Annual Report 2006 Growth

Transcription

1 Growth Annual Report 2006

2 Tat Seng Packaging Group Ltd. our mission To be the preferred corrugated products supplier Tat Seng strives to position ourselves as the first name that comes to mind whenever cartons and other corrugated packaging products are required by users. Tat Seng progresses through continuous improvements, so as to remain a key supplier in the paper packaging industry and to maintain our continuous growth in the marketplace.

3 Growth Annual Report Executive Chairman s Statement 04 Board of Directors 06 Financial Highlights 08 Corporate Information 09 Financial Statements Contents

4 Executive Chairman s Statement Tat Seng Packaging Group Ltd. Group turnover for the financial year ended 31 December 2006 increased $9.3 million or 20.4% as compared to the previous corresponding period. On behalf of the Board, I m pleased to bring you our Annual Report for the full year ended 31 December ACQUISITION OF NEW SUBSIDIARY The highlight of the year in review was the acquisition of an 80% equity stake in Hefei Dansun Packaging Co., Ltd. ( Dansun ). The acquisition cost of S$3.6 million was settled in cash. Subsequent to the acquisition, Dansun became the second China subsidiary of the Group at the end of September Dansun is in the same business as the Group; a corrugated paper carton manufacturer in Hefei, the capital of Anhui Province, China. Hefei is a key city in the mid-west of China, 450km west of Shanghai, Dansun is situated in the Hefei Economics & Technological Development Zone, one of the national industrial zones developed by the Provincial Government with special tax incentives. Dansun now serves MNCs located at the industrial parks in the vicinity and counts Unilever China, Haier, Yili and Mengniu amongst its customers. The Hefei Economic & Technological Development Zone is now one of the fastest developing economic zones in Central China. Dansun is thus well positioned to ride on this wave of economic progression, and is the launch pad of the next thrust of growth for the Group. PERFORMANCE REVIEW The Company changed its financial year end from 30 June to 31 December in 2005, to be coterminous with that of the Group s majority shareholder, PSC Corporation Limited. Accordingly, the prior year comparative figures in the audited accounts of this Annual Report included the financial period for the six months ended 31 December Following the acquisition of Dansun on 26 September 2006, the results of Dansun for the period from October to December 2006 were consolidated to the group results for the financial year ended 31 December Group turnover for the financial year ended 31 December 2006 increased S$9.3 million or 20.4% from S$45.5 million to S$54.8 million as compared to the previous corresponding period. This is mainly attributed to the 19.0% increase in sales from Tat Seng Packaging Suzhou Co., Ltd. ( Tat Seng Suzhou ), and the 5.8% contribution from Dansun, offset by a decrease of 4.2% in sales revenue from Singapore operations. The general increase in cost of sales and operating expenses for the Group is in line with the increase in turnover, and the inclusion of Dansun s financial results. In spite of the general increase in costs, profit from operating activities showed a slight improvement as compared to the previous corresponding period. The Group s profit before tax decreased S$0.3 million or 9.6% as compared to the previous corresponding period, mainly due to a net exchange loss of S$0.1 million as compared to a net exchange gain of S$0.3 million in prior year. BUSINESS REVIEW Singapore: Turnover from Singapore operations decreased as compared to the previous corresponding period. This is mainly due to the relocation of some of our customers products and their operations out of Singapore. However, we managed to lessen the impact of the decline in turnover with the increase in sales from other existing customers and additional sales from new customers. While the local economy is poised for continued growth in 2007, we are guarded in our optimism for recovery in a tight and contained Singapore market. 2

5 Growth Annual Report 2006 Executive Chairman s Statement Suzhou, China: Tat Seng Suzhou continued to bring in high volume of board sales to utilize the enlarged capacity of the new production line. This effort cumulated to S$1.6 million increase in turnover as compared to the previous corresponding period. Tat Seng Suzhou is expected to continue with its current strategy of acquiring board sales to consume its excess capacity. The sales teams are also working on securing higher value-added businesses, to effect a progressive change in the product mix to improve margins. Hefei, China: Dansun is faced with constraints in space and down stream production capacity. The Group had embarked on additional investments to enlarge its facilities to meet the increasing business potential of the rapidly developing economic zone. MOVING FORWARD Going forward, the Group would continue to be on the look out for synergistic opportunities for business development and growth. Singapore operations would seek to gain more business from existing and new customers, by reviewing and adjusting its business approaches to meet the challenges in a small market with intensive price competition. The fourth phase of the expansion in Tat Seng Suzhou to house the coating machine and to increase the storage space is expected to complete in April The coating machine could potentially enlarge the product mix, and trial runs are expected to complete in March Dansun s expansion plans have started with the commencement of construction on a piece of land that would yield 13,000 square meters of production space, and the order of a 6-colour, flexographic printer. This would enable Dansun to scale up its down stream production capacity to serve increased orders from luminaries in the Hefei Economic Development & Technological Zone. APPRECIATION FOR SHAREHOLDERS SUPPORT In recognition of our shareholders trust and support for the Group, the Board is pleased to propose a first and final dividend of 0.75 cents per ordinary share for the financial year ended 31 December We look forward to many prosperous years ahead with you. A WORD OF THANKS We are grateful for the opportunities and patronage extended to us by our existing and new customers, business partners and suppliers. We are committed to work with you for greater prospects in the coming years. My appreciation also goes to the Board, Management and employees of the Group for their dedications and contributions in meeting the challenges of this past year. With your efforts and hard work, we are closer to being the preferred corrugated products supplier in Singapore and China. Dr. Allan Yap Executive Chairman 3

