notes to the financial - cimc raffles

Yantai Raffles Shipyard Limited 

Reaching 

for 

Greater 

Heights 

ANNUAL REPORT 2009

Contents 

Our Core Values 1 

The Company 2 

About CIMC 4 

Chairman’s Statement 6 

CEO’S Review 10 

Corporate Highlights 12 

TAISUN Mating Process 14 

Corporate Social Responsibility 16 

Our Order Book 17 

Corporate Information 18 

Corporate Structure 19 

Board of Directors 20 

Financial Highlights 24 

Financial Review 25 

Our Vision 

To be the Yard of Choice. 

Our Mission 

To achieve annual sales revenue 

of RMB10 billion and to become a 

leading offshore solution provider 

trusted by customers, employees 

and stakeholders by 2012.


ANNUAL REPORT 2009 

1 

Corporate Objective 

With our sincerity and innovation, we provide world class 

offshore solutions through leading technology, quality 

processes and a safe environment, enabling the sharing of 

marine resources for sustainable development 

Our Core Values 

Integrity 

We commit to honesty and faithfulness as our foundation 

Service 

We maintain a customer-centric approach to provide 

responsive and excellent services 

Excellence 

We pursue effectiveness, efficiency and responsiveness in 

our operating processes 

Innovation 

We challenge conventions and foster innovations to create 

value for our customers and stakeholders 

Teamwork 

We focus on building a spirit of co operation as the key to 

achieving our mission and vision 

Accommodation 

We embrace diversity as a foundation to build a team which 

consistently achieves a high performance



3 

The Company 

Yantai Raffles Shipyard Limited is one of the largest 

Offshore and Marine Fabrication Shipyards in the 

world. It has experienced dramatic growth over the 

last 15 years and is now one of he most respected 

names in the Offshore and Shipbuilding Industry. 

With CIMC now establishing itself as the leading 

shareholder of Yantai Raffles Shipyard Limited with 

50.01%. this leads to many distinct competitive 

advantages such as excellent relationships throughout 

China and also strong financial support which allows us 

to invest to fufill our future development aspirations. 

Yantai Raffles Shipyard Limited offers total solutions to 

our customers and focuses on reliability, commitment to 

excellence, versatility and quality. Our quality solutions 

are reinforced by our engineering capabilities and 

innovative software which are unrivalled in the industry. 

Yantai Raffles Shipyard Limited has become the ‘Yard 

of Choice’ and is internationally recognized for its state 

of the art and record breaking facilities. Yantai Raffles 

Shipyard Limited is the home to ‘TAISUN’ the world’s 

record breaking crane. 

We have not only an impressive portfolio of completed 

Offshore Projects, but also have a very diverse range of 

projects currently under construction at Yantai Raffles 

Shipyard Limited. Yantai Raffles Shipyard Limited designs, 

builds, repairs and converts a range of offshore projects 

such as Jack Up Drilling Rigs, Semi Submersibles Drilling 

Rigs, FPSO’s and Pipelay Vessels. 

We look forward to a prosperous future for Yantai Raffles 

Shipyard Limited in which it is our vision to develop into 

a ‘World Class’ Organization; truly reaching for greater 

heights to become one of the leading Shipyards in 

the World.

4 

With over 20 years continual development, 

CIMC have developed into a World Class Enterprise.



5 

About CIMC 

China International Marine Containers (Group) Ltd. (CIMC) 

is dedicated to providing a wide range of heavy industry 

services ranging from the manufacturing and supplying of 

containers, trailers, tank equipment, airport boarding bridges 

as well as Offshore Construction. CIMC owns RMB37.36 

billion of total assets and has an annual sales of RMB20.48 

billion. CIMC also has over 100 subsidiaries and 47,000 staff 

all over China, North America, Europe, Asia and Australia. 

CIMC was founded in January 1980 in Shenzhen. CIMC 

went public in 1993 and has been listed in Shenzhen Stock 

Exchange since 1994. The main shareholders are COSCO 

and China Merchants Holdings. With 20 years continual 

development, CIMC has become a world class enterprise. 

In 2009, CIMC ranked No. 1397 in the Top 2000 World 

Leading Companies by Forbes and No. 119 in the Top 500 

Enterprises in China. In 2008, CIMC ranked No.49 in China’s 

Globally Most Competitive Companies. In 2007, CIMC 

containers were identified as one of China’s most Renowned 

Brands. In the same year, the CIMC brand was honored 

as the “Chinese World Brand” by General Administration 

of Quality Supervision, Inspection and Quarantine of the 

People’s Republic of China. 

CIMC’s Vehicle business is the key developing business of 

CIMC, targeted at providing first class road transportation 

equipment and services for the global market. CIMC has built 

up 22 production bases covering North America, Europe, 

Thailand, Mid-China, East China, South China, North China, 

Northwest China and Northeast China. 

CIMC is also heavily involved in the Airport equipment 

business covering passenger boarding bridges, automatic 

air cargo handling systems, and automatic parking systems. 

CIMC’s passenger boarding bridges have entered into over 

10 international markets, including North America, Europe, 

Africa and Southeast Asia. 

CIMC has now purchased the majority shareholding in 

Yantai Raffles Shipyard Limited. Yantai Raffles Shipyard 

Limited is a leading offshore and marine fabrication specialist 

currently building a variety of different vessels such as Semi 

Submersible Drilling Rigs, Jack Up Drilling Rigs, Elevating 

Support Vessels, Pipelay Vessels and a Fallpipe Vessel. 

The core business of CIMC is container manufacturing with 

over 34 production bases throughout the South, East and 

North of China in 11 major cities along the coast of China. 

CIMC is the only supplier of containers who can provide 

a whole series of containers with complete intellectual 

property rights.

6 

Harnessing 

the Full 

Potential 

of our 

Resources 

“I AM CONFIDENT THAT, 

AS WE TAKE STRATEGIC 

STEPS IN ENSURING 

DELIVERIES, WINNING 

NEW ORDERS, EXPANDING 

PRODUCTION CAPACITY, 

STRENGTHENING 

ENGINEERING CAPABILITY, 

AND OPTIMIZING OUR 

VALUE CHAIN, YANTAI 

RAFFLES WILL GRADUALLY 

BECOME A LEADING 

MARINE AND OFFSHORE 

BUILDER.”



7 

Chairman’s Statement 

Distinguished shareholders, 

2009 was a critical year where CIMC and Yantai 

Raffles deepened cooperation and achieved 

stable development. CIMC became the controlling 

shareholder of Yantai Raffles on 18 Jan 2010, reflecting 

our recognition of the achievements of Yantai Raffles in 

the past year, as well as our confidence in the offshore 

industry and in Yantai Raffles for years to come. 

Currently, the offshore industry is gradually recovering 

with the global economy. We were delighted to observe 

that Yantai Raffles not only successfully weathered the 

economic downturn, but it had also emerged stronger. 

However, there are still lots of work to be done to achieve 

our goal of becoming a leader in this competitive industry. 

We need to pursue business opportunities relentlessly and 

to overcome challenges. 

Challenges and Opportunities 

The current global economic crisis affected the developed 

countries greatly. For the shipping and oil and gas industries, 

2008 and 2009 were particularly difficult years. Many promising 

new build projects were canceled, with a small number of 

ship-owners electing to abandon vessels under construction 

due to financing challenges. On the contrary, China and other 

emerging economies have become a vital part of the global 

risk management framework. Their development models and 

competitive advantages have restored investors’ confidence 

in both the East and the West. 

As a marine and offshore builder, Yantai Raffles also faced 

tremendous challenges in 2009, including uncertainty and 

issues with project financing, similar to those faced by our 

clients. However, with great support from the government, 

understanding from our clients, cooperation from our 

partners and through our own efforts, we have not only 

largely preserved our order book, but also achieved 

significant progress in key projects. 

Russia, as well as in China. Against a complex backdrop 

of international rivalry and cooperation in the energy sector, 

and supported by extremely favorable conditions in China, I 

am confident that Yantai Raffles will be able to expand our 

market share and play a more important role in the industry. 

Prospects 

2009 saw closer and maturing cooperation between CIMC 

and Yantai Raffles. CIMC provided strong support for 

Yantai Raffles in areas such as finance, public relations, 

supply chain management, cost control, human resource 

management and corporate culture, through which Yantai 

Raffles has made significant progress. 

I am confident that, as we take strategic steps in ensuring 

deliveries, winning new orders, expanding production 

capacity, strengthening engineering capability, and 

optimizing our value chain, Yantai Raffles will gradually 

become a leading marine and offshore builder. 

I would like to extend our sincere gratitude to the 

government, shareholders, clients and partners, who have 

placed their trust and support in us. I would also like to 

thank the management and all our staff who have worked 

hard and persevered with the company. As Yantai Raffles 

steps into a new chapter of its history, let us work together 

to create a world-class offshore enterprise! 

Mai Bo Liang 

Chairman of the Board of Directors 


Since the beginning of 2010, the offshore market is gradually 

reviving. There are significant opportunities in Northern 

Europe, Middle East, Central Asia, West Africa, Brazil,



9

10 

Providing 

dedicated 

Services and 

Solutions. 

“We remain committed 

to deliver our 

projects, secure 

new orders, improve 

efficiencies, build 

our competitive 

strengths, and 

increase our product 

mix. Supported by 

synergies expected 

from a continuing and 

deeper cooperation 

with CIMC, we are 

confident we will 

realize our vision soon 

- to be the world 

class yard of choice.”



11 

CEO’s Review 

Dear Shareholders, 

Yantai Raffles faced many challenges in 2009. The 

operating environment was and continues to be 

volatile, reflecting global economic uncertainties, 

resulting in tight availability of credit, an increasing 

number of cancellations in the market and a shortage 

of new contracts. Nonetheless, we continue to work 

on our existing order books and press to close off 

all existing contracts. We have kept a sharp focus 

on meeting commitments to our existing clients, 

completing our various capital expenditure plans, 

streamlining management processes, improving 

production efficiencies and managing costs. 

Our revenue for 2009 is S$918.6 million and net profit after 

minority interest is S$27.3 million, both marginal increases 

over the previous financial year. Shareholders’ equity rose 

by 5.7% to S$611.4 million. 

Yantai Raffles is fortunate to have a strong corporate 

shareholder with vast international experience during 

these difficult times. CIMC increased its shareholding in 

Yantai Raffles in January 2010 to 50.01%. CIMC, with 

its vast local and international business experience, has 

brought tremendous benefits to the Group in all aspects 

of business operations over this period. Most importantly, 

their commitment to Yantai Raffles has instilled confidence 

in our business partners. Local government, financial 

institutions, and our valued clients and suppliers have all 

given strong support to the Group despite the gloomy 

global environment and delays in delivery of certain projects. 

I am pleased to report that Yantai Raffles is on the road to 

resolving the challenges in outsourcing and engineering. 

As of April 2010, four semi-submersible drilling rigs have 

been mated by our TAISUN crane, and are now in the final 

stages before delivery. Great improvements in quality and 

productivity have been achieved with each subsequent 

rig. We look to being able to better satisfy our clients with 

quality, on time schedule and low cost in the near future. 

New orders slowed down in 2009 but are expected to see 

recovery in 2010 with the recovery of oil prices. Prospects 

for the offshore marine industry appear positive. Yantai 

Raffles has received a significant number of enquiries 

and our key focus for 2010 is to convert many of these 

into new orders. Major oil and gas discoveries around 

the world will need more equipment, and Yantai Raffles 

is well-positioned to gain new orders through strategic 

partnership and cooperation arrangements with existing 

business partners. There is strong demand for Jack-up 

rigs and semisubmersible vessels at this time, and we 

look forward to closing contracts soon. Russia is another 

potential market that we are developing through an 

extensive marketing programme and production facility to 

participate in its growth. 

Yantai Raffles will continue to increase CAPEX investment 

to better service our clients and reduce costs. The major 

investment made to build the 18-metre deep wharf 

will be completed in early 2010, and will give Yantai 

Raffles a significant competitive advantage in building 

semisubmersibles, FPSO’s, FPU’s and similar vessels. 

More workshops will be built to bring more work under 

cover to reduce weather effects on our production. The 

acquisition of Longkou Sanlian shipyard was completed in 

early 2010. This facility will focus on building Jack-up rigs, 

but not the exclusion of other vessels. 

We remain committed to deliver our projects, secure new 

orders, improve efficiencies, build our competitive strengths, 

and increase our product mix. Supported by synergies 

expected from a continuing and deeper cooperation with 

CIMC, we are confident we will realize our vision soon - to 

be the world class yard of choice. 

Last but not least, I would like to express my deepest 

appreciation to all our staff and workers, our shareholders, 

clients and business partners for their ongoing faith and 

support of the Company. 

Brian Chang 

Deputy Chairman and CEO

12 

Corporate Highlights 

March 

05 

Mr Brian Chang, Chairman and Mr Stephen Pan, 

General Manager, Haiyang Raffles received Mr Jiang 

Shili, Mayor, Haiyang Municipal Government, Li 

Yuanhui, Vice Mayor and Mr Zhao Mingjia, Deputy Head 

of Organization Department. Both parties exchanged 

views on the future development plans for Haiyang 

Raffles, and signed the contract for Haiyang Raffles 

second-phase land area. Mr Chang and Mr Li signed 

the contract on behalf of their respective parties. 

April 

08 

Considering the tremendous challenges that we 

are currently facing, including the global economic 

downturn, the year forward is extremely difficult for 

the company. Mr Brian Chang, Deputy Chairman and 

CEO had decided to forgo his salary with effect from 

April 2009 until further notice. At the same time, all 

independent directors agreed to reduce directors’ fees 

by half. 

17 

24 

Sheng Li No. 2 drilling rig delivery ceremony was held 

on 17th March for Shengli Petroleum Administrative 

Bureau Ocean Drilling Company. 

Haiyang Raffles Offshore Equipment Co., Ltd (HROE) 

completed the increase of registered capital from 

RMB100 million to RMB200 million. This increase 

improved the capital structure for HROE, its self 

financing capabilities and management of financial 

risks. This provided a good foundation to ensure 

HROE’s continuous development. 

May 

18 

26 

June 

26 

The delivery ceremony of Shengli 3# drilling rig was held 

near the 20,000MT pedestal crane. 

The mid section of Van Oord for goods transportation 

was successfully launched in Beifang Shipyard. 

Yantai Raffles Shipyard Limited has successfully 

executed the launch of its first Elevating Support Vessel 

for Remedial Offshore when the ESV unit was winched 

over rollers onto the launching barge. The launch 

ceremony celebrated a major milestone in construction 

of one of the world’s first ESV vessels. 

Launching of the ESV vessel 

Shengli No.2 Rig Delivery



13 

September 

19 

25 

October 

14 

20 

After several months’ preparation, the kick-off 

ceremony for H195&H197 Projects Kick was held 

successfully in MPC of Haiyang Raffles according to 

the yard master schedule. 

Over 450 international and domestic dignatories and 

guests gathered around the dry dock at Yantai Raffles 

Shipyard in anticipation of witnessing the exciting 

completion of the mating of Schahin’s SS Pantanal as 

20,000 ton crane TAISUN gently lowered the massive 

12,000 ton deck box onto the hull. 

Russian Deputy Prime Minister, Mr. Igor Ivanovich 

Sechin, paid a special visit to Yantai Raffles Shipyard 

to witness the signing of a joint venture agreement 

between Yantai Raffles Shipyard and “Far Eastern 

Shipbuilding & Repair Centre”, a Russian Joint Stock 

Company that controls the Russian Far East sector 

shipbuilding industry. 

The ground breaking ceremony of CIMC Offshore 

Research and Development (R&D) Institute was held in 

the Yantai Hi-Tech Development Zone. The Yantai CIMC 

Offshore R&D Institute is wholly funded by CIMC with 

150 million RMB registered capital. The development 

of the institute will take place in two phases, with first 

phase construction to be completed in late 2011. The 

institute will spearhead marine and offshore engineering 

research, experimentation, design and consultation, 

marine and offshore project management and 

brokerage and exhibition services. 

22 

In the spirit of responding to Chairman Mr Mai Bo 

Liang’s rallying call to Yantai Raffles Management, 

a Pledging Ceremony was held for the successful 

delivery of COSL #1, D90 and Schahin H200 

projects. The eventwas duly attended by the some 80 

key personnel from various departments and project 

teams of the yard. 

November 

02 

18 

Yantai Raffles Offshore Ltd, a subsidiary of Yantai 

Raffles Shipyard Limited, entered into an agreement 

to purchase 100% equity interest in Longkou Sanlian 

shipyard in Shandong, China. The shipyard, with an 

existing land area of more than 400,000 sqm, will be 

built is one of the world’s largest specialised Jackup 

fabrication yards. 

December 

17 

Our TAISUN Crane yet again completed another 

remarkable achievement achieving the World’s 

heaviest ever commercial lift when it successfully 

lifted the deckbox of Saipem’s ‘Frigstad D90’ Semi 

Submersible Drilling Rig, ‘Scarabeo 9’ in front of over 

400 international and domestic guests. 

The Delivery Ceremony for the African Lifter 

Accommodation Barge was held successfully held on 

18th December 2009. 

Ground Breaking Ceremony of CIMC Research 

and Development Center 

Schahin ‘SS Pantanal’ Semi Submersible Drilling Rig Mating Ceremony

14 

TAISUN Mating Process 

TAISUN 20,000MT Crane 

Towering at 122 Metres and Spanning a width of 130 

metres, TAISUN is the world’s most powerful Crane. 

In 2009 it completed the Heaviest Ever Commercial lift by 

lifting the 17,000MT deckbox of Saipem ‘Frigstad D90’ 

Semi Submersible Drilling Rig as well as also undertaking 

the mating of Schahin ‘SS Pantanal’ Semi Submersible 

Drilling Rig. 

With the ability to accommodate loads of up to 120 metres 

wide and in a dry dock that is 14 metres deep, TAISUN is 

able to provide total lifting solutions for the world’s largest 

offshore vessels. 

Owing to its special load spreading design, TAISUN 

introduces extremely small stresses in the structures, 

simplifying the lifting design and increasing the number of 

structures that can be lifted. 

With the combination of both unrivaled capacity and 

flexibility, TAISUN is ready to take on some of the most 

challenging lifting projects offering a total turnkey solution 

to all our customers. 

TAISUN Mating Process 

After the deckbox has been 

completely outfitted, it is 

skidded onto our launching 

barge (1) and moved into the 

dock. (2). With the barge and 

deckbox in position, TAISUN’s 

hooks are lowered and 

connected (3). 

1 

2 

3 

The deckbox is lifted from the 

Barge (4) and the dock gates 

open. After the barge has been 

moved out of the dock (5), tugs 

collect the hull and assist it into 

the dock (6). Inside the dock 

the mooring and positioning 

winches take over control for 

final positioning (7) and (8). The 

critical time that the deckbox 

is suspended in the air is less 

than 24 hours, meaning that 

favourable weather conditions 

during this vital time can be 

assured. 

4 

5 6 

7 8



15 

9 

After the deckbox is supported on the 

columns (9), welders immediately start 

securing the hull to the topsides and 

after 7 days the now completed Semi 

can be released from the crane. The total 

operation from load out of the topsides 

to releasing the Semi Submersible from 

the Crane can be done in under 2 weeks, 

meaning that TAISUN is able to assemble 

one Semi every month. 

SUCCESSFUL MATING 

OPERATIONS OF 2009 

In 2009 Yantai Raffles completed 2 successful commercial lifts: 

Schahin ‘SS Pantanal’ Semi 

Submersible Drilling Rig 

(12,000MT) 

Saipem ‘Frigstad D90’ Semi 

Submersible Drilling Rig 

(17,000MT) one Semi every month.

16 

Corporate Social Responsibility 

Yantai Raffles has a strong Corporate Social Responsibility 

and always gives back to its community. We have set up a 

variety of social responsibility schemes to look after members 

of the Chinese community, especially in the Shandong 

Area. Yantai Raffles responded very quickly after the tragic 

Earthquake in Qinghai, China in April 2010 with over 3,164 

donators providing a total donation of RMB211,960.50. 

Mr Brian Chang personally donated USD75,000. In 

this fund-raising campaign, our company employees of 

various departments, as well as owners, vendors and subcontractors 

donated generously. 

In 2009 we also successfully visited 3 villages in Shandong, 

including Da Tuan, Dong Kou and Xi Kou in Zhifu Island in 

which we donated gifts with a total value of RMB30,000 to 

elderly members of the community. The Chinese community 

is at the heart of Yantai Raffles success and we continually 

forge strong relationships with its members. 

We regularly host many team building events to make Yantai 

Raffles a rewarding environment to work in. We hold a 

variety of sporting events to ensure our employees keep a 

fresh mind and approach to their work, including Badminton 

and Swimming. Our employees and our international team 

of professionals, who possess a high level of technical 

expertise, are the ‘drivers in Yantai Raffles success and that 

which ensures the prosperous future of our company. 

Yantai Raffles is also committed to ensuring corruption does 

not occur in the workplace and has implemented many anti 

corruption training seminars for all employees.



17 

Our Order Book 

1. Semi Submersible DP3 Drilling Rig (COSL Pioneer) 

Client: COSL Pioneer Pte Ltd 

Country: China 

2. Semi Submersible DP3 Drilling Rig (COSL Innovator) 

Client: COSL Innovator Pte Ltd 


3. Semi Submersible DP3 Drilling Rig (COSL Promoter) 

Client: COSL Promoter Pte Ltd 


4. Semi Submersible DP2 Drilling Rig (SS Pantanal) 

Client: Schahin/Baerfield Drilling LLC 

Country: Brazil 

1 6 7 

4 

9 

5. Semi Submersible DP2 Drilling Rig (SS Amazonia) 

Client: Schahin/Soratu Drilling LLC 

Country: Brazil 

6. Semi Submersible DP3 Drilling Rig 

(Saipem’s ‘Frigstad D90’) 

Client: Frigstad Discoverer Invest Ltd 

Country: Norway 

7. Super M2 Elevating Support Vessel 

Client: Remedial ‘Cyprus’ Limited 

Country: Cyprus 

8. Super M2 Jack Up Drilling Rig (2010) 

Client: Dragon Oil Turkmenistan Limited 

Country: Turkmenistan 

9. Pipelay Vessel (Castor) 

Client: Saipem (Portugal) Comercio Maritimo, 

Socidedade Unipessoal Lda 

Country: Portugal 

10. Fall Pipe Vessel (Stornes) 

Client: Van Oord Marine Services B.V. 

