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finanCial report finanCial report 34. 39. 42. 85.
DIRECTORS’ REPORT
36.
STATEMENT BY DIRECTORS
STATEMENT OF FINANCIAL POSITION
40.
CONSOLIDATED STATEMENT OF CASH FLOWS SHAREHOLDING STATISTICS
87.
37.
INDEPENDENT AUDITOR’S REPORT
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
43.
NOTICE OF AGM
NOTES TO THE FINANCIAL STATEMENTS
93.
PROXY FORM
direCtorS’ report
for the financial year ended 31 December 2009 The directors submit this annual report to the members together with the audited consolidated financial statements of the Group and the statement of financial position of the Company for the financial year ended 31 December 2009.
nameS of direCtorS
The directors in office at the date of this report are: Goh Ah Lee Chung Kim Yew Lee Fut Hua Christopher Chong Meng Tak Choo Yong Fee Lie Chin-Chin
arrangementS to aCquire ShareS or deBentureS
During and at the end of the financial year, neither the Company nor its subsidiaries was a party to any arrangement the object of which was to enable the directors to acquire benefits through the acquisition of shares in or debentures of the Company or of any other corporate body other than as disclosed in this report.
direCtorS’ intereSt in ShareS or deBentureS
According to the Register of Directors’ Shareholdings kept by the Company under Section 164 of the Companies Act, Cap. 50, none of the directors who held office at the end of the financial year was interested in shares of the Company and its related corporations except as follows:
holdingS regiStered in the name of direCtor As at 1.1.2009 The Company Lorenzo International Limited
As at 31.12.2009 and 21.01.2010
holdingS in whiCh direCtor iS deemed to have an intereSt As at 1.1.2009
As at 31.12.2009 and 21.01.2010
Number of shares
Goh Ah Lee
18,874,000
19,020,000
146,000
146,000
Chung Kim Yew
32,793,200
32,879,000
86,000
86,000
–
150,000
–
–
385,000
385,000
–
–
50,000
50,000
–
–
Lee Fut Hua Christopher Chong Meng Tak Choo Yong Fee
direCtorS’ BenefitS
Since the end of the previous financial year, no director has received or has become entitled to receive a benefit under a contract which is required to be disclosed under Section 201(8) of the Companies Act, Cap. 50, except for salaries, bonuses and fees and those benefits that are disclosed in this report and in Note 21 to the financial statements.
34.
2009
DIRECTORS’ REPORT
ANNUAL REPORT
Share options
No options were granted during the financial year to take up unissued shares of the Company or its subsidiaries. No shares were issued during the financial year to which this report relates by virtue of the exercise of options to take up unissued shares of the Company or any subsidiaries. There were no unissued shares of the Company and of the subsidiaries under option at the end of the financial year.
Audit Committee
The Audit Committee comprises the following members: Christopher Chong Meng Tak (Chairman) Choo Yong Fee Lie Chin-Chin The Audit Committee performs the functions set out in Section 201B(5) of the Companies Act, Cap. 50, the SGX Listing Manual and the Code of Corporate Governance. In performing its functions, the Committee reviewed the following: (i)
overall scope of both the internal and external audits and the assistance given by the Company’s officers to the auditors. It met with the Company’s internal and external auditors to discuss the results of their respective examinations and their evaluation of the Company’s system of internal accounting controls;
(ii)
half yearly financial information, the statement of financial position of the Company and the consolidated financial statements of the Group for the financial year ended 31 December 2009 as well as the auditor’s report thereon; and
(iii)
interested person transactions (as defined in Chapter 9 of the Listing Manual of the Singapore Exchange).
The Committee has full access to management and is given the resources required for it to discharge its functions. It has full authority and the discretion to invite any director or executive officer to attend its meetings. The Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees. The Committee is satisfied with the independence and objectivity of the external auditor and has recommended to The Board of Directors that the auditors, Foo Kon Tan Grant Thornton LLP, be nominated for re-appointment as auditor at the forthcoming Annual General Meeting of the Company.
auditors
The auditors, Foo Kon Tan Grant Thornton LLP, Certified Public Accountants, have expressed its willingness to accept reappointment.
On behalf of the Directors
GOH AH LEE
LEE FUT HUA Dated: 16 March 2010
ANNUAL REPORT
.35
2009
DIRECTORS’ REPORT
Statement By direCtorS for the financial year ended 31 December 2009
In the opinion of the directors, the accompanying statements of financial position, consolidated statement of comprehensive income, consolidated statement of changes in equity and the consolidated statement of cash flows, together with the notes thereon, are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group as at 31 December 2009 and of the results of the business, changes in equity and cash flows of the Group for the financial year ended on that date, and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
On behalf of the Directors
GOH AH LEE
LEE FUT HUA Dated: 16 March 2010
36.
2009
STATEMENT BY DIRECTORS
ANNUAL REPORT
independent auditor’S report to the memBerS of lorenZo international limited and itS SuBSidiarieS We have audited the accompanying financial statements of Lorenzo International Limited (“the Company”) and its subsidiaries (“the Group”), which comprise the statements of financial position of the Group and the Company as at 31 December 2009, the consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.
management’S reSponSiBility for the finanCial StatementS
Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: (a)
devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets;
(b)
selecting and applying appropriate accounting policies; and
(c)
making accounting estimates that are reasonable in the circumstances.
auditorS’ reSponSiBility
Our responsibility is to express an opinion on these financial 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 on whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial 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 financial 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 management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
ANNUAL REPORT
.37
2009
INDEPENDENT AUDITOR’S REPORT
Opinion
In our opinion: (a)
the consolidated financial statements of the Group and the statement of financial position 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 Company and of the Group as at 31 December 2009 and the results, changes in equity and cash flows of the Group for the financial 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 auditor have been properly kept in accordance with the provisions of the Act.
Foo Kon Tan Grant Thornton LLP Public Accountants and Certified Public Accountants Singapore, 16 March 2010
38.
2009
INDEPENDENT AUDITOR’S REPORT
ANNUAL REPORT
StatementS of finanCial poSition as at 31 December 2009
the Company 31 December 31 December 2009 2008
the group 1 January 31 December 31 December 2008 2009 2008
1 January 2008
Note
$
$
$
$
$
$
Land use rights
4
–
–
–
1,445,752
1,561,779
1,164,311
Property, plant and equipment
5
16,170
23,967
31,763
26,191,510
23,791,486
16,778,310
Subsidiaries
6
25,371,628
21,212,000
16,021,323
–
–
–
25,387,798
21,235,967
16,053,086
27,637,262
25,353,265
17,942,621
Assets Non-Current
Current Inventories
7
–
–
–
18,882,813
21,843,023
21,562,598
Trade and other receivables
8
495,008
5,016,777
5,373,838
8,478,234
7,378,446
8,850,048
Fixed deposits with banks
9
–
–
–
6,479,682
6,031,828
5,378,021
Cash and bank balances
10
175,253
1,019,311
645,421
7,667,679
8,552,623
9,027,716
Total assets
670,261
6,036,088
6,019,259
41,508,408
43,805,920
44,818,383
26,058,059
27,272,055
22,072,345
69,145,670
69,159,185
62,761,004
Equity and Liabilities Capital and reserves Share capital
11
25,513,920
25,513,920
20,635,649
25,513,920
25,513,920
20,635,649
Reserves
12
489,024
1,749,610
1,389,256
6,888,000
7,197,828
5,026,916
26,002,944
27,263,530
22,024,905
32,401,920
32,711,748
25,662,565
Liabilities Non-Current Borrowings
13
–
–
–
3,823,235
1,579,334
2,602,971
Deferred taxation
14
–
–
–
253,040
256,197
267,305
–
–
–
4,076,275
1,835,531
2,870,276
55,115
8,525
47,440
21,382,890
21,269,837
19,150,828
–
–
–
1,547,498
713,369
701,320
–
–
–
9,737,087
12,628,700
14,376,015
55,115
8,525
47,440
32,667,475
34,611,906
34,228,163
26,058,059
27,272,055
22,072,345
69,145,670
69,159,185
62,761,004
Current Trade and other payables
15
Current tax payable Borrowings Total equity and liabilities
13
The annexed notes form an integral part of and should be read in conjunction with these financial statements.
ANNUAL REPORT
.39
2009
STATEMENTS OF FINANCIAL POSITION
ConSolidated Statement of ComprehenSive inCome for the financial year ended 31 December 2009
Note
Year ended 31 December 2009
Year ended 31 December 2008
$
$
86,165,731
95,016,932
(51,529,030)
(60,842,759)
34,636,701
34,174,173
Continuing operations Revenue
16
Cost of sales Gross profit Other operating income
1,069,881
1,400,026
(8,339,606)
(8,513,060)
(20,417,118)
(18,217,289)
(1,497,804)
(1,513,461)
18
(719,896)
(1,197,355)
4,732,158
6,133,034
19
(2,731,530)
(2,083,805)
2,000,628
4,049,229
17
Distribution costs Administrative expenses Other operating expenses Finance costs Profit from continuing operations before taxation Taxation Profit from continuing operations Discontinued operation Loss from discontinued operation (at nil tax)
20
Profit for the year attributable to equity holders of the Company
21
(778,398) 1,222,230
(767,082) 3,282,147
Other comprehensive income: Foreign currency translation differences for foreign operations (at nil tax)
(692,058)
(91,823)
Other comprehensive income for the year
(692,058)
(91,823)
Total comprehensive income for the year
530,172
3,190,324
22
0.73
2.28
22
1.19
2.81
22
(0.46)
(0.53)
Earnings/(loss) per share (cents) Continuing and discontinued operations – basic and diluted Continuing operations – basic and diluted Discontinued operation – basic and diluted
The annexed notes form an integral part of and should be read in conjunction with these financial statements.
40.
2009
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
ANNUAL REPORT
Consolidated statement of changes in equity for the financial year ended 31 December 2009
Share capital
Exchange fluctuation reserve
Merger reserve
Retained profits
Total reserves
Total
$
$
$
$
$
$
20,635,649
(1,398,015)
(3,282,141)
9,707,072
5,026,916
25,662,565
Total comprehensive income for the year
–
(91,823)
–
3,282,147
3,190,324
3,190,324
Dividend paid (0.85 cents per share) (Note 27)
–
–
–
(1,019,412)
(1,019,412)
(1,019,412)
4,878,271
–
–
–
–
4,878,271
25,513,920
(1,489,838)
(3,282,141)
11,969,807
7,197,828
32,711,748
Total comprehensive income for the year
–
(692,058)
–
1,222,230
530,172
530,172
Dividend paid (0.50 cents per share) (Note 27)
–
(840,000)
(840,000)
Balance at 1 January 2008
Rights issue of shares, net of expenses Balance at 31 December 2008
Balance at 31 December 2009
25,513,920
– (2,181,896)
– (3,282,141)
(840,000) 12,352,037
6,888,000
32,401,920
The annexed notes form an integral part of and should be read in conjunction with these financial statements.
ANNUAL REPORT
.41
2009
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
ConSolidated Statement of CaSh flowS for the financial year ended 31 December 2009
Note Cash Flows from Operating Activities Profit/(loss) before taxation from: – Continuing operations – Discontinued operation (Note 20)
Year ended 31 December 2009
Year ended 31 December 2008
$
$
4,732,158 (778,398)
6,133,034 (767,082)
3,953,760
5,365,952
26,570 1,987,456 45,738 (26,234) 635,136 719,896 (107,550)
27,928 2,004,750 1,740 (8,191) 251,359 1,197,355 (151,272)
Operating profit before working capital changes Decrease/(increase) in inventories (Increase)/decrease in trade and other receivables Increase in trade and other payables
7,234,772 2,566,209 (1,082,022) 252,792
8,689,621 (1,275) 1,435,283 2,176,271
Cash generated from operations Interest paid Income tax paid
8,971,751 (719,896) (1,882,587)
12,299,900 (1,197,355) (2,115,053)
6,369,268
8,987,492
(5,736,628) – 462,172 107,550
(9,349,920) (330,812) 66,059 151,272
Net cash used in investing activities Cash Flows from Financing Activities Proceeds from issue of shares, net of expenses Payment to finance lease creditors Proceeds from bank loans Repayment of bank loans Repayment of bills payable Dividends paid
(5,166,906)
(9,463,401)
– (269,267) 4,500,000 (1,192,088) (3,205,453) (840,000)
4,878,271 (340,785) 500,000 (891,638) (2,478,450) (1,019,412)
Net cash (used in)/generated from financing activities
(1,006,808)
647,986
Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Effects of exchange rate changes on cash and cash equivalents Cash and cash equivalents at end of year
195,554 11,727,128 11,369 11,934,051
Profit for the year before taxation Adjustments for: Amortisation of land use rights Depreciation of property, plant and equipment Provision for doubtful debts Gain on disposal of property, plant and equipment Property, plant and equipment written off Interest expense Interest income
Net cash generated from operating activities Cash Flows from Investing Activities Acquisition of property, plant and equipment Acquisition of land use rights Proceeds from disposal of property, plant and equipment Interest received
a.
