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BOARD OF DIRECTORS Tey Kim Hwee
Non-Executive Chairman
SHARE REGISTRAR Boardroom Corporate & Advisory Services Pte. Ltd. 50 Raffles Place #32-01 Singapore Land Tower Singapore 048623 Tel : 65 6536 5355 Fax : 65 6536 1360 INDEPENDENT AUDITORS Mazars LLP Certified Public Accountants 133 Cecil Street #15-02 Keck Seng Tower Singapore 069535 Tel : 65 6224 4022 Fax : 65 6225 3974 Partner-in-charge : Denis Usher (Date of appointment : since FY ended 31 December 2011) PRINCIPAL BANKERS AND FINANCIAL INSTITUTION United Overseas Bank Limited 80 Raffles Place, UOB Plaza 1 Singapore 048624 ORIX Leasing Singapore Limited 331 North Bridge Road #19-01/06 Odeon Towers Singapore 188720
Wai Chee Leong AUDIT COMMITTEE Lee Sen Choon (Chairman) Tey Kim Hwee Wai Chee Leong NOMINATING COMMITTEE Wai Chee Leong (Chairman) Tey Kim Hwee Lee Sen Choon REMUNERATION COMMITTEE Wai Chee Leong (Chairman) Tey Kim Hwee Lee Sen Choon COMPANY SECRETARY Vincent Lim Bock Hui REGISTERED OFFICE 61 Kaki Bukit Road 2 Singapore 417869 Tel : 65 6749 5885 Fax : 65 6747 5979 Website : www.rokkogroup.com
Contents
01 02 04 06 08 09 10
About Rokko Group Message to Shareholders Operations Review Board of Directors Key Management Staff Corporate Structure Financial Contents
Message to Shareholders
Dear Shareholders, The Board of Directors (the Board) of Rokko Holdings Ltd. (Rokko) is pleased to present our annual report for the financial year ended 31 December (FY) 2011. During FY2011, the global semiconductor industry was affected by the negative sentiments surrounding the European debt crisis as well as two natural disasters in Asia, namely the earthquake and tsunami in Japan and the flooding in Thailand, which disrupted the supply chain of the electronics sector. While Rokko does not have a physical presence in these two countries, we were still affected by the calamities because some of our products components are sourced from Japan, while a good number of our customers depend on components from both countries. However, many of our customers have since resumed operations in Thailand.
Financial Scorecard
Our financial performance must therefore be seen against the backdrop of these circumstances as well as the exceptional profit of FY2010. Revenue and gross profit margin for the Equipment Division (our main sales and profit driver) both declined in FY2011 the former by 13% to S$22.9 million and the latter to 28.4% from 30.8% a year earlier. The Stamping and Tooling Divisions also slowed down due to the circumstances stated above. The Group recorded a net profit after tax of S$3.4 million in FY2011 (FY2010: S$4.3 million) on revenue of S$58.0 million (FY2010: S$42.6 million). The net profit included a one-time gain of S$3.3 million from the acquisition of a 100%-stake in Rokko Leadframes Pte. Ltd. (RLF) which was completed on 28 February 2011. We recognised ten months revenue contribution from RLF, which accounted for 36.9% of the Groups revenue in FY2011.
RLF manufactures leadframes and offers electroplating services for the semiconductor sector, and is also involved in consumable tooling and connector plating activities. Following the acquisition, we have been busy with integration efforts which have paid off with RLF contributing a gross profit margin of 2.7% for FY2011, reversing from a negative 7.0% in the three-month period before the acquisition. We continued to invest in research and development (R&D), incurring expenditure of S$1.2 million in FY2011, bringing total R&D investments since FY2007 to S$7.0 million. The Group was granted six patents in FY2011. To date, the Group has a total of 23 patents granted. Our financial position remains healthy with cash and cash equivalents of S$9.6 million and a net gearing ratio of 0.51 times as at 31 December 2011.
at RLF are likely to require further capital investments to modernise RLF, on top of the S$3.2 million incurred in FY2011. We believe these investments will significantly strengthen the operations of RLF as well as our overall value proposition to our customers in terms of synergy and efficiency. We will continue to focus on integrating RLF with the rest of the Group. Efforts to enhance the technological capabilities of the entire Group, including RLF, are expected to require capital expenditure of approximately S$5.0 million which will be incurred in FY2012. While expanding our product lines in Singapore, we will continue to relocate our labour-intensive operations and low margin products to our new plant in Malaysia.
Outlook
We expect the semiconductor equipment sector to gain momentum from the second half of FY2012 as it recovers from the economic uncertainty and the supply chain disruptions. The sector as a whole will continue to be underpinned by demand for computer chips used in tablet computers, smartphones, mobile devices and the automotive industry. We will continue to improve the performance of RLF, which provides the Group synergies in consumable tooling, connectors plating and base material products for the semiconductor sector. These efforts
Appreciation
This has been an eventful year marked by several challenges and the inclusion of a new group of employees from RLF to the Rokko family. On behalf of the Board, I wish to thank all management and staff, directors, customers, business partners and shareholders for their continuous support, faith and trust in Rokko.
Gary Lim
Managing Director March 2012
Operations Review
Equipment Division The Equipment Division designs, develops and manufactures customised automated equipment specific to customer requirements for semiconductor back-end assembly processes. Revenue from the Equipment Division decreased by 13.0% mainly due to the weakening of the United States Dollar (USD) against the Singapore Dollar (SGD) by around 8% as compared to a year earlier. The Equipment Division remains the major revenue driver, contributing S$22.9 million or 39.4% to the Groups revenue in FY2011. Gross profit margin for the Equipment Division decreased by 2.4 percentage points from 30.8% for FY2010 to 28.4% for FY2011 mainly due to the impact of the weakening USD despite sustaining sales volume. Development of advanced versions of the RS8000 series sawing singulation system and latest RS5000 series of stand-alone pick-and-place system complete inspection solution for customers to handle small and complex packages of semiconductor chip, was completed in FY2011. Through continued investments in new product development and intensive research and development (R&D) activities, the Equipment Division was granted four new patents in FY2011. These patents relate to the flagship sawing singulation product and the processing of integrated circuit units. Leadframes Division The Leadframes Division provides metal stamping, chemical etching and electroplating of a wide range of semiconductor lead frames. The acquisition of Jade Precision Engineering Pte Ltd (currently known as Rokko Leadframes Pte. Ltd. or RLF) was completed in February 2011. This new division which was formed pursuant to the acquisition contributed ten months of post-acquisition revenue, amounting to S$21.4 million or 36.9% to the Groups revenue for FY2011. It is now the second largest revenue contributor following the Equipment Division. After implementing various cost-cutting measures, the Leadframes Division recorded a gross profit margin of 2.7% for the ten-month post-acquisition period, reversing a negative gross margin of 7.0% in the threemonth period before the acquisition. Additional factory building and water treatment plant will be developed on the Groups existing plot of land at Nusa Cemerlang Industrial Park, Johor Bahru, to house certain operations of the Leadframes Division and Stamping Division. It is targeted to be completed at the end of 2012 and will start operation in the first quarter of 2013. It is estimated to increase 40% to the existing production capacity in Singapore. Stamping Division The Stamping Division provides connector stamping and plating services to manufacturers in the electronics industry. Revenue from the Stamping Division decreased by 10.1% in FY2011 mainly due to lower demand in the second half of FY2011 following supply chain disruptions caused by the two natural disasters in Asia. This division contributed S$9.7 million or 16.7% to the Groups revenue. Gross profit margin for the Stamping Division decreased by 13.2 percentage points from 27.3% for FY2010 to 14.1% for FY2011 due to higher raw material prices and lower margin sales to a major customer. The average capacity utilisation rate also declined from 61.1% for FY2010 to 55.1% for FY2011, in line with the decrease in sales volume to customers. The Stamping Division ceased to provide plating services pursuant to the inclusion of RLF to the Group. Plating services which was previously subcontracted by the Group had also terminated, thereby improving the Groups cost efficiencies.
Tooling Division The Tooling Division designs, develops and manufactures precision tools used in the front and back-end semiconductor manufacturing processes. Revenue from the Tooling Division decreased by 26.5% due to a decrease in customers orders amidst the slowdown in the global economy, particularly in the second half of FY2011. Gross profit margin for the Tooling Division decreased from 39.1% for FY2010 to 33.3% for FY2011 as sales volume declined due to weaker demand from major customers. The average capacity utilisation rate for FY2011 remained stable at 66.2% as compared to 67.7% for FY2010 as it continued to support intersegment demands from the Equipment, Stamping and Leadframes Divisions. To further improve factory space utilisation and reduce operating costs, the Group sold two units of terrace factories in February 2012 which are currently occupied by the Tooling Division and will relocate the entire Tooling Division to other available premises. Research & Development In line with the commitment to develop cuttingedge products, the Group incurred S$1.2 million in R&D expenditure in FY2011, of which S$0.1 million was capitalised. Since FY2007, the Group has incurred S$7.0 million in R&D expenditure of which S$2.0 million has been capitalised. With the amalgamation of Finix Technology Pte. Ltd. with Rokko Systems Pte. Ltd. (Rokko Systems), the Group wrote off the deferred R&D expenditure of S$0.5 million in FY2011. Investment of S$0.3 million in a solar
equipment project under Rokko Mechatronics Pte. Ltd. (Rokko Mechatronics) was also written off as the Group channelled its resources on existing products development and improvement. As it has always been the Groups objective to maintain and add value to its products, the Group consistently commits about 5% of revenue to R&D each year and will continue to invest in R&D in FY2012, with a focus on the Equipment Division. As of 15 March 2012, the Group has filed over 100 patents in various strategic countries and 23 have already been granted and enforced. Manufacturing Facilities The Group has been streamlining its various manufacturing facilities in view of its expansion in Iskandar in Johor (Malaysia) and following its acquisition of RLF. As at the end of FY2011, the Group had manufacturing locations in Singapore and Malaysia. In Singapore, the facilities are located in Tuas, Kaki Bukit, and Loyang, totalling 121,002 square feet while the manufacturing facilities in Malaysia are located at Sri Alam and Nusa Cemerlang, Johor Bahru with total built-up area of 52,321 square feet. In February 2012, the Group announced the disposal of two properties - terrace factories located at Kaki Bukit Industrial Terrace. The disposal provides the Group with the opportunity to consolidate its Tooling Division and re-organise its manufacturing facilities in Singapore to achieve better factory space utilisation and reduce energy cost with facilities sharing. Following the disposal, the Group will continue to own and operate in aggregate 111,798 square feet of industrial properties in Singapore.
Board of Directors
Lim Chong Chen
(Managing Director)
Lim Chong Chen is our Managing Director and has been our Director since our incorporation on 30 September 2003. He manages the operations of our Group, and is responsible for our Groups overall performance as well as charting and reviewing our corporate direction and business strategies. He was one of our founding shareholders in 1994 and has steered our Company onto the path of providing precision engineering services to customers in the semiconductor and electronics industries. He is instrumental to the business development and operational aspects of our business. Since 1994, our Group has grown from about 25 staff in a flatted factory in Singapore to over 300 staff with operations in Singapore and Malaysia as at 31 December 2011. Mr Lim holds a preuniversity qualifications and a Certificate in Computer Programming and Information Processing from the City and Guilds of London Institute.
(Non-Executive Chairman)
Tey Kim Hwee is our Non-Executive Chairman and has been our Director since our incorporation on 30 September 2003. He was one of our founding shareholders in 1994. Mr Tey is currently the managing director of Palmas Freight Sdn Bhd, a Malaysian company founded by him in 1987. He holds a Higher Stage Certificates in Accounting, Economics and Commercial Law from the London Chamber of Commerce and Industry.
Non-Executive Chairman
(Independent Director)
Wai Chee Leong was appointed as our Independent Director on 7 September 2007. He is currently a director and shareholder of Dominion LLC, a law firm established in Singapore in 2004. Prior to that, he was a journalist, then an associate and later a partner in law firms. He holds a Bachelor of Laws (Honours) Second Class Upper Division degree from the University of London, London School of Economics.
Independent Director
and his duties include overseeing the production and quality management functions of our Stamping and Leadframes Divisions. Prior to joining our Group in May 2004, he had been a design engineer with a company in Singapore from 1999. Mr Chey holds a Diploma in Mechanical Engineering from the Ungku Omar Polytechnic, Malaysia.
include the design and development of new systems, improvement of drawings, design of assembly parts, quality control and supporting all other departments in the Tooling Division. Prior to joining our Group in July 1999, she had worked as a design engineer in a company in China where she was responsible for designing and developing trim and forming die sets. Ms Shen holds a Masters in Mechanical Engineering from the Xidian University, PRC and a Master of Science (Electrical Engineering) from the National University of Singapore.
and Test, Equipment Division and oversees all our existing products and new products research and development work carried out for our Equipment Division. His main responsibilities include overseeing the assembly, programming, wiring and testing of our existing and new equipment. Prior to joining our Group in May 2005, he had worked as a senior engineer in the software department of a Korean company from 2000 where he was responsible for the software and electrical test for new equipment. Mr Jang holds a Bachelor of Engineering degree (Control and Instrumentation Engineering Major) from Gyeongsang National University, South Korea.
Lim Yoke Mein is our Administration Manager and is responsible for the administration matters of our Group, including those related to accounting, human resource and intellectual property. She reports to our Financial Controller on such matters. She also assists our Accounting Manager with the accounts of Rokko Systems. Prior to joining our Group in June 2004, she had worked in Malaysia where she performed administrative duties and was involved in the ISO9001 projects. Ms Lim holds a Bachelor of Arts (Honours) degree in Business Studies with Marketing from Middlesex University, United Kingdom. Seng Kwong Seng is our Toolroom Manager
and is in-charge of quality control as well as production and material control for our Tooling Division. Prior to joining our Group in January 1993, he was a team leader in the grinding department of a company in Singapore. Mr Seng holds a National Trade Certificate Grade Two in Tool and Die Making (Press Tool) from the Vocational and Industrial Training Board, Singapore. He also received a Craftman Certificate from Brown Boveri Government Training Centre Singapore.
