EnginEEred for growth annual report 2006
12 13 8 7 1 2 4
Operations Review Corporate Information CEO’s Message 5-Year FinancialProfle Financial Contents Corporate Profile Board ofDirectors
Contents higher speedofconstruction, strengthtovolumeratio, superiormaterial flexibilityin conventional material suchasconcreteforbuildingconstructionarenumerous.conventional material The to buildupon ideals. ofchoicefortheconstructionbuildings Steelisincreasinglythematerial and aestheticvaluetobuildings,layingsolid and temporary supportfordeepexcavations.and temporary ofusingsteelover The advantages foundations thatgivepeopletheconfidence Shaping thecityskyline,addingstructural design andaestheticsarejustsomeofthebenefitsusingsteel.
– at its mega-site in Tuas.Group in The mega-site its at housed are operations Singapore Its fabrication. steel of tons 45,000 of Group capacity production total the a has Malaysia, in facilities fabrication steel production Togetherwith years. 30 Its than more spanned has experience steel. value to adding in excels Yongnam n dties r consistently requirements. are project clients’ our to value adding detailers and fitters riggers, welders, technicians, experienced and qualified of engineers, pool costs. in-house our lower Furthermore, and yield improved productivity, increased in resulted have erection and fabrication steel technical for solutions engineering value and Yongnam’s and methods. designs technologies innovative exploit steel to latest utilizes Yongnam withsuch aspirestobethenamesynonymous Yongnam HoldingsLimited to thesatisfactionofourclients. manner, efficient and safe most the in installed and standards, exacting to fabricated designed, end meticulously are that structures The steel are results requirements. support strutting systems for deep excavation or buildings for structures steel it be needs, project specific clients’ our with consultation close in adopted design, fabrication and installation are of methods cost-effective most The expectations atalltimes. customer’s our exceed or meet to our products, processes and services of improvement continuous towards approach planned a takes Management System Quality Its (“SSSS”). Society from and Steel Structural classifcation Singapore company SI accredited qualified ISO-9001:2000, an IQNet is Yongnam • • Annual Report 2006
1 Corporate Profile 2 CEO’s Message Yongnam HoldingsLimited ciency Jack up Derrick up Jack Effciency High of units three building, Fab Wafer Sitronic the include 2006 in awarded projects New value of $107 million for Circle Line Phases 4 and 5. C854 is expected to be substantially completed by FY2007 and FY2007 by completed substantially be to expected is C854 5. and 4 Phases Line Circle for million $107 of value contract total a with works (strutting) engineering civil specialist all of 80% approximately secured had Group the all, In at variousstagesofcompletion-C854(50%completed),C855 (35%completed)andC856(32%completed). Phase 3 C851A and C853A contracts for the Circle Line are nearly completed. Circle Line Phases 4 and 5 contracts are for completionduring2007. The KPE421, KPE423 and KPE424 contracts had been substantially completed in 2006 with remaining works scheduled the KallangPayaLebarExpressway (KPE)andCircle Lineprojects. in revenue of$69.3millionforFY2006compared to$37.6milliontheprevious year. Revenuewasmainlycontributedby increase84.4% an registered saw also division business improvement.This Engineering substantial Civil Specialist Our Specialist CivilEngineering be will which completed in2008. Fabrication Derrick of unit 1 of exception the with 2007 in completed be to expected are These Faber. Fabrication, the Alexandra Pedestrian Bridge and a link-way forming part of the canopy walk linking Kent Ridge to Mount $37.4 millioninFY2005to$63.0FY2006. from revenue, in increase 68.4% the to contributed and completed been have Vivocity and extension Square Novena TanjungFusionpolis, undertaken. Bin’shad structure,Group steel the projectsfabricated major the of some are These Structural Steelworks Fusionpolis. Tanjung (extension).Vivocity. Bin.NovenaSquare KallangPayaLebarExpressway. MRT CircleLine. Key highlightsfrom thethree businessdivisionsare asfollows: Year underReview as wemoveforward totake advantageoftheverypositivebusinessconditionsinSingapore andtheregion. has rejoined the Group as Finance Director to help the Group strengthen our capital structure and Yongnam’swas who Chia, Mr. Director. Finance Director in 2002/3 was instrumental in Executive conceptualizing and implementing a restructuring plan for the Group. He an as Board the to Cheng Sin Chia Mr. welcome we Meanwhile, non-executive chairmantoleadtheBoard andwillupdateshareholders whenthisisfnalized. a identifying of process the in are We years. three-and-a-half past the for contribution Yap’sand guidance invaluable Mr.of appreciation its acknowledge to like would Board The year. this January early Yongnamin of management and I am presenting this report as your CEO as our Chairman, Mr. Yap Foo Seong had decided to step down from the Board million to$150.4million. $81.4 from revenue group 2006 in increase December 85% an 31 of back ended the on year million the $5.3 to for $599,000 from proft nine-fold, almost Net jumped Yongnam: for card report strong very a present to delighted am I Revenue for this division increased almost three-fold, from $6.5 million in FY2005 to $18.2 million in FY2006. This is This FY2006. in million mainly contributedbytheTanjung$18.2 BinPowerPlantprojectto inMalaysia,whichwassecured in2004. FY2005 in million $6.5 from three-fold, almost increased division this for Revenue Mechanical Engineering C855 andC856by2008.
• • Annual Report 2006 Poised forgrowth. and Constructionboom. outlook withInfrastructure Strong order book.Positive Strengthened balancesheet. Improved earnings.
fnancial fundamentals
Strengthened Balance Sheet Earlier this year, on 23 January 2007, the Group placed out 123 million new ordinary shares at $0.161 mainly to institutional investors, including Legg Mason International Equities (S) Ltd and JF Asset Management Limited, increasing its issued and paid-up share capital by approximately $19 million.
Based on Yongnam’s consolidated balance sheet at 31 December 2006, the issue of these new ordinary shares has increased the net asset value per share by 2.54 cents to 3.53 cents.
From the proceeds raised, a $2 million bridging facility provided by United Overseas Bank Limited has been fully repaid and approximately $6.5 million out of $8 million has been utilized to purchase strutting assets. Message
Prospects Positive outlook with Infrastructure and Construction boom. Poised for growth.
In view of the on-going infrastructure developments in Singapore, particularly the new MRT downtown line, Integrated Resorts, Business and Financial Centre in Marina Bay and developments along Orchard Road, outlook for the Group CEO’s CEO’s looks promising.
Going forward, to capitalize on these business opportunities, the Group will concentrate on further strengthening its core competencies and resources for Structural Steelworks and Specialist Civil Engineering which will also provide better margins.
Our proprietary modular strutting system continues to give the Group a strong competitive edge in meeting increasingly more stringent design and project requirements in infrastructural and construction projects. We have captured the lion’s share of the current ongoing works at KPE (C-421, C-423, and C-424) and the Circle Line (C825, C851A, C853A, C854, C855 and C856).
Most consultants, contractors and authorities in Singapore recognize the proven effciency, safety and cost effectiveness of our strutting system. The successful full-scale load test conducted on our strutting system in November 2006 will further enhance our competitive position. We will continue to capitalize on our market leadership and dominance in the specialist civil engineering market, not only in Singapore but also in the region. The Group has already started to actively pursue new business opportunities in the Middle East.
Challenges The recent ban on the export of sand by the Indonesian Government has not affected our works directly though it has had some impact on main contractors’ progress of works. The Singapore Government is actively working with the industry and trade bodies to look into more sustainable modes of construction to alleviate the sand shortage. Going forward, we expect this could present additional business opportunities for the Group as more construction projects shift towards using steel structures instead of concrete based buildings.
With increased business activities, the Group will be more exposed to steel price. For contracts that include the supply of steel, the Group will hedge our risks through forward purchases.
In labour-tight Singapore, all companies face with the issue of escalating labour costs. Similarly, Yongnam will face this issue, especially with skilled labour associated with the erection of steel.
Order Book and Outlook The Group’s order book as at 31 December 2006 amounted to $147 million, compared to $130 million at the end of 2005.
Notwithstanding the challenges ahead, the Board is optimistic that Yongnam will deliver improved earnings in FY2007, compared to FY2006.
Acknowledgements I would like to acknowledge with thanks the contributions of our Directors, the dedication shown by the employees of the Group and the support given by our major banker, UOB.
With enhancements to our risk management procedures and strong underlying business fundamentals, we believe the Group had weathered the storms and challenges of past years and are confdent that Yongnam is poised to deliver better returns and enhanced shareholder value in the years ahead.
Seow Soon Yong Chief Executive Offcer
Yongnam Holdings Limited • Annual Report 2006 3 Directors
Seow Soon Yong Tan Tin Nam Siau Sun King Seow Soon Hee Board of Board
SEOW SOON YONG,Chief Executive Offcer Appointed to the Board as Managing Director and Chief Executive Offcer on 19 October 1994, Mr. Seow is a member of the Nominating Committee. Mr. Seow joined the Company in 1978. Since then, he has diverse experiences within the Yongnam Group as Site Manager, Marketing Manager, Project Director and General Manager. He spearheaded a number of strategic programs that greatly enhanced the Group’s business and proftability. He subsequently became the Chief Executive Offcer of Yongnam Group in 1994. Mr. Seow, 52, was instrumental in pioneering the development and production of the in-house Modular Strutting System. He introduced the system to the industry in 1995 and is now accepted as the de facto cost-effective temporary support system for deep excavation works. Mr. Seow, a multilingual, maintains strong working relationships with customers in Asia. Venturing the Group in the structural steel business and later into the overseas markets, Mr. Seow secured a number of landmark projects notably Ocean Tower, Suntec City, the Brunei Airport Hanger Project, KLIA Satellite Building, new Bangkok Suvarnabhumi International Airport project and most recently the Fusionpolis.
TAN TIN NAM, Executive Director Appointed to the Board on 19 October 1994 and was last re-elected on 28 April 2005. Mr. Tan, 64, is the founder of the Yongnam Group. He has 40 years of experience in the construction industry. Prior to setting up his own business, Yongnam Engineering Works (YNEW) in 1971, Mr. Tan spent 6 years in mechanical engineering and construction companies which provided engineering services to granite quarry plants and shipyards. With strict discipline, strong commitments to clients in production quality and adherence to schedules and revolutionary engineering techniques, Mr. Tan led the expansion of YNEW into steel fabrication, mechanical & civil engineering for the construction of power plants, industrial plants, public works, building complexes and factories for both public and private institutions. YNEW was converted to Yongnam Engineering & Construction (Pte) Ltd in 1973. The Company, which won many industry acclaims, became an industry pacesetter and contributor to the economic development of Singapore in the 70’s and 80’s.
SIAU SUN KING, Executive Director A graduate in Mechanical Engineering from Ngee Ann Polytechnic, Singapore. Appointed to the Board on 19 October 1994 and was last re-elected on 28 April 2005. Mr. Siau, a founding partner of Yongnam Engineering Works (YNEW), has extensive experience in the mechanical engineering feld. He has held diverse responsibilities within the Group including mobilization of manpower, Site Foreman, Project Foreman and Project Director. He is now in charge of the Mechanical Engineering Division of the Group. Mr. Siau, 59, was actively involved in the erection and commission of the frst 2 container quay cranes in PSA in 1972. In 1973, he led the team in the installation and commissioning of the Cable Car System in Sentosa. The growth in the mechanical engineering business of the Group has been greatly attributable to Mr. Siau’s experience in meticulous planning and determination to serve the customers.
SEOW SOON HEE, Executive Director A graduate in Bachelor of Arts, Nanyang University, Singapore. Appointed to the Board on 19 October 1994 and was last re-elected on 31 May 2004. He is due for re-election at the forthcoming AGM. Mr. Seow Soon Hee joined the Group in 1977, working closely with Mr. Siau Sun King in the mechanical engineering business. He has held a diverse role in the Group including a stint in accounting, fnance and administration. Mr. Seow, 57, is currently overseeing the Group’s operation in Hong Kong and exploring new business opportunities in China.
CHIA SIN CHENG, Finance Director Appointed to the Board as Finance Director on 8 January 2007. He is due for re-election at the forthcoming AGM. Mr. Chia, 52, obtained his chartered accountancy qualifcation from the Institute of Chartered Accountants in England and Wales (UK) in 1980. He started his professional career with Ernst & Young where he spent 7 years in both its London and Singapore practices. He subsequently joined WBL Corporation, a company listed on the Mainboard of The Singapore Exchange where he spent the next 15 years.
4 Yongnam Holdings Limited • Annual Report 2006 Directors
Chia Sin Cheng Goon Kok Loon Lim Ghim Siew, Henry Liew Jat Yuen, Richard Board of Board
He served in a number of different position within WBL’s fnance and treasury group – Group Internal Audit Manager, Group Financial Controller, and Group General Manager Finance & Treasury. In 1996, he participated in the Advanced Management Program at Harvard Business School and the National University of Singapore/University of California, Los Angeles Executive Program in Financial Risk Management in an International Environment. In 2002, Mr. Chia joined Yongnam as Chief Financial Offcer and was instrumental in conceptualizing and implementing a restructuring plan for the Group. He subsequently left in 2004 to join Singapore Computer Systems Limited as its Chief Financial Offcer. With over 24 years of management experience of which 14 years were as Chief Financial Offcer, Mr Chia has taken companies through IPOs and has managed bond issues, company restructuring, investor relations, treasury, tax planning, risk management, feasibility studies, mergers & acquisitions and fraud investigations. Mr. Chia is a member of the Institute of Chartered Accountants in England and Wales and the Institute of Certifed Public Accountants, Singapore.
GOON KOK LOON, Non-Executive & Independent Director Appointed to the Board on 15 July 2003 and was last re-elected on 31 May 2004. Mr. Goon is the Chairman of the Audit Committee and member of both the Nominating Committee and Remuneration Committee. He is due for re-election at the forthcoming AGM. Mr. Goon, 65, was Deputy Group President and President (International business Division) of PSA Corporation Limited. He brings with him 37 years of extensive experience in corporate management, operation and administration from his service with PSA. Mr. Goon is a graduate from University of Liverpool, UK with a 1st Class Honours in Bachelor of Engineering (Electrical) and later attended the Postgraduate Study Program at the Massachusetts Institute of Technology, USA. He received both the Silver and Gold Public Administration Medals from the Singapore Government. He is also on the Board of Singapore Petroleum Company Limited and Venture Corporation Limited.
LIM GHIM SIEW, HENRY Non-Executive & Independent Director Appointed to the Board on 15 October 2002 and was last re-elected on 11 May 2006. Mr. Lim is the Chairman of the Nominating Committee and member of both the Remuneration Committee and the Audit Committee. Mr. Lim, 54, is the owner of the law frm, M/s G. S. Lim & Partners. Mr. Lim obtained his Law degree through the University of London in 1988 and was called to the English Bar in 1990 and the Singapore bar in 1992. He is a member of the Honorable Society of Lincoln’s Inn. His frm conducts mainly general litigation work. He is also the Chairman of a locally based shipping company and a Director of a confectionery company.
LIEW JAT YUEN, RICHARD Non-Executive & Independent Director Professor Liew was appointed to the Board on 23 January 2006 as an Independent Director and was last re-elected on 11 May 2006. He is the Chairman of Remuneration Committee and member of the Audit Committee. He graduated from the National University of Singapore with a Bachelor degree in 1986 and Master of Engineering degrees in 1988 and from Purdue University USA with a PhD in 1992. Professor Liew is a registered professional Engineer in Singapore, a Chartered Engineer in U.K and member of the Institution of Structural Engineers in U.K. In addition, he is a Chartered member of the Structural Engineering Institute of the America Society of Civil Engineering and a Member-at-large of the Structural Stability Research Council (SSRC) in USA. He is the Chairman of the National Group (Singapore) of International Association for Bridges and Structure Engineering, and the past president of the Singapore Structural Steel Society.Professor Liew has extensive research and practical experience in structural steel design and has consulted on numerous steel construction projects in Singapore and the region. An international renowned expert in steel and composite structures and fre safety engineering, Professor Liew provides specialist advices to the design and construction of high-rise and large span steel structural systems and has been involved in several national and international committees on design standards, building product specifcations and constructional practices and safety and made signifcant contributions to numerous guidelines for practice. Professor Liew is currently the Director of the (Structural Engineering programme in the Department of Civil Engineering at the National University of Singapore.
