CHEMICAL INDUSTRIES (FAR EAST) LIMITED

Transcription

1 CHEMICAL INDUSTRIES (FAR EAST) LIMITED REPORT AND FINANCIAL STATEMENTS FOR THE YEAR ENDED 31ST MARCH CONTENTS PAGE Corporate Information 2 Chairman's Message to shareholders 3 Corporate Governance 6 Board of Directors & Key Management 10 Report of the Directors 14 Auditors' Report 17 Balance Sheets 18 Consolidated Profit and Loss Statement 19 Consolidated Statement of Changes in Equity 20 Consolidated Cash Flow Statement 21 Notes to Financial Statements 22 Statement of Directors 46 Financial Profile 47 Shareholding Statistics 48 Notice of Annual General Meeting 50 1

2 CORPORATE INFORMATION BOARD OF DIRECTORS Executive Directors Lim Soo Peng J.P. (Chairman & Managing Director) Eric Lim Yew Tou Cecil Lim Yew Khang Dr Lam Ying NonExecutive Independent Directors Dr Chua Sui Leng Kwek Gim Song Dr Wan Soon Bee Cheng Pet Hian (Appointed on 26 August ) Audit Committee Cheng Pet Hian (Chairman Appointed on 3 November ) Dr Chua Sui Leng Dr Wan Soon Bee Kwek Gim Song Nomination Committee Dr Chua Sui Leng (Chairman Appointed on 3 November ) Eric Lim Yew Tou Dr Wan Soon Bee Remuneration Committee Cheng Pet Hian (Chairman Appointed on 12 May ) Lim Soo Peng Kwek Gim Song Dr Wan Soon Bee Secretary Pauline Khoo Registrars B.A.C.S. Pte Ltd 63 Cantonment Road Singapore Tel: bacs@pacific.net.sg Registered Office 3 Jalan Samulun Singapore Tel: Fax: chemical.ind@cifel.com.sg Town Office 17 Upper Circular Road #0500 Juta Building Singapore Tel: Fax: jutaprop@singnet.com.sg Factory 91 Sakra Avenue Jurong Island Singapore Tel: Fax: Subsidiary Companies Kimia Trading Pte. Ltd. Juta Properties Private Limited K.P. Chemicals Private Limited Chem Transport Pte Ltd Lion Heart Properties Pte Ltd JPI Investments Pte Ltd JPI Trading Pte Ltd Proctor House Ltd Principal Bankers OverseaChinese Banking Corporation Limited KBC Bank N.V. Banking Moscow Narodny Bank Limited The Hongkong and Shanghai Corporation Limited Malayan Banking Berhad United Overseas Bank Limited Auditors Deloitte & Touche Certified Public Accountants Singapore Partnerincharge: Mr Loi Chee Keong (Year of Appointment: 2002) 2

3 CHAIRMAN S MESSAGE TO SHAREHOLDERS I am pleased to report that Group revenue for FY has strengthened from $75.1 million to $86.8 million, showing an increase of 16% over FY. Group profit before exceptional items and income tax has improved significantly by 76% to $6.0 million compared to FY of $3.4 million, with the bulk of the increase coming from the chloralkali business. The construction of Lion Plaza was completed during the period under review with rental income commencing towards the end of FY. CHEMICAL INDUSTRIES (FAR EAST) LTD Revenue for the Company for FY increased by $8.7 million from $74.6 million to $83.3 million. This was attributed mainly to an increase in offtake by major customers and higher prices. Profit before exceptional items and income tax also more than doubled over the previous year from $2.2 million in FY to $5.4 million for FY. Throughout FY, demand for caustic soda and chlorine had been buoyant. Manufacturers of these chemicals, however, are hesitant to invest in new production capacity as the world economy looks increasingly uncertain. The Company had, however, benefited from the timely installation of a new electrolyser in August. This additional capacity had allowed the Company to substantially meet the increase in demand for both caustic soda and chlorine by our local customers. With economies of scale, productivity increased with the corresponding lowering of unit manufacturing costs. JUTA PROPERTIES PRIVATE LIMITED Juta s revenue increased by 15% from $560,000 in FY to $644,000 in FY. Operating costs were however higher. This has resulted in a loss of $235,000 for the current year. The other subsidiaries, viz JPI Investments Pte Ltd, JPIT Trading Pte Ltd and Proctor House Ltd, were dormant during FY. LION HEART PROPERTIES PTE LTD Lion Plaza was completed in February and rental income had contributed to the increase in Group revenue for FY. However, the performance of this subsidiary was impacted by 2 factors: a) In accordance with the Singapore Financial Reporting Standards about $5 million interest costs cannot be capitalised as the development has been completed. b) A final inducement fee to a major tenant accounted mainly for the Exceptional Loss of $5.2 million for FY. 3

