lle es meeting...by way of experiential learning, the fun way, we bring across the safety message to...

OUR VISIONWe aspire to be an excellent global engineering, procurement and construction company.

OUR MISSIONOur mission is to provide quality services that consistently meet our clients’ needs and expectations t h r o u g h e x c e l l e n c e i n o u r operations.

HSE POLICY STATEMENTOur mission is to provide a safe work ing envi ronment for our employees, protection of the environment, safeguarding owners’ plants and equipment.

CORE VALUESS… Safety above all, to protect our

equipment, the environment and ourselves

T… Teamwork to achieve quality products and services

R… Recognition of employees’ contribution and development of their potential

I… Inculcation of continuous work improvement as our culture

D… Development of pride and ownership in our work

E… Excellence in all our efforts to meet our vision

rotary engineering l imited annual report 2008

Sharpeningmeeting

our focus

SINGAPORE– Rotary Electrical Company (Private) Limited

– Rotary IMC Pte Ltd

– ShopGlobal Pte. Ltd.

– Rotary Mechanical And Construction Company (Private) Limited

– Rotary-Thai Construction Pte. Ltd.

– Rotary TREL Pte Ltd

– Rotary Electrical & Instrumentation Pte. Ltd.

– Rotary Automation Pte. Ltd.

– Rotary Production Services Network Pte. Ltd.

– Rotary Process Solutions Pte. Ltd.

– Rotary Logistics Pte. Ltd.

– Delimax Pte. Ltd.

– Eastlog Holding Pte. Ltd.

– EnRis Pte Ltd

– Jasinusa Automobile Pte. Ltd.

– IMC Equipment Pte Ltd

– Innovative Biotech Pte Ltd

– Itro Pte. Ltd.

– Powell Industries Asia Pte Ltd

– Pipe Rack Holding Company Private Limited

– OKP (Oil & Gas) Infrastructure Pte. Ltd.

– BuildGlobal Pte. Ltd.

– RSK Engineering Co Pte Ltd

– Supermec Private Limited

– Sixty-six Switchgears Co Pte Ltd

– Tiong Woon China Consortium Pte. Ltd.

– iPromar (Pte.) Ltd.

– Rotary Arabia Singapore Pte. Ltd.

– Petrol Steel Singapore Pte.Ltd.

ROTARY GROUP OF COMPANIES

MALAYSIA– Rotary MEC (M) Sdn Bhd

– Harvest E&I Engineering Sdn Bhd

THAILAND– Thai Rotary Engineering Public Company Limited

– Calvert Limited

INDONESIA– P.T. Rotary Engineering Indonesia

INDIA– Rotary MEC Engineering (India) Private Limited

– Rotary Techskill (India) Pvt Limited

PEOPLE’S REPUBLIC OF CHINA– Rotary Engineering (Shanghai) Co., Ltd.

– Fushun Rotary Cable Co. Ltd

– Changchun FAW UCC

– Rotary International Trading (Shanghai) Co., Ltd.

– Jinzhou Everthriving Logistics Co., Ltd.

– Rotary Engineering (Dalian) Limited

AUSTRALIA– Rotary Engineering (Australia) Pty Ltd

SAUDI ARABIA– Rotary Arabia Co. Ltd.

– Petrol Steel Co. Ltd.

RotaRy EnginEERing LimitEd(Company’s Registration No. 198000255E)

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08

CONTENTS01 Rotary at a Glance

04 Chairman’s Message

10 Board of Directors

14 Senior Management

22 Organisation Structure

26 Global Footprints

27 Operations Review

30 Human Resources

31 Health Safety & Environment

32 Scorecard

36 Code of Corporate Governance

45 Directors’ Report

49 Statement By Directors

50 Independent Auditors’ Report

52 Consolidated Income Statement

53 Balance Sheets

55 Statements of Changes in Equity

58 Consolidated Cash Flow Statement

60 Notes to the Financial Statements

ROTARY ENGINEERING LIMITED61 Jurong Island HighwaySingapore 627860T (65) 6311 9000F (65) 6311 9228

17 Tuas Avenue 20Singapore 638828T (65) 6861 1155F (65) 6862 1319

Board of Directors• Chia Kim Piow (Chairman & Managing Director)• Chia Kim Chua• Lam Khin Khui• Quek Wee Hong• Keith Tay Ah Kee• Wong Oi Moi• Badri Narayanan Santhana Krishnan

Audit Committee• Keith Tay Ah Kee (Chairman)• Lam Khin Khui• Quek Wee Hong• Badri Narayanan Santhana Krishnan

Nominating Committee• Quek Wee Hong (Chairman)• Lam Khin Khui• Keith Tay Ah Kee• Chia Kim Piow

Remuneration Committee• Lam Khin Khui (Chairman)• Keith Tay Ah Kee• Quek Wee Hong

Company Secretary• Tan Cher Liang Registered Office17 Tuas Avenue 20Singapore 638828T (65) 6861 1155F (65) 6862 1319

Share RegistrarBoardroom Corporate & Advisory Services Pte. Ltd.3 Church Street #08-01 Samsung Hub Singapore 049483T (65) 6536 5355F (65) 6536 1360

AuditorsErnst & Young LLPAudit Partner – Tan Chian Khong(since financial year 2007)

CORPORATE INFORMATION

�AnnuAl RepoRt 2008

RotaRy at a Glance RotaRy enGIneeRInG lIMIteD is one of the region’s leading oil and gas infrastructure services companies with an extensive international experience offering fully integrated engineering design, procurement, construction and maintenance (“ePcM”) services to the oil and gas, petroleum, petrochemical and pharmaceutical industries.

Headquartered in Singapore, the Group has established a strong presence in the Asia-Pacific region and continues to make its mark as a global player. established in �972, the Group has forged a reputation built on its hallmark traits of providing quality services, within budget, safely and on time delivery. today, the Group boasts a total strength of over 6,800 employees which include a highly and multi-skilled workforce that forms the mainstay of its core ePcM services.

Singapore remains a key market for the Group while it actively seeks business opportunities overseas. the Group has subsidiaries and associate companies in Malaysia, thailand, Indonesia, India, china, australia and the Middle east.

Rotary Engineering Limited is ISO 9000, ISO14000, OHSAS certified and is listed on the mainboard of the Stock Exchange of Singapore since 1993.

2 RotaRy EnginEERing LimitEd

a leader MuSt Have tHe caPacIty to translate vision into reality, to

see opportunities amid challenges, to seize them anD to fashion tHat

DecISIve Move Into a wInnInG one.

3AnnuAl RepoRt 2008

focusovercoming challenges

� RotaRy EnginEERing LimitEd

dear shareholders,on behalf of my fellow directors, I am pleased to present to you the performance of the Group for the financial year ended 31 December 2008.

a satisfactory yearFor some of us, I dare say, the year 2008 could be a year that we wish to forget. Indeed, 2008 could well be remembered as a year of tremendous turbulence. Rotary has had its fair share of ups and downs as we too are subject to the vagaries of the marketplace. Still, we are pleased to have turned in a creditable set of financials.

we posted a record turnover of S$520.� million. Net profit after tax and minority interest was S$50.9 million, down �% from the preceeding year. earnings per share was 9.0 cents against 9.3 cents in 2007.

we ended the year in a healthy financial state, recording a strong net cash position at S$�50.� million. we shall be rewarding shareholders with a proposed final dividend of 2.3 cents per share.

throughout the year, we continued to be sensitive to the changes around us, ever vigilant of the need to be nimble and responsive to client needs and market moves.

as I reflect on the year past, I would say that 2008 was a year where we sharpened our focus, fine-tuning every aspect of our business.

sharpening our focusGrowing our business as a service provider, our main concern is always that we deliver a superior and uncompromised level of service to our clients. this is not only to ensure that delighted clients will come back with more contracts, but also that through our showcase projects, potential new clients will come a-knocking. the universal terminal project on Jurong Island is one such showpiece. We hope that the work we do in

the Middle east, in time to come, will also develop into conversation pieces.

In 2008, we developed new working partnerships with some highly regarded names in the oil and Gas world. we are proud to be involved in exxonMobil’s second world-scale petrochemical project, called the Singapore Parallel train.

Technip Italy SpA, awarded us a S$37.9 million engineering, Procurement & construction contract in relation to neste oil’s new generation biofuel plant in Tuas. Finland-based Neste Oil is a refining and marketing company focused on advanced, clean traffic fuels. Technip, which is headquartered in Paris, ranks among the top five corporations in the field of oil, gas and petrochemical engineering. we were a lso act ive on the revamp and maintenance front, winning numerous contracts of varying sizes amounting to more than S$�6 million in 2008. we were pleased to have made good headway with an increase in contracts as well as clients in this area of business which we hope to grow, so to give us a boost in terms of a recurrent income stream.

Keeping clients satisfiedwe are especially pleased when we get repeat business from our clients. Oiltanking Singapore, with whom Rotary has forged a relationship for almost two decades, awarded us three contracts in excess of S$�02 million in 2008. these included S$60.� million from Oiltanking Odfjell Terminal Singapore Private limited (ootS) for the chem 6 project which involves the engineering design and construction of a 60,000 cubic metre (cbm) chemical storage facility at its existing site on Seraya, Jurong Island, with connectivity to petrochemical complexes, refineries and downstream chemical companies in and around Jurong Island. another $�2 million contract was awarded by Oiltanking Singapore Limited for the Oiltanking Phase 10 project. This involves a

chairman’s MeSSaGe

5AnnuAl RepoRt 2008

In 2009, we expect at least �0 engineers from china to join us after they graduate later in the year.

Keeping workers safeAn important aspect of work life that we focused on last year was the promotion of a safe work culture, and in this respect, we have fine-tuned our Health Safety & Environment (HSE) policy. This was marked by a HSe Symposium in november, where we also took the opportunity to endorse the revised and improved version of our HSe policy in the presence of our business associates. at that event, we joined the bizSaFe community as a bizSaFe partner. bizSaFe is a programme developed by the Workplace Safety and Health council to help SMes start the journey to build a safety culture. as a bizSaFe partner, Rotary provides motivating factors for SMes to join the programme. at the seminar, Rotary invited senior management of various companies that we work and partner with, to join the bizSAFE workshop for ceos and top Management. It is our corporate desire to support any move to build safety culture in organisations. Indeed, Rotary was also one of 33 heads of Singapore’s construction firms that signed a pledge to cut workplace injuries down to zero at the inaugural construction ceo Summit last year.

In the course of the year, the company also introduced a new initiative – the Safety carnival – where safety education and training is brought to our workers at their camps and dormitories on the weekend. By way of experiential learning, the fun way, we bring across the safety message to them.

Keeping workers motivatedto encourage and motivate our staff members, we have a Project Incentive Programme (PIP) in place, and over the last year or so, we have been fine-tuning this. The results are encouraging, and Rotary’s turnover rate is �.72%, compared to all industries’ average of 2.�% in 2008.

�20,000 cbm facility for clean petroleum products situated at the terminal along Jurong Island Highway.

other customers that rewarded us with repeat business last year include Shell eastern Petroleum, Thai Tank Terminal Ltd, SKEC (Thai) Ltd, CTCI (Thailand) Co Ltd and PTT Aromatics and Refining PCL.

Building human resourcesIt bears repeating that as a service company, our people are our most important resource and are central to our success. Since we started our Global Work Force Scheme with the launch of our first overseas training and test centre (ottc) in Dalian in June 2007, a total of 579 engineers and craftsmen have passed through our portals. a second ottc was opened in Fushun in March last year, focusing on training craftsmen in welding, Pipe Fitting and electrical Fitting.

Sharpening our focus in this area has meant looking into building more OTTCs and modifying the curriculum to ensure that they truly bear the hallmark of a Rotary programme. we are expanding our training footprint into India and Bangladesh where our OTTC in Chennai and Dhaka respectively, are expected to start operation this year.

Plans are also afoot to stride into the Middle east with this scheme when the time is right. with this initiative firmly taking root, we are on track to developing a ready and skilled workforce to fuel our growth globally. number of engineers and craftsmen trained in our ottcs as at end-february 2009

engineers

craftsmen

�0

438

�2

59

82

�97

�78 �0� 579

dalian fushun total

total


chairman’s MeSSaGe

Rotary globalisation planour internal re-structuring, part of the Rotary Globalisation Plan (RGP), is also on track. Formally launched in 2008, the RGP is the Group’s strategy for the next five years. With the help of consultants from Pricewaterhousecoopers, RGP charts our growth strategy in terms of our globalisation, identifying priority overseas markets and target sectors, restructuring of the organisation and importantly, improving internal business processes. the eight Key Business Units are now fully and independently operational. today, we are in a far better position to take advantage of opportunities that arise in various corners of the market. At the same time, we are well-placed for synergistic deals and cross-selling within the Rotary group.

Strengthening internal systemsas part of RGP strategy and as an integral part of our business process improvement workplan, the Group is implementing a new enterprise Resource Planning (eRP) system. through the eRP consultation and blue-printing roadmap, we will review, improve and capture best internal processes in eRP systems to support Rotary’s growth mapped out in RGP.

the consultation and process improvement initiatives will heavily involve the inputs of all departments and staff. eRP will be seamlessly integrated with our new SmartPlant engineering systems - including SmartPlant 3D, SmartPlant Foundation and SmartPlant Materials. we envision that our eRP, coupled with our SmartPlant systems, will bring Rotary engineering to greater heights.

meeting neW challengesas we stand on the threshold another year, the challenges that meet us are many. the most immediate one is how Rotary will ride out the downturn, a result of the global economic downturn. Indeed, Rotary is in a strong position today – with a more robust business model, a gifted and able management staff and a clear blueprint for long-term growth – to face the challenges that lie ahead.

Someone once said: “the pressure of adversity does not affect the mind of the brave man... It is more powerful than external circumstances”. adversity is certainly not new to Rotary, and looking ahead, we will – as we did before – make adversity work for us. we shall do this by building success upon success.

Construction-based projectswhereas in the past, engineering, Procurement and construction used to account for 70% of income, Rotary is increasingly putting more resources into larger construction-based projects. this reflects our adaptability to market conditions and widens our revenue base as we are able to be aservice-provider to process plants. Going forward, we expect the ePc-construction revenue ratio to shift in favour of construction-based projects.

By taking this approach, Rotary is leveraging on its strength of a large skilled workforce that it has built up over the year through its Global Work Force (GWF) scheme. At present, Rotary’s local workforce stands around 4,000, and globally the workforce stands at 6,800. we are reaping dividends from the GwF scheme as it enables us to bid for larger construction jobs. At the same time, our workers are also helping us to fill a vacuum caused by an older work force that is nearing retirement.

Indeed, taking on more construction jobs means that Rotary will not dislodge its workers and will be

7AnnuAl RepoRt 2008

well-positioned for the upturn when it comes. to this end, its Project Incentive Programme (PIP) serves not only to attract and reward good performance but also promote staff retention.

Increased efficiency and competitivenessAs always, the company keeps a keen eye on its efficiency and competitiveness. Aside from prudent, cost-control policies and adopting best practices, Rotary has slowly but surely been making gradual investments in automation over the years. large scale projects such as universal terminal had made it worthwhile for us to do so. the company had also recently ordered some S$5 million worth of automated pipe fabrication machines. this steady investment in automation will help to improve efficiency and productivity, and will enable us to be more competitive.

Looking farther afieldWe have identified our three priority market clusters, namely Southeast asia (including Singapore), Middle east and china. For Southeast asia, we are actively looking into the possibility of expanding into Vietnam and Brunei. In the Middle East, Saudi Arabia continues to be the beachhead. In china, we have built up our resource base in terms of engineering design centre, OTTCs, procurement network and fabrication workshop, and are now well positioned to take on more jobs. In addition to growing our existing markets, here and in the region, Rotary is also looking farther afield into emerging markets in Latin America and Africa, starting with Brazil. It is our

view that with value depressed and markets down, now is the right time to start building resources for the future.

outlooKthere are no signs yet of an end to the current global economic crisis. with oil prices down, demand for infrastructure is likely to be affected in the various markets that Rotary operates in around the world.

But the downturn will not last forever. In time, conditions will return to normal although we have been forewarned not to expect a quick return to the boom years before the crisis. while the immediate outlook may not be as rosy, we are confident that the upturn will come.

The key for Rotary is to be prepared for it, and when it does come, to be prepared to ride the growth wave again. a note of thanKsOn behalf of the Board of Directors, I would like to thank our customers, business associates and suppliers for their unwavering support, encouragement and assistance.

to the management and staff of the Rotary Group of Companies, the Board and I wish to extend our thanks and appreciation for their commitment and dedication.

Finally, thanks are due to all our shareholders who continue to believe in us and to support us.

mr. chia Kim piowchaiman & Managing Director

9AnnuAl RepoRt 2008

eQuippedready to advance

�0 RotaRy EnginEERing LimitEd

Board oF DIRectoRS

1. mr. chia Kim piow 2. mr. chia Kim chua 3. mr. Keith tay ah Kee 4. mr. Quek Wee hong

��AnnuAl RepoRt 2008

5. ms. Wong oi moi 6. mr. lam Khin Khui 7. mr. Badri narayanan santhana Krishnan


Board oF DIRectoRS

mr. chia Kim pioW is the Founder, chairman and Managing Director of the Rotary Group of Companies. With more than 35 years of experience in plant and facility design and construction, he is instrumental in developing the Group from a sub-contractor to a multi-national turnkey engineering design and construction group. under his stewardship, the Group has gained recognition as one of the region’s leading players in the oil and gas, petroleum, petrochemical and pharmaceutical industries.

mr. lam Khin Khui was appointed to the Board in 1993. He brought along with him a wealth of experience from the many years of working for both the private and government-linked companies. He is a partner with an international management consulting firm. He holds a Bachelor in Chemical engineering from university of Melbourne and a Diploma in Business Administration from National university of Singapore.

mr. Keith tay is a chartered accountant by profession and was formerly chairman and Managing Partner of an international accounting f i rm. He was Pres ident of cert i f ied Publ ic accountants of Singapore from �982 to �992. Mr tay is currently chairman of Stirling coleman capital ltd and holds directorships in several other companies. He is also on the Board of Singapore International chamber of commerce, of which he has also served as adjunct Professor in the School of Accountancy and Business of Nanyang technological university.

mr. lam Khin Khui

mr. Keith tay ah Kee

mr. chia Kim pioWchairman & managing director

mr. chia Kim chua was appointed to the Board in 1982. Since then, he has served as the head of Project Management Department and overseen many major ePc projects in Singapore as well as overseas. He is also the Management Representative for the Group’s ISo 9000, ISo ��000 and OHSAS 18000 certification. He holds a Diploma from Singapore Polytechnic.

mr. chia Kim chuaeXecutive director

independent director

independent director

13AnnuAl RepoRt 2008

mr. QueK Wee hong was appointed to the Board in 1993. He relinquished his executive position in 1995 and has since remained as a non-executive member of the Board. He was previously the Company Secretary and a member of the audit committee from 1993 to 1995. In 2001, he was re-appointed as a member of the audit committee. Prior to joining the Group, he held senior management positions in accounting, finance and management in both local and multi-national companies. He holds a Master in Business and is a Certified Public Accountant. He is also a chartered Secretary and administrator.

mr. QueK Wee hongindependent director

mr. Badri narayanan santhana Krishnannon-eXecutive director

mr. Badri narayanan santhana Krishnan was appointed to the Board in 2008. He is currently working with Oman Investment Fund, as an integral part of the fund’s Asia Pacific Investment Strategy. Prior to joining the Fund, he held positions with citigroup and Goldman Sachs in london, Dubai and India. currently located in oman, he specializes in investment and portfolio management. He is a chartered Financial analyst charter Holder.

ms. Wong oi moi has been associated with the Group since �975. She is currently a non-executive and Non-Independent Director of the Board.

ms. Wong oi moinon-eXecutive director

�� RotaRy EnginEERing LimitEd

senior ManaGeMent

1. mr. Khin maung myint 2. ms. Kellin tham 3. dr. abdul malek 4. mr. derek Koh

�5AnnuAl RepoRt 2008

5. mr. rick goh 6. mr. Joseph Khow 7. mr. tan teck seng


senior ManaGeMent

1. mr. loh eng Kee 2. mr. tham peng Weng 3. mr. Koh chun peng 4. mr. albert liew yoon Kong


5. mr. paul tan 6. mr. tony fam 7. mr. sarjit singh 8. mr. Bernard soh


mr. loh eng Keemanaging director

thai Rotary engineering Public company limited

mr. loh eng Kee is the Managing Director of thai Rotary engineering Public company limited (“tRel”). under his leadership and his wealth of experience, tRel is now widely known as one of the leading companies in turnkey EPC storage terminal construction and reliable main contractor in the oil and gas industry in thailand, the South-east asia region and as far as the african continent. Mr. loh is also the Project Director of Project Management team.

senior ManaGeMent

ms. Kellin tham is the Managing Director of Rotary electrical company (Private) ltd as well as General Manager of Rotary logistics Pte ltd, a one-stop shop logistics provider offering integrated warehousing, material logistics, procurement and total supply chain management services. Since 200�, she has played an instrumental role in overseeing the Group’s local and overseas projects’ procurement needs as well as that of many international clients. In 2008, Rotary electrical & Instrumentation Pte ltd was added to Ms. tham’s portfolio and since assuming stewardship as its’ Managing Director, she has continued to steadily grow the subsidiary’s business. Ms. tham is also the Managing Director of the Group’s subsidiary, Supermec Private ltd.