Yongnam Holdings Limited • Annual Report 2006 5 6 Key Executives Yongnam HoldingsLimited • • Annual Report 2006 CHEONG HOCKCHOON, during whichhewasappointedastheGeneralManagerofDPconsultantsPteLtd. years 8 for Project City Suntec the on Ltd Pte Architects DP joined he 1985, In Singapore. of Hunt University National Tutorthe as with Rider and Project Square Marina the with on Bailey and Surveyor Levett Quantity years a as 21 started has He industry. He building Projects.the in Singapore experience the of all for responsible Surveyors is of Nalpon Institute Mr. Singapore the Valuers. of and member and Building of Institute the of member Fellow Singapore, of University National the from Building BSc. Management, Project MSc. MICHAEL NALPON, including factoryspace,rawmaterials,labour,production machineryandequipment. of factors all from yield maximized has Group the areas, various in to experience methods innovative and assistance technical engineering design to providing ensure a smooth and effcient as day-to-day operation. With his extensive well as tracking and progressresources of allocation scheduling, fabrication, all for responsible is He Group. the of products manufactured all of management logistic and planning production production, in Mr. Seow has been with the Group for more than 20 years. He has comprehensive SEOW SOONHOCK, knowledge including KeppelDistripark,before joiningYongnam in1997. the practical construction of buildings and was their Project Manager on several key projects, in experience contractor,gain building to Singapore major a Ltd, (S) Huat Keng Low joined he 1984, In projects. construction and design out carry to (Design) Engineer Chief as 1979 and building request, the he was transferred to their Singapore offce in 1975. He joined Woh Hup Pte Ltd in in Engineer experience of Professional years 33 Kingdom, of construction industry. total United He joined Ove Arup & Partner in London as a Design Engineer. On his a the has Harendran Mr. in Singapore. Engineer in Chartered Engineers, Civil of A graduate in Bachelor of Science from University College London, member of the Institution CHELVADURAI HARENDRAN gautd n uies diitain rm h Snaoe nttt o Management, of 20 years of experience in than the engineering and construction more Institute industry with Keppel Group. He has was Lim Mr. Singapore Polytechnic. Singapore the the from Construction fromShip in Diploma Administration Business in graduated A LIM CHEONGGUAN,JOHN, Gas Turbine Units 3&4. Pulau Seraya Power Plant, MRT 203/204/404 Contracts, PSA Container Crane and Senoko Plant, Power Senoko Station, Power Jurong as such projects handled also he Singapore, CCCP,Gudang Pasir Project, Airport Johor.Langkawi Langkawi, in In Plant Cement Kedah included projects portfolio His Malaysia. in projects prominent numerous handle to tasked machinery,in Malaysia. With his extensive experience in commissioning steelworks and mechanical engineering, he was and steelworks structural generator and power plant, he was appointed as General Manager of Yongnam in subsidiaries knowledge the his in Foreman a With as started Company.years, 20 than more for Group the with been has Seow Mr. SEOW KHNGCHAI, infrastructure development projects. Kong Hong other and Extension Rail East KCRC Headquarters, Police Kong Hong as such Kong Hong in projects of number a handled Choon Hock then, Since Kong/China. Hong in operation our manage to Kong Hong to seconded was he 1999, In projects. infrastructure and structure steel in experience of years 24 has and Yongnam1978 Mr.joined in Cheong high-rise building,industrialstructures, powerplantsetc. of construction and design the for responsible was He Yongnam. joining before Bangkok in located Group Engineering Integrated Keppel the of company associate overseas an of piping system layout drawings etc. In 1993, Mr. Lim was appointed as the General Manager drawing, construction preparationstructural the of Groupin Engineering involved Integrated Engineering Group. He was later appointed as the General Manager of a Integrated subsidiary Keppel presentof the Keppel of origin the was Division Engineering Industrial the which of 1985, in Ltd Corporation Keppel of Division Engineering Industrial the Projectfor a Manager
General Manager–Malaysia Senior Project Manager
Production Director Senior Project Manager– Hong Kong
Senior Manager, BusinessDevelopment
Project Director Lim GhimSiew, Henry Goon KokLoon(Chairman) Audit Committee Yap FooSeong (Resignedon5January2007) Liew JatYuen, Richard Lim GhimSiew, Henry Goon KokLoon Chia SinCheng(Appointedon8January2007) Seow SoonHee Siau SunKing Tan Nam Tin Seow SoonYong (ManagingDirector /CEO) Board ofDirectors September 2006) Chong MeeFoong,ACIS(Resignedon1 Lathika DeviAmmaD/oPillay, ACIS (Appointed on1September2006) Lim LanSim,Joanne,ACIS Company Secretaries Goon KokLoon Seow SoonYong Lim GhimSiew, Henry(Chairman) Nominating Committee Lim GhimSiew, Henry Goon KokLoon Liew JatYuen, Richard (Chairman) Remuneration Committee Liew JatYuen, Richard
Singapore 637644 51 Tuas South Street 5 Registered Office Singapore 048624 #12-00 UOBPlaza1 80 RafflesPlace United OverseasBankLimited Principal Banker (Appointed witheffect from Yee Woon Yim Audit P Singapore 048583 #14-00 OneRafflesQuay 1 RafflesQuay Certifed PublicAccountants &YoungErnst Auditors Singapore 048424 #11-00 PWCBuilding 8 Cross Street Tricor Barbinder Share RegistrationServices Share Registrar 199407612N Company Registration Number Website :Www.yongnam.com.sg Email: [email protected] Fax :(65)67580753 Telephone :(65)67581511 fnancial yearended31December2003) Yongnam HoldingsLimited artner
• • Annual Report 2006
7 Corporate Information Operations Review
Structural Steelwork
Fusionpolis
Fusionpolis is not only a major development in Singapore, its unique structure and form make its construction a major engineering feat. With structural steel forming the major structural element, it is the single largest structural steel work project the Group had ever undertaken in our more than 30 years’ history. Immaculate planning and engineering are carefully executed on this demanding and challenging high-rise construction project.
Scheduled for completion by the end of May 2007, this development at One North comprises three multi-storey tower blocks and an auditorium. Designed like huge trees, the three multi-storey tower blocks, consisting of concrete cores with cantilevered steel floors projecting outwards, surrounds a spherical steel auditorium in the middle. The entire auditorium is supported on a single steel column that is about six-storey high. Sky bridges connect the three towers at various heights. The steel floors are supported on steel mega trusses that are subjected to post-tensioned forces on the top chords.
Tanjung Bin (Malaysia)
Fabrication and erection works at the 1st unit of 700MW Coal fre power plant was completed on schedule. The frst initial fring was successfully completed on 31 January 2006 and handed over to the owner.
Based on the success of the frst unit, the 2nd unit of 700MW Coal fre power plant was completed one month ahead of schedule and handed over for 2nd initial fring on 31 July 2006.
Work on the 3rd unit commenced on 15 February 2006 and was ready for initial fring on 31 January 2007 as scheduled. We expect to complete all remainding works by the middle of June 2007.
Other Projects
During the year, we have completed steel works at the landmark One Raffles Quay and carried out additions and alteration works at Novena Square, Vivocity and Changi Airport Terminal 3.
8 Yongnam Holdings Limited • Annual Report 2006 areas atSuntecConventionCentre, BrasBasahRoad. Steel Supporting and Decking of Beams, about 1,000 tons of steel and 2,000 sq. metre removal of decking are located below very heavy traffc remaining The completed. substantially is contract This Stations. Stage 1oftheCircle LineCL825–DhobyGhaut,BrasBasah,EsplanadeandPromenade bigger for requirements with continues sections sections ofsteeltoformstruts. strutting of design The performance. reliable and quality high consistent with work CL of proportion large a progressivelydeliver to able been have We main contractorandtheauthorities. having some impact on the main contractor’s progress of work. This problem is being managed by the The recent ban on the export of sand from Indonesia does not affect our works directly; but the ban is stock ofmaterials,supplementedwithnewfabricatedmaterialsfrom ourproduction facility. existing projectsfromour above the in Yongnamdeployed been has material system proprietarystrut with the sequence of work adopted by the main contractor. Removal of struts is in progress as the station worksprogresses.as progress in is struts of contractor.Removal main the by adopted work of sequence the with station has been completed, pending additional work adjacent to the HDB multi-storey car park in line The work is scheduled to be completed in the third quarter of 2007. Installation work of the 330m long Stage 3oftheCircle LineCL853ABishanStation A full-sized 20m long double-laced strut system was tested in collaboration with the National University to becarriedoutinSingapore. the be to believed is magnitude this of test full-scale A loads. design actual with compared system at our fabrication strut plant in modular Tuasproprietary this to on determine the test safe load capacity of full-scale a a used Yongnamout carried Strut proactively System, we 2006, November In construction projects. competitive strong a Group the give projectincreasinglyand requirementsthe moredesign meeting and stringent toin infrastructural edge in continues works, engineering civil construction and effcient excavation more deep and in safer for allows which System, Strutting proprietary Yongnam Our Yongnam StruttingSystem Specialist CivilEngineering walk linkingKentRidgeParktoMountFaber. canopy the of part forming link-way a and Bridge Pedestrian Alexandra Fabrication, Derrick up Jack Effciency High of units three building, Fabrication Wafer Sitronic the include awarded projects New • and 1sectionofthetunneltobeconstructedbyCutCoverasfollows: In 2005, we secured 12 contracts for Strutting Works; and, in the 2006 we secured with an additional 3 stations close and lines, West East and East HarbourFront Station. North North-South, existing the with intersect circle to a in moving Circle Station, Ghaut the Dhoby from of originating stations comfort 29 of and loop convenienceorbital an the is which enjoy Line to able be will Singapore in commuters 2010, In MRT Circle Line (C) A applications. engineering civil general detailed report onthistest canbeviewedonourwebsite. and basements building in LTA,MRT, the developers, by used to widely confdence is safety system strutting and proprietaryYongnam the as assurances authorities and strong consultants engineering provide contractors, test this of results positive The strain with deflections and stresses of monitoring gauges andtransducers. full with load, failure ultimate its to Singapore of • • •
Dcig and Decking Traffc of construction Temporary - section tunnel Cover and Cut PCS 856 CL Corporation, themaincontractor. Temporary - Farrer 854 Station CL Trafof construction Taiseiwith works Strutting and Decking fc Strutting and Decking Traf Temporaryfc of construction Works withSembawangEngineering &Construction,themaincontractor; with Station Labrador - LBD 856 CL Sembawang with Strut and WalerTemporary Engineering &Construction,themaincontractor; for contract Station Coast West - WCT 856 CL Strutting Works withSembawang Engineering&Construction,themaincontractor;
Yongnam HoldingsLimited • • Annual Report 2006 rst ever frst
9 Operations Review The CD Door installation work is scheduled for completion by mid 2007. We have installed 5 out of 6 big doors and 20 of the total 46 small doors. Overall, about 80% has been completed.
This station is flanked by the Junction 8 shopping centre, the existing Bishan MRT Station, multi-storey car park and bus terminal. Progress has been slow due to concerns arising from the proximity of the adjoining buildings. We anticipate completion by the end of 2007. Review Stage 3 of the Circle Line CL 851A Bartley Station This station is now substaintially completed and is scheduled to complete by May 2007. Awarded in February 2005, this 350m long station is built almost entirely under decking where traffc must continue to be allowed to travel. Even though we were given a very short time to complete the installation work, this has been achieved. Removal of the struts is its fnal phase of work. We are working closely with our main contractor, Tobishima Corporation, to deliver within the tight deadline.
Stage 4 of the Circle Line CL 854 – Thomson, Bukit Brown, Botanic Gardens and Farrer Stations Arising out of our good track record on the KPE 424 expressway project, the main contractor, Operations Taisei Corporation awarded us four new projects - 4 stations on CL 854 namely, Bukit Brown, Thomson, Botanic Gardens and Farrer. Work at Farrer Station, which commenced in August 2006, is now 30% completed. As the station is flanked on both sides by high-rise residential housing, this contract includes temporary traffc decking.
Installation work at Bukit Brown station has been completed and dismantling works is in progress (50% complete). The station is scheduled to complete by end December 2007.
Installation work at Thomson Station has been completed and dismantling works is in progress (60% complete).
At Botanic Gardens Station, off Bukit Timah Road, installation work has been completed, awaiting station construction prior to dismantling of struts. During the International Conference on Deep Excavation Conference, participants visited the site and LTA mentioned that this is a ‘Role Model Site’ as the standard of construction and cleanliness is very high.
Stage 4 & 5 of the Circle Line CL 855 – Holland, Bouna Vista, Cut & Cover Tunnel, and NUH Stations The main contractor of Circle Line Stage 4 & 5 Contract 855 is WH-STEC-AM JV. C855 has four locations of major bulk excavation - Holland Village Station (HLV), Bouna Vista Station (BNV), Cut & Cover Tunnel next to One North Station (C&C), and Kent Ridge Station (KRG). We have been awarded the temporary strutting works and the temporary decking works at these four locations with a total contract sum of S$41.8 million. Works at these four stations are particularly demanding and challenging especially at BNV, the biggest station of C855. The strutting arrangement is both ways for layer 2 to the last layer, layer 6; and most of the struts will be installed under the traffc and construction decks. The longest struts are 145m, a record length in Singapore. To-date, 10% of the strutting works has been installed.
Both ends of C&C are the starting points of the tunneling works; hence the temporary strutting installation works at C&C is one of the critical construction activities. The strutting installation works has been completed on time.
Situated next to National University Hospital (NUH), and the frst station that the TBMs will pass through, temporary strutting installation works at KRG is also one of the critical construction activities. It has also been completed on schedule.
After three stages of traffc diversion, the traffc decking works at HLV is 80% completed. The main station excavation and strutting installation works are expected to start sometime in April 2007.
Stage 4 & 5 of the Circle Line CL 856 – West Coast, Pasir Panjang and Labrador Park Station and a Cut and Cover Tunnel Section Stage 4 & 5 closes the orbital loop of the Circle Line with Harbour Front where the North East Line starts. This project was awarded in 2006. In spite of a short start up time we were able to meet the required schedule of installation work from our stock of existing struts and metal decking.
10 Yongnam Holdings Limited • Annual Report 2006 The main contractor is Sembawang Engineers & Constructors which is a subsidiary of an India based company, Punk Lloyd Company.
Installation works on the Cut and Cover Tunnel between Pasir Panjang and Labrador Park (PCS) and traffc diversion decking work has been completed and removal of strutting 40% completed.
Installation of struts at West Coast Station started in February 2007. Decking work at Review Labrador Park Station commenced on October 2006 and the strutting work is scheduled to commence in June 2007.
Expressway Construction
The Kallang Paya Lebar Expressway (KPE) contracts of C-421, C-423 and C-424, with a distance of 7 km, are nearing completion. Installation work has been substantially completed and strutting materials are being removed for re-use in other sites
C-421 KPE This contract is 91% completed. Out of the 1.5 km length from East Coast Expressway (ECP) to Nicoll Highway, it has a balance of about 200m under construction. The remaining Operations works in progress stretches north of the ECP to the middle of Geylang River, with ongoing construction under challenging conditions. Top-down construction and installation of struts in silt and marine clay soil conditions continue. Our works for the other parts of the expressway tunnel have been completed and follow-on works are proceeding by the main contractor.
Even though the contract period ended in October 2004, the works would only be substantially completed by mid-2007. This project has been described as one of the toughest projects in the world by visiting experts in the aftermath of the Nicoll Highway collapse. We are working in close collaboration with the main contractor, Sembawang Engineering & Construction to complete this project.
C-423 KPE This project is 86% completed. The installation and dismantling works at the 2.9 km tunnel have been substantially completed.
Most of the remaining work is centered at Area 1 from PIE to Aljunied Road, a length of 500m. This section is likely to be completed by the end of 2007. The works are in diffcult marine clay ground conditions and have to proceed under a temporary canal.
We are working in close collaboration with the main contractor, Samsung Corporation Engineering & Construction Group.
C-424 KPE Located at Eunos Link, along Airport Road to Tampines Road, the 2.8km long site runs along the Paya Lebar Airport Road. Construction equipment like cranes with tall boom lengths have to be closely monitored and equipped with special checked flags as warning signs to aircraft in the Paya Lebar Airport area.
Installation work is completed and all the tunnel walls and roof have been casted. We have about 5,000 tons of steel to dismantle and re-deploy to other sites. This is likely to be completed in mid 2007.
Mechanical Engineering Division
Retrofit of High Pressure Feed Water Heaters at Pulau Seraya Siemens awarded Stage 1 & 3 to Yongnam in February 2006 and May 2006 respectively. Both stages have been completed.
DSO Singapore Wind Tunnel Facility – preventive maintenance work AERO Systems Engineer awarded the maintenance works contracts from July to August 2006 and from December 2006 to January 2007;
DSO National Laboratories awarded some upgrading works to Yongnam. The works commenced in October 2006 and were completed by December 2006.
Yongnam Holdings Limited • Annual Report 2006 11 2006 2005 2004 2003 2002 $’000 $’000 $’000 $’000 $’000 PROFIT AND LOSS ACCOUNT
Revenue 150,412 81,429 63,592 65,341 61,660
Profit/(loss) before - 253 651 (12,456) (24,287) exceptional items and tax
Exceptional items - 438(1) 6,705(1) (1,453)(2) (5,542)
Profit/(loss) after 5,622 691 7,356 (13,909) (29,829) exceptional items Financial Profile Profit/(loss) after 5,335 600 7,154 (15,546) (29,885) taxation
BALANCE SHEET
Property, plant 62,847 59,097 58,657 66,877 86,068
5-Year and equipment
Other non-current assets 172 172 207 132 -
Net current/ 25,778 26,430 14,101 125 (14,195) (liabilities) assets (4) 88,797 85,699 72,965 67,134 71,873
Shareholders’ equity 7,380 1,819 1,432 (13,812) (11,344)
Short and long-term 79,837 82,296 70,005 79,446 81,717 borrowings
Deferred taxation 1,580 1,584 1,528 1,500 1,500
88,797 85,699 72,965 67,134 71,873
Note: (1) Exceptional items relate mainly to gains arising from shares settlement of fees,loan,interest and trade debts and gain arising from debt forgiveness (2) Exceptional items relate mainly to provision for impairment charge for leasehold properties and investment property and gain arising from the implementation of the S210 Scheme of Arrangement (3) Exceptional items relate mainly to provision for impairment charge of leasehold properties and for doubtful recovery of sundry debtors and deposits (4) In arriving at “net current assets”, current borrowings have been excluded
PER SHARE Unit (Cents) Earnings - Basic 0.72 0.08 1.29 (7.09) (17.50) - Fully diluted 0.66 0.08 1.28 (7.09) (17.50) Net asset value 0.99 0.24 0.19 (3.17) (6.64)
TURNOVER (Loss)/Profit After Taxation Earnings per share
($ Million) ($ Million) (cents) 160 10 4
140 5 0 120 0 -4 100 -5
80 -10 -8
60 -15 -12 40 -20 -16 20 -25
0 -30 -20 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006 2002 2003 2004 2005 2006
12 Yongnam Holdings Limited • Annual Report 2006 Financial Contents Report of the Directors 19
Statement by Directors 24
Independent Auditors’ Report 25
Consolidated Profit and Loss Account 26
Balance Sheets 27
Statements of Changes in Equity 28
Consolidated Cash Flow Statement 29
Notes to the Financial Statements 30
Yongnam Holdings Limited • Annual Report 2006 13 The Group is committed to maintaining a high standard of corporate governance, and has adopted and complied, wherever feasible with the Singapore Code of Corporate Governance. This Report describes Yongnam’s corporate governance processes and activities in 2006 with specific reference to the Principles of the Code. Governance
Board’s conduct of its affairs & Independence of the Board (Principle 1, 2 &3)
The Board’s key responsibilities include providing leadership and guidance to management on corporate strategy and business directions, evaluation of internal controls, risk management, financial reporting and compliances. The Board is aided in its tasks by Board Committees which have been established to focus on the key areas of Corporate oversight.
