staying the course - listed companycosco.listedcompany.com/misc/ar2013.pdf · cosco corporation is...

2Annual Report 2013

COSCO Corporation (Singapore) Limited

Annual Repor t 2013

STAYINGTHE COURSE

3Annual Report 2013

3COSCO Corporation (Singapore) Limited

Contents

Corporate ProfileCorporate StructureFinancial HighlightsSignificant DevelopmentsOur Major ShipyardsMajor Deliveries in 2013

Message from the ChairmanInterview with Vice Chairman and President

Ship Repair, Ship Building and Offshore Marine EngineeringDry Bulk Shipping and OthersGroup Financial Review

Corporate GovernanceCorporate InformationBoard of DirectorsKey ManagementInvestor RelationsRisk Management

Research and DevelopmentHuman Resources and Workplace SafetyCorporate Social Responsibility

Directors’ ReportStatement by DirectorsIndependent Auditor’s ReportConsolidated Income StatementConsolidated Statement of Comprehensive IncomeBalance SheetsConsolidated Statement of Changes in EquityConsolidated Statement of Cash FlowsNotes to the Financial StatementsFive-Year Summary

Shareholding Statistics Notice of Annual General Meeting Proxy Form for Annual General MeetingNotes for Proxy Form

COSCO OVERVIEW

1 2 4 6 10 11

KEY MESSAGES

14 18

OPERATIONS AND FINANCIAL REVIEW

24

27 28

CORPORATE GOVERNANCE AND TRANSPARENCY

32 51 52 58 60 62

INSIDE COSCO AND CORPORATE CITIZENSHIP

67 69 71

FINANCIAL STATEMENTS

74 78 79 80 81 82 83 84 85 145

146 148

INVESTOR RELATIONS CONTACTS

COSCO Corporation (Singapore) Limited

Mr Li Man, Vice President

Mr Wang Hui, General Manager, Investor Relations

Tel: (65) 6885 0888

Fax: (65) 6336 9006

Email: [email protected]

SPIN Capital Asia (Investor Relations Consultant)

Mr Michael Tan

Tel: (65) 6227 7790

Email: [email protected]

1Annual Report 2013

A MARINE GROUP SPECIALISING IN OFFSHORE MARINE ENGINEERING SOLUTIONS, SHIP BUILDING, SHIP REPAIR AND CONVERSION.

COSCO Corporation (Singapore) Limited,

operates one of the largest offshore marine

engineering, ship building, ship repair &

conversion and dry bulk shipping outfits in

China. It is the SGX Mainboard-listed subsidiary

of China Ocean Shipping (Group) Company

(“COSCO Group”), China’s largest shipping group

and one of the top shipping conglomerates in

the world.

Through our 51% stake in COSCO Shipyard

Group, one of the largest shipyard groups in

China with yards strategically located along

China’s coastline, we offer turnkey services in

offshore marine engineering, ship building, ship

repair and conversion. Our portfolio includes

deep-water oil rigs, FPSO (Floating Production,

Storage and Offloading) units, installation

vessels, barges and platform vessels.

Our yards cater to a worldwide clientele,

delivering new builds of varying types and

sizes including bulk carriers, oil tankers, special

purpose carriers and Liquefied Natural Gas

(LNG) carriers.

COSCO Corporation is constantly innovating

to stay ahead of the competition. We aim to

provide cost-effective solutions that meet

the current and future needs of the marine

industry. Since 2009, we have been part of the

FTSE ST China Index and the FTSE ST China Top

Index. The Bloomberg World Shipbuilding and

Bloomberg Asia Pacific Shipbuilding Indices also

include us as a component.

CORPORATE PROFILE

COSCO Overv iew


90% COSCO Marine Engineering (Singapore) Pte Ltd

50% COSCO (Nantong) Shipyard Co., Ltd

39% COSCO (Dalian) Shipyard Co., Ltd

51% COSCO Shipyard Group Co., Ltd

CORPORATE STRUCTURE

100% COSCO (Zhoushan) Shipyard Co., Ltd

95% COSCO (Shanghai) Shipyard Co., Ltd

75% COSCO (Guangdong) Shipyard Co., Ltd

60% COSCO (Lianyungang) Shipyard Co., Ltd

60% COSCO (Qidong) Offshore Co., Ltd

59% COSCO (Dalian) Shipyard Co., Ltd

50% COSCO (Nantong) Shipyard Co., Ltd

51% COSCO (Xiamen) Shipyard Co., Ltd

90% COSCO (Tianjin) Shipyard Co., Ltd

100% COSCO (Hongkong) Shipyard Co., Limited (Incorporated on 17 February 2014)

60% COSCO (Nantong) Clavon Ship Engineering Co., Ltd

75% COSCO Dalian Rikky Ocean Engineering Co., Ltd

51% Zhongxing Sea-Land Engineering Co., Ltd

60% COSCO Shipyard Total Automation Co., Ltd

30% Diesel Marine Dalian Ltd

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

30% DMI (Guangzhou) Ltd

Offshore Marine Engineering, Ship Building, Ship Repair and Conversion

100% COSCO Engineering Pte Ltd

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

COSCO Overv iew

3Annual Report 2013

Dry BulkShipping and Others

100% COSCO (Singapore) Pte Ltd

100% Harington Property Pte Ltd

100% Cos Fair Shipping Pte Ltd

100% Cos Glory Shipping Inc

100% Hanbo Shipping Limited

100% Sanbo Shipping Limited

100% Cos Knight Shipping Maritime Inc.

100% Cos Lucky Shipping Maritime Inc.

100% Cos Orchid Shipping Pte Ltd

100% Cos Prosperity Shipping Pte Ltd

COSCO Overv iew


FINANCIAL HIGHLIGHTS

TURNOVER(S$’m)

NET PROFIT ATTRIBUTABLETO EQUITY HOLDERS(S$’m)

NET ASSETS(S$’m)

REVENUE BY ACTIVITIES(%)

Construction82%#

Rendering of Services18%*

* Comprises of ship repair and marine engineering income and charter hire revenue

# Construction revenue from ship building and marine engineering

2013

2013

2013

2011

2011

2011

2012

2012

2012

2010

2010

2010

2009

2009

2009

COSCO Overv iew

2,899

3,861

4,163

3,734

3,508

2,175

31

110

249

140

106

1,611

1,794

2,000

2,049

5Annual Report 2013

DIVIDEND PER SHARE (cents)

AND DILUTED EARNINGS PER SHARE (cents)

5-YEAR PROFIT AND LOSS ACCOUNTS (S$’m)

Turnover

Operating Profit before Tax

Share of Profit/(Loss) of Associated Companies

Income Tax Expense

Net Profit

Non-Controlling Interests

Net Profit Attributable to Equity Holders of the Company

OTHER KEY STATISTICS

Number of Shares (m)

Diluted Earnings per Share (cents)

Dividend per Share (cents)

Dividend Cover (times)

Net Tangible Assets per Share (cents)

Net Asset Value per Share (cents)

Gearing Ratio (net of cash)(times)

Return on Equity (%)

Return on Assets (%)

2009

2,899

179

0

41

138

28

110

2009

2,239.2

4.9

3.0

1.6

48.0

48.4

cash

9.9

1.7

2010

3,861

402

0

43

359

110

249

2010

2,239.2

11.1

4.0

2.8

53.1

53.5

0.1

21.8

4.0

2011

4,163

286

1

74

213

73

140

2011

2,239.2

6.2

3.0

2.1

57.7

58.1

0.4

11.2

2.1

2012

3,734

229

1

60

170

64

106

2012

2,239.2

4.7

2.0

2.4

56.8

57.2

1.0

8.2

1.5

5Annual Report 2013

COSCO Overv iew

2013

3,508

61

0

8

53

22

31

2013

2,239.2

1.4

1.0

1.4

59.2

59.7

1.3

2.3

0.4

Diluted Earnings per Share (cents)

Dividend per Share (cents)

20132010 2011 20122009

12

9

6

3

0

4.7

1.4

1.0

4.9

11.1

6.2

2.0

3.0 3.0

4.0


SIGNIFICANT DEVELOPMENTS

DELIVERIES IN 2013

M.V. Ocean Topaz92,500 DWT bulk carrier

COSCO Overv iew

Sevan LouisianaDeep-water cyclindrical semi-submersible drilling unit

T-16Tender Rig

7Annual Report 2013

Ganado ExpressLivestock carrier

IB924Transportation barge

COSCO Overv iew


SIGNIFICANT DEVELOPMENTS

Cotemar 1Semi-submersible accommodation rig

A2SEA “2”Wind turbine installation vessel

COSCO Overv iew

CURRENT PROJECTS

9Annual Report 2013

Sevan 650 “4”Deep-water cyclindrical

semi-submersible drilling unit

Sapura Kencana 1200 Pipelay vessel

Triumph 1Jack-up drilling rig

COSCO Overv iew


OUR MAJOR SHIPYARDS

Zhoushan

Dalian

Guangdong

QidongNantong

Shanghai

CAPABILITIES DRY DOCK(DWT)

FLOATINGDOCK(DWT)

SHIPYARD

80,000

200,000

–

–

80,000400,000230,000

–

990,000

180,000300,000

–

150,00080,000

35,00080,000

–

80,000150,000

1,055,000

Offshore/ Shipbuilding/ Repair

Offshore

Offshore/ Repair

Repair/Offshore

Shipbuilding/ Repair

Offshore/ Shipbuilding/ Repair

Dalian

Qidong

Nantong

Shanghai

Zhoushan

Guangdong

Total

COSCO Overv iew

11Annual Report 2013

MAJOR DELIVERIES IN 2013

NAME OF VESSEL

COSCO Dalian Shipyard

M.V. Sicilian Express

M.V. Ecopride G.O.

M.V. Union Mariner

M.V. Xin Tang Shan Hai 1

M.V. Ocean Topaz

M.V. Guotou 107

COSCO Zhoushan Shipyard

M.V. Ocean Beauty

M.V. Ocean Master

M.V. Ocean Love

M.V. Ocean Lady

M.V. DL Acacia

M.V. DL Dahlia

COSCO Guangdong Shipyard

M.V. Chios Sunrise

M.V. Klima

M.V. Chios Luck

M.V. Flaf Gangos

M. V. Galloway Express

M.V. Greener

M.V. Ganado Express

COSCO Nantong Shipyard

T-16

T-17

COSCO Qidong Shipyard

IB914

IB924

Sevan Louisiana

PROJECT DETAILS

New build 92,500 DWT bulk carrier
















New build livestock carrier


New build livestock carrier

New build tender rig

New build tender rig

Jack-up barge

Transportation barge

3rd Sevan 650 ultra deep-water cylindrical drilling rig

DELIVERED IN

January 2013

January 2013

January 2013

April 2013

May 2013

November 2013

February 2013

March 2013

April 2013

May 2013

May 2013

June 2013

January 2013

January 2013

May 2013

August 2013

October 2013

October 2013

November 2013

June 2013

June 2013

August 2013

August 2013

October 2013


COSCO Overv iew


RESOLUTE AND DETERMINEDIn these times of profound change for the marine industry, we maintain focus on our strategy to be an integrated marine group. Boosted by successful deliveries of increasingly sophisticated projects, we remain resolute.


Sevan Louisiana


LI YUN PENG

Chairman

MESSAGE FROMTHE CHAIRMAN

“Our team is determined to stay the course in further developing the Group’s capability in both the offshore marine engineering and the ship building segments. “


Key Messages


DEAR SHAREHOLDERS,

I am pleased to deliver my first report as Chairman for

the financial year ended 31 December 2013.

It has been another challenging year for COSCO

Corporation. Operating conditions for most of 2013

continued to be difficult. The Group’s turnover was

$3.5 billion, lower by 6% from $3.7 billion for the

year before. Gross profit amounted to $321 million,

from $485 million in 2012. Net profit attributable

to shareholders was $30.6 million, a decline of 71%.

Diluted earnings per share was 1.4 cents. Group net

asset value per ordinary share as at 31 December

2013 was 59.7 cents.

Tremendous efforts were made during the year to

control cost and execute projects more effectively

under more difficult conditions. As the new

construction projects executed during 2013 were

from contracts secured two years before, at a time

when the shipping market was depressed, some

margins were understandably lower. Similarly, cost

pressures had also negatively compressed the

margins in our offshore marine engineering contracts.

OFFSHORE MARINE ENGINEERING CONTINUES TO BE

MAJOR CONTRIBUTOR

Shipyard operations continued to be the major

contributor to overall turnover, at 98.4%. The offshore

marine engineering segment accounted for 70% of

the shipyard turnover.

During the year under review, a total of 24 projects

were completed and delivered. They included one

jack-up barge, one transportation barge, one Sevan

650 ultra deep-water cylindrical drilling rig, two

tender rigs, two livestock carriers and 17 bulk carriers.

COSCO’s ship repair business continued to perform

above industry level, as it maintained its leadership

in the China market. During the year, this segment

contributed 10% to total shipyard revenue.

AN IMPROVED 2013 ORDER BOOK

Despite the difficult market conditions, COSCO

secured US$3 billion worth of contracts in 2013

compared to US$2 billion for the year earlier, including

repeat orders for the offshore marine segment. The

Group’s order book as at 31 December 2013 stood at

US$7.8 billion.

New orders received in 2013 covered 41 product units,

compared to 24 for the year before. They include one

semi-submersible tender assist drilling rig, one semi-

submersible accommodation rig, one LNG vessel, one

float-over launch barge, one stinger barge, one cargo

and training ship, two floating accommodation units,

two salvage lifting vessels, two module carriers, three

semi-submersible accommodation vessels, four jack-

up drilling rigs, five oil tankers, seven bulk carriers and

10 platform supply vessels.

The offshore marine engineering segment added 23

new projects to the order book in 2013, compared to

19 in the previous year. The order book at the end

of the financial year features a wide range of offshore

marine engineering and ship building projects,

including bulk carriers, oil tankers, livestock carriers,

module carriers, salvage lifting vessels, LNG carrier,

cargo and training ship, Sevan 650 deep-water drilling

unit, FPSO, semi-submersible accommodation rigs

and vessels, stinger barge and tender barges, float-

over launch barge, wind turbine installation vessel,

pipe-laying vessels, LeTourneau Super 116E jack-up

drilling rigs, tender rigs and platform supply vessels.

MARKET CONDITIONS REMAIN CHALLENGING

Much has been reported in media about the

improvement in world economic conditions since the

second half of 2013, with sentiments indicating that

growth should increase over the next two years.

Key Messages


MESSAGE FROMTHE CHAIRMAN

In an update on its World Economic Outlook in

January 2014, the International Monetary Fund (IMF)

projected higher global economic growth of 3.7%

for 2014 and 3.9% for 2015. However, it said that the

world economy was “not yet out of the woods” and

there were still downside risks, including lower-than-

expected inflation in the advanced economies and

the need to manage potential capital flow reversals

in the emerging and developing economies in light

of recent developments.

Generally, further acceleration in world economic

growth is expected to be driven by advanced

economies. The outlook for emerging markets such

as China and India has been described as mixed

despite some changes in their momentum.

Thus, we are concerned whether growth could

stabilise further with improvements in more

countries or is it just tentative, as the over-capacity in

the shipping market badly needs a sustained boost

from increased trade. The World Trade Organisation

(WTO) had said in September 2013 that world trade

growth in 2014 would likely be 4.5%, higher than

the growth of 2.5% in 2013.

In this improving market scenario, there are still

concerns about the impact of the winding down

of financial stimulus measures in the advanced

economies, the strength of the Chinese Yuan

against the US Dollar, higher financing costs and

the escalation of raw material and labour costs,

which can bring great pressure to the Group’s

performance going forward.

Overall, the Company maintains a cautious outlook

as it expects business and operating conditions to

remain difficult and challenging in 2014 amidst very

uncertain global economic growth prospects.

STAYING THE COURSE, AND LEVELLING UP

While the market seems to be improving, we are

mindful that prices of newbuilds for dry bulk and other

transport vessels had seen sustained decline since 2009

and we have to be realistic that prices might not return

to the pre-2008 level in the short-term. According to

statistics from Clarkson Research Services Ltd, dry

bulk carrier newbuild prices increased slightly in

2013 compared with 2012, but given the fact that

the oversupply situation continues to persist, prices

might not improve significantly in 2014. Contracts

secured over the last two to three years had been at

progressively lower prices, with many of them due

for delivery over the next two years.

We are also concerned that the surplus yard capacity

in China over the last few years has driven more

players into the offshore marine market, an area

where we have diversified into some seven years

earlier.

Although the offshore marine market has been

stable so far, it can be expected to remain highly

competitive in the product areas where we have

built our capability. However, we have been building

on our strength in some offshore product segments

and made breakthroughs into new product areas as

well.

Meanwhile, we have received re-orders for several

ultra deep-water cylindrical drilling rigs and jack-

up drilling rigs, as well as a new order for a semi-

submersible tender assist drilling rig that will be the

most modern of its kind when completed.

Key Messages


Our team is determined to stay the course in further

developing the Group’s capability in both the offshore

marine engineering and the ship building segments,

through greater R&D efforts to improve work

processes, and by maximising material utilisation,

reducing wastage, tightening inventories, increasing

productivity and keeping a tight rein on costs.

Going forward, we will recalibrate our capabilities and

resources to move up the value chain to offer more

sophisticated and higher value offshore products

and transport vessels with the view to secure better

returns for the Group.

While we continue to maintain our focus on growing

the shipyard segment, we will also be keeping a keen

eye on the volatile developments in dry bulk shipping

and their ramifications, to secure our interests in the

shipping segment.

During the year, there was an important change to

the Board. I would like to take this opportunity to

thank the outgoing Chairman, Mr Ma Ze Hua, who

relinquished responsibilities on 30 September 2013.

Mr Ma had helped to further lay the ground for the

Group’s future.

I am pleased to announce that the Board is proposing

a first and final dividend of one cent per share to be

approved at the upcoming Annual General Meeting.

On behalf of the Board of Directors, I would like to

record our deepest gratitude to our shareholders for

their patience and loyal support.

To all our Board of Directors, management and staff

I would like to express my sincere appreciation for

their continued dedication and contribution to the

Group in the year under review. I look forward to

more team work and greater support from them in

the challenging years ahead.

LI YUN PENG

Chairman

“Going forward, we will recalibrate our capabilities and resources to move up the value chain to offer more sophisticated and higher value offshore products and transport vessels with the view to secure better returns for the Group. “


Key Messages


CAPTAIN WU ZI HENG

Vice Chairman and President

“We successfully secured orders for 41 product units, compared to 24 for the previous year, with a total value of US$3 billion.“

INTERVIEW WITHVICE CHAIRMAN AND PRESIDENT


Key Messages


1. WHAT WERE YOUR MOST IMPORTANT EFFORTS IN

FY2013?

Notwithstanding difficult market conditions and

greater competition, we successfully secured ship

and offshore orders for 41 product units, compared

to 24 for the previous year, with a total value of US$3

billion.

The competition was very intense and it was

extremely challenging to secure the higher value

jobs. We had to work a lot harder. However, we have

built a sizeable base of satisfied customers over the

years and have received repeat orders from quite a

number of them.

As most of the contracts executed and delivered in

2013 were secured at lower prices in earlier years,

understandably our efforts were also focused on

higher productivity, managing costs and maximising

our resources including minimising material wastage.

That was not an easy task, as we had to contend

with increasing material and execution costs while

adhering to stringent quality standards and project

timelines.

2. WHAT IS YOUR VIEW ON THE PERFORMANCE OF

THE OFFSHORE MARINE ENGINEERING SERVICES

SEGMENT SO FAR? AND WHAT IS THE OUTLOOK FOR

THIS SEGMENT GOING FORWARD?

We were fortunate that the Group decided seven years

ago to diversify into the offshore marine segment. It

gave us the first-mover advantage to acquire the

technical know-how and execution experience ahead

of others in the competitive shipbuilding industry in

China.

We did better than expected in securing new offshore

marine contracts for 2013. Orders for 23 new projects

were received compared to 19 for 2012. In this respect,

our shipyard group fared better in this segment than

most other shipyards in China.

Significantly, we received quite a number of

repeat orders from satisfied customers in the last

couple of years, which attests to our ability to meet

sophisticated specifications and quality expectations.

In particular, we had new orders for platform supply

vessels (PSV), semi-submersible tender assist drilling

rig, LNG vessel, high-end floating accommodation

unit (FAU), Le Tourneau jack-up drilling rigs, semi-

submersible accommodation vessel, and other types

of products.

With the delivery in October 2013 of the “Sevan

Louisiana”, the sixth generation Sevan 650 III ultra

deep-water cylindrical drilling rig capable of drilling

depth up to 12,000 metres, COSCO has fully proven

its capability in the design and manufacturing

programme for such products.

In addition to the Sevan series, we also have on our

order book two Le Tourneau Workhorse jack-up

drilling rigs and five Le Tourneau Super 116E jack-up

drilling rigs.

Besides these high-end products, we had during the

year under review secured a US$200 million contract

to build a semi-submersible tender assist drilling

rig of the GustoMSC Ocean400 TD design. When

completed in 2015, it will be one of the largest and

most modern semi-submersible tender assist drilling

rigs to be delivered to the market.

These developments are very important to our team

as we further gear ourselves to secure and build more

of such drilling rigs and other high value products.

Looking back, I am pleased to say that we have

made significant progress in our core competencies.

However, we still have to continually make progress

in our R&D to further up-scale our capability to design

and construct more sophisticated and higher value

offshore products. Key areas that we have to manage

meticulously are execution and costs, to ensure that

we deliver our products on time with the highest

level of professionalism and with optimal returns.

In view of the continuing upstream investment

commitments from oil industry majors, the general

market sentiment is for the newbuild cycle for rigs to

remain resilient. They should also revive demand for

more floating production units.

Key Messages


INTERVIEW WITHVICE CHAIRMAN AND PRESIDENT

It is also very encouraging to note that the IEA

(International Energy Agency) has in its Oil

Market report for January 2014 expected world

oil consumption to increase by 1.3 mb/d (million

barrels per day) in 2014, from the 1.2 mb/d in 2013

in a scenario where the industrialised economies are

expected to continue to recover.

The offshore marine market should generally

continue to be buoyant.

3. THE SHIPPING MARKET SEEMED TO HAVE

RECOVERED FROM THE SECOND HALF OF 2013.

WHAT DO YOU FORESEE THE NEXT FEW YEARS WILL

BE LIKE FOR THE SHIPBUILDING BUSINESS?

The shipping market picked up slightly in the second

quarter of 2013 in anticipation of the recovery of the

Eurozone economies as well as that of the United

States. However, demand was uneven across the

various ship types and classes, which were still stuck

in an oversupply situation.

It is too early to predict anything, as the ship charter

business is still very uncertain. Our most immediate

concern is its impact on the price levels of newbuilds.

Price increases for newbuilds in 2013, compared to

2012, were uneven across the size categories with

16.3% rise for Capesize vessels, 7.8% for Panamax,

9.1% for Handymax and 6.2% for Handysize. The

market is still very fragile, highly susceptible to slight

changes in untoward economic, monetary, fiscal

policy and political developments.

There was some rebalancing in supply and demand

in 2013, with quite a sizeable volume of scrapping

in 2013. The subsequent slight pick up in charter

demand had also given a positive spin to market

sentiments. We are still wary that global economic

uncertainties could continue to have an unsettling

effect on the shipbuilding market.

4. HOW WAS THE SHIP REPAIR MARKET IN 2013? AND

WHAT IS THE OUTLOOK FOR THE NEW FINANCIAL

YEAR?

For the 2013 financial year, our shipyard group

repaired/retrofitted a total of 643 vessels, a decline

of 7% from the 693 units serviced in the year before.

We will further develop the repair, conversion

and retrofitting business, as it can make positive

contributions to our overall performance. However,

we have to be prepared for a slightly weaker ship

repair market in the short-term due to the trend of

global fleets becoming younger, and shipowners’

tighter cost control in the current state of the

shipping market.

5. COULD YOU GIVE US AN UPDATE ON YOUR

SHIPYARD FACILITIES?

We have six shipyards in the Group and they are

located in Dalian, Guangdong, Nantong, Qidong,

Shanghai and Zhoushan. Together they have a total

dry dock capacity of 990,000 DWT and floating dock

capacity of 1,055,000 DWT and 38 berths.

The Dalian facility has both dry and floating docks with

berths up to 3.72 kilometres. Qidong and Zhoushan

have only dry docks while Guangdong and Nantong

are floating dock yards. There are 62 workshops and

storage facilities altogether occupying some 644,000

square metres of yard premises. Currently, Qidong

Shipyard is our principal yard for offshore marine

engineering projects.

6. WHAT MEASURES HAVE YOU PUT IN PLACE TO

ENSURE SUSTAINABILITY IN THE FACE OF STIFFER

COMPETITION AND THE CONTINUING VOLATILE

MARKET?

We already have in place a dynamic programme

that has been designed to constantly drive more

innovation, greater project execution excellence,

effective lean management, higher productivity and

technical skills upgrading in all our operations.

Besides that, we have an ongoing training programme

to groom management talent by ensuring that they

receive exposure in as many relevant areas of the

Company’s business as possible.

Our R&D efforts are pushing new boundaries to

continuously improve work processes for greater

efficiency and quality assurance. We have some 1,600

highly trained and competent designers, engineers

and materials experts who specialise in research

for various product segments such as offshore

marine engineering, ship building, ship repair and

conversion, as well as development of new products.

Key Messages


We have received recognition from the Chinese

government for our pursuit for excellence. For

example, our COSCO Nantong shipyard was

presented with the first prize in China’s prestigious

State Science and Technology Award previously in

recognition of its key design and manufacturing

technologies for an ultra deep-water high stability

drilling and storage unit.

The Group has taken all feasible measures to support

our ongoing effort to level up our business from the

capacity and price-oriented paradigm to the higher

end of the market.

7. WHAT OBSERVATIONS DO YOU HAVE GOING INTO

2014 AND BEYOND?

The International Monetary Fund (IMF) in its latest

update on its World Economic Outlook in January

2014 projected the world economy to grow by

3.7% in 2014 and 3.9% in 2015. However, it flagged

concerns about the global economy and IMF warned

of downside risks such as the normalisation of

monetary policy in the advanced economies and

potential volatile capital movements.

Even before the latest IMF prognosis, analysts had

already expressed concerns of threats to recovery,

including the Eurozone’s financial health, US fiscal

policies, the tapering of quantitative easing, as

well as the still uncertain depth of recovery of the

Japanese, Eurozone and emerging economies. Also

of concern to us is the strength of the Chinese Yuan

and increasing cost pressures.

Over at the Eurozone, whatever growth has been

reported seems to be uneven across member

countries, with continuing concerns about the

banking system there. The handling of the tapering

of bond purchases by the US Federal Reserve could

affect capital flow and interest rates that could

negatively impact business growth.

It is important for the various governments to ensure

that reforms, fiscal policies and economic measures

work effectively to spur growth.

With this economic backdrop, we remain concerned

about the speed of overall global recovery as the

shipping industry badly needs a quick return to

better trading conditions.

Another observation is that we cannot foresee when

newbuild prices can recover to a sustainable level.

We also cannot expect new contract volumes to

return to the pre-2008 level in the short-term, and

therefore the market could continue to be price-

sensitive especially in the lower market segment.

The International Energy Outlook 2013 issued by the

United States’ Energy Information Administration

(EIA) had projected that world energy consumption

would grow by 56% between 2010 and 2040, with

fossil fuels meeting up to 80% of world energy use

over the three decades.

We view the projected continued rise in energy

consumption as an important boost for the offshore

marine market fundamentals, although there are still

a lot of economic uncertainties going forward.

We are watching the developments very closely

and will continue to be highly responsive in our

marketing efforts. We have a proven professional

management team and the structure, system and

capability to bring us forward. Our supportive and

hard-working technical and process workforce are

also strongly behind us to maximise our advantages

in the competitive market place.


Key Messages


DEVELOPING TRACTIONOur track record in the building of offshore marine engineering products such as rigs and barges as well as in other projects like accommodation vessels is growing. With developing expertise, we have successfully secured repeat orders as well.


M. V. Galloway Express


OVERVIEW

A leading marine conglomerate, COSCO Corporation

(COSCO) offers advanced capabilities in ship building,

ship repair and conversion, and offshore marine

engineering, supported by six major shipyards

strategically located along China’s coastline. Owned

by COSCO Shipyard Group, a subsidiary of COSCO

Corporation, these six modern shipyards are located

from Guangdong in the south to Nantong, Zhoushan,

Shanghai, and Qidong along the central coast, to

Dalian in the north. Together, these assets and

strengths enable it to meet the evolving challenges

of the global marine industry.

During the financial year, COSCO shipyards completed

and delivered 24 projects. They comprised one jack-

up barge, one transportation barge, one Sevan 650

ultra deep-water cylindrical drilling rig, two tender

rigs, two livestock carriers and 17 bulk carriers. Our

shipyard operations remained our largest revenue

generator, contributing 98.4% to Group turnover. The

offshore marine engineering business generated 70%

of the shipyard revenue, mitigating the decrease in

contributions from the ship building front.

SHIP BUILDING

In 2013, COSCO delivered 17 bulk carriers and two

livestock carriers, the 4,500 sq. metre “Galloway

Express” and “Ganado Express” to a range of local and

international customers. Its international customers

were primarily European. In terms of tonnage, its bulk

carriers ranged from the 35,000 DWT “M. V. CHIOS

LUCK” delivered by COSCO (Guangdong) Shipyard to

the 229 metre long, 92,500 DWT “M.V. OCEAN TOPAZ”

completed by COSCO (Dalian) Shipyard. Both were

delivered to European buyers.

OFFSHORE MARINE ENGINEERING

Leveraging on our growing presence in the offshore

marine engineering business, we successfully

delivered five projects over FY2013. These included

state-of-the-art barges and rigs.

A project highlight for the year is the completion and

delivery of Sevan Louisiana to Sevan Drilling ASA on

23 October 2013. Measuring 99 metres in length,

75 metres in breadth and 24.5 metres in depth, this

modern rig has a working depth of 3,800 metres and

a drilling depth of 12,000 metres. It is the third Sevan

650 ultra deep-water cylindrical drilling rig we have

SHIP REPAIR, SHIP BUILDINGAND OFFSHORE MARINE ENGINEERING

Operat ions and F inancia l Rev iew


built for Sevan Drilling and is a testament to our ever-

improving execution capabilities. Other highlights

included the delivery of a jack-up barge “IB914”

and a transportation barge “IB924” to an Australian

company.

SECURING NEW ORDERS

At 31 December 2013, the Group’s total order book

stood at US$7.8 billion, with progressive deliveries up

to 2016. This order book is subject to revision from

any new or cancellation of orders that may arise. Of

this figure, about 80% comprises orders for offshore-

related projects and the remainder, for ship building.

New orders received during FY2013 include, among

others, one semi-submersible tender assist drilling

rig, one semi-submersible accommodation rig,

one LNG vessel, one float-over launch barge, one

stinger barge, one cargo and training ship, two

floating accommodation units, two salvage lifting

vessels, two module carriers, three semi-submersible

accommodation vessels, four jack-up drilling rigs,

five oil tankers, seven bulk carriers and 10 platform

supply vessels.

A landmark contract was the US$200 million deal to

construct a semi-submersible tender assist drilling

rig. This rig is a GustoMSC Ocean400 TD design

equipped to work alongside specialised deep-water

trussed spars, tension leg platforms, and compliant

towers outside of benign environments and is very

well suited to production drilling in shallow water due

to its ability to drill and mobilise quickly in adverse

weather.

When completed in June 2015, this rig will be one

of the largest and most modern semi-submersible

tender assist drilling rigs in the market with the largest

variable deck load (VDL) of 4,000 MT and the highest

air-gap of 10 metres. The Derrick Equipment Set (DES)

is designed to drill on platforms of over 120 feet and

is equipped with a quad-mast rated for a one million

pound hook-load.

In November 2013, we secured orders from a Bermuda

company to build two LeTourneau Super 116E jack-up

drillings rigs, scheduled for delivery in first half 2016

and second half 2016 respectively.



We also continued growing our presence in the area

of accommodation vessels, securing six projects

over 2013. Of note would be a contract valued at

more than US$200 million for one semi-submersible

accommodation rig. In November, we secured two

contracts each in excess of US$200 million. These

are for the construction of two semi-submersible

accommodation vessels, with options for four more

units. Scheduled for delivery in 2016, the vessels

will be of Gusto MSC Ocean 500 design and will

be equipped with 500 beds, DP3 station keeping

systems, 10-point chain mooring and 300 tonne

cranes.

We entered the offshore marine engineering market

in 2006 and have gradually grown our presence.

Nonetheless, we expect to incur higher costs in the

execution of new product types. Despite this, we aim

to continue developing our capabilities in this area

even amidst an environment of increasing players in

the offshore marine engineering field.


SHIP REPAIR, SHIP BUILDINGAND OFFSHORE MARINE ENGINEERING

TYPES OF VESSELS REPAIRED IN FY2013BY NUMBER OF VESSELS

Tankers7%

Chemical Ships12%

Others12%

Containers Ships12%

Bulk Carriers57%

Ship Repair10%

Ship Building13%

Marine Engineering

70%

SHIPYARD REVENUE IN FY2013BY TYPE OF JOB

Ship Conversion7%


COSCO has an established presence in the dry bulk

shipping business. Currently comprising a fleet of

11 dry bulk carriers with a total carrying capacity of

607,600 DWT, our ships ply global trading routes,

transporting cargo such as iron ore, coal, steel, cement

and fertiliser to major ports worldwide. Some of

these dry bulk carriers are chartered out to other

ship owners and operators, and serve our large client

base of shipping companies from Germany, Norway,

Denmark, Greece, Switzerland, UK, USA and others.

