The Business of Craftsmanship. A n n u a l R e p o r t

Transcription

1 The Business of Craftsmanship A n n u a l R e p o r t

2 V I S I O N To be a leading organisation in the manufacturing and supply of accessories, products and services in the transportation industry. M I S S I O N To continuously bring about innovations and quality products in order to ensure customer loyalty and pride, and to achieve customer expansion. To build a Jackspeed community that provides opportunities for growth through continuous personal development and training. To safeguard all stakeholders interests and maximise returns through enhancement of values. CONTENTS About Jackspeed Letter to Shareholders Financial Highlights Board of Directors Key Management Operations Review Corporate Information Financial Contents

3 ABOUT JACKSPEED Jackspeed Corporation Limited ( Jackspeed or the Group ) is a specialist manufacturer and supplier of quality leather trim and accessories for the automobile sector and the aerospace sector. Headquartered in Singapore, we have manufacturing facilities spread across Singapore, Malaysia, Thailand and Indonesia and our customers include renowned international automotive manufacturers such as Ford Asia and General Motors. Established in 1993, Jackspeed is a specialist manufacturer of customfit automotive leather trim for seats, and a supplier of leather wrapping for interior automotive parts such as steering wheels, consoles and shift knobs. Capitalising on our technical strength and expertise and our keen attention to details, the Group was able to penetrate the niche market of leather, polyvinyl chloride and fabric seat customisation. Jackspeed is recognized in Southeast Asia for quality automotive leather trim. Our commitment to customer satisfaction is the cornerstone of Jackspeed s growing brand premium and is the foundation to our continued success in this highly competitive market. In 2006, Jackspeed leveraged on its experience in the leather trim business and broadened its product portfolio into the automotive accessories sector, supplying, assembling and installing automobile products and non-factory fitted accessories. With our extended product portfolio, we now provide our customers with a comprehensive and complementary one-stop range of automotive accessories products and services. Jackspeed also supplies leather upholstery to specialised aerospace and marine industries such as private jets, commercial planes, helicopters and pleasure crafts. Riding on Singapore s establishment as a regional Aviation Maintenance Repair and Overhaul hub, the Group has made inroads into the country s aircraft retrofitting market. Jackspeed is an Approved Vendor of ST Aerospace Engineering Pte Ltd, a Preferred Partner of Hawker Pacific Asia Pte Ltd and an Authorised Vendor for AirAsia Berhad. Accredited by international agencies, Jackspeed has received numerous quality certifications including ISO/TS 16949, the 14th Europe Award for quality, ISO (for environmental management), OHSAS certification (for occupational health and safety management system) and TUV Kraftfahrt Gmbh (for air bag safety). 1

4 LETTER TO SHAREHOLDERS Yeap Swee Chuan Chairman Liew Ham Chow Chief Executive Officer Dear Shareholders, We are pleased to present to you the Annual Report for Jackspeed Corporation Limited ( Jackspeed or our Group ) for the financial year ended 28 February 2007 ( FY2007 ). The year under review was one of challenges, during which we embarked on strategic initiatives to enhance our foothold in the European automobile accessories market, strengthen our competitive edge in the Thailand automotive industry and widen our customer base. The year was marked by several milestones, beginning with the maiden contribution to the Group s performance by Jackson Vehicle Holdings Pte Ltd ( JVH ), a specialty manufacturer of automotive accessories which our Group acquired in March 2006 as part of our strategy to expand our product portfolio and consolidate the Group s position within the regional automotive market. This was followed by two joint ventures with our strategic partner in Thailand, AAPICO Hitech Public Co., Ltd ( AAPICO ) a leading original equipment manufacturer ( OEM ) of automobile parts, car assembly jigs and chassis frames and the steady growth of the Group s aviation business. Group revenue rose 37.5% to S$43.7 million for FY2007 from S$31.8 million in FY2006, on the strength of the substantial S$18.0 million contribution from JVH and higher sales from our aviation business. However, we were affected by the conclusion of a supply contract from a Thailand OEM customer which hindered an otherwise good year of growth. Net profit attributable to shareholders increased 12.6% to S$2.9 million in FY2007 compared to S$2.6 million a year ago riding on additional contributions of S$1.5 million from our new automotive accessories business. It was partially lowered by lower contribution from the leather trim business. We are pleased that the revenue growth reflects the success of our strategy to expand our product portfolio and widen our earnings base. We believe JVH will continue to pave the way for the Group to capitalise on the booming Thailand OEM industry, widen our regional marketing footprint and usher in more business opportunities during and beyond FY2008. In line with higher sales from the Thailand market, which increased 170% to S$11.9 million in FY2007, and its strong growth potential, our Group embarked on two joint ventures with AAPICO. In June 2006, we entered into a joint venture with AAPICO and Coryor (S) Pte. Ltd. ( Coryor ), an accessories trader, to incorporate Katsuya International Pte Ltd ( Katsuya International ) in Singapore. Katsuya International which is 51% owned by Jackspeed, specialises in providing dip-printing services and manufacture of fabric-sprays to automotive OEM markets in countries such as Thailand. Riding on AAPICO s extensive industrial network and reputation, Katsuya International will be able to jumpstart its market penetration into the automotive OEM markets in Thailand and other parts of Asia and contribute to Jackspeed s future performance. 2