Country: Norway

18 

Corporate Information 

BOARD OF DIRECTORS 

Executive 

Mai Bo Liang (Chairman) 

Brian Chang (Deputy Chairman and CEO) 

Chang Yee Meng, Malcolm 

Yu Ya 

Yu Yu Qun 

Wang Yu 

Non-Executive 

Liu Chee Ming 

Yu Ning 

Zhang Li Min 

AUDIT COMMITTEE 

Zhang Li Min (Chairman) 

Liu Chee Ming 

Yu Ning 

REMUNERATION COMMITTEE 

Liu Chee Ming (Chairman) 

Chang Yee Meng Malcolm 

Zhang Li Min 

NOMINATING COMMITTEE 

Yu Ning (Chairman) 

Liu Chee Ming 

Yu Ya 

Company SECRETARY 

Lai Wai Kit Andrew 

(appointed on 8 August 2009) 

AUDITORS 

Ernst & Young LLP 

Public Accountants and Certified 

Public Accountants 

One Raffles Quay 

North Tower, Level 18 

Singapore 048583 

Partner in charge: 

Tan Chian Khong (from financial year 

ended 31 December 2009) 

REGISTERED OFFICE 

No. 1 Claymore Drive, 

#08-04 Orchard Towers, 


Tel: (65) 6735 8690 

Fax: (65) 6734 5449 

INVESTOR CONTACT 

Mr Steven Budgen 

Yantai Raffles Shipyard Limited, 

No.70 Zhifu East Road, 

Zhifu Island, 

Zhifu District, 

Yantai, 264000, 

Shandong, 

China 

Tel: (+86) 535 680 1451 

Email: ir@cimc-raffles.com 

PRINCIPAL BANKERS 

China Development Bank 

Bank of China 

China Construction Bank 

Bank of Communications 

China Merchants Bank 

Agricultural Bank of China 

Standard Chartered Bank 

The Royal Bank of Scotland



19 

Corporate Structure 

As at 31 December 2009 

100% 

CIMC Raffles Investments 

Limited 

(f.k.a YRS Investments Limited) 

Hong Kong SAR 

Yantai Raffles 

Shipyard Limited 

Singapore 

100% 

CIMC Raffles Leasing Pte Ltd 

(f.k.a YRS Shiplease Pte Ltd) 

Singapore 

36% 

100% 

Consafe MSV AB 

Sweden 

Coral Offshore Limited 

British Virgin Islands 

100% 

CIMC Raffles Yacht Limited 

(f.k.a Raffles Yacht Limited) 

Hong Kong SAR 

100% 

Asiatic Offshore Limited 


71.6% 

Yantai CIMC Raffles Shipyard 

Co., Ltd 

(f.k.a Yantai Raffles Shipyard Co. Ltd) 

People’s Republic of China 

100% 

Evolution Offshore Ltd 


100% 

Pelican Waters Investment Ltd 


100% 

Offshore Accomodation Pte Ltd 

Singapore 

100% 

Deepwater Venture Pte. Ltd. 

Singapore 

50% 

Peyan Singapore Pte. Ltd. 

Singapore 

85.2% 

12.8% 

Yantai CIMC Raffles Offshore Ltd 

(f.k.a Yantai Raffles Offshore Ltd) 


100% 

Haiyang Raffles Offshore 

Equipment Ltd 


30% Haiyang Blue Island Offshore Ltd 


50% 

Yan Pex Singapore Pte. Ltd. 

Singapore

20 

Board of Directors 

MR MAI BO LIANG 

Chairman and Executive Director 

MR BRIAN CHANG 

Deputy Chairman and CEO 

Mr Mai Bo Liang was appointed as our 

Executive Director and Chairman of Yantai 

Raffles with effect from 3 November 2008. 

He graduated with a mechanical engineering 

degree from South China University of 

Technology. Since 1982, Mr Mai has been 

working in China International Marine 

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

technician then as the Manager of Product 

Technical Department and General Manager. 

He began to serve as CIMC’s President in 

1992 and Director in March 1994. 

Mr Brian Chang, our Deputy Chairman and 

CEO founded Yantai Raffles in 1994. With 

over 40 years experience in the shipbuilding 

industry, he pioneered the construction of 

Singapore’s first Jack Up Drilling Rig at 

Far East Levingston Shipbuilding Limited 

(Currently known as Keppel Fels Limited). 

In 1971, Mr Chang started the Promet 

Group (Known today as PPL Shipyard) 

and has implemented and supervised a 

wide spectrum of marine projects ranging 

from offshore tugs and supply vessels to 

sophisticated offshore vessels including 

extreme environment Semi Submersible 

Drilling Platforms. 

To date, he has overseen more than 

600 Marine Construction Projects and 

has led Yantai Raffles to the forefront of 

the shipbuilding and marine fabrication 

sectors with the construction of the 

worlds largest gantry crane with a lifting 

capacity of 20,000MT. Mr Chang received 

a scholarship for an honors degree in 

Electrical Engineering at the City University, 

in London and graduated in 1965.



21 

MR MALCOLM CHANG 

Executive Director 

MR Yu Ya 


Mr Malcolm Chang was appointed to the 

Board in October 2000 and is currently 

overseeing the Group’s Contracts Department. 

Mr Chang holds directorships in several oil 

and gas infrastructure installation companies 

and was awarded an Honors degree in 

Science (Economics), Brunel University, 

United Kingdom, in 1995. 

Mr Yu Ya was appointed to the Board in 

March 2010. He is also currently the Deputy 

Party Secretary and General Manager 

of public relations at CIMC. Mr Yu Ya 

graduated from a Bachelor of Engineering 

and subsequently obtained a Master in 

Business Administration. Prior to joining 

CIMC, he was engaged in various senior 

positions such as Executive Director, Vice 

President and General Manager in the 

food industry.

22 

Board of Directors 

MR Yu Yu Qun 


Mr Wang Yu 


Mr Yu Yu Qun was appointed to the board 

in March 2010. He joined CIMC in 1992 

and is currently the Corporate Secretary 

of CIMC. Prior to this, he was involved as 

the Manager of the Finance Department, 

responsible for capital markets and fund 

raising activities. Mr Yu Yu Qun graduated 

with a Bachelor and Masters degree in 

Economics from Beijing University. He was 

with the State Bureau of Commodities 

before joining CIMC. 

Mr Wang Yu was appointed to the Board in 

March 2010. He has also been the General 

Counsel of CIMC since 2003. Prior to this, he 

was the general counsel of International Data 

Group – China and legal manager of China 

Cosco (Group) Ltd. Mr Wang Yu graduated 

from Dalian with Maritime University with 

a Bachelors degree in Engineering and a 

Masters in Law.



23 

MR Yu Ning 

Non-executive & Independent Director 

MR Zhang Li min 


MR Liu Chee Ming 


Mr Yu Ning was appointed to the 

Board in March 2010. He has vast 

experience in the legal profession. 

Mr Yu Ning has been the President 

of China National Association of 

Lawyers’ since 2005 and was the 

Vice President from 1995 to 2005. 

He is also the part time professor 

lecturer and mentor for Law Studies 

in Beijing University and Qinghua 

University. 

Mr Zhang Li Min was appointed 

to the Board in March 2010. He 

graduated from Tianjin University 

of Finance and Economics with a 

Masters Degree in Economic Analysis 

and Doctorate in Accounting and 

Auditing. He is currently the mentor 

to accounting doctorate students 

in Zhong Shan University and a 

consultant in Peng Chen CPA firm. 

Mr Zhang has been the member of 

China Certified Public Accountant 

Association since 2006. He is also 

the Vice President of China and 

Guangdong Auditing Association since 

2005. Mr Zhang is the independent 

director on the board of a number 

of listed companies in China. 

Mr Liu Chee Ming was appointed a 

Non-Executive Director to the Board 

in December 2005. Mr Liu brings 

with him over 30 years of experience 

within the financial services sector. 

He has been the Managing Director 

of Platinum Holdings Company 

Limited since 1996, prior to which 

he held senior-level positions at 

various Jardine Fleming entities 

for over 17 years. Mr Liu is an 

independent non-executive director 

of several public-listed companies, 

including StarHub Ltd in Singapore; 

and Kader Holdings Company Ltd 

in Hong Kong. Since May 1995, he 

has been a member of the Takeovers 

Appeal Committee and the Takeovers 

and Mergers Panel of the Securities 

and Futures Commission in Hong 

Kong. In 1st April 2008, he was 

appointed as a deputy Chairman. 

He is also currently a Governor of 

Singapore International School. Mr 

Liu holds a Bachelor of Business 

Administration from the former 

University of Singapore.

24 

Financial Highlights 

Revenue 

(S$ million) 

891.0 918.6 

Net Profit attributable to equity holders 

of the Company (S$ million) 

35.9 

26.9 

27.3 

323.4 

2007 2008 2009 

2007 2008 2009 

Net Assets 

(S$ million) 

565.1 

578.4 

611.4 

Earnings Per Share (Basic) 

attributable to equity holders of the Company 

(in Singapore cents) 

14.1 

9.9 10.0 

2007 2008 2009 

2007 2008 2009 

in S$ million 2007 2008 2009 

Current Assets 1,099.5 1,191.9 1,354.5 

Non-current Assets 403.3 529.9 622.1 

Total Assets 1,502.8 1,721.8 1,976.6 

Current Liabilities 918.1 1,120.8 1,040.0 

Non-current Liabilities 19.6 22.6 325.2 

Total Liabilities 937.7 1,143.4 1,365.2 

Total Equity 565.1 578.4 611.4



25 

Financial Review 

For the financial year ended 31 December 2009 

Offshore Group Ltd. While a substantial part of the value of 

the investments has recovered in 2009, the reversal of losses 

recorded in prior years has not been reflected in the profit and 

loss statement as guided by Accounting Standards. Groupwide 

cost control measures have seen reasonable results as 

evidenced by year-on-year savings in administrative expenses 

of approximately S$6.0 million or 10.5%. 

Net interest costs surged by 244% to S$17.9 million, due 

to a significantly higher level of borrowings established 

to support the Group’s working-capital requirement and 

CAPEX investment. Nevertheless, profit before tax improved 

by 25.1% to S$45.3 million. 

Overview 

The financial year 2009 (“FY2009”) was another challenging 

year for the Group. Despite the uncertainties and volatility 

of the global economy, the Group delivered a stable 

performance. 11 offshore projects are in an advanced stage 

of construction and registered revenue of S$918.6 million, a 

marginal 3% increase from S$891.0 million in FY2008. Net 

profit after tax and minority interests was S$27.3 million, 

an increase of 1.5% from the previous financial year. The 

Group’s earnings per share was 9.99 Singapore cents, while 

net asset value per share was S$2.17. The Group’s existing 

order book will provide a sustainable revenue stream through 

to 2011. 

In FY2009, the main Chinese operating subsidiary of the 

Group, Yantai CIMC Raffles Offshore Ltd obtained Advanced 

Technology Enterprise status and benefitted from a tax 

concession of 15% tax rate for 3 years from FY2009. As a 

result, profit net of tax further improved by 29.9% to S$32.6 

million. After minority interests’ share of subsidiaries’ results, 

net profit was reported at S$27.3 million. 

Review of financial performance 

While Group revenue remained constant with FY2008, gross 

profit decreased by 14.6% to S$109.1 million, mainly due 

to provisions made for contingencies including foreseeable 

losses for work-in-progress relating to certain projects under 

negotiation with owners. 

Operating profit however improved by 59.2% to S$64.0 

million, mainly as a result of effective foreign exchange 

hedging which maintained net foreign exchange losses at 

less than S$1 million, compared to net losses of S$18.7 

million in FY2008. Further, with a view to dispose of noncore 

assets and investments of the Group, YRS successfully 

negotiated a settlement for a debt investment and recorded 

a gain S$5.8 million. In FY2008, there were losses of S$18.5 

million on mark-to-market available-for-sale investments 

and strategic investment in an associated company, TSC

26 

Financial Review 


Review of financial position and cash flow 

Total assets have grown by 14.8% to S$1,976.6 million, as a 

result of high working capital requirement at the peak of the 

projects construction stage. CAPEX investment was lower 

by 33% from FY2008, as the Group cautiously controlled 

the pace of expansion of its facilities in view of the current 

uncertain economic environment. Included in the CAPEX was 

a S$32.0 million, downpayment for the planned purchase of 

100% equity in Longkou Sanlian Offshore Engineering Co., 

Ltd in the PRC. The acquisition was completed on 19 April 

2010. 

While total cash decreased by 3.7% to S$168.8 million, free 

cash was S$111.8 million, higher than the previous year by 

155.3% as a result of improved cash management. 

Total liabilities rose by 19.4% to S$1,365.2 million. In 

particular, the Group benefited from the continuing and 

increasing support of its bankers in the PRC, external 

borrowings grew by 118.6% to S$888.6 million, primarily to 

support production. The Group’s gearing ratio (calculated 

as net debt (borrowings less cash plus payables) over net 

debt plus equity) increased from 50% in previous year to 

65% as at 31 December 2009. 36.5% of the borrowings 

are non-current due to successful restructuring of short 

term debts to 3-years long term debts. Accordingly, the 

Group’s liquidity ratio improved to 1.30 as at 31 December 

2009 from 1.06 in end of FY2008. 

Going forward, the Group continues to establish large, flexible 

and comprehensive banking facilities with international and 

PRC relationship banks, not only to meet its operating 

requirements, but also with a strategy to provide liquidity 

and support new business opportunities as they arise. 

Shareholders’ equity rose by 5.7% to S$611.4 million.



27 

fiNANCIAL CONTENTS 

Corporate Governance 

Directors’ Report 

Statement by Directors 

Independent Auditors’ Report 

Consolidated Statement of Comprehensive Income 

Statements of Financial Position 

Statements of Changes in Equity 

Consolidated Statement of Cash Flows 

Notes to Financial Statements 

Shareholding Statistics 

Notice of Annual General Meeting 

28 

33 

37 

38 

40 

41 

43 

45 

47 

118 

119

28 

Corporate Governance Report 


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

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

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

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

Governance 2005 (the “2005 Code”) which is applicable to listed companies in Singapore, as a guide for the Group’s corporate 

governance practices. This report describes the Group’s corporate governance processes, activities and structures that were in place 

during the financial year ended 31 December 2009, with specific reference to the principles and guidelines of the 2005 Code. 

BOARD MATTERS 

Principle 1: Effective Board to lead and control the company 

Principle 2: Strong and independent Board 

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

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

The Board comprises the following directors as of 15 April 2010: 

Mr Mai Bo Liang 

Mr Brian Chang 

Mr Chang Yee Meng Malcolm 

Mr Yu Ya 

Mr Yu Yuqun 

Mr Wang Yu 

Mr Liu Chee Ming 

Mr Yu Ning 

Mr Zhang Limin 

(Chairman, Executive Director) 

(Deputy Chairman and Chief Executive Officer) 

(Executive Director) 




(Independent Non-executive Director) 



The principal functions of the Board are: 

• Approving the Group corporate policies and authorization matrix; 

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

• Supervising the management of business and affairs of Group; 

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

compliance; 

• Reviewing the financial performance of the Group; 

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

• Assuming responsibility for corporate governance. 

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

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

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

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

in pages 20 to 23. The Board is of the view that the current board size is appropriate, taking into account the nature and scope of 

the Group’s operation. Newly appointed directors are provided with background information about the Company and the Group, 

and are invited to visit the Group’s operations to enrich their understanding of its business operation. To keep pace with new laws, 

regulations and changing commercial risks, directors are encouraged to attend relevant and useful seminars conducted by external 

organizations. 

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

consideration and decision in between the scheduled meetings. 

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

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

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

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

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

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

capacity of the Board for independent decision making.



29 



The Chairman is the President and Director of the controlling shareholder of the Company, China International Marine Containers 

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

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

the Company, who is also CEO, having nearly 40 years of experiences in the offshore marine industry, bears the full executive 

responsibilities over the business directions and operational decisions of the Group. 

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

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

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

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

at all times. 

The Company Secretary is responsible to ensure that the Company complies with the requirements of the Companies Act. The Articles 

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

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

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

Nominating Committee (“NC”) 

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

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

The Nominating Committee was set up in January 2008 and comprised Mr Brian Chang, Mr Sum Soon Lim and Mr Ang Kong Hua 

as Chairman during FY2009. Following the resignation of certain directors, Mr Yu Ning is appointed as Chairman with effect from 12 

April 2010. The other NC members are Mr Yu Ya and Mr Liu Chee Ming with effect from 12 April 2010. The NC has a written Terms of 

Reference endorsed by the Board that sets out its duties and responsibilities. 

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

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

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

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

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

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

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

eligible to offer themselves for re-election. 

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

circumstances set forth in Guideline 2.1 of the 2005 Code and any other salient factors. Following the annual review, the non-executive 

directors are endorsed to be independent for FY2009. 

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

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

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

Remuneration Committee (“RC”) and Disclosure on remuneration 

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

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

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

The RC was set up in March 2007 and comprised Mr Liu Chee Ming, Mr Francis James Reidy and Mr Ang Kong Hua as chairman 

during FY2009. Following the resignation of certain directors, Mr Liu Chee Ming is appointed the RC Chairman with effect from 12 April 

2010. The other RC members are Mr Chang Yee Meng Malcolm and Mr Zhang Limin with effect from 12 April 2010.

30 



The principal responsibilities of RC are: 

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

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

of the required quality to run the Group successfully; 

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

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

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

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

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

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

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

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

Proposed Fee (FY2009) 

SGD 

Chairman Member 

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

Audit Committee 30,000 20,000 

Remuneration Committee 10,000 8,000 

Nominating Committee 8,000 5,000 

To demonstrate directors’ support to the Group during the year of world-wide financial crisis, a reduction of 50% for the period from 

April to Dec 2009 was volunteered by the non-executive directors. Chairman Mai Bo Liang, who was a non-executive director during 

FY2009 and FY2008, waived all of his fees for both years. 

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

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

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

Fee 

(%) 

Basic 

salary 

(%) 

Variable 

bonus 

/ profit 

sharing 

(%) 

Benefits in 

kind 

(%) 

Fair value 

of stock 

options 

(%) 

Total 

(%) 

Executive directors 

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

Julian Chang - 89 - 11 - 100 

Below S$250,000 

Brian Chang 


- 

- 

100 

100 

- 

- 

- 

- 

- 

- 

100 

100 

Mr Brian Chang waived all of his salary for the 9 months period from April 2009 to Dec 2009. Two immediate family members of a 

director had employment relationships with the Group and received remuneration aggregating less than S$250,000 in those capacities 

during the financial year.



31 



Audit Committee (“AC”) 

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

The AC was established in March 2007 and comprised 4 independent non-executive directors in FY2009. Mr Sum Soon Lim was 

the chairman and the other three members were Mr Ang Kong Hua, Mr Francis James Reidy and Mr Liu Chee Ming. Following the 

resignation of certain directors, Mr Zhang Limin is appointed the AC Chairman with effect from 12 April 2010. The other AC members 

are Mr Liu Chee Ming and Mr Yu Ning with effect from 12 April 2010. The Board is of the view that the members of AC have sufficient 

financial management expertise and experiences to discharge the AC’s function. 

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

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

evaluation of the adequacy of the Company’s system of internal accounting control, as well as assistance given by management 

to the external auditors; 

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

of objectivity and value for money; 

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

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

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

to FINFO; 

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

systems; 

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

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

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

the remuneration and terms of engagement of the external auditors. 

• To review interested person transactions. 

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

management. 

Internal Control and Internal Audit 

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

Principal 12: Sound system of internal control 

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

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

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

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

all errors and irregularities. The system is designed to manage rather than to eliminate the risk of failure to achieve business objectives. 

The controls are to provide reasonable, but not absolute, assurance to safeguard shareholders’ investments and the Group’s assets. 

The Internal Audit (“IA”) function is currently undertaken in-house by a team of qualified staff. With the assistance of IA, the AC 

and Board review the effectiveness of the key internal controls, including financial, operational and compliance controls, and risk 

management on an on-going basis. The scope of the IA covers all business and support functions within the Group. 

Communication with shareholders 

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

Principal 15: Greater shareholders participation at AGMs 

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

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

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

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

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

32 



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

shareholder to vote in absentia. 

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

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

address shareholders’ queries on the conduct of audit and auditors’ report. Resolutions are as far as possible, structured separately 

and may be voted on independently. 

Dealing in securities 

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

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

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

of half-yearly results and one month before the date of announcement of full year results.



33 



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

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

statement of changes in equity of the Company for the financial year ended 31 December 2009. 

Directors 

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

Mai Bo Liang 

Brian Chang 


Yu Ya (appointed on 17 March 2010) 

Yu Yuqun (appointed on 17 March 2010) 

Wang Yu (appointed on 17 March 2010) 

Liu Chee Ming 

Yu Ning (appointed on 17 March 2010) 

Zhang Limin (appointed on 17 March 2010) 

Arrangements to enable directors to acquire shares or debentures 

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

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

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

Directors’ interests in shares or debentures 

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

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

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

Name of director 

At the 

beginning 

of financial 

year 

Direct interest 


end of 

financial 

year 


beginning 


year 

Deemed interest 


end of 


year 

Ordinary shares of the Company 

Brian Chang 12,976,087 12,976,087 83,853,513 83,853,513 

Julian Chang 

(resigned on 17 March 2010) – – 1,050,000 1,050,000 

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

Ang Kong Hua 

(resigned on 10 February 2010) – – 2,056,000 1,051,000 

Francis James Reidy 

(resigned on 17 March 2010) 2,744,000 2,744,000 251,000 251,000 

Liu Chee Ming – – 3,799,700 1,101,000 

Sum Soon Lim 

(resigned on 14 April 2010) – – 400,000 200,000

34 



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

Name of director 


beginning 


year 

Direct interest 


end of 


year 

Share options of the Company 

Julian Chang 1 

(resigned on 17 March 2010) 2,000,000 2,000,000 

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

Ang Kong Hua 

(resigned on 10 February 2010) 50,000 50,000 

Francis James Reidy 

(resigned on 17 March 2010) 50,000 50,000 

Liu Chee Ming 50,000 50,000 

Sum Soon Lim 

(resigned on 14 April 2010) 50,000 50,000 

1 

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

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

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

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

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

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

subsidiaries that are not wholly owned by the Group. 