ms. Kellin thammanaging director

Rotary electrical & Instrumentation Pte ltdRotary electrical company (Private) ltd

Supermec Private ltd

dr. aBdul maleK joined the Group in January 2007 and is presently Managing Director of Rotary Process Solutions Pte ltd. the company was formed to further strengthen the Group’s process capabilities. He has 20 years of process engineering experience in designing hydrocarbon, chemicals and water plants for major clients worldwide. In 2008, Dr. Malek expanded his portfolio to head the engineering Department of Rel as its Director. He is also currently Director of Rotary Mec engineering (India) Private limited and Rotary engineering (Dalian) limited. under his leadership, the engineering department is further streamlined to upgrade its capabilities in undertaking global, multi-office projects. Dr. Malek holds four engineering degrees, including a PhD in chemical engineering and two Masters degrees. He is also a Board Member of the Public Utilities Board and PUB International Pte Ltd.

dr. aBdul maleKmanaging director

Rotary Process Solutions Pte ltd

mr. Joseph KhoW is the Managing Director of Rotary IMc Pte ltd (“RIMc”). Since 2000, Joseph has led RIMc to become a leading player in third-party maintenance service provider to the process industries in Singapore. Joseph has a Master in Science (Industrial and Systems engineering) from national university of Singapore, a Bachelor (Hons) in Mechanical Engineering from nanyang technological university and a Diploma (Mechanical) from Singapore Polytechnic. He is a member of the Institute of engineers in Singapore, and has served as President of the association of Process Industry from July 2002 to June 200�.

mr. Joseph KhoWmanaging director

Rotary IMc Pte ltd


mr. tan tecK seng is the Deputy Project Director of the Group’s Project Management Department. He first joined the Group in 1992 and over the years, he rose from a project engineer to head a team of project managers for various projects in Singapore and Indonesia. Mr. tan has a Honours degree in Mechanical Engineering from University of Liverpool (UK).

mr. tan tecK sengdeputy proJect director (proJect management)

Rotary engineering limited

mr. ricK goh joined the Group in 2006 as the Human Resource Director with more than �� years experience in human resource management and development. He is responsible for the human resource development polices and practices across the Group. He graduated from Latrobe University of Australia with a Bachelor of Business Administration degree (major in human resource management). He also holds a Graduate Diploma in Personnel Management with Singapore Institute of Management and a Diploma in electronic electrical engineering with ngee ann Polytechnic. In additional to his academic qualification, he is a certified performance management and teambuilding facilitator with professional bodies.

mr. ricK gohhuman resource director


mr. Bernard soh joined the Group in 2007 as the HSe Director. He is responsible for the health, safety and environment system policies and practices across the Group. He has more than �8 years of occupational safety and health experience in the regional construction and process industries. He graduated from university of new South wales with a Bachelor of Science degree (Major in Safety Science). He also holds a Diploma in Mechanical engineering with ngee ann Polytechnic. In addition to his academic qualification, he is a registered Workplace Safety and Health officer with Ministry of Manpower as well as a registered environmental control officer with national environment agency. He is also a member in the Workplace Safety and Health (WSH) Council construction and landscaping committee as well as an executive committee (co-opted) member of Singapore Institution of Safety Officers.

mr. Bernard sohdirector (health, safety & environment)


mr. dereK Koh is a chartered accountant with over 20 years of broad experience in professional practice and industry. Prior to joining the Group, he headed up various functions including Finance, Internal controls, corporate affairs, and Information technology in multi-national and asian companies. He also has audit, Corporate Finance & Recovery and Risk Management experience from professional practice. Mr. Koh holds an economics - accounting & Finance degree from the london School of economics.

mr. dereK Kohchief financial officer



mr. alBert lieW is the construction Director of the Group’s construction Management team. He has more than 28 years of construction experience gained from multi-national companies. Mr. liew is responsible for overseeing projects involving civil, steel structure, storage tanks, piping, electrical and instrumentation. He has spearheaded myriad oil & Gas plants, Petrochemical complexes, water treatment plants and Bridges in South East Asia, China & the Middle East. He specializes in storage tank construction work especially: cryogenic (double wall tank), spherical and double deck floating roof tanks. He is also certified in construction Management Supervision and construction Safety for Project Managers from Singapore PSB.

mr. alBert lieW yoon Kong

mr. Koh chun peng joined in aug 2007 as General Manager (china) overseeing the Group’s business in china. He runs Rotary engineering (Shanghai) ltd and Rotary engineering (Dalian) ltd. Involved heavily in the Group’s Global Workforce program, Mr. Koh also manages Rotary’s Global Design centre and overseas training & test centres in china. Since 2008, Mr. Koh is also appointed as the Head of Corporate Planning department and drives both internal process improvements and external strategy work for the group. Mr. Koh brings with him nearly ten years of china business experience. a former government scholar, he held managerial positions in Singapore’s overseas investment promotion arm, Ie Singapore. Mr. Koh also has experience in strategy consulting. He holds a MSc (Management) and BBA(Hons) from the national university of Singapore, a chinese language Proficiency Certificate from Beijing University, and has attended an executive Program for senior government officials jointly conducted by Beijing University and Fudan university.

mr. Koh chun penggeneral manager

Rotary engineering (Shanghai) co ltd Rotary engineering (Dalian) limited

construction director (construction management team)


mr. Khin maung myint is the General Manager of the Group’s Project Proposal Department. He joined the Group in �989, after spending �8 years in a petrochemical complex in Myanmar. Since then, he has been involved in project management, procurement, construction, testing and commissioning of oil and gas projects in asia, Middle east and africa. He holds a Bachelor of Mechanical Engineering from Rangoon Institute of technology, Myanmar.

mr. Khin maung myintgeneral manager (proJect proposal)


senior ManaGeMent

2�AnnuAl RepoRt 2008

mr. sarJit singhgeneral manager

Rotary Mec (M) Sdn Bhd

mr. paul tan is the General Manager of the Rotary Mechanical and construction company (Private) limited (RMc). He joined the Group in 2007, after spending �9 years in the oil, Gas & Petrochemical industry. His experience involved project management, procurement, construction of major refineries and petrochemical plants located at South east asia and china. He holds a Diploma in Mechanical engineering from ngee ann Polytechnic.

mr. paul tangeneral manager

Rotary Mechanical and construction company (Private) limited

mr. sarJit singh is the General Manager of Rotary MEC (M) Sdn Bhd (“RMEC”). Since 2001, Sarjit has led RMec to be the subcontracting company of choice with many international ePcc contractors. He holds a Bachelor (Hons) in Mechanical Engineering from United Kingdom. He is a registered professional engineer with the Institute of Engineers, and a member of the Board of engineers in Malaysia.

mr. tham peng Weng is the General Manager of ShopGlobal Pte ltd which handles all shop fabrication works to support all business units in the Rotary Group. With over 30 years’ experience in construction, fabrication, maintenance and workshop facilities, he is able to handle all aspects of project management. Coupled with his wealth of technical know-how and practical experience, he now heads Singapore and Batam fabrication workshops, to meet international demands.

mr. tham peng Wenggeneral manager

ShopGlobal Pte ltd

mr. tony fam is the acting General Manager of Rotary thai construction Pte ltd (“Rtc”), one of the strategic business units with the Group, responsible for engineering, Procurement and construction (“ePc”) of storage tanks. Concurrently, Mr. Fam is also the Vice President, Business Development/Marketing of the Group’s wholly owned subsidiary, thai Rotary engineering Public company limited (“tRel”), and was appointed as the Director in January 2009. Prior to joining the Group, Mr. Fam has over 20 years of experiences in the fields of project management within the oil and Gas industry and specialist underground pipeline re-construction works using the trenchless technologies. Mr. Fam graduated from Singapore Polytechnic in �986, with a Diploma in Mechanical engineering, also holds an advanced Diploma in Business Administration with University of Bradford (UK).

mr. tony famgeneral manager (acting)

Rotary thai construction Pte ltd


organisation StRuctuRe chairman & Managing Directorchia Kim pioW

executive Directorchia Kim chua

Project Mgt Team/ construction Mgt team

loh eng Kee (Project Director)tan tecK seng

(Dy Project Director)alBert lieW

(construction Director)

Singaporechia Kim pioW(Chairman/MD)

thailandloh eng Kee

(Managing Director)

Saudi arabiachia Kim pioW

(chairman)

MalaysiasarJit singh

(General Manager)

chinaKoh chun peng

(General Manager)

IndonesiatBa

Indiaamitava das

(General Manager)

country senior management

electrical & Instrumentation

Kellin tham(Managing Director)

Tankagetony fam

(acting General Manager)

Mechanicalpaul tan

(General Manager)

civilchia Kim chua

(executive Director)

Rotary electrical &

Instrumentation

Rotary-thai construction

Rotary Mechanical and construction

BuildGlobal

thai Rotary engineering Public company limited

Petrol Steel co ltdRotary arabia

co ltd

Rotary MEC (M) Sdn Bhd

Rotary engineering (Shanghai) co ltdRotary engineering (Dalian) limited

P.t. Rotary engineering Indonesia

Rotary Mec engineering (India) Private limited

Quality assurance & controlchia Kim chua (executive Director)

chay chun Weng (Manager)

Health, Safety & environmentBernard soh (Director)

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Human ResourcericK goh (Director)

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corporate PlanningKoh chun peng

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Planning & controlvelmond lim

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Project ProposalKhin maung myint (General Manager)

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2� RotaRy EnginEERing LimitEd

progressionheading towards the

targeted direction


gloBal FootPRIntS

rotary arabia co ltd

rotary mec engineering (india) private limited

Jinzhou everthriving logistics co. ltd

rotary engineering (shanghai) co. ltd rotary international trading (shanghai) co. ltd

thai rotary engineering public company limited

rotary mec (m) sdn Bhd

rotary engineering (dalian) limited

p.t. rotary engineering indonesia

rotary engineering (australia) pty ltd

petrol steel co ltd


Building success upon successDespite the economic slowdown, Rotary engineering managed to keep busy in the course of the year. activity continued in the oil and gas industry in asia as well as Singapore, and the Group saw a record turnover of S$520.� million, an increase of 2% over 2007. at the same time, we continue to develop and strengthen internal systems and structures in order to meet the challenges ahead.

singaporeRotary continued to execute a number of significant projects on Jurong Island, Singapore’s oil refining and petrochemical hub. These included its work on the exxonMobil’s second world-scale petrochemical project, called the Singapore Parallel train and neste oil’s world’s largest next-generation biofuel manufacturing plant.

In all, the Group secured contracts worth a total of S$333.5 million in 2008, down by 16% from the S$398.2 million achieved, the previous year.

Completed projectsa number of ePc projects saw completion in 2008. these included:

• an ePc contract for Power Seraya ltd for their facilities at Pulau Seraya Power Station.

• a project for Itro Pte ltd to build an isotherm plant that, when operational, would generate energy from waste. this is a joint venture between Rotary and the Sofinter Spa Group (Sofinter) of Italy. the patent for this innovative “Isotherm PwR ® technology” that treats toxic and hazardous waste and generates steam and/or electrical power is held by Itea Spa; Itro has been granted the licence to use this technology. Itea Spa is controlled by Sofinter, the industrial holding company of a group of highly specialised companies in this field.

• A S$28 million construction turnkey contract that we secured in april 2007 from international process plant maker JGC Singapore Pte Ltd for a chemical process plant on Jurong Island. the project relates to a plant owned by uS-based SI Group, a world leader in the production of alkylphenols, and a leading global producer of per formance resins. the SI Group had announced in 2005 their plans to build alkylated phenol plants on Jurong Island. It had said then that it expected to make the investments in stages over the next three years.

On-going projectsapart from ePc contracts, Rotary has also been active in securing a number of maintenance and revamp contracts through its subsidiary Rotary IMc. on-going projects include:

•Aplantupgradeprojectawardedby ChevronSingapore this project is for chevron Singapore’s facility at

Penjuru Terminal in Jurong. The scope of work involves upgrading and revamping of existing fuel oil systems, pumps and related facilities. Work is expected to be completed by December 2009.

•Aplantupgradeprojectawardedby TankstoreLtd this contract is for the upgrading the roofs of

four storage tanks for the Singapore-based oil trading company. this project is expected to be completed by november 2009.

•Aplantupgradeprojectawardedby SingaporePetroleumCompany this contract is for upgrading the roofs of two

storage tanks for the Singapore-based oil trading company. Work for this project is expected to be completed by august 2009.

operations RevIew


• Enhancedmaintenanceandupgradeof7tanksawardedbyShellEasternPetroleumLtd

this contract is for the maintenance and upgrading of the roofs of seven storage tanks for Shell Eastern Petroleum. Work will be completed progressively tank by tank, with the last tank to be completed by end 20��.

Work on various other projects continue unabated, even as we continue to source actively for new contracts. Nestethe year also saw Rotary starting on an interesting biofuel project. This was the S$37.9 mi l l ion engineering, Procurement & construction contract in relation to neste oil’s new generation biofuel plant in tuas. the contract, awarded by technip Italy SpA, involves the erection of 11 storage tanks: five feedstock tanks and two bio-naphtha tanks, with the remaining four tanks being in the process and utility area. The tanks will have a combined storage capacity of ��,000 cbm.

Shell Eastern PetroleumThe Group had bagged five parcels of work, totalling S$�75 million in relation to the Shell Houdini project since 2006:

• two contracts related to the new 800,000 tonne-per-annum Ethylene Catalytic Cracker unit (ECC) to be built on reclaimed land adjacent to the Shell Refinery on Bukom Island:

o A S$23.1 million contract secured by Rotary Electrical for electrical works to the ECC as well as its off-site and utility facilities and the scope of work has now expanded to S$30.4 million; and

o A S$24 mi l l ion cont ract to undertake engineering, procurement and construction works for atmospheric tanks supporting

the ecc.

• two contracts in relation to the 750,000-tonne-per-annum Mono ethylene Glycol (MeG) downstream plant on Jurong Island:

o A S$83 mil l ion contract for mechanical construction, piping and equipment installation works.

o A S$8.3 million contract for tankage works.

• a S$25 million contract comprising a few jobs including:

o Shell cDF relocation

o A S$10.3 million contract involving mechanical piping and steel structural works for the Shell Houdini Bukom Refinery Modification (BRM) project; the scope of work has now expanded to S$2�.6 million.

Oiltanking SingaporeOur work for Oiltanking Odfjell Terminal Singapore Private Limited (OOTS) is making good progress. Oiltanking Singapore had awarded us three contracts in excess of S$�02 million in 2008. these include S$60.� million from ootS for the chem 6 project which involves the engineering design and construction of a 60,000 cbm chemical storage facility at its existing site on Seraya, Jurong Island with connectivity to petrochemical complexes, refineries and downstream chemical companies in and around Jurong Island. another S$�2 million contract was awarded by Oiltanking Singapore Limited for the Oiltanking Phase 10 project. This involves a �20,000 cbm facility for clean petroleum products situated at the terminal along Jurong Island Highway. The third Oiltanking contract entails the modification of an existing propylene system at Oiltanking’s Jurong Island facility. This involves the building of additional new pumps and related facilities to enhance the process of loading propylene ships and to other plants. Work on this project is scheduled for completion by November this year. In addition, we are still working on the S$�5.5 million ootS contract involving the engineering design and construction of Mono ethylene Glycol (MeG) and Propylene oxide (Po) storage tanks and related facilities adjacent to the existing ootS chemical storage terminal on Jurong Island.

operations RevIew


remain committed to this important market and will continue to maintain a presence there.

IndonesiaCurrently still in progress is our work for PT Oiltanking Merak involving the engineering, procurement and construction of a 27�,000 cbm capacity storage terminal comprising 24 tanks in Merak, West Java, Indonesia. Batam, Indonesia, is also home to our 13-hectare fabrication facility where much of our effort and investment in automation come to fruition. Most of our equipment is housed here, and our Batam workshop caters to and supports Rotary’s fabrication requirements in the rest of the region.

ChinaOur joint venture with Beijing Everthriving Energy technology co. ltd., the Jinzhou everthriving Logistics Co Ltd, undertakes the transportation and sales of Liquefied Natural Gas (LNG) from the production field in Erdos, Inner Mongolia Province to a storage depot in Qin Huang Dao, Hebei Province. Apart from the five-year transportation contract for this route, it will also sell lnG in the city of Shenyang in liaoning Province.

overseascontributions from overseas jobs was S$220.� million or 42.3% of total revenue. The bulk of our overseas income emanates from the Thai market, where we have established a strong presence.

Thailand Thailand continued to be a dynamic market for us in 2008, contributing �7.5% to our overall revenue. our S$126 million project at the off-site & utility tank farm unit for Ma Ta Phut Olefins Co Ltd is progressing well. This tank farm, comprising nine spherical tanks and six atmospheric tanks, is housed within a naphtha cracker complex with an annual production capacity of 800,000 tonnes.

we secured contracts totalling S$�6.� million in 2008. that we also attracted repeat customers, is testament of our customers’ satisfaction with the overall quality of our service. we were able to secure contracts from a number of existing clients, including Thai Tank Terminal Ltd, CTCI (Thailand) Co Ltd and SKEC (Thai) Ltd.

We continue to work hard to prospect for new work and look towards forging a stronger presence in this market as well as in neighbouring Vietnam and Indochina, which also come under the jurisdiction of our Thai office.

Saudi ArabiaIn February 2008, we secured a uS$62 million contract to build 24 tanks for the Saudi Kayan Petrochemical complex in Jubail Industrial city in the Kingdom of Saudi Arabia through our joint venture Petrol Steel co ltd. this project is still in progress.

our fabrication facility in Jubail Industrial city is operational. Despite the current downturn, we

operations RevIew


human ReSouRceS

To meet the needs of all the different markets, Rotary needs to have a versatile and skilled workforce. With the Global Work Force initiative in place, this need is constantly being met. with a swelling of human talent, there is a need to manage these talents well and ensure that there is minimal leakage to the Group.

Strong and robust workforceRotary’s current headcount stands at 6,800, with 3,907 based in Singapore and the balance of 2,893 based overseas. The workforce is a virtual United Nations, with workers representing 14 nationalities, namely, Singapore, India, china, thai land, India, Malaysia, Myanmar, Philippines, Sri Lanka, Bangladesh, Pakistan, Italy, Iran and Indonesia. With such an extensive workforce, the company has a robust Human Resource Management system in place.

a cornerstone of our Human Resource Management system is that of developing a technical training curriculum that is at a level higher than other training curricula available in the market. In this way, we are able to raise the overall competencies of the Rotary workforce to stay ahead of competition. apart from formal training programmes, it also organises numerous in-house activities, including social activities that cater to staff needs and help foster a deeper sense of belonging.

one of these activities is Rotary active Day, an annual event that highlights the importance of healthy living and worklife balance. Another is the annual dinner and dance, a get-together where all

are encouraged to let their hair down and have fun. other staff-centred activities include Movie nights, KFC (Kentucky Fried Chicken) treat, Ice Cream Day for foreign workers on site, and celebrating the different festive occasions with these workers. these activities are part of Rotary’s commitment to building up a highly motivated and productive workforce.

Rotary Education Assistance Fundthe Rotary education assistance Fund has helped to fund the education of �9 children of Rotary staff. It is an in-house initiative driven solely by funding from Rotary’s senior management as well as the company’s Project Incentive Programme.launched in 2007, the Fund had the dual objectives of helping the company’s needy employees by providing financial support to their children in pursuit of education and to promote company loyalty and motivate employees to strive for better work performance.


Work safety is of paramount importance to us, and we strive to ensure a working environment that is risk-free so as to safeguard the health and safety of our employees.

We tackle Health Safety and Environment (HSE) issues at various levels.

at policy level, we have a formal HSe PolIcy that lays out in very clear terms the guiding principles we adhere to with regard to safety within the company. we believe Safety First is Safety always.

we have put in place a team of dedicated HSe professionals to lead our focus on HSe excellence. the team is headed by none other than the company’s chairman and Managing Director, Chia Kim Piow, who also wears the hat of Chief HSe officer. the HSe department comprises personnel with different expertise and experience, including a paramedic, an industrial nurse and a Tripod-BETA practitioner. Tripod-BETA is an approach to the analysis of incidents using the tripod theory of accident causation and the Hazard and effect Management Process. The Tripod-BETA method promotes thorough incident investigation with clear, concise and consistent reporting.

at all levels in the company, as long as a manager has subordinates, he is expected to lead by example. every manager or supervisor is trained and expected to follow HSe procedures to the letter.

Finally, the company believes firmly in educating and inculcating safety awareness at grassroots

health safety & envIRonMent

level. to this end, it has an on-going HSe programme that seeks to inform, to educate, to remind, to reinforce our principles. It has its own in-house training capabilities and conducts courses such as occupational First aid course and lifting Supervisor Workshop.

through various initiatives, it hopes to inculcate a Safety culture that becomes second nature to each and every Rotary staff member. one notable initiative undertaken was the Safety Carnival – where safety education and training were brought to Rotary workers at their camps and dormitories on the weekend. By way of fun and experiential learning, the safety message was brought across to them.