The Baltic Dry Index (BDI), a key measure of shipping

costs for commodities, started 2013 at 698 points and

ended it at 2,277 points, mainly driven by Capesize

dry bulk carrier freight rates. However, as our fleet

only consists of Handymax and Panamax carriers,

the freight rates of the afore-said carriers did not

increase significantly compared with the previous

year. In FY2013, the turnover from dry bulk shipping

and other businesses was steady at $55.6 million.

As a percentage of Group turnover, this segment

accounted for just 1.6%.

Nonetheless, any rebound in the BDI may be short-

lived or subdued as expansion in the global bulk

carrier fleet continues to outpace demand. This will

influence our dry bulk shipping business as well as

our bulk carrier ship building operations. Be that as

it may, we have to continue building on our strengths

and networks in the new financial year.


DRY BULK SHIPPINGAND OTHERS


GROUPFINANCIAL REVIEW

OVERVIEW

The Group achieved net profit attributable to equity

holders of $30.6 million on turnover of $3.5 billion

in 2013.

TURNOVER

Group turnover decreased 6.1% to $3.5 billion in

2013 from $3.7 billion in 2012 owing to a decrease

in shipyard revenue.

In 2013, turnover from shipyard operations

decreased by 6.1% to $3.5 billion from $3.7 billion

in 2012. This was due to lower revenue contribution

from the ship repair and ship building which more

than offset the growth in revenue from marine

engineering.

The Group successfully delivered 17 bulk carriers in

2013. Of these, COSCO Zhoushan shipyard delivered

six bulk carriers, COSCO Dalian shipyard delivered

six bulk carriers and COSCO Guangdong shipyard

delivered five bulk carriers. Additionally, COSCO

Nantong shipyard delivered two tender rigs, COSCO

Guangdong shipyard delivered two special purpose

carriers and COSCO Qidong shipyard delivered one

ultra deep-water cylindrical drilling rig and two

barges.

Turnover from dry bulk shipping and other

businesses increased marginally by 3.6% from $53.7

million in 2012 to $ 55.6 million in 2013.

The BDI started the year 2013 at 698 points and

ended the year at 2,277 points. The BDI averaged

1,206 points for FY2013, which is a 31.4% increase

from the average of 2012 of 918 points. The BDI

increase was driven mainly by stronger demand in

the Capesize dry bulk carrier sector and our dry bulk

shipping fleet comprises Handymax and Panamax

carriers.

Shipyard business remained the biggest revenue

contributor, forming 98.4% of Group turnover in 2013.

PROFITABILITY

Gross profit decreased 33.8% from $484.9 million in

2012 to $321.2 million in 2013 mainly due to higher

inventory write-downs and provision for expected

losses recognised on construction contracts which

resulted in lower profit contributions from ship

building and offshore marine engineering.

Other income comprised gain from the disposal of

scrap metal, interest income, net currency exchange

gain/(loss) and others. Compared to 2012, other

income decreased by 10.1% to $110.1 million in

2013 mainly due to lower sales value of scrap and

exchange loss of $18.9 million (2012: exchange gain

of $0.7 million) which were partially offset by a one-

off compensation received from customers in FY2013.

The exchange loss of $18.9 million was mainly due to

the strengthening of the Chinese Yuan against the US

Dollar.

Distribution costs decreased by 19.1% to $66.5

million, owing to less marketing and promotional

activities.

Interest expense increased by 10.9% to $110.8 million

in 2013 due to higher bank borrowings deployed to

fund shipyard operations.

On 17 October 2013, the Group made an

announcement on the DP3 deepwater drillship

contract stating that the shipowner has served notice

of termination and submitted a request for arbitration

in London for which the shipowner claimed for

a refund of the first installment of the contract

amounting to US$110 million paid by the shipowner



together with interests thereon, damages and

interest thereon, indemnity for future losses, further

or other relief and costs. Given the current stage

of arbitration proceedings, it is difficult to quantify

the eventual financial impact of the arbitration at

this point in time. Notwithstanding the arbitration

proceedings, the first instalment of US$110 million

was refunded to the shipowner together with

payment of interest thereon amounting to US$8.1

million on 13 January 2014.

Net profit attributable to equity holders of the

Company decreased 71.0% from $105.7 million in

2012 to $30.6 million in 2013.

BALANCE SHEET AND CASH FLOW

(31 December 2013 vs 31 December 2012)

Cash and cash equivalents increased from $1.7

billion to $2.0 billion mainly due to increase in bank

borrowings procured to finance shipyard operating

activities.

Trade and other receivables increased $165.7 million

to $2.9 billion mainly due to higher construction

contracts due from customers in the offshore marine

engineering segment. Advances paid to suppliers

decreased from $672.8 million to $595.6 million.

Trade and other payables increased $451.5 million

to $2.7 billion mainly due to higher accruals for

operating expenses and an increase in advances

received from customers (from $391.7 million to

$558.8 million).

Total borrowings increased by $756.1 million to

$3.8 billion due to additional funding procured for

shipyard operations.

SHARE CAPITAL

COSCO’s share capital remained unchanged at

$270.6 million. There was no new issue and allotment

of shares under the COSCO Corporation Employees’

Share Option Scheme 2002.

EQUITY

Shareholder’s equity increased marginally by

$54.3 million mainly due to an increase in currency

translation reserve and the transfer of 2013 profits

to retained earnings. This was partially offset by the

payment of dividends in May 2013.

NET GEARING

Total bank borrowings increased from $3.0 billion to

$3.8 billion due to additional funding procured for

business operations. The Group had a gearing ratio

(net of cash) of 1.3 at the end of FY2013.

EARNINGS PER SHARE

On a fully diluted basis, net earnings per share

decreased from 4.7 cents in FY2012 to 1.4 cents in

FY2013.

DIVIDENDS PER SHARE

The Board of Directors has proposed a first and

final tax exempt one-tier dividend of 1.0 cent.

The dividend payout will amount to $22.4 million

(FY2012: $44.8 million) while dividend cover was 1.4.

NET ASSET VALUE PER SHARE

The net asset value per share of COSCO Corporation

increased by 4.3% from 57.2 cents per share at

31 December 2012 to 59.7 cents per share at 31

December 2013.



LEVELLING UPWhile we continue to offer our integrated marine services with modern yard facilities across the length of China’s seaboard, we will press on to move up the value chain and offer more sophisticated, higher value-added products.


M.V. Union Mariner


COSCO Corporation (Singapore) Limited (“COSCO Corporation” or the “Company”) and its subsidiaries (together, the “Group”) believe that good corporate governance is essential to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the Company.

The Board of Directors (the “Board”), guided by the Singapore Code of Corporate Governance 2012 (the “CG Code 2012”) issued by the Monetary Authority of Singapore (the “MAS”), remains committed to the principles and guidelines stated therein to achieve high standards of business integrity, ethics and professionalism across all its activities. The Company complies with all key principles and guidelines set out in the CG Code 2012.

A. BOARD MATTERS

THE BOARD’S CONDUCT OF AFFAIRS Principle 1

Governance is overseen by the Board together with Management, who is led by the Group President and accountable to the Board. All directors make decisions objectively in the best interests of the Company and have exercise due diligence and independent judgment in so doing.

The principal functions of the Board apart from its statutory responsibilities are:

a) to provide entrepreneurial leadership; approve the strategic objectives, corporate policies and authorisation matrix of the Company; and ensure that the necessary financial and human resources are in place for the Company to meet its objectives;

b) to approve the nominations to the Board and appointment of key management, as may be recommended by the Nominating Committee;

c) to oversee the processes for risk management, financial reporting and compliance and evaluate the adequacy of internal controls; approve annual budget, key operational matters, major acquisition and divestment proposals, major funding proposals of the Company;

d) to assume responsibility for corporate governance framework of the Company and establish a framework of prudent and effective controls which enables risks to be assessed and managed, including safeguarding of shareholders’ interests and company’s assets;

e) to review management performance;

f ) to identify the key stakeholder groups and recognise that their perceptions affect the Company’s reputation;

g) to set values and standards (including ethical standards) of the Company and ensure that obligations to shareholders and others are understood and met; and

h) to promote corporate social responsibilities throughout the Group and include environmental and social factors as part of its strategic formulation.

CORPORATEGOVERNANCE

Corporate Governance and Transparency


The Board has delegated certain functions to the established Board Committees, namely Strategic Development, Enterprise Risk Management, Audit, Nominating and Remuneration Committees, save for the following matters which are reserved for the Board’s decision:

the Group’s long term objectives and commercial strategy, including any new and major strategic initiatives;

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

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

the approval of any acquisition of any investment, asset or business by the Company or any of its subsidiaries which would involve the commencement of an activity of a substantially different nature or character to any activity from time to time carried on by the Company or any of its subsidiaries;

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

the approval of risk management policy for the Company and its subsidiaries;

the approval of the Company’s quarterly results, audited financial statements and other appropriate statements for inclusion in the Company’s Annual Report as well as the issue of Annual Report;

the recommendation of the payment of any dividend by the Company or any exercise of the powers of the Board in relation to reserves or capitalisation of profit;

appointment or removal of director from the Board (with recommendation made by the Nominating Committee) and the appointment or removal of the Company Secretary;

make changes to the structure and size of the Board, following receipt of recommendation from the Nominating Committee;

in the case of any conflict of interest which the Board, after being appropriately advised, considers to be material, as to whether such conflict should be authorised and, if so, authorise such conflict upon such terms and conditions as the Board considers appropriate;

determining the remuneration packages for senior executives of the Company (following receipt of recommendation by the Remuneration Committee);

reviewing the performance of the Board annually; and

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

During the financial year, the Board had met five (5) times to discharge its duties and had on various occasions used circular resolutions in writing to sanction certain decisions. Day to day management of the Group has been delegated to the Group President and Executive Directors.



The attendance of the Directors at meetings of the Board and Board Committees for financial year ended 31 December 2013 is set out in the table below:

Name

Type of Meetings

Board

Committee

Audit Nominating RemunerationEnterprise RiskManagement

StrategicDevelopment

No. ofMeetings

held: 5

No. ofMeetings

held: 6

No. ofMeeting held: 1

No. ofMeeting held: 1

No. ofMeetings

held: 4

No. ofMeetingheld: 0

No. ofMeetingsAttended


No. ofMeeting

Attended

No. ofMeeting

Attended


No. ofMeeting

Attended

Ma Ze Hua 1 3 NA NA NA NA 0

Li Yun Peng 2 1 NA NA NA NA 0

Wu Zi Heng 5 NA 1 1 4 0

Liu Lian An 4 NA NA NA 3 NA

Wang Yu Hang 4 NA NA NA 2 NA

Wang Hai Min 4 NA NA NA NA NA

Ma Zhi Hong 4 NA NA NA NA NA

Tom Yee Lat Shing 5 6 1 1 4 0

Wang Kai Yuen 5 6 1 1 4 0

Er Kwong Wah 5 6 1 1 4 0

Ang Swee Tian 4 6 1 1 4 0

Ma Hong Han(Alternate to Ma Zhi Hong) 5 NA NA NA 4 NA

Li Man 3

(Alternate to Ma Ze Hua) 4 NA NA NA NA NA

Li Man 4

(Alternate to Li Yun Peng) 1 NA NA NA NA NA

Ouyang Chao Mei 5

(Alternate to Wang Yu Hang) 5 NA NA NA 4 NA

Notes:

1 Mr Ma Ze Hua resigned as Chairman and Non-Independent and Non-Executive Director and a member of the Strategic Development Committee on 30 September 2013.

2 Mr Li Yun Peng was appointed as Chairman and Non-Independent and Non-Executive Director and a member of the Strategic Development Committee on 30 September 2013.

3 Mr Li Man was ceased to be Alternate Director to Mr Ma Ze Hua on 30 September 2013.

4 Mr Li Man was appointed as Alternate Director to Mr Li Yun Peng on 30 September 2013.

5 Mr Ouyang Chao Mei was appointed as Alternate Director to Mr Wang Yu Hang on 25 January 2013.

NA - Not Applicable

For effective planning, the schedule of all Board and Board Committee meetings for the next calendar year is always planned in advance. A special Board meeting will be conducted for special project whenever it is required. The Company’s Articles of Association (the “Articles”) allow Board meetings to be conducted by way of telephone and video conferencing.

CORPORATEGOVERNANCE



BOARD COMPOSITION AND GUIDANCE

Principle 2

The Board has ten (10) members: two (2) Executive Directors, four (4) Non-Executive Directors and four (4) Non-Executive Independent Directors. No individual or group of individuals dominates the Board’s decision-making. Collectively, the Non-Executive Directors and Non-Executive Independent Directors bring a wide range of experience and expertise as they all currently occupy or have occupied senior positions in industry and public life, and as such, each contributes significant weight to Board decisions. None of the Non-Executive Independent Directors has any relationship with the Company, its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the director’s independent business judgment with a view to the best interests of the Company.

The Board believes that there is a strong and independent element on the Board and allows the Board to exercise objective judgment on corporate affairs independently from Management and 10% shareholders. It noted that the requirement for independent directors to make up at least half of the Board where the Chairman is not an independent director (Guideline 2.2 of the CG Code 2012) is not applicable to the Company until its financial year commencing 1 January 2017.

The Board of COSCO Corporation comprises the following members:

Li Yun Peng Chairman and Non-Independent and Non-Executive DirectorWu Zi Heng Vice Chairman, President and Non-Independent Executive DirectorLiu Lian An Non-Independent Executive DirectorWang Yu Hang Non-Independent and Non-Executive DirectorWang Hai Min Non-Independent and Non-Executive DirectorMa Zhi Hong Non-Independent and Non-Executive DirectorTom Yee Lat Shing Non-Executive Lead Independent DirectorWang Kai Yuen Non-Executive Independent Director Er Kwong Wah Non-Executive Independent Director Ang Swee Tian Non-Executive Independent Director

The Directors’ profiles are set out on pages 52 to 56 of this Annual Report.

Board assesses the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board annually. It is of the view that the current size of the Board is appropriate and will facilitate effective decision making. The Board, collectively, possess an appropriate balance and diversity of skills, experience and knowledge of the Company, which provide core competencies such as accounting or finance, business or management experience, industry knowledge, strategic planning experience and customer-based experience and knowledge.

Rigorous reviews have been carried out by the Board to assess the independent status of Mr Tom Yee Lat Shing (who was appointed on 16 November 1993), Dr Wang Kai Yuen (who was appointed on 2 May 2001) and Mr Er Kwong Wah (who was appointed on 20 December 2002), who have served on the Board beyond nine years. All of them are considered independent in accordance with the Guideline 2.3 of the CG Code 2012.

The Board will continue reviewing the size and composition of the Board and the independent status of its directors on an ongoing basis.

Directors are provided with regular updates on relevant new laws and regulations, and evolving commercial risks and business conditions from the Company’s relevant advisors. Newly appointed directors would receive a formal letter setting out the director’s duties and obligations and receive comprehensive and tailored induction and training in areas such as accounting, legal and industry-specific knowledge on joining the Board. Annual visits are arranged for Non-Executive Independent Directors to acquaint them with important operations overseas.



STRATEGIC DEVELOPMENT COMMITTEE

The Strategic Development Committee (“SDC”) comprises the following directors, majority of whom is independent directors:

Wu Zi Heng (Chairman) Non-Independent Executive Li Yun Peng Non-Independent and Non-ExecutiveTom Yee Lat Shing Non-Executive Lead Independent Wang Kai Yuen Non-Executive Independent Er Kwong Wah Non-Executive Independent Ang Swee Tian Non-Executive Independent

The Board acknowledges the importance of strategic planning and development. SDC assists the Board in fulfilling its responsibilities for developing, evaluating and monitoring the Company’s long and short-term strategic goals. The SDC operates at the Board level but does not assume the Board’s governance accountability or to make final strategic decisions. The SDC acts solely to address and develop current and future strategy-related issues. It has the responsibility for creating and driving the Company’s strategy development and planning and Management takes responsibility for implementing the Company’s strategies after the SDC received approval from the Board. The SDC did not hold any meeting during the financial year because several strategies that were being developed by the Management for SDC’s review have yet to be finalized. The SDC will hold meeting once the needs arise.

The SDC has the following authority and responsibilities:

a) Review and develop Company Strategies: Meet with Management periodically to review, develop and evaluate the Company’s evaluation and implementation of its business strategy;

b) Provide Resource Support: Support the Board or Management in the evaluation and/or refining of the Company’s strategic plans;

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

d) Recommend Improvements: Recommend areas of improvement and provide feedback to the Board and Management regarding the overall success of the business strategy.

CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Principle 3

Mr Li Yun Peng and Capt Wu Zi Heng, who are not related to each other, are respectively the Chairman of the Board and the President of the Company. The roles of Chairman and the President undertaken by separate persons will create a clear division of responsibilities and maintain an effective oversight.

The Chairman is responsible for the workings of the Board, ensuring the integrity and effectiveness of its governance process. In his absence, his appointed alternate would act on his behalf.

The President is the most senior executive in the Company and has full executive responsibilities over the business directions and operational decisions of the Group. He works closely with the Board to implement the policies set by the Board to realise the Group’s vision.

CORPORATEGOVERNANCE



BOARD MEMBERSHIP

Principle 4

Recommendations for nominations of new directors and retirement of directors are made by the Nominating Committee (“NC”) and considered by the Board as a whole.

The NC reviews and assesses candidates for directorship before making recommendations to the Board. The NC takes into consideration the skills and experience required and the existing composition of the Board and strives to ensure that the Board has an appropriate balance of independent directors as well as directors with the right profile of expertise, skills, attributes and abilities when recommending new directors to the Board.

The process for the appointment of new directors begins with the NC, together with the Chairman and President cum Vice Chairman of the Company, conducting a needs analysis and identifying the critical requirement in terms of expertise and skills that are needed in the context of the strengths and weaknesses of the existing Board. When a candidate has been endorsed by the NC, the NC will then make a recommendation to the Board for the approval of his appointment.

The NC assesses and recommends to the Board whether retiring directors are suitable for re-nomination for re-election. In evaluating a director’s contribution and performance for the purpose of re-nomination, the NC takes into consideration a variety of factors such as attendance, preparedness, participation and candour.

In accordance with the provisions of the Articles, one-third of the Directors retire by rotation and subject themselves to re-election at every Annual General Meeting (“AGM”) of the Company. In addition, new directors who were appointed by the Board during the year will hold office only until the next AGM and will be eligible for re-election.

The dates of initial appointment and last re-election/re-appointment of each of the Directors of the current Board are set out below:

Director PositionDate of InitialAppointment

Date of LastRe-election

/ Re-appointment

Li Yun Peng Chairman and Non-Independent and Non-Executive 30.9.2013 NA

Wu Zi Heng Vice Chairman, President and Non-Independent Executive 5.11.2011 20.4.2012

Liu Lian An Non-Independent and Executive 20.2.2012 20.4.2012

Wang Yu Hang Non-Independent and Non-Executive 14.7.2011 20.4.2012

Wang Hai Min Non-Independent and Non-Executive 2.8.2010 22.4.2013

Ma Zhi Hong Non-Independent and Non-Executive 2.8.2010 22.4.2013

Tom Yee Lat Shing Non-Executive Lead Independent 16.11.1993 22.4.2013

Wang Kai Yuen Non-Executive Independent 2.5.2001 20.4.2011

Er Kwong Wah Non-Executive Independent 20.12.2002 20.4.2012

Ang Swee Tian Non-Executive Independent 13.11.2007 22.4.2013

Ma Hong Han Alternate to Ma Zhi Hong 2.10.2012 NA

Li Man Alternate to Li Yun Peng 30.9.2013 NA

Ouyang Chao Mei Alternate to Wang Yu Hang 25.1.2013 NA

Note: NA - Not Applicable



NOMINATING COMMITTEE

The NC comprises five Directors, majority of whom including the Chairman is independent. The NC members are as follows:

Wang Kai Yuen (Chairman) Non-Executive Independent Wu Zi Heng Non-Independent ExecutiveTom Yee Lat Shing Non-Executive Lead Independent Er Kwong Wah Non-Executive Independent Ang Swee Tian Non-Executive Independent

The principal functions of the NC are to:

a) identify, review and recommend candidates for appointment as Directors of the Company and appointment to the Board committees as well as to senior management positions in the Company;

b) assess the qualifications of the proposed alternate directors to the Board;

c) evaluate the effectiveness of the Board as a whole and assess the contribution by each Director, to the effectiveness of the Board;

d) determine annually whether or not a Director is independent;

e) make recommendations to the Board on re-appointment of Board and Board committee members; and

f ) the review of training and professional development programs for the Board.

During the financial year, the NC held one (1) meeting and had on various occasions used circular resolutions in writing to resolve certain decisions which are then recommended to the Board. The NC had reviewed the nominations for the appointments of those directors that were appointed during the financial year for recommendation to the Board to approve the appointments. In arriving at their decisions on the new appointments, the NC took into consideration the incumbents’ academic qualifications, experience, their individual field of expertise and their potential contributions to the effectiveness of the Board. The NC also met and determined the independence of the Directors is in line with the undertakings described in the CG Code 2012. It also reviewed the composition of the Board and the Board Committees in relation to the needs of the Group.

The NC is of the opinion that the Board is able to exercise objective judgment on corporate affairs independently and no individual or small group of individuals dominates the Board’s decision making process.

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

During the financial year under review, the NC has ascertained that all Directors, including those who have multiple board representations, have devoted sufficient time and attention to the Group’s affairs and have discharged their duties and responsibilities adequately. As time requirements of each director are subjective, the NC has decided not to fix a maximum limit on the number of directorships a director can hold. The NC considers that the multiple board representations held presently by its Directors do not impede their respective performance in carrying out their duties to the Company.

The list of current directorships in other listed companies and/or other principal commitments held by the respective Directors are set out on page 57 of this Annual Report.

CORPORATEGOVERNANCE



One of the duties of the NC is to assess the qualifications of the appointed alternate directors to the Board. The Alternate Directors of the current Board are:

Ma Hong Han Alternate to Ma Zhi HongLi Man Alternate to Li Yun PengOuyang Chao Mei Alternate to Wang Yu Hang

All appointed Alternate Directors are based in Singapore and are familiar with the Group’s affairs and qualified to bear all the duties and responsibilities of their respective principal directors, who are principally based in the People’s Republic of China.

Mr Tom Yee Lat Shing, who is over the age of 70 years, will have to retire at the forthcoming Annual General Meeting pursuant to Section 153(6) of the Companies Act, Cap. 50. The assessment of Mr Tom Yee Lat Shing’s re-appointment and his independence were given particular consideration by the NC as he has now served on the Board for more than 20 years. The NC believes that due to his strength of character, experience and knowledge, Mr Tom Yee Lat Shing continues to be highly effective as a non-executive lead independent director. He provides objective and rigorous challenges to, and engages in constructive debate with, the Board and the committees on which he sits. Mr Tom Yee Lat Shing also brings a wealth of useful and relevant experience both in his position as a non-executive lead independent director and as the Chairman of the Audit Committee.

Accordingly, the NC has recommended and the Board has endorsed the re-appointment of Mr Tom Yee Lat Shing by shareholders at the forthcoming AGM.

BOARD PERFORMANCE

Principle 5

A formal assessment process is in place to assess the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board. The NC uses objective and appropriate quantitative and qualitative criteria to assess the performance of the Board as a whole and the contribution of each Director to the effectiveness of the Board. Assessment parameters include evaluation of the Board’s access to information, risk management, accountability, the Board’s performance in relation to discharging its principal functions, communication with management and stakeholders, the business performance of the Company, the quality of Board processes, the attendance records of the Directors at Board and Committee meetings and the level of participation at such meetings.

The evaluation of the Board is conducted annually. As part of the process, the Directors will complete appraisal forms which are collated by the Company Secretary. The Company Secretary will then review the results of the appraisal and present the results to the Chairman of the NC who will then present a report to the Board.

An individual assessment of each Director is also undertaken annually. The process of the assessment is through self-assessment where each Director will complete appraisal forms which are collated by the Company Secretary. The Company Secretary consolidates the appraisal forms and presents the results to the Chairman of the NC who will then present a report to the Board.



ACCESS TO INFORMATION

Principle 6

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

All Board members have separate and independent access to the advice and services of the Company Secretary. The Company Secretary attends all Board and Board committees meetings during the financial year. He is responsible for ensuring that Board procedures are followed and that applicable rules and regulations such as the SGX-ST Listing Manual (“Listing Manual”), Companies Act (Chapter 50), Securities and Futures Act (Chapter 289) and the Articles of the Company and all governance matters are complied with. The appointment and the removal of the Company Secretary are subject to the Board’s approval.

All Board members also have separate and independent access to the senior management of the Company and the Group. Board members are aware that they, whether as a group or individually, in the furtherance of their duties, can take independent professional advice, if necessary, at the Company’s expense.

B. REMUNERATION MATTERS

PROCEDURES FOR DEVELOPING REMUNERATION POLICIES Principle 7

REMUNERATION COMMITTEE

The Remuneration Committee (“RC”) comprises five Directors, majority of whom including the Chairman is independent. The RC members are as follows:

Er Kwong Wah (Chairman) Non-Executive Independent Wu Zi Heng Non-Independent ExecutiveTom Yee Lat Shing Non-Executive Lead Independent Wang Kai Yuen Non-Executive Independent Ang Swee Tian Non-Executive Independent

The principal functions of the RC are to:

a) recommend to the Board base salary level, benefits and incentive programmes, and identify components of salary which can best be used to focus management staff on achieving corporate objectives;

b) approve the structure of compensation programme (including but not limited to Directors’ fees, salaries, allowances, bonuses, options, shares-based incentives & awards and benefits in kind) for the Directors and senior management to ensure that the programme is competitive and sufficient to attract, retain and motivate senior management of the required quality to run the Company successfully;

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

d) review the Company’s obligations arising in the event of termination of EDs and key management personnel contracts of service to ensure that such contracts of service contain fair and reasonable termination clauses which are not overly generous;

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

CORPORATEGOVERNANCE



The RC meets to discuss the performance assessment of the Executive Directors as well as to discuss the level of emoluments to pay.

The recommendations for approval of the remuneration of the Executive Directors are forwarded to the Board. The RC also reviews and approves the remuneration of senior management.

Directors’ fees are recommended by the RC and are submitted for endorsement by the Board. Directors’ fees are subjected to approval by shareholders at the AGM.

LEVEL AND MIX OF REMUNERATION

Principle 8

In reviewing the remuneration packages of the Executive Directors, the RC takes into account the respective performance of the Group and the individual. In its deliberation, the RC takes into consideration, remuneration packages and employment conditions within the industry and benchmarked against comparable companies. The RC ensures the level and structure of remuneration of the key management personnel aligned with the long-term interest and risk policies of the Company as well as attract, retain and motivate them to provide good stewardship and management of the operations to meet the desire objective of the Company.

Non-Executive Independent Directors are paid a basic fee for their responsibilities as Independent Directors and servicing various committees. Such fees are approved by the shareholders of the Company as a lump sum payment at the AGM.

The Company currently adopts a remuneration policy for staff consisting of a fixed component and a variable component. The fixed component is in the form of a base / fixed salary. The variable component is in the form of a variable bonus that is linked to the Company and individual performance. Another element of the variable component is the grant of share options under the COSCO Group Employees’ Share Option Scheme 2002 .

Information on the COSCO Group Employees’ Share Option Scheme 2002 such as size of grants, exercise price of options that were granted as well as outstanding and vesting period of options are set out on pages 76 to 77 of the Annual Report.

During the financial year, the RC held one (1) meeting. The issues deliberated at the meeting and through the circular resolutions in writing included reviewing the termination of options granted, extension of exercise period of options granted, the bonus payments to key management personnel and the compensation programme for the Directors and key management personnel.



DISCLOSURE ON REMUNERATION

Principle 9

DIRECTORS’ AND KEY MANAGEMENT PERSONNEL REMUNERATION

The Directors’ and the top three key management personnel’s remuneration table for the financial year ended 31 December 2013 is as follows:

Fees (%) Salary (%) Bonus (%)Other

Benefits (%) Total (%)

Non-Independent Executive Director in the band of S$500,000 to S$750,000

Wu Zi Heng 0 38 46 16 100

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

Liu Lian An 0 46 41 13 100

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

Liu De Tian * (1) 0 4 93 3 100

Ouyang Chao Mei * (2) 0 65 5 30 100

Wang Yu Hang * 0 35 56 9 100

Ma Zhi Hong * 0 35 56 9 100

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

Tom Yee Lat Shing 100 0 0 0 100

Wang Kai Yuen 100 0 0 0 100

Er Kwong Wah 100 0 0 0 100

Ang Swee Tian 100 0 0 0 100

Notes:

* The salary, bonus and other benefits of the incumbent directors are paid by the subsidiaries.

1 Mr Liu De Tian resigned as Alternate Director to Mr Wang Yu Hang on 25 January 2013.

2 Mr Ouyang Chao Mei was appointed as Alternate Director to Mr Wang Yu Hang on 25 January 2013.

The Company does not disclose the remuneration of each individual director and the top three key management personnel to the nearest thousand dollars in accordance with the Principle 9.2 and 9.3 of the 2012 CG Code respectively, as the Board of Directors believes that it is not in the best interest of the Company to fully disclose such information given the highly competitive industry conditions for ship building and offshore marine engineering sectors particularly in the Peoples’ Republic of China.

Fees (%) Salary (%) Bonus (%)Other

Benefits (%) Total (%)

Executives in the Band of below S$500,000

Ma Hong Han 0 45 34 21 100

Li Man 0 48 29 23 100

Wong Meng Yun 0 48 41 11 100

None of the employees of the Company and its subsidiary companies was an immediate family member of a Director and whose remuneration exceeded S$50,000 during the financial year ended 31 December 2013.

CORPORATEGOVERNANCE



EXECUTIVES’ REMUNERATION

The Company adopts a remuneration strategy that supports a pay-for-performance philosophy. The Company has key performance indicator to link with Company’s performance and shareholders’ returns. Executives participate in an annual performance review process that assesses the individual’s performance and contributions.

The remuneration structure for the President and other key management personnel consists of the following components:

SALARY

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

BONUS

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

OTHER BENEFITS

Other benefits comprise of usage of Company’s car and other benefits-in-kind.

STOCK OPTION

The COSCO Group Employees’ Share Option Scheme 2002, approved by members of the Company on 8 May 2002, had expired on 8 May 2012. The share options have been granted to align the president and key management’s interest with that of shareholders. The options granted to them are made reference to the desired remuneration structure target and valued based on the Binomial Valuation Model. Details of the share option scheme can be found in the “Directors’ Report” section of the Annual Report.

C. ACCOUNTABILITY AND AUDIT

ACCOUNTABILITY

Principle 10

The Board has overall responsibility to shareholders for ensuring that the Group is well managed and guided by its strategic objectives. In presenting the Group’s annual and quarterly financial results to shareholders, the Board aims to provide shareholders with a balanced and understandable assessment of the Group’s performance, position and prospects. Management provides the Board with management accounts and other financial statements on a quarterly basis or as and when required by the Board.

RISK MANAGEMENT AND INTERNAL CONTROLS

Principle 11

The Group maintains a robust and effective system of internal controls, addressing financial, operational, compliance and information technology controls, and risk management systems, for all companies within the Group, but recognises that no internal control system will preclude all errors and irregularities. The system is designed to manage rather than to eliminate the risk of failure to achieve business objectives. The controls are to provide reasonable, but not absolute, assurance to safeguard shareholders’ investments and the Group’s assets.

The Board is responsible for the governance of risk. The Board should ensure that Management maintains sound system of risk management and internal controls to safeguard shareholders’ interests and the Company’s assets, and should determine the nature and extent of significant risks which the Board is willing to take in achieving its strategic objectives.



The Group’s key internal controls include:

a) establishment of risk management policies and systems;

b) establishment of policies and approval limits for key financial and operational matters, and issues reserved for the Board;

c) documents of key processes and procedures;

d) segregation of incompatible functions which give rise to a risk of errors or irregularities not being promptly detected;

e) maintenance of proper accounting records;

f ) safeguarding of assets;

g) ensuring compliance with appropriate legislation and regulations; and

h) engaging qualified and experience persons to take charge of important functions.

Operational risk management measures implemented by the Group include the implementation of safety, security and internal control measures and taking up appropriate insurance coverage.

Details of the Group’s financial risk management measures are outlined on pages 131 to 138 in the Notes to the Financial Statements.

In the course of the year, the AC and the Enterprise Risk Management Committee have reviewed, together with management and the internal and external auditors, the major business risks and effectiveness of the Group’s internal controls, including controls for managing financial, operational, compliance and information technology controls and risk management systems. Internal control standards are set with the objective of providing reasonable assurance that risks are effectively managed by the Group.

The Board has also received assurance from the President and Chief Financial Officer that the financial records as at 31 December 2013 have been properly maintained and the financial statements for the financial year under review give a true and fair view of the Company’s operations and finances and regarding the effectiveness of the Company’s risk management and internal control systems.

Based on the work performed by the internal and external auditors, the Group’s framework of management control, the review procedures established and maintained by the Company to monitor the key controls and procedures and to ensure their effectiveness, the annual reviews performed by the management, Board committees and the Board, the Board, with the concurrence of the AC and Enterprise Risk Management Committee, is of the view that the Group’s framework of internal controls in relation to the financial, operational, compliance and information technology controls and risk management system is adequate as at 31 December 2013 to provide reasonable assurance of the integrity and effectiveness of the Company in safeguarding its assets and shareholders’ value.

