THE SHAPE OF THINGS TO COME - cimc raffles

THE SHAPE 

OF THINGS 

TO COME 

YANTAI RAFFLES SHIPYARD LIMITED 

ANNUAL REPORT 2008

CORPORATE PROFILE 

Yantai Raffles Shipyard Limited is the largest builder of semisubmersible 

drilling rigs in China, with strong expertise and 

know-how in the construction of various offshore and marine 

projects which include jack-up drilling rigs, semi-submersible 

drilling rigs, floating production storage and offloading vessels, 

heavy lift vessels, pipe lay vessels and other prototype vessels. 

Leveraging on the innovation and scalability of our yard, Yantai 

Raffles is supported by a highly-skilled engineering force, cuttingedge 

facilities and superior technology. 

OUR VISION 

To be the Yard of Choice. 

OUR MISSION 

To be a leading offshore fabrication specialist, dedicated 

to bring value to our customers through delivery of total, 

integrated quality solutions and support, superior returns to our 

shareholders and create a rewarding work environment for 

our employees. 

Located in Yantai, Shandong Province of China, our yard, which 

spans nearly 100,000 square metres, is equipped with some of the 

largest state-of-the-art offshore marine construction infrastructure 

in the world. Our award-winning 20,000 metric tonne gantry 

crane, ‘Taisun’, has set a heavy lift world record with its lifting 

capacity; and it is set to revolutionalise the way semi-submersible 

rigs and other large offshore marine facilities are built. 

CONTENTS 

Our Core Values 

The Shape of Things to Come 

Chairman’s Message 

CEO Review 

Corporate Highlights in 2008 

Construction Process of a Semi-Submersible Drilling Rig 

Our Order Book 

Financial Highlights 

Financial Review 

Board of Directors 

Corporate Information 

Corporate Structure 

Financial Contents 

1 

2 

4 

8 

10 

12 

14 

15 

16 

18 

22 

23 

24

OUR CORE VALUES 

INNOVATION 

We thrive on creativity and ingenuity. We seek innovations and 

ideas from our employees and are not afraid to empower our 

employees and take measured risks for such innovations. We 

anticipate market trends and move quickly to meet change. 

TEAMWORK 

We believe that teamwork is important in all societies. We treat 

one another with respect and communicate openly and value 

the culture of mentorship. We appreciate the value of multiple 

perspectives and diverse expertise. 

EXCELLENT PERFORMANCE 

We are committed to perfect tasks given to us. We aspire to 

flawless execution and maintain good product quality. We seek 

the best talent and promote their development. 

CUSTOMER FOCUS 

We respect our customers above all else and never forget that 

they come to us by choice. We can achieve nothing without 

our customers. We share a personal responsibility to maintain 

our customers’ loyalty and trust. We listen and respond to our 

customers and seek to exceed their expectations. 

ANNUAL REPORT 2008 1

THE SHAPE OF THINGS TO COME 

2 YANTAI RAFFLES SHIPYARD LIMITED

The coming together of two world-class companies – one 

excelling in the construction of large offshore and marine 

projects with world class business facilities and cutting-edge 

construction methodologies; the other, the world’s leading 

manufacturer of transportation equipment – yields much synergy. 

The alliance, established in November 2008, when Shenzhenlisted 

China International Marine Containers (Group) Co., Ltd 

(“CIMC”) invested an initial 10% stake in our Group, led to 

the President of CIMC, Mr Mai Bo Liang, being appointed as 

Chairman and Director of Yantai Raffles Board. 

As one of the world’s leading shipyards with strong expertise in 

the construction of various offshore and marine projects, Yantai 

Raffles is now focused on securing increased production capacity 

and strengthening its engineering and manufacturing capabilities 

to be the best of its class. We look forward to a scalable, more 

efficient Yantai Raffles – which in effect, is the shape of things 

to come. 


CHAIRMAN’S MESSAGE 

Dear Shareholders 

I am delighted to be appointed as Chairman 

of Yantai Raffles Shipyard Limited 

(“Yantai Raffles” or the “Company”), 

and honoured to have this opportunity to 

participate in the future development of 

Yantai Raffles. 

The current global financial and broader 

economic climate has made significant 

impact and created new challenges 

for many industries around the world, 

including the offshore marine sector. 

Driven by our determination to be a world 

class leading shipyard, I firmly believe 

that Yantai Raffles has the ability and 

confidence not only to overcome these 

economic challenges, but also to create 

opportunities amidst the crisis. 

SEEING OPPORTUNITIES IN CRISIS 

Notwithstanding the global economic 

downturn and its recessionary impact 

on many countries, China, as a major 

representative of new emerging 

economies, has since 4Q2008, announced 

aggressive economic policies and measures 

to ease the domestic impact of the global 

downturn. The Chinese government has 

set an 8 percent Gross Domestic Product 

growth target for 2009 and, issued a 

series of economic stimulus measures to 

support the achievement of this growth 

target. These include a 4-trillion-yuan 

(US$600 billion) stimulus package and 

development plans for 10 key industries 

that include ours, namely the energy and 

shipbuilding industry. In view of this, I 

believe that China will play an increasingly 

important role in the global offshore 

industry, and this, in turn, will provide 

significant opportunities to the benefit of 

Yantai Raffles and its shareholders. 

THE SHAPE OF THINGS TO COME 

As you may already know, China 

International Marine Containers (Group) 

Co., Ltd (“CIMC”), of which I am President, 

acquired a 10% strategic stake in Yantai 

Raffles in November 2008, and has since 

increased that stake to approximately 

18.3% currently. This strategic alliance 

brings together two dynamic world class 

organisations, leveraging their respective 

strengths and promising to yield substantial 

synergies in the future. 

CIMC is recognised as the world leader 

in the manufacture of transportation 

equipment. With its excellent systems 

and vast experience in operating on a 

global scale, CIMC has honed its core 

competencies in the areas of resource 


“THROUGH YANTAI RAFFLES’ AND CIMC’S JOINT 

EFFORTS AND MUTUAL OBJECTIVES TO TRANSFORM 

YANTAI RAFFLES INTO A WORLD-CLASS BUSINESS, 

YANTAI RAFFLES WILL, OVER THE NEXT FEW YEARS, BE 

ABLE TO SECURE PROMINENCE IN THE CHINESE AND 

GLOBAL OFFSHORE INDUSTRY, THEREBY EARNING THE 

RESPECT, LOYALTY AND CONTINUED SUPPORT OF OUR 

CUSTOMERS, EMPLOYEES AND STAKEHOLDERS.” 

allocation, product development, state-ofthe-art 

production capabilities, provision of 

complete life cycle products and services, 

human resource management and 

considerable brand capital. Through the 

years, CIMC has forged strong long-term 

relationships with local and international 

banks. CIMC’s many successes on 

the world stage have won the attention 

of the Chinese government, and the 

company’s recent investment in Yantai 

Raffles has received great support from 

the Chinese authorities. 

Yantai Raffles, on the other hand, is one 

of the world’s leading shipyards and 

possesses significant business development 

capabilities, world class facilities and 

cutting-edge construction methodologies. 

Most importantly, it has an experienced, 

trustworthy and respectable business 

leader and partner in Mr Brian Chang, the 

Company’s Deputy Chairman. 

From the very outset of this alliance, CIMC 

has made clear its intention to share its 

complementary core competencies with 

Yantai Raffles, and vice versa. The benefits 

from this cooperation are already bearing 

fruit and I strongly believe that, with the 

capabilities and continued cooperation 

of both companies, Yantai Raffles will 

become a world-leader in the offshore 

marine industry in the foreseeable future. 

Even now, this transformation is well 

under way. 

In spite of the business opportunities, 

Yantai Raffles’ extensive resources 

and capabilities, which enables the 

Company to respond to adverse external 

factors, and to remain competitive in 

the current challenging market, Yantai 

Raffles needs to continue to improve. 

We have identified a number of key 

areas where there is room for significant 

and ongoing improvement. We must 

seize every opportunity, gain customers’ 

confidence, build up and demonstrate 

effective internal management, shorten 

construction cycles, strengthen delivery 

capability, build up supporting human 

resources systems, enhance engineering 

and management teams, and improve the 

commissioning and R&D centre in order 

to remain competitive. In addition, we 

are actively developing and implementing 

action plans to deliver efficiency and 

productivity gains, and reduce costs. 

We will continue to improve on our 

internal processes and communication, 

encourage innovation, and instill a renewed 

culture focused on sincerity, collaboration 

and excellence. 

OUR VISION FOR YANTAI RAFFLES 

I believe and expect that, through Yantai 

Raffles’ and CIMC’s joint efforts and 

mutual objectives to transform Yantai 

Raffles into a world-class business, Yantai 

Raffles will, over the next few years, be 

able to secure prominence in the Chinese 

and global offshore industry, thereby 

earning the respect, loyalty and continued 

support of our customers, employees and 

stakeholders. That is not only our dream, 

but our realistic goal. 

Mai Bo Liang 

Chairman of the Board 




CEO REVIEW 

Dear Shareholders, 

Yantai Raffles has undergone many 

changes over the past few years. You were 

recently advised of China International 

Marine Containers (Group) Co., Ltd 

(“CIMC”) investment into your Company 

as its second largest shareholder. In a 

short span of time, CIMC has brought 

significant enterprise value in the areas 

of procurement, advanced manufacturing 

processes, people management, finance 

and opportunities for new products and 

domestic sales. 

To reflect CIMC’s investment in your 

Company, the President and Director of 

CIMC, Mr Mai Bo Liang, was invited and 

kindly agreed to be the Chairman of Yantai 

Raffles’ Board in November 2008. 

In March 2009, CEO Mr Y J Cho completed 

his three-year contract with the Company 

and I was subsequently reinstated as CEO. 

HIGHLIGHTS OF 2008 

2008 has seen the Company facing 

several challenges, including increased 

costs and engineering changes on some 

of our projects, some of which resulted 

in project delays. With strong support 

from CIMC, your Company has identified 

solutions to many of these key challenges 

and has restructured many aspects of the 

operation and, to a large extent, restored 

much confidence. We are committed to 

resolving these ongoing challenges and 

expect to see the fruits of our efforts 

in 2010. 

I am pleased to report that, under all the 

circumstances, your Company returned a 

credible financial performance in 2008. 

For the 12 months ended 31 December 

2008, your Company reports a net 

profit attributable to equity holders of 

S$26.9 million. Further details can be 

found in the financial review and financial 

statements enclosed in this report. 

Over the past 9 months or so, you will 

have been bombarded daily with news 

about the global financial and economic 

environment, and I will not burden you 

further with that. Although your Company 

has not been totally immune from the 

impact of this global situation, we have 

been fortunate that our clients have held 

faith with us in spite of the challenges. 

The credit squeeze that started during the 

second half of last year is still being felt 

across many industries, and your Company 

has been working hard with its banks that 

continue to be very supportive of our 

business, particularly in China. We are also 

working with our clients, and supporting 

each other to overcome the challenges 

arising from the present situation, and I 

am pleased to say that all of our clients 

have been extremely constructive and 

cooperative in presenting and agreeing to 

solutions that work for us all. With the 

flexibility extended to us by our clients and 

by us to them, we are confident that all 

the projects will be successful. 

2008 was also the year when your 

Company created history by testing the 

largest gantry crane in the world. The 

name “Taisun” in China denotes greatness 

and is the reason that we named this 

crane “Taisun”. “Taisun” lifted 20,133 

metric tonnes in one extraordinary event 

and received the Guinness World Record 

for the heaviest lift made by any crane. 

In November 2008, “Taisun” completed 

its first commercial lift at 14,000 metric 

tonnes, and will continue to bring great 

value to your Company by changing the 

way very large projects are built. “Taisun” 

is a game-changer, and will save millions 

of man-hours per project as a result of 

complex modules now being built on the 

ground and not in the air. In 2009, we 

will be undertaking four further major 

commercial lifts varying from 14,000 to 

17,000 metric tonnes. 

In May 2008, the gantry crane bagged 

the inaugural “Spotlight on New 

Technology Award” and the 25th ASME- 

IPTI “Woelfel Best Mechanical Engineering 

Achievement Award” at the annual 

Offshore Technology Conference in 

Houston, USA. We believe “Taisun“ will 

be a great asset to your Company and on 

a larger scale, the offshore industry, for 

many years to come. 


CEO REVIEW 

In 2008, your Company invested RMB 400 

million in building its second fabrication 

yard in Haiyang, Shandong, China 

through our wholly owned subsidiary 

company, Haiyang Raffles Offshore 

Engineering Co., Ltd (“HROE”). The yard 

is fully operational and is now working 

at capacity. Management is currently 

very satisfied with HROE’s high levels of 

productivity and efficiency. 

Today, the headcount in our Engineering 

Department stands at 680, of which, 70% 

are graduate engineers. The in-house 

capability of our Engineering Department 

is growing rapidly. This means we can be 

less dependent on, and drastically reduce 

the use of, outsourcing engineering 

companies. We are now more than 90% 

self-sufficient in the scope of engineering. 

As our engineers gain experience, both 

through dedicated training programmes 

and on-the-job, we aim for our engineering 

capabilities to be second to none and 

a key competitive advantage. 

Whilst many companies have been 

cutting back on recruitment and capital 

investment, your Company continues 

to move forward and improve its 

capabilities in many areas. This include the 

building of a special deep water wharf 

to accommodate four deep water 

semisubmersible drilling rigs at one 

time, complete with thrusters. Your 

Company will therefore be able to 

install thrusters and commission the 

rigs alongside its wharf. With this 

facility, we will not need to take rigs 

out to deep water with consequential 

savings in time and money, and with 

improved safety. 

We are also using this period to up-skill 

our employees to enhance both their 

own careers and their contribution to 

your Company. 

we raised a total of RMB 2 million from 

staff, clients, subcontractors and other 

stakeholders. The funds were entrusted 

to the Yantai Red Cross Society and 

designated for the Beichuan County in 

Sichuan Province, one of the areas hit 

hardest by the earthquake. I wish to thank 

all donors for their generosity. Our hearts 

and our thoughts continue to be with the 

victims and their families. In addition, as 

part of our ongoing CSR initiatives, the 

employees of Yantai Raffles continue to 

care for the weak and aged in and around 

the Zhifu district. 

LOOKING AHEAD 

Your Company continues to have a very 

positive outlook, and is looking forward 

to an exciting future despite the current 

global industry downturn. We are well 

positioned and ready for the upturn. We 

will continue to strive to be a high quality, 

lowest cost manufacturer, and the Yard of 

Choice for our customers. 

A WORD OF THANKS 

I would like to express my deepest 

appreciation to all our employees, 

shareholders, vendors, clients and 

business partners, especially during these 

challenging times. I particularly appreciate 

the leadership of Mr Mai as Chairman of 

the Board in providing the benefit of his 

valuable experience and advice to help 

us overcome many of the challenges we 

have encountered. The road ahead will 

always be wrought with challenges, but 

all at Yantai Raffles are fully committed to 

make your Company the greatest in the 

industry. 

Brian Chang 

Deputy Chairman and 

Chief Executive Officer 

CORPORATE SOCIAL RESPONSIBILITY (CSR) 

Your Company responded compassionately 

and swiftly to calls for assistance in the 

aftermath of the Sichuan Earthquake 

in May 2008. Within just a few days, 


CORPORATE HIGHLIGHTS IN 2008 

11 FEBRUARY 

‘Taisun’ was conferred the inaugural Spotlight 

on New Technology Award by the Offshore 

Technology Conference (OTC) in Houston, USA. 

25 FEBRUARY 

Yantai Raffles delivers a 350-man accommodation 

barge MODU (Mobile Offshore Drilling Unit) to 

Marine Subsea, Norway. 

18 MARCH 

Yantai Raffles receives a Safety Certification 

prepared by the General Administration of 

Quality Supervision, Inspection and Quarantine 

of the PRC following the successful test 

lifts performed by ‘Taisun’, from the Special 

Equipment Inspection Institute of Shandong. 

08 APRIL 

Yantai Raffles reports a net profit of 

S$35.9 million for the 12 months ended 

31 December 2007, surging 74.3% from 

S$20.6 million as compared to FY2006. Group 

revenue rose 25.1% to S$323.4 million, from 

S$258.5 million previously. 

18 APRIL 

Yantai Raffles christens the world’s first fixed 

dual-beam gantry crane, ‘Taisun’. ‘Taisun’ is 

awarded a Guinness World Record for hoisting 

a 20,133 MT launching barge 30 metres above 

the water. 

05 MAY 

Yantai Raffles wins the ASME Woelfel Best 

Mechanical Engineering Achievement Award 

2008 for its innovative, new technology ‘Taisun’. 

13 MAY 

Yantai Raffles is a finalist for the Technical 

Innovation Award at the Seatrade Asia 

Awards 2008. 

23 MAY 

Yantai Raffles sets up the Sichuan Earthquake 

Relief Fund and, through the generosity of 

its clients, suppliers, business partners and 

employees, a donation of RMB 2 million was 

presented to the Sichuan Province Red Cross 

Society of China. The proceeds will aid the 

construction of Beichuan County in Mianyang 

city, considered to be one of the worst-affected 

regions in the quake zone. 


29 MAY 

Yantai Raffles successfully executes the 

keel laying for the Elevating Support Vessel 

(“ESV”) which is under construction for 

Remedial ‘Cyprus’ Limited. 

22 AUGUST 

Yantai Raffles reports revenue and net profit of 

S$346.2 million and S$13.0 million respectively 

for the six-month period ended 30 June 2008, 

an improvement of 144.8% and 32.7% as 

compared to S$141.4 million and S$9.8 million 

in the corresponding period in 2007. 

15 OCTOBER 

Yantai Raffles is one of the top 5 finalists for 

the Innovation Award at the Lloyd’s List Asia 

Awards 2008. 

17 – 19 OCTOBER 

Yantai Raffles participates in the Yantai 

International Ship and Marine Exhibition held in 

Shandong, China. 

03 NOVEMBER 

China International Marine Containers (Group) 

Co., Ltd (“CIMC”) completes the acquisition of 

its initial 10% stake in Yantai Raffles Shipyard 

Limited. Yantai Raffles appoints Mr Mai Bo Liang 

as Chairman and Non-executive Director of 

the Board. 

22 NOVEMBER 

‘Taisun’, celebrates its first commercial lift by 

successfully lifting the 14,000 MT deckbox of 

the ‘COSL Pioneer’ semi-submersible drilling 

rig, and mating it onto the columns and hull rig 

in one single operation. 

02 – 05 DECEMBER 

Yantai Raffles participates in the 17th 

International Oil and Gas Industry Exhibition and 

Conference, OSEA 2008, held in Singapore. 

ALTERNATE 

USES OF ‘TAISUN’ 

Towering at 122 metres and spanning 

a width of 130 metres, ‘Taisun’ is the 

world’s most powerful crane. In April 

2008, ‘Taisun’ set the record for “the 

heaviest weight lifted by a crane” in 

the Guinness World Records by lifting 

a barge ballasted with water, which 

weighed in at 20,133 metric tonnes. 

With the ability to accommodate 

loads of up to 120 metres wide and in 

a dock that is 14 metres deep, 

‘Taisun’ is able to provide total lifting 

solutions for the world’s largest 

offshore vessels. 

Owing to its special load spreading 

design, ‘Taisun’ introduces extremely 

small stresses in the structures, 

simplifying the lifting design and 

increasing the number of structures 

that can be lifted. 

It possesses the ability to: 

(1) Mate an entire outfitted deckbox 

onto its hull 

(2) Install FPSO topsides on the 

FPSO hull deck in one or two 

‘Integrated Modules’ 

(3) Decommission rigs 

(4) Hoist structures with widths of up 

to 120 metres 

With the combination of unrivalled 

capacity and flexibility, ‘Taisun’ is 

ready to take on the most challenging 

lifting projects and is for turnkey 

lifting operations. 


CONSTRUCTION PROCESS 

OF A SEMI-SUBMERSIBLE 

DRILLING RIG 

Providing clients with total solutions in the design, production and fabrication of 

various marine and offshore facilities such as jack-up rigs, semi-submersible drilling rigs 

and heavy-lift vessels, Yantai Raffles has the requisite technological and engineering 

capabilities to manufacture these complex vessels at our world-class yard in Yantai, China. 

A semi-submersible drilling rig may take up to 36 months to build, depending on the 

complexities of specifications required by the rig owner. In this section, we take a closer 

look at the construction process of a semi-submersible drilling rig at Yantai Raffles. 

1. BASIC DESIGN 

2. DETAILED ENGINEERING 

3. PRODUCTION PHASE 

• Basic designs are provided by the client 

during the contract proposal stage, 

or procured from a third party design 

company. The basic design drawings 

provide the overall framework for the 

development of the project. 

• Detailed production specifications are 

planned and accommodated for, eg: 

types of equipment required on board 

the rig and layout of the equipment. 

• Key rig components such as engines, 

drilling equipment, thrusters and 

switchboards are procured. 

• At Yantai Raffles, we utilise the 

Dassault Systemes Product Lifecycle 

Management (DS PLM) solutions: 

CATIA for the design of offshore 

structure, DELMIA for production 

and simulation, and ENOVIA VPLM 

for creating digital 3D mockups, 

facilitating multi-discipline 

collaboration, and standardising virtual 

product modeling best practices. The 

information sharing platform ensures 

strict quality control, design precision 

and other mission-critical elements in 

the end-to-end process of planning, 

designing, building and project 

management of the vessels. 

• Production phase commences after 

the completion of design drawings. 

• Yantai Raffles adopts the approach of 

outsourcing the construction of simple 

components or ‘blocks’ to smaller yards 

while retaining the complex assembly 

operations in our main yard. 

• The blocks are extensively outfitted at 

fabrication stage. This simplifies the 

assembly process, thereby reducing 

the time required. 

• Effective engineering support, 

logistics supply and quality control 

allow for these outsourced blocks to 

be constructed to the owners’ 

exact requirements. 

• The blocks are then assembled into 

two large components of the rig – the 

deckbox and the lower hull. 


4. DECKBOX / LOWER HULL 

MATING OPERATION 

• Once the deckbox and lower hull 

are completed, ‘Taisun’, our 20,000 

MT gantry crane is used to vertically 

mount the deckbox on top of 

the hull in one single unique 

mating operation. 

• With its colossal strength and unique 

capability, ‘Taisun’ has distinguished 

Yantai Raffles from other yards. With 

a lifting capacity that is five times more 

than conventional cranes, it allows 

Yantai Raffles to build vessels with 

greater efficiency, speed, safety and at 

lower cost. 

5. MECHANICAL COMPLETION AND 

COMMISSIONING 

• This refers to the final connection of 

mechanical components and systems 

such as pipes and cables in the rig. 

• Testing and certification of all systems 

on board. 

• Sea trial commences at this stage to 

test and certify these systems at sea. 

6. DELIVERY 

• The completed submersible drilling rig 

is now ready for delivery. 