4 5 17 21
A 4
10
property, plant and equipment
During the financial year, the Group acquired property, plant and equipment with an aggregate cost of $5,933,931 (2008 – $9,532,458) of which $197,303 (2008 - $182,538) was acquired by means of finance leases. Cash payments of $5,736,628 (2008 – $9,349,920) were made to purchase property, plant and equipment.
The annexed notes form an integral part of and should be read in conjunction with these financial statements.
42.
172,077 12,017,000 (461,949) 11,727,128
2009
CONSOLIDATED STATEMENT OF CASH FLOWS
ANNUAL REPORT
noteS to the finanCial StatementS for the financial year ended 31 December 2009
1
general information
The financial statements of the Company and of the Group for the year ended 31 December 2009 were authorised for issue in accordance with a resolution of the directors on the date of the Statement By Directors. The Company was incorporated as a limited liability company and domiciled in the Republic of Singapore on 16 June 2005 and was admitted to the Official List of the Singapore Exchange Securities Trading Limited (“SGX-SESDAQ”) on 11 May 2006 and transferred to SGX mainboard on 16 January 2008. The registered office is located at 27 Kaki Bukit Place, Eunos Techpark, Singapore 416205. The principal activities of the Company are those relating to an investment holding. The principal activities of the subsidiaries are stated in Note 6.
2(a) BaSiS of preparation
The financial statements are prepared in accordance with Singapore Financial Reporting Standards (“FRS”) including related Interpretations promulgated by the Accounting Standards Council (“ASC”). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below. The financial statements are presented in Singapore dollars which is the Company’s functional currency. All financial information has been presented in Singapore dollars, unless otherwise stated.
Significant accounting estimates and judgements
The preparation of the financial statements in conformity with FRS requires the use of judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the financial year. Although these estimates are based on management’s best knowledge of current events and actions, actual results may differ from those estimates. The critical accounting estimates and assumptions used and areas involving a high degree of judgement are detailed below:
Critical judgements
Classification of Land Use Rights as Operating Leases Within the People’s Republic of China, it is the practice for the State to issue Land Use Rights to individuals or entities. Such rights are evidenced through the granting of a Land Use Rights certificate, which gives the holder the right to use the land (including the construction of buildings thereon) for a given length of time. An upfront payment is made for these rights. The Directors judge that the substance of these arrangements is an operating lease over the land, and that the upfront payment represents prepaid lease rentals. As such a prepayment is recognised in the statement of financial position, analysed between current and non current assets. The prepayment is amortised to spread the lease cost over the duration of the term of the land use rights, as specified in the lease certificate.
ANNUAL REPORT
.43
2009
NOTES TO THE FINANCIAL STATEMENTS
2(a) Basis of preparation (cont’d) Critical assumptions used and accounting estimates in applying accounting policies
Income tax The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is involved in determining the group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Useful lives of property, plant and equipment Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. The Group performs annual reviews on whether the assumptions made on useful lives continue to be valid. As changes in the expected level of usage, competitors’ actions and technological obsolescence arising from changes in the market demands or service output of the assets could impact the economic useful lives and the residual values of these assets, leading to potential changes in future depreciation charges, impairment losses and/or write-offs. Impairment of property, plant and equipment and land use rights Property, plant and equipment and land use rights are reviewed to determine whether there is any indication that the carrying value of these assets may not be recoverable and have suffered impairment loss. If any such indication exists, the assets are tested for impairment. The recoverable amounts of the assets are estimated in order to determine the extent of the impairment loss, if any. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Such impairment loss is recognised in the profit or loss. Management judgement is required in the area of asset impairment, particularly in assessing: (1) whether an event has occurred that may indicate that the related asset values may not be recoverable; (2) whether the carrying value of an asset can be supported by the net present value of future cash flows which are estimated based upon the continued use of the asset in the business; (3) the appropriate key assumptions to be applied in preparing cash flow projections including whether these cash flow projections are discounted using an appropriate rate. Changing the assumptions selected by management to determine the level, if any, of impairment, including the discount rates or the growth rate assumptions in the cash flow projections could materially affect the net present value used in the impairment test and as a result affects the Group’s results. Impairment in investment in subsidiaries Determining whether investment in subsidiaries is impaired requires an estimation of the value-in-use of that investment. The value-in-use calculation requires the Group to estimate the future cash flows expected from the cash-generating units and an appropriate discount rate in order to calculate the present value of the future cash flows. Management has evaluated the recoverability of the investment based on such estimates. Allowance for bad and doubtful debts The Group makes allowance for bad and doubtful debts, if any, based on an assessment of the recoverability of trade and other receivables. Allowances are applied to trade and other receivables where events or changes in circumstances indicate that the balances may not be collectible. The identification of bad and doubtful debts requires the use of judgement and estimates. Where the expected outcome is different from the original estimate, such difference will impact carrying value of trade and other receivables and doubtful debt expenses in the year in which such estimate has been changed. Allowance for inventories A review is made periodically on inventories for excess inventories and decline in net realisable value below cost and a provision will be made against the inventory balance for any such decline. These reviews require management to estimate future demand for products. Possible changes in these estimates could result in revisions to the valuation of inventories.
44.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
2(b) New accounting standards and interpretations New accounting standards and interpretations effective in 2009
On 1 January 2009, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are mandatory for the application from that date. This includes the following FRS and INT FRS, which are relevant to the Group: FRS 1 (Revised 2008)
Presentation of Financial Statements – Revised presentation
Amendments to FRS 1 (Revised 2008)
Amendments Relating to Puttable Financial Instruments and Obligations Arising on Liquidation
FRS 23 (Revised)
Borrowing Costs
Amendments to FRS 27
Amendments Relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
Amendments to FRS 32
Amendments Relating to Puttable Financial Instruments and Obligations Arising on Liquidation
Amendments to FRS 39
Amendments Relating to Reclassification of Financial Assets
Amendments to FRS 101
Amendments Relating to Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate
Amendments to FRS 102
Amendments Relating to Vesting Conditions and Cancellation
Amendments to FRS 107
Amendments Relating to Reclassification of Financial Assets
Amendments to FRS 107
Financial Instruments: Disclosures – Improving Disclosures about Financial Instruments
FRS 108
Operating Segments
Amendments to INT FRS 109 and FRS 39
Embedded Derivatives
INT FRS 113
Customer Loyalty Programmes
INT FRS 116
Hedges of a Net Investment in a Foreign Operation
Improvements to FRSs 2008 The adoption of these new/revised FRS and INT FRS did not result in substantial changes to the Group’s accounting policies nor any significant impact on these financial statements except for the following:
FRS 1 (Revised 2008) Presentation of Financial Statements (effective from 1 January 2009)
The revised standard prohibits the presentation of items of income and expenses (that is, ‘non-owner changes in equity’) in the statement of changes in equity. All non-owner changes in equity are shown in a performance statement, but entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and statement of comprehensive income). The Group has chosen to adopt the former alternative. Where comparative information is restated or reclassified, a restated statement of financial position is required to be presented as at the beginning comparative period. Comparatives for 2008 have been restated to conform to the requirements of the revised standard.
Amendment to FRS 107 Improving disclosures about financial instruments (effective from 1 January 2009)
The amendment requires enhanced disclosures about fair value measurement and liquidity risk. In particular, the amendment requires disclosure of fair value measurements by level of a fair value measurement hierarchy. The adoption of the amendment results in additional disclosures but does not have an impact on the accounting policies and measurement bases adopted by the Group.
ANNUAL REPORT
.45
2009
NOTES TO THE FINANCIAL STATEMENTS
2(b) New accounting standards and interpretations (cont’d) New accounting standards and interpretations not yet adopted
At the date of authorisation of these financial statements, the following FRS and INT FRS were issued but not yet effective: FRS 24
Related Party Disclosures
FRS 27 (amended 2009)
Consolidated and Separate Financial Statements
FRS 103 (revised 2009)
Business combinations
Amendments to FRS 39
Financial instruments: Recognition and   measurement – Eligible hedged items
Amendments to INT FRS 109
Reassessment of Embedded Derivatives
INT FRS 117
Distributions of Non-cash Assets to Owners
INT FRS 118
Transfer of Assets from Customers
INT FRS 119
Extinguishing Financial Liabilities with Equity Instruments
Improvements to FRSs 2009 The directors do not anticipate that the adoption of other FRS and INT FRS in future periods will have a material impact on the consolidated financial statements of the Group.
3
Summary of significant accounting policies Consolidation
The financial statements of the Group include the financial statements of the Company and its subsidiaries made up to the end of the financial year. Information on its subsidiaries is given in Note 6. All inter-company balances and significant inter-company transactions and resulting unrealised profits or losses are eliminated on consolidation and the consolidated financial statements reflect external transactions and balances only. The results of subsidiaries acquired or disposed of during the financial year are included or excluded from the consolidated statement of comprehensive income from the effective date in which control is transferred to the Group or in which control ceases, respectively.
Common control business combination outside the scope of FRS 103
A business combination involving entities under common control is a business combination in which all the combining entities or businesses are ultimately controlled by the same party or parties both before and after the business combination, and that control is not transitory. The restructuring exercise described in annual report 2006 resulted in a business combination involving common control entities, and accordingly the accounting treatment is outside the scope of FRS 103. For such common control business combinations, the merger accounting principles are used to include the assets, liabilities, results, equity changes and cash flows of the combining entities in the consolidated financial statements. In applying merger accounting, financial statement items of the combining entities or businesses for the reporting period in which the common control combination occurs, and for any comparative periods disclosed, are included in the consolidated financial statements of the combined entity as if the combination had occurred from the date when the combining entities or businesses first came under the control of the controlling party or parties.
46.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
3
Summary of significant accounting policies (cont’d) Common control business combination outside the scope of FRS 103 (cont’d)
A single uniform set of accounting policies is adopted by the combined entity. Therefore, the combined entity recognised the assets, liabilities and equity of the combining entities or businesses at the carrying amounts in the consolidated financial statements of the controlling party or parties prior to the common control combination. The carrying amounts are included as if such consolidated financial statements had been prepared by the controlling party, including adjustments required for conforming the combined entity’s accounting policies and applying those policies to all periods presented. There is no recognition of any goodwill or excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of the common control combination. The effects of all transactions between the combining entities or businesses, whether occurring before or after the combination, are eliminated in preparing the consolidated financial statements of the combined entity.
Foreign currency translation
Monetary items Transactions in foreign currencies are translated at rates closely approximating those ruling at transaction dates. Foreign currency monetary items are retranslated to the functional currency at rates of exchange closely approximating those ruling at reporting date. Foreign currency differences arising on retranslation are recognised in income or loss. Non-monetary items Non-monetary items that are measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined. Currency translation differences on non-monetary items, whereby the gains or losses are recognised in the profit or loss, such as equity investments held at fair value through profit or loss or investment properties carried at fair value, are reported as part of the fair value gains or losses. Changes in the fair value of monetary securities denominated in foreign currencies classified as available-for-sale are analysed into currency translation differences on the amortised cost of the securities, and other changes. Currency translation differences on the amortised cost are recognised in the profit or loss, and other changes are recognised in fair value reserve within equity. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Subsidiaries
A subsidiary is an entity controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether there is control. Shares in subsidiaries are stated at cost less allowance for any impairment losses on an individual subsidiary basis. The purchase method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair values on the date of acquisition, irrespective of the extent of minority interest.
ANNUAL REPORT
.47
2009
NOTES TO THE FINANCIAL STATEMENTS
3
Summary of significant accounting policies (cont’d) Property, plant and equipment and depreciation
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses, if any. Depreciation is computed utilising the straight-line method to write off the cost of these assets over their estimated useful lives as follows: Leasehold properties
over the period of lease up to 50 years maximum
Motor vehicles
5 – 6 years
Plant, machinery and equipment
3 – 10 years
No depreciation has been provided for building construction work-in-progress. The residual values, depreciation methods and useful lives of property, plant and equipment are reviewed and adjusted as appropriate at the reporting date. The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset. Subsequent expenditure relating to property, plant and equipment that have been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the standard of performance of the asset before the expenditure was made, will flow to the Group and the cost can be reliably measured. Other subsequent expenditure is recognised as an expenses during the financial year in which is incurred. For acquisitions and disposals during the financial year, depreciation is provided from the month of acquisition and to the month before disposal respectively. Fully depreciated property, plant and equipment are retained in the books of accounts until they are no longer in use.
