ASL Marine Holdings Ltd

Transcription

1 V I S I O N ASL Marine Holdings Ltd Annual Report 2004

2 04 Chairman s Message 10 Board of Directors 14 Executive Officers 17 Corporate Information 20 Operations Review 24 Financial Highlights 26 Corporate Governance 39 Financial Reports

3 THE VISION FOR GROWTH 01 ASL Marine Holdings Ltd is a vertically-integrated marine company principally involved in shipbuilding, shiprepair, shipchartering and other marine related services, catering to customers mainly from Asia Pacific, South Asia, the Middle East and Europe. The Group started operations as a trader of scrapped steel material in 1974, and subsequently rode on the 1980s construction sector boom by undertaking building construction works. Strength in fluidity. An embodiment of balance and equilibrium, full of life, full of strength, two Chinese calligraphic brush strokes embrace the cover of the annual report. Rendered in opposing tandem, a semblance of harmony is beautifully created. Signifying ASL Marine s second year as a publicly-listed Company, the two simplistic strokes move with a constant evolving cycle. ASL Marine takes on the same evolution by reflecting on the past and leveraging on its strong foundation to surge forward with its vision. With subtlety, a debossed space encloses the two strokes. Distinguishably seated in the centre, the Chinese character, (vision) crystallises. A vision to see beyond. A vision for growth. Guided by its vision to be a key player in the marine sector, the Group undertook ship-breaking activities in 1986 before venturing into shipbuilding and shiprepair - where it successfully constructed its first barge and tugboat in 1988 and 1990, respectively. In 1989, the Group started to tap the growing market for shipchartering by providing charter of tugboats and barges and other marine logistics services. Headquartered and listed in Singapore, the Group owns and operates two shipyards in Singapore and Batam, providing a comprehensive range of marine engineering services including the building and repair of increasingly larger and more sophisticated vessels. Equipped with a fleet consisting mainly of tugboats and barges, ASL Marine has also carved a niche in providing shipchartering services to the marine and offshore infrastructure sector and Indonesia's coal energy industry. In May 2004, the Group successfully acquired the Tabang Coal Concession in Tabang, East Kalimantan which not only ensures a minimum utilisation of the Group's shipchartering fleet, but also enables the Group to move up the value chain in the transportation of coal.

4 02 Water flows humbly to the lowest level. Nothing is weaker than water, Yet for overcoming what is hard and strong, Nothing surpasses it. Lao Tzu

5 03 Moving with pace and fluidity, ASL Marine exudes quiet strength and flexibility in overcoming any obstacles. Priding ourselves in being swift and nimble, ASL Marine continues to anticipate and capitalise on new opportunities in the marine industry.

6 CHAIRMAN S MESSAGE 04 Dear Shareholders If there is a phrase to describe the financial year ended 30 June 2004 for ASL Marine, it would be Charting New Horizons. Upholding this mantra with a strong conviction, our vision for growth has guided our decision making and served to further differentiate us from the competition.

7 05 ASL Marine delivered a strong year with solid revenue gains and continued profitability across our portfolio - results which demonstrate that we are winning and growing across our business segments amidst a competitive market. We have also taken significant measures to increase productivity and tightly focus on business development efforts. I am heartened to say that the Group has successfully navigated through challenges such as high steel and fuel prices, and is now moving into the new financial year with a robust order book totalling $196 million. Revenue surged almost 50% to $118.3 million with major contributions from shipbuilding and shiprepair operations, while net attributable profit increased 9.4% to $9.9 million. During the year, our core business segments of shipbuilding, shiprepair and shipchartering contributed 48.6%, 23.3% and 28.1% to Group revenue and 22.8%, 44.1% and 33.1% to gross profit, respectively. Most importantly, we achieved our aim of delivering a better second half performance than the first half which had carried higher repair, improvement and maintenance, one-off mobilization, and third party charter costs. Group revenue was higher at $71.7 million in the second half of FY2004 compared to $46.6 million in the first half of FY2004, while net attributable profit was also stronger at $7.0 million compared to $2.9 million, respectively. For the year ended 30 June 2004, earnings per share amounted to 5.02 cents compared with 5.38 cents previously, while net tangible asset value per share rose 23.4% to cents from cents. RIDING THE GROWTH WAVE Our integrated marine operations enable our lines of business to act autonomously and compete collectively. With a truly integrated corporate structure, we are also able to strive for the perfect customer experience each time, every time - an experience that is seamless, efficient, and above all, convenient. At ASL Marine, we pride ourselves in being swift and nimble in the marketplace, anticipating opportunities and capitalizing them on the unexpected. A specific example would be our strategy in moving up the coal mining value chain.

8 CHAIRMAN S MESSAGE (continued) 06 Through an agreement between our 50%-owned associate company, ASL Energy, with Oriental Minerals Corporation and Manhattan Investments, we acquired exclusive rights to conduct mining operations and marketing of coal for a mining concession located at Tabang, East Kalimantan, Indonesia. Incidentally, it may be of interest to you that Kalimantan is one of the largest coal exporting regions in Indonesia. Commencing with just one set of tugboat and barge in September 2003, our operations in East Kalimantan was rapidly expanded to 20 sets of tugboats and barges by end The highly successful and profitable deployment of our fleet in Indonesian waters spurred us on to double the fleet size to 40 sets of tugboats and barges by December Given this buoyant scenario, it was only natural and fitting that we secure strategic stakes in other parts of the supply chain, and own mining and marketing rights. With these rights, we are in a more advantageous position to ensure at least a minimum utilization of the fleet deployed by ASL Energy. We also implemented various synergistic elements to our coal transportation business, one of which is the commencement of the construction of a floating terminal - a structure which will complement the existing coal terminal in Balikpapan, East Kalimantan by serving as a mobile offshore repository of coal, enabling the unloading of coal from our barges and its subsequent loading onto ocean-going vessels. Market opportunities in the region are immense and we look optimistically towards FY2005 and beyond. OTHER MILESTONES We scored a major corporate milestone in April 2004 when ASL Shipyard Pte Ltd, one of the Group s subsidiaries received an ISO 9001:2000 certification for its shipbuilding and shiprepair operations. Awarded by Lloyd's Register Quality Assurance (LRQA), this ISO certification bears testimony to our commitment towards a high standard of operational efficiency and quality-based processes in building and repairing vessels.