OUR ORDER BOOK 

1. SEMI-SUB DP3 DRILLING RIG (COSL PIONEER) 

Client: COSL Pioneer Pte Ltd 

Country: China 

2. SEMI-SUB DP3 DRILLING RIG (COSL INNOVATOR) 

Client: COSL Innovator Pte Ltd 


4. SEMI-SUB DP2 DRILLING RIG NO 1 F&G MILLENNIUM DESIGN 

Client: Schahin/Baerfield Drilling LLC 

Country: Brazil 

5. SEMI-SUB DP2 DRILLING RIG NO 2 F&G MILLENNIUM DESIGN 

Client: Schahin/Soratu Drilling LLC 

Country: Brazil 

3. SEMI-SUB DP3 DRILLING RIG (COSL PROMOTER) 

Client: COSL Promoter Pte Ltd 


5 9 

6 

8 7 

6. SEMI-SUB DP3 DRILLING RIG D90 

Client: Frigstad Discoverer Invest Ltd 

Country: Norway 

7. JACKUP DRILLING RIG F&G SUPER M2 DESIGN 

Client: Remedial ‘Cyprus’ Limited 

Country: Cyprus 

8. ROCK DUMPING BULK CARRIER 

Client: Van Oord Marine Services B.V. 


9. ICED STRENGTHENED PIPELAY VESSEL 

Client: Saipem (Portugal) Comercio Maritimo, 

Sociedade Unipessoal Lda 

Country: Portugal 

10. SEMI-SUBMERSIBLE CRANE VESSEL 

Client: Consafe MSV AB 

Country: Sweden 

11. 350-MAN ACCOMMODATION BARGE 

Client: Amisos Shipping Company Limited 

c/o Marine Subsea 


12. FALL PIPE VESSEL 

Client: Boskalis Westminster Shipping B.V. 

Country: Netherlands 


FINANCIAL HIGHLIGHTS 

Revenue 

(S$ million) 

Net Profit attributable to equity 

holders of the Company (S$ million) 

1000 

800 

891.0 

40 

35 

30 

35.9 

26.9 

600 

25 

20 

20.6 

400 

200 

258.5 

323.4 

15 

10 

5 

0 

2006 

(Restated) 

2007 2008 

0 

2006 

(Restated) 

2007 2008 

Net Assets 

(S$ million) 

600 

565.1 

578.4 

Earnings Per Share (Basic) 

attributable to equity holders of the Company 

(in Singapore cents) 

500 

15 

14.1 

400 

300 

316.6 

10 

9.5 9.9 

200 

5 

100 

0 

2006 

(Restated) 

2007 2008 

0 

2006 

(Restated) 

2007 2008 

in S$ million 2006 (Restated) 2007 2008 

Current Assets 517.9 1,099.5 1,191.9 

Non-current Assets 263.4 403.3 529.9 

Total Assets 781.3 1,502.8 1,721.8 

Current Liabilities 447.0 918.1 1,120.8 

Non-current Liabilities 17.7 19.6 22.6 

Total Liabilities 464.7 937.7 1,143.4 

Total Equity 316.6 565.1 578.4 


FINANCIAL REVIEW 

For the financial year ended 31 December 2008 

REVIEW OF FINANCIAL PERFORMANCE 

Group revenue from vessel and 

rig building grew by 176% to 

S$891.0 million from S$323.4 million 

in FY2007, with an order book value 

of approximately S$2.5 billion as of 

31 December 2008. Gross profit from 

construction contracts increased by 

131.0% to S$121.5 million from S$52.6 

million in FY2007. Operating in an extremely 

challenging business environment, the 

Group managed to deliver a positive 

net profit attributable to equity holders 

of S$26.9 million. The decline in net 

profit attributable to equity holders from 

S$35.9 million in 2007 was mainly due to 

provision for impairment of available-forsale 

investments and unrealized foreign 

exchange losses. Earnings per share 

for the year was 9.9 cents, down from 

14.1 cents in 2007. 

The increase in revenue is primarily due to 

higher percentage of completion achieved 

by projects as all are in the production 

phase of construction. Nonetheless, the 

Group’s gross profit margin suffered a 

slight decline to 13.6% in FY2008 from 

16.3% in FY2007, mainly due to the 

following: 

(i) Increase in price of materials and 

equipment, especially in the earlier 

part of FY2008; 

(ii) Higher ancillary out-sourcing and subcontracting 

costs; 

(iii) Provision for contractual liquidated 

damages of S$14.3 million and 

foreseeable losses of S$13.5 million 

for certain projects for which 

negotiation for waiver and/or 

monetary compensation have not 

been concluded as at the date of the 

audit report. 

The Group incurred other losses of 

S$25.1 million, as opposed to a gain of 

S$32.7 million in FY2007. The gain in 

FY2007 was mainly due to one-off sale 

of available-for-sale investments and a fair 

value gain on derivatives. In FY2008, the 

losses were mainly due to provision for 

impairment losses on available-for sale 

investments amounting to S$10.8 million, 

S$11.0 million of foreign exchange losses, 

S$23.2 million gain on forward contracts 

and S$30.9 million of a fair value loss 

on derivatives. 

For accounting purposes, available-forsale 

investments are marked to market 

using each investment’s quoted share 

price as the basis for deriving a fair 

value. Whereas management is of the 

view that a quoted share price is not 

necessarily the best or only indication of 

fair value in the current volatile financial 

and economic environment, particularly 

where investments are made with a long 

term investment horizon and the investee 

companies are financially strong with 

good business prospects, the Group is 

guided by FRS 39, and has recognised 

a S$10.8 million loss on available-forsale 

investments. 

The foreign exchanges losses (net) relate 

mainly to unrealized translation losses 

on foreign currency monetary items, 

particularly the USD syndicated bank loan 

secured in July 2008. The USD has since 

appreciated against SGD. 

The fair value loss on derivative 

financial instruments (net) refers to the 

mark to market losses on embedded 

derivatives arising from multi-currency 

contracts, partially offset by gain from 

foreign exchange forward contracts. 

Embedded derivatives reported a gain of 

S$21.8 million in FY2007 and a loss of 

S$30.9 million in FY2008. In FY2008, 

the Group commenced hedging certain 

exposures by way of foreign exchange 

forward contracts and successfully reported 

a gain of S$23.2 million, substantially 

mitigating the profit and loss volatility 


FINANCIAL REVIEW 


arising from the embedded derivatives. 

Distribution and administrative expenses 

rose to S$56.2 million in FY2008 from 

S$39.9 million in FY2007. The increase 

in business volume has driven all 

aspects of operational costs increase, 

including headcount and personnel 

costs, depreciation and armortisation 

and professional consultancy costs. For 

example, Group headcount stood at more 

than 4000 as at 31 December 2008, 

compared to 2700 as at 31 December 

2007, reflecting the successful recruitment 

of additional employees to meet current 

and projected contractual commitments. 

Net financing costs totaled S$5.2 million 

in FY2008 as opposed to S$6.9 million of 

net financing income in FY2007, due to the 

increase in borrowings to meet increased 

working capital and yard expansion and 

improvement requirements. 

Higher income tax expense of 

S$11.1 million as compared to S$9.4 million 

in FY2007 was due to higher tax rates in 

the Group’s PRC subsidiaries in FY2008 

and certain expenses not deductible for 

tax purpose including provision for loss 

in available-for-sale investments. The 

Group’s two major operating subsidiaries 

in the PRC were taxed at 25% compared 

to 12% in FY2007. The new Corporate 

Income Tax Law issued during the 5th 

Session of the 10th National People’s 

Congress has introduced a wide range of 

changes which include the unification of 

the income tax rate for domestic-invested 

and foreign-invested enterprises at 25%. 

As a result of the change, income tax 

expenses were higher in FY2008. 

REVIEW OF FINANCIAL POSITION 

Cash at bank for the Group stood 

at S$175.2 million, as compared to 

S$335.1 million as at 31 December 2007. 

Overall increase in business volume has 

driven a significantly higher level of working 

capital requirement, together with a funds 

requirement for ongoing expansion and 

improvement of yard facilities. The Group 

has secured and continues to establish 

banking facilities to support these 

ongoing requirements. 

Total assets of the Group were up by 

14.6% to S$1,721.8 million as of 31 

December 2008. The increase is mainly due 

to acquisition of land and sea use rights, 

property, plant and equipment, investment 

in subsidiary, and generally increased 

working capitals such as inventories 

and advances to suppliers. Property, 

plant and equipment increased from 

S$297.3 million to S$438.2 million. 

Major capital expenditure pertained to 

the building of a new fabrication yard, 

through the Group’s new 100% owned 

subsidiary, Haiyang Raffles Offshore 

Equipment Ltd. (“HROE”). HROE’s 

operations are quickly proving successful, 

and its production efficiency, quality 

control and responsiveness to needs have 

led to customers gaining confidence in the 

new yard. 

Total liabilities increased by 21.9% to 

S$1,143.4 million as of 31 December 

2008 due mainly to net new borrowings 

of S$334.6 miliion procured for business 

operations and the expansion of the 

Group’s yards. The Group funds its 

operations mainly from international banks 

in Singapore and banks in the PRC. The 

Group is in an ongoing process of securing 

a range of new and comprehensive 

banking facilities, primarily in the PRC, to 

not only enhance liquidity, but to extend 

the Group’s debt maturity profile. The 

introduction of China International Marine 

Containers (Group) Co., Ltd (“CIMC”) as 

a substantial shareholder of the Company 

is already proving to be of significant value 

to the Group, including, but not limited to, 

enhancing and expanding of the Group’s 

banking relationships in the PRC. 

Shareholders’ equity rose from 

S$565.1 million to S$578.4 million mainly 

due to FY2008 profits, partially offset 

by reversal of fair value gain reserve for 

available-for-sale investment. 

The net asset value per share stood at 

S$2.06 as at 31 December 2008. 


BOARD OF DIRECTORS 

MR MAI BO LIANG 

Chairman, Non-Executive Director 

Mr Mai Bo Liang was appointed as our Non-Executive Director 

and Chairman of Yantai Raffles with effect from 3 November 

2008. He graduated with a mechanical engineering degree from 

South China University of Technology. Since 1982, Mr. Mai has 

been working in China International Marine Containers (Group) 

Co., Ltd. (“CIMC”), first as technician then as manager of 

Product Technical Dept and general manager. He began to serve 

as CIMC’s President in 1992 and Director in March 1994. 

MR BRIAN CHANG 

Deputy Chairman and CEO, Executive Director 

Mr Brian Chang, our Deputy Chairman and CEO founded Yantai 

Raffles in 1994. With over 40 years of experience in the shipbuilding 

industry, he pioneered the construction of Singapore’s first jack-up 

drilling rig at Far East Levingston Shipbuildling Limited (currently 

known as Keppel FELS Limited). In 1971, Mr Chang started 

the Promet shipyard (known today as PPL Shipyard) and has 

implemented and supervised a wide spectrum of marine projects 

ranging from offshore tugs and supply boats to sophisticated 

offshore vessels including extreme environment semi-submersible 

drilling platforms. To date, he has overseen more than 600 

marine construction projects and has led Yantai Raffles to the 

forefront of the shipbuilding and marine fabrication sector with 

the construction of the world’s largest gantry crane with lifting 

capacity at 20,000 MT. Mr Chang received a scholarship for an 

Honors degree in Electrical Engineering at the City University, in 

London and graduated in 1965. 


MR JULIAN CHANG 

Executive Director 

Mr Julian Chang was appointed as a Director on the Board in 

September 1997 and helms the procurement, estimation and 

marketing departments in Yantai Raffles. Mr Chang brings with 

him more than 30 years of experience in the shipbuilding and 

offshore marine industry and was involved in establishing the 

Group’s main office in Singapore. Mr Chang holds Certificates 

in Shipping, Procurement Strategy and Advance Procurement, 

and was awarded a Diploma in Business Studies in 1975, from 

Tottenham College in the United Kingdom. 

MR MICHAEL LINDSAY SHARP 


MR MALCOLM CHANG 


Mr Malcolm Chang was appointed to the 

Board in October 2000 and is currently 

overseeing the Group’s Contracts 

Department. Mr Chang holds directorships 

in several oil and gas infrastructure 

installation companies and was awarded 

an Honors degree in Science (Economics), 

Brunel University, United Kingdom, 

in 1995. 

Mr Michael Sharp joined the Board in 

October 2006 and leads Yantai Raffles’ 

corporate finance, investment and investor 

relations activities. Mr Sharp has close to 

30 years of experience in the international 

banking sector with a wide range of 

responsibilities within the areas of equity 

and debt funding; fixed income and money 

markets; foreign exchange; investment 

and private banking. Prior to joining Yantai 

Raffles, Mr Sharp was the Head of Private 

Bank, South Island, at ANZ Banking Group 

in New Zealand from 1999 to 2006. Mr 

Sharp completed his A-levels at King 

Edward VI Grammar School, East Retford, 

Nottinghamshire, England. 



MR FRANCIS JAMES REIDY 

Independent Director 

Mr Francis James Reidy was appointed as an Independent Director to the Board in 

2003. He is currently a Director and shareholder of Pennsylvania General Energy, an 

oil and natural gas exploration, drilling and production company started in 1984, with 

annual sales amounting to US$60 million. From 1973 to 1984, he was the managing 

director of General Diesel, which in 1984 was sold to Unilever PLC. Mr Reidy currently 

holds directorships at Mc Clees Associates, Navy League of the United States, Operation 

Smile International and Research Centre for Bio-Electrics. He holds a Bachelor of Civil 

Engineering from Villanova University and a Diploma in Far East Studies from the 

University of Minnesota. 

MR LIU CHEE MING 

Non-Executive Director 

Mr Liu Chee Ming was appointed a Non-Executive Director to the Board in December 

2005. Mr Liu brings with him over 30 years of experience within the financial services 

sector. He has been the Managing Director of Platinum Holdings Company Limited since 

1996, prior to which he held senior-level positions at various Jardine Fleming entities for 

over 17 years. Mr Liu is an independent non-executive director of several public-listed 

companies, including StarHub Ltd in Singapore; and Kader Holdings Company Ltd in 

Hong Kong. Since May 1995, he has been a member of the Takeovers Appeal Committee 

and the Takeovers and Mergers Panel of the Securities and Futures Commission in Hong 

Kong. In 1st April 2008, he was appointed as a deputy Chairman. He is also currently 

a Governor of Singapore International School. Mr Liu holds a Bachelor of Business 

Administration from the former University of Singapore. 


MR SUM SOON LIM 


Mr Sum Soon Lim, an ex-banker, was appointed to the Board in January 2007 as an 

Independent Director. Mr Sum brings to the Board his expertise in the financial industry, 

having worked with the Singapore Economic Development Board, DBS Bank, J.P. Morgan 

Inc., Overseas Union Bank and Nuri Holdings (S) Pte Ltd, a private equity investment 

company, and had served as a corporate adviser to Temasek Holdings and Singapore 

Technologies. Currently the Chairman and Director of Times Development, Mr Sum also 

sits on the boards of Singapore Press Holdings Limited, Singapore Health Services Pte 

Ltd. and Singapore Technologies Telemedia Pte Ltd. He was a member of the Securities 

Industry Council from 1998 to 2005. Outside of Singapore, he is a commissioner of 

PT Indosat Tbk and the Chaiman of its risk management committee. Mr Sum holds a 

Bachelor of Science (Honors) in Production Engineering from the University of Nottingham 

in England. 

MR ANG KONG HUA 


Mr Ang Kong Hua, a well-known corporate figure in Singapore, was appointed to the 

Board as an Independent Director in September 2006. He is the Executive Director of NSL 

Ltd, a leading industrial group in Singapore, in which he had served as Chief Executive 

Officer for 28 years. Mr Ang also serves on the Boards of The Government of Singapore 

Investment Corporation Pte Ltd, GIC Special Investments Pte Ltd and DBS Bank Limited. 

Mr Ang graduated from the University of Hull, UK, with a Bachelor of Science (Economics) 

Upper II Honors degree in 1966. 


CORPORATE INFORMATION 


Executive 

Brian Chang 

Julian Chang 

Chang Yee Meng, Malcolm 

Michael Lindsay Sharp 

Non-Executive 

Mai Bo Liang (Chairman) 

Ang Kong Hua 

Francis James Reidy 

Liu Chee Ming 

Sum Soon Lim 

AUDIT COMMITTEE 

Sum Soon Lim (Chairman) 

Ang Kong Hua 


Liu Chee Ming 

NOMINATING COMMITTEE 

Ang Kong Hua (Chairman) 

Brian Chang 

Sum Soon Lim 

REMUNERATION COMMITTEE 

Ang Kong Hua (Chairman) 


Liu Chee Ming 

CORPORATE SECRETARY 

Oo Lay Kim 

AUDITORS 

Ernst & Young LLP 

Public Accountants and 

Certified Public Accountants 

One Raffles Quay 

Level 18, North Tower 

Singapore 048583 

Partner-in-charge : Tan Peck Yen 

(Appointed since financial year ended 

31 December 2007) 

PRINCIPAL BANKERS 

ABN AMRO Bank N.V. 

(a subsidiary undertaking of 

The Royal Bank of Scotland Group plc) 

One Raffles Quay 

South Tower, Level 26 


Bank of China 

No 11 Changjiang Road 

Economy and Technology 

Development District 

Yantai, Shandong, PRC 

China Construction Bank 

No 9 Nan Da Street 


China Merchants Bank 

No 60 Xingfuzhong Road 

Zhifu District 


China CITIC Bank 

No 207 Shengli Road 

Zhifu District 


REGISTERED OFFICE 

No. 1 Claymore Drive 

#08-04 Orchard Towers 


Tel: (65) 6735 8690 

Fax: (65) 6734 5449 


CORPORATE STRUCTURE 

As at 31 December 2008 

36% 

Consafe MSV AB 

Sweden 

100% 

Borneo Offshore Limited 

British Virgin Islands 

100% 

Coral Offshore Limited 


100% 

Deep Water Offshore Limited 


100% 

Raffles Yacht Limited 

Hong Kong SAR 

100% 

Evolution Offshore Ltd 


100% 

YRS Shiplease Pte Ltd 

Singapore 

100% 

Far East Drilling Ltd 


Yantai Raffles 

Shipyard Limited 

Singapore 

100% 

YRS Investments Limited 

Hong Kong SAR 

100% 

Asiatic Offshore Limited 


71.6% 

Yantai Raffles Shipyard Co. Ltd 

People’s Republic of China 

100% 

Baratpur Limited 


12.8% 

100% 

Offshore Accomodation Pte Ltd 

Singapore 

85.2% 

Yantai Raffles Offshore Ltd 


100% 

Pelican Waters Investment Ltd 


100% 

YRS Chartering Pte. Ltd. 

Singapore 

100% 

YRS Offshore Chartering Pte. Ltd. 

Singapore 

100% Deepwater Venture Pte. Ltd. 50% 

Singapore 

Peyan Singapore Pte. Ltd. 

Singapore 

100% 

Haiyang Raffles Offshore 

Equipment Ltd 

50% 


Yan Pex Singapore Pte. Ltd. 

Singapore 

30% 

Haiyang Blue Island Offshore Ltd 



FINANCIAL CONTENTS 

Corporate Governance 

Directors’ Report 

Statement By Directors 

Independent Auditors’ Report 

Consolidated Income Statement 

Balance sheets 

Statements of Changes in Equity 

Consolidated Cash Flow Statement 

Notes To Financial Statements 

Shareholding Statistics 

Notice of Annual General Meeting 

25 

29 

33 

34 

35 

36 

38 

40 

42 

99 

100 


CORPORATE GOVERNANCE REPORT 


The Board of Directors (the “Board”) is committed to ensure that high standards of corporate governance are practised by Yantai 

Raffles Shipyard Limited (the “Company”) and its subsidiaries (together the “Group”), as a fundamental part of its responsibilities to 

protect and enhance shareholders’ value and the financial performance of the Group. 

The Board uses the Code of Corporate Governance, issued by The Council on Corporate Disclosure and Governance 2005 (the “2005 

Code”) which is applicable to listed companies in Singapore, as a guide for the Group’s corporate governance practices. This report 

describes the Group’s corporate governance processes, activities and structures that were in place during the financial year ended 31 

December 2008, with specific reference to the principles and guidelines of the 2005 Code. 

BOARD MATTERS 

Principle 1: Effective Board to lead and control the company 

Principle 2: Strong and independent Board 

Principle 3: Clear division of Chairman and Chief Executive Officer (“CEO”) to ensure a balance of power and authority 

Principle 6: Provision of complete, adequate and timely information prior to board meetings and on an on-going basis 

The Board comprises the following directors as of 25 May 2009: 

Mr Mai Bo Liang 

Mr Brian Chang 

Mr Julian Chang 

Mr Chang Yee Meng Malcolm 

Mr Michael Lindsay Sharp 

Mr Ang Kong Hua 

Mr Francis James Reidy 

Mr Liu Chee Ming 

Mr Sum Soon Lim 

(Chairman, Non-executive Director) 

(Deputy Chairman and Chief Executive Officer) 

(Executive Director) 



(Independent Non-executive Director) 




The principal functions of the Board are: 

• Approving the Group corporate policies and authorization matrix; 

• Approving annual budgets, key operational matters, major acquisitions and disposals, major investment funding; 

• Supervising the management of business and affairs of Group; 

• Overseeing the processes for evaluating the adequacy of internal controls, risk management, financial reporting and 

compliance; 

• Reviewing the financial performance of the Group; 

• Approving nominations to the Board of Directors and, appointment of the various Board Committees and key executives; and 

• Assuming responsibility for corporate governance. 

The Board regularly reviews the business plans and financial performance of the Group. The Board has overall responsibility for putting 

in place a framework of good corporate governance in the Group, including the processes for financial reporting and compliance. 

As a group, the Board members bring with them their independent judgment, a broad range of industry knowledge, expertise and 

experience to bear on issues of strategy, performance, resources and standards of conduct. The profiles of the directors are set out at 

http://www.yantai-raffles.com/?page_id=23. The Board is of the view that the current board size is appropriate, taking into account 

the nature and scope of the Group’s operation. Newly appointed directors are provided with background information about the 

Company and the Group, and are invited to visit the Group’s operations to enrich their understanding of its business operation. To 

keep pace with new laws, regulations and changing commercial risks, directors are encouraged to attend relevant and useful seminars 

conducted by external organizations. 

The Board is scheduled to meet at least four times a year. Ad-hoc meetings may be convened when there are matters requiring the 

Board’s consideration and decision in between the scheduled meetings. 

The Board has delegated certain specific responsibilities to three Committees, namely the Audit Committee, the Remuneration 

Committee and the Nomination Committee. More information on these Committees is set out below. The Board accepts that 

while these Committees have the authority to examine particular issues and will report back to the Board with their decisions and 

recommendations, the ultimate responsibility for the final decision on all matters lies with the Board. 

