notes to the financial - cimc raffles
notes to the financial - cimc raffles
notes to the financial - cimc raffles
Create successful ePaper yourself
Turn your PDF publications into a flip-book with our unique Google optimized e-Paper software.
Yantai Raffles Shipyard Limited<br />
Reaching<br />
for<br />
Greater<br />
Heights<br />
ANNUAL REPORT 2009
Contents<br />
Our Core Values 1<br />
The Company 2<br />
About CIMC 4<br />
Chairman’s Statement 6<br />
CEO’S Review 10<br />
Corporate Highlights 12<br />
TAISUN Mating Process 14<br />
Corporate Social Responsibility 16<br />
Our Order Book 17<br />
Corporate Information 18<br />
Corporate Structure 19<br />
Board of Direc<strong>to</strong>rs 20<br />
Financial Highlights 24<br />
Financial Review 25<br />
Our Vision<br />
To be <strong>the</strong> Yard of Choice.<br />
Our Mission<br />
To achieve annual sales revenue<br />
of RMB10 billion and <strong>to</strong> become a<br />
leading offshore solution provider<br />
trusted by cus<strong>to</strong>mers, employees<br />
and stakeholders by 2012.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
1<br />
Corporate Objective<br />
With our sincerity and innovation, we provide world class<br />
offshore solutions through leading technology, quality<br />
processes and a safe environment, enabling <strong>the</strong> sharing of<br />
marine resources for sustainable development<br />
Our Core Values<br />
Integrity<br />
We commit <strong>to</strong> honesty and faithfulness as our foundation<br />
Service<br />
We maintain a cus<strong>to</strong>mer-centric approach <strong>to</strong> provide<br />
responsive and excellent services<br />
Excellence<br />
We pursue effectiveness, efficiency and responsiveness in<br />
our operating processes<br />
Innovation<br />
We challenge conventions and foster innovations <strong>to</strong> create<br />
value for our cus<strong>to</strong>mers and stakeholders<br />
Teamwork<br />
We focus on building a spirit of co operation as <strong>the</strong> key <strong>to</strong><br />
achieving our mission and vision<br />
Accommodation<br />
We embrace diversity as a foundation <strong>to</strong> build a team which<br />
consistently achieves a high performance
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
3<br />
The Company<br />
Yantai Raffles Shipyard Limited is one of <strong>the</strong> largest<br />
Offshore and Marine Fabrication Shipyards in <strong>the</strong><br />
world. It has experienced dramatic growth over <strong>the</strong><br />
last 15 years and is now one of he most respected<br />
names in <strong>the</strong> Offshore and Shipbuilding Industry.<br />
With CIMC now establishing itself as <strong>the</strong> leading<br />
shareholder of Yantai Raffles Shipyard Limited with<br />
50.01%. this leads <strong>to</strong> many distinct competitive<br />
advantages such as excellent relationships throughout<br />
China and also strong <strong>financial</strong> support which allows us<br />
<strong>to</strong> invest <strong>to</strong> fufill our future development aspirations.<br />
Yantai Raffles Shipyard Limited offers <strong>to</strong>tal solutions <strong>to</strong><br />
our cus<strong>to</strong>mers and focuses on reliability, commitment <strong>to</strong><br />
excellence, versatility and quality. Our quality solutions<br />
are reinforced by our engineering capabilities and<br />
innovative software which are unrivalled in <strong>the</strong> industry.<br />
Yantai Raffles Shipyard Limited has become <strong>the</strong> ‘Yard<br />
of Choice’ and is internationally recognized for its state<br />
of <strong>the</strong> art and record breaking facilities. Yantai Raffles<br />
Shipyard Limited is <strong>the</strong> home <strong>to</strong> ‘TAISUN’ <strong>the</strong> world’s<br />
record breaking crane.<br />
We have not only an impressive portfolio of completed<br />
Offshore Projects, but also have a very diverse range of<br />
projects currently under construction at Yantai Raffles<br />
Shipyard Limited. Yantai Raffles Shipyard Limited designs,<br />
builds, repairs and converts a range of offshore projects<br />
such as Jack Up Drilling Rigs, Semi Submersibles Drilling<br />
Rigs, FPSO’s and Pipelay Vessels.<br />
We look forward <strong>to</strong> a prosperous future for Yantai Raffles<br />
Shipyard Limited in which it is our vision <strong>to</strong> develop in<strong>to</strong><br />
a ‘World Class’ Organization; truly reaching for greater<br />
heights <strong>to</strong> become one of <strong>the</strong> leading Shipyards in<br />
<strong>the</strong> World.
4<br />
With over 20 years continual development,<br />
CIMC have developed in<strong>to</strong> a World Class Enterprise.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
5<br />
About CIMC<br />
China International Marine Containers (Group) Ltd. (CIMC)<br />
is dedicated <strong>to</strong> providing a wide range of heavy industry<br />
services ranging from <strong>the</strong> manufacturing and supplying of<br />
containers, trailers, tank equipment, airport boarding bridges<br />
as well as Offshore Construction. CIMC owns RMB37.36<br />
billion of <strong>to</strong>tal assets and has an annual sales of RMB20.48<br />
billion. CIMC also has over 100 subsidiaries and 47,000 staff<br />
all over China, North America, Europe, Asia and Australia.<br />
CIMC was founded in January 1980 in Shenzhen. CIMC<br />
went public in 1993 and has been listed in Shenzhen S<strong>to</strong>ck<br />
Exchange since 1994. The main shareholders are COSCO<br />
and China Merchants Holdings. With 20 years continual<br />
development, CIMC has become a world class enterprise.<br />
In 2009, CIMC ranked No. 1397 in <strong>the</strong> Top 2000 World<br />
Leading Companies by Forbes and No. 119 in <strong>the</strong> Top 500<br />
Enterprises in China. In 2008, CIMC ranked No.49 in China’s<br />
Globally Most Competitive Companies. In 2007, CIMC<br />
containers were identified as one of China’s most Renowned<br />
Brands. In <strong>the</strong> same year, <strong>the</strong> CIMC brand was honored<br />
as <strong>the</strong> “Chinese World Brand” by General Administration<br />
of Quality Supervision, Inspection and Quarantine of <strong>the</strong><br />
People’s Republic of China.<br />
CIMC’s Vehicle business is <strong>the</strong> key developing business of<br />
CIMC, targeted at providing first class road transportation<br />
equipment and services for <strong>the</strong> global market. CIMC has built<br />
up 22 production bases covering North America, Europe,<br />
Thailand, Mid-China, East China, South China, North China,<br />
Northwest China and Nor<strong>the</strong>ast China.<br />
CIMC is also heavily involved in <strong>the</strong> Airport equipment<br />
business covering passenger boarding bridges, au<strong>to</strong>matic<br />
air cargo handling systems, and au<strong>to</strong>matic parking systems.<br />
CIMC’s passenger boarding bridges have entered in<strong>to</strong> over<br />
10 international markets, including North America, Europe,<br />
Africa and Sou<strong>the</strong>ast Asia.<br />
CIMC has now purchased <strong>the</strong> majority shareholding in<br />
Yantai Raffles Shipyard Limited. Yantai Raffles Shipyard<br />
Limited is a leading offshore and marine fabrication specialist<br />
currently building a variety of different vessels such as Semi<br />
Submersible Drilling Rigs, Jack Up Drilling Rigs, Elevating<br />
Support Vessels, Pipelay Vessels and a Fallpipe Vessel.<br />
The core business of CIMC is container manufacturing with<br />
over 34 production bases throughout <strong>the</strong> South, East and<br />
North of China in 11 major cities along <strong>the</strong> coast of China.<br />
CIMC is <strong>the</strong> only supplier of containers who can provide<br />
a whole series of containers with complete intellectual<br />
property rights.
6<br />
Harnessing<br />
<strong>the</strong> Full<br />
Potential<br />
of our<br />
Resources<br />
“I AM CONFIDENT THAT,<br />
AS WE TAKE STRATEGIC<br />
STEPS IN ENSURING<br />
DELIVERIES, WINNING<br />
NEW ORDERS, EXPANDING<br />
PRODUCTION CAPACITY,<br />
STRENGTHENING<br />
ENGINEERING CAPABILITY,<br />
AND OPTIMIZING OUR<br />
VALUE CHAIN, YANTAI<br />
RAFFLES WILL GRADUALLY<br />
BECOME A LEADING<br />
MARINE AND OFFSHORE<br />
BUILDER.”
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
7<br />
Chairman’s Statement<br />
Distinguished shareholders,<br />
2009 was a critical year where CIMC and Yantai<br />
Raffles deepened cooperation and achieved<br />
stable development. CIMC became <strong>the</strong> controlling<br />
shareholder of Yantai Raffles on 18 Jan 2010, reflecting<br />
our recognition of <strong>the</strong> achievements of Yantai Raffles in<br />
<strong>the</strong> past year, as well as our confidence in <strong>the</strong> offshore<br />
industry and in Yantai Raffles for years <strong>to</strong> come.<br />
Currently, <strong>the</strong> offshore industry is gradually recovering<br />
with <strong>the</strong> global economy. We were delighted <strong>to</strong> observe<br />
that Yantai Raffles not only successfully wea<strong>the</strong>red <strong>the</strong><br />
economic downturn, but it had also emerged stronger.<br />
However, <strong>the</strong>re are still lots of work <strong>to</strong> be done <strong>to</strong> achieve<br />
our goal of becoming a leader in this competitive industry.<br />
We need <strong>to</strong> pursue business opportunities relentlessly and<br />
<strong>to</strong> overcome challenges.<br />
Challenges and Opportunities<br />
The current global economic crisis affected <strong>the</strong> developed<br />
countries greatly. For <strong>the</strong> shipping and oil and gas industries,<br />
2008 and 2009 were particularly difficult years. Many promising<br />
new build projects were canceled, with a small number of<br />
ship-owners electing <strong>to</strong> abandon vessels under construction<br />
due <strong>to</strong> financing challenges. On <strong>the</strong> contrary, China and o<strong>the</strong>r<br />
emerging economies have become a vital part of <strong>the</strong> global<br />
risk management framework. Their development models and<br />
competitive advantages have res<strong>to</strong>red inves<strong>to</strong>rs’ confidence<br />
in both <strong>the</strong> East and <strong>the</strong> West.<br />
As a marine and offshore builder, Yantai Raffles also faced<br />
tremendous challenges in 2009, including uncertainty and<br />
issues with project financing, similar <strong>to</strong> those faced by our<br />
clients. However, with great support from <strong>the</strong> government,<br />
understanding from our clients, cooperation from our<br />
partners and through our own efforts, we have not only<br />
largely preserved our order book, but also achieved<br />
significant progress in key projects.<br />
Russia, as well as in China. Against a complex backdrop<br />
of international rivalry and cooperation in <strong>the</strong> energy sec<strong>to</strong>r,<br />
and supported by extremely favorable conditions in China, I<br />
am confident that Yantai Raffles will be able <strong>to</strong> expand our<br />
market share and play a more important role in <strong>the</strong> industry.<br />
Prospects<br />
2009 saw closer and maturing cooperation between CIMC<br />
and Yantai Raffles. CIMC provided strong support for<br />
Yantai Raffles in areas such as finance, public relations,<br />
supply chain management, cost control, human resource<br />
management and corporate culture, through which Yantai<br />
Raffles has made significant progress.<br />
I am confident that, as we take strategic steps in ensuring<br />
deliveries, winning new orders, expanding production<br />
capacity, streng<strong>the</strong>ning engineering capability, and<br />
optimizing our value chain, Yantai Raffles will gradually<br />
become a leading marine and offshore builder.<br />
I would like <strong>to</strong> extend our sincere gratitude <strong>to</strong> <strong>the</strong><br />
government, shareholders, clients and partners, who have<br />
placed <strong>the</strong>ir trust and support in us. I would also like <strong>to</strong><br />
thank <strong>the</strong> management and all our staff who have worked<br />
hard and persevered with <strong>the</strong> company. As Yantai Raffles<br />
steps in<strong>to</strong> a new chapter of its his<strong>to</strong>ry, let us work <strong>to</strong>ge<strong>the</strong>r<br />
<strong>to</strong> create a world-class offshore enterprise!<br />
Mai Bo Liang<br />
Chairman of <strong>the</strong> Board of Direc<strong>to</strong>rs<br />
Yantai Raffles Shipyard Limited<br />
Since <strong>the</strong> beginning of 2010, <strong>the</strong> offshore market is gradually<br />
reviving. There are significant opportunities in Nor<strong>the</strong>rn<br />
Europe, Middle East, Central Asia, West Africa, Brazil,
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
9
10<br />
Providing<br />
dedicated<br />
Services and<br />
Solutions.<br />
“We remain committed<br />
<strong>to</strong> deliver our<br />
projects, secure<br />
new orders, improve<br />
efficiencies, build<br />
our competitive<br />
strengths, and<br />
increase our product<br />
mix. Supported by<br />
synergies expected<br />
from a continuing and<br />
deeper cooperation<br />
with CIMC, we are<br />
confident we will<br />
realize our vision soon<br />
- <strong>to</strong> be <strong>the</strong> world<br />
class yard of choice.”
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
11<br />
CEO’s Review<br />
Dear Shareholders,<br />
Yantai Raffles faced many challenges in 2009. The<br />
operating environment was and continues <strong>to</strong> be<br />
volatile, reflecting global economic uncertainties,<br />
resulting in tight availability of credit, an increasing<br />
number of cancellations in <strong>the</strong> market and a shortage<br />
of new contracts. None<strong>the</strong>less, we continue <strong>to</strong> work<br />
on our existing order books and press <strong>to</strong> close off<br />
all existing contracts. We have kept a sharp focus<br />
on meeting commitments <strong>to</strong> our existing clients,<br />
completing our various capital expenditure plans,<br />
streamlining management processes, improving<br />
production efficiencies and managing costs.<br />
Our revenue for 2009 is S$918.6 million and net profit after<br />
minority interest is S$27.3 million, both marginal increases<br />
over <strong>the</strong> previous <strong>financial</strong> year. Shareholders’ equity rose<br />
by 5.7% <strong>to</strong> S$611.4 million.<br />
Yantai Raffles is fortunate <strong>to</strong> have a strong corporate<br />
shareholder with vast international experience during<br />
<strong>the</strong>se difficult times. CIMC increased its shareholding in<br />
Yantai Raffles in January 2010 <strong>to</strong> 50.01%. CIMC, with<br />
its vast local and international business experience, has<br />
brought tremendous benefits <strong>to</strong> <strong>the</strong> Group in all aspects<br />
of business operations over this period. Most importantly,<br />
<strong>the</strong>ir commitment <strong>to</strong> Yantai Raffles has instilled confidence<br />
in our business partners. Local government, <strong>financial</strong><br />
institutions, and our valued clients and suppliers have all<br />
given strong support <strong>to</strong> <strong>the</strong> Group despite <strong>the</strong> gloomy<br />
global environment and delays in delivery of certain projects.<br />
I am pleased <strong>to</strong> report that Yantai Raffles is on <strong>the</strong> road <strong>to</strong><br />
resolving <strong>the</strong> challenges in outsourcing and engineering.<br />
As of April 2010, four semi-submersible drilling rigs have<br />
been mated by our TAISUN crane, and are now in <strong>the</strong> final<br />
stages before delivery. Great improvements in quality and<br />
productivity have been achieved with each subsequent<br />
rig. We look <strong>to</strong> being able <strong>to</strong> better satisfy our clients with<br />
quality, on time schedule and low cost in <strong>the</strong> near future.<br />
New orders slowed down in 2009 but are expected <strong>to</strong> see<br />
recovery in 2010 with <strong>the</strong> recovery of oil prices. Prospects<br />
for <strong>the</strong> offshore marine industry appear positive. Yantai<br />
Raffles has received a significant number of enquiries<br />
and our key focus for 2010 is <strong>to</strong> convert many of <strong>the</strong>se<br />
in<strong>to</strong> new orders. Major oil and gas discoveries around<br />
<strong>the</strong> world will need more equipment, and Yantai Raffles<br />
is well-positioned <strong>to</strong> gain new orders through strategic<br />
partnership and cooperation arrangements with existing<br />
business partners. There is strong demand for Jack-up<br />
rigs and semisubmersible vessels at this time, and we<br />
look forward <strong>to</strong> closing contracts soon. Russia is ano<strong>the</strong>r<br />
potential market that we are developing through an<br />
extensive marketing programme and production facility <strong>to</strong><br />
participate in its growth.<br />
Yantai Raffles will continue <strong>to</strong> increase CAPEX investment<br />
<strong>to</strong> better service our clients and reduce costs. The major<br />
investment made <strong>to</strong> build <strong>the</strong> 18-metre deep wharf<br />
will be completed in early 2010, and will give Yantai<br />
Raffles a significant competitive advantage in building<br />
semisubmersibles, FPSO’s, FPU’s and similar vessels.<br />
More workshops will be built <strong>to</strong> bring more work under<br />
cover <strong>to</strong> reduce wea<strong>the</strong>r effects on our production. The<br />
acquisition of Longkou Sanlian shipyard was completed in<br />
early 2010. This facility will focus on building Jack-up rigs,<br />
but not <strong>the</strong> exclusion of o<strong>the</strong>r vessels.<br />
We remain committed <strong>to</strong> deliver our projects, secure new<br />
orders, improve efficiencies, build our competitive strengths,<br />
and increase our product mix. Supported by synergies<br />
expected from a continuing and deeper cooperation with<br />
CIMC, we are confident we will realize our vision soon - <strong>to</strong><br />
be <strong>the</strong> world class yard of choice.<br />
Last but not least, I would like <strong>to</strong> express my deepest<br />
appreciation <strong>to</strong> all our staff and workers, our shareholders,<br />
clients and business partners for <strong>the</strong>ir ongoing faith and<br />
support of <strong>the</strong> Company.<br />
Brian Chang<br />
Deputy Chairman and CEO
12<br />
Corporate Highlights<br />
March<br />
05<br />
Mr Brian Chang, Chairman and Mr Stephen Pan,<br />
General Manager, Haiyang Raffles received Mr Jiang<br />
Shili, Mayor, Haiyang Municipal Government, Li<br />
Yuanhui, Vice Mayor and Mr Zhao Mingjia, Deputy Head<br />
of Organization Department. Both parties exchanged<br />
views on <strong>the</strong> future development plans for Haiyang<br />
Raffles, and signed <strong>the</strong> contract for Haiyang Raffles<br />
second-phase land area. Mr Chang and Mr Li signed<br />
<strong>the</strong> contract on behalf of <strong>the</strong>ir respective parties.<br />
April<br />
08<br />
Considering <strong>the</strong> tremendous challenges that we<br />
are currently facing, including <strong>the</strong> global economic<br />
downturn, <strong>the</strong> year forward is extremely difficult for<br />
<strong>the</strong> company. Mr Brian Chang, Deputy Chairman and<br />
CEO had decided <strong>to</strong> forgo his salary with effect from<br />
April 2009 until fur<strong>the</strong>r notice. At <strong>the</strong> same time, all<br />
independent direc<strong>to</strong>rs agreed <strong>to</strong> reduce direc<strong>to</strong>rs’ fees<br />
by half.<br />
17<br />
24<br />
Sheng Li No. 2 drilling rig delivery ceremony was held<br />
on 17th March for Shengli Petroleum Administrative<br />
Bureau Ocean Drilling Company.<br />
Haiyang Raffles Offshore Equipment Co., Ltd (HROE)<br />
completed <strong>the</strong> increase of registered capital from<br />
RMB100 million <strong>to</strong> RMB200 million. This increase<br />
improved <strong>the</strong> capital structure for HROE, its self<br />
financing capabilities and management of <strong>financial</strong><br />
risks. This provided a good foundation <strong>to</strong> ensure<br />
HROE’s continuous development.<br />
May<br />
18<br />
26<br />
June<br />
26<br />
The delivery ceremony of Shengli 3# drilling rig was held<br />
near <strong>the</strong> 20,000MT pedestal crane.<br />
The mid section of Van Oord for goods transportation<br />
was successfully launched in Beifang Shipyard.<br />
Yantai Raffles Shipyard Limited has successfully<br />
executed <strong>the</strong> launch of its first Elevating Support Vessel<br />
for Remedial Offshore when <strong>the</strong> ESV unit was winched<br />
over rollers on<strong>to</strong> <strong>the</strong> launching barge. The launch<br />
ceremony celebrated a major miles<strong>to</strong>ne in construction<br />
of one of <strong>the</strong> world’s first ESV vessels.<br />
Launching of <strong>the</strong> ESV vessel<br />
Shengli No.2 Rig Delivery
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
13<br />
September<br />
19<br />
25<br />
Oc<strong>to</strong>ber<br />
14<br />
20<br />
After several months’ preparation, <strong>the</strong> kick-off<br />
ceremony for H195&H197 Projects Kick was held<br />
successfully in MPC of Haiyang Raffles according <strong>to</strong><br />
<strong>the</strong> yard master schedule.<br />
Over 450 international and domestic digna<strong>to</strong>ries and<br />
guests ga<strong>the</strong>red around <strong>the</strong> dry dock at Yantai Raffles<br />
Shipyard in anticipation of witnessing <strong>the</strong> exciting<br />
completion of <strong>the</strong> mating of Schahin’s SS Pantanal as<br />
20,000 <strong>to</strong>n crane TAISUN gently lowered <strong>the</strong> massive<br />
12,000 <strong>to</strong>n deck box on<strong>to</strong> <strong>the</strong> hull.<br />
Russian Deputy Prime Minister, Mr. Igor Ivanovich<br />
Sechin, paid a special visit <strong>to</strong> Yantai Raffles Shipyard<br />
<strong>to</strong> witness <strong>the</strong> signing of a joint venture agreement<br />
between Yantai Raffles Shipyard and “Far Eastern<br />
Shipbuilding & Repair Centre”, a Russian Joint S<strong>to</strong>ck<br />
Company that controls <strong>the</strong> Russian Far East sec<strong>to</strong>r<br />
shipbuilding industry.<br />
The ground breaking ceremony of CIMC Offshore<br />
Research and Development (R&D) Institute was held in<br />
<strong>the</strong> Yantai Hi-Tech Development Zone. The Yantai CIMC<br />
Offshore R&D Institute is wholly funded by CIMC with<br />
150 million RMB registered capital. The development<br />
of <strong>the</strong> institute will take place in two phases, with first<br />
phase construction <strong>to</strong> be completed in late 2011. The<br />
institute will spearhead marine and offshore engineering<br />
research, experimentation, design and consultation,<br />
marine and offshore project management and<br />
brokerage and exhibition services.<br />
22<br />
In <strong>the</strong> spirit of responding <strong>to</strong> Chairman Mr Mai Bo<br />
Liang’s rallying call <strong>to</strong> Yantai Raffles Management,<br />
a Pledging Ceremony was held for <strong>the</strong> successful<br />
delivery of COSL #1, D90 and Schahin H200<br />
projects. The eventwas duly attended by <strong>the</strong> some 80<br />
key personnel from various departments and project<br />
teams of <strong>the</strong> yard.<br />
November<br />
02<br />
18<br />
Yantai Raffles Offshore Ltd, a subsidiary of Yantai<br />
Raffles Shipyard Limited, entered in<strong>to</strong> an agreement<br />
<strong>to</strong> purchase 100% equity interest in Longkou Sanlian<br />
shipyard in Shandong, China. The shipyard, with an<br />
existing land area of more than 400,000 sqm, will be<br />
built is one of <strong>the</strong> world’s largest specialised Jackup<br />
fabrication yards.<br />
December<br />
17<br />
Our TAISUN Crane yet again completed ano<strong>the</strong>r<br />
remarkable achievement achieving <strong>the</strong> World’s<br />
heaviest ever commercial lift when it successfully<br />
lifted <strong>the</strong> deckbox of Saipem’s ‘Frigstad D90’ Semi<br />
Submersible Drilling Rig, ‘Scarabeo 9’ in front of over<br />
400 international and domestic guests.<br />
The Delivery Ceremony for <strong>the</strong> African Lifter<br />
Accommodation Barge was held successfully held on<br />
18th December 2009.<br />
Ground Breaking Ceremony of CIMC Research<br />
and Development Center<br />
Schahin ‘SS Pantanal’ Semi Submersible Drilling Rig Mating Ceremony
14<br />
TAISUN Mating Process<br />
TAISUN 20,000MT Crane<br />
Towering at 122 Metres and Spanning a width of 130<br />
metres, TAISUN is <strong>the</strong> world’s most powerful Crane.<br />
In 2009 it completed <strong>the</strong> Heaviest Ever Commercial lift by<br />
lifting <strong>the</strong> 17,000MT deckbox of Saipem ‘Frigstad D90’<br />
Semi Submersible Drilling Rig as well as also undertaking<br />
<strong>the</strong> mating of Schahin ‘SS Pantanal’ Semi Submersible<br />
Drilling Rig.<br />
With <strong>the</strong> ability <strong>to</strong> accommodate loads of up <strong>to</strong> 120 metres<br />
wide and in a dry dock that is 14 metres deep, TAISUN is<br />
able <strong>to</strong> provide <strong>to</strong>tal lifting solutions for <strong>the</strong> world’s largest<br />
offshore vessels.<br />
Owing <strong>to</strong> its special load spreading design, TAISUN<br />
introduces extremely small stresses in <strong>the</strong> structures,<br />
simplifying <strong>the</strong> lifting design and increasing <strong>the</strong> number of<br />
structures that can be lifted.<br />
With <strong>the</strong> combination of both unrivaled capacity and<br />
flexibility, TAISUN is ready <strong>to</strong> take on some of <strong>the</strong> most<br />
challenging lifting projects offering a <strong>to</strong>tal turnkey solution<br />
<strong>to</strong> all our cus<strong>to</strong>mers.<br />
TAISUN Mating Process<br />
After <strong>the</strong> deckbox has been<br />
completely outfitted, it is<br />
skidded on<strong>to</strong> our launching<br />
barge (1) and moved in<strong>to</strong> <strong>the</strong><br />
dock. (2). With <strong>the</strong> barge and<br />
deckbox in position, TAISUN’s<br />
hooks are lowered and<br />
connected (3).<br />
1<br />
2<br />
3<br />
The deckbox is lifted from <strong>the</strong><br />
Barge (4) and <strong>the</strong> dock gates<br />
open. After <strong>the</strong> barge has been<br />
moved out of <strong>the</strong> dock (5), tugs<br />
collect <strong>the</strong> hull and assist it in<strong>to</strong><br />
<strong>the</strong> dock (6). Inside <strong>the</strong> dock<br />
<strong>the</strong> mooring and positioning<br />
winches take over control for<br />
final positioning (7) and (8). The<br />
critical time that <strong>the</strong> deckbox<br />
is suspended in <strong>the</strong> air is less<br />
than 24 hours, meaning that<br />
favourable wea<strong>the</strong>r conditions<br />
during this vital time can be<br />
assured.<br />
4<br />
5 6<br />
7 8
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
15<br />
9<br />
After <strong>the</strong> deckbox is supported on <strong>the</strong><br />
columns (9), welders immediately start<br />
securing <strong>the</strong> hull <strong>to</strong> <strong>the</strong> <strong>to</strong>psides and<br />
after 7 days <strong>the</strong> now completed Semi<br />
can be released from <strong>the</strong> crane. The <strong>to</strong>tal<br />
operation from load out of <strong>the</strong> <strong>to</strong>psides<br />
<strong>to</strong> releasing <strong>the</strong> Semi Submersible from<br />
<strong>the</strong> Crane can be done in under 2 weeks,<br />
meaning that TAISUN is able <strong>to</strong> assemble<br />
one Semi every month.<br />
SUCCESSFUL MATING<br />
OPERATIONS OF 2009<br />
In 2009 Yantai Raffles completed 2 successful commercial lifts:<br />
Schahin ‘SS Pantanal’ Semi<br />
Submersible Drilling Rig<br />
(12,000MT)<br />
Saipem ‘Frigstad D90’ Semi<br />
Submersible Drilling Rig<br />
(17,000MT) one Semi every month.
16<br />
Corporate Social Responsibility<br />
Yantai Raffles has a strong Corporate Social Responsibility<br />
and always gives back <strong>to</strong> its community. We have set up a<br />
variety of social responsibility schemes <strong>to</strong> look after members<br />
of <strong>the</strong> Chinese community, especially in <strong>the</strong> Shandong<br />
Area. Yantai Raffles responded very quickly after <strong>the</strong> tragic<br />
Earthquake in Qinghai, China in April 2010 with over 3,164<br />
dona<strong>to</strong>rs providing a <strong>to</strong>tal donation of RMB211,960.50.<br />
Mr Brian Chang personally donated USD75,000. In<br />
this fund-raising campaign, our company employees of<br />
various departments, as well as owners, vendors and subcontrac<strong>to</strong>rs<br />
donated generously.<br />
In 2009 we also successfully visited 3 villages in Shandong,<br />
including Da Tuan, Dong Kou and Xi Kou in Zhifu Island in<br />
which we donated gifts with a <strong>to</strong>tal value of RMB30,000 <strong>to</strong><br />
elderly members of <strong>the</strong> community. The Chinese community<br />
is at <strong>the</strong> heart of Yantai Raffles success and we continually<br />
forge strong relationships with its members.<br />
We regularly host many team building events <strong>to</strong> make Yantai<br />
Raffles a rewarding environment <strong>to</strong> work in. We hold a<br />
variety of sporting events <strong>to</strong> ensure our employees keep a<br />
fresh mind and approach <strong>to</strong> <strong>the</strong>ir work, including Badmin<strong>to</strong>n<br />
and Swimming. Our employees and our international team<br />
of professionals, who possess a high level of technical<br />
expertise, are <strong>the</strong> ‘drivers in Yantai Raffles success and that<br />
which ensures <strong>the</strong> prosperous future of our company.<br />
Yantai Raffles is also committed <strong>to</strong> ensuring corruption does<br />
not occur in <strong>the</strong> workplace and has implemented many anti<br />
corruption training seminars for all employees.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
17<br />
Our Order Book<br />
1. Semi Submersible DP3 Drilling Rig (COSL Pioneer)<br />
Client: COSL Pioneer Pte Ltd<br />
Country: China<br />
2. Semi Submersible DP3 Drilling Rig (COSL Innova<strong>to</strong>r)<br />
Client: COSL Innova<strong>to</strong>r Pte Ltd<br />
Country: China<br />
3. Semi Submersible DP3 Drilling Rig (COSL Promoter)<br />
Client: COSL Promoter Pte Ltd<br />
Country: China<br />
4. Semi Submersible DP2 Drilling Rig (SS Pantanal)<br />
Client: Schahin/Baerfield Drilling LLC<br />
Country: Brazil<br />
1 6 7<br />
4<br />
9<br />
5. Semi Submersible DP2 Drilling Rig (SS Amazonia)<br />
Client: Schahin/Soratu Drilling LLC<br />
Country: Brazil<br />
6. Semi Submersible DP3 Drilling Rig<br />
(Saipem’s ‘Frigstad D90’)<br />
Client: Frigstad Discoverer Invest Ltd<br />
Country: Norway<br />
7. Super M2 Elevating Support Vessel<br />
Client: Remedial ‘Cyprus’ Limited<br />
Country: Cyprus<br />
8. Super M2 Jack Up Drilling Rig (2010)<br />
Client: Dragon Oil Turkmenistan Limited<br />
Country: Turkmenistan<br />
9. Pipelay Vessel (Cas<strong>to</strong>r)<br />
Client: Saipem (Portugal) Comercio Maritimo,<br />
Socidedade Unipessoal Lda<br />
Country: Portugal<br />
10. Fall Pipe Vessel (S<strong>to</strong>rnes)<br />
Client: Van Oord Marine Services B.V.<br />
Country: Norway
18<br />
Corporate Information<br />
BOARD OF DIRECTORS<br />
Executive<br />
Mai Bo Liang (Chairman)<br />
Brian Chang (Deputy Chairman and CEO)<br />
Chang Yee Meng, Malcolm<br />
Yu Ya<br />
Yu Yu Qun<br />
Wang Yu<br />
Non-Executive<br />
Liu Chee Ming<br />
Yu Ning<br />
Zhang Li Min<br />
AUDIT COMMITTEE<br />
Zhang Li Min (Chairman)<br />
Liu Chee Ming<br />
Yu Ning<br />
REMUNERATION COMMITTEE<br />
Liu Chee Ming (Chairman)<br />
Chang Yee Meng Malcolm<br />
Zhang Li Min<br />
NOMINATING COMMITTEE<br />
Yu Ning (Chairman)<br />
Liu Chee Ming<br />
Yu Ya<br />
Company SECRETARY<br />
Lai Wai Kit Andrew<br />
(appointed on 8 August 2009)<br />
AUDITORS<br />
Ernst & Young LLP<br />
Public Accountants and Certified<br />
Public Accountants<br />
One Raffles Quay<br />
North Tower, Level 18<br />
Singapore 048583<br />
Partner in charge:<br />
Tan Chian Khong (from <strong>financial</strong> year<br />
ended 31 December 2009)<br />
REGISTERED OFFICE<br />
No. 1 Claymore Drive,<br />
#08-04 Orchard Towers,<br />
Singapore 229594<br />
Tel: (65) 6735 8690<br />
Fax: (65) 6734 5449<br />
INVESTOR CONTACT<br />
Mr Steven Budgen<br />
Yantai Raffles Shipyard Limited,<br />
No.70 Zhifu East Road,<br />
Zhifu Island,<br />
Zhifu District,<br />
Yantai, 264000,<br />
Shandong,<br />
China<br />
Tel: (+86) 535 680 1451<br />
Email: ir@<strong>cimc</strong>-<strong>raffles</strong>.com<br />
PRINCIPAL BANKERS<br />
China Development Bank<br />
Bank of China<br />
China Construction Bank<br />
Bank of Communications<br />
China Merchants Bank<br />
Agricultural Bank of China<br />
Standard Chartered Bank<br />
The Royal Bank of Scotland
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
19<br />
Corporate Structure<br />
As at 31 December 2009<br />
100%<br />
CIMC Raffles Investments<br />
Limited<br />
(f.k.a YRS Investments Limited)<br />
Hong Kong SAR<br />
Yantai Raffles<br />
Shipyard Limited<br />
Singapore<br />
100%<br />
CIMC Raffles Leasing Pte Ltd<br />
(f.k.a YRS Shiplease Pte Ltd)<br />
Singapore<br />
36%<br />
100%<br />
Consafe MSV AB<br />
Sweden<br />
Coral Offshore Limited<br />
British Virgin Islands<br />
100%<br />
CIMC Raffles Yacht Limited<br />
(f.k.a Raffles Yacht Limited)<br />
Hong Kong SAR<br />
100%<br />
Asiatic Offshore Limited<br />
British Virgin Islands<br />
71.6%<br />
Yantai CIMC Raffles Shipyard<br />
Co., Ltd<br />
(f.k.a Yantai Raffles Shipyard Co. Ltd)<br />
People’s Republic of China<br />
100%<br />
Evolution Offshore Ltd<br />
British Virgin Islands<br />
100%<br />
Pelican Waters Investment Ltd<br />
British Virgin Islands<br />
100%<br />
Offshore Accomodation Pte Ltd<br />
Singapore<br />
100%<br />
Deepwater Venture Pte. Ltd.<br />
Singapore<br />
50%<br />
Peyan Singapore Pte. Ltd.<br />
Singapore<br />
85.2%<br />
12.8%<br />
Yantai CIMC Raffles Offshore Ltd<br />
(f.k.a Yantai Raffles Offshore Ltd)<br />
People’s Republic of China<br />
100%<br />
Haiyang Raffles Offshore<br />
Equipment Ltd<br />
People’s Republic of China<br />
30% Haiyang Blue Island Offshore Ltd<br />
People’s Republic of China<br />
50%<br />
Yan Pex Singapore Pte. Ltd.<br />
Singapore
20<br />
Board of Direc<strong>to</strong>rs<br />
MR MAI BO LIANG<br />
Chairman and Executive Direc<strong>to</strong>r<br />
MR BRIAN CHANG<br />
Deputy Chairman and CEO<br />
Mr Mai Bo Liang was appointed as our<br />
Executive Direc<strong>to</strong>r and Chairman of Yantai<br />
Raffles with effect from 3 November 2008.<br />
He graduated with a mechanical engineering<br />
degree from South China University of<br />
Technology. Since 1982, Mr Mai has been<br />
working in China International Marine<br />
Containers (Group) Co, Ltd. (“CIMC”), first as<br />
technician <strong>the</strong>n as <strong>the</strong> Manager of Product<br />
Technical Department and General Manager.<br />
He began <strong>to</strong> serve as CIMC’s President in<br />
1992 and Direc<strong>to</strong>r in March 1994.<br />
Mr Brian Chang, our Deputy Chairman and<br />
CEO founded Yantai Raffles in 1994. With<br />
over 40 years experience in <strong>the</strong> shipbuilding<br />
industry, he pioneered <strong>the</strong> construction of<br />
Singapore’s first Jack Up Drilling Rig at<br />
Far East Levings<strong>to</strong>n Shipbuilding Limited<br />
(Currently known as Keppel Fels Limited).<br />
In 1971, Mr Chang started <strong>the</strong> Promet<br />
Group (Known <strong>to</strong>day as PPL Shipyard)<br />
and has implemented and supervised a<br />
wide spectrum of marine projects ranging<br />
from offshore tugs and supply vessels <strong>to</strong><br />
sophisticated offshore vessels including<br />
extreme environment Semi Submersible<br />
Drilling Platforms.<br />
To date, he has overseen more than<br />
600 Marine Construction Projects and<br />
has led Yantai Raffles <strong>to</strong> <strong>the</strong> forefront of<br />
<strong>the</strong> shipbuilding and marine fabrication<br />
sec<strong>to</strong>rs with <strong>the</strong> construction of <strong>the</strong><br />
worlds largest gantry crane with a lifting<br />
capacity of 20,000MT. Mr Chang received<br />
a scholarship for an honors degree in<br />
Electrical Engineering at <strong>the</strong> City University,<br />
in London and graduated in 1965.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
21<br />
MR MALCOLM CHANG<br />
Executive Direc<strong>to</strong>r<br />
MR Yu Ya<br />
Executive Direc<strong>to</strong>r<br />
Mr Malcolm Chang was appointed <strong>to</strong> <strong>the</strong><br />
Board in Oc<strong>to</strong>ber 2000 and is currently<br />
overseeing <strong>the</strong> Group’s Contracts Department.<br />
Mr Chang holds direc<strong>to</strong>rships in several oil<br />
and gas infrastructure installation companies<br />
and was awarded an Honors degree in<br />
Science (Economics), Brunel University,<br />
United Kingdom, in 1995.<br />
Mr Yu Ya was appointed <strong>to</strong> <strong>the</strong> Board in<br />
March 2010. He is also currently <strong>the</strong> Deputy<br />
Party Secretary and General Manager<br />
of public relations at CIMC. Mr Yu Ya<br />
graduated from a Bachelor of Engineering<br />
and subsequently obtained a Master in<br />
Business Administration. Prior <strong>to</strong> joining<br />
CIMC, he was engaged in various senior<br />
positions such as Executive Direc<strong>to</strong>r, Vice<br />
President and General Manager in <strong>the</strong><br />
food industry.
