rotary engineering limited annual report 2009 charting€¦ · tar y engineering l i m ite d ann u...

CHARTING NEW W

ATERS RoTARy ENGINEERING lImITEd ANNuAl REpoRT 2009

RoTARy GRoup oF CompANIESSINGAPORE

– RotaRy ElEctRical company

(pRivatE) limitEd

– RotaRy imc ptE ltd

– ShopGlobal ptE. ltd.

– RotaRy mEchanical and conStRuction

company (pRivatE) limitEd

– RotaRy-thai conStRuction ptE. ltd.

– RotaRy tREl ptE ltd

– RotaRy ElEctRical & inStRumEntation

ptE. ltd.

– RotaRy automation ptE. ltd.

– RotaRy pRoduction SERvicES nEtwoRk

ptE. ltd.

– RotaRy loGiSticS ptE. ltd.

– dElimax ptE. ltd.

– EaStloG holdinG ptE. ltd.

– EnRiS ptE ltd

– JaSinuSa automobilE ptE. ltd.

– innovativE biotEch ptE ltd

– itRo ptE. ltd.

– powEll induStRiES aSia ptE ltd

– pipE Rack holdinG company

pRivatE limitEd

– okp (oil & GaS) infRaStRuctuRE ptE. ltd.

– buildGlobal ptE. ltd.

– RSk EnGinEERinG co ptE ltd

– SupERmEc pRivatE limitEd

– Sixty-Six SwitchGEaRS co ptE ltd

– tionG woon china conSoRtium ptE. ltd.

– ipRomaR (ptE.) ltd.

– RotaRy aRabia SinGapoRE ptE. ltd.

– pEtRol StEEl SinGapoRE ptE.ltd.

MALAYSIA

– RotaRy mEc (m) Sdn bhd

– haRvESt E&i EnGinEERinG Sdn bhd

THAILAND

– thai RotaRy EnGinEERinG public

company limitEd

– calvERt limitEd

INDONESIA

– p.t. RotaRy EnGinEERinG indonESia

INDIA

– RotaRy mEc EnGinEERinG (india)

pRivatE limitEd

– RotaRy tEchSkill (india) pvt limitEd

PEOPLE’S REPUBLIC OF CHINA

– RotaRy EnGinEERinG (ShanGhai) co., ltd.

– RotaRy intERnational tRadinG

(ShanGhai) co., ltd.

– RotaRy EnGinEERinG (dalian) co. limitEd

– fuShun RotaRy cablE co. ltd

– chanGchun faw ucc

– Jinzhou EvERthRivinG loGiSticS co., ltd.

AUSTRALIA

– RotaRy EnGinEERinG (auStRalia) pty ltd

SAUDI ARABIA

– RotaRy aRabia co. ltd.

– pEtRol StEEl co. ltd.

ROTARY ENGINEERING LIMITED(company’S REGiStRation no. 198000255E)

RoTARy ENGINEERING lImITEd ANNuAl REpoRT 2009

CHARTING NEW WATERS

CoRpoRATE INFoRmATIoN

BOARD OF DIRECTORS• Chia Kim Piow (Chairman & Managing Director)• Chia Kim Chua• Keith Tay Ah Kee• Quek Wee Hong• Lam Khin Khui• Badri Narayanan Santhana Krishnan• Wong Oi Moi

AUDIT COMMITTEE• Keith Tay Ah Kee (Chairman)• Lam Khin Khui• Quek Wee Hong• Badri Narayanan Santhana Krishnan

NOMINATING COMMITTEE• Quek Wee Hong (Chairman)• Lam Khin Khui• Keith Tay Ah Kee• Chia Kim Piow

REMUNERATION COMMITTEE• Lam Khin Khui (Chairman)• Keith Tay Ah Kee• Quek Wee Hong

COMPANY SECRETARY• Tan Cher Liang

REGISTERED OFFICE17 Tuas Avenue 20Singapore 638828T (65) 6861 1155 F (65) 6862 1319

SHARE REGISTRARBoardroom Corporate & Advisory Services Pte. Ltd.50 Raffles Place #32-01Singapore Land TowerSingapore 048623T (65) 6536 5355 F (65) 6536 1360

AUDITORSErnst & Young LLPAudit Partner – Tan Chian Khong(since financial year 2007)

Every successful sailing team comprises of an experienced captain able to navigate the seas, recognise and predict patterns in weather, and adapt to existing vessel conditions. Equally important is a supportive and cooperative team of sailors who will carry out everything from reducing sail and hull trimming, to cooking and cleaning on board.

Rotary Engineering draws similar comparisons to the art and science of yacht racing. Through the onslaught of the financial tsunami in the past year, our team of dedicated, passionate and meticulous leaders have managed to steer our vessel into calm waters by navigating the geography, predicting the on-coming conditions and adapting to the changing environment.

As Rotary embarks on a voyage of globalisation, we have adopted the tagline “Charting New Waters” this year. Our team continues to seek new opportunities and break new ground.

CHARTING NEW WATERS

01 Rotary at a Glance

04 Chairman’s Message

12 Board of Directors

16 Senior Management

28 Organisation Structure

32 Global Footprints

34 Operations Review

37 Rotary Scorecard

42 Code of Corporate Governance

53 Directors’ Report

57 Statement By Directors

58 Independent Auditors’ Report

60 Consolidated Statement of

Comprehensive Income

61 Balance Sheets

63 Statements of Changes in Equity

66 Consolidated Cash Flow Statement

68 Notes to the Financial Statements

141 Statistics of Shareholdings

143 Notice of Annual General Meeting

149 Proxy Form

ROTARY ENGINEERING LIMITED is one of the region’s leading oil and gas infrastructure services companies

with an extensive international experience offering fully integrated engineering design, procurement, construction

and maintenance (“EPCM”) services to the oil and gas, petroleum, petrochemical and pharmaceutical industries.

Headquartered in Singapore, the Group has established a strong presence in the Asia-Pacifi c region and

continues to make its mark as a global player. Established in 1972, the Group has forged a reputation built on its

hallmark traits of providing quality services, within budget and on time delivery. Today, the Group boasts a total

strength of over 7,800 employees which include a highly and multi-skilled workforce that forms the mainstay of

its core EPCM services.

Singapore remains a key market for the Group while it actively seeks business opportunities overseas. The Group

has subsidiaries and associate companies in Malaysia, Thailand, Indonesia, India, China, Australia and the

Middle East.

Rotary Engineering Limited is ISO 9000, ISO14000, OHSAS certifi ed and listed on the mainboard of the Stock

Exchange of Singapore since 1993.

CONTENTS

ROTARY AT A GLANCE

02_Rotary_AR_Glance & Contents.indd 1 3/25/2010 9:10:52 PM

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CoRE VAluESS…SafEty abovE all, to pRotEct ouR

EQuIPMENT, THE ENvIRONMENT

and ouRSElvES

T…TEAMWORK TO ACHIEvE QuALITY

pRoductS and SERvicES

R…REcoGnition of EmployEES’

contRibution and dEvElopmEnt

of thEiR potEntial

I…inculcation of continuouS woRk

impRovEmEnt aS ouR cultuRE

D…dEvElopmEnt of pRidE and

ownERShip in ouR woRk

E…ExcEllEncE in all ouR EffoRtS

to mEEt ouR viSion

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ouR VISIoNwE aSpiRE to bE an ExcEllEnt Global

EnGinEERinG, pRocuREmEnt and

conStRuction company.

ouR mISSIoNOuR MISSION IS TO PROvIDE QuALITY

SERvicES that conSiStEntly mEEt ouR

cliEntS’ nEEdS and ExpEctationS

thRouGh ExcEllEncE in ouR

opERationS.

HSE polICy STATEmENTouR miSSion iS to pRovidE a SafE

woRkinG EnviRonmEnt foR ouR

EmployEES, pRotEction of thE

EnviRonmEnt, SafEGuaRdinG ownERS’

PLANTS AND EQuIPMENT.

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EXPANDINGHORIZONS“IF you WANT To buIld A SHIp, doN’T dRum up pEoplE ToGETHER To

CollECT Wood ANd doN’T ASSIGN THEm TASkS ANd WoRk, buT RATHER TEACH

THEm To loNG FoR THE ENdlESS ImmENSITy oF THE

SEA.”Antoine de Saint Exupery

CHAIRmAN’S mESSAGE

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DEAR SHAREHOLDERS ,

On behalf of my fellow directors, I am pleased to present to you the performance of the Group for the financial year ended 31 December 2009.

A GREAT YEARWe entered 2009 with some apprehension. As the credit crunch continued to take its toll on a global economy already deep in recession, project delays and cancellations were widely reported. Governments around the world, including Singapore sprung into action, putting in place stimulus packages. At Rotary, we have emerged stronger from the experience.

All things considered, it’s been a great year for Rotary. In FY2009, we achieved record profits and revenues, our order book as at 31 December 2009 stood at an all-time high of S$1.3 billion and we landed our single-largest EPC contract of S$1.1 billion amidst a difficult operating environment of diminishing prospects and intense competition.

We posted our highest-ever net profit after tax and minority interest of S$54.2 million, compared with S$50.9 previously. This achievement came on the back of record revenues of S$551.9 million, a 6% increase over last year’s S$520.1 million. Earnings per share grew by 7% at 9.6 cents for the 12 months to 31 December 2009.

We ended the year in a strong financial position. Our assets totalled S$497.4 million, with net tangible assets of S$260.2 million and cash equivalents of S$132.4 million.

The Board of Directors is recommending a final dividend of 3.8 cents per share, to our shareholders who have supported us unwaveringly.

As a leading provider of engineering, procurement, construction and maintenance services specialising in the Oil & Gas and Petrochemical industries, we continued to stay the course, steering ourselves in a way that will help us to manoeuvre perilous seas, avoiding treacherous rocks.

GROwING THE BUSINESSEven in tough times, opportunities abounded. Rotary with its solid management and financials, culture of proactive client service and strong track record as a trusted business partner, pursued prospects aggressively and developed valuable propositions for both Rotary and its clients. We continuously strived to meet the expectations of investors, clients and business partners, yet the key motivation has always been our values and aspiration to do well – for our own satisfaction. We held a realistic assessment of our capabilities, even as the last few years have seen us breaking our own records in terms of revenues and profits. It remained our desire to chart new waters, break new grounds and to move Rotary into another level altogether.

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SATORPWe were thrilled to be awarded our first mega-project in Saudi Arabia. Our uS$745 million (about S$1.1 billion) Engineering, Procurement and Construction (EPC) contract, awarded by Saudi Aramco Total Refining and Petrochemical Company (SATORP), to build a refinery tank farm at Jubail, Saudi Arabia, was a huge achievement. I am pleased to report that this project is currently well on track, with engineering design work in advanced stages and the delivery of steel plates in progress. Construction work will begin in second quarter of 2010.

It is to the credit of my management team that we are able to secure this contract, as well as put in place the supporting infrastructure to execute this project satisfactorily. For instance, we will need to engage about 1,500 more workers this year to meet the demands of this project. Our robust Human Resources Department, coupled with our Overseas Training and Test Centres (OTTCs), will play a huge role in ensuring adequate supply of skilled workers.

Middle East InitiativesThe SATORP contract has further consolidated our presence in a market where we have established a presence since 2006. We intend to capitalise

on SATORP to secure more work, and we believe we are well-placed to participate in tenders for new projects as Saudi Arabia rolls out its planned expansion of oil and gas infrastructure, which will transform the Kingdom from a source to a significant global processing hub for the petrochemical industry.

In other countries, we plan to develop infrastructure support opportunities in line with the changing and growing industrial landscape to further consolidate our invested presence in the region.

Asia Nearer home, our intention is to

continue building on the territories where we already have a foothold, as well as break into new areas, where possible, that will enable us to align our interests as partners with our clients and help us to scale the value chain gradually.

We continue to actively develop prospects directly with our clients especially in Indonesia and Malaysia, and we hope that some of these projects will come to fruition in due course.

Our projects nearer home are also ground-breaking in their own right. The construction contracts we are undertaking for oil majors are among the biggest we have worked on, involving some of the world’s largest process plants in recent times.

Others These are exciting times for Rotary as it accelerates into a mode that sees it scaling greater heights and breaking new ground in numerous ways.

Other parts of our business also enjoyed good growth. On the revamp and maintenance front, in spite of tough market conditions and intense competition, we are able to secure a number of contracts with oil majors that come with the option for further extension.

CHAIRmAN’S mESSAGE

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BUILDING STRONG SUPPORT INFRASTRUCTUREAs our growth momentum gathers, it is imperative that our internal support infrastructure is further strengthened in order to move us forward. As we pick up pace on the business development front, we are also mindful of the need to keep our internal support structures in order.

Human ResourcesThe importance of human capital cannot be underestimated as we move forward in our bid to become a bigger player in our selected space. With over 7,000 employees, our Human Resource Department adopts progressive and innovative strategies and initiatives to ensure that we continue to attract and retain talent at all levels.

Our Global Workforce (GWF) scheme has indeed sharpened our competitive edge as we grow our own crop of engineers and craftsmen who are attuned to the Rotary brand of service delivery. To date, our four Overseas Training and Test Centres in China, India and Bangladesh have trained almost 1,000 personnel. As we prepare to take on more and bigger projects, this scheme will take on greater importance. With our enhanced presence in Saudi Arabia, plans are already in place to set up a training centre there, tapping on and developing local talent to meet our project demands.

Health, Safety and Environment mattersOur commitment to provide a safe and risk-free working environment for our people remains unwavering. Over the year, we continued to focus on informing, educating, reminding and

reinforcing our principles relating to best Health, Safety and Environment practices. To this end, our team of dedicated HSE professionals has laboured tirelessly to create a safety culture so that it becomes second nature to our people. Many initiatives were launched in the course of the year and the clearest benefit is reflected in our accident frequency rate which in 2009, was reduced by 29% compared to the year before. Our target however is still to achieve zero injuries at our worksites.

Rotary Globalisation PlanThe Rotary Globalisation Plan, formally launched in 2008, is an internal restructuring programme that reflects Rotary’s intent to position itself strategically. With our six key Business units operational, the programme is now in the systems implementation and integration phase that includes the Enterprise Resource Planning (ERP) system, as well as the SmartPlant suite of engineering systems. We are confident that this will improve our work processes and enhance productivity.

OUTLOOkAs we stand on the threshold of another year, the overall outlook is vastly different from a year ago. Even as there are signs that the global economy is turning around with major economies

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emerging from recession, it is still some way from plain sailing conditions as economic weakness continued to be reported in other countries. Still, the current outlook for future energy demand appears encouraging and should underpin long-term prospects for oil and gas and petrochemical industries.

With many infrastructure projects in the pipeline in the Middle East and the returning activity in Asia, Rotary is well-placed to capitalise on these projects to develop existing territories. Overall, we expect growth to come mainly from overseas markets, in particular the Middle East.

We shall continue to work hard to deliver on our projects and focus on the most profitable opportunities. Our strong fundamentals will hold us in good stead as we look to reaping long-term rewards even as we overcome short-term challenges.

A NOTE OF THANkSOn behalf of the Board of Directors, I would like to thank our customers, business associates and suppliers for their unwavering support, encouragement and assistance.

To the management and staff of the Rotary Group of Companies, the Board and I wish to extend our thanks and appreciation for their commitment and dedication.

Finally, thanks are due to all our shareholders who continue to believe in us and to support us.

Mr. Chia kim PiowChairman & Managing Director

“FACTS FRom pApER ARE NoT THE SAmE AS FACTS FRom pEoplE. THE RElIAbIlITy oF THE pEoplE GIVING

you THE FACTS IS AS ImpoRTANT AS THE FACTS THEmSElVES.”

Harold S. Geneen

PROVENRELIABILITY

boARd oF dIRECToRS

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boARd oF dIRECToRS

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boARd oF dIRECToRS

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09 LAM kHIN kHUI was appointed to the Board in 1993. He brought along with him a wealth of experience from the many years of working for both the private and government-linked companies. He is a partner with an international management consulting firm. He holds a Bachelor in Chemical Engineering from university of Melbourne and a Diploma in Business Administration from National university of Singapore.

kEITH TAY is a Chartered Accountant by profession and was formerly Chairman and Managing Partner of an international accounting firm. He was President of Certified Public Accountants of Singapore from 1982 to 1992. Mr Tay is currently Chairman of Stirling Coleman Capital Ltd and holds directorships in several other companies. He is also on the Board of Singapore International Chamber of Commerce. He has also served as Adjunct Professor in the School of Accountancy and Business of Nanyang Technological university.

CHIA kIM CHUAEXECUTIVE DIRECTOR

LAM kHIN kHUIINDEPENDENT DIRECTOR

CHIA kIM PIOwCHAIRMAN & MANAGING DIRECTOR

kEITH TAY AH kEEINDEPENDENT DIRECTOR

CHIA kIM PIOw is the Founder, Chairman and Managing Director of the Rotary Group of Companies. With more than 38 years of experience in plant and facility design and construction, he is instrumental in developing the Group from a sub-contractor to a multinational turnkey engineering design and construction group. under his stewardship, the Group has gained recognition as one of the region’s leading players in the oil and gas, petroleum, petrochemical and pharmaceutical industries.

CHIA kIM CHUA was appointed to the Board in 1982. Since then, he has served as the head of Project Management Team and has overseen many major EPC projects in Singapore as well as overseas. He is also the Management Representative for the Group’s ISO 9000, ISO 14000 and OHSAS 18000 certification. He holds a Diploma from Singapore Polytechnic.

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wONG OI MOI has been associated with the Group since 1975. She is currently a Non-Executive and Non-Independent Director of the Board.

BADRI NARAYANAN SANTHANA kRISHNAN was appointed to the Board in 2008. He is currently working with Oman Investment Fund, as an integral part of the fund’s Asia Pacific Investment Strategy team. Prior to joining the Fund, he held positions with Citigroup and Goldman Sachs in London, Dubai and India. Currently located in Oman, he specialises in investment and portfolio management. He is a Chartered Financial Analyst.

BADRI NARAYANAN SANTHANA kRISHNAN

NON-EXECUTIVE DIRECTOR wONG OI MOINON-EXECUTIVE DIRECTOR

QUEk wEE HONG was appointed to the Board in 1993. He relinquished his executive position in 1995 and has since remained as a non-executive member of the Board. He was previously the Company Secretary and a member of the Audit Committee from 1993 to 1995. In 2001, he was re-appointed as a member of the Audit Committee. Prior to joining the Group, he held senior management positions in accounting, finance and management in both local and multinational companies. He holds a Masters in Business and is a Certified Public Accountant. He is also a Chartered Secretary and Administrator.

QUEk wEE HONGINDEPENDENT DIRECTOR

SENIoR mANAGEmENT

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SENIoR mANAGEmENT

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Senior management

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Kellin Tham is the General Manager of Rotary Logistics Pte Ltd, a one-stop shop logistics provider offering integrated warehousing, material logistics, procurement and total supply chain management services. Since 2001, she has played an instrumental role in overseeing the Group’s procurement needs for local and overseas projects. In 2008, Rotary Electrical & Instrumentation was added to Kellin’s portfolio and since assuming stewardship as its Managing Director, she has continued to steadily grow the subsidiary’s business. Kellin is also the Managing Director of the Group’s subsidiary, Supermec Pte Ltd.

Kellin Tham MANAGING DIRECTOR

ROTARY ELECTRICAL &

INSTRUMENTATION

PTE LTD

SUPERMEC

PTE LTD

alberT liew is the Construction Director of the Group’s Construction Management Team. He has more than 29 years of construction experience gained from multinational companies. Albert is responsible for overseeing projects involving civil, steel structure, storage tanks, piping, electrical and instrumentation. He has spearheaded a myriad oil and gas plants, petrochemical complexes, water treatment plants and bridges in Southeast Asia, China and the Middle East. He specialises in storage tank construction work especially cryogenic (double-walled tank), spherical and double deck floating roof tanks. He is also certified in Construction Management Supervision and Construction Safety for Project Managers from Singapore PSB.

alberT liew YOOn KOnG CONSTRUCTION DIRECTORROTARY ENGINEERING LIMITED

DereK KOhCHIEF FINANCIAL OFFICER ROTARY ENGINEERING LIMITED

DereK KOh is a Chartered Accountant with over 20 years of broad experience in professional practice and industry. Prior to joining the Group, he headed up various functions including Finance, Internal Controls, Corporate Affairs, and Information Technology in multinational and Asian companies. He also has Audit, Corporate Finance & Recovery and Risk Management experience from professional practice. Derek holds an Economics - Accounting & Finance degree from The London School of Economics.

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Khin maunG mYinT is the General Manager of the Group’s Project Proposal Department. He joined the Group in 1989, after spending 18 years in a petrochemical complex in Myanmar. Since then, he has been involved in project management, procurement, construction, testing and commissioning of oil and gas projects in Asia, Middle East and Africa. He holds a Bachelor of Mechanical Engineering from Rangoon Institute of Technology, Myanmar.

Khin maunG mYinT PROJECT PROPOSALGENERAL MANAGER ROTARY ENGINEERING LIMITED

hO Se wai joined the Group in June 2009 as CIO, with over 20 years of operational and professional experience in IT. Prior to joining the group, she held various positions in multinational companies, both in IT vendor environment as well as in in-house operations. These included heading up application support function, regional PMO for major IT outsource program, and managing a SAP consulting team. She graduated from the National University of Singapore with a Bachelor of Science degree (Computer Science and Information Systems).

hO Se waiCHIEF INFORMATION

OFFICERROTARY ENGINEERING

LIMITED

TOnY Fam is the Acting General Manager of Rotary-Thai Construction Pte Ltd (“RTC”), one of the strategic business units with the Group, responsible for Engineering, Procurement and Construction (“EPC”) of storage tanks. Concurrently, Tony is also the Vice President, Business Development/Marketing of Group’s wholly owned subsidiary, Thai Rotary Engineering Public Co. Ltd (“TREPCL”), and was appointed as the Director in January 2009. Prior joining the Group, Tony has over 20 years of experience in the fields of project management within the oil and gas industry, and specialist underground pipeline re-construction works using trenchless technologies. Tony graduated from Singapore Polytechnic in 1986, with a Diploma in Mechanical Engineering. He also holds an Advanced Diploma in Business Administration with University of Bradford (UK).

