Corporate Profile - Hoe Leong

1 Corporate Profile2 Chairman’s Statement5 Future Prospects6 Financial Highlights8 Corporate Structure10 Operations Review14 Board of Directors16 Key Management Team17 Financial Statements

Contents

We are committed to being a leader in the supply of heavy equipment for the

Oil & Gas and industrial sectors. This includes the trading and distribution

and design and manufacturing of an extensive range of heavy equipment and

industrial machinery spare parts as well as the provision of vessels for the Oil

& Gas industry.

Mission Statement

Hoe Leong_cover B.indd 1 03/04/2010 11:24 AM

Corporate Profile

Hoe Leong Corporation Ltd. (“Hoe Leong” or the “Group”) was incorporated in Singapore on 18 November 1994. It was successfully admitted to the Official List of the Singapore Exchange Securities Trading Limited (“SGX-ST”) on 5 December 2005.

1Hoe Leong Corporation Ltd. | Annual Report 2009

Hoe Leong’s principal business activities entail trading and distributing an extensive range of equipment parts for both heavy equipment and industrial machinery which include brands such as Caterpillar, Cummins, Hitachi, Hyster, Kato, Kobelco, Komatsu, Mitsubishi, P&H and Sumitomo.

The Group also designs and manufactures equipment parts for both heavy equipment and industrial machinery under its

own in-house brand names, “KBJ”, “OEM”, “ROSSI” and “TMI”. Since 2004, it commenced manufacturing certain equipment parts through its subsidiaries in the People’s Republic of China (“PRC”).

Hoe Leong sells directly to end-users as well as through distributors in Singapore and overseas markets including Indonesia, Malaysia, PRC and the emerging markets such as India and the Middle East. End-users

of its products are generally users of heavy equipment and industrial machinery in the agriculture, building and infrastructure construction, forestry, marine, mining and plantation industries.

Currently, Hoe Leong serves over 1,200 customers. It carries about 20,000 types of equipment parts in 25 categories for over 100 brands of products.

Since May 2008, the Group has also entered into the Oil & Gas sector by going into the Barge / Vessel Chartering business in partnership with Supreme Oilfield Services Pte Ltd (“SOS”), which has had 40 years of experience in servicing the onshore / offshore oil exploration companies. SOS supplies mooring & drilling equipment, mobilization & demobilization of equipment, the sale & rental of equipment and the engineering & fabrication of equipment.

Chairman’s Statement

“Riding on the gradual revival of the global economy, the Group be l ieves that the demand for energy will remain strong and expects the Oil & Gas industry to continue to be an attractive sector in the medium to long term.”

2 Hoe Leong Corporation Ltd. | Annual Report 2009

Dear Shareholders,

On behalf of Hoe Leong Corporation Limited (“Hoe Leong” or “the Group”), I am pleased to report a year of encouraging financial and business performance for the 12 months ended 31 December 2009 (“FY2009”).

Our performance in FY2009 continued to be affected by the global economic downturn. The global credit crunch and subsequent economic downturn has resulted in lower levels of business activities in the construction and mining sectors. This in turn dampened the demand for our products. Our revenue decreased 5.4% to S$61.2 million in FY2009, mainly due to a decline in revenue from the Trading and Distribution segment. However, amidst the difficult business environment, we continued to see a good level of acceptance from our customers for our in-house brands of products, with revenue from the Design and Manufacture segment rising by S$0.2 million.

Despite the challenges of the global economic downturn, the Group is delighted to deliver consistent revenue contribution from the Barge / Vessel Chartering business in FY2009, which helped to offset the decline in revenue from the two traditional business segments.

Strong contributions from the Oil & Gas business

The Barge / Vessel Charter ing business contributed positively to the Group’s overall financial performance in FY2009. We witnessed an increase in revenue of 65.0% in FY2009, due to a full year’s contribution from the barge charter which commenced in May 2008.

The Group made a successful foray into the Oil & Gas sector with the acquisition of Supreme Energy 01 in FY2008, a steel flat top deck cargo barge which was converted into a floating mud plant barge to support offshore drilling operations. Following the success of our maiden vessel, which was acquired and chartered to Supreme Oilfield Services (“SOS”) via a joint venture entity - Supreme Energy Pte Ltd., we made plans to further expand our fleet.