9 07 Aside from having international quality management systems in place, any successful business needs to recruit and retain good people. On this note, we have made a concerted effort to appoint established professionals to further enhance the Group's capabilities. Mr S. Thillainathan, who brings with him 29 years of extensive experience in the marine industry, was appointed Group Legal Manager in July More recently, Mr Mok Kim Whang, a veteran with 37 years of knowledge and experience in the marine sector, came onboard as Senior General Manager taking charge of the Group's shipbuilding and shiprepair operations. DIVIDEND In light of the commendable results, the Directors have recommended a first and final one-tier tax-exempt dividend of 1.4 cents per ordinary share. CREATING SHAREHOLDER VALUE Shareholder value is maintained and enhanced through foresight, combined with excellence in execution. ASL Marine has extensive expertise, energetic and dedicated employees that are capable of exploring the opportunities ahead. We set our sights high, driven by a strategic vision to achieve continued growth and good profitability leading to increased shareholder value. Finally, I would like to thank you again for being part of ASL Marine. I appreciate your confidence and look forward to enjoying future successes with you. Ang Kok Tian Chairman and Managing Director

10 08 I saw two clouds at morning, Tinged with the rising sun, And in the dawn they floated on, And mingled into one... John Gardiner Brainard

11 09 Constantly reshaping, regrouping and regenerating, ASL Marine seeks to anticipate and evolve with the changing winds of the economic landscape.

12 BOARD OF DIRECTORS 10 Ang Kok Tian aged 43 Chairman and Managing Director Mr Ang was appointed an Executive Director of the Company in October 2000, and Chairman of the Board and Managing Director in January Mr Ang has been with the Group for more than 15 years and has extensive knowledge and experience in the industry and is instrumental in developing the shipbuilding, shiprepairs and shipchartering business of the Group. Mr Ang is in charge of the Group s business strategies and direction, corporate plans and policies as well as the general management of the Group. In particular, he is in charge of the shipbuilding and shiprepair division and is responsible for all aspects of the shipyard s operations, including estimations, negotiations and contract finalisation. Mr Ang began his career at Ang Sin Liu Hardware, handling administration, purchasing and marketing for the company. He graduated from the National University of Singapore in 1986 where he received his Bachelor s Degree in Science.

13 11 Ang Ah Nui aged 40 Deputy Managing Director Mr Ang was appointed an Executive Director of the Company in October 2000 and Deputy Managing Director in January Mr Ang, having been with the Group for more than 15 years, has extensive industry knowledge and experience and is instrumental in seeking new markets for the business. Mr Ang is jointly responsible for the Group s business strategies and direction, corporate plans and policies, and for the general management of the Group s shipchartering operations, including business development and operations. Ang Kok Eng aged 37 Executive Director Mr Ang was appointed an Executive Director of the Company in October Mr Ang is responsible for developing marketing strategies, identifying new businesses/markets and customers for Asia. Mr Ang joined the Group on 1 December 1994 and was responsible for the operations of the shipyard in Batam, Indonesia. He is also in charge of the Group s management information systems. Prior to joining the Group, Mr Ang was the Product Manager of Navystar Industrial Co. Ltd, a toy manufacturing company based in Hong Kong and the PRC. He graduated from the University of Michigan, USA in 1992 with a Bachelor of Science Degree in Electrical Engineering.

14 BOARD OF DIRECTORS (continued) 12 Ang Kok Leong aged 35 Executive Director Mr Ang was appointed an Executive Director of the Company in October Mr Ang is responsible for developing marketing strategies, identifying new businesses/markets and customers for Europe and Middle East. Mr Ang joined the Group on 1 January 1995 as a Marketing Executive in the shipbuilding division. He graduated from Carnegie Mellon University in 1994 with a Bachelor of Science Degree in Industrial Management. David Hwang Soo Chin aged 55 Independent Director Mr Hwang joined the Board in January Mr Hwang is currently the President of SCA Packaging Asia, a provider of packaging products and solutions with operations in the PRC, Singapore, Batam and Malaysia. Mr Hwang was employed by leading packaging companies from Australia and the United Kingdom in various senior positions during the period In , he was appointed Executive Director of Tuan Sing Holdings Limited to oversee its manufacturing and construction activities. In , Mr Hwang worked in a major Indonesian Group where he was responsible for the Group s Retail and Property operations in Indonesia. Between , Mr Hwang was appointed Group Managing Director and Chief Executive Officer of Tuan Sing Holdings Limited. He was appointed as Chairman of SPP Limited, Gul Technologies Ltd and Vice- Chairman of the Grand Hotel Group Ltd which is listed on the Australian Stock Exchange. He is currently an Independent Director of New Lakeside Holdings Ltd, a Sesdaq listed company. He holds a Bachelor of Engineering (Chemical) Degree and a Diploma in Computer Science from the University of Queensland and is currently a Fellow member of the Singapore Institute of Directors.

15 13 Andre Yeap Poh Leong aged 43 Independent Director Mr Yeap joined the Board in January Mr Yeap is currently a Senior Counsel at Rajah & Tann. Prior to joining Rajah & Tann in 2004, he ran his own practice under the name Andre Yeap & Co. Mr Yeap had worked in various law firms in Singapore. He was a Senior Litigation Partner at Allen & Gledhill where he had worked from 1987 to 2000, before joining the partnership of Lee & Lee in His practice focuses on banking, commercial and corporate litigation with special emphasis on securities and stockbroking-related litigation as well as construction litigation, including ship and oil-rig matters, both in Court and in arbitration. He was appointed Senior Counsel on 4 January He graduated from the National University of Singapore with a Bachelor s Degree in Law and is a member of the Singapore International Arbitration Centre. Damian Hong Chin Fock aged 56 Independent Director Mr Hong joined the Board in May Mr Hong is currently an external consultant to Allen & Gledhill and also sits on the Board of Eng Wah Organisation Limited as an Independent Director. He lectures on a part time basis at Singapore Management University and is an Examiner of the Taxation Paper for ACCA. Mr Hong was employed by the Inland Revenue Authority of Singapore before joining KPMG in He retired from KPMG as Tax Principal in He graduated from University of Singapore with a Bachelor of Social Science Degree (Upper Class II Honours in Economics).

