ANNUAL REPORT 2008 YHI INTERNATIONALFAX: LIMITED(65) 6265 9927 / 6266 5368 BUILDING A 2 PANDAN ROAD SINGAPORE 609254 (65) 6264 2155 TEL: [email protected] EMAIL: www.yhi.com.sg GLOBAL BRAND WEBSITE:
ANNUAL REPORT 2008 ANNUAL REPORT 2008 BUILDING A YHI INTERNATIONAL LIMITED Listed on the mainboard of the Singapore Exchange GLOBAL BRANDCompany Registration Number 200007455H Listed on the mainboard of the Singapore Exchange Company Registration Number 200007455H // // Corporate Profile 06 // // Corporate Structure 16 // // Financial Summary 03 // // Board of Directors 12 // Financial Report 37 Heads of Subsidiaries & Key Officers 20 Five-Year Financial Highlights// 02// Financial Calendar & Corporate Information 24 Group Managing Director's Message 08 Our Global Presence 18 // Corporate Governance Report 30 Manufacturing Milestones 22 Review of Operations 28 CONTENTS At YHI, our aim is to continously provide our customers with quality products and distinctive customer services so as to build strong customer relationships. We also aim to provide growth and opportunities for our employees and to consistently generate stable returns to our shareholders. We will achieve these goals through our organisation-wide commitment to quality, professional and personnel management, sound business practices and teamwork.
MISSION STATEMENT 02 ANNUAL REPORT 2008 ANNUAL REPORT
FIVE-YEARSince our listing in 2003, we have been delivering FINANCIALcommendable HIGHLIGHTS performance in Revenue and Earnings and we will continue to target better growth year-on-year. YHI INTERNATIONAL LIMITED YHI INTERNATIONAL
REVENUE BY BUSINESS SEGMENTS (S$ ’million) 207.1 2004 REVENUE BY GEOGRAPHICAL 84.2 MARKETS (S$ ’million)115.4 GROUP REVENUE291.3 (S$ ’million) 2004 237.0 133.2 2004 2004 334.8 2005 97.8 2004 42.7 375.2 263.6 2004 123.5 2005 2005 146.1 426.9 2005 2006 2006 111.6 458.0 274.1 2005 65.2 2007 2006 135.5 2005 150.7 2008 2007 152.8 2006 300.1 89.0 2007 2006 151.3 2006 2008 157.9 162.3 2007 2008 113.3 2007 162.1 2007 Distribution 162.4 Manufacturing 2008 133.5 2008 2008
PAT BY BUSINESS SEGMENTS Asean (S$ ’million) 11.3 North East Asia 2004 9.0 Oceania & Others GROUP PAT (S$ ’million)20.3 25.5 2004 14.7 2004 10.8 27.5* 2005 DIVIDEND PAYOUT RATIO (%) 2005 14% 2005 15.7 26.3 2004 23% 2006 11.8* 2006 19.2 2005 26% 2007 19.4 2006 30% 2006 2008 2007 7.1 30% 18.2 2007 2007 2008 2008 2008 1.2
* FY2006 PAT included a one-time gain in negative goodwill effect of S$5.4 million 03 BUILDING A GLOBAL BRAND
FINANCIAL for the financial year SUMMARYended 31 December
RESULTS OF OPERATIONS Actual FY2008 FY2007 FY2006 FY2005 FY2004 S$ ’000 S$ ’000 S$ ’000 S$ ’000 S$ ’000
Sales 457,974 426,887 375,200 334,795 291,325 Profit before income tax 26,918 33,789 35,552 32,454 26,275 Net profit attributable to equity 19,436 26,256 27,513 25,471 20,347 holders of the Company Earnings per share (cents) 3.32 4.49 4.71 4.36 3.48
FINANCIAL POSITION Actual FY2008 FY2007 FY2006 FY2005 FY2004 S$ ’000 S$ ’000 S$ ’000 S$ ’000 S$ ’000
Current assets 203,376 210,448 160,675 153,441 130,651
Non-current assets 119,770 121,046 110,997 68,344 58,229
Total assets 323,146 331,494 271,672 221,785 188,880
Current liabilities 130,517 148,811 110,966 84,208 70,659
Non-current liabilities 7,975 9,612 7,943 4,265 10,817
Total liabilities 138,492 158,423 118,909 88,473 81,476
Net assets 184,654 173,071 152,763 133,312 107,404
Capital and reserves attributable to equity holders of the Company 180,378 168,109 148,101 129,902 104,698
Minority interests 4,276 4,962 4,662 3,410 2,706
Total equity 184,654 173,071 152,763 133,312 107,404
Net asset value per share (cents) 30.86 28.76 25.33 22.22 17.91
Explanatory Notes: 1 The Group’s earnings per share for FY2004 is restated and adjusted for comparative purposes to reflect the share split and the bonus shares as incurred in FY2005. 2 The Group’s net asset value per share for FY2004 is restated and adjusted for comparative purposes to reflect the share split and the bonus shares as incurred in FY2005.
ESTABLISHED
An established brand like YHI has been creating products and services that interact well with customers worldwide. It is BRAND EXPERIENCEthrough creating the right experience that fulfills the promise of quality to customers that has been the hallmark of our success over the years.
Photo courtesy of Redbull Racing Limited 06
ANNUAL REPORT 2008 ANNUAL REPORT CORPORATE PROFILEListed on the Mainboard of the Singapore Exchange Securities Trading Limited (SGX-ST) on 3 July 2003, YHI has successfully diversified its business and carved a niche for itself in the global automotive arena since its humble beginnings as a sole proprietorship established in 1948. YHI INTERNATIONAL LIMITED YHI INTERNATIONAL
YHI International Limited is a recognised distributor of high- TYRES quality automotive and industrial products, and a familiar and We have an extensive range of tyres from passenger cars to trusted name in alloy wheels manufacturing as an Original commercial and off-the-road vehicles, to cater for different Design Manufacturer providing integrated services from the market needs. The key tyre brands we represent are Yokohama, design and development to the manufacturing, marketing and Nankang, Nexen, Pirelli and our own proprietary brand - distribution of alloy wheels. NEUTON TYRES.
Today, YHI’s wide international presence can be seen with subsidiaries and associated companies located in Asean, China, Taiwan, Hong Kong, USA, Japan, Canada, Oceania and Italy. YHI also has 4 alloy wheels manufacturing plants located in Shanghai and Suzhou, China, Taoyuan in Taiwan and Sepang in Malaysia.
With an aim to build YHI into a global brand name where “The World Is Our Market”, we will strengthen and widen the YHI distribution network putting emphasis to promote and develop the market potential of our portfolio of premium and proprietary brands in the global market. 07 BUILDING A GLOBAL BRAND
ALLOY WHEELS INDUSTRIAL PRODUCTS Our alloy wheels brand portfolio includes renowned brands Our industrial products portfolio includes both automotive like Enkei, OZ, Konig and ADVANTI RACING. Our own batteries and rechargeable batteries for commercial and proprietary brand, ADVANTI RACING is an Official Partner to industrial use as well as golf and utility buggies from EZGO. Scuderia Toro Rosso Formula One Team. Some of the key brands we distribute for rechargeable batteries are Hitachi, Trojan, CSB and Benning. We have also launched NEUTON POWER - our own proprietary brand of industrial and automotive batteries. 08 ANNUAL REPORT 2008 ANNUAL REPORT GROUP MANAGING DIRECTOR’S MESSAGE YHI INTERNATIONAL LIMITED YHI INTERNATIONAL
Q. What are your thoughts on the performance of the RACING alloy wheels in new geographical markets also Group in FY2008? helped to boost our distribution segment. Profitability in A. Although we did not achieve double-digit growth in our manufacturing business segment was affected by turnover, we still managed to chalk up a 7.3% increase high operating costs in the first half of FY2008, as well over FY2007 despite the bad economic conditions. If as loss on foreign exchange due to volatility in major we discount the loss on foreign exchange and other global currencies. non-recurring items in FY2008, the Group's profit was at about the same level as in FY2007. I am generally Q. The global business environment is becoming more happy with our results in the prevailing challenging times. challenging, so how does the Group maintain its competitive edge? Q. How did the distribution and manufacturing business A. In my view, network is very important. So far we have segments perform in FY2008? been very successful in opening new geographical A. In FY2008, our distribution business segment accounted markets and this is our strength. We are able to achieve for approximately 65% and 94% of the Group's turnover wider market share through new business opportunities and net profit respectively. Our manufacturing business to promote our range of tyres, alloy wheels and batteries. segment accounted for 35% and 6% of the Group's In FY2008, our manufacturing plants have started to turnover and net profit respectively. Our distribution embark on various cost reduction measures to remain business segment exceeded our expectations primarily competitive through better production processes and due to better results from ASEAN and Oceania. enhanced technologies.
Q. What factors assisted in the development of both the business segments? A. Turnover from our distribution business segment was primarily driven by stronger tyres sales in both ASEAN and Oceania. Our relentless efforts to promote our proprietary brands NEUTON TYRES and ADVANTI 09 BUILDING A GLOBAL BRAND
We will intensify our focus to develop our portfolio of premium and proprietary brands to build the YHI brand name to gain global recognition and reputation. Our proprietary brands of ADVANTI RACING alloy wheels, NEUTON TYRES and NEUTON POWER will continue to be channelled out into our extensive global network...
Q. YHI celebrated its 60th year in 2008. How does it feel greatly enhanced. We have received many enquiries to have come so far? and orders from customers all over the world eager to A. Personally, I am proud that the YHI Group has come a market our ADVANTI RACING alloy wheels. long way since its humble beginnings as a sole proprietorship established in 1948. Today, YHI is a Q. The net profit for FY2008 was lower than in FY2007, familiar and trusted name in the global arena where "The what can the shareholders expect in terms of dividends World Is Our Market". for FY2008? A. Since our listing in year 2003, we have been rewarding Q. Developing YHI into a global brand name is an on- our shareholders with good dividend payments. Although going initiative. What are the plans and strategies the business environment is getting more challenging, adopted for this? YHI will continue to reward all supportive shareholders. A. We will intensify our focus to develop our portfolio of The proposed dividend payment of approximately S$5.8 premium and proprietary brands to build the YHI brand million will represent approximately 30% of our net profit name to gain global recognition and reputation. Our after tax. This payout % is similar to FY2007. proprietary brands of ADVANTI RACING alloy wheels, NEUTON TYRES and NEUTON POWER will continue In closing, I would like to take this opportunity to thank our to be channelled out into our extensive global network. Board of Directors for their guidance and to the Management For the manufacturing business segment, we have been and staff of the Group for their dedication, commitment and actively appointing new distributors in various contribution to the Group. To our stakeholders - our geographical markets for our alloy wheels brand portfolio shareholders, customers, suppliers and business associates which includes renowned brands like Enkei, OZ, Konig - my sincere appreciation for your support and confidence. and ADVANTI RACING. I look forward to meeting you at our coming shareholders' Q. In the inaugural Formula One night race in Singapore, meeting. how does it feel to be an Official Partner to Scuderia Toro Rosso Formula One Team? What are the benefits of such partnership? Yours sincerely, A. I feel very proud as a Singaporean especially when a home-grown Singapore Company has the opportunity TAY TIAN HOE RICHARD to showcase its alloy wheels in a world class racing GROUP MANAGING DIRECTOR event. Since we became an Official Partner to Scuderio Toro Rosso Formula One Team, the branding image of both YHI and ADVANTI RACING alloy wheels have been 董 事 长 献 辞
问: 您认为友发集团在2008财政年度的整体表现如 问: 您认为是什么原因影响着两个部门的表现？ 何? 答: 我们在亚细安和大洋洲轮胎销售强劲，带动了 答: 虽然我们的销售收入没有达到双位数增长, 但 整个批发部门的销售。再加上我们不遗余力地 是在目前全球经济不景气的情况下仍然取得 推销自有品牌 --- NEUTON 轮胎和雅泛迪轮圈，其 7.3%的增长幅度。如果剔除外汇因素和其它一 在新兴市场的销售也相应提升了批发部门的表 次性的费用，集团净利事实上保持了2007年的 现。制造部门的盈利则受到高成本和外汇大幅 水平。总体来说，我对集团的表现相当满意。 波动的影响。
问: 在2008年，批发和制造部门分别表现如何？ 问: 目前全球经济环境越来越有挑战性，友发集团 答: 2008年，我们的批发部门表现强劲，其销售收 怎样保持竞争优势呢？ 入占了集团总营业额的65%，净利润占了94%。 答: 在我看来，销售网络至关重要。可以说我们在 制造部门的销售收入和净利润则分别占了 这方面取得了成功，开拓了许多新的市场，这 35%和6%。批发部门表现超出预计，主要得益 是我们的强项。我们成功地进入新兴市场，并 于我们在亚细安和大洋洲分公司的良好表现。 推销全系列的产品，包括轮胎、轮圈和电池。 2008年，我们的工厂开始采取一系列降低成本 的措施，通过改进生产流程和引进新技术，来 提高竞争能力。 我们将大力推销优质和自有品牌产品，使友 发得到世界的承认，成为全球性品牌。我们 的自有品牌 —雅泛迪轮圈、NEUTON 轮胎和 NEUTON POWER电池，将继续通过全球的销 售网络推向世界......