6 board of directors Tat Seng Packaging Group Ltd. Lim Seng Chai Executive Director Kuik See Juan Independent Director Foo Der Rong Executive Director Cheong Poh Hua Executive Director Chee Teck Kwong Independent Director Lien Kait Long ndependent Director Dr. Allan Yap Executive Chairman Dr. John Chen Seow Phun Deputy Chairman Loh See Moon Managing Director Dr. Allan Yap > Executive Chairman Dr. Allan Yap was appointed as Executive Chairman of our Group on 21 November His portfolio includes 23 years of experience in finance, investment and banking. Dr. Yap is also the Executive Chairman of PSC Corporation Ltd and Intraco Limited. He is an Executive Director of Wing On Travel (Holdings) Limited and the Managing Director of Hanny Holdings Limited, which both are Hong Kong-listed companies. He is also a Director of MRI Holdings Limited, an Australian-listed company and the Chairman, CEO and Director of China Enterprises Limited, a company whose shares are traded on the OTC Bulletin Board in the United States of America. Dr. Yap is the Chairman and Chief Executive Officer of Burcon NutraScience Corporation, a Canada-listed company. He received an Honorary Degree of Doctor of Law from the University of Victoria, Canada. Dr. John Chen Seow Phun > Deputy Chairman Dr. John Chen joined our Company on 21 November 2005 as a Non-Executive Director and was concurrently appointed as Deputy Chairman of our Board. Dr. Chen was a Member of Parliament from 1988 to He served as the Assistant Secretary General of the National Trades Union Congress from 1991 to He was a Minister of State from 1997 to He is presently the Managing Director of JCL Business Development Pte Ltd, the Chairman of SAC Capital Private Limited, the Deputy Chairman and Non-Executive Director of PSC Corporation Ltd and sits on the Board of a number of publicly listed companies. Dr. Chen has been a Board member of the Economic Development Board, the Housing & Development Board, the Port of Singapore Authority and Singapore Power Ltd. Loh See Moon > Managing Director Mr. Loh See Moon was appointed as the Managing Director/Chief Executive Officer of our Group on 21 November Prior to his current appointment, Mr. Loh was the Deputy Managing Director of our Group. He mainly oversees our China operations and sets the strategies and policies for our Group s business development. Mr. Loh has been in the corrugated products industry since He was appointed as an Executive Director and concurrently as the Factory Manager of our Company in In 1981, he was promoted to the position of General Manager. In 1989, he was appointed as the Deputy Managing Director. Mr. Loh graduated from the Nanyang University in 1971 with a Bachelor of Science Degree. He has more than 25 years of experience in the corrugated products industry. 4

7 Growth Annual Report 2006 board of directors Foo Der Rong > Executive Director Mr. Foo graduated with a Bachelor of Commerce from Nanyang University and was appointed as an Executive Director of our Group on 21 November He is currently the MD/CEO of PSC Corporations Limited and Executive Director of Intraco Limited, both Singapore -listed companies. Mr. Foo has wealth of experience and knowledge in business development, corporate restructuring, investment strategies and operations management in the FMCG, Service and Manufacturing industries. Cheong Poh Hua > Executive Director Ms. Cheong Poh Hua, is an Executive Director of our Group. Ms. Cheong joined our Company in September 1981 and was later promoted to Finance and Administration Manager in Ms. Cheong is responsible for all the financial and administrative affairs of our Group. She was appointed as an Executive Director of our Group on 1 July Between 1978 to 1981, Ms. Cheong was an auditor in S.L. Chua & Company. Ms. Cheong graduated from Nanyang University in 1978 with a Bachelor of Commerce Degree in Accountancy. Ms. Cheong is a Certified Public Accountant and a non-practising member of the Institute of Certified Public Accountants of Singapore ( ICPAS ). She was admitted to the status of Fellow of both CPA Australia and ICPAS in November Lim Seng Chai > Executive Director Mr. Lim Seng Chai is an Executive Director of our Group. He is responsible for the business performance of the Group s Singapore operations. Mr. Lim served in the Singapore Armed Forces ( SAF ) for 23 years from 1971 to 1994 and attained the rank of Major while in service. He graduated from the Singapore Command and Staff College in 1991 and held various instructional, command and staff appointments in the SAF. He had been an Instructor in Officer Cadet School, a Battalion Commander, a Brigade General Staff Officer and a Division Deputy General Staff Officer for operation. Mr. Lim joined our Company in May 1994 as a Senior Manager. He was promoted to General Manager in July 1998 and was appointed as an Executive Director of our Group on 3 October Mr. Lim holds a Master of Business Administration Degree from Charles Sturt University, Australia. Kuik See Juan > Independent Director Mr. Kuik See Juan was appointed as an Independent Director of our Group on 14 February Since 1969, he has been an Associate Member of the Chartered Institute of Bankers, U.K., currently known as Institute of Financial Services. From 1972 to 1981, he held various senior officer positions with Bank of America NT & SA in Singapore and Jakarta. He joined the Goldvein Holdings Group in 1982 and was made Group Executive Director of Bonvests Holding Ltd, a public company listed on SGX, for the period from 1983 to Between 1989 to 1992, he was an Associate Director with Kay Hian James Capel Ltd. Mr. Kuik subsequently became the Deputy Managing Director of L&M Group Investments Ltd from 1992 to From 1994 to December 2000, he was the Executive Director of Super Coffeemix Manufacturing Ltd. Currently, he remains an Independent Director of Super Coffeemix Manufacturing Ltd. He is also presently the Chairman and Chief Executive Officer (since January 2001) of Inchone Pte Ltd., and holds Independent Director positions in two other public companies listed on SGX. Chee Teck Kwong > Independent Director Mr. Chee Teck Kwong Patrick, PBM, holds a Bachelor of Laws (Hons) Degree from The University of Singapore. He has been in private legal practice since He was the Managing Partner of Messrs. Chee & Teo, Advocates & Solicitors and in July 2006 he joined Messrs. Peter Low Partnership, Advocates & Solicitors, as a Legal Consultant. Mr. Chee is a Notary Public and a Commissioner for Oaths. He is a member of Singapore Institute of Arbitrators, Singapore Institute of Internal Auditors and Singapore Institute of Directors. He also sits on the Board of other public listed companies including PSC Corporation Ltd, CSC Holdings Limited, Richland Group Limited, King s Safetywear Limited, Singapore Windsor Holdings Limited and Hengxin Technology Ltd. Mr. Chee is active in community service and is the Vice Chairman of Teck Ghee Community Club and the Organising Chairman of National Street Soccer League. Mr. Chee is the recipient of the National Day Awards 2003 The Public Service Medal (Pingat Bakti Masayarakat) from the President of Republic of Singapore. Lien Kait Long > Independent Director Mr. Lien was appointed as an Independent Director and Chairman of the Group on 24 November He has over 36 years experience in accounting and finance, corporate management and business investment. He has held a number of senior management positions as well as executive directorships in various public and private corporations in Singapore, Hong Kong and China. He currently serves as an independent director on the boards of several Singapore and Chinese companies listed on the Singapore Exchange. The listed companies that he has present and prior experience in are from diverse industries including manufacturing, telecommunications, oil & gas, consumer, textile and food & beverage. Mr. Lien holds a Bachelor of Commerce degree from Nanyang University, and is a fellow member of the Institute of Certified Public Accountants of Singapore and CPA Australia. 5