22<br />
Board of Direc<strong>to</strong>rs<br />
MR Yu Yu Qun<br />
Executive Direc<strong>to</strong>r<br />
Mr Wang Yu<br />
Executive Direc<strong>to</strong>r<br />
Mr Yu Yu Qun was appointed <strong>to</strong> <strong>the</strong> board<br />
in March 2010. He joined CIMC in 1992<br />
and is currently <strong>the</strong> Corporate Secretary<br />
of CIMC. Prior <strong>to</strong> this, he was involved as<br />
<strong>the</strong> Manager of <strong>the</strong> Finance Department,<br />
responsible for capital markets and fund<br />
raising activities. Mr Yu Yu Qun graduated<br />
with a Bachelor and Masters degree in<br />
Economics from Beijing University. He was<br />
with <strong>the</strong> State Bureau of Commodities<br />
before joining CIMC.<br />
Mr Wang Yu was appointed <strong>to</strong> <strong>the</strong> Board in<br />
March 2010. He has also been <strong>the</strong> General<br />
Counsel of CIMC since 2003. Prior <strong>to</strong> this, he<br />
was <strong>the</strong> general counsel of International Data<br />
Group – China and legal manager of China<br />
Cosco (Group) Ltd. Mr Wang Yu graduated<br />
from Dalian with Maritime University with<br />
a Bachelors degree in Engineering and a<br />
Masters in Law.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
23<br />
MR Yu Ning<br />
Non-executive & Independent Direc<strong>to</strong>r<br />
MR Zhang Li min<br />
Non-executive & Independent Direc<strong>to</strong>r<br />
MR Liu Chee Ming<br />
Non-executive & Independent Direc<strong>to</strong>r<br />
Mr Yu Ning was appointed <strong>to</strong> <strong>the</strong><br />
Board in March 2010. He has vast<br />
experience in <strong>the</strong> legal profession.<br />
Mr Yu Ning has been <strong>the</strong> President<br />
of China National Association of<br />
Lawyers’ since 2005 and was <strong>the</strong><br />
Vice President from 1995 <strong>to</strong> 2005.<br />
He is also <strong>the</strong> part time professor<br />
lecturer and men<strong>to</strong>r for Law Studies<br />
in Beijing University and Qinghua<br />
University.<br />
Mr Zhang Li Min was appointed<br />
<strong>to</strong> <strong>the</strong> Board in March 2010. He<br />
graduated from Tianjin University<br />
of Finance and Economics with a<br />
Masters Degree in Economic Analysis<br />
and Doc<strong>to</strong>rate in Accounting and<br />
Auditing. He is currently <strong>the</strong> men<strong>to</strong>r<br />
<strong>to</strong> accounting doc<strong>to</strong>rate students<br />
in Zhong Shan University and a<br />
consultant in Peng Chen CPA firm.<br />
Mr Zhang has been <strong>the</strong> member of<br />
China Certified Public Accountant<br />
Association since 2006. He is also<br />
<strong>the</strong> Vice President of China and<br />
Guangdong Auditing Association since<br />
2005. Mr Zhang is <strong>the</strong> independent<br />
direc<strong>to</strong>r on <strong>the</strong> board of a number<br />
of listed companies in China.<br />
Mr Liu Chee Ming was appointed a<br />
Non-Executive Direc<strong>to</strong>r <strong>to</strong> <strong>the</strong> Board<br />
in December 2005. Mr Liu brings<br />
with him over 30 years of experience<br />
within <strong>the</strong> <strong>financial</strong> services sec<strong>to</strong>r.<br />
He has been <strong>the</strong> Managing Direc<strong>to</strong>r<br />
of Platinum Holdings Company<br />
Limited since 1996, prior <strong>to</strong> which<br />
he held senior-level positions at<br />
various Jardine Fleming entities<br />
for over 17 years. Mr Liu is an<br />
independent non-executive direc<strong>to</strong>r<br />
of several public-listed companies,<br />
including StarHub Ltd in Singapore;<br />
and Kader Holdings Company Ltd<br />
in Hong Kong. Since May 1995, he<br />
has been a member of <strong>the</strong> Takeovers<br />
Appeal Committee and <strong>the</strong> Takeovers<br />
and Mergers Panel of <strong>the</strong> Securities<br />
and Futures Commission in Hong<br />
Kong. In 1st April 2008, he was<br />
appointed as a deputy Chairman.<br />
He is also currently a Governor of<br />
Singapore International School. Mr<br />
Liu holds a Bachelor of Business<br />
Administration from <strong>the</strong> former<br />
University of Singapore.
24<br />
Financial Highlights<br />
Revenue<br />
(S$ million)<br />
891.0 918.6<br />
Net Profit attributable <strong>to</strong> equity holders<br />
of <strong>the</strong> Company (S$ million)<br />
35.9<br />
26.9<br />
27.3<br />
323.4<br />
2007 2008 2009<br />
2007 2008 2009<br />
Net Assets<br />
(S$ million)<br />
565.1<br />
578.4<br />
611.4<br />
Earnings Per Share (Basic)<br />
attributable <strong>to</strong> equity holders of <strong>the</strong> Company<br />
(in Singapore cents)<br />
14.1<br />
9.9 10.0<br />
2007 2008 2009<br />
2007 2008 2009<br />
in S$ million 2007 2008 2009<br />
Current Assets 1,099.5 1,191.9 1,354.5<br />
Non-current Assets 403.3 529.9 622.1<br />
Total Assets 1,502.8 1,721.8 1,976.6<br />
Current Liabilities 918.1 1,120.8 1,040.0<br />
Non-current Liabilities 19.6 22.6 325.2<br />
Total Liabilities 937.7 1,143.4 1,365.2<br />
Total Equity 565.1 578.4 611.4
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
25<br />
Financial Review<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Offshore Group Ltd. While a substantial part of <strong>the</strong> value of<br />
<strong>the</strong> investments has recovered in 2009, <strong>the</strong> reversal of losses<br />
recorded in prior years has not been reflected in <strong>the</strong> profit and<br />
loss statement as guided by Accounting Standards. Groupwide<br />
cost control measures have seen reasonable results as<br />
evidenced by year-on-year savings in administrative expenses<br />
of approximately S$6.0 million or 10.5%.<br />
Net interest costs surged by 244% <strong>to</strong> S$17.9 million, due<br />
<strong>to</strong> a significantly higher level of borrowings established<br />
<strong>to</strong> support <strong>the</strong> Group’s working-capital requirement and<br />
CAPEX investment. Never<strong>the</strong>less, profit before tax improved<br />
by 25.1% <strong>to</strong> S$45.3 million.<br />
Overview<br />
The <strong>financial</strong> year 2009 (“FY2009”) was ano<strong>the</strong>r challenging<br />
year for <strong>the</strong> Group. Despite <strong>the</strong> uncertainties and volatility<br />
of <strong>the</strong> global economy, <strong>the</strong> Group delivered a stable<br />
performance. 11 offshore projects are in an advanced stage<br />
of construction and registered revenue of S$918.6 million, a<br />
marginal 3% increase from S$891.0 million in FY2008. Net<br />
profit after tax and minority interests was S$27.3 million,<br />
an increase of 1.5% from <strong>the</strong> previous <strong>financial</strong> year. The<br />
Group’s earnings per share was 9.99 Singapore cents, while<br />
net asset value per share was S$2.17. The Group’s existing<br />
order book will provide a sustainable revenue stream through<br />
<strong>to</strong> 2011.<br />
In FY2009, <strong>the</strong> main Chinese operating subsidiary of <strong>the</strong><br />
Group, Yantai CIMC Raffles Offshore Ltd obtained Advanced<br />
Technology Enterprise status and benefitted from a tax<br />
concession of 15% tax rate for 3 years from FY2009. As a<br />
result, profit net of tax fur<strong>the</strong>r improved by 29.9% <strong>to</strong> S$32.6<br />
million. After minority interests’ share of subsidiaries’ results,<br />
net profit was reported at S$27.3 million.<br />
Review of <strong>financial</strong> performance<br />
While Group revenue remained constant with FY2008, gross<br />
profit decreased by 14.6% <strong>to</strong> S$109.1 million, mainly due<br />
<strong>to</strong> provisions made for contingencies including foreseeable<br />
losses for work-in-progress relating <strong>to</strong> certain projects under<br />
negotiation with owners.<br />
Operating profit however improved by 59.2% <strong>to</strong> S$64.0<br />
million, mainly as a result of effective foreign exchange<br />
hedging which maintained net foreign exchange losses at<br />
less than S$1 million, compared <strong>to</strong> net losses of S$18.7<br />
million in FY2008. Fur<strong>the</strong>r, with a view <strong>to</strong> dispose of noncore<br />
assets and investments of <strong>the</strong> Group, YRS successfully<br />
negotiated a settlement for a debt investment and recorded<br />
a gain S$5.8 million. In FY2008, <strong>the</strong>re were losses of S$18.5<br />
million on mark-<strong>to</strong>-market available-for-sale investments<br />
and strategic investment in an associated company, TSC
26<br />
Financial Review<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Review of <strong>financial</strong> position and cash flow<br />
Total assets have grown by 14.8% <strong>to</strong> S$1,976.6 million, as a<br />
result of high working capital requirement at <strong>the</strong> peak of <strong>the</strong><br />
projects construction stage. CAPEX investment was lower<br />
by 33% from FY2008, as <strong>the</strong> Group cautiously controlled<br />
<strong>the</strong> pace of expansion of its facilities in view of <strong>the</strong> current<br />
uncertain economic environment. Included in <strong>the</strong> CAPEX was<br />
a S$32.0 million, downpayment for <strong>the</strong> planned purchase of<br />
100% equity in Longkou Sanlian Offshore Engineering Co.,<br />
Ltd in <strong>the</strong> PRC. The acquisition was completed on 19 April<br />
2010.<br />
While <strong>to</strong>tal cash decreased by 3.7% <strong>to</strong> S$168.8 million, free<br />
cash was S$111.8 million, higher than <strong>the</strong> previous year by<br />
155.3% as a result of improved cash management.<br />
Total liabilities rose by 19.4% <strong>to</strong> S$1,365.2 million. In<br />
particular, <strong>the</strong> Group benefited from <strong>the</strong> continuing and<br />
increasing support of its bankers in <strong>the</strong> PRC, external<br />
borrowings grew by 118.6% <strong>to</strong> S$888.6 million, primarily <strong>to</strong><br />
support production. The Group’s gearing ratio (calculated<br />
as net debt (borrowings less cash plus payables) over net<br />
debt plus equity) increased from 50% in previous year <strong>to</strong><br />
65% as at 31 December 2009. 36.5% of <strong>the</strong> borrowings<br />
are non-current due <strong>to</strong> successful restructuring of short<br />
term debts <strong>to</strong> 3-years long term debts. Accordingly, <strong>the</strong><br />
Group’s liquidity ratio improved <strong>to</strong> 1.30 as at 31 December<br />
2009 from 1.06 in end of FY2008.<br />
Going forward, <strong>the</strong> Group continues <strong>to</strong> establish large, flexible<br />
and comprehensive banking facilities with international and<br />
PRC relationship banks, not only <strong>to</strong> meet its operating<br />
requirements, but also with a strategy <strong>to</strong> provide liquidity<br />
and support new business opportunities as <strong>the</strong>y arise.<br />
Shareholders’ equity rose by 5.7% <strong>to</strong> S$611.4 million.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
27<br />
fiNANCIAL CONTENTS<br />
Corporate Governance<br />
Direc<strong>to</strong>rs’ Report<br />
Statement by Direc<strong>to</strong>rs<br />
Independent Audi<strong>to</strong>rs’ Report<br />
Consolidated Statement of Comprehensive Income<br />
Statements of Financial Position<br />
Statements of Changes in Equity<br />
Consolidated Statement of Cash Flows<br />
Notes <strong>to</strong> Financial Statements<br />
Shareholding Statistics<br />
Notice of Annual General Meeting<br />
28<br />
33<br />
37<br />
38<br />
40<br />
41<br />
43<br />
45<br />
47<br />
118<br />
119
28<br />
Corporate Governance Report<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
The Board of Direc<strong>to</strong>rs (<strong>the</strong> “Board”) is committed <strong>to</strong> ensure that high standards of corporate governance are practised by Yantai<br />
Raffles Shipyard Limited (<strong>the</strong> “Company”) and its subsidiaries (<strong>to</strong>ge<strong>the</strong>r <strong>the</strong> “Group”), as a fundamental part of its responsibilities <strong>to</strong><br />
protect and enhance shareholders’ value and <strong>the</strong> <strong>financial</strong> performance of <strong>the</strong> Group.<br />
The Board uses <strong>the</strong> Code of Corporate Governance 2005 (<strong>the</strong> “2005 Code”), issued by The Council on Corporate Disclosure and<br />
Governance 2005 (<strong>the</strong> “2005 Code”) which is applicable <strong>to</strong> listed companies in Singapore, as a guide for <strong>the</strong> Group’s corporate<br />
governance practices. This report describes <strong>the</strong> Group’s corporate governance processes, activities and structures that were in place<br />
during <strong>the</strong> <strong>financial</strong> year ended 31 December 2009, with specific reference <strong>to</strong> <strong>the</strong> principles and guidelines of <strong>the</strong> 2005 Code.<br />
BOARD MATTERS<br />
Principle 1: Effective Board <strong>to</strong> lead and control <strong>the</strong> company<br />
Principle 2: Strong and independent Board<br />
Principle 3: Clear division of Chairman and Chief Executive Officer (“CEO”) <strong>to</strong> ensure a balance of power and authority<br />
Principle 6: Provision of complete, adequate and timely information prior <strong>to</strong> board meetings and on an on-going basis<br />
The Board comprises <strong>the</strong> following direc<strong>to</strong>rs as of 15 April 2010:<br />
Mr Mai Bo Liang<br />
Mr Brian Chang<br />
Mr Chang Yee Meng Malcolm<br />
Mr Yu Ya<br />
Mr Yu Yuqun<br />
Mr Wang Yu<br />
Mr Liu Chee Ming<br />
Mr Yu Ning<br />
Mr Zhang Limin<br />
(Chairman, Executive Direc<strong>to</strong>r)<br />
(Deputy Chairman and Chief Executive Officer)<br />
(Executive Direc<strong>to</strong>r)<br />
(Executive Direc<strong>to</strong>r)<br />
(Executive Direc<strong>to</strong>r)<br />
(Executive Direc<strong>to</strong>r)<br />
(Independent Non-executive Direc<strong>to</strong>r)<br />
(Independent Non-executive Direc<strong>to</strong>r)<br />
(Independent Non-executive Direc<strong>to</strong>r)<br />
The principal functions of <strong>the</strong> Board are:<br />
• Approving <strong>the</strong> Group corporate policies and authorization matrix;<br />
• Approving annual budgets, key operational matters, major acquisitions and disposals, major investment funding;<br />
• Supervising <strong>the</strong> management of business and affairs of Group;<br />
• Overseeing <strong>the</strong> processes for evaluating <strong>the</strong> adequacy of internal controls, risk management, <strong>financial</strong> reporting and<br />
compliance;<br />
• Reviewing <strong>the</strong> <strong>financial</strong> performance of <strong>the</strong> Group;<br />
• Approving nominations <strong>to</strong> <strong>the</strong> Board of Direc<strong>to</strong>rs and, appointment of <strong>the</strong> various Board Committees and key executives; and<br />
• Assuming responsibility for corporate governance.<br />
The Board regularly reviews <strong>the</strong> business plans and <strong>financial</strong> performance of <strong>the</strong> Group. The Board has overall responsibility for putting<br />
in place a framework of good corporate governance in <strong>the</strong> Group, including <strong>the</strong> processes for <strong>financial</strong> reporting and compliance.<br />
As a group, <strong>the</strong> Board members bring with <strong>the</strong>m <strong>the</strong>ir independent judgement, a broad range of industry knowledge, expertise and<br />
experience <strong>to</strong> bear on issues of strategy, performance, resources and standards of conduct. The profiles of <strong>the</strong> direc<strong>to</strong>rs are set out<br />
in pages 20 <strong>to</strong> 23. The Board is of <strong>the</strong> view that <strong>the</strong> current board size is appropriate, taking in<strong>to</strong> account <strong>the</strong> nature and scope of<br />
<strong>the</strong> Group’s operation. Newly appointed direc<strong>to</strong>rs are provided with background information about <strong>the</strong> Company and <strong>the</strong> Group,<br />
and are invited <strong>to</strong> visit <strong>the</strong> Group’s operations <strong>to</strong> enrich <strong>the</strong>ir understanding of its business operation. To keep pace with new laws,<br />
regulations and changing commercial risks, direc<strong>to</strong>rs are encouraged <strong>to</strong> attend relevant and useful seminars conducted by external<br />
organizations.<br />
The Board is scheduled <strong>to</strong> meet at least once a year. Ad-hoc meetings may be convened when <strong>the</strong>re are matters requiring <strong>the</strong> Board’s<br />
consideration and decision in between <strong>the</strong> scheduled meetings.<br />
The Board has delegated certain specific responsibilities <strong>to</strong> three Committees, namely <strong>the</strong> Audit Committee, <strong>the</strong> Remuneration<br />
Committee and <strong>the</strong> Nominating Committee. More information on <strong>the</strong>se Committees is set out below. The Board accepts that<br />
while <strong>the</strong>se Committees have <strong>the</strong> authority <strong>to</strong> examine particular issues and will report back <strong>to</strong> <strong>the</strong> Board with <strong>the</strong>ir decisions and<br />
recommendations, <strong>the</strong> ultimate responsibility for <strong>the</strong> final decision on all matters lies with <strong>the</strong> Board.<br />
The Group has operations in Singapore and <strong>the</strong> People’s Republic of China (“PRC”). The roles of Chairman and Deputy Chairman<br />
cum Chief Executive Officer (“CEO”) are separated <strong>to</strong> ensure an appropriate balance of power, increased accountability and greater<br />
capacity of <strong>the</strong> Board for independent decision making.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
29<br />
Corporate Governance Report<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
The Chairman is <strong>the</strong> President and Direc<strong>to</strong>r of <strong>the</strong> controlling shareholder of <strong>the</strong> Company, China International Marine Containers<br />
(Group) Ltd, a world class company ranked in <strong>the</strong> World Leading Companies by Forbes. Toge<strong>the</strong>r with <strong>the</strong> Deputy Chairman, <strong>the</strong>y<br />
are responsible for strategic business development decisions, and facilitating effectiveness of <strong>the</strong> Board. The Deputy Chairman of<br />
<strong>the</strong> Company, who is also CEO, having nearly 40 years of experiences in <strong>the</strong> offshore marine industry, bears <strong>the</strong> full executive<br />
responsibilities over <strong>the</strong> business directions and operational decisions of <strong>the</strong> Group.<br />
The Board is provided with half-yearly management accounts, project progress and operational reports. The annual budget, half-yearly<br />
<strong>financial</strong> results and updated forecasts are presented <strong>to</strong> <strong>the</strong> Board for approval. As a general rule, board papers are sent <strong>to</strong> direc<strong>to</strong>rs<br />
at least three working days in advance in order for direc<strong>to</strong>rs <strong>to</strong> be adequately prepared for each meeting. Senior management attends<br />
board meetings <strong>to</strong> answer any queries from <strong>the</strong> Board. The direc<strong>to</strong>rs also have unrestricted access <strong>to</strong> <strong>the</strong> Group’s senior management<br />
at all times.<br />
The Company Secretary is responsible <strong>to</strong> ensure that <strong>the</strong> Company complies with <strong>the</strong> requirements of <strong>the</strong> Companies Act. The Articles<br />
provide that <strong>the</strong> appointment or removal of <strong>the</strong> Company Secretary is subject <strong>to</strong> approval of <strong>the</strong> Board.<br />
The direc<strong>to</strong>rs, whe<strong>the</strong>r as a group or individually, seek independent professional advice relating <strong>to</strong> <strong>the</strong> Group’s affairs when necessary<br />
in <strong>the</strong> fur<strong>the</strong>rance of <strong>the</strong>ir duties, at <strong>the</strong> Group’s expense.<br />
Nominating Committee (“NC”)<br />
Principle 4: Formal and transparent process for appointment of new direc<strong>to</strong>rs<br />
Principle 5: Formal assessment of <strong>the</strong> effectiveness of <strong>the</strong> Board and contribution of each direc<strong>to</strong>r<br />
The Nominating Committee was set up in January 2008 and comprised Mr Brian Chang, Mr Sum Soon Lim and Mr Ang Kong Hua<br />
as Chairman during FY2009. Following <strong>the</strong> resignation of certain direc<strong>to</strong>rs, Mr Yu Ning is appointed as Chairman with effect from 12<br />
April 2010. The o<strong>the</strong>r NC members are Mr Yu Ya and Mr Liu Chee Ming with effect from 12 April 2010. The NC has a written Terms of<br />
Reference endorsed by <strong>the</strong> Board that sets out its duties and responsibilities.<br />
The appointments and re-appointments of direc<strong>to</strong>rs are done through a transparent process. The NC ascertains whe<strong>the</strong>r all nonexecutive<br />
direc<strong>to</strong>rs are independent and that direc<strong>to</strong>rs have devoted sufficient time and attention <strong>to</strong> <strong>the</strong> Group’s affairs. The NC<br />
evaluates <strong>the</strong> Board’s performance as a whole, and <strong>the</strong> performance of individual direc<strong>to</strong>rs, based on certain performance criteria,<br />
including qualitative and quantitative fac<strong>to</strong>rs such as performance of principal functions and fiduciary duties, level of participation in<br />
meetings, guidance provided <strong>to</strong> management, and attendance at meetings.<br />
Under <strong>the</strong> Company’s Articles of Association, each direc<strong>to</strong>r is required <strong>to</strong> retire at least once in every three years by rotation and all<br />
newly appointed direc<strong>to</strong>rs have <strong>to</strong> retire at <strong>the</strong> Annual General Meeting (“AGM”) following <strong>the</strong>ir appointments. The retiring direc<strong>to</strong>rs are<br />
eligible <strong>to</strong> offer <strong>the</strong>mselves for re-election.<br />
The NC is also responsible for determining annually, <strong>the</strong> independence of <strong>the</strong> direc<strong>to</strong>rs. In doing so, <strong>the</strong> NC takes in<strong>to</strong> account <strong>the</strong><br />
circumstances set forth in Guideline 2.1 of <strong>the</strong> 2005 Code and any o<strong>the</strong>r salient fac<strong>to</strong>rs. Following <strong>the</strong> annual review, <strong>the</strong> non-executive<br />
direc<strong>to</strong>rs are endorsed <strong>to</strong> be independent for FY2009.<br />
The NC is satisfied that sufficient time and attention are being given by <strong>the</strong> direc<strong>to</strong>rs <strong>to</strong> <strong>the</strong> affairs of <strong>the</strong> Group, notwithstanding that<br />
some of <strong>the</strong> direc<strong>to</strong>rs have multiple board representations, and <strong>the</strong>re is no need <strong>to</strong> implement internal guidelines <strong>to</strong> address <strong>the</strong>ir<br />
competing time commitments. The matter is reviewed on an annual basis by <strong>the</strong> NC.<br />
Remuneration Committee (“RC”) and Disclosure on remuneration<br />
Principle 7: Formal and transparent procedures for fixing remuneration package of direc<strong>to</strong>rs<br />
Principle 8: Appropriate remuneration <strong>to</strong> attract, retain and motivate direc<strong>to</strong>rs<br />
Principle 9: Clear disclosure of remuneration policy, level and mix<br />
The RC was set up in March 2007 and comprised Mr Liu Chee Ming, Mr Francis James Reidy and Mr Ang Kong Hua as chairman<br />
during FY2009. Following <strong>the</strong> resignation of certain direc<strong>to</strong>rs, Mr Liu Chee Ming is appointed <strong>the</strong> RC Chairman with effect from 12 April<br />
2010. The o<strong>the</strong>r RC members are Mr Chang Yee Meng Malcolm and Mr Zhang Limin with effect from 12 April 2010.
30<br />
Corporate Governance Report<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
The principal responsibilities of RC are:<br />
• Recommending <strong>to</strong> <strong>the</strong> Board for endorsement, a framework for computation of Board’s fees, as well as remuneration of executive<br />
direc<strong>to</strong>rs and senior management <strong>to</strong> ensure that <strong>the</strong>y are competitive and sufficient <strong>to</strong> attract, retain and motivate key executives<br />
of <strong>the</strong> required quality <strong>to</strong> run <strong>the</strong> Group successfully;<br />
• Recommending <strong>the</strong> specific remuneration package for each direc<strong>to</strong>r and for senior management of <strong>the</strong> Group; and<br />
• Administering <strong>the</strong> Yantai Raffles Executive Share Option Scheme (“ESOS”).<br />
The RC reviews and determines <strong>the</strong> remuneration packages of <strong>the</strong> executive direc<strong>to</strong>rs and key executives <strong>to</strong> ensure that <strong>the</strong>y are<br />
adequately remunerated. The RC also considers, in consultation with <strong>the</strong> Chairman, key executives’ responsibilities, skills, expertise<br />
and contribution <strong>to</strong> <strong>the</strong> Group’s performance and whe<strong>the</strong>r remuneration packages are competitive <strong>to</strong> ensure that <strong>the</strong> Group is able <strong>to</strong><br />
attract and retain <strong>the</strong> best available executive talent. No individual direc<strong>to</strong>r is involved in fixing his own remuneration.<br />
Non-executive direc<strong>to</strong>rs are paid fees annually on a standard fee basis. The fees proposed <strong>to</strong> be paid <strong>to</strong> <strong>the</strong> non-executive direc<strong>to</strong>rs<br />
for <strong>the</strong> current <strong>financial</strong> year are determined based on <strong>the</strong> following formula:<br />
Proposed Fee (FY2009)<br />
SGD<br />
Chairman Member<br />
Retainer fee for non-executive direc<strong>to</strong>rs 70,000 45,000<br />
Audit Committee 30,000 20,000<br />
Remuneration Committee 10,000 8,000<br />
Nominating Committee 8,000 5,000<br />
To demonstrate direc<strong>to</strong>rs’ support <strong>to</strong> <strong>the</strong> Group during <strong>the</strong> year of world-wide <strong>financial</strong> crisis, a reduction of 50% for <strong>the</strong> period from<br />
April <strong>to</strong> Dec 2009 was volunteered by <strong>the</strong> non-executive direc<strong>to</strong>rs. Chairman Mai Bo Liang, who was a non-executive direc<strong>to</strong>r during<br />
FY2009 and FY2008, waived all of his fees for both years.<br />
If a board or committee members occupies a position for part of <strong>the</strong> <strong>financial</strong> year, <strong>the</strong> fee or allowance payable will be prorated<br />
accordingly. Such fees will be approved by <strong>the</strong> shareholders of <strong>the</strong> Company as a lump sum payment at <strong>the</strong> AGM.<br />
The level and mix of each executive direc<strong>to</strong>r’s remuneration package for <strong>the</strong> current <strong>financial</strong> year is as follows:<br />
Fee<br />
(%)<br />
Basic<br />
salary<br />
(%)<br />
Variable<br />
bonus<br />
/ profit<br />
sharing<br />
(%)<br />
Benefits in<br />
kind<br />
(%)<br />
Fair value<br />
of s<strong>to</strong>ck<br />
options<br />
(%)<br />
Total<br />
(%)<br />
Executive direc<strong>to</strong>rs<br />
Between S$250,000 <strong>to</strong> S$499,999<br />
Julian Chang - 89 - 11 - 100<br />
Below S$250,000<br />
Brian Chang<br />
Chang Yee Meng Malcolm<br />
-<br />
-<br />
100<br />
100<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
100<br />
100<br />
Mr Brian Chang waived all of his salary for <strong>the</strong> 9 months period from April 2009 <strong>to</strong> Dec 2009. Two immediate family members of a<br />
direc<strong>to</strong>r had employment relationships with <strong>the</strong> Group and received remuneration aggregating less than S$250,000 in those capacities<br />
during <strong>the</strong> <strong>financial</strong> year.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
31<br />
Corporate Governance Report<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Audit Committee (“AC”)<br />
Principal 11: Establishment of an Audit Committee (AC) with written terms of reference.<br />
The AC was established in March 2007 and comprised 4 independent non-executive direc<strong>to</strong>rs in FY2009. Mr Sum Soon Lim was<br />
<strong>the</strong> chairman and <strong>the</strong> o<strong>the</strong>r three members were Mr Ang Kong Hua, Mr Francis James Reidy and Mr Liu Chee Ming. Following <strong>the</strong><br />
resignation of certain direc<strong>to</strong>rs, Mr Zhang Limin is appointed <strong>the</strong> AC Chairman with effect from 12 April 2010. The o<strong>the</strong>r AC members<br />
are Mr Liu Chee Ming and Mr Yu Ning with effect from 12 April 2010. The Board is of <strong>the</strong> view that <strong>the</strong> members of AC have sufficient<br />
<strong>financial</strong> management expertise and experiences <strong>to</strong> discharge <strong>the</strong> AC’s function.<br />
The AC has written Terms of Reference endorsed by <strong>the</strong> Board, setting out its duties and responsibilities as follows:<br />
• Reviewing <strong>the</strong> scope and results of <strong>the</strong> audit and its cost effectiveness, including <strong>the</strong> external audi<strong>to</strong>rs’ audit plan, audit report and<br />
evaluation of <strong>the</strong> adequacy of <strong>the</strong> Company’s system of internal accounting control, as well as assistance given by management<br />
<strong>to</strong> <strong>the</strong> external audi<strong>to</strong>rs;<br />
• Reviewing <strong>the</strong> nature and extent of <strong>the</strong> external audi<strong>to</strong>rs’ non-audit services <strong>to</strong> <strong>the</strong> Group, seeking <strong>to</strong> balance <strong>the</strong> maintenance<br />
of objectivity and value for money;<br />
• Reviewing any significant <strong>financial</strong> reporting issues and judgement so as <strong>to</strong> ensure <strong>the</strong> integrity of <strong>the</strong> <strong>financial</strong> statements of <strong>the</strong><br />
Group and <strong>the</strong> formal announcement relating <strong>to</strong> <strong>the</strong> Group’s <strong>financial</strong> performance;<br />
• Reviewing <strong>the</strong> half-yearly and full year <strong>financial</strong> statements of <strong>the</strong> Group, prior <strong>to</strong> submission <strong>to</strong> <strong>the</strong> Board for approval for release<br />
<strong>to</strong> FINFO;<br />
• Reviewing <strong>the</strong> adequacy of <strong>the</strong> Group’s internal control, operational and compliance controls, and risk management policies and<br />
systems;<br />
• Reviewing <strong>the</strong> adequacy and effectiveness of <strong>the</strong> Group’s internal audit function at least annually, including <strong>the</strong> adequacy of <strong>the</strong><br />
internal audit resources as well as <strong>the</strong> scope and results of <strong>the</strong> internal audit procedures; and<br />
• Making recommendation <strong>to</strong> <strong>the</strong> Board on <strong>the</strong> appointment, re-appointment and removal of <strong>the</strong> external audi<strong>to</strong>rs, and approving<br />
<strong>the</strong> remuneration and terms of engagement of <strong>the</strong> external audi<strong>to</strong>rs.<br />
• To review interested person transactions.<br />
The AC is authorized by <strong>the</strong> Board <strong>to</strong> investigate any matters within its Terms of Reference and has full access <strong>to</strong> <strong>the</strong> Group’s<br />
management.<br />
Internal Control and Internal Audit<br />
Principal 10: Board <strong>to</strong> present balanced and understandable assessment of <strong>the</strong> Group’s performance<br />
Principal 12: Sound system of internal control<br />
Principal 13: Establishment of an internal audit function that is independent of activities functions it audits<br />
The Board recognizes <strong>the</strong> importance of sound internal controls and risk management practices <strong>to</strong> good corporate governance.<br />
The Board affirms its overall responsibilities for <strong>the</strong> Group’s systems of internal controls and risk management, and for reviewing <strong>the</strong><br />
adequacy and integrity of those systems on an annual basis. The Board also recognizes that no internal control systems will preclude<br />
all errors and irregularities. The system is designed <strong>to</strong> manage ra<strong>the</strong>r than <strong>to</strong> eliminate <strong>the</strong> risk of failure <strong>to</strong> achieve business objectives.<br />
The controls are <strong>to</strong> provide reasonable, but not absolute, assurance <strong>to</strong> safeguard shareholders’ investments and <strong>the</strong> Group’s assets.<br />
The Internal Audit (“IA”) function is currently undertaken in-house by a team of qualified staff. With <strong>the</strong> assistance of IA, <strong>the</strong> AC<br />
and Board review <strong>the</strong> effectiveness of <strong>the</strong> key internal controls, including <strong>financial</strong>, operational and compliance controls, and risk<br />
management on an on-going basis. The scope of <strong>the</strong> IA covers all business and support functions within <strong>the</strong> Group.<br />
Communication with shareholders<br />
Principal 14: Regular, effective and fair communication with shareholders.<br />
Principal 15: Greater shareholders participation at AGMs<br />
The Group has a dedicated inves<strong>to</strong>r relations team which communicates with its shareholders and analysts on a regular basis and<br />
attends <strong>to</strong> <strong>the</strong>ir queries and concerns. It also manages <strong>the</strong> dissemination of corporate information <strong>to</strong> <strong>the</strong> media, <strong>the</strong> public as well as<br />
<strong>the</strong> institutional inves<strong>to</strong>rs and public shareholders <strong>to</strong> ensure it is made publicly available on a timely and non-selective basis. Material<br />
information including significant contracts, half year results and full year results are published on FINFO and <strong>the</strong> Company’s website<br />
www.<strong>cimc</strong>-<strong>raffles</strong>.com and where appropriate, through media release.
32<br />
Corporate Governance Report<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
The Articles allow a shareholder <strong>to</strong> appoint one or two proxies <strong>to</strong> attend and vote at an AGM. Articles currently do not allow a<br />
shareholder <strong>to</strong> vote in absentia.<br />
All direc<strong>to</strong>rs, including <strong>the</strong> Chairman of <strong>the</strong> Board, AC, NC and RC and senior management are in attendance at AGMs and<br />
Extraordinary General Meetings <strong>to</strong> address shareholders’ queries. The external audi<strong>to</strong>rs are also invited <strong>to</strong> attend <strong>the</strong> AGM’s <strong>to</strong><br />
address shareholders’ queries on <strong>the</strong> conduct of audit and audi<strong>to</strong>rs’ report. Resolutions are as far as possible, structured separately<br />
and may be voted on independently.<br />
Dealing in securities<br />
The Group provides guidance and internal regulation with regard <strong>to</strong> dealing in <strong>the</strong> Group’s securities by its direc<strong>to</strong>rs and officers. It<br />
prohibits its direc<strong>to</strong>rs and officers from dealing in securities of <strong>the</strong> Group while in possession of unpublished material price-sensitive<br />
information in relation <strong>to</strong> such securities and during <strong>the</strong> “closed period”, which is defined as two weeks before <strong>the</strong> date of announcement<br />
of half-yearly results and one month before <strong>the</strong> date of announcement of full year results.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
33<br />
Direc<strong>to</strong>rs’ Report<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
The direc<strong>to</strong>rs are pleased <strong>to</strong> present <strong>the</strong>ir report <strong>to</strong> <strong>the</strong> members <strong>to</strong>ge<strong>the</strong>r with <strong>the</strong> audited consolidated <strong>financial</strong> statements of Yantai<br />
Raffles Shipyard Limited (<strong>the</strong> “Company”) and its subsidiaries (collectively, <strong>the</strong> “Group”) and <strong>the</strong> statement of <strong>financial</strong> position and<br />
statement of changes in equity of <strong>the</strong> Company for <strong>the</strong> <strong>financial</strong> year ended 31 December 2009.<br />
Direc<strong>to</strong>rs<br />
The direc<strong>to</strong>rs of <strong>the</strong> Company in office at <strong>the</strong> date of this report are as follows:<br />
Mai Bo Liang<br />
Brian Chang<br />
Chang Yee Meng Malcolm<br />
Yu Ya (appointed on 17 March 2010)<br />
Yu Yuqun (appointed on 17 March 2010)<br />
Wang Yu (appointed on 17 March 2010)<br />
Liu Chee Ming<br />
Yu Ning (appointed on 17 March 2010)<br />
Zhang Limin (appointed on 17 March 2010)<br />
Arrangements <strong>to</strong> enable direc<strong>to</strong>rs <strong>to</strong> acquire shares or debentures<br />
Except as described in “Share options” in this report, nei<strong>the</strong>r at <strong>the</strong> end of nor at any time during <strong>the</strong> <strong>financial</strong> year was <strong>the</strong> Company<br />
a party <strong>to</strong> any arrangement whose objects are, or one of whose objects is, <strong>to</strong> enable <strong>the</strong> direc<strong>to</strong>rs of <strong>the</strong> Company <strong>to</strong> acquire benefits<br />
by means of <strong>the</strong> acquisition of shares or debentures of <strong>the</strong> Company or any o<strong>the</strong>r body corporate.<br />
Direc<strong>to</strong>rs’ interests in shares or debentures<br />
According <strong>to</strong> <strong>the</strong> register of direc<strong>to</strong>rs’ shareholdings required <strong>to</strong> be kept under Section 164 of <strong>the</strong> Singapore Companies Act, Cap. 50,<br />
<strong>the</strong> following direc<strong>to</strong>rs, who held office at <strong>the</strong> end of <strong>the</strong> <strong>financial</strong> year, had an interest in shares and share options of <strong>the</strong> Company and<br />
related corporations (o<strong>the</strong>r than wholly-owned subsidiaries) as stated below:<br />
Name of direc<strong>to</strong>r<br />
At <strong>the</strong><br />
beginning<br />
of <strong>financial</strong><br />
year<br />
Direct interest<br />
At <strong>the</strong><br />
end of<br />
<strong>financial</strong><br />
year<br />
At <strong>the</strong><br />
beginning<br />
of <strong>financial</strong><br />
year<br />
Deemed interest<br />
At <strong>the</strong><br />
end of<br />
<strong>financial</strong><br />
year<br />
Ordinary shares of <strong>the</strong> Company<br />
Brian Chang 12,976,087 12,976,087 83,853,513 83,853,513<br />
Julian Chang<br />
(resigned on 17 March 2010) – – 1,050,000 1,050,000<br />
Chang Yee Meng Malcolm – – 1,033,146 1,033,146<br />
Ang Kong Hua<br />
(resigned on 10 February 2010) – – 2,056,000 1,051,000<br />
Francis James Reidy<br />
(resigned on 17 March 2010) 2,744,000 2,744,000 251,000 251,000<br />
Liu Chee Ming – – 3,799,700 1,101,000<br />
Sum Soon Lim<br />
(resigned on 14 April 2010) – – 400,000 200,000
34<br />
Direc<strong>to</strong>rs’ Report<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Direc<strong>to</strong>rs’ interests in shares or debentures (cont’d)<br />
Name of direc<strong>to</strong>r<br />
At <strong>the</strong><br />
beginning<br />
of <strong>financial</strong><br />
year<br />
Direct interest<br />
At <strong>the</strong><br />
end of<br />
<strong>financial</strong><br />
year<br />
Share options of <strong>the</strong> Company<br />
Julian Chang 1<br />
(resigned on 17 March 2010) 2,000,000 2,000,000<br />
Chang Yee Meng Malcolm 1 1,600,000 1,600,000<br />
Ang Kong Hua<br />
(resigned on 10 February 2010) 50,000 50,000<br />
Francis James Reidy<br />
(resigned on 17 March 2010) 50,000 50,000<br />
Liu Chee Ming 50,000 50,000<br />
Sum Soon Lim<br />
(resigned on 14 April 2010) 50,000 50,000<br />
1<br />
These two direc<strong>to</strong>rs have agreed <strong>to</strong> waive all rights <strong>the</strong>y have or may have under <strong>the</strong> Options.<br />
Except as disclosed in this report, no direc<strong>to</strong>r who held office at <strong>the</strong> end of <strong>the</strong> <strong>financial</strong> year had interests in shares, share options,<br />
warrants or debentures of <strong>the</strong> Company, or of related corporations, ei<strong>the</strong>r at <strong>the</strong> beginning of <strong>the</strong> <strong>financial</strong> year, or date of appointment<br />
if later, or at <strong>the</strong> end of <strong>the</strong> <strong>financial</strong> year.<br />
Mr Brian Chang, who by virtue of his interest of not less than 20% of <strong>the</strong> issued capital of <strong>the</strong> Company, is deemed <strong>to</strong> have an interest<br />
in <strong>the</strong> whole of <strong>the</strong> share capital of <strong>the</strong> Company’s wholly owned subsidiaries and in <strong>the</strong> shares held by <strong>the</strong> Company in <strong>the</strong> following<br />
subsidiaries that are not wholly owned by <strong>the</strong> Group.<br />
At <strong>the</strong> beginning of<br />
<strong>financial</strong> year<br />
At <strong>the</strong> end of<br />
<strong>financial</strong> year<br />
Yantai Raffles Offshore Ltd<br />
(now known as Yantai CIMC Raffles Offshore Ltd.)<br />
– Registered and paid-in capital RMB 234,690,000 RMB 234,690,000<br />
Yantai Raffles Shipyard Co., Ltd<br />
(now known as Yantai CIMC Raffles Shipyard Co., Ltd.)<br />
– Registered and paid-in capital RMB 125,980,000 RMB 125,980,000<br />
Direc<strong>to</strong>rs’ contractual benefits<br />
Since <strong>the</strong> end of <strong>the</strong> previous <strong>financial</strong> year, no direc<strong>to</strong>r of <strong>the</strong> Company has received or become entitled <strong>to</strong> receive a benefit by reason<br />
of a contract made by <strong>the</strong> Company or a related corporation with <strong>the</strong> direc<strong>to</strong>r, or with a firm of which <strong>the</strong> direc<strong>to</strong>r is a member, or with<br />
a company in which <strong>the</strong> direc<strong>to</strong>r has a substantial <strong>financial</strong> interest, except as disclosed in <strong>the</strong> accompanying <strong>financial</strong> statements and<br />
in this report, and except that certain direc<strong>to</strong>rs have employment relationships with <strong>the</strong> Company and have received remuneration in<br />
those capacities.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
35<br />
Direc<strong>to</strong>rs’ Report<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Share options<br />
At an Extraordinary General Meeting held on 21 June 2006, shareholders approved <strong>the</strong> Yantai Raffles Executive Share Option Scheme<br />
(<strong>the</strong> “Scheme”) for <strong>the</strong> granting of non-transferable options that are settled by physical delivery of <strong>the</strong> ordinary shares of <strong>the</strong> Company,<br />
<strong>to</strong> eligible direc<strong>to</strong>rs, senior executives and employees respectively.<br />
The Scheme is operated at <strong>the</strong> discretion of <strong>the</strong> Remuneration Committee, subject <strong>to</strong> a maximum period of 10 years from <strong>the</strong> date<br />
on which <strong>the</strong> Scheme was adopted, beyond which is subject <strong>to</strong> approval of <strong>the</strong> members by way of ordinary resolutions in general<br />
meetings and any relevant authorities which may <strong>the</strong>n be required. The maximum aggregated number of shares which may be issued<br />
and/or transferred pursuant <strong>to</strong> all options shall not exceed 10% of <strong>the</strong> issued share capital of <strong>the</strong> Company on <strong>the</strong> day preceding <strong>the</strong><br />
date of grant.<br />
Under <strong>the</strong> Scheme, share options are granted <strong>to</strong> employees of <strong>the</strong> Group selected by <strong>the</strong> Remuneration Committee. The exercise<br />
price of <strong>the</strong> granted options is based on <strong>the</strong> arithmetic average of <strong>the</strong> daily volume weighted average price in Norwegian Kroner<br />
(“NOK”) of <strong>the</strong> Company’s shares traded on <strong>the</strong> Norwegian OTC during <strong>the</strong> period of three trading days ending on <strong>the</strong> day before<br />
<strong>the</strong> date of grant. Where <strong>the</strong>y are issued in currency o<strong>the</strong>r than NOK, it is based on <strong>the</strong> prevailing spot exchange rate quoted by <strong>the</strong><br />
Company’s bank. Share options shall be exercisable in whole or in part in respect of 1,000 shares or any multiple <strong>the</strong>reof, subject <strong>to</strong><br />
<strong>the</strong> vesting period as described by <strong>the</strong> Remuneration Committee in its absolute discretion.<br />
There is no option granted or exercised during <strong>the</strong> <strong>financial</strong> year ended 31 December 2009.<br />
Details of all <strong>the</strong> share options <strong>to</strong> subscribe for ordinary shares of <strong>the</strong> Company pursuant <strong>to</strong> <strong>the</strong> Scheme as at 31 December 2009 are<br />
as follows:<br />
Exercise period Exercise price Number of share options<br />
1 August 2008 – 31 July 2010 $2.80 190,000<br />
16 January 2009 – 15 January 2011 US$1.64 100,000<br />
1 February 2009 – 31 January 2011 NOK 10.50 60,000<br />
13 April 2009 – 12 April 2011 NOK 16.50 600,000<br />
22 May 2009 – 21 May 2011 US$1.6425 <strong>to</strong> US$1.65 1,154,003<br />
18 September 2009 – 17 September 2012 NOK 26.00 673,000<br />
18 September 2009 – 17 September 2017 NOK 26.00 3,500,000<br />
1 July 2010 – 30 June 2012 US$1.6425 <strong>to</strong> US$1.65 1,154,003<br />
Total 7,431,006<br />
During <strong>the</strong> <strong>financial</strong> year:<br />
• No share options that entitle <strong>the</strong> holder <strong>to</strong> participate, by virtue of <strong>the</strong> options, in any share issue of any o<strong>the</strong>r corporation have<br />
been granted, and<br />
• No options were granted at discount during <strong>the</strong> <strong>financial</strong> year ended 31 December 2009 (2008: 1,154,003 at a discount<br />
of 45%).<br />
The number of shares options granted <strong>to</strong> direc<strong>to</strong>rs of <strong>the</strong> Company pursuant <strong>to</strong> <strong>the</strong> Scheme and which remain outstanding as at 31<br />
December 2009 are disclosed in “Direc<strong>to</strong>rs’ interests in shares or debentures” of <strong>the</strong> report.