问: 友发在2008年庆祝了60周年生日。请问您有何 问: 与2007年相比，2008年集团净利下降了。股 感想？ 东还可以期望得到股息吗？ 答: 我个人对友发集团从一家建立于1948年的私营 答: 自2003年上市以来，我们一直以派发股息的形 企业，发展到今天的上市集团公司，感到非常 式来回报股东。虽然经济环境越来越具挑战 自豪。友发已成为大众熟知和信任的名字，我 性，友发将继续回报支持我们的股东。董事会 们正本着“世界为我市场”的目标迈进。 提议派发新币5百80万的股息，大约占本年净利 的30%。派发的百分比和去年相当接近。 问: 友发正致力于发展成一个世界品牌。请问在这 方面友发有哪些计划和策略呢？ 最后，我借此机会，感谢董事会成员，谢谢你们为 答: 我们将大力推销优质和自有品牌产品，使友发得 管理层和员工提出的宝贵建议，谢谢你们为友发作 到世界的承认，成为全球性品牌。我们的自有 出的贡献。 品牌—雅泛迪轮圈、NEUTON轮胎和NEUTON POWER电池，将继续通过全球的销售网络推向 同时我也要谢谢各位股东、客户、供应商和合作伙 世界。制造部门方面，我们已经在很多地区 伴，衷心感谢你们对友发的支持和信任。我期待着 委任了新的分销商，来推销包括Enkei、OZ、 在股东大会上与您见面。 Konig和雅泛迪在内的轮圈。 郑添和 问: 新加坡成功举办了首次一级方程式夜间大赛。 集团董事长 作为参赛队伍Scuderia Toro Rosso的合作伙 伴，您有何感想？友发从中得到什么益处？ 答: 作为新加坡人，我为我们公司可以有机会 在世界水平的大赛上展示产品感到相当自 豪。自从成为Scuderia Toro Rosso的合作伙伴以 来，友发和雅泛迪轮圈的知名度大大提高，并 收到多国客户关于雅泛迪轮圈的询问和订单。 12
ANNUAL REPORT 2008 ANNUAL REPORT BOARD OF DIRECTORS YHI INTERNATIONAL LIMITED YHI INTERNATIONAL
1 Mr Tay Tian Hoe Richard 2 Mr Tay Tiang Guan 3 Mr Yuen Sou Wai Group Managing Director, Aged 58, Executive Director, Aged 57, Executive Director & CFO, Aged 55, Singaporean Singaporean Singaporean Mr Richard Tay is the Group Mr Tay Tiang Guan is the Executive Mr Yuen Sou Wai is our Executive Managing Director and key founder Director of our Group. He has more Director and our Group Chief of our Group. He is a member of our than 31 years of business experience Financial Officer. In addition to his Nominating Committee. Mr Tay has and has extensive knowledge in the financial portfolio, Mr Yuen is also more than 38 years of business automotive and industrial products responsible for our Group’s experience in the areas of sales and industry. Mr Tay is responsible for operations in Oceania, USA and distribution of automotive products. spearheading our Group’s operations Canada. Mr Yuen has about 35 years He plays an important role in in Asean and overseeing our Group’s of broadbased financial management formulating and setting of overall business development and experience in various large local and business strategies and policies for operational management of our tyre multinational companies and prior to our Group including the development and industrial product distribution joining our Group in 1996, he was and growth of our Group’s business. He is a member of the the Regional Finance Director (Asia operations. Under his stewardship, Singapore Institute of Directors. Mr Pacific) with Diversey Corporation, Mr Tay has led the development and Tay was appointed to the Board on Canada, a group owned by Molson growth of our alloy wheels 26 August 2000. Companies Ltd. Mr Yuen holds a manufacturing business. He is a Master in Business Administration member of the Singapore Institute Degree from the University of of Directors. Mr Tay was appointed Leicester, United Kingdom. He is a to the Board on 26 August 2000. Fellow of the Chartered Institute of Management Accountants (UK), a Fellow Certified Public Accountant, Singapore and a member of the Singapore Institute of Directors. Mr Yuen was appointed to the Board on 22 May 2003. 13 BUILDING A GLOBAL BRAND
4 Mr Henry Tan Song Kok 5 Mr Hee Theng Fong 6 Mr Phua Tin How Independent Director, Aged 45, Independent Director, Aged 55, Independent Director, Aged 59, Singaporean Singaporean Singaporean Mr Henry Tan was appointed to the Mr Hee Theng Fong was appointed Mr Phua Tin How was appointed to Board on 22 May 2003. Mr Tan to the Board on 22 May 2003. the Board on 22 May 2003. Mr Phua currently chairs the Audit Committee Mr Hee currently chairs the currently chairs the Nominating and is a member of our Remuneration Committee and is a Committee and is a member of our Remuneration Committee and member of our Audit Committee. He Audit Committee and Remuneration Nominating Committee. He is the is currently a partner of KhattarWong Committee. Mr Phua is also a director Managing Director of Nexia TS and has been practicing as an of several listed companies in Public Accounting Corporation, the advocate and solicitor of the Singapore. He holds an MBA from Chairman of Nexia China and also Supreme Court of Singapore since INSEAD, France and a Bachelor of the Asia Pacific Regional Chairman 1982. Mr Hee is also a director of Science (Hons) Degree from the then and Board member of Nexia several companies including Delong University of Singapore (now known International. He is also a director Holdings Ltd, Datapluse Technology as National University of Singapore). of Raffles Education Corporation, Limited, Sinomem Technology Chosen Holdings Limited, Pertama Limited and NTUC Fairprice Co- Holdings Limited and China New operative Limited. He is actively Town Development Co Ltd. Mr Tan involved in arbitration cases in the graduated with a First Class Honours Asia Pacific region and holds several Degree in Accountancy from the arbitral appointments. He is a Fellow National University of Singapore. He of the Chartered Institute of is a fellow of the Institute of Certified Arbitrators (UK) and an Arbitrator with Public Accountants of Singapore, the Singapore International Arbitration member of Institute of Chartered Centre (SIAC) and China International Accountants in Australia, Institute of Economic and Trade Arbitration Internal Auditors, Inc (Singapore Commission (CIETAC). Chapter) and Singapore Institute of Directors. DELIVERING BRAND PROMISE
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ANNUAL REPORT 2008 ANNUAL REPORT CORPORATE STRUCTUREas at 31 December 2008 YHI INTERNATIONAL LIMITED YHI INTERNATIONAL
YHI CORPORATION EVO-TREND CORPORATION (SINGAPORE) PTE LTD 100% (MALAYSIA) SDN BHD 80% SINGAPORE MALAYSIA
YHI (MALAYSIA) SDN BHD 100% PT YHI INDONESIA MALAYSIA 95% INDONESIA
YHI (HONG KONG) CO LTD AUTOTREND (SHANGHAI) 100% HONG KONG CO LTD 100% SHANGHAI, PRC YHI (CHINA) STRATEGY CO LTD 100% YHI CORPORATION (THAILAND) HONG KONG CO LTD 49% THAILAND
YHI (AUSTRALIA) PTY LTD 80% AUSTRALIA YOKOHAMA TIRE SALES (SHANGHAI) CO LTD 49% SHANGHAI, PRC YHI (NEW ZEALAND) LTD 70% NEW ZEALAND YHI INTERNATIONAL MARKETING (SHANGHAI) CO LTD 100% SHANGHAI, PRC
YHI CORPORATION (GUANGZHOU) CO LTD 100% GUANGZHOU, PRC
YHI (CANADA) INC YHI POWER PTY LTD 90% 80% CANADA AUSTRALIA
PAN-MAR CORPORATION TTS INTERNATIONAL CO LTD D/B/A KONIG (AMERICAN) 51% 60% USA JAPAN
YHI (AMERICA) PTE LTD ADVANTI RACING USA, LLC 90% 100% USA SINGAPORE 17 BUILDING A GLOBAL BRAND
YHI MANUFACTURING (SINGAPORE) PTE LTD 100% SINGAPORE
YHI INTERNATIONAL (TAIWAN) CO LTD 100% TAIWAN
YHI MANUFACTURING (SHANGHAI) CO LTD 100% SHANGHAI, PRC
YHI ADVANTI MANUFACTURING (SHANGHAI) CO LTD 100% SHANGHAI, PRC
YHI PRECISION MOULDING (SHANGHAI) CO LTD 100% SHANGHAI, PRC
YHI ADVANTI MANUFACTURING (SUZHOU) CO LTD 100% SUZHOU, PRC
YHI MANUFACTURING (MALAYSIA) SDN BHD 100% MALAYSIA
O.Z. S.p.A 35.51% ITALY 18 ANNUAL REPORT 2008 ANNUAL REPORT OUR GLOBALPRESENCE YHI INTERNATIONAL LIMITED YHI INTERNATIONAL SINGAPORE INDONESIA TAIWAN YHI Corporation (Singapore) Pte Ltd PT YHI Indonesia YHI International (Taiwan) Co Ltd YHI Manufacturing (Singapore) Pte Ltd Jalan Agung Perkasa X Blok K2 (32668) No. 28 Lane 813 Gaoshi Road YHI (America) Pte Ltd No.4 Sunter Agung Podomoro Youth Industrial District No. 2 Pandan Road Jakarta, Utara Indonesia Yang-Mei Taoyuan Taiwan ROC Singapore 609254 Tel: (62) 21 6512 667 Tel: (886) 3 4966 777 Tel: (65) 6264 2155 Fax: (62) 21 6512 635 Fax: (886) 3 4966 772 Fax: (65) 6265 9927/ 6266 5368 Email: [email protected] Email: [email protected] Email: [email protected] Website: www.advanti-wheel.com Website: www.yhi.com.sg THAILAND YHI Corporation (Thailand) Co Ltd AUSTRALIA MALAYSIA No. 1111 Rama 9 Road YHI (Australia) Pty Ltd YHI (Malaysia) Sdn Bhd 2 Suanluang Bangkok 10250 Unit 1A/6 Boundary Road No. 15 Jalan U1/23 Seksyen U1 Thailand Northmead NSW 2152 HICOM-Glenmarie Industrial Park Tel: (66) 2319 6526 / 7 Sydney Australia 40150 Shah Alam Fax: (66) 2319 7062 Tel: (61) 2 9756 6688 Selangor Darul Ehsan Malaysia Email: [email protected] Fax: (61) 2 9756 6288 Tel: (60) 3 7804 9880 Email: [email protected] Fax: (60) 3 7804 9878 HONG KONG Website: www.yhi.com.au Email: [email protected] YHI (Hong Kong) Co Ltd Website: www.yhimalaysia.com YHI (China) Strategy Co Ltd YHI Power Pty Ltd Unit A & B 11F Dynamic Cargo Centre 1044 - 1046 Canley Vale Road YHI Manufacturing 188 Yeung Uk Road Tsuen Wan Wetherill Park NSW 2164 (Malaysia) Sdn Bhd New Territories Hong Kong Sydney Australia PT 29516 Lengkuk Teknologi Tel: (852) 2727 1883 Tel: (61) 2 9729 2288 Techpark @ Enstek Fax: (852) 2727 1301 Fax: (61) 2 9756 4066 71760 Bandar Enstek Negeri Sembilan Email: [email protected] Email: [email protected] Malaysia Website: www.yhihongkong.com Website: www.yhipower.com.au Tel: (60) 6 782 2288 Fax: (60) 6 782 2233 NEW ZEALAND Email: [email protected] YHI (New Zealand) Ltd Website: www.advanti-wheel.com 260 Puhinui Road Manukau City Auckland New Zealand Evo-Trend Corporation Tel: (64) 9 278 1712 (Malaysia) Sdn Bhd Fax: (64) 9 279 4855 Lot 32-B1 Jalan 5/32A Email: [email protected] Off 6 1/2 Miles Jalan Kepong Website: www.yhi.co.nz Kepong Industrial Area 52100 Kuala Lumpur Malaysia Tel: (60) 3 6257 1333 Fax: (60) 3 6257 7393 Email: [email protected] 19 BUILDING A GLOBAL BRAND
CHINA Autotrend (Shanghai) Co Ltd CANADA YHI Manufacturing (Shanghai) Co Ltd No. 28 1550 Lane Shui Qing Road YHI (Canada) Inc YHI Advanti Manufacturing Minhang District #2-97 Newkirk Road (Shanghai) Co Ltd Shanghai Zip Code : 201100 PRC Richmond Hill ON YHI International Marketing Tel: (86) 21 6413 8778 Canada L4C 3G4 (Shanghai) Co Ltd Fax: (86) 21 6413 8778 Tel: (1) 905 884 9968 No. 611 Shen Fu Road Email: [email protected] Fax: (1) 905 884 5938 Xinzhuang Industrial Zone Email: [email protected] Shanghai Zip Code : 201108 PRC Yokohama Tire Sales Website: www.yhicanada.com Tel: (86) 21 6489 6655 (Shanghai) Co Ltd Fax: (86) 21 6489 4455 Suite 3583 - 3586 Tower B City Centre USA Email: [email protected] 100 Zunyi Road Konig (American) [email protected] Shanghai Zip Code : 200051 PRC 121 Express Street Website: www.advanti-wheel.com Tel: (86) 21 6237 2727 Plainview NY11803 USA Fax: (86) 21 6237 2577 Tel: (1) 516 822 5700 YHI Advanti Manufacturing Email: [email protected] Fax: (1) 516 822 5703 (Suzhou) Co Ltd Email: [email protected] No. 138 Hong Xi Road YHI Corporation (Guangzhou) Co Ltd Website: www.konigwheels.com Suzhou New District Room 2708 - 2709 Yan Qiao Building Suzhou Zip Code : 215151 PRC No. 89 Yanling Road Tianhe District Advanti Racing USA, LLC Tel: (86) 512 6616 2288 Guangzhou Zip Code : 510507 PRC 13941 Norton Avenue Fax: (86) 512 6616 2211 Tel: (86) 20 8763 1313 Unit D, Chino, CA 91710 USA Email: [email protected] Fax: (86) 20 8779 1526 Toll Free: (1) 877 902 9839 Website: www.advanti-wheel.com Email: [email protected] Direct: (1) 909 902 9839 Website: www.yhigz.cn Email: [email protected] YHI Precision Moulding Website: www.advantiwheel.com (Shanghai) Co Ltd JAPAN Factory No. 2 No. 188 Ming Shen Road TTS International Co Ltd ITALY Song Jiang Industrial Zone 6F Yamada Building O.Z. S.p.A. Shanghai PRC 1-12-10 Kitahorie Nishi-ku Via Monte Bianco 10 Tel: (86) 21 5768 5188 Osaka 550-0014 Japan 35018 San Martino Fax: (86) 21 5768 5268 Tel: (81) 6 4390 0771 Di Lupari (PD) Italy Email: [email protected] Fax: (81) 6 4390 0772 Tel: (39) 049 942 3001 Email: [email protected] Fax: (39) 049 946 9176 Email: [email protected] Website: www.ozracing.com
Photo courtesy of Redbull Racing Limited YHI AR08FA 3/17/09 6:52 PM Page 19
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S OF ANNUAL REPORT 2008 ANNUAL REPORT HEAD SUBSIDIARIESKEY OFFICERS & YHI INTERNATIONAL LIMITED YHI INTERNATIONAL
SINGAPORE MALAYSIA CHINA CHINA
Mr Lu Chun Ya Mr Simon Hui Mr Steve Liew Mr Lee Teck Hock General Manager General Manager General Manager General Manager Alloy Wheels Division Commercial Division YHI Corporation (Singapore) YHI (Malaysia) Sdn Bhd China Operations China Operations Pte Ltd
Mr Lin Chen Wei Mr Wu Meng Mr Robert Tan Mr Alan Hsu Deputy General Manager Senior Manager Deputy General Manager Deputy General Manager YHI Advanti Manufacturing Autotrend (Shanghai) YHI Corporation (Singapore) YHI Manufacturing (Suzhou) Co Ltd Co Ltd Pte Ltd (Malaysia) Sdn Bhd
Mr Liu De Sen Mr Wang Zhan Wei Mr Alex Ong Mr Tham Kong Moo Deputy General Manager Senior Manager Deputy General Manager General Manager YHI Precision Moulding YHI Corporation YHI Corporation (Singapore) Evo-Trend Corporation (Shanghai) Co Ltd (Guangzhou) Co Ltd Pte Ltd (Malaysia) Sdn Bhd
Composite YHI AR08FA 3/17/09 6:52 PM Page 20
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21 BUILDING A GLOBAL BRAND
TAIWAN USA THAILAND AUSTRALIA
Mr Ricardo S. Guevara Mr Kevin Lee Mr Tony Suhan President/CEO Mr Pairoj Tay Deputy General Manager Konig (American) YHI International (Taiwan) Managing Director Managing Director YHI (Australia) Pty Ltd YHI Corporation (Thailand) Co Ltd Co Ltd
INDONESIA JAPAN
Mr Kelly Austin Mr David Chen Managing Director Director Advanti Racing USA Mr Takashi Tatemoto YHI Power Pty Ltd Mr Eka Satria Managing Manager Branch Manager TTS International Co Ltd PT YHI Indonesia CANADA NEW ZEALAND HONG KONG ITALY
Mr Derek Zhang Mr Christopher Talbot General Manager Managing Director YHI (Canada) Inc Mr Claudio Bernoni YHI (New Zealand) Ltd Mr Benny Kan Managing Director Branch Manager O.Z. S.p.A YHI (Hong Kong) Co Ltd
Composite 22
ANNUAL REPORT 2008 ANNUAL REPORT MANUFACTURING MILESTONESOur manufacturing business segment started with one production line in Taiwan in 1996. As at 31 December 2008, we have 15 manufacturing lines in operation. From innovative product designs to quality products, YHI’s manufacturing business segment is well positioned to help the Group moves ahead. YHI INTERNATIONAL LIMITED YHI INTERNATIONAL
1996 2004-2005 2006-2007 While distribution has been the core To enhance our capability as an In 2006, we commenced production business of YHI, we took a bold integrated Original Design Manufacturer in both of our 2 new alloy wheels initiative and ventured into alloy wheels of alloy wheels, we set up YHI Precision manufacturing plants – YHI Advanti manufacturing with our first plant Moulding (Shanghai) Co Ltd to Manufacturing (Suzhou) Co Ltd located in Taoyuan, Taiwan operating manufacture and supply alloy wheels located in Suzhou, China and YHI on one production line. moulds for our manufacturing plants. Manufacturing (Malaysia) Sdn Bhd located at Sepang, Malaysia. 2000-2001 On 1 November 2005, Konig (American) became part of the YHI We were appointed by Enkei Corporation We expanded our manufacturing Group thus further expanding our to manufacture their “Enkei Tuning” range operations through the setting up geographical presence into the USA. of alloy wheels under license in all 4 of our second manufacturing plant manufacturing plants. We also acquired in Shanghai, China where its first By end of 2005, our Shanghai plant was 35.51% shareholding in O.Z. S.p.A, production line commenced operations operating at full production capacity with which is a premier alloy wheels in September 2000. By July 2001, the 6 production lines bringing our total manufacturer in Italy. production capacity in our Shanghai production lines to 7 (including Taiwan). plant expanded with its second production line.
2002-2003 YHI Precision Moulding (Shanghai) Co Ltd The second phase expansion in Shanghai was completed in September 2002. By 2003, we had four production lines in operation raising our production capacity further to meet the growing global market demand for alloy wheels.
2004-2005
2000-2001 2002-2003
1996 23 BUILDING A GLOBAL BRAND
Our Quality Certificates
2008 2009 AND THE FUTURE MAT MANUFACTURING In Feb 2008, YHI entered into a supply Our manufacturing plants will intensify and sponsorship agreement with Formula efforts to embark on various productivity One team Scuderia Toro Rosso and measures to remain competitive through O.Z. S.p.A. to supply alloy wheels bearing better production processes and the Group’s proprietary brand enhanced technologies. The introduction ADVANTI RACING. of lightweight alloy wheels is an example. In this regard, we have acquired the MAT In July 2008, we commenced the (Most Advanced Technology) machinery operation of our second production from Enkei Corporation and installed it line at our Malaysian plant. at our Suzhou manufacturing facilities.
By end of 2008, our total manufacturing capacity was 15 production lines - 12 lines in China, 1 line in Taiwan and 2 lines in Malaysia. OUR VALUED PROPOSITION - SEAMLESS SUPPLY CHAIN
Design & Advertising Distribution Manufacturing Development & Promotion & Sales
2006-2007 2008 24
ANNUAL REPORT 2008 ANNUAL REPORT FINANCIAL CALENDAR YHI INTERNATIONAL LIMITED YHI INTERNATIONAL
14 May 2008 Announcement of first quarter unaudited results
11 August 2008 Announcement of half year unaudited results
6 November 2008 Announcement of third quarter unaudited results
31 December 2008 Financial year-end
27 February 2009 Announcement of full year unaudited results
30 April 2009 Annual General Meeting 25 BUILDING A GLOBAL BRAND
CORPORATE INFORMATION
BOARD OF DIRECTORS REMUNERATION COMMITTEE SHARE REGISTRAR Tay Tian Hoe Richard Hee Theng Fong Tricor Barbinder Share Group Managing Director Chairman Registration Services 8 Cross Street Tay Tiang Guan Phua Tin How PWC Building Level 11 Executive Director Member Singapore 048424
Yuen Sou Wai Henry Tan Song Kok PRINCIPAL BANKERS Executive Director & CFO Member DBS Bank Standard Chartered Bank Henry Tan Song Kok NOMINATING COMMITTEE Malayan Banking Berhad Independent Director Phua Tin How Chairman REGISTERED OFFICE Hee Theng Fong 2 Pandan Road Independent Director Tay Tian Hoe Richard Singapore 609254 Member Tel: (65) 6264 2155 Phua Tin How Fax: (65) 6265 9927/ 6266 5368 Independent Director Henry Tan Song Kok Email: [email protected] Member Website: www.yhi.com.sg AUDIT COMMITTEE Company Registration No.: Henry Tan Song Kok COMPANY SECRETARY 200007455H Chairman Gn Jong Yuh Gwendolyn LLB Hons Hee Theng Fong Member AUDITOR PricewaterhouseCoopers LLP Phua Tin How 8 Cross Street Member PWC Building Level 17 Singapore 048424
Partner-in-charge : Soh Kok Leong Year of appointment: 2008
A powerful brand is never created by chance. It is built upon a strong foundation of long term strategic groundwork. With this in place, YHI has the competitive edge to create better value not only to customers but also to employees, business partners and shareholders. 28
REVIEW OF
ANNUAL REPORT 2008 ANNUAL REPORT YHI Group’s FY2008 results were achieved against a backdrop OPERATIONSof challenging business conditions and economic uncertainties. Despite these challenges, YHI Group managed to achieve a net profit of S$19.4 million with a turnover of S$458.0 million. YHI INTERNATIONAL LIMITED YHI INTERNATIONAL
DISTRIBUTION BUSINESS PERFORMANCE OVERVIEW The Group’s turnover for FY2008 was S$458.0 million, up Sales Performance (S$ ’million) S$31.1 million or 7.3% over the previous year. This was attributable to the increase in sales for both the distribution 2007 and manufacturing business segments. 274.1 2008 300.1 The Group’s net profit after tax decreased by S$6.9 million or 26% from S$26.3 million in FY2007 to S$19.4 million in FY2008.
