GBY Grand Banks Yachts Annual Report 2011

7/29/2019 GBY Grand Banks Yachts Annual Report 2011

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GRAND BANKS YACHTS L IMITED 2011 ANNUAL REPORT


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Letter to Shareholders 2

Board of Directors 6

Statement of Corporate Governance 8

Directors Report 14

Statement by Directors 16Independent Auditors Report 17

Statements of Financial Position 18

Consolidated Income Statement 19

Consolidated Statement of Comprehensive Income 19

Consolidated Statement of Changes in Equity 20

Consolidated Statement of Cash Flows 22

Notes to The Financial Statements 23

Statistics of Shareholdings 48

Notice Of Annual General Meeting 49

Proxy Form

CONTENTS


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Dear Fellow Shareholders,

This was another year of progress and transformation at Grand Banks Yachts. In the face

of a protracted market downturn, we continued on a course of change that has made thisCompany leaner, more agile and more effective at delivering the best cruising yachts and

buying experiences to an increasingly global market.

However, it is important to understand the magnitude of the challenges we have managed.

Since the early part of the calendar year 2008, customer demand for new yachts has

deteriorated significantly particularly in our core market, the United States. For example,

in this last fiscal year ended June 30, 2011, Grand Banks sold just 10 new yachts in the

United States; compare that to a total of 48 sold in that market for the fiscal year ended

March 31, 2008.

Additionally, our network of independently owned dealers has been adversely impactedby the drop in customer demand for new yachts, while also dealing with increased

competition due to discounting by dealers for other manufacturers and an increase in the

number of used boats being sold by owners seeking a quick source of cash. At the same

time, the availability of financing for dealers to stock inventory has continued to decline,

while the terms offered by those willing to supply capital are much more onerous. As

such, even those dealers willing to risk the capital associated with stocking a yacht have

been, in many cases, unable to do so. As a result, the Companys new boat order-book

has declined 94%, from S$104 million as at March 31, 2008 to just over S$6 million

as at June 30, 2011.

As you may remember, the Company has undertaken a number of cost-saving initiatives

in response to these difficult market conditions, including the following: (i) the plant in

Singapore, where the company had been manufacturing for decades, was closed in June

2009 and the lease and buildings were sold for S$6.1 million; (ii) through a series of

retrenchments, our workforce was reduced from over 1,200 people at the end of fiscal

year 2008 to less than 380 today; (iii) capital expenditures have been cut over 89%

since FY2008 to only S$0.4 million this past year, such that the Companys infrastructure

has taken a back seat to the limited new product development plan approved by our

Board of Directors.

LETTER TO SHAREHOLDERS

Notwithstanding these efforts, Grand Banks Yachts cash position has declined from

S$38.4 million at the end of fiscal year 2008 to S$18.2 million on 30 June 2011.

During the year just ended June 30, 2011, the Company reported annual net sales

of S$28.1 million with a net loss after tax of S$7.7 million. This represents the thirdconsecutive year the Company has recorded pre-tax losses. These three years of losses

combined with our market capitalization dropping below S$40 million, requires the SGX

to review the Company for potential placement on the Watch-listan action my fellow

directors and I anticipated.

Therefore, amidst continued signs that our industry will not recover as quickly as

anticipated, it became clear last year that the Company and its Shareholders faced risk

beyond commercially prudent levels. As such, the Directors, after considering several

alternatives, unanimously concluded that the sound course of action was to raise funds,

preferably from a partner who could provide capital and relevant industry expertise.

The Board, aware of the risks and the strategic situation of the Company, has over

the past few years cultivated relationships with a number of financially strong entities

tied to our industry including both publicly held manufacturers and several leading

private equity funds so it was a natural first step to commence our search with these

organizations. Indeed, we were extremely fortunate to have found our prospective new

investor, and thereby created a new and important opportunity for the Company during a

period of extreme duress for all participants in the yacht industry, including Grand Banks.

As a result, after considerable work by both the Company and its prospective new

investor, I am pleased to highlight that on August 18, 2011, the Directors announced

that Grand Banks Yachts entered into an agreement with a company wholly owned by

Investindustrial IV L.P. to issue over 136 million new shares for an aggregate consideration

of approximately S$44.9 million.

Investindustrial, founded in 1990, is a leading European investment group with over

2 billion (approximately S$3.4 billion) of funds under management and more than 50

employees at its locations in London, Milan, Barcelona, Lugano, Luxembourg, Shanghai

and New York. I feel privileged, as both a Shareholder and an executive, to have

the opportunity to partner with the Best Private Equity Firm in both Italy and Iberia as


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ROBERT W LIVINGSTON IIPRESIDENT & CHIEF EXECUTIVE OFFICER

recognized at the 2009 and 2010 Private Equity International Awards. Investindustrials

portfolio companies generated aggregate sales of 4.8 billion (approximately S$8.3

billion) in 2010 with a total workforce exceeding 32,000 employees. The size of the

particular fund making the investment, Investindustrial IV L.P., is approximately 1 billion

(approximately S$1.7 billion), out of which more than 250 million (approximately

S$431 million) is available for future investments.

Given Investindustrials size and experience, the Directors believe that their proposed

investment is extremely beneficial as it provides the Company with:

a. increased working capital to fund its existing business operations and manage

through the current yacht industry downturn;

b. a strategic substantial Shareholder committed to supporting the Company in

strengthening its management team and accelerating the introduction of new

products;

c. new growth opportunities through leveraging the experience, resources and

reputation of Investindustrial as one of the leading international private equity

firms that has a demonstrated history of executing expansionary acquisitions for

its portfolio companies;d. the opportunity to mitigate some of the risk of the prolonged yacht industry

downturn currently faced by the Company and its shareholders; and

e. the most expeditious manner to return the Company to profitability.

Indeed, the Grand Banks shareholders have already benefited from this proposed

investment in two ways. First, the potential new investor, Investindustrial, announced

on August 18, 2011 that upon fulfillment of the conditions precedent to the proposed

Investindustrial, founded in 1990, is a leadingEuropean investment group with over 2 billion... of funds under management and more than50 employees at its locations in London, Milan,Barcelona, Lugano, Luxembourg, Shanghai andNew York.

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LETTER TO SHAREHOLDERS, CONTINUED

investment they will launch a mandatory general offer for all of the shares of the Company.

This mandatory general offer provides an opportunity for shareholders to sell their shares

without having to contend with the normally illiquid market in our stock.

Secondly, following our announcement of the potential investment, the SGX granted the

Company a waiver of the Watch-list rule until December 1, 2011. However, the SGX

clarified that if, at the next review in December 2011, the Companys average market

capitalization is still less than S$40 million over 120 market days on which trading was

not suspended or halted, the Company will be placed on the Watch-list. If this happens,

Grand Banks will need to have both a market capitalization above S$40 million and

return to profitability within 2 years to avoid being delisted.

Other key benefits derive from Investindustrials strategic location in Italy, a major hub of

international yachting. With their strong network of contacts throughout the region, we

believe Investindustrial can help us access top-tier industry management talent, including

yacht designers, who currently reside in Italy. Also, Investindustrials European presence

will be a key asset in expanding the Companys distribution capabilities in Western and

Eastern Europe.

Given all of the above, the Board of Directors unequivocally supports the prospective

investment by Investindustrial, believing strongly that it is in the best interests of our

Shareholders, employees, customers, independent dealers and, most importantly, the

Company. I would also like to point out as well that the Chairman of the Company,

being also its largest shareholder (through his direct interests and indirect interests via the

holding company, Merlion LP), has given undertakings to vote in favor of the proposed

investment as he believes the benefits of the proposal far outweigh the dilution on all

existing Shareholders, including the Chairman himself.

This is where you, our Shareholders, come into the equation. At the Shareholders meeting,

we will make a brief presentation reiterating the benefits of the proposed investment, and

will provide you the oppor tunity to ask questions of both the Companys Directors and its

new potential investor, Investindustrial, who will be in attendance. We would like to thank

you for carefully considering all of the issues in this letter and in the circular relating to

the proposed investment enclosed with your copy of the annual report as well as those

discussed in the financial announcements in giving the proposed investment your support.

