ACCOUNTANTS REPORT. At extraordinary general meetings held on 23 August 1999, the shareholders of the Company approved, inter alia, the following:

Transcription

1 ACCOUNTANTS REPORT 3 September 1999 The Board of Directors Tiong Woon Corporation Holding Ltd 13 & 15 Pandan Crescent Singapore Dear Sirs A. INTRODUCTION This report has been prepared for inclusion in the Prospectus of Tiong Woon Corporation Holding Ltd (the Company ) dated 3 September 1999 in connection with the Invitation to subscribe for 56,600,000 ordinary shares of S$0.10 each comprising 33,800,000 new ordinary shares of S$0.10 each ( New Shares ) and 22,800,000 ordinary shares of S$0.10 each ( Vendor Shares ), at the price of S$0.20 per share. The Company The Company was incorporated in Singapore on 21 August 1997 as a private limited company under the name of Tiong Woon Corporation Holding Pte Ltd with an authorised share capital of S$100,000 divided into 100,000 ordinary shares of S$1.00 each, and issued and paid-up share capital of S$3 divided into 3 ordinary shares of S$1.00 each. The principal activity of the Company is investment holding. Pursuant to a resolution passed on 23 August 1999, the Company was converted into a public company and changed its name to Tiong Woon Corporation Holding Ltd. At extraordinary general meetings held on 23 August 1999, the shareholders of the Company approved, inter alia, the following: (a) (b) (c) (d) (e) sub-division of each of the authorised and paid up ordinary shares of S$1.00 of the Company into 10 ordinary shares of S$0.10 each; increase in the authorised share capital of the Company from S$100,000 comprising 1,000,000 ordinary shares of S$0.10 each to S$30,000,000 comprising 300,000,000 ordinary shares of S$0.10 each; issue of 191,250,910 of ordinary shares of S$0.10 each pursuant to the Restructuring Exercise and Bond Subscription Agreement disclosed in (i) to (vi) below; adoption of a new set of Articles of Association of the Company; and issue of 33,800,000 New Shares of S$0.10 each at the price of S$0.20 each, which when issued and fully paid, will rank pari passu in all respects with the existing Shares. Following receipt of in-principle approval from the Stock Exchange of Singapore ( SES ), the Company and its subsidiary companies (the Group ) carried out a Restructuring Exercise to streamline and rationalise the corporate structure and business activities of the Group. The Company also issued shares pursuant to the Bond Subscription Agreement. The issued and paidup capital of the Company was changed as follows: (i) The Company acquired the entire issued and paid-up share capital of Tiong Woon Crane & Transport (Pte) Ltd comprising 800,000 ordinary shares of S$1.00 each from Ang Kah Hong, Ang Kha King and Ang Kah Leong who are directors as well as shareholders of the Company. The purchase consideration of S$8,447,674 was based on Tiong Woon Crane & 60

2 Transport (Pte) Ltd s Net Tangible Assets ( NTA ) as at 31 January The purchase consideration was satisfied by the issuance of 84,476,740 ordinary shares of S$0.10 each by the Company. (ii) (iii) The Company acquired the entire issued and paid-up share capital of Tiong Woon Marine Pte Ltd comprising 300,000 ordinary shares of S$1.00 each from Ang Kah Hong and Ang Kah Leong, who are directors as well as shareholders of the Company. The purchase consideration of S$3,529,412 was based on Tiong Woon Marine Pte Ltd s NTA at 31 January 1999, and was satisfied by the issuance of 35,294,120 ordinary shares of $0.10 each by the Company. The Company acquired the entire issued and paid-up share capital of Tiong Woon Enterprise Pte Ltd comprising 200,000 ordinary shares of S$1.00 each from Ang Kah Hong and Ang Kha King, who are directors as well as shareholders of the Company. The purchase consideration of S$1,622,153 was based on Tiong Woon Enterprise Pte Ltd s NTA at 31 January 1999 and was satisfied by the issuance of 16,221,530 ordinary shares of S$0.10 each by the Company. (iv) The Company acquired the entire issued and paid-up share capital of Tiong Woon Engineering Pte Ltd comprising 600,000 ordinary shares of S$1.00 each from Ang Kah Hong and Ang Kha King, who are directors as well as shareholders of the Company. The purchase consideration of S$525,852 was based on Tiong Woon Engineering Pte Ltd s consolidated NTA at 31 January 1999 and was satisfied by the issuance of 5,258,520 ordinary shares of S$0.10 each by the Company. (v) The Company acquired the entire issued and paid-up share capital of Tiong Woon Crane & Transport (M) Sdn Bhd ( Tiong Woon Malaysia ) comprising 100,000 ordinary shares of RM1.00 each from Ang Kah Hong, who is a director as well as a shareholder of the Company, Low Kham Hong and Shu Hock Seng for RM 3 cash. Tiong Woon Malaysia had a net asset deficiency of S$159,365 at 31 January Under the terms of the sales agreement, the transfer of the shares of Tiong Woon Malaysia to the Company was made subject to the approval of Foreign Investment Committee of Malaysia ( FIC ), application of which was made on 17 June The application to FIC was rejected at first instance on 16 July The Company has appealed to the FIC. The Company understands from the FIC that in the event that the appeal is approved, Tiong Woon Malaysia may be required to increase its issued share capital. Should the appeal not be successful, the Company will then decide on its next course of action with Tiong Woon Malaysia. The options would include retaining an interest in Tiong Woon Malaysia, disposing the Company s interest in it or liquidating it. The Company does not believe this will have a significant impact on the Group as Tiong Woon Malaysia is not expected to contribute significantly to the Group s profits in the near future. (vi) The Company issued 50,000,000 ordinary shares of S$0.10 each at par to the holders of bonds issued by Tiong Woon Crane & Transport (Pte) Ltd under the Bond Subscription Agreement following conversion of the bonds. The conversion ratio was based on a 30 per cent discount to the issue price of the Offer Shares. Bonds Number of issued at Conversion ordinary par value ratio shares S$ OCBC Capital 3,000, ,429,000 UOBVI 1,500, ,714,000 UOBVI2 1,500, ,714,000 ECICS Ventures 2 800, ,714,000 IFSMS 200, ,429,000 7,000,000 50,000,000 61

