Jes International Holdings Annual Report 2008

JES International Holdings Limited Annual Report 2008

Building Trust Delivering Value

JES International Holdings Limited is a major PRC shipbuilding group with production facilities capable of producing different types of vessels such as bulk carriers, containerships, ocean engineering vessels (mainly crane barges for offshore oil sector and offshore construction building works), Roll On/Roll Off (RO/RO) vessels and crude oil tankers. Our customers include major shipowners based in Europe, Canada and Asia, including the PRC. Our existing shipyard is located at Shiwei Port, Jingjiang City in Jiangsu Province in the PRC. With the new yard (adjacent to the existing yard) completed by end of the year 2009, our shipyard will have a combined gross land area of approximately 467,000m2 and a coastline of about 1,006 metres long with access to deep water and stable currents. As part of our plans to expand our production capacity at the new yard and our business strategy to seek shipbuilding contracts for larger, higher value vessels, we intend to begin construction of crude oil tankers and 176,000 DWT bulk carriers in our new yard. Our new yard will have the capacity to concurrently construct two 300,000 DWT Very Large Crude Oil Carriers (“VLCCs”) or three 176,000 DWT bulk carriers or large ocean engineering vessels and offshore equipment such as oil rigs.

JES International Holdings Limited

Contents 02

Our Products

03

Our Customer Network

04

Chairman’s Message

08

主席致词

12

Financial Highlights

14

Operations Review

18

Board of Directors

21

Key Management

23

Corporate Information

24

Corporate Governance Report, Financial Report & Other Information

JES INTERNATIONAL HOLDINGS LIMITED

01

Our Products

02

Bulk Carriers

Containerships

Bulk carriers are used for the transportation of bulk cargo items such as iron ore or food staples, and similar cargo. In FY2008, JES derived approximately 90.4% of its revenue from the construction of bulk carriers.

Containerships are used to transport all forms of general cargo that can be containerised. In recent years, JES had built and delivered containerships of 855 TEUs, 1,000 TEUs and 1,108 TEUs.

Ocean Engineering Vessels

Crude Oil Tankers

These are mainly crane barges used in the offshore oil sector and offshore construction building works. Our completed vessels include: - a salvage barge with revolving crane, the“Hua Tian Long“, with a lifting capacity of 4,000 tonnes, for the Guangzhou Salvage Bureau of the Ministry of Transport - a T-shape barge of 78,000 DWT for Samsung Heavy Industries Co., Ltd used to transport oil rig platform

Crude oil tankers are designed for the bulk transport of crude oil. JES’s current order book comprise three 85,000 LTDW crude oil tankers and will be built at its new yard, which has the capability and capacity to build concurrently up to two 300,000 DWT crude oil tankers.

Annual Report 2008

Our Customer Network

Canada Europe

Asia

Our customers include shipowners based in Europe, Canada and Asia, including the PRC. Our existing yard and the new yard are located adjacently at Shiwei Port, Jingjiang City in Jiangsu Province in the PRC.

JES INTERNATIONAL HOLDINGS LIMITED

03

Chairman’s Message

Dear Shareholders, On behalf of the Board of Directors, I am pleased to present you the annual report of JES International Holdings Limited (“JES” or the “Group”) for the financial year ended 31 December 2008 (“FY2008”).

2008 – A Year of Rapid Change and Dramatic Challenges Fresh from our Initial Public Offering (“IPO”) on the Singapore Exchange on 19 December 2007, JES kicked off the new financial year on a sound footing, securing new shipbuilding contracts for two 175,800 deadweight tonnes (“DWT”) bulk carriers and four 79,800 DWT bulk carriers valued at US$340.0 million from European customers and an order for a 85,000 long tonne deadweight (“LTDW”) oil tanker worth

“The Group remains confident of the long-term prospects of the PRC shipbuilding industry and believes the new yard will enable the Group to capitalise on future opportunities that arise. ”

US$67.5 million from an Indonesian customer in the first half of FY2008. While our customer acquisition efforts were commendable, the macro-economic picture started to darken from the second

Against this backdrop, JES announced on 16 January 2009

quarter of FY2008 (“2Q08”), when steel prices rose to new

that two of its customers have negotiated for revisions to their

highs, significantly increasing our production costs. To mitigate

existing contracts for 12 units of 37,500 DWT bulk carriers

the higher raw material costs and weakening of the US dollar

due to current economic and operating conditions. Under the

against the RMB, JES negotiated with its clients and secured

revised terms, orders for six vessels were cancelled while the

price increases of between 2% to 12% for eight of its existing

delivery dates for the remaining six vessels will be delayed

contracts collectively valued at around US$200.0 million.

between two to four months. The value of the six cancelled vessels total US$160.0 million.

The price increases foreshadowed a larger storm brewing in the horizon; a storm which finally broke in 4Q08 with the collapse of

Financial Highlights

major financial institutions worldwide. The subsequent financial turmoil has come swiftly and caused severe dislocation to the

Our financial performance should be seen against the

global economy. There is no need to elaborate on this malaise

backdrop of these harsh operating conditions. For FY2008,

except to inform shareholders of the dramatic effects it has had

JES recorded an 8.4% increase in revenue to RMB1.62 billion

on the global shipping industry. Shipping volumes and freight

from RMB1.49 billion in FY2007 as we built larger vessels with

rates have declined sharply. Financing for newbuilds has been

higher average contract prices.

constrained, leading to cancellations of existing shipbuilding orders, delay in delivery of vessels and renegotiation for lower

The Group recorded profit attributable to equity holders of

prices.

RMB47.5 million in FY2008, down 78.9% from RMB224.9

04

Annual Report 2008

Jin Xin Chairman and CEO

million in FY2007. Our profitability was affected by a

Covering approximately 300,000m2 and having an additional

combination of higher raw material costs and the depreciation

coastline of 286 metres, the new yard will be equipped with

of the US dollar against the RMB.

a new 400-metre long by 140-metre wide dry dock, a steel structure workshop with an area of approximately 130,000m2,

As at 31 December 2008, the Group’s cash and cash

auxiliary facilities, one 1,200-tonne and two 400-tonne

equivalents stood at RMB737.6 million (approximately

gantry cranes and other lifting equipment. The new yard will

S$155.2 million). The Group remains confident of the long-

enhance the Group’s shipbuilding capabilities and enable it to

term prospects of the PRC shipbuilding industry and believes

concurrently build three bulk carriers of 176,000 DWT each, or

the new yard will enable the Group to capitalise on future

two crude oil tankers of 300,000 DWT each, or to construct

opportunities that arise.

large ocean engineering vessels or offshore equipment such as oil rigs. The steel structure workshop is near completion

New Yard on Schedule for Completion

and will begin partial operations in 2Q09, allowing most of the steel structure works to be carried out indoors, reducing

As outlined in our IPO prospectus and as spelt out to

inefficiencies caused by bad weather conditions. The dry dock

shareholders last year, we have committed IPO funds into

is on schedule to be fully completed by end 2009. We expect

growth initiatives, focusing on the new yard currently under

revenue for newbuilds under construction at the new yard to

construction adjacent to our existing yard at Shiwei Port,

start accruing from 2Q09.

Jingjiang City in Jiangsu Province in the People’s Republic of China (“PRC”).

JES INTERNATIONAL HOLDINGS LIMITED

05

Chairman’s Message

Strategy JES continues to execute its strategy of constructing larger

The Group will also take the opportunity to start stocking up on

and higher-value vessels. Bulk carriers accounted for 90.4%

steel plates as steel prices soften, in its efforts to mitigate raw

of revenue in FY2008, compared to 76.7% in FY2007, and this

material costs.

strategy will continue to gain momentum, market conditions permitting. As at 31 December 2008, JES was building bulk

The Group continues to strive to improve its productivity and

carriers of various sizes, including 37,500 DWT, 53,800 DWT

efficiency, having started the implementation of technologically

and 79,800 DWT bulk carriers for customers from Greece,

advanced shipbuilding management software that will assist in

Croatia and South Korea and our last containership was

streamlining our construction processes, including designing,

completed and delivered in 3Q08.

production planning and monitoring. Recently, JES had also hired a team of experienced personnel from the shipbuilding industry

JES delivered seven vessels (five containerships and two bulk

for its management as well as engineering departments.

carriers) in FY2008 and our order book as at 31 December 2008 stood approximately at US$1.19 billion, for 38 vessels

We also have plans to expand our sales and marketing team

to be delivered from 2009 to 2012. The three 85,000 LTDW oil

outside of the PRC as part of our strategy to increase the reach

tankers and two 175,800 DWT bulk carriers in our order book

of our business development efforts and also to secure more

will be built at the new yard.

orders for the existing and new yard.

06

Annual Report 2008

Outlook We foresee conditions in 2009 to remain challenging, and

I am also pleased to announce that on 6 February 2009,

newbuild orders to remain slow. In February 2009, the PRC

the China Association of the National Shipbuilding Industry

government approved a stimulus plan for the shipbuilding

published statistics* which showed JES as among the top ten

industry and will include measures to extend existing financial

shipbuilders in the PRC for new orders (in terms of tonnage)

policies for ocean going vessels till 2012, increase credit

secured for 2008.

support for ship owners and provide funding for research and development of high-technology ships etc. The shipbuilding

* http://www.cansi.org.cn/cansi_jjyx/85111.htm

stimulus plan is expected to have positive effects on the PRC shipbuilding industry.

Appreciation

Despite the challenging year ahead, our strong order book will

It has been a challenging 2008 and I would like to take this

continue to keep our existing yard busy up till 2012 and we are

opportunity to thank our Board of Directors, management,

optimistic that JES will remain profitable in FY2009.

staff and business associates for their hard work and support. Most importantly, I would like to express my appreciation to our loyal shareholders for standing by us in a difficult 2008.

Jin Xin Chairman and CEO

JES INTERNATIONAL HOLDINGS LIMITED

07

主席致词

尊敬的股东们， 本人谨代表董事会，欣然提呈JES国际控股有限

危机却严重地打击了全球经济,使得全球经济迅速放

公司(“JES”或“集团”)截止2008年12月31日财政年度

缓,全球航运业也相对受到巨大影响。由于海运量和

(“2008年度” )的年报。

运费急剧下降，贸易信贷的紧缩导致新建船只筹资 困难，中国造船业面临现有订单被取消，延迟交船

2008年–克服严峻的运作环境

或与客户商谈削减船价的多项难题。

2008年度是JES在其成长过程中重要的里程碑。

在此环境下，JES在2009年1月16日宣布鉴于当今的

2007年12月19日集团在新加坡证券交易所主板成功

经济与运作环境,将修改与两位客户所签定有关于十

上市，并获得广大投资者的支持。集团不负各位股

二艘37,500载重吨散货轮的建造合约。按照新拟定

东的期望,在2008年度里的前六个月获得约4.08亿美

的合约条款，JES将延迟二到四个月交付六艘散货

元的造船订单，包括为欧洲客户建造价值为3.4亿美

轮,也将取消另外六艘散货轮的订单。所取消的散货

元的两艘175,800载重吨散货轮和四艘79,800载重吨

轮订单总价值为1.6亿美元。

散货轮,还有为印尼客户建造一艘价值6750万美元的 85,000载重吨油轮。

财政亮点

回顾年内，造船业从2008年第二季度起面对极之艰

尽管面对经济发展放缓的大环境,JES凭籍着以往的

困的宏观经济环境，加上中国钢材由于受到原材料

营运策略,着重建造较大型和高价值的船只,使集团

短缺的影响价格攀升至历年来的最高点，大大增加

2008年度的营业额取得8.4%的稳健增长至16.2亿人

了集团的生产成本。有鉴于此,集团起动了多项减少

民币，高于2007年度的14.9亿人民币。

运作成本的应对方案。为了减少原材料成本及美元 对人民币汇率波动影响，集团经过多次与客户的协

在原材料价格不断攀升和美元对人民币汇率波动

商，在2008年第二季度成功与客户达成修改八个造

的影响下，集团2008年度的净利润下滑78.9%，至

船合约的协议，将销售价格提升2%至12%之间(八个

4750万人民币(相比2007年度的2.25亿人民币)。

造船合约价值大约2亿美元)。 于年底，本集团拥有现金及银行结余7.38亿人民币 虽然获取价格调整为减轻集团运作成本带来明显帮

(约1.55亿新币)。集团对造船业的长远发展前景怀有

助，但在2008年第四季度所爆发的百年不遇的金融

信心。我们也相信正在兴建的造船厂将增加集团的

08

Annual Report 2008

生产能力同时也能有效地提高集团的竞争优势并将

坞，面积约13万平方米的船体钢结构厂房并配备一

进一步增强我们持续发展能力。

座1200吨和两座400吨龙门起重机等各种辅助设施。 新厂建成后，它将有效地加强集团的造船能力，集

新的造船厂

团将能够同时建造三艘达176,000载重吨的散货轮， 或两艘重达300,000载重吨的油轮，或兴建较大型

如招股说明书和去年的年报所载，集团已投入首次

的海洋工程装备，如钻井平台等。即将完成的船体

公开售股筹集的资金在毗邻现有船厂,位于中国江苏

钢结构厂房会在2009年第二季度局部投产以便钢结

靖江市十圩港口兴建新的造船厂。

构工作可以在室内进行，减少恶劣天气对生产的影 响。干船坞预计会在2009年底全面建成并为集团来

新建的造船厂面积约30万平方米，深水港岸线会延

年的财务表现带来显著贡献。

长286米。它将包括一座约400米长，140米宽的干船

JES INTERNATIONAL HOLDINGS LIMITED

09

主席致词

策略

前景

建造较大型和高价船只仍然是JES未来的发展策略。

鉴于全球性金融危机以及缓慢的经济增长趋势我们

2008年度散货轮的营业额占总营业额的90.4%，相

预计集团在2009年里将会继续面对较为严峻的运作

比2007年度的76.7%增长近13.7%。截止2008年12月

环境，新的订单将会持续放缓。在2009年2月份，中

31日，JES正在为希腊，克罗地亚及南韩的客户建造

国中央政府批准了一系列刺激造船业的方案。其中

37,500载重吨，53,800载重吨和79,800载重吨的散

包括延长现有对于海洋轮船的财政政策至2012年，

货轮。在2008年第三季度我们完成并交付了最后一

为船东增加信贷支持以及提供资金用于高科技船只

艘集装箱船。

的研发等。这一系列刺激方案预计将对中国造船业 产生良好的影响。

JES在2008年度交付了七艘船只(五艘集装箱船和 两艘散货轮)。截止2008年12月31日，订单总额达 11.9亿美元，从2009年至2012年集团预计将交付三 十八艘船只。订单中的三艘85,000载重吨的油轮和 两艘175,800载重吨的散货轮将在新建的造船厂里建 造。 在全球经济放缓的状况下，原材料也出现价格下滑 的趋势。集团将借钢材价格下滑的时机开始储备钢 板以缓和将来可能的原材料上涨的压力。 为了增加生产能力和提高效率，集团已开始运用一 套先进的造船管理软件务求简化整个建造过程，包 括设计，生产计划和监测。最近，集团也聘请了一 批在造船业拥有丰富经验的人员加入管理和工程部 门。 我们也打算扩大集团在中国境外的销售网络，为现 有和新的造船厂争取更多订单，提升业务表现。

10

Annual Report 2008

致谢 尽管2009年将会有许多挑战，我们现有的船厂已经

在过去的一年里，公司在较严峻的运作环境中，仍

按照目前的订单将生产期安排至2012年并且乐观地

得以发挥强劲增长势头，保持全年盈利。此项成就

认为JES在2009年度将会保持盈利。

若无幕后的功臣们绝不可能发生。在此让我代表董 事会向全体员工，董事，股东，供应商和生意伙伴

在此，我也很高兴地宣布按照2009年2月6日中国船

致以衷心地感谢，并且希望在往后的日子里，你们

舶工业行协会刊登统计，JES在2008年被列为中国承

能一如既往的支持和协助我们。

接船舶订单量*（以载重吨计算）的前十大企业。 * http://www.cansi.org.cn/cansi_jjyx/85111.htm

金鑫 主席兼总裁

JES INTERNATIONAL HOLDINGS LIMITED

11

Financial Highlights

Revenue

1,800

1620.7

1,600

1494.8

1,400 1,200

RMB million

1,000 800 600 400 200 0

2007

2008

Revenue Breakdown by Vessel Type

2008

90.4%

Bulk Carriers

8.6%

Containerships

1.0%

Ocean Engineering Vessels

Revenue Breakdown by Geographic Region

2008

12

Annual Report 2008

68.4%

Europe

10.8%

Canada

1.0%

PRC

19.8%

Other Asian Countries

Order Book

83.7%

Bulk Carriers

16.0%

Crude Oil Tankers

0.3%

Ocean Engineering Vessels

US$1.19Billion

Financial Position

2007

2008

19.66

4.08

143.49

147.03

1,435.08

737.60

Debt to Equity Ratio

0.67

1.0

Current Ratio

2.47

1.75

Earnings per Share* (RMB cents) Net Tangible Assets per Share* (RMB cents) Cash & Cash Equivalent (RMB millions)

* The number of shares used to compute earnings per share and net tangible assets per share for 2007 and 2008 are 1,144,054,000 and 1,166,028,000, respectively.

JES INTERNATIONAL HOLDINGS LIMITED

13

Operations Review

Revenue For the financial year ended 31 December 2008 (“FY2008”),

In terms of geographic distribution, we continued to derive

JES International Holdings Limited (“JES” or the “Group”)

the main bulk of FY2008 revenue from our customers in

recorded an 8.4% increase in revenue to RMB1.62 billion,

Europe, comprising 68.4% of revenue as compared to 64.9%

from RMB1.49 billion in FY2007. The increase was mainly

in FY2007. Revenue contribution from other geographical

attributed to the production of larger vessels with higher

regions in FY2008 remain little changed from FY2007, with

contract prices.

Canada contributing 10.8% and Asia contributing 20.8%. The European customers comprise mainly of Greek and Croatian

Segmental Contribution

shipowners for whom we are building bulk carriers of 37,500 DWT, 53,800 DWT and 79,800 DWT and we are also building

In line with its strategy to build larger vessels with higher contract

79,800 DWT bulk carriers for South Korean customers.

prices, JES derived 90.4% of revenue from constructing bulk carriers, 8.6% from containerships and 1.0% from ocean

Profitability

engineering vessels for the year under review. This can be seen against the 76.7% revenue contribution from bulk carriers,

JES recorded gross profit of RMB191.0 million in FY2008,

21.7% from containerships, 1.4% from ocean engineering

down 39.1% from RMB313.5 million in FY2007. The increase

vessels and 0.2% from other vessels in FY2007.

in revenue was offset by increased costs of production due to higher raw material costs and increased outsourced work. Correspondingly, gross margins declined to 11.8% in FY2008, from 21.0% in FY2007.

14

Annual Report 2008

As a result of the higher cost of production and translation

as the Group received more instalments from customers

losses of RMB69.5 million arising from the depreciation of

resulting in higher commission expenses paid to shipbrokers

US dollar against RMB, profit attributable to equity holders

as compared to FY2007.

for FY2008 was RMB47.5 million, a decline of 78.9% from RMB224.9 million in FY2007.