Indeed, Rotary’s accident Frequency Rate for 2008 had dropped by more than 50% compared to the year before, evidence that investment in this area is reaping dividends for the company.


rotary ScoRecaRDfinancials“enhancing shareholders value”

Strong revenue growth to continue to deliver sustainable value to our shareholders.

earnings (s$ million)

2006

2007

2008

35.2

52.8

50.9

earnings per share (cents)

2006

2007

2008

8.7

9.3

9.0

market capitalisation (s$ million)

2006

2007

2008

292

738

139


customers“Striving for total customer satisfaction”

customer satisfaction is our most important goal. we strive to not only meet your needs, but to exceed your expectations and help you achieve your goals.

singapore china malaysia thailand other

legend (s$ million) ¢ order Book ¢ revenue

437

557

510

640

446

520

2006

Fy2007:

s$510 m

8�.6%

�.�%

14.3%

0.7%2.0%

57.7%

0.5%0.8%

�7.5%

23.5%

rotary ScoRecaRD

2007

2008

Fy2008:

s$520 m


processes & Best practices“What we excel in – Doing the right thing & doing it right the first time”

continuous improvement, eliminating redundant processes, process redesign, implementing new business process to streamline our business operations to drive efficiency and productivity.

legend (%) ¢ Net Profit Margin ¢ return on equity ¢ return on assets

8.1

rotary ScoRecaRD

2006

2007

2008

25.6

10.6

34.6

10.4

12.8

9.8

27.3

11.1

people“Our Greatest Asset – Our people makes the difference”

People are the foundation of our success – past, present and future.

2006

2007

2008

3,000

6,800

4,200


Contents Code of Corporate Governance 36

Directors’ Report 45

statement by Directors 49

Independent Auditors’ Report 50

Consolidated Income statement 52

Balance sheets 53

statements of Changes in equity 55

Consolidated Cash Flow statement 58

notes to the Financial statements 60

SCOREhitting the bull’s-eye


CORPORATE GoVeRnAnCe

INTRODUCTION

the Board of Directors (the “Board”) and management of Rotary engineering Limited (the “Company”) and its subsidiaries (the “Group”) are committed to maintaining high standards of corporate governance by complying with the benchmark set by the Code of Corporate Governance 2005 (the “Code”). Good corporate governance establishes and maintains an ethical environment, which strives to enhance the interests of all shareholders.

the following report outlines the Company’s corporate governance policies and practices that were in place.

BOARD OF DIRECTORS

Principles 1, 2, 4 and 6

the Board of Directors is accountable to the shareholders and is responsible for maintaining a high standard of corporate governance and promoting continuing improvements in Board effectiveness. the Group strives to be consistent with the Code.

the Board comprises seven Directors, of whom two are executive, two are non-executive and three are independent Directors. the Board is made up of individuals from different professional, technical and financial backgrounds. Their core competencies, qualifications, skills and experience are extensive and complementary. there is a strong balance between the executive and non-executive Directors and a strong and independent element on the Board. Key information on Directors is set out on pages 10 to 13 of the Annual Report.

the Board oversees the management of the business and affairs of the Group; approves the Group’s corporate and strategic directions, appoints directors to the Board and approves the appointment of key managerial personnel, major funding, investment proposals and divestment, and reviews the financial performance of the Group. Where necessary, additional Board meetings are held to address significant issues or approve major transactions.

the two executive Directors form the executive Committee that acts for the Board in supervising the management of the Group’s business and affairs. Monthly business review meetings, presided by at least one executive Director, are held to review the progress of projects and operational performance. Major issues are highlighted for follow-up and corrective actions.

to facilitate effective management, certain functions have been assigned to various Board committees, each of which has its own written terms of reference. the composition of the Board and Board Committees are:

Committee Membership

Director Nature of Board Member Audit Nominating Remuneration

Chia Kim Piow Chairman & Managing Director Member

Chia Kim Chua executive

Wong oi Moi non-executive

Badri narayanan santhana Krishnan non-executive Member

Lam Khin Khui Independent Member Member Chairman

Quek Wee Hong Independent Member Chairman Member

Keith tay Ah Kee Independent Chairman Member Member


the Board of Directors is familiar with the Group’s business and governance practices. the Directors also receive updates and relevant training, particularly on relevant new laws, regulations and changing commercial risks, from time to time. there is a programme to ensure new directors receive relevant training and orientation before appointment to the Board.

All Directors have direct access to senior management and to the Company secretary. the Company secretary attends all Board meetings and ensures that Board procedures are followed. the Company secretary ensures that the Company complies with the Companies Act and the Listing Rules of the sGX-st. Working hand in hand with management; the Company secretary also ensures that the Company complies with other applicable rules and regulations.

the number of Board meetings held in the year and the attendance of every Board member at those meetings are as follows:

Meetings of: Board Audit Nominating Remuneration Committee Committee Committee

No. of Meetings held in 2008: 5 4 1 2

Name & Attendance of Director

Chia Kim Piow 5 - 1 -

Chia Kim Chua 5 - - -

Wong Liang Feng 1 5 - 1 -

Wong oi Moi 4 - - -

Badri narayanan santhana Krishnan 2 1 - - -

Lam Khin Khui 5 4 1 2

Quek Wee Hong 5 4 1 2

Keith tay Ah Kee 5 4 1 2

1 resigned on 31 December 20082 appointed on 22 September 2008

CHAIRMAN AND MANAGING DIRECTOR

Principle 3

Mr. Chia Kim Piow, who is both Chairman and Managing Director of the Company, leads the Board. this practice has been carried on since inception and he leads the Board meetings because of his in-depth knowledge of the Group’s operations as well as his excellent relationship with customers, suppliers and other external parties that carry on business with the Group. the Board members unanimously support Mr. Chia’s role as both Chairman and Managing Director.

the Board is of the view that the current single leadership arrangement works well, in particular it does not hinder the decision-making process of the Company unnecessarily.




NOMINATING COMMITTEE

Principle 5

the nominating Committee (“nC”) comprises Mr. Quek Wee Hong, Mr. Keith tay, Mr. Lam Khin Khui and Mr. Chia Kim Piow.

Mr. Quek, as Chairman of the Committee, Mr. Lam and Mr. tay, are Independent Directors.

the nC, which has written terms of reference approved by the Board, recommends to the Board any new Board appointments and nominates Directors for re-election, determining whether or not such nominee has the requisite qualifications and experience. Accordingly, in selecting potential new directors, the NC will seek to identify the competencies required to enable the Board to fulfill its responsibilities. In doing so, the nC will have regard to the results of the annual appraisal of the Board’s performance. the nC may engage consultants to search or assess candidates for new positions on the Board, or to engage such other independent experts as it considers necessary to carry out its duties and responsibilities. In line with this, the nC also determines the independence of Board members. In considering the appointment of any new director, the nC ensures that the new director possesses the necessary skills, knowledge and experience that could facilitate the Board in the making of sound and well considered decisions.

In reviewing the nomination of the retiring directors, the nC considered the performance and contribution of each of the retiring directors, having regard not only to their attendance and participation at Board and Board Committee meetings but also the time and effort devoted to the Group’s business and affairs, especially the operational and technical contributions.

Further, it sets objective performance criteria and the measurement processes to evaluate the performance of the Board once a year. the nC conducted an evaluation of the Board’s performance as a whole for the year ended 31 December 2008.

the nominating Committee is responsible for identifying and recommending to the Board new Board members, after considering the necessary and desirable competencies.

While the Code recommends that the nC be responsible for assessing the Board as a whole and for assessing the contribution of each individual director to the effectiveness of the Board as a whole, nC felt it is more appropriate and more effective to assess the Board as a whole bearing in mind that the each member of the Board contributes in different ways to the success of the Company.

Information on Directors’ age, position, date of initial appointment and date of last re-election are listed below.

Director Age Position Date of Initial Date of Last Appointment Re-election

Chia Kim Piow 60 executive Chairman & Managing Director 02-Dec-1980 n.A.

Chia Kim Chua 58 executive Director 01-Mar-1982 26-Apr-2006

Wong oi Moi 54 non-executive Director 04-May-1983 26-Apr-2006

Badri narayanan santhana Krishnan 29 non-executive Director 22-sep-2008 -

Lam Khin Khui 60 Independent Director 01-Feb-1993 23-Apr-2007

Quek Wee Hong 67 Independent Director 01-Jan-1993 23-Apr-2007

Keith tay Ah Kee 64 Independent Director 01-Feb-1993 23-Apr-2008



Pursuant to the Company’s Articles of Association, other than the Managing Director, all Directors submit themselves for re-election at least once every three years.

In accordance with Article 100 and Article 104 of the Company’s Articles of Association, new Directors must submit themselves for re-election at the next Annual General Meeting of the Company and one third of the Directors who are eligible for re-election must retire by rotation at every Annual General Meeting.

the Committee has recommended the nominations of Mr. Chia Kim Chua, Madam Wong oi Moi and Mr. Badri narayanan santhana Krishnan for re-election at the forthcoming Annual General Meeting.

REMUNERATION COMMITTEE

Principles 7, 8 and 9

the Remuneration Committee (“RC”) comprises entirely of non-executive directors of the Company.

the RC members are Mr. Lam Khin Khui as Chairman, Mr. Quek Wee Hong and Mr. Keith tay who are non-executive directors and independent of management. the RC, when required, has access to expert advice, both within and outside the Company.

the role of the RC, which has written terms of reference approved by the Board, is to review and recommend to the Board a framework of remuneration for the Board of Directors and senior key executives (MDs and EDs of major subsidiaries) of the Group. It determines specific remuneration packages for each Executive Director and reviews the terms of their service contracts. In line with the above, it considers and approves guidelines on salary, bonus, and other terms and conditions for members of senior management, as well as the granting of share options in accordance with the rules of the Company’s share option scheme.

In setting remuneration packages for Directors and senior key executives of the Group, the pay and employment conditions within the industry and in comparable companies are taken into consideration. the RC seeks to establish and maintain an appropriate and competitive level of remuneration to attract, retain and motivate key executives. the RC also ensures that the remuneration policies support the Company’s objectives and strategies.

the Managing Director and the executive Directors have service contracts and do not receive director’s fees. their compensations consist of salary, bonuses, options and performance awards that are dependent on the performance of the Group. The performance-related awards form a significant portion of their compensation. this is to align their interests with those of the shareholders and link rewards to corporate and individual performance.

executive Directors’ service contracts are subject to review every two years. the RC is of the view that the Directors’ service contracts are not excessively long or with onerous removal clauses.

the Independent and non-executive Directors are compensated through director’s fees. the fees take into account the level of contribution and responsibilities of the Directors. these fees are subject to shareholders’ approval at the Annual General Meeting.

the remuneration policy for key executives follows the guidelines laid down by the national Wages Council. Further, the Company’s performance, the responsibility and performance of individual key executive are taken into consideration. Both the Committee and the Chairman of the Board recommend the remuneration packages of key executives for the RC and the Board’s approval.

the Directors’ annual remuneration is set out below. Directors’ interests and the executives’ share option scheme are set out in the Directors’ Report.



the following table shows the breakdown (in percentage terms) of the remuneration and fees of Directors for year ended 31 December 2008.

DIRECTORS OF COMPANY SALARY BONUS FEES OTHER BENEFITS TOTAL

$5,250,000 to below $5,500,000

Chia Kim Piow 13% 84% - 3% 100%

$1,500,000 to below $1,750,000

Chia Kim Chua 20% 77% - 3% 100%

$250,000 to below $500,000

Wong Liang Feng 1 95% - - 5% 100%

Below $250,000

Badri narayanan santhana Krishnan - - 100% - 100%

Lam Khin Khui - - 100% - 100%

Quek Wee Hong - - 100% - 100%

Keith tay Ah Kee - - 100% - 100%

Wong oi Moi - - 100% - 100%

1 resigned on 31 December 2008

the annual remuneration for key executives (in percentage terms) during the year is as follows: KEY EXECUTIVES SALARY BONUS OTHER BENEFITS TOTAL

$500,000 to below $750,000

Loh eng Kee 28% 62% 10% 100%

tham sow Chee, Kellin 23% 71% 6% 100%

From $250,000 to below $500,000

Khow Chong Lam, Joseph 30% 64% 6% 100%

Dr Abdul Malek Bin Mohd Amin 68% 23% 9% 100%

Below $250,000

Fam Kok Kiong, tony 74% 21% 5% 100%

Goh soon Lip, Rick 64% 22% 14% 100%

Koh Chun Peng 69% 24% 7% 100%

Khin Maung Myint 68% 24% 8% 100%

Liew Yoon Kong, Albert 54% 28% 18% 100%

sarjit singh 37% 54% 9% 100%

soh Hong Kuan, Bernard 79% 15% 6% 100%

tan Kay Peng,Paul 69% 25% 6% 100%

tan teck seng 66% 29% 5% 100%

tham Peng Weng 57% 25% 18% 100%

there were no employees related to Directors of the Company whose remuneration exceeded $150,000 each during the year.



AUDIT COMMITTEE

Principle 11

the Audit Committee (“AC”), which has written terms of reference approved by the Board, comprises Mr. Keith tay Ah Kee as Chairman, Mr. Lam Khin Khui, Mr. Quek Wee Hong and Mr. Badri narayanan santhana Krishnan. Two of the members, including the Chairman, are qualified accountants. Mr. Tay, Mr. Lam and Mr. Quek are Independent Directors.

the AC reviews the scope of work, as set out in section 201 B(5) of the Companies Act, Cap 50, of both internal and external auditors and the assistance given by the Company’s officers to the auditors. It meets with the Company’s internal and external auditors to review their audit plans and discussed the results of their respective examinations and their evaluation of the Group’s operations and system of internal accounting controls. The AC also reviews significant financial reporting issues and judgments relating to the financial statements of the Group for each financial year as well as the Auditor’s report thereon, and the interim and annual results announcements, before submitting to the Board for approval. With the assistance of the auditors, the AC reviews the interested persons transactions for the Group.

The AC reviews the adequacy of the Company’s internal controls (financial, compliance and operational) and risk management policies and systems established by management. the AC also reviews the scope and results of the internal audit procedures including the effectiveness and adequacy of the internal audit function.

In line with the Code, the AC also reviews arrangements by which staff of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters and ensure that arrangements are in place for the independent investigations of such matters and for appropriate follow up actions.

Apart from formal meetings, the Chairman and various members of the AC will hold informal meetings and discussions with the management as and when necessary. Members of the AC have independent access to both external and internal auditors. the AC met with both internal and external auditors without the presence of management. the AC has reviewed the nature and volume of non-audit services to the Group by the external auditors and are satisfied that the nature and extent of such services would not prejudice the independence and objectivity of the external auditors. the AC recommends to the Board the appointment, re-appointment and removal of external auditors and approves the remuneration and terms of engagement of the external auditors for shareholders’ approval at the forthcoming Annual General Meeting.

ACCOUNTABILITY

Principle 10

the Board is accountable to the shareholders while management is accountable to the Board. Management presents quarterly and full-year financial statements to the AC and the Board for review and approval. The Board approves the results and authorizes the release of the results to sGX-st and the public via sGXnet.


INTERNAL CONTROLS & INTERNAL AUDIT

Principles 12 and 13

the Group has outsourced its internal audit function. the AC reviews its adequacy and effectiveness each year. The AC has reviewed the internal audit function and is satisfied that it has the appropriate standing to perform its functions effectively and objectively. Paul Wan & Co. provided the internal audit services for the Company and its subsidiaries during the year. the internal auditor reports primarily to the AC.

the Group has in place a system of internal controls to ensure that assets are safeguarded, proper accounting records are maintained and financial information used within the business and for publication is reliable. the controls include the documentation of key procedures and rules relating to the delegation of authorities. the AC, assisted by the auditors, has reviewed the effectiveness of these controls and the Board has deemed them to be adequate within the Group’s guidelines.

COMMUNICATION WITH SHAREHOLDERS

Principles 14 and 15

Price-sensitive information relating to the Group is released through sGXnet onto the sGX website which is available to the public in general. similarly, quarterly, full year results and annual reports announced or issued within the mandatory period are also released through the sGXnet. the Company’s Annual Report is available at its website www.rotaryeng.com.sg.

All shareholders of the Group receive the Annual Report and notice of Annual General Meeting. At Annual General Meetings, shareholders will be given opportunity to voice their views and to direct questions regarding the Group to senior management or Directors, including the Chairman of each of the Board Committees.

All Directors including all chairpersons of the Audit, nomination and Remuneration Committees are encouraged to be present at all general meetings of the Company. the external auditors are present at the Annual General Meetings.

RISK MANAGEMENT

the Company’s risk management policies are summarized as follows:

Contract pricing and executionThe ability to secure projects depends on competitive pricing, fulfilling the technical and commercial requirements, and delivery.

the tender Review Committee comprising of at least one Director, Project Manager, engineering Manager and Business Development Manager, reviews the technical and commercial terms and conditions, as well as quantity and pricing, before approval is given for the submission of the tender proposal.

Upon receipt of a contract, the Contract Review Committee comprising of at least one Director, Project Manager, engineering Manager and Business Development Manager reviews the changes to the technical and commercial terms and conditions, as well as quantity and pricing, before accepting the contract.

the Project Manager monitors the progress and the productivity of the contract on a regular and continuous basis to ensure technical specifications are met, delivery on schedule and costs are under control.



Information Systemthe Company has a disaster recovery plan and a maintenance program for its accounting and management information system. Adequate resources are dedicated to ensure the systems are running smoothly and, if there is a disruption, a quick resumption of services is assured.

Foreign currenciesThe Group operates in several countries and is exposed to movements in foreign currency rates. It identifies foreign currency needs for all contracts. The currency outflows are matched against the inflows. Hedging is used only when there is a material discrepancy between the flows.

Key executivesThe Company is a service provider. Therefore, its business development and profitability depends on its ability to attract and retain qualified personnel. Besides the basic human resource programmes, the key executives are offered remuneration packages that are competitive within the industry, employees’ share option scheme and a challenging work environment.

Material pricesThe Company depends on its suppliers for materials such as steel plates, pipes and fittings. Changes in prices affect the cost of construction. this is managed by forward planning of requirements, sourcing for alternate supply, and obtaining sufficient quantity at competitive prices.

Source of revenueSignificant part of Group’s turnover is derived from Singapore. Therefore, it is susceptible to a slowdown of the singapore economy. It has sought and continues to seek projects from outside singapore to diversify its revenue stream.

SECURITIES TRANSACTIONS

the Company has a clear policy on the trading of its share by directors and executives within the Group. the Company has adopted its own internal Code of Best Practices on securities transactions (“the securities transactions Code”). the securities transactions Code provides guidance to the directors and executives of the Group with regard to dealing in the Company’s shares. It emphasizes that the law on insider trading is applicable at all times, notwithstanding the window periods for dealing in the shares. the securities transactions Code also enables the Company to monitor such share transactions by requiring employees to report to the Company whenever they deal in the Company’s shares.

the Group issues circulars to its directors, executives and employees informing them that they must not trade in the listed securities of the Company one month before the announcement of the Group’s full year or two weeks before quarterly results and ending on the date of the announcement of such results.

the directors are required to notify the Company of any dealings in the Company’s securities (during the open window period) within two (2) business days of the transactions. The Board is satisfied with the Group’s commitment in compliance with the Code, and on the adequacy of internal controls within the Group.

MATERIAL CONTRACTS

Since the end of the previous financial year, the Company and its subsidiaries did not enter into any material contracts involving the interests of Directors or controlling shareholders, and no such material contracts subsisted at end of the financial year or were entered into since the end of the financial year.



INTERESTED PERSON TRANSACTIONS

the Company has established procedures to ensure that all transactions with interested persons are reported on a timely manner to the AC and that the transactions are carried out on a normal commercial terms and will not be prejudicial to the interests of the Company and its minority shareholders. the Company’s disclosure in respect of interested person transactions for the financial year ended 31 December 2008 are as follows:

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

Pioneer seafood 103 not applicable – Restaurant & the Company Catering Pte. Ltd. does not have a shareholders’ mandateunder Rule 920



DIRECTORS’ RePoRt

the Directors are pleased to present their report to the members together with the audited consolidated financial statements of Rotary Engineering Limited (the “Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2008.

Directors

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

Chia Kim Piow (Chairman and Managing Director)Chia Kim ChuaWong oi MoiBadri narayanan santhana Krishnan (Appointed on 22 september 2008)Lam Khin KhuiQuek Wee HongKeith tay Ah Kee

Arrangements to enable Directors to acquire shares and debentures

Except as described below, neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the Directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.

Directors’ interests in shares and debentures

The following Directors, who held office at the end of the financial year, had, according to the register of Directors’ shareholdings required to be kept under section 164 of the singapore Companies Act, Cap. 50, an interest in shares of the Company and related corporations as stated below:

Direct interest Deemed interest At the At the At the At the beginning of end of beginning of end of financial financial financial financial year year year year

Rotary Engineering Limited ordinary shares Chia Kim Piow 22,950,816 25,418,816 165,450,632 165,450,632Chia Kim Chua 22,242,400 22,242,400 – – Wong oi Moi 6,972,896 6,972,896 165,450,632 165,450,632Lam Khin Khui 842,800 842,800 – – Quek Wee Hong 1,120,000 1,120,000 – – Keith tay Ah Kee 459,200 459,200 – –


DIRECTORS’ RePoRt

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

There was no change in any of the above-mentioned interests between the end of the financial year and 21 January 2009.