Despite the fact that a considerable amount of our time was focused on creating strategic

alternatives for the Company, we did make further strides during the year in new product

development as well as strengthening both our management team and distribution

network of independent dealers.

New model development continued to be a key factor in our ability to outpace

competitors, as evidenced this year by the launch of the 53 Aleutian RP. Designed and

developed in-house at Grand Banks, the 53RP expands the Companys offerings in our

acclaimed raised-pilothouse line with a smartly-sized model that still offers all the superior

quality, luxury and performance the customers expect from the Aleutian Series.

Upon its launch at the 2010 Cannes International Boat Show, the 53RP quickly earned

high marks from customers and critics alike, driving both stock and retail orders in markets

all across the world. This is a winning testament not only to the boat and our brand, but

also to the dedicated team of designers, engineers, builders, craftspeople and other GB

employees behind every Grand Banks yacht that hits the water.

The past year also saw the debut of the 46 Eastbay SX in North America, where this

newest Zeus-powered Grand Banks yacht quickly muscled its way to the top of a hotly

competitive market for Downeast-style yachts. Solid sales and positive reviews prompted

our introduction in early 2011 of the 46FB, a flybridge-topped version that promises to

expand the potential of this model for years to come.

Late in the fiscal year, the Company completed and delivered the largest motoryacht ever

built by Grand Banks, the 76 Aleutian RP. The occasion marked not only a new flagship

yacht for the Company, but also a new model of customer collaboration building on

the strength of the Grand Banks brand and the Aleutian Series design to bring an ownersunique vision to life. This opportunity to leverage our proven reputation and renowned

production practices as a platform for customer-driven development shows a compelling

prospect for new sales channels in the future.

Other important developments at the Company involved not just products, but people

specifically, the recent appointment of Bruce Livingston as Production Director for Grand

Banks Yachts. A familiar name to those who know our recent history, Bruce originally

served as Director and Plant Manager at the Grand Banks factory in Johor, Malaysia,


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from 1996 to 2005. Since that time he has continued to build a stellar track record, and

he remains highly regarded by the production personnel at Grand Banks, and by the many

customers who know him well. Bringing him on board was the right choice at the right time, and

all of us are very excited to have Bruce back on the team.

Beyond the factory, we took great strides to ensure the strength of our sales network. Grand

Banks worked closely with our existing dealers to make excellent progress in reducing the age of

boat inventories, while continuing to add new dealers in key markets: Nick Whale Marine, with

offices in Mallorca and a stellar reputation for personalized service, was assigned to our new

Authorized Dealer in Spain.

We also worked to bolster our own retail businesses, adding personnel and opening new locations

for company-owned stores in Australia and the US Pacific Northwest. These continuing retail

operations have not only served to strengthen sales in these markets, they have also generated

revenue to the Company through the sale of used boats taken in trade or brokered through our

dealerships.

New construction is, after all, the lifeblood of our industry. In its absence, consumer excitement

fades, innovation falters, and creativity grows stagnant. Grand Banks, therefore, remains

intently focused on new model development on understanding intimately the needs of the

market, anticipating opportunities, and exceeding expectations. With the potential support of

a new investor, a skilled and experienced workforce, disciplined management, an outstanding

distribution network and one of the premier brands in the industry, I am confident we will succeed

in the face of ongoing adversity.

In closing, and on behalf of the entire team at Grand Banks Yachts, I would like to thank you for

your investment and your continued support.

Sincerely,

Robert W. Livingston II

President & C.E.O.

NEW FLAGSHIP: 76 ALEUTIAN RP NEAR PORTOFINO, ITALY

ARTISTS RENDERING OF THE 46 EASTBAY FB,

THE FIRST FLYBRIDGE WITH ZEUS

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BOARD OF DIRECTORS

Robert William Livingston [American, 71]ChairmanMember of Nominating CommitteeMember of Remuneration CommitteeMember of Strategic Vision Committee

Mr. Livingston is a founder member and has been on the Board since 8 June 1976. Hewas last re-elected to the Board on 8 October 2010.

He holds a Bachelor of Science (major in Accounting) from Minnesota State University,USA and he is a Certified Public Accountant.

He joined American Marine Ltd. (legacy company of Grand Banks Yachts Limited) in1972 as its Treasurer. Relocating to Singapore in 1974 to manage the Singapore plant,he was subsequently elected the President of the company following a managementbuyout in 1975. Over the last 35 years, under his leadership, Grand Banks hasdesigned, developed, built and exported over 5,000 high quality classic yachts world-wide.

Robert William Livingston II [American, 42]Executive DirectorPresident and Chief Executive OfficerMember of Strategic Vision Committee

Mr. Livingston II was appointed to the Board on 9 July 2004. He was last re-elected tothe Board on 9 October 2009.

He holds a Master of Business Administration from Duke University, USA. He also holdsa Bachelor of Science in Business Administration from Georgetown University, USA witha double major in Finance and International Management.

As Chief Executive Officer, he is responsible for the operation of the entire Group. Priorto joining the Group in 2001, Mr. Livingston spent time with Dean Witter, AmericaOnline, Morgan Stanley, and aQuantive in various investment banking and businessdevelopment positions. He also worked for Grand Banks Yachts from 1993 to 1995.Mr. Livingston is a member of the Young Presidents Organization (YPO) Singaporechapter.

Peter Kevin Poli [American, 49]Executive DirectorExecutive Vice President and Chief Financial Officer

Mr. Poli was appointed to the Board on 31 March 2008. He was last re-elected to theBoard on 8 October 2010.

He holds an MBA from Harvard Business School and a BA in Economics and Engineeringfrom Brown University. Mr. Poli was also elected a Fellow of The Institute of CharteredSecretaries and Administrators on 2 November 2010.

He is responsible for the Groups financial, human resources, and IT functions and will

also lead the evaluation of strategic business opportunities for Grand Banks. Prior tojoining the Company in 2004, he spent twelve years in the securities business, the lastthree of which as the CFO for a Morgan Stanley subsidiary. He also served as the CFOof specialty retailer FTD, helping to take the company public in 1999. Mr. Poli is amember of the Singapore Institute of Directors (SID) and a graduate of both the SingaporeAssociation of the Institute of Chartered Secretaries & Administrators professionalqualification scheme and the Executive Certificate in Directorship programme jointlyorganized by SMU and SID. In addition, in 2011, Mr. Poli successfully completed thefive modules comprising the Listed Company Director Programme organized by theSingapore Institute of Directors and supported by Singapore Exchange Ltd.


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Michael Grenville Gray[Singaporean, 65]Independent DirectorChairman of Audit CommitteeMember of Nominating Committee

Mr Gray was appointed to the Board on 1 November 2008. He was last re-electedto the Board on 9 October 2009.

He is an independent director and chairman of the Audit Committees of Avi-TechElectronics Limited, JEL Corporation (Holdings) Ltd and Ascendos India Trust, whichare listed in Singapore and a director of the VinaCapital Vietnam Opportunity Fund,which is listed in London, United Kingdom. He is the Senior Advisor to Tricor SingaporePte Ltd, a professional firm involved in corporate secretarial, accounting services andoutsourcing. Prior to his retirement at the end of 2004, Mr Gray was a partner inPricewaterhouseCoopers, Singapore and before that Territorial Senior Partner forPricewaterhouseCoopers Indochina (Vietnam, Cambodia and Laos). He has over 30

years experience in professional practice most of which has been in Southeast Asia.

Mr Gray was admitted as a member to the Institute of Chartered Accountants in Englandand Wales (FCA) in 1976. Apart from being a FCA, Mr Gray has a Bachelor ofScience Degree in Maritime Studies from the University of Plymouth and a Masters ofArts in South East Asian Studies from the National University of Singapore. He is aFellow of the Chartered Institute of Certified Public Accountants of Singapore, Fellow ofthe Chartered Institute of Logistics and Transport and a Fellow of the Singapore Instituteof Directors.