At the beginning of 

financial year 

At the end of 

financial year 

Yantai Raffles Offshore Ltd 

(now known as Yantai CIMC Raffles Offshore Ltd.) 

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

Yantai Raffles Shipyard Co., Ltd 

(now known as Yantai CIMC Raffles Shipyard Co., Ltd.) 

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

Directors’ contractual benefits 

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

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

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

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

those capacities.



35 



Share options 

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

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

to eligible directors, senior executives and employees respectively. 

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

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

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

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

date of grant. 

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

price of the granted options is based on the arithmetic average of the daily volume weighted average price in Norwegian Kroner 

(“NOK”) of the Company’s shares traded on the Norwegian OTC during the period of three trading days ending on the day before 

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

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

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

There is no option granted or exercised during the financial year ended 31 December 2009. 

Details of all the share options to subscribe for ordinary shares of the Company pursuant to the Scheme as at 31 December 2009 are 

as follows: 

Exercise period Exercise price Number of share options 

1 August 2008 – 31 July 2010 $2.80 190,000 

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

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

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

22 May 2009 – 21 May 2011 US$1.6425 to US$1.65 1,154,003 

18 September 2009 – 17 September 2012 NOK 26.00 673,000 

18 September 2009 – 17 September 2017 NOK 26.00 3,500,000 

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

Total 7,431,006 

During the financial year: 

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

been granted, and 

• No options were granted at discount during the financial year ended 31 December 2009 (2008: 1,154,003 at a discount 

of 45%). 

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

December 2009 are disclosed in “Directors’ interests in shares or debentures” of the report.

36 



Auditors 

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

On behalf of the Board of Directors, 

MAI BO LIANG 

Director 

BRIAN CHANG 


Singapore 

15 April 2010



37 

Statement by Directors 


We, Mai Bo Liang and Brian Chang, being two of the directors of Yantai Raffles Shipyard Limited, do hereby state that, in the opinion 

of the directors, 

(i) 

(ii) 

the accompanying consolidated statement of comprehensive income, statements of financial position, statements of changes in 

equity, and consolidated statement of cash flows together with notes thereto are drawn up so as to give a true and fair view of 

the state of affairs of the Group and of the Company as at 31 December 2009 and the results of the business, changes in equity 

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

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

they fall due. 

On behalf of the Board of Directors, 

MAI BO LIANG 


BRIAN CHANG 


Singapore 

15 April 2010

38 


To the Members of Yantai Raffles Shipyard Limited 


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

(collectively, the “Group”) set out on pages 40 to 117, which comprise the statements of financial position of the Group and the 

Company as at 31 December 2009, the statements of changes in equity of the Group and the Company, the consolidated statement 

of comprehensive income and consolidated statement of cash flows of the Group for the financial year then ended, and a summary of 

significant accounting policies and other explanatory notes. 

Management’s responsibility for the financial statements 

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

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

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

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

permit the preparation of true and fair profit and loss account and statement of financial position and to maintain accountability of assets; 

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

Auditors’ responsibility 

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

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

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

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

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

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

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

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

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

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

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



39 


To the Members of Yantai Raffles Shipyard Limited 


Opinion 

In our opinion, 

(i) 

(ii) 

the consolidated financial statements of the Group and the statement of financial position and statement of changes in equity of 

the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards 

so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and the results, 

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

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

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

Ernst & Young LLP 

Public Accountants and 

Certified Public Accountants 

Singapore 

15 April 2010

40 

Consolidated Statement of Comprehensive Income 


Group 

Note 2009 2008 

$’000 $’000 

Revenue 4 918,565 891,014 

Cost of sales (809,432) (763,199) 

Gross profit 109,133 127,815 

Other item of income 

Other income 5 25,552 30,077 

Other items of expense 

Marketing and distribution (349) (568) 

Administrative expenses (49,840) (55,670) 

Other expenses 6 (20,505) (61,464) 

Profit from operating activities 7 63,991 40,190 

Finance income 9 1,049 5,220 

Finance costs 9 (18,956) (10,461) 

Net finance costs 9 (17,907) (5,241) 

Share of results of associates (801) 1,285 

Profit before income tax 45,283 36,234 

Income tax expense 10 (12,732) (11,121) 

Profit net of tax 32,551 25,113 

Other comprehensive income/(loss) 

Recognition/(reversal) of changes of fair value on available-for-sale financial 

assets 206 (26,198) 

Foreign currency translation (6,501) 7,469 

Other comprehensive loss for the year, net of tax (6,295) (18,729) 

Total comprehensive income for the year 26,256 6,384 

Profit attributable to: 

Owners of the Company 27,332 26,932 

Minority interests 5,219 (1,819) 

32,551 25,113 

Total comprehensive income attributable to: 

Owners of the Company 21,359 7,220 

Minority interests 4,897 (836) 

26,256 6,384 

Earnings per share attributable to owners of the Company 

- Basic (cents per share) 11 9.99 9.85 

- Diluted (cents per share) 11 9.99 9.85 

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



41 



Group 

Company 

Note 2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

ASSETS 

Current assets 

Cash and cash equivalents 12 111,821 43,832 68,107 28,817 

Pledged deposits 12 49,119 131,401 – 103,823 

Trade and other receivables 13 127,720 105,839 50,417 35,126 

Inventories 15 149,279 244,710 44,905 136,344 

Vessels under construction 16 247,822 88,903 239,061 135,375 

Construction work-in-progress in 

excess of progress billings 17 336,533 94,302 268,783 311,604 

Derivative financial instruments 40 11,730 12,234 11,730 12,217 

Other current assets 18 320,486 470,701 154,302 193,491 

1,354,510 1,191,922 837,305 956,797 

Non-current assets 

Amounts due from subsidiaries 

(non-trade) 14 – – 77,095 89,651 

Financial assets, available-for-sale 19 1,141 3,529 – – 

Investment in subsidiaries 20 – – 83,866 83,136 

Investment in associates 22 14,828 15,978 – – 

Property, plant and equipment 23 500,499 438,176 610 1,160 

Prepayments 24 33,558 302 – – 

Land and sea use rights 24 30,654 31,116 – – 

Intangible assets 25 22,797 24,818 4,105 6,868 

Deferred tax assets 26 10,790 15,994 2,542 1,611 

Pledged deposits 12 7,856 – – – 

622,123 529,913 168,218 182,426 

Total assets 1,976,633 1,721,835 1,005,523 1,139,223 

LIABILITIES 

Current liabilities 

Progress billings in excess of construction workin-progress 

17 33,552 315,791 55,817 119,179 

Advances from customers 27 26 31,118 – – 

Derivative financial instruments 40 7,782 26,975 7,636 24,830 

Trade and other payables 28 383,718 329,476 83,822 102,539 

Borrowings 29 564,109 385,071 80,467 298,741 

Amounts due to subsidiaries (trade) 14 – – – 977 

Income tax payable 15,622 16,481 12,634 14,893 

Provision for other liabilities 30 35,145 15,895 16,910 9,479 

1,039,954 1,120,807 257,286 570,638 

Non-current liabilities 

Borrowings 29 324,484 21,433 182,576 146 

Other long term liabilities 833 1,150 – – 

325,317 22,583 182,576 146 

Total liabilities 1,365,271 1,143,390 439,862 570,784 

Net assets 611,362 578,445 565,661 568,439 


42 



Group 

Company 

Note 2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

EQUITY 

Equity attributable to owners of the Company 

Share capital 31 591,482 591,482 591,482 591,482 

Other reserves 32 30,973 28,188 15,580 9,125 

Accumulated losses (30,078) (55,313) (41,401) (32,168) 

592,377 564,357 565,661 568,439 

Minority interests 18,985 14,088 – – 

Total equity 611,362 578,445 565,661 568,439 




43 



Note 

Attributable to owners of the Company 

Share 

capital 

Other 

reserves 

Accumulated 

losses 

Minority 

interests 

Total 

equity 

$’000 $’000 $’000 $’000 $’000 

Group 

As at 1 January 2009 591,482 28,188 (55,313) 14,088 578,445 

Profit net of tax – – 27,332 5,219 32,551 

Other comprehensive loss for the year – (5,973) – (322) (6,295) 

Total comprehensive (loss) / income 

for the year – (5,973) 27,332 4,897 26,256 

Provision of equity-settled share options to 

employees 32 – 6,661 – – 6,661 

Transfer to PRC statutory reserve 32 – 2,303 (2,303) – – 

Transfer from reserve 32 – (206) 206 – – 

As at 31 December 2009 591,482 30,973 (30,078) 18,985 611,362 

As at 1 January 2008 591,246 40,170 (81,238) 14,924 565,102 

Profit net of tax – – 26,932 (1,819) 25,113 

Other comprehensive (loss) / income for the year – (19,712) – 983 (18,729) 

Total comprehensive (loss) / income 

for the year – (19,712) 26,932 (836) 6,384 


employees 32 – 6,777 – – 6,777 

Transfer to PRC statutory reserve 32 – 1,296 (1,296) – – 

Transfer from reserve 32 54 (343) 289 – – 

Exercise of employee share option 31 182 – – – 182 

As at 31 December 2008 591,482 28,188 (55,313) 14,088 578,445 


44 



Note 

Share 

Capital 

Other 

reserves 

Accumulated 

Losses 

Total 

equity 

$’000 $’000 $’000 $’000 

Company 

As at 1 January 2009 591,482 9,125 (32,168) 568,439 

Net loss for the financial year, representing total 

comprehensive loss for the financial year – – (9,439) (9,439) 


employees 32 – 6,661 – 6,661 

Transfer from reserve 32 – (206) 206 – 

As at 31 December 2009 591,482 15,580 (41,401) 565,661 

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

Net profit for the financial year, representing total 

comprehensive income for the financial year – – 29,444 29,444 


employees 32 – 6,777 – 6,777 

Transfer from reserve 32 54 (343) 289 – 

Exercise of employee share option 31 182 – – 182 

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




45 



Group 

Note 2009 2008 

$’000 $’000 

Cash flow from operating activities 


Adjustments for: 

- Amortisation of intangible assets 7 3,639 2,587 

- Amortisation of land and sea use rights 7 754 452 

- Depreciation on property, plant and equipment 7 15,770 10,351 

- Loss on disposal of investment in an associate 6 – 64 

- Loss on disposal of property, plant and equipment 6 115 968 

- Impairment loss on financial assets, available-for-sale 6 2,592 10,796 

- Impairment loss on investment in an associate 6 – 7,676 

- Impairment loss on property, plant and equipment 6 328 – 

- Provision for liquidated damages and foreseeable losses 7 2,520 25,621 

- Provision for warranties 7 990 4,128 

- Allowance for doubtful debts 6 109 – 

- Write-back of doubtful trade and other receivables 5 (93) (744) 

- Gain on a loan to a third party 5 (5,811) – 

- Share options expense 8 6,661 6,777 

- Interest expense 9 27,193 15,894 

- Interest income 9 (1,049) (5,220) 

- Share of results of associates 22 801 (1,285) 

- Fair value (gain)/loss on derivative financial instruments 5,6 (16,697) 30,917 

- Loss/(gain) on forward contracts 5,6 15,132 (23,235) 

- Translation differences (11,959) 16,663 

Operating cash flows before working capital changes 86,278 138,644 

Change in operating assets and liabilities 

- Inventories 95,431 (35,696) 

- Vessels under construction (158,919) (77,135) 

- Construction work-in-progress and excess progress billings (526,990) (352,250) 

- Trade and other receivables (16,086) (28,593) 

- Other current assets 150,215 (131,012) 

- Advances from customers (31,092) (9,027) 

- Trade and other payables 54,242 181,353 

- Provision for other liabilities 18,421 (4,027) 

- Other long term liabilities (318) (244) 

- Pledged deposits (7,856) – 

Cash used in operations (336,674) (317,987) 

Interest received 9 1,049 5,220 

Interest paid 9 (27,193) (15,894) 

Income tax paid (8,472) (8,506) 

Cash collected from pledged cash/(pledged) for performance bonds and trade facilities 82,282 (5,192) 

Net cash used in operating activities (289,008) (342,359) 


46 



Group 

Note 2009 2008 

$’000 $’000 

Cash flows from investing activities 

Proceeds from disposal of property, plant and equipment 152 398 

Purchase of property, plant and equipment and intangible assets (70,436) (129,153) 

Purchase of land and sea use rights (966) (26,523) 

Prepayments of land use rights (1,277) – 

Advance in relation to an acquisition of a company 24 (31,979) – 

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

Proceeds from disposal of an associate – 1,139 

Net cash used in investing activities (104,506) (156,009) 

Cash flows from financing activities 

Proceeds from issuance of ordinary shares – 182 

Proceeds from borrowings from banks 948,480 450,139 

Repayment of borrowings from banks (486,977) (116,994) 

Net cash from financing activities 461,503 333,327 

Net increase/(decrease) in cash and cash equivalents 67,989 (165,041) 

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

Cash and cash equivalents at end of financial year 12 111,821 43,832 




47 

Notes to the financial statements 


1. Corporate information 

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

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

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

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

associates are set out in Notes 20 and 22 respectively to the financial statements. 

2. Summary of significant accounting policies 

2.1 Basis of preparation 

The consolidated financial statements of the Group and the statement of financial position and statement of changes in equity 

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

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

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

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

The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of 

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

areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the 

financial statements are disclosed in Note 3. 

The Group incurred a net operating cash outflow of $289,008,000 (2008: $342,359,000) during the financial year ended 31 

December 2009. In the opinion of the directors, the Group is able to continue on a going concern basis. Despite its operating 

cash outflow in 2009, the Group is confident of its ability to generate cash flow from its operations, as well as from the continuing 

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

the preparation of the financial statement of the Group. 

2.2 Changes in accounting polices 

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

On 1 January 2009, the Group adopted the following FRS and INT FRS mandatory for annual financial periods beginning on or 

after 1 January 2009. 

• FRS 1 Presentation of Financial Statements (Revised) 

• Amendments to FRS 18 Revenue 

• Amendments to FRS 23 Borrowing Costs 

• Amendments to FRS 32 Financial Instruments: Presentation and FRS 1 Presentation of Financial Statements – Puttable 

Financial Instruments and Obligations Arising on Liquidation 

• Amendments to FRS 101 First-time Adoption of Financial Reporting Standards and FRS 27 Consolidated and Separate 

Financial Statements – Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate 

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

• Amendments to FRS 107 Financial Instruments: Disclosures 

• FRS 108 Operating Segments 

• Improvements to FRSs issued in 2008 

• INT FRS 113 Customer Loyalty Programmes 

• INT FRS 116 Hedges of a Net Investment in a Foreign Operation 

• Amendments to INT FRS 109 Reassessment of Embedded Derivatives and FRS 39 Financial Instruments: Recognition 

and Measurement – Embedded Derivatives 

• INT FRS 118 Transfers of Assets from Customers

48 



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

2.2 Changes in accounting policies (cont’d) 

Adoption of these FRS and INT FRS did not have any effect on the financial performance or position of the Group. They did 

however give rise to additional disclosures, including, in some cases, revisions to accounting policies. 

The principal effects of these changes are as follows: 

FRS 1 Presentation of Financial Statements – Revised presentation 

The revised FRS 1 separates owner and non-owner changes in equity. The statement of changes in equity includes only details 

of transactions with owners, with all non-owner changes in equity presented in the statement of other comprehensive income. 

In addition, the Standard introduces the statement of comprehensive income which presents income and expense recognised 

in the period. This statement may be presented in one single statement, or two linked statements. The Company has elected to 

present this statement as one single statement. 

Amendments to FRS 107 Financial Instruments: Disclosures 

The amendments to FRS 107 require additional disclosure about fair value measurement and liquidity risk. Fair value 

measurements are to be disclosed by source of inputs using a three level hierarchy for each class of financial instrument. In 

addition, reconciliation between the beginning and ending balance for Level 3 fair value measurements is now required, as well 

as significant transfers between Level 1 and Level 2 fair value measurements. The amendments also clarify the requirements for 

liquidity risk disclosures. The fair value measurement disclosures and liquidity risk disclosures are presented in Note 39 and Note 

38(e) to the financial statements respectively. 

FRS 108 Operating Segments 

FRS 108 requires disclosure of information about the Group’s operating segments and replaces the requirement to determine 

primary and secondary reporting segments of the Group. The Group determined that the Group currently has one reportable 

operating segment, which is the same as the business segment previously identified under FRS 14 Segment Reporting. 

The adoption of the Amendment to FRS 1 (revised), FRS 107 and FRS 108 are assessed to have no material financial impact on 

the financial results and the financial position of the Group for the year ended 31 December 2009. 

2.3 Standards issued but not yet effective 

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

Reference 

Description 

Effective for 

annual periods 

beginning on or 

after 

FRS 24 Related Party Disclosures (Revised) 1 January 2011 

FRS 27 Consolidated and Separate Financial Statements (Revised) 1 July 2009 

FRS 32 Amendment to Financial instruments: Presentation – Amendment relating to Classification of 1 February 2010 

Rights Issues 

FRS 39 Financial Instruments: Recognition and Measurement – Amendments relating to Eligible 1 July 2009 

Hedged Items 

FRS 101 Amendments to FRS 101: First-Time Adoption of Financial Reporting Standards 1 January 2010 

FRS 101 FRS 101 – First-Time Adoption of Financial Reporting Standards (Revised) 1 July 2009 

FRS 102 Share-based Payment – Group Cash-settled Share-based Payment Transactions 1 January 2010 

FRS 103 Business Combinations (Revised) 1 July 2009 

INT FRS 109/ 

FRS 39 

Amendments to INT FRS 109: Reassessment of Embedded Derivatives and FRS 39 

Financial Instruments: Recognition and Measurement Embedded Derivatives 

30 June 2009



49 




2.3 Standards issued but not yet effective (cont’d) 

Reference 

Description 

Effective for 

annual periods 

beginning on or 

after 

INT FRS 114 FRS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their 1 January 2011 

Interaction – Amendments relating to Prepayments of a Minimum Funding Requirements 

INT FRS 117 Distributions of Non-cash Assets to Owners 1 July 2009 

INT FRS 118 Transfers of Assets from customers 1 July 2009 

INT FRS 119 Extinguishing Financial Liabilities with Equity Instruments 1 July 2010 

– Improvements to FRSs issued in 2009 

– Amendments to FRS 38 Intangible Assets 1 July 2009 

– Amendments to FRS 102 Share-based Payment 1 July 2009 

– Amendments to INT FRS 109 Reassessment of Embedded Derivatives 1 July 2009 

– Amendments to INT FRS 116 Hedges of a Net Investment in a Foreign Operation 1 July 2009 

– Amendments to FRS 1 Presentation of Financial Statements 1 January 2010 

– Amendments to FRS 7 Statement of Cash Flows 1 January 2010 

– Amendments to FRS 17 Leases 1 January 2010 

– Amendments to FRS 18 Revenue 1 January 2010 

– Amendments to FRS 36 Impairment of Assets 1 January 2010 

– FRS 39 Financial Instruments: Recognition and Measurement 1 January 2010 

– Amendments to FRS 105 Non-current Assets Held for Sale and Discontinued Operations 1 January 2010 

– Amendments to FRS 108 Operating Segments 1 January 2010 

Except for the revised FRS 103 and the amendments to FRS 27, the Directors expect that the adoption of the other FRS and INT 

FRS above will have no material impact on the financial statements in the period of initial application. The nature of the impending 

changes in accounting policy on adoption of the revised FRS 103 and the amendments to FRS 27 are described below. 

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

The revised standards are effective for annual periods beginning on or after 1 July 2009. The revised FRS 103 introduces a 

number of changes in the accounting for business combinations occurring after 1 July 2009. These changes will impact the 

amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. The 

Amendments to FRS 27 require that a change in the ownership interest of a subsidiary (without loss of control) is accounted 

for as an equity transaction. Therefore, such transactions will no longer give rise to goodwill, nor will they give rise to a gain or 

loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of 

control of a subsidiary. Other consequential amendments were made to FRS 7 Statement of Cash Flows, FRS 12 Income Taxes, 

FRS 21 The Effects of Changes in Foreign Exchange Rates, FRS 28 Investments in Associates and FRS 31 Interests in Joint 

Ventures. The changes from the revised FRS 103 and Amendments to FRS 27 will affect future acquisitions or loss of control and 

transactions with minority interests. The standards may be early applied. However, the Group does not intend to early adopt.

50 




2.4 Revenue recognition 

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

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

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

(a) 

Revenue from construction contracts 

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

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

detailed accounting policies. 

(b) 

Revenue from sales contracts 

Revenue from ship and rig sales contracts is recognised upon delivery of the vessels, when significant risk and rewards 

of ownership of the vessels are transferred to the customer. Revenue is not recognised to the extent where there are 

significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of vessels. 

(c) 

Interest income 

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

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

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

recoverable amount. 

(d) 

Rental income 

Rental income arising from machinery and office premises is accounted for on a straight-line basis over the lease terms. 

The aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term 

on a straight-line basis. 

2.5 Group accounting 

(a) 

Subsidiaries 

Subsidiaries are entities over which the Group has the power to govern the financial and operating policies, generally 

accompanying a shareholding of more than one half of the voting rights, so as to obtain benefits from their activities. The 

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

whether the Group controls another entity. 

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

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

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

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

irrespective of the extent of any minority interest. An excess of the cost of business combination over the Group’s share in 

the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill 

on the statement of financial position. Please refer to the paragraph “2.7 Intangible assets - Goodwill” for the accounting 

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

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

income in the profit or loss on the date of acquisition. When the Group acquires a business, embedded derivatives 

separated from the host contract by the acquiree are not reassessed on acquisition unless the business combination 

results in a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required 

under the contract. 