By virtue of section 7 of the singapore Companies Act, Cap. 50, Mr. Chia Kim Piow and Madam Wong oi Moi are deemed to have interests in shares of the subsidiaries 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 date of appointment if later, or at the end of the financial year.

Directors’ contractual benefits

Except as disclosed in the financial statements, since the end of the previous financial year, no Director of the Company has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the Director, or with a firm of which the Director is a member, or with a company in which the Director has a substantial financial interest.

Share options

the Rotary engineering employees’ share option scheme (“the esos”) was approved at the Company’s extraordinary General Meeting on 15 December 2000.

the esos is a share incentive scheme to give recognition to employees whose contributions have been essential to the well-being and prosperity of the Group, i.e. referring to Rotary engineering Limited and its subsidiaries and associated companies.

on 26 october 2001, a total of 6,480,000 options to subscribe for ordinary shares in the Company (“Grant 1”) were granted to executive Directors, Independent Directors, Managerial staff and specially selected employees.

No option was granted during the financial year.

The exercise price for Grant 1 was fixed at 18.66 cents per share, and is exercisable from 27 October 2001 to 26 october 2011.

these options do not entitle the holder to participate, by virtue of the options, in any share issue of any other corporation. 5,605,000 options have been exercised as at the date of this report. no unissued shares other than those referred to above, are under option as at date of this report.


DIRECTORS’ RePoRt

Share options (cont’d)

Details of the options to subscribe for ordinary shares of the Company granted to employees of the Group pursuant to the scheme are as follows:

Aggregate Aggregate Aggregate options options option granted exercised cancelled Options since since since Aggregate granted commencement commencement commencement option during of scheme to of scheme to of scheme to outstanding as Exercise financial end of financial end of financial end of financial at end of the ExerciseName of participant period year year year year financial year price

Directors of the Company Chia Kim Chua 2001 - 2011 – 600,000 (600,000) – – $0.1866 Lam Khin Khui 2001 - 2011 – 300,000 (300,000) – – $0.1866

Quek Wee Hong 2001 - 2011 – 300,000 (300,000) – – $0.1866 Keith tay Ah Kee 2001 - 2011 – 300,000 (300,000) – – $0.1866 Managerial staff 2001 - 2011 – 4,070,000 (3,285,000) (770,000) 15,000 $0.1866 Specially selected staff 2001 - 2011 – 910,000 (820,000) (90,000) – $0.1866

total 6,480,000 (5,605,000) (860,000) 15,000

Audit Committee

the Audit Committee (“AC”) carried out its functions in accordance with section 201B(5) of the singapore Companies Act, Cap. 50, including the following:

• Reviews the audit plans of the internal and external auditors of the Company and ensures the adequacy of the Company’s system of accounting controls and the co-operation given by the Company’s management to the external and internal auditors;

• Reviews the quarterly and annual financial statements and the auditors’ report on the annual financial statements of the Company before their submission to the Board of Directors;

• Reviews effectiveness of the Company’s material internal controls, including financial, operational and compliance controls and risk management via reviews carried out by the internal auditors;

• Meets with the external auditors, other committees, and management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC;

• Reviews legal and regulatory matters that may have a material impact on the financial statements, related compliance policies and programmes and any reports received from regulators;


Audit Committee (cont’d)

• Reviews the cost effectiveness and the independence and objectivity of the external auditors;

• Reviews the nature and extent of non-audit services provided by the external auditors;

• Recommends to the Board of Directors the external auditors to be nominated, approves the compensation of the external auditors, and reviews the scope and results of the audit;

• Reports actions and minutes of the AC to the Board of Directors with such recommendations as the AC considers appropriate; and

• Reviews interested person transactions in accordance with the requirements of the Singapore Exchange securities trading Limited (sGX-st)’s Listing Manual.

The AC, 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 AC has also conducted a review of interested person transactions.

the AC convened four meetings during the year with full attendance from all members. the AC has also met with internal and external auditors, without the presence of the Company’s management, at least once a year.

Further details regarding the audit committee are disclosed in the Report on Corporate Governance.

Auditors

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

on behalf of the Board of Directors:

Chia Kim PiowDirector

Chia Kim ChuaDirector

singapore25 March 2009

DIRECTORS’ RePoRt


STATEMENT BY DIReCtoRs

We, Chia Kim Piow and Chia Kim Chua, being two of the Directors of Rotary engineering Limited, do hereby state that, in the opinion of the Directors,

(a) the accompanying balance sheets, consolidated income statement, statements of changes in equity, and consolidated cash flow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2008 and the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date, 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:

Chia Kim PiowDirector

Chia Kim ChuaDirector

singapore25 March 2009


INDEPENDENT AUDItoRs’ RePoRtto tHe MeMBeRs oF RotARY enGIneeRInG LIMIteD

We have audited the accompanying financial statements of Rotary Engineering Limited (the “Company”) and its subsidiaries (collectively, the “Group”) which comprise the balance sheets of the Group and the Company as at 31 December 2008, the statements of changes in equity of the Group and the Company and the income statement and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the singapore Companies Act, Cap. 50 (the Act) and singapore Financial Reporting standards. this responsibility includes devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss account and balance sheet and to maintain accountability of assets; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with singapore standards on Auditing. those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free 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 auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

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


INDEPENDENT AUDItoRs’ RePoRtto tHe MeMBeRs oF RotARY enGIneeRInG LIMIteD

Opinion

In our opinion,

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

(ii) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Ernst & Young LLPPublic Accountants and Certified Public Accountants singapore

25 March 2009


CONSOLIDATED InCoMe stAteMent FoR tHe YeAR enDeD 31 DeCeMBeR 2008

Note Group 2008 2007 $’000 $’000

Revenue 5 520,119 510,172Cost of sales (396,668) (385,541)

Gross profit 123,451 124,631 other revenue 6 3,148 7,187Administrative costs 6 (41,489) (42,219)other operating costs 6 (12,963) (16,313)Finance costs 6 (2,213) (2,243)share of results of associated companies (179) 469

Profit before tax 69,755 71,512Income tax expense 7 (15,477) (15,539)

Profit for the year 54,278 55,973 Attributable to:

equity holders of the parent 50,851 52,831Minority interests 3,427 3,142

54,278 55,973

Earnings per share attributable to equity holders of parent (cents per share)

Basic 8 9.0 9.3

Diluted 8 9.0 9.3

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


BALANCE sHeetsAs At 31 DeCeMBeR 2008

Note Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Non-current assets Property, plant and equipment 9 65,710 46,413 14,551 15,390Intangible assets 10 2,098 975 385 769Investments subsidiary companies 11 – – 58,684 57,514 Associated companies 12 23,903 23,500 22,562 21,173Deferred tax assets 13 220 81 – – other receivables 14 – 204 – 2,154other investments 15 6,255 3,653 5,526 2,658 Current assets Gross amount due from customers for contract work-in-progress 16 16,454 3,996 7,620 2,709Inventories 17 5,653 6,155 – – Prepaid operating expenses 309 269 56 56Downpayments made to suppliers 4,470 4,042 – 25Income tax recoverable 574 280 – – trade and other receivables 14 165,880 158,665 120,909 171,553other investments 15 6,848 11,163 – – Cash and cash equivalents 18 157,774 154,711 101,008 85,539

357,962 339,281 229,593 259,882

Current liabilities Income tax payable 13,849 16,993 3,025 7,895Loans and borrowings 20 8,056 42,929 153 42,153Gross amount due to customers for contract work-in-progress 16 68,861 69,133 69,112 77,171trade and other payables 21 119,771 79,274 82,338 100,670Downpayments from customers 27,274 28,069 15,808 10,509Derivatives 19 – 658 – 658

237,811 237,056 170,436 239,056

Net current assets 120,151 102,225 59,157 20,826


BALANCE sHeetsAs At 31 DeCeMBeR 2008


Note Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Non-current liabilities Deferred tax liabilities 13 1,476 1,246 778 778Loans and borrowings 20 477 603 288 450other payables 21 – – 3,781 3,781

(1,953) (1,849) (4,847) (5,009)

Net assets 216,384 175,202 156,018 115,475

Equity attributable to equity holders of the parent share capital 23 89,362 89,362 89,362 89,362Retained earnings 116,643 79,152 67,936 26,113other reserves 24 (1,522) (303) (1,280) –

204,483 168,211 156,018 115,475Minority interests 11,901 6,991 – –

Total equity 216,384 175,202 156,018 115,475


STATEMENTS oF CHAnGes In eQUItY FoR tHe FInAnCIAL YeAR enDeD 31 DeCeMBeR 2008

Attributable to equity holders of the parent

Foreign Fair currency value2008 Share Retained Capital Statutory translation adjustment Minority TotalGroup capital earnings reserve reserve reserve reserve Total interests equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2008 89,362 79,152 80 – (383) – 168,211 6,991 175,202

Foreign currency translation – – – – (573) – (573) (42) (615)net loss on available- for-sale financial assets – – – – – (946) (946) – (946)

net expenses recognised directly in equity – – – – (573) (946) (1,519) (42) (1,561)Profit for the year – 50,851 – – – – 50,851 3,427 54,278

total recognised income and expenses for the year – 50,851 – – (573) (946) 49,332 3,385 52,717

Dividends on ordinary shares (note 32) – (13,060) – – – – (13,060) – (13,060)Acquisition of an additional 1% equity interest in its 50%-owned associated company – – – – – – – 1,588 1,588Acquisition of minority interests (note 11) – – – – – – – (3) (3)Dividends paid to minority shareholders – – – – – – – (60) (60)transfer to statutory reserve – (300) – 300 – – – – – At 31 December 2008 89,362 116,643 80 300 (956) (946) 204,483 11,901 216,384




Attributable to equity holders of the parent Foreign currency 2007 Share Retained Capital translation Minority TotalGroup capital earnings reserve reserve Total interests equity $’000 $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2007 56,910 83,912 65 (3,456) 137,431 3,597 141,028 Foreign currency translation – – – 3,073 3,073 252 3,325

net income recognised directly in equity – – – 3,073 3,073 252 3,325Profit for the year – 52,831 15 – 52,846 3,142 55,988

total recognised income for the year – 52,831 15 3,073 55,919 3,394 59,313

Issue of new shares under share option plan 5 – – – 5 – 5Rights issue 32,447 – – – 32,447 – 32,447Dividends on ordinary shares (note 32) – (57,591) – – (57,591) – (57,591)

At 31 December 2007 89,362 79,152 80 (383) 168,211 6,991 175,202




Far value2008 Share Retained adjustment TotalCompany capital earnings reserve equity $’000 $’000 $’000 $’000

At 1 January 2008 89,362 26,113 – 115,475net loss on available-for-sale financial assets – – (1,280) (1,280)

net expenses recognised in equity – – (1,280) (1,280)Profit for the year – 54,883 – 54,883

total recognised income and expenses for the year – 54,883 (1,280) 53,603Dividends on ordinary shares (note 32) – (13,060) – (13,060)

At 31 December 2008 89,362 67,936 (1,280) 156,018

2007 Company At 1 January 2007 56,910 53,041 – 109,951Profit for the year, representing total recognised income for the year – 30,663 – 30,663Issue of new shares under share option plan 5 – – 5Rights issue 32,447 – – 32,447Dividends on ordinary shares (note 32) – (57,591) – (57,591)

At 31 December 2007 89,362 26,113 – 115,475



CONSOLIDATED CAsH FLoW stAteMentFoR tHe YeAR enDeD 31 DeCeMBeR 2008

Note Group 2008 2007 $’000 $’000

Operating activities Profit before tax 69,755 71,512Adjustments for: share of results of associated companies 179 (469) Depreciation of property, plant and equipment 9 6,898 5,590 Amortisation of intangible assets 10 542 476 Allowance for doubtful debts 2,701 108 Write-back of allowance for doubtful debts (2) (668) Reversal of write-down of inventories – (6) Allowance for obsolete inventories 41 38 Gain on disposal of property, plant and equipment (144) (533) Loss on disposal of other investments – 6 Gain on disposal of associate – (1,706) Fair value changes on derivative financial instruments (658) 161 Impairment loss on carrying costs and advances to associates 2,751 10,368 Interest income (1,966) (3,051) Interest expense 2,213 2,243 negative goodwill written-off 174 – Preliminary expenses written-off 249 – Dividends from quoted corporations in singapore (130) (3) Impairment loss on other investments 12 –

Operating cashflows before changes in working capital 82,615 84,066Increase in receivables (6,422) (21,811)Decrease/(increase) in inventories 461 (59)(Decrease)/increase in contract work-in-progress (13,606) 11,943Increase in payables 32,574 35,912

Cash flows from operations 95,622 110,051Interest received 2,045 2,994Interest paid (2,213) (2,243)tax paid (18,909) (11,517)

Net cash flows from operating activities 76,545 99,285

Investing activities Acquisition of associated companies (50) (13,723)Additional investment in associated companies (4,086) – Purchase of other investments (10,408) (7,344)Purchase of property, plant and equipment (23,733) (9,784)Additions to intangible assets (1,670) (1,363)Proceeds from disposal of property, plant and equipment 2,104 3,708Proceeds from disposal of other investments 11,163 91Proceeds from disposal of associated companies – 4,508Acquisition of subsidiary, net of cash acquired 11 1,813 – Acquisition of minority interests 11 (3) – Dividends from associate companies 305 160 Dividends from quoted corporations in singapore 130 3

Net cash flows used in investing activities (24,435) (23,744)


CONSOLIDATED CAsH FLoW stAteMentFoR tHe YeAR enDeD 31 DeCeMBeR 2008

Note Group 2008 2007 $’000 $’000

Financing activities Proceeds from issuance of ordinary share – 5Redemption of Multicurrency Medium term note Programme (42,000) – Proceeds from/(repayment of) bank loan and trade facilities 6,235 (5,904)Dividends paid: - by the Company (13,060) (25,144)- by subsidiaries to minority shareholders (60) – Decrease in pledged fixed deposits 163 584Repayment of finance lease obligations (284) (248)

Net cash flows used in financing activities (49,006) (30,707)

Net increase in cash and cash equivalents 3,104 44,834effect of exchange rate changes on cash and cash equivalents (124) 4,228Cash and cash equivalents at beginning of year 18 154,370 105,308 Cash and cash equivalents at end of year 18 157,350 154,370



NOTES to tHe FInAnCIAL stAteMents31 DeCeMBeR 2008

1. Corporate information

Rotary engineering Limited (the “Company”) is a limited liability company incorporated in singapore and is listed on the singapore exchange securities trading Limited (sGX-st).

The registered office and principal place of business of the Company is located at No. 17, Tuas Avenue 20, singapore 638828.

the principal activities of the Company are engineering design, procurement and construction services for plants and associated facilities. the principal activities of the Company’s subsidiaries are disclosed in Note 4 to the financial statements.

2. Summary of significant accounting policies

2.1 Basis of preparation

The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with singapore Financial Reporting standards (FRs).

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

The financial statements are presented in Singapore Dollars (SGD or $) and all values in the tables are rounded to the nearest thousand ($’000) as indicated.

2.2 Adoption of new and revised FRS

With effect from 1 January 2008, the Group had adopted all the new and revised FRs and Int FRs that are mandatory for financial years beginning on or after 1 January 2008. The adoption of these FRS and INT FRS has no significant impact to the Group.

2.3 Future changes in accounting policies

the Group has not adopted the following FRs and Int FRs that have been issued but not yet effective:

Effective for annual periods beginning Reference Description on or after

FRs 1 Presentation of Financial statements – Revised Presentation 1 January 2009

FRs 1 Presentation of Financial statements – Amendments 1 January 2009 relating to Puttable Financial Instruments and obligations Arising on Liquidation

FRs 23 Borrowing Costs 1 January 2009

FRs 27 Consolidated and separate Financial statements – 1 January 2009 Amendments relating to Cost of an Investment in a subsidiary, Jointly Controlled entity or Associate

FRs 32 Financial Instruments: Presentation – Amendments 1 January 2009 relating to Puttable Financial Instruments and obligations Arising on Liquidation



2.3 Future changes in accounting policies (cont’d)

Effective for annual periods beginning Reference Description on or after

FRs 39 Financial Instruments: Recognition and Measurement 1 July 2009 – Amendments relating to eligible hedged items

FRs 101 First-time Adoption of Financial Reporting standards 1 January 2009 – Amendments relating to Cost of an Investment in a subsidiary, Jointly Controlled entity or Associate

FRs 102 share-based payment – Amendments relating 1 January 2009 to vesting conditions and cancellations

FRs 108 operating segments 1 January 2009

Int FRs 113 Customer Loyalty Programmes 1 July 2008

Int FRs 116 Hedges of a net Investment in a Foreign operation 1 october 2008

Int FRs 117 Distributions of non-cash Assets to owners 1 July 2009

the Directors expect that the adoption of the above pronouncements will have no material impact on the financial statements in the period of initial application, except as indicated below.

FRS 1 Presentation of Financial Statements - Revised Presentation

the revised FRs 1 requires owner and non-owner changes in equity to be presented separately. the statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line item. In addition, the revised standard introduces the statement of comprehensive income: it presents all items of income and expenses recognised in profit or loss, together with all other items of recognised income and expenses, either in one single statement, or in two linked statements. the Group is concurrently evaluating the format to adopt.

FRS 101 First-time Adoption of Financial Reporting Standards and FRS 27 Consolidated and Separate Financial Statement – Amendments Relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate

the amendments are effective for annual periods beginning on or after 1 January 2009. FRs 101 has been amended to allow an entity, in its separate financial statements, to determine the cost of investment in subsidiary, jointly controlled entity or associate either at cost determined in accordance with FRS 27, deemed cost at fair value of the investment in its separate financial statements at the date of transition to FRs determined in accordance with FRs 39, or the previous GAAP carrying amount of the investment at the date of transition to FRs. the determination is made for each investment. FRS 27 has been amended to deleting the definition of the “cost method”, which would result in all dividends received from a subsidiary, jointly controlled entity or associate being recognised in profit or loss in its separate financial statements, instead of separating them into pre- and post-acquisition dividends. In addition, where a new parent entity is inserted above an existing parent of a group, the cost of the investment will be the carrying amount of the original parent (i.e. share of equity) rather than its fair value, provided that the original parent becomes a subsidiary, the assets and liabilities of the new group and the original group are the same immediately before and after the reorganisation, and there is no change in relative ownership interests of the existing shareholders. the Group will apply the amendments introduced by FRs 101 and FRs 27 prospectively.


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

2.3 Future changes in accounting policies (cont’d)

FRS 108 Operating Segments

FRs 108 requires entities to disclose segment information based on the information reviewed by the entity’s chief operating decision maker. the impact of this standard on the other segment disclosures is still to be determined. As this is a disclosure standard, it will have no impact on the financial position and result of the Group when implemented in 2009.

2.4 Basis of consolidation The consolidated financial statements comprise the financial statements of the Company and its

subsidiaries as at the balance sheet date. 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. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-

group transactions are eliminated in full. Acquisitions of subsidiaries are accounted for by applying the purchase method. Identifiable assets

acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Adjustments to those fair values relating to previously held interests are treated as a revaluation and recognised in equity. Any excess of the cost of business combination over the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as goodwill on the balance sheet. the accounting policy for goodwill is set out in note 2.8(a). Any excess of the Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised as income in the income statement on the date of acquisition.

subsidiaries are consolidated from the date of acquisition, being the date on which the Group

obtains control, and continue to be consolidated until the date that such control ceases.

2.5 Transactions with minority interests

Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. transactions with minority interests are accounted for using the entity concept method, whereby, transactions with minority interests are accounted for as transactions with equity holders. on acquisition of minority interests, the difference between the consideration and book value of the share of the net assets acquired is reflected as being a transaction between owners and recognised directly in equity. Gain or loss on disposal to minority interests is recognised directly in equity.




2.6 Foreign currency transactions in foreign currencies are measured in the respective functional currencies of the

Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date. non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.

exchange differences arising on the settlement of monetary items or on translating monetary items at

the balance sheet date are recognised in the income statement except for exchange differences arising on monetary items that form 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.

the assets and liabilities of foreign operations are translated into sGD at the rate of exchange ruling

at the balance sheet date and their income statement are translated at the weighted average exchange rates for the year. the exchange differences arising on the translation are taken directly to a separate component of equity as foreign currency translation reserve. on disposal of a foreign operation, the cumulative amount recognised in foreign currency translation reserve relating to that particular foreign operation is recognised in the income statement.

2.7 Property, plant and equipment All items of property, plant and equipment are initially recorded at cost. the cost of an item of

property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. Subsequent to recognition, leasehold land, leasehold buildings, office renovations, office equipment, furniture and fittings, motor vehicles, plant and equipment and other assets are stated at cost less accumulated depreciation and accumulated impairment losses.