For the financial year, the Board comprises eight directors, three of whom are independent directors and five are executive directors. All Board members have extensive business, financial, legal and management experiences.
On 5 January 2007, Mr. Kevin Yap resigned as the Executive Chairman and Director of the Company. Subsequently, Mr. Chia Sin Cheng was appointed as Executive Director on 8 January 2007. The Board is in the process of appointing a new Chairman.
Mr. Seow Soon Yong, the Managing Director, has the executive responsibility for the day-to-day operations of the Group while the responsibilities of the Chairman, among other things, include:
• lead the Board to ensure its effectiveness on all aspects of its role and sets its agenda; • ensure that the Board receives accurate, timely and clear information • ensure effective communication with shareholders; • encourage constructive relations between the Board and management; • facilitate the effective contribution of non-executive directors in particular; • encourage constructive relations between executive directors and non-executive directors; and • promote high standards of corporate governance.
The Board held a total of two meetings during the year in accordance with its planning cycle for the approval of the release of the half year and full year results. The attendance of the directors at meetings of the Board and Board committees, as well as the frequency of such meetings since the date of the last annual report and up to the date of this statement is tabulated below:
Audit Nominating Remuneration Board Committee Committee Committee No. of meetings 2 2 1 1 No. of meetings attended by respective directors Executive Directors: 1. Yap Foo Seong, Kevin (Executive Chairman) 2 2 1 1 (Resigned on 5 January 2007) 2. Seow Soon Yong (Managing Director) 2 2 1 1 3. Siau Sun King 2 - - - 4. Seow Soon Hee 2 1 - - 5. Tan Tin Nam 2 1 - - 6. Chia Sin Cheng NA NA NA NA (Appointed on 8 January 2007) Non-Executive and Independent Directors: 7. Goon Kok Loon 1 2 1 1 8. Lim Ghim Siew, Henry 2 2 1 1 9. Liew Jat Yuen, Richard 2 2 - 1
14 Yongnam Holdings Limited • Annual Report 2006 Board Membership & Board Performance (Principle 4 & 5)
The Nominating Committee (the “NC”) comprises the following directors:
Mr. Lim Ghim Siew, Henry (Chairman) Governance Mr. Goon Kok Loon Mr. Seow Soon Yong
The NC’s principal functions are to identify and select new directors and to review all nominations for the re- appointment of directors. The other key responsibilities of the NC are: Corporate
• to determine annually the independence of each director; • to decide on the ability and adequacy of directors with multiple board representations to carry out their duties; and • to propose, for Board’s approval, objective performance criteria to evaluate the effectiveness of the Board as a whole and the contribution by each director to the effectiveness of the Board.
The Company’s Articles of Association requires one third of directors (other than the managing director) to retire and subject themselves for re-election by shareholders at every AGM (“one-third rotation rule”). In other words, no director stays in office for more than three years without being re-elected by shareholders. In addition, a newly appointed director will submit himself for retirement and re-election at the AGM immediately following his appointment. Thereafter, he is subject to the one-third rotation rule. In addition to that, the appointment of all the Executive Directors including the Managing Director, is in accordance with a Service Agreement entered into between the respective individual and the Company. Under the terms of the said agreement, the Company or the relevant executives may terminate the respective director’s service by giving 6 months’ notice in writing or 6 months’ salary in lieu of notice.
To ensure that the Directors are competent in carrying out their expected roles and responsibilities, newly appointed directors are given briefings by the Chairman and Managing Director, on the strategies of the company and its key subsidiaries. The Directors will also, where necessary, receive appropriate training and orientation from time to time on other matters which would help them in the discharge of their duties as Director of the Board or as member of the Board Committee.
In view of the resignation of Mr. Yap Foo Seong on 5 January 2007, the management has then put forward Mr. Chia Sin Cheng’s curriculum vitae for the NC’s consideration on his appointment as Finance Director. Mr. Chia joined Yongnam in 2002 as Chief Financial Officer and was instrumental in conceptualizing and implementing a restructuring plan for the Group. The NC unanimously agreed that Mr. Chia Sin Cheng has all the requisite qualification and his extensive experience in company restructuring, investor relations, treasury, tax planning and risk management, would be most relevant to the Company’s business and due recommendation was made to the Board. The Board accepted the NC’s recommendation and appointed Mr. Chia Sin Cheng as an executive director and assumes the duties as Finance Director on 8 January 2007. The NC noted that the Board currently consisted of eight members, out of which three are Independent Directors. This complies with the Guidelines of the Code of Corporate Governance and the requirements of the Listing Manual. The NC held one meeting during the year 2006. The NC had conducted appraisal for each individual director and evaluated their performance as members of the Board. The NC reviewed the composition of the Board and concluded that the Board has an adequate mix of competency to discharge its duties and responsibilities.
Access to Information (Principle 6 & 10)
The Board receives periodic updates and financial information on affairs and issues that require the Board’s decision as well as on-going reports relating to operational and financial performance of the Group and the Company. The Board also has separate and independent access to the senior management and the Company Secretary at all times. The Company Secretary attends all Board meetings and is responsible to ensure that board procedures are followed. The Board also has access to independent professional advice where appropriate.
The Board accepts that it is accountable to the shareholders and adopted best practices to maintain shareholders’ confidence and trust. Shareholders are required to approve directors’ fees and also the appointment and re- appointment of auditors.
Yongnam Holdings Limited • Annual Report 2006 15 Remuneration Policies, Level and Mix of Remuneration and Disclosure (Principle 7, 8 and 9)
During the financial year, the Remuneration Committee (the “RC”) comprises the following directors:
Governance Dr. Liew Jat Yuen, Richard (Chairman) Mr. Goon Kok Loon Mr. Lim Ghim Siew, Henry
The RC has access to the Group Human Resource Manager when clarification and advice are needed. The key responsibilities of the RC are: Corporate
• to review and recommend to the Board in consultation with the Chairman of the Board, a framework of remuneration and to determine the specific remuneration packages and terms of employment for each of the executive directors and senior executives of the Group including those employees related to the executive directors and controlling shareholders of the Group;
• to recommend to the Board in consultation with the Chairman of the Board, the Employees’ Share Option Schemes or any long term incentive schemes which may be set up from time to time and to do all acts necessary in connection therewith; and
• to carry out its duties in the manner that it deems expedient, subject always to any regulations or restrictions that may be imposed upon the RC by the Board from time to time.
During the financial year, none of the non-executive directors are on service contracts or have consultancies with the Company. The non-executive directors who are also independent directors are paid directors’ fees, which comprise basic fees and additional fees, for serving on Board Committees. Payment of these fees is subject to shareholders’ approval.
During the year, the RC held one meeting to review and revise the compensation structure of the executive directors and senior executives. A breakdown showing the level and mix of the remuneration of the directors is as follows:
Fees Salary Bonus Others Total Remuneration Band ($ 250,000 - $ 499,999 ) Seow Soon Yong - 86% 7% 7% 100% Remuneration Band ( below $ 250,000 ) Yap Foo Seong - 94% - 6% 100% (Resigned on 5 January 2007) Siau Sun King - 83% 7% 10% 100% Seow Soon Hee - 83% 7% 10% 100% Tan Tin Nam - 82% 7% 11% 100% Chia Sin Cheng - - - - - (Appointed on 8 January 2007) Lim Ghim Siew, Henry 100% - - - 100% Goon Kok Loon 100% - - - 100% Liew Jat Yuen, Richard 100% - - - 100%
The gross remuneration received by each of the top 5 executives (excluding executive directors) of the Group was below the $250,000 band. Included in this category was Mr. Seow Soon Hock, the brother of Messrs. Seow Soon Yong, Seow Soon Hee and Siau Sun King. Apart from Mr. Seow Soon Hock, there were three other immediate family members of the executive directors employed by the Group, none of whose remuneration exceeded $150,000 during the year.
16 Yongnam Holdings Limited • Annual Report 2006 Audit Committee, Internal Control and Internal Audit (Principle 11, 12 and 13)
The Audit Committee (“AC”) comprises three members, namely Mr. Goon Kok Loon (Chairman), Mr. Lim Ghim Siew, Henry and Dr. Liew Jat Yuen, Richard. The AC comprises entirely of non-executive and independent directors. Governance
These members of the AC have had many years of experience at senior management positions in the financial and industrial sectors. They have sufficient financial management expertise and experience to discharge the AC’s functions. Corporate The AC performs the functions specified in the Singapore Companies Act, Cap 50, and the Listing Manual of the Singapore Exchange Securities Trading Limited (the “SGX-ST”). It meets with the external auditors, reviews the audit plan, the results of their examination and findings and their evaluation of the system of internal controls. The AC also reviews all the non-audit services provided by the external auditors to ensure that such services will not affect the independence of the external auditors together with their appointment and re-appointment.
In addition, the AC reviews the half-yearly and annual financial statements and all interested party transactions.
The AC also met up with the external auditors without the presence of management on the conclusion of the AC meeting to review the full year financial results for the year ended 31 December 2006.
The Company does not have an internal audit function at this time. The CFO together with the CEO oversees this function. After the restructuring of the Group and when the Group is stabilized, the Company would consider establishing an independent internal audit function.
The AC will be establishing an arrangement whereby staff of the Company can raise, in confidence, concerns about possible improprieties in matters of financial reporting or other matters.
Risk Identification and Management
The construction industry is operating in challenging conditions and is dependent on the economic performance of the country, its neighbors and the surrounding countries.
The Group embarks upon projects with durations of three years or more and run the risk of cost overruns, delays, disputes in claims and variation orders.
Cost of raw materials, in particular steel, which the Group specializes in, are subject to fluctuations due to worldwide demands. An increase in the price of steel will directly impact the bottom line.
As the Group explores into the neighboring countries, foreign exchange fluctuations becomes a factor affecting profitability. Price of steel is usually denominated in US dollars and any increase in the US currency will impact the Group negatively.
The Group’s customers are mainly construction and engineering companies who are the main contractors of projects. In the event of an economic slowdown, cash flow problems experienced by main contractors cascades down to the Group and its suppliers.
The construction industry continues to be dependent on foreign labor, both skilled and unskilled, due to the shortage of local workers. The Group’s core business, which is the fabrication and erection of prefabricated structural steel components, require skilled labor which is in short supply.
Communication With Shareholders (Principles 14) Greater Shareholders Participation (Principle 15)
The Company and the Group strive for timeliness and transparency in its disclosures to the shareholders and the public. The Company does not practise selective disclosure as all price-sensitive information is released through SGXNET. Results and annual reports are announced or issued within the mandatory periods.
All shareholders receive the annual report and Notice of AGM. At the AGM, shareholders are given the opportunity to air their views and ask directors and management questions regarding the Company. The external auditors are also present to address shareholders’ queries relating to the conduct of audit and the preparation and content of the audit report.
Yongnam Holdings Limited • Annual Report 2006 17 Dealings in securities
The Company has adopted the SGX-ST’s Listing Rule 1207(18) in relations to dealings in the Company’s securities. The directors and the senior management are advised not to deal in the Company’s shares during the Governance period commencing one month before the announcement of the Group’s financial results, ending on the date of announcement.
The directors and the senior management are also advised of the relevant provisions under the Securities and Futures Act of Singapore for dealing with the Company’s securities while in possession of unpublished material price-sensitive information in relation to the securities. Corporate
Material Contracts
There is no material contract entered into by the Company or any of its subsidiaries during the year.
Interested Person Transactions
The Company has laid down procedures for the notification to and approval by the Audit Committee for transactions with interested persons. There was no interested person transaction to be disclosed.
18 Yongnam Holdings Limited • Annual Report 2006 The Directors present their report together with the audited consolidated financial statements of Yongnam Holdings Limited (the “Company”) and its subsidiaries (the “Group”) and the balance sheet and statement of changes in equity of the Company for the year ended 31 December 2006.
Directors of the Directors
The Directors of the Company in office at the date of this report are :
Seow Soon Yong Tan Tin Nam Report Siau Sun King Seow Soon Hee Chia Sin Cheng (appointed on 8 January 2007) Goon Kok Loon Lim Ghim Siew, Henry Liew Jat Yuen, Richard
Arrangements to enable Directors to acquire shares and debentures
Except as disclosed in the subsequent paragraphs, neither at the end of nor at any time during the year was the Company a party to any arrangement whose object is to enable the Directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other body corporate.
Directors’ interest in shares and debentures
The following Directors, who held office at the end of the financial year, had, according to the register of directors’ shareholdings required to be kept under Section 164 of the Companies Act, an interest in shares of the Company and related corporations as stated below:
Direct interest Deemed interest
At At At At At At Name of Director 1.1.2006 31.12.2006 21.1.2007 1.1.2006 31.12.2006 21.1.2007
Yongnam Holdings Limited (Ordinary shares)
Tan Tin Nam 41,038,955 36,038,955 36,038,955 64,328,432 64,328,432 64,328,432 Seow Soon Yong 27,761,077 27,761,077 27,761,077 – – – Siau Sun King 29,330,077 29,330,077 29,330,077 – – – Seow Soon Hee 22,637,577 22,637,577 22,637,577 – 818,000 818,000 Yap Foo Seong 15,200,000 14,000,000 NA – – – Chia Sin Cheng NA NA 1,000,000 – – –
Yongnam Holdings Limited (Warrants to subscribe for ordinary shares, exercisable between 27 August 2005 to 26 August 2009 at $0.03 per share) Direct interest Deemed interest
At At At At Name of Director 1.1.2006 31.12.2006 1.1.2006 31.12.2006
Tan Tin Nam 10,129,492 5,129,492 – – Seow Soon Yong 5,926,846 5,926,846 – – Siau Sun King 6,088,346 6,088,346 – – Seow Soon Hee 439,595 439,595 5,405,000 5,405,000 Yap Foo Seong 5,951,000 5,951,000 – –
Yongnam Holdings Limited • Annual Report 2006 19 Directors’ interest in shares and debentures (cont’d)
Yongnam Holdings Limited (Options to subscribe for ordinary shares)
Direct interest Deemed interest of the Directors
At At At At Name of Director 1.1.2006 31.12.2006 1.1.2006 31.12.2006
Report Yap Foo Seong Exercisable between 2005 and 2009 9,366,371 9,366,371 – –
Except as disclosed in this report, no Director who held office at the end of the financial year had interest in shares, share options, warrants or debentures of the Company, or of related corporations, either at the beginning of the financial year, or date of appointment if later, or at the end of the financial year.
Directors’ contractual benefits
Except as disclosed in the financial statements, since the end of the previous financial year, no Director of the Company 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 the Director is a member, or with a company in which the Director has a substantial financial interest.
Share Options
The Share Options Scheme and Employee Share Option Scheme are administered by the Remuneration Committee (the “Committee”) comprising the following members:
Liew Jat Yuen, Richard (Chairman) Goon Kok Loon Lim Ghim Siew, Henry
Details of the schemes are as follows:
(a) Share Options Scheme (“SOS”)
During the Extraordinary General Meeting held on 26 August 2003, the shareholders of the Company approved the grant of Share Options to the then executive Chairman Mr Yap Foo Seong (“Mr Yap”) and the then finance director Mr Chia Sin Cheng (“Mr Chia”) to subscribe for 14,400,000 Option Shares and 8,000,000 Option Shares, respectively (subject to any adjustments for capitalisation, rights, sub-division or consolidated exercises undertaken by the Company), as part of their total remuneration packages.
The principal terms of the share options :
(i) Exercise Price : 20% discount to the Market Price (The prevailing market price of the Shares based on the average of the last dealt price per share as indicated in the daily official list or any other publication published by the SGX-ST for the last five(5) consecutive Market Days on which there are trades in the Shares immediately preceding the Date of Grant).
(ii) Option Period : The unexercised Options shall expire on the anniversary date falling 5 years from the Date of Grant (26 August 2003)
In granting the Options at a 20% discount to the Market Price, the Company seeks to reward the Grantees for their invaluable contributions to the Company as well as to provide each of the Grantees an incentive to improve the financial performance of the Group.