Subsidiaries are consolidated from the date on which control is transferred to the Group, and continues to be consolidated 

until the date that such control ceases.



51 




2.5 Group accounting (cont’d) 

(a) 

Subsidiaries (cont’d) 

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

statement of financial position date. In preparing the consolidated financial statements, transactions, balances and 

unrealised gains on transactions between Group companies are eliminated in full. Unrealised losses are also eliminated 

in full but are considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been 

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

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

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

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

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

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

interests are attributed to the owners of the Company, unless the minority interests have a binding obligation to, and are 

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

interests are attributed to the owners of the Company until the minority interests’ share of losses previously absorbed by 

the owners of the Company have been recovered. 

Minority interests are presented in the consolidated statement of financial position within equity, separately from the 

Company shareholders’ equity, and are separately disclosed in the consolidated statement of comprehensive income. 

Please refer to the paragraph “2.9 Investments in subsidiaries, associates and joint venture companies” for the accounting 

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

(b) 

Transactions with minority interests 

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

Group. Disposals to minority interests, which result in gains and losses for the Group, are recorded in the profit or loss. 

Acquisition of minority interests results in goodwill, being the difference between any considerations paid and the Group’s 

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

(c) 

Associates and joint venture companies 

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

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

directors. 

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

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

consent of the parties sharing control. 

The Group’s investments in associates and joint venture companies are accounted for using the equity method. Under 

the equity method, the investments in associates and joint venture companies are measured in the statement of financial 

position at cost plus post-acquisition changes in the Group’s share of net assets of the associates and joint venture 

companies. The Group’s share of the profit or loss of the associates and joint venture companies are recognised in the 

consolidated profit or loss. Where there has been a change recognised directly in other comprehensive income of the 

associates and joint venture companies, the Group recognises its share of such changes. The associates and joint venture 

companies are equity accounted for from the date the Group obtains significant influence until the date the Group ceases 

to have significant influence over the associates and joint venture companies. 

Goodwill relating to associates and joint venture companies is included in the carrying amount of the investment.

52 




2.5 Group accounting (cont’d) 

(c) 

Associates and joint venture companies (cont’d) 

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

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

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

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

When the Group’s share of losses in associates and joint venture companies equals or exceeds its interest in the associates 

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

unless it has incurred obligations or made payments on behalf of the associates and joint venture companies. 

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment 

loss on the Group’s investments in associates and joint venture companies. The Group determines at each statement 

of financial position date whether there is any objective evidence that the investments in the associates or joint venture 

companies is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the 

recoverable amount of the associates or joint venture companies and its carrying value and recognises the amount in the 

profit or loss. 

The financial statements of the associates and joint venture companies are prepared as of the same reporting date as the 

Company. Where necessary, adjustments are made to bring the accounting policies in line with those of the Group. 

2.6 Property, plant and equipment 

(a) 

Measurement 

(i) 

(ii) 

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

accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment 

is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow 

to the Group and the cost of the item can be measured reliably. 

Components of costs 

The cost of an item of property, plant and equipment includes its purchase price and any cost that is directly 

attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the 

manner intended by management. The projected cost of dismantling, removal or restoration is also included as part 

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

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

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

reserve.



53 




2.6 Property, plant and equipment (cont’d) 

(b) 

Depreciation 

Depreciation of property, plant and equipment is calculated using the straight-line method to allocate their depreciable 

amounts over their estimated useful lives as follows: 

Useful lives 

(Years) 

Buildings 20 – 30 

Quays and dry docks 50 

Barges 25 

Machinery and equipment 3 – 30 

Office equipment 3 – 15 

Motor vehicles 5 

The residual values, useful lives and depreciation methods of property, plant and equipment are reviewed, and adjusted 

prospectively, as appropriate, at each statement of financial position date. The effects of any revision of the residual values, 

useful lives and depreciation methods are included in the profit or loss for the financial year in which the changes arise. 

(c) 

Subsequent expenditure 

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

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

the Group and the cost of the item can be measured reliably. When significant parts of property, plant and equipment are 

required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and 

depreciation, respectively. Other subsequent expenditure is recognised as repair and maintenance expense in the profit or 

loss during the financial year in which it is incurred. 

(d) 

Disposal 

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

amount is taken to the profit or loss. An item of property, plant and equipment is also derecognised when no future 

economic benefits are expected from its use. Any gain or loss on the derecognition of the asset is included in the profit or 

loss in the year the asset is derecognised. 

(e) 

Construction in progress 

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

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

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

2.7 Intangible assets 

(a) 

Goodwill 

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

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

included in intangible assets. 

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

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

goodwill relating to the entity sold.

54 




2.7 Intangible assets (cont’d) 

(a) 

Goodwill (cont’d) 

Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2005 are treated 

as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and 

translated in accordance with the accounting policy set out in Note 2.21. 

Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed 

to be assets and liabilities of the Company and are recorded in SGD at the rates prevailing at the date of acquisition. 

(b) 

Computer software licenses 

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

and rebates. 

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

and accumulated impairment losses. These costs are amortised to the profit or loss using the straight-line method over 

their estimated useful lives of 3 to 10 years. 

(c) 

The useful life and amortisation method of intangible assets other than goodwill are reviewed, and adjusted prospectively, 

as appropriate, at least at each statement of financial position date. The effects of any revision of the amortisation year or 

amortisation method are included in the profit or loss for the financial year in which the changes arise. 

2.8 Construction contracts 

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

closely inter-related or inter-dependent in terms of their design, technology and functions or their ultimate purpose or use. 

Contract costs are recognised when incurred. 

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

revenue and expenses respectively by reference to the stage of completion of the contract activity at the statement of financial 

position date (percentage-of-completion method). When the outcome of a construction contract cannot be estimated reliably, 

contract revenue is recognised to the extent of contract costs incurred that are likely to be recoverable. When it is probable that 

total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. 

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

to the extent that it is probable that they will result in revenue and can be measured reliably. A variation or a claim is only included 

in contract revenue when it is probable that the customer will approve the variation or negotiations have reached an advanced 

stage such that it is probable that the customer will accept the claim. 

The percentage of completion is measured by reference to the contract costs incurred to date to the estimated total costs for 

the contract. Costs incurred during the financial year in connection with future activity on a contract are shown as construction 

contract work-in-progress on the statement of financial position unless it is not probable that such contract costs are recoverable 

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

Construction work-in-progress at the statement of financial position date is recorded in the statement of financial position 

at cost plus attributable profit less recognised losses, net of progress claims and allowance for foreseeable losses, and is 

presented in the statement of financial position as “construction work-in-progress in excess of progress billings” (as an asset) 

or “progress billings in excess of construction work-in-progress” (as a liability), as applicable. Construction costs include cost of 

direct materials, direct labour and overhead costs incurred in connection with the construction. Provision for foreseeable loss on 

a contract is provided for the year in which such losses are determined.



55 




2.9 Investments in subsidiaries, associates and joint venture companies 

Investments in subsidiaries, associates and joint venture companies are stated at cost less accumulated impairment losses in the 

Company’s statement of financial position. On disposal of investments in subsidiaries, associates and joint venture companies, 

the difference between net disposal proceeds and the carrying amounts of the investments are taken to the profit or loss. 

2.10 Land and sea use rights 

(a) 

Land use rights 

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

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

the lease terms of the agreements of 20 to 50 years. 

(b) 

Sea use rights 

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

agreements of 40 to 50 years. 

2.11 Impairment of non-financial assets 

(a) 

Goodwill 

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

included in the carrying amount of an investment in an associate or joint venture company is tested for impairment at point 

of the investment, rather than separately. 

For the purpose of impairment testing of goodwill, goodwill is allocated, from the acquisition date, to each of the Group’s 

cash-generating-units (CGU) expected to benefit from synergies arising from the business combination. 

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

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

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

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

An impairment loss on goodwill is recognised in the profit or loss and is not reversed in a subsequent year. 

(b) 

Intangible assets, property, plant and equipment, investments in subsidiaries, associates and joint venture companies 

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

venture companies are reviewed for impairment at each reporting date or whenever there is any indication that these 

assets may be impaired. If any such indication exists, the recoverable amount (i.e. the higher of the fair value less cost to 

sell and the value-in-use) of the asset is estimated to determine the amount of impairment loss. In assessing value in use, 

the estimated future cash flows expected to be generated by the asset are discounted to their present value using a pretax 

discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. 

In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by 

valuation multiples, quoted share prices for publicly traded subsidiaries or other available fair value indicators. 

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

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

recoverable amount is determined for the CGU to which the asset belongs. If the recoverable amount of the asset (or CGU) 

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

amount. Impairment losses are recognised in the profit or loss.

56 




2.11 Impairment of non-financial assets (cont’d) 

(b) 

Intangible assets, property, plant and equipment, investments in subsidiaries, associates and joint venture companies 

(cont’d) 

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment 

losses may no longer exist or may have decreased. A previously recognised impairment loss for an asset other than 

goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable 

amount since the last impairment loss was recognised. The carrying amount of an asset other than goodwill is increased 

to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been 

determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A 

reversal of impairment loss for an asset other than goodwill is recognised in the profit or loss. 

2.12 Financial assets 

(a) 

Classification 

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

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

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

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

(i) 

Loans and receivables 

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

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

of financial position date which are classified as non-current assets. Loans and receivables are classified within 

“trade and other receivables”, “amounts due from subsidiaries” and “cash and bank balances” on the statement of 

financial position. 

(ii) 

Available-for-sale financial assets 

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

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

management intends to dispose of the assets within 12 months after the statement of financial position date. 

(b) 

Recognition and derecognition 

Financial assets are recognised on the statement of financial position when, and only when, the Group becomes a party 

to the contractual provisions of the financial instrument. 

Purchases and sales of financial assets, are recognised or derecognised on trade-date – the date on which the Group 

commits to purchase or sell the asset. 

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

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

On sale or derecognition of a financial asset classified as available-for-sale, the profit or loss difference between the net 

sale proceeds and its carrying amount is taken to the profit or loss. The cumulative gain or loss previously recognised in 

other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment when the financial 

asset is sold or derecognised.



57 




2.12 Financial assets (cont’d) 

(c) 

Measurement 

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

Loans and receivables are subsequently carried at amortised cost using the effective interest method. Gain and 

losses are recognised in profit or loss when the loans and receivables are derecognised or impaired, and through the 

amortisation process. 

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

classified as available-for-sale are recognised in other comprehensive income. When financial assets classified as 

available-for-sale are sold or impaired, the cumulative gain or loss previously recognised in other comprehensive income is 

reclassified from equity to profit or loss as a reclassification adjustment. 

Interest and dividend income on financial assets, available-for-sale are recognised separately in the profit or loss. Changes 

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

into other comprehensive income on the amortised cost of the securities and other changes; the currency translation 

differences are recognised in the profit or loss and other changes are recognised in other comprehensive income. Changes 

in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in other comprehensive income, 

together with the related currency translation difference. Investments in equity instruments whose fair value cannot be 

reliably measured are measured at cost less impairment loss. 

(d) 

Impairment 

The Group assesses at each statement of financial position date whether there is any objective evidence that a financial 

asset or a group of financial assets is impaired. 

(i) 

Loans and receivables 

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

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

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

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

the assets’ original effective interest rate. The amount of allowance for impairment is recognised in the profit or loss 

within “other expenses”. 

When these financial assets become uncollectible, the carrying amount of impaired financial assets is reduced 

directly or if an amount was charged to the impairment allowance account, the amounts charged to the impairment 

allowance account are written off against the carrying value of the financial assets. 

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

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

subsequent reversal of an impairment loss is recognised in the profit or loss, to the extent that the carrying value of 

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

58 




2.12 Financial assets (cont’d) 

(d) 

Impairment (cont’d) 

(ii) 

Available-for-sale financial assets 

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

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

the security is impaired. 

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

been recognised in other comprehensive income is reclassified from equity and taken to the profit or loss. The 

cumulative loss is measured as the difference between the acquisition cost and the current fair value, less any 

impairment loss on that financial asset previously recognised in the profit or loss. 

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

profit or loss. 

2.13 Borrowings / Borrowing costs 

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

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

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

Borrowings which are due to be settled within 12 months after the statement of financial position date are presented as current 

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

payments, on a long-term basis is completed after the statement of financial position date and before the financial statements 

are authorised for issue. Other borrowings due to be settled more than 12 months after the statement of financial position date 

are presented as non-current borrowings in the statement of financial position. 

Borrowing costs are capitalised as part of the cost of a qualifying asset if they are directly attributable to the acquisition, 

construction or production of that asset. Capitalisation of borrowing costs commences when the activities to prepare the 

asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are 

capitalised until the assets are substantially completed for their intended use or sale. 

2.14 Financial liabilities 

Financial liabilities within the scope of FRS 39 are recognised on the statement of financial position when, and only when, the 

Group becomes a party to the contractual provisions of the financial instrument. 

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

attributable transaction costs. 

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

for derivatives, which are measured at fair value. 

For financial liabilities other than derivatives, gains and losses are recognised in profit or loss when the liabilities are derecognised, 

and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in profit 

or loss. Net gains or losses on derivatives include exchange differences. 

A financial liability is derecognised when the obligation under the liability is extinguished. When an existing financial liability is 

replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially 

modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new 

liability, and the difference in the respective carrying amounts is recognised in the profit or loss.



59 




2.15 Fair value estimation 

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

values. 

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

on quoted market prices at the statement of financial position date. The quoted market prices used for financial assets held by 

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

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

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

of financial position date. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation 

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

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

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

2.16 Leases 

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception 

date: whether fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a 

right to use the asset. For arrangements entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 

2005 in accordance with the transitional requirements of INT FRS 104. 

(a) 

As lessee 

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

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased 

item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of 

the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are 

apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on 

the remaining balance of the liability. Finance charges are charged to profit or loss. Contingent rents, if any, are charged as 

expenses in the periods in which they are incurred. 

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if 

there is no reasonable certainty that the Group will obtain ownership by the end of the lease term. 

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The 

aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term 

on a straight-line basis. 

(b) 

As lessor 

2.17 Inventories 

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating 

leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset 

and recognised over the lease term on the same bases as rental income. The accounting policy for rental income is set 

out in Note 2.4(d). 

Inventories are carried at the lower of cost and net realisable value. Cost incurred in bringing the inventories to their present 

location and conditions are determined using the weighted average method. Net realisable value is the estimated selling price in 

the ordinary course of business, less applicable variable selling expenses.

60 




2.18 Income taxes 

(a) 

Current tax 

Current income tax liabilities and assets are measured at the amounts expected to be paid to or recovered from the 

taxation authorities, using the tax rates and tax laws that have been enacted or substantively enacted by the statement of 

financial position date. 

Current taxes are recognised in profit or loss except to the extent that the tax relates to items recognised outside profit or 

loss, either in other comprehensive income or directly in equity. 

(b) 

Deferred tax 

Deferred income tax is provided using the liability method on temporary differences at the statement of financial position 

date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. 

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

– where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a 

transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit 

nor taxable profit or loss; and 

– in respect of taxable temporary differences associated with investments in subsidiaries, associates and joint venture 

companies, where the timing of the reversal of the temporary differences can be controlled and it is probable that the 

temporary differences will not reverse in the foreseeable future. 

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits 

and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible 

temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: 

– where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition 

of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects 

neither the accounting profit nor taxable profit or loss; and 

– in respect of deductible temporary differences associated with investments in subsidiaries, associates and joint 

venture companies, deferred income tax assets are recognised only to the extent that it is probable that the temporary 

differences will reverse in the foreseeable future and taxable profit will be available against which the temporary 

differences can be utilised. 

The carrying amount of deferred tax assets is reviewed at each statement of financial position date and reduced to the 

extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax 

asset to be utilised. Unrecognised deferred tax assets are reassessed at each statement of financial position date and 

are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be 

utilised. 

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is 

realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the 

statement of financial position date. 

Deferred income tax relating to items recognised outside profit or loss is recognised outside profit or loss. Deferred tax 

items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity 

and deferred tax arising from a business combination is adjusted against goodwill on acquisition. 

Deferred income tax assets and deferred income tax liabilities are offset, if a legally enforceable right exists to set off current 

tax assets against current income tax liabilities and the deferred income taxes relate to the same taxable entity and the 

same taxation authority.



61 




2.18 Income taxes (cont’d) 

(c) 

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

2.19 Provisions 

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

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

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

are stated with amount of VAT/GST included. The net amount of VAT/GST recoverable from, or payable to, the taxation 

authority is included as part of receivables or payables in the statement of financial position. 

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

probable that an outflow of economic resources will be required to settle the obligation and the amount of the obligation can be 

estimated reliably. 

Provisions are reviewed at each statement of financial position date and adjusted to reflect the current best estimate. If it is 

no longer probable that an outflow of economic resources will be required to settle the obligation, the provision is reversed. 

If the effect of the time value of money is material, provisions are discounted using a current pre tax rate that reflects where 

appropriate, the risk specific to the liability. When discounting is used, the increase in the provision due to the passage of time 

is recognised as finance cost. 

Provision for warranties 

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

at the statement of financial position date for expected warranty claims based on estimate from technical engineers and past 

experience of the probable level of repairs and rectifications. 

Provision for liquidated damages on construction contracts 

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

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

obligations. 

2.20 Employee compensation 

(a) 

Defined contribution plans 

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

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

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

the contributions have been paid. The Group’s contributions are recognised as employee compensation expense in the 

period in which the related service is performed. 

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

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

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

funds are listed below: 

Basic pension insurance 20% 

Basic medical insurance 7% 

Unemployment insurance 2% 

Maternity fund 2% 

Accident insurance 1% 

Housing fund 6%

62 




2.20 Employee compensation (cont’d) 

(b) 

Share-based compensation 

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

exchange for the grant of the share options is recognised as an expense in profit or loss with a corresponding increase in 

the share option reserve over the vesting period. The total amount to be recognised over the vesting period is determined 

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

included in the estimation of the number of shares under share options that are expected to become exercisable on the 

vesting date. At each statement of financial position date, the Group revises its estimates of the number of shares under 

share options that are expected to become exercisable on the vesting date and recognises the impact of the revision of 

the estimates in profit or loss, with a corresponding adjustment to the share option reserve over the remaining vesting 

period. 

No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a 

market condition, which are treated as vested irrespective of whether or not the market condition is satisfied, provided that 

all other performance and/or service conditions are satisfied. The employee share option reserve is transferred to retained 

earnings upon expiry of the share options. 

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

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

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

employees. 

In situations where equity instruments are issued and some or all of the goods or services received by the entity as 

consideration cannot be specifically identified, the unidentified goods or services received (or to be received) are measured 

as the difference between the fair value of the share-based payment and the fair value of any identifiable goods or services 

received at the grant date. This is then capitalised or expensed as appropriate. 

(c) 

Employee leave entitlement 

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

made for the estimated liability for leave as a result of services rendered by employees up to the statement of financial 

position date. 

(d) 

Termination benefits 

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

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

it is demonstrably committed to either terminate the employment of current employees according to a detailed plan without 

possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy. 

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

number of employees expected to accept the offer. Benefits falling due more than 12 months after statement of financial 

position date are discounted to present value. 

2.21 Currency translation 

(a) 

Functional and presentation currency 

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

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

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



63 




2.21 Currency translation (cont’d) 

(b) 

Transactions and balances 

Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency 

using the exchange rates approximating those ruling at the dates of the transactions. Currency translation gains and losses 

resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated 

in foreign currencies at the closing rates at the statement of financial position date are recognised in the profit or loss, 

except for currency translation differences on the net investment in foreign operations, borrowings in foreign currencies 

and other currency instruments qualifying as net investment hedges for foreign operations, which are recognised initially 

in other comprehensive income and accumulated under currency translation reserve in equity. The currency translation 

reserve is reclassified from equity to profit or loss of the Group on disposal of the foreign operation. 

Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange 

rates as at the dates of the initial transactions. Non-monetary items that are measured at fair values in foreign currency 

are translated using the exchange rates at the date when the fair values are determined. Currency translation differences 

on non-monetary items whereby the gains or losses are recognised in other comprehensive income, such as equity 

investments classified as available-for-sale financial assets, are included in other comprehensive income and accumulated 

under currency translation reserve in equity. 

(c) 

Translation of Group entities’ financial statements 

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

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

(i) 

(ii) 

(iii) 

Assets and liabilities are translated at the closing rates at the date of the statement of financial position; 

Statement of comprehensive income are translated at average exchange rates (unless the average is not a reasonable 

approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and 

expenses are translated using the exchange rates at the dates of the transactions); and 

All resulting exchange differences are taken directly to other comprehensive income. 

(d) 

Consolidation adjustments 

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

foreign currencies, and other currency instruments designated as hedges of such investments, are recognised initially in 

other comprehensive income and accumulated under currency translation reserve in equity. When a foreign operation is 

sold, such currency translation differences recorded in the currency translation reserve are recognised in the profit or loss 

as part of the gain or loss on sale. 

2.22 Segment reporting 

For management purposes, the Group currently has one operating segment. Disclosures on the segment information are shown 

in Note 35. 

2.23 Cash and cash equivalents 

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

deposits with financial institutions which are subject to insignificant risk of change in value and exclude pledged deposits with 

the financial institutions. 

2.24 Share capital and share issuance expenses 

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

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

64 




2.25 Dividends 

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

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

2.26 Contingencies 

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

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

Contingent liabilities and assets are not recognised on the statement of financial position of the Group. 

2.27 Derivative financial instruments and hedging activities 

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

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

and as liabilities when the fair value is negative. 

Subsequent to initial recognition, any gains or losses arising from changes in fair value on derivative financial instruments that do 

not qualify for hedge accounting are taken to the profit or loss for the financial year. 

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

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

instruments. 

Embedded derivatives 

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

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

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

(a) 

(b) 

(c) 

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

and risks of the host contract; 

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

the hybrid (combined) instrument is not measured at fair value with changes in fair value recognised in profit or loss (that 

is, a derivative that is embedded in a financial asset or financial liability at fair value through profit or loss). 

Embedded derivatives identified and separately accounted for at fair value through profit or loss. 