5 Another significant development in June 2006 was the incorporation of an associate company, AAPICO Jackspeed Co., Ltd ( AAPICO Jackspeed ), in which Jackspeed has a 40% stake. Our Group will use AAPICO Jackspeed as a vehicle to penetrate the global car accessories market, starting with the manufacture and supply of automobile parts. Production commenced in the first quarter of FY2008 and AAPICO Jackspeed is now a second-tier supplier for Ford Thailand. Through this joint venture, our Group has received fresh impetus to secure a bigger slice of the increasingly competitive Thailand automotive market in FY2008. Europe is the largest automotive region in the world and remains a core market for Jackspeed s distribution business. Our Group has established a significant presence there through our sales office in Belgium. Mindful of a possible slowdown in car sales for this region in FY2008, we have adopted a prudent expansion policy in this geographical market for our leather trim business. The successful integration of JCL and JVH has paved the way for the Group to make inroads into Europe s car accessories market. The Group s aviation business took off this year and recorded robust growth in FY2007. Revenue from this sector grew by 143.6%, driven by Singapore s establishment as a regional hub for Aviation Maintenance Repair and Overhaul ( MRO ). Jackspeed will continue to lay the foundations for future expansion in the regional aviation sector by setting up a seat repair station in FY2008. When completed, the repair station will allow the Group to provide specialised services to commercial air carriers and further expand our earnings base. Financial Position and Dividends The Group closed the year with a stronger balance sheet, as net asset value per share increased to Singapore cents as at 28 February 2007 compared to Singapore cents a year ago. The Group also increased its cash and cash equivalents balance by 48.3% to S$11.2 million as at 28 February 2007 from S$7.6 million a year earlier. To reward our loyal shareholders for their continued support, the Board of Directors is pleased to propose a final exempt (one-tier) dividend of 0.7 Singapore cents per share to be approved at the upcoming Annual General Meeting. Together with the interim exempt (one-tier) dividend of 0.3 Singapore cents per share announced earlier, the total exempt (one-tier) dividend of 1.0 Singapore cents for FY2007 represents a gross yield of around 6% based on closing share price as at 27 April Acknowledgements Jackspeed has been able to achieve growth in both revenue and net profit for FY2007 despite the challenges faced. This would not be possible without the continued support from our shareholders, our customers, our business partners, and the hard work and diligence from our management and staff. On the Board s behalf, please accept our heartfelt appreciation and thanks. Yeap Swee Chuan Chairman Liew Ham Chow Chief Executive Officer 3

6 Consistency in Quality

7 FINANCIAL HIGHLIGHTS Revenue $ million Profit before tax $ million Profit for the year $ million $ million Revenue Profit before tax Profit for the year

8 BOARD OF DIRECTORS YEAP SWEE CHUAN was appointed the Group s Non-Executive Chairman on 7 July 2006 and helms the development of Jackspeed s future business and expansion plans within the region and beyond. With over two decades of experience in the regional automotive industry, Mr Yeap brings to the Group a wealth of regional management and operating experience and a strong network of close working relationships with international car manufacturers. Considered to have played an important role in Thailand s emergence as the Detroit of the East, Mr Yeap was the founder of AAPICO Hitech Public Co., Ltd ( AAPICO ) the first Malaysian-Thailand automotive parts company listed on the Thailand Stock Exchange. Under his leadership, AAPICO grew to become one of the largest automotive parts company in Thailand. He is currently the director of Goodyear (Thailand) Public Co., Ltd, Chairman of the Malaysian-Thailand Chamber of Commerce, and sits on the Board of Trade of Thailand as director. Mr Yeap has a Bachelor of Technology degree from New Zealand. LIEW HAM CHOW, JACKSON has been our Executive Director since 1994 and Chief Executive Officer since In July 2006, Mr Liew relinquished his role as Chairman and Mr Yeap Swee Chuan was appointed the Group s Non- Executive Chairman. As CEO, he charts and reviews our corporate direction and business strategies and is responsible for the Group s strategic operations and overall performance. Mr Liew has been involved in the automotive industry through the incorporation of Jackson Vehicle Service Centre in 1983 and Jackspeed Automobile Service Centre in 1986 as workshops for the repair and maintenance of motor vehicles. As one of our founding shareholders, Mr Liew was pivotal in the development of the Group s automotive leather trim business from a smallmedium enterprise with nine employees to a recognised brand name in the region for quality automotive leather trim with 750 staff and manufacturing facilities in Singapore, Malaysia, Thailand and Indonesia. Mr Liew has an honorary Bachelor of Science (Business Administration) from Kennedy-Western University, Cheyenne, Wyoming, the USA. Mr Liew was awarded the title of The Entrepreneur of the Year in 2003 by the Rotary Club of Singapore and the Association of Small and Medium Enterprises (ASME). VOO JUN HING, VINCENT was appointed as an Executive Director of the Group on 11 October With over 15 years of experience in finance and management, Mr Voo is responsible for the Group s finance, accounts, statutory compliance and overall corporate governance. Mr Voo joined our Group in 2000 as our Administration and Human Resource Manager and was promoted to General Manager of our Malaysia subsidiary and subsequently General Manager of Singapore operations, before assuming his present appointment. Prior to joining our Group, Mr Voo worked at a Malaysia licensed tax firm, Taxplan Management Services Sdn Bhd as a senior tax supervisor from 1989 to Mr Voo has a Diploma in Business Studies from Southern College, Johor Bahru, Malaysia and a Higher Stage Group Diploma in Accounting from London Chamber of Commerce and Industry, and is an Accounting Administrator of the Malaysian Association of Accounting Administrators. HO CHOON MENG, SIMON was appointed an Executive Director of the Group on 7 July 2006 and oversees Jackspeed s accessories arm as well as the development of the Group s business and expansion plans. A founding member of JVH and having risen through the ranks from a sales manager to become its Chief Operating Officer, Mr Ho brings with him more than ten years of experience in sales and business development. He is well versed in the business of car accessories and continues to spearhead JVH s development in the car accessories business, including sourcing, production, engineering, sales and marketing. 6