20 Yongnam Holdings Limited • Annual Report 2006 Share Options (cont’d)
(a) Share Options Scheme (“SOS”) (cont’d)
(iii) Vesting of Options: The Options granted to Mr Yap Foo Seong shall only be exercisable, in
whole or in part (provided that the Options may be exercised in part only of the Directors in respect of 1,000 Shares or any multiple thereof). The Options shall vest as follows :- • 7,200,000 Options Shares shall vest on the Date of Grant (26 August 2003) and may be exercisable thereafter, and Report • the balance 7,200,000 Option Shares shall vest 12 months after the Date of Grant (26 August 2003) and may be exercisable thereafter.
All unexercised Options granted to Mr Chia Sin Cheng shall only be exercisable, in whole or in part (provided that the Options may be exercised in part only in respect of 1,000 Shares or any multiple thereof). The Options shall vest as follows :- • 4,000,000 Option Shares shall vest on the Date of Grant (26 August 2003) and may be exercisable thereafter; and • the balance 4,000,000 Option Shares is not exercisable as Mr Chia Sin Cheng resigned on 30 November 2003.
The information relating to SOS is as follows:
Aggregate Aggregate options options exercised/ Aggregate Options granted since lapsed since options granted commencement commencement outstanding during of SOS to end Adjustments of SOS to end as at end of financial year of financial year due to rights of financial year financial year Name of participant under review under review issue under review under review
Mr. Yap Foo Seong - 14,400,000 2,166,371 7,200,000 9,366,371 Mr. Chia Sin Cheng - 8,000,000 902,654 6,000,000 2,902,654
(b) Employee Share Option Scheme (“ESOS”)
The ESOS was approved by the shareholders during the Extraordinary General Meeting held on 16 June 2004. Executive and non-executive directors, and employees of the Group or associated companies are eligible to participate in the ESOS.
The ESOS share options granted are exercisable for ten years after date of grant, and are exercisable at an exercise price set at:
(i) a discount to a price (“Market Price”) equal to the average of the last dealt prices for the Shares on the Official List of the SGX-ST for the five consecutive market days immediately preceding the relevant date of grant of the ESOS share option, subject to a maximum of 20% discount (“Incentive Option”); or
(ii) a fixed Market Price (“Market Price Option”)
The Committee has the discretion to grant options set at a discount to Market Price, and determine the participants to whom, and the options to which, such reduction in exercise prices will apply.
Yongnam Holdings Limited • Annual Report 2006 21 Share Options (cont’d)
(b) Employee Share Option Scheme (“ESOS”) (cont’d)
Incentive Options granted are exercisable after the second anniversary from the date of grant of the option, and of the Directors
Market Price Options granted may be exercised after the first anniversary of the date of grant of that option.
Report The ESOS shall continue in operation for a maximum duration of ten years and may be continued for any further periods thereafter with the approval of Shareholders by ordinary resolution in general meeting and of any relevant authorities which may then be required.
No options have been granted since the inception of the ESOS.
Audit Committee
The Audit Committee (“AC”) comprises three members, namely Mr. Goon Kok Loon (Chairman), Mr. Lim Ghim Siew, Henry and Dr. Liew Jat Yuen, Richard. The AC is comprises entirely of non-executive and independent directors.
The AC performs the functions specified in the Singapore Companies Act, Cap 50 and the Listing Manual of the Singapore Exchange Securities Trading Limited. It meets with the external auditor, reviews the audit plan, the results of their examination and findings and their evaluation of the system of internal controls. The AC also reviews all the non-audit services provided by the external auditors to ensure that such services will not affect the independence of the external auditors together with their appointment and re-appointment.
In addition, the AC reviews the half-yearly and annual financial statements and all interested party transactions.
The AC also met up with the external auditors without the presence of management on the conclusion of the AC meeting to review the full year financial results for the year ended 31 December 2006.
Further information regarding the AC is disclosed in the Report on Corporate Governance.
22 Yongnam Holdings Limited • Annual Report 2006 Auditors
Ernst & Young have expressed their willingness to accept re-appointment as auditors. of the Directors On behalf of the Board of Directors, Report
Tan Tin Nam Director
Seow Soon Yong Director
Singapore 31 March 2007
Yongnam Holdings Limited • Annual Report 2006 23 We, Tan Tin Nam and Seow Soon Yong, being two of the Directors of Yongnam Holdings Limited, do hereby state that, in the opinion of the Directors:
(a) the accompanying balance sheets, consolidated profit and loss account, statements of changes in equity By Directors By Directors and consolidated cash flow statement together with the notes thereto are drawn up so as to give a true and fair view of the state of affairs of the Group and Company as at 31 December 2006, and of the results of the business, changes in equity and cash flows of the Group and changes in equity of the Company for the 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 Statement its debts as and when they fall due.
On behalf of the Board of Directors,
Tan Tin Nam Director
Seow Soon Yong Director
Singapore 31 March 2007
24 Yongnam Holdings Limited • Annual Report 2006 To the Members of Yongnam Holdings Limited
We have audited the accompanying financial statements of Yongnam Holdings Limited (the “Company”) and its subsidiaries (the “Group”) set out on pages 26 to 63, which comprise the balance sheets of the Group and the Company as at 31 December 2006, the statements of changes in equity of the Group and the Company, and the profit and loss account and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes.
Directors’ responsibility for the financial statements Auditors’ Report
The Company’s directors are 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: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Independent
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by directors, 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.
In our opinion,
(i) the consolidated financial statements of the Group, and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2006 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and
(ii) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.
Ernst & Young Certified Public Accountants
Singapore 31 March 2007
Yongnam Holdings Limited • Annual Report 2006 25 for the year ended 31 December 2006
2006 2005 Note $ $
Revenue 150,412,068 81,428,550
Costs of sales (127,867,572) (65,724,882)
Gross profit 22,544,496 15,703,668 Profit and Loss Account Profit Other operating income 3 1,167,610 1,079,443
General and administrative expenses (13,086,279) (12,359,158)
Exceptional items 4 – 438,564 Consolidated Finance income 5 3,695 3,057
Finance costs 6 (5,007,437) (4,174,165)
Profit before taxation 7 5,622,085 691,409
Taxation 8 (286,836) (91,798)
Profit for the year attributable to shareholders of the Company 5,335,249 599,611
Earnings per share 9
- Basic 0.72 cents 0.08 cents
- Fully diluted 0.66 cents 0.08 cents
The accompanying policies and explanatory notes form an integral part of the financial statements.
26 Yongnam Holdings Limited • Annual Report 2006 as at 31 December 2006
Group Company Sheets Note 2006 2005 2006 2005 $ $ $ $ Non current assets Property, plant and equipment 10 62,846,786 59,096,788 274,060 349,019 Balance Investment property 11 – – – – Subsidiaries 12 – – 20,113,147 20,832,442 Fixed deposits 13 172,247 172,331 – –
Current Assets Steel materials, at cost 5,496,774 2,006,523 – – Work-in-progress 14 69,141,525 63,546,787 – – Trade debtors 15 7,886,726 9,933,217 – – Sundry debtors and deposits 16 2,403,918 1,820,397 – 21,960 Cash and bank balances 1,396,191 1,395,663 43,469 8,585 86,325,134 78,702,587 43,469 30,545
Current liabilities Progress billings in excess of costs 14 1,437,308 6,972,550 – – Trade creditors 18 48,762,956 32,936,848 – – Sundry creditors and accruals 19 9,049,558 11,012,580 441,530 357,719 Amount due to a subsidiary 12 – – 371,097 445,277 Bank borrowings (secured) 20 35,005,683 30,994,415 7,850,571 7,691,790 Hire purchase creditors (secured) 24 494,912 654,577 54,087 54,087 Provision for taxation 1,297,648 1,350,942 5,786 5,786 96,048,065 83,921,912 8,723,071 8,554,659 Net current liabilities (9,722,931) (5,219,325) (8,679,602) (8,524,114)
Non current liabilities Bank borrowings (secured) 20 (43,896,282) (49,718,447) – – Hire purchase creditors (secured) 24 (440,017) (927,932) (214,522) (268,621) Provision for deferred tax 8 (1,579,947) (1,584,476) – –
Net assets 7,379,856 1,818,939 11,493,083 12,388,726
Equity Share capital 21 24,035,913 7,458,155 24,035,913 7,458,155 Share premium – 16,543,358 – 16,543,358 Capital reserves 22 9,032,945 9,034,945 2,196,313 2,198,313 Foreign currency translation reserve 1,004,413 811,145 – – Accumulated losses (26,693,415) (32,028,664) (14,739,143) (13,811,100)
7,379,856 1,818,939 11,493,083 12,388,726
The accompanying policies and explanatory notes form an integral part of the financial statements.
Yongnam Holdings Limited • Annual Report 2006 27 for the year ended 31 December 2006
Group Company Note 2006 2005 2006 2005 $ $ $ $
Share capital 21 Balance at beginning of year 7,458,155 7,427,145 7,458,155 7,427,145
of Changes in Equity Issue of shares during the year 34,400 31,010 34,400 31,010 Transfer of share premium to share capital 16,543,358 – 16,543,358 –
Balance at end of year 24,035,913 7,458,155 24,035,913 7,458,155 Statements Share premium Balance at beginning of year 16,543,358 16,465,835 16,543,358 16,465,835 Premium on issue of ordinary shares during the year – 77,523 – 77,523 Transfer of share premium to share capital (16,543,358) – (16,543,358) –
Balance at end of year – 16,543,358 – 16,543,358
Capital reserves 22 Balance at beginning of year 9,034,945 9,034,945 2,198,313 2,198,313 Exercise of warrants during the year (2,000) – (2,000) –
Balance at end of year 9,032,945 9,034,945 2,196,313 2,198,313
Foreign currency translation reserve (1) Balance at beginning of year 811,145 1,132,295 – – Translation during the year 193,268 (321,150) – –
Balance at end of year 1,004,413 811,145 – –
Accumulated losses Balance at beginning of year (32,028,664) (32,628,275) (13,811,100) (12,286,379) Net profit/(loss) for the year 5,335,249 599,611 (928,043) (1,524,721)
Balance at end of year (26,693,415) (32,028,664) (14,739,143) (13,811,100)
Total equity 7,379,856 1,818,939 11,493,083 12,388,726
Net income and expenses recognised directly in equity 193,268 (321,150) – –
Total recognised income and expense for the year 5,528,517 278,461 (928,043) (1,524,721)
(1) Foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign operations whose functional currency are different from that of the Company’s presentation currency.
The accompanying policies and explanatory notes form an integral part of the financial statements.
28 Yongnam Holdings Limited • Annual Report 2006 for the year ended 31 December 2006
Note 2006 2005 $ $
Cash flows from operating activities
Profit before taxation 5,622,085 691,409 Add/(less) : Cash Flow Statement Depreciation 3,078,271 1,222,241 Interest income (3,695) (3,057) Interest expense 5,007,437 4,174,165 Loss/(gain) on disposal/written off of property, plant and equipment 2,844,102 (182,597) Effects of changes in foreign exchange 198,523 (357,470)
Exceptional gain arising from share settlement of fee, loan, Consolidated interest and trade debts – (438,564)
Operating cash inflow before working capital change 16,746,723 5,106,127
Decrease/(increase) in debtors 1,462,970 (5,583,476) (Increase)/decrease in creditors (4,621,426) 20,326,116 Decrease/(increase) in steel materials and work-in-progress 11,643,956 (23,781,557) Decrease in amounts due to related parties – (19,330)
Cash generated from/(used in) operations 25,232,223 (3,952,120)
Income tax paid (338,202) (200,395) Interest received 3,695 3,057 Interest paid (5,007,437) (4,174,165)
Net cash generated from/(used in) operating activities 19,890,279 (8,323,623)
Cash flows from investing activities
Payments for property, plant and equipment (18,449,997) (5,602,710) Proceeds from disposal of property, plant and equipment 1,084,423 1,735,134
Net cash used in investing activities (17,365,574) (3,867,576)
Cash flows from financing activities
Net repayments on borrowings (5,081,517) (3,173,411) Decrease in fixed deposits pledged for banking facility – 34,713 Hire purchase instalments paid (745,680) (566,978) Issue of ordinary shares (1) 32,400 – Net cash used in financing activities (5,794,797) (3,705,676)
Net decrease in cash and cash equivalents (3,270,092) (15,896,875) Cash and cash equivalents at beginning of year 17 (16,176,898) (280,023) Cash and cash equivalents at end of year 17 (19,446,990) (16,176,898)
(1) In 2005, the Company issued 3,100,946 ordinary shares at a fair value of $0.035 each to fully discharge debts (Note 4).
The accompanying policies and explanatory notes form an integral part of the financial statements.
Yongnam Holdings Limited • Annual Report 2006 29 31 December 2006
1. Corporate information
Yongnam Holdings Limited (the “Company”), a limited liability company, is incorporated and domiciled in Singapore and is listed on the Singapore Exchange Securities Trading Limited.
The registered office and principal place of business of the Company is located at 51 Tuas South Street 5, Singapore 637644.
The principal activity of the Company is that of investment holding. The principal activities of the subsidiaries are set out in note 12 to the financial statements. There have been no significant changes in the nature of the activities during the financial year. to the Financial Statements
2. Significant accounting policies
Notes 2.1 Going concern assumption
As at 31 December 2006, the Group’s and Company’s current liabilities exceed its current assets by $9,722,931 and $8,679,602 (2005: $5,219,325 and $8,524,114) respectively. The Group and Company have total bank borrowings of $78,901,965 and $7,850,571 (2005: $80,712,862 and $7,691,790) respectively.
The financial statements have been prepared assuming that the Group and Company will continueas going concerns. On 11 January 2007, the Company had entered into a placement agreement with CIMB- GK Securities Pte Ltd for the placement of 123,000,000 ordinary shares of the Company at a placement price of $0.161. The net proceeds from the share placement exercise amounted to $19,023,257, net of placement expenses (Note 29).
In addition to the above, the ability of the Group and Company to continue as going concerns is also dependent on several factors which include:
(a) the Group continuing to receive support from its principal banker in relation to the banking facilities currently made available to the Group. The bank covenants include repayments of $300,000 per month and $250,000 per quarter to service both interest and principal of the revolving term loan;
(b) the Group’s ability to secure legal title to the investment property located at Springleaf Tower which was pledged to Hong Leong Finance for bank borrowings. The Group has obtained judgement in its favour during the year and the case is currently under appeal by United Overseas Bank Limited (Note 11). As at 31 December 2006, the loan from Hong Leong Finance amounted to $7,850,571 (2005: $7,691,790);
(c) adequate project financing facilities available to fund existing and new projects secured by the Group; and
(d) the Group’s ability to secure additional new profitable contracts and generate positive cash flows.
The Directors believe that the working capital available to the Group as at the date of this report and for the next twelve months is sufficient for its requirement.
2.2 Basis of preparation
The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).
The financial statements have been prepared on a historical cost basis except for investment properties and derivative financial instruments that have been measured at their fair values.
The financial statements are presented in Singapore Dollars (“SGD” or “$”).
30 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
2. Significant accounting policies (cont’d)
2.3 Changes in accounting policies
The accounting policies have been consistently applied by the Group and the Company and are consistent with those used in the previous financial year, except for the changes in accounting policies as discussed below.
(a) Adoption of amendments to FRS 39 – Financial Guarantee Contracts
The Company has issued corporate guarantee to a bank for bank borrowings of its subsidiaries. This guarantee is a financial guarantee contract as it requires the Company to reimburse the banks if the subsidiaries fail to make principal or interest payments when due in accordance with the terms of to the Financial Statements their borrowings.
Previously, financial guarantee issued by the Company to the bank in relation to borrowings by Notes subsidiaries are accounted for as contingent liabilities of the Company and are not recognised in the financial statements until the Company has an obligation to make payment under the guarantee in accordance with FRS 37 – Provisions, Contingent Liabilities and Contingent Assets.
On 1 January 2006, the Group and Company adopted the amendments to FRS 39 which requires financial guarantees to be accounted for initially at fair value and subsequently at the higher of :
• the amount initially recognised, less accumulated amortisation; and • the amount of obligation that arises under the guarantee.
The revised FRS 39 has been applied retrospectively to financial guarantees existing as at 1 January 2005.
The adoption of revised FRS 39 did not result in any significant impact to the financial statements.
2.4 FRS and INT FRS not yet effective
The Group has not applied the following FRS and INT FRS that have been issued but not yet effective:
Effective date (Annual periods beginning on or after) (i) FRS 1 (revised), Presentation of financial statements (Capital Disclosures) 1 January 2007 (ii) FRS 40, Investment Property 1 January 2007 (iii) FRS 107, Financial Instruments: Disclosure 1 January 2007 (iv) FRS 108, Operating Segments 1 January 2009 (v) INT FRS 107, Applying the Restatement Approach under FRS 29 Financial 1 March 2006 Reporting in Hyperinflationary Economics. (vi) INT FRS 108, Scope of FRS102, Share-based Payment 1 May 2006 (vii) INT FRS 109, Reassessment of Embedded Derivatives 1 June 2006 (viii) INT FRS 110, Interim Financial Reporting and Impairment 1 November 2006 (ix) INT FRS 111, Group and Treasury Share Transactions 1 March 2007 (x) INT FRS 112, Service Concession Arrangements 1 January 2008
The Directors expect that the adoption of the above pronouncements will have no impact to the financial statements in the period of initial application, except as indicated below.