16 EXECUTIVE OFFICERS 14 Lim Soon Teck Mok Kim Whang Lewis Roger Martin Thillainathan s/o S Sivalingamoorthy Tan Thiam Hee aged 35 Group Financial Controller and Company Secretary Mr Tan joined the Company in May 2003 and is responsible for overseeing the finance and accounting functions of the Group, including corporate secretarial and legal matters. Prior to joining the Company, Mr Tan has about seven years of accounting and financial management experience in a publicly-listed and diversified Group, Hua Kok International Ltd, which has business spanning across industries such as building construction, manufacturing and trading. His work experience covered both Singapore and overseas, including China, Indonesia, Malaysia and Australia. Previously, he worked as an Auditor in public accounting firms for about three years. Mr Tan holds a Bachelor of Accountancy Degree and a Master of Business Administration (International Business) Degree from Nanyang Technological University. He is a member of the Institute of Certified Public Accountants of Singapore and the Singapore Institute of Directors. Tan Thiam Hee Lee You Bom Tay Kes Siong

17 15 Thillainathan s/o S Sivalingamoorthy aged 54 Group Legal Manager Mok Kim Whang aged 53 Senior General Manager (Shipbuilding and Shiprepair) Tay Kes Siong aged 54 General Manager (Shipchartering) Mr S.Thillainathan joined the Company in July 2004 and is responsible for all legal and insurance matters for the Group. Mr S.Thillainathan has more than 29 years experience practicing and handling legal and insurance matters in the marine industry. Before joining the Company, Mr S.Thillainathan was employed as Senior Manager, Legal, by Labroy Marine Limited for more than 7 years. Prior to that he worked as Vice President, Legal and Secretariat of Sembawang Group for more than 16 years. Mr S.Thillainathan holds a Bachelor of Laws Degree (2nd Lower Honours), from University of Singapore in 1972, and was admitted as an Advocate & Solicitor of the High Court of Singapore in Mr Mok joined the Company in August 2004 and is responsible for setting business strategy and direction for the shipyard division, including management of its operation. Prior to joining the Company, Mr Mok served as Senior Vice President of Singapore Technologies Marine, Commercial Business since From 1989 to 1999, he rose from the position of production manager to Senior General Manager during his tenure at Pan United Shipyard. Over the years, Mr Mok held managerial positions across business development, ship-repair, engineering and project management functions in pre-eminent companies. These include Straits Steamship, Neptune Orient Lines and Keppel Shipyard. Mr Mok is a Marine Engineer by training and also successfully completed the Program for Management Development in Harvard Business School in Mr Tay joined the Group in October 2002 and is responsible for managing the shipping operations of the Group, including marketing, overall fleet scheduling, maintenance, crew management, shipping agencies, freight forwarding and freight documentation. Mr Tay has more than 30 years of experience in the shipping and marine industry. Prior to joining the Group, Mr Tay was a Marine Surveyor and a Director of Marine Management Surveyors and Services Pte Ltd. The company carried out marine and cargo surveys, consultancy, sea trials, compass adjustments, pre-purchase inspections, shipping agencies, forwarding and crew management.

18 EXECUTIVE OFFICERS (continued) 16 Lewis Roger Martin aged 54 Marketing Manager (Shipchartering) Lee You Bom aged 56 Manager (Shiprepair) Lim Soon Teck aged 52 Manager (Newbuilding) Mr Lewis joined the Group in July 1999 and is responsible for its sales and marketing functions, including client relationship management. Mr Lewis has over 32 years of experience in the shipping industry. He was appointed Shipping Manager cum Purchaser of M J Batty Pte Ltd in Subsequently, he joined Wallem Towage & Salvage Pte Ltd in 1974 where he spent 8 years as its Shipping/Operations Manager. In 1979, he was appointed as Shipbroker of Wallem Shipping (S) Pte Ltd. He then joined Ban Choon Shipping Pte Ltd in 1984 as the Shipping/Yard Manager where he spent 14 years, prior to joining the Group. Mr Lee is the manager for the Group s shiprepair division, he has been with the Group since June Mr Lee has more than 25 years of experience in the management of shipbuilding and shiprepair operations. Between 1978 and 1982, Mr Lee was a Manager with Tacoma Shipbuilding & Engineering Co Ltd and Maritime Consultants Co Ltd in Korea. From 1982 to 1997, he was with Otto Industrial Co Pte Ltd covering a wide spectrum of management functions. Prior to joining the Group, he was in P.T. Batamas (a subsidiary of Otto Industrial Co Pte Ltd) between 1997 to 2001 as Production/ Marketing Manager. Mr Lee holds a Bachelor of Marine Engineering Degree from National Fisheries University of Pusan, Korea in 1972 and Master of Marine Engineering Degree from Korea Maritime University in Mr Lim is the manager for the Group s newbuilding division, he has been with the Group since May He is responsible for the Group's shipbuilding and other marine engineering services including estimation, production scheduling, facilities planning and others. Mr Lim spent the first 10 years of his career with Maroil Shipbuilding and Engineering Pte Ltd where he worked up to the position of Estimating/Technical Manager. Subsequently, he joined Marine Technic Pte Ltd as an Operations Manager where he spent 5 years. He then joined Dynamic Marine Pte Ltd for two years as a Project Estimator before joining Conan Wu & Associates in 1991 as Site Superintendent.

19 CORPORATE INFORMATION 17 BOARD OF DIRECTORS Executive Ang Kok Tian (Chairman) Ang Ah Nui Ang Kok Eng Ang Kok Leong Independent, Non-Executive David Hwang Soo Chin Andre Yeap Poh Leong Damian Hong Chin Fock AUDIT COMMITTEE David Hwang Soo Chin (Chairman) Andre Yeap Poh Leong Damian Hong Chin Fock NOMINATING COMMITTEE Andre Yeap Poh Leong (Chairman) Damian Hong Chin Fock David Hwang Soo Chin REMUNERATION COMMITTEE Damian Hong Chin Fock (Chairman) David Hwang Soo Chin Andre Yeap Poh Leong COMPANY SECRETARY Tan Thiam Hee REGISTERED OFFICE 19 Pandan Road Singapore Telephone: Facsimile: Website: INCORPORATION DATA Place of Incorporation: Singapore Date of Incorporation: 4 October 2000 Company Registration No N LISTING ASL Marine Holdings Ltd s shares were listed on the Singapore Exchange Securities Trading Limited on 17 March 2003 SHARE REGISTRAR & SHARE TRANSFER OFFICE M & C Services Private Limited 138 Robinson Road #17-00 The Corporate Office Singapore Telephone: Facsimile: AUDITORS KPMG Certified Public Accountants 16 Raffles Quay #22-00 Hong Leong Building Singapore Audit Partner-In-Charge: Roger Tay (first appointed as audit partner in respect of the financial year ended 30 June 2004) PRINCIPAL BANKER United Overseas Bank Limited DBS Bank Ltd SOLICITORS Ang & Partners

20 18 Between earth and earth s atmosphere, the amount of water remains constant; there is never a drop more, never a drop less. This is a story of circular infinity, of a planet birthing itself. Linda Hogan, Northern Lights, Autumn 1990

21 19 Constantly evolving and moving with infinity, the swirling water engulfs and overpowers. Taking on a similar movement and strength, ASL Marine s conscious effort in building larger and more sophisticated vessels has seen us grown from strength to strength.