Administrative expenses in FY2008 increased 63.8% to RMB29.1 million, from RMB17.8 million in FY2007. The

Earnings per share was 4.08 RMB cents for FY2008

increase was in tandem with the growth of the Group’s

(based on weighted average number of ordinary shares of

operations as well as expenses related to JES’s status as

1,165,468,175) compared to 19.66 RMB cents for FY2007

a Singapore Exchange Mainboard-listed company such as

(for better comparison, computed based on number of

directors’ fees and remuneration, travelling and compliance

ordinary shares in issue, from the IPO date to end of FY2007

expenses.

of 1,144,054,000). Other operating expenses increased to RMB71.0 million in

Expenses

FY2008, from RMB20.2 million in FY2007. The increase was mainly attributed to a net exchange loss of RMB69.5 million,

Selling and distribution expenses – comprised commission

arising from US dollar denominated contracted revenue being

expenses to shipbrokers – are dependent on timing of

converted to RMB for percentage-of-completion recognition

instalments received from customers. For the year under

at the beginning of construction, against the subsequent

review, selling and distribution expenses for JES increased

lower amount of actual RMB received from customers.

14.3% to RMB57.8 million, from RMB50.6 million in FY2007,

JES INTERNATIONAL HOLDINGS LIMITED

15

Operations Review

Balance Sheet As at 31 December 2008, property, plant and equipment

Pledged fixed deposits used to secure refund guarantees

increased to RMB432.8 million, from RMB35.3 million as

provided to customers as at 31 December 2008 amounted to

at 31 December 2007, due to the construction-in-progress

RMB347.9 million, from RMB89.6 million as at 31 December

costs of building the new yard, which is being funded by the

2007 as the Group had more ongoing shipbuilding projects.

IPO proceeds. Depreciation of these costs is expected to commence when the new yard begins operations in the later

As at 31 December 2008, the Group had cash and cash

part of FY2009.

equivalents of RMB737.6 million (approximately S$155.2 million), compared to RMB1.44 billion (approximately S$283.7

Inventories increased to RMB121.8 million as at 31 December

million) as at 31 December 2007, which are mainly proceeds

2008, from RMB61.7 million as at 31 December 2007 mainly

from the IPO and have been drawn down for the ongoing

due to more ongoing shipbuilding projects in FY2008.

construction of the new yard. The estimated costs of the new

Correspondingly,

yard construction are approximately S$148.2 million of which

other

receivables,

prepayments

and

deposits increased to RMB731.0 million as at 31 December 2008, compared to RMB452.8 million as at 31 December 2007 as JES made more advance payments to suppliers for equipment, engines and raw materials.

16

Annual Report 2008

we have utilised S$61.0 million.

Order Book As at 31 December 2008, with the Group having a larger

As at 31 December 2008, the Group’s order book stood

number of vessels under construction, combined trade

approximately at US$1.19 billion, for 38 vessels (mainly bulk

payables and notes payable – both relating to equipment and

carriers) to be delivered from FY2009 to FY2012. JES delivered

raw materials for shipbuilding – rose to RMB464.5 million, from

a total of five containerships (last containership in order book

RMB416.4 million as at 31 December 2007.

delivered in 3Q08) and two bulk carriers to customers in FY2008, compared to eight vessels in FY2007.

Amounts due to customers for construction contracts as at 31 December 2008 increased to RMB937.8 million,

JES’s current order book comprises 83.7% bulk carriers,

from RMB312.8 million as at 31 December 2007 as

16.0% crude oil tankers and 0.3% ocean engineering vessels.

the Group received more advances from customers for

Of these, three 85,000 LTDW crude oil tankers and two

effective shipbuilding contracts that have yet to commence

175,800 DWT bulk carriers will be constructed at the new yard.

construction.

The new yard – the core of the Group’s expansion plans – and its additional shipbuilding capacity and new facilities will allow

Short term borrowings for the Group amounted to RMB20.0

the Group to secure more orders for larger, higher value and

million as at 31 December 2008, compared to RMB143.7

more technologically advanced vessels such as bulk carriers

million as at 31 December 2007. JES did not have any long

beyond 100,000 DWT, crude oil tankers as well as offshore

term borrowings as at 31 December 2008.

equipment such as oil rigs and FPSOs.

JES INTERNATIONAL HOLDINGS LIMITED

17

Board Of Directors

1 Jin Xin 3

4

6 5

18

2

Annual Report 2008

Chong Teck Sin Lead Independent

Chief Executive Officer

Director

4 Sha Pengcheng 1

2

Chairman and

Executive Director

5

Zhu Xiaoyang Executive Director

3 Tong Chi Ho Non-Executive Director

6 Ong Kian Guan Independent Director

Mr Jin Xin (金鑫)

Chairman and Chief Executive Officer

is our Group’s founder and was appointed as a Director of our Company on 18 August 2006 and as our Chairman and CEO pursuant to a Service Agreement on 5 November 2007. Mr Jin oversees the overall management and operations of our Group and is also responsible for formulating the business strategies and policies of our Group. He possesses substantial experience and knowledge of the shipbuilding industry. From 1970 to 1977, Mr Jin worked as a technician with Shiwei Yard in Jiangsu Province, which later became Jingjiang County No. 2 Shipyard. After graduating from Jingjiang County Workers’ University, he returned to Jingjiang County No. 2 Shipyard and was appointed as the deputy head of its technical department. In 1984, Mr Jin was promoted to its deputy plant manager to take charge of manufacturing. When the Jingjiang Jointly-Run Shipyard was founded in 1987, Mr Jin was appointed as its plant manager. Under Mr Jin’s leadership, the Jingjiang JointlyRun Shipyard underwent various restructuring exercises and became Jiangsu Eastern, the business of which we acquired through the restructuring exercise before the IPO of the Company.

Mr Zhu Xiaoyang (朱晓阳)

was appointed as our Executive Director on 5 November 2007. He is our Production Director for our Production and Quality Control Department. He is responsible for the strategic management of all our Group’s projects as the Production Director. As the Production Director, he is in charge of formulating and implementing management policies for the hull shop and the pre-outfitting shop. Mr Zhu joined the Jingjiang No. 2 Shipyard in 1975. He was gradually promoted to be supervisor of the steel shop, deputy plant manager, manager of a painting plant of Jingjiang Ship Engineering General Company and subsequently to deputy general manager. Mr Zhu obtained a certificate in Ship Design and Construction from Zhenjiang Ship Institute in 1988 and a diploma in Economic Management from Economic Management Institute of Yangzhou University in 1998 and became accredited by Taizhou Professional Qualification Accreditation Office as a qualified engineer in 2005.

Mr Tong Chi Ho (唐志浩) Mr Jin obtained a Diploma in Machinery Manufacturing from Jingjiang County Workers’ University in 1983. He became accredited by Taizhou Professional Qualification Accreditation Office as a qualified senior engineer in 2001. Mr Jin was also accredited by the Jiangsu Province Department of Personnel as a senior economist in 2006.

Mr Sha Pengcheng (沙鹏程)

Executive Director

was appointed as our Executive Director on 5 November 2007. He is our Administration Director for our Administration Department. His responsibility is to formulate and implement policies as well as to oversee all matters relating to work safety, environmental protection and security. From 1974 to 1980, Mr Sha worked as the deputy factory supervisor at Shiwei Yard and was promoted to be the factory supervisor and head of manufacturing department in 1980 and 1985, respectively. When the Jingjiang Jointly-Run Shipyard was founded in 1987, Mr Sha was appointed as its assistant plant manager and head of manufacturing department. In 1994, he was also appointed as the Assistant General Manager of Jingjiang Ship Engineering and subsequently Assistant General Manager at Jiangsu Eastern.

Executive Director

Non-Executive Director

is our Non-Executive Director. He was appointed as a Director of our Company on 4 April 2006. He is currently the Chairman of Excel Technology (China) Co., Ltd, a company engaged in providing various information technology applications and solutions in relation to various business functions such as manufacturing, supply chain management, customer relationship management and third party logistics. He was also its chief executive officer from 2003 to December 2006. Mr Tong was formerly the President and Chief Executive Officer of Omnibz (S) Pte Ltd from 2000 to 2003. From 1996 to 1999, he was a manager at Manufacture Services (S) Pte Ltd and was in charge of information technology management in the Asia Pacific region. Mr Tong was appointed as an independent director of Wanxiang International Limited, a company also listed on the mainboard of the SGX-ST, since 18 May 2007. Mr Tong obtained a Master’s degree in Computer Science and Applications from Queen’s University of Belfast, United Kingdom in 1990.

Mr Sha was accredited as a qualified technician in 1989 by the Yangzhou Professional Qualification Reformation Office.

JES INTERNATIONAL HOLDINGS LIMITED

19

Board Of Directors

Mr Chong Teck Sin (张铁沁) Lead Independent Director

Mr Ong Kian Guan (王健源) Independent Director

is our Lead Independent Director and was appointed as our

is an Independent Director of our Company and was appointed

Director on 5 November 2007. Since October 2008, Mr Chong

on 5 November 2007. Mr Ong is also an Independent

has been appointed as a member of the Board of Directors of

Director of three other companies listed in Singapore which

the National Kidney Foundation. He has also been a board

includes China Haida Ltd, China Animal Healthcare Ltd and

member of the Accounting and Corporate Regulatory Authority

China XLX Fertiliser Ltd. He is currently an Audit Partner of

since April 2004. He was previously the Group Managing

Baker Tilly TFWLCL and specialises in the audits of public

Director (Commercial) of Seksun Corporation Ltd from 1999

listed companies, and initial public offering, financial due

to 2004 where he was responsible for the overall management

diligence and outsourced internal audit assignments. From

of the Seksun Group. Prior to joining Seksun Corporation Ltd,

August 2002 to November 2004, he was the Chief Financial

he was the Strategic Development Director of China for Glaxo

Officer of Medtecs International Corporation Limited and

Wellcome Asia Pacific Pte Ltd from 1997 to 1999 responsible

was responsible for the financial aspects as well as certain

for the strategic development of Glaxo’s China business. He

administrative affairs of the group. Prior to that, he was an

was the General Manager and then Senior General Manager

Audit Senior and thereafter a Senior Audit Manager with Arthur

of Singapore Suzhou Industrial Park Development Co., Ltd

Andersen from February 1995 to June 2002. He graduated

from 1994 to 1997 pioneering the development of Suzhou

from Nanyang Technological University with a Bachelor’s

Industrial Park.

degree in Accountancy in 1992.

Mr Chong is currently the director of three other companies listed on the mainboard of the SGX-ST. He is also an independent non-executive director of a HKSE GEM-listed company named Changan Minsheng APLL Logistics Co., Ltd and is a director of British-American Tobacco (Singapore) Pte Ltd. Mr Chong obtained a Bachelor of Engineering (Naval Architecture) degree from the University of Tokyo and a Master’s degree in Business Administration from the National University of Singapore in 1981 and 1987, respectively.

20

Annual Report 2008

Key Management

Tin It Phong (陈一峰) Chief Financial Officer

Yang Lifeng (杨立峰) Sales and Marketing Manager

Mr Tin is responsible for the financial, accounting, budgeting

Mr Yang is responsible for formulating our sales strategies

and taxation matters of our Group and reports directly to our

and marketing plans. Mr Yang started his career in 1997 and

Chairman and CEO. He joined our Group on 15 September

joined Jingjiang Ship Engineering as a worker in the paint

2006. From 1997 to 2002, Mr Tin worked as an audit staff

shop. In 1999, Mr Yang was transferred to the sales and

with Arthur Andersen. From 2002 to 2004, he was appointed

marketing department. He was promoted to deputy head of

as an Audit Manager first at Ernst & Young and then at KPMG.

sales and marketing department of Jingjiang Sumec in 2003

From 2004 to 2005, he worked as an Accounting Manager

and continued to hold that position in Jiangsu Eastern until

at Pacific International Lines. He was appointed the Chief

2006. Mr. Yang was appointed to his current position in 2006.

Financial Officer of Zen Development Holdings Limited in

He obtained a Diploma in Chemical Engineering from Suzhou

August 2005. Mr Tin became a Certified Public Accountant

University in the PRC in 1997.

of the Institute of Certified Public Accountants of Singapore in 2000. He graduated from Nanyang Technological University, Singapore, in 1997 and holds a Bachelor of Accountancy degree.

Liu Weiyun (刘卫云)

Finance Manager

Mr Liu is responsible for the financial and accounting matters of our PRC operations. Mr Liu joined as an accounts staff of Jingjiang Jointly-Run Shipyard in 1990. In 1994, he was promoted to be its accountant. From 1996 to 2000, Mr Liu worked as the deputy head of finance department of Jingjiang Ship Engineering. In 2001, he was appointed as the deputy head of finance department of Jingjiang Sumec and continued to hold that position in Jiangsu Eastern until 2006. Mr. Liu was appointed to his current position in 2006. Mr Liu obtained a Certificate in Accounting and Statistics from Jingjiang Industrial Enterprise Management School in 1990 and was accredited by Taizhou Professional Qualification Accreditation Office in the PRC as a qualified accountant in 2003.

JES INTERNATIONAL HOLDINGS LIMITED

21

Key Management

Huang Zhangming (黄章明) Project Manager

Zheng Daizhong (郑代忠) Technical Manager

Mr Huang is responsible for co-ordinating and managing our

Mr Zheng is responsible for overseeing construction design

construction projects. From 1986 to 1989, he worked in the

and production management design of all our projects.

accounting department of Jingjiang Energy-saving Materials

From 1996 to 1997, Mr Zheng worked as an apprentice with

Plant. In 1991, Mr Huang joined Jingjiang Jointly-Run Shipyard

Jingjiang Ship Engineering. He was promoted to a technician

as the supervisor of the machinery and electronics workshop.

in 1997. From 2001 to 2003, he was the head of engineering

He was subsequently appointed as the head of hull workshop

division at Jingjiang Sumec. In 2004, Mr Zheng was appointed

and the head of logistics management department. In 2005,

as the deputy head of the technical department at Jiangsu

Mr Huang was appointed as the assistant general manager

Eastern and the chief project engineer for the construction of

and the head of planning department of Jiangsu Eastern.

vessels of 7,600 DWT. In 2006, Mr Zheng was promoted to

Mr. Huang was appointed to his current position in 2006. Mr

his current position and he is also the chief project engineer

Huang obtained a Certificate in Economic Management from

for the construction of bulk carriers of 80,300 DWT. In 1996,

Economic Management Institute of Yangzhou University in the

he obtained a Certificate in Engine Equipment from Liaoning

PRC in 1998.

Bohai Shipping Industry School in the PRC.

Zhu Jianjiang (朱建江)

Project Manager

Mr Zhu is responsible for co-ordinating and managing our construction projects. Mr Zhu started his career as a technician with the Jingjiang Jointly-Run Shipyard in 1988. In 1994, he was appointed as the head of technical department of Jingjiang Ship Engineering. In 2001, Mr Zhu was promoted to assistant general manager and project manager whilst still holding the position as head of technical department in Jingjiang Sumec and he continued in these roles in Jiangsu Eastern until 2006. Mr Zhu was appointed to his current position in 2006. In 1988, Mr Zhu obtained a certificate in Shipbuilding Design and Manufacturing from Wuhan Water Transportation College in the PRC. He was accredited by Taizhou Professional Qualification Accreditation Office in the PRC as a qualified engineer in 2005.

22

Annual Report 2008

Corporate Information

Board of Directors

Principal Place of Business

Jin Xin

Shiwei Port

(Chairman and Chief Executive Officer)

Sha Pengcheng (Executive Director)

Jingjiang City, Jiangsu Province

Zhu Xiaoyang

People’s Republic of China 214521

(Executive Director)

Chong Teck Sin (Lead Independent Director) Ong Kian Guan

(Independent Director)

Tong Chi Ho

(Non-Executive Director)

Website: www.jes-intl.com

Auditors BDO Raffles

Audit Committee

(Public Accountants and Certified Public Accountants)

Chong Teck Sin (Chairman)

19 Keppel Road

Ong Kian Guan

#02-01 Jit Poh Building

Tong Chi Ho

Singapore 089058

Remuneration Committee

Partner-in-charge: Lai Keng Wei

Ong Kian Guan

(Appointed with effect since financial year ended 31

(Chairman)

Chong Teck Sin

December 2008)

Tong Chi Ho

Company Secretary Nominating Committee Ong Kian Guan

Chai Xui Gyn, ACIS

(Chairman)

Chong Teck Sin

Share Registrar

Jin Xin

Boardroom Corporate & Advisory Services Pte. Ltd. 3 Church Street #08-01

Executive Committee

Samsung Hub

Jin Xin

Singapore 049483

(Chairman)

Sha Pengcheng Zhu Xiaoyang

Principal Banker

Tin It Phong

ABN AMRO Bank N.V. One Raffles Quay

Registered Office

South Tower, Level 26

8 Cross Street

Singapore 048583

#11-00 PWC Building Singapore 048424

Company Registration Number

Tel: +65 6236 3333

200604831K

Fax: +65 6236 4399

JES INTERNATIONAL HOLDINGS LIMITED

23

CORPORATE GOVERNANCE REPORT, FINANCIAL REPORT & OTHER INFORMATION

25

Corporate Governance Report

37

Directors’ Report

41

Statement By Directors

42

Independent Auditors’ Report

44

Balance Sheets

45

Consolidated Income Statement

46

Consolidated Statement Of Changes In Equity

47

Statement Of Changes In Equity

48

Consolidated Statement Of Cash Flow

50

Notes To The Financial Statements

95

Statistics Of Shareholdings

97

Notice Of Annual General Meeting



Proxy Form

Corporate governance report

The Board of Directors of JES International Holdings Limited (“Board”) recognises the importance of and is committed to setting and maintaining a high standard of corporate governance to protect shareholders’ interests and enhance long-term shareholders’ value and corporate transparency. This Corporate Governance Report outlines the Group’s corporate governance processes and activities with reference to the Singapore Code of Corporate Governance introduced in April 2001 and amended in 2005 (“Code”). The Group is in the course of implementing further practices to comply more fully with the recommendation of the Code. Where there are deviations from the Code, appropriate explanations will be provided.

PRINCIPLE 1: BOARD’S CONDUCT OF AFFAIRS Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board. The Board is responsible for the overall direction and management of the Group. Its role involves the protection and enhancement of long-term shareholders’ value through the enhancement of corporate performance and accountability. Key matters which the Board oversees include: (i)

approve board policies, strategies and long-term objectives of the Group;

(ii)

ensure monitoring of management performance;

(iii)

oversee the processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance (See Principle 12 on internal controls and risk management);

(iv)

review and approve annual financial budgets, material acquisitions of assets, major funding proposals, investment and divestment proposals; and

(v)

assume responsibility for corporate governance.

All directors are obliged to act in good faith and consider the interests of the Company at all times. To assist in the execution of its responsibilities, the Board has established an Audit Committee, Nominating Committee and Remuneration Committee. The Board has also established an Executive Committee with effect from 19 February 2008. Each committee has its own defined terms of reference and operating procedures. The effectiveness of each committee is also constantly reviewed by the Board. The Board meets on a regular basis and when necessary to address any specific matter. Article 120(2) of the Company’s Articles of Association provides for the meetings to be convened via teleconferencing or videoconferencing.