Land use rights
The land use rights are stated at cost less accumulated amortisation and any impairment losses. Amortisation is calculated on a straight-line basis to write off the cost of the land use rights its useful life.
Financial assets
Financial assets can be divided into the following categories: financial assets at fair value through profit or loss, held-tomaturity investments, loans and receivables and available-for-sale financial assets. Financial assets are assigned to the different categories by management on initial recognition, depending on the purpose for which the investments were acquired. The designation of financial assets is re-evaluated and classification may be changed at the reporting date with the exception that the designation of financial assets at fair value through profit or loss is not revocable. All financial assets are recognised on their trade date – the date on which the Company and the Group commit to purchase or sell the asset. Financial assets are initially recognised at fair value, plus directly attributable transaction costs except for financial assets at fair value through profit or loss, which are recognised at fair value. Derecognition of financial instruments occurs when the rights to receive cash flows from the investments expire or are transferred and substantially all of the risks and rewards of ownership have been transferred. An assessment for impairment is undertaken at least at each reporting date whether or not there is objective evidence that a financial asset or a group of financial assets is impaired.
48.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
3
Summary of significant accounting policies (cont’d) Financial assets (cont’d)
Non-compounding interest and other cash flows resulting from holding financial assets are recognised in profit or loss when received, regardless of how the related carrying amount of financial assets is measured. The Group does not hold any financial assets at fair value through profit or loss, held-to-maturity investments or availablefor-sale financial assets.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Company provides money, goods or services directly to a debtor with no intention of trading the receivables. They are included in current assets, except for maturities greater than 12 months after the reporting date which are classified as non-current assets. Loans and receivables are subsequently measured at amortised cost using the effective interest method, less provision for impairment. Any change in their value is recognised in profit or loss. Any reversal shall not result in a carrying amount that exceeds what the amortised cost would have been had any impairment loss not been recognised at the date the impairment is reversed. Any reversal is recognised in profit or loss. Receivables are provided against when objective evidence is received that the Company will not be able to collect all amounts due to it in accordance with the original terms of the receivables. The amount of the write-down is determined as the difference between the asset’s carrying amount and the present value of estimated future cash flows. Loans and receivables are included in trade and other receivables in the statement of financial position.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost formula and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of manufactured inventories and work-in-progress, cost includes an appropriate share of production overheads based on normal operating capacity.. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
Impairment of non-financial assets
The carrying amounts of non-financial assets, other than inventories, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. If it is not possible to estimate the recoverable amount of the individual asset, then the recoverable amount of the cashgenerating unit to which the assets belong will be identified. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). As a result, some assets are tested individually for impairment and some are tested at cash-generating unit level. Goodwill is allocated to those cash-generating units that are expected to benefit from synergies of the related business combination and represent the lowest level within the Company at which management controls the related cash flows.
ANNUAL REPORT
.49
2009
NOTES TO THE FINANCIAL STATEMENTS
3
Summary of significant accounting policies (cont’d) Impairment of non-financial assets (cont’d)
Individual assets or cash-generating units that include goodwill and other intangible assets with an indefinite useful life or those not yet available for use are tested for impairment at least annually or more often if there are indicators of impairment. All other individual assets or cash-generating units are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s or cash-generating unit’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use, based on an internal discounted cash flow evaluation. Impairment losses recognised for cash-generating units, to which goodwill has been allocated, are credited initially to the carrying amount of goodwill. Any remaining impairment loss is charged pro rata to the other assets in the cash-generating unit. With the exception of goodwill, all assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist. Any impairment loss is charged to profit or loss unless it reverses a previous revaluation in which case it is charged to equity. With the exception of goodwill, •
An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount or when there is an indication that the impairment loss recognised for the asset no longer exists or decreases.
•
An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined if no impairment loss had been recognised.
•
A reversal of an impairment loss on a revalued asset is credited directly to equity under the heading revaluation surplus. However, to the extent that an impairment loss on the same revalued asset was previously recognised in profit or loss, a decrease in that impairment loss is reversed through profit or loss.
An impairment loss in respect of goodwill is not reversed, even if it relates to an impairment loss recognised in an interim period that would have been reduced or avoided had the impairment assessment been made at a subsequent reporting date.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances and bank deposits. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts which are repayable on demand and which form an integral part of cash management.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account.
50.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
3
Summary of significant accounting policies (cont’d) Dividends
Final dividends proposed by the directors are not accounted for in shareholders’ equity as an appropriation of retained profit, until they have been approved by the shareholders in a general meeting. When these dividends have been approved by the shareholders and declared, they are recognised as a liability. Interim dividends are simultaneously proposed and declared, because of the articles of association of the Company grant the directors the authority to declare interim dividends. Consequently, interim dividends are recognised directly as a liability when they are proposed and declared.
Income taxes
The liability method of tax effect accounting is adopted by the Company and the Group. Current taxation is provided at the current taxation rate based on the tax payable on the income for the financial year that is chargeable to tax. Deferred taxation is provided at the current taxation rate on all temporary differences existing at the reporting date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differences (unless the deferred tax liability arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss). Deferred income tax is provided on all temporary differences arising on investment in subsidiaries, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilised (unless the deferred tax asset arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss). The statutory tax rates enacted or substantively enacted at the reporting date are used to determine deferred income tax.
Financial liabilities
The Group’s financial liabilities include borrowings, bank loans and overdraft, trade and other payables. They are included in the statement of financial position items “non-current financial liabilities”, “current financial liabilities” and “trade and other payables”. Financial liabilities are recognised when the Company and the Group becomes a party to the contractual agreements of the instrument. All interest-related charges are recognised as an expense in “finance cost” in the profit or loss. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled. Borrowings are recognised initially at fair value of proceeds received less attributable transaction costs, if any. Borrowings are subsequently stated at amortised cost which is the initial fair value less any principal repayments. Any difference between the proceeds (net of transaction costs) and the redemption value is taken to profit or loss over the period of the borrowings using the effective interest method. The interest expense is chargeable on the amortised cost over the period of borrowing using the effective interest method.
ANNUAL REPORT
.51
2009
NOTES TO THE FINANCIAL STATEMENTS
3
Summary of significant accounting policies (cont’d) Financial liabilities (cont’d)
Gains and losses are recognised in profit or loss when the liabilities are derecognised as well as through the amortisation process. Borrowings which are due to be settled within twelve months after the reporting date are included in current borrowings in the statement of financial position even though the original terms were for a period longer than twelve months and an agreement to refinance, or to reschedule payments, on a long-term basis is completed after the reporting date. Borrowings to be settled within the Group’s normal operating cycle are considered as current. Other borrowings due to be settled more than twelve months after the reporting date are included in non-current borrowings in the statement of financial position. Trade payables are initially measured at fair value, and subsequently measured at amortised cost, using the effective interest method.
Financial guarantees
The Company has issued corporate guarantees to banks for bank borrowings of its subsidiaries. These guarantees are financial guarantee contracts as they require the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of their borrowings. Financial guarantee contracts are initially recognised at their fair value plus transaction costs. Financial guarantee contracts are subsequently amortised to profit or loss over the period of the subsidiaries’ borrowings, unless the Company has incurred an obligation to reimburse the bank for an amount higher than the unamortised amount. In this case, the financial guarantee contracts shall be carried at the expected amount payable to the bank.
Leases
Finance leases When assets are financed by lease agreements that give rights approximating to ownership, the assets are capitalised as if they had been purchased outright at values equivalent to the lower of the fair values of the leased assets and the present value of the total minimum lease payments during the periods of the leases. The corresponding lease commitments are included under liabilities. The excess of the lease payments over the recorded lease obligations is treated as finance charges which are amortised over each lease term to give a constant effective rate of charge on the remaining balance of the obligation. The leased assets are depreciated on a straight-line basis over their estimated useful lives as detailed in the accounting policy on “property, plant and equipment”. Operating leases Leases of assets in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Rentals on operating leases are charged to the profit or loss on a straight-line basis over the lease term. Lease incentives, if any, are recognised as an integral part of the net consideration agreed for the use of the leased asset. Penalty payments on early termination, if any, are recognised in the profit or loss when incurred. The land use rights held by the Group are regarded as operating leases. The amounts paid for these rights are treated as lease prepayments and are amortised over the period for which the rights have been granted in accordance with the land use rights certificate.
52.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
3
Summary of significant accounting policies (cont’d) Provisions
Provisions are recognised when there is a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Present obligations arising from onerous contracts are recognised as provisions. The directors review the provisions annually and where in their opinion, the provision is inadequate or excessive, due adjustment is made.
Financial instruments
Financial instruments carried on the statement of financial position include cash and cash equivalents, financial assets and financial liabilities. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. These instruments are recognised when contracted for. Disclosures on financial risk management objectives and policies are provided in Note 25.
Revenue recognition
Revenue from the sale of goods is measured at the fair value of the consideration received or receivable, net of returns and allowances, goods and services taxes or other sales taxes, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. Revenue from the sale of goods is recognised upon delivery of goods and acceptance by customers. Revenue from post-sale services is recognised over the period in which the services are rendered. Interest income is recognised on a time proportion basis using the effective interest method. Dividend income is recognised when the right to receive payment is established.
Functional currency
Items included in the financial statements of each entity in the Group are measured using the currency that best reflects the economic substance of the underlying events and circumstances relevant to that entity (“the functional currency�). The consolidated financial statements of the Group and the statement of financial position of the Company are presented in Singapore dollars to the nearest thousand, which is also the functional currency of the Company.
Employee benefits
Pension obligations Obligations for contributions to defined contribution plans are recognised as an expense in profit or loss as incurred. Employee leave entitlements Employee entitlements to annual leave are recognised when they accrue to employees. Accrual is made for the unconsumed leave as a result of services rendered by employees up to the reporting date. Key management personnel Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity. Directors and certain key executive officers are considered key management personnel.
ANNUAL REPORT
.53
2009
NOTES TO THE FINANCIAL STATEMENTS
3
Summary of significant accounting policies (cont’d) Operating Segments
For management reporting purposes, operating segments are organised based on their products and services which are independently managed by the respective segment managers responsible for the performance of the respective segments under their charge. The segment managers are directly accountable to the chief executive officer who regularly reviews the segment results in order to allocate resources to the segments and to assess segment performance. Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. Segment information is presented in respect of the Group’s geographical and business segments. The primary format, business segments, is based on the Group’s management and internal reporting structure. In presenting information on the basis of business segments, segment revenue and segment assets are based on the nature of the products or services provided by the Group. Information for geographical segments is based on the geographical location of the principal places of business.
Discontinued operations
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative period.
54.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
4 Land use rights 31 December 2009
31 December 2008
$
$
1,710,478
1,277,864
–
330,812
The Group Cost Balance at beginning of year Additions
(94,623)
Translation differences Balance at end of year
101,802
1,615,855
1,710,478
Accumulated amortisation 148,699
113,553
Amortisation for the year
26,570
27,928
Translation differences
(5,166)
7,218
Balance at beginning of year
Balance at end of year Net book value
170,103
148,699
1,445,752
1,561,779
Land use rights comprise:
Location
Use of property
Land area (sq. metres) 2009
2008
Tenure
(a)
No. 61 Shengxi Road, Kunshan Economic Development Zone, Jiang Su, PRC 215335
Industrial
10,504
10,504
Leasehold 43 years, up to November 2043
(b)
Dong Fan Lu Dianshan Lake Town, Kunshan
Industrial
40,978
40,978
Leasehold 50 years, up to November 2056
Land use rights with net book value amounting to RMB1,085,580 ($223,087) [2008 – RMB1,118,242 ($235,837)] are pledged to financial institutions to secure bank borrowings granted to a subsidiary [Note 13.2(a)].