Development, Tooling Division. She manages all the research and development work carried out for our Tooling Division. Her responsibilities
Corporate Structure
Financial Contents
11 14 15 17 18 19 20 23 76 78 92 98 99
Report to the Directors Statement by the Directors Report of the Independent Auditors Consolidated Statement of Comprehensive Income Statement of Financial Position Consolidated Statement of Changes in Equity Consolidated Statement of Cash Flows Noted to the Financial Statements Statistics of Shareholdings Corporate Governance Notice of Annual General Meeting Notice of Book Closure Appendix Proxy Form
11
By virtue of Section 7 of the Act, Mr. Lim Chong Chen is deemed to have interests in the wholly-owned subsidiaries of Rokko Holdings Ltd. at the beginning and at the end of the financial year. There was no change in any of the above mentioned interests in the Company between the end of the financial year and 21 January 2012. Since the end of the previous financial year, no director has received or become entitled to receive a benefit which is required to be disclosed by reason of a contract made by the Company or a related corporation with the director or with a firm of which the director is a member, or with a company in which the director has a substantial financial interest, except as disclosed in Note 7 to the accompanying financial statements. Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares or debentures of the Company or of related corporations either at the beginning or at the end of the financial year. Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose object is to enable the directors to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.
12
AUDIT COMMITTEE The Audit Committee of the Company, consisting of all Non-Executive Directors, is chaired by Mr. Lee Sen Choon, an Independent Director, and includes Mr. Tey Kim Hwee, Non-Executive Chairman and Mr. Wai Chee Leong, an Independent Director. The Audit Committee has met (2) two times during the financial year and has reviewed the following, where relevant, with the directors and external auditors of the Company:(a) (b) (c) the external and internal audit plans and results of the external and internal auditors examination and evaluation of the Groups systems of internal accounting controls; the Groups financial and operating results and accounting policies; the financial statements of the Company and the consolidated financial statements of the Group before their submission to the directors of the Company and external auditors report on those financial statements; half-yearly and annual announcements as well as the related press releases on the results and financial position of the Company and the Group; the co-operation and assistance given by the management to the Groups external auditors; and the re-appointment of the external auditors of the Group.
The Audit Committee has full access to and has the co-operation of the management and has been given the resources required for it to discharge its function properly. It also has full discretion to invite any Director and executive officer to attend its meetings. The external auditors have unrestricted access to the Audit Committee. The Audit Committee has recommended to the directors the nomination of Mazars LLP, Public Accountants and Certified Public Accountants, for re-appointment as external auditors of the Group at the forthcoming Annual General Meeting of the Company.
13
14
(b)
The Board of Directors has, on the date of this statement, authorised these financial statements for issue.
15
16
MAZARS LLP PUBLIC ACCOUNTANTS AND CERTIFIED PUBLIC ACCOUNTANTS Denis Usher Partner-in-charge
17
Revenue Cost of sales Gross profit Other income Distribution costs Administrative expenses Other operating expenses Finance costs Profit before taxation Income tax credit/(expense) Net profit for the year Other comprehensive (loss)/income: Provision for deferred tax arising from revaluation surplus, net of reversal Exchange differences on translation of foreign operations, net of tax Surplus on revaluation of property, plant and equipment, net of tax Other comprehensive (loss)/income for the year Total comprehensive income for the year Profit attributable to equity holders of the Company Total comprehensive income attributable to: The equity holders of the Company Earnings per share for profit attributable to the equity holders of the Company (cents) - Basic
42,584,498 (29,377,273) 13,207,225 716,948 (2,127,945) (4,914,887) (1,507,985) (555,388) 4,817,968 (555,907) 4,262,061
22
3,139,780
5,956,330
30
2.13
2.76
The annexed notes form an integral part of and should be read in conjunction with these financial statements.
18
9 10 11 12
13 14 15 16
17 18 19 20
21 22 24
12,548,038 955,845 521,160 14,025,043 9,620,582 15,578,008 488,460 25,687,050 39,712,093 67,628,584
8,259,316 1,499,814 9,759,130 9,296,390 533,629 10,620,765 265,309 20,716,093 30,475,223 56,238,112
23 24 21
The annexed notes form an integral part of and should be read in conjunction with these financial statements.
Note
Attributable to Equity Holders of the Company Foreign Currency Share Treasury Translation Revaluation Accumulated Capital Shares Reserves Reserve Profits Total Equity S$ S$ S$ S$ S$ S$ 12,442,108 (525,717) (186,913) (799,265) (908,100) 2,050,067 12,704,531 25,762,889 (186,913) (799,265)
At 1 January 2011 18 29 -
Dividends paid
Revaluation surplus related to disposal of property, plant and equipment 20 12,442,108 10,432,808 18 (89,770) (435,947) (552,302) (712,630) (941,480) 923,437 (33,380) (224,537) (902,093)
At 31 December 2011
At 1 January 2010
(355,798) (908,100)
2,050,067 2,050,067
Dividends paid
At 31 December 2010
The annexed notes form an integral part of and should be read in conjunction with these financial statements.
19
20
Operating activities Profit before income tax Adjustments for:Depreciation of property, plant and equipment, net of eliminated accumulated depreciation on revaluation reserve Amortisation of research and development expenditure Deferred research and development expenditure written-off Impairment of inventories to net realisable value Write-back of impairment of property, plant and equipment made previously Revaluation loss on certain property, plant and equipment Gain on acquisition of a subsidiary Gain on disposal of property, plant and equipment Recovery of bad debts previously written-off Allowance/(write-back) for slow moving and obsolete inventories Provision for/(write-back of) equipment warranty no longer required Interest income Interest expense Operating profit before working capital changes Changes in working capital:Inventories Trade and other receivables Trade and other payables Trust receipts Invoice financing Cash pledged Cash generated from operations Interest received Income tax paid Cash flows from operating activities
2,433,806
4,817,968
9 11 11 13 6 6 A 4 4 13 23 4 5
3,092,472 283,906 842,994 258,615 (3,285,956) (213,984) (7,404) 378,966 11,083 (13,733) 841,377 4,622,142
2,329,866 262,892 (412,516) 250,090 (1,299) (80,019) (51,642) (6,156) 555,388 7,664,572
2,357,322 889,295 (3,553,308) 1,368,199 16,956 (500,000) 5,200,606 13,733 (115,898) 5,098,441
(1,716,949) 6,186,055 (6,464,698) 3,581,139 (638,159) 1,368,199 8,611,960 6,156 (153,174) 8,464,942
he annexed notes form an integral part of and should be read in conjunction with these financial statements.
21
Financing activities Repayment of bank loans and overdrafts Finance lease repayments/obtained (net of repayment) Proceeds from bank loans Proceeds from bridging loan Bank overdraft assumed (net of cash in bank) from acquisition of a subsidiary Interest paid Dividend paid Proceeds from issue of new shares(net) Purchase of treasury shares Cash flows used in financing activities Investing activities Purchase of property, plant and equipment Acquisition of a subsidiary Proceeds from disposal of property, plant and equipment Deferred development expenditure Cash flows used in investing activities Net (decrease)/increase in cash and cash equivalents Effect of currency translation on cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year
16
During the financial year ended 31 December 2011, the Group acquired property, plant and equipment with an aggregate cost of approximately S$6,178,257 (2010: S$7,464,802). Payments of S$6,111,166 (2010: S$6,596,613) were made for the acquisitions, of which S$1,981,557 (2010: S$3,394,528) was financed by bank loan and finance lease, S$1,327,831 (2010: Nil) by trust receipts and remaining S$2,801,778 (2010: S$3,212,285) by internal cash flow. As at 31 December 2011, S$67,092 (2010: S$857,989) was recorded as trade and other payables.
The annexed notes form an integral part of and should be read in conjunction with these financial statements.
22
2011 Property, plant and equipment Cash and cash equivalents Trade and other receivables Inventories Trade and other payables Interest bearing liabilities Bank overdraft Deferred tax liabilities Net identifiable assets and liabilities Gain on acquisition of a subsidiary Purchase consideration in cash Less: bank overdraft assumed (net of cash in bank) Net cash outflows on acquisition of a subsidiary
22
The acquisition has resulted a gain on acquisition of a subsidiary of S$3,285,956 and was included as part of the other income in the consolidated financial statements of the Group. Presented in the consolidated statement of cash flows as follows: Group S$ (8,000,000)
Investing activities Acquisition of a subsidiary Financing activities Bank overdraft assumed (net of cash in bank) from acquisition of a subsidiary
(1,076,227)
23
24
25
26
27
28
29
30
31
Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised except: where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and in respect of deductible temporary differences associated with investments in subsidiaries, deferred income tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
32
33
34
35
36
The expenditure capitalised includes cost of material, direct labour and related expenses. Such development costs are amortised commencing from commercial production or when it is available for use, whichever is earlier, on a straight-line basis over the period of its expected benefits, which normally does not exceed 3 years. Development costs that do not meet the above criteria are expensed as incurred. 2.19 Inventories Inventories are carried at the lower of cost and net realisable value. Cost is determined on the first in first out basis for finished goods and weighted average formula on spare parts and material and comprises all cost of purchases, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. In the case of design and manufacture of work-in-progress and finished goods, cost includes an appropriate share of overheads based on normal operating capacity. Net realisable value is the estimated selling price in the ordinary course of business less the estimated cost of completion and the estimated cost necessary to make the sale. When inventories are sold, the carrying amount of those inventories is recognised as an expense in the period in which the related revenue is recognised. The amount of any write-down of inventories to net realisable value and all losses of inventories are recognised as an expense in the period the writedown or loss occurs. The amount of any reversal of any write-down of inventories, arising from an increase in net realisable value, is recognised in profit or loss in the period in which the reversal occurs. 2.20 Trade and other receivables Trade and other receivables are recognised initially at fair value and subsequently at amortised cost using the effective interest method, less any accumulated impairment losses. 2.21 Provisions Provisions are recognised when the Group has a present obligation as a result of a past event where it is probable that it will result in an outflow of economic benefits that can be reasonably estimated. Provisions are reviewed at each reporting date and adjusted to reflect its current best estimates. If it is no longer probable that an outflow of economic resources embodying economic benefits will be required to settle the obligation, the provisions are reversed.
37
38
Key Management personnel Key management personnel are those persons having the authority and responsibility for planning, directing and controlling the activities of the entity. 2.27 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the executive committee whose members are responsible for allocating resources and assessing performance of the operating segments. 2.28 Future changes in FRSs The Group has not adopted the following standards and interpretations that have been issued but not yet effective: Descriptions Effective date for the period beginning on or after
The Conceptual Framework for Financial Reporting 2010 (Chapters 1 1 March 2011 / 1 July 2011 and 3) Amendments to FRS 101 Severe Hyperinflation and Removal of Fixed 1 July 2011 Dates for First-time Adopters FRS 19 Employee Benefits 1 January 2013 FRS 27 Separate Financial Statements 1 January 2013 FRS 28 Investments in Associates and Joint Ventures 1 January 2013 FRS 107 Amendments to FRS 107 Disclosures Transfers of Financial Assets 1 July 2011 The Directors of the Company anticipate that the application of these Standards or Interpretations will have no material impact on the financial statements of the Group and the Company.
39
2010 S$ 42,584,498
Group 2011 S$ Gain on disposal of property, plant and equipment Gain on acquisition of a subsidiary Grant income Insurance claims Interest income on bank deposits Write-back provision for bad debts Write-back of impairment of property, plant and equipment made previously Write-back of provision for slow moving and obsolete inventories no longer required Others 213,984 3,285,956 27,250 46,193 13,733 7,404 12,481 3,607,001 5. FINANCE COSTS Group 2011 S$ Interest on finance leases Interest on term loans Interest on trust receipts Interest on working capital loan and invoice financing 94,331 235,073 260,431 251,542 841,377 2010 S$ 101,967 203,903 80,126 169,392 555,388 2010 S$ 1,299 209,593 6,156 412,516 80,019 7,365 716,948
40
Note
2011 S$
2010 S$
Cost of inventories and consumables recognised in cost of sales Depreciation of property, plant and equipment Exchange loss (net) Gain on disposal of property, plant and equipment Directors fees Directors remuneration Allowance/(write-back) for slow moving and obsolete inventories Write-down of inventories to their net realisable value Loss on revaluation of certain property, plant and equipment Write-back of impairment of property, plant and equipment made previously Research and development expenses Provision for /(write-back of) provision for equipment warranty-net Operating leases Staff costs
13 9 4 7 7 13 13
24,809,340 2,329,866 1,257,895 (1,299) 105,000 449,359 (80,019) 250,090 (412,516) 1,112,486 (51,642) 153,881 5,239,065
23 7
Research and development expenses include salaries and wages of S$745,118 (2010: S$817,209). 7. SALARIES AND WAGES Group
2011 S$ Staff costs Salaries and bonus Defined contribution plans - CPF contribution Direct labour Rental for staff and workers Foreign workers levy Staff welfare Other staff related expense 1,579,517 164,414 7,277,647 177,907 136,965 50,084 104,188 9,490,722
41
Directors remuneration - Directors of the Company - Salaries and bonuses - Defined contribution plans - Directors of subsidiaries - Salaries and bonuses - Defined contribution plans
2011 S$
2010 S$
The key management personnel consist of the Directors of the Company and their subsidiaries and their remunerations are disclosed above. 8. INCOME TAX EXPENSE Group
Note Current tax expense Current year (Over)/under-provision of income tax in prior years
2011 S$
Deferred taxation Origination and reversal of temporary differences Under-provision in prior years 22 Total tax (credit)/expense
42
2010 S$ 4,817,968 819,054 (13,984) 9,396 (114,983) (75,400) (83,339) 53,578 (38,415) 555,907
2,433,806 413,747 (9,156) 115,184 (725,824) 28,238 (77,775) (291,712) (183,548) (6,021) 529,988 (732,169) (23,843) (963,891)
The Singapore Government has announced on 17 February 2012 that companies will receive a cash grant of 5% for non-taxable companies on total revenue subject to a cap of S$5,000 for year of assessment 2012 (year ended 31 December 2011). Enhanced allowance relates to productivity and innovation credit which was introduced in the Singapore Budget 2011 to provide enhanced tax deductions, for investments in a broad range of activities along the innovation value chain, for which the Group has claimed 300% (2010: 150%) tax deduction mainly for its investment in automated equipment incurred during the year ended 31 December 2011.
9.