Freehold land has an unlimited life and therefore is not depreciated. Depreciation is computed on

a straight-line basis over the estimated useful life of the assets as follows: Leasehold land - over period of lease of 30 years Leasehold buildings - over the period of the lease of 30 to 50 years Office renovations - 10 years Office equipment, furniture and fittings - 3 to 10 years Plant and machinery - 5 to 10 years Motor vehicles - 5 years other assets - 3 to 10 years

Assets under construction included in construction-in-progress are not depreciated as these assets are not yet available for use.

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.



2. Summary of significant accounting policies (cont’d) 2.7 Property, plant and equipment (cont’d) The residual value, useful life and depreciation method are reviewed at each financial year-end to

ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.

An item of property, plant and equipment is derecognised upon disposal or when no future

economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the income statement in the year the asset is derecognised.

2.8 Intangible assets (a) Goodwill Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost

less accumulated impairment losses. Goodwill is reviewed for impairment annually or more frequently if events and circumstances indicate that the carrying value may be impaired.

For the purpose of impairment testing, goodwill acquired is allocated to each of the Group’s cash-generating units that are expected to benefit from the synergies of the combination.

the cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an impairment loss is recognised in the income statement. Impairment losses recognised for goodwill are not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and the portion of the cash-generating unit retained.

Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with the accounting policy set out in note 2.6.

Goodwill and fair value adjustments which arose on acquisitions of foreign operations before 1 January 2005 are deemed to be assets and liabilities of the Company and are recorded in sGD at the rates prevailing at the date of acquisition.



2. Summary of significant accounting policies (cont’d) 2.8 Intangible assets (cont’d) (b) Other intangible assets

Intangible assets acquired separately are measured initially at cost. the cost of intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less any accumulated amortisation and accumulated impairment losses.

Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an indication that the intangible asset may be impaired. the amortisation period and the amortisation method are reviewed at least at each financial year-end.

Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. such intangible assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the useful life assessment continues to be supportable.

Software

Software acquired separately is amortised on a straight line basis over its finite useful life of 3 years.

2.9 Impairment of non-financial assets the Group assesses at each reporting date whether there is an indication that an asset may be

impaired. If any such indication exists, or when annual impairment assessment for an asset is required, the Group makes an estimate of the asset’s recoverable amount.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its 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 expected to be generated by the asset are discounted to their present value. Where the carrying amount of an asset exceeds its recoverable amount, the asset is written down to its recoverable amount.

Impairment losses are recognised in the income statement except for assets that are previously revalued where the revaluation was taken to equity. In this case the impairment is also recognised in equity up to the amount of any previous revaluation.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. A previously recognised impairment loss 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. If that is the case, the carrying amount of the asset is increased to its recoverable amount. that increase cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised previously. such reversal is recognised in the income statement unless the asset is measured at revalued amount, in which case the reversal is treated as a revaluation increase.




2.10 Subsidiaries A subsidiary is an entity over which the Group has the power to govern the financial and operating

policies so as to obtain benefits from its activities. In the Company’s separate financial statements, investments in subsidiaries are accounted for at

cost less impairment losses.

2.11 Associates An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant

influence. The associate is equity accounted for from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

the Group’s investments in associates are accounted for using the equity method. Under the equity

method, the investment in associate is measured in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the investment is deducted from the carrying amount of the investment and is recognised as income as part of the Group’s share of results of the associate in the period in which the investment is acquired.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the

Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

The most recent available audited financial statements of the associates are used by the Group

in applying the equity method. Where the dates of the audited financial statements used are not co-terminous with those of the Group, the share of results is arrived at from the last audited financial statements available and un-audited management financial statements to the end of the accounting period. Consistent accounting policies are applied for like transactions and events in similar circumstances.

In the Company’s separate financial statements, investments in associates are accounted for at

cost less impairment losses.

2.12 Financial assets

Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs.

A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired. 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.




2.12 Financial assets (cont’d)

All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e., the date that the Group commits 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.

(a) Financial assets at fair value through profit or loss

Financial assets held for trading are classified as financial assets at fair value through profit or loss. Financial assets held for trading are derivatives (including separated embedded derivatives) or financial assets acquired principally for the purpose of selling in the near term.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes in fair value of the financial assets are recognised in the income statement. Net gains or net losses on financial assets at fair value through profit or loss include exchange differences, interest and dividend income.

(b) Loans and receivables

Financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method. Gains and losses are recognised in the income statement when the loans and receivables are derecognised or impaired, and through the amortisation process.

(c) Available-for-sale financial assets

Available-for-sale financial assets are financial assets that are not classified in any of the other categories. After initial recognition, available-for-sale financial assets are measured at fair value. Any gains or losses from changes in fair value of the financial asset are recognised directly in the fair value adjustment reserve in equity, except that impairment losses, foreign exchange gains and losses on monetary instruments and interest calculated using the effective interest method are recognised in the income statement. the cumulative gain or loss previously recognised in equity is recognised in the income statement when the financial asset is derecognised.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment loss.



2. Summary of significant accounting policies (cont’d) 2.13 Impairment of financial assets the Group assesses at each balance sheet date whether there is any objective evidence that a

financial asset is impaired. (a) Assets carried at amortised cost If there is objective evidence that an impairment loss on financial assets carried at amortised

cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. the impairment loss is recognised in the income statement.

When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to the allowance account, the amounts charged to the allowance account are written off against the carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

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 was recognised, the previously recognised impairment loss is reversed to the extent that the carrying amount of the asset does not exceed its amortised cost at the reversal date. the amount of reversal is recognised in the income statement.

(b) Assets carried at cost

If there is objective evidence (such as significant adverse changes in the business environment where the issuer operates, probability of insolvency or significant financial difficulties of the issuer) that an impairment loss on financial assets carried at cost has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

(c) Available-for-sale financial assets

Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or obligor, and the disappearance of an active trading market are considerations to determine whether there is objective evidence that investment securities classified as available-for-sale financial assets are impaired.




2.13 Impairment of financial assets (cont’d)

(c) Available-for-sale financial assets (cont’d)

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and amortisation) and its current fair value, less any impairment loss previously recognised in the income statement, is transferred from equity to the income statement. Reversals of impairment losses in respect of equity instruments are not recognised in the income statement. Reversals of impairment losses on debt instruments are recognised in the income statement if the increase in fair value of the debt instrument can be objectively related to an event occurring after the impairment loss was recognised in the income statement.

2.14 Cash and cash equivalents Cash and cash equivalents comprise cash at bank and in hand and fixed deposits. These also

include bank overdrafts that form an integral part of the Group’s cash management.

2.15 Construction contracts

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, when the outcome of a construction contract can be estimated reliably. 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 and contract costs are recognised as expense in the period in which they are incurred. An expected loss on the construction contract is recognised as an expense immediately when it is probable that total contract costs will exceed total contract revenue.

Contract revenue comprises the initial amount of revenue agreed in the contract and variations in contract work, claims and incentive payments to the extent that it is probable that they will result in revenue and they are capable of being reliably measured.

the stage of completion is determined by reference to the professional judgment of project engineeers on amount of work performed.

2.16 Inventories Inventories are stated at the lower of cost and net realisable value. Costs incurred in bringing the

inventories to their present location and conditions are accounted for using purchase costs on a first-in first-out basis. Net realisable value is the estimated selling price in the ordinary course of business, less estimated cost of disposal and after making allowance for damages, obsolete and slow moving items.




2.17 Financial liabilities Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes

a party to the contractual provisions of the financial instrument.

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

Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective interest method, except for derivatives, which are measured at fair value.

A financial liability is derecognised when the obligation under the liability is extinguished. For financial liabilities other than derivatives, gains and losses are recognised in the income statement when the liabilities are derecognised, and through the amortisation process. Any gains or losses arising from changes in fair value of derivatives are recognised in the income statement. net gains or losses on derivatives include exchange differences.

2.18 Financial guarantee 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.

Financial guarantees are recognised initially at fair value. Subsequent to initial recognition, financial guarantees are recognised as income in the income statement over the period of the guarantee. If it is probable that the liability will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with the difference charged to the income statement.

2.19 Employee benefits (a) Defined contribution plans The Group participates in the national pension schemes as defined by the laws of the

countries in which it has operations. In particular, the singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to defined contribution pension schemes are recognised as an expense in the period in which the related service is performed.

(b) Employee leave entitlement employee entitlements to annual leave are recognised as a liability when they accrue to

employees. the estimated liability for leave is recognised for services rendered by employees up to balance sheet date.



2. Summary of significant accounting policies (cont’d) 2.19 Employee benefits (cont’d) (c) Employee share option plans employees of the Group receive remuneration in the form of share options as consideration

for services rendered. the cost of these equity-settled transactions with employees is measured by reference to the fair value of the options at the date on which the options are granted. the cost is recognised in the income statement, with a corresponding increase in the employee share option reserve, over the vesting period. the cumulative expense recognised at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of options that will ultimately vest. the charge or credit to the income statement for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.

no expense is recognised for options that do not ultimately vest, except for options where vesting is conditional upon a market condition, which are treated as vested irrespective of whether or not the market condition is satisfied, provided that all other performance and/or service conditions are satisfied. The employee share option reserve is transferred to revenue reserve upon expiry of the share options. When the options are exercised, the employee share option reserve is transferred to share capital if new shares are issued, or to treasury shares if the options are satisfied by the reissuance of treasury shares.

2.20 Leases (a) As lessee Finance leases, which transfer to the Group substantially all the risks and rewards incidental to

ownership of the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the income statement. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of

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

operating lease payments are recognised as an expense in the income statement on a

straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

(b) As lessor Leases where the Group retains substantially all the risks and rewards of ownership of the asset

are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. the accounting policy for rental income is set out in note 2.21(e).




2.21 Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to

the Group and the revenue can be reliably measured. Revenue is measured at the fair value of consideration received or receivable.

(a) Sale of goods Revenue from sale of goods is recognised upon the transfer of significant risk and rewards

of ownership of the goods to the customer. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(b) Rendering of services Revenue from construction contracts is recognised by reference to the stage of completion at

the balance sheet date. stage of completion is determined by reference to the professional judgment of project engineers on amount of work performed. Where the contract outcome cannot be measured reliably, revenue is recognised to the extent of the expenses recognised that are recoverable.

(c) Interest income

Interest income is recognised using the effective interest method.

(d) Dividend income

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

(e) Rental income

Rental income arising on properties is accounted for on a straight-line basis over the lease terms. the aggregated costs of incentives provided to lessees are recognised as a reduction of rental income over the lease term on a straight-line basis.

2.22 Income taxes (a) Current tax Current tax assets and liabilities are measured at the amount expected to be recovered from

or paid to the taxation authorities. the tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.

Current taxes are recognised in the income statement except that tax relating to items

recognised directly in equity is recognised directly in equity.




2.22 Income taxes (cont’d) (b) Deferred tax Deferred income tax is provided using the liability method on temporary differences at the

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

Deferred tax assets and liabilities are recognised for all taxable temporary differences,

except: • Where the deferred tax arises from the initial recognition of an asset or liability in a

transaction that is not a business combination and, at the time of the transaction affects neither the accounting profit nor taxable profit or loss;

• In respect of temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled by the Group and it is probable that the temporary differences will not reverse in the foreseeable future; and

• In respect of deductible temporary differences and carry-forward of unused tax credits and unused tax losses, if it is not probable that taxable profit will be available against which the deductible temporary differences and carry-forward of unused tax credits and unused tax losses can be utilised.

the carrying amount of deferred tax asset is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply

to the year when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted or substantively enacted at the balance sheet date.

Deferred taxes are recognised in the income statement except that deferred tax relating to

items recognised directly in equity is recognised directly in equity and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

(c) Sales tax

Revenues, expenses and assets are recognised net of the amount of sales tax except:

- Where the sales tax incurred in a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

- Receivables and payables that are stated with the amount of sales tax included.

the net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.




2.23 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 and that is subject to risks and returns that are different from those of components operating in other economic environment.

2.24 Share capital and share issue expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of ordinary shares are deducted against share capital.

2.25 Contingencies A contingent liability or asset is a possible obligation or asset that arises from past events and whose

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

Contingent liabilities and assets are not recognised on the balance sheet of the Group. 3. Significant Accounting Judgments and Estimates The preparation of the Group’s financial statements requires management to make judgments,

estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected in the future.

3.1 Judgments made in applying accounting policies

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimations, which has the most significant effect on the amounts recognised in the financial statements:

(a) Income taxes

The Group has exposure to income taxes in numerous jurisdictions. Significant judgment is involved in determining the Group-wide provision for income taxes. there are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. the Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. the carrying amount of the Group’s income tax payables, income tax recoverable, deferred tax assets and deferred tax liabilities at the balance sheet date was $13,849,000 (2007: $16,993,000), $574,000 (2007: $280,000), $220,000 (2007: $81,000) and $1,476,000 (2007: $1,246,000) respectively.



3. Significant Accounting Judgments and Estimates (cont’d) 3.1 Judgments made in applying accounting policies (cont’d)

(b) Impairment of available-for-sale financial assets

The Group classifies certain assets as available-for-sale financial assets and recognises changes in their fair value in equity. When the fair value declines, management exercises judgment based on the observable data relating to the possible events that may have caused the decline in value to determine whether the decline in value is an impairment that should be recognised in the income statement. For the financial year ended 31 December 2008 and 2007, no impairment loss was recognised.

3.2 Key sources of estimation uncertainty

the key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Useful lives of plant and equipment

the cost of plant and equipment is depreciated on a straight-line basis over the plant and equipment’s estimated economic useful lives. Management estimates the useful lives of these plant and equipment to be within 3 to 10 years. Changes in the expected level of usage and technological developments could impact the economic useful lives of these assets, therefore, future depreciation charges could be revised. the carrying amount of the Group’s plant and equipment at the balance sheet date is disclosed in note 9 to the financial statements.

(b) Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill and other indefinite life intangibles are tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable.

When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows.

(c) Impairment of loans and receivables

the Group assesses at each balance sheet date whether there is any objective evidence that a financial asset is impaired. To determine whether there is objective evidence of impairment, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated based on historical loss experience for assets with similar credit risk characteristics. the carrying amount of the Group’s loans and receivables at the balance sheet date is disclosed in Note 14 to the financial statements.



3. Significant Accounting Judgements and Estimates (cont’d)

3.2 Key sources of estimation uncertainty (con’d)

(d) Construction contracts

the Group recognises contract revenue by reference to the stage of completion of the contract activity at the balance sheet date, when the outcome of a construction contract can be estimated reliably. the stage of completion is measured by reference to the professional judgment of project engineers on the amount of work performed. Significant assumptions are required to estimate the total contract costs and the recoverable variation works that will affect the stage of completion. the estimates are made based on past experience and knowledge of the project engineers. the carrying amounts of assets and liabilities arising from construction contracts at the balance sheet date are disclosed in Note 16 to the financial statements.

(e) Deferred tax assets

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies. the carrying value of recognised tax losses at 31 December 2008 was $220,000 (2007: $81,000) and the unrecognised tax losses at 31 December 2008 was $1,065,000 (2007: $1,363,000).

4. Group companies

the subsidiary and associated companies at 31 December 2008 are:

Name of Company (Country of Proportion (%) incorporation and of ownership place of business) Principal activities interest 2008 2007

Subsidiary companies held by the Company:

Rotary electrical Company electrical and engineering 100.0 100.0

(Private) Limited (@) contractor and supplier (singapore)

Rotary Mechanical and Contractor in mechanical 100.0 100.0 Construction Company piping and related works (Private) Limited (@)

(singapore) supermec Private Limited (@) Insurance broker and electrical

(singapore) and engineering material traders 60.0 60.0

shopGlobal Pte. Ltd. (@) engineering consultants, designers 100.0 100.0 (formerly known as and builders Rotary Pharma Pte Ltd) (singapore)



4. Group companies (cont’d)



P.t. Rotary MeCoM (###) Dormant 70.0 70.0 (Indonesia)

Rotary electrical & Instrumentation engineering, design installation 100.0 100.0 Pte. Ltd. (formerly known as and repair services Rotary ReI International Pte. Ltd.) (@)

(singapore)

sixty-six switchgears Co Pte Ltd (@) electrical testing and testing 60.0 60.0 (singapore) of switchgear

Innovative Biotech Pte Ltd (@) trading of medical products 97.6 97.3 (singapore) and equipment

Fushun Rotary engineering Dormant 90.0 90.0 Co Ltd (#)

(People’s Republic of China)

Fushun Rotary Cable Co Ltd (*) (1) Manufacturing of cables 69.1 69.1 (People’s Republic of China) and wires

Rotary engineering (Australia) Dormant 100.0 100.0 Pty Ltd (***)

(Australia)

Rotary tReL Pte Ltd (@) engineering construction 100.0 100.0 (singapore)

Pt. Rotary engineering steel fabrication and construction 100.0 100.0 Indonesia (*) (2)

(Indonesia)

Rotary MeC engineering engineering design, procurement 100.0 100.0 (India) Private Limited (*) (3) and construction services for (India) plants and associated facilities

thai Rotary engineering engineering design and construction 91.9 91.9 Public Company Limited (**) (##) works (thailand)

Calvert Limited (**) Investment holding 90.6 90.6 (thailand)

Rotary IMC Pte Ltd (@) Provision of integrated 100.0 100.0 (singapore) maintenance services






Rotary engineering (shanghai) executing turnkey and ePC projects 100.0 100.0 Co., Ltd. (*) (4)

(People’s Republic of China)

Rotary International trading Construction and engineering 100.0 100.0 (shanghai) Co., Ltd (*)(4) related materials and equipment (People’s Republic of China) as well as provision of trading agency and services

Rotary Automation Pte. Ltd. (@) engineering, design, procurement, 100.0 100.0

(singapore) construction and maintenance service

Rotary engineering (Dalian) Limited (*)(5) Provide engineering design, 100.0 100.0 (People’s Republic of China) management construction and

advisory services; engineering personnel and worker training services

IMC equipment Pte Ltd (@) Dormant 100.0 100.0 (singapore)

BuildGlobal Pte. Ltd. engineering works 100.0 100.0 (formerly known as RKB engineering Co Pte Ltd) (@)

(singapore)

Rotary Process solutions Pte. Ltd. (@) Provide process-related services 100.0 100.0 (singapore) for oil and petrochemical industries

Petrol steel Co. Ltd. (**) engineering, procurement services 51.0 50.0

(saudi Arabia) with primary focus in the electrical and instruments aspects

Petrol steel singapore Pte. Ltd. (@) Manufacturing of tanks, reservoirs 51.0 – (singapore) and containers of metal, and providing storage tanks and pressure vessel





Held by subsidiaries:

thai Rotary engineering engineering design and 43.3 43.3 Public Company Limited (**) construction works (thailand)

Comdale services Limited (***) Investment holding – 100.0 (British Virgin Islands)

enRis Pte Ltd (@) Provision of diagnostic and 90.0 90.0 (singapore) maintenance services for plants and related facilities

Rotary-thai Pharma Pte. Ltd. (###) engineering design, procurement, 100.0 100.0 (singapore) construction management, validation and consultancy services

Rotary-thai Construction Pte. Ltd. (@) Contractor in engineering and 91.9 91.9 (singapore) scaffolding works

Rotary Logistics Pte. Ltd. (@) “one-stop shop” logistics provider 100.0 100.0 (singapore) offering integrated warehousing, material logistics, procurement and total supply chain management services

(@) Audited by ernst & Young LLP, singapore

(*) Audited by other firms. (1) Liao Ning ZhongHuaXin, Certified Public Accountants Co., Ltd, China

(2) Kantar Akuntan Publik, Drs. sukimto sjamsuli, Indonesia

(3) sudhakar Pai Associates, Chartered Accountants, India

(4) Shanghai Huashen Certified Public Accounts Co. Ltd, China

(5) Liaoning Pan-China Certified Public Accountants Co., Ltd, China

(**) Audited by member firm of Ernst & Young Global in the respective countries.

(***) not required to be audited under the laws of the country of incorporation.

(#) not required to be audited as the company is dormant since its incorporation.

(##) the Company holds a direct interest of 48.6% in the subsidiary. the balance interest is held through a subsidiary of the Company.

(###) no audited accounts as the Company is exempted from audit.