9 LEE SENG JEOW, ANDREW was appointed an Executive Director of the Group on 7 July He is responsible for the management of the sales and marketing division and supports in the Group s operational and expansion initiatives. Mr Lee has over 15 years of experience in the automotive industry and an in-depth understanding of the region s operating environment. Prior to joining our Group, Mr. Lee was a founding member of JVH as its Deputy Chief Executive Officer, and was tasked with directing the company s business and expansion strategies. He had also served as Senior Manager for Tan Chong International Ltd where he led a highly motivated and enthusiastic sales force, and with Premium Automobiles as General Manager for Sales and Marketing, where he formulated and implemented the company s marketing and business strategies. Mr Lee has a Diploma in Production Engineering from the Singapore Polytechnic and graduated with a Bachelor degree in Social Sciences from the University of Calgary, Canada in ANG KIAN LEE was appointed as an Executive Director of the Group on 7 July 2006 and is responsible for the development of new business ventures of the Group. Prior to this appointment, Mr Ang was appointed our Non-Executive Director on 8 December Mr Ang has 20 years of management experience as director of the Lion Group of Companies in Indonesia, including listed PT Lion Metal Works and worked as a Bank Inspector with the Monetary Authority of Singapore from 1974 to He is currently a director of Raeco Pte Ltd a company dealing with financial investments and he is also a commissioner of P.T. Djabesmen Indonesia. He graduated from the Nanyang University of Singapore with a Bachelor of Commerce (Honours) degree in CHANG YEH HONG was appointed as an Independent Director of the Group on 9 October He is currently the managing director of Nordic Corporation Pte Ltd and its related companies. Prior to this appointment, Mr Chang was an executive director of Technics Group Holdings Ltd, in charge of finance and corporate development. He has over 18 years of experience in banking with Standard Chartered Bank and Citibank, holding local, regional and global positions. Prior to 2002, he was the regional managing director of Asia Pacific with Citibank and global head of a product group with Standard Chartered Bank. Mr Chang holds a Bachelor of Arts degree majoring in Economics from the National University of Singapore and has completed the International Executive Management Programme in INSEAD Fontainebleau, France and the Business Financial Management Programme with Manchester Business School, UK. LEE KIM LIAN, JULIANA was appointed as an Independent Director of the Group on 30 September She is a director of Aptus Law Corporation (formerly known as Chui, Sim, Goh & Lim, Advocates and Solicitors). Ms Lee has more than 15 years of experience in legal practice and currently heads the corporate practice of Aptus Law Corporation. Her main areas of practice are corporate law, corporate finance, mergers and acquisitions and venture capital. She is currently also an independent director of FM Holdings Ltd and Lee Metal Group Ltd. She graduated with a Bachelor of Laws (Honours) degree from the National University of Singapore. 7

