

shipbuilding management system sotware to better

manage and to mitigate the risks o late ship-built

delivery and quality. A “COSCO Shipyard CIMS

System Maintenance and Operation Regulation” has

been developed and updated to ensure commonpractices, smooth and stable operation throughout

the various shipyard subsidiaries.

The Group is also exposed to counterparty risk

rom customers that could result in nancial losses

should those counterparties become unable to

meet their obligations to the Group.

FLUCTUATIONS IN THE BALTIC DRY

INDEX (“BDI”)

The BDI is a benchmark o the dry bulk shipping

industry and is an indication o the price o moving

major raw materials by sea. It is generally recognised

as an economic indicator o the movement o the

volume o global trade.

An increase in the BDI is generally considered

to indicate an increase in demand or dry bulk

shipping, whereas a decrease in the BDI is generally

considered to indicate a decrease in demand or dry

bulk shipping, and the capital expenditures o dry

bulk shipping companies are usually driven mainly

by the BDI outlook.

Currently, the dry bulk shipping industry is

experiencing excess capacity leading to lower

charter rates. The fuctuations in the BDI result in an

uncertain outlook or the dry bulk shipping industry,

which typically has an impact on vessel owners’

willingness to place new orders or bulk carrier

vessels, which in turn aects the Group’s services

and products.

RAW MATERIALS

The Group depends upon the availability, quality

and cost o steel and steel-plates rom around the

world, which exposes it to price, quality and supply

fuctuations. Although the Group will take measures

to protect against the short-term impacts o these

fuctuations and o the concentration o supply,

there is no guarantee that these will be eective.

A ailure to recover higher costs o shortalls in

availability could materially and adversely aect the

Group’s perormance.

The Group manages this risk through constant

monitoring o the markets in which it operatesand continuous review o capital expenditure

programs to ensure they refect market conditions.

A continuous ocus on operating expenditure is also

an important method o mitigating this risk.

The Group has developed uniorm processes

and procedures with applications such as SAP

to manage procurement o raw materials. The

Group also has developed strategic alliances with

certain selected major steel mills and other leading

companies on the purchase o steel supply, bunker,

marine valves, boilers, engines and other related

equipments to mitigate risks in such supplies.

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2. INTERNAL RISKS

Internal risks are those arising rom actors primarily

within the Group’s control, including rom the Group

structure and processes.

INFORMATION TECHNOLOGY

INFRASTRUCTURE

The Group depends on accurate, timely inormation

and numerical data rom key sotware application to

aid day-to-day business and decision making. Any

disruption caused by ailings in these systems, o

underlying equipment or o communication networks

could delay or otherwise impact the Group’s day-

to-day business and decision making and have

materially eects on the Group’s perormance.

OPERATIONAL PERFORMANCE AND

PROJECT DELIVERY

Failure to meet production targets can result in

increased unit costs, which are pronounced at

operations with higher levels o xed costs. Unit

costs may exceed orecasts, adversely aecting

perormance and the results o operations.

Failure to meet project delivery times and costs could

have a negative eect on operational perormance

and lead to increased costs or reductions in revenue

and protability.

A number o strategies have been implemented

to mitigate these risks including managementoversight o operating perormance and project

delivery through regular executive management

briengs, increased eectiveness o procurement

initiatives to reduce unit costs and improve delivery

o projects.

The Group has also established an enterprise

technology standards system under the guidance o

Singaporean and South Korean experts to enhance

the basic design and detailed design o ships and

marine engineering products.

EMPLOYEES

The Group depends on the continued contributions

o its executive ocers and employees, both

individually and as a group. While the Group reviews

its people policies on a regular basis and invests

signicant resources in training and development

and recognising individuals with high potential,

there can be no guarantee that it will be able to

attract, develop and retain these individuals at an

appropriate cost and ensure that the capabilities

o the Group’s employees meets its business

needs. Any ailure to do so may aect the Group’s

perormance.

The ability to recruit, develop and retain appropriate

skills or the Group is made dicult by competition

or skilled labor. The ailure to retain skilled employees

or to recruit new sta may lead to increased costs,

interruptions to existing operations and delay in new

projects.

A number o strategies are implemented to mitigate

this risk including attention to an appropriate suite

o reward and benet structures and ongoing

renement o the Group as an attractive employee

proposition.

MANAGING COST OF WAGES THROUGH

OUTSOURCING

Ship repair is a labor-intensive industry and an

increase in wages will have a signicant impact on theGroup. The Group had been encountering increases

in labor cost. Other than having a permanent work

orce o skilled employees on the payroll, the Group

has adopted a contract hiring system, unskilled

manpower is hired on a contractual basis and paid

according to projects undertaken. While the Group

has beneted rom the decrease in xed costs, it is

a risk rom ailure by these third parties to deliver

on their contractual commitments, which may

adversely impact its’ reputation and perormance.

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3. EXECUTION RISKS

Execution risks arise rom the implementation o the

Group’s strategy and its change and investments

program, which aim to enhance long term

shareholders’ value.

INVESTMENT, ACqUISITION AND

DISPOSALS

Risks inherent in the investments, acquisition and

disposals may have an adverse impact on the

Group’s business or nancial results.

From time to time, the Group may make investments,

acquisitions and disposals o businesses. While

these are careully, planned, the rationale or

them may be based on incorrect assumptions or

conclusions and they may not realise the anticipated

or unintended eects. Additionally, while the Group

seeks protection, or example through warranties

and indemnities, signicant liabilities may not be

identied in due diligence or come to light ater the

warranty or indemnity periods. These actors may

materially and adversely impact the perormance or

nancial condition o the Group.

4. FINANCIAL RISKS

The Group is exposed to market risks such as

interest rate and exchange rate risks arising rom

its international business. The PRC government

has recently imposed stringent lending guidelines

to commercial banks intended to cool its propertymarket down. However, these new lending

guidelines have caused the borrowing costs o

businesses to surge across the board.

At the same time, the fuctuations o value o

Renminbi against the US dollar and other major

currencies have also poised uncertainties to the

Group’s operations.

MANAGING CURRENCY FLUCTUATION

The main nancial risks acing the Group are

fuctuations in oreign currency, interest rate risk,

availability o nancing to meet the Group’s needs

and deault by counterparties and customers. Any

o these nancial risks may materially and adversely

impact the Group’s business, nancial condition,

results o operation and prospect.

The Group has established a management system

to address nancial risks. Fluctuations in currency

exchange rates are closely monitored. The Group

at its discretion may employ simple orward hedging

on a systematic approach to meet its nancial

obligations and oreign and local currencies needs.

The Group does not engage in speculative oreign

investments. Strict compliance controls are in place

to ensure that procedures are adhered to and

management decisions are not made unilaterally.

The Group also engaged the guidance o the holding

company in managing its oreign exchange risk

exposure. The holding company has an experienced

Treasury operations team responsible or managing

the unding requirements and liquidity risks.

A detailed disclosure o the Group’s nancial risks

can be ound on pages 135 to 144 in the Notes to

the Financial Statements.

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RESEARCH & DEVELOPMENT

Behind every product and service we oer is a

commitment to be a part o technological innovation

through adaptation o leading technologies. Fortied

by our Research and Development, COSCO visualises

a dynamic uture that can be spurred through our

quest or greater eciency, enhanced productivity,

and higher quality standards.

With a commitment towards innovation, we lay an

important oundation that drives our technological

progress and anchors our competitive advantage

now and in the uture.

2011 IN REVIEW

COSCO’s R&D team encompasses more than 1,400

competent individuals who are technically skilled,

specialising in research and specic areas such as

ship repair, ship conversion, ship building and oshore

marine engineering.

COSCO Shipyard delivered two 5,000 units car

carriers, namely COSCO Shengshi and COSCO

Tengei in February and June 2011 respectively. This

project was jointly designed by COSCO Shipyard and

the Shanghai Design Institute, and registered with NK

Class.

In August 2011, COSCO Shipyard brought to ruition

two in-house designed 59,000 DWT shuttle tankers,

built or the Danish owner Lauritzen Tankers A/S and

named "Dan Cisne" and "Dan Sabia". The Panamax-sized vessels are double-hulled DP co-shuttle tankers,

and comply with the saety requirements o both the

Danish Maritime Authority and the Brazilian national

oil company "Petrobras Campos Basin Oshore”.

They are designed to have better maneuverability in

providing crude oil transer services between FPSO,

FSO, oil platorms, and onshore oil acilities. COSCO

Shipyard owns all the independent intellectual

property rights o their basic, detailed and production

designs.

During the year, the National Copyright Administration

o the PRC issued the copyright registration certicate

or the SAP Production & Design Integration V1.0

(reerred to as S-PDI system) to COSCO. This unique

system was established by our group's own R&D

department in a project which lasted two and a hal

years and cost a total o 110 person-months. The

S-PDI system is based on the SAP ERP platorm, and

brings the integration advantages o the SAP system

into ull play. It has achieved integration management

o the whole process o ship building production.

The successul registration o the inormation

management system, the creation o world class ship

styles and other initiatives attest to COSCO’s growing

R&D capabilities.

PARTNERSHIPS FOR GROWTH

Collaborations with prominent institutions have always

been a key pillar o our research and development

strategy. The year 2011 saw us reach a strategic

agreement with Hunan Valin Xiangtan Iron & Steel

Co., Ltd, a large Chinese steel maker, to develop and

produce high-grade steel or marine and oshore

use. This strategic cooperation agreement will enable

both partners to strengthen their capabilities, work

together to develop innovative ships, and improve their

management skills.

The year in review also paved the way or a collaborative

agreement between the COSCO Shipyard Group and

Fleet Management Limited (FLEET). For many years,

COSCO has successully cooperated with FLEET onship repair and ship building projects. In all o these

projects, both companies were deeply involved at

each stage o the construction, not only on quality

improvement issues but also in various other technical

aspects such as the introduction o next generation

equipment or systems on the vessels, improved

environmentally-riendly designs and enhanced saety

and energy eciency or vessels.

LOOKING AHEAD

2011 has been truly rewarding in R&D and we will

urther build on this platorm, investing in all our R&D

eorts to lead us to long-term and sustainable growth.

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HUMAN RESOURCES & WORKPLACE SAFETY

HUMAN RESOURCES

PEOPLE FIRST

In our pursuit o excellence, COSCO places

PEOPLE at the core o our HR strategy. We

understand that it is through people that the Group

is able to transorm and realise its vision. We have

structured programmes to develop this most vital

o resources. In the areas o recruitment, training,

compensation and benets, as well as incentives,

we have established an important multi-aceted

oundation that anchors our growth.

One o the most important aspects is our

remuneration and reward scheme where promising

sta are recruited and constantly developed through

a competitive perormance and appraisal system.

This helps sta systematically progress in their

career and personal goals.

RECRUITMENT AND TRAINING

As a leading, world-class enterprise, we recognise

that human capital is one o the most essential

elements in optimising progress. Along these lines,

we have a pro-active recruitment and training

programme. Every year, more than 1,000 resh

graduates are actively recruited rom renowned

Chinese universities. These top graduates are

subjected to management training courses in

preparation or their management positions in

the uture. Technical stas are required to pass acourse beore commencing work and are assessed

annually to ensure their skills meet the necessary

standards.

At COSCO, continuous learning is a undamental

building block o growth. Our employees undergo

training to comply with international standards and

saety measures, as well as undertake courses in

technical, engineering and management skills. Over

2011, COSCO Shipyard Materials Centre began

an E-procurement Platorm training course. Sta

rom the Materials Centre o the Group, Inormation

Centre, and representatives rom the materials

sector o each subsidiary were given the opportunity

to attend this course.

REWARD AND RETENTION

Recognising eort and achievement and inculcating

loyalty are important objectives at COSCO. We instill

this in various ways, one o which is the perormance

and achievement appraisal system that aligns

work goals with personal career development

and remuneration. Another example is the “Model

Employee Reward” scheme which gives best-

perorming employees a chance to visit one o the

Group’s overseas subsidiaries. Apart rom being an

incentive trip, it is an opportunity to experience the

work culture in a oreign environment.

LOOKING FORWARD

As we move ahead, COSCO will continue to

eectively manage our workorce. Both contract and

in-house workers will be given priority and benets.

This will enable us to achieve optimum growth.

WORKPLACE SAFETY

A SAFE AND SECURE ENVIRONMENT

Workplace saety goes hand in hand with human

resource management. Towards that end, we

require our sta to undergo workplace saety training

courses specially designed to inorm and educate

workers about potential workplace dangers and the

necessary precautions. Tests are also administeredto ensure a undamental level o prociency and

understanding.

During 2011, COSCO Nantong shipyard produced

a workplace saety manual or ship operations and

oshore marine engineering, circulating it to all

workplace saety inspectors and managers. With a

clear set o guidelines, COSCO has maintained a

commendable saety record over the last decade.

We will continue to abide by these guidelines and

strengthen these measures to promote a secure

work environment.

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ENVIRONMENTAL SAFETY

We always aim to do our best to protect the

environment as we believe that environmental saety

is a part o overall workplace saety. With a goal o

reducing environmental degradation, we proactively

saeguard our environment through regular acility

and equipment upgrades.

The Saety Committee established in 2009 continues

to conduct requent site visits to all shipyards to

ensure that saety requirements are adhered to.

Equipment and tools are also checked and sent or

scheduled monthly maintenance.

SAFETY STANDARDS ESSENTIAL

To maintain and raise saety awareness levels,

we undertake regular education and training.

Compulsory training sessions are conducted

every week, discussing the latest saety rules

and regulations. The training sessions include

live demonstrations o saety measures and

an assessment test to evaluate participants’

competencies and prociencies.

In addition, we have implemented a grading system

in the saety management ocers’ course, giving

saety ocers a urther means to monitor and

manage the saety o their individual shipyards.

COSCO also engages external parties to appraise

various departments in COSCO, checking the

standards at the Group and awarding certicationsin the areas o work environment quality and

workplace saety.

MEDICAL BENEFITS

At COSCO, we believe that medical benets

complement our attention to workplace saety.

Towards that end, we have established an all-

inclusive network o supporting operations which

include on-site medical acilities at all shipyards.

Among other things, we also conduct annual

health checks, provide medical insurance, dental

treatment and immunisation against infuenza. We

recognise that a healthy workorce is essential to

the productivity and perormance o our corporation

and strive to provide a well-tended, supportive

environment.

2012: TARGETS AND MEASURES

COSCO will continue to emphasise and improve

on workplace saety going orward. The new

equipment brought into our yards entails the need

to educate our workers on the relevant usage

techniques, saety procedures and regulations. All

o this is implemented through thorough training

sessions and programmes, underlining our “saety

rst” culture. We will also retain our reward scheme

to encourage workplace saety and deter hazardous

on-site behaviour.

In addition, we will institute short-term, on-board

stints or maintenance sta in order to improve

the operational oversight and workplace saety

management skills o ship management. Their

responsibilities include the prevention o piracy,

smuggling, pollution, re, collision, personal injury

and typhoon disaster management.

COSCO Shipyards’ management has maintained

an overall good record in the areas o saety, security

and stability. Looking ahead, we will strive to better

our ship tracking, monitoring and inspection

operations, as well as improve inormation exchange

among all onshore and oshore departments

and all crew on our vessels. This will acilitate aholistic understanding o operational procedures,

thus reducing the risk o workplace incidents and

enabling greater operational eciency.

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CORPORATESOCIAL RESPONSIBILITY

OVERVIEWMore than enhancing our capabilities as an enterprise,

COSCO believes that achieving sustainable growth

and corporate development is partaking in a

process to integrate social, environmental, ethical

and human rights concerns into our business

operations and core strategy in close collaboration

with our stakeholders. Enhancing the visibility o

our Corporate Social Responsibility activities, we

disseminate good practices in a way that benets

all stakeholders including shareholders, businesspartners, employees, customers and suppliers.

SOCIAL CONTRIBUTIONSWith the goal o ostering positive relationships

within the communities in which we operate

in, COSCO engages in a myriad o activities to

address appropriately local needs and encourages

employees to play an active role in their communities.

SINGAPOREIn Singapore, COSCO continues to support the

Yellow Ribbon Project or the th year running. This

project is a campaign established to encourage

employment or ex-convicts and engage the

community to give ex-oenders a second chance.

This gesture may be simple, but it is in support o

a worthy cause. Through this programme, many

ex-oenders were successully integrated back into

society.

CHINA As part o COSCO’s continued commitment

towards contributing to the next generation, the

COSCO Group o companies in China has been

actively engaged in campaigns oering substantialsupport to education. This year, COSCO Zhoushan

Shipyard, through its Youth League Committee,

organised a social activity called “Transer Youth

Love, Warm Tibetan Herdsman” which aims to

support the education o needy students in the

remote area o Tibet.

Under this campaign, the general cadre, sta

and league members helped the less ortunate

by donating more than 1200 pieces o clothing,

schoolbags and stationery to Liuheng COSCO

Primary School through the “Charity Donation Day”

undraising drive.

On another note, COSCO Nantong Shipyard’s Trade

Union and Youth League Committee launched a

social campaign called “Blue Ocean Plan - Love

Tibet”. Blue Ocean Plan is a part o the “Love Tibet”

campaign which comprises three parts “Seagull,

Seashell and Dolphin” intending to build a long-term

donation system helping needy children. With the

aim o improving Tibetans’ literacy levels, this project

acquired and donated books, schoolbags, stationery,

and teaching materials to needy students along with

clothing, books and toys contributed by the COSCOsta.

Aside rom our local contributions, COSCO

Corporation has been involved in giving to the less

ortunate communities in China through the COSCO

Charity Foundation – the rst non-public oundation

initiated by state-owned enterprises. The oundation

manages COSCO’s charity works and social projects

within China in areas such as disaster relie, poverty

aid, medical aid and educational support. The unding

or this charity comes rom COSCO subsidiaries.

ENVIRONMENTAL AWARENESSCOSCO recognises the importance o preserving the

natural environment in order to create a sustainable

society or our uture generations. COSCO is committed

to achieving this goal by seeking to combine ongoing

innovation in environmental technology coupled with

environmentally sound business practices. In support

o this commitment, COSCO Shipyard launched a

creative design campaign named the “Green Ship

o the Future” which encourages both proessional

technical sta and production management personnel

o COSCO to develop innovative, eco-riendly ideas

or uture ship designs.

All design work had to ully integrate environmentally-

riendly, economic eatures ensuring workplace

saety and health and promoting energy and water

conservation, recycling and waste minimisation.

CONCLUSIONUpholding high standards in Corporate Social

Responsibility within the Group is a long-standing

commitment by COSCO. Our community projects,

environmental protection eorts and involvement

with charities are our way o giving back to the wider

community which has ultimately enabled us to grow as

a leading corporation. Looking ahead, we will continue

our social involvement and support the strengthening

o community ties.