Thus, in November 2009, we acquired a second vessel, Supreme Voyager through a second joint venture entity with SOS - Supreme Voyager Pte. Ltd. This offshore supply vessel commenced operation in late December 2009, and is expected to contribute positively to our financial performance in FY2010.



In line with our strategic intent to diversify our revenue streams, we announced a proposed acquisition of a 49.0% equity interest in the tanker business of Sumatec Resources Berhad represented by the Semua group of companies in January 2010. This proposed acquisition serves as an excellent and timely opportunity to meet our objective of further expanding our current scale of business activities in the Oil & Gas sector.

Oil & Gas industry remains attractive

The global economy had started to show signs of recovery in late FY2009. Riding on the gradual revival of the global economy, the Group believes that the demand for energy will remain strong and expects the Oil & Gas industry to continue to be an attractive sector in the medium to long term.

As we move forward in 2010, we seek to steadily grow the higher-margin Oil & Gas business segment. We will continue to look at the options of mergers and acquisitions, or joint ventures etc, to further grow this part of the business.

The current investment in the Oil & Gas sector is to own and charter vessels on a bareboat basis. In order to steadily develop and grow this business

segment and increase the Group’s exposure to the attractive Oil & Gas sector, we plan to acquire more offshore supply vessels over the next few years and to charter these assets at more attractive rates. It is therefore essential to form strategic partnerships with established industry players such as SOS, while developing our own in-house capabilities to participate in this attractive market with lower risk.

To facilitate our expansion into the Oil & Gas sector, the Group conducted a placement of 25 million new shares at an issue price of S$0.30 per share. The share placement raised net proceeds of approximately S$7.3 million, which were utilized in the following manner:

• approximately S$0.98 million to fulfill the payment of the initial deposit for the acquisition of the offshore supply vessel by Supreme Voyager Pte. Ltd.;

• approximately S$4.3 million for partial payments for the abovementioned vessel; and

• the remainder of approximately S$2.0 million for general working capital purposes.

Traditional business provides stable income

Our traditional business in the supply of heavy equipment parts is a stable business, and has started to turn around towards the end of FY2009, backed by the steady increase in demand for our products. Yet, we recognise that the long term challenges of this business will not be easily overcome. Thus, it is essential for us to take positive and proactive steps to mitigate the effects of the global economic downturn, such as actively reviewing and managing our current cost structure.

In light of this, the marketing of our own brands will continue to be a major area of focus in 2010 as we seek to expand our market share for our in-house products. It is important that we remain relentless in our pursuit of quality in both products and services, and to understand that, in order to stay in tune with our customers’ needs, we need to constantly innovate and introduce new services and products to the market.

Beyond that, we will also continue to look at opportunities in expanding and strengthening our presence geographically. Leveraging on our extensive experience and expertise in Singapore, we will continue to look at potential opportunities presented in overseas markets which we are already in, such as Malaysia, Hong Kong, Indonesia, China and Australia.

Special thanks

Last but not least, on behalf of the Board of Directors, I would like to express our appreciation to all our professional parties, staff, business partners and our shareholders, for their assistance and support in the past years. We hope that they will continue to support us as we work even harder to overcome the challenges in the coming years.

James Kuah Geok LinChairman and CEO



Future Prospects


Hoe Leong has made its entry into the attractive Oil & Gas sector. We believe that the demand for energy will remain strong and this sector is expected to remain attractive in the coming years.

The financial return from this venture into the Oil & Gas sector is expected to be substantially higher than our current business as we continue to grow our equipment parts business and expand into new markets.

Hoe Leong is looking to boost the Group’s shareholder value with this diversification into the Oil & Gas business through the owning, chartering and managing of all types of offshore equipment, barges, ships and other related activities.