22 OPERATIONS REVIEW 20

23 21 As a vertically-integrated marine company with shipbuilding, shiprepair and shipchartering operations, we have capitalised on our complementary resources and worked them in harmony to deliver the results. SHIPBUILDING ASL Marine s revenue from shipbuilding operations increased 63.6% to $57.5 million due to contributions from the construction of 13 tugboats and 33 barges in FY2004, compared to nine tugboats and 24 barges previously. In particular, the Group s conscious effort in building larger and more sophisticated vessels paid off as the average unit revenue recognised for tugboats increased by about 28% through contributions from six Azimuth Stern Drive tugboats which typically have a higher contract value. Among the 33 barges, ASL Marine also enjoyed 50% proportionate revenue of approximately $3.8 million for 13 barges built for ASL Energy. The shipbuilding operations achieved gross profit of $3.3 million, an increase of $1.1 million year-on-year. With stronger margins from the second half of FY2004, the Group recorded gross profit margin of 5.7% for the year. As at 30 June 2004, the Group has an outstanding order book of $158.9 million for shipbuilding. Approximately 68% of these projects are expected to be recognised within FY2005 and the balance will be substantially recognised in FY2006. As vessels with higher contract value and margins are due to be delivered in FY2005, the Group expects to generate higher revenue and gross profit margin from the shipbuilding operations. In order to expand our capability in building and repairing larger vessels, the Group is also currently building a 240m x 60m graving dry dock in our Batam shipyard. This is expected to be completed and operational in the first half of FY2006. SHIPREPAIRS AND OTHER MARINE RELATED SERVICES The revenue from shiprepairs and other marine related services almost doubled to $27.5 million due to the trading sales of vessels, cranes, winches and scrap metal which garnered approximately $10.2 million in FY2004 compared to $1.6 million previously. In addition, more shiprepair jobs were also undertaken during the period. Gross profit for this division increased to $6.4 million, but gross profit margin declined to 23.5% due to the substantially higher proportion of these trading sales items which generally have lower margins. In addition, several shiprepair jobs involved ship-plate replacement which also generally has lower margins, but they provide metal scraps which are sold and contribute to the Group's other income. In addition, when the 5,000 dwt floating dock facility in the Batam shipyard commences operation in the second half of FY2005, the Group expects to reap additional revenue and margin contribution correspondingly.

24 OPERATIONS REVIEW (continued) 22

25 23 SHIPCHARTERING AND RENTAL INCOME Revenue from shipchartering and rental operations increased by 11.9% to $33.2 million in FY2004, mainly due to the coal shipping contract secured with ASL Energy that commenced in September This contract is to support the $127 million contract that ASL Energy secured with PT. Pelayaran Segara Niaga Utama to transport coal in Indonesia waters for various coal concession over a five-year period. In FY2004, the Group recorded gross profit of $4.8 million and gross profit margin of 14.3% from this division. Stronger margins of 20% in the second half of FY2004 mitigated the substantially lower 8.6% margin in the first half of FY2004, which encountered lower vessels utilisation, higher costs of repair and improvement and third-party vessels charter, as well as oneoff mobilization costs incurred in deploying vessels to Indonesia for the coal transporting business. As at 30 June 2004, the Group has an outstanding order book of approximately $36.7 million for shipchartering. In addition, the Group also enjoys a substantial portion of shipchartering revenue that is short-term and ad-hoc in nature. For the year under review, the Group took delivery of three tugboats and 12 barges to cope with market demand. Further, we are also in active discussion with various parties to form strategic alliances/joint ventures to take advantage of the booming shipchartering market in the region. JOINTLY-CONTROLLED ENTITY OPERATIONS In FY2004, ASL Energy took delivery of 12 tugboats and 17 barges. As many more vessels are expedited to support ASL Energy s operations in Indonesia, most of the third parties vessels charter from local operators in Indonesia waters have been retired. Further, as more of our own vessels are called into service by ASL Energy, shipchartering margins are expected to further improve. The first shipment of coal from our Tabang Coal Concession is expected to leave Tabang by the end of first half of FY2005. As production of coal would take some time to reach its optimum capacity, the guaranteed minimal operating cashflow of US$2.3 million for FY2005 would be the likely gross profit contribution expected for the coal mining and marketing business. As part of our medium to longer term plans, the Group is building a 65,000 dwt floating terminal that we envision will play an important role in East Kalimantan s coal transportation network. The floating terminal is expected to be completed and operational by end of first half of FY2006. It is a strategic investment to the Group and serves to further strengthen our foothold in the Indonesian coal industry and thereby securing continuity to the operations there. INDUSTRY PROSPECTS The local marine industry is expected to continue its positive industry outlook. With a strong set of order books and well-established and verticallyintegrated operations that complement each other harmoniously, the Group expects to achieve revenue and profit growth for FY2005, barring the adverse impacts that may be caused by further increases in insurance premium and prices of steel and fuel.

26 FINANCIAL HIGHLIGHTS 24 REVENUE NET PROFIT FY FY FY FY FY FY FY FY FY FY ($ Million) ($ Million) REVENUE BY OPERATIONS FY2003 FY % 28.1% 37.6% 48.6% 17.9% 23.3% ($ Million) Shipbuilding : 35.1 Shiprepair : 14.1 Shipchartering : 29.7 ($ Million) Shipbuilding : 57.5 Shiprepair : 27.5 Shipchartering : 33.2

27 FINANCIAL HIGHLIGHTS 25 GROSS PROFIT BY OPERATIONS FY % FY % 44.3% 33.1% 40% 44.2% ($ Million) Shipbuilding : 2.2 Shiprepair : 5.6 Shipchartering : 6.2 ($ Million) Shipbuilding : 3.3 Shiprepair : 6.4 Shipchartering : 4.8 GROWTH IN CHARTER FLEET SIZE FY FY FY FY FY Number of Vessels

28 CORPORATE GOVERNANCE 26 ASL Marine is committed to maintaining a high standard of corporate governance which conforms with the principles set out in the Code of Corporate Governance ( Code ) prescribed by the Singapore Exchange Securities Trading Limited ( SGX-ST ) so as to ensure greater transparency and protection of shareholders' interests. The Board of directors (the Board ) is pleased to report on the compliance of the Company with the Code. This statement outlines the main corporate governance practices that are adopted by the Company. BOARD MATTERS Principle 1: Board s Conduct of its Affairs The key role of the Board is to protect and enhance shareholders value. To fulfill this, the Board oversees the business affairs of the Group. It reviews and advises on overall strategy, policies and objectives, sets goals, supervises executive management, monitors business performance and goals achievement, and assumes responsibility for overall corporate governance of the Group. The Board has put in place financial authorization guidelines for operating and capital budgets, procurement of goods and services and acceptances of bank facilities. It is responsible for approving annual budget, financial results for release to the SGX-ST, distribution of dividends, material acquisitions and investment proposals. For effective and efficient execution of its responsibilities, the Board has established and delegated some of its power to its executive management and specialized Board Committees such as the Audit Committee ( AC ), Nominating Committee ( NC ) and Remuneration Committee ( RC ). Each of the Committees has its respective written terms of reference which will be reviewed on a regular basis. The directors are provided with information and updates from time to time including any changes in legislation, government policies and regulations and guidelines from SGX-ST that affect the Company or the directors in discharging their duties. Training will be made available to the directors when necessary and newly appointed directors will be given briefings by management on the business activities of the Group, its strategic direction and corporate governance practices. The Board conducts regular scheduled meetings and as warranted by circumstances on matters material to the Group. The Board will meet at least four times a year. The Company s Articles of Association provides for Board meeting to be conducted via telephone conference.