JES INTERNATIONAL HOLDINGS LIMITED

25

Corporate governance report

The number of Board and Board Committee meetings held during the financial year 2008 and the attendance of each director where relevant are as follows: Audit Committee

Board

Remuneration Committee

Nominating Committee

Executive Committee

No. of No. of No. of No. of No. of No. of No. of No. of No. of No. of meetings meetings meetings meetings meetings meetings meetings meetings meetings meetings held attended held attended held attended held attended held attended

Directors Jin Xin

4

4

—

—

—

—

2

2

8

8

Sha Pengcheng

4

3

—

—

—

—

—

—

8

5

Zhu Xiaoyang

4

2

—

—

—

—

—

—

8

4

Ong Kian Guan

4

4

4

4

1

1

2

2

—

—

Tong Chi Ho

4

4

4

4

1

1

—

—

—

—

Chong Teck Sin

4

4

4

4

1

1

2

2

—

—

All directors are provided with regular updates on changes in the relevant laws and regulations to enable them to make well-informed decisions and to ensure that the directors are competent in carrying out their expected roles and responsibilities. Management also conducts orientation programme and briefings, where necessary, to familiarise newly appointed directors with the various businesses operations and processes of the Group. First-time directors have also undertaken training on the roles and responsibilities of being a director of a listed company. Directors may also request for further explanations, briefings or information on any aspect of the operations or business issues from management. The Board set up the Executive Committee (“EC”) which comprises of three executive directors and the CFO: (i) (ii) (iii) (iv)

Mr Mr Mr Mr

Jin Xin Sha Pengcheng Zhu Xiaoyang Tin It Phong

(Chairman of EC)

The EC is formed with a view to facilitate and streamline the Group’s decision making process. This committee is delegated with the authority and responsibility for the day to day operational management and with limits of the executive power delegated by the Board, to be responsible for the supervision of management of the Group’s operation. The principal responsibilities of the EC are as follows:(a)

make key decisions on the day to day operational management and supervision of the management of the Group’s operation;

(b)

manage capital expenditure for amounts not exceeding US$3 million;

(c)

manage procurement in relation to ship building contract expenditure for amounts not exceeding US$10 million; and

(d)

to review the performance of the Company and its group of companies, deliberate on corporate strategies, group business and principal risks, address important operational and financial issues and make recommendations to the Board for approval.

Any transactions that exceed the above scopes would require separate Board approval. The EC shall convene a meeting as and when the Chairman or any member of EC deems fit.

26

Annual Report 2008

Corporate governance report

PRINCIPLE 2: BOARD COMPOSITION AND GUIDANCE There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making. The Board currently has six directors, comprising three executive directors and three non-executive directors, namely: (i) (ii) (iii) (iv) (v) (vi)

Mr Mr Mr Mr Mr Mr

Jin Xin Sha Pengcheng Zhu Xiaoyang Chong Teck Sin Ong Kian Guan Tong Chi Ho

(Chairman and CEO) (Executive Director) (Executive Director) (Lead Independent Director) (Independent Director) (Non-executive Director)

Both Mr Chong Teck Sin and Mr Ong Kian Guan, the independent directors, do not have any existing business or professional relationship with the Group, the directors or substantial shareholders. The Board examines its size and considers that the current Board size (6) and number of Board committees appropriate for effective decision-making, taking into account the scope and nature of the operations of the Group. The Board considers that its directors possess the necessary experience and knowledge to lead the Group effectively. The details of each director’s experience are provided in the “Board of Directors” section on pages 18 to 20 in this annual report. The non-executive directors participate actively in the Board committees. They are free to request for further clarification and also has separate and independent access to the Group’s senior management. When necessary, the non-executive directors initiate meetings to address any specific matter. This is usually led by the Lead Independent Director who co-ordinates informal meeting sessions, involving any other management team member if required.

PRINCIPLE 3: CHAIRMAN AND CHIEF EXECUTIVE OFFICER There should be a clear division of responsibilities at the top of the company – the working of the Board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power. The Group’s Chairman, Mr Jin Xin, is also the Chief Executive Officer (“CEO”). Mr Jin, as the founder, has played an instrumental role in developing business of the Group. He has considerable industry experience and has provided the Group with strong leadership and vision. It is hence the view of the Board to adopt a single leadership structure, whereby the Chairman and CEO are the same individual. However, as good corporate governance practice and to ensure that there is no concentration of power and authority vested in one individual, Mr Chong Teck Sin has been appointed as the Lead Independent Director. He will be available to the shareholders where their concerns cannot be resolved through the normal channels to the Chairman or CEO, or where such contact is not possible or inappropriate.

JES INTERNATIONAL HOLDINGS LIMITED

27

Corporate governance report

Hence, the Directors are of the view that there are sufficient safeguards and checks to ensure the process of decision-making by the Board is independent and based on collective decision-making without the Chairman being able to exercise considerable power or influence. The Chairman leads the Board to ensure its effectiveness on all aspects of its role. He approves the agendas for the Board and the agendas for Board committees are approved by the Chairman together with the respective chairman of the Board committees. The Chairman also exercises control over the quality, quantity and timeliness of information flow between the Board, management and shareholders of the Company. He encourages interactions between the Board and senior management, as well as between the executive and non-executive directors. The Chairman also takes a leading role in ensuring the Group’s compliance with corporate governance guidelines.

PRINCIPLE 4: BOARD MEMBERSHIP There should be a formal and transparent process for the appointment of new directors to the Board.

PRINCIPLE 5: BOARD PERFORMANCE There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board. The Board established a Nominating Committee (“NC”), which includes two independent directors and one executive director namely: (i) (ii) (iii)

Mr Ong Kian Guan Mr Chong Teck Sin Mr Jin Xin

(Chairman of NC)

The functions of the NC are as follows: (a)

recommend to the Board on all Board appointments, re-nomination, re-election and removal of incumbents to/from the Board having regard to the independence of the existing and proposed directors, their qualification, knowledge, skills, expertise, performance and contributions;

(b)

assessing the independence of each director;

(c)

ascertaining whether each director is able to and has been adequately carrying out his duties as a director; and

(d)

evaluate the performance and effectiveness of the Board as a whole.

The NC will decide on how the Board’s performance is to be evaluated and propose objective performance criteria, subject to the approval of the Board, which addresses how the Board has enhanced long-term shareholders’ value. The Board will also implement a process to be carried out by the NC for assessing the effectiveness of the Board as a whole and for assessing the contribution by each individual director to the effectiveness of the Board. In assessing an individual director, the NC may take into account factors, such as directors’ attendance at Board meetings and committee meetings (where applicable) and preparedness, candour and participation shown at such meetings.

28

Annual Report 2008

Corporate governance report

Each member of the NC shall abstain from voting on any resolutions and making any recommendations and/or participating in any deliberations of the NC in respect of the assessment of his performance or re-nomination as director. Article 107 of the Company’s Articles of Association provides that one-third of the Board is required to be retired from office at each Annual General Meeting (“AGM”). The directors will submit themselves for renomination and re-election at regular intervals and at least once every three years. Date of initial appointment as Director

Date of last re-election as Director

18 August 2006

24 April 2008

None

Mr Sha Pengcheng

5 November 2007

24 April 2008

None

Mr Zhu Xiaoyang

5 November 2007

24 April 2008

None

Mr Chong Teck Sin

5 November 2007

24 April 2008

Wanxiang International Limited Beyonics Technology Limited Sihuan Pharmaceutical Holdings Group Ltd

Mr Ong Kian Guan

5 November 2007

24 April 2008

China Animal Healthcare Ltd China Haida Ltd China XLX Fertiliser Ltd

4 April 2006

–

Name of Director Mr Jin Xin

Mr Tong Chi Ho

Directorship in other listed companies

Wanxiang International Limited

PRINCIPLE 6: ACCESS TO INFORMATION In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis. Management has an obligation to supply the Board with complete, adequate information in a timely manner. The Board is free to request for further clarification and also has separate and independent access to the Group’s senior management, as well as to the company secretary. In the furtherance of their duties, directors may consult independent professional advice, if necessary, at the Group’s expense.

PRINCIPLE 7: PROCEDURES FOR DEVELOPING REMUNERATION POLICIES There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

PRINCIPLE 8: LEVEL AND MIX OF REMUNERATION The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance.

JES INTERNATIONAL HOLDINGS LIMITED

29

Corporate governance report

The Board had set up a Remuneration Committee (“RC”) which consists of two independent directors and one non-executive director namely: (i) (ii) (iii)

Mr Ong Kian Guan Mr Chong Teck Sin Mr Tong Chi Ho

(Chairman of RC)

The functions of the RC are as follows: (a)

to recommend to the Board a framework of remuneration for directors and executive officers; and

(b)

to determine specific remuneration packages for each executive director, covering all aspects of remuneration, including but not limited to director’s fees, salaries, allowances, bonuses, options and benefits in kind.

The executive directors have service contracts of an initial period of three years which include performance bonuses. The RC shall review the drafts of all service contracts to be entered into between an executive director and the Company before giving its recommendations to the Board. Non-executive and independent directors have no service contracts. The payment of directors’ fees to non-executive and independent directors is subject to the approval at the AGM. No director or member of the RC shall be involved in deciding his own remuneration, compensation, options or any form of benefits to be granted to him, except for providing information and documents specifically requested by the Committee to assist it in its deliberations.

PRINCIPLE 9: DISCLOSURE OF REMUNERATION Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration and the procedures for setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance. A breakdown showing each director’s remuneration, in percentage terms showing the level and mix for the year ended 31 December 2008, is as follows: Salaries %

Bonus %

Other benefits %

Total %

–

98

–

2

100

Sha Pengcheng

–

100

–

–

100

Zhu Xiaoyang

–

94

–

6

100

100

–

–

–

100

Directors

Fees %

S$250,000 to below S$500,000 Jin Xin Below S$250,000

Chong Teck Sin Ong Kian Guan

100

–

–

–

100

Tong Chi Ho

100

–

–

–

100

All the key executives (Mr Tin It Phong, Mr Liu Weiyun, Mr Yang Lifeng, Mr Huang Zhangming, Mr Zhu Jianjiang, Mr Zheng Daizhong and Mr Zhang Zhizhong) earned remuneration of below S$250,000 for the financial year ended 31 December 2008. Mr Zhang Zhizhong had left the Group as at 31 December 2008. There is no employee of the Group who is an immediate family member of a director or substantial shareholder whose remuneration exceeds S$150,000 for the financial year ended 31 December 2008.

30

Annual Report 2008

Corporate governance report

PRINCIPLE 10: ACCOUNTABILITY AND AUDIT The Board should present a balanced and understandable assessment of the company’s performance, position and prospects. The Board provides shareholders with quarterly and annual financial reports via SGXNET. Results for the first three quarters are released to shareholders within 45 days of the end of each quarter. Annual results are released within 60 days of the financial year-end. In presenting the annual and quarterly financial statements to shareholders, the Board aims to provide shareholders with a balanced and clear assessment of the Group’s position and prospects.

PRINCIPLE 11: AUDIT COMMITTEE The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly set out its authority and duties. The Board set up an Audit Committee (“AC”) which comprises two independent directors and one nonexecutive director namely: (i) (ii) (iii)

Mr Chong Teck Sin Mr Ong Kian Guan Mr Tong Chi Ho

(Chairman of AC)

The AC will assist the Board in discharging its responsibilities to safeguard the Group’s assets, maintain adequate accounting records, and develop and maintain effective systems of internal control, with the overall objective of ensuring that the management creates and maintains an effective control environment in the Group. The AC will provide a channel of communication between the Board, management, internal and external auditors on matters relating to audit. The main functions of the AC are as follows: (a)

review with the internal and external auditors on the audit plans, their evaluation of the Group’s system of internal accounting controls, their letter to management and the management’s response;

(b)

commission an external auditor or a suitable accounting firm to review the adequacy and effectiveness of the Group’s existing system of internal controls;

(c)

review the quarterly and annual financial information including balance sheets and income statements and auditors’ report (where applicable) before submission to the Board of Directors for approval, focusing in particular on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, compliance with accounting standards and compliance with the Listing Manual(1) and any other relevant statutory or regulatory requirements;

(d)

review the Group’s internal control procedures and ensure co-ordination between the internal/external auditors and the management, and review the assistance given by the management to the auditors, and discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of the management, where necessary);

(e)

review and discuss with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on the Group’s operating results or financial position, and the management’s response;

JES INTERNATIONAL HOLDINGS LIMITED

31

Corporate governance report

(f)

review the independence of the external auditors, consider the appointment or re-appointment of the external auditors and matters relating to the resignation or dismissal of the auditors;

(g)

consider and recommend all proposed transactions not in the ordinary course of the Company’s business of value exceeding S$5,000,000 which are submitted by the executive management of the Company to the AC;

(h)

grant prior approval before entry by the Group into: (i)

any proposed interested person transactions of value exceeding S$1,000,000 (or its equivalent in Renminbi) or 3% of the Company’s last audited net tangible assets, whichever is the lower; and

(ii)

any proposed new type of interested person transaction, regardless of value;

(i)

review interested person transactions (if any) falling within the scope of Chapter 9 of the Listing Manual at least on a quarterly basis;

(j)

review potential conflicts of interests, if any;

(k)

review on a quarterly basis the report prepared by management setting out the progress of vessels under construction pursuant to the shipbuilding contracts relative to the agreed delivery dates of those vessels;

(l)

if the Group decides to enter in hedging transactions, review the procedures put in place by the Group;

(m)

review and, if in the best interest of the Group, approve the acquisition of the land use rights relating to the new yard, including the price to be paid for such land use rights;

(n)

undertake such other reviews and projects as may be requested by the Board of Directors, and will report to the Board of Directors its findings from time to time on matters arising and requiring the attention of the AC; and

(o)

generally undertake such other functions and duties as may be required by statute or the Listing Manual, or such amendments as may be made thereto from time to time.

Note: (1)

Colin Ng & Partners LLP has been appointed as the Group Compliance Advisor to assist management in complying with the Company’s continuing listing obligations under the Listing Rules.

In relation to the purchase of the land use rights relating to the new yard, the AC has adopted the following guidelines: -

the AC shall review and, in the best interests of the Group, approve the proposal of the terms of the land to be purchased, in particular the price or price range;

-

the AC may engage the services of a professional valuer and such other industry experts for guidance in its review and approval process; and

-

the AC may from time to time, adopt such additional or other new guidelines as it deems fit.

32

Annual Report 2008

Corporate governance report

Apart from the duties listed above, the AC will commission and review the findings or internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material impact on the Group’s operating results and/or financial position. Each member of the AC shall abstain from voting on any resolutions and making any recommendations and/or participating in any deliberations of the AC in respect of matters in which he is interested. The AC has the power to conduct or authorise investigations into any matters within the AC’s scope of responsibilities. The AC is authorised to obtain independent professional advice if it deems necessary in the discharge of its responsibilities. Such expenses are to be borne by the Group. The AC has full access to the management and also full discretion to invite any director or key management to attend its meetings, and has been given reasonable resources to enable it to discharge this function. The AC meets with the external auditors, without the presence of management, at least once a year.

PRINCIPLE 12: INTERNAL CONTROLS The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets. The Board is responsible for the overall internal control framework and is fully aware of the need to put in place a system of internal controls within the Group to safeguard shareholders’ interests and the Group’s assets, and to manage risks. The Board recognises that, in the absence of evidence to the contrary, the internal control system maintained by the Group’s management and that was in place throughout the financial year and up to the date of this report provides reasonable, but not absolute, assurance against material financial misstatements or losses, and includes the safeguard of assets, the maintenance of proper accounting records, the reliability of financial information, compliance with appropriate legislation, regulations and best practices, and the identification and containment of financial, operational and compliance risks. The Board notes that all internal control systems contain inherent limitations and no system of internal controls could provide absolute assurance against the occurrence of material errors, poor judgment in decision-making, human error losses, fraud or other irregularities. The Board is satisfied that currently there are adequate internal controls in the Group.

PRINCIPLE 13: INTERNAL AUDIT The company should establish an internal audit function that is independent of the activities it audits. The Company has appointed Messrs TransFingo Pte Ltd as its internal auditor during the financial year ended 31 December 2008. The internal auditor will report directly to the AC. The AC has the responsibility to establish an independent internal audit function, review the internal audit program and ensure coordination between internal auditors, external auditors and management and ensure that the internal auditor meets or exceeds the standards set by nationally or internationally recognised professional bodies. Separately, in order to ensure compliance with the Company’s continuing listing obligations under the Listing Manual and in accordance with sound corporate governance principles, the Company has also appointed Colin Ng & Partners LLP as the Group Compliance Advisor.

JES INTERNATIONAL HOLDINGS LIMITED

33

Corporate governance report

The Compliance Advisor will, inter alia, do the following: (a)

assist management in complying with the Company’s continuing listing obligations under the Listing Manual; and

(b)

conduct a refresher training course for the directors and management on the continuing listing obligations under the Listing Manual and the corporate governance standards set out in the Code of Corporate Governance 2005.

PRINCIPLE 14: COMMUNICATION WITH SHAREHOLDERS Companies should engage in regular, effective and fair communication with shareholders.

PRINCIPLE 15: GREATER SHAREHOLDER PARTICIPATION The company should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the company. The management is committed to regular and proactive communication with its shareholders in line with continuous disclosure obligations of the Group according to the Listing Manual of the SGX-ST. Pertinent information will be disclosed to shareholders in a timely, fair and equitable manner. Information is disseminated to shareholders on a timely basis through: SGXNET announcements and news releases Annual Report prepared and issued to all shareholders The Group’s website at www.jes-intl.com which shareholders can access information on the Group, such as corporate announcements, press releases, annual reports and corporate profile of the Group. All shareholders of the Company receive the annual reports, circulars and notices of the AGM. The notices are also advertised in newspapers. The participation of shareholders is encouraged at the Company’s AGM. The Chairman of the Audit Committee, Remuneration Committee, Nomination Committee and Executive Committee will be available at the forthcoming AGM to answer questions. The external auditors will also be present to assist the directors in addressing any relevant queries from the shareholders.

PRINCIPLE 16: CODE ON DEALING IN SECURITIES, INTERESTED PERSON TRANSACTIONS POLICY, ETC. (This is not a requirement under the Code) 16.1 Dealings in Securities The Group has adopted a set of code in relation to dealings in the Company’s securities to all its officers pursuant to the SGX-ST Listing Manual. The Group and its officers are not allowed to deal in the Company’s shares during the period commencing two weeks before the announcement of the Company’s financial statements for each of the first three quarters of its financial year and one month before the announcement of the Company’s full year financial statements or when they are in possession of any unpublished price sensitive information of the Group.

34

Annual Report 2008

Corporate governance report

16.2 Interested Person Transactions The Group has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the AC and that transactions are conducted on an arm’s length basis that are not prejudicial to the interests of the shareholders. Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than $100,000 and transactions conducted under shareholders’ mandate pursuant to Rule 920)

Aggregate value of all interested person transactions conducted under shareholders’ mandate pursuant to Rule 920 (excluding transactions less than $100,000)

RMB’000

RMB’000

Rental paid to Jiangsu Eastern Shipyard Co., Ltd.

(13,200)

–

Processing service fee from Jiangsu Eastern Shipyard Co., Ltd.

123,728

–

Payment on behalf by JYJJP Eastern Shipyard Accessories Manufacturing Co., Ltd.

