Professional Documents
Culture Documents
(Registered by the Singapore Exchange Securities Trading Limited acting as an agent on behalf of the Monetary Authority of Singapore on 25 July 2011)
A One-Stop
Refrigeration Systems
Provider
This document is important. If you are in any doubt as to the action you should take, you should
consult your legal, financial, tax or other professional adviser(s).
Collins Stewart Pte. Limited (the Sponsor) has made an application to the Singapore Exchange Securities
Trading Limited (the SGX-ST) for permission to deal in, and for quotation of, all the ordinary shares (the
Shares) in the capital of Far East Group Limited (the Company) already issued and the new Shares
which are the subject of the Placement (the New Shares) on Catalist (as defined herein). The dealing in
and quotation of the Shares will be in Singapore dollars.
Companies listed on Catalist may carry higher investment risk when compared with larger or more established
companies listed on the Main Board of the SGX-ST. In particular, companies may list on Catalist without
a track record of profitability and there is no assurance that there will be a liquid market in the shares or
units of shares traded on Catalist. You should be aware of the risks of investing in such companies and
should make the decision to invest only after careful consideration and, if appropriate, consultation with
your professional adviser(s).
The Placement is made in or accompanied by this Offer Document that has been registered by the SGX-ST
acting as an agent on behalf of the Monetary Authority of Singapore (the Authority). We have not lodged
or registered this Offer Document in any other jurisdiction.
Neither the Authority nor the SGX-ST has examined or approved the contents of this Offer Document. Neither
the Authority nor the SGX-ST assumes any responsibility for the contents of this Offer Document, including
the correctness of any of the statements or opinions made or reports contained in this Offer Document.
The SGX-ST does not normally review the application for admission but relies on the Sponsor confirming
that our Company is suitable to be listed and complies with the Catalist Rules. Neither the Authority nor the
SGX-ST has in any way considered the merits of the Shares being offered for investment.
Far
East Group Limited
(Incorporated in the Republic of Singapore
The registration of this Offer Document by the SGX-ST does not imply that the Securities and Futures Act
(Chapter 289) of Singapore, or any other legal or regulatory requirements, or requirements under the SGXSTs listing rules, have been complied with.
Placement of 18,800,000
New Shares by way of
placement, at S$0.27 per
Share, payable in full on
application.
Acceptance of applications will be conditional upon the issue of the New Shares and permission being
granted by the SGX-ST for the listing and quotation of all our existing issued Shares and the New Shares on
Catalist. Monies paid in respect of any application accepted will be returned to you at your own risk, without
interest or any share of revenue or benefit arising therefrom, if the admission and listing do not proceed, and
you will not have any claims against us, the Sponsor or the Placement Agent (as defined herein).
After the expiration of six months from the date of registration of this Offer Document, no person shall make
an offer of securities, or allot, issue or sell any of our Shares, on the basis of this Offer Document, and no
officer or equivalent person or promoter of our Company will authorise or permit the offer of any of our Shares
or the allotment, issue or sale of any of our Shares, on the basis of this Offer Document.
on 18 March 1964)
(Company Registration No.:196400096C)
Investing in our Shares involves risks which are described in the RISK FACTORS section of this
Offer Document.
Our Company is not part of, nor related in any way, to Far East Organization, its subsidiaries or
associated companies (the Far East Organization Group of Companies). Our Directors and Controlling
Shareholder (as defined herein) have no direct or indirect relationships with the Far East Organization
Group of Companies. Our Group (as defined herein) is also not engaged in the same line of business
as that of the Far East Organization Group of Companies.
ABOUT US
BUSINESS MODEL
Our Groups business activities can be broadly segmented as follows: Commercial and light industrial (refrigeration)
Residential and commercial (air-conditioning)
Oil, marine and gas (refrigeration and air-conditioning)
COMPETITIVE STRENGTHS
PROSPECTS
CONTENTS
CORPORATE INFORMATION .............................................................................................................
DEFINITIONS ......................................................................................................................................
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16
18
19
19
22
23
26
27
28
29
31
39
DILUTION.............................................................................................................................................
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42
46
47
50
OVERVIEW ................................................................................................................................
50
SEASONALITY ..........................................................................................................................
54
INFLATION .................................................................................................................................
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54
55
59
61
63
64
66
66
69
70
SHAREHOLDERS ....................................................................................................................
71
MORATORIUM ...........................................................................................................................
72
CONTENTS
HISTORY ..............................................................................................................................................
73
BUSINESS ...........................................................................................................................................
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84
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88
89
89
90
91
92
93
94
96
98
99
101
INSURANCE ..............................................................................................................................
102
COMPETITION ..........................................................................................................................
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103
105
PROSPECTS .............................................................................................................................
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106
107
109
109
DIRECTORS .............................................................................................................................
109
113
EMPLOYEES .............................................................................................................................
115
116
SERVICE AGREEMENTS..........................................................................................................
116
118
CONTENTS
INTERESTED PERSON TRANSACTIONS .........................................................................................
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121
122
125
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135
136
138
138
140
140
141
142
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153
A-1
B-1
C-1
D-1
E-1
APPENDIX F LETTER FROM SAC CAPITAL PRIVATE LIMITED TO THE AUDIT COMMITTEE ....
F-1
CORPORATE INFORMATION
BOARD OF DIRECTORS
Loh Ee Ming
(Non-executive Chairman)
Steven Loh
(Chief Executive Officer and Executive Director)
David Leng
(Chief Operating Officer and Executive Director)
Karen Loh
(Non-executive Director)
Hew Koon Chan (Independent Director)
Andrew Mak
(Independent Director)
Tan Hwee Kiong (Independent Director)
COMPANY SECRETARY
COMPANY REGISTRATION
NUMBER
196400096C
CORPORATE INFORMATION
INDEPENDENT FINANCIAL
ADVISER
PRINCIPAL BANKERS
RECEIVING BANKER
DEFINITIONS
In this Offer Document and the accompanying Application Form, the following definitions apply where the
context so admits:Group Companies
Company or Far East Group
Edenkool
Far East HK
Far East JB
Far East KL
Far East Refrigeration (M) Sdn Bhd, the holding company of Far
East Penang, Far East Maju, Fast East KL, Far East JB, FE&B,
Far East Kuching and Safety Enterprises
FE&B
Green Point
Group
Our Company and our subsidiaries (as set out in the General
Information on our Group Our Subsidiaries section of this Offer
Document)
RSP
Safety Enterprises
Authority
Bitzer
BSI
CDP
Chinhero Development
DEFINITIONS
CIAS
CPF
ERM
HSA
ISO
Old FER HK
SAIC
SCCS
SGX-ST
SER
SERM
SIPO
UPL
Ziehl-Abegg
Ziehl-Abegg AG
Acquisition Options
Adjusted EPS
General
DEFINITIONS
Adjusted NTA
Application Form
Application List
Articles or Articles of
Association
ASEAN
Associate
(a)
(b)
Associated Company
Audit Committee
(ii)
(iii)
(b)
DEFINITIONS
Board or Board of Directors
business trust
Catalist
Catalist Rules
CEO
Companies Act
Controlling Shareholder
A person who:(a)
(b)
COO
Director
entity
EPS
Executive Director
Executive Officer
Exposure Period
FY
GDP
DEFINITIONS
GST
Hong Kong
IB
Internet Banking
Independent Director
Indochina
IPO
IP Licence Agreement
20 June 2011, being the latest practicable date for the purposes
of lodgement of this Offer Document with the SGX-ST acting as
an agent on behalf of the Authority
Macau
Maju Facility
Management Agreement
Market Day
NAV
New Shares
Nominating Committee
Non-executive Director
NTA
Offer Document
DEFINITIONS
PBT
PER
Placement
Placement Agreement
Placement Price
Placement Shares
PRC
Pre-IPO Investment
Pre-IPO Investors
Regional Affiliates
Registration
Remuneration Committee
SEA
South-east Asia
Securities Account
Service Agreements
11
DEFINITIONS
SGXNET
Shareholders
Shares
Sub-Division
Substantial Shareholder
HK$
JPY
RM
RMB
S$ and cents
sqft
Square feet
US$
% or per cent.
Per centum
N.A.
Not applicable
12
DEFINITIONS
For the purpose of this Offer Document, the following persons named in the second column below are
also known by the names set out in the first column:Name used in this Offer Document
Andrew Mak
David Leng
Karen Loh
Loh Ee Ming
Richard Chung
Sam Cheung
Sharon Loh
Steven Loh
The expressions Depositor, Depository Agent and Depository Register shall have the meanings
ascribed to them respectively in Section 130A of the Companies Act.
Words importing the singular shall, where applicable, include the plural and vice versa and words
importing the masculine gender shall, where applicable, include the feminine and neuter genders and
vice versa. References to persons shall include corporations.
Any reference in this Offer Document and the Application Form to any statute or enactment is a reference
to that statute or enactment as for the time being amended or re-enacted. Any word defined under the
Companies Act, the SFA or any statutory modification thereof and used in this Offer Document and the
Application Form shall, where applicable, have the meaning assigned to it under the Companies Act, the
SFA or any statutory modification thereof, as the case may be.
Any reference in this Offer Document and the Application Form to Shares being allotted to an applicant
includes allotment to CDP for the account of that Applicant.
Any reference to a time of day in this Offer Document shall be a reference to Singapore time unless
otherwise stated.
References in this Offer Document to we, our, and us refer to our Group.
Any discrepancies in the tables included herein between the listed amounts and the totals thereof are due
to rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation of
the figures that precede them.
Certain names with Chinese characters have been translated into English names. Such translations are
provided solely for the convenience of investors and may not have been registered with the relevant PRC
authorities and as such, should not be construed as representations that the English names actually
represent the Chinese characters.
13
Brine cooler
CNC
Condenser
A heat exchanger that generally rejects all heat from the system.
The hot and high-pressure refrigerant gas is discharged from the
compressor to the condenser, which rejects the heat from the
gas to some cooler medium. Thus, the cool refrigerant condenses
back to the liquid state and drains from the condenser to continue
in the system cycle.
Condensing unit
Compressor
Custom coil
EMS
ERP
A heat exchange device or unit with a fan that draws air across
the coil to be cooled. This is achieved through the evaporative
process of the refrigerant whereby heat is extracted from the air
causing it to be cooled and subsequently circulated.
G4
HACCP
Heat exchanger
HVAC
HVAC&R
ISO9000
ISO9001:2000
ISO9001:2008
Montreal Protocol
Pipe insulation
A thermal insulation unit used to prevent heat loss and heat gain
from pipes, to save energy, minimise condensation and improve
effectiveness of thermal systems.
PVC trunking
Refrigerant
15
(b)
(c)
(d)
(e)
other matters discussed in this Offer Document regarding matters that are not historical fact,
are only predictions. These forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expected, expressed or implied by these
forward-looking statements. These risks, uncertainties and other factors include, among others:(a)
changes in political, social, economic and stock or securities market conditions and the regulatory
environment in Singapore and other countries in which we conduct business;
(b)
(c)
the risk that we may be unable to realise our anticipated growth strategies and expected internal
growth;
(d)
changes in the availability and prices of raw materials which we require to operate our business;
(e)
(f)
changes in competitive conditions and our ability to compete under such conditions;
(g)
changes in our future capital needs and the availability of financing and capital to fund such needs;
(h)
(i)
the factors described in the Risk Factors section of this Offer Document.
All forward-looking statements made by or attributable to us, or persons acting on our behalf, contained in
this Offer Document are expressly qualified in their entirety by such factors.
Given the risks and uncertainties that may cause our actual future results, performance or achievements
to be materially different from that expected, expressed or implied by the forward-looking statements in
this Offer Document, undue reliance must not be placed on these statements which apply only as at the
date of this Offer Document. None of our Company, the Sponsor and the Placement Agent or any other
person represents or warrants that our Groups actual future results, performance or achievements will be
as discussed in those statements. Further, our Company, the Sponsor and the Placement Agent disclaim
any responsibility to update any of those forward-looking statements to reflect future developments,
events or circumstances for any reason, even if new information becomes available or other events occur
in the future.
16
17
SELLING RESTRICTIONS
This Offer Document does not constitute an offer, solicitation or invitation to subscribe for our Shares
in any jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to any
person to whom it is unlawful to make such offer, solicitation or invitation. No action has been or will be
taken under the requirements of the legislation or regulations of, or of the legal or regulatory authorities
of, any jurisdiction, except for the lodgement and/or registration of this Offer Document in Singapore in
order to permit a public offering of the New Shares and the public distribution of this Offer Document in
Singapore. The distribution of this Offer Document and the offering of the Shares in certain jurisdictions
may be restricted by the relevant laws in such jurisdictions. Persons who may come into possession of
this Offer Document are required by our Company, and the Sponsor and the Placement Agent to inform
themselves about, and to observe and comply with, any such restrictions at their own expense and
without liability to our Company, and the Sponsor and the Placement Agent.
Persons to whom a copy of this Offer Document has been issued shall not circulate to any other
person, reproduce or otherwise distribute this Offer Document or any information herein for any purpose
whatsoever nor permit or cause the same to occur.
18
(b)
an omission from the Offer Document of any information that should have been included in it under
Section 243 of the SFA; or
(c)
a new circumstance that has arisen since the Offer Document was lodged with the SGX-ST would
have been required by Section 243 of the SFA to be included in the Offer Document if it had arisen
before this Offer Document was lodged,
that is materially adverse from the point of view of an investor, we may lodge a supplementary or
replacement offer document with the SGX-ST acting as an agent on behalf of the Authority.
In the event that a supplementary or replacement offer document is lodged with the SGX-ST, the
Placement shall be kept open for at least 14 days after the lodgement of such supplementary or
replacement offer document.
19
(b)
where the New Shares have not been issued to the applicants, our Company shall either:(i)
within two days (excluding any Saturday, Sunday or public holiday) from the date of
lodgement of the supplementary or replacement offer document, give the applicants notice in
writing of how to obtain, or arrange to receive, a copy of the supplementary or replacement
offer document, and provide the applicants with an option to withdraw their applications and
take all reasonable steps to make available within a reasonable period the supplementary or
replacement offer document to the applicants who have indicated that they wish to obtain, or
who have arranged to receive, a copy of the supplementary or replacement offer document;
or
(ii)
within seven days from the date of lodgement of the supplementary or replacement offer
document, give the applicants the supplementary or replacement offer document, as the
case may be, and provide the applicants with an option to withdraw their applications; or
(iii)
treat the applications as withdrawn and cancelled, in which case the applications shall be
deemed to have been withdrawn and cancelled, and our Company shall, within seven days
from the date of lodgement of the supplementary or replacement offer document, return all
monies paid in respect of any application, without interest or a share of revenue or other
benefit arising therefrom; or
where the New Shares have been issued to the applicants, our Company shall either:(i)
within two days (excluding any Saturday, Sunday or public holiday) from the date of
lodgement of the supplementary or replacement offer document, give the applicants notice in
writing of how to obtain, or arrange to receive, a copy of the supplementary or replacement
offer document, and provide the applicants with an option to withdraw their applications and
take all reasonable steps to make available within a reasonable period the supplementary or
replacement offer document to the applicants who have indicated that they wish to obtain, or
have arranged to receive, a copy of the supplementary or replacement offer document;
(ii)
within seven days from the date of lodgement of the supplementary or replacement offer
document, give the applicants the supplementary or replacement offer document, as the
case may be, and provide the applicants with an option to return to our Company the New
Shares, which they do not wish to retain title in; or
(iii)
treat the issue of the New Shares as void, in which case the issue shall be deemed void
and our Company shall within seven days from the date of lodgement of the supplementary
or replacement offer document, return all monies paid in respect of any application, without
interest or a share of revenue or other benefit arising therefrom.
An applicant who wishes to exercise his option under paragraph (a)(i) or (a)(ii) to withdraw his application
shall, within 14 days from the date of lodgement of the supplementary or replacement offer document,
notify our Company of this, whereupon our Company shall, within seven days from the receipt of such
notification, return the application monies without interest or any share of revenue or other benefit arising
therefrom and at his own risk, and he will not have any claim against our Company, the Sponsor or the
Placement Agent.
An applicant who wishes to exercise his option under paragraph (b)(i) or (b)(ii) to return the New Shares
issued to him shall, within 14 days from the date of lodgement of the supplementary or replacement offer
document, notify our Company of this and return all documents, if any, purporting to be evidence of title
to those New Shares to our Company, whereupon our Company shall, within seven days from the receipt
of such notification and documents, if any, pay to him all monies paid by him for those Shares, without
interest or any share of revenue or other benefit arising therefrom and at his own risk, and the issue
of those Shares shall be deemed to be void, and he will not have any claim against our Company, the
Sponsor or the Placement Agent.
20
Event
12 August 2011
The above timetable is only indicative as it assumes that the date of closing of the Application List
is 4 August 2011, the date of admission of our Company to Catalist is 8 August 2011, the SGX-STs
shareholding spread requirement will be complied with and the New Shares will be issued and fully paidup prior to 8 August 2011.
The above timetable and procedures may be subject to such modification as the SGX-ST may, in its
absolute discretion, decide, including the commencement date of trading on a "ready" basis.
In the event of any changes in the closure of the Application List or the time period during which the
Placement is open, we will publicly announce the same:(a)
(b)
in a major English language newspaper in Singapore such as The Straits Times and/or The
Business Times.
We will provide details of the results of the Placement (including the level of subscription for the New
Shares), as soon as it is practicable after the closure of the Application List through the channels
described in (a) and (b) above.
Investors should consult the SGX-STs announcement on ready trading date on the Internet (at
the SGX-ST website http://www.sgx.com) or newspapers, or check with their brokers on the date
on which trading on a ready basis will commence.
22
(ii)
(iii)
(iv)
(v)
(vi)
(vii)
Please refer to the Business Our Competitive Strengths section of this Offer Document for further
details.
OUR BUSINESS STRATEGIES AND FUTURE PLANS
Our business strategies and future plans for the growth and expansion of our business are as follows:(i)
(ii)
(iii)
(iv)
23
FY2008
Audited
FY2009
29,191
7,103
1,358
964
933
31
1.7
1.3
26,805
7,187
1,639
1,342
1,312
30
2.4
1.8
FY2010
32,616
10,719
5,449
4,553
4,506
47
8.4
6.2
6.4
4.8
(3)
(3),(4)
(3),(4)
(4)
(4)
(4)
(4)
Notes:(1)
For comparative purposes, the EPS for the period under review has been computed based on the profit attributable to
equity holders of our Company and the pre-Placement share capital of 53,520,000 Shares. The Adjusted EPS in FY2010
has been computed based on the profit attributable to equity holders of our Company, adjusted for non-recurring income of
approximately S$1,062,000 in relation to gain on disposal of investment properties, and the pre-Placement share capital of
53,520,000 Shares.
(2)
For comparative purposes, the fully diluted EPS for the period under review has been computed based on the profit
attributable to equity holders of our Company and the post-Placement share capital of 72,320,000 Shares. The Adjusted EPS
in FY2010 has been computed based on the profit attributable to equity holders of our Company, adjusted for non-recurring
income of approximately S$1,062,000 in relation to gain on disposal of investment properties, and the post-Placement share
capital of 72,320,000 Shares.
(3)
Includes non-recurring income of approximately S$1,062,000 in relation to gain on disposal of investment properties. For
illustration purposes, had such non-recurring income been excluded, our profit before tax, profit for the year and profit
attributable to equity holders of our Company would have been approximately S$4,387,000, S$3,491,000 and S$3,444,000
respectively.
(4)
Had the Service Agreements been in place since the beginning of FY2010, (i) the profit for the year and profit attributable to
equity holders of our Company in FY2010 would have been approximately S$4,210,000 and S$4,163,000 respectively; (ii) the
EPS and fully diluted EPS would have been 7.8 cents and 5.8 cents respectively; and (iii) the Adjusted EPS and fully diluted
Adjusted EPS would have been 5.8 cents and 4.3 cents respectively.
24
(S$000)
ASSETS
Current assets
Non-current assets
20,311
7,799
28,110
LIABILITIES
Current liabilities
Non-current liabilities
11,751
2,985
14,736
Net assets
13,374
EQUITY
Equity attributable to equity holders of the Company
Non-controlling interests
13,218
156
Total equity
13,374
24.7
26.9
Note:(1)
The NTA per share and Adjusted NTA per Share as at 31 December 2010 have been computed based on our pre-Placement
share capital of 53,520,000 Shares.
25
THE PLACEMENT
Issue size
Placement Price
The Placement
Our Directors consider that the listing of our Company and the
quotation of our Shares on Catalist will enhance our public image
locally and overseas and enable us to tap the capital markets for
the expansion of our operations.
The Placement will also provide members of the public with
an opportunity to participate in the equity of our Company. In
addition, the proceeds of the Placement will provide us with
additional capital to finance our business expansion.
Listing status
Prior to the Placement, there had been no public market for our
Shares. Our Shares will be quoted in S$ on Catalist, subject to
admission of our Company to Catalist and permission to deal in,
and for quotation of, our Shares being granted by the SGX-ST.
Risk factors
26
PLAN OF DISTRIBUTION
The Placement
The Placement is for 18,800,000 Placement Shares offered in Singapore by way of Placement, managed
and sponsored by Collins Stewart.
Prior to the Placement, there has been no public market for our Shares. The Placement Price was
determined by our Company in consultation with the Sponsor and the Placement Agent, taking into
consideration, amongst other things, prevailing market conditions and the estimated market demand for
the New Shares, determined through a book-building process. The Placement Price is the same for all
Placement Shares and is payable in full on application.
Pursuant to the Management Agreement, we have appointed Collins Stewart and Collins Stewart
has agreed to manage and sponsor the Placement. Please refer to the Management and Placement
Arrangements section of this Offer Document for further details on the Management Agreement.
Placement Shares
Pursuant to the Placement Agreement, Collins Stewart has agreed to subscribe for and/or procure
subscribers for the Placement Shares for a placement commission of 3.25% of the Placement Price for
each Placement Share, payable by our Company. Collins Stewart may, at its absolute discretion, appoint
one or more sub-placement agents for the Placement Shares. Please refer to the Management and
Placement Arrangements section of this Offer Document for further details on the Placement Agreement.
Subscribers of the Placement Shares may be required to pay a brokerage of up to 1.0% of the Placement
Price (plus GST thereon, if applicable) to the Placement Agent or any sub-placement agent that may be
appointed by the Placement Agent.
The Placement Shares are reserved for placement to members of the public and institutional investors
in Singapore at the Placement Price. Application for the Placement Shares may only be made by way
of Placement Shares Application Form. The terms, conditions and procedures for the application and
acceptance are set out in Appendix E Terms, Conditions and Procedures for Application of this Offer
Document.
None of our Directors or Substantial Shareholders intends to subscribe for the Placement Shares.
To the best of our knowledge and belief, as at the date of this Offer Document, we are not aware of any
person who intends to subscribe for more than 5% of the New Shares. However, through a book-building
process to assess market demand for our Shares, there may be person(s) who may indicate an interest
to subscribe for Shares amounting to more than 5% of the New Shares. If such person(s) were to make
an application for more than 5% of the New Shares pursuant to the Placement and are subsequently
allotted such number of Shares, we will make the necessary announcements at an appropriate time. The
final allotment of Shares will be in accordance with the shareholding spread and distribution guidelines as
set out in Rule 406 of the Catalist Rules.
No Shares shall be issued and allotted and/or allocated on the basis of this Offer Document later than six
months after the date of Registration.
27
Amount
(S$000)
As a % of gross
proceeds from the
Placement
(a)
600
11.8
(b)
400
7.9
(c)
300
5.9
(d)
2,200
43.3
3,500
68.9
43
1,014
165
354
0.8
20.0
3.3
7.0
5,076
100.0
Net proceeds
Expenses(1)
Notes:(1)
Of the total estimated listing expenses of approximately S$1.6 million, S$440,000 will be capitalised against share capital and
the balance of the estimated listing expenses will be charged to the profit or loss.
(2)
Based on a placement commission of 3.25% of the Placement Price for each Placement Share.
Further details of our use of proceeds may be found in the Prospects, Business Strategies and Future
Plans Our Business Strategies and Future Plans section of this Offer Document.
In the event that the amount set aside to meet our Companys portion of the estimated expenses listed
above is in excess of the actual expenses incurred in connection with the Placement, such excess amount
will be applied towards our general working capital purpose.
Pending the deployment of the net proceeds as aforesaid, the funds will be placed in short-term deposits
with financial institutions, used to invest in short-term money market instruments and/or used for general
working capital requirements as our Directors may deem appropriate.
In the event that any part of our proposed uses of the net proceeds from the issue of the New Shares
does not materialise or proceed as planned, our Directors will carefully evaluate the situation and may
reallocate the intended funding to other purposes and/or hold such funds on short-term deposits for so
long as our Directors deem it to be in the interest of our Company and our Shareholders, taken as a
whole. Any change in the use of the net proceeds will be subject to Shareholders approval and the listing
rules of the SGX-ST and appropriate announcements will be made by our Company on the SGXNET.
28
any breach of the warranties or undertakings in the Management Agreement which comes to the
knowledge of Collins Stewart; or
(ii)
any occurrence of certain specified events which comes to the knowledge of Collins Stewart; or
(iii)
any material adverse change, or any development involving a prospective material adverse change,
in the condition (financial or otherwise) of our Company and/or any of our subsidiaries; or
(iv)
(v)
any change, or any development involving a prospective change, in local, national or international,
financial (including stock market, foreign exchange market, inter-bank market or interest rates
or money market), political, industrial, economic, legal or monetary conditions, taxation or
exchange controls (including without limitation, the imposition of any moratorium, suspension or
material restriction on trading in securities generally on the SGX-ST due to exceptional financial
circumstances or otherwise material adverse changes in foreign exchange controls in Singapore
or overseas, or any combination of any such changes or developments or crisis, or any material
deterioration of any such conditions); or
(vi)
any imminent threat or occurrence of any local, national or international outbreak or escalation of
hostilities, insurrection, terrorist attacks or armed conflict (whether or not involving financial markets
in any jurisdiction); or
(vii)
any regional or local outbreak of disease that may have an adverse effect on the financial markets;
or
(viii)
which has resulted or is in the reasonable opinion of Collins Stewart, (i) results or is likely to result in a
material adverse fluctuation or adverse conditions in the stock market in Singapore or elsewhere; or (ii)
is likely to materially prejudice the success of the Placement; or (iii) makes it impracticable, inadvisable,
inexpedient or uncommercial to proceed with any of the transactions contemplated in the Management
Agreement; or (iv) is likely to have a material adverse effect on the business, trading position, operations
29
at any time up to the close of the Application List, a notice of refusal to an admission of our
Company to Catalist is issued by the SGX-ST to the Sponsor; or
(b)
at any time after the Registration but before the close of the Application List, our Company fails
and/or neglects to lodge a supplementary or replacement Offer Document (as the case may be) if
we become aware of:(i)
(ii)
an omission from this Offer Document of any information that should have been included in it
under Section 243 of the SFA; or
(iii)
a new circumstance that has arisen since this Offer Document was lodged with the SGX-ST
acting as an agent on behalf of the Authority and would have been required by Section 243
of the SFA to be included in the Offer Document if it had arisen before this Offer Document
was lodged,
the Shares have not been admitted to the Official List of the SGX-ST on or before 8 August 2011
(or such other date as our Company and the Sponsor may agree).
The obligations under the Placement Agreement are conditional upon the Management Agreement not
being determined or rescinded pursuant to the provisions of the Management Agreement. In the case
of the non-fulfilment of any of the conditions in the Management Agreement or the release or discharge
of the Sponsor from its obligations under or pursuant to the Management Agreement, the Placement
Agreement shall be terminated and the parties shall be released from their respective obligations under
the Placement Agreement.
In the event that the Management Agreement and/or the Placement Agreement is terminated, our
Company reserves the right, at our absolute discretion, to cancel the Placement.
Save as disclosed above, we do not have any material relationship with the Sponsor and the Placement
Agent.
30
RISK FACTORS
An investment in our Shares involves significant risks. Prospective investors should carefully consider
and evaluate the following considerations and all other information contained in this Offer Document,
including our consolidated financial statements and related notes, before deciding to invest in our Shares.
Some of the following risk factors relate principally to the industry in which our Group operates and the
business of our Group in general. Other considerations relate principally to general economic and political
conditions and the securities market and ownership of our Shares, including possible future sales of
Shares. Additional risks not presently known to us or that we currently deem immaterial may also impair
our business operations.
Our business, results of operations, financial condition and prospects could be materially and adversely
affected by any of these risks. In such cases, the trading price of our Shares could decline due to any of
these risks and investors may lose all or part of their investment in our Shares.
This Offer Document also contains forward-looking statements that involve risks and uncertainties. The
actual results of our operations could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including the risks described below and elsewhere in this Offer
Document. Please refer to the Cautionary Note Regarding Forward-Looking Statements section of this
Offer Document for further details.
Before deciding to invest in our Shares, you should seek professional advice from your advisers about
your particular circumstances. To the best of our Directors knowledge and belief, all the risk factors that
are material to investors in making an informed judgement have been set out below.
RISKS RELATING TO OUR INDUSTRY AND BUSINESS
Our continued success is dependent on our management team and skilled personnel
Our Group is dependent on the continued employment and performance of our Executive Directors
and Executive Officers. Our management team is led by experienced personnel who have extensive
experience in our industry and possess in-depth knowledge and know-how of our business. Our
management team is guided by Loh Ee Ming (our Non-executive Chairman) and headed by Steven Loh
(our CEO and Executive Director), who each has more than 60 and 20 years experience in the HVAC&R
industry respectively and have been instrumental in formulating our business strategies and spearheading
the growth of our business operations. They are assisted by David Leng (our COO (Sales and Marketing)
and Executive Director) and our Executive Officers, Allan Ward, Richard Chung, and Tan Su Kim, each
of whom is experienced in his respective field and has qualified knowledge and/or expertise in running
our day-to-day operations. The loss of any of our key management staff for any reason without suitable
and timely replacements, and the inability to attract, train and retain qualified management personnel will
adversely affect our operations, revenue and profits. Please refer to the Directors, Executive Officers and
Staff section of this Offer Document for more details on the qualifications and working experience of our
Executive Directors and Executive Officers.
In addition, having a team of experienced and skilled managers and technical personnel is essential
to our business operations. Our industry and business require our managers and technical personnel,
such as engineers and technicians to be skilled and experienced in their respective disciplines. However,
owing to the specialised nature of our work, there is a limited supply of adequately skilled personnel in
our industry. Hence, our continued success depends largely on our ability to attract and retain skilled
employees. To the extent that we lose any of our skilled personnel for whatever reasons without suitable
or timely replacements and/or we are unable to recruit the required number of suitably skilled personnel,
either locally or from overseas, to meet our operational and business needs, our revenue and profitability
may be negatively affected. We may also have to pay substantial wages to attract and retain the required
personnel, and this may have an adverse impact on our operating margins.
We are dependent on our corporate name and reputation
We believe that we have an established corporate name and reputation, and are widely recognised by
peers, customers and suppliers in our industry. We consider our corporate name and reputation to be vital
in promoting recognition, customer loyalty and suppliers confidence. Hence, should there be any negative
publicity against our Group, or should there be any major defects found in our products and projects,
31
RISK FACTORS
which our Group is involved in, our corporate image and reputation will be adversely affected and our
customers may lose confidence in our products and services. This will adversely affect our business and
financial performance.
We are dependent on a major supplier
Bitzer is one of our major suppliers who supplies us with compressors, condensers, receivers and
relevant spare parts. Purchases from Bitzer had accounted for approximately 36.2%, 26.2% and 28.9%
of our Groups purchases in FY2008, FY2009 and FY2010 respectively. For further details of our major
suppliers, please refer to the Business Our Major Suppliers section of this Offer Document.
Our Directors believe that we depend significantly on our relationship with Bitzer. As we do not enter into
long-term contract with Bitzer, there is no assurance that it will continue to fulfil our requirements and
expectations in terms of cost and product quality, nor is there assurance that we will be able to continue
to source for products from Bitzer. In addition, should we fail to maintain good relationship with Bitzer, or
there is a prolonged lead time in delivery, or it fails to deliver our products on time, and we are unable to
source these products of similar quality from alternative suppliers on a timely basis, our business and/
or delivery timeline to our customers will be affected. This in turn may adversely affect our reputation if
our customers lose confidence in our products and services, and our revenue and profitability may be
adversely affected.
We are susceptible to fluctuations in the prices of our agency products and raw materials
Our agency products comprise mainly compressors, condensers, controllers, valves and copper pipes,
and these accounted for 83.9%, 85.9% and 90.0% of our total cost of sales in FY2008, FY2009 and
FY2010 respectively. The prices of such products which we can secure from our suppliers are influenced
by factors including the volume of our purchases and the general market conditions affecting such
products.
The key raw materials used in the manufacturing of our Eden brand of heat exchangers are mainly
copper pipes, galvanised sheets, aluminium sheets and fan sets. These raw materials accounted for
14.2%, 12.0% and 8.2% of our total cost of sales in FY2008, FY2009 and FY2010 respectively. We are
susceptible to fluctuations in the prices of such raw materials as these are commodities and their prices
are subject to the changes in global demand and supply conditions.
In the event that the prices of our agency products and raw materials fluctuate adversely against us and
we are unable to pass on the price increases to our customers, or find alternative sources of agency
products and raw materials of comparable quantity at acceptable prices, our financial performance will be
adversely affected.
We are exposed to credit risks of our customers
We typically grant credit terms of 30 to 90 days to our customers and based on our experience in FY2008,
FY2009 and FY2010, our customers typically made payment within the credit period. However, we may
be exposed to payment delays and/or defaults by our customers. In FY2008, FY2009 and FY2010, our
average trade debtors turnover days were 86 days, 73 days and 62 days respectively. Please refer to the
Business - Credit Management section of this Offer Document for the reasons for the fluctuations in the
average trade debtors turnover days over the period under review.
Any deterioration in the financial positions of our Groups customers may materially or adversely affect
our profits and cash flow as these customers may default on their payments to us. We cannot assure you
that the risks of default by our customers will not increase in the future or that we will not experience cash
flow problems as a result of such defaults. Should these events develop into actual events, our operations
and profitability will be adversely affected.
We are exposed to disputes and claims in relation to defects in workmanship and non-compliance
to contract specifications
Disputes and claims in relation to defects in workmanship and non-compliance to contract specifications
are common in our industry. There can be no assurance that any future disputes and claims will not
result in undue delays in payment by our customers or in protracted litigation, which will have a negative
32
RISK FACTORS
impact on our financial performance and corporate reputation. In addition, we may incur additional costs
in rectifying alleged defects. Such additional costs may have an adverse effect on our overall financial
performance.
We are dependent on our research and development capabilities
We strongly believe that our research and development capabilities are instrumental to our business
and provide us with a competitive edge over our competitors. Hence, we place a great emphasis on
research and development, in particular, in improving the efficiency and effectiveness of our products, and
developing cost-effective and environmentally friendly technology to meet the changing market needs of
the HVAC&R industry. Thus, in the event that our research and development capabilities are restricted by
the availability of our financial resources and/or research and development personnel, our business and
financial performance may be adversely impacted.
On the other hand, there is no assurance that the results of our research and development will be
commercially successful. In the event that our newly developed products cannot be broadly accepted
by our customers, our investment in research and development may not yield returns which match our
expectations, and this would adversely affect our profitability and prospects.
Our business may be affected by competition from existing industry players and new entrants
We operate in a competitive environment and we are subject to competition from existing industry players
and new entrants. Our success depends on our ability to compete effectively against our existing and
potential competitors on, amongst others, technological know-how, quality of products and services, price,
track record, reputation and timely delivery. There can be no assurance that we will be able to compete
successfully in the future. In the event that our competitors are able to provide products and services
of comparable or better quality at competitive prices, our business and financial performance will be
adversely affected.
We are subject to intellectual property risks
We rely on our registered trade marks and patents, for business operations. In particular, we rely on our
patents to protect some of our proprietary designs and functions and we consider our patents to be vital
in maintaining our competitveness. Please refer to the Business Intellectual Property section of this
Offer Document for further details on our trade marks and patents. Though our trade marks and patents
are registered, we are susceptible to third parties infringement of our intellectual property rights, and
there is no assurance that third parties will not copy or otherwise obtain and use our intellectual property
rights without authorisation.
Should we fail or be unable to assert our rights over such intellectual property, there may be an adverse
impact on our business and marketing plans. Adequate protection of our intellectual property is vital to our
business. In enforcing our rights against third parties infringements of our intellectual property rights, we
may incur substantial time, resources and costs in any intellectual property infringement claims initiated
by us and there is no assurance that we will be able to stop or prevent such infringement completely.
Hence, our business, reputation, financial condition and results of operations may be adversely affected if
we are unable to protect our intellectual property rights effectively.
In addition, some of our proprietary know-how and technical knowledge and technical expertise may not
be patentable. Although we have stringent controls for maintaining confidentiality, there is no assurance
that there will be no unauthorised disclosure of our proprietary information, or that our competitors will
not copy them. In the event that our proprietary know-how and technical expertise are replicated by our
competitors, there can be no assurance that we would be able to detect such unauthorised replications.
Hence, our business and financial performance may be adversely affected if we are unable to protect our
intellectual property rights effectively.
We cannot be certain that our systems, technologies and processes do not infringe valid patents or
intellectual property rights held by third parties. We may unknowingly infringe intellectual property rights
of third parties, in which case, we may have to incur substantial costs and resources in defending suits
that may be brought against us for alleged infringement of intellectual property owned by third parties. In
33
RISK FACTORS
addition, should we fail to defend against the suits brought against us, we will have to discontinue utilising
our systems, technologies and processes in our business and/or may be required to pay substantial
monetary damages. This will adversely affect our operations and business.
In addition, the approvals from the Trademark Office of the SAIC and the SIPO for the applications of the
transfers of trade marks and patents from SER to our Company are currently pending. Please refer to the
Business Intellectual Property section of this Offer Document for further details. There is no assurance
that the aforementioned approvals will be granted. Hence, in the event that the registration of the transfer
of the trade marks is not successful, or we fail to renew the registration of our trade marks upon expiry,
or the validity of our registered patents expire, we may not be able to prevent third parties from using our
trade marks and/or patents, which may adversely affect our reputation, brand image, financial condition
and results of operations.
Further, pursuant to to the IP Licence Agreement (please refer to the Interested Person Transactions
Present and On-going Interested Person Transactions section of this Offer Document), the Regional
Affiliates shall be entitled to use certain of our trade marks and patents for their manufacture, distribution,
promotion and sale of Eden brand of heat exchangers and condensing units in the PRC as well as
sale of these products to our Group. In the event that there are any major complaints or defects on the
Regional Affiliates products and/or services, or adverse publicity on the Regional Affiliates and trade
marks due to circumstances beyond our control, our reputation will be adversely affected and our
customers may lose confidence in our products and services, thereby adversely affecting our revenue
and profitability.
We are exposed to foreign exchange risks
Foreign exchange risks arise mainly from a mismatch between the currency of our sales and the currency
of our purchases. We may also suffer foreign currency losses if there are significant adverse fluctuations
in currency exchange rates between the time of our purchases and payments in foreign currencies and
the time of our sales and receipts. This may adversely affect our financial results.
In addition, as our reporting currency is in S$, the financial statements of our subsidiaries in Malaysia and
Hong Kong will need to be translated to S$ for consolidation purposes. As such, any material fluctuations
in foreign exchange rates will result in translation gains or losses on consolidation. Any such translation
gains or losses will be recorded as translation reserves or deficits as part of our Shareholders equity.
At present, while we do not have any formal policy for hedging against foreign exchange exposure, we
do use forward contracts to manage our foreign exchange risks from time to time. Typically, we do not
purchase forward currency contracts of amounts greater than our existing purchase commitments. We
will continue to monitor our foreign exchange exposure and may continue to employ forward currency
contracts to manage our foreign exchange exposure should the need arise. Prior to implementing any
formal hedging policies, we will seek the approval of our Board on the policy and put in place adequate
procedures which shall be reviewed and approved by our Audit Committee. Thereafter, all hedging
transactions entered into by our Group will be in accordance with set policies and procedures. Please
refer to the Managements Discussion and Analysis of Results of Operations and Financial Position
Foreign Exchange Management section of this Offer Document for further details.