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FINANCIAL

CONTENTS

FINANCIAL STATEMENTS

70 Directors’ Report

75 Statement by Directors

76 Independent Auditor’s Report

77 Consolidated Income Statement

78 Consolidated Statement of Comprehensive Income

79 Balance Sheets

80 Consolidated Statement of Changes in Equity

81 Consolidated Statement of Cash Flows

83 Notes to the Financial Statements

151 Five-Year Summary

152 Shareholding Statistics

154 Notice of Annual General Meeting

Proxy Form for Annual General Meeting

Notes for Proxy Form

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Directors’ ReportFor The Financial Year Ended 31 December 2011


An nua l Re port 20 11

The directors present their report to the members together with the audited financial statements of the Group for thefinancial year ended 31 December 2011 and the balance sheet of the Company as at 31 December 2011.

Directors

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

Ma Ze Hua (appointed on 6 January 2012)Wu Zi Heng (appointed on 5 November 2011)Jiang Li Jun (redesignated as Non-Executive Director on 22 November 2011)Wang Hai MinMa Zhi HongWang Yu Hang (appointed on 14 July 2011)

Liu Lian An (appointed on 20 February 2012) Tom Yee Lat ShingWang Kai YuenEr Kwong Wah Ang Swee TianLi Jian Xiong (alternate director to Ma Ze Hua)Lu Cheng Gang (alternate director to Wang Hai Min) Ye Bin Lin (alternate director to Ma Zhi Hong)Liu De Tian (alternate director to Wang Yu Hang)

Arrangements to enable directors to acquire shares and debentures

Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objectwas to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of,the Company or any other body corporate, other than as disclosed under “Share options” on pages 72, 73 and 74 of thisreport.

Directors’ interests in shares or debentures

(a) According to the register of directors’ shareholdings, none of the directors holding office at the end of the financialyear had any interest in the shares or debentures of the Company or its related corporations, except as follows:

Number of ordinaryshares registered

in name of

director or nominee

Number of ordinaryshares in which

a director is deemed

to have an interest

At

31.12.2011

At1.1.2011or date of

appointment,if later

At

31.12.2011



The Company

Tom Yee Lat Shing 1,400,000 1,400,000 – –

Wang Kai Yuen 900,000 900,000 1,000,000 1,000,000

Er Kwong Wah 650,000 650,000 – –

Ang Swee Tian 130,000 130,000 5,000 5,000

Li Jian Xiong 1,000,000 1,000,000 – –

Lu Cheng Gang – – 50,000 50,000

Ye Bin Lin 600,000 600,000 – –

Liu De Tian 153,000 153,000 120,000 120,000

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An nu al Repo rt 2011


Directors’ interests in shares or debentures (continued)

(a) (continued)

Number of unissued ordinary

shares under options held

by director

At

31.12.2011



Related corporationsCOSCO International Holdings Limited

- Share Option Scheme

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

China COSCO Holdings Company Limited

- Share Appreciation Rights Plan

Lu Cheng Gang 265,000 265,000

(b) According to the register of directors’ shareholdings, certain directors holding office at the end of the financial yearhad interests in the options to subscribe for ordinary shares of the Company granted pursuant to the Cosco GroupEmployees’ Share Option Scheme 2002 as set out below and under “Share options” on pages 72, 73 and 74 of this

report.

Number of unissued ordinary

shares under option held

by director

At

31.12.2011



2006 Options

Lu Cheng Gang – 700,000

2007 Options

Er Kwong Wah 300,000 300,000

Li Jian Xiong 700,000 700,000

Lu Cheng Gang 700,000 700,000

Ye Bin Lin 700,000 700,000

Liu De Tian 700,000 700,000

2008 Options

Tom Yee Lat Shing 300,000 300,000

Wang Kai Yuen 300,000 300,000

Er Kwong Wah 300,000 300,000

Li Jian Xiong 700,000 700,000

Lu Cheng Gang 700,000 700,000

Ye Bin Lin 700,000 700,000

Liu De Tian 700,000 700,000

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Directors’ interests in shares or debentures (continued)

(c) The directors’ interests in the ordinary shares and share options of the Company as at 21 January 2012 were thesame as those as at 31 December 2011.

Directors’ contractual benefits

Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or witha company in which he has a substantial financial interest, except as disclosed in the accompanying financial statementsand in this report, and except that certain directors have employment relationships with the ultimate holding corporation orrelated corporations, and have received remuneration in those capacities.

Share options

(a) Cosco Group Employees’ Share Option Scheme 2002

The Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”) was approved by members of theCompany at an Extraordinary General Meeting on 8 May 2002.

Under the Scheme 2002, share options to subscribe for the ordinary shares of the Company are granted todirectors, key management personnel and employees. The exercise price of the granted options is determinedat the average of the closing prices of the Company’s ordinary shares as quoted on the Singapore Exchange forthe five market days immediately preceding the date of the grant. The options may be exercised in full or in part

in respect of 1,000 shares or a multiple thereof, on the payment of the exercise price. The Group has no legal orconstructive obligation to repurchase or settle the options in cash.

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

company, or the holding company for at least one year on or prior to the date of the grant, may be exercised twelvemonths after the date of grant but before the end of one hundred and twenty months. For employees and directorswho are in the service of the associated company and non-executive directors, the options shall expire at the end of sixty months. Options issued at a discount to market price, may only be exercised two years after the date of thegrant.

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

company, or the holding company for at least six months but less than one year on or prior to the date of grant,may be exercised twenty-four months after the date of the grant but before the end of one hundred and twenty

months. For employees and directors who are in the service of the associated company and non-executivedirectors, the options shall expire at the end of sixty months. Options issued at a discount to market price, may onlybe exercised three years after the date of the grant.

Particulars of the options granted pursuant to the Scheme 2002 in 2006, 2007 and 2008 known as “2006 Options”,

“2007 Options” and “2008 Options” respectively were set out in the Directors’ Report for the financial years ended31 December 2006, 31 December 2007 and 31 December 2008 respectively.

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

Er Kwong Wah (Chairman)Wu Zi HengTom Yee Lat Shing

Wang Kai YuenAng Swee Tian

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Share options (continued)

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

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

Aggregate

granted since

commencement

of Scheme

2002 to

Aggregate

exercised since

commencement

of Scheme

2002 to

Aggregate

lapsed since

commencement

of Scheme

2002 to

Aggregate

outstanding

as at

Name of directors 31.12.2011 31.12.2011 31.12.2011 31.12.2011

Tom Yee Lat Shing 2,200,000 1,900,000 – 300,000Wang Kai Yuen 2,200,000 1,900,000 – 300,000

Er Kwong Wah 2,200,000 1,600,000 – 600,000

Li Jian Xiong 4,700,000 3,300,000 – 1,400,000

Lu Cheng Gang 2,100,000 – 700,000 1,400,000

Ye Bin Lin 4,700,000 3,300,000 – 1,400,000

Liu De Tian 4,400,000 3,000,000 – 1,400,000

22,500,000 15,000,000 700,000 6,800,000

No options have been granted to controlling shareholders of the Company or their associates (as defined in theListing Manual of the Singapore Exchange Securities Trading Limited).

No options have been granted during the financial year.

No participant under the Scheme 2002 has received 5% or more of the total number of shares under optionavailable under the Scheme 2002.

There were no shares of the Company allotted and issued by virtue of the exercise of options to take up unissuedshares of the Company during the financial year. There were no unissued shares of the subsidiaries under option atthe end of the financial year.

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(b) Share options outstanding

The number of unissued ordinary shares of the Company under option in relation to the Scheme 2002 outstanding

at the end of the financial year was as follows:

Options relating to

Scheme 2002

Number

of unissued

ordinary

shares at

1.1.2011

Number

lapsed

during the

financial

year

Number

of unissued

ordinary

shares at

31.12.2011

Exercise

price Exercise period

’000 ’000 ’000 $

2006 Options 2,780 (2,100) 680 1.23 21.2.2007 – 20.2.2016

2007 Options (i) 10,970 (420) 10,550 2.48 5.2.2008 – 4.2.2017

2008 Options (ii) 17,200 (120) 17,080 2.95 24.3.2009 – 23.3.2018

30,950 (2,640) 28,310

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

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

Independent auditor

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

On behalf of the directors

WU ZI HENG

Director

TOM YEE LAT SHING

Director

2 March 2012

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Statement by DirectorsFor The Financial Year Ended 31 December 2011

In the opinion of the directors,

(a) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 77to 150 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group asat 31 December 2011, and of the results of the business, changes in equity and cash flows of the Group for thefinancial year then ended; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts

as and when they fall due.

On behalf of the directors

WU ZI HENG

Director

TOM YEE LAT SHING

Director

2 March 2012

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Independent Auditor’s ReportTo The Members of Cosco Corporation (Singapore) Limited

For The Financial Year Ended 31 December 2011



Report on the Financial Statements

We have audited the accompanying financial statements of Cosco Corporation (Singapore) Limited (the “Company”) and itssubsidiaries (the “Group”) set out on pages 77 to 150, which comprise the consolidated balance sheet of the Group andbalance sheet of the Company as at 31 December 2011, the consolidated income statement, the consolidated statementof comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flowsof the Group for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance withthe provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devisingand maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are

safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that theyare recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and tomaintain accountability of assets.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit inaccordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements andplan and perform the audit to obtain reasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financialstatements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material

misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation of financial statements that give a true and fair view in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentationof the financial statements.

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

Opinion

In our opinion, the consolidated financial statements of the Group and the balance sheet of the Company are properlydrawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a trueand fair view of the state of affairs of the Group and of the Company as at 31 December 2011, and the results, changes inequity and cash flows of the Group for the financial year ended on that date.

Report on other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiariesincorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act.

PricewaterhouseCoopers LLPPublic Accountants and Certified Public Accountants

Singapore, 2 March 2012

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Consolidated Income StatementFor The Financial Year Ended 31 December 2011

Note 2011 2010$’000 $’000

Sales 4 4,162,921 3,861,445

Cost of sales (3,782,127) (3,385,358)

Gross profit 380,794 476,087

Other income (net) 7 218,626 178,253

Expenses

- Distribution (64,004) (50,172)

- Administrative (201,861) (160,164)

- Finance 8 (46,713) (42,131)

Share of profit/(loss) of associated companies 20 717 (27)

Profit before income tax 287,559 401,846

Income tax expense 9(a) (74,195) (43,240)

Net profit 213,364 358,606

Profit attributable to:

Equity holders of the Company 139,671 248,837

Non-controlling interests 73,693 109,769

213,364 358,606

Earnings per share for profit attributable to equity holders of

the Company

(expressed in cents per share) 10

- Basic 6.24 11.11

- Diluted 6.24 11.11

The accompanying notes form an integral part of these financial statements.

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Consolidated Statement of Comprehensive IncomeFor The Financial Year Ended 31 December 2011



Note 2011 2010$’000 $’000

Net profit 213,364 358,606

Other comprehensive income/(loss):

Available-for-sale financial assets

- Net fair value loss 32(b)(v) (52) (279)

Currency translation differences arising from consolidation 32(b)(iii) 92,314 (100,144)

Reclassification of currency translation reserves on disposal of subsidiaries 32(b)(iii) 233 –

Other comprehensive income/(loss), net of tax 92,495 (100,423)

Total comprehensive income for the year 305,859 258,183

Total comprehensive income attributable to:

Equity holders of the Company 192,186 181,752

Non-controlling interests 113,673 76,431

305,859 258,183


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Balance Sheets As at 31 December 2011

The Group The CompanyNote 2011

$’000

2010$’000

2011

$’000

2010$’000

ASSETS

Current assets

Cash and cash equivalents 11(a) 1,585,268 867,201 125,851 116,957

Forward currency contracts 12 4,728 – – –

Trade and other receivables 13 2,010,450 1,976,663 4,476 2,895

Inventories 14 491,484 518,035 – –

Construction contract work-in-progress 15 148,098 182,728 – –

Other current assets 16 6,935 4,155 192 205

4,246,963 3,548,782 130,519 120,057

Non-current assets

Trade and other receivables 17 63,867 49,089 – –

Available-for-sale financial assets 18 4,407 3,434 – –

Club memberships 19 390 557 172 172

Investments in associated companies 20 4,102 3,569 – –

Investments in subsidiaries 21 – – 369,666 374,037

Investment properties 22 14,405 14,619 – –

Property, plant and equipment 23 2,412,126 2,207,952 924 650

Intangible assets 24 9,526 9,468 – –

Deferred expenditure 25 3,211 3,169 – –

Deferred income tax assets 30 241,513 212,703 – –

2,753,547 2,504,560 370,762 374,859

Total assets 7,000,510 6,053,342 501,281 494,916

LIABILITIES

Current liabilities

Forward currency contracts 12 4,728 – – –

Trade and other payables 26 2,697,294 3,144,533 18,236 17,620

Current income tax liabilities 9(b) 66,460 72,766 372 245

Borrowings 27 1,668,322 555,148 – –

Provisions for other liabilities 29 59,430 45,049 – –

4,496,234 3,817,496 18,608 17,865

Non-current liabilities

Borrowings 27 498,090 437,065 – –

Deferred income tax liabilities 30 5,712 4,304 5,582 4,056

503,802 441,369 5,582 4,056

Total liabilities 5,000,036 4,258,865 24,190 21,921

NET ASSETS 2,000,474 1,794,477 477,091 472,995

EQUITY

Capital and reserves attributable to

equity holders of the Company

Share capital 31 270,608 270,608 270,608 270,608

Statutory and other reserves 32 181,320 103,950 45,105 45,105

Retained earnings 849,305 824,059 161,378 157,2821,301,233 1,198,617 477,091 472,995

Non-controlling interests 699,241 595,860 – –

Total equity 2,000,474 1,794,477 477,091 472,995


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Consolidated Statement of Changes In Equity For The Financial Year Ended 31 December 2011



Attributable to equityholders of the Company

NoteShare

capital

Statutory

and other

reserves

Retained

earnings Total

Non-

controlling

interests

Total

equity

$’000 $’000 $’000 $’000 $’000 $’000

2011

Beginning of financial year 270,608 103,950 824,059 1,198,617 595,860 1,794,477

Total comprehensive income for the year – 52,515 139,671 192,186 113,673 305,859

Disposal of subsidiaries 11(b)(i) – – – – (1,093) (1,093)

Dividend declared by subsidiaries to

non-controlling interests of subsidiaries – – – – (9,199) (9,199)Dividend for 2010 33 – – (89,570) (89,570) – (89,570)

Transfer from asset revaluation reserveto retained earnings 32(b)(iv) – (3,218) 3,218 – – –

Transfer from retained earnings tostatutory reserves 32(b)(ii) – 28,073 (28,073) – – –

End of financial year 270,608 181,320 849,305 1,301,233 699,241 2,000,474

2010

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

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

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

Dividend declared by subsidiaries tonon-controlling interests of subsidiaries – – – – (1,164) (1,164)

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

Transfer from asset revaluation reserveto retained earnings 32(b)(iv) – (3,218) 3,218 – – –

Transfer from retained earnings tostatutory reserves 32(b)(ii) – 223 (223) – – –

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


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Consolidated Statement of cash FlowsFor The Financial Year Ended 31 December 2011

Note 2011$’000

2010$’000

Cash flows from operating activities

Net profit 213,364 358,606

Adjustments for:

- Income tax expense 74,195 43,240

- Depreciation and amortisation 164,088 168,426

- Net reversal of impairment of trade and other receivables (1,140) (31,241)

- Allowance for inventory write-down 18,144 572

- Reversal of impairment in value of transferable club memberships – (16)

- Net gain on disposal of property, plant and equipment (105) (743)

- Expected losses recognised on construction contracts 150,377 64,822

- Write-off for property, plant and equipment 249 136

- Gain on disposal of subsidiaries (9,261) –

- Net fair value gain on forward currency contracts – (13,253)

- Share of (profit)/loss from associated companies (717) 27

- Dividend income (2) (20)

- Finance expenses 46,713 42,131

- Interest income (28,548) (13,882)

627,357 618,805

Changes in working capital:

- Inventories and construction contract work-in-progress 43,037 171,920

- Trade and other receivables (59,307) (552,397)

- Trade and other payables (572,730) (469,060)

- Other current assets (2,780) 2,418

- Deferred expenditure – (2,193)

- Provisions for other liabilities 14,381 8,613

- Exchange differences 2,361 66,029

Cash generated from/(used in) operations 52,319 (155,865)

Income tax paid (103,978) (109,234)

Net cash used in operating activities (51,659) (265,099)


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Consolidated Statement of cash FlowsFor The Financial Year Ended 31 December 2011



Note 2011$’000

2010$’000

Cash flows from investing activities

Purchase of property, plant and equipment (257,898) (176,105)

Proceeds from disposal of property, plant and equipment 1,638 11,200

Purchase of investment properties (3) (10)

Purchase of a transferable club membership – (61)

Purchase of available-for-sale financial assets (824) –

Net cash outflow on disposal of subsidiaries 11(b) (3,957) (3,950)

Dividends received 119 648

Interest received 25,831 20,022

Net cash used in investing activities (235,094) (148,256)

Cash flows from financing activities

Proceeds from borrowings 2,033,907 838,819

Repayments of borrowings (918,576) (899,945)

Repayments of finance lease liabilities (3) (17)

Decrease in bank deposits pledged 1,761 266

Interest paid (43,683) (41,750)

Dividends paid to equity holders of the Company (89,570) (67,177)

Dividends paid to non-controlling interests of subsidiaries (7,116) (2,499)

Net cash provided by/(used in) financing activities 976,720 (172,303)

Net increase/(decrease) in cash and cash equivalents 689,967 (585,658)

Cash and cash equivalents at beginning of financial year 863,913 1,545,621

Effects of currency translation on cash and cash equivalents 30,168 (96,050)

Cash and cash equivalents at end of financial year 11(a) 1,584,048 863,913


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Notes To The Financial StatementsFor The Financial Year Ended 31 December 2011

These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

1. General information

Cosco Corporation (Singapore) Limited (the “Company”) is incorporated and domiciled in Singapore. The address of its registered office is 9 Temasek Boulevard, #07-00 Suntec Tower Two, Singapore 038989.

The Company is listed on the Singapore Exchange.

The principal activities of the Company are those of investment holding and provision of management services to thesubsidiaries. The principal activities of its subsidiaries are set out in Note 21 to the financial statements.

2. Significant accounting policies

2.1 Basis of preparation

These financial statements have been prepared in accordance with Singapore Financial Reporting Standards(“FRS”). The financial statements have been prepared under the historical cost convention, except as disclosed inthe accounting policies below.

The preparation of financial statements in conformity with FRS requires management to exercise its judgement in theprocess of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimatesand assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and

estimates are significant to the financial statements, are disclosed in Note 3.

As at 31 December 2011, the Group’s current liabilities exceed its current assets by $249,271,000 (2010:$268,714,000). The directors expect that the Group will be able to meet its liabilities as and when they fall due onthe basis of the undrawn committed credit facilities.

Interpretations and amendments to published standards effective in 2011

On 1 January 2011, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that aremandatory for application from that date. Changes to the Group’s accounting policies have been made as required,in accordance with the transitional provisions in the respective FRS and INT FRS.

The adoption of these new or amended FRS and INT FRS did not result in substantial changes to the Group’s andCompany’s accounting policies and had no material effect on the amounts reported for the current or prior financial

years.

