- Hoe Leong Corporation

Transcription

HL•COVER(03.03).ai
4/1/08
11:51:41 PM
Hoe Leong Corporation Ltd.
www.hoeleong.com
6 Clementi Loop • Singapore 129814 • Tel : +65 6463 8666
• Fax : +65 6564 7252 • Registration No: 199408433W
Mission Statement
We are committed in being the leader in trading, distributing as
well as the designing and manufacturing of an extensive range
of spare parts for heavy equipment and industrial machinery so
as to meet the various demands and achieve absolute precision
in the market place.
HOE LEONG CORPORATION LTD.
Hoe Leong Corporation Ltd. was incorporated in Singapore on 18 November 1994. It was successfully admitted to the Official List of
the Singapore Exchange Securities Trading Limited (“SGX-ST”) on 5 December 2005.
Its principal business activities are as follows:• Trading and distributing an extensive range of equipment parts for both heavy equipment and industry machinery including brands
such as Cargo Winch, Caterpillar, Cummins, Fiat Allis, Hitachi, Hyster, Kato, Kobelco, Komatsu, Mitsubishi, P&H and Sumitomo.
•
Design and manufacture of equipment parts for both heavy equipment and industrial machinery under its own in-house brand
names, “KBJ”, “OEM”, “ROSSI” and “TMI”. Initially, it out-sourced the manufacture of its products to overseas contract manufacturers.
Since 2004, it has also commenced manufacturing certain equipment parts through its PRC subsidiaries.
Hoe Leong sells directly to end-users as well as through distributors in Singapore and overseas markets including Indonesia, Malaysia,
the People’s Republic of China and the Emerging Markets (which includes India and the Middle East). End-users of its products are
generally users of heavy equipment and industrial machinery in the agriculture, building and infrastructure construction, forestry,
marine, mining and plantation industries.
Currently, Hoe Leong serves over 1,200 customers. It carries about 20,000 types of equipment parts in 25 categories for over 100
brands of products.
CORPORATE PROFILE I CORPORATE INFORMATION
BOARD OF DIRECTORS
REGISTERED OFFICE
Executive:
James Kuah Geok Lin (Chairman and CEO)
Paul Kuah Geok Khim (Executive Director)
Peter Kuah Geok Koon (Executive Director)
Quah Yoke Hwee (Executive Director)
6 Clementi Loop, Singapore 129814
Tel : (65) 6463-8666 Fax : (65) 6564-7252
Website : http://www.hoeleong.com
Non-Executive:
Ang Mong Seng (Independent Director)
Lim Kok Hoong (Independent Director)
Peter Boo Song Heng (Independent Director)
AUDIT COMMITTEE
Lim Kok Hoong (Chairman)
Ang Mong Seng
Peter Boo Song Heng
NOMINATING COMMITTEE
Peter Boo Song Heng (Chairman)
Ang Mong Seng
James Kuah Geok Lin
REMUNERATION COMMITTEE
Ang Mong Seng (Chairman)
Lim Kok Hoong
Peter Boo Song Heng
COMPANY SECRETARY
SHARE REGISTRAR
Tricor Barbinder Share Registration Services
(A division of Tricor Singapore Pte. Ltd.)
8 Cross Street, #11-00 PWC Building
Singapore 048424
AUDITORS
KPMG
16 Raffles Quay, #22-00 Hong Leong Building
Singapore 048581
Audit Partner-in-charge
Phuoc Tran
Partner-in-charge since financial year ended
31 December 2004
PRINCIPAL BANKERS
United Overseas Bank Limited
Oversea-Chinese Banking Corporation Limited
Registration No. 199408433W
Eileen Koh
02 I 03
SINGAPORE
100%
100%
HO LEONG
TRACTORS
SDN. BHD.
(MALAYSIA)
100%
JILIN KANTO BUHIN
CONSTRUCTION
MACHINERY
MANUFACTURING
CO., LTD.
(CHINA)
100%
KUNSHAN
KANTO BUHIN
MANUFACTURING
CO., LTD.
(CHINA)
HOE LEONG MACHINERY
(H.K.) LIMITED
(HONG KONG)
100%
QUANZHOU KANTO BUHIN
MACHINERY MANUFACTURING CO., LTD
(CHINA)
71.4%
99%
PT TRACKSPARE
(INDONESIA)
TRACKSPARES (AUST) PTY. LTD.
(AUSTRALIA)
83.2%
SHENYANG MILEQUIP
INDUSTRY CO., LTD
(CHINA)
Our Brands
We can readily provide assistance to
customers with their requirements
attributed by our extensive experience in
the industry.
Our large and varied inventories and our
regional sales network are beneficial to our
customers as they have easy accessibility
to replacement parts, thereby shortening
their downtime.
CORPORATE STRUCTURE I FINANCIAL HIGHLIGHTS
TMI
TRATTORI
MACCHINE
)4!,)!
Revenue By Geographical Segments In FY2007
Revenue by Geographical segments ($’000)
PRC and Hong Kong 11%
Emerging Markets[1] 16%
Singapore
Malaysia
Indonesia
PRC and Hong Kong
Emerging Markets[1]
Others[2]
Grand Total
Others[2] 7%
Singapore 4%
Indonesia 31%
Malaysia 31%
80
Revenue by Business Activities ($ million)
40.2
41.6
39.0
5
40.4
2.0
2.7
4
30
Trading and
Distribution
20
17.7
15.6
21.9
25.0
FY2006
FY2007
Design and
Manufacture
0
FY2004 FY2005
Net Profit and Margin
10.8
3.6
3
Trading and
Distribution
2
1
2.7
0
2.7
FY2004 FY2005
3.3
FY2006
0.6
FY2007
Design and
Manufacture
12.0%
Net Profit
Net Margin
6
9.3
30
NAV Per Ordinary Share (in cents)
10.0%
25
5
($ million)
4.1
6
40
7
Segment results by Business Activities ($ million)
8
7
60
10
FY 2005 FY 2006 FY 2007
3,346
2,585
2,641
17,352
20,846
20,386
17,845
20,823
20,142
7,173
7,188
7,041
7,313
9,162
10,158
3,012
2,905
4,835
56,041 63,509 65,203
1. Emerging Markets refer to India, Middle East, Pakistan
and Russia.
2. Others include Australia, Korea, Japan, Myanmar,
Papua New Guinea, New Zealand, South Africa,
Thailand and Vietnam.
70
50
FY 2004
3,468
17,212
18,716
7,984
6,420
2,921
56,721
26.4
8.0%
6.4
23.2
20
4
23.5
6.0%
4.6
3
18.7
15
4.0%
2
10
2.0%
1
0
5.3
6.1
FY2004 FY2005
4.1
3.0
FY2006 FY2007
0.0%
5
0
FY2004
FY2005
FY2006
FY2007
04 I 05
Dear Shareholders,
On behalf of the Board of Directors, I am pleased to present our
Annual Report for the financial year ended 31 December 2007
(“FY2007”).
We have made much progress for the year under review. One of
the key areas of focus in FY2007 was the rationalisation of our
China operations. During the period, we have seen increased
orders for our own in-house brands of products, indicating
increased acceptance from our customers. For financial year
ending 31 December 2008 (“FY2008”) and beyond, we intend
to further our marketing efforts for our own brands and we
expect the percentage revenue contribution from this segment
to continue to increase.
In addition, we are also expanding our geographical footprint
through strategic partnerships. In early 2007, we have entered
into a joint venture to enter the Australian market. The
performance of this venture has been very encouraging and we
have intentions to scale up our Australian operations in the near
future. In addition to Australia, we are also assessing possible
ventures into other markets such as the Middle East and India
where we believe there are huge demand for our products.
Further to organic expansion, we are also looking at strategic
investments or acquisitions that can accelerate our growth with
the aim of enhancing the shareholders’ value at a faster pace.
There are many opportunities out there but we remain prudent
about the risk exposure of such investments. However, we are
pleased to share with you that, as at the date of printing of this
Annual Report; we have successfully diversified into the Oil &
Gas sector through a joint venture to own and charter out a
specialist barge.
Foundation for Growth
FY2007 had been a challenging year in terms of our financial
performance as we continue to lay the foundation for our future
growth. Our turnover rose by 2.7% in FY2007 to $65.2 million
as we received more orders from our Design and Manufacture
segment. Gross profit decline by 11.8% to $16.3 million in FY2007
as our China operations were affected by the rationalisation
efforts during this period.
CHAIRMANʼS STATEMENT
We continue to carry a wide range of products as reflected
by the increase in our inventory level; from $35.5 million for
the financial year ended 31 December 2006 (“FY2006”) to
$40.6 million in FY2007. At the same time, we are also actively
expanding our network of over 1,200 customers from diverse
industries. We will also continue to work closely with our
principals and maintain our distributorships with well-known
international names while developing our own brands for
certain specific markets and products.
Expansion of our geographical presence will continue in strategic
locations such as Australia, the Middle East and India where we
believe there are strong demands. Currently, our key markets are
still Malaysia and Indonesia which account for 31.3% and 30.9%
of the revenue respectively.
Looking Forward
Going forward, we recognize that any potential slowdown in the
global economy may affect the Group’s operations. However,
given that the emerging countries such as the Middle East and
China are still spending top dollars on their infrastructural
needs; at the same time, commodities prices have been strong
and as this is expected to continue for the foreseeable future, we
expect our business to remain robust.
While we recognize that
our current business
is still attractive, it
is important to look
beyond our traditional
business.
Improving our operations in China will be one of our key
priorities for the coming year as we look to expand our customer
network beyond the current base. We have received encouraging
feedback from our customers since the introduction of our inhouse brands and witnessed some switch-over to our range
of in-house brands of equipment parts. In FY2008, we expect
the revenue contribution from our Design and Manufacture
segment to grow steadily.
While we recognize that our current business is still attractive, it
is important to look beyond our traditional business. To further
enhance our shareholders’ value, we are actively looking at
strategic investments that have a faster rate of return than our
current business. Although profitability is one consideration,
the management is also taking a prudent approach to ensure
that the risk exposure is manageable. In the long term, our
intention is to build up other business streams that have better
visibility, which can help to diversify our risks and supplement
our core business.
For instance, our recent diversification into the Oil & Gas
sector demonstrates our investment philosophy. We adopted a
two-pronged strategy to mitigate our risk exposure. First, our
partner has more than 25 years of experience in the business of
chartering of vessels and supply of equipment to companies in
the Oil & Gas sector. Second, we are limiting our exposure by
maintaining the joint venture company as an asset owning and
chartering company, akin to a shipping trust.
I am also happy to share with you that we have secured our first
bareboat charter agreement earlier this year (2008) based on a
daily charter rate of US$8,000 for a minimal period of two years.
In terms of returns, our assessment shows that we can expect
return on equity and return on assets of approximately 45% and
15% respectively.
Going forward, we remain open to investment opportunities in
other attractive sectors.
In Appreciation
At this juncture, I would like to take this opportunity to express
our gratitude to all our professional parties, staff, business
partners and our shareholders, for their assistance and support
through the years.
As such, I am pleased to announce that, subject to shareholders’
approval, the Board of Directors is recommending a final
dividend of 0.5 Singapore cents per share for the financial year
ended 31 December 2007.
We hope that you will continue to support us as we work even
harder to bring the company and its business to greater heights
in FY2008 and beyond.
Kuah Geok Lin
Chairman and CEO
06 I 07
REVENUE
The Group’s revenue increased by approximately $1.7 million or
2.7% from $63.5 million in FY2006 to $65.2 million in FY2007.
This was mainly due to the increase in revenue contribution
from the Design and Manufacture segment.
our Design and Manufacture segment from products offered
under the Trading and Distribution segment.
GEOGRAPHICAL GROWTH
Design and Manufacture Segment
Revenue from the Design and Manufacture segment increased
approximately $3.1 million or 14.0% to $25.0 million in FY2007
from $21.9 million in FY2006. The growth was mainly driven by
stronger market demand for our products in Malaysia, India,
Singapore and Indonesia.
For the year under review, revenue contribution from Emerging
Markets and other regions increased by approximately $1.0
million and $1.9 million respectively. In FY2007, we have
strategically entered the Australian market via a joint venture.
We are encouraged by the performance of this market thus far
and have further intentions to expand our presence in Australia.
Even though this was the first year of its operations, the joint
venture has registered a positive contribution to our net profit.
Trading and Distribution Segment
GROSS PROFIT
Revenue from our Trading and Distribution segment decreased
approximately $1.4 million or 3.3% to $40.2 million in FY2007
from $41.6 million in FY2006. The Group reported lower
revenue of approximately $3.2 million from Malaysia, Indonesia
and the Middle East. This is attributable to customers switching
over to our range of in-house brands of products offered under
Gross profit declined by $2.2 million or 11.8% from $18.5
million in FY2006 to $16.3 million in FY2007. Gross profit
margin decreased slightly by four percentage points from 29%
in FY2006 to 25% in FY2007. This is mainly due to increase in
production overheads as we rationalised our China operations
as well as an increase in raw material costs such as steel prices.
OPERATION REVIEW
EXPENSES
Distribution expenses grew by approximately $0.5 million or
15.2% from $3.4 million in FY2006 to $3.9 million in FY2007 as
we see higher sales turnover. There is also a general increase in
the cost of operation for the current year under review. Other
expenses decreased by approximately $1.7 million or 37.5%
from $4.4 million in FY2006 to $2.7 million in FY2007 mainly
attributable to the write-back of excess allowance for obsolete
inventories.
BALANCE SHEET
Trade and other receivables increased by approximately $2.4
million from $23.8 million as at 31 December 2006 to $26.2
million as at 31 December 2007. This was in tandem with higher
revenue achieved in FY2007 as well as more attractive credit
terms being granted to selected customers in our traditional
markets and emerging markets.
CASH FLOW STATEMENT
Cash and cash equivalents (net of bank overdraft) increased by
approximately $0.9 million from $2.3 million as at 31 December
2006 to $3.2 million as at 31 December 2007. This is attributable
to (i) surplus of net proceeds from the issue of new ordinary
shares over dividend paid out on 6 June 2007 of approximately
$2.2 million which has been used by the Company for general
working capital purposes; and (ii) financing received from our
suppliers.
Prospects
Going forward, we will continue to focus on
maintaining an extensive range of products. At the
same time, we will be focusing on establishing our
own branded products. With increased acceptance,
we can expect increased orders and therefore
increased activities for our China operations.
In addition to our traditional business segment,
we will also continue to explore diversification
opportunities that will help to accelerate the
appreciation of our shareholders’ value. We have
since identified the Oil & Gas sector as an attractive
area to participate given the global demand for
energy and rising energy prices. We therefore expect
that the industry will continue to be attractive for
the years to come.
08 I 09
From left to right:, Mr Lim Kok Hoong, Mr Ang Mong Seng, Mr Quah Yoke Hwee, Mr James Kuah, Dr Peter Kuah, Mr Paul Kuah, Mr Peter Boo.
Mr James Kuah Geok Lin, Chairman and CEO
Mr James Kuah Geok Lin is our Chairman and CEO. He has been
one of our Executive Directors since 18 November 1994. He
was last re-elected a Director on 25 July 2003. He started as an
architect in 1974 with the Housing Development Board. In 1978,
Mr James Kuah joined the Company as a Director in charge of
operations and played a key role in Company’s regional drive
into Indonesia and Malaysia. Under his leadership, the Company
was ranked 24th in the 2000 Enterprise 50 Award organized by
Andersen Consulting and The Business Times with support
from the Economic Development Board. His other advisory
positions include that of Vice-President of the Singapore
Metal and Machinery Association, Chairman of Nanyang Kuah
Si Association, Vice-Chairman of the Singapore Ann Kway
Association, Corporate member of the Singapore Institute
of Architects and Vice-Chairman of the International Trade
Committee of the Singapore Chinese Chamber of Commerce &
Industry. He holds a Bachelor degree in Architecture from the
University of Singapore.
Mr Paul Kuah Geok Khim, Executive Director
Mr Paul Kuah Geok Khim has been our Sales and Marketing
Director (Overseas) since 22 December 1994 and was last reelected a Director on 18 April 2007. He began his career with our
Group in 1979. Prior to his present position, he was in charge of
warehousing and inventory control, gaining valuable experience
BOARD OF DIRECTORS
in this field. Presently, as a Sales and Marketing Director, he
oversees all our branches operations and major export markets.