4 KIMIA TRADING PTE LTD continues to meet its customer s demand through this subsidiary s imports. As a result, revenue of Kimia increased by 5% from $15.8 million in FY to $16.5 million in FY. We expect this trend to continue in FY The corresponding Profit before tax increased by about 22% from $0.9 million in FY to $1.1 million in FY. CHEM TRANSPORT PTE LTD In FY, as a result of a change in our logistics requirements, transportation needs of the parent company were reduced and this accounted for the decrease in revenue of this subsidiary by 21% from $1.4 million in FY to $1.1 million in FY In line with the reduction in revenue, pretax profit decreased from $55,000 in FY to $45,000 in FY. OVERVIEW Given the global chemical growth the Board had decided that the current way forward for the Group and shareholders will be a concentrated focus on core chemical competencies, essentially a focus on the manufacture, trading and supply of our chloralkali products. To this end all efforts will be concentrated on maximizing the returns on all our assets and a return to a dividend payout policy. To achieve this goal, noncore assets will be disposed off at the opportunistic time. The demand for the Company s chemicals is expected to continue growing. Current customers are increasing their offtake and new investors on Jurong Island have indicated new demand. Given that our existing production facilities on Jurong Island has been fully utilized, new facilities may have to be installed to meet further increases in long term contracted demand. With the completion of Lion Plaza earlier this year, a major launch to showcase the new building took place. All the major office agents were invited to heighten their awareness and uniqueness of Lion Plaza. The results have been encouraging and, at the time of printing, we are pending the confirmation of another major 15 year lease. With these secured revenue streams, the valuation of Lion Plaza will be reflected accordingly. This will enable Chemical Industries (Far East) Limited to sell Lion Plaza at a higher price. It is intended that Lion Plaza be sold off by the 2nd quarter of FY Our funding bank in the U.K. has been very supportive in covering the substantial cost overruns due to the inordinate length of time it took in the construction of Lion Plaza. It is anticipated that, with the sale of the property, a shortfall will arise in the repayment of the bank loans, and this has been covered by a corporate guarantee from Chemical Industries (Far East) Limited. Management is exploring ways to meet this obligation and will make all the necessary announcements when a conclusion has been arrived at. 4

5 DIVIDEND AND DIRECTORS FEES In view of the loss sustained by the Group for the current year, I will not be proposing the payment of a dividend. For the Chairman and Members of the Board, I propose directors fees of $177,000. DIRECTORS I reluctantly announce the impending resignation and retirement of the following directors: Mr Kwek Gim Song has decided that he will be embarking on a second lap with an involvement in business and will be stepping down from the Board effective 31 July. We wish to place on record our thanks for his 5 years of service. My fellow directors and I will miss his humour and full hearted support and will join me in wishing him every best wishes for his new venture. Dr Lam Ying joined us in 1998 as an executive director. During his tenure, he has contributed significantly in the planning and administration of our plant at Sakra. The state of his health, after two operations in the last two years, and his expressed desire to do more travelling has resulted in his decision not to seek reelection. We will miss his presence and in recording our thanks we wish him a happy and fruitful retirement. STAFF I would like to place on record my appreciation for the hard work put in by all staff in achieving the sales target for the year. The team spirit continues to prevail in the Group and it is only through such team work that we have been able to meet customers needs and demands in this ever challenging business environment. On behalf of the Board, I would like to thank all shareholders, customers and suppliers for their continuing support during this challenging year. LIM SOO PENG CHAIRMAN 27 June 5

6 CORPORATE GOVERNANCE Application of the principles of corporate governance promotes the efficiency and effectiveness of the operations carried out by Group personnel as well as facilitate the maintenance of integrity in the conduct of the business of the Group. Adherence to good practice in corporate governance will also enhance investor confidence and contribute to a harmonious relationship between stakeholders and the management team. Ultimately, the aim is to increase longterm value and raise returns to shareholders. Code of Corporate Governance The SGXST requires listed companies to describe their corporate governance practice with specific reference to the Code in their annual report. This forms part of their continuing obligations under the Listing Manual. Any deviation from the Code with an appropriate explanation should be disclosed. Board of Directors The directors of the Company are: Lim Soo Peng J.P. Eric Lim Yew Tou Cecil Lim Yew Khang Dr Lam Ying Dr Chua Sui Leng Dr Wan Soon Bee Kwek Gim Song Cheng Pet Hian Chairman and Managing Director Executive Executive Executive Independent nonexecutive Independent nonexecutive Independent nonexecutive Independent nonexecutive The Board oversees the management of the business and affairs of the Group. Apart from its statutory responsibilities, the Board reviews the business strategies and key activities of the Group. It holds regular meetings to review the performance of the business, to approve significant acquisitions and disposals and to approve the release of halfyearly and annual results. Some of its functions are carried out through Board committees such as the Audit Committee, the Remuneration Committe and the Nomination Committee. During the period since the last Annual General Meeting six Board meetings were held. The attendance at the meetings is as follows: Lim Soo Peng J.P. 6 Eric Lim Yew Tou 6 Cecil Lim Yew Khang 6 Dr Lam Ying 6 Dr Chua Sui Leng 6 Dr Wan Soon Bee 6 Kwek Gim Song 3 Cheng Pet Hian 6 The directors and officers of the Group are prohibited from dealing in the shares of the Company on shortterm considerations. In particular, they are barred from dealing in the shares during the period commencing one month before the announcement of the annual or interim results, as the case may be, and ending on the date of the announcement. Officers are reminded that the law on insider trading applies at all times. They are specifically cautioned when they are in possession of pricesensitive information. 6