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

Fair value changes on these derivatives are recognised in the profit or loss when the changes arise. 

2.28 Government grants 

Government grants are recognised as a credit in the consolidated statement of comprehensive income when all attaching condition 

have been compiled with and received. Government grants are presented in the consolidated statement of comprehensive 

income under “other income”.



65 



3. Significant accounting judgements and estimates 

Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, 

including expectations of future events that are believed to be reasonable under the circumstances. 

3.1 Critical accounting estimates and assumptions 

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

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

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

discussed below. 

(i) 

Impairment of goodwill 

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

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

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

of goodwill at the statement of financial position date is disclosed in Note 25. 

(ii) 

Revenue recognition 

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

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

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

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

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

contracts is disclosed in consolidated income statement. 

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

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

could impact the amount of revenue and expenses recognised in the profit or loss in the year in which the change is made 

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

(iii) 

Income taxes 

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

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

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

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

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

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

consolidated statement of financial position. 

(iv) 

Useful lives of property, plant and equipment 

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

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

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

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

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

The carrying amount of property, plant and equipment is disclosed in Note 23.

66 



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

3.1 Critical accounting estimates and assumptions (cont’d) 

(v) 

Executive Share Option 

The Group measures the cost of equity-settled transactions with employees by reference to the fair value of the equity 

instruments at the date of which they are granted. Estimated fair value for share-based payment transactions requires 

determining the most appropriate valuation model, which is dependent on the terms and conditions of the grant. This 

estimate also requires determining the most appropriate inputs to the valuation model including the expected lift of the 

share option, volatility and dividend yield and making assumptions about them. The assumptions and models used for 

estimating fair value for share-based payment transactions are disclosed in Note 31. 

(vi) 

Provision for liquidated damages on construction contracts 

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

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

contractual obligations. The carrying amount of provision for liquidated damages on construction contracts is disclosed in 

Note 17. 

(vii) 

Provision for warranties on construction contracts 

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

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

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

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

and labour costs. 

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

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

amount has been reliably estimated. 

The carrying amount of the provision for warranties is disclosed in Note 30. 

(viii) Impairment of loans and receivables 

The Group assesses at each statement of financial position date whether there is any objective evidence that a financial 

asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the 

probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments. 

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on 

historical loss experience for assets with similar credit risk characteristics. The carrying amount of the Group’s loans and 

receivable at the statement of financial position date is disclosed in Note 33. 

(ix) 

Impairment of available-for-sale financial assets 

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

in other comprehensive income. When the fair value declines, management makes assumptions about the decline in 

value to determine where there is an impairment that should be recognised in the profit or loss. At 31 December 2009, 

impairment losses of $2,592,000 (2008: $10,796,000) have been recognised for available-for-sale financial assets. The 

carrying amount of available-for-sale financial assets as at 31 December 2009 was $1,141,000 (2008: $3,529,000).



67 



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

3.1 Critical accounting estimates and assumptions (cont’d) 

(x) 

Impairment of non-financial assets 

The Group assesses whether there are any indicators of impairment for all non-financial assets except for goodwill 

(mentioned in 3.1(i)) at each reporting date. Indefinite life intangibles are tested for impairment annually and at other times 

when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying 

amounts may not be recoverable. 

When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset 

or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. 

The carrying amount of the Group’s non-financial assets as at the statement of financial position is disclosed in Notes 20, 

21, 22, 23, 24 and 25 to the financial statements. 

(xi) 

Deferred income tax assets 

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be 

available against which the losses can be utilised. Significant management judgement is required to determine the amount 

of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with 

future tax planning strategies. The carrying amount of the deferred income tax assets as disclosed in Note 26. 

3.2 Critical judgements in applying the Group’s accounting policies 

The following judgements are made by management in the process of applying the Group’s accounting policies that have the 

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

(i) 

Reclaimed land and buildings without ownership certificates 

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

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

amount of the buildings without the relevant ownership certificates amounted to $21,328,000 as at 31 December 2009 

(2008: $22,311,000). The Group has made the necessary applications to the relevant authorities. The directors expect 

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

buildings and premises in the meantime without any penalty. The buildings and premises have been recognised as assets 

of the Group pending obtaining the ownership certificates. 

No contingent liabilities in connection with any possible breach or non-compliance with the relevant laws and regulations in 

respect of the buildings without ownership certificates have been provided for in the financial statements as the directors 

are of the opinion that the risk associated thereof is low. 

(ii) 

Determination of functional currency 

The Group measures foreign currency transactions in the respective functional currencies of the Company and its 

subsidiaries. In determining the functional currencies of the entities in the Group, judgement is required to determine the 

currency that mainly influences sales prices for goods and services and of the country whose competitive forces and 

regulations mainly determines the sales prices of its goods and services. The functional currencies of the entities in the 

Group are determined based on management’s assessment of the economic in which the entities operate and the entities’ 

process of determining sales prices. 

4. Revenue 

Revenue comprises revenue earned on construction contracts, including variation orders in the contract works and claims.

68 



5. Other income 

Group 

2009 2008 

$’000 $’000 

Rental income from machinery and office premises 1,239 4,945 

Gain on sale of scrap materials 65 299 

Fair value gain on derivative financial instruments 16,697 – 

Gain on forward contracts – 23,235 

Grant income from jobs credit scheme 166 – 

Government grants 813 80 

Gain on a loan to a third party 5,811 – 

Write back of doubtful trade and other receivables (Note 13) 93 744 

Miscellaneous gain 668 774 

25,552 30,077 

During the financial year ended 31 December 2009, the Singapore Finance Minister announced the introduction of a Jobs Credit 

Scheme (“JCS”). Under this JCS, the Group received a 12% cash grant on the first $2,500 of each month’s wages for each 

employee on their Central Provident Fund payroll. The JCS is for one year, and the Group received its grant income of $166,000 

(2008: Nil) during the financial year ended 31 December 2009. 

The gain on a loan to a third party relates to a settlement gain of US$4,000,000 on a loan of US$2,000,000 to a third party in 

year 2006. 

6. Other expenses 

Group 

2009 2008 

$’000 $’000 

Allowance for doubtful debts (Note 13) 109 – 

Impairment loss on property, plant and equipment (Note 23) 328 – 

Impairment loss on financial assets, available-for-sale (Note 19) 2,592 10,796 

Impairment loss on investment in an associate (Note 22) – 7,676 

Loss on disposal of investment in an associate (Note 22) – 64 

Loss on disposal of property, plant and equipment 115 968 

Fair value loss on derivative financial instruments – 30,917 

Loss on forward contracts 15,132 – 

Foreign exchange losses, net 2,229 11,043 

20,505 61,464



69 



7. Profit from operating activities 

Profit from operating activities is derived after charging the following items: 

Group 

2009 2008 

$’000 $’000 

Depreciation on property, plant and equipment (Note 23) 15,770 10,351 

Employee compensation (Note 8) 84,010 78,842 

Operating leases expenses 4,657 2,814 

Provision for liquidated damages and foreseeable losses (Note 17) 2,520 25,621 

Provision for warranties 990 4,128 

Amortisation of land and sea use rights (Note 24) 754 452 

Amortisation of intangible assets (Note 25) 3,639 2,587 

8. Employee compensation 

Group 

2009 2008 

$’000 $’000 

Wages, salaries and bonuses 59,367 58,601 

Employer’s contribution to defined contribution plans including Central Provident Fund 

and social security insurance 14,041 8,984 

Welfare expenses 3,941 4,480 

Share options expense (Note 32) 6,661 6,777 

84,010 78,842 

9. Net finance costs 

Group 

2009 2008 

$’000 $’000 

Finance Income: 

Interest income from bank deposits 923 5,160 

Interest income from loans to an associate 126 60 

1,049 5,220 

Finance costs: 

Interest on bank loans (25,171) (15,854) 

Interest on finance lease (1,477) (10) 

Interest paid to a related party (545) (30) 

Less: Interest expenses capitalised to construction work in progress 8,237 5,433 

(18,956) (10,461) 

Net finance costs (17,907) (5,241)

70 



10. Income tax expense 

Major components of income tax expense: 

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

Statement of comprehensive income: 

Group 

2009 2008 

$’000 $’000 

Current income tax 

Current income taxation 7,172 19,068 

Under/(over) provision in respect of prior years 441 (1,593) 

7,613 17,475 

Deferred tax 

Origination and reversal of temporary differences (Note 26) 4,552 (4,816) 

Under provision of deferred tax assets in respect of prior years (291) (1,284) 

Over provision of deferred tax liabilities in respect of prior years – (198) 

Effect of reduction in tax rates (Note 26) 858 (56) 

5,119 (6,354) 

Income tax expense recognised in profit or loss 12,732 11,121 

Relationship between tax expense and accounting profit 

The reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for 

the years ended 31 December 2009 and 2008 are as follows: 

Group 

2009 2008 

$’000 $’000 


Tax at the domestic rates applicable to profits in the countries where the Group operates 8,758 6,318 

Adjustments: 

Effect of reduction in tax rates 858 (56) 

Effect of partial tax exemption (76) (28) 

Expenses not deductible for tax purposes 2,888 8,342 

Income not subject to taxation (1) (181) 

Share of results of associates 155 (199) 

Under provision of deferred tax assets in respect of prior years (291) (1,284) 

Over provision of deferred tax liabilities in respect of prior years – (198) 

Under/(over) provision of income tax in respect of prior years 441 (1,593) 

Income tax expense recognised in profit or loss 12,732 11,121 

The corporate income tax rate applicable to Yantai Raffles Shipyard Limited, YRS Shiplease Pte Ltd, Offshore Accommodation 

Pte Ltd, Deepwater Venture Pte Ltd, Peyan Singapore Pte Ltd and Yan Pex Singapore Pte Ltd was reduced to 17% for the year 

of assessment 2010 onwards from 18% for year of assessment 2009. 

The Company and its Singapore subsidiaries’ tax liabilities have been computed based on the corporate tax rate and tax laws 

prevailing at statement of financial position date.



71 



10. Income tax expense (cont’d) 

YRS Investments Limited and Raffles Yacht Limited are incorporated in Hong Kong and are subject to the income tax laws in 

Hong Kong at corporate tax rate of 16.5% (2008: 17.5%) for the financial year ended 31 December 2009. 

Pelican Waters Investment Ltd, Asiatic Offshore Limited, Coral Offshore Limited and Evolution Offshore Ltd are incorporated 

under the International Business Companies Act of the British Virgin Islands (“BVI”) and accordingly, are exempted from payment 

of BVI income taxes. 

On 28 October 2009, Yantai Raffles Offshore Ltd. (“YROL”) was granted the “Advanced Technology Enterprise” status by 

National Science and Technology Association. YROL is hence subject to income tax rate of 15% (2008: 25%) for the three 

years beginning from the financial year ended 31 December 2009. Based on the implementation and administrative rules and 

regulations relating to the PRC Corporate Income Tax, Yantai Raffles Shipyard Co., Ltd. (“YRSCL”) and Haiyang Raffles Offshore 

Equipment Ltd. (“HROE”) are subjected to income tax at the rate of 25% (2008: 25%) for the financial year ended 31 December 

2009. 

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

11. Earnings per share 

Basic earnings per share are calculated by dividing the net result attributable to owners of the Company by the weighted average 

number of ordinary shares outstanding during the financial year. 

For the purpose of calculating diluted earnings per share, the weighted average number of ordinary shares outstanding is 

adjusted for the effects of all dilutive potential ordinary shares. The Company has only one category of dilutive potential ordinary 

shares, that is, share options. 

For the share options, the weighted average number of shares in issue is adjusted as if all share options that are dilutive were 

exercised. The number of shares that could have been issued upon the exercise of all dilutive share options less the number of 

shares that could have been issued at fair value (determined as the Company’s average share price for the financial year) for the 

same total proceeds is added to the denominator as the number of shares issued for no consideration, with no adjustment to 

results (numerator). 

The following table reflects the profit and share data used in the computation of basic and diluted earnings per share for the 

financial years ended 31 December: 

Group 

2009 2008 

Net profit attributable to owners of the Company ($’000) 27,332 26,932 

Weighted average number of ordinary shares in issue 

and adjusted for basic earnings per share (‘000) 273,565 273,524 

Earnings per share attributable to owners of the Company 

- Basic (cents per share) 9.99 9.85 

- Diluted (cents per share) 9.99 9.85 

The share options granted to employees are anti-dilutive for the financial years ended 31 December 2009 and 2008. Accordingly, 

diluted earnings per share are similar to basic earnings per share for the financial years ended 31 December 2009 and 2008.

72 



12. Cash and bank balances 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Cash and cash equivalents 111,821 43,832 68,107 28,817 

Pledged deposits (current) 49,119 131,401 – 103,823 

160,940 175,233 68,107 132,640 

Pledged deposits (non-current) 7,856 – – – 

168,796 175,233 68,107 132,640 

At the statement of financial position date, the carrying amounts of cash and bank balances approximate their fair values. 

Cash and cash equivalents, pledged deposits (current) and pledged deposits (non-current) are denominated in the following 

currencies: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Cash and cash equivalents and 

pledged deposits (current): 

Chinese Renminbi 63,654 28,265 – – 

Euro 4,670 27,512 2,523 21,118 

Norwegian Kroner 10 658 10 658 

Singapore Dollar 146 129 146 129 

Sterling Pound 1 – 1 – 

United States Dollar 92,459 118,669 65,427 110,735 

160,940 175,233 68,107 132,640 

Pledged deposits (non-current): 

Chinese Renminbi 7,856 – – – 

168,796 175,233 68,107 132,640 

Pledged deposits at the statement of financial position dates has an average maturity of 1 day to 3 years (2008: 1 day to 6 

months) from the end of the financial year. The range of interest rates of pledged deposits and cash at bank are as follows: 

Group 

Company 

2009 2008 2009 2008 

% % % % 

Chinese Renminbi 0.36 0.36 to 0.72 – – 

Euro 0.10 to 1.70 0.10 to 3.00 – 1.00 to 3.00 

Singapore Dollar – 0.00 to 0.10 – 0.00 to 0.10 

United States Dollar 0.10 to 2.88 0.25 to 3.12 – 0.25 to 3.12 

The exposure of cash and bank balances to interest rate risks is disclosed in Note 38(c). 

As at 31 December 2009, the Group secured short term bank loans of Nil (2008: $28,742,000) by way of a charge over certain 

bank balances amounting to Nil (2008: $5,887,000) as disclosed in Note 29(a).



73 



13. Trade and other receivables 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Trade and other receivables: 

Trade receivables 35,872 36,305 29,269 31,840 

Less : allowance for doubtful 

receivables (832) (1,550) (323) (1,029) 

Trade receivables, net 35,040 34,755 28,946 30,811 

Tax recoverable 42,687 40,472 35 59 

Other receivables 18,257 24,826 253 533 

Loans to an associate 2,485 2,259 – – 

Loans to third parties 25,965 2,877 17,544 – 

Deposits 6,288 3,723 3,639 3,723 

Less: allowance for doubtful 

receivables (3,002) (3,073) – – 

Other receivables, net 92,680 71,084 21,471 4,315 

127,720 105,839 50,417 35,126 

Trade receivables are non-interest bearing and generally on 3 to 10 days’ terms. These are recognised at the original invoice 

amounts which represent their fair values on initial recognition. 

Other receivables are non-interest bearing and have no fixed terms of repayment. 

Loans to an associate are non-trade, bearing annual interest rates of LIBOR 1 month plus 5% and STIBOR 1 month plus 5% 

(2008: LIBOR 1 month plus 5%) and repayable upon delivery of a vessel. 

Loans to third parties are non-trade, non-interesting bearing and repayable within 12 months from the statement of financial 

position date.

74 



13. Trade and other receivables (cont’d) 

Trade receivables 

Receivables that are past due but not impaired 

The Group has trade receivables amounting to $27,865,000 (2008: $12,233,000) that are past due at the statement of financial 

position date but not impaired. These receivables are unsecured and the analysis of their aging at the statement of financial 

position date is as follows: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Trade receivables past due: 

Lesser than 30 days 27,860 11,167 27,860 11,167 

30 to 60 days – – – – 

61 to 90 days 5 – 5 – 

91 to 120 days – – – – 

More than 120 days – 1,066 – 1,066 

27,865 12,233 27,865 12,233 

Receivables that are past due but not impaired relate to a number of independent customers that have a good track record 

with the Group. Based on past experience, the directors of the Company are of the opinion that no provision for impairment 

is necessary in respect of these balances as there has not been a significant change in credit quality and the balances are still 

considered fully recoverable. The Group does not hold any collateral or other credit enhancements over these balances. 

Receivables that are impaired 

The Group’s trade receivables that are impaired at the statement of financial position date and the movement of the allowance 

accounts used to record the impairment are as follows: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Trade receivables – nominal amounts 1,913 2,602 1,404 2,081 

Less: allowance for impairment (832) (1,550) (323) (1,029) 

1,081 1,052 1,081 1,052 

Movement in allowance accounts: 

At beginning of the financial year 1,550 1,625 1,029 1,138 

Allowance for the year 109 – 109 – 

Write off during the year (722) – (722) 

Write back during the year (93) (109) (93) (109) 

Exchange differences (12) 34 – – 

At end of the financial year 832 1,550 323 1,029 

Trade receivables that are individually determined to be impaired at the statement of financial position date relate to debtors that 

are in significant financial difficulties and/or have defaulted on payments. These receivables are not secured by any collateral or 

credit enhancements.



75 



13. Trade and other receivables (cont’d) 

Other receivables 

As of 31 December 2009, tax recoverable includes an amount of $8,224,000 (2008: Nil) withheld by State Tax Bureau of Yantai 

Export Processing Zone (the “Tax Bureau”), pending final results of the regular tax inspection on a subsidiary, YROL, for the 

financial years ended 31 December 2008 and 31 December 2007. In December 2009, the Tax Bureau initiated the transfer 

pricing review on YROL from years 2001 to 2008, which is still ongoing at the date of this report. The directors are of the opinion 

that the results of tax reviews cannot be reliably estimated and no allowance for doubtful receivables has been provided as at 

31 December 2009. 

Movements in allowance for doubtful receivables are as follows: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

At beginning of the financial year 3,073 3,514 – 635 

Write back during the year – (635) – (635) 

Exchange difference (71) 194 – – 

At end of the financial year 3,002 3,073 – – 

Trade and other receivables are denominated in the following currencies: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Chinese Renminbi 66,177 61,213 11 167 

Euro 6,252 17,723 6,252 17,723 

Norwegian Kroner – 1,119 – 1,119 



127,720 105,839 50,417 35,126

76 



14. Amounts due from/(to) subsidiaries 

Amounts due from subsidiaries (non-trade) (non-current) are unsecured, non-interest bearing and are not expected to be 

collected within the next 12 months. 

Amounts due from subsidiaries are denominated in the following currencies: 

Company 

2009 2008 

$’000 $’000 

Chinese Renminbi 12,099 13,232 

Euro 1,683 846 

Norwegian Kroner 4,017 3,392 

Singapore Dollar 503 132 

United States Dollar 58,793 72,049 

77,095 89,651 

Amounts due to subsidiaries (trade) (current) are unsecured, non-interest bearing and are expected to be repaid within the next 

12 months. 

Amounts due to subsidiaries are denominated in the following currencies: 

Company 

2009 2008 

$’000 $’000 

Chinese Renminbi – 119 

United States Dollar – 858 

– 977



77 



15. Inventories 

Inventories are stated at the lower of cost and net realisable value and comprise of materials and supplies held for 

construction. 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Statement of financial position: 

Inventories, at cost 149,641 244,782 44,905 136,344 

Less: provision for inventory obsolescence (362) (72) – – 

Inventories, net 149,279 244,710 44,905 136,344 

Income statement: 

At beginning of the financial year 244,782 209,122 

Materials purchased 127,181 289,722 

Inventories recognised as an expense in 

cost of sales (222,021) (254,106) 

Inventories written down (301) – 

Reversal of write-down of inventories – 44 

At end of the financial year 149,641 244,782 

Bank borrowings are secured by inventories amounting to $10,769,100 (2008: $10,981,000) as disclosed in Note 29(a). 

16. Vessels under construction 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Vessels under construction 247,822 88,903 239,061 135,375 

Vessels under construction as at 31 December 2009 are intended for sale or lease upon the completion of construction.

78 



17. Construction work-in-progress 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Aggregate contract costs recognised and 

recognised profits to date 1,998,513 1,155,595 1,888,481 1,587,756 

Less: Liquidated damages and foreseeable losses (30,316) (27,796) (23,889) (17,169) 

Progress billings received and receivable (1,665,216) (1,349,288) (1,651,626) (1,378,162) 

Amount due from/(to) customers for contract work, 

net 302,981 (221,489) 212,966 192,425 

Comprising: 

Construction work-in-progress in excess of progress 

billings 336,533 94,302 268,783 311,604 

Progress billings in excess of construction work-inprogress 

(33,552) (315,791) (55,817) (119,179) 

302,981 (221,489) 212,966 192,425 

Borrowings costs of $8,237,000 (2008: $5,433,000) arising from financing the construction contracts were capitalised during 

the financial year and included in the “aggregate contract costs recognised”. 

Bank borrowings are secured by construction work-in-progress of the projects with the balance of $41,320,000 (2008: 

$31,382,000) and future contract milestones of certain projects of $475,909,000 (2008: Nil) as disclosed in Note 29(a). 

Included in “aggregate contract costs recognised” of the Company is an amount of Nil (2008: $21,794,000) of advances to 

subsidiaries in relation to ongoing construction contracts. 

18. Other current assets 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Prepayments 3,100 718 1,847 82 

Advance to suppliers, net 317,386 432,403 152,455 193,409 

Advance to an associate – 37,580 – – 

Total 320,486 470,701 154,302 193,491



79 



19. Financial assets, available-for-sale 

Group 

2009 2008 

$’000 $’000 

At beginning of the financial year 3,529 58,872 

Additions – 1,870 

Allowance for impairment (2,592) (10,796) 

Reclassification to investment in an associate (Note 22) – (20,086) 

Recognition/(reversal) of changes of fair value in equity (Note 32(b)(iv)) 206 (26,198) 

Currency translation difference (2) (133) 

At end of the financial year 1,141 3,529 

The financial assets available-for-sale are denominated in the following currencies: 

Group 

2009 2008 

$’000 $’000 

Quoted securities: 

- Australian Dollars 1,141 2,036 

- Norwegian Kroner – 1,493 

1,141 3,529 

There has been a significant decline in the market value of the listed equity investments during the financial year. Such a decline 

indicates that the listed equity investments have been impaired and an impairment loss of $2,592,000 (2008: $10,796,000) has 

been recognised in the profit or loss for the financial year.