45,970

–

Advances from JYJJP Eastern Shipyard Accessories Manufacturing Co., Ltd.

123,211

–

Resulting joint venture following the completion of the acquisition of 49.18% interest in JYJJP Eastern Shipyard Accessories Manufacturing Co., Ltd. from Lofty Leader Investment Limited(1)

(211,571)

–

Name of interested person FY2008

Note: (1)

The Company entered into an acquisition agreement with Lofty Leader Investment Limited to safeguard the 405 mu Land which would be at risk if JYJJP Eastern Shipyard Accessories Manufacturing Co., Ltd. was deregistered by the PRC authority.

16.3 Material Contracts Save for the service agreements between the executive directors and the Company, there were no material contracts entered into by the Company or its subsidiaries involving the interest of the CEO, any director, or controlling shareholder. 16.4 Risk Management Management regularly reviews the Group’s business and operational activities to identify areas of significant business risks as well as appropriate measures to control and mitigate these risks. The management reviews all significant control policies and procedures and highlights all significant matters to the directors and the AC.

JES INTERNATIONAL HOLDINGS LIMITED

35

Corporate governance report

16.5 Use of IPO Proceeds The Company raised S$250.0 million, from its IPO from the issuance of 373,135,000 new ordinary shares of S$0.67 each on 19 December 2007. Subsequently, as part of the over-allotment exercise, the Company also received another S$14.7 million from the issuance of 21,974,000 new ordinary shares of S$0.67 each. As at the date of this report, the total net proceeds of S$246.3 million (after deducting IPO expenses as disclosed on page 44 of the Company’s Prospectus dated 11 December 2007) were utilised as follows: Amount Allocated SGD’000

Amount Utilised SGD’000

Balance SGD’000

148,162

61,016

87,146

Repayment of a loan from ABN AMRO Bank (China) Co., Ltd., Shanghai Branch in the principal amount of RMB130.0 million*

25,425

25,425

–

Working capital

57,868

35,401

22,467

General corporate purposes

14,853

–

14,853

246,308

121,842

124,466

Use of proceeds Financing construction of the new yard^

36

*

Amount has been repaid on 19 February 2008.

^

Total net proceeds included S$14.7 million from the over-allotment exercise which has been allocated for financing construction of the new yard.

Annual Report 2008

directors’ report

The Directors of the Company present their report to the Members together with the audited consolidated financial statements of JES International Holdings Limited (the “Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2008.

1.

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

2.

Jin Xin Sha Pengcheng Zhu Xiaoyang Chong Teck Sin Ong Kian Guan Tong Chi Ho

Arrangements to enable Directors to acquire shares or debentures Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object is to enable the Directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.

3.

Directors’ interests in shares or debentures The Directors of the Company holding office at end of the financial year had no interests in the shares or debentures of the Company and its related corporations as recorded in the Register of Directors’ Shareholdings kept by the Company under section 164 of the Singapore Companies Act, Cap 50 (the “Act”) except as follows: Name of the Directors and companies in which interests are held

Shareholdings registered in name of Director or nominee At At At 01.01.2008 31.12.2008 21.1.2009

Shareholdings in which Director is deemed to have an interest At At At 01.01.2008 31.12.2008 21.1.2009

The Company JES International Holdings Limited (No. of ordinary shares) Mr Jin Xin Mr Tong Chi Ho Mr Chong Teck Sin

– 37,208,000 –

– 28,708,000 50,000

– 28,708,000 50,000

6,860 350 440

6,860 350 440

565,099,000 644,352,000 644,352,000 – – – – – –

Holding company JES Overseas Investment Limited (No. of ordinary shares) Mr Jin Xin Mr Sha Pengcheng Mr Zhu Xiaoyang

6,260 350 440

– – –

– – –

JES INTERNATIONAL HOLDINGS LIMITED

– – –

37

directors’ report

3.

Directors’ interests in shares or debentures (Continued) By virtue of Section 7 of the Act, Mr Jin Xin is deemed to have interests in the shares of the Company and all related corporations of the Company. Except as disclosed in this report, no Director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or at the end of the financial year.

4.

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 by a related corporation with the Director, or with a firm of which he is a member, or with a company in which he has a substantial financial interest, except for salaries and other benefits as disclosed in the financial statements. Certain Directors received remuneration from subsidiaries in their capacity as Directors and/or executives of those subsidiaries as disclosed in Note 36 to the accompanying financial statements.

5.

Share options There were no share options granted by the Company or its subsidiaries during the financial year. There were no shares issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries. There were no unissued shares under option in the Company or its subsidiaries as at the end of the financial year.

6.

Audit committee The members of the Audit Committee during the financial year and at the date of this report are: Mr Chong Teck Sin (Chairman) Mr Ong Kian Guan Mr Tong Chi Ho The Audit Committee carried out its functions in accordance with Section 201B (5) of the Act, including the following: review with the internal and external auditors on the audit plans, their evaluation of the Group’s system of internal accounting controls, their letter to management and the management’s response; commission an external auditor or a suitable accounting firm to review the adequacy and effectiveness of the Group’s existing system of internal controls; review the quarterly and annual financial information including balance sheets and income statements and auditors’ report (where applicable) before submission to the Board of Directors for approval, focusing in particular on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, compliance with accounting standards and compliance with the Listing Manual and any other relevant statutory or regulatory requirements;

38

Annual Report 2008

directors’ report

6.

Audit committee (Continued) review the Group’s internal control procedures and ensure co-ordination between the internal/ external auditors and the management, and review the assistance given by the management to the auditors, and discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss (in the absence of the management, where necessary); review and discuss with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on the Group’s operating results or financial position, and the management’s response; review the independence of the external auditors, consider the appointment or re-appointment of the external auditors and matters relating to the resignation or dismissal of the auditors; consider and recommend all proposed transactions not in the ordinary course of the Company’s business of value exceeding S$5,000,000 which are submitted by the executive management of the Company to the Audit Committee; grant prior approval before entry by the Group into: (i)

any proposed interested person transactions of value exceeding S$1,000,000 (or its equivalent in Renminbi) or 3% of the Company’s last audited net tangible assets, whichever is the lower; and

(ii)

any proposed new type of interested person transaction, regardless of value;

review interested person transactions (if any) falling within the scope of Chapter 9 of the Listing Manual at least on a quarterly basis; review potential conflicts of interests, if any; review on a quarterly basis the report prepared by management setting out the progress of vessels under construction pursuant to the shipbuilding contracts relative to the agreed delivery dates of those vessels; if the Group decides to enter in hedging transactions, review the procedures put in place by the Group; review and, if in the best interest of the Group, approve the acquisition of the land use rights relating to the new yard, including the price to be paid for such land use rights; undertake such other reviews and projects as may be requested by the Board of Directors, and will report to the Board of Directors its findings from time to time on matters arising and requiring the attention of the Audit Committee; and generally undertake such other functions and duties as may be required by statute or the Listing Manual, or such amendments as may be made thereto from time to time. The Audit Committee has full access to and has the co-operation of the management and is given the resources required for it to discharge its functions. It has full authority and the discretion to invite any Director or executive officer to attend its meetings.

JES INTERNATIONAL HOLDINGS LIMITED

39

directors’ report

6.

Audit committee (Continued) The Audit Committee, having reviewed all non-audit services provided by the external auditors to the Group, is satisfied that the nature and extent of such services would not affect the independence of the external auditors. The Audit Committee has recommended to the Board of Directors that the independent auditors, BDO Raffles, be nominated for re-appointment at the forthcoming Annual General Meeting of the Company. Further details regarding the Audit Committee are disclosed in the Corporate Governance Report.

7.

Independent auditors The independent auditors, BDO Raffles, has expressed their willingness to accept re-appointment.

On behalf of the Board of Directors

Mr Jin Xin Director

Singapore 23 March 2009

40

Annual Report 2008

Mr Tong Chi Ho Director

statement by directors

In the opinion of the Directors, (a)

the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008, and of the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year then ended; and

(b)

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

On behalf of the Board of Directors

Mr Jin Xin Director

Mr Tong Chi Ho Director

Singapore 23 March 2009

JES INTERNATIONAL HOLDINGS LIMITED

41

independent auditors’ report To the Members of JES International Holdings Limited

We have audited the accompanying financial statements of JES International Holdings Limited (the “Company”) and its subsidiaries (the “Group”) which comprise the balance sheets of the Group and of the Company as at 31 December 2008, the income statement, statement of changes in equity and cash flow statement of the Group and statement of changes in equity of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 44 to 94. 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: (a)

devising and maintaining a system of internal accounting controls sufficient to provide 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 income statement and balance sheets and to maintain accountability of assets;

(b)

selecting and applying appropriate accounting policies; and

(c)

making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ 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 auditors consider the 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.

42

Annual Report 2008

independent auditors’ report To the Members of JES International Holdings Limited

Opinion In our opinion, (a)

the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and of the results, changes in equity and cash flows of the Group and changes in equity of the Company for the financial year ended on that date; and

(b)

the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

BDO Raffles Public Accountants and Certified Public Accountants Singapore 23 March 2009

JES INTERNATIONAL HOLDINGS LIMITED

43

balance sheets As at 31 December 2008

Note Non-current assets Property, plant and equipment Investments in subsidiaries Loan to a subsidiary Total non-current assets Current assets Inventories Due from customers for construction contracts Trade receivables Other receivables, prepayments and deposits Due from a subsidiary Financial assets at fair value through profit or loss Deposits for notes payable Pledged fixed deposits Cash and cash equivalents Assets held for sale Total current assets Less: Current liabilities Trade payables Other payables and accruals Due to customers for construction contracts Due to a subsidiary Due to a related party Bank borrowings Notes payable Income tax payable Total current liabilities Net current assets Less: Non-current liabilities Housing contribution fund Deferred tax liabilities Total non-current liabilities Net assets Capital and reserves Share capital Statutory reserve Merger reserve Foreign currency translation reserve Accumulated profits/(losses) Total capital and reserves

The Group 2008 2007 RMB’000 RMB’000

4 5 6

432,812 – – 432,812

35,337 – – 35,337

300 512,728 109,376 622,404

16 111,052 – 111,068

7 8 9 10 11 12 13 14 15

121,773 636,285 5,292 730,953 – 441 200,686 347,884 737,592 2,780,906 211,571 2,992,477

61,680 505,606 4,621 452,755 – 956 148,770 89,617 1,435,084 2,699,089 – 2,699,089

– – – 137 268,032 – – – 271,700 539,869 211,571 751,440

– – – – – – – – 1,205,895 1,205,895 – 1,205,895

17 18 8 11 19 20 21

116,651 112,621 937,829 – 169,181 20,000 347,877 1,660 1,705,819 1,286,658

267,671 91,343 312,802 – 127,865 143,733 148,770 – 1,092,184 1,606,905

– 37,811 – – – – – 1,660 39,471 711,969

– 13,460 – 1,338 – – – – 14,798 1,191,097

22

600 4,504 5,104 1,714,366

600 – 600 1,641,642

– 4,504 4,504 1,329,869

– – – 1,302,165

23 24 25 26

1,381,918 1,310,160 59,400 53,093 (14,478) (14,478) (48,370) (1,821) 335,896 294,688 1,714,366 1,641,642

16

The accompanying notes form an integral part of the financial statements

44

Annual Report 2008

The Company 2008 2007 RMB’000 RMB’000

1,381,918 1,310,160 – – – – (48,353) (1,821) (3,696) (6,174) 1,329,869 1,302,165

Consolidated INCOME STATEMENT For the financial year ended 31 December 2008

Note

2008 RMB’000

2007 RMB’000

27

1,620,739

1,494,844

(1,429,692)

(1,181,370)

191,047

313,474

31,202

11,436

Selling and distribution expenses

(57,756)

(50,551)

Administrative expenses

(29,100)

(17,764)

Revenue Cost of sales Gross profit Other operating income

28

Other operating expenses

29

(71,047)

(20,158)

Finance costs

30

(10,357)

(11,526)

Profit before income tax

31

53,989

224,911

Income tax expense

32

(6,474)

–

47,515

224,911

Profit attributable to equity holders Earnings per share from profit attributable to equity holders of the Company: - Basic (RMB cents)

33 (a)

4.08

19.66

- Diluted (RMB cents)

33 (b)

4.08

19.66

The accompanying notes form an integral part of the financial statements

JES INTERNATIONAL HOLDINGS LIMITED

45

Consolidated Statement of Changes in Equity For the financial year ended 31 December 2008

Foreign currency translation Accumulated reserve profits Total RMB’000 RMB’000 RMB’000

Share capital RMB’000

Statutory reserve RMB’000

Merger reserve RMB’000

1,310,160

53,093

(14,478)

(1,821)

294,688

1,641,642

Foreign currency translation representing total loss recognised directly in equity

–

–

–

(46,549)

–

(46,549)

Profit attributable to equity holders

–

–

–

–

47,515

47,515

Total recognised income/(expense) for the financial year

–

–

–

(46,549)

47,515

966

The Group

Note

Balance at 1 January 2008

Issue of ordinary shares pursuant to the overallotment exercise

23

74,544

–

–

–

–

74,544

Share issue expenses

23

(2,786)

–

–

–

–

(2,786)

–

6,307

–

–

(6,307)

–

1,381,918

59,400

(14,478)

(48,370)

335,896

1,714,366

Transfer to statutory reserve Balance at 31 December 2008

The Group

Note

Foreign Convertible currency Share Statutory bonds Merger translation Accumulated capital reserve reserve reserve reserve profits Total RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Balance at 1 January 2007

*

18,556

7,183

(14,478)

1,451

104,314

117,026

Foreign currency translation representing total loss recognised directly in equity

–

–

–

–

(3,272)

–

(3,272)

Profit attributable to equity holders

–

–

–

–

–

224,911

224,911

Total recognised income/ (expense) for the financial year

–

–

–

–

(3,272)

224,911

221,639

Issue of ordinary shares pursuant to the - Initial Public Offering

23

1,266,195

–

–

–

–

–

1,266,195

- Convertible bonds

23

114,371

–

–

–

–

–

114,371

Conversion of convertible bonds

23

7,183

–

(7,183)

–

–

–

–

Share issue expenses

23

(77,589)

–

–

–

–

–

(77,589)

–

34,537

–

–

–

(34,537)

–

1,310,160

53,093

–

(14,478)

(1,821)

294,688

1,641,642

Transfer to statutory reserve Balance at 31 December 2007 * Denotes amount less than RMB1,000.

The accompanying notes form an integral part of the financial statements

46

Annual Report 2008

Statement of Changes in Equity For the financial year ended 31 December 2008

The Company

Note

Balance at 1 January 2008

Foreign currency translation reserve RMB’000

Share capital RMB’000

Accumulated profits/(losses) RMB’000

Total RMB’000

1,310,160

(1,821)

(6,174)

1,302,165

Foreign currency translation representing total loss recognised directly in equity

–

(46,532)

–

(46,532)

Profit for the financial year

–

–

2,478

2,478

Total recognised income/(expense) for the financial year

–

(46,532)

2,478

(44,054)

Issue of ordinary shares pursuant to the overallotment exercise

23

74,544

–

–

74,544

Share issue expenses

23

(2,786)

–

–

(2,786)

1,381,918

(48,353)

(3,696)

1,329,869

Balance at 31 December 2008

The Company

Note

Foreign Convertible currency Share bonds translation capital reserve reserve RMB’000 RMB’000 RMB’000

Accumulated losses RMB’000

Total RMB’000

Balance at 1 January 2007

*

7,183

1,451

(837)

7,797

Foreign currency translation representing total loss recognised directly in equity

–

–

(3,272)

–

(3,272)

Loss for the financial year

–

–

–

(5,337)

(5,337)

Total recognised expenses for the financial year

–

–

(3,272)

(5,337)

(8,609)

Issue of ordinary shares pursuant to the - Initial Public Offering

23

1,266,195

–

–

–

1,266,195

- Convertible bonds

23

114,371

–

–

–

114,371

Conversion of convertible bonds

23

7,183

(7,183)

–

–

–

Share issue expenses

23

(77,589)

–

–

–

(77,589)

1,310,160

–

(1,821)

(6,174)

1,302,165

Balance at 31 December 2007 * Denotes amount less than RMB1,000.

The accompanying notes form an integral part of the financial statements

JES INTERNATIONAL HOLDINGS LIMITED

47

Consolidated Statement of cash flow For the financial year ended 31 December 2008

Note

2008 RMB’000

2007 RMB’000

53,989

224,911

329

–

4,404

5,218

Interest income

(23,460)

(2,013)

Interest expense

9,908

7,549

Reversal of allowance for doubtful trade receivables

–

(1,153)

Reversal of allowance for doubtful other receivables

(860)

(2,822)

–

(215)

515

(121)

44,825

231,354

Inventories

(60,093)

47,238

Due from/to customers for construction contracts

494,348

(299,708)

(1,000)

23,064

(274,898)

(96,390)

(51,916)

(130,350)

Pledged fixed deposits

(258,267)

1,340

Trade payables

Cash flows from operating activities Profit before income tax Adjustments for: Allowance for doubtful trade receivables Depreciation of property, plant and equipment

Gain on disposal of financial assets at fair value through profit or loss Fair value loss/(gain) on financial assets at fair value through profit or loss Operating cash flows before movements in working capital Working capital changes:

Trade receivables Other receivables, prepayments and deposits Deposits for notes payable

(151,020)

103,148

Other payables and accruals

21,193

38,290

Due to a related party

41,316

124,386

199,107

130,350

Cash generated from operations

3,595

172,722

Interest paid

(9,908)

(7,549)

Interest received

23,460

2,013

Net cash from operating activities

17,147

167,186

(401,890)

(7,620)

(2,440)

(547)

–

784

(211,571)

–

(46,537)

(3,272)

(662,438)

(10,655)

Notes payable

Cash flows from investing activities Purchase of property, plant and equipment Deposits for the purchase of land use rights Proceeds from disposal of financial assets at fair value through profit or loss Purchase of assets held for sale Effect of foreign currency alignment on investing activities Net cash used in investing activities

48

Annual Report 2008

Consolidated Statement of cash flow For the financial year ended 31 December 2008

Note

2008 RMB’000

2007 RMB’000

Proceeds from bank borrowings

100,000

143,733

Repayment of bank borrowings

(223,733)

–

71,758

1,190,375

–

(111,064)

(51,975)

1,223,044

(697,266)

1,379,575

Net effect of exchange rate changes on the balance of cash held in foreign currencies

(226)

–

Cash and cash equivalents at beginning of the financial year

1,435,084

55,509

737,592

1,435,084

Cash flows from financing activities

Proceeds from issuance of share capital, net of share issue expenses Repayment of entrusted bank loan Net cash (used in)/from financing activities Net (decrease)/increase in cash and cash equivalents

Cash and cash equivalents at end of the financial year

15

The accompanying notes form an integral part of the financial statements

JES INTERNATIONAL HOLDINGS LIMITED

49

Notes to the financial statements For the financial year ended 31 December 2008

1.