Roger Gaimster Langdale [Singaporean, 75]Independent DirectorChairman of Nominating CommitteeMember of Audit CommitteeMember of Remuneration Committee

Mr. Langdale was appointed to the Board on 11 November 2003. He was last re-elected to the Board on 8 October 2010.

He is the proprietor of Langdale Management, providing consulting services in the areasof commercial financial management and corporate governance. He was formerly theChief Financial Officer and Executive Director of The North Borneo Timbers Bhd and aPartner in Peat Marwick Mitchell & Co, a legacy firm of KPMG. He is a Fellow of theInstitute of Chartered Accountants in England and Wales and a member of the Institute ofCertified Public Accountants of Singapore, the Malaysian Association of Certified PublicAccountants and the Singapore Institute of Directors.

Jeffrey Stewart Bland [American, 65]Independent DirectorChairman of Remuneration CommitteeChairman of Strategic Vision CommitteeMember of Audit Committee

Dr. Bland was appointed to the Board on 2 March 2007. He was last re-elected to theBoard on 8 October 2010.

He holds a Ph.D. in Chemistry from the University of Oregon, and a Bachelor of Sciencein Biology from the University of California.

Dr. Bland is the Chief Executive Officer of KinDex Therapeutics Ltd, a medical researchcompany, and the President of MetaProteomics Ltd, a biotechnology entity as well asa board member of Next Foods, Inc, a company based in Boulder, Colorado whichproduces and distributes probiotic fruit drinks in the United States, under the GoodBellybrand. He is also the Chief Science Officer of Metagenics, Inc, a leading manufacturerand distributor of medical foods and nutraceutical products owned by Alticor, the multi-billion dollar global network-marketing company that owns Amway and which ownsand manages manufacturing facilities throughout the world including in the USA andChina, organically certified farms for growing food supplements in the USA, Mexicoand Brazil, and distribution facilities in North America, Europe and Asia. He has beeninternationally recognized as a leader in the nutritional medicine field for over 30 yearsand has served on numerous private and public Boards of Directors. Dr. Bland hasauthored five books on nutritional medicine for the healthcare profession and four bookson nutrition and health for the general public. He is also the principal author of over 100peer-reviewed research papers on nutritional biochemistry. He also holds numeroushonors and patents.

BOARD OF DIRECTORS


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STATEMENT OF CORPORATE GOVERNANCE

The Directors of Grand Banks Yachts Limited (the Company) are committed tomaintaining a high standard of corporate governance within the Company and itssubsidiary companies (the Group). The Company has adopted the principles set out in

the Code of Corporate Governance 2005 (the Code) established by the SingaporeCorporate Governance Committee and the relevant sections of the Listing Manual issuedby the Singapore Exchange Securities Trading Limited (SGX-ST).

This report outlines the Companys main corporate governance practices that arein place. Where there are deviations from the Code, appropriate explanations areprovided.

BOARD OF DIRECTORS(Code of Corporate Governance Principles 1, 2, 3, 4, 6 & 10)

Robert William Livingston (Chairman)Robert William Livingston II

Jeffrey Stewart BlandMichael Grenville GrayRoger Gaimster LangdalePeter Kevin PoliThe Board of Directors consists of two executive directors, one non-executive directorand three independent directors. Every Director is expected, in the course of carrying outhis duties, to act in good faith and consider at all times, the interests of the Group. TheBoard oversees the management of the Group and meets regularly throughout the yearto do so. The Board sets the overall strategy of the Group as well as policies coveringvarious matters with an emphasis on internal controls, financial performance and riskmanagement procedures. The Board delegates the implementation of business policiesand day-to-day operations to the Executive Directors and the Groups management

team.

The Boards three independent directors are respected professionals drawn from abroad spectrum of expertise which enables them, in their collective wisdom, to contributeeffectively and provide a balance of views at both Board and Board Committee

meetings. Details of the Directors academic and professional qualifications and otherappointments are set out on page 6 and 7 of this Annual Report.

The role of the Chairman is separate from that of the Chief Executive Officer. The ChiefExecutive Officer is the son of the Chairman. There is adequate accountability andtransparency as independent directors make up 50% of the Board. The Board is able toexercise its power objectively and independently from the management.

The Chairmans responsibilities include promoting high standards of corporategovernance, scheduling meetings that enable the Board to per form its duties, establishingthe agenda for the Board meetings in consultation with the CEO and ensuring that theBoard reviews and approves the Groups material strategies and policies. The CEOsresponsibilities encompass managing the day-to-day business activities of the Group,developing and executing the Groups strategies, reporting back to the Board on theperformance of the Group, and providing guidance to the Groups employees.

Matters which specifically require the Boards approval or involvement are thoseinvolving material acquisitions and disposals of assets, borrowings, corporate orfinancial restructuring, share issuances, dividends and other returns to shareholders,establishment of strategies and objectives, setting the Groups budget and financialplans, monitoring financial and management performance, authorizing executivecompensation, evaluating internal controls and risk management, approving quarterlyand year-end financial reports and overseeing corporate governance.

The Board held eight meetings in the financial year ended 30 June 2011 including adhoc Board meetings which are also held whenever the Boards guidance or approvalis required, outside of the scheduled Board meetings. The number of Board and

Committee meetings and the record of attendance of each director during the financialyear ended 30 June 2011 is set out below:


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BOARD OFDIRECTORS MEETINGS

AUDITCOMMITTEE MEETINGS

REMUNERATIONCOMMITTEE MEETINGS

NOMINATINGCOMMITTEE MEETINGS

STRATEGIC VISIONCOMMITTEE MEETINGS

NAME OF DIRECTOR NO.HELD NO.ATTENDED NO.HELD NO.ATTENDED NO.HELD NO.ATTENDED NO.HELD NO.ATTENDED NO.HELD NO.ATTENDED

Robert William Livingston 8 7 NA NA 4 4 3 3 0 0

Robert William Livingston II 8 8 NA NA NA NA NA NA 0 0

Jeffrey Stewart Bland 8 8 4 4 4 4 NA NA 0 0

Michael Grenville Gray 8 7 4 4 NA NA 3 2 NA NA

Roger Gaimster Langdale 8 8 4 4 4 4 3 3 NA NA

Peter Kevin Poli 8 8 NA NA NA NA NA NA NA NA

NA Not applicable as he is not a member of the Committee


Dates of Board, Board Committee and annual general meetings are scheduled in

advance in consultation with all of the Directors. A Director who is unable to attenda Board or Committee meeting in person is invited to participate in the meeting viatelephone or video conference.

The Directors are provided with complete and timely information prior to meetings and onan on-going basis to enable them to fulfill their duties. Management provided membersof the Board with quarterly management accounts, as well as relevant backgroundinformation relating to the matters that were discussed at the Board meetings. Detailedboard papers are sent out to the Directors before the scheduled meetings so that Director sunderstand the issues in advance and may spend more time discussing the topic at themeeting. However, certain sensitive issues are tabled at the meeting and discussedwithout any materials being distributed.

The Directors have separate and independent access to the Companys seniormanagement and the company secretary. Each member of the Board also has directaccess to the Groups independent professional advisors, as and when necessary,to discharge his responsibility effectively with any costs of doing so covered by theGroup. In addition, the Directors, either individually or as a group, may seek separateindependent professional advice, if necessary, at the expense of the Company.

The Directors continuously update themselves on new laws, regulations and changingcommercial risks. Every Director is also invited to seek additional training to develop

further skills for performing his duties. All three Directors residing in Singapore for theentire fiscal year (Messrs Gray, Langdale and Poli) attended classes and/or eventssponsored by the Singapore Institute of Directors in the past year. The Directors mayalso, at any time, visit the Groups production facility, sales locations or attend dealermeetings, trade shows and customer activities in order to gain a better understandingof the Groups business. If regulatory changes have a material impact on either theGroup or the Directors then Management will brief the Directors at the Board meetings.

BOARD MEMBERSHIPIn accordance with the Companys Articles of Association, half of the Board includingthe Chairman is subject to re-election annually. The directors named below are retiringand being eligible, offer themselves for re-election at the next annual general meeting.