With a team of business development personnel under him, he
ensures that every business opportunity in the emerging market
is well tapped.
Dr Peter Kuah Geok Koon, Executive Director
Dr Peter Kuah Geok Koon is our Manufacturing and Production
Director in charge of the manufacturing and production
operations in China. He joined the Board on 24 July 2001 and
was last re-elected a Director on 18 April 2007. Since 1998,
he has also been in charge of our Hong Kong subsidiary, Hoe
Leong Machinery (H.K.) Limited where he is involved in its
daily running, including sales development in Hong Kong and
China. Dr Kuah joined our Company when it was established
in 1994. Prior to joining us, he worked as a principal engineer
in Deleuw Cather and Company, a USA engineering company.
He has published more than ten papers in professional journals.
In 1990, he was conferred a guest professorship by Chongqing
Jiaotong University and has also been previously engaged by
United Nations Development Plan to lecture in transportation
in various universities in China. Dr Kuah was a German scholar
and obtained a Diplom-Ing. (FH) degree in civil engineering
from Fachhochschule fuer Technik, Stuttgart in 1979. He also
obtained a Master degree in Civil Engineering from the University
of Michigan, Ann Arbor, USA, in 1981 and a doctorate degree in
Civil Engineering from the University of Maryland, College Park,
USA in 1986.
Mr Quah Yoke Hwee, Executive Director
Mr Peter Boo Song Heng, Independent Director
Mr Quah Yoke Hwee is our Sales and Marketing Director
(Singapore). He joined the Board on 18 November 1994 and
was appointed the Managing Director of the Company since 15
January 1996. He is responsible for overseeing the Company’s
daily trading and distribution operations in Singapore and
the after sales and front office services. Mr Quah has more
than 30 years of experience in the equipment parts trading
and distribution business. He is a member of the River Valley
High School Advisory Committee. He holds a H.S.C. “A” level
certificate.
Mr Peter Boo Song Heng was appointed as our Independent
Director on 29 September 2005. Mr Boo founded Material
Handling Engineering Pte Ltd in 1975 and led the company to
its listing on the SESDAQ in 1989. The company subsequently
changed its name to MHE Holdings Ltd. In May 2000, he divested
off his controlling interest in MHE Holdings Ltd and retired from
the company. Since then, he has been sitting on the board of
numerous companies in Singapore as well as overseas. He is
currently a board member of Compact Metal Industries Ltd. and
NTUC Healthcare Co-operative Ltd, where he is the Chairman
of their Audit Committee. Mr Boo is also a board member
and Treasurer of Bizlink Centre Singapore Ltd and a committee
member of the Yellow Ribbon Fund. He holds a Diploma in
Mechanical Engineering from Singapore Polytechnic.
Mr Ang Mong Seng, Independent Director
Mr Ang Mong Seng was appointed as our Independent Director
on 29 September 2005. Mr Ang is a Member of Parliament for
Hong Kah GRC (Bukit Gombak). He is the Chief Operating Officer
of EM Services Pte Ltd. He is also the Chairman of Hong Kah
Town Council and Vice Chairman of South West Community
Development Council. Mr Ang has 30 years of experience in
Estate Management. Mr Ang is also an Independent Director
of United Fiber System Ltd, Ecowise Holdings Ltd, AnnAik Ltd.,
Vicplas International Ltd and Chip Eng Seng Corporation Ltd.
Mr Ang obtained a Bachelor of Arts degree from Nanyang
University in 1973.
Mr Lim Kok Hoong, Independent Director
Mr Lim Kok Hoong was appointed as our Independent Director
on 29 September 2005. Mr Lim has more than 32 years of audit
experience. He has been a Managing Partner at Arthur Andersen
Singapore till June 2002. In July 2002, he joined Ernst & Young
Singapore as a Senior Partner and retired in June 2003. Mr Lim
has extensive business experience especially in Singapore,
Malaysia, Indonesia, Thailand, the Philippines and Vietnam.
He is currently an Audit Committee member of A*STAR
and a board member of Singapore Tourism Board, where
he is also the Chairman of their Audit Committee. Mr Lim
is the Chairman of the Board of Directors of Parkway
Trust Management Limited and also a board member of
Genting International Public Limited Company, where
he is the Chairman of their Audit Committee. He holds
a Bachelor of Commerce degree from the University of
Western Australia and is a member of the Institute of
Chartered Accountants in Australia and the Institute of
Certified Public Accountants of Singapore.
10 I11
Mdm Kuah Geok Khim, Operations Manager
Mr Quah Seng Kee, Business Development Manager
Mdm Kuah Geok Khim is our Operations Manager. She joined
our Company in 1975 and is responsible for the administrative
functions of the Group including general office administration,
the maintenance and procurement of office equipment
and computerisation. She is also in charge of our inventory
management and management information system. In addition,
she is responsible for our sales and purchases, shipping, import
and export functions. She has completed secondary school
education in Singapore.
Mr Quah Seng Kee is our Business Development Manager. He
is in charge of developing our overseas markets. He worked at
Pacaar International Inc, a company specialising in heavy duty
truck sales as its District Manager and later joined Pactruss
Corporation and subsequently ITS Marketing Pte Ltd (both
companies dealing in heavy duty truck parts) as Managing
Director. Prior to joining us in 2000, Mr Quah held the position
of Regional Manager for PAI Industries Inc, also a dealer of
heavy duty truck parts. Mr Quah graduated with a Diploma in
Marketing from the Chartered Institute of Marketing in 1986
and obtained a Master of Business Administration degree from
the University of Hull in 1993.
Mdm Lim Gek Ser, Human Resource Manager
Mdm Lim Gek Ser joined the Company in 2004 as a Human
Resource Manager and is responsible for the Group Human
Resource and administration including compensation and
benefits, expatriate administration, human resource planning
and development, overall employee relations and logistic
functions of the Company. Prior to joining our Company, Ms
Lim worked in both the service and manufacturing industries
for more than 10 years in the same trade. She holds a Bachelor of
Human Resource Management degree from Curtin University.
Mr Lim Lian Tuan, Director of Sales and Marketing,
Ho Leong Tractors Sdn. Bhd.
Mr Tan Wee Boon, Financial Controller
Mr. Tan joined the Company in July 2007. He oversees the
overall financial and accounting functions of the Group. He
holds a professional qualification from the Association of
Chartered Certified Accountants (ACCA) of United Kingdom.
He is a Fellow of ACCA of the United Kingdom and a member of
Institute of Certified Public Accountants of Singapore. He also
holds a Bachelor degree in Business Administration from the
National University of Singapore majoring in Finance.
Mr Lim Lian Tuan is the Sales and Marketing Director of our
wholly-owned subsidiary, Ho Leong Tractors Sdn Bhd (“HL
Tractors”). He joined HL Tractors in 1987. He oversees our
Group’s Malaysian operations. From 1984 to 1986, he worked
in Ho Leong Machinery Sdn. Bhd. as a sales executive for the
Malaysian operations. Prior to that Mr Lim worked as a sales
executive with TAS Berhad and Trackspare Sdn Bhd, both of
whom were distributors of equipment parts for both heavy
equipment and industrial machinery. He holds the equivalent
of a GCE ‘O’ level certificate.
KEY MANAGEMENT TEAM I FINANCIAL STATEMENTS
Financial Statements
14 Corporate Governance Report 27 Directors’ Report
33 Statement by Directors 34 Independent Auditors’ Report
36 Balance Sheets 37 Consolidated Income Statement
38 Consolidated Statement of Changes in Equity
39 Consolidated Cash Flow Statement 40 Notes to the Financial Statements
79 Supplementary Information 80 Shareholding Statistics
83 Notice of Annual General Meeting Proxy Form
12 I 13
Corporate Governance Report
The Board of Directors (the “Board”) is committed to ensure high standards of corporate governance
to protect the interests of shareholders at the same time to enhance long term shareholders’
value through corporate performance and accountability. The Board observes and adheres to the
principles and guidelines set out in the Code of Corporate Governance 2005 (the “Code”). Where
there are deviations from the Code, appropriate explanations are provided.
A.
BOARD MATTERS
The Board’s Conduct of its Affairs
Principle 1:
Every company should be headed by an effective Board to lead and control
the company. The Board is collectively responsible for the success of the
company. The Board works with Management to achieve this and the
Management remains accountable to the Board.
The Board is entrusted with the responsibility of the overall management of the company and
their main duties are to:–
(a)
provide entrepreneurial leadership, set strategic aims, and ensure that the necessary financial
and human resources are in place for the company to meet its objective;
(b)
approve board policies, strategic plans, and financial objectives of the Group and monitor
the performance of Management;
(c)
approve annual budgets, funding, material investment and divestment proposals;
(d)
approve half year and full year results and announcements and annual report;
(e)
ensure an adequate system of internal controls and compliance with financial reporting
requirements;
(f)
review the financial performance of the Group, proposal of dividends and review interested
person transactions;
(g)
approve the nomination of directors and appointment of key personnel; and
(h)
assume responsibility for corporate governance.
To facilitate effective management, certain functions have been delegated by the Board to various
Board Committees. The Board Committees operate under clearly defined terms of reference. The
Chairman of the respective Committees will report to the Board on the outcome of the Committee
meetings.
ANNUAL REPORT 2007 I 14
The Board conducts regular scheduled meetings during the year. Ad-hoc meetings are convened
when circumstances require. Article 106 of the Company’s Articles of Association permits meetings
of the Directors to be conducted by means of telephone conference or other methods of
simultaneous communication by electronic or telegraphic means.
A record of the Directors’ attendances at Board and Board Committee meetings during the financial
year ended 31 December 2007 is disclosed as follows:
Name of Director
Audit
Committee
Board
Nominating
Committee
Remuneration
Committee
No. of
No. of
No. of
No. of
meetings Attendance meetings Attendance meetings Attendance meetings Attendance
James Kuah Geok Lin
2
2
–
–
1
1
–
–
Paul Kuah Geok Khim
2
2
–
–
–
–
–
–
Peter Kuah Geok Koon
2
2
–
–
–
–
–
–
Quah Yoke Hwee
2
2
–
–
–
–
–
–
Ang Mong Seng
2
2
2
2
1
1
1
1
Lim Kok Hoong
2
2
2
2
–
–
1
1
Peter Boo Song Heng
2
2
2
2
1
1
1
1
The Directors come from diverse backgrounds and possess varied expertise in audit, business,
finance, industry and management fields. At meetings and as and when necessary, the Directors
are provided with regular updates on changes in the relevant laws and regulations to enable
them to make well-informed decisions. Where possible and when opportunity arises, the Directors
will be invited to locations within the Group’s operating businesses to enable them to obtain a
better perspective of the business and enhance their understanding of the Group’s operations.
The Company will consider formulating training programmes, if the need arises.
Board Composition and Guidance
Principle 2:
There should be a strong and independent element on the Board, which
is able to exercise objective judgement on corporate affairs independently,
in particular, from Management. No individual or small group of individuals
should be allowed to dominate the Board’s decision making.
The Board comprises seven directors, three of whom are independent non-executive directors.
More than one third of the Board is independent. The strong independent element on the Board
ensures that it is able to exercise objective and independent judgement on corporate affairs.
I 15
The Executive Directors have extensive experience in the heavy equipment and industrial machinery
equipment parts industry and the non-executive directors are experienced and successful in their
respective professions. The Board’s structure, size and composition is reviewed annually by the
Nominating Committee who is of the view that the current size of the Board is appropriate,
taking into account the nature and scope of the Group’s operations, to facilitate effective decision
making.
The Nominating Committee is satisfied that the Board comprises directors who as a group provide
core competencies such as accounting, finance, business and management experience, industry
knowledge, strategic planning experience and customer-based experience and knowledge to lead
the company effectively.
Chairman and Chief Executive Officer
Principle 3:
There should be a clear division of responsibilities at the top of the
company – the working of the Board and the executive responsibility of
the company’s business – which will ensure a balance of power and
authority, such that no one individual represents a considerable
concentration of power.
The Chairman and Chief Executive Officer (“CEO”) of the Company is Mr James Kuah Geok Lin.
The Board, after careful consideration, is of opinion that it is not necessary, under current
circumstances, to separate the roles of the Chairman and CEO. This is after taking into consideration
the size, scope and nature of the operations of our Group, together with the strong presence of
our Independent Directors who ensure that decision-making is based on collective decision and
that there is no concentration of power and authority vested in one individual.
Our Chairman and CEO has played an instrumental role in developing the business of our Group.
He has extensive industry experience and has also provided our Group with strong leadership and
vision. It is hence the view of the Board that it is in the best interests of our Group to adopt a
single leadership structure, whereby the Chairman and CEO are the same individual.
The Chairman takes an active role in the management of the Group and also bears responsibility
for the workings of the Board, ensuring the integrity and effectiveness of the governance process
of the Board, ensuring that Board meetings are held regularly, and setting the Board meeting
agenda in consultation with all members of the Board. The Chairman reviews board papers before
they are presented to the Board and ensures that Board members are provided with adequate
and timely information.
Board Membership
Principle 4:
There should be a formal and transparent process for the appointment of
new directors to the Board.
The Nominating Committee (“NC”) is established for the purposes of ensuring that there is a
formal and transparent process for all Board appointments. The NC comprises the following three
members, majority of whom are independent non-executive directors:Mr Peter Boo Song Heng
Mr Ang Mong Seng
Mr James Kuah Geok Lin
(Chairman)
(Member)
(Member)
The NC has adopted written terms of reference defining its membership, administration and
duties. Duties and responsibilities of the NC include:
(a)
to make recommendations to the Board on all board appointments having regard to the
director’s contribution and performance;
(b)
to determine annually whether a director is independent; and
(c)
to assess the composition and effectiveness of the Board as a whole and to determine if
each director has been adequately carrying out his duties.
Each member of our NC shall abstain from voting on any resolution in respect of his re-nomination
as a director.
The search and nomination process for new directors, if any, will be through search companies,
contacts and recommendations that go through the normal selection process, to cast its net as
wide as possible for the right candidates.
Our Articles of Association require one-third of the Directors, or if their number is not a multiple
of three, the number nearest to but not less than one-third of our Directors, to retire and subject
themselves to re-election by the shareholders in every Annual General Meeting. In addition, all
Directors of the Company, including the Managing Director after his initial term of engagement
as Managing Director, shall retire from office at least once every three years. A retiring Director is
eligible for re-election at the meeting at which he retires.
The profiles of the Directors are disclosed on page 10 and 11 (“Board of Directors”) of this
annual report.
I 17
Board Performance
Principle 5:
There should be a formal assessment of the effectiveness of the Board as
a whole and the contribution by each Director to the effectiveness of the
Board.
The NC will decide how the Board’s performance is to be evaluated and propose objective
performance criteria, subject to the approval of the Board, which will address how the Board has
enhanced long-term shareholders’ value. The NC has in place an annual Board evaluation exercise
to assess the effectiveness of the Board and to facilitate discussion to enable the Board to discharge
its duties more effectively. Each member of the NC shall abstain from voting on any resolution in
respect of his performance as a director.
Notwithstanding that some of the Directors have multiple board representations, the NC is satisfied
that each Director is able to and has been adequately carrying out his duties as a director of the
company.
The Board and the NC have endeavoured to ensure that Directors appointed to the Board possess
the experience, knowledge and expertise relevant to the Group’s business.
Access to Information
Principle 6:
In order to fulfill their responsibilities, Board members should be provided
with complete, adequate and timely information prior to Board meetings
and on an on-going basis.
Management provides the Board with adequate and timely information as well as a review of the
Group’s performance prior to the Board meetings. The Board has separate and independent access
to the Group’s senior management and company secretary, should they have any queries on the
affairs of the Group.
Should the Directors, whether as a group or individually, require independent professional advice,
the company will bear the expenses incurred if such advice is required to enable the directors to
discharge their duties professionally.
The company secretary attends all Board meetings and is responsible for ensuring that Board
procedures are followed and that applicable rules and regulations (in particular the Companies
Act and the SGX-ST Listing rules) are complied with.
B.
REMUNERATION MATTERS
Procedures for Developing Remuneration Policies
Principle 7:
There should be a formal and transparent procedure for developing policy
on executive remuneration and for fixing the remuneration packages of
individual directors. No director should be involved in deciding his own
remuneration.