Yongnam Holdings Limited • Annual Report 2006 31 31 December 2006
2. Significant accounting policies (cont’d)
2.4 FRS and INT FRS not yet effective (cont'd)
(a) FRS 107, Financial Instruments: Disclosures and amendments to FRS 1 (revised), Presentation of financial statements (Capital Disclosure)
FRS 107 introduces new disclosures to improve the information about the financial instruments. It requires the disclosure of qualitative and quantitative information about the exposure to risks arising from financial instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk, including sensitivity analysis to market risk. The amendment to FRS 1 requires the Group to make new disclosures to enable users of the financial statements to evaluate the Group’s to the Financial Statements objectives, policies and processes for managing capital. The Group will apply FRS 107 and the amendment to FRS 1 from annual period beginning 1 January 2007.
Notes (b) FRS 40, Investment Property
FRS 40 requires investment properties to be stated either at fair value or at cost less accumulated depreciation. The Group has not decided on the accounting policy for the adoption of FRS 40 and hence the impact of the adoption has not been determined.
(c) FRS 108, Operating Segments
FRS 108 requires the Group to adopt a “management perspective approach” in reporting financial and descriptive information about its reportable segment. Financial information is required to be reported on the basis that it is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. FRS 108 introduces additional segmental disclosures to be made to improve the information about operating segments. The Group will apply FRS 108 from annual period beginning 1 January 2009.
2.5 Significant accounting estimates and judgments
Estimates, assumptions concerning the future and judgments are made in the preparation of the financial statements. They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses, and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including expectations of future events that are believed to be reasonable under the circumstances.
Key sources of estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(i) Revenue recognition on construction contracts
The Group recognises contract revenue by reference to the stage of completion, which is measured by the extent of contract costs incurred-to-date in relation to the latest estimated total costs of the contract where the outcome can be reliably estimated.
As the amounts certified may not coincide with the revenue recognised, significant judgments by management are required in determining the reasonableness of the percentages of completion of the various construction projects based on the extent of contract cost incurred. Changes in percentage of completion would result in changes in contract revenue and contract costs recognised in profit and loss account during the year.
Significant judgments by management are also required in assessing the recoverability of the contracts based on estimated total contract revenue and contract costs. In assessing total contract revenue, an estimation of the recoverable variation works from the customers have been included. In making the judgment, management’s evaluation is based on the actual level of work performed and past experience.
32 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
2. Significant accounting policies (cont’d)
2.5 Significant accounting estimates and judgments (cont’d)
Key sources of estimation uncertainty (cont’d)
(ii) Depreciation of plant and machinery, steel beams and columns
The costs of plant and machinery (including cranes), steel beams and columns are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of these plant and machinery to be within 5 to 20 years and steel beams and columns to be 15 years. The residual values of the steel beams and columns are estimated to be $370 (2005: $370) per ton. to the Financial Statements Changes in the expected level of usage could impact the economic useful lives and the residual values of these assets, therefore future depreciation charges could be revised. The carrying amount of plant and machinery (including cranes), steel beams and columns as at 31 December 2006 amounted to $39,056,566 (2005: $34,006,119). Based on management’s estimates, a 5% difference in the Notes expected useful lives or residual value for steel beams and columns would result in approximately 5% (2005: 5%) difference in depreciation charge.
(iii) Taxation
The Group has exposure to income taxes in several jurisdictions. Significant judgment is involved in determining the Group-wide provision for income taxes. There are certain transactions and computations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for expected tax issues based on estimates of whether additional taxes will be due. Where the final outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. As at 31 December 2006, the carrying amount of the Group’s provision for current and deferred taxation amounted to $2,877,595 (2005: $2,935,418).
The Group’s exposure to additional tax assessments not provided for in the financial statements is disclosed in Note 24 (c).
2.6 Foreign currency
(a) Foreign currency transactions
Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance sheet date are recognised in the profit and loss account except for exchange differences arising on monetary items that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in a separate component of equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated profit and loss account on disposal of the subsidiary. In the Company’s separate financial statements, such exchange differences are recognised in the profit and loss account.
(b) Foreign currency translation
On consolidation, the results and financial position of foreign operations are translated into SGD using the following procedures:
(i) Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balance sheet date; and
(ii) Income and expenses for each income statement are translated at average exchange rates for the year, which approximates the exchange rates at the dates of the transactions.
Yongnam Holdings Limited • Annual Report 2006 33 31 December 2006
2. Significant accounting policies (cont’d)
2.6 Foreign currency (cont'd)
(b) Foreign currency translation (cont’d)
All resulting exchange differences are recognised in a separate component of equity as foreign currency translation reserve.
Goodwill and fair value adjustments which arose on acquisitions of foreign subsidiaries before 1 January 2005 are deemed to be assets and liabilities of the parent company and are recorded in SGD at the rates prevailing at the date of acquisition. to the Financial Statements
On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that foreign operation is recognised in the consolidated profit and loss account as a
Notes component of the gain or loss on disposal.
2.7 Subsidiaries and principles of consolidation
(a) Subsidiaries
A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as to obtain benefits from its activities. The Group generally has such power when it directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less any impairment losses.
(b) Principles of consolidation
The consolidated financial statements comprise the financial statements of the Company andits subsidiaries as at the balance sheet date. The financial statements of the subsidiaries are prepared for the same reporting date as the Company. Consistent accounting policies are applied for like transactions and events in similar circumstances.
All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full.
Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
Acquisitions of subsidiaries are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date 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 values at the acquisition date, irrespective of the extent of any minority interest.
For acquisitions prior to 1 January 2001, the excess of the Company’s share of the net assets of a subsidiary at acquisition date over the cost to the Company is included in capital reserve on consolidation in shareholders’ equity. Any excess of the cost of the business combination on or after 1 January 2001 over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill which will be measured at cost less any accumulated impairment losses.
34 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
2. Significant accounting policies (cont’d)
2.8 Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and any impairment in value. All items of property, plant and equipment are initially recorded at cost.
The initial cost of property, plant and equipment comprises its purchase price, including import duties and non-refundable purchase taxes and any directly attributable costs of bringing the asset to its working condition and location for its intended use, any trade discounts and rebates are deducted in arriving at the purchase price. Expenditure incurred after the property, plant and equipment have been put into operation, such as repairs and maintenance and overhaul costs, is normally charged to the profit and loss account in the period in which the costs are incurred. In situations where it can be clearly demonstrated that the to the Financial Statements expenditure has resulted in an increase in the future economic benefits expected to be obtained from the use of an item of property, plant and equipment beyond its originally assessed standard of performance,
the expenditure is capitalised as an additional cost of property, plant and equipment. Notes
Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated useful lives of the assets as follows :-
Leasehold properties - Over the remaining term of lease Plant and machinery - 5 - 10 years Motor vehicles - 3 - 6 years Office equipment and furniture - 3 - 10 years Cranes - 5 to 20 years Steel beams and columns - 15 years, taking into consideration estimated residual values
The residual values, useful life and depreciation method are reviewed at each financial year-end to ensure that the amount, method and period of depreciation are consistent with previous estimates and the expected pattern of consumption of the future economic benefits embodied in the items of property, plant and equipment.
An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset is included in the profit and loss account in the year the asset is derecognised.
2.9 Investment properties
Investment properties are investments in properties that are not occupied substantially for use by or in the operations of the Group. They are accounted for as long term investments and are carried in the balance sheet at revalued amounts based on annual directors’ valuation. Professional valuation is made once in every 3 years.
The surplus on revaluation is credited directly to revaluation reserve unless it reverses a previous revaluation decrease relating to the same class of assets, which was previously recognised as an expense. In these circumstances, the increase is recognised as income to the extent of the previous write down. Any deficit on revaluation is recognised as an expense unless it reverse a previous surplus relating to that asset, in which case it is charged against any related revaluation surplus, to the extent that the decrease does not exceed the amount held in the revaluation surplus in respect of that same class of assets. Any balance remaining in the revaluation surplus in respect of an investment property, is transferred directly to accumulated profits on retirement or disposal of the investment property.
Yongnam Holdings Limited • Annual Report 2006 35 31 December 2006
2. Significant accounting policies (cont’d)
2.10 Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset (i.e. goodwill acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverable amount.
An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that to the Financial Statements reflects current market assessments of the time value of money and the risks specific to the asset. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment losses of continuing operations are recognised in the
Notes profit and loss account as ‘impairment losses’.
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed 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. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Reversal of an impairment loss is recognised in the profit and loss account. After such a reversal, the depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on a systematic basis over its remaining useful life.
The Group does not reverse in a subsequent period, any impairment loss recognised for goodwill.
2.11 Financial assets
Financial assets within the scope of FRS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument.
When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after initial recognition and, where allowed and appropriate, re- evaluates this designation at each financial year-end.
(a) Financial assets at fair value through profit or loss
Derivative financial instruments whose fair value is positive are classified as financial assets at fair value through profit or loss. The accounting policy for derivative financial instruments is disclosed in Note 2.22.
(b) Loans and receivables
Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and receivables. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in profit and loss account when the loans and receivables are derecognised or impaired, as well as through the amortisation process.
The Group classified the following financial assets as loans and receivables:
• Cash and cash equivalents • Trade and other receivables, including amounts due from subsidiary companies
36 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
2. Significant accounting policies (cont’d)
2.12 Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and at bank, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value. These also include bank overdrafts that form an integral part of the Group’s cash management.
2.13 Impairment of financial assets
The Group assesses at each balance sheet date whether there is any objective evidence that a financial to the Financial Statements asset or group of financial assets is impaired.
If there is objective evidence that an impairment loss on loans and receivables carried at amortised cost Notes has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is recognised in the profit and loss account.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit and loss account, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.
2.14 Derecognition of financial assets
A financial asset is derecognised where the contractual rights to receive cash flows from the asset have expired.
On derecognition of a financial asset, the difference between the carrying amount and the sum of(a) the consideration received (including any new asset obtained less any new liability assumed) and (b) any cumulative gain or loss that has been recognised directly in equity is recognised in the profit and loss account.
2.15 Steel materials
Steel materials are stated in the financial statements at the lower of cost and net realisable value. Cost is determined using the weighted average method.
2.16 Financial liabilities
Financial liabilities include trade creditors, which are normally on credit terms of 30 to 90 days, other creditors, payables to subsidiary companies and interest bearing loans and borrowing. Financial liabilities are initially recognised at fair value of consideration received less directly attributable transaction costs and subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in the profit and loss account when the liabilities are derecognised as well as through the amortisation process. The liabilities are derecognized when the obligation under the liability is discharged or cancelled or expired.
2.17 Borrowing costs
Borrowing costs are generally expensed as incurred. Borrowing costs are capitalized if they are directly attributable to the acquisition, construction or production of a qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are ready for their intended use.
Yongnam Holdings Limited • Annual Report 2006 37 31 December 2006
2. Significant accounting policies (cont’d)
2.18 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) where, as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation, the provision is reversed. to the Financial Statements
2.19 Employee benefits
Notes (a) Defined contribution plans
The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular, the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is performed.
(b) Employee leave entitlement
Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.
(c) Employee share option plans
Employees (including senior executives) of the Group receive remuneration in the form of share- based payment transactions, whereby employees render services as consideration for share options (‘equity-settled transactions’).
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which the share options are granted. In valuing the share options, no account is taken of any performance conditions, other than conditions linked to the price of the shares of the Company (‘market conditions’), if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in the employee share option reserve, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (‘the vesting date’). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vested irrespective of whether or not the market condition is satisfied, provided that all other performance conditions are satisfied.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification, which increases the total fair value of the share-based payment arrangement, or is otherwise beneficial to the employee as measured at the date of modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original award, as described in the previous paragraph.
38 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
2. Significant accounting policies (cont’d)
2.20 Revenue recognition
Contract revenue and contract costs are recognised in the profit and loss account as revenue and costs of sales respectively, by reference to the stage of completion of the contract activity at the balance sheet date, when the outcome of a construction contract can be estimated reliably. The stage of completion is measured by the proportion that the contract costs incurred to date bear to the estimated total costs of the contract. Where the contract outcome cannot be measured reliably, revenue is recognized only to the extent of the expenses recognised that are recoverable.
2.21 Income taxes to the Financial Statements
(a) Current tax Notes Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively enacted by the balance sheet date.
(b) Deferred tax
Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
• Where the deferred tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• In respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry-forward of unused tax credits and unused tax losses can be utilised except:
• Where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
• In respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.
Yongnam Holdings Limited • Annual Report 2006 39 31 December 2006
2. Significant accounting policies (cont’d)
2.21 Income taxes (cont'd)
(b) Deferred tax (cont’d)
Income tax relating to items recognised directly in equity is recognised in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
to the Financial Statements (c) Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except: Notes • Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
• Receivables and payables that are stated with the amount of sales tax included.
The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the balance sheet.
2.22 Derivative financial instruments
Derivative financial instruments are carried as financial assets or liabilities through profit and lossand are initially recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at fair value at each balance date.
Any gains or losses arising from changes in fair value on derivative financial instruments that do not qualify for hedge accounting are taken to the profit and loss account for the year.
2.23 Leases
(a) Operating leases
Operating lease payments are recognised as an expense in the profit and loss account on a straight line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight line basis.
(b) Finance leases
Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalized at the inception of the lease at the fair value of the leased asset, or, if lower, at the present value of the minimum lease payments. Any initial direct costs are also added to the amount capitalized. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to the profit and loss account.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term.
2.24 Warrants
The assigned fair value of the warrants is capitalized as capital reserve. The value of warrants, when exercised by the holder, is capitalized as share capital. At the expiry of the warrants, if the warrants are not exercised, the balance of the capital reserve account in respect of the warrants not exercised will become a distributable reserve.
40 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
2. Significant accounting policies (cont’d)
2.25 Construction contracts
Work-in-progress is stated at costs plus attributable profits less foreseeable losses and progress payments received or receivable on uncompleted contracts. Costs include materials, labour and other direct and indirect expenses attributable to the construction activity.
An expected loss on the construction contract is recognised as an expense immediately when it is probable that total contract costs will exceed total contract revenue.
Provision for liquidated damages for the late completion of projects is made where there is a contractual obligation and written notice is received from customers, and where in management’s opinion an extension to the Financial Statements of time is unlikely to be granted. Notes 3. Other operating income Group 2006 2005 $ $
Included in other operating income : - rental income 142,899 67,500 - sale of scrap and steel materials 735,259 774,348
4. Exceptional items Group 2006 2005 $ $ Settlement of debts in respect of amounts owed to certain trade creditors of a subsidiary settled by issue of Nil (2005: 3,100,946) shares – 302,758 Issue of Nil (2005: 3,100,946) ordinary shares computed at fair value – (108,533) Write off certain trade creditors on lapse of claim on the Company via share settlement – 244,339
– 438,564
In 2005, the Company issued 3,100,946 ordinary shares of par value of $0.01 each at an issue price of $0.035 each to certain trade creditors of a subsidiary, for settlement of approximately $302,758 owing by the subsidiary. The fair value of the shares issued is $0.035 each, amounting to $108,533.
5. Finance income Group 2006 2005 $ $
Interest income 3,695 3,057
Yongnam Holdings Limited • Annual Report 2006 41 31 December 2006
6. Finance costs Group 2006 2005 $ $
Interest expenses : - bank borrowings 4,545,942 3,922,591 - hire purchase 71,494 103,681 - others 189,100 15,170 Bank charges 200,901 132,723 to the Financial Statements 5,007,437 4,174,165 Notes 7. Profit before taxation
The following items have been (charged)/credited in arriving at profit before taxation:
Group 2006 2005 $ $
Non audit fees to: - Auditors of the Company (26,558) (49,036) - Other auditors (30,758) (9,303) Provision for doubtful trade debts (Note 15) – (49,850) Rental expense – operating lease (1,045,658) (1,331,088) Depreciation of property, plant and equipment (1) (4,287,381) (4,056,648) (Loss)/gain on disposal/write off of property, plant and equipment (2,844,102) 182,597 Staff costs (2) (26,955,176) (19,311,999) Foreign exchange loss (51,312) (175,579)
(1) This represents total depreciation charge for the year, of which $1,209,110 (2005: $2,834,407) had been allocated to construction costs incurred to-date (Note 14).
(2) This represents total staff costs for the year, out of which $22,816,916 (2005: $10,714,901) had been allocated to construction costs incurred to-date (Note 14). Included in total staff costs are contributions to defined contribution schemes of $2,400,328 (2005: $1,270,067).
8. Taxation
Major components of income tax expense for the years ended 31 December were :
Group 2006 2005 $ $ In respect of profit for the year: Current tax - Singapore (286,836) (132,000) - Foreign – (19,758) Deferred tax - Singapore – – - Foreign – (56,476) Over provision of current tax in respect of prior years – 116,436
(286,836) (91,798)
42 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
8. Taxation (cont’d)
A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the years ended 31 December is as follows: Group 2006 2005 $ $
Profit before tax 5,622,085 691,409
Tax calculated at tax rate of 20% (2005: 20%) (1,124,417) (138,282) to the Financial Statements
Adjustments: Tax exempt income – 10,500 Notes Tax effect of expenses not deductible for tax purposes (1,064,145) (242,777) Tax effect of income not subject to tax – – Deferred tax assets not recognised (1,094,088) (517,625) Utilisation of deferred tax assets previously not recognised 3,282,650 942,623 Tax effects of different tax rates applicable to overseas subsidiary companies – (24,470) Losses not allowable to be carried forward – (200,552) Over provision in respect of prior years – 116,436 Others (286,836) (37,651)
(286,836) (91,798)
Deferred tax liabilities 1,579,947 1,584,476
This could be analysed as follows: Differences in depreciation 79,947 84,476 Others* 1,500,000 1,500,000
1,579,947 1,584,476
* relates to provision for taxation on the profit of the sale of a subsidiary’s leasehold properties in prior years.