4.7%12.6%

20.7%

62.0%

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009

S$’000 S$’000 S$’000 S$’000 S$’000

Singapore 3,346 2,585 2,641 4,477 2,906

Other Asean Countries 36,625 42,680 42,307 36,772 37,887

Other Asian Countries 14,486 16,349 17,125 15,096 12,667

Other Regions 1,584 1,895 3,130 8,310 7,705

Grand Total 56,041 63,509 65,203 64,655 61,165

Revenue by Geographical Segments

Singapore

Other Asean Countries

Other Asian Countries

Other Regions

Financial Highlights


80

70

60

50

40

30

20

10

0

7

6

5

4

3

2

1

0

12.0%

10.0%

8.0%

6.0%

4.0%

2.0%

0.0%

8

7

6

5

4

3

2

1

0

30

25

20

15

10

5

0

FY05 FY06 FY07 FY08 FY09




Revenue by Operating Segments (S$ million)

Net Profit and Margin (S$ million)

Results by Operating Segments (S$ million)

NAV Per Ordinary Share (in Singapore cents)

Trading and Distribution

Net Profit Net Margin

Design and Manufacture Barge / Vessel Chartering

40.4

41.6 40.2 2.7 4.4

15.6

21.925.0 25.4 25.6

36.631.2

4.3

2.3

3.6

1.4

2.6

2.8

3.5

0.7 0.4

3.3

0.1

1.3

6.1

10.8

6.4

4.6

0.3

4.1 4.5

3.0

23.2 23.5

18.7 18.2

20.6

0.2

Financial Highlights


7.3

Our Brands

We can readily provide assistance to customers and fulfill their requirements, because of our extensive experience in the industry.

Our large and varied inventories and our regional sales network are beneficial to our customers as they have easy accessibility to replacement parts, thereby shortening their downtime.

100%

100%

100%

100% 100%

99%

83.2%

71.4%

Hoe Leong Corporation Ltd.

Ho Leong TractorsSdn. Bhd. (Malaysia)

Jilin Kanto Buhin Construction Machinery Manufacturing Co., Ltd. (China)

Kunshan Kanto BuhinManufacturing Co., Ltd.(China)

Hoe Leong Machinery(H.K.) Limited(Hong Kong)

Quanzhou Kanto Buhin Machinery Manufacturing Co., Ltd(China)

PT Trackspare(Indonesia)

Shenyang Milequip Industry Co., Ltd(China)

Trackspares (Aust) Pty. Ltd.(Australia)

60% Supreme Energy Pte. Ltd.(Singapore)

70% Supreme Voyager Pte. Ltd.(Singapore)

Corporate Structure

TMI MACCHINETRATTORI


Operations Review

Revenue boosted by strong performance from the Barge / Vessel Chartering Business

The Group’s revenue decreased by 5.4% from $64.7 million in financial year ended 31 December 2008 (“FY2008”) to $61.2 million in financial year ended 31 December 2009 (“FY2009”). This decline was mainly brought about by the decrease in revenue derived from the Trading and Distribution segment. The decline was however compensated by a strong contribution from the Barge / Vessel Chartering business which saw a growth of 65.0% in FY2009 as compared to the previous year.

Revenue from the Barge / Vessel Chartering business increased by approximately S$1.7 million to S$4.4 million in FY2009. This was due mainly to the revenue contribution from the first full 12 months of operation of the barge – Supreme Energy 01, which commenced operation in May 2008. The second vessel, Supreme Voyager which was acquired in November 2009 had also commenced operations in late December 2009.


Overall, the Group registered a fairly stable revenue performance in FY2009 and acheived effective control over its operating expenses. The Group’s net profit attributable to equity holders rose significantly to S$4.5 million in FY2009 from S$0.2 million in FY2008, due in part to strong contribution from our Barge / Vessel Chartering business and to the writeback of excess allowance for slow moving inventory in FY2009.

Operations Review


Revenue from the Design and Manufacture business segment also edged up by approximately S$0.2 million to S$25.6 million in FY2009. This was mainly derived from the Malaysian market where customers continued to demand for our range of in-house design and manufactured parts which are more cost effective and of equivalent quality when compared to the equipment parts offered under the Trading and Distribution segment.