Motor vehicles S$ Total S$ At cost Plant and Tool and Freehold Construction machinery equipment land in progress S$ S$ S$ S$
Group
At valuation Leasehold Furniture Factory Office buildings and fixtures renovation equipment S$ S$ S$ S$
At cost or at valuation 268,634 96,784 (1,898) 289,821 (343) 652,998 2,261,173 2,259,360 505,598 44,827,170 6,553,847 1,301,051 (2,126) 36 (2,502) (28,360) (396) (17,056) 26,200 718,863 66,499 25,914,792 15,162,175 6,860 2,085,737 999,867 (2,086,680) 1,646,841 836,431 (246,173) 1,441,624 125,275 (26,438) 377,740 18,031,093 721,533 318,240 130,360 971,645 903,701 (66,499) (62,000) (10,233,166) 1,051,495 34,288,854 3,114,062 6,178,258 - (12,536,174) 49,735,210 (29,380) (51,220) 77,585,548
At 1 January 2011 10,431,654 Additions Disposals (1,900,000) Completion of construction in progress 1,086,813 Assets from acquisition of a subsidiary 7,550,000 Elimination of accumulated depreciation on revaluation (29,380) Exchange realignment (473)
At 31 December 2011
17,138,614
At cost or at valuation At 1 January 2010 Additions Disposals Revaluation adjustment Exchange realignment 212,209 70,730 (12,114) (2,191) 268,634 1,646,841 1,441,624 377,740 18,031,093 1,094,687 636,182 (76,116) (7,912) 1,242,338 230,119 (5,065) (25,768) 328,643 16,756,702 49,500 1,273,161 (22,073) (403) 23,303
1,051,495 1,051,495
At 31 December 2010
10,431,654
43
9.
At cost Motor vehicles S$ Total S$ 12,592,464 3,121,852 292,749 40,437 (66,499) 66,499 23,697,906 15,264,825 (1,293) (19,337) 3,672 331,893 34,171,755 6,518,977 253,460 8,101,216 40,249 1,449,865 (10,378) (960) 12,799 292,749 9,553,502 337,121 122,362 (16,184) (13,828) 429,471 (486,860) (9,747,307) (29,380) - (10,591,808) 40,100,871 (8,780) 45,185,219 11,415,332 2,329,866 (116,181) (985,593) (50,960) 12,592,464 9,553,502 1,426,544 429,471 568,316 Plant and Tool and Freehold Construction machinery equipment land in progress S$ S$ S$ S$
44
Group
At valuation Leasehold Furniture Factory Office buildings and fixtures renovation equipment S$ S$ S$ S$ 181,015 43,902 (1,139) 289,821 350 513,949 149,336 951,072 856,883 45,273 200,367 197,350 (10,856) (67,268) (11,495) (2,738) (13,880) (25,078) 181,015 1,070,291 1,017,660 1,669 1,097,467 718,820 2,340 1,924,243 (245,016) (26,438) 1,070,291 270,523 1,017,660 211,861
47,776 560,269
Accumulated depreciation At 1 January 2011 Depreciation charge Elimination of accumulated depreciation on revaluation Disposals Assets from acquisition of a subsidiary Exchange realignment At 31 December 2011
(29,380) (18,549)
At 1 January 2010 Depreciation charge Disposals Revaluation adjustment Exchange realignment At 31 December 2010
Net book value At 31 December 2011 139,049 87,619 576,550 423,964 84,991 1,163,706 335,117
16,511,679
2,085,737 1,051,495
32,400,329 21,696,390
At 31 December 2010
10,383,878
45
At Cost At 1 January 2011 Additions At 31 December 2011 At 1 January 2010 Additions At 31 December 2010 Accumulated depreciation At 1 January 2011 Charge for the year At 31 December 2011 At 1 January 2010 Charge for the year At 31 December 2010 Net book value At 31 December 2011 At 31 December 2010
Renovation S$
Total S$
8,688 8,688
18,892 18,892
8,688 8,688
1,734 1,734
594 594
89,331 187,525
16,943 17,158
5,198 8,094
111,472 212,777
46
At 31 December 2010
Cost Accumulated depreciation Net book value 10. GOODWILL Goodwill on consolidation Cost At 1 January 2011 and 31 December 2011 At 1 January 2010 and 31 December 2010 Carrying amount At 31 December 2011 and 31 December 2010
Group S$
760,828 760,828
760,828
47
2010 S$
760,828
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculation use cash flow projections based on financial budgets provided by management covering a 5-year period. Key assumptions used for value-in-use calculations The key assumptions for the value-in-use calculations are those regarding the discount rate, growth rate and gross margin. Management determined the budgeted gross margin based on past performance and its expectation for market development. The discount rates used are pre-tax and reflect specific risks relating to the relevant segments. Equipment 2011 2010 Gross margin Growth rate Discount rate 23% 10% 5% 30% 10% 6%
48
Cost At 1 January 2011 Additions Write-off during the year At 31 December 2011 At 1 January 2010 Additions At 31 December 2010 Accumulated amortisation At 1 January 2011 Amortisation Write-off during the year At 31 December 2011 At 1 January 2010 Addition during the year At 31 December 2010 Carrying amount At 31 December 2011 At 31 December 2010
427,002 1,455,525
Total salaries and wages capitalised into deferred development expenditure were S$98,377 (2010: S$125,840). During the year, the Group has written-off S$842,994 (2010: S$ Nil) net of accumulated amortisation as the Group channelled its resources on existing product development and improvement. 12. INVESTMENT IN SUBSIDIARIES (a) Investment in subsidiaries:Company
2010 S$
6,994,881
6,346,301
49
Name of company
Rokko Technology Pte. Ltd. and its subsidiary: - Rokko Technology Sdn Bhd (i) Rokko Ventures Pte. Ltd. and its subsidiaries: - Rokko Systems Pte. Ltd.(ii)
Singapore Singapore
100 100
100 100
2,361,660 -
2,361,660 -
- Rokko Mechatronics Pte. Ltd. Rokko Materials Pte. Ltd. and its subsidiaries - Rokko Stamping Pte. Ltd. (iv)
Singapore
100
100
Singapore
100
100
1,000,000
100,000
Singapore
100
100
100,000
- Rokko Leadframes Pte. Ltd. (v) PT. Rokko Sakti Indonesia (iii)
Singapore
100
Indonesia
100
151,420
6,994,881
6,346,301
All the subsidiaries of the Group incorporated in Singapore are audited by Mazars LLP, Public Accountants and Certified Public Accountants.
50
iii
iv
13.
INVENTORIES Group
2011 S$ Finished goods Less: Allowance for slow moving and obsolete inventories
Raw materials and consumables Less: Allowance for slow moving and obsolete inventories
Work-in-progress Total
11,279,653 13,802,848
51
The cost of inventories recognised as expense and included in cost of sales amounted to S$33,112,229 (2010: S$24,809,340). During the financial year ended 31 December 2011, S$258,615 (2010: S$Nil) of inventories has been written down to its net realisable value and has been included in the other operating expenses. 14. TRADE AND OTHER RECEIVABLES Group Company
2011 S$ Trade receivables Other receivables Deposits Prepayments Staff loans 9,446,839 286,714 152,077 571,408 34,280 10,491,318
2010 S$
2011 S$
Trade receivables are non-interest bearing and are generally on 30 to 90 days credit term. Trade and other receivables denominated in foreign currencies at the end of the reporting date are as follows: Group Company
2011 S$ Malaysian Ringgit Indonesian Rupiah United States dollar 68,937 7,285,674
2010 S$
2011 S$
2010 S$ -
52
2010 S$
The non-trade amounts owing by subsidiaries are unsecured, interest-free, repayable on demand and is denominated in Singapore dollars. 16. CASH AND CASH EQUIVALENTS Group Company
2011 S$ Cash on hand Cash with banks Cash pledged to the bank Cash and cash equivalents as stated in consolidated statements of cash flows 24,627 9,604,603 9,629,230 (500,000) 9,129,230
2010 S$
2011 S$
2010 S$
636,013 636,013
1,361,239 1,361,239
Cash and cash equivalents denominated in foreign currencies at the end of the reporting date are as follows: Group Company
2011 S$ United States dollar Malaysian Ringgit Japanese Yen 4,228,400 1,411,194 2,628
2010 S$
2011 S$
2010 S$
7,386 -
1,261,650 -
53
Issued and fully paid up with no par value: At 1 January Issuance of new shares At 31 December
2010
S$
165,000,000 165,000,000
12,442,108 12,442,108
The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. All issued shares are fully paid. In 2010, the Company issued 15,000,000 new shares at S$0.14 each pursuant to a private placement, raising net proceeds of S$2,009,300. The cost of issuing the shares was approximately S$90,700. 2011 Net asset value in S$ of the Group Number of shares issued as at 31 December in the Company Net asset value per share in cents 18. TREASURY SHARES Group and Company Number of shares 2011 2010 2011 S$ Balance at 1 January Purchase of treasury shares Balance at 31 December 5,000,000 1,714,000 6,714,000 4,355,000 645,000 5,000,000 27,916,491 158,286,000 17.64 2010 25,762,889 160,000,000 16.10
Amount
Treasury shares relate to ordinary shares of the Company that are purchased and held by the Company. Pursuant to the share buy back mandate approved by shareholders at the AGM held on 8 April 2011, the Company purchased 1,714,000 (2010: 645,000) shares by way of on-market purchase at share prices ranging from S$0.101 to S$0.136 (2010: S$0.125 to S$0.155). The total amount paid to purchase the shares was S$186,913 (2010: S$89,770).
54
(b)
20.
REVALUATION RESERVE The revaluation reserve relates to the revaluation of the leasehold buildings of the Group. There is no restriction on the distribution of the balance of the revaluation reserves to shareholders. During the current year, revaluation surplus amounting to S$902,093 (2010: S$ Nil) has been realised to accumulated profits upon the disposals of two leasehold buildings previously held by its subsidiaries through statement of changes in equity.
21.
Current Obligations under finance lease (secured) (a) Interest-bearing term loans (secured) (b) Bridging loans (c) Trust receipts (secured) (d) Invoice financing (e)
2011 S$
2010 S$
2011 S$
2010 S$
49,633 49,633
Non-current Obligations under finance lease (secured) (a) Interest-bearing term loans (secured) (b) Bridging loans (c)
55
Within 1 year
Principal 2011 S$ -
69,754 1,269,223 150,053 2,062,201 Group Interest Principal 2010 2010 S$ S$ 56,045 779,247
643,189 1,478,481
50,599
966
49,633
The effective interest rate for the finance lease ranges from 3.60% - 7.99% (2010: 3.87% - 7.37%) per annum. The finance leases are secured against property, plant and equipment with a net book value amounting to S$3,529,119 (2010: S$2,773,565), and corporate guarantee by Rokko Holdings Ltd. Finance lease denominated in foreign currencies at the end of the reporting date are as follows: Group Company
2010 S$ 26,659
2011 S$
2010 S$ -
56
(iii)
Term loans denominated in foreign currencies at the end of the reporting date are as follows: Group Company
2011 S$ United States dollar Malaysian Ringgit (c) Bridging loans 4,344,451 580,154
2010 S$
2011 S$
2010 S$ -
2,960,250 629,308
Payments 2011 S$ Within 1 year 1,406,789 After 1 year but within 5 years 686,066 2,092,855
Principal 2011 S$
Payments 2011 S$ -
Principal 2011 S$ -
59,649 1,347,140 20,280 665,786 79,929 2,012,926 Group Interest 2010 S$ 103,942
Payments 2010 S$ Within 1 year After 1 year but within 5 years 989,102 1,674,626 2,663,728
Principal 2010 S$ -
57
2011 S$ United States dollar Japanese Yen Euro (e) Invoice financing 4,993,720 4,028,564 680,780
2010 S$
2011 S$
2010 S$ -
2,427,916 2,724,480 -
The invoice financings are secured by Corporate guarantee by Rokko Holdings Ltd. The effective interest rate for invoice financing ranges from 2.54% - 3.25% (2010: 2.18% - 2.52%) per annum. Invoice financing denominated in foreign currencies at the end of the reporting date are as follows: Group Company
2010 S$
2011 S$ -
2010 S$ -
2,887,463
58
At 31 Charged to December profit or loss 2011 S$ S$ 1,274,161 28,779 1,302,940 (789,467) (166,378) (955,845)
GROUP
At 1 January 2010 S$
Charged to equity
(1,234,179) (1,234,179)
(2,139) (2,139)
(263,496) (263,496)
(1,499,814) (1,499,814)
COMPANY
COMPANY
59
2011 S$ Trade payables Accrued operating expenses Other payables 6,357,548 2,686,092 576,942 9,620,582
2010 S$
2011 S$
Trade and other payables are non-interest bearing and are normally settled on 30 to 90 days credit term. Trade and other payables denominated in foreign currencies at the end of the reporting date are as follows: Group Company
2011 S$ Korean Won Malaysian Ringgit Japanese Yen United States dollar Others 329,164 3,097,094 2,848,768 83,291
2010 S$
2011 S$
2010 S$ -
Included in the accrued operating expenses is the provision for warranties. The Group provides one-year warranty on equipment and undertake to repair or replace items that fail to perform satisfactorily. A provision is recognised at the reporting date for expected warranty claims based on past experience of the level of repairs and returns as well as management best estimation of the possible outcome on an individual case basis. Movements in provision for warranties are as follows:2011 S$ Balance at beginning of the year Effect of exchange rate changes Provisions for/(write-back) made during the year-net Balance at end of the year 183,627 507 11,083 195,217 2010 S$ 235,722 (453) (51,642) 183,627
60
The key management personnel comprise of the directors of the Company and its subsidiaries and their remuneration are disclosed in Note 7.
61
2011 S$ Capital expenditure contracted but not provided for in the financial statements - In respect of the purchase of property, plant and equipment
2010 S$
2011 S$
2010 S$
131,000
The capital commitments are pertaining to implementation of ERP software and upgrading of services for the Group which are on-going as at 31 December 2011. 27. SEGMENT INFORMATION For management purposes, the Group is organised into business units based on their products and services, and has five reportable operating segments as follows: I. II. III. IV. V. The Equipment segment designs, develops and manufactures customised automated equipment specific to customer requirements. The Leadframes segment manufactures lead frames for semiconductor industry. The Stamping segment provides connector stamping plating services to manufacturers in the electronics industry. The Tooling segment designs, develops and manufactures precision tools used in the front and back end semiconductor manufacturing processes. The Trading and others segment is an investment arm which derived revenue from provision of corporate services and renting out premises to subsidiaries.
Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business unit separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below is measured differently from operating profit or loss in the consolidated financial statements. Group financing (including finance costs) and income taxes are managed on a group basis and are not allocating to operating segments. Transfer prices between operating segments are on an arms length basis in a manner similar to transactions with third parties.
27.