7 Board Composition and Balance Of the 8 directors on the Board, four are independent nonexecutive directors. This is considered an appropriate sized Board as the Group is not overly large and its operations are not widely distributed. Under the Company s Articles of Association onethird of the directors (excluding the Managing Director) shall retire from office each year. The retiring directors are eligible for reelection. In addition, any new director appointed during the year will have to retire at the annual general meeting following his appointment; he is eligible for reelection if he so desires. In the forthcoming Annual General Meeting Mr Eric Lim Yew Tou and Mr Cheng Pet Hian will retire from office but have offered themselves for reelection as directors. Dr Lam Ying will also retire from office; he has declined nomination for reelection as a director. Pursuant to Section 153 of the Companies Act, Cap. 50, Mr Lim Soo Peng and Dr Chua Sui Leng will retire as directors but have offered themselves for reelection at the forthcoming Annual General Meeting. The Nomination Committee comprises the following members: Chairman: Members: Dr Chua Sui Leng Mr Eric Lim Yew Tou Dr Wan Soon Bee Dr Chua and Dr Wan are independent nonexecutive directors. Chairman and Chief Executive Officer The posts of Chairman and Managing Director are held by Mr Lim Soo Peng. As Managing Director, Mr Lim bears executive responsibility for the daytoday operations of the Group. His duties as Chairman include the scheduling of Board meetings, the fixing of the meeting agenda, the control of the quality and timeliness of data and information supplied to the Board and compliance with the Code of Governance and the Listing Rules. Access to Information Relevant information is provided to the Board prior to its meetings. Such information includes financial management reports, budgets, feasibility studies, announcement of results, disclosure information and other matters requiring the Board s decision. Separate access to senior management is available to Board members. Should the directors be of the view that independent professional advice is warranted on any matter, arrangement is made for the appointment of suitable professional advisors. Remuneration Matters The Remuneration Committee comprises the following members: Chairman: Mr Cheng Pet Hian (appointed 12 May ) Members: Mr Lim Soo Peng Mr Kwek Gim Song Dr Wan Soon Bee Except for Mr Lim Soo Peng who stepped down as Chairman on 12 May, the Committee is made up of independent nonexecutive directors. Pending a comprehensive review of remuneration policies the Committe has decided to stay with the status quo. 7

8 Level and Mix of Remuneration The remuneration received by directors during the financial year is as follows: Benefitin Directors Salary Bonus kind fee Total S$500,000 and above Lim Soo Peng 48% 49% 3% 100% S$250,000 to S$500,000 Eric Lim Yew Tou 67% 29% 4% 100% Cecil Lim Yew Khang 67% 29% 4% 100% Dr Lam Ying 83% 12% 5% 100% Below S$250,000 Dr Chua Sui Leng 100% 100% Dr Wan Soon Bee 100% 100% Kwek Gim Song 100% 100% Cheng Pet Hian 100% 100% The remuneration received by directors during the previous financial year is as follows: Directors Salary Bonus fee Total S$500,000 and above Lim Soo Peng 58% 39% 3% 100% S$250,000 to S$500,000 Eric Lim Yew Tou 66% 30% 4% 100% Cecil Lim Yew Khang 66% 30% 4% 100% Dr Lam Ying 81% 14% 5% 100% Below S$250,000 Dr Chua Sui Leng 100% 100% Dr Wan Soon Bee 100% 100% Lee Suet Fern 100% 100% Kwek Gim Song 100% 100% The remuneration of the top five key executives (excluding executive directors) for the financial year under review and the previous financial year is in each case below S$250,000. There is no employee who is an immediate family member of a director or the CEO whose remuneration exceeded $150,000 p.a. All the directors receive directors fee for attending to Board matters. Except for the higher payment to the Chairman, the directors are paid equally. A director who serves for part of the financial year only will have his fee prorated. Total directors fee for the financial year amounted to S$177,000 (S$180,000). None of the directors has been granted share options as the Company does not have a share option scheme. 8

9 Audit Committee The Audit Committee comprises four independent nonexecutive directors: Mr Cheng Pet Hian Chairman (appointed 3 November ) Dr Chua Sui Leng Dr Wan Soon Bee Mr Kwek Gim Song The Audit Committee met as necessary and performed the functions specified in the Singapore Companies Act. In performing its functions, the Audit Committee reviewed the overall scope of the external audit and the assistance given by the company s officers to the external auditors. It met with the company s external auditors to discuss the results of their examinations and their evaluation of the company s system of internal accounting controls. The Audit Committee also reviewed the financial statements of the Company and of the Group before their submission to the Board. The external auditors, Deloitte & Touche, Certified Public Accountants, were first appointed on 1 August They are also the external auditors of all the Company s subsidiaries. The partner in charge of the audit is Mr Loi Chee Keong. The Audit Committee has recommended the nomination of Deloitte & Touche, for reappointment as external auditors of the Company at the forthcoming Annual General Meeting of the Company. Internal Controls The Audit Committee is responsible for reviewing the effectiveness and efficacy of the system of internal accounting controls of the Group. Adequate internal controls are in place to safeguard assets and the investment of shareholders. Internal Audit The Chairman of the Audit Committee is of the view that, for a company of this size, an internal audit function is not necessary. Interested Person Transaction During the financial year under review, there was no discloseable interested person transaction. Communication with Shareholders Communication with shareholders is generally effected through the Company s annual report and announcements made on the SGXNET and in the press. Shareholders are invited to the Company s general meetings, at which they are free to raise queries to which responses are given. Each year the annual general meeting is generally held within four months of the previous financial year end. Separate resolutions are tabled in respect of distinct issues at such meetings. Shareholders unable to attend are entitled to appoint up to two proxies to attend on their behalf. The directors and the external auditors of the Company are present at such meetings to answer shareholders questions. 9