TOnY Fam GENERAL MANAGER (ACTING) ROTARY-THAI

CONSTRUCTION PTE LTD

SENIoR mANAGEmENT

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SENIoR mANAGEmENT

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SENIoR mANAGEmENT

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kOH CHUN PENG BUSINESS

DEVELOPMENT DIRECTOR ROTARY ENGINEERING LIMITED

Heading the Group’s business development activities, kOH CHUN PENG develops new prospective clients in Singapore and globally, and matures prospects to clients for the Group. Joined in August 2007, Mr Koh is concurrently the General Manager (China) overseeing the Group’s business in China. He runs Rotary Engineering (Shanghai) Ltd and Rotary Engineering (Dalian) Ltd. Mr Koh brings with him business and market development expertise, and almost ten years of China business experience. A former government scholar, he held managerial positions in Singapore government’s overseas investment promotion arm, IE Singapore. Mr Koh has also professional experience in strategy consulting. He holds a MSc (Management) and BBA(Hons) from the National university of Singapore, a Chinese Language Proficiency Certificate from Beijing university, and has attended an Executive Program for senior government officials jointly conducted by Beijing university and Fudan univesity.

JOSEPH kHOw is the Managing Director of Rotary IMC Pte Ltd (“RIMC”). Since 2000, Joseph has led RIMC to become a leading player in third-party maintenance service provider to the process industries in Singapore. Joseph has a Masters in Science (Industrial and Systems Engineering) from National university of Singapore, a Bachelor (Hons) in Mechanical Engineering from Nanyang Technological university and a Diploma (Mechanical) from Singapore Polytechnic. He is a member of the Institute of Engineers in Singapore, and has served as President of the Association of Process Industry from July 2002 to June 2004.

JOSEPH kHOw MANAGING DIRECTOR ROTARY IMC PTE LTD

LOH ENG kEE MANAGING DIRECTOR THAI ROTARY ENGINEERING

PUBLIC COMPANY LIMITED

LOH ENG kEE is the Managing Director of Thai Rotary Engineering Public Company Limited (“TREPCL”). under his leadership and his wealth of experience, TREPCL is now widely known as one of the leading companies in turnkey EPC storage terminal construction and reliable main contractor in the oil and gas industry in Southeast Asia and Africa. He is also the Project Director of Project Management Team. In 2009, he was appointed Project Manager to the SATORP project, the Group’s biggest project to date in Saudi Arabia.

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DR. M. MAHALINGAMENGINEERING DIRECTOR

ROTARY ENGINEERING LIMITED

DR. M. MAHALINGAM joined the Group in January 2010 as Engineering Director with more than 32 years of experience in engineering design and development in the fields of oil and gas, petrochemical, chemical and infrastructure projects. He works closely with other Directors and Senior Management to formulate the Group’s engineering policies, procedures and engineering execution methods. He holds three engineering degrees which includes a PhD in Mechanical Engineering.

THAM PENG wENG is the General Manager of ShopGlobal Pte Ltd which handles all shop fabrication works to support all business units in the Group. With over 31 years of experience in construction, fabrication, maintenance and workshop facilities, he is able to handle all aspects of project management. As head of the Singapore and Batam fabrication workshops, he is able to meet international demands given his wealth of technical know-how and practical experience.

THAM PENG wENG GENERAL MANAGER

SHOPGLOBAL PTE LTD

SARJIT SINGH is the General Manager of Rotary MEC (M) Sdn Bhd (“RMEC”). Since 2001, Sarjit has led RMEC to be the subcontracting company of choice with many international EPC contractors. under his leadership, RMEC has ventured successfully into Sudan and now are looking for opportunities in Central Asia and other parts of the world, especially where Petronas has a presence. He holds a Bachelor (Hons) in Mechanical Engineering from united Kingdom. He is a registered professional engineer with the Institute of Engineers, and a member of the Board of Engineers in Malaysia.

SARJIT SINGH GENERAL MANAGER

ROTARY MEC (M) SDN BHD

LAM CHOON VOON was previously the CEO of a local firm engaged in Facility Services as well as a founder of a medical device distribution company. Prior to that, he was involved in venture capital investment work from the private sector and government agencies. Choon voon has a Masters Degree awarded by Curtin university of Technology.

LAM CHOON VOONGENERAL MANAGER

ROTARY MECHANICAL AND

CONSTRUCTION COMPANY

PTE LTD

SENIoR mANAGEmENT

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kUNIO NAkAMURA possesses a Bachelor Degree in Polymer Chemistry awarded by Tokyo Institute of Technology in 1997, and he brings with him 32 years of extensive experience in multi-disciplinary projects in petroleum and petrochemical industry. His first project as a Project Engineer was for the SRC Expansion Project in Singapore from 1978 to 1980 in which he was in charge of the offsite facilities including two 1 million barrels crude tanks. Previously, Mr. Nakamura was the Managing Director for JGC Singapore, and he was instrumental in strengthening the EPC capabilities for the company, making it an established market leader in the industry.

kUNIO NAkAMURACHIEF OPERATING OFFICERROTARY ENGINEERING LIMITED

LEE kIT TONG joined the Group in December 2009 as Project Director. Prior to joining the Group, he was the Turnaround Manager with Shell Chemicals Seraya. He has more than 20 years of experience in Maintenance, Engineering and Project Management and was active in promoting worker skill upgrading and standardisation in the petrochemical industry in Singapore. Two of the notable standardisation projects spearheaded by him was the adoption of internet-based software, Primos, for managing foreign worker quota application and worker skill upgrading, and the development of Safety Management Standard, SS506. He graduated from the National university of Singapore with an Honours degree in Electrical Engineering.

BERNARD SOH joined the Group in 2007 as the HSE Director. He is responsible for the health, safety and environment system policies and practices across the Group. He has more than 19 years of occupational safety and health experience in the regional construction and process industries. He graduated from the university of New South Wales with a Bachelor of Science degree (Major in Safety Science). He also holds a Diploma in Mechanical Engineering with Ngee Ann Polytechnic. In addition to his academic qualification, he is a registered Workplace Safety and Health Officer with the Ministry of Manpower as well as a registered Environmental Control Officer with the National Environment Agency. He is also a member in the Workplace Safety and Health (WSH) Council Construction and Landscaping Committee as well as an executive committee (co-opted) member of Singapore Institution of Safety Officers.

BERNARD SOH HEALTH, SAFETY & ENVIRONMENT DIRECTORROTARY ENGINEERING LIMITED

LEE kIT TONG PROJECT DIRECTORROTARY ENGINEERING LIMITED

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TAN TECk SENG is the Deputy Project Director of the Group’s Project Management Team. He first joined the Group in 1992 and over the years, he rose from a project engineer to heading a team of project managers for various projects in Singapore and overseas. Teck Seng has a Honours degree in Mechanical Engineering from the university of Liverpool (uK).

RICk GOH HUMAN RESOURCE DIRECTOR

ROTARY ENGINEERING LIMITED

TAN TECk SENG DEPUTY PROJECT DIRECTORROTARY ENGINEERING LIMITED

RICk GOH joined the Group in 2006 as the Human Resource Director with more than 15 years experience in human resource management and development. He is responsible for the human resource development policies and practices across the Group. He graduated from the Latrobe university of Australia with a Bachelor of Business Administration degree (major in human resource management). He also holds a Graduate Diploma in Personnel Management with Singapore Institute of Management and a Diploma in Electronic Electrical Engineering with Ngee Ann Polytechnic. In addition to his academic qualifications, he is a certified performance management and teambuilding facilitators with professional bodies.

PAUL TAN is the General Manager of the Rotary Mechanical And Construction Company Pte Ltd (RMC). He joined the Group in 2007, after spending 19 years in the oil and gas and petrochemical industry. His experience involved project management, procurement, construction of major refineries and petrochemical plants located at Southeast Asia and China. He holds a Diploma in Mechanical Engineering from Ngee Ann Polytechnic.

PAUL TAN GENERAL MANAGER ROTARY MECHANICAL AND

CONSTRUCTION COMPANY

PTE LTD

wONG kHEk SIN DEPUTY CONSTRUCTION

DIRECTORROTARY ENGINEERING LIMITED

wONG kHEk SIN joined the Group in 1991 as Construction Manager. Since then he has successfully managed multi-million dollar projects in Singapore and the region, including China, India, Malaysia and Thailand. He has more than 25 years of experience in the oil and gas industry. He was responsible for projects which involve civil, tankage, piping, electrical and instrumentation as well as testing and commissioning works. Mr Wong possesses a National Certificate in Supervision and was also certified under the Construction Safety Course for Project Managers.

Corporate Services

Country Senior Management

LEGEND

ENTITIES

Rotary Electrical & Instrumentation

Pte Ltd

Thai Rotary Engineering Public Company Limited

Petrol Steel Company LimitedRotary Arabia Company Limited

Rotary MEC (Malaysia) Sdn Bhd

Rotary Engineering (Shanghai) Company LimitedRotary Engineering (Dalian) Company Limited

Rotary International Trading (Shanghai) Company Limited

P.T. Rotary Engineering Indonesia

Rotary MEC Engineering (India) Pvt Ltd

Rotary Mechanical & Construction Company

(Private) Ltd

Rotary-ThaiConstruction

Pte Ltd

BuildGlobalPte Ltd

Rotary IMC Pte LtdRotary Production

Services Network Pte Ltd

SingaporeCHIA KIM PIOW(Chairman/MD)

Chairman & Managing DirectorCHIA KIM PIOW

Executive DirectorCHIA KIM CHUA

Chief Operating OfficerKUNIO NAKAMURA

Project Management Team/ Construction Management Team

LOH ENG KEE (Project Director)LEE KIT TONG (Project Director)

TAN TECK SENG (Deputy Project Director)ALBERT LIEW (Construction Director)

WONG KHEK SIN (Deputy Construction Director)

Electrical Instrumentation

KELLIN THAM(Managing Director)

MechanicalPAUL TAN (GM)

LAM CHOON VOON (GM)

TankageTONY FAM

(Acting General Manager)

CivilCHIA KIM CHUA

(Executive Director)

FinanceDEREK KOH

(Chief Financial Officer)

Planning & ControlVELMOND LIM

(Manager)

Human ResourceRICK GOH(Director)

Project ProposalKHIN MAUNG MYINT(General Manager)

Information SystemsHO SE WAI

(Chief Information Officer)

Business DevelopmentKOH CHUN PENG

(Director)

Corporate PlanningDEREK KOH


Contract & LegalWONG JIT ONN

(Manager)

MaintenanceJOSEPH KHOW

(Managing Director)Technical Services

ThailandLOH ENG KEE

(Managing Director)

Saudi ArabiaCHIA KIM PIOW

(Chairman)

MalaysiaSARJIT SINGH

(General Manager)

ChinaKOH CHUN PENG

(General Manager)

IndonesiaTBA

IndiaAMITAVA DAS

(General Manager)

Engi

neer

ing

MAS

ILAM

ANI M

AHAL

INGA

M (D

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Log

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AM P

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G (G

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Quality Assurance & ControlCHIA KIM CHUA (Executive Director)

Health, Safety & EnvironmentBERNARD SOH (Director)

oRGANISATIoN STRuCTuRE

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Corporate Services

Country Senior Management

LEGEND

ENTITIES

Rotary Electrical & Instrumentation

Pte Ltd

Thai Rotary Engineering Public Company Limited

Petrol Steel Company LimitedRotary Arabia Company Limited

Rotary MEC (Malaysia) Sdn Bhd

Rotary Engineering (Shanghai) Company LimitedRotary Engineering (Dalian) Company Limited

Rotary International Trading (Shanghai) Company Limited

P.T. Rotary Engineering Indonesia

Rotary MEC Engineering (India) Pvt Ltd

Rotary Mechanical & Construction Company

(Private) Ltd

Rotary-ThaiConstruction

Pte Ltd

BuildGlobalPte Ltd

Rotary IMC Pte LtdRotary Production

Services Network Pte Ltd

SingaporeCHIA KIM PIOW(Chairman/MD)

Chairman & Managing DirectorCHIA KIM PIOW

Executive DirectorCHIA KIM CHUA

Chief Operating OfficerKUNIO NAKAMURA

Project Management Team/ Construction Management Team

LOH ENG KEE (Project Director)LEE KIT TONG (Project Director)

TAN TECK SENG (Deputy Project Director)ALBERT LIEW (Construction Director)

WONG KHEK SIN (Deputy Construction Director)

Electrical Instrumentation

KELLIN THAM(Managing Director)

MechanicalPAUL TAN (GM)

LAM CHOON VOON (GM)

TankageTONY FAM

(Acting General Manager)

CivilCHIA KIM CHUA

(Executive Director)

FinanceDEREK KOH


Planning & ControlVELMOND LIM

(Manager)

Human ResourceRICK GOH(Director)

Project ProposalKHIN MAUNG MYINT(General Manager)

Information SystemsHO SE WAI

(Chief Information Officer)

Business DevelopmentKOH CHUN PENG

(Director)

Corporate PlanningDEREK KOH


Contract & LegalWONG JIT ONN

(Manager)

MaintenanceJOSEPH KHOW

(Managing Director)Technical Services

ThailandLOH ENG KEE

(Managing Director)

Saudi ArabiaCHIA KIM PIOW

(Chairman)

MalaysiaSARJIT SINGH

(General Manager)

ChinaKOH CHUN PENG

(General Manager)

IndonesiaTBA

IndiaAMITAVA DAS

(General Manager)

Engi

neer

ing

MAS

ILAM

ANI M

AHAL

INGA

M (D

irect

or)

Proc

urem

ent &

Log

istic

s (R

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Pte

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Quality Assurance & ControlCHIA KIM CHUA (Executive Director)

Health, Safety & EnvironmentBERNARD SOH (Director)

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“SomE pEoplE ComE INTo ouR lIVES ANd QuICkly Go. SomE STAy FoR A WHIlE, lEAVE FooT pRINTS

oN ouR HEARTS, ANd WE ARE NEVER, EVER THE SAmE.”

Flavia Weedn

mAINTAINING RELATIONS

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singaporemalaysiathailandindonesiaindiachinamiddle east

GlobAl FooTpRINTS

SAR0912008 • Rotary • 25/03/2010 08:55 • 11_Rotary_AR_operations review.indd

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Rotary Arabia Co Ltd

Petrol Steel Co Ltd

Rotary MEC (M) Sdn Bhd

Thai Rotary Engineering

Public Company Limited

Rotary Engineering Limited P.T. Rotary Engineering Indonesia

Rotary Engineering (Dalian) Co. Ltd

Rotary Engineering (Shanghai) Co. Ltd

Rotary International Trading (Shanghai) Co. Ltd

Rotary MEC Engineering (India) Private Limited

SAR0912008 • Rotary • 25/03/2010 08:55 • 11_Rotary_AR_operations review.indd

opERATIoNS REVIEW

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A REMARkABLE YEARRotary Engineering stayed busy, and ahead of the competition, despite the challenging operating environment in 2009. Even though there were project delays, and cancellations were widely reported across countries and industries, we were kept busy executing and delivering our projects in hand. The prospect of diminishing opportunities amidst a global recession also spurred us to pursue every opportunity zealously, and we secured a number of new contracts, including our single largest EPC contract in Saudi Arabia. As at 31 December 2009, the Group’s order book stands at S$1.3 billion; of this, more than 80% originates from outside Singapore with projects lasting up to the end of 2012.

Indeed, the fruit of our hard work is reflected in our financial results. The Group saw a record turnover of S$551.9 million, an increase of 6% over 2009.

Operationally, we were busy on all fronts. As a provider of engineering, procurement, construction and maintenance services serving the oil and gas and petrochemical sectors, this meant that all our different business units were actively engaged in supporting the execution of our projects. Depending on clients’ needs, the projects may involve some or all our business units.

Singapore remained the Group’s largest revenue contributor in FY2009 with S$347.9 million with our overseas business contributing the remaining 37%, or S$204.0 million. Saudi Arabia contributed S$111.5 million, or 20% of revenue, while Thailand’s share of revenue came to S$67.8 million.

PROJECTS: COMPLETED AND ON-GOINGA number of EPC projects saw completion in 2009, mostly on time and with good safety and quality records.

OiltankingRotary completed four projects for the Oiltanking Group, a valued client of over two decades.

These projects were:• Chem 6 project which involved the engineering

design and construction of a 60,000 cubic metre (cbm) chemical storage facility at its existing site on Seraya, Jurong Island with connectivity to petrochemical complexes, refineries and downstream chemical companies in and around Jurong Island;

• Oiltanking Phase 10 project involving a 120,000 cbm facility for clean petroleum products situated at the terminal along Jurong Island Highway;

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• the engineering design and construction of Mono Ethylene Glycol (MEG) and Propylene Oxide (PO) storage tanks and related facilities adjacent to the existing OOTS chemical storage terminal on Jurong Island (Chem 5); and

• the project for PT Oiltanking Merak which involved the engineering, procurement and construction of a 274,000 cbm capacity storage terminal comprising 24 tanks in Merak, West Java, Indonesia.

We are currently still working on a number of projects for Oiltanking. The scope of these works include piping, civil and structure, electrical and instrumentation and are due for completion in 2010.

ShellOur relationship with Shell Eastern Petroleum has been built and cemented over the years. The level of rapport and trust is evident in the numerous projects that they have entrusted to us.

In 2009, we completed a number of projects for Shell. These were mainly for work we did in relation to the 750,000 tonnes per annum Mono Ethylene Glycol (MEG) downstream plant and the world-scale 800,000 tonnes per annum

Ethylene Cracker Complex on Pulau Bukom, part of the Shell Eastern Petrochemicals Complex. Rotary’s scope of work involved mechanical works including tankage, field construction of structure, piping and equipment installation as well as electrical and instrumentation works. In addition, we were also involved in modification projects to Shell’s Pulau Bukom refinery, as part of the Houdini Project.

Our work for Shell also extends to revamp and maintenance and the year saw us completing major shutdown works for Shell Chemicals Seraya. At the same time, we also renewed our anchor maintenance contract in Shell Chemicals Seraya for another three years up to 2012, with an option of two years’ extension up to 2014. We have also been awarded maintenance contracts for Shell’s MEG plant, and two revamp and maintenance packages for Shell’s Long Residue Catalytic Cracking unit (LRCCu) at its Pulau Bukom refinery.

Other projects that saw completion in the year were:

• Power Seraya: This project saw Rotary involved in the extension of pipeline to three tanks as well as electrical and instrumentation works.

opERATIoNS REVIEW

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• Saudi Kayan Petrochemical Complex: We constructed 24 tanks for the Saudi Kayan Petrochemical Company at its petrochemical complex in AI-Jubail, Kingdom of Saudi Arabia. This project involved the engineering, supply, fabrication, construction, testing and pre-commissioning of 24 tanks.

• Singapore Petroleum Company Facility Upgrade: We were contracted to upgrade the roofs of two storage tanks.

The projects that we are currently working on include:

• Chevron Singapore Plant Upgrade: For this plant upgrade project at Penjuru Terminal in Jurong, Rotary has been tasked with upgrading and revamping of existing fuel oil systems, pumps and related facilities.

• ExxonMobil Singapore Parallel Train: The scope of our contract relating to ExxonMobil’s second world-scale petrochemical project, known as the Singapore Parallel Train, includes mechanical work, piping, structure installation, electrical and instrumentation installation and testing works.

• Air Liquide Hermes Hydrogen Plant: Our work for Singapore Oxygen Air Liquide in relation to the Hermes Hydrogen Plant involves mainly electrical and instrumentation work. We are

delighted for the opportunity to work with this new client.

• Jurong Rock Cavern (JRC): We have been contracted to carry out further engineering works in relation to this project. The JRC is an innovative initiative driven by JTC to increase underground oil storage capacity on Jurong Island. JRC will comprise an oil storage complex to be built at subterranean depths beneath the seabed of Banyan Basin.

• Neste Oil Biofuel Plant: We have been awarded two packages for this project. Apart from the Engineering, Procurement & Construction contract to erect 11 storage tanks for Neste Oil’s new generation biofuel plant in Tuas, Rotary is also undertaking electrical and instrumentation works.

• Tankstore Ltd Facility Upgrade: This contract is for the upgrading of the roofs of four storage tanks for the Singapore-based oil trading company.

Saudi ArabiaSince our initial entry into the Middle East in 2006, we have steadily delivered three projects and in 2009, we landed our single largest contract to date: a uS$745 million (about S$1.1 billion) Engineering, Procurement and Construction (EPC) contract, awarded by Saudi Aramco Total Refining and Petrochemical Company (SATORP), to build a refinery tank farm at Jubail, Saudi Arabia. The project is progressing well and work on site is scheduled to begin in second quarter of 2010.

ThailandIn 2009, we secured an Engineering, Procurement and Construction (EPC) contract from Thailand’s PTT Tank Terminal Company Limited for the PTT Tank Terminal Project. Work is underway to construct an ammonia storage tank and facilities at Map Ta Phut petrochemical hub at Rayong Province, Thailand.

Our other project at the offsite and utility tank farm unit for Ma Ta Phut Olefins Co Ltd saw completion in February 2010. This tank farm, comprising nine spherical tanks and 11 atmospheric tanks, is housed within a naphtha cracker complex with an annual production capacity of 800,000 tonnes.