The Board notes that the system of internal controls and risk management put in place by the Group provides reasonable, but not absolute, assurance that the Group will not be adversely affected by any event that could be reasonably foreseen. In this regard, the Board also notes that no system of controls and risk management can provide absolute assurance against irregularities especially those arising from poor judgment in decision making, human error and fraud.

CORPORATEGOVERNANCE



ENTERPRISE RISK MANAGEMENT COMMITTEE

The Enterprise Risk Management Committee (“ERMC”) comprises eight members, majority is Non-Executive and the Chairman is independent. The ERMC members are:

Ang Swee Tian (Chairman) Non-Executive IndependentWu Zi Heng Non-Independent ExecutiveLiu Lian An Non-Independent ExecutiveTom Yee Lat Shing Non-Executive Lead IndependentWang Kai Yuen Non-Executive Independent Er Kwong Wah Non-Executive Independent Wang Yu Hang Managing Director of COSCO Shipyard Group Co., LtdMa Hong Han Chief Financial OfficerOuyang Chao Mei Managing Director of COSCO (Singapore) Pte Ltd

The ERMC assists the Board in fulfilling its oversight responsibilities on risk management framework and policies. The responsibilities of the ERMC include the following:

a) reviews the overall risk management systems and process and makes recommendations on changes as and when considered appropriate;

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

c) reviews periodically the Group’s material risk exposures and evaluates the adequacy and effectiveness of the mitigating measures implemented by management.

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

The ERMC has conducted four (4) meetings during the year at which discussions were held on the establishment of new risk management policies, the existing risk management structure, the key risk exposures of the Group and the action plans to mitigate such risks.

COSCO Shipyard Group continues to have a comprehensive strategic agreement with a leading Chinese insurance institution to strengthen its risk management system and to enhance its operational structure. The said insurance institution has established a team to provide the Group with different facades of insurance for domestic and international trades; setting up a standardised claims and liabilities system; the evaluation of ship owners’ credit ratings, the tracking of ship owners’ risk; and the evaluation of countries’ credit ratings. The Company believes all these efforts are to help the Group to move towards the establishment of an all-encompassing risk management system.

AUDIT COMMITTEE

Principle 12

The Audit Committee (“AC”) comprises all independent directors of the Company, as follows:

Tom Yee Lat Shing (Chairman) Non-Executive Lead IndependentWang Kai Yuen Non-Executive IndependentEr Kwong Wah Non-Executive Independent Ang Swee Tian Non-Executive Independent



The Board is satisfied with the composition of the AC and the AC members are appropriately qualified to discharge their responsibilities. On 21 February 2014, Mr Tom Yee Lat Shing was appointed as the Lead Independent Director of the Company, in line with the Board’s policy of adopting a high standards governance in accordance with the CG Code 2012. All members of the AC have recent and relevant accounting or related financial management expertise or experience, as the Board interprets such qualification in its business judgment. By briefings given by the External Auditors, the AC and Management are always kept abreast of changes to accounting standards and issues which have a direct impact on financial statements. AC members will also attend trainings regarding the new accounting standards as and when such need arises.

The AC performs the following functions:

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

b) reviews with the internal auditors, their audit plan, the adequacy of the internal audit procedures and their evaluation of the effectiveness of the overall internal control systems, including financial, operational, compliance and information technology controls and risk management systems;

c) reviews the quarterly and annual financial statements, including announcements to shareholders and the SGX-ST prior to submission to the Board so as to ensure the integrity of the Company’s financial statements;

d) reviews any significant findings and recommendations of the external and internal auditors and related management response and assistance given by the management to auditors;

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

f ) conducts annual review of the independence and objectivity of the external auditors, including the volume of non-audit services provided by the external auditors, to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors before confirming their re-nomination; and

g) reviews the qualifications of the candidate(s) for chief financial officer before recommending such appointment to the Board.

The AC and the Board of Directors, with the assistance of internal and external auditors, reviews the effectiveness of the key internal controls, including financial, operational, compliance, information technology controls and risk management systems on an on-going basis. There are formal procedures in place for both the internal and external auditors to report independently their findings and recommendations to the AC.

The AC has full access to, and cooperation from the Management including internal and external auditors, and has full discretion to invite any Director or executive officer to attend its meetings. The AC has also expressed power to investigate any matter brought to its attention, within its terms of reference, with the power to retain professional advice at the Company’s expense.

The Group recognises the importance of the internal audit function which, being independent of Management is one of the principal means by which the AC is able to carry out its responsibilities effectively. The Company has appointed Messrs Deloitte & Touche Enterprise Risk Services Pte. Ltd. as the outsourced internal auditors of the Group.

The internal auditors plan their internal audit schedules in consultation with the Management and submit their respective plans to the AC for approval. The Internal Auditors report directly to the AC and the AC will then escalate the IA report to the Board as part of their oversight role.

The AC conducts regular meetings scheduled on a quarterly basis. Apart from the quarterly meetings, the AC meets with the external and internal auditors, without the presence of the management at least once a year. Ad-hoc meetings may be carried out from time to time, as circumstances require. The AC held six (6) meetings during the financial year.

CORPORATEGOVERNANCE



After reviewing the non-audit services provided by the external auditors, PricewaterhouseCoopers LLP to the Group, the AC is satisfied with the independence and objectivity of the external auditors and recommends to the Board of Directors, the nomination of the external auditors for re-appointment.

The fee paid to PricewaterhouseCoopers LLP for audit and non-audit services for the financial year ended 31 December 2013 is S$1,400,000 and S$35,000 respectively.

The Company complies with Rules 712 and 715 of the Listing Manual of the Singapore Exchange Securities Trading Limited in relation to appointing appropriate auditing firm based in Singapore to audit its accounts, and its Singapore-incorporated subsidiaries and significant associated companies.

Whistle-blowing Policy

The Company has in place a whistle-blowing policy and arrangements by which staff may, in confidence, raise concerns about possible corporate improprieties in matters of financial reporting or other matters. To ensure independent investigation of such matters and for appropriate follow-up action, all whistle-blowing reports are to be sent to the internal audit function. The AC, President and Chief Financial Officer of the Company will be informed immediately of all whistle-blowing reports received.

Details of the whistle-blowing policy and arrangements are given to all staff for their easy reference. New staff is briefed on these during the orientation programme.

INTERNAL AUDIT

Principle 13

The AC reviews the adequacy and effectiveness of the internal audit function annually. The internal audit function’s primary line of reporting is to the Chairman of the AC. Internal Audit is an independent function within the Company. Internal Auditors report directly to the AC and administratively to the President. The Company has also appointed Messrs. Deloitte & Touche Enterprise Risk Services Pte. Ltd. as the internal auditors of the Group. The internal auditors have unfettered access to all the Company’s documents, records, properties and personnel, including access to the AC.

The AC is satisfied with the independence and objectivity of the outsourced Internal Auditors and believes that they have appropriate standing to perform their functions effectively.

D. SHAREHOLDER RIGHTS AND RESPONSIBILITIES

SHAREHOLDER RIGHTS

Principle 14

COSCO treats all shareholders fairly and equitably, and recognises, protects and facilitates the exercise of shareholders’ rights and continually review and update such governance arrangements. The Company strives for timeliness and transparency in its disclosures to the shareholders and the public. All information on the Company’s new initiatives will be disseminated via SGXNET to ensure fair communication with the shareholders and the public.

COMMUNICATION WITH SHAREHOLDERS

Principle 15

The Company has put in place an investor relations policy to promote regular and effective communication with shareholders. All questions raised by the shareholders would be escalated to and addressed by the Senior Management, General Manager of Investor Relations and / or relevant person-in-charge.



All announcements will be disseminated via SGXNET timely in accordance with the Listing Manual. The Company currently holds media and analyst briefings upon the release of its quarterly financial results. Management regularly receives visiting fund managers to provide them an insight to the Company’s business and developments, as well as to better understand and address their concerns. In addition to the media and analyst briefings, the Company has taken part in various road shows. This allows the Board to understand the view of the shareholders about the Company.

The Company does not practise selective disclosure. Price-sensitive information is first publicly released via SGXNET, either before the Company meets with any group of investors or analysts or simultaneously with such meetings. Subsequently, all released announcements will be uploaded to the Company’s website at www.cosco.com.sg. Where there is inadvertent disclosure made to a select group, the Company ensures it would make the same disclosure publicly to others as promptly as possible.

All quarterly and full year results announcements, annual reports, dividend declaration and notice of book closure are announced via SGXNET or issued within the prescribed period under Listing Manual.

DIVIDEND POLICY

The Company does not have a specific dividend policy. Nonetheless, the Management after reviewing the performance of the Company in the relevant financial period will make appropriate recommendation to the Board. Any dividend declaration will be communicated to shareholders via announcement through SGXNET.

The Board has recommended a first and final tax-exempt (one-tier) dividend of S$0.01 per ordinary share for the financial year ended 31 December 2013 for the shareholders’ approval at the forthcoming AGM.

CONDUCT OF SHAREHOLDER MEETINGS

Principle 16

COSCO Corporation encourages shareholders to participate actively in general meetings. At general meetings of the Company, shareholders are given the equitable opportunity to participate effectively in and vote at the meeting and express their views and ask questions regarding the Company and the Group. The Company Secretary is present to brief the attendees the rules govern the general meetings, including voting procedures, upon requested by the shareholder. The proceeding of the AGM is properly recorded, including all comments or queries from shareholders relating to the agenda of the meeting and responses from the Board and Management. All minutes of general meetings are opened to the inspection of shareholders within one month after the general meeting was held when requested by any shareholder.

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

The Board members and chairpersons of the Audit, Nominating, Remuneration, Enterprise Risk Management and Strategic Development Committees are present and available to address shareholders’ questions at general meetings. The external auditors are also present to address shareholders’ queries relating to the conduct of the audit and the preparation and content of the auditors’ report.

CORPORATEGOVERNANCE



E. INTERESTED PERSON TRANSACTIONS (“IPTS”) POLICY

The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the Company’s interested person transactions with the China Ocean Shipping (Group) Company and its associates, which are covered by a Shareholders’ Mandate approved at each general meeting.

The AC reviews the Shareholders’ Mandate at regular intervals, and is satisfied that the review procedures for IPTs and the reviews to be made periodically by the AC in relation thereto are adequate to ensure that the IPTs will be transacted on normal terms and will not be prejudicial to the interests of the Company and its minority shareholders.

Name of interested person

Aggregate value of all interested person transactions during the financial period under review

(excluding transactions less than $100,000 and transactions

conducted under shareholders’ mandate pursuant to Rule 920)

Aggregate value of all interested person transactions conducted under shareholders’ mandate

pursuant to Rule 920 (excluding transactions less than $100,000)

S$’000 S$’000

Between Subsidiaries and:

Chimbusco Dalian Branch – 17,772Chimbusco Guangzhou Branch – 2,446Chimbusco Shanghai Branch – 1,091Chimbusco Zhoushan Branch – 5,236COSCO (Cayman) Mercury Co., Ltd – 1,388COSCO (HK) Insurance Brokers Ltd – 248COSCO (HK) Investment & Development Co., Ltd – 170COSCO (HK) Shipping Co., Ltd – 9,010COSCO (JM) Aluminium Co., Ltd – 164COSCO Bulk Carrier Co., Ltd – 11,514COSCO Bulk Tianjin Forwarding Co., Ltd – 242COSCO Container Lines Co., Ltd – 7,593COSCO Finance Co., Ltd – 1,111,073COSCO Far-Reaching Shipping Co., Ltd – 753COSCO Jiangsu International Freight Co., Ltd – 4,663COSCO Logistics (Nantong) – 2,908COSCO Logistics Dalian Co., Ltd – 793COSCO Petroleum Pte Ltd – 7,640COSCO Shipping Co., Ltd – 23,237COSCO Southern Asphalt Shipping Co., Ltd – 156COSCO Wallem Ship Management Co., Ltd – 1,077Dalian Ocean Shipping Company – 1,587Guangdong Ocean Shipping Company – 137Myanmar Cosco Limited – 133Nantong Chimbusco Marine Bunker – 5,832Nantong COSCO Heavy Industry Co., Ltd – 323Nantong COSCO Ship Equipment Company – 1,831Qingdao Manning Co-operation Ltd – 3,219Qingdao Ocean Shipping Company – 1,700Shanghai Ocean Crew Co., Ltd – 4,788Shanghai Ocean Shipping Company – 380Shenzhen Ocean Shipping Company – 1,623Xiamen Mintai Ferry Co., Ltd – 326Xiamen Ocean Shipping Company – 1,288Total – 1,232,341



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

As at 31/12/2013

As at 31/12/2012

S$’000 S$’000

Balances placed with a fellow subsidiary, COSCO Finance Co., Ltd :

- Cash at bank 286,908 187,552

- Short-term bank deposits 439,612 407,625

726,520 595,177

Loan from a fellow subsidiary, COSCO Finance Co., Ltd 2,086 33,712

F. DEALING IN SECURITIES

In line with Chapter 12 Rule 1207(19) of the Listing Manual on dealings in securities, the Company has adopted an internal compliance code which provides guidance to its Directors and officers in relation to dealings in its securities.

The Listing Manual prohibits securities dealings by the Directors and employees while in possession of price-sensitive information. The Management should not deal in the Company’s shares on short-term considerations. The Company issues regular circulars to its Directors, principal officers and relevant officers who have access to unpublished material price-sensitive information to remind them of the aforementioned prohibition and to remind them of the requirement to report their dealings in shares of the Company. The Directors and employees are also prohibited from dealing in the securities of the Company during the period commencing two weeks before the announcement of financial results of the Company for each of the first, second and third quarters of its financial year or one month before the announcement of the Company’s full year financial statements.

CORPORATEGOVERNANCE



CORPORATEINFORMATION

BOARD OF DIRECTORSLi Yun Peng Chairman and Non-Independent and Non-Executive Director Wu Zi Heng Vice Chairman, President and Non-Independent Executive DirectorLiu Lian An Non-Independent and Executive DirectorWang Yu Hang Non-Independent and Non-Executive DirectorWang Hai Min Non-Independent and Non-Executive DirectorMa Zhi Hong Non-Independent and Non-Executive Director Tom Yee Lat Shing Non-Executive Lead Independent Director Wang Kai Yuen Non-Executive Independent DirectorEr Kwong Wah Non-Executive Independent DirectorAng Swee Tian Non-Executive Independent Director

ALTERNATE DIRECTORSMa Hong Han Alternate to Ma Zhi HongLi Man Alternate to Li Yun PengOuyang Chao Mei Alternate to Wang Yu Hang

AUDIT COMMITTEETom Yee Lat Shing ChairmanWang Kai Yuen Er Kwong Wah Ang Swee Tian

REMUNERATION COMMITTEEEr Kwong Wah ChairmanWu Zi Heng Tom Yee Lat ShingWang Kai YuenAng Swee Tian

NOMINATING COMMITTEEWang Kai Yuen ChairmanWu Zi Heng Tom Yee Lat ShingEr Kwong WahAng Swee Tian

ENTERPRISE RISK MANAGEMENT COMMITTEEAng Swee Tian ChairmanWu Zi HengLiu Lian AnTom Yee Lat ShingWang Kai YuenEr Kwong Wah Wang Yu Hang Ma Hong Han Ouyang Chao Mei

STRATEGIC DEVELOPMENT COMMITTEEWu Zi Heng ChairmanLi Yun Peng Tom Yee Lat ShingWang Kai YuenEr Kwong Wah Ang Swee Tian

REGISTERED OFFICE AND BUSINESS CONTACT INFORMATION9 Temasek Boulevard#07-00 Suntec Tower TwoSingapore 038989Telephone: 6885 0888Fascimile: 6336 9006Website: www.cosco.com.sg

COMPANY REGISTRATION NUMBER196100159G

AUDITORSPricewaterhouseCoopers LLP8 Cross Street #17-00PWC BuildingSingapore 048424Partner-in-charge:Soh Kok Leong (since FY2012)

COMPANY SECRETARIESTeo Meng Keong Low Siew Tian

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



MR LI YUN PENG Chairman and Non-Independent andNon-Executive Director

CAPTAIN WU ZI HENGVice Chairman, President and Non-Independent Executive Director

Mr Li Yun Peng was appointed as the Chairman and Non-Independent and Non-Executive Director of the Company with effect from 30 September 2013.

Mr Li started his career on COSCO’s ocean-going vessels as an engineer. After that, he served in COSCO Tianjin as Deputy Manager and General Manager of Human Resources Department, General Manager of Administration Department and Party Secretary Office.

After he joined China Ocean Shipping (Group) Company, Mr Li has taken various posts including Deputy General Manager of Executive Division, Deputy Secretary of Party Disciplinary Inspection Office, General Manager of Supervisory Division, Director of Organisation Division, General Manager of Human Resources Division, Assistant to the President, Party Committee Member, Director of Party Disciplinary Inspection Office and Executive Vice President of COSCO Group.

In July 2013, Mr Li Yun Peng was appointed as a Director of Board and the President of China Ocean Shipping (Group) Company.

With over 30 years’ expertise in the shipping industry, Mr Li has rich experiences in corporate management, internal control and human resources development.

Mr Li Yun Peng received his master’s degree in ship and naval architectural design from Tianjin University. He is a senior engineer.

Captain Wu Zi Heng was appointed Vice Chairman, President and Non-Independent Executive Director of the Company in November 2011.

Captain Wu brings to his current role almost two decades of directorship experience in various functions within the COSCO Group as well as from other organisations. Prior to his current appointment, from July 2008 to November 2011, Captain Wu was Deputy Managing Director of China Ocean Shipping Tally Company. From December 2002 to March 2008, Captain Wu was Chairman of the National Committee of Chinese Seamen and Construction Workers Union. He was Director of COSCO Research and Development Center from September 1999 to December 2002 and Deputy Managing Director of COSCO Xiamen from December 1995 to September 1999.

Prior to that, from November 1993 to December 1995, Captain Wu helped lead COSCO Xiamen as Assistant Managing Director and as Deputy Director of the executive office and passenger shipping department. Captain Wu started his career in COSCO Guangzhou as a deck officer and was a ship’s master until November 1993.

Born in October 1956, Captain Wu started his professional career in July 1975. He graduated from Dalian Maritime University with a master’s degree and is a senior engineer. From September 1978 to August 1982, Captain Wu studied marine navigation in Dalian Maritime University. He is also the Vice Chairman of China Institute of Navigation and an expert on work safety, as accredited by China’s State Administration of Work Safety.

BOARD OF DIRECTORS




MR LIU LIAN ANNon-Independent Executive Director

MR WANG HAI MINNon-Independent and Non-Executive Director

Mr Liu Lian An was appointed Executive Director on 20 February 2012. Currently, he is also Chairman of COSCO Holdings (Singapore) Pte. Ltd.

Born in 1956, Mr Liu graduated from Dalian Maritime University with a Bachelor’s degree in 1982.

Mr Liu joined COSCO Tianjin in 1982. Over the past years, he has worked as Manager of Shipping Department and Vice General Manager of COSCO Corporation (Singapore) Ltd., Vice General Manager, General Manager of Shipping Department, Vice General Manager of COSCO BULK and General Manager of China COSCO Bulk Division.

Mr Wang Hai Min has been appointed as a Non-Independent and Non-Executive Director of the Company with effect from 2 August 2010.

Mr Wang graduated from Shanghai Maritime University and obtained his MBA degree from Fudan University. He joined COSCO in July 1995 and had been the head of planning and cooperation department of the strategic planning division, the deputy general manager of the corporate planning division and the general manager of the strategy and development division of COSCO Container Lines Co. Ltd. In 2010, Mr Wang joined China Ocean Shipping (Group) Co. and became the general manager of the transportation division.

In October 2013, Mr Wang Hai Min was appointed as the deputy managing director in COSCO Pacific Ltd.


BOARD OF DIRECTORS

MR WANG YU HANGNon-Independent and Non-Executive Director

MR MA ZHI HONGNon-Independent and Non-Executive Director

Mr Wang Yu Hang was appointed as a Non-Independent and Non-Executive Director of the Company with effect from 14 July 2011.

Born in October 1961, Mr Wang is a senior engineer with a bachelor’s degree. From September 1979 to September 1983, Mr Wang studied in the marine engineering department of Dalian Maritime University and started his career in Tianjin Ocean Shipping Company (COSCO Tianjin) after graduation. Mr Wang joined COSCO Group head office in June 1987 and held various positions including deputy general manager of the business development department, deputy general manager of the human resources department, general manager of the supervision department and general manager of the human resources department. From February 2000 to June 2011, Mr Wang was the vice president in COSCO America, deputy managing director and managing director in COSCO Shipbuilding Industry Co. Mr Wang became managing director of COSCO Shipyard Group Co. Ltd. in June 2011.

Mr Ma Zhi Hong has been appointed as a Non-Independent and Non-Executive Director of the Company with effect from 2 August 2010.

Mr Ma Zhi Hong, born in March 1957, graduated from the Dalian Maritime University with a doctorate degree. He joined COSCO in July 1979. For more than 30 years, Mr Ma has worked as an engineer on-board ships, chief engineering superintendent of COSCO Container Lines Co., Ltd, vice president of COSCO Bulk Carrier Co., Ltd, assistant president of COSCO Group head office, vice president of COSCO (Hong Kong) Group Ltd and deputy managing director of COSCO Shipyard Group Co., Ltd.



MR TOM YEE LAT SHINGNon-Executive Lead Independent Director

DR WANG KAI YUENNon-Executive Independent Director

Mr Tom Yee Lat Shing was appointed to the Board on 16 November 1993. He is a Non-Executive Lead Independent Director and was last re-elected as Director on 22 April 2013. He was appointed as Lead Independent Director effective from 21 February 2014. He is Chairman of the Company’s Audit Committee and member of the Nominating, Enterprise Risk Management, Remuneration and Strategic Development Committees. Mr Yee is a Singapore Chartered Accountant and was a partner of an international public accounting firm from 1974 to 1989. He has more than 35 years of experience in the field of accounting and auditing and extensive experience in handling major audit assignments of public listed and private companies in various industries, including insurance, manufacturing and retailing. He is currently a consultant. Mr Yee sits on the boards of several Singapore-listed companies. He is a fellow member of the Institute of Chartered Accountants in Australia, CPA (Australia) and Institute of Singapore Chartered Accountants and an associate member of the Institute of Chartered Secretaries and Administrators. He is also a fellow member of the Singapore Institute of Directors.

Dr Wang Kai Yuen was appointed as a Non-Executive Independent Director on 2 May 2001. He chairs the Nominating Committee and is a member of the Audit, Enterprise Risk Management, Remuneration and Strategic Development Committee. Dr Wang served as a Member of Parliament for the Bukit Timah Constituency from December 1984 until April 2006. He was the Chairman of Feedback Unit from 2002 until his retirement from politics. He retired as the Centre Manager of Fuji Xerox Singapore Software Centre in December 2009. Dr Wang also holds directorships at ComfortDelgro Group Ltd, CAO (Singapore) Corporation Ltd, Ezion Holdings Ltd, SuperBowl Holdings Ltd, Matex International Ltd, and others.

He graduated from the University of Singapore with a First Class Honours degree in Electrical and Electronics engineering.

Dr Wang holds a Master of Science in Electrical Engineering, a Master of Science in Industrial Engineering and a PhD in Engineering from Stanford University, USA. He received a Friend of Labour Award in 1988 for his contributions to the Singapore labour movement.



MR ER KWONG WAHNon-Executive Independent Director

MR ANG SWEE TIANNon-Executive Independent Director

Mr Er Kwong Wah was appointed as a Non-Executive Independent Director on 20 December 2002. He chairs the Remuneration Committee and is a member of the Audit, Nominating, Enterprise Risk Management and Strategic Development Committee. A Colombo Plan and Bank of Tokyo Scholar, Mr Er obtained a first class honours degree in Electrical Engineering at the University of Toronto, Canada, in 1970 and an MBA from the Manchester Business School of the University of Manchester, UK in 1978.

Mr Er spent 27 years in the Singapore Civil Service and served in various departments including the Ministry of Defence, Public Service Commission, Ministry of Finance, Ministry of Education and Ministry of Community Development. He was Permanent Secretary in the Ministry of Education from 1987-1994, and then in the Ministry of Community Development until his retirement in 1998.

Currently, he is an Executive Director of the East Asia Institute of Management, as well as an Independent Director on the Boards of several public listed companies.

For his outstanding service in the Government and in the community, Mr Er was awarded the PPA (E) or Public Administration Medal (Gold), the BBM (Public Service Star) and the PBM (Public Service Medal). In 1991, the Government of France conferred him a National Honour with the award of Commandeur dans l’Ordre des Palmes Academiques.

Mr Ang Swee Tian is a Non-Executive Independent Director of COSCO Corporation (Singapore) Limited. He chairs the Enterprise Risk Management Committee and is a member of the Audit, Remuneration, Nominating and Strategic Development Committees.

Mr Ang was the President of Singapore Exchange Ltd (“SGX”) from 1999 to 2005 during which he played an active role in successfully promoting SGX as a preferred listing and capital raising venue for Chinese enterprises. Mr Ang also played a pivotal role in establishing Asia’s first financial futures exchange, the Singapore International Monetary Exchange (“SIMEX”) in Singapore in 1984 and was instrumental to establishing SGX AsiaClear which started offering OTC clearing facility in 2006. Following his retirement in January 2006, Mr Ang served as Senior Adviser to SGX until December 2007.

In March 2007, Mr Ang became the first person from an Asian Exchange to be inducted into the Futures Industry Association’s Futures Hall of Fame which was established to honour and recognise outstanding individuals for their contributions to the global futures and options industry. Mr Ang graduated from Nanyang University of Singapore with a First-Class Honours Degree in Accountancy in 1970. He was conferred a Master Degree in Business Administration with distinction by the Northwestern University in 1973.

BOARD OF DIRECTORS



DIRECTOR

Li Yun Peng

Wu Zi Heng

Liu Lian An

Wang Hai Min

Wang Yu Hang

Ma Zhi Hong

Tom Yee Lat Shing

Wang Kai Yuen

Er Kwong Wah

Ang Swee Tian

FURTHER INFORMATION ON BOARD OF DIRECTORS

The list of current directorships in other listed companies held by the respective Directors are as follows:

CURRENT DIRECTORSHIP IN OTHER LISTED COMPANIES

Nil

Nil

Nil

Nil




CAPTAIN WU ZI HENG

Vice Chairman and President

Captain Wu Zi Heng was appointed Vice Chairman,

President and Non-Independent Executive Director

of the Company in November 2011.

Captain Wu brings to his current role almost two

decades of directorship experience in various

functions within the COSCO Group as well as from

other organisations. Prior to his current appointment,

from July 2008 to November 2011, Captain Wu was

Deputy Managing Director of China Ocean Shipping

Tally Company. From December 2002 to March 2008,

Captain Wu was Chairman of the National Committee

of Chinese Seamen and Construction Workers Union.

He was Director of COSCO Research and Development

Center from September 1999 to December 2002 and

Deputy Managing Director of COSCO Xiamen from

December 1995 to September 1999.

Prior to that, from November 1993 to December 1995,

Captain Wu helped lead COSCO Xiamen as Assistant

Managing Director and as Deputy Director of the

executive office and passenger shipping department.

Captain Wu started his career in COSCO Guangzhou as

a deck officer and was a ship’s master until November

1993.

Born in October 1956, Captain Wu started his

professional career in July 1975. He graduated from

Dalian Maritime University with a master’s degree and

is a senior engineer. From September 1978 to August

1982, Captain Wu studied marine navigation in Dalian

Maritime University. He is also the Vice Chairman of

China Institute of Navigation and an expert on work

safety, as accredited by China’s State Administration

of Work Safety.

CAPTAIN WU ZI HENGVice Chairman and President

MR LI MANVice President

MR MA HONG HANChief Financial Officer

MR WONG MENG YUNFinancial Controller

KEY MANAGEMENT

YNAGEMENT



MR MA HONG HAN

Chief Financial Officer

Mr Ma Hong Han was appointed Chief Financial

Officer of the Company in August 2012. He has

extensive experience in finance and corporate

financial management.

From April 1994 to November 1996, Mr Ma worked in

Accounting Department, Finance Division of China

Ocean Shipping (Group) Company. From November

1996 to February 2002, Mr Ma was an assistant

manager of Overseas Financial Management

Department, Finance Division of China Ocean

Shipping (Group) Company.

From February 2002 to November 2006, Mr Ma was

Deputy General Manager and then General Manager

of Finance Division of COSCO Americas Inc.

From December 2006 to July 2012, Mr Ma was Deputy

General Manager of Finance Division, China Ocean

Shipping (Group) Company.

Mr Ma graduated from Renmin University of China in

July 1994 with a Bachelor’s Degree of Economics.

MR LI MAN

Vice President

Mr Li Man has rich knowledge and experience in

corporate management and business operation.

From July 1993 to Oct 1997, Mr Li served as a manager

in Secretary Division, Executive Office of Tianjin Ocean

Shipping Company. From October 1997 to August

1999, Mr Li was Deputy General Manager of Qingdao

AIER Food Co. Ltd. From August 1999 to January

2001, he was Deputy General Manager of Executive

Office, COSCO Bulk Carrier Co. Ltd. From January 2001

to September 2005, Mr Li served as Deputy General

Manager and General Manager of Tianjin Shore-

Based Industry Company, COSCO Bulk Carrier Co. Ltd.

From September 2005 to August 2007, Mr Li was

Deputy General Manager of Executive Office, China

Ocean Shipping (Group) Company. From August

2007 to August 2009, Mr Li served as Vice Governor

in Yanbian Korean Autonomous Prefecture, Jilin

Province, P.R. China. From October 2009 to October

2012, he was Executive Vice President of BOAO

COSCO Co. Ltd.

Mr Li graduated from Dalian Maritime University in

July 1993 with a Bachelor’s Degree in Engineering. He

received his MBA in July 2002 and Ph.D. in Business

Administration and Enterprise Management in May

2009 from Nankai University.

MR WONG MENG YUN

Financial Controller

Mr Wong Meng Yun has more than 30 years of

professional and leadership experience in financial

management, corporate finance, internal and external

audit and treasury management of which 12 years

were in a senior regional management position with

a leading US-listed software company prior to his

joining the Group in July 2008.

He graduated from the University of Singapore

with a Bachelor of Accountancy and is a Fellow of

the Association of Chartered Certified Accountants,

CPA Australia, the Institute of Singapore Chartered

Accountants, the Chartered Institute of Arbitrators,

the Institute of Arbitrators and Mediators Australia

and the Singapore Institute of Arbitrators. He is

a Certified Treasury Professional (CTP) with the

Association for Financial Professionals, a Certified

Internal Auditor (CIA) with certification in control self-

assessment (CCSA) and a Certified Financial Services

Auditor (CFSA) with the Institute of Internal Auditors,

as well as, a Certified Information Systems Auditor

(CISA) and a Certified Information Security Manager

(CISM) with the Information Systems Audit and

Control Association (ISACA).

He speaks in public seminars organised by the Institute

of Internal Auditors, Singapore and the Institute of

Singapore Chartered Accountants on topics related

to risk management and internal controls.


Corporate Governance and TransparencyCorporate Governance and Transparency


As a well-known, public-listed corporation and a

global marine conglomerate, COSCO Corporation

recognises that an active Investor Relations (IR)

strategy is essential to meet investor expectations

and sustain long-term growth and investor

confidence.

Driven by strong and accountable leadership, we

practise effective corporate governance, regular

performance reporting and clear and timely investor

communications through our investor relations

programme. We believe that sound, frequent and

substantive corporate disclosure will enable fair and

informed assessment of our corporate performance

and business prospects.

Based on a sound business model, flexible and far-

sighted management, and a significant market

presence, our regular investor relations engagement

has generated significant investment interest in our

company and stock. This interest has prompted our

inclusion in the FTSE ST China Index since January

2009, and in the FTSE China Top Index since July

2009. These indices were created to reflect the

Source: Bloomberg

increasing representation of China-based companies

on the Singapore stock market and offer investors

simple vehicles through which they can participate

in the potential growth of highly liquid, locally-listed

China companies.

We are also a component of the Bloomberg World

Shipbuilding Index and Bloomberg Asia Pacific

Shipbuilding Index.

ENGAGING INVESTORS

Broadly-followed and widely-traded, COSCO’s stock

is supported by timely and pertinent corporate

disclosure. Over the year in review, we undertook

announcements covering newly-secured contracts,

vessel completion and deliveries, quarterly results,

growth strategies, operational commentaries and

developments, and our business outlook.

Beyond stock exchange announcements, we engage

the media in news reports on a variety of platforms

such as newswires, print and broadcast. We directly

reach out to the general public and shareholders

through roadshows, investor meetings, and Annual

INVESTOR RELATIONS


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

FY2013

3100

3000

3400

3300

3200

1,000

0,950

0,850

0,900

0,750

0,800

0,700

0,650

0.755

3167,43

Last PriceCOS SP Equity (R1) 0.755 unchFSSTI Index (L1) 3167.43 +14.14


MAJOR INVESTOR RELATIONS EVENTS IN 2013

COMPANY NAME OF ANALYST

CIMB Siew Khee Lim

Credit Suisse Gerald Wong

Daiwa Securities Adrian Loh

DBS Vickers Pei Hwa Ho

Deutsche Bank Kevin Chong

Goldman Sachs Miang Chuen Koh

HSBC Neel Sinha

JP Morgan Ajay Narayan Mirchandani

Macquarie Somesh Kumar Agarwal

Maybank Kim Eng Chee Keong Yeak

Morgan Stanley Andy Meng

OCBC Low Pei Han

Religare Vincent Fernando

UBS Cheryl Lee

UOB Kay Hian Nancy Wei

ANALYST COVERAGEand Extraordinary General Meetings. In addition,

we conduct results briefings with analysts every

financial quarter. Last but not least, we meet regularly

with the investment community of stock brokerages,

banks and other financial institutions to discuss the

latest COSCO Corporation corporate developments.