36<br />
Direc<strong>to</strong>rs’ Report<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Audi<strong>to</strong>rs<br />
Ernst & Young LLP have expressed <strong>the</strong>ir willingness <strong>to</strong> accept reappointment as audi<strong>to</strong>rs.<br />
On behalf of <strong>the</strong> Board of Direc<strong>to</strong>rs,<br />
MAI BO LIANG<br />
Direc<strong>to</strong>r<br />
BRIAN CHANG<br />
Direc<strong>to</strong>r<br />
Singapore<br />
15 April 2010
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
37<br />
Statement by Direc<strong>to</strong>rs<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
We, Mai Bo Liang and Brian Chang, being two of <strong>the</strong> direc<strong>to</strong>rs of Yantai Raffles Shipyard Limited, do hereby state that, in <strong>the</strong> opinion<br />
of <strong>the</strong> direc<strong>to</strong>rs,<br />
(i)<br />
(ii)<br />
<strong>the</strong> accompanying consolidated statement of comprehensive income, statements of <strong>financial</strong> position, statements of changes in<br />
equity, and consolidated statement of cash flows <strong>to</strong>ge<strong>the</strong>r with <strong>notes</strong> <strong>the</strong>re<strong>to</strong> are drawn up so as <strong>to</strong> give a true and fair view of<br />
<strong>the</strong> state of affairs of <strong>the</strong> Group and of <strong>the</strong> Company as at 31 December 2009 and <strong>the</strong> results of <strong>the</strong> business, changes in equity<br />
and cash flows of <strong>the</strong> Group and <strong>the</strong> changes in equity of <strong>the</strong> Company for <strong>the</strong> <strong>financial</strong> year ended on that date, and<br />
at <strong>the</strong> date of this statement, <strong>the</strong>re are reasonable grounds <strong>to</strong> believe that <strong>the</strong> Company will be able <strong>to</strong> pay its debts as and when<br />
<strong>the</strong>y fall due.<br />
On behalf of <strong>the</strong> Board of Direc<strong>to</strong>rs,<br />
MAI BO LIANG<br />
Direc<strong>to</strong>r<br />
BRIAN CHANG<br />
Direc<strong>to</strong>r<br />
Singapore<br />
15 April 2010
38<br />
Independent Audi<strong>to</strong>rs’ Report<br />
To <strong>the</strong> Members of Yantai Raffles Shipyard Limited<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
We have audited <strong>the</strong> accompanying <strong>financial</strong> statements of Yantai Raffles Shipyard Limited (<strong>the</strong> “Company”) and its subsidiaries<br />
(collectively, <strong>the</strong> “Group”) set out on pages 40 <strong>to</strong> 117, which comprise <strong>the</strong> statements of <strong>financial</strong> position of <strong>the</strong> Group and <strong>the</strong><br />
Company as at 31 December 2009, <strong>the</strong> statements of changes in equity of <strong>the</strong> Group and <strong>the</strong> Company, <strong>the</strong> consolidated statement<br />
of comprehensive income and consolidated statement of cash flows of <strong>the</strong> Group for <strong>the</strong> <strong>financial</strong> year <strong>the</strong>n ended, and a summary of<br />
significant accounting policies and o<strong>the</strong>r explana<strong>to</strong>ry <strong>notes</strong>.<br />
Management’s responsibility for <strong>the</strong> <strong>financial</strong> statements<br />
Management is responsible for <strong>the</strong> preparation and fair presentation of <strong>the</strong>se <strong>financial</strong> statements in accordance with <strong>the</strong> provisions of<br />
<strong>the</strong> Singapore Companies Act, Cap. 50 (<strong>the</strong> “Act”) and Singapore Financial Reporting Standards. This responsibility includes devising<br />
and maintaining a system of internal accounting controls sufficient <strong>to</strong> provide a reasonable assurance that assets are safeguarded<br />
against loss from unauthorised use or disposition; and transactions are properly authorised and that <strong>the</strong>y are recorded as necessary <strong>to</strong><br />
permit <strong>the</strong> preparation of true and fair profit and loss account and statement of <strong>financial</strong> position and <strong>to</strong> maintain accountability of assets;<br />
selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in <strong>the</strong> circumstances.<br />
Audi<strong>to</strong>rs’ responsibility<br />
Our responsibility is <strong>to</strong> express an opinion on <strong>the</strong>se <strong>financial</strong> statements based on our audit. We conducted our audit in accordance<br />
with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform <strong>the</strong><br />
audit <strong>to</strong> obtain reasonable assurance whe<strong>the</strong>r <strong>the</strong> <strong>financial</strong> statements are free of material misstatement.<br />
An audit involves performing procedures <strong>to</strong> obtain audit evidence about <strong>the</strong> amounts and disclosures in <strong>the</strong> <strong>financial</strong> statements.<br />
The procedures selected depend on <strong>the</strong> audi<strong>to</strong>r’s judgement, including <strong>the</strong> assessment of <strong>the</strong> risks of material misstatement of <strong>the</strong><br />
<strong>financial</strong> statements, whe<strong>the</strong>r due <strong>to</strong> fraud or error. In making those risk assessments, <strong>the</strong> audi<strong>to</strong>r considers internal control relevant<br />
<strong>to</strong> <strong>the</strong> entity’s preparation and fair presentation of <strong>the</strong> <strong>financial</strong> statements in order <strong>to</strong> design audit procedures that are appropriate<br />
in <strong>the</strong> circumstances, but not for <strong>the</strong> purpose of expressing an opinion on <strong>the</strong> effectiveness of <strong>the</strong> entity’s internal control. An audit<br />
also includes evaluating <strong>the</strong> appropriateness of accounting policies used and <strong>the</strong> reasonableness of accounting estimates made by<br />
management, as well as evaluating <strong>the</strong> overall presentation of <strong>the</strong> <strong>financial</strong> statements.<br />
We believe that <strong>the</strong> audit evidence we have obtained is sufficient and appropriate <strong>to</strong> provide a basis for our audit opinion.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
39<br />
Independent Audi<strong>to</strong>rs’ Report<br />
To <strong>the</strong> Members of Yantai Raffles Shipyard Limited<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Opinion<br />
In our opinion,<br />
(i)<br />
(ii)<br />
<strong>the</strong> consolidated <strong>financial</strong> statements of <strong>the</strong> Group and <strong>the</strong> statement of <strong>financial</strong> position and statement of changes in equity of<br />
<strong>the</strong> Company are properly drawn up in accordance with <strong>the</strong> provisions of <strong>the</strong> Act and Singapore Financial Reporting Standards<br />
so as <strong>to</strong> give a true and fair view of <strong>the</strong> state of affairs of <strong>the</strong> Group and of <strong>the</strong> Company as at 31 December 2009 and <strong>the</strong> results,<br />
changes in equity and cash flows of <strong>the</strong> Group and changes in equity of <strong>the</strong> Company for <strong>the</strong> year ended on that date; and<br />
<strong>the</strong> accounting and o<strong>the</strong>r records required by <strong>the</strong> Act <strong>to</strong> be kept by <strong>the</strong> Company and by <strong>the</strong> subsidiaries incorporated in<br />
Singapore of which we are <strong>the</strong> audi<strong>to</strong>rs have been properly kept in accordance with <strong>the</strong> provisions of <strong>the</strong> Act.<br />
Ernst & Young LLP<br />
Public Accountants and<br />
Certified Public Accountants<br />
Singapore<br />
15 April 2010
40<br />
Consolidated Statement of Comprehensive Income<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Group<br />
Note 2009 2008<br />
$’000 $’000<br />
Revenue 4 918,565 891,014<br />
Cost of sales (809,432) (763,199)<br />
Gross profit 109,133 127,815<br />
O<strong>the</strong>r item of income<br />
O<strong>the</strong>r income 5 25,552 30,077<br />
O<strong>the</strong>r items of expense<br />
Marketing and distribution (349) (568)<br />
Administrative expenses (49,840) (55,670)<br />
O<strong>the</strong>r expenses 6 (20,505) (61,464)<br />
Profit from operating activities 7 63,991 40,190<br />
Finance income 9 1,049 5,220<br />
Finance costs 9 (18,956) (10,461)<br />
Net finance costs 9 (17,907) (5,241)<br />
Share of results of associates (801) 1,285<br />
Profit before income tax 45,283 36,234<br />
Income tax expense 10 (12,732) (11,121)<br />
Profit net of tax 32,551 25,113<br />
O<strong>the</strong>r comprehensive income/(loss)<br />
Recognition/(reversal) of changes of fair value on available-for-sale <strong>financial</strong><br />
assets 206 (26,198)<br />
Foreign currency translation (6,501) 7,469<br />
O<strong>the</strong>r comprehensive loss for <strong>the</strong> year, net of tax (6,295) (18,729)<br />
Total comprehensive income for <strong>the</strong> year 26,256 6,384<br />
Profit attributable <strong>to</strong>:<br />
Owners of <strong>the</strong> Company 27,332 26,932<br />
Minority interests 5,219 (1,819)<br />
32,551 25,113<br />
Total comprehensive income attributable <strong>to</strong>:<br />
Owners of <strong>the</strong> Company 21,359 7,220<br />
Minority interests 4,897 (836)<br />
26,256 6,384<br />
Earnings per share attributable <strong>to</strong> owners of <strong>the</strong> Company<br />
- Basic (cents per share) 11 9.99 9.85<br />
- Diluted (cents per share) 11 9.99 9.85<br />
The accompanying accounting policies and explana<strong>to</strong>ry <strong>notes</strong> form an integral part of <strong>the</strong> <strong>financial</strong> statements.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
41<br />
Statements of Financial Position<br />
As at 31 December 2009<br />
Group<br />
Company<br />
Note 2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
ASSETS<br />
Current assets<br />
Cash and cash equivalents 12 111,821 43,832 68,107 28,817<br />
Pledged deposits 12 49,119 131,401 – 103,823<br />
Trade and o<strong>the</strong>r receivables 13 127,720 105,839 50,417 35,126<br />
Inven<strong>to</strong>ries 15 149,279 244,710 44,905 136,344<br />
Vessels under construction 16 247,822 88,903 239,061 135,375<br />
Construction work-in-progress in<br />
excess of progress billings 17 336,533 94,302 268,783 311,604<br />
Derivative <strong>financial</strong> instruments 40 11,730 12,234 11,730 12,217<br />
O<strong>the</strong>r current assets 18 320,486 470,701 154,302 193,491<br />
1,354,510 1,191,922 837,305 956,797<br />
Non-current assets<br />
Amounts due from subsidiaries<br />
(non-trade) 14 – – 77,095 89,651<br />
Financial assets, available-for-sale 19 1,141 3,529 – –<br />
Investment in subsidiaries 20 – – 83,866 83,136<br />
Investment in associates 22 14,828 15,978 – –<br />
Property, plant and equipment 23 500,499 438,176 610 1,160<br />
Prepayments 24 33,558 302 – –<br />
Land and sea use rights 24 30,654 31,116 – –<br />
Intangible assets 25 22,797 24,818 4,105 6,868<br />
Deferred tax assets 26 10,790 15,994 2,542 1,611<br />
Pledged deposits 12 7,856 – – –<br />
622,123 529,913 168,218 182,426<br />
Total assets 1,976,633 1,721,835 1,005,523 1,139,223<br />
LIABILITIES<br />
Current liabilities<br />
Progress billings in excess of construction workin-progress<br />
17 33,552 315,791 55,817 119,179<br />
Advances from cus<strong>to</strong>mers 27 26 31,118 – –<br />
Derivative <strong>financial</strong> instruments 40 7,782 26,975 7,636 24,830<br />
Trade and o<strong>the</strong>r payables 28 383,718 329,476 83,822 102,539<br />
Borrowings 29 564,109 385,071 80,467 298,741<br />
Amounts due <strong>to</strong> subsidiaries (trade) 14 – – – 977<br />
Income tax payable 15,622 16,481 12,634 14,893<br />
Provision for o<strong>the</strong>r liabilities 30 35,145 15,895 16,910 9,479<br />
1,039,954 1,120,807 257,286 570,638<br />
Non-current liabilities<br />
Borrowings 29 324,484 21,433 182,576 146<br />
O<strong>the</strong>r long term liabilities 833 1,150 – –<br />
325,317 22,583 182,576 146<br />
Total liabilities 1,365,271 1,143,390 439,862 570,784<br />
Net assets 611,362 578,445 565,661 568,439<br />
The accompanying accounting policies and explana<strong>to</strong>ry <strong>notes</strong> form an integral part of <strong>the</strong> <strong>financial</strong> statements.
42<br />
Statements of Financial Position<br />
As at 31 December 2009<br />
Group<br />
Company<br />
Note 2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
EQUITY<br />
Equity attributable <strong>to</strong> owners of <strong>the</strong> Company<br />
Share capital 31 591,482 591,482 591,482 591,482<br />
O<strong>the</strong>r reserves 32 30,973 28,188 15,580 9,125<br />
Accumulated losses (30,078) (55,313) (41,401) (32,168)<br />
592,377 564,357 565,661 568,439<br />
Minority interests 18,985 14,088 – –<br />
Total equity 611,362 578,445 565,661 568,439<br />
The accompanying accounting policies and explana<strong>to</strong>ry <strong>notes</strong> form an integral part of <strong>the</strong> <strong>financial</strong> statements.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
43<br />
Statements of Changes in Equity<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Note<br />
Attributable <strong>to</strong> owners of <strong>the</strong> Company<br />
Share<br />
capital<br />
O<strong>the</strong>r<br />
reserves<br />
Accumulated<br />
losses<br />
Minority<br />
interests<br />
Total<br />
equity<br />
$’000 $’000 $’000 $’000 $’000<br />
Group<br />
As at 1 January 2009 591,482 28,188 (55,313) 14,088 578,445<br />
Profit net of tax – – 27,332 5,219 32,551<br />
O<strong>the</strong>r comprehensive loss for <strong>the</strong> year – (5,973) – (322) (6,295)<br />
Total comprehensive (loss) / income<br />
for <strong>the</strong> year – (5,973) 27,332 4,897 26,256<br />
Provision of equity-settled share options <strong>to</strong><br />
employees 32 – 6,661 – – 6,661<br />
Transfer <strong>to</strong> PRC statu<strong>to</strong>ry reserve 32 – 2,303 (2,303) – –<br />
Transfer from reserve 32 – (206) 206 – –<br />
As at 31 December 2009 591,482 30,973 (30,078) 18,985 611,362<br />
As at 1 January 2008 591,246 40,170 (81,238) 14,924 565,102<br />
Profit net of tax – – 26,932 (1,819) 25,113<br />
O<strong>the</strong>r comprehensive (loss) / income for <strong>the</strong> year – (19,712) – 983 (18,729)<br />
Total comprehensive (loss) / income<br />
for <strong>the</strong> year – (19,712) 26,932 (836) 6,384<br />
Provision of equity-settled share options <strong>to</strong><br />
employees 32 – 6,777 – – 6,777<br />
Transfer <strong>to</strong> PRC statu<strong>to</strong>ry reserve 32 – 1,296 (1,296) – –<br />
Transfer from reserve 32 54 (343) 289 – –<br />
Exercise of employee share option 31 182 – – – 182<br />
As at 31 December 2008 591,482 28,188 (55,313) 14,088 578,445<br />
The accompanying accounting policies and explana<strong>to</strong>ry <strong>notes</strong> form an integral part of <strong>the</strong> <strong>financial</strong> statements.
44<br />
Statements of Changes in Equity<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Note<br />
Share<br />
Capital<br />
O<strong>the</strong>r<br />
reserves<br />
Accumulated<br />
Losses<br />
Total<br />
equity<br />
$’000 $’000 $’000 $’000<br />
Company<br />
As at 1 January 2009 591,482 9,125 (32,168) 568,439<br />
Net loss for <strong>the</strong> <strong>financial</strong> year, representing <strong>to</strong>tal<br />
comprehensive loss for <strong>the</strong> <strong>financial</strong> year – – (9,439) (9,439)<br />
Provision of equity-settled share options <strong>to</strong><br />
employees 32 – 6,661 – 6,661<br />
Transfer from reserve 32 – (206) 206 –<br />
As at 31 December 2009 591,482 15,580 (41,401) 565,661<br />
As at 1 January 2008 591,246 2,691 (61,901) 532,036<br />
Net profit for <strong>the</strong> <strong>financial</strong> year, representing <strong>to</strong>tal<br />
comprehensive income for <strong>the</strong> <strong>financial</strong> year – – 29,444 29,444<br />
Provision of equity-settled share options <strong>to</strong><br />
employees 32 – 6,777 – 6,777<br />
Transfer from reserve 32 54 (343) 289 –<br />
Exercise of employee share option 31 182 – – 182<br />
As at 31 December 2008 591,482 9,125 (32,168) 568,439<br />
The accompanying accounting policies and explana<strong>to</strong>ry <strong>notes</strong> form an integral part of <strong>the</strong> <strong>financial</strong> statements.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
45<br />
Consolidated Statement of Cash Flows<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Group<br />
Note 2009 2008<br />
$’000 $’000<br />
Cash flow from operating activities<br />
Profit before income tax 45,283 36,234<br />
Adjustments for:<br />
- Amortisation of intangible assets 7 3,639 2,587<br />
- Amortisation of land and sea use rights 7 754 452<br />
- Depreciation on property, plant and equipment 7 15,770 10,351<br />
- Loss on disposal of investment in an associate 6 – 64<br />
- Loss on disposal of property, plant and equipment 6 115 968<br />
- Impairment loss on <strong>financial</strong> assets, available-for-sale 6 2,592 10,796<br />
- Impairment loss on investment in an associate 6 – 7,676<br />
- Impairment loss on property, plant and equipment 6 328 –<br />
- Provision for liquidated damages and foreseeable losses 7 2,520 25,621<br />
- Provision for warranties 7 990 4,128<br />
- Allowance for doubtful debts 6 109 –<br />
- Write-back of doubtful trade and o<strong>the</strong>r receivables 5 (93) (744)<br />
- Gain on a loan <strong>to</strong> a third party 5 (5,811) –<br />
- Share options expense 8 6,661 6,777<br />
- Interest expense 9 27,193 15,894<br />
- Interest income 9 (1,049) (5,220)<br />
- Share of results of associates 22 801 (1,285)<br />
- Fair value (gain)/loss on derivative <strong>financial</strong> instruments 5,6 (16,697) 30,917<br />
- Loss/(gain) on forward contracts 5,6 15,132 (23,235)<br />
- Translation differences (11,959) 16,663<br />
Operating cash flows before working capital changes 86,278 138,644<br />
Change in operating assets and liabilities<br />
- Inven<strong>to</strong>ries 95,431 (35,696)<br />
- Vessels under construction (158,919) (77,135)<br />
- Construction work-in-progress and excess progress billings (526,990) (352,250)<br />
- Trade and o<strong>the</strong>r receivables (16,086) (28,593)<br />
- O<strong>the</strong>r current assets 150,215 (131,012)<br />
- Advances from cus<strong>to</strong>mers (31,092) (9,027)<br />
- Trade and o<strong>the</strong>r payables 54,242 181,353<br />
- Provision for o<strong>the</strong>r liabilities 18,421 (4,027)<br />
- O<strong>the</strong>r long term liabilities (318) (244)<br />
- Pledged deposits (7,856) –<br />
Cash used in operations (336,674) (317,987)<br />
Interest received 9 1,049 5,220<br />
Interest paid 9 (27,193) (15,894)<br />
Income tax paid (8,472) (8,506)<br />
Cash collected from pledged cash/(pledged) for performance bonds and trade facilities 82,282 (5,192)<br />
Net cash used in operating activities (289,008) (342,359)<br />
The accompanying accounting policies and explana<strong>to</strong>ry <strong>notes</strong> form an integral part of <strong>the</strong> <strong>financial</strong> statements.
46<br />
Consolidated Statement of Cash Flows<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
Group<br />
Note 2009 2008<br />
$’000 $’000<br />
Cash flows from investing activities<br />
Proceeds from disposal of property, plant and equipment 152 398<br />
Purchase of property, plant and equipment and intangible assets (70,436) (129,153)<br />
Purchase of land and sea use rights (966) (26,523)<br />
Prepayments of land use rights (1,277) –<br />
Advance in relation <strong>to</strong> an acquisition of a company 24 (31,979) –<br />
Purchase of <strong>financial</strong> assets, available-for-sale – (1,870)<br />
Proceeds from disposal of an associate – 1,139<br />
Net cash used in investing activities (104,506) (156,009)<br />
Cash flows from financing activities<br />
Proceeds from issuance of ordinary shares – 182<br />
Proceeds from borrowings from banks 948,480 450,139<br />
Repayment of borrowings from banks (486,977) (116,994)<br />
Net cash from financing activities 461,503 333,327<br />
Net increase/(decrease) in cash and cash equivalents 67,989 (165,041)<br />
Cash and cash equivalents at beginning of <strong>financial</strong> year 43,832 208,873<br />
Cash and cash equivalents at end of <strong>financial</strong> year 12 111,821 43,832<br />
The accompanying accounting policies and explana<strong>to</strong>ry <strong>notes</strong> form an integral part of <strong>the</strong> <strong>financial</strong> statements.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
47<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
1. Corporate information<br />
Yantai Raffles Shipyard Limited (<strong>the</strong> “Company”) is incorporated and domiciled in Singapore. The address of its registered office<br />
is No.1 Claymore Drive, #08-04 Orchard Towers, Rear Block Apartment, Singapore 229594.<br />
The principal activities of <strong>the</strong> Company are <strong>to</strong> carry on <strong>the</strong> business of provision of project management services, <strong>the</strong> construction<br />
and conversion of vessels, rigs and offshore facilities and investment holding. The principal activities of its subsidiaries and<br />
associates are set out in Notes 20 and 22 respectively <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements.<br />
2. Summary of significant accounting policies<br />
2.1 Basis of preparation<br />
The consolidated <strong>financial</strong> statements of <strong>the</strong> Group and <strong>the</strong> statement of <strong>financial</strong> position and statement of changes in equity<br />
of <strong>the</strong> Company have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).<br />
The <strong>financial</strong> statements have been prepared on a his<strong>to</strong>rical cost basis, except as disclosed in <strong>the</strong> accounting policies below.<br />
The consolidated <strong>financial</strong> statements are presented in Singapore Dollars (“SGD” or “$”) and all values are rounded in <strong>the</strong> tables<br />
<strong>to</strong> <strong>the</strong> nearest thousand ($’000) except when o<strong>the</strong>rwise indicated.<br />
The preparation of <strong>financial</strong> statements in conformity with FRS requires management <strong>to</strong> exercise its judgement in <strong>the</strong> process of<br />
applying <strong>the</strong> Group’s accounting policies. It also requires <strong>the</strong> use of certain critical accounting estimates and assumptions. The<br />
areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant <strong>to</strong> <strong>the</strong><br />
<strong>financial</strong> statements are disclosed in Note 3.<br />
The Group incurred a net operating cash outflow of $289,008,000 (2008: $342,359,000) during <strong>the</strong> <strong>financial</strong> year ended 31<br />
December 2009. In <strong>the</strong> opinion of <strong>the</strong> direc<strong>to</strong>rs, <strong>the</strong> Group is able <strong>to</strong> continue on a going concern basis. Despite its operating<br />
cash outflow in 2009, <strong>the</strong> Group is confident of its ability <strong>to</strong> generate cash flow from its operations, as well as from <strong>the</strong> continuing<br />
support of its bankers. Accordingly, <strong>the</strong> direc<strong>to</strong>rs are of <strong>the</strong> view that <strong>the</strong> use of <strong>the</strong> going concern assumption is appropriate for<br />
<strong>the</strong> preparation of <strong>the</strong> <strong>financial</strong> statement of <strong>the</strong> Group.<br />
2.2 Changes in accounting polices<br />
The accounting policies adopted are consistent with those of <strong>the</strong> previous <strong>financial</strong> year except as follows:<br />
On 1 January 2009, <strong>the</strong> Group adopted <strong>the</strong> following FRS and INT FRS manda<strong>to</strong>ry for annual <strong>financial</strong> periods beginning on or<br />
after 1 January 2009.<br />
• FRS 1 Presentation of Financial Statements (Revised)<br />
• Amendments <strong>to</strong> FRS 18 Revenue<br />
• Amendments <strong>to</strong> FRS 23 Borrowing Costs<br />
• Amendments <strong>to</strong> FRS 32 Financial Instruments: Presentation and FRS 1 Presentation of Financial Statements – Puttable<br />
Financial Instruments and Obligations Arising on Liquidation<br />
• Amendments <strong>to</strong> FRS 101 First-time Adoption of Financial Reporting Standards and FRS 27 Consolidated and Separate<br />
Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate<br />
• Amendments <strong>to</strong> FRS 102 Share-based Payment – Vesting Conditions and Cancellations<br />
• Amendments <strong>to</strong> FRS 107 Financial Instruments: Disclosures<br />
• FRS 108 Operating Segments<br />
• Improvements <strong>to</strong> FRSs issued in 2008<br />
• INT FRS 113 Cus<strong>to</strong>mer Loyalty Programmes<br />
• INT FRS 116 Hedges of a Net Investment in a Foreign Operation<br />
• Amendments <strong>to</strong> INT FRS 109 Reassessment of Embedded Derivatives and FRS 39 Financial Instruments: Recognition<br />
and Measurement – Embedded Derivatives<br />
• INT FRS 118 Transfers of Assets from Cus<strong>to</strong>mers
48<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.2 Changes in accounting policies (cont’d)<br />
Adoption of <strong>the</strong>se FRS and INT FRS did not have any effect on <strong>the</strong> <strong>financial</strong> performance or position of <strong>the</strong> Group. They did<br />
however give rise <strong>to</strong> additional disclosures, including, in some cases, revisions <strong>to</strong> accounting policies.<br />
The principal effects of <strong>the</strong>se changes are as follows:<br />
FRS 1 Presentation of Financial Statements – Revised presentation<br />
The revised FRS 1 separates owner and non-owner changes in equity. The statement of changes in equity includes only details<br />
of transactions with owners, with all non-owner changes in equity presented in <strong>the</strong> statement of o<strong>the</strong>r comprehensive income.<br />
In addition, <strong>the</strong> Standard introduces <strong>the</strong> statement of comprehensive income which presents income and expense recognised<br />
in <strong>the</strong> period. This statement may be presented in one single statement, or two linked statements. The Company has elected <strong>to</strong><br />
present this statement as one single statement.<br />
Amendments <strong>to</strong> FRS 107 Financial Instruments: Disclosures<br />
The amendments <strong>to</strong> FRS 107 require additional disclosure about fair value measurement and liquidity risk. Fair value<br />
measurements are <strong>to</strong> be disclosed by source of inputs using a three level hierarchy for each class of <strong>financial</strong> instrument. In<br />
addition, reconciliation between <strong>the</strong> beginning and ending balance for Level 3 fair value measurements is now required, as well<br />
as significant transfers between Level 1 and Level 2 fair value measurements. The amendments also clarify <strong>the</strong> requirements for<br />
liquidity risk disclosures. The fair value measurement disclosures and liquidity risk disclosures are presented in Note 39 and Note<br />
38(e) <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements respectively.<br />
FRS 108 Operating Segments<br />
FRS 108 requires disclosure of information about <strong>the</strong> Group’s operating segments and replaces <strong>the</strong> requirement <strong>to</strong> determine<br />
primary and secondary reporting segments of <strong>the</strong> Group. The Group determined that <strong>the</strong> Group currently has one reportable<br />
operating segment, which is <strong>the</strong> same as <strong>the</strong> business segment previously identified under FRS 14 Segment Reporting.<br />
The adoption of <strong>the</strong> Amendment <strong>to</strong> FRS 1 (revised), FRS 107 and FRS 108 are assessed <strong>to</strong> have no material <strong>financial</strong> impact on<br />
<strong>the</strong> <strong>financial</strong> results and <strong>the</strong> <strong>financial</strong> position of <strong>the</strong> Group for <strong>the</strong> year ended 31 December 2009.<br />
2.3 Standards issued but not yet effective<br />
The Group has not adopted <strong>the</strong> following FRS and INT FRS that have been issued but not yet effective:<br />
Reference<br />
Description<br />
Effective for<br />
annual periods<br />
beginning on or<br />
after<br />
FRS 24 Related Party Disclosures (Revised) 1 January 2011<br />
FRS 27 Consolidated and Separate Financial Statements (Revised) 1 July 2009<br />
FRS 32 Amendment <strong>to</strong> Financial instruments: Presentation – Amendment relating <strong>to</strong> Classification of 1 February 2010<br />
Rights Issues<br />
FRS 39 Financial Instruments: Recognition and Measurement – Amendments relating <strong>to</strong> Eligible 1 July 2009<br />
Hedged Items<br />
FRS 101 Amendments <strong>to</strong> FRS 101: First-Time Adoption of Financial Reporting Standards 1 January 2010<br />
FRS 101 FRS 101 – First-Time Adoption of Financial Reporting Standards (Revised) 1 July 2009<br />
FRS 102 Share-based Payment – Group Cash-settled Share-based Payment Transactions 1 January 2010<br />
FRS 103 Business Combinations (Revised) 1 July 2009<br />
INT FRS 109/<br />
FRS 39<br />
Amendments <strong>to</strong> INT FRS 109: Reassessment of Embedded Derivatives and FRS 39<br />
Financial Instruments: Recognition and Measurement Embedded Derivatives<br />
30 June 2009
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
49<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.3 Standards issued but not yet effective (cont’d)<br />
Reference<br />
Description<br />
Effective for<br />
annual periods<br />
beginning on or<br />
after<br />
INT FRS 114 FRS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and <strong>the</strong>ir 1 January 2011<br />
Interaction – Amendments relating <strong>to</strong> Prepayments of a Minimum Funding Requirements<br />
INT FRS 117 Distributions of Non-cash Assets <strong>to</strong> Owners 1 July 2009<br />
INT FRS 118 Transfers of Assets from cus<strong>to</strong>mers 1 July 2009<br />
INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments 1 July 2010<br />
– Improvements <strong>to</strong> FRSs issued in 2009<br />
– Amendments <strong>to</strong> FRS 38 Intangible Assets 1 July 2009<br />
– Amendments <strong>to</strong> FRS 102 Share-based Payment 1 July 2009<br />
– Amendments <strong>to</strong> INT FRS 109 Reassessment of Embedded Derivatives 1 July 2009<br />
– Amendments <strong>to</strong> INT FRS 116 Hedges of a Net Investment in a Foreign Operation 1 July 2009<br />
– Amendments <strong>to</strong> FRS 1 Presentation of Financial Statements 1 January 2010<br />
– Amendments <strong>to</strong> FRS 7 Statement of Cash Flows 1 January 2010<br />
– Amendments <strong>to</strong> FRS 17 Leases 1 January 2010<br />
– Amendments <strong>to</strong> FRS 18 Revenue 1 January 2010<br />
– Amendments <strong>to</strong> FRS 36 Impairment of Assets 1 January 2010<br />
– FRS 39 Financial Instruments: Recognition and Measurement 1 January 2010<br />
– Amendments <strong>to</strong> FRS 105 Non-current Assets Held for Sale and Discontinued Operations 1 January 2010<br />
– Amendments <strong>to</strong> FRS 108 Operating Segments 1 January 2010<br />
Except for <strong>the</strong> revised FRS 103 and <strong>the</strong> amendments <strong>to</strong> FRS 27, <strong>the</strong> Direc<strong>to</strong>rs expect that <strong>the</strong> adoption of <strong>the</strong> o<strong>the</strong>r FRS and INT<br />
FRS above will have no material impact on <strong>the</strong> <strong>financial</strong> statements in <strong>the</strong> period of initial application. The nature of <strong>the</strong> impending<br />
changes in accounting policy on adoption of <strong>the</strong> revised FRS 103 and <strong>the</strong> amendments <strong>to</strong> FRS 27 are described below.<br />
Revised FRS 103 Business Combinations and Amendments <strong>to</strong> FRS 27 Consolidated and Separate Financial Statements<br />
The revised standards are effective for annual periods beginning on or after 1 July 2009. The revised FRS 103 introduces a<br />
number of changes in <strong>the</strong> accounting for business combinations occurring after 1 July 2009. These changes will impact <strong>the</strong><br />
amount of goodwill recognised, <strong>the</strong> reported results in <strong>the</strong> period that an acquisition occurs, and future reported results. The<br />
Amendments <strong>to</strong> FRS 27 require that a change in <strong>the</strong> ownership interest of a subsidiary (without loss of control) is accounted<br />
for as an equity transaction. Therefore, such transactions will no longer give rise <strong>to</strong> goodwill, nor will <strong>the</strong>y give rise <strong>to</strong> a gain or<br />
loss. Fur<strong>the</strong>rmore, <strong>the</strong> amended standard changes <strong>the</strong> accounting for losses incurred by <strong>the</strong> subsidiary as well as <strong>the</strong> loss of<br />
control of a subsidiary. O<strong>the</strong>r consequential amendments were made <strong>to</strong> FRS 7 Statement of Cash Flows, FRS 12 Income Taxes,<br />
FRS 21 The Effects of Changes in Foreign Exchange Rates, FRS 28 Investments in Associates and FRS 31 Interests in Joint<br />
Ventures. The changes from <strong>the</strong> revised FRS 103 and Amendments <strong>to</strong> FRS 27 will affect future acquisitions or loss of control and<br />
transactions with minority interests. The standards may be early applied. However, <strong>the</strong> Group does not intend <strong>to</strong> early adopt.