Associated companies held by the Company: Rotary MeC (M) sdn Bhd (*) engineering works 49.0 49.0 (Malaysia)

Rotary Production services engineering, construction and 50.0 50.0 network Pte. Ltd. (@) maintenance services (singapore)

Powell Industries Asia Pte Ltd (@) supply of power control room 40.0 40.0 (singapore) systems

Jasinusa Automobile Pte. Ltd. (@) Investment holding 25.0 25.0 (singapore)

tiong Woon China Consortium Provision of heavy lift, equipment 25.0 25.0 Pte. Ltd. (**)(2) (***) installation, project engineering,

(singapore) heavy haulage and marine transportation services

Pipe Rack Holding Company Constructing and providing pipe 25.0 25.0 Private Limited (@) rack and pipelines facilities (singapore)

eastlog Holding Pte. Ltd. (**)(1) Investment holding 20.0 20.0 (singapore)

Jinzhou Everthriving Logistics Transport and sale of liquefied 45.0 45.0 Co., Ltd. (**) (6) natural gas (People’s Republic of China)

Harvest e & I engineering electrical works in process plant, 40.0 40.0 sdn Bhd (**) (4) construction, engineering, (Malaysia) services, suppliers, repair of ships, tankers and ocean going-vessels and general trading





Associated companies held by the Company

Itro Pte. Ltd. (@) Build, operate and jointly own an 40.0 40.0 (singapore) industrial waste treatment plant that generates steam energy to support the needs of process plants

Delimax Pte. Ltd. (@) electrical work construction, suppliers 40.0 40.0 (singapore) and repair of ships, tankers and other ocean-going vessels

oKP (oil & Gas) Infrastructure Civil engineering 45.0 45.0 Pte. Ltd. (**) (5)

(singapore)

Rotary Arabia Co. Ltd. (*) engineering and procurement services 50.0 50.0 (saudi Arabia) with primary focus in the electrical

and instruments aspects

Rotary Arabia singapore Building construction including major 25.0 – Pte. Ltd. (@) upgrading works, repair and

(singapore) maintenance

RsK engineering Co Pte Ltd (@) Pipe fabrication services 40.0 40.0 (singapore)

Rotary Techskill India Testing and certification of workers 45.0 45.0 Private Limited (**)(3) in mechanical works (India)

iPromar (Pte.) Ltd. (**) (7) ship repair and marine services 25.0 – (singapore)




(@) Audited by ernst & Young LLP, singapore. (*) Audited by member firm of Ernst & Young Global in the respective countries (**) Audited by other firms (1) GohthienChee & Co, singapore (2) PriceWaterHouseCoopers, singapore (3) t.Xavier BsC FCA Chartered Accountant Pte Ltd, India (4) Deloitte & touche Chartered Accountants, Malaysia (5) nexia tan & sitoh, singapore (6) Liaoning Huawei Accountant’s Company Ltd, China (7) Akber Ali & Co, singapore (***) The financial year of the Company ends on 30 June.

(a) on 3 April 2008, the Company acquired an additional 1% equity interest in its 50% owned associated company, Petrol steel Co. Ltd. (PsCL) for a consideration of $21,000. Upon acquisition, PsCL became a subsidiary of the Group (note 11).

(b) During the year, the Company incorporated Petrol steel singapore Pte. Ltd. (PssPL) with an issued capital of $200,000. the Company paid a consideration of $102,000, representing 51% equity interest in PssPL.

(c) eastlog Holding Pte. Ltd. (eastlog), an associated company, undertook a rights issue exercise on the basis of 1 rights share for every 2 existing ordinary shares during the year.

the Company had fully subscribed to its entitlement of 1,200,000 rights shares at a subscription price of Us$1.00 per rights shares. After the subscription, the Company continues to hold a 20% of equity interest in eastlog.

(d) the Company acquired 1 ordinary share at a consideration of $1, representing 25% equity interest in Rotary Arabia singapore Pte. Ltd., during the year.

(e) the Group’s subsidiary company, Rotary Mechanical and Construction Company (Private) Limited, acquired 50,000 ordinary shares at a consideration of $50,000, representing 25% equity interest in iPromar Pte. Ltd.

(f) During the year, the Company paid a consideration of RMB 12,000,000 to increase its interest in its associated company, Jinzhou everthriving Logistics Co., Ltd (“JZe”), to 51%. the increased stake in JZe was pending for approval from the China authorities and JZe was not treated as a subsidiary in the financial year.

(g) the Company paid a consideration of $3,650 to acquire an additional 5,000 shares in its subsidiary company, Innovative Biotech Pte Ltd (IB), and increased its equity interest in IB to 97.6% (note 11).

(h) the Group’s subsidiary company, Comdale services Limited, was struck off from the register in British Virgin Islands during the year.

(i) Subsequent to the financial year, Rotary-Thai Pharma Pte. Ltd. was struck off from the singapore Registry of Companies.



5. Revenue

Revenue represents invoiced value of goods supplied, services rendered and progress claims on the percentage of completion of contract work-in-progress analysed as follows:

Group 2008 2007 $’000 $’000

external parties 505,046 497,474 Associated companies 15,073 12,698

520,119 510,172

Contract revenue 497,165 490,762 sales of goods 19,355 18,260 others 3,599 1,150

520,119 510,172

6. Other revenue, administrative costs, other operating costs and finance costs

this is stated after charging/(crediting):

Group 2008 2007 $’000 $’000

Other revenue Gain on disposal of property, plant and equipment (144) (533) Gain on disposal of associate – (1,706) Loss on disposal of other investments – 6 Gross dividends from quoted corporations in singapore (130) (3) Interest income - Fixed deposits (1,327) (2,907) - Associated companies (note 26a) (488) (124) - third parties (151) –

Administrative costs non-audit services (other auditors) 171 136 Employee benefits expense (Note 25) 27,518 29,039 Fair value changes in derivatives (658) 161 Reversal of write-down of inventories – (6) Allowance for obsolete inventories 41 38 (Gain)/loss on foreign exchange (1,077) 4,586

Other operating costs Depreciation of property, plant and equipment 6,898 5,590 Write-back of allowance for doubtful debts (2) (668) Allowance for doubtful debts 2,701 108 Impairment loss on carrying costs and advances to associates 2,751 10,368 Amortisation of intangible assets 542 476 Bad debts written off 73 –



6. Other revenue, administrative costs, other operating costs and finance costs (cont’d)

Group 2008 2007 $’000 $’000

Finance costs Interest expense on loans and borrowings (including bank overdrafts) 2,164 2,188 Finance charges payable under finance lease 49 55

7. Income tax expense

(a) Major components of income tax expense

the major components of income tax expense for the years ended 31 December 2008 and 2007 are:

Group 2008 2007 $’000 $’000

Current income tax - Current income taxation singapore 10,619 13,560 Foreign 4,293 2,522

14,912 16,082 - Under/(over) provision in respect of previous years 474 (543)

15,386 15,539

Deferred income tax - origination and reversal of temporary differences 57 – - Under provision in respect of previous years 34 –

91 –

Income tax expense recognised in the income statement 15,477 15,539



7. Income tax expense (cont’d)

(b) Relationship between tax expense and accounting profit

The reconciliation between tax expense and the product of profit before tax multiplied by the applicable corporate tax rate for the years ended 31 December 2008 and 2007 are as follows:

Group 2008 2007 $’000 $’000

Profit before tax 69,755 71,512

Tax at the domestic rates applicable to profits in the countries where the Group operates 13,811 12,968 Adjustments: non-deductible expenses 979 5,104 Income not subject to taxation (29) (548) effect of reduction in tax rate – (74) effect of partial tax exemption and tax relief (209) (742) Benefits from previously unrecognised deferred tax assets (58) (721) Deferred tax assets not recognised 240 179 Under/(over) provision in respect of previous years 508 (543) share of results of associated companies 32 (84) others 203 –

15,477 15,539

the above reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.

8. Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the financial year.

Diluted earnings per share amounts are calculated by dividing profit for the year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the year plus the weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.



8. Earnings per share (cont’d)

The following tables reflects the profit and loss and share data used in the computation of basic and diluted earnings per share for the years ended 31 December:

Group 2008 2007 $’000 $’000

Profit net of tax attributable to ordinary equity holders of the parent used in computation of basic and diluted earnings per share 50,851 52,831

Group 2008 2007 ’000 ’000

Weighted average number of ordinary shares for basic earnings per share computation 567,839 567,836 Dilutive effect of share options 11 13

Weighted average number of ordinary shares for diluted earnings per share computation 567,850 567,849

no (2007: 20,000) ordinary shares were issued from the exercise of share options.

Since the end of the financial year, no (2007: nil) options were exercised to acquire ordinary shares. there have been no transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these financial statements.

9. Property, plant and equipment

Office equipment, Freehold Leasehold Leasehold Office furniture Motor Plant and Other Construction- Group land land buildings renovations and fittings vehicles machinery assets in-progress Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Cost At 1 January

2007 665 1,339 35,504 1,211 7,600 5,075 19,268 7,312 2,891 80,865 Additions – – 1,482 788 1,186 1,370 2,845 1,137 1,145 9,953 Disposals – – – (24) (171) (869) (2,285) – (1,000) (4,349) Currency realignment (6) (171) (463) 51 138 76 443 (64) 5 9

At 31 December

2007 and 1 January 2008 659 1,168 36,523 2,026 8,753 5,652 20,271 8,385 3,041 86,478 Additions – 1,149 – 535 1,133 897 11,509 1,283 7,421 23,927

Disposals – – – (21) (218) (371) (291) (177) (1,694) (2,772) Acquisition of subsidiary (note 11) – – – – – – 1,181 – 3,435 4,616 Reclassification – – 131 – 617 – 169 – (917) – Currency realignment (23) (138) (841) (2) (21) (6) (502) (235) 255 (1,513)

At 31 December

2008 636 2,179 35,813 2,538 10,264 6,172 32,337 9,256 11,541 110,736



9. Property, plant and equipment (cont’d)

Office equipment, Freehold Leasehold Leasehold Office furniture Motor Plant and Other Construction- Group land land buildings renovations and fittings vehicles machinery assets in-progress Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Accumulated depreciation and impairment loss

At 1 January 2007 – 309 9,012 1,095 6,650 3,022 8,777 6,786 – 35,651 Depreciation charge for the year – 34 1,442 134 672 813 1,728 767 – 5,590 Disposals – – – (24) (162) (745) (247) – – (1,178) Currency realignment – (70) (311) 50 195 73 297 (232) – 2

At 31 December 2007

and 1 January 2008 – 273 10,143 1,255 7,355 3,163 10,555 7,321 – 40,065 Depreciation charge for the year – 31 1,485 236 783 907 2,784 672 – 6,898 Disposals – – – (17) (151) (312) (175) (157) – (812) Reclassification – – – – 481 – (481) – – – Currency realignment – (11) (180) (30) (59) (42) (550) (253) – (1,125)

At 31 December

2008 – 293 11,448 1,444 8,409 3,716 12,133 7,583 – 45,026

Net carrying amount

At 31 December 2008 636 1,886 24,365 1,094 1,855 2,456 20,204 1,673 11,541 65,710

At 31 December 2007 659 895 26,380 771 1,398 2,489 9,716 1,064 3,041 46,413




Office equipment, Leasehold Office furniture Motor Other Company buildings renovations and fittings vehicles assets Total

$’000 $’000 $’000 $’000 $’000 $’000

Cost At 1 January

2007 10,292 341 5,465 2,299 11,108 29,505 Additions – 7 796 685 427 1,915 Disposals – – (105) (550) (2,264) (2,919)

At 31 December

2007 and 1 January 2008 10,292 348 6,156 2,434 9,271 28,501 Additions – 100 491 38 576 1,205 Disposals – – (6) (36) (52) (94)

At 31 December

2008 10,292 448 6,641 2,436 9,795 29,612

Accumulated depreciation and impairment loss At 1 January 2007 2,676 273 4,995 1,119 3,082 12,145 Depreciation charge

for the year 206 11 457 436 742 1,852 Disposals – – (102) (550) (234) (886)

At 31 December

2007 and 1 January 2008 2,882 284 5,350 1,005 3,590 13,111 Depreciation charge

for the year 206 20 493 437 818 1,974 Disposals – – (4) (14) (6) (24)

At 31 December

2008 3,088 304 5,839 1,428 4,402 15,061

Net carrying amount

At 31 December 2008 7,204 144 802 1,008 5,393 14,551

At 31 December

2007 7,410 64 806 1,429 5,681 15,390




(a) other assets comprise electrical equipment, containers, air conditioners and hand tools.

(b) Assets held under finance leases

During the financial year, the Group acquired plant and equipment with an aggregate cost of $194,000 (2007: $169,000) by means of finance leases. The cash outflow on acquisition of plant and equipment amounted to $23,733,000 (2007: $9,784,000).

The carrying amount of plant and equipment held under finance leases at the balance sheet date as follows:

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Motor vehicles 600 720 350 535 Plant and machinery 96 128 – –

696 848 350 535

Leased assets are pledged as security for the related finance lease liabilities.

(c) the followings are the major properties of the Group:

Located in Singapore:

(i) A 3-hanger workshop building and a 3-storey office building located at 17 Tuas Avenue 20 on a leasehold land area of 19,863 sqm (60 years from 1 January 1992).

(ii) A JTC Type 4 single-storey corner terrace with extended mezzanine office floor at 2 Gul street 2 on a leasehold land area of 1,610 sqm (30 years from 6 August 2007).

(iii) A leasehold land with an area of 27,027.20 sqm in Jurong Island for industrial use (30 years from 1 April 1999).

Located overseas:

(i) A leasehold land and building with a land area of 2,421.3 sqm in Fushun, People’s Republic of China for industrial use (30 years from 1994).

(ii) A leasehold land and building with a land area of 120,000 sqm in Batam, Indonesia for industrial use (30 years from 1996).

(iii) A freehold land with an area of 70,000 sqm in Huay Pong, thailand for industrial use.

(iv) A leasehold land with an area of 64,942.9 sqm in Jubail, saudi Arabia for industrial use (10 years from 2006).




(d) Assets under construction

Included in plant and equipment of the Group at 31 December 2008 was an amount of $11,541,000 (2007: $3,041,000) relating to expenditure for plants in the course of construction.

10. Intangible assets

Group Company Software $’000 $’000

Cost:

At 1 January 2007 172 – Additions 1,363 1,154 Currency realignment (1) –

At 31 December 2007 and 1 January 2008 1,534 1,154 Additions 1,670 – Currency realignment (13) –

At 31 December 2008 3,191 1,154 Accumulated amortisation and impairment:

At 1 January 2007 85 – Amortisation 476 385 Currency realignment (2) –

At 31 December 2007 and 1 January 2008 559 385 Amortisation 542 384 Currency realignment (8) –

At 31 December 2008 1,093 769

Net carrying amount:

At 31 December 2008 2,098 385

At 31 December 2007 975 769

the amortisation of software is included in the ‘other operating costs’ line items in the income

statement.



11. Subsidiary companies

Company 2008 2007 $’000 $’000

Unquoted equity shares at cost 60,620 59,450 Less: Impairment losses (1,936) (1,936) 58,684 57,514

Details of the subsidiary companies are set out in Note 4 to the financial statements.

Acquisition of subsidiary

on 3 April 2008, the Company acquired an additional 1% equity interest in its 50%-owned associated company, Petrol steel Co. Ltd. (PsCL). Upon the acquisition, PsCL became a subsidiary of the Group.

The fair values of the identifiable assets and liabilities of PSCL as at the date of acquisition were:

$’000

Property, plant and equipment 4,616 trade and other receivables 5,104 Cash and cash equivalents 1,813

11,533

trade and other payables 7,107 Gross amount due to customers for contracts work-in-progress 876 Amount due to bankers 601 Income tax payable 85

8,669

Net identifiable assets 2,864



11. Subsidiary companies (cont’d)

Acquisition of subsidiary (cont’d)

total cost of business combination

the total cost of the business combination is as follows:

$’000

Consideration for 50% equity interest previously held: - Cash paid 1,065

Consideration for acquisition of additional 1% equity interest: - Deferred cash settlement 21

1,086

The effect of acquisition on cash flows is as follows:

total consideration for 1% equity interest acquired 21 Less: non-cash consideration (21)

Consideration settled in cash – Less: Cash and cash equivalents of subsidiary acquired (1,813)

Net cash inflow on acquisition (1,813)

the total consideration for the 50% equity interest in PsCL was paid by the Company on 26 April 2006

and it represented the fair value of the share of net identifiable assets.

Impact of acquisition on income statement

From the date of acquisition, PSCL has contributed $2,496,000 to the Group’s profit net of tax. If the combination had taken place at the beginning of the financial year, the Group’s profit, net of tax would have been $2,756,000 and revenue would have been $53,313,000.

Goodwill arising on acquisition

the acquisition of 50% equity interest in PsCL on 26 April 2006 did not give rise to any goodwill. negative goodwill of $174,000 arose from the acquisition of additional 1% equity interest in PsCL and was recognised in the income statement.

Acquisition of minority interests

on 2 February 2008, the Company acquired an additional 0.3% equity interest in Innovative Biotech Pte Ltd from its minority interests for a cash consideration of $3,650. on the date of acquisition, the book value of the additional interest acquired was $3,650.



12. Associated companies

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Unquoted equity shares at cost 28,446 25,378 28,263 25,242 Impairment loss (5,701) (4,069) (5,701) (4,069)

22,745 21,309 22,562 21,173 Share of post-acquisition profits of associated companies, less dividend received 1,158 2,191 – –

Carrying amount of investments 23,903 23,500 22,562 21,173 Details on the associated companies are set out in Note 4 to the financial statements.

on 3 April 2008, the Company acquired an additional 1% equity interest in its 50%-owned associate, Petrol steel Co. Ltd (PsCL). Upon the acquisition, PsCL became a subsidiary of the Group (note 11).

the Group has not recognised losses relating to eastlog Holdings Pte. Ltd. and Pipe Rack Holding Company Private Limited where investment cost was fully impaired.

The summarised financial information of the associated companies, not adjusted for the proportion of ownership interest held by the Group, is as follows:

Group 2008 2007 $’000 $’000

Assets and liabilities Current assets 61,601 66,478

non-current assets 82,274 55,406

Total assets 143,875 121,884

Current liabilities 58,476 44,233 non-current liabilities 1,817 2,427

Total liabilities 60,293 46,660

Results:

Revenue 73,900 74,004

(Loss)/profit for the year (1,193) 2,661



13. Deferred tax

Deferred income tax as at 31 December relates to the following:

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Deferred tax liabilities Differences in depreciation for

tax purposes (1,213) (1,071) (735) (735) other deferred tax liabilities (263) (175) (43) (43)

(1,476) (1,246) (778) (778)

Deferred tax assets

Unutilised tax losses 220 81 – –

Tax effect of temporary differences for which no deferred tax asset is recognised

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Unrecognised tax losses 1,065 1,363 – – Unabsorbed capital allowances 376 376 – –

1,441 1,739 – –

Unrecognised tax losses and unabsorbed capital allowances

the tax losses and unabsorbed capital allowances are available for offset against future taxable profits of the companies in which the losses and unabsorbed capital allowances arose, for which no deferred tax asset is recognised due to uncertainty of its recoverability.

the use of these tax losses and unabsorbed capital allowances are subject to the agreement of the tax authorities and compliance with certain provisions of the tax legislation of the respective countries in which the companies operate.

tax consequences of proposed dividends

there are no income tax consequences (2007: nil) attached to the dividends to the shareholders proposed by the Company but not recognised as a liability in the financial statements (Note 32).



14. Trade and other receivables

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Trade and other receivables (current): trade receivables

- third parties 147,967 138,387 85,818 112,376 - subsidiary companies – – 10,604 634 - Associated companies 7,089 9,216 4,146 7,618 other receivables

- subsidiary companies (non-trade) – – 18,208 48,380 - Associated companies (non-trade) 4,673 6,047 53 927 - third parties 705 340 – – staff loan and advances 913 400 622 285 sundry deposits 2,301 1,101 805 924 Recoverables 1,313 1,466 322 143 Withholding tax recoverables 910 1,620 322 191 Interest receivables 9 88 9 75

165,880 158,665 120,909 171,553

Other receivables (non-current):

other receivables - third parties – 212 – –

- subsidiary companies (non-trade) – – – 2,162 - Associated companies (non-trade) 7,986 6,876 7,986 6,876 Less: Allowance for impairment (7,986) (6,884) (7,986) (6,884)

– 204 – 2,154

total trade and other receivables (current and non-current) 165,880 158,869 120,909 173,707 Add: Cash and cash equivalent (note 18) 157,774 154,711 101,008 85,539

total loans and receivables 323,654 313,580 221,917 259,246



14. Trade and other receivables (cont’d)

trade receivables

trade receivables are non-interest bearing and are generally on 30 to 90 days’ terms. they are recognised at their original invoice amounts which represent their fair values on initial recognition.

As at 31 December 2008, the following amounts denominated in foreign currencies are included in trade receivables:

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

eUR 513 16,845 511 5,086 IDR 5,468 4,047 1,986 2,563 InR – 1,459 – – MYR – 441 – – RMB 919 2,397 – 367 tHB 9,652 9,419 – – UsD 38,368 20,300 9,072 11,544

Related party balances and staff loans

Amounts due from subsidiary and associated companies included in current trade and other receivables are unsecured, non-interest bearing and are repayable on demand. the amounts are to be settled in cash.

Recoverables relate to payment for purchases made on behalf of customers.

non-current amounts due from subsidiary and associated companies are unsecured, have no repayment terms and are repayable only when the cash flow of the borrower permits. Accordingly, the fair value of these are not determinable as the timing of the future cash flow arising from the amounts cannot be estimated reliably. these amounts are non-interest bearing except for loan amount of $6,468,750 (2007: $6,500,250) and $517,500 (2007: $nil) which interest bear at a rate of 8% and 10% per annum respectively.

Staff loans are interest free for first time disbursement only. Subsequent loans are charged at prime rates.