3 The Group Following the completion of the Restructuring Exercise referred to above, the Company has an equity interest in each of the following subsidiary companies. Date and Interest Issued and Name of subsidiary country of held by the paid-up company Principal activities incorporation Group share capital Tiong Woon Crane & Hiring out of cranes and % S$800,000 Transport (Pte) Ltd * providing transport services Singapore Tiong Woon Marine Providing wharfing and % S$300,000 Pte Ltd * stevedoring services, sale Singapore of barges and import and export of sand, rocks and granite Tiong Woon Engineering Investment holding % S$600,000 Pte Ltd * Singapore Tiong Woon Enterprise Trading % S$200,000 Pte Ltd * Singapore Tiong Woon Crane & Hiring out of cranes and % RM100,000 Transport (M) Sdn Bhd + providing transport services Malaysia P.T. Tiong Woon Hiring out of cranes and % US$500,000*** Indonesia ++ providing transport services Indonesia Tiong Woon Philippines Hiring out of cranes and % Pesos 7,600,000 Inc ** providing transport services Philippines Note:- * Audited by PricewaterhouseCoopers, Singapore for the last five financial years ** Not yet commenced operations *** Of which, US$250,000 has been paid up + Audited by Huang Yan Teo & Company for the period up to 31 December 1995, and then by PricewaterhouseCoopers, Johore Bahru ++ Audited by PricewaterhouseCoopers, Jakarta since its incorporation B. BASIS OF PRESENTATION OF PROFORMA FINANCIAL INFORMATION OF THE GROUP The proforma financial information set out in Sections C to I below has been prepared on the basis of the accounting policies of the Group set out in Section G to this report and in accordance with Singapore generally accepted accounting principles. The proforma financial information of the Group is expressed in Singapore dollars and is presented on the basis that the Group structure had been in place throughout the periods covered by this report. The proforma financial information in this report is based on the audited financial statements of the companies in the Group for the years ended 30 June 1994 to 1998, and the period from 1 July 1998 to 31 January In arriving at the proforma financial information of the Group, we have made such adjustments as we considered appropriate in order to present the financial statements of the Group on a consistent and comparable basis. 62

4 C. STATEMENT OF PROFORMA RESULTS OF THE GROUP Set out below are the proforma results of the Group for the years ended 30 June 1994 to 1998 and the seven months to 31 January The Statement of Proforma Results of the Group is presented as if the Group structure as described in Section A had been in place since 1 July 1993 and after making such adjustments as we considered appropriate. The adjustments made are set out in Section D below. 7 months ended 31 < As at 30 June > January S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 Turnover 22,716 26,532 38,226 38,801 46,639 18,152 Profit before taxation 4,802 2,992 6,215 4,685 3, Taxation (1,430) (1,006) (1,740) (1,277) (1,106) (165) Profit after taxation 3,372 1,986 4,475 3,408 2, Profit attributable to the shareholders of the Group 3,372 1,986 4,475 3,408 2, As explained in Note 1 to Section D, during the financial year ended 30 June 1997, the Group changed the depreciation rates for machinery from 20% per annum to a range of 10% to 20% per annum, depending on the age, type and economic useful life of the machinery. The effect of this change of depreciation rates has been applied retroactively from 1 July 1993 to arrive at the proforma results of the Group for comparison purposes. If the change in depreciation rates had not been applied retroactively to 1 July 1993, the proforma results of the Group for the financial years ended 30 June 1997 and 1998, and the period from 1 July 1998 to 31 January 1999 will be as follows: 7 months ended 31 < Year ended 30 June > January S$ 000 S$ 000 S$ 000 Turnover 38,801 46,639 18,152 Profit before taxation 6,570 5,474 1,861 Taxation (1,772) (1,576) (470) Profit after taxation 4,798 3,898 1,391 Profit attributable to the shareholders of the Group 4,798 3,898 1,391 63

5 Notes to the Statement of Proforma Results of the Group: 1. Turnover Turnover represents the invoiced value of goods and services to external customers. Intercompany transactions within the Group have been eliminated. 2. Profit before taxation Adjusted profit before taxation of the Group is arrived at after: 7 months ended 31 < Year ended 30 June > January S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 Charging: Depreciation of fixed assets 3,639 4,442 5,210 6,674 8,112 4,896 Directors remuneration Bad debts written off Fixed assets written off Interest expense bank loans bank overdrafts hire purchase contracts , factoring others loan from related parties Foreign exchange loss Provision for doubtful debts Provision for dry docking costs* Provision for stock obsolescence 24 Share of joint venture loss 29 Crediting: Bad debts recovered Interest income bank deposits others 1 1 Foreign exchange gain Gain on disposal of fixed assets 2, Share of joint venture profit 1 36 * During the financial year ended 30 June 1997, the Group commenced making provision for dry docking expenses. Prior to that dry docking expenses were charged to the profit and loss account as and when incurred. No adjustment has been made to the proforma results of the Group for the effect of this change in accounting basis for dry docking expense in view of its immateriality to the results of the Group for the years ended 30 June 1994 to Taxation The effective taxation charge of the Group for certain years is higher than the statutory tax rate due primarily to the non-deductibility of certain expenses for taxation purposes. 64