PAT Performance (S$ ’million) DISTRIBUTION BUSINESS Our distribution business segment, which accounted for 2007 19.2 approximately 65% of the Group’s total revenue in FY2008, increased by S$26 million or 9.5% from S$274.1 million in 2008 18.2 FY2007 to S$300.1 million in FY2008. The increase in revenue was mainly due to stronger sales in the Asean and Oceania operations. MANUFACTURING BUSINESS Net profit after tax from our distribution business segment, Sales Performance (S$ ’million) which accounted for approximately 94% of the Group’s overall profit in FY2008 decreased by S$1 million or 5% to S$18.2 2007 million in FY2008 from S$19.2 million in FY2007. 152.8 2008 157.9 MANUFACTURING BUSINESS Our manufacturing business segment, which accounted for approximately 35% of our Group’s total revenue in FY2008, PAT Performance (S$ ’million) increased by S$5.1 million or 3% from S$152.8 million in FY2007 to S$157.9 million in FY2008. The increase in revenue 2007 7.1 2008 1.2 29 BUILDING A GLOBAL BRAND
was primarily due to increased output from additional production Yokohama tyres are not available, we will market other brands capacity in Suzhou, China. of tyres which are mainly sourced from various tyre manufacturers based in Indonesia, Korea and Taiwan. Net profit after tax from our manufacturing business segment, which accounted for approximately 6% of the Group’s overall The main focus for our manufacturing business segment is profit in FY2008 decreased from S$7.1 million in FY2007 to to improve our competitive edge to stay ahead of competitions. S$1.2 million in FY2008. Selling prices are expected to decrease in line with declining raw material and fuel costs. We shall consolidate and strive Our manufacturing business segment was operating in a for continual innovations and improvements to reduce challenging business environment in FY2008. Our manufacturing operating costs. We believe that our initiative to acquire MAT profitability was affected by high operating costs in the first machinery from Enkei Corporation will bring good benefits half of FY2008 as well as loss on foreign exchange for to our manufacturing facilities from the cost perspectives. receivables as a result of unfavourable exchange rates against Renminbi. In addition, there was a decrease of approximately We will intensify our focus to develop the market potential of S$2.0 million in the share of profit from O.Z. S.p.A in FY2008 YHI’s portfolio of premium and proprietary brands of tyres, as compared to FY2007. alloy wheels and batteries. We will continue to participate in key international trade exhibitions to leverage on the exposure LOOKING AHEAD to international customers and enhance our YHI brand image. The economic outlook in 2009 is expected to be uncertain Going forward, we will continue to build YHI into a global brand and the Group will operate in a very challenging environment name and push ahead to enhance our global positioning and and our profitability is expected to be under pressure. marketing network. The Group will be vigilant and disciplined in its business decisions and will strive for continual innovations For our distribution business segment, Yokohama tyres will and improvements in our production and distribution systems continue to be the main focus in ASEAN. In subsidiaries where so as to improve productivity and to reduce operating costs. 30
CORPORATE GOVERNANCE REPORT
CORPORATE GOVERNANCE REPORT 31
CORPORATE GOVERNANCE REPORT
REPORT ON CORPORATE GOVERNANCE 2. reviewing the adequacy and integrity of the Company’s internal controls, risk management systems and financial The Board of Directors (the “Board”) of YHI International reporting and compliance; Limited (the “Company”) recognises the importance of 3. approving major investments and divestments and corporate governance in ensuring greater transparency, funding proposals; and protecting the interests of its shareholders as well as 4. ensuring accurate, adequate and timely reporting to, and strengthening investors’ confidence in its management and communication with shareholders. financial reporting and is committed to maintaining a high standard of corporate governance within the Group. The The Board has adopted a set of internal controls and guidelines Board has also established various internal control measures which set out approval limits for investments and divestments, and monitoring mechanisms, where applicable, to ensure capital expenditure and business contracts at the Board level. that effective corporate governance is practised. The Board The Board holds regular scheduled meetings on a quarterly is also responsible for the overall corporate governance of basis to review the Group’s key activities, business strategies, the Group. funding decisions, financial performance and to approve the release of quarterly and annual results of the Group. When The Listing Manual of the SGX-ST requires that an issuer circumstances require, ad-hoc meetings are arranged. If and who holds its Annual General Meeting (“AGM”) on or after when authority to make decisions is delegated by the Board 1 January 2007 (the “effective date”) should describe its to a Board Committee, such delegation is disclosed. The corporate governance practices with specific reference to the Directors are also constantly kept updated on the Group’s Code of Corporate Governance 2005 (“Code”) in its annual development via email correspondence which allows them report. to participate and to share their views. Board meetings are conducted in Singapore and attendance by Directors are This statement outlines the main corporate governance regular either in person or via telephone conference if the practices that were in place throughout the financial year, Directors are travelling overseas. with specific references made to each of the principles of the Code in the annual report. The attendance of the Directors at meetings of the Board and Board committees, as well as the frequency of such meetings is disclosed in Table 1 below. A. BOARD MATTERS
Principle 1: Board’s Conduct of its Affairs Principle 2: Board Composition and Balance
The Board comprises three executive Directors and three The Board comprises three executive Directors and three independent Directors, all having the right competencies and independent non-executive Directors. Key information diversity of experience enabling them to effectively contribute regarding the Directors is given in the “Corporate Information” to the Group. section of this annual report. The independence of each Director will be reviewed annually by the Nominating The principal functions of the Board are: Committee. The Nominating Committee is of the view that the current Board, with independent non-executive Directors 1. reviewing and approving key business strategies making up at least one-third of the Board, has a strong and financial plans and monitoring the organisational and independent element that is able to exercise objective performance; judgement on corporate affairs independently from the
Table 1: Attendance of Directors at Board and Board committee Meetings
Attendance at Meetings in FY2008 Audit Remuneration Nominating Board Committee Committee Committee Number of meetings Number of meetings Number of meetings Number of meetings Name Held : 4 Held : 4 Held : 1 Held : 1 Tay Tian Hoe Richard 4 N.A. N.A. 1 Tay Tiang Guan 4 N.A. N.A. N.A. Yuen Sou Wai 4 N.A. N.A. N.A. Henry Tan Song Kok 4 4 1 1 Hee Theng Fong 4 4 1 N.A. Phua Tin How 4 4 1 1 32
CORPORATE GOVERNANCE REPORT
management. The Nominating Committee is also of the view Articles require at least one-third of our Directors (excluding that no individual or small group of individuals dominates the the Group Managing Director) to retire from office by rotation Board’s decision making process. and submit themselves to re-nomination and re-election by shareholders at every AGM. In other words, no Director stays The Board is of the view that the current board size of six in office for more than three years without being re-elected Directors is appropriate, taking into account the nature and by shareholders. scope of the Company’s operations. The Nominating Committee recommended to the Board The Board considers that its composition of independent that Messrs Tay Tiang Guan and Henry Tan Song Kok be non-executive Directors provide an effective Board with a mix nominated for re-appointment at the forthcoming Annual of knowledge, business contacts and successful business General Meeting (“AGM”). In making the recommendation, and commercial experience as well as core competencies the Nominating Committee had considered the Directors’ including accounting, finance, business and management. contribution to the Group. This balance is important in ensuring that the strategies proposed by the executive management are fully discussed The responsibilities of the Nominating Committee are and examined, taking into account the long term interests contained in written terms of reference and are as follows: of the Group. Non-executive Directors are actively involved in strategic decisions. We also encourage our non-executive a. reviewing and recommending to the Board annually, the Directors to meet without management present to review Board’s structure, size and composition; management’s performance and monitor reports thereof. b. identifying and making recommendations to the Board as to which Directors are to retire by rotation and to All Directors are updated regularly concerning any changes be put forward for re-election at each AGM of the in company policies, risk management and accounting Company, having regard to the Directors’ contribution standards. The Company also provides ongoing education and performance, including independent Directors; on Board processes, governance and best practices. There c. determining the criteria (in particular, taking into has been no appointment of new Directors since our listing. account a Director’s independence and competing time commitments) for identifying candidates and reviewing nominations for the appointment of Directors to the Principle 3: Role of Chairman and Group Managing Director Board; and d. deciding how the Board’s performance may be evaluated Currently, we do not have a Chairman of the Board. However, and proposing objective performance criteria for the a Chairman is usually appointed for our Board meetings and Board’s approval. the Chairman exercises control over quality, quantity and timeliness of the flow of information between management and the Board. Principle 5: Board Performance
Our Group Managing Director is Mr Tay Tian Hoe Richard. The Nominating Committee will use its best efforts to He has full executive responsibilities of the overall business ensure that Directors appointed to our Board possess the directions and operational decisions of our Group. All major relevant necessary background, experience and knowledge decisions made by our Group Managing Director are reviewed and that each Director brings to the Board an independent by the Audit Committee. and objective perspective to enable balanced and well- considered decisions to be made. A formal review of the Our Group Managing Director’s performance and appointment Board’s performance will be undertaken collectively by the to the Board is reviewed annually by the Nominating Committee Board annually and informally by the Nominating Committee and his remuneration package is reviewed periodically by the with inputs from the other Board members and the Group Remuneration Committee. Managing Director.
We believe that apart from the fiduciary duties (i.e. acting Principle 4: Board Membership in good faith, with due diligence and care and in the best interests of the Company and its shareholders), the Board’s Mr Phua Tin How, an independent non-executive Director, is key responsibilities are to set strategic directions and ensure the Chairman of the Nominating Committee. The Nominating that the long term objective of enhancing shareholders’ Committee comprises two independent Directors, Messrs wealth is achieved. Phua Tin How and Henry Tan Song Kok and an executive Director, Mr Tay Tian Hoe Richard. For the year under review, the Nominating Committee assessed the effectiveness of the Board as a whole. The We believe that Board renewal must be an ongoing process Board’s performance was measured by its ability to support which ensures both good governance and maintains relevance the management especially in times of crisis and to steer the to the changing needs of the Company and business. Our Company towards profitable directions and the attainment 33
CORPORATE GOVERNANCE REPORT of strategic and long-term objectives set by the Board. B. REMUNERATION MATTERS Hence, the Nominating Committee adopted a formal policy to evaluate the Board’s performance as a whole. Principle 7: Procedures for Developing Remuneration Policies Principle 8: Level and Mix of Remuneration Principle 6: Access to Information The function of the Remuneration Committee is to review the In order to ensure that the Board is able to discharge its remuneration of the executive Directors of the Company and responsibilities, the management is required to provide to provide a greater degree of objectivity and transparency in adequate and timely information to the Board on Board the setting of remuneration. affairs and issues that require the Board’s decision as well as ongoing reports relating to the operational and financial Mr Hee Theng Fong, an independent Director, is the Chairman performance of the Company. of the Remuneration Committee. The Remuneration Committee comprises three independent Directors, Messrs In order to properly prepare Directors for Board meetings, Hee Theng Fong, Henry Tan Song Kok and Phua Tin How. all Directors are issued a Board report prior to any Board meeting to provide contextual information that enables them The responsibilities of the Remuneration Committee are: to obtain further information, where necessary. a. to recommend to the Board a framework of remuneration The Board has separate and independent access to the for the executive Directors of the Group on all aspects of senior management and the Company Secretary at all times. remuneration such as Directors’ fees, salaries, allowances, Should Directors, whether as a group or individually, need bonuses, options and benefits-in-kind; and independent professional advice, the Company Secretary b. to determine the specific remuneration packages and will, upon directions by the Board, appoint a professional terms of employment for each executive Director. advisor selected by the group or the individual to render the advice. The cost of such professional advice will be borne by The Remuneration Committee has access to expert the Company. professional advice on human resource matters whenever there is a need to consult externally. In its deliberations, the The Company Secretary attends all meetings of the Board and Remuneration Committee takes into consideration industry ensures that board procedures are followed and applicable practices and norms in compensation in addition to the rules and regulations are complied with. The Company Company’s relative performance and the performance of the Secretary also attends all meetings of the Audit Committee, individual Directors. No Director will be involved in deciding Nominating Committee and Remuneration Committee. The his own remuneration. appointment and removal of the Company Secretary is a matter for the Board as a whole. The performance-related elements of remuneration should form a significant proportion of the total remuneration Please refer to the “Corporate Information” section of the package of the executive Director. Each executive Director annual report for the composition of the Company’s Board of has a service contract with a fixed appointment period and Directors and Board committees. the Remuneration Committee reviews in particular termination provisions. The remuneration of each non-executive Director is determined by his contribution to the Company, taking into account factors such as efforts and time spent as well as his responsibilities on the Board. The Board will recommend the remuneration of the non-executive Directors for approval at the AGM.
Table 2: The breakdown of the Directors’ remuneration for FY2008
S$500,001 % of % of Below to Above Variable Fixed Remuneration Bands S$500,000 S$1,000,000 S$1,000,000 Remuneration Remuneration Tay Tian Hoe Richard - - • 78 % 22 % Tay Tiang Guan - - • 81 % 19 % Yuen Sou Wai - • - 70 % 30 % Henry Tan Song Kok • - - - - Hee Theng Fong • - - - - Phua Tin How • - - - - 34
CORPORATE GOVERNANCE REPORT
The YHI Share Option Scheme (“Scheme”) was put in place C. ACCOUNTABILITY AND AUDIT on 22 May 2003. However, we have not granted any share options pursuant to the YHI Share Option Scheme in past Principle 10: Accountability financial years. The Board believes that it should promote best practices as a The Scheme will be administered by a committee comprising means to build an excellent business for our shareholders as the following members: they are accountable to shareholders for the Company’s and the Group’s performance. • Hee Theng Fong (Chairman) • Henry Tan Song Kok The Board is mindful of its obligations to provide timely and • Phua Tin How fair disclosure of material information in compliance with statutory reporting requirements. Price sensitive information is first publicly released, either before the Company meets Principle 9: Disclosure of Remuneration with any group of investors or analysts or simultaneously with such meetings. Our executive Directors’ remuneration consists of their salary, allowances, bonuses, and profit sharing awards conditional Financial results and annual reports will be announced or upon their meeting certain profit before tax targets. Our issued within the mandatory period. The Board will provide independent non-executive Directors have remuneration reports to regulators when required. The management will packages which consist of a Directors’ fee component. The provide the Board with monthly management accounts when Directors’ fees are based on a scale of fees divided into basic required. retainer fees as a Director and additional fees for serving on Board committees as the chairman of the committee. Directors’ fees for independent non-executive Directors are Principle 11: Audit Committee subject to the approval of shareholders at the AGM. Mr Henry Tan Song Kok, an independent Director is the The report on Directors’ remuneration for financial year 2008 Chairman of the Audit Committee. The Audit Committee is disclosed in Table 2. comprises three independent Directors, Messrs Henry Tan Song Kok, Hee Theng Fong and Phua Tin How. At least two members of the Audit Committee have the appropriate Remuneration of Key Employees accounting or related financial management expertise or experience. The Audit Committee has explicit authority and Details of remuneration paid to the executive officers (who are reasonable resources, as well as full access to the Directors not Directors of the Company) of the Group for the financial and executives. year 2008 are set out below: The Audit Committee holds periodic meetings and reviews primarily the following: Name of Key Executive* Below S$250,000 (a) the audit plan of our Company’s external auditor; Tan Yong Quan Robert • (b) the external auditor’s reports; Lu Chun Ya • (c) the co-operation given by our officers to the external auditor; * Remuneration amounts are inclusive of salary, bonus, allowances and (d) the scope and results of the internal audit procedures; Central Provident Fund contributions. There were no share options (e) the financial statements of our Company and our Group granted to employees during the financial year. before their submission to our Board; (f) the independence of the external auditor; (g) nomination of external auditor for appointment; Details of employees whose remuneration exceed S$150,000 (h) our Group’s compliance with such functions and duties as and are immediate family members of our executive Directors may be required under the relevant statutes or the Listing are set out below: Manual of the SGX-ST, and by such amendments made thereto from time to time; Name of Employee Below S$250,000 (i) interested persons transactions; and (j) capital expenditure transactions. Tay Thiam Seng + •
Tay Soek Eng Margaret + • The Audit Committee meetings are attended by the Group Managing Director, executive Directors and Internal Auditor. + Mr Tay Thiam Seng and Mdm Tay Soek Eng Margaret are related to our The presence of the external auditor has been requested executive Directors, Mr Tay Tian Hoe Richard and Mr Tay Tiang Guan. during these meetings. During this financial year, the Audit Committee has also met up with the external auditor and with the Internal Auditor, without any executives of the Group being present. 35
CORPORATE GOVERNANCE REPORT
Since the financial year 2007, the Audit Committee has on behalf of the Board, has reviewed the effectiveness of the implemented whistle blowing arrangements, which allow staff internal control system put in place by the management and and shareholders of the Company to confidentially report is satisfied that there are adequate internal controls in the violations of the Group’s Code of Ethics and Business Conduct Company. The Directors regularly review the effectiveness of (see the Company’s Management Manual), complaints and/ all internal controls, including operational controls. or questionable accounting, control or auditing practices. The reports can be made on an anonymous basis, but the Company recommends that the informant(s) put their name(s) Principle 13: Internal Audits to the allegations. The Group has a policy of “no-retaliation” against good-faith informants. The Audit Committee’s responsibility in overseeing that the Company’s internal controls and risk management systems The Internal Auditor shall investigate any allegations and are adequate will be complemented by the work of the Internal reports to the Audit Committee, and depending on various Auditor (“IA”). The IA reports directly to the chairman of the factors, including the seriousness of the matter, may Audit Committee on audit matters. The Audit Committee also involve the external auditor, the Independent Inquiry meets with the IA at least once during the year without the Committee, and/or the police. presence of management. The Audit Committee also reviews the IA’s reports on a quarterly basis. The Audit Committee also Within 14 days of completion of the investigations (which reviews and approves the annual IA plans and resources to should usually take no longer than 14 days) the informant ensure that the IA has the necessary resources to adequately (if not anonymous) will be informed of the results of the perform its functions. investigations, but any disciplinary action taken will remain confidential. The Group will protect the informant unless The IA has adopted the Standards for Professional Practice the allegations are found to have been false and made of Internal Auditing set by The Institute of Internal Auditors. To maliciously, in which event the informant’s behaviour will be ensure the adequacy of the internal audit functions, the Audit treated as gross misconduct and handled accordingly. The Committee has reviewed the IA’s activities, the IA’s resources Audit Committee ensures that the investigations conducted and standing in the Company, on a half yearly basis. are independent and the follow-up action(s) appropriate.