In Financial Year 2013, we participated in

analyst meetings and investor conferences. As

a measurement of our commitment, our senior

management participates regularly in them.

Through these events, we were able to interact

with bankers, research analysts, fund managers and

stockbrokers. This occurred almost every month

throughout the year, giving this audience, and

through them, the wider investment community,

frequent opportunities to engage, analyse and keep

abreast of changes within COSCO.

DATE

8 January 201322 January 201321 February 20135 March 201323 March 201322 April 20133 May 20136 June 20131 August 201328 August 201312 September 201317 September 20135 November 201313 November 2013

ORGANISER

DBS VickersCredit SuisseCOSCO CorporationBAMLSIASCOSCO Corporation COSCO CorporationCITI COSCO CorporationMacquarieGoldman SachsUBSCOSCO CorporationMorgan Stanley

THEME

Pulse of Asia 2013Offshore & Marine Corporate DayFY2012 Full Year Results BriefingASEAN Star Conference 2013Corporate Profile SeminarAnnual General MeetingFY2013 1st Quarter Results BriefingASEAN Investor ConferenceFY2013 2nd Quarter Results BriefingASEAN ConferenceAnnual Global Commodities ConferenceASEAN Conference 2013FY2013 3rd Quarter Results BriefingTwelfth Annual Asia Pacific Summit



INTRODUCTION

Risk management and internal controls have been

the main focus of the various objectives of the

Corporate Governance Council (“CG Council”) to raise

the standard of corporate governance in its recent

Code of Corporate Governance (“CG Code”) revision.

In the 2012 CG Code, the CG Council introduces the

revised Principle 11 to focus on Risk Management

and Internal Controls. Immediately on 10 May 2012,

a Risk Governance Guidance for Listed Boards was

also released by CG Council. These efforts by CG

Council are aiming at providing detail guidance to

listed companies’ board and management on risk

management which aims to ultimately contribute to

better and sustained value to investors, raise investor

confidence and enhance Singapore’s reputation as a

leading and trusted international financial center.

At COSCO Corporation (Singapore) Limited, the

Board of Directors (“Board”) believes that good

corporate governance is an effectual balance of

promoting the long-term success of the Company

and providing accountability and control systems

which are symmetric with risks involved. It is

essential to facilitate effective, entrepreneurial and

prudent management.

The Board has delegated the risk management

and internal controls of the Group to an Enterprise

Risk Management Committee (“ERMC”). In the

ever changing business environment, the risk

management process of the Group is constantly

reviewed and updated by the ERMC. The risk

management process is aiming to identifying

the risk factors that may have a material impact

on the Group’s operation, and to manage them

appropriately.

The Company has adopted an Enterprise Risk

Management Policy in August 2012 aims to:

and process in managing COSCO’s risks;

managing, monitoring and mitigating COSCO’s

risks; and

accountabilities and decision making processes.

With the above policy, the risks identification and

management have been carried out and placed

under the purview of the ERMC.

The material risk factors identified by the Group’s

risk management process are set out below. Each of

these could have a material and adverse impact on

the Group, including its business, financial condition,

results of operation and prospect. These risk factors

have been divided into four categories: external;

internal; execution and financial.

RISK MANAGEMENT PROCESS

The ERMC has delegated the day-to-day management

of risk within the Group to the Risk Management

Committee (“RMC”) of each of its operating

subsidiaries and each RMC comprises senior

management staff of the respective division within

the operating subsidiaries.

The ERMC also engages Deloitte & Touche Enterprise

Risk Services Pte Ltd to perform strategic risk profiling

in the Group’s major subsidiaries. As the Group’s

enterprise risk management program is a long-term

initiative that calls for commitment and inputs from

various stakeholders, the enterprise risk management

policies have been implemented in phases with

guidance from Deloitte & Touche Enterprise Risk

Services Pte Ltd in a systematic manner and coupled

with constant education and training of local

management staff and risk owners.

The Board currently conducts periodical reviews of the

risks and it identifies the key risks for the year ahead

to stay current with the ever-changing operating

environment. As part of this review, operational

and strategic risks are proposed as key risks by the

RMC, based on inputs from regions, function heads

and business leaders. The risk factors set out below

reflect the key risks identified. Each of the key risks is

assigned to the Chairman of the RMC at the operating

subsidiaries who proposes a level of risk the Group

is willing to take and develops appropriate action

plans to mitigate the risks. All risk mitigation plans are

reviewed and agreed by the Board.

RISK MANAGEMENT



Once risk mitigation plans are agreed, each operating

subsidiary is asked to carry out a self-assessment

exercise which requires all operating units to confirm

compliance with the Group’s policies and also to

confirm that key operational controls are in place

and working effectively. The results of this exercise,

together with a review of specific plans for strategic

risks, enable the Board to confirm that the business

has a sound risk-based framework of internal controls.

The Group Auditors, internal and external, provide

independent reassurance that the standard of risk

management, compliance and control meet the

needs of the business. Group Audit status reports

are discussed with ERMC, Audit Committee and

Board on a regular basis. The Board also recognises

that the risks facing the business may sometimes

change over short time periods. Every quarter, each

operating subsidiary provides an update on new and

emerging risks and reports to update the Group’s

risks are provided to the ERMC, Audit Committee and

the Board.

The Board concurred with the opinions of its sub-

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

adequacy of the internal controls system (of which

risk management is one of its crucial segments) to

addressing its financial, operational, compliance and

information technology risks in meeting the current

scope of the Group’s business operations.

It is not possible and practical to identify and

anticipate every risk that may impact the Group.

While the Group’s risk management process attempts

to identify and manage (where possible) the key risks

it faces, no such process can totally eliminate risks

or guarantee that every risk is identified, or, that it is

possible, economically viable, or prudent to manage

such risks.

Consequently, there can never be an absolute

assurance against the Group failing to achieve its

objectives or a material loss arising. Some material

risks may not be known, others, even though currently

deemed as immaterial, could become material and

new risks may also emerge.

The Board affirms its overall responsibility on risk

management and to review the adequacy and

integrity of the control system on an annual basis.

1. EXTERNAL RISKS

The Group is subject to a number of external risks. The

Group defines external risks as those that stem from

factors which are mainly outside of its control. These

risks will often arise from the nature of the Group and

the industry in which it operates.

GLOBAL ECONOMIC DOWNTURN AND UNCERTAINTIES

The global capital and credit markets have been

experiencing periods of extreme volatility and

disruption. The global economic uncertainties,

concerns over recession, inflation or deflation, energy

costs, geopolitical issues, commodity prices and

the availability and cost of credit, have contributed

to unprecedented levels of market volatility and

diminished expectations for the global economy

and the capital and consumer markets. These factors,

combined with others, precipitated a severe global

economic downturn, the full extent of which remains

to be seen.

The Group is susceptible to the cyclical world-wide

demand and pricing in its industries, which are highly

dependent upon global economic condition. The

uncertainties are likely to result in a decrease in the

overall demand for vessels and risks of default by the

ship-owners in taking delivery of the vessels upon

completion.

LEGAL, REGULATORY, POLITICAL AND SOCIETAL RISKS

The Group is at risk from significant and rapid change

in the legal systems, regulatory controls, custom and

practices in the regions in which it operates.

Political uncertainties, regime change and change

in society, including increased scrutiny of the

Group, its businesses or its industry, for example by

governmental and non-governmental organisations

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

material legal and regulatory change, and changes

to custom and practices. These affect a wide range of



areas and are expected to have material and

adverse impacts on the performance and financial

condition of the Group if they are not pre-empted

appropriately.

COMPETITION

The ship building, ship repair, offshore marine

engineering and dry bulk shipping industries

are highly competitive. The primary bases for

competition in the ship repair, ship building and

offshore marine engineering industries are matching

of the customers’ demands with the capabilities

and capacity of a shipyard, the type and quality of

vessel, price, delivery schedule/availability and type

of equipment.

The Group expects to face increased competition

from existing competitors and new entrants into

these industries in the future. In the event that the

Group is unable to continually upgrade its shipyard

capabilities, the Group’s business, financial condition,

results of operation and prospect may be adversely

affected.

Being a relatively new entrant in the offshore marine

engineering industry, the Group expects to incur

higher costs during execution of offshore marine

engineering projects on new product types. The

Group may face stiff competition, especially under

this era of global uncertainties whereby some

players have adopted aggressive pricing strategy in

order to secure new orders.

Increased competition in the markets have caused

contract values of new ship building contracts to

deteriorate and these poised adverse impact to the

Group’s performance and financial condition.

CUSTOMER DEMAND

Customer demand for the Group’s services and

expertise is expected to increase to a higher level

of expectation. The Group expects greater scrutiny

by customers before they take delivery of vessels.

This will, inadvertently, increase the cost of building

the vessel. A failure to recover higher costs could

materially and adversely impact the Group’s

performance.

The Group has introduced enhanced modern

shipbuilding management system software to better

manage and to mitigate the risks of late ship-built

delivery and quality. A “COSCO Shipyard CIMS System

Maintenance and Operation Regulation” has been

developed and updated to ensure common practices,

smooth and stable operation throughout the various

shipyard subsidiaries.

The Group is also exposed to counterparty risk from

customers that could result in financial losses should

those counterparties become unable to meet their

obligations to the Group.

FLUCTUATIONS IN THE BALTIC DRY INDEX (“BDI”)

The BDI is a benchmark of the dry bulk shipping

industry and is an indication of the price of moving

major raw materials by sea. It is generally recognised

as an economic indicator of the movement of the

volume of global trade.

An increase in the BDI is generally considered to

indicate an increase in demand for dry bulk shipping,

whereas a decrease in the BDI is generally considered

to indicate a decrease in demand for dry bulk

shipping, and the capital expenditures of dry bulk

shipping companies are usually driven mainly by the

BDI outlook.

For recent years, the dry bulk shipping index has

recorded historical low as the shipping industry is

experiencing excess capacity leading to lower charter

rates. The fluctuations in the BDI result in an uncertain

outlook for the dry bulk shipping industry, which

typically has an impact on vessel owners’ willingness

to place new orders for bulk carrier vessels, which in

turn affects the Group’s services and products.

RAW MATERIALS

The Group depends upon the availability, quality

and cost of steel and steel-plates from around the

world, which exposes it to price, quality and supply

fluctuations. Although the Group will take measures

to protect against the short-term impacts of these

fluctuations and of the concentration of supply, there

is no guarantee that these will be effective. A failure

RISK MANAGEMENT



to recover higher costs of shortfalls in availability

could materially and adversely affect the Group’s

performance.

The Group manages this risk through constant

monitoring of the markets in which it operates and

continuous review of capital expenditure programs to

ensure they reflect market conditions. A continuous

focus on operating expenditure is also an important

method of mitigating this risk.

The Group has developed uniform processes and

procedures with applications such as SAP to manage

procurement of raw materials. The Group also has

developed strategic alliances with certain selected

major steel mills and other leading companies on

the purchase of steel supply, bunker, marine valves,

boilers, engines and other related equipment to

mitigate risks in such supplies.

2. INTERNAL RISKS

Internal risks are those arising from factors primarily

within the Group’s control, including from the Group

structure and processes.

INFORMATION TECHNOLOGY INFRASTRUCTURE

The Group depends on accurate, timely information

and numerical data from key software application

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

Any disruption caused by failings in these systems,

of underlying equipment or of communication

networks could delay or otherwise impact the Group’s

day- to-day business and decision making and have

materially effects on the Group’s performance.

OPERATIONAL PERFORMANCE AND PROJECT DELIVERY

Failure to meet production targets can result in

increased unit costs, which are pronounced at

operations with higher levels of fixed costs. Unit

costs may exceed forecasts, adversely affecting

performance and the results of operations.

Failure to meet project delivery times and costs could

have a negative effect on operational performance

and lead to increased costs or reductions in revenue

and profitability.

A number of strategies have been implemented

to mitigate these risks including management

oversight of operating performance and project

delivery through regular executive management

briefings, increased effectiveness of procurement

initiatives to reduce unit costs and improve delivery

of projects.

The Group has also established an enterprise

technology standards system under the guidance of

Singaporean and South Korean experts to enhance

the basic design and detailed design of ships and

marine engineering products.

EMPLOYEES

The Group depends on the continued contributions

of its executive officers and employees, both

individually and as a group. While the Group reviews

its people policies on a regular basis and invests

significant resources in training and development

and recognising individuals with high potential,

there can be no guarantee that it will be able to

attract, develop and retain these individuals at an

appropriate cost and ensure that the capabilities of

the Group’s employees meets its business needs. Any

failure to do so may affect the Group’s performance.

The ability to recruit, develop and retain appropriate

skills for the Group is made difficult by competition

for skilled labor. The failure to retain skilled employees

or to recruit new staff may lead to increased costs,

interruptions to existing operations and delay in

new projects.

A number of strategies are implemented to mitigate

this risk including attention to an appropriate suite

of reward and benefit structures and ongoing

refinement of the Group as an attractive employee

proposition.



RISK MANAGEMENT

MANAGING COST OF WAGES THROUGH

OUTSOURCING

Ship repair is a labor-intensive industry and an

increase in wages will have a significant impact

on the Group. The Group had been encountering

increases in labor cost. Other than having a

permanent work force of skilled employees on

the payroll, the Group has adopted a contract

hiring system, unskilled manpower is hired on a

contractual basis and paid according to projects

undertaken. While the Group has benefited from

the decrease in fixed costs, it is a risk from failure

by these third parties to deliver on their contractual

commitments, which may adversely impact its’

reputation and performance.

3. EXECUTION RISKS

Execution risks arise from the implementation

of the Group’s strategy and its change and

investments program, which aim to enhance long

term shareholders’ value.

INVESTMENT, ACQUISITION AND DISPOSALS

Risks inherent in the investments, acquisition and

disposals may have an adverse impact on the

Group’s business or financial results.

From time to time, the Group may make

investments, acquisitions and disposals of

businesses. While these are carefully, planned,

the rationale for them may be based on incorrect

assumptions or conclusions and they may not

realise the anticipated or unintended effects.

Additionally, while the Group seeks protection,

for example through warranties and indemnities,

significant liabilities may not be identified in due

diligence or come to light after the warranty or

indemnity periods. These factors may materially

and adversely impact the performance or financial

condition of the Group.

4. FINANCIAL RISKS

The Group is exposed to market risks such as

interest rate and exchange rate risks arising from

its international business. The PRC government

continuous property cooling off measures and

shadow banking activities have caused liquidity

crunch and forced commercial banks to tighten their

lending policy. As a result, borrowing costs surged

across the board.

At the same time, the appreciation of value of

Renminbi against the US dollar and other major

currencies have also poised uncertainties to the

Group’s operations.

MANAGING CURRENCY FLUCTUATION

The main financial risks facing the Group are

fluctuations in foreign currency, interest rate risk,

availability of financing to meet the Group’s needs

and default by counterparties and customers. Any

of these financial risks may materially and adversely

impact the Group’s business, financial condition,

results of operation and prospect.

The Group has established a management system

to address financial risks. Fluctuations in currency

exchange rates are closely monitored. The Group at

its discretion may employ simple forward hedging

on a systematic approach to meet its financial

obligations and both foreign and local currencies

needs.

The Group does not engage in speculative foreign

investments. Strict compliance controls are in place

to ensure that procedures are adhered to and

management decisions are not made unilaterally.

The Group also engaged the guidance of the holding

company in managing its foreign exchange risk

exposure. The holding company has an experienced

Treasury operations team responsible for managing

the funding requirements and liquidity risks.

A detailed disclosure of the Group’s financial risks

can be found on pages 131 to 138 in the Notes to the

Financial Statements.



Here at COSCO, we have always believed that

innovation is an integral part of industry success.

While relatively new to the offshore marine

engineering field, our commitment towards

innovation in this burgeoning sector is unwavering.

We also employ the latest technology in our

operations, which enables us to better manage

and deploy our resources.

Our COSCO Shipyard Technology Centre, with

bases in Group headquarters and various shipyards

has a combined staff of over 1,600. Based in Dalian,

the Technology Centre in Group headquarters

primarily engages in research and development of

oil and gas-related products and technologies. It

also undertakes design of specialised vessels and

marine engineering products. Meanwhile, our R&D

Centres in Nantong and Qidong shipyards mainly

conduct design of offshore marine engineering

projects such as cylindrical rigs, semi-submersible

rigs, FPSOs and wind turbine installation vessels.

Our supporting enterprises work in tandem with

the shipyards and are tasked to carry out product

design of complementary products such as the

jack-up drilling platform’s lift system and single-

point mooring systems.

With committed research and development, our

goal is to develop and patent new product types

and build new or industry-leading product models.

This could be in the areas of bulk carriers or offshore

marine engineering vessels. These achievements

will augment our core operations and allow us to

offer that much more value-add in our services.

With increased expertise, we seek to develop more

efficient and reliable rigs, bulk carriers, car carriers,

heavy lift vessels, wind turbines installation vessels,

shuttle tankers and other ship types.

LOOKING BACK AT 2013

The beginning of the year saw COSCO’s receipt

of AIP certification from Lloyd’s Register for its

self-designed 81,000 DWT dual-fuel bulk carrier.

Considered to be environment-friendly, it had

reduced carbon dioxide (CO2) emission by 10%

to 20% and nitric oxide and nitrogen dioxide

(NOX) by 90%; hence, fulfilling the emission

standard required by the International Maritime

Organisation (IMO), International Grains Council

(IGC), International Code for Ships using Gas or

other Low Flash-Point Fuels (IGF Code) and other

related regulatory standards. This successful

project springs from the collaboration between

COSCO’s ship design center, Golden Union, the ship

owner and Lloyd’s Register.

RESEARCH AND DEVELOPMENT

Ins ide COSCO and Corporate Ci t izenship


RESEARCH AND DEVELOPMENT

In February 2013, Nantong Shipyard was awarded

the “Offshore Renewable Award”, a category

under the “Offshore Support Journal Award”,

for the Sea Installer, a wind turbine installation

vessel which it designed and built. Not losing

momentum, in September, Nantong Shipyard

was listed as a national, post-doctoral research

centre by the Ministry of Human Resources and

Social Security and the National Post-Doctoral

Management Committee.

For its research and development, Dalian

Shipyard received 11 national patents in July.

On the same trail of success, Shanghai Shipyard

secured an impressive 18 national patents the

following month.

Built by COSCO (Qidong) Shipyard, the ultra

deep-water cylindrical offshore drilling rig,

Sevan Louisiana, was successfully delivered to

its Norwegian owner, Sevan Drilling in October

2013. This, in fact, is part of the duly-called

“Sevan Series” of four rigs. We have developed

and delivered two in recent years; the Sevan

Louisiana is the third.

These state-of-the-art rigs had drilled in the

waters of Brazil for Petrobras, Brazil’s largest

and the world’s 7th biggest energy company.

Employing their capabilities, they were

instrumental in discovering large offshore oil

and gas fields.

Aside from the Sevan rigs, Zhoushan shipyard

has designed and built a 152,000 DWT shuttle

tanker for Knutsen OAS Shipping, a Norwegian

integrated shipping company. It functions as

a crude oil transporter at the oil platform and

port terminal in between the North Sea and

the Brazilian Sea. Meeting major oil companies

Petrobras and Statoil’s requirements, it has

centralised cargo control and ballast treatment

systems and a fatigue life of 25 years.

Over 2013, COSCO has also started design work

for two module carriers. The first for COSCO, its

double-deck is accessible and of an “all-pass” type.

It is fitted with sliding and lifting equipment for

moving and loading heavy cargo and dangerous

goods as well as to cater to offshore platform

supply demands. This ship is designed to operate

in winter conditions of up to -39 degrees Celsius

and meets 1A ice-class sailing requirements.

Other achievements include the development

of a cylindrical FPSO, an industry first for China

in the area of Engineering, Procurement and

Construction (EPC) vessels. This vessel has a

diameter of 78 metres and a depth of 32 metres.

We also designed a jack-up drilling platform lift

system for a 400 feet jack-up drilling platform.

MOVING AHEAD

Going into the new year, COSCO continues to

push forward. We will increase our R&D efforts,

invest in new technology and equipment, and

widen our skill base, especially in offshore marine

engineering, thus maintaining and sharpening our

edge further in the marine industry.



HUMAN RESOURCES

FOSTERING HUMAN CAPITALHuman capital is an indispensable aspect of a company. Key to any organisation, it concerns the entire operations and sustainability of the business. Through a specially tailored comprehensive HR strategy, we endeavour to nurture growth and maximise the potential of our people; enriching, motivating and empowering them in their personal and professional development.

COSCO focuses on fostering a skilled and capable talent pool that will shape our growth and propel the Group forward in achieving our long-term goals. Carefully structured programmes encompassing recruitment, training, incentives, compensation and benefits are put in place to equip our people with the right skills and competencies to manage and execute their job activities.

INVESTING IN OUR PEOPLE – RECRUITMENT AND TRAININGRecognising that people form the foundation of the Company, COSCO anchors our recruitment and training policy on building a quality workforce that is strong from the core. We recruit new talents by way of a competitive remuneration and reward scheme, regularly reviewing and appraising their performance.

Employing top graduates from highly regarded Chinese universities, we send them for management trainee courses in preparation for future management roles. We seek to track their progress, assisting them in achieving their career and personal goals while they grow with the Company.

HUMAN RESOURCES AND WORKPLACE SAFETY

We are advocates of continuous learning. We believe that having a strong and effective team trained with relevant skills and capabilities will effectively aid us in our advancement in the marine industry. We send our employees on courses related to international standards and safety measures; technical, engineering as well as management skills. Technical staff are also required to pass a course before they commence work and are assessed every year to ensure their skills meet the necessary standards. As part of our training programme, COSCO has organised training courses for our senior technical management staff to strengthen and reinforce their knowledge and expertise.

VALUING OUR EMPLOYEES – REWARD AND RETENTIONCOSCO values and appreciates each and every employee for his or her contribution to the Group. Their efforts and achievements are also reflective of their sense of belonging to this company. Through the performance and achievement appraisal system, we facilitate in aligning their work goals with personal career development and remuneration. Nurturing a culture of flexibility and mutual respect is also one way we instill a sense of belonging in our people. Through open communication channels at all levels, there is greater understanding, and employees are also empowered with greater responsibilities in their decision-making, thus achieving greater cohesiveness and efficiency within the Group.

OUTLOOKEntering a new year, COSCO will continue with the effective management of our workforce of contract and in-house workers, providing them with priorities and benefits to maintain a harmonious balance that will enable us to achieve optimal performance.



HUMAN RESOURCES AND WORKPLACE SAFETY

WORKPLACE SAFETY

WORKPLACE SAFETY AWARENESSCommitted to ensuring the safety of all our employees and stakeholders, COSCO has an established system of safety regimes and protocols aimed at inculcating a strong culture of safety in the workplace. All staff have to undergo workplace safety training courses specially designed to inform and educate them about potential workplace dangers and the precautionary measures to take. To ensure fundamental levels of proficiency and understanding are in place, tests are also conducted on a regular basis.

In June 2013, all employees and sub-contractor workers across COSCO Shipyard Group participated in a month-long safety campaign. Seminars, workshops, exercises and large-scale drills were carried out at all shipyards.

UPHOLDING SAFETY STANDARDSBesides the activities conducted during our Safety Month in June, we also carry out regular safety education and training around the year. Weekly mandatory training sessions are held to discuss the latest safety rules and regulations. Included in these training sessions are live demonstrations of safety measures as well as an assessment test to evaluate participants’ competencies and proficiencies.

We have also implemented a grading system in the safety management officers’ course, providing an additional avenue for them to monitor and manage the safety of their individual shipyards. COSCO also appoints external parties to evaluate safety standards amongst various departments in COSCO, and award certifications in the areas of work environment quality and workplace safety.

ENVIRONMENTAL SAFETYAs COSCO owns one of the largest ship repair, ship building and offshore marine engineering operations in China, we are conscious of the environmental impact of our work. To this end, we place strong emphasis on environmental awareness and safety in our business management.

Our Safety Committee, established since 2009, conducts regular site visits to all our shipyards to

ensure that safety requirements are strictly adhered to. We also implement action plans that will minimise detrimental effects as well as protect the environment. All equipment and tools are duly checked and sent for monthly maintenance while upgrades to facilities and equipment are also carried out regularly.

MEDICAL WELFARE BENEFITSWe adopt a comprehensive approach in ensuring the health of our workforce. Besides having a broad spectrum of supporting operations which includes on-site medical facilities at all shipyards, we also conduct annual health checks and provide welfare benefits such as medical insurance, hospitalisation and dental benefits. A people-oriented company, COSCO is steadfast in taking care of our people as we believe that having healthy employees benefits a company’s productivity and growth. We will continue providing a safe and healthy work environment for all.

2014: MEASURES AND OBJECTIVESFor 2014, we will keep at inculcating the COSCO “safety first” frame of mind, highlighting workplace safety improvements and maintaining our consistent track record for safety. As new equipment is brought into our yards, it is necessary to educate our workers on the relevant usage techniques, safety procedures and regulations through training sessions and programmes. We will also be retaining our reward scheme to cultivate workplace safety and deter hazardous on-site activities.

Looking beyond safety in our shipyards, we will continue with our on-ship safety regime for our bulk carrier fleet, sending the crew for regular training on the prevention of piracy, smuggling, pollution, fire, collision, personal injury and typhoon disaster management.

Over the years, COSCO has maintained a good track record for the provision of safety, security and stability. Moving forward, we seek to boost our ship tracking, monitoring and inspection operations, and information exchange amongst all onshore and offshore departments and crew on our vessels. Through this, we will be able to attain deeper understanding of operational procedures that will reduce the risk of workplace accidents and allow for greater operational efficiency.



OVERVIEW

At COSCO, we hold an overarching aim to build a

socially responsible corporate culture that addresses

social, environmental and ethical concerns. Towards

that end, we have adopted industry best practices

throughout our organisation. Through such actions

we also use our standing as a leading enterprise to

influence standards on corporate social engagement

in today’s world. In the long term, such alignment

of business strategy and operations with socially

responsible values will generate sustainable benefits

for all our stakeholders, including shareholders,

business partners, employees, customers, suppliers,

communities as well as the environment.

SOCIAL CONTRIBUTIONS

COSCO forges strong and positive relationships,

reaching out to various needy groups within the

communities we serve in. We actively engage

in various charity events and activities, taking

on multiple roles to serve diverse local needs.

Promoting the spirit of volunteerism, we encourage

our employees to support worthy causes and to give

back to the community.

SINGAPORE

2013 marks our 7th consecutive year participating in

the Yellow Ribbon Project, underlining our support

and commitment to this programme. During the year,

we sponsored S$10,000 at its 10th Anniversary Gala

Dinner on 20 July 2013. The Yellow Ribbon Project is

set up to offer ex-offenders support and assistance in

employment and re-integration into society.

Another event COSCO sponsored in 2013 was the

Singapore Chinese Orchestra (SCO) Fundraising Gala

Dinner on 15 September 2013, where we contributed

S$15,000 for the development and funding of the

operating cost of the SCO.

CHINA

At COSCO, we share a commitment to support and

engage our youth. Over the years, COSCO’s group

of companies in China has been actively involved in

campaigns that offer support on issues like education

and youth social welfare.

Into our third year, COSCO Zhoushan Shipyard’s

Youth League Committee has organised educational

programmes to support needy students in remote

areas, such as offering supplementary lessons as well as

other programmes to support their educational needs.

CORPORATE SOCIAL RESPONSIBILITY


Captain Wu Zi Heng receiving the token of appreciation for sponsorship towards SCO Fundraising Gala Dinner and Concert 2013 from Prime Minister Lee Hsien Loong.


Apart from those, COSCO Zhoushan Shipyard is

active in other social activities. It specially organised

a ‘Parenting Day’ for its first line production workers.

On this special day, the workers brought their

kindergarten-age children to the shipyard. Parent

representatives shared stories on familial love while

the children took turns expressing their gratitude to

their parents, helping to deepen family bonds.

Over at COSCO Dalian Shipyard, workers visited the

elderly and physically challenged villagers in a visit

to Wafangdian City in Dalian. Throughout the year,

COSCO Shanghai Shipyard was also involved in

several Corporate Social Responsibility activities, such

as the yearly donation drive and a blood donation

campaign.

COSCO Nantong Shipyard, for the third consecutive

year, has continued with its social campaign, the “Blue

Ocean Plan”; contributing and distributing books,

school bags, stationery and other study materials

for its employees’ children. This campaign seeks to

establish a long-term donation system to improve

literacy levels among needy children. Into its fifth

year running, the shipyard has been aiding the needy

through the Youth Civilization Group, offering love,

warmth and care through their campaigns.

On Mothers’ Day, the youth worker representatives of

COSCO Nantong Shipyard also visited the Old Folks’

Home with fresh fruits, flowers and food.

Besides local contributions, COSCO Corporation has

been donating to the COSCO Charity Foundation

– the first non-public foundation initiated by state-

owned enterprises. The foundation manages

COSCO’s charity works and social projects within

China for disaster relief, poverty aid, medical aid and

educational support. COSCO subsidiaries contribute

to the funding of this charity, and their unwavering

support through these years has facilitated the

foundation in reaching out to a wider social network

beyond its employees.

ENVIRONMENTAL AWARENESS

It is important that we exist in harmony with the

environment so as to create a sustainable society for

our future generations. COSCO remains steadfast

in this commitment, fulfilling our responsibility

as a corporate citizen through continuous efforts

in combining technological innovation with

environmentally sound business practices.

Towards this end, COSCO Shipyard achieved a new

milestone with its self-designed 81,000 DWT dual-

fuel bulk carrier receiving the AIP certification from

the Lloyd’s Register in the beginning of the year.

This environmentally-friendly carrier, a collaboration

between COSCO’s ship design centre, Golden

Union, the ship owner and Lloyd’s Register, is able

to reduce emissions of carbon dioxide (CO2) by 10%

to 20%, and nitric oxide and nitrogen dioxide (NOX)

by 90%, fulfilling the emission standards required

by International Maritime Organisation (IMO) and

International Grains Council (IGC), as well as the

International Code for Ships using Gas or other

Low Flash-Point Fuels (IGF Code) and other related

regulatory standards.

Looking ahead, we will continue to operate on the

basis of environmentally-friendly technologies and

ensure minimal wastage through use of innovative

‘green’ design.

CONCLUSION

COSCO is dedicated to maintaining high standards of

Corporate Social Responsibility practices within our

Group. We actively participate in community projects,

environmental protection and charities, helping to

sustain the communities which have enabled us to

develop as a leading corporation. Going forward,

we will press on with our social involvement and

conduct our business operations in a way that does

not compromise the health, welfare and safety of

our employees, customers, communities and the

ecological system.

CORPORATE SOCIAL RESPONSIBILITY


FINANCIAL STATEMENTS

74 Directors’ Report

78 Statement by Directors

79 Independent Auditor’s Report

80 Consolidated Income Statement

81 Consolidated Statement of Comprehensive Income

82 Balance Sheets

83 Consolidated Statement of Changes in Equity

84 Consolidated Statement of Cash Flows

85 Notes to the Financial Statements

145 Five-Year Summary

146 Shareholding Statistics

148 Notice of Annual General Meeting

Proxy Form for Annual General Meeting

Notes for Proxy Form

DIRECTORS’ REPORTFor the nancial year ended 31 December 2013


Financia l Statements

The directors present their report to the members together with the audited fi nancial statements of the Group for the

fi nancial year ended 31 December 2013 and the balance sheet of the Company as at 31 December 2013.

Directors

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

Li Yun Peng (appointed on 30 September 2013)

Wu Zi Heng

Liu Lian An

Wang Hai Min

Wang Yu Hang

Ma Zhi Hong

Tom Yee Lat Shing

Wang Kai Yuen

Er Kwong Wah

Ang Swee Tian

Ma Hong Han (alternate director to Ma Zhi Hong)

Li Man (alternate director to Li Yun Peng, appointed on 30 September 2013)

Ouyang Chao Mei (alternate director to Wang Yu Hang)

Arrangements to enable directors to acquire shares and debentures

Neither at the end of nor at any time during the fi nancial year was the Company a party to any arrangement whose object

was to enable the directors of the Company to acquire benefi ts by means of the acquisition of shares in, or debentures

of, the Company or any other body corporate, other than as disclosed under “Share options” on pages 76 and 77 of this

report.

Directors’ interests in shares or debentures

(a) According to the register of directors’ shareholdings, none of the directors holding offi ce at the end of the fi nancial

year had any interest in the shares or debentures of the Company or its related corporations, except as follows:

Number of ordinary shares

registered in name of

director or nominee


in which a director is deemed

to have an interest

The Company

At

31.12.2013

At

1.1.2013

or date of

appointment,

if later

At

31.12.2013

At

1.1.2013

or date of

appointment,

if later

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

Wang Kai Yuen 900,000 900,000 100,000 1,000,000

Er Kwong Wah 650,000 650,000 – –

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




Directors’ interests in shares or debentures (continued)

(a) (continued)

Number of unissued ordinary

shares under options held

by director

At

31.12.2013

At

1.1.2013

or date of

appointment,

if later

Related corporations

China COSCO Holdings Company Limited

- Share Appreciation Rights

Li Man 200,000 200,000

Wang Hai Min 222,000 222,000

Li Yun Peng 1,630,000 1,630,000

Ma Hong Han 60,000 60,000

(b) According to the register of directors’ shareholdings, certain directors holding offi ce at the end of the fi nancial year

had interests in the options to subscribe for ordinary shares of the Company granted pursuant to the COSCO Group

Employees’ Share Option Scheme 2002 as set out below and under “Share options” on pages 76 and 77 of this

report.