We may face uncertainties in the expansion of our business
As described in the Prospects, Business Strategies and Future Plans Our Business Strategies and
Future Plans section of this Offer Document, our growth strategies include expansion of our sales
and distribution network, expansion and upgrade of existing manufacturing facilities and research and
development of new products, which will require substantial capital expenditures as well as financial
and management resources. The success of our expansion plans depends on many factors, some of
which are not within our control. Thus, there is no assurance that our expenditures in pursuing our growth
strategies and expansion plans or any such plans our Group may engage in the future will result in
successful implementation. While we have planned our expansion based on our current outlook of the
regional and global markets, we cannot be sure that such expansion plans will yield a sufficient level of
revenue or returns. If we are unsuccessful in materialising our business growth strategies and expansion
plans and fail to generate a sufficient level of revenue or returns after such expenditure, our business,
results of operations and financial position will be adversely affected.
34
RISK FACTORS
We may need further financing for future growth
We may come across other potential business opportunities that we deem favourable for our Groups
future growth and prospects. Under such circumstances, we may need to obtain additional equity or debt
financing. Additional equity financing may lead to a dilution in the interests of our Shareholders. Additional
debt financing may restrict our ability to pay dividends. Such financing may increase our vulnerability to
adverse economic conditions and also require us to set aside cash for interest and principal repayments.
Hence, our growth prospects may be limited due to a reduction in funds for capital expenditure, working
capital and other general corporate purposes, thus restricting our flexibility to plan for, or react to, changes
in our business and our industry. In addition, there is no assurance that we will be able to obtain additional
financing on terms that are acceptable to us, or at all.
We may not be able to keep pace with the changes in the technologies of our products due to
market and/or regulatory demands
Our industry is characterised by rapid and significant changes in, and changes in the applications of,
technology. We may need to modify our product specifications and/or introduce new technologies into
our products to keep abreast with market and/or regulatory demands, such as changes in our customers
preferences and/or implementation of new guidelines relating to the use of our systems and products.
Hence, the development of new technologies and/or introduction of new, or changes in, industry
standards, government regulations and industry guidelines may adversely affect the demand for certain of
our existing systems and products, or render certain of our systems and products obsolete.
For instance, pursuant to the Montreal Protocol, the R-22 refrigerant (a non-environmentally friendly but
widely used refrigerant throughout the world) is expected to be phased out by 2015, with R-410A and
R-507 as the viable alternative refrigerants for air-conditioning and refrigeration applications respectively.
However, with the introduction of the R-410A and R-507 refrigerants, adjustments and alterations to
current refrigeration and air-conditioning systems and products are required to replace and retrofit those
that are non-conforming, thereby increasing costs to manufacturers. In addition, it may render some of the
current air-conditioning and refrigeration systems and products obsolete.
Hence, it is essential that we continue to keep abreast of technological developments in order to
anticipate changes in technology and regulatory standards so as to ensure that our systems and products
are current, and continue to develop and introduce new and enhanced systems and products on a
timely basis. In the event that we are unable to keep up with such technological changes or cater to our
customers specifications and requirements, we may not be able to maintain our competitive edge and our
business will be adversely affected.
The outbreak of communicable diseases, if uncontrolled, could affect our business
An outbreak or resurgence of communicable diseases (such as the avian influenza), if uncontrolled, may
potentially affect our business and operations. In addition, if any of the employees in our manufacturing
facilities or the facilities of our suppliers and/or customers is infected with communicable diseases, we
may experience disruptions to our projects progress as we, our suppliers and our customers may be
required to temporarily stop activities for quarantine purposes. Accordingly, these disruptions to our
business and operations may result in a negative impact on our financial performance.
Our insurance coverage may not be adequate
We have general insurance coverage in respect of our business and employees, including insurance
coverage against burglary and fire on our fixed assets and inventories, as well as work injury,
hospitalisation, surgical and medical insurance for our employees. However, in the event that such claims
exceed the coverage of the insurance policies which we have taken up, we may be liable for the shortfall
between amounts claimed and amounts insured. We are not insured against the loss of key personnel,
business interruption and product liability. If the events outlined above were to occur, our business,
financial performance and financial position may be materially and adversely affected. Please refer to the
Business Insurance section of this Offer Document for more details.
35
RISK FACTORS
Fire, flood or other natural calamities may disrupt our operations and adversely affect our financial
position, results of operations and profitability
Our manufacturing facility is located in Selangor, Malaysia. Natural calamities, such as fire, earthquake,
flood or other natural disasters, resulting in significant damage to our manufacturing facility, major
disruptions to our manufacturing processes and damages to the infrastructure which affect the transport
of raw materials and products to and from our manufacturing facility, will have significant adverse effects
on our business, financial condition and results of operations. While we consider our insurance policies
in respect of loss and/or damage to our manufacturing equipment and facilities as well as inventories to
be adequate, such insurance may not be sufficient to cover all our potential losses. In the event that such
losses exceed the insurance coverage or is not covered by the insurance policies we have taken up, we
may be liable for the shortfall of the amounts claimed and will sustain financial losses, and may also incur
additional costs in the event of increased insurance premiums payable in future.
We may experience industry-related accidents that may expose us to liability claims
Due to the nature of our business operations, we are subject to the risks of our employees or third parties
being involved with accidents while on or near our premises or job sites, which may lead to serious
human injuries or in more severe cases, loss of human lives. Any significant accident, even for which we
may not be responsible or found to be at fault, may expose us to claims and liabilities which may result
in significant legal costs and damages, drawing on our resources including time and money. In addition,
although we maintain work injury compensation insurance policy, in the event that claims made against us
arising from accidents are in excess of our insurance coverage, and/or the insurance claims are contested
by the insurance companies or the affected persons, we will be required to pay for such compensation
and our insurance premiums will be increased in the future. This will adversely affect the corporate image
and financial performance of our Group.
We are exposed to prepayment risks to our suppliers
We make prepayments to certain suppliers in order to secure raw materials and products on better terms.
However, should such suppliers experience financial difficulties or disruptions to their businesses and fail
to deliver to us raw materials and products despite prepayments already having been made, or should
there be any disruption in or shortage of supply or reduction of allocation of raw materials and products
to us from our suppliers for any reason, we may be unable to recover the prepayments made to our
suppliers and may have to undertake contingency measures to source for alternative suppliers. There is
no assurance that such contingency measures will be sufficient to meet our project needs or that we will
be able to do so at comparable costs. If contingency measures are inadequate or the related costs are
higher, our business operations and financial performance will be adversely affected.
We are subject to any adverse change in the political, economic, regulatory or social conditions in
the countries that we operate in or in which we intend to expand our business
We are governed by the laws, regulations and government policies in each of the countries that we
operate in or in which we intend to expand our business and operations. Our business and future growth
is dependent on the political, economic, regulatory and social conditions in these countries. Any economic
downturn or changes in policies implemented by the governments in these countries, currency and
interest rate fluctuations, capital controls or capital restrictions, labour laws, changes in environmental
protection laws and regulations, duties and taxations and limitations on imports and exports could
materially and adversely affect our operations, financial performance and future growth.
Our operations may suffer a material adverse impact if there is a non-renewal of our licences and
certificates
We have obtained all requisite licences and certificates for our current business operations. However,
some of these licences are subject to periodic review and renewal by the relevant government authorities
and the standards of compliance required in relation thereto may from time to time be subject to changes.
Non-renewal of or the rejection of new applications for our licences and certificates will have a material
adverse effect on our operations and profitability.
36
RISK FACTORS
RISKS RELATING TO AN INVESTMENT IN OUR SHARES
Investments in securities quoted on Catalist involve a higher degree of risk and can be less liquid
than shares quoted on the Main Board of the SGX-ST
An application has been made for our Shares to be listed for quotation on Catalist, a listing platform
designed primarily for fast-growing and emerging or smaller companies to which a higher investment risk
tends to be attached as compared to larger or more established companies. An investment in shares
quoted on Catalist may carry higher risk than an investment in shares quoted on the Main Board of the
SGX-ST. Catalist was newly formed in December 2007 and the future success and liquidity in the market
of our own Shares cannot be guaranteed.
Our Controlling Shareholder, UPL and its Associates will retain significant control of our Group
after the Placement which will allow it to influence the outcome of decisions requiring approvals
from Shareholders
Upon completion of the Placement, our Controlling Shareholder, UPL and its Associates (namely, Steven
Loh and Sam Cheung) will beneficially own in aggregate 65.6% of our Companys post-Placement share
capital. As a result, our Controlling Shareholder and its Associates, if they act together, will be able to
exercise significant influence over matters requiring Shareholders approval, including the election of
Directors and the approval of significant corporate transactions, and will have veto power with respect to
any Shareholders action or approval requiring a majority vote. Such concentration of ownership may also
have the effect of delaying, preventing or deterring a change in control of our Group even if such change
may be beneficial to our minority Shareholders.
Future sale of our Shares could adversely affect the Share price
Any future sale of Shares can have a downward pressure on our Share price. The sale of a significant
amount of Shares in the public market after the Placement, or the perception that such sales may occur,
could adversely affect the market price of our Shares. These factors also affect our ability to sell additional
equity securities, if any. Except as otherwise described in the General Information on our Group
Moratorium section of this Offer Document, there will be no restriction imposed on our Shareholders to
dispose of their shareholdings.
Our Share price may fluctuate following the Placement
The market price of our Shares may fluctuate significantly and rapidly after the Placement as a result of,
among others, the following factors, some of which are beyond our control:(i)
(ii)
(iii)
the success or failure of our management team in implementing our business strategies and future
plans;
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
material changes or uncertainty in the political, economic and regulatory environment in the
markets that we operate.
These fluctuations may be exaggerated if the trading volume of our Shares is low.
37
RISK FACTORS
New investors will face immediate dilution and may experience future dilution
Our Placement Price of S$0.27 is higher than our Adjusted NTA per Share, after adjusting for the net
proceeds from the issue of New Shares, of approximately 24.8 cents. If we were liquidated immediately
following the Placement, each investor subscribing for the New Shares pursuant to the Placement would
receive less than the price he paid for his Shares. Please refer to the Dilution section of this Offer
Document for further details.
There has been no prior market for our Shares
Prior to the Placement, there has been no public market for our Shares. Although we have made an
application to the SGX-ST to list our Shares on Catalist, there is no assurance that an active trading
market for our Shares will develop, or if it develops, be sustained. There is no assurance that the market
price for our Shares will not decline below the Placement Price. The market price of our Shares could be
subject to significant fluctuations due to various external factors and events including the liquidity of our
Shares in the market, difference between our actual financial or operating results and those expected by
investors and analysts, the general market conditions and broad market fluctuations.
Negative publicity, including those relating to any of our Directors, Controlling Shareholder and
Executive Officers may adversely affect our Share price
Negative publicity or announcement relating to any of our Directors, Controlling Shareholder and
Executive Officers may adversely affect the markets perception of our Group or the Share performance
of our Company, whether or not it is justifiable, thereby adversely affecting our Share price.
38
ISSUE STATISTICS
PLACEMENT PRICE
27.0 cents
Adjusted NTA
Adjusted NTA per Share as at 31 December 2010:(a)
before adjusting for the estimated net proceeds from the issue of the New
Shares and based on our Companys pre-Placement share capital of
53,520,000 Shares
26.9 cents
(b)
after adjusting for the estimated net proceeds from the issue of the New
Shares and based on our Companys post-Placement share capital of
72,320,000 Shares
24.8 cents
Premium of Placement Price per Share over the Adjusted NTA per Share as at
31 December 2010:(a)
before adjusting for the estimated net proceeds from the issue of the New
Shares and based on our Companys pre-Placement share capital of
53,520,000 Shares
0.4%
(b)
after adjusting for the estimated net proceeds from the issue of the New
Shares and based on our Companys post-Placement share capital of
72,320,000 Shares
8.9%
Adjusted EPS
Adjusted EPS of our Group in FY2010 based on our Companys pre-Placement
share capital of 53,520,000 Shares
6.4 cents
5.8 cents
PER
PER based on the Adjusted EPS of our Group in FY2010 based on our Companys
pre-Placement share capital of 53,520,000 Shares
4.2 times
PER based on the Adjusted EPS of our Group in FY2010 based on our Companys
pre-Placement share capital of 53,520,000 Shares had the Service Agreements
been effected for FY2010
4.7 times
9.2 cents
Net operating cash flow per Share of our Group for FY2010 based on our
Companys pre-Placement share capital of 53,520,000 Shares had the Service
Agreements been effected for FY2010
8.6 cents
39
ISSUE STATISTICS
PRICE TO NET OPERATING CASH FLOW RATIO
Ratio of Placement Price to net operating cash flow per Share for FY2010
2.9 times
Ratio of Placement Price to net operating cash flow per Share had the Service
Agreements been effected for FY2010
3.1 times
MARKET CAPITALISATION
Market capitalisation based on the Placement Price and post-Placement share
capital of 72,320,000 Shares
S$19.5 million
Note:(1)
Net operating cash flow is defined as profit for the year attributable to Shareholders with depreciation expense added back.
40
DILUTION
Dilution is the amount by which the Placement Price paid by the applicants of our New Shares (New
Investors) exceeds our Adjusted NTA per Share immediately after the Placement. Our Adjusted NTA
per Share as at 31 December 2010, before adjusting for the estimated net proceeds due to our Company
from the Placement and based on the pre-Placement issued and paid-up share capital of 53,520,000
Shares was 26.9 cents per Share.
Pursuant to the Placement in respect of 18,800,000 New Shares at the Placement Price, our Adjusted
NTA per Share as at 31 December 2010, after adjusting for the estimated net proceeds from the
Placement and based on the post-Placement issued and paid-up share capital of 72,320,000 Shares
would have been 24.8 cents. This represents an immediate decrease in Adjusted NTA per Share of 2.1
cents to our existing Shareholders and an immediate dilution in Adjusted NTA per Share of 2.2 cents or
approximately 8.1% to our New Investors.
The following table illustrates the dilution on a per Share basis:Cents
Placement Price
27.0
Adjusted NTA per Share as at 31 December 2010, based on the pre-Placement share capital of
53,520,000 Shares
26.9
(2.1)
24.8
2.2
Note:(1)
The computed Adjusted NTA per Share does not take into account our actual financial performance from 1 January 2011
up to the Latest Practicable Date and the interim dividend of S$2.0 million declared in February 2011 in respect of FY2011.
Depending on our actual financial results, our Adjusted NTA per Share may be higher or lower than the computed Adjusted
NTA per Share.
The following table summarises the average effective cost per Share paid by our Director and the Pre-IPO
Investors for Shares acquired by them (adjusted for Sub-Division) during the period of three years prior to
the date of lodgement of this Offer Document and by our new investors pursuant to the Placement:Number of
Shares
Director
David Leng
Pre-IPO Investors (excluding David Leng)
Sam Cheung
Richard Chung
New investors
Total
consideration
(S$)
Average effective
cash cost per
Share
(cents)
367,200(1)
87,430
23.8
4,200,000
420,000
1,000,020
100,002
23.8
23.8
18,800,000
5,076,000
27.0
Note:(1)
This relates to Shares acquired by David Leng pursuant to the Pre-IPO Investment.
Save as disclosed above and in the General Information on our Group Share Capital section of this
Offer Document, none of our Directors, Substantial Shareholders or their Associates have acquired any
Shares during the period of three years prior to the date of lodgement of this Offer Document.
41
based on unaudited consolidated balance sheet of our Group as at 31 May 2011; and
(ii)
as adjusted for the estimated net proceeds from the Placement, after deducting estimated
expenses related to the Placement.
($000)
As at 31 May 2011
3,141
36
6,641
36
3,177
6,677
4,426
18
480
4,426
18
480
175
127
175
127
5,226
5,226
51
791
51
791
1,669
1,669
2,511
2,511
7,737
7,737
12,620
16,120
20,357
23,857
Indebtedness
Current
- Trust receipts and bills payable, secured and guaranteed
- Finance lease obligations, secured but non-guaranteed
- Loans from shareholders and directors, non-secured and
non-guaranteed
- Bank borrowings, secured and guaranteed
- Bank borrowings, unsecured but guaranteed
Non-current
- Finance lease obligations, secured but non-guaranteed
- Loans from shareholders and directors, non-secured and
non-guaranteed
- Bank borrowings, secured and guaranteed
Total indebtedness
As at the Latest Practicable Date, the amount owing by our Company to Loh Ee Ming amounted to
approximately S$1.2 million, which is on an unsecured and interest-free basis. This amount is currently
being repaid in monthly repayments of S$40,000. Pursuant to an undertaking by Loh Ee Ming, our
Company shall have the right to renegotiate such monthly repayment arrangement in the event our Audit
Committee is of the view that our Group is not in the financial position to make such monthly repayments,
taking into account our working capital and gearing position. Please refer to the Interested Person
Transactions Present and On-going Interested Person Transactions section of this Offer Document for
more details.
42
Financial
institution
Type of
facility/
tenure
Amount of
facilities
granted
(000)
Amount
outstanding
as at the
Latest
Practicable
Date
Interest rate
(000)
(%)
Facilities
used by
Security
Singapore
United
Term loan
Overseas
(commencing
Bank Limited
on 1 October
2003 and
expiring on
30 September
2028)
DBS Bank
Ltd
Standard
Chartered
Bank
RHB Bank
Berhad
S$1,599
S$1,489
5.25
Overdraft
S$1,000
Prime(1) + 0.25
Trade facilities
S$6,000
S$1,049
COF(2) + 2.50
Term loan
(commencing
on 1 March
2009 and
expiring on 28
February 2014)
S$600
S$340
2.35
Overdraft
S$600
Prime(1) + 0.75
Trade facilities
S$2,000
S$1,839
Prime(1) + 0.50
Bridging loan
(commencing
on 1 May 2009
and expiring
on 28 February
2012)
S$1,000
S$27
5.00
S$100
Prime(1) + 0.25
Trade facilities
S$1,200
S$611
COF(2) + 3.00
Trade facilities
S$800
S$418
COF(2) + 2.50
Short term
revolving
credit
S$100
S$100
COF(2) + 2.50
Overdraft
Far East
Group
Far East
Group
43
Far East
Group
Far East
Group
Financial
institution
CIMB Bank
Berhad,
Singapore
Branch
Type of
facility/
tenure
Trade facilities
and overdraft
Amount of
facilities
granted
(000)
S$500
Amount
outstanding
as at the
Latest
Practicable
Date
Interest rate
(000)
(%)
COF(2) + 2.50
Facilities
used by
Security
Far East
Group
Far East
Maju
Prime(1) + 0.50
Malaysia
United
Overseas
Bank
(Malaysia)
Berhad
Trade facilities
RM2,000
RM810
BLR(3) + 1.25
Overdraft
RM1,000
BLR(3) + 1.00
Trade facilities
RM600
BLR(3) + 0.50
Overdraft
RM400
BLR(3) + 0.75
Far East
KL
CIMB Bank
Berhad
Overdraft
RM140
BLR(3) + 2.00
Far East
Penang
44
Financial
institution
Type of
facility/
tenure
Amount of
facilities
granted
(000)
Amount
outstanding
as at the
Latest
Practicable
Date
Interest rate
(000)
(%)
Facilities
used by
Security
Hong Kong
DBS Bank
Overdraft and
(Hong Kong)
trade facilities
Limited
HK$4,000
HK$1,458
Prime(1)
(overdraft)
Standard rate
quoted by
banks (trade
facilities)
Far East
HK
Notes:(1)
(2)
(3)
As at the Latest Practicable Date, our total banking facilities amounted to approximately S$17.8
million equivalent, comprising utilised facilities of approximately S$6.4 million and unutilised facilities
of approximately S$11.4 million. To the best of our Directors knowledge, we are not in breach of any
of the terms and conditions or covenants associated with any credit arrangement or bank loan which
could materially affect our financial position and results or business operations, or the investments of our
Shareholders.
As set out in the table above, certain of our Interested Persons had provided joint and several personal
guarantees to secure banking facilities granted by banks to our Group. Please refer to the Interested
Person Transactions Present and On-going Interested Person Transactions: Provision of personal
guarantees by certain Interested Persons section of this Offer Document for further details.
45
DIVIDEND POLICY
Our Company and some of our subsidiaries had declared and/or paid dividends in respect of FY2008,
FY2009, FY2010 and FY2011 as follows:FY2008
Our Company
Far East Group
Our Subsidiaries
Far East KL
Far East Maju
Safety Enterprises
FE&B
Far East Penang
Far East Malaysia
Far East Kuching
RSP
FY2009
FY2010
S$2,000,000
RM1,477,000
RM575,500
RM189,000
RM162,200
RM57,400
S$14,000
RM276,000
RM369,070
RM50,000
RM40,000
RM760,000
RM10,000
FY2011(1)
S$2,000,000(2)
RM355,000
RM1,917,800
RM1,336,000
RM106,800
RM4,028,000
Notes:(1)
(2)
As at the date of this Offer Document, S$2.0 million of dividends declared by our Company in FY2011 remain outstanding. We
intend to repay 50% of such amounts outstanding in FY2011, and the remaining 50% in FY2012, using internally generated
funds.
Save as disclosed above, neither our Company nor any of our subsidiaries has declared any dividend
during the period under review and up to the Latest Practicable Date.
We currently do not have a formal dividend policy. However, we intend to recommend and distribute
dividends of at least 20% of our net profit attributable to Shareholders for each of FY2011 and FY2012
(Proposed Dividends), subject to the factors outlined below. Investors should note that the foregoing
statement on the Proposed Dividends is merely a statement of our present intention and shall not
constitute a legally binding obligation on our Company or legally binding statement in respect of our future
dividends which may be subject to modification (including reduction or non-declaration thereof) in our
Directors sole and absolute discretion. Investors should not treat the Proposed Dividends as an indication
of our Groups future dividend policy. No inference should or can be made from any of the foregoing
statements as to our actual future profitability or ability to pay dividends.
There can be no assurance that dividends will be paid in the future or of the amount or timing of any
dividends that will be paid in the future. The form, frequency and amount of future dividends on our
Shares will depend on our earnings and financial position, including the level of our cash and retained
earnings, our results of operations, our capital needs, our plans for expansion and any restriction on
payment of dividends imposed on us by our financing arrangements (if any) and other factors as our
Directors may deem appropriate. We may declare dividends by ordinary resolution of our Shareholders at
a general meeting, but will not pay dividends in excess of the amount recommended by our Board. Our
Directors may also declare an interim dividend without seeking Shareholders approval.
Information relating to taxes payable on dividends is set out in Appendix D Taxation of this Offer
Document.
46
FY2008
FY2009
FY2010
Turnover
Cost of sales
29,191
(22,088)
26,805
(19,618)
32,616
(21,897)
7,103
7,187
10,719
603
(2,291)
(3,284)
(159)
(623)
9
713
(2,077)
(3,484)
(216)
(487)
3
1,453
(2,654)
(3,556)
(225)
(302)
14
1,358
(394)
1,639
(297)
5,449(3)
(896)
964
1,342
4,553(3),(4)
Gross profit
Other operating income
Distribution and selling expenses
Administrative expenses
Other operating expenses
Financial expenses
Interest income
Profit before tax
Tax expense
Profit for the year
Exchange differences on translating foreign operations
(321)
(215)
124
643
1,127
4,677(3)
933
31
1,312
30
4,506(3),(4)
47
964
1,342
4,553
1.7
1.3
2.4
1.8
EPS(1) (cents)
EPS (fully diluted)(2) (cents)
Adjusted EPS(1) (cents)
Adjusted EPS (fully diluted)(2) (cents)
8.4(4)
6.2(4)
6.4(4)
4.8(4)
Notes:(1)
For comparative purposes, the EPS for the period under review has been computed based on the profit attributable to
equity holders of our Company and the pre-Placement share capital of 53,520,000 Shares. The Adjusted EPS in FY2010
has been computed based on the profit attributable to equity holders of our Company, adjusted for non-recurring income of
approximately S$1,062,000 in relation to gain on disposal of investment properties, and the pre-Placement share capital of
53,520,000 Shares.
(2)
For comparative purposes, the fully diluted EPS for the period under review has been computed based on the profit
attributable to equity holders of our Company and the post-Placement share capital of 72,320,000 Shares. The Adjusted EPS
in FY2010 has been computed based on the profit attributable to equity holders of our Company, adjusted for non-recurring
income of approximately S$1,062,000 in relation to gain on disposal of investment properties, and the post-Placement share
capital of 72,320,000 Shares.
47
Includes non-recurring income of approximately S$1,062,000 in relation to gain on disposal of investment properties. For
illustration purposes, had such non-recurring income been excluded, our profit before tax, profit for the year and profit
attributable to equity holders of our Company would have been approximately S$4,387,000, S$3,491,000 and S$3,444,000
respectively.
(4)
Had the Service Agreements been in place since the beginning of FY2010, (i) the profit for the year and profit attributable to
equity holders of our Company in FY2010 would have been approximately S$4,210,000 and S$4,163,000 respectively; (ii) the
EPS and fully diluted EPS would have been 7.8 cents and 5.8 cents respectively; and (iii) the Adjusted EPS and fully diluted
Adjusted EPS would have been 5.8 cents and 4.3 cents respectively.
(S$000)
ASSETS
Non-current assets
Fixed assets
Unquoted investments
Deferred tax assets
Other receivables
7,518
89
174
18
7,799
Current assets
Inventories
Trade debtors
Other receivables
Deposits
Prepayments
Due from affiliated companies (trade)
Tax recoverable
Fixed deposits
Cash and bank balances
8,200
6,647
137
101
1,253
217
6
1,400
2,350
20,311
LIABILITIES
Current liabilities
Trade payables
Gross amount due to customers for contract work-in-progress
Trust receipts and bills payable (secured)
Other creditors
Accruals and other liabilities
Provision for warranty
Dividends payable
Due to affiliated company (trade)
Due to affiliated company (non-trade)
Provision for income tax
Finance lease obligations (current)
Loan from shareholders and directors (current)
Term loans (current)
Bank overdrafts (secured)
1,495
593
3,424
768
1,749
50
1,636
255
111
597
18
550
448
57
11,751
Non-current liabilities
Deferred tax liabilities
Finance lease obligations (non-current)
Loan from shareholders and directors (non-current)
Term loans (non-current)
152
58
1,032
1,743
2,985
Net assets
13,374
48
(S$000)
EQUITY
Share capital
Accumulated profits
Capital reserves
Translation reserve
8,135
5,812
322
(1,051)
13,218
156
Total equity
13,374
24.7
Adjusted NTA
Adjusted NTA per Share(1) (cents)
14,405
26.9
Note:(1)
The NTA per share and Adjusted NTA per Share as at 31 December 2010 have been computed based on our pre-Placement
share capital of 53,520,000 Shares.
49
50
General economic and/or socio-political environment. Our ability to secure new contracts and
projects may be affected by general economic and/or socio-political environment in the countries
where our Group and customers operate in, in particular, Asia. Any changes in the economic and/
or socio-political environment, in particular, in countries where we operate, mainly Singapore,
Malaysia and Indonesia, may lead to changes in, amongst other things, the level of customers
demand as well as an eventual impact on the demand for our products and services.
(b)
Changes in regulatory codes and practices in relation to refrigeration and air-conditioning which will
affect the type of products that our customers buy from us. For instance, new regulatory codes and
practices may be imposed pursuant to any food infections and/or scares which will in turn affect the
type of and level of demand for our products and services.
(c)
Supply and pricing of products that we distribute, which are dependent on the terms that we
are able to secure from our suppliers. In our negotiation with our customers, we will take into
consideration, inter alia, the general market pricing of such products and adjust our selling prices
accordingly, and this will affect our revenue.
(d)
Supply and pricing of raw materials. Our key raw materials used in the manufacturing of our Eden
brand of heat exchangers are mainly copper pipes, galvanised sheets, aluminum sheets and fan
sets. The pricing of such raw materials is largely determined by actual prevailing commodity pricing
based on global demand and supply conditions.
(e)
Availability of equivalent and competitive products through other distribution channels. Our revenue
is dependent on our ability to maintain our market position and pricing of our products. Our selling
prices may be affected if competition intensifies and our competitors adopt aggressive pricing
strategies in order to gain market share or with the entrance of new players.
(f)
Our ability to develop new and more energy-efficient Eden brand of products.
(g)
Fluctuations in foreign currencies. During the period under review, approximately 6% to 12% of
our total revenue was denominated in US$, which is not the functional currency of our Company
or subsidiaries. Fluctuations in US$ will affect our revenue, and the weakening of US$ against our
functional currency in S$, RM or HK$, as the case may be, will affect our revenue in an adverse
manner.
Please refer to the Risk Factors section of this Offer Document for other factors which may affect our
revenue.
51
FY2008
FY2009
FY2010
98.0
0.9
1.1
97.9
1.0
1.1
98.1
1.0
0.9
100.0
100.0
100.0
Our cost of products comprises mainly cost of agency products as well as cost of raw materials used
in the manufacture of our Eden brand of heat exchangers (mainly copper pipes, galvanised sheets,
aluminum sheets and fan sets). Cost of products also includes other incidental costs of our purchases,
such as inward freight charges which accounted for approximately 1.2% to 2.0% of our cost of sales
during the period under review. Our cost of products as a percentage of cost of sales remained relatively
stable at approximately 98% during the period under review.
Direct labour costs comprise mainly salaries and other related costs of our manufacturing staff. Our direct
labour costs remained relatively stable at approximately 1.0% of our cost of sales during the period under
review.
Our overhead costs comprise mainly depreciation of plant and machinery, replacement of tools and parts
of our plant and machinery, and factory maintenance costs. Our overhead costs remained relatively stable
at approximately 1.0% during the period under review.
The main factors affecting our cost of sales include:(a)
Cost of products. We purchase agency products for distribution to our customers, and these
comprise mainly compressors, condensers, controllers, valves, as well as copper pipes. The prices
of such products which we can secure from our suppliers are influenced by the general market
conditions affecting such products.
(b)
Cost of raw materials. Our raw materials comprise mainly copper pipes, galvanised sheets,
aluminum sheets and fan sets used in the manufacture of our Eden brand of heat exchangers.
The costs of these raw materials accounted for more than 60% of our total cost of raw materials
during the period under review. The prices of these raw materials are primarily dependent on actual
prevailing commodity pricing based on global demand and supply conditions.
(c)
Fluctuations in foreign currencies. Our purchases are mainly denominated in US$ and , which
accounted for more than 80% of our total purchases. Fluctuations in these currencies will affect our
cost of sales, and the strengthening of these currencies against our functional currencies in S$, RM
or HK$, as the case may be, will affect our cost of sales in an adverse manner.
(d)
Fluctuations in freight charges. We purchase our agency products and raw materials mainly from
overseas suppliers, which accounted for more than 80% of our total purchases during the period
under review. Inward freight charges accounted for approximately 1.2% to 2.0% of our cost of sales
during the period under review. Increase in freight rates due to increasing oil prices will affect our
cost of sales.
52
FY2008
FY2009
FY2010
64.7
18.5
4.5
4.4
7.9
72.5
13.3
3.9
3.4
6.9
71.6
12.2
4.4
2.9
8.9
100.0
100.0
100.0
Distribution and selling expenses comprise mainly salaries and related costs of our sales and marketing
staff, travelling and entertainment expenses, outward freight charges, running costs of vehicles, and other
expenses such as advertising and promotion expenses. Such expenses are affected by the number of
sales and marketing staff employed and the level of marketing efforts undertaken by us.
Administrative expenses
Administrative expenses accounted for approximately 11.3%, 13.0% and 10.9% of our total revenue in
FY2008, FY2009 and FY2010 respectively. The breakdown of our administrative expenses for the period
under review is as follows:As a percentage of total administrative expenses (%)
Salaries and related costs
Directors fee
Legal and professional fees
Rental expenses
Depreciation charges
Telephone and utilities charges
Others
Total
FY2008
FY2009
FY2010
51.4
4.4
11.8
4.4
6.5
5.7
15.8
53.4
4.4
12.2
5.4
6.1
5.3
13.2
51.7
4.9
13.1
7.8
5.2
5.8
11.5
100.0
100.0
100.0
Administrative expenses comprise mainly salaries and related expenses paid to our directors, finance
and administrative staff, directors fees, legal and professional fees, rental of premises, depreciation
costs of fixed assets, telephone and utilities charges as well as other expenses such as insurance, office
maintenance, property tax and office expenses.
Other operating expenses
Other operating expenses comprise mainly net foreign exchange losses, one-off licence fee paid to a
supplier, loss on disposal of investment in a subsidiary company in Hong Kong and loss on disposal of an
unquoted investment. Our other operating expenses remained relatively stable at S$0.2 million during the
period under review.
53
FY2008
FY2009
FY2010
394
1,358
29.0
297
1,639
18.1
896
5,449
16.4
Our effective tax rate decreased from 29.0% in FY2008 to 18.1% in FY2009. The higher effective tax rate
in FY2008 was mainly due to an under-provision of deferred tax in prior years taken up in FY2008 and
certain of our expenses not deductible for tax purposes. Our effective tax rate decreased from 18.1% in
FY2009 to 16.4% in FY2010 mainly due to the utilisation of tax losses in one of our subsidiaries.
SEASONALITY
Our business is generally not subject to any significant seasonal fluctuations.
INFLATION
We do not consider the impact of inflation on our financial performance during the period under review to
be significant.
CHANGE OF ACCOUNTING POLICIES
Our accounting policies have been consistently applied by our Group for the period under review, except
for the changes in accounting policies arising from adoption of new and revised financial reporting
standards as detailed in Section 2.2 of Appendix A Independent Auditors Report on the Audited
Consolidated Financial Statements of Far East Group Limited and Subsidiary Companies for the Financial
Years Ended 31 December 2008, 2009 and 2010 of this Offer Document.
The adoption of new and revised standards resulted in changes to certain accounting policies but did not
impact on the financial position or performance of our Group.
54
FY2008
S$000
%
FY2009
S$000
%
FY2010
S$000
%
20,642
70.8
19,662
73.4
23,733
72.8
5,414
18.5
4,704
17.5
6,194
19.0
3,135
10.7
2,439
9.1
2,689
8.2
29,191
100.0
26,805
100.0
32,616
100.0
Gross profit
FY2008
S$000
%
FY2009
S$000
%
FY2010
S$000
%
4,876
68.7
5,431
75.6
7,990
74.5
1,182
16.6
928
12.9
1,648
15.4
1,045
14.7
828
11.5
1,081
10.1
7,103
100.0
7,187
100.0
10,719
100.0
FY2008
FY2009
FY2010
23.6
27.6
33.7
21.8
19.7
26.6
33.3
33.9
40.2
Average
24.3
26.8
32.9
55
Revenue
FY2008
S$000
%
FY2009
S$000
%
FY2010
S$000
%
Singapore
Malaysia
Indonesia
Hong Kong / PRC(1)
Indochina(2)
Others(3)
12,250
7,808
3,632
1,643
1,645
2,213
42.0
26.7
12.5
5.6
5.6
7.6
11,083
7,572
2,996
2,127
810
2,217
41.4
28.2
11.2
7.9
3.0
8.3
13,756
8,872
3,810
3,383
922
1,873
42.2
27.2
11.7
10.4
2.8
5.7
29,191
100.0
26,805
100.0
32,616
100.0
Notes:(1)
(2)
(3)
FY2009 vs FY2008
Revenue
Our revenue decreased by 8.2% or S$2.4 million, from approximately S$29.2 million in FY2008 to
approximately S$26.8 million in FY2009.
The decrease in revenue was attributable to the decreased sales from all of our business segments,
with a decline of S$1.0 million from our commercial and light industrial (refrigeration) business segment,
S$0.7 million from our residential and commercial (air-conditioning) business segment and S$0.7 million
from our oil, marine and gas (refrigeration and air-conditioning) business segment. The decline in
revenue was mainly attributable to the lower customer demand due to the global economic and financial
crisis in FY2009. In addition, one of our key customers in the oil, marine and gas (refrigeration and airconditioning) business segment had shifted its operations out of Singapore and this partly contributed to
the decline in revenue in FY2009.
The decline in revenue in FY2009 was attributable to decreased sales of S$1.2 million from Singapore,
S$0.2 million from Malaysia, and S$0.6 million from Indonesia as compared to FY2008, as a result of the
lower customer demand due to the global economic and financial crisis in FY2009. The decline in revenue
generated from Singapore was also attributable to the abovementioned shifting of operations by one of
our key customers out of Singapore.
Gross profit
Our gross profit increased marginally by 1.2% or S$0.1 million, from approximately S$7.1 million in
FY2008 to approximately S$7.2 million in FY2009, despite a 8.2% decline in our revenue.
Our gross profit margin improved by 2.5 percentage points, from 24.3% in FY2008 to 26.8% in FY2009.
The improvement of our gross profit margin was mainly due to increased gross profit margins of our
commercial and light industrial (refrigeration) as well as oil, marine and gas (refrigeration and airconditioning) business segments, which were partially offset by the lower gross profit margin of our
residential and commercial (air-conditioning) business segment.
56
a decrease in provision for stock obsolescence (which was recognised as an expense in cost of
sales) in FY2009 as compared to FY2008, which had contributed to an improvement in gross profit
margin of approximately 1.6%; and
(ii)
an increase in average selling price of our products as we had introduced new series of
refrigeration products in FY2009 which had commanded higher margins.
Notwithstanding the aforementioned positive impact of the inventory write-down, the gross profit margin
of our residential and commercial (air-conditioning) business segment declined by 2.1 percentage points,
from 21.8% in FY2008 to 19.7% in FY2009. This was mainly due to the relatively high average cost of our
copper stock which we were unable to effectively pass on to our customers as this business segment is
relatively more competitive.
In the case of our oil, marine and gas (refrigeration and air-conditioning) business segment, the positive
impact of the inventory write-down was partially offset by more competitive pricing strategy in order to
capture market share in FY2009. As a result, the gross profit margin of this business segment improved
only marginally by 0.6 percentage points, from 33.3% in FY2008 to 33.9% in FY2009.
Other operating income
Other operating income increased by 18.1% or S$0.1 million, from approximately S$0.6 million in FY2008
to approximately S$0.7 million in FY2009, which was mainly attributable to an increase of approximately
S$0.2 million in commission income and S$0.1 million in jobs credit grants. The increase in other
operating income was partially reduced by a gain of approximately S$0.2 million in FY2008 in relation to
write-off of a long outstanding unclaimed debt, and there was no such item in FY2009.
Distribution and selling expenses
Distribution and selling expenses decreased by 9.3% or S$0.2 million, from approximately S$2.3 million in
FY2008 to approximately S$2.1 million in FY2009, mainly due to a decrease of S$0.1 million in travelling
and entertainment expenses in FY2009 as we participated in fewer exhibitions due to the sluggish
economic conditions in the year.
Administrative expenses
Administrative expenses increased by 6.1% or S$0.2 million, from approximately S$3.3 million in FY2008
to approximately S$3.5 million in FY2009, mainly due to an increase of approximately S$0.2 million in
salaries and related costs with the addition of five new staff at Edenkool, a new subsidiary in Singapore.
Financial expenses
Our financial expenses decreased by 21.8% or S$0.1 million, from approximately S$0.6 million in FY2008
to approximately S$0.5 million in FY2009. This was mainly due to a decrease in interest rates on our bank
borrowings, coupled with a lower utilisation of bank overdrafts and trade facilities in FY2009.
Profit before tax
Profit before tax increased by 20.7% or S$0.2 million, from approximately S$1.4 million in FY2008 to
approximately S$1.6 million in FY2009. The increase was due to an increase in gross profit and other
operating income, decrease in distribution and selling expenses as well as financial expenses, partially
offset by an increase in administrative expenses.
Tax expense
Our income tax expenses were S$0.4 million and S$0.3 million, with effective tax rates of 29.0% and
18.1% in FY2008 and FY2009 respectively.
57
(ii)
favourable currency exchange rates of our purchases which were mainly in US$ and . The
average exchange rate of US$ weakened against S$ by 6.9%, from S$1.00:US$0.6881 in FY2009
to S$1.00:US$0.7355 in FY2010. The average exchange rate of S$ and weakened by 13.0%,
from S$1.00:0.4935 in FY2009 to S$1.00:0.5575 in FY2010.
58
59
60
(S$000)
FY2008
Audited
FY2009
FY2010
790
(305)
225
2,755
(274)
130
1,798
872
(2,135)
710
(163)
2,611
547
535
3,158
547
3,158
3,693
Note:(1)
Cash and cash equivalents comprise fixed deposits as well as cash and bank balances, net of bank overdrafts.