2.2 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the ship repair, ship buildingand marine engineering income, rental income, time charter revenue, shipping agency income and sale of scrapmaterials in the ordinary course of the Group’s activities. Revenue is presented net of value-added tax, rebates anddiscounts, and after eliminating revenue within the Group.

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2. Significant accounting policies (continued)

2.2 Revenue recognition (continued)

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

probable that the collectibility of the related receivables is reasonably assured and when the specific criteria for eachof the Group’s activities are met as follows:

(a) Rendering of services

(i) Ship repair, ship building and marine related activities

Revenue from ship repair, ship building, marine engineering, container repairs and services, fabrication

work services and production of marine outfitting components is recognised on the percentage-of-completion method based on progress of the contract work, where the outcome of the contractcan be estimated reliably. If the contract covers a number of projects and the cost and revenue of such individual projects can be identified within the terms of the overall contract, each such projectis treated as a separate contract. Provision is made in full where applicable for expected losses oncontracts in progress. Please refer to the paragraph “Construction contracts” for the accounting

policy on revenue from construction contracts for ship building and marine related activities.

(ii) Shipping

Revenue from time charter is recognised on the straight-line basis over the period of the time charteragreement. Any losses arising from time charters are provided for in full as soon as they are expected.

Booking commissions, agency and transhipment fees are recognised upon the rendering of servicesto customers.

Revenue from freight forwarding, transport agency and feeder services are recognised when theservice is rendered.

(b) Rental income

Rental income from operating leases on investment properties and property, plant and equipment isrecognised on the straight-line basis over the lease term.

(c) Sale of scrap materials

Revenue from sale of scrap materials is recognised when the products have been delivered to the customer,the customer has accepted the products and collectibility of the related receivables is reasonably assured.

(d) Interest income

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

(e) Dividend income

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

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2.3 Group accounting

(a) Subsidiaries

(i) Consolidation

Subsidiaries are entities (including special purpose entities) over which the Group has powerto govern the financial and operating policies so as to obtain benefits from its activities, generallyaccompanied by a shareholding giving rise to a majority of the voting rights. The existence and effectof potential voting rights that are currently exercisable or convertible are considered when assessing

whether the Group controls another entity. Subsidiaries are consolidated from the date on which

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

In preparing the consolidated financial statements, transactions, balances and unrealised gains ontransactions between group entities are eliminated. Unrealised losses are also eliminated but areconsidered an impairment indicator of the asset transferred. Accounting policies of subsidiaries havebeen changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests are that part of the net results of operations and of net assets of a subsidiaryattributable to the interests which are not owned directly or indirectly by the equity holders of theCompany. They are shown separately in the consolidated income statement, the consolidatedstatement of comprehensive income, statement of changes in equity and balance sheet. Totalcomprehensive income is attributed to the non-controlling interests based on their respective interestsin a subsidiary, even if this results in the non-controlling interests having a deficit balance.

(ii) Acquisitions

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

The consideration transferred for the acquisition of a subsidiary or business comprises the fair valueof the assets transferred, the liabilities incurred and the equity interests issued by the Group. Theconsideration transferred also includes the fair value of any contingent consideration arrangement and

the fair value of any pre-existing equity interest in the subsidiary.

Acquisition-related costs are expensed as incurred.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination

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

On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in theacquiree at the date of acquisition either at fair value or at the non-controlling interest’s proportionateshare of the acquiree’s net identifiable assets.

The excess of (i) the consideration transferred, the amount of any non-controll ing interest in theacquiree and the acquisition-date fair value of any previous equity interest in the acquiree over (ii) thefair value of the net identifiable assets acquired is recorded as goodwill. Please refer to the paragraph“Intangible assets - Goodwill on acquisitions” for the subsequent accounting policy on goodwill.

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2.3 Group accounting (continued)

(a) Subsidiaries (continued)

(iii) Disposals

When a change in the Group ownership interest in a subsidiary results in a loss of control overthe subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts previously recognised in other comprehensive income in respect of that entity are alsoreclassified to the income statement or transferred directly to retained earnings if required by a

specific Standard.

Any retained equity interest in the entity is remeasured at fair value. The difference between thecarrying amount of the retained interest at the date when control is lost and its fair value is recognisedin the income statement.

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

accounting policy on investments in subsidiaries in the separate financial statements of the Company.

(b) Transactions with non-controlling interests

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control over thesubsidiary are accounted for as transactions with equity owners of the Company. Any difference between thechange in the carrying amounts of the non-controlling interest and the fair value of the consideration paid or

received is recognised within equity attributable to the equity holders of the Company.

(c) Associated companies

Associated companies are entities over which the Group has significant influence, but not control, generallyaccompanied by a shareholding giving rise to voting rights of 20% and above but not exceeding 50%.Investments in associated companies are accounted for in the consolidated financial statements using theequity method of accounting less impairment losses, if any.

(i) Acquisitions

Investments in associated companies are initially recognised at cost. The cost of an acquisitionis measured at the fair value of the assets given, equity instruments issued or liabilities incurred or

assumed at the date of exchange, plus costs directly attributable to the acquisition. Goodwill onassociated companies represents the excess of the cost of acquisition of the associate over the

Group’s share of the fair value of the identifiable net assets of the associate and is included in thecarrying amount of the investments.

(ii) Equity method of accounting

In applying the equity method of accounting, the Group’s share of its associated companies’ post-acquisition profits or losses are recognised in the income statement and its share of post-acquisition

other comprehensive income is recognised in other comprehensive income. These post-acquisitionmovements and distributions received from the associated companies are adjusted against thecarrying amount of the investments. When the Group’s share of losses in an associated companyequals or exceeds its interest in the associated company, including any other unsecured non-current

receivables, the Group does not recognise further losses, unless it has obligations or has madepayments on behalf of the associated company.

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2.3 Group accounting (continued)

(c) Associated companies (continued)

(ii) Equity method of accounting (continued)

Unrealised gains on transactions between the Group and its associated companies are eliminated tothe extent of the Group’s interest in the associated companies. Unrealised losses are also eliminatedunless the transaction provides evidence of an impairment of the asset transferred. The accountingpolicies of associated companies have been changed where necessary to ensure consistency with

the accounting policies adopted by the Group.

(iii) Disposals

Investments in associated companies are derecognised when the Group loses significant influence. Any retained interest in the entity is remeasured at its fair value. The difference between the carryingamount of the retained interest at the date when significant influence is lost and its fair value is

recognised in the income statement.

Gains and losses arising from partial disposals or dilutions in investments in associated companies inwhich significant influence is retained are recognised in the income statement.

Please refer to the paragraph “Investments in subsidiaries and associated companies” for theaccounting policy on investments in associated companies in the separate financial statements of the

Company.

2.4 Property, plant and equipment

(a) Measurement

(i) Land and buildings

Land and buildings are initially recognised at cost. Freehold land is subsequently carried at cost lessaccumulated impairment losses. Buildings and leasehold land are subsequently carried at cost lessaccumulated depreciation and accumulated impairment losses.

(ii) Motor vessels

Motor vessels are initially recognised at cost and subsequently carried at cost less accumulated

depreciation and accumulated impairment losses.

The cost of motor vessels includes actual interest incurred on borrowings used to finance the motorvessels while under construction and other direct relevant expenditure incurred in bringing the vesselsinto operation. For this purpose, the interest rate applied to funds provided for constructing the motorvessels is arrived at by reference to the actual rate payable on borrowings for construction purposes. The capitalisation of interest charges will cease upon the completion and delivery of the motorvessels.

(iii) Other property, plant and equipment

All other items of property, plant and equipment are initially recognised at cost and subsequentlycarried at cost less accumulated depreciation and accumulated impairment losses.

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2.4 Property, plant and equipment (continued)

(a) Measurement (continued)

(iv) Components of costs

The cost of an item of property, plant and equipment initially recognised includes its purchaseprice and any cost that is directly attributable to bringing the asset to the location and conditionnecessary for it to be capable of operating in the manner intended by management. Cost alsoincludes borrowing costs that are directly attributable to the acquisition, construction or production

of a qualifying asset (Note 2.6). The projected cost of dismantlement, removal or restoration

is also recognised as part of the cost of property, plant and equipment if the obligation for thedismantlement, removal or restoration is incurred as a consequence of either acquiring the asset orusing the asset for purpose other than to produce inventories.

(b) Depreciation

Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculatedusing the straight-line method to allocate their depreciable amounts over their estimated useful lives asfollows:

Useful lives

Buildings on freehold land 50 years

Leasehold land and buildings 10 - 50 yearsOffice renovations, furniture, fixtures and equipment 3 - 5 years

Plant, machinery and equipment 3 - 10 years

Motor vehicles 5 - 10 years

Motor vessels 20 years

Docks and quays 30 years

No depreciation is provided for construction-in-progress.

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

are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision arerecognised in the income statement when the changes arise.

(c) Subsequent expenditure

Subsequent expenditure relating to property, plant and equipment that has already been recognised isadded to the carrying amount of the asset only when it is probable that future economic benefits associated

with the item will flow to the Group and the cost of the item can be measured reliably. All other repair andmaintenance expenses are recognised in the income statement when incurred.

The motor vessels are subject to overhauls at regular intervals. The inherent components of the initialoverhaul are determined based on the estimated costs of the next overhaul and are separately depreciatedover a period of 2½ years in order to reflect the estimated intervals between two overhauls. The costs of the overhauls subsequently incurred are capitalised as additions and the carrying amounts of the replaced

components are written off to the income statement.

(d) Disposal

On disposal of an item of property, plant and equipment, the difference between the disposal proceeds andits carrying amount is recognised in the income statement.

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2.5 Intangible assets

Goodwill on acquisitions

Goodwill on acquisitions of subsidiaries and businesses on or after 1 January 2010 represents the excess of (i) theconsideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fairvalue of any previous equity interest in the acquiree over (ii) the fair value of the net identifiable assets acquired.

Goodwill on acquisition of subsidiaries and businesses prior to 1 January 2010 and on acquisition of joint venturesand associated companies represents the excess of the cost of the acquisition over the fair value of the Group’s

share of the net identifiable assets acquired.

Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulatedimpairment losses.

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

Gains and losses on the disposal of subsidiaries and associated companies include the carrying amount of goodwillrelating to the entity sold, except for goodwill arising from acquisitions prior to 1 January 2001. Such goodwillwas adjusted against retained profits in the year of acquisition and is not recognised in the income statement ondisposal.

2.6 Borrowing costs

Borrowing costs are recognised in the income statement using the effective interest method except for those coststhat are directly attributable to borrowings acquired specifically for the construction of motor vessels, docks andquays. The actual borrowing costs incurred during the construction period less any investment income on temporaryinvestments of these borrowings, are capitalised in the cost of the docks and quays.

2.7 Construction contracts

A construction contract is a contract specifically negotiated for the construction of an asset or a combination of

assets that are closely interrelated or interdependent in terms of their design, technology and functions or theirultimate purpose or use.

Contract costs are recognised when incurred.

When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs arerecognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at

the balance sheet date (“percentage-of-completion method”). When the outcome of a construction contract cannotbe estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to berecoverable. When it is probable that total contract costs will exceed total contract revenue, the expected loss isrecognised as an expense immediately.

Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contractwork and claims that can be measured reliably. A variation or a claim is recognised as contract revenue when it is

probable that the customer will approve the variation or negotiations have reached an advanced stage such that it isprobable that the customer will accept the claim.

The stage of completion is measured by reference to the completion of a physical proportion of the contract work.

Costs incurred during the financial year in connection with future activity on a contract are excluded from costsincurred to date when determining the stage of completion of a contract. Such costs are shown as “constructioncontract work-in-progress” on the balance sheet unless it is not probable that such contract costs are recoverablefrom the customers, in which case, such costs are recognised as an expense immediately.

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2.7 Construction contracts (continued)

At the balance sheet date, the cumulative costs incurred plus recognised profits (less recognised losses) on eachcontract is compared against the progress billings. Where cumulative costs incurred plus the recognised profits(less recognised losses) exceed progress billings, the balance is presented as due from customers on constructioncontracts within “trade and other receivables”. Where progress billings exceed cumulative costs incurred plusrecognised profits (less recognised losses), the balance is presented as due to customers on construction contractswithin “trade and other payables”.

Progress billings not yet paid by customers and retentions by customers are included within “trade and otherreceivables”. Advances received are included within “trade and other payables”.

2.8 Investment properties

Investment properties include those portions of office buildings that are held for long-term rental yields and/or forcapital appreciation.

Investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciationand accumulated impairment losses. Depreciation is calculated using the straight-line method to allocatethe depreciable amounts over the estimated useful lives of 10 to 50 years. The residual values, useful lives anddepreciation method of investment properties are reviewed, and adjusted as appropriate, at each balance sheetdate. The effects of any revision are included in the income statement when the changes arise.

Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovationsand improvements is capitalised and the carrying amounts of the replaced components are recognised in theincome statement. The cost of maintenance, repairs and minor improvements is recognised in the income statementwhen incurred.

On disposal of an investment property, the difference between the disposal proceeds and the carrying amount isrecognised in the income statement.

2.9 Investments in subsidiaries and associated companies

Investments in subsidiaries and associated companies are carried at cost less accumulated impairment losses inthe Company’s balance sheet. On disposal of investments in subsidiaries and associated companies, the differencebetween disposal proceeds and the carrying amounts of the investments are recognised in the income statement.

2.10 Impairment of non-financial assets

(a) Goodwill

Goodwill recognised separately as an intangible asset is tested for impairment annually, and whenever thereis indication that the goodwill may be impaired. Goodwill included in the carrying amount of an investment inassociated company is tested for impairment as part of the investment, rather than separately.

For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating unit (“CGU”) expected to benefit from synergies arising from the business combination.

An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds therecoverable amount of the CGU. The recoverable amount of a CGU is the higher of a CGU’s fair value lesscost to sell and value-in-use.

The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated tothe CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each assetin the CGU.

An impairment loss on goodwill is recognised as an expense and is not reversed in a subsequent period.

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2.10 Impairment of non-financial assets (continued)

(b) Property, plant and equipment

Investment properties

Investments in subsidiaries and associated companies

Property, plant and equipment, investment properties and investments in subsidiaries and associatedcompanies are tested for impairment whenever there is any objective evidence or indication that these assetsmay be impaired.

For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to

sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cashinflows that are largely independent of those from other assets. If this is the case, the recoverable amount isdetermined for the CGU to which the asset belongs.

If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carryingamount of the asset (or CGU) is reduced to its recoverable amount.

The difference between the carrying amount and recoverable amount is recognised as an impairment loss inthe income statement unless the asset is carried at revalued amount, in which case, such impairment loss istreated as a revaluation decrease.

An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a changein the estimates used to determine the asset’s recoverable amount since the last impairment loss was

recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided thatthis amount does not exceed the carrying amount that would have been determined (net of any accumulatedamortisation or depreciation) had no impairment loss been recognised for the asset in prior years.

A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unlessthe asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.However, to the extent that an impairment loss on the same revalued asset was previously recognised as anexpense, a reversal of that impairment is also credited to the income statement.

2.11 Financial assets

(a) Classification

The Group classifies its financial assets in the following categories: at fair value through profit or loss, loansand receivables, held-to-maturity, and available-for-sale. The classification depends on the nature of the

asset and the purpose for which the assets were acquired. Management determines the classification of itsfinancial assets at initial recognition and in the case of assets classified as held-to-maturity, re-evaluates thisdesignation at each balance sheet date.

(i) Financial assets at fair value through profit or loss

This category has two sub-categories: fi nancial assets held for trading, and those designatedat fair value through profit or loss at inception. A financial asset is classified as held for trading if it

is acquired principally for the purpose of selling in the short term. Financial assets designated asat fair value through profit or loss at inception are those that are managed and their performancesare evaluated on a fair value basis, in accordance with a documented Group investment strategy.

Derivatives are also categorised as held for trading unless they are designated as hedges. Assets inthis category are presented as current assets if they are either held for trading or are expected to berealised within 12 months after the balance sheet date.

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2.11 Financial assets (continued)

(a) Classification (continued)

(ii) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments thatare not quoted in an active market. They are presented as current assets, except for those expectedto be realised later than 12 months after the balance sheet date which are presented as non-currentassets. Loans and receivables are presented as “trade and other receivables” and “cash and cash

equivalents”.

(iii) Held-to-maturity financial assets

Held-to-maturi ty fi nancial assets are non-derivative fi nancial assets with fi xed or determinablepayments and fixed maturities that the Group’s management has the positive intention and abilityto hold to maturity. If the Group were to sell other than an insignificant amount of held-to-maturity

financial assets, the whole category would be tainted and reclassified as available-for-sale. They arepresented as non-current assets, except for those maturing within 12 months after the balance sheetdate which are presented as current assets. The Group currently does not have any held-to-maturityfinancial assets.

(iv) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category ornot classified in any of the other categories. They are presented as non-current assets unless theinvestment matures or management intends to dispose of the assets within 12 months after thebalance sheet date.

(b) Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade date - the date on which the

Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash flows from the financial assets haveexpired or have been transferred and the Group has transferred substantially all risks and rewardsof ownership. On disposal of a financial asset, the difference between the carrying amount and the sale

proceeds is recognised in the income statement. Any amount in other comprehensive income relating to thatasset is reclassified to the income statement.

Trade receivables that are factored out to banks and other financial institutions with recourse to the Groupare not derecognised until the recourse period has expired and the risks and rewards of the receivableshave been fully transferred. The corresponding cash received from the financial institutions is recorded asborrowings.

(c) Initial measurement

Financial assets are initially recognised at fair value plus transaction costs except for financial assets at fairvalue through profit or loss, which are recognised at fair value. Transaction costs for financial assets at fairvalue through profit or loss are recognised immediately as expenses.

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(d) Subsequent measurement

Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequentlycarried at fair value. Loans and receivables and held-to-maturity financial assets are subsequently carried atamortised cost using the effective interest method.

Changes in the fair value of financial assets at fair value through profit or loss including the effects of currencytranslation, interest and dividends, are recognised in the income statement when the changes arise.

Interest and dividend income on available-for-sale financial assets are recognised separately in the incomestatement. Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominatedin foreign currencies are analysed into currency translation differences on the amortised cost of the securitiesand other changes; the currency translation differences are recognised in the income statement and theother changes are recognised in other comprehensive income and accumulated in the fair value reserve.Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in

other comprehensive income and accumulated in the fair value reserve, together with the related currencytranslation differences.

(e) Impairment

The Group assesses at each balance sheet date whether there is objective evidence that a financial assetor a group of financial assets is impaired and recognises an allowance for impairment when such evidence

exists.

(i) Loans and receivables/Held-to-maturity financial assets

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, anddefault or significant delay in payments are objective evidence that these financial assets are impaired.

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

which is calculated as the difference between the carrying amount and the present value of estimatedfuture cash fl ows, discounted at the original effective interest rate. When the asset becomesuncollectible, it is written off against the allowance account. Subsequent recoveries of amountspreviously written off are recognised against the same line item in the income statement.

The impairment allowance is reduced through the income statement in a subsequent period whenthe amount of impairment loss decreases and the related decrease can be objectively measured.