50<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.4 Revenue recognition<br />
Revenue comprises <strong>the</strong> fair value of <strong>the</strong> consideration received or receivable for <strong>the</strong> sale of goods and rendering of services in<br />
<strong>the</strong> ordinary course of <strong>the</strong> Group’s activities. Revenue is presented, net of value-added tax, rebates and discounts, and after<br />
eliminating sales within <strong>the</strong> Group. Revenue is recognised as follows:<br />
(a)<br />
Revenue from construction contracts<br />
Revenue from ship and rig conversion and building is recognised on percentage of completion method when <strong>the</strong> outcome<br />
of <strong>the</strong> construction contracts can be reliably ascertained. Please refer <strong>to</strong> paragraph “2.8 Construction contracts” for more<br />
detailed accounting policies.<br />
(b)<br />
Revenue from sales contracts<br />
Revenue from ship and rig sales contracts is recognised upon delivery of <strong>the</strong> vessels, when significant risk and rewards<br />
of ownership of <strong>the</strong> vessels are transferred <strong>to</strong> <strong>the</strong> cus<strong>to</strong>mer. Revenue is not recognised <strong>to</strong> <strong>the</strong> extent where <strong>the</strong>re are<br />
significant uncertainties regarding recovery of <strong>the</strong> consideration due, associated costs or <strong>the</strong> possible return of vessels.<br />
(c)<br />
Interest income<br />
Interest income is recognised on a time-proportion basis using <strong>the</strong> effective interest method. When a receivable is impaired,<br />
<strong>the</strong> Group reduces <strong>the</strong> carrying amount <strong>to</strong> its recoverable amount, being <strong>the</strong> estimated future cash flow discounted at<br />
<strong>the</strong> original effective interest rate of <strong>the</strong> instrument, and continues amortising <strong>the</strong> discount as interest income on <strong>the</strong><br />
recoverable amount.<br />
(d)<br />
Rental income<br />
Rental income arising from machinery and office premises is accounted for on a straight-line basis over <strong>the</strong> lease terms.<br />
The aggregate costs of incentives provided <strong>to</strong> lessees are recognised as a reduction of rental income over <strong>the</strong> lease term<br />
on a straight-line basis.<br />
2.5 Group accounting<br />
(a)<br />
Subsidiaries<br />
Subsidiaries are entities over which <strong>the</strong> Group has <strong>the</strong> power <strong>to</strong> govern <strong>the</strong> <strong>financial</strong> and operating policies, generally<br />
accompanying a shareholding of more than one half of <strong>the</strong> voting rights, so as <strong>to</strong> obtain benefits from <strong>the</strong>ir activities. The<br />
existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing<br />
whe<strong>the</strong>r <strong>the</strong> Group controls ano<strong>the</strong>r entity.<br />
The purchase method of accounting is used <strong>to</strong> account for <strong>the</strong> acquisition of subsidiaries by <strong>the</strong> Group. The cost of an<br />
acquisition is measured as <strong>the</strong> fair value of <strong>the</strong> assets acquired, equity instruments issued or liabilities incurred or assumed<br />
at <strong>the</strong> date of exchange, plus costs directly attributable <strong>to</strong> <strong>the</strong> acquisition. Identifiable assets acquired and liabilities and<br />
contingent liabilities assumed in a business combination are measured initially at <strong>the</strong>ir fair value on <strong>the</strong> date of acquisition,<br />
irrespective of <strong>the</strong> extent of any minority interest. An excess of <strong>the</strong> cost of business combination over <strong>the</strong> Group’s share in<br />
<strong>the</strong> net fair value of <strong>the</strong> acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill<br />
on <strong>the</strong> statement of <strong>financial</strong> position. Please refer <strong>to</strong> <strong>the</strong> paragraph “2.7 Intangible assets - Goodwill” for <strong>the</strong> accounting<br />
policy on goodwill on acquisition of subsidiaries. Any excess of <strong>the</strong> Group’s share in <strong>the</strong> net fair value of <strong>the</strong> acquired<br />
subsidiary’s identifiable assets, liabilities and contingent liabilities over cost of business combination is recognised as<br />
income in <strong>the</strong> profit or loss on <strong>the</strong> date of acquisition. When <strong>the</strong> Group acquires a business, embedded derivatives<br />
separated from <strong>the</strong> host contract by <strong>the</strong> acquiree are not reassessed on acquisition unless <strong>the</strong> business combination<br />
results in a change in <strong>the</strong> terms of <strong>the</strong> contract that significantly modifies <strong>the</strong> cash flows that would o<strong>the</strong>rwise be required<br />
under <strong>the</strong> contract.<br />
Subsidiaries are consolidated from <strong>the</strong> date on which control is transferred <strong>to</strong> <strong>the</strong> Group, and continues <strong>to</strong> be consolidated<br />
until <strong>the</strong> date that such control ceases.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
51<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.5 Group accounting (cont’d)<br />
(a)<br />
Subsidiaries (cont’d)<br />
The consolidated <strong>financial</strong> statements comprise <strong>the</strong> <strong>financial</strong> statements of <strong>the</strong> Company and its subsidiaries as at <strong>the</strong><br />
statement of <strong>financial</strong> position date. In preparing <strong>the</strong> consolidated <strong>financial</strong> statements, transactions, balances and<br />
unrealised gains on transactions between Group companies are eliminated in full. Unrealised losses are also eliminated<br />
in full but are considered an impairment indica<strong>to</strong>r of <strong>the</strong> asset transferred. Accounting policies of subsidiaries have been<br />
changed where necessary <strong>to</strong> ensure consistency with <strong>the</strong> policies adopted by <strong>the</strong> Group.<br />
Minority interests are that part of <strong>the</strong> net results of operations and of net assets of a subsidiary attributable <strong>to</strong> interests<br />
which are not owned directly or indirectly by <strong>the</strong> Group. They are measured at <strong>the</strong> minorities’ share of <strong>the</strong> fair value of <strong>the</strong><br />
subsidiaries’ identifiable assets and liabilities at <strong>the</strong> date of acquisition by <strong>the</strong> Group and <strong>the</strong> minorities’ share of changes<br />
in equity since <strong>the</strong> date of acquisition, except when <strong>the</strong> losses applicable <strong>to</strong> <strong>the</strong> minority interests in a subsidiary exceed<br />
<strong>the</strong> minority interests in <strong>the</strong> equity of that subsidiary. In such cases, <strong>the</strong> excess and fur<strong>the</strong>r losses applicable <strong>to</strong> <strong>the</strong> minority<br />
interests are attributed <strong>to</strong> <strong>the</strong> owners of <strong>the</strong> Company, unless <strong>the</strong> minority interests have a binding obligation <strong>to</strong>, and are<br />
able <strong>to</strong>, make good <strong>the</strong> losses. When that subsidiary subsequently reports profits, <strong>the</strong> profits applicable <strong>to</strong> <strong>the</strong> minority<br />
interests are attributed <strong>to</strong> <strong>the</strong> owners of <strong>the</strong> Company until <strong>the</strong> minority interests’ share of losses previously absorbed by<br />
<strong>the</strong> owners of <strong>the</strong> Company have been recovered.<br />
Minority interests are presented in <strong>the</strong> consolidated statement of <strong>financial</strong> position within equity, separately from <strong>the</strong><br />
Company shareholders’ equity, and are separately disclosed in <strong>the</strong> consolidated statement of comprehensive income.<br />
Please refer <strong>to</strong> <strong>the</strong> paragraph “2.9 Investments in subsidiaries, associates and joint venture companies” for <strong>the</strong> accounting<br />
policy on investment in subsidiaries in <strong>the</strong> separate <strong>financial</strong> statements of <strong>the</strong> Company.<br />
(b)<br />
Transactions with minority interests<br />
The Group applies a policy of treating transactions with minority interests as transactions with parties external <strong>to</strong> <strong>the</strong><br />
Group. Disposals <strong>to</strong> minority interests, which result in gains and losses for <strong>the</strong> Group, are recorded in <strong>the</strong> profit or loss.<br />
Acquisition of minority interests results in goodwill, being <strong>the</strong> difference between any considerations paid and <strong>the</strong> Group’s<br />
incremental share of <strong>the</strong> carrying value of identifiable net assets of <strong>the</strong> subsidiary.<br />
(c)<br />
Associates and joint venture companies<br />
An associate is an entity, not being a subsidiary or joint venture company, in which <strong>the</strong> Group has significant influence.<br />
This generally coincides with <strong>the</strong> Group having 20% or more of <strong>the</strong> voting power or has representation on <strong>the</strong> board of<br />
direc<strong>to</strong>rs.<br />
A joint venture company is a contractual arrangement whereby two or more parties undertake an economic activity that is<br />
subject <strong>to</strong> joint control, where <strong>the</strong> strategic <strong>financial</strong> and operating decisions relating <strong>to</strong> <strong>the</strong> activity require <strong>the</strong> unanimous<br />
consent of <strong>the</strong> parties sharing control.<br />
The Group’s investments in associates and joint venture companies are accounted for using <strong>the</strong> equity method. Under<br />
<strong>the</strong> equity method, <strong>the</strong> investments in associates and joint venture companies are measured in <strong>the</strong> statement of <strong>financial</strong><br />
position at cost plus post-acquisition changes in <strong>the</strong> Group’s share of net assets of <strong>the</strong> associates and joint venture<br />
companies. The Group’s share of <strong>the</strong> profit or loss of <strong>the</strong> associates and joint venture companies are recognised in <strong>the</strong><br />
consolidated profit or loss. Where <strong>the</strong>re has been a change recognised directly in o<strong>the</strong>r comprehensive income of <strong>the</strong><br />
associates and joint venture companies, <strong>the</strong> Group recognises its share of such changes. The associates and joint venture<br />
companies are equity accounted for from <strong>the</strong> date <strong>the</strong> Group obtains significant influence until <strong>the</strong> date <strong>the</strong> Group ceases<br />
<strong>to</strong> have significant influence over <strong>the</strong> associates and joint venture companies.<br />
Goodwill relating <strong>to</strong> associates and joint venture companies is included in <strong>the</strong> carrying amount of <strong>the</strong> investment.
52<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.5 Group accounting (cont’d)<br />
(c)<br />
Associates and joint venture companies (cont’d)<br />
Any excess of <strong>the</strong> Group’s share of <strong>the</strong> net fair value of <strong>the</strong> associates’ and joint venture companies’ identifiable assets,<br />
liabilities and contingent liabilities over <strong>the</strong> cost of <strong>the</strong> investment is excluded from <strong>the</strong> carrying amount of <strong>the</strong> investment<br />
and is instead included as income in <strong>the</strong> determination of <strong>the</strong> Group’s share of <strong>the</strong> associates’ and joint venture companies’<br />
profit or loss in <strong>the</strong> period in which <strong>the</strong> investment is acquired.<br />
When <strong>the</strong> Group’s share of losses in associates and joint venture companies equals or exceeds its interest in <strong>the</strong> associates<br />
and joint venture companies, including any o<strong>the</strong>r unsecured receivables, <strong>the</strong> Group does not recognise fur<strong>the</strong>r losses,<br />
unless it has incurred obligations or made payments on behalf of <strong>the</strong> associates and joint venture companies.<br />
After application of <strong>the</strong> equity method, <strong>the</strong> Group determines whe<strong>the</strong>r it is necessary <strong>to</strong> recognise an additional impairment<br />
loss on <strong>the</strong> Group’s investments in associates and joint venture companies. The Group determines at each statement<br />
of <strong>financial</strong> position date whe<strong>the</strong>r <strong>the</strong>re is any objective evidence that <strong>the</strong> investments in <strong>the</strong> associates or joint venture<br />
companies is impaired. If this is <strong>the</strong> case, <strong>the</strong> Group calculates <strong>the</strong> amount of impairment as <strong>the</strong> difference between <strong>the</strong><br />
recoverable amount of <strong>the</strong> associates or joint venture companies and its carrying value and recognises <strong>the</strong> amount in <strong>the</strong><br />
profit or loss.<br />
The <strong>financial</strong> statements of <strong>the</strong> associates and joint venture companies are prepared as of <strong>the</strong> same reporting date as <strong>the</strong><br />
Company. Where necessary, adjustments are made <strong>to</strong> bring <strong>the</strong> accounting policies in line with those of <strong>the</strong> Group.<br />
2.6 Property, plant and equipment<br />
(a)<br />
Measurement<br />
(i)<br />
(ii)<br />
All items of property, plant and equipment are initially recognised at cost and subsequently carried at cost less<br />
accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment<br />
is recognised as an asset if, and only if, it is probable that future economic benefits associated with <strong>the</strong> item will flow<br />
<strong>to</strong> <strong>the</strong> Group and <strong>the</strong> cost of <strong>the</strong> item can be measured reliably.<br />
Components of costs<br />
The cost of an item of property, plant and equipment includes its purchase price and any cost that is directly<br />
attributable <strong>to</strong> bringing <strong>the</strong> asset <strong>to</strong> <strong>the</strong> location and condition necessary for it <strong>to</strong> be capable of operating in <strong>the</strong><br />
manner intended by management. The projected cost of dismantling, removal or res<strong>to</strong>ration is also included as part<br />
of <strong>the</strong> cost of property, plant and equipment if <strong>the</strong> obligation for <strong>the</strong> dismantling, removal or res<strong>to</strong>ration is incurred<br />
as a consequence of acquiring or using <strong>the</strong> asset. Cost may also include any gains/losses on qualifying cash<br />
flow hedges of foreign currency purchases of property, plant and equipment that are transferred from <strong>the</strong> hedging<br />
reserve.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
53<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.6 Property, plant and equipment (cont’d)<br />
(b)<br />
Depreciation<br />
Depreciation of property, plant and equipment is calculated using <strong>the</strong> straight-line method <strong>to</strong> allocate <strong>the</strong>ir depreciable<br />
amounts over <strong>the</strong>ir estimated useful lives as follows:<br />
Useful lives<br />
(Years)<br />
Buildings 20 – 30<br />
Quays and dry docks 50<br />
Barges 25<br />
Machinery and equipment 3 – 30<br />
Office equipment 3 – 15<br />
Mo<strong>to</strong>r vehicles 5<br />
The residual values, useful lives and depreciation methods of property, plant and equipment are reviewed, and adjusted<br />
prospectively, as appropriate, at each statement of <strong>financial</strong> position date. The effects of any revision of <strong>the</strong> residual values,<br />
useful lives and depreciation methods are included in <strong>the</strong> profit or loss for <strong>the</strong> <strong>financial</strong> year in which <strong>the</strong> changes arise.<br />
(c)<br />
Subsequent expenditure<br />
Subsequent expenditure relating <strong>to</strong> property, plant and equipment that has already been recognised is added <strong>to</strong> <strong>the</strong><br />
carrying amount of <strong>the</strong> asset only when it is probable that future economic benefits associated with <strong>the</strong> item will flow <strong>to</strong><br />
<strong>the</strong> Group and <strong>the</strong> cost of <strong>the</strong> item can be measured reliably. When significant parts of property, plant and equipment are<br />
required <strong>to</strong> be replaced in intervals, <strong>the</strong> Group recognises such parts as individual assets with specific useful lives and<br />
depreciation, respectively. O<strong>the</strong>r subsequent expenditure is recognised as repair and maintenance expense in <strong>the</strong> profit or<br />
loss during <strong>the</strong> <strong>financial</strong> year in which it is incurred.<br />
(d)<br />
Disposal<br />
On disposal of an item of property, plant and equipment, <strong>the</strong> difference between <strong>the</strong> net disposal proceeds and its carrying<br />
amount is taken <strong>to</strong> <strong>the</strong> profit or loss. An item of property, plant and equipment is also derecognised when no future<br />
economic benefits are expected from its use. Any gain or loss on <strong>the</strong> derecognition of <strong>the</strong> asset is included in <strong>the</strong> profit or<br />
loss in <strong>the</strong> year <strong>the</strong> asset is derecognised.<br />
(e)<br />
Construction in progress<br />
Construction in progress is intended <strong>to</strong> be held as property, plant and equipment upon <strong>the</strong> completion of construction and<br />
is stated at cost. These amounts include all expenditure incurred in developing <strong>the</strong> fixed assets. Assets under construction<br />
included in property, plant and equipment are not depreciated as <strong>the</strong>y are not yet available for use.<br />
2.7 Intangible assets<br />
(a)<br />
Goodwill<br />
Goodwill represents <strong>the</strong> excess of <strong>the</strong> cost of acquisition of subsidiaries over <strong>the</strong> fair value of <strong>the</strong> Group’s share of <strong>the</strong><br />
identifiable net assets of <strong>the</strong> acquired subsidiaries at <strong>the</strong> date of acquisition. Goodwill on acquisitions of subsidiaries is<br />
included in intangible assets.<br />
Goodwill recognised separately as intangible assets is tested at least annually for impairment and carried at cost less<br />
accumulated impairment losses. Gains and losses on <strong>the</strong> disposal of <strong>the</strong> subsidiaries include <strong>the</strong> carrying amount of<br />
goodwill relating <strong>to</strong> <strong>the</strong> entity sold.
54<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.7 Intangible assets (cont’d)<br />
(a)<br />
Goodwill (cont’d)<br />
Goodwill and fair value adjustments arising on <strong>the</strong> acquisition of foreign operation on or after 1 January 2005 are treated<br />
as assets and liabilities of <strong>the</strong> foreign operations and are recorded in <strong>the</strong> functional currency of <strong>the</strong> foreign operations and<br />
translated in accordance with <strong>the</strong> accounting policy set out in Note 2.21.<br />
Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed<br />
<strong>to</strong> be assets and liabilities of <strong>the</strong> Company and are recorded in SGD at <strong>the</strong> rates prevailing at <strong>the</strong> date of acquisition.<br />
(b)<br />
Computer software licenses<br />
Acquired computer software licenses are initially capitalised at cost which includes <strong>the</strong> purchase price net of any discounts<br />
and rebates.<br />
Following initial recognition, computer software licenses are subsequently carried at cost less accumulated amortisation<br />
and accumulated impairment losses. These costs are amortised <strong>to</strong> <strong>the</strong> profit or loss using <strong>the</strong> straight-line method over<br />
<strong>the</strong>ir estimated useful lives of 3 <strong>to</strong> 10 years.<br />
(c)<br />
The useful life and amortisation method of intangible assets o<strong>the</strong>r than goodwill are reviewed, and adjusted prospectively,<br />
as appropriate, at least at each statement of <strong>financial</strong> position date. The effects of any revision of <strong>the</strong> amortisation year or<br />
amortisation method are included in <strong>the</strong> profit or loss for <strong>the</strong> <strong>financial</strong> year in which <strong>the</strong> changes arise.<br />
2.8 Construction contracts<br />
A construction contract is a contract specifically negotiated for <strong>the</strong> construction of an asset or a combination of assets that are<br />
closely inter-related or inter-dependent in terms of <strong>the</strong>ir design, technology and functions or <strong>the</strong>ir ultimate purpose or use.<br />
Contract costs are recognised when incurred.<br />
When <strong>the</strong> outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as<br />
revenue and expenses respectively by reference <strong>to</strong> <strong>the</strong> stage of completion of <strong>the</strong> contract activity at <strong>the</strong> statement of <strong>financial</strong><br />
position date (percentage-of-completion method). When <strong>the</strong> outcome of a construction contract cannot be estimated reliably,<br />
contract revenue is recognised <strong>to</strong> <strong>the</strong> extent of contract costs incurred that are likely <strong>to</strong> be recoverable. When it is probable that<br />
<strong>to</strong>tal contract costs will exceed <strong>to</strong>tal contract revenue, <strong>the</strong> expected loss is recognised as an expense immediately.<br />
Contract revenue comprises <strong>the</strong> initial amount of revenue agreed in <strong>the</strong> contract and variations in <strong>the</strong> contract work and claims<br />
<strong>to</strong> <strong>the</strong> extent that it is probable that <strong>the</strong>y will result in revenue and can be measured reliably. A variation or a claim is only included<br />
in contract revenue when it is probable that <strong>the</strong> cus<strong>to</strong>mer will approve <strong>the</strong> variation or negotiations have reached an advanced<br />
stage such that it is probable that <strong>the</strong> cus<strong>to</strong>mer will accept <strong>the</strong> claim.<br />
The percentage of completion is measured by reference <strong>to</strong> <strong>the</strong> contract costs incurred <strong>to</strong> date <strong>to</strong> <strong>the</strong> estimated <strong>to</strong>tal costs for<br />
<strong>the</strong> contract. Costs incurred during <strong>the</strong> <strong>financial</strong> year in connection with future activity on a contract are shown as construction<br />
contract work-in-progress on <strong>the</strong> statement of <strong>financial</strong> position unless it is not probable that such contract costs are recoverable<br />
from <strong>the</strong> cus<strong>to</strong>mers, in which case, such contract costs incurred are recognised as an expense immediately.<br />
Construction work-in-progress at <strong>the</strong> statement of <strong>financial</strong> position date is recorded in <strong>the</strong> statement of <strong>financial</strong> position<br />
at cost plus attributable profit less recognised losses, net of progress claims and allowance for foreseeable losses, and is<br />
presented in <strong>the</strong> statement of <strong>financial</strong> position as “construction work-in-progress in excess of progress billings” (as an asset)<br />
or “progress billings in excess of construction work-in-progress” (as a liability), as applicable. Construction costs include cost of<br />
direct materials, direct labour and overhead costs incurred in connection with <strong>the</strong> construction. Provision for foreseeable loss on<br />
a contract is provided for <strong>the</strong> year in which such losses are determined.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
55<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.9 Investments in subsidiaries, associates and joint venture companies<br />
Investments in subsidiaries, associates and joint venture companies are stated at cost less accumulated impairment losses in <strong>the</strong><br />
Company’s statement of <strong>financial</strong> position. On disposal of investments in subsidiaries, associates and joint venture companies,<br />
<strong>the</strong> difference between net disposal proceeds and <strong>the</strong> carrying amounts of <strong>the</strong> investments are taken <strong>to</strong> <strong>the</strong> profit or loss.<br />
2.10 Land and sea use rights<br />
(a)<br />
Land use rights<br />
Land use rights are initially measured at cost. Following initial recognition, land use rights are measured at cost less<br />
accumulated amortisation and accumulated impairment losses. Land use rights are amortised on a straight line basis over<br />
<strong>the</strong> lease terms of <strong>the</strong> agreements of 20 <strong>to</strong> 50 years.<br />
(b)<br />
Sea use rights<br />
Cost of acquisition of sea use rights is capitalised and amortised on a straight line basis over <strong>the</strong> lease terms of <strong>the</strong><br />
agreements of 40 <strong>to</strong> 50 years.<br />
2.11 Impairment of non-<strong>financial</strong> assets<br />
(a)<br />
Goodwill<br />
Goodwill is tested for impairment annually and whenever <strong>the</strong>re is indication that <strong>the</strong> goodwill may be impaired. Goodwill<br />
included in <strong>the</strong> carrying amount of an investment in an associate or joint venture company is tested for impairment at point<br />
of <strong>the</strong> investment, ra<strong>the</strong>r than separately.<br />
For <strong>the</strong> purpose of impairment testing of goodwill, goodwill is allocated, from <strong>the</strong> acquisition date, <strong>to</strong> each of <strong>the</strong> Group’s<br />
cash-generating-units (CGU) expected <strong>to</strong> benefit from synergies arising from <strong>the</strong> business combination.<br />
An impairment loss is recognised when <strong>the</strong> carrying amount of a CGU, including <strong>the</strong> goodwill, exceeds <strong>the</strong> recoverable<br />
amount of <strong>the</strong> CGU. Recoverable amount of a CGU is <strong>the</strong> higher of <strong>the</strong> CGU’s fair value less cost <strong>to</strong> sell and valuein-use.<br />
The <strong>to</strong>tal impairment loss of a CGU is allocated first <strong>to</strong> reduce <strong>the</strong> carrying amount of goodwill allocated <strong>to</strong> <strong>the</strong> CGU and<br />
<strong>the</strong>n <strong>to</strong> <strong>the</strong> o<strong>the</strong>r assets of <strong>the</strong> CGU pro-rata on <strong>the</strong> basis of <strong>the</strong> carrying amount of each asset in <strong>the</strong> CGU.<br />
An impairment loss on goodwill is recognised in <strong>the</strong> profit or loss and is not reversed in a subsequent year.<br />
(b)<br />
Intangible assets, property, plant and equipment, investments in subsidiaries, associates and joint venture companies<br />
Intangible assets (o<strong>the</strong>r than goodwill), property, plant and equipment, investments in subsidiaries, associates and joint<br />
venture companies are reviewed for impairment at each reporting date or whenever <strong>the</strong>re is any indication that <strong>the</strong>se<br />
assets may be impaired. If any such indication exists, <strong>the</strong> recoverable amount (i.e. <strong>the</strong> higher of <strong>the</strong> fair value less cost <strong>to</strong><br />
sell and <strong>the</strong> value-in-use) of <strong>the</strong> asset is estimated <strong>to</strong> determine <strong>the</strong> amount of impairment loss. In assessing value in use,<br />
<strong>the</strong> estimated future cash flows expected <strong>to</strong> be generated by <strong>the</strong> asset are discounted <strong>to</strong> <strong>the</strong>ir present value using a pretax<br />
discount rate that reflects current market assessments of <strong>the</strong> time value of money and <strong>the</strong> risks specific <strong>to</strong> <strong>the</strong> asset.<br />
In determining fair value less costs <strong>to</strong> sell, an appropriate valuation model is used. These calculations are corroborated by<br />
valuation multiples, quoted share prices for publicly traded subsidiaries or o<strong>the</strong>r available fair value indica<strong>to</strong>rs.<br />
For <strong>the</strong> purpose of impairment testing of <strong>the</strong>se assets, recoverable amount is determined on an individual asset basis<br />
unless <strong>the</strong> asset does not generate cash flows that are largely independent of those from o<strong>the</strong>r assets. If this is <strong>the</strong> case,<br />
recoverable amount is determined for <strong>the</strong> CGU <strong>to</strong> which <strong>the</strong> asset belongs. If <strong>the</strong> recoverable amount of <strong>the</strong> asset (or CGU)<br />
is estimated <strong>to</strong> be less than its carrying amount, <strong>the</strong> carrying amount of <strong>the</strong> asset (or CGU) is reduced <strong>to</strong> its recoverable<br />
amount. Impairment losses are recognised in <strong>the</strong> profit or loss.
56<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.11 Impairment of non-<strong>financial</strong> assets (cont’d)<br />
(b)<br />
Intangible assets, property, plant and equipment, investments in subsidiaries, associates and joint venture companies<br />
(cont’d)<br />
An assessment is made at each reporting date as <strong>to</strong> whe<strong>the</strong>r <strong>the</strong>re is any indication that previously recognised impairment<br />
losses may no longer exist or may have decreased. A previously recognised impairment loss for an asset o<strong>the</strong>r than<br />
goodwill is reversed if, and only if, <strong>the</strong>re has been a change in <strong>the</strong> estimates used <strong>to</strong> determine <strong>the</strong> asset’s recoverable<br />
amount since <strong>the</strong> last impairment loss was recognised. The carrying amount of an asset o<strong>the</strong>r than goodwill is increased<br />
<strong>to</strong> its revised recoverable amount, provided that this amount does not exceed <strong>the</strong> carrying amount that would have been<br />
determined (net of amortisation or depreciation) had no impairment loss been recognised for <strong>the</strong> asset in prior years. A<br />
reversal of impairment loss for an asset o<strong>the</strong>r than goodwill is recognised in <strong>the</strong> profit or loss.<br />
2.12 Financial assets<br />
(a)<br />
Classification<br />
The Group classifies its <strong>financial</strong> assets as ei<strong>the</strong>r <strong>financial</strong> assets at fair value through profit and loss, loans and receivables,<br />
held <strong>to</strong> maturity investments or available-for-sale <strong>financial</strong> assets, as appropriate. The classification depends on <strong>the</strong> purpose<br />
for which <strong>the</strong> assets were acquired. Management determines <strong>the</strong> classification of its <strong>financial</strong> assets at initial recognition<br />
and where allowed and appropriate, re-evaluates this designation at every reporting date.<br />
(i)<br />
Loans and receivables<br />
Loans and receivables are non-derivative <strong>financial</strong> assets with fixed or determinable payments that are not quoted in<br />
an active market. They are included in current assets, except those maturing later than 12 months after <strong>the</strong> statement<br />
of <strong>financial</strong> position date which are classified as non-current assets. Loans and receivables are classified within<br />
“trade and o<strong>the</strong>r receivables”, “amounts due from subsidiaries” and “cash and bank balances” on <strong>the</strong> statement of<br />
<strong>financial</strong> position.<br />
(ii)<br />
Available-for-sale <strong>financial</strong> assets<br />
Available-for-sale <strong>financial</strong> assets are non-derivative <strong>financial</strong> assets that are ei<strong>the</strong>r designated in this category or<br />
not classified in any of <strong>the</strong> o<strong>the</strong>r categories as prescribed in FRS 39. They are included in non-current assets unless<br />
management intends <strong>to</strong> dispose of <strong>the</strong> assets within 12 months after <strong>the</strong> statement of <strong>financial</strong> position date.<br />
(b)<br />
Recognition and derecognition<br />
Financial assets are recognised on <strong>the</strong> statement of <strong>financial</strong> position when, and only when, <strong>the</strong> Group becomes a party<br />
<strong>to</strong> <strong>the</strong> contractual provisions of <strong>the</strong> <strong>financial</strong> instrument.<br />
Purchases and sales of <strong>financial</strong> assets, are recognised or derecognised on trade-date – <strong>the</strong> date on which <strong>the</strong> Group<br />
commits <strong>to</strong> purchase or sell <strong>the</strong> asset.<br />
Financial assets are derecognised when <strong>the</strong> contractual right <strong>to</strong> receive cash flows from <strong>the</strong> <strong>financial</strong> assets have expired<br />
or have been transferred and <strong>the</strong> Group has transferred substantially all risks and rewards of ownership.<br />
On sale or derecognition of a <strong>financial</strong> asset classified as available-for-sale, <strong>the</strong> profit or loss difference between <strong>the</strong> net<br />
sale proceeds and its carrying amount is taken <strong>to</strong> <strong>the</strong> profit or loss. The cumulative gain or loss previously recognised in<br />
o<strong>the</strong>r comprehensive income is reclassified from equity <strong>to</strong> profit or loss as a reclassification adjustment when <strong>the</strong> <strong>financial</strong><br />
asset is sold or derecognised.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
57<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.12 Financial assets (cont’d)<br />
(c)<br />
Measurement<br />
Loans and receivables and available-for-sale <strong>financial</strong> assets are initially recognised at fair value plus transaction costs.<br />
Loans and receivables are subsequently carried at amortised cost using <strong>the</strong> effective interest method. Gain and<br />
losses are recognised in profit or loss when <strong>the</strong> loans and receivables are derecognised or impaired, and through <strong>the</strong><br />
amortisation process.<br />
Financial assets, available-for-sale, are subsequently carried at fair value. Changes in <strong>the</strong> fair value of <strong>financial</strong> assets<br />
classified as available-for-sale are recognised in o<strong>the</strong>r comprehensive income. When <strong>financial</strong> assets classified as<br />
available-for-sale are sold or impaired, <strong>the</strong> cumulative gain or loss previously recognised in o<strong>the</strong>r comprehensive income is<br />
reclassified from equity <strong>to</strong> profit or loss as a reclassification adjustment.<br />
Interest and dividend income on <strong>financial</strong> assets, available-for-sale are recognised separately in <strong>the</strong> profit or loss. Changes<br />
in <strong>the</strong> fair values of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies are analysed<br />
in<strong>to</strong> o<strong>the</strong>r comprehensive income on <strong>the</strong> amortised cost of <strong>the</strong> securities and o<strong>the</strong>r changes; <strong>the</strong> currency translation<br />
differences are recognised in <strong>the</strong> profit or loss and o<strong>the</strong>r changes are recognised in o<strong>the</strong>r comprehensive income. Changes<br />
in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in o<strong>the</strong>r comprehensive income,<br />
<strong>to</strong>ge<strong>the</strong>r with <strong>the</strong> related currency translation difference. Investments in equity instruments whose fair value cannot be<br />
reliably measured are measured at cost less impairment loss.<br />
(d)<br />
Impairment<br />
The Group assesses at each statement of <strong>financial</strong> position date whe<strong>the</strong>r <strong>the</strong>re is any objective evidence that a <strong>financial</strong><br />
asset or a group of <strong>financial</strong> assets is impaired.<br />
(i)<br />
Loans and receivables<br />
Significant <strong>financial</strong> difficulties of <strong>the</strong> deb<strong>to</strong>r, probability that <strong>the</strong> deb<strong>to</strong>r will enter bankruptcy and or default or<br />
significant delay in payments are objective evidence that <strong>the</strong>se <strong>financial</strong> assets are impaired. The carrying amount of<br />
<strong>the</strong>se assets is reduced through <strong>the</strong> use of an impairment allowance account. The amount of <strong>the</strong> allowance is <strong>the</strong><br />
difference between <strong>the</strong> asset’s carrying amount and <strong>the</strong> present value of estimated future cash flows, discounted at<br />
<strong>the</strong> assets’ original effective interest rate. The amount of allowance for impairment is recognised in <strong>the</strong> profit or loss<br />
within “o<strong>the</strong>r expenses”.<br />
When <strong>the</strong>se <strong>financial</strong> assets become uncollectible, <strong>the</strong> carrying amount of impaired <strong>financial</strong> assets is reduced<br />
directly or if an amount was charged <strong>to</strong> <strong>the</strong> impairment allowance account, <strong>the</strong> amounts charged <strong>to</strong> <strong>the</strong> impairment<br />
allowance account are written off against <strong>the</strong> carrying value of <strong>the</strong> <strong>financial</strong> assets.<br />
If, in a subsequent year, <strong>the</strong> amount of <strong>the</strong> impairment loss decreases and <strong>the</strong> decrease can be related objectively <strong>to</strong><br />
an event occurring after <strong>the</strong> impairment was recognised, <strong>the</strong> previously recognised impairment loss is reversed. Any<br />
subsequent reversal of an impairment loss is recognised in <strong>the</strong> profit or loss, <strong>to</strong> <strong>the</strong> extent that <strong>the</strong> carrying value of<br />
<strong>the</strong> asset does not exceed its amortised cost at <strong>the</strong> reversal date.
58<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.12 Financial assets (cont’d)<br />
(d)<br />
Impairment (cont’d)<br />
(ii)<br />
Available-for-sale <strong>financial</strong> assets<br />
In <strong>the</strong> case of an equity security classified as available-for-sale, a significant or prolonged decline in <strong>the</strong> fair value of<br />
<strong>the</strong> security below its cost and disappearance of an active trading market for <strong>the</strong> security is objective evidence that<br />
<strong>the</strong> security is impaired.<br />
When <strong>the</strong>re is objective evidence that an available-for-sale <strong>financial</strong> asset is impaired, <strong>the</strong> cumulative loss that has<br />
been recognised in o<strong>the</strong>r comprehensive income is reclassified from equity and taken <strong>to</strong> <strong>the</strong> profit or loss. The<br />
cumulative loss is measured as <strong>the</strong> difference between <strong>the</strong> acquisition cost and <strong>the</strong> current fair value, less any<br />
impairment loss on that <strong>financial</strong> asset previously recognised in <strong>the</strong> profit or loss.<br />
Impairment losses on equity instruments classified as available-for-sale <strong>financial</strong> assets are not reversed through<br />
profit or loss.<br />
2.13 Borrowings / Borrowing costs<br />
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised<br />
cost. Any difference between <strong>the</strong> proceeds (net of transaction costs) and <strong>the</strong> redemption value is recognised in <strong>the</strong> profit or loss<br />
over <strong>the</strong> years of <strong>the</strong> borrowings using <strong>the</strong> effective interest method.<br />
Borrowings which are due <strong>to</strong> be settled within 12 months after <strong>the</strong> statement of <strong>financial</strong> position date are presented as current<br />
borrowings even though <strong>the</strong> original term was for a year longer than 12 months and an agreement <strong>to</strong> refinance, or <strong>to</strong> reschedule<br />
payments, on a long-term basis is completed after <strong>the</strong> statement of <strong>financial</strong> position date and before <strong>the</strong> <strong>financial</strong> statements<br />
are authorised for issue. O<strong>the</strong>r borrowings due <strong>to</strong> be settled more than 12 months after <strong>the</strong> statement of <strong>financial</strong> position date<br />
are presented as non-current borrowings in <strong>the</strong> statement of <strong>financial</strong> position.<br />
Borrowing costs are capitalised as part of <strong>the</strong> cost of a qualifying asset if <strong>the</strong>y are directly attributable <strong>to</strong> <strong>the</strong> acquisition,<br />
construction or production of that asset. Capitalisation of borrowing costs commences when <strong>the</strong> activities <strong>to</strong> prepare <strong>the</strong><br />
asset for its intended use or sale are in progress and <strong>the</strong> expenditures and borrowing costs are incurred. Borrowing costs are<br />
capitalised until <strong>the</strong> assets are substantially completed for <strong>the</strong>ir intended use or sale.<br />
2.14 Financial liabilities<br />
Financial liabilities within <strong>the</strong> scope of FRS 39 are recognised on <strong>the</strong> statement of <strong>financial</strong> position when, and only when, <strong>the</strong><br />
Group becomes a party <strong>to</strong> <strong>the</strong> contractual provisions of <strong>the</strong> <strong>financial</strong> instrument.<br />
Financial liabilities are recognised initially at fair value, plus, in <strong>the</strong> case of <strong>financial</strong> liabilities o<strong>the</strong>r than derivatives, directly<br />
attributable transaction costs.<br />
Subsequent <strong>to</strong> initial recognition, all <strong>financial</strong> liabilities are measured at amortised cost using <strong>the</strong> effective interest method, except<br />
for derivatives, which are measured at fair value.<br />
For <strong>financial</strong> liabilities o<strong>the</strong>r than derivatives, gains and losses are recognised in profit or loss when <strong>the</strong> liabilities are derecognised,<br />
and through <strong>the</strong> amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in profit<br />
or loss. Net gains or losses on derivatives include exchange differences.<br />
A <strong>financial</strong> liability is derecognised when <strong>the</strong> obligation under <strong>the</strong> liability is extinguished. When an existing <strong>financial</strong> liability is<br />
replaced by ano<strong>the</strong>r from <strong>the</strong> same lender on substantially different terms, or <strong>the</strong> terms of an existing liability are substantially<br />
modified, such an exchange or modification is treated as a derecognition of <strong>the</strong> original liability and <strong>the</strong> recognition of a new<br />
liability, and <strong>the</strong> difference in <strong>the</strong> respective carrying amounts is recognised in <strong>the</strong> profit or loss.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
59<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.15 Fair value estimation<br />
The carrying amounts of current <strong>financial</strong> assets and liabilities, carried at amortised cost, are assumed <strong>to</strong> approximate <strong>the</strong>ir fair<br />
values.<br />
The fair values of <strong>financial</strong> instruments traded in active markets (such as exchange-traded securities and derivatives) are based<br />
on quoted market prices at <strong>the</strong> statement of <strong>financial</strong> position date. The quoted market prices used for <strong>financial</strong> assets held by<br />
<strong>the</strong> Group are <strong>the</strong> current bid prices; <strong>the</strong> appropriate quoted market prices for <strong>financial</strong> liabilities are <strong>the</strong> current ask prices.<br />
The fair values of <strong>financial</strong> instruments that are not traded in an active market are determined by using valuation techniques.<br />
The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each statement<br />
of <strong>financial</strong> position date. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation<br />
techniques, such as estimated discounted cash flows, are also used <strong>to</strong> determine <strong>the</strong> fair values of <strong>the</strong> <strong>financial</strong> instruments.<br />
The fair values of <strong>financial</strong> liabilities carried at amortised cost are estimated by discounting <strong>the</strong> future contractual cash flows at<br />
<strong>the</strong> current market interest rates that are available <strong>to</strong> <strong>the</strong> Group for similar <strong>financial</strong> liabilities.<br />
2.16 Leases<br />
The determination of whe<strong>the</strong>r an arrangement is, or contains a lease is based on <strong>the</strong> substance of <strong>the</strong> arrangement at inception<br />
date: whe<strong>the</strong>r fulfilment of <strong>the</strong> arrangement is dependent on <strong>the</strong> use of a specific asset or assets or <strong>the</strong> arrangement conveys a<br />
right <strong>to</strong> use <strong>the</strong> asset. For arrangements entered in<strong>to</strong> prior <strong>to</strong> 1 January 2005, <strong>the</strong> date of inception is deemed <strong>to</strong> be 1 January<br />
2005 in accordance with <strong>the</strong> transitional requirements of INT FRS 104.<br />
(a)<br />
As lessee<br />
The Group leases certain property, plant and equipment from third parties.<br />
Finance leases, which transfer <strong>to</strong> <strong>the</strong> Group substantially all <strong>the</strong> risks and rewards incidental <strong>to</strong> ownership of <strong>the</strong> leased<br />
item, are capitalised at <strong>the</strong> inception of <strong>the</strong> lease at <strong>the</strong> fair value of <strong>the</strong> leased asset or, if lower, at <strong>the</strong> present value of<br />
<strong>the</strong> minimum lease payments. Any initial direct costs are also added <strong>to</strong> <strong>the</strong> amount capitalised. Lease payments are<br />
apportioned between <strong>the</strong> finance charges and reduction of <strong>the</strong> lease liability so as <strong>to</strong> achieve a constant rate of interest on<br />
<strong>the</strong> remaining balance of <strong>the</strong> liability. Finance charges are charged <strong>to</strong> profit or loss. Contingent rents, if any, are charged as<br />
expenses in <strong>the</strong> periods in which <strong>the</strong>y are incurred.<br />
Capitalised leased assets are depreciated over <strong>the</strong> shorter of <strong>the</strong> estimated useful life of <strong>the</strong> asset and <strong>the</strong> lease term, if<br />
<strong>the</strong>re is no reasonable certainty that <strong>the</strong> Group will obtain ownership by <strong>the</strong> end of <strong>the</strong> lease term.<br />
Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over <strong>the</strong> lease term. The<br />
aggregate benefit of incentives provided by <strong>the</strong> lessor is recognised as a reduction of rental expense over <strong>the</strong> lease term<br />
on a straight-line basis.<br />
(b)<br />
As lessor<br />
2.17 Inven<strong>to</strong>ries<br />
Leases where <strong>the</strong> Group retains substantially all <strong>the</strong> risks and rewards of ownership of <strong>the</strong> asset are classified as operating<br />
leases. Initial direct costs incurred in negotiating an operating lease are added <strong>to</strong> <strong>the</strong> carrying amount of <strong>the</strong> leased asset<br />
and recognised over <strong>the</strong> lease term on <strong>the</strong> same bases as rental income. The accounting policy for rental income is set<br />
out in Note 2.4(d).<br />
Inven<strong>to</strong>ries are carried at <strong>the</strong> lower of cost and net realisable value. Cost incurred in bringing <strong>the</strong> inven<strong>to</strong>ries <strong>to</strong> <strong>the</strong>ir present<br />
location and conditions are determined using <strong>the</strong> weighted average method. Net realisable value is <strong>the</strong> estimated selling price in<br />
<strong>the</strong> ordinary course of business, less applicable variable selling expenses.