61
62
(S$000)
1 January 2011
to the Latest
Practicable Date
FY2008
FY2009
FY2010
195
17
51
20
26
30
74
24
213
17
3
81
102
39
196
13
23
22
13
309
342
438
71
1
13
154
1
7
5
4
14
168
31
Capital expenditures
Building
Plant and machinery
Renovations
Office equipment, furniture and fittings
Computers
Motor vehicles
Divestments
Plant and machinery
Renovations
Office equipment, furniture and fittings
Computers
Motor vehicles
The above capital expenditures were financed by internally generated funds and finance leases.
Commitments
Capital commitments
As at the Latest Practicable Date, we do not have any material capital commitments.
Operating lease commitments
As at the Latest Practicable Date, we have operating lease commitments as follows:(S$000)
Not later than one year
Later than one year but not later than five years
More than five years
161
242
866
63
FY2008
FY2009
FY2010
54.9
26.8
12.4
5.0
0.9
55.3
27.4
9.2
6.5
1.6
58.3
25.9
6.3
9.0
0.5
S$
RM
JPY
Others
39.8
48.1
5.0
4.8
2.1
0.2
47.4
38.6
6.6
4.6
2.7
0.1
44.9
43.3
5.8
4.5
1.5
70.6
22.9
6.5
72.0
21.1
6.9
67.4
27.7
4.9
64
65
FY2008
FY2009
FY2010
153
0.5
11.3
111
0.4
6.8
204
0.6
3.7
7,000
700
612
Total
8,312
Pursuant to the Investment Agreement, our Company and the Majority Shareholders jointly and severally
granted the Pre-IPO Investors a put option to require our Company and/or the Majority Shareholders to
acquire all of the Pre-IPO Investors Shares at an acquisition price equivalent to the principal amount
paid for such Shares plus a compounded annual interest of 4.0% in the event that our Company was
unsuccessful in the Placement (for any reason other than our Companys decision not to proceed with
the Placement). In the event of a material breach of the Investment Agreement or, amongst others, our
Company decided not to proceed with the Placement, the Majority Shareholders and our Company jointly
and severally granted the Pre-IPO Investors a put option to require the Majority Shareholders and/or our
Company to acquire all of the Pre-IPO Investors Shares at an acquisition price equivalent to the principal
amount paid for such Shares plus a compounded annual interest of 6.0%.
Further to the Pre-IPO Investment and as at the Latest Practicable Date, the issued and paid-up share
capital of our Company was S$9,322,192.32 comprising 89,200 Shares.
66
the conversion of our Company into a public limited company and the change of our name to Far
East Group Limited;
(b)
(c)
the sub-division of every one (1) Share into 600 Shares (the Sub-Division);
(d)
the issue of the New Shares pursuant to the Placement, which when allotted or allocated, issued
and fully-paid, will rank pari passu in all respects with the existing Shares;
(e)
the authorisation of our Directors, pursuant to Section 161 of the Companies Act, to:(i)
allot and issue Shares whether by way of rights, bonus or otherwise (including Shares
as may be issued pursuant to any Instrument (as defined below) made or granted by our
Directors while this resolution is in force notwithstanding that the authority conferred by this
resolution may have ceased to be in force at the time of issue of such Shares); and/or
(ii)
make or grant offers, agreements or options (collectively, Instruments) that might or would
require Shares to be issued, including but not limited to the creation and issue of warrants,
debentures or other instruments convertible into Shares,
at any time and upon such terms and conditions and for such purposes and to such persons as our
Directors may in their absolute discretion deem fit, provided that the aggregate number of Shares
issued pursuant to such authority (including Shares to be issued pursuant to any Instrument but
excluding Shares which may be issued pursuant to any adjustments (Adjustments) effected under
any relevant Instrument, which Adjustment shall be made in compliance with the provisions of
the Catalist Rules for the time being in force (unless such compliance has been waived by the
SGX-ST) and the Articles of Association for the time being of our Company), shall not exceed
100% of the issued share capital of our Company (excluding treasury shares) immediately after
the Placement, and provided that the aggregate number of such Shares to be issued other than
on a pro rata basis in pursuance to such authority (including Shares to be issued pursuant to any
Instrument but excluding shares which may be issued pursuant to any Adjustment effected under
any relevant Instrument) to the existing Shareholders shall not exceed 50% of the issued share
capital of our Company (excluding treasury shares) immediately after the Placement, and, unless
revoked or varied by our Company in general meeting, such authority shall continue in force until
the conclusion of the next Annual General Meeting of our Company or the date by which the next
Annual General Meeting of our Company is required by law to be held, whichever is the earlier; and
(f)
the adoption of the Shareholders Mandate (details of which are set out in the Interested Person
Transactions Shareholders Mandate section of this Offer Document).
As at the date of this Offer Document, there is only one class of shares in the capital of our Company,
being the Shares. A summary of the Articles of Association of our Company relating to, among others,
the voting rights of our Shareholders is set out in Appendix B Summary of the Constitution of our
Company of this Offer Document. There is no founder, management, deferred or unissued Shares
reserved for issuance for any purpose. No person has been, or is entitled to be, given an option to
subscribe for or purchase any shares in or debentures of our Company or our subsidiaries.
67
Resultant issued
and paid-up share
capital
(S$)
80,888
89,200
53,520,000
18,800,000
8,134,740
9,322,192
9,322,192
13,958,192
72,320,000
13,958,192
Save as disclosed above, there were no changes in the issued and paid-up capital of our Company within
the three years preceding the date of this Offer Document.
The shareholders equity of our Company as at 31 December 2010, before and after adjustments to
reflect the Pre-IPO Investment and the issue of the New Shares pursuant to the Placement are set out
below:-
(S$000)
As at
31 December
2010
After adjusting
for the Pre-IPO
Investment
After the
Placement
8,135
1,803
9,322
1,803
13,958(1)
667
9,938
11,125
Share capital
Reserves(2)
14,625
Notes:(1)
After deducting expenses incurred relating to the Placement of approximately S$440,000 which will be capitalised against
share capital.
(2)
68
93.88%
Green Point
(Singapore)
100.0%
100.0%
69
FE&B
(Malaysia)
100.0%
100.0%
Far East KL
(Malaysia)
100.0%
Edenkool
(Singapore)
100.0%
100.0%
RSP
(Singapore)
57.1%
Safety Enterprises
(Malaysia)
100.0%
Far East HK
(Hong Kong)
100.0%
Far East JB
(Malaysia)
100.0%
Equity
interest
held by our
Company
Name of
company
Principal business/
Principal place of business
Edenkool
26 May 2009/
Singapore
S$200,000
100.0%
Far East HK
30 December 2005/
Hong Kong
HK$3,000,000
100.0%
23 January 1980/
Malaysia
100.0%
Far East KL
27 February 1976/
Malaysia
100.0%
10 May 1994/
Malaysia
RM2
100.0%
21 March 1983/
Malaysia
RM2,839,000
100.0%
Investment holding/
Malaysia
RM4,000,000
100.0%
6 February 1980/
Malaysia
RM850,000
93.88%(2)
FE&B
10 August 1987/
Malaysia
RM400,000
100.0%
Green Point
13 July 2009/
Singapore
S$2
100.0%
RSP
15 July 1998/
Singapore
S$70,000
57.1%(3)
70
Name of
company
Principal business/
Principal place of business
Issued and
paid-up
capital
Equity
interest
held by our
Company
RM20,000
100.0%
Notes:(1)
(2)
The remaining shareholders of Far East Penang are Yap Kwong Sen (5.88%) and the estate of Lee Lee Boon (0.24%), both
of whom are not related to any of our Directors, Executive Officers and Substantial Shareholders.
(3)
The remaining 42.9% shareholding interest in RSP is owned by Richard Chung, one of our Executive Officers.
Deemed Interest
Number of
Shares
654,600
3,700,200
1.2
6.9
42,570,000
42,570,000
4,200,000
79.5
79.5
7.9
42,570,000
79.5
439,800
711,600
823,800
0.8
1.3
1.6
4,200,000
420,000
Direct Interest
%
Number of
Shares
654,600
3,700,200
0.9
5.1
42,570,000
42,570,000
4,200,000
58.9
58.9
5.8
42,570,000
58.9
439,800
711,600
823,800
0.6
1.0
1.1
7.9
0.8
4,200,000
420,000
5.8
0.6
18,800,000
26.0
53,520,000
100.0
72,320,000
100.0
71
Number of
Shares
Deemed Interest
Loh Ee Ming (our Non-executive Chairman) is the father of Steven Loh (our CEO and Executive Director) and Karen Loh (our
Non-executive Director), and father-in-law of Sam Cheung (a Pre-IPO Investor). Steven Loh and Karen Loh are siblings. Karen
Loh is the wife of Sam Cheung.
(2)
UPL is an investment holding company incorporated in Singapore and the shareholders are Loh Ee Ming, Steven Loh, Karen
Loh, Lum Soo Mooi (spouse of Loh Ee Ming) and Sharon Loh (daughter of Loh Ee Ming and Lum Soo Mooi, and sibling of
Steven Loh and Karen Loh) with shareholding interests of 40.68%, 27.42%, 10.68%, 10.33% and 10.89% respectively. The
directors of UPL are Loh Ee Ming, Steven Loh, Sharon Loh and Lum Soo Mooi.
(3)
Lim Keng Ann is an employee of our Group and is not related to any of our Directors, Executive Officers and Substantial
Shareholders.
(4)
Ng Tat Keong is not related to any of our Directors, Executive Officers and Substantial Shareholders.
(5)
Chan Tuck Kwye is not related to any of our Directors, Executive Officers and Substantial Shareholders.
(6)
Saved as disclosed above, there are no family relationships amongst our Directors, Executive Officers
and Substantial Shareholders.
Save as disclosed above, our Company is not directly or indirectly owned or controlled, whether severally
or jointly, by any other corporation, any government or other natural or legal person.
The Shares held by our Directors and Substantial Shareholders do not carry different voting rights from
the New Shares which are the subject of the Placement. To the best of our knowledge, none of our
Directors is aware of any arrangement, the operation of which may at a subsequent date, result in a
change in control of our Company.
Save as disclosed above in the General Information on our Group Share Capital section of this Offer
Document, there were no significant changes in the percentages of ownership of our Directors and
Substantial Shareholders in our Company during the period under review and up to the Latest Practicable
Date.
There has not been any public take-over offer by a third party in respect of our Shares or by our Company
in respect of shares of another corporation or units of a business trust which has occurred between
1 January 2010 and the Latest Practicable Date.
MORATORIUM
To demonstrate their commitment to our Group, each of UPL (our Controlling Shareholder), Steven Loh
(our CEO and Executive Director) and the Pre-IPO Investors, who in aggregate hold 51,544,800 Shares,
in our Company immediately after the Placement (representing approximately 71.3% of the enlarged
issued share capital of our Company after the Placement), have undertaken not to sell, realise, transfer or
dispose of any part of their respective interests in the issued share capital of our Company immediately
after the Placement (adjusted for any bonus issue or sub-division) for a period of 12 months commencing
from the date of admission of our Company to Catalist.
In addition, Loh Ee Ming (our Non-executive Chairman), Steven Loh, Karen Loh (our Non-executive
Director), Lum Soo Mooi and Sharon Loh, being all the shareholders of UPL, have undertaken not to
sell, realise, transfer or dispose of any part of their respective interests in the issued share capital of UPL
immediately after the Placement (adjusted for any bonus issue or sub-division) for a period of 12 months
commencing from the date of admission of our Company to Catalist.
72
HISTORY
We are one of the pioneers in the refrigeration and air-conditioning business in Singapore with more than
58 years of experience in the HVAC&R industry.
Our history can be traced back to 1953 when Loh Ee Ming, our founder and Non-executive Chairman,
started a sole proprietorship to principally engage in the business of providing repair services of
refrigerators at a leased shop located at Bencoolen Street, Singapore. In March 1964, Loh Ee Ming,
together with Ng Tat Keong and Chan Tuck Kwye, incorporated our Company under the Companies Act
as a private limited company under the name of Far East Refrigeration (Pte.) Limited.
In 1966, we were principally engaged in the manufacturing and distribution of commercial refrigerators as
well as the trading of related spare parts with a staff strength of five employees. In the same year, as part
of our expansion plans, we shifted from our leased premises at Bencoolen Street to our own premises at
230 Serangoon Road, Singapore 218081 (230 Serangoon Road).
In 1967, Loh Ee Ming saw huge demand for commercial refrigerators in Malaysia and established our
first overseas subsidiary, Far East Malaysia, with a staff strength of approximately 20 employees to
focus primarily on the manufacturing and distribution of commercial refrigerators and installation of cold
rooms, as well as trading of refrigeration and air-conditioning parts in Johor, Kuala Lumpur and Penang in
Malaysia.
In 1971, our staff strength increased to approximately 15 employees in Singapore and we purchased a
property at 1120 Serangoon Road, Singapore 328205 (1120 Serangoon Road), with an estimated gross
floor area of 1,400 sqft, as our office, service workshop and additional warehouse for storage.
In 1973, to cater to our expansion requirements, we sold 230 Serangoon Road and moved to a leased
premise located at 3A Kinta Road, Singapore, which has an estimated gross floor area of approximately
4,000 sqft whilst maintaining our showroom at 1120 Serangoon Road. This new premise was used for
our sales and marketing activities in relation to commercial refrigerators as well as refrigeration and airconditioning parts.
In 1976, we acquired Far East KL and Safety Enterprises. Far East KL was focused on the manufacturing
and distribution of commercial refrigerators, whilst Safety Enterprises was focused on distribution of
imported refrigeration and air-conditioning parts in Kuala Lumpur.
In 1979, to cater to the increase in our export business volume, we acquired Elektro-Metall (Singapore)
Private Limited (Elektro-Metall), which owned a factory and warehouse with an estimated gross floor
area of 25,112 sqft at 5 Third Lok Yang Road, Singapore 628000 to enhance our warehouse and storage
capacities. This factory became our regional logistics hub distributing our products in larger volumes to
various countries in SEA, including Malaysia. In 2004, the business and assets of Elektro-Metall were
subsequently transferred to our Group and in 2008, Elektro-Metall was dissolved.
In 1980, as our business continued to grow in Malaysia, we established Far East JB to consolidate our
manufacturing facility from Far East Malaysia. In the same year, we established Far East Penang to focus
on marketing and distribution of commercial refrigerators as well as refrigeration and air-conditioning parts
in Penang.
In 1983, we acquired Far East Maju, a company located in Kuala Lumpur to principally engage in the
manufacture of condensers and assembly of condensing units.
In 1988, Loh Ee Ming saw the business potential in the PRC and in order to reduce our dependence on
the Singapore and Malaysia markets, we incorporated Far East Refrigeration (Hong Kong) Limited (Old
FER HK), which acted as a business platform for our Group to the PRC market.
In 1990, Steven Loh (our CEO and Executive Director, and son of Loh Ee Ming), joined our Group as a
retail sales executive. In 2003, he became our Group managing director.
In 1992, we streamlined our Groups businesses to focus on distribution of refrigeration and airconditioning systems and products and terminated the manufacturing of commercial refrigerators due to
intense competition in this business segment.
73
HISTORY
In 1993, as our business continued to expand, we recognised the importance of branding. To this end,
we created the Fascold brand for our manufactured range of products such as condensers, condensing
units, evaporators, and custom coils. These products were manufactured by Far East Maju.
In the same year, we acquired FE&B, which was principally engaged in the sales, marketing and
distribution of our products in South Malaysia.
In 1994, in order to garner greater market share and strengthen our market position in Malaysia, we
incorporated Far East Kuching in Kuching (the capital of East Malaysian state of Sarawak) to focus
primarily on the retailing and trading of refrigeration and air-conditioning parts, relevant spare parts and
components in East Malaysia.
In 1994, we adopted a computerised inventory system, ERP program, which enabled us to have better
control of our inventories and monitor the movement of our inventories on a real time basis. In 1995,
we introduced the fully computerised commercial Stock Control Inventory Management and Accounting
System (SCIMAS) to manage our inventories more efficiently and to provide information on our products
to our customers on a timely basis.
In 1998, we incorporated RSP to focus primarily on Energy Management Systems (EMS), refrigeration
monitoring as well as control and alarm management systems to cater to emerging demand for new
technology within the HVAC&R industry. With the establishment of RSP, we are equipped with the
advanced refrigeration technologies and online monitoring systems that help food-related companies to
comply with the HACCP requirements. We are also currently providing refrigeration monitoring as well
as control and alarm management systems to HSA (Singapore Blood Bank) and several cord blood
companies.
Over the years, we strive to maintain a quality management system to ensure only quality products and
services are provided to our customers. As a testament to our commitment, our Company was awarded
the ISO9001:2008 certification for assembly and trading of refrigeration parts since May 2002. Our
subsidiaries, Far East Maju and Safety Enterprises have also obtained the ISO9001:2008 certifications
since October 2004.
In 2003, we carried out a rebranding exercise and changed our in-house brand name to Eden. This was
part of our vision to launch a comprehensive range of innovative in-house manufactured heat exchangers
which uses high energy-efficient coil technologies. This was part of our Green Program which brings us
into the next phase of expansion, in line with the increasing environmental awareness in providing fresh
and hygienic food storage solutions to the community.
Our Eden brand of products, in particular, our Eden brand of heat exchangers, are manufactured by
our subsidiary, Far East Maju. Our Eden brand of products cover a wide range of international standard
and quality heat exchangers, including evaporators, brine coolers, condensers and custom coils,
which are extensively used in commercial, light industrial and marine applications. Today, Eden has a
comprehensive product range of G4 heat exchangers.
In 2003, in conjunction with our 50th anniversary since the commencement of our business, and to further
expand our operations, we acquired a new building at 112 Lavender Street, Singapore 338728, with an
estimated gross floor area of approximately 20,839 sqft (the Far East Refrigeration Building). The Far
East Refrigeration Building serves as our head office and retail centre.
From 2004 to 2005, our Group underwent a series of corporate restructuring exercises to achieve our
corporate objectives of becoming a comprehensive provider of refrigeration and air-conditioning systems
and products, and to streamline and rationalise our corporate structure and business activities of our
Group.
In December 2005, we incorporated a new Hong Kong subsidiary, Far East HK, to take over the business
and operations of Old FER HK. In 2009, we disposed of Old FER HK to Karen Loh. Please refer to the
Interested Person Transactions Past Interested Person Transactions section of this Offer Document for
further details.
74
HISTORY
In 2008, our Eden brand of heat exchangers were successfully tested in the laboratory of Ziehl-Abegg,
which is one of Europes accredited laboratories. The results of the tests certified that our products
specifications, such as noise level and air flow performance, were in line with markets requirements.
These certifications are a further testimony of the quality of our products. In particular, our Eden brand
of heat exchangers are widely recognised and used by well-known international and regional retail chains,
including Carrefour, Metro, Tesco and Giant. We were also one of the major suppliers of refrigeration
equipment to Singapores two Integrated Resorts, namely Resorts World Sentosa and Marina Bay Sands.
In 2009, we expanded our business into the servicing, repair and overhauling of Bitzers reciprocating and
screw compressors by establishing Green Point through a franchise program with Bitzer Refrigeration
Asia Limited (a wholly-owned subsidiary of Bitzer, a leading manufacturer of compressors in Germany).
In view of the rapid growth of residential and commercial air-conditioning business in Singapore, we
incorporated Edenkool in May 2009, to primarily focus on providing air-conditioning materials (such as
copper pipes, PVC trunkings, electrical wires, refrigerants, class O and 1 closed cell insulation pipes and
sheets) to the residential and commercial air-conditioning markets.
As part of our business strategy to expand regionally, we obtained a licence from the Vietnam
Department of Industry and Trade in September 2010 to set up a new representative office in Ho Chi Minh
City, Vietnam to serve as our Groups gateway into the Indochina market (namely Vietnam, Cambodia,
Laos and Myanmar).
In May 2011, we established a representative office in Indonesia to provide sales and marketing support
and assistance for our distributors and dealers in Indonesia.
Since our establishment, our Group has grown rapidly and we have evolved into a comprehensive
provider of refrigeration and air-conditioning systems and products in the HVAC&R industry. We have
grown from a provider of repair services of refrigerators to a distributor of a wide range of agency products
for several prominent manufacturers in the HVAC&R industry, as well as a manufacturer and distributor of
heat exchangers and condensing units under our own brand Eden. As at the Latest Practicable Date, we
have 118 employees, with subsidiaries in Singapore, Malaysia and Hong Kong as well as representative
offices in Vietnam and Indonesia.
On 18 March 2011, we changed our name to Far East Group Pte. Ltd.. On 25 July 2011, our Company
was converted into a public company and changed our name to Far East Group Limited. For further
details on the share capital of our Company, please refer to the General Information on our Group
Share Capital section of this Offer Document.
75
BUSINESS
BUSINESS OVERVIEW
We are a comprehensive provider of refrigeration and air-conditioning systems and products in the
HVAC&R industry, principally engaged in the sourcing and distribution of a wide range of agency products
as well as the manufacturing and distribution of heat exchangers and condensing units under our own
brand Eden. Our Directors believe that we are one of the leading regional distributors of commercial and
light industrial refrigeration systems and products in the SEA region.
For our agency products, some of the international brands that we distribute are Bitzer, Copeland,
Embraco, Danfoss, Emerson Flows, Eliwell, Honeywell, Saginomiya, Castel, ebm-papst, Ziehl-Abegg,
HARP and Aeroflex. For further details on the agency products that we distribute, please refer to the
Business Our Products section of this Offer Document.
We possess a comprehensive range of innovative in-house manufactured heat exchangers under our own
brand Eden, which use high energy-efficient coil technologies. Our Eden brand of heat exchangers are
used for refrigeration and cooling by prominent end-users in various industries, such as retail (Carrefour,
Metro, Tesco, Giant, Cold Storage and NTUC FairPrice), food and beverage (Resorts World Sentosa and
Marina Bay Sands), pharmaceutical (HSA (Singapore Blood Bank)), hospitality (The St. Regis Singapore,
Shangri-La Hotel Singapore and Capella Singapore), logistics (CIAS Flight Kitchen), food processing
(Chun Cheng Fishery and Angliss Singapore) and shipping (Jurong Shipyard Pte Ltd, Keppel Shipyard
Limited and Sembawang Shipyard Pte Ltd).
As part of our value-added services to our customers, we also provide design and consultancy services
in relation to refrigeration and air-conditioning systems, as well as relevant product trainings and aftersales support.
We have a broad customer base of more than 1,000 active customers, of which 50% are repeat
customers who have purchased from us for five years or more. Our customers include distributors,
dealers as well as refrigeration and air-conditioning contractors who use our products and services to
provide comprehensive refrigeration and air-conditioning systems to end-users, such as supermarkets,
cold store distribution centres, food processing and catering facilities, hotels, hospitals, food and beverage
establishments, convenient stores, petrol stations, marine vessels, oil rigs and barges.
Our head office is based in Singapore and we have subsidiaries in Singapore, Malaysia and Hong Kong,
as well as representative offices in Vietnam and Indonesia. Our Company and subsidiaries in Singapore
focus primarily on the business opportunities arising from Singapore and other SEA countries. Our
subsidiaries in Malaysia operate as retail and distribution offices covering the Malaysian market whilst
our subsidiary in Hong Kong serves as a business platform to the Hong Kong and PRC markets. Our
representative office in Vietnam serves as our Groups gateway into the Indochina market while our
representative office in Indonesia covers the Indonesia market.
As at the Latest Practicable Date, we have appointed approximately 20 dealers and distributors with a
wide business and distribution network in their respective countries, including Malaysia, Thailand, the
Philippines, Myanmar, Mauritius, Vietnam, Sri Lanka and Indonesia. We also provide design and technical
services to our dealers and distributors in connection with the sale of our products. Please refer to the
Business Distribution Channels section of this Offer Document for further details.
Our head office is currently located at 112 Lavender Street, Far East Refrigeration Building, Singapore
338728, occupying an estimated gross floor area of 20,839 sqft. Our main warehouse and workshop is
located at 5 Third Lok Yang Road, Singapore 628000, occupying an estimated gross floor area of 25,112
sqft. Our manufacturing facility is located at Lot 1998/D Jalan Perusahaan 3, Taman Industri Selesa Jaya,
43300 Balakong, Seri Kembangan, Selangor Darul Ehsan, Malaysia, occupying an estimated gross floor
area of 39,719 sqft.
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OUR PRODUCTS
We manufacture and distribute our Eden brand of heat exchangers and condensing units, as well as
represent and distribute agency products. As at the Latest Practicable Date, we have 13 series with more
than 300 models of evaporators, condensers and condensing units to serve the cooling requirements of
different business segments, some of which are as follows:Eden brand of heat exchangers and condensing units
Product
Product description
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BUSINESS
Product
Product description
These evaporators are designed for ultrafast freezing applications to maintain food
freshness, prevent loss of product weight
and ultimate reduction in energy.
78
BUSINESS
Product
Product description
Compressors
Product
Brand / Country
Product description
Bitzer / Germany
Bitzer / Germany
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BUSINESS
Product
Brand / Country
Product description
Bitzer / Germany
Controllers, thermostats, systems protection, thermal expansion valves and line components
Product
Brand / Country
Product description
Saginomiya /
Japan
Danfoss /
Denmark
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BUSINESS
Product
Brand / Country
Product description
Eliwell / Italy
Honeywell / United
States of America
Honeywell
offers
a
comprehensive range of
thermostats, controllers, valves
and actuators used mainly in
residential and commercial airconditioning applications.
Emerson Flows /
United States of
America
Castel / Italy
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BUSINESS
Accessories
Product
Brand
Product description
Copper Pipes
Eden
We provide a comprehensive
range of our Eden brand
of high quality refrigeration
and air-conditioning copper
pipes. These copper pipes are
supplied in both hard drawn
length and annealed form,
after meticulous cleaning,
dehydrating and capping, to
ensure that internal cleanliness
standards are met. Most of
our Eden copper pipes have
undergone hydrostatic tests
conducted by the TV SD
PSB Pte Ltd in Singapore.
Insulation materials
Aeroflex
Refrigerants
HARP, ICOOL
Our Eden brand of heat exchangers and condensing units are developed by our research and
development team. During the period under review, we have developed a comprehensive range of G4
heat exchangers which uses high energy-efficient coil technologies.
All our Eden G4 condensers and evaporators are designed with the latest smart circuitry and
incorporate the inner groove tube technology, which allows the refrigerant to be evenly distributed
throughout the evaporators. This maximises coil efficiency and increases internal primary coil surface
area, thereby providing higher efficiency and cooling capacity with a smaller physical evaporator
dimension. This may result in a reduction of the number of evaporator fan motors used, hence reducing
the energy consumption of fan motors by up to 50%. In addition, our fins technology that are used in our
refrigeration and air-conditioning systems are made of high-grade aluminum (Aluminum Association - AA
1100 Standard) with Double Sine Wave Pattern and Rippled Fin Edges to provide higher heat transfer
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BUSINESS
efficiency, which results in greater energy efficiency as compared with conventional fin designs. Some of
the designs are patented and registered with the relevant authority in the PRC. Please refer to Business
Intellectual Property section of this Offer Document for further details.
In 2008, our Eden brand of heat exchangers were successfully tested in the laboratory of Ziehl-Abegg,
which is one of Europes accredited laboratories. The results of the tests certified that our products
specifications, such as noise level and air flow performance, were in line with markets requirements.
These certifications are a further testimony of the quality of our products.
OUR BUSINESS MODEL
Our business activities can be broadly segmented into the following categories:(i)
(ii)
(iii)
The description of each of our Groups business segments are set out as follows:Commercial and light industrial (refrigeration)
Our Directors believe that we are one of the leading regional distributors of commercial and light industrial
refrigeration systems and products in SEA, including compressors, condensers, condensing units, multiple
compressor racks units, electronic controls, energy management solutions, service equipment and tools
and our Eden range of heat exchangers. Our customers are mainly refrigeration contractors, who use
our products and services to provide a comprehensive refrigeration system to the end users, such as
Carrefour, NTUC FairPrice, Resorts World Sentosa and Marina Bay Sands.
We purchase agency products from international brands such as Bitzer, Embraco, Danfoss, Emerson
Flows and Eliwell. In addition, we manufacture our Eden brand of heat exchangers and customise our
products to suit our customers specific design requirements.
We also offer value-added services to our customers by providing design and consultancy services in
relation to refrigeration and air-conditioning systems, as well as relevant product trainings and after-sales
support.
Our commercial and light industrial (refrigeration) business segment contributed approximately 70.8%,
73.4%, and 72.8% of our total revenue in FY2008, FY2009 and FY2010 respectively.
Residential and commercial (air-conditioning)
We distribute a wide range of air-conditioning materials, including copper pipes, insulation materials,
fittings, PVC trunkings and other relevant components for residential and commercial air-conditioning
applications. Our customers are mainly air-conditioning contractors and distributors, who use our
products and services to provide air-conditioning systems for residential and commercial projects, such
as condominiums, offices, warehouses and shopping complexes in Singapore and other SEA countries.
With our expertise and experience in the manufacture of heat exchangers, we are able to customise and
manufacture replacement air handling unit coils for commercial air-conditioning.
We purchase air-conditioning materials from international brands such as Aeroflex, Castel, Emerson
Flows and Honeywell.
Our residential and commercial (air-conditioning) business segment contributed approximately 18.5%,
17.5% and 19.0% of our total revenue in FY2008, FY2009 and FY2010 respectively.
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BUSINESS
Oil, marine and gas (refrigeration and air-conditioning)
We distribute a range of air-conditioning and refrigeration systems to the oil, marine and gas industry.
These products include our Eden brand of heat exchangers and packaged condensing units supplied
to ships, vessels and oil rigs, which are primarily used to preserve food, other perishables and also to
provide a cool and comfortable environment for the crew. Our customers are mainly project contractors
who supply our systems and products to shipyards, such as Jurong Shipyard Pte Ltd, Keppel Shipyard
Limited and Sembawang Shipyard Pte Ltd.
With our extensive experience in the HVAC&R industry, we are also able to provide consultancy, technical
support, product customisation and design services to our customers in the oil, marine and gas industry.
We purchase air-conditioning and refrigeration materials from international brands such as Bitzer, Danfoss
and Castel.
Our oil, marine and gas (refrigeration and air-conditioning) business segment contributed approximately
10.7%, 9.1%, and 8.2% of our total revenue in FY2008, FY2009 and FY2010 respectively.
BUSINESS AND MANUFACTURING PROCESS
Our business process
In general, our business process can be illustrated diagrammatically as follows:-
After-sales service
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BUSINESS
(2)
(3)
(4)
(5)
(6)
After-sales service
Our sales personnel visit our customers regularly to provide updates on our products, follow-up on
pending quotations and delivery, as well as to offer a range of technical support services to them.
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Our manufacturing process
In general, the manufacturing process of a heat exchanger can be illustrated diagrammatically as follows:-
Incoming raw
materials
Fin press
section
Sheet metal
section
Tube
section
Sub-assembly section
Lacing
Expanding
Flaring
Belling
Leak test
Painting
Electrical
Brazing
Final assembly
section
Packing
Storage
Delivery
A general description of the manufacturing process of a heat exchanger is set out below:(1)
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BUSINESS
(2)
(ii)
(iii)
Tube section
Copper pipes are straightened, cut, bent and capped to form various components such as
straight tubes, hairpin tubes, headers, distributors and other copper components required in
the final assembly section.
(3)
Sub-assembly section
In the sub-assembly section, the components produced or formed in the fin press, sheet metal and
tube sections as described above are assembled whereby:-
(4)
(a)
straight or hairpin tubes are laced through the fins and are internally expanded to form a
tight fit within the fins;
(b)
the ends of these tubes are then flared and belled for the insertion and brazing of return
bends;
(c)
(d)
the coil is pressurised with nitrogen and then tested for leaks by immersing into a water tank;
(e)
(f)
electrical components such as electrical fans, defrost heaters, control boxes are then fitted
and wired accordingly.
(5)
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AWARDS AND ACHIEVEMENTS
Our Company has been conferred the following awards and achievements since establishment:Awarding authority/
company
Award/Achievement
Description
Year of award
Eliwell SPA
2003
2010
BUSINESS
To improve our profile and increase public awareness of our products and services, we advertise in print
media, including trade magazines and industry directories, and display posters and banners relating to
our Group and products at our retail stores and distributors stores. In addition, we furnish our marketing
package (comprising posters, catalogues, folders, technical leaflets, gifts and banners), which contains
information and sales promotions of our products, to our distributors and customers.
Our corporate website (http://www.fareastref.com.sg/) and product website (http://www.edensolution.com)
are important sales and marketing channels, which contain information on, amongst others, our history,
product range and catalogues, news, corporate culture, awards and accolades, current promotions and
a downloadable survey form through which customers can lodge their complaints, compliments and
suggestions. Information contained in our internet websites does not constitute part of this Offer
Document.
Our sales and marketing activities have increased our corporate profile and public awareness of our
products and services. We are confident that our on-going sales and marketing efforts and activities will
continue to contribute to the growth of our market share and effectively market our products and services
to our customers in the local and regional markets.
DISTRIBUTION CHANNELS
We market and distribute our products and services through various distribution channels including
direct selling, representative offices, refrigeration and air-conditioning contractors, distributors and/
or dealers. In Singapore, Malaysia and Hong Kong, our products and services are directly distributed
through companies within our Group in the respective countries. Most of the companies within our Group
are equipped with showrooms, retail facilities and warehouses, to provide timely deliveries, and quality
products and services to our customers.
We have representative offices in Vietnam and Indonesia to serve as our Groups gateway into the
Indochina and Indonesia markets respectively, to generate sales leads and provide necessary assistance
to distributors and dealers in Vietnam and Indonesia.
To extend our regional reach, we have also appointed a number of distributors and dealers who are wellestablished and have a wide business and distribution network in their respective countries, including
Malaysia, Thailand, the Philippines, Myanmar, Mauritius, Vietnam, Sri Lanka and Indonesia. As at the
Latest Practicable Date, we have approximately 20 distributors and dealers who distribute our products to
end users, sub-distributors and sub-dealers, refrigeration and air-conditioning contractors and/or original
equipment manufacturer customers in the SEA region and other regions. We also provide design and
technical services to our distributors and dealers in connection with the sale of our products.
MANUFACTURING FACILITY AND CAPACITY
Our manufacturing facility is located at Lot 1998/D Jalan Perusahaan 3, Taman Industri Selesa
Jaya, 43300 Balakong, Seri Kembangan, Selangor Darul Ehsan, Malaysia, with a gross floor area of
approximately 39,719 sqft. Please refer to the Business Properties and Fixed Assets section of this
Offer Document for further details on our Maju Facility.
Our Maju Facility is primarily engaged in manufacturing and research and development of our Eden
brand of heat exchangers, including unit coolers, blast freezers/chillers and air cooled condensers.
Our Maju Facility is equipped with adequate machines and equipment, including fin presses, expander
machines, tube bending machines and a full range of sheet metal manufacturing machines.
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BUSINESS
The following table illustrates the annual manufacturing capacity, actual annual manufacturing output
and the utilisation rate for our manufacturing lines of coils at our Maju Facility for FY2008, FY2009 and
FY2010:Annual manufacturing
capacity (1)
(Units)
Actual annual
manufacturing output
(Units)
Utilisation rate
(%)
(2)
FY2008
FY2009
FY2010
FY2008
FY2009
FY2010
FY2008
FY2009
FY2010
7,200
7,200
7,200
6,670
4,980
4,590
92.6
69.1
63.7
Coils
Notes:(1)
Our annual manufacturing capacity is derived based on 22 manufacturing staff on one work shift of nine hours per day for 250
days in a year.
(2)
Utilisation rate is calculated based on our actual annual manufacturing output divided by our annual manufacturing capacity.
Our utilisation rate decreased from 92.6% in FY2008 to 69.1% in FY2009, mainly due to the relocation of
one of our major customers out of Singapore. In addition, due to the global economic crisis in FY2008,
the demand for our products declined in FY2009.
Our utilisation rate decreased from 69.1% in FY2009 to 63.7% in FY2010, mainly due to the decline in
the number of units of coils manufactured as the coils we manufactured during this period were larger
units of higher values.
During the period under review and up to the Latest Practicable Date, we have not experienced any form
of disruption to the operations in our Maju Facility.
QUALITY CONTROL AND SAFETY ASSURANCE
Quality control
We believe that quality control in our products and services is one of the key factors that contribute to
our growth and success. We have established a stringent quality management system for our business
operations and manufacturing process.
These quality control measures ensure that our products and services meet the requirements and
expectations of our customers. Our quality control measures, from sourcing and procurement of
raw materials and agency products to the delivery of our finished products, adhere closely to the ISO
guidelines. We are committed to comply with ISO9001 and will continuously improve on our quality control.
Our commitment to quality is evidenced by the following certifications received by us:Certifying
authority
Date of expiry
BSI
12 May 2014
Global
Certification
Limited
17 August 2013
Safety Enterprises
Global
Certification
Limited
17 August 2013
Certification
Receiving party
Scope
ISO9001:2008
ISO9001:2008
ISO9001:2008
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BUSINESS
Our quality control measures include the following:Sourcing and procurement
We source and procure the raw materials that are used in our manufacturing, as well as agency
products that we distribute to our customers. We maintain an updated list of suppliers that are selected
through a process of formal audit and qualification checks, which are conducted by our procurement
manager, engineer and quality control personnel (the procurement team) by taking into account various
considerations, including product quality, specification compliance, service quality, delivery schedule,
payment terms and price. Suppliers performances are monitored by our procurement team regularly to
ensure that the quality of products supplied by them meet our requirements. In addition, our raw materials
and agency products are purchased at competitive prices without compromising on quality.
Incoming quality assurance
Upon receipt of the raw materials and agency products at our warehouse, our quality control personnel
will conduct inspections on them to ensure that there are no discrepancies in the quantity and quality
in accordance to our specifications. Should there be any discrepancy, such raw materials and agency
products would be rejected and returned to our suppliers. The raw materials and agency products that
pass our quality standards will be stored in our warehouses, pending delivery or manufacturing.
In-process quality assurance
During the course of manufacturing, our technicians will conduct periodic quality inspections based on our
internal quality control checklist.
Out-going quality assurance
Our quality control personnel will inspect our out-going finished products and their packaging thoroughly
to ensure that the quality, quantity and specifications are in accordance with our customers requirements
before delivery to our customers.
After-sales service and customer support
Our sales and marketing personnel maintain regular contact with our customers to foster and maintain
good business relationships and obtain feedbacks on our products and services. These frequent contact
with our customers also helps us to better understand the industries in which our customers operate and
allow us to service our customers business needs and provide efficient after-sales service.
In general, we provide standard product warranties of one year for our in-house manufactured products
and we offer back-to-back manufacturer warranties for our agency products that we represent and
distribute. Should our customers detect any manufacturing defects in our products within the warranty
period, we will make the necessary repairs or replacements.
Safety assurance
We have put in place comprehensive safety measures for our business operations and manufacturing
facility to ensure the safety of our staff. These measures include periodic fire drills, monthly manufacturing
equipment checks and regular meetings to cultivate safety awareness among our staff. We also ensure
that our manufacturing personnel are properly trained to operate our manufacturing machines safely.
INVENTORY MANAGEMENT
Our inventories comprise raw materials, refrigeration and air-conditioning systems and products, including
compressors, condensers, evaporators, condensing units, controllers, valves, copper pipes, and insulation
materials.
We have an ERP inventory management system in-place which tracks the movements of our inventories
in all our warehouses on a real-time basis. We also review our inventory levels periodically to ensure we
are able to continue to meet the needs of our customers.
Our inventories are maintained and replenished based on annual budgets, sales orders on hand and
anticipated demand patterns. We also take into consideration the delivery lead time before manufacturing
or placing orders with our suppliers.
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Our average inventory turnover days for the period under review are as follows:-
FY2008
FY2009
FY2010
181
179
136
Note:(1)
Average inventory turnover days are computed as follows:(Average inventories/cost of sales) x number of days
Where:Average inventory is defined as the average of the opening and closing amount of the relevant financial year.
Number of days is defined as the number of calendar days in the relevant financial year.
In general, delivery lead time from our suppliers range from two to four months. As such, we typically
maintain sufficient inventories of up to five months in order to meet the demand from our customers as
well as to support our subsidiaries operations.