The Group has operations in Singapore and the People’s Republic of China (“PRC”). The roles of Chairman and Deputy Chairman cum 

Chief Executive Officer (“CEO”) are separated to ensure an appropriate balance of power, increased accountability and greater capacity 

of the Board for independent decision making. 




The Chairman was appointed on 3 November 2008. He is the President and Director of China International Marine Containers 

(Group) Ltd, a world class company ranked in the World Leading Companies by Forbes. Together with the Deputy Chairman, they are 

responsible for strategic business development, and facilitating effectiveness of the Board. The Deputy Chairman of the Company, 

having nearly 40 years of experience in the shipbuilding industry, and also CEO of the PRC subsidiaries, bears full executive responsibility 

for business and operational decisions. 

The Board is provided with quarterly management accounts, project progress and operational reports. The annual budget, quarterly 

financial results and updated forecasts are presented to the Board for approval. As a general rule, board papers are sent to directors 

at least three working days in advance in order for directors to be adequately prepared for each meeting. Senior management attends 

board meetings to answer any queries from the Board. The directors also have unrestricted access to the Group’s senior management 

at all times. 

The Company Secretary attends all Board meetings and ensures the Board procedures are followed. It is the Company Secretary’s 

responsibility to ensure that the Company complies with the requirements of the Companies Act. The Articles provide that the 

appointment or removal of the Company Secretary is subject to approval of the Board. 

The directors, whether as a group or individually, seek independent professional advice relating to the Group’s affairs when necessary 

in the furtherance of their duties, at the Group’s expense. 

Nomination Committee (“NC”) 

Principle 4: Formal and transparent process for appointment of new directors 

Principle 5: Formal assessment of the effectiveness of the Board and contribution of each director 

The Nomination Committee was set up in January 2008. It is chaired by Mr Ang Kong Hua. The other RC members are Mr Brian Chang 

and Mr Sum Soon Lim. The NC has a written Terms of Reference endorsed by the Board that sets out its duties and responsibilities. 

The appointments and re-appointments of directors are done through a transparent process. The NC ascertains whether all nonexecutive 

directors are independent and that directors have devoted sufficient time and attention to the Group’s affairs. The NC 

evaluates the Board’s performance as a whole, and the performance of individual directors, based on certain performance criteria, 

including qualitative and quantitative factors such as performance of principal functions and fiduciary duties, level of participation in 

meetings, guidance provided to management, and attendance at meetings. 

Under the Company’s Articles of Association, each director is required to retire at least once in every three years by rotation and all 

newly appointed directors have to retire at the Annual General Meeting (“AGM”) following their appointments. The retiring directors 

are eligible to offer themselves for re-election. 

The NC is also responsible for determining annually, the independence of the directors. In doing so, the NC takes into account the 

circumstances set forth in Guideline 2.1 of the 2005 Code and any other salient factors. Following the annual review, Mr Ang Kong 

Hua, Mr Francis James Reidy and Mr Sum Soon Lim are endorsed to be independent for FY2008. Mr Liu Chee Ming is assessed to be 

independent at the point of assessment for FY2009. 

The NC is satisfied that sufficient time and attention are being given by the directors to the affairs of the Group, notwithstanding 

that some of the directors have multiple board representations, and there is no need to implement internal guidelines to address their 

competing time commitments. The matter is reviewed on an annual basis by the NC. 

Remuneration Committee (“RC”) and Disclosure on remuneration 

Principle 7: Formal and transparent procedures for fixing remuneration package of directors 

Principle 8: Appropriate remuneration to attract, retain and motivate directors 

Principle 9: Clear disclosure of remuneration policy, level and mix 

The RC was set up in March 2007 and comprises three non-executive and independent directors. It is chaired by Mr Ang Kong Hua. 

The other RC members are Mr Francis James Reidy and Mr Liu Chee Ming. 

The principal responsibilities of RC are: 

• Recommending to the Board for endorsement, a framework for computation of Board’s fees, as well as remuneration of executive 

directors and senior management to ensure that they are competitive and sufficient to attract, retain and motivate key executives 

of the required quality to run the Group successfully; 




• Recommending the specific remuneration package for each director and for senior management of the Group; and 

• Administering the Yantai Raffles Employee Share Option Scheme (“ESOS”). 

The RC reviews and determines the remuneration packages of the executive directors and key executives to ensure that they are 

adequately remunerated. The RC also considers, in consultation with the Chairman, key executives’ responsibilities, skills, expertise 

and contribution to the Group’s performance and whether remuneration packages are competitive to ensure that the Group is able to 

attract and retain the best available executive talent. No individual director is involved in fixing his own remuneration. 

Non executive directors are paid fees annually on a standard fee basis. The fees proposed to be paid to the non-executive directors for 

the current financial year are determined based on the following formula: 

Proposed Fee (FY2008) 

SGD 

Chairman Member 

Retainer fee for non-executive directors 70,000 45,000 

Audit Committee 30,000 20,000 

Remuneration Committee 10,000 8,000 

Nomination Committee 8,000 5,000 

If a board or committee members occupies a position for part of the financial year, the fee or allowance payable will be prorated 

accordingly. Such fees will be approved by the shareholders of the Company as a lump sum payment at the AGM. 

The level and mix of each executive director’s remuneration package for the current financial year is as follows: 

Fee 

(%) 

Basic salary 

(%) 

Variable 

bonus / 

profit 

sharing 

(%) 

Benefits in 

kind 

(%) 

Fair value of 

stock options 

(%) 

Executive directors 

Between S$500,000 to S$999,999 

Brian Chang - 100 - - - 100 

Julian Chang 


- 

- 

70 

43 

11 

7 

19 

19 

- 

32 

100 

100 

Between S$250,000 to S$499,999 

Malcolm Chang - 93 - 7 - 100 

Two immediate family members of certain directors have employment relationships with the Group and have received remuneration 

aggregating approximately S$309,000 in those capacities during the financial year. 

Total 

(%) 

Audit Committee (“AC”) 

Principal 11: Establishment of an Audit Committee (AC) with written terms of reference. 

The AC was established in March 2007 and comprises 4 non-executive directors, out of whom three are independent directors in 

FY2008. Mr Sum Soon Lim is the chairman and the other three members are Mr Ang Kong Hua, Mr Francis James Reidy and Mr Liu 

Chee Ming. The Board is of the view that the members of AC have sufficient financial management expertise and experiences to 

discharge the AC’s function. 

The AC has written Terms of Reference endorsed by the Board, setting out its duties and responsibilities as follows: 

• Reviewing the scope and results of the audit and its cost effectiveness, including the external auditors’ audit plan, audit report and 

evaluation of the system of internal accounting control, as well as assistance given by management to the external auditors; 

• Reviewing the nature and extent of the external auditors’ non-audit services to the Group, seeking to balance the maintenance 

of objectivity and value for money; 

• Reviewing any significant financial reporting issues and judgment so as to ensure the integrity of the financial statements of the 

Group and the formal announcement relating to the Group’s financial performance; 

• Reviewing the quarterly and full year financial statements of the Group, prior to submission to the Board for approval for release 

to FINFO; 




• Reviewing the adequacy of the Group’s internal control, operational and compliance controls, and risk management policies and 

systems; 

• Reviewing the adequacy and effectiveness of the Group’s internal audit function at least annually, including the adequacy of the 

internal audit resources as well as the scope and results of the internal audit procedures; and 

• Making recommendation to the Board on the appointment, re-appointment and removal of the external auditors, and approving 

the remuneration and terms of engagement of the external auditors. 

• To review interested person transactions. 

The AC is authorized by the Board to investigate any matters within its Terms of Reference and has full access to the Group’s 

management. 

Internal Control and Internal Audit 

Principal 10: Board to present balanced and understandable assessment of the Group’s performance 

Principal 12: Sound system of internal control 

Principal 13: Establishment of an internal audit function that is independent of activities functions it audits 

The Board recognizes the importance of sound internal controls and risk management practices to good corporate governance. The 

Board affirms its overall responsibilities for the Group’s systems of internal controls and risk management, and for reviewing the 

adequacy and integrity of those systems on an annual basis. The Board also recognizes that no internal control systems 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. 

With effect from January 2007, the Internal Audit (“IA”) function is principally outsourced to Deloitte & Touche Enterprise Risk 

Services Pte Ltd. With the assistance of IA, the AC and Board review the effectiveness of the key internal controls, including financial, 

operational and compliance controls, and risk management on an on-going basis. There are formal procedures in place for both 

internal and external auditors to report independently their findings and recommendations to the AC. The AC also reviews and 

approves the annual IA plans and resources to ensure that IA has the necessary resources to adequately perform its functions. The 

scope of the IA covers all business and support functions within the Group. 

Communication with shareholders 

Principal 14: Regular, effective and fair communication with shareholders. 

Principal 15: Greater shareholders participation at AGMs 

The Group has a dedicated investor relations team which communicates with its shareholders and analysts on a regular basis and 

attends to their queries and concerns. It also manages the dissemination of corporate information to the media, the public as well as 

the institutional investors and public shareholders to ensure it is made publicly available on a timely and non-selective basis. Material 

information including significant contracts, half year results and full year results are published on FINFO and the Company’s website 

www.yantai-raffles.com and where appropriate, through media release. 

The Articles allow a shareholder to appoint one or two proxies to attend and vote at an AGM. Articles currently do not allow a 

shareholder to vote in absentia. 

All directors, including the Chairman of the Board, AC and RC and senior management are in attendance at AGMs and Extraordinary 

General Meetings to address shareholders’ queries. The external auditors are also invited to attend the AGM’s to address shareholders’ 

queries on the conduct of audit and auditors’ report. Resolutions are as far as possible, structured separately and may be voted on 

independently. 

Dealing in securities 

The Group provides guidance and internal regulation with regard to dealing in the Group’s securities by its directors and officers. It 

prohibits its directors and officers from dealing in securities of the Group while in possession of unpublished material price-sensitive 

information in relation to such securities and during the “closed period”, which is defined as two weeks before the date of announcement 

of results for each of the first three quarters of the Group’s financial year and one month before the date of announcement of full 

year results. 


DIRECTORS’ REPORT 


The directors are pleased to present their report to the members together with the audited consolidated financial statements of Yantai 

Raffles Shipyard Limited (the “Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of 

changes in equity of the Company for the financial year ended 31 December 2008. 

Directors 

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

Mai Bo Liang (appointed on 3 November 2008) 

Brian Chang 

Julian Chang 

Chang Yee Meng Malcolm 


Ang Kong Hua 


Liu Chee Ming 

Sum Soon Lim 

Arrangements to enable directors to acquire shares or debentures 

Except as described in “Share Options” in this report, neither at the end of nor at any time during the financial year was the Company 

a party to any arrangement whose objects, or one of whose objects is, to enable the directors of the Company to acquire benefits by 

means of the acquisition of shares or debentures of the Company or any other body corporate. 

Directors’ interests in shares or debentures 

According to the register of directors’ shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, 

the following directors, who held office at the end of the financial year, had an interest in shares and share options of the Company 

and related corporations (other than wholly-owned subsidiaries) as stated below: 

Name of director 

At the 

beginning 

of financial 

year 

Direct interest 

At the 

end of 

financial 

year 

At the 

beginning 

of financial 

year 

Deemed interest 

At the 

end of 

financial 

year 

Ordinary shares of the Company 

Brian Chang 12,976,087 12,976,087 111,210,013 83,853,513 

Julian Chang – – 1,050,000 1,050,000 

Chang Yee Meng Malcolm – – 1,033,146 1,033,146 

Michael Lindsay Sharp – – 120,000 210,000 

Ang Kong Hua – – 2,056,000 2,056,000 

Francis James Reidy 2,744,000 2,744,000 171,000 – 

Liu Chee Ming – – 3,698,700 3,799,700 

Sum Soon Lim – – 400,000 400,000 




Directors’ interests in shares or debentures (cont’d) 

Name of director 

At the 

beginning 

of financial 

year 

Direct interest 

At the 

end of 

financial 

year 

Share options of the Company 

Julian Chang 1 2,000,000 2,000,000 

Chang Yee Meng Malcolm 1 1,600,000 1,600,000 

Michael Lindsay Sharp 300,000 300,000 

Ang Kong Hua 50,000 50,000 

Francis James Reidy 50,000 50,000 

Liu Chee Ming 50,000 50,000 

Sum Soon Lim 50,000 50,000 

1 These two directors have agreed to waive all rights they have or may have under the Options. 

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options, 

warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment 

if later, or at the end of the financial year. 

Mr Brian Chang, who by virtue of his interest of not less than 20% of the issued capital of the Company, is deemed to have an interest 

in the whole of the share capital of the Company’s wholly owned subsidiaries and in the shares held by the Company in the following 

subsidiaries that are not wholly owned by the Group. 

At the beginning of 

financial year 

At the end of 

financial year 

Yantai Raffles Offshore Ltd 

– Registered and paid-in capital RMB 234,690,000 RMB 234,690,000 

Yantai Raffles Shipyard Co., Ltd 

– Registered and paid-in capital RMB 125,980,000 RMB 125,980,000 

Directors’ contractual benefits 

Since the end of the previous financial year, no director of the Company has received or become entitled to receive a benefit by reason 

of a contract made by the Company or a related corporation with the director, or with a firm of which the director is a member, or with 

a company in which the director has a substantial financial interest, except as disclosed in the accompanying financial statements and 

in this report, and except that certain directors have employment relationships with the Company and have received remuneration in 

those capacities. 




Share options 

At an Extraordinary General Meeting held on 21 June 2006, shareholders approved the Yantai Raffles Executive Share Option Scheme 

(the “Scheme”) for the granting of non-transferable options that are settled by physical delivery of the ordinary shares of the Company, 

to eligible directors, senior executives and employees respectively. 

The Scheme is operated at the discretion of the Remuneration Committee, subject to a maximum period of 10 years from the date 

on which the Scheme was adopted, beyond which is subject to approval of the members by way of ordinary resolutions in general 

meetings and any relevant authorities which may then be required. The maximum aggregated number of shares which may be issued 

and/or transferred pursuant to all options shall not exceed 10% of the issued share capital of the Company on the day preceding the 

date of grant. 

Under the Scheme, share options are granted to employees of the Group selected by the Remuneration Committee. The exercise price 

of the granted options is based on the arithmetic average of the daily volume weighted average price in Norwegian Kroner (“NOK”) 

of the Company’s shares traded on the Norwegian OTC during the period of three trading days ending on the day before the date of 

grant. Where they are issued in currency other than NOK, it is based on the prevailing spot exchange rate quoted by the Company’s 

bank. Share options shall be exercisable in whole or in part in respect of 1,000 shares or any multiple thereof, subject to the vesting 

period as described by the Remuneration Committee in its absolute discretion. 

During the financial year ended 31 December 2008, share options in respect of 1,154,003 were granted to certain senior management 

staff and employees, at an exercise price between USD1.6425 to USD1.65 per share (the “2008 Share Options”). The 2008 Share 

Options are exercisable from 1 July 2010 to 30 June 2012. 

Details of all the share options to subscribe for ordinary shares of the Company pursuant to the Scheme as at 31 December 2008 are 

as follows: 

Exercise period Exercise price Number of share options 

1 August 2008 – 31 July 2010 $2.80 390,000 

16 January 2009 – 15 January 2011 US$1.64 100,000 

1 February 2009 – 31 January 2011 NOK 10.50 60,000 

13 April 2009 – 12 April 2011 NOK 16.50 600,000 

22 May 2009 – 21 May 2011 US$1.64 to US$3.05 1,154,003 

18 September 2009 – 17 September 2012 NOK 26.00 936,000 

18 September 2009 – 17 September 2017 NOK 26.00 3,505,000 

1 July 2010 – 30 June 2012 US$1.6425 to US$1.65 1,154,003 

Total 7,899,006 

Since the commencement of the Scheme till the end of the financial year: 

• No share options that entitle the holder to participate, by virtue of the options, in any share issue of any other corporation have 

been granted, and 

• Other than 1,154,003 share options that were granted to certain senior executives, none of whom are directors, at a discount 

of 45% to market average price at time of grant, there were no other share options that were issued at a discount. 

The number of shares options granted to directors of the Company pursuant to the Scheme and which remain outstanding as at 31 

December 2008 are disclosed in “Directors’ interests in shares or debentures” of the report. 




Auditors 

Ernst & Young LLP have expressed their willingness to accept reappointment as auditors. 

On behalf of the Board of Directors, 

JULIAN CHANG 

Director 

MICHAEL LINDSAY SHARP 

Director 

Singapore 

25 May 2009 


STATEMENT BY DIRECTORS 

We, Julian Chang and Michael Lindsay Sharp, being two of the directors of Yantai Raffles Shipyard Limited, do hereby state that, in 

the opinion of the directors, 

(i) 

(ii) 

the accompanying balance sheets, consolidated income statement, statements of changes in equity, and consolidated cash flow 

statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of 

the Company as at 31 December 2008 and the results of the business, changes in equity and cash flows of the Group and the 

changes in equity of the Company for the financial year ended on that date, and 

at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when 

they fall due. 

On behalf of the Board of Directors, 

JULIAN CHANG 

Director 

MICHAEL LINDSAY SHARP 

Director 

Singapore 

25 May 2009 


INDEPENDENT AUDITORS’ REPORT 

To the Members of Yantai Raffles Shipyard Limited 

We have audited the accompanying financial statements of Yantai Raffles Shipyard Limited (the “Company”) and its subsidiaries 

(collectively, the “Group”) set out on pages 35 to 98, which comprise the balance sheets of the Group and the Company as at 31 

December 2008, the statements of changes in equity of the Group and the Company, the income statement and cash flow statement 

of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory notes. 

Management’s responsibility for the financial statements 

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of 

the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes devising 

and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded 

against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to 

permit the preparation of true and fair profit and loss account and balance sheet and to maintain accountability of assets; selecting and 

applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. 

Auditors’ responsibility 

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

with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the 

audit to obtain reasonable assurance whether the financial statements are free of material misstatement. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. 

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

financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant 

to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate 

in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit 

also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by 

management, as well as evaluating the overall presentation of the financial statements. 

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

Opinion 

In our opinion, 

(i) 

(ii) 

the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company 

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

true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and the results, changes in 

equity and cash flows of the Group and changes in equity of the Company for the year ended on that date; and 

the accounting and other records required by the Act to be kept by the Company and by the subsidiaries incorporated in 

Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. 

Ernst & Young LLP 

Public Accountants and Certified Public Accountants 

Singapore 

25 May 2009 


CONSOLIDATED INCOME STATEMENT 


Group 

Note 2008 2007 

$’000 $’000 

Revenue 4 891,014 323,448 

Cost of sales (769,528) (270,800) 

Gross profit 121,486 52,648 

Other (losses)/gains, net 5 (25,058) 32,697 

Expenses 

- Distribution and marketing expenses (568) (503) 

- Administrative expenses (55,670) (39,419) 

Profit from operating activities 6 40,190 45,423 

Finance income 8 5,220 10,790 

Finance costs 8 (10,461) (3,935) 

Net finance (costs)/income 8 (5,241) 6,855 

Share of results of associates 1,285 (190) 

Profit before income tax 36,234 52,088 

Income tax expense 9 (11,121) (9,399) 

Profit for the year 25,113 42,689 

Attributable to: 

Equity holders of the Company 26,932 35,907 

Minority interests (1,819) 6,782 

25,113 42,689 

Earnings per share attributable to equity holders of the Company 

- Basic (cents per share) 10 9.85 14.08 

- Diluted (cents per share) 10 9.85 13.99 

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


BALANCE SHEETS 


Group 

Company 

Note 2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

ASSETS 

Current assets 

Cash and bank balances 11 175,233 335,082 132,640 251,969 

Trade and other receivables 12 105,839 76,502 35,126 50,321 

Amounts due from subsidiaries 

(non-trade) 13 – – 34,349 2,622 

Inventories 14 244,710 209,014 136,344 74,417 

Vessels under construction 15 88,903 11,768 135,375 105,957 

Construction work-in-progress in 

excess of progress billings 16 94,302 103,013 311,604 531,756 

Derivative financial instruments 36(g) 12,234 24,400 12,217 24,400 

Other current assets 17 470,701 339,689 193,491 108,878 

1,191,922 1,099,468 991,146 1,150,320 

Non-current assets 

Amounts due from subsidiaries 

(non-trade) 13 – – 55,302 74,134 

Financial assets, available-for-sale 18 3,529 58,872 – – 

Investment in subsidiaries 19 – – 83,136 81,608 

Investment in associates 20 15,978 579 – – 

Investment in a joint venture 20 – 2,894 – – 

Property, plant and equipment 21 438,176 297,286 1,160 683 

Prepayments 22 302 8,697 – – 

Land and sea use rights 22 31,116 3,839 – – 

Intangible assets 23 24,818 20,428 6,868 3,174 

Deferred tax assets 24 15,994 10,778 1,611 – 

529,913 403,373 148,077 159,599 

Total assets 1,721,835 1,502,841 1,139,223 1,309,919 



BALANCE SHEETS 


Group 

Company 

Note 2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

LIABILITIES 

Current liabilities 

Progress billings in excess of 

construction work-in-progress 16 315,791 648,955 119,179 620,019 

Advances from customers 25 31,118 40,145 – 172 

Derivative financial instruments 36(g) 26,975 – 24,830 – 

Trade and other payables 26 329,476 148,123 102,539 35,118 

Borrowings 27 385,071 55,400 298,741 24,302 

Amounts due to subsidiaries (trade) 13 – – 977 82,870 

Income tax payable 16,481 7,511 14,893 1,600 

Provision for other liabilities 28 15,895 17,969 9,479 11,922 

1,120,807 918,103 570,638 776,003 

Non-current liabilities 

Borrowings 27 21,433 16,550 146 188 

Deferred tax liabilities 24 – 1,692 – 1,692 

Other long term liabilities 1,150 1,394 – – 

22,583 19,636 146 1,880 

Total liabilities 1,143,390 937,739 570,784 777,883 

Net assets 578,445 565,102 568,439 532,036 

EQUITY 

Equity attributable to equity holders 

of the Company 

Share capital 29 591,482 591,246 591,482 591,246 

Other reserves 30 26,394 39,672 9,125 2,691 

Accumulated losses (53,519) (80,740) (32,168) (61,901) 

564,357 550,178 568,439 532,036 

Minority interests 14,088 14,924 – – 

Total equity 578,445 565,102 568,439 532,036 



STATEMENTS OF CHANGES IN EQUITY 


Attributable to equity 

holders of the Company 

Note 

Share Other Accumulated Minority Total 

capital reserves losses interests equity 

$’000 $’000 $’000 $’000 $’000 

Group 

As at 1 January 2008 591,246 39,672 (80,740) 14,924 565,102 

Reversal of fair value gains on 

available-for-sale financial assets 

recognised in equity previously 30 – (26,198) – – (26,198) 

Currency translation differences 30 – 6,486 – 983 7,469 

Net income recognised directly in 

equity – (19,712) – 983 (18,729) 