Number of unissued ordinary

shares under option

held by director

At

31.12.2013

At

1.1.2013

or date of

appointment,

if later

2008 Options

Tom Yee Lat Shing – 300,000

Wang Kai Yuen – 300,000

Er Kwong Wah – 300,000

(c) The directors’ interests in the ordinary shares and share options of the Company as at 21 January 2014 were the

same as those as at 31 December 2013.

Directors’ contractual benefi ts

Since the end of the previous fi nancial year, no director has received or become entitled to receive a benefi t by reason of

a contract made by the Company or a related corporation with the director or with a fi rm of which he is a member or with

a company in which he has a substantial fi nancial interest, except as disclosed in the accompanying fi nancial statements

and in this report, and except that certain directors have employment relationships with the ultimate holding corporation or

related corporations, and have received remuneration in those capacities.




Share options

(a) COSCO Group Employees’ Share Option Scheme 2002

The COSCO Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”) was approved by members of the

Company at an Extraordinary General Meeting on 8 May 2002.

Under the Scheme 2002, share options to subscribe for the ordinary shares of the Company are granted to

directors, key management personnel and employees. The exercise price of the granted options is determined

at the average of the closing prices of the Company’s ordinary shares as quoted on the Singapore Exchange for

the fi ve market days immediately preceding the date of the grant. The options may be exercised in full or in part

in respect of 1,000 shares or a multiple thereof, on the payment of the exercise price. The Group has no legal or

constructive obligation to repurchase or settle the options in cash.

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

company, or the holding company for at least one year on or prior to the date of the grant, may be exercised twelve

months after the date of grant but before the end of one hundred and twenty months. For employees and directors

who are in the service of the associated company and non-executive directors, the options shall expire at the end of

sixty months. Options issued at a discount to market price, may only be exercised two years after the date of the

grant.

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

company, or the holding company for at least six months but less than one year on or prior to the date of grant,

may be exercised twenty-four months after the date of the grant but before the end of one hundred and twenty

months. For employees and directors who are in the service of the associated company and non-executive

directors, the options shall expire at the end of sixty months. Options issued at a discount to market price, may only

be exercised three years after the date of the grant.

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

“2007 Options” and “2008 Options” respectively were set out in the Directors’ Report for the fi nancial years ended

31 December 2006, 31 December 2007 and 31 December 2008 respectively.

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

Er Kwong Wah (Chairman)

Wu Zi Heng

Tom Yee Lat Shing

Wang Kai Yuen

Ang Swee Tian

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

Name of directors

Aggregate

granted since

commencement

of Scheme

2002 to

31.12.2013

Aggregate

exercised since

commencement

of Scheme

2002 to

31.12.2013

Aggregate

lapsed since

commencement

of Scheme

2002 to

31.12.2013

Aggregate

outstanding

as at

31.12.2013

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

Wang Kai Yuen 2,200,000 1,900,000 300,000 –

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

6,600,000 5,400,000 1,200,000 –




Share options (continued)

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

No options have been granted to controlling shareholders of the Company or their associates (as defi ned in the

Listing Manual of the Singapore Exchange Securities Trading Limited).

No options have been granted during the fi nancial year.

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

available under the Scheme 2002.

There were no shares of the Company allotted and issued by virtue of the exercise of options to take up unissued

shares of the Company during the fi nancial year. There were no unissued shares of the subsidiaries under option at

the end of the fi nancial year.

(b) Share options outstanding

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

at the end of the fi nancial year was as follows:

Options relating to

Scheme 2002

Number

of unissued

ordinary

shares at

1.1.2013

Number

lapsed

during the

fi nancial

year

Number

of unissued

ordinary

shares at

31.12.2013

Exercise

price Exercise period

’000 ’000 ’000 $

2006 Options 550 – 550 1.23 21.2.2007 - 20.2.2016

2007 Options 6,250 (2,500) 3,750 2.48 5.2.2008 - 4.2.2017

2008 Options (i) 12,750 (3,840) 8,910 2.95 24.3.2009 - 23.3.2018

19,550 (6,340) 13,210

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

Independent auditor

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

On behalf of the directors

WU ZI HENG

Director

TOM YEE LAT SHING

Director

3 March 2014

STATEMENT BY DIRECTORSFor the nancial year ended 31 December 2013



In the opinion of the directors,

(a) the balance sheet of the Company and the consolidated fi nancial statements of the Group as set out on pages 80

to 144 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as

at 31 December 2013, and of the results of the business, changes in equity and cash fl ows of the Group for the

fi nancial year then ended; and

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

as and when they fall due.

On behalf of the directors

WU ZI HENG

Director

TOM YEE LAT SHING

Director

3 March 2014

INDEPENDENT AUDITOR’S REPORTTO THE MEMBERS OF COSCO CORPORATION (SINGAPORE) LIMITED

For the nancial year ended 31 December 2013



Report on the Financial Statements

We have audited the accompanying fi nancial statements of COSCO Corporation (Singapore) Limited (the “Company”)

and its subsidiaries (the “Group”) set out on pages 80 to 144, which comprise the consolidated balance sheet of the

Group and balance sheet of the Company as at 31 December 2013, the consolidated income statement, the statement of

comprehensive income, the statement of changes in equity and the statement of cash fl ows of the Group for the fi nancial

year then ended, and a summary of signifi cant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation of fi nancial statements that give a true and fair view in accordance with

the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devising

and maintaining a system of internal accounting controls suffi cient to provide a reasonable assurance that assets are

safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they

are recorded as necessary to permit the preparation of true and fair profi t and loss accounts and balance sheets and to

maintain accountability of assets.

Auditor’s Responsibility

Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in

accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and

plan and perform the audit to obtain reasonable assurance about whether the fi nancial statements are free from material

misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial

statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material

misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entity’s preparation of fi nancial statements that give a true and fair view in order

to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the entity’s internal 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 fi nancial statements.

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

Opinion

In our opinion, the consolidated fi nancial statements of the Group and the balance sheet of the Company are properly

drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true

and fair view of the state of affairs of the Group and of the Company as at 31 December 2013, and of the results, changes

in equity and cash fl ows of the Group for the fi nancial year ended on that date.

Report on other Legal and Regulatory Requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries

incorporated in Singapore, of which we are the auditors, have been properly kept in accordance with the provisions of the

Act.

PricewaterhouseCoopers LLP

Public Accountants and Chartered Accountants

Singapore, 3 March 2014

CONSOLIDATED INCOME STATEMENTFor the nancial year ended 31 December 2013

The accompanying notes form an integral part of these fi nancial statements.



Note 2013 2012

$’000 $’000

Sales 4 3,508,134 3,734,261

Cost of sales (3,186,946) (3,249,358)

Gross profi t 321,188 484,903

Other income (net) 7 110,138 122,567

Expenses

- Distribution (66,523) (82,268)

- Administrative (193,423) (196,175)

- Finance 8 (110,845) (99,986)

Share of profi t of associated companies 20 407 580

Profi t before income tax 60,942 229,621

Income tax expense 9(a) (8,157) (59,842)

Net profi t 52,785 169,779

Profi t attributable to:

Equity holders of the Company 30,615 105,685

Non-controlling interests 22,170 64,094

52,785 169,779

Earnings per share attributable to equity holders of the Company

(expressed in cents per share) 10

- Basic 1.37 4.72

- Diluted 1.37 4.72

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the nancial year ended 31 December 2013




Note 2013 2012

$’000 $’000

Net profi t 52,785 169,779

Other comprehensive income/(loss):

Available-for-sale fi nancial assets

- Net fair value (loss)/gain 31(b)(v) (92) 37

Currency translation differences arising from consolidation 31(b)(iii) 118,317 (92,713)

Other comprehensive income/(loss), net of tax 118,225 (92,676)

Total comprehensive income for the year 171,010 77,103

Total comprehensive income attributable to:

Equity holders of the Company 99,053 47,450

Non-controlling interests 71,957 29,653

171,010 77,103

BALANCE SHEETSAs at 31 December 2013




The Group The Company

Note 2013

$’000

2012

$’000

2013

$’000

2012

$’000

ASSETS

Current assets

Cash and cash equivalents 11 2,028,397 1,692,836 54,408 83,905

Forward currency contracts 12 770 – – –

Trade and other receivables 13 2,911,828 2,738,701 31,758 16,877

Inventories 14 1,046,764 352,183 – –

Construction contract work-in-progress 15 208,366 93,009 – –

Other current assets 16 15,235 11,865 176 191

6,211,360 4,888,594 86,342 100,973

Non-current assets

Trade and other receivables 17 36,874 44,344 – –

Available-for-sale fi nancial assets 18 4,391 4,244 – –

Club memberships 19 303 310 88 99

Investments in associated companies 20 4,826 4,235 – –

Investments in subsidiaries 21 – – 370,988 370,269

Investment properties 22 11,293 11,730 – –

Property, plant and equipment 23 2,227,868 2,225,689 768 905

Intangible assets 24 9,539 9,477 – –

Deferred expenditure 25 3,066 3,020 – –

Deferred income tax assets 29 225,212 201,914 – –

2,523,372 2,504,963 371,844 371,273

Total assets 8,734,732 7,393,557 458,186 472,246

LIABILITIES

Current liabilities

Trade and other payables 26 2,695,911 2,244,367 18,149 17,886

Current income tax liabilities 9(b) 25,288 10,383 1,531 896

Borrowings 27 1,926,065 1,467,910 – –

Provisions for other liabilities 28 55,396 55,719 – –

4,702,660 3,778,379 19,680 18,782

Non-current liabilities

Borrowings 27 1,856,463 1,558,541 – –

Deferred income tax liabilities 29 528 7,432 398 7,302

1,856,991 1,565,973 398 7,302

Total liabilities 6,559,651 5,344,352 20,078 26,084

NET ASSETS 2,175,081 2,049,205 438,108 446,162

EQUITY

Capital and reserves attributable to

equity holders of the Company

Share capital 30 270,608 270,608 270,608 270,608

Statutory and other reserves 31 245,139 152,927 45,105 45,105

Retained earnings 820,027 857,971 122,395 130,449

1,335,774 1,281,506 438,108 446,162

Non-controlling interests 839,307 767,699 – –

Total equity 2,175,081 2,049,205 438,108 446,162

CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the nancial year ended 31 December 2013




Attributable to equity

holders of the Company

Note

Share

capital

Statutory

and other

reserves

Retained

earnings Total

Non-

controlling

interests

Total

equity

$’000 $’000 $’000 $’000 $’000 $’000

2013

Beginning of fi nancial year 270,608 152,927 857,971 1,281,506 767,699 2,049,205

Total comprehensive income

for the year – 68,438 30,615 99,053 71,957 171,010

Dividend declared by subsidiaries

to non-controlling interests of

subsidiaries – – – – (349) (349)

Dividend for 2012 32 – – (44,785) (44,785) – (44,785)

Transfer from asset revaluation

reserve to retained earnings 31(b)(iv) – (3,218) 3,218 – – –

Transfer from retained earnings

to statutory reserves 31(b)(ii) – 26,992 (26,992) – – –

End of fi nancial year 270,608 245,139 820,027 1,335,774 839,307 2,175,081

2012

Beginning of fi nancial year 270,608 181,320 849,305 1,301,233 699,241 2,000,474

Total comprehensive income

for the year – (58,235) 105,685 47,450 29,653 77,103

Contribution by non-controlling

interests for increase in

registered capital of a

subsidiary – – – – 39,200 39,200

Dividend declared by subsidiaries

to non-controlling interests of

subsidiaries – – – – (395) (395)

Dividend for 2011 32 – – (67,177) (67,177) – (67,177)

Transfer from asset revaluation

reserve to retained earnings 31(b)(iv) – (3,218) 3,218 – – –

Transfer from retained earnings

to statutory reserves 31(b)(ii) – 33,060 (33,060) – – –

End of fi nancial year 270,608 152,927 857,971 1,281,506 767,699 2,049,205

CONSOLIDATED STATEMENT OF CASH FLOWSFor the nancial year ended 31 December 2013




Note 2013

$’000

2012

$’000

Cash fl ows from operating activities

Net profi t 52,785 169,779

Adjustments for:

- Allowance for impairment of property, plant and equipment 110 8,131

- Allowance for impairment of transferable club memberships 11 73

- Amortisation of deferred expenditure 86 85

- Depreciation of property, plant and equipment and investment properties 183,525 178,895

- Dividend income (503) (407)

- Income tax expense 8,157 59,842

- Interest expense 110,845 99,986

- Interest income (44,712) (39,413)

- Net allowance for/(reversal of) expected losses recognised on

construction contracts 85,717 (28,564)

- Provision for an onerous contract 144 –

- Net allowance for inventory write-down 23,678 2,013

- Net allowance for impairment of trade and other receivables 5,228 7,814

- Net (gain)/loss on disposal of property, plant and equipment (666) 661

- Share of profi t of associated companies (407) (580)

- Net fair value gain on forward currency contracts (750) –

- Write-off of property, plant and equipment 469 230

423,717 458,545

Changes in working capital:

- Inventories and construction contract work-in-progress (833,616) 192,377

- Trade and other receivables (160,444) (711,138)

- Trade and other payables 365,518 (430,111)

- Other current assets (3,370) (4,930)

- Provisions for other liabilities (323) (3,711)

- Exchange differences 89,691 925

Cash used in operations (118,827) (498,043)

Income tax paid (11,598) (82,123)

Net cash used in operating activities (130,425) (580,166)

Cash fl ows from investing activities

Purchase of property, plant and equipment (61,855) (122,656)

Proceeds from disposal of property, plant and equipment 10,620 8,943

Dividends received 613 691

Interest received 34,451 33,816

Net cash used in investing activities (16,171) (79,206)

Cash fl ows from fi nancing activities

Proceeds from borrowings 2,103,985 2,434,479

Repayments of borrowings (1,542,339) (1,469,975)

Proceeds from non-controlling interests for increase in registered capital

of a subsidiary – 39,200

Decrease/(increase) in bank deposits pledged 14,207 (16,344)

Interest paid (110,662) (93,504)

Dividends paid to equity holders of the Company (44,785) (67,177)

Dividends paid to non-controlling interests of subsidiaries (634) (893)

Net cash provided by fi nancing activities 419,772 825,786

Net increase in cash and cash equivalents 273,176 166,414

Cash and cash equivalents at beginning of fi nancial year 1,675,272 1,584,048

Effects of currency translation on cash and cash equivalents 76,592 (75,190)

Cash and cash equivalents at end of fi nancial year 11 2,025,040 1,675,272

NOTES TO THE FINANCIAL STATEMENTSFor the nancial year ended 31 December 2013



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

1. General information

COSCO Corporation (Singapore) Limited (the “Company”) is incorporated and domiciled in Singapore. The address

of its registered offi ce is 9 Temasek Boulevard, #07-00 Suntec Tower Two, Singapore 038989.

The Company is listed on the Singapore Exchange.

The principal activities of the Company are those of investment holding. The principal activities of its subsidiaries are

set out in Note 21 to the fi nancial statements.

2. Signifi cant accounting policies

2.1 Basis of preparation

These fi nancial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”)

under the historical cost convention, except as disclosed in the accounting policies below.

The preparation of fi nancial statements in conformity with FRS requires management to exercise its judgement in the

process of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates

and assumptions. The areas involving a higher degree of judgement or complexity, or areas where assumptions and

estimates are signifi cant to the fi nancial statements, are disclosed in Note 3.

Interpretations and amendments to published standards effective in 2013

On 1 January 2013, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are

mandatory for application for the fi nancial year. Changes to the Group’s accounting policies have been made as

required, in accordance with the transitional provisions in the respective FRS and INT FRS.

The adoption of these new or amended FRS and INT FRS did not result in substantial changes to the accounting

policies of the Group and the Company and had no material effect on the amounts reported for the current or prior

fi nancial years.

FRS 113 Fair Value Measurement

FRS 113 aims to improve consistency and reduce complexity by providing a precise defi nition of fair value and a

single source of fair value measurement and disclosure requirements for use across FRSs. The requirements do not

extend the use of fair value accounting but provide guidance on how it should be applied when its use is already

required or permitted by other standards within FRSs.

The adoption of FRS 113 does not have any material impact on the accounting policies of the Group. The Group

has incorporated the additional disclosures required by FRS 113 into the fi nancial statements.

2.2 Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the ship repair, ship building and

marine engineering income, rental income, charter hire revenue, and sale of scrap materials in the ordinary course

of the Group’s activities. Revenue is presented net of value-added tax, rebates and discounts, and after eliminating

revenue within the Group.




2. Signifi cant accounting policies (continued)

2.2 Revenue recognition (continued)

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

probable that the collectibility of the related receivables is reasonably assured and when the specifi c criteria for each

of the Group’s activities are met as follows:

(a) Rendering of services

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

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

work services and production of marine outfi tting components is recognised on the percentage-of-

completion method based on progress of the contract work, where the outcome of the contract

can be estimated reliably. If the contract covers a number of projects and the cost and revenue of

such individual projects can be identifi ed within the terms of the overall contract, each such project

is treated as a separate contract. Provision is made in full where applicable for expected losses on

contracts in progress. Please refer to the paragraph “Construction contracts” for the accounting

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

(ii) Shipping

Revenue from time charter is recognised on the straight-line basis over the period of the time charter

agreement.

Revenue from voyage charter is recognised rateably over the estimated length of the voyage within

the reporting period and ends in the subsequent reporting period.

The Group determines the percentage of completion of voyage freight using the discharge-to-

discharge method. Under this method, voyage revenue is recognised rateably over the period from

the departure of a vessel from its original discharge port to departure from the next discharge port.

Demurrage is included if a claim is considered probable. Losses arising from time or voyage charters

are provided for as soon as they are anticipated.

(b) Rental income

Rental income from operating leases on investment properties and property, plant and equipment is

recognised on the straight-line basis over the lease term.

(c) Sale of scrap materials

Revenue from sale of scrap materials is recognised when the products have been delivered to the customer,

the customer has accepted the products and collectibility of the related receivables is reasonably assured.

(d) Interest income

Interest income is recognised using the effective interest method.

(e) Dividend income

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





2.3 Group accounting

(a) Subsidiaries

(i) Consolidation

Subsidiaries are entities (including special purpose entities) over which the Group has power

to govern the fi nancial and operating policies so as to obtain benefi ts from its activities, generally

accompanied by a shareholding giving rise to a majority of the voting rights. The existence and effect

of potential voting rights that are currently exercisable or convertible are considered when assessing

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

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

In preparing the consolidated fi nancial statements, transactions, balances and unrealised gains on

transactions between group entities are eliminated. Unrealised losses are also eliminated but are

considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have

been changed where necessary to ensure consistency with the policies adopted by the Group.

Non-controlling interests are that part of the net results of operations and of net assets of a

subsidiary attributable to the interests which are not owned directly or indirectly by the equity holders

of the Company. They are shown separately in the consolidated income statement, statement of

comprehensive income, statement of changes in equity and balance sheet. Total comprehensive

income is attributed to the non-controlling interests based on their respective interests in a subsidiary,

even if this results in the non-controlling interests having a defi cit balance.

(ii) Acquisitions

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

The consideration transferred for the acquisition of a subsidiary or business comprises the fair value

of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The

consideration transferred also includes the fair value of any contingent consideration arrangement.

Acquisition-related costs are expensed as incurred.

Identifi able assets acquired and liabilities and contingent liabilities assumed in a business combination

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

On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the

acquiree at the date of acquisition either at fair value or at the non-controlling interest’s proportionate

share of the acquiree’s net identifi able assets.

The excess of (i) the consideration transferred, the amount of any non-controlling interest in the

acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over (ii) the

fair value of the identifi able net assets acquired is recorded as goodwill. Please refer to the paragraph

“Intangible assets - Goodwill on acquisitions” for the accounting policy on goodwill subsequent to

initial recognition.

(iii) Disposals

When a change in the Group’s ownership interest in a subsidiary results in a loss of control over

the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised.

Amounts previously recognised in other comprehensive income in respect of that entity are also

reclassifi ed to the income statement or transferred directly to retained earnings if required by a

specifi c Standard.





2.3 Group accounting (continued)

(a) Subsidiaries (continued)

(iii) Disposals (continued)

Any retained equity interest in the entity is remeasured at fair value. The difference between the

carrying amount of the retained interest at the date when control is lost and its fair value is recognised

in the income statement.

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

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

(b) Transactions with non-controlling interests

Changes in the Group’s ownership interest in a subsidiary that do not result in a loss of control over the

subsidiary are accounted for as transactions with equity owners of the Company. Any difference between the

change in the carrying amounts of the non-controlling interest and the fair value of the consideration paid or

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

(c) Associated companies

Associated companies are entities over which the Group has signifi cant infl uence, but not control, generally

accompanied by a shareholding giving rise to voting rights of 20% and above but not exceeding 50%.

Investments in associated companies are accounted for in the consolidated fi nancial statements using the

equity method of accounting less impairment losses, if any.

(i) Acquisitions

Investments in associated companies are initially recognised at cost. The cost of an acquisition

is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or

assumed at the date of exchange, plus costs directly attributable to the acquisition. Goodwill on

associated companies represents the excess of the cost of acquisition of the associate over the

Group’s share of the fair value of the identifi able net assets of the associate and is included in the

carrying amount of the investments.

(ii) Equity method of accounting

In applying the equity method of accounting, the Group’s share of its associated companies’ post-

acquisition profi ts or losses are recognised in the income statement and its share of post-acquisition

other comprehensive income is recognised in other comprehensive income. These post-acquisition

movements and distributions received from the associated companies are adjusted against the

carrying amount of the investments. When the Group’s share of losses in an associated company

equals or exceeds its interest in the associated company, including any other unsecured non-current

receivables, the Group does not recognise further losses, unless it has obligations to make or has

made payments on behalf of the associated company.

Unrealised gains on transactions between the Group and its associated companies are eliminated to

the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated

unless the transaction provides evidence of an impairment of the asset transferred. The accounting

policies of associated companies have been changed where necessary to ensure consistency with

the accounting policies adopted by the Group.





2.3 Group accounting (continued)

(c) Associated companies (continued)

(iii) Disposals

Investments in associated companies are derecognised when the Group loses signifi cant infl uence.

Any retained interest in the entity is remeasured at its fair value. The difference between the carrying

amount of the retained interest at the date when signifi cant infl uence is lost and its fair value is

recognised in the income statement.

Gains and losses arising from partial disposals or dilutions in investments in associated companies in

which signifi cant infl uence is retained are recognised in the income statement.

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

accounting policy on investments in associated companies in the separate fi nancial statements of the

Company.

2.4 Property, plant and equipment

(a) Measurement

(i) Land and buildings

Land and buildings are initially recognised at cost. Freehold land is subsequently carried at cost less

accumulated impairment losses. Buildings and leasehold land are subsequently carried at cost less

accumulated depreciation and accumulated impairment losses.

(ii) Motor vessels

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

depreciation and accumulated impairment losses.

The cost of motor vessels includes actual interest incurred on borrowings used to fi nance the motor

vessels while under construction and other direct relevant expenditure incurred in bringing the vessels

into operation. For this purpose, the interest rate applied to funds provided for constructing the motor

vessels is arrived at by reference to the actual rate payable on borrowings for construction purposes.

The capitalisation of interest charges will cease upon the completion and delivery of the motor

vessels.

(iii) Other property, plant and equipment

All other items of property, plant and equipment are initially recognised at cost and subsequently

carried at cost less accumulated depreciation and accumulated impairment losses.

(iv) Components of costs

The cost of an item of property, plant and equipment initially recognised includes its purchase

price and any cost that is directly attributable to bringing the asset to the location and condition

necessary for it to be capable of operating in the manner intended by management. Cost also

includes borrowing costs that are directly attributable to the acquisition, construction or production

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

is also recognised as part of the cost of property, plant and equipment if the obligation for the

dismantlement, removal or restoration is incurred as a consequence of either acquiring the asset or

using the asset for purpose other than to produce inventories.





2.4 Property, plant and equipment (continued)

(b) Depreciation

Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculated

using the straight-line method to allocate their depreciable amounts over their estimated useful lives as

follows:

Useful lives

Buildings on freehold land 50 years

Leasehold land and buildings 10 - 50 years

Offi ce renovations, furniture, fi xtures and equipment 3 - 5 years

Plant, machinery and equipment 3 - 10 years

Motor vehicles 5 - 10 years

Motor vessels 20 years

Docks and quays 30 years

No depreciation is provided for construction-in-progress.

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

are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are

recognised in the income statement when the changes arise.

(c) Subsequent expenditure

Subsequent expenditure relating to property, plant and equipment that has already been recognised is

added to the carrying amount of the asset only when it is probable that future economic benefi ts associated

with the item will fl ow to the Group and the cost of the item can be measured reliably. All other repair and

maintenance expenses are recognised in the income statement when incurred.

The motor vessels are subject to overhauls at regular intervals. The inherent components of the initial

overhaul are determined based on the estimated costs of the next overhaul and are separately depreciated

over a period of 2½ years in order to refl ect the estimated intervals between two overhauls. The costs of

the overhauls subsequently incurred are capitalised as additions and the carrying amounts of the replaced

components are written off to the income statement.

(d) Disposal

On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and

its carrying amount is recognised in the income statement.

2.5 Intangible assets

Goodwill on acquisitions

Goodwill on acquisitions of subsidiaries and businesses on or after 1 January 2010 represents the excess of (i) the

sum of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-

date fair value of any previous equity interest in the acquiree over (ii) the fair value of the net identifi able assets

acquired.

Goodwill on acquisition of subsidiaries and businesses prior to 1 January 2010 and on acquisition of joint ventures

and associated companies represents the excess of the cost of the acquisition over the fair value of the Group’s

share of the net identifi able assets acquired.





2.5 Intangible assets (continued)

Goodwill on acquisitions (continued)

Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated

impairment losses.

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

Gains and losses on the disposal of subsidiaries and associated companies include the carrying amount of goodwill

relating to the entity sold, except for goodwill arising from acquisitions prior to 1 January 2001. Such goodwill

was adjusted against retained profi ts in the year of acquisition and is not recognised in the income statement on

disposal.

2.6 Borrowing costs

Borrowing costs are recognised in the income statement using the effective interest method except for those costs

that are directly attributable to borrowings acquired specifi cally for the construction of motor vessels, docks and

quays. The actual borrowing costs incurred during the construction period less any investment income on temporary

investments of these borrowings, are capitalised in the cost of the docks and quays.

2.7 Construction contracts

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

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

ultimate purpose or use.

Contract costs are recognised when incurred.

When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are

recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at

the balance sheet date (“percentage-of-completion method”). When the outcome of a construction contract cannot

be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely to be

recoverable. When it is probable that total contract costs will exceed total contract revenue, the expected loss is

recognised as an expense immediately.

Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract

work and claims that can be measured reliably. A variation or a claim is recognised as contract revenue when it is

probable that the customer will approve the variation or negotiations have reached an advanced stage such that it is

probable that the customer will accept the claim.

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

Costs incurred during the fi nancial year in connection with future activity on a contract are excluded from costs

incurred to date when determining the stage of completion of a contract. Such costs are shown as “construction

contract work-in-progress” on the balance sheet unless it is not probable that such contract costs are recoverable

from the customers, in which case, such costs are recognised as an expense immediately.

At the balance sheet date, the cumulative costs incurred plus recognised profi ts (less recognised losses) on each

contract is compared against the progress billings. Where the cumulative costs incurred plus the recognised profi ts

(less recognised losses) exceed progress billings, the balance is presented as due from customers on construction

contracts within “trade and other receivables”. Where progress billings exceed cumulative costs incurred plus

recognised profi ts (less recognised losses), the balance is presented as due to customers on construction contracts

within “trade and other payables”.

Progress billings not yet paid by customers and retentions by customers are included within “trade and other

receivables”. Advances received are included within “trade and other payables”.





2.8 Investment properties

Investment properties include those portions of offi ce buildings that are held for long-term rental yields and/or for

capital appreciation.

Investment properties are initially recognised at cost and subsequently carried at cost less accumulated depreciation

and accumulated impairment losses. Depreciation is calculated using the straight-line method to allocate

the depreciable amounts over the estimated useful lives of 10 to 50 years. The residual values, useful lives and

depreciation method of investment properties are reviewed, and adjusted as appropriate, at each balance sheet

date. The effects of any revision are included in the income statement when the changes arise.

Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovations

and improvements is capitalised and the carrying amounts of the replaced components are recognised in the

income statement. The cost of maintenance, repairs and minor improvements is recognised in the income statement

when incurred.

On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is

recognised in the income statement.

2.9 Investments in subsidiaries and associated companies

Investments in subsidiaries and associated companies are carried at cost less accumulated impairment losses in

the Company’s balance sheet. On disposal of investments in subsidiaries and associated companies, the difference

between disposal proceeds and the carrying amounts of the investments are recognised in the income statement.

2.10 Impairment of non-fi nancial assets

(a) Goodwill

Goodwill recognised separately as an intangible asset is tested for impairment annually, and whenever there

is indication that the goodwill may be impaired. Goodwill included in the carrying amount of an investment in

associated company is tested for impairment as part of the investment, rather than separately.

For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-

generating unit (“CGU”) expected to benefi t from synergies arising from the business combination.

An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the

recoverable amount of the CGU. The recoverable amount of a CGU is the higher of a CGU’s fair value less

cost to sell and value-in-use.

The total impairment loss of a CGU is allocated fi rst to reduce the carrying amount of goodwill allocated to

the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset

in the CGU.

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





2.10 Impairment of non-fi nancial assets (continued)

(b) Property, plant and equipment

Investment properties

Investments in subsidiaries and associated companies

Property, plant and equipment, investment properties and investments in subsidiaries and associated

companies are tested for impairment whenever there is any objective evidence or indication that these assets

may be impaired.

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

sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash

infl ows that are largely independent of those from other assets. If this is the case, the recoverable amount is

determined for the CGU to which the asset belongs.

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

amount of the asset (or CGU) is reduced to its recoverable amount.

The difference between the carrying amount and recoverable amount is recognised as an impairment loss in

the income statement unless the asset is carried at revalued amount, in which case, such impairment loss is

treated as a revaluation decrease.

An impairment loss for an asset other than goodwill is reversed only if, there has been a change in the

estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.

The carrying amount of this asset is increased to its revised recoverable amount, provided that this

amount does not exceed the carrying amount that would have been determined (net of any accumulated

amortisation or depreciation) had no impairment loss been recognised for the asset in prior years.

A reversal of impairment loss for an asset other than goodwill is recognised in the income statement, unless

the asset is carried at revalued amount, in which case, such reversal is treated as a revaluation increase.

However, to the extent that an impairment loss on the same revalued asset was previously recognised as an

expense, a reversal of that impairment is also recognised in the income statement.

2.11 Financial assets

(a) Classifi cation

The Group classifi es its fi nancial assets in the following categories: at fair value through profi t or loss, loans

and receivables, held-to-maturity, and available-for-sale. The classifi cation depends on the nature of the

asset and the purpose for which the assets were acquired. Management determines the classifi cation of its

fi nancial assets at initial recognition and in the case of assets classifi ed as held-to-maturity, re-evaluates this

designation at each balance sheet date.

(i) Financial assets at fair value through profi t or loss

This category has two sub-categories: fi nancial assets held for trading, and those designated

at fair value through profi t or loss at inception. A fi nancial asset is classifi ed as held for trading if it

is acquired principally for the purpose of selling in the short term. Financial assets designated as

at fair value through profi t or loss at inception are those that are managed and their performances

are evaluated on a fair value basis, in accordance with a documented Group investment strategy.

Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in

this category are presented as current assets if they are either held for trading or are expected to be

realised within 12 months after the balance sheet date.





2.11 Financial assets (continued)

(a) Classifi cation (continued)

(ii) Loans and receivables

Loans and receivables are non-derivative fi nancial assets with fi xed or determinable payments that

are not quoted in an active market. They are presented as current assets, except for those expected

to be realised later than 12 months after the balance sheet date which are presented as non-current

assets. Loans and receivables are presented as “trade and other receivables” and “cash and cash

equivalents”.

(iii) Held-to-maturity fi nancial assets

Held-to-maturity fi nancial assets are non-derivative fi nancial assets with fi xed or determinable

payments and fi xed maturities that the Group’s management has the positive intention and ability

to hold to maturity. If the Group were to sell other than an insignifi cant amount of held-to-maturity

fi nancial assets, the whole category would be tainted and reclassifi ed as available-for-sale. They are

presented as non-current assets, except for those maturing within 12 months after the balance sheet

date which are presented as current assets. The Group currently does not have any held-to-maturity

fi nancial assets.

(iv) Available-for-sale fi nancial assets

Available-for-sale fi nancial assets are non-derivatives that are either designated in this category or

not classifi ed in any of the other categories. They are presented as non-current assets unless the

investment matures or management intends to dispose of the assets within 12 months after the

balance sheet date.

(b) Recognition and derecognition

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

Group commits to purchase or sell the asset.

Financial assets are derecognised when the rights to receive cash fl ows from the fi nancial assets have

expired or have been transferred and the Group has transferred substantially all risks and rewards

of ownership. On disposal of a fi nancial asset, the difference between the carrying amount and the sale

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

asset is reclassifi ed to the income statement.

Trade receivables that are factored out to banks and other fi nancial institutions with recourse to the Group

are not derecognised until the recourse period has expired and the risks and rewards of the receivables

have been fully transferred. The corresponding cash received from the fi nancial institutions is recorded as

borrowings.