The carrying amount of the asset previously impaired is increased to the extent that the new carryingamount does not exceed the amortised cost had no impairment been recognised in prior periods.

(ii) Available-for-sale financial assets

In addition to the objective evidence of impairment described in Note 2.11(e)(i), a significant orprolonged decline in the fair value of an equity security below its cost is considered as an indicator

that the available-for-sale financial asset is impaired.

If any evidence of impairment exists, the cumulative loss that was recognised in other comprehensiveincome is reclassified to the income statement. The cumulative loss is measured as the difference

between the acquisition cost (net of any principal repayments and amortisation) and the currentfair value, less any impairment loss previously recognised as an expense. The impairment lossesrecognised as an expense on equity securities are not reversed through the income statement.

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(f) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is alegally enforceable right to offset and there is an intention to settle on a net basis or realise the asset andsettle the liability simultaneously.

2.12 Financial guarantees

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

for services provided to a subsidiary. These guarantees are financial guarantees as they require the Company toreimburse the banks and third parties if the subsidiaries fail to make principal or interest payments when due inaccordance with the terms of their borrowings or payment for services when due, respectively.

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

Financial guarantees are subsequently amortised to the income statement over the period of the subsidiaries’borrowings, unless it is probable that the Company will reimburse the bank for an amount higher than theunamortised amount. In this case, the financial guarantees shall be carried at the expected amount payable to thebank in the Company’s balance sheet.

Intra-group transactions are eliminated on consolidation.

2.13 Borrowings

Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for atleast 12 months after the balance sheet date, in which case they are presented as non-current liabilities.

Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortisedcost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the

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

2.14 Trade and other payables

Trade and other payables represent liabilities for goods and services provided to the Group prior to the end of

financial year which are unpaid. They are classified as current liabilities if payment is due within one year or less (or inthe normal operating cycle of the business if longer). If not, they are presented as non-current liabilities.

Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using theeffective interest method.

2.15 Derivative financial instruments and hedging activities

A derivative financial instrument is initially recognised at its fair value on the date the contract is entered into andis subsequently carried at its fair value. The method of recognising the resulting gain or loss depends on whether

the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Groupdesignates each hedge as fair value hedge.

Fair value changes on derivatives that are not designated or do not qualify for hedge accounting are recognised inthe income statement when the changes arise.

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2.15 Derivative financial instruments and hedging activities (continued)

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

hedged items, as well as its risk management objective and strategies for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, on whether thederivatives designated as hedging instruments are highly effective in offsetting changes in fair values or cash flows of the hedged items.

The carrying amount of a derivative designated as a hedge is presented as a non-current asset or liability if the remaining expected life of the hedged item is more than 12 months, and as a current asset or liability if the

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

as a current asset or liability.

Fair value hedge

The Group has entered into currency forwards that are fair value hedges for currency risk arising from its firmcommitments for sales denominated in foreign currencies (“hedged item”). The fair value changes on the hedged

item resulting from currency risk are recognised in income statement. The fair value changes on the effective portionof currency forwards designated as fair value hedges are recognised in income statement within the same lineitem as the fair value changes from the hedged item. The fair value changes on the ineffective portion of currencyforwards are recognised separately in income statement.

2.16 Fair value estimation of financial assets and liabilities

The fair values of financial instruments traded in active markets (such as exchange-traded and over-the-countersecurities and derivatives) are based on quoted market prices at the balance sheet date. The quoted market pricesused for financial assets are the current bid prices; the appropriate quoted market prices for financial liabilities arethe current asking prices.

The fair values of financial instruments that are not traded in an active market are determined by using valuationtechniques. The Group uses a variety of methods and makes assumptions that are based on market conditionsexisting at each balance sheet date. Where appropriate, quoted market prices or dealer quotes for similar

instruments are used. Valuation techniques, such as discounted cash flow analyses, are also used to determine thefair values of the financial instruments.

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

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

2.17 Leases

(a) When the Group is the lessee:

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

(i) Lessee - Finance leases

Leases of property, plant and equipment where the Group assumes substantially all risks and rewardsincidental to ownership of the leased assets are classified as finance leases.

The leased assets and the corresponding lease liabilities (net of finance charges) under finance leasesare recognised on the balance sheet as property, plant and equipment and borrowings respectively, atthe inception of the leases based on the lower of the fair value of the leased assets and the presentvalue of the minimum lease payments.

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2.17 Leases (continued)

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

(i) Lessee - Finance leases (continued)

Each lease payment is apportioned between the finance expense and the reduction of theoutstanding lease liability. The finance expense is recognised in the income statement on a basis thatreflects a constant periodic rate of interest on the finance lease liability.

(ii) Lessee - Operating leases

Leases of property, plant and equipment where substantially all risks and rewards incidental toownership are retained by the lessors are classified as operating leases. Payments made underoperating leases (net of any incentives received from the lessors) are recognised in the incomestatement on the straight-line basis over the lease term.

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

(b) When the Group is the lessor:

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

(i) Lessor - Operating leases

Leases of property, plant and equipment and investment properties where the Group retainssubstantially all risks and rewards incidental to ownership are classified as operating leases. Rentalincome from operating leases (net of any incentives given to lessees) is recognised in the incomestatement on the straight-line basis over the lease term.

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

the carrying amount of the leased asset and recognised as an expense in the income statement overthe lease term on the same basis as the lease income.

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

2.18 Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted averagemethod. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other directcosts and related production overheads (based on normal operating capacity) but excludes borrowing costs.Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and applicable variable selling expenses.

2.19 Income taxes

Current income tax for current and prior periods is recognised at the amount expected to be paid to or recoveredfrom the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by thebalance sheet date.

Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilitiesand their carrying amounts in the financial statements except when the deferred income tax arises from the initialrecognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither

accounting nor taxable profit or loss at the time of the transaction.

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2.19 Income taxes (continued)

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

associated companies, except where the Group is able to control the timing of the reversal of the temporarydifference and it is probable that the temporary difference will not reverse in the foreseeable future.

A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be availableagainst which the deductible temporary differences and tax losses can be utilised.

Deferred income tax is measured:

(i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or thedeferred income tax liability is settled, based on tax rates and tax laws that have been enacted orsubstantively enacted by the balance sheet date; and

(ii) based on the tax consequence that will follow from the manner in which the Group expects, at the balancesheet date, to recover or settle the carrying amounts of its assets and liabilities, except for investment

properties. Investment property measured at fair value is presumed to be recovered entirely through sale.

Current and deferred income tax are recognised as income or expense in the income statement, except to theextent that the tax arises from a business combination or a transaction which is recognised directly in equity.Deferred tax arising from a business combination is adjusted against goodwill on acquisition.

2.20 Provisions

Provisions for warranty and other liabilities are recognised when the Group has a present legal or constructiveobligation as a result of past events; it is more likely than not that an outflow of resources will be required to settlethe obligation; and the amount has been reliably estimated. Provisions are not recognised for future operatinglosses.

The Group recognises the estimated liability to repair or replace products still under warranty at the balance sheetdate. This provision is calculated based on estimates by technical engineers and historical experience of the level of

repairs and replacements.

Other provisions are measured at the present value of the expenditure expected to be required to settle theobligation using a pre-tax discount rate that reflects the current market assessment of the time value of money andthe risks specific to the obligation. The increase in the provision due to the passage of time is recognised in the

income statement as finance expense.

Changes in the estimated timing or amount of the expenditure or discount rate are recognised in the incomestatement when the changes arise.

2.21 Employee compensation

Employee benefits are recognised as an expense, unless the cost qualifies to be capitalised as an asset.

(a) Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixedcontributions into separate entities such as the Central Provident Fund and social security plans in the

People’s Republic of China (“PRC”) on a mandatory, contractual or voluntary basis. The Group has no furtherpayment obligations once the contributions have been paid.

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2.21 Employee compensation (continued)

(b) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is madefor the estimated liability for annual leave as a result of services rendered by employees up to the balancesheet date.

(c) Share-based compensation

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

services received in exchange for the grant of the options is recognised as an expense in the incomestatement with a corresponding increase in the share option reserve over the vesting period. The totalamount to be recognised over the vesting period is determined by reference to the fair value of theoptions granted on the date of the grant. Non-market vesting conditions are included in the estimation of the number of shares under option that are expected to become exercisable on the vesting date. At eachbalance sheet date, the Group revises its estimates of the number of shares under options that are expected

to become exercisable on the vesting date and recognises the impact of the revision of the estimates in theincome statement, with a corresponding adjustment to the share option reserve over the remaining vestingperiod.

When the options are exercised, the proceeds received (net of transaction costs) are credited to share capitalaccount when new ordinary shares are issued.

2.22 Currency translation

(a) Functional and presentation currency

Items included in the financial statements of each entity in the Group are measured using the currency of theprimary economic environment in which the entity operates (“functional currency”). The financial statementsare presented in Singapore Dollars, which is the functional currency of the Company.

(b) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated intothe functional currency using the exchange rates at the dates of the transactions. Currency translationdifferences resulting from the settlement of such transactions and from the translation of monetary assets

and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognisedin the income statement. However, in the consolidated financial statements, currency translation differences

arising from borrowings in foreign currencies and other currency instruments designated and qualifying as netinvestment hedges and net investment in foreign operations, are recognised in other comprehensive incomeand accumulated in the currency translation reserve.

When a foreign operation is disposed of or any borrowings forming part of the net investment of the foreignoperation are repaid, a proportionate share of the accumulated translation differences is reclassified to profitor loss, as part of the gain or loss on disposal.

All foreign exchange gains and losses impacting profit or loss are presented in the income statement within“other income (net)”.

Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates atthe date when the fair values are determined.

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2.22 Currency translation (continued)

(c) Translation of Group entities’ financial statements

The results and financial position of all the Group entities (none of which has the currency of ahyperinflationary economy) that have a functional currency different from the presentation currency aretranslated into the presentation currency as follows:

(i) Assets and liabilities are translated at the closing exchange rates at the reporting date;

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

reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates,in which case, income and expenses are translated using the exchange rates at the dates of thetransactions); and

(iii) All resulting currency translation differences are recognised in other comprehensive income andaccumulated in the currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets andliabilities of the foreign operations and translated at the closing rates at the reporting date.

2.23 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the key

management whose members are responsible for allocating resources and assessing performance of the operatingsegments.

2.24 Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents includecash on hand, deposits with financial institutions which are subject to an insignificant risk of change in value andbank overdrafts and exclude pledged deposits with financial institutions. Bank overdrafts are presented as current

borrowings on the balance sheet.

2.25 Share capital

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

shares are deducted against the share capital account.

2.26 Dividends to Company’s shareholders

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

2.27 Government grants

Grants from the government are recognised as a receivable at their fair value when there is reasonable assurancethat the grant will be received and the Group will comply with all the attached conditions.

Government grants receivable are recognised as income over the periods necessary to match them with the relatedcosts which they are intended to compensate, on a systematic basis. Government grants relating to expenses are

shown separately as other income.

Government grants relating to assets are deducted against the carrying amount of the assets.

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3. Critical accounting estimates, assumptions and judgements

Estimates, assumptions and judgements are continually evaluated and are based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Uncertain tax positions

The Group is subject to income taxes in numerous jurisdictions. In determining the tax liabilities, managementapplies the statutory tax rate of the tax jurisdictions in which the subsidiaries operate in and is required toestimate the amount of capital allowances and the deductibility of certain expenses (“uncertain tax positions”)at each tax jurisdiction. There are many transactions and calculations for which the ultimate tax determinationis uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit

issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these

matters is different from the amount that were initially recorded, such differences will impact the income taxand deferred income tax provisions in the period in which such determination is made.

As management believes that the tax positions are sustainable, the Group has not recognised any additionaltax liability on these uncertain tax positions. The maximum exposure of these uncertain tax positions, notrecognised in these financial statements is $6,832,000.

(b) Construction contracts

The Group uses the percentage-of-completion method to account for its contract revenue. The stage of completion is measured by reference to the completion of a physical proportion of the contract work.

Significant judgement is required in determining the stage of completion, the estimated total contract costs,

the estimated completion dates, as well as the recoverability of the contracts.

If the stage of completion increases/decreases by 10% from management’s estimates, the Group’srevenue will increase/decrease by $625,794,000 and the Group’s cost of sales will increase/decrease by$588,061,000.

If the total contract costs to be incurred increase/decrease by 10% from management’s estimates, theGroup’s cost of sales will increase/decrease by $313,339,000.

(c) Useful life of property, plant and equipment

The management of the Group determines the estimated useful lives and related depreciation expense forthe property, plant and equipment. The management of the Group estimates useful lives of the property,

plant and equipment by reference to expected usage of the property, plant and equipment, expected repairand maintenance, and technical or commercial obsolescence arising from changes or improvements in

the market. The useful lives and related depreciation expense could change significantly as a result of thechanges in these factors.

(d) Impairment of receivables

Management reviews its receivables for objective evidence of impairment regularly. Significant financialdifficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significantdelay in payments are considered objective evidence that a receivable is impaired. In determining this,

management makes judgement as to whether there is observable data indicating that there has been asignificant change in the payment ability of the debtor, or whether there have been significant changes withadverse effect in the technological, market, economic or legal environment in which the debtor operates.

Where there is objective evidence of impairment, management makes judgements as to whether animpairment loss should be recorded in the income statement. In determining this, management usesestimates based on historical loss experience for assets with similar credit risk characteristics. The

methodology and assumptions used for estimating both the amount and timing of future cash flows arereviewed regularly to reduce any differences between the estimated loss and actual loss experience.

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

(d) Impairment of receivables (continued)

Any changes in the net present values of estimated cash flows from management’s estimates for all past duereceivables, will not result in any significant impact to the Group’s allowance for impairment.

(e) Warranty claims

The provision for warranty is based on estimates from known and expected warranty work and contractualobligation for further work to be performed after completion. The warranty provision could differ from futureclaims. Movements in provision for warranty are detailed in Note 29(b).

4. Revenue

The Group

2011 2010

$’000 $’000

Construction revenue

- Ship building and marine engineering 3,372,402 2,832,915

Rendering of services

- Ship repair and marine engineering income 723,716 886,568

- Time charter revenue 65,995 128,605

- Shipping agency income – 12,615

Others 808 742

Total revenue 4,162,921 3,861,445

5. Expenses by nature

The Group

2011 2010

$’000 $’000

Raw materials, finished goods, consumables and other overheads 2,309,492 2,036,572

Changes in inventories and construction contract work-in-progress 134,461 131,824

Net reversal of impairment of trade and other receivables (1,140) (31,241)

Expected losses recognised on construction contracts 150,377 64,822

Depreciation and amortisation 164,088 168,426

Director and employee compensation (Note 6) 338,033 317,330

Sub-contractor expenses 626,108 616,942

Allowance for inventory write-down 18,144 572

Write-off for property, plant and equipment 249 136

Rental expense on operating leases 58,016 69,886

Repairs and maintenance 35,533 22,489

Non-audit service fees paid/payable to auditor of the Company 300 77

Commission 49,194 39,917Crew overheads 10,324 13,682

Vessel overheads 6,379 8,421

Other expenses 148,434 135,839

Total cost of sales, distribution and administrative expenses 4,047,992 3,595,694

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6. Director and employee compensation

The Group

2011 2010

$’000 $’000

Wages, salaries and staff benefits 304,032 287,577

Employer’s contribution to defined contribution plans including CentralProvident Fund 33,696 29,468

Directors’ fees of the Company 305 285

338,033 317,330

7. Other income (net)

The Group

2011 2010

$’000 $’000

Rental income 3,095 2,564

Dividend income 2 20

Currency exchange gain - net 50,606 25,655

Interest income 28,548 13,882

Reversal of impairment in value of transferable club memberships – 16

Net fair value gain on forward currency contracts – 13,253

Net gain on disposal of property, plant and equipment 105 743

Gain on disposal of subsidiaries (Note 11(b)(i)) 9,261 –

Compensation received from customers 15,981 15,055

Government grants 5,574 4,038

Sundry income 10,256 12,743

Sale of scrap materials 95,198 90,284

218,626 178,253

8. Finance expenses

The Group

2011

$’000

2010$’000

Interest expense

- Bank borrowings and bills payable 46,552 44,564

- Loan from a fellow subsidiary 160 –

- Finance lease liabilities 1 3

Total interest expense 46,713 44,567

Less: Amount capitalised in construction of property, plant and equipment

(Note 23(c)) – (2,436)

Finance expenses recognised in the income statement 46,713 42,131

Borrowing costs on financing were capitalised at a rate of nil (2010: 3.71%) per annum.

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9. Income taxes

(a) Income tax expense

The Group

2011 2010

$’000 $’000

Tax expense attributable to profit is made up of:

Current income tax

- Singapore 551 442

- Foreign 124,610 131,484

125,161 131,926

Deferred income tax (Note 30)

- Singapore – (3)

- Foreign (23,844) (66,338)

(23,844) (66,341)

101,317 65,585

(Over)/under provision in prior financial years:

- Current income tax

- Singapore 55 (763)

- Foreign (37,194) (24,480)

(37,139) (25,243)- Deferred income tax (Note 30)

- Foreign 10,017 2,898

74,195 43,240

The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax as explained below:

The Group

2011 2010

$’000 $’000

Profit before tax and share of profit/(loss) of associated companies 286,842 401,873

Tax calculated at a tax rate of 17% (2010: 17%) 48,763 68,318

Effects of:

- Change in tax rate in other countries 36,068 (14,669)

- Different tax rates in other countries 16,726 22,631

- Singapore stepped income exemption (130) (170)

- Exemption of shipping profits under Approved International ShippingScheme and Section 13A of Singapore Income Tax Act (2,229) (7,074)

- Profits exempted from tax (3,189) (6,808)

- Income not subject to tax (2,035) (5,160)

- Expenses not deductible for tax purposes 8,396 8,894- Utilisation of previously unrecognised deferred tax asset (3,298) (383)

- Deferred tax asset not recognised 1,822 –

- Others 423 6

Tax charge 101,317 65,585

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9. Income taxes (continued) (b) Movements in current income tax liabilities

The Group The Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Beginning of financial year 72,766 84,136 245 549

Currency translation differences 9,833 (8,680) – –

Disposal of subsidiaries (Note 11(b)) (183) (139) – –

Income tax paid (103,978) (109,234) (1,718) (819)

Tax expense on profit for the currentfinancial year 125,161 131,926 1,901 1,050

Over provision in prior financial years (37,139) (25,243) (56) (535)

End of financial year 66,460 72,766 372 245

(c) The tax credit relating to each component of other comprehensive income is as follows:

2011 2010

Before

Tax

Tax

credit

After

Tax

Before Tax

Taxcredit

After Tax

$’000 $’000 $’000 $’000 $’000 $’000

Fair value loss on available-for-sale financial assets (53) 1 (52) (389) 110 (279)

Currency translationdifferences arising fromconsolidation 92,314 – 92,314 (100,144) – (100,144)

Reclassification of currencytranslation reserves ondisposal of subsidiaries 233 – 233 – – –

Other comprehensive

income/(loss) 92,494 1 92,495 (100,533) 110 (100,423)

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10. Earnings per share

(a) Basic earnings per share

Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company

by the weighted average number of ordinary shares outstanding during the financial year.