8 financial highlights Tat Seng Packaging Group Ltd. Financial Year FY2002 FY2003 FY2004 FY2005 FY2005 FY mths ended 12 mths ended 12 mths ended 12 mths ended 6 mths ended 12 mths ended Financial Period 30/06/ /06/ /06/ /06/ /12/ /12/2006 Turnover ($) 33,511,000 30,029,000 34,782,000 38,130,000 26,025,000 54,827,000 Earnings per share (cents) Profit after taxation ($) 4,118,000 1,806,000 3,214,000 2,490,000 1,074,000 2,354,000 Shareholders Equity ($) 42,332,000 39,387,000 41,147,000 39,614,000 43,384,000 45,067,000 6% 5% 17% Sales analysis by customer sector for FY2006 8% 7% Electronics & Electrical Medical, Pharmaceutical & Chemical Printing, Publishers & Converters Plastic & Metal Stamping Food & Beverage Others Computer Industries % 33% 6

9 Growth Annual Report 2006 financial highlights turnover ($ million) earnings per share (cents) profit after taxation ($ million) Shareholder s Equity ($ million) 7

10 corporate information Tat Seng Packaging Group Ltd. Board Of Directors Dr. Allan Yap (Executive Chairman) Dr. John Chen Seow Phun (Deputy Chairman) Loh See Moon (Managing Director) Foo Der Rong (Executive Director) Cheong Poh Hua (Executive Director) Lim Seng Chai (Executive Director) Chee Teck Kwong (Independent Director) Kuik See Juan (Independent Director) Lien Kait Long (Independent Director) Company Secretary Lotus Isabella Lim Mei Hua Lee Bee Fong Audit Committee Lien Kait Long (Chairman) Chee Teck Kwong Kuik See Juan Dr. John Chen Seow Phun Remuneration Committee Chee Teck Kwong (Chairman) Kuik See Juan Lien Kait Long Nominating Committee Kuik See Juan (Chairman) Chee Teck Kwong Lien Kait Long Registered Office 28 Senoko Drive Singapore Tel : (65) Fax : (65) general@tatseng-packaging.com Website: Company Registration Number : M Registrar And Share Transfer Office Tricor Barbinder Share Registration Services 8 Cross Street # PWC Building Singapore AUDITORS Ernst & Young Certified Public Accountants One Raffles Quay North Tower Level 18 Singapore Partner-in-charge: Philip Li (Partner since financial year ended 30th June 2005) PRINCIPAL BANKERS United Overseas Bank Limited 80 Raffles Place UOB Plaza Singapore DBS Bank Ltd 6 Shenton Way DBS Building Tower One Singapore

11 Corporate reports 10 Corporate Governance Report 15 Directors Report 18 Statement by the Directors 19 Independent Auditors Report 20 Balance Sheets 21 Consolidated Profit and Loss Account 22 Statement of Changes in Equity 24 Consolidated Cash Flow Statement 25 Notes to the Financial Statements 58 Land & Buildings 60 Statistics of Shareholdings 61 Notice of Annual General Meeting Proxy Form