62
Business segments
Leadframes S$ 535,532 363,978 1,306,176 1,412,230 131,160 124,856 3,007,593 72,597 68,455 219,092 318,913 86,042 35,972 923,470 92,196 157,453 289 3,070 95,827 163,609 712,841 2,356,112 2,006,881 1,349,609 9,018,523 11,623,625 2,280,000 4,100,000 16,001,931 18,978,962 9,690,517 10,782,930 4,071,948 5,543,400 58,048,630 42,584,498 S$ S$ S$ S$ S$ S$ S$ S$ S$ Stamping Tooling Trading and Others Total
OPERATING SEGMENT S$
Equipment
S$
1,675,551
1,905,728
Interest income
3,030
Interest expense
349,500
Depreciation
538,049
Amortisation of deferred 262,892 729,406 91,999 637,407 (219,052) 622,896 1,452,546 588,694 1,719,343 1,172,356 (596,660) (214,017) 270,589 (75,284) 157,636 29,282 35,683 2,954,640 (815,712) 408,879 1,723,135 513,410 1,876,979 1,201,638 2,990,323 283,906 406,844 (963,891) 1,370,735 262,892 7,319,843 555,907 6,763,936
development expenditure
283,906
(901,371)
(107,212)
(794,159)
(Write back)/allowance for slow moving and obsolete inventories 45,711 83,005 (80,019) -
295,961
378,966 258,615
(80,019) -
212,904
842,994
(412,516) 250,090
842,994 -
(412,516) 250,090
Impairment of property
7,370,212 23,249,790 25,019,868 32,602,146 19,389,262 841,067 1,811,606 1,571,053 8,327 4,015,101 10,953,287 12,741,321 15,377,211 59,044 3,073,976
160,055
4,983,438
98,377
27.
OPERATING SEGMENT
Inter-segment revenue
Interest income
Interest expense
Depreciation
Amortisation of deferred
development expenditure
(Write back)/allowance for slow moving and obsolete inventories 378,966 258,615 842,994 115,226,004 6,178,257 98,377 68,402,125 43,353,219 125,840 7,464,802 79,050,726 250,090 (47,597,420) (28,690,032) (412,516) (22,812,614) (12,877,996) (80,019) -
Impairment of property
Capital expenditure
63
64
Depreciation adjustment arising from revaluation reserves of Rokko Leadframes Pte Ltd: Depreciation charges attributable to revaluation reserves was reversed by debiting revaluation reserves in equity at Rokko Leadframes Pte Ltd company level. At consolidation, this amount was restated as the revaluation reserves have been recognised as gain on acquisition. Depreciation on revaluation reserves Deferred tax attributable to revaluation reserves Profit on inter-company sales of fixed assets Net depreciation charges added at consolidation 133,885 (22,760) 111,125 84,879
65
Note E The following items are (eliminated from)/added to total assets on consolidation : 2011 S$ 1) Amounts owing by inter-companies 2) Investments in subsidiaries 3) Goodwill on acquisition of minority interest 4) Profit on inter-company sales of fixed assets net off depreciation adjustments 5) Profit on inter-company sales included in inventory Note F Movements in deferred development expenditure: 2011 S$ Deferred development expenditure as at 1 January Deferred development expenditure for reportable segments for the year Amortisation for reportable segment Deferred development expenditure written off Deferred development expenditure as at 31 December Note G Amount owing to inter-companies are eliminated on consolidation. 1,455,525 98,377 (283,906) (842,994) 427,002 2010 S$ 1,592,577 125,840 (262,892) 1,455,525 (28,681,407) (19,286,403) 760,828 (59,429) (331,009) (47,597,420) 2010 S$ (12,875,694) (10,537,823) 760,828 (85,675) (74,250) (22,812,614)
27.
66
Geographical segments
ASEAN 2010 S$ S$ S$ S$ S$ S$ S$ S$ S$ 2011 2010 2011 2010 2011 2010 2011 2010 China and Taiwan Others Elimination TOTAL
Group
2011
S$
Segment revenue 32,958,607 18,978,962 51,937,569 66,810,317 10,537,823 77,348,140 7,464,802 125,840 1,656,887 (66,883,823) (21,110,028) (19,286,403) (10,537,823) (47,597,420) (10,572,205) 67,628,584 67,628,584 6,178,258 98,377 9,589,470 8,544,700 530,014 1,081,191 (16,001,931) (18,978,962) 58,048,630 (16,001,931) (18,978,962) 9,589,470 8,544,700 530,014 1,081,191 58,048,630 42,584,498 42,584,498 56,238,112 56,238,112 7,464,802 125,840
47,929,146
Intersegment sales
16,001,931
Total
63,931,077
Segment assets
115,226,004
Unallocated assets
19,286,403
Total assets
134,512,407
Capital expenditure
4,521,371
98,377
Top five external customers contributed S$37.2 million or 64% of the Groups revenue for FY2011 (FY2010: S$33.8 million or 79%). These revenues are attributable to the Equipment, Leadframes, Tooling and Stamping segments.
67
9,620,582 521,160 2,062,201 11,218,018 2,012,926 9,928,482 2,904,419 38,267,788 Carrying amount S$
9,620,582 521,160 2,212,254 13,570,602 2,092,855 9,984,988 2,919,937 40,922,378 Contractual cashflows S$
GROUP 2010 Trade and other payables Amount owing to directors Finance leases Term loans Bridging loans Trust receipts Invoice financing
9,296,390
9,296,390
5,995,756 5,995,756
533,629 533,629 1,478,481 507,458 8,466,774 246,819 2,663,728 494,551 5,781,400 5,781,400 2,890,514 2,890,514 31,110,916 19,750,761
Contractual cashflows include the interest element. The amount owing to directors is payable subject to review and approval of the Audit Committee.
68
2011 S$ By geographical areas Singapore Malaysia Philippines China and Taiwan Thailand Others
2010 S$
2011 S$
2010 S$
8,620,716
5,276,945
69
2011 S$ Trade and other receivables Cash and cash equivalents 9,919,910 9,629,230 19,549,140
2010 S$
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets. No allowance for individually significant exposures and collective impairment was made based on past experience. Financial assets that are past due and/or impaired There is no other class of financial assets that is past due and/or impaired except for the other receivables. The aged analysis of trade receivables and the impairment are as follows: Gross 2011 S$ 4,810,432 2,133,384 374,534 422,794 879,572 8,620,716 Impairment 2011 S$ Gross 2010 S$ 2,655,272 702,564 653,922 3,537 1,260,650 5,275,945 Impairment 2010 S$ -
Group Not past due Past due 0 30 days Past due 31 60 days Past due 61 90 days More than 90 days Total
Based on past experience, the Company believes that no impairment allowance is necessary in respect of trade receivables due to the good payment track records of its customers.
70
71
72
2011 Fixed rate Finance lease obligations Bridging loan Trust receipts Invoice financing Variable rate Term loans 2010 Fixed rate Finance lease obligations Bridging loan Trust receipts Invoice financing Variable rate Term loans
601,248 529,330 -
427,907 136,456 -
240,068 -
604,989
614,851
622,390
631,012
314,034 930,447 -
235,314 529,547 -
59,555 136,275 -
313,695
313,558
302,448
306,993
Interest rate for certain term loans is fixed in the range of 4% to 6.25% per annum. Interest rate for bridging loans is fixed at 5% per annum. The other financial instruments of the Group are not subjected to interest rate risks. Capital management The Groups objectives when managing capital are to safeguard the Groups ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
73
2011 S$ Total borrowings Less: cash and cash equivalents Net debt Total equity Total capital Gearing ratio
Group
2010 S$
The Group and the Company are not subject to any externally imposed capital requirements. 29. DIVIDENDS PAID Group and Company 2011 2010 S$ S$ 799,265 726,635 800,000
First and final dividend paid in respect of the previous financial year of 0.5 cent (2010: 0.05 cent) per ordinary share, tax exempt one-tier Interim dividend paid in respect of the current financial year - Nil (2010: 0.05 cent) per ordinary share, tax exempt one-tier
The Directors have proposed a final dividend for the financial year ended 31 December 2011 of 0.25 cent per ordinary share (excluding Treasury Shares), tax exempt one-tier amounting to S$400,000. These financial statements do not reflect the dividend payable, which will be accounted for in the shareholders equity as an appropriation of retained earnings for the financial year ending 31 December 2012.
74
Basic earnings per share is based on: Net profit attributable to ordinary shareholders of the Company
2011 S$ 3,397,697
2010 S$ 4,262,061
Group 2011 2010 No. of shares No. of shares Weighted average number of ordinary shares 159,314,562 154,225,203
The basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Company and held as treasury shares. As there are no dilutive potential ordinary shares as at the end of the financial year ended 31 December 2011, no diluted earnings per share are presented. 31. CONTINGENT LIABILITY The Group and the Company did not have any significant contingent liabilities as at 31 December 2011. 32. DIRECTORS REMUNERATION Companys directors receiving remuneration from the Group: Number of director 2011 2010
5 5
5 5
75
Factory
Factory Lot No.15, Jalan Bukit 7, Kawasan MIEL Bandar Seri Alam Phase III, 81750 Masai Johor, Malaysia Lot No.17, Jalan Bukit 7, Factory Kawasan MIEL Bandar Seri Alam Phase III, 81750 Masai Johor, Malaysia 27 Tuas Avenue 2, Singapore 639458 Factory cum office
Freehold
30-year leasehold from 16 October 2011 30-year leasehold from 7 March 2008 Freehold
17 Tuas Road, Singapore 638487 Factory cum office No. 8 Lot 205, Jalan Mega 1/10, Factory cum office Taman Perindustrian Nusa Cemerlang, 79200 Bandar Nusa Jaya, Johor, Malaysia
76
Statistics of Shareholdings
as at 15 March 2012
Issued and fully paid-up capital Number of shares Class of shares Voting rights : : : : S$12,442,108 165,000,000 Ordinary shares One vote per ordinary share
The Company held 6,714,000 treasury shares, constituting 4.24% of the total number of issued shares (excluding treasury shares). DISTRIBUTION OF SHAREHOLDINGS SIZE OF SHAREHOLDINGS 1 999 1,000 10,000 10,001 1,000,000 1,000,001 and above Total TWENTY LARGEST SHAREHOLDERS No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. NAME Lim Chong Chen Lee Sun Lim Maybank Kim Eng Securities Pte. Ltd. OCBC Securities Private Ltd Tan Keat Seang UOB Kay Hian Pte Ltd Tey Kim Hwee Lim Yoke Mein Lau Kok Yin Chey Long Wan Baek Seung Ho DMG & Partners Securities Pte Ltd Low Chai Chong Phillip Securities Pte Ltd Law Jow Yuan Shy Dayanghirang Manolo Dimayuga Zhang Jing Khoo Poi Lan Chan Tuck Sing Lim Yee Chuan TOTAL NO. OF SHARES 112,460,260 3,785,920 2,694,000 1,741,000 1,482,000 1,379,000 1,225,560 1,160,960 1,000,000 902,000 890,000 821,000 774,000 669,000 625,000 600,000 545,000 514,000 500,000 450,000 134,218,700 % 71.05 2.39 1.70 1.10 0.94 0.87 0.77 0.73 0.63 0.57 0.56 0.52 0.49 0.42 0.39 0.38 0.34 0.32 0.32 0.28 84.77 NO. OF SHAREHOLDERS 6 458 378 8 850 % 0.71 53.88 44.47 0.94 100.00 NO. OF SHARES 3,560 1,545,440 30,808,300 125,928,700 158,286,000 % 0.00 0.98 19.46 79.56 100.00
77
Statistics of Shareholdings
as at 15 March 2012
SHARES HELD BY PUBLIC Based on the information provided to the Company as at 15 March 2012, 26.81% of the issued ordinary shares of the Company were held by the public. Accordingly, Rule 723 of the Listing Manual (Section B: Rules of Catalist) of the Singapore Exchange Securities Trading Limited has been complied with. SUBSTANTIAL SHAREHOLDER Direct Interest Number of % Shares Lim Chong Chen 112,460,260 71.05 Deemed Interest Number of % Shares -
78
Corporate Governance
The Board of Directors (the Board) and the management of the Company (the Management) are committed to maintaining high standards of corporate governance and ensuring the recommendations of the Code of Corporate Governance 2005 (the Code) have been complied with in order to protect the interests of shareholders of the Company (the Shareholders). The following describes the Companys corporate governance processes and activities for the financial year ended 31 December 2011 (FY2011) with specific reference to the Code. BOARDS CONDUCT OF AFFAIRS PRINCIPLE 1 : Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board. The Board comprises the following members:Tey Kim Hwee (Non-Executive Chairman) Lim Chong Chen (Managing Director) Lim Yee Chuan (Executive Director) Lee Sen Choon (Lead Independent Director) Wai Chee Leong (Independent Director) The Boards principal role is to enhance and protect the interests of Shareholders. The Board oversees the overall management of the Company and its subsidiaries (the Group), approves significant policies and sets overall corporate strategies and directions of the Group. More than one-third (1/3) of the Board is made up of Independent Directors. The Directors have the right core competencies and diversity of experience to enable them, in their collective wisdom, to contribute effectively. Every Director is expected to act in good faith and to consider at all times, the interests of the Company. The Board meets regularly on a half-yearly basis and ad-hoc Board meetings are convened when they are deemed necessary. The Companys articles of association (Articles) provide for telephonic meetings. The Board has established three (3) Board committees to assist in the execution of its responsibilities. They are the Audit Committee (AC), the Nominating Committee (NC) and the Remuneration Committee (RC), all of which are chaired by Independent Directors. The number of Board and Board committee meetings held in FY2011, as well as the attendance of each Board member thereof, is set out below:-
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Corporate Governance
Board Audit Number of meetings held Board Members Tey Kim Hwee Lim Chong Chen Lim Yee Chuan Lee Sen Choon Wai Chee Leong 2 2 2 2 2 2 2 Board Committees Nominating 1 Remuneration 1
The Company has adopted internal guidelines setting forth matters which specifically require the Boards approval such as, amongst others, new investments, divestments and commitments to term loans and lines of credit from financial institutions. Every Director of the Board has received the appropriate training, including his/her duties as a director and how to discharge those duties. The Directors have also been briefed on the business and governance practices of the Group. The Company provides further relevant training on matters, including relevant new laws, regulations and changing commercial risks, to the Directors from time to time. The Board ensures that incoming and newly appointed Directors will be given an orientation and briefing on the Groups business strategies, operations and governance practices to facilitate the effective discharge of their duties. Newly appointed Directors will also be provided a formal letter setting out their duties and obligations. BOARD COMPOSITION AND BALANCE PRINCIPLE 2 : There should be a strong and independent element on the Board, which is able to exercise objective judgment on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Boards decision making. The Board comprises two (2) Executive Directors and three (3) Non-Executive Directors, with relevant and diverse experience to contribute effectively to the Group. Of the three (3) Non-Executive Directors, two (2) are independent within the meaning of the Code. The Independent Directors make up at least one-third (1/3) of the Board, and thus meet the requirement of the Code. There is therefore a strong and independent element on the Board. The independence of each Director has been and will be reviewed annually by the NC. The NC adopts the Codes definition of what constitutes an independent director in its review. The Independent Directors have confirmed that they do not have any relationship with the Company, its related companies or its officers that could interfere, or be reasonably perceived to interfere, with the exercise of the Directors independent business judgment with a view to the best interests of the Company. The NC has reviewed and determined that the Independent Directors are independent. The Board has examined its size and is of the view that it is an appropriate size for effective decision-making, taking into account the scope and nature of the operations of the Group.