2011 2010

Net profit attributable to equity holders of the Company ($’000) 139,671 248,837

Weighted average number of ordinary shares outstanding for basicearnings per share (’000) 2,239,245 2,239,245

Basic earnings per share (cents per share) 6.24 11.11

(b) Diluted earnings per share

For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares

outstanding is adjusted for the effects of all dilutive potential ordinary shares arising from share options.

For share options, the weighted average number of shares on issue has been adjusted as if all dilutiveshare options were exercised. The number of shares that could have been issued upon the exercise of all dilutive share options less the number of shares that could have been issued at fair value (determinedas the Company’s average share price for the financial year) for the same total proceeds is added to thedenominator as the number of shares issued for no consideration. No adjustment is made to the net profit.

Diluted earnings per share attributable to equity holders of the Company is calculated as follows:

2011 2010

Net profit attributable to equity holders of the Company ($’000) 139,671 248,837

Weighted average number of ordinary shares outstanding for basicearnings per share (’000) 2,239,245 2,239,245

Adjustment for

- share options (’000) 160 658

Weighted average number of ordinary shares outstanding for dilutedearnings per share (’000) 2,239,405 2,239,903

Diluted earnings per share (cents per share) 6.24 11.11

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11. Cash and cash equivalents

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


2011 2010 2011 2010

$’000 $’000 $’000 $’000

Cash at bank and on hand 603,948 261,309 5,796 14,361

Short-term bank deposits 981,320 605,892 120,055 102,596

1,585,268 867,201 125,851 116,957

Cash at bank and short-term bank deposits include an amount of $1,174,981,000 (2010: $473,545,000)placed with a fellow subsidiary, Cosco Finance Co., Ltd.

For the purpose of presenting the consolidated statement of cash flows, the consolidated cash and cashequivalents comprise the following:

The Group

2011 2010

$’000 $’000

Cash and bank balances (as above) 1,585,268 867,201

Less: Bank deposits pledged (Note 27) (1,220) (3,288)

Cash and cash equivalents per consolidated statement of cash flows 1,584,048 863,913

In 2011, cash and bank balances and short-term bank deposits of the Group to the extent of $1,220,000

were pledged as security for trade finance facilities.

In 2010, cash and bank balances and short-term bank deposits of the Group to the extent of $3,288,000were pledged as security for the following:

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

(ii) trade finance facilities; and

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

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11. Cash and cash equivalents (continued)

(b) Disposal of subsidiaries

(i) On 20 May 2011, the Company disposed of its entire interest in Costar Shipping Pte Ltd and Coslink(M) Sdn Bhd for a cash consideration of $11,650,000. The effects of the disposal on the cash flowsof the Group were:

The Group

$’000

Carrying amounts of assets and liabilities disposed

Cash and cash equivalents (15,914)

Club memberships (169)

Trade and other receivables (15,086)

Property, plant and equipment (Note 23) (2,854)

Total assets (34,023)

Trade and other payables 30,558

Current income tax liabilities (Note 9) 183

Deferred tax liabilities (Note 30) 33

Total liabilities 30,774

Net assets derecognised (3,249)

Less: Non-controlling interests 1,093

Net assets disposed (2,156)

The aggregate cash flows arising from the disposal of Costar Shipping Pte Ltd and Coslink (M) SdnBhd were:

The Group

$’000

Net assets disposed (as above) 2,156

Reclassification of currency translation reserve (Note 32(b)(iii)) 233

Gain on disposal (Note 7) 9,261

Cash proceeds from disposal 11,650

Less: Cash and cash equivalents in subsidiaries disposed (15,914)

Add: Bank deposits pledged by subsidiaries disposed 307

Net cash outflow on disposal (3,957)

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11. Cash and cash equivalents (continued)

(b) Disposal of subsidiaries (continued)

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

(“CSG”) has ceased to have control over Diesel Marine Dalian Ltd and Diesel Marine International(Nantong) Co., Ltd, being companies in which CSG has an equity interest of 30% each. As a resultof this cessation of control, the assets and liabilities of these two companies were deconsolidatedfrom the financial statements of the Group. The effects of the disposal on the cash flows of the Groupwere:

The Group

$’000

Carrying amounts of assets and liabilities disposed

Cash and cash equivalents (3,950)

Inventories (3,698)

Trade and other receivables (5,810)

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

Total assets (19,795)

Trade and other payables 11,003

Current income tax liabilities (Note 9) 139

Total liabilities 11,142

Net assets derecognised (8,653)

Less: Non-controlling interests 6,057

Net assets disposed (2,596)

The aggregate cash flows arising from the disposal of Diesel Marine Dalian Ltd and Diesel MarineInternational (Nantong) Co., Ltd were:

The Group

$’000

Net assets disposed (as above) 2,596

Reclassification to investment in associated companies (Note 20) (2,596)Cash proceeds from disposal –

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

Net cash outflow on disposal (3,950)

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12. Forward currency contracts

The Group

Contract Fair value

notional

amount Assets Liabilities Net assets

$’000 $’000 $’000 $’000

2011

Derivatives held for hedging

Fair-value hedges

- Forward currency contracts - current 161,167 4,728 (4,728) –

Non-hedging instruments- Forward currency contracts – – – –

2010

Derivatives held for hedging

Fair-value hedges

- Forward currency contracts - current – – – –

Non-hedging instruments

- Forward currency contracts – – – –

The forward currency contracts are transacted to hedge for currency risk arising from the Group’s commitments for

sales denominated in foreign currencies.

Fair value gains/(losses) on the above fair value hedges are recognised in the profit and loss as follows:

The Group

2011 2010

$’000 $’000

Hedged item: Firm commitments (4,728) –

Hedging instrument: Forward currency contracts 4,728 –

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13. Trade and other receivables - current


2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade receivables:

- Non-related parties (i) 335,065 388,841 – –

- Fellow subsidiaries 90,239 114,600 – –

- Associated companies – 2,502 – –

- A subsidiary – – – 131

425,304 505,943 – 131

Less: Allowance for impairment of receivables -non-related parties (13,647) (17,553) – –

Trade receivables - net 411,657 488,390 – 131

Construction contracts due fromcustomers (Note 15):

- Non-related parties 755,421 545,451 – –

- Fellow subsidiaries – 20,346 – –

755,421 565,797 – –

Other receivables:

- Non-related parties 28,728 56,126 6 109

- Ultimate holding corporation (iv) – 23 – –

- Fellow subsidiaries (ii) 7,266 4,488 9 –

- Associated companies (iii) 1,098 – – –

- A subsidiary – – 67 –

37,092 60,637 82 109

Less: Allowance for impairment of otherreceivables- non-related parties (2,706) (792) – –

Other receivables - net 34,386 59,845 82 109

Advances paid to suppliers 804,755 858,775 – –

Staff advances 1,110 1,222 – –

Dividend receivable from

- Subsidiaries – – 4,394 2,655

- Associated companies 3,121 2,634 – –

Total 2,010,450 1,976,663 4,476 2,895

(i) Certain subsidiaries of the Group have factored trade receivables with carrying amounts of $328,756,000 (2010:$45,283,000) to banks in exchange for cash during the financial year ended 31 December 2011. The transactions havebeen accounted for as collateralised borrowings as the banks have full recourse to the subsidiaries in the event of default bythe debtors (Note 27).

(ii) Other receivables due from fellow subsidiaries are unsecured, interest-free and repayable on demand.

(iii) Other receivables due from associated companies are unsecured, interest-bearing at 6.65% per annum and repayable ondemand.

(iv) In 2010, other receivables due from ultimate holding corporation were unsecured, interest-free and repayable on demand.

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14. Inventories

The Group

2011 2010

$’000 $’000

Raw materials 360,273 429,816

Work-in-progress 86,027 46,014

Finished goods 45,184 42,205

491,484 518,035

The cost of inventories recognised as an expense and included in “cost of sales” amounted to $3,672,894,000

(2010: $3,322,337,000).

15. Construction contract work-in-progress

The Group

2011 2010

$’000 $’000

Beginning of financial year 182,728 199,385

Contract costs incurred during the financial year 2,927,243 2,566,433

Contract expenses recognised in the income statement during the financial year (2,970,114) (2,572,134)

Currency translation differences 8,241 (10,956)End of financial year 148,098 182,728

Aggregate costs incurred and profits recognised (less losses recognised) to date on

uncompleted construction contracts 3,160,935 2,616,896

Less: Progress billings (2,854,686) (2,448,845)

Currency translation differences 19,629 (6,424)

325,878 161,627

Analysed as:

Due from customers on construction contracts (Note 13) 755,421 565,797

Due to customers on construction contracts (Note 26) (429,543) (404,170)

325,878 161,627

Advances received on construction contracts (Note 26) 412,314 1,122,503

16. Other current assets


2011 2010 2011 2010

$’000 $’000 $’000 $’000

Deposits 1,552 1,687 11 7

Prepayments 5,383 2,468 181 1986,935 4,155 192 205

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17. Trade and other receivables - non-current


2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade receivables:

- Non-related parties (i) 75,717 72,739 – –

Less: Current portion (23,360) (34,507) – –

52,357 38,232 – –

Other receivables:

- A non-related party (ii) 11,510 10,857 – –

63,867 49,089 – –

(i) As at 31 December 2011, trade receivables amounting to $74,197,000 are unsecured, bearing interest ranging from 3% to7% per annum with quarterly instalment payments that will be repayable in full by 2016. The remaining trade receivablesamounting to $1,520,000 are unsecured, interest-free and will be repayable in full by 2013. The fair values of the non-current trade receivables approximated its carrying amounts, determined from cash flow analyses discounted at marketborrowing rates of 2.83% per annum which the directors expected to be available to the Group.

As at 31 December 2010, trade receivables amounting to $33,049,000 are unsecured, bearing interest at 7% per annumwith quarterly instalment payments that will be repayable in full by 2015. The remaining trade receivables amounting to$39,690,000 are secured, interest-free and with monthly instalment payments that will be repayable in full by 2012. Thefair values of the non-current trade receivables approximated its carrying amounts, determined from the cash flow analysesdiscounted at market borrowing rates of 3.40% per annum which the directors expected to be available to the Group.

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

As at 31 December 2011, the fair values of the non-current other receivables are unlikely to be materially different from itscarrying amounts, determined from cash flow analyses discounted at market borrowing rates of 5.31% per annum (2010:3.40% per annum) which the directors expected to be available to the Group.

18. Available-for-sale financial assets

The Group

2011 2010

$’000 $’000


Currency translation differences 202 (211)

Additions 824 –

Fair value loss recognised in equity (Note 32(b)(v)) (53) (389)

End of financial year 4,407 3,434

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18. Available-for-sale financial assets (continued)

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

The Group

2011 2010

$’000 $’000

Quoted equity shares in a corporation, at fair value 505 530

Unquoted equity shares in corporations, at cost

- A fellow subsidiary 2,883 1,943

- A non-related party 1,019 961

3,902 2,904

4,407 3,434

The directors do not anticipate that the carrying amounts of these unquoted equity investments will deviatesignificantly from their fair values on the basis that these unquoted equity shares in corporations are in positive nettangible assets position.

19. Club memberships


2011 2010 2011 2010$’000 $’000 $’000 $’000

Transferable club memberships, at cost 671 937 428 428

Currency translation differences 2 (13) – –

Allowance for impairment in value of clubmemberships (283) (367) (256) (256)

390 557 172 172

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20. Investments in associated companies

The Group

2011 2010

$’000 $’000



Reclassification from investment in subsidiaries(Note 11(b)(ii)) – 2,596

Share of profit/(loss) after tax 717 (27)

Dividends declared, net of tax (419) (696)


The summarised financial information of associated companies, not adjusted for theproportion of ownership interest held by the Group, is as follows:

- Assets 36,338 29,638

- Liabilities 22,904 18,141

- Revenue 25,396 24,052

- Net profit/(loss) 2,283 (207)

Details of associated companies are set out below:

Name of

associated companies Principal activities

Country of

incorporation/

business

% ofpaid-up

capital held by

subsidiaries

2011

%

2010%

DMI (Guangzhou) Ltd (i) Overhaul and spare-parts replacement andrepair

People’sRepublicof China(“PRC”)

30 30

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

Overhaul and spare-parts replacement andrepair

PRC 40 40

Diesel Marine International(Nantong) Co., Ltd (i) and (ii)


PRC 30 30

Diesel Marine Dalian Ltd (i)and (ii)


PRC 30 30

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

(ii) See Note 11(b)(ii).

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21. Investments in subsidiaries

The Company

2011 2010

$’000 $’000

Unquoted equity shares


Additions – 82,664

Disposals (4,789) –

388,746 393,535

Accumulated impairment losses (19,080) (19,498)


Movements in accumulated impairment losses are as follows:

2011 2010

$’000 $’000


Reversal of impairment charge (418) (560)


Details of the subsidiaries are set out below:

Name ofsubsidiaries

Principalactivities

Country ofincorporation/

businessCost of

investment

% of paid-up capital held by

The Company Subsidiaries

2011 2010 2011 2010 2011 2010

$’000 $’000 % % % %

Cosco(Singapore)Pte Ltd (i)

Ship owning, shipchartering andinvestment holding

Singapore 87,664 87,664 100 100 – –

Cosco MarineEngineering(Singapore)

Pte Ltd (i)

Ship repairing,marine engineering,container repairs

and services,fabrication worksservices andproduction of marineoutfitting components

Singapore 2,242 2,242 90 90 – –

Harington PropertyPte Ltd (i)

Trading and investingin properties, provideproperty managementservices andinvestment holding

Singapore 52,701 52,701 100 100 – –

Coslink (M)Sdn. Bhd. (ii),(vi)

Shipping agency andrelated activities

Malaysia – 771 – 70 – 18

Costar Shipping

Pte Ltd (i), (vi)

Shipping agent

and investmentholding

Singapore – 4,018 – 70 – –

Cosco ShipyardGroup Co., Ltd(iv) and (v)

Investment holding People’sRepublic of

China (“PRC”)

191,173 191,173 51 51 – –

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21. Investments in subsidiaries (continued)

Name ofsubsidiaries

Principalactivities


businessCost of

investment



2011 2010 2011 2010 2011 2010

$’000 $’000 % % % %

Cosco (Nantong)Shipyard Co., Ltd(iv) and (v)

Ship repair andmarine engineering

PRC 24,670 24,670 50 50 50 50

Cosco (Dalian)Shipyard Co., Ltd

(iv) and (v)

Ship repair, shipbuilding and marine

engineering

PRC 30,296 30,296 39 39 59 59

Cosco (Guangdong)Shipyard Co., Ltd(iv) and (v)

Ship repair and shipbuilding

PRC – – – – 75 75

Cosco (Zhoushan)Shipyard Co., Ltd(iv) and (v)

Ship repair, shipbuilding and marineengineering

PRC – – – – 100 100

Cosco (Xiamen)Shipyard Co., Ltd (iv)

Ship repair PRC – – – – 51 51

Cosco (Shanghai)Shipyard Co., Ltd (iv)


Cosco (Tianjin)Shipyard Co., Ltd (iv)


Cosco (Lianyungang)Shipyard Co., Ltd (iv)


Cosco (Qidong)Offshore Co., Ltd(iv) and (v)

Offshore marineengineering

PRC – – – – 60 60

Cosco Dalian RikkyOcean EngineeringCo., Ltd (iv)

Overhaul, repair,commissioningand spare-partsreplacement of governor,turbocharger andengine fuel system

PRC – – – – 75 75

Cosco (Nantong)Ocean ShipyardCo., Ltd (iv)

Ship repair andcorrosion control

PRC – – – – 60 60

Zhongyuan Sea-Land EngineeringCo., Ltd (iv)


Cosco Shipyard Total AutomationCo., Ltd (iv)

Design, manufacture,sale and technicalservice relating tovessels and industrialinstruments

PRC – – – – 60 60

Cos Fair ShippingPte Ltd (i)

Ship owning and shipchartering

Singapore/ Worldwide

– – – – 100 100

Cos GloryShipping Inc. (i)


Panama/ Worldwide

– – – – 100 100

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21. Investments in subsidiaries (continued)

Name ofsubsidiaries

Principalactivities


businessCost of

investment



2011 2010 2011 2010 2011 2010

$’000 $’000 % % % %

Hanbo ShippingLimited (ii)


Hong Kong/ Worldwide

– – – – 100 100

Sanbo ShippingLimited (ii)


Hong Kong/ Worldwide

– – – – 100 100

Cos OrchidShipping Pte Ltd (i)



– – – – 100 100

Cos ProsperityShipping Pte Ltd (i)



– – – – 100 100

Cos Knight ShippingMaritime Inc. (i)


Panama/ Worldwide

– – – – 100 100

Cos Lucky ShippingMaritime Inc. (i)


Panama/ Worldwide

– – – – 100 100

Costar Agencies (M)Sdn. Bhd. (iii), (vi)

Shipping agent Malaysia – – – – – 100

CNF Shipping (M)Sdn. Bhd. (iii), (vi) Shipping agent Malaysia – – – – – 60

CNF Shipping AgenciesPte Ltd (i), (vi)

Vessel chartering,feedering, freightforwarders, transportagent, warehousingand other relatedservices

Singapore – – – – – 100

CoscoEngineeringPte Ltd (i)

Ship repairing, marineengineering, containerrepairs and services,fabrication worksservices and

production of marineoutfitting components

Singapore – – – – 100 100

388,746 393,535

(i) Audited by PricewaterhouseCoopers LLP, Singapore.

(ii) Audited by PricewaterhouseCoopers firms outside Singapore.

(iii) Audited by Deloitte KassimChan, Malaysia.

(iv) Audited by RSM China Certified Public Accountants, PRC.

(v) Audited by PricewaterhouseCoopers LLP, Singapore and firms outside Singapore for the purposes of preparation of consolidated financial statements.

(vi) See Note 11(b)(i)

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22. Investment properties

The Group

2011 2010

$’000 $’000

Cost



Additions 3 10

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


Accumulated depreciation and accumulated impairment losses



Depreciation charge 502 471

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


Net book value 14,405 14,619

Fair values 22,642 19,806

Investment properties are stated at cost less accumulated depreciation and accumulated impairment losses as theGroup has elected to adopt the cost model method to measure its investment properties.

Fair values of the investment properties as at the balance sheet date are stated based on independent professionalvaluations using the direct comparison method.

Investment properties are leased to fellow subsidiaries and non-related parties under operating leases.