Board Member Date of appointment Date of last electionRobert William Livingston II 9 July 2004 9 October 2009Michael Grenville Gray 1 November 2008 9 October 2009Roger Gaimster Langdale 11 November 2003 8 October 2010Robert William Livingston 8 June 1976 8 October 2010


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DIRECTORS INTEREST IN SHARESThe number of shares held, directly and indirectly, in the Company as at 30 June 2011by each director is listed below:

Director Number of SharesRobert William Livingston 27,428,180Robert William Livingston II 137,000

Jeffrey Stewart Bland 1,000Michael Grenville Gray 1,000Roger Gaimster Langdale 25,000Peter Kevin Poli 107,000

BOARD COMMITTEESThe Board has established a Nominating Committee, a Remuneration Committee, aStrategic Vision Committee and an Audit Committee to facilitate the discharge of certainof its responsibilities.

NOMINATING COMMITTEE(Code of Corporate Governance Principles 4 & 5)

Roger Gaimster Langdale (Chairman)Robert William LivingstonMichael Grenville Gray

The Nominating Committee whose terms of reference are approved by the Board iscomprised of two independent directors and one non-executive director. It meets at leastonce a year.

The role of the Committee is to make recommendations to the Board on all Boardappointments and on the composition of executive and independent directors of theBoard. It is also charged with the responsibility of re-nominating directors who are retiringby rotation as well as determining annually whether or not a director is independent.It assesses the effectiveness of the Board as a whole and the contribution of eachindividual director to the effectiveness of the Board. It proposes objective performancecriteria to evaluate the Boards performance. Such criteria include directors attendance

at meetings, their knowledge of the Company, contribution during discussions andwillingness to keep up to date with developments in both the business and legislation. Itperiodically engages external consultants to help in this evaluation process.

The Nominating Committee periodically reviews the existing attributes and competenciesof the Board in order to determine the desired expertise or experience required tostrengthen or supplement the Board. This assists the Nominating Committee in identifyingand nominating suitable candidates for appointment to the Board.

When the need for a new Director is identified, the Nominating Committee will makerecommendations to the Board regarding the identification and selection of suitablecandidates based on the desired qualifications, skill sets, competencies and experience,which are required to supplement the Boards existing attributes. If need be, theNominating Committee may seek assistance from external search consultants for theselection of potential candidates. Directors and Management may also put forwardnames of potential candidates, together with their curriculum vitae, for consideration.

The Nominating Committee, after completing its assessment, would then meet withthe short-listed candidates to assess their suitability, before submitting the appropriaterecommendations to the Board for approval.

REMUNERATION COMMITTEE(Code of Corporate Governance Principles 7, 8 & 9)

Jeffrey Stewart Bland (Chairman)Roger Gaimster LangdaleRobert William Livingston

The Remuneration Committee (RC) whose terms of reference are approved by the Board

is comprised of two independent directors and a non-executive director. It meets at leasttwice a year.

The role of the Committee is to review and make recommendations to the Board on theframework of remuneration packages and policies applicable to the Chief ExecutiveOfficer (CEO) and the directors. The RC also reviews the remuneration of the Groupssenior executives.



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In reviewing and determining the remuneration packages of the CEO, the ExecutiveDirectors and the Groups senior executives, the RC considers the executivesresponsibilities, skills, expertise and contribution to the Groups performance and if

the remuneration packages are competitive and sufficient to ensure that the Group isable to attract and retain executive talent. In line with Guideline 8.4 of the Codeof Corporate Governance which encourages Long-term Incentive Schemes, the RCcurrently administers the Groups Performance Incentive Plan which was approved byShareholders at the EGM held on 14 July 2008 with the objective of attracting andretaining key employees of the Group whose contributions are essential to the long-termgrowth and profitability of the Group.

The RC regularly utilizes external expert advice and data to assist in the evaluation o f itscompensation recommendations. None of the RC members or Directors is involved indeliberations in respect of any remuneration, compensation or any form of benefit to begranted to him or someone related to him.

No Independent and non-Executive Directors have Service Agreements with the Group.

They are paid Directors fees, which are determined by the Board based on the effort,time spent and responsibilities of the Directors. The Directors fees are subject to approvalby the Shareholders at each AGM.

The schedule of annual fees for Independent and non-executive Directors is as follows:Board member: $17,500Chairman of the Board: additional $11,000Member of the Audit Committee: $8,000Chairman of the Audit Committee: additional $10,000Member of other Committees: $3,000Chairman of other Committees: additional $4,000

The tables below show the remuneration bands of the Directors and the top five senior

executives of the Group who are not directors as well as the approximate percentagebreakdown of the remuneration.

Remuneration of Directors

Remuneration Band &

Name of Director

Base/Fixed

Salary (1)Incentive

Plan

Directors

Fees

Other

Benefits (2)Total

$750,000 to $1,000,000Robert William Livingston II 63% 12% - 25% 100%

$250,000 to $500,000Robert William Livingston - - 14% 86% 100%Peter Kevin Poli 63% 7% - 30% 100%

Below $250,000Jeffrey Stewart Bland - - 100% - 100%Michael Grenville Gray - - 100% - 100%Roger Gaimster Langdale - - 100% - 100%

Remuneration of Top Five Senior Executives (who are not Directors)

Remuneration Band &Name of Key Executive

Base/FixedSalary (1)

IncentivePlan

DirectorsFees

OtherBenefits (2)

Total

Below $250,000Ler Ching Chua 100% - - - 100%Bruce Livingston (3) 96% - - 4% 100%Neil B McCurdy 90% 10% - - 100%

Mohidin Pitchai Rowther 100% - - - 100%Wong Yung Pine 91% 9% - - 100%

(1) Inclusive of Central Provident Fund contributions and other fixed monthly payments.(2) Inclusive of benefits-in-kind.(3) Mr. Bruce Livingston joined as a full time employee on 1 May 2011 and as such his remuneration is

for two months.



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STRATEGIC VISION COMMITTEE

Jeffrey Stewart Bland (Chairman)

Robert William LivingstonRobert William Livingston II

The Strategic Vision Committee whose terms of reference are approved by the Board iscomprised of the Chairman of the Board of Directors, one independent director and oneexecutive director. It meets as requested by its Chairman.

The role of the Committee is to provide the Board with an objective and innovativeview of the future of the boating industry and a comprehensive understanding of theglobal market opportunities available to the Company. The Committee draws from theexperience of management in market research, product development, production, qualityassurance, finance and customer service along with its own independent evaluation ofmarket dynamics, trend analysis, public relations, economic and environmental factorsin carrying out its duties and responsibilities.

AUDIT COMMITTEE(Code of Corporate Governance Principle 11; Listing Manual Rule 1207(6)(b))

Michael Grenville Gray (Chairman)Jeffrey Stewart BlandRoger Gaimster Langdale

The Audit Committee is comprised of three independent directors who are appropriatelyqualified to discharge their responsibilities and functions under the terms of referenceapproved by the Board. It meets at least four times a year.

The Committee reviews the effectiveness of the Groups material internal controlsincluding financial and operational controls, and risk management. It receives reportsfrom the management, the internal and the external auditors and follows up onoutstanding matters contained in those reports where appropriate. It reviews the Groupsinterim and annual announcements and financial statements before they are submittedto the Board for approval. It reviews the Groups compliance with the Listing Manualand Code of Corporate Governance including interested person transactions. It alsorecommends the appointment of the external auditors and reviews their independenceand their fees.

With respect to the Groups audit, the Audit Committee reviews the following: the scopeof the independent auditors audit plan, the cost-effectiveness of the independent audit,the independent auditors reports and the significant financial reporting issues and

judgements to assess the integrity of the Groups financial statements.

The Committee has full access to and the cooperation of the Groups managementteam to enable it to properly discharge its responsibilities. The Audit Committee has fulldiscretion to invite any Director or executive officer to attend its meetings and has accessto other outside resources to enable it to complete its duties. In performing its functions,the Audit Committee also reviews the assistance given by the Groups managers tothe independent auditors. The internal and the external auditors also have unrestrictedaccess to the Audit Committee.