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RoTARy SCoRECARd

9.6

9.0

9.3

0 2 4 6 8 10 12

EARNINGS pER ShARE (cENtS)

2009

2008

2007

FINANCIAL“Enhancing shareholders value”

Strong revenue growth to continue to deliver sustainable value to our shareholders.

EARNINGS (S$ MILLION)

50.9

52.8

0 10 20 30 40 50 60

2009

2008

2007

54.2

596

139

738

MARKEt cApItALISAtION (S$ MILLION)

2009

2008

2007

0 100 200 300 400 500 600 700 800

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RoTARy SCoRECARd

Others0.9%Singapore

63%

Indonesia3.6%

Thailand12.3%

Singapore57.7%

Malaysia0.8% China

0.5%

Thailand17.5%

Other23.5%

Saudi Arabia20.2%

fy2009S$552M

REvENuE bREAKdOwN by GEOGRAphIcAL SEGMENt

fy2008S$520M

520

4462008

LEgENd (S$ million) Order bookRevenue

0 300 600 900 1,200 15,000

CUSTOMERS“Striving for total customer satisfaction”

Customer satisfaction is our most important goal.

510

6402007

552

1,2592009

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RoTARy SCoRECARd

9.8

27.3

11.1

2008

9.8

23.2

10.9

2009

0 5 10 15 20 25 30 35 35

10.4

34.6

12.8

2007

PROCESSES & BEST PRACTICES“what we excel in – Doing the right thing & doing it right the first time”

Continuous improvement and process redesign to streamline our operations to drive efficiency and productivity.

LEGEND (%) Net Profit Margin Return On Equity Return On Assets

PEOPLE“Our Greatest Asset – Our people makes the difference”

People are the foundation of our success – past, present and future.

7,800

6,800

4,200

2009

2008

2007

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

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“THE pESSImIST ComplAINS AbouT THE WINd; THE

opTImIST ExpECTS IT To CHANGE; THE REAlIST AdjuSTS THE SAIlS.”

William A. Ward

CALCULATEDmOVES

42 Code of Corporate GovernanCe

53 direCtors’ report

57 statement by direCtors

58 independent auditors’ report

60 ConsoLidated statement of

CompreHensive inCome

61 baLanCe sHeets

63 statements of CHanGes in equity

66 ConsoLidated CasH fLow statement

68 notes to tHe finanCiaL statements

141 statistiCs of sHareHoLdinGs

143 notiCe of annuaL GeneraL meetinG

149 proXy form

FINANCIAL REPORTS

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CODE OF CORPORATE GOVERNANCE

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introduCtion

The Board of Directors (the “Board”) and management of Rotary Engineering Limited (the “Company”) and its subsidiaries (the “Group”) are committed to maintaining high standards of corporate governance by complying with the benchmark set by the Code of Corporate Governance 2005 (the “Code”). Good corporate governance establishes and maintains an ethical environment, which strives to enhance the interests of all shareholders.

The following report outlines the Company’s corporate governance policies and practices that were in place.

board of direCtors

principles 1, 2, 4 and 6

The Board of Directors is accountable to the shareholders and is responsible for maintaining a high standard of corporate governance and promoting continuing improvements in Board effectiveness. The Group strives to be consistent with the Code.

The Board comprises seven Directors, of whom two are executive, two are non-executive and three are independent Directors. The Board is made up of individuals from different professional, technical and financial backgrounds. Their core competencies, qualifications, skills and experience are extensive and complementary. There is a strong balance between the Executive and Non-Executive Directors and a strong and independent element on the Board. Key information on Directors is set out on pages 12 to 15 of the Annual Report.

The Board oversees the management of the business and affairs of the Group; approves the Group’s corporate and strategic directions, appoints directors to the Board and approves the appointment of key managerial personnel, major funding, investment proposals and divestment, and reviews the financial performance of the Group. Where necessary, additional Board meetings are held to address significant issues or approve major transactions.

The two Executive Directors form the Executive Committee that acts for the Board in supervising the management of the Group’s business and affairs. Monthly business review meetings, presided by at least one Executive Director, are held to review the progress of projects and operational performance. Major issues are highlighted for follow-up and corrective actions.


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To facilitate effective management, certain functions have been assigned to various Board committees, each of which has its own written terms of reference. The composition of the Board and Board Committees are:

Committee membershipdirector nature of board member audit nominating remuneration

Chia Kim Piow Chairman & Managing Director MemberChia Kim Chua ExecutiveKeith Tay Ah Kee Independent Chairman Member MemberQuek Wee Hong Independent Member Chairman MemberLam Khin Khui Independent Member Member ChairmanBadri NarayananSanthana Krishnan Non-Executive MemberWong Oi Moi Non-Executive

The Board of Directors is familiar with the Group’s business and governance practices. The Directors also receive updates and relevant training, particularly on relevant new laws, regulations and changing commercial risks, from time to time. There is a programme to ensure new directors receive relevant training and orientation before appointment to the Board.

All Directors have direct access to senior management and to the Company Secretary. The role of the Company Secretary is clearly defined and includes the responsibility of ensuring that Board procedures are followed and that applicable rules and regulations are complied with.

The number of Board meetings held in the year and the attendance of every Board member at those meetings are as follows:

meetings of: board auditCommittee

nominatingCommittee

remunerationCommittee

no. of meetings held in 2009: 4 4 1 2

name & attendance of directorChia Kim Piow 4 – 1 –Chia Kim Chua 4 – – –Keith Tay Ah Kee 4 4 1 2Quek Wee Hong 4 4 1 2Lam Khin Khui 4 4 1 2Badri Narayanan Santhana Krishnan1 4 3 – –Wong Oi Moi 4 – – –

1 Mr Krishnan was appointed as a member of the Audit Committee on 24 February 2009.


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CHairman and manaGinG direCtor

principle 3

Mr. Chia Kim Piow, who is both Chairman and Managing Director of the Company, leads the Board. This practice has been carried on since inception and he leads the Board meetings because of his in-depth knowledge of the Group’s operations as well as his excellent relationship with customers, suppliers and other external parties that carry on business with the Group. The Board members unanimously support Mr. Chia’s role as both Chairman and Managing Director.

The Board is of the view that the current single leadership arrangement works well, in particular it does not hinder the decision-making process of the Company unnecessarily.

nominatinG Committee

principle 5

The Nominating Committee (“NC”) comprises Mr. Quek Wee Hong, Mr. Keith Tay, Mr. Lam Khin Khui and Mr. Chia Kim Piow.

Mr. Quek, as Chairman of the Committee, Mr. Lam and Mr. Tay, are Independent Directors.

The NC, which has written terms of reference approved by the Board, recommends to the Board any new Board appointments and nominates Directors for re-election, determining whether or not such nominee has the requisite qualifications and experience. Accordingly, in selecting potential new directors, the NC will seek to identify the competencies required to enable the Board to fulfill its responsibilities. In doing so, the NC will have regard to the results of the annual appraisal of the Board’s performance. The NC may engage consultants to search or assess candidates for new positions on the Board, or to engage such other independent experts as it considers necessary to carry out its duties and responsibilities. In line with this, the NC also determines the independence of Board members. In considering the appointment of any new director, the NC ensures that the new director possesses the necessary skills, knowledge and experience that could facilitate the Board in the making of sound and well considered decisions.

In reviewing the nomination of the retiring directors, the NC considered the performance and contribution of each of the retiring directors, having regard not only to their attendance and participation at Board and Board Committee meetings but also the time and effort devoted to the Group’s business and affairs, especially the operational and technical contributions.

Further, it sets objective performance criteria and the measurement processes to evaluate the performance of the Board once a year. The NC conducted an evaluation of the Board’s performance as a whole for the year ended 31 December 2009.

The NC is responsible for identifying and recommending to the Board new Board members, after considering the necessary and desirable competencies.


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While the Code recommends that the NC be responsible for assessing the Board as a whole and for assessing the contribution of each individual director to the effectiveness of the Board as a whole, NC felt it is more appropriate and more effective to assess the Board as a whole bearing in mind that the each member of the Board contributes in different ways to the success of the Company.

Information on Directors’ position, date of initial appointment and date of last re-election are listed below.

director age position date of initialappointment

date of Lastre-election

Chia Kim Piow 61 Executive Chairman& Managing Director 02-Dec-1980 N.A.

Chia Kim Chua 59 Executive Director 01-Mar-1982 22-Apr-2009Keith Tay Ah Kee 65 Independent Director 01-Feb-1993 23-Apr-2008Quek Wee Hong 68 Independent Director 01-Jan-1993 23-Apr-2007Lam Khin Khui 61 Independent Director 01-Feb-1993 23-Apr-2007Badri NarayananSanthana Krishnan 29 Non-Executive Director 22-Sep-2008 22-Apr-2009Wong Oi Moi 55 Non-Executive Director 04-May-1983 22-Apr-2009

Pursuant to the Company’s Articles of Association, other than the Managing Director, all Directors submit themselves for re-election at least once every three years.

In accordance with Article 117 and Article 107 of the Company’s Articles of Association, new Directors must submit themselves for re-election at the next Annual General Meeting of the Company and one third of the Directors who are eligible for re-election must retire by rotation at every Annual General Meeting. The Committee has recommended the nomination of Mr. Lam Khin Khui and Mr. Quek Wee Hong for re-election at the forthcoming Annual General Meeting.

remuneration Committee

principles 7, 8 and 9

The Remuneration Committee (“RC”) comprises entirely of non-executive directors of the Company.

The RC members are Mr. Lam Khin Khui as Chairman, Mr. Quek Wee Hong and Mr. Keith Tay who are non-executive directors and independent of management. The RC, when required, has access to expert advice, both within and outside the Company.

The role of the RC, which has written terms of reference approved by the Board, is to review and recommend to the Board a framework of remuneration for the Board of Directors and senior key executives (MDs and EDs of major subsidiaries) of the Group. It determines specific remuneration packages for each Executive Director and reviews the terms of their service contracts. In line with the above, it considers and approves guidelines on salary, bonus, and other terms and conditions for members of senior management, as well as the granting of share options in accordance with the rules of the Company’s Share Option Scheme.


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In setting remuneration packages for Directors and senior key executives of the Group, the pay and employment conditions within the industry and in comparable companies are taken into consideration. The RC seeks to establish and maintain an appropriate and competitive level of remuneration to attract, retain and motivate key executives. The RC also ensures that the remuneration policies support the Company’s objectives and strategies.

The Managing Director and the Executive Directors have service contracts and do not receive director’s fees. Their compensations consist of salary, bonuses, options and performance awards that are dependent on the performance of the Group. The performance-related awards form a significant portion of their compensation. This is to align their interests with those of the shareholders and link rewards to corporate and individual performance.

Executive Directors’ service contracts are subject to review every three years. The RC is of the view that the Directors’ service contracts are not excessively long or with onerous removal clauses.

The Independent and Non-Executive Directors are compensated through director’s fees. The fees take into account the level of contribution and responsibilities of the Directors. These fees are subject to shareholders’ approval at the Annual General Meeting.

The remuneration policy for key executives follows the guidelines laid down by the National Wages Council. Further, the Company’s performance, the responsibility and performance of individual key executive are taken into consideration. Both the Committee and the Chairman of the Board recommend the remuneration packages of key executives for the RC and the Board’s approval.

The Directors’ annual remuneration is set out below. Directors’ interests and the Executives’ Share Option Scheme are set out in the Directors’ Report.

The following table shows the breakdown (in percentage terms) of the remuneration and fees of Directors for year ended 31 December 2009.

direCtors of Company saLary bonus feesotHer

benefits totaL

$5,500,000 to below $5,750,000Chia Kim Piow 13% 85% – 2% 100%$1,250,000 to below $1,500,000Chia Kim Chua 24% 72% – 4% 100%below $250,000Keith Tay Ah Kee – – 100% – 100%Quek Wee Hong – – 100% – 100%Lam Khin Khui – – 100% – 100%Badri Narayanan Santhana Krishnan – – 100% – 100%Wong Oi Moi – – 100% – 100%


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The annual remuneration for key executives (in percentage terms) during the year is as follows:

Key eXeCutives saLary bonus otHer benefits totaL

from $1,500,000 to below $1,750,000Tham Sow Chee, Kellin 19% 78% 3% 100%from $750,000 to below $1,000,000Loh Eng Kee 26% 68% 6% 100%$500,000 to below $750,000Khow Chong Lam, Joseph 24% 70% 6% 100%from $250,000 to below $500,000Dr Abdul Malek Bin Mohd Amin 73% 21% 6% 100%Koh Thong Hean, Derek 100% – – 100%Liew Yoon Kong, Albert 61% 23% 16% 100%below $250,000Fam Kok Kiong, Tony 78% 18% 4% 100%Goh Soon Lip, Rick 66% 20% 14% 100%Ho Se Wai 95% – 5% 100%Koh Chun Peng 73% 21% 6% 100%Khin Maung Myint 72% 23% 5% 100%Lee Kit Tong 98% – 2% 100%Sarjit Singh 75% 6% 19% 100%Soh Hong Kuan, Bernard 82% 13% 5% 100%Tan Kay Peng,Paul 74% 22% 4% 100%Tan Teck Seng 60% 23% 17% 100%Tham Peng Weng 60% 24% 16% 100%Wong Khek Sin 60% 24% 16% 100%

There were no employees related to Directors of the Company.


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audit Committee

principle 11

The Audit Committee (“AC”), which has written terms of reference approved by the Board, comprises Mr. Keith Tay Ah Kee as Chairman, Mr. Lam Khin Khui, Mr. Quek Wee Hong and Mr. Badri Narayanan Santhana Krishnan. Two of the members, including the Chairman, are qualified accountants. Mr. Tay, Mr. Lam and Mr. Quek are Independent Directors.

The AC reviews the scope of work, as set out in section 201 B(5) of the Companies Act, Cap 50, of both internal and external auditors and the assistance given by the Company’s officers to the auditors. It meets with the Company’s internal and external auditors to review their audit plans and discussed the results of their respective examinations and their evaluation of the Group’s operations and system of internal accounting controls. The AC also reviews significant financial reporting issues and judgments relating to the financial statements of the Group for each financial year as well as the Auditor’s report thereon, and the interim and annual results announcements, before submitting to the Board for approval. With the assistance of the auditors, the AC reviews the interested persons transactions for the Group.

The AC reviews the adequacy of the Company’s internal controls (financial, compliance and operational) and risk management policies and systems established by management. The AC also reviews the scope and results of the internal audit procedures including the effectiveness and adequacy of the internal audit function.

In line with the Code, the AC also reviews arrangements by which staff of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters and ensure that arrangements are in place for the independent investigations of such matters and for appropriate follow up actions.

Apart from formal meetings, the Chairman and various members of the AC will hold informal meetings and discussions with the management as and when necessary. Members of the AC have independent access to both external and internal auditors. The AC met with both internal and external auditors without the presence of management.

The AC has reviewed the nature and volume of non-audit services to the Group by the external auditors and are satisfied that the nature and extent of such services would not prejudice the independence and objectivity of the external auditors. The AC recommends to the Board the appointment, re-appointment and removal of external auditors and approves the remuneration and terms of engagement of the external auditors for shareholders’ approval at the forthcoming Annual General Meeting.


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aCCountabiLity

principle 10

The Board is accountable to the shareholders while management is accountable to the Board. Management presents quarterly and full-year financial statements to the AC and the Board for review and approval. The Board approves the results and authorizes the release of the results to SGX-ST and the public via SGXNET.

internaL ControLs & internaL audit

principles 12 and 13

The Group has outsourced its internal audit function. The AC reviews its adequacy and effectiveness each year. The AC has reviewed the internal audit function and is satisfied that it has the appropriate standing to perform its functions effectively and objectively. Paul Wan & Co. provided the internal audit services for the Company and its subsidiaries during the year. The internal auditor reports primarily to the AC.

The Group has in place a system of internal controls to ensure that assets are safeguarded, proper accounting records are maintained and financial information used within the business and for publication is reliable. The controls include the documentation of key procedures and rules relating to the delegation of authorities. The AC, assisted by the auditors, has reviewed the effectiveness of these controls and the Board has deemed them to be adequate within the Group’s guidelines.

CommuniCation witH sHareHoLders

principles 14 and 15

Price-sensitive information relating to the Group is released through SGXNET onto the SGX website which is available to the public in general. Similarly, quarterly, full year results and annual reports announced or issued within the mandatory period are also released through the SGXNET. The Company’s Annual Report is available at its website www.rotaryeng.com.sg.

All shareholders of the Group receive the Annual Report and notice of Annual General Meeting. At Annual General Meetings, shareholders will be given opportunity to voice their views and to direct questions regarding the Group to senior management or Directors, including the Chairman of each of the Board Committees.

All Directors including all chairpersons of the Audit, Nomination and Remuneration Committees are encouraged to be present at all general meetings of the Company. The external auditors are present at the Annual General Meetings.


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risK manaGement

The Company’s risk management policies are summarized as follows:

Contract pricing and executionThe ability to secure projects depends on competitive pricing, fulfilling the technical and commercial requirements, and delivery.

The Tender Review Committee comprising of at least one Director, Project Manager, Engineering Manager and Business Development Manager, reviews the technical and commercial terms and conditions, as well as quantity and pricing, before approval is given for the submission of the tender proposal.

Upon receipt of a contract, the Contract Review Committee comprising of at least one Director, Project Manager, Engineering Manager and Business Development Manager reviews the changes to the technical and commercial terms and conditions, as well as quantity and pricing, before accepting the contract.

The Project Manager monitors the progress and the productivity of the contract on a regular and continuous basis to ensure technical specifications are met, delivery on schedule and costs are under control.

information systemThe Company has a disaster recovery plan and a maintenance program for its accounting and management information system. Adequate resources are dedicated to ensure the systems are running smoothly and, if there is a disruption, a quick resumption of services is assured.

foreign currenciesThe Group operates in several countries and is exposed to movements in foreign currency rates. It identifies foreign currency needs for all contracts. The currency outflows are matched against the inflows. Hedging is used only when there is a material discrepancy between the flows.

Key executivesThe Company is a service provider. Therefore, its business development and profitability depends on its ability to attract and retain qualified personnel. Besides the basic human resource programmes, the key executives are offered remuneration packages that are competitive within the industry, employees’ share option scheme and a challenging work environment.

material pricesThe Company depends on its suppliers for materials such as steel plates, pipes and fittings. Changes in prices affect the cost of construction. This is managed by forward planning of requirements, sourcing for alternate supply, and obtaining sufficient quantity at competitive prices.

source of revenueSignificant part of Group’s turnover is derived from Singapore. Therefore, it is susceptible to a slowdown of the Singapore economy. It has sought and continues to seek projects from outside Singapore to diversify its revenue stream.


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seCurities transaCtions

The Company has a clear policy on the trading of its share by directors and executives within the Group. The Company has adopted its own internal Code of Best Practices on Securities Transactions (“the Securities Transactions Code”). The Securities Transactions Code provides guidance to the directors and executives of the Group with regard to dealing in the Company’s shares. It emphasizes that the law on insider trading is applicable at all times, notwithstanding the window periods for dealing in the shares. The Securities Transactions Code also enables the Company to monitor such share transactions by requiring employees to report to the Company whenever they deal in the Company’s shares.

The Group issues circulars to its directors, executives and employees informing them that they must not trade in the listed securities of the Company one month before the announcement of the Group’s full year or two weeks before quarterly results and ending on the date of the announcement of such results.

The directors are required to notify the Company of any dealings in the Company’s securities (during the open window period) within two (2) business days of the transactions. The Board is satisfied with the Group’s commitment in compliance with the Code, and on the adequacy of internal controls within the Group.

materiaL ContraCts

Since the end of the previous financial year, the Company and its subsidiaries did not enter into any material contracts involving the interests of Directors or controlling shareholders, and no such material contracts subsisted at end of the financial year or were entered into since the end of the financial year.

interested person transaCtions

The Company has established procedures to ensure that all transactions with interested persons are reported on a timely manner to the AC and that the transactions are carried out at arm’s length and under normal commercial terms. The Company’s disclosure in respect of interested person transactions for the financial year ended 31 December 2009 are as follows:

name ofinterested person

aggregate value of allinterested person

transactions (excludingtransactions less than $100,000and transactions conducted undershareholders’ mandate rule 920)

(s$’000)

aggregate value of allinterested person

transactions conductedunder shareholders’mandate pursuant

to rule 920(excluding transactionsless than $100,000)

(s$’000)

Pioneer SeafoodRestaurant &

Catering Pte. Ltd.

137 Not applicable –the Company

does not have ashareholders’ mandate

under Rule 920

GENERAL INFORmATION

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directors

Chia Kim Piow (Chairman and Managing Director)Chia Kim ChuaKeith Tay Ah KeeQuek Wee HongLam Khin KhuiBadri Narayanan Santhana KrishnanWong Oi Moi

audit Committee

Keith Tay Ah Kee (Chairman)Lam Khin KhuiQuek Wee HongBadri Narayanan Santhana Krishnan

Company secretary

Tan Cher Liang

registered office

No. 17 Tuas Avenue 20Singapore 638828

share registrar

Boardroom Corporate & Advisory Services Pte. Ltd.50 Raffles Place #32-01Singapore Land TowerSingapore 048623

auditors

Ernst & Young LLPOne Raffles QuayNorth Tower, Level 18Singapore 048583Partner in charge: Tan Chian Khong (since financial year ended 31 December 2007)

DIRECTORS’ REPORT

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The Directors are pleased to present their report to the members together with the audited consolidated financial statements of Rotary Engineering Limited (the “Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2009.

directors

The Directors of the Company in office at the date of this report are:

Chia Kim Piow (Chairman and Managing Director)Chia Kim ChuaKeith Tay Ah KeeQuek Wee HongLam Khin KhuiBadri Narayanan Santhana KrishnanWong Oi Moi

arrangements to enable directors to acquire shares and debentures

Except as described below, neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the Directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

directors’ interests in shares and debentures

The following Directors, who held office at the end of the financial year, had, according to the register of Directors’ shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares of the Company and related corporations as stated below:

direct interest deemed interestat the

beginning offinancial year

at theend of

financial year

at thebeginning offinancial year

at theend of

financial year

rotary engineering LimitedOrdinary shares

Chia Kim Piow 25,418,816 25,418,816 165,450,632 165,450,632Chia Kim Chua 22,242,400 22,242,400 – –Wong Oi Moi 6,972,896 6,972,896 165,450,632 165,450,632Lam Khin Khui 842,800 842,800 – –Quek Wee Hong 1,120,000 1,120,000 – –Keith Tay Ah Kee 459,200 459,200 – –

There was no change in any of the above-mentioned interests between the end of the financial year and 21 January 2010.