10 BOARD OF DIRECTORS LIM SOO PENG Chairman and Managing Director Mr Lim Soo Peng J.P., an Executive Director, is a founder member of the Company and has sat on the Board of Directors since its inception in This was in response to the invitation by the Singapore Government to effect a transition as owner of a leading commodities trading house to a manufacturer of essential chemicals in the nascent industrialisation programme of Singapore in the decade of the sixties. Concurrent with his duties as the Chairman and Managing Director of Chemical Industries Mr. Lim Soo Peng also sat on the board of a leading property development company. In the decades of the seventies and eighties, Mr. Lim Soo Peng spearheaded ventures into Thailand, Australia and Indonesia which covered specialty chemicals and industrial gases. Encouraged by the success of these ventures, at the beginning of the nineties, he led the Company to invest in China and the United Kingdom, investments which are currently ongoing. He was appointed a Justice of the Peace in 1966 and is currently a member of the Prisons Board of Visiting Justices and Board of Inspection and a member of the Drug Rehabilitation Centre Committee. In the 1960s he was an elected Member of Parliament. He also served on a number of government committees and statutory boards. For his public service contributions, Mr Lim was awarded the Public Service Medal (PBM) and the Public Service Star (BBM). Mr Lim is also a director of FHTK Holdings Ltd, another listed company of the SGX with extensive interests in the fruit business stretching from China, Europe to the Americas. ERIC LIM YEW TOU Mr Eric Lim, an Executive Director, joined the Board in June 1981 and was appointed a member of the Nomination Committee in May He graduated in 1975 from the University of Singapore (presently known as the National University of Singapore) with a Bachelor of Arts degree and obtained an Honours degree in Social Science the following year. He is an alumnus of the Harvard Business School. A graduate of the Singapore Command and Staff College, he is a Captain in the Singapore Armed Forces Reserves. He has been actively involved in various aspects of the Group s chloralkali business since joining the Company and is currently tasked with the marketing function and developing the Group s business to ride on the new opportunities presented by the Company s new manufacturing facility on Jurong Island. Mr Eric Lim is also involved in exploring new business opportunities suitable for the continued growth of the Group. CECIL LIM YEW KHANG Mr Cecil Lim, an Executive Director, joined the Board in August He graduated in 1975 from the University of Singapore (presently known as the National University of Singapore) with a Bachelor of Arts degree and obtained an Honours degree in Social Science in In addition, he holds a Master of Science in Business Studies from the London Business School and was a key appointment holder in the Singapore Armed Forces Reserves. He started his working career in the financial investment arena prior to joining the Group in He currently oversees the finance, production and operation of the Company and has been tasked with meeting the supply needs of our chloralkali customers. Mr Cecil Lim is also actively involved with the Group s property business in London and is presently overseeing the sale of Lion Plaza. 10

11 DR LAM YING Dr Lam Ying joined the Board in December 1997 and became an Executive Director in December He was appointed a member of the Audit Committee in March 1998 and step down as a member on 3 November. He graduated with a Bachelor of Science (Hons) degree in Biochemistry from the University of Adelaide, South Australia, in 1965 and obtained his doctorate in 1969 from the same university while holding a postgraduate scholarship. His current appointment entails overseeing the development of the manufacturing management organisation and operations of the Company s chloralkali manufacturing facility on Jurong Island. Prior to joining the Group, Dr Lam served 31 years until 1990 as a key Senior Executive in the Regional Headquarters of a multinational group based in Singapore. In addition, he had served as Chairman and Executive Director for a number of group companies in the Asean countries engaged in the manufacturing and sales of glass and paper packaging products and building materials. He was also responsible for the identification and investments for the group in Asean and East Asia. From 1990 to 1998, Dr Lam was an Executive Director of Khalista Chemical (Far East) Corp. Pte Ltd, President of Khalista (Liuzhou) Chemical Ltd in China and Managing Director of Isuhara Shipping International Pte Ltd. DR CHUA SUI LENG Dr Chua Sui Leng, a NonExecutive Independent Director, joined the Board in March He has been a member of the Audit Committee since his appointment as a Director and was elected Chairman of the said Committee in March On 3 November, Dr Chua step down as Chairman of the Audit Committee and was elected Chairman of the Nomination Committee. He has been a member of the Nomination Committee since May A medical practitioner by profession, he completed his medical degree in 1959 at the University of Malaya. After serving in the government service for a couple of years he began his practice in the private sector. KWEK GIM SONG BENEDICT Mr Kwek Gim Song, a NonExecutive Independent Director, joined the Board in July 2000 and was appointed a member of the Audit Committee and Renumeration Committee in May He is currently Chairman of Auston International Group Ltd and is also on the Board of Directors of JTC Corporation, Jurong Port Pte Ltd, SembCorp Engineers and Constructors and NTUC ChoiceHomes. Mr Kwek graduated in 1969 with a Bachelor of Social Science (Hons) degree in Economics from the University of Singapore (presently known as the National University of Singapore) and was formerly President and Chief Executive Officer of Keppel TatLee Bank. 11