In FY2008 and FY2009, we purchased our inventories in bulk to obtain more competitive prices from
our suppliers. In FY2010, we implemented a more stringent procurement policy and together with our
increase in sales in the year, our average inventory turnover days decreased from 179 days in FY2009 to
136 days in FY2010.
We regularly assess our inventories to identify slow moving inventories. Inventories that remained unsold
or unused for more than 12 months are provided for inventory obsolescence.
The write-down or write-back of inventories for the period under review are as follows:(S$000)
Inventories
Write-down/(write-back) of inventories
FY2008
FY2009
FY2010
11,164
8,109
8,200
1,074
557
(1,154)
In FY2008, we adopted a more stringent inventory obsolescence provision policy which resulted in higher
allowance for inventory obsolescence in FY2008. In FY2009, we made additional provision for inventory
obsolescence of approximately S$557,000 as our sales and business was affected by the global financial
crisis. In FY2010, we recorded an inventory write-back of approximately S$1,154,000.
OUR MAJOR SUPPLIERS
We purchase our raw materials and agency products, including compressors, condensers, controllers,
valves, copper pipes, cold room panels and insulation materials from different suppliers.
We also purchase heat exchangers and condensing units from SER, who is an Interested Person. Please
refer to Interested Person Transactions Interested Persons section of this Offer Document for further
details on SER.
The key considerations in selecting our suppliers, amongst others, include the quality of their products,
pricing, services and timeliness of delivery. We do not depend on a single supplier for our materials.
Generally, we do not enter into any long-term or exclusive contracts for the purchase of raw materials and
agency products so as to allow us flexibility in terms of pricing, quality and timeliness of delivery of our
supplies.
Save for agency products, our Directors believe that our raw materials and non-agency products can be
easily sourced from other suppliers. We purchase from suppliers who are able to offer us the required
quality at the most competitive prices.
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The table below sets out our major suppliers which accounted for 5% or more of our total purchases
during the period under review:Name of supplier
Products purchased
Bitzer
Compressors, condensers,
receivers and spare parts
26.2
28.9
2.6
2.2
8.8
5.7
5.9
6.6
44.5
34.3
44.3
Our purchases from Bitzer decreased in FY2009, mainly due to lower demand for Bitzer products as a
result of the global financial crisis. Our purchases from Bitzer increased from FY2009 to FY2010, mainly
attributable to an increase in demand for Bitzer products as the economy improved.
Our purchases of cold room panels from Changzhou Jingxue increased from FY2009 to FY2010, as we
supplied such panels to one of our major customers for its project. Please refer to the Business Our
Major Customers section of this Offer Document for futher details on this customer.
Our purchases of copper pipes and fittings from Zhejiang Hailiang increased from FY2008 to FY2010.
This was attributable to an increase in copper prices as well as an increase in demand for copper pipes
and fittings from our residential and commercial (air-conditioning) business segment over the period under
review.
To the best of our Directors knowledge, we are not aware of any information or arrangements which
would lead to a cessation or termination of our current relationship with any of our major suppliers.
Our Directors are of the opinion that our business and profitability will not be materially affected by the
loss of any single supplier and are currently not dependent on any particular industrial, commercial or
financial contract with any supplier.
As at the date of this Offer Document and save as disclosed above, none of our Directors or Substantial
Shareholders nor their respective Associates has any interest, direct or indirect, in any of the above major
suppliers.
OUR MAJOR CUSTOMERS
We have a broad customer base of more than 1,000 active customers, of which 50% are repeat
customers who have purchased from us for five years or more. Our customers include distributors,
dealers and refrigeration and air-conditioning contractors in commercial and light industrial (refrigeration),
residential and commercial (air-conditioning) as well as oil, marine and gas (refrigeration and airconditioning) business segments.
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The table below sets out our major customer which accounted for 5% or more of our revenue during the
period under review:Name of customer
10.4
Chun Cheng Fishery was our new customer in FY2010. Our sales to Chun Cheng Fishery in FY2010
comprised the design and supply of a comprehensive refrigeration system for its cold rooms and food
processing rooms.
Generally, we do not enter into long-term sales agreement with our customers. Our Directors are of
the opinion that our business and profitability are currently not dependent on any particular industrial,
commercial or financial contract with any customer.
To the best of our Directors knowledge, we are not aware of any information or arrangements which
would lead to a cessation or termination of our current relationship with any of our major customers.
As at the date of this Offer Document, none of our Directors or Substantial Shareholders nor their
respective Associates has any interest, direct or indirect, in the above major customer.
CREDIT MANAGEMENT
Credit terms from our suppliers
Credit terms granted by our suppliers depend on, inter alia, our relationship with the suppliers and the
size of transactions. Generally, our suppliers grant us credit terms ranging from 30 to 90 days.
We may make full payment to certain suppliers before the delivery of our order is made, in order to enjoy
early payment discounts.
Our average trade payables turnover days for FY2008, FY2009 and FY2010 are as follows:-
FY2008
FY2009
FY2010
41
34
27
Note:(1)
Average trade payables turnover days are computed as follows:(Average trade payables/costs of sales) x number of days
Where:Average trade payables is defined as the average of the opening and closing amount of the relevant financial year.
Number of days is defined as the number of calendar days in the relevant financial year.
Our average trade payables turnover days decreased from 41 days in FY2008 to 27 days in FY2010 as
we made efforts to be more prompt in our settlements in order to secure more attractive terms from our
suppliers.
Credit terms to our customers
In general, we grant credit terms of 30 to 90 days to our customers. Our finance department is responsible
for overseeing and managing the collection from debtors on a monthly basis, and prepares a report of
outstanding amounts due from our customers for review by our credit committee, which is headed by one
of our Executive Directors. In addition, our finance department routinely communicates with our customers
directly on their respective credit terms and payment status so as to minimise our Groups credit risk
exposure to these customers.
We perform credit assessment of all our existing customers on a regular basis. In our assessment of the
credit terms to be extended to each customer, we take into consideration various factors, including their
creditworthiness, market reputation, the transaction volume, payment history and length of relationship
with us. For new customers, we usually require them to make cash payment upon or before delivery of our
products. Once our business relationship with these new customers is established and such customers
are deemed creditworthy, we will grant them a credit term, which is based on our credit assessment.
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BUSINESS
Our average trade debtors turnover days for FY2008, FY2009 and FY2010 are as follows:FY2008
FY2009
FY2010
86
73
62
Average trade debtors turnover days are computed as follows:(Average trade debtors/revenue) x number of days
Where:Average trade debtors is defined as the average of the opening and closing amount of the relevant financial year.
Number of days is defined as the number of calendar days in the relevant financial year.
Our average trade debtors turnover days decreased from 86 days in FY2008 to 62 days in FY2010 as a
result of our tighter credit control over the years.
The collectability of trade debtors will be assessed based on factors, including but not limited to, the
length of time that such trade debtors have been outstanding and the financial standing of our trade
debtors. In the event that there are significant uncertainties regarding collectability, we will make the
necessary provisions or write-off the bad debt.
The amounts of provisions for doubtful debts, provisions for doubtful debts written back and bad debts
written off during the period under review were as follows:(S$000)
FY2008
FY2009
FY2010
300
223
(505)
12
456
80
(221)
(222)
33
(117)
(9)
12
Total
30
93
(81)
0.1
2.2
0.3
5.7
(0.2)
(1.5)
debts
debts
debts
debts
(trade related)
(non-trade related)
written back (trade related)
written back (non-trade related)
In FY2008, we made provisions for doubtful debts of approximately S$523,000 which included (i)
trade related debts due from a related party of approximately S$180,000 as the company had ceased
operation; and (ii) non-trade related debts due from a third party of approximately S$223,000 in relation to
the balance of the proceeds from the sale of our business in Hong Kong in 2005.
In FY2009, we made a provision of trade related debts amounting to S$456,000 mainly in relation to a
customer who went into compulsory liquidation.
The ageing for our trade debtors as at 31 December 2010 is as follows:-
0 to 30
days
31 to 60
days
61 to 90
days
91 to 120
days
> 120
days
3,052
1,384
1,489
207
515
46.0
20.8
22.4
3.1
7.7
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PROPERTIES AND FIXED ASSETS
Properties
As at the Latest Practicable Date, our Group owned the following properties:-
Location
Country
Tenure
Estimated
gross floor
area
(sqft)
Encumbrances
Usage
Owner
112 Lavender
Street,Far East
Refrigeration Building,
Singapore 338728(1)
Singapore
Freehold
20,839
Mortgaged to
Head office,
United Overseas warehouse,
Bank Limited
showroom and
office
Far East
Group
Singapore
60-year
leasehold
commencing
from 1
January 1972
25,112
Mortgaged to
DBS Bank Ltd
Warehouse and
office
Far East
Group
Malaysia
Freehold
39,719
Mortgaged to
United Overseas
Bank (Malaysia)
Bhd
Manufacturing
facility,
warehouse and
office
Far East
Maju
60 Lebuh Noordin,
10300 Pulau Pinang,
Malaysia
Malaysia
Freehold
3,265
Mortgaged to
CIMB Bank
Berhad
Warehouse and
office
Far East
Penang
Malaysia
99-year
leasehold
commencing
from 16
November
1982
5,616
Mortgaged to
Warehouse and
OCBC Bank
office
(Malaysia) Berhad
Far East
KL
Hong Kong
75 years
renewable
for 75 years
commencing
from 18
September
1899
1,050
Mortgaged to
Office
DBS Bank (Hong
Kong) Limited
Far East
HK
Note:(1)
The second and third floors of this property are leased to third party tenants (the Tenants) for the operation of their business
for tenures of up to two years. As at the Latest Practicable Date, the Tenants have no business dealing with our Group and
none of our Directors, Controlling Shareholder or their Associates has any interest in the Tenants business.
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As at the Latest Practicable Date, we leased the following properties:-
Location
Country
Tenure
Approximate
monthly
Estimated
rental and gross floor
fees
area
(sqft)
Usage
Lessor
51 Ubi Avenue 1,
Singapore
#01-04 and #02-04,
Paya Ubi Industrial
Park, Singapore
408933
1 July 2009
to 30 June
2011(1)
S$9,095
6,761
Jakarta Design
Center, 4th Floor
SR 26, Jl. Gatot
Subroto Kv. 53
Slipi, Jakarta
10260, Indonesia
1 November
2009 to 31
October
2011
US$434
334
PT Cipta
Paramula
Sejati
3 November
2010 to 2
November
2011
US$598
354
Ocean
Information
Investment
Corporation
1 August
2010 to 31
July 2012
RM4,200
3,615
Warehouse
and office
Far East
Kuching
Kuching Park
Hotel Sdn Bhd
1 January
2010 to 31
December
2012
RM1,600
3,079
Warehouse
and office
FE&B
Chuan Yuan
Realty Sdn
Bhd
Indonesia
Warehouse
and office
Lessee
G/F, Man On
Building, 2-4
Tung On Street,
Kowloon, Hong
Kong
500
Warehouse
and retail
Far East
HK
Fung Keung
400
Warehouse
and retail
Far East
HK
3,000
Warehouse
Far East
HK
Chinhero
Development(2)
HK$18,800
Workshop Unit
Hong Kong 1 December HK$10,000
No. 7 on 18/F &
2008 to 30
Storeroom, Wah
November
Fat Industrial
2011
Building, Nos. 1016 Kung Yip Street,
Kwai Chung, New
Territories, Hong
Kong
97
BUSINESS
Notes:(1)
We did not renew the lease and had shifted our previous warehouse and office at this property to our existing premise at 112
Lavender Street, Far East Refrigeration Building, Singapore 338728.
(2)
Chinhero Development is an Interested Person. Please refer to the Interested Person Transactions Present and On-going
Interested Person Transactions section of this Offer Document for further details on the lease of this property from Chinhero
Development.
Fixed Assets
We own other material fixed assets comprising mainly equipment, furniture and fittings, office equipment
and motor vehicles. Our fixed assets had a net book value of approximately S$7,518,000 as at
31 December 2010.
To the best of our Directors knowledge, save as disclosed in the Government Regulations section of this
Offer Document, there are no regulatory requirements or environmental issues that may materially affect
our utilisation of the above properties and fixed assets.
RESEARCH AND DEVELOPMENT
Our Directors believe that we have a comprehensive range of innovative in-house manufactured heat
exchangers which utilise high energy-efficient coil technologies. We place great emphasis on continual
research and development efforts in order to meet changing market demands and requirements. In
particular, we intend to research and develop more energy-efficient products in conjunction with our
Green Program. This brings us into the next phase of expansion, in line with the increasing environmental
awareness in providing fresh and hygienic food storage solutions to the community.
Our research and development activities are carried out by our research and development team at Far
East Maju, and headed by Allan Ward, our COO (Engineering and Manufacturing). Our research and
development activities are also supported by our technical personnel from various departments within our
Group.
We have successfully developed an average of two to three series of products annually over the last
five years and to-date, we have 13 series with more than 300 models of evaporators, condensers and
condensing units to serve the cooling requirements of different business segments.
Please refer to Business Our Products section of this Offer Document for further details on the
products we developed.
All our Eden brand of G4 condensers and evaporators are designed with the latest smart circuitry
and incorporate the inner groove tube technology, which allows the refrigerant to be evenly distributed
throughout the evaporator. This maximises coil efficiency and increases internal primary coil surface
area, thereby providing higher efficiency and cooling capacity with a smaller physical evaporator
dimension. This may result in a reduction of the number of evaporator fan motors used, hence reducing
the energy consumption of fan motors by up to 50%. In addition, our fins technology that are used in our
refrigeration and air-conditioning systems are made of high-grade aluminum (Aluminum Association - AA
1100 Standard) with Double Sine Wave Pattern and Rippled Fin Edges to provide higher heat transfer
efficiency, which results in greater energy efficiency as compared with conventional fin designs.
Some of the designs are patented and registered with the relevant authority in the PRC. Please refer to
Business Intellectual Property section of this Offer Document for further details.
During the period under review, our research and development expenses were immaterial.
98
BUSINESS
INTELLECTUAL PROPERTY
Pursuant to the IP Licence Agreement, SER has acknowledged that it has been holding all its trade
marks and patents (Intellectual Properties) on behalf of our Company. As at the Latest Practicable Date,
such Intellectual Properties are in the process of being transferred to our Company. Please refer to the
Interested Person Transactions Present and On-going Interested Person Transactions section of this
Offer Document for further details on the IP Licence Agreement. The details of the Intellectual Properties
which are in the process of being transferred to our Company are as follows:Trade Marks
Trade Mark
Class
Registration
number
Place of
application
Registration
date
Date of
expiry
4285664
The PRC
7 March
2007
6 March
2017
11
4280192
The PRC
14 May
2007
13 May
2017
11
4280166
The PRC
11
8270743
The PRC
-(1)
-(1)
11
8270738
The PRC
-(1)
-(1)
28 February 27 February
2007
2017
Note:(1)
The application for the registration of these trade marks was submitted on 12 May 2010, and are subject to the approval from
the relevant government authority.
99
BUSINESS
Patents
Patent
Description
Patent number
Date/Place of
application
Date of
approval
Patent right
period
Design Patent
()
Matrix Condenser
((2))
ZL201030177809.4
21 May
2010/
the PRC
10 November
2010
10 years
from
21 May
2010
Jumbo Condenser
((1))
ZL201030177815.X
21 May
2010/
the PRC
15 December
2010
10 years
from
21 May
2010
Unit Cooler
()
ZL201030177798.X
21 May
2010/
the PRC
12 January
2011
10 years
from
21 May
2010
ZL201020201868.5
21 May
2010/
the PRC
15 December
2010
10 years
from
21 May
2010
As at the date of this Offer Document, the applications of the transfer of the above trade marks and
patents from SER to our Company are subject to approvals from the Trademark Office of the SAIC and
the SIPO respectively. The Legal Advisers to our Company on the PRC Law, Victory Legal Group, has
advised that the above-mentioned approvals from the relevant authorities for transfers will generally take
up to six months from the date of submission of applications to the authorities. Victory Legal Group does
not foresee any difficulty in obtaining the approval for the transfer of trade marks and patents within such
period of time. Barring unforeseen circumstances, we expect to obtain the approval for the transfer of the
trade marks and patents by end of 2011.
100
BUSINESS
Further to the above, we have applied for the registration of the following trade marks:Trade Mark
Class
Country of
application
Application number
Date of application
7 and 11
7
11
Singapore
Malaysia
Malaysia
T1105060B
2011007235
2011007236
18 April 2011
21 April 2011
21 April 2011
7 and 11
7
11
7 and 11
7 and 11
Singapore
Malaysia
Malaysia
Indonesia
Vietnam
T1105067Z
2011007237
2011007238
D00.2011.017136
4-2011-07388
18 April 2011
21 April 2011
21 April 2011
2 May 2011
21 April 2011
11
11
Singapore
Malaysia
T1105066A
2011007241
18 April 2011
21 April 2011
11
11
Singapore
Malaysia
T1105064E
2011007239
18 April 2011
21 April 2011
11
11
Singapore
Malaysia
T1105065C
2011007240
18 April 2011
21 April 2011
As at the Latest Practicable Date, the applications to register the trade marks as stated in the table
above have been submitted to the trade mark offices in the relevant jurisdictions and are subject to their
approval. We do not foresee any difficulty in obtaining the approval for the registration of the above trade
marks.
Save as disclosed above, our business or profitability is not materially dependent on any trademarks,
patents and/or other intellectual rights.
As at the Latest Practicable Date, we have not faced any claims for our infringement of other registered
intellectual properties held by third parties.
STAFF TRAINING
Our Directors believe that our employees are one of our most important assets. The technical competency
and product knowledge of our employees are instrumental to the continuous growth of our Group. As
such, we place great emphasis on the training and development of our employees and aim to equip them
with relevant skills and knowledge to perform their respective duties effectively, thereby increasing our
overall competitiveness and productivity.
For new employees, they undergo an orientation program which covers topics including our corporate
working culture, our industrys relevant rules and regulations, and our products, services and safety
requirements. In addition, new employees are required to undergo a one month on-the-job training to
familiarise themselves with their job scopes and duties.
In addition, our suppliers or our in-house engineers will periodically provide training for our sales
personnel and/or update them on newly launched products. When necessary, we also invite external
trainers and/or instructors to conduct training for our employees. To encourage our senior managers to
continually upgrade themselves, we provide them partial or full sponsorship of their enrolment in personal
enrichment courses. Such sponsorships will require our Executive Directors approval and the candidates
are typically subject to a service bond with our Group.
As most of our staff trainings are conducted internally, our training costs for FY2008, FY2009 and FY2010
were immaterial.
101
BUSINESS
INSURANCE
We maintain general insurance coverage in respect of our business and employees. Our insurance policy
coverage includes work injury compensation (for any mishap that occurs to our employees in the course
of their work), employee medical, hospitalisation and surgical, burglary, money, public liability, fire and
motor vehicles (for transport vehicles used by our Group). We are in the process of obtaining product
liability insurance in relation to our Eden brand of heat exchangers and condensing units.
Our Directors are of the view that the above insurance policies are adequate for our existing operations.
However, significant damage to our operations may still have a material adverse effect on our results
of operations or financial condition. We have not experienced any difficulties obtaining or renewing
our insurance policies or realising claims under any of our insurance policies. We perform an annual
review of our insurance coverage to ensure that it adequately satisfies both our business and regulatory
requirements, and we may increase our insurance coverage if we deem it necessary and appropriate.
COMPETITION
Our Directors believe that we operate in a competitive environment where the barriers to entry
are relatively high, mainly due to the nature of our industry and business being capital intensive and
competing factors such as technological know-how, track record, reputation and established relationships
with our suppliers and customers. We believe that the primary elements of competition for our business
are largely based on, amongst others, technological know-how, quality of our products and services,
price, track record, reputation and timely delivery.
To the best of our Directors knowledge and belief, our competitors are as follows:Company name
Business segment
Country
Distributor
Central Refrigeration & Air-Conditioning (Pte) Ltd
Singapore
Singapore
Singapore
Malaysia
Hong Kong
Manufacturer
PT Guntner Indonesia
Indonesia
None of our Directors, Substantial Shareholders or their respective Associates has any interest, direct or
indirect, in any of our competitors set out above.
102
BUSINESS
In view of our competitive strengths set out below, we believe that we are well-positioned to compete with
our competitors.
OUR COMPETITIVE STRENGTHS
We believe that our competitive strengths are as follows:We are a one-stop refrigeration systems provider
Our Directors believe that we are one of the leading regional distributors of commercial and light industrial
refrigeration systems and products in the SEA region with the ability to provide a one-stop solution for the
refrigeration industry.
With a comprehensive range of agency products and our Eden brand of heat exchangers and
condensing units, we are able to provide refrigeration system solutions to meet various stringent
specifications and requirements of our customers. We also maintain a comprehensive range of
replacement parts to provide after-sales support.
As part of our value-added services, we also provide design and consultancy services in relation to
refrigeration and air-conditioning systems, as well as relevant product trainings and after-sales support.
We have an established reputation and track record
With more than 58 years of experience in the HVAC&R industry, we have successfully built up our
reputation as a reliable refrigeration and air-conditioning systems provider in the commercial and light
industrial (refrigeration), residential and commercial (air-conditioning) as well as oil, marine and gas
(refrigeration and air-conditioning) business segments in the SEA region.
We have a diversified customer base comprising mainly distributors, dealers, refrigeration and airconditioning contractors who supply to end-users in various industries such as retail (Carrefour, Metro,
Tesco, Giant, Cold Storage and NTUC FairPrice), food and beverage (Resorts World Sentosa and
Marina Bay Sands), pharmaceutical (HSA (Singapore Blood Bank)), hospitality (The St. Regis Singapore,
Shangri-La Hotel Singapore and Capella Singapore), logistics (CIAS Flight Kitchen), food processing
(Chun Cheng Fishery and Angliss Singapore) and shipping (Jurong Shipyard Pte Ltd, Keppel Shipyard
Limited and Sembawang Shipyard Pte Ltd).
As a testament to our established reputation and track record, our Company was one of the winners of
the SME500 award in Singapore in 2001, 2002, 2003 and 2010.
We have established strong business relationships with our business partners
With considerable experience in the HVAC&R industry, we have built strong relationships with an
extensive network of suppliers and customers, whose support are instrumental to the success of our
business.
We have more than 10 years working relationship with most of our suppliers, and in particular, we have
established strong working relationships with Bitzer and Castel SRL over the past 30 years. On the
back of our reputation and well-established relationships with our suppliers, we are able to enjoy timely
supply of quality products at competitive price and/or better terms. We have also been recognised by our
suppliers, such as Bitzer and Eliwell SPA, who conferred us with awards recognising us as one of their
top distributors in the Asia Pacific Region (except for the PRC).
We have also established strong business relationships with our customers. As a testament of customer
satisfaction and loyalty, 50% of our active customer base of more than 1,000 customers are our repeat
customers who have regularly purchased from us for five years or more.
We have a wide distribution network
Our Group has a wide distribution network regionally including SEA, Hong Kong, the PRC, Indochina and
Indonesia. Most of the companies within our Group are equipped with showrooms, retail facilities and
warehouses, to provide timely deliveries, and quality products and services to our customers.
103
BUSINESS
In addition, we have appointed a number of distributors and dealers, who are well-established and have
a wide business and distribution networks in their respective countries, including Malaysia, Thailand, the
Philippines, Myanmar, Mauritius, Vietnam, Sri Lanka and Indonesia. As at the Latest Practicable Date, we
have approximately 20 distributors and dealers who distribute our products to end users, sub-distributors
and sub-dealers, refrigeration and air-conditioning contractors and/or original equipment manufacturer
customers in the SEA region and other regions. Please refer to Business - Distribution Channels section
of this Offer Document for further details.
We have strong research and development capabilities
Our research and development activities are undertaken by our research and development team at Far
East Maju, and headed by Allan Ward, our COO (Engineering and Manufacturing) who has more than 48
years of experience in the HVAC&R industry. Our research and development activities are also supported
by our technical personnel from various departments within our Group.
We have successfully developed an average of two to three series of products annually over the last
five years and to-date, we have 13 series with more than 300 models of evaporators, condensers and
condensing units to serve different business segments. Please refer to the Business Our Products
and Business Research and Development sections of this Offer Document for further details on the
products our Group has developed in the past.
We place great emphasis on continual research and development efforts in order to meet changing
market demands and requirements. In particular, we intend to research and develop more energy-efficient
products in conjunction with our Green Program. This brings us into the next phase of expansion, in line
with the increasing environmental awareness in providing fresh and hygienic food storage solutions to the
community.
We provide quality products and services at competitive prices
We place strong emphasis on the quality of our products and services, and have implemented stringent
quality control measurements in our business and manufacturing processes to ensure that we are able
to consistently provide quality products and services to our customers. For our agency products, we are
able to sell them to our dealers and distributors at competitive prices, due to our bulk purchasing volume
and well-established relationships with our suppliers. In addition, our sales and marketing department
maintains regular contact with our customers so as to (i) obtain their feedback with regard to our products
so that we can improve on the quality of our products and services; (ii) be updated with their business
needs; and (iii) foster good business relationships. As a testament to our efforts on quality assurance,
we have obtained the ISO 9001:2008 certifications. Please refer to the Business Quality Control and
Safety Assurance section of this Offer Document for further details on our quality controls of our products
and services.
We have an experienced management team
Our success to date has been largely attributable to the efforts of our experienced management team,
guided by Loh Ee Ming (our Non-executive Chairman) and spearheaded by Steven Loh (our CEO and
Executive Director). Loh Ee Ming and Steven Loh have more than 60 and 20 years experience in the
HVAC&R industry respectively and have been instrumental in formulating our business strategies and
spearheading the growth of our business operations. They are assisted by David Leng (our COO (Sales
and Marketing) and Executive Director) and our management team, including our Executive Officers, Allan
Ward, Richard Chung, and Tan Su Kim, each of whom is experienced in his respective field, possess
wide network of contacts within our industry, and has qualified knowledge and/or expertise in running the
day-to-day operations of our Group. Please refer to the Directors, Executive Officers and Staff section of
this Offer Document for further details on their experiences and qualifications. Our Directors believe that
our experienced management team will continue to lead the growth and expansion of our Group in the
future.
104
The information was derived from an article titled Global HVAC market to hit US88bn in 2014, obtained from the internet
website of http://www.constructionweekonline.com, published by ITP Business Publishing Ltd, which was accessed on 4 May
2011. ITP Business Publishing Ltd has not consented for the inclusion of the above information in this Offer Document for
the purposes of Secion 249 of the Securities and Futures Act and is therefore not liable for the relevant information under
Sections 253 and 254 of the Securities and Futures Act. While our Directors have taken reasonable action to ensure that the
information is extracted accurately and fairly and has been included in this Offer Document in its proper form and context,
they have not independently verified the accuracy of the relevant information.
The information was derived from an article titled Asia-Pacific region economic growth to reach 7.3% in 2011: UN report,
obtained from the internet website of Xinhua News Agency, which was accessed on 18 May 2011. Xinhua News Agency
has not consented for the inclusion of the above information in this Offer Document for the purposes of Secion 249 of the
Securities and Futures Act and is therefore not liable for the relevant information under Sections 253 and 254 of the Securities
and Futures Act. While our Directors have taken reasonable action to ensure that the information is extracted accurately and
fairly and has been included in this Offer Document in its proper form and context, they have not independently verified the
accuracy of the relevant information.
The information was derived from the reports titled Global Frozen Food and Frozen Food in Asia-Pacific dated October
2010 published by Datamonitor. Datamonitor has not consented for the inclusion of the above information in this Offer
Document for the purposes of Secion 249 of the Securities and Futures Act and is therefore not liable for the relevant
information under Sections 253 and 254 of the Securities and Futures Act. While our Directors have taken reasonable action
to ensure that the information is extracted accurately and fairly and has been included in this Offer Document in its proper
form and context, they have not independently verified the accuracy of the relevant information.
105
The demand for our products is expected to increase in FY2011, on the back of improving
economic conditions, both regionally and globally.
(2)
The unit costs of our agency products and raw materials (such as copper and aluminium) are
expected to increase in FY2011. Such price increases may generally be passed on in the form of
higher average selling prices to our customers, in particular, in the commercial and light industrial
(refrigeration) and oil, marine and gas (refrigeration and air-conditioning) business segments.
(3)
With increased competition in the residential and commercial (air-conditioning) business segment,
generally more competitive product selling prices to our customers are expected in this business
segment.
106
107
108
Board of Directors
Steven Loh
CEO and Executive Director
David Leng
COO (Sales and Marketing) and
Executive Director
Allan Ward
COO (Engineering and
Manufacturing)
Tan Su Kim
Financial Controller
Richard Chung
Head of Systems and Projects
DIRECTORS
The Board of Directors is entrusted with the responsibility for the overall management of our Group. Our
Directors particulars as at the Latest Practicable Date are listed below:Name
Age
Address
Designation
Loh Ee Ming
77
Non-executive Chairman
Steven Loh
44
David Leng
54
Karen Loh
39
Non-executive Director
49
Independent Director
Andrew Mak
42
Independent Director
45
Independent Director
109
110
Present Directorships
Past Directorships
Loh Ee Ming
Group Companies
Far East JB
Far East KL
Far East Kuching
Far East Maju
Far East Malaysia
Far East Penang
FE&B
RSP
Group Companies
Nil
Other Companies
Energy Xchange Pte. Ltd.
Old FER HK
SER
UPL
Other Companies
Elektro-Metall (Singapore) Pte Ltd
Inner Mongolia Vibronic Jade Industry (S)
Pte Ltd
Magna-Tek Equipment (FE) Pte Ltd
Ya Cheng Automotive Accessories Pte. Ltd.
Group Companies
Edenkool
Far East JB
Far East KL
Far East Kuching
Far East Maju
Far East Malaysia
Far East Penang
FE&B
Greenpoint
RSP
Group Companies
Nil
Other Companies
Energy Xchange Pte. Ltd.
ERM
Old FER HK
SER
SERM
UPL
Other Companies
Elektro-Metall (Singapore) Pte Ltd
HVAC & R Products (S) Pte. Ltd.
Jas Metal Coatings Pte Ltd
Magna-Tek Equipment (FE) Pte Ltd
Naga Sumber Energi Batu Bara (S) Pte Ltd
Group Companies
Edenkool
Greenpoint
Group Companies
Nil
Other Companies
Nil
Other Companies
Daekk Properties Pte Ltd
HVAC & R Products (S) Pte. Ltd.
Inner Mongolia Vibronic Jade Industry (S)
Pte. Ltd.
Steven Loh
David Leng
112
Name
Present Directorships
Past Directorships
Karen Loh
Group Companies
Far East HK
Group Companies
Nil
Other Companies
Chinhero Development
ERM
Old FER HK
SERM
Youth Boutique Ltd
Other Companies
RSP Hong Kong Limited
Group Companies
Nil
Other Companies
Integer Capital Pte. Ltd.
Nordic Group Limited
Omega Excel Ltd
Plasmotech Pte Ltd
Roxy-Pacific Holdings Limited
SP Manufacturing Pte. Ltd.
Trinity Christian Centre Limited
Group Companies
Nil
Other Companies
Action Asia Limited
Nidec Component Technology Co., Ltd.
Andrew Mak
Group Companies
Nil
Group Companies
Nil
Other Companies
Leader Environmental Technologies
Limited
Other Companies
China Vogue Casualwear Ltd.
Group Companies
Nil
Group Companies
Nil
Other Companies
Snap-on Tools Singapore Pte Ltd
Other Companies
SPX Cooling Technologies Singapore Pte. Ltd.
EXECUTIVE OFFICERS
The day-to-day operations of our Group are entrusted to our Executive Officers who are responsible for
different functions of our Group whose particulars as at the Latest Practicable Date are set out below:Name
Age
Address
Position
Allan Ward
64
Richard Chung
42
Tan Su Kim
49
Financial Controller
The working and business experience and areas of responsibility of our Executive Officers are set out
below:Allan Ward is our COO (Engineering and Manufacturing) and is responsible for the overall day-to-day
operations of Far East Maju and Safety Enterprises. He is also responsible for all the engineering and
design of Eden products, research and development activities, our Groups manufacturing activities,
113
Present directorships
Past directorships
Allan Ward
Group Companies
Far East Maju
Far East Malaysia
Safety Enterprises
Group Companies
Nil
Other Companies
Nil
Other Companies
SERM
Group Companies
Greenpoint
RSP
Group Companies
Nil
Other Companies
Nil
Other Companies
RSP Systems HK Ltd
Group Companies
Nil
Group Companies
Nil
Other Companies
Nil
Other Companies
Nil
Richard Chung
Tan Su Kim
EMPLOYEES
As at the Latest Practicable Date, we had 118 full-time employees. Our employees are not unionised. The
relationship and cooperation between the management and employees have been good and are expected
to continue in the future. There has not been any incidence of work stoppages or major labour disputes
which affected our operations.
The breakdown of our full-time employees by function and geographical location as at the end of each of
FY2008, FY2009 and FY2010 are as follows:Function
FY2008
FY2009
FY2010
10
33
34
2
35
9
44
36
2
32
9
41
31
2
32
114
123
115
FY2008
FY2009
FY2010
47
60
5
53
64
4
47
59
5
2
2
114
123
115
Senior Management
Sales and marketing
Administrative
Research and development
General staff and technicians
Total
Geographical Location
Singapore
Malaysia
Hong Kong
Vietnam
Indonesia
Total
115
FY2009
FY2010
FY2011
(Estimated)(2)
A
B
A
A
N.A.
N.A.
N.A.
A
B
A
A
N.A.
N.A.
N.A.
A
B
A
A
A
A
A
B
A
A
B
A
A
B
A
A
Directors
Loh Ee Ming
Steven Loh
David Leng
Karen Loh
Hew Koon Chan
Andrew Mak
Tan Hwee Kiong
Executive Officers
Allan Ward
Richard Chung
Tan Su Kim
Notes:(1)
(2)
The estimated amount of remuneration payable in FY2011 excludes any bonus or any other profit-linked agreement or
arrangement.
We have not set aside or accrued any amounts to provide for pension, retirement or similar benefits for
our Directors, Executive Officers or any of our employees, except as required for purposes of compliance
with the relevant laws of the jurisdictions in which our Group operates.
Related Employees
As at the Latest Practicable Date, we did not have employees who were related to our Directors or
Substantial Shareholders.
Should we employ any employee who is related to our Directors or Substantial Shareholders in the future,
his employment and the proposed terms of his employment will be subject to the review and approval of
our Remuneration Committee. In addition, his remuneration will be reviewed annually by our Remuneration
Committee to ensure that his remuneration package is in line with our staff remuneration guidelines and
commensurate with his job scopes and level of responsibilities. Any bonus, pay increase and/or promotion
for such related employee will also be subject to the review and approval of our Remuneration Committee.
In the event that a member of our Remuneration Committee is related to the employee under review, he
will abstain from the review.
SERVICE AGREEMENTS
Our Company entered into respective Service Agreements with our Executive Directors, Steven Loh and
David Leng (each an Appointee) in June 2011.
The Service Agreements are valid for an initial period of three years with effect from 1 January 2011
(Initial Term). Upon the expiry of the Initial Term, the Service Agreements are automatically renewed
annually unless either party gives notice of its intention to terminate in the manner set out below. During
the Initial Term, either party may, as the case may be, terminate the Service Agreements at any time by
giving to the other party not less than six months notice in writing, or in lieu of notice, payment of an
116
if the Appointees are guilty of any gross default or grave misconduct in connection with or affecting
the business of our Group;
(ii)
in the event of any serious or repeated breach or non-observance by the Appointees of any of the
stipulations contained in the Service Agreements;
(iii)
if the Appointees become bankrupt or make any composition or enter into any deed of arrangement
with their creditors;
(iv)
(v)
The Service Agreements provided for, amongst other things, the salary payable to the Appointees, annual
leave, medical benefits, grounds of termination and certain restrictive covenants (including non-compete
obligations). Under the terms of the respective Service Agreements, Steven Loh and David Leng are
entitled to a monthly fixed salary of S$30,800 and S$16,200 respectively.
Our Group will also provide each of the Appointee with a motor vehicle allowance and all related
expenses incurred in connection with the motor vehicle shall be borne by us. All reasonable travelling,
hotel and other expenses incurred by the Appointee in connection with our Groups business will also be
borne by us.
Each Appointee will also be paid an incentive bonus based on our PBT. For this purpose, PBT shall
refer to our Groups audited consolidated PBT before payment of incentive bonus, excluding any gains
from extraordinary items and after minority interests for the relevant financial year.
The amount of incentive bonus that each Appointee will receive in each financial year will be determined
as follows:PBT
Steven Loh
Incentive bonus
David Leng
Nil
Nil
Under the Service Agreements, the remuneration of the Appointee is subject to annual review by the
Remuneration Committee.
Had the Service Agreements been in place with effect from 1 January 2010, the aggregate remuneration
(including CPF contributions and other benefits, if any) paid to the Appointees for FY2010 would have
been approximately S$839,000 (instead of S$426,000), and our PBT, net profit for the year and net profit
attributable to equity holders of our Company would have been S$5,036,000 (instead of S$5,449,000),
S$4,210,000 (instead of S$4,553,000) and S$4,163,000 (instead of S$4,506,000) respectively.
117
review the audit plans of the external auditors and our internal auditors, including the results of our
external and internal auditors review and evaluation of our system of internal controls;
(b)
review the annual consolidated financial statements and the external auditors report on those
financial statements, and discuss any significant adjustments, major risk areas, changes in
accounting policies, compliance with international financial reporting standards, concerns and
issues arising from their audits including any matters which the auditors may wish to discuss in
the absence of management, where necessary, before submission to our Board of Directors for
approval;
(c)
review the periodic consolidated financial statements comprising the profit and loss statements and
the balance sheets and such other information required by the Catalist Rules, before submission to
our Board of Directors for approval;
(d)
review and discuss with external and internal auditors (if any), any suspected fraud, irregularity
or infringement of any relevant laws, rules or regulations, which has or is likely to have a material
impact on our Groups operating results or financial position and our managements response;
118
(f)
review the report of the internal control review to be conducted within one year after our Companys
admission to Catalist and to consider and make recommendations to our Board whether to continue
such reviews;
(g)
consider the appointment and re-appointment of the external auditors and matters relating to
resignation or dismissal thereof;
(h)
review and ratify any interested person transactions falling within the scope of Chapter 9 of the
Catalist Rules;
(i)
review the guidelines and review procedures set out in the Interested Person Transactions
Guidelines and Review Procedures for Future Interested Person Transactions other than those
covered in the Shareholders Mandate section of this Offer Document and future interested person
transactions, if any;
(j)
monitor all the undertakings and agreements described in the Potential Conflicts of Interests
Interests of Directors, Controlling Shareholder or their Associates section of this Offer Document;
(k)
(l)
review the adequacy and supervision of the finance and accounting team on an annual basis;
(m)
review the procedures by which employees of our Group may, in confidence, report to the Chairman
of our Audit Committee, possible improprieties in matters of financial reporting or other matters and
ensure that there are arrangements in place for independent investigation and follow-up actions in
relation thereto;
(n)
undertake such other reviews and projects as may be requested by our Board of Directors, and will
report to our Board its findings from time to time on matters arising and requiring the attention of
our Audit Committee; and
(o)
undertake generally such other functions and duties as may be required by law or the Catalist
Rules, and by such amendments made thereto from time to time.
Apart from the duties listed above, our Audit Committee shall commission and review the findings of
internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal
controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material
impact on our Groups operating results and/or financial position. Each member of our Audit Committee
shall abstain from voting on any resolutions in respect of matters in which he is interested.
Our Audit Committee shall also commission an annual internal control audit until such time as our Audit
Committee is satisfied that our Groups internal controls are robust and effective enough to mitigate our
Groups internal control weaknesses (if any). Prior to the decommissioning of such annual audit, our
Board is required to report to the SGX-ST and the Sponsor on how the key internal control weaknesses
have been rectified, and the basis for the decision to decommission the annual internal control audit.
Thereafter, such audits may be initiated by our Audit Committee as and when it deems fit to satisfy itself
that our Groups internal controls remain robust and effective. Upon completion of the internal control
audit, appropriate disclosure will be made via SGXNET of any material, price-sensitive internal control
weaknesses and any follow-up actions to be taken by our Board.