10 KEY MANAGEMENT LIEW SAN CHOW is our General Manager in charge of our Indonesia operations, covering administration, human resource and production functions. He joined our Group in 1996 as a Production Manager in charge of the daily operations in the production of automotive leather trim. Prior to joining our Group, he worked in Jackspeed Automobile Service Centre as a manager supervising the daily operations for the repair and servicing of cars. PANG PUI FUN is our General Manager in charge of Singapore operations. Ms Pang joined the Group in 1995 as an Administrative Assistant and through her exemplary efforts progressed within the Group. Prior to her present appointment, Ms Pang was the Assistant General Manager of Singapore operations from 2005 and the Group Purchasing Manager from 2003, responsible for the entire Group s procurement function and logistic management. Ms Pang was a quality assurance auditor in an electronics company, from 1992 to Ms Pang has a Bachelor of Science in Business Management from Management Development Institute of Singapore. LIM KIAN KOK is our General Manager in charge of Malaysia operations. Mr Lim joined the Group in 2001 as a Marketing Executive for our Malaysia factory. In 2004, he was made the Quality Assurance Manager of Malaysia operations and Group s management representative for Quality, Environmental, Occupational Health and Safety management systems, responsible for the Group s quality control procedures and continued compliance with ISO/TS 16949, ISO and OHSAS standards. He was promoted in 2005 to Assistant General Manager in charge of Malaysia operations. Mr Lim has a Bachelor in Business Administration from National Cheng Chi University, Taipei and was the Branch Officer-incharge at Hong Leong Assurance Bhd when he left in December PHAU SOEK CHING is our General Manager in charge of Thailand operations. Ms Phau joined the Group in 2004 as the Personal Assistant to the CEO. In 2005, she assumed the position of Assistant General Manager in charge of the Thailand operations. Prior to joining the Group, Ms Phau was assistant to the Managing Director for Pan Asian Metal Pte Ltd and was seconded to China from 1999 to Ms Phau worked as a dealer for OUB Securities Pte Ltd from 1994 to 1998 and possesses the necessary cross-border exposure and knowledge to ensure the continued success of our Thailand operations. Ms Phau has a Bachelor of Arts and Social Sciences, majoring in Economics and Chinese Studies from the National University of Singapore. KHOO SOO FANG is our Financial Controller responsible for overseeing and supervising the Finance Department as well as monitoring the performance of our subsidiaries. Prior to joining us in 2001, Ms Khoo was an audit assistant at Messrs Foo, Kon & Tan from 1990 to She joined Coop international Pte Ltd as an accountant in 1991 and Glenn Industries (Asia) Pte Ltd as an accountant in She was the finance manager for Yenom Holdings Pte Ltd from 1997 to Ms Khoo has a Bachelor of Accountancy from the Nanyang Technological University and is a member of the Institute of Certified Public Accountants of Singapore. NG CHONG JIN is our Head of Corporate Affairs in charge of identifying and evaluating new business opportunities such as mergers, acquisitions and general business expansion. Mr Ng joined the Group in 2005 bringing with him a wealth of investment and financial experience. Prior to his joining, Mr Ng was a senior credit and marketing officer in United Overseas Bank Limited. He joined Joo Cheong Co Pte Ltd as its Business Development Manager in 1997, and was the Chief Executive Officer of Pivota.com Sdn Bhd from He was also the Investment and Business Development Manager for Ng Chong Geng & Sons Sdn Bhd from Mr Ng has a Bachelor of Science majoring in Banking and Finance from the University of Missouri-Columbia, USA. 8

11 Mastery of Innovation

12 OPERATIONS REVIEW Financial Performance FY2007 saw Jackspeed expanding its product portfolio beyond the leather trim business. We successfully added a new dimension, the automotive accessories business, through our investment in our newly acquired subsidiary, Jackson Vehicle Holdings ( JVH ), which has resulted in significant returns. Group revenue was 37.5% higher at S$43.7 million in FY2007 compared to S$31.8 million in FY2006, boosted mainly by the maiden contribution of the automotive accessories business and strong revenue growth from our aviation business. Revenue from the Group s leather trim business on the other hand, was affected by the conclusion of a major supply contract in June 2006 and a slowdown in sales from our Malaysian market where car production volume has fallen. This resulted in relatively lower revenue contributions from the leather trim business as compared to the previous year. Profit attributable to shareholders increased 12.6% to S$2.9 million for FY2007 from S$2.6 million for FY2006. The higher profit was attributable mainly to the Group s new automotive accessories business which contributed S$1.5 million to the profit, but this was partially offset by lower contribution from the leather trim business. Net profit margin however declined to 6.7% in FY2007 from 8.2% in FY2006, due mainly to lower utilisation of the Group s production capacity, amortisation of intangibles and share of loss in associates which amounted to S$0.41 million. Financial Position The Group closed the year with a strengthened financial position. On an enlarged share capital, net asset value per share increased to Singapore cents (on 174,666,667 shares) as at 28 February 2007 compared to Singapore cents (131,000,000 shares) a year earlier. This was backed by a stronger cash and cash equivalent balance held of S$11.2 million as at 28 February 2007, an increase of S$3.6 million or 48.3% from S$7.6 million as at 28 February The increase came about as cash flow from financing activities increased to S$5.4 million for FY2007 from an outflow of S$3.8 million for FY2006, mainly due to the proceeds from the share placement during the year. This was offset by lower cash from operating activities from S$3.0 million for FY2006 to S$1.4 million for FY2007 and an increase in cash used in investing activities to S$3.3 million for FY2007 from S$0.1 million for FY2006 due mainly to the investments in JVH and associate companies. Segmental Contribution Distributor market The distributor market continues to be the main contributor to the overall revenue of the Group, accounting for S$21.6 million or 49.3% of total revenue for FY2007. The S$4.2 million or 24.4% increase in revenue from S$17.4 million for FY2006 was mainly due to the maiden contribution of the newly added automotive accessories business. The leather trim distributor market had a challenging year and recorded S$16.8 million in sales revenue for FY2007 compared to S$17.3 million a year ago. While significant potential exists within the segment, our leather trim business was affected by the end of production life-cycles for certain car models which resulted in lower sales to a distributor in Singapore and smaller increases in orders from other customers. OEM market The OEM market accounted for S$17.2 million or 39.2% of Group revenue for FY2007 compared to S$11.4 million for FY2006. The S$5.8 million increase was attributable mainly to the revenue from the automotive accessories business that was newly added in FY2007. The OEM market for the leather trim business struggled during the year as a supply contract to a customer in Thailand with whom the Group has been contracted for leather trim assembly since 2002, expired in June 2006 and sales of Malaysian automobile also experienced an unusual dip during the year. These affected revenue contributions from the leather trim business which declined to S$5.4 million in FY2007 from S$11.4 million in FY2006. Retail, after-market and non-automotive Retail, after-market and non-automotive generated S$5.0 million or 11.4% of Group revenue for FY2007 compared to S$3.1 million for FY2006. Retail and after-market grew in tandem with the Group s focus on expanding its presence in this segment. The automotive segment, which includes our aviation business, benefited from Singapore s emergence as a regional aviation Maintenance, Repair and Overhaul hub ( MRO ) and its revenue grew as it secured more retrofitting jobs in FY