12 DR WAN SOON BEE Dr Wan Soon Bee, a NonExecutive Independent Director, joined the Board in July He was appointed a member of the Audit Committee in May 2001 and a member of the Nomination as well as the Renumeration Committee in May Dr Wan is a former Minister of State and was a Member of Parliament from December 1980 to October Along with his involvement in the Labour movement he was Deputy SecretaryGeneral of the National Trade Union Congress from August 1981 to October 1987 and Chairman of Comfort Group Ltd from July 1986 to August He was on the Board of Directors of SIA from 1981 to His varied career saw him working as the Director, Information Technology, in Straits Steamship Land Ltd, Director/General Manager of Steamers Telecommunications Pte Ltd and Director (Projects) of Neptune Orient Lines Ltd. CHENG PET HIAN Mr Cheng Pet Hian, a NonExecutive Independent Director, joined the Board in August and was subsequently appointed Chairman of the Audit Committee on 3 November and a member of the Remuneration Committee on 1 February. On 12 May, Mr Cheng was appointed Chairman of the Remuneration Committee. Mr Cheng qualified as a Chartered Accountant in 1966 from the Institute of Chartered Accountants in England and Wales and is presently a Fellow of the Institute. He was the Chief Financial Officer of a large publicly listed corporation for three years. Mr Cheng spent the large part of his career in public accounting, having been a partner of an international public accounting firm for 22 years until his retirement in

13 KEY MANAGEMENT Jimmy Liaw Mun Kong Financial Controller Mr Jimmy Liaw joined the Group in October He graduated in 1977 from the University of Singapore (presently known as the National University of Singapore) with a Bachelor of Accountancy degree. He is a Certified Public Accountant of Singapore and an Associate of the Chartered Institute of Management Accountants, United Kingdom. Mr Liaw has extensive experience in financial management and management accounting having worked in various types of organizations ranging from international public accounting and marketing & distribution to resort management and manufacturing. Tan Pua Yong Plant Manager Mr Tan Pua Yong joined the Group in August 1988 as Assistant Plant Manager and was promoted to Plant Manager in April He graduated in 1973 from the University of Singapore (presently known as the National University of Singapore) with a Bachelor of Engineering (Hons) degree. In 1979 he obtained his Master of Science (Industrial Engineering) degree from the same university. Mr Tan is a Chartered Engineer and also a registered Professional Engineer. Prior to joining the Group Mr Tan was a Senior Engineer with the Public Utilities Board. Collin Lim Yew Tee Deputy Plant Manager Mr Collin Lim joined the Group in August 1997 as a Project Engineer and was promoted to Deputy Plant Manager in March He graduated in 1987 with a Diploma in Electrical Engineering from Ngee Ann Polytechnic and obtained his Bachelor of Engineering (Hons) degree from the Nanyang Technological University in 1994, specializing in Electrical Engineering. Prior to his graduate studies, Mr Lim was employed by a local contracting company from 1989 to 1991 in the area of project management. Immediately after his graduation from the Nanyang Technological University, he was employed by the Ministry of Defence as an Electrical Engineer and was involved in various projects from 1994 to He was one of the key personnel involved in overseeing the construction of our new manufacturing facility on Jurong Island. Wong Moon Seng Technical Adviser to Chairman Mr Wong Moon Seng joined the Group in He graduated with a Bachelor of Science degree in Chemical Engineering from the Taiwan National University in During his tenure with the Company, he has been actively involved in the evolution of the Company s manufacturing technology from the first generation mercury cells to the current state of the art ion exchange membrane cells. He serves as the Company s technical advisor on the chloralkali operation. Previous to that he held the post of Deputy Plant Manager 13

14 REPORT OF THE DIRECTORS The directors present their report together with the audited financial statements of the company and the consolidated financial statements of the group for the financial year ended 31 March. DIRECTORS The directors of the company in office at the date of this report are: Lim Soo Peng J.P. (Chairman and Managing Director) Eric Lim Yew Tou Cecil Lim Yew Khang Dr Lam Ying Dr Chua Sui Leng Dr Wan Soon Bee Kwek Gim Song Cheng Pet Hian (Appointed on 26 August ) AUDIT COMMITTEE The Audit Committee met as necessary and performed the functions specified in the Singapore Companies Act. In performing its functions, the Audit Committee reviewed the overall scope of the external audit and the assistance given by the company s officers to the external auditors. It met with the company s external auditors to discuss the results of their examinations and their evaluation of the company s system of internal accounting controls. The Audit Committee also reviewed the financial statements of the company and of the group for the six months ended 30 September and for the year ended 31 March as well as the auditors report for the year ended 31 March. The Audit Committee recommended to the Board of Directors, subject to the approval of shareholders, the nomination of Deloitte & Touche, Certified Public Accountants, for reappointment as external auditors at the forthcoming Annual General Meeting of the company. The members of the Audit Committee at the date of this report are as follows: Cheng Pet Hian Dr Chua Sui Leng Dr Wan Soon Bee Kwek Gim Song (Chairman/nonexecutive director) (Appointed on 3 November ) (Nonexecutive director) (Nonexecutive director) (Nonexecutive director) ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES Neither at the end of the financial year nor at any time during the financial year did there subsist any arrangement whose object is to enable the directors of the company to acquire benefits by means of the acquisition of shares or debentures in the company or any other body corporate. 14