The following amounts are recognised in the income statement:

The Group

2011 2010

$’000 $’000

Rental income 1,292 1,372

Direct operating expenses arising from investment properties that generatedrental income 681 769

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23. Property, plant and equipment

The Group

Freeholdlandand

buildings$’000

Leaseholdlandand

buildings$’000

Officerenovations,

furniture,fixtures

andequipment

$’000

Plant,machinery

andequipment

$’000

Motorvehicles

$’000

Motorvessels$’000

Docks andquays$’000

Construction-in-progress

$’000Total$’000

2011

Cost

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

Currency translation

differences – 52,049 2,683 48,336 2,485 2,877 47,946 3,550 159,926

Additions – 8,753 2,568 4,480 2,187 3,312 – 236,598 257,898

Disposals – (403) (423) (3,778) (1,680) (3,360) – (368) (10,012)

Disposal of

subsidiaries

(Note 11(b)(i)) (3,044) – (2,080) – (1,177) – – – (6,301)

Reclassification – 39,359 2,957 81,268 1,440 – 84,042 (209,066) –

End of financial year – 983,457 53,392 935,553 47,772 283,686 929,290 89,788 3,322,938

Accumulateddepreciation

Beginning of

financial year 944 107,021 30,481 249,089 28,458 134,707 162,775 – 713,475


differences – 8,085 2,142 19,913 1,986 1,792 11,593 – 45,511

Depreciation charge – 31,888 7,543 78,247 5,884 11,773 28,168 – 163,503

Disposals – (186) (422) (2,870) (1,430) (3,322) – – (8,230)

Disposal of

subsidiaries

(Note 11(b)(i)) (944) – (1,985) – (518) – – – (3,447)

Reclassification – (2,268) – 34 (34) – 2,268 – –

End of financial year – 144,540 37,759 344,413 34,346 144,950 204,804 – 910,812

Net book value

End of financialyear – 838,917 15,633 5 91,140 13,426 1 38,736 724,486 89,788 2,412,126

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23. Property, plant and equipment (continued)

The Group

Freeholdland andbuildings

$’000

Leaseholdland andbuildings

$’000

Officerenovations,

furniture,fixtures andequipment

$’000

Plant,machinery

andequipment

$’000

Motorvehicles

$’000

Motorvessels$’000

Docks andquays$’000

Construction-in-progress

$’000Total$’000

2010

Cost

Beginning of

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


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

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

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

Disposal of

subsidiaries

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

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

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

Accumulated

depreciation

Beginning of

financial year 883 78,713 23,529 195,409 24,692 134,363 143,988 – 601,577


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

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

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

Disposal of

subsidiaries

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

Reclassification – 502 (74) (588) – – (17) – (177)

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

Net book value

End of financial year 2,100 776,678 17,206 556,158 16,059 146,150 634,527 59,074 2,207,952

(a) The carrying amount of motor vehicles held under finance leases at 31 December 2011 amounted to nil (2010: $32,000)

(Note 27).

(b) As at the balance sheet date, the net book values of motor vessels of the Group amounting to $28,940,000 (2010:

$67,825,000) are mortgaged to banks to secure long-term bank borrowings and bank facilities (Note 27).

(c) Borrowing costs of nil (2010: $2,436,000) which arise mainly due to financing for the construction of docks and quays, are

capitalised during the financial year (Note 8).

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23. Property, plant and equipment (continued)

The Company

Office

renovations,

furniture,

fixtures and

equipment

Motor

vehicles Total

$’000 $’000 $’000

2011

Cost

Beginning of financial year 558 1,128 1,686

Additions 8 608 616

Disposals (13) (524) (537)

End of financial year 553 1,212 1,765

Accumulated depreciation

Beginning of financial year 531 505 1,036

Depreciation charge 17 116 133

Disposals (13) (315) (328)

End of financial year 535 306 841

Net book value


2010

Cost

Beginning of financial year 551 1,128 1,679

Additions 7 – 7

End of financial year 558 1,128 1,686

Accumulated depreciation

Beginning of financial year 512 392 904

Depreciation charge 19 113 132

End of financial year 531 505 1,036

Net book value


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24. Intangible assets

The Group

2011 2010

$’000 $’000

Goodwill arising on consolidation 9,526 9,468

Cost




Net book value 9,526 9,468

Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (“CGU”), identified as the subsidiaries in the People’s

Republic of China (“PRC”) according to country of operation and business segments. The business segment refersto ship repair, ship building and marine engineering activities.

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cashflow projections based on the existing capacity of the CGU. Cash flows beyond 2011 are extrapolated using theestimated growth rate stated below. The growth rate does not exceed the long-term average growth rate for shiprepair business in the PRC in which the CGU operates.

Key assumptions used for value-in-use calculations:

2011 2010

Growth rate1 3.30% 4.50%

Discount rate 2 5.31% 2.27%

1 Weighted average growth rate used to extrapolate cash flows beyond the budget period2 Pre-tax discount rate applied to the pre-tax cash flow projections

These assumptions were used for the analysis of the CGU within the business segment. Management determinedbudgeted gross margin based on past performance and its expectations of the market development. The weighted

average growth rate used was consistent with the forecasts included in industry reports. The discount rate used waspre-tax and reflected specific risks relating to the relevant segments.

The impairment test has revealed that the recoverable amount of the CGU is higher than its carrying amount.

Hence, there is no impairment charge recognised for the financial years ended 31 December 2011 and 31December 2010.

In addition, a decrease in the growth rate by 1% would not result in any impairment charge for both financial years.

25. Deferred expenditure

Deferred expenditure relates to rental prepaid for leasehold land on operating leases and is amortised on the

straight-line basis over the lease period.

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26. Trade and other payables


2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade payables:


- Associated companies 2,180 2,057 – –

- Fellow subsidiaries 25,821 42,913 – –

665,725 577,877 – –

Construction contracts: Advances received (Note 15):- Non-related parties 412,314 1,122,503 – –

Due to customers (Note 15):


841,857 1,526,673 – –

Advances from non-related parties 52,952 33,927 – –

Non-trade payables:- Ultimate holding corporation – 680 – –

- A subsidiary – – 15,000 15,000

- A fellow subsidiary – – 11 –

– 680 15,011 15,000

Deposits received 13,656 12,218 – –

Other accruals for operating expenses 1,118,304 991,000 3,225 2,620

Dividend payable to non-controlling interests of subsidiaries 4,800 2,158 – –

Total 2,697,294 3,144,533 18,236 17,620

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

interest-free and are repayable on demand.

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27. Borrowings

The Group

2011 2010

$’000 $’000

Current

Bank borrowings (unsecured) 1,367,186 410,280

Bank borrowings (secured) 231,026 47,337

Bills payable 70,110 97,528

Finance lease liabilities (Note 28) – 3

1,668,322 555,148

Non-current

Bank borrowings (unsecured) 398,888 427,743

Bank borrowings (secured) 99,202 9,322

498,090 437,065

Total borrowings 2,166,412 992,213

The exposure of the borrowings of the Group to interest rate changes and the contractual repricing dates at thebalance sheet dates are as follows:

The Group

2011 2010

$’000 $’000

Less than 1 year 1,668,322 555,148

1 – 5 years 435,281 380,732

Over 5 years 62,809 56,333

2,166,412 992,213

Bank borrowings (unsecured) include an amount of $5,766,000 (2010: Nil) from a fellow subsidiary, Cosco FinanceCo., Ltd.

(a) Security granted

At the balance sheet date, total borrowings include secured liabilities of $330,228,000 (2010: $56,662,000)for the Group. Secured bank borrowings are secured by:

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

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

(iii) certain trade receivables (Note 13)

In 2010, finance lease liabilities of the Group were secured by the rights to the leased motor vehicles, which

would revert to the lessor in the event of default by the Group (Note 23). The finance lease liabilities havebeen fully repaid during the year.

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27. Borrowings (continued)

(b) Fair values of non-current borrowings

At the balance sheet date, the carrying amounts of non-current borrowings approximated their fair values.

The fair values were determined from cash flow analyses, discounted at the market borrowing rates whichthe directors expected to be available to the Group as follows:

2011 2010

SGD USD RMB EUR SGD USD RMB EUR

Bank borrowings – 2.83% 5.31% 5.27% – 2.79% 3.71% –

Finance lease liabilities – – – – 4.91% – – –

28. Finance lease liabilities

The Group

2011 2010

$’000 $’000

Minimum lease payments due:

- Not later than one year – 4

– 4Less: Future finance charges – (1)

Present value of finance lease liabilities – 3

The present values of finance lease liabilities are analysed as follows:- Not later than one year (Note 27) – 3

– 3

29. Provisions for other liabilities

The Group

2011 2010

$’000 $’000

Provision for off hire claim on hire income (Note (a)) 3,840 7,043

Provision for warranties (Note (b)) 46,440 38,006

Legal claims (Note (c)) 9,150 –

59,430 45,049

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29. Provisions for other liabilities (continued)

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

The Group

2011 2010

$’000 $’000


Provision made during the financial year 1,585 1,715

Provision utilised during the financial year (4,916) (7,572)

Currency translation differences 128 (1,342)


Provision for off hire claim on hire income is in respect of refund to be made to customers for period in whichthe motor vessels are not available for use.

(b) Movements in provision for warranties were as follows:

The Group

2011 2010

$’000 $’000


Provision made during the financial year 11,329 21,289

Provision utilised during the financial year (5,907) (2,819)

Currency translation differences 3,012 (2,658)


The Group gives one to two-year warranties on certain ship building and marine engineering contractsand undertakes to repair or rectify defects that fail to perform satisfactorily. A provision is recognised at the

balance sheet date for expected warranty claims based on an estimate by technical engineers and pastexperience of the possible repairs and rectifications.

(c) Legal claims

The provision for legal claims is in respect of certain legal claims brought against the Group by customers,and is expected to be utilised.

Movement in provision for legal claims is as follows:

The Group

2011 2010

$’000 $’000

Beginning of financial year – –

Currency translation difference 550 –

Provision made 8,600 –

End of financial year 9,150 –

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30. Deferred income taxes Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current incometax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscalauthority. The amounts, determined after appropriate offsetting, are shown on the balance sheets as follows:


2011 2010 2011 2010

$’000 $’000 $’000 $’000

Deferred income tax assets:

- to be recovered within one year 231,087 207,444 – –

- to be recovered after one year 10,426 5,259 – –

241,513 212,703 – –

Deferred income tax liabilities:

- to be settled after one year 5,712 4,304 5,582 4,056

5,712 4,304 5,582 4,056

Deferred income tax assets are recognised for tax losses, capital allowances, provisions and accruals carried

forward to the extent that realisation of the related tax benefits through future taxable profits is probable. TheGroup has unrecognised tax losses of $7,288,000 (2010: $13,192,000) for which no deferred tax asset has beenrecognised at the balance sheet date which can be carried forward and used to offset against future taxableincome subject to meeting certain statutory requirements by those companies with unrecognised tax losses in theirrespective countries of incorporation.

The movements in the deferred income tax account, net were as follows:


2011 2010 2011 2010

$’000 $’000 $’000 $’000

Beginning of financial year (208,399) (156,123) 4,056 2,198

Change in tax rate 36,068 (14,669) – –

Currency translation differences (13,541) 11,277 215 (112)

Disposal of subsidiaries (Note 11(b)) (33) – – –

Deferred tax (credited)/charged to income

statement (49,895) (48,774) 1,311 1,970Deferred tax credited to equity (Note 32(b)(v)) (1) (110) – –

End of financial year (235,801) (208,399) 5,582 4,056

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30. Deferred income taxes (continued) The movements in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) during the financial year were as follows:

The Group

Deferred income tax liabilities 2011 2010

$’000 $’000

Accelerated tax depreciation

Beginning of financial year 163 166

Credited to income statement – (3)

Disposal of subsidiaries (33) –

End of financial year 130 163

Fair value gain



Credited to equity (Note 32(b)(v)) (1) (110)


Undistributed profits of foreign subsidiaries



Charged to income statement 1,311 1,970


Total



Disposal of subsidiaries (33) –


Credited to equity (1) (110)


Reconciliation of total deferred income tax liabilities after appropriate offsettingfrom the same tax jurisdiction is as follows:

Total deferred income tax liabilities 5,807 4,310

Offsetting of deferred income tax assets from the same tax jurisdiction (95) (6)

Total deferred income tax liabilities after appropriate offsetting from the sametax jurisdiction 5,712 4,304

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30. Deferred income taxes (continued)

The Group

Deferred income tax assets 2011 2010

$’000 $’000

Provisions and accruals

Beginning of financial year (212,709) (158,695)

Change in tax rate 36,068 (14,669)

Currency translation differences (13,761) 11,396

Credited to income statement (51,206) (50,741)

End of financial year (241,608) (212,709)

Reconciliation of total deferred income tax assets after appropriate offsettingfrom the same tax jurisdiction is as follows:

Total deferred income tax assets (241,608) (212,709)

Offsetting of deferred income tax liabilities from the same tax jurisdiction 95 6

Total deferred income tax assets after appropriate offsetting from the sametax jurisdiction (241,513) (212,703)

The Company

Deferred income tax liabilities 2011 2010

$’000 $’000

Undistributed profits of foreign subsidiariesBeginning of financial year 4,056 2,198




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31. Share capital

Issued share capital

No. of

ordinary

shares Amount

’000 $’000

2011

Beginning and end of financial year 2,239,245 270,608

2010

Beginning and end of financial year 2,239,245 270,608

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

There were no shares issued in 2011 and 2010.

Share options

Under the Cosco Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”), share options are granted todirectors, key management and employees. The exercise price of the granted options is equal to the average of theclosing prices of the Company’s ordinary shares on the Singapore Exchange for the five market days immediately

preceding the date of grant. The options may be exercised in full or in part in respect of 1,000 shares or a multiplethereof, on the payment of the exercise price. The persons to whom the options have been issued have no right to

participate by virtue of the options in any share issue of any other company. The Group has no legal or constructiveobligation to repurchase or settle the options in cash.

Options issued to directors and employees who have been in the service of the Company, subsidiary or associatedcompany, or the holding company for at least one year on or prior to the date of grant, may be exercised twelve

months after the date of grant but before the end of one hundred and twenty months. For employees and directorswho are in the service of the associated company and non-executive directors, the options shall expire at the end of sixty months. Options issued at a discount to market price, may only be exercised two years after the date of grant.

Options issued to directors and employees who have been in the service of the Company, subsidiary or associatedcompany, or the holding company for at least six months but less than one year on or prior to the date of grant,may be exercised twenty-four months after the date of grant but before the end of one hundred and twenty months.

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

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

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31. Share capital (continued)


Movements in the number of unissued ordinary shares under option at the end of the financial year and theirexercise prices are as follows:

The Group and the Company

Financial year ended 31 December 2011

Number of ordinary shares

under option outstanding

Options relating

to Scheme 2002

Beginning

of financial

year

Lapsedduring

financial

year

End of

financial

year

Exercise


’000 ’000 ’000 $

2006 Options (i) 2,780 (2,100) 680 1.23 21.2.2007 – 20.2.2016

2007 Options (ii) 10,970 (420) 10,550 2.48 5.2.2008 – 4.2.2017

2008 Options (iii) 17,200 (120) 17,080 2.95 24.3.2009 – 23.3.2018

30,950 (2,640) 28,310


Number of ordinary shares

under option outstanding

Options relating

to Scheme 2002

Beginning

of financial

year

Lapsed

during

financial

year

End of

financial

year

Exercise


’000 ’000 ’000 $

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

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

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

34,980 (4,030) 30,950

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

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

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

Out of the outstanding options on 28,310,000 shares (2010: 30,950,000), options on 28,310,000 shares (2010:30,950,000) are exercisable. There was no share option issued in 2011 and 2010. There were also no shares of

the Company allotted and issued by virtue of the exercise of options to take up unissued shares of the Company in2011 and 2010.

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32. Statutory and other reserves


2011 2010 2011 2010

$’000 $’000 $’000 $’000

(a) Composition:

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

Statutory reserve 165,445 137,372 – –

Currency translation reserve (38,262) (90,804) – –

Asset revaluation reserve 9,336 12,554 – –

Fair value reserve 154 181 – –Realised surplus on long-terminvestment 69 69 527 527

181,320 103,950 45,105 45,105

(b) Movements:

(i) Share option reserve

Beginning and end of financial year 44,578 44,578 44,578 44,578

The Group

2011 2010

$’000 $’000

(ii) Statutory reserve


Transfer from retained earnings 28,073 223


(iii) Currency translation reserve

Beginning of financial year (90,804) (23,861)

Net currency translation differences

of financial statements of foreignsubsidiaries and associated

companies 92,314 (100,144)

Reclassification of currencytranslation reserve on disposalof subsidiaries 233 –

Non-controlling interests (40,005) 33,201

End of financial year (38,262) (90,804)

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32. Statutory and other reserves (continued)

The Group

2011 2010

$’000 $’000

(b) Movements: (continued)

(iv) Asset revaluation reserve


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


(v) Fair value reserve


Fair value changes for available-for-sale financial asset (53) (389)

Deferred tax credited to equity (Note 30) 1 110

Non-controlling interests 25 137


Statutory reserve represents the amount set aside in compliance with the local laws in the PRC where thesubsidiaries of the Group reside.

Statutory and other reserves are non-distributable.

33. Dividends

The Group and

Company

2011 2010

$’000 $’000

Ordinary dividends paid

Final tax-exempt one-tier dividend paid in respect of the previous financial year

of 4.0 cents (2010: 3.0 cents) per ordinary share 89,570 67,177

At the Annual General Meeting scheduled on 20 April 2012, a first and final tax-exempt one-tier dividend of 3 centsper ordinary share (2010: first and final tax-exempt one-tier dividend of 4 cents per ordinary share) amounting to atotal of $67,177,000 (2010: $89,570,000), based on the number of shares issued as of 31 December 2011, will berecommended. These financial statements do not reflect the dividends recommended for the financial year ended 31December 2011, which will be accounted for in equity as an appropriation of retained earnings in the financial yearending 31 December 2012.

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34. Commitments

(a) Capital commitments

Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements

are as follows:

The Group

2011 2010

$’000 $’000

Property, plant and equipment 82,608 102,537

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

The Group leases various office premises, docks, quays and motor vessels under non-cancellable operatinglease agreements. The leases have varying terms, escalation clauses and renewal rights.

The future aggregate minimum lease payables under non-cancellable operating leases contracted for at thebalance sheet date but not recognised as liabilities, are as follows:

The Group

2011 2010

$’000 $’000

Not later than 1 year 25,112 19,271

Later than 1 year but not later than 5 years 47,986 42,690

Later than 5 years 101,111 66,245

174,209 128,206

(c) Operating lease commitments – where the Group is a lessor

The Group leases out certain items of property, plant and equipment and investment properties to non-related parties under non-cancellable operating leases.

The future minimum lease receivables under non-cancellable operating leases contracted for at the balancesheet date but not recognised as receivables, are analysed as follows:

The Group2011 2010

$’000 $’000

Not later than 1 year 21,068 28,664

Later than 1 year but not later than 5 years 9,781 1,189

30,849 29,853

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35. Financial risk management

Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, interest rate riskand price risk), credit risk and liquidity risk.

Risk management is carried out under policies approved by the Board of Directors. The Board approves guidelinesfor overall risk management, as well as policies covering these specific areas.

(a) Market risk

(i) Currency risk

Currency risks arise from transactions denominated in currencies other than the respective functionalcurrencies of the entities in the Group.

The Group monitors its foreign currency exchange risks closely and where appropriate, enters intoforward currency contracts to manage the currency exposure.