13 Business Outlook The global automotive industry grew 3% in 2006 with over 50 million passenger cars produced. While the traditional automotive markets Europe and the US have experienced a slowdown, the Southeast Asian automotive industry continues to grow due to the lower operating costs which led many renowned car makers to shift their production bases to the region. Riding on this trend, the automotive industries in Thailand and Malaysia countries where Jackspeed s plants are based will continue to experience significant growth in the near future. We expect the market conditions for our leather trim business to remain challenging in FY2008 as the rise in leather material prices will have an impact on gross margins. To moderate the price increase of leather, our Group has initiated discussions with our customers to increase our selling prices and is sourcing for alternative leather-based material to reduce raw material cost. We will intensify our marketing efforts to expand our customer base and we will continue to explore additional co-operation opportunities with other automotive manufacturers. Having widened our earnings base into the automotive accessories and aviation businesses, we will continue to build and strengthen our presence in the market. We will endeavour to grow our market share of the automotive accessories both in Europe and the Southeast Asia, particularly in the highly competitive Thailand automotive industry where we have our newly formed joint venture, AAPICO Jackspeed, an alliance with AAPICO Hitech Public Co., Ltd who is one of Thailand s biggest suppliers of car parts. The Group is optimistic about the growth opportunities of its aviation business, particularly in Singapore, which has established itself as the regional hub for Aviation MRO, and we will continue to lay the foundation for expansion into the regional aviation sector. At the same time, we will continue to seek out new opportunities to expand into or invest in regions and businesses with strong growth potential. 11

14 CORPORATE INFORMATION BOARD OF DIRECTORS Yeap Swee Chuan (Non-Executive Chairman) Liew Ham Chow (Executive Director and Chief Executive Officer) Voo Jun Hing (Executive Director) Lee Seng Jeow (Executive Director) Ho Choon Meng (Executive Director) Ang Kian Lee (Executive Director) Chang Yeh Hong (Independent Director) Lee Kim Lian Juliana (Independent Director) JOINT COMPANY SECRETARIES Low Mei Mei Maureen, ACIS, LLB (Hons) (London) Khoo Soo Fang, CPA SHARE REGISTRAR AND SHARE TRANSFER OFFICE M&C Services Private Limited 138 Robinson Road #17-00 The Corporate Office Singapore AUDITORS RSM Chio Lim (member of RSM International) 18 Cross Street #09-01 Marsh & McLennan Centre Singapore PRINCIPAL BANKERS Malayan Banking Berhad DBS Bank Limited United Overseas Bank Limited Hong Leong Bank Berhad REGISTERED OFFICE 47 Loyang Drive Singapore Tel: (65) Fax: (65) Website:

15 FINANCIAL CONTENTS Corporate Governance Report Report of the Directors Statement of Directors Independent Auditors Report Balance Sheets Consolidated Income Statement Statements of Changes in Equity Consolidated Cash Flow Statement Notes to Financial Statements Statistics of Shareholdings Notice of Annual General Meeting Proxy Form

16 CORPORATE GOVERNANCE REPORT The Board and Management of Jackspeed Corporation Limited (the Company ) is committed to achieving high standards of corporate governance for the sustainability and stability of the Group s performance. This Report describes the Company s corporate governance framework and practices with specific reference made to each of the principles of the Code of Corporate Governance 2005 ( the Code ). Where otherwise indicated, the Company believes that it has and will remain compliant with the Code. Principle 1 The Board s Conduct Of Its Affairs The Board consists of eight members, comprising a Non-Executive Chairman, two Non-Executive Independent Directors and fi ve Executive Directors. Together, the Directors bring a wide range of business, legal and fi nancial experience relevant to the Group. The Board sets the overall business direction, provides guidance on the Company s strategic plans with particular attention paid to growth and fi nancial performance and oversees the management of the Company. The principal functions of the Board include: (a) (b) (c) (d) Approving policies, strategies and fi nancial objectives of the Company and monitoring the performance of Management; Overseeing the processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance; Approving nominations of Board Directors, committee members and key personnel; and Approving annual budgets, funding requirements, expansion programme, capital investment, major acquisitions and divestments proposals. To ensure smooth and effective running of the Group and to facilitate decision making, the Board has delegated some of its powers and functions to various Committees, such as the Audit Committee, Nominating Committee and Remuneration Committee which are headed by Independent Directors. These Committees operate within their own written terms of reference. The Board meets regularly to discuss and address Board matters. The Company s Articles of Association provide for the Board to convene meetings via teleconferencing and electronic means. During the financial year, the Board met 5 times. The number of Board Meetings held and the attendance of each Board member at the meetings for the financial year ended 28 February 2007 are disclosed below: Name of Director Yeap Swee Chuan (1) Non-Executive Chairman Liew Ham Chow Executive Director and Chief Executive Officer Voo Jun Hing Executive Director Chang Yeh Hong Independent Director Lee Kim Lian, Juliana Independent Director Ang Kian Lee Executive Director Ho Choon Meng (1) Executive Director Lee Seng Jeow, Andrew (1) Executive Director Number of meetings held while a member Number of meetings attended (1) Messrs Yeap Swee Chuan, Ho Choon Meng and Lee Seng Jeow, Andrew, were appointed as Directors on 7 July