General corporate information The Company (Registration No. 200604831K) is incorporated and domiciled in the Republic of Singapore and is listed on the Main Board of the Singapore Exchange Securities Trading Limited (SGX-ST). The immediate and ultimate holding company is JES Overseas Investment Limited, which is incorporated in the British Virgin Islands. The principal activity of the Company is that of investment holding. The Company’s registered office is located at 8 Cross Street, #11-00 PWC Building, Singapore 048424. The principal activities of the subsidiaries are disclosed in Note 5 to the financial statements. The principal place of business is located at Shiwei Port, Jingjiang, Jiangsu Province, People’s Republic of China (“PRC”). The consolidated financial statements of the Group and balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2008 were authorised for issue by the Board of Directors on 23 March 2009.

2.

Summary of significant accounting policies

2.1

Basis of preparation The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 and Singapore Financial Reporting Standards (“FRS”) including related Interpretations of FRS (“INT FRS”) and are prepared under the historical cost convention, except as disclosed in the accounting policies below. The individual financial statements of each entity in the Group are measured and presented using the currency of the primary economic environment in which the entity operates (“functional currency”). The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are presented in Renminbi (“RMB”), which is the presentation currency for the consolidated financial statements. The functional currency of the Company is Singapore Dollars (“SGD”). As the Group mainly operates in PRC, RMB is used as the presentation currency of the Group. All values are rounded to the nearest thousand (RMB’000) as indicated, unless otherwise stated. The preparation of financial statements in conformity with FRS requires management to make judgements, estimates and assumptions that affect the Group’s and the Company’s application of accounting policies and reported amounts of assets, liabilities, revenue, expenses and the disclosure of contingent liabilities at the reporting date. Although these estimates are based on management’s best knowledge of current events and actions, actual results may differ from those estimates. Information about key sources of estimation uncertainty and critical accounting judgements that are significant to the financial statements are disclosed in Note 3 to the financial statements. In the current financial year, the Group and the Company have adopted all the new and revised FRS and INT FRS that are relevant to its operations and effective for annual periods beginning on or after 1 January 2008. The adoption of these new/revised FRS and INT FRS does not result in changes to the Group’s and Company’s accounting policies and has no material effect on the amounts reported for the current or prior years.

50

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.1

Basis of preparation (Continued) FRS and INT FRS issued but not yet effective At the date of authorisation of these financial statements, the following FRS and INT FRS that are relevant to the Group and the Company were issued but not effective: Effective from annual periods beginning on or after FRS 1

:

Presentation of Financial Statements (Revised 2008)

1 January 2009

Presentation of Financial Statements (Amendments relating to puttable financial instruments and obligations arising on liquidation)

1 January 2009

FRS 32

:

Financial Instruments: Presentation (Amendments relating to puttable financial instruments and obligations arising on liquidation)

1 January 2009

FRS 108

:

Operating Segments

1 January 2009

INT FRS 116

:

Hedges of a Net Investment in a Foreign Operation

1 October 2008

Consequential amendments were also made to various standards as a result of these new/revised standards. The management anticipates that the adoption of the above FRS and INT FRS in future periods will not have a material impact on the financial statements of the Group and of the Company in the period of their initial application, except as disclosed below: FRS 1 – Presentation of Financial Statements (Revised 2008) FRS 1 (revised 2008) requires an entity to present, in a statement of changes in equity, all owner changes in equity. All non-owner changes in equity (i.e. comprehensive income) are required to be presented in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). Components of comprehensive income are not permitted to be presented in the statement of changes in equity. In addition, a statement of financial position is required at the beginning of the earliest comparative period following a retrospective application of an accounting policy, a retrospective restatement of items in its financial statements or a reclassification of items in the financial statements. FRS 1 (revised 2008) does not have any impact on the Group’s and the Company’s financial positions or results. FRS 108 – Operating Segments FRS 108 requires an entity to adopt the management approach in reporting financial and descriptive information about its reportable segment. Financial information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. Additional disclosures are also required to provide more information on the operating segments. The Group will apply FRS 108 from financial period beginning 1 January 2009.

JES INTERNATIONAL HOLDINGS LIMITED

51

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.2

Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries. Subsidiaries are entities (including special purposes entities) over which the Company has the power to govern the financial operating policies, generally accompanied by a shareholding giving rise to the majority of the voting rights, as to obtain benefits from their activities. Subsidiaries are consolidated from the date on which control is transferred to the Group up to the effective date on which control ceases, as appropriate. Intra-group balances and transactions and any unrealised income and expenses arising from intragroup transactions are eliminated on consolidation. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no impairment. Accounting policies of subsidiaries are changed, where necessary, to ensure consistency with the policies adopted by other members of the Group. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the same reporting date as the Company. Investments in subsidiaries are stated at cost on the Company’s balance sheet less any accumulated impairment losses. The acquisition of subsidiaries is accounted for using the purchase method. The cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under FRS 103 are recognised at their fair values at the acquisition date, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell. Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the income statement. The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the identifiable assets, liabilities and contingent liabilities recognised.

52

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.3

Common Control Business Combination Outside the Scope of FRS 103 A business combination involving entities under common control is a business combination in which all the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. A business combination involving common control entities, is outside the scope of FRS 103 Business Combinations. For such common control business combinations, the merger accounting principles are used to include the assets, liabilities, results, equity changes and cash flows of the combining entities in the consolidated financial statements. In applying merger accounting, financial statement items of the combining entities or businesses for the reporting period in which the common control combination occurs, and for any comparative periods disclosed, are included in the consolidated financial statements of the combined entity as if the combination had occurred from the date when the coming entities or businesses first came under the control of the controlling party or parties. A single uniform set of accounting policies is adopted by the combined entity. Therefore, the combined entity recognises the assets, liabilities and equity of the combining entities or businesses at the carrying amounts in the consolidated financial statements of the controlling party or parties prior to the common control combination. The carrying amounts are included as if such combined entity’s accounting policies and applying those policies to all periods presented. There is no recognition of any goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of the common control combination. The effects of all transactions between the combining entities or businesses, whether occurring before or after the combination, are eliminated in preparing the consolidated financial statements of the combined entity. Merger reserve represents the differences between the nominal amount of the share capital of the combining entities at the date on which it was acquired by the Group and the nominal amount of the share capital issued as consideration for the acquisition. All business combinations are accounted for using the purchase method except for the acquisition of Jiangsu Eastern Heavy Industries Co., Ltd, which was accounted for using the merger accounting as described above.

2.4

Foreign currencies and currency translation In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rate of exchange prevailing on the date of the transaction. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.

JES INTERNATIONAL HOLDINGS LIMITED

53

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.4

Foreign currencies and currency translation (Continued) Exchange differences arising on the settlement of monetary items, and on retranslation of monetary items are included in the income statement for the period except for exchange differences arising from borrowings in foreign currencies or on monetary items that from part of the Group’s net investment in foreign operations, which are recognised initially in equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated income statement on disposal of the foreign operation. Exchange differences arising on the retranslation of non-monetary items carried at fair value are included in the income statement for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity. For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in RMB using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s translation reserve. Such translation differences are recognised in the income statement in the period in which the foreign operation is disposed of.

2.5

Property, plant and equipment Property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and any accumulated impairment losses. The cost of property, plant and equipment includes its purchase price and any costs 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 dismantlement, removal or restoration is also included as part of the cost of property, plant and equipment if the obligation for the dismantlement, removal or restoration is incurred as a consequence of acquiring or using the property, plant and equipment. Subsequent expenditure relating to the property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that the future economic benefits associated with the item, in excess of standard performance of the asset before the expenditure was made, will flow to the Group and the Company, and the cost of the item can be reliably measured. All other repair and maintenance expenses are recognised in the income statement when incurred. The residual values, useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date to ensure that the residual values, period of depreciation and depreciation method are consistent with previous estimates and the expected pattern of consumption of future economic benefits embodied in the items of property, plant and equipment.

54

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.5

Property, plant and equipment (Continued) Depreciation is recognised in the income statement so as to write off the cost of assets, other than construction-in-progress, over their estimated useful lives, using the straight-line method, on the following bases: Years Plant and machinery Motor vehicles Office equipment

12 6 6

Construction-in-progress represents buildings, plant and machinery under construction or pending installation which is stated at cost less accumulated impairment losses, if any. Cost comprises of the direct costs incurred during the period of construction, installation and testing. No provision for depreciation is made on construction-in-progress until such time when the relevant assets are completed and ready for intended use. When the assets concerned are brought into use, the costs are transferred to property, plant and equipment and depreciated in accordance with the policy stated above. The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the net sales proceeds and the carrying amount of the asset and is recognised in the income statement. Any amount in the revaluation reserve relating to that asset is transferred to retained earnings directly. Fully depreciated property, plant and equipment are retained in the financial statements until they are no longer in use. 2.6

Impairment of tangible assets At each balance sheet date, the Group and the Company review the carrying amounts of their tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group and the Company estimate the recoverable amount of the cash-generating unit to which the asset belongs. Recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

JES INTERNATIONAL HOLDINGS LIMITED

55

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.6

Impairment of tangible assets (Continued) If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease. As assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the income statement, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

2.7

Inventories Inventories are stated at the lower of cost and net realisable value. Costs comprise direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in, first-out method. Net realisable value represents the estimated selling price less applicable variable selling expenses.

2.8

Financial instruments Financial assets and financial liabilities are recognised on the Group’s and Company’s balance sheets when the Group and the Company become a party to the contractual provisions of the financial instruments. Classification The Group and the Company classify their financial assets in the following categories: financial assets at fair value through profit or loss and loans and receivables. The classification depends on the purpose of which the assets were acquired. The management determines the classification of their financial assets at initial recognition and re-evaluates this designation at reporting date, with the exception that the designation of financial assets at fair value through profit or loss is irrevocable.

56

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.8

Financial instruments (Continued) Financial assets at fair value through profit or loss (FVTPL) Financial assets are classified as FVTPL if the financial asset is either held for trading or is designated as such upon initial recognition. A financial asset is classified as held for trading if it has been acquired principally for the purpose of selling in the short term; or if it is part of an identified portfolio of financial instruments with a recent actual pattern of short-term profit-taking and which is managed by the Group; or if it is a derivative that is not designated and effective as a hedging instrument or a financial guarantee contract. Assets in this category are classified as current assets if they are either held for trading or are expected to be realised within 12 months after the balance sheet date. A financial asset which is not classified as held for trading may be designated as FVTPL upon initial recognition if the financial asset is managed as part of a group of financial instruments, with its performance being evaluated on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping is provided internally on that basis. Financial assets at fair value through profit or loss are stated at fair value, with any resultant gain or loss recognised in the income statement. The net gain or loss recognised in the income statement incorporates any dividend or interest earned on the financial asset. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in active market. They are presented as current assets, except for those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Loans and receivables are recognised initially at fair values and subsequently measured at amortised cost using the effective interest method less impairment, if any. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, and through the amortisation process. Interest is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial. The effective interest method calculates the amortised cost of a financial instrument and allocates the interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments (including all fees and points paid or received between parties to the contract that form an integral part of the effective interest rate, transaction costs and all other premiums or discounts) through the expected life of the financial instrument, or where appropriate, a shorter period to the net carrying amount of the financial asset or financial liability. Income and expense are recognised on an effective interest basis for debt instruments other than those financial instruments at fair value through profit or loss. Loans and receivables are presented as “Loan to a subsidiary”, “Trade receivables”; “Other receivables, prepayments and deposits”, “Due from a subsidiary”, “Deposits for notes payable”, “Pledged fixed deposits” and “Cash and cash equivalents” on the balance sheets.

JES INTERNATIONAL HOLDINGS LIMITED

57

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.8

Financial instruments (Continued) Loans and receivables (Continued) An allowance for impairment of receivables is established when there is objective evidence that the Group and the Company will not be able to collect amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidences that these financial assets are impaired. The amount of the allowance is recognised in the income statement. Cash and cash equivalents comprise cash on hand, cash with banks, demand deposits and short-term highly liquid investments that are readily convertible to known amount of cash and which are subject to an insignificant risk of changes in values. Pledged fixed deposits are pledged to financial institutions. Derecognition of financial assets The Group and the Company derecognise a financial asset only when the contractual rights to the cash flows from the asset expire, or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group and the Company neither transfer nor retain substantially all the risks and rewards of ownership and continue to control the transferred asset, the Group and the Company recognise their retained interest in the asset and an associated liability for amounts it may have to pay. If the Group and the Company retain substantially all the risks and rewards of ownership of a transferred financial asset, the Group and the Company continue to recognise the financial asset and also recognise a collateralised borrowing for the proceeds receivable. On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that has been recognised directly in equity is recognised in the income statement. All regular way purchases and sales of financial assets are recognised or derecognised on the trade date, i.e. the date that the Group and the Company commit to purchase or sell the asset. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace concerned. Impairment of financial assets Financial assets, other than those at fair value through profit or loss, are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. The carrying amounts of all financial assets are reduced by the impairment losses directly with the exception of trade receivables where the carrying amounts are reduced through the use of an allowance account. Changes in the carrying amount of the allowance account are recognised in the income statement.

58

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.8

Financial instruments (Continued) Impairment of financial assets (Continued) If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment loss was recognised, the previously recognised impairment loss is reversed through the income statement to the extent the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised. Classification as debt or equity Financial liabilities and equity instruments issued by the Group and the Company are classified according to the substance of the contractual arrangements entered into and the definitions of a financial liability and an equity instrument. Equity instruments An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs. Financial liabilities Financial liabilities are classified as either financial liabilities “at fair value through profit or loss” or other financial liabilities. Financial liabilities are classified as FVTPL if the financial liability is either held for trading or it is designated as such upon initial recognition. 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. Other financial liabilities Trade and other payables Trade and other payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, where applicable, with interest expense recognised on an effective yield basis. Interest-bearing bank loans and borrowings Interest-bearing bank loans and borrowings are initially measured at fair value, net of transaction costs incurred, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption value is recognised in the income statement over the period of the borrowings, where possible, using the effective interest method.

JES INTERNATIONAL HOLDINGS LIMITED

59

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.8

Financial instruments (Continued) Other financial liabilities (Continued) Interest-bearing bank loans and borrowings (Continued) Borrowings which are due to be settled within 12 months after the balance sheet date are presented as current borrowings even though the original term was for a period longer than 12 months and an agreement to refinance, to reschedule payments, on a long-term basis is completed after the balance sheet date and before the financial statements are authorised for issue. Other borrowings due to be settled more than 12 months after the balance sheet date are presented as non-current borrowings in the balance sheet. Financial guarantee contract A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because a specified debtor fails to make payment when due. These guarantees are financial guarantee contracts as they require the Group to reimburse the banks if the debtors fail to make principal or interest payments when due, in accordance with the terms of their borrowings. Financial guarantee contract liabilities are measured initially at their fair values, plus transaction cost, and subsequently at the higher of the amount of obligation under the contract recognised as a provision in accordance with FRS 37 Provisions, Contingent Liabilities and Contingent Assets and the amount initially recognised less cumulative amortisation in accordance with FRS 18 Revenue. Derecognition of financial liabilities The Group and the Company derecognise financial liabilities when, and only when, the Group’s and the Company’s obligations are discharged, cancelled or they expire. For financial liabilities other than derivatives, gains and loses are recognised in the income statement when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in the income statement. Net gains or losses on derivatives include exchange differences.

2.9

Construction contracts A construction contract is a contract specifically negotiated for the construction of an asset or a combination of assets that are closely interrelated or interdependent in terms of their design, technology and functions or their ultimate purpose or use. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity at the balance sheet date (“percentage-of-completion method”), except where this would not be representative of the stage of completion. Variations in contract work, claims and incentive payments are included to the extent that they have been agreed with the customer. 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. Contract costs are recognised as expenses in the period in which they are incurred. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.

60

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.9

Construction contracts (Continued) Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract work and claims that can be measured reliably. A variation or a claim is recognised as contract revenue when it is probable that the customer will approve the variation or negotiations have reached an advanced stage such that it is probable that the customer will accept the claim. The stage of completion is measured by reference to the contract cost incurred to date bear to the estimated total costs of the contract. Costs incurred during the financial year in connection with future activity on a contract are excluded from costs incurred to date when determining the stage of completion of a contract. Such costs are shown as “Due from customers for construction contracts” on the balance sheet unless it is not probable that such contract costs are recoverable from the customers, in which case, such costs are recognised as an expense immediately. At the balance sheet date, the aggregated costs incurred plus attributable profit (less recognised loss) on each contract is compared against the progress billings. Where costs incurred plus the attributable profits (less recognised losses) exceed progress billings, the balance is presented as “Due from customers for construction contracts”. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is presented as “Due to customers for construction contracts”. Progress billings not yet paid by customers and retentions are included within “Trade receivables”. Advances received are included within “Due from customers for construction contracts”.

2.10 Assets held for sale Assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Assets (and disposal groups) classified as held for sale are measured at the lower of the assets’ previous carrying amount and fair value less costs to sell. 2.11 Operating lease Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to the income statement on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as an expense in the period in which they are incurred. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

JES INTERNATIONAL HOLDINGS LIMITED

61

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.12 Provisions Provisions are recognised when the Group and the Company have a present legal or constructive obligation as a result of a past event, it is probable that the Group and the Company will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the balance sheet date, taking into account the risks and uncertainties surrounding the obligation. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. The expense relating to any provision is recognised in the income statement. When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, the receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably. 2.13 Revenue recognition Revenue is recognised when it is probable that the economic benefits associated with the transaction will flow to the Group and the Company and the amount of revenue can be measured reliably. Revenue is measured at the fair value of consideration received or receivable for the rendering of services in the ordinary course of the Group’s and the Company’s activities. Revenue from construction contracts Please refer to Note 2.9 “Construction Contracts” for the accounting policy for revenue recognition from construction contracts. Income from sale of scrap materials Income from sale of scrap materials is recognised upon the transfer of significant risks and rewards of ownership of the goods to customers, which generally coincides with delivery and acceptance of the goods sold. Interest income Interest income is accrued on a time basis, by reference to the principal outstanding and at the applicable effective interest rate. Dividend income Dividend income from investments is recognised when the shareholders’ rights to receive payment have been established. 2.14 Retirement benefit costs Defined contribution plans are post-employment benefit plans under which the Group and the Company pay fixed contributions into separate entities such as the Singapore Central Provident Fund and the social security plan in People’s Republic of China (the “PRC”) on a mandatory, contractual or voluntary basis. The Group and the Company have no further payment obligations once the contributions have been paid.

62

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.14 Retirement benefit costs (Continued) Pursuant to the relevant regulations of the PRC government, the subsidiaries in the PRC have participated in a local municipal government retirement benefits scheme (the “Scheme”), whereby the subsidiaries in the PRC are required to contribute a certain percentage of the basic salaries of their employees, subject to a certain ceiling, to the Scheme to fund their retirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of all existing and future retired employees of the subsidiaries in the PRC. The only obligation of the Group with respect to the Scheme is to pay the ongoing required contributions under the Scheme mentioned above. Contributions to defined contribution plans are recognised as an expense in the income statement in the same financial year as the employment that gives rise to the contributions. There are no provisions under the Scheme whereby forfeited contributions may be used to reduce future contributions. 2.15 Finance costs Interest expense is expensed in the income statement in the financial year in which it is incurred using the effective interest method, except to the extent that it is capitalised as being attributable to the acquisition, construction or production of asset which necessarily takes a substantial period of time to be prepared for its intended use. 2.16 Income tax Income tax expense represents the sum of the tax currently payable and deferred tax. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group’s and the Company’s liabilities for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and subsidiaries operate by the balance sheet date. Deferred tax is recognised on the differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and are accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised on taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

JES INTERNATIONAL HOLDINGS LIMITED

63

Notes to the financial statements For the financial year ended 31 December 2008

2.