Profit for the year – – 26,932 (1,819) 25,113 

Total recognised income and 

expense – (19,712) 26,932 (836) 6,384 

Grant of equity-settled share options 

to employees 30 – 6,777 – – 6,777 

Transfer from reserve 54 (343) 289 – – 

Exercise of employee share option 29 182 – – – 182 

As at 31 December 2008 591,482 26,394 (53,519) 14,088 578,445 

As at 1 January 2007 417,608 4,671 (116,647) 11,011 316,643 

Net gain on available-for-sale 

financial assets 30 – 32,828 – – 32,828 

Currency translation differences 30 – (381) – (12) (393) 

Net income recognised directly in 

equity – 32,447 – (12) 32,435 

Profit for the year – – 35,907 6,782 42,689 

Total recognised income and 

expense – 32,447 35,907 6,770 75,124 

Acquisition of minority interests in 

subsidiaries – – – (2,857) (2,857) 


to employees 30 – 2,554 – – 2,554 

Issue of shares 29 178,077 – – – 178,077 

Share issue expense 29 (4,439) – – – (4,439) 

As at 31 December 2007 591,246 39,672 (80,740) 14,924 565,102 



STATEMENTS OF CHANGES IN EQUITY 


Attributable to equity 

holders of the Company 

Note 

Share Other Accumulated Total 

capital reserves losses equity 

$’000 $’000 $’000 $’000 

Company 

As at 1 January 2008 591,246 2,691 (61,901) 532,036 

Profit for the year, representing total 

recognised income and expense – – 29,444 29,444 


to employees 30 – 6,777 – 6,777 

Transfer from reserve 54 (343) 289 – 

Exercise of employee share option 29 182 – – 182 

As at 31 December 2008 591,482 9,125 (32,168) 568,439 

As at 1 January 2007 417,608 137 (71,260) 346,485 

Profit for the year, representing total 

recognised income and expense – – 9,359 9,359 


to employees 30 – 2,554 – 2,554 

Issue of shares 29 178,077 – – 178,077 

Share issue expense 29 (4,439) – – (4,439) 

As at 31 December 2007 591,246 2,691 (61,901) 532,036 



CONSOLIDATED CASH FLOW STATEMENT 


Group 

Note 2008 2007 

$’000 $’000 

Cash flow from operating activities 


Adjustments for: 

- Amortisation of intangible assets 2,587 918 

- Amortisation of land and sea use rights 452 101 

- Bad debts written off – 990 

- Depreciation on property, plant and equipment 10,351 6,342 

- Impairment loss on property, plant and equipment – 413 

- Loss on disposal of property, plant and equipment 968 1,092 

- Impairment loss on financial assets, available for sale 10,796 1,649 

- Impairment loss on investments in an associate 7,676 – 

- Gain on sale of financial assets, available-for-sale – (9,625) 

- Write back of provision for liquidated damages (2,175) (1,890) 

- Provision for warranty costs 4,128 1,026 

- Write back of doubtful debts (744) (60) 

- Provision for foreseeable losses 27,796 – 

- Translation differences 16,663 563 

- Share options expense 6,777 2,554 

- Interest expense 10,461 3,935 

- Interest income (5,220) (10,790) 

- Share of results of associates (1,285) 190 

- Loss on disposal of investment in an associate 64 – 

- Fair value losses/(gains) on derivative financial 

instruments 30,917 (21,800) 

- Gain on forward contracts (23,235) – 

Operating cash flows before working capital changes 133,211 27,696 

Change in operating assets and liabilities 

- Inventories (35,696) (191,614) 

- Vessel under construction (77,135) (11,768) 

- Construction work-in-progress and excess progress 

billings (352,250) 340,794 

- Trade and other receivables (28,593) 29,897 

- Other current assets (131,012) (295,562) 

- Advances from customers (9,027) 38,292 

- Trade and other payables 181,353 76,992 

- Other long term liabilities (244) (358) 

- Provision for other liabilities (4,027) 8,394 

Cash (used in)/generated from operations (323,420) 22,763 

Interest received 5,220 10,790 

Interest paid (10,461) (3,935) 

Income tax paid (8,506) (9,163) 

Cash pledged for performance bonds and trade facilities (5,192) (15,561) 

Net cash (used in)/generated from operating activities (342,359) 4,894 



CONSOLIDATED CASH FLOW STATEMENT 


Group 

Note 2008 2007 

$’000 $’000 

Cash flows from investing activities 

Proceeds from disposal of property, plant and equipment 398 402 

Purchase of property, plant and equipment and intangible assets (137,548) (93,596) 

Purchase of land and sea use rights (26,523) (601) 

Prepayments 8,395 (8,107) 

Proceeds from sales of financial assets, available-for-sale – 27,011 

Purchase of financial assets, available-for-sale (1,870) (33,848) 

Investment in an associate and a joint venture company – (3,663) 

Proceeds from disposal of an associate 1,139 – 

Net cash used in investing activities (156,009) (112,402) 

Cash flows from financing activities 

Proceeds from issuance of ordinary shares 182 178,077 

Share issue expenses – (4,439) 

Proceeds from borrowings from banks 450,139 168,461 

Repayment of borrowings from banks (116,994) (210,841) 

Net cash from financing activities 333,327 131,258 

Net (decrease)/increase in cash and cash equivalents (165,041) 23,750 

Cash and cash equivalents at beginning of financial year 208,873 185,123 

Cash and cash equivalents at end of financial year 11 43,832 208,873 



NOTES TO THE FINANCIAL STATEMENTS 


1. Corporate information 

Yantai Raffles Shipyard Limited (the “Company”) is incorporated and domiciled in Singapore. The address of its registered office 

is No.1 Claymore Drive, #08-04 Orchard Towers, Singapore 229594. 

The principal activities of the Company are to carry on the business of provision of project management services, the construction 

and conversion of vessels, rigs and offshore facilities and investment holding. The principal activities of its subsidiaries and 

associates are set out in Note 19 and 20 respectively to the financial statements. 

2. Summary of significant accounting policies 

2.1 Basis of preparation 

The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company 

have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). 

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

The consolidated financial statements are presented in Singapore Dollars (“SGD” or “$”) and all values are rounded in the tables 

to the nearest thousand ($’000) except when otherwise indicated. 

The preparation of financial statements in conformity with FRS requires management to exercise its judgment 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 judgment or complexity, or areas where assumptions and estimates are significant to the 

financial statements are disclosed in Note 3. 

The Group recorded net operating cash outflow of $342,359,000 (2007: net cash inflow of $4,894,000) and net decrease in 

cash and cash equivalents of S$165,041,000 (2007: net increase of $23,750,000) during the financial year ended 31 December 

2008. In the opinion of the directors, the Group is able to continue on going concern basis. Despite its operating outflow in 

2008, the Group is confident of its ability to generate cash flow from its operations, as well as from the continuing support 

of its bankers. Accordingly, the directors are of the view that the use of the going concern assumption is appropriate for the 

preparation of the financial statements of the Group. 

2.2 Changes in accounting polices 

The accounting policies have been consistently applied by the Group during the financial year ended 31 December 2008, except 

for the changes in accounting policies discussed below. New standards effective for annual periods beginning on or after the 

dates as stated are as follows: 

Effective for 

annual periods 

beginning on or after 

FRS 107 Financial Instrument: Disclosure 1 January 2008 

INT FRS 111 FRS 102 - Group and Treasury Share Transactions 1 January 2008 

INT FRS 112 Service Concession Arrangements 1 January 2008 

INT FRS 114 FRS 19 - The Limits on a Defined Benefit Assets, 

Minimum Funding Requirements and their Interaction 

1 January 2008 




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

2.2 Changes in accounting polices (cont’d) 

FRS 107, Financial Instruments: Disclosures and amendment to FRS 1(revised), Presentation of financial statements 

(Capital Disclosures) 

FRS 107 introduces new disclosures to improve the information about financial instruments. It requires the disclosure of qualitative 

and quantitative information about exposure to risks arising from financial instruments, including specified minimum disclosures 

about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. The amendment to FRS 1 requires the 

Group to make new disclosures to enable users of financial statements to evaluate the Group’s objectives, policies and processes 

for managing capital. The Group has applied FRS 107 during the current financial year. 

The other standards are not applicable to the Group’s activities. 

2.3 Future changes in accounting policies 

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

Effective for 

annual periods 

beginning on or after 

FRS 1 Presentation of Financial Statements – Revised presentation 1 January 2009 

FRS 1 

Presentation of Financial Statements – Amendments relating to Puttable Financial 

Instruments and Obligations Arising on Liquidation 


FRS 23 Borrowing Costs 1 January 2009 

FRS 27 

FRS 32 

FRS 39 

FRS 101 

Consolidated and Separate Financial Statements – Amendments relating to Cost of 

an Investment in a Subsidiary, Jointly Controlled Entity or Associate 

Financial Instruments: Presentation – Amendments relating to Puttable Financial 

Instruments and Obligations Arising on Liquidation 

Financial Instruments: Recognition and measurement – Amendments relating to 

Eligible Hedge Items 

First-time Adoption of Financial Reporting Standards – Amendments relating to 

Cost of an Investment in a Subsidiary, Joint Controlled Entity or Associate 



1 July 2009 


FRS 102 Share-based payment – Vesting conditions and cancellations 1 January 2009 

FRS 108 Operating Segments 1 January 2009 

INT FRS 113 Customer Loyalty Programme 1 July 2008 

INT FRS 116 Hedge of a Net Investment in a Foreign Operation 1 October 2008 

INT FRS 117 Distribution of Non-Cash Assets to Owners 1 July 2009 





2.3 Future changes in accounting policies (cont’d) 

The directors expect that the adoption of the above pronouncements will have no material impact on the financial statements in 

the period of initial application, except for FRS 1 and FRS 108 and Improvements to FRSs as indicated below. 

FRS 1 Presentation of Financial Statements – Revised presentation 

The revised FRS 1 requires owner and non-owner changes in equity to be presented separately. The statement of changes in 

equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line item. 

In addition, the revised standard introduces the statement of comprehensive income: it presents all items of income and expense, 

either in one single statement, or in two linked statements. The Group is currently evaluating the format to adopt. 

FRS 108 Operating Segments 

FRS 108 requires entities to disclose segment information based on the information reviewed by the entity’s chief operating 

decision maker. The impact of this standard on the other segment disclosures is still to be determined. The Group does not expect 

this standard to have any impact on the financial position and results of the Group when implemented in 2009. 

2.4 Revenue recognition 

Revenue comprises the fair value of the consideration received or receivable for the sale of goods and rendering of services in 

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

eliminating sales within the Group. Revenue is recognised as follows: 

(a) 

Revenue from construction contracts 

Revenue from ship and rig conversion and building is recognised on percentage of completion method when the outcome 

of the construction contracts can be reliably ascertained. Please refer to paragraph “2.8 Construction Contracts” for more 

detailed accounting policies. 

(b) 

Revenue from sales contracts 

Revenue from ship and rig sales contracts is recognised upon delivery of the vessels. 

(c) 

Interest income 

Interest income is recognised on a time-proportion basis using the effective interest method. When a receivable is impaired, 

the Group reduces the carrying amount to its recoverable amount, being the estimated future cash flow discounted at 

the original effective interest rate of the instrument, and continues amortising the discount as interest income on the 

recoverable amount. 

2.5 Group accounting 

(a) 

Subsidiaries 

Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and 

operating policies, generally accompanying a shareholding of more than one half 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. 





2.5 Group accounting (cont’d) 

(a) 

Subsidiaries (cont’d) 

The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an 

acquisition is measured as the fair value of the assets acquired, equity instruments issued or liabilities incurred or assumed 

at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and 

contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition, 

irrespective of the extent of any minority interest. Please refer to the paragraph “2.7 Intangible assets - Goodwill” for the 

accounting policy on goodwill on acquisition of subsidiaries. Any excess of the Group’s share in the net fair value of the 

acquired subsidiary’s identifiable assets, liabilities and contingent liabilities over cost of business combination is recognised 

as income in the income statement on the date of acquisition. 

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. 

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the 

balance sheet date. In preparing the consolidated financial statements, transactions, balances and unrealised gains on 

transactions between Group companies are eliminated. Unrealised losses are also eliminated but are considered an 

impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to 

ensure consistency with the policies adopted by the Group. 

Minority interests are that part of the net results of operations and of net assets of a subsidiary attributable to interests 

which are not owned directly or indirectly by the Group. They are measured at the minorities’ share of the fair value of the 

subsidiaries’ identifiable assets and liabilities at the date of acquisition by the Group and the minorities’ share of changes 

in equity since the date of acquisition, except when the losses applicable to the minority interests in a subsidiary exceed 

the minority interests in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minority 

interests are attributed to the equity holders of the Company, unless the minority interests have a binding obligation to, 

and are able to, make good the losses. When that subsidiary subsequently reports profits, the profits applicable to the 

minority interests are attributed to the equity holders of the Company until the minority interests’ share of losses previously 

absorbed by the equity holders of the Company have been recovered. 

Minority interests are presented in the consolidated balance sheet within equity, separately from the parent shareholders’ 

equity, and are separately disclosed in the consolidated income statement. 

Please refer to the paragraph “2.9 Investment in subsidiaries, associates and a joint venture company” for the accounting 

policy on investment in subsidiaries in the separate financial statements of the Company. 

(b) 

Transactions with minority interests 

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the 

Group. Disposals to minority interests, which result in gains and losses for the Group, are recorded in the income statement. 

Purchase from minority interests result in goodwill, being the difference between any considerations paid and the Group’s 

incremental share of the carrying value of identifiable net assets of the subsidiary. 

(c) 

Associates and joint venture company 

An associate is an entity, not being a subsidiary or a joint venture company, in which the Group has significant influence. 

This generally coincides with the Group having 20% or more of the voting power or has representation on the board of 

directors. 

A joint venture company is a contractual arrangement whereby two or more parties undertake an economic activity that is 

subject to joint control, where the strategic financial and operating decisions relating to the activity require the unanimous 

consent of the parties sharing control. 





2.5 Group accounting (cont’d) 

(c) 

Associates and joint venture company (cont’d) 

The Group’s investment in an associate and a joint venture company are accounted for using the equity method. Under 

the equity method, the investments in an associate company and joint venture company are carried in the balance sheet 

at cost plus post-acquisition changes in the Group’s share of net assets of the associate and joint venture company. The 

Group’s share of the profit or loss of the associate and joint venture company are recognised in the consolidated income 

statement. Where there has been a change recognised directly in the equity of the associate and joint venture company, 

the Group recognises its share of such changes. After application of the equity method, the Group determines whether it 

is necessary to recognise any impairment loss with respect to the Group’s net investment in the associate and joint venture 

company. The associate and joint venture company are equity accounted for from the date the Group obtains significant 

influence until the date the Group ceases to have significant influence over the associate and joint venture company. 

Goodwill relating to an associate and a joint venture company is included in the carrying amount of the investment. 

Any excess of the Group’s share of the net fair value of the associate’s and joint venture company’s identifiable assets, 

liabilities and contingent liabilities over the cost of the investment is excluded from the carrying amount of the investment 

and is instead included as income in the determination of the Group’s share of the associate’s and joint venture company’s 

profit or loss in the year in which the investment is acquired. 

When the Group’s share of losses in an associate and a joint venture company equals or exceeds its interest in the associate 

and joint venture company, including any other unsecured receivables, the Group does not recognise further losses, unless 

it has incurred obligations or made payments on behalf of the associate and joint venture company. 

The most recent available audited financial statements of the associate and joint venture company are used by the Group in 

applying the equity method. Where the dates of the audited financial statements used are not co-terminous with those of 

the Group, the share of results is arrived at from the last audited financial statements available and management financial 

statements to the end of the accounting year. Consistent accounting polices are applied for like transactions and events in 

similar circumstances. 

2.6 Property, plant and equipment 

(a) 

Measurement 

(i) 

(ii) 

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

accumulated depreciation and accumulated impairment losses. 

Components of costs 

The cost of an item of property, plant and equipment 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. The projected cost of dismantling, removal or restoration is also included as 

part of the cost of property, plant and equipment if the obligation for the dismantling, removal or restoration is 

incurred as a consequence of acquiring or using the asset. Cost may also include any gains/losses on qualifying cash 

flow hedges of foreign currency purchases of property, plant and equipment that are transferred from the hedging 

reserve. 





2.6 Property, plant and equipment (cont’d) 

(b) 

Depreciation 

Depreciation 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 (Years) 

Buildings 20 – 30 

Quays and dry docks 50 

Barges 25 

Machinery and equipment 3 – 15 

Office equipment 3 – 15 

Motor vehicles 5 

The residual values and useful lives of property, plant and equipment are reviewed, and adjusted as appropriate, at each 

balance sheet date. The effects of any revision of the residual values and useful lives are included in the income statement 

for the financial year in which the changes arise. 

(c) 

Subsequent expenditure 

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

carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to 

the Group and the cost of the item can be measured reliably. Other subsequent expenditure is recognised as repair and 

maintenance expense in the income statement during the financial year in which it is incurred. 

(d) 

Disposal 

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

amount is taken to the income statement. An item of property, plant and equipment is also derecognised when no future 

economic benefits are expected from its use. 

(e) 

Construction in progress 

Construction in progress is intended to be held as property, plant and equipment upon the completion of construction and 

is stated at cost. These amounts include all expenditure incurred in developing the fixed assets. Assets under construction 

included in property, plant and equipment are not depreciated as they are not available for use. 

2.7 Intangible assets 

(a) 

Goodwill 

Goodwill represents the excess of the cost of acquisition of subsidiaries over the fair value of the Group’s share of the 

identifiable net assets of the acquired subsidiaries at the date of acquisition. Goodwill on acquisitions of subsidiaries is 

included in intangible assets. 

Goodwill recognised separately as intangible assets is tested at least annually for impairment and carried at cost less 

accumulated impairment losses. Gains and losses on the disposal of the subsidiaries include the carrying amount of 

goodwill relating to the entity sold. 





2.7 Intangible assets (cont’d) 

(b) 

Computer software licenses 

Acquired computer software licenses are initially capitalised at cost which includes the purchase price net of any discounts 

and rebates. 

Following initial recognition, computer software licenses are subsequently carried at cost less accumulated amortisation 

and accumulated impairment losses. These costs are amortised to the income statement using the straight-line method 

over their estimated useful lives of 3 to 10 years. 

(c) 

The amortisation year and amortisation method of intangible assets other than goodwill are reviewed at least at each 

balance sheet date. The effects of any revision of the amortisation year or amortisation method are included in the income 

statement for the financial year in which the changes arise. 

2.8 Construction contracts 

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

closely inter-related or inter-dependent 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 only included in 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 percentage of completion is measured by reference to the contract costs incurred to date to the estimated total costs for 

the contract. Costs incurred during the financial year in connection with future activity on a contract 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 contract costs incurred are recognised as an expense immediately. 

Construction work-in-progress at the balance sheet date is recorded in the balance sheet at cost plus attributable profit 

less recognised losses, net of progress claims and allowance for foreseeable losses, and is presented in the balance sheet as 

“construction work-in-progress in excess of progress billings” (as an asset) or “progress billing in excess of construction workin-progress” 

(as a liability), as applicable. Construction costs include cost of direct materials, direct labour and overhead costs 

incurred in connection with the construction. Provision for foreseeable loss on a contract is provided for the year in which such 

losses are determined. 

2.9 Investment in subsidiaries, associates and a joint venture company 

Investment in subsidiaries, associates and a joint venture company are stated at cost less accumulated impairment losses in the 

Company’s balance sheet. On disposal of investment in subsidiaries, associates and a joint venture company, the difference 

between net disposal proceeds and the carrying amounts of the investment are taken to the income statement. 





2.10 Land and sea use rights 

Land use rights 

Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less accumulated 

amortisation and accumulated impairment losses. Land use rights are amortised on a straight line basis over the lease terms of 

the agreements of 20 to 50 years. 

Sea use rights 

Cost of acquisition of sea use rights is capitalised and amortised on a straight line basis over the lease terms of the agreements 

of 40 to 50 years. 

2.11 Impairment of non-financial assets 

(a) 

Goodwill 

Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired. Goodwill 

included in the carrying amount of an investment in an associate is tested for impairment at point 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-units 

(CGU) expected to benefit from synergies arising from the business combination. 

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

amount of the CGU. Recoverable amount of a CGU is the higher of the CGU’s fair value less cost to sell and value-in-use. 

The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and 

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

An impairment loss on goodwill is recognised in the income statement and is not reversed in the subsequent year. 

(b) 

Intangible assets, property, plant and equipment, investment in subsidiaries, associates and a joint venture company 

Intangible assets (other than goodwill), property, plant and equipment and investment in subsidiaries, associates and a joint 

venture company are reviewed for impairment whenever there is any indication that these assets may be impaired. If any 

such indication exists, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) of the 

asset is estimated to determine the amount of impairment loss. 

For the purpose of impairment testing of these assets, recoverable amount is determined on an individual asset basis 

unless the asset does not generate cashflows that are largely independent of those from other assets. If this is the case, 

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. 

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

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

an asset other than goodwill is increased to its revised recoverable amount, provided that this amount does not exceed 

the carrying amount that would have been determined (net of 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. 





2.12 Financial assets 

(a) 

Classification 

The Group classifies its financial assets as either financial assets at fair value through profit and loss, loans and receivables, 

held to maturity investments or available-for-sale financial assets, as appropriate. The classification depends on the purpose 

for which the assets were acquired. Management determines the classification of its financial assets at initial recognition 

and where allowed and appropriate, re-evaluates this designation at every reporting date. 

(i) 

Loans and receivables 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in 

an active market. They are included in current assets, except those maturing later than 12 months after the balance 

sheet date which are classified as non-current assets. Loans and receivables are classified within “trade and other 

receivables” and “cash and bank balances” on the balance sheet. 

(ii) 

Available-for-sale financial assets 

Available-for-sale financial assets are non-derivative financial assets that are either designated in this category or 

not classified in any of the other categories as prescribed in FRS 39. They are included in non-current assets unless 

management intends to dispose of the assets within 12 months after the balance sheet date. 

(b) 

Recognition and derecognition 

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual 

provisions of the financial instrument. 

Purchases and sales of financial assets, available-for-sale, are recognised on trade-date – the date on which the Company 

commits to purchase or sell the asset. 

Financial assets are derecognised when the right to receive cash flows from the financial assets have expired or have been 

transferred and the Group has transferred substantially all risks and rewards of ownership. 

On sale of a financial asset classified as available-for-sale, the difference between the net sale proceeds and its carrying 

amount is taken to the income statement. Any amount in the fair value reserve relating to that asset is also taken to the 


(c) 

Measurement 

Loans and receivables and available-for-sale financial assets are initially recognised at fair value plus transaction costs. 