DIRECTORS’ REPORT

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directors’ interests in shares and debentures (cont’d)

By virtue of Section 7 of the Singapore Companies Act, Cap. 50, Mr. Chia Kim Piow and Madam Wong Oi Moi are deemed to have interests in shares of the subsidiaries of the Company.

Except as disclosed in this report, no Director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment if later, or at the end of the financial year.

directors’ contractual benefits

Except as disclosed in the financial statements, since the end of the previous financial year, no Director of the Company 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 the Director is a member, or with a company in which the Director has a substantial financial interest.

share options

The Rotary Engineering Employees’ Share Option Scheme (“the ESOS”) was approved at the Company’s Extraordinary General Meeting on 15 December 2000.

The ESOS is a share incentive scheme to give recognition to employees whose contributions have been essential to the well-being and prosperity of the Group, that is referring to Rotary Engineering Limited and its subsidiaries and associated companies.

On 26 October 2001, a total of 6,480,000 options to subscribe for ordinary shares in the Company (“Grant 1”) were granted to Executive Directors, Independent Directors, Managerial Staff and Specially selected Employees.

No option was granted during the financial year.

The exercise price for Grant 1 was fixed at 18.66 cents per share, and is exercisable from 27 October 2001 to 26 October 2011.

These options do not entitle the holder to participate, by virtue of the options, in any share issue of any other corporation. 5,605,000 options have been exercised as at the date of this report. No unissued shares other than those referred to above, are under option as at date of this report.

DIRECTORS’ REPORT

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share options (cont’d)

Details of the options to subscribe for ordinary shares of the Company granted to employees of the Group pursuant to the scheme are as follows:

name of

participant

exercise

period

options

granted

during

financial

year

aggregate

options

granted since

commencement

of scheme to

end of

financial year

aggregate

option

exercised

since

commencement

of scheme to

end of

financial year

aggregate

option

cancelled

since

commencement

of scheme to

end of

financial year

aggregate

option

outstanding as

at end of the

financial year

exercise

price

directors of theCompany

Chia Kim Chua 2001 – 2011 – 600,000 (600,000) – – $0.1866

Lam Khin Khui 2001 – 2011 – 300,000 (300,000) – – $0.1866

Quek Wee Hong 2001 – 2011 – 300,000 (300,000) – – $0.1866

Keith Tay Ah Kee 2001 – 2011 – 300,000 (300,000) – – $0.1866

managerial staff 2001 – 2011 – 4,070,000 (3,285,000) (770,000) 15,000 $0.1866

speciallyselected staff 2001 – 2011 – 910,000 (820,000) (90,000) – $0.1866

Total 6,480,000 (5,605,000) (860,000) 15,000

audit Committee

The Audit Committee (“AC”) carried out its functions in accordance with section 201B(5) of the Singapore Companies Act, Cap. 50, including the following:

• ReviewstheauditplansoftheinternalandexternalauditorsoftheCompanyandensurestheadequacy of the Company’s system of accounting controls and the co-operation given by the Company’s management to the external and internal auditors;

• Reviewsthequarterlyandannualfinancialstatementsandtheauditors’reportontheannualfinancial statements of the Company before their submission to the Board of Directors;

• Reviews effectiveness of the Company’s material internal controls, including financial,operational and compliance controls and risk management via reviews carried out by the internal auditors;

• Meetswith theexternalauditors,othercommittees,andmanagement inseparateexecutivesessions to discuss any matters that these groups believe should be discussed privately with the AC;

DIRECTORS’ REPORT

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audit Committee (cont’d)

• Reviews legal and regulatory matters that may have a material impact on the financialstatements, related compliance policies and programmes and any reports received from regulators;

• Reviews the cost effectiveness and the independence and objectivity of the externalauditors;

• Reviewsthenatureandextentofnon-auditservicesprovidedbytheexternalauditors;

• Recommendsto theBoardofDirectors theexternalauditors tobenominated,approvesthecompensation of the external auditors, and reviews the scope and results of the audit;

• ReportsactionsandminutesoftheACtotheBoardofDirectorswithsuchrecommendationsas the AC considers appropriate; and

• ReviewsinterestedpersontransactionsinaccordancewiththerequirementsoftheSingaporeExchange Securities Trading Limited (SGX-ST)’s Listing Manual.

The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditors. The AC has also conducted a review of interested person transactions.

The AC convened four meetings during the year with full attendance from all members. The AC has also met with internal and external auditors, without the presence of the Company’s management, at least once a year.

Further details regarding the audit committee are disclosed in the Report on Corporate Governance.

auditors

Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.

On behalf of the Board of Directors:

Chia Kim piowDirector

Chia Kim ChuaDirector

Singapore18 March 2010

STATEmENT BY DIRECTORS

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We, Chia Kim Piow and Chia Kim Chua, being two of the Directors of Rotary Engineering Limited, do hereby state that, in the opinion of the Directors,

(a) the accompanying balance sheets, consolidated statement of comprehensive income, statements of changes in equity, and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date, 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 Board of Directors:

Chia Kim piowDirector

Chia Kim ChuaDirector

Singapore18 March 2010

INDEPENDENT AUDITORS’ REPORTTO THE MEMBERS OF ROTARY ENGINEERING LIMITED

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We have audited the accompanying financial statements of Rotary Engineering Limited (the “Company”) and its subsidiaries (collectively, the “Group”) which comprise the balance sheets of the Group and the Company as at 31 December 2009, the statements of changes in equity of the Group and the Company and the consolidated statement of comprehensive income and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.

management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes devising and 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 they are recorded as necessary to permit the preparation of true and fair profit and loss account and balance sheet and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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

TO THE MEMBERS OF ROTARY ENGINEERING LIMITED

INDEPENDENT AUDITORS’ REPORT

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opinion

In our opinion,

(i) the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and

(ii) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

ernst & young LLpPublic Accountants andCertified Public AccountantsSingapore

18 March 2010

CONSOLIDATED STATEmENT OF COmPREHENSIVE INCOmEFOR THE YEAR ENDED 31 DECEMBER 2009

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note Group2009 2008$’000 $’000

revenue 5 551,896 520,119Cost of sales (421,979) (396,668)

Gross profit 129,917 123,451

Other revenue 6 1,220 3,148Administrative costs 6 (42,206) (41,489)Other operating costs 6 (22,204) (12,963)Finance costs 6 (239) (2,213)Share of results of associated companies (1,223) (179)

profit before tax 65,265 69,755Income tax expense 7 (13,182) (15,477)

profit net of tax 52,083 54,278

other comprehensive incomeNet gain/(loss) on available-for-sale financial assets 1,479 (946)Foreign currency translation (599) (615)

other comprehensive income for the year, net of tax 880 (1,561)

total comprehensive income for the year 52,963 52,717

profit net of tax attributable to:Owners of the parent 54,238 50,851Minority interests (2,155) 3,427

52,083 54,278

total comprehensive income attributable to:Owners of the parent 55,557 49,332Minority interests (2,594) 3,385

52,963 52,717

earnings per share attributable to owners of parent(cents per share)Basic 8 9.6 9.0

Diluted 8 9.6 9.0

The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

AS AT 31 DECEMBER 2009

BALANCE SHEETS

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note Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

non-current assetsProperty, plant and equipment 9 78,426 65,710 17,222 14,551Intangible assets 10 2,490 2,098 848 385Investments Subsidiary companies 11 – – 68,787 58,684 Associated companies 12 22,729 23,903 22,362 22,562Deferred tax assets 13 332 220 – –Other receivables 14 – – – –Other investments 15 1,773 6,255 895 5,526

Current assets

Gross amount due from customers for contract work-in-progress 16 9,927 16,454 5,366 7,620Inventories 17 6,737 5,653 – –Prepaid operating expenses 814 309 552 56Downpayments made to suppliers 1,564 4,470 – –Tax recoverable 1,877 1,484 – 322Trade and other receivables 14 238,407 164,970 190,519 120,587Other investments 15 – 6,848 – –Cash and cash equivalents 18 132,369 157,774 72,776 101,008

391,695 357,962 269,213 229,593

Current liabilities

Income tax payable 15,008 13,849 4,783 3,025Loans and borrowings 20 7,309 8,056 162 153Gross amount due to customers for contract work-in-progress 16 79,987 68,861 77,857 69,112Trade and other payables 21 97,858 119,771 84,301 82,338Downpayments from customers 32,584 27,274 27,549 15,808Derivatives 19 – – – –

232,746 237,811 194,652 170,436

net current assets 158,949 120,151 74,561 59,157


BALANCE SHEETSAS AT 31 DECEMBER 2009

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note Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

non-current liabilitiesDeferred tax liabilities 13 1,842 1,476 1,020 778Loans and borrowings 20 136 477 97 288Other payables 21 – – – 3,781

(1,978) (1,953) (1,117) (4,847)

net assets 262,721 216,384 183,558 156,018

equity attributable to equity holders of the parentShare capital 23 89,362 89,362 89,362 89,362Retained earnings 157,821 116,643 94,196 67,936Other reserves 24 (203) (1,522) – (1,280)

246,980 204,483 183,558 156,018minority interests 15,741 11,901 – –

total equity 262,721 216,384 183,558 156,018


FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2009

STATEmENTS OF CHANGES IN EQUITY

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attributable to owners of the parent

2009

Group

share

capital

retained

earnings

Capital

reserve

statutory

reserve

foreign

currency

translation

reserve

fair

value

adjustment

reserve total

minority

interests

total

equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2009 89,362 116,643 80 300 (956) (946) 204,483 11,901 216,384

Profit net of tax – 54,238 – – – – 54,238 (2,155) 52,083

Other comprehensive

income for the year – – – – (160) 1,479 1,319 (439) 880

Total comprehensive

income for the year – 54,238 – – (160) 1,479 55,557 (2,594) 52,963

Dividends on ordinary

shares (Note 32) – (13,060) – – – – (13,060) – (13,060)

Share issued by

a subsidiary – – – – – – – 8,591 8,591

Dividends paid to

minority

shareholders – – – – – – – (2,120) (2,120)

Acquisition of

minority interest – – – – – – – (37) (37)

At 31 December 2009 89,362 157,821 80 300 (1,116) 533 246,980 15,741 262,721


STATEmENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2009

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attributable to owners of the parent

2008

Group

share

capital

retained

earnings

Capital

reserve

statutory

reserve

foreign

currency

translation

reserve

fair

value

adjustment

reserve total

minority

interests

total

equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2008 89,362 79,152 80 – (383) – 168,211 6,991 175,202

Profit net of tax – 50,851 – – – – 50,851 3,427 54,278

Other comprehensive

income for the year – – – – (573) (946) (1,519) (42) (1,561)

Total comprehensive

income for the year – 50,851 – – (573) (946) 49,332 3,385 52,717

Dividends on ordinary

shares (Note 32) – (13,060) – – – – (13,060) – (13,060)

Acquisition of

an additional 1%

equity interest in

its 50%-owned

associated company – – – – – – – 1,588 1,588

Acquisition of minority

interests (Note 11) – – – – – – – (3) (3)

Dividends paid to

minority

shareholders – – – – – – – (60) (60)

Transfer to

statutory reserve – (300) – 300 – – – – –

At 31 December 2008 89,362 116,643 80 300 (956) (946) 204,483 11,901 216,384



STATEmENTS OF CHANGES IN EQUITY

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2009Company

sharecapital

retainedearnings

far valueadjustment

reservetotalequity

$’000 $’000 $’000 $’000

At 1 January 2009 89,362 67,936 (1,280) 156,018

Profit net of tax – 39,320 – 39,320Other comprehensive income for the year – – 1,280 1,280

Total comprehensive income for the year – 39,320 1,280 40,600

Dividends on ordinary shares (Note 32) – (13,060) – (13,060)

At 31 December 2009 89,362 94,196 – 183,558

2008Company

At 1 January 2008 89,362 26,113 – 115,475

Profit net of tax – 54,883 – 54,883Other comprehensive income for the year – – (1,280) (1,280)

Total comprehensive income for the year – 54,883 (1,280) 53,603

Dividends on ordinary shares (Note 32) – (13,060) – (13,060)

At 31 December 2008 89,362 67,936 (1,280) 156,018


CONSOLIDATED CASH FLOW STATEmENTFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2009

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note 2009 2008$’000 $’000

operating activitiesprofit before tax 65,265 69,755Adjustments for: Share of results of associated companies 1,223 179 Allowance for doubtful debts 8,441 2,701 Allowance for obsolete inventories 148 41 Amortisation of intangible assets 10 995 542 Bad debts written off 173 – Depreciation of property, plant and equipment 9 10,696 6,898 Dividends from quoted investments (62) (130) Fair value changes on derivative financial instruments – (658) Gain on disposal of other investments (182) – Gain on disposal of property, plant and equipment (85) (144) Impairment loss on advances to associates 2,783 1,119 Impairment loss on investment in associates 200 1,632 Impairment loss on other investments – 12 Interest expense 239 2,213 Interest income (790) (1,966) Negative goodwill written-off 3 174 Obsolete inventories written off 773 – Preliminary expenses written-off – 249 Reversal of write-down of inventories (58) – Write-back of allowance for doubtful debts (4) (2)

operating cashflows before changes in working capital 89,758 82,615Increase in receivables (84,067) (6,422)(Increase)/decrease in inventories (1,947) 461Increase/(decrease) in contract work-in-progress 17,653 (13,606)(Decrease)/increase in payables (16,603) 32,574

Cash flows from operations 4,794 95,622Changes in working capitalInterest received 790 2,045Interest paid (239) (2,213)Tax paid (11,254) (18,909)

net cash flows (used in)/from operating activities (5,909) 76,545



CONSOLIDATED CASH FLOW STATEmENT

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note 2009 2008$’000 $’000

investing activitiesAcquisition of associated companies – (50)Acquisition of subsidiary, net of cash acquired – 1,813Acquisition of minority interests (40) (3)Additional investment in associated companies – (4,086)Additions to intangible assets (1,410) (1,670)Dividends from associate companies 483 305Dividends from quoted investments 62 130Proceeds from disposal of other investments 12,990 11,163Proceeds from disposal of property, plant and equipment 706 2,104Proceed from share issue by a subsidiary 8,591 –Purchase of other investments – (10,408)Purchase of property, plant and equipment (24,107) (23,733)

net cash flows used in investing activities (2,725) (24,435)

financing activitiesRedemption of Multicurrency Medium Term Note Programme – (42,000)(Repayment of)/proceeds from bank loan and trade facilities, net (564) 6,235Dividends paid:– by the Company (13,060) (13,060)– by subsidiaries to minority shareholders (2,120) (60)(Increase)/decrease in pledged fixed deposits (3) 163Repayment of finance lease obligations, net (339) (284)

net cash flows used in financing activities (16,086) (49,006)

net increase in cash and cash equivalents (24,720) 3,104Effect of exchange rate changes on cash and cash equivalents (405) (124)Cash and cash equivalents at beginning of year 18 157,350 154,370

Cash and cash equivalents at end of year 18 132,225 157,350


NOTES TO THE FINANCIAL STATEmENTS31 DECEMBER 2009

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1. Corporate information

Rotary Engineering Limited (the “Company”) is a limited liability company incorporated in Singapore and is listed on the Singapore Exchange Securities Trading Limited (SGX-ST).

The registered office and principal place of business of the Company is located at No. 17, Tuas Avenue 20, Singapore 638828.

The principal activities of the Company are engineering design, procurement and construction services for plants and associated facilities. The principal activities of the Company’s subsidiaries are disclosed in Note 4 to the financial statements.

2. summary of significant accounting policies

2.1 Basis of preparation

The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (FRS).

The financial statements have been prepared on the historical cost basis except as disclosed in the accounting policies below.

The financial statements are presented in Singapore Dollars (SGD or $) and all values in the tables are rounded to the nearest thousand ($’000) as indicated.

2.2 Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except as follows:

On 1 January 2009, the Group adopted the following standards and interpretations mandatory for annual financial periods beginning on or after 1 January 2009.

• FRS1Presentation of Financial Statements (Revised)• AmendmentstoFRS18Revenue• AmendmentstoFRS23Borrowing Costs• AmendmentstoFRS32Financial Instruments: Presentation and FRS 1 Presentation

of Financial Statements – Puttable Financial Instruments and Obligations Arising on Liquidation

• Amendments to FRS101First-time Adoption of Financial Reporting Standards and FRS 27 Consolidated and Separate Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

• Amendments to FRS 102 Share-based Payment – Vesting Conditions and Cancellations

• AmendmentstoFRS107Financial Instruments: Disclosures• FRS108 Operating Segments

31 DECEMBER 2009

NOTES TO THE FINANCIAL STATEmENTS

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2. summary of significant accounting policies (cont’d)

2.2 Changes in accounting policies (cont’d)

• ImprovementstoFRSsissuedin2008• INTFRS113Customer Loyalty Programmes• INTFRS116Hedges of a Net Investment in a Foreign Operation• Amendments to INT FRS 109Reassessment of Embedded Derivatives and FRS 39

Financial Instruments: Recognition and Measurement – Embedded Derivatives• INTFRS118Transfers of Assets from Customers

Adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group. They did however give rise to additional disclosures.

The principal effects of these changes are as follows:

FRS 1 Presentation of Financial Statements – Revised presentation

The revised FRS 1 separates owner and non-owner changes in equity. The statement of changes in equity includes only details of transactions with owners, with all non-owner changes in equity presented in the statement of other comprehensive income. In addition, the Standard introduces the statement of comprehensive income which presents income and expense recognised in the period. This statement may be presented in one single statement, or two linked statements. The Group has elected to present this statement as one single statement.

Amendments to FRS 107 Financial Instruments: Disclosures

The amendments to FRS 107 require additional disclosure about fair value measurement and liquidity risk. Fair value measurements are to be disclosed by source of inputs using a three level hierarchy for each class of financial instrument. In addition, reconciliation between the beginning and ending balance for Level 3 fair value measurements is now required, as well as significant transfers between Level 1 and Level 2 fair value measurements. The amendments also clarify the requirements for liquidity risk disclosures. The fair value measurement disclosures and liquidity risk disclosures are presented in Note 28 and Note 29 to the financial statements respectively.

FRS 108 Operating Segments

FRS 108 requires disclosure of information about the Group’s operating segments and replaces the requirement to determine primary and secondary reporting segments of the Group. The Group determined that the reportable operating segments are the same as the business segments previously identified under FRS 14 Segment Reporting. Additional disclosures about each of the segments are shown in Note 31, including revised comparative information.


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2.3 Standards issued but not effective

The Group has not adopted the following standards and interpretations that have been issued but not yet effective:

DescriptionEffective for annual periods

beginning on or after

Revised FRS 24 Related party Disclosures 1 January 2011Amendments to FRS 27 Consolidated and SeparateFinancial Statements

1 July 2009

Amendments to FRS 32 Financial Instruments:Disclosure and Presentation

1 February 2010

Amendments to FRS 39 Financial lnstruments:Recognition and Measurement – Eligible Hedged Item

1 July 2009

Amendments to FRS 101 First-Time Adoption ofFinancial Reporting Standards

1 January 2010

Amendments to FRS 102 Share-based Payment 1 January 2010Revised FRS 103 Business Combinations 1 July 2009Amendments to FRS 105 Non-current Assets Held forSale and Discontinued Operations

1 July 2009

Amendments to INT FRS 109 and FRS 39 –Reassessment of Embedded Derivatives FinancialInstruments – Eligible Hedged Item

30 June 2009

INT FRS 114 Prepayments of a Minimum FundingRequirement

1 January 2011

INT FRS 117 Distributions of Non-cash Assets toOwners

1 July 2009

INT FRS 118 Transfer of Assets from Customers 1 July 2009INT FRS 119 Extinguishing Financial Liabilities withEquity Instruments

1 July 2010

Improvements to FRSs issued in 2009: – Amendments to FRS 38 Intangible Assets 1 July 2009 – Amendments to FRS 39 Financial Instruments: Recognition and Measurement

1 January 2010

– Amendments to FRS 102 Share-based Payment 1 July 2009 – Amendments to INT FRS 109 Reassessment of Embedded Derivatives

1 July 2009

– Amendments to INT FRS 116 Hedges of a Net Investment in a Foreign Operation

1 July 2009

– Amendments to FRS 1 Presentation of Financial Statements

1 January 2010

– Amendments to FRS 7 Statement of Cash Flows 1 January 2010 – Amendments to FRS 17 Leases 1 January 2010 – Amendments to FRS 36 Impairment of Assets 1 January 2010

31 DECEMBER 2009


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2.3 Standards issued but not effective (cont’d)

DescriptionEffective for annual periods

beginning on or after

– FRS 39 Financial Instruments: Recognition and Measurement

1 January 2010

– Amendments to FRS 105 Non-current Assets Held for Sale and Discontinued Operations

1 January 2010

– Amendments to FRS 108 Operating Segments 1 January 2010

Except for the revised FRS 103 and the amendments to FRS 27, the directors expect that the adoption of the other standards and interpretations above will have no material impact on the financial statements in the period of initial application. The nature of the impending changes in accounting policy on adoption of the revised FRS 103 and the amendments to FRS 27 are described below.