6 4. Related party transactions Related parties include companies in which a director or his relatives have substantial financial interests. Significant related party transactions entered into during the periods covered by this report at terms agreed between the parties are as follows: 7 months ended 31 < Year ended 30 June > January S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 Payments to related parties: Rental of equipment Repayment of loan Supply of labour 1, Purchase of equipment 4,094 1, Interest on loan Receipts from related parties: Loan 383 Rental of equipment Supply of labour 33 Sale of equipment 2, Upkeep of machinery

7 D. STATEMENT OF ADJUSTMENTS Adjustments made to the audited accounts to arrive at the Statement of Proforma Results of the Group are as follows:- 7 months ended 31 < As at 30 June > January S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 Turnover As shown in audited accounts 23,049 28,607 40,115 42,374 50,298 19,569 Storage income 1,146 1,257 1,750 Elimination of intercompany sales (1,479) (3,332) (3,639) (3,573) (3,659) (1,417) As shown in proforma financial results 22,716 26,532 38,226 38,801 46,639 18,152 Profit/(loss)before taxation As shown in audited accounts 1,413 (825) 2,678 6,503 5,452 1,799 Adjustments: Effect of change in depreciation rates 3,753 3,927 3,646 (1,735) (1,698) (1,095) Effect of change in depreciation rates on gain on sale of equipment (11) (322) (184) (149) (98) (64) Effect of elimination of inter-company gain on sale of equipment (353) Effect of elimination of interest expense on convertible bonds upon conversion to shares As shown in proforma financial results 4,802 2,992 6,215 4,685 3, Taxation As shown in audited accounts ,803 1, Adjustments: Under/(over) provision of deferred tax 75 (213) (37) (31) 304 (17) Under/(over) provision of tax (140) (83) Tax effect of elimination of interest expense on convertible bonds upon conversion to shares 6 16 Deferred tax effect on change of depreciation rates (495) (470) (305) As shown in proforma financial results 1,430 1,006 1,740 1,277 1, Notes to Statement of Adjustment 1. Change in depreciation rates During the financial year ended 30 June 1997, the Group changed the depreciation rates for machinery from 20% per annum to a range of 10% to 20% per annum, depending on the age, type and economic useful life of the machinery. The effect of this change of depreciation rates has been applied retroactively from 1 July 1993 to arrive at the proforma results of the Group for comparison purposes. 66

8 E. STATEMENT OF PROFORMA BALANCE SHEETS OF THE GROUP Set out below is the Statement of Proforma Balance Sheets of the Group at 30 June 1994 to 1998 and at 31 January The Statement of Proforma Balance Sheets of the Group is presented as if the group structure as described in Section A had been in place since 1 July 1993 and after making proforma adjustments as set out in Section D and consolidation adjustments, as we considered appropriate. As at 31 < As at 30 June > January S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 Fixed assets 22,858 28,398 32,634 40,923 48,974 48,573 Interest in joint ventures ,878 28,428 32,649 40,939 48,974 48,573 Current assets 9,324 9,349 10,647 15,093 15,058 12,657 Less Current liabilities (18,007) (21,189) (21,872) (26,941) (17,681) (16,424) Net current liabilities (8,683) (11,840) (11,225) (11,848) (2,623) (3,767) Bill payables and creditors due after 12 months Deferred taxation 1,436 2,078 3,049 3,386 4,270 4,258 Hire purchase due after 12 months (secured) 5,988 5,977 5,381 8,434 10,192 7,702 Term loans due after 12 months 1,216 1,014 1,014 1,672 6,389 7,344 8,640 9,069 9,444 13,492 21,241 19,411 Net assets 5,555 7,519 11,980 15,599 25,110 25,395 Shareholders equity 5,555 7,519 11,980 15,599 25,110 25,395 Notes to the Statement of Proforma Balance Sheets of the Group 1. Fixed Assets As at 31 < As at 30 June > January S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 As shown in audited accounts 19,469 21,192 21,891 31,998 41,845 42,603 Effect of elimination of intercompany gain on sale of equipment (353) (141) (66) Effect of change in depreciation rates* 3,753 7,680 11,326 9,591 7,893 6,798 Effect of change in depreciation rates on sale of equipment (11) (333) (517) (666) (764) (828) As shown in proforma balance sheet 22,858 28,398 32,634 40,923 48,974 48,573 * During the financial year ended 30 June 1997, the Group changed the depreciation rates for machinery from 20% per annum to a range of 10% to 20% per annum, depending on the age, type and economic useful life of the machinery. The effect of this change of depreciation rates has been applied retroactively from 1 July 1993 to arrive at the proforma results of the Group for comparison purposes. 67

9 2. Shareholders equity The movements in the shareholders equity of the Group are as follows: As at 31 < As at 30 June > January S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 S$ 000 Balance at beginning of the year 2,813 5,555 7,519 11,980 15,599 25,110 Profit attributable to shareholders of the Group 3,372 1,986 4,475 3,408 2, Dividends paid/proposed (1,010) Capitalisation of convertible bonds* 7,000 Increase in share capital** Foreign currency translation reserve (22) (14) 11 (61) (252) Balance at end of the year 5,555 7,519 11,980 15,599 25,110 25,395 * Pursuant to the Bond Subscription Agreement, the bonds of S$7,000,000 were deemed to have been converted to equity shares. The Company issued 50,000,000 ordinary shares of S$0.10 each to the Venture Capital Investors. The consideration was based on a 30 per cent discount to the issue price of the Offer Shares. ** Cash injection by shareholders. 68