As at 31 December 2006, based on latest available tax assessment, certain subsidiaries in Singapore have unutilised tax losses of approximately $41,200,000 (2005: $48,900,000) and unabsorbed capital allowances of $330,000 (2005: $8,550,000) available for offsetting against future taxable income subject to confirmation by the tax authorities, and there being no substantial change in shareholders in accordance with the relevant provisions of the Income Tax Act.
In addition, certain overseas subsidiaries have unutilised tax losses carried forward of approximately $19,080,000 (2005: $11,700,000) and unabsorbed capital allowances of $220,000 (2005: Nil). The availability of these losses is subject to meeting certain statutory requirements by that overseas subsidiaries in their country of operations.
Yongnam Holdings Limited • Annual Report 2006 43 31 December 2006
8. Income tax (cont’d)
Tax effect of temporary differences for which no deferred tax asset is recognised due to uncertainty of its recoverability : Group 2006 2005 $ $
Unutilised tax losses 12,056,000 8,315,000 Unabsorbed capital allowances 110,000 2,090,000
to the Financial Statements Other temporary difference – 579,000
12,166,000 10,984,000 Notes
9. Earnings per share
Basic earnings per share is calculated by dividing the net profit attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year.
The following reflects the profit and loss account and share data used in the basic and diluted earnings per share computations for the years ended 31 December: Group 2006 2005 $ $
Net profit attributable to ordinary shareholders for basic and diluted earnings per share 5,335,249 599,611
Weighted average number of ordinary shares applicable to basic earnings per share computation 745,915,470 745,298,646
Effect of dilution: Share options 2,637,138 4,717,876 Warrants 54,953,664 10,468,158 Weighted average number of ordinary shares for diluted earnings per share computation 803,506,272 760,484,680
Subsequent to the financial year ended 31 December 2006, the Company issued the following:
• 123,000,000 ordinary shares pursuant to a share placement exercise; • 161,942,146 ordinary shares pursuant to exercise of warrants; and • 12,269,025 ordinary shares pursuant to exercise of options.
44 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
10. Property, plant and equipment Office Leasehold Plant and Motor equipment Steel beams Group properties machinery vehicles and furniture and columns Cranes Total $ $ $ $ $ $ $ Cost At 1 January 2005 34,887,872 13,838,453 1,145,257 3,908,366 44,233,129 5,666,849 103,679,926 Additions 15,009 1,107,915 549,793 231,862 3,972,290 135,129 6,011,998 Disposals/written off – (5,355,162) (313,785) (1,557,726) (2,126,744) – (9,353,417) Translation adjustments 50,085 14,018 1,397 1,897 147,206 – 214,603 to the Financial Statements
At 31 December 2005 and 1 January 2006 34,952,966 9,605,224 1,382,662 2,584,399 46,225,881 5,801,978 100,553,110 Additions 21,671 520,099 104,588 235,128 17,685,151 – 18,566,637 Notes Disposals/written off – (574,783) (162,455) (42,476) (18,684,653) – (19,464,367) Translation adjustments (17,088) (7,066) (7,481) (1,271) (100) (440) (33,446)
At 31 December 2006 34,957,549 9,543,474 1,317,314 2,775,780 45,226,279 5,801,538 99,621,934
Accumulated depreciation and impairment At 1 January 2005 9,726,676 11,523,088 485,743 3,804,480 16,868,714 2,613,570 45,022,271 Depreciation charge 1,217,982 806,468 230,523 80,637 1,415,209 305,829 4,056,648 Disposals – (5,078,115) (172,013) (1,557,726) (883,578) – (7,691,432) Translation adjustments 10,025 18,305 863 2,168 37,474 – 68,835
At 31 December 2005 and 1 January 2006 10,954,683 7,269,746 545,116 2,329,559 17,437,819 2,919,399 41,456,322 Depreciation charge 1,220,191 646,430 216,508 151,188 1,781,467 271,597 4,287,381 Disposals – (555,739) (116,125) (23,404) (8,251,469) – (8,946,737) Translation adjustments (9,988) (4,616) (6,092) (1,213) – 91 (21,818)
At 31 December 2006 12,164,886 7,355,821 639,407 2,456,130 10,967,817 3,191,087 36,775,148
Net book value
At 31 December 2006 22,792,663 2,187,653 677,907 319,650 34,258,462 2,610,451 62,846,786
At 31 December 2005 23,998,283 2,335,478 837,546 254,840 28,788,062 2,882,579 59,096,788
Yongnam Holdings Limited • Annual Report 2006 45 31 December 2006
10. Property, plant and equipment (cont’d)
Motor vehicles $
Company
Cost At 1 January 2005 228,008
to the Financial Statements Additions 295,084 Disposals (73,334)
Notes At 31 December 2005 and 1 January 2006 and 31 December 2006 449,758
Accumulated depreciation At 1 January 2005 49,899 Depreciation charge for the year 75,285 Disposals (24,445)
At 31 December 2005 and 1 January 2006 100,739 Depreciation charge for the year 74,959 At 31 December 2006 175,698
Net book value At 31 December 2006 274,060
At 31 December 2005 349,019
As at 31 December 2006, the Group had property, plant and equipment under hire purchase contracts with a net book value of $2,379,919 (2005: $2,941,472). Leasehold properties are mortgaged to banks to secure banking facilities granted to certain subsidiaries (Note 20).
As at 31 December 2006, the Company had motor vehicles under hire purchase contracts with a net book value of $274,060 (2005: $349,019).
During the financial year, the Group and Company acquired property, plant and equipment of $98,100 and $Nil (2005: $409,288 and $295,084) respectively by means of hire purchase.
Details of the leasehold properties at 31 December 2006 are as follows :
Site area Build-up (square area (square Location metres) metres) Tenure of lease
51 Tuas South Street 5, 75,619 26,511 30 years expiring on 31 March 2028 subject Singapore # to the fulfilment of conditions
PLO No. 3 8,094 2,748 60 years expiring on 16 August 2054 Pontian Industrial Estates, Johore, Malaysia
PLO No. 7 8,094 3,520 60 years expiring on 18 August 2058 Pontian Industrial Estates, Johore, Malaysia
# Lease title of 51 Tuas South Street 5 has not been obtained as the subsidiary is still in the process of fulfilling certain criteria as set out by Jurong Town Corporation.
46 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
11. Investment property Group 2006 2005 $ $
Cost Balance at beginning and end of year 12,161,359 12,161,359
Provision for impairment loss Balance at beginning and end of year (12,161,359) (12,161,359) to the Financial Statements Net carrying value – –
The investment property, located at Anson Road, Singapore, consists of office space on the 23rd storey of Notes Springleaf Tower, an office block, with an unexpired lease of 99 years from 1 October 1996. The property is pledged for a long-term loan due to Hong Leong Finance (“HLF”) (Note 20).
A legal dispute over the ownership of this investment property has arisen between the Group and the mortgagee of the Springleaf Tower. On 2 December 2004, the court ruled in favour of the mortgagee and the Group has appealed against this judgement. On 18 August 2005, the Court of Appeal dismissed the Group’s appeal for the right of ownership.
During the year, the Group had re-appealed against the judgement and was successful in securing the right of ownership of the property. The judgement was made in favour of the Group on 23 November 2006. On 22 December 2006, the mortgagee had filed an appeal on the related judgement and the legal proceedings are still in progress.
A full provision for this investment property had been made in the prior years in view of the uncertainty of this matter.
12. Subsidiaries
Company 2006 2005 $ $
(a) Unquoted shares, at cost 38,467,732 38,467,732 Due from subsidiaries (non-trade) 25,485,107 26,204,402
63,952,839 64,672,134 Less : Impairment loss in subsidiary (25,431,590) (25,431,590) Provision for doubtful receivables (18,408,102) (18,408,102)
20,113,147 20,832,442
The amounts owing by subsidiaries are interest free, unsecured and repayable only when the cash flows of the subsidiaries permit. Company 2006 2005 $ $
(b) Due to a subsidiary (non-trade) (371,097) (445,277)
The amount due to a subsidiary is unsecured, interest-free and repayable on demand.
Yongnam Holdings Limited • Annual Report 2006 47 31 December 2006
12. Subsidiaries (cont’d)
(c) Details of subsidiaries are as follows:
Country of Company Interest held Principal Name Incorporation Cost of investment By the Group activity 2006 2005 2006 2005 $ $ % % Held by the Company
Yongnam Engineering Singapore 37,945,499 37,945,499 100 100 Engineering to the Financial Statements & Construction contractors (Private) Limited *
Notes Yongnam Singapore 2 2 100 100 Property Development Pte Ltd* investment
Yongnam Investment Singapore 2 2 100 100 Investment Pte Ltd * holding
Yongnam Engineering Malaysia 388,525 388,525 70 70 Engineering Sdn Bhd **** contractors
Yongnam Engineering Thailand 99,180 99,180 48.4 48.4 Engineering & Construction contractors (Thailand) Ltd **#
Yongnam Steel Work China 34,524 34,524 100 100 Dormant System Engineering (Shanghai) Co., Ltd @ 38,467,732 38,467,732
Country of Interest held Principal Name Incorporation By the Group activity 2006 2005 % % Held by subsidiaries
Held by Yongnam Engineering & Construction (Private) Limited :
YNE Project Engineering (Private) Singapore 100 100 Engineering Limited * contractors
Yongnam Engineering Hong Kong 100 100 Engineering (Hong Kong) Ltd *** contractors
Held by Yongnam Engineering Sdn Bhd :
Polifond Technologies Sdn Bhd **** Malaysia 70 70 Dormant
Held by YNE Project Engineering (Private) Limited :
Jiwa Harmoni Offshore Sdn Bhd **** Malaysia 100 100 Engineering contractors
48 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
12. Subsidiaries (cont’d)
* Audited by Ernst & Young, Singapore. ** Audited by KPJ Business Company Limited, Thailand. *** Audited by F. S. Li & Co, Hong Kong. **** Audited by SQ Morrison, Chartered Accountants (Malaysia). @ Not required to be audited in the country of incorporation. # The Group holds 48.4% (2005 : 48.4%) equity in Yongnam Engineering & Construction (Thailand) Ltd (“YNET”). In accordance with the Singapore Companies Act, Cap. 50, the Group considers YNET as a subsidiary by virtue of the Group having board control. Accordingly, the results and net assets of the subsidiary have been included in the consolidated financial statements. to the Financial Statements
13. Fixed deposits (non current)
The fixed deposits are pledged to secure long term banking facilities granted to certain subsidiaries. The Notes weighted average effective interest rate at the balance sheet date is 2.68% (2005: 1.10%) per annum.
14. Work-in-progress/(progress billings in excess of costs) Group 2006 2005
$ $
Contract costs incurred to-date 225,760,312 229,774,316 Attributable profit less recognised losses to date 57,452,714 44,047,698
283,213,026 273,822,014 Progress billings (215,508,809) (217,247,777)
67,704,217 56,574,237
Disclosed as : Work-in-progress 69,141,525 63,546,787 Progress billings in excess of costs (1,437,308) (6,972,550)
67,704,217 56,574,237
The following were allocated to contract costs incurred during the year: Group 2006 2005 $ $
Depreciation property, plant and equipment 1,209,110 2,834,407 Staff costs 22,816,916 10,714,901
Yongnam Holdings Limited • Annual Report 2006 49 31 December 2006
15. Trade debtors Group 2006 2005 $ $
Trade debtors are stated after deducting provision for doubtful debts of : 1,522,270 1,530,142
Balance at beginning of year 1,530,142 4,100,040
to the Financial Statements Provision during the year – 49,850 Bad debts written-off against provision – (2,645,979) Exchange rate adjustments (7,872) 26,231 Notes Balance at end of year 1,522,270 1,530,142
Trade debtors are non-interest bearing and are generally on 30 to 60 days’ term. They are recognised at their original invoiced amounts which represents their fair values on initial recognition.
As at 31 December 2006, the following amounts are included in the Group’s trade debtors:- • $34,405 (2005: $3,886,716) denominated in United States Dollars; • $798,231 (2005: $1,223,590) denominated in Thai Baht; and • $2,890,660 (2005: $130,566) denominated in Malaysia Ringgit.
16. Sundry debtors and deposits Group Company 2006 2005 2006 2005 $ $ $ $
Sundry debtors 993,057 947,564 – 2,400 Deposits 490,119 450,342 – 19,560 Staff loans 1,500 – – – Duties recoverable* 919,242 422,491 – –
2,403,918 1,820,397 – 21,960
* comprising goods and services taxes and value added taxes.
As at 31 December 2006, the following amounts are included in the Group’s sundry debtors and deposits:- • $Nil (2005: $463,712) denominated in Thai Baht; and • $Nil (2005: $146,301) denominated in Malaysia Ringgit. • $351,000 (2005: $Nil) denominated in Hong Kong Dollars.
50 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
17. Cash and cash equivalents
Cash and cash equivalents consist of cash on hand and balances with banks less bank overdrafts. Cash and cash equivalents included in the cash flow statement comprise the following balance sheet amounts :
Group 2006 2005 $ $
Cash and bank balances 1,396,191 1,395,663
Bank overdrafts (Note 20) (20,843,181) (17,572,561) to the Financial Statements
(19,446,990) (16,176,898) Notes As at 31 December 2006, the following amounts are included in the Group’s cash and bank balances and bank overdrafts:-
Cash and bank balances • $165,994 (2005: $570,658) denominated in Thai Baht; and • $16,386 (2005: $139,968) denominated in Malaysia Ringgit.
Bank overdrafts • $1,295,093 (2005: $1,270,960) denominated in Malaysia Ringgit.
18. Trade creditors
Trade creditors are non interest bearing and are generally on credit term of 30 to 90 days.
As at 31 December 2006, the following amounts are included in the Group’s trade creditors:- • $26,936 (2005: $770,660) denominated in Thai Baht; and • $5,793,525 (2005: $6,198,242) denominated in Malaysia Ringgit.
19. Sundry creditors and accruals Group Company 2006 2005 2006 2005 $ $ $ $
Accrued operating expenses 8,495,946 10,774,762 324,030 254,719 Amounts owing to directors 553,612 237,818 117,500 103,000
9,049,558 11,012,580 441,530 357,719
The amounts owing to directors are interest free, unsecured and repayable on demand.
20. Bank borrowings (secured) Group Company 2006 2005 2006 2005 $ $ $ $
Bank overdrafts 20,843,181 17,572,561 – – Term loans 58,058,784 63,140,301 7,850,571 7,691,790
78,901,965 80,712,862 7,850,571 7,691,790
Yongnam Holdings Limited • Annual Report 2006 51 31 December 2006
20. Bank borrowings (secured) (cont’d)
Represented by: Group Company 2006 2005 2006 2005 $ $ $ $
Current 35,005,683 30,994,415 7,850,571 7,691,790 Non current 43,896,282 49,718,447 – –
to the Financial Statements 78,901,965 80,712,862 7,850,571 7,691,790
(a) Terms and repayment schedules Notes After 1 year but within 5 The Group Total Within 1 year years After 5 years 2006 $ $ $ $
- S$ term loan, due from 2000 to 2015 (1) 7,850,571 7,850,571 – –
- S$ revolving term loan (2) 38,062,950 3,600,000 14,400,000 20,062,950
- S$ term loan (2) 10,763,500 2,167,600 8,595,900 –
- HK$ term loan (3) 1,381,763 544,331 837,432 –
- S$ bank overdrafts (4) 19,548,088 19,548,088 – –
- RM bank overdraft (5) 1,295,093 1,295,093 – –
78,901,965 35,005,683 23,833,332 20,062,950
The Group 2005
- S$ term loan, due from 2000 to 2015 (1) 7,691,790 7,691,790 – –
- S$ revolving term loan (2) 41,445,545 3,600,000 14,400,000 23,445,545
- S$ term loan (2) 12,000,000 1,583,800 8,670,400 1,745,800
- HK$ term loan (3) 2,002,966 546,264 1,456,702 –
- S$ bank overdrafts (4) 16,301,601 16,301,601 – –
- RM bank overdraft (5) 1,270,960 1,270,960 – –
80,712,862 30,994,415 24,527,102 25,191,345
52 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
20. Bank borrowings (secured) (cont’d)
(a) Terms and repayment schedules (cont’d) After 1 year but within 5 The Company Total Within 1 year years After 5 years 2006 $ $ $ $ - S$ term loan, due from 2000 to 2015 (1) 7,850,571 7,850,571 – –
2005 - S$ term loan, due from to the Financial Statements 2000 to 2015 (1) 7,691,790 7,691,790 – –
(1)
The long term loan is secured on the Group’s investment property (Note 11). As disclosed in Note Notes 11, the Group had failed to secure the legal ownership of the investment property in 2005. This has resulted in a breach of certain bank covenants. The bank had agreed to withhold the legal proceedings against the Group provided that the Group fulfils certain conditions stipulated, including timely agreed minimum monthly payment. Due to the breach of bank covenants, the loan has been classified as current liability.
(2) The S$ revolving term loan and S$ term loan were secured by, inter alia, the following: (1) a legal mortgage over the Group’s property at 51 Tuas South Street 5; (2) a debenture (fixed and floating charge) over certain subsidiary’s assets and future undertaking, property, assets, revenue and rights; (3) corporate guarantee by the Company and certain subsidiary; (4) a first and second registered all-monies debenture (fixed and floating charge) over the Company’s assets and future undertakings, property, assets, revenue and rights; (5) legal assignments of the contracts and insurance in relation to certain projects undertaken by the Group executed in favour of UOB Bank; and (6) a letter of charge and set-off in respect of deposit placed with the bank.