The Committee has reviewed the non-audit services provided by the external auditorsand these services, in its opinion, would not affect the independence of the externalauditors. The Committee recommends their re-appointment.

INTERNAL CONTROL(Code of Corporate Governance Principle 12)

The Board with the assistance of the Audit Committee ensures that the Group maintainsan adequate system of internal controls to safeguard shareholders investments and theGroups assets. The internal controls provide reasonable but not absolute assurance thatthe Group will not be adversely affected by any event that could be reasonably foreseenas it strives to achieve its business objectives. Reviews and tests of the internal controlprocedures and systems are carried out by an external internal audit firm. The Board isthus satisfied with the adequacy of the Groups internal controls.

INTERNAL AUDIT FUNCTION(Code of Corporate Governance Principle 13)

During the fiscal year ended 30 June 2010, Management recommended to the Boardthat the internal audit function be outsourced to an external organization for a varietyof reasons. As a result, the Audit Committee conducted an exhaustive search processand selected JF Virtus Pte Ltd last year. The Audit Committee originally committed to atwo-year engagement with the outside firm which terminates 30 June 2012. So far, the



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Audit Committee has determined the outside firm has met or exceeded its obligationsunder the terms of engagement. The internal audit firm reports to the Chairman of theAudit Committee and has unrestricted, direct access to the Audit Committee. The Audit

Committee reviews and approves the annual internal audit plan as well as reviews theresults of the regular audits. The Board is satisfied with the adequacy of the internalaudit function and is confident it has an appropriate standing within the Group and isindependent of the activities it audits.

COMMUNICATION WITH SHAREHOLDERS(Code of Corporate Governance Principles 14 & 15)

The Company makes all necessary disclosures to the public via SGXNET. The Companyalso maintains a comprehensive website accessible to the public which describes theCompanys products and independent dealers, among other items, and includes aninvestor relations tab to assist shareholders.

Shareholders of the Company receive the Annual Reports and notices of Annual GeneralMeetings (AGMs) which are also advertised in the newspapers at least 14 days priorto the AGMs. The Board encourages shareholders participation at the AGMs andperiodically communicates with shareholders through the course of the financial year.Members of the Board and chairmen of the Board committees use their best efforts tobe present at the AGM and any Extraordinary General Meeting, if required, to answerqueries raised at the meetings.

DEALING IN SECURITIES(Listing Manual Rule 1207(18))

The Company has adopted and complied with the section on dealings in securities inthe Best Practices Guide issued by SGX-ST.

Directors and senior executives of the Group are advised not to deal in the Companysshares on short-term considerations or when they are in possession of unpublishedmaterial price-sensitive information. They are also reminded regularly not to deal in theCompanys shares during the period commencing one month before the announcementof the Groups interim and annual results and ending on the date of announcement ofthose results. And such reminders include a computer generated email sent to all Directorsand Senior executives on a quarterly basis. Directors and Senior executives are required

to report to the Company secretary whenever they deal in the Companys shares. TheCompany secretary assists the Audit Committee and the Board in monitoring such sharetransactions and making the necessary announcements. Director s and Senior executives

are also reminded to be mindful of the laws on insider trading and to ensure that theirdealings in securities do not contravene the laws on insider trading as determined bythe Securities and Futures Act, the Companies Act and other appropriate regulatoryauthorities.

INTERESTED PERSON TRANSACTIONS(Listing Manual Rule 907 & 1207 (16))

There were no interested person transactions during the year.

MATERIAL CONTRACTS(Listing Manual Rule 1207(8))

No material contracts of the Company or its subsidiaries involving the interests of theChief Executive Officer or any Director or controlling shareholders existed at the end ofthe financial year or have been entered into since the end of the previous financial year.In addition, no Director or a related company with a Director has received a benefit fromany contract entered into by the Group since the end of the previous financial year.

RISK MANAGEMENTWith the help of an external consultant, the Group has designed an enterprise riskmanagement (ERM) framework to monitor, manage and build awareness within theGroup of the various risks to which the Group is exposed. The Board also reviews theGroups business and operational activities to identify areas of significant business riskas well as appropriate measures to control and mitigate these risks within the Groupspolicies and business strategies. The independent external firm retained to performthe Groups internal audit function has updated the Groups Enterprise Risk AssessmentProcess and created a risk register to be used by the Audit Committee and the externalfirm to monitor the manner in which the Group manages such risks. The previous riskassessment of the Groups operations has also been updated by the new internal auditfirm. The objective of the risk assessment is to identify and assess risks which include keyfinancial, operational, strategic and regulatory risks.

The Audit Committee is regularly updated on the Groups risk management program.



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DIRECTORS REPORT

We are pleased to submit this annual report to the members of the Company togetherwith the audited financial statements for the financial year ended 30 June 2011.

DIRECTORS

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

Robert William LivingstonRobert William Livingston II

Jeffrey Stewart BlandMichael Grenville GrayRoger Gaimster LangdalePeter Kevin Poli

DIRECTORS INTERESTS

According to the register kept by the Company for the purposes of Section 164 of theSingapore Companies Act, Chapter 50 (the Act), particulars of interests of directors whoheld office at the end of the financial year (including those held by their spouses andinfant children) in shares, debentures, warrants and share options in the Company andin related corporations (other than wholly-owned subsidiaries) are as follows:

Holdings atbeginning of year

Holdings atend of year

The CompanyOrdinary shares

Robert William Livingston * 27,428,180 27,428,180Robert William Livingston II 95,000 137,000

Jeffrey Stewart Bland + 1,000 1,000

Michael Grenville Gray 1,000 1,000Roger Gaimster Langdale 25,000 25,000Peter Kevin Poli 54,000 107,000

* This includes 26,250,000 (2010: 26,250,000) shares held beneficially by Merlion, LP, ofwhich Robert William Livingston is a director and owns 100% of its voting shares with his wife,Mary Isabella Livingston.

+ The 1,000 shares are held in trust by Robert William Livingston.

By virtue of his substantial interest in the share capital of the Company, Robert WilliamLivingston is also deemed to have interest in the shares held by the Company in itssubsidiaries at the beginning and at the end of the financial year.

Except as disclosed in this report, no director who held office at the end of the financial

year had interests in shares, debentures, warrants or share options of the Company, orof related corporations, either at the beginning of the financial year, or at the end of thefinancial year.

There was no change in any of the above mentioned interests in the Company betweenthe end of the financial year and 21 July 2011.

Except for shares granted under the Performance Incentive Plan, neither at the end ofnor at any time during the financial year was the Company a party to any arrangementwhose objects are, or one of whose objects is, to enable the directors of the Company toacquire benefits by means of the acquisition of shares in or debentures of the Companyor any other body corporate.

Except for short-term employee benefits received and as disclosed in the accompanying

financial statements, since the end of the last financial year, no director has received orbecome entitled to receive, a benefit by reason of a contract made by the Company ora related corporation with the director, or with a firm of which he is a member, or witha company in which he has a substantial financial interest.

SHARE OPTIONS

During the financial year, there were(i) no options granted by the Company to any person to take up unissued shares in

the Company; and

(ii) no shares issued by virtue of any exercise of option to take up unissued shares ofthe Company.

As at the end of the financial year, there were no unissued shares of the Company underoption.


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DIRECTORS REPORT

PERFORMANCE INCENTIVE PLAN

Grand Banks Yachts Limiteds Performance Incentive Plan (the Plan) was approvedand adopted by its members at an Extraordinary General Meeting of the Companyheld on 14 July 2008. The Plan is based on the principle of pay for performance and

is designed to enable the Company to reward, retain and motivate employees whosecontributions are essential to the well-being and prosperity of the Group and to giverecognition to outstanding employees who have contributed to the Group.

The Companys Board of Directors has authorised and appointed its RemunerationCommittee, which is comprised of two independent directors and the chairman ofthe Board, to administer the Plan. The Plan shall continue in force, at the discretionof the Remuneration Committee, subject to a maximum of ten years commencing 14

July 2008. Any awards made to participants prior to such expiry or termination willcontinue to remain valid.

Size of the Plan

The total number of new shares which may be allotted and issued to the participants

shall not exceed 12% of the total number of issued shares of the Company.