The Remuneration Committee (“RC”) is established for the purposes of ensuring that there is a
formal and transparent process for developing policy and fixing the remuneration packages of
individual directors. The RC comprises the following three independent non-executive directors:Mr Ang Mong Seng
Mr Lim Kok Hoong
Mr Peter Boo Song Heng
(Chairman)
(Member)
(Member)
The RC has adopted written terms of reference defining its membership, administration and duties.
Duties and responsibilities of the RC include:
(a)
to review and recommend to the Board a framework of remuneration for the Board and key
executives;
(b)
to review and determine specific remuneration packages for each Executive Director and the
CEO which should cover all aspects of remuneration including but not limited to directors’
fees, salaries, allowances, bonuses, options and benefits in kind;
(c)
to review and recommend to the Board the terms of renewal of service contracts of Directors;
(d)
to retain such professional consultancy firm as the committee may deem necessary to enable
it to discharge its duties satisfactory;
(e)
to consider various disclosure requirements for Directors’ remuneration, particularly those
required by regulatory bodies such as the SGX-ST, and ensure that there is adequate disclosure
in the financial statements to ensure and enhance transparency between the Company and
relevant interested parties; and
(f)
to carry out such other duties as may be agreed to by the RC and the Board.
The RC’s recommendations would be made in consultation with the Chairman of the Board and
submitted for endorsement by the entire Board and no Director shall participate in decisions on
his/her own remuneration.
I 19
Level and Mix of Remuneration
Principle 8:
The level of remuneration should be appropriate to attract, retain and
motivate the directors needed to run the company successfully but the
company should avoid paying more for this purpose. A significant
proportion of executive directors’ remuneration should be structured so
as to link rewards to corporate and individual performance.
It is the Group’s policy to set a level of remuneration that is appropriate to attract, retain and
motivate the directors. The independent non-executive directors receive directors’ fees in accordance
with their level of contribution, taking into account factors such as effort and time spent and
responsibilities of the directors. The Board may, if it considers necessary, consult experts on the
remuneration of non-executive directors and would recommend the remuneration of the nonexecutive directors for approval at the Annual General Meeting (“AGM”).
The Company has entered into a service agreement with each of our Executive Directors, namely
James Kuah Geok Lin, Paul Kuah Geok Khim, Peter Kuah Geok Koon and Quah Yoke Hwee and
our Executive Officer, Mdm Kuah Geok Khim (collectively the “Appointees”) for an initial period
of three years commencing on 5 December 2005. The service agreements contain non-competition
and non-solicitation clauses, which are binding on the Appointees during their period of employment
with the Company and for a period of 12 months after the cessation of their employment with
the Company. The Executive Directors do not receive directors’ fees. The remuneration of the
Appointees comprise a basic salary fixed component which include the 13-month supplement and
a variable component which include an incentive bonus (“Incentive Bonus”) at the end of every
financial year of the company based on the audited consolidated profit before tax (before the
Incentive Bonus) of our Group. The Appointees are also entitled to other benefits including dental,
optical and medical benefits, personal accident, hospitalization and surgical insurance and travelling
and entertainment expenses incurred for the purposes of our Group’s business.
The service agreements of the Appointees shall be subject to termination:
(i)
by the Company or any of the Appointees giving to the other at least three months’ written
notice; or
(ii)
without prior notice, upon the occurrence of certain specified events, including wilful neglect
in the discharge of duties.
Disclosure on Remuneration
Principle 9:
Each Company should provide clear disclosure of its remuneration policy,
level and mix of remuneration, and the procedure for setting remuneration,
in the company’s annual report. It should provide disclosure in relation to
its remuneration policies to enable investors to understand the link
between remuneration paid to directors and key executives, and
performance.
A breakdown showing the level and mix of each individual Director’s remuneration for the year
ended 31 December 2007 is disclosed in the table below:
Name of Directors
Remuneration
band ($)
James Kuah Geok Lin (1)
Paul Kuah Geok Khim
Incentive
Salary (%)
#
54
(1)
Peter Kuah Geok Koon (1)
$250,000 to
$499,999
Quah Yoke Hwee (1)
Ang Mong Seng
$0 to
$249,999
Lim Kok Hoong
Peter Boo Song Heng
Other
Bonus (%)
Fees (%)
benefits (%)
Total (%)
29
–
17
100
62
29
–
9
100
68
25
–
7
100
62
30
–
8
100
–
–
100
–
100
–
–
100
–
100
–
–
100
–
100
Note:
(#)
includes the 13-month supplement.
(1)
All of our Executive Directors, namely James Kuah Geok Lin, Paul Kuah Geok Khim, Peter Kuah Geok Koon and Quah
Yoke Hwee are siblings.
The table below shows the level and mix of the remuneration of our key executives (who are not
directors) for the year ended 31 December 2007:
Name of Executives
Salary (%)#
Incentive
bonus (%)
69
24
5
2
100
79
–
21
–
100
82
–
18
–
100
Lim Lian Tuan
67
–
–
33
100
Quah Seng Kee
81
–
19
–
100
85
–
15
–
100
Mdm Kuah Geok Khim
Remuneration
band ($)
Other
benefits and
Variable
allowances
bonus (%)
(%)
(1)
Leow Quek Kien (2)
Lim Gek Ser
Tan Wee Boon
$0 to $249,999
(3)
Total (%)
Note:
(#)
includes the 13-month supplement.
(1)
Mdm Kuah Geok Khim is the sister of our Executive Directors, namely James Kuah Geok Lin, Paul Kuah Geok Khim,
Peter Kuah Geok Koon and Quah Yoke Hwee.
(2)
Mr Leow Quek Kien has tendered his resignation as Financial Controller of the Company. His last day with the
Company was on 8 June 2007.
(3)
Mr Tan Wee Boon has been appointed as Financial Controller of the Company on 24 July 2007.
I 21
Save as disclosed above, there is no immediate family member of the directors and whose
remuneration exceeded $150,000 during the financial year.
C.
ACCOUNTABILITY AND AUDIT
Accountability
Principle 10:
The Board should present a balanced and understandable assessment of
the company’s performance, position and prospects.
One of the Board’s principal duties is to protect and enhance the long-term value and returns to
the shareholders of the Company. The accountability of the Board to the shareholders is
demonstrated through the presentation of the periodic financial statements as well as the timely
announcements and news releases of significant corporate developments and activities so that
the shareholders can have a detailed explanation and balanced assessment of the Group’s financial
position and prospects.
The Management presents to the Audit Committee the interim and full-year results for reviews
and recommends them to the Board for approval. The Board approves the results and authorizes
the release of the results to the SGX-ST and the public via SGXNET as required by the SGX-ST
Listing Manual.
Audit Committee
Principle 11:
The Board should establish an Audit Committee (“AC”) with written terms
of reference which clearly set out its authority and duties.
The AC comprises the following three independent directors:Mr Lim Kok Hoong
Mr Ang Mong Seng
Mr Peter Boo Song Heng
(Chairman)
(Member)
(Member)
The Board is of the view that the members of the AC are appropriately qualified, having accounting
or related financial management expertise or experience as the Board interprets such qualification,
to discharge their responsibilities.
As a sub-committee of the Board of Directors, it assists the Board in discharging their responsibility
to safeguard our assets, maintain adequate accounting records, and develop and maintain effective
systems of internal control, with the overall objective of ensuring that our management creates
and maintains an effective control environment in our Group. The AC will also review and supervise
the internal audit functions of the Group.
Our AC will provide a channel of communication between our Board, our management and our
external auditors on matters relating to audit.
Our AC has adopted written terms of reference defining its membership, administration and
duties. Duties and responsibilities of the AC include:
(a)
review with the external auditors the audit plan, their evaluation of the system of internal
accounting controls, their letter to management and the management’s response;
(b)
review the interim and annual financial statements and balance sheet and profit and loss
accounts before submission to our Board for approval, focusing in particular on changes in
accounting policies and practices, major risk areas, significant adjustments resulting from the
audit, compliance with accounting standards and compliance with the Listing Manual and
any other relevant statutory or regulatory requirements;
(c)
review the scope and results of the audit and its cost effectiveness and the independence
and objectivity of the external auditors. Where the auditors also supply a substantial volume
of non-audit services to the Company, the AC would keep the nature and extent of such
services under review, seeking to balance the maintenance of objectivity and value for money;
(d)
review the internal control procedures and ensure co-ordination between the external auditors
and our management, and review the assistance given by our management to the auditors,
and discuss problems and concerns, if any, arising from the interim and final audits, and any
matters which the auditors may wish to discuss in the absence of our management at least
annually;
(e)
review and discuss with the external auditors any suspected fraud or irregularity, or suspected
infringement of any relevant laws, rules or regulations, which has or is likely to have a
material impact on our Group’s operating results or financial position, and our management’s
response;
(f)
to review the independence and objectivity of the external auditors annually;
(g)
consider the appointment or re-appointment of the external auditors and matters relating to
the resignation or dismissal of the auditors;
(h)
review interested person transactions (if any) falling within the scope of Chapter 9 of the
Listing Manual;
(i)
review potential conflicts of interest, if any;
I 23
(j)
undertake such other reviews and projects as may be requested by the Board, and will
report to the Board its findings from time to time on matters arising and requiring the
attention of the AC; and
(k)
generally undertake such other functions and duties as may be required by statute or the
Listing Manual, or by such amendments as may be made thereto from time to time.
In the event that any Director has a personal material interest in any contract or proposed contract
or arrangement, he will abstain from reviewing that particular transaction or voting on the particular
resolution.
Apart from the duties listed above, the AC shall commission and review the findings of internal
investigations into matters where there is any suspected fraud or irregularity, or failure of internal
controls or infringement of any Singapore law, rule or regulation which has or is likely to have a
material impact on our Company’s operating results and/or financial position.
In performing its functions, the AC has explicit authority to investigate any matter within its terms
of reference, having full access to and co-operation by management and full discretion to invite
any director or executive officer to attend meetings, and reasonable resources to enable it to
discharge its function properly.
Internal Controls
Principle 12:
The Board should ensure that the Management maintains a sound system
of internal controls to safeguard the shareholders’ investments and the
company’s assets.
The Board recognizes the importance of maintaining a sound system of internal controls to
safeguard the shareholders’ interest and investments and the Group’s assets. The AC has during
the FY2007 reviewed and assessed the Group’s internal controls and had accepted the
recommendations made by the appointed Internal Auditors. The Group is now in stages of
implementing improvement to the Group’s existing internal controls.
The Board further recognizes that no systems of internal controls can provide absolute assurance
against occurrence of material errors, poor judgement in decision making, human errors or
irregularities.
Internal Audit
Principle 13:
The Company should establish an internal audit function that is
independent of the activities it audits.
The Company has engaged the services of external consultant to perform its internal audit function.
The AC reviews annually the Internal Audit plan independently of Management and the internal
auditors reports directly to the Chairman of AC.
Communication with Shareholders
Principle 14:
Companies should engage in regular, effective and fair communication with
shareholders.
The Company endeavours to communicate regularly, effectively and fairly with its shareholders.
Timely, as well as, detailed disclosure is made to the public in compliance with SGX-ST guidelines.
The Company does not practise selective disclosure. Price sensitive information is first publicly
released, either before the Company meets with any group of investors or analysts.
Shareholders are kept informed of developments and performance of the Group through
announcements published via SGXNET and the press when necessary as well as in the annual
report. Other announcements are also made on an ad-hoc basis where applicable as soon as
possible to ensure timely dissemination of the information to shareholders.
Principle 15:
Companies should encourage greater shareholder participation at AGMs,
and allow shareholders the opportunity to communicate their views on
various matters affecting the Company.
All shareholders of the Company receive the annual report of the Company and notice of AGM
within the prescribed period. Participation of shareholders is encouraged at the Company’s general
meetings. To facilitate voting by shareholders, the Company’s article allows shareholders to appoint
not more than two proxies to attend and vote at the same general meeting. The Board of
Directors (including the Chairman of the respective Board committees), Management, as well as
the external auditors will attend the Company’s AGM to address any questions that shareholders
may have.
I 25
D.
DEALINGS IN SECURITIES
The Company has adopted the SGX-ST’s Best Practices Guide applicable to dealings in the
Company’s securities by its Directors, management and officers. Directors, management and officers
of the Group who have access to price-sensitive, financial or confidential information are not
permitted to deal in the Company’s shares during the periods commencing one month before the
announcement of the Group’s half-year or full year results and ending on the date of the
announcements of such results.
Directors, management and officers of the Group are also required to observe insider trading laws
at all times even when dealing in securities within the permitted trading period. In addition, the
Directors, management and officers of the Group are discouraged from dealing in the Company’s
securities on short-term considerations.
E.
INTERESTED PERSON TRANSACTIONS
The Board had reviewed all interested person transactions for the financial year ended 31 December
2007 and was satisfied that aggregate value of the transactions is below the threshold level as set
out in SGX-ST’s Listing Rules and do not require any immediate announcement or obtain
shareholders approval as defined under the Listing Rules.
F.
MATERIAL CONTRACTS
Pursuant to Rule 1207(8) of the Listing Manual, the Company confirms that there was no material
contract entered into between the Company and its subsidiaries which involved the interests of
any director or controlling shareholder, either still subsisting at the end of the financial year or if
not then subsisting, which was entered into since the end of the previous financial year.
Directors’ Report
We are pleased to submit this annual report to the members of the Company together with the
audited financial statements for the financial year ended 31 December 2007.
Directors
The directors in office at the date of this report are as follows:
Kuah Geok Lin
Quah Yoke Hwee
Kuah Geok Khim
Kuah Geok Koon
Ang Mong Seng
Lim Kok Hoong
Peter Boo Song Heng
Directors’ interests
According to the register kept by the Company for the purposes of Section 164 of the Singapore
Companies Act, Chapter 50 (the Act), particulars of interests of directors who held office at the
end of the financial year (including those held by their spouses and infant children) in shares,
debentures, warrants and share options in the Company and its related corporations are as follows:
Holdings
at beginning
of the year
Holdings
at end
of the year
Ordinary shares
– interests held
6,300,660
8,820,924
Warrants
– interests held
–
630,066
288,600
288,600
Name of director and corporation in
which interests are held
Kuah Geok Lin
The Company
Ultimate Holding Company
Hoe Leong Co. (Pte.) Ltd.
Ordinary shares
– interests held
I 27
Holdings
at beginning
of the year
Holdings
at end
of the year
5
5
Ordinary shares
– interests held
6,250,660
8,750,924
Warrants
– interests held
–
625,066
288,600
288,600
Ordinary shares
– interests held
6,250,660
8,750,924
Warrants
– interests held
–
625,066
288,600
288,600
Subsidiary
PT Trackspare
Ordinary shares of US$1,000 each fully paid
– interests held
Quah Yoke Hwee
The Company
Ordinary shares
– interests held
Kuah Geok Khim
The Company
Ordinary shares
– interests held
Holdings
at beginning
of the year
Holdings
at end
of the year
Ordinary shares
– interests held
6,250,660
8,750,924
Warrants
– interests held
–
625,066
288,600
288,600
100,000
100,000
Ordinary shares
– interests held
100,000
140,000
Warrants
– interests held
–
10,000
Kuah Geok Koon
The Company
Ordinary shares
– interests held
Ang Mong Seng
The Company
Ordinary shares
– interests held
Peter Boo Song Heng
The Company
Kuah Geok Lin, Quah Yoke Hwee, Kuah Geok Khim and Kuah Geok Koon have the following
deemed interests in the Company and related corporations:
Corporation in which interests are held
The Company
Holdings
at beginning
of the year
Holdings
at end
of the year
113,567,340
158,994,276
I 29
By virtue of Section 7 of the Act, Kuah Geok Lin, Quah Yoke Hwee, Kuah Geok Khim and Kuah
Geok Koon are deemed to have an interest in all the other wholly-owned subsidiaries of Hoe
Leong Co. (Pte.) Ltd., at the beginning and at the end of the financial year.
There were no changes in any of the above mentioned interests in the Company between the
end of the financial year and 21 January 2008.
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 or of the related
corporations, either at the beginning or at the end of the financial year.
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 in or debentures of the Company or any
other body corporate.
Except for salaries, bonuses and fees and those benefits that are disclosed in Note 22 to the
financial statements, since the end of the last financial year, no director 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 he is a member or with a company in which he has a
substantial financial interest.