The loans are repayable in agreed monthly and quarterly instalments. The interest rates for the revolving term loan are subject to revision on the anniversary of the loan.
(3) The HK$ loan was secured by the following: (1) a debenture (fixed and floating charge) over a subsidiary’s assets; and (2) corporate guarantee by the Company and a subsidiary.
The loans are repayable in agreed monthly instalments.
(4) The bank overdrafts were secured under the same terms as the facility agreement for the term loan as disclosed in (2) above.
(5) The bank overdraft was secured by the following: (1) corporate guarantees by the Company and certain subsidiaries; (2) an all-monies debenture over a subsidiary’s present and future assets and properties; (3) a subsidiary’s undertaking to perfect the legal assignment of all its future contracts and insurance proceeds; and (4) third party first and second legal charges over leasehold property of the Group located at PLO7, Pontian Industrial Estates, Johore, Malaysia.
(b) Effective interest rates
The weighted average effective interest rates per annum at the balance sheet date are as follows:
Group Company 2006 2005 2006 2005 % % % %
Trust receipts – 5.59 – – Bank overdrafts 5.21 5.18 – – Bank loans 6.93 4.06 9.75 9.75 Revolving credit facilities 5.51 4.06 – –
Yongnam Holdings Limited • Annual Report 2006 53 31 December 2006
21. Share capital Group and Company 2006 2005 $ $
Issued and fully paid : Balance at beginning of year 745,815,470 (2005: 742,714,524) ordinary shares 7,458,155 7,427,145
Issuance during the year
to the Financial Statements Exercise of Share Options of 1,000,000 (2005 : Nil) ordinary shares(1) 26,400 –
(2)
Notes Exercise of Warrants of 200,000 (2005: Nil) ordinary shares 8,000 –
Issuance of Nil (2005: 3,100,946) ordinary shares of $0.01 each in connection with Malaysian Settlement Shares (Note 4) – 31,010
Transfer of share premium reserve to share capital 16,543,358 – Balance at end of year 747,015,470 (2005 : 745,815,470) ordinary shares 24,035,913 7,458,155
(1) The Company issued 1,000,000 ordinary shares at $0.0264 each pursuant to the exercise of 1,000,000 options under the share option scheme.
(2) The Company issued 200,000 ordinary shares at $0.03 each pursuant to the exercise of 200,000 warrants.
The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction.
In accordance with the Companies (Amendment) Act 2005, on 30 January 2006, the shares of the Company ceased to have a par value and the amount standing in the share premium reserve became part of the Company’s share capital.
The Company has a Share Option Scheme (Note 25a) under which options to subscribe for the Company’s ordinary shares have been granted. The Company has also issued warrants for the subscription of the Company’s ordinary shares (Note 23).
22. Capital reserves Note Group Company 2006 2005 2006 2005 $ $ $ $
Capital reserve on consolidation arising from acquisition of subsidiaries 6,836,632 6,836,632 – – Warrants reserve 23 2,196,313 2,198,313 2,196,313 2,198,313
9,032,945 9,034,945 2,196,313 2,198,313
The capital reserves are non-distributable.
54 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
23. Warrants reserve Group and Company 2006 2005 $ $ Balance at beginning of year 219,831,324 (2005: 219,831,324) warrants 2,198,313 2,198,313
Exercise during the year 200,000 (2005: Nil) warrants (2,000) – Balance at end of year
219,631,324 (2005: 219,831,324) warrants 2,196,313 2,198,313 to the Financial Statements
In connection with the Rights Issue in 2004, 93,463,936 Attached Warrants were issued. Pursuant to an agreement with the UOB Group as part of the debt forgiveness in 2004, the Company had: Notes
(i) paid UOB one cent for each of the Attached Warrants issued to Rights subscribers (a total of $934,639); and
(ii) issued 16,367,388 UOB deficient warrants (“Deficient Warrants”) at no cost with a warrant value for $0.01 for the shortfall between Attached Warrants issued and 110 million UOB warrants, and paid UOB $1,686 for the shortfall of deficient warrants; and
(iii) issued 110 million warrants to UOB (“UOB Warrants”) at no cost with a warrant value of $0.01.
Based on the above, the fair value of the warrants has been assessed to be $0.01 each.
An aggregate of 219,831,324 warrants at $0.01 were released in 2005 by the Central Depository (Pte) Limited to the Rights subscribers and UOB on the terms described above. These warrants have been listed since 26 August 2005. The warrants are valid for 5 years from date of issue, with an exercise price of $0.03.
24. Commitments and contingencies
(a) Operating lease commitments
The Group has future minimum lease payments under non-cancellable operating lease in respect of lease of land up to 31 March 2028 as follows : Group 2006 2005 $ $
Within one year 636,852 864,805 After one year but not more than five years 2,547,408 3,246,240 After five years 10,348,845 13,999,410
13,533,105 18,110,455
Yongnam Holdings Limited • Annual Report 2006 55 31 December 2006
24. Commitments and contingencies (cont’d)
(b) Hire purchase creditors (secured)
Future minimum payments together with the present value of the net minimum payments are as follows :
Present Present Minimum value of Minimum value of Group payments payments payments payments 2006 2006 2005 2005
to the Financial Statements $ $ $ $
Within one year 539,404 494,912 717,421 654,577
Notes After one year but not more than five years 523,478 440,017 1,045,500 927,932
Total minimum lease payments 1,062,882 934,929 1,762,921 1,582,509
Less : amounts representing interest (127,953) – (180,412) –
Present value of minimum lease payments 934,929 934,929 1,582,509 1,582,509
Present Present Minimum value of Minimum value of Company Payments payments payments payments 2006 2006 2005 2005 $ $ $ $
Within one year 62,796 54,087 62,796 54,087 After one year but not more than five years 256,351 214,522 319,160 268,621
Total minimum lease payments 319,147 268,609 381,956 322,708
Less : amounts representing interest (50,538) – (59,248) –
Present value of minimum lease payments 268,609 268,609 322,708 322,708
The liabilities are secured on the Group and the Company’s property, plant and equipment as disclosed in Note 10. The weighted average effective interest rate of the Group and the Company at the balance sheet date is 5.475% and 4.36% per annum (2005 : 5.6% and 4.36%).
56 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
24. Commitments and contingencies (cont’d)
(c) Contingent liabilities
As at the balance sheet date, the Company has provided corporate guarantees to certain financial institutions for banking facilities granted to certain subsidiaries amounting to approximately $137 million (2005: $136 million). As at 31 December 2006, the amount outstanding is approximately $84 million (2005: $81 million).
There was an additional tax assessments raised to a subsidiary company in respect of withholding tax payable to the tax authorities. No provision has been made in the financial statements as the matter is under discussion and is not finalised. The tax exposure is approximately $280,000 (2005: $280,000). to the Financial Statements
Save as disclosed above, the Directors of the Company are not aware of any litigation or arbitration to
which the Company or any of its subsidiaries is a party or of which any of their respective properties Notes is the subject or which is contemplated, the outcome of which in the opinion of the Directors would have a material and adverse effect on the financial position of the Company and its subsidiaries taken as a whole.
25. Share Options
The Share Options Scheme and Employee Share Option Scheme are administered by the Remuneration Committee (the “Committee”) comprising the following members:
Richard Liew Jat Yuen (Chairman) Goon Kok Loon Henry Lim Ghim Siew
Details of the schemes are as follows:
(a) Share Options Scheme (“SOS”)
During the Extraordinary General Meeting held on 26 August 2003, the shareholders of the Company approved the grant of Share Options to the then executive Chairman Mr Yap Foo Seong (“Mr Yap”) and the then finance director Mr Chia Sin Cheng (“Mr Chia”) to subscribe for 14,400,000 Option Shares and 8,000,000 Option Shares, respectively (subject to any adjustments for capitalisation, rights, sub-division or consolidated exercises undertaken by the Company), as part of their total remuneration packages.
The principal terms of the share options :
(i) Exercise Price : 20% discount to the Market Price (The prevailing market price of the Shares based on the average of the last dealt price per share as indicated in the daily official list or any other publication published by the SGX-ST for the last five(5) consecutive Market Days on which there are trades in the Shares immediately preceding the Date of Grant).
(ii) Option Period : The unexercised Options shall expire on the anniversary date falling 5 years from the Date of Grant (26 August 2003).
In granting the Options at a 20% discount to the Market Price, the Company seeks to reward the Grantees for their invaluable contributions to the Company as well as to provide each of the Grantees an incentive to improve the financial performance of the Group.
Yongnam Holdings Limited • Annual Report 2006 57 31 December 2006
25. Share Options (cont’d)
(a) Share Options Scheme (“SOS”) (cont’d)
(iii) Vesting of Options: The Options granted to Mr Yap Foo Seong shall only be exercisable, in whole or in part (provided that the Options may be exercised in part only in respect of 1,000 Shares or any multiple thereof). The Options shall vest as follows :- • 7,200,000 Options Shares shall vest on the Date of Grant (26 August 2003) and may be exercisable thereafter, and • the balance 7,200,000 Option Shares shall vest 12 months after the
to the Financial Statements Date of Grant (26 August 2003) and may be exercisable thereafter.
All unexercised Options granted to Mr Chia Sin Cheng shall only be exercisable, in whole or in part (provided that the Options may be
Notes exercised in part only in respect of 1,000 Shares or any multiple thereof). The Options shall vest as follows :- • 4,000,000 Option Shares shall vest on the Date of Grant (26 August 2003) and may be exercisable thereafter; and • the balance 4,000,000 Option Shares is not exercisable as Mr Chia Sin Cheng resigned on 30 November 2003.
The information relating to SOS is as follows: Aggregate options Options Aggregate options exercised/ Aggregate granted granted since lapsed since options during commencement commencement outstanding financial of SOS to end Adjustments of SOS to end as at end of year under of financial year due to rights of financial year financial year Name of participant review under review issue under review under review
Mr. Yap Foo Seong - 14,400,000 2,166,371 7,200,000 9,366,371 Mr. Chia Sin Cheng - 8,000,000 902,654 6,000,000 2,902,654
The weighted average market price of ordinary shares for which share options were exercise during the year was $0.105.
(b) Employee Share Option Scheme (“ESOS”)
The ESOS was approved by the shareholders during the Extraordinary General Meeting held on 16 June 2004. Executive and non-executive directors, and employees of the Group or associated companies are eligible to participate in the ESOS.
The ESOS share options granted are exercisable for ten years after date of grant, and are exercisable at an exercise price set at:
(i) a discount to a price (“Market Price”) equal to the average of the last dealt prices for the Shares on the Official List of the SGX-ST for the five consecutive market days immediately preceding the relevant date of grant of the ESOS share option, subject to a maximum of 20% discount (“Incentive Option”); or
(ii) a fixed Market Price (“Market Price Option”)
The Committee has the discretion to grant options set at a discount to Market Price, and determine the participants to whom, and the options to which, such reduction in exercise prices will apply.
Incentive Options granted are exercisable after the second anniversary from the date of grant of the option, and
Market Price Options granted may be exercised after the first anniversary of the date of grant of that option.
The ESOS shall continue in operation for a maximum duration of ten years and may be continued for any further periods thereafter with the approval of Shareholders by ordinary resolution in general meeting and of any relevant authorities which may then be required.
No options have been granted since the inception of the ESOS.
58 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
26. Related party transactions
(a) Purchase of services
An entity or individual is considered a related party of the Group for the purposes of the financial statements if : (i) it possesses the ability (directly or indirectly) to control or exercise significant influence over the operating and financing decisions of the Group or vice versa; or (ii) it is subject to common control or common significant influence.
In addition to the related party information disclosed elsewhere in the financial statements, the following related party transactions took place between the Group and a related party during the financial year at terms agreed by parties concerned : to the Financial Statements Group 2006 2005 $ $ Notes
Transportation services provided by a company in which a director has substantial financial interest 58,843 40,738
(b) Compensation of key management personnel Group 2006 2005 $ $
Directors’ remuneration 1,170,280 1,176,145 Directors’ fees 67,500 50,000 Other key management personnel's remuneration 712,499 664,820
Included in directors’ and other key management personnel's remuneration are contributions to defined contribution schemes of $63,599 (2005: $76,229). Group 2006 2005 $ $
Number of directors of the Company during the year In remuneration bands : $250,000 to below $500,000 1 1 Below $250,000 7 6
Directors’ interest in share option plan
The Company’s Executive Chairman held options to purchase ordinary shares of the Company under the Share Option Scheme as disclosed in Note 25.
Yongnam Holdings Limited • Annual Report 2006 59 31 December 2006
27. Financial risk management objectives and policies
(a) Financial risk management
The Group’s principal financial instruments, other than derivative financial instruments, comprise bank loans and overdraft, hire purchase contracts, cash and short term deposits. The main purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other financial assets and liabilities such as trade debtors and trade creditors, which arise directly from its operations.
The main risks arising from the Group’s financial instruments are foreign currency risk, interest rate risk, liquidity risk and credit risk. The Group does not hold or issue derivative financial instruments for to the Financial Statements trading purposes. Derivative transactions, principally forward currency contracts, are entered into for the purpose of managing currency risks arising from the Group’s operations.
Notes (i) Foreign currency risk
The companies in the Group primarily transacts in their respective functional currencies. The exposure of the Group to foreign currency risk arise from certain transactions denominated in foreign currencies, primarily in United States dollars. To mitigate foreign currency risk, the Group enter into financial hedges as appropriate. The Group does not use foreign currency exchange contracts for trading purposes.
As at 31 December 2006, the Group had entered into forward foreign currency exchange buy contracts amounting to $Nil (2005: $903,485). The fair value of the contracts amounted to $Nil (2005: $5,859).
(ii) Interest rate and liquidity risk
The ability of the Group and Company to continue as going concerns is dependent on several factors which are mentioned and more fully described in Note 2.1 to the financial statements. The Directors believe that the working capital available to the Group as at the date of this report is sufficient for its present requirement for the next 12 months. The Group’s income and operating cash flows are dependent on changes in market interest rates, as the Group holds significant interest bearing liabilities. The ability of the Group to manage its interest rate and liquidity risks is dependent on the continued support from the principal banker.
All the bank borrowings are on floating rates and the Group’s interest rate risk exposure is also disclosed in Note 20.
(iii) Credit risk
The carrying amounts of trade and other debtors, fixed deposits and cash and bank balances represent the Group’s maximum exposure to credit risk. No other financial assets carry a significant exposure to credit risk.
Concentration of credit risk exists when changes in economic, industry or geographic factors similarly affect groups of counterparties whose aggregate credit exposure is significant in relation to the Group’s total credit exposure. The Group is principally involved in the construction activities. Consequently, the risk of non-payment from its trade debtors is affected by any unfavourable economic changes to the construction industry.
The Group manages its credit risk through regular review on collectibility of receivables. Cash and deposits are placed with reputable financial institutions.
Since the Group trades only with recognised and creditworthy third parties, there is no requirement for collateral.
60 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
27. Financial risk management objectives and policies (cont’d)
(b) Fair values
(i) Cash and cash equivalents, other debtors, deposits and sundry creditors
The carrying amounts approximate fair values due to the relatively short term maturity of these financial instruments.
(ii) Trade debtors and trade creditors
The carrying amounts approximate fair values because these are subject to normal trade credit terms. to the Financial Statements
(iii) Hire purchase creditors Notes The fair value of hire purchase creditors is determined by their present value of minimum lease payments (Note 24).
(iv) Bank borrowings
The fair value of floating rate term loans approximates its carrying value as it is based on floating interest rates and terms that continue to be available to the Group. The fair value of fixed rate term loans, estimated using discounted cash flow analysis, approximates the carrying value.
28. Segment information
A segment is a distinguishable component of the Group that is engaged either in providing products or services, or in providing products or services within a particular economic environment, which is subject to risks and rewards that are different from those of other segments.
Segment information is presented in respect of the Group’s segments. The primary format, by geographical segments is based on the Group’s management and internal reporting structure. Inter-segment pricing, if any, is determined on an arm’s length basis.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis.
Segment capital expenditure is the total cost incurred during the period to acquire segment assets which are expected to be used for more than one period.
Geographical segments
The Group operates in four geographical areas, namely Singapore, Malaysia, Thailand and Hong Kong. Singapore and Malaysia are major markets for these revenue. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets and capital expenditure are based on the geographical location of the assets.
Segmental accounting policies are the same policies of the Group as described in Note 2.