Our Audit Committee, (a) having conducted an interview with Tan Su Kim; (b) considered her qualifications
and past working experience (as described in the Directors, Management and Staff Executive Officers
section of this Offer Document; (c) observed her abilities, familiarity and diligence in relation to the
financial matters and information on our Group; and (d) noted the absence of any negative feedback from
Ernst & Young LLP, is of the view that Tan Su Kim is suitable for the position of Financial Controller.
119
to make recommendations to the Board on all board appointments, including re-nominations, having
regard to the Directors contribution and performance (for example, attendance, preparedness,
participation and candour);
(b)
(c)
in respect of a Director who has multiple board representations on various companies, to decide
whether or not such Director is able to and has been adequately carrying out his/her duties as
Director, having regard to the competing time commitments that are faced when serving on multiple
boards;
(d)
to decide how the Boards performance may be evaluated and propose objective performance
criteria, as approved by the Board that allows comparison with its industry peers, and address how
the Board has enhanced long term shareholders value; and
(e)
to assess the performance of the Board and contribution of each Director to the effectiveness of
the Board.
Each member of the Nominating Committee shall abstain from voting on any resolution relating to the
assessment of his performance or his re-nomination as Director.
120
(2)
Amount of
facilities
guaranteed
(000)
Interest rate
(%)
S$100
Prime(2) + 1.75
Trade
facilities
S$1,200
Prime(2) + 0.25
Overdraft
US$100
Prime(2) + 0.50
Trade
facilities
US$800
COF(3) + 2.25
S$500
Prime(2) + 0.375
S$1,400
Prime(2)
S$750
Prime(2) + 1.00
(overdraft)
Type of
facility
Details of guarantee(1)
Singapore
Bank of China
Citibank
Overdraft
Oversea-Chinese
Banking Corporation
Limited
Overdraft
The Bank of
East Asia, Limited
Overdraft
and trade
facilities
Trade
facilities
SIBOR(4) + 2.00
(trade facilities)
United Overseas
Bank Limited
Overdraft
S$30
Prime(2) + 0.50
122
Financial
institution
Amount of
facilities
guaranteed
(000)
Interest rate
(%)
Details of guarantee(1)
Overdraft
RM300
BLR(5) + 1.25
Trade
facilities
RM300
BLR(5) + 1.75
Type of
facility
Malaysia
Maybank
Notes:(1)
These facilities were also supported by other guarantees and securities provided by our Group.
(2)
(3)
(4)
(5)
The largest aggregate outstanding amount guaranteed during the Relevant Period, based on
month-end balances, was approximately S$2.7 million. As at the Latest Practicable Date, the above
facilities had been fully settled and the guarantees provided by the Interested Persons had been
discharged.
As no fees were charged by the Interested Persons for the provision of the guarantees, the above
arrangements were not carried out on an arms length basis.
(3)
Financial institution
Type of
facilities
Amount of
facilities
guaranteed
Interest rate
Details of guarantee
SER
United Overseas
Bank (China)
Limited, Shanghai
Branch
Working
capital loan
and trade
finance
US$200,000 or
RMB1,450,000
115% of the
(i) Corporate guarantee by Far
Peoples Bank of
East Group; and
China base rate
(ii) Personal guarantee by Steven
Loh
Working
capital loan
US$300,000 and
115% of the
(i) Corporate guarantee by Far
Peoples Bank of
East Group;
China base rate
(ii) Corporate guarantee by SER;
100% of the
and
Peoples Bank of
China base rate (iii) Personal guarantee by Steven
Loh
SERM
United Overseas
Bank (China)
Limited, Shanghai
Branch
RMB3,000,000
The largest aggregate outstanding amount guaranteed during the Relevant Period, based on
month-end balances, was equivalent to approximately S$425,000. As at the Latest Practicable
Date, the aggregate outstanding amount guaranteed was equivalent to approximately S$388,007.
As at the date of this Offer Document, our Company has been discharged of the above guarantees.
123
(S$000)
SER
SERM
As at 31
December
2008
As at 31
December
2009
As at 31
December
2010
As at the
Latest
Practicable
Date
Largest
amount
outstanding
during the
Relevant
Period
168
207
242
Such advances were not carried out on arms length basis as they were on unsecured, interest-free
basis and had no fixed terms of repayment. We do not intend to enter into such transactions in the
future.
(5)
FY2008
FY2009
FY2010
From 1 January
2011 to Latest
Practicable Date
SER
40
43
SERM
42
84
92
(S$000)
Our Executive Directors are of the opinion that the above transactions were conducted on an arms
length basis and were on normal commercial terms. In the event that such arrangements occur
in the future, we will comply with the procedures set out in the Interested Person Transactions
Guidelines and Review Procedures for Future Interested Person Transactions other than those
covered in the Shareholders Mandate section of this Offer Document and be subject to the
relevant provisions of Chapter 9 of the Catalist Rules and/or other applicable provisions of the
Catalist Rules.
124
(S$000)
As at 31
December
2008
As at 31
December
2009
As at 31
December
2010
2,366
1,866
1,432
1,211
2,610
177
150
150
677
111
107
111
121
22
584
Save for an advance granted by David Leng to our Company in February 2009 of S$500,000
(Interest-bearing Loan) which was interest-bearing for two months at an interest rate of 4.5% per
annum, the advances from the aforementioned Interested Persons during the Relevant Period were
made on a preferential basis as they were unsecured and interest-free. The Interest-bearing Loan
was made on an arms length basis and was repaid to David Leng in May 2009.
The outstanding amount of $107,000 owing to Old FER HK as at the Latest Practicable Date has
no fixed terms of repayment.
The outstanding amount of S$1.2 million owing to Loh Ee Ming as at the Latest Practicable Date
is currently being repaid by monthly repayments of S$40,000. Pursuant to an undertaking by Loh
Ee Ming, our Company shall have the right to renegotiate such monthly repayment arrangement in
the event our Audit Committee is of the view that our Group is not in the financial position to make
such monthly repayments, taking into account our working capital and gearing position.
(2)
(S$000)
As at
31 December
2010
UPL
As at the
Largest amount
Latest Practicable outstanding during
Date
the Relevant Period
1,308
1,754
3,062
Steven Loh
27
27
54
David Leng
138
138
275
The amount of dividends due to the aforesaid Interested Persons as at the Latest Practicable Date
relate to the interim dividends declared by our Company in respect of FY2011. We intend to repay
50% of such amounts outstanding in FY2011 and the remaining 50% in FY2012, using internally
generated funds.
125
Financial
institution
Type of facility/
tenure
Amount
outstanding
as at the
Amount of
Latest
facilities Practicable
granted
Date
(000)
(000)
Interest rate
(%)
Facilities
used by
Security(1)
Singapore
United
Overseas
Bank
Limited
DBS Bank
Ltd
Term loan
(commencing
on 1 October
2003 and
expiring on
30 September
2028)
S$1,599
S$1,489
5.25
Overdraft
S$1,000
Prime(2) + 0.25
Trade facilities
S$6,000
S$1,049
COF(3) + 2.50
Term loan
(commencing
on 1 March
2009 and
expiring on 28
February 2014)
S$600
S$340
2.35
Overdraft
S$600
Prime(2) + 0.75
Trade facilities
S$2,000
S$1,839
Prime(2) + 0.50
Bridging loan
(commencing
on 1 May 2009
and expiring
on 28 February
2012)
S$1,000
S$27
5.00
S$100
Prime(2) + 0.25
Standard
Chartered
Bank
Overdraft
Trade facilities
S$1,200
S$611
COF(3) + 3.00
RHB Bank
Berhad
Trade facilities
S$800
S$418
COF(3) + 2.50
Short term
revolving credit
S$100
S$100
COF(3) + 2.50
126
Far East
Group
Far East
Group
Far East
Group
Far East
Group
Financial
institution
Type of facility/
tenure
CIMB Bank
Berhad
Trade facilities
and overdraft
S$500
COF(3) + 2.50
Prime(2) + 0.50
Far East
Group
United
Overseas
Bank
(Malaysia)
Berhad
Trade facilities
RM2,000
RM810
BLR(4) + 1.25
Far East
Maju
Overdraft
RM1,000
BLR(4) + 1.00
OCBC Bank
(Malaysia)
Berhad
Trade facilities
RM600
BLR(4) + 0.50
Far East
KL
Overdraft
RM400
BLR(4) + 0.75
CIMB Bank
Berhad
Overdraft
RM140
BLR(4) + 2.00
Far East
Penang
HK$4,000
HK$1,458
Prime(2)
(overdraft)
Far East
HK
Interest rate
(%)
Facilities
used by
Security(1)
Malaysia
Hong Kong
DBS Bank
Overdraft and
(Hong Kong)
trade facilities
Limited
Standard rate
quoted by
banks (trade
facilities)
Notes:(1)
These facilities were also supported by other guarantees and securities provided by our Group.
(2)
(3)
(4)
The largest aggregate outstanding amount guaranteed by the Guarantors during the Relevant
Period, based on month-end balances, was approximately S$11.9 million. As as the Latest
Practicable Date, the aggregate outstanding amount guaranteed was approximately S$7.7 million.
As no fees were charged by the Guarantors for the provision of the guarantees, the above
arrangements were not carried out on an arms length basis.
127
(5)
(ii)
(iii)
our Company ceases to be listed on the SGX-ST (whether on the Main Board or
Catalist).
Our Directors are of the view that the Technical and Management Services Agreement was
negotiated on an arms length basis and is on normal commercial terms.
The terms of the Technical and Management Services Agreement shall be subject to review
and approval of our Audit Committee every two years.
128
the Regional Affiliates shall protect and enhance the value of the goodwill of the
Intellectual Properties, failing which, the Regional Affiliates shall be liable for and will
indemnify our Company against any and all liability, loss, costs and other expenses of
similar nature suffered, directly or indirectly, by our Company over any misappropriation
of the intellectual property rights licenced to the Regional Affiliates; and
(ii)
the Regional Affiliates are not allowed to grant or sub-licence to any other party the
use of the Intellectual Properties, unless prior written consent of our Company has
been obtained.
To safeguard the interests of our Group, Loh Ee Ming and Steven Loh have jointly and
severally undertake to indemnify our Group against any misappropriation of the intellectual
property rights by any of the Regional Affiliates pursuant to the IP Licence Agreement
(Indemnity Undertaking).
The Independent Financial Adviser has been appointed to advise our Audit Committee on
whether the IP Licence Agreement is on normal commercial terms and is not prejudicial to
the interest of our Company and our minority Shareholders. Please refer to the Interested
Person Transactions - Opinion of the Independent Financial Adviser section of this Offer
Document for the opinion of the Independent Financial Adviser. Our Audit Committee, having
considered the opinion of the Independent Financial Adviser, is of the view that the IP
Licence Agreement is on normal commercial terms and is not prejudicial to the interest of
our Company and our minority Shareholders.
The IP Licence Agreement which constitutes an interested person transaction shall be
deemed to have been specifically approved by Shareholders upon their subscription of our
Shares in connection with the Placement and will thereafter not be subject to Rules 905 and
906 of the Catalist Rules to the extent that there is no variation or amendment to the terms
of the IP Licence Agreement (including the fees charged) which is adverse to our Group.
129
(c)
(i)
(ii)
(iii)
our Company ceases to be listed on the SGX-ST (whether on the Main Board or
Catalist); or
(iv)
(ii)
our Company ceases to be listed on the SGX-ST (whether on the Main Board or
Catalist).
Our Directors are of the view that the Acquisition Options are beneficial to our Group and are
not prejudicial to the interests of our Company and our minority Shareholders.
130
Trade Transactions
During the Relevant Period, there were trade transactions between our Company, and SER
and SERM. The aggregate amounts of such transactions with SER and SERM in FY2008,
FY2009 and FY2010 and from 1 January 2011 to the Latest Practicable Date were as
follows:-
(S$000)
FY2008
FY2009
FY2010
From 1 January
2011 to Latest
Practicable Date
861
898
793
366
23
35
28
26
27
199
14
These relate mainly to our Eden brand of heat exchangers and condensing units.
(2)
These relate to refrigeration and air-conditioning parts for the assembly of condensing units.
(3)
These relate mainly to fan motors for SERMs urgent requirements to be assembled onto the heat
exchangers.
Our purchases from and sales to SER and SERM were on normal commercial terms. We
intend to continue with trade transactions with SER and SERM in the future. We may also
enter into trade transactions with ERM in the future. Such transactions shall be subject to the
guidelines and review procedures under the Shareholders Mandate set out in the Interested
Person Transactions Shareholders Mandate section of this Offer Document.
SHAREHOLDERS MANDATE
Chapter 9 of the Catalist Rules states that where the value of a single interested person transaction or
the aggregate value of all transactions entered into with the same Interested Person during a financial
year reaches or exceeds:(a)
3% of the groups latest audited net tangible assets, the listed company is required to make an
immediate announcement of the transaction; and
(b)
5% of the groups latest audited net tangible assets, the listed company is required to make an
immediate announcement and seek shareholders approval for that transaction.
Interested person transactions of value less than S$100,000 are not required to be aggregated.
Under Chapter 9 of the Catalist Rules, a listed company may seek a shareholders mandate for recurrent
transactions of a revenue or trading nature or those necessary for its day-to-day operations, which may
be carried out with the listed companys interested persons, but not for the purchase or sale of assets,
undertakings or businesses.
We anticipate that our Group would, in the ordinary course of business, enter into transactions including
but not limited to the transactions set out in this section with persons which are considered interested
persons as defined in Chapter 9 of the Catalist Rules. It is likely that such transactions will occur with
some degree of frequency and could arise at any time and from time to time.
131
the classes of Interested Persons with which the entity at risk will be transacting;
(ii)
(iii)
(iv)
(v)
the independent financial advisers opinion on whether the methods or procedures in (iv) above are
sufficient to ensure that the transactions will be carried out on normal commercial terms and will
not be prejudicial to the interests of our Company and our minority Shareholders;
(vi)
an opinion from the audit committee if it takes a different view to the independent financial adviser;
(vii)
a statement from us that we will obtain a fresh mandate from Shareholders if the methods and
procedures in (iv) become inappropriate; and
(viii)
a statement that the Interested Person will abstain, and has undertaken to ensure that its
associates will abstain, from voting on the resolution approving the transaction.
On 22 July 2011, our Shareholders approved a mandate (the Shareholders Mandate) for us to enter
into the following categories of interested person transactions with the following Interested Persons (as
explained below). Accordingly, our new Shareholders who subscribe for our New Shares in the Placement
are deemed to have approved the Shareholders Mandate.
The Shareholders Mandate will take effect from the admission of our Company to Catalist and will be
effective until the earlier of the following: (i) the first annual general meeting following our admission
to Catalist, or (ii) first anniversary of our date of admission to Catalist. Thereafter, approval from
Shareholders for renewal of the Shareholders Mandate will be sought at each subsequent annual general
meeting.
UPL, Steven Loh and Sam Cheung will abstain, and have undertaken that their Associates will abstain,
from voting on the resolutions for the renewal of the Shareholders Mandate in respect of any Shares
respectively held by them and their Associates.
Loh Ee Ming, Steven Loh, Karen Loh and Sam Cheung will also decline to accept nomination as proxy or
otherwise from any Shareholder to vote on the resolutions for the renewal of the Shareholders Mandate,
unless given specific instructions by the Shareholder in the relevant proxy form as to how his votes are to
be casted.
Categories of Interested Persons
The Shareholders Mandate will apply to our Groups transactions with SER, SERM and ERM (the
Mandated Interested Persons).
132
purchase of Eden brand of products (comprising heat exchangers and condensing units) from the
Mandated Interested Persons (through SER); and
(b)
sale of agency products for the assembly of condensing units to the Mandated Interested Persons.
Transactions with Interested Persons that do not fall within the ambit of the Shareholders Mandate shall
be subject to the relevant provisions of Chapter 9 and/or other applicable provisions of the Catalist Rules.
Rationale for and benefits of the Shareholders Mandate
The Mandated Interested Persons are engaged primarily in the manufacture and distribution of our Eden
brand of heat exchangers and condensing units in the PRC pursuant to the IP Licence Agreement. Please
refer to the Business Intellectual Property and Interested Person Transactions Present and Ongoing Interested Person Transactions sections of this Offer Document for further details.
We purchase such products from the Mandated Interested Persons, in the ordinary course of our
business, for distribution in markets outside the PRC. Our Maju Facility manufactures the Eden brand
of heat exchangers but not condensing units. As such, the Mandated Interested Persons are the only
suppliers of our Eden brand of condensing units.
We also engage in sale of refrigeration and air-conditioning products to the Mandated Interested Persons
for their assembly of heat exchangers and condensing units. The Directors believe that such sale
transactions would, to a large extent, ensure that parts and components used in the manufacture of the
heat exchangers and condensing units by the Mandated Interested Persons will meet our technical and
quality specifications.
The Shareholders Mandate and the renewal of the Shareholders Mandate on an annual basis will
eliminate the need to convene general meetings from time to time to seek Shareholders approval as
and when potential transactions with the relevant Interested Persons arise, thereby eliminating the
administrative time and expenses in convening such meetings, without compromising the corporate
objectives and adversely affecting the business opportunities available to our Group.
The Shareholders Mandate is intended to facilitate recurrent transactions of a revenue or trading nature
or those necessary for day-to-day operations, provided that they are carried out on an arms length basis
and on normal commercial terms and are not prejudicial to the interests of our Company and our minority
Shareholders.
Disclosure will be made in our annual report of the aggregate value of interested person transactions
conducted pursuant to the Shareholders Mandate during the financial year and in the annual reports for
subsequent years that the Shareholders Mandate continues in force. In addition, we will announce the
aggregate value of transactions conducted pursuant to the Shareholders Mandate during the relevant
financial period within the required time frame stipulated in the Catalist Rules.
133
Our Eden brand of condensing units can only be purchased from the Mandated Interested
Persons (through SER) whereas our Eden brand of heat exchangers can be purchased from the
Mandated Interested Persons and our Maju Facility. As such products are proprietary in nature,
our Executive Directors believe that we would not be able to obtain comparable quotations from
independent third parties for the same or similar products.
(b)
When there is a need to make a purchase (whether upon the receipt of an enquiry from our
customers or to stock up our inventory), we will check with our Maju Facility and the Mandated
Interested Persons on their ability to fulfil our requirements taking into consideration pricing,
delivery schedule and payment terms. We will give priority to purchasing from our Maju Facility if it
is able to fulfil our orders based on our price and delivery schedule requirements. In the event such
orders are unable to be fulfilled by our Maju Facility, we will purchase from the Mandated Interested
Persons.
(c)
Purchases from the Mandated Interested Persons shall be based on a price list which has been
evaluated and pre-approved by an Executive Officer who does not have an interest in such
transaction at the start of each financial year (the Pre-approved Price List). Any revisions of
the Pre-approved Price List during the year shall be subject to re-evaluation and approval by an
Executive Director who does not have an interest in such transaction. The Pre-approved Price List
shall be compared to the prices for similar products quoted by our Maju Facility. Prior to purchasing
from the Mandated Interested Persons, we will ensure that the prices are comparable or lower than
those of our Maju Facility.
(d)
In assessing the price for purchases from the Mandated Interested Person, references shall also
be made to the prices of the same or reasonably similar products sold to independent third parties,
contemporaneously in time, by the Mandated Interested Persons. The Mandated Interested Persons
shall provide our Group with two recent invoices for the same or reasonably similar products sold to
independent third parties for comparison. In general, the prices and terms extended to our Group
by the Mandated Interested Persons shall be no less favourable than to their respective third party
customers.
In determining whether the price and terms offered by the Mandated Interested Persons are fair
and reasonable, factors such as, but not limited to, delivery schedules, specification requirements,
quality, payment terms, track record, preferential rates, discounts and/or rebates offered for bulk
purchases will be taken into consideration.
(e)
All purchases from the Mandated Interested Persons shall be recorded in an interested person
transaction register (IPT Register) setting out details of the transactions, relevant evaluations in
paragraph (d) above and approvals.
When selling products to the Mandated Interested Persons, the price and terms of two other
successful transactions of a similar nature with independent third party customers will be used for
comparison, taking into consideration the credit worthiness and repayment history of the customers
and sales volume.
(b)
The sale price to the Mandated Interested Persons shall not be lower than the lowest sale price of
the two other comparable successful transactions with independent third party customers.
In reviewing the prices and terms offered to the Mandated Interested Persons, all pertinent factors,
including but not limited to, delivery schedules and requirements, specification requirements and
payment terms, will be taken into consideration.
134
All sales transactions with the Mandated Interested Persons shall be recorded in the IPT Register,
setting out details of the transactions, relevant evaluations in paragraph (b) above and approvals.
In addition, to supplement internal control procedures to ensure that all interested person transactions
covered by the Shareholders Mandate will be carried out on normal commercial terms and will not
be prejudicial to the interests of our Company and our minority Shareholders, the following limits for
transactions with the Mandated Interested Persons shall be applied:(i)
(ii)
Our Audit Committee shall review the IPT Register on a half-yearly basis, to ensure that all transactions
with the Mandated Interested Persons are carried out in accordance with the guidelines and procedures
set out above.
Our Audit Committee shall review from time to time such guidelines and procedures to determine if
they continue to be adequate and/or commercially practicable in ensuring that transactions between the
Mandated Interested Persons and our Group are conducted on normal commercial terms, and are not
prejudicial to the interests of our Company and minority Shareholders.
Our Audit Committee may also engage external parties to carry out such periodic reviews if deemed
necessary or appropriate. Further, if during these periodic reviews, our Audit Committee is of the view
that the above guidelines and procedures are not sufficient to ensure that transactions with Mandated
Interested Persons will be conducted on normal commercial terms and will not be prejudicial to the
interests of our Company and minority Shareholders, we will revert to our Shareholders for a fresh
mandate based on new guidelines and procedures. During the period prior to obtaining a fresh mandate
from Shareholders, all transactions with the Mandated Interested Persons shall be subject to the review
and prior approval by our Audit Committee.
OPINION OF THE INDEPENDENT FINANCIAL ADVISER
SAC Capital has been appointed as the Independent Financial Adviser to the Audit Committee to
express an opinion, for the purposes of Chapter 9 of the Catalist Rules, on whether (i) the method and
review procedures for determining the transaction prices of the interested person transactions under the
Shareholders Mandate, if applied strictly, are sufficient to ensure that these interested person transactions
will be carried out on normal commercial terms and will not be prejudicial to the interests of our Company
and our minority Shareholders, and (ii) the IP Licence Agreement was entered into on normal commercial
terms and will not be prejudicial to the interests of our Company and our minority Shareholders.
Based on its evaluation of the Shareholders Mandate and the IP Licence Agreement, and subject to the
qualifications and assumptions as set out in its letter, SAC Capital is of the opinion that:(i)
the guidelines and review procedures of our Company as set out in the Interested Person
Transactions Shareholders Mandate: Guidelines and review procedures under Shareholders
Mandate section of this Offer Document for determining the transaction prices of the interested
person transactions under the Shareholders Mandate, if applied strictly, are sufficient to ensure
that such transactions will be conducted on normal commercial terms and will not be prejudicial to
the interests of our Company and our minority Shareholders; and
(ii)
the IP Licence Agreement was entered into on normal commercial terms and is not prejudicial to
the interests of our Company and our minority Shareholders.
Please refer to Appendix F Letter from SAC Capital Private Limited to the Audit Committee of this
Offer Document for the full text of the letter from the Independent Financial Adviser.
135
Where practicable, when purchasing products from or engaging the services of an Interested
Person, two other quotations from non-Interested Persons will be obtained for comparison to
ensure that the interests of minority Shareholders are not compromised. The purchase price or fee
for services shall not be higher than the most competitive price or fee of the two other quotations
from non-Interested Persons. In determining the most competitive price or fee, all pertinent factors,
including but not limited to quality, delivery time and track record will be taken into consideration.
Where it is not practicable to obtain two other quotations from non-Interested Persons for any
particular transaction, our Audit Committee shall be consulted on the procedures to be adopted
in order to ensure that the proposed transaction with the Interested Person is carried out at arms
length and on normal commercial terms.
(b)
When selling products or providing services to an Interested Person, the price and terms of two
other successful transactions of a similar nature with independent third party customers will be
used for comparison, taking into consideration the credit worthiness and repayment history of
the customers and sales volume. The sale price to the Interested Person shall not be lower than
the lowest sale price of the two comparable successful transactions with independent third party
customers. In reviewing the prices and terms offered to the Interested Person, all pertinent factors,
including but not limited to, delivery schedules and requirements, specification requirements and
payment terms will be taken into consideration. Where it is not practicable to obtain two other
successful transactions of a similar nature with other third party customers, our Audit Committee
shall be consulted on the procedures to be adopted in order to ensure that the proposed
transaction with the Interested Person is carried out at arms length and on normal commercial
terms.
(c)
When leasing properties from or to an Interested Person, our Directors shall take appropriate steps
to ensure that such rent is commensurate with the prevailing market rates, including adopting
measures such as making relevant enquiries with landlords of similar properties, engaging an
independent valuer to ascertain the market rental for the relevant properties or obtaining suitable
reports or reviews published by property agents (as necessary). The rent payable shall be based
on the most competitive market rental rate of similar properties in terms of size and location, based
on the results of the relevant enquiries.
Such transactions with an Interested Person equal to or exceeding $100,000 will be reviewed and
approved by a Director or our Financial Controller, who shall not be an Interested Person in respect of the
particular transaction. In addition, any Other Interested Person Transaction of a value equal to or more
than 3% of our latest audited NTA value will be approved by our Audit Committee prior to entry into such
transactions, and will be announced.
Should the value of any Other Interested Person Transaction exceed 5% of our Groups last audited NTA,
it must be announced and made subject to approval by Shareholders of our Company. All Other Interested
Person Transactions above $100,000 (or its equivalent) must be recorded in the IPT Register. In the event
that these transactions are entered into with the same Interested Person (including his Associates) during
the current financial year, such transactions are to be aggregated for purposes of determining whether
shareholder approvals and/or announcements are necessary.
Our Audit Committee will review all Other Interested Person Transactions, if any, and examine any
supporting documents or such other data deemed necessary by our Audit Committee for such review, at
least half yearly to ensure that they are carried out at arms length and in accordance with the procedures
outlined above. It will take into account all relevant non-quantitative factors. In the event that a member
of our Audit Committee is interested in any Other Interested Person Transaction, he will abstain from
136
137
The Regional Affiliates, under the IP Licence Agreement, are principally engaged in the
manufacture and sale of the Eden brand of heat exchangers and condensing units solely in the
PRC market (save for sale of such products to our Group outside the PRC). Our Groups business
activities in the PRC, on the other hand, are focused on the distribution of agency products
(excluding the Eliwell brand of temperature controllers which is carried by the Regional Affiliates).
As such, there is a clear product differentiation in the geographical markets where the Regional
Affiliates and our Group operate;
(b)
Pursuant to a deed of undertaking dated 27 June 2011, the Regional Affiliates have each
irrevocably undertaken and undertaken to procure, to the fullest possible extent, that they
shall endeavour to fulfil or give priority to our Groups orders of the Eden brand of products
manufactured by the Regional Affiliates. The aforesaid deed of undertaking shall subsist and be
effective without limit in point of time, but shall terminate in any of the following events, whichever is
the earliest:(i)
(ii)
(iii)
our Company ceases to be listed on the SGX-ST (whether on the Main Board or Catalist);
(c)
Pursuant to the IP Licence Agreement, our Company shall be entitled to the Licencing Fee which
is based on 2.0% of the revenue which the Regional Affiliates derive from their sale of Eden
brand of heat exchangers and condensing units in the PRC. For further details of the IP Licence
Agreement, please refer to the Interested Person Transactions Interested Persons section of this
Offer Document;
(d)
The Regional Affiliates as well as UPL, the shareholders of UPL and Sam Cheung (the Affiliates
Shareholders) have, pursuant to a deed of non-compete undertaking dated 27 June 2011 (the
Non-compete Deed), irrevocably undertaken and undertaken to procure, to the fullest possible
extent, that:(i)
the Regional Affiliates, the Affiliates Shareholders and their present or future subsidiaries or
associated companies (where applicable) shall not, solely or jointly with or on behalf of any
other person or entity, directly or indirectly, carry on or be engaged in any business or activity
which is outside its existing scope of business;
(ii)
the Regional Affiliates and the Affiliates Shareholders shall not, without the prior written
consent of our Company, either solely or jointly with or on behalf of any other person directly
or indirectly solicit or entice away, or endeavour to solicit or entice away, any employee of
our Group or any related company. The Regional Affiliates and the Affiliates Shareholders
shall not cause or permit any person directly or indirectly under its control or its directors,
employees or shareholders to directly or indirectly solicit or entice away, or endeavour to
solicit or entice away, any employee of our Group or any related company;
(iii)
the Affiliates Shareholders have agreed that they will disclose any conflict and will abstain
from voting and discussions on matters in which there is a conflict of interest between our
Group and the Regional Affiliates; and
138
SER and the Affiliates Shareholders undertake to grant us or our nominee(s) the first right
of refusal in the event that any of them intend or decide to dispose of all or any part of their
respective interests in the Regional Affiliates or its businesses, assets and/or undertakings
(as may be applicable) subject to applicable rules and regulations.
The Non-compete Deed shall subsist and be effective without limit in point of time, but shall
terminate in any of the following events, whichever is the earliest:(i)
(ii)
(iii)
our Company ceases to be listed on the SGX-ST (whether on the Main Board or Catalist).
Any changes in the scope of the Non-compete Deed shall be subject to the review and approval of
our Audit Committee;
(e)
Pursuant to the Acquisition Option Agreements dated 27 June 2011, our Company shall have the
options to acquire the respective equity interests in, or the assets, businesses and undertakings,
held by UPL and SER in the Regional Affiliates, as the case may be. For further details on the
Acquisition Option Agreements, please refer to the Interested Person Transactions Present and
On-going Interested Person Transactions section of this Offer Document;
(f)
Pursuant to the Technical and Management Services Agreement dated 27 June 2011, the Assigned
Persons have each irrevocably undertaken and undertaken to procure, to the fullest possible
extent:(i)
to monitor and ensure that the businesses of the Regional Affiliates are not competing with
our Group;
(ii)
to highlight any potential conflicts of interests arising from our Regional Affiliates to our
Board; and
(iii)
to act in the best interests of our Group, and to place the interests of our Group above that of
the Regional Affiliates at all times.
For further details on the Technical and Management Services Agreement, please refer to the
Interested Person Transactions Present and On-going Interested Person Transactions section of
this Offer Document; and
(g)
Under the terms and conditions of the IP Licence Agreement, the Regional Affiliates shall protect
and enhance the value of the goodwill of the Intellectual Properties, failing that, the Regional
Affiliates shall be liable for and will indemnify our Company against any liability, loss, costs
and other expenses of similar nature suffered, directly or indirectly, by our Company over any
misappropriation of the intellectual property rights licenced to the Regional Affiliates.
To further safeguard the interests of our Group, Loh Ee Ming and Steven Loh have jointly and
severally provided the Indemnity Undertaking. For further details on the Indemnity Undertaking,
please refer to the Interested Person Transactions Present and On-going Interested Person
Transactions section of this Offer Document.
Save as disclosed above and in the Interested Person Transactions section of this Offer Document,
during the period under review and from 1 January 2011 to the Latest Practicable Date:(a)
none of our Directors, Controlling Shareholder or any of their Associates has any interest, direct
or indirect, in any material transactions to which our Company or any of our subsidiary was or is a
party;
139
none of our Directors, Controlling Shareholder or any of their Associates has any interest, direct or
indirect, in any entity carrying on the same business or dealing in similar services which competes
materially or directly with the existing business of our Group; and
(c)
none of our Directors, Controlling Shareholder or any of their Associates has any interest, direct or
indirect, in any enterprise or company that is our customer or supplier of goods or services.
INTERESTS OF EXPERTS
None of the experts named in this Offer Document:(i)
(ii)
has a material interest, whether direct or indirect, in our Shares or in the shares of our subsidiaries;
or
(iii)
has a material economic interest, whether direct or indirect, in our Company, including an interest
in the success of the Placement.
140
141
has, at any time during the last 10 years, had an application or a petition under any
bankruptcy laws of any jurisdiction filed against him or against a partnership of which he was
a partner at the time when he was a partner or at any time within two (2) years from the date
he ceased to be a partner;
(b)
has, at any time during the last 10 years, had an application or a petition under any law of
any jurisdiction filed against an entity (not being a partnership) of which he was a director or
an equivalent person or a key executive, at the time when he was a director or an equivalent
person or a key executive of that entity or at any time within 2 years from the date he ceased
to be a director or an equivalent person or a key executive of that entity, for the winding up or
dissolution of that entity or, where that entity is the trustee of a business trust, that business
trust, on the ground of insolvency;
(c)
(d)
has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or
dishonesty which is punishable with imprisonment, or has been the subject of any criminal
proceedings (including any pending criminal proceedings of which he is aware) for such
purpose;
(e)
has ever been convicted of any offence, in Singapore or elsewhere, involving a breach of any
law or regulatory requirement that relates to the securities or futures industry in Singapore
or elsewhere, or has been the subject of any criminal proceedings (including any pending
criminal proceedings of which he is aware) for such breach;
(f)
has, at any time during the last 10 years, had judgement entered against him in any
civil proceedings in Singapore or elsewhere involving a breach of any law or regulatory
requirement that relates to the securities or futures industry in Singapore or elsewhere, or a
finding of fraud, misrepresentation or dishonesty on his part, nor has he been the subject of
any civil proceedings (including any pending civil proceedings of which he is aware) involving
an allegation of fraud, misrepresentation or dishonesty on his part;
(g)
has ever been convicted in Singapore or elsewhere of any offence in connection with the
formation or management of any entity or business trust;
(h)
has ever been disqualified from acting as a director or an equivalent person of any entity
(including the trustee of a business trust), or from taking part directly or indirectly in the
management of any entity or business trust;
(i)
has ever been the subject of any order, judgement or ruling of any court, tribunal or
governmental body permanently or temporarily enjoining him from engaging in any type of
business practice or activity;
(j)
has ever, to his knowledge, been concerned with the management or conduct, in Singapore
or elsewhere, of affairs of:(i)
any corporation which has been investigated for a breach of any law or regulatory
requirement governing corporations in Singapore or elsewhere;
(ii)
any entity (not being a corporation) which has been investigated for a breach of any
law or regulatory requirement governing such entities in Singapore or elsewhere;
(iii)
any business trust which has been investigated for a breach of any law or regulatory
requirement governing business trusts in Singapore or elsewhere; or
142
any entity or business trust which has been investigated for a breach of any law or
regulatory requirement that relates to the securities or futures industry in Singapore or
elsewhere,
in connection with any matter occurring or arising during the period when he was so
concerned with the entity or business trust; and
(k)
has been the subject of any current or past investigation or disciplinary proceedings, or has
been reprimanded or issued any warning, by the Authority or any other regulatory authority,
exchange, professional body or governmental agency, whether in Singapore or elsewhere.
Save as disclosed below and in the General Information on our Group Share Capital section
of this Offer Document, there were no changes in the issued and paid-up share capital of our
Company and our subsidiaries within the three years preceding the Latest Practicable Date:Date of issue
Number of shares
issued
Consideration per
share
8,312
S$142.86
2
199,998
S$1.00
S$1.00
Incorporation
Capital injection
S$2.00
S$200,000.00
1,000,000
HK$1.00
Capital injection
HK$3,000,000.00
Purpose
Resultant issued
share capital
Our Company
15 March 2011
Pre-IPO investment
S$9,322,192.32
Edenkool
26 May 2009
17 July 2009
Far East HK
30 April 2009
3.
Save as disclosed above and in the General Information on our Group Share Capital section of
this Offer Document, no shares in, or debentures of, our Company or our subsidiaries have been
issued, or are proposed to be issued, as fully or partly paid for cash or for a consideration other
than cash, during the last three years preceding the date of lodgement of this Offer Document.
143
The following contracts, not being contracts entered into in the ordinary course of business, have
been entered into by our Company and our subsidiaries within the two years preceding the date of
lodgement of this Offer Document and are or may be material:(a)
three separate agreements dated 27 June 2011 entered into between our Company, UPL
and SER pursuant to which our Company was granted options to acquire their respective
equity interests in, or the assets, businesses and undertakings of, the Regional Affiliates
(please refer to the Interested Person Transactions Present and On-going Interested
Person Transactions section of this Offer Document for further details);
(b)
an agreement dated 27 June 2011 entered into between our Company and the Regional
Affiliates pursuant to which our Company shall provide technical support, business
development and general management services to the Regional Affiliates for a period of two
years commencing from the date of our admission to Catalist (please refer to the Interested
Person Transactions Present and On-going Interested Person Transactions section of this
Offer Document for further details);
(c)
an agreement dated 27 June 2011 entered into between our Company and the Regional
Affiliates for the use of trade marks and patents (please refer to the Interested Person
Transactions Present and On-going Interested Person Transactions section of this Offer
Document for futher details);
(d)
an agreement dated 23 March 2011 entered into between our Company and SER pursuant
to which SER shall transfer all its patents to our Company (please refer to the Business
Intellectual Property section of this Offer Document for further details of the transfer of
patents); and
(e)
an agreement dated 1 February 2011 entered into between our Company, the majority
Shareholders of our Company (being UPL, Steven Loh, David Leng and Lim Keng Ann)
and the Pre-IPO Investors pursuant to which the Pre-IPO Investors agreed to subscribe
for an aggregate of 8,312 new Shares (before Sub-Division) to be issued by our Company
(please refer to the General Information on our Group Share Capital section of this Offer
Document for further details).
Save as disclosed above, our Group has not entered into any material contracts, not being
contracts entered into in the ordinary course of business within the two years preceding the date of
lodgement of this Offer Document.
LITIGATION
5.
There are no legal or arbitration proceedings, including those which are pending or known to be
contemplated, which may have or have had during the last 12 months before the date of this Offer
Document, a material effect on our Groups financial position or profitability.
MISCELLANEOUS
6.
Save as disclosed in this Offer Document, our Directors are not aware of any relevant material
information including trading factors or risks which are unlikely to be known or anticipated by the
general public and which could materially affect the profits of our Company and our subsidiaries.
7.
Save as disclosed in this Offer Document, the financial condition and operations of our Group are
not likely to be affected by any of the following:(a)
known trends or demands, commitments, events or uncertainties that will result in or are
reasonably likely to result in our Groups liquidity increasing or decreasing in any material
way;
(b)
(d)
known trends or uncertainties that have had or that we reasonably expect will have a material
favourable or unfavourable impact on revenues or operating income.
8.
Save as disclosed in this Offer Document, our Directors are not aware of any event which has
occurred since 31 December 2010 (being the end of the period covered by the most recent
financial statements of our Group included in this Offer Document) to the Latest Practicable Date
which may have a material effect on the financial position and results of our Group.
9.
Details, including the name, address and professional qualifications (including membership in a
professional body) of our auditors for the period under review are as follows:Name and address
Ernst & Young LLP
One Raffles Quay
North Tower, Level 18
Singapore 048583
Partner-in-charge/
Professional qualification
Membership in
professional body
We currently have no intention of changing our auditors after the admission of our Company to
Catalist.
CONSENTS
10.
Ernst & Young LLP, the Independent Auditors and Reporting Accountants, has given and have not
withdrawn their written consent to the issue of this Offer Document with the inclusion herein of
the Independent Auditors Report on the Audited Consolidated Financial Statements of Far East
Group Limited and Subsidiary Companies for the Financial Years Ended 31 December 2008, 2009
and 2010 in the form and context in which it is included and references to their name in the form
and context in which it appears in this Offer Document and to act in such capacity in relation to this
Offer Document.
11.
Collins Stewart Pte. Limited, the Sponsor and the Placement Agent, has given and has not
withdrawn its written consent to the issue of this Offer Document with the inclusion herein of its
name and references thereto in the form and context in which it appears in this Offer Document
and to act in such capacity in relation to this Offer Document.
12.
Loo & Partners LLP, the Solicitors to the Placement and Legal Advisers to our Company on
Singapore Law, has given and has not withdrawn its written consent to the issue of this Offer
Document with the inclusion herein of its name and references thereto in the form and context
in which it appears in this Offer Document and to act in such capacity in relation to this Offer
Document.
13.