In addition to the above, the Audit Committee shall commission D. COMMUNICATION WITH SHAREHOLDERS and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of Principle 14: Communication with Shareholders internal controls or infringement of any Singapore law, rule or Principle 15: Greater Shareholder Participation regulation which has or is likely to have a material impact on our Group’s operating results and/or financial position. Each We believe in regular and timely communication with member of the Audit Committee shall abstain from voting on shareholders as part of our organisation development to any resolutions and making any recommendations and/or build systems and procedures that will enable us to operate participating in any deliberations of the Audit Committee in globally. respect of matters in which he is interested. We believe that a high level of disclosure on a timely basis is The Audit Committee has nominated PricewaterhouseCoopers essential to enhance the standard of corporate governance. LLP for re-appointment as auditor of the Company at the Hence, the Company does not practise selective disclosure. forthcoming AGM. In line with the provisions of the Listing Manual of the SGX-ST and the Companies Act (Cap 50, Singapore), the Board’s policy The Audit Committee has conducted an annual review of is that all shareholders should be equally and timely informed the volume of non-audit services to satisfy itself that the of all major developments that impact the Company or the nature and extent of such services will not prejudice the Group. It is also the Board’s policy that all corporate news, independence and objectivity of the auditor before confirming strategies and announcements be promptly disseminated their re-nomination. through the SGXNET system, press releases, annual reports, and other various media including our corporate website (http://www.yhi.com.sg). Principle 12: Internal Controls The Group Managing Director and executive Directors The Board acknowledges that it is responsible for the overall meet up with analysts and investors when our quarterly internal control framework, but recognises that no cost effective results are announced through the SGXNET system, to internal control system will preclude all errors and irregularities, explain our financial performance, Group’s strategy and as a system is designed to manage rather than eliminate the major developments. However, any information that may risk of failure to achieve business objectives, and can provide be regarded as undisclosed material information about the only reasonable and not absolute assurance against material Group will not be given. misstatement or loss. During the year, the Audit Committee, 36
CORPORATE GOVERNANCE REPORT
We support the Code’s principle to encourage shareholder the Best Practices Guide issued by SGX-ST and that internal participation. Shareholders are encouraged to attend the AGM controls are adequate for its current operations. and to stay informed of the Company’s strategy and goals, to ensure a high level of accountability. Notice of the AGM is despatched to shareholders, together with explanatory notes G. MATERIAL CONTRACTS or a circular on items of special business (if necessary), at least 14 working days before the meeting. Shareholders may There were no material contracts entered into by the Company vote in person or by proxy. The Board welcomes questions or its subsidiaries for the benefit of the Directors or controlling from shareholders who wish to raise issues either informally shareholders during the financial year ended 31 December or formally before or at the AGM. The Chairpersons of the 2008. Audit, Remuneration and Nominating Committees, and the external auditors, are normally available at the meeting to answer questions relating to the work of their committees. H. INTERESTED PERSONS TRANSACTIONS
The Company has adopted an internal policy in respect of E. DEALING IN SECURITIES any transaction with interested persons and has set out the procedures for review and approval of the Company’s The Company has adopted internal codes pursuant to the interested persons transactions. SGXST Best Practices Guide applicable to all its officers in relation to dealings in the Company’s securities. Its officers In order to ensure that the Company complies with Chapter are not allowed to deal in the Company’s shares during the 9 of the Listing Manual of the SGX-ST on interested persons period commencing two weeks before the announcement of transactions, the Audit Committee meets quarterly to review the Company’s quarterly, half-yearly and one month before all interested persons transactions of the Company. However, the announcement of the Company’s full year results and if the Company enters into an interested persons transaction, ending on the date of the announcement of these results. the Audit Committee ensures compliance with the relevant rules under Chapter 9. Directors and executives are also expected to observe insider trading laws at all times even when dealing with securities There were no interested persons transactions conducted within permitted trading period(s). under the shareholders’ mandate pursuant to Rule 920 of the Listing Manual of the SGX-ST.
F. BEST PRACTICES GUIDE There were no interested persons transactions entered between the Group and interested persons during the financial The Board confirms that during the financial year ended 31 period from 01 January 2008 to 31 December 2008. December 2008, the Company has complied materially with
Aggregate value of all interested Aggregate value of persons transactions during the all interested persons financial year under review (excluding transactions conducted transactions less than S$100,000 under shareholders’ Mandate and transactions conducted under (excluding transactions less Interested Persons Shareholders’ Mandate) than S$100,000) Total NA NIL NIL NIL 37
CORPORATE GOVERNANCE REPORT
// FINANCIAL // // // Independent Auditor’s Report // Statistics42 of Shareholdings 86 REPORT // Consolidated Statement of Changes in Equity 45 // Statement by // Directors Balance 41Sheets 44 // Notes to the Financial Statements 47 Directors’ Report 38 // Proxy Form Consolidated Income Statement 43 Consolidated Cash Flow Statement 46 Notice of Annual General Meeting 88 38
DIRECTORS’
REPORTFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
The directors present their report to the members together with the audited financial statements of the Group for the financial year ended 31 December 2008 and the balance sheet of the Company at 31 December 2008.
Directors The directors of the Company in office at the date of this report are as follows:
Tay Tian Hoe Richard Tay Tiang Guan Yuen Sou Wai Henry Tan Song Kok Hee Theng Fong Phua Tin How
Arrangements to enable directors to acquire shares and debentures Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate, other than as disclosed under “Share Options” on pages 39 and 40 of this report.
Directors’ interests in shares and debentures (a) According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or its related corporations, except as follows:
Holdings registered in Holdings in which a director name of director or norminee is deemed to have an interest
At At At At 31.12.2008 1.1.2008 31.12.2008 1.1.2008
The Company (No. of ordinary shares) Tay Tian Hoe Richard 18,674,000 13,234,000 344,949,628 342,423,628 Tay Tiang Guan 3,800,000 600,000 400,000 400,000 Yuen Sou Wai 240,000 240,000 – – Hee Theng Fong 120,000 120,000 – – Henry Tan Song Kok 40,000 40,000 – – Phua Tin How 110,000 110,000 – –
immediate and ultimate holding company - YHI Holdings Pte Ltd (No. of ordinary shares) Tay Tian Hoe Richard 422,765 388,967 – – Tay Tiang Guan 170,450 170,450 – –
39
DIRECTORS’
REPORTFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
Directors’ interests in shares or debentures (conT’D)
(b) Tay Tian Hoe Richard, who by virtue of his interest of not less than 20% of the issued capital of the Company, is deemed to have an interest in the whole of the share capital of the Company’s wholly-owned subsidiaries and in the shares held by the Company in the following subsidiaries that are not wholly-owned by the Group:
At 31.12.2008 At 1.1.2008 YHI (Australia) Pty Limited - No. of ordinary shares 80,000 80,000
YHI (New Zealand) Limited - No. of ordinary shares 70,000 70,000
Pan-Mar Corporation D/B/A Konig (American) - Common stock US$76,500 US$76,500
TTS International Co., Ltd - No. of ordinary shares 120 120
YHI Power Pty Limited - No. of ordinary shares 6,400 6,400
YHI Corporation (Thailand) Co Ltd - No. of ordinary shares 24,500 24,500
Evo-Trend Corporation (Malaysia) Sdn Bhd - No. of ordinary shares 160,000 160,000
YHI (Canada) Inc. - No. of ordinary shares 180,000 180,000
Advanti Racing USA LLC - Common stock US$45,900 –
PT YHI Indonesia - No. of ordinary shares 304,000 –
(c) The directors’ interest in the ordinary shares of the Company as at 21 January 2009 were the same as those as at 31 December 2008.
Directors’ contractual benefits
Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest, except as disclosed in the accompanying financial statements and in this report.
SHARE options
YHI Share Option Scheme The YHI Share Option Scheme (the “Scheme”) for key management personnel and employees of the Group in respect of unissued shares of the Company was approved by the members of the Company at an Extraordinary General Meeting on 22 May 2003. The purpose of the Scheme is to provide an opportunity for executive directors and employees of the Group to participate in the equity of the Company so as to motivate them towards better performance through increased dedication and loyalty. The members of the Remuneration Committee administering the Scheme are Phua Tin How, Hee Theng Fong and Henry Tan Song Kok.
The aggregate number of shares over which options may be granted on any date, when added to the number of shares issued and issuable in respect of all options granted under the Scheme, shall not exceed 15% of the issued shares of the Company on the day preceding that date. 40
DIRECTORS’
REPORTFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
Share options (cont’d)
YHI Share Option Scheme (cont’d) The number of shares comprised in any options to be offered to a participant in the Scheme shall be determined at the absolute discretion of the Remuneration Committee, who shall take into account criteria such as the rank, the past performance, years of service, potential for future development and contribution of the participant.
Offers of options made to grantees, if not accepted by the grantees within 30 days will lapse. The Scheme shall continue in operation for a maximum of 10 years commencing on the date which the Scheme is adopted by the Company in general meeting, unless otherwise extended by the members by ordinary resolution in general meeting.
There were no options granted during the financial year to subscribe for unissued shares of the Company or its subsidiaries.
No shares were issued during the year by virtue of the exercise of options to take up unissued shares of the Company or its subsidiaries.
There were no unissued shares of the Company under the option at the end of the financial year.
Audit Committee
The members of the Audit Committee at the end of the financial year were as follows:
Henry Tan Song Kok (Chairman) Hee Theng Fong Phua Tin How
All members of the Audit Committee were non-executive directors.
The Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act. In performing those functions, the Committee reviewed:
• The scope and the results of internal audit procedures with the internal auditor;
• The audit plan of the Company’s independent auditor and its report on the weaknesses of internal accounting controls arising from the statutory audit;
• The assistance given by the Company’s management to the independent auditor; and
• The balance sheet of the Company and the consolidated financial statements of the Group for the financial year ended 31 December 2008 before their submission to the Board of Directors, as well as the independent auditor’s report on the balance sheet of the Company and the consolidated financial statements of the Group.
The Audit Committee has recommended to the Board that the independent auditor, PricewaterhouseCoopers LLP, be nominated for re-appointment at the forthcoming Annual General Meeting of the Company.
Independent Auditor The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re-appointment.
On behalf of the directors
TAY TIAN HOE RICHARD YUEN SOU WAI Director Director
10 March 2009
41
STATEMENT
BYFOR DIRECTORS THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
In the opinion of the directors,
(a) the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 43 to 85 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 2008 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended; and
(b) 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
TAY TIAN HOE RICHARD YUEN SOU WAI Director Director
10 March 2009
42
INDEPENDENT
AUDITOR’STO THE MEMBERS OF YHI REPORT INTERNATIONAL LIMITED
We have audited the accompanying financial statements of YHI International Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 43 to 85, which comprise the balance sheets of the Company and of the Group as at 31 December 2008, and the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement of the Group for the financial 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 control 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.
Auditor’s 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 as to 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 judgement, 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.
Opinion In our opinion,
(a) the balance sheet of the Company and the consolidated financial statements of the Group 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 2008 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.
PricewaterhouseCoopers LLP Public Accountants and Certified Public Accountants Singapore, 10 March 2009
43
CONSOLIDATED
INCOME FOR THE FINANCIAL STATEMENT YEAR ENDED 31 DECEMBER 2008
Note 2008 2007 $’000 $’000
Sales 4 457,974 426,887 Cost of sales 5 (346,591) (327,954) Gross profit 111,383 98,933
Other gains - net 4 1,594 1,959
Expenses - Distribution 5 (34,965) (30,693) - Administrative 5 (45,283) (34,042) - Finance 6 (6,333) (4,844)
Share of profit of associated companies 15 522 2,476
Profit before income tax 26,918 33,789
Income tax expense 8 (5,835) (5,950) Total profit 21,083 27,839
Attributable to: Equity holders of the Company 19,436 26,256 Minority interests 1,647 1,583 21,083 27,839
Earnings per share attributable to the equity holders of the Company 9 - Basic 3.32 cents 4.49 cents - Diluted 3.32 cents 4.49 cents
The accompanying notes form an integral part of these financial statements. 44
BALANCE
SHEETSAS AT 31 DECEMBER 2008
Group Company Note 2008 2007 2008 2007 $’000 $’000 $’000 $’000
ASSETS Current assets Cash and cash equivalents 10 20,929 23,360 615 471 Trade and other receivables 11 75,262 84,253 38,188 50,164 Inventories 12 97,976 92,971 – – Other current assets 13 9,209 9,864 15 39
203,376 210,448 38,818 50,674 Non-current assets Financial assets, available-for-sale 14 6,830 6,830 – – Transferable club membership, at cost 131 131 – – Investments in associated companies 15 17,172 16,650 – – Investments in subsidiaries 16 – – 86,194 72,917 Property, plant and equipment 17 86,671 88,643 377 351 Intangible assets 18 4,099 5,303 – – Deferred income tax assets 8 4,867 3,489 – –
119,770 121,046 86,571 73,268
Total assets 323,146 331,494 125,389 123,942
LIABILITIES Current liabilities Trade and other payables 19 43,220 59,837 4,404 5,053 Current income tax liabilities 8 3,304 3,765 582 843 Borrowings 20 83,993 85,209 – –
130,517 148,811 4,986 5,896
Non-current liabilities Borrowings 20 6,778 8,307 – – Deferred income tax liabilities 8 1,197 1,305 – – 7,975 9,612 – –
Total liabilities 138,492 158,423 4,986 5,896
NET ASSETS 184,654 173,071 120,403 118,046
EQUITY Capital and reserves attributable to equity holders of the Company Share capital 22 77,001 77,001 77,001 77,001 Other reserves 23 2,388 1,125 – – Retained earnings 24 100,989 89,983 43,402 41,045
180,378 168,109 120,403 118,046 Minority interests 4,276 4,962 – –
Total equity 184,654 173,071 120,403 118,046
The accompanying notes form an integral part of these financial statements. 45
CONSOLIDATED STATEMENT OF CHANGESFOR THE FINANCIAL IN EQUITY YEAR ENDED 31 DECEMBER 2008
Attributable to equity holders of the Company Share Other Retained Minority Total Note capital reserves earnings Total interests equity $’000 $’000 $’000 $’000 $’000 $’000
2008 Beginning of financial year 77,001 1,125 89,983 168,109 4,962 173,071 Currency translation differences – 725 – 725 (1,862) (1,137) Net profit – – 19,436 19,436 1,647 21,083 Total recognised income/(loss) – 725 19,436 20,161 (215) 19,946 Transfer to other reserves 23(b)(i ) – 538 (538) – – – Dividends relating to 2007 paid 25 – – (7,892) (7,892) (471) (8,363)
End of financial year 77,001 2,388 100,989 180,378 4,276 184,654
2007 Beginning of financial year 77,001 (290) 71,390 148,101 4,662 152,763 Currency translation differences – 767 – 767 (711) 56 Net profit – – 26,256 26,256 1,583 27,839 Total recognised income – 767 26,256 27,023 872 27,895 Transfer to other reserves 23(b)(i ) – 648 (648) – – – Dividends relating to 2006 paid 25 – – (7,015) (7,015) (572) (7,587)
End of financial year 77,001 1,125 89,983 168,109 4,962 173,071
The accompanying notes form an integral part of these financial statements. 46
CONSOLIDATED CASH FLOW STATEMENTFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2008
Note 2008 2007 $’000 $’000
Cash flows from operating activities Total profit 21,083 27,839
Adjustments for: - Income tax expense 5,835 5,950 - Depreciation of property, plant and equipment 11,725 9,739 - Amortisation of intangible assets 63 – - Loss on disposal of subsidiaries 765 – - Gain on disposal of property, plant and equipment (228) (110) - Interest expense 6,333 4,844 - Interest income (291) (343) - Share of profit of associated companies (522) (2,476) - Changes in fair values of derivatives – 73 - Unrealised translation gains (3,521) (309)
Operating cash flow before working capital changes 41,242 45,207
Changes in working capital, net of effects from disposal of subsidiary: - Inventories (5,024) (25,225) - Trade and other receivables 8,864 (17,626) - Other current assets 655 (3,735) - Trade and other payables (16,583) 6,835
Cash generated from operations 29,154 5,456
Interest received 291 343 Income tax paid (7,355) (6,685)
Net cash provided by/(used in) operating activities 22,090 (886)
Cash flows from investing activities Proceeds from disposal of subsidiaries, net of cash 10 3,118 – Purchase of property, plant and equipment (10,512) (17,197) Proceeds from disposal of property, plant and equipment 1,079 2,098 Purchase of financial assets, available-for-sale – (1,815)
Net cash used in investing activities (6,315) (16,914)
Cash flows from financing activities Proceeds from borrowings 34,771 53,245 Repayment of borrowings (37,440) (21,291) Repayment of finance lease liabilities (740) (327) Interest paid (6,372) (4,802) Dividends paid to equity holders of the Company (7,892) (7,015) Dividends paid to minority interests (471) (572)
Net cash (used in)/provided by financing activities (18,144) 19,238
Net (decrease)/increase in cash and cash equivalents held (2,369) 1,438 Cash and cash equivalents at beginning of financial year 19,950 18,568 Effects of currency translation on cash and cash equivalents (32) (56)
Cash and cash equivalents at end of financial year 10 17,549 19,950
The accompanying notes form an integral part of these financial statements. 47
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
1. General information
YHI International Limited (the “Company”) is listed on the Singapore Exchange and incorporated and domiciled in Singapore. The address of its registered office is No. 2 Pandan Road, Singapore 609254.
The principal activity of the Company is that of an investment holding company. The principal activities of its subsidiaries are set out in Note 16 to the financial statements.
2. Significant accounting policies
2.1 basis of Preparation The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below.
The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group’s accounting policies. It also requires the use of certain critical accounting estimates and assumptions. Areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in Note 3.
There are no new or amended Standards and Interpretations effective in 2008 which are relevant to the Group.
2.2 revenue Recognition Sales comprise the fair value of the consideration received or receivable for the sale of goods in the ordinary course of the Group’s activities. Sales are presented net of value-added tax, rebates and discounts, and after eliminating sales within the Group.
The Group recognises revenue when the amount of revenue and related cost can be reliably measured, when it is probable that the collectibility of the related receivables is reasonably assured and when the specific criteria for each of the Group’s activities are met as follows:
(a) Sale of Goods – Automotive and Industrial Product and Alloy Wheels Revenue from these sales is recognised when a Group entity has delivered the products to locations specified by its customers and the customers have accepted the products in accordance with the sales contract.
(b) Interest Income Interest income is recognised using the effective interest method.
(c) Dividend Income Dividend income is recognised when the right to receive payment is established.
2.3 group Accounting
(a) Subsidiaries
Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and operating policies, generally accompanied by a shareholding giving rise to the majority of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.
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 dates of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value on the date of acquisition, irrespective of the extent of minority interest. Please refer to the paragraph “Intangible assets – Goodwill” for the accounting policy on goodwill on acquisition of subsidiaries.
48
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
2. Significant Accounting Policies (cont’d) 2.3 group Accounting (cont’d) (a) Subsidiaries (cont’d) Subsidiaries are consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date on which control ceases.