12 corporate governance report TAT SENG PACKAGING GROUP LTD. The Board of Directors of the Company ( the Board ) continuously strives to maintain a high standard of corporate governance and transparency. The Board is pleased to confi rm that it has adhered to the principles and guidelines of the new Code of Corporate Governance 2005 ( the Code ) where it is applicable and practical. This report sets out the Company s corporate governance processes for the fi nancial year ended 31 December 2006 with specifi c reference to the Code. A. BOARD MATTERS Principle 1: The Board s Conduct of Affairs The Board s primary role is to protect and enhance long-term shareholders value. It sets the overall business strategy for the Company and its subsidiaries ( the Group ); reviews and approves annual budgets, fi nancial plans and monitors the Group s performance; approves major acquisitions and disposal of assets; approves the annual reports and accounts, the release of half-year and full year fi nancial results announcements; and ensure the Group s compliance with all the laws and regulations that are relevant to the business. The Board carries out these functions directly or through various committees, which would make recommendations to the Board. These committees constituted by the Board are the Nominating Committee ( NC ), Remuneration Committee ( RC ) and Audit Committee ( AC ). Each Committee has its own defi ned terms of reference and operating procedures. The Board met two times during the fi nancial year. Board meetings had included tele-conference. The attendance of the Directors at meetings of the Board and Board Committees is as follows: Name of Director Meeting Board AC NC RC No. No. of No. No. of No. No. of No. No. of Held Attendance Held Attendance Held Attendance Held Attendance Dr. Allan Yap Dr. John Chen Seow Phun Mr. Loh See Moon Mr. Foo Der Rong Mr. Lim Seng Chai Ms. Cheong Poh Hua Mr. Lien Kait Long Mr. Chee Teck Kwong Mr. Kuik See Juan Principle 2: Board Composition and Guidance The Board comprises nine members as follows: (a) Dr. Allan Yap (Executive Chairman) (b) Dr. John Chen Seow Phun (Non-Executive Deputy Chairman) (c) Mr. Loh See Moon (Managing Director) (d) Mr. Foo Der Rong (Executive Director) (e) Mr. Lim Seng Chai (Executive Director) (f) Ms. Cheong Poh Hua (Executive Director) (g) Mr. Lien Kait Long (Non-Executive & Independent Director) (h) Mr. Chee Teck Kwong (Non-Executive & Independent Director) (i) Mr. Kuik See Juan (Non-Executive & Independent Director) 010

13 Growth ANNUAL REPORT 2006 corporate governance report The Board come from diverse backgrounds and possess varied expertises in the fi elds of fi nance, accounts, legal, business and management. The Board reviews the independence of each Director on a yearly basis and adopts the Code s defi nition of what constitutes an Independent Director. Principle 3: Chairman and Chief Executive Officer The Executive Chairman, Dr. Allan Yap and the Chief Executive Offi cer (CEO) or Managing Director, Mr. Loh See Moon are not related to each other. The Chairman is responsible for leading the Board to ensure its effectiveness on all aspects of its role, while the Managing Director is responsible for the day-to-day operations of the Group and plays a key role in running the Group s businesses and operations. Principle 4: Board Memberships The NC comprises three Non-Executive and Independent Directors as follows: (a) Mr. Kuik See Juan (Chairman) (b) Mr. Lien Kait Long (Member) (c) Mr. Chee Teck Kwong (Member) The NC is to make recommendations to the Board concerning the appointments, re-appointments and determining the independence of the Directors. The Directors submit themselves for re-election at regular intervals and the Company s Articles provide at least one-third of the Directors, or the number nearest to one-third, are to retire by rotation at every Annual General Meeting ( AGM ). The NC has reviewed the independence of each director for Financial Year 2006 in accordance with the Code s defi nition of independence and is satisfi ed that one-third of the Board comprises Independent Directors. Principle 5: Board Performance The NC evaluates the Board s performance as a whole, using objective and appropriate quantitative and qualitative criteria. Assessment parameters include the attendance records at Board and Board Committee meetings, the level of participation at such meetings, the guidance provided to the Management and the performance of the Group. The NC has conducted a formal assessment of the Board s performance as a whole for Financial Year Principle 6: Access to Information The Board members are provided with complete and adequate information within a reasonable period in advance of the Board meetings. The Board has separate and independent access to the Company s Management and the Company Secretary at all times on an on-going basis. The role of Company Secretary is to ensure that Board procedures are followed and that applicable rules and regulations are complied with. B. REMUNERATION MATTERS Principle 7: Procedure for Developing Remuneration Policies The RC consists of the following three members who are Independent and Non-Executive Directors: (a) Mr. Chee Teck Kwong (Chairman) (b) Mr. Lien Kait Long (Member) (c) Mr. Kuik See Juan (Member) The RC sets the remuneration packages of individual Directors and Senior Management, reviews the Directors remuneration and makes recommendations to the Board for approval. 011