Receivables that are past due but not impaired

the Group has trade receivables amounting to $37,566,000 (2007: $28,016,000) that are past due at the balance sheet date but not impaired. these receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:

Group 2008 2007 $’000 $’000

trade receivables past due: Lesser than 30 days 11,919 9,656 30 to 60 days 2,199 4,466 61 to 90 days 561 3,737 91 to 120 days 2,618 4,194 More than 120 days 20,269 5,963

37,566 28,016

Receivables that are impaired

the Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance accounts used to record the impairment are as follows:

Group Individually impaired 2008 2007 $’000 $’000

trade receivables – nominal amounts 11,325 958 Less : Allowance for impairment (3,325) (958)

8,000 –

Movement in allowance accounts: At 1 January 958 1,561

Charge for the year 2,701 108 Write-off for the year (331) (51)

Write back for the year (2) (668) Currency realignment (1) 8

At 31 December 3,325 958




Receivables that are impaired (cont’d)

trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in significant financial difficulties and have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.

At the balance sheet date, the Group and the Company have provided an allowance of $7,602,354 (2007: $6,500,250) for impairment of non-current other receivable due from an associated company with a nominal amount of $7,602,354 (2007: $6,500,250). this associated company has incurred significant financial losses for the current and past three financial years.

During the year, the Group and the Company has provided an allowance of $1,102,104 (2007: $6,500,250) for impairment in this allowance account.

15. Other investments

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Other investments non-current

Available-for-sale financial assets

Unquoted equity investments at cost 1,026 1,855 976 976 Less: Impairment losses (109) (109) (109) (109)

917 1,746 867 867 Quoted shares, at fair value 3,638 – 2,959 –

4,555 1,746 3,826 867

Held for trading investment

Quoted shares, at fair value – 207 – 91 Quoted investment, at fair value 1,700 1,700 1,700 1,700

1,700 1,907 1,700 1,791

6,255 3,653 5,526 2,658



15. Other investments (cont’d)

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Other investments, current Held for trading investment Bills of exchange and promissory notes * – 10,172 – – Quoted investment, at fair value - mutual fund – 991 – – Government bills 6,848 – – –

total 6,848 11,163 – –

* these represent bills of exchange and promissory notes which were purchased from a bank at a discount and are availed by banks. the bills of exchange and promissory notes bear interest at market rates and have an average maturity of 7 days to 3 months (2007: 7 days to 3 months).

Unquoted shares are denominated in tHB and MYR. Unquoted shares are stated at cost as there is no market price and the fair value cannot be reliably measured using valuation techniques.

On 1 July 2008, the Group reclassified its investment in the quoted shares of companies listed in the singapore and thailand stock exchange, that was previously held for trading to available for sale investment. The quoted shares are held by the Group for the past two preceding financial years and are no longer intended to be held for the purpose of selling or repurchasing it in the near future.

The quoted shares are reclassified at its fair value at that date ($195,000) and will be subsequently remeasured at fair value with any change in fair value recorded in the fair value adjustment reserve until the quoted shares are impaired or derecognised. Before the reclassification, an impairment loss of $12,029 (2007: nil) is recognised in the income statement for the year.

Impairment loss

During the financial year, the Group recognised an impairment loss of $12,029 (2007: $nil) pertaining to quoted investment carried at fair value.



16. Gross amount due from/(to) customers for contract work-in-progress

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Aggregate amount of costs incurred and recognised profits (less recognised losses) to date 1,149,230 1,013,813 833,196 698,326 Less: Progress billings (1,201,637) (1,078,950) (894,688) (772,788)

(52,407) (65,137) (61,492) (74,462)

Presented as:

Gross amount due from customers for contract works 16,454 3,996 7,620 2,709 Gross amount due to customers for contract works (68,861) (69,133) (69,112) (77,171)

(52,407) (65,137) (61,492) (74,462)

Retention sums on construction contract included in trade receivables 18,141 47,864 11,866 46,379

17. Inventories

Group 2008 2007 $’000 $’000

Balance sheet: Raw materials, supplies and consumables 4,907 5,451 Medical products 746 704

total inventories at lower of cost and net realisable value 5,653 6,155

Income statement

Inventories recognised as an expense in Cost of sales Inclusive of the following charge/(credit): - Reversal of write-down of inventories – (6) - Allowance for obsolete inventories 41 38

the reversal of write-down of inventories was made when the related inventories were sold above their carrying amounts.



18. Cash and cash equivalents

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Fixed deposits 111,457 83,356 91,474 55,382 Cash at bank and in hand 46,317 71,355 9,534 30,157

157,774 154,711 101,008 85,539

Cash at banks earn interest at floating rates based on daily bank deposit rates.

short term deposits are made for varying periods of one week to twelve months depending on the immediate cash requirements of the Group and earn interests at the respective short term deposit rates.

Cash and cash equivalents denominated in foreign currencies at 31 December are as follows:

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

AUD 35 1 – 1 eUR 790 545 301 539 GBP 112 8 – – IDR 950 391 – 142 InR 303 8,048 162 – RMB 1,828 3,165 – – tHB 3,462 11,747 197 – UsD 10,646 11,518 4,263 10,274 sAR 5,801 – – –

For the purpose of the consolidated cash flow statement, cash and cash equivalents comprise the following as at balance sheet date:

Group 2008 2007 $’000 $’000

Fixed deposits 111,457 83,356 Cash and bank balances 46,317 71,355 Bank overdraft, unsecured (333) (78)

157,441 154,633 Less: Fixed deposits pledged as securities for bank facilities (91) (263)

Cash and cash equivalents 157,350 154,370

Bank overdrafts are included in the determination of cash and cash equivalents because they form an integral part of the Group’s cash management.




19. Derivatives

2008 2007 Contract/ Contract/ notional notional amount Assets Liabilities amount Assets Liabilities Group $’000 $’000 $’000 $’000 $’000 $’000

Interest rate swap, representing total derivative – – – 42,000 – (658)

Add: Held-for-trading investments

(current and non-current) (note 15) 8,548 – 13,070 –

total held for trading assets/ (liabilities) 8,548 – 13,070 (658)

Company

Interest rate swap, representing total derivative – – – 42,000 – (658)

Add: Held-for-trading investments

(current and non-current) (note 15) 1,700 – 1,791 –

total held for trading assets/ (liabilities) 1,700 – 1,791 (658)

The interest rate swap was used to hedge cash flow interest risk arising from a floating rate multi currency medium term note amounting to $42,000,000 (note 20). this interest rate swap received floating interest for a range of 1.6445% to 4.8877% (2007: 3.584% to 4.8877%), paid interest rate from a range of 3.65% to 4.45% (2007: 3.65% to 4.25%) and had same maturity terms as the medium term note. the medium term note matured and was fully redeemed on 14 August 2008. the Group does not apply hedge accounting.


20. Loans and borrowings

Group Company Maturity 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Current: Obligations under finance

leases (note 22) 2009 284 248 153 153 Bank overdrafts on demand 333 78 – – RMB bank loans 2008 – 40 – – trade facilities - tHB 2008 – 563 – – - UsD 2009 7,240 – – – - sAR 2009 199 – – – Multicurrency Medium term note (Mtn) - unsecured 2008 – 42,000 – 42,000

8,056 42,929 153 42,153

Non-current:

Obligations under finance leases (note 22) 2010 - 2012 477 603 288 450

total loans and

borrowings 8,533 43,532 441 42,603

Obligations under finance leases

these obligations are secured by a charge over the leased asset (note 9). the average discount rate implicit in the leases is 4.21% p.a. (2007: 4.26% p.a.). these obligations are denominated in the respective functional currencies of the relevant entities in the Group.

Bank overdrafts

Bank overdrafts, denominated in tHB, bear interest at 4.25% to 8.20% p.a. (2007: 7.13% to 8.25% p.a.) and are secured by a pledge on fixed deposits amounting to $91,000 (Note 18).

RMB bank loans

the amounts bore interest at 2.92% (2007: 2.92%) p.a. and were fully repaid in May 2008.

trade facility – tHB

Trade facilities bore interest at 4.8% - 5.14% p.a. (2007: 5% p.a.), were secured by a pledge on fixed deposits amounting to $263,000 and were fully repaid during the year.

trade facility – UsD

the amounts bear interest 5.68% p.a. (2007: nil) and are secured by promissory notes.

trade facility – sAR

the amounts bear interest of 6.98% p.a. (2007: nil) and are secured by promissory notes.



20. Loans and borrowings (cont’d)

Multicurrency Medium term note (Mtn)

this represents $42 million notes (the “note”) issued by the Company on 15 August 2006 as part of the $200 million Mtn programme established in 2005. the note matured and was fully redeemed on 14 August 2008.

Interest on the note was payable every six months based on sGD swap offer Rate + 1.25%. this interest rate repriced every August and February.

the note constitutes direct, unconditional, unsubordinated and unsecured obligations of the Company and shall at all times rank pari passu, without any preference or priority among themselves, and pari passu with all other present and future unsecured obligations (other than subordinated obligations and priorities created by law) of the Company.

21. Trade and other payables

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Trade and other payables (current):

trade payables - third parties 76,697 42,831 24,604 18,147

- subsidiary companies – – 38,481 60,091 - Associated companies 2,272 2,547 258 26 other payables

- third parties 219 1,071 62 65 - subsidiary companies (non-trade) – – 6,253 3,228 - Associated companies (non-trade) 19 12 19 12 Accrued operating expenses 40,564 32,813 12,661 19,101

119,771 79,274 82,338 100,670

other payables (non-current):

- subsidiary companies (non-trade) – – 3,781 3,781

total trade and other payables 119,771 79,274 86,119 104,451 Add:

Loans and borrowings (note 20) 8,533 43,532 441 42,603

Total financial liabilities carried at amortised cost 128,304 122,806 86,560 147,054



21. Trade and other payables (cont’d)

trade payables/other payables

trade payables are non-interest bearing and are normally settled on 60-day terms, while other payables have an average credit term of two months.

Amounts due to subsidiary and associated companies

these amounts are unsecured, non-interest bearing and repayable on demand.

other non-current payables

these amounts are non-interest bearing with no repayment terms and are repayable only when the cash flow of the borrower permits. Accordingly, the fair value of the amounts due to related companies cannot be determined as the timing of the future cash flow arising from the amounts cannot be estimated reliably.

As at 31 December 2008, the following amounts denominated in foreign currencies are included in trade payables:

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

AUD 2 1 – 1 CAD – 3 – – eUR 672 17,081 255 11,846 GBP 24 329 – – IDR 12,933 4,785 – – InR 990 642 3 4 MYR – 30 – – RMB 535 1,657 55 146 tHB 15,784 6,570 498 83 UsD 17,434 15,889 10,512 2,979 sAR 6,583 – – –



22. Obligations under finance leases

The Group has finance leases for certain items of plant and equipment and motor vehicles (note 9). these leases have terms of renewal but no purchase options and escalation clauses. there are no restrictions placed upon the Group by entering into the leases. Renewal is at the option of the specific entity that holds the lease. The average discount rate implicit in the leases is 4.21% (2007: 4.26%).

Future minimum lease payments under finance leases together with the present value of net minimum lease payments are as follows:

2008 2007 Present Present Minimum value of Minimum value of Group payments payments payments payments $’000 $’000 $’000 $’000

Within one year 337 284 304 248 After one year but not more than five years 501 477 657 603

total minimum lease payments 838 761 961 851 Less: Amounts representing finance charges (77) – (110) –

Present value of minimum lease payments 761 761 851 851

Company

Within one year 198 153 198 153 After one year but not more than five years 286 288 484 450

total minimum lease payments 484 441 682 603 Less: Amounts representing finance charges (43) – (79) –

Present value of minimum lease payments 441 441 603 603

these obligations are secured by a charge over the leased assets (note 9). these obligations are denominated in the respective functional currencies of the relevant entities in the Group.



23. Share capital

Group and Company 2008 2007 No. of No. of shares shares ’000 $’000 ’000 $’000

At 1 January 567,839 89,362 405,585 56,910 exercise of employee share options – – 20 5 Rights issue – – 162,234 32,447

At 31 December 567,839 89,362 567,839 89,362

the holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restrictions.

the Company has an employee share option plans under which options to subscribe for the Company’s ordinary shares have been granted to employees of the Group.

24. Other reserves

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Fair value adjustment reserve (946) – (1,280) – Foreign currency translation reserve (956) (383) – – statutory reserve 300 – – – Capital reserve 80 80 – –

(1,522) (303) (1,280) –

(a) Fair value adjustment reserve

Fair value adjustment reserve represents the cumulative fair value changes, net of tax, of available-for-sale financial assets until they are disposed of or impaired.

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

At 1 January – – – – net loss on fair value of available- for-sale financial assets during the financial year (946) – (1,280) –

At 31 December (946) – (1,280) –



24. Other reserves (cont’d)

(b) Foreign currency translation reserve

the foreign currency translation reserve represents exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from that of the Group’s presentation currency.

Group 2008 2007 $’000 $’000

At 1 January (383) (3,456) net effect of exchange differences arising from translation of financial statements of foreign operations (573) 3,073

At 31 December (956) (383)

(c) Statutory reserve fund

In accordance with the saudi Arabian Regulations applicable to the subsidiary in the saudi Arabia (sA), the subsidiary is required to make appropriation to a statutory Reserve Fund (SRF). At least 10% of the statutory after tax profits after deducting losses brought forward as determined in accordance with the applicable sA accounting standards and regulations must be allocated to the sRF until the cumulative total of the sRF reaches 50% of the subsidiary’s registered capital. the sRF is not available for dividend distribution to shareholders.

Group 2008 2007 $’000 $’000

At 1 January – – transferred from retained earnings 300 –

At 31 December 300 –



25. Employee benefits

Group 2008 2007 $’000 $’000

Employee benefits expense (including executive directors): Salaries, bonuses and other benefits 24,169 26,458 Central Provident Fund contributions 3,349 2,581

27,518 29,039

the Company has an employee share incentive scheme for the granting of non-transferable options to full time employees, including executive and non-executive Directors. options are granted for a term of 10 years to purchase Rotary engineering Limited ordinary shares. each share option entitles the employees of the Company to subscribe for one new ordinary share of $0.10 each in the Company.

the exercise price has been set at $0.1866 per share option, is based on the average of the last dealt price of the share for the three market days prior to the date of grant.

the number of shares to be offered to an eligible person under the scheme shall be determined at the discretion of the Remuneration Committee.

Movement of share options during the financial year

the following table illustrates the number (no.) and weighted average exercise prices (WAeP) of, and movement in, share options during the financial year:

2008 2007 No. WAEP ($) No. WAEP ($)

outstanding at 1 January 15,000 0.1866 35,000 0.1866 - exercised – – 20,000 0.1866

outstanding at 31 December 15,000 0.1866 15,000 0.1866

exercisable at 31 December 15,000 0.1866 15,000 0.1866

- the weighted average share price at the date of exercise of the options exercised in year 2007

was $0.93.

- the exercise price for optional outstanding at the end of the year was $0.1866 (2007: $0.1866). the weighted average remaining contractual life for these options is 3 years (2007: 4 years).



25. Employee benefits (cont’d)

the following table summarises information about options outstanding at 31 December 2008:

Shares subject Date of grant Option period to options Exercise price

26 october 2001 27 october 2001 - 26 october 2011 15,000 $0.1866

there were no options granted at a discount.

26. Related party disclosures

(a) Sale and purchase of goods and services

In addition to the related party information disclosed elsewhere in the financial statements, the following significant transactions between the Group and related parties took place at terms agreed between the parties during the financial year:

Group 2008 2007 $’000 $’000

Associated companies Purchase of goods and services 13,304 13,002

Contract sales and services (15,073) (14,152) Insurance premium received (46) (50) Interest received (488) (124) Accounting fee received (72) (48) Rental (received)/paid (130) 160 Payment of expenses on behalf of associated companies 4,382 1,248 Recovery of administration expenses 36 – sale of property (383) – Payment of expenses on behalf by associated companies (3) –



26. Related party disclosures (cont’d)

(b) Compensation of key management personnel

Group 2008 2007 $’000 $’000

Short-term employee benefits 12,174 12,058 Central Provident Fund contributions 175 119

12,349 12,177

Comprise amounts paid to: - Directors of the Company 9,251 7,810 - other key management personnel 3,098 4,367

12,349 12,177

the remuneration of key management personnel is determined by the remuneration committee having regard to the performance of individuals and market trends.

27. Commitments

(a) Capital commitments

Capital expenditure contracted for as at the balance sheet date but not recognised in the financial statements are as follows:

Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Capital commitments in respect of property, plant and equipment 1,329 22 – –

(b) Operating lease commitments – as lessee

Future minimum rental payable under non-cancellable operating leases at the balance sheet date are as follows:

Group 2008 2007 $’000 $’000

not later than one year 516 811 Later than one year but not later than five years 2,543 3,666 Later than five years 11,770 12,287

14,829 16,764



28. Fair value of financial instruments

The fair value of financial assets and liabilities by classes that are not carried at fair value and whose carrying amounts that are not reasonable approximation of fair value are as follows:

Group Company

Note 2008 2007 2008 2007 $’000 $’000 $’000 $’000

Carrying Fair Carrying Fair Carrying Fair Carrying Fair amount value amount value amount value amount value

Financial assets: other investment, at cost 15 917 u 1,746 u 867 u 867 u

u Investment in equity instruments carried at cost (note 15)

Fair value information has not been disclosed for the Group’s other investments that are carried at cost because fair value cannot be measured reliably. these equity instruments represent ordinary shares that are not quoted on any market and do not have any comparable industry peer that is listed. In addition, the variability in the range of reasonable fair value estimates derived from valuation techniques is significant. The Group does not intend to dispose of this investment in the foreseeable future.

Determination of fair value

Derivatives (Note 19)

the fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

Quoted equity instruments (Note 15)

Fair value is determined directly by reference to their published market bid price at the balance sheet date.

Lease obligations (Note 22)

The fair values are estimated by discounting expected future cash flows at market incremental lending rates for similar types of leasing arrangements at the balance sheet date.

Current trade and other receivables and payables, non-current other receivables and payables, loans and borrowings and current other investments

The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term nature or that they are floating rate instruments that are re-priced to market rates on or near the balance sheet date.



29. Financial risk management objectives and policies

The Group and the Company is exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include credit risk, liquidity risk, interest rate risk and foreign currency risk. the Board of Directors reviews and agrees policies and procedures for the management of these risks, which are executed by the Chief Financial Officer and Financial Controller. The Audit Committee provides independent oversight to the effectiveness of the risk management process. It is, and has been throughout the current and previous financial year that the Group’s policy is that no derivatives shall be undertaken except for the use as hedging instruments where appropriate and cost-efficient. The Group and the Company do not apply hedge accounting.

the following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned financial risks and the objectives, policies and processes for the management of these risks.

(a) Credit risk

Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty default on its obligations. the Group’s and the Company’s exposure to credit risk arises primarily from trade and other receivables. For other financial assets (including other investment, cash and cash equivalents and derivatives), the Group and the Company minimise credit risk by dealing exclusively with high credit rating counterparties.

the Group’s objective is to seek continual revenue growth while minimising losses incurred due to increased credit risk exposure. the Group trades only with recognised and creditworthy third parties. It is the Group’s policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis with the result that the Group’s exposure to bad debts is not significant.

exposure to credit risk

At the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of financial assets recognised in the balance sheets, including derivatives with positive fair values.

Information regarding credit enhancements for trade receivables is disclosed in note 14.



29. Financial risk management objectives and policies (cont’d)

(a) Credit risk (cont’d)

Credit risk concentration profile

the Group determines concentrations of credit risk by monitoring the country of its trade receivables (Note 14) on an ongoing basis. The credit risk concentration profile of the Group’s trade receivables at the balance sheet date is as follows:

Group 2008 2007 $’000 % of total $’000 % of total

By country: singapore 103,155 70% 127,067 92%

saudi Arabia 22,420 15% – – thailand 12,161 8% 8,658 6% Indonesia 9,703 7% 1,484 1% others 528 – 1,178 1%

147,967 100% 138,387 100%

Financial assets that are neither past due nor impaired

trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents, other investment and derivatives that are neither past due nor impaired are placed with or entered into with reputable financial institutions.

Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired is disclosed in note 14 (trade and other receivables) and note 15 (other investments).




(b) Liquidity risk

Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. the Group’s and the Company’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.

The Group maintains sufficient liquid financial assets and stand-by credit facilities with at least 5 different banks. At the balance sheet date, approximately 99% (2007: 99%) of the Group’s loans and borrowings (note 20) will mature in less than one year based on the carrying amount reflected in the financial statements.

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities at the balance sheet date based on contractual undiscounted payments.

2008 2007 $’000 $’000 1 year One to More than 1 year One to More than Group or less five years five years Total or less five years five years Total

trade and other payables 119,771 – – 119,771 79,274 – – 79,274 Derivatives – – – – 658 – – 658 Loans and borrowings 8,056 477 – 8,533 42,929 603 – 43,532

127,827 477 – 128,304 122,861 603 – 123,464

Company

trade and other payables 82,338 – 3,781 86,119 100,670 – 3,781 104,451 Derivatives – – – – 658 – – 658 Loans and borrowings 153 288 – 441 42,153 450 – 42,603

82,491 288 3,781 86,560 143,481 450 3,781 147,712




(c) Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial instruments will fluctuate because of changes in market interest rates. the Group’s and the Company’s exposure to interest rate risk arises primarily from their loans and borrowings, interest-bearing loans given to associated companies and investments in debt securities. All of the Group’s and the Company’s financial assets and liabilities at floating rates are contractually re-priced at intervals of less than 6 months (2007: less than 6 months) from the balance sheet date.

sensitivity analysis for interest rate risk

At the balance sheet date, if sGD interest rates had been 100 (2007: 100) basis points lower/higher with all other variables held constant, the Group’s profit net of tax would have been $73,000 (2007: $420,000) higher/lower, arising mainly as a result of lower/higher interest expense on floating rate loans and borrowings.