Share options
(a)
Share options
During the financial year, there were:
(i)
no options granted by the Company or its subsidiaries to any person to take up unissued
shares in the Company or its subsidiaries; and
(ii)
no shares issued by virtue of any exercise of option to take up unissued shares of the
Company or its subsidiaries.
As at the end of the financial year, there were no unissued shares of the Company or its
subsidiaries under option.
(b)
Warrants
During the financial year, the Company issued 75,516,000 right shares with 18,879,000
detachable warrants. Each warrant entitles the warrant holder to subscribe for one new
ordinary share in the Company at the exercise price of $0.16 per share. The warrants do not
entitle the holders of the warrants, by virtual of such holdings, to any rights to participate in
any share issue of any other company. During the financial year, the Company issued 63,000
new ordinary shares pursuant to the exercise of warrants as disclosed below.
At the end of the financial year, details of the unissued ordinary shares of the Company
under warrants are as follow:
Date of
issue
Warrants
outstanding
at 1/1/2007
Warrants
issued
Warrants
exercised
Warants
expired
Warrants
outstanding
at 31/12/2007
Date of
expiration
–
18,879,000
(63,000)
–
18,816,000
30/5/2009
30/5/2007
Except as reported above, there were no other options to take up unissued shares of the
Company or its subsidiaries that were outstanding as at the end of the financial year.
Audit Committee
The members of the Audit Committee during the year and at the date of this report are:
•
Lim Kok Hoong (Chairman), non-executive director
•
Ang Mong Seng, non-executive director
•
Peter Boo Song Heng, non-executive director
The Audit Committee performs the functions specified in Section 201B of the Act, the SGX
Listing Manual and the Code of Corporate Governance.
The Audit Committee has held two meetings since the last directors’ report. In performing its
functions, the Audit Committee met with the Company’s external auditors to discuss the scope of
their work, the results of their examination and evaluation of the Company’s internal accounting
control system. The Company’s internal audit function has been outsourced and the Audit
Committee has discussed the scope of the work with the appointed firm, the results of their
examination and their evaluation of the Company’s internal accounting system, where appropriate.
The Audit Committee also reviewed the following:
•
assistance provided by the Company’s officers to the internal and external auditors;
•
financial statements of the Group and the Company prior to their submission to the directors
of the Company for adoption; and
•
interested person transactions (as defined in Chapter 9 of the SGX Listing Manual).
The Audit Committee has full access to management and is given the resources required for it to
discharge its functions. It has full authority and the discretion to invite any director or executive
officer to attend its meetings. The Audit Committee also recommends the appointment of the
external auditors and reviews the level of audit and non-audit fees.
I 31
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, be nominated for
re-appointment as auditors at the forthcoming Annual General Meeting of the Company.
Auditors
The auditors, KPMG, have indicated their willingness to accept re-appointment.
On behalf of the Board of Directors
Kuah Geok Lin
Director
Quah Yoke Hwee
Director
20 March 2008
Statement by Directors
In our opinion:
(a)
the financial statements set out on pages 36 to 78 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 2007
and of 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 Singapore Companies Act, Chapter 50
and Singapore Financial Reporting Standards; 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.
The Board of Directors has, on the date of this statement, authorised these financial statements
for issue.
On behalf of the Board of Directors
Kuah Geok Lin
Director
Quah Yoke Hwee
Director
20 March 2008
I 33
Independent Auditors’ Report
Members of the Company
We have audited the financial statements of Hoe Leong Corporation Ltd. (the Company) and its
subsidiaries (the Group), which comprise the balance sheets of the Group and the Company as at
31 December 2007, the income statement, statement of changes in equity and cash flow statement
of the Group for the year then ended, and a summary of significant accounting policies and
other explanatory notes, as set out on pages 36 to 78.
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, Chapter 50 (the Act) and
Singapore Financial Reporting Standards. This responsibility includes:
(a)
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 were recorded as necessary
to permit the preparation of true and fair profit and loss accounts and balance sheets and
to maintain accountability of assets;
(b)
selecting and applying appropriate accounting policies; and
(c)
making accounting estimates that are reasonable in the circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the 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 the 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.
Opinion
In our opinion:
(a)
the consolidated financial statements of the Group and the balance sheet of the Company,
are properly drawn up in accordance with the provisions of the Act and Singapore Financial
Reporting Standards to give a true and fair view of the state of affairs of the Group and of
the Company as at 31 December 2007 and of the results, changes in equity and cash flows
of the Group for the year ended on that date; and
(b)
the accounting and other records required by the Act to be kept by the Company have been
properly kept in accordance with the provisions of the Act.
KPMG
Public Accountants and
Certified Public Accountants
Singapore
20 March 2008
I 35
Balance Sheets
As at 31 December 2007
Note
Non-current assets
Property, plant and equipment
Subsidiaries
Deferred tax assets
Company
2007
2006
$’000
$’000
17,893
–
13
18,563
–
–
12,812
13,899
–
13,295
13,639
–
17,906
18,563
26,711
26,934
550
40,564
26,239
4,901
–
35,549
23,820
3,153
–
32,341
29,588
890
–
27,650
23,878
807
72,254
62,522
62,819
52,335
90,160
81,085
89,530
79,269
46,563
(1,883)
4,710
37,778
(1,745)
8,318
46,563
–
4,463
37,778
–
7,780
Minority interests
49,390
530
44,351
72
51,026
–
45,558
–
Total equity
49,920
44,423
51,026
45,558
1,301
37
1,777
22
1,138
37
1,777
22
1,338
1,799
1,175
1,799
9,706
27,824
1,372
7,706
25,704
1,453
8,211
27,769
1,349
6,300
24,372
1,240
38,902
34,863
37,329
31,912
Total liabilities
40,240
36,662
38,504
33,711
Total equity and liabilities
90,160
81,085
89,530
79,269
Current assets
Assets held for sale
Inventories
Trade and other receivables
Cash and cash equivalents
3
4
5
Group
2007
2006
$’000
$’000
6
7
8
9
Total assets
Equity attributable to equity holders
of the Company
Share capital
Currency translation reserve
Accumulated profits
Non-current liabilities
Financial liabilities
Deferred tax liabilities
Current liabilities
Trade and other payables
Current tax payable
10
11
12
5
13
12
The accompanying notes form an integral part of these financial statements.
Consolidated Income Statement
Year ended 31 December 2007
Note
2007
$’000
2006
$’000
14
65,203
63,509
Cost of sales
(48,894)
(45,026)
Gross profit
16,309
18,483
Other income
1,451
1,800
Distribution expenses
(3,871)
(3,361)
Administrative expenses
(5,485)
(5,401)
Other expenses
(2,742)
(4,387)
Results from operating activities
5,662
7,134
37
31
(1,395)
(1,412)
Revenue
Finance income
Finance expense
Net finance expenses
15
(1,358)
(1,381)
Profit before income tax
16
4,304
5,753
Income tax expense
17
(1,354)
(1,677)
2,950
4,076
3,000
4,087
(50)
(11)
2,950
4,076
Profit for the year
Attributable to:
Equity holders of the Company
Minority interests
Profit for the year
Earnings per share
Basic earnings per share (cents)
18
1.29
2.16
Diluted earnings per share (cents)
18
1.23
2.16
I 37
Consolidated Statement of Changes in Equity
At 1 January 2006
Translation differences relating
to financial statements of
foreign subsidiaries
Total
attributable to
Currency
equity holders
Share
Share translation Accumulated
of the
Minority
capital premium
reserve
profits
Company
interests
$’000
$’000
$’000
$’000
$’000
$’000
Total
equity
$’000
37,758
46
(958)
6,050
42,896
905
43,801
–
–
(787)
–
(787)
–
(787)
Net losses recognised directly
in equity
–
–
(787)
–
(787)
–
(787)
Net profit for the year
–
–
–
4,087
4,087
(11)
4,076
Total recognised income and
expense for the year
–
–
(787)
4,087
3,300
(11)
3,289
Expenses on issue of shares
–
(26)
–
–
(26)
–
(26)
20
(20)
–
–
–
–
–
Final dividend paid for 2005
of $0.00964 per share
(net of 20% tax)
–
–
–
(1,819)
(1,819)
–
(1,819)
Acquisition of minority interests
–
–
–
–
–
(822)
(822)
At 31 December 2006
37,778
–
(1,745)
8,318
44,351
72
44,423
At 1 January 2007
37,778
–
(1,745)
8,318
44,351
72
44,423
–
–
(138)
–
(138)
–
(138)
Transfer from share premium
account to share capital
upon implementation of the
Companies (Amendment)
Act 2005
Translation differences relating
to financial statements of
foreign subsidiaries
Net losses recognised directly
in equity
–
–
(138)
–
(138)
–
(138)
Net profit for the year
–
–
–
3,000
3,000
(50)
2,950
Total recognised income and
expense for the year
Issue of new shares
Issue of shares to minority
shareholder of subsidiary
Expenses on issue of shares
Final dividend paid for 2006
of $0.035 per share
(net of 18% tax)
At 31 December 2007
–
–
(138)
3,000
2,862
(50)
2,812
9,071
–
–
–
9,071
–
9,071
–
–
–
–
–
508
508
(286)
–
–
–
(286)
–
(286)
–
–
–
(6,608)
(6,608)
–
(6,608)
46,563
–
(1,883)
4,710
49,390
530
49,920
Consolidated Cash Flow Statement
Note
Operating activities
Adjustments for:
Depreciation
Interest income
Finance expense
Property, plant and equipment written off
Negative goodwill on acquisition of minority interests
Loss/(gain) on disposal of property, plant and equipment
2007
$’000
2006
$’000
4,304
5,753
1,228
(37)
1,395
431
–
173
7,494
818
(31)
1,412
–
(221)
(42)
7,689
Changes in working capital:
Inventories
Cash generated from operations
Income taxes paid
Cash flows (used in)/generated from operating activities
(5,015)
(2,420)
(426)
(367)
(1,435)
(1,802)
1,169
(6,103)
242
2,997
(1,202)
1,795
Investing activities
Interest received
Purchase of property, plant and equipment
Proceeds from disposal of property, plant and equipment
Acquisition of additional interests from minority interests
Cash flows used in investing activities
37
(2,338)
913
–
(1,388)
31
(2,283)
81
(356)
(2,527)
(6,608)
(1,456)
(474)
3,078
(171)
4,117
(3,600)
(1,819)
(1,188)
415
(456)
(24)
7,500
(6,859)
508
9,071
(286)
4,179
–
–
(26)
(2,457)
989
2,336
(124)
3,201
(3,189)
5,793
(268)
2,336
3
15
15
Financing activities
Dividends paid
Interest paid
(Decrease)/increase in non-trade amount due to others
Proceeds from/(repayment of) bills payable and trust receipts
Payment of finance lease liabilities
Proceeds from interest-bearing borrowings
Repayment of interest-bearing borrowings
Proceeds from issue of shares to minority shareholder of
subsidiary
Proceeds from issue of shares
Expenses for the issue of shares
Cash flows generated from/(used in) financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of exchange fluctuations
Cash and cash equivalents at end of year
9
I 39
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 20 March 2008.
1
Domicile and activities
Hoe Leong Corporation Ltd. (the Company) was incorporated in the Republic of Singapore
with its registered office at 6 Clementi Loop, Singapore 129814.
The principal activities of the Group and of the Company are those relating to designing,
manufacturing, sale and distribution of machinery parts.
The immediate and ultimate holding company during the financial year was Hoe Leong Co.
(Pte.) Ltd., a company incorporated in the Republic of Singapore.
The consolidated financial statements relate to the Company and its subsidiaries (referred
to as the Group).
2
Summary of significant accounting policies
2.1
Basis of preparation
The financial statements are prepared in accordance with Singapore Financial Reporting
Standards (FRS).
The financial statements have been prepared on the historical cost basis except for certain
financial assets and financial liabilities which are measured at fair value. The financial
statements are presented in Singapore dollars which is the Company’s functional currency,
has been rounded to the nearest thousand, unless otherwise stated.
The preparation of financial statements in conformity with FRS requires management to
make judgements, estimates and assumptions that affect the application of policies and
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 the estimate is revised and in
any future periods affected.
2
Summary of significant accounting policies (cont’d)
2.1
Basis of preparation (cont’d)
In particular, information about significant areas of estimation uncertainty and critical
judgements in applying accounting policies that have the most significant effect on the
amount recognised in the financial statements are described in the following notes:
• Note 4
– measurement of impairment loss in respect of investment in subsidiaries.
• Note 7
– measurement of net realisable value of inventories. Inventories have been
written down to net realisable value to be consistent with the view that
assets should not be carried in excess of amounts expected to be realised
from their sale or use. Estimates of net realisable value are based on the
most reliable evidence available at the balance sheet date. These estimates
take into consideration of market demand, competition, selling price and
cost directly relating to events occurring after the end of the financial year
to the extent that such events confirm conditions existing at the end of the
financial year.
• Note 8
– measurement of recoverable amounts of trade receivables. The Group
evaluates whether there is any objective evidence that trade receivables are
impaired, and determines the amount of impairment loss as a result of the
inability of the customers to make required payments. The Group determines
the estimates based on the ageing of the trade receivables balance, creditworthiness, and historical write-off experience. If the financial condition of
the customers were to deteriorate, actual write-offs would be higher than
estimated.
The accounting policies used by the Group have been applied consistently to all periods
presented in these financial statements.
2.2
Consolidation
Business combinations
Business combinations are accounted for under the purchase method. The cost of an
acquisition is measured at the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange, plus costs directly attributable to
the acquisition.
The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities
and contingent liabilities over the cost of acquisition is credited to the income statement in
the period of the acquisition.
I 41
2
2.2
Consolidation (cont’d)
Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Group has the
power, directly to govern the financial and operating policies of an entity so as to obtain
benefits from its activities. In assessing control, potential voting rights presently exercisable
are taken into account. The financial statements of subsidiaries are included in the
consolidated financial statements from the date that control commences until the date that
control ceases. The accounting policies of subsidiaries have been changed where necessary
to align them with the policies adopted by the Group.
Transactions eliminated on consolidation
Intra-group balances and transactions and any unrealised income or expenses arising from
intra-group transactions, are eliminated in preparing the consolidated financial statements.
Unrealised gains arising from transactions with equity accounted investees are eliminated
against the investment to the extent of the Group’s interest in the investee. Unrealised
losses are eliminated in the same way as unrealised gains, but only to the extent that there
is no evidence of impairment.
Accounting for subsidiaries
Investments in subsidiaries are stated in the Company’s balance sheet at cost less accumulated
impairment losses.
2.3
Foreign currencies
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of
Group entities at the exchange rate at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the reporting date are retranslated to the
functional currency at the exchange rate at the reporting date. Non-monetary assets and
liabilities denominated in foreign currencies that are measured at fair value are retranslated
to the functional currency at the exchange rate at the date on which the fair value was
determined. Foreign currency differences arising on retranslation are recognised in the income
statement.
2
2.3
Foreign currencies (cont’d)
Foreign operations
The assets and liabilities of foreign operations are translated to Singapore dollars at exchange
rates prevailing at the reporting date. The income and expense of foreign operations are
translated to Singapore dollars exchange rates prevailing at the dates of the transactions.
Foreign currency differences are recognised in the foreign currency translation reserve. When
a foreign operation is disposed of, in part or in full, the relevant amount in the foreign
exchange translation reserve is transferred to the income statement.
2.4
Property, plant and equipment are stated at cost less accumulated depreciation and
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 assets to a working condition for its intended use,
and the cost of dismantling and removing the items and restoring the site on which they
are located. Purchased software that is integral to the functionality of the related equipment
is capitalised as part of that equipment.
When parts of an item of property, plant and equipment have different useful lives, they
are accounted for as separate items (major components) of property, plant and equipment.
The cost of replacing part of an items of property, plant and equipment is recognised in
the carrying amount of the item if it is probable that the future economic benefits embodied
within the part will flow to the Group and its cost can be measured reliably. The costs of
the day-to-day servicing of property, plant and equipment are recognised in the income
statement as incurred.
Freehold land and construction-in-progress are not depreciated. Depreciation on other
property, plant and equipment recognised in the income statement on a straight-line basis
over their estimated useful lives (or lease term, if shorter) of each part of an item of
property, plant and equipment.