15 DIRECTORS INTERESTS IN SHARES AND DEBENTURES The directors of the company holding office at the end of the financial year had no interests in the share capital and debentures of the company and related corporations as recorded in the register of directors shareholdings kept by the company under Section 164 of the Singapore Companies Act except as follows: Shareholdings registered in the names of directors Shareholdings in which the directors are deemed to have interests Names of directors and company in which interests are held At 1 April At 31 March At 21 April At 1 April At 31 March At 21 April Number of ordinary shares of $1 each THE COMPANY Lim Soo Peng 6,447,250 6,447,250 6,447,250 24,512,500 24,512,500 24,512,500 Eric Lim Yew Tou 17,000 17,000 17,000 3,520,000 3,520,000 3,520,000 Cecil Lim Yew Khang 14,000 14,000 14,000 3,520,000 3,520,000 3,520,000 Dr Lam Ying 6,001 6,001 6,001 Dr Chua Sui Leng 176, , , , , ,000 By virtue of Section 7 of the Singapore Companies Act, Mr Lim Soo Peng is deemed to have an interest in all the ordinary shares of the subsidiaries of the company. DIRECTORS RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS Since the beginning of the financial year, no director has received or become entitled to receive a benefit which is required to be disclosed under Section 201(8) of the Singapore Companies Act, by reason of a contract made by the company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest except as disclosed in the financial statements. OPTION TO TAKE UP UNISSUED SHARES During the financial year, no option to take up unissued shares of the company or any corporation in the group was granted. OPTION EXERCISED During the financial year, there were no shares of the company or any corporation in the group issued by virtue of the exercise of an option to take up unissued shares. 15

16 UNISSUED SHARES UNDER OPTION At the end of the financial year, there were no unissued shares of the company or any corporation in the group under option. AUDITORS The auditors, Deloitte & Touche, have expressed their willingness to accept reappointment. ON BEHALF OF THE DIRECTORS LIM SOO PENG CHENG PET HIAN Singapore 27 June 16

17 AUDITORS' REPORT TO THE MEMBERS OF CHEMICAL INDUSTRIES (FAR EAST) LIMITED. We have audited the accompanying financial statements of Chemical Industries (Far East) Limited for the year ended 31 March. These financial statements are the responsibility of the company s directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the Singapore Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. Without qualifying our opinion, the company has breached financial convenants relating to the maintenance of certain financial ratios and the sale of the property held for sale by 31 March in respect of the bank loan as at 31 March of $37 million. $6 million of the bank loan is payable within twelve months of the balance sheet date. Consequently, the balance of the $31 million has been classified as current liabilities. The directors of the company are confident that the group and the company are able to pay their debts as and when they fall due and continue to operate as going concerns and obtaining additional credit facilities, if necesary. The accompanying financial statements and the consolidated financial statements have been prepared on the assumption that the group and the company will continue as going concerns. Further details are set out in Note 1 to the financial statements. In our opinion, a) the accompanying consolidated financial statements of the group and the balance sheet of the company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act ) and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the group and of the company as at 31 March and of the results, changes in equity and cash flows of the group for the year ended on that date; and b) the accounting and other records required by the Act to be kept by the company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act. DELOITTE & TOUCHE Certified Public Accountants Loi Chee Keong Partner Singapore 27 June 17

18 BALANCE SHEETS 31 March Note SHAREHOLDERS EQUITY AND LIABILITIES The Company ISSUED CAPITAL 5 75,945 75,945 75,945 75,945 RESERVES 18,042 19,926 ACCUMULATED LOSSES (31,382) (30,589) (34,907) (36,278) SHAREHOLDERS EQUITY 62,605 65,282 41,038 39,667 MINORITY INTERESTS 6 2,860 2,617 NONCURRENT LIABILITIES Due to subsidiaries (nontrade) 13 3,681 4,797 Deferred income tax liability 7 5,200 3,200 5,200 3,200 Longterm bank loans 8 37,000 37,000 Obligations under finance leases 9 3,985 2,163 3,780 1,798 Total NonCurrent Liabilities 9,185 42,363 12,661 46,795 CURRENT LIABILITIES Trade payables 35,622 17,476 7,404 7,286 Due to subsidiaries (trade) 13 5,883 4,273 Other payables and accrued expenses 10 10,033 9,787 3,758 3,591 Shortterm bank loans 11 4,996 1,851 4,996 1,851 Current portion of finance lease obligations 9 2,078 1,204 1,918 1,008 Current portion of longterm bank loans 8 624, ,444 52,354 22,869 Bank overdrafts 8 4,889 5,797 4,889 5,797 Income tax payable 1,411 2,661 Total Current Liabilities 683, ,220 81,202 46,675 TOTAL 757, , , ,137 ASSETS NONCURRENT ASSETS Property, plant and equipment 12 92,609 94,004 92,037 93,191 Subsidiaries 13 11,818 13,745 Associates 14 Longterm investments 15 5,994 6,321 5,994 6,321 Investment properties 16 19,114 21,411 Total NonCurrent Assets 117, , , ,257 CURRENT ASSETS Property held for sale / Property under redevelopment for sale , ,061 Inventories 18 5,423 3,948 4,704 3,286 Trade receivables 19 10,865 7,875 9,568 7,875 Other receivables and prepayments 20 3,927 7,774 2,600 2,422 Cash and bank balances 20,327 11,088 8,180 6,297 Total Current Assets 640, ,746 25,052 19,880 TOTAL 757, , , ,137 See accompanying notes to financial statements. 18