In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group entitles are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the assets transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Minority interests are that part of the net results of operations and of net assets of a subsidiary attributable to interests which are not owned directly or indirectly by the Group. They are measured at the minorities’ share of the fair value of the subsidiaries’ identifiable assets and liabilities at the date of acquisition by the Group and the minorities’ share of changes in equity since the date of acquisition, except when the minorities’ share of losses in a subsidiary exceeds its interests in the equity of that subsidiary. In such cases, the excess and further losses applicable to the minorities are attributed to the equity holders of the Company, unless the minorities have a binding obligation to, and are able to, make good the losses. When that subsidiary subsequently reports profits, the profits applicable to the minority interests are attributed to the equity holders of the Company until the minorities’ share of losses previously absorbed by the equity holders of the Company are fully recovered.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the accounting policy on investments in subsidiaries in the separate financial statements of the Company.
(b) Transactions with Minority Interests The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recognised in the income statement. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the Group’s incremental share of the carrying value of identifiable net assets of the subsidiary.
(c) Associated Companies Associated companies are entities over which the Group has significant influence, but not control, generally accompanied by a shareholding giving rise to between and including 20% and 50% of the voting rights. Investments in associated companies are accounted for in the consolidated financial statements using the equity method of accounting less impairment losses.
Investments in associated companies are initially recognised at cost. The cost of an acquisition is measured at 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.
In applying the equity method of accounting, the Group’s share of its associated companies’ post-acquisition profits or losses are recognised in the income statement and its share of post-acquisition movements in reserves is recognised in equity directly. These post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associated company equals or exceeds its interest in the associated company, including any other unsecured non-current receivables, the Group does not recognise further losses, unless it has incurred obligations or has made payments on behalf of the associated company.
Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associated companies have been changed where necessary to ensure consistency with the accounting policies adopted by the Group.
Dilution gains and losses arising from investments in associated companies are recognised in the income statement.
Please refer to the paragraph “Investments in subsidiaries and associated companies” for the accounting policy on investments in associated companies in the separate financial statements of the Company. 49
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
2. Significant Accounting Policies (cont’d) 2.4 Property, Plant and Equipment (a) Measurement (i) Property, Plant And Equipment Property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses.
(ii) Component of Costs The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
(b) Depreciation Freehold land is not depreciated. Depreciation on other items of property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:
Useful lives
Buildings on freehold land 50 years Leasehold properties 3 to 50 years Office equipment, plant and machinery 2 to 5 years Motor vehicles 3 to 7 years Renovation 5 to 10 years Computers 2 to 5 years Furniture and fittings 2 to 10 years
The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are included in the income statement when the changes arise.
(c) Subsequent Expenditure Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. All other repair and maintenance expenses are recognised in the income statement when incurred.
(d) Disposal On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in the income statement.
2.5 intangible Assets (a) Goodwill on Acquisitions Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable assets, liabilities and contingent liabilities of the acquired subsidiaries and associated companies at the date of acquisition.
Goodwill on subsidiaries is recognised separately as intangible assets and carried at cost less accumulated impairment losses.
Goodwill on associated companies is included in the carrying amount of the investments.
Gains and losses on the disposal of subsidiaries and associated companies include the carrying amount of goodwill relating to the entity sold, except for goodwill arising from acquisitions prior to 1 January 2001. Such goodwill was adjusted against retained earnings in the year of acquisition and not recognised in the income statement on disposal.
50
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
2. Significant Accounting Policies (cont’d) 2.5 intangible Assets (cont’d) (b) Acquired Trademarks Trademarks acquired are initially recognised at cost and are subsequently carried at cost less accumulated amortisation and accumulated impairment losses. These costs are amortised to the income statement using the straight-line method over 30 years.
The amortisation period and amortisation method of trademarks are reviewed at least at each balance sheet date. The effects of any revision are included in the income statement for the financial year in which the changes arise.
2.6 investments in Subsidiaries and Associated Companies Investments in subsidiaries and associated companies are carried at cost less accumulated impairment losses in the Company’s balance sheet. On disposal of investments in subsidiaries, the difference between net disposal proceeds and the carrying amounts of the investments are recognised in the income statement.
2.7 impairment of Non-Financial Assets (a) Goodwill Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired. Goodwill included in the carrying amount of an investment in associated company is tested for impairment as part of the investment, rather than separately.
For the purpose of impairment testing of goodwill, goodwill is allocated to each of the Group’s cash-generating- units (“CGU”) expected to benefit from synergies arising from the business combination.
An impairment loss is recognised when the carrying amount of a CGU, including the goodwill, exceeds the recoverable amount of the CGU. The recoverable amount of a CGU is the higher of the CGU’s fair value less cost to sell and value-in-use.
The total impairment loss of a CGU is allocated first to reduce the carrying amount of goodwill allocated to the CGU and then to the other assets of the CGU pro-rata on the basis of the carrying amount of each asset in the CGU.
An impairment loss on goodwill is recognised in the income statement and is not reversed in a subsequent period.
(b) Intangible Assets Property, Plant and Equipment Investments in Subsidiaries and Associated Companies Intangible assets, property, plant and equipment and investments in subsidiaries and associated companies are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and the value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, the recoverable amount is determined for the CGU to which the asset belongs.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount is recognised as an impairment loss in the income statement.
An impairment loss for an asset other than goodwill is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of this asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years. A reversal of impairment loss for an asset other than goodwill is recognised in the income statement. 51
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
2. Significant Accounting Policies (cont’d) 2.8 financial Assets (a) Classification The Group classifies financial assets in the following categories: loans and receivables, and available-for-sale. The classification depends on the purpose for which the assets were acquired. Management determines the classification of its financial assets at initial recognition.
(i) 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 are presented as current assets, except for those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Loans and receivables are presented as “trade and other receivables” and “cash and cash equivalents” on the balance sheet.
(ii) Financial assets, available-for-sale Financial assets, available-for-sale, are non-derivatives that are either designated in this category or not classified in any of the other categories. They are presented as non-current assets unless management intends to dispose off the assets within 12 months after the balance sheet date.
(b) recognition and Derecognition Regular way purchases and sales of financial assets are recognised on trade-date – the date on which the Group commits to purchase or sell the asset.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. On disposal of a financial asset, the difference between the carrying amount and the sale proceeds is recognised in the income statement. Any amount in the fair value reserve relating to that asset is transferred to the income statement.
(c) initial Measurement Financial assets are initially recognised at fair value plus transaction costs.
(d) subsequent Measurement Financial assets, available-for-sale are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method.
Interest and dividend income on financial assets, available-for-sale are recognised separately in the income statement. Changes in the fair values of available-for-sale debt securities (i.e. monetary items) denominated in foreign currencies are analysed into currency translation differences on the amortised cost of the securities and other changes; the currency translation differences are recognised in the income statement and the other changes are recognised in the fair value reserve. Changes in fair values of available-for-sale equity securities (i.e. non-monetary items) are recognised in the fair value reserve, together with the related currency translation differences.
(e) impairment The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognises an allowance for impairment when such evidence exists.
(i) Loans and receivables Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, and default or significant delay in payments are objective evidence that these financial assets are impaired.
The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. When the asset becomes uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are recognised against the same line item in the income statement. 52
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
2. Significant Accounting Policies (cont’d) 2.8 financial Assets (cont’d) (e) Impairment (cont’d) (i) Loans and receivables (cont’d) The allowance for impairment loss account is reduced through the income statement in a subsequent period when the amount of impairment loss decreases and the related decrease can be objectively measured. The carrying amount of the asset previously impaired is increased to the extent that the new carrying amount does not exceed the amortised cost had no impairment been recognised in prior periods.
(ii) Financial assets, available-for-sale Significant or prolonged declines in the fair value of the security below its cost and the disappearance of an active trading market for the security are objective evidence that the security is impaired.
The cumulative loss that was recognised in the fair value reserve is transferred to the income statement. The cumulative loss is measured as the difference between the acquisition cost (net of any principal repayments and amortisation) and the current fair value, less any impairment loss previously recognised in the income statement on debt securities. The impairment losses recognised in the income statement on equity securities are not reversed through the income statement.
2.9 borrowings Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date.
Borrowings are initially recognised at fair value (net of transaction costs) and are subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the effective interest method.
2.10 trade and Other Payables Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost using the effective interest method.
2.11 fair Value Estimation of Financial Assets and Liabilities The fair values of financial instruments traded in active markets (such as exchange-traded and over-the-counter securities and derivatives) are based on quoted market prices at the balance sheet date. The quoted market prices used for financial assets are the current bid prices; the appropriate quoted market prices for financial liabilities are the current ask prices.
The fair values of financial instruments that are not traded in an active market are determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Where appropriate, quoted market prices or dealer quotes for similar instruments are used. Valuation techniques, such as estimated discounted cash flow analyses, are also used to determine the fair values of the financial instruments. The fair values of currency forwards are determined using actively quoted forward exchange rates.
The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.
2.12 leases When the Group is the lessee:
The Group leases certain property, plant and equipment from non-related parties.
(a) Lessee - Finance Leases Leases where the Group assumes substantially all risks and rewards incidental to ownership of the leased assets are classified as finance leases. 53
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
2. Significant Accounting Policies (cont’d) 2.12 leases (cont’d) (a) Lessee - Finance Leases (cont’d) The leased assets and the corresponding lease liabilities (net of finance charges) under finance leases are recognised on the balance sheet as property, plant and equipment and borrowings respectively, at the inception of the leases based on the lower of the fair value of the leased assets and the present value of the minimum lease payments.
Each lease payment is apportioned between the finance expense and the reduction of the outstanding lease liability. The finance expense is recognised in the income statement on a basis that reflects a constant periodic rate of interest on the finance lease liability.
(b) Lessee - Operating Leases Leases of property, plant and equipment where substantially all risks and rewards incidental to ownership are retained by the lessors are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in the income statement on a straight-line basis over the period of the lease.
2.13 inventories Inventories are carried at the lower of cost and net realisable value. Cost is determined on a weighted average basis. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity) but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
2.14 income Taxes Current income tax for current and prior periods is recognised at the amount expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date.
Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction.
A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries and associated companies, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised.
Deferred income tax is measured:
(i) At the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date; and
(ii) Based on the tax consequence that will follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.
Current and deferred income taxes are recognised as income or expenses in the income statement, except to the extent that the tax arises from a business combination or a transaction which is recognised directly in equity. Deferred tax arising from a business combination is adjusted against goodwill on acquisition. 54
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
2. Significant Accounting Policies (cont’d) 2.15 Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses.
2.16 employee Compensation The Group’s contributions are recognised as employee compensation expense when they are due, unless they can be capitalised as an asset.
(a) Defined Contribution Plans Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid.
(b) employee Leave Entitlement Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.
2.17 currency Translation (a) Functional and Presentation Currency Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The financial statements are presented in Singapore Dollars.
(b) Transactions and Balances Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency translation differences from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised in the income statement, unless they arise from borrowings in foreign currencies, other currency instruments designated and qualifying as net investment hedges and net investment in foreign operations. Those currency translation differences are recognised in the currency translation reserve in the consolidated financial statements and transferred to the income statement as part of the gain or loss on disposal of the foreign operation.
Non-monetary items measured at fair values in foreign currencies are translated using the exchange rates at the date when the fair values are determined.
(c) Translation of Group Entities’ Financial Statements The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
(i) Assets and liabilities are translated at the closing exchange rates at the date of that balance sheet;
(ii) Income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case, income and expenses are translated using the exchange rates at the dates of the transactions); and
(iii) All resulting exchange differences are recognised to the foreign currency translation reserve.
Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005 are treated as assets and liabilities of the foreign operations and translated at the closing rates at the date of the balance sheet. For acquisitions prior to 1 January 2005, the exchange rates at the dates of acquisition are used. 55
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
2. Significant Accounting Policies (cont’d) 2.18 segment Reporting A business segment is a distinguishable component of the Group engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is a distinguishable component of the Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments.
2.19 cash and Cash Equivalents For the purpose of presentation in the consolidated cash flow statement, cash and cash equivalents include cash on hand, deposits with financial institutions which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are presented as current borrowings on the balance sheet.
2.20 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.
2.21 Dividends to Company’s Shareholders Dividends to Company’s shareholders are recognised when the dividends are approved for payment.
3. critical accounting estimates, assumptions and judgements Estimates, assumptions and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
(a) estimated Impairment of Goodwill Goodwill is tested for impairment annually and whenever there is indication that the goodwill may be impaired.
The recoverable amounts of these assets and where applicable, cash-generating units, have been determined based on value-in-use calculations. These calculations require the use of estimates (Note 18).
If the management’s estimated gross margin at 31 December 2008 is lowered by 10 percentage points, there will be no impact on the carrying amounts of goodwill.
If the management’s estimated pre-tax discount rate applied to the discounted cash flows at 31 December 2008 is raised by 1 percentage point, there will be no impact on the carrying amounts of goodwill.
(b) impairment of Loans and Receivables Management reviews its loans and receivables for objective evidence of impairment on a monthly basis. Significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy, and default or significant delay in payments are considered objective evidence that a receivable is impaired. In determining this, management makes judgement as to whether there is observable data indicating that there has been a significant change in the payment ability of the debtor, or whether there have been significant changes with adverse effect in the technological, market, economic or legal environment in which the debtor operates.
Where there is objective evidence of impairment, management makes judgements as to whether an impairment loss should be recorded in the income statement. In determining this, management uses estimates based on historical loss experience for assets with similar credit risk characteristics. The methodology and assumptions used for estimating both the amount and timing of future cash flows are reviewed regularly to reduce any differences between the estimated loss and actual loss experience. 56
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
4. revenue and other gains - net
Group 2008 2007 $’000 $’000
Sale of goods - Automotive and industrial products 300,119 274,134 - Alloy wheels 157,855 152,753
Total sales 457,974 426,887
Other gains – net: - Bad trade debts recovered 769 548 - Changes in fair value of financial assets and liabilities held for trading – (73) - Gain on disposal of property, plant and equipment 228 110 - Interest income 291 343 - Net loss on disposal of subsidiaries (765) – - Other 1,071 1,031
Total other gains - net 1,594 1,959
459,568 428,846
5. expenses by nature
Group 2008 2007 $’000 $’000
Advertising and promotion 4,884 2,018 Amortisation of intangible assets (Note 18) 63 – Carriage outwards 8,575 7,712 Changes in inventories of raw materials, work-in-progress and finished goods (5,005) (25,225) Commission charges 4,665 3,381 Currency translation losses – net 7,096 1,213 Depreciation of property, plant and equipment (Note 17) 11,725 9,739 Employee compensation (Note 7) 39,199 33,803 Purchases of raw materials, finished goods and consumables 333,643 337,874 Rental on operating leases 3,113 2,921 Research expense 2,493 2,303 Transportation and travelling expense 4,416 3,876 Other expenses 11,972 13,074
Total cost of sales, distribution and administrative expenses 426,839 392,689
6. finance expenses
Group 2008 2007 $’000 $’000
Interest expense: - Bank loans 4,413 3,138 - Bank overdrafts 603 561 - Trust receipt loans 1,161 1,017 - Finance leases 156 128
6,333 4,844 57
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
7. employee compensation
Group 2008 2007 $’000 $’000
Wages and salaries 35,735 31,070 Employer’s contribution to defined contribution plans including Central Provident Fund 3,464 2,733
39,199 33,803
8. income tax (a) income Tax Expense
Group 2008 2007 $’000 $’000
Tax expense attributable to profit is made up of:
Current income tax - Singapore 2,093 2,450 - Foreign 6,138 5,187
8,231 7,637 Deferred income tax (1,781) (1,186)
6,450 6,451
Over provision of current income tax in the previous financial years (675) (547) Over provision of deferred income tax assets in the previous financial years 60 46
5,835 5,950
The tax expense on profit differs from the amount that would arise using the Singapore standard rate of income tax as explained below:
Group 2008 2007 $’000 $’000
Profit before income tax 26,918 33,789
Tax calculated at a tax rate of 18% (2007: 18%) 4,845 6,082 Effects of: - Change in Singapore tax rate – (7) - Singapore statutory stepped income exemption (70) (70) - Effects of different tax rates in other countries 1,256 795 - Income not subject to tax (51) (213) - Expenses not deductible for tax purposes 2,136 991 - Exempt income (2,042) (1,146) - Unremitted statutory profits of China subsidiaries 287 – - Other 89 19
Tax charge 6,450 6,451
58
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
8. Income tax (cont’d) (a) Income Tax Expense (cont’d) The Group’s deferred tax liabilities and assets have been computed based on the corporate tax rate and tax laws prevailing at balance sheet date. On 22 January 2009, the Singapore Minister of Finance announced a reduction in corporate tax rate from 18% to 17% with effect from the year of assessment 2010. The effect of the reduction in the corporate tax rate on the Group’s deferred tax liabilities and assets is not material.
(b) Movements in Current Income Tax Liabilities
Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Beginning of financial year 3,765 3,398 843 1,259 Currency translation differences (662) (38) – – Income tax paid (7,355) (6,685) (534) (439) Tax expense on profit from the current financial year 8,231 7,637 423 545 Over provision in previous financial years (675) (547) (150) (522)
End of financial year 3,304 3,765 582 843
(c) Deferred Income Taxes Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts, determined after appropriate offsetting, are shown on the balance sheets as follows:
Group 2008 2007 $’000 $’000
Deferred Income Tax Assets: - To be recovered within one year (425) (290) - To be recovered after one year (4,442) (3,199)
(4,867) (3,489)
Deferred Income Tax Liabilities: - To be settled within one year 241 578 - To be settled after one year 956 727
1,197 1,305
The movement in the net deferred income tax account is as follows:
Group 2008 2007 $’000 $’000
Beginning of financial year (2,184) (1,078) Effects of change in Singapore tax rate – (7) Currency translation differences 235 41 Credited to income statement (1,781) (1,186) Over provision of deferred tax assets in previous financial years 60 46
End of financial year (3,670) (2,184) 59
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
8. income tax (cont’d) (c) Deferred Income Taxes (cont’d) The movement in the deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) during the financial year is as follows:
Deferred Income Tax Liabilities
Accelerated tax depreciation $’000
2008 Beginning of financial year 1,305 Currency translation differences 85 Credited to income statement (193) End of financial year 1,197
2007 Beginning of financial year 1,784 Effect of change in Singapore tax rate (7) Currency translation differences (17) Credited to income statement (474) Under provision in previous financial years 19 End of financial year 1,305
Deferred Income Tax Assets
Provisions Tax losses Other Total $’000 $’000 $’000 $’000
2008 Beginning of financial year (3,140) (196) (153) (3,489) Currency translation differences 151 – (1) 150 (Credited)/charged to income statement (1,489) 196 (295) (1,588) Over provision in previous financial years 60 – – 60 End of financial year (4,418) – (449) (4,867)
2007 Beginning of financial year (2,508) (202) (152) (2,862) Currency translation differences 14 11 33 58 Charged/(credited) to income statement (673) (5) (34) (712) Over provision in previous financial years 27 – – 27 End of financial year (3,140) (196) (153) (3,489)
9. earnings per share Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year.