14 corporate governance report TAT SENG PACKAGING GROUP LTD. Principle 8: Level and Mix of Remuneration The RC determines the remuneration package of the Executive Director based on the performance of the Group. Directors fees payable to Non-Executive Directors are based on effort, time spent and responsibilities of each individual Director. It makes its recommendations to the Board for presentation to the shareholders for approval at the AGM. Principle 9: Disclosure on Remuneration The remuneration of the Directors for Financial Year 2006 is appended below: Remuneration Band and Name of Director Director s Fees % Salary/Allowance % Bonus/Profit Sharing % Benefits-in-kind % Total % $500,000 and above Mr. Loh See Moon $250,000 to below $500,000 Dr. Allan Yap Below $250,000 Mr. Foo Der Rong Ms. Cheong Poh Hua Mr. Lim Seng Chai Dr. John Chen Seow Phun Mr. Lien Kait Long Mr. Chee Teck Kwong Mr. Kuik See Juan Note: a. Directors fees are subjected to approval of the shareholders at the forthcoming Annual General Meeting. Save as disclosed above, there was no employee of the Group who is an immediate family member of a Director or the CEO whose remuneration exceeds S$150,000 during the fi nancial year ended 31 December C. ACCOUNTABILITY AND AUDIT Principle 10: Accountability The Board is mindful of its obligation to provide reliable, timely and fair disclosure on the Group s performance to shareholders. The Management understands its role in providing all members of the Board with fi nancial information that present a balanced and comprehensive assessment of the Group s performance, position and prospects. A review of the Group s fi nancial performance and commentary on the competitive conditions within the industry, in which the Group operates, is provided to shareholders in the Group s half-year and full year results announcements via SGXNET. Principle 11: Audit Committee The AC comprises three Independent Directors and one Non-Executive Director as follows: (a) Mr. Lien Kait Long (Chairman and Independent Director) (b) Mr. Chee Teck Kwong (Member and Independent Director) (c) Mr. Kuik See Juan (Member and Independent Director) (d) Dr. John Chen Seow Phun (Member and Non-Executive Director) 012

15 Growth ANNUAL REPORT 2006 corporate governance report The AC s duties are to: (a) Review the audit plans and audit reports of the Group s internal and external auditors; (b) Review the Group s half-yearly and yearly results announcements and the fi nancial statements before submission to the Board for approval to release the results announcement via the SGXNET. (c) Review with the internal and external auditors on their evaluations of the systems of internal accounting controls and actions required to address noted defi ciencies; (d) Review related and interested person transactions; (e) Review the independence of external auditors annually including the nature and extent of non-audit services provided by the external auditors; (f) Recommend to the Board the appointment or re-appointment of the external auditors. (g) Assist the Board in the execution of its corporate governance responsibilities according to established Board references and requirements. The AC has reviewed the non-audit services provided by the external auditors and is satisfi ed that the provision of such services has not affected the independence of the external auditors. The AC is pleased to confi rm their re-nomination. Whistle-Blowing Policy A Whistle-Blowing Policy was approved by the Board and implemented on 11 December The Board believes that this policy will provide an avenue for employees to bring their complaints to the attention of the Audit Committee Chairman without fear of reprisal. The establishment of the Whistle-Blowing structure is to allow the Group to detect and deter wrongdoing in preparing and implementing fi nancial policies, reports and materials as well as internal controls essential to support its fi nancial and accounting system. Principle 12: Internal Controls The Board is responsible for the overall control framework and is fully aware of the needs to put in place a system of internal controls within the Group to safeguard shareholders interests and the Group s assets. The Board has reviewed and is satisfi ed with the adequacy of the Group s internal controls established by the Management for the fi nancial year Principle 13: Internal Audit An internal auditor has been appointed during the fi nancial year 2006 to review the Group s Singapore and China plants risk exposures. The Internal Auditor reports primarily to the Chairman of AC, but administratively to the Management. The AC reviews and approves the Internal Audit plan on an annual basis to ensure the adequacy of the internal audit function. The AC has reviewed the internal auditor s fi ndings and recommendations for improvement, and there were no material internal control weaknesses found in the processes under review for the fi nancial year ended 31 December D. COMMUNICATION WITH SHAREHOLDERS The Group makes announcements of its fi nancial results and provides material information as required under the SGX-ST Listing Manual via SGXNET. Annual Report and notice of AGM are sent to all shareholders. The notice of AGM is also published in a local newspaper and announced via SGXNET. Shareholders are encouraged to attend the Group s AGM. At the AGM, shareholders are given the opportunity to share with and communicate their views to the Directors and Management. The Chairpersons of the Audit, Remuneration, Nominating Committees and the external auditors are requested to be present and available to address shareholders queries about the conduct of external audit, the preparation and the contents of the auditors report. Shareholders can also visit the Group s website at to fi nd out more about the Group s performance and latest developments. They can also see updated fi nancial highlights, corporate announcements, press releases and annual report under the Investor Relations section. The Group also allows each shareholder to appoint one to two proxies to attend and vote at all general meetings on his/her behalf using a proxy form. 013

16 corporate governance report TAT SENG PACKAGING GROUP LTD. E. RISK MANAGEMENT The Group regularly assesses and reviews its business and operational environments in order to identify areas of signifi cant business and fi nancial risks such as credit risks, foreign exchange risks, liquidity risks and interest rate risks, as well as appropriate measures to control and mitigate these risks. F. DEALING IN SECURITIES The Group has adopted internal compliance code pursuant to the SGX-ST Listing Manual applicable to all Directors and employees in relation to dealings in the Company s securities. The Group reminded its Directors and employees to refrain from trading in its securities for the period one month before the announcement of the Group s half-year and full year results and ending on the date of the announcement of the results. s and notices were sent and published to all Directors and employees within the prescribed period respectively. G. MATERIAL CONTRACTS There were no material contracts entered into by the Group or any of its subsidiaries involving the interest of the CEO, any Director, or controlling shareholder. H. INTERESTED PERSON TRANSACTIONS There were no interested person transactions for the fi nancial year ended 31 December