I 43
2
2.4
Property, plant and equipment (cont’d)
The estimated useful lives are as follows:
Freehold building and leasehold land and building
–
Over the remaining lease term
ranging from 19 to 50 years
Furniture, fittings and office equipment
–
5 to 10 years
Material handling equipment
–
5 to 10 years
Computers
–
3 years
Motor vehicles
–
5 years
Depreciation methods, useful lives and residual value are reviewed and adjusted as
appropriate, at each reporting date.
2.5
Intangible assets – Goodwill
Goodwill
Goodwill and negative goodwill arise on the acquisition of subsidiaries.
Goodwill represents the excess of the cost of the acquisition over the Group’s interest in
the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree.
Goodwill is measured at cost less accumulated impairment losses. Goodwill is tested for
impairment as described in note 2.8. Negative goodwill is recognised immediately in the
income statement.
Acquisitions of minority interests
Goodwill arising on the acquisition of minority interests in a subsidiary represents the excess
of the cost of the additional investment over the carrying amount of the net assets acquired
at the date of exchange.
2
2.6
Financial instruments
Non-derivative financial assets
Non-derivative financial instruments comprise trade and other receivables, cash and cash
equivalents, financial liabilities and trade and other payables. These non-derivative financial
instruments are recognised initially at fair value plus any directly attributable transaction
costs. Subsequent to initial recognition, non-derivative financial instruments are measured
at amortised cost using the effective interest method, less any impairment losses.
A financial instrument is recognised if the Group becomes a party to the contractual
provisions of the instrument. Financial assets are derecognised if the Group’s contractual
rights to the cash flows from the financial assets expire or if the Group transfers the
financial assets to another party without retaining control or transfers substantially all the
risks and rewards of the assets. Regular way purchases and sales of financial assets are
accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell
the asset. Financial liabilities are derecognised if the Group’s obligations specified in the
contract expire or are discharged or cancelled.
Cash and cash equivalents comprise cash balances and bank deposits. Bank overdrafts that
are repayable on demand and that form an integral part of the Group’s cash management
are included as a component of cash and cash equivalents for the purposes of the cash
flow statement.
Derivative financial instruments and hedging activities
The Group holds derivative financial instruments to hedge its foreign currency and interest
rate risk exposures. Embedded derivatives are separated from the host contract and accounted
for separately if the economic characteristics and risks of the host contract and the embedded
derivative are not closely related, a separate instrument with the same terms as the embedded
derivative would meet the definition of a derivative, and the combined instrument is not
measured at fair value through profit or loss.
Derivatives are recognised initially at fair value; attributable transaction costs are recognised
in the income statement when incurred. Subsequent to initial recognition, derivatives are
measured at fair value.
I 45
2
2.6
Financial instruments (cont’d)
Impairment of financial assets
A financial asset is assessed at each reporting date to determine whether there is any
objective evidence that it is impaired. A financial asset is considered to be impaired if
objective evidence indicates that one or more events have had a negative effect on the
estimated future cash flows of that asset.
An impairment loss in respect of a financial asset measured at amortised cost is calculated
as the difference between its carrying amount, and the present value of the estimated
future cash flows discounted at the original effective interest rate.
Individually significant financial assets are tested for impairment on an individual basis. The
remaining financial assets are assessed collectively in groups that share similar credit risk
characteristics.
All impairment losses are recognised in the income statement.
An impairment loss is reversed if the reversal can be related objectively to an event occurring
after the impairment loss was recognised. For financial assets measured at amortised cost,
the reversal is recognised in the income statement.
Share capital
Ordinary shares are classified as equity.
Incremental costs directly attributable to the issue of ordinary shares and share options are
recognised as a deduction from equity, net of any tax effects.
Where share capital recognised as equity is repurchased (treasury shares), the amount of
the consideration paid, including directly attributable costs, net of any tax effects, is presented
as a deduction from equity. Where such shares are subsequently reissued, sold or cancelled,
the consideration received is recognised as a change in equity. No gain or loss is recognised
in the income statement.
2
2.7
Leases
When entities within the Group are lessees of a finance lease
Leased assets in which the Group assumes substantially all the risks and rewards of ownership
are classified as finance leases. Upon initial recognition, property, plant and equipment
acquired through finance leases are capitalised at the lower of its fair value and the present
value of the minimum lease payments. Subsequent to initial recognition, the asset is
accounted for in accordance with the accounting policy applicable to that asset. Leased
assets are depreciated over the shorter of the lease term and their useful lives. Lease payments
are apportioned between finance expense and reduction of the lease liability. The finance
expense is allocated to each period during the lease term so as to produce a constant
periodic rate of interest on the remaining balance of the liability. Contingent lease payments
are accounted for by revising the minimum lease payments over the remaining term of the
lease when the lease adjustment is confirmed.
When entities within the Group are lessees of an operating lease
Where the Group has the use of assets under operating leases, payments made under the
leases are recognised in the income statement on a straight-line basis over the term of the
lease. Lease incentives received are recognised in the income statement as an integral part
of the total lease payments made. Contingent rentals are charged to the profit and loss
account in the accounting period in which they are incurred.
2.8
Impairment – non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred
tax assets, are reviewed at each reporting date to determine whether there is any indication
of impairment. If any such indication exists, the assets’ recoverable amounts are estimated.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating
unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable
asset group that generates cash flows that are largely independent from other assets and
groups. Impairment losses are recognised in the income statement unless it reverses a
previous revaluation, credited to equity, in which case it is charged to equity. Impairment
losses recognised in respect of cash-generating units are allocated first to reduce the carrying
amount of any goodwill allocated to the units and then to reduce the carrying amount of
the other assets in the unit (group of units) on a pro rata basis.
The recoverable amount of an asset or cash-generating unit is the greater of its value in
use and its fair value less costs to sell. In assessing value in use, the estimated future cash
flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset or cashgenerating unit.
I 47
2
2.8
Impairment – non-financial assets (cont’d)
Impairment losses recognised in prior periods are assessed at each reporting date for any
indications that the loss has decreased or no longer exists. An impairment loss is reversed
if there has been a change in the estimates used to determine the recoverable amount. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or
amortisation, if no impairment loss had been recognised.
2.9
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated using
the weighted average cost formula and comprises all costs of purchase, costs of conversion
and other costs incurred in bringing the inventories to their present location and condition.
In the case of manufactured inventories and work-in-progress, cost includes an appropriate
share of production overheads based on normal operating capacity. Net realisable value is
the estimated selling price in the ordinary course of business, less the estimated costs of
completion and selling expenses.
2.10 Non-current assets held for sale
Non-current assets that are expected to be recovered primarily through sale rather than
continuing use are classified as held for sale. Immediately before classification as held for
sale, the assets are remeasured in accordance with the Group’s accounting policies. Thereafter
generally the assets are measured at the lower of their carrying amount and fair value less
cost to sell. Impairment losses on initial classification as held for sale and subsequent gains
or losses on remeasurement are recognised in the income statement. Gains are not recognised
in excess of any cumulative impairment loss.
2.11 Employee benefits
Defined contribution plans
Obligations for contributions to defined contribution pension plans are recognised as an
expense in the income statement as incurred.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are
expensed as the related service is provided.
A provision is recognised for the amount expected to be paid under short-term cash bonus
or profit-sharing plans if the Group has a present legal or constructive obligation to pay
this amount as a result of past service provided by the employee and the obligation can be
estimated reliably.
2
2.12 Provision
A provision is recognised if, as a result of a past event, the Group has a present legal or
constructive obligation that can be estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation. Provisions are determined by
discounting the expected future cash flows at a pre-tax that reflects current market
assessments of the time value of money and the risks specific to the liability.
2.13 Revenue recognition
Sale of goods
Revenue from the sale of goods is measured at the fair value of the consideration received
or receivable, net of returns and allowances, trade discounts and volume rebates. Revenue
is recognised when the significant risks and rewards of ownership have been transferred to
the buyer, recovery of the consideration is probable, the associated costs and possible
return of goods can be estimated reliably, and there is no continuing management
involvement with the goods, and the amount of revenue can be measured reliably.
Transfers of risks and rewards vary depending on the individual terms of the contract of
sale. For sales of goods, transfer usually occurs when the product is received at the customers’
warehouse; however, for some international shipments, transfer occurs upon loading of the
goods on to the relevant carrier.
Rental income
Rental income receivable under operating leases is recognised in the income statement on
a straight-line basis over the term of the lease. Lease incentives granted are recognised as
an integral part of the total rental income to be received. Contingent rentals are recognised
as income in the accounting period in which they are earned.
2.14 Finance income and expense
Finance income comprises interest income on funds placed as bank deposits that are
recognised in the income statement. Finance expenses comprise interest expense on
borrowings that are recognised in the income statement.
I 49
2
2.15 Income tax expense
Income tax expense comprises current and deferred tax. Income tax expense is recognised
in the income statement except to the extent that it relates to items recognised directly in
equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates
enacted or substantively enacted at the reporting date, and any adjustment to tax payable
in respect of previous years.
Deferred tax is recognised using the balance sheet method, providing for temporary
differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not recognised for
the following temporary differences: the initial recognition of goodwill, the initial recognition
of assets or liabilities in a transaction that not a business combination and that affects
neither accounting nor taxable profit and differences relating to investments in subsidiaries
to the extent that it is probable that they will not reverse in the foreseeable future. Deferred
tax is measured at the tax rates that are expected to be applied to the temporary differences
when they reverse, based on the laws that have been enacted or substantively enacted by
the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset
current tax liabilities and assets and they relate to income taxes levied by the same tax
authority as the same taxable entity, or on different tax entities, but intend to settle current
tax liabilities and assets on a net basis or their tax assets and liabilities will be realised
simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable
profits will be available against which temporary differences can be utilised. Deferred tax
assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realised.
3
Furniture,
Leasehold fittings
Material
Freehold Freehold land and and office
handling
Motor Construction
land
building building equipment equipment Computers vehicles -in-progress
Group
Cost
At 1 January 2006
Additions
Disposals
Transfers
Written off
Translation differences on
consolidation
At 31 December 2006
Additions
Disposals
Reclassified to assets held
for sale
Written off
consolidation
At 31 December 2007
Accumulated depreciation
At 1 January 2006
Depreciation charge for
the year
Disposals
Written off
consolidation
At 31 December 2006
the year
Reclassified to assets held
for sale
Disposals
Written off
consolidation
At 31 December 2007
Carrying amount
At 1 January 2006
At 31 December 2006
At 31 December 2007
Total
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
223
–
–
–
–
1,322
–
–
–
–
14,925
–
–
182
–
1,988
71
(5)
(2)
(39)
3,376
1,567
(351)
(15)
–
843
373
(2)
–
–
1,187
485
(62)
–
–
–
165
–
(165)
–
23,864
2,661
(420)
–
(39)
(6)
217
–
–
(33)
1,289
–
–
(33)
15,074
–
–
(16)
1,997
101
(1)
(171)
4,406
1,813
(1,416)
(9)
1,205
143
–
(19)
1,591
442
(96)
–
–
79
–
(287)
25,779
2,578
(1,513)
–
–
–
–
(650)
–
–
(9)
67
(563)
4
(34)
7
(1)
(78)
–
(650)
(607)
1
218
5
1,294
6
14,430
(12)
2,076
44
4,351
(9)
1,309
(26)
1,917
–
1
9
25,596
–
266
1,739
1,888
999
768
974
–
6,634
–
–
–
26
–
–
311
–
–
42
(5)
(38)
248
(69)
–
100
–
–
91
(49)
–
–
–
–
818
(123)
(38)
–
–
(7)
285
(3)
2,047
(15)
1,872
(25)
1,153
(7)
861
(18)
998
–
–
(75)
7,216
–
26
335
56
443
169
199
–
1,228
–
–
–
–
–
–
(100)
–
–
–
–
(8)
–
(347)
(144)
–
–
(23)
–
(79)
(1)
–
–
–
(100)
(426)
(176)
–
–
1
312
–
2,282
(12)
1,908
4
1,109
(9)
998
(23)
1,094
–
–
(39)
7,703
223
217
218
1,056
1,004
982
13,186
13,027
12,148
100
125
168
2,377
3,253
3,242
75
344
311
213
593
823
–
–
1
17,230
18,563
17,893
I 51
3
Company
Furniture,
Leasehold
fittings
Material
land and and office handling
Motor
building equipment equipment Computers vehicles
$’000
$’000
$’000
$’000
$’000
Total
$’000
Cost
At 1 January 2006
14,430
1,315
739
471
198
17,153
Additions
–
14
16
354
390
774
Disposals
–
(5)
–
(2)
–
(7)
14,430
1,324
755
823
588
17,920
Additions
–
3
5
86
–
94
Disposals
–
–
–
(2)
–
(2)
14,430
1,327
760
907
588
18,012
1,702
1,255
638
438
131
4,164
290
24
37
85
30
466
–
(5)
–
–
–
(5)
1,992
1,274
675
523
161
4,625
290
20
26
146
95
577
–
–
–
(2)
–
(2)
2,282
1,294
701
667
256
5,200
At 31 December 2006
At 31 December 2007
Accumulated depreciation
At 1 January 2006
the year
Disposals
At 31 December 2006
the year
Disposals
At 31 December 2007
Carrying amount
At 1 January 2006
12,728
60
101
33
67
12,989
At 31 December 2006
12,438
50
80
300
427
13,295
At 31 December 2007
12,148
33
59
240
332
12,812
The carrying amount of the property, plant and equipment of the Group and the Company
includes amounts totalling $591,000 (2006: $427,000) and $323,000 (2006: $427,000)
respectively in respect of office equipment and motor vehicles held under finance lease
agreements.
During the year, the Group acquired property, plant and equipment with an aggregate cost
of $2,578,000 (2006: $2,661,000), of which $240,000 (2006: $377,000) were under finance
leases.
3
The following property, plant and equipment are pledged as security to secure credit facilities:
Group
2007
$’000
2006
$’000
12,148
12,438
89
1,087
12,237
13,525
At carrying amount:
– leasehold land and building
– material handling equipment and motor vehicles
4
Subsidiaries
Company
2007
2006
$’000
$’000
Equity investments, at cost
17,625
13,639
Allowance for impairment losses
(3,726)
–
Carrying amount
13,899
13,639
Country of
incorporation
Name of subsidiary
Ho Leong Tractors Sdn. Bhd.
Effective
equity held
by the Group
2007
2006
%
%
Malaysia
100
100
Hong Kong
100
100
People’s Republic
of China
100
–
Indonesia
99
99
Jilin Kanto Buhin Construction Machinery
Manufacturing Co., Ltd.
People’s Republic
of China
100
100
Shenyang Milequip Industry Co., Ltd.
People’s Republic
of China
83.2
83.2
Kunshan Kanto Buhin Manufacturing Co., Ltd.
People’s Republic
of China
100
100
Australia
71.4
–
Hoe Leong Machinery (H.K.) Limited
(a)
Quanzhou Kanto Buhin Machinery
Manufacturing Co., Ltd.*
PT Trackspare(b)
Trackspares (Australia) Pty Ltd.(c)
I 53
4
Subsidiaries (cont’d)
Other member firms of KPMG International are auditors of significant foreign-incorporated
subsidiaries.
(a)
Audited by Maradebbie & Partners (Practising) CPA, Hong Kong.
(b)
Audited by Drs Bernardi & Co., Indonesia.
(c)
Audited by Fowler Board Chartered Accountants, Australia.
* A wholly-owned subsidiary held under Hoe Leong Machinery (H.K.) Limited.
Due to continued losses of a subsidiary, the Company performed an impairment review to
assess the recoverable amount of the investment in the subsidiary. The estimated recoverable
amount of the subsidiary was based on its estimated net selling price.
5
Deferred tax
Movements in deferred tax assets and liabilities of the Group (prior to offsetting of balances)
during the year are as follows:
Group
Deferred tax assets
Provisions
Others
Recognised
At
in income
At
1 January statement 31 December
2006
(note 17)
2006
$’000
$’000
$’000
Property, plant and
equipment
Others
Recognised
in income
At
statement 31 December
(note 17)
2007
$’000
$’000
20
–
20
4
(4)
–
24
(4)
20
–
14
14
24
10
34
(42)
–
(42)
(32)
32
–
(74)
32
(42)
(16)
–
(16)
(90)
32
(58)
5
Deferred tax (cont’d)
Deferred tax assets and liabilities of the Company (prior to offsetting of balances) are
attributable to the following:
Company
2007
2006
$’000
$’000
Deferred tax assets
Provisions
21
20
(58)
(42)
Deferred tax liabilities and assets are offset when there is a legally enforceable right to set
off current tax assets against current tax liabilities and when the deferred taxes relate to
the same taxation authority. The following amounts, determined after appropriate offsetting,
are included in the balance sheet as follows:
Group
2007
2006
$’000
$’000
6
Company
2007
2006
$’000
$’000
Deferred tax assets
13
–
–
–
(37)
(22)
(37)
(22)
Assets held for sale
The leasehold building and land use rights of Jilin Kanto Buhin Construction Machinery
Manufacturing Co., Ltd., a subsidiary of the Group, is presented as held for sale following
the decision on 18 April 2007 to cease its operations and to transfer it to another subsidiary,
Kunshan Kanto Buhin Manufacturing Co., Ltd. As at 31 December 2007, the carrying
amount of the leasehold building and land use rights is $550,000.