17 CORPORATE GOVERNANCE REPORT The Company has adopted internal guidelines setting forth matters that require Board s approval. Matters that specifi cally require Board s approval are those involving, annual budget, major funding and investment proposals, mergers and acquisition transactions, release of results announcements and any other announcements, appointment of Directors and key personnel and all other matters of material importance. The Board will review the guidelines on a periodical basis to ensure their relevance to the operations of the Company. Board members are also encouraged to attend seminars and receive training to improve themselves in the discharge of their duties as Directors. The Company works closely with professionals to provide its Directors with changes to relevant laws, regulations and accounting standards. Principle 2 - Board Composition And Guidance The Company endeavours to maintain a strong and independent element on the Board and will continue to review the Board size to ensure that it is appropriate and effective to facilitate decision making. The Independent Directors have confirmed that they do not have any relationship with the Company or its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Director s independent business judgement. The Nominating Committee ( NC ) has reviewed and determined that the said Directors are independent. The independence of each Director is reviewed annually by the NC. The Board will review its current size to ensure that it is appropriate and effective to facilitate decision making, taking into account the nature and scope of the Company s operations. Together, the Board members possess a balanced field of core competencies to lead the Company. Details of the Board members qualifi cations and experience are presented in this Annual Report under the heading Board of Directors. Principle 3 - Chairman And Chief Executive Officer The Chairman and Chief Executive Officer (CEO) functions are assumed by different individuals. The Chairman, Mr Yeap Swee Chuan, is a Non-Executive Director, while Mr Liew Ham Chow is an Executive Director and CEO. The clear division of responsibilities between the Chairman and the CEO ensures proper balance of power and authority in the Company. The CEO is the most senior executive in the Company and assumes executive responsibility for the Company s business, while the Chairman assumes the responsibility for the management of the Board. The Chairman ensures that regular Board meetings are held and ad-hoc meetings are convened when necessary. The Chairman ensures that the Board members are provided with complete, adequate and timely information. Principle 4 - Board Membership The Nominating Committee ( NC ) comprises three members, a majority of whom including the Chairman are Non- Executive Independent Directors. Chairman : Lee Kim Lian, Juliana Member : Chang Yeh Hong Member : Liew Ham Chow The NC is established for the purposes of ensuring that there is a formal and transparent process for all board appointments. It has adopted written terms of reference defining its membership, administration and duties. The NC met twice during the year and was attended by all members. The duties of the NC are as follows: (a) (b) (c) To make recommendations to the Board on all board appointments; To re-nominate Directors having regard to the director s contribution and performance; To determine annually whether or not a director is independent; and 15

18 CORPORATE GOVERNANCE REPORT (d) To make recommendation to the Board the performance criteria and appraisal process to be used for the evaluation of the individual Directors as well as the effectiveness of the board as a whole, which criteria and process shall be subject to board s approval The Articles of Association of the Company currently require one-third of the Directors to retire and subject themselves to re-election by the shareholders in every Annual General Meeting. In addition, all Directors of the Company shall retire from office at least once every three years. The dates of fi rst appointment and last election of each director, together with their directorship in other listed companies are set out below: Name of Director Appointment Date of first appointment Date of last re-election Directorships in other listed companies Yeap Swee Chuan Non-Executive Chairman 7 July 2006 Aapico Hitech Public Co., Ltd Goodyear (Thailand) Public Co., Ltd Liew Ham Chow Executive Director 15 January February 2005 Voo Jun Hing Executive Director 11 October February 2005 Ang Kian Lee Non-Executive Director re-designated as Executive Director 8 December July February 2006 Ho Choon Meng Executive Director 7 July 2006 Lee Seng Jeow, Andrew Executive Director 7 July 2006 Chang Yeh Hong Independent Director 9 October February 2006 Union Steel Holdings Ltd Lim Kim Lian, Juliana Independent Director 30 September February 2006 FM Holdings Ltd Lee Metal Group Ltd The details of the Board members qualifications and experience including the year of initial appointment and election are presented in this Annual Report under the heading Board of Directors. Principle 5 - Board Performance The NC evaluates the performance of the Board as a whole as well as the contributions made by each director to the effectiveness of the Board. The NC will consider the attendance, participation and contribution of individual Directors at Board and Committee meetings and those factors set out in the Code of Corporate Governance to evaluate the individual director s performance. Principle 6 - Access To Information The Board is furnished with board papers prior to any Board meeting. These papers are issued in sufficient time to enable the Directors to obtain additional information or explanations from the Management, if necessary. The Directors may communicate directly with the Management team and the Company Secretary on all matters whenever they deem necessary. The Company Secretary attends Board meetings and is responsible for recording of the proceedings. The appointment and removal of the Company Secretary is a matter for the Board as a whole. The Company currently does not have a formal procedure for Directors to seek independent and professional advice for the furtherance of their duties. However, Directors may, on a case-to-case basis, propose to the Board for such independent and professional advice, the cost of which may be borne by the Company. 16