ANNUAL REPORT
.55
2009
NOTES TO THE FINANCIAL STATEMENTS
5 Property, plant and equipment
The Group
Leasehold properties
Motor vehicles
Building construction work-inprogress
Plant, machinery and equipment
$
$
$
$
Total $
9,231,622
3,146,372
1,626,516
11,862,092
25,866,602 9,532,458
Cost At 1 January 2008 Additions
10,780
438,638
7,791,190
1,291,850
507,534
–
(490,578)
(16,956)
–
–
(170,486)
–
(686,751)
(857,237)
Translation differences
(119,590)
(65,240)
(47,033)
(92,819)
(324,682)
At 31 December 2008
9,630,346
3,349,284
8,880,095
12,357,416
34,217,141
60,465
379,219
1,701,627
3,792,620
5,933,931
(10,312,245)
10,312,245
Transfer Disposals
Additions Transfer
–
–
Disposals
(219,075)
(338,352)
Translation differences
(136,783)
(43,104)
At 31 December 2009
– (269,477)
–
(2,038,013)
(2,595,440)
(185,222)
(634,586)
9,334,953
3,347,047
–
24,239,046
36,921,046
At 1 January 2008
790,282
1,765,760
–
6,532,250
9,088,292
Depreciation
189,305
454,686
–
1,360,759
2,004,750
Transfer
374,019
–
–
(374,019)
–
–
(152,011)
–
(395,999)
(548,010)
Translation differences
(13,614)
(42,087)
–
(63,676)
(119,377)
At 31 December 2008
1,339,992
2,026,348
–
7,059,315
10,425,655
232,709
407,980
–
1,346,767
1,987,456
(294,574)
–
(1,229,792)
(1,524,366)
Accumulated depreciation
Disposals
Depreciation Disposals
–
2,855
–
1,550,095
2,142,609
–
7,036,832
10,729,536
At 31 December 2009
7,784,858
1,204,438
–
17,202,214
26,191,510
At 31 December 2008
8,290,354
1,322,936
8,880,095
5,298,101
23,791,486
Translation differences At 31 December 2009
(22,606)
(139,458)
(159,209)
Net book value
56.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
5 Property, plant and equipment (cont’d) Plant and equipment
Total
$
$
38,982
38,982
–
–
38,982
38,982
–
–
38,982
38,982
At 1 January 2008
7,219
7,219
Depreciation
7,797
7,797
15,015
15,015
7,797
7,797
22,812
22,812
At 31 December 2009
16,170
16,170
At 31 December 2008
23,967
23,967
The Company Cost At 1 January 2008 Additions At 31 December 2008 Additions At 31 December 2009 Accumulated depreciation
At 31 December 2008 Depreciation At 31 December 2009 Net book value
(i) The leasehold properties comprise: Location
Land area (approximate)
Tenure
Singapore (a)
27 Kaki Bukit Place, Eunos Techpark, Singapore 416205#
446 sq m
Leasehold 60 years, up to November 2055
People’s Republic of China (b)
No. 61 Shengxi Road, Kunshan Economic Development Zone, Jiang Su, PRC 215335
10,504 sq m
Leasehold 43 years, up to November 2043
(c)
Dong Fan Lu Dianshan Lake Town, Kunshan, Jiang Su, People’s Republic of China
40,978 sq m
Leasehold 50 years, up to November 2056
ANNUAL REPORT
.57
2009
NOTES TO THE FINANCIAL STATEMENTS
5 Property, plant and equipment (cont’d) (i) The leasehold properties comprise: Location
Land area (approximate)
Tenure
Malaysia
58.
(d)
No. 21 Jalan TSB 8, Taman Industri Sungai Buloh, 47000 Sungai Buloh, Selangor held under H.S. (M) 7608 P.T. No. 20040 Mukim Sungai Buloh District of Petaling Negeri Selangor, Malaysia#
5,567 sq m
Leasehold 99 years, up to March 2091
(e)
No.13 Jalan Bulan NU5/N, Section U5, Sungai Buloh, Batu 3, 40170 Shah Alam, Selangor held under H.S. (D) 116747 PT 35849 Pekan Baru Subang District of Petaling Negeri Selangor, Malaysia#
1,680 sq m
Leasehold 99 years, up to December 2096
(f)
Kepong Business Centre (Lot No. 4) held under the master title Pajakan Negeri 31481, No Lot 58742, Mukim Batu, District of Kuala Lumpur, Wilayah Persekutuan, Malaysia#
506 sq m
Leasehold 99 years, up to July 2101
(g)
Kepong Business Centre (Lot No. 5) held under the master title Pajakan Negeri 31481, No Lot 58742, Mukim Batu, District of Kuala Lumpur, Wilayah Persekutuan, Malaysia#
538 sq m
Leasehold 99 years, up to July 2101
(h)
No. 16-1, 16-2, 16-3 Jalan PJU 5/8, PJU 5 Dataran Sunway, Kota Damansara, 47810 Petaling Jaya Malaysia held under H.S. (D) 145167, P.T. No. 352 in Pekan Baru Sungai Buloh Daerah Petaling Negeri Selangor (Sunway), Malaysia#
153 sq m
Leasehold 99 years, up to November 2100
(i)
No. 18-1, 18-2, 18-3 Jalan PJU 5/8, PJU 5 Dataran Sunway, Kota Damansara, 47810 Petaling Jaya Malaysia held under H.S (D) 145168, P.T. No.353 in Pekan Baru Sungai Buloh Daerah Petaling Negeri Selangor (Sunway), Malaysia#
153 sq m
Leasehold 99 years, up to November 2100
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
5 Property, plant and equipment (cont’d) (i) The leasehold properties comprise: Land area (approximate)
Location
Tenure
(j)
No. 33 Jalan Bulan FU5/F, Section U5, Sungai Buloh, Batu 3, 40170 Shah Alam, Selangor held under HS(D) 116305 No PT 35680, Pekan Baru Subang, District of Petaling, Selangor, Malaysia#
163 sq m
Leasehold 99 years, up to December 2096
(k)
No. 54 Jalan Bulan HU5/H, Section U5, Sungai Buloh, Batu 3, 40170 Shah Alam, Selangor held under HS(D) 116361 No PT 35736, Pekan Baru Subang, District of Petaling, Selangor, Malaysia#
316 sq m
Leasehold 99 years, up to December 2096
Notes:
6
(1)
Property, plant and equipment with net book value amounting to $582,216 (2008 – $828,254) were acquired under financing arrangements.
#
Leasehold properties pledged to financial institutions to secure bank borrowings granted to the Group (Note 13).
Subsidiaries 31 December 2009
31 December 2008
$
$
25,371,628
21,212,000
The Company Unquoted equity investments, at cost The subsidiaries are:
Name
Country of incorporation/ Principal place of business
Cost of investment 31 December 2009
Percentage of equity held
31 December 31 December 2008 2009
31 December 2008
$
$
$
$
Principal activities
Held by the Company #
Uhin Holding Pte Ltd
Singapore
11,107,835
11,107,835
100%
100%
Investment holding and manufacturing and trading of sofa sets/accessories
**
Lorenzo International (Kunshan) Co., Ltd
People’s Republic of China
14,263, 793
10,104,165
100%
100%
Investment holding
ANNUAL REPORT
.59
2009
NOTES TO THE FINANCIAL STATEMENTS
6
Subsidiaries (cont’d) The subsidiaries are:
Name
Country of incorporation/ Principal place of business
Cost of investment 31 December 2009
Percentage of equity held
31 December 31 December 2008 2009
31 December 2008
$
$
$
$
Principal activities
Held by Uhin Holding Pte Ltd *
Uhin Sofa Sdn Bhd
Malaysia
–
–
100%
100%
Investment holding and manufacturing and trading of sofa sets/accessories
#
Supreme Furnishing Centre Pte Ltd
Singapore
–
–
100%
100%
Retail sale of furniture
*
Uhin International Co., Ltd
Taiwan
–
–
100%
100%
Retail/trading of furniture
**
Lorenzo Furniture (Shanghai) People’s Republic of Co., Ltd China
–
–
100%
100%
Retail/trading of furniture
**
Qiao Design Pty Ltd
–
–
–
100%
Deregistered in 2009 (Note 20)
People’s Republic of China
–
–
100%
100%
Manufacturing and sale of sofa sets and furniture
Australia
Held by Supreme Furnishing Centre Pte Ltd **
Supreme Furniture (Kunshan) Co., Ltd
Held by Uhin Sofa Sdn Bhd *
Ginova Furnishing Sdn Bhd
Malaysia
–
–
100%
100%
Investment holding and provision of management services
*
Monica Design Sdn. Bhd (formerly known as Yao Pong Industries (M) Sdn. Bhd)
Malaysia
–
–
100%
100%
Trading in furniture and related accessories (dormant)
Malaysia
–
–
100%
100%
Manufacture and supply of wooden frames
–
–
100%
100%
Retail in sofa furniture and accessories
25,371,628
21,212,000
Held by Uhin Sofa Sdn Bhd *
Uhin Wood Industries Sdn Bhd
Held by Ginova Furnishing Sdn Bhd *
#
60.
Ginova Marketing Sdn Bhd
Malaysia
Audited by Foo Kon Tan Grant Thornton LLP
*
Audited by a member firm of Grant Thornton International Ltd
**
Audited by Foo Kon Tan Grant Thornton LLP for consolidation purposes
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
7 Inventories 31 December 2009
31 December 2008
$
$
Finished goods
12,158,533
12,937,759
Raw materials
3,901,514
5,992,350
Work-in-progress
1,325,566
1,709,311
Stocks-in-transit
1,497,200
1,203,603
18,882,813
21,843,023
26,743,967
40,178,033
The Group At Cost
Cost of inventories included in cost of sales
8 Trade and other receivables The Company
The Group
31 December 2009
31 December 2008
31 December 2009
31 December 2008
$
$
$
$
–
–
4,942,732
3,842,851
Balance at beginning
–
–
(1,740)
Allowance for the year
–
–
(45,738)
(1,740)
Allowance utilised
–
–
1,740
93,484
Balance at end
–
–
(45,738)
(1,740)
–
–
4,896,994
3,841,111
Trade receivables – third parties Allowance for impairment of trade receivables
Net trade receivables
(i)
(93,484)
Other receivables –
–
1,513,469
1,585,190
14,718
17,287
917,884
1,019,023
480,290
4,997,189
–
–
Advance to suppliers
–
2,301
500,691
130,981
Tax recoverable
–
–
35,954
418,604
Others
–
–
613,242
383,537
(ii)
495,008
5,016,777
3,581,240
3,537,335
(i) + (ii)
495,008
5,016,777
8,478,234
7,378,446
Deposits Prepayments Amount due from subsidiaries (non-trade)
Total
The non-trade amount due from subsidiaries represents unsecured and interest-free advances, which are repayable on demand. Trade receivables are normally on terms not exceeding 30 days.
ANNUAL REPORT
.61
2009
NOTES TO THE FINANCIAL STATEMENTS
8 Trade and other receivables (cont’d) Trade and other receivables are denominated in the following currencies:
The Company
The Group
31 December 2009
31 December 2008
31 December 2009
31 December 2008
$
$
$
$
Singapore dollars
283,224
4,804,993
1,159,443
629,157
United States dollars
211,784
211,784
2,576,694
2,366,199 1,954,617
Malaysian Ringgit
–
–
2,137,101
New Taiwan dollars
–
–
564,664
508,353
China Renminbi
–
–
2,040,332
1,903,023
Australian dollars
–
–
–
17,097
495,008
5,016,777
8,478,234
7,378,446
The credit risk for trade receivables based on the information provided to key management is as follows:
The Company
The Group
31 December 2009
31 December 2008
31 December 2009
31 December 2008
$
$
$
$
By geographical areas 495,008
5,016,777
3,119,220
2,061,848
People’s Republic of China
–
–
2,657,249
2,836,531
Malaysia
–
–
2,137,101
1,954,617
Other countries
–
–
564,664
525,450
495,008
5,016,777
8,478,234
7,378,446
Singapore
The ageing analysis of trade and other receivables which are not impaired is as follows:
The Company 31 December 2009
31 December 2008
31 December 2009
31 December 2008
$
$
$
$
283,225
5,016,777
7,009,168
6,031,179
Past due 0 – 30 days
–
–
1,177,271
967,861
Past due 31 – 60 days
–
–
1,229
150,476
211,783
–
290,566
228,930
495,008
5,016,777
8,478,234
7,378,446
Not due
Past due more than 60 days
62.