19 CONSOLIDATED PROFIT AND LOSS STATEMENT Year Ended 31 March Note REVENUE 21 86,843 75,126 COST OF SALES (62,411) (56,349) GROSS PROFIT 24,432 18,777 OTHER OPERATING INCOME 22 2,844 2,536 DISTRIBUTION COSTS (6,025) (6,107) ADMINISTRATIVE EXPENSES (7,059) (7,232) OTHER OPERATING EXPENSES (101) (1,472) PROFIT FROM OPERATIONS 14,091 6,502 FINANCE COSTS 23 (8,110) (3,138) PROFIT BEFORE EXCEPTIONAL ITEMS AND INCOME TAX 5,981 3,364 EXCEPTIONAL ITEMS 24 (5,210) (85,392) PROFIT (LOSS) BEFORE INCOME TAX (82,028) INCOME TAX 26 (1,348) 3,109 LOSS AFTER INCOME TAX BUT BEFORE MINORITY INTERESTS (577) (78,919) MINORITY INTERESTS (216) 22,012 LOSS ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY (793) (56,907) Basic and fully diluted loss per share (cents) 27 (1.04) (74.93) See accompanying notes to financial statements. 19

20 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Year Ended 31 March Other reserves Issued capital Accumulated profits (losses) Asset revaluation reserve Currency realignment Dividend reserve reserve Total other reserves Total Balance at 31 March ,945 26,318 19,500 1,732 1,570 22, ,065 Dividend paid (1,570) (1,570) (1,570) Currency translation differences (1,306) (1,306) (1,306) Net loss not recognised in the profit and loss statement (1,306) (1,306) (1,306) Net loss for the year (56,907) (56,907) Balance at 31 March 75,945 (30,589) 19, ,926 65,282 Deficit on revaluation of investment properties (1,965) (1,965) (1,965) Currency translation differences Net (loss) profit not recognised in the profit and loss statement (1,965) 81 (1,884) (1,884) Net loss for the year (793) (793) Balance at 31 March 75,945 (31,382) 17, ,042 62,605 See accompanying notes to financial statements. 20

21 CONSOLIDATED CASH FLOW STATEMENT Year Ended 31 March Cash flows used in operating activities: Profit (Loss) before income tax 771 (82,028) Adjustments for: Depreciation of property, plant and equipment 6,214 5,917 Depreciation of investment properties Dividend income (242) (248) Gain on disposal of plant and equipment (19) (105) Gain on disposal of longterm investments (2,153) (1,974) Interest expense 8,110 3,138 Interest income (26) (12) Impairment loss on property under redevelopment for sale 64,994 Operating profit (loss) before working capital changes 12,987 (9,967) Inventories (1,475) (22) Trade receivables (2,990) 1,550 Other receivables and prepayments 3,161 (2,444) Property held for sale / Property under redevelopment for sale (74,897) (120,559) Trade payables 9,066 7,071 Other payables and accrued expenses 246 1,453 Cash used in operations (53,902) (122,918) Income tax refunded 80 1,856 Dividend paid (1,570) Interest paid (31,804) (28,907) Interest received Dividend received Net cash used in operating activities (85,358) (151,279) Cash flows from investing activities: Proceeds from disposal of plant and equipment Purchase of property, plant and equipment (Note A) (740) (4,694) Proceeds from sale of longterm investments 2,480 4,713 Net cash from investing activities 1, Cash flows from financing activities: Other payablesrelated party (1,000) Shortterm bank loans 3,145 (3,282) Longterm bank loans 92, ,190 Repayment of finance lease obligations (2,179) (412) Net cash from financing activities 93, ,496 Net effect of exchange rate changes in consolidating subsidiaries 531 2,576 Net increase in cash and cash equivalents 10,147 4,917 Cash and cash equivalents at beginning of year 5, Cash and cash equivalents at end of year 15,438 5,291 Cash and cash equivalents at end of year comprise the following: Cash and banks balances 20,327 11,088 Bank overdrafts (4,889) (5,797) 15,438 5,291 A. Property, plant and equipment During the financial year, the group acquired property, plant and equipment with an aggregate cost of $4,819,000 ( : $7,132,000) of which $4,079,000 ( : $2,438,000) was acquired by means of finance leases. Cash payments of $740,000 ( : $4,694,000) were made to purchase property, plant and equipment. See accompanying notes to financial statements. 21