19 CORPORATE GOVERNANCE REPORT Principle 7 - Procedures For Developing Remuneration Policies The Remuneration Committee ( RC ) comprises three members, a majority of whom including the Chairman are Non- Executive Independent Directors. Chairman : Chang Yeh Hong Member : Lee Kim Lian, Juliana Member* : Liew Ham Chow * In line with the Code that the RC should comprise entirely of Non-Executive Directors, Mr Yeap Swee Chuan will be appointed a member of the RC in place of Mr Liew Ham Chow subject to his re-election at the AGM to be held in June The RC is established for the purposes of ensuring that there is a formal and transparent procedure for fi xing the remuneration packages of individual Directors. The overriding principle is that no Director should be involved in deciding his own remuneration. It has adopted written terms of reference that defi nes its membership, roles and functions and administration. The RC met twice during the year and was attended by all members. The duties of the RC are as follows: (a) (b) (c) To review and recommend to the Board a framework of remuneration for Executive Directors, Chief Executive Officer ( CEO ) and key executives of the Company; To review the remuneration packages of all managerial staff that are related to any of the Executive Directors or CEO; and To recommend to the Board in consultation with senior Management and the Chairman of the Board, the Executive s and Employees Share Option Schemes or any long-term incentive scheme when applicable. Principle 8 - Level and Mix of Remuneration The RC determines the remuneration packages for each Executive Director based on the performance of the Company and the individual. The remuneration of the Executive Directors is based on service agreements. The Independent Directors and Non-Executive Directors are paid an annual director s fee. In determining the quantum of directors fees, factors such as effort and time spent, and responsibilities of the Directors are taken into account. The RC ensures that none of the Non-Executive Directors are over-compensated to the extent that their independence may be compromised. The Directors fees are subject to shareholders approval at the Annual General Meeting. The remuneration policies for key executives is based largely on the Company s performance and the responsibilities and performance of each individual key executive. The RC recommends the remuneration packages of key executives to the Board for approval. 17

20 CORPORATE GOVERNANCE REPORT Principle 9 - Disclosure on Remuneration The remuneration of Directors for the year ended 28 February 2007 is set out below: Remuneration Band and Name of Director Salary and Other Benefits Performance Bonus (2) Directors Fees (3) % % % $250,000 to below $500,000 Liew Ham Chow Below $250,000 Yeap Swee Chuan (1) 100 Voon Jun Hing 91 9 Chang Yeh Hong 100 Lee Kim Lian, Juliana 100 Ang Kian Lee 100 Ho Choon Meng (1) Lee Seng Jeow, Andrew (1) (1) Messrs Yeap Swee Chuan, Ho Choon Meng and Lee Seng Jeow, Andrew, were appointed as Directors on 7 July (2) Performance bonus will be paid in June 2007 (3) Directors fees are subject to Shareholder s approval at the AGM to be held in June The range of gross remuneration of the top six executives (executives who are not Directors) of the Company is as follows: Remuneration Band No of Executives $250,000 and above Nil Below $250,000 6 There are no immediate family members of a Director or Substantial Shareholder whose remuneration exceeds $150,000 for the financial year ended 28 February Principle 10 - Accountability The Board is accountable to the shareholders while Management is accountable to the Board. As defi ned in the Code, the Board presents to shareholders a balanced and understandable assessment of the Company s performance, position and prospect. The Management provides all Board members with management reports and accounts which represent balanced, understandable assessment of the Company s performance, position and prospect on a regular basis. It is the Board s policy to provide the shareholders with all important and price sensitive information. These are done through the SGXNET during half-yearly announcements and as and when necessary. 18

21 CORPORATE GOVERNANCE REPORT Principle 11 - Audit Committee The Audit Committee ( AC ) comprises three members, the majority of whom are Non-Executive Independent Directors. Chairman : Chang Yeh Hong Member : Lee Kim Lian, Juliana Member* : Voo Jun Hing * Mr Ang Kian Lee will step down as an Executive Director and become a Non-Executive Director after the conclusion of the AGM to be held in June In line with the Code that the AC should comprise entirely of Non-Executive Directors, Mr Ang will be appointed as a member of the AC in place of Mr Voo Jun Hing. The AC is established to assist the Board with discharging its responsibility to safeguard the Company s assets, maintain adequate accounting records and develop and maintain effective systems of internal control. The Board is of the opinion that the members of the AC possess the necessary qualifi cations and experience in discharging their duties. The details of the Board member s qualifi cations and experience are presented in this Annual Report under the heading Board of Directors. The terms of reference of the AC are as follows: (a) (b) (c) (d) (e) (f) (g) To review the audit plan, system of internal controls and the audit report in conjunction with both the internal and external auditors; To review the assistance given by the Company s officers to both the internal and external auditors; To review the independence and objectivity of the external auditors annually; To nominate external auditors for re-appointment; To review the financial statements of the Company including half-year and full-year results and the respective announcements before submission to the Board of Directors; To give due consideration to the requirements of Stock Exchange Listing Rules; and To review interested person transactions. In discharging the above duties, the AC confirms that it has full access to and co-operation from management and is given full discretion to invite any Director or Executive Director to attend its meetings. In addition, the AC has also been given reasonable resources to enable it to perform its functions properly. The AC has conducted an annual review of the volume of non-audit services to satisfy itself that the nature and extent of such services will not prejudice the independence and objectivity of the auditors before recommending their renomination to the Board. The Company has adopted a Whistle Blowing Policy with the objective of providing a process for staff to raise, in confidence and without fear of retaliation, incidents of possible improprieties in matters of financial reporting or other matters to the Chairman of the AC. During the year, the AC met twice and the details of attendance are as follows: Number of meetings held while a member Number of meetings attended Chang Yeh Hong 2 2 Lee Kim Lian, Juliana 2 2 Voo Jun Hing