Loans and receivables are subsequently carried at amortised cost using the effective interest method. Financial assets, 

available-for-sale, are subsequently carried at fair value. Changes in the fair value of financial assets classified as availablefor-sale 

are recognised in the fair value reserve within equity. When financial assets classified as available-for-sale are sold 

or impaired, the accumulated fair value adjustments in the fair value reserve within equity are included in the income 

statement. 

Interest and dividend income on financial assets, available-for-sale are recognised separately in the income statement. 

Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies 

are analysed into currency translation differences on the amortised cost of the securities and other changes; the currency 

translation differences are recognised in the income statement and other changes are recognised in the fair value reserve. 

Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in the fair value 

reserve, together with the related currency translation difference. 





2.12 Financial assets (cont’d) 

(d) 

Impairment 

The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of 

financial assets is impaired. 

(i) 

Loans and receivables 

Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and or default or 

significant delay in payments are objective evidence that these financial assets are impaired. The carrying amount of 

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

difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at 

the original effective interest rate. The amount of allowance for impairment is recognised in the income statement 

within “Administrative expenses”. 

If, in a subsequent year, the amount of the impairment loss decreases and the decrease can be related objectively 

to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. 

Any subsequent reversal of an impairment loss is recognised in the income statement, to the extent that the carrying 

value of the asset does not exceed its amortised cost at the reversal date. 

(ii) 

Available-for-sale financial assets 

In the case of an equity security classified as available-for-sale, a significant or prolonged decline in the fair value of 

the security below its cost and disappearance of an active trading market for the security are objective evidence that 

the security is impaired. 

When there is objective evidence that an available-for-sale financial asset is impaired, the cumulative loss that has 

been recognised directly in the fair value reserve is removed from the fair value reserve within equity and recognised 

in the income statement. The cumulative loss is measured as the difference between the acquisition cost and the 

current fair value, less any impairment loss on that financial asset previously recognised in the income statement. 

Impairment losses on equity instruments classified as available-for-sale financial assets are not reversed through the 


2.13 Borrowings / Borrowing costs 

Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised 

cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income 

statement over the years of the borrowings using the effective interest method. 

Borrowings which are due to be settled within 12 months after the balance sheet date are presented as current borrowings even 

though the original term was for a year longer than 12 months and an agreement to refinance, or to reschedule payments, on 

a long-term basis is completed after the balance sheet date and before the financial statements are authorised for issue. Other 

borrowings due to be settled more than 12 months after the balance sheet date are presented as non-current borrowings in the 

balance sheet. 

Borrowings costs are recognised in the income statement using the effective interest method. Costs that are directly attributable 

to borrowings acquired specifically for the construction of vessels and rigs are capitalised in contract costs and charged to income 

statement as part of cost of sales. Capitalisation of borrowing cost commences when the activities to prepare the asset for its 

intended use or sales are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until 

the completion of the construction. 





2.14 Financial liabilities 

Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual 

provisions of the financial instrument. 

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

attributable transaction costs. 

Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective interest method, 

except for derivatives, which are measured at fair value. 

A financial liability is derecognised when the obligation under the liability is extinguished. For financial liabilities other than 

derivatives, gains and losses are recognised in the income statement when the liabilities are derecognised, and through the 

amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in the income statement. 

Net gains or losses on derivatives include exchange differences. 

2.15 Fair value estimation 

The carrying amounts of current financial assets and liabilities, carried at amortised cost, are assumed to approximate their fair 

values. 

The fair values of financial instruments traded in active markets (such as exchange-traded securities and derivatives) are based 

on quoted market prices at the balance sheet date. The quoted market prices used for financial assets held by the Group are the 

current bid prices; the appropriate quoted market prices for financial liabilities are the current ask prices. 

The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. 

The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet 

date. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation techniques, such as 

estimated discounted cash flows, are also used to determine the fair values of the financial instruments. 

The fair values of financial liabilities carried at amortised cost are estimated by discounting the future contractual cash flows at 

the current market interest rates that are available to the Group for similar financial liabilities. 

2.16 Operating leases 

The Group leases certain property, plant and equipment from third parties. 

Leases of property, plant and equipment where substantially of the risks and rewards of ownership are retained by the lessor are 

classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are taken 

to the income statement on a straight-line basis over the year of the lease. 

Contingent rents are recognised as an expense in the income statement in the financial year in which they are incurred. 

When an operating lease is terminated before the lease year has expired, any payment required to be made to the lessor by way 

of penalty is recognised as an expense in the financial year in which termination takes place. 

2.17 Inventories 

Inventories are carried at the lower of cost and net realisable value. Cost is determined using the weighted average method. Net 

realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. 





2.18 Income taxes 

(a) 

Current tax 

Current income tax liabilities and assets are measured at the amounts 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. 

(b) 

Deferred tax 

Deferred tax assets/liabilities are recognised for all deductible and taxable temporary differences arising between the tax 

bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred tax assets/ 

liabilities arise from the initial recognition of an asset or liability in a transaction that is not a business combination and at 

the time of the transaction, affects neither accounting nor taxable profit or loss. 

Deferred tax liability is recognised on temporary differences arising on investment in subsidiaries, 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. 

Deferred tax asset is recognised to the extent that it is probable that future taxable profit will be available against which 

the temporary differences can be utilised. 

Deferred tax assets and liabilities are measured at: 

(i) 

(ii) 

the tax rates that are expected to apply when the related deferred tax asset is realised or the deferred tax liability is 

settled, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date; 

and 

the tax consequence that would follow from the manner in which the Group expects, at the balance sheet date, to 

recover or settle the carrying amounts of its assets and liabilities. 

Current and deferred taxes are recognised as income or expenses in the income statement for the year, except to the 

extent that the tax arises from a business combination or a transaction which is recognised directly in equity. 

(c) 

Value added tax (“VAT”) and Goods and Service Tax (“GST”) 

Revenue, expenses and assets are recognised net of the amount of sales tax except where the sales tax incurred on a 

purchase of assets or services is not recoverable from the taxation authority, in which case the VAT/GST is recognised 

as part of the cost of acquisition of the asset or as part of the expense item as applicable, and receivables and 

payables that are stated with amount of VAT/GST included. The net amount of VAT/GST recoverable from, or payable 

to, the taxation authority is included as part of receivables or payables in the balance sheet. 

2.19 Provisions 

Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is more 

likely than not that an outflow of economic resources will be required to settle the obligation and the amount of obligation can 

be estimated reliably. 

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable 

that an outflow of economic resources will be required to settle the obligation, the provision is reversed. If the effect of the time 

value of money is material, provisions are discounted using a current pre tax rate that reflects where appropriate, the risk specific 

to the liability. When discounting is used, the increase in the provision due to the passage of time is recognised as finance cost. 

Provision for warranties 

The Group recognises the estimated liability to repair or rectify any defect caused by faulty design done. A provision is recognised 

at the balance sheet date for expected warranty claims based on estimate from technical engineers and past experience of the 

probable level of repairs and rectifications. 





2.19 Provisions (cont’d) 

Provision for liquidated damages on construction contracts 

The Group recognises provision for liquidated damages in respect of anticipated claims from project owners for construction 

contracts of which deadlines are overdue or are not expected to be delivered on time in accordance with contractual 

obligations. 

2.20 Employee compensation 

(a) 

Defined contribution plans 

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into 

separate entities such as the Central Provident Fund in Singapore and social security insurance in the People’s Republic of 

China (the “PRC”) on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the 

contributions have been paid. The Group’s contributions are recognised as employee compensation expense when they are 

due. 

In accordance with the relevant regulations in the PRC, the premiums and welfare benefit contributions borne by the 

Group are calculated based on percentage of the total salary of employees, subject to a certain ceiling, and are paid to 

the labour and social welfare authorities. The applicable percentage used to provide for insurance premium and welfare 

benefits funds are listed below: 

Basic pension insurance 20% 

Basic medical insurance 7% 

Unemployment insurance 2% 

Maternity fund 2% 

Accident insurance 1% 

Housing fund 6% 

(b) 

Share-based compensation 

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

in exchange for the grant of the share options is recognised as an expense in the income statement with a corresponding 

increase in the share option reserve over the vesting period. The total amount to be recognised over the vesting period 

is determined by reference to the fair value of the share options granted on the date of the grant. Non-market vesting 

conditions are included in the estimation of the number of shares under share options 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 

share 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 share options are exercised, the proceeds received (net of any directly attributable transaction costs) and the 

related balance previously recognised in the share option reserve are credited either to share capital, when new ordinary 

shares are issued, or to the “treasury shares” account within equity, when treasury shares purchased are re-issued to the 

employees. 

(c) 

Employee leave entitlement 

Employee entitlements to annual leave are recognised as a liability when they accrue to employees. A provision is made 

for the estimated liability for leave as a result of services rendered by employees up to the balance sheet date. 





2.20 Employee compensation (cont’d) 

(d) 

Termination benefits 

Termination benefits are payable when employment is terminated before the normal retirement date or whenever an 

employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when 

it is demonstrably committed to either terminate the employment of current employees according to a detailed plan 

without possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary 

redundancy. In the case of an offer made to encourage voluntary redundancy, the measurement of termination benefits is 

based on the number of employees expected to accept the offer. Benefits falling due more than 12 months after balance 

sheet date are discounted to present value. 

2.21 Currency translation 

(a) 

Functional and presentation currency 

Items included in the financial statements of each entity in the Group are measured using the currency of the primary 

economic environment in which the entity operates (“functional currency”). The financial statements are presented in 

Singapore Dollar, which is the Company’s functional currency. 

(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 prevailing at the dates of the transactions. Currency translation gains and losses 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, except for currency 

translation differences on the net investment in foreign operations, borrowings in foreign currencies and other currency 

instruments qualifying as net investment hedges for foreign operations, which are included in the currency translation 

reserve within equity in the consolidated financial statements. 

Non-monetary items that are measured at fair values in foreign currency are translated using the exchange rates at the date 

when the fair values are determined. Currency translation differences on non-monetary items whereby the gains or losses 

are recognised directly in equity, such as equity investments classified as available-for-sale financial assets, are included in 

the fair value reserve. 

(c) 

Translation of Group entities’ financial statements 

The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) 

that have a functional currency different from the Singapore Dollar are translated into the Singapore Dollar as follows: 

(i) 

(ii) 

(iii) 

Assets and liabilities are translated at the closing rates at the date of the balance sheet; 

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 

All resulting exchange differences are taken to the currency translation reserve within equity. 

(d) 

Consolidation adjustments 

On consolidation, currency translation differences arising from the net investment in foreign operations, borrowings in 

foreign currencies, and other currency instruments designated as hedges of such investments, are taken to the currency 

translation reserve. When a foreign operation is sold, such currency translation differences recorded in the currency 

translation reserve are recognised in the income statement as part of the gain or loss on sale. 





2.22 Segment reporting 

A business segment is a distinguishable component of the Group engaged in providing products or services that are subject 

to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable 

component of the Group engaged in providing products or services within a particular economic environment that is subject to 

risks and returns that are different from those of segments operating in other economic environments. 

2.23 Cash and cash equivalents 

For the purpose of presentation in the consolidated cash flow statement, cash and cash equivalents include cash on hand, 

deposits with financial institutions which are subject to insignificant risk of change in value and bank overdrafts. 

2.24 Bank overdrafts 

Bank overdrafts are shown within borrowings in current liabilities on the balance sheet. 

2.25 Share capital 

Proceeds from issuance of ordinary shares are recognised as share capital in equity. 

Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account. 

2.26 Dividends 

Interim dividends are recorded in the financial year in which they are declared payable. Final dividends are recorded in the 

financial year in which the dividends are approved by the shareholders. 

2.27 Contingencies 

A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed 

only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control of the Group. 

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

2.28 Derivative financial instruments and hedging activities 

Derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into and 

are subsequently re-measured at fair value. Derivative financial instruments are carried as assets when the fair value is positive 

and as liabilities when the fair value is negative. 

Any gains or losses arising from changes in fair value on derivative financial instruments that do not qualify for hedge accounting 

are taken to the income statement for the financial year. 

The fair value of forward currency contracts is calculated by reference to current forward exchange rates for contracts with 

similar maturity profiles. The fair value of interest rate derivative contracts is determined by reference to market values for similar 

instruments. 





2.28 Derivative financial instruments and hedging activities (cont’d) 

Embedded derivatives 

The Group assesses when it first becomes a party to a contract whether any embedded derivatives contained in the contract are 

required to be separated from the host contract and accounted for as derivatives. 

An embedded derivative is to be separated from the host contract and accounted for as a derivative if, and only if: 

(a) 

(b) 

(c) 

the economic characteristics and risks of the embedded derivative are not closely related to the economic characteristics 

and risks of the host contract; 

a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and 

the hybrid (combined) instrument is not measured at fair value with changes in fair value recognised in income statement 

(that is, a derivative that is embedded in a financial asset or financial liability at fair value through income statement). 

Embedded derivatives identified and separately accounted for are fair value through income statement. 

Derivatives that are not designated or do not qualify for hedge accounting 

Fair value changes on these derivatives are recognised in the income statement when the changes arise. 

3. Significant accounting judgements and estimates 

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. 

3.1 Critical accounting estimates and assumptions 

The Group on its own or in reliance on third party experts makes estimates and assumptions concerning the future. The resulting 

accounting estimates, by definition, will seldom equal the related actual results. The estimates and assumptions that have a 

significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year 

are discussed below. 

(i) 

Impairment of goodwill 

Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating units to which 

the goodwill is allocated. This requires the Group to estimate the future cashflows expected from the cash-generating units 

and an appropriate discount rate in order to calculate the present value of the future cashflows. The carrying amount of 

goodwill at the balance sheet date is disclosed in Note 23. 

(ii) 

Impairment of available-for-sale financial assets 

The Group classifies certain assets as available-for-sales financial assets and recognises movements of their fair values in 

the equity. When the fair value declines, management makes assumptions about the decline in value to determine where 

there is an impairment that should be recognised in the income statement. At 31 December 2008, impairment losses of 

$10,796,000 (2007: $1,649,000) have been recognised for available-for-sale financial assets. The carrying amount of 

available-for-sale financial assets as at 31 December 2008 was $3,529,000 (2007: $58,872,000). 




3. Significant accounting judgements and estimates (cont’d) 

3.1 Critical accounting estimates and assumptions (cont’d) 

(iii) 

Revenue recognition 

The Group uses the percentage of completion method to account for its contract revenue where it is probable that contract 

costs are recoverable. The stage of completion is measured in accordance with the accounting policy stated in Note 2.8. 

Significant judgement is required in determining the stage of completion, the extent of the contract costs incurred, the 

estimated total contract revenue and contract cost and the recoverability of the contracts. In making the assumption, the 

Group evaluates by relying on past experience and the work of the project management team. Revenue from construction 

contracts is disclosed in consolidated income statement. 

The stage of completion of each construction contract is assessed on a cumulative basis in each accounting year. Changes 

in estimate of contract revenue or contract costs, or the effect of a change in the estimate of the outcome of a contract 

could impact the amount of revenue and expenses recognised in the income statement in the year in which the change is 

made and in subsequent years. Such impact could potentially be significant. 

(iv) 

Income taxes 

The Group has exposure to income taxes in more than one jurisdiction. Significant judgement is required in determining 

the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax 

determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues 

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

from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in 

the year in which such determination is made. The carrying amount of taxation and deferred taxation is disclosed in the 

consolidated balance sheet. 

(v) 

Useful lives of property, plant and equipment 

The Group’s management determines the estimated useful lives and related depreciation charges for its plant and 

equipment. This estimate is based on the historical experience of the actual useful lives of plant and equipment of similar 

nature and functions. It could change significantly as a result of technical innovations and competitor actions in response 

to severe industry cycles. Management will increase the depreciation charge where useful lives are shorter than previously 

estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or 

sold. 

(vi) 

Fair value of Executive Share Option 

The Group determines the fair value of the share options granted under its Executive Share Option Scheme as disclosed in 

Note 29, using the Binomial and Trinomial Valuation models with significant inputs estimated by management. 

(vii) 


The Group recognised provision for liquidated damages in respect of anticipated claims from project owners for construction 

contracts of which deadlines were overdue or where vessels were not expected to be delivered on time in accordance with 

contractual obligations. 

(viii) Provision for warranties on construction contracts 

The Group has exposure to warranties arising from warranty obligations stated in its construction contracts. Management 

estimates the related provision for future warranty claims based on available knowledge and historical warranty claim 

information, as well as recent trends that suggest that past cost information may differ from future claims. 

Factors that could impact the estimated claim information include the quality of the Group’s products as well as the parts 

and labour costs. 




3. Significant accounting judgements and estimates (cont’d) 

3.1 Critical accounting estimates and assumptions (cont’d) 

(viii) Provision for warranties on construction contracts (cont’d) 

The Group recognises provision for warranties to the extent that it has a present legal or constructive obligation as a result 

of past event; it is more likely than not that an outflow of resources will be required to settle the obligation; and that the 

amount has been reliably estimated. 

The carrying amount of the provision for warranties is disclosed in Note 28. 

(ix) 

Deferred income tax assets 

The Group recognises deferred income tax assets on carried forward tax losses to the extent there are sufficient estimated 

future taxable profits and/or taxable temporary differences against which the tax losses can be utilised. The carrying 

amount of the deferred income tax assets as disclosed in Note 24. 

3.2 Critical judgements in applying the Group’s accounting policies 

The following judgement is made by management in the process of applying the Group’s accounting policies that have the most 

significant effect on the amounts recognised in the financial statements. 

(i) 

Revenue recognition 

In the process of applying the Group’s accounting policies, the directors are of the opinion that the application of judgements 

to the determination of the stage of percentage of completion which in turn affects contract revenue recognised, has the 

most significant effect on the amounts recognised in the financial statements. 

(ii) 

Reclaimed land and buildings without ownership certificates 

The Group is in the process of applying for the State-owned Land Use Right Certificate in respect of land reclaimed from 

the sea as well as Building Ownership Certificates for certain buildings and premises of the PRC subsidiaries. The carrying 

amount of the buildings without the relevant ownership certificates amounted to $22,311,000 as of 31 December 2008 

(2007: $15,038,000). The Group has made the necessary applications to the relevant authorities. The directors expect 

to obtain the relevant approvals in due course and are of the opinion that the PRC subsidiaries can continue to use the 

buildings and premises in the meantime without any penalty. The buildings and premises have been recognised as assets 

of the Group pending obtaining the ownership certificates. 

No contingent liabilities in connection with any possible breach or non-compliance with the relevant laws and regulations 

in respect of the buildings without ownership certificates have been provided for in the financial statements as the directors 

are of the opinion that the risk associated thereof is low. 

4. Revenue 

Revenue comprises revenue earned on construction contracts, including variation orders in the contract works and claims. 




5. Other (losses)/gains, net 

Group 

2008 2007 

$’000 $’000 

Write back of doubtful trade and other receivables 744 60 

Bad debts written off – (990) 

Foreign exchange losses, net (11,043) (9,251) 

Gain on sale of financial assets, available-for-sale – 9,625 

Impairment loss on property, plant and equipment – (413) 

Impairment loss on financial assets, available-for-sale (10,796) (1,649) 

Impairment loss on investment in an associate (7,676) – 

Loss on disposal of investment in an associate (64) – 

Loss on disposal of property, plant and equipment (968) (1,092) 

Write back of provision for liquidated damages on construction contracts 2,175 1,890 

Rental income from machinery and office premises 4,945 683 

Gain on sale of scrap materials 6,628 3,336 

Compensation income arising from project termination – 7,507 

Fair value (loss)/gain on derivative financial instruments (30,917) 21,800 

Gain on forward contracts 23,235 – 

Miscellaneous (losses)/gains, net (1,321) 1,191 

(25,058) 32,697 

6. Profit from operating activities 

Profit from operating activities is derived after charging the following items: 

Group 

2008 2007 

$’000 $’000 

Depreciation on property, plant and equipment (Note 21) 10,351 6,342 

Employee compensation (Note 7) 78,842 35,304 

Operating leases expenses 2,814 656 

Provision for warranty (Note 28) 4,128 1,026 

Amortisation of land and sea use rights (Note 22) 452 101 

Amortisation of intangible assets (Note 23) 2,587 918 




7. Employee compensation 

Group 

2008 2007 

$’000 $’000 

Wages, salaries and bonuses 58,601 26,320 

Employer’s contribution to defined contribution plans including Central Provident Fund 

and social security insurance 8,984 4,241 

Welfare expenses 4,480 2,189 

Share options expense (Note 30) 6,777 2,554 

78,842 35,304 

8. Net finance (costs)/income 

Group 

2008 2007 

$’000 $’000 

Interest income 5,220 10,790 

Finance costs: 

Interest on early retirement benefits – (79) 

Interest on bank loans and overdrafts (15,864) (6,897) 

Interest paid to related parties (30) (132) 

Less: Amount included in cost of sales 5,433 3,173 

(10,461) (3,935) 

Net finance (costs)/income (5,241) 6,855 

9. Income tax expense 

Group 

2008 2007 

$’000 $’000 

Income tax expense 

Tax expense attributable to profit is made up of: 

Current income tax 19,068 12,586 

Underprovision in respect of prior years (1,593) 92 

17,475 12,678 

Deferred tax (Note 24) (6,354) (3,279) 

11,121 9,399 




9. Income tax expense (cont’d) 

The tax expense on profit before income tax differs from the amount that would arise using the Singapore standard rate of 

income tax is as follows: 

Group 

2008 2007 

$’000 $’000 


Tax at the domestic rates applicable to profits in the countries where the Group 

operates 6,318 9,376 

Effects of: 

Effect of changes in tax rate (56) (3,491) 

Effects of partial tax exemption (28) (55) 

Expenses not deductible for tax purposes 8,112 6,202 

Income not subject to taxation (181) – 

Utilisation of previously unrecognised tax losses and capital allowances – (33) 

Deferred tax assets not recognised 31 – 

Recognition of deferred tax assets on prior year unrecognised losses – (2,553) 

Under provision of deferred tax assets in respect of prior year (1,284) (139) 

Over provision of deferred tax liabilities in respect of prior year (198) – 

(Over)/under provision of income tax in respect of prior year (1,593) 92 

Income tax expense recognised in the income statement 11,121 9,399 

Yantai Raffles Shipyard Limited, YRS Shiplease Pte Ltd, Offshore Accomodation Pte Ltd, YRS Chartering Pte Ltd, YRS Offshore 

Chartering Pte Ltd, Deepwater Venture Pte Ltd, Peyan Singapore Pte Ltd and Yan Pex Singapore Pte Ltd are incorporated in 

Singapore and accordingly, are subject to the income tax laws of Inland Revenue Authority of Singapore (“IRAS”) and the income 

tax rate is 18% (2007: 18%) for the financial year ended 31 December 2008. 