Naqiz and Partners, the Legal Advisers to our Company on Malaysia Law, has given and has not
withdrawn its written consent to the issue of this Offer Document with the inclusion herein of its
name and references thereto in the form and context in which it appears in this Offer Document
and to act in such capacity in relation to this Offer Document.
14.
Pang & Co. in association with Salans LLP, the Legal Advisers to our Company on Hong Kong Law,
has given and has not withdrawn its written consent to the issue of this Offer Document with the
inclusion herein of its name and references thereto in the form and context in which it appears in
this Offer Document and to act in such capacity in relation to this Offer Document.
145
Victory Legal Group, the Legal Advisers to our Company on PRC Law, has given and has not
withdrawn its written consent to the issue of this Offer Document with the inclusion herein of the
statement in the Business - Intellectual Property section of this Offer Document, in the form and
context in which they are included and references to its name in the form and context in which it
appears in this Offer Document and to act in such capacity in relation to this Offer Document.
16.
SAC Capital, as the Independent Financial Adviser to the Audit Committee, has given and has
not withdrawn its written consent to the issue of this Offer Document with the inclusion herein
of the statement in the Interested Person Transactions - Opinion of the Independent Financial
Adviser section of this Offer Document and the Letter from SAC Capital Private Limited to the
Audit Committee set out in Appendix F of this Offer Document, in the form and context in which
it is included and references to their name in the form and context in which it appears in this Offer
Document and to act in such capacity in relation to this Offer Document.
17.
Each of the Share Registrar and Share Transfer Office, the Principal Bankers and the Receiving
Banker do not make or purport to make any statement in this Offer Document or any statement
upon which a statement in this Offer Document is based and each of them makes no representation
regarding any statement in this Offer Document and to the maximum extent permitted by law,
expressly disclaims and takes no responsibility for any liability to any person which is based on, or
arises out of, any statement, information or opinions in, or omission from, this Offer Document.
This Offer Document has been seen and approved by our Directors and they individually and
collectively accept full responsibility for the accuracy of the information given herein and confirm,
having made all reasonable enquiries, that to the best of their knowledge and belief, the facts
stated and the opinions expressed herein are fair and accurate in all material respects as of the
date hereof and there are no material facts the omission of which would make any statements in
this Offer Document misleading and that this Offer Document constitutes full and true disclosure of
all material facts about the Placement and our Group.
The following documents or copies thereof may be inspected at our registered office at 112
Lavender Street, #04-00, Far East Refrigeration Building, Singapore 338728, during normal
business hours for a period of six months from the date of Registration:(a)
(b)
the Independent Auditors Report on the Audited Consolidated Financial Statements of Far
East Group Limited and Subsidiary Companies for the Financial Years Ended 31 December
2008, 2009 and 2010 set out in Appendix A of this Offer Document;
(c)
the Letter from SAC Capital Private Limited to the Audit Committee set out in Appendix F of
this Offer Document;
(d)
(e)
(f)
146
GOVERNMENT REGULATIONS
We are subject to all relevant laws and regulations of the countries where our business operations
are located. Save as disclosed below, as at the Latest Practicable Date, our business operations were
not subject to any special legislations or regulatory controls other than those generally applicable to
companies and businesses incorporated and/or operating in Singapore, Malaysia and Hong Kong. We
have thus far not experienced any adverse effect on our business in complying with these regulations.
Singapore
We have identified the main laws and regulations that materially affect our operations and the relevant
regulatory bodies in the following countries (apart from those pertaining to general business requirements)
as set out below.
Regulation of Imports and Exports Act (Cap. 272A)
Under the Regulation of Imports and Exports Act (Cap. 272A), the Director-General of Customs appointed
under Section 4(1) of the Customs Act (Cap. 70) may make regulations for the registration, regulation and
control of all or any class of goods imported into, exported from, transshipped in or in-transit through
Singapore. The Regulation of Imports and Exports Regulations (RIER) was prescribed in 1999 to control
the import, export or trans-shipment of goods through requirements of permits. We are, by virtue of our
import and export business, subject to the RIER.
Pursuant to Regulation 37(1) of the RIER, the Director-General of Customs may maintain a register
containing the particulars of importers, exporters, common carriers or any other person who desires to
apply for a permit or any other form of approval under the RIER.
Workplace Safety and Health Act 2006
Under the Ministry of Manpowers (MOM) Workplace Safety and Health Act 2006 (WSHA), every
employer has the duty to take, so far as is reasonably practicable, such measures as are necessary
to ensure the safety and health of his employees at work. These measures include providing and
maintaining for the employees a work environment which is safe, without risk to health, and has adequate
facilities and arrangements for their welfare at work, ensuring that sufficient safety measures are taken
in respect of any machinery, equipment, plant, article or process used by the employees, ensuring
that the employees are not exposed to hazards arising out of the arrangement, disposal, manipulation,
organisation, processing, storage, transport, working or use of things in their workplace or near their
workplace and under the control of the employer, developing and implementing procedures for dealing
with emergencies that may arise while those persons are at work and ensuring that the person at work
has adequate instruction, information, training and supervision as is necessary for that person to perform
his work.
More specific duties imposed by the MOM on employers are laid out in the Workplace Safety and
Health (General Provisions) Regulations. Some of these duties include taking effective measures to
protect persons at work from the harmful effects of any exposure to any bio-hazardous material which
may constitute a risk to their health and ensuring that machineries and equipment in the workplace are
safe for use. In addition to the above, under the WSHA, inspectors appointed by the Commissioner for
Workplace Safety and Health (CWSH) may, inter alia, enter, inspect and examine any workplace and
any machinery, equipment, plant, installation or article at any workplace, to make such examination and
inquiry as may be necessary to ascertain whether the provisions of the WSHA are complied with. In
connection with the foregoing, an authorised examiner has inspected a lifting equipment that we use for
our operations and has issued a Certificate of Test/Thorough Visual Examination of Lifting Equipment
which is valid until 23 May 2012. In the said certificate, the examiner declared that the lifting equipment
complies with all of the requirements under the Workplace Safety and Health (General Provisions)
Regulations.
Under the WSHA, the CWSH may serve a remedial order or a stop-work order in respect of a workplace
if he is satisfied that (i) the workplace is in such condition, or is so located, or any part of the machinery,
equipment, plant or article in the workplace is so used, that any process or work carried on in the
workplace cannot be carried on with due regard to the safety, health and welfare of the persons at work;
(ii) any person has contravened any duty imposed by the WSHA; or (iii) any person has done any act, or
has refrained from doing any act which, in the opinion of the CWSH, poses or is likely to pose a risk to
147
GOVERNMENT REGULATIONS
the safety, health and welfare of persons at work. The remedial order shall direct the person served with
the order to take such measures, to the satisfaction of the CWSH, to inter alia remedy any danger so as
to enable the work or process in the workplace to be carried on with due regard to the safety, health and
welfare of the persons at work, whilst the stopwork order shall direct the person served with the order to
immediately cease to carry on any work indefinitely or until such measures as are required by the CWSH
have been taken to remedy any danger so as to enable the work in the workplace to be carried on with
due regard to the safety, health and welfare of the persons at work.
Workplace Safety and Health (Registration of Factories) Regulations 2008 (2008 WSH Factories
Regulations)
Pursuant to the 2008 WSH Factories Regulations which came into operation on 1 November 2008
repealing the Workplace Safety and Health (Registration of Factories) Regulations 2006, any person who
desires to occupy or use any premises as a factory falling within any of the classes of factories described
in the First Schedule of the 2008 WSH Factories Regulations must apply to the CWSH to register the
premises as a factory one month before the factory starts operations. A certificate of registration issued
by the CWSH is valid for a period of one year, or such other period as the CWSH may determine, and
may be renewed subsequently upon the payment of a renewal fee.
Under the 2008 WSH Factories Regulations, any person who desires to occupy or use any premises as a
factory not falling within any of the classes of factories described in the First Schedule of the 2008 WSH
Factories Regulations must, before the commencement of operation of the factory, submit a notification to
the CWSH informing the CWSH of his intention to occupy or use those premises as such a factory. The
notification is not subject to any renewal requirements.
However, in the event that the CWSH is of the view that the factory in respect of which a notification has
been submitted is to pose or likely to pose a risk to the safety, health and welfare of persons at work in
the factory, the CWSH may, by notice in writing, (i) specify the date from which the notification shall cease
to be valid; and (ii) direct the occupier of the factory to register the factory notwithstanding that the factory
does not fall within any of the classes of the factories described in the First Schedule.
As our premises at 5 Third Lok Yang Road, Singapore 628000, does not fall under any of the classes
of the factories described in the First Schedule, a notification to the CWSH will suffice. However, the
2008 WSH Factories Regulations states that notwithstanding the revocation of the Workplace Safety and
Health (Registration of Factories) Regulations, any certificate of registration or factory permit issued under
the revoked Regulations which was valid immediately before 1st November 2008 shall, if it was issued
in respect of a factory not falling within any of the classes of factories described in the First Schedule,
be deemed to be a notification made under Regulation 5 in respect of that factory. In a letter dated
14 October 2010, the CWSH confirmed that our premises at 5 Third Lok Yang Road is under the Factory
Notification Scheme.
Work Injury Compensation Act (Cap. 354)
The Work Injury Compensation Act (Cap. 354) (WICA), as regulated by the MOM, applies to all
employees (with the exception of those set out in the Fourth Schedule of the WICA), who have entered
into or works under a contract of service or apprenticeship with an employer, in respect of injury suffered
by them in the course of their employment and sets out, inter alia, the amount of compensation that they
are entitled to and the method(s) of calculating such compensation.
The WICA provides that if in any employment, personal injury by accident arising out of and in the
course of the employment is caused to an employee, his employer shall be liable to pay compensation
in accordance with the provisions of the WICA. The amount of compensation shall be computed in
accordance with a fixed formula as set out in the Third Schedule of the WICA, subject to a maximum and
minimum limit.
148
GOVERNMENT REGULATIONS
Employment of Foreign Workers
The availability and the employment cost of skilled and unskilled foreign workers are affected by the
Governments policies and regulations on the immigration and employment of foreign workers in
Singapore. The policies and regulations are set out in, inter alia, the Employment of Foreign Manpower
Act (Cap. 91A) and the relevant Government Gazettes.
The availability of foreign workers is regulated by the MOM through the following policy instruments:(a)
(b)
(c)
(d)
(e)
skill trade test requirement whereby the foreign worker will need to meet a basic skill requirement
before he can work in Singapore.
Under the work permit conditions, employers are required to provide acceptable accommodation for their
foreign workers. Such accommodation must meet the statutory requirements set by various government
agencies, including the National Environment Agency, the Public Utilities Board, the Singapore Civil
Defence Force and the Building & Construction Authority.
In relation to the employment of foreign mid-level skilled workers, employers must ensure that such
persons apply for a S Pass. The S Pass is intended for foreigners who:earn a monthly fixed income of at least S$1,800; and
have degree or diploma level educational qualifications.
In relation to the employment of foreign professionals and executives, employers must ensure that such
persons apply for an employment pass. The employment pass is intended for foreigners who:earn a monthly fixed income of at least S$2,500; and
have recognised qualifications.
An employer of foreign workers is also subject to, inter alia, the provisions set out in the Employment Act
(Cap. 91), the Immigration Act (Cap. 133) and the regulations issued pursuant to the Immigration Act.
From 1 January 2008, employers are required to purchase and maintain insurance for the medical
expenses of their work permit and S Pass holders during their stay in Singapore. The requirement to
purchase and maintain insurance is included as a condition of the work permit or S Pass.
Hazardous Substances Licence (HS Licence)
The HS Licence is required for any person who wishes to import, use, keep in storage and supply
hazardous substances controlled under Section 22 of the Environmental Protection and Management Act
(Cap. 94A) (EPMA). Our Company is currently a holder of a HS Licence for the following Annex C GPI
ozone depleting substances: 1) 1-chloro-1,1-difluoro-ethane (100% purity) and 2) chlorodifluoromethane
(100% purity). The licence is subject to the provisions of the EPMA, the EPMA (Hazardous Substances)
Regulations, the EPMA (Ozone Depleting Substances) Regulations and to the following conditions, inter
alia:1)
the licence holder shall state, among other things, the type of controlled ozone depleting
substances imported and/or exported, the weight in metric tonne, the calculated level of import
and/or export, the country of origin and/or final destination and the value in S$ in his application for
import and/or export;
149
GOVERNMENT REGULATIONS
2)
annually and not later than 31 January of each year, the licence holder must submit to the Pollution
Control Department, National Environmental Agency (PCD-NEA) the certified calculated level of
imports and/or exports of the controlled substance, with such details as the type, the country of
origin, and/or final destination and value of the imports and/or exports in S$;
3)
prior approval from PCD-NEA shall be obtained for the import or export of the hazardous substance
under the licence. Misdeclaration shall constitute a prosecutable offence;
4)
the licence holder shall maintain an up-to-date inventory of the controlled hazardous substance
imported and/or exported and shall submit a monthly return of such inventory records to the PCDNEA; and
5)
the licence holder shall properly label the containers of the controlled substances. Any licence
holder found mislabeling will be liable for prosecution. Random checks will be conducted by PCDNEA officials.
(ii)
Far East Maju is required to train Malaysian citizens so as to channel a transfer in technology and
skills in all levels and positions; and
(iii)
Far East Maju is required to carry out the approved activities in accordance with all applicable
Malaysian laws and regulations.
The Manufacturing Licence is valid for an indefinite period subject to MITIs right to revoke the
Manufacturing Licence for breach of any of the conditions imposed.
We confirm that all our licences, registrations and permits are current and existing. We have also not
committed any offences in relation to:(a)
(b)
150
GOVERNMENT REGULATIONS
We have also not received any notices from or been subject to any penalties imposed by any regulatory
body or authority in Malaysia administering or having responsibility or jurisdiction over our licences (or the
lack thereof).
Occupational Safety and Health
Under the Malaysian Occupational Safety and Health Act 1994 (OSHA 1994) and the Occupational
Safety and Health (Safety and Health Officer) Order 1997 (P.U.(A) 316/1997), an employer involved in
a manufacturing activity utilising specific heavy equipment and machinery employing more than 100
employees shall employ a safety and health officer. An employee under the OSHA 1994 is defined to
include an independent contractor engaged by an employer or a self-employed person and any employee
of the independent contractor.
Section 30 of the OSHA 1994 also states that an employer is required to establish a safety and
health committee at the place of work if there are 40 or more persons employed at the place of work.
The Occupational Safety and Health (Safety and Health Committee) Regulations 1996 stipulates that
a safety and health committee shall consist of a chairman, secretary, representatives of employer and
representatives of employees. Where there are 100 persons or less employed, there shall not be less
than two representatives each from the employees and the management on the committee.
As at Latest Practicable Date, all the Malaysian companies in our Group employ less than 40 employees
and is therefore exempted from employing a safety and health officer or establishing a safety and health
committee.
Employment Laws and Regulations
The main legislation, the Employment Act 1955 applies to all employees in Peninsular Malaysia and the
Federal Territory of Labuan whose monthly wages do not exceed RM1,500 and all manual labourers
irrespective of their wages. Employers may draw up the contract of service but it should not contravene
the minimum benefits stipulated under the law.
Some of the obligations of an employer under the Employment Act 1955 are as follows:(i)
every employee must be given a written contract of service containing the terms and conditions of
the employment, including provisions relating to the termination of contract;
(ii)
(iii)
special provisions for the protection of female employees pertaining to night work and maternity
benefits;
(iv)
normal hours of work and other provisions relating to numbers of working hours;
(v)
entitlement of paid annual leave, sick leave and public holidays; and
(vi)
We have entered into letters of engagement with all our employees and the terms of employment for our
employees are consistent with general Malaysian practice and do not contravene Malaysian employment
regulations.
Hong Kong
Ozone Layer Protection Ordinance (Chapter 403 of the Laws of Hong Kong)
Far East HK is engaged in the trade and provision of refrigeration and air-conditioning parts in Hong
Kong. As part of its business, it imports hydrochlorofluorocarbons (HCFCs). The Ozone Layer Protection
Ordinance (the Ordinance), Chapter 403 of the Laws of Hong Kong, requires any person who imports
or exports a scheduled substance, HCFC being one of such scheduled substance, to be registered under
151
GOVERNMENT REGULATIONS
the Ordinance and to obtain a licence for each import or export of such scheduled substance. Far East
HK has been registered under Section 5 of the Ordinance and the registration is valid until 31 December
2011.
As at the Latest Practicable Date and to the best of our Directors knowledge, we are in compliance
with all applicable laws and regulations which are material to our business operations in the countries
we operate, and we have obtained all the necessary business licences and permits for our business
operations in the countries we operate.
152
EXCHANGE CONTROLS
Singapore
Currently, there are no Singapore governmental laws, decrees, regulations or other legislation that may
affect the following:(i)
the import or export of capital, including the availability of cash and cash equivalents for use by our
Group; and
(ii)
the remittance of dividends, interest or other payments to non-resident holders of our Companys
securities.
Malaysia
There are no restrictions on the repatriation of capital, profits, dividends, interest, fees or rental by foreign
direct investors or portfolio investors, subject to the applicable reporting requirements, and any withholding
tax, and provided such remittance is effected through authorised channels, such as licensed banks or
licensed remittance operators. Such remittance should be in foreign currency (save for the currency of
Israel) as the remittance of RM in excess of RM10,000 will require prior permission from the Foreign
Exchange Administration Department of Bank Negara Malaysia.
Hong Kong
There are no exchange controls in Hong Kong.
153
A-1
Index
Page
Statement by Directors
A-3
A-4
A-5
A-8
A-9
A-10
A-13
A-16
A-2
the accompanying consolidated financial statements together with notes thereto are drawn up so
as to give a true and fair view of the state of affairs of the Group as at 31 December 2008, 2009
and 2010 and of the results of the business and changes in equity and cash flows of the Group for
the years ended 31 December 2008, 2009 and 2010; and
(b)
at the date of this statement there are reasonable grounds to believe that the Company will be able
to pay its debts as and when they fall due.
A-3
Non-current assets
Fixed assets
Investment properties
Unquoted investments
Deferred tax assets
Other receivables
2010
$
2009
$
2008
$
4
5
7
8
11
7,518,145
88,968
174,014
18,329
7,402,526
214,146
91,183
199,231
7,523,044
244,936
102,424
171,998
9
10
11
8,199,554
6,646,543
136,827
101,384
1,253,187
217,647
6,052
1,399,779
2,350,114
8,108,720
4,213,089
143,635
98,420
555,843
21,978
86,447
8,832
22,887
409,785
2,778,697
11,164,269
6,150,983
403,546
65,037
231,028
120,814
289,747
301,373
68,062
151,501
1,686,888
20,311,087
16,448,333
20,633,248
Current assets
Inventories
Trade debtors
Other receivables
Deposits
Prepayments
Due from holding company (non-trade)
Due from affiliated companies (trade)
Due from affiliated companies (non-trade)
Tax recoverable
Fixed deposits
Cash and bank balances
12
12
12
A-5
2010
$
2009
$
2008
$
Current liabilities
Trade payables
Gross amount due to customers for contract
work-in-progress
Trust receipts and bills payable (secured)
Other creditors
Accruals and other liabilities
Provision for warranty
Dividends payable
Due to affiliated company (trade)
Due to affiliated company (non-trade)
Loan from related party
Provision for income tax
Finance lease obligations (current)
Loans from shareholders and directors (current)
Term loans (current)
Derivative financial instruments
Bank overdrafts (secured)
13
1,495,044
1,361,692
1,974,489
14
15
593,000
3,423,536
767,512
1,749,428
50,000
1,636,087
255,143
110,958
596,973
17,927
550,000
447,641
203
57,374
4,164,239
268,734
1,929,602
82,295
90,968
16,148
125,095
390,000
748,947
30,981
8,083,933
538,472
1,209,338
82,254
234,433
22,706
150,000
164,364
4,350
703,772
286,571
1,291,985
11,750,826
9,208,701
14,746,667
8,560,261
7,239,632
5,886,581
8
19
152,307
58,480
144,600
177,807
9,737
21
20
1,032,397
1,742,490
1,625,897
2,679,591
1,838,773
2,315,304
13,374,043
10,696,630
9,587,362
16
17
12
12
18
19
21
20
35
15
A-6
22
23
Non-controlling interests
2010
$
2009
$
2008
$
8,134,740
5,812,040
322,393
(1,051,441)
8,134,740
3,305,706
322,393
(1,175,957)
8,134,740
1,993,269
322,393
(964,689)
13,217,732
156,311
10,586,882
109,748
9,485,713
101,649
13,374,043
10,696,630
9,587,362
The accompanying accounting policies and explanatory notes form an integral part of the financial
statements.
A-7
Turnover
Cost of sales
2009
$
2008
$
32,616,138
(21,897,153)
26,805,412
(19,617,616)
29,191,390
(22,088,842)
10,718,985
1,452,735
(2,654,288)
(3,555,725)
(225,125)
7,187,796
712,498
(2,077,241)
(3,484,476)
(215,788)
7,102,548
603,450
(2,290,990)
(3,284,443)
(158,768)
5,736,582
(301,659)
14,489
2,122,789
(486,697)
3,004
1,971,797
(622,949)
8,936
5,449,412
(896,600)
1,639,096
(296,930)
1,357,784
(393,875)
4,552,812
1,342,166
963,909
Attributable to:
Equity holders of the Company
Non-controlling interests
4,506,334
46,478
1,312,437
29,729
933,165
30,744
4,552,812
1,342,166
963,909
9.3
2.7
1.9
Gross profit
Other operating income
Distribution and selling expenses
Administrative expenses
Other operating expenses
Profit from operations
Financial expenses
Interest income
Profit before tax
Tax expense
24
2010
$
25
26
27
29
30
31
The accompanying accounting policies and explanatory notes form an integral part of the financial
statements.
A-8
2010
$
2009
$
4,552,812
1,342,166
124,601
(214,613)
2008
$
963,909
(320,923)
4,677,413
1,127,553
642,986
Attributable to:
Equity holders of the Company
Non-controlling interests
4,630,850
46,563
1,101,169
26,384
613,562
29,424
4,677,413
1,127,553
642,986
The accompanying accounting policies and explanatory notes form an integral part of the financial
statements.
A-9
As at 1 January 2008
Equity,
total
$
Equity
attributable
to owners of
the parent,
total
$
Share
capital
$
Accumulated
profits
$
8,948,676
8,872,151
8,134,740
1,060,104
322,393
Capital
reserve
$
Translation
reserve
$
Noncontrolling
interests
$
(645,086)
76,525
963,909
933,165
933,165
(320,923)
(319,603)
(319,603)
(1,320)
Total comprehensive
income for the year
642,986
613,562
933,165
(319,603)
29,424
(1,097)
(1,097)
(3,203)
(3,203)
(4,300)
(4,300)
9,485,713
8,134,740
1,993,269
322,393
Dividends declared
to non-controlling
interest, representing
total contributions by
and distributions to
owners
Non-controlling
interest discharged
arising from the
disposal of interest
in a subsidiary,
representing
total changes in
ownership interests
in subsidiaries
Total transactions
with owners in their
capacity as owners
As at 31 December
2008
9,587,362
A-10
(964,689)
30,744
101,649
Equity,
total
$
Equity
attributable
to owners of
the parent,
total
$
Share
capital
$
Accumulated
profits
$
As at 1 January 2009
9,587,362
9,485,713
8,134,740
1,993,269
322,393
1,342,166
1,312,437
1,312,437
(211,268)
(3,345)
1,101,169
1,312,437
(211,268)
26,384
Total comprehensive
income for the year
(214,613)
1,127,553
(211,268)
Capital
reserve
$
Translation
reserve
$
Noncontrolling
interests
$
(964,689)
101,649
29,729
Dividends declared
to non-controlling
interest, representing
total contributions by
and distributions to
owners
Non-controlling
interest discharged
arising from the
disposal of interest
in a subsidiary,
representing
total changes in
ownership interests
in subsidiaries
(6,006)
(6,006)
(12,279)
(12,279)
Total transactions
with owners in their
capacity as owners
(18,285)
(18,285)
10,586,882
8,134,740
3,305,706
322,393
As at 31 December
2009
10,696,630
A-11
(1,175,957)
109,748
As at 1 January 2010
Profit for the year
Other comprehensive
income
Equity,
total
$
Equity
attributable
to owners of
the parent,
total
$
Share
capital
$
Accumulated
profits
$
10,696,630
10,586,882
8,134,740
3,305,706
322,393
4,552,812
4,506,334
4,506,334
46,478
124,601
124,516
124,516
85
Capital
reserve
$
Translation
reserve
$
Noncontrolling
interests
$
(1,175,957)
109,748
Total comprehensive
income for the year
Dividends (Note 32),
representing total
transactions with
owners in their
capacity as owners
4,677,413
4,630,850
4,506,334
124,516
46,563
(2,000,000)
(2,000,000)
(2,000,000)
As at 31 December
2010
13,374,043
13,217,732
8,134,740
A-12
5,812,040
322,393
(1,051,441)
156,311
2010
$
2009
$
2008
$
5,449,412
1,639,096
1,357,784
33,367
(66,996)
12,273
(8,914)
(49,991)
(1,154,215)
342
(43,928)
557,059
33,814
38
(1,062,245)
(7,881)
432,741
24,999
203
301,659
(14,489)
50,000
47,081
(53,747)
416,336
12,008
486,697
(3,004)
(200,749)
3,987,346
A-13
456,233
(176,827)
80,474
(222,402)
2,981,098
119,381
(505,015)
11,848
222,928
180,639
1,074,247
50
(1)
(4,474)
412,725
12,897
622,949
(8,936)
(1,512)
(249,797)
3,245,713
2010
$
2009
$
2008
$
593,000
1,063,381
(14,878)
(700,308)
(2,399,825)
186,608
21,978
2,498,490
401,839
(358,198)
1,659,976
441,623
46,959
(1,485,834)
274,465
466,620
442,510
285,669
329,586
(332,276)
133,352
(740,703)
498,778
(180,174)
(612,797)
(3,919,694)
(269,738)
720,264
(793,832)
(672,923)
31,360
(176,006)
2,448,555
(301,659)
(389,192)
26,015
14,489
3,589,822
(486,697)
(462,286)
110,822
3,004
1,615,052
(622,949)
(211,380)
8,936
1,798,208
2,754,665
789,659
11,059
A-14
1,203,002
13,526
(344,410)
56,872
(341,462)
(1,691)
1
5,730
(309,202)
872,118
(273,531)
(305,162)
2010
$
2009
$
2008
$
(446,208)
(433,500)
(17,193)
(1,238,407)
(5,965)
(526,648)
(150,000)
(14,087)
(773,337)
1,600,000
(16,112)
(111,051)
(26,102)
(129,676)
507,920
(2,135,308)
129,963
224,979
33
535,018
3,157,501
2,611,097
546,404
709,476
(163,072)
3,692,519
3,157,501
546,404
The accompanying accounting policies and explanatory notes form an integral part of the financial
statements.
A-15
Corporate information
Far East Group Limited (formerly known as Far East Group Pte. Ltd.) (the Company) is a private
limited company domiciled and incorporated in Singapore. The address of the Companys registered
office and principal place of business is 112 Lavender Street, #04-00 Far East Refrigeration
Building, Singapore 338728.
The Companys holding and ultimate holding company is Universal Pte. Ltd., incorporated in
Singapore.
The principal activities of the Company consist of trading of refrigeration parts, servicing of
refrigerators and cold rooms, construction and installation of commercial refrigerators and cold
rooms and all other incidental business of refrigeration.
The principal activities of the subsidiary companies are shown in Note 6.
2.
2.1
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with
Singapore Financial Reporting Standards (FRS).
The financial statements have been prepared on a historical cost basis except as disclosed in the
accounting policies below.
The financial statements are presented in Singapore Dollars (SGD or $).
2.2
A-16
2.2
A-17
2.2
Transaction costs would no longer be capitalised as part of the cost of acquisition but will be
expensed immediately;
Consideration contingent on future events are recognised at fair value on the acquisition date
and any changes in the amount of consideration to be paid will no longer be adjusted against
goodwill but recognised in profit or loss;
The Group elects for each acquisition of a business, to measure non-controlling interest at
fair value, or at the non-controlling interests proportionate share of the acquirees identifiable
net assets, and this impacts the amount of goodwill recognised; and
When a business is acquired in stages, the previously held equity interests in the acquiree
is remeasured to fair value at the acquisition date with any corresponding gain or loss
recognised in profit or loss, and this impacts the amount of goodwill recognised.
According to its transitional provisions, the revised FRS 103 has been applied prospectively. Assets
and liabilities that arose from business combinations whose acquisition dates are before 1 January
2010 are not adjusted.
A-18
2.2
2.3
A change in the ownership interest of a subsidiary that does not result in a loss of control
is accounted for as an equity transaction. Therefore, such a change will have no impact on
goodwill, nor will it give rise to a gain or loss recognised in profit or loss;
Losses incurred by a subsidiary are allocated to the non-controlling interest even if the losses
exceed the non-controlling interest in the subsidiarys equity; and
When control over a subsidiary is lost, any interest retained is measured at fair value with the
corresponding gain or loss recognised in profit or loss.
According to its transitional provisions, the revised FRS 27 has been applied prospectively,
and does not impact the Groups consolidated financial statements in respect of transactions
with non-controlling interests, attribution of losses to non-controlling interests and disposal
of subsidiaries before 1 January 2010. The changes will affect future transactions with noncontrolling interests.
Description
Amendment to FRS 32 Financial Instruments: Presentation - Classification
of Rights Issues
1 February 2010
1 July 2010
1 July 2010
1 January 2011
1 January 2011
1 January 2011
1 January 2011
1 July 2011
1 July 2011
1 January 2012
1 January 2012
A-19
2.3
2.4
Foreign currency
The Groups financial statements are presented in Singapore dollars, which is also the Companys
functional currency. Each entity in the Group determines its own functional currency and items
included in the financial statement of each entity are measured using that functional currency.
(a)
A-20
2.4
Group companies
On consolidation, the results and financial position of foreign operations are translated into
SGD using the following procedures:
-
Assets and liabilities are translated at the rate ruling at that balance sheet date; and
Income and expenses are translated at average exchange rates for the year, which
approximates the exchange rates at the dates of the transactions.
All resulting exchange differences are recognised initially in other comprehensive income and
accumulated under a separate component of equity as foreign currency translation reserve.
On disposal of a foreign operation, the cumulative amount recognised in foreign currency
translation reserve relating to that foreign operation is recognised in profit or loss.
In the case of a partial disposal without loss of control of a subsidiary that includes a foreign
operation, the proportionate share of the cumulative amount of the exchange differences are
re-attributed to non-controlling interest and are not recognised in profit or loss.
2.5
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.
A-21
2.5
Basis of consolidation
Business combinations from 1 January 2010
The consolidated financial statements comprise the financial statements of the Company
and its subsidiaries as at the end of the reporting period. The financial statements of the
subsidiaries used in the preparation of the consolidated financial statements are prepared for
the same reporting date as the Company. Consistent accounting policies are applied to like
transactions and events in similar circumstances.
All intra-group balances, income and expenses and unrealised gains and losses resulting
from intra-group transactions are eliminated in full.
Subsidiaries are 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.
Business combinations are accounted for by applying the acquisition method. Identifiable
assets acquired and liabilities assumed in a business combination are measured initially at
their fair values at the acquisition date. Acquisition-related costs are recognised as expenses
in the periods in which the costs are incurred and the services are received.
When the Group acquires a business, it assesses the financial assets and liabilities assumed
for appropriate classification and designation in accordance with the contractual terms,
economic circumstances and pertinent conditions as at the acquisition date. This includes
the separation of embedded derivatives in host contracts by the acquiree.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value
at the acquisition date. Subsequent changes to the fair value of the contingent consideration
which is deemed to be an asset or liability, will be recognised in accordance with FRS
39 either in profit or loss or as change to other comprehensive income. If the contingent
consideration is classified as equity, it is not be remeasured until it is finally settled within
equity.
In business combinations achieved in stages, previously held equity interests in the acquiree
are remeasured to fair value at the acquisition date and any corresponding gain or loss is
recognised in profit or loss.
The Group elects for each individual business combination, whether non-controlling interest
in the acquiree (if any) is recognised on the acquisition date at fair value, or at the noncontrolling interests proportionate share of the acquiree identifiable net assets.
Any excess of the sum of the fair value of the consideration transferred in the business
combination, the amount of non-controlling interest in the acquiree (if any), and the fair value
of the Groups previously held equity interest in the acquiree (if any), over the net fair value
of the acquirees identifiable assets and liabilities is recorded as goodwill. In instances where
the latter amount exceeds the former, the excess is recognised as gain on bargain purchase
in profit or loss on the acquisition date.
A-22
2.5
2.6
2.7
Affiliated companies
An affiliated company is a company, not being a subsidiary company, associated company or joint
venture company in which one or more of the directors or shareholders of the Company or its
subsidiaries have a significant equity interest or exercise significant influence.
A-23
2.8
Related parties
A party is considered to be related to the Group if:
(a)
2.9
(ii)
has an interest in the Group that gives it significant influence over the Group; or
(iii)
(b)
(c)
(d)
The party is a member of the key management personnel of the Group or its parent;
(e)
The party is a close member of the family of any individual referred to in (a) or (d); or
(f)
The party is an entity that is controlled, jointly controlled or significantly influenced by or for
which significant voting power in such entity resides with, directly or indirectly, any individual
referred to in (d) or (e); or
(g)
The party is a post-employment benefit plan for the benefit of the employees of the Group, or
of any entity that is a related party of the Group.
Fixed assets
All fixed assets are initially recorded at cost. Such cost includes the cost of replacing part of the
fixed asset and borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying fixed asset. The accounting policy for borrowing cost is set out in Note
2.18. The cost of an item of fixed asset is recognised as an asset, if and only if, it is probable that
future economic benefits associated with the item will flow to the Group and the cost of the item
can be measure reliably.
Subsequent to recognition, fixed assets are measured at cost less accumulated depreciation and
any accumulated impairment losses.
Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation is
computed on a straight-line basis over the estimated useful life of the asset as follows:
Buildings
Leasehold land and buildings
Plant and machinery
Motor vehicles
Office equipment, furniture and fittings
Renovation
Computers
50 years
Lease term
5 to 10 years
5 years
3 to 10 years
3 to 10 years
3 years
A-24
2.9
A-25
A-26
(b)
(c)
A-27
(c)
A-29
2.15 Inventories
Inventories are stated at the lower of cost and net realisable value.
Cost is determined using the weighted average method. The cost of raw materials includes cost of
purchase. The cost of work-in-progress and finished goods includes materials, all direct expenditure
and an attributable proportion of overheads.
Where necessary, allowance is provided for damaged, obsolete and slow moving items to adjust
the carrying value of inventories to the lower of cost and net realisable value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated
costs of completion and the estimated costs necessary to make the sale.
2.16 Financial liabilities
Initial recognition and measurement
Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes
a party to the contractual provisions of the financial instrument. The Group determines the
classification of its financial liabilities at initial recognition.
All financial liabilities are recognised initially at fair value plus, in the case of financial liabilities not
at fair value through profit or loss, directly attributable transaction costs.
Subsequent measurement
The measurement of financial liabilities depends on their classification as follows:
(a)
A-30
Derecognition
A financial liability is derecognised when the obligation under the liability is discharged or cancelled
or expires. When an existing financial liability is replaced by another from the same lender on
substantially different terms, or the terms of an existing liability are substantially modified, such an
exchange or modification is treated as a derecognition of the original liability and the recognition of
a new liability, and the difference in the respective carrying amounts is recognised in profit or loss.
2.17 Financial guarantee
A financial guarantee contract is a contract that requires the issuer to make specified payments to
reimburse the holder for a loss it incurs because a specified debtor fails to make payment when
due.
Financial guarantees are recognised initially at fair value, adjusted for transaction costs that are
directly attributable to the issuance of the guarantee. Subsequent to initial recognition, financial
guarantees are recognised as income in profit or loss over the period of the guarantee. If it is
probable that the liability will be higher than the amount initially recognised less amortisation, the
liability is recorded at the higher amount with the difference charged to profit or loss.
2.18 Borrowing costs
Borrowing costs are expenses when incurred except for borrowing costs directly attributable to the
acquisition, construction or production of a qualifying asset which are capitalised. 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 substantially completed for their intended use or sale. All other borrowing costs
are expensed in the period they occur. Borrowing costs consist of interest and other costs that an
entity incurs in connection with the borrowing of funds.
2.19 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 economic resources will be required to
settle the obligation, the provision is reversed. If the effect of the time value of money is material,
provisions are discounted using a current pre tax rate that reflects, where appropriate, the risks
specific to the liability. When discounting is used, the increase in the provision due to the passage
of time is recognised as a finance cost.
A-31
(b)
2.21 Leases
The determination of whether an arrangement is, or contains a lease is based on the substance of
the arrangement at inception date: whether fulfilment of the arrangement is dependent on the use
of a specific asset or assets or the arrangement conveys a right to use the asset. For arrangements
entered into prior to 1 January 2005, the date of inception is deemed to be 1 January 2005 in
accordance with the transitional requirements of INT FRS 104.
(a)
As lessee
Finance leases, which transfer to the Group substantially all the risks and rewards incidental
to ownership of the leased item, are capitalised 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 capitalised. 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 profit
or loss. Contingent rents, if any, are charged as expenses in the periods in which they are
incurred.
Capitalised leased assets are depreciated over the shorter of the estimated useful life of
the asset and the lease term, if there is no reasonable certainty that the Group will obtain
ownership by the end of the lease term.
Operating lease payments are recognised as an expense in profit or loss 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)
As lessor
Leases where the Group retains substantially all the risks and rewards of ownership of
the asset are classified as operating leases. Initial direct costs incurred in negotiating an
operating lease are added to the carrying amount of the leased asset and recognised over
the lease term on the same bases as rental income. The accounting policy for rental income
is set out in Note 2.22(e). Contingent rents are recognised as revenue in the period in which
they are earned.
A-32
2.22 Revenue
Revenue is recognised to the extent that it is probable that the economic benefits will flow
to the Group and the revenue can be reliably measured. Revenue is measured at fair value of
consideration received or receivable, excluding discounts, rebates, and sales taxes or duty. The
Group assesses its revenue arrangements to determine if it is acting as principal or agent. The
Group has concluded that it is acting as a principal in all of its revenue arrangements. The following
specific recognition criteria must also be met before revenue is recognised:
(a)
Sale of goods
Revenue is recognised upon the transfer of significant risk and rewards of ownership of the
goods to the customer. Revenue is not recognised to the extent where there are significant
uncertainties regarding recovery of the consideration due, associated costs or the possible
return of goods.
(b)
(c)
Interest income
Interest income is recognised using the effective interest method.
(d)
Dividend income
Dividend income is recognised when the Groups right to receive payment is established.
(e)
Rental income
Rental income is accounted for on a straight-line basis over the lease terms. The aggregate
costs of incentives provided to lessees are recognised as a reduction of rental income over
the lease term on a straight-line basis.
Current tax
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, in the countries where the Group operates and generates taxable
income.
Current taxes are recognised in profit or loss except to the extent that the tax relates to
items recognised outside profit or loss, either in other comprehensive income or directly in
equity. Management periodically evaluates positions taken in the tax returns with respect to
situations in which applicable tax regulations are subject to interpretations and establishes
provisions where appropriate.
A-33
Deferred tax
Deferred 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 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
Deferred 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 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
The carrying amount of deferred 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 tax asset to be utilised. Unrecognised deferred 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 utilised.
Deferred 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.
Deferred tax relating to items recognised outside profit or loss is recognised outside profit or
loss. Deferred tax items are recognised in correlation to the underlying transaction either in
other comprehensive income or directly in equity and deferred tax arising from a business
combination is adjusted against goodwill on acquisition.
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.
A-34
Sales tax
Revenues, expenses and assets are recognised net of the amount of sales tax except:
-
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.
2.24 Share capital and share issue expense
Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental
costs directly attributable to the issuance of ordinary shares are deducted against share capital.
2.25 Government grants
Government grants are recognised at their fair value when there is reasonable assurance that the
grant will be received and all attaching conditions will be complied with. When the grant relates
to an expense item, it is recognised in profit or loss as other operating income over the period
necessary to match them on a systematic basis to the costs that it is intended to compensate.