(c) Initial measurement

Financial assets are initially recognised at fair value plus transaction costs except for fi nancial assets at fair

value through profi t or loss, which are recognised at fair value. Transaction costs for fi nancial assets at fair

value through profi t or loss are recognised immediately as expenses.






(d) Subsequent measurement

Available-for-sale fi nancial assets and fi nancial assets at fair value through profi t or loss are subsequently

carried at fair value. Loans and receivables and held-to-maturity fi nancial assets are subsequently carried at

amortised cost using the effective interest method.

Changes in the fair value of fi nancial assets at fair value through profi t or loss including the effects of currency

translation, interest and dividends, are recognised in the income statement when the changes arise.

Interest and dividend income on available-for-sale fi nancial assets are recognised separately in the income

statement. Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominated

in foreign currencies are analysed into currency translation differences on the amortised cost of the securities

and other changes; the currency translation differences are recognised in the income statement and the

other changes are recognised in other comprehensive income and accumulated in the fair value reserve.

Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in

other comprehensive income and accumulated in the fair value reserve, together with the related currency

translation differences.

(e) Impairment

The Group assesses at each balance sheet date whether there is objective evidence that a fi nancial asset

or a group of fi nancial assets is impaired and recognises an allowance for impairment when such evidence

exists.

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

Signifi cant fi nancial diffi culties of the debtor, probability that the debtor will enter bankruptcy, and

default or signifi cant delay in payments are objective evidence that these fi nancial assets are impaired.

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

which is calculated as the difference between the carrying amount and the present value of estimated

future cash fl ows, discounted at the original effective interest rate. When the asset becomes

uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts

previously written off are recognised against the same line item in the income statement.

The impairment allowance is reduced through the income statement in a subsequent period when

the amount of impairment loss decreases and the related decrease can be objectively measured.

The carrying amount of the asset previously impaired is increased to the extent that the new carrying

amount does not exceed the amortised cost had no impairment been recognised in prior periods.

(ii) Available-for-sale fi nancial assets

In addition to the objective evidence of impairment described in Note 2.11(e)(i), a signifi cant or

prolonged decline in the fair value of an equity security below its cost is considered as an indicator

that the available-for-sale fi nancial asset is impaired.

If any evidence of impairment exists, the cumulative loss that was previously recognised in other

comprehensive income is reclassifi ed to the income statement. The cumulative loss is measured as

the difference between the acquisition cost (net of any principal repayments and amortisation) and

the current fair value, less any impairment loss previously recognised as an expense. The impairment

losses recognised as an expense on equity securities are not reversed through the income statement.






(f) Offsetting fi nancial instruments

Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a

legally enforceable right to offset and there is an intention to settle on a net basis or realise the asset and

settle the liability simultaneously.

2.12 Financial guarantees

The Company issues corporate guarantees to banks for borrowings of its subsidiaries and third parties for services

provided to a subsidiary. These guarantees are fi nancial guarantees as they require the Company to reimburse the

banks and third parties if the subsidiaries fail to make principal or interest payments when due in accordance with

the terms of their borrowings.

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

sheet.

Financial guarantees are subsequently amortised to the income statement over the period of the subsidiaries’

borrowings, unless it is probable that the Company will reimburse the banks for an amount higher than the

unamortised amount. In this case, the fi nancial guarantees shall be carried at the expected amount payable to the

banks in the Company’s balance sheet.

Intra-group transactions are eliminated on consolidation.

2.13 Borrowings

Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at

least 12 months after the balance sheet date, in which case they are presented as non-current liabilities.

Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised

cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the

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

2.14 Trade and other payables

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

fi nancial year which are unpaid. They are classifi ed as current liabilities if payment is due within one year or less (or in

the normal operating cycle of the business if longer). Otherwise, they are presented as non-current liabilities.

Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the

effective interest method.

2.15 Derivative fi nancial instruments and hedging activities

A derivative fi nancial instrument is initially recognised at its fair value on the date the contract is entered into and

is subsequently carried at its fair value. The method of recognising the resulting gain or loss depends on whether

the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group

designates each hedge as fair value hedge.

Fair value changes on derivatives that are not designated or do not qualify for hedge accounting are recognised in

the income statement when the changes arise.





2.15 Derivative fi nancial instruments and hedging activities (continued)

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

hedged items, as well as its risk management objective and strategies for undertaking various hedge transactions.

The Group also documents its assessment, both at hedge inception and on an ongoing basis, on whether the

derivatives designated as hedging instruments are highly effective in offsetting changes in fair values or cash fl ows of

the hedged items.

The carrying amount of a derivative designated as a hedge is presented as a non-current asset or liability if

the remaining expected life of the hedged item is more than 12 months, and as a current asset or liability if the

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

as a current asset or liability.

Fair value hedge

The Group has not designated any derivatives as hedging instruments during the fi nancial year.

2.16 Fair value estimation of fi nancial assets and liabilities

The fair values of fi nancial instruments traded in active markets (such as exchange-traded and over-the-counter

securities and derivatives) are based on quoted market prices at the balance sheet date. The quoted market prices

used for fi nancial assets are the current bid prices; the appropriate quoted market prices for fi nancial liabilities are

the current asking prices.

The fair values of fi nancial instruments that are not traded in an active market are determined by using valuation

techniques. The Group uses a variety of methods and makes assumptions based on market conditions existing

at each balance sheet date. Where appropriate, quoted market prices or dealer quotes for similar instruments are

used. Valuation techniques, such as discounted cash fl ow analyses, are also used to determine the fair values of the

fi nancial instruments.

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

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

2.17 Leases

(a) When the Group is the lessee:

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

(i) Lessee - Finance leases

Leases of property, plant and equipment where the Group assumes substantially all risks and rewards

incidental to ownership of the leased assets are classifi ed as fi nance leases.

The leased assets and the corresponding lease liabilities (net of fi nance charges) under fi nance leases

are recognised on the balance sheet as property, plant and equipment and borrowings respectively, at

the inception of the leases based on the lower of the fair value of the leased assets and the present

value of the minimum lease payments.

Each lease payment is apportioned between the finance expense and the reduction of the

outstanding lease liability. The fi nance expense is recognised in the income statement on a basis that

refl ects a constant periodic rate of interest on the fi nance lease liability.





2.17 Leases (continued)

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

(ii) Lessee - Operating leases

Leases of property, plant and equipment where substantially all risks and rewards incidental to

ownership are retained by the lessors are classifi ed as operating leases. Payments made under

operating leases (net of any incentives received from the lessors) are recognised in the income

statement on a straight-line basis over the lease term.

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

(b) When the Group is the lessor:

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

parties and related parties.

(i) Lessor - Operating leases

Leases of property, plant and equipment and investment properties where the Group retains

substantially all risks and rewards incidental to ownership are classifi ed as operating leases. Rental

income from operating leases (net of any incentives given to lessees) is recognised in the income

statement on the straight-line basis over the lease term.

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

the carrying amount of the leased asset and recognised as an expense in the income statement over

the lease term on the same basis as the lease income.

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

2.18 Inventories

Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted average

method. The cost of fi nished goods and work-in-progress comprises raw materials, direct labour, other direct

costs and related production overheads (based on normal operating capacity) but excludes borrowing costs.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of

completion and applicable variable selling expenses.

2.19 Income taxes

Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered

from the tax authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the

balance sheet date.

Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities

and their carrying amounts in the fi nancial statements except when the deferred income tax arises from the initial

recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither

accounting nor taxable profi t or loss at the time of the transaction.

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

associated companies, except where the Group is able to control the timing of the reversal of the temporary

difference and it is probable that the temporary difference will not reverse in the foreseeable future.





2.19 Income taxes (continued)

A deferred income tax asset is recognised to the extent that it is probable that future taxable profi t will be available

against which the deductible temporary differences and tax losses can be utilised.

Deferred income tax is measured:

(i) at the tax rates that are expected to apply when the related deferred income tax asset is realised or the

deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or

substantively enacted by the balance sheet date; and

(ii) based on the tax consequence that will follow from the manner in which the Group expects, at the balance

sheet date, to recover or settle the carrying amounts of its assets and liabilities, except for investment

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

Current and deferred income tax are recognised as income or expense in the income statement, except to the

extent that the tax arises from a business combination or a transaction which is recognised directly in equity.

Deferred tax arising from a business combination is adjusted against goodwill on acquisition.

2.20 Provisions

Provisions for warranty and other liabilities are recognised when the Group has a present legal or constructive

obligation as a result of past events; it is more likely than not that an outfl ow of resources will be required to settle

the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating

losses.

The Group recognises the estimated liability to repair or replace products still under warranty at the balance sheet

date. This provision is calculated based on estimates by technical engineers and historical experience of the level of

repairs and replacements.

Other provisions are measured at the present value of the expenditure expected to be required to settle the

obligation using a pre-tax discount rate that refl ects the current market assessment of the time value of money and

the risks specifi c to the obligation. The increase in the provision due to the passage of time is recognised in the

income statement as fi nance expense.

Changes in the estimated timing or amount of the expenditure or discount rate are recognised in the income

statement when the changes arise.

2.21 Employee compensation

Employee benefi ts are recognised as an expense, unless the cost qualifi es to be capitalised as an asset.

(a) Defi ned contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed

contributions into separate entities such as the Central Provident Fund and social security plans in the

People’s Republic of China (“PRC”) on a mandatory, contractual or voluntary basis. The Group has no further

payment obligations once the contributions have been paid.





2.21 Employee compensation (continued)

(b) Employee leave entitlements

Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made

for the estimated liability for annual leave as a result of services rendered by employees up to the balance

sheet date.

(c) Share-based compensation

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

received in exchange for the grant of the options is recognised as an expense with a corresponding

increase in the share option reserve over the vesting period. The total amount to be recognised over the

vesting period is determined by reference to the fair value of the options granted on the date of the grant.

Non-market vesting conditions are included in the estimation of the number of shares under option that

are expected to become exercisable on the vesting date. At each balance sheet date, the Group revises

its estimates of the number of shares under options that are expected to become exercisable on the

vesting date and recognises the impact of the revision of the estimates in the income statement, with a

corresponding adjustment to the share option reserve over the remaining vesting period.

When the options are exercised, the proceeds received (net of transaction costs) are credited to share capital

account when new ordinary shares are issued.

2.22 Currency translation

(a) Functional and presentation currency

Items included in the fi nancial statements of each entity in the Group are measured using the currency of the

primary economic environment in which the entity operates (“functional currency”). The fi nancial statements

are presented in Singapore Dollars, which is the functional currency of the Company.

(b) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) are translated into

the functional currency using the exchange rates at the dates of the transactions. Currency translation

differences resulting from the settlement of such transactions and from the translation of monetary assets

and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised

in the income statement. However, in the consolidated fi nancial statements, currency translation differences

arising from borrowings in foreign currencies and other currency instruments designated and qualifying as net

investment hedges and net investment in foreign operations, are recognised in other comprehensive income

and accumulated in the currency translation reserve.

When a foreign operation is disposed of or any borrowings forming part of the net investment of the foreign

operation are repaid, a proportionate share of the accumulated translation differences is reclassifi ed to the

income statement, as part of the gain or loss on disposal.

Foreign exchange gains and losses that impact the income statement are presented in the income statement

within “other income (net)”.

Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at

the date when the fair values are determined.





2.22 Currency translation (continued)

(c) Translation of Group entities’ fi nancial statements

The results and financial position of all the Group entities (none of which has the currency of a

hyperinfl ationary economy) that have a functional currency different from the presentation currency are

translated into the presentation currency as follows:

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

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

reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates,

in which case, income and expenses are translated using the exchange rates at the dates of the

transactions); and

(iii) All resulting currency translation differences are recognised in other comprehensive income and

accumulated in the currency translation reserve. The currency translation differences are reclassifi ed

to the income statement on disposal or partial disposal of the entity giving rise to such reserve.

Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and

liabilities of the foreign operations and translated at the closing rates at the reporting date.

2.23 Segment reporting

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

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

segments.

2.24 Cash and cash equivalents

For the purpose of presentation in the consolidated statement of cash fl ows, cash and cash equivalents include

cash on hand, deposits with fi nancial institutions which are subject to an insignifi cant risk of change in value and

bank overdrafts and exclude pledged deposits with fi nancial institutions. Bank overdrafts are presented as current

borrowings on the balance sheet.

2.25 Share capital

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

shares are deducted against the share capital account.

2.26 Dividends to Company’s shareholders

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

2.27 Government grants

Grants from the government are recognised as a receivable at their fair value when there is reasonable assurance

that the grant will be received and the Group will comply with all the attached conditions.

Government grants receivable are recognised as income over the periods necessary to match them with the related

costs which they are intended to compensate, on a systematic basis. Government grants relating to expenses are

shown separately as other income.

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




3. Critical accounting estimates, assumptions and judgements

Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other

factors, including expectations of future events that are believed to be reasonable under the circumstances.

(a) Construction contracts

The Group uses the percentage-of-completion method to account for its contract revenue. The stage of

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

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

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

If the stage of completion increases/decreases by 10% from management’s estimates, the Group’s

revenue will increase/decrease by $572,539,000 and the Group’s cost of sales will increase/decrease by

$525,949,000.

If the total contract costs to be incurred increase/decrease by 10% from management’s estimates, the

Group’s cost of sales will increase/decrease by $335,607,000.

(b) Useful life of property, plant and equipment

The management of the Group determines the estimated useful lives and related depreciation expense for

the property, plant and equipment. The management of the Group estimates useful lives of the property,

plant and equipment by reference to expected usage of the property, plant and equipment, expected repair

and maintenance, and technical or commercial obsolescence arising from the changes or improvements in

the market. The useful lives and related depreciation expense could change signifi cantly as a result of the

changes in these factors.

(c) Impairment of receivables

Management reviews its receivables for objective evidence of impairment regularly. Signifi cant fi nancial

diffi culties of the debtor, the probability that the debtor will enter bankruptcy, and default or signifi cant

delay in payments are considered objective evidence that a receivable is impaired. In determining this,

management has made judgement as to whether there is observable data indicating that there has been a

signifi cant change in the payment ability of the debtor, or whether there have been signifi cant changes with

adverse effect in the technological, market, economic or legal environment in which the debtor operates.

Where there is objective evidence of impairment, management has made judgements as to whether an

impairment loss should be recorded in the income statement. In determining this, management has

used estimates based on historical loss experience for assets with similar credit risk characteristics. The

methodology and assumptions used for estimating both the amount and timing of future cash fl ows are

reviewed regularly to reduce any differences between the estimated loss and actual loss experience.

Any changes in the net present values of estimated cash fl ows from management’s estimates for all past due

receivables, will not result in any signifi cant impact to the Group’s allowance for impairment.

(d) Warranty claims

The provision for warranty is based on estimates from known and expected warranty work and contractual

obligation for further work to be performed after completion. The warranty provision could differ from future

claims. Movements in provision for warranty are detailed in Note 28(b).




4. Revenue

The Group

2013 2012

$’000 $’000

Construction revenue

- Ship building and marine engineering 2,878,612 2,975,466

Rendering of services

- Ship repair and marine engineering 573,893 705,078

- Charter hire 54,731 52,839

Others 898 878

Total sales 3,508,134 3,734,261

5. Expenses by nature

The Group

2013 2012

$’000 $’000

Allowance for impairment of property, plant and equipment 110 8,131

Allowance for impairment of transferable club memberships 11 73

Amortisation of deferred expenditure 86 85

Changes in inventories and construction contract work-in-progress (784,475) 162,672

Commission 41,714 54,591

Crew overheads 12,401 9,796

Depreciation of property, plant and equipment and

investment properties 183,525 178,895

Director and employee compensation (Note 6) 363,758 354,675

Net allowance for impairment of trade and other receivables 5,228 7,814

Net allowance for inventory write-down 23,678 2,013

Net allowance for/(reversal of) expected losses recognised

on construction contracts 85,717 (28,564)

Non-audit service fees paid/payable to auditor of the Company 35 93

Other expenses 126,731 133,111

Provision for an onerous contract 144 –

Raw materials, fi nished goods, consumables and other overheads 2,834,362 2,067,980

Rental expense on operating leases 78,758 74,467

Repairs and maintenance 18,813 25,581

Sub-contractor expenses 439,680 467,274

Vessel overheads 16,147 8,884

Write-off of property, plant and equipment 469 230

Total cost of sales, distribution and administrative expenses 3,446,892 3,527,801




6. Director and employee compensation

The Group

2013 2012

$’000 $’000

Wages, salaries and staff benefi ts 323,250 316,391

Employer’s contribution to defi ned contribution plans

including Central Provident Fund 40,203 37,979

Directors’ fees of the Company 305 305

363,758 354,675

7. Other income (net)

The Group

2013 2012

$’000 $’000

Compensation received from customers 17,452 918

Currency exchange (loss)/gain – net (18,933) 675

Dividend income 503 407

Government grants 14,678 10,329

Interest income 44,712 39,413

Net fair value gain on forward currency contracts 750 –

Net gain/(loss) on disposal of property, plant and equipment 666 (661)

Rental income 2,379 2,924

Sale of scrap materials 44,178 60,636

Sundry income 3,753 7,926

110,138 122,567

8. Finance expenses

The Group

2013 2012

$’000 $’000

Interest expense

- Bank borrowings and bills payable 109,829 99,800

- Loan from a fellow subsidiary 1,330 712

Total interest expense 111,159 100,512

Less: Amount capitalised in construction of property, plant

and equipment (Note 23) (314) (526)

Finance expenses recognised in the income statement 110,845 99,986




9. Income taxes

(a) Income tax expense

The Group

2013 2012

$’000 $’000

Tax expense attributable to profi t is made up of:

Profi t for the fi nancial year:

- Current income tax

- Singapore 718 714

- Foreign 34,505 68,306

35,223 69,020

- Deferred income tax (Note 29)

- Foreign (16,040) 18,049

19,183 87,069

(Over)/under provision in prior fi nancial years:

- Current income tax

- Singapore (172) (109)

- Foreign (9,832) (39,351)

(10,004) (39,460)

- Deferred income tax (Note 29)

- Foreign (1,022) 12,233

8,157 59,842

The tax on the Group’s profi t before tax differs from the theoretical amount that would arise using the

Singapore standard rate of income tax as follows:

The Group

2013 2012

$’000 $’000

Profi t before tax and share of profi t of associated companies 60,535 229,041

Tax calculated at a tax rate of 17% (2012: 17%) 10,291 38,937

Effects of:

- Change in tax rate in other countries 3,299 30,517

- Different tax rates in other countries (3,792) 6,799

- Tax incentives (987) (1,086)

- Income not subject to tax (72) (70)

- Expenses not deductible for tax purposes 5,547 10,457

- Utilisation of previously unrecognised deferred tax assets (10) –

- Deferred tax assets not recognised 4,858 1,082

- Others 49 433

Tax charge 19,183 87,069




9. Income taxes (continued)

(b) Movements in current income tax liabilities


2013 2012 2013 2012

$’000 $’000 $’000 $’000

Beginning of fi nancial year 10,383 66,460 896 372

Currency translation differences 1,284 (3,514) – –

Income tax paid (11,598) (82,123) (12) (54)

Tax expense on profi t for

the current fi nancial year 35,223 69,020 757 643

Over provision in prior fi nancial years (10,004) (39,460) (110) (65)

End of fi nancial year 25,288 10,383 1,531 896

(c) The tax (charge)/credit relating to each component of other comprehensive income is as follows:

2013 2012

Before

Tax

Tax

(charge)/

credit

After

Tax

Before

Tax

Tax

(charge)/

credit

After

Tax

$’000 $’000 $’000 $’000 $’000 $’000

Fair value (loss)/gain on available-

for-sale fi nancial assets (123) 31 (92) 49 (12) 37

Currency translation differences

arising from consolidation 118,317 – 118,317 (92,713) – (92,713)

Other comprehensive

income/(loss) 118,194 31 118,225 (92,664) (12) (92,676)

10. Earnings per share

(a) Basic earnings per share

Basic earnings per share is calculated by dividing the net profi t attributable to equity holders of the Company

by the weighted average number of ordinary shares outstanding during the fi nancial year.

2013 2012

Net profi t attributable to equity holders of the Company ($’000) 30,615 105,685

Weighted average number of ordinary shares

outstanding for basic earnings per share (’000) 2,239,245 2,239,245

Basic earnings per share (cents per share) 1.37 4.72




10. Earnings per share (continued)

(b) Diluted earnings per share

For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares

outstanding is adjusted for the effects of all dilutive potential ordinary shares arising from share options.

For share options, the weighted average number of shares on issue has been adjusted as if all dilutive

share options were exercised. The number of shares that could have been issued upon the exercise of

all dilutive share options less the number of shares that could have been issued at fair value (determined

as the Company’s average share price for the fi nancial year) for the same total proceeds is added to the

denominator as the number of shares issued for no consideration. No adjustment is made to the net profi t.

Diluted earnings per share attributable to equity holders of the Company is calculated as follows:

2013 2012

Net profi t attributable to equity holders of the

Company ($’000) 30,615 105,685


outstanding for basic earnings per share (’000) 2,239,245 2,239,245


outstanding for diluted earnings per share (’000) 2,239,245 2,239,245

Diluted earnings per share (cents per share) 1.37 4.72

11. Cash and cash equivalents

Cash and cash equivalents at the end of the fi nancial year comprise the following:


2013 2012 2013 2012

$’000 $’000 $’000 $’000

Cash at bank and on hand 689,502 858,707 8,598 2,236

Short-term bank deposits 1,338,895 834,129 45,810 81,669

2,028,397 1,692,836 54,408 83,905

Cash at bank and short-term bank deposits include an amount of $726,520,000 (2012: $595,177,000) placed with

a fellow subsidiary, COSCO Finance Co., Ltd.

For the purpose of presenting the consolidated statement of cash fl ows, the consolidated cash and cash

equivalents comprise the following:

The Group

2013 2012

$’000 $’000

Cash and bank balances (as above) 2,028,397 1,692,836

Less: Bank deposits pledged (3,357) (17,564)

Cash and cash equivalents per consolidated statement of cash fl ows 2,025,040 1,675,272

In 2013, cash and bank balances and short-term bank deposits of the Group amounting to $3,357,000 (2012:

$17,564,000) are pledged as security for trade fi nance facilities.




12. Forward currency contracts

The Group

Contract Fair value

notional

amount Assets Liabilities

$’000 $’000 $’000

2013

Non-hedging instruments

- Forward currency contracts 125,906 770 –

2012

Non-hedging instruments

- Forward currency contracts – – –

13. Trade and other receivables - current


2013 2012 2013 2012

$’000 $’000 $’000 $’000

Trade receivables:

- Non-related parties (i) 215,099 298,156 – –

- Fellow subsidiaries 22,667 41,131 – –

237,766 339,287 – –

Less: Allowance for impairment

of receivables

- non-related parties (11,323) (11,038) – –

Trade receivables - net 226,443 328,249 – –

Construction contracts due from

customers (Note 15):

- Non-related parties (i) 2,031,327 1,679,398 – –

Other receivables:

- Non-related parties 55,161 44,715 7 7

- Fellow subsidiaries (ii) 10,125 12,844 – –

- Associated companies (ii) 1 1,716 – –

- A subsidiary – – 1,392 1,401

65,287 59,275 1,399 1,408

Less: Allowance for impairment

of other receivables

- non-related parties (11,978) (5,867) – –

Other receivables – net 53,309 53,408 1,399 1,408

Loan to an associated company (iii) 939 882 – –

Advances paid to suppliers 595,584 672,805 – –

Staff advances 1,120 1,032 – –

Dividend receivable from

- Subsidiaries – – 30,359 15,469

- Associated companies 3,106 2,927 – –

Total 2,911,828 2,738,701 31,758 16,877




13. Trade and other receivables - current (continued)

(i) Certain subsidiaries of the Group have factored trade receivables and construction contracts due from

customers with carrying amounts of $1,119,841,000 (2012: $1,006,722,000) to banks in exchange for

cash during the fi nancial year ended 31 December 2013. The transactions have been accounted for as

collateralised borrowings as the banks have full recourse to the subsidiaries in the event of default by the

debtors (Note 27).

(ii) Other receivables due from fellow subsidiaries and associated companies are unsecured, interest-free and

are repayable on demand.

(iii) The loan to an associated company is unsecured, interest-bearing at 6.15% (2012: 6.15%) per annum and is

repayable on demand.

14. Inventories

The Group

2013 2012

$’000 $’000

Raw materials 295,049 269,710

Work-in-progress 706,883 38,831

Finished goods 44,832 43,642

1,046,764 352,183

The cost of inventories recognised as an expense and included in “cost of sales” amounted to $3,066,475,000

(2012: $3,331,766,000).

15. Construction contract work-in-progress

The Group

2013 2012

$’000 $’000

Beginning of fi nancial year 93,009 148,098

Contract costs incurred during the fi nancial year 2,643,902 2,589,925

Contract expenses recognised in the income

statement during the fi nancial year (2,537,414) (2,638,476)

Currency translation differences 8,869 (6,538)

End of fi nancial year 208,366 93,009

Aggregate costs incurred and profi ts recognised

(less losses recognised) to date on uncompleted construction contracts 3,563,072 3,442,243

Less: Progress billings (1,682,434) (1,884,406)


1,931,749 1,538,527

Presented as:

Due from customers on construction contracts (Note 13) 2,031,327 1,679,398

Due to customers on construction contracts (Note 26) (99,578) (140,871)

1,931,749 1,538,527

Advances received on construction contracts (Note 26) 495,181 (339,207)

Retentions on construction contracts 8,697 4,529




16. Other current assets


2013 2012 2013 2012

$’000 $’000 $’000 $’000

Deposits 2,660 1,712 16 6

Prepayments 12,575 10,153 160 185

15,235 11,865 176 191

17. Trade and other receivables - non-current

The Group

2013 2012

$’000 $’000

Trade receivables:

- Non-related parties (i) 40,595 45,503

Less: Current portion (15,380) (12,114)

25,215 33,389

Other receivables:

- A non-related party (ii) 11,659 10,955

36,874 44,344

(i) As at 31 December 2013, trade receivables amounting to $32,456,000 are unsecured, bear interest ranging

from 4% to 8% per annum with quarterly instalment payments that are repayable in full by 2016. The

remaining trade receivables amounting to $8,139,000 are secured by 4 vessels, bear interest of 4.5% in 2014

and 5.5% in 2015, and are repayable in full by 2015. The fair values of the non-current trade receivables

approximate its carrying amounts, determined from cash fl ow analyses discounted at market borrowing rates

of 2.67% per annum which the directors expected to be available to the Group.

As at 31 December 2012, trade receivables amounting to $42,121,000 are unsecured, bear interest ranging

from 6% to 8% per annum with quarterly instalment payments that are repayable in full by 2016. The

remaining trade receivables amounting to $3,382,000 are secured, interest-free and are repayable in full by

2014. The fair values of the non-current trade receivables approximate its carrying amounts, determined from

cash fl ow analyses discounted at market borrowing rates of 3.26% per annum which the directors expected

to be available to the Group.

(ii) Other receivables from a non-related party are unsecured and interest-free. As at 31 December 2013, the fair

values of the non-current other receivables are not materially different from its carrying amounts, determined

from cash fl ow analyses discounted at market borrowing rates of 4.22% per annum (2012: 4.59% per annum)

which the directors expected to be available to the Group.




18. Available-for-sale fi nancial assets

The Group

2013 2012

$’000 $’000


Currency translation differences 270 (212)

Fair value (loss)/gain recognised in equity [Note 31(b)(v)] (123) 49


At the balance sheet date, available-for-sale fi nancial assets include the following:

The Group

2013 2012

$’000 $’000

Quoted equity shares in a corporation, at fair value 438 530

Unquoted equity shares in corporations, at cost

- A fellow subsidiary 2,921 2,744

- A non-related party 1,032 970

3,953 3,714

4,391 4,244

The directors do not anticipate that the carrying amounts of these unquoted equity investments will deviate

signifi cantly from their fair values on the basis that these unquoted equity shares in corporations are in positive net

tangible assets position.

19. Club memberships


2013 2012 2013 2012

$’000 $’000 $’000 $’000

Transferable club memberships, at cost 664 673 428 428

Currency translation differences 5 (9) – –

Allowance for impairment in

value of club memberships (366) (354) (340) (329)

303 310 88 99




20. Investments in associated companies

The Group

2013 2012

$’000 $’000



Share of profi t after tax 407 580

Dividends declared, net of tax (98) (244)


The summarised fi nancial information of associated companies, not adjusted for the proportion of ownership interest

held by the Group, is as follows:

- Assets 32,365 35,573

- Liabilities 16,516 21,677

- Revenue 32,507 28,153

- Net profi t 1,277 1,845

Details of associated companies are set out below:

Name of

associated companies Principal activities

Country of

incorporation/

business

% of

paid-up

capital held by

subsidiaries

2013

%

2012

%

DMI (Guangzhou) Ltd (i) Overhaul and spare-parts

replacement and repair

People’s

Republic

of China

(“PRC”)

30 30

Tru-Marine Cosco (Tianjin) Engineering Co., Ltd (i) Overhaul and spare-parts


PRC 40 40

Diesel Marine International (Nantong) Co., Ltd (i) Overhaul and spare-parts


PRC 30 30

Diesel Marine Dalian Ltd (i) Overhaul and spare-parts


PRC 30 30

(i) Audited by Ruihua Certifi ed Public Accountants, PRC.




21. Investments in subsidiaries

The Company

2013 2012

$’000 $’000

Unquoted equity shares


Accumulated impairment losses (17,758) (18,477)


Movements in accumulated impairment losses are as follows:

2013 2012

$’000 $’000


Reversal of impairment charge (719) (603)


Details of the subsidiaries are set out below:

Name of

subsidiaries

Principal

activities

Country of

incorporation/

business

Cost of

investment

% of paid–up capital held by

The Company Subsidiaries

2013 2012 2013 2012 2013 2012

$’000 $’000 % % % %

COSCO

(Singapore)

Pte Ltd (i)

Ship owning, ship

chartering and

investment

holding

Singapore 87,664 87,664 100 100 – –

COSCO Marine

Engineering

(Singapore)

Pte Ltd (i)

Ship repairing,

marine

engineering,

container repairs

and services,

fabrication works

services and

production of

marine

outfi tting

components

Singapore 2,242 2,242 90 90 – –

Harington

Property

Pte Ltd (i)

Trading and

investing in

properties,

provide property

management

services and

investment

holding

Singapore 52,701 52,701 100 100 – –

COSCO Shipyard

Group Co., Ltd

(iii) and (iv)

Investment holding People’s

Republic of

China (“PRC”)

191,173 191,173 51 51 – –




21. Investments in subsidiaries (continued)

Name of

subsidiaries

Principal

activities

Country of

incorporation/

business

Cost of

investment



2013 2012 2013 2012 2013 2012

$’000 $’000 % % % %

COSCO (Nantong)

Shipyard Co., Ltd

(iii) and (iv)

Ship repair and

marine engineering

PRC 24,670 24,670 50 50 50 50

COSCO (Dalian)

Shipyard Co., Ltd

(iii) and (iv)

Ship repair, ship

building and

marine engineering

PRC 30,296 30,296 39 39 59 59

COSCO

(Guangdong)

Shipyard Co.,

Ltd (iii) and (iv)

Ship repair, ship

building and

marine engineering

PRC – – – – 75 75

COSCO

(Zhoushan)

Shipyard Co., Ltd

(iii) and (iv)

Ship repair, ship

building and

marine engineering

PRC – – – – 100 100

COSCO (Xiamen)

Shipyard Co., Ltd (iii)

Ship repair PRC – – – – 51 51

COSCO

(Shanghai)

Shipyard Co., Ltd

(iii) and (iv)

Ship repair

and marine

engineering

PRC – – – – 95 95

COSCO (Tianjin)



COSCO

(Lianyungang)



COSCO (Qidong)

Offshore Co.,

Ltd (iii) and (iv)

Offshore

marine engineering

PRC – – – – 60 60

COSCO Dalian

Rikky Ocean

Engineering

Co., Ltd (iii)

Overhaul, repair,

commissioning

and spare-parts

replacement of

governor,

turbocharger and

engine fuel system

PRC – – – – 75 75

COSCO (Nantong)

Clavon Ship

Engineering Co.,Ltd

(formerly known as

COSCO (Nantong)

Ocean Shipyard

Co., Ltd) (iii)

Ship repair and

corrosion control

PRC – – – – 60 60





Name of

subsidiaries

Principal

activities

Country of

incorporation/

business

Cost of

investment



2013 2012 2013 2012 2013 2012

$’000 $’000 % % % %

Zhongxing Sea-Land

Engineering Co., Ltd

(formerly known as

Zhongyuan Sea-

Land Engineering

Co., Ltd) (iii)


COSCO

Shipyard Total

Automation Co.,

Ltd (iii)

Design,

manufacture, sale

and technical

service relating

to vessels

and industrial

instruments

PRC – – – – 60 60

Cos Fair Shipping

Pte Ltd (i)

Ship owning

and ship chartering

Singapore/

Worldwide

– – – – 100 100

Cos Glory

Shipping Inc. (i)

Ship owning

and ship chartering

Panama/

Worldwide

– – – – 100 100

Hanbo Shipping

Limited (ii)

Ship owning

and ship chartering

Hong Kong/

Worldwide

– – – – 100 100

Sanbo Shipping

Limited (ii)

Ship owning

and ship chartering

Hong Kong/

Worldwide

– – – – 100 100

Cos Orchid

Shipping Pte Ltd (i)

Ship owning

and ship chartering

Singapore/

Worldwide

– – – – 100 100

Cos Prosperity

Shipping Pte Ltd (i)

Ship owning

and ship chartering

Singapore/

Worldwide

– – – – 100 100

Cos Knight Shipping

Maritime Inc. (i)

Ship owning

and ship chartering

Panama/

Worldwide

– – – – 100 100

Cos Lucky

Shipping

Maritime Inc. (i)

Ship owning

and ship chartering

Panama/

Worldwide

– – – – 100 100

COSCO

Engineering

Pte Ltd (i)

Ship repairing,

marine engineering,

container repairs

and services,

fabrication works

services and

production of

marine outfi tting

components

Singapore – – – – 100 100

388,746 388,746





(i) Audited by PricewaterhouseCoopers LLP, Singapore.