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Corporate Governance
The composition of the Board is reviewed on an annual basis by the NC, and the NC is of the view that the current Board has the appropriate mix of expertise and experience, and collectively possesses the necessary core competencies for effective functioning and informed decision-making. The Board as a group comprises members with core competencies in accounting and finance, business and management experience, industry knowledge, strategic planning and customer-based experience and knowledge. Where necessary or appropriate, the Non-Executive Directors will meet without the presence of the Management. The profiles of the Directors are set out on pages 6 and 7 of this Annual Report. CHAIRMAN AND MANAGING DIRECTOR PRINCIPLE 3 : There should be a clear division of responsibilities at the top of the company the working of the Board and the executive responsibility of the companys business which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power. As the Non-Executive Chairman, Mr Tey Kim Hwees role is to advise the Board on overall business strategies and future direction of the Group. Mr Lim Chong Chen is the Managing Director of the Company and oversees the business and operational decisions made in running the Groups business. Although the Non-Executive Chairman, Mr Tey Kim Hwee, is the brother-in-law of the Managing Director, Mr Lim Chong Chen, the Board is of the view that there are sufficient safeguards and checks to ensure that the process of decision-making by the Board is independent and based on collective decisions without any individual or group of individuals exercising any considerable concentration of power or influence. All major decisions are made in consultation with the Board. In addition, the Company had appointed a Lead Independent Director, Mr Lee Sen Choon. As the Lead Independent Director, Mr Lee Sen Choon is the contact person for Shareholders in situations where there are concerns or issues which communication with the Non-Executive Chairman, Managing Director, or Financial Controller has failed to resolve or where such communication is considered inappropriate. The Board collectively ensures the followings, in consultation with the Management: the effective scheduling of meetings to enable the Board to perform its duties responsibly, while not interfering with the flow of the Groups operations; the effective preparation of the agenda for Board meetings; the exercise of control over the quality, quantity and timeliness of the flow of information between the Management and the Board, and between the Company and its Shareholders; and compliance with the Companys guidelines on corporate governance.
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Corporate Governance
BOARD MEMBERSHIP PRINCIPLE 4 : There should be a formal and transparent process for the appointment of new directors to the Board. Identification and selection of new Directors will be made by the NC which comprises three (3) NonExecutive Directors, Mr Tey Kim Hwee, Mr Lee Sen Choon and Mr Wai Chee Leong. Mr Lee Sen Choon and Mr Wai Chee Leong are Independent Directors. The Chairman of the NC is Mr Wai Chee Leong who is not directly associated (as defined under the Code) with any substantial Shareholders of the Company. The NC has written terms of reference and its responsibilities include:(a) (b) (c) (d) (e) making recommendations to the Board on all board appointments and re-nominations having regard to the Directors contribution and performance; ensuring that all Directors submit themselves for re-nomination and re-election at regular intervals and at least once every three (3) years; determining annually whether a Director is independent; deciding whether a Director is able to and has adequately carried out his/her duties as a Director of the Company, in particular, where the Director concerned has multiple board representations; and assessing the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board.
The NC is of the view that Mr Lee Sen Choon and Mr Wai Chee Leong are independent. The Company does not have a formal process for the selection and appointment of new Directors to the Board. However, if required, the Company has or is able to procure search services, contacts and recommendations for the purposes of identifying suitably qualified and experienced persons for appointment to the Board. Information required in respect of each Directors academic and professional qualification is set out in the Board of Directors section of this Annual Report. Information on shareholdings in the Company held by each Director is set out in the Directors Report section of this Annual Report. According to the Companys Articles, one-third (1/3) of the Directors are required to retire from office and subject themselves to re-election at every Annual General Meeting (AGM). Every Director must retire at least once every three (3) years. The NC has recommended to the Board that Mr Tey Kim Hwee and Mr Lee Sen Choon be nominated for reelection at the forthcoming AGM. In making the recommendations, the NC had considered the Directors overall contributions and performance.
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Corporate Governance
The year of initial appointment and last re-election of each Director are set out below:Director Date of initial appointment Date of last reelection Current directorships in listed companies Past directorships in listed companies (preceding three years) Kyodo-Allied Industries Ltd
Lim Chong Chen Tey Kim Hwee Lim Yee Chuan Lee Sen Choon
Best World International Limited Hor Kew Corporation Limited Soon Lian Holdings Limited
7 September 2007
8 April 2011
BOARD PERFORMANCE PRINCIPLE 5 : There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board. Board performance is linked to the overall performance of the Group. The Board complies with the applicable laws and members of the Board are required to act in good faith, with due diligence and care in the best interests of the Company and its Shareholders. The NC is responsible for assessing the effectiveness of the Board as a whole and for assessing the contribution of each Director annually. The performance criteria include comparison with industry peers, addressing how the Board has enhanced long-term Shareholders value and consideration of the Companys share price performance over a five (5) year period vis--vis the Singapore Straits Times Index and a benchmark index of its industry peers (as appropriate). Other performance criteria that may be used include return on assets, return on equity, return on investment and economic value added over a longer-term period. The criteria for the evaluation of the performance of individual Directors include qualitative and quantitative factors such as performance of principal functions and fiduciary duties, level of participation at meetings, guidance provided to the Management and attendance record. The NC has assessed the current Boards performance to-date and is of the view that the performance of the Board as a whole was satisfactory. Although one of the Board members have multiple board representations, the NC is satisfied that sufficient time and attention has been given by the Directors to the Group.
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Corporate Governance
The Board and the NC have endeavoured to ensure that the Directors appointed to the Board possess the background, experience, business knowledge, finance and management skills critical to the Groups business. They have also ensured that each Director, with his/her special contributions, brings to the Board an independent and objective perspective to enable balanced and well-considered decisions to be made. ACCESS TO INFORMATION PRINCIPLE 6 : In order to fulfil their responsibilities, Board members should be provided with complete, adequate and timely information prior to board meetings and on an on-going basis. Board members are able to obtain complete, adequate and timely information and have direct access to the Management for this purpose. This is to enable them to fulfill their responsibilities efficiently. Board members are also provided with detailed board papers prior to each Board meeting so that the members may better understand the relevant issues beforehand, thereby allowing for more time at such meetings for questions that members may have. The Directors have separate and independent access to the Companys senior management and the Company Secretary. The Directors may also, either individually or as a group, in the furtherance of their duties, take independent professional advice, if necessary, at the Companys expense. The Company Secretary attends all Board meetings and ensures that all Board procedures are followed. Where the Company Secretary is unable to attend any Board meeting, he ensures that a suitable replacement is arranged and that proper minutes of the same are taken and kept. The Company Secretary also ensures that the Company complies with the requirements of the Companies Act, Chapter 50 of Singapore, and the Listing Manual (Section B: Rules of Catalist) of the Singapore Exchange Securities Trading Limited (the SGX-ST) (Rules of Catalist). The appointment and removal of the Company Secretary are subject to the approval of the Board as a whole. PROCEDURES FOR DEVELOPING REMUNERATION POLICIES PRINCIPLE 7 : There should be a formal and transparent procedure for developing policies on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration. The RC comprises three (3) Non-Executive Directors, Mr Tey Kim Hwee, Mr Lee Sen Choon and Mr Wai Chee Leong. Mr Lee Sen Choon and Mr Wai Chee Leong are Independent Directors. The Chairman of the RC is Mr Wai Chee Leong. The RC has written terms of reference and its responsibilities include:(a) (b) (c) (d) the recommendation to the Board of a framework of remuneration for Board members and senior management; the determination of the specific remuneration packages for each Executive Director; the determination of the appropriateness of the remuneration of Non-Executive Directors, taking into consideration the level of their contribution; and the review and recommendation to the Board of the terms of renewal of the service agreements of Executive Directors.
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Corporate Governance
The RC members are familiar with executive compensation matters as they each manage their own business and/or are holding directorships on the boards of other listed companies. The RC has access to advice regarding executive compensation matters, if required. The RCs recommendations are submitted for endorsement by the Board. No Director is involved in deciding his/her own remuneration. LEVEL AND MIX OF REMUNERATION PRINCIPLE 8 : The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but companies should avoid paying more than is necessary for this purpose. A significant proportion of executive directors remuneration should be structured so as to link rewards to corporate and individual performance. In setting remuneration packages, the RC takes into consideration the employment conditions within the industry and the Groups performance, as well as the performance of individual Directors and key executives. The Company has a staff remuneration policy which comprises a fixed component and a variable component. The fixed and variable components are in the form of a base salary and variable bonus, respectively, and are linked to the performance of the Company and the individual. The Non-Executive Directors do not have service agreements with the Company. They are paid Directors fees, which are determined by the Board based on their effort, time spent and responsibilities as the Non-Executive Directors. The fees are subject to approval by the Shareholders at each AGM. Except as disclosed, the Independent Directors and Non-Executive Director do not receive any remuneration from the Company. DISCLOSURE ON REMUNERATION PRINCIPLE 9 : Each company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the companys annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance. The Board has not included a separate annual remuneration report to Shareholders in this Annual Report on the remuneration of Directors and the key executives (who are not Directors of the Company) as the Board is of the view that the matters which are required to be disclosed in such annual remuneration report have been sufficiently disclosed in this Corporate Governance Report and in the financial statements of the Company. A breakdown, showing the level and mix of each Directors remuneration for FY2011 in terms of percentage, is as follows:-
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Corporate Governance
Fixed Salary and Benefits-in-Kind Variable or Performance Related Income/ Bonus
Remuneration Band and Name of Directors Below S$250,000 Lim Chong Chen Lim Yee Chuan Tey Kim Hwee Lee Sen Choon Wai Chee Leong
Others
Directors Fees
Total
15% 22% -
A breakdown, showing the level and mix of each of the top four (4) key executives remuneration for FY2011 in terms of percentage, is as follows:Variable or Performance Related Income/Bonus
Remuneration Band and Name of Key Executives Below S$250,000 Cheh Mei Lee Seng Kwong Seng Chey Long Wan Jang Deok Chun
Fixed Salary
Total
12% 4% 22% 8%
No employee who is an immediate family member (as defined in the Rules of Catalist) of a Director or the Managing Director was paid more than S$150,000 during FY2011. ROKKO EMPLOYEE SHARE OPTION SCHEME (ROKKO ESOS) The Rokko ESOS is administered by a Committee (the Committee) comprising Mr Tey Kim Hwee, Mr Wai Chee Leong and Mr Lee Sen Choon. The Rokko ESOS is summarised as follows: The Committee shall have the absolute discretion to grant the options with a subscription price at no discount, or at a discount of up to a maximum of 20% of the market price, being the average of the last dealt price of the Companys shares on the Singapore Exchange Securities Trading Limited (SGXST) on the five (5) market days immediately preceding the date of grant of such options. Subject to the rules and such other conditions as may be imposed by the Committee from time to time, the options granted are exercisable in whole or in part at any time:(a) (b) after the first anniversary of the date of grant of the option if the subscription price of the option granted was at market price: and after the second anniversary of the date of grant of the option if the subscription price of the option granted was at a discount to the market price.
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Corporate Governance
Provided always that an option that is granted to an eligible employee shall be exercised before the tenth anniversary of the date of grant of the option and an option which is granted to a Non-Executive Director (including Independent Director) of the Company or its subsidiaries shall be exercised before the fifth anniversary of the date of grant of that option. The total number of shares issued and issuable in respect of all options pursuant to Rokko ESOS shall not exceed 15% of the total issued share capital of the Company on the day preceding the relevant date of the option, provided that in relation to controlling shareholder(s) and/or associate(s) of controlling shareholder(s):(i) the aggregate number of shares which may be offered by way of grant of options to participants who are controlling shareholder(s) and/or associate(s) of controlling shareholder(s) under the Rokko ESOS shall not exceed 25% of the total number of shares available under the Rokko ESOS; and the aggregate number of shares which may be offered by way of grant of options to each participant who is a controlling shareholder or his Associate under the Rokko ESOS shall not exceed 10% of the total number of shares available under the Rokko ESOS.
(ii)
The Rokko ESOS was approved on 4 September 2008 at an Extraordinary General Meeting of the Company. ROKKO PERFORMANCE SHARE SCHEME (ROKKO PSS) The Rokko PSS is administered by a committee (the PSS Committee) comprising Mr Tey Kim Hwee, Mr Lim Chong Chen, Mr Wai Chee Leong and Mr Lee Sen Choon. The Rokko PSS is summarised as follows: The PSS Committee may grant awards which represent the right of a participant to receive fully paid shares free of charge, upon the participant achieving prescribed performance targets and/or when due recognition should be given to any good work performance and/or significant contribution to the Company and/or when the Company decides to pay part of an employees annual cash bonus payment in the form of shares. The PSS Committee will take into account various factors when determining the method to arrive at the exact number of shares comprised in an award. Such factors include, but are not limited to, the current price of the shares, the total issued share capital of the Company and the predetermined dollar amount which the PSS Committee decides that a participant deserves for meeting his performance targets. The PSS Committee shall monitor the grant of awards carefully to ensure that the size of the Rokko PSS will comply with the relevant rules of the SGX-ST. The total number of shares which may be delivered pursuant to awards granted under the Rokko PSS, when added to the number of shares issued and/or issuable under other share-based incentive schemes of the Company (including the Rokko ESOS), shall not exceed 15% of the issued shares excluding treasury shares of the Company on the day preceding the relevant date of award. The aggregate number of shares available to controlling shareholders and their associates (including adjustments made in accordance with the rules of the Rokko PSS) must not exceed 25% of the shares available under the Rokko PSS. The number of shares available to each controlling shareholder or his associate (including adjustments made in accordance with the rules of the Rokko PSS) must also not exceed 10% of the shares available under the Rokko PSS.