10 F. STATEMENT OF PROFORMA NET ASSETS OF THE COMPANY AND THE GROUP The Statement of Proforma Net Assets of the Company and the Group as at 31 January 1999 is set out below. The Statement of Proforma Net Assets of the Group is presented as if the group structure as described in Section A had been in place at 31 January 1999 and after making consolidation adjustments as we considered appropriate. Note Company Group S$ 000 S$ 000 Fixed assets 1 42,603 Subsidiaries 2 14,125 Current assets Stocks Trade debtors 4 9,685 Other debtors, deposits and prepaid expenses 5 1,215 Due from related parties (trade) 6 32 Fixed deposits Cash and bank balances ,657 Current liabilities Trade creditors and bills payable 3,909 Due to related parties (trade) Other creditors and accrued charges 8 1,443 Hire purchase (secured) 9 6,875 Long term loans due within one year 10 2,223 Bank overdrafts Provision for income tax 366 Convertible bonds 11 7,000 Loan from directors ,036 Net current liabilities (10) (10,379) Bills payable and creditors due after 12 months 107 Deferred taxation 13 2,615 Hire purchase due after 12 months (secured) 9 7,702 Term loans due after 12 months 10 7,844 18,268 Net assets 14,115 13,956 Shareholders equity 14,115 13,956 69

11 G. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (i) Basis of accounting The financial statements are prepared under the historical cost convention. (ii) Basis of consolidation The Group consolidated financial statements include the financial statements of the Company and its subsidiary companies. All intercompany balances and significant intercompany transactions are eliminated on consolidation and the consolidated financial statements reflect external transactions only. The difference between the cost to the Group and the net assets of subsidiary companies at the time of acquisition is included as goodwill or capital reserve on consolidation and taken to capital reserve. Where the capital reserve results in a net debit balance, the net debit balance will be taken to revenue reserve. (iii) (iv) Subsidiary companies Investments in subsidiary companies are stated at cost. Where cost exceeds the underlying net assets value, provision is made to the extent of the amount considered by the Directors to be a decline in value that is other than temporary. Turnover and revenue recognition Turnover represents the gross invoiced value of services rendered and goods delivered. Revenue is recognised upon completion of services rendered and delivery of goods and billings. (v) Depreciation of fixed assets Fixed assets are depreciated at the following annual rates in equal instalments over their economic useful lives. Leasehold properties 5% Machinery less than or 5 years 10% more than 5 years to 10 years 14% more than 10 years 20% Tugboats and barges 10% Office equipment 10% 20% Furniture and fixtures 10% Office renovation 20% Motor vehicles 20% (vi) Taxation Current taxation is provided based on the tax payable on the income for the year that is chargeable to tax. Deferred taxation is provided using the liability method for all material timing differences in the recognition of certain income and expenses for accounting and for taxation purposes. Deferred tax benefits are recognised only to the extent of any deferred tax liability or where such benefits are expected to be realisable in the near future. 70

12 (vii) Foreign currencies Amounts payable and receivable denominated in foreign currencies are translated into Singapore dollars at exchange rates prevailing at the balance sheet date. Transactions in foreign currencies during the year are converted into Singapore dollars at exchange rates prevailing at the transaction dates. All exchange differences are taken to the profit and loss account. For inclusion in the proforma financial statements of the Group, the assets and liabilities of foreign subsidiary companies are translated into Singapore dollars at exchange rates prevailing at the balance sheet dates. The results of foreign subsidiary companies are translated into Singapore dollars at the average exchange rates for the accounting period. The resulting exchange differences are taken to a foreign currency translation adjustment reserve. (viii) (ix) (x) (xi) Interest in joint ventures Interest in joint venture is recorded in the accounts of the company at cost plus the attributable share of profits less losses. Hire purchase assets Assets acquired on hire purchase arrangements are capitalised in the accounts, and the corresponding obligations treated as liabilities. The assets so capitalised are depreciated in accordance with the company s policy for depreciation of fixed assets. The excess of the total instalments payable over the capitalised amount is treated as interest charge which are amortised over each hire purchase term to give a constant rate of charge on the remaining balance of the obligation. Dry docking and special survey expenditure Estimated annual provision for dry docking and special survey expenditure which are incurred once in every two to three years is charged against the results of each financial year. Stock Stock is stated at the lower of cost and net realisable value. Cost is calculated on a first in first out basis. H. NOTES TO STATEMENT OF NET ASSETS AT 31 JANUARY Fixed assets Group Accumulated Net book At cost depreciation Amount S$ 000 S$ 000 S$ 000 Leasehold land and buildings 4, ,632 Cranes and equipment 61,655 31,362 30,293 Tugboats and barges 12,511 5,541 6,970 Furniture and fixtures Office equipment and computers 1, Office renovation Motor vehicles ,848 38,245 42,603 71

13 Included in the above are fixed assets acquired under hire purchase contracts with a net book value of S$21,659,000. Details of the Group s leasehold properties are set out on page 58 of the Prospectus. 2. Subsidiaries Unquoted equity shares, at cost Company S$ 000 Tiong Woon Crane & Transport (Pte) Ltd 8,448 Tiong Woon Marine Pte Ltd 3,529 Tiong Woon Enterprise Pte Ltd 1,622 Tiong Woon Engineering Pte Ltd 526 Tiong Woon Crane & Transport (M) Sdn Bhd * PT Tiong Woon Indonesia ** Tiong Woon Philippines Inc. ** 14,125 * The cost of investment is RM 3 (S$1.00) ** Subsidiaries of Tiong Woon Engineering Pte Ltd The principal activities and places of incorporation of each subsidiary company are set out in Section A of this Report. 3. Stocks Group S$ 000 Spare parts 15 Cranes for sale Trade debtors Group S$ 000 Trade debtors 11,129 Less : Provision for doubtful debts (1,444) 9,685 72