(d) Foreign currency risk

the Group and the Company hold cash and cash equivalents denominated in foreign currencies for working capital purposes. At the balance sheet date, such foreign currency balances (mainly in UsD) amount to $27,021,000 and $4,923,000 for the Group and the Company respectively.

the Group requires all of its operating entities to use forward currency contracts to eliminate the currency exposures on any individual transactions in excess of $500,000 for which payment is anticipated more than one month after the Group has entered into a firm commitment for a sale or purchase. the forward currency contracts must be in the same currency as the hedged item. It is the Group’s policy not to enter into forward contracts until a firm commitment is in place. It is the Group’s policy to negotiate the terms of the hedge derivatives to match the terms of the hedged item to maximise hedge effectiveness.

the Group is also exposed to currency translation risk arising from its net investments in foreign operations, including saudi Arabia, Indonesia, People’s Republic of China (“PRC”), India and thailand. the Group’s net investments are not hedged as currency positions are considered to be long-term in nature.

sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s profit net of tax to a reasonably possible change in the UsD exchange rates against the respective functional currencies of the Group entities, with all other variables held constant.




(d) Foreign currency risk (cont’d)

Group 2008 2007 $’000 $’000

Profit net Profit net of tax of tax

UsD/sGD - strengthened 1% (2007: 1%) +226 +176

- weakened 1% (2007: 1%) -226 -176 UsD/tHB

- strengthened 1% (2007: 1%) +26 – - weakened 1% (2007: 1%) -26 –

30. Capital management

the primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy capital ratios in order to support its business and maximise shareholder value.

the Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. to maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. no changes were made in the objectives, policies or processes during the years ended 31 December 2008 and 31 December 2007.

the Group monitors capital using a gearing ratio, which is net debt divided by total capital plus net debt. the Group’s policy is to keep gearing ratio at below 50%. the Group include within net debt, loans and borrowings, trade and other payables, less cash and cash equivalents. Capital includes equity attributable to equity holder of the parent.



30. Capital management (cont’d)

At balance sheet date, the Group’s cash and cash equivalents are in excess of its financial liabilities.

Group 2008 2007 $’000 $’000

Loans and borrowings (note 20) 8,533 43,532 trade and other payables (note 21) 119,711 79,274 Less: Cash and cash equivalents (note 18) (157,774) (154,711) net debt (29,530) (31,905)

equity attributable to equity holders of the parent, representing total capital 204,483 168,211

31. Segment information

Reporting format

the primary segment reporting format is determined to be business segments as the Group’s risks and rates of return are affected predominantly by differences in the products and services produced. secondary information is reported geographically. the operating businesses are organised and managed separately according to the nature of the products and services provided, with each segment representing a strategic business unit that offers different products and serves different markets.

Business segments

the Project services segment provides engineering design, procurement and construction services for plants and associated facilities in oil and gas, petrochemical and pharmaceutical industries.

the Maintenance and trading segment provides maintenance, engineering and other related services to chemical process industry, including warehousing, trading and logistics services of equipment and products.



31. Segment information (cont’d)

Geographical segments

the Group’s geographical segments are based on the location of the Group’s assets. sales to external customers disclosed in geographical segments are based on the geographical location of its customers. others include countries such as India, norway and Dubai.

Allocation basis and transfer pricing

segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets, income tax and deferred tax assets and liabilities, obligations under finance leases and related expenses.

transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions with third parties. segment revenue, expenses and results include transfers between business segments. these transfers are eliminated on consolidation.

Business segments

the following table presents revenue and results information regarding the Group’s business segments for the years ended 31 December 2008 and 2007.

Maintenance Project services and trading Eliminations Consolidated 2008 2007 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Segment revenue sales to external

customers 463,483 459,771 56,636 50,401 – – 520,119 510,172 Inter-segment sales 1,484 1,659 114,533 117,408 (116,017) (119,067) – –

total revenue 464,967 461,430 171,169 167,809 (116,017) (119,067) 520,119 510,172

segment result 88,274 104,733 35,177 19,946 – – 123,451 124,679

Unallocated expenses (51,304) (51,393)

Finance costs (2,213) (2,243) share of results of associated companies (179) 469

Profit before tax 69,755 71,512 Income tax expense (15,477) (15,539)

Profit after tax 54,278 55,973



31. Segment information (cont’d)

Business segments (cont’d)

the following table presents assets, liabilities and other segment information regarding the Group’s business segments as at and for the years ended 31 December 2008 and 2007.

Maintenance Project services and trading Consolidated 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000

Assets and liabilities

segment assets 355,082 307,187 76,369 83,059 431,451 390,246 Investment in associates 23,903 23,500 – – 23,903 23,500 Unallocated assets 794 361

total assets 456,148 414,107

segment liabilities 199,354 153,092 24,324 24,065 223,678 177,157

Unallocated liabilities 16,086 61,748

total liabilities 239,764 238,905

Other segment information:

Capital expenditure 24,231 9,288 1,366 2,028 25,597 11,316 Depreciation and amortisation 5,610 4,249 1,830 1,817 7,440 6,066 Impairment loss on carrying costs and advances to associates 2,751 10,368 – – 2,751 10,368



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32. Dividends paid and proposed

Group and Company 2008 2007 $’000 $’000

Declared and paid during the year

Dividends on ordinary shares: - Final exempt (one-tier), dividend of 2.3 cents

(2007: 1.6 cents less tax of 18%) per share 13,060 7,450 - Bonus dividend of 10 cents per share – 32,447 - special dividend of 1.5 cents per share – 6,984 - Interim dividend of 2.3 cents per share less tax of 18% – 10,710

13,060 57,591

Proposed but not recognised as a liability as at 31 December:

Dividends on ordinary shares, subject to shareholders’ approval at the Annual General Meeting: - Final exempt (one-tier), dividend of 2.3 cents (2007: 2.3 cents) per share 13,060 13,060

33. Subsequent event

on 22 January 2009, the singapore Finance Minister announced the revision in the singapore corporate tax from 18% to 17% with effect from Year of Assessment 2010. In accordance with FRs 12, Income taxes, and FRs 10, events After the Balance sheet Date, this is a non-adjusting subsequent event and the financial effect of the reduced tax rate will be reflected in the 31 December 2009 financial year.

the Group’s deferred tax provision has been computed on the year end prevailing tax rate of 18%. Applying the reduced tax rate of 17% would result in an approximately $14,760 reduction in deferred tax liability.

34. Authorisation of financial statements

The financial statements for the year ended 31 December 2008 were authorised for issue in accordance with a resolution of the Directors on 25 March 2009.


STATISTICS oF sHAReHoLDInGsAs At 9 MARCH 2009

number of ordinary shares in issue : 567,839,000Class of shares : ordinary shares Voting rights : one vote per share

STATISTICS OF SHAREHOLDINGS

Size of Shareholding Number of Shareholders % Number of Shares %

1 - 999 52 0.65 19,274 0.001,000 - 10,000 5,342 66.53 27,834,256 4.9010,001 - 1,000,000 2,606 32.46 110,665,533 19.491,000,001 and above 29 0.36 429,319,937 75.61

8,029 100.00 567,839,000 100.00

SUBSTANTIAL SHAREHOLDERS(As recorded in the Register of substantial shareholders as at 9 March 2009)

Direct Interest % Deemed Interest %

Chia Kim Piow (note 1) 25,418,816 4.48 172,423,528 30.37

Wong oi Moi (note 2) 6,972,896 1.23 190,869,448 33.62

ReL Investments Pte Ltd 165,450,632 29.14 - -

Funderburk Asia-Pac Investments I Limited (note 3) 121,350,888 21.37 - -

oman Investment Fund - - 121,350,888 21.37

Notes:

1. Mr. Chia Kim Piow is deemed to have an interest in the shares held by his spouse, Madam Wong oi Moi and ReL Investments Pte Ltd.

2. Madam Wong oi Moi is deemed to have an interest in the shares held by her spouse, Mr. Chia Kim Piow and ReL Investments Pte Ltd.

3. Funderburk Asia-Pac Investments I Limited is the wholly owned subsidiary of oman Investment Fund.


TWENTY LARGEST SHAREHOLDERS

No. Name of Shareholders Number of Shares %

1. ReL InVestMents Pte LtD 165,450,632 29.14

2. FUnDeRBURK AsIA - PAC InVestMent I LIMIteD 121,350,888 21.37

3. CHIA KIM PIoW 25,418,816 4.48

4. CHIA KIM CHUA 22,242,400 3.92

5. DBs noMInees Pte LtD 16,908,984 2.98

6. RAFFLes noMInees Pte LtD 11,264,000 1.98

7. HsBC (sInGAPoRe) noMInees Pte LtD 8,887,000 1.57

8. UnIteD oVeRseAs BAnK noMInees Pte LtD 7,203,300 1.27

9. WonG oI MoI 6,972,896 1.23

10. DB noMInees (s) Pte LtD 5,022,355 0.88

11. CItIBAnK noMInees sInGAPoRe Pte LtD 4,780,650 0.84

12. KIM enG seCURItIes Pte. LtD. 4,587,400 0.81

13. DBs VICKeRs seCURItIes (s) Pte LtD 3,947,200 0.70

14. PHILLIP seCURItIes Pte LtD 2,876,586 0.51

15. DBsn seRVICes Pte LtD 2,354,000 0.41

16. oCBC noMInees sInGAPoRe Pte LtD 2,294,400 0.40

17. MoRGAn stAnLeY AsIA (sInGAPoRe) seCURItIes Pte LtD 2,265,500 0.40

18. oCBC seCURItIes PRIVAte LtD 2,219,400 0.39

19. CHenG BUCK PoH 2,008,000 0.35

20. WonG AH WAH @ WonG FonG FUI 2,000,000 0.35

totAL 420,054,407 73.98

PERCENTAGE OF SHAREHOLDINGS IN HANDS OF THE PUBLIC

38.88% of the Company’s shares are held in the hands of the public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of the sGX-st.

STATISTICS oF sHAReHoLDInGsAs At 9 MARCH 2009


NOTICE oF AnnUAL GeneRAL MeetInG

notICe Is HeReBY GIVen that the 29th Annual General Meeting of RotARY enGIneeRInG LIMIteD (“the Company”) will be held at 17 tuas Avenue 20, singapore 638828 on Wednesday, 22 April 2009 at 10.00 a.m. for the following purposes:

AS ORDINARY BUSINESS:

1. to receive and adopt the Directors’ Report and Audited Accounts of the Company for the year ended 31 December 2008 together with the Auditors’ Report thereon. (Resolution 1) 2. To declare a final one-tier tax exempt dividend of Singapore 2.3 cents per ordinary share for the year ended 31 December 2008. (Resolution 2) 3. to approve the payment of Directors’ Fees of s$300,000 for the year ended 31 December 2008 (2007: s$288,000). (Resolution 3) 4. to re-elect the following Directors retiring pursuant to Articles 100 and 104 of the Articles

of Association of the Company: (a) Mr. Chia Kim Chua (Retiring under Article 100) (Resolution 4) (b) Madam Wong oi Moi (Retiring under Article 100) (Resolution 5) (c) Mr. Badri narayanan santhana Krishnan (Retiring under Article 104) (Resolution 6) Mr. Krishnan will, upon re-election as Director of the Company, remain member of the

Audit Committee. 5. To re-appoint Messrs Ernst & Young LLP as Auditors and to authorise the Directors to fix their remuneration. (Resolution 7) 6. to transact any other business which may be properly transacted at an Annual General

Meeting. AS SPECIAL BUSINESS: To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications: 7. Authority to issue shares that pursuant to section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing

Manual of the singapore exchange securities trading Limited, the Directors of the Company be authorised and empowered to:

(a) (i) issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or

(ii) 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) options, warrants, debentures or other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors of the Company may in their absolute discretion deem fit; and



(b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any Instruments made or granted by the Directors of the Company while this Resolution was in force,

provided that:

(1) the aggregate number of shares (including shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) to be issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the total number of issued shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares and Instruments to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such calculation as may be prescribed by the singapore exchange securities trading Limited) for the purpose of determining the aggregate number of shares that may be issued under sub-paragraph (1) above, the total number of issued shares shall be based on the total number of issued shares in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

(a) new shares arising from the conversion or exercise of the convertible securities;

(b) new shares arising from exercising share options or vesting of share awards which are outstanding or subsisting at the time of the passing of this Resolution; and

(c) any subsequent bonus issue, consolidation or subdivision of shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the singapore exchange securities trading Limited for the time being in force (unless such compliance has been waived by the singapore exchange securities trading Limited) and the Articles of Association of the Company; and

(4) unless revoked or varied by the Company in a general meeting, such authority 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 earlier.

[see explanatory note (i)] (Resolution 8)


8. Authority to issue shares under the Rotary Employees’ Share Option Scheme that pursuant to section 161 of the Companies Act, Cap. 50, the Directors of the

Company be authorised and empowered to offer and grant options under the Rotary employees’ share option scheme (“the scheme”) and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional ordinary shares to be issued pursuant to the scheme shall not exceed fifteen per centum (15%) of the total number of issued shares in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

[see explanatory note (ii)] (Resolution 9)

By order of the Board

tAn CHeR LIAnGCoMPAnY seCRetARY

singapore, 6 April 2009



Explanatory Notes on Ordinary Resolutions to be passed:

(i) the ordinary Resolution 8 in item 7 above, if passed, will empower the Directors of the Company, effective 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 or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant instruments convertible into shares and to issue shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the total number of issued shares in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to shareholders.

For determining the aggregate number of shares that may be issued, the total number of issued shares will be calculated based on the total number of issued shares in the capital of the Company at the time this ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time when this ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision of shares.

(ii) the ordinary Resolution 9 in item 8 above, if passed, will empower the Directors of the Company, effective until the next Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the scheme up to a number not exceeding in aggregate (for the entire duration of the Scheme) fifteen per centum (15%) of the total number of issued shares in the capital of the Company from time to time.

Notes:

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 17 tuas Avenue 20, singapore 638828 not less than forty-eight (48) hours before the time for holding the Meeting.



✁PROXY FoRMROTARY ENGINEERING LIMITED(Co. Reg. no. 198000255e)(Incorporated In the Republic of singapore with limited liability)

(Please see notes overleaf before completing this Form)

Total number of Shares in: No. of Shares

(a) CDP Register

(b) Register of Members

I/We, of

being a member/members of Rotary engineering Limited (the “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 the person, or either or both of the persons, referred to above, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the 29th Annual General Meeting (the “Meeting”) of the Company to be held on Wednesday, 22 April 2009 at 10.00 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions 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. Resolutions relating to: For Against

1 Directors’ Report and Audited Accounts for the year ended 31 December 2008

2 Payment of proposed final dividend

3 Approval of Directors’ fees amounting to s$300,000

4 Re-election of Mr. Chia Kim Chua as a Director

5 Re-election of Madam Wong oi Moi as a Director

6 Re-election of Mr. Badri narayanan santhana Krishnan as a Director

7 Re-appointment of Messrs ernst & Young LLP as Auditors

8 Authority to issue shares

9 Authority to allot and issue shares under the Rotary employees’ share option scheme

Dated this day of 2009.

signature of shareholder(s) or, Common seal of Corporate shareholder

IMPORTANT:

1. For investors who have used their CPF monies to buy Rotary engineering Limited’s shares, this Report is forwarded to them at the request of the 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.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.


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 of Singapore), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you.

2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.

3. Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion of his/her shareholding (expressed as a percentage of the whole) to be represented by each proxy.

4. Completion and return of this instrument appointing a proxy shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.

5. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 17 tuas Avenue 20 singapore 638828 not less than 48 hours before the time appointed for the Meeting.

6. 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 seal or under the hand of an officer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certified copy thereof must be lodged with the instrument.

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

General:

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. In addition, in the case of shares entered 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.

PROXY FoRM

CONTENTS01 Rotary at a Glance

04 Chairman’s Message

10 Board of Directors

14 Senior Management

22 Organisation Structure

26 Global Footprints

27 Operations Review

30 Human Resources

31 Health Safety & Environment

32 Scorecard

36 Code of Corporate Governance

45 Directors’ Report

49 Statement By Directors

50 Independent Auditors’ Report

52 Consolidated Income Statement

53 Balance Sheets

55 Statements of Changes in Equity

58 Consolidated Cash Flow Statement

60 Notes to the Financial Statements

ROTARY ENGINEERING LIMITED61 Jurong Island HighwaySingapore 627860T (65) 6311 9000F (65) 6311 9228

17 Tuas Avenue 20Singapore 638828T (65) 6861 1155F (65) 6862 1319

Board of Directors• Chia Kim Piow (Chairman & Managing Director)• Chia Kim Chua• Lam Khin Khui• Quek Wee Hong• Keith Tay Ah Kee• Wong Oi Moi• Badri Narayanan Santhana Krishnan

Audit Committee• Keith Tay Ah Kee (Chairman)• Lam Khin Khui• Quek Wee Hong• Badri Narayanan Santhana Krishnan

Nominating Committee• Quek Wee Hong (Chairman)• Lam Khin Khui• Keith Tay Ah Kee• Chia Kim Piow

Remuneration Committee• Lam Khin Khui (Chairman)• Keith Tay Ah Kee• Quek Wee Hong

Company Secretary• Tan Cher Liang Registered Office17 Tuas Avenue 20Singapore 638828T (65) 6861 1155F (65) 6862 1319

Share RegistrarBoardroom Corporate & Advisory Services Pte. Ltd.3 Church Street #08-01 Samsung Hub Singapore 049483T (65) 6536 5355F (65) 6536 1360

AuditorsErnst & Young LLPAudit Partner – Tan Chian Khong(since financial year 2007)

CORPORATE INFORMATION

OUR VISIONWe aspire to be an excellent global engineering, procurement and construction company.

OUR MISSIONOur mission is to provide quality services that consistently meet our clients’ needs and expectations t h r o u g h e x c e l l e n c e i n o u r operations.

HSE POLICY STATEMENTOur mission is to provide a safe work ing envi ronment for our employees, protection of the environment, safeguarding owners’ plants and equipment.

CORE VALUESS… Safety above all, to protect our

equipment, the environment and ourselves

T… Teamwork to achieve quality products and services

R… Recognition of employees’ contribution and development of their potential

I… Inculcation of continuous work improvement as our culture

D… Development of pride and ownership in our work

E… Excellence in all our efforts to meet our vision

rotary engineering l imited annual report 2008

Sharpeningmeeting

our focus

SINGAPORE– Rotary Electrical Company (Private) Limited

– Rotary IMC Pte Ltd

– ShopGlobal Pte. Ltd.

– Rotary Mechanical And Construction Company (Private) Limited

– Rotary-Thai Construction Pte. Ltd.

– Rotary TREL Pte Ltd

– Rotary Electrical & Instrumentation Pte. Ltd.

– Rotary Automation Pte. Ltd.

– Rotary Production Services Network Pte. Ltd.

– Rotary Process Solutions Pte. Ltd.

– Rotary Logistics Pte. Ltd.

– Delimax Pte. Ltd.

– Eastlog Holding Pte. Ltd.

– EnRis Pte Ltd

– Jasinusa Automobile Pte. Ltd.

– IMC Equipment Pte Ltd

– Innovative Biotech Pte Ltd

– Itro Pte. Ltd.

– Powell Industries Asia Pte Ltd

– Pipe Rack Holding Company Private Limited

– OKP (Oil & Gas) Infrastructure Pte. Ltd.

– BuildGlobal Pte. Ltd.

– RSK Engineering Co Pte Ltd

– Supermec Private Limited

– Sixty-six Switchgears Co Pte Ltd

– Tiong Woon China Consortium Pte. Ltd.

– iPromar (Pte.) Ltd.

– Rotary Arabia Singapore Pte. Ltd.

– Petrol Steel Singapore Pte.Ltd.

ROTARY GROUP OF COMPANIES

MALAYSIA– Rotary MEC (M) Sdn Bhd

– Harvest E&I Engineering Sdn Bhd

THAILAND– Thai Rotary Engineering Public Company Limited

– Calvert Limited

INDONESIA– P.T. Rotary Engineering Indonesia

INDIA– Rotary MEC Engineering (India) Private Limited

– Rotary Techskill (India) Pvt Limited

PEOPLE’S REPUBLIC OF CHINA– Rotary Engineering (Shanghai) Co., Ltd.

– Fushun Rotary Cable Co. Ltd

– Changchun FAW UCC

– Rotary International Trading (Shanghai) Co., Ltd.

– Jinzhou Everthriving Logistics Co., Ltd.

– Rotary Engineering (Dalian) Limited

AUSTRALIA– Rotary Engineering (Australia) Pty Ltd

SAUDI ARABIA– Rotary Arabia Co. Ltd.

– Petrol Steel Co. Ltd.

RotaRy EnginEERing LimitEd(Company’s Registration No. 198000255E)

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