Revised FRS 103 Business Combinations and Amendments to FRS 27 Consolidated and Separate Financial Statements

The revised standards are effective for annual periods beginning on or after 1 July 2009. The revised FRS 103 introduces a number of changes in the accounting for business combinations occurring after 1 July 2009. These changes will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. The Amendments to FRS 27 require that a change in the ownership interest of a subsidiary (without loss of control) is accounted for as an equity transaction. Therefore, such transactions will no longer give rise to goodwill, nor will they give rise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. Other consequential amendments were made to FRS 7 Statement of Cash Flows, FRS 12 Income Taxes, FRS 21 The Effects of Changes in Foreign Exchange Rates, FRS 28 Investments in Associates and FRS 31 Interests in Joint Ventures. The changes from revised FRS 103 and Amendments to FRS 27 will affect future acquisitions or loss of control and transactions with minority interests. The standards may be early applied. However, the Group does not intend to early adopt.

2.4 Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the balance sheet date. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. When the reporting dates of the parent and a subsidiary are different, the subsidiary prepares additional financial statements as of the same date as that of the parent for consolidation purposes. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full.


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2.4 Basis of consolidation (cont’d)

Acquisitions of subsidiaries are accounted for by applying the purchase method. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity. Any excess of the cost of business combination over the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill on the balance sheet. The accounting policy for goodwill is set out in Note 2.8(a). Any excess of the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised as income in profit or loss on the date of acquisition. When the Group acquires a business, embedded derivatives separated from the host contract by the acquiree are not reassessed on acquisition unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required under the contract.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.

2.5 Transactions with minority interests

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in profit or loss of the Group and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. Transactions with minority interests are accounted for using the entity concept method, whereby, transactions with minority interests are accounted for as transactions with owners. On acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is reflected as being a transaction between owners and recognised directly in equity. Gain or loss on disposal to minority interests is recognised directly in equity.

2.6 Foreign currency

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

31 DECEMBER 2009


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2.6 Foreign currency (cont’d)

Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign operations, which are recognised initially in other comprehensive income and accumulated under foreign currency translation reserve in equity. The foreign currency translation reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation.

The assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at the balance sheet date and their statement of comprehensive income are translated at the weighted average exchange rates for the year. The exchange differences arising on the translation are taken directly to other comprehensive income. On disposal of a foreign operation, the cumulative amount recognised in other comprehensive income relating to that particular foreign operation is recognised in the profit or loss.

2.7 Property, plant and equipment

All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, 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.

Subsequent to recognition, leasehold land, leasehold building, office renovations, office equipment, furniture and fittings, motor vehicles, plant and equipment, and other assets are measured at cost less accumulated depreciation and accumulated impairment losses. When significant parts of property, plant and equipment are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in the income statement as incurred.

Freehold land has an unlimited life and therefore is not depreciated. Depreciation is computed on a straight-line basis over the estimated useful life of the assets as follows:

Leasehold land – over period of lease of 30 yearsLeasehold buildings – over the period of the lease of 30 to 50 yearsOffice renovations – 10 yearsOffice equipment, furniture and fittings – 3 to 10 yearsPlant and machinery – 5 to 10 yearsMotor vehicles – 5 yearsOther assets – 3 to 10 years


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2.7 Property, plant and equipment (cont’d)

Assets under construction included in construction-in-progress are not depreciated as these assets are not yet available for use.

The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

2.8 Intangible assets

a) Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired is allocated, from the acquisition date, to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.

31 DECEMBER 2009


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2.8 Intangible assets (cont’d)

a) Goodwill (cont’d)

Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in Note 2.6.

Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed to be assets and liabilities of the Company and are recorded in SGD at the rates prevailing at the date of acquisition.

b) other intangible assets

Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses.

Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates. The amortisation expense on intangible assets with finite lives is recognised in the profit or loss in the expense category consistent with the function of the intangible asset.

Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the carrying amount of the asset and are recognised in the profit or loss when the asset is derecognised.

Software

Software acquired separately is amortised on a straight line basis over its finite useful life of 3 years.


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2.8 Intangible assets (cont’d)

b) other intangible assets (cont’d)

Land use rights

Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated amortisation and accumulated impairment losses. The land use rights are amortised over the lease term of 50 years.

2.9 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when an annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount.

Impairment losses are recognised in the profit or loss except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is also recognised in other comprehensive income up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. Such reversal is recognised in the profit or loss unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.

2.10 Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less impairment losses.

31 DECEMBER 2009


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2.11 Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. An associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associates is measured in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associates. Goodwill relating to an associate is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is deducted from the carrying amount of the investment and is recognised as income as part of the Group’s share of results of the associate in the period in which the investment is acquired.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s investment in its associates. The Group determines at each balance sheet date whether there is any objective evidence that the investment in the associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate and its carrying value and recognises the amount in the profit or loss.

The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group.

In the Company’s separate financial statements, investments in associates are accounted for at cost less impairment losses.

2.12 Financial assets

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.


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2.12 Financial assets (cont’d)

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been recognised in other comprehensive income is recognised in profit or loss.

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned.

(a) financial assets at fair value through profit or loss

Financial assets held for trading are classified as financial assets at fair value through profit or loss. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in profit or loss. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income.

(b) Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the amortisation process.

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2.12 Financial assets (cont’d)

(c) available-for-sale financial assets

Available-for-sale financial assets are financial assets that are not classified in any of the other categories. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial asset is derecognised.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.

2.13 Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired.

(a) assets carried at amortised cost

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment loss is recognised in profit or loss.

When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. The amount of reversal is recognised in profit or loss.


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2.13 Impairment of financial assets (cont’d)

(b) assets carried at cost

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

(c) available-for-sale financial assets

Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from equity to profit or loss. Reversals of impairment losses in respect of equity instruments are not recognised in the income statement. Reversals of impairment losses on debt instruments are recognised in profit or loss if the increase in fair value of the debt instrument can be objectively related to an event occurring after the impairment loss was recognised in profit or loss.

2.14 Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and in hand and short-term deposits. These also include bank overdrafts that form an integral part of the Group’s cash management.

2.15 Construction contracts

Contract revenue and contract costs are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date, when the outcome of a construction contract can be estimated reliably. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable and contract costs are recognised as expense in the period in which they are incurred. An expected loss on the construction contract is recognised as an expense immediately when it is probable that total contract costs will exceed total contract revenue.

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2.15 Construction contracts (cont’d)

Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

The stage of completion is determined by reference to the professional judgment of project engineers on amount of work performed.

2.16 Inventories

Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the inventories to their present location and conditions are accounted for using purchase costs on a first-in first-out basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of disposal and after making allowance for damages, obsolete and slow moving items.

2.17 Financial liabilities

Financial liabilities within the scope of FRS 39 are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives, directly attributable transaction costs.

Subsequent to initial recognition, derivatives are measured at fair value. Other financial liabilities (except for financial guarantee) are measured at amortised cost using the effective interest method.

For financial liabilities other than derivatives, gains and losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in profit or loss. Net gains or losses on derivatives include exchange differences.

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the profit or loss.


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2.18 Financial guarantee

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due.

Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of the guarantee. Subsequent to initial recognition, financial guarantees are recognised as income in profit or loss over the period of the guarantee. If it is probable that the liability will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with the difference charged to profit or loss.

2.19 Employee benefits

(a) defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

(b) employee leave entitlement

Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.

(c) employee share option plans

Employees of the Group receive remuneration in the form of share options as consideration for services rendered. The cost of these equity-settled transactions with employees is measured by reference to the fair value of the options at the date on which the options are granted. This cost is recognised in profit or loss, with a corresponding increase in the employee share option reserve, over the vesting period. The cumulative expense recognised at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of options that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

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2.19 Employee benefits (cont’d)

(c) employee share option plans (cont’d)

No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a market condition, which are treated as vested irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied. The employee share option reserve is transferred to retained earnings upon expiry of the share options. When the options are exercised, the employee share option reserve is transferred to share capital if new shares are issued, or to treasury shares if the options are satisfied by the reissuance of treasury shares.

In situations where equity instruments are issued and some or all of the goods or services received by the entity as consideration cannot be specifically identified, the unidentified goods or services received (or to be received) are measured as the difference between the fair value of the share-based payment and the fair value of any identifiable goods or services received at the grant date. This is then capitalised or expensed as appropriate.

2.20 Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset. For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in accordance with the transitional requirements of INT FRS 104.

a) as lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease term.


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2.20 Leases (cont’d)

a) as lessee (cont’d)

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

b) as lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.21.

2.21 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.

(a) sale of goods

Revenue from sale of goods is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(b) rendering of services

Revenue from construction contracts is recognised by reference to the stage of completion at the balance sheet date. Stage of completion is determined by reference to the professional judgment of project engineers on amount of work performed. Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the expenses recognised that are recoverable.

(c) interest income

Interest income is recognised using the effective interest method.

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2.21 Revenue (cont’d)

(d) dividend income

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

(e) rental income

Rental income arising on properties is accounted for on a straight-line basis over the lease terms. The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.

2.22 Income taxes

(a) Current tax

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or loss, either in other comprehensive income or directly in equity.

(b) deferred tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.

Deferred tax liabilities are recognised for all temporary differences, except:

• where the deferred income tax liability arises from the initial recognitionof goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• in respect of taxable temporary differences associated with investments insubsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.


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2.22 Income taxes (cont’d)

(b) deferred tax (cont’d)

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except:

• where the deferred income tax asset relating to the deductible temporarydifference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

• inrespectofdeductibletemporarydifferencesassociatedwithinvestmentsinsubsidiaries, associates and interests in joint ventures, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

Deferred income tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the same taxation authority.

31 DECEMBER 2009


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2.22 Income taxes (cont’d)

(c) sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

– Where the sales tax incurred in a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

– Receivables and payables that are stated with the amount of sales tax included.

The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.

2.23 Segment reporting

For management purposes, the Group is organised into operating segments based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers report directly to the management of the Company who regularly review the segment results in order to allocate resources to the segments and to assess the segment performance. Additional disclosures on each of these segments are shown in Note 31, including the factors used to identify the reportable segments and the measurement basis of segment information.

2.24 Share capital and share issue expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.

2.25 Contingencies

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group.

Contingent liabilities and assets are not recognised on the balance sheet of the Group.


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3. significant accounting Judgements and estimates

The preparation of the Group’s financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

3.1 Judgements made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following judgements, apart from those involving estimations, which has the most significant effect on the amounts recognised in the financial statements:

a) income taxes

The Group has exposure to income taxes in numerous jurisdictions. Significant judgment is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amount of the Group’s income tax payables, income tax recoverable, deferred tax assets and deferred tax liabilities at the balance sheet date was $15,008,000 (2008: $13,849,000), $1,877,000 (2008: $1,484,000), $332,000 (2008: $220,000) and $1,842,000 (2008: $1,476,000) respectively.

b) impairment of available-for-sale financial assets

The Group reviews its debt securities classified as available-for-sale investments at each balance sheet date to assess whether they are impaired. The Group also records impairment charges on available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is “significant” or “prolonged” requires judgement. In making this judgement, the Group evaluates, among other factors, historical share price movements and the duration and extent to which the fair value of an investment is less than its cost. No impairment loss on available-for-sale financial assets was recognised during the year ended 31 December 2009 and 2008.

3.2 Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

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3. significant accounting Judgements and estimates (cont’d)

3.2 Key sources of estimation uncertainty (cont’d)

a) useful lives of plant and equipment

The cost of plant and equipment is depreciated on a straight-line basis over the plant and equipment’s estimated economic useful lives. Management estimates the useful lives of these plant and equipment to be within 3 to 10 years. Changes in the expected level of usage and technological developments could impact the economic useful lives and residual values of these assets, therefore, future depreciation charges could be revised. The carrying amount of the Group’s plant and equipment at the balance sheet date is disclosed in Note 9 to the financial statements.

b) impairment of loans and receivables

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and receivables at the balance sheet date is disclosed in Note 14 to the financial statements.

d) Construction contracts

The Group recognises contract revenue by reference to the stage of completion of the contract activity at the balance sheet date, when the outcome of a construction contract can be estimated reliably. The stage of completion is measured by reference to the professional judgment of project engineers on the amount of work performed. Significant assumptions are required to estimate the total contract costs and the recoverable variation works that will affect the stage of completion. The estimates are made based on past experience and knowledge of the project engineers. The carrying amounts of assets and liabilities arising from construction contracts at the balance sheet date are disclosed in Note 16 to the financial statements.

e) deferred tax assets

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. The carrying value of recognised and unrecognised tax losses at 31 December 2009 were $1,244,000 (2008: $829,000) and $346,000 (2008: $1,065,000) respectively.


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4. Group companies

The subsidiary and associated companies at 31 December 2009 are:

name of Company (Country of incorporation and place of business) principal activities

proportion (%) of ownership

interest2009 2008

Subsidiary companies held by the Company:

Rotary Electrical Company (Private) Limited (@)

(Singapore)

Electrical and engineering contractor and supplier

100.0 100.0

Rotary Mechanical and Construction Company (Private) Limited (@)

(Singapore)

Contractor in mechanical piping and related works

100.0 100.0

Supermec Private Limited (@)

(Singapore)Insurance broker and electrical and engineering material traders

60.0 60.0

ShopGlobal Pte. Ltd. (@)

(Singapore)Engineering consultants, designers and builders

100.0 100.0

P.T. Rotary MECOM (###)

(Indonesia)Dormant 70.0 70.0

Rotary Electrical & Instrumentation Pte. Ltd. (@)

(Singapore)

Engineering, design installation and repair services

100.0 100.0

Sixty-six Switchgears Co Pte Ltd (@)

(Singapore)Electrical testing and testing of switchgear

60.0 60.0

Innovative Biotech Pte Ltd (@)

(Singapore)Trading of medical products and equipment

97.6 97.6

Fushun Rotary Engineering Co Ltd (#)

(People’s Republic of China)

Dormant 90.0 90.0

Fushun Rotary Cable Co Ltd (*) (1)

(People’s Republic of China)Manufacturing of cables and wires 69.1 69.1

31 DECEMBER 2009


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4. Group companies (cont’d)



interest2009 2008


Rotary Engineering (Australia) Pty Ltd (***)

(Australia)

Dormant 100.0 100.0

Rotary TREL Pte Ltd (@)

(Singapore)Engineering construction 100.0 100.0

PT. Rotary Engineering Indonesia (*) (2)

(Indonesia)

Steel fabrication and construction 100.0 100.0

Rotary MEC Engineering (India) Private Limited (*) (3)

(India)

Engineering design, procurement and construction services for plants and associated facilities

100.0 100.0

Thai Rotary Engineering Public Company Limited (**) (##)

(Thailand)

Engineering design and construction works

91.9 91.9

Calvert Limited (**)

(Thailand)Investment holding 90.6 90.6

Rotary IMC Pte Ltd (@)(d)

(Singapore)Provision of integrated maintenance services

100.0 100.0

Rotary Engineering (Shanghai) Co., Ltd. (*) (4)


Executing turnkey and EPC projects

100.0 100.0

Rotary International Trading (Shanghai) Co., Ltd. (*)(4)


Construction and engineering related materials and equipment as well as provision of trading agency and services

100.0 100.0

Rotary Automation Pte. Ltd. (@)

(Singapore)Engineering, design, procurement, construction and maintenance service

100.0 100.0


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interest2009 2008


Rotary Engineering (Dalian) Limited (*)(5)


Provide engineering design, management construction and advisory services; engineering personnel and worker training services

100.0 100.0

IMC Equipment Pte Ltd (@)(b)

(Singapore)Dormant 100.0 100.0

BuildGlobal Pte. Ltd. (@)

(Singapore)Engineering works 100.0 100.0

Rotary Process Solutions Pte. Ltd. (@)

(Singapore)

Provide process-related services for oil and petrochemical industries

100.0 100.0

Petrol Steel Co. Ltd. (**)(e)

(Saudi Arabia)Engineering, procurement services with primary focus in the electrical and instruments aspects

51.0 51.0

Petrol Steel Singapore Pte. Ltd. (@)

(Singapore)

Manufacturing of tanks, reservoirs and containers of metal, and providing storage tanks and pressure vessel

51.0 51.0

Singlobal (M) Sdn Bhd (c)(***) Engineering, design, procurement and construction services for plants and associated facilities

100.0 –

Rotary Logistics Pte. Ltd. (@)(b)

(Singapore)“One-stop shop” logistics provider offering integrated warehousing, material logistics, procurement and total supply chain management services

100.0 100.0

REL-TREL Joint Venture (**) (f) Engineering design and construction works

93.9 –

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interest2009 2008

Held by subsidiaries:

Thai Rotary Engineering Public Company Limited (**)

(Thailand)

Engineering design and construction works

43.3 43.3

EnRis Pte Ltd (@)(d)

(Singapore)Provision of diagnostic and maintenance services for plants and related facilities

100.0 90.0

Rotary-Thai Construction Pte. Ltd. (@)

(Singapore)

Contractor in engineering and scaffolding works

91.9 91.9

Rotary-Thai Pharma Pte. Ltd. (a)

(Singapore)Engineering, design, procurement, construction management, validation and consultancy services

– 100.0

(@) Audited by Ernst & Young LLP, Singapore(*) Audited by other firms.

(1) Liao Ning ZhongHuaXin, Certified Public Accountants Co., Ltd, China(2) Kantar Akuntan Publik, Drs. Sukimto Sjamsuli, Indonesia(3) Sudhakar Pai Associates, Chartered Accountants, India(4) Shanghai Huashen Certified Public Accounts Co. Ltd, China(5) Liaoning Pan-China Certified Public Accountants Co., Ltd, China

(**) Audited by member firm of Ernst & Young Global in the respective countries.(***) Not required to be audited under the laws of the country of incorporation.(#) Not required to be audited as the company is dormant since its incorporation.(##) The Company holds a direct interest of 48.6% in the subsidiary. The balance interest

is held through a subsidiary of the Company.(###) No audited accounts as the Company is exempted from audit.

(a) The Group’s subsidiary company, Rotary Thai-Pharma Pte. Ltd. was struck off from the Singapore Registry of Companies on 12 February 2009.

(b) On 15 April 2009, the Company has acquired 1,000,000 ordinary shares of Rotary Logistics Pte Ltd, representing 100% equity interest, from its subsidiary, IMC Equipment Pte Ltd (“IMCE”) at the consideration of $1,051,000. IMCE was struck off from the Singapore Registry of Companies on 4 March 2010.


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(c) On 16 December 2009, the Company incorporated a wholly-owned subsidiary, Singlobal (M) Sdn Bhd, which share capital of MYR 1,200,000 comprises 1,200,000 ordinary shares at MYR 1 each.

(d) On 28 December 2009, the Group’s wholly-owned subsidiary, Rotary IMC Pte Ltd (“RIMC”) acquired an additional 10% equity interest in Enris Pte Ltd (“ENRIS”) from its minority interests at a cash consideration of $40,000. As a result of this acquisition, ENRIS became a wholly-owned subsidiary of RIMC. On the date of the acquisition, the book value of the additional interest acquired was $37,000. The difference between the consideration and the book value of the interest acquired of $3,000 was written off to profit and loss.

(e) During the year, the Company subscribed an additional 23,000 ordinary shares in Petrol Steel Co. Ltd (“PSCL”) at the consideration of SAR 23,000,000. This investment has been effected by way of capitalisation of a loan amount of SAR 23,000,000 due from PSCL. Subsequent to subscription, the Company’s equity stake in PSCL remains at 51%.

(f) REL-TREL Joint Venture (“the Joint Venture”) was formed under the Joint Venture Agreement dated 8 May 2009. The objective of the Joint Venture is to render design and construction services of storage tank and facilities under a construction agreement dated 30 October 2009. The profits and losses of the Joint Venture are shared between the Company and Thai Rotary Engineering Public Company Limited (“TREL”) in the proportion of 25%-75%.



interest2009 2008

Associated companies held by the Company:

Rotary MEC (M) Sdn Bhd (*)

(Malaysia)Engineering works 49.0 49.0

Rotary Production Services Network Pte. Ltd. (@)

(Singapore)

Engineering, construction and maintenance services

50.0 50.0

Powell Industries Asia Pte Ltd (@)

(Singapore)

Supply of power control room systems

40.0 40.0

Jasinusa Automobile Pte. Ltd. (@)

(Singapore)

Investment holding 25.0 25.0

31 DECEMBER 2009


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interest2009 2008


Tiong Woon China Consortium Pte. Ltd. (**)(2) (***)

(Singapore)

Provision of heavy lift, equipment installation, project engineering, heavy haulage and marine transportation services

25.0 25.0

Pipe Rack Holding Company Private Limited (@)

(Singapore) (Note 12)

Constructing and providing pipe rack and pipelines facilities

– 25.0

Eastlog Holding Pte. Ltd. (**)(7)

(Singapore)Investment holding 20.0 20.0

Jinzhou Everthriving Logistics Co., Ltd. (**) (6)


Transport and sale of liquefied natural gas

45.0 45.0

Harvest E & I Engineering Sdn Bhd (**) (4)

(Malaysia)

Electrical works in process plant, construction, engineering, services, suppliers, repair of ships, tankers and ocean going-vessels and general trading

40.0 40.0

Itro Pte. Ltd. (@)

(Singapore)Build, operate and jointly own an industrial waste treatment plant that generates steam energy to support the needs of process plants

40.0 40.0

Delimax Pte. Ltd. (@)

(Singapore)Electrical work construction, suppliers and repair of ships, tankers and other ocean-going vessels

40.0 40.0

OKP (Oil & Gas) Infrastructure Pte. Ltd. (**) (5)

(Singapore)

Civil engineering 45.0 45.0


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interest2009 2008


Rotary Arabia Co. Ltd. (*)

(Saudi Arabia)Engineering and procurement services with primary focus in the electrical and instruments aspects

50.0 50.0

Rotary Arabia Singapore Pte. Ltd. (@)

(Singapore)

Building construction including major upgrading works, repair and maintenance

25.0 25.0

RSK Engineering Co Pte Ltd (@)

(Singapore)Pipe fabrication services 40.0 40.0

Rotary Techskill India Private Limited (**)(3)

(India)

Testing and certification of workers in mechanical works

45.0 45.0

iPromar (Pte.) Ltd. (**) (7)

(Singapore)Ship repair and marine services 25.0 25.0

(@) Audited by Ernst & Young LLP, Singapore.(*) Audited by member firm of Ernst & Young Global in the respective countries(**) Audited by other firms

(1) GohThienChee & Co, Singapore(2) PriceWaterHouseCoopers, Singapore(3) T.Xavier BSC FCA Chartered Accountant Pte Ltd, India(4) Deloitte & Touche Chartered Accountants, Malaysia(5) Nexia Tan & Sitoh, Singapore(6) Liaoning Huawei Accountant’s Company Ltd, China(7) Akber Ali & Co, Singapore

(***) The financial year of the Company ends on 30 June.