60<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.18 Income taxes<br />
(a)<br />
Current tax<br />
Current income tax liabilities and assets are measured at <strong>the</strong> amounts expected <strong>to</strong> be paid <strong>to</strong> or recovered from <strong>the</strong><br />
taxation authorities, using <strong>the</strong> tax rates and tax laws that have been enacted or substantively enacted by <strong>the</strong> statement of<br />
<strong>financial</strong> position date.<br />
Current taxes are recognised in profit or loss except <strong>to</strong> <strong>the</strong> extent that <strong>the</strong> tax relates <strong>to</strong> items recognised outside profit or<br />
loss, ei<strong>the</strong>r in o<strong>the</strong>r comprehensive income or directly in equity.<br />
(b)<br />
Deferred tax<br />
Deferred income tax is provided using <strong>the</strong> liability method on temporary differences at <strong>the</strong> statement of <strong>financial</strong> position<br />
date between <strong>the</strong> tax bases of assets and liabilities and <strong>the</strong>ir carrying amounts for <strong>financial</strong> reporting purposes.<br />
Deferred tax liabilities are recognised for all temporary differences, except:<br />
– where <strong>the</strong> deferred income tax liability arises from <strong>the</strong> initial recognition of goodwill or of an asset or liability in a<br />
transaction that is not a business combination and, at <strong>the</strong> time of <strong>the</strong> transaction, affects nei<strong>the</strong>r <strong>the</strong> accounting profit<br />
nor taxable profit or loss; and<br />
– in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint venture<br />
companies, where <strong>the</strong> timing of <strong>the</strong> reversal of <strong>the</strong> temporary differences can be controlled and it is probable that <strong>the</strong><br />
temporary differences will not reverse in <strong>the</strong> foreseeable future.<br />
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits<br />
and unused tax losses, <strong>to</strong> <strong>the</strong> extent that it is probable that taxable profit will be available against which <strong>the</strong> deductible<br />
temporary differences, and <strong>the</strong> carry forward of unused tax credits and unused tax losses can be utilised except:<br />
– where <strong>the</strong> deferred income tax asset relating <strong>to</strong> <strong>the</strong> deductible temporary difference arises from <strong>the</strong> initial recognition<br />
of an asset or liability in a transaction that is not a business combination and, at <strong>the</strong> time of <strong>the</strong> transaction, affects<br />
nei<strong>the</strong>r <strong>the</strong> accounting profit nor taxable profit or loss; and<br />
– in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint<br />
venture companies, deferred income tax assets are recognised only <strong>to</strong> <strong>the</strong> extent that it is probable that <strong>the</strong> temporary<br />
differences will reverse in <strong>the</strong> foreseeable future and taxable profit will be available against which <strong>the</strong> temporary<br />
differences can be utilised.<br />
The carrying amount of deferred tax assets is reviewed at each statement of <strong>financial</strong> position date and reduced <strong>to</strong> <strong>the</strong><br />
extent that it is no longer probable that sufficient taxable profit will be available <strong>to</strong> allow all or part of <strong>the</strong> deferred tax<br />
asset <strong>to</strong> be utilised. Unrecognised deferred tax assets are reassessed at each statement of <strong>financial</strong> position date and<br />
are recognised <strong>to</strong> <strong>the</strong> extent that it has become probable that future taxable profit will allow <strong>the</strong> deferred tax asset <strong>to</strong> be<br />
utilised.<br />
Deferred tax assets and liabilities are measured at <strong>the</strong> tax rates that are expected <strong>to</strong> apply <strong>to</strong> <strong>the</strong> year when <strong>the</strong> asset is<br />
realised or <strong>the</strong> liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at <strong>the</strong><br />
statement of <strong>financial</strong> position date.<br />
Deferred income tax relating <strong>to</strong> items recognised outside profit or loss is recognised outside profit or loss. Deferred tax<br />
items are recognised in correlation <strong>to</strong> <strong>the</strong> underlying transaction ei<strong>the</strong>r in o<strong>the</strong>r comprehensive income or directly in equity<br />
and deferred tax arising from a business combination is adjusted against goodwill on acquisition.<br />
Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists <strong>to</strong> set off current<br />
tax assets against current income tax liabilities and <strong>the</strong> deferred income taxes relate <strong>to</strong> <strong>the</strong> same taxable entity and <strong>the</strong><br />
same taxation authority.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
61<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.18 Income taxes (cont’d)<br />
(c)<br />
Value added tax (“VAT”) and Goods and Service Tax (“GST”)<br />
2.19 Provisions<br />
Revenue, expenses and assets are recognised net of <strong>the</strong> amount of sales tax except where <strong>the</strong> sales tax incurred in a<br />
purchase of assets or services is not recoverable from <strong>the</strong> taxation authority, in which case <strong>the</strong> VAT/GST is recognised as<br />
part of <strong>the</strong> cost of acquisition of <strong>the</strong> asset or as part of <strong>the</strong> expense item as applicable, and receivables and payables that<br />
are stated with amount of VAT/GST included. The net amount of VAT/GST recoverable from, or payable <strong>to</strong>, <strong>the</strong> taxation<br />
authority is included as part of receivables or payables in <strong>the</strong> statement of <strong>financial</strong> position.<br />
Provisions are recognised when <strong>the</strong> Group has a present legal or constructive obligation as a result of past events, and it is<br />
probable that an outflow of economic resources will be required <strong>to</strong> settle <strong>the</strong> obligation and <strong>the</strong> amount of <strong>the</strong> obligation can be<br />
estimated reliably.<br />
Provisions are reviewed at each statement of <strong>financial</strong> position date and adjusted <strong>to</strong> reflect <strong>the</strong> current best estimate. If it is<br />
no longer probable that an outflow of economic resources will be required <strong>to</strong> settle <strong>the</strong> obligation, <strong>the</strong> provision is reversed.<br />
If <strong>the</strong> effect of <strong>the</strong> time value of money is material, provisions are discounted using a current pre tax rate that reflects where<br />
appropriate, <strong>the</strong> risk specific <strong>to</strong> <strong>the</strong> liability. When discounting is used, <strong>the</strong> increase in <strong>the</strong> provision due <strong>to</strong> <strong>the</strong> passage of time<br />
is recognised as finance cost.<br />
Provision for warranties<br />
The Group recognises <strong>the</strong> estimated liability <strong>to</strong> repair or rectify any defect caused by faulty design done. A provision is recognised<br />
at <strong>the</strong> statement of <strong>financial</strong> position date for expected warranty claims based on estimate from technical engineers and past<br />
experience of <strong>the</strong> probable level of repairs and rectifications.<br />
Provision for liquidated damages on construction contracts<br />
The Group recognises provision for liquidated damages in respect of anticipated claims from project owners for construction<br />
contracts of which deadlines are overdue or are not expected <strong>to</strong> be delivered on time in accordance with contractual<br />
obligations.<br />
2.20 Employee compensation<br />
(a)<br />
Defined contribution plans<br />
Defined contribution plans are post-employment benefit plans under which <strong>the</strong> Group pays fixed contributions in<strong>to</strong><br />
separate entities such as <strong>the</strong> Central Provident Fund in Singapore and social security insurance in <strong>the</strong> People’s Republic<br />
of China (<strong>the</strong> “PRC”) on a manda<strong>to</strong>ry, contractual or voluntary basis. The Group has no fur<strong>the</strong>r payment obligations once<br />
<strong>the</strong> contributions have been paid. The Group’s contributions are recognised as employee compensation expense in <strong>the</strong><br />
period in which <strong>the</strong> related service is performed.<br />
In accordance with <strong>the</strong> relevant regulations in <strong>the</strong> PRC, <strong>the</strong> premiums and welfare benefit contributions borne by <strong>the</strong> Group<br />
are calculated based on percentage of <strong>the</strong> <strong>to</strong>tal salary of employees, subject <strong>to</strong> a certain ceiling, and are paid <strong>to</strong> <strong>the</strong> labour<br />
and social welfare authorities. The applicable percentage used <strong>to</strong> provide for insurance premium and welfare benefits<br />
funds are listed below:<br />
Basic pension insurance 20%<br />
Basic medical insurance 7%<br />
Unemployment insurance 2%<br />
Maternity fund 2%<br />
Accident insurance 1%<br />
Housing fund 6%
62<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.20 Employee compensation (cont’d)<br />
(b)<br />
Share-based compensation<br />
The Group operates an equity-settled, share-based compensation plan. The fair value of <strong>the</strong> employee services received in<br />
exchange for <strong>the</strong> grant of <strong>the</strong> share options is recognised as an expense in profit or loss with a corresponding increase in<br />
<strong>the</strong> share option reserve over <strong>the</strong> vesting period. The <strong>to</strong>tal amount <strong>to</strong> be recognised over <strong>the</strong> vesting period is determined<br />
by reference <strong>to</strong> <strong>the</strong> fair value of <strong>the</strong> share options granted on <strong>the</strong> date of <strong>the</strong> grant. Non-market vesting conditions are<br />
included in <strong>the</strong> estimation of <strong>the</strong> number of shares under share options that are expected <strong>to</strong> become exercisable on <strong>the</strong><br />
vesting date. At each statement of <strong>financial</strong> position date, <strong>the</strong> Group revises its estimates of <strong>the</strong> number of shares under<br />
share options that are expected <strong>to</strong> become exercisable on <strong>the</strong> vesting date and recognises <strong>the</strong> impact of <strong>the</strong> revision of<br />
<strong>the</strong> estimates in profit or loss, with a corresponding adjustment <strong>to</strong> <strong>the</strong> share option reserve over <strong>the</strong> remaining vesting<br />
period.<br />
No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a<br />
market condition, which are treated as vested irrespective of whe<strong>the</strong>r or not <strong>the</strong> market condition is satisfied, provided that<br />
all o<strong>the</strong>r performance and/or service conditions are satisfied. The employee share option reserve is transferred <strong>to</strong> retained<br />
earnings upon expiry of <strong>the</strong> share options.<br />
When <strong>the</strong> share options are exercised, <strong>the</strong> proceeds received (net of any directly attributable transaction costs) and <strong>the</strong><br />
related balance previously recognised in <strong>the</strong> share option reserve are credited ei<strong>the</strong>r <strong>to</strong> share capital, when new ordinary<br />
shares are issued, or <strong>to</strong> <strong>the</strong> “treasury shares” account within equity, when treasury shares purchased are re-issued <strong>to</strong> <strong>the</strong><br />
employees.<br />
In situations where equity instruments are issued and some or all of <strong>the</strong> goods or services received by <strong>the</strong> entity as<br />
consideration cannot be specifically identified, <strong>the</strong> unidentified goods or services received (or <strong>to</strong> be received) are measured<br />
as <strong>the</strong> difference between <strong>the</strong> fair value of <strong>the</strong> share-based payment and <strong>the</strong> fair value of any identifiable goods or services<br />
received at <strong>the</strong> grant date. This is <strong>the</strong>n capitalised or expensed as appropriate.<br />
(c)<br />
Employee leave entitlement<br />
Employee entitlements <strong>to</strong> annual leave are recognised as a liability when <strong>the</strong>y accrue <strong>to</strong> employees. A provision is<br />
made for <strong>the</strong> estimated liability for leave as a result of services rendered by employees up <strong>to</strong> <strong>the</strong> statement of <strong>financial</strong><br />
position date.<br />
(d)<br />
Termination benefits<br />
Termination benefits are payable when employment is terminated before <strong>the</strong> normal retirement date or whenever an<br />
employee accepts voluntary redundancy in exchange for <strong>the</strong>se benefits. The Group recognises termination benefits when<br />
it is demonstrably committed <strong>to</strong> ei<strong>the</strong>r terminate <strong>the</strong> employment of current employees according <strong>to</strong> a detailed plan without<br />
possibility of withdrawal; or providing termination benefits as a result of an offer made <strong>to</strong> encourage voluntary redundancy.<br />
In <strong>the</strong> case of an offer made <strong>to</strong> encourage voluntary redundancy, <strong>the</strong> measurement of termination benefits is based on <strong>the</strong><br />
number of employees expected <strong>to</strong> accept <strong>the</strong> offer. Benefits falling due more than 12 months after statement of <strong>financial</strong><br />
position date are discounted <strong>to</strong> present value.<br />
2.21 Currency translation<br />
(a)<br />
Functional and presentation currency<br />
Items included in <strong>the</strong> <strong>financial</strong> statements of each entity in <strong>the</strong> Group are measured using <strong>the</strong> currency of <strong>the</strong> primary<br />
economic environment in which <strong>the</strong> entity operates (“functional currency”). The <strong>financial</strong> statements are presented in<br />
Singapore Dollar, which is <strong>the</strong> Company’s functional currency.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
63<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.21 Currency translation (cont’d)<br />
(b)<br />
Transactions and balances<br />
Transactions in a currency o<strong>the</strong>r than <strong>the</strong> functional currency (“foreign currency”) are translated in<strong>to</strong> <strong>the</strong> functional currency<br />
using <strong>the</strong> exchange rates approximating those ruling at <strong>the</strong> dates of <strong>the</strong> transactions. Currency translation gains and losses<br />
resulting from <strong>the</strong> settlement of such transactions and from <strong>the</strong> translation of monetary assets and liabilities denominated<br />
in foreign currencies at <strong>the</strong> closing rates at <strong>the</strong> statement of <strong>financial</strong> position date are recognised in <strong>the</strong> profit or loss,<br />
except for currency translation differences on <strong>the</strong> net investment in foreign operations, borrowings in foreign currencies<br />
and o<strong>the</strong>r currency instruments qualifying as net investment hedges for foreign operations, which are recognised initially<br />
in o<strong>the</strong>r comprehensive income and accumulated under currency translation reserve in equity. The currency translation<br />
reserve is reclassified from equity <strong>to</strong> profit or loss of <strong>the</strong> Group on disposal of <strong>the</strong> foreign operation.<br />
Non-monetary items that are measured in terms of his<strong>to</strong>rical cost in a foreign currency are translated using <strong>the</strong> exchange<br />
rates as at <strong>the</strong> dates of <strong>the</strong> initial transactions. Non-monetary items that are measured at fair values in foreign currency<br />
are translated using <strong>the</strong> exchange rates at <strong>the</strong> date when <strong>the</strong> fair values are determined. Currency translation differences<br />
on non-monetary items whereby <strong>the</strong> gains or losses are recognised in o<strong>the</strong>r comprehensive income, such as equity<br />
investments classified as available-for-sale <strong>financial</strong> assets, are included in o<strong>the</strong>r comprehensive income and accumulated<br />
under currency translation reserve in equity.<br />
(c)<br />
Translation of Group entities’ <strong>financial</strong> statements<br />
The results and <strong>financial</strong> position of all <strong>the</strong> Group entities (none of which has <strong>the</strong> currency of a hyperinflationary economy)<br />
that have a functional currency different from <strong>the</strong> Singapore Dollar are translated in<strong>to</strong> <strong>the</strong> Singapore Dollar as follows:<br />
(i)<br />
(ii)<br />
(iii)<br />
Assets and liabilities are translated at <strong>the</strong> closing rates at <strong>the</strong> date of <strong>the</strong> statement of <strong>financial</strong> position;<br />
Statement of comprehensive income are translated at average exchange rates (unless <strong>the</strong> average is not a reasonable<br />
approximation of <strong>the</strong> cumulative effect of <strong>the</strong> rates prevailing on <strong>the</strong> transaction dates, in which case income and<br />
expenses are translated using <strong>the</strong> exchange rates at <strong>the</strong> dates of <strong>the</strong> transactions); and<br />
All resulting exchange differences are taken directly <strong>to</strong> o<strong>the</strong>r comprehensive income.<br />
(d)<br />
Consolidation adjustments<br />
On consolidation, currency translation differences arising from <strong>the</strong> net investment in foreign operations, borrowings in<br />
foreign currencies, and o<strong>the</strong>r currency instruments designated as hedges of such investments, are recognised initially in<br />
o<strong>the</strong>r comprehensive income and accumulated under currency translation reserve in equity. When a foreign operation is<br />
sold, such currency translation differences recorded in <strong>the</strong> currency translation reserve are recognised in <strong>the</strong> profit or loss<br />
as part of <strong>the</strong> gain or loss on sale.<br />
2.22 Segment reporting<br />
For management purposes, <strong>the</strong> Group currently has one operating segment. Disclosures on <strong>the</strong> segment information are shown<br />
in Note 35.<br />
2.23 Cash and cash equivalents<br />
For <strong>the</strong> purpose of presentation in <strong>the</strong> consolidated cash flow statement, cash and cash equivalents include cash on hand,<br />
deposits with <strong>financial</strong> institutions which are subject <strong>to</strong> insignificant risk of change in value and exclude pledged deposits with<br />
<strong>the</strong> <strong>financial</strong> institutions.<br />
2.24 Share capital and share issuance expenses<br />
Proceeds from issuance of ordinary shares are recognised as share capital in equity.<br />
Incremental costs directly attributable <strong>to</strong> <strong>the</strong> issuance of new ordinary shares are deducted against <strong>the</strong> share capital account.
64<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
2. Summary of significant accounting policies (cont’d)<br />
2.25 Dividends<br />
Interim dividends are recorded in <strong>the</strong> <strong>financial</strong> year in which <strong>the</strong>y are declared payable. Final dividends are recorded in <strong>the</strong><br />
<strong>financial</strong> year in which <strong>the</strong> dividends are approved by <strong>the</strong> shareholders.<br />
2.26 Contingencies<br />
A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will be confirmed<br />
only by <strong>the</strong> occurrence or non-occurrence of uncertain future event(s) not wholly within <strong>the</strong> control of <strong>the</strong> Group.<br />
Contingent liabilities and assets are not recognised on <strong>the</strong> statement of <strong>financial</strong> position of <strong>the</strong> Group.<br />
2.27 Derivative <strong>financial</strong> instruments and hedging activities<br />
Derivative <strong>financial</strong> instruments are initially recognised at fair value on <strong>the</strong> date on which a derivative contract is entered in<strong>to</strong> and<br />
are subsequently remeasured at fair value. Derivative <strong>financial</strong> instruments are carried as assets when <strong>the</strong> fair value is positive<br />
and as liabilities when <strong>the</strong> fair value is negative.<br />
Subsequent <strong>to</strong> initial recognition, any gains or losses arising from changes in fair value on derivative <strong>financial</strong> instruments that do<br />
not qualify for hedge accounting are taken <strong>to</strong> <strong>the</strong> profit or loss for <strong>the</strong> <strong>financial</strong> year.<br />
The fair value of forward currency contracts is calculated by reference <strong>to</strong> current forward exchange rates for contracts with<br />
similar maturity profiles. The fair value of interest rate derivative contracts is determined by reference <strong>to</strong> market values for similar<br />
instruments.<br />
Embedded derivatives<br />
The Group assesses when it first becomes a party <strong>to</strong> a contract whe<strong>the</strong>r any embedded derivatives contained in <strong>the</strong> contract<br />
are required <strong>to</strong> be separated from <strong>the</strong> host contract and accounted for as derivatives.<br />
An embedded derivative is <strong>to</strong> be separated from <strong>the</strong> host contract and accounted for as a derivative if, and only if:<br />
(a)<br />
(b)<br />
(c)<br />
<strong>the</strong> economic characteristics and risks of <strong>the</strong> embedded derivative are not closely related <strong>to</strong> <strong>the</strong> economic characteristics<br />
and risks of <strong>the</strong> host contract;<br />
a separate instrument with <strong>the</strong> same terms as <strong>the</strong> embedded derivative would meet <strong>the</strong> definition of a derivative; and<br />
<strong>the</strong> hybrid (combined) instrument is not measured at fair value with changes in fair value recognised in profit or loss (that<br />
is, a derivative that is embedded in a <strong>financial</strong> asset or <strong>financial</strong> liability at fair value through profit or loss).<br />
Embedded derivatives identified and separately accounted for at fair value through profit or loss.<br />
Derivatives that are not designated or do not qualify for hedge accounting<br />
Fair value changes on <strong>the</strong>se derivatives are recognised in <strong>the</strong> profit or loss when <strong>the</strong> changes arise.<br />
2.28 Government grants<br />
Government grants are recognised as a credit in <strong>the</strong> consolidated statement of comprehensive income when all attaching condition<br />
have been compiled with and received. Government grants are presented in <strong>the</strong> consolidated statement of comprehensive<br />
income under “o<strong>the</strong>r income”.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
65<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
3. Significant accounting judgements and estimates<br />
Estimates, assumptions and judgements are continually evaluated and are based on his<strong>to</strong>rical experience and o<strong>the</strong>r fac<strong>to</strong>rs,<br />
including expectations of future events that are believed <strong>to</strong> be reasonable under <strong>the</strong> circumstances.<br />
3.1 Critical accounting estimates and assumptions<br />
The Group on its own or in reliance on third party experts makes estimates and assumptions concerning <strong>the</strong> future. The resulting<br />
accounting estimates, by definition, will seldom equal <strong>the</strong> related actual results. The estimates and assumptions that have a<br />
significant risk of causing a material adjustment <strong>to</strong> <strong>the</strong> carrying amounts of assets and liabilities within <strong>the</strong> next <strong>financial</strong> year are<br />
discussed below.<br />
(i)<br />
Impairment of goodwill<br />
Determining whe<strong>the</strong>r goodwill is impaired requires an estimation of <strong>the</strong> value in use of <strong>the</strong> cash-generating units <strong>to</strong> which<br />
<strong>the</strong> goodwill is allocated. This requires <strong>the</strong> Group <strong>to</strong> estimate <strong>the</strong> future cash flows expected from <strong>the</strong> cash-generating<br />
units and an appropriate discount rate in order <strong>to</strong> calculate <strong>the</strong> present value of <strong>the</strong> future cash flows. The carrying amount<br />
of goodwill at <strong>the</strong> statement of <strong>financial</strong> position date is disclosed in Note 25.<br />
(ii)<br />
Revenue recognition<br />
The Group uses <strong>the</strong> percentage of completion method <strong>to</strong> account for its contract revenue where it is probable that contract<br />
costs are recoverable. The stage of completion is measured in accordance with <strong>the</strong> accounting policy stated in Note 2.8.<br />
Significant judgement is required in determining <strong>the</strong> stage of completion, <strong>the</strong> extent of <strong>the</strong> contract costs incurred, <strong>the</strong><br />
estimated <strong>to</strong>tal contract revenue and contract cost and <strong>the</strong> recoverability of <strong>the</strong> contracts. In making <strong>the</strong> assumption, <strong>the</strong><br />
Group evaluates by relying on past experience and <strong>the</strong> work of <strong>the</strong> project management team. Revenue from construction<br />
contracts is disclosed in consolidated income statement.<br />
The stage of completion of each construction contract is assessed on a cumulative basis in each accounting year. Changes<br />
in estimate of contract revenue or contract costs, or <strong>the</strong> effect of a change in <strong>the</strong> estimate of <strong>the</strong> outcome of a contract<br />
could impact <strong>the</strong> amount of revenue and expenses recognised in <strong>the</strong> profit or loss in <strong>the</strong> year in which <strong>the</strong> change is made<br />
and in subsequent years. Such impact could potentially be significant.<br />
(iii)<br />
Income taxes<br />
The Group has exposure <strong>to</strong> income taxes in more than one jurisdiction. Significant judgement is required in determining<br />
<strong>the</strong> group-wide provision for income taxes. There are certain transactions and computations for which <strong>the</strong> ultimate tax<br />
determination is uncertain during <strong>the</strong> ordinary course of business. The Group recognises liabilities for expected tax issues<br />
based on estimates of whe<strong>the</strong>r additional taxes will be due. Where <strong>the</strong> final tax outcome of <strong>the</strong>se matters is different from<br />
<strong>the</strong> amounts that were initially recognised, such differences will impact <strong>the</strong> income tax and deferred tax provisions in<br />
<strong>the</strong> year in which such determination is made. The carrying amount of taxation and deferred taxation is disclosed in <strong>the</strong><br />
consolidated statement of <strong>financial</strong> position.<br />
(iv)<br />
Useful lives of property, plant and equipment<br />
The Group’s management determines <strong>the</strong> estimated useful lives and related depreciation charges for its plant and<br />
equipment. This estimate is based on <strong>the</strong> his<strong>to</strong>rical experience of <strong>the</strong> actual useful lives of plant and equipment of similar<br />
nature and functions. It could change significantly as a result of technical innovations and competi<strong>to</strong>r actions in response<br />
<strong>to</strong> severe industry cycles. Management will increase <strong>the</strong> depreciation charge where useful lives are shorter than previously<br />
estimated, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold.<br />
The carrying amount of property, plant and equipment is disclosed in Note 23.
66<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
3. Significant accounting judgements and estimates (cont’d)<br />
3.1 Critical accounting estimates and assumptions (cont’d)<br />
(v)<br />
Executive Share Option<br />
The Group measures <strong>the</strong> cost of equity-settled transactions with employees by reference <strong>to</strong> <strong>the</strong> fair value of <strong>the</strong> equity<br />
instruments at <strong>the</strong> date of which <strong>the</strong>y are granted. Estimated fair value for share-based payment transactions requires<br />
determining <strong>the</strong> most appropriate valuation model, which is dependent on <strong>the</strong> terms and conditions of <strong>the</strong> grant. This<br />
estimate also requires determining <strong>the</strong> most appropriate inputs <strong>to</strong> <strong>the</strong> valuation model including <strong>the</strong> expected lift of <strong>the</strong><br />
share option, volatility and dividend yield and making assumptions about <strong>the</strong>m. The assumptions and models used for<br />
estimating fair value for share-based payment transactions are disclosed in Note 31.<br />
(vi)<br />
Provision for liquidated damages on construction contracts<br />
The Group recognises provision for liquidated damages in respect of anticipated claims from project owners for construction<br />
contracts of which deadlines were overdue or where vessels were not expected <strong>to</strong> be delivered on time in accordance with<br />
contractual obligations. The carrying amount of provision for liquidated damages on construction contracts is disclosed in<br />
Note 17.<br />
(vii)<br />
Provision for warranties on construction contracts<br />
The Group has exposure <strong>to</strong> warranties arising from warranty obligations stated in its construction contracts. Management<br />
estimates <strong>the</strong> related provision for future warranty claims based on available knowledge and his<strong>to</strong>rical warranty claim<br />
information, as well as recent trends that suggest that past cost information may differ from future claims.<br />
Fac<strong>to</strong>rs that could impact <strong>the</strong> estimated claim information include <strong>the</strong> quality of <strong>the</strong> Group’s products as well as <strong>the</strong> parts<br />
and labour costs.<br />
The Group recognises provision for warranties <strong>to</strong> <strong>the</strong> extent that it has a present legal or constructive obligation as a result<br />
of past event; it is more likely than not that an outflow of resources will be required <strong>to</strong> settle <strong>the</strong> obligation; and that <strong>the</strong><br />
amount has been reliably estimated.<br />
The carrying amount of <strong>the</strong> provision for warranties is disclosed in Note 30.<br />
(viii) Impairment of loans and receivables<br />
The Group assesses at each statement of <strong>financial</strong> position date whe<strong>the</strong>r <strong>the</strong>re is any objective evidence that a <strong>financial</strong><br />
asset is impaired. To determine whe<strong>the</strong>r <strong>the</strong>re is objective evidence of impairment, <strong>the</strong> Group considers fac<strong>to</strong>rs such as <strong>the</strong><br />
probability of insolvency or significant <strong>financial</strong> difficulties of <strong>the</strong> deb<strong>to</strong>r and default or significant delay in payments.<br />
Where <strong>the</strong>re is objective evidence of impairment, <strong>the</strong> amount and timing of future cash flows are estimated based on<br />
his<strong>to</strong>rical loss experience for assets with similar credit risk characteristics. The carrying amount of <strong>the</strong> Group’s loans and<br />
receivable at <strong>the</strong> statement of <strong>financial</strong> position date is disclosed in Note 33.<br />
(ix)<br />
Impairment of available-for-sale <strong>financial</strong> assets<br />
The Group classifies certain assets as available-for-sales <strong>financial</strong> assets and recognises movements of <strong>the</strong>ir fair values<br />
in o<strong>the</strong>r comprehensive income. When <strong>the</strong> fair value declines, management makes assumptions about <strong>the</strong> decline in<br />
value <strong>to</strong> determine where <strong>the</strong>re is an impairment that should be recognised in <strong>the</strong> profit or loss. At 31 December 2009,<br />
impairment losses of $2,592,000 (2008: $10,796,000) have been recognised for available-for-sale <strong>financial</strong> assets. The<br />
carrying amount of available-for-sale <strong>financial</strong> assets as at 31 December 2009 was $1,141,000 (2008: $3,529,000).
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
67<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
3. Significant accounting judgements and estimates (cont’d)<br />
3.1 Critical accounting estimates and assumptions (cont’d)<br />
(x)<br />
Impairment of non-<strong>financial</strong> assets<br />
The Group assesses whe<strong>the</strong>r <strong>the</strong>re are any indica<strong>to</strong>rs of impairment for all non-<strong>financial</strong> assets except for goodwill<br />
(mentioned in 3.1(i)) at each reporting date. Indefinite life intangibles are tested for impairment annually and at o<strong>the</strong>r times<br />
when such indica<strong>to</strong>rs exist. O<strong>the</strong>r non-<strong>financial</strong> assets are tested for impairment when <strong>the</strong>re are indica<strong>to</strong>rs that <strong>the</strong> carrying<br />
amounts may not be recoverable.<br />
When value in use calculations are undertaken, management must estimate <strong>the</strong> expected future cash flows from <strong>the</strong> asset<br />
or cash-generating unit and choose a suitable discount rate in order <strong>to</strong> calculate <strong>the</strong> present value of those cash flows.<br />
The carrying amount of <strong>the</strong> Group’s non-<strong>financial</strong> assets as at <strong>the</strong> statement of <strong>financial</strong> position is disclosed in Notes 20,<br />
21, 22, 23, 24 and 25 <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements.<br />
(xi)<br />
Deferred income tax assets<br />
Deferred tax assets are recognised for all unused tax losses <strong>to</strong> <strong>the</strong> extent that it is probable that taxable profit will be<br />
available against which <strong>the</strong> losses can be utilised. Significant management judgement is required <strong>to</strong> determine <strong>the</strong> amount<br />
of deferred tax assets that can be recognised, based upon <strong>the</strong> likely timing and level of future taxable profits <strong>to</strong>ge<strong>the</strong>r with<br />
future tax planning strategies. The carrying amount of <strong>the</strong> deferred income tax assets as disclosed in Note 26.<br />
3.2 Critical judgements in applying <strong>the</strong> Group’s accounting policies<br />
The following judgements are made by management in <strong>the</strong> process of applying <strong>the</strong> Group’s accounting policies that have <strong>the</strong><br />
most significant effect on <strong>the</strong> amounts recognised in <strong>the</strong> <strong>financial</strong> statements.<br />
(i)<br />
Reclaimed land and buildings without ownership certificates<br />
The Group is in <strong>the</strong> process of applying for <strong>the</strong> State-owned Land Use Right Certificate in respect of land reclaimed from<br />
<strong>the</strong> sea as well as Building Ownership Certificates for certain buildings and premises of <strong>the</strong> PRC subsidiaries. The carrying<br />
amount of <strong>the</strong> buildings without <strong>the</strong> relevant ownership certificates amounted <strong>to</strong> $21,328,000 as at 31 December 2009<br />
(2008: $22,311,000). The Group has made <strong>the</strong> necessary applications <strong>to</strong> <strong>the</strong> relevant authorities. The direc<strong>to</strong>rs expect<br />
<strong>to</strong> obtain <strong>the</strong> relevant approvals in due course and are of <strong>the</strong> opinion that <strong>the</strong> PRC subsidiaries can continue <strong>to</strong> use <strong>the</strong><br />
buildings and premises in <strong>the</strong> meantime without any penalty. The buildings and premises have been recognised as assets<br />
of <strong>the</strong> Group pending obtaining <strong>the</strong> ownership certificates.<br />
No contingent liabilities in connection with any possible breach or non-compliance with <strong>the</strong> relevant laws and regulations in<br />
respect of <strong>the</strong> buildings without ownership certificates have been provided for in <strong>the</strong> <strong>financial</strong> statements as <strong>the</strong> direc<strong>to</strong>rs<br />
are of <strong>the</strong> opinion that <strong>the</strong> risk associated <strong>the</strong>reof is low.<br />
(ii)<br />
Determination of functional currency<br />
The Group measures foreign currency transactions in <strong>the</strong> respective functional currencies of <strong>the</strong> Company and its<br />
subsidiaries. In determining <strong>the</strong> functional currencies of <strong>the</strong> entities in <strong>the</strong> Group, judgement is required <strong>to</strong> determine <strong>the</strong><br />
currency that mainly influences sales prices for goods and services and of <strong>the</strong> country whose competitive forces and<br />
regulations mainly determines <strong>the</strong> sales prices of its goods and services. The functional currencies of <strong>the</strong> entities in <strong>the</strong><br />
Group are determined based on management’s assessment of <strong>the</strong> economic in which <strong>the</strong> entities operate and <strong>the</strong> entities’<br />
process of determining sales prices.<br />
4. Revenue<br />
Revenue comprises revenue earned on construction contracts, including variation orders in <strong>the</strong> contract works and claims.