22 NOTES TO FINANCIAL STATEMENTS 31 March 1. GENERAL The company (Registration No K) is incorporated in the Republic of Singapore with its principal place of business and registered office at 3 Jalan Samulun, Singapore The company is listed on the Singapore Exchange Securities Trading Limited. The financial statements are expressed in Singapore dollars. The principal activities of the company are investment holding and the manufacture and sale of chemicals. The principal activities of the subsidiaries are disclosed in Note 13 to the financial statements. The company has breached financial convenants relating to the maintenance of certain financial ratios and the sale of the property held for sale by 31 March in respect of the bank loan as at 31 March of $37 million. $6 million of the bank loan is repayable within twelve months of the balance sheet date. Consequently, the balance of the $31 million has been classified as current liabilities. The directors of the company are confident that the group and the company are able to pay their debts as and when they fall due and continue to operate as going concerns and obtaining additional credit facilities, if necessary. As at 31 March, the group and the company s current liabilities exceeded its current assets by $43,067,000 and $56,150,000 respectively. The accompanying financial statements and the consolidated financial statements have been prepared on the assumption that the group and the company will continue as going concerns. The accompanying finanical statements do not include any adjustments relating to the realisation and classification of asset amounts or to the amounts and the classification of liabilities that may be necessary if the company and the group are unable to continue as going concerns. Should the going concern assumption be inappropriate, adjustments would have to be made to reflect the situation that assets may need to be realised other than in the amounts at which they were recorded in the accompanying balance sheets. In addition, the group and the company may have to provide for further liabilities that might arise, and to reclassify noncurrent assets and noncurrent liabilities as current assets and current liabilities respectively. No adjustments have been made in the accompanying financial statements in respect of these. The financial statements of the company and of the consolidated financial statements of the group for the year ended 31 March were authorised for issue by the Board of Directors on 27 June. 22

23 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements are prepared in accordance with the historical cost convention, modified to include the revaluation of investment properties, and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards. BASIS OF CONSOLIDATION The consolidated financial statements incorporate the financial statements of the company and enterprises controlled by the company (its subsidiaries) made up to March 31 each year. Control is achieved when the company has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. On acquisition, the assets and liabilities of the relevant subsidiaries are measured at their fair values at the date of acquisition. The interest of minority shareholders is stated at the minority s proportion of the fair values of the assets and liabilities recognised. The results of subsidiaries acquired or disposed of during the year are included in the consolidated profit and loss statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used in line with those used by other members of the group. All significant intercompany transactions and balances between group enterprises are fully eliminated on consolidation. Where a group enterprise transacts with an associate of the group, unrealised profits and losses are eliminated to the extent of the group s interest in the relevant associate. Associates are entities over which the group exercises significant influence, through participation in the financial and operating policy decisions of the investee. The equity method of accounting is used. In the company s financial statements, investments in subsidiaries and associates are carried at cost less any impairment in net recoverable value that has been recognised in the profit and loss statement. MINORITY INTEREST Minority interest is stated at the appropriate proportion of the fair values of the net identifiable assets of subsidiaries at the time of acquisition adjusted for the appropriate share of post acquisition profit or loss. FINANCIAL ASSETS The company s and group s principal financial assets are cash and bank balances, trade and other receivables and investments. Trade and other receivables are stated at their nominal values as reduced by appropriate allowances for estimated irrecoverable amounts. Long term investments are stated at cost less impairment losses recognised when the investment s carrying amount exceeds its estimated recoverable amount. Impairment losses are recognised in the profit and loss statement. FINANCIAL LIABILITIES AND EQUITY Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Significant financial liabilities include finance lease obligations, interestbearing bank loans and bank overdrafts and trade and other payables. The accounting policy adopted for finance lease obligations is outlined below. Interestbearing bank loans and overdrafts are recorded at the proceeds received, net of transactions costs. Finance charges are accounted for on an accrual basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise. Trade and other payables are stated at their nominal values. Equity instruments are recorded at the fair value of the consideration received, net of direct issue costs. 23

24 INVESTMENTS Investments held for longterm are stated at cost less any impairment in net recoverable value. INVENTORIES Inventories are measured at the lower of cost (weighted average method) and net realisable value. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value represents the estimated selling price less all estimated costs to completion and costs to be incurred in marketing, selling and distribution. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are carried at cost less accumulated depreciation and any impairment loss where the recoverable amount of the asset is estimated to be lower than its carrying amount. Constructioninprogress consists of land cost, related acquisition expenses and construction costs incurred during the period of construction. The gain or loss arising on the disposal or retirement of an asset is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the profit and loss statement. Depreciation is charged so as to write off the cost of assets, other than constructioninprogress, over their estimated useful lives, using the straightline method, on the following bases: Number of years Leasehold buildings 10 to 30 (over the terms of lease) Plant, machinery and laboratory equipment 10 to 20 Steel cylinders 15 Office equipment, furniture and fittings 3 to 10 Motor vehicles 4 Fully depreciated assets still in use are retained in the financial statements. Assets held under finance lease arrangements are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, the term of the relevant leases. INVESTMENT PROPERTIES Investment properties are held on a longterm basis for investment potential and income. Investment properties are stated at valuation on an open market value for existing use basis by an independent professional valuer at least once every five years, less accumulated depreciation and any impairment loss. Leasehold land, buildings and improvements are depreciated over 50 years using the straight method. Freehold land is not depreciated. The net surplus or deficit on revalution is taken to the asset revaluation reserve except when the total of this reserve is not sufficient to cover a deficit, in which case the amount by which the deficit exceeds the amount in the asset revaluation reserve is charged to the profit and loss statement. The asset revaluation reserve is released to accumulated losses as and when the related revalued property is sold. 24