The Group
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
9 Fixed deposits with banks 31 December 2009
31 December 2008
$
$
6,479,682
6,031,828
31 December 2009
31 December 2008
$
$
The Group Fixed deposits (unpledged) (Note 10)
Fixed deposits are denominated in the following currencies:
Singapore dollars
293,212
464,128
Malaysian Ringgit
6,186,470
5,567,700
6,479,682
6,031,828
The fixed deposits have an average maturity ranging from 30 days to 365 days from the end of the financial year with the following weighted average effective interest rates per annum: 31 December 2009
31 December 2008
Singapore dollars
0.5%
0.9%
Malaysian Ringgit
2.0%
3.0%
The Group
10
Cash and bank balances The Company
Cash and bank balances
The Group
31 December 2009
31 December 2008
31 December 2009
31 December 2008
$
$
$
$
175,253
1,019,311
7,667,679
8,552,623
For purpose of the consolidated cash flow statement, the year end cash and cash equivalents comprise the following:
The Group
Note
Fixed deposits (unpledged)
31 December 2008
$
$
7,667,679
8,552,623
13.3 & 13.5
(2,213,310)
(2,857,323)
9
6,479,682
6,031,828
11,934,051
11,727,128
Cash and bank balances Bank overdraft (secured)
31 December 2009
ANNUAL REPORT
.63
2009
NOTES TO THE FINANCIAL STATEMENTS
10
Cash and bank balances (cont’d) Cash and cash equivalents are denominated in the following currencies: The Company
The Group
31 December 2009
31 December 2008
31 December 2009
31 December 2008
$
$
$
$
175,253
1,019,311
United States dollars
–
–
1,482,819
643,097
Australian dollars
–
–
–
80,498
New Zealand dollars
–
–
–
–
Malaysian Ringgit
–
–
8,143,813
8,581,785
New Taiwan dollars
–
–
2,315,246
2,272,810
Singapore dollars
China Renminbi
(739,474)*
(499,373)*
–
–
731,647
648,311
175,253
1,019,311
11,934,051
11,727,128
* At 31 December 2009, amounts include bank overdraft of $2,213,310 (2008 : $2,857,323)
11
Share capital 2009
2008
Number of Ordinary Shares
2009
2008
$
$
The Company and The Group Issued and fully paid, with no par value Balance at 1 January Rights issue of ordinary shares, net of expenses Balance at 31 December
168,000,000
120,000,000
25,513,920
20,635,649
–
48,000,000
–
4,878,271
168,000,000
168,000,000
25,513,920
25,513,920
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at shareholders’ meetings. All shares rank equally with regard to the Company’s residual assets. In 2008, the company issued 48,000,000 new ordinary shares at an issue price of $0.11 per share under a rights issue on the basis of 2 rights shares for every 5 existing ordinary shares of the Company. Net proceeds from the issuance of the rights shares amounting to $4,878,271 were earmarked for funding the expansion of the Group’s operations.
64.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
12 Reserves The Company 31 December 2009
31 December 2008
31 December 2009
31 December 2008
$
$
$
$
489,024
1,749,610
12,352,037
11,969,807
Exchange fluctuation reserve
–
–
(2,181,896)
(1,489,838)
Merger reserve
–
–
(3,282,141)
(3,282,141)
489,024
1,749,610
6,888,000
7,197,828
Retained profits
13
The Group
(a)
Exchange fluctuation reserve arises from the translation of financial statements of foreign entities whose functional currencies are different from the functional currency of the Company.
(b)
The merger reserve arises from the difference between the nominal value of shares issued by the Company and the net asset values of the subsidiaries acquired under the pooling-of interest method of consolidation.
Borrowings The Group
Note
31 December 2009
31 December 2008
1 January 2008
$
$
$
Non-Current Finance lease liabilities
13.1
241,689
284,918
333,717
Bank loans (secured)
13.2
3,581,546
1,294,416
2,269,254
3,823,235
1,579,334
2,602,971
Current Finance lease liabilities
13.1
185,317
215,906
332,144
Bank loans (secured)
13.2
2,038,188
1,049,746
668,959
Bills payable (secured)
13.3
5,300,272
8,505,725
10,986,175
Bank overdraft (secured)
13.3
2,213,310
2,857,323
2,388,737
9,737,087
12,628,700
14,376,015
13,560,322
14,208,034
16,978,986
ANNUAL REPORT
.65
2009
NOTES TO THE FINANCIAL STATEMENTS
13
Borrowings (cont’d) 13.1 Finance lease liabilities 31 December 2009
31 December 2008
1 January 2008
$
$
$
Due not later than one year
217,633
248,388
367,265
Due later than one year and not later than five years
255,707
298,879
373,964
10,443
22,983
–
The Group Minimum lease payments payable:
Due later than five years
483,783
570,250
741,229
Finance charges allocated to future periods
(56,777)
(69,426)
(75,368)
Present value of minimum lease payments
427,006
500,824
665,861
Due not later than one year
185,317
215,906
332,144
Due later than one year and not later than five years
233,301
266,459
333,717
8,388
18,459
–
427,006
500,824
665,861
Present value of minimum lease payments:
Due later than five years
13.2 Bank loans (secured) The Group
Year of maturity
31 December 2009 $
31 December 2008 $
1 January 2008 $
276,220
Note
Currency
–#1
(a)
RMB
2010
287,700
295,260
–#2
(b)
SGD
2010
500,000
500,000
–
–#3
(c)
SGD
2009
–
69,165
268,880
Bank loans: Short-term loan
Long-term loan –#4
(d)
SGD
2019
1,363,200
1,479,737
1,590,982
– – – – –
(e) (f)
SGD SGD RINGGIT RINGGIT RINGGIT
2012 2013 2008 2008 2008
1,580,715 1,888,119 – – –
– – – – –
– – 343,108 235,820 223,203
5,619,734
2,344,162
2,938,213
2,038,188
1,049,746
668,959
2,901,292
459,733
898,827
680,254
834,683
1,370,427
5,619,734
2,344,162
2,938,213
# # # # #
5 6 7 8 9
Repayable in: Not later than one year Later than one year and not later than five years Later than five years
66.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
13
Borrowings (cont’d) 13.2 Bank loans (secured) (cont’d) (a)
The bank loan bears interest at 5.35% (2008: 6.847%) per annum.
The bank loan is secured by a legal mortgage of the land use rights at No. 61 Shengxi Road, Kunshan Economic Development Zone, Jiang Su, PRC 215335 (Note 5).
(b)
Interest is charged at 3.35% (2008 - 4.5%) per annum.
The bank loan is secured by a corporate guarantee by the Company.
(c)
The loan was repaid in 2009. At 31 December 2008, interest was charged at 1.75% above the Bank Prime Rate per annum. The Bank Prime Rate was determined by the bank from time to time.
(d)
Interest is charged at 1.75% (2008: 1.75%) per annum above the Enterprise Financing Rate per annum. The Enterprise Financing Rate is determined by the bank from time to time.
Bank loans (a) and (b) are secured by, inter-alia: (i)
a legal mortgage of the leasehold property at 27 Kaki Bukit Place Eunos Techpark Singapore 416205;
(ii)
a corporate guarantee by the Company; and
(iii)
a corporate guarantee by a subsidiary.
(e) & (f)
The loans bear interest at 5% per annum. The interest rate may be varied from time to time at the discretion of the lender.
The loans are secured by a corporate guarantee by the Company.
13.3 Bank borrowings (secured) 31 December 2009
31 December 2008
$
$
Bills payable (secured)
5,300,272
8,505,725
Bank overdraft (secured) (Note 10)
2,213,310
2,857,323
7,513,582
11,363,048
The Group
The bills payable and bank overdraft bank borrowings of the Group are secured by: (a)
a first legal mortgage of the Group’s leasehold properties (Note 5);
(b)
a debenture over a subsidiary’s present and future fixed and floating assets for $4,465,730 (2008 – $4,528,950);
(c)
a corporate guarantee for $6,023,000 (2008 – $6,108,000) by a subsidiary;
(d)
a joint and several personal guarantee by all directors of a subsidiary; and
(e)
a corporate guarantee for $31,394,000 (2008 – $32,074,000) by the Company.
ANNUAL REPORT
.67
2009
NOTES TO THE FINANCIAL STATEMENTS
13
Borrowings (cont’d) 13.4 Currency risk
Total borrowings are denominated in the following currencies: 31 December 2009
31 December 2008
$
$
Singapore dollars
7,374,857
4,772,879
United States dollars
4,413,864
6,952,772
The Group
Euro Malaysian Ringgit China Renminbi
–
210,609
1,483,901
1,976,514
287,700
295,260
13,560,322
14,208,034
13.5 Weighted average effective interest rates
The weighted average effective interest rates per annum of total borrowings at the reporting date are as follows: 31 December 2009
31 December 2008
Finance lease liabilities
3.1%
6.0%
Bank loans
5.2%
6.2%
Bills payable
3.9%
7.6%
Bank overdraft (Note 10)
5.1%
7.8%
13.6 Carrying amounts and fair values
Bank borrowings The fair value of loans at fixed rates together with the carrying amounts shown in the consolidated statement of financial position, are as follows:
The Group Secured bank loans [Note 13.2(e) & (f)]
Carrying amount
Fair value
Carrying amount
Fair value
31 December 2009 $
31 December 2009 $
31 December 2008 $
31 December 2008 $
3,468,834
3,468,834
–
–
3,468,834
3,468,834
–
–
The fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. The carrying amounts of current bank borrowings approximate their fair values and the carrying amounts of noncurrent bank borrowings approximate their fair values as these borrowings are interest-bearing at the market rates and repriced within 12 months. Finance lease liabilities The fair value of finance lease liabilities is estimated as the present value of future principal and interest cash flows, discounted at market interest rates for similar lease agreements at the reporting date.
68.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
14 Deferred taxation 31 December 2009
31 December 2008
$
$
256,197
267,305
The Group Deferred tax liabilities Balance at beginning
(3,157)
Exchange difference on translation
(11,108)
253,040
256,197
260,005
264,923
The balance comprises tax on: Excess of net book value over tax written down value of property, plant and equipment
(6,965)
Others
(8,726)
253,040
256,197
15 Trade and other payables The Company
Trade payables – third parties
Other payables Deposits received Accruals
The Group
31 December 2009
31 December 2008
31 December 2009
31 December 2008
$
$
$
$
–
–
7,532,193
9,571,488
–
–
7,532,193
9,571,488
55,115
8,525
2,217,779
1,500,945
–
–
7,019,821
5,730,054
–
–
4,613,097
4,467,350
55,115
8,525
13,850,697
11,698,349
55,115
8,525
21,382,890
21,269,837
Trade and other payables have credit terms of between 30 – 60 days. Trade and other payables are denominated in the following currencies: The Company
The Group
31 December 2009
31 December 2008
31 December 2009
31 December 2008
$
$
$
$
55,115
8,525
1,968,425
1,757,103
United States dollars
–
–
2,458,619
1,660,380
Australian dollars
–
–
–
37,926
Euro
–
–
304
–
Malaysian Ringgit
–
–
8,650,852
7,742,313
New Taiwan dollars
–
–
1,988,347
1,169,390
China Renminbi
–
–
6,316,343
8,902,725
55,115
8,525
21,382,890
21,269,837
Singapore dollars
ANNUAL REPORT
.69
2009
NOTES TO THE FINANCIAL STATEMENTS
16 Revenue
Revenue represents the fair value of goods sold and services rendered, after sale taxes, allowances for returns and trade discounts, and after elimination of all significant intra-group transactions.
The Group Sale of goods Post-sale services
2009
2008
$
$
85,922,990
94,519,506
242,741
497,426
86,165,731
95,016,932
2009
2008
$
$
17 Other operating income The Group
26,234
8,191
Interest income
106,450
149,539
Exchange gain, net
164,042
300,243
Transportation income
430,588
853,077
Government grant – Jobs Credit Scheme
140,222
–
Sundry income
202,345
88,976
1,069,881
1,400,026
2009
2008
$
$
Gain on disposal of property, plant and equipment
18 Finance costs The Group Interest expenses – Finance leases
32,359
35,281
– Trade finances
364,159
737,869
– Overdraft
177,080
206,049
– Bank charges
131,555
204,297
14,743
13,859
719,896
1,197,355
2009
2008
$
$
2,276,119
2,140,961
455,411
(57,156)
– Others
19 Taxation The Group Current taxation Under/ (Over) provision of taxation in respect of prior years
Income tax expense from continuing operations Income tax from discontinued operation
70.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
2,731,530
2,083,805
2,731,530
2,083,805
–
–
2,731,530
2,083,805
19 Taxation (cont’d) The Group Profit before taxation from continuing operations Loss before tax from discontinuing operations
2009
2008
$
$
4,732,158
6,133,034
(778,398)
(767,082)
3,953,760
5,365,952
Tax at Singapore statutory rate of 17% (2008 – 18%)
672,139
965,872
Tax effect on non-deductible expenses
208,887
582,127
Tax effect on non-taxable income
(10,828)
(163,346)
Deferred tax assets on temporary differences not recognised
835,035
172,000
Under/ (over) provision in prior years
455,411
(57,156)
Differences in foreign tax rates
581,773
639,045
Others
(10,887)
(54,737)
2,731,530
2,083,805
The Group
At the reporting date, the Group had unutilised tax losses amounting to approximately $2,781,000 (2008 – $1,628,000) which are available for offset against future taxable profits subject to compliance with the relevant countries’ tax legislations. The Group has not recognised a deferred tax asset in respect of the tax losses because it is not reasonably certain that these tax losses will be allowed by the relevant tax authorities in the future.