68<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
5. O<strong>the</strong>r income<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Rental income from machinery and office premises 1,239 4,945<br />
Gain on sale of scrap materials 65 299<br />
Fair value gain on derivative <strong>financial</strong> instruments 16,697 –<br />
Gain on forward contracts – 23,235<br />
Grant income from jobs credit scheme 166 –<br />
Government grants 813 80<br />
Gain on a loan <strong>to</strong> a third party 5,811 –<br />
Write back of doubtful trade and o<strong>the</strong>r receivables (Note 13) 93 744<br />
Miscellaneous gain 668 774<br />
25,552 30,077<br />
During <strong>the</strong> <strong>financial</strong> year ended 31 December 2009, <strong>the</strong> Singapore Finance Minister announced <strong>the</strong> introduction of a Jobs Credit<br />
Scheme (“JCS”). Under this JCS, <strong>the</strong> Group received a 12% cash grant on <strong>the</strong> first $2,500 of each month’s wages for each<br />
employee on <strong>the</strong>ir Central Provident Fund payroll. The JCS is for one year, and <strong>the</strong> Group received its grant income of $166,000<br />
(2008: Nil) during <strong>the</strong> <strong>financial</strong> year ended 31 December 2009.<br />
The gain on a loan <strong>to</strong> a third party relates <strong>to</strong> a settlement gain of US$4,000,000 on a loan of US$2,000,000 <strong>to</strong> a third party in<br />
year 2006.<br />
6. O<strong>the</strong>r expenses<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Allowance for doubtful debts (Note 13) 109 –<br />
Impairment loss on property, plant and equipment (Note 23) 328 –<br />
Impairment loss on <strong>financial</strong> assets, available-for-sale (Note 19) 2,592 10,796<br />
Impairment loss on investment in an associate (Note 22) – 7,676<br />
Loss on disposal of investment in an associate (Note 22) – 64<br />
Loss on disposal of property, plant and equipment 115 968<br />
Fair value loss on derivative <strong>financial</strong> instruments – 30,917<br />
Loss on forward contracts 15,132 –<br />
Foreign exchange losses, net 2,229 11,043<br />
20,505 61,464
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
69<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
7. Profit from operating activities<br />
Profit from operating activities is derived after charging <strong>the</strong> following items:<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Depreciation on property, plant and equipment (Note 23) 15,770 10,351<br />
Employee compensation (Note 8) 84,010 78,842<br />
Operating leases expenses 4,657 2,814<br />
Provision for liquidated damages and foreseeable losses (Note 17) 2,520 25,621<br />
Provision for warranties 990 4,128<br />
Amortisation of land and sea use rights (Note 24) 754 452<br />
Amortisation of intangible assets (Note 25) 3,639 2,587<br />
8. Employee compensation<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Wages, salaries and bonuses 59,367 58,601<br />
Employer’s contribution <strong>to</strong> defined contribution plans including Central Provident Fund<br />
and social security insurance 14,041 8,984<br />
Welfare expenses 3,941 4,480<br />
Share options expense (Note 32) 6,661 6,777<br />
84,010 78,842<br />
9. Net finance costs<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Finance Income:<br />
Interest income from bank deposits 923 5,160<br />
Interest income from loans <strong>to</strong> an associate 126 60<br />
1,049 5,220<br />
Finance costs:<br />
Interest on bank loans (25,171) (15,854)<br />
Interest on finance lease (1,477) (10)<br />
Interest paid <strong>to</strong> a related party (545) (30)<br />
Less: Interest expenses capitalised <strong>to</strong> construction work in progress 8,237 5,433<br />
(18,956) (10,461)<br />
Net finance costs (17,907) (5,241)
70<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
10. Income tax expense<br />
Major components of income tax expense:<br />
The major components of income tax expense for <strong>the</strong> years ended 31 December 2009 and 2008 are:<br />
Statement of comprehensive income:<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Current income tax<br />
Current income taxation 7,172 19,068<br />
Under/(over) provision in respect of prior years 441 (1,593)<br />
7,613 17,475<br />
Deferred tax<br />
Origination and reversal of temporary differences (Note 26) 4,552 (4,816)<br />
Under provision of deferred tax assets in respect of prior years (291) (1,284)<br />
Over provision of deferred tax liabilities in respect of prior years – (198)<br />
Effect of reduction in tax rates (Note 26) 858 (56)<br />
5,119 (6,354)<br />
Income tax expense recognised in profit or loss 12,732 11,121<br />
Relationship between tax expense and accounting profit<br />
The reconciliation between tax expense and <strong>the</strong> product of accounting profit multiplied by <strong>the</strong> applicable corporate tax rate for<br />
<strong>the</strong> years ended 31 December 2009 and 2008 are as follows:<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Profit before income tax 45,283 36,234<br />
Tax at <strong>the</strong> domestic rates applicable <strong>to</strong> profits in <strong>the</strong> countries where <strong>the</strong> Group operates 8,758 6,318<br />
Adjustments:<br />
Effect of reduction in tax rates 858 (56)<br />
Effect of partial tax exemption (76) (28)<br />
Expenses not deductible for tax purposes 2,888 8,342<br />
Income not subject <strong>to</strong> taxation (1) (181)<br />
Share of results of associates 155 (199)<br />
Under provision of deferred tax assets in respect of prior years (291) (1,284)<br />
Over provision of deferred tax liabilities in respect of prior years – (198)<br />
Under/(over) provision of income tax in respect of prior years 441 (1,593)<br />
Income tax expense recognised in profit or loss 12,732 11,121<br />
The corporate income tax rate applicable <strong>to</strong> Yantai Raffles Shipyard Limited, YRS Shiplease Pte Ltd, Offshore Accommodation<br />
Pte Ltd, Deepwater Venture Pte Ltd, Peyan Singapore Pte Ltd and Yan Pex Singapore Pte Ltd was reduced <strong>to</strong> 17% for <strong>the</strong> year<br />
of assessment 2010 onwards from 18% for year of assessment 2009.<br />
The Company and its Singapore subsidiaries’ tax liabilities have been computed based on <strong>the</strong> corporate tax rate and tax laws<br />
prevailing at statement of <strong>financial</strong> position date.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
71<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
10. Income tax expense (cont’d)<br />
YRS Investments Limited and Raffles Yacht Limited are incorporated in Hong Kong and are subject <strong>to</strong> <strong>the</strong> income tax laws in<br />
Hong Kong at corporate tax rate of 16.5% (2008: 17.5%) for <strong>the</strong> <strong>financial</strong> year ended 31 December 2009.<br />
Pelican Waters Investment Ltd, Asiatic Offshore Limited, Coral Offshore Limited and Evolution Offshore Ltd are incorporated<br />
under <strong>the</strong> International Business Companies Act of <strong>the</strong> British Virgin Islands (“BVI”) and accordingly, are exempted from payment<br />
of BVI income taxes.<br />
On 28 Oc<strong>to</strong>ber 2009, Yantai Raffles Offshore Ltd. (“YROL”) was granted <strong>the</strong> “Advanced Technology Enterprise” status by<br />
National Science and Technology Association. YROL is hence subject <strong>to</strong> income tax rate of 15% (2008: 25%) for <strong>the</strong> three<br />
years beginning from <strong>the</strong> <strong>financial</strong> year ended 31 December 2009. Based on <strong>the</strong> implementation and administrative rules and<br />
regulations relating <strong>to</strong> <strong>the</strong> PRC Corporate Income Tax, Yantai Raffles Shipyard Co., Ltd. (“YRSCL”) and Haiyang Raffles Offshore<br />
Equipment Ltd. (“HROE”) are subjected <strong>to</strong> income tax at <strong>the</strong> rate of 25% (2008: 25%) for <strong>the</strong> <strong>financial</strong> year ended 31 December<br />
2009.<br />
The above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.<br />
11. Earnings per share<br />
Basic earnings per share are calculated by dividing <strong>the</strong> net result attributable <strong>to</strong> owners of <strong>the</strong> Company by <strong>the</strong> weighted average<br />
number of ordinary shares outstanding during <strong>the</strong> <strong>financial</strong> year.<br />
For <strong>the</strong> purpose of calculating diluted earnings per share, <strong>the</strong> weighted average number of ordinary shares outstanding is<br />
adjusted for <strong>the</strong> effects of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary<br />
shares, that is, share options.<br />
For <strong>the</strong> share options, <strong>the</strong> weighted average number of shares in issue is adjusted as if all share options that are dilutive were<br />
exercised. The number of shares that could have been issued upon <strong>the</strong> exercise of all dilutive share options less <strong>the</strong> number of<br />
shares that could have been issued at fair value (determined as <strong>the</strong> Company’s average share price for <strong>the</strong> <strong>financial</strong> year) for <strong>the</strong><br />
same <strong>to</strong>tal proceeds is added <strong>to</strong> <strong>the</strong> denomina<strong>to</strong>r as <strong>the</strong> number of shares issued for no consideration, with no adjustment <strong>to</strong><br />
results (numera<strong>to</strong>r).<br />
The following table reflects <strong>the</strong> profit and share data used in <strong>the</strong> computation of basic and diluted earnings per share for <strong>the</strong><br />
<strong>financial</strong> years ended 31 December:<br />
Group<br />
2009 2008<br />
Net profit attributable <strong>to</strong> owners of <strong>the</strong> Company ($’000) 27,332 26,932<br />
Weighted average number of ordinary shares in issue<br />
and adjusted for basic earnings per share (‘000) 273,565 273,524<br />
Earnings per share attributable <strong>to</strong> owners of <strong>the</strong> Company<br />
- Basic (cents per share) 9.99 9.85<br />
- Diluted (cents per share) 9.99 9.85<br />
The share options granted <strong>to</strong> employees are anti-dilutive for <strong>the</strong> <strong>financial</strong> years ended 31 December 2009 and 2008. Accordingly,<br />
diluted earnings per share are similar <strong>to</strong> basic earnings per share for <strong>the</strong> <strong>financial</strong> years ended 31 December 2009 and 2008.
72<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
12. Cash and bank balances<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Cash and cash equivalents 111,821 43,832 68,107 28,817<br />
Pledged deposits (current) 49,119 131,401 – 103,823<br />
160,940 175,233 68,107 132,640<br />
Pledged deposits (non-current) 7,856 – – –<br />
168,796 175,233 68,107 132,640<br />
At <strong>the</strong> statement of <strong>financial</strong> position date, <strong>the</strong> carrying amounts of cash and bank balances approximate <strong>the</strong>ir fair values.<br />
Cash and cash equivalents, pledged deposits (current) and pledged deposits (non-current) are denominated in <strong>the</strong> following<br />
currencies:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Cash and cash equivalents and<br />
pledged deposits (current):<br />
Chinese Renminbi 63,654 28,265 – –<br />
Euro 4,670 27,512 2,523 21,118<br />
Norwegian Kroner 10 658 10 658<br />
Singapore Dollar 146 129 146 129<br />
Sterling Pound 1 – 1 –<br />
United States Dollar 92,459 118,669 65,427 110,735<br />
160,940 175,233 68,107 132,640<br />
Pledged deposits (non-current):<br />
Chinese Renminbi 7,856 – – –<br />
168,796 175,233 68,107 132,640<br />
Pledged deposits at <strong>the</strong> statement of <strong>financial</strong> position dates has an average maturity of 1 day <strong>to</strong> 3 years (2008: 1 day <strong>to</strong> 6<br />
months) from <strong>the</strong> end of <strong>the</strong> <strong>financial</strong> year. The range of interest rates of pledged deposits and cash at bank are as follows:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
% % % %<br />
Chinese Renminbi 0.36 0.36 <strong>to</strong> 0.72 – –<br />
Euro 0.10 <strong>to</strong> 1.70 0.10 <strong>to</strong> 3.00 – 1.00 <strong>to</strong> 3.00<br />
Singapore Dollar – 0.00 <strong>to</strong> 0.10 – 0.00 <strong>to</strong> 0.10<br />
United States Dollar 0.10 <strong>to</strong> 2.88 0.25 <strong>to</strong> 3.12 – 0.25 <strong>to</strong> 3.12<br />
The exposure of cash and bank balances <strong>to</strong> interest rate risks is disclosed in Note 38(c).<br />
As at 31 December 2009, <strong>the</strong> Group secured short term bank loans of Nil (2008: $28,742,000) by way of a charge over certain<br />
bank balances amounting <strong>to</strong> Nil (2008: $5,887,000) as disclosed in Note 29(a).
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
73<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
13. Trade and o<strong>the</strong>r receivables<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Trade and o<strong>the</strong>r receivables:<br />
Trade receivables 35,872 36,305 29,269 31,840<br />
Less : allowance for doubtful<br />
receivables (832) (1,550) (323) (1,029)<br />
Trade receivables, net 35,040 34,755 28,946 30,811<br />
Tax recoverable 42,687 40,472 35 59<br />
O<strong>the</strong>r receivables 18,257 24,826 253 533<br />
Loans <strong>to</strong> an associate 2,485 2,259 – –<br />
Loans <strong>to</strong> third parties 25,965 2,877 17,544 –<br />
Deposits 6,288 3,723 3,639 3,723<br />
Less: allowance for doubtful<br />
receivables (3,002) (3,073) – –<br />
O<strong>the</strong>r receivables, net 92,680 71,084 21,471 4,315<br />
127,720 105,839 50,417 35,126<br />
Trade receivables are non-interest bearing and generally on 3 <strong>to</strong> 10 days’ terms. These are recognised at <strong>the</strong> original invoice<br />
amounts which represent <strong>the</strong>ir fair values on initial recognition.<br />
O<strong>the</strong>r receivables are non-interest bearing and have no fixed terms of repayment.<br />
Loans <strong>to</strong> an associate are non-trade, bearing annual interest rates of LIBOR 1 month plus 5% and STIBOR 1 month plus 5%<br />
(2008: LIBOR 1 month plus 5%) and repayable upon delivery of a vessel.<br />
Loans <strong>to</strong> third parties are non-trade, non-interesting bearing and repayable within 12 months from <strong>the</strong> statement of <strong>financial</strong><br />
position date.
74<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
13. Trade and o<strong>the</strong>r receivables (cont’d)<br />
Trade receivables<br />
Receivables that are past due but not impaired<br />
The Group has trade receivables amounting <strong>to</strong> $27,865,000 (2008: $12,233,000) that are past due at <strong>the</strong> statement of <strong>financial</strong><br />
position date but not impaired. These receivables are unsecured and <strong>the</strong> analysis of <strong>the</strong>ir aging at <strong>the</strong> statement of <strong>financial</strong><br />
position date is as follows:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Trade receivables past due:<br />
Lesser than 30 days 27,860 11,167 27,860 11,167<br />
30 <strong>to</strong> 60 days – – – –<br />
61 <strong>to</strong> 90 days 5 – 5 –<br />
91 <strong>to</strong> 120 days – – – –<br />
More than 120 days – 1,066 – 1,066<br />
27,865 12,233 27,865 12,233<br />
Receivables that are past due but not impaired relate <strong>to</strong> a number of independent cus<strong>to</strong>mers that have a good track record<br />
with <strong>the</strong> Group. Based on past experience, <strong>the</strong> direc<strong>to</strong>rs of <strong>the</strong> Company are of <strong>the</strong> opinion that no provision for impairment<br />
is necessary in respect of <strong>the</strong>se balances as <strong>the</strong>re has not been a significant change in credit quality and <strong>the</strong> balances are still<br />
considered fully recoverable. The Group does not hold any collateral or o<strong>the</strong>r credit enhancements over <strong>the</strong>se balances.<br />
Receivables that are impaired<br />
The Group’s trade receivables that are impaired at <strong>the</strong> statement of <strong>financial</strong> position date and <strong>the</strong> movement of <strong>the</strong> allowance<br />
accounts used <strong>to</strong> record <strong>the</strong> impairment are as follows:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Trade receivables – nominal amounts 1,913 2,602 1,404 2,081<br />
Less: allowance for impairment (832) (1,550) (323) (1,029)<br />
1,081 1,052 1,081 1,052<br />
Movement in allowance accounts:<br />
At beginning of <strong>the</strong> <strong>financial</strong> year 1,550 1,625 1,029 1,138<br />
Allowance for <strong>the</strong> year 109 – 109 –<br />
Write off during <strong>the</strong> year (722) – (722)<br />
Write back during <strong>the</strong> year (93) (109) (93) (109)<br />
Exchange differences (12) 34 – –<br />
At end of <strong>the</strong> <strong>financial</strong> year 832 1,550 323 1,029<br />
Trade receivables that are individually determined <strong>to</strong> be impaired at <strong>the</strong> statement of <strong>financial</strong> position date relate <strong>to</strong> deb<strong>to</strong>rs that<br />
are in significant <strong>financial</strong> difficulties and/or have defaulted on payments. These receivables are not secured by any collateral or<br />
credit enhancements.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
75<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
13. Trade and o<strong>the</strong>r receivables (cont’d)<br />
O<strong>the</strong>r receivables<br />
As of 31 December 2009, tax recoverable includes an amount of $8,224,000 (2008: Nil) withheld by State Tax Bureau of Yantai<br />
Export Processing Zone (<strong>the</strong> “Tax Bureau”), pending final results of <strong>the</strong> regular tax inspection on a subsidiary, YROL, for <strong>the</strong><br />
<strong>financial</strong> years ended 31 December 2008 and 31 December 2007. In December 2009, <strong>the</strong> Tax Bureau initiated <strong>the</strong> transfer<br />
pricing review on YROL from years 2001 <strong>to</strong> 2008, which is still ongoing at <strong>the</strong> date of this report. The direc<strong>to</strong>rs are of <strong>the</strong> opinion<br />
that <strong>the</strong> results of tax reviews cannot be reliably estimated and no allowance for doubtful receivables has been provided as at<br />
31 December 2009.<br />
Movements in allowance for doubtful receivables are as follows:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
At beginning of <strong>the</strong> <strong>financial</strong> year 3,073 3,514 – 635<br />
Write back during <strong>the</strong> year – (635) – (635)<br />
Exchange difference (71) 194 – –<br />
At end of <strong>the</strong> <strong>financial</strong> year 3,002 3,073 – –<br />
Trade and o<strong>the</strong>r receivables are denominated in <strong>the</strong> following currencies:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Chinese Renminbi 66,177 61,213 11 167<br />
Euro 6,252 17,723 6,252 17,723<br />
Norwegian Kroner – 1,119 – 1,119<br />
Singapore Dollar 192 216 191 216<br />
United States Dollar 55,099 25,568 43,963 15,901<br />
127,720 105,839 50,417 35,126
76<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
14. Amounts due from/(<strong>to</strong>) subsidiaries<br />
Amounts due from subsidiaries (non-trade) (non-current) are unsecured, non-interest bearing and are not expected <strong>to</strong> be<br />
collected within <strong>the</strong> next 12 months.<br />
Amounts due from subsidiaries are denominated in <strong>the</strong> following currencies:<br />
Company<br />
2009 2008<br />
$’000 $’000<br />
Chinese Renminbi 12,099 13,232<br />
Euro 1,683 846<br />
Norwegian Kroner 4,017 3,392<br />
Singapore Dollar 503 132<br />
United States Dollar 58,793 72,049<br />
77,095 89,651<br />
Amounts due <strong>to</strong> subsidiaries (trade) (current) are unsecured, non-interest bearing and are expected <strong>to</strong> be repaid within <strong>the</strong> next<br />
12 months.<br />
Amounts due <strong>to</strong> subsidiaries are denominated in <strong>the</strong> following currencies:<br />
Company<br />
2009 2008<br />
$’000 $’000<br />
Chinese Renminbi – 119<br />
United States Dollar – 858<br />
– 977
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
77<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
15. Inven<strong>to</strong>ries<br />
Inven<strong>to</strong>ries are stated at <strong>the</strong> lower of cost and net realisable value and comprise of materials and supplies held for<br />
construction.<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Statement of <strong>financial</strong> position:<br />
Inven<strong>to</strong>ries, at cost 149,641 244,782 44,905 136,344<br />
Less: provision for inven<strong>to</strong>ry obsolescence (362) (72) – –<br />
Inven<strong>to</strong>ries, net 149,279 244,710 44,905 136,344<br />
Income statement:<br />
At beginning of <strong>the</strong> <strong>financial</strong> year 244,782 209,122<br />
Materials purchased 127,181 289,722<br />
Inven<strong>to</strong>ries recognised as an expense in<br />
cost of sales (222,021) (254,106)<br />
Inven<strong>to</strong>ries written down (301) –<br />
Reversal of write-down of inven<strong>to</strong>ries – 44<br />
At end of <strong>the</strong> <strong>financial</strong> year 149,641 244,782<br />
Bank borrowings are secured by inven<strong>to</strong>ries amounting <strong>to</strong> $10,769,100 (2008: $10,981,000) as disclosed in Note 29(a).<br />
16. Vessels under construction<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Vessels under construction 247,822 88,903 239,061 135,375<br />
Vessels under construction as at 31 December 2009 are intended for sale or lease upon <strong>the</strong> completion of construction.
78<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
17. Construction work-in-progress<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Aggregate contract costs recognised and<br />
recognised profits <strong>to</strong> date 1,998,513 1,155,595 1,888,481 1,587,756<br />
Less: Liquidated damages and foreseeable losses (30,316) (27,796) (23,889) (17,169)<br />
Progress billings received and receivable (1,665,216) (1,349,288) (1,651,626) (1,378,162)<br />
Amount due from/(<strong>to</strong>) cus<strong>to</strong>mers for contract work,<br />
net 302,981 (221,489) 212,966 192,425<br />
Comprising:<br />
Construction work-in-progress in excess of progress<br />
billings 336,533 94,302 268,783 311,604<br />
Progress billings in excess of construction work-inprogress<br />
(33,552) (315,791) (55,817) (119,179)<br />
302,981 (221,489) 212,966 192,425<br />
Borrowings costs of $8,237,000 (2008: $5,433,000) arising from financing <strong>the</strong> construction contracts were capitalised during<br />
<strong>the</strong> <strong>financial</strong> year and included in <strong>the</strong> “aggregate contract costs recognised”.<br />
Bank borrowings are secured by construction work-in-progress of <strong>the</strong> projects with <strong>the</strong> balance of $41,320,000 (2008:<br />
$31,382,000) and future contract miles<strong>to</strong>nes of certain projects of $475,909,000 (2008: Nil) as disclosed in Note 29(a).<br />
Included in “aggregate contract costs recognised” of <strong>the</strong> Company is an amount of Nil (2008: $21,794,000) of advances <strong>to</strong><br />
subsidiaries in relation <strong>to</strong> ongoing construction contracts.<br />
18. O<strong>the</strong>r current assets<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Prepayments 3,100 718 1,847 82<br />
Advance <strong>to</strong> suppliers, net 317,386 432,403 152,455 193,409<br />
Advance <strong>to</strong> an associate – 37,580 – –<br />
Total 320,486 470,701 154,302 193,491
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
79<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
19. Financial assets, available-for-sale<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
At beginning of <strong>the</strong> <strong>financial</strong> year 3,529 58,872<br />
Additions – 1,870<br />
Allowance for impairment (2,592) (10,796)<br />
Reclassification <strong>to</strong> investment in an associate (Note 22) – (20,086)<br />
Recognition/(reversal) of changes of fair value in equity (Note 32(b)(iv)) 206 (26,198)<br />
Currency translation difference (2) (133)<br />
At end of <strong>the</strong> <strong>financial</strong> year 1,141 3,529<br />
The <strong>financial</strong> assets available-for-sale are denominated in <strong>the</strong> following currencies:<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Quoted securities:<br />
- Australian Dollars 1,141 2,036<br />
- Norwegian Kroner – 1,493<br />
1,141 3,529<br />
There has been a significant decline in <strong>the</strong> market value of <strong>the</strong> listed equity investments during <strong>the</strong> <strong>financial</strong> year. Such a decline<br />
indicates that <strong>the</strong> listed equity investments have been impaired and an impairment loss of $2,592,000 (2008: $10,796,000) has<br />
been recognised in <strong>the</strong> profit or loss for <strong>the</strong> <strong>financial</strong> year.
80<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
20. Investment in subsidiaries<br />
Company<br />
2009 2008<br />
$’000 $’000<br />
Shares, at cost 81,382 81,382<br />
Capital contribution in <strong>the</strong> form of share options issued <strong>to</strong> employees of subsidiaries 2,484 1,754<br />
As at 31 December 2009, <strong>the</strong> details of <strong>the</strong> subsidiaries of <strong>the</strong> Group are as follows:<br />
83,866 83,136<br />
Name of companies<br />
Principal activities<br />
Country of<br />
incorporation<br />
Effective equity interest<br />
holding by <strong>the</strong> Group<br />
31<br />
December<br />
2009<br />
31<br />
December<br />
2008<br />
% %<br />
Held by <strong>the</strong> Company<br />
Yantai Raffles Offshore Ltd.<br />
(now known as Yantai CIMC Raffles<br />
Offshore Ltd) (b)<br />
Offshore and marine project<br />
construction and supply of<br />
engineering works and materials<br />
People’s Republic<br />
of China<br />
94.38 (a) 94.38 (a)<br />
Yantai Raffles Shipyard Co., Ltd.<br />
(now known as Yantai CIMC Raffles<br />
Shipyard Co., Ltd) (b)<br />
Offshore and marine project<br />
construction and supply of<br />
engineering works and materials<br />
People’s Republic<br />
of China<br />
71.63 71.63<br />
YRS Investments Limited (c) Investment holding Hong Kong SAR 100 100<br />
YRS Shiplease Pte Ltd. (d)<br />
Offshore and marine vessel leasing<br />
opera<strong>to</strong>r (including chartering)<br />
Singapore 100 100<br />
Raffles Yacht Limited (c)<br />
Construction and sale<br />
of mega yachts<br />
Hong Kong SAR 100 100<br />
Held through Yantai Raffles Offshore<br />
Ltd. (now known as Yantai CIMC<br />
Raffles Offshore Ltd)<br />
Haiyang Raffles Offshore Equipment<br />
Ltd. (b)<br />
Offshore and marine project<br />
construction and supply of<br />
engineering works and materials<br />
People’s Republic<br />
of China<br />
100 100<br />
Held through YRS Shiplease<br />
Pte Ltd.<br />
Pelican Waters Investments Ltd (e)<br />
Ownership and chartering of self<br />
unloading bulk carrier<br />
British Virgin Islands 100 100<br />
Asiatic Offshore Limited (e) Investment holding British Virgin Islands 100 100
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
81<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
20. Investment in subsidiaries (cont’d)<br />
Name of companies<br />
Principal activities<br />
Country of<br />
incorporation<br />
Effective equity interest<br />
holding by <strong>the</strong> Group<br />
31 31<br />
December December<br />
2009 2008<br />
% %<br />
Held through YRS Shiplease<br />
Pte Ltd. (cont’d)<br />
Coral Offshore Limited (e), (f) Dormant British Virgin<br />
Islands<br />
100 100<br />
Offshore Accomodation Pte Ltd. (d)<br />
Ownership and chartering of<br />
accommodation barge<br />
Singapore 100 100<br />
Evolution Offshore Ltd. (e), (f) Dormant British Virgin<br />
Islands<br />
100 100<br />
Deepwater Venture Pte Ltd. (d) Dormant Singapore 100 100<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
(e)<br />
(f)<br />
Effective equity interest stated is inclusive of indirect interests held by a subsidiary company, Yantai Raffles Shipyard Co.,<br />
Ltd.<br />
Audited by Wan Long Asia Certified Public Accountants, a firm of certified public accountants in <strong>the</strong> PRC for PRC statu<strong>to</strong>ry<br />
audit purpose and audited by Ernst & Young, Shanghai for purpose of consolidation.<br />
Audited by Grant Thorn<strong>to</strong>n CPA, Hong Kong.<br />
Audited by Ernst & Young LLP, Singapore.<br />
Not required <strong>to</strong> be audited under <strong>the</strong> laws of <strong>the</strong> country of incorporation.<br />
These entities are in <strong>the</strong> midst of being struck off.<br />
Subsidiaries such as Borneo Offshore Limited, Deep Water Offshore Limited, Far East Drilling Ltd., Baratpur Limited,<br />
YRS Chartering Pte. Ltd., and YRS Offshore Chartering Pte. Ltd. were deregistered during <strong>the</strong> <strong>financial</strong> year ended<br />
31 December 2009.
82<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
21. Investment in joint ventures<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Unquoted shares, at cost – –<br />
Name of companies<br />
Principal activities<br />
Country of<br />
incorporation<br />
Effective equity interest<br />
holding by <strong>the</strong> Group<br />
31<br />
December<br />
2009<br />
31<br />
December<br />
2008<br />
% %<br />
Held through Deepwater Venture Pte Ltd.<br />
Peyan Singapore Pte Ltd. (a) Dormant Singapore 50 50<br />
Yan Pex Singapore Pte Ltd. (a) Dormant Singapore 50 50<br />
(a)<br />
Audited by Ernst & Young LLP, Singapore.<br />
As at 31 December 2009, <strong>the</strong> carrying amounts of <strong>the</strong> two joint ventures have been fully impaired.<br />
22. Investment in associates<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Shares, at cost<br />
At beginning of <strong>financial</strong> year 15,978 3,473<br />
Reclassification from <strong>financial</strong> assets, available-for-sale (Note19) – 20,086<br />
Disposal during <strong>the</strong> year – (1,139)<br />
At end of <strong>financial</strong> year 15,978 22,420<br />
Share of post-acquisition (losses)/profits (801) 1,285<br />
Loss on disposal of investment in an associate – (64)<br />
Impairment loss on investment in an associate – (7,676)<br />
Exchange difference (349) 13<br />
14,828 15,978
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
83<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
22. Investment in associates (cont’d)<br />
Name<br />
Principal activities<br />
Country of<br />
incorporation<br />
Effective equity interest<br />
holding by <strong>the</strong> Group<br />
31 31<br />
December December<br />
2009 2008<br />
% %<br />
Held through YRS Shiplease Pte Ltd.<br />
Consafe MSV AB (a)<br />
Ownership and chartering of semisubmersible<br />
crane/accommodation<br />
vessel<br />
Sweden 36% 36%<br />
Held through Yantai Raffles Offshore<br />
Ltd. (now known as Yantai CIMC<br />
Raffles Offshore Ltd)<br />
Haiyang Blue Island Offshore Ltd (b)<br />
(“HBIO”)<br />
Design, construct, sale and repair<br />
offshore marine facilities<br />
People’s Republic of<br />
China<br />
28% 28%<br />
Held through YRS Investments<br />
Limited (“YRSI”)<br />
TSC Offshore Group Ltd (c) (“TSC”)<br />
Construction and trading of rig<br />
products and technology and oilfield<br />
expendables and supplies, <strong>the</strong><br />
provision of rig turnkey solutions and<br />
consultancy services<br />
Cayman Islands 7% (d) 8% (d)<br />
(a)<br />
(b)<br />
(c)<br />
(d)<br />
Audited by Ohrlings PricewaterhouseCoopers AB.<br />
Audited by Shandong Wanlong Qilu CPA Co. Ltd., a firm of certified public accountants in <strong>the</strong> PRC.<br />
Audited by KPMG, Hong Kong<br />
On 5 November 2008, a subsidiary and a direc<strong>to</strong>r cum shareholder, Brian Chang entered in<strong>to</strong> an agreement <strong>to</strong> act in<br />
concert in respect of <strong>the</strong>ir shareholding in TSC. Both parties agree <strong>to</strong> act <strong>to</strong>ge<strong>the</strong>r and co-operate by concerted exercise<br />
of <strong>the</strong> voting rights <strong>the</strong>y hold as well as in respect of advisory role according <strong>to</strong> Brian Chang by TSC. Accordingly, <strong>the</strong><br />
investment in TSC is classified as investment in an associate as <strong>the</strong> subsidiary has significant influence over TSC.<br />
The summarised <strong>financial</strong> information of <strong>the</strong> associates, not adjusted for <strong>the</strong> proportion of ownership interest held by <strong>the</strong> Group,<br />
is as follows:<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Assets and liabilities of <strong>the</strong> associates:<br />
Total assets 487,645 432,172<br />
Total liabilities 274,984 255,554<br />
Results of <strong>the</strong> associates:<br />
Revenue 218,862 248,855<br />
(Loss)/profit for <strong>the</strong> <strong>financial</strong> year (9,153) 16,963
84<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
23. Property, plant and equipment<br />
Group<br />
Quays<br />
and dry<br />
Machinery<br />
and<br />
Office Mo<strong>to</strong>r Construction<br />
Buildings docks equipment Barges equipment vehicles in progress Total<br />
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000<br />
Cost<br />
At 1 January 2008 23,454 95,168 69,949 6,748 1,434 463 128,622 325,838<br />
Currency translation differences 1,953 6,702 8,228 1,516 – – 5,568 23,967<br />
Additions 2,010 501 10,300 35,519 100 – 115,449 163,879<br />
Transfers 7,491 2,518 89,344 24,038 – – (123,391) –<br />
Disposals (431) – (3,222) (33,228) – – – (36,881)<br />
At 31 December 2008 34,477 104,889 174,599 34,593 1,534 463 126,248 476,803<br />
Currency translation differences (1,014) (2,748) (5,498) (1,155) – – (1,467) (11,882)<br />
Additions 201 386 16,947 11,555 16 – 60,815 89,920<br />
Transfers 6,279 8,848 28,839 191 – – (44,796) (639)<br />
Disposals (18) – (748) – (4) – – (770)<br />
At 31 December 2009 39,925 111,375 214,139 45,184 1,546 463 140,800 553,432<br />
Accumulated depreciation<br />
and impairment loss<br />
At 1 January 2008 1,742 7,815 16,218 1,563 1,194 20 – 28,552<br />
Currency translation differences 144 633 1,154 80 – – – 2,011<br />
Depreciation charge 788 2,754 5,596 973 147 93 – 10,351<br />
Disposals (140) – (2,147) – – – – (2,287)<br />
At 31 December 2008 2,534 11,202 20,821 2,616 1,341 113 – 38,627<br />
Currency translation differences (92) (354) (751) (92) – – – (1,289)<br />
Depreciation charge 1,033 2,945 9,383 2,185 131 93 – 15,770<br />
Disposals (8) – (491) – (4) – – (503)<br />
Impairment loss – – 328 – – – – 328<br />
At 31 December 2009 3,467 13,793 29,290 4,709 1,468 206 – 52,933<br />
Net carrying amount<br />
At 31 December 2009 36,458 97,582 184,849 40,475 78 257 140,800 500,499<br />
At 31 December 2008 31,943 93,687 153,778 31,977 193 350 126,248 438,176
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
85<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
23. Property, plant and equipment (cont’d)<br />
Machinery<br />
and<br />
equipment<br />
Office<br />
equipment<br />
Mo<strong>to</strong>r<br />
vehicles<br />
Construction<br />
in progress<br />
Total<br />
$’000 $’000 $’000 $’000 $’000<br />
Company<br />
Cost<br />
At 1 January 2008 1,368 1,433 463 – 3,264<br />
Additions – 101 – 616 717<br />
At 31 December 2008 1,368 1,534 463 616 3,981<br />
Additions – 16 – 234 250<br />
Disposals – (4) – – (4)<br />
Transfers <strong>to</strong> intangible assets – – – (576) (576)<br />
At 31 December 2009 1,368 1,546 463 274 3,651<br />
Accumulated depreciation<br />
At 1 January 2008 1,368 1,193 20 – 2,581<br />
Depreciation charge – 147 93 – 240<br />
At 31 December 2008 1,368 1,340 113 – 2,821<br />
Depreciation charge – 131 93 – 224<br />
Disposals – (4) – – (4)<br />
At 31 December 2009 1,368 1,467 206 – 3,041<br />
Net carrying amount<br />
At 31 December 2009 – 79 257 274 610<br />
At 31 December 2008 – 194 350 616 1,160<br />
Depreciation of property, plant and equipment<br />
Depreciation on property, plant and equipment of $13,453,000 (2008: $8,752,000) arising from construction work were<br />
capitalised during <strong>the</strong> <strong>financial</strong> year, and included in <strong>the</strong> aggregate contract costs.<br />
Property, plant and equipment pledged as security<br />
Bank borrowings are secured by a 20,000T crane and construction in progress with a carrying amount of $61,388,000 (2008:<br />
$63,007,000) and $15,361,000 (2008: Nil) as disclosed in Note 29(a).
86<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
23. Property, plant and equipment (cont’d)<br />
Property, plant and equipment held under finance lease<br />
During <strong>the</strong> <strong>financial</strong> year, <strong>the</strong> Group acquired barges, machinery and equipment with an aggregate cost of $39,375,000 (2008:<br />
$35,519,000) by means of finance leases.<br />
The carrying amounts of <strong>the</strong> machinery and equipment, barges and mo<strong>to</strong>r vehicles held under finance leases at <strong>the</strong> statement<br />
of <strong>financial</strong> position date were $70,068,000 (2008: $36,277,000). The carrying amounts of each category of finance lease are<br />
as follows:<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Machinery and equipment 29,336 –<br />
Barges 40,475 35,927<br />
Mo<strong>to</strong>r vehicles 257 350<br />
Total 70,068 36,277<br />
Building ownership certificates<br />
The Group is in <strong>the</strong> process of applying for <strong>the</strong> Building Ownership Certificates for certain buildings and premises of <strong>the</strong> PRC<br />
subsidiaries. The carrying amount of <strong>the</strong> buildings without <strong>the</strong> relevant ownership certificates amounted <strong>to</strong> $21,328,000 (2008:<br />
$22,311,000) as at 31 December 2009. The Group has made <strong>the</strong> necessary applications <strong>to</strong> <strong>the</strong> relevant authorities. The direc<strong>to</strong>rs<br />
expect <strong>to</strong> obtain <strong>the</strong> relevant approvals in due course and are of <strong>the</strong> opinion that <strong>the</strong> PRC subsidiaries can continue <strong>to</strong> use <strong>the</strong><br />
buildings and premises in <strong>the</strong> meantime without any penalty. The buildings and premises have been recognised as assets of <strong>the</strong><br />
Group pending obtaining <strong>the</strong> ownership certificates.<br />
No contingent liabilities in connection with any possible breach or non-compliance with <strong>the</strong> relevant laws and regulations in<br />
respect of <strong>the</strong> buildings without ownership certificates have been provided for in <strong>the</strong> <strong>financial</strong> statements as <strong>the</strong> direc<strong>to</strong>rs are of<br />
<strong>the</strong> opinion that <strong>the</strong> risk associated <strong>the</strong>reof is low.<br />
24. Prepayments and land and sea use rights<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Prepayment in relation <strong>to</strong> purchase of land use right 1,356 –<br />
Advance in relation <strong>to</strong> an acquisition of a company (Note 37(a)) 31,979 –<br />
O<strong>the</strong>r prepayments 223 302<br />
Total 33,558 302<br />
Land and sea use rights<br />
The Group’s land and sea use rights are located in <strong>the</strong> PRC where <strong>the</strong> Group’s PRC shipbuilding and s<strong>to</strong>rage facilities reside.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
87<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
24. Prepayments and land and sea use rights (cont’d)<br />
Land and sea use rights (cont’d)<br />
Land use<br />
rights<br />
Sea use<br />
rights<br />
Total<br />
$’000 $’000 $’000<br />
Group<br />
Cost<br />
At 1 January 2008 548 3,891 4,439<br />
Currency translation differences 942 321 1,263<br />
Additions 25,130 1,393 26,523<br />
At 31 December 2008 26,620 5,605 32,225<br />
Currency translation differences (656) (131) (787)<br />
Additions 966 _ 966<br />
Transfer from construction in progress 63 _ 63<br />
At 31 December 2009 26,993 5,474 32,467<br />
Accumulated amortisation<br />
At 1 January 2008 – 600 600<br />
Currency translation differences 12 45 57<br />
Amortisation 324 128 452<br />
At 31 December 2008 336 773 1,109<br />
Currency translation differences (28) (22) (50)<br />
Amortisation 634 120 754<br />
At 31 December 2009 942 871 1,813<br />
Net carrying amount<br />
At 31 December 2009 26,051 4,603 30,654<br />
At 31 December 2008 26,284 4,832 31,116<br />
Average remaining amortisation period (years) 32 41<br />
Land use rights agreements<br />
In accordance with <strong>the</strong> relevant PRC laws, <strong>the</strong> land use rights agreements relating <strong>to</strong> <strong>the</strong> land on which <strong>the</strong> property, plant and<br />
equipment of <strong>the</strong> PRC subsidiaries is residing allow <strong>the</strong> PRC government <strong>to</strong> expropriate <strong>the</strong> land with 30 days’ notice <strong>to</strong> <strong>the</strong><br />
subsidiaries.<br />
In addition, <strong>the</strong> land on which <strong>the</strong> property, plant and equipment of <strong>the</strong> PRC subsidiaries is residing is held on a leasehold basis.<br />
Accordingly, <strong>the</strong> PRC subsidiaries have <strong>to</strong> obtain <strong>the</strong> approval of <strong>the</strong> relevant authorities before <strong>the</strong>y can sell or mortgage certain<br />
properties on <strong>the</strong>ir land.<br />
The Group is in <strong>the</strong> process of applying for <strong>the</strong> Land Use Right Certificate in respect of land reclaimed from <strong>the</strong> sea.