Revenue from the Trading and Distribution segment decreased by approximately S$5.4 million to S$31.2 million mainly due to lower revenue derived from Indonesia, China, Malaysia and India as a result of the global economic downturn.

The Group’s gross profit for FY2009 decreased slightly by 3.9% to S$18.9 million from S$19.7 million in FY2008. Overall, the Group’s gross profit margin for FY2009 remained stable at 30.9% as compared to 30.4% in FY2008. Operating expenses declined significantly in FY2009

Administrative expenses in FY2009 increased by 14.9% to S$8.2 million from S$7.2 million in FY2008. This was due to an increase in allowance for doubtful debts made and accrual for higher bonus payable in view of the higher profit achieved by the Group.

Other expenses for FY2009 decreased significantly by 90.8% to S$0.6 million from S$6.9 million in FY2008, due mainly to the write-back of excess allowance for slow moving inventories in the current year. Also contributing to the decrease in other expenses is the net foreign exchange gain

of $0.8 million as compared to the net foreign exchange loss of S$1.3 million in FY2008.

As such, the Group’s net profit attributable to equity holders increased significantly to S$4.5 million in FY2009 from S$0.2 million in FY2008.

Balance Sheet Remained Healthy

Property, plant and equipment increased from $30.7 million in FY2008 to $53.9 million in FY2009 mainly due to the acquisition of Supreme Voyager. This increase was partially offset by the disposal and write-off of certain plant and equipment.

Inventories decreased from $47.3 million in FY2008 to $35.3 million in FY2009 as a result of a reduction of inventories purchased. In addition, $0.6 million worth of damaged inventories were written off. Inventory turnover days remained stable at approximately 356 days for both FY2009 and FY2008.

Trade and other receivables declined slightly to $19.0 million in FY2009 mainly due to the decline in sales and an increase in allowance for doubtful debts made during the year.


Share capital increased from $46.6 million in FY2008 to $53.9 million in FY2009 as a result of the Share Placement after deducting expenses of approximately $0.2 million incurred in connection with the placement.

Financial liabilities decreased by approximately $3.7 million to $40.1 million in FY2009 mainly due to repayment of trust receipts, bank loans and bank overdraft. The decrease was partially offset by debt financing for the purchase of Supreme Voyager in FY2009.

Cash Flow Improved with Better Inventory and Cost Control

Cash and cash equivalents (net of bank overdraft) increased from a deficit of $1.0 million as at 31 December 2008 to a surplus of $6.2 million as at 31 December 2009 mainly due to reduction in inventories purchased.

Outlook

The Group’s business and financial strength has improved significantly in FY2009. Its entry into the very first barge charter contract in the Oil & Gas sector in FY2008 helped to secure stable long term income. Now that the second vessel – Supreme Voyager has started its operation in late 2009, the Group envisages this segment to grow correspondingly and contribute positively to the Group’s financial performance in FY2010. Going forward, the Group will also look at strengthening its fleet of vessels as well as expanding its Oil & Gas business through potential mergers and acquisitions, joint ventures, etc.

At the same time, the Group will continue to focus on maintaining a comprehensive range of

products in relation to its heavy equipment parts business. Other than that, it will also continue to explore opportunities in overseas markets, to further establish its own branded products.

While the global and regional economies are showing signs of gradual improvement, the strength of the economic recovery remains uncertain. The Group will continue to remain vigilant in managing costs and improving its operational efficiencies.

Operations Review

From left to right: Mr Lim Kok Hoong, Mr Ang Mong Seng, Mr Quah Yoke Hwee, Mr James Kuah, Dr Peter Kuah, Mr Paul Kuah, Mr Peter Boo.