20 Discontinued operation On 24 June 2009, the Group publicly announced the decision of its Board of Directors to discontinue the Australian operations related to the Qiao Retail segment. The discontinuance was consistent with the Group’s long-term strategy to concentrate on its profit making business by focusing on its core operations, being the trading of sofas and other furniture in the Retail, Export and LRS segments, and exiting the business which had been underperforming over the last three years. Qiao Design Pty Ltd, the wholly owned subsidiary in Australia, was deregistered during the financial year following cessation of the Qiao Retail business. The Qiao Retail segment was a discontinued operation and the comparative consolidated statement of comprehensive income has been re-presented to show the discontinued operation separately from continuing operations.
ANNUAL REPORT
.71
2009
NOTES TO THE FINANCIAL STATEMENTS
20
diSContinued operation (cont’d) The results of the discontinued operation are as follows: 2009
2008
$
$
The Group Revenue
578,664
295,563
Operating expenses
(901,245)
(1,062,645)
Restructuring costs
(455,817)
–
Results from operating activities
(778,398)
(767,082)
–
Taxation Results of discontinued activities, net of income tax
(778,398) 2009
The Group Loss for the year Basic and diluted loss per share (cents) (Note 22)
$
– (767,082) 2008 $
(778,398)
(767,082)
(0.46)
(0.53)
2009
2008
$
$
Cash flows from discontinued operation are as follows:
The Group Net cash used in operating activities
(651,101)
(360,673)
–
(268,446)
Net cash generated from financing activities
557,058
697,465
Net cash (used in)/generated from discontinued operation
(94,043)
68,346
Net cash used in investing activities
The effects of the disposal on individual assets and liabilities of the Group are as follows:
The Group Cash and cash equivalents Amounts due to related parties Elimination of amounts due to related parties on consolidation Net assets Gain on disposal Consideration received Cash consideration received, satisfied in cash Cash disposed of Net cash inflow
72.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
2009
2008
$
$
100
–
(1,656,074)
–
(1,655,974)
–
1,656,074
–
100 –
–
100
–
100
–
(100)
–
–
–
21 Profit for the year The Group
Note
2009
2008
$
$
Profit for the year has been arrived at after charging: Amortisation of land use rights
4
26,570
27,928
Allowance for impairment of trade receivables
8
45,738
1,740
85,800
85,800
5
1,987,456
2,004,750
Directors’ fee Depreciation of property, plant and equipment Inventories written off Operating lease rentals of showroom and warehouse premises Property, plant and equipment written off
93,860
22,710
5,264,689
5,037,684
635,136
251,359
1,018,889
1,251,644
16,422
16,016
229,822
283,357
7,178
18,271
16,643,514
16,147,738
202,679
721,124
Staff costs – Directors: `
– Directors’ remuneration other than fee – CPF contributions – Key management personnel (other than directors): – Salaries, wages and other related costs – CPF contributions and others – Other than key management personnel: – Salaries, wages and other related costs – CPF contributions and others
18,073,238
18,438,150
18,118,504
18,438,150
106,450
149,539
and crediting: Interest income Gain on disposal of property, plant and equipment
26,234
8,191
Exchange gain, net
79,532
33,027
22 Earnings/(LOSS) per share The basic and diluted earnings/(loss) per share is calculated by dividing the net profit attributable to equity holders by the weighted average number of ordinary shares in issue during the financial year.
The Group Profit from continuing operations Loss from discontinued operation Profit for the for the year attributable to equity holders of the Company
2009
2008
$
$
2,000,628
4,049,229
(778,398)
(767,082)
1,222,230
3,282,147
168,000,000
144,000,000
– Continuing and discontinued operations
0.73
2.28
– Continuing operations
1.19
2.81
– Discontinued operation
(0.46)
(0.53)
Weighted average number of ordinary shares in issue for basis earnings per share Basic and diluted earnings/(loss) per share (cents):
The Company did not have any stock options or dilutive potential ordinary shares at 31 December 2008 and 2009.
ANNUAL REPORT
.73
2009
NOTES TO THE FINANCIAL STATEMENTS
23 Operating segments The Group
For management reporting purposes, the Group is organised into the following reportable operating segments which are the Group’s strategic business units as follows: (a)
Retail;
(b)
Export; and
(c)
Licensing Retail System (“LRS”).
Retail relates to revenue generated from retail chain stores for trading of sofa and other furniture. Export relates to revenue generated from overseas customers for trading of sofa and other furniture. LRS relates to revenue generated from overseas for licensing for trading of sofa and other furniture. During the financial year, the Group discontinued the operation of the Qiao Retail business segment. The Group Chief Executive Officer (“Group’s CEO”) monitors the operating results of its operating segments for the purpose of making decisions about resource allocation and performance assessment. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO reviews internal management reports on at least a quarterly basis. Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group’s CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.
Segment Revenue and Expenses
All segment revenue and expense are directly attributable to the segments.
Segment Assets and Liabilities
Segment assets include all operating assets used by a segment and consist principally of operating cash, receivables, inventories and property, plant and equipment, net of allowances and provisions. Whilst most of such assets can be directly attributed to individual segments, the carrying amount of certain assets used jointly by two or more segments is allocated to the segments on a reasonable basis. Segment liabilities include all operating liabilities and consist principally of accounts, wages, and accrued liabilities. Segment assets and liabilities do not include current tax payable and deferred taxation.
74.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
23 Operating segments (cont’d) Segment Assets and Liabilities (cont’d) Retail
Revenue
Export
Qiao Retail (Discontinued Operation)
LRS
Total
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
$’000
56,519
56,012
20,726
30,068
8,342
8,690
579
247
86,166
95,017
26,550
25,256
6,613
7,191
1,455
1,580
19
147
34,637
34,174
1,070
1,400
(31,033)
(29,011)
(720)
(1,197)
Result: Segment results Other income Unallocated corporate expenses Finance costs Profit before taxation Income tax Profit after taxation
3,954
5,366
(2,732)
(2,084)
1,222
3,282
OTHER INFORMATION: Assets: 34,733
32,290
Unallocated corporate assets
34,413
36,869
Consolidated total assets
69,146
69,159
(23,687)
(21,377)
(13,057)
(15,070)
Segment assets
27,828
26,745
6,256
4,298
649
765
–
482
Liabilities: Segment liabilities
(10,399)
(8,466)
(13,265)
(12,852)
(23)
(21)
–
(38)
Unallocated corporate liabilities Consolidated total liabilities
(36,744)
(36,447)
1,007
1,029
4,927
8,503
–
–
–
–
5,934
9,532
Depreciation of property, plant and equipment
976
941
946
999
55
46
10
19
1,987
2,005
Property, plant & equipment written off
318
88
317
163
–
–
–
–
635
251
Capital expenditure
Reconciliations of reportable segment assets: 2009
2008
$’000
$’000
Total assets for reportable segment Retail Export LRS Discontinued Operation Unallocated corporate assets
27,828 6,256 649 – 34,413
26,745 4,298 765 482 36,869
Consolidated total assets
69,146
69,159
The Group
ANNUAL REPORT
.75
2009
NOTES TO THE FINANCIAL STATEMENTS
23 Operating segments (cont’d) Segment Assets and Liabilities (cont’d)
Reconciliations of reportable segment liabilities:
The Group
2009
2008
$’000
$’000
Total liabilities for reportable segment Retail
10,399
8,466
Export
13,265
12,852
23
21
–
38
Unallocated corporate assets
13,057
15,070
Consolidated total liabilities
36,744
36,447
LRS Discontinued Operation
The following table shows the distribution of the Group’s consolidated sales by geographical market, based on the geographical location of the customers: Sales by Geographical Market 2009
2008
$’000
$’000
Singapore
11,068
10,623
Malaysia
39,889
39,224
The Group
Taiwan
9,448
8,289
China
2,185
4,323
23,576
32,558
86,166
95,017
Other countries
The following table shows the carrying amount of the consolidated total assets and additions to property, plant and equipment by geographical area in which the assets are located: Carrying Amount of Assets 31 December 2008
31 December 2009
31 December 2008
$’000
$’000
$’000
$’000
9,940
8,570
171
164
26,694
779
792
Taiwan
4,773
5,015
60
232
China
28,014
28,397
4,924
8,337
–
483
–
7
69,146
69,159
5,934
9,532
Other countries
76.
31 December 2009
26,419
Singapore Malaysia
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
Additions to Property, Plant and Equipment
24
Significant related party transactions Other than the related party information disclosed elsewhere in the financial statements, there is no significant related party transactions.
25 Financial risk management objectives and policies The Company and the Group are exposed to financial risks arising from its operations and the use of financial instruments. The key financial risks include market price risk, foreign currency risk, interest rate risk, credit risk and liquidity risk. The Company and the Group focus on the unpredictability of financial markets and seeks to minimise adverse effects from the unpredictability of financial markets on the Company’s and the Group’s financial performance.
25.1 Market price risk
The Group does not hold any quoted or marketable financial instruments and hence, is not exposed to any movement in market price.
25.2 Foreign currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. Currency risk arises when transactions are denominated in foreign currencies. The Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the functional currencies of the respective group entities, primarily the United States Dollars (USD), Malaysian Ringgit (Ringgit), New Taiwan Dollars (NTD) and China Renminbi (RMB). Such risks are managed by matching sales with corresponding purchases, and assets and liabilities of the same currencies and amounts. The Group does not enter into currency options and does not use forward exchange contracts to protect against volatility associated with foreign currency sales and purchases. Foreign currency exposure
Note
United States Dollars
Malaysian Ringgit
New Taiwan Dollars
China Renminbi
$’000
RM’000
$’000
RM’000 2,040
At 31 December 2009 Trade and other receivables
8
2,577
2,137
565
Fixed deposits
9
–
6,186
–
–
Cash and cash equivalents
10
1,483
8,144
2,315
732
Borrowings
13
(4,414)
(1,484)
Trade & other payables
15
(2,459)
(8,651)
(2,813)
6,332
Net currency exposure
– (1,988) 892
(288) (6,316) (3,832)
ANNUAL REPORT
.77
2009
NOTES TO THE FINANCIAL STATEMENTS
25 Financial risk management objectives and policies 25.2 Foreign currency risk (cont’d) Foreign currency exposure (cont’d)
United States Dollars
Malaysian Ringgit
New Taiwan Dollars
China Renminbi
Note
$’000
RM’000
$’000
RM’000
Trade and other receivables
8
2,366
1,955
508
1,903
Fixed deposits
9
–
5,568
–
–
At 31 December 2008
Cash and cash equivalents
10
643
8,582
2,273
648
Borrowings
13
(6,953)
(1,977)
–
(295)
Trade & other payables
15
(1,660)
(7,742)
(1,169)
(8,903)
(5,604)
6,386
1,612
(6,647)
Net currency exposure
Sensitivity analysis for foreign currency risk The following table demonstrates the sensitivity to a reasonably possible change in the USD, Ringgit, NTD, and RMB against SGD with all other variables held constant, of the Group’s and the Company’s profit net of tax. The Group 2009
2008
$’000
$’000 Increase/(Decrease)
Profit net of tax USD
– strengthened 5% (2008 – 5%) – weakened 5% (2008 – 5%)
Ringgit
– strengthened 5% (2008 – 5%) – weakened 5% (2008 – 5%)
NTD
– strengthened 5% (2008 – 5%) – weakened 5% (2008 – 5%)
RMB
– strengthened 5% (2008 – 5%) – weakened 5% (2008 – 5%)
Equity
Profit net of tax
Equity
(117)
(117)
(230)
(230)
117
117
230
230
263
263
262
262
(263)
(263)
(262)
(262)
37
37
66
66
(37)
(37)
(66)
(66)
(159)
(159)
(273)
(273)
159
159
273
273
The Company 2009
2008
$’000
$’000 Increase/(Decrease)
Profit net of tax USD
– strengthened 5% (2008 – 5%) – weakened 5% (2008 – 5%)
78.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
Equity
Profit net of tax
Equity
9
9
9
9
(9)
(9)
(9)
(9)
25 Financial risk management objectives and policies (cont’d) 25.3 Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of the Company’s and the Group’s financial instruments will fluctuate because of changes in market interest rates. The Group’s exposure to interest rate risk arises primarily from their loans and borrowings. The Group does not hedge its investments in fixed rate debt securities. The Group obtains additional financing through bank borrowings and finance lease arrangements. The Group’s policy is to obtain the most favourable interest rates available without increasing its interest rate exposure. Sensitivity analysis of interest rate risk For floating rate financial assets and liabilities, a change of 75 basis points lower or higher at the reporting date would increase/(decrease) profit by the amount shown below, with all other variables held constant, in particular foreign currency rates. The Group FY 2009
Profit (decreased)/increased by
FY2008
75bp Higher
75bp Lower
75bp Higher
75bp Lower
$’000
$’000
$’000
$’000
53
(61)
61
(53)
25.4 Credit risk
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The Group’s exposure to credit risk arises primarily from trade receivables. The Group adopts the policy of dealing only with customers of appropriate credit history, and obtaining sufficient security where appropriate to mitigate credit risk. Credit exposure to an individual counterparty is restricted by credit limits that are approved by the Executive Directors based on ongoing credit evaluation. The counterparty’s payment profile and credit exposure are continuously monitored at the entity level by the respective management and at the company and at group level by the Executive Directors. Credit terms are generally not more than 30 days. The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures. The allowance account in respect of trade and other receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is considered irrecoverable and the amount charged to the allowance account is written off against the carrying amount of the impaired financial asset.