2.26 Segment reporting
For management purposes, the Group is organised into operating segments based on their
products and services which are independently managed by the respective segment managers
responsible for the performance of the respective segments under their charge. The segment
managers report directly to the management of the Company who regularly review the segment
results in order to allocate resources to the segments and to assess the segment performance.
Additional disclosures on each of these segments are shown in Note 39, including the factors used
to identify the reportable segments and the measurement basis of segment information.
A-35
(ii)
Impairment of receivables
The Group assesses at each balance sheet whether there is objective evidence that
receivables have been impaired. Impairment loss is calculated based on a review of
the current status of existing receivables and historical collections experience. Such
allowances are adjusted periodically to reflect the actual and past experience. As at
31 December 2010, the carrying amount of trade and other receivables of the Group,
including balances with affiliated, associated and holding companies amounted to
$7,019,346 (2009: $4,473,981; 2008: $7,266,463).
(iii)
Income taxes
The Group has exposure to income taxes in numerous jurisdictions. Significant
judgement is involved in determining the group-wide provision for income taxes. There
are certain transactions and computations for which the ultimate tax determination is
uncertain during the ordinary course of business. The Group recognises liabilities for
expected tax issues based on estimates of whether additional taxes will be due. Where
the final tax outcome of these matters is different from the amounts that were initially
recognised, such differences will impact the income tax and deferred tax provisions in
the period in which such determination is made. As at 31 December 2010, the carrying
amounts of the Groups provision for income tax, deferred tax assets and deferred tax
liabilities were $596,973 (2009: $125,095; $164,364), $174,014 (2009: $199,231; 2008:
$171,998) and $152,307 (2009: $144,600; 2008: $177,807) respectively.
A-36
(v)
(vi)
(b)
A-37
Fixed assets
Cost
As at 1.1.2008
Additions
Disposals
Write off
Translation
difference
Freehold
land
$
Buildings
$
2,775,973
3,841,526
(90,543)
Leasehold
land
Plant
and
and
buildings machinery
$
$
630,014
(12,060)
1,703,813
195,147
(81,969)
Motor
vehicles
$
Office
equipment,
furniture
and fittings
$
571,792
26,235
1,043,595
50,752
(2,946)
(1,871)
Renovation
$
978,059
17,260
(16,749)
(29,087)
(8,573)
581,278
212,649
(154,327)
1,060,443
73,794
(491)
(27,800)
(5,472)
(9,694)
(3,022)
1,789,191
2,838
(922)
634,128
196,012
(13,784)
1,124,052
102,192
(5,489)
1,013,914
81,250
(7,409)
As at
31.12.2008
and 1.1.2009
Additions
Disposals
Write off
Translation
difference
2,775,973
As at
31.12.2009
and 1.1.2010
Additions
Disposals
Write off
Translation
difference
2,775,973
3,724,678
16,819
608,753
35,389
18,839
35,871
8,433
11,942
1,875
2,775,973
3,776,886
627,592
1,826,978
824,789
1,232,697
1,089,630
As at
31.12.2010
3,750,983
1,105
(27,410)
617,954
(9,201)
1,816,991
A-38
986,746
30,190
Computers
$
Total
$
1,000,238 12,545,010
19,808
309,202
(2,946)
(1,871)
(8,952)
(247,933)
1,011,094 12,601,462
23,724
341,462
(1)
(154,819)
(13,468)
(13,468)
(2,923)
(85,522)
1,018,426 12,689,115
38,899
438,010
(2,932)
(25,047)
(717)
(6,206)
3,026
115,375
1,056,702 13,211,247
Accumulated
depreciation
and
impairment
loss
At 1.1.2008
Charge for the
year
Disposals
Write off
Translation
difference
As at 31.12.2008
and 1.1.2009
Charge for the
year
Disposals
Write off
Translation
difference
As at 31.12.2009
and 1.1.2010
Charge for the
year
Disposals
Write off
Translation
difference
Leasehold
land
and
Plant and
buildings machinery
$
$
Freehold
land
$
Buildings
$
398,465
397,664
1,383,820
507,067
57,779
6,893
126,737
37,476
(10,092)
(4,031)
(66,575)
446,152
400,526
1,443,982
57,500
6,545
128,825
(3,339)
(1,751)
(22,093)
735,873
Renovation
$
Computers
$
Total
$
437,361
935,895
63,473
(1,690)
(1,821)
85,557
34,810
412,725
(1,690)
(1,821)
(14,449)
(17,535)
(6,607)
(7,652)
(126,941)
530,094
778,300
516,311
963,053
4,796,145
5,078,418
36,597
(151,496)
66,255
(197)
86,287
34,327
(1)
(13,468)
416,336
(151,694)
(13,468)
(4,833)
(6,106)
(2,263)
(2,618)
(43,003)
500,313
405,320
58,021
10,357
96,385
(323)
86,109
(13,784)
67,538
(5,147)
85,987
(3,992)
28,344
(1,303)
(717)
4,673
(54,734)
31,090
4,444
8,299
2,386
2,880
563,007
360,943
1,677,866
487,131
908,942
684,716
1,010,497
5,693,102
3,304,831
217,428
373,009
51,184
282,143
470,435
48,041
7,523,044
As at
31.12.2009
2,775,973
3,224,365
203,433
238,477
223,766
285,800
413,579
37,133
7,402,526
As at
31.12.2010
2,775,973
3,213,879
266,649
149,112
337,658
323,755
404,914
46,205
7,518,145
As at
31.12.2010
1,550,714
Motor
vehicles
$
Office
equipment,
furniture
and fittings
$
A-39
410,362
838,252
600,335
981,293
5,286,589
432,741
(19,402)
(5,864)
(962)
Freehold land and buildings of the Group with net book values amounting to $5,989,852
(2009: $6,000,338; 2008: $6,080,804); and
(b)
Leasehold land and buildings of the Group with net book value amounting to $266,649 (2009:
$203,433; 2008: $217,428).
During the financial year ended 31 December 2010, the Group acquired fixed assets with an
aggregate cost of $93,600 (2009: $Nil; 2008: $Nil) by means of finance leases. The cash outflow on
acquisition of fixed assets amounted to $344,410 (2009: $341,462; 2008: $309,202).
Net book values of fixed assets under finance leases are as follows:
2010
$
Motor vehicles
5.
2009
$
107,822
2008
$
9,444
Investment properties
2010
$
Cost
At beginning of year
Disposal
Translation difference
2009
$
696,784
(640,577)
(56,207)
At end of year
Accumulated depreciation
At beginning of year
Charge for the year
Disposal
Translation difference
482,638
24,999
(499,819)
(7,818)
2008
$
717,139
(20,355)
726,875
(9,736)
696,784
717,139
472,203
12,008
(1,573)
460,571
12,897
(1,265)
At end of year
482,638
472,203
214,146
244,936
The property rental income earned by the Group for the year ended 31 December 2010 from its
investment properties, all of which are leased out under operating leases, amounted to $42,539
(2009: $62,245; 2008: $61,015). Direct operating expenses (including repairs and maintenance)
arising on the rental-earning investment properties amounted to $3,222 (2009: $5,557; 2008:
$5,006).
A-40
6.
Principal activities
Country of
incorporation and
place of business
Effective equity
held by the Group
2010
2009
2008
%
%
%
Investment holding
Malaysia
100
100
100
Hong Kong
Nil
Nil
93.88
Hong Kong
100
100
100
Singapore
57.1
57.1
57.1
Singapore
100
100
Nil
Singapore
100
100
Nil
A-41
Principal activities
Country of
incorporation and
place of business
Effective equity
held by the Group
2010
2009
2008
%
%
%
Malaysia
100
100
100
Trading of electrical,
refrigeration and airconditioning equipment
and parts
Malaysia
100
100
100
Trading of electrical,
refrigeration and airconditioning equipment
and parts
Malaysia
93.88
93.88
93.88
Trading of electrical,
refrigeration and airconditioning equipment
and parts
Malaysia
100
100
100
Trading of electrical,
refrigeration and airconditioning equipment
and parts
Malaysia
100
100
100
Trading of electrical,
refrigeration and airconditioning equipment
and parts
Malaysia
100
100
100
Trading of electrical,
refrigeration and airconditioning equipment
and parts
Malaysia
100
100
100
Audited by Ho & Chung CPA Limited for 2008 and 2009. Audited by a member firm of Ernst & Young Global for 2010.
This subsidiary ceased trading activities in the financial year ended 31 December 2007.
During the financial year ended 31 December 2009, the Group disposed off its entire interest in Far
East Refrigeration (Hong Kong) Limited to a related party for a cash consideration of HK$1.
A-42
Unquoted investments
(a)
(b)
2009
$
2008
$
95,865
(6,897)
371,865
(276,000)
(4,682)
383,945
(276,000)
(5,521)
88,968
91,183
102,424
Country of
incorporation and
place of business
Effective equity
held by the Group
2010 2009 2008
%
%
%
2010
$
Cost of investment
2009
2008
$
$
Peoples Republic
of China
Nil
10.80
10.80
276,000
276,000
Peoples Republic
of China
30.00
30.00
30.00
95,865
95,865
95,865
RSP Systems HK
Limited
Hong Kong
Nil
Nil
28.55
12,080
95,865
(6,897)
371,865
(276,000)
(4,682)
383,945
(276,000)
(5,521)
88,968
91,183
102,424
A-43
8.
Deferred taxation
Deferred tax assets arise as a result of:
2010
$
2009
$
2008
$
174,014
199,231
(12,713)
184,711
174,014
199,231
171,998
152,307
144,600
177,807
2010
$
2009
$
2008
$
6,065,458
721,201
995,780
417,115
6,020,334
936,389
993,919
158,078
9,243,470
291,749
1,420,189
208,861
8,199,554
8,108,720
11,164,269
9.
Inventories
Balance sheet
Finished goods
Finished goods-in-transit
Raw materials
Work-in-progress
A-44
Inventories (contd)
2010
$
2009
$
2008
$
20,593,610
18,837,872
19,343,569
557,059
1,074,247
Profit or loss
Inventories recognised as an expense in cost of sales
Inclusive of the following charge:
- Inventories written down
- Inventories written back
(1,154,215)
The management of the Group reviews an aging analysis of inventories to identify obsolete and
slow-moving inventory items at each balance sheet date. An allowance for obsolete and slowmoving inventory items amounting to $Nil (2009: $557,059; 2008, $1,074,247) was provided with
inventories written down to adjust the carrying value of inventories to the lower of cost and net
realisable value. In 2010, allowance for obsolete and slow-moving inventory items amounting to
$1,154,215 (2009: $Nil; 2008: $Nil) was written back as previously identified obsolete and slowmoving inventory items were sold during the financial year.
10.
Trade debtors
2010
$
2009
$
2008
$
7,387,906
(741,363)
5,252,491
(1,039,402)
7,603,924
(1,452,941)
6,646,543
4,213,089
6,150,983
Trade debtors are non-interest bearing and are generally on 30 to 90 days terms. They are
recognised at their original invoice amounts which represent their fair values on initial recognition.
Debtors that are past due but not impaired
The Group has trade debtors amounting to $3,836,260 (2009: $1,898,907; 2008: $3,329,057) that
are past due at the balance sheet date but not impaired. These debtors are unsecured and the
analysis of their aging at the balance sheet date is as follows:
A-45
2010
$
2009
$
2008
$
2,101,876
514,080
726,668
87,527
406,109
1,084,063
383,585
150,535
83,537
197,187
1,401,264
1,226,316
196,077
207,124
298,276
3,836,260
1,898,907
3,329,057
At beginning of year
Allowance for the year
Reclassification (previously classified as allowance against
amount due from an associated company (Note 12))
Written off against allowance
Written-back
Translation difference
At end of year
2010
$
2009
$
2008
$
1,039,402
33,367
1,452,941
456,233
1,814,914
119,381
(243,101)
(66,996)
(21,309)
741,363
(691,457)
(176,827)
(1,488)
1,039,402
196,000
(162,309)
(505,015)
(10,030)
1,452,941
Trade debtors that are individually determined to be impaired at the balance sheet date relate to
debtors that are in significant financial difficulties and have defaulted on payments. These debts are
not secured by any collateral or credit enhancements.
Allowance for doubtful debts amounting to $66,996 (2009: $176,827; 2008: $505,015) was writtenback as these previously impaired amounts were recovered from trade debtors during the financial
year.
Trade debtors denominated in foreign currencies as at 31 December are as follows:
A-46
2010
$
2009
$
237,783
15,346
45,068
5,803
531,278
16,150
103,505
2,370
2008
$
1,081,555
172,312
24,864
Other receivables
2010
$
2009
$
2008
$
Sundry debtors
Allowance for doubtful sundry debtors
136,827
221,239
(77,604)
699,533
(295,987)
136,827
143,635
403,546
18,329
155,156
143,635
403,546
Movements in allowance for doubtful sundry debtors during the year are as follows:
2010
$
At beginning of year
Allowance for the year
Written off against allowance
Written-back
Translation difference
2009
$
77,604
(62,489)
(8,914)
(6,201)
At end of year
2008
$
295,987
80,474
(71,802)
(222,402)
(4,653)
108,152
222,928
(35,205)
112
77,604
295,987
Other debtors that are individually determined to be impaired at the balance sheet date relate to
debtors that are in significant difficulties and have defaulted on payments. These debts are not
secured by any collateral or credit enhancements.
Allowance for doubtful sundry debtors amounting to $8,914 (2009: $222,402; 2008: $Nil) was
written back as these previously impaired accounts were recovered from sundry debtors during the
financial year.
12.
At beginning of year
Allowance for the year
Written-back
At end of year
A-47
2010
$
2009
$
2008
$
136,711
(49,991)
180,639
(43,928)
180,639
86,720
136,711
180,639
2009
$
18,925
2008
$
112,606
96,306
Included in the amount due to holding/affiliated companies are amounts denominated in the
following currencies:
2010
$
United States Dollar
Ringgit Malaysia
13.
255,143
2009
$
69,319
16,148
2008
$
234,433
Trade payables
These amounts are non-interest bearing. Trade payables are normally settled on 30 to 90 days
terms.
Trade payables denominated in foreign currencies as at 31 December are as follows:
A-48
2010
$
2009
$
2008
$
567,998
284,632
1,043
70,421
22,754
434,483
103,221
13,756
263,012
2,464
607,030
292,816
33,938
11,054
383,896
1,369
10,587
15.
2009
$
2008
$
3,657,000
(4,250,000)
(593,000)
713,157
1,899,907
A-49
2009
$
2008
$
812,908
232,445
107,920
144,835
53,108
60,000
17.
2010
$
2009
$
2008
$
1,616,579
132,849
1,786,785
142,817
912,117
297,221
1,749,428
1,929,602
1,209,338
18.
A-50
2009
1 year to 5 years
Not later than 1 year
2008
1 year to 5 years
Not later than 1 year
Interest
$
Present
value of
principal
$
62,328
20,784
3,849
2,856
58,480
17,927
83,112
6,705
76,407
12,046
5,376
2,309
1,026
9,737
4,350
17,422
3,335
14,087
During the financial year ended 31 December 2009, the Group repaid all the finance lease
obligations. In the financial years ended 31 December 2010 and 2008, the finance lease terms
were 5 years and ranged from 1 to 5 years respectively with options to purchase at the end of the
lease term. Finance lease terms do not contain restrictions concerning dividends, additional debt or
further leasing. As at 31 December 2010, the effective interest rates was 4.19% (2009: Nil; 2008:
6.4%) per annum.
A-51
Term loans
2010
$
2009
$
2008
$
(b)
(c)
(d)
(e)
281,231
376,212
1,515,390
1,567,820
1,622,115
100,571
100,662
101,833
399,777
516,639
174,393
516,900
A-52
2009
$
2008
$
445,286
501,715
2,190,131
3,428,538
2,601,875
447,641
1,742,490
748,947
2,679,591
286,571
2,315,304
2,190,131
3,428,538
2,601,875
(a)
The term loan was secured by a first party legal charge for RM1,500,000 and second legal
charge for RM3,000,000 over freehold land and leasehold land and building with total net
book value of $Nil (2009: $1,418,828; 2008: $1,455,902) and joint and several guarantees by
certain directors.
(b)
The term loan is secured by legal mortgages over freehold land and buildings with a net
book value of $4,429,172 (2009: $4,468,364; 2008: $4,507,554), and joint and several
guarantees by certain directors.
(c)
The term loan is secured by joint and several guarantees by certain directors.
(d)
The term loan is secured by a first legal charge over leasehold land and building with a net
book value of $117,072 (2009: $122,537; 2008: $Nil) and joint and several guarantees by
certain directors.
(e)
The bridging loan is secured by joint and several guarantees by certain directors.
(f)
The term loan was secured by a legal mortgage over leasehold building and investment
property with total net book value of $Nil (2009: $20,697; 2008: $46,503) and joint and
several guarantees by certain directors and related parties.
As at 31 December 2010, the effective interest rates range from 2.35% to 5.25% (2009: 2.41% to
7.40%; 2008: 3.25% to 7.40%) per annum.
21.
A-53
Share capital
2010
$
2009
$
2008
$
8,134,740
8,134,740
8,134,740
80,888
80,888
80,888
The holders of the ordinary shares are entitled to receive dividends as and when declared by the
Company. All ordinary shares carry one vote per share without restriction. The ordinary shares
have no par value.
23.
Translation reserve
The translation reserve represents exchange differences arising from the translation of the financial
statements of foreign operations whose functional currencies are different from the Groups
presentation currency.
24.
Turnover
Turnover represents the invoiced value of goods sold net of returns and allowances, sales tax
and goods and services tax. Significant intra-group transactions have been excluded from Group
turnover.
Sale of goods
Project sales and installation works
Project maintenance service
A-54
2010
$
2009
$
2008
$
28,503,867
4,069,081
43,190
25,357,184
1,417,033
31,195
27,664,732
1,521,078
5,580
32,616,138
26,805,412
29,191,390
2009
$
2008
$
135,279
184,079
1,062,245
7,881
17,310
45,941
190,695
100,751
195,610
53,747
101,481
70,214
46,445
76,188
185,567
273,844
1,512
1
4,474
15,419
1,452,735
712,498
603,450
During the financial year ended 31 December 2009, the Singapore Finance Minister announced
the introduction of a Jobs Credit Scheme (Scheme). Under this Scheme, the Group received a 12%
cash grant on the first $2,500 of each months wages for each employee on their Central Provident
Fund payroll. The Group received its grant income of $101,481 in four receipts in March, June,
September and December 2009. The government extended the Jobs Credit scheme for half a year
in 2010 and the Group received a cash grant of $17,310 at stepped-down rates of 6% and 3% in
March and June 2010 respectively.
26.
A-55
2010
$
2009
$
2008
$
203,960
21,165
60,108
110,780
33,814
38
11,048
153,019
5,749
225,125
215,788
158,768
28.
2010
$
2009
$
2008
$
12,273
432,741
24,999
416,336
12,008
11,848
412,725
12,897
121,500
53,911
99,000
53,803
88,500
54,408
585,596
348,400
(66,996)
33,367
556,843
339,043
(176,827)
456,233
529,856
309,945
(505,015)
119,381
180,639
(49,991)
(8,914)
50,000
(1,154,215)
342
203
3,951,323
(43,928)
80,474
(222,402)
557,059
3,565,246
222,928
1,074,247
50
3,171,316
2010
$
2009
$
2008
$
3,615,477
326,252
9,594
3,275,787
280,597
8,862
2,909,517
255,556
6,243
3,951,323
3,565,246
3,171,316
Personnel expenses
A-56
Financial expenses
Interest expense
- finance lease obligations
- bank overdrafts
- term loans
- related party
- trust receipts
- director
- others
30.
2010
$
2009
$
2008
$
3,587
8,838
127,808
160,963
463
2,519
45,216
146,782
5,500
275,489
5,583
5,608
1,427
96,193
138,393
9,000
368,923
9,013
301,659
486,697
622,949
2010
$
2009
$
2008
$
864,125
(2,984)
381,315
(22,824)
325,203
(34,605)
17,755
17,704
(59,913)
1,229
18,710
84,143
(2,877)
424
Tax expense
Current tax
- current year
- over provision in respect of prior years
Deferred tax
- current year
- under provision in respect of prior years
Reduction in opening deferred taxes resulting from
reduction in tax rate
896,600
296,930
393,875
As at 31 December 2010, the Group had unutilised tax losses of approximately $584,000 (2009:
$264,000; 2008: $372,000) available for offset against future taxable profits, subject to agreement
of the relevant income tax authorities and compliance with certain provisions of the tax legislation
of the respective countries in which the subsidiary companies operate.
A-57
Accounting profit
Tax at the applicable rate of 17% (2009: 17%; 2008: 18%)
Tax effect of expenses not deductible in determining taxable
profit, net
Tax effect arising from differences in tax rates
(Over)/under provision in respect of prior years
Deferred tax asset not recognised
Tax exemption
Effect of utilisation of reinvestment allowance
Utilisation of deferred tax asset previously not recognised
Reduction in opening deferred taxes resulting from
reduction in tax rate
Others
Tax expense
2010
$
2009
$
2008
$
5,449,412
1,639,096
1,357,784
926,400
278,646
244,401
118,984
(119,524)
14,720
54,545
(49,081)
(7,115)
(57,066)
19,220
(13,044)
(21,595)
83,674
(31,074)
(9,839)
(6,181)
48,433
130,475
49,538
21,781
(40,651)
(38,938)
(21,588)
14,737
(2,877)
896,600
296,930
424
393,875
The corporate income tax rate applicable to Singapore companies of the Group was reduced to
17% for the year of assessment 2010 onwards from 18% for the year of assessment 2009.
31.
A-58
(1)
32.
2010
$
2009
$
4,506,334
1,312,437
933,165
48,532,800
48,532,800
48,532,800
For comparative purposes, earnings per share for the financial years reported on have been computed on the profit
for the year attributable to ordinary equity holders divided by the number of ordinary shares adjusted for the subdivision for every one ordinary share into 600 ordinary shares (see Note 40 (d) (iii)).
Dividends
2010
$
Declared during the financial year:
Interim exempt (one-tier) dividend for 2010: $24.73
(2009: $Nil; 2008: $Nil) per share
33.
2008
$
2009
$
2,000,000
2008
$
2009
$
2008
$
2,350,114
(57,374)
1,399,779
2,778,697
(30,981)
409,785
1,686,888
(1,291,985)
151,501
3,692,519
3,157,501
As at 31 December 2010, fixed deposits earn interest at 0.15% to 2.75% per annum.
A-59
546,404
34.
2010
$
2009
$
2008
$
597,483
64,933
73,763
3,132
5
522,329
100,672
45,172
190,976
229,846
415
(b)
2009
$
2008
$
Income
Sale of goods to affiliated companies
Commission income from affiliated companies
233,760
135,279
27,797
123,739
49,009
46,444
Expenses
Purchases from affiliated companies
Rental paid to a related party
Interest expense paid to a director
Interest expense paid to a related party
792,804
21,192
897,530
22,548
5,583
5,500
860,557
20,952
9,000
2010
$
2009
$
2008
$
889,921
44,075
859,038
36,848
796,479
43,322
933,996
895,886
839,801
A-60
Contingent liabilities
The Company issued corporate guarantees to banks for securing banking facilities of
subsidiary and affiliated companies.
(b)
Lease commitments
As a lessee
As at 31 December 2010, the Group had aggregate lease commitments in respect of stores
and offices of $1,389,000 (2009: $1,490,000; 2008: $1,397,000) payable as follows:
2010
$
2009
$
2008
$
208,000
298,000
883,000
217,000
338,000
935,000
103,000
307,000
987,000
1,389,000
1,490,000
1,397,000
Most leases contain renewable options. Lease terms do not contain restrictions on the
Groups activities concerning dividends, additional debt or further leasing.
Minimum lease payments recognised as an expense in profit or loss of the Group for the
financial year ended 31 December 2010 amounted to $268,192 (2009: $179,571; 2008:
$135,945).
As a lessor
The Group leases out freehold and leasehold buildings under operating lease arrangements,
with leases negotiated up to a term of 2 years with options to renew upon expiry of lease
periods. The terms of the lease generally also require the tenant to pay a security deposit.
As at 31 December 2010, the Group had aggregate future minimum lease receivables under
non-cancellable operating leases as follows:
2010
$
Not later than one year
One year through five years
A-61
2009
$
2008
$
51,000
101,000
39,000
152,000
48,000
51,000
140,000
200,000
EUR 200,521 (2009: $Nil; 2008: $Nil) for a consideration of $171,389 and
HKD1,036,000 (2009: $Nil; 2008: $Nil);
JPY 2,000,000 (2009: $Nil; 2008: $Nil) for a consideration of HKD 191,200 (2009: $Nil;
2008: $Nil).
within 5 months (2009: 2 months; 2008: 5 months) from the end of the financial year.
36.
A-62
A-63
Group
1 year
or less
$
1 to 5
years
$
More
than
5 years
$
Total
$
2010
Financial assets
Trade debtors
Other receivables
Cash and cash equivalents
Total undiscounted financial assets
Financial liabilities
Trade payables
Other payables and liabilities
Finance lease obligations
Loan and borrowings
Derivative financial instruments
Total undiscounted financial liabilities
6,864,190
136,827
3,749,893
18,329
6,864,190
155,156
3,749,893
10,750,910
18,329
10,769,239
1,750,187
4,263,985
20,784
4,567,620
203
62,328
1,613,754
1,908,164
1,750,187
4,263,985
83,112
8,089,538
203
10,602,779
1,676,082
1,908,164
14,187,025
(1,657,753)
(1,908,164)
(3,417,786)
148,131
A-64
Group
1 year
or less
$
More
than
5 years
$
1 to 5
years
$
Total
$
2009
Financial assets
Trade debtors
Other receivables
Cash and cash equivalents
4,299,536
174,445
3,188,482
4,299,536
174,445
3,188,482
7,662,463
7,662,463
Financial liabilities
Trade payables
Other payables and liabilities
Loan and borrowings
1,452,660
2,296,779
5,467,701
2,482,669
2,583,517
1,452,660
2,296,779
10,533,887
9,217,140
2,482,669
2,583,517
14,283,326
(1,554,677)
(2,482,669)
(2,583,517)
(6,620,863)
2008
Financial assets
Trade debtors
Other receivables
Cash and cash equivalents
6,440,730
825,733
1,838,389
6,440,730
825,733
1,838,389
9,104,852
9,104,852
Financial liabilities
Trade payables
Other payables and liabilities
Loan and borrowings
2,208,922
1,852,770
10,627,014
1,529,636
3,354,714
2,208,922
1,852,770
15,511,364
14,688,706
1,529,636
3,354,714
19,573,056
(5,583,854)
(1,529,636)
(3,354,714)
(10,468,204)
A-65
2010
$
2008
$
USD/SGD
+35,000
35,000
27,000
+27,000
+24,000
24,000
EUR/SGD
87,000
+87,000
14,000
+14,000
+7,000
7,000
+5,000
5,000
+34,000
34,000
RM/SGD
+2,000
2,000
+4,000
4,000
+5,000
5,000
JPY/SGD
2,000
+2,000
16,000
+16,000
22,000
+22,000
A-66
2009
% of
total
2008
% of
total
% of
total
3,435,333
1,691,946
527,737
52%
25%
8%
1,866,681
1,065,563
614,530
44%
25%
15%
3,088,356
1,348,560
653,243
50%
22%
11%
759,019
25,239
207,269
11%
0%
4%
317,744
25,980
322,591
7%
1%
8%
311,613
23,804
725,407
5%
0%
12%
6,646,543
100%
4,213,089
100%
6,150,983
100%
A-67
37.
2010
$
Carrying amount
2009
$
2008
$
Fair value
2009
$
2010
$
2008
$
Financial assets
Available for sale financial assets
Unquoted investments
88,968
91,183
102,424
4,213,089
143,635
98,420
6,150,983
403,546
65,037
6,646,543
155,156
101,384
4,213,089
143,635
98,420
6,150,983
403,546
65,037
21,978
120,814
21,978
120,814
95,279
409,785
2,778,697
591,120
151,501
1,686,888
217,647
1,399,779
2,350,114
95,279
409,785
2,778,697
591,120
151,501
1,686,888
10,870,623
7,760,883
9,169,889
10,870,623
7,760,883
9,169,889
A-68
Carrying amount
2009
$
2008
$
2010
$
Fair value
2009
$
2008
$
Financial liabilities
Financial liabilities carried at amortised cost
Trade payables
Trust receipts and bills
payable
Other creditors
Accruals and other
liabilities
Dividend payable
Due to affiliated company
Loan from related party
Finance lease obligations
Term loans
Bank overdrafts
1,495,044
1,361,692
1,974,489
1,495,044
1,361,692
1,974,489
3,423,536
767,512
4,164,239
268,734
8,083,933
538,472
3,423,536
767,512
4,164,239
268,734
8,083,933
538,472
1,749,428
1,636,087
366,101
76,407
2,190,131
57,374
1,929,602
82,295
107,116
3,428,538
30,981
1,209,338
82,254
257,139
150,000
14,087
2,601,875
1,291,985
1,749,428
1,636,087
366,101
76,407
2,190,131
57,374
1,929,602
82,295
107,116
3,428,538
30,981
1,209,338
82,254
257,139
150,000
14,087
2,601,875
1,291,985
11,761,620
11,373,197
16,203,572
11,761,620
11,373,197
16,203,572
1,582,397
2,015,897
2,542,545
13,344,017
13,389,094
18,746,117
A-69
Quoted
prices in
active
markets
for identical
instruments
(Level 1)
Financial liabilities:
Derivatives (Note 35)
- Forward currency contracts
Group
2010
$
Significant
Significant
other
unobservable
observable
inputs
inputs
(Level 2)
(Level 3)
(203)
Total
(203)
No comparatives have been presented as there were no financial instruments carried at fair
value as at 31 December 2009.
Fair value hierarchy
The Company classifies fair value measurement using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The fair value hierarchy have
the following levels:
Level 1 Quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 Inputs other than quoted prices included within Level 1 that are observable
for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from
prices), and
Level 3 Inputs for the asset or liability that are not based on observable market data
(unobservable inputs)
There have been no transfers between Level 1 and Level 2 during the financial years ended
2010 and 2009.
Derivatives (Note 35): Forward currency contracts are valued by financial institutions using a
valuation technique with market observable inputs.
A-70
(c)
38.
Capital management
The primary objective of the Groups capital structure is to maintain an efficient mix of debt and
equity in order to achieve a low cost of capital, while taking into account the desirability of retaining
financial flexibility to pursue business opportunities and adequate access to liquidity to mitigate the
effect of unforeseen events on cash flows.
The directors regularly review the Groups capital structure and made adequate adjustments to
reflect economic conditions, business strategies and future commitments. No changes were made
to the objectives, policies or processes during the years ended 31 December 2008, 2009 and 2010.
A-71
2008
$
3,423,536
76,407
2,190,131
57,374
4,164,239
3,428,538
30,981
8,083,933
14,087
2,601,875
1,291,985
Net debt
5,747,448
7,623,758
11,991,880
13,217,732
10,586,882
9,485,713
Total capital
13,217,732
10,586,882
9,485,713
0.43
0.72
1.26
Gearing ratio
39.
2009
$
Segment information
For management purposes, the Group is organised into business units based on products and
services, and has three reportable operating segments as follows:
-
Oil, marine and gas (refrigeration and air-conditioning) segment relates to sales and
distribution of a range of air-condition and refrigeration systems suitable for the oil, marine
and gas industry. These products include the Groups brand of heat exchangers and
packaged condensing units installed onboard ships, vessels and oil rigs, which are primarily
used to preserve food, other perishables and also to provide air-condition for the living and
working spaces of the vessels crew.
A-72
2010
Revenue
Cost of sales
Gross profit
2009
Revenue
Cost of sales
Gross profit
2008
Revenue
Cost of sales
Gross profit
Residential and
commercial
(airconditioning)
$
Commercial
and light
industrial
(refrigeration)
$
Total
$
6,194,465
(4,546,391)
23,732,437
(15,742,026)
2,689,236
(1,608,736)
32,616,138
(21,897,153)
1,648,074
7,990,411
1,080,500
10,718,985
4,704,147
(3,775,597)
19,661,618
(14,230,466)
2,439,647
(1,611,553)
26,805,412
(19,617,616)
928,550
5,431,152
828,094
7,187,796
5,414,430
(4,233,067)
20,641,502
(15,765,412)
3,135,458
(2,090,363)
29,191,390
(22,088,842)
1,181,363
4,876,090
1,045,095
7,102,548
A-73
Revenue
Singapore
Malaysia
Indonesia
Hong Kong/Macau/Peoples Republic of China
Indo-China*
Others
2010
$
2009
$
2008
$
13,755,693
8,872,299
3,810,232
3,382,777
922,370
1,872,767
11,083,158
7,572,458
2,996,464
2,127,215
809,507
2,216,610
12,249,862
7,808,003
3,632,106
1,642,935
1,644,897
2,213,587
32,616,138
26,805,412
29,191,390
2010
$
2009
$
2008
$
5,166,439
2,325,051
44,984
5,053,977
2,546,440
16,255
5,094,285
2,621,827
51,868
7,536,474
7,616,672
7,767,980
Non-current assets
Singapore
Malaysia
Hong Kong
Non-current assets information presented above consist of fixed assets, investment properties and
other receivables as presented in the consolidated balance sheet.
Information about a major customer
Revenue from one major customer amounted to $3,400,000 (2009: $Nil; 2008: $Nil), arising from
project sales and installation works in the residential and commercial cooling segment.
40.
On 15 February 2011, the Company declared an interim exempt (one-tier) dividend of $24.73
per share, amounting to $2,000,000.
(b)
On 17 March 2011, the Company issued 8,312 new ordinary shares for a cash consideration
of $1,187,452.
(c)
On 18 March 2011, the Company changed its name from Far East Refrigeration (Pte) Limited
to Far East Group Pte. Ltd.
A-74
At an extraordinary general meeting held on 22 July 2011, the shareholders approved, inter
alia, the following:
(i)
the conversion of the Company into a public limited company and the change of the
name to Far East Group Limited;
(ii)
(iii)
the sub-division of every one ordinary share into 600 ordinary shares (the SubDivision);
(iv)
the issue of 18,800,000 new ordinary shares pursuant to the placement, which when
allotted or allocated, issued and fully-paid, will rank pari passu in all respects with the
existing ordinary shares; and
(v)
the authorisation of the Directors, pursuant to Section 161 of the Companies Act, to
allot and issue ordinary shares whether by way of rights, bonus or otherwise
(including ordinary shares as may be issued pursuant to any Instrument (as
defined below) made or granted by the Directors while this resolution is in force
notwithstanding that the authority conferred by this resolution may have ceased
to be in force at the time of issue of such ordinary shares), and/or
make or grant offers, agreements or options (collectively, Instruments) that
might or would require ordinary shares to be issued, including but not limited to
the creation and issue of warrants, debentures or other instruments convertible
into ordinary shares,
at any time and upon such terms and conditions and for such purposes and to such
persons as the Directors may in their absolute discretion deem fit, provided that the
aggregate number of ordinary shares issued pursuant to such authority (including
ordinary shares to be issued pursuant to any Instrument but excluding ordinary shares
which may be issued pursuant to any adjustments (Adjustments) effected under
any relevant Instrument, which Adjustment shall be made in compliance with the
provisions of the Catalist Rules for the time being in force (unless such compliance
has been waived by the SGX-ST) and the Articles of Association for the time being
of the Company), shall not exceed 100% of the issued share capital of the Company
(excluding treasury shares) immediately after the placement, and provided that the
aggregate number of such ordinary shares to be issued other than on a pro rata basis
in pursuance to such authority (including ordinary shares to be issued pursuant to
any Instrument but excluding shares which may be issued pursuant to any Adjustment
effected under any relevant Instrument) to the existing shareholders shall not
exceed 50% of the issued share capital of the Company (excluding treasury shares)
immediately after the placement, and, unless revoked or varied by the Company in
general meeting, such authority shall continue in force until the conclusion of the next
Annual General Meeting of the Company or the date by which the next Annual General
Meeting of the Company is required by law to be held, whichever is the earlier; and
(vi)
A-75
A-76
Directors
(a)
(b)
Remuneration
Fees payable to Non-executive Directors shall be a fixed sum (not being a commission
on or a percentage of profits or turnover of our Company) as shall, from time to time, be
determined by our Company in general meeting. Fees payable to Directors shall not be
increased except at a general meeting convened by a notice specifying the intention to
propose such increase.
Any Director who holds any executive office, or who serves on any committee of our
Directors, or who performs services outside the ordinary duties of a Director, may be
paid extra remuneration by way of salary, commission or otherwise, as the Directors may
determine.
The remuneration of an Executive Chairman shall be fixed by our Directors and may be by
way of salary or commission or participation in profits or by any or all of these modes but
shall not be by a commission on or a percentage of turnover.
Our Directors shall have power to pay pensions or other retirement, superannuation, death
or disability benefits to (or to any person in respect of) any Director for the time being holding
any executive office and for the purpose of providing any such pensions or other benefits, to
contribute to any scheme or fund or to pay premiums.
(c)
Borrowing
Our Directors may exercise all the powers of our Company to raise or borrow money, to
mortgage or charge its undertaking, property and uncalled capital, and to issue debentures
and other securities for any debt, liability or obligation of our Company.
(d)
(e)
Shareholding qualification
There is no shareholding qualification for Directors in the Articles of Association of our
Company.
B-1
(b)
Voting rights
A holder of our ordinary shares is entitled to attend, speak and vote at any general meeting,
in person or by proxy. Proxies need not be a Shareholder. A person who holds ordinary
shares through the SGX-ST book-entry settlement system will only be entitled to vote at a
general meeting as a Shareholder if his name appears on the depository register maintained
by CDP 48 hours before the general meeting. Except as otherwise provided in our Articles of
Association, two or more Shareholders must be present in person or by proxy to constitute
a quorum at any general meeting. Under our Articles of Association, on a show of hands,
every Shareholder present in person and by proxy shall have one vote, and on a poll, every
Shareholder present in person or by proxy shall have one vote for each ordinary share
which he holds or represents. A poll may be demanded in certain circumstances, including
by the Chairman of the meeting or by any shareholder present in person or by proxy and
representing not less than one-tenth of the total voting rights of all Shareholders having the
right to attend and vote at the meeting or by any two Shareholders present in person or by
proxy and entitled to vote. In the case of a tie vote, whether on a show of hands or a poll, the
Chairman of the meeting shall be entitled to a casting vote.
3.
Change in capital
Changes in the capital structure of our Company (for example, an increase, consolidation,
cancellation, sub-division or conversion of our share capital) require Shareholders to pass an
ordinary resolution. Ordinary resolutions generally require at least 14 days notice in writing. The
notice must be given to each of our Shareholders who have supplied us or (as the case may be)
the CDP with an address in Singapore for the giving of notices and must set forth the place, the
day and the hour of the meeting. However, we are required to obtain our Shareholders approval
by way of a special resolution for any reduction of our share capital, subject to the conditions
prescribed by law.
B-2
5.
B-3
C-2
a company
(ii)
(iii)
(iv)
(v)
(vi)
companies whose associated companies include any of (i), (ii), (iii), (iv) or (v);
(b)
a company with any of its directors (together with their close relatives, related trusts as well as
companies controlled by any of the directors, their close relatives and related trusts);
(c)
a company with any of its pension funds and employee share schemes;
(d)
a person with any investment company, unit trust or other fund whose investment such person
manages on a discretionary basis, but only in respect of the investment account which such person
manages;
(e)
a financial or other professional adviser, including a stockbroker, with its customer in respect of the
shareholdings of:(i)
the adviser and persons controlling, controlled by or under the same control as the adviser;
and
(ii)
all the funds which the adviser manages on a discretionary basis, where the shareholdings
of the adviser and any of those funds in the customer total 10% or more of the customers
equity share capital;
(f)
directors of a company (together with their close relatives, related trusts and companies controlled
by any of such directors, their close relatives and related trusts) which is subject to an offer or
where the directors have reason to believe a bona fide offer for their company may be imminent;
(g)
partners; and
C-3
an individual;
(ii)
(iii)
(iv)
any person who is accustomed to act in accordance with the instructions of (i); and
(v)
Under the Singapore Take-over Code, a mandatory offer made with consideration other than cash must
be accompanied by a cash alternative at not less than the highest price paid by the offeror or any person
acting in concert within the six months preceding the acquisition of shares which triggered the mandatory
offer obligation.