Group 2008 2007 Net profit attributable to equity holders of the Company ($’000) 19,436 26,256
Weighted average number of ordinary shares in issue for basic earnings per share (’000) 584,592 584,592
Basic earnings per share 3.32 cents 4.49 cents
Diluted earnings per share is the same as basic earnings per share. There are no dilutive potential ordinary shares as there are no outstanding share options at the beginning and end of the financial year. 60
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
10. cash and cash equivalents
Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Cash at bank and on hand 19,738 22,356 615 471 Short-term bank deposits 1,191 1,004 – –
20,929 23,360 615 471
For the purposes of presenting the consolidated cash flow statement, the consolidated cash and cash equivalents comprise the following:
Group 2008 2007 $’000 $’000
Cash and bank balances (as above) 20,929 23,360 Less: Bank overdrafts (Note 20) (3,380) (3,410)
Cash and cash equivalents per consolidated cash flow statement 17,549 19,950
Disposal of Subsidiaries On 10 December 2008, the Company disposed of its 100% interest in Eastbourne Metal Coatings Co Ltd for a cash consideration of $3,118,000 and on 30 December 2008, the Company liquidated its wholly-owned subsidiary, YHI (Middle East) FZE for nil consideration.
The aggregate effects of the disposal of subsidiaries on the cashflows of the Group are:
Carrying amount $’000
Identifiable Assets and Liabilities Trade and other receivables (127) Inventories (19) Property, plant and equipment (2,629)
Total assets (2,775)
Trade and other payables 33
Identifiable net assets disposed (2,742)
The aggregate cash inflows arising from the disposal of Eastbourne Metal Coatings Co Ltd and YHI (Middle East) FZE were:
Group $’000
Identifiable assets disposed (as above) 2,742 Goodwill (Note 18) 1,141
3,883 Loss on disposal (765)
Cash proceeds from disposal 3,118
61
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
11. trade and other receivables
Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Trade receivables - Non-related parties 74,219 86,486 – – - Associated companies 1,894 986 – – 76,113 87,472 – – Less: Allowance for impairment of receivables - Non-related parties (4,274) (5,790) – –
Trade receivables – net 71,839 81,682 – –
Due from subsidiaries (non-trade) – – 38,188 50,164 Other receivables 3,423 2,571 – –
75,262 84,253 38,188 50,164
The non-trade amounts due from subsidiaries are unsecured, interest-free and are repayable on demand.
12. inventories
Group 2008 2007 $’000 $’000
Materials and supplies 6,996 8,387 Work-in-progress 2,929 4,058 Finished goods 88,051 80,526
97,976 92,971
The cost of inventories recognised as an expense and included in “cost of sales” amounted to $328,638,000 (2007: $312,649,000).
13. other current assets
Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Prepayments 8,446 9,387 15 35 Deposits 763 477 – 4
9,209 9,864 15 39 62
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
14. financial assets, available-for-sale
Group 2008 2007 $’000 $’000
Beginning of financial year 6,830 5,015 Additions – 1,815
End of financial year 6,830 6,830
Available-for-sale financial assets are analysed as follows:
Group 2008 2007 $’000 $’000
Unlisted Securities: - Equity securities - China 6,830 6,830
The fair values of unlisted equity securities are based on cashflows discounted at the per annum market interest rates adjusted for risk premiums specific to the securities (2008: 9.08%, 2007: 9.08%).
15. investments in associated companies
Group 2008 2007 $’000 $’000
Beginning of financial year 16,650 14,174 Share of profits 522 2,476
End of financial year 17,172 16,650
The summarised financial information of associated companies is as follows:
Group 2008 2007 $’000 $’000
- Assets 99,900 99,033 - Liabilities 69,629 70,719 - Revenue 228,838 222,171 - Net profits 800 7,065
Details of associated companies are as follows: Country of business/ Effective Name of companies Principal activities incorporation equity holding 2008 2007 % %
Held by subsidiaries:
O.Z. S.p.A * Investment holding, Italy 36 36 manufacturer, importer, exporter and distributor of alloy wheels
Yokohama Tire Sales (Shanghai) Co., Ltd ** Distributor of tyres and People’s Republic 49 49 related goods of China
* Audited by Deloitte and Touche, Italy. ** Audited by Shanghai Maiyizi CPA Firm, China. 63
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
16. investments in subsidiaries
Company 2008 2007 $’000 $’000
Equity investment at cost Beginning of financial year 72,917 66,226 Additional investments in a subsidiary 13,277 6,691
End of financial year 86,194 72,917
On 22 May 2008 and 31 December 2008, the Company made additional capital injections into YHI Manufacturing (Singapore) Pte Ltd amounting to $10,901,000 and $2,376,000 respectively.
Details of subsidiaries are as follows: Country of business/ Effective Name of companies Principal activities incorporation equity holding 2008 2007 % %
Held by the Company: (a) YHI Manufacturing Investment holding, importer, Singapore 100 100 (Singapore) Pte Ltd exporter and distributor of alloy wheels and related goods
(a) YHI Corporation Importer, exporter and distributor Singapore 100 100 (Singapore) Pte Ltd of tyres, alloy wheels and related goods and industrial batteries
(b) YHI (Malaysia) Sdn Bhd Importer and distributor of tyres, Malaysia 100 100 alloy wheels and related goods and industrial batteries
(c) YHI (China) Strategy Investment holding, trading of golf Hong Kong 100 100 Company Limited car accessories and related goods
(c) YHI (Hong Kong) Importer, exporter and distributor of Hong Kong 100 100 Co Limited tyres, alloy wheels and related goods
(d) YHI International Manufacturing, distribution and export Taiwan 100 100 (Taiwan) Co., Ltd. of alloy wheels
(e) YHI (Australia) Pty Limited Importer and distributor of tyres, alloy Australia 80 80 wheels and related goods
(f) YHI (New Zealand) Limited Importer and distributor of tyres, alloy New Zealand 70 70 wheels and related goods
Held by subsidiaries:
(g) YHI Manufacturing Manufacturing, distribution and People’s Republic 100 100 (Shanghai) Co., Ltd export of alloy wheels of China
(g) YHI Advanti Manufacturing Manufacturing, distribution and People’s Republic 100 100 (Shanghai) Co., Ltd export of alloy wheels of China
(g) Eastbourne Metal Metal finishing services for People’s Republic – 100 Coatings Co., Ltd aluminium wheels and accessories of China
64
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
16. investments in subsidiaries (cont’d)
Country of business/ Effective Name of companies Principal activities incorporation equity holding 2008 2007 % %
Held by subsidiaries:
(g) YHI Precision Moulding Manufacturing and supply of People’s Republic 100 100 (Shanghai) Co., Ltd alloy wheels moulds of China
(g) YHI Advanti Manufacturing Manufacturing, distribution and People’s Republic 100 100 (Suzhou) Co Ltd export of alloy wheels of China
(b) YHI Manufacturing Manufacturing, distribution and Malaysia 100 100 (Malaysia) Sdn Bhd export of alloy wheels
(a) YHI (America) Pte Ltd Investment holding Singapore 100 100
(h) Pan-Mar Corporation Importer, exporter and distributor United States 51 51 D/B/A Konig (American) of tyres, alloy wheels and related of America goods
(i) TTS International Co., Ltd Importer, exporter and distributor Japan 60 60 of alloy wheels and related goods
(g) YHI International Marketing (Shanghai) Co., Ltd Distribution of tyres, alloy wheels People’s Republic 100 100 and related goods of China
(e) YHI Power Pty Limited Importer and distributor Australia 64 64 of industrial batteries
(j) YHI Corporation (Thailand) Distribution of tyres, alloy wheels Thailand 49 49 Co Ltd and related goods
(g) Autotrend (Shanghai) Retail of tyres, alloy wheels, People’s Republic 100 100 Co., Ltd industrial batteries and related of China goods
(b) Evo-Trend Corporation Distribution of tyres, alloy wheels Malaysia 80 80 (Malaysia) Sdn Bhd and related goods
(k) YHI (Middle East) FZE Distribution of tyres, alloy wheels United Arab – 100 and related goods Emirates
(l) YHI Corporation Distribution of tyres, alloy wheels People’s Republic 100 100 (Guangzhou) Co Ltd and related goods of China
(m) YHI (Canada) Inc. Importer, exporter and distributor Canada 90 90 of tyres, alloy wheels and related goods
(h) Advanti Racing USA LLC Importer, exporter and distributor United States 46 – of tyres, alloy wheels and related of America goods
(n) PT YHI Indonesia Distribution of tyres, alloy wheels Indonesia 95 – and related goods
65
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
16. investments in subsidiaries (cont’d) (a) Audited by PricewaterhouseCoopers LLP, Singapore (b) Audited by SE Lai Associates, Malaysia * (c) Audited by Wilson Ho & Co. C.P.A., Hong Kong * (d) Audited by KPMG, Taiwan * (e) Audited by Lamb Lowe & Partners, Australia * (f) Audited by PricewaterhouseCoopers, New Zealand (g) Audited by Shanghai Da Long Certified Public Accountants Co., Ltd for local statutory purposes. For the purpose of preparing the consolidated financial statements, these financial statements have been audited by PricewaterhouseCoopers, Shanghai (h) Audited by J.P. Marsala & Co., United States of America *. Advanti Racing USA LLC is regarded as a subsidiary on the basis that the Group has power to govern its financial and operating policies. (i) Not required to be audited under the laws of the country of incorporation. For the purpose of preparing the consolidated financial statements, certain review procedures have been carried out on these financial statements by PricewaterhouseCoopers, Japan (j) YHI Corporation (Thailand) Co Ltd is regarded as a subsidiary on the basis that the Group has power to govern its financial and operating policies. This subsidiary is audited by Adisorn & Associates Ltd, Thailand * (k) Audited by N.R. Doshi & Co., United Arab Emirates * (l) Audited by Guangzhou Haizheng Public Accountants Co., Ltd for local statutory purposes. For the purpose of preparing the consolidated financial statements, these financial statements have been audited by Wilson Ho & Co. C.P.A., Hong Kong * (m) Audited by Henderson Tse Chartered Accountants, Canada * (n) Audited by Thalib Daeng & Rekan, Indonesia *
* For the subsidiaries not audited by PricewaterhouseCoopers LLP, Singapore and its network firms, the Board of Directors and the Audit Committee are satisfied with the appointment of their auditors in accordance with Rule 716 of the SGX Listing Manual.
17. property, plant and equipment
Buildings Office on equipment, Freehold freehold Leasehold plant and Motor Furniture land land properties machinery vehicles Renovation Computers and fittings Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Group 2008 Cost Beginning of financial year 3,431 7,722 33,954 67,590 5,047 1,264 2,756 1,335 123,099 Currency translation differences – (779) 1,403 2,797 (309) (101) (78) (68) 2,865 Additions – – 217 9,467 1,144 100 215 102 11,245 Disposals – – (2,625) (1,679) (945) – (96) (47) (5,392)
End of financial year 3,431 6,943 32,949 78,175 4,937 1,263 2,797 1,322 131,817
Accumulated depreciation Beginning of financial year – 366 6,642 21,450 2,393 671 1,971 963 34,456 Currency translation differences – (43) 124 1,116 (166) (29) (67) (56) 879 Depreciation charge – 157 1,459 8,769 687 86 447 120 11,725 Disposals – – (479) (814) (491) – (89) (41) (1,914)
End of financial year – 480 7,746 30,521 2,423 728 2,262 986 45,146
Net book value end of financial year 3,431 6,463 25,203 47,654 2,514 535 535 336 86,671 66
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
17. property, plant and equipment (cont’d)
Buildings Office on equipment, Freehold freehold Leasehold plant and Motor Furniture land land properties machinery vehicles Renovation Computers and fittings Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Group 2007 Cost Beginning of financial year 4,103 8,684 33,926 52,806 4,449 1,247 2,269 1,000 108,484 Currency translation differences (319) 486 (54) 163 96 (1) 15 275 661 Additions – 52 84 14,730 958 74 477 65 16,440 Disposals (353) (1,500) (2) (109) (456) (56) (5) (5) (2,486)
End of financial year 3,431 7,722 33,954 67,590 5,047 1,264 2,756 1,335 123,099
Accumulated depreciation Beginning of financial year – 273 5,258 14,689 1,869 636 1,646 601 24,972 Currency translation differences – 8 (65) (29) 55 (21) 18 277 243 Depreciation charge – 162 1,449 6,793 868 70 311 86 9,739 Disposals – (77) – (3) (399) (14) (4) (1) (498)
End of financial year – 366 6,642 21,450 2,393 671 1,971 963 34,456
Net book value end of financial year 3,431 7,356 27,312 46,140 2,654 593 785 372 88,643
Motor vehicles $’000
Company 2008 Cost Beginning of financial year 900 Additions 250 Disposals (450)
End of financial year 700
Accumulated depreciation Beginning of financial year 549 Depreciation charge 157 Disposals (383)
End of financial year 323
Net book value end of financial year 377
67
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
17. property, plant and equipment (cont’d)
Motor vehicles $’000
Company 2007 Cost Beginning of financial year 900 Additions –
End of financial year 900
Accumulated depreciation Beginning of financial year 369 Depreciation charge 180 End of financial year 549
Net book value end of financial year 351
(a) Included in additions in the consolidated financial statements are $696,000 (2007: $374,000) of motor vehicles acquired under finance leases.
The carrying amounts of motor vehicles, and office equipment, plant and machinery held under finance leases at 31 December 2008 amounted to $1,107,000 (2007: $1,104,000) and $41,000 (2007: $85,000) respectively.
(b) At the balance sheet date, the carrying amounts of property, plant and equipment of the Group pledged as securities for borrowings (Note 20) are as follows:
Group 2008 2007 $’000 $’000
Freehold land 2,028 3,431 Buildings on freehold land 7,431 6,899 Leasehold properties 1,595 2,471 Plant and machinery 9,403 8,059
20,457 20,860 68
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
18. intangible assets Composition:
Group 2008 2007 $’000 $’000
Goodwill arising on consolidation, at cost [Note (a)] 2,301 3,442 Trademark [Note (b)] 1,798 1,861 4,099 5,303
(a) goodwill Arising on Consolidation
Group 2008 2007 $’000 $’000
Cost Beginning of financial year 3,442 3,442 Disposal of a subsidiary (Note 10) (1,141) – End of financial year 2,301 3,442
Impairment tests for goodwill Goodwill is allocated to the Group’s cash generating units (“CGUs”) identified according to countries of operation and business segments.
A segment-level summary of the goodwill allocation is as follows:
2008 2007
Distribution Distribution of automotive of automotive products manufacturing products and Manufacturing and industrial of alloy industrial of alloy products wheels* Total products wheels Total $’000 $’000 $’000 $’000 $’000 $’000
Singapore 881 – 881 881 – 881 Malaysia 505 – 505 505 – 505 China/Hong Kong 59 – 59 59 1,141 1,200 New Zealand 86 – 86 86 – 86 USA 770 – 770 770 – 770 2,301 – 2,301 2,301 1,141 3,442
* Disposed of during the financial year (Note 10).
The recoverable amount of a CGU was determined based on value-in-use. Cash flow projections used in the value-in-use calculations were based on financial budgets approved by management covering a five-year period.
Key assumptions used for value-in-use calculations:
Distribution of automotive products and industrial products
Gross margin 1 20% Growth rate 2 5% Discount rate 3 5%
1 Budgeted gross margin. 2 Weighted average growth rate used to extrapolate cash flows beyond the budget period. 3 Pre-tax discount rate applied to the pre-tax cash flow projections.
69
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
18. intangible assets (cont’d) (a) goodwill Arising on Consolidation (cont’d) These assumptions were used for the analysis of each CGU within the business segment. Management determined weighted average gross margin based on past performance and its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The weighted average discount rates used are pre-tax and reflect specific risks relating to the relevant segments.
(b) trademark
Group 2008 2007 $’000 $’000
Cost Beginning and end of financial year 1,861 1,861
Accumulated amortisation Beginning of financial year – – Amortisation charge 63 –
End of financial year 63 –
Net book value 1,798 1,861
19. trade and other payables
Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Trade payables to - Non-related parties 22,949 35,953 – – - Associated companies 187 121 – –
23,136 36,074 – – Due to a related party (non-trade) 176 186 – – Due to directors (non-trade)* 3,471 4,070 3,471 4,070 Accrued operating expenses 8,469 8,678 601 613 Other payables 5,313 6,490 332 370 Payable for purchase of property, plant and equipment 845 807 – – Advance payments received 1,810 3,532 – –
43,220 59,837 4,404 5,053
* This amount relates primarily to performance bonus payable to the Executive Directors of the Company based on the results of the financial year ended pursuant to the service agreements entered between the Executive Directors and the Company.
The related party refers to a company in which certain directors have financial interests. The non-trade amount due to a related party is unsecured, interest-free and is repayable on demand. 70
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
20. borrowings
Group 2008 2007 $’000 $’000
Current Current portion of long-term bank loans 5,977 7,815 Short-term bank loans 57,729 51,801 Trust receipt loans 16,495 21,732 Bank overdrafts (Note 10) 3,380 3,410 Finance lease liabilities (Note 21) 412 451
83,993 85,209
Non-current Long-term bank loans 5,892 7,416 Finance lease liabilities (Note 21) 886 891
6,778 8,307
Total borrowings 90,771 93,516
The exposure of the borrowings of the Group to interest rate changes and the contractual repricing dates at the balance sheet dates are as follows:
Group 2008 2007 $’000 $’000
6 months or less 82,262 83,540 6 – 12 months 1,731 1,669 1 – 5 years 6,778 7,901 Over 5 years – 406
90,771 93,516
(a) security Granted Certain borrowings granted to the Group are guaranteed by the Company and secured on the following:
(i) Borrowings of $11,570,000 (2007: $10,310,000) are secured over a first legal mortgage on certain subsidiaries’ freehold and leasehold properties [Note 17(b)];
(ii) Borrowings of $3,400,000 (2007: $3,669,000) are secured over a first legal charge on plant and machinery of a subsidiary [Note 17(b)];
(iii) Borrowings of $16,000,000 (2007: $4,481,000) are secured over a first and floating charge on all the assets of a subsidiary; and
(iv) Borrowings of $14,254,000 (2007: $17,411,000) are secured over banker’s guarantees, up to $20.1 million (2007: $20.1 million), given as security to other financial institutions which granted banking facilities to certain subsidiaries. The banker’s guarantees are in turn secured by a first and floating charge on all the assets of a subsidiary referred to in paragraph (iii) above.