88<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
25. Intangible assets<br />
Goodwill<br />
Computer<br />
software<br />
licenses<br />
Total<br />
$’000 $’000 $’000<br />
Group<br />
Cost<br />
At 1 January 2008 16,397 6,188 22,585<br />
Currency translation differences – 120 120<br />
Additions – 6,897 6,897<br />
At 31 December 2008 16,397 13,205 29,602<br />
Currency translation differences – (86) (86)<br />
Additions – 1,104 1,104<br />
Transfer from construction in progress – 576 576<br />
At 31 December 2009 16,397 14,799 31,196<br />
Accumulated amortisation<br />
At 1 January 2008 – 2,157 2,157<br />
Amortisation – 2,587 2,587<br />
Currency translation differences – 40 40<br />
At 31 December 2008 – 4,784 4,784<br />
Amortisation – 3,639 3,639<br />
Currency translation differences – (24) (24)<br />
At 31 December 2009 – 8,399 8,399<br />
Net carrying amount<br />
At 31 December 2009 16,397 6,400 22,797<br />
At 31 December 2008 16,397 8,421 24,818<br />
Average remaining amortisation period (years) – 5
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
89<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
25. Intangible assets (cont’d)<br />
Computer<br />
software<br />
licenses<br />
$’000<br />
Company<br />
Cost<br />
At 1 January 2008 4,879<br />
Additions 6,094<br />
At 31 December 2008 10,973<br />
Additions 44<br />
Transfer from construction-in-progress 576<br />
At 31 December 2009 11,593<br />
Accumulated amortisation and impairment loss<br />
At 1 January 2008 1,705<br />
Amortisation 2,400<br />
At 31 December 2008 4,105<br />
Amortisation 3,383<br />
At 31 December 2009 7,488<br />
Net carrying amount<br />
At 31 December 2009 4,105<br />
At 31 December 2008 6,868<br />
Average remaining amortisation period (years) 1<br />
Impairment test for goodwill<br />
Goodwill arising from business combinations has been allocated <strong>to</strong> <strong>the</strong> cash-generating unit (“CGU”) for impairment testing. The<br />
recoverable amount is determined based on a value in use calculation using cash flow projections based on <strong>financial</strong> budgets<br />
approved by management covering a period of three <strong>financial</strong> years ending 2010, 2011 and 2012 (<strong>the</strong> “Projection Periods”). The<br />
pre-tax discount rate applied <strong>to</strong> <strong>the</strong> cash flow projections is 5.91% (2008:7.24%). The <strong>financial</strong> budget is prepared based on<br />
existing and potential contracts <strong>to</strong> be granted <strong>to</strong> <strong>the</strong> CGU for <strong>the</strong> Projection Periods.<br />
The following describes each key assumption on which management has based on its cash flow projections <strong>to</strong> undertake<br />
impairment testing of goodwill.<br />
– Budgeted gross margins – management determined <strong>the</strong> budgeted gross margin based on operational plans for <strong>the</strong> CGU<br />
and <strong>the</strong> expected margin <strong>to</strong> be achieved which is reasonable in view of <strong>the</strong> scope of services provided by <strong>the</strong> CGU.<br />
– Growth rates – management forecasted growth rates of 2% in 2009 (2008: 2%) based on order book on hand as well<br />
as published industry research and do not exceed <strong>the</strong> long-term average growth rate for <strong>the</strong> industries relevant <strong>to</strong> <strong>the</strong><br />
CGUs.
90<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
26. Deferred tax<br />
Deferred tax assets and liabilities are offset when <strong>the</strong>re is a legally enforceable right <strong>to</strong> set off current tax assets against current<br />
tax liabilities and when <strong>the</strong> deferred taxes relate <strong>to</strong> <strong>the</strong> same fiscal authority.<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Deferred tax assets 11,590 17,221 3,860 3,705<br />
Deferred tax liabilities (800) (1,227) (1,318) (2,094)<br />
10,790 15,994 2,542 1,611<br />
The movement in <strong>the</strong> deferred tax assets and liabilities during <strong>the</strong> <strong>financial</strong> year is as follows:<br />
Fair value<br />
losses on<br />
derivatives<br />
<strong>financial</strong><br />
instruments,<br />
net<br />
Unutilised<br />
business<br />
losses<br />
Interest<br />
receivables<br />
Amortisation<br />
of preoperating<br />
expenses<br />
Group<br />
Impairment<br />
and<br />
depreciation<br />
of property,<br />
plant and<br />
equipment<br />
Provisions<br />
Accrued<br />
expenses<br />
Recognised<br />
profits on<br />
construction<br />
contracts<br />
Reinvestment<br />
allowance<br />
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000<br />
Total<br />
Deferred<br />
tax assets/<br />
(liabilities)<br />
At 1 January<br />
2008 – – – 498 (697) 2,015 865 6,405 – 9,086<br />
Currency<br />
translation<br />
differences 18 6 – 16 59 124 67 262 2 554<br />
Credit/(charge)<br />
<strong>to</strong> profit or loss<br />
(Note 10) 514 282 (713) (514) 34 5,884 176 591 44 6,298<br />
Reduction in tax<br />
rates – – – – 12 31 13 – – 56<br />
At 31 December<br />
2008 532 288 (713) – (592) 8,054 1,121 7,258 46 15,994<br />
Currency<br />
translation<br />
differences 5 (6) – – (10) (39) (60) 26 (1) (85)<br />
(Charge)/credit <strong>to</strong><br />
profit or loss<br />
(Note 10) (569) (282) 160 – 297 (1,565) 914 (3,216) – (4,261)<br />
Reduction in tax<br />
rates (Note 10) 54 – (7) – 65 102 59 (1,131) – (858)<br />
At 31 December<br />
2009 22 – (560) – (240) 6,552 2,034 2,937 45 10,790
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
91<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
26. Deferred tax (cont’d)<br />
Company<br />
Impairment<br />
and<br />
depreciation<br />
of property,<br />
plant and<br />
equipment Provisions<br />
Interest<br />
receivables<br />
Total<br />
$’000 $’000 $’000 $’000<br />
Deferred tax (liabilities)/assets<br />
At 1 January 2008 (1,692) – – (1,692)<br />
Charge/(credit) <strong>to</strong> profit or loss 311 3,705 (713) 3,303<br />
At 31 December 2008 (1,381) 3,705 (713) 1,611<br />
Credit <strong>to</strong> profit or loss 623 155 153 931<br />
At 31 December 2009 (758) 3,860 (560) 2,542<br />
Unrecognised tax losses<br />
At <strong>the</strong> statement of <strong>financial</strong> position date, <strong>the</strong> Group has no tax losses that are available for offset against future taxable profits<br />
of <strong>the</strong> companies in which <strong>the</strong> losses arose.<br />
Unrecognised temporary differences relating <strong>to</strong> investments in subsidiaries<br />
At <strong>the</strong> statement of <strong>financial</strong> position date, no deferred tax liability (2008: Nil) has been recognised for taxes that would be<br />
payable on <strong>the</strong> undistributed earnings of certain of <strong>the</strong> Group’s subsidiaries as <strong>the</strong> Group has determined that undistributed<br />
earnings of its subsidiaries will not be distributed in <strong>the</strong> foreseeable future.<br />
27. Advances from cus<strong>to</strong>mers<br />
This relates <strong>to</strong> advances received on construction contracts.
92<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
28. Trade and o<strong>the</strong>r payables<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Trade payables:<br />
- third parties 239,048 209,289 41,023 62,280<br />
- amounts due <strong>to</strong> an associate 28,051 1,244 – –<br />
267,099 210,533 41,023 62,280<br />
O<strong>the</strong>r payables 31,701 32,806 19,304 24,130<br />
Amount due <strong>to</strong> CIMC Vehicle Financial Leasing Co.,<br />
Ltd. (1) – 6,105 – –<br />
Amounts due <strong>to</strong> Leung Kee Holdings Ltd. (2) 3,509 10,070 3,509 10,070<br />
Amounts due <strong>to</strong> a direc<strong>to</strong>r (3) 1,257 1,893 1,257 1,893<br />
Accrued costs of sales 71,118 60,996 16,552 –<br />
Accrued operating expenses 9,034 7,073 2,177 4,166<br />
116,619 118,943 42,799 40,259<br />
Total 383,718 329,476 83,822 102,539<br />
(1)<br />
CIMC Vehicle Financial Leasing Co., Ltd (“CIMC Leasing”) is a shareholder related company.<br />
(2)<br />
Leung Kee Holdings Ltd. is a direc<strong>to</strong>r related company.<br />
(3)<br />
The amounts are due <strong>to</strong> a direc<strong>to</strong>r, who is also a major shareholder.<br />
The carrying amounts of trade and o<strong>the</strong>r payables approximate <strong>the</strong>ir fair values at <strong>the</strong> statement of <strong>financial</strong> position date.<br />
Trade payables are unsecured, non-interest bearing and generally on 30 <strong>to</strong> 60 days’ terms.<br />
O<strong>the</strong>r payables, amounts due <strong>to</strong> an associate (trade) and amounts due <strong>to</strong> a direc<strong>to</strong>r are unsecured, non-interest bearing and<br />
repayable on demand.<br />
The amount due <strong>to</strong> CIMC Leasing is unsecured, non-interest bearing and fully repaid in <strong>the</strong> <strong>financial</strong> year ended 31 December 2009.<br />
The amounts due <strong>to</strong> Leung Kee Holdings Ltd. are unsecured, bear effective interest rate at 3% per annum over and above <strong>the</strong><br />
London Inter-Bank Offered Rate (“LIBOR”) (2008: 3% above LIBOR per annum) and have been fully repaid subsequent <strong>to</strong> <strong>the</strong><br />
<strong>financial</strong> year ended 31 December 2009.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
93<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
28. Trade and o<strong>the</strong>r payables (cont’d)<br />
Trade and o<strong>the</strong>r payables are denominated in <strong>the</strong> following currencies:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Chinese Renminbi 250,845 199,070 140 107<br />
Euro 34,884 26,315 22,936 18,559<br />
Singapore Dollar 36,327 6,602 36,223 6,579<br />
Sterling Pound 127 3,553 18 3,440<br />
United States Dollar 60,724 72,569 24,504 55,637<br />
Norwegian Kroner 811 20,556 1 17,406<br />
Swedish Krona – 811 – 811<br />
383,718 329,476 83,822 102,539<br />
29. Borrowings<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Current<br />
Finance lease 8,474 36 36 36<br />
Loans from banks:<br />
- Secured 215,473 167,571 80,431 92,100<br />
- Unsecured 340,162 217,464 – 206,605<br />
555,635 385,035 80,431 298,705<br />
564,109 385,071 80,467 298,741<br />
Non-current<br />
Finance lease 12,279 146 109 146<br />
Loans from banks:<br />
- Secured 209,181 21,052 182,467 –<br />
- Unsecured 102,794 – – –<br />
311,975 21,052 182,467 –<br />
Loan from a third party 230 235 – –<br />
324,484 21,433 182,576 146<br />
Total borrowings 888,593 406,504 263,043 298,887
94<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
29. Borrowings (cont’d)<br />
As at 31 December 2009, certain direc<strong>to</strong>rs of <strong>the</strong> Company have provided personal guarantees amounting <strong>to</strong> Nil (2008:<br />
$38,552,000) in respect of certain credit facilities granted <strong>to</strong> <strong>the</strong> Group.<br />
(a)<br />
Securities granted<br />
Secured loans from banks<br />
The secured loans from banks bear effective interest at 0.60% <strong>to</strong> 5.76% (2008: 1.96% <strong>to</strong> 8.22%). Certain bank borrowings<br />
are secured by <strong>the</strong> following:<br />
(i) certain property, plant and equipment as disclosed in Note 23;<br />
(ii) construction work-in-progress as disclosed in Note 17;<br />
(iii) inven<strong>to</strong>ries as disclosed in Note 15;<br />
(iv) charge over certain bank balances as disclosed in Note 12;<br />
(v) future contract miles<strong>to</strong>nes of certain projects as disclosed in Note 17.<br />
Loan from a third party<br />
Non-current loan from a third party is unsecured, non-interest bearing and is not expected <strong>to</strong> be repaid within 12<br />
months.<br />
(b)<br />
Maturity of borrowings<br />
The current borrowings have an average maturity of 6 months from 31 December 2009 (2008: 3 months). The non-current<br />
borrowings as at 31 December 2009 have maturity of between 2 <strong>to</strong> 5 years (2008: 2 <strong>to</strong> 5 years).<br />
(c)<br />
Currency risk<br />
The carrying amounts of <strong>to</strong>tal borrowings are denominated in <strong>the</strong> following currencies:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Chinese Renminbi 556,786 85,493 – –<br />
Euro 10,496 1,056 – –<br />
Singapore Dollar 165 183 165 183<br />
Sterling Pound 77 – – –<br />
United States Dollar 321,069 319,772 262,878 298,704<br />
888,593 406,504 263,043 298,887
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
95<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
29. Borrowings (cont’d)<br />
(d)<br />
Interest rate risks<br />
The range of <strong>the</strong> interest rates of <strong>to</strong>tal borrowings at <strong>the</strong> statement of <strong>financial</strong> position date is as follows:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
% % % %<br />
Bank borrowings<br />
Chinese Renminbi 4.78 <strong>to</strong> 5.76 5.54 <strong>to</strong> 8.22 – –<br />
Euro 1.49 <strong>to</strong> 4.03 3.97 <strong>to</strong> 5.79 – –<br />
Sterling Pound 3.21 – – –<br />
United States Dollar 0.60 <strong>to</strong> 4.64 1.96 <strong>to</strong> 7.32 1.79 <strong>to</strong> 4.33 1.96 <strong>to</strong> 6.16<br />
Finance lease<br />
Chinese Renminbi 4.97 <strong>to</strong> 5.76 – – –<br />
Singapore Dollar 4.85 4.85 4.85 4.85<br />
The exposure of current and non-current borrowings <strong>to</strong> interest rate risks is disclosed in Note 38(c).<br />
(e)<br />
Defaults or breaches<br />
During <strong>the</strong> <strong>financial</strong> year ended 31 December 2009, <strong>the</strong> Company breached certain <strong>financial</strong> covenants of two bank<br />
loans.<br />
The outstanding balance from China Development Bank as at 31 December 2009 is $210,525,000, including $28,070,000<br />
presented as current borrowings and $182,455,000 as non-current borrowings as at <strong>the</strong> statement of <strong>financial</strong> position<br />
date. The Company did not fulfil <strong>the</strong> requirement <strong>to</strong> maintain <strong>the</strong> ratio of <strong>to</strong>tal borrowings and tangible assets of less than<br />
1. Subsequent <strong>to</strong> year end, <strong>the</strong> bank has consented <strong>to</strong> a waiver of <strong>the</strong> breach as at 31 December 2009 and no repayment<br />
is required prior <strong>to</strong> contractual payment.<br />
The outstanding balance from The Royal Bank of Scotland (“RBS”) as at 31 December 2009 is $41,085,000 and is<br />
presented as current liabilities as at <strong>the</strong> statement of <strong>financial</strong> position date. The Company did not fulfil <strong>the</strong> requirement<br />
<strong>to</strong> maintain <strong>the</strong> ratio of gross debt and EBITDA of less than 3. The loan matured on 15 January 2010 and <strong>the</strong> Company<br />
repaid <strong>the</strong> RBS loan prior <strong>to</strong> maturity.<br />
30. Provision for o<strong>the</strong>r liabilities<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
O<strong>the</strong>r liabilities 29,432 8,763 12,200 2,347<br />
Provision for warranties 5,713 7,132 4,710 7,132<br />
35,145 15,895 16,910 9,479<br />
O<strong>the</strong>r liabilities pertain <strong>to</strong> amounts in dispute with cus<strong>to</strong>mers on certain terminated projects.<br />
The Group normally gives a one-year warranty on certain defects and undertakes <strong>to</strong> repair or rectify such defects resulting from<br />
faulty design. A provision was recognised at <strong>the</strong> statement of <strong>financial</strong> position date for possible warranty claims based on an<br />
estimate by technical engineers and past experience of <strong>the</strong> possible level of repairs and rectifications.
96<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
30. Provision for o<strong>the</strong>r liabilities (cont’d)<br />
Movement in provision for warranties is as follows:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Provision for warranties<br />
At beginning of <strong>the</strong> <strong>financial</strong> year 7,132 7,400 7,132 7,400<br />
Provision made during <strong>the</strong> <strong>financial</strong> year 1,495 4,128 492 4,128<br />
Provision utilised during <strong>the</strong> <strong>financial</strong> year (2,248) (4,396) – (4,396)<br />
Provision reversed during <strong>the</strong> <strong>financial</strong> year (505) – (2,753) –<br />
Exchange difference (161) – (161) –<br />
At end of <strong>the</strong> <strong>financial</strong> year 5,713 7,132 4,710 7,132<br />
31. Share capital and share options<br />
(a)<br />
Share capital<br />
Group and Company<br />
No. of shares Amount<br />
‘000 $’000<br />
2009<br />
At 1 January 2009 and 31 December 2009 273,565 591,482<br />
2008<br />
At 1 January 2008 273,500 591,246<br />
Exercise of employee share options 65 182<br />
Transfer from share option reserve – 54<br />
At 31 December 2008 273,565 591,482<br />
The holders with ordinary shares are entitled <strong>to</strong> receive dividends as and when declared by <strong>the</strong> Company. All ordinary<br />
shares carry one vote per share without restrictions. The ordinary shares have no par value.<br />
(b)<br />
Share options<br />
Fair value of share options granted<br />
The fair value of share options granted under <strong>the</strong> Scheme during <strong>the</strong> <strong>financial</strong> year is determined using <strong>the</strong> Trinomial<br />
valuation model, taking in<strong>to</strong> account <strong>the</strong> terms and conditions upon which <strong>the</strong> instruments were granted. $6,661,000<br />
(2008: $6,777,000) was charged <strong>to</strong> <strong>the</strong> profit or loss during <strong>the</strong> <strong>financial</strong> year.<br />
At an Extraordinary General Meeting held on 21 June 2006, shareholders approved <strong>the</strong> Scheme for <strong>the</strong> granting of nontransferable<br />
share options that are settled by physical delivery of <strong>the</strong> ordinary shares of <strong>the</strong> Company, <strong>to</strong> eligible direc<strong>to</strong>rs,<br />
senior executives and employees, respectively.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
97<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
31. Share capital and share options (cont’d)<br />
(b)<br />
Share options (cont’d)<br />
Fair value of share options granted (cont’d)<br />
The Scheme is operated at <strong>the</strong> discretion of <strong>the</strong> Remuneration Committee, subject <strong>to</strong> a maximum period of 10 years from<br />
<strong>the</strong> date on which <strong>the</strong> Scheme was adopted, beyond which is subject <strong>to</strong> approval of <strong>the</strong> members by way of ordinary<br />
resolutions in general meetings and any relevant authorities which may <strong>the</strong>n be required. The maximum aggregated<br />
number of shares which may be issued and/or transferred pursuant <strong>to</strong> all share options shall not exceed 10% of <strong>the</strong> issued<br />
share capital of <strong>the</strong> Company on <strong>the</strong> day preceding <strong>the</strong> date of grant.<br />
Under <strong>the</strong> Scheme, share options are granted <strong>to</strong> employees of <strong>the</strong> Group selected by <strong>the</strong> Remuneration Committee.<br />
The exercise price of <strong>the</strong> granted share options is based on <strong>the</strong> arithmetic average of <strong>the</strong> daily volume weighted average<br />
price in Norwegian Kroner (“NOK”) of <strong>the</strong> Company’s shares traded on <strong>the</strong> Norwegian OTC during <strong>the</strong> period of three<br />
trading days ending on <strong>the</strong> day before <strong>the</strong> date of grant. Where <strong>the</strong>y are issued in currency o<strong>the</strong>r than NOK, it is based<br />
on <strong>the</strong> prevailing spot exchange rate quoted by <strong>the</strong> Company’s bank. Share options shall be exercisable in whole or in<br />
part in respect of 1,000 shares or any multiple <strong>the</strong>reof, subject <strong>to</strong> <strong>the</strong> vesting period as described by <strong>the</strong> Remuneration<br />
Committee in its absolute discretion.<br />
During <strong>the</strong> <strong>financial</strong> year:<br />
• No share options that entitle <strong>the</strong> holder <strong>to</strong> participate, by virtue of <strong>the</strong> options, in any share issue of any o<strong>the</strong>r<br />
corporation have been granted, and<br />
• No share options were granted at a discount during <strong>the</strong> <strong>financial</strong> year ended 31 December 2009 (2008: 1,154,003<br />
at a discount of 45%).<br />
Details of all share options <strong>to</strong> subscribe for ordinary shares of <strong>the</strong> Company pursuant <strong>to</strong> <strong>the</strong> Scheme as at 31 December<br />
2009 are as follows:<br />
2006<br />
Share options<br />
2007<br />
Share options<br />
2008<br />
Share options<br />
Outstanding at 1 January 2009 390,000 6,355,003 1,154,003<br />
- Forfeited (47,500) (268,000) –<br />
- Expired (152,500) – –<br />
Outstanding at<br />
31 December 2009 190,000 6,087,003 1,154,003<br />
Exercise price $2.80 US$1.64 <strong>to</strong> US$1.65<br />
NOK 10.50 <strong>to</strong> NOK 26.00<br />
US$1.6425 <strong>to</strong> US$1.65<br />
Exercise period<br />
1 August 2008 <strong>to</strong><br />
31 July 2010<br />
16 January 2009 <strong>to</strong> 17<br />
September 2017<br />
1 July 2010 <strong>to</strong><br />
30 June 2012<br />
There is no share option granted or exercised during <strong>the</strong> <strong>financial</strong> year ended 31 December 2009.<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2008, <strong>the</strong> fair value of share options granted was determined using valuation<br />
model. The significant inputs in<strong>to</strong> <strong>the</strong> model were share price of NOK16.00, at <strong>the</strong> respective grant dates, exercise price<br />
shown above, standard deviation of expected share price returns of 45%, <strong>the</strong> option life shown above and annual risk-free<br />
interest rate of between 5.23% <strong>to</strong> 5.40%. The volatility measured at <strong>the</strong> standard deviation of expected share price returns<br />
is based on statistical analysis of volatility of market comparables.
98<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
31. Share capital and share options (cont’d)<br />
(b)<br />
Share options (cont’d)<br />
Fair value of share options granted (cont’d)<br />
The following table lists <strong>the</strong> inputs <strong>to</strong> <strong>the</strong> share option pricing model for <strong>the</strong> <strong>financial</strong> years ended 31 December 2008,<br />
31 December 2007 and 31 December 2006:<br />
2006<br />
Share options<br />
2007<br />
Share options<br />
2008<br />
Share options<br />
Standard deviation of expected share returns (%) 40 45 45<br />
Option life (years) 4 4 <strong>to</strong> 10 4<br />
Annual risk-free rate (%) 5 4.41 <strong>to</strong> 4.76 5.23 <strong>to</strong> 5.40<br />
Share price $2.62 NOK 10.50 <strong>to</strong><br />
NOK 26.50<br />
NOK 16.00<br />
32. O<strong>the</strong>r reserves<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
(a)<br />
Composition:<br />
Capital reserve 2,567 2,567 – –<br />
PRC statu<strong>to</strong>ry surplus reserve 7,886 5,583 – –<br />
Share option reserve 15,580 9,125 15,580 9,125<br />
Fair value reserve – (206) – –<br />
Currency translation reserve 4,940 11,119 – –<br />
30,973 28,188 15,580 9,125
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
99<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
32. O<strong>the</strong>r reserves (cont’d)<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
(b)<br />
Movements:<br />
(i)<br />
Capital reserve<br />
At beginning and end of <strong>financial</strong> year 2,567 2,567 – –<br />
(ii)<br />
PRC statu<strong>to</strong>ry surplus reserve<br />
At beginning of <strong>financial</strong> year 5,583 4,287 – –<br />
Transfer from accumulated losses 2,303 1,296 – –<br />
At end of <strong>financial</strong> year 7,886 5,583 – –<br />
(iii)<br />
Share option reserve<br />
At beginning and end of <strong>financial</strong> year 9,125 2,691 9,125 2,691<br />
Provision of equity-settled share options<br />
<strong>to</strong> employees 6,661 6,777 6,661 6,777<br />
Expiry of share options (206) (289) (206) (289)<br />
Exercise of share options – (54) – (54)<br />
At end of <strong>financial</strong> year 15,580 9,125 15,580 9,125<br />
Share option reserve represents <strong>the</strong> equity-settled share options granted <strong>to</strong> employees. The reserve is made up of<br />
<strong>the</strong> cumulative value of services from employees recorded over <strong>the</strong> vesting period commencing from <strong>the</strong> grant date<br />
of equity-settled share options, and is reduced by <strong>the</strong> expiry of <strong>the</strong> share option. When <strong>the</strong> option is exercised, <strong>the</strong><br />
amount from <strong>the</strong> share option reserve is transferred <strong>to</strong> share capital. When <strong>the</strong> share option expires, <strong>the</strong> amount from<br />
<strong>the</strong> share option reserve is transferred <strong>to</strong> accumulated losses.<br />
(iv) Fair value reserve Group<br />
2009 2008<br />
$’000 $’000<br />
At beginning of <strong>financial</strong> year (206) 25,992<br />
Financial assets, available-for-sale<br />
- Recognition/(reversal) of changes of fair values in equity (Note 19) 206 (26,198)<br />
At end of <strong>financial</strong> year – (206)<br />
Fair value adjustment reserve represents <strong>the</strong> cumulative fair value changes, net of tax, of available-for-sale <strong>financial</strong><br />
assets until <strong>the</strong>y are disposed of or impaired.
100<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
32. O<strong>the</strong>r reserves (cont’d)<br />
(b)<br />
Movements (cont’d):<br />
(v) Currency translation reserve Group<br />
2009 2008<br />
$’000 $’000<br />
At beginning of <strong>financial</strong> year 11,119 4,633<br />
Net currency translation differences of <strong>financial</strong> statements of foreign<br />
subsidiaries (6,501) 7,469<br />
Minority interests 322 (983)<br />
(6,179) 6,486<br />
At end of <strong>financial</strong> year 4,940 11,119<br />
The currency translation reserve represents exchange differences arising from <strong>the</strong> translation of <strong>the</strong> <strong>financial</strong> statements<br />
of foreign operations whose functional currencies are different from that of <strong>the</strong> Group’s presentation currency.<br />
(c)<br />
Non-distributable statu<strong>to</strong>ry reserves<br />
Subsidiaries established in <strong>the</strong> PRC (<strong>the</strong> “PRC subsidiaries”) are required <strong>to</strong> maintain certain statu<strong>to</strong>ry reserves by<br />
transferring from <strong>the</strong>ir profit after taxation in accordance with <strong>the</strong> relevant laws and regulations and, if applicable, Articles<br />
of Association of <strong>the</strong> PRC subsidiaries, before any dividend is declared and paid.<br />
(i)<br />
PRC Statu<strong>to</strong>ry Surplus Reserve<br />
The PRC subsidiaries are required <strong>to</strong> transfer, at <strong>the</strong>ir direc<strong>to</strong>rs’ recommendation, a certain percentage of <strong>the</strong>ir profit<br />
after taxation calculated in accordance with <strong>the</strong> PRC accounting standards and systems <strong>to</strong> <strong>the</strong> statu<strong>to</strong>ry surplus<br />
reserve until <strong>the</strong> balance reaches 50% of <strong>the</strong>ir respective registered capital, where fur<strong>the</strong>r transfers will be at <strong>the</strong>ir<br />
direc<strong>to</strong>rs’ recommendation. The statu<strong>to</strong>ry surplus reserve can only be used <strong>to</strong> make up prior year losses or <strong>to</strong><br />
increase share capital, provided that <strong>the</strong> fund does not fall below 25% of <strong>the</strong> registered capital.<br />
(ii)<br />
Staff bonus and welfare fund<br />
The PRC subsidiaries are required <strong>to</strong> appropriate staff bonus and welfare fund from <strong>the</strong>ir profit after taxation calculated<br />
in accordance with <strong>the</strong> PRC accounting standards and systems. The percentage <strong>to</strong> be appropriated is determined<br />
by <strong>the</strong> board of direc<strong>to</strong>rs of <strong>the</strong> companies. The staff bonus and welfare fund can only be used for special bonuses<br />
and collective welfare benefits <strong>to</strong> staffs and workers. The fund may not be reversed or distributed <strong>to</strong> <strong>the</strong> owners.<br />
For <strong>the</strong> <strong>financial</strong> years ended 31 December 2009 and 31 December 2008, <strong>the</strong> board of direc<strong>to</strong>rs of <strong>the</strong> PRC<br />
subsidiaries have not approved <strong>the</strong> appropriation of staff bonus and welfare fund.<br />
(iii)<br />
Enterprise expansion fund<br />
The PRC subsidiaries are required <strong>to</strong> appropriate <strong>the</strong> enterprise expansion fund from <strong>the</strong>ir profit after taxation<br />
calculated in accordance with <strong>the</strong> PRC accounting standards and systems. The percentage <strong>to</strong> be appropriated<br />
is determined by <strong>the</strong> board of direc<strong>to</strong>rs of <strong>the</strong> PRC subsidiaries. Upon approval from <strong>the</strong> board of direc<strong>to</strong>rs, <strong>the</strong><br />
enterprise expansion fund can be used <strong>to</strong> expand production or <strong>to</strong> increase capital.<br />
For <strong>the</strong> <strong>financial</strong> years ended 31 December 2009 and 31 December 2008, <strong>the</strong> board of direc<strong>to</strong>rs of <strong>the</strong> PRC<br />
subsidiaries have not approved <strong>the</strong> appropriation of enterprise expansion fund.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
101<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
32. O<strong>the</strong>r reserves (cont’d)<br />
(c)<br />
Non-distributable statu<strong>to</strong>ry reserves (cont’d)<br />
(iv)<br />
Capital reserve<br />
Capital reserve represents contribution <strong>to</strong> paid-in capital in excess of <strong>the</strong> registered capital of <strong>the</strong> PRC subsidiaries<br />
and appropriation from retained earnings in respect of waiver of debts in accordance with <strong>the</strong> PRC rules and<br />
regulations. The reserve is non-distributable under <strong>the</strong> PRC laws.<br />
33. Loans and receivables<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Non-current<br />
Amounts due from subsidiaries (non-trade) – – 77,095 89,651<br />
Pledged deposits 7,856 – – –<br />
Current<br />
Cash and cash equivalents 111,821 43,832 68,107 28,817<br />
Pledged deposits 49,119 131,401 – 103,823<br />
Trade and o<strong>the</strong>r receivables 127,720 105,839 50,417 35,126<br />
Total loans and receivables 296,516 281,072 195,619 257,417<br />
34. Financial liabilities carried at amortised cost<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Non-current<br />
Borrowings 324,484 21,433 182,576 146<br />
Current<br />
Trade and o<strong>the</strong>r payables 383,718 329,476 83,822 102,539<br />
Borrowings 564,109 385,071 80,467 298,741<br />
Amounts due <strong>to</strong> subsidiaries (trade) – – – 977<br />
Total <strong>financial</strong> liabilities carried at amortised cost 1,272,311 735,980 346,865 402,403
102<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
35. Segment information<br />
The Group currently has only one operating segment. The principal activities of <strong>the</strong> Group are <strong>to</strong> carry on <strong>the</strong> business of<br />
construction and conversion of offshore and marine projects and investment holding. Management moni<strong>to</strong>rs revenue from <strong>the</strong><br />
geographical location of its cus<strong>to</strong>mers separately for <strong>the</strong> purpose of making strategic decisions.<br />
Geographical information<br />
Revenue information based on <strong>the</strong> geographical location of its cus<strong>to</strong>mers is as follows:<br />
Total revenue<br />
2009 2008<br />
$’000 $’000<br />
Asia 9,385 636<br />
Europe 612,926 615,850<br />
USA 296,254 274,528<br />
918,565 891,014<br />
Non-current assets based on <strong>the</strong> geographical location of <strong>the</strong> assets are located in Asia, namely People’s Republic of China<br />
and Singapore.<br />
36. Related party transactions<br />
In addition <strong>to</strong> <strong>the</strong> related party information disclosed elsewhere in <strong>the</strong> <strong>financial</strong> statements, <strong>the</strong> following significant transactions<br />
between <strong>the</strong> Group and related parties <strong>to</strong>ok place at terms agreed between <strong>the</strong> parties during <strong>the</strong> <strong>financial</strong> year:<br />
(a)<br />
Sale and purchase of goods and services<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Construction contract revenue from an associate 11,433 56,424<br />
Purchase of subcontract service from an associate 72,327 16,656<br />
Purchases from related companies of an associate 48,987 7,695<br />
Purchase of labour services from a company related <strong>to</strong> a shareholder 998 –<br />
Transfer of fixed assets from an associate 22,125 –<br />
Interest due from an associate 126 60<br />
Interest paid <strong>to</strong> a direc<strong>to</strong>r related company 545 30<br />
(b)<br />
Loans<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Loans <strong>to</strong> an associate (Note 13) 2,485 2,259
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
103<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
36. Related party transactions (cont’d)<br />
(c)<br />
Expenses<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Direc<strong>to</strong>rs’ remuneration 1,505 1,942<br />
Direc<strong>to</strong>rs’ fee 193 321<br />
(d)<br />
Key management personnel compensation<br />
Key management personnel compensation is analysed as follows:<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Salaries and o<strong>the</strong>r short-term employee benefits 553 2,574<br />
Share options expense – 4,623<br />
553 7,197<br />
The remuneration of key management personnel is determined by <strong>the</strong> board of direc<strong>to</strong>rs having regards <strong>to</strong> <strong>the</strong> performance<br />
of individuals and market trends. No share options have been granted <strong>to</strong> <strong>the</strong> Company’s key management personnel<br />
during <strong>the</strong> <strong>financial</strong> years ended 31 December 2009 and 2008.<br />
(e)<br />
Personal guarantees by direc<strong>to</strong>rs<br />
As at 31 December 2009, certain direc<strong>to</strong>rs of <strong>the</strong> Company have provided personal guarantees amounting <strong>to</strong> Nil (2008:<br />
$38,552,000), <strong>to</strong> secure certain credit facilities of <strong>the</strong> Group.
104<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
37. Commitments and contingencies<br />
(a)<br />
Capital commitments<br />
Capital expenditures contracted for at <strong>the</strong> statement of <strong>financial</strong> position date but not recognised in <strong>the</strong> <strong>financial</strong> statements<br />
are analysed as follows:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Property, plant and equipment 29,713 27,285 – –<br />
Vessels built for sales or charter 181,069 324,608 161,624 308,900<br />
Proposed acquisition of a company* 42,776 – – –<br />
253,558 351,893 161,624 308,900<br />
* On 2 November 2009, YROL has entered in<strong>to</strong> an agreement <strong>to</strong> purchase 100% equity interest in Longkou Sanlian<br />
Offshore Engineering Co., Ltd in Shandong, China, for cash consideration of RMB291 million. According <strong>to</strong> <strong>the</strong><br />
agreement, advance of RMB100 million, equivalent of S$21 million being first down payment and ano<strong>the</strong>r advance<br />
of RMB56 million, equivalent of S$11 million, being agreed fees due <strong>to</strong> relevant government authority in PRC, was<br />
paid in <strong>the</strong> <strong>financial</strong> year ended 31 December 2009. The acquisition is expected <strong>to</strong> be completed in <strong>the</strong> <strong>financial</strong> year<br />
ending 31 December 2010.<br />
(b)<br />
Operating lease commitments - as lessee<br />
The future aggregate minimum lease payable in respect of warehouse, land and sea use rights under non-cancellable<br />
operating leases contracted for at <strong>the</strong> statement of <strong>financial</strong> position date but not recognised as liabilities, are analysed as<br />
follows:<br />
Group<br />
Company<br />
2009 2008 2009 2008<br />
$’000 $’000 $’000 $’000<br />
Not later than one year 3,956 3,225 349 414<br />
Between two and five years 4,491 8,058 316 386<br />
Later than five years 7,927 10,629 – –<br />
16,374 21,912 665 800
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
105<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
37. Commitments and contingencies (cont’d)<br />
(c)<br />
Finance lease commitments<br />
The group has finance leases for certain items of machinery, barges and mo<strong>to</strong>r vehicle.<br />
Future minimum lease payments under finance leases <strong>to</strong>ge<strong>the</strong>r with present value of <strong>the</strong> net minimum lease payments are<br />
as follows:<br />
Minimum<br />
lease<br />
payments<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Present<br />
value of<br />
payments<br />
(Note 29)<br />
Minimum<br />
lease<br />
payments<br />
Present<br />
value of<br />
payments<br />
(Note 29)<br />
Not later than one year 9,554 8,474 44 36<br />
Later than one year but not later than five<br />
years 13,263 12,279 166 146<br />
Total minimum lease payments 22,817 20,753 210 182<br />
Less: amounts representing finance charges (2,064) – (28) –<br />
Present value of minimum lease payments 20,753 20,753 182 182<br />
Minimum<br />
lease<br />
payments<br />
Company<br />
2009 2008<br />
$’000 $’000<br />
Present<br />
value of<br />
payments<br />
(Note 29)<br />
Minimum<br />
lease<br />
payments<br />
Present<br />
value of<br />
payments<br />
(Note 29)<br />
Not later than one year 44 36 44 36<br />
Later than one year but not later than five<br />
years 122 109 166 146<br />
Total minimum lease payments 166 145 210 182<br />
Less: amounts representing finance charges (21) – (28) –<br />
Present value of minimum lease payments 145 145 182 182<br />
(d)<br />
Performance guarantees<br />
As at 31 December 2009, performance guarantees issued by <strong>financial</strong> institutions for contracts awarded <strong>to</strong> <strong>the</strong> Company<br />
and its subsidiaries amounted <strong>to</strong> $262,475,000 (2008: $353,513,000).<br />
(e)<br />
Contingent liabilities<br />
As at 31 December 2009, <strong>the</strong> Company has provided corporate guarantees <strong>to</strong> a <strong>financial</strong> institution for performance<br />
guarantees issued for contracts awarded <strong>to</strong> a PRC subsidiary amounting <strong>to</strong> $185,036,000 (2008: $71,549,000).