The Rokko PSS was approved on 12 April 2010 at an Extraordinary General Meeting of the Company. No grants have been made under the Rokko ESOS and Rokko PSS (the Schemes) since the respective dates of adoption of the Schemes up to the end of FY2011.
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Corporate Governance
ACCOUNTABILITY PRINCIPLE 10 : The Board should present a balanced and understandable assessment of the companys performance, position and prospects. The Management provides the Board with adequate and timely management accounts of the Groups performance on a regular basis in order to assist the Board in understanding the financial status and performance of the Group and for the Board to effectively discharge its duties. It is the Boards responsibility to provide Shareholders with a detailed and balanced explanation and analysis of the Companys performance, position and prospects on a half-yearly basis. AUDIT COMMITTEE PRINCIPLE 11 : The Board should establish an Audit Committee with written terms of reference which clearly set out its authority and duties. Whilst the responsibility for the management and performance of the Group rests with the Board, the AC serves to enhance the corporate governance of the Company. It serves by providing independent input to the Board, as well as by facilitating communication between the Board and the external auditors. The AC comprises three (3) Non-Executive Directors, Mr Tey Kim Hwee, Mr Lee Sen Choon and Mr Wai Chee Leong. Mr Lee Sen Choon and Mr Wai Chee Leong are Independent Directors. The Chairman of the AC is Mr Lee Sen Choon. The AC has written terms of reference and its responsibilities include:(a) (b) (c) (d) reviewing the audit plan of the external auditors, their management letter and the Managements response; reviewing the external auditors reports; reviewing the internal control and procedures and approval of arrangements for all interested person transactions; ensuring that the internal audit function is adequate, and that review of the effectiveness of material internal controls and risk management is conducted at least annually by the internal and/or external auditors; reviewing and ensuring the integrity of the financial statements of the Company and its subsidiaries before submission to the Board for approval; commissioning, reviewing and discussing with the external auditors, any suspected fraud or irregularity, or suspected failure of internal controls, or suspected infringement of any relevant laws, rules or regulations; and reviewing the independence of the external auditors annually, and recommending to the Board the appointment, re-appointment or removal of the external auditors and approving the remuneration and terms of engagement of the external auditors.
(e) (f)
(g)
Mr Tey Kim Hwee is a businessman. Mr Lee Sen Choon is a partner at a certified public accounting firm in Singapore and Mr Wai Chee Leong is a director of a law firm. The Board is of the view that the AC has the requisite financial management expertise and experience to discharge its responsibilities.
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Corporate Governance
The AC has explicit authority to investigate any matter within its terms of reference, full access to and co-operation by the Management and discretion to invite any Director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions properly. The AC has recommended to the Board the re-appointment of Mazars LLP as the Companys external auditors at its forthcoming AGM. During FY2011, the fees paid by the Company to Mazars LLP and its affiliates for audit and non-audit services amounted to $142,500 and $19,086 respectively. The non-audit services comprised tax compliance services. The AC has reviewed the non-audit services provided by the external auditors and is of the opinion that they would not affect the independence of the external auditors. The Company has complied with Rules 712 and 715 of the Rules of Catalist in relation to its external auditors. The AC meets with the external auditors and with the internal auditors (where engaged) at least annually, and without the presence of the Management, if deemed necessary. The AC has reasonable resources to enable it to discharge its function properly. The AC undertakes such further functions as may be agreed to by the AC and the Board from time to time. The AC has reviewed arrangements by which the staff of the Company may, in confidence, raise concerns about possible improprieties in matters of financial reporting or other matters, with the objective of ensuring that arrangements are in place for the independent investigation of such matters for appropriate follow-up action. INTERNAL CONTROLS PRINCIPLE 12 : The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders investments and the companys assets. The Groups internal controls and systems are designed to provide reasonable assurance as to the integrity and reliability of the financial information and to safeguard and maintain accountability of assets. Procedures are in place to identify major business risks and evaluate potential financial effects, as well as for the authorisation of capital expenditure and investments. The Board believes that, in the absence of any evidence to the contrary, the system of internal controls maintained by the Management provides reasonable assurance against material financial misstatements or loss, safeguarding of assets, the maintenance of proper accounting records, reliability of financial information, compliance with legislation, regulations and best practices and the identification and management of business risks. The Board, with the concurrence of the AC, is therefore of the view that the system of internal controls and risk management maintained by the Group is adequate to address financial, operational and financial risks of the Group and meet the needs of the Group in its current business environment as well as to safeguard Shareholders investments and the Groups assets. In addition, the AC reviews the effectiveness of internal and operational controls and risk management on an annual basis. Based on the information provided to the AC, nothing has come to its attention to cause it to believe that the system of internal controls and risk management is inadequate. The Board notes that no system of internal control can provide absolute assurance against the occurrence of material errors, poor judgment in decision-making, human error, fraud or other irregularities.
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Corporate Governance
INTERNAL AUDIT PRINCIPLE 13 : The Company should establish an internal audit function that is independent of the activities it audits. The Company has outsourced the internal audit function to an external professional firm, AT ADLER, to perform the review and test of controls of the Groups processes. The internal auditors report directly to the chairman of the AC. The AC reviews and approves the annual internal audit plans and reviews the scope and results of the internal audit performed by the internal auditors. The AC will ensure the adequacy of the internal audit function at least annually. The internal audit was conducted in accordance with the International Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors. COMMUNICATION WITH SHAREHOLDER PRINCIPLE 14 : Companies should engage in regular, effective and fair communication with shareholders. The Company recognises that effective communication leads to transparency and enhances accountability. The Company regularly conveys pertinent information, gathers views or input, and addresses Shareholders concerns. In this regard, the Company provides timely information to its Shareholders via the SGXNET announcements and press releases and ensures that price-sensitive information is publicly released where required under the Rules of Catalist, and is announced within the mandatory period. The Company does not practise selective disclosure. GREATER SHAREHOLDERS PARTICIPATION PRINCIPLE 15 : Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate theirs view on various matters affecting the company. The Company reports its financial results on a half-yearly basis and informs its Shareholders of any major developments that impact the Group promptly through the SGXNET, press releases and the Companys website. The Articles of the Company allows a Shareholder to appoint up to two (2) proxies to attend and vote in a shareholders meeting. Shareholders are given the opportunity at general meetings to air their views and ask the Directors and the Management questions regarding the Company. The external auditors and members of the AC, NC and RC will be available at such general meetings to address any questions raised by the Shareholders. The Company also ensures that there are separate resolutions at general meetings on each distinct issue. DEALING IN SECURITIES In line with Rule 1204(19) of the Rules of Catalist, the Company has adopted policies on dealings in the Companys securities and made them known to its Directors and officers of the Group, in compliance with the best practices promulgated by the SGX-ST.
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Corporate Governance
All Directors and employees are advised in writing not to deal in the Companys securities on short term considerations and not to trade in the Companys securities during the blackout period of one (1) month prior to the Groups full year or half year results announcements. The Directors and employees are also advised to refrain from trading in the Companys securities when they are in possession of price-sensitive information which is not available to the public. RISK MANAGEMENT The Company does not have a risk management committee. However, the Management regularly reviews the Groups business and operational activities to identify areas of significant business risks as well as appropriate measures to control and mitigate these risks. The Management reviews all significant control policies and procedures and highlights all significant matters to the Board and the AC. MATERIAL CONTRACTS There were no material contracts of the Company or its subsidiaries involving the interest of any Director or controlling Shareholder, either still subsisting at the end of FY2011 or if not then subsisting, entered into since the end of the previous financial year. INTERESTED PERSON TRANSACTIONS All interested person transactions are documented and submitted periodically to the AC for review and approval, to ensure such transactions are carried out at arms length basis and on normal commercial terms and are not prejudicial to the Company and its minority Shareholders. The Board will ensure all disclosure, approval and other requirements on interested person transactions, including those required by prevailing legislation, Rules of Catalist and accounting standards are complied with. The AC has reviewed the interest person transactions entered into during FY2011 and none of these interested person transactions was S$100,000 and more in value. The Company does not have a Shareholders mandate for interested person transactions. USE OF PROCEEDS FROM THE PLACEMENT OF 15 MILLION NEW SHARES AT S$0.14 EACH Of the S$2.0 million net proceeds raised from the 15 million new shares issued pursuant to a private placement in May 2010, S$1.0 million which was intended to be used for expansion of business in the Peoples Republic of China has been re-allocated for use in the expansion of the manufacturing facility in Malaysia. There is no change in the use of the remaining net proceeds of S$1.0 million for research and development of new products.
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Corporate Governance
The following table shows the net proceeds utilised and unutilised as at 15 March 2012:Amount allocated S$ Expansion of the manufacturing facility in Malaysia Research and development of new products Total NON-SPONSOR FEES No non-sponsor fees were paid to the Companys sponsor, PrimePartners Corporate Finance Pte. Ltd. during FY2011. 1,000,000 1,000,000 2,000,000 Amount utilised S$ 364,000 1,000,000 1,364,000 Amount unutilised S$ 636,000 Nil 636,000
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93
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; and (B) (notwithstanding that this authority may have ceased to be in force) issue Shares in pursuance of any Instrument made or granted by the Directors while this authority was in force,
provided that:(1) the aggregate number of Shares to be issued pursuant to this authority (including Shares to be issued in pursuance of Instruments made or granted pursuant to this authority) does not exceed one hundred per cent (100%) of the total number of issued Shares (excluding treasury shares) (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of Shares to be issued other than on a pro-rata basis to the existing shareholders of the Company (including Shares to be issued in pursuance of Instruments made or granted pursuant to this authority) does not exceed fifty per cent (50%) of the total number of issued Shares (excluding treasury shares) (as calculated in accordance with sub-paragraph (2) below):(subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of Shares that may be issued under sub-paragraph (1) above, the percentage of issued Shares shall be based on the total number of issued Shares (excluding treasury shares) at the time this authority is given, after adjusting for:(i) (ii) new Shares arising from the conversion or exercise of convertible securities; new Shares arising from exercising share options or vesting of share awards outstanding or subsisting at the time this authority is given, provided the options or awards were granted in compliance with Part Vlll of Chapter 8 of the Rules of Catalist; and any subsequent bonus issue, consolidation or sub-division of Shares;
(2)
(iii)
94
(4)
95
(ii)
and otherwise in accordance with all other laws, regulations and rules of the SGX-ST as may for the time being be applicable, be and is hereby authorised and approved generally and unconditionally (the Share Purchase Mandate); (b) the authority conferred on the Directors pursuant to the Share Purchase Mandate may be exercised by the Directors at any time and from time to time during the period commencing from the passing of this Resolution and expiring on the earliest of:(i) (ii) (iii) (c) the date on which the next annual general meeting of the Company is held or required by law to be held; the date on which Share purchases have been carried out to the full extent of the Share Purchase Mandate; or the date on which the authority contained in the Share Purchase Mandate is varied or revoked by an ordinary resolution of shareholders of the Company in general meeting;
in this Resolution:Prescribed Limit means ten per cent (10%) of the issued Shares as at the date of the passing of this Resolution; and Maximum Price in relation to a Share to be purchased, means an amount (excluding brokerage, commissions, stamp duties, applicable goods and services tax and other related expenses) not exceeding:(i) (ii) in the case of a Market Purchase: in the case of an Off-Market Purchase: 105 per cent (105%) of the Average Closing Price; and 120 per cent (120%) of the Highest Last Dealt Price,
96
BY ORDER OF THE BOARD VINCENT LIM BOCK HUI COMPANY SECRETARY Singapore 2 April 2012 Explanatory Notes:(i) Under the Rules of Catalist, a share issue mandate approved by shareholders as a ordinary resolution will enable directors of an issuer to issue an aggregate number of new shares and convertible securities of the issuer of up to 100% of the issued share capital of the issuer (excluding treasury shares) as at the time of passing of the resolution approving the share issue mandate, of which the aggregate number of new shares and convertibles securities issued other than on a pro-rata basis to existing shareholders must be not more than 50% of the issued share capital of the issuer (excluding treasury shares). The Directors are of the opinion that the proposed share issue mandate will enable the Company to respond faster to business opportunities and to have greater flexibility and scope in negotiating with third parties in potential fund raising exercises or other arrangements or transactions involving the capital of the Company. Ordinary Resolution 7, if passed, will empower the Directors from the date of the above AGM until the date of the next annual general meeting, to allot and issue Shares and/or Instruments. The aggregate number of Shares (including Shares to be issued in pursuance of Instruments made or granted) which
97
(iii)
(iv)
Notes:(1) (2) A member of the Company entitled to attend and vote at the AGM may appoint not more than two (2) proxies to attend and vote instead of him. Where a member appoints two (2) proxies, he shall specify the proportion of his shareholding to be represented by each proxy in the instrument appointing the proxies. A proxy need not be a member of the Company. If the member is a corporation, the instrument appointing the proxy must be under seal or the hand of an officer or attorney duly authorised. The instrument appointing a proxy must be deposited at the Companys registered office at 61 Kaki Bukit Road 2, Singapore 417869 not less than 48 hours before the time appointed for holding the AGM.
(3) (4)
98
By Order of the Board VINCENT LIM BOCK HUI COMPANY SECRETARY Singapore 2 April 2012
99
Appendix
PROPOSED RENEWAL OF THE SHARE PURCHASE MANDATE 1. Introduction Shareholders had approved a mandate (the Share Purchase Mandate) at the extraordinary general meeting held on 21 November 2008 to enable the Company to purchase or otherwise acquire issued ordinary shares in the capital of the Company (Shares). The Share Purchase Mandate is subject to annual renewal and was last renewed at the annual general meeting held on 8 April 2011. The authority conferred on the directors of the Company (the Directors) under the current Share Purchase Mandate will expire at the forthcoming annual general meeting to be held on 18 April 2012 (AGM2012). Accordingly, the Directors propose to seek the approval of shareholders of the Company (Shareholders) for the further renewal of the Share Purchase Mandate. The purpose of this letter (the Letter) is to provide Shareholders with information in relation to the renewal of the Share Purchase Mandate. 2. Rationale for the Renewal of Share Purchase Mandate The rationale for the Company to undertake the renewal of the Share Purchase Mandate is that it would give the Company the flexibility to undertake purchases of its Shares at any time, subject to market conditions, during the period when the Share Purchase Mandate is in force. Share purchases provide the Company with a mechanism to facilitate the return of surplus cash over and above its ordinary capital requirements, in an expedient and cost-efficient manner. The renewed Share Purchase Mandate will also allow the Directors to exercise greater control over the Companys share capital structure, dividend payout and cash reserves, with a view to enhancing the net tangible assets and/or earnings per Share. The purchase of Shares will only be undertaken if the Directors believe that it can benefit the Company and Shareholders. Shareholders should note that purchases of Shares pursuant to the renewed Share Purchase Mandate may not be carried out to the full 10% limit as authorised. No purchase of Shares will be made in circumstances, which would have or may have a material adverse effect on the liquidity and capital of the Company and the Group. 3. Authority and Limits of the Renewed Share Purchase Mandate The authority and limitations placed on purchases of Shares by the Company under the renewed Share Purchase Mandate, if renewed at the AGM2012, are summarised below:(a) Maximum Number of Shares The Company may purchase only Shares, which are issued and fully paid-up. The total number of Shares that may be purchased or acquired is limited to that number of Shares representing not more than 10% of the issued Shares as at the date of the AGM2012 at which the resolution renewing the Share Purchase Mandate is proposed to be passed (the Approval Date). Shares, which are held as treasury shares, will be disregarded for purposes of computing the 10% limit. For illustrative purpose, as at 15 March 2012 (the Latest Practicable Date), the Company had 158,286,000 issued Shares (excluding 6,714,000 treasury shares) and thus up to 15,828,600 issued Shares may be purchased by the Company, assuming that the number of issued Shares (excluding treasury shares) of the Company remains unchanged up to the date of the AGM2012.