ANNUAL REPORT
.79
2009
NOTES TO THE FINANCIAL STATEMENTS
25 Financial risk management objectives and policies (cont’d) 25.4 Credit risk (cont’d)
Exposure to credit risk The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date was: The Group Group
Company
2009
2008
2009
2008
$’000
$’000
$’000
$’000
Guarantees provided to subsidiaries in respect of banking facilities – Note 13.2(d)
1,980,000
2,980,000
–
–
– Note 13.3(c)
6,023,000
6,018,000
–
–
– Note 13.3(e)
–
–
31,394,000
32,074,000
95,050
212,839
Letters of credit issued in favour of third parties
The current interest rates charged by the lenders on the loans to subsidiaries are at market rate and are consistent with the borrowing cost of the subsidiaries without any corporate guarantees. The Company’s and the Group’s major classes of financial assets are bank deposits and trade receivables. Cash is held with financial institutions of reputable financial institutions. Further details of credit risks on trade and other receivables are disclosed in Note 8.
25.5 Liquidity risk
Liquidity or funding risk is the risk that an enterprise will encounter difficulty in raising funds to meet commitments associated with financial instruments. Liquidity risk may result from an inability to sell a financial asset quickly at close to its fair value. The Company’s and the Group’s exposure to liquidity risk arises primarily from mismatches of the maturities of financial assets and liabilities. The Company’s and Group’s objective is to maintain a balance between continuity of funding and flexibility through the use of stand-by credit facilities.
80.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
25 Financial risk management objectives and policies (cont’d) 25.5 Liquidity risk (cont’d) The table below analyses the maturity profile of the Company’s and the Group’s financial liabilities based on contractual undiscounted cash flows, including estimated interest payment:
The Group
Less than 1 year
Between 2 and 5 years
Over 5 years
Total
$
$
$
$
At 31 December 2009 Trade and other payables
21,382,890
–
–
21,382,890
Borrowings
10,194,978
3,307,866
726,071
14,228,915
31,577,868
3,307,866
726,071
35,611,805
At 31 December 2008 Trade and other payables
21,269,837
–
–
21,269,837
Borrowings
13,522,119
860,569
909,416
15,292,104
34,791,956
860,569
909,416
36,561,941
Less than 1 year
Between 2 and 5 years
Over 5 years
Total
$
$
$
$
55,115
–
–
55,115
55,115
–
–
55,115
8,525
–
–
8,525
8,525
–
–
8,525
The Company At 31 December 2009 Trade and other payables
At 31 December 2008 Trade and other payables
The Company and Group ensure that there are adequate funds to meet all its obligations in a timely and cost-effective manner and has available adequate amount of committed credit facilities from financial institutions to meet its working capital requirements.
ANNUAL REPORT
.81
2009
NOTES TO THE FINANCIAL STATEMENTS
26 Financial instruments Fair values
The carrying amounts of financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values. The Company and the Group do not anticipate that the carrying amounts recorded at the reporting date would be significantly different from the values that would eventually be received or settled.
27 Dividends The Group 2009
2008
$
$
840,000
1,019,412
Approved and paid during the financial year: Final dividend out of 2008 profit: 0.50 cents (2008 – 0.85 cents out of 2007 profit) per share: one-tier tax-exempt
28
Capital management The Group’s objectives when managing capital are: (a)
to safeguard the Group’s ability to continue as a going concern;
(b)
to support the Group’s stability and growth;
(c)
to provide capital for the purpose of strengthening the Company’s risk management capability; and
(d)
to provide an adequate return to shareholders.
The Group actively and regularly reviews and manages its capital structure to ensure optimal capital structure and shareholder returns, taking into consideration the future capital requirements of the Group and capital efficiency, prevailing and projected profitability, projected operating cash flows, projected capital expenditures and projected strategic investment opportunities. The Group currently does not adopt any formal dividend policy. The Board of Directors monitors capital based on the net debt to net assets ratio. Net debt comprises total borrowings less cash and cash equivalents. Net assets comprise total equity. There were no changes in the Group’s approach to capital management during the year.
82.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
28
Capital management (cont’d) The Company and its subsidiaries are not subject to externally imposed capital requirements.
Total borrowings Less: Cash and cash equivalents Net debt Net assets
Net debt to net assets ratio (times)
29
2009
2008
$
$
13,560
14,208
(11,934)
(11,727)
1,626
2,481
32,401
32,711
0.05
0.08
Commitments At the reporting date, the Group was committed to making the following rental payments in respect of non-cancellable operating leases of showroom and warehouse premises with an original term of more than one year: 2009
2008
$
$
Not later than one year
2,204,149
2,103,141
Later than one year and not later than five years
1,419,850
1,854,524
–
–
3,623,999
3,957,655
The Group
Later than five years
The operating leases expire between January 2010 and November 2012 with an option to renewal upon maturity. The current rent payments on the leases ranging from $11,000 to $30,000 per month are subject to revision on renewal.
30
Contingent liabilities Group
Company
2009
2008
2009
2008
$
$
$
$
Guarantees provided to subsidiaries in respect of banking facilities – Note 13.2(d)
1,980,000
2,980,000
–
–
– Note 13.3(c)
6,023,000
6,018,000
–
–
– Note 13.3(e)
–
–
31,394,000
32,074,000
95,050
212,839
–
–
Letters of credit issued in favour of third parties
ANNUAL REPORT
.83
2009
NOTES TO THE FINANCIAL STATEMENTS
31
Comparatives Certain comparatives have been reclassified to conform to current year’s presentation.
FRS 1 (Revised 2008) Presentation of Financial Statements
The Group applies revised FRS 1 Presentation of Financial Statements (Revised 2007), which became effective as of 1 January 2009. As a result, the Group presents in the consolidated statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in the consolidated statement of comprehensive income as other comprehensive income.
Reclassifications
Amounts of $497,426 related to post-sale service income have been reclassified from other operating income to revenue for the year ended 31 December 2008 in the consolidated statement of comprehensive income. Bank loans of $69,165 have been reclassified from non-current liabilities to current liabilities as at 31 December 2008 in the consolidated statement of financial position.
84.
2009
NOTES TO THE FINANCIAL STATEMENTS
ANNUAL REPORT
Shareholding StatiStiCS as at 11 March 2010
Share Capital
Issued and fully paid capital Total number of shares in issue Class of shares Voting Rights
– – – –
$25,980,000 168,000,000 Ordinary shares fully paid One vote of each ordinary share
ShareholdingS held in handS of puBliC
Based on information available to the Company as at 11 March 2010, approximately 48.53% of the issued ordinary shares of the Company is held by the public. Accordingly, Rule 723 of the Listing Manual issued by the Singapore Exchange Securities Trading Limited has been complied with.
diStriBution of ShareholdingS Size of Shareholdings
No. of Shareholders
%
No. of Shares
%
169 435 622 20 1,246
13.56 34.91 49.92 1.61 100.00
6,576 2,014,078 57,441,298 108,538,048 168,000,000
0.00 1.20 34.19 64.61 100.00
NO. OF SHARES
%
1 – 999 1,000 – 10,000 10,001 – 1,000,000 1,000,001 and above Total
treaSury ShareS
There are no treasury shares held in the issued share capital of the Company.
top 20 largeSt ShareholderS S/N
NAME
1
CHUNG KIM YEW
25,793,200
15.35
2
HONG LEONG FINANCE NOMINEES PTE LTD
19,000,000
11.31
3
NG SOON HENG
14,042,800
8.36
4
MAYBAN NOMINEES (S) PTE LTD
12,838,150
7.64
5
GOH AH LEE
6,874,000
4.09
6
KIM ENG SECURITIES PTE. LTD.
3,460,000
2.06
7
CHUNG YOOK FONG
3,248,000
1.93
8
CHUNG KAM SENG
2,695,000
1.61
9
CHUNG YOKE WAH
2,640,000
1.57
10
YAN XIU YUN
2,502,000
1.49
11
ONG TIAK BENG
2,320,000
1.38
12
ROBIN NG ZHI PENG
2,215,000
1.32
13
LEE SEE YEE
1,637,000
0.98
14
PHILLIP SECURITIES PTE LTD
1,513,744
0.90
15
DBS VICKERS SECURITIES (S) PTE LTD
1,449,000
0.86
16
CHEN MEI YING
1,400,154
0.83
17
LEE LI YUEN
1,373,000
0.82
18
LYE KIM CHYE
1,232,000
0.73
19
DMG & PARTNERS SECURITIES PTE LTD
1,220,000
0.72
20
LEE SEE CHEE Total
1,085,000
0.65
108,538,048
64.61
ANNUAL REPORT
.85
2009
SHAREHOLDING STATISTICS
Substantial Shareholders
(As shown in the Company’s Register of Substantial Shareholders as at 11 March 2010) No. of Shares No.
Name
Direct Interest
%
Deemed Interest
%
1
CHUNG KIM YEW
25,793,200
15.35
7,086,000
4.22
2
NG SOON HENG
14,042,800
8.36
11,800,000
7.02
3
GOH AH LEE
6,874,000
4.09
12,146,000
7.23
Notes: 1)
Chung Kim Yew is deemed to be interested in shares held by spouse, Ms Wong Ying Nyok and shares held by his nominees, Hong Leong Finance Nominees Pte. Ltd.
2)
Ng Soon Heng is deemed to be interested in the shares held by his nominees, Mayban Nominees (S) Pte. Ltd.
3)
Goh Ah Lee is deemed to be interested in shares held by spouse, Ms Lee Lee Wah and shares held by his nominees, Hong Leong Finance Nominees Pte. Ltd.
86.
2009
SHAREHOLDING STATISTICS
ANNUAL REPORT
notiCe of annual general meeting LORENZO INTERNATIONAL LIMITED Company Registration No. 200508277C
notiCe iS hereBy given that the Fifth Annual General Meeting of the Company will be held at 27 Kaki Bukit Place Eunos Techpark Singapore 416205 on Thursday, 29 April 2009 at 9.30 a.m. to transact the following business:
ordinary BuSineSS 1.
To receive and adopt the Audited Accounts for the financial year ended 31 December 2009 together with the Reports of the Directors and the Auditors of the Company.
2.
To re-elect as a Director, Mr Lee Fut Hua who is retiring under Article 96 of the Company’s Articles of Association: Mr Lee Fut Hua will, upon re-election as a Director of the Company, remain as an Executive Director of the Company.
3.
(resolution 2)
To re-elect as a Director, Mr Christopher Chong who is retiring under Article 91 of the Company’s Articles of Association: Mr Christopher Chong will, upon re-election as a Director of the Company, remain as an Independent Director of the Company.
4.
(resolution 1)
(resolution 3)
To re-elect as a Director, Mr Choo Yong Fee who is retiring under Article 91 of the Company’s Articles of Association: Mr Choo Yong Fee will, upon re-election as a Director of the Company, remain as an Independent Director of the Company.
5.
To approve the payment of Directors’ fees of S$85,800 for the financial year ending 31 December 2010, to be paid quarterly in arrears.
6.
To re-appoint Foo Kon Tan Grant Thornton LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration.
7.
To transact any other business that may be transacted at an Annual General Meeting.