Yongnam Holdings Limited • Annual Report 2006 61 31 December 2006
28. Segment information (cont’d)
Primary segment - by geographical Singapore Malaysia Others Elimination Group $ $ $ $ $
Year ended 31 December 2006
Revenue from external customers 125,620,229 17,064,090 7,727,749 – 150,412,068 to the Financial Statements Inter-segment revenue – 8,752,878 – (8,752,878) – Total revenue 125,620,229 25,816,968 7,727,749 (8,752,878) 150,412,068
Notes Segment results 11,968,318 (141,096) (2,117,769) 916,374 10,625,827 Finance income 3,695 Finance costs (5,007,437)
Profit before taxation 5,622,085 Tax (286,836) Net profit 5,335,249
Segment assets 135,154,918 7,427,029 6,555,449 – 149,137,396 Unallocated assets 206,771 Consolidated total assets 149,344,167
Segment liabilities 52,126,281 6,413,271 710,269 – 59,249,821 Unallocated liabilities 82,714,490 Consolidated total liabilities 141,964,311
Capital expenditure 18,372,619 180,835 13,183 – 18,566,637 Depreciation 4,057,740 190,792 38,849 – 4,287,381
Year ended 31 December 2005
Revenue from external 69,363,547 4,761,648 7,303,355 – 81,428,550 customers Inter-segment revenue – 6,638,789 – (6,638,789) - Total revenue 69,363,547 11,400,437 7,303,355 (6,638,789) 81,428,550
Segment results 7,027,734 (391,297) (1,613,403) (160,517) 4,862,517 Finance income 3,057 Finance costs (4,174,165)
Profit before taxation 691,409 Tax (91,798) Net profit 599,611
Segment assets 122,420,911 11,064,526 4,313,937 – 137,799,374 Unallocated assets 172,331 Consolidated total assets 137,971,705
Segment liabilities 41,743,753 7,108,787 2,069,440 – 50,921,980 Unallocated liabilities 85,230,789 Consolidated total liabilities 136,152,769
Capital expenditure 5,460,338 528,153 23,507 – 6,011,998 Depreciation 3,874,772 154,019 27,856 – 4,056,647
62 Yongnam Holdings Limited • Annual Report 2006 31 December 2006
28. Segment information (cont’d)
Segment assets consist primarily of property, plant and equipment, work-in-progress, inventories, receivables and operating cash. Segment liabilities comprise operating liabilities. Capital expenditure comprises additions to property, plant and equipment. Group 2006 2005 $ $
Revenue to the Financial Statements Structural steelworks 62,975,749 37,392,352 Specialist civil engineering 69,280,612 37,561,029 Mechanical engineering 18,155,707 6,475,169 Notes
150,412,068 81,428,550
It is not meaningful to show the total assets employed and the capital expenditure by business activity.
29. Subsequent event
On 11 January 2007, the Company had entered into a placement agreement with CIMB-GK Securities Pte Ltd for the placement of 123,000,000 ordinary shares of the Company at a placement price of $0.161. The net proceeds from the share placement exercise amounted to $19,023,257, net of placement expenses.
30. Authorisation of financial statements
The financial statements of the Company for the year ended 31 December 2006 were authorised for issue in accordance with a resolution of the Directors on 31 March 2007.
Yongnam Holdings Limited • Annual Report 2006 63 As at 30 March 2007
DISTRIBUTION OF SHAREHOLDERS BY SIZE OF SHAREHOLDINGS No. of % of % of Size of Shareholdings Shareholders Shareholders No. of Shares Shareholdings
1 - 999 82 1.33 22,214 0.00
of Shareholdings 1,000 - 10,000 2,209 35.84 14,015,540 1.34 10,001 - 1,000,000 3,791 61.5 284,517,513 27.25 1,000,001 - and above 82 1.33 745,671,374 71.41
Grand Total 6,164 100.00 1,044,226,641 100.00 Statistics
TWENTY LARGEST SHAREHOLDERS % of Name of Shareholder No. of Shares Shareholdings
1 DBS NOMINEES PTE LTD 80,154,519 7.68 2 YONGNAM PRIVATE LIMITED 64,328,432 6.16 3 UNITED ENGINEERS (SINGAPORE) PTE LTD 58,939,514 5.64 4 CITIBANK NOMINEES SINGAPORE PTE LTD 56,368,000 5.40 5 UNITED OVERSEAS BANK NOMINEES PTE LTD 52,866,396 5.06 6 DBSN SERVICES PTE LTD 40,000,000 3.83 7 TAN TIN NAM 36,038,955 3.45 8 HSBC (SINGAPORE) NOMINEES PTE LTD 33,082,000 3.17 9 SEOW SOON HEE 21,637,577 2.07 10 SBS NOMINEES PTE LTD 21,600,000 2.07 11 MORGAN STANLEY ASIA (SINGAPORE) SECURITIES PTE LTD 19,159,000 1.83 12 KIM ENG SECURITIES PTE. LTD. 16,771,065 1.61 13 OCBC SECURITIES PRIVATE LTD 13,190,790 1.26 14 MAYBAN NOMINEES (S) PTE LTD 12,824,000 1.23 15 THONG KONG FATT 11,279,000 1.08 16 YAP FOO SEONG 10,828,371 1.04 17 HONG LEONG FINANCE NOMINEES PTE LTD 10,500,000 1.01 18 CHAN OI LIN 8,140,000 0.78 19 SIAU SUN KING 7,887,577 0.76 20 SEOW SOON YONG 6,787,577 0.65 582,382,773 55.78
Substantial Shareholders No. of shares No. of shares registered in in which the name of substantial substantial shareholders Percentage shareholder or are deemed to of issued Name nominee be interested Total shares
Tan Tin Nam 36,038,955 64,328,432(1) 100,367,387 9.61 JPMorgan Chase & Co. and its affiliates - 101,639,000(2) 101,639,000 9.73 Yongnam Private Limited 64,328,432 - 64,328,432 6.16 United Engineers (Singapore) Pte Ltd 58,939,514 - 58,939,514 5.64 United Engineers Limited - 58,939,514(3) - 5.64
(1) This represents Mr. Tan Tin Nam’s deemed interest of 64,328,432 held in the name Yongnam Private Limited. (2) This represents JPMorgan Chase & Co. and its affiliates deemed interest of 101,639,000 held in the name of the following nominees: (i) 9,639,000 shares held by HSBC (Singapore) Nominees Pte Ltd; (ii) 52,000,000 shares held by DBS Nominees Pte Ltd a/c The Bank of New York Brussels; (iii) 40,000,000 shares held by Raffles Nominee (Pte) Ltd. (3) This represents United Engineers Limited’s deemed interest of 58,939,514 held in the name of United Engineers (Singapore) Pte Ltd.
64 Yongnam Holdings Limited • Annual Report 2006 As at 30 March 2007
DISTRIBUTION OF WARRANTHOLDERS BY SIZE OF WARRANTHOLDINGS No. of % of % of Size of Warrantholdings Warrantholders Warrantholders No. of Warrants Warrantholdings
1 - 999 57 17.54 24,692 0.04 1,000 - 10,000 116 35.69 471,252 0.82 10,001 - 1,000,000 135 41.54 15,487,020 26.85 of Warrantholdings 1,000,001 - and above 17 5.23 41,706,214 72.29
Grand Total 325 100.00 57,689,178 100.00
TWENTY LARGEST WARRANTHOLDERS Statistics % of Name of Warrantholders No. of Shares Warrantholdings
1 YAP FOO SEONG 6,000,000 10.40 2 LEE PUI CHING 5,405,000 9.37 3 TAN TIN NAM 5,129,492 8.89 4 SBS NOMINEES PTE LTD 3,100,000 5.37 5 SEOW SOON YONG 2,764,596 4.79 6 SIAU SUN KING 2,514,596 4.36 7 TAN ENG CHUA 2,233,000 3.87 8 MAYBAN NOMINEES (S) PTE LTD 1,886,000 3.27 9 HONG LEONG FINANCE NOMINEES PTE LTD 1,750,000 3.03 10 GO MEI LIN 1,596,000 2.77 11 SEOW SOON HOCK 1,504,500 2.61 12 CHONG YIM PENG 1,502,500 2.60 13 PHILLIP SECURITIES PTE LTD 1,410,642 2.45 14 UNITED OVERSEAS BANK NOMINEES PTE LTD 1,371,500 2.38 15 KIM ENG SECURITIES PTE. LTD. 1,327,006 2.30 16 TIONG WOON CRANE & TRANSPORT (PTE) LTD 1,208,882 2.10 17 CHONG YING LAI 1,002,500 1.74 18 LEONG KOK YEOW 1,000,000 1.73 19 LOH POH LIM 950,000 1.65 20 NEXWELL INTERNATIONAL PTE LTD 921,104 1.60 44,577,318 77.28
Yongnam Holdings Limited • Annual Report 2006 65 NOTICE IS HEREBY GIVEN that the Annual General Meeting of Yongnam Holdings Limited (the “Company”) will be held at 51 Tuas South Street 5, Singapore 637644 on Friday, 27 April 2007 at 9.30 a.m. to transact the following business:
ORDINARY BUSINESS
1. To receive and consider the Audited Accounts of the Company for the financial year ended 31 December 2006 and the Reports of the Directors and Auditors thereon. (Resolution 1)
2. To approve the Directors’ fees of S$67,500.00 for the financial year ended 31 December 2006. (Year 2005: S$50,000.00) (Resolution 2) of Annual General Meeting
3. To re-elect the following Directors retiring in accordance with the Company’s Articles of Association:-
Notice (a) Mr Seow Soon Hee (retiring under Article 104) (Resolution 3) (b) Mr Goon Kok Loon (retiring under Article 104) (Resolution 4) (c) Mr Chia Sin Cheng (retiring under Article 108) (Resolution 5) (See Explanatory Note 1)
4. To re-appoint Messrs Ernst & Young as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 6)
SPECIAL BUSINESS
5. To consider and, if thought fit, pass the following ordinary resolution with or without modifications:
Authority to allot and issue shares
(a) “That, pursuant to Section 161 of the Companies Act, Chapter 50 and the listing rules of the Singapore Exchange Securities Trading Limited, approval be and is hereby given to the Directors of the Company at any time to such persons and upon such terms and for such purposes as the Directors may in their absolute discretion deem fit, to:
(i) issue shares and convertible securities in the capital of the Company whether by way of rights or otherwise;
(ii) make or grant offers, agreements or options that might or would require shares to be issued or other transferable rights to subscribe for or purchase shares (collectively referred as “Instruments”) including but not limited to the creation and issue of warrants, debentures or other instruments convertible into shares;
(iii) issue additional Instruments arising from adjustments made to the number of Instruments previously issued in the event of rights, bonus or capitalization issues; and
(b) (Notwithstanding the authority conferred by the shareholders may have ceased to be in force) Issue shares in pursuance of any Instrument made or granted by the Directors while the authority was in force,
provided always that
(i) the aggregate number of shares to be issued pursuant to this resolution (including shares to be issued in pursuance of Instruments made or granted pursuant to this resolution) does not exceed 50% of the Company’s issued share capital, of which the aggregate number of shares (including shares to be issued in pursuance of Instruments made or granted pursuant to this resolution) to be issued other than on a pro-rata basis to shareholders of the Company does not exceed 20% of the issued share capital of the Company, and for the purpose of this resolution, the issued share capital shall be the Company’s issued share capital at the time this resolution is passed, after adjusting for;
66 Yongnam Holdings Limited • Annual Report 2006 a) new shares arising from the conversion or exercise of convertible securities, or
b) new shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time this resolution is passed provided the options or awards were granted in compliance with Part VIII of Chapter 8 of the Listing Manual of the Singapore Exchange Securities Trading Limited, and
c) any subsequent consolidation or subdivision of the Company’s shares, and
(ii) such authority shall, unless revoked or varied by the Company at a general meeting, continue in force until the conclusion of the next Annual General Meeting or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is the earlier.” (Resolution 7) of Annual General Meeting (See Explanatory Note 2)
6. To consider and, if thought fit, pass the following ordinary resolution with or without modifications: Notice Authority to grant options and to issue shares under the Yongnam Employee Share Option Scheme
“That authority be and is hereby given to the Directors of the Company to offer and grant options from time to time in accordance with the provisions of the Yongnam Employee Share Option Scheme (the “Scheme”), and, pursuant to Section 161 of the Companies Act, Chapter 50, to allot and issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted under the Scheme, provided that the aggregate number shares to be issued pursuant to the Scheme shall not exceed 15% of the issued share capital of the Company from time to time, as determined in accordance with the provisions of the Scheme.” (Resolution 8) (See Explanatory Note 3)
OTHER BUSINESS
7. To transact any other business that may be properly transacted at an Annual General Meeting of the Company.
Dated this 12th day of April 2007
By Order of the Board Joanna Lim Company Secretary
NOTES:
1) A member of the Company entitled to attend and vote at the Meeting is entitled to appoint a proxy and vote in his stead.
2) A proxy need not be a member of the Company.
3) If the appointer is a corporation, the proxy must be executed under seal or the hand of its duly authorised officer or attorney.
4) The instrument appointing a proxy must be deposited at the registered office of the Company at 51 Tuas South Street 5, Singapore 637644 not later than 48 hours before the time appointed for the Meeting.
Yongnam Holdings Limited • Annual Report 2006 67 EXPLANATORY NOTES:
1. Mr Goon Kok Loon will, upon re-election as a director of the Company, continue to serve as the 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.
2. The Ordinary Resolution in item no. 5 is to authorise the Directors of the Company from the date of the above Meeting until the next Annual General Meeting to issue shares and convertible securities in the Company up to an amount not exceeding in aggregate 50% of the issued share capital of the Company of which the total number of shares and convertible securities issued other than on a pro-rata basis to existing shareholders shall not exceed 20% of the issued share capital of the Company for such purposes as they consider would be in the interests of the Company. Rule 806(3) of the Listing Manual of the Singapore of Annual General Meeting Exchange Securities Trading Limited currently provides that the percentage of issued share capital is based on the Company’s share capital at the time the mandate is passed after adjusting for:-
Notice (a) new shares arising from the conversion of convertible securities or employee share options on issue when the mandate is passed; and
(b) any subsequent consolidation or subdivision of shares.
This authority will, unless revoked or varied at a general meeting, expire at the next Annual General Meeting of the Company.
3. The Ordinary Resolution in item no. 6 above, if passed, will empower the Directors of the Company to offer and grant options under the Yongnam Employee Share Option Scheme and to allot and issue shares pursuant to the exercise of such options under the Yongnam Employee Share Option Scheme. The aggregate nominal amount of new shares over which the Company may grant Options on any date, when added to the nominal amount of new shares issued and issuable in respect of (a) all options granted under the Scheme, and (b) all awards granted under any other share option, share incentive, performance share or restricted share plan implemented by the Company and for the time being in force, shall not exceed 15 per cent of the issued share capital of the Company on the day preceding that date.
68 Yongnam Holdings Limited • Annual Report 2006 YONGNAM HOLDINGS LIMITED IMPORTANT Registration Number: 199407612N 1. For investors who have used their CPF monies (Incorporated in the Republic of Singapore) to buy Yongnam Holdings Limited’s shares, this Annual Report 2006 is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY. PROXY FORM 2. This Proxy Form is not valid for use by CPF (Please see notes overleaf before completing this Form) investors and shall be ineffective for all intents and purposes if used or purported to be used by them. 3. CPF Investors who wish to vote should contact their CPF Approved Nominees.
I/We______of ______being a member/members of Yongnam Holdings Limited (the “Company”), hereby appoint:-
Name NRIC/Passport No. Proportion of Shareholdings No. of Shares % Address
and/or (delete where appropriate)
Name NRIC/Passport No. Proportion of Shareholdings No. of Shares % Address
or failing him/her, the Chairman of the Meeting, as my/our proxy/proxies to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting of the Company to be held at 51 Tuas South Street 5, Singapore 637644 on Friday, 27 April 2007 at 9.30 a.m. and at any adjournment thereof. I/We direct my/our proxy/ proxies to vote for or against the Ordinary Resolutions to be proposed at the Annual General Meeting as indicated with an “X” in the spaces provided hereunder. If no specified directions as to voting are given, the proxy/proxies will vote or abstain from voting at his/their discretion. The authority herein includes the right to demand or join in demanding a poll and to vote on a poll.
Ordinary Resolutions For Against 1 Directors’ Reports and Audited Accounts for the year ended 31 December 2006. (Resolution 1) 2. Approval of Directors’ Fees for Non-executive Directors amounting to S$67,500.00. (Resolution 2) 3 (a). Re-election of Mr Seow Soon Hee as Director. (Resolution 3) 3 (b). Re-election of Mr Goon Kok Loon as Director. (Resolution 4) 3 (c). Re-election of Mr Chia Sin Cheng as Director. (Resolution 5) 4. Re-appointment of Ernst & Young as Auditors. (Resolution 6) 5. Authority to allot and issue shares. (Resolution 7) 6. Authority to allot and to issue shares under the ESOS. (Resolution 8)
Dated this ______day of ______2007
Total number of Shares in: No. of Shares (a) CDP Register (b) Register of Members
______Signature(s) of Shareholder(s)/ Common Seal of Corporate Shareholder
IMPORTANT: Please read notes overleaf Notes:-
1. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies to attend and vote in his stead. Such proxy need not be a member of the Company.
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 in his/her stead. A proxy need not be a member of the Company.
3. Where a member appoints two proxies, the appointments shall be invalid unless he/she specifies the proportion of his/ her shareholding (expressed as a percentage of the whole) to be represented by each proxy.
4. Completion and return of this instrument appointing a proxy or proxies shall not preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the Meeting in person, and in such event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy, to the Meeting.
5. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 51 Tuas South Street 5, Singapore 637644 not less than 48 hours before the time appointed for the Meeting.
6. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a duly certified copy thereof must be lodged with the instrument.
7. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.
General:
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 Meeting, as certified by The Central Depository (Pte) Limited to the Company. ------
AFFIX STAMP
The Company Secretary YONGNAM HOLDINGS LIMITED 51 Tuas South Street 5 Singapore 637644
------YONGNAM HOLDINGS LIMITED 51 Tuas South Street 5, Singapore 637644 Tel: (65) 6758 1511 Fax: (65) 6758 0753 [email protected]