29 27 The attendance of the directors at Board and Committee meetings held and the number of meetings attended by each member at the respective meetings during the financial year ended 30 June 2004 are as follows:- Audit Nominating Remuneration Board Committee Committee Committee No. of meetings held Directors No. of meetings attended Ang Kok Tian 4 NA NA NA Ang Ah Nui 4 NA NA NA Ang Kok Eng 2 NA NA NA Ang Kok Leong 3 NA NA NA David Hwang Soo Chin Andre Yeap Poh Leong Damian Hong Chin Fock (NA) Not Applicable Principle 2: Board Composition and Balance The Board comprises seven members, of whom four are executive directors and three are independent non-executive directors making up not less than one-third of the Board. Among the directors are business leaders, tax and legal professionals. The experience, knowledge and expertise of the existing members are considered sufficient to effectively lead and control the Company, taking into account the scope and nature of its operations. The Board will constantly review its composition and balance to determine its appropriateness and effectiveness. The Company has benefited from the executive management's access to its directors for guidance and exchange of views both within and outside of the Board and Board Committees meetings. Each director brings invaluable experience and expertise which contributes to the strategic aspirations of the Group. The profiles of the directors are set out on pages 10 to 13 in the section titled Board of directors of the annual report.

30 CORPORATE GOVERNANCE (continued) 28 Principle 3: Chairman and Chief Executive Officer The chairman and the managing director of the Company, Mr Ang Kok Tian, leads the management in setting marketing strategies, objectives and missions and is responsible for the day-to-day operations of the Group. Mr Ang ensures complete, adequate and timely flow of information between the Board and management, arranges for Board meetings, prepares meeting agendas, and oversees the Company s compliance with corporate governance guidelines. Mr Ang s performance and remuneration are reviewed annually by the NC and RC, whose members comprise independent non-executive directors. All major decisions are made by the Board and in the event of conflict of interests, the independent directors opinions and decisions are sought. In view of the strong independent element on the Board that ensures decisions are not based on a considerable concentration of power in a single individual, the existence of various Committees with power and authority to perform key functions beyond the authority of or without undue influence from the chairman and managing director, the Board believes that, there are adequate safeguards in place to ensure an appropriate balance of power and authority within the spirit of good corporate governance. NOMINATING COMMITTEE Principle 4: Board Membership The NC was established on 29 January It currently comprises three independent non-executive directors, Mr Andre Yeap Poh Leong, Mr David Hwang Soo Chin and Mr Damian Hong Chin Fock. Mr Andre Yeap is the chairman of the NC. The operations of the NC are regulated by its terms of reference, which were approved and are subject to review by the Board. The functions of the NC includes recommendations to the Board on all appointments and re-appointments/re-elections of directors having regard to their contribution and performance. The NC is also tasked to assess the independence of the directors annually. Article 91 of the Company s Articles of Association requires every director (other than the managing director or joint managing director) to retire from office once every 3 years, and for this purpose, 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) shall retire from office by rotation at each annual general meeting. A retiring director shall be eligible for re-election. Furthermore, pursuant to Article 97, any director appointed by the Board shall hold office until the next annual general meeting but shall then be eligible for re-election at that meeting. At the forthcoming annual general meeting, Mr Ang Kok Eng and Mr Ang Kok Leong will be retiring pursuant to Article 91 of the Company s Articles of Association. Both of them, being eligible for re-election, have offered themselves for re-election.

31 29 Date first appointed/ last re-elected Audit Nominating Remuneration Name of director as director Committee Committee Committee Ang Kok Tian 4 Oct 00/12 Nov (Chairman and Managing Director) Ang Ah Nui 4 Oct 00/20 Nov (Deputy Managing Director) Ang Kok Eng 18 Oct 02/12 Nov (Executive Director) Ang Kok Leong 18 Oct 02/12 Nov (Executive Director) David Hwang Soo Chin 17 Jan 03/20 Nov 03 Chairman Member Member (Independent Non-executive Director) Andre Yeap Poh Leong 17 Jan 03/ 20 Nov 03 Member Chairman Member (Independent Non-executive Director) Damian Hong Chin Fock 16 May 03/20 Nov 03 Member Member Chairman (Independent Non-executive Director) Mr Ang Kok Tian, Mr Ang Ah Nui, Mr Ang Kok Eng and Mr Ang Kok Leong are substantial shareholders of the Company. Please refer to the section titled Analysis of Shareholdings on pages 100 to 102 for details of their shareholding interests in the Company.

32 CORPORATE GOVERNANCE (continued) 30 Principle 5: Board Performance The NC assesses the performance and effectiveness of the Board as a whole, and the contribution of each individual director to the effectiveness of the Board. The NC decides whether the directors are able to and has been adequately carrying out their duties as directors of the Company particularly when the directors have multiple board representations. The assessment process involves evaluation against performance criteria proposed by the NC and approved by the Board. ACCESS TO INFORMATION Principle 6: Access to Information The Board and the Board Committees are furnished with complete and adequate information in a timely manner to enable full deliberation on the issues to be considered at the respective meetings. Meeting papers are circulated to each director at least 3 days prior to each meeting. The directors, in furtherance of their duties, are entitled to take independent professional advice at the expense of the Company when necessary, and are provided with the names and contact details of the Company's executive management and the company secretary for independent and separate access. The company secretary attends all Board meetings, attends to corporate secretarial administration matters and ensures Board procedures are followed. REMUNERATION MATTERS Principle 7: Procedures for Developing Remuneration Policies The RC was established on 29 January It comprises three independent non-executive directors, Mr Damian Hong Chin Fock, Mr David Hwang Soo Chin and Mr Andre Yeap Poh Leong. Mr Damian Hong is the chairman of the RC. In discharging their duties, the members have access to advice from the internal human resources personnel, and if required, advice from external experts. The operations of the RC are regulated by its terms of reference, which were approved and are subject to review by the Board.