Appendix
(b) Duration of Authority Purchases of Shares may be made, at any time and from time to time, from the Approval Date up to the earliest of:(i) (ii) (iii) (c) the date on which the next annual general meeting of the Company is held or required by law to be held; the date on which Share purchases have been carried out to the full extent of the renewed Share Purchase Mandate; or the date on which the authority contained in the renewed Share Purchase Mandate is varied or revoked by an ordinary resolution of Shareholders in a general meeting.
Manner of Purchase Purchases of Shares may be made on the Singapore Exchange Securities Trading Limited (the SGX-ST) (Market Purchases) and/or otherwise than on the SGX-ST, in accordance with an equal access scheme (Off-Market Purchases) as defined in Section 76C(6) of the Companies Act, Chapter 50 of Singapore (Companies Act). Market Purchases refer to purchases of Shares by the Company effected on the SGX-ST through the Quotation and Execution System for Trading (Quest-ST), the trading system that has replaced Central Limit Order Book (CLOB) trading system, through one or more duly licensed stockbrokers appointed by the Company for the purpose. Off-Market Purchases refer to purchases of Shares by the Company made under an equal access scheme or schemes for the purchase of Shares from Shareholders. The Directors may impose such terms and conditions, which are not inconsistent with the renewed Share Purchase Mandate and the Companies Act, as they consider fit in the interests of the Company in connection with or in relation to an equal access scheme or schemes. Under the Companies Act, an equal access scheme must satisfy all the following conditions:(i) (ii) (iii) offers for the purchase of issued shares shall be made to every person who holds issued shares to purchase the same percentage of their issued shares; all of those persons shall be given a reasonable opportunity to accept the offers made; and the terms of all the offers are the same, except that there shall be disregarded:(aa) differences in consideration attributable to the fact that offers may relate to shares with different accrued dividend entitlements; (bb) (if applicable) differences in consideration attributable to the fact that offers relate to shares with different amounts remaining unpaid; and (cc) differences in the offers introduced solely to ensure that each person is left with a whole number of shares.
Appendix
In addition, the Listing Manual (Section B: Rules of Catalist) of the SGX-ST (Catalist Rules), provides that, in making an Off-Market Purchase, the Company must issue an offer document to all Shareholders, which must contain at least the following information:(i) (ii) (iii) (iv) the terms and conditions of the offer; the period and procedures for acceptances; the reasons for the proposed share purchase; the consequences, if any, of share purchases by the Company that will arise under the Singapore Code on Take-overs and Mergers (the Take-over Code) or other applicable take-over rules; whether the share purchase, if made, would have any effect on the listing of the Shares on the SGX-ST; details of any share purchases made by the Company in the previous 12 months (whether Market Purchases or Off-Market Purchases), giving the total number of Shares purchased, the purchase price per Share or the highest and lowest prices paid for the purchases, where relevant, and the total consideration paid for the purchases; and whether the Shares purchased by the Company will be cancelled or kept as treasury shares.
(v) (vi)
(v)
(d)
Maximum Purchase Price The purchase price (excluding brokerage, stamp duties, commissions, applicable goods and services tax and other related expenses) to be paid for the Shares will be determined by the Directors. However, the purchase price must not exceed:(i) (ii) in the case of a Market Purchase, 105% of the Average Closing Price (as defined below); and in the case of an Off-Market Purchase pursuant to an equal access scheme, 120% of the Highest Last Dealt Price (as defined below),
(the Maximum Price) in either case, excluding related expenses of the purchase. For the above purposes:Average Closing Price means the average of the closing market prices of a Share over the last 5 Market Days on which transactions in Shares were recorded, preceding the day of the Market Purchase, and deemed to be adjusted for any corporate action that occurs after such five-day market period; Highest Last Dealt Price means the highest price transacted for a Share as recorded on the Market Day on which there were trades in Shares immediately preceding the day of the making of the offer pursuant to the Off-Market Purchase;
Appendix
day of the making of the offer means the day on which the Company announces its intention to make an offer for the purchase of Shares from Shareholders, stating the purchase price (which shall not be more than the Maximum Price calculated on the foregoing basis) for each Share and the relevant terms of the equal access scheme for effecting the Off-Market Purchase; and Market Day means a day on which the SGX-ST is open for trading in securities. 4. Status of Purchased Shares Any Share which is purchased by the Company is deemed cancelled immediately on purchase (and all rights and privileges attached to that Share will expire on cancellation) unless such Share is held by the Company as a treasury share. Accordingly, the total number of issued Shares will be diminished by the number of Shares purchased by the Company and which are not held as treasury shares. Under the Companies Act, Shares purchased by the Company may be held or dealt with as treasury shares. According to the key provisions on treasury shares under the Companies Act:(a) Maximum Holdings The number of Shares held as treasury shares cannot at any time exceed 10% of the total number of issued Shares. (b) Voting and other Rights The Company will not have the right to attend or vote at meetings and/or to receive any dividends in respect of treasury shares. However, the allotment of treasury shares as fully paid bonus shares is allowed. Also, a subdivision or consolidation of any treasury share into treasury shares of a smaller amount is allowed so long as the total value of the treasury shares after the subdivision or consolidation is the same as before. (c) Disposal and Cancellation The Company may dispose of treasury shares at any time in the following ways:(i) (ii) (iii) (iv) (v) selling the treasury shares for cash; transferring the treasury shares for the purposes of or pursuant to an employees share scheme; transferring the treasury shares as consideration for the acquisition of shares in or assets of another company or assets of a person; cancelling the treasury shares; or selling, transferring or otherwise using the treasury shares for such other purposes as may be prescribed by the Minister for Finance.
At the time of each purchase of Shares by the Company, the Directors will decide whether the Shares purchased will be cancelled or kept as treasury shares, or partly cancelled and partly kept as treasury shares, depending on the needs of the Company at that time.
Appendix
5. Source of Funds Any purchase of Shares may be made out of the Companys distributable profits that are available for payment as dividends. The Companies Act also permits the Company to purchase its Shares out of capital, provided that:(a) the Company is able to pay its debts in full at the time it purchases the Shares and will be able to pay its debts as they fall due in the normal course of business in the 12 months immediately following the purchase; and the value of the Companys assets is not less than the value of its liabilities (including contingent liabilities) and will not after the purchase of Shares become less than the value of its liabilities (including contingent liabilities).
(b)
The Company will use internal sources of funds, or a combination of internal resources and external borrowings, to finance purchases of its Shares. 6. Financial Effects It is not possible for the Company to realistically calculate or quantify the impact of purchases that may be made pursuant to the renewed Share Purchase Mandate on the net tangible asset value and earnings per Share as the resultant effect would depend on factors such as the aggregate numbers of Shares purchased, the purchase prices paid at the relevant times, whether the Shares purchased are held in treasury or immediately cancelled on purchase, how the Shares held in treasury are subsequently dealt with by the Company in accordance with Section 76K of the Companies Act, and the amounts (if any) borrowed by the Company to fund the purchases. Where the purchase of Shares is made out of distributable profits, such purchase (including costs incidental to the purchase) will correspondingly reduce the amount available for the distribution of cash dividends by the Company. Where the purchase of Shares is made out of capital, the amount available for the distribution of cash dividends by the Company will not be reduced. Where the purchase of Shares is financed through internal resources, it will reduce the cash reserves of the Group and the Company, and thus the current assets and shareholders funds of the Group and the Company. This will result in an increase in the gearing ratios of the Group and the Company and a decline in the current ratios of the Group and the Company. The actual impact on the gearing and current ratios will depend on the number of Shares purchased and the prices at which the Shares are purchased. Where the purchase of Shares is financed through external borrowings or financing, there would be an increase in the gearing ratios of the Group and the Company, and a decline in the current ratios and shareholders funds of the Group and the Company, with the actual impact dependent on the number of Shares purchased and the prices at which the Shares are purchased.
Appendix
For illustrative purposes only and on the basis of the following assumptions:(a) that the purchase by the Company of 9,786,000 Shares, being the number of Shares which the Company may purchase and hold as additional treasury shares, was made on 31 December 2011; that the Company purchased the Shares via Market Purchases at the Maximum Price of $0.0935 for each Share (being 105% of the Average Closing Price as at 31 December 2011); and that the purchase of the Shares by the Company, which required funds amounting to $915,000, was financed entirely using its internal sources of funds, the financial effects of Share purchases by the Company pursuant to the renewed Share Purchase Mandate on the audited consolidated financial statements of the Group for the financial year ended 31 December 2011 (FY2011), are set out below.
(b) (c)
Appendix
Scenario 1 Purchase of 9,786,000 Shares by the Company pursuant to the renewed Share Purchase Mandate made entirely out of capital and held as treasury shares Group Before Share Purchase As at 31 December 2011 Share capital Revenue reserves (distributable)(1) Statutory reserves Revaluation surplus Treasury shares(1) Shareholders funds Net tangible assets Current assets Current liabilities Working capital Total liabilities Cash and cash equivalents Number of Shares (000) Financial Ratios Net tangible assets per Share(2) (cents) Earnings per Share Current ratio
Notes:(1) Treasury shares arising from Share purchases made out of capital are presented as a debit balance in equity. For Share purchases made out of capital and held as treasury shares, the revenue reserve balance that is distributable after the Share purchases is not affected. Net tangible assets equal total net assets less deferred expenditure and other intangible assets. For the earnings per Share computation, treasury shares are excluded from the weighted average number of Shares in issue. The weighted average number of Shares used in the computation of earnings per Share is as follows:Group and Company Before Share Purchase Weighted average number of Shares (4) (5) Gearing ratio equals total borrowings divided by shareholders funds. Current ratio equals current assets divided by current liabilities. 159,314,562 After Share Purchase 159,289,590
(5) (3) (2)
Company Before Share Purchase S$000 12,442 1,160 (712) 12,890 12,890 6,005 201 5,804 221 636 165,000 After Share Purchase S$000 12,442 1,160 (1,627) 11,975 11,975 5,090 201 4,889 221 (279) 165,000
After Share Purchase S$000 12,442 16,206 (942) 923 (1,627) 27,002 25,814 33,126 25,687 7,439 39,712 8,714 165,000
S$000 12,442 16,206 (942) 923 (712) 27,917 26,729 34,041 25,687 8,354 39,712 9,629 165,000
(cents)
(2) (3)
Appendix
Scenario 2 Purchase of 9,786,000 Shares by the Company pursuant to the renewed Share Purchase Mandate made entirely out of profits and held as treasury shares Group Before Share After Share Purchase Purchase $000 $000 12,442 16,206 (942) 923 (712) 27,917 26,729 34,041 25,687 8,354 39,712 9,629 165,000 12,442 16,206 (942) 923 (1,627) 27,002 25,814 33,126 25,687 7,439 39,712 8,714 165,000 Company Before Share After Share Purchase Purchase $000 $000 12,442 1,160 (712) 12,890 12,890 6,005 201 5,804 221 636 165,000 12,442 1,160 (1,627) 11,975 11,975 5,090 201 4,889 221 (279) 165,000
As at 31 December 2011 Share capital Revenue reserves (distributable)(1) Statutory reserves Revaluation surplus Treasury shares(1) Shareholders funds Net tangible assets(2) Current assets Current liabilities Working capital Total liabilities Cash and cash equivalents Number of Shares (000) Financial Ratios Net tangible assets per Share(2) (cents) Earnings per Share(3) (cents) Gearing ratio(4) (times) Current ratio(5) (times)
Notes:(1) (a)
For Share purchases made out of profits, the amount of revenue reserve that is available for distribution as dividends after the Share purchases is $15,291,000 and $245,000 at the Group and Company levels, respectively, which are arrived at after deducting $915,000 being the cost of the Share purchases made out of profits and held as treasury shares. Prior to the Share purchases made out of profits and held as treasury shares, the Company will endeavour that sufficient dividends are declared and paid by its subsidiaries to the Company to enable the Company to purchase its shares out of profits.
(b)
(2) (3)
Net tangible assets equal total net assets less deferred expenditure and other intangible assets. For the earnings per Share computation, treasury shares are excluded from the weighted average number of Shares in issue. The weighted average number of Shares used in the computation of earnings per Share is as follows:Group and Company Before Share Purchase Weighted average number of Shares 159,314,562 After Share Purchase 159,289,590
(4) (3)
Gearing ratio equals total borrowings divided by shareholders funds. Current ratio equals current assets divided by current liabilities.