14 5. Other debtors, deposits and prepaid expenses Group S$ 000 Deposits 69 Prepaid expenses 799 Advances to staff 35 Other debtors 312 1, Due from/to related parties Related parties are companies and partnerships in which a director or his relatives have substantial financial interests. Balances due to/from related parties are unsecured, interest free and have no fixed repayment terms. 7. Fixed deposits Fixed deposits amounting to S$300,000 have been pledged to the Group s bankers in respect of credit facilities granted to the Group. 8. Other creditors and accrued charges Group S$ 000 Other creditors 706 Accrued charges 737 1, Hire purchase (secured) Group S$ 000 Minimum lease payments due within one year 7,702 within two to five years 8,576 16,278 Finance charges allocated to future periods (1,701) 14,577 Shown as: Current liabilities 6,875 Non-current liabilities 7,702 14,577 The liabilities are secured on fixed assets acquired under the hire purchase contracts (Note 1). 73

15 10. Long term loans and bank overdrafts Group S$ 000 Long term loans (secured) 10,067 Less : current portion (2,223) 7,844 Short term bank loans Bank overdrafts (secured) 396 Bank overdrafts (unsecured) Details of the long term loans are as follows: (a) A construction loan of S$5,000,000 bears interest at 1% above the bank s prime lending rate ranging from 6.25% to 8.25% per annum for the current financial period, and is repayable over 3 years by 11 quarterly instalments of S$135,000 each commencing September 1998 with a final 12th payment of S$3,515,000. The construction loan is secured by the following: l l l First legal mortgage over freehold land and buildings which are owned by a director of the Company; Assignment of building agreement and mortgage-in-escrow for leasehold properties which are owned by the Company; and Guarantees by the directors, Ang Kah Hong, Ang Kha King and Ang Kah Leong, jointly and individually. (b) (c) (d) A term loan of S$1,750,000 bears interest at 1% above the bank s prime lending rate ranging from 6.5% to 8.5% per annum, and is repayable over 2 years by 24 monthly instalments of S$79,350 (inclusive of interest) commencing July The term loan is secured by a first legal mortgage over a freehold property owned by one of the directors of the Company and a letter of set-off in respect of fixed deposit of S$300,000. A term loan of S$950,000 bears interest at 1% above the bank s prime lending rate ranging from 6.5% to 8.5% per annum, and is repayable over 36 monthly instalments of S$28,901 (inclusive of interest) commencing December The term loan is secured by a second legal mortgage over a freehold property owned by a director of the Company. Term loans from finance companies of S$3,408,544 are secured by way of mortgages on 6 of the Group s barges and 4 of the Group s tugboats as well as assignment of insurance and earnings on these vessels. The loans are repayable over a period of 36 to 48 months and bear interest rates ranging from 3.625% to 9.5% per annum. The short term bank overdrafts are secured by the following: (a) (b) (c) First legal mortgage over freehold land and buildings which are owned by a director of the Company; Assignment of building agreements and mortgage-in-escrow for leasehold properties which are owned by the Company; and Guarantees by the directors Ang Kah Hong, Ang Kha King and Ang Kah Leong jointly and individually. 74

16 11. Convertible bonds The unsecured convertible bonds carry an interest charge of 1.5% per annum and are redeemable on 31 October 1999 or convertible to equity upon receiving the in-principle approval from the Stock Exchange of Singapore for the listing of the Group, whichever is earlier. If the Group fails to obtain the in-principal approval from the Stock Exchange of Singapore for listing by 31 October 1999, the Group is liable to redeem the convertible bonds at principal value plus a compensation of S$1,297,110 to the bond holders. 12. Loan from directors The loan from directors is interest free and has no fixed term of repayment. 13. Deferred taxation Group S$ 000 Balance at beginning of the year 2,305 Provision for the year 347 Provision written back (37) 2, Shareholders equity The shareholders equity set out in the Statement of Proforma Balance Sheets is stated on the assumption that the Company has received in principle approval from the Stock Exchange of Singapore for the listing of the Company, and the convertible bonds of S$7,000,000 have been converted to equity. Group S$ 000 As shown in Statement of Proforma Balance Sheets 25,395 Convertible bonds converted to equity (7,000) Effect of change in depreciation rates (6,798) Effect of change in depreciation rates on gain on sale of equipment 828 Tax effect of change in depreciation rates 1,562 Effect of elimination of interest expense on convertible bonds (84) Under provision of deferred tax 81 Over provision of taxation (50) Tax effect of elimination of interest expense on convertible bonds 22 As shown in Statement of Proforma Net Assets 13,956 75

17 The gearing of the Group as at 31 January 1999 based on the adjusted shareholders equity is as follows: Group S$ 000 Borrowings: Hire purchase liabilities 14,577 Bank term loans 10,067 Bank overdrafts 560 Convertible bonds 7,000 32,204 Adjusted shareholders equity 13,956 Gearing ratio 2.31 The gearing of the Group as at 31 January 1999 based on the assumption that the convertible bonds have been converted to shareholders equity, is as follows: Group S$ 000 Borrowings: Hire purchase liabilities 14,577 Bank term loans 10,067 Bank overdrafts ,204 Shareholders equity (after conversion of bonds) 20,956 Gearing ratio Future capital expenditure Group S$ 000 Capital expenditure not provided for are as follows: Commitments in respect of contracts placed for: purchase of plant and machinery 2,000 Commitment in respect of additional share capital contribution of an overseas subsidiary