31 DECEMBER 2009


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5. revenue

Revenue represents invoiced value of goods supplied, services rendered and progress claims on the percentage of completion of contract work-in-progress analysed as follows:

Group2009 2008$’000 $’000

External parties 541,662 505,046Associated companies 10,234 15,073

551,896 520,119

Contract revenue 533,511 497,165Sales of goods 10,551 19,355Others 7,834 3,599

551,896 520,119

6. other revenue, administrative costs, other operating costs and finance costs

This is stated after charging/(crediting):

Group2009 2008$’000 $’000

Other revenue Gain on disposal of property, plant and equipment (85) (144) Gain on disposal of other investments (182) – Gross dividends from quoted investments (62) (130) Interest income – Associated companies (Note 26a) (324) (488) – Fixed deposits (463) (1,327) – Third parties (3) (151)

Administrative costs Allowance for obsolete inventories 148 41 Employee benefits expense (Note 25) 32,193 27,518 Fair value changes in derivatives – (658) Gain on foreign exchange (182) (1,077) Non-audit services (other auditors) 216 171 Obsolete inventories written off 773 – Reversal of write-down of inventories (58) –


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6. other revenue, administrative costs, other operating costs and finance costs (cont’d)

Group2009 2008$’000 $’000

Other operating costs Allowance for doubtful debts 8,441 2,701 Amortisation of intangible assets 995 542 Bad debts written off 173 73 Depreciation of property, plant and equipment 10,696 6,898 Impairment loss on investment in associates 200 1,632 Impairment loss on advances to associates 2,783 1,119 Write-back of allowance for doubtful debts (4) (2)

Finance costs Finance charges payable under finance lease 40 49 Interest expense on loans and borrowings (including bank overdrafts) 199 2,164

7. income tax expense

(a) major components of income tax expense

The major components of income tax expense for the years ended 31 December 2009 and 2008 are:

Group2009 2008$’000 $’000

Current income tax – Current income taxation Singapore 12,441 10,619 Foreign 418 4,293

12,859 14,912 – (Over)/under provision in respect of previous years (25) 474

12,834 15,386

Deferred income tax – Origination and reversal of temporary differences 204 57 – Under provision in respect of previous years 144 34

348 91

Income tax expense recognised in profit or loss 13,182 15,477

31 DECEMBER 2009


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7. income tax expense (cont’d)

(b) relationship between tax expense and accounting profit

The reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the years ended 31 December 2009 and 2008 are as follows:

Group2009 2008$’000 $’000

Profit before tax 65,265 69,755

Tax at the domestic rates applicable to profits in the countries where the Group operates 12,404 13,811

Adjustments: Non-deductible expenses 1,334 979 Income not subject to taxation (747) (29) Effect of reduction in tax rate (34) – Effect of partial tax exemption and tax relief (199) (209) Benefits from previously unrecognised deferred tax assets (8) (58) Deferred tax assets not recognised 835 240 (Over)/under provision in respect of previous years (25) 508 Under provision for deferred tax liabilities in respect of previous years 144 – Share of results of associated companies (638) 32 Others 116 203

Income tax expense recognised in profit or loss 13,182 15,477

The corporate income tax rate applicable to Singapore companies of the Group was reduced to 17% for the year of assessment 2010 onwards from 18% for year of assessment 2009. The corporate income tax rate applicable to Malaysian companies of the Group was reduced from 27% to 26% and 25% for the year of assessment 2008 and the year of assessment 2009 onwards respectively.

The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.

8. earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable to owners of the parent by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.


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8. earnings per share (cont’d)

The following tables reflects the profit and share data used in the computation of basic and diluted earnings per share for the years ended 31 December:

Group2009 2008$’000 $’000

Profit net of tax attributable to owners of the parent used in computation of basic and diluted earnings per share 54,238 50,851

no. of shares

No. of shares

’000 ’000

Weighted average number of ordinary shares for basic earnings per share computation 567,839 567,839Dilutive effect of share options 11 11

Weighted average number of ordinary shares for diluted earnings per share computation 567,850 567,850

No ordinary shares were issued from the exercise of share option during the year ended 31 December 2009 and 2008.

Since the end of the financial year, no (2008: nil) options were exercised to acquire ordinary shares. There have been no transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements.

31 DECEMBER 2009


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9. property, plant and equipment

Group

freehold

land

Leasehold

land

Leasehold

buildings

office

renovations

office

equipment,

furniture

and fittings

motor

vehicles

plant and

machinery

other

assets

Construction-

in-progress total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Cost

At 1 January 2008 659 1,168 36,523 2,026 8,753 5,652 20,271 8,385 3,041 86,478

Additions – 1,149 – 535 1,133 897 11,509 1,283 7,421 23,927

Disposals – – – (21) (218) (371) (291) (177) (1,694) (2,772)

Acquisition of

subsidiary – – – – – – 1,181 – 3,435 4,616

Reclassification – – 131 – 617 – 169 – (917) –

Currency realignment (23) (138) (841) (2) (21) (6) (502) (235) 255 (1,513)

At 31 December 2008

and 1 January 2009 636 2,179 35,813 2,538 10,264 6,172 32,337 9,256 11,541 110,736

Additions – 492 – 1,099 1,932 3,050 12,058 156 5,418 24,205

Disposals – – – (46) (413) (703) (1,181) – – (2,343)

Reclassification – – 3,361 – – – 141 – (3,502) –

Currency realignment 9 82 443 (8) 98 (366) 315 125 (241) 457

At 31 December 2009 645 2,753 39,617 3,583 11,881 8,153 43,670 9,537 13,216 133,055


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9. property, plant and equipment (cont’d)

Group

freehold

land

Leasehold

land

Leasehold

buildings

office

renovations

office

equipment,

furniture

and fittings

motor

vehicles

plant and

machinery

other

assets

Construction-

in-progress total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

accumulated

depreciation

and impairment loss

At 1 January 2008 – 273 10,143 1,255 7,355 3,163 10,555 7,321 – 40,065

Depreciation charge for

the year – 31 1,485 236 783 907 2,784 672 – 6,898

Disposals – – – (17) (151) (312) (175) (157) – (812)

Reclassification – – – – 481 – (481) – – –

Currency realignment – (11) (180) (30) (59) (42) (550) (253) – (1,125)

At 31 December 2008

and 1 January 2009 – 293 11,448 1,444 8,409 3,716 12,133 7,583 – 45,026

Depreciation charge

for the year – 38 1,228 387 1,268 1,284 6,368 123 – 10,696

Disposals – – – (46) (404) (569) (703) – – (1,722)

Reclassification – 42 233 3 83 (52) 222 98 – 629

At 31 December 2009 – 373 12,909 1,788 9,356 4,379 18,020 7,804 – 54,629

net carrying amount

At 31 December 2009 645 2,380 26,708 1,795 2,525 3,774 25,650 1,733 13,216 78,426

At 31 December 2008 636 1,886 24,365 1,094 1,855 2,456 20,204 1,673 11,541 65,710

31 DECEMBER 2009


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CompanyLeasehold buildings

office renovations

office equipment,

furniture and fittings

motor vehicles

other assets total

$’000 $’000 $’000 $’000 $’000 $’000

CostAt 1 January 2008 10,292 348 6,156 2,434 9,271 28,501Additions – 100 491 38 576 1,205Disposals – – (6) (36) (52) (94)

At 31 December 2008 and 1 January 2009 10,292 448 6,641 2,436 9,795 29,612Additions – 900 1,239 1,282 2,007 5,428Disposals – – (80) (500) – (580)

At 31 December 2009 10,292 1,348 7,800 3,218 11,802 34,460

accumulated depreciation and impairment lossAt 1 January 2008 2,882 284 5,350 1,005 3,590 13,111Depreciation charge for the year 206 20 493 437 818 1,974Disposals – – (4) (14) (6) (24)

At 31 December 2008 and 1 January 2009 3,088 304 5,839 1,428 4,402 15,061Charge for the year 206 108 763 638 949 2,664Disposals – – (78) (409) – (487)

At 31 December 2009 3,294 412 6,524 1,657 5,351 17,238

net carrying amountAt 31 December 2009 6,998 936 1,276 1,561 6,451 17,222

At 31 December 2008 7,204 144 802 1,008 5,393 14,551


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(a) Other assets comprise electrical equipment, containers, air conditioners and hand tools.

(b) Assets held under finance leases

During the financial year, the Group acquired plant and equipment with an aggregate cost of $98,000 (2008: $194,000) by means of finance leases. The cash outflow on acquisition of property, plant and equipment amounted to $24,107,000 (2008: $23,733,000).

The carrying amount of plant and equipment held under finance leases at the balance sheet date as follows:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Motor vehicles 276 600 166 350Plant and machinery 210 96 – –

486 696 166 350

Leased assets are pledged as security for the related finance lease liabilities.

(c) The followings are the major properties of the Group:

Located in Singapore:

(i) A 3-hanger workshop building and a 3-storey office building located at 17 Tuas Avenue 20 on a leasehold land area of 19,863 sqm (60 years from 1 January 1992).

(ii) A JTC Type 4 single-storey corner terrace with extended mezzanine office floor at 2 Gul Street 2 on a leasehold land area of 1,610 sqm (30 years from 6 August 2008).

(iii) A leasehold land with an area of 27,027.20 sqm in Jurong Island for industrial use (30 years from 1 April 1999).

Located overseas:

(i) A leasehold land and building with a land area of 2,421.3 sqm in Fushun, People’s Republic of China for industrial use (30 years from 1994).

31 DECEMBER 2009


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Located overseas (cont’d):

(ii) A leasehold land and building with a land area of 120,000 sqm in Batam, Indonesia for industrial use (30 years from 1996).

(iii) A freehold land with an area of 70,000 sqm in Huay Pong, Thailand for industrial use.

(iv) A leasehold land with an area of 64,942.9 sqm in Jubail, Saudi Arabia for industrial use (10 years from 2006).

(v) An industrial property in Malaysia with a land area of approximately 669 sqm with existing office, factory and ancillary buildings located at No. 16 Jalan PJS 7/21 Bandar Sunway, 46150 Petaling Jaya, Selangor (54 years from 2009).

(d) Assets under construction

Included in plant and equipment of the Group at 31 December 2009 was an amount of $13,216,000 (2008: $11,541,000) relating to expenditure for plants in the course of construction.

10. intangible assets

Group Company

softwareLand use

right total software$’000 $’000 $’000 $’000

Cost: At 1 January 2008 1,534 – 1,534 1,154 Additions 130 1,540 1,670 – Currency realignment (13) – (13) –

At 31 December 2008 and 1 January 2009 1,651 1,540 3,191 1,154 Additions 1,410 – 1,410 1,271 Currency realignment 8 (31) (23) –

At 31 December 2009 3,069 1,509 4,578 2,425


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10. intangible assets (cont’d)

Group Company

softwareLand use

right total software$’000 $’000 $’000 $’000

accumulated amortisation and impairment: At 1 January 2008 559 – 559 385 Amortisation 510 32 542 384 Currency realignment (8) – (8) –

At 31 December 2008 and 1 January 2009 1,061 32 1,093 769 Amortisation 963 32 995 1,990 Currency realignment 2 (2) – –

At 31 December 2009 2,026 62 2,088 1,577

net carrying amount: At 31 December 2009 1,043 1,447 2,490 848

At 31 December 2008 590 1,508 2,098 385

The Group has land use right over one plot of state-owned land in People’s Republic of China (PRC) where the Group’s PRC manufacturing, fabrication and storage facilities reside. The land use right is not transferable and has a remaining tenure of 48 years (2008: 49 years).

The amortisation of software and land use right is included in the ‘Other operating costs’ line items in statement of comprehensive income.

31 DECEMBER 2009


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11. subsidiary companies

Company2009 2008$’000 $’000

Unquoted equity shares, at cost 71,353 60,620Less: Impairment losses (2,566) (1,936)

68,787 58,684

Details of the subsidiary companies are set out in Note 4 to the financial statements.

12. associated companies

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Unquoted equity shares, at cost 27,046 28,446 26,863 28,263Impairment losses (4,501) (5,701) (4,501) (5,701)

22,545 22,745 22,362 22,562Share of post-acquisition profits of associated companies, less dividend received 184 1,158 – –

Carrying value of investments 22,729 23,903 22,362 22,562

Details on the associated companies are set out in Note 4 to the financial statements.

During the year, the Company’s shareholdings in Pipe Rack Holding Company Private Limited (“Pipe Rack”) has been diluted from 25% to 19%, and the Company’s investment in Pipe Rack has been accounted for as other investment (Note 15).

The Group has not recognised losses relating to Eastlog Holding Pte. Ltd. where its share of losses exceeds the Group’s interest in this associate. The Group’s cumulative share of unrecognised losses (2008: profits) at the balance sheet date was $451,875 (2008: $44,525), of which $496,400 (2008: $1,688,800) was the share of the current year’s losses. The Group has no obligation in respect of these losses.


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12. associated companies (cont’d)

The summarised financial information of the associated companies, not adjusted for the proportion of ownership interest held by the Group, is as follows:

Group2009 2008$’000 $’000

assets and liabilitiesCurrent assets 97,577 61,601Non-current assets 133,087 82,274

total assets 230,664 143,875

Current liabilities 109,231 58,476Non-current liabilities 15,774 1,817

total liabilities 125,005 60,293

results:

Revenue 82,054 73,900

Profit net of tax 2,280 1,193

13. deferred tax

Deferred income tax as at 31 December relates to the following:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

deferred tax liabilitiesDifferences in depreciation for tax purposes (2,964) (1,213) (2,049) (735)Other items – (263) – (43)

(2,964) (1,476) (2,049) (778)

deferred tax assetsUnutilised tax losses 332 220 – –Provisions 1,122 – 1,029 –

1,454 220 1,029 –

net deferred tax liabilities (1,510) (1,256) (1,020) (778)

31 DECEMBER 2009


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13. deferred tax (cont’d)

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

disclosures in balance sheets:Deferred tax assets 332 220 – –Deferred tax liabilities (1,842) (1,476) (1,020) (778)

(1,510) (1,256) (1,020) (778)

tax effect of temporary differences for which no deferred tax asset is recognised

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Unrecognised tax losses 587 1,065 – –Unabsorbed capital allowances – 376 – –

587 1,441 – –

Unrecognised tax losses and unabsorbed capital allowances

The tax losses and unabsorbed capital allowances are available for offset against future taxable profits of the companies in which the losses and unabsorbed capital allowances arose, for which no deferred tax asset is recognised due to uncertainty of its recoverability.

The use of these tax losses and unabsorbed capital allowances are subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.

Tax consequences of proposed dividends

There are no income tax consequences (2008: nil) attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the financial statements (Note 32).

Unrecognised temporary differences relating to investments in subsidiaries and joint venture

At the balance sheet date, no deferred tax liability (2008: nil) has been recognised for taxes that would be payable on the undistributed earnings of certain of the Group’s subsidiaries as the Group has determined that undistributed earnings of its subsidiaries will not be distributed in the foreseeable future.

Such temporary differences for which no deferred tax liability has been recognised aggregate to $15,761,000 (2008: $19,814,000). The deferred tax liability is estimated to be $1,483,000 (2008: $1,717,000).


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14. trade and other receivables

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

trade and other receivables (current):Trade receivables – Third parties 217,397 147,967 156,852 85,818 – Subsidiary companies – – 10,835 10,604 – Associated companies 14,659 7,089 4,244 4,146Other receivables – Subsidiary companies

(non-trade) – – 15,928 18,208 – Associated companies

(non-trade) 857 4,673 857 53 – Third parties 26 705 – –Staff loan and advances 362 913 73 622Sundry deposits 3,829 2,301 1,238 805Recoverables 1,268 1,313 489 322Interest receivables 9 9 3 9

238,407 164,970 190,519 120,587

other receivables (non-current):Other receivables – Associated companies

(non-trade) 10,797 7,986 10,797 7,986Less: Allowance for impairment (10,797) (7,986) (10,797) (7,986)

– – – –

Total trade and other receivables (current and non-current) 238,407 164,970 190,519 120,587Add: Cash and cash equivalent

(Note 18) 132,369 157,774 72,776 101,008

Total loans and receivables 370,776 322,744 263,295 221,595

31 DECEMBER 2009


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14. trade and other receivables (cont’d)

Trade receivables

Trade receivables are non-interest bearing and are generally on 30 to 90 days’ terms. They are recognised at their original invoice amounts which represent their fair values on initial recognition.

As at 31 December 2009, the following amounts denominated in foreign currencies are included in trade receivables:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

EUR – 513 59 511IDR – 1,986 – 1,986MYR 62 – – –USD 48,040 38,368 33,315 9,072

Related party balances and staff loans

Amounts due from subsidiary and associated companies included in current trade and other receivables are unsecured and are repayable on demand. The amounts are to be settled in cash. These amounts are non-interest bearing except for amount of $7,399,836 (2008: $Nil) which interest bear at a rate of 5.5% per annum.

Recoverables relate to payment for purchases made on behalf of customers.

Non-current amounts due from associated companies are unsecured, have no repayment terms and are repayable only when the cash flow of the borrower permits. Accordingly, the fair value of these are not determinable as the timing of the future cash flow arising from the amounts cannot be estimated reliably. These amounts are non-interest bearing except for loan amount of $6,323,850 (2008: $6,468,750) and $2,816,924 (2008: $517,500) which interest bear at a rate of 8% (2008: 8%) and 10% (2008: 10%) per annum respectively.

Staff loans are interest free for first time disbursement only. Subsequent loans are charged at prime rates.


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Receivables that are past due but not impaired

The Group has trade receivables amounting to $41,052,000 (2008: $37,566,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:

Group2009 2008$’000 $’000

Trade receivables past due: Lesser than 30 days 14,420 11,919 30 to 60 days 3,558 2,199 61 to 90 days 3,383 561 91 to 120 days 3,745 2,618 More than 120 days 15,946 20,269

41,052 37,566

Receivables that are impaired

The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:

Groupindividually impaired2009 2008$’000 $’000

Trade receivables – nominal amounts 11,485 11,325Less: Allowance for impairment (11,485) (3,325)

– 8,000

Movement in allowance accounts: At 1 January 3,325 958 Charge for the year 8,441 2,701 Write-off for the year (277) (331) Write back for the year (4) (2) Currency realignment – (1)

At 31 December 11,485 3,325

31 DECEMBER 2009


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Receivables that are impaired (cont’d)

Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

At the balance sheet date, the Group and the Company have provided an allowance of $10,797,331 (2008: $7,986,216) for impairment of non-current other receivable due from an associated company with a nominal amount of $10,797,311 (2008: $7,986,216). This associated company has incurred significant financial losses for the current and past three financial years.

During the year, the Group and the Company has provided an allowance of $2,782,885 (2008: $1,102,104) for impairment in this allowance account.

15. other investments

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

other investments non-current

Available-for-sale financial assets

Unquoted equity investments at cost 2,376 1,026 2,376 976Less: Impairment losses (1,509) (109) (1,509) (109)

867 917 867 867Quoted shares, at fair value 906 3,638 28 2,959

1,773 4,555 895 3,826

Held for trading investmentQuoted investment, at fair value – 1,700 – 1,700

1,773 6,255 895 5,526

other investments, current

Held for trading investmentGovernment bills – 6,848 – –

Unquoted equity investments are denominated in SGD, THB and MYR. Unquoted equity investments are stated at cost as there is no market price and the fair value cannot be reliably measured using valuation techniques.


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16. Gross amount due from/(to) customers for contract work-in-progress

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Aggregate amount of costs incurred and recognised profits (less recognised losses) to date 910,746 1,149,230 393,126 833,196Less: Progress billings (980,806) (1,201,637) (465,617) (894,688)

(70,060) (52,407) (72,491) (61,492)

Presented as:

Gross amount due from customers for contract work 9,927 16,454 5,366 7,620

Gross amount due to customers for contract work (79,987) (68,861) (77,857) (69,112)

(70,060) (52,407) (72,491) (61,492)

Retention sums on construction contract included in trade receivables 33,080 18,141 17,905 11,866

31 DECEMBER 2009


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17. inventories

Group2009 2008$’000 $’000

balance sheetRaw materials, supplies and consumables 6,283 4,907Medical products 454 746

Total inventories at lower of cost and net realisable value 6,737 5,653

income statementInventories recognised as an expense in cost of sales 5,431 13,123Inventories recognised as an expense in administrative costs are inclusive of the following charge/(credit): – Reversal of write-down of inventories (58) – – Allowance for obsolete inventories 148 41 – Obsolete inventories written off 773 –

The reversal of write-down of inventories was made when the related inventories were sold above their carrying amounts.