17 Growth ANNUAL REPORT 2006 directors report The Directors are pleased to present their report to the members together with the audited consolidated fi nancial statements of Tat Seng Packaging Group Ltd (the Company ) and its subsidiaries (collectively, the Group ) and the balance sheet and statement of changes in equity of the Company for the fi nancial year ended 31 December Directors The Directors of the Company in offi ce at the date of this report are: Allan Yap John Chen Seow Phun Loh See Moon Foo Der Rong Cheong Poh Hua Lim Seng Chai Kuik See Juan Chee Teck Kwong Lien Kait Long - Chairman - Deputy Chairman - Managing Director In accordance with Articles 91 of the Company s Articles of Association, Dr. Allan Yap, Mr. Lim Seng Chai and Mr. Kuik See Juan shall retire and, being eligible, offer themselves for re-election. Arrangements to enable Directors to acquire shares or debentures Neither at the end of nor at any time during the fi nancial year was the Company a party to any arrangement whose objects are, or one of whose object is, to enable the Directors of the Company to acquire benefi ts by means of the acquisition of shares or debentures of the Company or any other body corporate. Directors interests in shares or debentures The following Directors, who held offi ce at the end of the fi nancial year, had, according to the register of Directors shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares of the Company and related corporations (other than wholly-owned subsidiary) as stated below: Direct interest Deemed interest At the At the At the At the beginning of end of beginning of end of Name of Director financial year financial year financial year financial year The Company (ordinary shares of $0.20 each) Loh See Moon 23,580,000 23,580,000 Cheong Poh Hua 516, , , ,000 Lim Seng Chai 500, , , ,000 There was no change in any of the above-mentioned interests between the end of the fi nancial year and 21 January Except as disclosed in this report, no other Director who held offi ce at the end of the fi nancial year had interests in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning or and of the fi nancial year or on 21 January Directors contractual benefits Except as disclosed in the fi nancial statements, since the end of the previous fi nancial year, no Director of the Company has received or become entitled to receive a benefi t by reason of a contract made by the Company or a related corporation with the Director, or with a fi rm of which the Director is a member, or with a company in which the Director has a substantial fi nancial interest. 015

18 directors report TAT SENG PACKAGING GROUP LTD. Issue of shares, debentures or options No shares or debentures or options to take up unissued shares of the Company and its subsidiaries were issued or granted during the fi nancial year. As at 31 December 2006, no options over the unissued shares of the Company and its subsidiaries were outstanding. Audit committee The Audit Committee ( AC ) carries out its functions in accordance with section 201B(5) of the Singapore Companies Act, Cap. 50, including the following: Reviews the audit plans of the internal and external auditors of the Company and ensures the adequacy of the Company s system of accounting controls and the co-operation given by the Company s Management to the external and internal auditors; Reviews the half yearly and annual fi nancial statements and the independent auditors report on the annual fi nancial statements of the Company before their submission to the Board of Directors; Reviews effectiveness of the Company s material internal controls, including fi nancial, operational and compliance controls and risk management via reviews carried out by the internal auditors; Meets with the external auditors, other committees, and Management in separate executive sessions to discuss any matters that these groups believe should be discussed privately with the AC; Reviews legal and regulatory matters that may have a material impact on the fi nancial statements, related compliance policies and programmes and any reports received from regulators; Reviews the cost effectiveness and the independence and objectivity of the external auditors; Reviews the nature and extent of non-audit services provided by the external auditors; Recommends to the Board of Directors the external auditors to be nominated, approves the compensation of the external auditors, and reviews the scope and results of the audit; Reports actions and minutes of the AC to the Board of Directors with such recommendations as the AC considers appropriate; and Reviews interested person transactions in accordance with the requirements of the Singapore Exchange Securities Trading Limited, (SGX-ST) s Listing Manual. The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfi ed that the nature and extent of such services would not affect the independence of the external auditors. The AC has also conducted a review of interested person transactions. The AC met with external auditors, without the presence of the Company s Management, at least once a year. Further details regarding the Audit Committee are disclosed in the Report on Corporate Governance. 016

19 Growth ANNUAL REPORT 2006 directors report Auditors Ernst & Young have expressed their willingness to accept reappointment as auditors. On behalf of the Board of Directors: Loh See Moon Director Cheong Poh Hua Director Singapore 21 March

20 statement by directors TAT SENG PACKAGING GROUP LTD. We, Loh See Moon and Cheong Poh Hua, being two of the Directors of Tat Seng Packaging Group Ltd., do hereby state that, in the opinion of the Directors, (i) the accompanying balance sheets, consolidated profi t and loss account, statement of changes in equity, and consolidated cash fl ow statement together with notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2006 and the results of the business, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date, and (ii) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due. On behalf of the Board of Directors: Loh See Moon Director Cheong Poh Hua Director Singapore 21 March

21 Growth ANNUAL REPORT 2006 independent auditors report To the Members of Tat Seng Packaging Group Ltd. We have audited the accompanying fi nancial statements of Tat Seng Packaging Group Ltd. (the Company ) and its subsidiaries (collectively, the Group ) set out on pages 20 to 57, which comprise the balance sheets of the Group and the Company as at 31 December 2006, the statements of changes in equity of the Group and the Company, the profi t and loss account and cash fl ow statement of the Group for the year then ended, and a summary of signifi cant accounting policies and other explanatory notes. Directors responsibility for the financial statements The Company s Directors are responsible for the preparation and fair presentation of these fi nancial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the Act ) and Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of fi nancial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors responsibility Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the fi nancial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the fi nancial statements. The procedures selected depend on the auditor s judgement, including the assessment of the risks of material misstatement of the fi nancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the fi nancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Directors, as well as evaluating the overall presentation of the fi nancial statements. We believe that the audit evidence we have obtained is suffi cient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, (i) the consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of 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 December 2006 and the results, changes in equity and cash fl ows of the Group and the changes in equity of the Company for the year ended on that date; and (ii) 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. ERNST & YOUNG Certifi ed Public Accountants Singapore 21 March