(ii) Audited by PricewaterhouseCoopers fi rms outside Singapore.

(iii) Audited by Ruihua Certifi ed Public Accountants, PRC.

(iv) Audited by PricewaterhouseCoopers LLP, Singapore and fi rms outside Singapore for the purposes of

preparation of consolidated fi nancial statements of the Group.

22. Investment properties

The Group

2013 2012

$’000 $’000

Cost



Reclassifi cation to property, plant and equipment (Note 23) (438) (3,229)


Accumulated depreciation



Depreciation charge 384 506

Reclassifi cation to property, plant and equipment (Note 23) (175) (1,301)


Net book value 11,293 11,730

Fair values 21,667 19,727

Investment properties are stated at cost less accumulated depreciation as the Group has elected to adopt the cost

model method to measure its investment properties.

Valuation techniques used to derive Level 2 fair values

Level 2 fair values of the investment properties are stated based on independent professional valuations using the

direct comparison method.

Sale prices of the comparable properties in close proximity are adjusted for differences in key attributes, such as

property size. The most signifi cant input into this valuation approach is selling price per square metre.

Valuation process of the Group

The Group engages external, independent and qualifi ed valuers to determine the fair values of the investment

properties at the end of each fi nancial year based on the properties’ highest and best use. As at 31 December

2013, the fair values of the properties have been determined by CBRE Private Limited.

Investment properties are leased to fellow subsidiaries, associated companies and non-related parties under

operating leases.




22. Investment properties (continued)

The following amounts are recognised in the income statement:

The Group

2013 2012

$’000 $’000

Rental income 1,044 1,184

Direct operating expenses arising from investment

properties that generate rental income 500 568

23. Property, plant and equipment

The Group

Leasehold

land and

buildings

$’000

Offi ce

renovations,

furniture,

fi xtures and

equipment

$’000

Plant,

machinery

and

equipment

$’000

Motor

vehicles

$’000

Motor

vessels

$’000

Docks

and quays

$’000

Construction-

in-progress

$’000

Total

$’000

2013

Cost

Beginning of fi nancial year 1,018,600 55,481 937,271 46,400 267,111 918,509 21,793 3,265,165

Currency translation differences 64,201 3,504 60,090 2,865 9,074 59,009 1,402 200,145

Additions 2,387 2,051 3,179 155 2,512 – 51,571 61,855

Disposals (10,023) (2,612) (24,555) (3,093) (2,309) – (1,038) (43,630)

Reclassifi cation 14,200 750 653 864 12,426 9,685 (38,140) 438

End of fi nancial year 1,089,365 59,174 976,638 47,191 288,814 987,203 35,588 3,483,973

Accumulated depreciation and impairment losses

Beginning of fi nancial year 177,751 42,233 406,180 37,225 146,578 229,509 – 1,039,476

Currency translation differences 11,912 2,833 28,456 2,463 5,096 15,650 – 66,410

Depreciation charge 37,382 6,442 90,318 4,411 11,295 33,293 – 183,141

Impairment charge – – 110 – – – – 110

Disposals (8,197) (2,562) (17,162) (3,182) (2,104) – – (33,207)

Reclassifi cation 175 – (1,273) – 1,273 – – 175

End of fi nancial year 219,023 48,946 506,629 40,917 162,138 278,452 – 1,256,105

Net book value End of fi nancial year 870,342 10,228 470,009 6,274 126,676 708,751 35,588 2,227,868

2012

Cost

Beginning of fi nancial year 983,457 53,392 935,553 47,772 283,686 929,290 89,788 3,322,938

Currency translation differences (46,676) (2,536) (45,021) (2,224) (16,457) (44,806) (4,313) (162,033)

Additions 28,956 3,602 4,141 1,254 976 – 83,727 122,656

Disposals (1,280) (764) (15,745) (971) (1,094) (5) (1,766) (21,625)

Reclassifi cation 54,143 1,787 58,343 569 – 34,030 (145,643) 3,229

End of fi nancial year 1,018,600 55,481 937,271 46,400 267,111 918,509 21,793 3,265,165

Accumulated depreciation and impairment losses

Beginning of fi nancial year 144,540 37,759 344,413 34,346 144,950 204,804 – 910,812

Currency translation differences (7,205) (1,872) (17,632) (1,691) (8,682) (10,284) – (47,366)

Depreciation charge 35,181 7,100 87,096 5,375 11,376 32,261 – 178,389

Impairment charge 6,407 – 970 – – 754 – 8,131

Disposals (494) (760) (8,661) (805) (1,066) (5) – (11,791)

Reclassifi cation (678) 6 (6) – – 1,979 – 1,301

End of fi nancial year 177,751 42,233 406,180 37,225 146,578 229,509 – 1,039,476

Net book value End of fi nancial year 840,849 13,248 531,091 9,175 120,533 689,000 21,793 2,225,689




23. Property, plant and equipment (continued)

The Group (continued)

Borrowing costs of $314,000 (2012: $526,000) which arise mainly due to fi nancing for the construction of docks

and quays are capitalised during the fi nancial year (Note 8) at an effective rate of 5.89% (2012: 6.27%) per annum.

The Company

Offi ce

renovations,

furniture,

fi xtures and

equipment

Motor

vehicles Total

$’000 $’000 $’000

2013

Cost

Beginning of fi nancial year 565 1,122 1,687

Additions 1 – 1

End of fi nancial year 566 1,122 1,688


Beginning of fi nancial year 546 236 782

Depreciation charge 10 128 138

End of fi nancial year 556 364 920

Net book valueEnd of fi nancial year 10 758 768

2012

Cost

Beginning of fi nancial year 553 1,212 1,765

Additions 14 245 259

Disposals (2) (335) (337)

End of fi nancial year 565 1,122 1,687


Beginning of fi nancial year 535 306 841

Depreciation charge 13 123 136

Disposals (2) (193) (195)

End of fi nancial year 546 236 782

Net book value End of fi nancial year 19 886 905




24. Intangible assets

The Group

2013 2012

$’000 $’000

Goodwill arising on consolidation 9,539 9,477

Cost




Net book value 9,539 9,477

Impairment tests for goodwill

Goodwill is allocated to the Group’s cash-generating units (“CGU”), identifi ed as the subsidiaries in the People’s

Republic of China (“PRC”) according to country of operation and business segments. The business segment refers

to ship repair, ship building and marine engineering activities.

The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use cash

fl ow projections based on the existing capacity of the CGU. Cash fl ows beyond 2013 are extrapolated using the

estimated growth rate stated below. The growth rate does not exceed the long-term average growth rate for ship

repair, ship building and marine engineering business in the PRC in which the CGU operates.

Key assumptions used for value-in-use calculations:

2013 2012

Growth rate1 3.70% 3.50%

Discount rate2 4.22% 4.59%

1 Weighted average growth rate used to extrapolate cash fl ows beyond the budget period

2 Pre-tax discount rate applied to the pre-tax cash fl ow projections

These assumptions were used for the analysis of the CGU within the business segment. Management determined

budgeted gross margin based on past performance and its expectations of the market development. The weighted

average growth rate used was consistent with the forecasts included in industry reports. The discount rate used was

pre-tax and refl ected specifi c risks relating to the relevant segments.

The impairment test has revealed that the recoverable amount of the CGU is higher than its carrying amount.

Hence, there is no impairment charge recognised for the fi nancial years ended 31 December 2013 and 31

December 2012.

In addition, a decrease in the growth rate or an increase in the discount rate by 1% per annum would not result in

any impairment charge for both fi nancial years.

25. Deferred expenditure

Deferred expenditure relates to prepaid rental for leasehold land on operating leases and is amortised on the

straight-line basis over the lease period.




26. Trade and other payables


2013 2012 2013 2012

$’000 $’000 $’000 $’000

Trade payables:

- Non-related parties 565,599 508,140 – –

- Associated companies 1,919 922 – –


606,122 534,109 – –

Construction contracts: Advances

received (Note 15):



495,181 339,207 – –

Due to customers (Note 15):


594,759 480,078 – –

Advances from non-related parties 63,619 52,453 – –

Non-trade payables:

- A subsidiary – – 15,000 15,000

- A fellow subsidiary – – 2 9

– – 15,002 15,009

Deposits received 9,944 7,708 – –

Deferred income 7,354 3,364 – –

Other accruals for operating expenses 1,410,065 1,162,590 3,147 2,877

Dividend payable to non controlling

interests of subsidiaries 4,048 4,065 – –

Total 2,695,911 2,244,367 18,149 17,886

The non-trade balances payable to subsidiary and fellow subsidiary are unsecured, interest-free and are repayable

on demand.




27. Borrowings

The Group

2013 2012

$’000 $’000

Current

Bank borrowings (unsecured) 1,133,610 994,718

Bank borrowings (secured) 666,244 378,215

Loans from a fellow subsidiary (unsecured) 2,086 31,752

Bills payable 124,125 63,225

1,926,065 1,467,910

Non-current

Bank borrowings (unsecured) 1,402,866 1,103,254

Bank borrowings (secured) 453,597 453,327

Loans from a fellow subsidiary (unsecured) – 1,960

1,856,463 1,558,541

Total borrowings 3,782,528 3,026,451

The exposure of the borrowings of the Group to interest rate changes and the contractual repricing dates at the

balance sheet dates are as follows:

The Group

2013 2012

$’000 $’000

Less than 1 year 1,926,065 1,467,910

1 – 5 years 1,849,162 1,525,221

Over 5 years 7,301 33,320

3,782,528 3,026,451

(a) Security granted

At the balance sheet date, total borrowings include secured liabilities of $1,119,841,000 (2012:

$831,542,000) for the Group. Secured bank borrowings are secured by:

(i) certain trade receivables (Note 13)

(ii) certain construction contracts due from customers (Note 13)

(b) Loans from a fellow subsidiary

The loans from a fellow subsidiary are unsecured, interest-bearing at 5.35% (2012: 4.96%) and are repayable

on demand.




27. Borrowings (continued)

(c) Fair values of non-current borrowings

At the balance sheet date, the carrying amounts of non-current borrowings approximated their fair values.

The fair values were determined from cash fl ow analyses, discounted at the market borrowing rates which

the directors expected to be available to the Group as follows:

2013 2012

USD RMB USD RMB

Bank borrowings 2.67% 4.22% 3.26% 4.59%

28. Provisions for other liabilities

The Group

2013 2012

$’000 $’000

Provision for off hire claim [Note (a)] 2,321 2,794

Provision for warranties [Note (b)] 43,449 44,057

Provision for legal claims [Note (c)] 9,482 8,868

Provision for an onerous contract [Note (d)] 144 –

55,396 55,719

(a) Movements in provision for off hire claim on hire income are as follows:

The Group

2013 2012

$’000 $’000


Provision made during the fi nancial year 332 604

Provision utilised during the fi nancial year (904) (1,413)



Provision for off hire claim on charter hire income is in respect of refund to be made to customers for period

in which the motor vessels are not available for use.




28. Provisions for other liabilities (continued)

(b) Movements in provision for warranties are as follows:

The Group

2013 2012

$’000 $’000


Provision made during the fi nancial year 15,456 7,000

Provision utilised during the fi nancial year (19,315) (7,057)



The Group gives one to two-year warranties on certain ship building and marine engineering contracts

and undertakes to repair or rectify defects that fail to perform satisfactorily. A provision is recognised at the

balance sheet date for expected warranty claims based on an estimate by technical engineers and past

experience of the possible repairs and rectifi cations.

(c) Movements in provision for legal claims are as follows:

The Group

2013 2012

$’000 $’000


Currency translation difference 571 (444)

Provision made during the fi nancial year 43 162


The provision for legal claims is in respect of certain legal claims brought against the Group by customers.

(d) Movements in provision for an onerous contract are as follows:

The Group

2013 2012

$’000 $’000

Beginning of fi nancial year – –

Provision made during the fi nancial year 144 –

End of fi nancial year 144 –

The provision for an onerous contract is in respect of a charter hire contract where the costs of meeting the

obligation under the contract exceed the expected revenue for the remaining contractual period.




29. Deferred income taxes

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income

tax assets against current income tax liabilities and when the deferred income taxes relate to the same fi scal

authority. The amounts, determined after appropriate offsetting, are shown on the balance sheets as follows:


2013 2012 2013 2012

$’000 $’000 $’000 $’000

Deferred income tax assets:

- To be recovered within one year 218,756 195,624 – –

- To be recovered after one year 6,456 6,290 – –

225,212 201,914 – –

Deferred income tax liabilities:

- To be settled after one year 528 7,432 398 7,302

Deferred income tax assets are recognised for tax losses, capital allowances, provisions and accruals carried

forward to the extent that realisation of the related tax benefi ts through future taxable profi ts is probable. The

Group has unrecognised tax losses of $20,579,000 (2012: $7,979,000) for which no deferred tax asset has been

recognised at the balance sheet date which can be carried forward and used to offset against future taxable

income subject to meeting certain statutory requirements by those companies with unrecognised tax losses in their

respective countries of incorporation.

The movements in the deferred income tax account, net were as follows:


2013 2012 2013 2012

$’000 $’000 $’000 $’000

Beginning of fi nancial year (194,482) (235,801) 7,302 5,582

Change in tax rate 3,299 30,517 – –

Currency translation differences (13,109) 11,025 137 (269)

Deferred tax (credited)/charged to income

statement (20,361) (235) (7,041) 1,989

Deferred tax (credited)/charged to equity

[Note 31(b)(v)] (31) 12 – –

End of fi nancial year (224,684) (194,482) 398 7,302




29. Deferred income taxes (continued)

The movements in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax

jurisdiction) during the fi nancial year were as follows:

The Group

Deferred income tax liabilities 2013 2012

$’000 $’000

Accelerated tax depreciation

Beginning and end of fi nancial year 130 130

Fair value gain

Beginning of fi nancial year 102 95


(Credited)/charged to equity [Note 31(b)(v)] (31) 12

End of fi nancial year 82 102

Undistributed profi ts of foreign subsidiaries



(Credited)/charged to income statement (7,041) 1,989

End of fi nancial year 398 7,302

Total




(Credited)/charged to equity (31) 12


Reconciliation of total deferred income tax liabilities after appropriate offsetting from the same tax jurisdiction is as

follows:

The Group

2013 2012

$’000 $’000

Total deferred income tax liabilities 610 7,534

Offsetting of deferred income tax assets from the same tax jurisdiction (82) (102)

Total deferred income tax liabilities after appropriate offsetting from the

same tax jurisdiction 528 7,432




29. Deferred income taxes (continued)

The Group

Deferred income tax assets 2013 2012

$’000 $’000

Provisions and accruals

Beginning of fi nancial year (202,016) (241,608)

Change in tax rate 3,299 30,517

Currency translation differences (13,257) 11,299

Credited to income statement (13,320) (2,224)

End of fi nancial year (225,294) (202,016)

Reconciliation of total deferred income tax assets after appropriate offsetting from the same tax jurisdiction is as

follows:

The Group

2013 2012

$’000 $’000

Total deferred income tax assets (225,294) (202,016)

Offsetting of deferred income tax liabilities from the same tax jurisdiction 82 102

Total deferred income tax assets after appropriate offsetting from the

same tax jurisdiction (225,212) (201,914)

The Company

Deferred income tax liabilities 2013 2012

$’000 $’000

Undistributed profi ts of foreign subsidiaries





30. Share capital

Issued share capital

No. of ordinary

shares Amount

’000 $’000

2013

Beginning and end of fi nancial year 2,239,245 270,608

2012

Beginning and end of fi nancial year 2,239,245 270,608

All issued shares are fully paid. There is no par value for these ordinary shares.

Fully paid ordinary shares carry one vote per share and carry a right to dividends as and when declared by the

Company.




30. Share capital (continued)

Share options

Under the COSCO Group Employees’ Share Option Scheme 2002 (the “Scheme 2002”), share options are granted to directors, key management and employees. The exercise price of the granted options is equal to the average of the closing prices of the Company’s ordinary shares on the Singapore Exchange for the fi ve market days immediately preceding the date of grant. The options may be exercised in full or in part in respect of 1,000 shares or a multiple thereof, on the payment of the exercise price. The persons to whom the options have been issued have no right to participate by virtue of the options in any share issue of any other company. The Group has no legal or constructive obligation to repurchase or settle the options in cash.

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

Options issued to directors and employees who have been in the service of the Company, subsidiary or associated company, or the holding company for at least six months but less than one year on or prior to the date of grant, may be exercised twenty-four months after the date of grant but before the end of one hundred and twenty months. For employees and directors who are in the service of the associated company and non-executive directors, the options shall expire at the end of sixty months. Options issued at a discount to market price, may only be exercised three years after the date of grant.

Movements in the number of unissued ordinary shares under option at the end of the fi nancial year and their exercise prices are as follows:

The Group and the Company

Financial year ended 31 December 2013


under option outstanding

Options relating to

Scheme 2002

Beginning of

fi nancial year

Lapsed during

fi nancial year

End of

fi nancial year

Exercise


’000 ’000 ’000 $

2006 Options 550 – 550 1.23 21.2.2007 - 20.2.2016

2007 Options 6,250 (2,500) 3,750 2.48 5.2.2008 - 4.2.2017

2008 Options (ii) 12,750 (3,840) 8,910 2.95 24.3.2009 - 23.3.2018

19,550 (6,340) 13,210



under option outstanding

Options relating to

Scheme 2002

Beginning of

fi nancial year

Lapsed during

fi nancial year

End of

fi nancial year

Exercise


’000 ’000 ’000 $

2006 Options 680 (130) 550 1.23 21.2.2007 - 20.2.2016

2007 Options (i) 10,550 (4,300) 6,250 2.48 5.2.2008 - 4.2.2017

2008 Options (ii) 17,080 (4,330) 12,750 2.95 24.3.2009 - 23.3.2018

28,310 (8,760) 19,550

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

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

Out of the outstanding options on 13,210,000 shares (2012: 19,550,000), options on 13,210,000 shares (2012: 19,550,000) are exercisable. There was no share option issued in 2013 and 2012. There were also no shares of the Company allotted and issued by virtue of the exercise of options to take up unissued shares of the Company in

2013 and 2012.




31. Statutory and other reserves


2013 2012 2013 2012

$’000 $’000 $’000 $’000

(a) Composition:

Share option reserve 44,578 44,578 44,578 44,578

Statutory reserve 225,497 198,505 – –

Currency translation reserve (28,031) (96,516) – –

Asset revaluation reserve 2,900 6,118 – –

Fair value reserve 126 173 – –

Other reserve 69 69 527 527

245,139 152,927 45,105 45,105

(b) Movements:

(i) Share option reserve

Beginning and end of

fi nancial year 44,578 44,578 44,578 44,578

The Group

2013 2012

$’000 $’000

(ii) Statutory reserve


Transfer from retained earnings 26,992 33,060


(iii) Currency translation reserve

Beginning of fi nancial year (96,516) (38,262)

Net currency translation differences of fi nancial statements

of foreign subsidiaries and associated companies 118,317 (92,713)

Non-controlling interests (49,832) 34,459

End of fi nancial year (28,031) (96,516)




31. Statutory and other reserves (continued)

The Group

2013 2012

$’000 $’000

(b) Movements: (continued)

(iv) Asset revaluation reserve


Revaluation reserve transferred to retained earnings (3,218) (3,218)


(v) Fair value reserve

Beginning of fi nancial year 173 154

Fair value (loss)/gain for available-for-sale fi nancial asset

(Note 18) (123) 49

Deferred tax credited/(charged) to equity (Note 29) 31 (12)

(92) 37

Non-controlling interests 45 (18)

End of fi nancial year 126 173

Statutory reserve represents the amount set aside in compliance with the local laws in the PRC where the

subsidiaries of the Group reside.

Statutory and other reserves are non-distributable.

32. Dividends

The Group and Company

2013 2012

$’000 $’000

Ordinary dividends paid

Final tax-exempt one-tier dividend paid in respect of the previous fi nancial

year of 2.0 cents (2012: 3.0 cents) per ordinary share 44,785 67,177

At the Annual General Meeting scheduled on 23 April 2014, a fi rst and fi nal tax-exempt one-tier dividend of 1 cent

per ordinary share (2012: fi rst and fi nal tax-exempt one-tier dividend of 2 cents per ordinary share) amounting to a

total of $22,392,000 (2012: $44,785,000), based on the number of shares issued as of 31 December 2013, will be

recommended. These fi nancial statements do not refl ect the dividends recommended for the fi nancial year ended 31

December 2013, which will be accounted for in equity as an appropriation of retained earnings in the fi nancial year

ending 31 December 2014.




33. Commitments

(a) Capital commitments

Capital expenditure contracted for at the balance sheet date but not recognised in the fi nancial statements

are as follows:

The Group

2013 2012

$’000 $’000

Property, plant and equipment 86,564 60,056

(b) Operating lease commitments – where the Group is a lessee

The Group leases various offi ce premises, docks and quays to non-related parties and related parties under

non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal

rights.

The future aggregate minimum lease payables under non-cancellable operating leases contracted for at the

balance sheet date but not recognised as liabilities, are as follows:

The Group

2013 2012

$’000 $’000

Not later than 1 year 11,782 17,067

Later than 1 year but not later than 5 years 34,499 39,914

Later than 5 years 67,441 88,813

113,722 145,794

(c) Operating lease commitments – where the Group is a lessor

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

related parties and related parties under non-cancellable operating leases.

The future minimum lease receivables under non-cancellable operating leases contracted for at the balance

sheet date but not recognised as receivables, are analysed as follows:

The Group

2013 2012

$’000 $’000

Not later than 1 year 17,711 12,149

Later than 1 year but not later than 5 years 434 2,632

18,145 14,781




34. Financial risk management

Financial risk factors

The Group’s activities expose it to a variety of fi nancial risks: market risk (including currency risk, interest rate risk

and price risk), credit risk and liquidity risk.

Risk management is carried out under policies approved by the Board of Directors. The Board approves guidelines

for overall risk management, as well as policies covering these specifi c areas.

(a) Market risk

(i) Currency risk

Currency risk arises from transactions denominated in currencies other than the respective functional

currencies of the entities in the Group.

The Group monitors its foreign currency exchange risk closely and where appropriate, enters into

forward currency contracts to manage the currency exposure.

In addition, the Group has certain investments in foreign operations, whose net assets are exposed to

currency translation risk. Currency exposure to the net assets of the Group’s foreign operations in the

People’s Republic of China is managed primarily through borrowings denominated in RMB and USD.

The Group’s currency exposure based on the information available to key management is as follows:

SGD USD RMB Others* Total

$’000 $’000 $’000 $’000 $’000

At 31 December 2013

Financial assets

Cash and cash equivalents and

available-for-sale fi nancial assets 18,955 793,135 1,217,874 2,824 2,032,788

Trade and other receivables, excluding

advances paid to suppliers 2,057 2,192,357 158,691 13 2,353,118

Receivables from subsidiaries – – 30,359 – 30,359

Other fi nancial assets 103 – 2,557 – 2,660

21,115 2,985,492 1,409,481 2,837 4,418,925

Financial liabilities

Borrowings – 2,880,348 902,180 – 3,782,528

Payables by subsidiaries – – 30,359 – 30,359

Other fi nancial liabilities 4,940 228,350 1,796,294 12,398 2,041,982

4,940 3,108,698 2,728,833 12,398 5,854,869

Net fi nancial assets/(liabilities) 16,175 (123,206) (1,319,352) (9,561) (1,435,944)

Less: Net fi nancial assets/(liabilities)

denominated in the respective

entities’ functional currencies (15,741) (56,118) 1,319,225 –

Add: Firm commitments and highly

probable forecast transactions

in foreign currencies – 2,249,944 – (79,581)

Less : Currency forwards – (125,906) – –

Currency exposure 434 1,944,714 (127) (89,142)

* Others mainly include Euro, Norwegian Kronor and Japanese Yen.




34. Financial risk management (continued)

(a) Market risk (continued)

(i) Currency risk (continued)

SGD USD RMB Others* Total

$’000 $’000 $’000 $’000 $’000

At 31 December 2012

Financial assets

Cash and cash equivalents and

available-for-sale fi nancial assets 18,658 983,325 679,222 15,875 1,697,080

Trade and other receivables, excluding

advances paid to suppliers 3,909 1,922,471 182,222 1,638 2,110,240

Receivables from subsidiaries – – 15,469 – 15,469

Other fi nancial assets 89 – 1,623 – 1,712

22,656 2,905,796 878,536 17,513 3,824,501


Borrowings – 2,153,738 872,713 – 3,026,451

Payables by subsidiaries – – 15,469 – 15,469

Other fi nancial liabilities 8,726 92,329 1,603,709 15,370 1,720,134

8,726 2,246,067 2,491,891 15,370 4,762,054

Net fi nancial assets/(liabilities) 13,930 659,729 (1,613,355) 2,143 (937,553)

Less: Net fi nancial assets/(liabilities)

denominated in the respective

entities’ functional currencies (13,805) (60,866) 1,613,286 –

Add: Firm commitments and highly

probable forecast transactions

in foreign currencies – 2,636,039 – (50,548)

Currency exposure 125 3,234,902 (69) (48,405)

* Others mainly include Euro, Norwegian Kronor and Japanese Yen.






(i) Currency risk (continued)

The Company’s currency exposure based on the information available to key management is as

follows:

2013 2012

SGD USD RMB Total SGD USD RMB Total

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

Financial assets

Cash and cash equivalents 2,295 52,112 1 54,408 8,868 75,036 1 83,905

Trade and other receivables 1,411 4 30,359 31,774 1,407 7 15,469 16,883

3,706 52,116 30,360 86,182 10,275 75,043 15,470 100,788


Other fi nancial liabilities 18,147 – 2 18,149 17,877 – 9 17,886

Net fi nancial (liabilities)/assets (14,441) 52,116 30,358 68,033 (7,602) 75,043 15,461 82,902

Less: Net fi nancial assets

denominated in the entity’s

functional currency 14,441 – – 7,602 – –

Currency exposure – 52,116 30,358 – 75,043 15,461

If the USD changes against the SGD and RMB by 500 basis points (2012: 500 basis points) with all

other variables including tax rate being held constant, the effects arising from the net fi nancial asset

position will be as follows:

2013 2012

Increase/(decrease)

Profi t

after tax

Profi t

after tax

$’000 $’000

The Group

USD against SGD

- strengthened 1,712 2,575

- weakened (1,712) (2,575)

USD against RMB

- strengthened (1,461) 3,193

- weakened 1,461 (3,193)

The Company

USD against SGD

- strengthened 1,713 2,550

- weakened (1,713) (2,550)






(ii) Price risk

The Group is not exposed to any signifi cant equity securities price risk.

(iii) Cash fl ow and fair value interest rate risks

Cash fl ow interest rate risk is the risk that the future cash fl ows of a fi nancial instrument will fl uctuate

because of changes in market interest rates. Fair value interest rate risk is the risk that the value

of a fi nancial instrument will fl uctuate due to changes in market interest rates. The Group has cash

balances placed with reputable banks and fi nancial institutions which generate interest income for the

Group. The Group manages its interest rate risks by placing such balances on varying maturities and

interest rate terms.

The Group’s interest rate risk mainly arises from non-current borrowings. The Group monitors the

interest rates on borrowings closely to ensure that the borrowings are maintained at favourable rates

and will use derivative fi nancial instruments to hedge their exposures when the exposure is signifi cant.

The Group’s borrowings at variable rates on which effective hedges have not been entered into, are

denominated mainly in RMB and USD. If the RMB and USD interest rates increase/decrease by 0.5%

(2012: 0.5%) with all other variables including tax rate being held constant, the profi t after tax will be

lower/higher by $465,000 (2012: $2,934,000) and $7,946,000 (2012: $6,594,000) respectively as a

result of higher/lower interest expense on these borrowings.

(b) Credit risk

Credit risk refers to the risk that a counter party will default on its contractual obligation resulting in fi nancial

loss to the Group.

Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of

customers who are internationally dispersed. Due to these factors, management believes that no additional

credit risk beyond the amount of allowance for impairment made is inherent in the Group’s and Company’s

trade receivables.

The Group has no signifi cant concentrations of credit risk. The Group has policies in place to ensure that

sales of products and services are made to customers with an appropriate credit history.

A subsidiary in the Group obtained a pledge of 4 vessels (2012: 4 vessels) valued at US$100,000,000 (2012:

US$19,900,000) to secure its outstanding trade receivables of US$6,400,000 (2012: US$5,145,000) as at 31

December 2013. The pledge was secured under a second preferred mortgage issued by the debtor to the

subsidiary.

Other than the above-mentioned, the Group and Company do not hold any other collateral. The maximum

exposure to credit risk for each class of fi nancial instruments is the carrying amount of that class of fi nancial

instruments presented on the balance sheet.

The Group’s and Company’s major classes of fi nancial assets are bank deposits and trade receivables.





(b) Credit risk (continued)

The credit risk for trade receivables (including amount due from customer on construction contracts) based

on the information provided to key management is as follows:

The Group

2013 2012

$’000 $’000

By business segments

Ship repair, ship building and marine engineering activities 2,275,838 2,036,545

Shipping 7,147 4,491

2,282,985 2,041,036

(i) Financial assets that are neither past due nor impaired

Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-

ratings assigned by international credit-rating agencies. Trade receivables that are neither past due

nor impaired are substantially companies with a good collection track record with the Group.

(ii) Financial assets that are past due and/or impaired

There is no other class of fi nancial assets that is past due and/or impaired except for trade

receivables.

The age analysis of trade receivables past due but not impaired is as follows:

The Group

2013 2012

$’000 $’000

Past due 0 to 3 months 1,830 9,552

Past due 3 to 6 months 1,344 1,213

Past due over 6 months 3,307 3,692

6,481 14,457





(b) Credit risk (continued)

(ii) Financial assets that are past due and/or impaired (continued)

The carrying amount of trade receivables individually determined to be impaired and the movement in

the related allowance for impairment are as follows:

The Group

2013 2012

$’000 $’000

Gross amount 11,323 11,038

Less: Allowance for impairment (11,323) (11,038)

– –



Allowance utilised (40) (6,441)

(Reversal of allowance)/allowance made (354) 4,461


(c) Liquidity risk

The Group adopts prudent liquidity risk management by maintaining suffi cient cash and having an adequate

amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature

of the underlying businesses, the Group aims at maintaining fl exibility in funding by keeping committed credit

facilities available.

The table below analyses the maturity profi le of the Group’s and Company’s fi nancial liabilities (including

forward currency contracts) based on contractual undiscounted cash fl ows.

Less than

1 year

Between

1 and 5

years

Over

5 years

$’000 $’000 $’000

The Group

At 31 December 2013

Gross-settled currency forwards

- Receipts 126,081 – –

- Payments (125,906) – –

Other fi nancial liabilities (2,041,982) – –

Borrowings (2,005,616) (1,899,274) (7,641)

At 31 December 2012

Other fi nancial liabilities (1,735,603) – –

Borrowings (1,551,537) (1,575,060) (35,318)

The Company

At 31 December 2013

Other fi nancial liabilities (18,149) – –

At 31 December 2012

Other fi nancial liabilities (17,886) – –





(d) Capital risk

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going

concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to

maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment,

return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell

assets to reduce borrowings.

Management monitors capital based on the return on shareholders’ fund. The return on shareholders’ fund

was 2.3% per annum for the current fi nancial year ended 31 December 2013 (2012: 8.2% per annum).

The return on shareholders’ fund is calculated as net profi t attributable to equity holders of the Company

divided by average shareholders’ equity.

The Group and the Company are in compliance with all externally imposed capital requirements for the

fi nancial years ended 31 December 2013 and 31 December 2012.

(e) Fair value measurements

The following table presents assets and liabilities measured at fair value and classifi ed by level of the following

fair value measurement hierarchy:

(i) quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);

(ii) inputs other than quoted prices included within Level 1 that are observable for the asset or liability,

either directly (as prices) or indirectly (derived from prices) (Level 2); and

(iii) inputs for the asset or liability that are not based on observable market data (unobservable inputs)

(Level 3).

Level 1 Level 2 Level 3 Total

$’000 $’000 $’000 $’000

The Group

2013

Assets


- Quoted equity shares 438 – – 438

- Unquoted equity shares – – 3,953 3,953

Forward currency contracts – 770 – 770

Total assets 438 770 3,953 5,161

2012

Assets


- Quoted equity shares 530 – – 530

- Unquoted equity shares – – 3,714 3,714

Total assets 530 – 3,714 4,244





(e) Fair value measurements (continued)

The fair value of fi nancial instruments traded in active markets (such as trading and available-for-sale

securities) is based on quoted market prices at the balance sheet date. The quoted market price used for

fi nancial assets held by the Group is the current bid price. These instruments are included in Level 1.

The fair value of fi nancial instruments that are not traded in an active market (for example, over-the-counter

derivatives) is determined by using valuation techniques. The Group uses a variety of methods and makes

assumptions that are based on market conditions existing at each balance sheet date. The fair value of

forward currency contracts is determined using quoted forward exchange rates at the balance sheet date.