7
Inventories
Group
2007
2006
$’000
$’000
Raw materials
Work-in-progress
Finished goods
Goods-in-transit
Company
2007
2006
$’000
$’000
682
1,194
–
–
1,191
1,782
–
–
37,890
32,059
31,659
27,323
801
514
682
327
40,564
35,549
32,341
27,650
I 55
7
Inventories (cont’d)
In 2007, raw materials and changes in finished goods and work-in-progress, recognised in
cost of sales for the year, amounted to $47,142,000 (2006: $43,160,000).
Finished goods are stated after deducting an allowance for obsolete inventories amounting
to $18,309,000 (2006: $19,886,000) and $15,917,000 (2006: $17,518,000) for the Group
and the Company respectively.
Change in estimates
During the year ended 31 December 2007, the Group reassessed its accounting estimate
for making allowance for obsolete inventories based on recent experience and price trends.
The effect of the change in estimating allowance for obsolete inventories resulted in a
credit of $2,773,000 recognised in the income statement in 2007. It is impractical to estimate
the effect of this change in future period.
8
Group
2007
2006
$’000
$’000
Company
2007
2006
$’000
$’000
Trade receivables
24,846
24,062
17,473
17,716
Impairment losses
(1,567)
(1,586)
(211)
(220)
Net receivables
23,279
22,476
17,262
17,496
466
616
–
–
1,950
102
1,884
30
Recoverables
13
20
6
12
Rental receivables
21
24
21
24
Prepayments
336
527
154
134
Tax recoverables
109
11
–
–
62
–
–
–
– subsidiaries
–
–
9,027
6,049
– affiliated corporations
3
44
–
–
–
–
1,234
133
26,239
23,820
29,588
23,878
Advance to suppliers
Deposits
Others
Trade amounts due from:
Non-trade amounts due from:
– subsidiaries
8
Trade and other receivables (cont’d)
Outstanding balances with related companies are unsecured and interest-free. There is no
allowance for doubtful debts arising from the outstanding balances.
The maximum exposure to credit risk for trade receivables at the reporting date (by country)
is:
Group
Company
2007
2006
2007
2006
$’000
$’000
$’000
$’000
Singapore
Malaysia
Indonesia
People’s Republic of China/Hong Kong
Emerging markets*
Others
473
9,524
6,934
1,337
3,979
1,032
23,279
554
9,320
6,589
1,941
3,474
598
22,476
9,556
1,681
1,420
–
3,979
626
17,262
10,956
1,508
960
–
3,474
598
17,496
* Emerging markets refer to India, Middle East, Pakistan and Russia.
Impairment losses
The ageing of trade receivables at the reporting date is:
Group
Not past
Past due
Past due
Past due
due
0 - 30 days
31 - 120 days
more than 120 days
Company
Not past due
Past due 0 - 30 days
Past due 31 - 120 days
Past due more than 120 days
Gross
2007
$’000
Impairment
losses
2007
$’000
Gross
2006
$’000
Impairment
losses
2006
$’000
7,185
3,799
7,908
5,954
24,846
–
–
–
1,567
1,567
7,486
3,913
5,758
6,905
24,062
–
–
–
1,586
1,586
4,391
2,733
8,775
1,574
17,473
–
–
–
211
211
6,201
3,594
6,760
1,161
17,716
–
–
–
220
220
I 57
8
Trade and other receivables (cont’d)
Impairment losses (cont’d)
The change in impairment loss in respect of trade receivables during the year is as follows:
Group
2007
2006
$’000
$’000
1,586
1,424
(19)
162
1,567
1,586
At 1 January
Impairment loss (reversed)/recognised
At 31 December
Company
2007
2006
$’000
$’000
220
101
(9)
119
211
220
Based on historical default rates, the Group believes that no impairment allowance is
necessary in respect of trade receivables not past due and those that have past due, except
for certain specific doubtful receivables identified and for which impairment loss is recognised.
Outstanding trade receivables are mainly arising by customers that have a good record with
the Group.
9
Note
Cash in hand and at banks
Bank overdrafts (secured)
Cash and cash equivalents in the cash
flow statement
12
Group
2007
2006
$’000
$’000
4,901
3,153
(1,700)
(817)
3,201
Company
2007
2006
$’000
$’000
890
807
2,336
Included in cash at banks are amounts of $1,182,000 (2006: $1,061,000) held in countries
under foreign exchange controls.
The weighted average effective interest rates per annum for cash at banks at the balance
sheet date for the Group and Company are 1.76% (2006: 0.94%) and 2.53% (2006:
2.10%) respectively. Interest rates reprice at intervals of one, three or six months.
10
Share capital
Group and Company
2007
2006
No. of shares
No. of shares
(’000)
(’000)
Fully paid ordinary shares, with no par value
At 1 January
Issue of new shares
– Rights cum warrants issue
– Exercise of warrants
At 31 December
188,791
188,791
75,516
63
264,370
–
–
188,791
10
Share capital (cont’d)
During the financial year, the following share issues were made by the Company:
•
75,516,000 rights shares at $0.12 each with 18,879,000 free detachable warrants at
an exercise price of $0.16.
•
63,000 shares were issued at $0.16 each fully paid for cash upon the exercise of
warrants.
At 31 December 2007, there were 18,816,000 warrants outstanding.
Each warrant entitles the warrant holder to subscribe for one new ordinary share in the
Company at the exercise price of $0.16 per share. The warrants do not entitle the holders
of the warrants, by virtual of such holdings, to any rights to participate in any share issue
of any other company. The warrants were listed and quoted on the SGX-ST on 5 June
2007 and expire on 30 May 2009.
The holders of ordinary shares are entitled to receive dividends as declared from time to
time and are entitled to one vote per share at the meeting of the Company. All shares rank
equally with regard to the Company’s residual assets.
Capital management
The Board’s policy is to maintain adequate capital base so as to maintain investors’, creditors’
and market confidence and to sustain future development of the business. The Board of
Directors monitors the return on capital, which the Group defines as net operating income
divided by total shareholders’ equity excluding minority interests. The Board also monitors
the level of dividends to ordinary shareholders. The Group funds its operations and growth
through a mix of equity and debts. This includes the maintenance of adequate lines of
credit and assessing the need to raise additional equity where required.
There were no changes in the Group’s approach to capital management during the year.
Neither the Company nor any of its subsidiaries are subject to externally imposed capital
requirement.
11
Currency translation reserve
The currency translation reserve of the Group comprises foreign exchange differences arising
from the translation of the financial statements of foreign entities whose functional currencies
are different from that of the Company.
I 59
12
Note
Group
2007
2006
$’000
$’000
Company
2007
2006
$’000
$’000
Non-current liabilities
Secured bank loan A
873
1,455
873
1,455
Secured bank loan B
70
–
–
–
358
322
265
322
1,301
1,777
1,138
1,777
1,700
817
1,700
817
Secured bank loan A
582
563
582
563
Secured bank loan B
19
–
–
–
Secured bank loan C
–
1,332
–
–
Secured bank loan D
4,000
–
4,000
–
Unsecured bank loan E
6,290
7,970
6,290
7,970
Unsecured bank loan F
4,000
4,000
4,000
4,000
Secured trust receipts
4,600
5,997
4,600
5,997
Unsecured trust receipts
6,540
4,965
6,540
4,965
93
60
57
60
27,824
25,704
27,769
24,372
29,125
27,481
28,907
26,149
Finance lease liabilities
Current liabilities
Secured bank overdraft
Total financial liabilities
9
Interest-bearing borrowings
(i)
The secured bank loans A and D, bank overdraft and trust receipts are secured by a
first legal mortgage over leasehold property of the Company with a book value of
$12,148,000 (2006: $12,438,000).
(ii)
The secured bank loan B is secured by chattel mortgages over the motor vehicles of a
subsidiary with a carrying amount of $89,000 (2006: Nil), and a personal guarantee
by a director of a subsidiary.
(iii) The secured bank loan C was secured by certain property, plant and equipment of a
subsidiary with a carrying amount of $Nil (2006: $1,088,000). The loan has been fully
repaid in 2007.
12
Financial liabilities (cont’d)
At 31 December 2007, the Group and the Company had obligations under finance leases
that are repayable as follows:
2007
2006
Group
Payments Interest Principal Payments Interest Principal
$’000
$’000
$’000
$’000
$’000
$’000
Payable:
Within 1 year
110
17
93
74
14
60
After 1 year but within 5 years
366
63
303
267
52
215
More than 5 years
67
12
55
132
25
107
543
92
451
473
91
382
Company
Payable:
Within 1 year
70
13
57
74
14
60
261
51
210
267
52
215
More than 5 years
67
12
55
132
25
107
398
76
322
473
91
382
Terms and debt repayment schedule
Terms and conditions of outstanding loans and borrowings are as follows:
Year of maturity
Group
S$ floating rate loans
– loan A
– loan D
– loan E
– loan F
A$ fixed rate loan B
RMB fixed rate loan C
Trust receipts
Bank overdrafts
2008 – 2010
2008
2008
2008
2008 – 2011
2007
2009 – 2014
2008
Repayable on demand
2007
Face Carrying
value amount
$’000
$’000
1,455
4,000
6,290
4,000
89
–
451
11,140
1,700
29,125
1,455
4,000
6,290
4,000
89
–
451
11,140
1,700
29,125
2006
Face
Carrying
value
amount
$’000
$’000
2,018
–
7,970
4,000
–
1,332
382
10,962
817
27,481
2,018
–
7,970
4,000
–
1,332
382
10,962
817
27,481
I 61
12
Terms and debt repayment schedule (cont’d)
Year of maturity
Company
S$ floating rate loan
– loan A
– loan D
– loan E
– loan F
Trust receipts
Bank overdrafts
2008 – 2010
2008
2008
2008
2009 – 2014
2008
Repayable on demand
2007
Face Carrying
value amount
$’000
$’000
1,455
4,000
6,290
4,000
322
11,140
1,700
28,907
1,455
4,000
6,290
4,000
322
11,140
1,700
28,907
2006
Face
Carrying
value
amount
$’000
$’000
2,018
–
7,970
4,000
382
10,962
817
26,149
2,018
–
7,970
4,000
382
10,962
817
26,149
The floating rate term loans bear interest of approximately 3% to 5% (2006: 3% to 5%)
per annum and are repriced on monthly to half-yearly basis.
The A$ fixed rate loan bears interest of approximately 8% to 10% (2006: Nil) per annum.
Bank overdrafts are unsecured, repayable on demand and have a weighted average effective
interest rate of 6% (2006: 6%) per annum. Interest rates of bank overdrafts reprice at an
interval of 1 month.
The weighted average effective interest rate of trust receipts at the end of the financial
year is 6.34% (2006: 4.56%) per annum. Interest rate reprice at intervals of one, three or
six months.
The following are the expected contractual undiscounted cash inflows/(outflows) of financial
liabilities, including interest payments and excluding the impact of netting agreements:
Carrying
Cash flows
amount
Contractual
Within More
cash
Within 1 to 5 than
Group
flows
1 year years 5 years
2007
$’000
$’000
$’000
$’000 $’000
Non-derivative financial liabilities
Variable interest rate loans
15,745
(15,954) (15,051)
(903)
–
Fixed interest rate loan
89
(89)
(70)
(19)
–
451
(543)
(110)
(366)
(67)
Bank overdrafts
1,700
(1,700)
(1,700)
–
–
Trust receipts
11,140
(11,140) (11,140)
–
–
Trade and other payables*
7,989
(7,989)
(7,989)
–
–
(37,415) (36,060) (1,288)
(67)
12
Terms and debt repayment schedule (cont’d)
Carrying
amount
Cash flows
Contractual
Within More
cash
Within 1 to 5 than
flows
1 year years 5 years
$’000
$’000
$’000 $’000
Group
2006
Fixed interest rate loans
Bank overdrafts
Trust receipts
13,988
1,332
382
817
10,962
6,070
(14,306)
(1,377)
(473)
(817)
(10,962)
(6,070)
(34,005)
2006
Derivative financial liabilities
Forward exchange contracts used for
hedging – outflow
2,454
2,503
Company
2007
Trust receipts
15,745
322
11,140
6,968
2006
Bank overdrafts
Trust receipts
2006
Derivative financial liabilities
Forward exchange contracts used for
hedging – outflow
$’000
(12,770) (1,536)
(1,377)
–
(74)
(399)
(817)
–
(10,962)
–
(6,070)
–
(32,070) (1,935)
2,503
–
–
–
–
–
–
–
–
–
(15,954)
(398)
(11,140)
(6,968)
(34,460)
(15,051)
(903)
(70)
(261)
(11,140)
–
(6,968)
–
(33,229) (1,164)
–
(67)
–
–
(67)
13,988
382
817
10,962
4,981
(14,306)
(473)
(817)
(10,962)
(4,981)
(31,539)
(12,770) (1,536)
–
(74)
(267) (132)
(817)
–
–
(10,962)
–
–
(4,981)
–
–
(29,604) (1,803) (132)
2,454
2,503
2,503
–
–
* Excludes accrued expenses.
I 63
13
Group
2007
2006
$’000
$’000
Company
2007
2006
$’000
$’000
Trade payables
2,899
3,234
1,379
2,060
Bills payable (secured)
1,066
446
1,066
446
Bills payable (unsecured)
3,397
1,117
3,397
1,117
Other payables and accrued expenses
2,119
2,112
1,567
1,620
225
233
225
229
–
49
–
49
– subsidiaries
–
–
298
387
– others
–
41
–
–
– subsidiaries
–
–
279
392
– others (loan)
–
474
–
–
9,706
7,706
8,211
6,300
Deposits
Derivative liabilities
Trade amounts due to:
Non-trade amounts due to:
Outstanding balances with related parties and loan amount due to others are unsecured,
interest free and repayable on demand.
14
Revenue
Revenue represents sales of goods less discounts and returns.
15
Finance income and expense
Group
2007
$’000
Recognised in the income statement
Interest income from bank deposits
Finance income
Interest expense:
– interest-bearing borrowings (including bank overdrafts)
– finance lease liabilities
Finance expense
Net finance income and expense recognised in income
statement
16
2006
$’000
37
37
31
31
(1,379)
(16)
(1,395)
(1,409)
(3)
(1,412)
(1,358)
(1,381)
Profit before income tax includes the following:
Group
2007
$’000
2006
$’000
Non-audit fees paid to:
– auditors of the Company
12
6
– other auditors
85
85
Operating lease expenses
830
737
Exchange loss/(gain)
829
(112)
(1,567)
1,613
–
367
28
177
431
–
Loss/(gain) on disposal of property, plant and equipment
173
(42)
–
(221)
Rental income
(1,276)
(1,394)
Staff costs
4,978
3,634
378
249
Allowance (written-back)/made for obsolete inventories
Inventories written off
Allowance made for doubtful receivables, net of write-back
Negative goodwill on acquisition of minority interests
Contributions to defined contribution plans, included in
staff costs
I 65
17
Income tax expense
Group
2007
$’000
Current tax expense
Current year
Adjustments for prior years
Deferred tax expense
Origination and reversal of temporary differences
Underprovision in prior year
Total income tax expense
Reconciliation of effective tax rate
Tax using the Singapore tax rate of 18% (2006: 20%)
Effect of reduction in tax rates
Effect of different tax rates in other countries
Expenses not deductible for tax purposes
Income not subject to tax
(Over)/underprovided in prior years
Deferred tax asset not recognised
Others
2006
$’000
1,725
(373)
1,352
1,478
199
1,677
(21)
23
2
1,354
–
–
–
1,677
4,304
775
(2)
536
790
(519)
(351)
118
7
1,354
5,753
1,151
–
(1)
313
(19)
199
44
(10)
1,677
The Singapore corporate tax rate has been reduced from 20% to 18% with effect from
the financial year ended 31 December 2007.