Finance lease liabilities are secured by the rights to the leased property, plant and equipment [Note 17(a)], which will revert back to the lessor in the event of default by the Group. 71
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
20. borrowings (cont’d) (b) fair Values of Non-Current Borrowings
Group 2008 2007 $’000 $’000
Long-term bank loans 5,478 6,383 Finance lease liabilities 886 891
The fair values above are determined from cash flow analyses, discounted at the per annum borrowing rates which the directors expected to be available to the Group as follows:
Group 2008 2007
Long-term bank loans 4.4% 6.9% Finance lease liabilities 9.0% 9.0%
(c) interest Rate Risk The weighted average effective per annum interest rates of total borrowings at the balance sheet date are as follows:
Group
2008 2007 AUD NZD MYR SGD USD RMB Other AUD NZD MYR SGD USD RMB Other % % % % % % % % % % % % % %
Trust receipt loan 8.3 – 4.1 – 5.3 – 3.2 7.9 – 4.2 3.8 5.8 – 3.9 Bank overdrafts 10.3 – 7.5 – – – – 10.3 – 7.7 – – – – Bank loans 6.4 7.0 3.5 3.8 – 6.6 3.4 8.4 9.7 5.1 3.8 5.6 6.0 3.3 Finance lease liabilities 10.4 – 5.8 – 8.3 – 2.5 9.4 – 3.7 – 6.5 – 3.9
21. finance lease liabilities The Group leases certain property, plant and equipment from non-related parties under finance leases.
Group 2008 2007 $’000 $’000
Minimum lease payments due: - Not later than one year 520 557 - Between two and five years 1,004 1,015
1,524 1,572 Less: Future finance charges (226) (230)
Present value of finance lease liabilities 1,298 1,342 72
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
21. finance lease liabilities (cont’d) The present values of finance lease liabilities are analysed as follows:
Group 2008 2007 $’000 $’000
Not later than one year (Note 20) 412 451 Between one and five years (Note 20) 886 891
1,298 1,342
22. Share capital The share capital of the Company and the Group comprised fully paid-up 584,592,000 (2007: 584,592,000) ordinary shares with no par value, amounting to a total of $77,001,000 (2007: $77,001,000).
23. other reserves
Group 2008 2007 $’000 $’000
(a) composition: General reserve 4,268 3,485 Currency translation reserve (1,880) (2,360)
2,388 1,125
Other reserves are non-distributable.
Group 2008 2007 $’000 $’000
(b) movements: (i) General reserve Beginning of financial year 3,485 2,853 Currency translation differences 245 (16) Transfer from retained earnings 538 648
End of financial year 4,268 3,485
(ii) Currency translation reserve Beginning of financial year (2,360) (3,143) Currency translation differences 480 783
End of financial year (1,880) (2,360)
General reserve fund Subsidiaries established in the People’s Republic of China (the “PRC Subsidiaries”) are required to maintain certain statutory reserves by transferring from their profit after taxation in accordance with the relevant laws and regulations and, if applicable, Articles of Association of the PRC Subsidiaries, before any dividend is declared and paid.
73
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
23. other reserves (cont’d) General reserve fund (cont’d) The PRC Subsidiaries are required to transfer at least 10% of their profit after taxation calculated in accordance with the PRC Accounting Standards and Systems, to the general reserve fund until the balance reaches 50% of their respective registered capital, where further transfers will be at their directors’ recommendation. The general reserve fund can only be used to make up prior year losses or to increase share capital, provided that the fund does not fall below 25% of the registered capital.
For the current financial year, the Board of Directors of the PRC Subsidiaries approved to appropriate 10% of their profit after taxation to general reserve fund amounted to $538,000 (2007: $648,000).
24. retained earnings (a) Retained profits of the Group are distributable except for accumulated retained earnings of associated companies amounting to $3,140,000 (2007: $2,618,000). Retained profits of the Company are distributable.
(b) Movement in retained profits for the Company is as follows:
Company 2008 2007 $’000 $’000
Beginning of financial year 41,045 32,120 Net profit 10,249 15,940 Dividends paid (Note 25) (7,892) (7,015)
End of financial year 43,402 41,045
25. dividends
Group and Company 2008 2007 $’000 $’000
Ordinary dividends paid or proposed Final exempt dividend paid in respect of the previous financial year of 1.35 cents (2007: 1.2 cents) per share 7,892 7,015
At the Annual General Meeting to be held on 30 April 2009, a final exempt dividend of 1.0 cent per share amounting to a total of $5,846,000 will be recommended. These financial statements do not reflect this dividend, which will be accounted for in shareholders’ equity as an appropriation of retained earnings in the financial year ending 31 December 2009.
26. commitments (a) capital Commitments Capital expenditures contracted for at the balance sheet date but not recognised in the financial statements are as follows:
Group 2008 2007 $’000 $’000
Property, plant and equipment 707 988 74
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
26. commitments (cont’d) (b) operating Lease Arrangements – where the Group is a lessee The future aggregate minimum lease payments payable under non-cancellable operating leases contracted for at the balance sheet date but not recognised as liabilities are as follows:
Group 2008 2007 $’000 $’000
Not later than one year 3,428 3,044 Between two and five years 8,866 7,929 Later than five years 1,595 1,816
13,889 12,789
Included in the above are the Group’s lease commitments in respect of leases of land which are as follows:
(i) Lease of land up to 31 August 2009 for a monthly rental presently of $6,601; and
(ii) Lease of land up to 30 September 2014 for a monthly rental presently of $10,226.
The above lease rentals are subject to annual revision up to 5.5% per annum.
27. financial risk management Financial Risk Factors The Group’s activities expose it to market risk (including currency risk, interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management strategy seeks to minimise adverse effects from the unpredictability of financial markets on the Group’s financial performance. The Group’s risk management policies and guidelines are set to monitor and control the potential material adverse impact of these exposures. The Board of Directors is responsible for setting the objectives and underlying principles of financial risk management for the Group.
(a) market Risk (i) Currency risk The Group operates principally in the Asia-Pacific region with dominant operations in Singapore and People’s Republic of China. Entities in the Group regularly transact in currencies other than their respective functional currencies (“foreign currencies”).
Currency risk arises when transactions are denominated in foreign currencies such as United States Dollar (“USD”), Renminbi (“RMB”), Malaysian Ringgit (“MYR”), Australian Dollar (“AUD”) and New Zealand Dollar (“NZD”). To manage the currency risk, individual Group entities enter into currency forwards, where appropriate. The Group’s exposures to foreign currencies are primarily managed through matching financial assets and financial liabilities denominated in foreign currencies. The Group does not utilise currency forwards or other arrangements for trading or speculative purposes. 75
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
27. financial risk management (cont’d) (a) market Risk (cont’d) (i) Currency risk (cont’d) The Group’s currency exposure based on the information provided to key management is as follows:
SGD USD RMB AUD MYR NZD Other Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
2008 Financial assets Cash and cash equivalents and financial assets, available-for-sale 4,458 11,080 5,878 2,228 398 831 2,886 27,759 Trade and other receivables 72,450 39,221 15,725 21,120 13,637 4,305 19,331 185,789 Other financial assets 99 156 3,864 419 2,876 208 1,587 9,209
77,007 50,457 25,467 23,767 16,911 5,344 23,804 222,757
Financial liabilities Borrowings 19,000 14,840 35,687 4,526 11,347 3,737 1,634 90,771 Other financial liabilities 71,084 14,437 30,981 9,276 11,347 1,940 7,859 146,924
90,084 29,277 66,668 13,802 22,694 5,677 9,493 237,695
Net financial (liabilities)/assets (13,077) 21,180 (41,201) 9,965 (5,783) (333) 14,311 (14,938)
Less: Net financial assets/(liabilities) denominated in the respective entities’ functional currencies 3,243 6,529 38,452 378 1,782 1,157 (1,349) 50,192
Currency exposure on financial assets and liabilities (9,834) 27,709 (2,749) 10,343 (4,001) 824 12,962 35,254 76
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
27. financial risk management (cont’d) (a) market Risk (cont’d) (i) Currency risk (cont’d)
SGD USD RMB AUD MYR NZD Other Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
2007 Financial assets Cash and cash equivalents and financial assets, available-for-sale 3,553 13,173 5,831 4,620 1,335 118 1,560 30,190 Trade and other receivables 63,410 46,955 29,859 19,952 13,062 5,398 7,239 185,875
Other financial assets 149 75 6,446 338 1,196 297 1,363 9,864
67,112 60,203 42,136 24,910 15,593 5,813 10,162 225,929
Financial liabilities Borrowings 7,481 9,542 42,399 15,353 10,651 3,781 4,309 93,516 Other financial liabilities 58,388 24,304 48,952 6,685 12,173 2,189 6,136 158,827
65,869 33,846 91,351 22,038 22,824 5,970 10,445 252,343
Net financial assets/(liabilities) 1,243 26,357 (49,215) 2,872 (7,231) (157) (283) (26,414)
Less: Net financial (liabilities)/ assets denominated in the respective entities’ functional currencies (6,458) 4,692 40,014 1,121 2,876 714 1,544 44,503
Currency exposure on financial assets and liabilities (5,215) 31,049 (9,201) 3,993 (4,355) 557 1,261 18,089
The Company’s currency exposure based on the information provided to key management is as follows:
2008 2007 SGD USD AUD Other Total SGD USD AUD Other Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial assets Cash and cash equivalents 594 21 – – 615 421 50 – – 471 Trade and other receivables 34,415 – 2,458 1,315 38,188 46,268 – 2,604 1,292 50,164 Other financial assets 15 – – – 15 39 – – – 39
35,024 21 2,458 1,315 38,818 46,728 50 2,604 1,292 50,674 77
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
27. financial risk management (cont’d) (a) market Risk (cont’d) (i) Currency risk (cont’d)
2008 2007 SGD USD AUD Other Total SGD USD AUD Other Total $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000
Financial liabilities Other financial liabilities 4,404 – – – 4,404 5,053 – – – 5,053
4,404 – – – 4,404 5,053 – – – 5,053
Net financial assets 30,620 21 2,458 1,315 34,414 41,675 50 2,604 1,292 45,621
Less: Net financial assets denominated in functional currency (30,620) – – – (30,620) (41,675) – – – (41,675)
Currency exposure – 21 2,458 1,315 3,794 – 50 2,604 1,292 3,946
If the USD, RMB and AUD change against the SGD by 6 percentage points (2007: 5 percentage points), 3 percentage points (2007: 1 percentage point) and 5 percentage points (2007: 6 percentage points) respectively with all other variables including tax rate being held constant, the effects arising from the net financial liability/asset position will be as follows:
2008 2007 Increase/(decrease) Profit Profit after tax Equity after tax Equity $’000 $’000 $’000 $’000
Group USD against SGD - Strengthened 1,663 (70) 1,552 (56) - Weakened (1,663) 70 (1,552) 56 RMB against SGD - Strengthened (82) 511 (92) 145 - Weakened 82 (511) 92 (145) AUD against SGD - Strengthened 517 664 239 657 - Weakened (517) (664) (239) (657)
Company USD against SGD - Strengthened 1 – 2 – - Weakened (1) – (2) – AUD against SGD - Strengthened 123 – 156 – - Weakened (123) – (156) – 78
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
27. financial risk management (cont’d) (a) market Risk (cont’d) (ii) Cash flow and fair value interest rate risks Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. As the Group has no significant interest- bearing assets, the Group’s income is substantially independent of changes in market interest rates.
The Group’s policy is to maintain 80 - 90% of its borrowings in fixed rate instruments.
The Group’s and Company’s borrowings at variable rates on which effective hedges have not been entered into are denominated mainly in AUD and MYR. If the AUD and MYR interest rates increase/decrease by 0.50 percentage points (2007: 0.50 percentage points) with all other variables including tax rate being held constant, the profit after tax will be lower/higher by $10,000 (2007: $19,000) and $19,000 (2007: $14,000) as a result of higher/lower interest expense on these borrowings.
(iii) Price risk The Group and Company have insignificant exposure to equity security price risk as the Group and Company do not hold significant financial assets.
(b) credit Risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group. For trade receivables, the Group adopts the policy of dealing only with customers of appropriate credit history, and obtaining sufficient collateral where appropriate to mitigate credit risk.
Credit exposure to an individual counterparty is restricted by credit limits that are approved by the respective Heads of the various subsidiaries 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 Group level by the Head of Finance.
As the Group and Company do not hold any collateral, the maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the balance sheet, except as follows:
Company 2008 2007 $’000 $’000
Corporate guarantees provided to banks on subsidiaries’ loans 73,056 72,043
The Group’s and Company’s major classes of financial assets are bank deposits and trade receivables.
The Company’s investment holding activities do not expose it to significant credit risk. 79
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
27. financial risk management (Cont’d) (b) credit Risk (cont’d) The credit risk for trade receivables based on the information provided to key management is as follows:
Group 2008 2007 $’000 $’000
By geographical areas Singapore 18,190 19,454 Malaysia 7,563 7,634 Taiwan 519 1,876 Australia 17,209 16,428 New Zealand 3,524 4,707 United States 3,299 6,384 United Kingdom 241 1,041 Italy 225 1,970 Indonesia 882 2,468 Sweden 175 1,731 People’s Republic of China 9,078 6,692 Other countries 10,934 11,297
71,839 81,682
Group 2008 2007 $’000 $’000
By types of customers Non-related parties - Multi-national companies – – - Other companies 71,839 81,682
71,839 81,682
(i) Financial assets that are neither past due nor impaired Bank deposits that are neither past due nor impaired are mainly deposits with banks with high credit-ratings assigned by international credit-rating agencies. Trade receivables that are neither past due nor impaired are substantially companies with a good collection track record with the Group.
The Group and Company do not have any receivables that would have been past due or impaired if the terms were not re-negotiated during the financial year.
(ii) Financial assets that are past due and/or impaired There is no other class of financial assets that is past due and/or impaired except for trade receivables.
The age analysis of trade receivables past due but not impaired is as follows:
Group 2008 2007 $’000 $’000
Past due one month 6,212 5,714 Past due two months 2,850 1,418 Past due over two months 849 1,771
9,911 8,903 80
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
27. Financial risk management (cont’d) (b) Credit Risk (cont’d) (ii) Financial assets that are past due and/or impaired (cont’d)
The carrying amount of trade receivables individually determined to be impaired and the movement in the related allowance for impairment are as follows:
Group 2008 2007 $’000 $’000
Gross amount 4,274 5,790 Less: Allowance for impairment (4,274) (5,790)
– –
Beginning of financial year 5,790 6,495 Currency translation differences (177) 297 Allowance made 904 711 Allowance utilised (1,474) (1,165) Bad debts recovered (769) (548)
End of financial year 4,274 5,790
The impaired trade receivables are long outstanding and are not expected to be recovered.
(c) Liquidity Risk The Group and Company manage the liquidity risk by maintaining sufficient cash to enable them to meet their normal operating commitments and having an adequate amount of committed credit facilities (Note 20).
The table below analyses the maturity profile of the Group’s and Company’s financial liabilities (including derivative financial liabilities) based on contractual undiscounted cash flows.
Less Between than 1 and 5 Over 1 year years 5 years Total $’000 $’000 $’000 $’000
Group 2008 Trade and other payables 43,220 – – 43,220 Borrowings 83,993 6,778 – 90,771
127,213 6,778 – 133,991
2007 Trade and other payables 59,837 – – 59,837 Borrowings 85,209 7,901 406 93,516
145,046 7,901 406 153,353
81
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
27. financial risk management (cont’d) (c) liquidity Risk (cont’d)
Less Between than 1 and 5 Over 1 year years 5 years Total $’000 $’000 $’000 $’000
Company 2008 Trade and other payables 4,404 – – 4,404
2007 Trade and other payables 5,053 – – 5,053
(d) capital Risk The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce borrowings.
Management monitors capital based on a gearing ratio. The Group’s and Company’s strategies, which were unchanged from 2007, are to maintain gearing ratios within 50% to 70%.
The gearing ratio is calculated as total borrowings divided by total capital and reserves attributable to equity holders of the Company.
Group Company 2008 2007 2008 2007 $’000 $’000 $’000 $’000
Total borrowings 90,771 93,516 – –
Total capital and reserves attributable to equity holders 180,378 168,109 120,403 118,046
Gearing ratio 50% 56% – –
28. immediate and ultimate holding company The immediate and ultimate holding company is YHI Holdings Pte Ltd, incorporated in Singapore.
29. related party transactions In addition to the information disclosed elsewhere in the financial statements, the following transactions took place between the Group and related parties at terms agreed between the parties during the financial year:
(a) sales and Purchases of Goods and Services
Group 2008 2007 $’000 $’000
Legal fees paid to Hee Theng Fong & Co – 3
Hee Theng Fong & Co is a firm owned by a director of the Company, Mr Hee Theng Fong.
Outstanding balances at 31 December 2008 are set out in Notes 11 and 19 respectively. 82
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
29. Related party transactions (cont’d) (b) Key Management Personnel Compensation The key management personnel compensation is analysed as follows:
Group 2008 2007 $’000 $’000
Salaries and other short-term employee benefits 7,919 8,228 Post-employment benefits – contribution to CPF 175 143
8,094 8,371
Included in the above was total compensation to directors of the Company amounted to $4,671,000 (2007: $5,467,000).