106<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
38. Financial risk management objectives and policies<br />
The Group’s activities expose it <strong>to</strong> a variety of <strong>financial</strong> risks include currency risk, price risk, interest rate risk, credit risk and<br />
liquidity risk. The Group’s overall risk management programme focuses on <strong>the</strong> unpredictability of <strong>financial</strong> markets and seeks <strong>to</strong><br />
minimise potential adverse effects on <strong>the</strong> Group’s <strong>financial</strong> performance.<br />
Risk management is carried out under policies approved by <strong>the</strong> board of direc<strong>to</strong>rs. The board provides general principles for<br />
overall risk management such as currency risk, price risk, interest rate risk, credit risk and liquidity risk.<br />
(a)<br />
Currency risk<br />
The Group operates mainly in Asia and is exposed <strong>to</strong> foreign exchange risk arising from various currencies combinations.<br />
The Group’s sales are mainly denominated in USD, Euro and RMB. The Group’s purchases are mainly denominated in<br />
USD, RMB, Norwegian Kroner (“NOK”) and Euro whilst its operating costs are denominated mainly in RMB and Singapore<br />
Dollar (“SGD”).<br />
To <strong>the</strong> extent that <strong>the</strong> Group’s sales, purchases and operating costs are not naturally matched in <strong>the</strong> same currency and<br />
that <strong>the</strong>re is timing differences between collections and payments, <strong>the</strong> Group will be exposed <strong>to</strong> any adverse fluctuations of<br />
<strong>the</strong> various currencies against <strong>the</strong> SGD. Restrictions over <strong>the</strong> conversion or remittance of foreign currencies such as RMB<br />
may also expose <strong>the</strong> Group <strong>to</strong> adverse fluctuations in exchange rates. As a result, <strong>the</strong> Group’s earnings may be materially<br />
and adversely affected.<br />
The Group closely moni<strong>to</strong>rs exchange rate movements and cash flow requirements for various currencies. It seeks <strong>to</strong> enter<br />
in<strong>to</strong> contracts with cus<strong>to</strong>mers whereby progress settlements are in a mix of various currencies which it requires <strong>to</strong> pay for<br />
its purchases and operating costs. It also obtains bank borrowings in <strong>the</strong> currencies that are required for operation. The<br />
Group engages foreign currency contracts <strong>to</strong> hedge material exchange exposures.<br />
The <strong>financial</strong> statements of certain subsidiaries are prepared in <strong>the</strong>ir respective functional currencies, namely RMB and<br />
USD. This represents a translation risk in that any material fluctuation in <strong>the</strong> RMB and USD against SGD will have an effect<br />
on <strong>the</strong> Group’s consolidated <strong>financial</strong> statements which are presented in SGD. Translation exposure is not normally hedged<br />
as <strong>the</strong>se investments are intended <strong>to</strong> be held on a long term basis and <strong>the</strong> translation risk arising from <strong>the</strong> investments<br />
cannot be appropriately hedged by short-term hedging instruments available. Fur<strong>the</strong>rmore, <strong>the</strong> cost of entering in<strong>to</strong> such<br />
hedging activities outweighs <strong>the</strong> benefits.<br />
Currently, <strong>the</strong> PRC government imposes control over foreign currencies. RMB, <strong>the</strong> official currency of <strong>the</strong> PRC, is not freely<br />
convertible. Enterprises operating in <strong>the</strong> PRC can enter in<strong>to</strong> exchange transactions through <strong>the</strong> People’s Bank of China or<br />
o<strong>the</strong>r authorised <strong>financial</strong> institutions.<br />
Payments for imported materials or services, which are outside of <strong>the</strong> PRC, are subject <strong>to</strong> <strong>the</strong> availability of foreign currency<br />
which depends on <strong>the</strong> foreign currency denominated earnings of <strong>the</strong> enterprises. Exchanges of RMB for foreign currency<br />
must be arranged through <strong>the</strong> People’s Bank of China or o<strong>the</strong>r authorised <strong>financial</strong> institutions and is granted <strong>to</strong> enterprises<br />
in <strong>the</strong> PRC for valid reasons such as purchase of imported materials and remittance of earnings. While conversion of<br />
RMB in<strong>to</strong> SGD or o<strong>the</strong>r currencies can generally be effected at <strong>the</strong> People’s Bank of China or o<strong>the</strong>r authorised <strong>financial</strong><br />
institutions, <strong>the</strong>re is no guarantee that it can be effected at all times.<br />
The Group’s currency exposure is disclosed in <strong>the</strong> respective <strong>notes</strong> <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements relating <strong>to</strong> <strong>the</strong> <strong>financial</strong><br />
assets and <strong>financial</strong> liabilities.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
107<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
38. Financial risk management objectives and policies (cont’d)<br />
(a)<br />
Currency risk (cont’d)<br />
The following table demonstrates <strong>the</strong> sensitivity <strong>to</strong> a reasonably possible change in <strong>the</strong> EUR, NOK, USD and GBP against<br />
<strong>the</strong> SGD and RMB, with all o<strong>the</strong>r variables held constant, of <strong>the</strong> Group’s profit net of tax:<br />
Group<br />
Profit net of tax<br />
2009 2008<br />
$’000 $’000<br />
EUR/SGD: - streng<strong>the</strong>ned 5% (2008: 5%) (588) (1,014)<br />
- weakened 5% (2008: 5%) 588 1,014<br />
EUR/RMB: - streng<strong>the</strong>ned 5% (2008: 5%) (863) (121)<br />
- weakened 5% (2008: 5%) 863 121<br />
NOK/SGD: - streng<strong>the</strong>ned 5% (2008: 5%) - (781)<br />
- weakened 5% (2008: 5%) - 781<br />
NOK/RMB: - streng<strong>the</strong>ned 5% (2008: 5%) (34) (158)<br />
- weakened 5% (2008: 5%) 34 158<br />
USD/SGD: - streng<strong>the</strong>ned 5% (2008: 5%) (7,390) (11,385)<br />
- weakened 5% (2008: 5%) 7,390 11,385<br />
USD/RMB: - streng<strong>the</strong>ned 5% (2008: 5%) (2,849) (1,642)<br />
- weakened 5% (2008: 5%) 2,849 1,642<br />
GBP/SGD: - streng<strong>the</strong>ned 5% (2008: 5%) - (172)<br />
- weakened 5% (2008: 5%) - 172<br />
GBP/RMB: - streng<strong>the</strong>ned 5% (2008: 5%) (7) (6)<br />
- weakened 5% (2008: 5%) 7 6<br />
(b)<br />
Price risk<br />
The Group is exposed <strong>to</strong> equity securities price risk because of <strong>the</strong> investments held by <strong>the</strong> Group classified as “<strong>financial</strong><br />
assets, available-for-sale”. The securities are listed on <strong>the</strong> s<strong>to</strong>ck exchanges in Australia and Norway.<br />
Sensitivity analysis for equity price risk<br />
As at 31 December 2009, if a general increase of 5% (2008: 5%) in market price of investment is estimated, with all<br />
o<strong>the</strong>r variables held constant, <strong>the</strong> fair value reserve would increase by $57,000 for <strong>the</strong> year ended 31 December 2009<br />
(2008: $176,000). A general decrease of <strong>the</strong> same percentage in market price of investment would have had <strong>the</strong> equal<br />
but opposite effect on <strong>the</strong> fair value reserve <strong>to</strong> <strong>the</strong> amount shown above, on <strong>the</strong> basis that all o<strong>the</strong>r variables remain<br />
constant.
108<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
38. Financial risk management objectives and policies (cont’d)<br />
(c)<br />
Interest rate risk<br />
Cash flow interest rate risk is <strong>the</strong> risk that <strong>the</strong> future cash flows of <strong>financial</strong> instrument will fluctuate because of changes<br />
in market interest rates. Fair value interest rate risk is <strong>the</strong> risk that <strong>the</strong> value of a <strong>financial</strong> instrument will fluctuate due <strong>to</strong><br />
changes in market interest rates. The Group’s borrowings with variable interest rates are expected <strong>to</strong> reprice in less than<br />
one year from <strong>the</strong> <strong>financial</strong> year end.<br />
The Group’s policy is <strong>to</strong> obtain <strong>the</strong> most favourable rates available <strong>to</strong> manage interest cost, whilst taking in<strong>to</strong> consideration<br />
an increasing or declining interest rate environment. The Group enters in<strong>to</strong> Interest Rate Swap <strong>to</strong> hedge certain level of<br />
long-term interest rate exposure.<br />
Sensitivity analysis for interest rate risk<br />
As at 31 December 2009, if a general increase of 5% (2008: 5%) in market interest rate is estimated, with all o<strong>the</strong>r variables<br />
held constant, <strong>the</strong> Group profit net of tax would decrease by $289,000 for <strong>the</strong> year ended 31 December 2009 (2008:<br />
$186,000). A general decrease of <strong>the</strong> same percentage in market interest rate would have had <strong>the</strong> equal but opposite<br />
effect on <strong>the</strong> profit net of tax <strong>to</strong> <strong>the</strong> amount shown above, on <strong>the</strong> basis that all o<strong>the</strong>r variables remain constant.<br />
The <strong>financial</strong> assets and liabilities of <strong>the</strong> Group are set out in <strong>the</strong> table below, categorised by <strong>the</strong> earlier of contractual<br />
repricing or maturity date.<br />
Less than<br />
6 months<br />
Variable rates<br />
6 <strong>to</strong> 12<br />
months<br />
1 <strong>to</strong> 5<br />
years<br />
Sub<strong>to</strong>tal<br />
Less than<br />
6 months<br />
Fixed rates<br />
6 <strong>to</strong> 12<br />
months<br />
1 <strong>to</strong> 5<br />
years<br />
Sub<strong>to</strong>tal<br />
Less than<br />
12 months<br />
Non-interest<br />
bearing<br />
1 <strong>to</strong> 5<br />
years Sub<strong>to</strong>tal Total<br />
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000<br />
Group<br />
At 31 December 2009<br />
Assets<br />
Cash and cash<br />
equivalents 43,714 – – 43,714 – – – – 68,107 – 68,107 111,821<br />
Pledged deposits<br />
(current) – – – – 5,302 43,817 – 49,119 – – – 49,119<br />
Pledged deposits<br />
(non-current) – – – – – – 7,856 7,856 – – – 7,856<br />
Loans <strong>to</strong> an associate – 2,485 – 2,485 – – – – – – – 2,485<br />
Liabilities<br />
Amounts due <strong>to</strong> Leung<br />
Kee Holding Ltd. 3,509 – – 3,509 – – – – – – 3,509<br />
Borrowings 236 114,639 182,455 297,330 49,376 399,858 141,799 591,033 – 230 230 888,593<br />
At 31 December 2008<br />
Assets<br />
Cash and cash<br />
equivalents 15,123 – – 15,123 – – – – 28,709 – 28,709 43,832<br />
Pledged deposits<br />
(current) – – – – 131,401 – – 131,401 – – – 131,401<br />
Loans <strong>to</strong> an associate – 2,259 – 2,259 – – – – – – – 2,259<br />
Liabilities<br />
Amounts due <strong>to</strong> Leung<br />
Kee Holding Ltd. 5,754 4,316 – 10,070 – – – – – – – 10,070<br />
Borrowings 306,952 33,682 21,052 361,686 30,754 13,683 146 44,583 – 235 235 406,504
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
109<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
38. Financial risk management objectives and policies (cont’d)<br />
(c)<br />
Interest rate risks (cont’d)<br />
Less than<br />
6 months<br />
Variable rates<br />
6 <strong>to</strong> 12<br />
months<br />
1 <strong>to</strong> 5<br />
years<br />
Sub<strong>to</strong>tal<br />
Less than<br />
6 months<br />
Fixed rates<br />
6 <strong>to</strong> 12<br />
months<br />
1 <strong>to</strong> 5<br />
Years<br />
Sub<strong>to</strong>tal<br />
Non-interest<br />
bearing<br />
Less than<br />
12 months Total<br />
$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000<br />
Company<br />
At 31 December 2009<br />
Assets<br />
Cash and cash equivalents – – – – – – – – 68,107 68,107<br />
Liabilities<br />
Amounts due <strong>to</strong> Leung Kee<br />
Holding Ltd. 3,509 – – 3,509 – – – – – 3,509<br />
Borrowings 235 80,188 182,454 262,877 23 21 122 166 – 263,043<br />
At 31 December 2008<br />
Assets<br />
Cash and cash equivalents 108 – – 108 – – – – 28,709 28,817<br />
Pledged deposits (current) – – – – 103,823 – – 103,823 – 103,823<br />
Liabilities<br />
Amounts due <strong>to</strong> Leung Kee<br />
Holding Ltd. 5,754 4,316 – 10,070 – – – – – 10,070<br />
Borrowings 296,425 – – 296,425 2,316 – 146 2,462 – 298,887<br />
(d)<br />
Credit risk<br />
Credit risk refers <strong>to</strong> <strong>the</strong> risk that a counterparty will default on its contractual obligations resulting in <strong>financial</strong> loss <strong>to</strong> <strong>the</strong><br />
Group. For trade receivables, <strong>the</strong> Group adopts <strong>the</strong> policy of assessing credit worthiness and credit his<strong>to</strong>ry of cus<strong>to</strong>mers<br />
and obtaining sufficient security where appropriate <strong>to</strong> mitigate credit risk.<br />
The credit risk of <strong>the</strong> Group’s o<strong>the</strong>r <strong>financial</strong> assets, which comprise cash and bank balances, available-for-sale <strong>financial</strong><br />
assets, amounts due from associates, o<strong>the</strong>r receivables and certain derivative instruments, arises from default of <strong>the</strong><br />
counterparty, with a maximum exposure equal <strong>to</strong> <strong>the</strong> carrying amounts of <strong>the</strong>se <strong>financial</strong> instruments. The Company is also<br />
exposed <strong>to</strong> credit risk through <strong>the</strong> granting of <strong>financial</strong> guarantees, fur<strong>the</strong>r details of which are disclosed in Note 37.<br />
As at 31 December 2009, 96% (2008: 98%) of trade receivables relate <strong>to</strong> three major cus<strong>to</strong>mers of <strong>the</strong> Group. The Group<br />
has policies in place <strong>to</strong> ensure its dealings are with cus<strong>to</strong>mers with an acceptable credit his<strong>to</strong>ry.
110<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
38. Financial risk management objectives and policies (cont’d)<br />
(e)<br />
Liquidity risk<br />
The Group moni<strong>to</strong>rs its risks <strong>to</strong> a shortage of funds and considers <strong>the</strong> maturity of its <strong>financial</strong> assets and liabilities and<br />
projected cash flows from operations. The Group’s objective is <strong>to</strong> maintain a balance between continuity of funding and<br />
flexibility through <strong>the</strong> use of stand-by credit facilities.<br />
The Group and <strong>the</strong> Company moni<strong>to</strong>r and manage internal liquidity risk and seek <strong>to</strong> maintain sufficient liquid <strong>financial</strong><br />
assets and stand-by credit facilities with at least five major <strong>financial</strong> institutions. At <strong>the</strong> statement of <strong>financial</strong> position date,<br />
approximately 63.5% (2008: 94.7%) of <strong>the</strong> Group’s loans and borrowings (Note 29) will mature in less than one year based<br />
on <strong>the</strong> carrying amount reflected in <strong>the</strong> <strong>financial</strong> statements. 30.6% (2008: 99.9%) of <strong>the</strong> Company’s loans and borrowings<br />
will mature in less than one year at <strong>the</strong> statement of <strong>financial</strong> position date. As at 31 December 2009, <strong>the</strong> Group has<br />
unutilised banking facilities of $227.4 million (2008: $245.8 million).<br />
During <strong>the</strong> <strong>financial</strong> year, <strong>the</strong> Company breached certain similar <strong>financial</strong> covenants of two bank loans (Note 29). Subsequent<br />
<strong>to</strong> year end, <strong>the</strong> Company has obtained a waiver of <strong>the</strong> breach for <strong>the</strong> one bank loan and repaid <strong>the</strong> o<strong>the</strong>r.<br />
The table below summarises <strong>the</strong> maturity profile of <strong>the</strong> Group’s and <strong>the</strong> Company’s <strong>financial</strong> assets and <strong>financial</strong> liabilities<br />
at <strong>the</strong> statement of <strong>financial</strong> position date based on contractual undiscounted payments.<br />
1 year<br />
or less<br />
Group<br />
2009 2008<br />
1 <strong>to</strong><br />
5 years Total<br />
1 year<br />
or less<br />
1 <strong>to</strong><br />
5 years Total<br />
$’000 $’000 $’000 $’000 $’000 $’000<br />
Financial assets:<br />
Cash and bank balances 160,940 7,856 168,796 175,233 – 175,233<br />
Trade and o<strong>the</strong>r receivables 126,639 1,081 127,720 104,787 1,052 105,839<br />
Derivative <strong>financial</strong> instruments 11,730 – 11,730 12,234 – 12,234<br />
Financial assets, available-forsale<br />
– 1,141 1,141 – 3,529 3,529<br />
Total undiscounted <strong>financial</strong><br />
assets 299,309 10,078 309,387 292,254 4,581 296,835<br />
Financial liabilities:<br />
Trade and o<strong>the</strong>r payables 383,718 – 383,718 329,476 – 329,476<br />
Borrowings 576,918 360,604 937,522 388,968 23,438 412,406<br />
Derivative <strong>financial</strong> instruments 7,782 – 7,782 26,975 – 26,975<br />
Total undiscounted <strong>financial</strong><br />
liabilities 968,418 360,604 1,329,022 745,419 23,438 768,857<br />
Net undiscounted <strong>financial</strong><br />
liabilities (669,109) (350,526) (1,019,635) (453,165) (18,857) (472,022)
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
111<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
38. Financial risk management objectives and policies (cont’d)<br />
(e)<br />
Liquidity risk (cont’d)<br />
1 year<br />
or less<br />
Company<br />
2009 2008<br />
1 <strong>to</strong><br />
5 years Total<br />
1 year<br />
or less<br />
1 <strong>to</strong><br />
5 years Total<br />
$’000 $’000 $’000 $’000 $’000 $’000<br />
Financial assets:<br />
Cash and bank balances 68,107 – 68,107 132,640 – 132,640<br />
Trade and o<strong>the</strong>r receivables 49,336 1,081 50,417 34,074 1,052 35,126<br />
Derivative <strong>financial</strong> instruments 11,730 – 11,730 12,217 – 12,217<br />
Amounts due from subsidiaries<br />
(non-trade) – 77,095 77,095 – 89,651 89,651<br />
Total undiscounted <strong>financial</strong><br />
assets 129,173 78,176 207,349 178,931 90,703 269,634<br />
Financial liabilities:<br />
Trade and o<strong>the</strong>r payables 83,822 – 83,822 102,539 – 102,539<br />
Borrowings 80,931 195,034 275,965 300,100 182 300,282<br />
Derivative <strong>financial</strong> instruments 7,636 – 7,636 24,830 – 24,830<br />
Amounts due <strong>to</strong> subsidiaries<br />
(trade) – – – 977 – 977<br />
Total undiscounted <strong>financial</strong><br />
liabilities 172,389 195,034 367,423 428,446 182 428,628<br />
Net undiscounted <strong>financial</strong><br />
(liabilities)/assets (43,216) (116,858) (160,074) (249,515) 90,521 (158,994)
112<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
39. Fair values of <strong>financial</strong> instruments<br />
The following table shows an analysis of <strong>financial</strong> instruments carried at fair value by level of fair value hierarchy.<br />
(a)<br />
Fair value of <strong>financial</strong> instruments that are carried at fair value<br />
Quoted<br />
prices in<br />
active<br />
markets for<br />
identical<br />
instruments<br />
Group<br />
Significant<br />
o<strong>the</strong>r<br />
observable<br />
inputs<br />
Company<br />
2009 2009<br />
$’000 $’000<br />
Significant<br />
unobservable<br />
inputs<br />
Total<br />
Quoted<br />
prices in<br />
active<br />
markets for<br />
identical<br />
instruments<br />
Significant<br />
o<strong>the</strong>r<br />
observable<br />
inputs<br />
Significant<br />
unobservable<br />
inputs<br />
(Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3)<br />
Total<br />
Financial assets:<br />
Available-for-sale <strong>financial</strong><br />
assets (Note 19)<br />
- quoted securities 1,141 – – 1,141 – – – –<br />
Derivatives (Note 40)<br />
- forward currency<br />
contracts – 3,483 – 3,483 – 3,483 – 3,483<br />
- embedded derivatives – 8,247 – 8,247 – 8,247 – 8,247<br />
At 31 December 2009 1,141 11,730 – 12,871 – 11,730 – 11,730<br />
Financial liabilities:<br />
Derivatives (Note 40)<br />
- forward currency<br />
contracts – 7,492 – 7,492 – 7,346 – 7,346<br />
- embedded derivatives – 290 – 290 – 290 – 290<br />
At 31 December 2009 – 7,782 – 7,782 – 7,636 – 7,636<br />
Fair value hierarchy<br />
The Group classify fair value measurement using a fair value hierarchy that reflects <strong>the</strong> significance of <strong>the</strong> inputs used in<br />
making <strong>the</strong> measurements. The fair value hierarchy have <strong>the</strong> following levels:<br />
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities;<br />
Level 2 - Inputs o<strong>the</strong>r than quoted prices included within Level 1 that are observable for <strong>the</strong> asset or liability, ei<strong>the</strong>r<br />
directly (i.e., as prices) or indirectly (i.e., derived from prices); and<br />
Level 3 - Inputs for <strong>the</strong> asset or liability that are not based on observable market data (unobservable inputs)<br />
Determination of fair value<br />
Quoted equity instruments (Note 19): Fair value is determined directly by reference <strong>to</strong> <strong>the</strong>ir published market bid price at<br />
<strong>the</strong> statement of <strong>financial</strong> position date.<br />
Derivatives (Note 40): Forward currency contracts and embedded derivatives are valued using a valuation technique with<br />
market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models,<br />
using present value calculations. The models incorporate various inputs including <strong>the</strong> credit quality of counterparties and<br />
foreign exchange spot and forward rates.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
113<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
39. Fair values of <strong>financial</strong> instruments (cont’d)<br />
(b)<br />
Fair value of <strong>financial</strong> instruments by classes that are not carried at fair value and whose carrying amounts are reasonable<br />
approximation of fair value<br />
Management has determined that <strong>the</strong> carrying amount of cash and cash equivalents, current pledged deposits, trade<br />
and o<strong>the</strong>r receivables, current trade and o<strong>the</strong>r payables, amounts due <strong>to</strong> subsidiaries, current borrowings and borrowings<br />
with variable interest rates, reasonably approximate <strong>the</strong>ir fair values because <strong>the</strong>se are mostly short-term in nature or are<br />
repriced frequently.<br />
(c)<br />
Fair value of <strong>financial</strong> instruments by classes that are not carried at fair value and whose carrying amounts are not<br />
reasonable approximation of fair value<br />
The fair value of <strong>financial</strong> assets and liabilities by classes that are not carried at fair value and whose carrying amounts are<br />
not reasonable approximation of fair value are as follows:<br />
Carrying<br />
amount<br />
2009<br />
$’000<br />
Fair<br />
value<br />
Group<br />
Carrying<br />
amount<br />
2008<br />
$’000<br />
Fair<br />
value<br />
Carrying<br />
amount<br />
2009<br />
$’000<br />
Fair<br />
value<br />
Company<br />
Carrying<br />
amount<br />
2008<br />
$’000<br />
Fair<br />
value<br />
Financial assets:<br />
Pledged deposits<br />
(non-current) 7,856 7,127 – – – – – –<br />
Amounts due from<br />
subsidiaries (Noncurrent)<br />
(Note14) – – – – 77,095 65,542 89,651 76,217<br />
Financial liabilities:<br />
Finance leases<br />
(Note 29) 12,279 13,263 146 166 109 122 146 166<br />
Fixed rate bank loans<br />
(Note 29) 129,520 138,221 – – – – – –<br />
Determination of fair value<br />
Amount due from subsidiaries (Note 14)<br />
The non-current receivables from subsidiaries <strong>to</strong> <strong>the</strong> Company amounting <strong>to</strong> $77,095,000 (2008: $89,651,000) is not<br />
expected <strong>to</strong> be repayable within <strong>the</strong> next twelve months from statement of <strong>financial</strong> position date. Accordingly, <strong>the</strong> fair<br />
value of <strong>the</strong> amount due from subsidiaries is estimated by discounting <strong>the</strong> future cash flows at <strong>the</strong> market interest rate.<br />
Finance leases and fixed rate bank loans (Note 29)<br />
The fair values as disclosed in <strong>the</strong> table above are estimated by discounting expected future cash flows at market incremental<br />
lending rate for similar types of lending, borrowing or leasing arrangements at <strong>the</strong> statement of <strong>financial</strong> position date.
114<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
40. Derivative <strong>financial</strong> instruments<br />
Cash flow hedges-Embedded foreign currency forward contracts<br />
The Group closely moni<strong>to</strong>rs exchange rate movements and cash flows for <strong>the</strong> various currencies in which <strong>the</strong> Group transacts<br />
its business. The Group seeks <strong>to</strong> enter in<strong>to</strong> contracts with cus<strong>to</strong>mers where progress payments are made in a mix of various<br />
currencies (such as USD, EUR, NOK and RMB) which <strong>the</strong> Group requires <strong>to</strong> pay for its purchases and operating costs.<br />
Contractual payments due from cus<strong>to</strong>mers and denominated in currencies o<strong>the</strong>r than <strong>the</strong> currency in which <strong>the</strong> ship-building<br />
contracts are routinely expressed, <strong>the</strong> functional currencies of <strong>the</strong> Company or <strong>the</strong> cus<strong>to</strong>mers, are deemed <strong>to</strong> be contracts with<br />
embedded derivatives which are required <strong>to</strong> be accounted for separately under FRS 39 as if <strong>the</strong> Group had entered in<strong>to</strong> foreign<br />
currency forward contracts.<br />
Forward currency contracts are also used <strong>to</strong> hedge <strong>the</strong> Group’s sales and purchases denominated in USD for which firm<br />
commitments existed at <strong>the</strong> statement of <strong>financial</strong> position date, extending <strong>to</strong> June 2010.<br />
Under <strong>the</strong>se arrangements, as of statement of <strong>financial</strong> position date, <strong>the</strong> fair value and notional amount of derivative <strong>financial</strong><br />
instruments (namely embedded foreign currency forward contracts and forward currency contracts) of <strong>the</strong> Group as at 31<br />
December are as follows:<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Contract/<br />
Notional<br />
Amount Assets Liabilities<br />
Contract/<br />
Notional<br />
Amount Assets Liabilities<br />
Embedded derivatives 662,587 8,247 (290) 548,602 6,674 (13,705)<br />
Forward currency contracts 295,802 3,483 (7,492) 665,007 5,560 (13,270)<br />
Total derivatives 11,730 (7,782) 12,234 (26,975)<br />
Company<br />
2009 2008<br />
$’000 $’000<br />
Contract/<br />
Notional<br />
Amount Assets Liabilities<br />
Contract/<br />
Notional<br />
Amount Assets Liabilities<br />
Embedded derivatives 662,587 8,247 (290) 548,602 6,674 (13,705)<br />
Forward currency contracts 281,308 3,483 (7,346) 564,312 5,543 (11,125)<br />
Total derivatives 11,730 (7,636) 12,217 (24,830)<br />
As at 31 December 2009 and 2008, <strong>the</strong> derivative <strong>financial</strong> instruments of <strong>the</strong> Group and <strong>the</strong> Company are not designated nor<br />
qualify for hedge accounting. Fair value changes are recognised in <strong>the</strong> profit or loss and hence, no hedging reserve is recorded<br />
as at 31 December 2009 and 31 December 2008.
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
115<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
41. Capital management<br />
The primary objective of <strong>the</strong> Group’s capital management is <strong>to</strong> ensure that it maintains a strong credit rating and healthy capital<br />
ratios in order <strong>to</strong> support its business and maximise shareholder value.<br />
The Group manages its capital structure and makes adjustments <strong>to</strong> it, in light of changes in economic conditions and <strong>the</strong> risk<br />
characteristics of <strong>the</strong> underlying assets. To maintain or adjust <strong>the</strong> capital structure, <strong>the</strong> Group may adjust <strong>the</strong> dividend payment<br />
<strong>to</strong> shareholders, return capital <strong>to</strong> shareholders or issue new shares. As disclosed in Note 32(c), <strong>the</strong> PRC subsidiaries of <strong>the</strong><br />
Group are required <strong>to</strong> contribute and maintain a non-distributable statu<strong>to</strong>ry surplus reserve fund and enterprise expansion<br />
fund. These externally imposed capital requirements have been complied with by <strong>the</strong> subsidiaries for <strong>the</strong> <strong>financial</strong> year ended<br />
31 December 2009 and 2008. No changes were made in <strong>the</strong> objectives, policies or processes for managing capital during <strong>the</strong><br />
year ended 31 December 2009.<br />
The Group moni<strong>to</strong>rs capital using a gearing ratio, which is net debt divided by <strong>the</strong> <strong>to</strong>tal capital plus net debt. The Group ideally<br />
targets <strong>to</strong> maintain a gearing ratio between 30% and 70%. Net debts include borrowings, trade and o<strong>the</strong>r payables, less cash<br />
and bank balances. Capital includes equity attributable <strong>to</strong> owners of <strong>the</strong> Company, less <strong>the</strong> PRC statu<strong>to</strong>ry surplus reserve and<br />
fair value reserve. The Group’s ability <strong>to</strong> raise additional capital under favourable terms is subject, inter alia, <strong>to</strong> external market<br />
forces and fac<strong>to</strong>rs that are beyond <strong>the</strong> Group’s control. The gearing ratios as <strong>the</strong> statement of <strong>financial</strong> position dates are as<br />
follows:<br />
Group<br />
2009 2008<br />
$’000 $’000<br />
Borrowings (Note 29) 888,593 406,504<br />
Trade and o<strong>the</strong>r payables (Note 28) 383,718 329,476<br />
Less: Cash and bank balances (Note 12) (168,796) (175,233)<br />
Net debts 1,103,515 560,747<br />
Equity attributable <strong>to</strong> <strong>the</strong> owners of <strong>the</strong> Company 592,377 564,357<br />
Less: - Fair value reserve (Note 32) – 206<br />
- PRC statu<strong>to</strong>ry surplus reserve (Note 32) (7,886) (5,583)<br />
Total capital 584,491 558,980<br />
Capital and net debt 1,688,006 1,119,727<br />
Gearing ratio 65% 50%
116<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
42. Subsequent events<br />
(a)<br />
Substantial shareholder change<br />
On 16 November 2009, China International Marine Containers (Group) Co. Ltd (“CIMC”) through its wholly-owned subsidiary,<br />
Bright Days Limited (<strong>the</strong> “Offeror”), initiated a voluntary unconditional cash offer (<strong>the</strong> “Offer”), for all <strong>the</strong> shares of <strong>the</strong><br />
Company o<strong>the</strong>r than those held directly or indirectly by entities related <strong>to</strong> Mr Brian Chang, <strong>the</strong> <strong>the</strong>n largest shareholder. The<br />
Offer was completed on 18 January 2010 with acceptance of 78,400,575 shares. As part of <strong>the</strong> shareholders agreement,<br />
<strong>the</strong> Offeror fur<strong>the</strong>r acquired 8,434,000 shares from Mr Brian Chang’s related entity. As a result of <strong>the</strong> Offer and swap<br />
arrangement, CIMC and Mr Brian Chang indirectly own 50.01% and 31.95% of <strong>the</strong> shares in <strong>the</strong> Company respectively.<br />
Following <strong>the</strong> change of majority control, <strong>the</strong> Company has proposed <strong>to</strong> obtain shareholders’ approval <strong>to</strong> change its name<br />
<strong>to</strong> CIMC Raffles Offshore (Singapore) Limited.<br />
(b)<br />
Functional currency change<br />
With effect from 1 January 2010, taking in<strong>to</strong> consideration <strong>the</strong> economic substance of <strong>the</strong> underlying transactions, event<br />
and conditions going forward, <strong>the</strong> Company has adopted <strong>the</strong> change of its functional currency from Singapore Dollars<br />
<strong>to</strong> United State Dollars (“USD”). In accordance with FRS 21, <strong>the</strong> change in functional currency would be accounted for<br />
prospectively from <strong>the</strong> date of <strong>the</strong> change. The Company shall translate all items in<strong>to</strong> <strong>the</strong> new functional currency using <strong>the</strong><br />
exchange rate at <strong>the</strong> date of <strong>the</strong> change. All <strong>the</strong> transactions entered in<strong>to</strong> subsequent <strong>to</strong> <strong>the</strong> change in functional currency<br />
will be accounted for as if <strong>the</strong> accounting records were kept in USD.<br />
43. Comparatives<br />
Certain comparative figures in <strong>the</strong> <strong>financial</strong> statements have been reclassified <strong>to</strong> better reflect <strong>the</strong> nature of <strong>the</strong> balances and<br />
conform with current year’s presentation.<br />
Company<br />
As<br />
As<br />
stated restated<br />
2008 2008<br />
$’000 $’000<br />
Statement of Financial Position<br />
Assets<br />
Current assets<br />
Amounts due from subsidiaries (non-trade) 34,349 –<br />
Non-current assets<br />
Amounts due from subsidiaries (non-trade) 55,302 89,651
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
117<br />
Notes <strong>to</strong> <strong>the</strong> <strong>financial</strong> statements<br />
For <strong>the</strong> <strong>financial</strong> year ended 31 December 2009<br />
43. Comparatives<br />
Group<br />
As<br />
As<br />
stated restated<br />
2008 2008<br />
$’000 $’000<br />
Statement of Financial Position (cont’d)<br />
Equity<br />
O<strong>the</strong>r reserves 26,394 28,188<br />
Accumulated losses (53,519) (55,313)<br />
Statement of Comprehensive Income<br />
Cost of sales (769,528) (763,199)<br />
O<strong>the</strong>r income 36,406 30,077<br />
44. Authorisation of <strong>financial</strong> statements<br />
The consolidated <strong>financial</strong> statements for <strong>the</strong> <strong>financial</strong> year ended 31 December 2009 were authorised for issue in accordance<br />
with a resolution of <strong>the</strong> board of direc<strong>to</strong>rs of Yantai Raffles Shipyard Limited on 15 April 2010.
118<br />
Shareholdings Statistics<br />
As at 6 May 2010<br />
Shareholders List as at 6 May 2010<br />
No. Shareholders No. of Shares Percentage<br />
1 DNB Nor Bank ASA 131,147,700 47.94%<br />
2 Bright Day Limited 130,158,651 47.58%<br />
3 Platinum Nominees Limited 5,755,200 2.10%<br />
4 Airtrust (Singapore) Pte Limited 2,035,449 0.74%<br />
5 Francis James Reidy 1,876,000 0.69%<br />
6 James W. Reidy 1,257,000 0.46%<br />
7 Tracy Chang 1,000,000 0.37%<br />
8 Lotus Jong 120,000 0.04%<br />
9 Carolyn Fong Wai Lyn 100,000 0.04%<br />
10 John McDonald Green-Armytage 55,000 0.02%<br />
Total 273,505,000 99.98%
Yantai Raffles Shipyard Limited<br />
ANNUAL REPORT 2009<br />
119<br />
Notice of Annual General Meeting<br />
NOTICE IS HEREBY GIVEN that <strong>the</strong> Annual General Meeting of <strong>the</strong> Company will be held on 11 June 2010 (Friday) at 3.30 p.m.<br />
(Singapore Time) at No. 1 Claymore Drive, #08-04 Orchard Towers, Singapore 229594 for <strong>the</strong> following purposes:-<br />
As Ordinary Business<br />
1. To receive and adopt <strong>the</strong> Direc<strong>to</strong>rs’ Report and Audited Accounts for <strong>the</strong> <strong>financial</strong> year ended 31 December 2009 (<strong>the</strong> “Financial<br />
Year”), <strong>to</strong>ge<strong>the</strong>r with <strong>the</strong> Audi<strong>to</strong>rs’ Report <strong>the</strong>reon.<br />
(Resolution 1)<br />
2. To re-elect Mr. Mai Bo Liang, a Direc<strong>to</strong>r retiring by rotation pursuant <strong>to</strong> Article 91 of <strong>the</strong> Articles of Association of <strong>the</strong> Company.<br />
(Resolution 2)<br />
3. To appoint Mr. Yu Ya, a Direc<strong>to</strong>r appointed after <strong>the</strong> date of <strong>the</strong> last Annual General Meeting and eligible for re-election pursuant<br />
<strong>to</strong> Article 97 of <strong>the</strong> Articles of Association of <strong>the</strong> Company.<br />
(Resolution 3)<br />
4. To appoint Mr. Yu Yu Qun, a Direc<strong>to</strong>r appointed after <strong>the</strong> date of <strong>the</strong> last Annual General Meeting and eligible for re-election<br />
pursuant <strong>to</strong> Article 97 of <strong>the</strong> Articles of Association of <strong>the</strong> Company.<br />
(Resolution 4)<br />
5. To appoint Mr. Wang Yu, a Direc<strong>to</strong>r appointed after <strong>the</strong> date of <strong>the</strong> last Annual General Meeting and eligible for re-election<br />
pursuant <strong>to</strong> Article 97 of <strong>the</strong> Articles of Association of <strong>the</strong> Company.<br />
(Resolution 5)<br />
6. To appoint Mr. Yu Ning, a Direc<strong>to</strong>r appointed after <strong>the</strong> date of <strong>the</strong> last Annual General Meeting and eligible for re-election pursuant<br />
<strong>to</strong> Article 97 of <strong>the</strong> Articles of Association of <strong>the</strong> Company.<br />
(Resolution 6)<br />
7. To appoint Mr. Zhang Li Min, a Direc<strong>to</strong>r appointed after <strong>the</strong> date of <strong>the</strong> last Annual General Meeting and eligible for re-election<br />
pursuant <strong>to</strong> Article 97 of <strong>the</strong> Articles of Association of <strong>the</strong> Company.<br />
(Resolution 7)<br />
8. To approve <strong>the</strong> payment of Direc<strong>to</strong>rs’ fee of S$193,125 for <strong>the</strong> Financial Year.<br />
(Resolution 8)<br />
9. To re-appoint ERNST & YOUNG LLP, <strong>the</strong> retiring audi<strong>to</strong>r, as an Audi<strong>to</strong>r of <strong>the</strong> Company and <strong>to</strong> authorise <strong>the</strong> Direc<strong>to</strong>rs <strong>to</strong> fix <strong>the</strong>ir<br />
remuneration.<br />
(Resolution 9)<br />
As Special Business<br />
10. To consider, and if thought fit, <strong>to</strong> pass <strong>the</strong> following resolution as an ordinary resolution, with or without modifications:-<br />
“AUTHORITY TO ISSUE SHARES<br />
That pursuant <strong>to</strong> <strong>the</strong> provisions of Section 161 of <strong>the</strong> Companies Act, Cap. 50, <strong>the</strong> Direc<strong>to</strong>rs be and are hereby authorised <strong>to</strong> allot<br />
and issue:<br />
(i)<br />
(ii)<br />
shares in <strong>the</strong> Company; and<br />
convertible securities and any shares in <strong>the</strong> Company pursuant <strong>to</strong> <strong>the</strong> conversion of such convertible securities<br />
(whe<strong>the</strong>r by way of rights, bonus or o<strong>the</strong>rwise) at any time and from time <strong>to</strong> time upon such terms and conditions whe<strong>the</strong>r for cash<br />
or o<strong>the</strong>rwise with such rights and restrictions and for such purposes and <strong>to</strong> such persons as <strong>the</strong> Direc<strong>to</strong>rs shall in <strong>the</strong>ir absolute<br />
discretion deem fit <strong>to</strong> impose and that such authority shall continue in force until <strong>the</strong> conclusion of <strong>the</strong> next Annual General<br />
Meeting or <strong>the</strong> expiration of <strong>the</strong> period within which <strong>the</strong> next Annual General Meeting of <strong>the</strong> Company is required by law <strong>to</strong> be<br />
held, whichever is earlier.”<br />
(Resolution 10)
120<br />
Notice of Annual General Meeting<br />
As Special Business (cont’d)<br />
11. To transact any o<strong>the</strong>r business that may be properly conducted at <strong>the</strong> Annual General Meeting.<br />
By Order of <strong>the</strong> Board<br />
ANDREW LAI<br />
Company Secretary<br />
Singapore, 24 May 2010<br />
Explana<strong>to</strong>ry Note:<br />
Ordinary Resolution 10 is <strong>to</strong> empower <strong>the</strong> Direc<strong>to</strong>rs of <strong>the</strong> Company from <strong>the</strong> date of <strong>the</strong> above meeting until <strong>the</strong> next Annual<br />
General Meeting <strong>to</strong> issue shares and convertible securities in <strong>the</strong> Company. This authority will, unless revoked or varied at a<br />
general meeting, expire at <strong>the</strong> conclusion of <strong>the</strong> next Annual General Meeting of <strong>the</strong> Company or <strong>the</strong> expiration of period within<br />
which <strong>the</strong> next Annual General Meeting of <strong>the</strong> Company is required by law <strong>to</strong> be held, whichever is earlier.<br />
Notes:<br />
1. A member of <strong>the</strong> Company entitled <strong>to</strong> attend and vote at <strong>the</strong> Annual General Meeting of <strong>the</strong> Company is entitled <strong>to</strong> appoint<br />
one or two proxies <strong>to</strong> attend in his stead. A proxy need not be a member of <strong>the</strong> Company.<br />
2. A member of <strong>the</strong> Company which is a corporation is entitled <strong>to</strong> appoint its authorized representatives or proxies <strong>to</strong> vote on<br />
its behalf.<br />
3. The instrument appointing a proxy must be deposited at 6 Temasek Boulevard, #29-00 Suntec Tower Four Singapore<br />
038986 marked <strong>to</strong> <strong>the</strong> attention of <strong>the</strong> Company Secretary, not less than 48 hours before <strong>the</strong> time appointed for holding of<br />
<strong>the</strong> Annual General Meeting.
This page is intentionally left blank.
This page is intentionally left blank.
Singapore Head Office<br />
Yantai Raffles Shipyard Limited<br />
Address: No 1. Claymore Drive #08-04<br />
Orchard Towers,<br />
Singapore 229594<br />
Tel: +65 6735 8690<br />
Fax: +65 6734 5449<br />
Yantai CIMC Raffles Offshore Ltd<br />
Address: No.70 Zhifu East Road,<br />
Zhifu Island, Yantai, Shandong,<br />
China, 264000<br />
Tel: +86 535 680 1451<br />
Fax: +86 535 680 1260<br />
Email: ir@<strong>cimc</strong>-<strong>raffles</strong>.com<br />
www.<strong>cimc</strong>-<strong>raffles</strong>.com