22 CORPORATE GOVERNANCE REPORT Principle 12 - Internal Controls The Board believes that, in the absence of any evidence to the contrary, the system of internal controls maintained by the Company s management provides reasonable assurance against material fi nancial misstatements or loss and includes the safeguarding of assets, the maintenance of proper accounting records, the reliability of fi nancial information, compliance with appropriate legislation, regulation and best practice and the identification and management of business risks. The Board notes that no system of internal control can provide absolute assurance against the occurrence of material errors, poor judgment in decision-making, human error, fraud or other irregularities. Principle 13 - Internal Audit The Company outsourced its internal audit function to Nexia Tan & Sitoh Certified Public Accountants, to carry out internal audit review using a risk-based approach. The internal auditors report to the AC and are independent of the activities it audits. The internal auditors assist the AC to independently review the system of internal control as established by the Management of the Company and its subsidiaries which provides the Board with much assurance it requires regarding the adequacy and integrity of the Group s system of internal control. The internal auditors review the internal controls in the key activities of the business based on a three-year internal audit strategy and a detailed internal audit plan approved by the AC. The internal auditors adopt a risk-based approach and prepare its audit strategy and plan based on the risk profiles of the Group. Recommendations for improvements noted by the internal auditors are followed up for implementation by the Management. During the financial year ended 28 February 2007, the internal auditors carried out two cycles of internal audit to test the existence and effectiveness of the system of internal control of the Company as well as its subsidiaries. The AC considers the report from internal auditors before reporting and making recommendations to the Board in strengthening risk management, internal control and governance system. Principle 14 - Communication With Shareholders The Company endeavours to communicate regularly, effectively and fairly with its shareholders. The Board ensures that materials and information helpful to shareholders is released on a timely basis. All announcements are communicated to the shareholders through SGXNET. Principle 15 - Greater Shareholder Participation The Annual General Meeting is the principal forum for dialogue with shareholders. There is an open question and answer session at which shareholders may raise questions or share their views regarding the proposed resolutions and the Company s businesses and affairs. In addition, the Chairman of the respective Committees and Management will be present at the AGM to address any queries from the shareholders. The Company s external auditors are also invited to attend the AGM and are available to assist the Directors in addressing any relevant queries by the shareholders relating to the conduct of the audit and the preparation and content of their auditors report. The Board values shareholders feedback and input. 20

23 CORPORATE GOVERNANCE REPORT SECURITIES TRANSACTIONS The Company has set out guidelines to the Directors and key employees of the group to prohibit dealings in the Company s securities while in possession of price sensitive information and during the period commencing one month before the announcement of the Company s half year and full year results and ending on the date of announcement of the results. All Directors and Executives of the Company are also advised to observe insider trading laws at all times even when dealing in the Company s securities within the permitted trading period. INTERESTED PERSON TRANSACTIONS The Company has set out procedures governing all interested person transactions to ensure that they are carried out on an arm s length basis, on normal commercial terms and will not be prejudicial to the interests of the Company and its shareholders. For the financial year under review, the Group entered into interested person transactions with Jackspeed Automobile (S) Pte Ltd. Name of Interested Person Aggregate value of all interested person transactions during the financial year under review (excluding transactions less than S$100,000 and transactions conducted under shareholders mandate pursuant to Rule 920) Aggregate value of all interested person transactions conducted under shareholders mandate pursuant to Rule 920 (excluding transactions less than S$100,000) Jackspeed Automobile (S) Pte Ltd BUSINESS RISK MANAGEMENT The Group has expanded our potential market segment into the aviation business, where previously, majority of our revenue comes from the automobile market. We further expect the establishment of new offices and factories in strategic locations and endeavour to continuously seek opportunities to expand both our markets, products and services. The Management seeks to identify areas of significant business risks and will consider the appropriate measures to be taken to control and mitigate these risks. The Management reviews all significant control policies and procedures and highlights all significant matters to the AC. INVENTORY RISK MANAGEMENT The Group s sales still comprise a significant portion to the car distributor market, where sales of our products are dependent of the consumer demand of our customer s vehicles, amongst other factors. In order to manage our inventory risk, we seek to understand our car distributor market customers well, by evaluating the markets they operate in, and their modus operandi. We will be able to manage the inventory by having the most practicable level of inventory for certain customers, and at times, we will only place orders for raw materials upon firm orders from customers. 21