The Company and its Singapore subsidiaries’ tax liabilities have been computed based on the corporate tax rate tax laws prevailing 

at balance sheet date. On 22 January 2009, the Singapore Second Minister for Finance announced changes to the Singapore 

Tax laws, which included new incentives that might be available to certain group entities with effect from the year of assessment 

2009. The Company and its Singapore subsidiaries’ tax exposure for the financial year ended 31 December 2008 have not taken 

into consideration the effect of these incentives as the final detailed interpretation of the incentive had not been released by the 

tax authority as the date of authorisation of the financial statement. 

YRS Investments Limited and Raffles Yacht Limited are incorporated in Hong Kong and are subject to the income tax laws in Hong 

Kong at corporate tax rate of 17.5% for the financial year ended 31 December 2008 (2007: 17.5%). 

Pelican Waters Investment Ltd, Asiatic Offshore Limited, Borneo Offshore Limited, Baratpur Limited, Coral Offshore Limited, Deep 

Water Offshore Ltd, Evolution Offshore Ltd and Far East Drilling Ltd are incorporated under the International Business Companies 

Act of the British Virgin Islands (“BVI”) and accordingly, are exempted from payment of BVI income taxes. 

On 16 March 2007, the PRC Corporate Income Tax Law (“the New Corporate Income Tax Law”) was approved and became 

effective on 1 January 2008. The New Corporate Income Tax Law introduces a wide range of changes which include, but are 

not limited to, the unification of the income tax rate for domestic-invested and foreign-invested enterprises at 25%. Based on 

the implementation and administrative rules and regulations relating to the New Corporate Income, YRSCL, YROL and HROE are 

subjected to income tax at the rate of 25% for the financial year ended 31 December 2008 (2007: 24%). 




10. Earnings per share 

Basic earnings per share are calculated by dividing the net result attributable to equity holders of the Company by the weighted 

average number of ordinary shares outstanding during the financial year. 

For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares outstanding are 

adjusted for the effects of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary 

shares, that is, share options. 

For the share options, the weighted average number of shares in issue is adjusted as if all share options that are dilutive were 

exercised. The number of shares that could have been issued upon the exercise of all dilutive share options less the number of 

shares that could have been issued at fair value (determined as the Company’s average share price for the financial year) for the 

same total proceeds is added to the denominator as the number of shares issued for no consideration, with no adjustment to 

results (numerator). 

The following table reflects the income statement and share data used in the computation of basic and diluted earnings per 

shares for the years ended 31 December: 

Group 

2008 2007 

Net profit attributable to equity holders of the Company 

($’000) 26,932 35,907 

Weighted average number of ordinary shares in issue for 

basic earnings per share (‘000) 273,524 254,952 

Effect of dilution: 

- Share options – 1,673 

Weighted average number of ordinary shares adjusted 

for the effect of dilution 273,524 256,625 

Earnings per share attributable to equity holders of the Company 

- Basic (cents per share) 9.85 14.08 

- Diluted (cents per share) 9.85 13.99 

The share options granted to employees are anti-dilutive for the current financial year. Accordingly, diluted earnings per share is 

similar to basic earnings per share for the current financial year. 

11. Cash and bank balances 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Cash at bank and on hand 43,696 115,954 28,817 32,841 

Fixed deposits 131,537 219,128 103,823 219,128 

175,233 335,082 132,640 251,969 




11. Cash and bank balances (cont’d) 

At the balance sheet dates, the carrying amounts of cash and bank balances approximate their fair values. Cash and bank 

balances were denominated in the following currencies: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Chinese Renminbi 28,265 63,057 – – 

Euro 27,512 35,717 21,118 29,656 

Norwegian Kroner 659 92,248 658 92,248 

Singapore Dollar 128 1,078 129 1,077 

United States Dollar 118,669 142,982 110,735 128,988 

175,233 335,082 132,640 251,969 

Fixed deposits at the balance sheet dates had an average maturity of 1 day to 6 months (2007: 1 day to 6 months) from the end 

of the financial year. The range of interest rates of fixed deposits and cash at bank are as follows: 

Group 

Company 

2008 2007 2008 2007 

% % % % 

Chinese Renminbi 0.36 to 0.72 0.81 to 1.53 – – 

Euro 0.10 to 3.00 0.10 to 4.00 1.00 to 3.00 0.55 to 4.00 

Norwegian Kroner – 3.00 to 5.56 – 3.00 to 5.56 

Singapore Dollar 0.00 to 0.10 1.86 to 3.31 0.00 to 0.10 1.86 to 3.31 

United States Dollar 0.25 to 3.12 0.25 to 5.48 0.25 to 3.12 0.25 to 5.48 

The exposure of cash and bank balances to interest rate risks is disclosed in Note 36(c). 

For the purposes of the consolidated cash flow statements, the consolidated cash and cash equivalents comprised the 

following: 

Group 

2008 2007 

$’000 $’000 

Cash and bank balances (as shown) 175,233 335,082 

Less: Balances pledged in respect of performance bonds and trade facilities (131,401) (126,209) 

Cash and cash equivalents per consolidated cash flow statement 43,832 208,873 

As at 31 December 2008, the Group secured short term bank loans of $28,742,000 (2007: $24,266,000) by way of a charge 

over certain bank balances amounting to $5,887,000 (2007: $10,397,000) as disclosed in Note 27. 




12. Trade and other receivables 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Trade receivables 36,305 46,582 31,840 46,095 

Less : Allowance for doubtful 

receivables (1,550) (1,625) (1,029) (1,138) 

Trade receivables, net 34,755 44,957 30,811 44,957 

Tax recoverable 40,472 21,308 59 303 

Other receivables 29,962 10,044 533 1,989 

Deposits 3,723 3,707 3,723 3,707 

Less: Allowance for doubtful 

receivables (3,073) (3,514) – (635) 

Other receivables, net 71,084 31,545 4,315 5,364 

105,839 76,502 35,126 50,321 

Trade receivables are non-interest bearing and generally on 5 to 30 days’ terms. These are recognised at the original invoice 

amounts which represent their fair values on initial recognition. 

Trade receivables 

Receivables that are past due but not impaired 

The Group has trade receivables amounting to $12,233,000 (2007: $30,629,000) that are past due at the balance sheet date but 

not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Trade receivables past due: 

Lesser than 30 days 11,167 – 11,167 – 

30 to 60 days – 40 – 40 

61 to 90 days – 29,650 – 29,650 

91 to 120 days – – – – 

More than 120 days 1,066 939 1,066 939 

12,233 30,629 12,233 30,629 

Receivables that were past due but not impaired relate to a number of independent customers that have a good track record 

with the Group. Based on past experience, the directors of the Company are of the opinion that no provision for impairment 

is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still 

considered fully recoverable. The Group does not hold any collateral or other credit enhancements over these balances. 




12. Trade and other receivables (cont’d) 

Trade receivables (cont’d) 

Receivables that are impaired 

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

record the impairment are as follows: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Trade receivables – nominal amounts 2,602 2,564 2,081 2,077 

Less: Allowance for impairment (1,550) (1,625) (1,029) (1,138) 

1,052 939 1,052 939 

Movement in allowance accounts: 

At 1 January 1,625 1,508 1,138 1,138 

Allowance for the year – 93 – – 

Write back during the year (109) – (109) – 

Exchange differences 34 24 – – 

At 31 December 1,550 1,625 1,029 1,138 

Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in 

significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit 

enhancements. 

Other receivables 

Movements in allowance for doubtful receivables are as follows: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

At 1 January 3,514 3,663 635 880 

Allowance for the year – 92 – – 

Write back during the year (635) (245) (635) (245) 

Exchange difference 194 4 – – 

At 31 December 3,073 3,514 – 635 

Trade and other receivables were denominated in the following currencies: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Chinese Renminbi 61,213 23,537 167 156 

Euro 17,723 4 17,723 4 

Norwegian Kroner 1,119 140 1,119 140 

Singapore Dollar 216 187 216 187 


105,839 76,502 35,126 50,321 




13. Amount due from/(to) subsidiaries 

Amounts due from subsidiaries (non-trade) (current) and amounts due to subsidiaries (trade) (current) are unsecured, noninterest 

bearing, and are repayable on demand. 

Amounts due from subsidiaries (non-trade) (non-current) are unsecured, non-interest bearing and are not expected to be repaid 

within the next 12 months. 

14. Inventories 

Inventories are stated at the lower of cost and net realisable value and comprise of materials and supplies held for construction. 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Inventories, at cost 244,710 209,014 136,344 74,417 

Bank borrowings are secured by inventories amounting to $10,981,000 (2007: $Nil) as disclosed in Note 27. 

15. Vessels under construction 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Vessels under construction 88,903 11,768 135,375 105,957 

Vessels under construction as at 31 December 2008 are committed for sale within one year from balance sheet date. Subsequent 

to 31 December 2008, there are further costs incurred in respect of the construction of the vessels. 

16. Construction work-in-progress 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Aggregate contract costs recognised and 

recognised profits to date 1,155,595 315,172 1,587,756 811,771 

Less: Foreseeable losses (27,796) – (17,169) – 

Less: Progress billings received and receivable (1,349,288) (861,114) (1,378,162) (900,034) 

Amount due to customers for contract work, 

net (221,489) (545,942) 192,425 (88,263) 

Comprising: 

Construction work-in-progress in excess of 

progress billings 94,302 103,013 311,604 531,756 

Progress billings in excess of construction 

work-in-progress (315,791) (648,955) (119,179) (620,019) 

(221,489) (545,942) 192,425 (88,263) 




16. Construction work-in-progress (cont’d) 

Borrowings costs of $5,433,000 (2007: $3,173,000) arising from financing the construction contracts were capitalised during 

the financial year and included in the “aggregate contract costs recognised”. 

Bank borrowings are secured by construction work-in-progress of the projects with the balance of $31,382,000 (2007: 

$11,141,000) as disclosed in Note 27. 

Included in “aggregate contract costs recognised” of the Company is an amount of $21,794,000 (2007: $408,541,000) of 

advances to subsidiaries in relation to ongoing construction contracts. 

17. Other current assets 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Prepayments 718 2,199 82 920 

Advances to suppliers, net 432,403 337,490 193,409 107,958 

Advances to an associate 37,580 – – – 

Total 470,701 339,689 193,491 108,878 

18. Financial assets, available-for-sale 

Group 

2008 2007 

$’000 $’000 

At beginning of the financial year 58,872 12,008 

Additions 1,870 33,848 

Disposal – (17,386) 

Allowance for impairment (10,796) (1,649) 

Reclassification to investment in an associate (20,086) – 

Currency translation difference (133) (777) 

(Reversal)/ recognition of fair value gains in equity [Note 30(b)(iv)] (26,198) 32,828 

At end of the financial year 3,529 58,872 

The financial assets available-for-sale are denominated in the following currencies: 

Group 

2008 2007 

$’000 $’000 

Quoted securities: 

- Australian Dollars 2,036 5,282 

- Norwegian Kroner 1,493 11,189 

- Hong Kong Dollars – 42,401 

3,529 58,872 

There has been a significant decline in the market value of the listed equity investments during the financial year. Such a decline 

indicates that the listed equity investments have been impaired and an impairment loss of $10,796,000 (2007: $1,649,000) has 

been recognised in the income statement for the financial year. There was also a transfer from the available-for-sale investment 

revaluation reserve of $3,709,000 (2007: Nil) pertaining to the equity investments. 




19. Investment in subsidiaries 

Investment in subsidiaries 

Company 

2008 2007 

$’000 $’000 

Shares, at cost 81,382 75,944 

Additional investment – 5,438 

Capital contribution in the form of share options issued to employees of subsidiaries 1,754 226 

83,136 81,608 

As at 31 December 2008, the details of the subsidiaries of the Group are as follows: 

Name of companies 

Principal activities 

Country of 

incorporation 

Effective equity interest 

holding by the Group 

31 December 31 December 

2008 2007 

% % 

Held by the Company 

Yantai Raffles Offshore Ltd. (b) 

Offshore and marine project construction 

and supply of engineering works and 

materials 

People’s Republic 

of China 

94.38 (a) 94.38 (a) 

Yantai Raffles Shipyard 

Co., Ltd. (b) 



materials 


of China 

71.63 71.63 

YRS Investments Limited (c) Investment holding Hong Kong SAR 100 100 

YRS Shiplease Pte Ltd (d) 

Offshore and marine vessel leasing 

operator (including chartering) 

Singapore 100 100 

Raffles Yacht Limited (c) Construction and sale of mega yachts Hong Kong SAR 100 100 

Held through Yantai Raffles 

Offshore Ltd 

Haiyang Raffles Offshore 

Equipment Ltd (b) 



materials 


of China 

100 100 

Held through YRS Shiplease 

Pte Ltd 

Pelican Waters Investment Ltd (f) 

Ownership and chartering of self 

unloading bulk carrier 

British Virgin 

Islands 

100 100 

Asiatic Offshore Limited (f) Investment holding British Virgin 

Islands 

100 100 




19. Investment in subsidiaries (cont’d) 

Name of companies 


Country of 

incorporation 




2008 2007 

% % 


Pte Ltd (cont’d) 

Borneo Offshore Limited (f) Dormant British Virgin 

Islands 

Baratpur Limited (f) Dormant British Virgin 

Islands 

Coral Offshore Limited (f) Dormant British Virgin 

Islands 

Deep Water Offshore 

Dormant British Virgin 

Ltd (f) Islands 

100 100 

100 100 

100 100 

100 100 

Offshore Accomodation 

Pte Ltd (d) 

Ownership and 

chartering of accommodation barge 

Singapore 100 100 

Evolution Offshore Ltd (f) Dormant British Virgin 

Islands 

Far East Drilling Ltd (f) Dormant British Virgin 

Islands 

100 100 

100 100 

YRS Chartering Pte Ltd (g)(j) Dormant Singapore 100 – 

YRS Offshore Chartering Dormant Singapore 100 – 

Pte Ltd (h)(j) 

Deepwater Venture Pte Ltd (e) Dormant Singapore 100 – 

Held through Deepwater 

Venture Pte Ltd 

Peyan Singapore Pte Ltd (i) Dormant Singapore 50 – 

Yan Pex Singapore Pte Ltd (i) Dormant Singapore 50 – 




19. Investment in subsidiaries (cont’d) 

(a) 

Effective equity interest stated is inclusive of indirect interests held by a subsidiary company, Yantai Raffles Shipyard Co., Ltd. 

(b) 

Audited by Wan Long Asia Certified Public Accountants, a firm of certified public accountants in the PRC for PRC statutory audit purpose and audited by Ernst 

& Young, Shanghai for purposes of consolidation. 

(c) 

Audited by Grant Thornton CPA, Hong Kong. 

(d) 

Audited by Ernst & Young LLP, Singapore. 

(e) Incorporated on 23 July 2008. 

(f) 

Not required to be audited under the laws of the country of incorporation. 

(g) Incorporated on 9 July 2008. 

(h) Incorporated on 15 July 2008. 

(i) Incorporated on 20 August 2008. 

(j) 

Subsequent to the financial year end, these entities have been struck off. 

20. Investment in associates and joint venture 

Group 

2008 2007 

$’000 $’000 

Unquoted shares, at cost 

At beginning of financial year 3,663 – 

Acquisition during the financial year – 3,663 

- Associate – 769 

- Joint venture – 2,894 

Reclassification from financial assets, available-for-sale 20,086 – 

Disposal during the year (1,139) – 

At end of financial year 22,610 3,663 

Share of post-acquisition profits/(losses) 1,095 (190) 

Loss on disposal of investment in an associate (64) – 

Impairment loss on investment in an associate (7,676) – 

Exchange difference 13 – 

15,978 3,473 

Commitments in relation to future financial support to an associate – 23,623 




20. Investment in associates and joint venture (cont’d) 

Name 


Country of 

incorporation 




2008 2007 

% % 


Pte Ltd 

Consafe MSV AB (a) 

Held through Yantai Raffles 

Offshore Ltd (“YROL”) 

Ownership and chartering of 

semi-submersible crane/accommodation 

vessel 

Sweden 36% 36% 

Haiyang Blue Island 

Offshore Ltd (b) 

(“HBIO”) 

Design, construct, sale and repair 

offshore marine facilities 


of China 

28% (d) 46% 

Held through YRS Investments 

Limited (“YRSI”) 

TSC Offshore Group Ltd (c) 

(“TSC”) 

Construction and trading of rig products 

and technology and oilfield expendables 

and supplies, the provision of rig turnkey 

solutions and consultancy services 

Cayman Islands 8% (e) – 

(a) 

(b) 

(c) 

Audited by Ohrlings PricewaterhouseCoopers AB. 

Audited by Shandong Wanlong Qilu CPA Co. Ltd, a firm of certified public accountants in the PRC. 

Audited by KPMG, Hong Kong 

(d) During the financial year, YROL disposed 18% of its effective equity interest in HBIO for a total consideration of RMB 5,700,000. 

(e) 

On 5 November 2008, a subsidiary and a director cum shareholder, Brian Chang entered into an agreement to act in concert in respect of their shareholdings 

in TSC. Both parties agree to act together and co-operate by concerted exercise of the voting rights they hold as well as in respect of advisory role accorded 

to Brian Chang by TSC. Accordingly, the investment in TSC is classified as investment in associates as the subsidiary has significant influence over TSC. 

The summarised financial information of the associates, not adjusted for the proportion of ownership interest held by the Group, 

is as follows: 

Group 

2008 2007 

$’000 $’000 

Assets and liabilities of the associates: 

Total assets 432,172 116,320 

Total liabilities 255,554 108,717 

Results of the associates: 

Revenue 248,855 4,817 

Profit/(loss) for the financial year 16,963 (529) 




21. Property, plant and equipment 

Buildings 

Quays 

and dry 

docks 

Machinery 

and 

equipment Barges 

Office 

equipment 

Motor 

vehicles 

Construction 

in progress Total 

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

Group 

Cost 

At 1 January 2007 17,246 94,219 54,537 8,287 1,278 – 68,697 244,264 

Currency translation differences (6) 145 1 22 – – (172) (10) 

Additions 817 681 6,510 56 158 463 81,989 90,674 

Transfer 6,769 123 10,880 (1,617) – – (16,155) – 

Disposals (1,372) – (1,979) – (2) – (215) (3,568) 

Transfer to “construction work-inprogress” 

– – – – – – (5,522) (5,522) 

At 31 December 2007 23,454 95,168 69,949 6,748 1,434 463 128,622 325,838 

Currency translation differences 1,953 6,702 8,228 1,516 – – 5,568 23,967 

Additions 2,010 501 10,300 2,291 100 – 115,449 130,651 

Transfer 7,491 2,518 89,344 24,038 – – (123,391) – 

Disposals (431) – (3,222) – – – – (3,653) 

At 31 December 2008 34,477 104,889 174,599 34,593 1,534 463 126,248 476,803 

Accumulated depreciation and 

impairment loss 

At 1 January 2007 1,593 5,234 14,829 1,120 1,084 – 3 23,863 

Currency translation differences 2 (6) 16 (1) – – (3) 8 

Depreciation charge 447 2,587 2,734 444 110 20 – 6,342 

Impairment loss – – 413 – – – – 413 

Disposals (300) – (1,774) – – – – (2,074) 

At 31 December 2007 1,742 7,815 16,218 1,563 1,194 20 – 28,552 

Currency translation differences 144 633 1,154 80 – – – 2,011 

Depreciation charge 788 2,754 5,596 973 147 93 – 10,351 

Disposals (140) – (2,147) – – – – (2,287) 

At 31 December 2008 2,534 11,202 20,821 2,616 1,341 113 – 38,627 

Net carrying amount 

At 31 December 2008 31,943 93,687 153,778 31,977 193 350 126,248 438,176 

At 31 December 2007 21,712 87,353 53,731 5,185 240 443 128,622 297,286 




21. Property, plant and equipment (cont’d) 

Machinery and 

equipment 

Office 

equipment 

Motor 

vehicles 

Construction 

in progress 

Total 

$’000 $’000 $’000 $’000 $’000 

Company 

Cost 

At 1 January 2007 1,368 1,277 – – 2,645 

Additions – 158 463 – 621 

Disposals – (2) – – (2) 

At 31 December 2007 1,368 1,433 463 – 3,264 

Additions – 101 – 616 717 

At 31 December 2008 1,368 1,534 463 616 3,981 

Accumulated depreciation 

and impairment loss 

At 1 January 2007 1,368 1,083 – – 2,451 

Depreciation charge – 110 20 – 130 

At 31 December 2007 1,368 1,193 20 – 2,581 

Depreciation charge – 147 93 – 240 

At 31 December 2008 1,368 1,340 113 – 2,821 


At 31 December 2008 – 194 350 616 1,160 

At 31 December 2007 – 240 443 – 683 





Depreciation of property, plant and equipment 

Depreciation on property, plant and equipment of $8,752,000 (2007: $5,589,000) arising from construction work were capitalised 

during the financial year, and included in the aggregate contract costs. 

Property, plant and equipment pledged as security 

Bank borrowings of $27,366,690 (2007: $62,982,000) are secured by the following property, plant and equipment as disclosed 

in Note 27: 

(i) 

20,000T crane with a carrying amount of $63,007,000 (2007: $52,059,000); and 

(ii) certain construction in progress with carrying amount of $NIL (2007: $18,923,000). 

Property, plant and equipment held under finance lease 

During the financial year ended 31 December 2007, the Group acquired a motor vehicle with an aggregate cost of $288,000 by 

means of a finance lease as disclosed in Note 27. The cash outflow on acquisition of the motor vehicle amounted to $58,000. 

The carrying amount of the motor vehicle held under finance lease at the balance sheet date was $220,800 (2007: $278,000). 

Construction in progress 

Construction in progress mainly relates to cranes, barge and buildings with carrying amounts of $1,001,000 (2007: $68,798,000), 

$67,121,000 (2007: $23,288,000) and $33,105,000 (2007: $8,228,000) respectively. 

Building ownership certificates 

The Group is in the process of applying for the Building Ownership Certificates for certain buildings and premises of the PRC 

subsidiaries. The carrying amount of the buildings without the relevant ownership certificates amounted to $22,311,000 as at 31 

December 2008 (2007: $15,038,000). The Group has made the necessary applications to the relevant authorities. The directors 

expect to obtain the relevant approvals in due course and are of the opinion that the PRC subsidiaries can continue to use the 

buildings and premises in the meantime without any penalty. The buildings and premises have been recognised as assets of the 

Group pending obtaining the ownership certificates. 





Building ownership certificates (cont’d) 

No contingent liabilities in connection with any possible breach or non-compliance with the relevant laws and regulations in 

respect of the buildings without ownership certificates have been provided for in the financial statements as the directors are of 

the opinion that the risk associated thereof is low. 

22. Prepayments and land and sea use rights 

Group 

2008 2007 

$’000 $’000 

Cost associated with purchase of sea use rights (a) – 8,465 

Prepayment in relation to purchase of land use right – 166 

Other prepayments 302 66 

Total 302 8,697 

(a) 

This pertains to compensation cost incurred in connection with the construction of deep water wharf. As of 31 December 2008, the Group is in the process 

of applying for approval for the transfer of sea use rights from the Sea and Fishery Bureau of Yantai. 