80 



20. Investment in subsidiaries 

Company 

2009 2008 

$’000 $’000 

Shares, at cost 81,382 81,382 

Capital contribution in the form of share options issued to employees of subsidiaries 2,484 1,754 

As at 31 December 2009, the details of the subsidiaries of the Group are as follows: 

83,866 83,136 

Name of companies 

Principal activities 

Country of 

incorporation 

Effective equity interest 

holding by the Group 

31 

December 

2009 

31 

December 

2008 

% % 

Held by the Company 

Yantai Raffles Offshore Ltd. 

(now known as Yantai CIMC Raffles 

Offshore Ltd) (b) 

Offshore and marine project 

construction and supply of 

engineering works and materials 

People’s Republic 

of China 

94.38 (a) 94.38 (a) 

Yantai Raffles Shipyard Co., Ltd. 

(now known as Yantai CIMC Raffles 

Shipyard Co., Ltd) (b) 





of China 

71.63 71.63 

YRS Investments Limited (c) Investment holding Hong Kong SAR 100 100 

YRS Shiplease Pte Ltd. (d) 

Offshore and marine vessel leasing 

operator (including chartering) 

Singapore 100 100 

Raffles Yacht Limited (c) 

Construction and sale 

of mega yachts 

Hong Kong SAR 100 100 

Held through Yantai Raffles Offshore 

Ltd. (now known as Yantai CIMC 

Raffles Offshore Ltd) 

Haiyang Raffles Offshore Equipment 

Ltd. (b) 





of China 

100 100 

Held through YRS Shiplease 

Pte Ltd. 

Pelican Waters Investments Ltd (e) 

Ownership and chartering of self 

unloading bulk carrier 

British Virgin Islands 100 100 

Asiatic Offshore Limited (e) Investment holding British Virgin Islands 100 100



81 



20. Investment in subsidiaries (cont’d) 



Country of 

incorporation 



31 31 

December December 

2009 2008 

% % 

Held through YRS Shiplease 

Pte Ltd. (cont’d) 

Coral Offshore Limited (e), (f) Dormant British Virgin 

Islands 

100 100 

Offshore Accomodation Pte Ltd. (d) 

Ownership and chartering of 

accommodation barge 

Singapore 100 100 

Evolution Offshore Ltd. (e), (f) Dormant British Virgin 

Islands 

100 100 

Deepwater Venture Pte Ltd. (d) Dormant Singapore 100 100 

(a) 

(b) 

(c) 

(d) 

(e) 

(f) 

Effective equity interest stated is inclusive of indirect interests held by a subsidiary company, Yantai Raffles Shipyard Co., 

Ltd. 

Audited by Wan Long Asia Certified Public Accountants, a firm of certified public accountants in the PRC for PRC statutory 

audit purpose and audited by Ernst & Young, Shanghai for purpose of consolidation. 

Audited by Grant Thornton CPA, Hong Kong. 

Audited by Ernst & Young LLP, Singapore. 

Not required to be audited under the laws of the country of incorporation. 

These entities are in the midst of being struck off. 

Subsidiaries such as Borneo Offshore Limited, Deep Water Offshore Limited, Far East Drilling Ltd., Baratpur Limited, 

YRS Chartering Pte. Ltd., and YRS Offshore Chartering Pte. Ltd. were deregistered during the financial year ended 

31 December 2009.

82 



21. Investment in joint ventures 

Group 

2009 2008 

$’000 $’000 

Unquoted shares, at cost – – 



Country of 

incorporation 



31 

December 

2009 

31 

December 

2008 

% % 

Held through Deepwater Venture Pte Ltd. 

Peyan Singapore Pte Ltd. (a) Dormant Singapore 50 50 

Yan Pex Singapore Pte Ltd. (a) Dormant Singapore 50 50 

(a) 

Audited by Ernst & Young LLP, Singapore. 

As at 31 December 2009, the carrying amounts of the two joint ventures have been fully impaired. 

22. Investment in associates 

Group 

2009 2008 

$’000 $’000 

Shares, at cost 

At beginning of financial year 15,978 3,473 

Reclassification from financial assets, available-for-sale (Note19) – 20,086 

Disposal during the year – (1,139) 

At end of financial year 15,978 22,420 

Share of post-acquisition (losses)/profits (801) 1,285 

Loss on disposal of investment in an associate – (64) 

Impairment loss on investment in an associate – (7,676) 

Exchange difference (349) 13 

14,828 15,978



83 



22. Investment in associates (cont’d) 

Name 


Country of 

incorporation 



31 31 

December December 

2009 2008 

% % 

Held through YRS Shiplease Pte Ltd. 

Consafe MSV AB (a) 

Ownership and chartering of semisubmersible 

crane/accommodation 

vessel 

Sweden 36% 36% 

Held through Yantai Raffles Offshore 

Ltd. (now known as Yantai CIMC 

Raffles Offshore Ltd) 

Haiyang Blue Island Offshore Ltd (b) 

(“HBIO”) 

Design, construct, sale and repair 

offshore marine facilities 

People’s Republic of 

China 

28% 28% 

Held through YRS Investments 

Limited (“YRSI”) 

TSC Offshore Group Ltd (c) (“TSC”) 

Construction and trading of rig 

products and technology and oilfield 

expendables and supplies, the 

provision of rig turnkey solutions and 

consultancy services 

Cayman Islands 7% (d) 8% (d) 

(a) 

(b) 

(c) 

(d) 

Audited by Ohrlings PricewaterhouseCoopers AB. 

Audited by Shandong Wanlong Qilu CPA Co. Ltd., a firm of certified public accountants in the PRC. 

Audited by KPMG, Hong Kong 

On 5 November 2008, a subsidiary and a director cum shareholder, Brian Chang entered into an agreement to act in 

concert in respect of their shareholding in TSC. Both parties agree to act together and co-operate by concerted exercise 

of the voting rights they hold as well as in respect of advisory role according to Brian Chang by TSC. Accordingly, the 

investment in TSC is classified as investment in an associate as the subsidiary has significant influence over TSC. 

The summarised financial information of the associates, not adjusted for the proportion of ownership interest held by the Group, 

is as follows: 

Group 

2009 2008 

$’000 $’000 

Assets and liabilities of the associates: 

Total assets 487,645 432,172 

Total liabilities 274,984 255,554 

Results of the associates: 

Revenue 218,862 248,855 

(Loss)/profit for the financial year (9,153) 16,963

84 



23. Property, plant and equipment 

Group 

Quays 

and dry 

Machinery 

and 

Office Motor Construction 

Buildings docks equipment Barges equipment vehicles in progress Total 

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

Cost 

At 1 January 2008 23,454 95,168 69,949 6,748 1,434 463 128,622 325,838 

Currency translation differences 1,953 6,702 8,228 1,516 – – 5,568 23,967 

Additions 2,010 501 10,300 35,519 100 – 115,449 163,879 

Transfers 7,491 2,518 89,344 24,038 – – (123,391) – 

Disposals (431) – (3,222) (33,228) – – – (36,881) 

At 31 December 2008 34,477 104,889 174,599 34,593 1,534 463 126,248 476,803 

Currency translation differences (1,014) (2,748) (5,498) (1,155) – – (1,467) (11,882) 

Additions 201 386 16,947 11,555 16 – 60,815 89,920 

Transfers 6,279 8,848 28,839 191 – – (44,796) (639) 

Disposals (18) – (748) – (4) – – (770) 

At 31 December 2009 39,925 111,375 214,139 45,184 1,546 463 140,800 553,432 

Accumulated depreciation 

and impairment loss 

At 1 January 2008 1,742 7,815 16,218 1,563 1,194 20 – 28,552 

Currency translation differences 144 633 1,154 80 – – – 2,011 

Depreciation charge 788 2,754 5,596 973 147 93 – 10,351 

Disposals (140) – (2,147) – – – – (2,287) 

At 31 December 2008 2,534 11,202 20,821 2,616 1,341 113 – 38,627 

Currency translation differences (92) (354) (751) (92) – – – (1,289) 

Depreciation charge 1,033 2,945 9,383 2,185 131 93 – 15,770 

Disposals (8) – (491) – (4) – – (503) 

Impairment loss – – 328 – – – – 328 

At 31 December 2009 3,467 13,793 29,290 4,709 1,468 206 – 52,933 

Net carrying amount 

At 31 December 2009 36,458 97,582 184,849 40,475 78 257 140,800 500,499 

At 31 December 2008 31,943 93,687 153,778 31,977 193 350 126,248 438,176



85 



23. Property, plant and equipment (cont’d) 

Machinery 

and 

equipment 

Office 

equipment 

Motor 

vehicles 

Construction 

in progress 

Total 

$’000 $’000 $’000 $’000 $’000 

Company 

Cost 

At 1 January 2008 1,368 1,433 463 – 3,264 

Additions – 101 – 616 717 

At 31 December 2008 1,368 1,534 463 616 3,981 

Additions – 16 – 234 250 

Disposals – (4) – – (4) 

Transfers to intangible assets – – – (576) (576) 

At 31 December 2009 1,368 1,546 463 274 3,651 

Accumulated depreciation 

At 1 January 2008 1,368 1,193 20 – 2,581 

Depreciation charge – 147 93 – 240 

At 31 December 2008 1,368 1,340 113 – 2,821 

Depreciation charge – 131 93 – 224 

Disposals – (4) – – (4) 

At 31 December 2009 1,368 1,467 206 – 3,041 


At 31 December 2009 – 79 257 274 610 

At 31 December 2008 – 194 350 616 1,160 

Depreciation of property, plant and equipment 

Depreciation on property, plant and equipment of $13,453,000 (2008: $8,752,000) arising from construction work were 

capitalised during the financial year, and included in the aggregate contract costs. 

Property, plant and equipment pledged as security 

Bank borrowings are secured by a 20,000T crane and construction in progress with a carrying amount of $61,388,000 (2008: 

$63,007,000) and $15,361,000 (2008: Nil) as disclosed in Note 29(a).

86 



23. Property, plant and equipment (cont’d) 

Property, plant and equipment held under finance lease 

During the financial year, the Group acquired barges, machinery and equipment with an aggregate cost of $39,375,000 (2008: 

$35,519,000) by means of finance leases. 

The carrying amounts of the machinery and equipment, barges and motor vehicles held under finance leases at the statement 

of financial position date were $70,068,000 (2008: $36,277,000). The carrying amounts of each category of finance lease are 

as follows: 

Group 

2009 2008 

$’000 $’000 

Machinery and equipment 29,336 – 

Barges 40,475 35,927 

Motor vehicles 257 350 

Total 70,068 36,277 

Building ownership certificates 

The Group is in the process of applying for the Building Ownership Certificates for certain buildings and premises of the PRC 

subsidiaries. The carrying amount of the buildings without the relevant ownership certificates amounted to $21,328,000 (2008: 

$22,311,000) as at 31 December 2009. The Group has made the necessary applications to the relevant authorities. The directors 

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

buildings and premises in the meantime without any penalty. The buildings and premises have been recognised as assets of the 

Group pending obtaining the ownership certificates. 

No contingent liabilities in connection with any possible breach or non-compliance with the relevant laws and regulations in 

respect of the buildings without ownership certificates have been provided for in the financial statements as the directors are of 

the opinion that the risk associated thereof is low. 

24. Prepayments and land and sea use rights 

Group 

2009 2008 

$’000 $’000 

Prepayment in relation to purchase of land use right 1,356 – 

Advance in relation to an acquisition of a company (Note 37(a)) 31,979 – 

Other prepayments 223 302 

Total 33,558 302 

Land and sea use rights 

The Group’s land and sea use rights are located in the PRC where the Group’s PRC shipbuilding and storage facilities reside.



87 



24. Prepayments and land and sea use rights (cont’d) 

Land and sea use rights (cont’d) 

Land use 

rights 

Sea use 

rights 

Total 

$’000 $’000 $’000 

Group 

Cost 

At 1 January 2008 548 3,891 4,439 

Currency translation differences 942 321 1,263 

Additions 25,130 1,393 26,523 

At 31 December 2008 26,620 5,605 32,225 

Currency translation differences (656) (131) (787) 

Additions 966 _ 966 

Transfer from construction in progress 63 _ 63 

At 31 December 2009 26,993 5,474 32,467 

Accumulated amortisation 

At 1 January 2008 – 600 600 

Currency translation differences 12 45 57 

Amortisation 324 128 452 

At 31 December 2008 336 773 1,109 

Currency translation differences (28) (22) (50) 

Amortisation 634 120 754 

At 31 December 2009 942 871 1,813 


At 31 December 2009 26,051 4,603 30,654 

At 31 December 2008 26,284 4,832 31,116 

Average remaining amortisation period (years) 32 41 

Land use rights agreements 

In accordance with the relevant PRC laws, the land use rights agreements relating to the land on which the property, plant and 

equipment of the PRC subsidiaries is residing allow the PRC government to expropriate the land with 30 days’ notice to the 

subsidiaries. 

In addition, the land on which the property, plant and equipment of the PRC subsidiaries is residing is held on a leasehold basis. 

Accordingly, the PRC subsidiaries have to obtain the approval of the relevant authorities before they can sell or mortgage certain 

properties on their land. 

The Group is in the process of applying for the Land Use Right Certificate in respect of land reclaimed from the sea.

88 



25. Intangible assets 

Goodwill 

Computer 

software 

licenses 

Total 

$’000 $’000 $’000 

Group 

Cost 

At 1 January 2008 16,397 6,188 22,585 

Currency translation differences – 120 120 

Additions – 6,897 6,897 

At 31 December 2008 16,397 13,205 29,602 

Currency translation differences – (86) (86) 

Additions – 1,104 1,104 

Transfer from construction in progress – 576 576 

At 31 December 2009 16,397 14,799 31,196 

Accumulated amortisation 

At 1 January 2008 – 2,157 2,157 

Amortisation – 2,587 2,587 

Currency translation differences – 40 40 

At 31 December 2008 – 4,784 4,784 

Amortisation – 3,639 3,639 

Currency translation differences – (24) (24) 

At 31 December 2009 – 8,399 8,399 


At 31 December 2009 16,397 6,400 22,797 

At 31 December 2008 16,397 8,421 24,818 

Average remaining amortisation period (years) – 5



89 



25. Intangible assets (cont’d) 

Computer 

software 

licenses 

$’000 

Company 

Cost 

At 1 January 2008 4,879 

Additions 6,094 

At 31 December 2008 10,973 

Additions 44 

Transfer from construction-in-progress 576 

At 31 December 2009 11,593 

Accumulated amortisation and impairment loss 

At 1 January 2008 1,705 

Amortisation 2,400 

At 31 December 2008 4,105 

Amortisation 3,383 

At 31 December 2009 7,488 


At 31 December 2009 4,105 

At 31 December 2008 6,868 

Average remaining amortisation period (years) 1 

Impairment test for goodwill 

Goodwill arising from business combinations has been allocated to the cash-generating unit (“CGU”) for impairment testing. The 

recoverable amount is determined based on a value in use calculation using cash flow projections based on financial budgets 

approved by management covering a period of three financial years ending 2010, 2011 and 2012 (the “Projection Periods”). The 

pre-tax discount rate applied to the cash flow projections is 5.91% (2008:7.24%). The financial budget is prepared based on 

existing and potential contracts to be granted to the CGU for the Projection Periods. 

The following describes each key assumption on which management has based on its cash flow projections to undertake 

impairment testing of goodwill. 

– Budgeted gross margins – management determined the budgeted gross margin based on operational plans for the CGU 

and the expected margin to be achieved which is reasonable in view of the scope of services provided by the CGU. 

– Growth rates – management forecasted growth rates of 2% in 2009 (2008: 2%) based on order book on hand as well 

as published industry research and do not exceed the long-term average growth rate for the industries relevant to the 

CGUs.

90 



26. Deferred tax 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current 

tax liabilities and when the deferred taxes relate to the same fiscal authority. 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Deferred tax assets 11,590 17,221 3,860 3,705 

Deferred tax liabilities (800) (1,227) (1,318) (2,094) 

10,790 15,994 2,542 1,611 

The movement in the deferred tax assets and liabilities during the financial year is as follows: 

Fair value 

losses on 

derivatives 


instruments, 

net 

Unutilised 

business 

losses 

Interest 

receivables 

Amortisation 

of preoperating 

expenses 

Group 

Impairment 

and 

depreciation 

of property, 

plant and 

equipment 

Provisions 

Accrued 

expenses 

Recognised 

profits on 

construction 

contracts 

Reinvestment 

allowance 

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

Total 

Deferred 

tax assets/ 

(liabilities) 

At 1 January 

2008 – – – 498 (697) 2,015 865 6,405 – 9,086 

Currency 

translation 

differences 18 6 – 16 59 124 67 262 2 554 

Credit/(charge) 

to profit or loss 

(Note 10) 514 282 (713) (514) 34 5,884 176 591 44 6,298 

Reduction in tax 

rates – – – – 12 31 13 – – 56 

At 31 December 

2008 532 288 (713) – (592) 8,054 1,121 7,258 46 15,994 

Currency 

translation 

differences 5 (6) – – (10) (39) (60) 26 (1) (85) 

(Charge)/credit to 

profit or loss 

(Note 10) (569) (282) 160 – 297 (1,565) 914 (3,216) – (4,261) 

Reduction in tax 

rates (Note 10) 54 – (7) – 65 102 59 (1,131) – (858) 

At 31 December 

2009 22 – (560) – (240) 6,552 2,034 2,937 45 10,790



91 



26. Deferred tax (cont’d) 

Company 

Impairment 

and 

depreciation 

of property, 

plant and 

equipment Provisions 

Interest 

receivables 

Total 

$’000 $’000 $’000 $’000 

Deferred tax (liabilities)/assets 

At 1 January 2008 (1,692) – – (1,692) 

Charge/(credit) to profit or loss 311 3,705 (713) 3,303 

At 31 December 2008 (1,381) 3,705 (713) 1,611 

Credit to profit or loss 623 155 153 931 

At 31 December 2009 (758) 3,860 (560) 2,542 

Unrecognised tax losses 

At the statement of financial position date, the Group has no tax losses that are available for offset against future taxable profits 

of the companies in which the losses arose. 

Unrecognised temporary differences relating to investments in subsidiaries 

At the statement of financial position date, no deferred tax liability (2008: Nil) has been recognised for taxes that would be 

payable on the undistributed earnings of certain of the Group’s subsidiaries as the Group has determined that undistributed 

earnings of its subsidiaries will not be distributed in the foreseeable future. 

27. Advances from customers 

This relates to advances received on construction contracts.

92 



28. Trade and other payables 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Trade payables: 

- third parties 239,048 209,289 41,023 62,280 

- amounts due to an associate 28,051 1,244 – – 

267,099 210,533 41,023 62,280 

Other payables 31,701 32,806 19,304 24,130 

Amount due to CIMC Vehicle Financial Leasing Co., 

Ltd. (1) – 6,105 – – 

Amounts due to Leung Kee Holdings Ltd. (2) 3,509 10,070 3,509 10,070 

Amounts due to a director (3) 1,257 1,893 1,257 1,893 

Accrued costs of sales 71,118 60,996 16,552 – 

Accrued operating expenses 9,034 7,073 2,177 4,166 

116,619 118,943 42,799 40,259 

Total 383,718 329,476 83,822 102,539 

(1) 

CIMC Vehicle Financial Leasing Co., Ltd (“CIMC Leasing”) is a shareholder related company. 

(2) 

Leung Kee Holdings Ltd. is a director related company. 

(3) 

The amounts are due to a director, who is also a major shareholder. 

The carrying amounts of trade and other payables approximate their fair values at the statement of financial position date. 

Trade payables are unsecured, non-interest bearing and generally on 30 to 60 days’ terms. 

Other payables, amounts due to an associate (trade) and amounts due to a director are unsecured, non-interest bearing and 

repayable on demand. 

The amount due to CIMC Leasing is unsecured, non-interest bearing and fully repaid in the financial year ended 31 December 2009. 

The amounts due to Leung Kee Holdings Ltd. are unsecured, bear effective interest rate at 3% per annum over and above the 

London Inter-Bank Offered Rate (“LIBOR”) (2008: 3% above LIBOR per annum) and have been fully repaid subsequent to the 

financial year ended 31 December 2009.



93 



28. Trade and other payables (cont’d) 

Trade and other payables are denominated in the following currencies: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Chinese Renminbi 250,845 199,070 140 107 

Euro 34,884 26,315 22,936 18,559 

Singapore Dollar 36,327 6,602 36,223 6,579 

Sterling Pound 127 3,553 18 3,440 


Norwegian Kroner 811 20,556 1 17,406 

Swedish Krona – 811 – 811 

383,718 329,476 83,822 102,539 

29. Borrowings 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Current 

Finance lease 8,474 36 36 36 

Loans from banks: 

- Secured 215,473 167,571 80,431 92,100 

- Unsecured 340,162 217,464 – 206,605 

555,635 385,035 80,431 298,705 

564,109 385,071 80,467 298,741 

Non-current 

Finance lease 12,279 146 109 146 

Loans from banks: 

- Secured 209,181 21,052 182,467 – 

- Unsecured 102,794 – – – 

311,975 21,052 182,467 – 

Loan from a third party 230 235 – – 

324,484 21,433 182,576 146 

Total borrowings 888,593 406,504 263,043 298,887

94 



29. Borrowings (cont’d) 

As at 31 December 2009, certain directors of the Company have provided personal guarantees amounting to Nil (2008: 

$38,552,000) in respect of certain credit facilities granted to the Group. 