Deferred tax assets have not been recognised in respect of the following items:
Deductible temporary differences
Tax losses
Group
2007
2006
$’000
$’000
2,160
2,531
1,029
–
Company
2007
2006
$’000
$’000
–
–
–
–
The tax losses are subject to agreement by the tax authorities and compliance with tax
regulations in the respective countries in which certain subsidiaries operate. The deductible
temporary differences do not expire under current tax legislation. Deferred tax assets have
not been recognised in respect of these items because it is not probable that future taxable
profit will be available against which the Group can utilise the benefits.
18
Earnings per share
Group
2007
$’000
2006
$’000
Basic earnings per share is based on:
Net profit attributable to equity holders of the Company
3,000
No. of
shares
(’000)
Issued ordinary shares at beginning of the year
Effect of new shares issued
Weighted average number of ordinary shares at the
end of the year
4,087
No. of
shares
(’000)
188,791
188,791
44,082
–
232,873
188,791
$’000
$’000
Diluted earnings per share is based on:
Net profit attributable to equity holders of the Company
3,000
No. of
shares
(’000)
Weighted average number of ordinary shares used in
the calculation of basic earnings per share
Potential ordinary shares issuable under warrants
Adjusted weighted average number of ordinary shares
in issue
4,087
No. of
shares
(’000)
232,873
188,791
10,976
–
243,849
188,791
For the purpose of calculating the diluted earnings per ordinary share, the weighted average
number of ordinary shares in issue is adjusted to take into account the dilutive effect
arising from the dilutive share options and contingently issueable shares, with potential
ordinary shares weighted for the period outstanding.
I 67
19
Segment reporting
Segment information is presented in respect of the Group’s business and geographical
segments. The primary format for business segments is based on the Group’s management
and internal reporting structure.
Inter-segment pricing is determined on mutually agreed terms.
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 property, plant and equipment, cash and bank balances, loans and expenses, corporate
assets and head office expenses, and income tax assets and liabilities.
Segment capital expenditure is the total cost incurred during the period to acquire property,
plant and equipment, and intangible assets other than goodwill.
Business segments
The Group comprises the following main business segments:
(i)
Design and manufacture
Design, manufacture and sale of equipment parts for both heavy equipment and
industrial machinery under in-house brand names, “KBJ”, “OEM”, “ROSSI” and “TMI”.
(ii) Trading and distribution
Trading and distributing of an extensive range of equipment parts for both heavy
equipment and industrial machinery sourced from third parties.
Geographical segments
The Group’s businesses operate in five principal geographical areas, namely, Singapore,
Malaysia, Indonesia, People’s Republic of China (PRC)/Hong Kong and the Emerging Markets.
Emerging markets refer to India, Middle East, Pakistan and Russia.
In presenting information on the basis of geographical segments, segment revenue is based
on the geographical location of customers. Segment assets are based on the geographical
location of the assets.
19
Segment reporting (cont’d)
(a) Business segments
Design and
manufacture
2007
2006
$’000
$’000
Trading and
distribution
2007
2006
$’000
$’000
Total operation
2007
2006
$’000
$’000
25,020
21,948
40,183
41,561
65,203
63,509
601
3,289
3,610
2,045
4,211
5,334
Revenue and expenses
Total external revenue
Segment results
Other income
1,451
1,800
Net finance costs
(1,358)
(1,381)
Income tax expense
(1,354)
(1,677)
Profit for the year
2,950
4,076
68,615
58,071
Unallocated assets
21,545
23,014
Total assets
90,160
81,085
18,718
3,261
Unallocated liabilities
21,522
33,401
Total liabilities
40,240
36,662
Capital expenditure
2,578
2,661
Depreciation
1,228
818
Allowance (written-back)/made for
obsolete inventories
(1,567)
1,613
28
177
–
367
431
–
Assets and liabilities
Segment assets
Segment liabilities
33,605
10,268
21,542
1,208
35,010
8,450
36,529
2,053
Other segment information
Allowance made for doubtful receivables, net of write-back
Inventories written off
I 69
19
Segment reporting (cont’d)
(b) Geographical segments
PRC/
Emerging Other
Total
Singapore Malaysia Indonesia Hong Kong markets regions operation
$’000
$’000
$’000
$’000
$’000
$’000
$’000
2007
Revenue from
external
customers
2,641
20,386
20,142
7,041
10,158
4,835
65,203
Segment assets
55,350
14,247
7,928
10,030
–
2,605
90,160
94
320
51
1,995
–
118
2,578
Revenue from
external
customers
2,585
20,846
20,823
7,188
9,162
2,905
63,509
Segment assets
42,748
15,195
7,886
11,121
3,525
610
81,085
775
9
62
1,815
–
–
2,661
Capital expenditure
2006
Capital expenditure
20
Financial risk management
Risk management is integral to the whole business of the Group. The Group has a system
of controls in place to create an acceptable balance between the cost of risks occurring
and the cost of managing the risks. The management continually monitors the Group’s risk
management process to ensure that an appropriate balance between risk and control is
achieved. Risk management policies and systems are reviewed regularly to reflect changes
in market conditions and the Group’s activities.
The Audit Committee oversees how management monitors compliance with the Group’s
risk management policies and procedures and reviews the adequacy of the risk management
framework in relation to the risks faced by the Group. The Audit Committee is assisted in
its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc
reviews of risk management controls and procedures, the results of which are reported to
the Audit Committee.
Credit risk
The Group has a credit policy in place which establishes credit limits for customers and
monitors their balances on an ongoing basis. Credit evaluations are performed on all
customers requiring credit over a certain amount. Credit quality of customers is assessed
after taking into account its financial position and past experience with the customers.
20
Financial risk management (cont’d)
Credit risk (cont’d)
The Group establishes an allowance for impairment that represents its estimate of incurred
losses in respect of trade and other receivables. The allowance account in respect of trade
and other receivables is used to record impairment losses unless the Group is satisfied that
no recovery of the amount owing is possible. At that point, the financial asset is considered
irrecoverable and the amount charged to the allowance account is written off against the
carrying amount of the impaired financial asset.
Cash and fixed deposits are placed with banks and financial institutions which are regulated.
At the balance sheet date, there is no significant concentration of credit risk. The maximum
exposure to credit risk is represented by the carrying amount of each financial asset at the
balance sheet.
Liquidity risk
The Group monitors its liquidity risk and maintains a level of cash and cash equivalents
deemed adequate by management to finance the Group’s operations and to mitigate the
effects of fluctuations in cash flows.
Market risk
Market risk is the risk that changes in market prices, such as interest rates and foreign
exchange rates, will affect the Group’s income or the value of its holdings of financial
instruments. The objective of market risk management is to manage and control market
risk exposures within acceptance parameters, while optimising the return on risk.
Interest rate risk
The Group’s fixed-rate borrowings are exposed to a risk of change in their fair value due to
changes in interest rates. The Group’s variable-rate borrowings are exposed to a risk of
change in cash flows due to changes in interest rates. Short-term receivables and payables
are not exposed to interest rate risk.
Sensitivity analysis
For variable rate financial assets and liabilities, a change of 100bp in interest rate at the
reporting date would increase/(decrease) profit before tax by the amounts shown below.
This analysis assumes that all other variables, in particular foreign currency rates, remain
constant.
I 71
20
Interest rate risk (cont’d)
Profit before tax
100bp
100bp
increase
decrease
$’000
$’000
Group
31 December 2007
Variable instruments
(286)
286
(258)
258
31 December 2006
Variable instruments
Foreign currency risk
The Group is exposed to foreign currency risk on sales, purchases and borrowing that are
denominated in currencies other than the respective functional currencies of Group entities.
The currencies giving rise to this risk are primarily US dollar and Euro.
In respect of other monetary assets and liabilities held in currencies other than Singapore
dollar, the Group ensures that the net exposure is kept to an acceptable level by buying or
selling foreign currencies at spot rates, where necessary, to address short term imbalances.
The Group uses forward exchange contracts to hedge its foreign currency risk, where
necessary, the forward exchange contracts are rated over at maturity at market rates. At 31
December 2007, the Group has outstanding forward exchange contracts with notional
amounts of approximately US$Nil (2006: US$1,600,000).
Owing to the nature of the Group’s operations, most transactions have maturity dates of
less than one year.
20
Foreign currency risk (cont’d)
The Group’s and Company’s exposures to foreign currencies are as follows:
31 December 2007
US
Euro
dollar
$’000
$’000
Group
Trust receipts
Company
Trust receipts
31 December 2006
US
Euro
dollar
$’000
$’000
12
4
(1,768)
(3,112)
(4,864)
7,167
428
(8,398)
(2,628)
(3,431)
105
3
(3,250)
(1,482)
(4,624)
6,044
642
(7,413)
(1,962)
(2,689)
12
4
(1,768)
(3,112)
(4,864)
4,997
346
(8,398)
(2,628)
(5,683)
105
3
(3,250)
(1,482)
(4,624)
3,749
636
(7,413)
(1,962)
(4,990)
Sensitivity analysis
A 10% strengthening of Singapore dollar against the following currencies at the reporting
date would increase/(decrease) profit before tax by the amounts shown below. This analysis
assumes that all other variables, in particular interest rates, remain constant.
Group
Profit
before tax
$’000
Company
Profit
before tax
$’000
31 December 2007
US dollar
Euro
343
486
568
486
31 December 2006
US dollar
Euro
269
462
499
462
A 10% weakening of Singapore dollar against the above currencies would have had the
equal but opposite effect on the above currencies to the amounts shown above, on the
basis that all other variables remain constant.
I 73
20
Estimation of fair values
The following summarises the significant methods and assumptions used in estimating the
fair values of financial instruments of the Group and Company.
Derivative
The fair value of forward exchange contracts is based on their listed market price, if available.
If a listed market price is not available, fair value is estimated by discounting the difference
between the contractual forward price and the current forward price for the residual period
to maturity of the contract using a risk-free interest rate (based on government bonds).
Fair value, which is determined for disclosure purposes, is calculated based on the present
value of future principal and interest cash flows, discounted at the market rate of interest
at the reporting date. For finance leases, the market rate of interest is determined by
reference to similar lease agreements.
Other financial assets and liabilities
The carrying amounts of financial liabilities with a maturity of less than one year (including
trade and other receivables, cash and cash equivalents, and trade and other payables) are
assumed to approximate their fair values because of the short period to maturity. All other
financial assets and liabilities are discounted to determine their fair values.
The aggregate net fair values of recognised financial assets and liabilities which are not
carried at fair value in the balance sheet at 31 December are represented in the following
table:
Group
Secured bank loans
Unrecognised loss
Company
Secured bank loans
Unrecognised loss
Carrying
amount
2007
$’000
Fair
value
2007
$’000
Carrying
amount
2006
$’000
Fair
value
2006
$’000
1,455
1,536
(81)
3,350
3,544
(194)
1,455
1,536
(81)
2,018
2,167
(149)
21
Commitments
(a) Operating lease commitments
At 31 December 2007, the Group and the Company have commitments for future
minimum lease payments under non-cancellable operating leases as follows:
The Group leases land, warehouse and factory facilities under operating leases. The
leases typically run for an initial period of two to thirty years, with an option to renew
after that date. Lease payments are usually increased annually to reflect market rentals.
None of the leases includes contingent rentals.
Group
2007
2006
$’000
$’000
Company
2007
2006
$’000
$’000
Payable:
Within 1 year
After 5 years
453
509
362
343
1,503
1,621
1,449
1,374
14,795
14,342
14,795
14,342
16,751
16,472
16,606
16,059
(b) Operating lease receivables
The Group leases out its leasehold building owned by the Company (refer to Note 3).
Non-cancellable operating lease rentals are receivable as follows:
Group and Company
2007
2006
$’000
$’000
Receivable:
Within 1 year
1,350
1,067
463
1,201
1,813
2,268
The leases typically run for an initial period of two to three years, with an option to
renew the lease after that date. Usually, there is no change in lease rentals during the
lease period.
I 75
21
Commitments (cont’d)
(c)
Capital commitments
At 31 December 2007, the Group has the following commitments:
Group
2007
2006
$’000
$’000
Capital expenditure contracted but not
provided for in the financial statements
22
43
Company
2007
2006
$’000
$’000
7
–
–
Related parties
For the purpose of these financial statements, parties are considered to be related to the
Group if the Group has the ability, directly or indirectly, to control the party or exercise
significant influence over the party in making financial and operating decisions, or vice
versa, or where the Group and the party are subject to common control or common
significant influence. Related parties may be individual or other entities. An affiliated
corporation refers to a corporation other than a subsidiary and associated corporation,
which is directly or indirectly under common management control or significant influence
of certain shareholders of the Company.
Other related party transactions
Other than those disclosed elsewhere in the financial statements, the transactions with
related parties are as follows:
Group
2007
$’000
2006
$’000
Affiliated corporations
Rental and miscellaneous expenses
Rental income
103
90
84
82
22
Related parties (cont’d)
Key management personnel compensation
Key management personnel of the Group are persons having the authority and responsibility
for planning, directing and controlling the activities of the entity. The directors, department
heads and the chief executive officer are considered as key management personnel of the
Group.
Group
2007
$’000
2006
$’000
Short-term employee benefits
– directors
– other key management personnel
23
1,497
1,581
698
644
2,195
2,225
Subsequent events
On 6 March 2008, the Group entered into a joint venture agreement with Supreme Oilfield
Services Pte Ltd (SOS) to incorporate a new joint venture company, Supreme Energy Pte.
Ltd. with a share capital of US$1 million in which the Group and SOS own 60% and 40%
respectively. In accordance with the joint venture arrangement, both parties will extend a
further US$2.5 million to Supreme Energy Pte. Ltd. in proportion to the respective
shareholdings, in the form of interest-free shareholders’ loan.
24
New accounting standards and interpretations not yet adopted
The Group has not applied the following accounting standards (including its consequential
amendments) and interpretations that have been issued as of the balance sheet date but
are not yet effective:
FRS 23
Borrowing Costs
FRS 108
Operating Segments
INT FRS 111
FRS 102 Group and Treasury Share Transaction
INT FRS 112
Service Concession Arrangements
FRS 23 will become effective for the Group’s financial statements for the year ending 31
December 2009. FRS 23 removes the option to expense borrowing costs and requires that
an entity to capitalise borrowing costs directly attributable to the acquisition, construction
or production of a qualifying asset as part of the cost of that assets.
I 77
24
New accounting standards and interpretations not yet adopted
(cont’d)
FRS 108 will become effective for the Group’s financial statements for the year ending 31
December 2009. FRS 108, which replaces FRS 14 Segment Reporting, requires identification
and reporting of operating segments based on internal reports that are regularly reviewed
by the Group’s chief operating decision maker in order to allocate resources to the segment
and to assess its performance.
Management is currently assessing the impact of FRS 108 on the format and extent of
disclosures presented in the financial statements. This standard does not have any impact
on the Group’s financial result or position.
The Group has not considered the impact of accounting standards issued after the balance
sheet date.
Supplementary Information
(SGX-ST Listing Manual disclosure requirements)
1 Directors’ remuneration – Group and Company
The number of directors in each of the remuneration bands are as follows:
Executive
Directors
Nonexecutive
Directors
Total
$500,000 and above
–
–
–
$250,000 to below $500,000
4
–
4
Below $250,000
–
3
3
Total
4
3
7
2007
2 Interested person transactions
The number of directors in each of the remuneration bands are as follows:
Interested person
Aggregate value
of all transactions
(excluding transactions
conducted under
a shareholders’
mandate pursuant
to Rule 920)
$’000
Aggregate value of
all transactions
conducted under
a shareholders’
mandate pursuant
to Rule 920 of the
SGX Listing Manual
$’000
–
–
I 79
Shareholding statistics as at 17 March 2008
Distribution of Shareholders by Size of Shareholdings as at 17 March 2008
Size of
Shareholdings
No. of
Shareholders
%
No. of Shares
%
1 - 999
106
9.42
48,748
0.02
1,000 - 10,000
389
34.58
1,925,619
0.73
10,001 - 1,000,000
617
54.84
40,765,958
15.42
13
1.16
221,631,482
83.83
1,125
100.00
264,371,807
100.00
1,000,001 and above
TOTAL
Twenty Largest Shareholders as at 17 March 2008
No.