Board of Directors


Mr James Kuah Geok LinChairman and CEO

Mr James Kuah Geok Lin is our Chairman and CEO. He joined the Board as one of our Executive Directors since 18 November 1994. He was last re-elected as a Director on 24 April 2008. He started as an architect in 1974 with the Housing Development Board. In 1978, Mr James Kuah joined the Company as a Director in charge of operations and played a key role in the Company’s regional drive into Indonesia and Malaysia. Under his leadership, the Company was ranked 24th in the 2000 Enterprise 50 Award organized by Andersen Consulting and The Business Times with support from the Economic Development Board. His other advisory positions include that of Permanent Honorary Chairman of the Singapore Metal and Machinery Association, Chairman of Nanyang Kuah

Si Association, Chairman of General Affair Committee of the Singapore Chinese Chamber of Commerce & Industry, Vice-Chairman of the Singapore Ann Kway Association and Corporate member of the Singapore Institute of Architects. He holds a Bachelor of Architecture degree from the University of Singapore.

Mr Paul Kuah Geok KhimExecutive Director

Mr Paul Kuah Geok Khim joined the Board as our Sales and Marketing Director (Overseas) since 22 December 1994 and was last re-elected as a Director on 18 April 2007. He began his career with our Group in 1979. Prior to his present position, he was in charge of warehousing and inventory control, gaining valuable experience in this field. Presently, as a Sales and Marketing Director, he oversees all our branches’ operations and

major export markets. With a team of business development personnel under him, he ensures that every business opportunity in the emerging market is well tapped.

Dr Peter Kuah Geok KoonExecutive Director

Dr Peter Kuah Geok Koon joined the Board as one of our Executive Directors on 24 July 2001 and was last re-elected as a Director on 18 April 2007. Since 1998, he has also been in charge of our Hong Kong subsidiary, Hoe Leong Machinery (H.K.) Limited and Quanzhou Kanto Buhin Machinery Manufacturing Co. Ltd., where he is involved in its daily running, including sales development in Hong Kong and managing the production plant in Quanzhou, China. Dr Peter Kuah joined our company when it was established in 1994. Prior to joining us, he worked as a


Board of Directors

principal engineer in Deleuw Cather and Company, a USA engineering company. He has published more than ten papers in professional journals. In 1990, he was conferred a guest professorship by Chongqing Jiaotong University and has also been previously engaged by United Nations Development Plan to lecture on transportation in various universities in China. Dr Peter Kuah was a PSC German scholar and obtained a Diplom-Ing. (FH) degree in civil engineering from Fachhochschule fuer Technik, Stuttgart in 1979. He also obtained a Master degree in Civil Engineering from the University of Michigan, Ann Arbor, USA, in 1981 and a Doctorate degree in Civil Engineering from the University of Maryland, College Park, USA in 1986.

Mr Quah Yoke HweeExecutive Director

Mr Quah Yoke Hwee is our Sales and Marketing Director (Singapore). He joined the Board since 18 November 1994 and was appointed the Managing Director of the Company on 15 January 1996. He was last re-elected as a Director on 27 April 2009. He is responsible for overseeing the Company’s daily trading and distribution operations in Singapore and the after-sales and front office services. Mr Quah has more than 30 years of experience in the equipment parts trading and distribution business. He is a member of the River Valley High School Advisory Committee. He holds a H.S.C. “A” level certificate.

Mr Ang Mong SengIndependent Director

Mr Ang Mong Seng was appointed as an Independent Director on 29 September 2005. He was last re-elected as a Director on 24 April 2008. Mr Ang is a Member of Parliament for Hong Kah GRC (Bukit Gombak). He is the Chief Operating Officer of EM Services Pte Ltd. He is also the Chairman of Hong Kah Town Council and Vice Chairman of South West Community Development Council. Mr Ang has 30 years of experience in Estate Management. Mr Ang is also an Independent Director of United Fiber System Ltd., Ecowise Holdings Ltd., AnnAik Ltd., Vicplas International Ltd. and Chip Eng Seng Corporation Ltd. Mr Ang obtained a Bachelor of Arts degree from Nanyang University in 1973.