These investments are included in Level 2. In infrequent circumstances, where a valuation technique for

these instruments is based on signifi cant unobservable inputs, such instruments are included in Level 3.

Changes in Level 3 fi nancial instruments for the fi nancial year ended 31 December 2013 is disclosed in Note

18.

The carrying value less impairment provision of trade receivables and payables are assumed to approximate

their fair values. The fair value of fi nancial liabilities for disclosure purposes is estimated based on quoted

market prices or dealer quotes for similar instruments by discounting the future contractual cash fl ows at the

current market interest rate that is available to the Group for similar fi nancial instruments. The fair value of

current borrowings approximates their carrying amount.

(f) Financial instruments by category

The carrying amount of different categories of fi nancial instruments is as disclosed on the face of the balance

sheets and in Note 18 to the fi nancial statements, except for the following:


2013 2012 2013 2012

$’000 $’000 $’000 $’000

Loans and receivables 4,384,175 3,804,788 86,182 100,788

Financial liabilities at amortised cost 5,824,510 4,746,585 18,149 17,886

35. Immediate and ultimate holding corporation

The Company’s immediate and ultimate holding corporation is China Ocean Shipping (Group) Company, registered

in the People’s Republic of China.

36. Related party transactions

(a) The Company is controlled by China Ocean Shipping (Group) Company (“COSCO”), the parent company and

a state-owned enterprise established in the People’s Republic of China (“PRC”).

COSCO itself is controlled by the PRC government, which also owns a signifi cant portion of the productive

assets in the PRC. In accordance with amendment to FRS 24, other government-related entities and

their subsidiaries (other than COSCO group companies), directly or indirectly controlled, jointly-controlled

or signifi cantly infl uenced by the PRC government are also defi ned as related parties of the Group. On

that basis, related parties include COSCO and its subsidiaries, other government-related entities and

their subsidiaries directly or indirectly controlled, jointly controlled or signifi cantly infl uenced by the PRC

government, other entities and corporations in which the Company is able to control or exercise signifi cant

infl uence and key management personnel of the Company and COSCO as well as their close family

members.




36. Related party transactions (continued)

(a) (continued)

The transactions conducted with government-related entities are based on terms agreed between the

parties.

In addition to the related party information and transactions disclosed elsewhere in the consolidated fi nancial

statements, the following is a summary of signifi cant related party transactions entered into the ordinary

course of business between the Group and its related parties during the fi nancial year.

The Group

2013 2012

$’000 $’000

Revenue

Sales to fellow subsidiaries 47,182 42,922

Sales to associated companies 83 120

Sales to related parties 873 3

Rental income received/receivable from fellow subsidiaries 975 917

Rental income received/receivable from associated companies 16 19

Rental income received/receivable from related parties 75 164

Service income received from ultimate holding corporation 101 67

Service income received from fellow subsidiaries 3,101 3,804

Service income receivable from associated companies 340 154

Interest received/receivable from a fellow subsidiary 13,708 30,928

Interest received/receivable from an associated company 33 –

Commission received/receivable from a fellow subsidiary – 283

Expenditure

Purchases from fellow subsidiaries 50,159 49,118

Purchases from associated companies 206 295

Purchases of plant and equipment from fellow subsidiaries – 4,114

Rental paid/payable to fellow subsidiaries 7,422 1,807

Rental paid/payable to a related party – 6,284

Vessel rental paid/payable to a fellow subsidiary 13,440 –

Crew wages paid/payable to fellow subsidiaries 8,007 7,991

Sub-contractor costs paid/payable to fellow subsidiaries 5,464 5,472

Sub-contractor costs paid/payable to associated companies 8,640 4,409

Sub-contractor costs paid/payable to a related party – 777

Utilities expenses paid/payable to a related party 503 2,335

Service expenses paid/payable to fellow subsidiaries 2,097 249

Service expenses paid/payable to an associated company – 546

Service expenses paid/payable to related parties 83 83

Insurance premium paid/payble to a fellow subsidiary 248 –

Interest paid/payable to a fellow subsidiary 1,330 712

Commitments

Operating lease commitments with fellow subsidiaries where the

Group is a lessor 36 49

Operating lease commitments with an associated company where the

Group is a lessor 17 –

Operating lease commitments with a related party where the

Group is a lessee – 517




36. Related party transactions (continued)

(a) (continued)

Related parties refer to corporations related by common shareholders.

Outstanding balances as at 31 December 2013, arising from sales or purchases of goods and services and

loans from a fellow subsidiary, are set out in Notes 13, 26 and 27 respectively.

(b) Share options granted to key management and non-executive directors

There were no share options granted to key management and non-executive directors of the Group during

2013 and 2012. The share options were given on the same terms and conditions as those offered to other

employees of the Company (Note 30). The outstanding number of share options granted to key management

of the Group at the end of the fi nancial year was Nil (2012: 2,300,000).

(c) Key management personnel compensation

Key management personnel compensation is as follows:

The Group

2013 2012

$’000 $’000

Salaries and other short-term employee benefi ts 3,045 3,703

Directors’ fees of the Company 305 305

Employer’s contribution to defi ned contribution plans

including Central Provident Fund 9 8

3,359 4,016

Included in the above was total compensation to directors of the Company amounting to $3,014,000 (2012:

$3,670,000).

37. Segment information

Management has determined the operating segments based on the reports reviewed by the key management that

are used to make strategic decisions.

The key management considers the business from the business segment perspective. The segment in the People’s

Republic of China derives revenue from ship repair, ship building and marine engineering activities. On the other

hand, the segments in Singapore derive revenue from shipping, ship repair and marine engineering activities.

Other services included within Singapore include rental of property; but these are not included within the reportable

operating segments, as they are not included in the reports provided to the key management. The results of these

operations are included in the “all other segments” column.




37. Segment information (continued)

The segment information provided to the key management for the reportable segments is as follows:

Shipping

Ship repair,

ship building

and marine

engineering

activities

All other

segments

Total for

continuing

operations

$’000 $’000 $’000 $’000


The Group

Sales

- External sales 54,731 3,452,505 898 3,508,134

- Inter-segment sales – 1,741 33,951 35,692

54,731 3,454,246 34,849 3,543,826

Elimination (35,692)

3,508,134

Segment results 1,075 173,154 (2,849) 171,380

Finance expense (110,845)

Share of profi t of associated companies 407

Profi t before income tax 60,942

Income tax expense (8,157)

Net profi t 52,785

Other segment items

Capital expenditure

- Property, plant and equipment 2,536 59,318 1 61,855

Amortisation of deferred expenditure – 86 – 86


investment properties 11,397 171,467 661 183,525

Net allowance for impairment of trade and other

receivables 839 4,389 – 5,228

Net allowance for inventory write-down – 23,678 – 23,678

Net allowance for expected losses recognised on

construction contracts – 85,717 – 85,717

Provision for an onerous contract 144 – – 144

Allowance for impairment of property, plant and

equipment – 110 – 110

Segment assets 127,895 7,006,632 26,881 7,161,408

Associated companies 4,826

Short-term bank deposits 1,338,895

Available-for-sale fi nancial assets 4,391

Deferred income tax assets 225,212

Consolidated total assets 8,734,732

Segment liabilities 15,450 2,733,256 2,601 2,751,307

Borrowings 3,782,528

Current income tax liabilities 25,288

Deferred income tax liabilities 528

Consolidated total liabilities 6,559,651

Consolidated net assets 2,175,081





The segment information provided to the key management for the reportable segments is as follows: (continued)

Shipping

Ship repair,

ship building

and marine

engineering

activities

All other

segments

Total for

continuing

operations

$’000 $’000 $’000 $’000


The Group

Sales

- External sales 52,839 3,680,544 878 3,734,261

- Inter-segment sales – 563 49,433 49,996

52,839 3,681,107 50,311 3,784,257

Elimination (49,996)

3,734,261

Segment results 6,096 332,629 (9,698) 329,027

Finance expense (99,986)

Share of profi t of associated companies 580

Profi t before income tax 229,621

Income tax expense (59,842)

Net profi t 169,779

Other segment items

Capital expenditure

- Property, plant and equipment 976 121,382 298 122,656

Amortisation of deferred expenditure – 85 – 85


investment properties 11,477 166,766 652 178,895

Net allowance for impairment of trade and other

receivables – 7,814 – 7,814

Net allowance for inventory write-down – 2,013 – 2,013

Net reversal of expected losses recognised on

construction contracts – (28,564) – (28,564)

Allowance for impairment of property, plant and

equipment – 8,131 – 8,131

Segment assets 133,451 6,192,572 23,012 6,349,035

Associated companies 4,235

Short-term bank deposits 834,129

Available-for-sale fi nancial assets 4,244

Deferred income tax assets 201,914

Consolidated total assets 7,393,557

Segment liabilities 14,188 2,282,699 3,199 2,300,086

Borrowings 3,026,451

Current income tax liabilities 10,383

Deferred income tax liabilities 7,432

Consolidated total liabilities 5,344,352

Consolidated net assets 2,049,205





Geographical information

The Group’s business segments operate in two main geographical areas:

People’s Republic of China - the operations in this area are principally in ship repair, ship building and marine

engineering activities; and

Singapore - the operations in this area are principally in shipping, ship repair and marine related activities and

rental of property.

Sales are based on the country in which the services are rendered to the customer. Non-current assets are shown

by the geographical area where the assets are located.

Sales for

continuing operations Non-current assets

2013 2012 2013 2012

$’000 $’000 $’000 $’000

People’s Republic of China 3,435,034 3,663,535 2,385,232 2,360,699

Singapore * 73,100 70,726 138,140 144,264

3,508,134 3,734,261 2,523,372 2,504,963

* The Group’s shipping companies operate in worldwide shipping routes. Hence, it would not be meaningful to

allocate sales to any geographical segments for shipping activities.

Revenue of approximately $491,272,000 (2012: $671,334,000) is derived from a single customer. This revenue is

attributable to the People’s Republic of China ship repair, ship building and marine engineering activities segment.

38. Contingent liability

On 5 August 2013, a customer of a subsidiary served notice of termination on alleged grounds of delay in the

delivery of a vessel, the construction of which is substantially completed. On 5 September 2013, the customer

submitted a request for arbitration in London for which the customer claimed for a refund of the fi rst instalment

paid on the contract amounting to US$110 million together with interest thereon, damages and interest thereon,

indemnity for future losses, further or other relief and costs. On 7 October 2013, the customer rejected the

subsidiary’s without prejudice proposal to settle the matter. The subsidiary has appointed legal advisers in London

in relation to the arbitration and is responding to the request for arbitration accordingly. Given the current stage of

arbitration proceedings, the directors are of the opinion that it is diffi cult to quantify the eventual fi nancial impact of

the arbitration, if any, as at the date of these fi nancial statements.

Notwithstanding the arbitration proceedings, the subsidiary has on 13 January 2014 refunded the fi rst instalment

paid of US$110 million together with payment of interest thereon amounting to US$8.1 million to the customer.

39. Event occurring after balance sheet date

On 17 February 2014, the Group incorporated a wholly-owned subsidiary, COSCO (Hongkong) Shipyard Co.,

Limited (“COSCO HK”), through COSCO Shipyard Group Co., Ltd. COSCO HK has a share capital of US$500,000

and is domiciled in Hong Kong. The principal activities of COSCO HK relate to the provision of shipyard fi nancing,

marketing and sales of shipbuilding and offshore projects. COSCO HK will be consolidated with effect from 17

February 2014.




40. New or revised accounting standards and interpretations

Below are the mandatory standards, amendments and interpretations to existing standards that have been

published, and are relevant for the Group’s accounting periods beginning on or after 1 January 2013 or later periods

and which the Group has not early adopted.

FRS 110 Consolidated Financial Statements (effective for annual periods beginning on or after 1 January

2014)

FRS 110 replaces all of the guidance on control and consolidation in FRS 27 “Consolidated and Separate

Financial Statements” and INT FRS 12 “Consolidation – Special Purpose Entities”. The same criteria are now

applied to all entities to determine control. Additional guidance is also provided to assist in the determination

of control where this is diffi cult to assess.

The Group will apply FRS 110 from 1 January 2014, but this is not expected to have any signifi cant impact

on the fi nancial statements of the Group.

FRS 111 Joint Arrangements (effective for annual periods beginning on or after 1 January 2014)

FRS 111 introduces a number of changes. The “types” of joint arrangements have been reduced to two: joint

operations and joint ventures. The existing policy choice of proportionate consolidation for jointly controlled

entities has been eliminated and equity accounting is mandatory for participants in joint ventures. Entities that

participate in joint operations will follow accounting much like that for joint assets or joint operations currently.



FRS 112 Disclosure of Interests in Other Entities (effective for annual periods beginning on or after 1 January

2014)

FRS 112 requires disclosure of information that helps fi nancial statement readers to evaluate the nature,

risks and fi nancial effects associated with the entity’s interests in (1) subsidiaries, (2) associates, (3) joint

arrangements and (4) unconsolidated structured entities.



41. Authorisation of fi nancial statements

These fi nancial statements were authorised for issue in accordance with a resolution of the Board of Directors of

COSCO Corporation (Singapore) Limited on 3 March 2014.

FIVE-YEAR SUMMARY



Notes 2009 2010 2011 2012 2013

$’000 $’000 $’000 $’000 $’000

INCOME STATEMENT

Turnover 2,899,004 3,861,445 4,162,921 3,734,261 3,508,134

Operating profi t before taxation 178,338 401,873 286,842 229,041 60,535

Share of profi t/(loss) of

associated companies 1 214 (27) 717 580 407

Profi t before income tax 178,552 401,846 287,559 229,621 60,942

Income tax expense (40,758) (43,240) (74,195) (59,842) (8,157)

Net profi t 137,794 358,606 213,364 169,779 52,785

Attributable to:

Equity holders of the company 110,080 248,837 139,671 105,685 30,615

Non-controlling interests 27,714 109,769 73,693 64,094 22,170

Net profi t 137,794 358,606 213,364 169,779 52,785

Dividend 2 67,177 89,570 67,177 44,785 22,392

BALANCE SHEET

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

Statutory and other reserves 174,030 103,950 181,320 152,927 245,139

Retained earnings 639,404 824,059 849,305 857,971 820,027

Non-controlling interests 526,650 595,860 699,241 767,699 839,307

Total equity 1,610,692 1,794,477 2,000,474 2,049,205 2,175,081

Trade and other receivables – 49,089 63,867 44,344 36,874

Available-for-sale fi nancial assets 4,034 3,434 4,407 4,244 4,391

Club memberships 492 557 390 310 303

Investments in associated companies 1,922 3,569 4,102 4,235 4,826

Investment properties 11,786 14,619 14,405 11,730 11,293

Property, plant and equipment 2,349,098 2,207,952 2,412,126 2,225,689 2,227,868

Intangible assets 9,525 9,468 9,526 9,477 9,539

Deferred expenditure 1,061 3,169 3,211 3,020 3,066

Deferred income tax assets 158,523 212,703 241,513 201,914 225,212

Current assets 3,885,885 3,548,782 4,246,963 4,888,594 6,211,360

Current liabilities (3,870,288) (3,817,496) (4,496,234) (3,778,379) (4,702,660)

Non-current liabilities (941,346) (441,369) (503,802) (1,565,973) (1,856,991)

Net Assets 1,610,692 1,794,477 2,000,474 2,049,205 2,175,081

RATIOS

Basic earnings per share (cents) 3 4.9 11.1 6.2 4.7 1.4

Dividend per share (cents) 3.0 4.0 3.0 2.0 1.0

Dividend cover (times) 4 1.6 2.8 2.1 2.4 1.4

Net tangible assets per share (cents) 48.0 53.1 57.7 56.8 59.2

Gearing ratio (Net of Cash) 5 cash 0.1 0.4 1.0 1.3 Notes

1. The share of profi t/(loss) of associated companies is net of tax.

2. The dividend for 2013 is calculated based on the number of shares issued as of 31 December 2013. The actual amount payable will

be based on the number of shares issue at book closure date, which will be accounted for in equity as an appropriation of retained

earnings in the fi nancial year ending 31 December 2014.

3. Basic earnings per share is calculated as net profi t attributable to equity holders of the company divided by the weighted average

number of ordinary shares issued in the fi nancial year.

4. The dividend cover is calculated as net profi t attributable to equity holders of the Company divided by the amount of equity dividend.

5. Gearing ratio is derived by taking total borrowings (net of cash) over the shareholders’ funds.

SHAREHOLDING STATISTICSAs at 3 March 2014


STATISTICS OF SHAREHOLDERS AS AT 3 MARCH 2014

Class of Shares - Ordinary shares

Voting Rights - One Vote per share

DISTRIBUTION OF SHAREHOLDERS AS AT 3 MARCH 2014

SIZE OF NO. OF

SHAREHOLDINGS SHAREHOLDERS % NO. OF SHARES %

1 - 999 108 0.30 42,102 0.00

1,000 - 10,000 24,088 67.38 123,123,309 5.50

10,001 - 1,000,000 11,509 32.20 493,565,377 22.04

1,000,001 and above 44 0.12 1,622,514,166 72.46

Total 35,749 100.00 2,239,244,954 100.00

SUBSTANTIAL SHAREHOLDER

DIRECT INTEREST DEEMED INTEREST

NO. NAME

NO. OF SHARES

HELD %

NO. OF SHARES

HELD %

1. CHINA OCEAN SHIPPING

(GROUP) COMPANY 1,194,565,488 53.35 – –

COMPLIANCE WITH RULE 723 OF THE SGX-ST LISTING MANUAL

Based on information available and to the best knowledge of the Company as at 3 March 2014 approximately 46.51% of

the ordinary shares of the Company are held by the public. The Company is therefore in compliance with Rule 723 of the

SGX-ST Listing Manual.

SHAREHOLDING STATISTICSAs at 3 March 2014


TWENTY LARGEST SHAREHOLDERS AS AT 3 MARCH 2014

NO. SHAREHOLDER’S NAME NO. OF SHARES %

1 CHINA OCEAN SHIPPING (GROUP) COMPANY 1,194,565,488 53.35

2 SEMBCORP MARINE LTD 70,000,000 3.13

3 DBS NOMINEES PTE LTD 50,787,129 2.27

4 CITIBANK NOMINEES SINGAPORE PTE LTD 38,809,920 1.73

5 UNITED OVERSEAS BANK NOMINEES PTE LTD 33,770,058 1.51

6 RAFFLES NOMINEES (PTE) LTD 21,799,130 0.97

7 SCM INVESTMENT HOLDINGS PTE LTD 21,000,000 0.94

8 SEMBMARINE INVESTMENT PTE LTD 20,400,000 0.91

9 UOB KAY HIAN PTE LTD 18,759,670 0.84

10 BANK OF SINGAPORE NOMINEES PTE LTD 16,460,806 0.74

11 HSBC (SINGAPORE) NOMINEES PTE LTD 15,974,231 0.71

12 OCBC SECURITIES PRIVATE LTD 13,676,724 0.61

13 PHILLIP SECURITIES PTE LTD 11,014,300 0.49

14 OCBC NOMINEES SINGAPORE PTE LTD 10,219,369 0.46

15 DBSN SERVICES PTE LTD 9,247,434 0.41

16 HUI SHUNE MING @ HUI SHUN MENG 7,800,000 0.35

17 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 7,014,200 0.31

18 MAYBANK KIM ENG SECURITIES PTE LTD 6,885,524 0.31

19 CIMB SECURITIES (SINGAPORE) PTE LTD 6,017,000 0.27

20 CITIBANK CONSUMER NOMINEES PTE LTD 5,605,467 0.25

TOTAL 1,579,806,450 70.56

NOTICE OF ANNUAL GENERAL MEETING


NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of the Company will be held at Suntec Singapore

International Convention & Exhibition Centre, 1 Raffl es Boulevard, Suntec City, Singapore 039593, Meeting Room 324 –

326, Level 3 on Wednesday, 23 April 2014 at 3:00 p.m. for the purpose of transacting the following businesses:

Ordinary Business:

1. To receive and adopt the Directors’ Report and Audited Financial Statements for the fi nancial year

ended 31 December 2013 together with the Auditors’ Report thereon.

(Resolution 1)

2. To approve a First and Final tax-exempt (one-tier) Dividend of S$0.01 per ordinary share for the

year ended 31 December 2013.

(Resolution 2)

3. To approve payment of Directors’ Fees of S$305,000 for the year ended 31 December 2013. (last

year: S$305,000)

(Resolution 3)

4. To re-elect the following directors, on recommendation of the Nominating Committee and

endorsement of the Board of Directors, who are retiring in accordance with Article 98 of the

Articles of Association of the Company and who, being eligible, offer themselves for re-election:

a. Capt Wu Zi Heng (See Explanatory Note 1) (Resolution 4)

b. Dr Wang Kai Yuen (See Explanatory Note 2) (Resolution 5)

5. To re-elect, on recommendation of the Nominating Committee and endorsement of the Board

of Directors, Mr Li Yun Peng, a Director who is retiring in accordance with Article 104 of the

Articles of Association of the Company and who, being eligible, offer himself for re-election.

(See Explanatory Note 3)

(Resolution 6)

6. To re-appoint, on recommendation of the Nominating Committee and endorsement of the

Board of Directors, Mr Tom Yee Lat Shing, a Director who will retire under Section 153(6) of the

Companies Act (Cap 50), to hold offi ce from the date of this Annual General Meeting until the next

Annual General Meeting of the Company. (See Explanatory Note 4)

(Resolution 7)

7. To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors and to authorise the Directors to

fi x their remuneration.

(Resolution 8)

Special Business:

To consider and, if thought fi t, to pass the following as Ordinary Resolutions, with or without modifi cations:

8. General Mandate to authorise the Directors to issue shares or convertible securities: (Resolution 9)

“That pursuant to Section 161 of the Companies Act (Cap 50) and the Listing Rules of the

Singapore Exchange Securities Trading Limited (the “Listing Rules”), authority be and is hereby

given to the Directors to:

(a) issue shares in the capital of the Company (whether by way of bonus, rights or otherwise);

or

(b) make or grant offers, agreements or options that might or would require Shares to be

issued, including but not limited to the creation and issue of (as well as adjustments to)

warrants, options, debentures or other instruments convertible into Shares;



at any time and upon such terms and conditions and for such purposes as the Directors may in

their absolute discretion deem fi t provided that:

(i) the aggregate number of shares and convertible securities that may be issued shall not

be more than 50% of the issued shares in the capital of the Company (calculated in

accordance with (ii) below), of which the aggregate number of shares and convertible

securities issued other than on a pro rata basis to existing shareholders must be not more

than 20% of the issued shares in the capital of the Company (calculated in accordance

with (ii) below); and

(ii) for the purpose of determining the aggregate number of shares and convertible securities

that may be issued pursuant to (i) above, the percentage of issued share capital shall be

calculated based on the issued shares in the capital of the Company at the time of the

passing of this resolution after adjusting for (a) new shares arising from the conversion or

exercise of any convertible securities; (b) new shares arising from exercising share options

or vesting of share awards outstanding or subsisting at the time of the passing of this

resolution and (c) any subsequent consolidation or subdivision of shares; and

(iii) unless revoked or varied by ordinary resolution of the shareholders of the Company in

general meeting, this resolution shall remain in force until the next Annual General Meeting

of the Company or the date by which the next Annual General Meeting of the Company is

required by law to be held, whichever is earlier.” (See Explanatory Note 5)

9. Proposed Renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions (Resolution 10)

(i) “That approval be and is hereby given for the renewal of the mandate for the purposes

of Chapter 9 of the Listing Manual of the SGX-ST, for the Company, its subsidiaries and

associated companies or any of them to enter into any of the transactions falling within the

types of Interested Person Transactions, particulars of which are set out in the Appendix

A (“Appendix”) to the Annual Report of the Company for the fi nancial year ended 31

December 2013 with any party who is of the class of Interested Persons described in the

Appendix provided that such transactions are made on normal commercial terms and will

not be prejudicial to the interests of the Company and its minority shareholders and in

accordance with the review procedures set out in the Appendix;

(ii) That the Audit Committee of the Company be and is hereby authorised to take such

actions as it deems proper in respect of such procedures and/or to modify or implement

such procedures as may be necessary to take into consideration any amendment to

Chapter 9 of the Listing Manual of the SGX-ST which may be prescribed by the SGX-ST

from time to time;

(iii) That the Directors of the Company be and are hereby authorised to complete and do

all such acts and things (including all such documents as may be required) as they may

consider expedient or necessary or in the interests of the Company to give effect to this

Resolution; and

(iv) That the authority conferred by this Resolution shall, unless revoked or varied by the

Company in general meeting, continue in force until the conclusion of the next Annual

General Meeting of the Company or the date by which the next Annual General Meeting of

the Company is required by law to be held, whichever is earlier.” (See Explanatory Note 6)

BY ORDER OF THE BOARD

Teo Meng Keong

Company Secretary

Singapore, 2 April 2014



Explanatory Notes on Business to be transacted

1. Capt Wu Zi Heng will, upon re-election as a Director, remain as the Chairman of the Strategic Development Committee and a

member of the Nominating Committee, Remuneration Committee and Enterprise Risk Management Committee.

2. Dr Wang Kai Yuen will, upon re-election as a Director, remain as the Chairman of the Nominating Committee and a member of the

Enterprise Risk Management Committee, Remuneration Committee, Audit Committee and Strategic Development Committee; and

will be considered independent for the purpose of Rule 704(8) of the Listing Manual of the SGX-ST.

3. Mr Li Yun Peng will, upon re-election as a Director, remain as a member of the Strategic Development Committee.

4. Mr Tom Yee Lat Shing will, upon re-appointment, remain as the Chairman of the Audit Committee and a member of the Nominating

Committee, Remuneration Committee, Enterprise Risk Management Committee and Strategic Development Committee; and will be

considered independent for the purposes of Rule 704(8) of the Listing Manual of the SGX-ST.

5. Ordinary Resolution 9 is to empower the Directors of the Company from the date of the above Meeting until the next Annual General

Meeting to issue shares and/or convertible securities in the capital of the Company up to an amount not exceeding in aggregate

50% of the issued shares in the capital of the Company of which the total number of shares and convertible securities issued other

than on a pro-rata basis to existing shareholders shall not exceed 20% of the issued shares in the capital of the Company at the

time the resolution is passed, for such purposes as they consider would be in the interests of the Company. This authority will,

unless revoked or varied at a general meeting, expire at the next Annual General Meeting of the Company.

6. Ordinary Resolution 10 is to renew the General Mandate to allow the Company, its subsidiaries and associated companies or any of

them to enter into certain Recurrent Interested Person Transactions with person who are considered “Interested Persons” (as defi ned

in Chapter 9 of the Listing Manual of the SGX-ST).

The Company’s Audit Committee has confi rmed that the methods and procedures for determining the transaction process have

not changed since the last renewal of the Shareholders’ Mandate on 22 April 2013 in respect of transactions described in Section

2.1 of Schedule II of the Appendix; and since the approval of the additional Shareholders’ Mandate on 17 July 2007 in respect of

transactions described in Section 2.2 of Schedule II of the Appendix; and that the said methods and procedures are suffi cient to

ensure that the Recurrent Interested Person Transactions will be carried out on normal commercial terms and will not be prejudicial

to the interests of the Company and its minority shareholders.

NOTES:

i. A member of the Company entitled to attend and vote at a meeting is entitled to appoint one or two proxies to attend and vote in

his stead. A proxy need not be a member of the Company.

ii. Where a member appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding

(expressed as a percentage of the whole) to be represented by each proxy.

iii. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 9 Temasek Boulevard,

#07-00 Suntec Tower Two, Singapore 038989 not later than 48 hours before the time fi xed for holding the Annual General Meeting.

iv. This instrument appointing a proxy or proxies must be under the hand of the appointer or his attorney duly authorised in writing.

Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal

or under the hand of any attorney duly authorised.

v. A corporation which is a member may also authorise by resolution of its directors or other governing body, such person as it thinks

fi t to act as its representative at the meeting in accordance with Section 179 of the Companies Act (Cap 50).



NOTICE OF BOOKS CLOSURE

The Company had on 26 February 2014 announced that, subject to the approval of shareholders to the First and Final

Dividend being obtained at the Annual General Meeting to be held on 23 April 2014, the Transfer Books and the Register

of Members of the Company will be closed on 5 May 2014 for the preparation of dividend warrants for shareholders of

ordinary shares registered in the books of the Company.

Duly completed registrable transfers of ordinary shares in the capital of the Company (“Shares”) received by the Company’s

Share Registrar, Tricor Barbinder Share Registration Services, 80 Robinson Road, #02-00, Singapore 068898 up to 5:00

p.m. on 2 May 2014 will be entitled to the proposed First and Final Dividend.

Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with Shares at 5:00 p.m. on 2

May 2014 will be entitled to the proposed First and Final Dividend. Payment of the dividends, if approved by members at

the Annual General Meeting, will be made on 21 May 2014.

This page has been intentionally left blank.

COSCO CORPORATION (SINGAPORE) LIMITED(Incorporated in the Republic of Singapore)

(Company Registration No.: 196100159G)

ANNUAL GENERAL MEETING

PROXY FORM

Important:

1. For investors who have used their CPF monies to

buy the Company’s shares, this Annual Report is

sent to them at the request of their CPF Approved

Nominees solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF

investors and shall be ineffective for all intents and

purposes if used or purported to be used by them.

3. CPF investors who wish to vote should contact their

CPF Approved Nominees.

I/We NRIC/Passport No.

of

being a member of Cosco Corporation (Singapore) Limited (the “Company”), hereby appoint

Name Address NRIC/Passport No.

Proportion of

Shareholdings (%)

And/or (delete as appropriate)

Name Address NRIC/Passport No.

Proportion of

Shareholdings (%)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the

Annual General Meeting of the Company to be held at Suntec Singapore International Convention & Exhibition Centre, 1

Raffl es Boulevard, Suntec City, Singapore 039593, Meeting Room 324 – 326, Level 3 on Wednesday, 23 April 2014 at 3:00

p.m. and at any adjournment thereof.

I/We have indicated with an “X” in the appropriate box against the item how I/we wish my/our proxy/proxies to vote. If no

specifi c direction as to voting is given or in the event of any item arising not summarised below, my/our proxy/proxies may

vote or abstain at the discretion of my/our proxy/proxies.

No. Resolutions For Against

ORDINARY BUSINESS

1. To receive and adopt the Directors’ Report and Audited Financial Statements for the year ended 31

December 2013 together with the Auditors’ Report thereon.

2. To declare a First and Final tax exempt (one-tier) Dividend of S$0.01 per ordinary share for the year

ended 31 December 2013.

3. To approve payment of Directors’ Fees.

4. To re-elect Capt Wu Zi Heng, who is retiring under Article 98 of the Articles of Association of the

Company.

5. To re-elect Dr Wang Kai Yuen, who is retiring under Article 98 of the Articles of Association of the

Company.

6. To re-elect Mr Li Yun Peng, who is retiring under Article 104 of the Articles of Association of the

Company.

7. To re-appoint Mr Tom Yee Lat Shing, who is retiring pursuant to Section 153(6) of the Companies

Act, Cap 50.

8. To re-appoint Messrs. PricewaterhouseCoopers LLP as Auditors of the Company and to authorise

the Directors to fi x their remuneration.

SPECIAL BUSINESS

9. To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Cap 50.

10. To approve the renewal of Shareholders’ Mandate for Recurrent Interested Person Transactions.

Dated this day of 2014

Total No. of Shares in No. of Shares

CDP Register

Register of Members

Signature of Member(s) or Common Seal

IMPORTANT: Please Read Notes for This Proxy Form.

COSCO CORPORATION (SINGAPORE) LIMITED

9 Temasek Boulevard, #07-00 Suntec Tower Two,

Singapore 038989

Second fold

Third fold

Apply glue here

Please

affi x

postage

stamp

First fold

NOTES:

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defi ned in section 130A of the Companies

Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number

of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the

aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the

instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A Shareholder of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote on his behalf. Such proxy

need not be a Member of the Company.

3. Where a Shareholder appoints two proxies, the appointments shall be invalid unless he specifi es the proportion of his shareholding (expressed as a percentage of the whole) to

be represented by each proxy.

4. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at 9 Temasek Boulevard, #07-00 Suntec Tower Two, Singapore 038989

not less than 48 hours before the time set for holding the annual general meeting. The sending of a Proxy Form by a Shareholder does not preclude him from attending and

voting in person at the annual general meeting if he fi nds that he is able to do so. In such event, the relevant Proxy Forms will be deemed to be revoked.

5. The instrument appointing a proxy or proxies must be under the hand of the appointer or of his attorney duly authorised in writing. Where the instrument appointing a proxy or

proxies is executed by a corporation, it must be executed either under its seal or under the hand of a director or an offi cer or attorney duly authorised.

6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointer by an attorney, the power of attorney (or other authority) or a duly certifi ed copy thereof

must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a Shareholder may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative at the annual

general meeting, in accordance with section 179 of the Companies Act, Chapter 50 of Singapore.

8. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the

appointer are not ascertainable from the instructions of the appointer specifi ed in the instrument appointing a proxy or proxies. In addition, in the case of a Shareholder whose

Shares are entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the Shareholder, being the appointer, is not shown

to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the annual general meeting, as certifi ed by The Central

Depository (Pte) Limited to the Company.

This page has been intentionally left blank.


9 Temasek Boulevard

#07-00 Suntec Tower Two

Singapore 038989

Telephone: 6885 0888

Fascimile: 6336 9006

www.cosco . com . sg

staying the course - listed companycosco.listedcompany.com/misc/ar2013.pdf · cosco corporation is...

Documents