Summary of significant accounting policies (Continued)

2.16 Income tax (Continued) The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited to the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. 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 they relate to income taxes levied by the same taxation authority and the Group and the Company intend to settle its current tax assets and liabilities on a net basis. Current and deferred tax are recognised as an expense or income in the income statement, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost. 2.17 Segment reporting A business segment is a distinguishable component of the Group that is engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group that is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of components operating in other economic environments. The Group’s revenue, assets, liabilities and capital expenditures are almost entirely attributable to a single business segment of building and sales of various ships, therefore, no business segments are presented. 2.18 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 and the Company. Contingent liabilities and assets are not recognised on the balance sheets of the Group and the Company. 2.19 Dividends Equity dividends are recognised when they become legally payable. Interim dividends are recorded in the financial year in which they are declared payable. Final dividends are recorded in the financial year in which dividends are approved by shareholders.

64

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

3.

Critical accounting judgements and key sources of estimation uncertainty In the application of the Group’s and the Company’s accounting policies, which are described in Note 2 to the financial statements, management made judgements, estimates and assumptions about the carrying amounts of assets and liabilities that were not readily apparent from other sources. The estimates and associated assumptions were based on historical experience and other factors that were considered to be reasonable under the circumstances. Actual results may differ from these estimates. These estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.

3.1

Critical judgements made in applying the accounting policies The following are the critical judgements apart from those involving estimations (see below), that management has made in the process of applying the Group’s and the Company’s accounting policies and that have significant effect on the amounts recognised in the financial statements. (i)

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 environment in which the entities operate and the entities’ process of determining sales prices.

(ii)

Impairment of investments and financial assets The Group and the Company follow the guidance of FRS 39 on determining when an investment of financial asset is impaired. This determination requires significant judgement, management evaluates, among other factors, the duration and extent to which the fair value of an investment or financial asset is less than its cost and the financial health of and near-term business outlook for the investment or financial asset, including factors such as industry and sector performance, changes in technology and operational and financing cash flow.

3.2

Key sources of estimation uncertainty (i)

Revenue recognition The Group recognises contract revenue based on the percentage-of-completion method. The percentage-of-completion is measured in accordance with the accounting policy stated in Note 2.9 to the financial statements. Significant assumptions are required in determining the percentage-of-completion, the extent of the contract cost incurred, the estimated total contract revenue, contract cost and the recoverability of the contracts. In making these assumptions, the Group evaluates by relying on past experience. Revenue from construction contracts is disclosed in Note 27 to the financial statements.

JES INTERNATIONAL HOLDINGS LIMITED

65

Notes to the financial statements For the financial year ended 31 December 2008

3.

Critical accounting judgements and key sources of estimation uncertainty (Continued)

3.2

Key sources of estimation uncertainty (Continued) (ii)

Depreciation of property, plant and equipment These assets are depreciated on a straight-line method over their estimated useful lives. Management estimates the useful lives of these assets to be within 6 to 12 years. The carrying amounts of the Group’s and the Company’s property, plant and equipment as at 31 December 2008 were approximately RMB432.81 million (2007: RMB35.34 million) and RMB300,000 (2007: RMB16,000) respectively. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised.

(iii)

Income taxes The amount of income tax is being calculated on estimated assessable profits based on the completed contract method which is in accordance with the tax rules and regulations applicable in the PRC. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. The carrying amounts of the Group’s and the Company’s income tax payables as at 31 December 2008 were RMB1.66 million (2007: Nil) and RMB1.66 million (2007: Nil) respectively.

(iv)

Withholding tax on dividends According to the New Corporate Income Tax Law (“CIT”) and the Detailed Implementation Regulations, dividends distributed to the foreign investor by Foreign Invested Enterprises (“FIE”) in the PRC, would be subject to withholding tax of 10% (5% for countries such as Singapore that has signed bilateral treaty with the PRC). The FIE’s profits, arising in the financial year 2008 and beyond, to be distributed to the foreign investors as dividends shall be subject to withholding tax. The management has considered the above tax exposure and has provided for deferred tax liability as at 31 December 2008 based on the assumption that the FIE will, in the foreseeable future, declare dividend payments to the Company and there will be withholding tax on dividends to be distributed out of the retained earnings for financial year 2008. The carrying amounts of the Group’s and the Company’s deferred tax liabilities on dividends as at 31 December 2008 were RMB4.50 million (2007: Nil) and RMB4.50 million (2007: Nil) respectively.

(v)

Impairment of loans and receivables Management reviews its loans and receivables for objective evidence of impairment at least quarterly. Significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in payments are considered objective evidences that a receivable is impaired. In determining this, management makes judgements as to whether there is observable data indicating that there has been a significant change in the payment ability of the debtor, or whether there have been significant changes with adverse effect in the technological, market, economic or legal environment in which the debtor operates in. Where there is objective evidence of impairment, management makes judgements as to whether an impairment loss should be recorded in the income statement. In determining this, management uses estimates based on historical loss experience for assets with similar credit risk characteristics. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between the estimated loss and actual loss experience. The carrying amounts of the Group’s and the Company’s loans and receivables at the balance sheet date are disclosed in the respective notes to the financial statements.

66

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

4.

Property, plant and equipment

The Group

Plant and machinery RMB’000

Motor vehicles RMB’000

68,395

1,134

Office Constructionequipment in-progress Total RMB’000 RMB’000 RMB’000

Cost At 1 January 2008

1,038

7,892

78,459 (1)

Additions

12,223

315

11

389,341

Transfers

980

–

–

(980)

–

–

(10)

(2)

–

(12)

81,598

1,439

1,047

396,253

480,337

41,871

356

895

–

43,122

4,160

197

47

–

4,404

–

–

(1)

–

(1)

46,031

553

941

–

47,525

35,567

886

106

396,253

432,812

65,988

986

976

2,889

70,839

2,407

148

62

5,003

7,620

68,395

1,134

1,038

7,892

78,459

36,860

183

861

–

37,904

5,011

173

34

–

5,218

41,871

356

895

–

43,122

26,524

778

143

7,892

35,337

Exchange translation differences At 31 December 2008

401,890

Accumulated depreciation At 1 January 2008 Charged for the financial year Exchange translation differences At 31 December 2008 Net book value At 31 December 2008 Cost At 1 January 2007 Additions At 31 December 2007 Accumulated depreciation At 1 January 2007 Charged for the financial year At 31 December 2007 Net book value At 31 December 2007 (1)

These additions of construction-in-progress are mainly due to building of the new yard by a subsidiary.

JES INTERNATIONAL HOLDINGS LIMITED

67

Notes to the financial statements For the financial year ended 31 December 2008

4.

Property, plant and equipment (Continued) Office equipment RMB’000

Total RMB’000

–

28

28

Additions

315

11

326

Exchange translation differences

(12)

(2)

(14)

At 31 December 2008

303

37

340

At 1 January 2008

–

12

12

Charged for the financial year

8

22

30

Exchange translation differences

–

(2)

(2)

At 31 December 2008

8

32

40

295

5

300

The Company

Motor vehicle RMB’000

Cost At 1 January 2008

Accumulated depreciation

Net book value At 31 December 2008

The Company

Office equipment RMB’000

Cost At 1 January 2007

12

Additions

16

At 31 December 2007

28

Accumulated depreciation At 1 January 2007

–

Charged for the financial year

12

At 31 December 2007

12

Net book value At 31 December 2007

68

Annual Report 2008

16

Notes to the financial statements For the financial year ended 31 December 2008

5.

Investments in subsidiaries The Company 2008 2007 RMB’000 RMB’000 Unquoted equity interests, at cost

512,728

111,052

Details of subsidiaries are as follows: Name of subsidiary/ (Country of incorporation)

Effective equity held by the Group

Paid-up capital 2008 2007 RMB’000 RMB’000

2008 %

2007 %

Jiangsu Eastern Heavy Industries Co., Ltd (“JEHI”) (PRC)

451,372

111,052

100

100

Jiangsu New Eastern Marine Engineering Equipment Co., Ltd (PRC)

61,356

–

100

–

Principal activities

Shipbuilding

Dormant

During the financial year ended 31 December 2008, the Company increased its investment in JEHI by RMB340.32 million. Following the increase in the investment, the registered capital of JEHI is RMB451.37 million and Company’s equity interest in the subsidiary is 100% (2007:100%). On 26 June 2008, the Company incorporated a wholly-owned subsidiary, Jiangsu New Eastern Marine Engineering Equipment Co., Ltd with a paid-up capital of RMB61.36 million. The subsidiaries are audited by BDO Shanghai Zhonghua, a member firm of BDO International.

6.

Loan to a subsidiary During the financial year ended 31 December 2008, the Company granted a loan of USD15.95 million to its wholly-owned subsidiary, JEHI, for a period of 8 years from 6 June 2008 to 6 June 2016, with interest payable at 3.0% per annum. The Company earned interest income of USD239,250 (equivalent to RMB1.69 million) during the financial year ended 31 December 2008. The carrying amount of the loan to a subsidiary approximates its fair value and is denominated in United States Dollars.

JES INTERNATIONAL HOLDINGS LIMITED

69

Notes to the financial statements For the financial year ended 31 December 2008

7.

Inventories The Group 2008 2007 RMB’000 RMB’000 Raw materials

121,773

61,680

Raw materials mainly consist of steel products and imported equipment which are used in the Group’s shipbuilding activities. The cost of inventories recognised as expense and included in “cost of sales” for the financial year ended 31 December 2008 amounts to RMB1,186.41 million (2007: RMB957.27 million).

8.

Due from/to customers for construction contracts The Group 2008 2007 RMB’000 RMB’000 Aggregate costs incurred and profits recognised to date

2,762,849

2,600,305

Less: Progress billings

(3,064,393)

(2,407,501)

(301,544)

192,804

Due from customers for construction contracts

636,285

505,606

Due to customers for construction contracts

(937,829)

(312,802)

(301,544)

192,804

As at 31 December 2008, the amount due to customers for construction contracts includes advances received for construction contracts amounting to RMB111.48 million (2007: Nil). As at 31 December 2008, retention monies held by customers for contract work amounted to Nil (2007: Nil).

9.

Trade receivables The Group 2008 2007 RMB’000 RMB’000

70

Trade receivables – third parties

7,548

6,548

Allowance for doubtful trade receivables

(2,256)

(1,927)

5,292

4,621

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

9.

Trade receivables (Continued) The ageing of trade receivables are as follows: The Group Gross Impairment Gross Impairment receivables allowance receivables allowance 2008 2008 2007 2007 RMB’000 RMB’000 RMB’000 RMB’000 Past due 0 – 30 days

–

–

1,240

(62)

Past due 31 – 60 days

–

–

–

–

Past due 61 – 90 days

–

–

1,730

(86)

Past due 91 – 360 days

4,855

(243)

1,894

(95)

More than one year

2,693

(2,013)

1,684

(1,684)

7,548

(2,256)

6,548

(1,927)

Movements in allowance for doubtful trade receivables are as follows: The Group 2008 2007 RMB’000 RMB’000 At beginning of the financial year

1,927

3,158

329

–

Reversal of allowance for doubtful trade receivables

–

(1,153)

Allowance for doubtful trade receivables written off

–

(78)

2,256

1,927

Allowance for doubtful trade receivables

At end of the financial year

As at 31 December 2008, the management has reviewed the allowance for doubtful trade receivables and determined the allowance for doubtful trade receivables of Nil (2007: RMB1.15 million) to be no longer required. The currency profiles of the Group’s trade receivables are as follows: The Group 2008 2007 RMB’000 RMB’000 Renminbi United States Dollars

680

–

4,612

4,621

5,292

4,621

JES INTERNATIONAL HOLDINGS LIMITED

71

Notes to the financial statements For the financial year ended 31 December 2008

10.

Other receivables, prepayments and deposits The Group 2008 2007 RMB’000 RMB’000

The Company 2008 2007 RMB’000 RMB’000

Other receivables

196,154

181,072

106

–

Advances to suppliers

472,338

212,553

–

–

63,686

61,246

–

–

31

–

31

–

732,209

454,871

137

–

(1,256)

(2,116)

–

–

730,953

452,755

137

–

Deposits for land use rights Rental deposit Allowance for doubtful other receivables

Other receivables mainly comprise input VAT from the import of machinery and equipment. Advances to suppliers represent monies paid in advance for raw materials purchased. Deposits for land use rights represent deposits paid for the purchase of land use right. Movements in allowance for doubtful other receivables are as follows: The Group 2008 2007 RMB’000 RMB’000 At beginning of the financial year

The Company 2008 2007 RMB’000 RMB’000

2,116

5,338

–

–

Reversal of allowance for doubtful other receivables

(860)

(2,822)

–

–

Allowance for doubtful other receivables written off

–

(400)

–

–

1,256

2,116

–

–

At end of the financial year

As at 31 December 2008, the management has reviewed the allowance for doubtful other receivables and determined the allowance for doubtful other receivables of RMB0.86 million (2007: RMB2.82 million) to be no longer required. The currency profiles of the Group’s and Company’s other receivables, prepayments and deposits are as follows: The Group 2008 2007 RMB’000 RMB’000 Renminbi

564,796

405,002

–

–

United States Dollars

166,020

47,753

–

–

137

–

137

–

730,953

452,755

137

–

Singapore Dollars

72

The Company 2008 2007 RMB’000 RMB’000

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

11.

Due from/to a subsidiary The amounts due from/to are non-trade in nature, unsecured, interest-free and repayable on demand. As at 31 December 2008, the carrying amount of due from a subsidiary approximates its fair value and is denominated in Singapore Dollars. As at 31 December 2007, the carrying amount of due to a subsidiary approximates its fair value and is denominated in Renminbi.

12.

Financial assets at fair value through profit or loss The Group 2008 2007 RMB’000 RMB’000 At beginning of the financial year

956

1,404

Disposal during the financial year

–

(569)

Fair value (loss)/gain recognised in income statement

(515)

121

At end of the financial year

441

956

Financial assets at fair value through profit or loss relate to investments in open-ended funds. The financial assets at fair value through profit or loss are denominated in Renminbi.

13.

Deposits for notes payable These amounts represent deposits for issuance of notes payable as disclosed in Note 21 to the financial statements. The deposits for notes payable bear average effective interest rate of 1.73% (2007: 0.04%) per annum. The deposits for notes payable are denominated in Renminbi.

14.

Pledged fixed deposits The pledged fixed deposits represent deposits with financial institutions for the refund guarantees to foreign customers and for the issuance of letters of credit. The pledged fixed deposits, with fixed and flexible periods, bear average effective interest rate of 1.77% (2007: 0.84%) per annum. Included in the pledged fixed deposits, for the financial year ended 31 December 2007 was an amount pledged to financial institution for bank borrowing that amounted to RMB13.73 million.

JES INTERNATIONAL HOLDINGS LIMITED

73

Notes to the financial statements For the financial year ended 31 December 2008

14.

Pledged fixed deposits (Continued) The currency profiles of the Group’s pledged fixed deposits are as follows: The Group 2008 2007 RMB’000 RMB’000 Renminbi United States Dollars

15.

347,845

71,961

39

17,656

347,884

89,617

Cash and cash equivalents The Group 2008 2007 RMB’000 RMB’000

The Company 2008 2007 RMB’000 RMB’000

Cash on hand and cash at bank

534,862

204,067

69,173

1,528

Short-term fixed deposits

202,527

1,204,367

202,527

1,204,367

203

26,650

–

–

737,592

1,435,084

271,700

1,205,895

Cash designated for the purchase of raw materials*

*

The cash designated for the purchase of raw materials relate to 2 (2007:4) vessels under construction.

The average effective interest rate on short-term bank deposits, with maturity period of 14-21 days (2007: 7 days), was 0.43% (2007: 1.68%) per annum. The currency profiles of the Group’s and the Company’s cash and cash equivalents are as follows: The Group 2008 2007 RMB’000 RMB’000 Renminbi United States Dollars Singapore Dollars

74

Annual Report 2008

The Company 2008 2007 RMB’000 RMB’000

461,794

25,560

–

–

66,583

203,629

62,487

–

209,215

1,205,895

209,213

1,205,895

737,592

1,435,084

271,700

1,205,895

Notes to the financial statements For the financial year ended 31 December 2008

16.

Assets held for sale On 4 July 2008, the Company entered into an acquisition agreement with Lofty Leader Investment Limited (“Lofty Leader”) for the purchase of a 49.18% equity interest in JYJJP Eastern Shipyard Accessories Manufacturing Co., Ltd (“Jiangsu New Eastern”) for an aggregate consideration of USD30 million. The acquisition of the 49.18% equity interest in Jiangsu New Eastern was approved by the Jiangsu Foreign Economic and Trade Bureau on 10 July 2008, and on 24 November 2008, the Jiangsu Industrial and Commercial Administration Bureau gave its approval for a change in Jiangsu New Eastern’s business license. The principal activity of Jiangsu New Eastern is of producing and selling ship equipment and outfitting parts. As at 31 December 2008, Jiangsu New Eastern has not commenced operations. Jiangsu Eastern Shipyard Co., Ltd (“Jiangsu Eastern”), who is an existing shareholder of Jiangsu New Eastern holds the remaining 50.82% equity interest in Jiangsu New Eastern. It is a company incorporated under the laws of the PRC and is directly controlled by Mr Jin Xin, the Chairman and Chief Executive Officer of the Company. The Company has entered into an Equity Transfer Agreement on 5 December 2008 under which Jiangsu Eastern, and/or its nominee, has committed to purchase the Company’s 49.18% equity interest in Jiangsu New Eastern upon the completion of the construction of the new shipyard and assignment of the land use rights of the new yard to JEHI, subject to PRC government’s approvals being secured. Jiangsu New Eastern is not intended to form part of the Company’s group of companies and the management is committed to dispose Jiangsu New Eastern within 12 months.

17.

Trade payables No interest is charged on the trade payables. The carrying amounts of trade payables approximate their fair values and are denominated in Renminbi.

18.

Other payables and accruals The Group 2008 2007 RMB’000 RMB’000

The Company 2008 2007 RMB’000 RMB’000

Other payables

43,600

21,766

34,287

–

Accrued operating expenses

69,021

69,577

3,524

13,460

112,621

91,343

37,811

13,460

JES INTERNATIONAL HOLDINGS LIMITED

75

Notes to the financial statements For the financial year ended 31 December 2008

18.

Other payables and accruals (Continued) The currency profiles of the Group’s and Company’s other payables and accruals are as follows: The Group

The Company

2008 RMB’000

2007 RMB’000

Renminbi

14,547

34,617

–

–

United States Dollars

94,550

43,266

34,287

–

3,524

13,460

3,524

13,460

112,621

91,343

37,811

13,460

Singapore Dollars

2008 RMB’000

2007 RMB’000

As at 31 December 2008, other payables mainly consist of an amount payable for an acquisition as explained in Note 16 to the financial statements. The accrued expenses mainly consist of accrual of commission payable to brokers. As at 31 December 2007, other payables and accruals mainly consist of accrued expenses related to initial public offering and operating expenses.