(a) 

Securities granted 

Secured loans from banks 

The secured loans from banks bear effective interest at 0.60% to 5.76% (2008: 1.96% to 8.22%). Certain bank borrowings 

are secured by the following: 

(i) certain property, plant and equipment as disclosed in Note 23; 

(ii) construction work-in-progress as disclosed in Note 17; 

(iii) inventories as disclosed in Note 15; 

(iv) charge over certain bank balances as disclosed in Note 12; 

(v) future contract milestones of certain projects as disclosed in Note 17. 

Loan from a third party 

Non-current loan from a third party is unsecured, non-interest bearing and is not expected to be repaid within 12 

months. 

(b) 

Maturity of borrowings 

The current borrowings have an average maturity of 6 months from 31 December 2009 (2008: 3 months). The non-current 

borrowings as at 31 December 2009 have maturity of between 2 to 5 years (2008: 2 to 5 years). 

(c) 

Currency risk 

The carrying amounts of total borrowings are denominated in the following currencies: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Chinese Renminbi 556,786 85,493 – – 

Euro 10,496 1,056 – – 


Sterling Pound 77 – – – 


888,593 406,504 263,043 298,887



95 



29. Borrowings (cont’d) 

(d) 

Interest rate risks 

The range of the interest rates of total borrowings at the statement of financial position date is as follows: 

Group 

Company 

2009 2008 2009 2008 

% % % % 

Bank borrowings 

Chinese Renminbi 4.78 to 5.76 5.54 to 8.22 – – 

Euro 1.49 to 4.03 3.97 to 5.79 – – 

Sterling Pound 3.21 – – – 

United States Dollar 0.60 to 4.64 1.96 to 7.32 1.79 to 4.33 1.96 to 6.16 

Finance lease 

Chinese Renminbi 4.97 to 5.76 – – – 

Singapore Dollar 4.85 4.85 4.85 4.85 

The exposure of current and non-current borrowings to interest rate risks is disclosed in Note 38(c). 

(e) 

Defaults or breaches 

During the financial year ended 31 December 2009, the Company breached certain financial covenants of two bank 

loans. 

The outstanding balance from China Development Bank as at 31 December 2009 is $210,525,000, including $28,070,000 

presented as current borrowings and $182,455,000 as non-current borrowings as at the statement of financial position 

date. The Company did not fulfil the requirement to maintain the ratio of total borrowings and tangible assets of less than 

1. Subsequent to year end, the bank has consented to a waiver of the breach as at 31 December 2009 and no repayment 

is required prior to contractual payment. 

The outstanding balance from The Royal Bank of Scotland (“RBS”) as at 31 December 2009 is $41,085,000 and is 

presented as current liabilities as at the statement of financial position date. The Company did not fulfil the requirement 

to maintain the ratio of gross debt and EBITDA of less than 3. The loan matured on 15 January 2010 and the Company 

repaid the RBS loan prior to maturity. 

30. Provision for other liabilities 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Other liabilities 29,432 8,763 12,200 2,347 

Provision for warranties 5,713 7,132 4,710 7,132 

35,145 15,895 16,910 9,479 

Other liabilities pertain to amounts in dispute with customers on certain terminated projects. 

The Group normally gives a one-year warranty on certain defects and undertakes to repair or rectify such defects resulting from 

faulty design. A provision was recognised at the statement of financial position date for possible warranty claims based on an 

estimate by technical engineers and past experience of the possible level of repairs and rectifications.

96 



30. Provision for other liabilities (cont’d) 

Movement in provision for warranties is as follows: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Provision for warranties 

At beginning of the financial year 7,132 7,400 7,132 7,400 

Provision made during the financial year 1,495 4,128 492 4,128 

Provision utilised during the financial year (2,248) (4,396) – (4,396) 

Provision reversed during the financial year (505) – (2,753) – 

Exchange difference (161) – (161) – 

At end of the financial year 5,713 7,132 4,710 7,132 

31. Share capital and share options 

(a) 

Share capital 

Group and Company 

No. of shares Amount 

‘000 $’000 

2009 

At 1 January 2009 and 31 December 2009 273,565 591,482 

2008 

At 1 January 2008 273,500 591,246 

Exercise of employee share options 65 182 

Transfer from share option reserve – 54 

At 31 December 2008 273,565 591,482 

The holders with ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary 

shares carry one vote per share without restrictions. The ordinary shares have no par value. 

(b) 

Share options 

Fair value of share options granted 

The fair value of share options granted under the Scheme during the financial year is determined using the Trinomial 

valuation model, taking into account the terms and conditions upon which the instruments were granted. $6,661,000 

(2008: $6,777,000) was charged to the profit or loss during the financial year. 

At an Extraordinary General Meeting held on 21 June 2006, shareholders approved the Scheme for the granting of nontransferable 

share options that are settled by physical delivery of the ordinary shares of the Company, to eligible directors, 

senior executives and employees, respectively.



97 



31. Share capital and share options (cont’d) 

(b) 

Share options (cont’d) 

Fair value of share options granted (cont’d) 

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

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

resolutions in general meetings and any relevant authorities which may then be required. The maximum aggregated 

number of shares which may be issued and/or transferred pursuant to all share options shall not exceed 10% of the issued 

share capital of the Company on the day preceding the date of grant. 

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

The exercise price of the granted share options is based on the arithmetic average of the daily volume weighted average 

price in Norwegian Kroner (“NOK”) of the Company’s shares traded on the Norwegian OTC during the period of three 

trading days ending on the day before the date of grant. Where they are issued in currency other than NOK, it is based 

on the prevailing spot exchange rate quoted by the Company’s bank. Share options shall be exercisable in whole or in 

part in respect of 1,000 shares or any multiple thereof, subject to the vesting period as described by the Remuneration 

Committee in its absolute discretion. 

During the financial year: 

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

corporation have been granted, and 

• No share options were granted at a discount during the financial year ended 31 December 2009 (2008: 1,154,003 

at a discount of 45%). 

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

2009 are as follows: 

2006 

Share options 

2007 

Share options 

2008 

Share options 

Outstanding at 1 January 2009 390,000 6,355,003 1,154,003 

- Forfeited (47,500) (268,000) – 

- Expired (152,500) – – 

Outstanding at 

31 December 2009 190,000 6,087,003 1,154,003 

Exercise price $2.80 US$1.64 to US$1.65 

NOK 10.50 to NOK 26.00 

US$1.6425 to US$1.65 

Exercise period 

1 August 2008 to 

31 July 2010 

16 January 2009 to 17 

September 2017 

1 July 2010 to 

30 June 2012 

There is no share option granted or exercised during the financial year ended 31 December 2009. 

For the financial year ended 31 December 2008, the fair value of share options granted was determined using valuation 

model. The significant inputs into the model were share price of NOK16.00, at the respective grant dates, exercise price 

shown above, standard deviation of expected share price returns of 45%, the option life shown above and annual risk-free 

interest rate of between 5.23% to 5.40%. The volatility measured at the standard deviation of expected share price returns 

is based on statistical analysis of volatility of market comparables.

98 



31. Share capital and share options (cont’d) 

(b) 

Share options (cont’d) 

Fair value of share options granted (cont’d) 

The following table lists the inputs to the share option pricing model for the financial years ended 31 December 2008, 

31 December 2007 and 31 December 2006: 

2006 

Share options 

2007 

Share options 

2008 

Share options 

Standard deviation of expected share returns (%) 40 45 45 

Option life (years) 4 4 to 10 4 

Annual risk-free rate (%) 5 4.41 to 4.76 5.23 to 5.40 

Share price $2.62 NOK 10.50 to 

NOK 26.50 

NOK 16.00 

32. Other reserves 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

(a) 

Composition: 

Capital reserve 2,567 2,567 – – 

PRC statutory surplus reserve 7,886 5,583 – – 

Share option reserve 15,580 9,125 15,580 9,125 

Fair value reserve – (206) – – 

Currency translation reserve 4,940 11,119 – – 

30,973 28,188 15,580 9,125



99 



32. Other reserves (cont’d) 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

(b) 

Movements: 

(i) 

Capital reserve 

At beginning and end of financial year 2,567 2,567 – – 

(ii) 

PRC statutory surplus reserve 

At beginning of financial year 5,583 4,287 – – 

Transfer from accumulated losses 2,303 1,296 – – 

At end of financial year 7,886 5,583 – – 

(iii) 

Share option reserve 

At beginning and end of financial year 9,125 2,691 9,125 2,691 

Provision of equity-settled share options 

to employees 6,661 6,777 6,661 6,777 

Expiry of share options (206) (289) (206) (289) 

Exercise of share options – (54) – (54) 

At end of financial year 15,580 9,125 15,580 9,125 

Share option reserve represents the equity-settled share options granted to employees. The reserve is made up of 

the cumulative value of services from employees recorded over the vesting period commencing from the grant date 

of equity-settled share options, and is reduced by the expiry of the share option. When the option is exercised, the 

amount from the share option reserve is transferred to share capital. When the share option expires, the amount from 

the share option reserve is transferred to accumulated losses. 

(iv) Fair value reserve Group 

2009 2008 

$’000 $’000 

At beginning of financial year (206) 25,992 

Financial assets, available-for-sale 

- Recognition/(reversal) of changes of fair values in equity (Note 19) 206 (26,198) 

At end of financial year – (206) 

Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial 

assets until they are disposed of or impaired.

100 




(b) 

Movements (cont’d): 

(v) Currency translation reserve Group 

2009 2008 

$’000 $’000 

At beginning of financial year 11,119 4,633 

Net currency translation differences of financial statements of foreign 

subsidiaries (6,501) 7,469 

Minority interests 322 (983) 

(6,179) 6,486 

At end of financial year 4,940 11,119 

The currency translation reserve represents exchange differences arising from the translation of the financial statements 

of foreign operations whose functional currencies are different from that of the Group’s presentation currency. 

(c) 

Non-distributable statutory reserves 

Subsidiaries established in the PRC (the “PRC subsidiaries”) are required to maintain certain statutory reserves by 

transferring from their profit after taxation in accordance with the relevant laws and regulations and, if applicable, Articles 

of Association of the PRC subsidiaries, before any dividend is declared and paid. 

(i) 

PRC Statutory Surplus Reserve 

The PRC subsidiaries are required to transfer, at their directors’ recommendation, a certain percentage of their profit 

after taxation calculated in accordance with the PRC accounting standards and systems to the statutory surplus 

reserve until the balance reaches 50% of their respective registered capital, where further transfers will be at their 

directors’ recommendation. The statutory surplus reserve can only be used to make up prior year losses or to 

increase share capital, provided that the fund does not fall below 25% of the registered capital. 

(ii) 

Staff bonus and welfare fund 

The PRC subsidiaries are required to appropriate staff bonus and welfare fund from their profit after taxation calculated 

in accordance with the PRC accounting standards and systems. The percentage to be appropriated is determined 

by the board of directors of the companies. The staff bonus and welfare fund can only be used for special bonuses 

and collective welfare benefits to staffs and workers. The fund may not be reversed or distributed to the owners. 

For the financial years ended 31 December 2009 and 31 December 2008, the board of directors of the PRC 

subsidiaries have not approved the appropriation of staff bonus and welfare fund. 

(iii) 

Enterprise expansion fund 

The PRC subsidiaries are required to appropriate the enterprise expansion fund from their profit after taxation 

calculated in accordance with the PRC accounting standards and systems. The percentage to be appropriated 

is determined by the board of directors of the PRC subsidiaries. Upon approval from the board of directors, the 

enterprise expansion fund can be used to expand production or to increase capital. 

For the financial years ended 31 December 2009 and 31 December 2008, the board of directors of the PRC 

subsidiaries have not approved the appropriation of enterprise expansion fund.



101 




(c) 

Non-distributable statutory reserves (cont’d) 

(iv) 

Capital reserve 

Capital reserve represents contribution to paid-in capital in excess of the registered capital of the PRC subsidiaries 

and appropriation from retained earnings in respect of waiver of debts in accordance with the PRC rules and 

regulations. The reserve is non-distributable under the PRC laws. 

33. Loans and receivables 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Non-current 

Amounts due from subsidiaries (non-trade) – – 77,095 89,651 

Pledged deposits 7,856 – – – 

Current 

Cash and cash equivalents 111,821 43,832 68,107 28,817 

Pledged deposits 49,119 131,401 – 103,823 

Trade and other receivables 127,720 105,839 50,417 35,126 

Total loans and receivables 296,516 281,072 195,619 257,417 

34. Financial liabilities carried at amortised cost 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Non-current 

Borrowings 324,484 21,433 182,576 146 

Current 

Trade and other payables 383,718 329,476 83,822 102,539 

Borrowings 564,109 385,071 80,467 298,741 

Amounts due to subsidiaries (trade) – – – 977 

Total financial liabilities carried at amortised cost 1,272,311 735,980 346,865 402,403

102 



35. Segment information 

The Group currently has only one operating segment. The principal activities of the Group are to carry on the business of 

construction and conversion of offshore and marine projects and investment holding. Management monitors revenue from the 

geographical location of its customers separately for the purpose of making strategic decisions. 

Geographical information 

Revenue information based on the geographical location of its customers is as follows: 

Total revenue 

2009 2008 

$’000 $’000 

Asia 9,385 636 

Europe 612,926 615,850 

USA 296,254 274,528 

918,565 891,014 

Non-current assets based on the geographical location of the assets are located in Asia, namely People’s Republic of China 

and Singapore. 

36. Related party transactions 

In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions 

between the Group and related parties took place at terms agreed between the parties during the financial year: 

(a) 

Sale and purchase of goods and services 

Group 

2009 2008 

$’000 $’000 

Construction contract revenue from an associate 11,433 56,424 

Purchase of subcontract service from an associate 72,327 16,656 

Purchases from related companies of an associate 48,987 7,695 

Purchase of labour services from a company related to a shareholder 998 – 

Transfer of fixed assets from an associate 22,125 – 

Interest due from an associate 126 60 

Interest paid to a director related company 545 30 

(b) 

Loans 

Group 

2009 2008 

$’000 $’000 

Loans to an associate (Note 13) 2,485 2,259



103 



36. Related party transactions (cont’d) 

(c) 

Expenses 

Group 

2009 2008 

$’000 $’000 

Directors’ remuneration 1,505 1,942 

Directors’ fee 193 321 

(d) 

Key management personnel compensation 

Key management personnel compensation is analysed as follows: 

Group 

2009 2008 

$’000 $’000 

Salaries and other short-term employee benefits 553 2,574 

Share options expense – 4,623 

553 7,197 

The remuneration of key management personnel is determined by the board of directors having regards to the performance 

of individuals and market trends. No share options have been granted to the Company’s key management personnel 

during the financial years ended 31 December 2009 and 2008. 

(e) 

Personal guarantees by directors 

As at 31 December 2009, certain directors of the Company have provided personal guarantees amounting to Nil (2008: 

$38,552,000), to secure certain credit facilities of the Group.

104 



37. Commitments and contingencies 

(a) 

Capital commitments 

Capital expenditures contracted for at the statement of financial position date but not recognised in the financial statements 

are analysed as follows: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Property, plant and equipment 29,713 27,285 – – 

Vessels built for sales or charter 181,069 324,608 161,624 308,900 

Proposed acquisition of a company* 42,776 – – – 

253,558 351,893 161,624 308,900 

* On 2 November 2009, YROL has entered into an agreement to purchase 100% equity interest in Longkou Sanlian 

Offshore Engineering Co., Ltd in Shandong, China, for cash consideration of RMB291 million. According to the 

agreement, advance of RMB100 million, equivalent of S$21 million being first down payment and another advance 

of RMB56 million, equivalent of S$11 million, being agreed fees due to relevant government authority in PRC, was 

paid in the financial year ended 31 December 2009. The acquisition is expected to be completed in the financial year 

ending 31 December 2010. 

(b) 

Operating lease commitments - as lessee 

The future aggregate minimum lease payable in respect of warehouse, land and sea use rights under non-cancellable 

operating leases contracted for at the statement of financial position date but not recognised as liabilities, are analysed as 

follows: 

Group 

Company 

2009 2008 2009 2008 

$’000 $’000 $’000 $’000 

Not later than one year 3,956 3,225 349 414 

Between two and five years 4,491 8,058 316 386 

Later than five years 7,927 10,629 – – 

16,374 21,912 665 800



105 



37. Commitments and contingencies (cont’d) 

(c) 

Finance lease commitments 

The group has finance leases for certain items of machinery, barges and motor vehicle. 

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

as follows: 

Minimum 

lease 

payments 

Group 

2009 2008 

$’000 $’000 

Present 

value of 

payments 

(Note 29) 

Minimum 

lease 

payments 

Present 

value of 

payments 

(Note 29) 

Not later than one year 9,554 8,474 44 36 

Later than one year but not later than five 

years 13,263 12,279 166 146 

Total minimum lease payments 22,817 20,753 210 182 

Less: amounts representing finance charges (2,064) – (28) – 

Present value of minimum lease payments 20,753 20,753 182 182 

Minimum 

lease 

payments 

Company 

2009 2008 

$’000 $’000 

Present 

value of 

payments 

(Note 29) 

Minimum 

lease 

payments 

Present 

value of 

payments 

(Note 29) 

Not later than one year 44 36 44 36 

Later than one year but not later than five 

years 122 109 166 146 

Total minimum lease payments 166 145 210 182 

Less: amounts representing finance charges (21) – (28) – 

Present value of minimum lease payments 145 145 182 182 

(d) 

Performance guarantees 

As at 31 December 2009, performance guarantees issued by financial institutions for contracts awarded to the Company 

and its subsidiaries amounted to $262,475,000 (2008: $353,513,000). 

(e) 

Contingent liabilities 

As at 31 December 2009, the Company has provided corporate guarantees to a financial institution for performance 

guarantees issued for contracts awarded to a PRC subsidiary amounting to $185,036,000 (2008: $71,549,000).

106 



38. Financial risk management objectives and policies 

The Group’s activities expose it to a variety of financial risks include currency risk, price risk, interest rate risk, credit risk and 

liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to 

minimise potential adverse effects on the Group’s financial performance. 

Risk management is carried out under policies approved by the board of directors. The board provides general principles for 

overall risk management such as currency risk, price risk, interest rate risk, credit risk and liquidity risk. 

(a) 

Currency risk 

The Group operates mainly in Asia and is exposed to foreign exchange risk arising from various currencies combinations. 

The Group’s sales are mainly denominated in USD, Euro and RMB. The Group’s purchases are mainly denominated in 

USD, RMB, Norwegian Kroner (“NOK”) and Euro whilst its operating costs are denominated mainly in RMB and Singapore 

Dollar (“SGD”). 

To the extent that the Group’s sales, purchases and operating costs are not naturally matched in the same currency and 

that there is timing differences between collections and payments, the Group will be exposed to any adverse fluctuations of 

the various currencies against the SGD. Restrictions over the conversion or remittance of foreign currencies such as RMB 

may also expose the Group to adverse fluctuations in exchange rates. As a result, the Group’s earnings may be materially 

and adversely affected. 

The Group closely monitors exchange rate movements and cash flow requirements for various currencies. It seeks to enter 

into contracts with customers whereby progress settlements are in a mix of various currencies which it requires to pay for 

its purchases and operating costs. It also obtains bank borrowings in the currencies that are required for operation. The 

Group engages foreign currency contracts to hedge material exchange exposures. 

The financial statements of certain subsidiaries are prepared in their respective functional currencies, namely RMB and 

USD. This represents a translation risk in that any material fluctuation in the RMB and USD against SGD will have an effect 

on the Group’s consolidated financial statements which are presented in SGD. Translation exposure is not normally hedged 

as these investments are intended to be held on a long term basis and the translation risk arising from the investments 

cannot be appropriately hedged by short-term hedging instruments available. Furthermore, the cost of entering into such 

hedging activities outweighs the benefits. 

Currently, the PRC government imposes control over foreign currencies. RMB, the official currency of the PRC, is not freely 

convertible. Enterprises operating in the PRC can enter into exchange transactions through the People’s Bank of China or 

other authorised financial institutions. 

Payments for imported materials or services, which are outside of the PRC, are subject to the availability of foreign currency 

which depends on the foreign currency denominated earnings of the enterprises. Exchanges of RMB for foreign currency 

must be arranged through the People’s Bank of China or other authorised financial institutions and is granted to enterprises 

in the PRC for valid reasons such as purchase of imported materials and remittance of earnings. While conversion of 

RMB into SGD or other currencies can generally be effected at the People’s Bank of China or other authorised financial 

institutions, there is no guarantee that it can be effected at all times. 

The Group’s currency exposure is disclosed in the respective notes to the financial statements relating to the financial 

assets and financial liabilities.



107 



38. Financial risk management objectives and policies (cont’d) 

(a) 

Currency risk (cont’d) 

The following table demonstrates the sensitivity to a reasonably possible change in the EUR, NOK, USD and GBP against 

the SGD and RMB, with all other variables held constant, of the Group’s profit net of tax: 

Group 

Profit net of tax 

2009 2008 

$’000 $’000 

EUR/SGD: - strengthened 5% (2008: 5%) (588) (1,014) 

- weakened 5% (2008: 5%) 588 1,014 

EUR/RMB: - strengthened 5% (2008: 5%) (863) (121) 

- weakened 5% (2008: 5%) 863 121 

NOK/SGD: - strengthened 5% (2008: 5%) - (781) 

- weakened 5% (2008: 5%) - 781 

NOK/RMB: - strengthened 5% (2008: 5%) (34) (158) 

- weakened 5% (2008: 5%) 34 158 

USD/SGD: - strengthened 5% (2008: 5%) (7,390) (11,385) 

- weakened 5% (2008: 5%) 7,390 11,385 

USD/RMB: - strengthened 5% (2008: 5%) (2,849) (1,642) 

- weakened 5% (2008: 5%) 2,849 1,642 

GBP/SGD: - strengthened 5% (2008: 5%) - (172) 

- weakened 5% (2008: 5%) - 172 

GBP/RMB: - strengthened 5% (2008: 5%) (7) (6) 

- weakened 5% (2008: 5%) 7 6 

(b) 

Price risk 

The Group is exposed to equity securities price risk because of the investments held by the Group classified as “financial 

assets, available-for-sale”. The securities are listed on the stock exchanges in Australia and Norway. 