Appendix
Shareholders should note that the financial effects set out in this Section 6 are purely for illustrative purposes only. In particular, it is important to note that the above analysis is based on historical FY2011 numbers and are in no way indicative of the Companys real financial position or a forecast of the Companys financial figures. The Company will take into account both financial and non-financial factors (for example, share market conditions and the performance of the Shares) in assessing the relative impact of a Share purchase before execution. 7. Catalist Rules Under the Catalist Rules, a listed company may purchase shares by way of Market Purchases at a price per share which is not more than 5% above the average of the closing market prices of the shares over the last 5 Market Days, on which transactions in the shares were recorded, before the day on which the purchases were made and deemed to be adjusted for any corporate action that occurs after the relevant 5-day period. The Maximum Price for a Share in relation to Market Purchases by the Company, referred to in Section 3(d) above, conforms to this restriction. The Catalist Rules specify that a listed company shall report all purchases or acquisitions of its shares to the SGX-ST not later than 9.00 a.m. (a) in the case of a Market Purchase, on the Market Day following the day of purchase or acquisition of any of its shares and (b) in the case of an Off-Market Purchase under an equal access scheme, on the second Market Day after the close of acceptances of the offer. Such announcement must include details of the date of the purchases of the shares, the total number of shares purchased, the number of shares cancelled, the number of shares held as treasury shares, the purchase price per share or the highest and lowest prices paid for such shares (as applicable), the total consideration (including stamp duties and clearing charges) paid or payable for the shares, and the cumulative number of shares purchased. Such announcement will be made in the form prescribed by the Catalist Rules. While the Catalist Rules do not expressly prohibit any purchase of shares by a listed company during any particular time or times, because the listed company would be regarded as an insider in relation to any proposed purchase of its issued shares, the Company will not undertake any purchase of Shares pursuant to the renewed Share Purchase Mandate at any time after a price sensitive development has occurred or has been the subject of a decision until the price sensitive information has been publicly announced. In particular, in observing the best practices recommended in the Catalist Rules on securities dealings, the Company will not purchase any Shares through Market Purchases during the period of 1 month immediately preceding the announcement of the Companys half year and full year results, as the case may be, and ending on the date of announcement of the relevant results. 8. Listing Status on the SGX-ST The Company is required under Rule 723 of the Catalist Rules to ensure that at least 10% of its issued Shares (excluding treasury shares) are in the hands of the public. The public, as defined in the Catalist Rules, are persons other than the Directors, Chief Executive Officer (or, in the case of the Company, the Managing Director), substantial Shareholders and controlling Shareholders of the Company and its subsidiaries, as well as the associates (as defined in the Catalist Rules) of such persons. As at the Latest Practicable Date, there were approximately 42,429,220 issued Shares in the hands of the public (as defined above), representing 26.81% of the total number of issued Shares (excluding treasury shares) of the Company. Assuming that the Company purchases 15,828,600 Shares, which represents the full 10% limit pursuant to the renewed Share Purchase Mandate, through Market Purchases and holds 9,786,000 of such Shares as treasury shares while cancelling the remaining 6,042,600 Shares, the number of issued Shares in the hands of the public would be reduced to
Appendix
26,600,620 Shares, representing 18.67% of the total number of issued Shares (excluding treasury shares) of the Company. As at the Latest Practicable Date, the Company held 6,714,000 treasury shares. Under the Companies Act, in the event that the number of Shares held as treasury shares by the Company at any time exceeds 10% of the total number of issued Shares at that time, the Company shall dispose of or cancel the excess treasury shares within 6 months. In view of the foregoing, the Company is of the view that there is, at present, a sufficient number of Shares in public hands that would permit the Company to potentially undertake purchases of its Shares through Market Purchases up to the full 10% limit pursuant to the renewed Share Purchase Mandate without:(a) (b) (c) 9. affecting adversely the listing status of the Shares on the SGX-ST; causing market illiquidity; or affecting adversely the orderly trading of Shares.
Tax Implications Where the Company uses its Distributable Profits for Share Purchases Under Section 10J of the Income Tax Act, Chapter 134 (the Income Tax Act), a company which purchases its own shares using its distributable profits is deemed to have paid a dividend to the shareholders from whom the shares are acquired. As the Company is under the one-tier corporate tax system, the provisions under Section 44 of the Income Tax Act do not apply to the Company. That is, the Company does not need to provide for the franking of dividends for any Share purchase made. The tax treatment of the receipt from a Share purchase in the hands of the Shareholders will depend on whether the disposal arises from a Market Purchase or an Off-Market Purchase. Proceeds received by Shareholders who sell their Shares to the Company in Market Purchases will be treated for income tax purposes like any other disposal of shares made on the SGX-ST and not as dividends. Whether or not such proceeds are taxable in the hands of such Shareholders will depend on whether such proceeds are receipts of an income or capital nature. Proceeds received by Shareholders who sell their Shares to the Company in an Off-Market Purchase effected by way of an equal access scheme will be treated for income tax purposes as receipts of dividends. Where the Company uses its Contributed Capital for the Share Purchases Under Section 10J of the Income Tax Act, a company which purchases its own shares using its contributed capital is not deemed to have paid a dividend to its shareholders from whom the shares are acquired. Proceeds received by Shareholders who sell their Shares to the Company for which the purchases were made out of contributed capital will be treated for income tax purposes like any other disposal of shares made on the SGX-ST and not as dividends. Whether or not such proceeds are taxable in the hands of such Shareholders will depend on whether such proceeds are receipts of an income or capital nature. Shareholders should note that the foregoing is not to be regarded as advice on the tax position of any Shareholder. Shareholders who are in doubt as to their respective tax positions or the tax implications
Appendix
of Share purchases by the Company, or, who may be subject to tax whether in or outside Singapore, should consult their own professional advisers. 10. Implications of Take-over Code If as a result of any purchase or acquisition by the Company of its Shares, a Shareholders proportionate interest in the voting capital of the Company increases, such increase will be treated as an acquisition for the purposes of the Take-over Code. If such increase results in a change in control, or as a result of such increase a Shareholder or group of Shareholders acting in concert obtain or consolidate control, it may in certain circumstances give rise to an obligation on the part of such Shareholder or Shareholders to make a take-over offer under Rule 14 of the Take-over Code. The circumstances under which Shareholders, including Directors and persons acting in concert with them respectively will incur an obligation to make a take-over offer under Rule 14 after a purchase of Shares by the Company are set out in Appendix 2 (TOC Appendix 2) of the Take-over Code. In relation to the Directors and persons acting in concert with them, Rule 14 of the Take-over Code provides that unless exempted (or if exempted, such exemption is subsequently revoked), Directors and persons acting in concert with them will incur an obligation to make a take-over offer if, as a result of a purchase of Shares by the Company:(a) (b) the percentage of voting rights held by such Directors and their concert parties in the Company increases to 30% or more; or if they together hold between 30% and 50% of the Companys voting rights, their voting rights increase by more than 1% in any period of 6 months.
Under TOC Appendix 2, a Shareholder not acting in concert with the Directors will not be required to make a take-over offer under Rule 14 of the Take-over Code if, as a result of the Company purchasing its Shares, the voting rights of such Shareholder would increase to 30% or more, or, if such Shareholder holds between 30% and 50% of the Companys voting rights, the voting rights of such Shareholder would increase by more than 1% in any period of 6 months. Such Shareholder need not abstain from voting in respect of the resolution authorising the renewed Share Purchase Mandate. Under the Take-over Code, persons acting in concert comprise individuals or companies who, pursuant to an agreement or understanding (whether formal or informal) co-operate, through the acquisition by any of them of shares in a company to obtain or consolidate control of that company. Unless the contrary is established, the following persons, inter alia, will be presumed to be acting in concert: (i) a company with any of its directors; and (ii) a company, its parent, subsidiaries and fellow subsidiaries, and their associated companies, and companies of which such companies are associated companies, all with each other. For this purpose, ownership or control of 20% or more of the equity share capital of a company will be regarded as the test of associated company status. As at the Latest Practicable Date, Mr Lim Chong Chen, the Managing Director and controlling Shareholder of the Company, held 71.05% of the voting rights of the Company and therefore would not be obliged to make a take-over offer under Rule 14 of the Take-over Code as a result of any purchase of Shares by the Company under the renewed Share Purchase Mandate. Shareholders who are in doubt as to whether they would incur any obligation to make a take-over offer as a result of any purchase of Shares by the Company pursuant to the renewed Share Purchase Mandate are advised to consult their professional advisers and/or the Securities Industry Council and/or other relevant authorities at the earliest opportunity.
Appendix
11. Reporting Requirements under the Companies Act Within 30 days of the passing of the Shareholders resolution to renew the Share Purchase Mandate, the Directors shall lodge a copy of such resolution with the Registrar of Companies (the Registrar). The Directors shall lodge with the Registrar a notice of Share purchase within 30 days of a Share purchase. Such notification shall include the date of the purchase, the number of Shares purchased by the Company, the number of Shares cancelled, the number of Shares held as treasury shares, the Companys issued share capital before and after the purchase, the amount of consideration paid by the Company for the purchase and such other particulars as may be required in the prescribed form. Within 30 days of the cancellation or disposal of treasury shares in accordance with the provisions of the Companies Act, the Directors shall lodge with the Registrar the notice of cancellation or disposal of treasury shares in the prescribed form. 12. Share Purchases in the Previous 12 Months 1,714,000 Shares had been purchased by the Company in the 12 months preceding the Latest Practicable Date by way of Market Purchases at prices per Share ranging from $0.10 to $0.135, and the total consideration paid for the purchases (including brokerage and other charges) amounted to approximately $186,913. These 1,714,000 Shares are held as treasury shares of the Company. 13. Directors and Substantial Shareholders Interests The interests of the Directors and substantial Shareholders in the share capital of the Company as at the Latest Practicable Date are, as follows:Direct Number of Shares Directors Tey Kim Hwee Lim Chong Chen Lim Yee Chuan Lee Sen Choon Wai Chee Leong Substantial Shareholders (other than Directors) 14. Approval and Resolution Shareholders approval for the proposed renewal of the Share Purchase Mandate is sought at the AGM2012. The resolution relating to the proposed renewal of the Share Purchase Mandate is set out in the Notice of AGM as Ordinary Resolution 10. 15. Directors Recommendations Having fully considered the rationale for the renewal of the Share Purchase Mandate set out in this Letter, the Directors believe that the renewal of the Share Purchase Mandate is in the best interests of the Company. The Directors recommend that Shareholders vote in favour of Ordinary Resolution 10 to renew the Share Purchase Mandate to be proposed at the AGM2012. Deemed Interest Number of Shares %
Appendix
16. Directors Responsibility Statement This Letter has been seen and approved by all Directors who collectively and individually accept full responsibility for the accuracy of the information given in this Letter and confirm, after having made all reasonable enquiries, that to the best of their knowledge and belief, this Letter constitutes full and true disclosure of all material facts about the proposed renewal of Share Purchase Mandate, the Company and its subsidiaries, and the Directors are not aware of any facts the omission of which would make any statement in this Letter misleading. Where information in the Letter has been extracted from published or otherwise publicly available sources or obtained from a named source, the sole responsibility of the Directors has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in the Letter in its proper form and context. 17. Advice to Shareholders Shareholders, who are in doubt as to the action they should take should consult their stockbroker, bank manager, solicitor, accountant or other professional advisers immediately.
IMPORTANT 1. This Annual Report is also forwarded to investors who have used their CPF moneys to buy shares in the Company at the request of their CPF Approved Nominees, and is sent solely for their information only. 2. This Proxy Form is therefore not valid for use by such CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.
I/We ___________________________________________________________________________________________ (Name) of ___________________________________________________________________________________________ (Address) being a member/members of ROKKO HOLDINGS LTD. (the Company) hereby appoint:Name Address NRIC / Passport Number Proportion of Shareholdings (%)
and/or (delete as appropriate) Name Address NRIC / Passport Number Proportion of Shareholdings (%)
as my/our proxy/proxies to attend and to vote for me/us on my/our behalf, at the Annual General Meeting (AGM) of the Company to be held at 61 Kaki Bukit Road 2, Singapore 417869 on Wednesday, 18 April 2012 at 10.00 am and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the resolutions to be proposed at the AGM as indicated hereunder. If no specific direction as to voting is given, the proxy/proxies will vote or abstain from voting at his/her/their discretion, as he/she/they will on any other matter arising at the AGM and at any adjournment thereof. No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. Resolutions relating to:Ordinary Business Audited Accounts for the financial year ended 31 December 2011 (FY2011) together with Reports of Directors and Independent Auditors and Statement by the Directors First and final dividend of S$0.0025 per ordinary share for FY2011 Re-election of Mr Tey Kim Hwee as a Director of the Company Re-election of Mr Lee Sen Choon as a Director of the Company Payment of Directors fees of S$90,000 for FY2011 Re-appointment of Mazars LLP as Auditors of the Company Special Business General authority to allot and issue shares Authority to allot and issue shares pursuant to the Rokko Employee Share Option Scheme Authority to allot and issue shares pursuant to the Rokko Performance Share Scheme Renewal of share purchase mandate For Against
(Please indicate with a cross [X] in the space provided whether you wish your vote to be cast for or against the resolution as set out in the Notice of the AGM.) Dated this ________ day of ________________ 2012 Total number of Shares in: (a) CDP Register (b) Register of Members No. of Shares
______________________________________________________ Signature(s) of Member(s) or Common Seal IMPORTANT: PLEASE READ NOTES OVERLEAF
Notes:1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of shares. If you have shares registered in your name in the Register of Members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, this proxy form shall be deemed to relate to all the shares held by you. A member of the Company entitled to attend and vote at the AGM is entitled to appoint not more than two proxies to attend and vote on his behalf. A proxy need not be a member of the Company. Where a member appoints two proxies, the proportion of the shareholding to be represented by each proxy shall be specified in this proxy form. If no proportion is specified, the Company shall be entitled to treat the first named proxy as representing the entire shareholding and any second named proxy as an alternate to the first named or at the Companys option to treat this proxy form as invalid. This proxy form must be deposited at the registered office of the Company at 61 Kaki Bukit Road 2, Singapore 417869 not less than 48 hours before the time set for the AGM. This proxy form must be under the hand of the appointor or of his attorney duly authorised in writing. Where this proxy form is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. Where this proxy form is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with this proxy form, failing which this proxy form shall be treated as invalid. The Company shall be entitled to reject a proxy form which is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the proxy form. In addition, in the case of shares entered in the Depository Register, the Company may reject a proxy form if the member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the AGM, as certified by The Central Depository (Pte) Limited to the Company.
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This Annual Report has been prepared by the Company and its contents have been reviewed by the Companys sponsor, PrimePartners Corporate Finance Pte. Ltd. (the Sponsor) for compliance with the relevant rules of the Singapore Exchange Securities Trading Limited (the SGX-ST). The Sponsor has not independently verified the contents of this Annual Report. This Annual Report has not been examined or approved by the SGX-ST and the SGX-ST assumes no responsibility for the contents of this Annual Report, including the correctness of any of the statements or opinions made or reports contained in this Annual Report. The contact person for the Sponsor is Mr Mark Liew, Managing Director, Corporate Finance, at 20 Cecil Street, #21-02 Equity Plaza, Singapore 049705, telephone (65) 6229-8088.