19.

Due to a related party The amount due to a related party is non-trade in nature, unsecured, interest-free and repayable on demand. The carrying amount of due to a related party approximates its fair value and is denominated in Renminbi.

20.

Bank borrowings Bank borrowings consist of the following: The Group 2008 2007 RMB’000 RMB’000 Unsecured short-term bank borrowing

20,000

–

–

13,733

–

130,000

20,000

143,733

Secured short-term bank borrowings - Bank borrowing I - Bank borrowing II Amount due for settlement within 12 months As at 31 December 2007,

76

(i)

Bank borrowing I was secured by a pledged fixed deposit amounting to RMB13.73 million.

(ii)

Bank borrowing II was guaranteed by a personal guarantee from a Director of the Company.

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

20.

Bank borrowings (Continued) The average effective interest rates for bank borrowings are as follows: The Group 2008 2007 Renminbi United States Dollars

3.62%

2.52%

–

0.5%

The management estimates that the carrying amounts of the Group’s bank borrowings approximate their fair values. The currency profiles of the Group’s bank borrowings are as follows: The Group 2008 2007 RMB’000 RMB’000 Renminbi United States Dollars

21.

20,000

130,000

–

13,733

20,000

143,733

Notes payable For the financial year ended 31 December 2008, the average effective interest rate for notes payable is 0.22% (2007: 2.83%) per annum. As at 31 December 2007 and 2008, the notes payables are secured by deposits (Note 13).

22.

Housing contribution fund These amounts represent contributions by a subsidiary’s employees to housing contribution fund in accordance with Notice 14, “Accounting Treatment of Housing Fund” issued by Ministry of Finance of the PRC (中华人民共和国财政部《关于印发企业住房基金会计处理补充规定的通知》 (财会字 [1995] 14号)). In 1998, the State Council issued Notice 23, “Housing System Reformation”, which abolished the housing contribution fund.

JES INTERNATIONAL HOLDINGS LIMITED

77

Notes to the financial statements For the financial year ended 31 December 2008

23.

Share capital The Group and the Company 2008 Number of shares

2007 RMB’000

Number of shares After sub-division

RMB’000

Before sub-division

Issued and fully paid Balance at beginning of financial year

1,144,054,000

1,310,160

–

2

*

–

–

–

686,658

–

1,144,054,000

1,310,160

–

686,660

*

Sub-division of shares

–

–

686,660,000

(686,660)

–

Issuance of ordinary shares pursuant to the - conversion of convertible bonds

–

–

84,259,000

–

121,554

Issuance of ordinary shares

- initial public offering - overallotment exercise Share issue expenses Balance at end of financial year *

–

–

373,135,000

–

1,266,195

21,974,000

74,544

–

–

–

–

(2,786)

–

–

(77,589)

1,166,028,000

1,381,918

1,144,054,000

–

1,310,160

Represents the Company’s paid-up share capital of SGD2 (equivalent to approximately RMB10), comprising 2 subscriber shares on incorporation.

The Company has one class of ordinary shares which carries no right to fixed income. Fully paid ordinary shares, which have no par value, carry one vote per share and carry a right to dividends. All newly issued ordinary shares in the financial years ended 31 December 2008 and 2007 rank paripassu with the existing ordinary shares. The Group’s and the Company’s objectives when managing capital are to safeguard the Group’s and Company’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The Group and the Company manage capital by regularly monitoring their current and expected liquidity requirements. In order to maintain or achieve an optimal capital structure, the Group and the Company may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce borrowings. No changes were made in the objectives, policies or processes during the financial years ended 31 December 2008 and 31 December 2007.

78

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

23.

Share capital (Continued) The Group and the Company are not subject to either internally or externally imposed capital requirements except for conversion of RMB into foreign currencies, which is subject to the rules and regulations of the foreign exchange control promulgated by the PRC government, and as disclosed in Note 24(a) to the financial statements, subsidiaries of the Group are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied with by the subsidiaries for the financial years ended 31 December 2008 and 2007. The Group and the Company also monitor capital using the debt to equity ratio. This ratio is calculated as total liabilities divided by equity. Total liabilities is the sum of “current liabilities” and “non-current liabilities” as shown in the balance sheets and equity is “capital and reserves” as shown in the balance sheets. The Group’s strategy is to maintain the debt to equity ratio below 1.0. The debt to equity ratio as at 31 December 2008 and 2007 were as follows: 2008

2007

Total liabilities (RMB’000)

1,710,923

1,092,784

Equity (RMB’000)

1,714,366

1,641,642

0.998

0.666

Debt to equity ratio

24.

Statutory reserve The Group (a)

Statutory surplus reserve According to the relevant PRC regulations and the Articles of Association of the subsidiaries, they are required to transfer 10% of their profit after income tax to the statutory surplus reserve until the reserve balance reaches 50% of their registered capital. The transfer to this reserve must be made before the distribution of dividends to equity owners. Statutory surplus reserve can be used to make good previous years’ losses, if any, and may be converted into paid-in capital in proportion to the existing interests of equity owners, provided that the balance after such conversion is not less than 25% of the registered capital.

(b)

Statutory public welfare fund According to the relevant PRC regulations and the Articles of Association of the subsidiaries, they are required to transfer 5% of their profit after income tax to the statutory public welfare fund. The statutory public welfare fund is established for the purpose of providing employee facilities and other collective benefits to its employees.

Movements in these accounts are set out in the consolidated statement of changes in equity.

JES INTERNATIONAL HOLDINGS LIMITED

79

Notes to the financial statements For the financial year ended 31 December 2008

25.

Merger reserve The Group’s merger reserve represents the difference between the nominal amount of shares issued by the subsidiary, JEHI, in exchange for the nominal amount of shares acquired in respect of the acquisition entity.

26.

Foreign currency translation reserve The foreign currency translation reserve comprises all foreign exchange differences arising from the translation of the financial statements of the companies in the Group whose functional currencies are different from that of the Group’s presentation currency, Renminbi. Movement in this account is set out in the statements of changes in equity.

27.

Revenue The Group 2008 2007 RMB’000 RMB’000 Revenue from shipbuilding

28.

1,620,739

1,494,844

Other operating income The Group 2008 2007 RMB’000 RMB’000 Interest income

23,460

2,013

6,312

4,716

Reversal of allowance for doubtful other receivables

860

2,822

Reversal of allowance for doubtful trade receivables

–

1,153

21

–

Gain on disposal of financial assets at fair value through profit or loss

–

215

Fair value gain on financial assets at fair value through profit or loss

–

121

549

396

31,202

11,436

Sale of scrap materials

Write back of bad debts written off

Sundry income

80

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

29.

Other operating expenses The Group 2008 2007 RMB’000 RMB’000 Compensation to employees

–

548

69,541

19,510

Sundry expenses

400

100

Fair value loss on structured deposits

591

–

Fair value loss on financial assets at fair value through profit or loss

515

–

71,047

20,158

Net foreign exchange loss

30.

Finance costs The Group 2008 2007 RMB’000 RMB’000 Interest expense Drawdown fee on bank borrowings Bank service charges

9,908

7,549

–

3,900

449

77

10,357

11,526

Interest expense is incurred mainly on notes payable, letters of credit and bank borrowings.

JES INTERNATIONAL HOLDINGS LIMITED

81

Notes to the financial statements For the financial year ended 31 December 2008

31.

Profit before income tax The following items have been included in arriving at profit before income tax: The Group 2008 2007 RMB’000 RMB’000 After charging: Commission expense (included in selling and distribution expenses)

57,756

50,551

Staff salaries, wages and bonuses (included in cost of sales and administrative expenses)

33,510

26,041

7,852

2,960

Operating lease expenses (included in cost of sales and administrative expenses)

13,240

13,200

Depreciation of property, plant and equipment (included in cost of sales and administrative expenses)

4,404

5,218

Directors’ remuneration and bonuses (included in administrative expenses)

2,168

2,230

690

708

Employer’s contributions to defined contribution plans * (included in administrative expenses)

Directors’ fee (included in administrative expenses) Non audit fee paid to auditors of the Company (included in administrative expenses)

32

11

Allowance for doubtful trade receivables (included in administrative expenses)

329

–

Fair value loss on financial assets at fair value through profit or loss (included in other operating expense)

515

–

*

32.

The Company makes contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. The employees of the Group who are employed in the PRC participate in a defined contribution retirement benefit plan organised by the relevant provincial government. For the financial year ended 31 December 2008, the Group is required to make monthly defined contribution to these plans at 32% (2007: 32%) of the employees’ monthly salaries and wages as stipulated by local rules and regulations. These pension contributions are expensed as incurred. The Group has no other obligations for the payment of retirement and other post-retirement benefits of employees or retirees other than the payments disclosed in this note.

Income tax expense The Group 2008 2007 RMB’000 RMB’000 Current income tax expense

1,721

–

Deferred income tax expense

4,753

–

Total income tax expense in the consolidated income statement

6,474

–

The Group is subject to income tax on an entity basis on profit arising or derived from the tax jurisdiction in which each entity within the Group is domiciled and operates. Pursuant to the applicable income tax laws and regulations of the PRC, a new foreign invested manufacturing enterprise is entitled to preferential tax rates (tax holiday): two years’ exemption and three years’ 50% reduction in the income tax rate.

82

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

32.

Income tax expense (Continued) On 22 August 2006, the subsidiary, JEHI was established in the PRC as a wholly foreign owned enterprise (“WFOE”) under the laws of the PRC. In accordance with the “Income Tax Law of the PRC for Enterprise with Foreign Investment and Foreign Enterprise”, where JEHI is entitled to full exemption from Enterprise Income Tax (“EIT”) for the first two years commencing from its first profitable year and, thereafter is entitled to a 50% relief of EIT for the next three years. JEHI is exempted from income tax commencing from January 2007. The income tax expenses varied from the amount of income tax expense determined by applying the Singapore income tax rate of 18% (2007: 18%) to profit before income tax as a result of the following differences: The Group 2008 2007 RMB’000 RMB’000 Profit before income tax

53,989

224,911

Tax calculated at statutory tax rate @ 18 % (2007: 18%)

9,718

40,484

Difference in tax rate

3,153

33,736

Non-deductible expenses

3,308

2,492

Differences between percentage-of-completion method and completed contract method

55,142

(39,470)

Non-taxable income

(69,600)

(37,242)

Deferred income tax expenses

4,753

–

Income tax expense

6,474

–

For income tax purposes, completed contract method of recognising revenue is adopted instead of percentage-of-completion method. The tax effects of the differences between completed contract method and percentage-of-completion method of recognising is recognised as deferred tax liabilities. As at 31 December 2008 no deferred tax liabilities were recognised in respect of the differences as the subsidiaries being WFOE, are entitled to full exemption of income tax for the first two years commencing from their first profitable year. Movements in deferred tax liabilities during the financial year are as follows: The Group 2008 2007 RMB’000 RMB’000 At beginning of the financial year Charged to income statement Exchange translation differences At end of the financial year

–

–

4,753

–

(249) 4,504

–

Deferred income tax expense is recognised in respect of withholding tax on dividends to be distributed out of the profit of a subsidiary in the PRC. Under the new Corporate Income Tax Law, dividends distributed to the foreign investor by Foreign Invested Enterprise (“FIE”) will no longer be tax exempted. Such dividends will be subject to a 5% withholding tax starting from 1 January 2008.

JES INTERNATIONAL HOLDINGS LIMITED

83

Notes to the financial statements For the financial year ended 31 December 2008

33.

Earnings per share The calculation of basic and diluted earnings per share attributable to the ordinary equity holders of the Company is based on the following: (a)

Basic earnings per share Basic earnings per share is calculated by dividing profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. Earnings 2008 RMB’000 Earnings for the purpose of basic earnings per share (profit for the financial year attributable to equity holders of the Company)

47,515

2007 RMB’000

224,911

Number of shares 2008

2007

Number of shares

1,166,028,000

1,144,054,000

Weighted average number of ordinary shares for the purpose of basic earnings per share

1,165,468,175

1,144,054,000

4.08

19.66

Earnings per share (RMB cents) – Basic

Earnings per share of 19.66 RMB cents for the financial year ended 31 December 2007 was computed based on 1,114,054,000 ordinary shares in issue as at 31 December 2007. The earnings per share would have been 329.76 RMB cents if the actual weighted average number of ordinary shares have been used. (b)

Diluted earnings per share Diluted earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year plus the weighted average number of ordinary shares that would be issued on the conversion of all dilutive potential ordinary shares into ordinary shares. There is no dilutive potential ordinary share during the financial years ended 31 December 2008 and 2007.

84

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

34.

Contingent liabilities The Group has contingent liabilities in respect of guarantees arising in the ordinary course of business. It is not anticipated that any material liabilities will arise from the contingent liabilities. (a)

Guarantees provided for the refund guarantees The Group has acted as the guarantor for the trading houses in respect of refund guarantee provided by the bankers to the subsidiary’s customers. The amounts and maturities of these guarantees as at the respective balance sheet dates are as follows: The Group 2008 2007 RMB’000 RMB’000 Within one year

114,000

601,000

One to two years

245,000

264,000

–

39,000

359,000

904,000

Two to three years

(b)

Refund guarantees The Group is contingently liable to its bankers in respect of refund guarantees provided by the bankers to the subsidiary’s customers. The amounts and maturities of the guarantees as at the respective balance sheet dates are as follows: The Group 2008 2007 RMB’000 RMB’000 Within one year

34,440

273,000

One to two years

77,240

–

Two to three years

77,560

–

189,240

273,000

JES INTERNATIONAL HOLDINGS LIMITED

85

Notes to the financial statements For the financial year ended 31 December 2008

35.

Commitments (a)

Capital commitments Capital expenditures contracted for at the balance sheet date but not yet incurred are as follows: The Group 2008 2007 RMB’000 RMB’000 Development costs

(b)

621,157

5,289

Operating lease commitments As at each of the balance sheet dates, the future aggregate minimum lease payments under noncancellable operating leases contracted for but not recognised as liabilities, are as follows: The Group 2008 2007 RMB’000 RMB’000 Within one year

13,357

13,200

After one year but before five years

52,800

52,800

After five years

49,500

49,500

115,657

115,500

Operating lease payments represent rents payable by the Group and the Company for office premises and other operating facilities. Leases are negotiated for an average term of 1 to 11 years and rentals are fixed for an average of 1 to 11 years. (c)

86

The Company is committed to pay RMB411.25 million (equivalent to USD60 million) as share capital of its wholly-owned subsidiary, Jiangsu New Eastern Marine Engineering Equipment Co., Ltd (“JNEM”). As at 31 December 2008, the Company had only contributed paid-up capital of RMB61.36 million (equivalent to USD9 million) out of the total amount of share capital to be paid.

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

36.

Significant related party transactions Related parties are entities with common direct or indirect shareholders and/or directors. Parties are considered to be related if one party has the ability to control the other party in making financial and operating decisions. Certain of the Group’s transactions and arrangements are with related parties and the effect of these on the basis determined between the parties is reflected in these financial statements. The balances are unsecured, interest-free and repayable on demand unless otherwise stated. During the financial year, in addition to those disclosed elsewhere in these financial statements, the following significant transactions took place at terms agreed between the parties: The Group

The Company

2008 RMB’000

2007 RMB’000

2008 RMB’000

2007 RMB’000

Processing service fee from a related party

123,728

270,720

–

–

Rental paid to a related party

(13,200)

(13,200)

–

–

Payment on behalf by a related party

45,970

–

–

–

123,211

–

–

–

Loan to a subsidiary

–

–

(109,376)

–

Advances to a subsidiary

–

–

(268,000)

–

Payment on behalf for a subsidiary

–

–

(482)

–

Payment on behalf by a subsidiary

–

–

500

1,338

Interest income from a subsidiary

–

–

1,389

–

With related parties

Advances from a related party With subsidiary

Key management personnel compensation is analysed as follows: The Group 2008 2007 RMB’000 RMB’000 Directors Salaries and other short-term employee benefits Post-employee benefits including defined contribution plans

2,168

2,230

48

49

2,216

2,279

1,212

1,118

104

122

1,316

1,240

Other key management personnel Salaries and other short-term employee benefits Post-employee benefits including defined contribution plans

JES INTERNATIONAL HOLDINGS LIMITED

87

Notes to the financial statements For the financial year ended 31 December 2008

37.

Segment information Geographical segments The Group’s revenue, based on customers’ location, are mainly derived from Europe, PRC, other Asian countries and Canada. The Group 2008 2007 RMB’000 RMB’000 Europe

1,109,327

970,383

16,178

21,232

Other Asian countries

320,840

316,017

Canada

174,394

187,212

1,620,739

1,494,844

PRC

Business segments No information by business segments is presented as the principal operation of the Group relates entirely to shipbuilding.

38.

Financial risk management The Group’s activities expose it to credit risk, liquidity risk and market risks (including interest rate risk, foreign currency risk and commodity price risk). The Group’s overall risk management strategy seeks to minimise adverse effects from the volatility of financial markets on the Group’s financial performance. The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Group. The Group management then establishes the detailed policies such as risk identification and measurement, exposure limits and hedging strategies, in accordance with the objectives and underlying principles approved by the Board of Directors. There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the risk. Market risk exposures are measured using sensitivity analysis indicated below.

88

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

38.

Financial risk management (Continued) Credit risk Concentrations of significant risk with respect to trade receivables are limited due to the numbers of customers who are internationally dispersed. In addition, payment terms are provided for each milestone reached and payment guarantees are provided by the customer’s banks. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group’s receivables. Allowances made in respect of estimated irrecoverable amounts are determined by reference to past default experience. The Group performs ongoing credit evaluation of its debtors’ financial condition and generally does not require collateral. Other than the amount due from a subsidiary, the Group and Company do not have any significant credit exposure to any single debtor. The Group’s major classes of financial assets are trade and other receivables, financial assets at fair value through profit or loss, deposits for notes payable, pledged fixed deposits and cash and cash equivalents. As at 31 December 2008 and 2007, substantially all the bank balances and deposits as detailed in Notes 13, 14 and 15 to the financial statements, are held in major financial institutions which are regulated and located in both PRC and Singapore, which the management believes are of high credit quality. The management does not expect any losses arising from non-performance by these counterparties. The Group’s trade receivables amounting to RMB5.29 million as at 31 December 2008 (2007: RMB4.62 million) would have been either past due or impaired if the terms were not renegotiated during the financial year. Further details of credit risk on trade receivables are disclosed in Note 9.

JES INTERNATIONAL HOLDINGS LIMITED

89

Notes to the financial statements For the financial year ended 31 December 2008

38.

Financial risk management (Continued) Liquidity risk Liquidity risk refers to the risk in which the Group and the Company encounter difficulties in meeting its short-term obligations. Liquidity risk is managed by matching the payment and receipt cycle. The following table details the Group’s and the Company’s remaining contractual maturity for their nonderivative financial instruments. The table has been drawn up based on undiscounted cash flows of financial instruments based on the earlier of the contractual date or when the Group and the Company are expected to pay. The table includes both interests and principal cash flows.