18. Cash and cash equivalents

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Short-term deposits 91,615 111,457 67,635 91,474Cash at bank and in hand 40,754 46,317 5,141 9,534

132,369 157,774 72,776 101,008

Cash at banks earn interest at floating rates based on daily bank deposit rates.

Short term deposits are made for varying periods of one week to twelve months depending on the immediate cash requirements of the Group and earn interests at the respective short term deposit rates.


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18. Cash and cash equivalents (cont’d)

Cash and cash equivalents denominated in foreign currencies at 31 December are as follows:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

AUD 42 35 – –EUR 631 790 20 301GBP 107 112 – –IDR 197 – 197 –INR – – – 162MYR 192 – 2 –THB – – – 197USD 37,622 10,646 35,898 4,263

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the following as at balance sheet date:

Group2009 2008$’000 $’000

Short-term deposits 91,615 111,457Cash and bank balances 40,754 46,317Bank overdraft, unsecured (50) (333)

132,319 157,441Less: Short-term deposits pledged as securities

for bank facilities (94) (91)

Cash and cash equivalents 132,225 157,350

Bank overdrafts are included in the determination of cash and cash equivalents because they form an integral part of the Group’s cash management.

31 DECEMBER 2009


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19. derivatives

2009 2008Contract/notional amount assets Liabilities

Contract/notional amount Assets Liabilities

Group $’000 $’000 $’000 $’000 $’000 $’000

Forward currency contract, representing total derivative 35,542 – – – – –

Add:Held-for-trading investments (current and non-current) (Note 15) – – 8,548 –

Total held for trading assets/(liabilities) – – 8,548 –

Company

Forward currency contract, representing total derivative 35,542 – – – – –

Add:Held-for-trading investments (current and non-current) (Note 15) – – 1,700 –

Total held for trading assets/(liabilities) – – 1,700 –

Forward currency contracts are used to hedge the Group’s foreign currency risk arising from a fixed deposit denominated in USD.


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20. Loans and borrowings

Group Companymaturity 2009 2008 2009 2008

$’000 $’000 $’000 $’000

Current:Obligations under finance leases (Note 22) 2010 384 284 162 153Bank overdrafts On demand 50 333 – –Trade facilities – USD

– SAR2010 6,875 7,240 – –2010 – 199 – –

7,309 8,056 162 153

non-current:Obligations under finance leases (Note 22) 2011 – 2012 136 477 97 288

Total loans and borrowings 7,445 8,533 259 441

Obligations under finance leases

These obligations are secured by a charge over the leased asset (Note 9). The average discount rate implicit in the leases is 4.21% p.a. (2008: 4.21% p.a.). These obligations are denominated in the respective functional currencies of the relevant entities in the Group.

Bank overdrafts

Bank overdrafts, denominated in THB, bear interest at the minimum overdraft rate (MOR) per annum and are secure by a pledge of a subsidiary’s fixed deposits amounting to $94,000 (Note 18) and guaranteed by the Company.

Trade facility – USD

The amounts bear interest at commercial rate, which is 1.71% (2008: 5.60%) per annum and are secured by promissory notes.

Trade facility – SAR

The amounts borne interest at commercial rate, which was 6.98% per annum in 2008, and were secured by promissory notes. The amounts were fully repaid during the year.

31 DECEMBER 2009


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21. trade and other payables

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

trade and other payables (current):

Trade payables – Third parties 61,117 76,697 26,936 24,604 – Subsidiary companies – – 39,376 38,481 – Associated companies 6,394 2,272 4,852 258

Other payables – Third parties 1,953 219 – 62 – Subsidiary companies

(non-trade) – – 104 6,253 – Associated companies

(non-trade) 8 19 8 19Accrued operating expenses 28,386 40,564 13,025 12,661

97,858 119,771 84,301 82,338

other payables (non-current): – Subsidiary companies

(non-trade) – – – 3,781

Total trade and other payables 97,858 119,771 84,301 86,119Add:Loans and borrowings (Note 20) 7,445 8,533 259 441

Total financial liabilities carried at amortised cost 105,303 128,304 84,560 86,560


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21. trade and other payables (cont’d)

Trade payables/Other payables

Trade payables are non-interest bearing and are normally settled on 60-day terms, while other payables have an average credit term of two months.

Amounts due to subsidiary and associated companies

These amounts are unsecured, non-interest bearing and repayable on demand.

Other non-current payables

These amounts were non-interest bearing with no repayment terms and are repayable only when the cash flow of the borrower permits. Accordingly, the fair value of the amounts due to related companies cannot be determined as the timing of the future cash flow arising from the amounts cannot be estimated reliably.

As at 31 December 2009, the following amounts denominated in foreign currencies are included in trade payables:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

AUD 7 2 – –CAD – – – –EUR 2,240 672 1,989 255GBP 30 24 4 –INR – 3 – 3MYR 785 – – –RMB 3 55 3 55THB 111 713 103 498USD 5,472 17,434 1,088 10,512

31 DECEMBER 2009


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22. obligations under finance leases

The Group has finance leases for certain items of plant and equipment and motor vehicles (Note 9). These leases have terms of renewal but no purchase options and escalation clauses. There are no restrictions placed upon the Group by entering into the leases. Renewal is at the option of the specific entity that holds the lease. The average discount rate implicit in the leases is 4.21% (2008: 4.21%).

Future minimum lease payments under finance leases together with the present value of net minimum lease payments are as follows:

2009 2008

Groupminimum payments

present value of

paymentsMinimum payments

Present value of

payments$’000 $’000 $’000 $’000

Within one year 408 384 337 284After one year but not more than five years 146 136 501 477

Total minimum lease payments 554 520 838 761Less: Amounts representing

finance charges (34) – (77) –

Present value of minimum lease payments 520 520 761 761

Company

Within one year 186 162 198 153After one year but not more than five years 89 97 286 288

Total minimum lease payments 275 259 484 441Less: Amounts representing finance charges (16) – (43) –

Present value of minimum lease payments 259 259 441 441

These obligations are secured by a charge over the leased assets (Note 9). These obligations are denominated in the respective functional currencies of the relevant entities in the Group.


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23. share capital

Group and Company2009 2008

no. of shares’000 $’000

No. of shares ’000 $’000

At 1 January and 31 December 567,839 89,362 567,839 89,362

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions. The ordinary shares have no par value.

The Company has an employee share option plans under which options to subscribe for the Company’s ordinary shares have been granted to employees of the Group.

24. other reserves

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Fair value adjustment reserve 533 (946) – (1,280)Foreign currency translation reserve (1,116) (956) – –Statutory reserve 300 300 – –Capital reserve 80 80 – –

(203) (1,522) – (1,280)

a) fair value adjustment reserve

Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial assets until they are disposed of or impaired.

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

At 1 January (946) – (1,280) – Net loss on fair value of available-for-sale financial assets during the financial year 1,479 (946) 1,280 (1,280)

At 31 December 533 (946) – (1,280)

31 DECEMBER 2009


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24. other reserves (cont’d)

b) foreign currency translation reserve

The foreign currency translation reserve represents exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.

Group2009 2008$’000 $’000

At 1 January (956) (383) Net effect of exchange differences arising from translation of financial statements of foreign operations (160) (573)

At 31 December (1,116) (956)

c) statutory reserve fund

In accordance with the Saudi Arabian Regulations applicable to the subsidiary in the Saudi Arabia (“SA”), the subsidiary is required to make appropriation to a Statutory Reserve Fund (“SRF”). At least 10% of the statutory after tax profits after deducting losses brought forward as determined in accordance with the applicable SA accounting standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50% of the subsidiary’s registered capital. No such transfer has been made during the year due to the loss for the year incurred by the subsidiary. The SRF is not available for dividend distribution to shareholders.

Group2009 2008$’000 $’000

At 1 January 300 – Transferred from retained earnings – 300

At 31 December 300 300


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25. employee benefits

Group2009 2008$’000 $’000

Employee benefits expense (including executive directors):

Salaries, bonuses and other benefits 74,790 65,008Central Provident Fund contributions 3,574 3,349Other short-term benefits 22,987 14,789

101,351 83,146Less: Amount included in contracts work-in-progress (68,158) (55,628)

32,193 27,518

The Company has an employee share incentive scheme for the granting of non-transferable options to full time employees, including Executive and Non-Executive Directors. Options are granted for a term of 10 years to purchase Rotary Engineering Limited ordinary shares. Each share option entitles the employees of the Company to subscribe for one new ordinary share of $0.10 each in the Company.

The exercise price has been set at $0.1866 per share option, is based on the average of the last dealt price of the share for the three market days prior to the date of grant.

The number of shares to be offered to an eligible person under the scheme shall be determined at the discretion of the Remuneration Committee.

Movement of share options during the financial year

The following table illustrates the number (No.) and weighted average exercise prices (WAEP) of, and movement in, share options during the financial year:

2009 2008no. waep ($) No. WAEP ($)

Outstanding at 1 January and 31 December 15,000 0.1866 15,000 0.1866

– No options were exercised in year 2009 and 2008.

– The exercise price for optional outstanding at the end of the year was $0.1866 (2008: $0.1866). The weighted average remaining contractual life for these options is 2 years (2008: 3 years).

31 DECEMBER 2009


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25. employee benefits (cont’d)

The following table summarises information about options outstanding at 31 December 2009:

date of grant option period

shares subject

to optionsexercise

price

26 October 2001 27 October 2001 – 26 October 2011 15,000 $0.1866

There were no options granted at a discount.

26. related party disclosures

(a) sale and purchase of goods and services

In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place at terms agreed between the parties during the financial year:

Group2009 2008$’000 $’000

associated companiesPurchase of goods and services 17,263 13,304Contract sales and services (4,429) (15,073)Insurance premium received (57) (46)Interest received (324) (488)Accounting fee received (74) (72)Rental received (28) (130)Payment of expenses on behalf of associated companies 1,275 4,382Recovery of administration expenses 27 36Sale of property – (383)Payment of expenses on behalf by associated companies (36) (3)


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26. related party disclosures (cont’d)

(b) Compensation of key management personnel

Group2009 2008$’000 $’000

Short-term employee benefits 13,082 12,174Central Provident Fund contributions 318 175

13,400 12,349

Comprise amounts paid to: – Directors of the Company 7,009 7,630 – Other key management personnel 6,391 4,719

13,400 12,349

The remuneration of key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends.

27. Commitments

a) Capital commitments

Capital expenditure contracted for as at the balance sheet date but not recognised in the financial statements are as follows:

Group2009 2008$’000 $’000

Capital commitments in respect of property, plant and equipment – 1,329

31 DECEMBER 2009


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27. Commitments (cont’d)

b) operating lease commitments – as lessee

The Group has entered into commercial leases on certain premises. These leases have an average tenure of 30 years with no renewal option or contingent rent provision in the contracts.

Minimum lease payments recognised as an expense in profit or loss for the financial year ended 31 December 2009 amounted to $494,000 (2008: $546,000).

Future minimum rental payable under non-cancellable operating leases at the balance sheet date are as follows:

Group2009 2008$’000 $’000

Not later than one year 744 516Later than one year but not later than five years 2,713 2,543Later than five years 11,031 11,770

14,488 14,829


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28. fair value of financial instruments

A. Fair value of financial instruments that are carried at fair value

The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy:

Group2009$’000

quoted prices in active

markets for identical

instruments

significant other

observable inputs

significant unobservable

inputs total(Level 1) (Level 2) (Level 3)

financial assets: Available-for-sale financial assets (Note 15) – Equity instruments

(quoted) 906 – – 906 Derivatives (Note 19) – Forward currency

contract – – – –

At 31 December 2009 906 – – 906

Fair value hierarchy

The Group classify fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy have the following levels:

• Level 1-Quoted prices (unadjusted) in activemarkets for identical assets orliabilities

• Level 2 – Inputs other than quoted prices included within Level 1 that areobservable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices), and

• Level3–Inputsfortheassetorliabilitythatarenotbasedonobservablemarketdata (unobservable inputs)

31 DECEMBER 2009


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28. fair value of financial instruments (cont’d)

A. Fair value of financial instruments that are carried at fair value (cont’d)

Determination of fair value

Quoted equity instruments (Note 15): Fair value is determined directly by reference to their published market bid price at the balance sheet date.

Derivatives (Note 19): Forward currency contracts are valued using a valuation technique with market observable inputs. The most frequently applied valuation techniques include forward pricing models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, and foreign exchange spot and forward rates.

B. Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are reasonable approximation of fair value

Current trade and other receivables and payables, and loans and borrowings (Note 20)

The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market interest rates on or near the balance sheet date.

C. Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value

The fair value of financial assets and liabilities by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value are as follows:

Group Company

note 2009 2008 2009 2008

$’000 $’000 $’000 $’000

Carrying

amount

fair

value

Carrying

amount

Fair

value

Carrying

amount

fair

value

Carrying

amount

Fair

value

financial assets:

Equity instruments,

at cost 15 867 * 917 * 867 * 867 *

* Investment in equity instruments carried at cost (Note 22)


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28. fair value of financial instruments (cont’d)

C. Fair value of financial instruments by classes that are not carried at fair value and whose carrying amounts are not reasonable approximation of fair value (cont’d)

Fair value information has not been disclosed for the Group’s investments in equity instruments that are carried at cost because fair value cannot be measured reliably. These equity instruments represent ordinary shares in companies that are not quoted on any market and do not have any comparable industry peer that is listed. In addition, the variability in the range of reasonable fair value estimates derived from valuation techniques is significant. The Group does not intend to dispose of these investments in the foreseeable future.

29. financial risk management objectives and policies

The Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk. The Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Chief Financial Officer and Financial Controller. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year that the Group’s policy is that no derivatives shall be undertaken except for the use as hedging instruments where appropriate and cost-efficient. The Group and the Company do not apply hedge accounting.

The following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

(a) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including other investment, cash and cash equivalents and derivatives), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

The Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. The Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

Exposure to credit risk

At the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the balance sheets, including derivatives with positive fair values.

31 DECEMBER 2009


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29. financial risk management objectives and policies (cont’d)

(a) Credit risk (cont’d)

Credit risk concentration profile

The Group determines concentrations of credit risk by monitoring the country of its trade receivables on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the balance sheet date is as follows:

Group2009 2008

$’000 % of total $’000 % of total

by country:Singapore 180,285 83% 103,155 70%Saudi Arabia 22,499 10% 22,420 15%Thailand 10,146 5% 12,161 8%Indonesia 4,198 2% 9,703 7%Others 269 – 528 –

217,397 100% 147,967 100%

At the balance sheet date, approximately:

– 69% (2008: 28%) of the Group’s trade receivables were due from 5 major customers who are in the oil and gas industry located in Singapore and Kingdom of Saudi Arabia.

– 6% (2008: 7%) of the Group’s trade and other receivables were due from related parties while 17% (2008: 12%) of the Company’s receivables were balances with related parties.

Financial assets that are neither past due nor impaired

Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents, other investment and derivatives that are neither past due nor impaired are placed with or entered into with reputable financial institutions or companies with high credit values and no history of default.

Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired is disclosed in Note 14 (Trade and other receivables) and Note 15 (Other investments).


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(b) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

The Group maintains sufficient liquid financial assets and stand-by credit facilities with at least 5 different banks. At the balance sheet date, approximately 98% (2008: 95%) and 63% (2008: 35%) of the Group’s and Company’s loans and borrowings (Note 20) will mature in less than one year based on the carrying amount reflected in the financial statements respectively.

analysis of financial instruments by remaining contractual maturities

The table below summarises the maturity profile of the Group’s and the Company’s financial assets and liabilities at the balance sheet date based on contractual undiscounted repayment obligations.

2009

$’000

2008

$’000

Group

1 year

or less

one to

five years

more than

five years total

1 year

or less

one to

five years

more than

five years total

financial assets:

Other investments – 1,773 – 1,773 6,848 6,255 – 13,103

Trade and other

receivables 238,407 – – 238,407 164,970 – – 164,970

Cash and cash

equivalents 132,369 – – 132,369 157,774 – – 157,774

Total undiscounted

financial assets 370,776 1,773 – 372,549 329,592 6,255 – 335,847

financial liabilities:

Trade and other

payables 97,858 – – 97,858 119,771 – – 119,771

Loans and borrowings 7,333 146 – 7,479 8,109 501 – 8,610

Total undiscounted

financial liabilities 105,191 146 – 105,337 127,880 501 – 128,381

Total net

undiscounted

financial assets 265,585 1,627 – 267,212 201,712 5,754 – 207,466

31 DECEMBER 2009


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(b) Liquidity risk (cont’d)

2009

$’000

2008

$’000

Company

1 year

or less

one to

five years

more than

five years total

1 year

or less

One to

five years

More than

five years Total

financial assets:

Other investments – 895 – 895 – 5,526 – 5,526

Trade and other

receivables 190,519 – – 190,519 120,587 – – 120,587

Cash and cash

equivalents 72,776 – – 72,776 101,008 – – 101,008

Total undiscounted

financial assets 263,295 895 – 264,190 221,595 5,526 – 227,121

financial liabilities:

Trade and other

payables 84,301 – – 84,301 82,338 – 3,781 86,119

Loans and borrowings 186 89 – 275 198 286 – 484

Total undiscounted

financial liabilities 84,487 89 – 84,576 82,536 286 3,781 86,603

Total net

undiscounted

financial assets/

(liabilities) 178,808 806 – 179,614 139,059 5,240 (3,781) 140,518

(c) interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates. The Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings, interest-bearing loans given to associated companies. All of the Group’s and the Company’s financial assets and liabilities at floating rates are contractually re-priced at intervals of less than 6 months (2008: less than 6 months) from the balance sheet date.

Sensitivity analysis for interest rate risk

At the balance sheet date, if USD interest rates had been 100 (2008: 100) basis points lower/higher with all other variables held constant, the Group’s profit net of tax would have been $69,000 (2008: $73,000) higher/lower, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings. The assumed movement in basis points for interest rate sensitivity analysis is based on the currently observable market environment, showing a significantly higher volatility as in prior years.


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(d) foreign currency risk

The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective functional currencies of Group entities, primarily SGD, Thai Baht (THB) and Saudi Riyals (SAR). The foreign currencies in which these transactions are denominated are mainly US Dollars (USD). Approximately 21% (2008: 22%) of the Group’s sales are denominated in foreign currencies whilst almost 97% (2008: 92%) of costs are denominated in the respective functional currencies of the Group entities. The Group’s trade receivable and trade payable balances denominated in foreign currencies at the balance sheet date are disclosed in Note 14 and 21, respectively.

The Group and the Company hold cash and cash equivalents denominated in foreign currencies for working capital purposes. At the balance sheet date, such foreign currency balances (mainly in USD) amount to $38,791,000 (2008: $11,583,000) and $36,117,000 (2008: $4,923,000) for the Group and the Company respectively.

The Group requires all of its operating entities to use forward currency contracts to eliminate the currency exposures on any individual transactions in excess of $1,000,000 for which payment is anticipated more than one month after the Group has entered into a firm commitment for a sale or purchase. The forward currency contracts must be in the same currency as the hedged item. It is the Group’s policy not to enter into forward contracts until a firm commitment is in place. It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness.

The Group is also exposed to currency translation risk arising from its net investments in foreign operations, including Saudi Arabia, Indonesia, People’s Republic of China (“PRC”), India and Thailand. The Group’s net investments are not hedged as currency positions are considered to be long-term in nature.

31 DECEMBER 2009


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(d) Foreign currency risk (cont’d)

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s profit net of tax to a reasonably possible change in the USD exchange rate against the respective functional currencies of the Group entities, with all other variables held constant.

Group2009 2008$’000 $’000

profit net of tax

Profit net of tax

USD/SGD – strengthened 1% (2008: 1%) +163 +226 – weakened 1% (2008: 1%) -163 -226USD/THB – strengthened 1% (2008: 1%) +1 +1 – weakened 1% (2008: 1%) -1 -1

30. Capital management

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2009 and 31 December 2008.

The Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. The Group’s policy is to keep gearing ratio at below 50%. The Group include within net debt, loans and borrowings, trade and other payables, less cash and cash equivalents. Capital includes equity attributable to equity holder of the parent.


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30. Capital management (cont’d)

At balance sheet date, the Group’s cash and cash equivalents are in excess of its financial liabilities.

Group2009 2008$’000 $’000

Loans and borrowings (Note 20) 7,445 8,533Trade and other payables (Note 21) 97,858 119,711Less: Cash and cash equivalents (Note 18) (132,369) (157,774)

Net cash position (27,066) (29,530)

Equity attributable to owners of the parent, representing total capital 246,980 204,483

31. segment information

Reporting format

The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. Secondary information is reported geographically. The operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

Business segments

The Project services segment provides engineering design, procurement and construction services for plants and associated facilities in oil and gas, petrochemical and pharmaceutical industries.

The Maintenance and trading segment provides maintenance, engineering and other related services to chemical process industry, including warehousing, trading and logistics services of equipment and products.

Geographical segments

The Group’s geographical segments are based on the location of the Group’s assets. Sales to external customers disclosed in geographical segments are based on the geographical location of its customers. Others include countries such as India, Norway and Dubai.

31 DECEMBER 2009


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31. segment information (cont’d)

Allocation basis and transfer pricing

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, income tax and deferred tax assets and liabilities, obligations under finance leases and related expenses.

Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. Segment revenue, expenses and results include transfers between business segments. These transfers are eliminated on consolidation.