Participants of the Plan

The following persons shall be eligible to participate in the Plan:

Group employees who have attained the age of 21 years, hold such rank as may bedesignated by the Remuneration Committee and where terms of employment are deemedacceptable to the Remuneration Committee. So far, the Remuneration Committee haskept participants to a minimum.

Grant of Shares

In accordance with the requirements of the SGX Listing Manual, specific shareholderapproval must be sought to grant awards to one participant in the Plan who is anassociate of a controlling shareholder of the Company. As an associate of a controllingshareholder, the total number of shares which may be allotted and issued to this par ticipantshall not exceed 10% of the total number of shares available under the Plan.

Share awards granted and vested, during the financial year, and share awardsoutstanding at the end of the financial year, under the Plan, are as follows:

Date of grant1 July2010

Performanceshares granted

Performanceshares vested

30 June2011

000 000 000 000

2 October 2009 316 (178) 138(1)

15 October 2009 800 800(2)

1 October 2010 780 780(3)

1,116 780 (178) 1,718

(1) These shares have been earned and will vest on 2 October 2011 and 4 October 2011,subject to the fulfilment of time-based service condition.

(2) These shares have not been earned. The number of shares that can ultimately be earned willdepend on the achievement of the performance targets set and ranges from 0 to 800,000shares. The shares, if earned, will vest on 30 June 2012 subject to the fulfilment of time-based

service and performance conditions.(3) These shares have not been earned. The number of shares that can ultimately be earned will

depend on the achievement of the performance targets set and ranges from 0 to 780,000shares. The shares, if earned, will vest on 30 June 2013 subject to the fulfilment of time-basedservice and performance conditions.

AUDIT COMMITTEE

The members of the Audit Committee during the year and at the date of this report areas follows:

Michael Grenville Gray (Chairman, Independent director)

Jeffrey Stewart Bland (Independent director)Roger Gaimster Langdale (Independent director)

The Audit Committee performs the functions specified by section 201B of the CompaniesAct, the SGX Listing Manual and the Code of Corporate Governance.

The Audit Committee held four meetings since the last directors report. In performingits functions, the Audit Committee met wi th the Companys external and internal auditorsto discuss the scope of their work, the results of their examination and evaluation of theCompanys internal accounting control system.


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STATEMENT BY DIRECTORSDIRECTORS REPORT

The Audit Committee also reviewed the following:

assistance provided by the Companys officers to the internal and externalauditors;

quarterly financial information and annual financial statements of the Group and theCompany prior to their submission to the directors of the Company for adoption;and

interested person transactions (as defined in Chapter 9 of the SGX ListingManual).

The Audit Committee has full access to the management and is given the resourcesrequired for it to discharge its functions. It has full authority and the discretion to inviteany director or executive officer to attend its meetings. The Audit Committee alsorecommends the appointment of the external auditors and reviews the level of audit andnon-audit fees.

The Audit Committee is satisfied with the independence and objectivity of the external

auditors and has recommended to the Board of Directors that the auditors, KPMG LLP,be nominated for re-appointment as auditor s at the forthcoming Annual General Meetingof the Company.

AUDITORS

The auditors, KPMG LLP, have indicated their willingness to accept re-appointment.

On behalf of the Board of Directors

Robert William LivingstonDirector

Robert William Livingston IIDirector

9 September 2011

In our opinion:

(a) the financial statements set out on pages 18 to 47 are drawn up so as to give atrue and fair view of the state of affairs of the Group and of the Company as at30 June 2011 and the results, changes in equity and cash flows of the Group for

the year ended on that date in accordance with the provisions of the SingaporeCompanies Act, Chapter 50 and Singapore Financial Reporting Standards; and

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

The Board of Directors has, on the date of this statement, authorised these financialstatements for issue.

On behalf of the Board of Directors

Robert William LivingstonDirector

Robert William Livingston IIDirector

9 September 2011


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INDEPENDENT AUDITORS REPORT

Members of the CompanyGrand Banks Yachts Limited

REPORT ON THE FINANCIAL STATEMENTS

We have audited the accompanying financial statements of Grand Banks YachtsLimited (the Company) and its subsidiaries (the Group), which comprise the statementsof financial position of the Group and the Company as at 30 June 2011, the incomestatement, statement of comprehensive income, statement of changes in equity andstatement of cash flows of the Group for the year then ended, and a summary ofsignificant accounting policies and other explanatory information, as set out on pages18 to 47.

Managements responsibility for the financial statements

Management is responsible for the preparation of financial statements that give a trueand fair view in accordance with the provisions of the Singapore Companies Act,Chapter 50 (the Act) and Singapore Financial Reporting Standards, and for devising and

maintaining a system of internal accounting controls sufficient to provide a reasonableassurance that assets are safeguarded against loss from unauthorised use or disposition;and transactions are properly authorised and that they are recorded as necessary topermit the preparation of true and fair profit and loss accounts and balance sheets andto maintain accountability of assets.

Auditors responsibility

Our responsibility is to express an opinion on these financial statements based on ouraudit. We conducted our audit in accordance with Singapore Standards on Auditing.Those standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance about whether the financial statements are freefrom material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditorsjudgement, including the assessment of the risks o f material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditor

considers internal control relevant to the entitys preparation of financial statements thatgive a true and fair view in order to design audit procedures that are appropriate inthe circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entitys internal control. An audit also includes evaluating the appropriatenessof 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 toprovide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements of the Group and the statementof financial position of the Company are properly drawn up in accordance with theprovisions of the Act and Singapore Financial Reporting Standards to give a true andfair view of the state of affairs of the Group and of the Company as at 30 June 2011and the results, changes in equity and cash flows of the Group for the year ended onthat date.

REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS

In our opinion, the accounting and other records required by the Act to be kept by theCompany and by the subsidiary incorporated in Singapore o f which we are the auditorshave been properly kept in accordance with the provisions of the Act.

KPMG LLPPublic Accountants andCertified Public Accountants

Singapore

9 September 2011


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STATEMENTS OF FINANCIAL POSITIONAs at 30 June 2011

The accompanying notes form an integral part of these financial statements.

Group Company Note 2011 2010 2011 2010

$000 $000 $000 $000

Non-current assets

Property, plant andequipment 4 12,856 16,503

Subsidiaries 5 19,000 19,000

Intangible assets 6 155 224

Deferred tax assets 7 2,573 2,717

15,584 19,444 19,000 19,000

Current assetsInventories 8 21,648 22,820

Trade and other receivables 10 1,844 1,067 380 124

Prepayments 11 743 729 1 1

Current tax recoverable 39

Debt securities held-for-trading 12 1,076 1,111 817 817

Cash and cash equivalents 13 18,161 24,754 6,554 7,019

43,511 50,481 7,752 7,961

Total assets 59,095 69,925 26,752 26,961

Group Company Note 2011 2010 2011 2010

$000 $000 $000 $000

Current liabilities

Trade and other payables 14 7,643 8,054 298 259

Provision for warranty claims 15 1,509 1,648

Current tax payable 17 283 1 1

9,169 9,985 299 260

Non-current liability

Other payables 14 195 424

Total liabilities 9,364 10,409 299 260

Capital and reserves

Share capital 16 23,761 23,681 23,761 23,681

Share-based compensationreserve 17 126 101 126 101

Foreign currency translationreserve 18 (21,224) (19,073)

Accumulated profits 47,068 54,807 2,566 2,919

Total equity 49,731 59,516 26,453 26,701

Total equity and liabilities 59,095 69,925 26,752 26,961


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CONSOLIDATEDINCOME STATEMENT

Year ended 30 June 2011

CONSOLIDATEDSTATEMENT OF

COMPREHENSIVE INCOMEYear ended 30 June 2011


Note 2011 2010$000 $000

Revenue 19 28,083 29,230

Cost of sales (25,780) (28,452)

Gross profit 2,303 778

Selling and marketing expenses (5,065) (4,725)

Administrative expenses (4,728) (4,284)

Other operating (expense)/income, net (364) 186

Loss from operations (7,854) (8,045)