Sensitivity analysis for equity price risk 

As at 31 December 2009, if a general increase of 5% (2008: 5%) in market price of investment is estimated, with all 

other variables held constant, the fair value reserve would increase by $57,000 for the year ended 31 December 2009 

(2008: $176,000). A general decrease of the same percentage in market price of investment would have had the equal 

but opposite effect on the fair value reserve to the amount shown above, on the basis that all other variables remain 

constant.

108 




(c) 

Interest rate risk 

Cash flow interest rate risk is the risk that the future cash flows of financial instrument will fluctuate because of changes 

in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to 

changes in market interest rates. The Group’s borrowings with variable interest rates are expected to reprice in less than 

one year from the financial year end. 

The Group’s policy is to obtain the most favourable rates available to manage interest cost, whilst taking into consideration 

an increasing or declining interest rate environment. The Group enters into Interest Rate Swap to hedge certain level of 

long-term interest rate exposure. 

Sensitivity analysis for interest rate risk 

As at 31 December 2009, if a general increase of 5% (2008: 5%) in market interest rate is estimated, with all other variables 

held constant, the Group profit net of tax would decrease by $289,000 for the year ended 31 December 2009 (2008: 

$186,000). A general decrease of the same percentage in market interest rate would have had the equal but opposite 

effect on the profit net of tax to the amount shown above, on the basis that all other variables remain constant. 

The financial assets and liabilities of the Group are set out in the table below, categorised by the earlier of contractual 

repricing or maturity date. 

Less than 

6 months 

Variable rates 

6 to 12 

months 


years 

Subtotal 

Less than 

6 months 

Fixed rates 


months 


years 


Less than 

12 months 

Non-interest 

bearing 


years Subtotal Total 

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

Group 

At 31 December 2009 

Assets 

Cash and cash 

equivalents 43,714 – – 43,714 – – – – 68,107 – 68,107 111,821 

Pledged deposits 

(current) – – – – 5,302 43,817 – 49,119 – – – 49,119 


(non-current) – – – – – – 7,856 7,856 – – – 7,856 

Loans to an associate – 2,485 – 2,485 – – – – – – – 2,485 

Liabilities 

Amounts due to Leung 

Kee Holding Ltd. 3,509 – – 3,509 – – – – – – 3,509 

Borrowings 236 114,639 182,455 297,330 49,376 399,858 141,799 591,033 – 230 230 888,593 


Assets 

Cash and cash 

equivalents 15,123 – – 15,123 – – – – 28,709 – 28,709 43,832 


(current) – – – – 131,401 – – 131,401 – – – 131,401 

Loans to an associate – 2,259 – 2,259 – – – – – – – 2,259 

Liabilities 

Amounts due to Leung 

Kee Holding Ltd. 5,754 4,316 – 10,070 – – – – – – – 10,070 

Borrowings 306,952 33,682 21,052 361,686 30,754 13,683 146 44,583 – 235 235 406,504



109 




(c) 

Interest rate risks (cont’d) 

Less than 

6 months 

Variable rates 


months 


years 


Less than 

6 months 

Fixed rates 


months 


Years 


Non-interest 

bearing 

Less than 

12 months Total 

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

Company 


Assets 

Cash and cash equivalents – – – – – – – – 68,107 68,107 

Liabilities 

Amounts due to Leung Kee 

Holding Ltd. 3,509 – – 3,509 – – – – – 3,509 

Borrowings 235 80,188 182,454 262,877 23 21 122 166 – 263,043 


Assets 

Cash and cash equivalents 108 – – 108 – – – – 28,709 28,817 

Pledged deposits (current) – – – – 103,823 – – 103,823 – 103,823 

Liabilities 

Amounts due to Leung Kee 

Holding Ltd. 5,754 4,316 – 10,070 – – – – – 10,070 

Borrowings 296,425 – – 296,425 2,316 – 146 2,462 – 298,887 

(d) 

Credit risk 

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the 

Group. For trade receivables, the Group adopts the policy of assessing credit worthiness and credit history of customers 

and obtaining sufficient security where appropriate to mitigate credit risk. 

The credit risk of the Group’s other financial assets, which comprise cash and bank balances, available-for-sale financial 

assets, amounts due from associates, other receivables and certain derivative instruments, arises from default of the 

counterparty, with a maximum exposure equal to the carrying amounts of these financial instruments. The Company is also 

exposed to credit risk through the granting of financial guarantees, further details of which are disclosed in Note 37. 

As at 31 December 2009, 96% (2008: 98%) of trade receivables relate to three major customers of the Group. The Group 

has policies in place to ensure its dealings are with customers with an acceptable credit history.

110 




(e) 

Liquidity risk 

The Group monitors its risks to a shortage of funds and considers the maturity of its financial assets and liabilities and 

projected cash flows from operations. The Group’s objective is to maintain a balance between continuity of funding and 

flexibility through the use of stand-by credit facilities. 

The Group and the Company monitor and manage internal liquidity risk and seek to maintain sufficient liquid financial 

assets and stand-by credit facilities with at least five major financial institutions. At the statement of financial position date, 

approximately 63.5% (2008: 94.7%) of the Group’s loans and borrowings (Note 29) will mature in less than one year based 

on the carrying amount reflected in the financial statements. 30.6% (2008: 99.9%) of the Company’s loans and borrowings 

will mature in less than one year at the statement of financial position date. As at 31 December 2009, the Group has 

unutilised banking facilities of $227.4 million (2008: $245.8 million). 

During the financial year, the Company breached certain similar financial covenants of two bank loans (Note 29). Subsequent 

to year end, the Company has obtained a waiver of the breach for the one bank loan and repaid the other. 

The table below summarises the maturity profile of the Group’s and the Company’s financial assets and financial liabilities 

at the statement of financial position date based on contractual undiscounted payments. 

1 year 

or less 

Group 

2009 2008 

1 to 

5 years Total 

1 year 

or less 


5 years Total 

$’000 $’000 $’000 $’000 $’000 $’000 

Financial assets: 

Cash and bank balances 160,940 7,856 168,796 175,233 – 175,233 

Trade and other receivables 126,639 1,081 127,720 104,787 1,052 105,839 

Derivative financial instruments 11,730 – 11,730 12,234 – 12,234 

Financial assets, available-forsale 

– 1,141 1,141 – 3,529 3,529 

Total undiscounted financial 

assets 299,309 10,078 309,387 292,254 4,581 296,835 

Financial liabilities: 

Trade and other payables 383,718 – 383,718 329,476 – 329,476 

Borrowings 576,918 360,604 937,522 388,968 23,438 412,406 



liabilities 968,418 360,604 1,329,022 745,419 23,438 768,857 

Net undiscounted financial 

liabilities (669,109) (350,526) (1,019,635) (453,165) (18,857) (472,022)



111 




(e) 

Liquidity risk (cont’d) 

1 year 

or less 

Company 

2009 2008 


5 years Total 

1 year 

or less 


5 years Total 

$’000 $’000 $’000 $’000 $’000 $’000 


Cash and bank balances 68,107 – 68,107 132,640 – 132,640 

Trade and other receivables 49,336 1,081 50,417 34,074 1,052 35,126 


Amounts due from subsidiaries 

(non-trade) – 77,095 77,095 – 89,651 89,651 


assets 129,173 78,176 207,349 178,931 90,703 269,634 


Trade and other payables 83,822 – 83,822 102,539 – 102,539 

Borrowings 80,931 195,034 275,965 300,100 182 300,282 


Amounts due to subsidiaries 

(trade) – – – 977 – 977 


liabilities 172,389 195,034 367,423 428,446 182 428,628 

Net undiscounted financial 

(liabilities)/assets (43,216) (116,858) (160,074) (249,515) 90,521 (158,994)

112 



39. Fair values of financial instruments 

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

(a) 

Fair value of financial instruments that are carried at fair value 

Quoted 

prices in 

active 

markets for 

identical 

instruments 

Group 

Significant 

other 

observable 

inputs 

Company 

2009 2009 

$’000 $’000 

Significant 

unobservable 

inputs 

Total 

Quoted 

prices in 

active 

markets for 

identical 

instruments 

Significant 

other 

observable 

inputs 

Significant 

unobservable 

inputs 

(Level 1) (Level 2) (Level 3) (Level 1) (Level 2) (Level 3) 

Total 


Available-for-sale financial 

assets (Note 19) 

- quoted securities 1,141 – – 1,141 – – – – 

Derivatives (Note 40) 

- forward currency 

contracts – 3,483 – 3,483 – 3,483 – 3,483 

- embedded derivatives – 8,247 – 8,247 – 8,247 – 8,247 

At 31 December 2009 1,141 11,730 – 12,871 – 11,730 – 11,730 


Derivatives (Note 40) 

- forward currency 

contracts – 7,492 – 7,492 – 7,346 – 7,346 

- embedded derivatives – 290 – 290 – 290 – 290 

At 31 December 2009 – 7,782 – 7,782 – 7,636 – 7,636 

Fair value hierarchy 

The Group classify fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in 

making the measurements. The fair value hierarchy have the following levels: 

Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities; 

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either 

directly (i.e., as prices) or indirectly (i.e., derived from prices); and 

Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs) 

Determination of fair value 

Quoted equity instruments (Note 19): Fair value is determined directly by reference to their published market bid price at 

the statement of financial position date. 

Derivatives (Note 40): Forward currency contracts and embedded derivatives are valued using a valuation technique with 

market observable inputs. The most frequently applied valuation techniques include forward pricing and swap models, 

using present value calculations. The models incorporate various inputs including the credit quality of counterparties and 

foreign exchange spot and forward rates.



113 



39. Fair values of financial instruments (cont’d) 

(b) 

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

approximation of fair value 

Management has determined that the carrying amount of cash and cash equivalents, current pledged deposits, trade 

and other receivables, current trade and other payables, amounts due to subsidiaries, current borrowings and borrowings 

with variable interest rates, reasonably approximate their fair values because these are mostly short-term in nature or are 

repriced frequently. 

(c) 

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

reasonable approximation of fair value 

The fair value of financial assets and liabilities by classes that are not carried at fair value and whose carrying amounts are 

not reasonable approximation of fair value are as follows: 

Carrying 

amount 

2009 

$’000 

Fair 

value 

Group 

Carrying 

amount 

2008 

$’000 

Fair 

value 

Carrying 

amount 

2009 

$’000 

Fair 

value 

Company 

Carrying 

amount 

2008 

$’000 

Fair 

value 



(non-current) 7,856 7,127 – – – – – – 

Amounts due from 

subsidiaries (Noncurrent) 

(Note14) – – – – 77,095 65,542 89,651 76,217 


Finance leases 

(Note 29) 12,279 13,263 146 166 109 122 146 166 

Fixed rate bank loans 

(Note 29) 129,520 138,221 – – – – – – 

Determination of fair value 

Amount due from subsidiaries (Note 14) 

The non-current receivables from subsidiaries to the Company amounting to $77,095,000 (2008: $89,651,000) is not 

expected to be repayable within the next twelve months from statement of financial position date. Accordingly, the fair 

value of the amount due from subsidiaries is estimated by discounting the future cash flows at the market interest rate. 

Finance leases and fixed rate bank loans (Note 29) 

The fair values as disclosed in the table above are estimated by discounting expected future cash flows at market incremental 

lending rate for similar types of lending, borrowing or leasing arrangements at the statement of financial position date.

114 



40. Derivative financial instruments 

Cash flow hedges-Embedded foreign currency forward contracts 

The Group closely monitors exchange rate movements and cash flows for the various currencies in which the Group transacts 

its business. The Group seeks to enter into contracts with customers where progress payments are made in a mix of various 

currencies (such as USD, EUR, NOK and RMB) which the Group requires to pay for its purchases and operating costs. 

Contractual payments due from customers and denominated in currencies other than the currency in which the ship-building 

contracts are routinely expressed, the functional currencies of the Company or the customers, are deemed to be contracts with 

embedded derivatives which are required to be accounted for separately under FRS 39 as if the Group had entered into foreign 

currency forward contracts. 

Forward currency contracts are also used to hedge the Group’s sales and purchases denominated in USD for which firm 

commitments existed at the statement of financial position date, extending to June 2010. 

Under these arrangements, as of statement of financial position date, the fair value and notional amount of derivative financial 

instruments (namely embedded foreign currency forward contracts and forward currency contracts) of the Group as at 31 

December are as follows: 

Group 

2009 2008 

$’000 $’000 

Contract/ 

Notional 

Amount Assets Liabilities 

Contract/ 

Notional 


Embedded derivatives 662,587 8,247 (290) 548,602 6,674 (13,705) 

Forward currency contracts 295,802 3,483 (7,492) 665,007 5,560 (13,270) 

Total derivatives 11,730 (7,782) 12,234 (26,975) 

Company 

2009 2008 

$’000 $’000 

Contract/ 

Notional 


Contract/ 

Notional 


Embedded derivatives 662,587 8,247 (290) 548,602 6,674 (13,705) 

Forward currency contracts 281,308 3,483 (7,346) 564,312 5,543 (11,125) 

Total derivatives 11,730 (7,636) 12,217 (24,830) 

As at 31 December 2009 and 2008, the derivative financial instruments of the Group and the Company are not designated nor 

qualify for hedge accounting. Fair value changes are recognised in the profit or loss and hence, no hedging reserve is recorded 

as at 31 December 2009 and 31 December 2008.



115 



41. Capital management 

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital 

ratios in order to support its business and maximise shareholder value. 

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions and the risk 

characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust the dividend payment 

to shareholders, return capital to shareholders or issue new shares. As disclosed in Note 32(c), the PRC subsidiaries of the 

Group are required to contribute and maintain a non-distributable statutory surplus reserve fund and enterprise expansion 

fund. These externally imposed capital requirements have been complied with by the subsidiaries for the financial year ended 

31 December 2009 and 2008. No changes were made in the objectives, policies or processes for managing capital during the 

year ended 31 December 2009. 

The Group monitors capital using a gearing ratio, which is net debt divided by the total capital plus net debt. The Group ideally 

targets to maintain a gearing ratio between 30% and 70%. Net debts include borrowings, trade and other payables, less cash 

and bank balances. Capital includes equity attributable to owners of the Company, less the PRC statutory surplus reserve and 

fair value reserve. The Group’s ability to raise additional capital under favourable terms is subject, inter alia, to external market 

forces and factors that are beyond the Group’s control. The gearing ratios as the statement of financial position dates are as 

follows: 

Group 

2009 2008 

$’000 $’000 

Borrowings (Note 29) 888,593 406,504 

Trade and other payables (Note 28) 383,718 329,476 

Less: Cash and bank balances (Note 12) (168,796) (175,233) 

Net debts 1,103,515 560,747 

Equity attributable to the owners of the Company 592,377 564,357 

Less: - Fair value reserve (Note 32) – 206 

- PRC statutory surplus reserve (Note 32) (7,886) (5,583) 

Total capital 584,491 558,980 

Capital and net debt 1,688,006 1,119,727 

Gearing ratio 65% 50%

116 



42. Subsequent events 

(a) 

Substantial shareholder change 

On 16 November 2009, China International Marine Containers (Group) Co. Ltd (“CIMC”) through its wholly-owned subsidiary, 

Bright Days Limited (the “Offeror”), initiated a voluntary unconditional cash offer (the “Offer”), for all the shares of the 

Company other than those held directly or indirectly by entities related to Mr Brian Chang, the then largest shareholder. The 

Offer was completed on 18 January 2010 with acceptance of 78,400,575 shares. As part of the shareholders agreement, 

the Offeror further acquired 8,434,000 shares from Mr Brian Chang’s related entity. As a result of the Offer and swap 

arrangement, CIMC and Mr Brian Chang indirectly own 50.01% and 31.95% of the shares in the Company respectively. 

Following the change of majority control, the Company has proposed to obtain shareholders’ approval to change its name 

to CIMC Raffles Offshore (Singapore) Limited. 

(b) 

Functional currency change 

With effect from 1 January 2010, taking into consideration the economic substance of the underlying transactions, event 

and conditions going forward, the Company has adopted the change of its functional currency from Singapore Dollars 

to United State Dollars (“USD”). In accordance with FRS 21, the change in functional currency would be accounted for 

prospectively from the date of the change. The Company shall translate all items into the new functional currency using the 

exchange rate at the date of the change. All the transactions entered into subsequent to the change in functional currency 

will be accounted for as if the accounting records were kept in USD. 

43. Comparatives 

Certain comparative figures in the financial statements have been reclassified to better reflect the nature of the balances and 

conform with current year’s presentation. 

Company 

As 

As 

stated restated 

2008 2008 

$’000 $’000 

Statement of Financial Position 

Assets 

Current assets 

Amounts due from subsidiaries (non-trade) 34,349 – 

Non-current assets 

Amounts due from subsidiaries (non-trade) 55,302 89,651



117 



43. Comparatives 

Group 

As 

As 

stated restated 

2008 2008 

$’000 $’000 

Statement of Financial Position (cont’d) 

Equity 

Other reserves 26,394 28,188 

Accumulated losses (53,519) (55,313) 

Statement of Comprehensive Income 

Cost of sales (769,528) (763,199) 

Other income 36,406 30,077 

44. Authorisation of financial statements 

The consolidated financial statements for the financial year ended 31 December 2009 were authorised for issue in accordance 

with a resolution of the board of directors of Yantai Raffles Shipyard Limited on 15 April 2010.

118 

Shareholdings Statistics 

As at 6 May 2010 

Shareholders List as at 6 May 2010 

No. Shareholders No. of Shares Percentage 

1 DNB Nor Bank ASA 131,147,700 47.94% 

2 Bright Day Limited 130,158,651 47.58% 

3 Platinum Nominees Limited 5,755,200 2.10% 

4 Airtrust (Singapore) Pte Limited 2,035,449 0.74% 

5 Francis James Reidy 1,876,000 0.69% 

6 James W. Reidy 1,257,000 0.46% 

7 Tracy Chang 1,000,000 0.37% 

8 Lotus Jong 120,000 0.04% 

9 Carolyn Fong Wai Lyn 100,000 0.04% 

10 John McDonald Green-Armytage 55,000 0.02% 

Total 273,505,000 99.98%



119 


NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held on 11 June 2010 (Friday) at 3.30 p.m. 

(Singapore Time) at No. 1 Claymore Drive, #08-04 Orchard Towers, Singapore 229594 for the following purposes:- 

As Ordinary Business 

1. To receive and adopt the Directors’ Report and Audited Accounts for the financial year ended 31 December 2009 (the “Financial 

Year”), together with the Auditors’ Report thereon. 

(Resolution 1) 

2. To re-elect Mr. Mai Bo Liang, a Director retiring by rotation pursuant to Article 91 of the Articles of Association of the Company. 


3. To appoint Mr. Yu Ya, a Director appointed after the date of the last Annual General Meeting and eligible for re-election pursuant 

to Article 97 of the Articles of Association of the Company. 


4. To appoint Mr. Yu Yu Qun, a Director appointed after the date of the last Annual General Meeting and eligible for re-election 

pursuant to Article 97 of the Articles of Association of the Company. 


5. To appoint Mr. Wang Yu, a Director appointed after the date of the last Annual General Meeting and eligible for re-election 



6. To appoint Mr. Yu Ning, a Director appointed after the date of the last Annual General Meeting and eligible for re-election pursuant 

to Article 97 of the Articles of Association of the Company. 


7. To appoint Mr. Zhang Li Min, a Director appointed after the date of the last Annual General Meeting and eligible for re-election 



8. To approve the payment of Directors’ fee of S$193,125 for the Financial Year. 


9. To re-appoint ERNST & YOUNG LLP, the retiring auditor, as an Auditor of the Company and to authorise the Directors to fix their 

remuneration. 


As Special Business 

10. To consider, and if thought fit, to pass the following resolution as an ordinary resolution, with or without modifications:- 

“AUTHORITY TO ISSUE SHARES 

That pursuant to the provisions of Section 161 of the Companies Act, Cap. 50, the Directors be and are hereby authorised to allot 

and issue: 

(i) 

(ii) 

shares in the Company; and 

convertible securities and any shares in the Company pursuant to the conversion of such convertible securities 

(whether by way of rights, bonus or otherwise) at any time and from time to time upon such terms and conditions whether for cash 

or otherwise with such rights and restrictions and for such purposes and to such persons as the Directors shall in their absolute 

discretion deem fit to impose and that such authority shall continue in force until the conclusion of the next Annual General 

Meeting or the expiration of the period within which the next Annual General Meeting of the Company is required by law to be 

held, whichever is earlier.” 

(Resolution 10)

120 


As Special Business (cont’d) 

11. To transact any other business that may be properly conducted at the Annual General Meeting. 

By Order of the Board 

ANDREW LAI 

Company Secretary 

Singapore, 24 May 2010 

Explanatory Note: 

Ordinary Resolution 10 is to empower the Directors of the Company from the date of the above meeting until the next Annual 

General Meeting to issue shares and convertible securities in the Company. This authority will, unless revoked or varied at a 

general meeting, expire at the conclusion of the next Annual General Meeting of the Company or the expiration of period within 

which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. 

Notes: 

1. A member of the Company entitled to attend and vote at the Annual General Meeting of the Company is entitled to appoint 

one or two proxies to attend in his stead. A proxy need not be a member of the Company. 

2. A member of the Company which is a corporation is entitled to appoint its authorized representatives or proxies to vote on 

its behalf. 

3. The instrument appointing a proxy must be deposited at 6 Temasek Boulevard, #29-00 Suntec Tower Four Singapore 

038986 marked to the attention of the Company Secretary, not less than 48 hours before the time appointed for holding of 

the Annual General Meeting.

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Singapore Head Office 


Address: No 1. Claymore Drive #08-04 

Orchard Towers, 


Tel: +65 6735 8690 

Fax: +65 6734 5449 

Yantai CIMC Raffles Offshore Ltd 

Address: No.70 Zhifu East Road, 

Zhifu Island, Yantai, Shandong, 

China, 264000 

Tel: +86 535 680 1451 

Fax: +86 535 680 1260 

Email: ir@cimc-raffles.com 

www.cimc-raffles.com

notes to the financial - cimc raffles

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