(resolution 4) (resolution 5) (resolution 6)
ANNUAL REPORT
.87
2009
NOTICE OF ANNUAL GENERAL MEETING
SPECIAL BUSINESS 8.
To consider and, if thought fit, to pass the following resolution as an Ordinary Resolution, with or without modifications: “That pursuant to Section 161 of the Companies Act, Chapter 50 and Rule 806(2) of the Listing Manual of the Singapore Exchange Securities Trading Limited, authority be and is hereby given to the Directors to allot and issue shares and convertible securities in the Company (whether by way of rights, bonus or otherwise) at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit provided that the aggregate number of shares and convertible securities to be issued pursuant to this Resolution does not exceed fifty per cent (50%) of the issued share capital (excluding treasury shares) of the Company at the date of this Resolution, of which the aggregate number of shares and convertible securities to be issued other than on a pro rata basis to shareholders of the Company does not exceed twenty per cent (20%) of the issued share capital (excluding treasury shares) of the Company at the date of this Resolution, and, the aforementioned 50% limit may be increased to 100% for the Company to undertake pro-rata renounceable rights issues and unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier, except that the Directors shall be authorised to issue and allot new shares pursuant to convertible securities notwithstanding that such authority has ceased.” [See Explanatory Note (i)]
9.
To consider and, if thought fit, pass the following resolution as an ordinary resolution, with or without modifications: “That subject to and pursuant to the share issue mandate in resolution 7 above being obtained, authority be and is hereby given to the Directors to issue new shares other than on a pro-rata basis to shareholders of the Company at an issue price per new share which shall be determined by the Directors in their absolute discretion provided that such price shall not represent more than a 20% discount for new shares to the weighted average price per share determined in accordance with the requirements of the SGX-ST.” [See Explanatory Note (ii)]
10.
(Resolution 7)
(Resolution 8)
To consider and, if thought fit, pass the following resolution as an ordinary resolution, with or without modifications: That: (a)
for the purposes of the Listing Manual of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) and Sections 76C and 76E of the Companies Act (Chapter 50) (the “Companies Act”), the Directors of the Company be and are hereby authorised to exercise all the powers of the Company to purchase or otherwise acquire the issued ordinary shares fully paid in the capital of the Company (the “Shares”) not exceeding in aggregate the Prescribed Limit (as hereafter defined), during the Relevant Period or within any one financial year of the Company, whichever is the earlier, at such price(s) as may be determined by the Directors of the Company from time to time up to the Maximum Price (as hereafter defined), whether by way of: (i)
on-market purchase(s) (each a “Market Purchase”) transacted on the SGXST through the SGX-ST’s Central Limit Order Book (CLOB) trading system or, as the case may be, any other stock exchange on which the Shares may for the time being be listed and quoted, through one or more duly licensed stockbrokers appointed by the Company for the purpose; and/or
(ii)
off-market purchase(s) (each an “Off-Market Purchase”) if effected otherwise than on the SGX-ST in accordance with any equal access scheme(s) as may be determined or formulated by the Directors of the Company as they consider fit, which scheme(s) shall satisfy all the conditions prescribed by the Listing Rules;
(the “Share Buyback Mandate”);
88.
2009
NOTICE OF ANNUAL GENERAL MEETING
ANNUAL REPORT
(Resolution 9)
SPECIAL BUSINESS (b)
unless varied or revoked by the Company in general meeting, the authority conferred on the Directors of the Company pursuant to the Share Buyback Mandate may be exercised by the Directors at any time and from time to time during the period commencing from the passing of this Resolution and expiring on the earlier of: (i)
the conclusion of the next annual general meeting of the Company (“AGM”) or the date by which such AGM is required by law to be held;
(ii)
the date on which the purchases or acquisitions of Shares by the Company pursuant to the Share Buyback Mandate are carried out to the full extent mandated;
(iii)
the date on which the authority contained in the Share Buyback Mandate is varied or revoked by ordinary resolution of the Company in general meeting;
(c)
in this Resolution:
“Prescribed Limit” means that number of issued Shares representing 5% of the total issued shares of the Company as at the date of passing of this Resolution;
“Relevant Period” means the period commencing from the date on which the AGM is held and expiring on the date the next AGM is held or is required by law to be held, whichever is the earlier, after the date of this Resolution; and
“Maximum Price” in relation to a Share to be purchased or acquired, means an amount (excluding brokerage, commission, stamp duties, applicable goods and services tax, clearance fees and other related expenses) not exceeding: (i)
in the case of a Market Purchase, 105% of the Average Closing Price of the Shares; and
(ii)
in the case of an Off-Market Purchase pursuant to an equal access scheme, 105% of the Average Closing Price of the Shares;
where: “Average Closing Price” means the average of the closing market prices of a Share over the last five market days on which transactions in the Shares were recorded on the SGX-ST immediately preceding the date of the Market Purchase by the Company or, as the case may be, the date of the making of the offer pursuant to the OffMarket Purchase, and deemed to be adjusted for any corporate action that occurs after the relevant five-day period; and “date of the making of the offer” means the date on which the Company announces its intention to make an offer for the purchase or acquisition of Shares from holders of Shares, stating therein the relevant terms of the equal access scheme for effecting the Off-Market Purchase; (d)
the Directors and each of them be and are hereby authorised to deal with the Shares purchased by the Company, pursuant to the Share Buyback Mandate in any manner as they think fit, which is allowable under the Companies Act; and
(e)
the Directors and each of them be and are hereby authorised to complete and do all such acts and things (including executing such documents as may be required) as they or he may consider necessary, desirable or expedient to give effect to the transactions contemplated by this Resolution. [See Explanatory Note (iii)]
(Resolution 9)
ANNUAL REPORT
.89
2009
NOTICE OF ANNUAL GENERAL MEETING
SPECIAL BUSINESS 11.
To consider and, if thought fit, pass the following ordinary resolution with or without any modifications: “That the Board of Directors of the Company be and is hereby authorised to grant awards (“Awards”) in accordance with the provisions of the Lorenzo Share Performance Share Plan (“Lorenzo SPP”) and pursuant to Section 161 of the Companies Act, Cap. 50, to allot and issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to grant of Awards under the Lorenzo SPP and in the event the renewal of the Share Purchase Mandate is approved by the shareholders, to apply any Shares purchased under the Share Purchase Mandate toward the satisfaction of Awards granted under the Lorenzo SPP provided that the aggregate number of Shares available under the Lorenzo SPP shall not exceed 15% of the total issued share capital (excluding treasury shares) of the Company from time to time.” [See Explanatory Note (iv)]
(Resolution 10)
By Order of the Board Ong Beng Hong Company Secretary 13 April 2010 Explanatory Notes: (i)
The Ordinary Resolution 7 proposed in item 8 above, if passed, will empower the Directors from the passing of the above Meeting until the date of the next Annual General Meeting, to allot and issue Shares and convertible securities in the Company up to an amount not exceeding, in total, 50% (or 100% in the event of a pro-rata renounceable right’s issue) of the issued share capital of the Company at the time of passing of this resolution, of which up to 20% may be issued other than on a pro rata basis to shareholders. For the purpose of determining the aggregate number of Shares which may be issued, the percentage of share capital shall be based on the Company’s issued share capital at the time this Ordinary Resolution is passed, after adjusting for (a) new Shares arising from the conversion or exercise of convertible shares, (b) new Shares arising from the exercise of share options or vesting of share awards which are outstanding or subsisting at the time this Ordinary Resolution is passed and (c) any subsequent consolidation or subdivision of Shares.
(ii)
The Ordinary Resolution 8 proposed under item 9 above, if passed, will authorise the Directors to issue new Shares (other than on a pro-rata basis to shareholders of the Company) at an issue price of up to 20% discount to the weighted average price per Share.
(iii)
The Ordinary Resolution 9 proposed under item 10 above, if passed, will empower the Directors of the Company, from the date of this Annual General Meeting until the date the next Annual General Meeting is to be held or is required by law to be held, whichever is the earlier, to make purchases (whether by way of Market Purchases or Off-Market Purchases on an equal access scheme) from time to time of up to 5% of the total number of issued Shares excluding any Shares which are held as treasury shares by the Company, at prices up to but not exceeding the Maximum Price. The rationale for, the authority and limitation on, the sources of funds to be used for the purchase or acquisition including the amount of financing and the financial effects of the purchase or acquisition of Shares by the Company pursuant to the Share Purchase Mandate are set out in greater detail in the Letter to Shareholders dated 13 April 2010.
90.
2009
NOTICE OF ANNUAL GENERAL MEETING
ANNUAL REPORT
(iv)
The Ordinary Resolution 10 proposed under item 11 above, if passed, will authorise the Directors to grant award of shares in accordance with the provisions of the Lorenzo SPP and pursuant to Section 161 of the Companies Act (Chapter 50) to allot and issue shares under the Lorenzo SPP. The SPP was approved by the shareholders of the Company in general meeting on 9 December 2009. Please refer to the Circular dated 23 November 2009 for further details.
Notes: 1)
A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy or proxies (not more than two) to attend and vote on his/her behalf. A proxy need not be a member of the Company.
2)
The instrument appointing a proxy or proxies must be under the hand of the appointor or of his/her attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised.
3)
The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 27 Kaki Bukit Place Eunos Techpark Singapore 416205.
ANNUAL REPORT
.91
2009
NOTICE OF ANNUAL GENERAL MEETING
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proxy form annual general meeting lorenZo international limited ACRA Registration Number: 200508277C (Incorporated in the Republic of Singapore)
IMPORTANT: 1. This Annual Report is also forwarded to investors who have used their CPF monies to buy shares in the Company at the request of their CPF Approved Nominees, and is sent solely for their information only. 2. This Proxy Form is therefore, not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.
I/We
(Name)
of being a member/members of Lorenzo International Limited (the “Company”) hereby appoint NAME
ADDRESS
NRIC/PASSPORT NUMBER
(Address)
PROPORTION OF MY/ OUR SHAREHOLDING (%) No. of shares
%
and/or (delete as appropriate) NAME
ADDRESS
NRIC/PASSPORT NUMBER
PROPORTION OF MY/ OUR SHAREHOLDING (%) No. of shares
%
as my/our proxy/proxies to vote for me/us on my/our behalf at the Fifth Annual General Meeting of the Company, to be held at 27 Kaki Bukit Place Eunos Techpark Singapore 416205 on Thursday, 29 April 2010 at 9.30 a.m., and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given, the proxy/proxies will vote or abstain from voting at his/their discretion, as he/they will on any other matter arising at the Meeting. No.
Resolutions Relating To:
For
Against
Ordinary Business 1.
Adoption of Reports and Accounts
2.
Re-appointment of Mr Lee Fut Hua
3.
Re-appointment of Mr Christopher Chong
4.
Re-appointment of Mr Choo Yong Fee
5.
Approval of Directors’ Fees for the financial year ending 31 December 2010
6.
Re-appointment of Auditors Special Business
7.
Authority to allot and issue new shares
8.
Authority to issue new shares at a discount of up to 20%
9.
Renewal of Share Purchase Mandate
10.
Authority to grant awards and issue shares under the Lorenzo share performance plan
(Please indicate with a cross [X] in the space provided whether you wish your vote to be cast for or against the Resolutions as set out in the Notice of the Meeting.) Dated this
day of
Signature of Shareholder(s) or Common Seal Important: Please read notes overleaf
2010.
Number of Shares held in CDP Register Member’s Register TOTAL
.93
2009
PROXY FORM ANNUAL REPORT
Notes: 1.
Please insert the total number of shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act (Chapter 50), you should insert that number of Shares. If you have Shares registered in your name in the Register of Members, you should insert that number of Shares. If you have Shares registered in your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.
2.
A member entitled to attend and vote at the Meeting is entitled to appoint one or two proxies to attend and vote in his stead.
3.
Where a member appoints more than one proxy, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy.
4.
A proxy need not be a member of the Company.
5.
The instrument appointing a proxy or proxies must be deposited at the Company’s registered office at 27 Kaki Bukit Place Eunos Techpark Singapore 416205, not less than 48 hours before the time set for the Meeting.
6.
The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or under the hand of its attorney or a duly authorised officer.
7.
Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter of power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.
8.
A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.
9.
The submission of an instrument or form appointing a proxy by a member of the Company does not preclude him from attending and voting in person at the Annual General Meeting if he is able to do so.
10.
The Company shall be entitled to reject a Proxy Form which is incomplete, improperly completed, illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified on the Proxy Form. In addition, in the case of shares entered in the Depository Register, the Company may reject a Proxy Form if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.
94.
2009
PROXY FORM
ANNUAL REPORT
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