O TTO M ARINE L IMITED - Microsoft Internet Explorer - SGX

Accounting Policies — Revenue and Cost of Sales Recognition”. As a result, we recognise revenue from a
project only during the duration of a contract related to that project, which could extend over two or more
financial reporting periods, and we do not recognise revenue during periods when we have not secured
shipbuilding contracts. As we may begin construction of a vessel without a contract and sign a contract only
when construction is well advanced (see ‘‘— Our Operations — Shipbuilding”), it is possible that the period
during which we recognise revenue for a project is substantially shorter than the period of vessel construction.
For example, we entered into contracts for the construction and delivery of two vessels with Esnaad in 2006,
and we were able to deliver these vessels also in 2006, since construction of the vessels had been commenced
already in 2005, prior to the signing of the contract. As a result, all of the revenue relating to these vessels and
these contracts was recognised in 2006 and attributed to Esnaad.
Save as disclosed in “Interested Person Transactions and Conflicts of Interest”, none of our Directors or
Substantial Shareholders and their Associates has any interest, direct or indirect, in any of the abovementioned
major customers.
Our Major Suppliers
We are dependent on a number of suppliers who supply certain equipment for our new shipbuilding and
ship repair or conversion projects or where the equipment brand is specified by customers. See “Risk
Factors — Risks Relating to Our Business and Operations”. The following suppliers accounted for 5.0% or
more of our purchases for any of FY2005, FY2006 , FY2007 and the five months ended 31 May 2008:
Percentage of Total Purchases (%)
Five Months Ended
Suppliers FY2005 FY2006 FY2007 31 May 2008 Items Purchased
LSH Group (1),(3) . . . . . . . . . . . . — 19.7 37.0 41.5 Equipment and components,
including engines, generator sets,
winches, compressors and bulk
tanks
Yawson . . . . . . . . . . . . . . . . . . — — 7.9 — Vessels
Hoe Seng Huat Pte. Ltd. . . . . . . 7.1 4.7 — 0.1 Steel
Tractors Group (2) . . . . . . . . . . . 6.6 4.5 — 0.5 Engines and generator sets
Asia Enterprises (Private)
Limited . . . . . . . . . . . . . . . . 12.0 2.8 0.1 — Steel plates
Guijiang Shipbuilding Co Ltd . . — — 2.3 6.4 Subcontracting cost for
outsourced shipbuilding
Europe Marine Control B.V . . . . — — 0.8 9.1 Diesel electric engine
Notes:
(1) LSH Group refers to Lei Shing Hong (Singapore) Pte. Ltd. (“LSH Singapore”) and Lei Shing Hong Trading
Limited (“LSH Trading”), both of which are wholly-owned subsidiaries of Lei Shing Hong Limited
(“LSH”).
(2) Tractors Group refers to TSL Power Systems and Tractors Singapore Limited. TSL Power Systems is a
sole-proprietorship, wholly-owned by Tractors Singapore Limited.
(3) Purchases from LSH Group include items that LSH Group purchased from Hoe Seng Huat Pte. Ltd., Tractors
Group, Asia Enterprises (Private) Limited and Europe Marine Control B.V..
Our purchases consist primarily of engines, propellers, bulk tanks, compressors, winches, generator sets,
and consumables and direct materials such as steel plates, cabling, piping systems and other materials for our
shipbuilding activities. We also purchase equipment for our shipyard. See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Revenue and
Cost of Sales Recognition — Purchases and Cost of Sales”. In addition, in the five months ended 31 May
2008, we incurred substantial costs for purchases of high-value diesel electric engines and for increased
outsourcing of vessel construction to shipyards in China, including Guijiang Shipbuilding Co Ltd. See “— Our
Operations — Shipbuilding — Outsourcing”.
We purchase equipment and supplies from manufacturers or through stockists and authorised dealers of
manufacturers. In October 2006, we started using LSH Group to assist us with procurement for a number of
our purchases. For major equipment such as engines, winches, propulsion systems and generators, we select
the manufacturer based on vessel specifications and enter into an agreement directly with the manufacturer or
its authorised agent. Such an agreement would typically provide that LSH Group may make payment on our
behalf. For some of our other purchases, such as consumables, steel plates, valves and pipes, LSH Group
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