Effective interest rate %

Within one year RMB’000

After one year but no later than five years RMB’000

Total RMB’000

The Group As at 31 December 2008 Financial liabilities Bank borrowings Notes payable Trade payables Other payables and accruals Due to a related party

3.64 – – – –

20,171 347,877 116,651 112,621 169,181 766,501

– – – – – –

20,171 347,877 116,651 112,621 169,181 766,501

As at 31 December 2007 Financial liabilities Bank borrowings Notes payable Trade payables Other payables and accruals Due to a related party

2.33 – – – –

148,514 148,770 267,671 91,343 127,865 784,163

– – – – – –

148,514 148,770 267,671 91,343 127,865 784,163

Financial liabilities Other payables and accruals

–

37,811

–

37,811

As at 31 December 2007 Financial liabilities Other payables and accruals Due to a subsidiary

– –

13,460 1,338 14,798

– – –

13,460 1,338 14,798

The Company As at 31 December 2008

The Group’s and the Company’s operations are financed mainly through equity, retained profits and bank borrowings. Adequate lines of credits are maintained to ensure the necessary liquidity is available when required.

90

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

38.

Financial risk management (Continued) Market risk The Group, in the normal course of business, is also exposed to interest rate risk, foreign currency risk and commodity price risk. The Group risk management strategy aims to minimise the adverse effects of financial risk on the Group financial performance. Interest rate risk Interest rate risk arises on interest-earning financial assets and interest-bearing financial liabilities. The Group’s interest rate risk arises primarily from its cash and cash equivalents, pledged fixed deposits, deposits for notes payable, bank borrowings and notes payable. Pledged fixed deposits and deposits for notes payable are fixed rate instruments. Hence, the Group is not exposed to significant cash flow interest rate risk relating to these instruments. The following tables sets out the carrying amount, by maturity, of the Group’s financial instruments, that are exposed to interest rate risks. Floating rate maturing After one year Within one but no later than year five years RMB’000 RMB’000

Total RMB’000

The Group As at 31 December 2008 Financial liabilities Bank borrowings

20,000

–

20,000

347,877

–

347,877

367,877

–

367,877

Bank borrowings

143,733

–

143,733

Notes payable

148,770

–

148,770

292,503

–

292,503

Notes payable

As at 31 December 2007 Financial liabilities

Interest rate risk is managed by the Group on an ongoing basis with the primary objective of limiting the extent to which net interest expense could be affected by an adverse movement in interest rates.

JES INTERNATIONAL HOLDINGS LIMITED

91

Notes to the financial statements For the financial year ended 31 December 2008

38.

Financial risk management (Continued) Interest rate sensitivity analysis The sensitivity analysis below has been determined based on the exposure to interest rate risks for non-derivative instruments at the balance sheet date. For floating rate liabilities, the analysis is prepared assuming the amount of liability outstanding at the balance sheet date was outstanding for the whole year. The sensitivity analysis assumes an instantaneous 100 basis points (“bp”) change in the interest rates from the balance sheet date, with all variables held constant. Income statement 100 bp 100 bp increase decrease RMB’000 RMB’000 The Group As at 31 December 2008 Bank borrowings

(6)

6

Notes payable

(6)

6

Bank borrowings

(33)

33

Notes payable

(42)

42

As at 31 December 2007

At the balance sheet dates, the equity is not affected by changes in the interest rates.

Foreign currency risk The Company and its subsidiaries maintain their respective books and accounts in their functional currencies. As a result, the Group and the Company are subject to transaction and translation exposures resulting from currency exchange rate fluctuations. The Group has shipbuilding contracts with international customers and is exposed to currency risk arising primarily from United States Dollars. The Group aims to mitigate the currency risk when negotiating the contract price and payment terms of shipbuilding contracts. At present, the Group does not have any formal policy for hedging against exchange exposure. The Group did not enter into any forward contract or engage in any hedging activities during the financial year.

92

Annual Report 2008

Notes to the financial statements For the financial year ended 31 December 2008

38.

Financial risk management (Continued) Foreign currency sensitivity analysis A 10% strengthening of RMB against the following currencies at the reporting date would increase/ (decrease) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant. Increase/(Decrease) Income statement The Group The Company RMB’000 RMB’000 As at 31 December 2008 United States Dollars Singapore Dollars

(14,270)

(4,415)

6,220

(20,583)

22,446

–

As at 31 December 2007 United States Dollars

A 10% weakening in RMB interest rate would have an equal but opposite effect. At the balance sheet dates, the equity is not affected by changes in the foreign exchange rates. Commodity price risk The Group has commodity price risk as steel plates are one of the main components of raw materials. Metals are traded commodities and their prices are subject to the fluctuations of the world commodity markets. Any significant increases in the prices for metals will have a material adverse impact on the financial position and results of operation. The Group’s profitability will be adversely affected if the Group is unable to pass on any increase in raw material prices to its customers on a timely basis or find cheaper alternative sources of supply. The Group monitors the material price fluctuation closely and constantly studies other ways to reduce material wastage in order to reduce the impact of material price risk. Fair values The carrying amount of the financial assets and financial liabilities in the financial statements approximate their fair values due to the relative short term maturity of these financial instruments. The fair values of other classes of financial assets and liabilities are disclosed in the respective notes to the financial statements. The fair values of financial assets and financial liabilities are determined as follows: (i)

the fair value of financial assets and financial liabilities with standard terms and conditions and trade on active liquid markets are determined with reference to quoted market prices; and

(ii)

the fair value of other financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow.

JES INTERNATIONAL HOLDINGS LIMITED

93

Notes to the financial statements For the financial year ended 31 December 2008

39.

Reclassification Comparatives in the financial statements have been reclassified to better reflect the nature of balances and conform to the current financial year’s presentation.

The Group

As previously reported 2007 RMB’000

After reclassification 2007 RMB’000

Balance sheet Current assets Inventories

567,286

61,680

–

505,606

404,145

91,343

–

312,802

Inventories

(435,215)

47,238

Other payables and accruals

221,035

38,290

–

(299,708)

Due from customers for construction contracts Current liabilities Other payables and accruals Due to customers for construction contracts Consolidated cash flow statement Working capital changes:

Due from/to customers for construction contracts

94

Annual Report 2008

statistics of shareholdings As at 17 March 2009

Issued and fully paid-up capital No. of shares issued Class of shares Voting rights

: : : :

S$272,828,098 1,166,028,000 Ordinary shares One vote per share

DISTRIBUTION OF SHAREHOLDINGS

SIZE OF SHAREHOLDINGS 1

-

999

1,000

-

10,001

-

NO. OF SHAREHOLDERS

NO. OF SHARES

%

%

2

0.03

301

0.00

10,000

3,320

51.91

18,647,222

1.60

1,000,000

3,038

47.50

165,720,001

14.21

1,000,001 AND ABOVE

36

0.56

981,660,476

84.19

6,396

100.00

1,166,028,000

100.00

NO. OF SHARES

%

TOTAL :

TWENTY LARGEST SHAREHOLDERS NO.

NAME

1.

JES OVERSEAS INVESTMENT LIMITED

2.

644,352,000

55.26

CITIBANK NOMINEES SINGAPORE PTE LTD

60,764,809

5.21

3.

UOB KAY HIAN PTE LTD

44,077,000

3.78

4.

HSBC (SINGAPORE) NOMINEES PTE LTD

43,901,000

3.77

5.

RAFFLES NOMINEES PTE LTD

29,091,667

2.49

6.

ABN AMRO NOMINEES SINGAPORE PTE LTD

28,957,000

2.48

7.

KIM ENG SECURITIES PTE. LTD.

15,574,000

1.34

8.

STRATEGIC TIMES LIMITED

13,500,000

1.16

9.

WESTCOMB SECURITIES PTE LTD

10,000,000

0.86

10.

OCBC SECURITIES PRIVATE LTD

9,819,000

0.84

11.

CHEN SHAOZHONG

9,500,000

0.81

12.

TOMMIE GOH THIAM POH

9,213,000

0.79

13.

CIMB-GK SECURITIES PTE. LTD.

7,500,000

0.64

14.

OCBC CAPITAL INVESTMENT PRIVATE LIMITED

5,266,000

0.45

15.

DBS NOMINEES PTE LTD

5,192,000

0.45

16.

SINGAPORE ENTERPRISES PTE LTD

4,500,000

0.39

17.

UNITED OVERSEAS BANK NOMINEES PTE LTD

3,733,000

0.32

18.

GOH POH HENG

3,050,000

0.26

19.

PINETREE FUND PTE LTD

3,014,000

0.26

20.

ZHOU YISHU TOTAL :

2,750,000

0.24

953,754,476

81.80

JES INTERNATIONAL HOLDINGS LIMITED

95

statistics of shareholdings As at 17 March 2009

SUBSTANTIAL SHAREHOLDERS Substantial Shareholders of the Company (as recorded in the Register of Substantial Shareholders) as at 17 March 2009 are as follows: Name

JES Overseas Investment Limited(1) (2)

Jin Xin

Direct Interest (No. of Ordinary Shares)

%

Indirect Interest (No. of Ordinary Shares)

%

645,002,000

55.32

–

–

–

–

645,002,000

55.32

Notes: (1)

The shareholdings of JES Overseas Investment Limited (“JES Overseas”) as at 17 March 2009 has included the acquisition of 650,000 ordinary shares through married deal on 16 March 2009.

(2)

Mr Jin Xin is deemed to be interested in the 645,002,000 ordinary shares held by JES Overseas by virtue of his 68.60% shareholdings in JES Overseas.

FREE FLOAT As at 17 March 2009, approximately 42.71% of the issued ordinary shares of the Company was held in the hands of the public (on the basis of information available to the Company). Accordingly, the Company has complied with Rule 723 of the Listing Manual of the Singapore Exchange Securities Trading Limited.

96

Annual Report 2008

Notice of annual general meeting

NOTICE IS HEREBY GIVEN THAT the Annual General Meeting of JES INTERNATIONAL HOLDINGS LIMITED (the “Company”) will be held at M Hotel, 81 Anson Road, Shenton Room, Basement 1, Singapore 079908 on Wednesday, 29 April 2009 at 9.30a.m., for the following purposes:-

AS ORDINARY BUSINESS 1.

To receive and adopt the Audited Financial Statements for the financial year ended 31 December 2008 together with the Directors’ Report and Auditors’ Report thereon.

Resolution 1

2.

To approve basic Directors’ fees of S$140,000 for the financial year ending 31 December 2009 to be made payable on a quarterly basis.

Resolution 2

3.

To re-elect the following Directors who are retiring by rotation in accordance with Article 107 of the Company’s Articles of Association:-

4.

(i)

Mr Tong Chi Ho [See Explanatory Note (i)]

Resolution 3

(ii)

Mr Chong Teck Sin [See Explanatory Note (ii)]

Resolution 4

To re-appoint Messrs BDO Raffles, Certified Public Accountants as auditors of the Company and to authorise the Directors to fix their remuneration.

Resolution 5

AS SPECIAL BUSINESS To consider and, if thought fit, to pass the following resolutions (with or without amendments) as Ordinary Resolutions:5.

“THAT pursuant to Section 161 of the Companies Act, Cap. 50 (the “Act”) and the listing rules of the Singapore Exchange Securities Trading Limited (“SGX-ST”), authority be and is hereby given to the Directors to: (a)

issue shares in the capital of the Company whether by way of bonus issue, rights issue or otherwise; and/or

(b)

make or grant offers, agreements or options (collectively “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares; and/or

(c)

issue additional Instruments convertible into shares arising from adjustments made to the number of Instruments

Resolution 6

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may, in their absolute discretion, deem fit; and (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instrument made or granted by the Directors while this Resolution was in force,

JES INTERNATIONAL HOLDINGS LIMITED

97

Notice of annual general meeting

provided that: (I)

98

the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of any Instruments made or granted pursuant to this Resolution): (a)

by way of renounceable rights issues on a pro-rata basis to shareholders of the Company (“Renounceable Rights Issues”) shall not exceed 100 percent of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in paragraph (III) below); and

(b)

otherwise than by way of Renounceable Rights Issues (“Other Shares Issues”) shall not exceed 50 percent of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with paragraph (III) below), of which the aggregate number of shares to be issued other than on a pro rata basis to shareholders of the Company shall not exceed 20 percent, of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with paragraph (III) below);

(II)

the Renounceable Rights Issues and Other Shares Issues shall not, in aggregate, exceed 100 percent of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in paragraph (III) below);

(III)

(subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under paragraphs (1)(a) and (1)(b) above, the percentage of issued shares shall be based on the total number of issued shares in the capital of the Company excluding treasury shares at the time this Resolution is passed, after adjusting for: (i)

new shares arising from the conversion or exercise of any convertible securities or shares options or vesting of share awards which are outstanding or subsisting at the time this Resolution is passed; and

(ii)

any subsequent bonus issue or consolidation or subdivision of shares;

(IV)

in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and

(V)

(unless revoked or varied by the Company in General Meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.” [See Explanatory Note (iii)]

Annual Report 2008

Notice of annual general meeting

6.

Placement of Shares under the Share Issue Mandate at more than 10% Discount “THAT notwithstanding Rule 811 of the Listing Manual, the Directors of the Company be and are hereby authorised to issue shares and/or Instruments other than on a pro-rata basis pursuant to the aforesaid general mandate at a discount not exceeding twenty percent (20%) to the weighted average price for trades done on the SGX-ST for the full market day on which the placement or subscription agreement in relation to such shares and/or Instruments is executed, provided that:-

7.

(a)

in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the SGX-ST for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and

(b)

(unless revoked or varied by the Company in General Meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.” [See Explanatory Note (iv)]

Resolution 7

To transact any other business which may be properly transacted at an Annual General Meeting.

BY ORDER OF THE BOARD

Chai Xui Gyn Company Secretary

Date: 14 April 2009

JES INTERNATIONAL HOLDINGS LIMITED

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Notice of annual general meeting

Explanatory Notes: (i)

If re-elected under Resolution No. 3, Mr Tong Chi Ho will remain as a member for both Audit Committee and Remuneration Committee.

(ii)

If re-elected under Resolution No. 4, Mr Chong Teck Sin will remain as the Lead Independent Director, Chairman of the Audit Committee, a member for both Nominating Committee and Remuneration Committee. Mr Chong will be considered independent for the purpose of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.

(iii)

Resolution No. 6 above empower the Directors to issue shares in the capital of the Company and to make or grant instruments (such as warrants or debentures) convertible into shares, and to issue shares in pursuance of such instruments; up to a number not exceeding (i) 100% for Renounceable Rights Issues and (ii) 50% for Other Shares Issues, of which up to 20% may be issued other than on a pro-rata basis to shareholders, provided that the total number of shares which may be issued pursuant to (i) and (ii) shall not exceed 100% of the issued shares (excluding treasury shares) in the capital of the Company. For the purpose of determining the aggregate number of shares that may be issued, the percentage of issued shares shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time that Resolution No. 6 is passed, after adjusting for (a) new shares arising from the conversion or exercise of any convertible securities or share option or vesting of share awards which are outstanding or subsisting at the time that Resolution No. 6 is passed, and (b) any subsequent bonus issue or consolidation or subdivision or shares. The authority for undertaking 100% Renounceable Rights Issues is proposed pursuant to the SGX-ST’s news release of 19 February 2009 which introduced further measures to accelerate and facilitate the fund raising efforts of listed issuers.

(iv)

Resolution No. 7 is to authorise the Directors to issue new shares to subscribers or placees at a discount of not more than 20% to the weighted average price for trades done on the SGX-ST for the full market day on which the placement or subscription agreement is signed. The maximum pricing discount of 20% is proposed pursuant to the SGX-ST’s news release of 19 February 2009 which introduced further measures to accelerate and facilitate the fund raising efforts of listed issuers.

Notes: (i)

A member entitled to attend and vote at the Meeting is entitled to appoint not more than two proxies to attend and vote in his stead. A member of the Company, which is a corporation, is entitled to appoint its authorised representative or proxy to vote on its behalf. A proxy need not be a member of the Company.

(ii)

If the appointor is a corporation, the proxy must be executed under seal or the hand of its duly authorised officer or attorney.

(iii)

The instrument appointing a proxy must be deposited at the Company’s registered office at 8 Cross Street, #11-00 PWC Building, Singapore 048424 at least 48 hours before the time of the Meeting.

100

Annual Report 2008

JES INTERNATIONAL HOLDINGS LIMITED (Incorporated in the Republic of Singapore) (Company Registration No. 200604831K)

IMPORTANT: 1. For investors who have used their CPF monies to buy JES International Holdings Limited’s shares, this Annual Report is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. 2. This Proxy Form is not valid for use by CPF Investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

PROXY FORM (Please see notes overleaf before completing this Form)

(Name) NRIC/Passport No.

I/We of

(Address)

being a member/members of the above-mentioned Company, hereby appoint:Name

NRIC/Passport No.

Proportion of Shareholdings No. of Shares

Address

%

and/or (delete as appropriate) Name

NRIC/Passport No.

Proportion of Shareholdings No. of Shares

Address

%

or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to attend and to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held at M Hotel, 81 Anson Road, Shenton Room, Basement 1, Singapore 079908 on the 29th day of April, 2009 at 9.30 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll. (Please indicate your vote “For” or “Against” with a tick [ ] within the box provided) No. Ordinary Resolutions

For

Against

Ordinary Business Adoption of the Audited Financial Statements for the financial year ended 31 1. December 2008 together with the Directors’ Report and Auditors’ Report. Approval of basic Directors’ fees for financial year ending 31 December 2009 to 2. be made payable on a quarterly basis. 3. Re-election of Mr Tong Chi Ho as Director. 4. Re-election of Mr Chong Teck Sin as Director. 5.

Re-appointment of Auditors and authorise Directors to fix their remuneration.

Special Business 6. Approval of Share Issue Mandate. Approval of placement of shares under the share issue mandate at more than 7. 10% discount.

Dated this

day of

2009.

Total number of Shares in: (a) CDP Register (b) Register of Members

Signature(s) of Shareholder(s) Or, Common Seal of Corporate Shareholder

No. of Shares

Notes: 1.

Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.

2.

A member of the Company entitled to attend and vote at the Meeting of the Company is entitled to appoint not more than two proxies to attend and vote in his/her stead.

3.

Where a member appoints two proxies, he/she shall specify the percentage of his/her shares to be represented by each proxy and if no percentage is specified, the first named proxy shall be deemed to represent 100 per cent of his shareholding and the second named proxy shall be deemed to be an alternate to the first named.

4.

A proxy need not be a member of the Company.

5.

The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or under the hand of its attorney or duly authorised officer. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

6.

The instrument appointing a proxy or proxies together with the letter of power of attorney, if any, must be deposited at the registered office of the Company at 8 Cross Street, #11-00 PWC Building, Singapore 048424, not less than 48 hours before the time appointed for the Meeting.

7.

A corporation which is a member may authorise by resolution of its directors or other governing body such a person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50.

8.

Please indicate with an “ ” in the spaces provided whether you wish your vote(s) to be for or against the Resolutions as set out in the Notice of Annual General Meeting. In the absence of specific directions, the proxy/proxies will vote or abstain as he/she/they may think fit, as he/she/they will on any other matter arising at the Meeting.

9.

The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies.

10.

In the case of a member whose shares are entered against his name in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

JES International Holdings Limited 8 Cross Street #11-00 PWC Building Singapore 048424 Tel: +65 6236 3333 Fax: +65 6236 4399