Chairman's Statement

Dear Shareholders

China has shown remarkable innovation and improvement in shipbuilding techniques, especially in offshore marine engineering, bulk carriers, container ships and oil carriers.

China shipbuilders delivered 28.8 million DWT of vessel in 2008, commanding 29.5% of the world’s new building market, according to the Chinese Ministry of Industry and Information Technology. China’s share of new orders secured in 2008 was even higher at some 37.7%. At Yangzijiang’s two shipyards in Jiangsu, we delivered 27 vessels in 2008, amounting to 850,000 DWT, making us one of China’s ten most productive yards in terms of vessel tonnage delivered.

After 4 years of shipbuilding boom, the global fleet of transportation vessels had reached historic capacity. A disconcerting number of these ships now sit idle as international trade financing had been frozen by the worldwide credit crunch, a sudden and severe downturn in the shipbuilding industry, especially from the third quarter of 2008 onwards. The industry has been hard hit by multiple whammies many shipyards, even major ones, are plagued by order cancellations.

Despite the gloom in the industry, I am pleased to inform Yangzijiang’s shareholders that we did not merely perform well in FY08 but we performed exceptionally well.

Our FY08 revenue was RMB 7.4 billion, which was 91% higher year-on-year, while earnings attributable to shareholders was 82% higher at RMB 1.6 billion in 2008.

Operating cash flow continued to improve to RMB 2.6 billion, and we sat on a huge cash reserve of RMB 3.0 billion as at the end of the year. At Yangzijiang, some 155 vessels (78 containerships and 77 bulk carriers) worth US$6.9 billion sit on our order books as at 31 December 2008, And I would like to highlight that we have demonstrated an ability to keep client orders intact thereby ensuring full capacity utilization of our 2 yards over the next 4 years.

Shareholders should be rest assured that our huge increase in vessel orders was without compromise. We have remained prudent, accepting orders from only financially sound ship owners with credible vessel chartering history. We also require a cash deposit amounting to 20% of the contracted value upon inking the new-building agreement plus another 20% of banker’s guarantee upon work commencement. We are grateful for being selected as a major Chinese shipbuilder approved for entitlement to fiscal stimulus measures to revitalize the marine sector. Our clients have benefited from preferential ship refinancing terms for ship owners with vessels on order at approved yards such as Yangzijiang.

Rising up to Challenging Business Environment

What began as a sub-prime mortgage crisis in the United States has deepened into a financial crisis that is undermining global economic structures. The resulting imbalance in demand versus supply of vessels has aggravated the distress faced by shipyards.

Having built ships for over half a century, we have always seized opportunities that are hidden in crisis and used them to propel the Group to greater heights. During the recession of 1987, we penetrated the new-building market outside mainland China. During the Asian financial crisis of 1996-1997, we penetrated Europe’s new-building market by securing our first German customer.

These forays had paid off: last year, more than half of our revenues were from Germany. Less than 5% of FY08 revenues were from Chinese customers, and we now intend to focus on developing this market where government action to stimulate domestic demand has been aggressive.Other areas of growth include expanding our range of vessel design and new business segments in marine engineering. We will also seize M&A opportunities that enable us to expand and upgrade our shipbuilding capability and technology. Our vision is for Yangzijiang to emerge from the economic crisis as a larger corporate enterprise.

And even though we are already one of China’s most efficient yards, we will continue to raise our operational efficiency.

Our sincere thanks go to shareholders for the support and trust that you have shown. To show our appreciation, the board of directors has recommended a final tax-exempt dividend of 1.8 Singapore cents a share. In addition to the interim tax-exempt dividend of 1 Singapore cent, the total dividend amounts to 2.8 Singapore cents per share for FY08. Dividend payout was 30%.

Ship owners, suppliers and other business associates have also played an important role in our progress, and continue to do so. For this support, we also wish to extend appreciation.

At the same time, we also wish to recognize the tireless effort put up by the board of directors, management and all the staff.

Now that we have garnered widespread support and trust from shareholders, directors and business partners, the entire team at Yangzijiang will demonstrate good faith, responsibility, service excellence and efficiency in our spirited fight to push boundaries in our next stage of growth.

Let us join hands to sail the seas!

Yours sincerely,