33 31 The RC recommends, in consultation with the chairman of the Board, the framework of remuneration for directors serving on the Board and key executives, and determines specifically the remuneration package for each executive director of the Company. The Committee covers all aspects of remuneration including director s fees, salaries, allowances, bonuses, options and benefits in kind. The RC s recommendations are submitted for endorsement by the entire Board. The overriding principle is that no director should be involved in deciding his own remuneration. The RC also administers the ASL Employee Share Option Scheme ( ESOS ) approved on 23 January 2003, in accordance with the rules of the scheme. It determines and approves the allocation of the share options, the date of the grant and the price thereof. Principle 8: Level and Mix of Remuneration The Company s remuneration policy is to provide remuneration packages which will reward performance and attract, retain and motivate directors and executives to run the Company successfully. In setting the remuneration packages, the RC generally takes into consideration pay and employment conditions within the industry and in comparable companies, and takes into account the Company's and individual s performance. Non-executive directors are remunerated based on the level of contributions, responsibilities and attendance for serving on the Board and Board Committees. The Company currently does not have a formal service contract with non-executive directors. Fees for the non-executive directors are recommended by the Board subject to approval of shareholders at the annual general meeting.

34 CORPORATE GOVERNANCE (continued) 32 The four executive directors remuneration are governed by service agreements entered into with the Company on 17 January Under the service agreements, Mr Ang Kok Tian and Mr Ang Ah Nui were appointed for an initial term of a fixed period of two years while Mr Ang Kok Eng and Mr Ang Kok Leong were for a fixed period of one year with effect from the date of the Company s admission to the Official List of the SGX-ST. After the initial period, the service agreements shall be automatically renewed unless terminated by either party. There are no existing or proposed service contracts entered into or to be entered into by the directors with the Company or any of the subsidiaries which provide for benefits upon termination of employment. The ESOS which vests over a period of three years has been established as a long term incentive scheme to align the interests of shareholders with those of the directors and employees. Details of the ESOS including the vesting schedule adopted by the Company are set out in the directors report. Principle 9: Disclosure on Remuneration The number of directors of the Company with remuneration from the Company and all of its subsidiary companies are in the following bands: Number of directors Remuneration band $250,000 to $499, Below $250, Total 7 7

35 33 The following table shows the breakdown of remuneration in percentage terms received by the directors and top five executive officers for the financial year ended 30 June 2004: Directors Fee Salary Bonus Benefits Total % % % % % Directors $250,000 to $499,999 Ang Kok Tian Ang Ah Nui Below $250,000 Ang Kok Eng Ang Kok Leong David Hwang Soo Chin Andre Yeap Poh Leong Damian Hong Chin Fock Top 5 Executive Officers Below $250,000 Tan Thiam Hee Tay Kes Siong Roger Lewis Martin Lim Soon Teck Lee You Bom The above remuneration does not include benefits attached to share options granted to directors and employees which have not been valued as the options are not exercisable as at the date of this report. Mr Ang Kok Tian, Mr Ang Ah Nui, Mr Ang Kok Eng and Mr Ang Kok Leong are brothers. Saved as disclosed, the Company and its subsidiaries do not have any employee who is an immediate family member of a director or the chief executive officer whose remuneration exceeds $150,000 during the year.

36 CORPORATE GOVERNANCE (continued) 34 ACCOUNTABILITY AND AUDIT COMMITTEE Principle 10: Accountability The Board is accountable to the shareholders while management is accountable to the Board. The management provides the Board with management accounts on a monthly basis. Principle 11: Audit Committee The AC was established on 29 January It comprises three independent non-executive directors, Mr David Hwang Soo Chin, Mr Andre Yeap Poh Leong and Mr Damian Hong Chin Fock. Mr David Hwang is the chairman of the AC. The Board is of the opinion that the members of the AC have had many years of experience and in senior management positions and possess sufficient accounting or financial management expertise to discharge their duties. The operations of the AC are regulated by its terms of reference, which were approved and are subject to review by the Board. The duties of the AC, which meets at least four times a year, include the followings: To review with the internal auditor, external auditors and management, the Company s general policies and control procedures, interested person transactions, as well as any financial information presented to shareholders; To review the audit plans of the Company s internal and external auditors; To review the internal and external auditors evaluation of the Group's system of internal controls; To review the internal and external auditors reports; To review the co-operation given by the Company's officers to the internal and external auditors; To review the scope and results of the internal audit procedures; To review the adequacy of the internal control procedures; To review the scope and results of external audit and its cost effectiveness and the independence and objectivity of the external auditors; To nominate and review the appointment or re-appointment of external auditors; To review the financial statements of the Company and of the Group, accounting principles and policies thereto and management of financial matters before endorsement by the Board; and To review interested person transactions between the Group and interested persons.

37 35 The AC has explicit authority to investigate any matter within the scope of its duties, and power to obtain independent professional advice. It has been given full access to and co-operation by management and reasonable resources to discharge its duties properly and full discretion to invite other directors or executives to attend its meetings. At least once annually, the AC meets the external and internal auditors without the presence of management to review any areas of audit concern. The AC oversees the scope and results of external audit, and the independence and objectivity of the external auditors annually. For the financial year under review, the AC has reviewed all non-audit services provided by the Company s external auditors, KPMG, and is satisfied with their independence and objectivity. The fees that are charged to the Group by the external auditors for non-audit services were $81,800 and $427,450 for the financial years ended 30 June 2004 and 30 June 2003 respectively. The AC of the Company has pursuant to section 201B of the Companies Act (Cap.50) nominated Ernst & Young to be appointed as auditors of the Company at the forthcoming annual general meeting in place of the retiring auditors, KPMG. INTERNAL CONTROLS AND AUDITS Principle 12: Internal Controls The Group has a system of internal control designed to provide reasonable assurance that assets are safeguarded, proper accounting records are maintained, and that financial information used for financial reporting is reliable. It should be noted that such system can provide only reasonable and not absolute assurance against material loss or financial misstatement. The AC reviews the internal and external auditors reports, and if required, will make recommendations to the Board and monitors the implementation of any improvements in the internal control systems. Internal audit reports on any material non-compliance and internal control weakness and recommendations on the actions to be taken to resolve the noncompliance and/or improve the internal control are submitted to the AC for review semi-annually. The Company s external auditors also report to the AC on any material internal control weaknesses noted during the course of their audit. The AC has reviewed the effectiveness of the Group s internal control system based on the internal and external auditors reports and management controls which are in place. The Board is of the view that there are adequate internal controls within the Group taking into account the nature and size of the Group's business and operations.