Other non-operating (expense)/income, net 20 (96) 67

Loss before taxation 20 (7,950) (7,978)

Income tax credit 22 211 455

Loss for the year (7,739) (7,523)

Earnings per share (cents) 23

- Basic (8.06) (7.85)

- Diluted (8.06) (7.85)

2011 2010$000 $000


Other comprehensive income

Translation differences relating to financial statementsof foreign subsidiaries (2,151) 1,803

Other comprehensive income for the year,net of income tax (2,151) 1,803

Total comprehensive income for the year (9,890) (5,720)


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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYYear ended 30 June 2011

Group Share capital

Share-basedcompensationreserve

Foreign currencytranslationreserve

Accumulatedprofits Total

$000 $000 $000 $000 $000

At 1 June 2009 23,583 (20,876) 62,330 65,037

Total comprehensive income for the year


Other comprehensive incomeTranslation differences relating to financial statements of foreign

subsidiaries 1,803 1,803

Total other comprehensive income 1,803 1,803

Total comprehensive income for the year 1,803 (7,523) (5,720)

Transactions with owners, recorded directly in equity

Equity-settled performance shares 98 101 199

At 30 June 2010 23,681 101 (19,073) 54,807 59,516



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CONSOLIDATED STATEMENT OF CHANGES IN EQUITYYear ended 30 June 2011


Group Share capital

Share-basedcompensationreserve

Foreign currencytranslationreserve

Accumulatedprofits Total

$000 $000 $000 $000 $000

At 1 June 2010 23,681 101 (19,073) 54,807 59,516

Total comprehensive income for the year


Other comprehensive incomeTranslation differences relating to financial statements of foreign

subsidiaries (2,151) (2,151)

Total other comprehensive income (2,151) (7,739) (9,890)

Total comprehensive income for the year (2,151) (7,739) (9,890)

Transactions with owners, recorded directly in equity

Equity-settled performance shares 80 25 105

At 30 June 2011 23,761 126 (21,224) 47,068 49,731


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CONSOLIDATED STATEMENT OF CASH FLOWSYear ended 30 June 2011

Group

2011 2010

$000 $000

Operating activities

Loss before taxation (7,950) (7,978)

Adjustments for:-

Depreciation of property, plant and equipment 3,208 3,962

Amortisation of intangible assets 59 59

Reversal of impairment losses on property, plantand equipment (7)

Gain on disposal of property, plant andequipment (34) (62)

Property, plant and equipment written off 67 13

Interest income (180) (240)

Provision for warranty claims 1,139 376

Fair valuation (gain)/loss on debt securities held-for-trading 35 (22)

Equity-settled share-based compensation 105 199

(3,551) (3,700)

Changes in working capital:

Increase in inventories (119) (1,760)

(Increase)/Decrease in trade and otherreceivables (1,064) 1,508

Increase in prepayments (41) (35)

Decrease in trade and other payables (157) (4,651)

Net cash used in operations (4,932) (8,638)

Net income taxes (paid)/refunded (91) 994

Warranty claims paid (1,205) (1,457)

Cash flows from operating activities (6,228) (9,101)

Group

2011 2010

$000 $000

Investing activitiesInterest received 180 240

Proceeds from disposal of property, plant andequipment 35 165

Purchase of property, plant and equipment (420) (1,405)

Cash flows from investing activities (205) (1,000)

Net decrease in cash and cash equivalents (6,433) (10,101)

Cash and cash equivalents at beginning of year 24,754 34,600

Effect of exchange rate changes on balancesheld in foreign currency (160) 255

Cash and cash equivalents at end of year(Note 13) 18,161 24,754


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NOTES TO THE FINANCIAL STATEMENTS

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 9September 2011.

1 DOMICILE AND ACTIVITIES

Grand Banks Yachts Limited (the Company) is incorporated in the Republic ofSingapore and has its registered office at 541 Orchard Road #11-04 LiatTowers Singapore 238881.

The principal activities of the Company are those of an investment holdingcompany with significant subsidiaries in the business of manufacturing and sellingluxury yachts worldwide. See Note 5 to the financial statements for additionalinformation on the subsidiaries.

The consolidated financial statements relate to the Company and i ts subsidiaries(referred to as the Group).

2 BASIS OF PREPARATION

2.1 Statement of compliance

The financial statements have been prepared in accordance with SingaporeFinancial Reporting Standards (FRS).

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis exceptfor certain financial assets which are measured at fair value.

2.3 Functional and presentation currency

These financial statements are presented in Singapore dollars, which is alsothe Groups functional currency. The financial statements of the Company andits subsidiaries are measured in respective functional currencies determined by

management. All financial information presented in Singapore dollars have beenrounded to the nearest thousand, unless otherwise stated.

2.4 Use of estimates and judgements

The preparation of the financial statements in conformity with FRSs requiresmanagement to make judgements, estimates and assumptions that affect theapplication of accounting policies and the reported amounts of assets, liabilities,income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis.Revisions to accounting estimates are recognised in the period in which theestimates are revised and in any future periods affected.

In particular, information about significant areas of critical judgements andestimation uncertainty are described in the following notes:

Critical judgement

Review for indicators of impairment for non-financial assets

The Group assessed whether there were indicators of impairment for all non-financial assets except for inventories and deferred tax assets at each reportingdate. In performing its review, the Group considered the latest availablemanagement budgets, long term economic indicators and industry outlooks andsustainability, market competition, underlying business fundamentals and marketperception of the corporate brand. The review requires significant assumptionsparticularly given the uncertainty regarding the timing of economic recoveries inthe regions where the Group sells its yachts.


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2 BASIS OF PREPARATION (CONTD)

2.4 Use of estimates and judgements (Contd)

Key sources of estimation uncertainty

a) Note 3.3 and 4 estimation of useful lives of property, plant andequipment

b) Note 3.6 and 4 estimation of recoverable amounts of non-financial assetsgrouped in cash-generating units

c) Note 3.9 and 15 measurement for provision for warranty claims

d) Note 3.11 recognition of revenue using percentage of completionmethod

e) Note 3.12 and 7 recognition of deferred tax assets

f) Note 8 measurement of allowance for inventories obsolescence

g) Note 29 measurement of provision for legal claims

2.5 Changes in accounting policies

On 1 July 2010, the Group adopted the following new or amended FRS that aremandatory for application from that date.

Amendment to FRS 102 - Amendments relating to Group cash-settled share-based payment transactions

Amendment to FRS 108 - Amendments relating to disclosure of information aboutsegment assets

The effects of adoption of the above FRS did not result in substantial changesto the Groups accounting policies and had no material effect on the amountsreported for the current or prior financial years.

3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies used by the Group as set out below have been appliedconsistently to all periods presented in these financial statements.

3.1 Basis of consolidation

Business combination

Business combinations are accounted for using the acquisition method as at theacquisition date, which is the date on which control is transferred to the Group.Control is the power to govern the financial and operating policies of an entityso as to obtain benefits from its activities. In assessing control, the Group takesinto consideration potential voting rights that are currently exercisable.

Subsidiaries

Subsidiaries are companies controlled by the Group. Control exists when the

Group has the power, directly or indirectly, to govern the financial and operatingpolicies of a company so as to obtain benefits from its activities. In assessingcontrol, potential voting rights that are presently exercisable are taken intoaccount. The financial statements of subsidiaries are included in the consolidatedfinancial statements from the date that control commences until the date thatcontrol ceases. The accounting policies of subsidiaries have been changedwhere necessary to align with the policies adopted by the Group.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income or expensearising from intra-group transactions, are eliminated in preparing the consolidatedfinancial statements.

Accounting for subsidiaries by the Company

Investments in subsidiaries are stated in the Companys statement of financialposition at cost less impairment losses.


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3 SIGNIFICANT ACCOUNTING POLICIES (CONTD)

3.2 Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functionalcurrencies of Group entities at the exchange rate at the date of the transaction.Monetary assets and liabilities denominated in foreign currencies at the reportingdate are retranslated to the functional currency at the exchange rate at the reportingdate. Non-monetary assets and liabilities denominated in foreign currenciesthat are measured at fair value are retranslated to the functional currency atthe exchange rate at the date on which the fair value was determined. Non-monetary items in a foreign currency that are measured in term of historical costare translated using the exchange rate at the date of the transaction.