Land and sea use rights 

The Group’s land and sea use rights are located in the People’s Republic of China (“PRC”) where the Group’s PRC shipbuilding 

and storage facilities reside. 

Group 

Land use rights Sea use rights Total 

$’000 $’000 $’000 

Cost 

At 1 January 2007 – 3,865 3,865 

Additions 551 50 601 

Currency translation differences (3) (24) (27) 

At 31 December 2007 548 3,891 4,439 

Additions 25,130 1,393 26,523 

Currency translation differences 942 321 1,263 

At 31 December 2008 26,620 5,605 32,225 

Accumulated amortisation 

At 1 January 2007 – 502 502 

Amortisation – 101 101 

Currency translation differences – (3) (3) 

At 31 December 2007 – 600 600 

Amortisation 324 128 452 

Currency translation differences 12 45 57 

At 31 December 2008 336 773 1,109 


At 31 December 2008 26,284 4,832 31,116 

At 31 December 2007 548 3,291 3,839 

Average remaining amortisation period (years) 33 42 




22. Prepayments and land and sea use rights (cont’d) 

Land use rights agreements 

In accordance with the relevant PRC laws, the land use rights agreements relating to the land on which the property, plant and 

equipment of the PRC subsidiaries is residing allow the PRC government to expropriate the land with 30 days’ notice to the 

subsidiaries. 

In addition, the land on which the property, plant and equipment of the PRC subsidiaries is residing is held on a leasehold basis. 

Accordingly, the PRC subsidiaries have to obtain the approval of the relevant authorities before they can sell or mortgage certain 

properties on their land. 

The Group is in the process of applying for the State-owned Land Use Right Certificate in respect of land reclaimed from the 

sea. 

23. Intangible assets 

Group 

Goodwill 

Computer 

software 

licenses 

Total 

$’000 $’000 $’000 

Cost 

At 1 January 2007 13,817 3,266 17,083 

Arising from acquisition of equity interests from minority interests 2,580 – 2,580 

Additions – 2,922 2,922 

At 31 December 2007 16,397 6,188 22,585 

Currency translation differences – 120 120 

Additions – 6,897 6,897 

At 31 December 2008 16,397 13,205 29,602 

Accumulated amortisation 

At 1 January 2007 – 1,239 1,239 

Amortisation – 918 918 

At 31 December 2007 – 2,157 2,157 

Amortisation – 2,587 2,587 

Currency translation differences – 40 40 

At 31 December 2008 – 4,784 4,784 


At 31 December 2008 16,397 8,421 24,818 

At 31 December 2007 16,397 4,031 20,428 

Average remaining amortisation period (years) – 6 




23. Intangible assets (cont’d) 

Company 

Computer 

software 

licenses 

$’000 

Cost 

At 1 January 2007 2,279 

Additions 2,600 

At 31 December 2007 4,879 


At 31 December 2008 10,973 

Accumulated amortisation and impairment loss 

At 1 January 2007 913 

Additions 792 

At 31 December 2007 1,705 


At 31 December 2008 4,105 


At 31 December 2008 6,868 

At 31 December 2007 3,174 

Average remaining amortisation period (years) 2 

Impairment test for goodwill 

The recoverable amount is determined based on a value in use calculation using cash flow projections based on financial budgets 

approved by management covering a period of three financial years ending 2009, 2010 and 2011 (the “Projection Periods”). 

The pre-tax discount rate applied to the cash flow projections is 7.24%. The financial budget is prepared based on existing and 

potential contracts to be granted to the CGU for the Projection Periods. The Group has not projected a growth rate beyond the 

Projection Periods. 

The following described each key assumption on which management has based on its cash flow projections to undertake 

impairment testing of goodwill. 

– Budgeted gross margins – management determined the budgeted gross margin based on operational plans for the CGU 

and the expected margin to be achieved which is reasonable in view of the scope of services provided by the CGU. 

– Growth rates – management forecasted growth rates based on order book on hand as well as published industry 

research. 




24. Deferred tax 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current 

tax liabilities and when the deferred taxes relate to the same fiscal authority. The amounts, determined after appropriate offsetting, 

are shown on the balance sheets as follows: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Deferred tax assets 15,994 10,778 1,611 – 

Deferred tax liabilities – (1,692) – (1,692) 

Deferred tax, net 15,994 9,086 1,611 (1,692) 

The movement in the deferred tax assets and liabilities during the financial year is as follows: 

Fair value 

losses on 

derivatives 

financial 

instruments, 

net 

Unutilised 

business 

losses 

Interest 

receivables 

Amortisation 

of preoperating 

expenses 

Group 

Impairment 

and 

depreciation of 

property, plant 

and equipment Provisions 

Accrued 

expenses 

Recognised 

profits on 

construction 

contracts 

Reinvestment 

allowance 

Total 

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

Deferred tax (liabilities)/ 

assets 

At 1 January 2007 – – (719) 483 649 1,998 761 2,656 – 5,828 

Currency translation 

differences – – – – (4) (7) 2 (12) – (21) 

(Charge)/credit to income 

statement 

(Note 9) – – 719 15 (1,342) 24 102 3,761 – 3,279 

At 31 December 2007 – – – 498 (697) 2,015 865 6,405 – 9,086 

Currency translation 

differences 18 6 – 16 59 124 67 262 2 554 

(Charge)/credit to income 

statement 

(Note 9) 514 282 (713) (514) 46 5,915 189 591 44 6,354 

At 31 December 2008 532 288 (713) – (592) 8,054 1,121 7,258 46 15,994 




24. Deferred tax (cont’d) 

Deferred tax (liabilities)/assets 

Company 

Impairment and 

depreciation of 

Interest 

receivables 

property, plant 

and equipment Provisions Total 

$’000 $’000 $’000 $’000 

At 1 January 2007 (719) 204 1,095 580 

(Charge)/credit to income statement 719 (1,896) (1,095) (2,272) 

At 31 December 2007 – (1,692) – (1,692) 

(Charge)/credit to income statement (713) 311 3,705 3,303 

At 31 December 2008 (713) (1,381) 3,705 1,611 

25. Advances from customers 

This relates to advances received on construction contracts. 

26. Trade and other payables 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Trade payables: 

- third parties 209,289 102,458 62,280 16,780 

Other payables 32,806 20,570 24,130 9,952 

Amount due to an associate 1,244 – – – 

Amount due to CIMC Vehicle Financial Leasing 

Co., Ltd (1) 6,105 – – – 

Amount due to Leung Kee Holdings Ltd (2) 10,070 – 10,070 – 

Amount due to shareholder (3) 1,893 2,016 1,893 2,016 

Accrued costs of sales 60,996 13,910 – – 

Accrued operating expenses 7,073 9,169 4,166 6,370 

120,187 45,665 40,259 18,338 

Total 329,476 148,123 102,539 35,118 

(1) CIMC Vehicle Financial Leasing Co., Ltd (“CIMC Leasing) is a shareholder related company. 

(2) Leung Kee Holdings Ltd is a director related company. 

(3) The amount relates to profit sharing payable to a director cum shareholder. 

The carrying amounts of current trade and other payables approximate their fair values at the balance sheet date. 

The amount due to CIMC Leasing is unsecured, non-interest bearing and repayable on demand. 

The amount due to Leung Kee Holdings Ltd is unsecured, bears effective interest rate at 2.58% per annum over and above the 

London Inter-Bank Offered Rate and has remaining maturity terms of between 9 to 10 months. 




26. Trade and other payables (cont’d) 

Trade and other payables were denominated in the following currencies: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Chinese Renminbi 199,070 99,262 107 – 

Euro 26,315 15,294 18,559 6,578 

Singapore Dollar 6,602 13,165 6,579 13,129 

Sterling Pound 3,553 121 3,440 – 


Norwegian Kroner 20,556 124 17,406 124 

Swedish Krona 811 – 811 – 

329,476 148,123 102,539 35,118 

27. Borrowings 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Current 

Finance lease 36 36 36 36 

Loans from banks: 

- Secured 167,571 46,839 92,100 24,266 

- Unsecured 217,464 8,525 206,605 – 

385,035 55,364 298,705 24,266 

385,071 55,400 298,741 24,302 

Non-current 

Finance lease 146 188 146 188 

Loans from banks: 

- Secured 21,052 16,142 – – 

Loans from third party 235 220 – – 

21,433 16,550 146 188 

Total borrowings 406,504 71,950 298,887 24,490 

As at 31 December 2008, certain directors of the Company have provided personal guarantees amounting to $38,552,000 

(2007: $40,637,000) in respect of certain credit facilities granted to the Group. 




27. Borrowings (cont’d) 

(a) 

Securities granted 

Secured loans from banks 

The secured loans from banks bear effective interest at 1.96% to 8.22% (2007: 5.85% to 12.02%). Certain bank 

borrowings are secured by the following: 

(i) certain construction work-in-progress as disclosed in Note 16; 

(ii) certain property, plant and equipment as disclosed in Note 21; 

(iii) 

certain inventories as disclosed in Note 14; and 

(iv) charge over certain bank balances as disclosed in Note 11. 

Loan from third party 

Non-current loan from third party is unsecured, non-interest bearing and is not expected to be repaid within 12 months. 

(b) 

Maturity of borrowings 

The current borrowings have an average maturity of 3 months from 31 December 2008 (2007: 3 months). The non-current 

borrowings as at 31 December 2008 have maturity of between 2 to 5 years (2007: 2 to 6 years). 

(c) 

Currency risk 

The carrying amounts of total borrowings were denominated in the following currencies at balance sheet date: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Chinese Renminbi 85,493 36,465 – – 

Euro 1,056 369 – – 

Singapore Dollar 183 224 183 224 


406,504 71,950 298,887 24,490 

(d) 

Interest rate risks 

The range of the interest rates of total borrowings at the balance sheet date was as follows: 

Group 

Company 

2008 2007 2008 2007 

% % % % 

Bank borrowings 

Chinese Renminbi 5.54 to 8.22 5.85 to 8.02 – – 

Euro Dollar 3.97 to 5.79 6.09 to 6.20 – – 

United States Dollar 1.96 to 7.32 6.36 to 12.02 1.96 to 6.16 6.36 to 6.87 

Finance lease 

Singapore Dollar 4.85 4.85 4.85 4.85 

The exposure of current and non-current borrowings to interest rate risks is disclosed in Note 36. 




27. Borrowings (cont’d) 

(e) 

Carrying amounts and fair values 

The carrying amounts of current and non-current borrowings approximated their fair values as they are repriced 

frequently. 

(f) 

Defaults or breaches 

During the current financial year, the Company breached certain financial covenants of 2 bank loans. 

The amount outstanding as at 31 December 2008 is $253,031,000 and is presented as current liabilities at the balance 

sheet date. The bank is contractually entitled to demand for full and immediate repayment of the outstanding loan amount 

in the event of breach of covenant prior to the contractual repayment date of 25 June 2009. Subsequent to year end, the 

banks have consented to a waiver of the breaches for the financial year ended 31 December 2008. 

As at the date of this report, no repayment demand prior to contract repayment date of 19 June 2009 has been made to 

the Company. 

28. Provision for other liabilities 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Other liabilities 8,763 8,394 2,347 2,347 

Provision for liquidated damages on 

construction contracts – 2,175 – 2,175 

Provision for warranties on construction 

contracts 7,132 7,400 7,132 7,400 

15,895 17,969 9,479 11,922 

The Group normally gives a one-year warranty on certain defects and undertakes to repair or rectify such defects resulting 

from faulty design. A provision was recognised at the balance sheet date for possible warranty claims based on an estimate by 

technical engineers and past experience of the possible level of repairs and rectifications. 

Movements in provision for liquidated damages on construction contracts and provision for warranties on construction contracts 

are as follows: 

Group and Company 

2008 2007 

$’000 $’000 



Provision made during the financial year – 2,175 

Provision reversed during the financial year (2,175) (4,065) 

At end of the financial year – 2,175 

Provision for warranties on construction contracts 


Provision made during the financial year 4,128 2,046 

Provision utilised during the financial year (4,396) – 

Provision reversed during the financial year – (1,020) 

At end of the financial year 7,132 7,400 




29. Share capital and share options 

(a) 

Share capital 

Group and Company 

No. of shares Amount 

‘000 $’000 

2008 

At 1 January 2008 273,500 591,246 

Exercise of employee share options 65 182 

Transfer from share option reserve – 54 

At 31 December 2008 273,565 591,482 

2007 

At 1 January 2007 252,200 417,608 

Issue of shares 21,300 178,077 

Share issue expenses – (4,439) 

At 31 December 2007 273,500 591,246 

The holders with ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary 

shares carry one vote per share without restrictions. 

For the financial year ended 31 December 2007, the Company issued 21,300,000 ordinary shares for a total consideration 

of $178,077,000 for cash to provide funds for the expansion of the Group’s operations. The newly issued shares rank pari 

passu in all respects with the previously issued shares. 

(b) 

Share options 

Fair value of share options granted 

The fair value of share options granted under the Scheme during the financial year is determined using the Trinomial 

valuation model, taking into account the terms and conditions upon which the instruments were granted. $6,777,000 

(2007: $2,554,000) was charged to the income statement during the financial year. 

At an Extraordinary General Meeting held on 21 June 2006, shareholders approved the Yantai Raffles Executive Scheme 

(the “Scheme”) for the granting of non-transferable share options that are settled by physical delivery of the ordinary 

shares of the Company, to eligible directors, senior executives and employees respectively. 

The Scheme is operated at the discretion of the Remuneration Committee, subject to a maximum period of 10 years from 

the date on which the Scheme was adopted, beyond which is subject to approval of the members by way of ordinary 

resolutions in general meetings and any relevant authorities which may then be required. The maximum aggregated 

number of shares which may be issued and/or transferred pursuant to all share options shall not exceed 10% of the issued 

share capital of the Company on the day preceding the date of grant. 

Under the Scheme, share options are granted to employees of the Group selected by the Remuneration Committee. The 

exercise price of the granted share options is based on the arithmetic average of the daily volume weighted average price 

in Norwegian Kroner (“NOK”) of the Company’s shares traded on the Norwegian OTC during the period of three trading 

days ending on the day before the date of grant. Where they are issued in currency other than NOK, it is based on the 

prevailing spot exchange rate quoted by the Company’s bank. Share options shall be exercisable in whole or in part in 

respect of 1,000 shares or any multiple thereof, subject to the vesting period as described by the Remuneration Committee 

in its absolute discretion. 




29. Share capital and share options (cont’d) 

(b) 

Share options (cont’d) 

Fair value of share options granted (cont’d) 

During the financial year ended 31 December 2008, a total of $1,154,003 options were granted to certain senior 

management staff at an exercise price between US$1.6425 to US$1.65 per share (the “2008 share options”). The 2008 

share options are exercisable from 1 July 2010 to 30 June 2012. 

Since the commencement of the Scheme till the end of the financial year: 

• No share options that entitle the holder to participate, by virtue of the options, in any share issue of any other 

corporation have been granted, and 

• Other than 1,154,003 share options that were granted to certain senior executives, none of whom are directors, at 

a discount of 45% to market average price at time of grant, there were no other share options that were issued at 

a discount. 

Details of all share options to subscribe for ordinary shares of the Company pursuant to the Scheme as at 31 December 

2008 are as follows: 

2006 

Share options 

2007 

Share options 

2008 

Share options 

Outstanding at 1 January 2008 525,000 6,690,289 – 

- Granted – – 1,154,003 

- Forfeited – (335,286) – 

- Exercised (65,000) – – 

- Cancelled (70,000) – – 

Outstanding at 31 December 2008 390,000 6,355,003 1,154,003 

Exercise price $2.80 NOK 10.50 to NOK 26.00 US$1.6425 to US$1.65 

Exercise period 

1 August 2008 to 

31 July 2010 

16 January 2009 to 

17 September 2017 

1 July 2010 to 

30 June 2012 

As at 31 December 2008, 65,000 of the share options are exercised. 

The fair value of share options granted during the financial year ended 31 December 2008 determined using valuation 

model and the charge to the income statement during the period was $530,000. The significant inputs into the model 

were share price of NOK16.00, at the respective grant dates, exercise price shown above, standard deviation of expected 

share price returns of 45%, the option life shown above and annual risk-free interest rate of between 5.23% to 5.40%. 

The volatility measured at the standard deviation of expected share price returns is based on statistical analysis of volatility 

of market comparables. 




29. Share capital and share options (cont’d) 

The following table lists the inputs to the share option pricing model for the financial years ended 31 December 2008 and 

31 December 2007: 

2008 

Share options 

2007 

Share options 

2006 

Share options 

Standard deviation of expected share 

returns (%) 45 45 40 

Option life (years) 4 4 to 10 4 

Annual risk-free rate (%) 5.23 to 5.40 4.41 to 4.76 5 

Share price NOK 16.00 NOK 10.50 to NOK 26.50 $2.62 

30. Other reserves 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

(a) 

Composition: 

Capital reserve 2,567 2,567 – – 

PRC statutory surplus reserve 3,789 3,789 – – 

Share option reserve 9,125 2,691 9,125 2,691 

Fair value reserve (206) 25,992 – – 

Currency translation reserve 11,119 4,633 – – 

26,394 39,672 9,125 2,691 

(b) 

Movements: 

(i) 

Capital reserve 

At beginning/end of financial year 2,567 2,567 – – 

(ii) 

PRC statutory surplus reserve 

At beginning/end of financial year 3,789 3,789 – – 

(iii) 

Share option reserve 

At beginning of financial year 2,691 137 2,691 137 

Grant of equity-settled share 

options to employees 6,777 2,554 6,777 2,554 

Expiry of share options (289) – (289) – 

Exercise of share options (54) – (54) – 

At end of financial year 9,125 2,691 9,125 2,691 




30. Other reserves (cont’d) 

(b) 

Movements: (cont’d) 

Group 

2008 2007 

$’000 $’000 

(iv) 

Fair value reserve 

At beginning of financial year 25,992 (6,836) 

Financial assets, available-for-sale 

- (Reversal)/recognition of fair value gains (Note 18) (26,198) 32,828 

At end of financial year (206) 25,992 

(v) 

Currency translation reserve 

At beginning of financial year 4,633 5,014 

Net currency translation differences of financial statements of foreign subsidiaries 7,469 (393) 

Minority interests (983) 12 

6,486 (381) 

At end of financial year 11,119 4,633 

(c) 

Share option reserve 

Share option reserve represents the equity-settled share options granted to employees. The reserve is made up of the 

cumulative value of services from employees recorded over the vesting period commencing from the grant date of equitysettled 

share options, and is reduced by the expiry of the share option. When the option is exercised, the amount from 

the share option reserve is transferred to share capital. When the share option expires, the amount from the share option 

reserve is transferred to accumulated gains/(losses). 

(d) 

Non-distributable statutory reserves 

Subsidiaries established in the PRC (the “PRC subsidiaries”) are required to maintain certain statutory reserves by transferring 

from their profit after taxation in accordance with the relevant laws and regulations and, if applicable, Articles of Association 

of the PRC subsidiaries, before any dividend is declared and paid. 

(i) 

PRC Statutory Surplus Reserve 

The PRC subsidiaries are required to transfer, at their directors’ recommendation, a certain percentage of their profit 

after taxation to the statutory surplus reserve until the balance reaches 50% of their respective registered capital, 

where further transfers will be at their directors’ recommendation. The statutory surplus reserve can only be used 

to make up prior year losses or to increase share capital, provided that the fund does not fall below 25% of the 

registered capital. 

(ii) 

Staff and workers’ bonus and welfare fund 

The PRC subsidiaries are required to appropriate staff and workers’ bonus and welfare fund from their profit after 

taxation calculated in accordance with the PRC accounting standards and systems. The percentage to be appropriated 

is determined by the board of directors of the companies. The staff and workers’ bonus and welfare fund can only 

be used for special bonuses and collective welfare benefits to staffs and workers. The fund may not be reversed or 

distributed to the owners. The staff and workers’ bonus and welfare fund, due to its nature, is classified as other 

liabilities in the consolidated balance sheet and correspondingly debited to staff costs in the consolidated income 

statement. 




30. Other reserves (cont’d) 

(d) 

Non-distributable statutory reserves (cont’d) 

(ii) 

Staff and workers’ bonus and welfare fund (cont’d) 

For the financial year ended 31 December 2008 and 31 December 2007, the board of directors of the PRC subsidiaries 

have not approved the appropriation of staff and workers’ bonus and welfare fund. 

(iii) 

Enterprise expansion fund 

The PRC subsidiaries are required to appropriate the enterprise expansion fund from their profit after taxation 

calculated in accordance with the PRC accounting standards and systems. The percentage to be appropriated is 

determined by the board of directors of the PRC subsidiaries. Upon approval from the board of directors, the 

enterprise expansion fund can be used to expand production or to increase capital. 

For the financial year ended 31 December 2008 and 31 December 2007, the board of directors of the PRC subsidiaries 

have not approved the appropriation of enterprise expansion fund. 

(iv) 

Capital reserve 

Capital reserve represents contribution to paid-in capital in excess of the registered capital of the PRC subsidiaries and 

appropriation from retained earnings in respect of waiver of debts in accordance with the PRC rules and regulations. 

The reserve is non-distributable under the PRC laws. 

31. Loans and receivables 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Non-current 

Amounts due from subsidiaries (non-trade) – – 55,302 74,134 

Current 

Cash and bank balances 175,233 335,082 132,640 251,969 

Trade and other receivables 105,839 76,502 35,126 50,321 

Amounts due from subsidiaries (non-trade) – – 34,349 2,622 

Total loans and receivables 281,072 411,584 257,417 379,046 




32. Financial liabilities carried at amortised cost 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Non-current 

Borrowings 21,433 16,550 146 188 

Current 

Trade and other payables 329,476 148,123 102,539 35,118 

Borrowings 385,071 55,400 298,741 24,302 

Amounts due to subsidiaries (trade) – – 977 82,870 

Provision for other liabilities 15,895 17,969 9,479 11,922 

Total financial liabilities carried at amortised 

cost 751,875 238,042 411,882 154,400 

33. Segment information 

Reporting format 

The primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected 

predominantly by differences in the products and services produced. Secondary information is reported geographically. The 

operating businesses are organised and managed separately accordingly to the nature of the products and services provided, 

with each segment representing a strategic business unit that offers different products and serves different markets. 

Primary reporting format - Business segments 

The Group currently has only one business segment. The principal activities of the Group are to carry on the business of 

construction and conversion of offshore and marine projects and investment holding. Accordingly, it is not meaningful to disclose 

information by business segments for the current financial year. 

Secondary reporting format - Geographical segments 

The Group’s revenue by geographical segments is based on the location of its customers. 

Segment assets of the Group are based on the geographical location of the assets and are located in Asia, namely People’s 

Republic of China and Singapore. 