38 CORPORATE GOVERNANCE (continued) 36 Principle 13: Internal Audit The Company has an adequately resourced internal audit function within the Company s corporate office. The AC is responsible for the adequacy of the internal audit function, its resources and its standing. The internal auditor reports functionally to the AC and administratively to the Group Financial Controller. The internal auditor has unrestricted access to all records, properties, functions and co-operation from management and staff necessary to effectively discharge his responsibilities, and is independent of the activities he audits. The internal auditor, who works cordially with the external auditors, has an appropriate standing within the Company. Reporting to the AC, the internal auditor has adopted the Singapore Standards on Auditing issued by the Institute of Certified Public Accountants of Singapore to carry out internal audit review in accordance with the annual audit plan which is formulated through the risk assessment approved by the AC, and performs checks and compliance tests of the Company's systems of internal control including financial and operational controls and risk management. The AC has reviewed the internal audit functions and risk assessment. The AC has also reviewed the external auditors audit plan, report and management letter. In the financial year under review, the AC is of the opinion that there has been adequate internal audit function. COMMUNICATION WITH SHAREHOLDERS Principle 14: Communication with Shareholders The Board is mindful of its obligations to provide its shareholders with timely disclosure of material information presented in a fair and objective manner. Financial results, annual reports, press releases on major developments in the business and operations, on-line management Q & A at Shareinvestor.com and any other material announcements are released through MASNET. In addition, all shareholders will receive the annual report of the Company and notice of annual general meeting by post within the mandatory period. The shareholders can also access all such information about the Group at the Group s corporate website at Principle 15: Greater Shareholder Participation Shareholders are given the right to vote on resolutions at general meetings. Each distinct issue will be carried in a separate resolution. Proxy form is sent with notice of general meeting to all shareholders so that those shareholders who cannot attend the general meeting in person can appoint a proxy or proxies to attend and vote on their behalf.

39 37 The Board, management, external auditors and chairmen of the AC, NC and RC will be present at annual general meetings to address any questions that shareholders may have concerning the Group. INTERESTED PERSON TRANSACTIONS The Company has adopted an internal policy in respect of any transactions with interested persons and has set out the procedures for review and approval of the interested person transactions entered into by the Group. In accordance with Rule 907 of the Listing Manual of SGX-ST, there were no material interested person transactions entered into by the Group for the financial year ended 30 June MATERIAL CONTRACTS Since the end of the previous financial year, the Company and its subsidiary companies did not enter into any material contracts involving the interests of chief executive officer, any directors or any controlling shareholders of the Company or their associates and no such material contracts still subsist at the end of the financial year. DEALINGS IN THE COMPANY S SECURITIES The Company has adopted an internal code of best practices on dealings in the Company s securities which the officers are required to observe. Under the code, officers are not allowed to deal in the Company s securities during the period commencing one month before the announcement of the Company s results and ending on the date of announcement of the results, and whenever they are in possession of unpublished material price sensitive information. RISK MANAGEMENT POLICIES AND PROCESSES The Company adopts a proactive and hands-on approach in managing and supervising the Group s business. The management regularly reviews the Company s external and internal factors that affect the Company's activities to identify significant areas of risks. External factors include economic, business, natural environment, political, social and technological factors. Internal factors reflect management's choices and include such matters as infrastructure, personnel, process and technology. The Management also looks into appropriate measures to control and mitigate these risks. The management reviews all significant control policies and procedures and highlights all significant matters to the directors and the AC.

40 38

41 39 40 Directors Reports 47 Statement by Directors 48 Auditors Report 49 Balance Sheets 51 Consolidated Profit and Loss Account 52 Consolidated Statement of Changes in Equity 53 Statement of Changes in Equity 54 Consolidated Statement of Cash Flows 56 Notes to the Financial Statements 100 Analysis of Shareholdings 103 Analysis of Warrantholdings 104 Notice of Annual General Meeting 107 Proxy Form

42 40 DIRECTORS REPORT FOR THE YEAR ENDED 30 JUNE 2004 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 30 June DIRECTORS The directors in office at the date of this report are as follows: Ang Kok Tian Ang Ah Nui Ang Kok Eng Ang Kok Leong Hwang Soo Chin Andre Yeap Poh Leong Hong Chin Fock DIRECTORS INTERESTS According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the Act ), particulars of interests of directors, who held office at the end of the financial year in shares, share options and warrants in the Company and in related corporations (other than wholly-owned subsidiaries), are as follows: Holdings in the name of the director, spouse or infant children Other holdings in which the director is deemed to have an interest THE COMPANY Ordinary shares of $0.10 each At beginning At end At beginning At end of the year of the year of the year of the year Ang Kok Tian 42,180,000 32,760, ,820,000* 115,240,000* Ang Ah Nui 42,180,000 31,680, ,820,000* 116,320,000* Ang Kok Eng 17,760,000 27,720, ,240,000* 120,280,000* Ang Kok Leong 17,760,000 27,720, ,240,000* 120,280,000* * Ang Kok Tian, Ang Ah Nui, Ang Kok Eng and Ang Kok Leong are brothers. Each of the brothers is deemed to be interested in the shares held by the other and their father and sister.

43 41 DIRECTORS REPORT FOR THE YEAR ENDED 30 JUNE 2004 THE COMPANY (continued) Options to subscribe for ordinary shares of $0.10 each Holdings Holdings at beginning at end Exercise price Exercise period of the year of the year Hwang Soo Chin $ December 2004 to 17 December ,000 # Andre Yeap Poh Leong $ December 2004 to 17 December ,000 # Hong Chin Fock $ December 2004 to 17 December ,000 # # Of which 100,000 options are exercisable on or after 18 December 2004, 75,000 on or after 18 December 2005 and 75,000 on or after 18 December Warrants to subscribe for ordinary shares of $0.10 each Holdings Holdings at beginning at end Exercise price Exercise period of the year of the year Ang Kok Tian $ April 2004 to 1 April ,190,000 Ang Ah Nui $ April 2004 to 1 April ,920,000 Ang Kok Eng $ April 2004 to 1 April ,930,000 Ang Kok Leong $ April 2004 to 1 April ,930,000 Holdings in the name of the director, spouse or infant children Other holdings in which the director is deemed to have an interest SUBSIDIARY At beginning At end At beginning At end of the year of the year of the year of the year PT Capitol Shipping Nusantara Ordinary shares of US$1.00 each Ang Kok Tian ,000 Ang Ah Nui ,000 Ang Kok Eng ,000 Ang Kok Leong ,000