18 16. Operating lease commitments The Group has commitments for future minimum lease payments under non-cancellable operating leases as follows: Group S$ 000 Payable within one year 1,190 Payable within two to five years 5,517 Payable after five years 14,711 21, Contingent liabilities (a) The Group has issued letters of indemnity amounting to S$205,000 to insurance companies for guarantees given to the Controller of Immigration for employment of foreign workers. (b) A subsidiary has a potential liability of S$120,000 in respect of damages to a customer s equipment in the course of transportation. Neither the subsidiary nor the Group has provided for this contingent liability as the directors of the subsidiary and the Group believe that the potential liability is fully covered by the subsidiary s insurance policies. I. NET TANGIBLE ASSET BACKING The net tangible asset backing of the Group for each of the ordinary shares is based on the proforma financial statements of the Group as at 31 January 1999 and after taking into account the following: S$ 000 Net Tangible Assets Net tangible assets at 31 January ,956 Issue of 50,000,000 Shares of S$0.10 each at S$0.14 per share pursuant to the Bond Subscription Agreement 7,000 20,956 Proceeds from the issue of 33,800,000 Shares of S$0.10 each at S$0.20 per share 6,760 Less: estimated issue expenses (700) Adjusted net tangible assets after the issue of the New Shares 27,016 77

19 Number Of shares Issued Share Capital Sub-division of ordinary shares of S$1.00 each into ordinary shares of S$0.10 each 30 Issue of new Shares pursuant to the Group Restructuring 141,250,910 Shares issued pursuant to the Bond Subscription Agreement 50,000, ,250,940 Invitation Shares to be issued pursuant to the Invitation 33,800, ,050,940 Cents Net tangible assets backing per issued and fully paid share Pre-flotation 11.0 Post-flotation 12.0 J. DIVIDENDS The Company has not paid nor proposed any dividend since its date of incorporation. K. GENERAL No audited financial statements have been prepared for any period subsequent to 31 January Yours faithfully PricewaterhouseCoopers Certified Public Accountants Singapore 78

20 LETTER FROM THE REPORTING ACCOUNTANTS IN RELATION TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 30 JUNE September 1999 Tiong Woon Corporation Holding Ltd 13 & 15 Pandan Crescent Singapore Dear Sirs This letter has been prepared for inclusion in the prospectus dated 3 September 1999 (the Prospectus ) of Tiong Woon Corporation Holding Ltd (the Company ) in connection with the invitation in respect of 56,600,000 shares of S$0.10 each comprising 33,800,000 New Shares and 22,800,000 Vendor Shares. We have reviewed the unaudited balance sheet of the Company and its subsidiary companies (the Group ) as at 30 June 1999, and the related profit and loss account of the Group for the year then ended as set out on page 80 of the Prospectus. These financial statements are the responsibility of the Company s management. Our responsibility is to issue a report on these financial statements based on our review. A review of the interim financial information consists principally of obtaining an understanding of the system for the preparation of financial information, applying analytical review procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an examination in accordance with Singapore Standards on Auditing and Statements of Auditing Practice, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the financial information set out on page 80 of the Prospectus for it to be in conformity with accounting policies normally adopted by the Group. Yours faithfully PricewaterhouseCoopers Certified Public Accountants Singapore 79

21 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP FOR THE YEAR ENDED 30 JUNE 1999 The unaudited consolidated financial statements of the Group as of and for the year ended 30 June 1999 set out below have been prepared on the basis of the accounting policies consistent with those appearing in the Accountants Report as set out on pages 70 to 71 of this Prospectus:- Unaudited consolidated profit and loss account for the year ended 30 June 1999 S$ 000 Tur nover 32,198 Profit before taxation 5,089 Taxation (1,349) Profit after taxation attributable to the shareholders of the Company 3,740 Unaudited consolidated balance sheet as at 30 June 1999 S$ 000 Fixed assets 39,259 Current assets 14,325 Less current liabilities (20,059) Net current liabilities (5,734) Bills payable and creditors due after 12 months (44) Deferred taxation (3,121) Hire purchase due after 12 months (7,327) Term loans due after 12 months (6,542) Net assets 16,491 Shareholders equity 16,491 80