Shareholder’s Name
Number of Shares Held
%
1
HOE LEONG CO. (PTE.) LTD.
158,994,276
60.14
2
TAT HONG HOLDINGS LTD
14,253,800
5.39
3
KUAH GEOK LIN
8,820,924
3.34
4
KUAH GEOK KHIM
8,750,924
3.31
5
KUAH GEOK KOON
8,750,924
3.31
6
QUAH YOKE HWEE
8,750,924
3.31
7
KUAH GEOK KHIM
4,228,910
1.60
8
KIM ENG SECURITIES PTE. LTD.
2,138,500
0.81
9
OCBC SECURITIES PRIVATE LTD
1,698,200
0.64
10
DBS VICKERS SECURITIES (SINGAPORE) PTE LTD
1,535,100
0.58
11
ONG MUN WAH
1,414,000
0.53
12
NG KIM TECK
1,215,000
0.46
13
NUN KWONG HOLDINGS PTE LTD
1,080,000
0.41
14
UOB KAY HIAN PTE LTD
947,282
0.36
15
NOMURA SINGAPORE LIMITED
719,000
0.27
16
PHILLIP SECURITIES PTE LTD
697,350
0.26
17
CHEW CHENG
670,000
0.25
18
S.T.G ENGINEERING PTE LTD
590,000
0.22
19
LIM KIM PON
554,000
0.21
20
DBS NOMINEES PTE LTD
523,500
0.20
226,332,614
85.60
TOTAL
Shareholding Statistics as at 17 March 2008
Class of shares
:
Ordinary shares fully paid
Voting rights
:
One vote per share
No. of issued and paid-up shares
:
264,371,807
Register of Substantial Shareholders as at 17 March 2008
Direct Interest
Deemed Interest
No. of Shares
%
158,994,276
60.14
–
–
15,463,000
5.85
–
–
Kuah Geok Lin
8,820,924
3.34
158,994,276 *
60.14
Kuah Geok Khim
8,750,924
3.31
158,994,276 *
60.14
Kuah Geok Koon
8,750,924
3.31
158,994,276 *
60.14
Quah Yoke Hwee
8,750,924
3.31
158,994,276 *
60.14
Mdm Kuah Geok Khim
4,228,910
1.60
158,994,276 *
60.14
Tat Hong Holdings Ltd
No. of Shares
%
Note:
*
Messrs Kuah Geok Lin, Kuah Geok Khim, Kuah Geok Koon, Quah Yoke Hwee and Mdm Kuah Geok Khim are
deemed to be interested in the shares held by Hoe Leong Co. (Pte.) Ltd. in the Company.
I 81
Distribution of Warrantholders by Size of Warrantholdings
as at 17 March 2008
Size of
Warrantholdings
No. of
Warrantholders
%
No. of Warrants
%
1 - 999
1,000 - 10,000
10,001 - 1,000,000
1,000,001 and above
369
356
53
2
47.31
45.64
6.79
0.26
108,212
970,671
5,012,747
12,722,434
0.58
5.16
26.64
67.62
TOTAL
780
100.00
18,814,064
100.00
Twenty Largest Warrant Shareholders as at 17 March 2008
No.
Warrantholder’s Name
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HOE LEONG CO. (PTE.) LTD.
TAT HONG HOLDINGS LTD
KUAH GEOK LIN
KUAH GEOK KHIM
KUAH GEOK KOON
QUAH YOKE HWEE
KUAH GEOK KHIM
HO KIAU SENG
ZEN PROPERTY MANAGEMENT
DBS VICKERS SECURITIES (SINGAPORE) PTE LTD
LUI SIE LOONG
TAN JUI YAK
ONG MUN WAH
CHUNG TZE TONG
KOH CHEOH LIANG VINCENT
UOB KAY HIAN PTE LTD
HENG HWA HENG
OCBC SECURITIES PRIVATE LTD
TOH SOO CHENG
NUN KWONG HOLDINGS PTE LTD
TOTAL
Number of Warrants Held
11,356,734
1,365,700
630,066
625,066
625,066
625,066
302,065
276,200
227,000
135,900
130,000
101,351
101,000
100,000
100,000
96,070
69,000
50,974
50,125
45,000
17,012,383
%
60.36
7.26
3.35
3.32
3.32
3.32
1.61
1.47
1.21
0.72
0.69
0.54
0.54
0.53
0.53
0.51
0.37
0.27
0.27
0.24
90.43
Percentage of Shareholding in the Hands of Public
As at 17 March 2008, approximately 18.92% of Hoe Leong’s issued ordinary shares is held by the
public and, therefore, Rule 723 of the Listing Manual is complied with.
Notice of Annual General Meeting
(Company Registration No. 199408433W)
(Incorporated in the Republic of Singapore)
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at
Jurong Country Club, 9 Science Centre Road, Singapore 609078 (Albizia 1 at Level 2) on Thursday,
24 April 2008 at 11.00 a.m. to transact the following business:-
AS ORDINARY BUSINESS
1.
To receive and adopt the Audited Accounts of the Company for the financial year ended
31 December 2007 and the Directors’ Report and the Auditors’ Report thereon.
(Resolution 1)
2.
To declare a final one-tier tax-exempt dividend of 0.5 Singapore cents per ordinary share for
the financial year ended 31 December 2007.
(Resolution 2)
3.
To re-elect the following Directors retiring by rotation pursuant to Article 95(2) of the
Company’s Articles of Association:
(i)
Mr Kuah Geok Lin
(Resolution 3)
(ii)
Mr Ang Mong Seng
(Resolution 4)
Mr Kuah Geok Lin, who is an Executive Director, if re-elected, will continue to serve as a
member of the Nominating Committee and will be considered as Non-Independent Director.
In accordance with the requirements of Rule 704(8) of the Singapore Exchange Securities
Trading Limited’s Listing Manual, Mr Ang Mong Seng, who is Non-Executive Director, if
re-elected, will continue to serve as the Chairman of the Remuneration Committee as well
as a member of the Audit Committee and Nominating Committee and will be considered as
an Independent Director.
4.
To approve payment of Directors’ fees of $110,000 for the financial year ended 31 December
2007 (2006 : $110,000).
(Resolution 5)
5.
To re-appoint KPMG as auditors of the Company and to authorise the Directors to fix their
remuneration.
(Resolution 6)
I 83
AS SPECIAL BUSINESS
6.
To consider and, if thought fit, to pass the following as an ordinary resolution with or
without modifications:Authority To Allot And Issue Shares
”That pursuant to Section 161 of the Companies Act, Chapter 50, and the Listing Rules of
the Singapore Exchange Securities Trading Limited, approval be and is hereby given to the
Directors of the Company at any time to such persons and upon such terms and for such
purposes as the Directors may in their absolute discretion deem fit, to:
(a)
(b)
(i)
issue shares in the capital of the Company whether by way of rights, bonus or
otherwise;
(ii)
make or grant offers, agreements or options that might or would require shares
to be issued or other transferable rights to subscribe for or purchase shares
(collectively, “Instruments”) including but not limited to the creation and issue of
warrants, debentures or other instruments convertible into shares;
(iii)
issue additional Instruments arising from adjustments made to the number of
Instruments previously issued in the event of rights, bonus or capitalisation issues;
and
(notwithstanding the authority conferred by the shareholders may have ceased to be in
force) issue shares in pursuance of any Instrument made or granted by the Directors
while the authority was in force,
provided always that
the aggregate number of shares to be issued pursuant to this resolution (including
shares to be issued in pursuance of Instruments made or granted pursuant to this
resolution) does not exceed 50% of the Company’s total number of issued shares
excluding treasury shares, of which the aggregate number of shares (including shares
to be issued in pursuance of Instruments made or granted pursuant to this resolution)
to be issued other than on a pro rata basis to shareholders of the Company does not
exceed 20% of the total number of issued shares excluding treasury shares of the
Company, and for the purpose of this resolution, the total number of issued shares
excluding treasury shares shall be the Company’s total number of issued shares excluding
treasury shares at the time this resolution is passed, after adjusting for:
(a)
new shares arising from the conversion or exercise of convertible securities,
(b)
new shares arising from exercising share options or vesting of share awards
outstanding or subsisting at the time this resolution is passed provided the options
or awards were granted in compliance with Part VIII of Chapter 8 of the Listing
Manual of the Singapore Exchange Securities Trading Limited, and
(c)
any subsequent bonus issue, consolidation or subdivision of the Company’s shares,
and
such authority shall, unless revoked or varied by the Company at a general meeting,
continue in force until the conclusion of the next Annual General Meeting or the date
by which the next Annual General Meeting of the Company is required by law to be
held, whichever is the earlier.”
(Resolution 7)
7.
To transact any other ordinary business which may be properly transacted at an Annual
General Meeting.
NOTICE OF BOOKS CLOSURE
NOTICE IS HEREBY GIVEN that the Register of Members and Share Transfer Books of the Company
will be closed on 9 May 2008 to determine the shareholders’ entitlements to the proposed dividend.
Duly completed registrable transfers of shares received by the Company’s Share Registrar, Tricor
Barbinder Share Registration Services (a business division of Tricor Singapore Pte. Ltd.) at 8 Cross
Street, #11-00 PWC Building, Singapore 048424, up to 5.00 p.m. on 8 May 2008 will be registered
to determine shareholders’ entitlements to the proposed dividends. Subject as aforesaid, shareholders
whose securities accounts with The Central Depository (Pte) Limited are credited with ordinary
shares in the capital of the Company as at 5.00 p.m. on the Book Closure Date will be entitled
to the dividend.
The proposed dividend, if approved by the members at the Annual General Meeting, will be paid
on 23 May 2008.
BY ORDER OF THE BOARD
EILEEN KOH (MS)
Company Secretary
8 April 2008
Singapore
I 85
Explanatory Notes:
1.
The ordinary resolution in item 6 above is to authorise the Directors of the Company from
the date of the above Meeting until the next Annual General Meeting to issue shares and
convertible securities in the Company up to an amount not exceeding in aggregate 50 per
cent of the total number of issued shares excluding treasury shares of the Company of
which the total number of shares and convertible securities issued other than on a pro rata
basis to existing shareholders shall not exceed 20 per cent of the total number of issued
shares excluding treasury shares of the Company at the time the resolution is passed, for
such purposes as they consider would be in the interests of the Company. Rule 806(3) of
the Listing Manual of Singapore Exchange Securities Trading Limited currently provides that
the total number of issued shares excluding treasury shares of the Company for this purpose
shall be the total number of issued shares excluding treasury shares at the time of this
resolution is passed (after adjusting for new shares arising from the conversion of convertible
securities or share options on issue at the time this resolution is passed and any subsequent
consolidation or subdivision of the Company’s shares). This authority will, unless revoked or
varied at a general meeting, expire at the next Annual General Meeting of the Company.
Notes:
1.
A member of the Company entitled to attend and vote at the Meeting is entitled to appoint
not more than two proxies to attend and vote in his stead.
2.
A proxy need not be a member of the Company.
3.
If the appointor is a corporation, the proxy must be executed under seal or the hand of its
duly authorised officer or attorney.
4.
The instrument appointing a proxy must be deposited at the registered office of the Company
at 6 Clementi Loop, Singapore 129814 not later than 48 hours before the time appointed
for the Meeting.
Important:
(Company Registration No. 199408433W)
(Incorporated in the Republic of Singapore)
1.
For investors who have used their CPF monies to buy Hoe Leong
Corporation Ltd. shares, this Annual Report 2007 is forwarded to
them at the request of their CPF Approved Nominees and is sent
FOR INFORMATION ONLY.
PROXY FORM
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 vote should contact their CPF Approved
Nominees.
I/We
(Name)
of
being *a member/members of Hoe Leong Corporation Ltd. (the “Company”), hereby appoint
Name
Address
NRIC/
Passport No.
(Address)
Proportion of
shareholdings (%)
*and/or
or failing *him/them, the Chairman of the meeting as *my/our *proxy/proxies to vote for *me/us on *my/our
behalf and, if necessary, to demand a poll, at the Annual General Meeting of the Company to be held at
Jurong Country Club, 9 Science Centre Road, Singapore 609078 (Albizia 1 at Level 2) on 24 April 2008,
Thursday at 11.00 a.m. and at any adjournment thereof.
*I/We direct *my/our proxy/proxies to vote for or against the Ordinary Resolutions to be proposed at the
Annual General Meeting as indicated with an “X” in the spaces provided hereunder. If no specific directions
as to voting are given, the *proxy /proxies will vote or abstain from voting at *his/their discretion.
Ordinary Resolutions
For
1.
To receive and adopt the Directors’ Report and Audited Accounts for the financial year
ended 31 December 2007 and the Auditors’ Report thereon.
(Resolution 1)
2.
To declare a final one-tier tax-exempt dividend of 0.5 Singapore cents per ordinary share
for the financial year ended 31 December 2007.
(Resolution 2)
3.
To re-elect the following Directors retiring by rotation pursuant to Article 95(2) of the
Companyís Articles of Association:(i) Mr Kuah Geok Lin
(Resolution 3)
(ii) Mr Ang Mong Seng
(Resolution 4)
4.
To approve payment of Directors’ fees of $110,000 for the financial year ended 31
December 2007.
(Resolution 5)
5.
To re-appoint KPMG as Auditors of the Company and to authorise the Directors to fix
their remuneration.
(Resolution 6)
6.
To approve the Ordinary Resolution pursuant to Section 161 of the Companies Act, Chapter
50.
(Resolution 7)
Against
Total Number of Shares Held
Dated this
day of
✂
Signature(s) of Member(s)/Common Seal
* Delete accordingly
2008
Notes :
1. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not
more than two proxies to attend and vote in his stead. Such proxy need not be a member of the Company.
2. Where a member of the Company appoints two proxies, he shall specify the proportion of his shareholding (expressed
as a percentage of the whole) to be represented by each such proxy.
3. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly
authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be
executed either under its common seal or under the hand of its attorney or duly authorised officer.
4. A corporation which is a member of the Company may authorise by resolution of its directors or other governing
body such person as it thinks fit to act as its representative at the Annual General Meeting, in accordance with its
Articles of Association and Section 179 of the Companies Act, Chapter 50 of Singapore.
5. The instrument appointing proxy or proxies, together with the power of attorney or other authority (if any) under
which it is signed, or notarially certified copy thereof, must be deposited at the registered office of the Company at
6 Clementi Loop, Singapore 129814 not later than 48 hours before the time set for the Annual General Meeting.
6. A member should insert the total number of shares held. If the member has shares entered against his name in the
Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), he should insert
that number of shares. If the member has shares registered in his name in the Register of Members of the Company,
he should insert the number of shares. If the member has shares entered against his name in the Depository Register
and shares registered in his name in the Register of Members of the Company, he should insert the aggregate
number of shares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held by the
member of the Company.
7. 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 members of the
Company whose shares are entered against their names in the Depository Register, the Company may reject any
instrument appointing a proxy or proxies lodged if such members are not shown to have shares entered against their
names in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting as
certified by The Central Depository (Pte) Limited to the Company.
8. A Depositor shall not be regarded as a member of the Company entitled to attend the Annual General Meeting and
to speak and vote thereat unless his name appears on the Depository Register 48 hours before the time set for the
Annual General Meeting.
Contents
01 Mission Statement 02 Corporate
Profile 03 Corporate Information
04 Corporate Structure 05 Financial
Highlights 06 Chairman’s Statement
08 Operation Review 10 Board of
Directors 12 Key Management Team
13 Financial Statements 14 Corporate
Governance Report 27 Directors’
Report 33 Statement by Directors
34 Independent Auditors’ Report
36 Balance Sheets 37 Consolidated
Income Statement 38 Consolidated
Statement of Changes in Equity
39 Consolidated Cash Flow Statement
40 Notes to the Financial Statements
79 Supplementary Information
80 Shareholding Statistics
83 Notice of Annual General Meeting
– Proxy Form
HL(IFC).indd 1
4/2/08 12:06:19 AM
HL•COVER(03.03).ai
4/1/08
11:51:41 PM
www.hoeleong.com
6 Clementi Loop • Singapore 129814 • Tel : +65 6463 8666
• Fax : +65 6564 7252 • Registration No: 199408433W

- Hoe Leong Corporation

Transcription

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