The following table shows the Group’s revenue by geographical markets: 

Total revenue 

2008 2007 

$’000 $’000 

Asia 636 562 

Europe 615,850 282,551 

USA 274,528 40,335 

891,014 323,448 




34. Related party transactions 

In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions 

between the Group and related parties took place at terms agreed between the parties during the financial years: 

(a) 

Sale and purchase of goods and services 

Group 

2008 2007 

$’000 $’000 

Interest paid to firm connected with a director 190 132 

Purchases of equipment from an associate 7,695 – 

Consultancy fees paid to a firm connected with a director – 409 

(b) 

Expenses 

Group 

2008 2007 

$’000 $’000 

Directors’ remuneration 1,942 3,701 

Directors’ fee 321 316 

(c) 

Key management personnel compensation 

Key management personnel compensation is analysed as follows: 

Group 

2008 2007 

$’000 $’000 

Salaries and other short-term employee benefits 2,574 3,722 

Share options expense 4,623 1,761 

7,197 5,483 

The remuneration of key management personnel is determined by the board of directors having regards to the performance 

of individuals and market trends. During the financial year ended 31 December 2008, Nil (2007: 4,100,000) share options 

have been granted to the Company’s directors. 

(d) 

Personal guarantees by directors 

As at 31 December 2008, certain directors of the Company have provided personal guarantees amounting to $38,552,000 

(2007: $40,637,000), to secure certain credit facilities of the Group. 




35. Commitments and contingencies 

(a) 

Capital commitments 

Capital expenditures contracted for at the balance sheet date but not recognised in the financial statements are analysed 

as follows: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Land and sea use rights – 1,969 – – 

Property, plant and equipment 27,285 40,783 – – 

Vessels built for sales or charter 324,608 475,044 308,900 249,061 

351,893 517,796 308,900 249,061 

During the financial year 2007, a PRC subsidiary of the Group, Yantai Raffles Offshore Ltd (“YROL”), entered into a 

compensation agreement in connection with the acquisition of sea use rights as disclosed in Note 22. Under this 

arrangement, Yantai Xing Yang is given priority to tender for YROL’s subcontract works on the condition that all terms are 

equal and Yantai Xing Yang has the capacity to undertake such subcontract works. 

(b) 

Operating lease commitments - where a group company is a lessee 

The future aggregate minimum lease payable in respect of warehouse, land and sea use rights under non-cancellable 

operating leases contracted for at the balance sheet date but not recognised as liabilities, are analysed as follows: 

Group 

Company 

2008 2007 2008 2007 

$’000 $’000 $’000 $’000 

Not later than one year 3,225 2,391 414 356 

Between two and five years 8,058 5,983 386 26 

Later than five years 10,629 9,193 – – 

21,912 17,567 800 382 

(c) 

Performance guarantees 

As of 31 December 2008, performance guarantees issued by financial institutions for contracts awarded to the Company 

and its subsidiaries amounted to $353,513,000 (2007: $364,985,000). 

(d) 

Contingent liabilities 

As of 31 December 2008, the Company has provided corporate guarantees to a financial institution for performance 

guarantees issued for contracts awarded to a PRC subsidiary amounting to $71,549,000 (2007: $71,425,000). 




36. Financial risk management objectives and policies 

The Group’s activities expose it to a variety of financial risks include market risk (including currency risk, interest rate risk and price 

risk), credit risk, liquidity risk and cash flow interest rate risk. The Group’s overall risk management programme focuses on the 

unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. 

Risk management is carried out under policies approved by the board of directors. The board provides general principles for 

overall risk management such as currency risk, market risk, cash flow and fair value interest rate risk, credit risk and liquidity 

risk. 

(a) 

Currency risk 

The Group operates mainly in Asia and is exposed to foreign exchange risk arising from various currencies combinations. 

The Group’s sales are mainly denominated in United States Dollar (“USD”), Euro and Chinese Renminbi (“RMB”). The 

Group’s purchases are mainly denominated in United States Dollar, Chinese Renminbi (“RMB”), Norwegian Kroner (“NOK”) 

and Euro whilst its operating costs are denominated mainly in RMB and Singapore Dollar (“SGD”). 

To the extent that the Group’s sales, purchases and operating costs are not naturally matched in the same currency and 

that there is timing differences between collections and payments, the Group will be exposed to any adverse fluctuations 

of the various currencies against the SGD. Restrictions over the conversion or remittance of foreign currencies such as RMB 

may also expose the Group to adverse fluctuations in exchange rates. As a result, the Group’s earnings may be materially 

and adversely affected. 

The Group closely monitors exchange rate movements and cash flow requirements for various currencies. It seeks to enter 

into contracts with customers whereby progress settlements are in a mix of various currencies which it requires to pay for 

its purchases and operating costs. It also obtains bank borrowings in the currencies that are required for operation. The 

Group engages foreign currency contracts to hedge material exchange exposures. 

The financial statements of certain subsidiaries are prepared in their respective functional currencies, namely RMB and USD. 

This represents a translation risk in that any material fluctuation in the RMB and USD against SGD will have an effect on 

the Group’s consolidated financial statements which are presented in SGD. Translation exposure is not normally hedged as 

these investments are intended to be held on a long term basis and the translation risk arising from the investments cannot 

be appropriately hedged by short-term hedging instruments available. Furthermore, the cost of entering into such hedging 

activities outweighs the benefits. 

Currently, the PRC government imposes control over foreign currencies. RMB, the official currency of the PRC, is not freely 

convertible. Enterprises operating in the PRC can enter into exchange transactions through the People’s Bank of China or 

other authorised financial institutions. 

Payments for imported materials or services, which are outside of the PRC, are subject to the availability of foreign currency 

which depends on the foreign currency denominated earnings of the enterprises. Exchanges of RMB for foreign currency 

must be arranged through the People’s Bank of China or other authorised financial institutions and is granted to enterprises 

in the PRC for valid reasons such as purchase of imported materials and remittance of earnings. While conversion of 

RMB into SGD or other currencies can generally be effected at the People’s Bank of China or other authorised financial 

institutions, there is no guarantee that it can be effected at all times. 

The Group’s currency exposure is disclosed in the respective notes to the financial statements relating to the financial assets 

and financial liabilities. 




36. Financial risk management objectives and policies (cont’d) 

(a) 

Currency risk (cont’d) 

The following table demonstrates the sensitivity to a reasonably possible change in the EUR, NOK, USD and GBP against 

the S$ and RMB$, with all other variables held constant, of the Group’s profit net of tax: 

Group 

Profit net of tax 

2008 2007 

$’000 $’000 

EUR/SGD: - strengthened 5% (2007: 5%) 1,014 1,154 

- weakened 5% (2007: 5%) (1,014) (1,154) 

EUR/RMB: - strengthened 5% (2007: 5%) (121) (151) 

- weakened 5% (2007: 5%) 121 151 

NOK/SGD: - strengthened 5% (2007: 5%) (781) 4,613 

- weakened 5% (2007: 5%) 781 (4,613) 

NOK/RMB: - strengthened 5% (2007: 5%) (158) - 

- weakened 5% (2007: 5%) 158 - 

USD/SGD: - strengthened 5% (2007: 5%) (11,385) 6,963 

- weakened 5% (2007: 5%) 11,385 (6,963) 

USD/RMB: - strengthened 5% (2007: 5%) (1,642) 26 

- weakened 5% (2007: 5%) 1,642 (26) 

GBP/SGD: - strengthened 5% (2007: 5%) (172) - 

- weakened 5% (2007: 5%) 172 - 

(b) 

Price risk 

The Group is exposed to equity securities price risk because of the investments held by the Group classified as “financial 

assets, available-for-sale”. The securities are listed on the stock exchanges in Australia and Norway. 

Sensitivity analysis for equity price risk 

As at 31 December 2008, if a general increase of 5% (2007: 5%) in market price of investment is estimated, with all 

other variables held constant, the fair value reserve would increase by $176,000 for the year ended 31 December 2008 

(2007: $2,944,000). A general decrease of the same percentage in market price of investment would have had the equal 

but opposite effect on the fair value reserve to the amount shown above, on the basis that all other variables remain 

constant. 

(c) 

Cash flow and fair value interest rate risks 

Cash flow interest rate risk is the risk that the future cash flows of financial instrument will fluctuate because of changes 

in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to 

changes in market interest rates. The Group’s borrowings are currently predominantly variable rate loans and are expected 

to reprice in less than one year from the financial year end. 

The Group’s policy is to obtain the most favourable rates available to manage interest cost, whilst taking into consideration 

an increasing or declining interest rate environment. 





(c) 

Cash flow and fair value interest rate risks (cont’d) 

The financial assets and liabilities of the Group are non-interest bearing except for cash and bank balances and borrowings 

as set out in the table below, categorised by the earlier of contractual repricing or maturity date. 

Less than 

6 months 

Variable rates 

6 to 12 

months 

1 to 5 

years 

Less than 

6 months 

Fixed rates 

6 to 12 

months 

1 to 5 

years 

Over 5 

years 

Noninterest 

bearing 

Total 

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

Group 

At 31 December 2008 

Assets 

Cash and bank balances 42,566 – – 103,958 – – – 28,709 175,233 

Liabilities 

Borrowings 306,952 33,682 21,051 30,754 13,683 146 – 236 406,504 


Assets 

Cash and bank balances 90,539 – – 219,263 – – – 25,280 335,082 

Liabilities 

Borrowings 24,266 5,375 16,142 1,496 24,263 – 188 220 71,950 

The Group’s borrowings at variable rates are denominated in Euro, Singapore Dollar, Chinese Renminbi and United States 

Dollar as disclosed in Note 27. 

Variable 

rates 

Less than 

6 months 

Less than 

6 months 

Fixed rates 

6 to 12 

months 

1 to 5 

years 

Over 5 

years 

Noninterest 

bearing 

Total 

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

Company 


Assets 

Cash and bank balances 111 103,822 – – – 28,707 132,640 

Liabilities 

Borrowings 296,425 2,316 – 146 – – 298,887 


Assets 

Cash and bank balances 7,564 219,128 – – – 25,277 251,969 

Liabilities 

Borrowings 24,266 – 36 – 188 – 24,490 

The Company’s borrowings at variable rates are denominated in Singapore Dollar and United States Dollar as disclosed in 

Note 27. 





(d) 

Credit risk 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the 

Group. For trade receivables, the Group adopts the policy of assessing credit worthiness and credit history of customers 

and obtaining sufficient security where appropriate to mitigate credit risk. 

The credit risk of the Group’s other financial assets, which comprise cash and cash equivalents, available-for-sale financial 

assets, amounts due from associates, other receivables and certain derivative instruments, arises from default of the 

counterparty, with a maximum exposure equal to the carrying amounts of these financial instruments. The Company is 

also exposed to credit risk through the granting of financial guarantees, further details of which are disclosed in Note 35 

to the financial statements. 

As at 31 December 2008, 98% (2007: 96%) of trade receivables relate to 3 major customers of the Group. The Group has 

policies in place to ensure its dealings are with customers with an acceptable credit history. 

(e) 

Liquidity risk 

The Group monitors its risks to a shortage of funds and considers the maturity of its financial assets and liabilities and 

projected cash flows from operations. The Group’s objective is to maintain a balance between continuity of funding and 

flexibility through the use of stand-by credit facilities. 

The Group and the Company monitor and manage internal liquidity risk and seek to maintain sufficient liquid financial 

assets and stand-by credit facilities with at least five major financial institutions. At the balance sheet date, approximately 

94.7% (2007: 77%) of the Group’s loans and borrowings (Note 27) will mature in less than one year based on the carrying 

amount reflected in the financial statements. 99.9% (2007: 99.2%) of the Company’s loans and borrowings will mature 

in less than one year at the balance sheet date. As at 31 December 2008, the Group has unutilised banking facilities of 

$245.8 millions. The Group is actively seeking to extend the maturity profile of its borrowings, particularly with the major 

Chinese banks, to the extent current market conditions allow. The Group is also seeking to establish new banking facilities 

to enhance its liquidity position and accommodate future repayment obligations. Subsequent to the year end, the Group 

has secured new banking facilities amounting to $425.7 millions. As at the date of this report, the Group has undrawn 

banking facilities aggregating $274.3 millions. The Group also has further applications in progress at various stages of 

approvals aggregating $973.8 millions. 

During the financial year, the Company breached certain similar financial covenants of two bank loans with an outstanding 

aggregate balance of $253,031,000 as at 31 December 2008. Subsequent to year end, the banks have consented to a 

waiver of the breaches and no repayment demand prior to contractual repayment date has been made. 

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities at the balance sheet 

date based on contractual undiscounted payments. 

Group 

2008 2007 

1 year 1 to 5 

1 year 1 to 5 

or less years Total or less years Total 

$’000 $’000 $’000 $’000 $’000 $’000 

Trade and other payables 329,476 – 329,476 148,123 – 148,123 

Borrowings 389,015 23,833 412,848 56,557 19,667 76,224 

718,491 23,833 742,324 204,680 19,667 224,347 

Company 

Trade and other payables 102,539 – 102,539 35,118 – 35,118 

Borrowings 300,091 230 300,321 24,491 297 24,788 

Due to subsidiaries (trade) 258 719 977 82,870 – 82,870 

402,888 949 403,837 142,479 297 142,776 





(f) 

Fair values 

The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between 

knowledgeable and willing parties in an arm’s length transaction, other than in a forced or liquidation sale. 

Management has determined that the carrying amounts of cash and short term deposits, current trade and other 

receivables, bank overdrafts, current trade and other payables, other liabilities, current bank loans and non-current floating 

rate loans based on their notional amounts, reasonably approximate their fair values because these are mostly short term 

in nature or are repriced frequently. 

(g) 

Derivative financial instruments 

Cash flow hedges – Embedded foreign currency forward contracts 

The Group closely monitors exchange rate movements and cash flows for the various currencies in which the Group 

transacts its business. The Group seeks to enter into contracts with customers where progress payments are made in a mix 

of various currencies (such as USD, EUR, NOK and RMB) which the Group requires to pay for its purchases and operating 

costs. Contractual payments due from customers and denominated in currencies other than the currency in which the shipbuilding 

contracts are routinely expressed, the functional currencies of the Company or the customers, are deemed to be 

contracts with embedded derivatives which are required to be accounted for separately under FRS 39 as if the Group had 

entered into foreign currency forward contracts. 

Forward currency contracts are also used to hedge the Group’s sales and purchases denominated in USD for which firm 

commitments existed at the balance sheet date, extending to July 2009. 

Under these arrangements, as of balance sheet date, the fair value and notional amount of derivative financial instruments 

(namely embedded foreign currency forward contracts and forward currency contracts) of the Group as at 31 December 

are as follows: 

Group 

2008 2007 

S$’000 

S$’000 

Contract/ 

Notional 

Amount Assets Liabilities 

Contract/ 

Notional 


Embedded derivatives 548,602 6,674 (13,705) 693,789 24,400 – 

Forward currency contracts 665,007 5,560 (13,270) – – – 

Total derivatives 12,234 (26,975) 24,400 

Company 

2008 2007 

S$’000 

S$’000 

Contract/ 

Notional 


Contract/ 

Notional 


Embedded derivatives 548,602 6,674 (13,705) 693,789 24,400 – 

Forward currency contracts 564,312 5,543 (11,125) – – – 

Total derivatives 12,217 (24,830) 24,400 

As at 31 December 2008 and 2007, the derivative financial instruments of the Group and the Company are not designated 

nor qualify for hedge accounting. Fair value changes are recognised in the income statement and hence, no hedging 

reserve is recorded as at 31 December 2008 and 2007. 




37. Capital management 

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital 

ratios in order to support its business and maximise shareholder value. 

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions and the risk 

characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment 

to shareholders, return capital to shareholders or issue new shares. As disclosed in Note 30(d), the PRC subsidiaries of the Group 

are required to contribute and maintain a non-distributable statutory surplus reserve fund and enterprise expansion fund. This 

externally imposed capital requirement has been complied with by the subsidiaries for the financial year ended 31 December 

2008 and 2007. No changes were made in the objectives, policies or processes for managing capital during the year ended 31 

December 2008. 

The Group monitors capital using a gearing ratio, which is net debt divided by the total capital plus net debt. The Group ideally 

targets to maintain a gearing ratio between 30% and 70%. Net debts includes interest-bearing bank and other borrowings, 

loans from associates, trade and other payables, accruals, less cash and cash equivalents. Capital includes equity attributable to 

equity holders of the parent, less the hedging reserve or the net unrealised gains reserve. The Group’s ability to raise additional 

capital under favourable terms is subject, inter alia, to external market forces and factors that are beyond the Group’s control. 

The gearing ratios as the balance sheet dates were as follows: 

Group 

2008 2007 

$’000 $’000 

Borrowings (Note 27) 406,504 71,950 

Trade payables and other payables (Note 26) 329,476 148,123 

Provision for other liabilities (Note 28) 15,895 17,969 

Less: Cash and bank balances (Note 11) (175,233) (355,082) 

Net debt 576,642 (117,040) 

Equity attributable to the equity holders of the Company 564,357 550,178 

Less: - Fair value reserve (Note 30) 206 (25,992) 

- Statutory reserve fund (Note 30) (3,789) (3,789) 

Total capital 560,774 520,397 

Capital and net debt 1,137,416 403,357 

Gearing ratio 51% n.m. 

n.m.: not meaningful 




38. Comparatives 

Certain comparative figures have been reclassified to conform with the current year’s presentation as follows: 

Balance Sheets 

Group 

Company 

As previously 

stated 2007 

As restated 

2007 

As previously 

stated 2007 

As restated 

2007 

$’000 $’000 $’000 $’000 

Current assets 

Inventories 106,276 209,014 – 74,417 

Vessels under construction 114,506 11,768 180,374 105,957 

Construction work-in-progress in 

excess of progress billings 70,633 103,013 499,376 531,756 

Other current assets 231,731 339,689 920 108,878 

Current liabilities 

Progress billings in excess of 

construction work-in-progress 508,617 648,955 479,681 620,019 

39. Authorisation of financial statements 

The consolidated financial statements for the financial year ended 31 December 2008 were authorised for issue in accordance 

with a resolution of the board of directors of Yantai Raffles Shipyard Limited on 25 May 2009. 


SHAREHOLDINGS STATISTICS 

As at 25 May 2009 

Shareholders List as at 25 May 2009 

No. Shareholders No. of Shares Percentage 

1 DNB Nor Bank ASA 131,147,700 47.94% 

2 Leung Kee Holdings Limited 51,758,207 18.92% 

3 Sharp Vision Holdings Limited 27,356,500 10.00% 

4 Yantai Shipyard Pte Ltd 19,200,000 7.02% 

5 Brian Chang 12,976,087 4.74% 

6 Bright Touch Investment Limited 9,521,306 3.48% 

7 Platinum Nominees Limited 9,284,200 3.39% 

8 Airtrust (Singapore) Pte Limited 3,715,000 1.39% 

9 Francis James Reidy 2,744,000 1.00% 

10 James W. Reidy 1,257,000 0.46% 

Total 268,960,000 98.32% 


NOTICE OF ANNUAL GENERAL MEETING 

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held on 24 June 2009 (Wednesday) at 4.00 p.m. 

(Singapore Time) at Pan Pacific Orchard, Monet Room, Level 3, 10 Claymore Road, Singapore 229540 for the following purposes:- 

As Ordinary Business 

1. 

2. 

To receive and adopt the Directors’ Report and Audited Accounts for the financial year ended 31 December 2008, together 

with the Auditors’ Report thereon. 

(Resolution 1) 

To re-elect Mr Mai Bo Liang, a Director retiring pursuant to Article 97 of the Articles of Association of the Company. 


3. 

4. 

5. 

6. 

To re-elect Mr Brian Chang, a Director retiring by rotation pursuant to Article 91 of the Articles of Association of the 

Company. 


To re-elect Mr Francis James Reidy, a Director retiring by rotation pursuant to Article 91 of the Articles of Association of the 

Company. 


To re-elect Mr Ang Kong Hua, a Director retiring by rotation pursuant to Article 91 of the Articles of Association of the 

Company. 


To approve the payment of Directors’ fees of S$320,667 for the financial year ended 31 December 2008. 


7. 

To re-appoint Ernst & Young LLP as Auditors and to authorize the Directors to fix their remuneration. 


As Special Business 

8. 

To consider, and if thought fit, to pass the following resolution as an ordinary resolution, with or without modifications:- 

“AUTHORITY TO ISSUE SHARES 

That pursuant to the provisions of Section 161 of the Companies Act, Cap. 50, the Directors be and are hereby authorized 

to allot and issue: 

(i) 

(ii) 

shares in the Company; and 

convertible securities and any shares in the Company pursuant to the conversion of such convertible securities 

(whether by way of rights, bonus or otherwise) at any time and from time to time upon such terms and conditions whether 

for cash or otherwise with such rights and restrictions and for such purposes and to such persons as the Directors shall in their 

absolute discretion deem fit to impose and that such authority shall continue in force until the conclusion of the next Annual 

General Meeting or the expiration of the period within which the next Annual General Meeting of the Company is required 

by law to be held, whichever is earlier.” 



NOTICE OF ANNUAL GENERAL MEETING 

As Special Business (cont’d) 

9. 

To transact any other business that may properly be transacted at an Annual General Meeting 

By Order of the Board 

OO LAY KIM 

Company Secretary 

Singapore, 5 June 2009 

Explanatory Notes: 

• Mr Mai Bo Liang, upon re-election as a Director, will remain as the Chairman of the Board of Directors. 

• Mr Brian Chang, upon re-election as a Director, will remain as the Deputy Chairman of the Board of Directors and a member of 

the Nominating Committee. 

• Mr Francis James Reidy, upon re-election as a Director, will remain as a member of the Audit Committee and a member of the 

Remuneration Committee. 

• Mr Ang Kong Hua, upon re-election as a Director, will remain as the Chairman of the Nominating Committee, Chairman of the 

Remuneration Committee and a member of the Audit Committee. 

• Ordinary Resolution 8 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 convertible securities in the Company. This authority will, unless revoked or varied at a 

general meeting, expire at the conclusion of the next Annual General Meeting of the Company or the expiration of period within 

which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. 

Notes: 

1. 

2. 

3. 

A member of the Company entitled to attend and vote at the Annual General Meeting of the Company is entitled to appoint one 

or two proxies to attend in his stead. A proxy need not be a member of the Company. 

A member of the Company which is a corporation is entitled to appoint its authorized representatives or proxies to vote on its 

behalf. 

The instrument appointing a proxy must be deposited at the Registered Office of the Company at 1 Claymore Drive #08-04, Orchard 

Towers, Singapore 229594 not less than 48 hours before the time appointed for holding of the Annual General Meeting. 


This page is intentionally left blank



YANTAI RAFFLES SHIPYARD LIMITED 

No. 1 Claymore Drive 

#08-04 Orchard Towers 

Singapore 229594

THE SHAPE OF THINGS TO COME - cimc raffles

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