In addition, the Group has certain investments in foreign operations, whose net assets are exposed tocurrency translation risk. Currency exposure to the net assets of the Group’s foreign operations in thePeople’s Republic of China is managed primarily through borrowings denominated in RMB.

The Group’s currency exposure based on the information available to key management is as follows:

SGD USD RMB Others* Total

$’000 $’000 $’000 $’000 $’000

At 31 December 2011

Financial assets

Cash and cash equivalents andavailable-for-sale financial assets 42,834 429,910 1,029,859 87,072 1,589,675

Trade and other receivables,excluding advances paid tosuppliers 3,894 1,041,330 217,421 6,917 1,269,562

Receivables from subsidiaries – – 4,394 – 4,394

Other financial assets 80 – 1,472 – 1,552

46,808 1,471,240 1,253,146 93,989 2,865,183

Financial liabilities

Borrowings – 1,421,594 718,794 26,024 2,166,412

Payables by subsidiaries – – 4,394 – 4,394

Other financial liabilities 6,243 90,384 1,718,176 672 1,815,475

6,243 1,511,978 2,441,364 26,696 3,986,281

Net financial assets/(liabilities) 40,565 (40,738) (1,188,218) 67,293 (1,121,098)

Less: Net financial assets/(liabilities)denominated in the respectiveentities’ functional currencies (40,173) (88,617) 1,188,223 –

Add: Firm commitments and highly

probable forecast transactionsin foreign currencies – 2,920,443 – 50,173

Less: Currency forwards – (161,167) – –

Currency exposure 392 2,629,921 5 117,466

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

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35. Financial risk management (continued)

(a) Market risk (continued)

(i) Currency risk (continued)

SGD USD RMB Others* Total

$’000 $’000 $’000 $’000 $’000

At 31 December 2010

Financial assets

Cash and cash equivalents and

available-for-sale financial assets 74,475 308,646 462,625 24,889 870,635 Trade and other receivables,

excluding advances paid tosuppliers 15,415 864,332 229,860 57,370 1,166,977

Receivables from subsidiaries – – 2,655 – 2,655

Other financial assets 284 – 1,365 38 1,687

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


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

Payables to subsidiaries – – 2,655 – 2,655

Other financial liabilities 16,192 80,158 1,490,298 4,328 1,590,97616,195 361,257 2,204,064 4,328 2,585,844

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

Less: Net financial assets/(liabilities)denominated in the respectiveentities’ functional currencies (73,628) (108,500) 1,507,562 (2,298)

Add: Firm commitments and highlyprobable forecast transactionsin foreign currencies – 3,143,108 – 72,709

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

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

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(a) Market risk (continued)

(i) Currency risk (continued)

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

2011 2010

SGD USD RMB Total SGD USD RMB Total

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

Financial assets

Cash and cash equivalents 36,662 89,189 – 125,851 63,535 53,422 – 116,957

Trade and other receivables 81 12 4,394 4,487 237 10 2,655 2,902

36,743 89,201 4,394 130,338 63,772 53,432 2,655 119,859


Borrowings – – – – – – – –

Other financial liabilities 17,981 255 – 18,236 17,620 – – 17,620

17,981 255 – 18,236 17,620 – – 17,620

Net financial assets 18,762 88,946 4,394 112,102 46,152 53,432 2,655 102,239

Less: Net financial assets

denominated in theentity’s functional

currency (18,762) – – (46,152) – –

Currency exposure – 88,946 4,394 – 53,432 2,655

If the USD changes against the SGD and RMB by 500 basis points (2010: 500 basis points) with allother variables including tax rate being held constant, the effects arising from the net financial assetposition will be as follows:

2011 2010

Increase/(decrease)

Profit

after tax

Profitafter tax

$’000 $’000

The Group

USD against SGD

- strengthened 2,832 1,412

- weakened (2,832) (1,412)

USD against RMB

- strengthened (1,339) 3,840

- weakened 1,339 (3,840)

The Company

USD against SGD

- strengthened 2,847 1,728

- weakened (2,847) (1,728)

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(b) Credit risk (continued)

Other than the above-mentioned, the Group and Company do not hold any other collateral. The maximumexposure to credit risk for each class of financial instruments is the carrying amount of that class of financialinstruments presented on the balance sheet, except as follows:

The Company

2011 2010

$’000 $’000

Corporate guarantees provided to banks on subsidiaries’ loans 1,111 15,939

Corporate guarantees provided to third parties for services provided toa subsidiary – 156

1,111 16,095

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

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

on the information provided to key management is as follows:


2011 2010 2011 2010

$’000 $’000 $’000 $’000

By business segments

Shipping 3,876 7,165 – –

Ship repair, ship building and marineengineering activities 1,215,559 1,070,615 – –

Others – 14,639 – 131

1,219,435 1,092,419 – 131

(i) Financial assets that are neither past due nor impaired

Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings assigned by international credit-rating agencies. Trade receivables that are neither past due

nor impaired are substantially companies with a good collection track record with the Group.

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(b) Credit risk (continued)

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

There is no other class of fi nancial assets that is past due and/or impaired except for tradereceivables.

The age analysis of trade receivables past due but not impaired is as follows:

The Group

2011 2010

$’000 $’000

Past due 0 to 3 months 1,373 3,274

Past due 3 to 6 months 1,201 23

Past due over 6 months 1,784 610

4,358 3,907

The carrying amount of trade receivables individually determined to be impaired and the movement inthe related allowance for impairment are as follows:

The Group

2011 2010

$’000 $’000

Gross amount 13,647 17,553

Less: Allowance for impairment (13,647) (17,553)

– –


Currency translation differences 749 (1,642)

Allowance utilised (1,752) (575)

Reversal of allowances (2,903) (31,250)

Amount written off – (16)End of financial year 13,647 17,553

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(c) Liquidity risk

The Group adopts prudent liquidity risk management by maintaining sufficient cash and having an adequateamount of committed credit facilities and the ability to close out market positions. Due to the dynamic natureof the underlying businesses, the Group aims at maintaining flexibility in funding by keeping committed creditfacilities available.

As at 31 December 2011, the Group’s current liabilities exceed its current assets by $249,271,000 (2010:$268,714,000). The directors expect that the Group will be able to meet its liabilities as and when they fall

due on the basis of the undrawn committed credit facilities.

The table below analyses the maturity profile of the Group’s and Company’s financial liabilities (includingforward currency contracts) based on contractual undiscounted cash flows.

Less than

1 year

Between

1 and 5

years

Over

5 years

$’000 $’000 $’000

The Group

At 31 December 2011

Gross-settled forward currency contracts - fair valuehedges

- Receipts 166,017 – –

- Payments (161,289) – –

Other financial liabilities (1,815,475) – –

Borrowings (1,725,180) (489,680) (68,218)

At 31 December 2010

Gross-settled forward currency contracts

- Receipts – – –

- Payments – – –

Other financial liabilities (1,593,631) – –

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

The Company

At 31 December 2011

Other financial liabilities (18,236) – –

Borrowings – – –

Financial guarantee contracts (1,111) – –

At 31 December 2010

Other financial liabilities (17,620) – –

Financial guarantee contracts (16,095) – –

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(d) Capital risk

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a goingconcern and to maintain an optimal capital structure so as to maximise shareholder value. In order tomaintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment,return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sellassets to reduce borrowings.

Management monitors capital based on the return on shareholders’ fund. The return on shareholders’ fund

was 11.2% per annum for the current financial year ended 31 December 2011 (2010: 21.8% per annum).

The return on shareholders’ fund is calculated as net profit attributable to equity holders of the Companydivided by average shareholders’ equity.

The Group and the Company are in compliance with all externally imposed capital requirements for thefinancial years ended 31 December 2011 and 31 December 2010.

(e) Fair value measurements

The following table presents assets and liabilities measured at fair value and classified by level of the followingfair value measurement hierarchy:

(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

(b) inputs other than quoted prices included within Level 1 that are observable for the asset or liability,either directly (as prices) or indirectly (derived from prices) (Level 2); and

(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs)(Level 3).

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(e) Fair value measurements (continued)

Level 1 Level 2 Level 3 Total

$’000 $’000 $’000 $’000

The Group

2011

Assets


- Quoted equity shares 505 – – 505- Unquoted equity shares – – 3,902 3,902

Forward currency contracts – 4,728 – 4,728

Total assets 505 4,728 3,902 9,135

Liabilities

Forward currency contracts – 4,728 – 4,728

2010

Assets


- Quoted equity shares 530 – – 530- Unquoted equity shares – – 2,904 2,904

Total assets 530 – 2,904 3,434

Liabilities

Forward currency contracts – – – –

The fair value of financial instruments traded in active markets (such as trading and available-for-salesecurities) is based on quoted market prices at the balance sheet date. The quoted market price used for

financial assets held by the Group is the current bid price. These instruments are included in Level 1.

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter

derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makesassumptions that are based on market conditions existing at each balance sheet date. The fair value of forward currency contracts is determined using quoted forward exchange rates at the balance sheet date. These investments are included in Level 2. In infrequent circumstances, where a valuation technique forthese instruments is based on significant unobservable inputs, such instruments are included in Level 3.

Changes in Level 3 financial instruments for the financial year ended 31 December 2011 is disclosed in Note18.

The carrying value less impairment provision of trade receivables and payables are assumed to approximatetheir fair values. The fair value of financial liabilities for disclosure purposes is estimated based on quotedmarket prices or dealer quotes for similar instruments by discounting the future contractual cash flows at the

current market interest rate that is available to the Group for similar financial instruments. The fair value of

current borrowings approximates their carrying amount.

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(f) Financial instruments by category

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

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


2011 2010 2011 2010

$’000 $’000 $’000 $’000

Loans and receivables 2,856,382 2,034,178 130,338 119,859

Financial liabilities at amortised cost 3,981,887 2,583,189 18,236 17,620

36. Immediate and ultimate holding corporation

The Company’s immediate and ultimate holding corporation is China Ocean Shipping (Group) Company, registeredin the People’s Republic of China.

37. Related party transactions

(a) The Company is controlled by China Ocean Shipping (Group) Company (“COSCO”), the parent company and

a state-owned enterprise established in the People’s Republic of China (“PRC”).

The Group has adopted the amendment to FRS 24, “Related party disclosures” in 2009. The amendmentintroduces an exemption from all of the disclosure requirements of FRS 24 for transactions amonggovernment-related entities and the government. Those disclosures are replaced with a requirement todisclose the name of the government and the nature of their relationship, the nature and amount of anyindividually-significant transactions, and the extent of any collectively-significant transactions qualitatively orquantitatively. It also clarifies and simplifies the definition of a related party.

COSCO itself is controlled by the PRC government, which also owns a significant portion of the productiveassets in the PRC. In accordance with amendment to FRS 24, other government-related entities and theirsubsidiaries (other than COSCO group companies), directly or indirectly controlled, jointly controlled orsignificantly influenced by the PRC government are also defined as related party corporation of the Group.On that basis, related party corporation include COSCO and its subsidiaries, other government-relatedentities and their subsidiaries directly or indirectly controlled, jointly controlled or significantly influenced by

the PRC government, other entities and corporations in which the Company is able to control or exercisesignificant influence and key management personnel of the Company and COSCO as well as their closefamily members.

The transactions of revenues and expenses in nature conducted with government-related entities werebased on arm’s length transactions.

In addition to the related party information and transactions disclosed elsewhere in the consolidated financialstatements, the following is a summary of significant related party transactions entered into the ordinarycourse of business between the Group and its related parties during the financial year.

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37. Related party transactions (continued)

(a) (continued)

The Group

2011 2010

$’000 $’000

Revenue

Sales to fellow subsidiaries 38,837 85,759

Sales to associated companies 51 142

Sales to related party corporations – 97

Sale of bunker to a fellow subsidiary 1,351 –Rental income received/receivable from fellow subsidiaries 962 879

Rental income received/receivable from associated companies 19 177

Rental income received/receivable from related party corporations 286 306

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

Service income received from ultimate holding corporation 101 85

Service income received from fellow subsidiaries 4,075 3,789

Service income receivable from associated companies 21 –

Interest received/receivable from a fellow subsidiary 12,484 10,711

Expenditure

Purchases from fellow subsidiaries 44,039 37,137

Purchases from associated companies 465 294

Purchases from related party corporations – 44

Purchases of plant and equipment from fellow subsidiaries 2,720 –

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

Rental paid/payable to fellow subsidiaries 672 48

Rental paid/payable to a related party corporation 6,301 6,936

Vessel rental paid/payable to a fellow subsidiary 781 6,404

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

Crew wages paid/payable to fellow subsidiaries 7,257 7,603

Sub-contractor costs paid/payable to fellow subsidiaries 15,885 25,551

Sub-contractor costs paid/payable to associated companies 5,029 6,141

Sub-contractor costs paid/payable to a related party corporation 920 1,128

Utilities expenses paid/payable to a related party corporation 1,822 2,444

Service expenses paid/payable to fellow subsidiaries 560 2,797

Service expenses paid/payable to an associated company 1,027 –

Service expenses paid/payable to related party corporations 88 75

Commission paid/payable to a fellow subsidiary 957 33

Interest paid/payable to a fellow subsidiary 160 –

Outstanding balances as at 31 December 2011, arising from sales or purchases of goods and services, areset out in Notes 13 and 26 respectively.

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37. Related party transactions (continued) (b) Share options granted to key management

There were no share options granted to key management of the Group during 2011 and 2010. The share

options were given on the same terms and conditions as those offered to other employees of the Company(Note 31). The outstanding number of share options granted to key management of the Group at the end of the financial year was 6,800,000 (2010: 10,300,000).

(c) Key management personnel compensation

Key management personnel compensation is as follows:

The Group2011 2010

$’000 $’000

Salaries and other short-term employee benefits 4,978 3,519

Directors’ fees of the Company 305 285

Employer’s contribution to defined contribution plans including CentralProvident Fund 8 8

5,291 3,812

Included in the above was total compensation to directors of the Company amounting to $4,876,000 (2010:$3,506,000).

38. Segment information

Management has determined the operating segments based on the reports reviewed by the key management that

are used to make strategic decisions.

The key management considers the business from the business segment perspective. The segment in the People’sRepublic of China derives revenue from ship repair, ship building and marine engineering activities. On the otherhand, the segments in Singapore and Malaysia derive revenue from shipping, shipping agency, ship repair andmarine engineering activities.

Other services included within Singapore and Malaysia include shipping agency activities and rental of property; but

these are not included within the reportable operating segments, as they are not included in the reports provided tothe key management. The results of these operations are included in the “all other segments” column.

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38. Segment information (continued) The segment information provided to the key management for the reportable segments is as follows:

Shipping

Ship repair,

ship building

and marine

engineering

activities

All other

segments

Total for

continuing

operations

$’000 $’000 $’000 $’000


The Group

Sales

- External sales 65,995 4,096,118 808 4,162,921

- Inter-segment sales – 745 98,427 99,172

65,995 4,096,863 99,235 4,262,093

Elimination (99,172)

4,162,921

Segment results 33,398 298,372 1,785 333,555

Finance expense (46,713)

Share of profit of associated companies 717

Profit before income tax 287,559

Income tax expense (74,195)Net profit 213,364

Other segment items

Capital expenditure

- property, plant and equipment 3,403 253,873 622 257,898

Depreciation and amortisation 11,875 151,565 648 164,088

Allowance for inventory write-down – 18,144 – 18,144

Net reversal of impairment of trade and otherreceivables – (1,140) – (1,140)

Expected losses recognised on constructioncontracts – 150,377 – 150,377

Segment assets 151,634 5,591,389 26,145 5,769,168

Associated companies 4,102

Short-term bank deposits 981,320

Available-for-sale financial assets 4,407

Deferred income tax assets 241,513

Consolidated total assets 7,000,510

Segment liabilities 16,168 2,742,035 3,249 2,761,452

Borrowings 2,166,412

Current income tax liabilities 66,460

Deferred income tax liabilities 5,712

Consolidated total liabilities 5,000,036

Consolidated net assets 2,000,474

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38. Segment information (continued) The segment information provided to the key management for the reportable segments is as follows: (continued)

Shipping

Ship repair,

ship building

and marine

engineering

activities

All other

segments

Total for

continuing

operations

$’000 $’000 $’000 $’000


The Group

Sales

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

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

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

Elimination (65,230)

3,861,445

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

Finance expense (42,131)

Share of loss of associated companies (27)

Profit before income tax 401,846

Income tax expense (43,240)Net profit 358,606

Other segment items

Capital expenditure

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

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

Allowance for inventory write-down – 572 – 572

Net reversal of impairment of trade and otherreceivables – (31,241) – (31,241)

Expected losses recognised on constructioncontracts – 64,822 – 64,822

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

Associated companies 3,569

Short-term bank deposits 605,892

Available-for-sale financial assets 3,434

Deferred income tax assets 212,703

Consolidated total assets 6,053,342

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

Borrowings 992,213

Current income tax liabilities 72,766

Deferred income tax liabilities 4,304

Consolidated total liabilities 4,258,865

Consolidated net assets 1,794,477

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38. Segment information (continued) Geographical information

The Group’s business segments operate in three main geographical areas:

People’s Republic of China - the operations in this area are principally in ship repair, ship building and marineengineering activities;

Singapore - the operations in this area are principally in shipping, shipping agency, ship repair and marinerelated activities, rental of property; and

Malaysia - the operations in this area were principally in shipping agency activities.

Sales are based on the country in which the services are rendered to the customer. Non-current assets are shownby the geographical area where the assets are located.

Sales for

continuing operations Non-current assets

2011 2010 2011 2010

$’000 $’000 $’000 $’000

People’s Republic of China 4,084,582 3,711,802 2,589,970 2,330,568

Singapore* 78,339 147,433 163,577 173,903

Malaysia – 2,210 – 89

4,162,921 3,861,445 2,753,547 2,504,560

* The Group’s shipping companies operate in worldwide shipping routes. Hence, it would not be meaningful to allocate salesto any geographical segments for shipping activities.

Revenues of approximately $500,018,000 (2010: Nil) are derived from a single customer. These revenues areattributable to the People’s Republic of China ship repair, ship building and marine engineering activities segment.

39. New or revised accounting standards and interpretations

Below are the mandatory standards, amendments and interpretations to existing standards that have beenpublished, and are relevant for the Group’s accounting periods beginning on or after 1 January 2012 or later periodsand which the Group has not early adopted.

Amendments to FRS 107 Disclosures - Transfers of Financial Assets (effective for annual periods beginningon or after 1 July 2011)

Amendments to FRS 1 Presentation of Financial Statements (effective for annual periods beginning on orafter 1 July 2011)

FRS 19 (revised 2011) Employee Benefits (effective for annual periods beginning on or after 1 July 2013)

FRS 27 (revised 2011) Separate Financial Statements (effective for annual periods beginning on or after 1

July 2013)

FRS 113 Fair Value Measurement (effective for annual periods beginning on or after 1 July 2013)

The management anticipates that the adoption of the above amendments to FRS in the future periods will not havea material impact on the financial statements of the Group and of the Company in the period of their initial adoption.