44 42 DIRECTORS REPORT (continued) FOR THE YEAR ENDED 30 JUNE 2004 DIRECTORS INTERESTS (continued) By virtue of Section 7 of the Act, Ang Kok Tian, Ang Ah Nui, Ang Kok Eng and Ang Kok Leong are deemed to have interests in the shares of all wholly-owned subsidiaries of ASL Marine Holdings Ltd, at the beginning and at the end of the financial year. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations either at the beginning or at the end of the financial year. There were no changes in any of the above mentioned directors' interests in the Company or in related corporations between the end of the financial year and 21 July Except as disclosed under the Share Options and Warrants sections of this report, 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. 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 The ASL Employee Share Option Scheme (the Scheme ) was approved and adopted by the shareholders of the Company at an Extraordinary General Meeting held on 23 January The Scheme is administered by the Remuneration Committee (the Committee ) of the Company comprising three independent directors, Mr Hong Chin Fock (Chairman), Mr Hwang Soo Chin and Mr Andre Yeap Poh Leong. Details of the Scheme were set out in the Directors Report for the year ended 30 June Other statutory information regarding the Scheme is set out below: (i) Exercise Price The exercise price of each option for each share to be paid upon the exercise of the options are as follows: the options were granted at the exercise price of $0.55 per share and no options were granted at a discount to the then prevailing Market Price; and

45 43 DIRECTORS REPORT FOR THE YEAR ENDED 30 JUNE 2004 SHARE OPTIONS (continued) the Market Price, defined as the average of the last dealt price for a share, as determined by reference to the daily Official List published by Singapore Exchange Securities Trading Limited ( SGX-ST ) for five consecutive market days immediately prior to the date an offer to grant an option is made ( Offer Date ), rounded up to the nearest whole cent. (ii) Option Exercise Period The options which were granted shall be exercisable during the option exercise period commencing after the first anniversary of the Offer Date and expiring on, in the case of options granted to non-executive directors and/or associated company employees, the day preceding the fifth anniversary of the Offer Date and, in the case of options granted to other than non-executive directors and/or associated company employees, the day preceding the tenth anniversary of the Offer Date. At the end of the financial year, details of the options granted under the Scheme on the unissued ordinary shares of $0.10 each of the Company are as follows: Options Options Number of Date of Exercise outstanding outstanding option grant of price per at Options Options Options at holders Exercise options share 1/7/2003 granted exercised cancelled 30/6/2004 at 30/6/2004 period 18/12/2003 $0.55-4,750,000 - (500,000) 4,250,000* 51 18/12/2004 to 17/12/ /12/2003 $ , ,000# 3 18/12/2004 to 17/12/2008 5,500,000 - (500,000) 5,000,000 * These are granted to the employees of the Company of which 1,700,000 options are exercisable on or after 18 December 2004, 1,292,000 on or after 18 December 2005 and 1,258,000 on or after 18 December # These are granted to directors of the Company of which 300,000 options are exercisable on or after 18 December 2004, 225,000 on or after 18 December 2005 and 225,000 on or after 18 December Except as disclosed above, there were no unissued shares of the Company or its subsidiaries under options granted by the Company or its subsidiaries at the end of the financial year.

46 44 DIRECTORS REPORT (continued) FOR THE YEAR ENDED 30 JUNE 2004 SHARE OPTIONS (continued) Details of options granted to directors of the Company under the Scheme are as follows: Aggregate Aggregate Aggregate options granted options exercised options lapsed Aggregate Options granted since since since options for financial commencement commencement commencement outstanding year ended of Scheme to of Scheme to of Scheme to as at Name of director 30/6/ /6/ /6/ /6/ /6/2004 Hwang Soo Chin 250, , ,000 Andre Yeap Poh Leong 250, , ,000 Hong Chin Fock 250, , ,000 Since the commencement of the Scheme, no options have been granted to the controlling shareholders of the Company or their associates. Since the commencement of the Scheme, no participants under the Scheme has been granted 5% or more of the total options available under the Scheme. Since the commencement of the Scheme, no options have been granted to the employees of the Company or its related corporation who receive 5% or more of the total options available to the employees of the Company or its related corporations under the Scheme. The options granted by the Company do not entitle the holders of the options, by virtue of such holding, to any rights to participate in any share issue of any other company. WARRANTS On 2 April 2004, the Company issued 49,500,000 warrants to subscribe for 49,500,000 new ordinary shares of $0.10 each in the capital of the Company in conjunction with a $20 million transferable loan facility obtained by the Company during the year. The warrants were issued at a price of $0.025 per warrant and may be exercised at any time from the date of issue of the warrants up to 1 April Each warrant entitles the holder to subscribe for one new ordinary share of $0.10 each in the share capital of the Company at an exercise price of $0.53 per share. The warrants granted by the Company do not entitle the holder of the warrants, by virtue of such holding, to any rights to participate in any share issue of any other company. Full terms and conditions pertaining to the warrants are set out in detail in the Deed Poll dated 26 February 2004 which is available for inspection at the office of the warrant agent. During the financial year, the Company did not issue any ordinary shares pursuant to the exercise of the warrants. At the end of the financial year, the number of warrants of the Company outstanding was 49,500,000.

47 45 DIRECTORS REPORT FOR THE YEAR ENDED 30 JUNE 2004 AUDIT COMMITTEE The members of the Audit Committee during the year and at the date of this report are: Hwang Soo Chin Andre Yeap Poh Leong Hong Chin Fock (Chairman/Independent director) (Independent director) (Independent director) The Audit Committee performs the functions specified in Section 201B of the Companies Act, the SGX-ST Listing Manual and the Code of Corporate Governance. The Audit Committee has held 4 meetings since the last directors' report. In performing its functions, the Audit Committee met with the management, internal auditor and external auditors to discuss and review the following: i. the audit plans of the internal auditor and external auditors of the Group and the results of their examination and evaluation of the Group s systems of internal accounting controls; ii. iii. iv. the Group s financial and operating results and accounting policies; that no restrictions were being placed by the management upon the work of the internal and external auditors; the Group s transactions with related parties and interested persons; v. the annual and interim financial statements to be announced to shareholders before their submission to the Board of Directors for adoption; and vi. the independence of the external auditors. The Audit Committee is authorised to investigate any matters within its terms of reference, has full access to management and also full discretion to invite any director or executive officer to attend its meetings, as well as reasonable resources to enable it to discharge its functions properly. The Audit Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees. The Audit Committee is satisfied with the independence and objectivity of the external auditors. The Audit Committee has not 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.

48 46 DIRECTORS REPORT (continued) FOR THE YEAR ENDED 30 JUNE 2004 On behalf of the Board of Directors Ang Kok Tian Director Ang Ah Nui Director Singapore 27 August 2004

49 47 STATEMENT BY DIRECTORS FOR THE YEAR ENDED 30 JUNE 2004 In our opinion:- (a) (b) the financial statements set out on pages 49 to 99 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 30 June 2004 and of the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and 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 Ang Kok Tian Director Ang Ah Nui Director Singapore 27 August 2004