Foreign currency differences arising on retranslation are recognised in profit orloss, except for differences arising on the retranslation of monetary items that insubstance form part of the Groups net investment in a foreign operation (see

below).

Foreign operations

The assets and liabilities of foreign operations are translated to Singapore dollarsat exchange rates at the reporting date. The income and expenses of foreignoperations are translated to Singapore dollars at exchange rates at the dates of thetransactions. Goodwill and fair value adjustments arising on the acquisition of aforeign operation on or after 1 January 2005 are treated as assets and liabilitiesof the foreign operation and translated at the closing rate. For acquisitions priorto 1 January 2005, the exchange rates at the date of acquisitions were used.

Foreign currency differences are recognised in other comprehensive income. Ifa foreign operation is disposed of, in part or in full, then the relevant amount inthe foreign currency translation reserve is transferred to profit or loss as par t of theprofit or loss on disposal.

When the settlement of a monetary item receivable from or payable to a foreignoperation is neither planned nor likely in the foreseeable future, foreign exchangegains and losses arising from such a monetary item are considered to formpart of a net investment in a foreign operation and are recognised in othercomprehensive income, and are presented within equity in the foreign currencytranslation reserve.

3.3 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciationand impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset.The cost of self-constructed assets includes the cost of materials and direct labour,any other costs directly attributable to bringing the asset to a working conditionfor its intended use. Purchased software that is integral to the functionality of therelated equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different usefullives, they are accounted for as separate items (major components) of property,plant and equipment.

The cost of replacing part of an item of property, plant and equipment isrecognised in the carrying amount of the item if it is probable that the futureeconomic benefits embodied within the part will flow to the Group, and its costcan be measured reliably. The costs of the day-to-day servicing of property, plant

and equipment are recognised in profit or loss as incurred.

Depreciation is recognised in profit or loss on a straight-line basis over theestimated useful lives of each part of an item of property, plant and equipment.

The estimated useful lives are as follows:

Buildings on leasehold land - 22 - 28 yearsLeasehold land - Lease period of 30 yearsPlant and machinery - 10 yearsFurniture, fixtures and equipment - 3 to 5 yearsToolings and moulds - 4 to 8 yearsMotor vehicles and work boats - 5 to 10 years

Assets under construction are not depreciated. Depreciation commences whenthe assets are ready for use.

Depreciation methods, useful lives and residual values are reviewed, and adjustedas appropriate, at each reporting date.


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3.4 Intangible assets

Research and development

Development activities involve a plan or design for the production of new orsubstantially improved products and processes. Development expenditure iscapitalised only if development costs can be measured reliably, the product orprocess is technically and commercially feasible, future economic benefits areprobable, and the Group intends to and has sufficient resources to completedevelopment and to use or sell the asset. The expenditure capitalised includes thecost of materials, direct labour and overhead costs that are directly attributableto preparing the asset for its intended use. Other development expenditure isrecognised in profit or loss as incurred.

Capitalised development expenditure is stated at cost less accumulatedamortisation and impairment losses. Amortisation is recognised in profit or losson a straight-line basis over the estimated useful life of approximately 6 years.

Trade marks

Trade marks with finite useful life are stated at cost less accumulated amor tisationand impairment losses.

Trade marks are amortised in profit or loss on a straight-line basis over theirestimated useful life of 20 years.

3.5 Financial instruments

Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the datethat they are originated. All other financial assets are recognised initially on thetrade date, which is the date that the Group becomes a party to the contractualprovisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cashflows from the asset expire, or it transfers the rights to receive the contractual cashflows on the financial asset in a transaction in which substantially all the risksand rewards of ownership of the financial asset are transferred. Any interest in

transferred financial assets that is created or retained by the Group is recognisedas a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in thestatement of financial position when, and only when, the Group has a legal right

to offset the amounts and intends either to settle on a net basis or to realise theasset and settle the liability simultaneously.

The Groups non-derivative financial assets comprise loans and receivables anddebt securities held-for-trading.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable paymentsthat are not quoted in an active market. Such assets are recognised initially atfair value plus any directly attributable transaction costs. Subsequent to initialrecognition, loans and receivables are measured at amortised cost using theeffective interest method, less any impairment losses.

Loans and receivables comprise cash and cash equivalents, and trade and otherreceivables.

Cash and cash equivalents comprise cash balances and bank deposits. For thepurpose of the cash flow statement, cash and cash equivalents exclude short-termdeposits which are pledged to the bank as security and cannot be withdrawn ondemand.

Held-for-trading

Financial instruments held-for-trading are classified as current assets and arestated at fair value, with any resultant gain or loss recognised in profit or loss.

The fair value of financial instruments classified as held-for-trading is determinedas the quoted bid price at the balance sheet date.

Non-derivative financial liabilities

The Group initially recognises all financial liabilities on the trade date at whichthe Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations aredischarged, cancelled or expire.


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3.5 Financial instruments (Contd)

Financial assets and liabilities are offset and the net amount presented in the

statement of financial position when, and only when, the Group has a legal rightto offset the amounts and intends either to settle on a net basis or to realise theasset and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities into the other financialliabilities category. Such financial liabilities are recognised initially at fair valueplus any directly attributable transaction costs. Subsequent to initial recognition,these financial liabilities are measured at amortised cost using the effective interestmethod.

The Groups non-derivative financial liabilities comprise trade and other payables.

Share capital

Ordinary share are classified as equity. Incremental costs directly attributable tothe issue of ordinary shares are recognised as a deduction from equity, net of anytax effects.

Financial guarantees

Financial guarantees are financial instruments issued by the Group that requirethe issuer to make specified payments to reimburse the holder for the loss i t incursbecause a specified debtor fails to meet payment when due in accordance withthe original or modified terms of a debt instrument.

Financial guarantees are recognised initially at fair value and are classified asfinancial liabilities. Subsequent to initial measurement, the financial guaranteesare stated at the higher of the initial fair value less cumulative amortisation andthe amount that would be recognised if they were accounted for as contingentliabilities. When financial guarantees are terminated before their original expirydate, the carrying amount of the financial guarantee is transferred to profit orloss.

3.6 Impairment

Non-derivative financial assets

A financial asset not carried at fair value through profit or loss is assessed at the

end of each reporting period to determine whether there is objective evidencethat it is impaired. A financial asset is considered to be impaired if objectiveevidence indicates that a loss event has occurred after the initial recognition ofthe asset, and that the loss event has a negative effect on the estimated futurecash flows of that asset that can be estimated reliably.

An impairment loss in respect of a financial asset measured at amortised cost iscalculated as the difference between its carrying amount and the present value ofthe estimated future cash flows, discounted at the assets original effective interestrate.

Individually significant financial assets are tested for impairment on an individualbasis. The remaining financial assets are assessed collectively in groups thatshare similar credit risk characteristics.

When a subsequent event causes the amount of impairment loss to decrease, thedecrease in impairment loss is reversed through profit or loss.

Non-financial assets

The carrying amounts of the Groups non-financial assets, other than inventoriesand deferred tax assets, are reviewed at each reporting date to determinewhether there is any indication of impairment. If any such indication exists, thenthe assets recoverable amount is estimated. An impairment loss is recognised ifthe carrying amount of an asset or i ts related cash-generating unit (CGU) exceedsits estimated recoverable amount.

The recoverable amount of an asset or CGU is the greater of its value in useand its fair value less costs to sell. In assessing value in use, the estimatedfuture cash flows are discounted to their present value using a pre-tax discountrate that reflects current market assessments of the time value of money andthe risks specific to the asset or CGU. For the purpose of impairment testing,assets that cannot be tested individually are grouped together into the smallestgroup of assets that generates cash inflows from continuing use that are largelyindependent of the cash inflows of other assets or CGU.


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GBY Grand Banks Yachts Annual Report 2011

Documents

Transcript of GBY Grand Banks Yachts Annual Report 2011