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40. Authorisation of financial statements

These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of Cosco Corporation (Singapore) Limited on 2 March 2012.

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Five-Year Summary

Notes 2007 2008 2009 2010 2011$’000 $’000 $’000 $’000 $’000

INCOME STATEMENT

Turnover 2,261,700 3,476,009 2,899,004 3,861,445 4,162,921

Operating profit before taxation 497,536 450,745 178,338 401,873 286,842

Share of (loss)/profit of associated companies 1 537 643 214 (27) 717

Profit before income tax 498,073 451,388 178,552 401,846 287,559

Income tax expense (19,512) (31,620) (40,758) (43,240) (74,195)

Net profit 478,561 419,768 137,794 358,606 213,364

Attributable to:

Equity holders of the company 336,568 302,588 110,080 248,837 139,671

Non-controlling interests 141,993 117,180 27,714 109,769 73,693

Net profit 478,561 419,768 137,794 358,606 213,364

Dividend 2 156,738 156,747 67,177 89,570 67,177

BALANCE SHEET

Share capital 266,852 270,608 270,608 270,608 270,608

Statutory and other reserves 82,806 167,904 174,030 103,950 181,320

Retained earnings 590,249 705,692 639,404 824,059 849,305

Non-controlling interests 362,847 464,963 526,650 595,860 699,241

Total equity 1,302,754 1,609,167 1,610,692 1,794,477 2,000,474

Forward Currency Contracts 8,778 1,441 – – –

Trade and other receivables – – – 49,089 63,867

Financial assets, available-for-sale 3,067 3,630 4,034 3,434 4,407

Club memberships 479 473 492 557 390

Investments in associated companies 1,794 2,577 1,922 3,569 4,102

Investment properties 11,472 12,217 11,786 14,619 14,405

Property, plant and equipment 1,478,453 2,081,950 2,349,098 2,207,952 2,412,126

Intangible assets 9,302 9,546 9,525 9,468 9,526

Deferred income tax assets 21,996 91,417 158,523 212,703 241,513

Deferred expenditure – – 1,061 3,169 3,211

Current assets 2,431,829 4,596,023 3,885,885 3,548,782 4,246,963

Current liabilities (2,557,025) (4,572,188) (3,870,288) (3,817,496) (4,496,234)

Non-current liabilities (107,391) (617,919) (941,346) (441,369) (503,802)

Net Assets 1,302,754 1,609,167 1,610,692 1,794,477 2,000,474

RATIOS

Basic earnings per share (cents) 3 15.1 13.5 4.9 11.1 6.2

Dividend per share (cents) 7.0 7.0 3.0 4.0 3.0

Dividend cover (times) 4 2.1 1.9 1.6 2.8 2.1

Net tangible assets per share (cents) 41.6 50.7 48.0 53.1 57.7

Gearing ratio (Net of Cash) 5 cash cash cash 0.1 0.4

Notes

1. The share of profit of associated companies is net of tax.

2. The dividend for 2011 is calculated based on the number of shares issued as of 31 December 2011. The actual amount payable willbe based on the number of shares issue at book closure date.

3. Basic earnings per share is calculated as net profit attributable to equity holders of the company divided by the weighted averagenumber of ordinary shares issued in the financial year.

4. The dividend cover is calculated as net profit attributable to equity holders of the Company divided by the amount of equity dividend.

5. Gearing ratio is derived by taking total borrowings (net of cash) over the shareholders’ funds.

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Shareholding Statistics As at 6 March 2012



STATISTICS OF SHAREHOLDERS AS AT 6 MARCH 2012

Class of Shares – Ordinary shares

Voting Rights – One Vote per share

DISTRIBUTION OF SHAREHOLDERS AS AT 6 MARCH 2012

SIZE OF SHAREHOLDINGS

NO. OF

SHAREHOLDERS % NO. OF SHARES %

1 – 999 103 0.28 37,378 0.00

1,000 – 10,000 26,514 72.03 131,229,588 5.8610,001 – 1,000,000 10,147 27.57 410,043,042 18.31

1,000,001 and above 46 0.12 1,697,934,946 75.83

Total 36,810 100.00 2,239,244,954 100.00

SUBSTANTIAL SHAREHOLDER

DIRECT INTEREST DEEMED INTEREST

NO. NAME

NO. OF SHARES

HELD %

NO. OF SHARES

HELD %

1. China Ocean Shipping (Group)Company Pte Ltd 1,194,565,488 53.35 – –

COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL

Based on information available and to the best knowledge of the Company as at 6 March 2012 approximately 46.38% of the ordinary shares of the Company are held by the public. The Company is therefore in compliance with Rule 723 of theSGX-ST Listing Manual.

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Shareholding Statistics As at 6 March 2012

TWENTY LARGEST SHAREHOLDERS AS AT 6 MARCH 2012

SHAREHOLDER’S NAME NO OF SHARES %

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

2 SEMBCORP MARINE LTD 70,000,000 3.13

3 DBS NOMINEES PTE LTD 61,655,823 2.75

4 CITIBANK NOMINEES SINGAPORE PTE LTD 55,230,973 2.47

5 UNITED OVERSEAS BANK NOMINEES PTE LTD 33,457,518 1.49

6 HSBC (SINGAPORE) NOMINEES PTE LTD 31,154,287 1.39

7 RAFFLES NOMINEES (PTE) LTD 31,038,335 1.39

8 DBSN SERVICES PTE LTD 25,614,305 1.149 SCM INVESTMENT HOLDINGS PTE LTD 21,000,000 0.94

10 SEMBMARINE INVESTMENT PTE LTD 20,400,000 0.91

11 UOB KAY HIAN PTE LTD 18,379,670 0.82

12 BANK OF SINGAPORE NOMINEES PTE LTD 18,200,918 0.81

13 OCBC SECURITIES PRIVATE LTD 12,351,324 0.55

14 PHILLIP SECURITIES PTE LTD 9,403,030 0.42

15 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 8,356,738 0.37

16 HUI SHUNE MING @ HUI SHUN MENG 8,300,000 0.37

17 OCBC NOMINEES SINGAPORE PTE LTD 8,272,369 0.37

18 LIM & TAN SECURITIES PTE LTD 6,035,000 0.2719 MAYBANK KIM ENG SECURITIES PTE LTD 5,445,716 0.24

20 CIMB SECURITIES (SINGAPORE) PTE LTD 5,129,000 0.23

Total 1,643,990,494 73.41

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Notice of Annual General Meeting



NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at Suntec SingaporeInternational Convention & Exhibition Centre, 1 Raffles Boulevard Suntec City, Singapore 039593, Meeting Room 325-326,Level 3 on Friday, 20 April 2012 at 3:00 p.m. for the purpose of transacting the following businesses:

Ordinary Business:

1. To receive and adopt the Directors’ Report and Audited Financial Statements for the financial yearended 31 December 2011 together with the Auditors’ Report thereon.

(Resolution 1)

2. To approve a First and Final tax-exempt (one-tier) Dividend of S$0.03 per ordinary share for theyear ended 31 December 2011.

(Resolution 2)

3. To approve payment of Directors’ Fees of S$305,000 for the year ended 31 December 2011. (lastyear: S$285,000)

(Resolution 3)

4. To re-elect the following directors, on recommendation of the Nominat ing Committee andendorsement of the Board of Directors, who are retiring in accordance with Article 98 of the Articles of Association of the Company and who, being eligible, offer themselves for re-election:

a. Mr Jiang Li Jun (Resolution 4)

b. Mr Er Kwong Wah (See Explanatory Note 1) (Resolution 5)

5. To re-elect the following directors, on recommendation of the Nominating Committee andendorsement of the Board of Directors, who are retiring in accordance with Article 104 of the Articles of Association of the Company and who, being eligible, offer themselves for re-election:

a. Mr Ma Ze Hua (Resolution 6)

b. Mr Wu Zi Heng (Resolution 7)

c. Mr Liu Lian An (Resolution 8)

d. Mr Wang Yu Hang (Resolution 9)

6. To re-appoint, on recommendation of the Nominating Committee and endorsement of theBoard of Directors, Mr Tom Yee Lat Shing, a Director who will retire under Section 153(6) of theCompanies Act, Cap 50, to hold office from the date of this Annual General Meeting until the next Annual General Meeting of the Company. (See Explanatory Note 2)

(Resolution 10)

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

fix their remuneration.

(Resolution 11)

Special Business:

To consider and, if thought fit, to pass the following as Ordinary Resolutions, with or without modifications:

8. General Mandate to authorise the Directors to issue shares or convertible securities: (Resolution 12)

“That pursuant to Section 161 of the Companies Act (Cap 50) and the Listing Manual of theSingapore Exchange Securities Trading Limited (“SGX-ST”) (the “Listing Manual”), authority be andis hereby given to the Directors to allot and issue:-

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

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

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

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at any time and upon such terms and conditions and for such purposes as the Directors may intheir absolute discretion deem fit provided that :-

(i) the aggregate number of shares and convertible securities that may be issued shall notbe more than 50% of the issued shares in the capital of the Company (calculated inaccordance with (ii) below), of which the aggregate number of shares and convertiblesecurities issued other than on a pro rata basis to existing shareholders must be not morethan 20% of the issued shares in the capital of the Company (calculated in accordancewith (ii) below); and

(ii) for the purpose of determining the aggregate number of shares and convertible securitiesthat may be issued pursuant to (i) above, the percentage of issued share capital shall becalculated based on the issued shares in the capital of the Company at the time of thepassing of this resolution after adjusting for (a) new shares arising from the conversion or

exercise of any convertible securities; (b) new shares arising from exercising share optionsor vesting of share awards outstanding or subsisting at the time of the passing of thisresolution and (c) any subsequent consolidation or subdivision of shares; and

(iii) unless revoked or varied by ordinary resolution of the shareholders of the Company ingeneral meeting, this resolution shall remain in force until the next Annual General Meetingof the Company or the date by which the next Annual General Meeting of the Company isrequired by law to be held, whichever is earlier”. (See Explanatory Note 3)

9. Authority to allot and issue shares under the Cosco Group Employees’ Share Option Scheme2002 (“Scheme”)

(Resolution 13)

“That approval be and is hereby given to the Directors to allot and issue from time to time suchnumber of shares in the capital of the Company as may be required to be issued pursuant to the

exercise of options granted under the Cosco Group Employees’ Share Option Scheme 2002.”(See Explanatory Note 4)

10. Proposed Renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions (Resolution 14)

(i) “That approval be and is hereby given for the renewal of the mandate for the purposesof Chapter 9 of the Listing Manual, for the Company, its subsidiaries and associatedcompanies or any of them to enter into any of the transactions falling within the typesof Interested Person Transactions, particulars of which are set out in the Appendix A (“Appendix”) to the Annual Report of the Company for the financial year ended 31December 2011 with any party who is of the class of Interested Persons described in the Appendix provided that such transactions are made on normal commercial terms and willnot be prejudicial to the interests of the Company and its minority shareholders and in

accordance with the review procedures set out in the Appendix;(ii) That the Audit Committee of the Company be and is hereby authorised to take such

actions as it deems proper in respect of such procedures and/or to modify or implementsuch procedures as may be necessary to take into consideration any amendment toChapter 9 of the Listing Manual which may be prescribed by the SGX-ST from time totime;

(iii) That the Directors of the Company be and are hereby authorised to complete and doall such acts and things (including all such documents as may be required) as they mayconsider expedient or necessary or in the interests of the Company to give effect to thisResolution; and

(iv) That the authority conferred by this Resolution shall, unless revoked or varied by theCompany in general meeting, continue in force until the conclusion of the next Annual

General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.” (See Explanatory Note 5)

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BY ORDER OF THE BOARD

Teo Meng KeongCompany Secretary


Explanatory Notes on Business to be transacted

1. Mr Er Kwong Wah will, upon election as a Director, remain as the Chairman of the Remuneration Committee and a member of the

Audit Committee, Nominating Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will

be considered independent for the purpose of Rule 704(8) of the Listing Manual.

2. Mr Tom Yee Lat Shing will, upon re-appointment, remain as the Chairman of the Audit Committee and a member of the Nominating

Committee, Remuneration Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will be

considered independent for the purposes of Rule 704(8) of the Listing Manual.

3. Ordinary Resolution 12 is to empower the Directors of the Company from the date of the above Meeting until the next Annual

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

aggregate 50% of the issued shares in the capital of the Company of which the total number of shares and convertible securities

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

Company at the time the resolution is passed, for such purposes as they consider would be in the interests of the Company. This

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

4. Ordinary Resolution 13 is to empower the Directors of the Company, from the date of this Meeting until the next Annual GeneralMeeting, to allot and issue shares in the capital of the Company pursuant to the exercise of such options under the Scheme. The

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

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

5. Ordinary Resolution 14 is to renew the General Mandate to allow the Company, its subsidiaries and associated companies or any of

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

in Chapter 9 of the Listing Manual).

The Company’s Audit Committee has confirmed that the methods and procedures for determining the transaction process have

not changed since the last renewal of the Shareholders’ Mandate on 20 April 2011 in respect of transactions described in Section

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

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

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

to the interests of the Company and its minority shareholders.

NOTES:

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

his stead. A proxy need not be a member of the Company.

ii. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding

(expressed as a percentage of the whole) to be represented by each proxy.

iii. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 9 Temasek Boulevard,

#07-00 Suntec Tower Two, Singapore 038989 not later than 48 hours before the time fixed for holding the Annual General Meeting.

iv. This instrument appointing a proxy or proxies must be under the hand of the appointer or his attorney duly authorised in writing.

Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal

or under the hand of any attorney duly authorised.

v. A corporation which is a member may also authorise by resolution of its directors or other governing body, such person as it thinks

fit to act as its representative at the meeting in accordance with Section 179 of the Companies Act (Cap. 50).

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NOTICE OF BOOKS CLOSURE

NOTICE IS HEREBY GIVEN that, subject to the approval of shareholders to the First and Final Dividend being obtained atthe Annual General Meeting to be held on 20 April 2012, the Transfer Books and the Register of Members of the Companywill be closed on 4 May 2012 for the preparation of dividend warrants for shareholders of ordinary shares registered in thebooks of the Company.

Duly completed registrable transfers of ordinary shares in the capital of the Company (“Shares”) received by the Company’s

Share Registrar, Tricor Barbinder Share Registration Services, 80 Robinson Road, #02-00, Singapore 068898 up to 5.00p.m. on 3 May 2012 will be entitled to the proposed First and Final Dividend.

Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at 5.00 p.m. on 3May 2012 will be entitled to the proposed First and Final Dividend. Payment of the dividends, if approved by members at

the Annual General Meeting, will be made on 18 May 2012.

BY ORDER OF THE BOARD

Teo Meng KeongCompany Secretary


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COSCO CORPORATION (SINGAPORE) LIMITED(Incorporated in the Republic of Singapore)(Company Registration No.: 196100159G)

ANNUAL GENERAL MEETINGPROXY FORM

I/We NRIC/Passport No.of being a member of Cosco Corporation (Singapore) Limited (the “Company”), hereby appoint

Name Address

NRIC/Passport

Number

Proportion of

Shareholdings (%)

And/or (delete as appropriate)

Name Address

NRIC/Passport

Number

Proportion of

Shareholdings (%)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual General

Meeting of the Company to be held at Suntec Singapore International Convention & Exhibition Centre, 1 Raffles Boulevard SuntecCity, Singapore 039593, Meeting Room 325-326, Level 3 on Friday, 20 April 2012 at 3:00 p.m. and at any adjournment thereof.

I/We have indicated with an “X” in the appropriate box against the item how I/we wish my/our proxy/proxies to vote. If no specificdirection as to voting is given or in the event of any item arising not summarised below, my/our proxy/proxies may vote or abstain atthe discretion of my/our proxy/proxies.

No. Resolutions For Against

ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Audited Financial Statements for the year ended 31 December2011 together with the Auditors’ Report thereon.

2. To declare a First and Final tax exempt (one-tier) Dividend of S$0.03 per ordinary share for the year ended 31

December 2011.

3. To approve payment of Directors’ Fees.

4. To re-elect Mr Jiang Li Jun, who is retiring under Article 98 of the Articles of Association of the Company.

5. To re-elect Mr Er Kwong Wah, who is retiring under Article 98 of the Articles of Association of the Company.

6. To re-elect Mr Ma Ze Hua, who is retiring under Article 104 of the Articles of Association of the Company.

7. To re-elect Mr Wu Zi Heng, who is retiring under Article 104 of the Articles of Association of the Company.

8. To re-elect Mr Liu Lian An, who is retiring under Article 104 of the Articles of Association of the Company.

9. To re-elect Mr Wang Yu Hang, who is retiring under Article 104 of the Articles of Association of the Company.

10. To re-appoint Mr Tom Yee Lat Shing, who is retiring pursuant to Section 153(6) of the Companies Act, Cap 50.

11. To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors of the Company and to authorise the

Directors to fix their remuneration.

SPECIAL BUSINESS

12. To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Cap 50.

13. To authorise Directors to issue shares pursuant to the Cosco Group Employees’ Share Option Scheme 2002.

14. To approve the renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions.

Dated this day of 2012

Total No. of Shares in No. of Shares

CDP Register

Register of Members

Signature of Member(s) or Common Seal

IMPORTANT: Please Read Notes for This Proxy Form.

Important:

1. For investors who have used their CPF monies to buy theCompany’s shares, this Annual Report is sent to them atthe request of their CPF Approved Nominees solely FORINFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors andshall be ineffective for all intents and purposes if used orpurported to be used by them.

3. CPF investors who wish to vote should contact their CPF Approved Nominees.

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NOTES:

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in section 130A of the Companies

Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number

of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the

aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the

instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A Shareholder of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote on his behalf. Such proxy

need not be a Member of the Company.

3. Where a Shareholder appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to

be represented by each proxy.

4. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 9 Temasek Boulevard, #07-00 Suntec Tower Two, Singapore 038989

not less than 48 hours before the time set for holding the annual general meeting. The sending of a Proxy Form by a Shareholder does not preclude him from attending and

voting in person at the annual general meeting if he finds that he is able to do so. In such event, the relevant Proxy Forms will be deemed to be revoked.

5. The instrument appointing a proxy or proxies must be under the hand of the appointer or of his attorney duly authorised in writing. Where the instrument appointing a proxy or

proxies is executed by a corporation, it must be executed either under its seal or under the hand of a director or an officer or attorney duly authorised.

6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointer by an attorney, the power of attorney (or other authority) or a duly certified copy thereof

must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a Shareholder may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the annual

general meeting, in accordance with section 179 of the Companies Act, Chapter 50 of Singapore.

8. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the

appointer are not ascertainable from the instructions of the appointer specified in the instrument appointing a proxy or proxies. In addition, in the case of a Shareholder whose

Shares are entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the Shareholder, being the appointer, is not shown

to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the annual general meeting, as certified by The Central

Depository (Pte) Limited to the Company.

First fold

COSCO CORPORATION (SINGAPORE) LIMITED9 Temasek Boulevard, #07-00 Suntec Tower Two,

Singapore 038989

Second fold

Third fold

Apply glue here

Pleaseaffix

postagestamp

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Documents

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