30. Segment information (a) Primary Reporting Format – Business Segments
Distribution of automotive products and industrial Manufacturing products of alloy wheels Elimination Group $’000 $’000 $’000 $’000
2008 Sales: - external sales 300,119 157,855 – 457,974 - inter-segment sales – 39,479 (39,479) –
300,119 197,334 (39,479) 457,974
Segment result 26,700 4,592 – 31,292 Other gains - net 1,594 Unallocated costs (157)
32,729 Finance expenses (6,333) Share of profit of associated companies 31 491 – 522
Profit before income tax 26,918 Income tax expense (5,835)
Total profit 21,083
Other segment items Capital expenditure – Property, plant and equipment 2,160 9,085 – 11,245 Depreciation 2,580 9,145 – 11,725 Amortisation 63 – – 63
Segment assets 178,018 167,586 (45,503) 300,101 Associated companies 2,302 14,870 – 17,172 Unallocated assets 5,873
Consolidated total assets 323,146
Segment liabilities (86,708) (34,793) 79,770 (41,731) Unallocated liabilities (96,761)
Consolidated total liabilities (138,492)
83
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
30. Segment information (cont’d) (a) Primary Reporting Format – Business Segments (cont’d)
Distribution of automotive products and industrial Manufacturing products of alloy wheels Elimination Group $’000 $’000 $’000 $’000
2007 Sales: - external sales 274,134 152,753 – 426,887 - inter-segment sales – 34,769 (34,769) –
274,134 187,522 (34,769) 426,887
Segment result 26,929 7,450 – 34,379 Other gains - net 1,959 Unallocated costs (181)
36,157 Finance expenses (4,844) Share of profit of associated companies (121) 2,597 – 2,476
Profit before income tax 33,789 Income tax expense (5,950)
Total profit 27,839
Other segment items Capital expenditure – Property, plant and equipment 2,577 13,863 – 16,440 Depreciation 2,371 7,368 – 9,739
Segment assets 169,787 173,144 (32,436) 310,495 Associated companies 2,271 14,379 – 16,650 Unallocated assets 4,349
Consolidated total assets 331,494
Segment liabilities (89,665) (46,759) 78,222 (58,202) Unallocated liabilities (100,221)
Consolidated total liabilities (158,423)
At 31 December 2008, the Group is organised into two main business segments:
• Distribution of automotive products and industrial products.
• Manufacturing of alloy wheels.
Inter-segment transactions are recorded at their transacted price which is generally at fair value. Unallocated costs represent corporate expenses. Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, receivables and operating cash, and exclude deferred income tax assets. Segment liabilities comprise operating liabilities and exclude income tax liabilities and borrowings. Capital expenditure comprise additions to property, plant and equipment and intangible assets, including those acquired through business combinations. 84
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
30. Segment information (cont’d) (b) secondary Reporting Format - Geographical Segments The Group’s two business segments operate in following geographical areas:
• Singapore, Malaysia, Indonesia, Thailand, Japan, USA, Canada, Australia and New Zealand - The areas of operation mainly arise from distribution of automotive and industrial products.
• China/Hong Kong - The areas of operation mainly arise from both distribution of automotive products and manufacturing of alloy wheels.
• Taiwan - The areas of operation mainly arise from manufacturing of alloy wheels.
Capital Sales Total assets expenditure 2008 2007 2008 2007 2008 2007 $’000 $’000 $’000 $’000 $’000 $’000
Singapore 96,455 99,031 57,852 54,756 703 607 Malaysia 63,608 50,413 27,502 27,899 3,013 1,059 Thailand 1,713 1,844 1,528 1,158 82 8 Indonesia 321 – 817 – 50 – China/Hong Kong 177,313 169,342 179,798 184,311 5,851 13,233 Taiwan 24,553 27,724 9,902 10,498 476 551 Australia 85,021 65,911 52,320 46,731 904 510 New Zealand 21,753 21,302 11,498 13,624 78 342 Japan 4,758 5,056 2,128 1,299 13 14 USA 20,399 20,566 11,546 10,493 73 6 Canada 1,074 235 414 411 2 78 Middle East 485 232 – 600 – 32 Unallocated corporate assets – – 13,344 12,150 – –
497,453 461,656 368,649 363,930 11,245 16,440 Eliminations (39,479) (34,769) (45,503) (32,436) – –
457,974 426,887 323,146 331,494 11,245 16,440
31. events occurring after balance sheet date On 26 February 2009, the Company made an additional capital injection into a subsidiary, YHI Manufacturing (Singapore) Pte Ltd, amounting to $9,503,600. The newly issued shares rank pari passu in all respect with the previously issued shares. 85
NOTES TO THE FINANCIALFOR THE FINANCIAL STATEMENTS YEAR ENDED 31 DECEMBER 2008
32. new or revised accounting standards and interpretations Certain new standards, amendments and interpretations to existing standards have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2009 or later periods and which the Group has not early adopted. The Group’s assessment of the impact of adopting those standards, amendments and interpretations that are relevant to the Group is set out below:
(a) frs 1(R) Presentation of Financial Statements (effective for annual periods beginning on or after 1 January 2009)
The revised standard requires: • All changes in equity arising from transactions with owners in their capacity as owners to be presented separately from components of comprehensive income; • Components of comprehensive income not to be included in statement of changes in equity; • Items of income and expenses and components of other comprehensive income to be presented either in a single statement of comprehensive income with subtotals, or in two separate statements (a separate statement of profit and loss followed by a statement of comprehensive income); • Presentation of restated balance sheet as at the beginning of the comparative period when entities make restatements or reclassifications of comparative information.
The revisions also include changes in the titles of some of the financial statements primary statements.
The Group will apply the revised standard from 1 January 2009 and provide comparative information that conforms to the requirements of the revised standard. The key impact of the application of the revised standard is the presentation of an additional primary statement, that is, the statement of comprehensive income.
(b) frs 108 Operating Segments (effective for annual periods beginning on or after 1 January 2009) FRS 108 supersedes FRS 14 Segment Reporting and requires the Group to report the financial performance of its operating segments based on the information used internally by management for evaluating segment performance and deciding on allocation of resources. Such information may be different from the information included in the financial statements, and the basis of its preparation and reconciliation to the amounts recognised in the financial statements shall be disclosed.
The Group will apply FRS 108 from 1 January 2009 and provide comparative information that conforms to the requirements of FRS 108. The Group expects the new operating segments to be significantly different from business segments currently disclosed and expects more information to be disclosed under FRS 108.
33. authorisation of financial statements These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of YHI International Limited on 10 March 2009. 86
Statistics of ShareholdingsAs at 10 March 2009
Analysis of shareholdings
Number of shares 584,591,628 Class of shares ordinary shares Voting rights one vote per share
No. of % of % of Size of Shareholdings Shareholders Shareholders No. of Shares Shareholdings
1 - 999 75 3.70 30,502 - 1,000 - 10,000 660 32.57 4,273,192 0.73 10,001 - 1,000,000 1,270 62.69 79,369,706 13.58 1,000,001 - and above 21 1.04 500,918,228 85.69
Grand Total 2,026 100.00 584,591,628 100.00
Public Shareholders %
Non-public shareholders 58.4 Public shareholders 41.6
Pursuant to Rule 723 of the Listing Manual of the Singapore Exchange Securities Trading Limited, it is confirmed that at least 10% of the issued ordinary shares of the Company is at all times held by the public.
Substantial Shareholders
No. of Shares Direct Interest Deemed Interest %
YHI Holdings Pte Ltd 341,391,628 - 58.40 Tay Tian Hoe Richard 18,674,000 344,949,628 62.20(1)
Note
(1) Mr Tay Tian Hoe Richard is deemed to have an interest in the 341,391,628 shares held in the name of YHI Holdings Pte Ltd and 3,558,000 shares held by his spouse, Mdm Lee Suat Kwan, by virtue of Section 7 of the Companies Act, Cap. 50. Mr Tay’s 62.20% interest includes his direct and deemed interest in the Company. 87
Statistics of ShareholdingsAs at 10 March 2009
TWENTY LARGEST SHAREHOLDERS AS AT 10 MARCH 2009
% of Name of Shareholder No. of Shares Shareholdings
1 YHI HOLDINGS PTE LTD 341,391,628 58.40 2 HSBC (SINGAPORE) NOMINEES PTE LTD 30,711,000 5.25 3 CITIBANK NOMINEES SINGAPORE PTE LTD 28,330,000 4.85 4 DBS VICKERS SECURITIES (SINGAPORE) PTE LTD 21,483,800 3.68 5 TAY TIAN HOE RICHARD 18,674,000 3.19 6 PHILLIP SECURITIES PTE LTD 6,591,200 1.13 7 NTUC THRIFT & LOAN CO-OPERATIVE LIMITED 6,340,000 1.08 8 DB NOMINEES (SINGAPORE) PTE LTD 5,524,200 0.94 9 ORIX INVESTMENT AND MANAGEMENT PTE LTD 4,800,000 0.82 10 DBS NOMINEES PTE LTD 4,048,400 0.69 11 NG CHWEE CHENG 3,847,000 0.66 12 KIM ENG SECURITIES PTE. LTD. 3,801,000 0.65 13 TAY TIANG GUAN 3,800,000 0.65 14 UOB KAY HIAN PTE LTD 3,722,000 0.64 15 LEE SUAT KWAN 3,558,000 0.61 16 TAY THIAM SENG 3,000,000 0.51 17 ING NOMINEES (SINGAPORE) PTE LTD 2,619,000 0.45 18 LEE LING LING 2,475,000 0.42 19 UNITED OVERSEAS BANK NOMINEES PTE LTD 2,451,600 0.42 20 TAN YONG CHIANG OR TAN HUI LIANG 1,970,000 0.34
Total: 499,137,828 85.38 88
NOTICE OF ANNUALMEETING GENERAL
NOTICE IS HEREBY GIVEN that the Annual General Meeting of YHI International Limited (the “Company”) will be held at Jurong Country Club, Ficus 2 & 3, Level 2, 9 Science Centre Road, Singapore 609078 on Thursday, 30 April 2009 at 10.00 a.m. for the following purposes:
AS ORDINARY BUSINESS
1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the financial year ended 31 December 2008 together with the Auditor’s Report thereon. Resolution 1
2. To declare a first and final tax exempt dividend of 1.00 Singapore cent per ordinary share for the financial year ended 31 December 2008 (2007: 1.35 Singapore cents). Resolution 2
3. To re-elect the following Directors retiring pursuant to Article 107 of the Company’s Articles of Association:
Mr Tay Tiang Guan Resolution 3 Mr Henry Tan Song Kok Resolution 4
Mr Henry Tan Song Kok will, upon re-election as a Director of the Company, remain as a member of the Remuneration and Nominating Committees and Chairman of the Audit Committee and will be considered independent for the purposes of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.
4. To approve the payment of Directors’ fees of S$135,000 for the financial year ended 31 December 2008 (2007: S$135,000). Resolution 5
5. To re-appoint PricewaterhouseCoopers LLP, Certified Public Accountants as Auditor of the Company and to authorise the Directors to fix their remuneration. Resolution 6
6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting.
AS SPECIAL BUSINESS
To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications:
7. Authority to allot and issue shares
“That, pursuant to Section 161 of the Companies Act, Cap. 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 of the Company to:-
(a) allot and issue shares in the Company; and (b) issue convertible securities and any shares in the Company pursuant to convertible securities (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 shall in their absolute discretion deem fit, provided that the aggregate number of shares (including any shares to be issued pursuant to the convertible securities) in the Company to be issued pursuant to such authority:-
(i) shall not exceed fifty per cent (50%) of the issued share capital of the Company (excluding treasury 89
NOTICE OF ANNUALMEETING GENERAL
shares) at the time this Resolution is passed and that the aggregate number of shares in the Company to be issued other than on a pro-rata basis to the existing shareholders of the Company shall not exceed twenty per cent (20%) of the issued share capital of the Company (excluding treasury shares) at the time this Resolution is passed; and
(ii) notwithstanding paragraph (i) above, where the share capital is to be allotted via a pro-rata renounceable rights issue, shall not exceed one hundred per cent (100%) of the issued share capital of the Company (excluding treasury shares) at the time this Resolution is passed.
That unless revoked or varied by the Company in a general meeting, such authority shall continue in full force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting is required by law to be held, whichever is the earlier, except that the Directors shall be authorised to allot and issue new shares pursuant to the convertible securities notwithstanding that such authority has ceased.
For the purposes of this Resolution and Rule 806(3) of the Listing Manual, the percentage of issued share capital is based on the issued share capital of the Company at the time this Resolution is passed after adjusting for:-
(i) new shares arising from the conversion or exercise of convertible securities; (ii) new shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time of the passing of this Resolution, provided the options or awards were granted in compliance with the rules of the Listing Manual; and
(iii) any subsequent bonus issue, consolidation or subdivision of shares.” [See Explanatory Note (i)] Resolution 7
8. Authority to grant options and issue shares under the YHI Share Option Scheme
“That the Directors of the Company be and are hereby authorised to offer and grant options and share awards in accordance with the YHI Share Option Scheme (the “Scheme”) and to issue such shares as may be required to be issued pursuant to the exercise of the options under the Scheme provided always that the aggregate number of shares to be issued pursuant to the Scheme shall not exceed 15 per cent (15%) of the issued share capital of the Company from time to time.” [See Explanatory Note (ii)] Resolution 8
By Order of the Board
Gn Jong Yuh Gwendolyn Company Secretary
Singapore 08 April 2009 90
NOTICE OF ANNUALMEETING GENERAL
Explanatory Notes:
(i) The Ordinary Resolution 7 proposed in item 7 above, if passed, will empower the Directors from the date of this Meeting until the date of the next Annual General Meeting, to allot and issue shares and convertible securities in the Company. The aggregate number of shares (including any shares issued pursuant to the convertible securities) which the Directors may allot and issue under this Resolution (a) shall not exceed fifty per cent (50%) of the issued share capital (as defined in Resolution 7) of the Company.
For issues of shares other than on a pro-rata basis to all shareholders, the aggregate number of shares to be issued shall not exceed twenty per cent (20%) of the issued share capital (as defined in Resolution 7) of the Company.
For issue of shares via a pro-rata renounceable rights issue, the aggregate number of shares to be issued shall not exceed one hundred per cent (100%) of the issued share capital (as defined in Resolution 7) of the Company. This is one of the new measures introduced by the Singapore Exchange Limited, in consultation with the Monetary Authority of Singapore, on 20 February 2009 to accelerate and facilitate listed issuers’ fund raising efforts and will be in effect until 31 December 2010.
This authority will, unless previously revoked or varied at a general meeting, expire at 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 earlier. However, notwithstanding the cessation of this authority, the Directors are empowered to issue shares pursuant to any convertible securities issued under this authority.
(ii) The Ordinary Resolution 8 proposed in item 8 above, if passed, will empower the Directors of the Company, to grant options and to allot and issue shares upon the exercise of such options in accordance with the Scheme.
Note:
1. A Member entitled to attend and vote at the Annual General Meeting is entitled to appoint one or two proxies to attend and vote in his/her stead. A proxy need not be a Member of the Company.
2. If the appointor is a corporation, the instrument appointing a proxy must be executed under seal or the hand of its duly authorised officer or attorney.
3. The instrument appointing a proxy must be deposited at the registered office of the Company at No. 2 Pandan Road, Singapore 609254 not less than forty-eight (48) hours before the time appointed for holding the Annual General Meeting. Important 91 YHI INTERNATIONAL LIMITED 1. For investors who have used their CPF monies to buy YHI International Limited shares, the Annual Report is (Incorporated In the Republic of Singapore - forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. Company Registration No. 200007455H) 2. This Proxy Form is 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. PROXY FORM (Please see notes overleaf before completing this Form)
I/We, (name) of
(address) being a member/members of YHI International Limited (the “Company”), hereby appoint:
Name Address NRIC/ Proportion of Passport No. shareholdings %
and/or (delete as appropriate)
or failing him/her, the Chairman of the Meeting as my/our proxy to vote for me/us on my/our behalf at the Annual General Meeting of the Company to be held at Jurong Country Club, Ficus 2 & 3, Level 2, 9 Science Centre Road, Singapore 609078 on Thursday, 30 April 2009 at 10.00 a.m. and at any adjournment thereof. The proxy is to vote on the business before the Meeting as indicated below. If no specific direction as to voting is given, the proxy will vote or abstain from voting at his/her discretion, as he/she will on any other matter arising at the Meeting:
No. Resolutions relating to: For Against 1. Directors’ and Auditor’s Report and Audited Accounts of the Company for the year ended 31 December 2008 2. Payment of proposed first and final dividend of 1.00 Singapore cent per share 3. Re-election of Mr Tay Tiang Guan as Director of the Company 4. Re-election of Mr Henry Tan Song Kok as Director of the Company 5. Approval of Directors’ fees amounting to S$135,000 for the financial year ended 31 December 2008 (2007: S$135,000) 6. Re-appointment of PricewaterhouseCoopers LLP, Certified Public Accountants as Auditor and to authorise the Directors to fix their remuneration 7. Authority to allot and issue new shares 8. Authority to grant options and issue shares under the YHI Share Option Scheme
(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 …………….. 2009 Total number of no. of Shares Shares in: Held (a) CDP Register (b) Register of Members ……………………………………………………………. Signature(s) of Member(s) or Common Seal ✁ 92
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 of Singapore), 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 entered against your name in 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 will be deemed to relate to all the shares held by you.
2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote instead of him/her.
3. Where a member appoints more than one proxy, he shall specify the proportion of his shareholding to be represented by each proxy. If no such proportion or number is specified the first named proxy may be treated as representing 100% of the shareholding and any second named proxy as an alternate to the first named.
4. A proxy need not be a member of the Company.
5. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at No. 2 Pandan Road, Singapore 609254 not less than 48 hours before the time appointed for the Annual General Meeting.
6. The instrument appointing a proxy or proxies must be under the hand of the appointor or 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 seal or under the hand of an officer or attorney duly authorised.
7. Where an instrument appointing a proxy or proxies is signed on behalf of the appointor by the attorney, the letter or 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 Annual General Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.
9. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged 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 Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company. 93 94 // // Corporate Profile 06 // // Corporate Structure 16 // // Financial Summary 03 // // Board of Directors 12 // Financial Report 37 Heads of Subsidiaries & Key Officers 20 Five-Year Financial Highlights// 02// Financial Calendar & Corporate Information 24 Group Managing Director's Message 08 Our Global Presence 18 // Corporate Governance Report 30 Manufacturing Milestones 22 Review of Operations 28 CONTENTS ANNUAL REPORT 2008 YHI INTERNATIONALFAX: LIMITED(65) 6265 9927 / 6266 5368 BUILDING A 2 PANDAN ROAD SINGAPORE 609254 (65) 6264 2155 TEL: [email protected] EMAIL: www.yhi.com.sg GLOBAL BRAND WEBSITE:
ANNUAL REPORT 2008 ANNUAL REPORT 2008 BUILDING A YHI INTERNATIONAL LIMITED Listed on the mainboard of the Singapore Exchange GLOBAL BRANDCompany Registration Number 200007455H Listed on the mainboard of the Singapore Exchange Company Registration Number 200007455H