Liquidation or other return of capital
If our Company liquidates or in the event of any other return of capital, holders of our Shares will be
entitled to participate in any surplus assets in proportion to their shareholdings, subject to any special
rights attaching to any other class of shares.
Indemnity
As permitted by Singapore law, our Articles provide that, subject to the Companies Act, our Board of
Directors and officers shall be entitled to be indemnified by us against any liability incurred in defending
any proceedings, whether civil or criminal, which relate to anything done or omitted to have been done
as an officer, director or employee and in which judgement is given in their favour or in which they are
acquitted or in connection with any application under any statute for relief from liability in respect thereof
in which relief is granted by the court. We may not indemnify our Directors and officers against any liability
which by law would otherwise attach to them in respect of any negligence, default, breach of duty or
breach of trust of which they may be guilty in relation to us.
Limitations on rights to hold or vote Shares
Except as described in Voting Rights and Takeovers above, there are no limitations imposed by
Singapore law or by our Articles on the rights of non-resident shareholders to hold or vote in respect of
our Shares.
Minority rights
The rights of minority shareholders of Singapore-incorporated companies are protected under Section 216
of the Companies Act, which gives the Singapore courts a general power to make any order, upon
application by any of our shareholders, as they think fit to remedy any of the following situations where:(a)
our affairs are being conducted or the powers of our Board of Directors are being exercised in a
manner oppressive to, or in disregard of the interests of, one or more of our shareholders; or
(b)
we take an action, or threaten to take an action, or our shareholders pass a resolution, or propose
to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more
of our shareholders, including the applicant.
Singapore courts have a wide discretion as to the relief they may grant and that relief is in no way limited
to those listed in the Companies Act. Without prejudice to the foregoing, the Singapore courts may:(a)
(b)
C-4
authorise civil proceedings to be brought in our name of, or on behalf of, by a person or persons
and on such terms as the court may direct;
(d)
provide for the purchase of a minority Shareholders Shares by our other Shareholders or by us
and, in the case of a purchase of Shares by us, a corresponding reduction of our share capital; or
(e)
C-5
APPENDIX D TAXATION
The following is a discussion of certain tax matters relating to Singapore income tax, capital gains tax,
stamp duty, estate duty and GST consequences in relation to the purchase, ownership and disposal of
our Shares. The discussion is limited to a general description of certain tax consequences in Singapore
with respect to the ownership of shares and is based on laws, regulations and interpretations now in effect
and available as at the date of this Offer Document. The laws, regulations and interpretations, however,
may change at any time, and any change could be retroactive to the date of issuance of our Shares.
These laws and regulations are also subject to various interpretations and the relevant tax authorities or
the courts of Singapore could later disagree with the explanations or conclusions set out below.
Prospective purchasers of our Shares should consult their tax advisers concerning the tax
consequences of owning and disposing of our Shares. Neither our Company, our Directors nor
any other persons involved in the Placement accepts responsibility for any tax effects or liabilities
resulting from the subscription, purchase, holding or disposal of our Shares.
Individual income tax
Individual taxpayers who are Singapore tax residents are subject to Singapore income tax on income
accrued in or derived from Singapore. All foreign-sourced income (except for income received through a
partnership in Singapore) received on or after 1 January 2004 in Singapore by tax resident individuals will
be exempt from tax. Certain Singapore-sourced investment income (such as interest from debt securities)
derived by tax resident individuals on or after 1 January 2004 from certain financial instruments (other
than income derived through a partnership in Singapore or from the carrying on of a trade, business or
profession) will be exempt from tax.
For a Singapore tax resident individual, the tax rate will vary according to the individuals circumstances
but is subject to a maximum rate of 20.0%.
Non-resident individuals, subject to certain exceptions, are generally subject to income tax on income
accrued in or derived from Singapore at the prevailing rate of 20.0%.
An individual will be regarded as being resident in Singapore in a year of assessment if, in the preceding
year, he was physically present in Singapore or exercised employment in Singapore (other than as a
director of a company) for 183 days or more, or if he resides in Singapore.
Corporate income tax
Corporate taxpayers who are Singapore tax residents are subject to Singapore income tax on income
accrued in or derived from Singapore and subject to certain exceptions, on foreign-sourced income
received or deemed to be received in Singapore from outside Singapore. Foreign-sourced income in the
form of dividends, branch profits and services income received or deemed to be received in Singapore by
resident corporate taxpayers on or after 1 June 2003 will be exempt from Singapore income tax if certain
prescribed conditions are met.
Non-resident corporate taxpayers are subject to Singapore income tax on income accrued in or derived
from Singapore and subject to certain exceptions, on foreign income received or deemed to be received
in Singapore from outside Singapore.
A corporate taxpayer is regarded as resident for Singapore tax purposes if its business is controlled and
managed in Singapore.
The prevailing corporate tax rate in Singapore is 17.0%. Further, corporate tax exemption will apply to the
first S$300,000 of a companys chargeable income as follows:(i)
(ii)
The remaining chargeable income will be fully taxable at the corporate tax rate of 17.0%.
D-1
APPENDIX D TAXATION
Cash dividend distributions
Dividends paid by a Singapore tax resident company would be considered as sourced from Singapore.
Dividends received in respect of the shares of a Singapore tax resident company by either Singapore tax
resident or non-Singapore tax resident shareholders are not subject to Singapore withholding tax.
Under the one-tier corporate tax system in Singapore, the tax paid by a Singapore tax resident company
is a final tax and the after-tax profits of the company can be distributed to its shareholders as one-tier tax
exempt dividends.
Where our Company is tax resident in Singapore, our Company may distribute one-tier tax exempt
dividends to our Shareholders. The dividends will be exempt from Singapore income tax in the hands of
our Shareholders.
Bonus issues and scrip dividends
Under current Singapore tax law and practice, a capitalisation of profits followed by the issue of new
shares, credited as fully paid, pro-rata to shareholders (bonus issue) does not represent a distribution
of dividends by a company to its shareholders. Therefore, a Singapore resident shareholder receiving
shares by way of a bonus issue should not have a liability to Singapore income tax.
When a dividend is to be satisfied wholly or in part in the form of an allotment of ordinary shares credited
as fully paid, the dividend declared will be treated as income to its shareholders. However, under the
one-tier corporate tax system and where our Company is tax resident in Singapore, such a dividend will
be exempt from Singapore income tax. Similarly, when our Shareholders are given the right to elect to
receive an allotment of ordinary Shares credited as fully paid in lieu of cash, the dividend declared will be
treated as one-tier tax exempt dividend income and will not be subject to Singapore income tax.
Gains on disposal of ordinary Shares
Singapore does not impose tax on capital gains. Gains may be construed to be of an income nature and
subject to Singapore income tax if they arise from or are otherwise connected with the activities of a trade
or business carried on in Singapore. The gains may also be liable to tax in the hands of the shareholders
if the shares were acquired with the intention or purpose of making a profit by sale and not with the
intention to be held for long-term investment purposes.
Any gains from the disposal of the Shares are not taxable in Singapore unless the seller is regarded
as having derived gains of an income nature in Singapore, in which case, the gains would be subject
to tax at the prevailing corporate tax rate. Because the precise tax status will vary from shareholder
to shareholder, Shareholders should consult their own professional adviser on the Singapore tax
consequences that may apply to their individual circumstances.
Stamp duty
There is no stamp duty payable on the subscription, allotment or holding of the Shares.
Stamp duty is payable on the instrument of transfer of the Shares at the rate of S$0.20 for every S$100 or
any part thereof, computed on the amount or value of consideration. The amount or value of consideration
is the actual consideration or market value of the Shares, whichever is higher.
The purchaser is liable for stamp duty, unless there is an agreement to the contrary. No stamp duty
is payable if no instrument of transfer is executed or the instrument of transfer is executed outside
Singapore. However, stamp duty would be payable if the instrument of transfer which is executed outside
Singapore is received in Singapore.
Stamp duty is, however, not applicable in respect of electronic transfers of the Shares through the CDP.
Estate duty
The Singapore estate duty was abolished with effect from 15 February 2008.
D-2
APPENDIX D TAXATION
Goods and Services Tax (GST)
The sale of our Shares by an investor belonging in Singapore through a SGX-ST member or to another
person belonging in Singapore is an exempt supply not subject to GST. Any GST (e.g. GST on brokerage)
incurred by the investor in connection with the making of this exempt supply will generally become an
additional cost to the investor unless the investor satisfies certain conditions prescribed under the GST
legislation or by the Comptroller of GST.
Where the Shares are sold by a GST registered investor to a person belonging outside Singapore (and
who is outside Singapore at the time of the supply), the sale is a taxable supply subject to GST at zerorate. Consequently, any GST incurred by him in the making of this zero-rated supply for the purpose of
his business will, subject to the provisions of the GST legislation, be recoverable as an input tax credit in
his GST returns.
Investors should seek their own tax advice on the recoverability of GST incurred on expenses in
connection with the sale of shares.
Services such as brokerage, handling and clearing services rendered by a GST registered person to an
investor belonging in Singapore in connection with the investors purchase, sale or holding of the Shares
will be subject to GST at the prevailing rate, that is, 7.0%. Similar services rendered contractually to an
investor belonging outside Singapore are subject to GST at zero-rate, provided that the investor is not
physically present in Singapore at the time the services are performed and the services provided do not
directly benefit a person who belongs in Singapore.
D-3
2.
Your application for the New Shares may only be made by way of printed Placement Shares
Application Form.
YOU MAY NOT USE CPF FUNDS TO APPLY FOR THE NEW SHARES.
3.
You are allowed to submit only one application in your own name for the New Shares.
If you, not being an approved nominee company, have submitted an application for the
New Shares in your own name, you should not submit any other application for the New
Shares for any other person. Such separate applications shall be deemed to be multiple
applications and will be liable to be rejected at the discretion of our Company, the Sponsor
or the Placement Agent.
Joint applications shall be rejected. Multiple applications for New Shares shall be liable
to be rejected at the discretion of our Company. If you submit or procure submissions of
multiple share applications, you may be deemed to have committed an offence under the
Penal Code, Chapter 224 of Singapore and the SFA, and your applications may be referred
to the relevant authorities for investigation. Multiple applications or those appearing to be or
suspected of being multiple applications will be liable to be rejected at the discretion of our
Company, the Sponsor or the Placement Agent.
4.
We will not accept applications from any person under the age of 21 years, undischarged
bankrupts, sole proprietorships, partnerships or non-corporate bodies, joint Securities Account
holders of CDP and from applicants whose addresses (as furnished in their Application Forms)
bear post office box numbers. No person acting or purporting to act on behalf of a deceased person
is allowed to apply under the Securities Account maintained with CDP in the name of the deceased
at the time of application.
5.
We will not recognise the existence of a trust. Any application by a trustee or trustees must be
made in his/her/their own name(s) and without qualification or, where the application is made by
way of an Application Form by a nominee, in the name(s) of an approved nominee company or
approved nominee companies after complying with paragraph 6 below.
6.
7.
IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIES
ACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you do
not have an existing Securities Account with CDP in your own name at the time of your application,
your application will be rejected. If you have an existing Securities Account with CDP but fail to
provide your Securities Account number or provide an incorrect Securities Account number in
Section B of the Application Form, your application is liable to be rejected. Subject to paragraph 8
below, your application shall be rejected if your particulars such as name, NRIC/passport number,
nationality, permanent residence status and CDP Securities Account number provided in your
Application Form differ from those particulars in your Securities Account as maintained with CDP.
If you have more than one individual direct Securities Account with CDP, your application shall be
rejected.
E-1
If your address as stated in the Application Form is different from the address registered
with CDP, you must inform CDP of your updated address promptly, failing which the
notification letter on successful allotment and other correspondences from CDP will be sent
to your address last registered with CDP.
9.
Our Company reserves the right to reject any application which does not conform strictly
to the instructions set out in the Application Form and in this Offer Document or with the
terms and conditions of this Offer Document or, in the case of an application by way of
an Application Form, which is illegible, incomplete, incorrectly completed or which is
accompanied by an improperly drawn up or improper form of remittance. Our Company
further reserves the right to treat as valid any applications not completed or submitted
or effected in all respects in accordance with the instructions set out in the Application
Form or the terms and conditions of this Offer Document, and also to present for payment
or other processes all remittances at any time after receipt and to have full access to all
information relating to, or deriving from, such remittances or the processing thereof.
10.
Our Company reserves the right to reject or accept, in whole or in part, or to scale down or to ballot
any application, without assigning any reason therefor, and no enquiry and/or correspondence on
the decision of our Company will be entertained. In deciding the basis of allotment which shall be
at our discretion, due consideration will be given to the desirability of allotting the New Shares to a
reasonable number of applicants with a view to establishing an adequate market for our Shares.
11.
Share certificates will be registered in the name of CDP or its nominee and will be forwarded only
to CDP. It is expected that CDP will send to you, at your own risk, within 15 Market Days after the
close of the Application List, a statement of account stating that your Securities Account has been
credited with the number of New Shares allotted to you. This will be the only acknowledgement
of application monies received and is not an acknowledgement by our Company. You irrevocably
authorise CDP to complete and sign on your behalf as transferee or renouncee any instrument
of transfer and/or other documents required for the issue or transfer of the New Shares allotted to
you.
12.
You irrevocably authorise CDP to disclose the outcome of your application, including the number
of New Shares allotted to you pursuant to your application, to us, the Sponsor and the Placement
Agent and any other parties so authorised by the foregoing persons.
13.
Any reference to you or the applicant in this section shall include an individual, a corporation,
an approved nominee company and trustee applying for the New Shares by way of a Placement
Shares Application Form.
14.
By completing and delivering an Application Form in accordance with the provisions of this Offer
Document, you:(a)
irrevocably offer, agree and undertake to subscribe for the number of New Shares specified
in your application (or such smaller number for which the application is accepted) at the
Placement Price for each New Share and agree that you will accept such New Shares as
may be allotted to you, in each case on the terms of, and subject to the conditions set out in
this Offer Document and the Memorandum and Articles of Association of our Company;
(b)
warrant the truth and accuracy of the information contained, and representations and
declarations made, in your application, and acknowledge and agree that such information,
representations and declarations will be relied on by our Company in determining whether to
accept your application and/or whether to allot any New Shares to you;
(c)
agree that the aggregate Placement Price for the New Shares applied for is due and payable
to our Company upon application; and
E-2
15.
agree and warrant that, if the laws of any jurisdictions outside Singapore are applicable
to your application, you have complied with all such laws and none of our Company, the
Sponsor and/or the Placement Agent will infringe any such laws as a result of the acceptance
of your application.
Our acceptance of applications will be conditional upon, inter alia, our Company being satisfied
that:(a)
permission has been granted by the SGX-ST to deal in and for quotation of all our existing
Shares and the New Shares on Catalist;
(b)
the Management Agreement and the Placement Agreement referred to in the Management
and Placement Arrangements section of this Offer Document have become unconditional
and have not been terminated or cancelled prior to such date as we may determine; and
(c)
no stop order has been issued under the SFA which directs that no further shares to which
this Offer Document relates be allotted and/or allocated.
16.
17.
We will not allot shares on the basis of this Offer Document later than six months after the date of
Registration.
18.
Additional terms and conditions for application by way of an Application Form are set out below.
Your application for the New Shares must be made using the WHITE Application Forms
for Placement Shares accompanying and forming part of this Offer Document. ONLY ONE
APPLICATION shall be enclosed in each envelope.
We draw your attention to the detailed instructions contained in the Application Form and this
Offer Document for the completion of the Application Form which must be carefully followed. Our
Company reserves the right to reject applications which do not conform strictly to the
instructions set out in the Application Form and this Offer Document or to the terms and
conditions of this Offer Document or which are illegible, incomplete, incorrectly completed
or which are accompanied by improperly drawn remittances or improper form of remittances
or which are not honoured upon their first presentation.
2.
Your Application Form must be completed in English. Please type or write clearly in ink using
BLOCK LETTERS.
3.
All spaces in the Application Form, except those under the heading FOR OFFICIAL USE ONLY,
must be completed and the words NOT APPLICABLE or N.A. should be written in any space
that is not applicable.
4.
Individuals, corporations, approved nominee companies and trustees must give their names in full.
You must make your application, in the case of individuals, in your full names as they appear in
your identity card (if applicants have such identification documents) or in your passport and, in the
case of corporations, in your full names as registered with a competent authority. If you are not an
individual, you must complete the Application Form under the hand of an official who must state
the name and capacity in which he signs the Application Form. If you are a corporation completing
the Application Form, you are required to affix your Common Seal (if any) in accordance with
your Memorandum and Articles of Association or equivalent constitutive documents. If you are a
E-3
(a)
You must complete Sections A and B and sign on page 1 of the Application Form.
(b)
You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Form.
Where paragraph 7(a) is deleted, you must also complete Section C of the Application Form
with particulars of the beneficial owner(s).
(c)
If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be, on
page 1 of the Application Form, your application is liable to be rejected.
6.
7.
Your application must be accompanied by a remittance in Singapore currency for the full amount
payable, in respect of the number of New Shares applied for, in the form of a BANKERS DRAFT
or CASHIERS ORDER drawn on a bank in Singapore, made out in favour of FAR EAST GROUP
SHARE ISSUE ACCOUNT crossed A/C PAYEE ONLY, with your name and address of the
applicant written clearly on the reverse side. We will not accept applications not accompanied
by any payment or accompanied by any other form of payment. We will reject remittances
bearing NOT TRANSFERABLE or NON TRANSFERABLE crossings. The completed and signed
WHITE Placement Shares Application Form, and your remittance in full in respect of the number
of New Shares applied for in accordance with the terms and conditions of this Offer Document,
with your name and address written clearly on the reverse side, must be enclosed and sealed in
an envelope to be provided by you. The sealed envelope must be DESPATCHED BY ORDINARY
POST OR DELIVERED BY HAND, at your own risk, to Boardroom Corporate & Advisory
Services Pte Ltd, 50 Raffles Place, #32-01, Singapore Land Tower, Singapore 048623, to arrive
by 12.00 noon on 4 August 2011 or such other time as our Company may, in consultation
with the Sponsor, decide. Local Urgent Mail or Registered Post must NOT be used. No
acknowledgement of receipt will be issued by our Company, the Sponsor or the Placement Agent
for applications and application monies received.
8.
Monies paid in respect of unsuccessful applications are expected to be returned (without interest
or any share of revenue or other benefit arising therefrom) to you by ordinary post within 24 hours
of balloting of applications at your own risk. Where your application is rejected or accepted in part
only, the full amount or the balance of the application monies, as the case may be, will be refunded
(without interest or any share of revenue or other benefit arising therefrom) to you by ordinary
post at your own risk within 14 Market Days after the close of the Application List, provided that
the remittance accompanying such application which has been presented for payment or other
processes has been honoured and the application monies have been received in the designated
share issue account. In the event that the Placement is cancelled by us following the termination
of the Placement Agreement, the application monies received will be refunded (without interest or
any share of revenue or any other benefit arising therefrom) to you by ordinary post or telegraphic
transfer at your own risk within 5 Market Days of the termination of the Placement. In the event
that the Placement is cancelled by us following the issuance of a stop order by the SGX-ST, acting
E-4
Capitalised terms used in the Application Form and defined in this Offer Document shall bear the
meanings assigned to them in this Offer Document.
10.
in consideration of our Company having distributed the Application Form to you and agreeing
to close the Application List at 12.00 noon on 4 August 2011 or such other time or date as
our Directors may, in consultation with the Sponsor, decide:(i)
(ii)
your remittance will be honoured on first presentation and that any application monies
returnable may be held pending clearance of your payment without interest or any
share of revenue or other benefit arising therefrom;
(b)
all applications, acceptances and contracts resulting therefrom under the Placement shall
be governed by and construed in accordance with the laws of Singapore and that you
irrevocably submit to the non-exclusive jurisdiction of the Singapore courts;
(c)
in respect of the New Shares for which your application has been received and not rejected,
acceptance of your application shall be constituted by written notification and not otherwise,
notwithstanding any remittance being presented for payment by or on behalf of our
Company;
(d)
you will not be entitled to exercise any remedy of rescission for misrepresentation at any time
after acceptance of your application;
(e)
in making your application, reliance is placed solely on the information contained in this Offer
Document and none of our Company, the Sponsor and the Placement Agent nor any other
person involved in the Placement shall have any liability for any information not so contained;
(f)
you consent to the disclosure of your name, NRIC/passport number, address, nationality,
permanent residence status, CDP Securities Account number, CPF Investment Account
number (if applicable) and share application amount to our Share Registrar and Share
Transfer Office, CDP, SCCS, SGX-ST, our Company, the Sponsor and the Placement Agent
or other authorised operators; and
(g)
you irrevocably agree and undertake to subscribe for the number of New Shares applied
for as stated in the Application Form or any smaller number of such New Shares that may
be allotted to you in respect of your application. In the event that our Company decides to
allot any smaller number of New Shares or not to allot any New Shares to you, you agree to
accept such decision as final.
E-5
(B)
Unless otherwise defined herein, all terms in the Offer Document shall have the same meanings in this
letter.
1.
INTRODUCTION
This letter has been prepared in relation to the proposed initial public offering (the IPO) and the
listing of and quotation for the ordinary shares (the Shares) of Far East Group Limited (Far East
Group or the Company) on the Singapore Exchange Securities Trading Limited (SGX-ST).
The Company anticipates that the Company and its subsidiaries (the Group) would, in the
ordinary course of business, enter into certain transactions with persons which are considered
interested persons as defined in Chapter 9 of the SGX-ST Listing Manual Section B: Rules of
Catalist (the Catalist Rules). It is likely that such transactions will occur with some degree of
frequency and could arise at any time and from time to time.
Under Chapter 9 of the Catalist Rules, a listed company may seek a shareholders mandate
for recurrent transactions of a revenue or trading nature or those necessary for its day-to-day
operations, which may be carried out with the listed companys interested persons, but not for the
purchase or sale of assets, undertakings or businesses.
Pursuant to Rule 920(2) of the Catalist Rules, the Company may treat a general mandate as
having been obtained from its shareholders for it to enter into interested person transactions if the
information required under Rule 920(1)(b) of the Catalist Rules is included in the offer document
issued in connection with the IPO. Accordingly, on 22 July 2011, the shareholders of the Company
approved a mandate (the Shareholders Mandate) for the Group to enter into certain categories
of interested person transactions with Shanghai Eden Refrigeration Co., Ltd. (SER), Shanghai
Eden Refrigeration Manufacturing Co., Ltd. (SERM) and Eden Refrigeration Manufacturing
(Jiangsu) Co., Ltd. (ERM) (the Regional Affiliates). Pursuant thereto, new Shareholders who
subscribe for the New Shares in the Invitation are deemed to have approved the Shareholders
Mandate.
In addition, pursuant to an intellectual properties licence agreement (the IP Licence Agreement)
entered into between the Company and the Regional Affiliates on 27 June 2011, the Company
has granted the Regional Affiliates the right to use the list of trademarks and patents set out in
the section entitled Business Intellectual Property in the Offer Document in consideration of
receiving licensing fees computed based on 2% of the revenue derived from the sale of Eden
brand of heat exchangers and condensing units by the Regional Affiliates in the PRC (the
Licencing Fee). As set out above, entering into the IP Licence Agreement with the Regional
Affiliates would constitute an interested person transaction pursuant to Chapter 9 of the Catalist
Rules. New Shareholders who subscribe for the New Shares in connection with the placement are
deemed to have also approved the IP Licence Agreement.
F-1
TERMS OF REFERENCE
We have been appointed as the independent financial adviser to the Audit Committee to express
an opinion, for the purposes of Chapter 9 of the Catalist Rules, on whether (i) the method and
review procedures for determining the transaction prices of the interested person transactions
under the Shareholders Mandate, if applied strictly, are sufficient to ensure that these interested
person transactions will be carried out on normal commercial terms and will not be prejudicial to
the interests of the Company and its minority Shareholders, and (ii) the IP Licence Agreement was
entered into on normal commercial terms and will not be prejudicial to the interests of the Company
and its minority Shareholders.
We were not privy to the negotiations entered into by the Company in relation to the interested
person transactions contemplated under the Shareholders Mandate or the IP Licence Agreement
nor were we involved in the deliberations leading up to the decision of the Directors to undertake
the Shareholders Mandate and the IP Licence Agreement. We do not, by this letter, warrant the
merits of the Shareholders Mandate and the IP Licence Agreement. We have also not conducted
a comprehensive independent review of the business, operations or financial condition of the
Company and/or its subsidiaries (the Group) or any of the Regional Affiliates.
For the purposes of arriving at our opinion in respect of the Shareholders Mandate and the IP
Licence Agreement, we have taken into account the review procedures set up by the Company for
determining the transaction prices of the interested person transactions under the Shareholders
Mandate and the financial terms of the IP Licence Agreement but have not evaluated, and have
not been requested to comment on, the strategic or commercial merits or risks of the Shareholders
Mandate and the IP Licence Agreement or the prospects or earnings potential of the Company or
the Group. Such evaluation shall remain the sole responsibility of the Directors.
In the course of our evaluation and for the purposes of our opinion herein, we have held
discussions with the management of the Company (the Management). We have relied on the
information and representations, whether written or verbal, provided to us by the Directors and the
Management, including information contained in the Offer Document. We have not independently
verified such information or representations and accordingly cannot and do not warrant, and do
not accept any responsibility for, the accuracy, completeness or adequacy of these information
or representations. We have, however, made such enquiry and exercised such judgement (as we
deemed necessary) in assessing the information and representations provided to us, and have
found no reason to doubt the reliability of such information or representations.
The Directors (including those who may have delegated detailed supervision of the Offer
Document) have confirmed to us that, having made all reasonable enquiries and to the best of
their knowledge and belief, (a) all material information available to them in connection with the
Shareholders Mandate and the IP Licence Agreement has been disclosed in the Offer Document;
(b) such information is true and accurate in all material respects; and (c) there is no other material
information or fact, the omission of which would cause any information disclosed to us or the
facts stated in the Offer Document to be inaccurate, incomplete or misleading in any material
F-2
4.
SHAREHOLDERS MANDATE
4.1
Background
The Group purchases the Eden brand of heat exchangers and condensing units from SER, which
are manufactured by SERM. The Group also sells refrigeration and air-conditioning parts for the
assembly of condensing units to SER, and fan motors to SERM on an ad-hoc basis to be used in
the production of its heat exchangers. The Group also anticipates entering into transactions with
ERM for similar products in the future.
F-3
(S$000)
From
1 January 2011
to the Latest
Practicable Date
FY2008
FY2009
FY2010
861
898
793
366
23
35
28
26
27
199
14
These relate mainly to the Eden brand of heat exchangers and condensing units.
(2)
These relate to refrigeration and air-conditioning parts for the assembly of condensing units.
(3)
These mainly relate to fan motors for SERMs urgent requirements to be assembled onto the heat exchangers.
4.3
(b)
(c)
(d)
is set out in the section entitled Interested Person Transactions - Shareholders Mandate of the
Offer Document.
4.4
(b)
Thereafter, approval from Shareholders for the renewal of the Shareholders Mandate will be sought
at each subsequent annual general meeting.
F-5
Disclosure
In accordance with the requirements of Chapter 9 of the Catalist Rules, disclosure will be made in
the Companys annual report of the aggregate value of interested person transactions conducted
pursuant to the Shareholders Mandate during the financial year, and in the annual reports for
subsequent financial years that the Shareholders Mandate continues in force. The Company
will also announce the aggregate value of transactions conducted pursuant to the Shareholders
Mandate during the relevant financial period within the required time frame stipulated in the Catalist
Rules.
4.6
the rationale for and benefits of the Shareholders Mandate as set out in the section entitled
Interested Person Transactions Shareholders Mandate: Rationale for and benefits of the
Shareholders Mandate of the Offer Document; and
(b)
the guidelines and review procedures under the Shareholders Mandate and, in particular,
the role of the Audit Committee in enforcing the Shareholders Mandate, as set out in the
section entitled Interested Person Transactions Shareholders Mandate: Guidelines and
review procedures under Shareholders Mandate of the Offer Document.
5.
5.1
Background
On 27 June 2011, the Regional Affiliates entered into the IP Licence Agreement with the Company.
SER has acknowledged in the IP Licence Agreement that SER has been holding all of its trade
marks and patents as set out in the section entitled Business Intellectual Property in the Offer
Document (the Intellectual Properties) on behalf of the Company. Such Intellectual Properties
are in the process of being transferred to the Company for an aggregate consideration of US$400,
being the administrative costs of the transfer process. For further details on the Intellectual
Properties, please refer to the section entitled Business Intellectual Property of the Offer
Document.
As at the Latest Practicable Date, the applications of the transfer of the trade marks and patents
from SER to the Company are subject to approvals from the Trademark Office of the SAIC and the
SIPO respectively. The legal adviser to the Company on PRC law does not foresee any difficulty in
obtaining the approvals for the transfer of the trade marks and patents from SER to the Company
within six months from the date of submission of applications to the authorities.
Upon the transfer of these Intellectual Properties, SER and SERM will no longer be able to use
these Intellectual Properties. As each of SER and SERM is currently distributing and manufacturing
products under the Intellectual Properties, the Company and the Regional Affiliates have entered
into the IP Licence Agreement pursuant to which the Company has granted the Regional Affiliates
the right to use and incorporate these Intellectual Properties in their products.
F-6
the Regional Affiliates shall protect and enhance the value of the goodwill of the Intellectual
Properties, failing which, the Regional Affiliates shall be liable for and will indemnify the
Company against any and all liability, loss, costs and other expenses of similar nature
suffered, directly or indirectly, by the Company over any misappropriation of the intellectual
property rights licensed to the Regional Affiliates; and
(b)
the Regional Affiliates are not allowed to grant or sub-licence to any other party the use of
the Intellectual Properties, unless prior written consent of the Company has been obtained.
Please refer to the section entitled Interested Person Transactions Present and On-going
Interested Person Transactions: Transactions with Regional Affiliates Intellectual Properties
Licence Agreement of the Offer Document for further details on the IP Licence Agreement.
5.3
5.4
F-7
(b)
(c)
NAICS Code
Description
3334
3332
As noted from the benchmark analysis report, the said database contains 11,073 agreements and is based on agreements
obtained primarily from the US Securities and Exchange filings of companies that are listed on the US stock exchange. The
agreements are available through the public filings at the Securities and Exchange Royalty for various industries and classified
under different agreement types (license agreements, technology license agreements, trademark license agreements,
franchise agreements, cost sharing agreements and R&D agreements). The database allows searching for agreements by the
SIC codes, keywords, agreement types, royalty rates, exclusivity, agreement number and contract party criteria.
The database is updated regularly but not systematically and it does not represent an exhaustive search of the SEC filings.
The last update of the database was made in March 2010 when the SEC filing were reviewed.
F-8
Licensor
Licensee
McQuay
International
O.Y.L
Manufacturing
Company
Sdn Bhd
Trademarks relating to
2% of the net sales 5 years (auto
heating, ventilating and air of licensed products
renewed
conditioning products
unless
terminated by
written notice)
No
McQuay
International
Shenzhen
O.Y.L Electrical
Co. Ltd.
No
McQuay
International
P.T. O.Y.L
Sentra
Manufacturing
Trademarks relating to
2% of the net sales 5 years (auto
heating, ventilating and air of licensed products
renewed
conditioning products
unless
terminated by
written notice)
No
Enersyst
Development
Center, Inc.
Ross
Industries, Inc.
5% of charged
Patents, proprietary
information and know-how
sale price of
relating to coolers, chillers licensed products;
and freezers technologies a minimum annual
payment of
US$100,000
Perpetual
unless
terminated
by mutual
agreement.
Licensee
has the right
to terminate
unilaterally
after 2.5 years.
Yes(1)
Sir Worldwide,
LLC
Channel
Freeze
Technologies,
Inc.
Perpetual
Yes
Perpetual
No
Company
Regional
Affiliates
F-9
Licence Fee
2% of net sales
of licensed
products
Tenure
Exclusivity
(2)
It was agreed, inter alia, that Sir Worldwide, LLC (Sir Worldwide) shall grant Channel Freeze Technologies, Inc.
(Channel Freeze) the exclusive right to manufacture and sell the Channel Ice Technology Units throughout
the world for (i) U.S. Patent No. 5029453 and (ii) all trade secrets, patents, patent applications, know-how and
technology used by Sir Worldwide in connection with its CIT Units. Sir Worldwide shall also, inter alia, assign and
transfer to Channel Freeze the trademark CIT Units or Channel Ice Technology Units, all intellectual property
relating to the business and assets of Sir Worldwide. In consideration, Channel Freeze shall compensate Sir
Worldwide as follows:
(i)
Fee Payment: 10% of net gross invoice price on Channel Ice Technology Units sold to distributors, or 13%
of net gross invoice price on Channel Ice Technology Units sold at base price (having the meaning of price
listed for end user or retail sales); and
(i)
Royalty Payment: 5% of net sales of the Channel Ice Technology Units and related materials.
In our analysis, we have only taken into consideration the royalty payment in respect of this agreement.
(a)
Licencing Fee
Based on the above, we note that the licensing fees of the above Comparable Licensing
Agreements range between 2% and 5% of the net sales of licensed products, save for one
transaction in which a minimum royalty fee of US$100,000 is chargeable. On the above
basis, it would appear that the licensing fee of 2% on the sales of products under the Eden
brand charged by the Company on the Regional Affiliates is within the range of licensing
fees charged in the Comparable Licensing Agreements, albeit at the low end of the range of
licensing rates charged.
We also note that the licence rights granted under 3 of the above Comparable Licensing
Agreements are not exclusive to the licensee and 2 are exclusive to the licensee. We
observe that where the licence rights granted are exclusive to the licensee, the licensing fees
are generally higher than those where the licence rights are non-exclusive to the licensee.
Under the IP Licence Agreement, the licence rights granted are not exclusive to the Regional
Affiliates. In this regard, the Licensing Fee of 2% on the sales of heat exchangers and
condensing units under the Eden brand charged by the Company on the Regional Affiliates
is within the range of licensing fees charged in the comparable licensing agreements with
non-exclusivity clauses. 2 of these comparable licensing agreements with non-exclusivity
clauses charged licensing fees at 2% of the net sales of licensed products, while the
remaining licensing agreement charged a licensing fee of 2% to 5% of the net sales of
licensed products.
(b)
Tenure
The tenure of the IP Licence Agreement is for a perpetual period commencing from
1 January 2011 unless terminated by either parties. We note that this is within the range of
tenures of the Comparable Licensing Agreements where the tenure ranged from a term of 5
years (auto renewed unless terminated by written notice) or with a perpetual term.
F-10
(c)
6.
F-11
OUR OPINION
Having regard to our evaluation of the Shareholders Mandate and the IP Licence Agreement, the
details of which are set out in paragraphs 4.6 and 5.5 of this letter, and subject to the qualifications
and assumptions set out in this letter, we are of the opinion that:
(a)
the guidelines and review procedures of the Company as set out in the section entitled
Interested Person Transactions Shareholders Mandate: Guidelines and Review Procedures
under Shareholders Mandate of the Offer Document for determining the transaction prices
of the interested person transactions under the Shareholders Mandate, if applied strictly, are
sufficient to ensure that such transactions will be conducted on normal commercial terms
and will not be prejudicial to the interests of the Company and its minority Shareholders;
(b)
the IP Licence Agreement was entered into on normal commercial terms and is not
prejudicial to the interests of the Company and its minority Shareholders having considered,
inter alia, the following:
(i)
(ii)
an assessment of the reasonableness of the Licencing Fee and the tenure of the IP
Licence Agreement as a comparison to the Comparable Licensing Agreements in the
royalty benchmarking analysis; and
(iii)
Our opinion is addressed to the Audit Committee in connection with and for the purpose
of their consideration of the Shareholders Mandate and the IP Licence Agreement and for
inclusion in the Offer Document. Whilst a copy of this letter may be reproduced in the Offer
Document, neither the Company nor the Directors may reproduce, disseminate or quote this
letter (or any part thereof) for any other purpose at any time and in any manner without the
prior written consent of SAC Capital.
Our opinion is governed by, and construed in accordance with, the laws of Singapore, and
is strictly limited to the matters stated herein and does not apply by implication to any other
matter.
Yours faithfully
For and on behalf of
SAC CAPITAL PRIVATE LIMITED
Ong Hwee Li
CEO
Bernard Lim
Partner
F-12
ABOUT US
BUSINESS MODEL
Our Groups business activities can be broadly segmented as follows: Commercial and light industrial (refrigeration)
Residential and commercial (air-conditioning)
Oil, marine and gas (refrigeration and air-conditioning)
COMPETITIVE STRENGTHS
PROSPECTS
ABOUT US
BUSINESS MODEL
Our Groups business activities can be broadly segmented as follows: Commercial and light industrial (refrigeration)
Residential and commercial (air-conditioning)
Oil, marine and gas (refrigeration and air-conditioning)
COMPETITIVE STRENGTHS
PROSPECTS
(Registered by the Singapore Exchange Securities Trading Limited acting as an agent on behalf of the Monetary Authority of Singapore on 25 July 2011)
A One-Stop
Refrigeration Systems
Provider
This document is important. If you are in any doubt as to the action you should take, you should
consult your legal, financial, tax or other professional adviser(s).
Collins Stewart Pte. Limited (the Sponsor) has made an application to the Singapore Exchange Securities
Trading Limited (the SGX-ST) for permission to deal in, and for quotation of, all the ordinary shares (the
Shares) in the capital of Far East Group Limited (the Company) already issued and the new Shares
which are the subject of the Placement (the New Shares) on Catalist (as defined herein). The dealing in
and quotation of the Shares will be in Singapore dollars.
Companies listed on Catalist may carry higher investment risk when compared with larger or more established
companies listed on the Main Board of the SGX-ST. In particular, companies may list on Catalist without
a track record of profitability and there is no assurance that there will be a liquid market in the shares or
units of shares traded on Catalist. You should be aware of the risks of investing in such companies and
should make the decision to invest only after careful consideration and, if appropriate, consultation with
your professional adviser(s).
The Placement is made in or accompanied by this Offer Document that has been registered by the SGX-ST
acting as an agent on behalf of the Monetary Authority of Singapore (the Authority). We have not lodged
or registered this Offer Document in any other jurisdiction.
Neither the Authority nor the SGX-ST has examined or approved the contents of this Offer Document. Neither
the Authority nor the SGX-ST assumes any responsibility for the contents of this Offer Document, including
the correctness of any of the statements or opinions made or reports contained in this Offer Document.
The SGX-ST does not normally review the application for admission but relies on the Sponsor confirming
that our Company is suitable to be listed and complies with the Catalist Rules. Neither the Authority nor the
SGX-ST has in any way considered the merits of the Shares being offered for investment.
Far
East Group Limited
(Incorporated in the Republic of Singapore
The registration of this Offer Document by the SGX-ST does not imply that the Securities and Futures Act
(Chapter 289) of Singapore, or any other legal or regulatory requirements, or requirements under the SGXSTs listing rules, have been complied with.
Placement of 18,800,000
New Shares by way of
placement, at S$0.27 per
Share, payable in full on
application.
Acceptance of applications will be conditional upon the issue of the New Shares and permission being
granted by the SGX-ST for the listing and quotation of all our existing issued Shares and the New Shares on
Catalist. Monies paid in respect of any application accepted will be returned to you at your own risk, without
interest or any share of revenue or benefit arising therefrom, if the admission and listing do not proceed, and
you will not have any claims against us, the Sponsor or the Placement Agent (as defined herein).
After the expiration of six months from the date of registration of this Offer Document, no person shall make
an offer of securities, or allot, issue or sell any of our Shares, on the basis of this Offer Document, and no
officer or equivalent person or promoter of our Company will authorise or permit the offer of any of our Shares
or the allotment, issue or sale of any of our Shares, on the basis of this Offer Document.
on 18 March 1964)
(Company Registration No.:196400096C)
Investing in our Shares involves risks which are described in the RISK FACTORS section of this
Offer Document.
Our Company is not part of, nor related in any way, to Far East Organization, its subsidiaries or
associated companies (the Far East Organization Group of Companies). Our Directors and Controlling
Shareholder (as defined herein) have no direct or indirect relationships with the Far East Organization
Group of Companies. Our Group (as defined herein) is also not engaged in the same line of business
as that of the Far East Organization Group of Companies.