22 GENERAL AND STATUTORY INFORMATION INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS 1. The particulars of the Directors and Executive Officers are set out on pages 54 to 56 of this Prospectus. 2. The business and working experience of the Directors are as follows:- Mr Ang Kah Hong is the Group Chairman and Managing Director. Mr Ang has been a director of Tiong Woon CT since its inception in 1980 and joined the Board of Directors of the Company in He has more than 19 years of experience in heavy lift and heavy haulage operations. He is mainly responsible for envisioning the Group as an integrated heavy lift, heavy haulage and marine transportation services provider. His experience has been invaluable to the development of the Group in recent years. Mr Ang s primary responsibilities include identifying, formulating and developing corporate objectives and strategies for the Group. He is also the director-in-charge of the marine and trading operations as well as finance and administration of the Group. Mr Ang Kah Leong is an Executive Director of the Company. He is one of the founding shareholders of Tiong Woon CT and has been a director of Tiong Woon CT since its inception in He joined the Board of Directors of the Company in He possesses extensive experience in the heavy haulage and heavy lift operations. His contribution to the growth of the Group has been invaluable. Mr Ang s key responsibilities include overseeing the function of repair and maintenance of the Group s cranes and equipment. This is to ensure that the equipment is in good condition and is reliable. Mr Ang Kha King is an Executive Director of the Company. He is one of the founding shareholders of Tiong Woon CT and has been a director of Tiong Woon CT since its inception in He joined the Board of Directors of the Company in His key responsibilities include the review of the Group s decision making process and the formulation of business direction for Tiong Woon Marine and Tiong Woon Enterprise. In addition, he oversees the external operational functions and liaise with the operations department to ensure that there are adequate machines and equipment available for the job. Mr Tan Swee Khim is an Executive Director of the Company. Mr Tan has been a director of Tiong Woon CT since 1993 and was appointed to the Board of Directors of the Company on 23 August Prior to joining the Group in 1982, he was working as a shipping executive for six years and has extensive experience in shipping. Since joining the Group as a marketing executive, Mr Tan had several promotions and is currently the Director-in-charge of the Group s heavy lift and haulage operations. He is responsible for the Group s marketing, operations, maintenance and project engineering in Singapore and overseas. He is responsible for promoting the Group s services to both new and existing customers and identifying business opportunities for the Group. Mr Tan is also the acting Managing Director in the absence of Mr Ang Kah Hong. Mr Yeo Wee Tiong, Mark is a non-executive Director of the Company. He has been a director of Tiong Woon CT since 1998 and was appointed to the Board of Directors of the Company on 23 August He is an Investment Manager at UOB Venture Management. Prior to joining the direct investment industry in 1996, he spent six years in the corporate finance area working for N M Rothschild & Sons (Singapore) Ltd and Smith Barney Shearson, HG Asia (Singapore) Pte Ltd where he was involved in advisory services on mergers and acquisitions, corporate restructuring and public listings. Mr Yeo started his career in the audit division of Ernst & Young in New Zealand and holds a Bachelor of Commerce degree with a double major in Accounting and Marketing from the University of Canterbury, New Zealand. Mr Ong Kai Seong is a non-executive Director of the Company. He has been a director of Tiong Woon CT since 1998 and was appointed to the Board of Directors of the Company on 23 August He is currently the Senior Vice President of OCBC Capital Management Singapore Pte Ltd responsible for venture capital investments. Prior to starting the venture capital arm of the OCBC 81

23 Bank Group, he was an academic in the Nanyang Technological University and also served as a consultant to large corporations, statutory board and the United Nations. Before that, he worked with a multinational company in marketing function, served in senior management positions with a listed company and the public sector. Positions held include General Manager and Executive Director. He also served in the Council and Committees of various professional bodies including the Institution of Engineers, Singapore and Singapore Institute of Management. He holds a Bachelor of Mechanical Engineering, First Class Honours degree from the University of Canterbury, New Zealand and a Master of Business Administration from the National University of Singapore. He is a Singapore Registered Professional Engineer and a Fellow of the Institution of Engineers, Singapore. Mr Wong King Kheng is appointed as the Independent Director of the Company on 23 August He is presently the managing partner of a public accounting firm in Singapore. Prior to that, his experience as an audit manager in an international accounting firm gave him extensive exposure in the fields of auditing, tax planning, management consulting and public listing consulting. He graduated as a member of the Institute of Chartered Accountants in England and Wales and is also a member of the Institute of Certified Public Accountants, Singapore. Mr Chandra Mohan s/o Rethnam is appointed as the Independent Director of the Company on 23 August He is presently an advocate & solicitor and a partner of a law firm in Singapore. Prior to that, he was a lecturer with the Faculty of Law at the National University of Singapore which he had joined in He holds a Bachelor of Law (Honours) degree from the University of Singapore and a Master of Law degree from the University of Cambridge. Mr Chua Gah Hok is the alternate director to Mr Ong Kai Seong. He has been a director of Tiong Woon CT since 1998 and was appointed to the Board of Directors of the Company on 23 August He is currently a Vice President of OCBC Capital Management Singapore Pte Ltd responsible for venture capital investments. Prior to joining the venture capital arm of the OCBC Bank Group, he was with a merchant bank for five years specialising in corporate finance transactions. Before that, he spent two years with a major transport service company and was responsible for system maintenance and, prior to that, he spent five years with a statutory board and was responsible for construction supervision and project management of civil engineering projects. Mr Chua obtained a Diplome d Ingenieur from l Ecole Nationale des Travaux Publics de l Etat in France and a Master of Business Administration from the National University of Singapore. 3. The interests of the Directors and substantial Shareholders in the Shares as at the date of this Prospectus (before the Invitation) as recorded in the Register of Directors Shareholdings maintained under the Act, and the Register of Substantial Shareholders, are as follows:- No. of Shares registered No. of Shares in which in the names of Directors or substantial Directors or substantial Shareholders are deemed Shareholders % to have an interest % Directors Ang Kah Hong 7,765, ,805, Ang Kah Leong 7,765, ,805, Ang Kha King 7,765, ,805, Tan Swee Khim 2,650, Yeo Wee Tiong, Mark Ong Kai Seong Wong King Kheng * Chandra Mohan s/o Rethnam * Chua Gah Hok (alternate to Ong Kai Seong) 82

24 No. of Shares registered No. of Shares in which in the names of Directors or substantial Directors or substantial Shareholders are deemed Shareholders % to have an interest % Substantial Shareholders ACKS 114,805, OCBC Capital 21,429, UOBVI 10,714, UOBVI2 10,714, * Messrs Wong King Kheng and Chandra Mohan s/o Rethnam have each been allocated 30,000 Reserved Shares pursuant to the Invitation. The independent Directors may dispose of or transfer all or part of their respective shareholding after the admission of the Company to the Official List of the SES. 4. The list of present and past directorships of each Director, excluding those held in the Company, over the past five years preceding the date of this Prospectus, are as follows:- Name List of Other Directorships List of Past Directorships Ang Kah Hong Ang Kah Leong Ang Kha King Tan Swee Khim Group companies Tiong Woon CT Tiong Woon Enterprise Tiong Woon Engineering Tiong Woon Marine Tiong Woon Malaysia Tiong Woon Indonesia Tiong Woon Philippines Others Ang Choo Kim & Sons Pte Ltd Chung Hwa Engineering Construction Pte Ltd Chung Hwa Engineering Construction Sdn Bhd Profitway Collections Sdn Bhd Group companies Tiong Woon CT Tiong Woon Marine Others Ang Choo Kim & Sons (Pte) Limited Group companies Tiong Woon CT Tiong Woon Enterprise Tiong Woon Engineering Tiong Woon Indonesia Tiong Woon Philippines Others Ang Choo Kim & Sons (Pte) Limited King Chuan Trading Pte Ltd Group companies Tiong Woon CT Tiong Woon Indonesia PACF East Consultancy & Agency Pte Ltd (formerly known as Angohtan Pte Ltd) Tiong Woon Engineering Nil Nil 83