22 balance sheets as at 31 December 2006 TAT SENG PACKAGING GROUP LTD. Group Company Note $ $ $ $ Non-current assets Property, plant and equipment 3 42,021,415 38,046,240 11,120,601 12,173,302 Investments in subsidiaries 4 11,012,381 7,390,710 Intangible assets 5 638,447 30,000 30,000 30,000 Investment securities 6 1,111,505 7,297 1,111,505 7,297 Loan to subsidiary 7 4,867,300 8,428,000 Current assets Inventories 8 7,148,734 4,969,543 2,394,560 2,366,281 Trade receivables 9 12,355,693 9,528,990 2,663,634 2,513,450 Other receivables and deposits , ,260 73,600 72,933 Prepaid operating expenses 139,562 67,830 18,837 62,633 Amount due from subsidiary , ,171 Short-term investments 12 1,414,250 1,414,250 Fixed deposits 12 4,250,000 6,450,843 4,250,000 2,000,000 Cash and short term deposits 12 8,320,618 2,315,953 1,340,480 1,185,971 32,873,970 24,928,669 11,192,181 10,497,689 Current liabilities Trade and other payables 13 6,552,362 6,940, , ,706 Bills payable to banks 14 11,125,374 5,833,724 75,533 Interest-bearing bank loans and borrowings 15 4,906, ,200 Other liabilities 16 1,957,677 1,765,691 1,311,171 1,115,717 Tax payable 1,344,709 1,049,977 1,245, ,419 25,886,884 16,001,784 3,508,587 2,800,442 Net current assets 6,987,086 8,926,885 7,683,594 7,697,247 Non-current liabilities Deferred tax liabilities 24 3,900,271 3,625,671 2,220,379 2,261,863 Interest-bearing bank loans and borrowings 15 1,790,986 Net assets 45,067,196 43,384,751 33,605,002 33,464,693 Equity attributable to equity holders of the Company Share capital 17 31,440,000 31,440,000 31,440,000 31,440,000 Reserves 12,859,632 11,944,751 2,165,002 2,024,693 Minority interests 767,564 Total equity 45,067,196 43,384,751 33,605,002 33,464, The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.

23 Growth ANNUAL REPORT 2006 consolidated profit and loss account 6 months ended Note $ $ Revenues Sales of goods 54,826,606 26,025,920 Cost of sales (43,876,390) (20,448,425) Gross profit 10,950,216 5,577,495 Other operating income , ,291 Distribution and selling expenses (3,409,686) (1,635,448) General and administrative expenses (4,751,266) (2,564,391) Other operating expenses 20 (117,458) (103,099) Finance costs 22 (187,452) (41,149) Profit before tax 23 2,987,685 1,465,699 Tax expense 24 (634,556) (391,560) Profit for the year 2,353,129 1,074,139 Attributable to: Equity holders of the Company 2,321,755 1,074,139 Minority interests 31,374 Profit for the year 2,353,129 1,074,139 Basic earnings per share (cents) Diluted earnings per share (cents) The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements. 021

24 statement of changes in equity for the fi nancial year ended 31 December 2006 TAT SENG PACKAGING GROUP LTD. Minority Total Attributable to equity holders of the Company interests equity Share Other capital Accumulated reserves Total (Note 17) profits (Note 18) reserves $ $ $ $ $ $ 2005 Group At 1 July ,440,000 2,807,523 5,366,553 8,174,076 39,614,076 Net surplus on revaluation of assets (Note 18(b)) 3,863,111 3,863,111 3,863,111 Net effect of exchange differences (Note 18(c)) 91,025 91,025 91,025 Capitalisation of accumulated profi ts of subsidiary (Note 18(e)) (1,009,310) 1,009,310 Appropriation to reserve fund (Note 18(d)) (108,933) 108,933 Net income recognised directly in equity (1,118,243) 5,072,379 3,954,136 3,954,136 Profi t for the period 1,074,139 1,074,139 1,074,139 Total recognised income and expenses for the year (44,104) 5,072,379 5,028,275 5,028,275 Dividends on ordinary shares (Note 33) (1,257,600) (1,257,600) (1,257,600) At 31 December ,440,000 1,505,819 10,438,932 11,944,751 43,384, At 1 January ,440,000 1,505,819 10,438,932 11,944,751 43,384,751 Net change in fair value adjustment reserve (Note 18(a)) (191,793) (191,793) (191,793) Net effect of exchange differences (Note 18(c)) (1,215,081) (1,215,081) (1,215,081) Acquisition of subsidiary 736, ,190 Appropriation to reserve fund (Note 18(d)) (150,349) 150,349 Net income recognised directly in equity (150,349) (1,256,525) (1,406,874) 736,190 (670,684) Profi t for the year 2,321,755 2,321,755 31,374 2,353,129 Total recognised income and expenses for the year 2,171,406 (1,256,525) 914, ,564 1,682,445 At 31 December ,440,000 3,677,225 9,182,407 12,859, ,564 45,067,196 The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements. 022