Business segments

The following table presents revenue and results information regarding the Group’s business segments for the years ended 31 December 2009 and 2008.

project services

maintenance

and trading eliminations Consolidated

2009 2008 2009 2008 2009 2008 2009 2008

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Segment revenue

Sales to external

customers 473,518 463,483 78,378 56,636 – – 551,896 520,119

Inter-segment sales 4,147 1,484 79,407 114,533 (83,554) (116,017) – –

Total revenue 477,665 464,967 157,785 171,169 (83,554) (116,017) 551,896 520,119

Segment result 107,050 88,274 22,867 35,177 – – 129,917 123,451

Unallocated expenses (63,190) (51,304)

Finance costs (239) (2,213)

Share of results

of associated

companies (1,223) (179)

Profit before tax 65,265 69,755

Income tax expense (13,182) (15,477)

Profit net of tax 52,083 54,278


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Business segments (cont’d)

The following table presents assets, liabilities and other segment information regarding the Group’s business segments as at and for the years ended 31 December 2009 and 2008.

project servicesmaintenance and trading Consolidated

2009 2008 2009 2008 2009 2008$’000 $’000 $’000 $’000 $’000 $’000

assets and liabilities

Segment assets 413,549 355,082 60,776 76,369 474,325 431,451Investment in associates 22,729 23,903 – – 22,729 23,903Unallocated assets 391 794

Total assets 497,445 456,148

Segment liabilities 198,512 199,354 18,842 24,324 217,354 223,678Unallocated liabilities 17,370 16,086

Total liabilities 234,724 239,764

other segment information:

Capital expenditure 23,443 24,231 2,172 1,366 25,615 25,597Depreciation and amortisation 9,681 5,610 2,010 1,830 11,691 7,440Impairment loss on carrying costs and advances to associates 2,983 2,751 – – 2,983 2,751

31 DECEMBER 2009


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Geographical segments

The following table presents revenue, capital expenditure and certain assets information regarding the Group’s geographical segments for the years ended 31 December 2009 and 2008.

singapore

people’s republic

of China malaysia thailand indonesia saudi arabia others total

2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008 2009 2008

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

revenue:

Sales to external

customers 347,851 300,053 1,852 2,697 1,487 3,947 67,830 91,080 19,941 62,790 111,531 54,673 1,404 4,879 551,896 520,119

other segment

information:

Segment assets 380,434 310,269 12,083 14,318 713 – 21,539 35,352 10,812 19,096 46,991 50,269 1,753 2,147 474,325 431,451

Unallocated assets 391 794

Investment in

associates 22,715 23,890 – – – – – – – – – – 14 13 22,729 23,903

Total assets 497,445 456,148

Capital expenditure 11,013 2,015 1,231 3,448 539 – 1,284 2,885 4,543 86 6,987 17,134 18 29 25,615 25,597


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32. dividends paid and proposed

Group and Company2009 2008$’000 $’000

Declared and paid during the year

Dividends on ordinary shares:– Final exempt (one-tier), dividend of 2.3 cents

(2008: 2.3 cents less tax of 18%) per share 13,060 13,060

Proposed but not recognised as a liability as at 31 December:

Dividends on ordinary shares, subject to shareholders’ approval at the Annual General Meeting:

– Final exempt (one-tier), dividend of 3.8 cents (2008: 2.3 cents) per share 21,578 13,060

33. authorisation of financial statements

The financial statements for the year ended 31 December 2009 were authorised for issue in accordance with a resolution of the Directors on 18 March 2010.

AS AT 2 MARCH 2010

STATISTICS OF SHAREHOLDINGS

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Number of ordinary shares in issue : 567,839,000Class of shares : Ordinary sharesVoting rights : One vote per share

statistiCs of sHareHoLdinGs

size of shareholdingnumber of

shareholders %number of

shares %

1 – 999 64 0.71 24,650 0.011,000 – 10,000 6,198 69.04 33,580,171 5.9110,001 – 1,000,000 2,694 30.01 107,483,698 18.931,000,001 and above 22 0.24 426,750,481 75.15

8,978 100.00 567,839,000 100.00

substantiaL sHareHoLders(As recorded in the Register of Substantial Shareholders as at 2 March 2010)

direct interest % deemed interest %

Chia Kim Piow (Note 1) 25,418,816 4.48 172,423,528 30.37Wong Oi Moi (Note 2) 6,972,896 1.23 190,869,448 33.62REL Investments Pte Ltd 165,450,632 29.14 – –Funderburk Asia-Pac InvestmentsI Limited (Note 3) 121,350,888 21.37 – –Oman Investment Fund – – 121,350,888 21.37

notes:

1. Chia Kim Piow is deemed to have an interest in the shares held by his spouse, Wong Oi Moi and REL Investments Pte Ltd.

2. Wong Oi Moi is deemed to have an interest in the shares held by her spouse, Chia Kim Piow and REL Investments Pte Ltd.

3. Funderburk Asia-Pac Investments I Limited is the wholly owned subsidiary of Oman Investment Fund.

STATISTICS OF SHAREHOLDINGSAS AT 2 MARCH 2010

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twenty LarGest sHareHoLders

no. name of shareholders number of shares %

1 REL INVESTMENTS PTE LTD 165,450,632 29.142 FUNDERBURK ASIA – PAC INVESTMENTS I LIMITED 121,350,888 21.373 CHIA KIM PIOW 25,418,816 4.484 CHIA KIM CHUA 22,242,400 3.925 DBS NOMINEES PTE LTD 15,722,716 2.776 HSBC (SINGAPORE) NOMINEES PTE LTD 13,665,000 2.417 CITIBANK NOMINEES SINGAPORE PTE LTD 10,763,395 1.908 WONG OI MOI 6,972,896 1.239 UNITED OVERSEAS BANK NOMINEES PTE LTD 6,786,700 1.2010 YEO CHUNG SUN 6,139,000 1.0811 UOB KAY HIAN PTE LTD 4,894,000 0.8612 PHILLIP SECURITIES PTE LTD 4,267,986 0.7513 DBSN SERVICES PTE LTD 3,612,699 0.6414 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 3,181,000 0.5615 CIMB-GK SECURITIES PTE. LTD. 3,111,000 0.5516 KIM ENG SECURITIES PTE. LTD. 2,836,974 0.5017 MORGAN STANLEY ASIA (SINGAPORE)

SECURITIES PTE LTD 2,807,979 0.4918 OCBC SECURITIES PRIVATE LTD 2,693,400 0.4719 RAFFLES NOMINEES (PTE) LTD 2,364,000 0.4220 OCBC NOMINEES SINGAPORE PTE LTD 2,180,000 0.38

TOTAL 426,461,481 75.12

perCentaGe of sHareHoLdinGs in Hands of tHe pubLiC

39.17% of the Company’s shares are held in the hands of the public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of the SGX-ST.

NOTICE OF ANNUAL GENERAL mEETING

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NOTICE IS HEREBY GIVEN that the 30th Annual General Meeting of ROTARY ENGINEERING LIMITED (“the Company”) will be held at 17 Tuas Avenue 20, Singapore 638828 on Thursday, 15 April 2010 at 10.00 a.m. for the following purposes:

as ordinary business:

1. To receive and adopt the Directors’ Report and Audited Accounts of the Company for the year ended 31 December 2009 together with the Auditors’ Report thereon. (resolution 1)

2. To declare a final one-tier tax exempt dividend of Singapore 3.8 cents per ordinary share for the year ended 31 December 2009. (resolution 2)

3. To approve the payment of Directors’ Fees of S$341,000 for the year ended 31 December 2009 (2008: S$300,000). (resolution 3)

4. To re-elect the following Directors retiring pursuant to Article 107 of the Articles of Association of the Company:(a) Mr Quek Wee Hong (resolution 4)(b) Mr Lam Khin Khui (resolution 5)

Mr Quek will, upon re-election as Director of the Company, remain as Chairman of the Nominating Committee and members of the Audit and Remuneration Committees and will be considered independent.

Mr Lam will, upon re-election as Director of the Company, remain as Chairman of the Remuneration Committee and members of the Audit and Nominating Committees and will be considered independent.

5. To re-appoint Messrs Ernst & Young LLP as Auditors and to authorise the Directors to fix their remuneration. (resolution 6)

6. To transact any other business which may be properly transacted at an Annual General Meeting.

as speCiaL business:

To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications:

7. autHority to issue sHares

That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, the Directors of the Company be authorised and empowered to:

(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into shares,


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at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and

(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instruments made or granted by the Directors of the Company while this Resolution was in force,

provided that:

(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares (excluding treasury shares) in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such calculation as may be prescribed by the Singapore Exchange Securities Trading Limited) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares (excluding treasury shares) shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of any convertible securities;

(b) new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and

(c) any subsequent bonus issue, consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the Singapore Exchange Securities Trading Limited for the time being in force (unless such compliance has been waived by the Singapore Exchange Securities Trading Limited) and the Articles of Association of the Company; and

(4) unless revoked or varied by the Company in a general meeting, such authority shall 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 (i)] (resolution 7)


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8. authority to issue shares under the rotary employees’ share option scheme

That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant options under the Rotary Employees’ Share Option Scheme (“the Scheme”) and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional ordinary shares to be issued pursuant to the Scheme shall not exceed fifteen per centum (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a 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 (ii)] (resolution 8)

9. proposed renewal of the share buy-back mandate

That:

(1) for the purposes of Sections 76C and 76E of the Companies Act (Cap 50) of Singapore (“Companies act”), the exercise by the Directors of the Company of all the powers of the Company to purchase or otherwise acquire issued ordinary shares in the capital of the Company (“shares”) not exceeding in aggregate the Maximum Limit (as hereafter defined), at such price or prices as may be determined by the Directors from time to time up to the Maximum Price (as hereafter defined), whether by way of:

(a) market purchase(s) on the SGX-ST and/or any other securities exchange on which the Shares may for the time being be listed and quoted (“other exchange”), and/or

(b) off-market purchase(s) (if effected otherwise than on the SGX-ST or, as the case may be, the Other Exchange) in accordance with any equal access scheme(s) as may be determined or formulated by the Directors as they consider fit, which scheme(s) shall satisfy all the conditions prescribed by the Companies Act,

and otherwise in accordance with all other laws and regulations and rules of the SGX-ST as may for the time being be applicable (on a poll taken), be and is hereby authorised and approved generally and unconditionally (“renewed share buy-back mandate”);


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(2) unless varied or revoked by the Company in a general meeting, the authority conferred on the Directors of the Company pursuant to the Renewed Share Buy-Back Mandate may be exercised by the Directors at any time and from time to time during the period commencing from of the date of the passing of this Resolution and expiring on the earliest of:

(a) the date on which the next Annual General Meeting of the Company is held;

(b) the date by which the next Annual General Meeting of the Company is required by law to be held, or

(c) the date on which the purchases or acquisitions of shares by the Company pursuant to the Renewed Share Buy-Back Mandate are carried out to the full extent mandated.

In this Resolution:

“maximum Limit” means that number of issued Shares representing ten per cent. (10%) of the total number of issued Shares (excluding Shares held as treasury shares) as at the date of the passing of this Ordinary Resolution unless the Company has effected a reduction of the total number of issued Shares of the Company in accordance with the applicable provisions of the Companies Act, at any time during the Relevant Period, in which event the issued Shares shall be taken to be the total number of issued Shares as altered (excluding any Shares which are held as treasury shares as at that date); and

“relevant period” means the period commencing from the date of the Annual General Meeting at which the Renewed Share Buy-Back Mandate is approved and thereafter, expiring on the date on which the next Annual General Meeting is held or is required by law to be held, whichever is the earlier, after the date of the passing of this Ordinary Resolution; and

“maximum price”, in relation to a Share to be purchased, means the purchase price (excluding ancillary expenses such as brokerage, commission, applicable goods and services tax, stamp duties, clearance fees and other related expenses) to be determined by the Directors which, in the case of a Market Purchase and an Off-Market Purchase pursuant to an equal excess scheme, must not exceed 105% of the Average Closing Price of the Shares in either case.

where:–

“average Closing price” means the average of the closing market prices of a Share for the five (5) consecutive market days on which transactions in the Shares were recorded on the SGX-ST immediately preceding the date of the Market Purchase by the Company or, as the case may be, the date of the making of the offer pursuant to Off-Market Purchase, and deemed to be adjusted in accordance with the rules of the Listing Manual for any corporate action which occurs after the relevant five (5) market day period.


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“date of making of the offer” means the date on which the Company announces its intention to make an offer for the purchase or acquisition of shares from holders of shares, stating therein the relevant terms of the equal access scheme for effecting the Off-Market Purchase;

(3) the Directors of the Company and/or any of them be and are hereby authorized to complete and do all such acts and things (including executing such documents as may be required) as they and/or he may consider expedient and necessary to give effect to the transactions contemplated and/or authorized by this Resolution.[See Explanatory Note (iii)] (resolution 9)

(by takingof a poll)

By Order of the Board

TAN CHER LIANGCOMPANY SECRETARY

Singapore, 30 March 2010


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explanatory notes on ordinary resolutions to be passed:

(i) The Ordinary Resolution 7 in item 7 above, if passed, will empower the Directors of the Company, effective 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 or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant instruments convertible into shares and to issue shares pursuant to such Instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury shares) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders.

For determining the aggregate number of shares that may be issued, the total number of issued shares (excluding treasury shares) will be calculated based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares.

(ii) The Ordinary Resolution 8 in item 8 above, if passed, will empower the Directors of the Company, effective until the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a number not exceeding in aggregate (for the entire duration of the Scheme) fifteen per centum (15%) of the total number of issued shares (excluding treasury shares) in the capital of the Company from time to time.

(iii) The Company intends to use its internal sources of funds to finance the purchase or acquisition of its Shares. The amount of financing required for the Company to purchase or acquire its Shares, and the impact on the Company’s financial position, cannot be ascertained as at the date of this Notice as these will depend on, inter alia, the number of Shares purchased or acquired and the price at which such Shares were purchased or acquired and whether the Shares purchased or acquired are held in treasury or cancelled. Based on the existing issued Shares as at 18 March 2010 (“Latest practicable date”), the purchase by the Company of 10% of its issued Shares will result in the purchase or acquisition of 56,783,900 Shares. In the case of both market and off-market purchases by the Company and assuming that the Company purchases or acquires the 56,783,900 Shares at the Maximum Price of S$1.08 for one Share (being the price equivalent to 105% of the average of the closing market prices of the Shares for the five consecutive market days on which the Shares were traded on the SGX-ST immediately preceding the Latest Practicable Date), the maximum amount of funds required for the purchase or acquisition of the 56,783,900 Shares is S$61,326,612. The financial effects of the purchase or acquisition of such Shares by the Company pursuant to the proposed Renewed Share Buy-Back Mandate on the audited financial statements of the Group for FY2009 based on these assumptions are set out in paragraph 7 of the Letter to Shareholders dated 30 March 2010.

notes:

1. A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a one or two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 17 Tuas Avenue 20, Singapore 638828 not less than forty-eight (48) hours before the time for holding the meeting.

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proXy form

important:

1. For investors who have used their CPF monies to buy Rotary Engineering Limited’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.

rotary enGineerinG Limited(Co. Reg. No. 198000255E)(Incorporated in The Republic of Singapore with limited liability)

I/We,ofbeing a member/members of Rotary Engineering Limited (the “Company”), hereby appoint:

name nriC/passport no. proportion of shareholdings

no. of shares %

address

and/or (delete as appropriate)

name nriC/passport no. proportion of shareholdings

no. of shares %

address

or failing the person, or either or both of the persons, referred to above, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on Thursday, 15 April 2010 at 10.00 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

no. resolutions relating to: for against1 Directors’ Report and Audited Accounts for the year ended

31 December 20092 Payment of proposed final dividend3 Approval of Directors’ fees amounting to S$341,0004 Re-election of Mr Quek Wee Hong as a Director5 Re-election of Mr Lam Khin Khui as a Director6 Re-appointment of Messrs Ernst & Young LLP as Auditors7 Authority to issue shares8 Authority to issue shares under the Rotary Employees’

Share Option Scheme9 Proposed Renewal of the Share Buy-Back Mandate (by

taking a poll)

If you wish to exercise all your votes “For” or “Against”, please tick within the box provided.Alternatively, please indicate the number of votes as appropriate.

Dated this day of 2010

total number of shares in: no. of shares(a) CDP Register

(b) Register of Members

Signature of Shareholder(s)or, Common Seal of Corporate Shareholder

(please see notes overleaf before completing this form)

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proXy form

notes:

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as 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 member 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 in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.

5. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 17 Tuas Avenue 20 Singapore 638828 not less than 48 hours before the time appointed for the Meeting.

6. The instrument appointing a proxy or proxies must be under the hand of the appointor 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 an officer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certified copy thereof must be lodged with the instrument.

7. A corporation which is a member may 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, Chapter 50 of Singapore.

8. as Chia Kim piow, Chia Kim Chua and wong oi moi are deemed to be persons acting in concert with the substantial shareholder, reL investments pte Ltd, by virtue of their shareholdings therein, they are required under note 3 of appendix 2 of the take-over Code to abstain from voting for and/or recommending that shareholders vote in favour of ordinary resolution 9 and should accordingly, not be appointed as proxies in respect of ordinary resolution 9.

General:

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 appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, 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 Meeting, as certified by The Central Depository (Pte) Limited to the Company.

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CoRpoRATE INFoRmATIoN

BOARD OF DIRECTORS• Chia Kim Piow (Chairman & Managing Director)• Chia Kim Chua• Keith Tay Ah Kee• Quek Wee Hong• Lam Khin Khui• Badri Narayanan Santhana Krishnan• Wong Oi Moi

AUDIT COMMITTEE• Keith Tay Ah Kee (Chairman)• Lam Khin Khui• Quek Wee Hong• Badri Narayanan Santhana Krishnan

NOMINATING COMMITTEE• Quek Wee Hong (Chairman)• Lam Khin Khui• Keith Tay Ah Kee• Chia Kim Piow

REMUNERATION COMMITTEE• Lam Khin Khui (Chairman)• Keith Tay Ah Kee• Quek Wee Hong

COMPANY SECRETARY• Tan Cher Liang

REGISTERED OFFICE17 Tuas Avenue 20Singapore 638828T (65) 6861 1155 F (65) 6862 1319

SHARE REGISTRARBoardroom Corporate & Advisory Services Pte. Ltd.50 Raffles Place #32-01Singapore Land TowerSingapore 048623T (65) 6536 5355 F (65) 6536 1360

AUDITORSErnst & Young LLPAudit Partner – Tan Chian Khong(since financial year 2007)

Every successful sailing team comprises of an experienced captain able to navigate the seas, recognise and predict patterns in weather, and adapt to existing vessel conditions. Equally important is a supportive and cooperative team of sailors who will carry out everything from reducing sail and hull trimming, to cooking and cleaning on board.

Rotary Engineering draws similar comparisons to the art and science of yacht racing. Through the onslaught of the financial tsunami in the past year, our team of dedicated, passionate and meticulous leaders have managed to steer our vessel into calm waters by navigating the geography, predicting the on-coming conditions and adapting to the changing environment.

As Rotary embarks on a voyage of globalisation, we have adopted the tagline “Charting New Waters” this year. Our team continues to seek new opportunities and break new ground.

CHARTING NEW WATERS

CHARTING NEW W

ATERS RoTARy ENGINEERING lImITEd ANNuAl REpoRT 2009

RoTARy GRoup oF CompANIESSINGAPORE

– RotaRy ElEctRical company

(pRivatE) limitEd

– RotaRy imc ptE ltd

– ShopGlobal ptE. ltd.

– RotaRy mEchanical and conStRuction

company (pRivatE) limitEd

– RotaRy-thai conStRuction ptE. ltd.

– RotaRy tREl ptE ltd

– RotaRy ElEctRical & inStRumEntation

ptE. ltd.

– RotaRy automation ptE. ltd.

– RotaRy pRoduction SERvicES nEtwoRk

ptE. ltd.

– RotaRy loGiSticS ptE. ltd.

– dElimax ptE. ltd.

– EaStloG holdinG ptE. ltd.

– EnRiS ptE ltd

– JaSinuSa automobilE ptE. ltd.

– innovativE biotEch ptE ltd

– itRo ptE. ltd.

– powEll induStRiES aSia ptE ltd

– pipE Rack holdinG company

pRivatE limitEd

– okp (oil & GaS) infRaStRuctuRE ptE. ltd.

– buildGlobal ptE. ltd.

– RSk EnGinEERinG co ptE ltd

– SupERmEc pRivatE limitEd

– Sixty-Six SwitchGEaRS co ptE ltd

– tionG woon china conSoRtium ptE. ltd.

– ipRomaR (ptE.) ltd.

– RotaRy aRabia SinGapoRE ptE. ltd.

– pEtRol StEEl SinGapoRE ptE.ltd.

MALAYSIA

– RotaRy mEc (m) Sdn bhd

– haRvESt E&i EnGinEERinG Sdn bhd

THAILAND

– thai RotaRy EnGinEERinG public

company limitEd

– calvERt limitEd

INDONESIA

– p.t. RotaRy EnGinEERinG indonESia

INDIA

– RotaRy mEc EnGinEERinG (india)

pRivatE limitEd

– RotaRy tEchSkill (india) pvt limitEd

PEOPLE’S REPUBLIC OF CHINA

– RotaRy EnGinEERinG (ShanGhai) co., ltd.

– RotaRy intERnational tRadinG

(ShanGhai) co., ltd.

– RotaRy EnGinEERinG (dalian) co. limitEd

– fuShun RotaRy cablE co. ltd

– chanGchun faw ucc

– Jinzhou EvERthRivinG loGiSticS co., ltd.

AUSTRALIA

– RotaRy EnGinEERinG (auStRalia) pty ltd

SAUDI ARABIA

– RotaRy aRabia co. ltd.

– pEtRol StEEl co. ltd.

ROTARY ENGINEERING LIMITED(company’S REGiStRation no. 198000255E)

RoTARy ENGINEERING lImITEd ANNuAl REpoRT 2009

CHARTING NEW WATERS

rotary engineering limited annual report 2009 charting€¦ · tar y engineering l i m ite d ann u...

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