25 Name List of Other Directorships List of Past Directorships Yeo Wee Tiong, Mark Ong Kai Seong Wong King Kheng Group companies Tiong Woon CT Others Hitchins (Far East) Pte Ltd Simplex (Holdings) Pte Ltd Group companies Tiong Woon CT Others Asia Pacific Edible Oil Limited Asian Capital Management Limited (members voluntary winding up) Asiawide Chemicals Pte Ltd CivilTech International Limited CV Consumer Services Limited Far East Myanmar Packaging Pte Ltd Myanmar Capital Management Pte Ltd Myanmar Integrated Port Services Pte Ltd Myanmar Integrated Port Limited Royal-Sweet Asia Ltd The Myanmar Growth Fund Limited Group companies Nil Others Ossia International Ltd SWP Consulting Pte Ltd Intec Global Pte Ltd The Business Exchange Pte Ltd Nil Nil Nil Chandra Mohan Group companies s/o Rethnam Nil Nil Others Blanchett Pte Ltd Eriston Investments Pte Ltd InfoSeek Communications (s) Pte Ltd JC Investment Pte Ltd Sprucetree International Pte Ltd Chua Gah Hok Group companies Tiong Woon CT (alternate director) Others Myanmar Integrated Port Services Pte Ltd Asiawide Chemicals Pte Ltd Nil 5. The business and working experience of the Executive Officers are as follows:- Lee Kum Mun is the Group General Manager. He began as a project engineer in Nippon Express (S) Pte Ltd in the heavy haulage division in 1994 and was promoted to Assistant Operations Manager in He joined the Group in 1996 as a branch manager for Tiong Woon Malaysia and was promoted to his current position in He holds a Bachelor of Engineering degree from the National University of Singapore. 84

26 Luciana Jasman is the Group Accounting Manager, responsible for the Group s overall accounting and financial functions. Prior to joining the Group in August 1998, she was with Vikay Industrial Ltd for eight years as an accountant. She is an associate member of the Association of Chartered Certified Accountants. Ng Geok Choo, the Group s Administration Manager, joined the Group in 1988 and has been with the Group for more than 10 years. She is responsible for the Group s general administration and insurance for all the Group s equipment. Ang Siew Chien, the Group s Human Resource Executive has been with the Group since In 1995, she left to further her studies. Upon completion of her studies, she returned to join the Group and is now in charge of human resource. She holds a diploma in Business Studies from the Ngee Ann Polytechnic. Joseph Lee Huat Cherh, the Assistant Marketing Manager, joined the Group in 1994 as a marketing executive. He was involved in many projects undertaken by the Group and has managed to establish a wide network in the construction and transportation industry. In 1997, he was promoted to his current position. Yeo Boon Chuan joined the Group in 1985 and has been with the Group for more than 10 years. As the Operations Manager, he is responsible for the control and deployment of the fleet of equipment and manpower for the jobs and projects undertaken by the Group. Hartmut Friedric Wilhelm Matz, the Marine Superintendent of the Group, has been with the Group since December He has approximately 22 years of experience in project cargo transportation and is in charge of overseas projects, inclusive of transportation and land and sea erections. He received his qualification as a Master Mariner from Seefahartschule Cuxhaven. Lim Kok Yeong, the Assistant Workshop Manager, joined the Group in Prior to joining the Group, he was with the Singapore Armed Forces as a company commander for 12 years, responsible for terminal services crane and lifting operations. He has extensive experience and knowledge in the maintenance and servicing of equipment. He holds a Diploma in Mechanical Engineering from the Ngee Ann Polytechnic. Tan Kwee Peng, the Operations and Administration Manager, joined the Group in 1989 and has been with the Group for approximately 10 years. She is responsible for managing the marine operations and administrative matters. 6. None of the Executive Officers hold any present and past directorships, including those held in the Company, over the past five years preceding the date of this Prospectus. 7. Save as disclosed on pages 22, 82 and 83 of this Prospectus, none of the Directors or substantial Shareholders have any shareholding in the Company. 8. Messrs Ang Kah Hong, Ang Kah Leong and Ang Kha King are brothers. Mr Lee Kum Mun is the husband of Ms Ang Siew Chien who is the daughter of Mr Ang Kah Hong. Save as disclosed, none of the Directors, Executive Officers and substantial Shareholders are related to one another. None of the Directors have any professional relationship with the Company and its other Directors and substantial Shareholders, except for:- (a) (b) (c) Mr Yeo Wee Tiong, Mark, who is a nominee director of UOBVI and UOBVI2 and an employee of UOB Venture Management; Messrs Ong Kai Seong and Chua Gah Hok, who are nominee directors of OCBC Capital and employees of OCBC Capital Management Singapore Pte Ltd; and Messrs Chandra Mohan s/o Rethnam and Wong King Kheng whose respective firms sometimes provide services to the Group as stated on page 53 of this Prospectus. 85