25 Growth ANNUAL REPORT 2006 statement of changes in equity for the fi nancial year ended 31 December 2006 Statement of Changes in Equity for the fi nancial year ended 31 December 2006 (cont d) Attributable to equity holders of the Company Share Other capital Accumulated reserves Total Total (Note 17) profits (Note 18) reserves equity $ $ $ $ $ 2005 Company At 1 July ,440,000 2,138, ,679 2,873,861 34,313,861 Net surplus on revaluation of assets (Note 18(b)) 86,000 86,000 86,000 Net income recognised directly in equity 86,000 86,000 86,000 Profi t for the period 322, , ,432 Total recognised income and expenses for the year 322,432 86, , ,432 Dividends on ordinary shares (1,257,600) (1,257,600) (1,257,600) At 31 December ,440,000 1,203, ,679 2,024,693 33,464, At 1 January ,440,000 1,203, ,679 2,024,693 33,464,693 Net change in fair value adjustment reserve (Note 18(a)) (191,793) (191,793) (191,793) Net income recognised directly in equity (191,793) (191,793) (191,793) Profi t for the year 332, , ,102 Total recognised income and expenses for the year 332,102 (191,793) 140, ,309 At 31 December ,440,000 1,535, ,886 2,165,002 33,605,002 The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements. 023

26 consolidated cash flow statement TAT SENG PACKAGING GROUP LTD. 6 months ended Note $ $ Profi t before tax 2,987,685 1,465,699 Adjustments for: Depreciation expenses 3 3,274,846 1,610,225 Property, plant and equipment written off 7,731 6,020 Bad trade debts written off 22,250 Impairment in value of club memberships 5,000 Write-back of allowance for doubtful receivables, net (60,767) (39,671) (Write-back of allowance)/allowance for stock obsolescence, net (102,570) 8,579 Fair value changes on quoted investments (334) Interest expense 150,435 24,751 Interest income (221,103) (47,385) Net loss/(gain) on disposal of property, plant and equipment 10,400 (39,725) Net effect of exchange differences (199,011) (100,470) Operating profit before working capital changes 5,847,646 2,914,939 (Increase)/decrease in inventories (898,251) 946,523 Increase in trade and other receivables and prepaid operating expenses (852,816) (1,432,232) Decrease in trade and other payables and other liabilities 1,354,079 4,158,621 Cash flows generated from operations 5,450,658 6,587,851 Interest paid (150,435) (24,751) Tax paid (429,411) (440,880) Net cash flows generated from operating activities 4,870,812 6,122,220 Cash flows from investing activities Proceeds from disposal of property, plant and equipment 13, ,628 Purchase of property, plant and equipment 3 (1,281,544) (1,361,789) Acquisition of a subsidiary, net of cash acquired 26 (1,635,907) Purchase of investment securities (1,296,000) Interest received 221,103 47,385 Net cash flows used in investing activities (3,978,374) (1,173,776) Cash flows from financing activities Dividends paid (1,257,600) Proceeds from/(repayment of) short term loans 1,497,134 (530,005) Decrease/(Increase) in pledge in cash at banks and in hand 748,840 (4,450,843) Net cash flows generated from/(used in) financing activities 2,245,974 (6,238,448)) Net increase/(decrease) in cash and cash equivalents 3,138,412 (1,290,004) Cash and cash equivalents at beginning of year/period 12 5,730,203 7,020,207 Cash and cash equivalents at end of year/period 12 8,868,615 5,730, The accompanying accounting policies and explanatory notes form an integral part of the fi nancial statements.

27 Growth ANNUAL REPORT 2006 notes to the financial statements 1. Corporate information Tat Seng Packaging Group Ltd. (the Company ) is a public limited liability company, which is incorporated in the Republic of Singapore and listed on the Mainboard of Singapore Exchange Securities Trading Limitied. The immediate and ultimate holding company is PSC Corporation Ltd, incorporated in the Republic of Singapore. The registered offi ce and principal place of business of the Company is located at 28 Senoko Drive, Singapore The principal activities of the Company and its subsidiaries (Note 4) are the manufacture and sales of corrugated paper products and sales of other packaging products. There have been no signifi cant changes in the nature of these activities during the fi nancial year. 2. Summary of significant accounting policies 2.1 Basis of preparation The consolidated fi nancial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards ( FRS ). The fi nancial statements have been prepared on a historical cost basis except for leasehold land and buildings and available-forsales fi nancial assets that have been measured at their fair values. The fi nancial statements are presented in Singapore Dollars ( SGD or $ ). The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous fi nancial year. 2.2 FRS and INT FRS not yet effective The Group and the Company have not applied the following FRS and INT FRS that have been issued but not yet effective: Effective date (Annual periods beginning on or after) FRS 1 : Amendment to FRS 1 (revised), Presentation of Financial Statements (Capital Disclosures) 1 January 2007 FRS 40 : Investment Property 1 January 2007 FRS 107 : Financial Instruments: Disclosures 1 January 2007 FRS 108 : Operating Segments 1 January 2009 INT FRS 107 : Applying the Restatement Approach under FRS 29, Financial Reporting in Hyperinfl ationary Economies 1 March 2006 INT FRS 108 : Scope of FRS 102, Share-based Payment 1 May 2006 INT FRS 109 : Reassessment of Embedded Derivatives 1 June 2006 INT FRS 110 : Interim Financial Reporting and Impairment 1 November 2006 INT FRS 111 : Group and Treasury Share Transactions 1 March 2007 INT FRS 112 : Service Concession Arrangement 1 January