Mr Lim Kok HoongIndependent Director

Mr Lim Kok Hoong was appointed as an Independent Director on 29 September 2005. He was last re-elected as a Director on 18 April 2006. Mr Lim has more than 32 years of audit experience. He was the Managing Partner of Arthur Andersen Singapore till June 2002. In July 2002, he joined Ernst & Young Singapore as a Senior Partner and retired in June 2003. Mr Lim has extensive business experience especially in Singapore, Malaysia, Indonesia, Thailand, the Philippines and Vietnam. He is currently an Audit Committee member of A*STAR and a board member of Singapore Tourism Board, where he is also the Chairman

of their Audit Committee. Mr Lim is the Chairman of the Board of Directors of Parkway Trust Management Limited and also a board member of Genting International Public Limited Company, where he is also the Chairman of their Audit Committee. He holds a Bachelor of Commerce degree from the University of Western Australia and is a member of the Institute of Chartered Accountants in Australia and the Institute of Certified Public Accountants of Singapore.

Mr Peter Boo Song HengIndependent Director

Mr Peter Boo Song Heng was appointed as an Independent Director on 29 September 2005. He was last re-elected as a Director on 27 April 2009. Mr Peter Boo founded Material Handling Engineering Pte Ltd in 1975 and led the company to its listing on the SESDAQ in 1989. The company subsequently changed its name to MHE Holdings Ltd. In May 2000, he divested off his controlling interest in MHE Holdings Ltd and retired from the company. Since then, he has been sitting on the board of numerous companies in Singapore as well as overseas. He is currently a board member of Compact Metal Industries Ltd. and NTUC Healthcare Co-operative Ltd. Mr Peter Boo is also a board member of Bizlink Centre Singapore Ltd. and a committee member of the Yellow Ribbon Fund. He holds a diploma in Mechanical Engineering from Singapore Polytechnic.

Key Management Team


Mdm Kuah Geok KhimOperations Manager

Mdm Kuah Geok Khim is our Operations Manager. She joined our Company in 1975 and is responsible for the administrative functions of the Group including general office administration, the maintenance and procurement of office equipment and computerization. She is also in charge of our inventory management and management information system. In addition, she is responsible for our sales and purchases, shipping, import and export functions.

Mr Lim Lian TuanDirector of Sales and Marketing, Ho Leong Tractors Sdn. Bhd.

Mr Lim Lian Tuan is our Sales and Marketing Director of our wholly-owned subsidiary, Ho Leong Tractors Sdn Bhd (“HL Tractors”). He joined HL Tractors in 1987. He oversees our Group’s Malaysian operations. From 1984 to 1986, he worked in Ho Leong Machinery Sdn. Bhd. as a Sales Executive for the Malaysian operations. Prior to that, Mr Lim worked as a Sales Executive with TAS Berhad and Trackspare Sdn Bhd, both of whom were distributors of equipment parts for both heavy equipment and industrial machinery. He holds the equivalent of a GCE ‘O’ certificate.

Mr Tan Wee BoonFinancial Controller

Mr Tan Wee Boon is our Financial Controller. He joined our Company in 2007 and oversees the overall financial and accounting functions of the Group. He holds a professional qualification from the Association of Chartered Certified Accountants (ACCA) of United Kingdom. He is a Fellow of the ACCA of the United Kingdom and a member of Institute of Certified Public Accountants of Singapore. He also holds a Bachelor degree in Business Administration from the National University of Singapore majoring in Finance.

Ms Pwo Chun ChunHuman Resources & Administrative Manager

Ms Pwo Chun Chun is our Human Resources and Administrative Manager. She joined our company in 2010 and is responsible for the Group Human Resource and administration including compensation and benefits, expatriate administration, human resource planning and development and overall employee relations. Prior to joining our company, Ms Pwo worked in the service and other various industries for more than 10 years in the same profession. She holds a Diploma in Human Resource Management from Productivity and Standard Board in Singapore.

Mr Alvin Kuah Han ZhouBusiness Development Manager

Mr Alvin Kuah Han Zhou is our Business Development Manager. He joined our company in 2009 and was promoted to Business Development Manager with effect from 1 April 2010. Mr Alvin Kuah is responsible for all the business development activities of our spare parts and oil and gas sector in the local and overseas market, and he also oversees the daily operations of Middle East region and Australia. Prior to joining our company, Mr Alvin Kuah was in the electronics manufacturing industry for two years specializing in application sales engineering. He holds a Bachelor degree in Electrical Electronics and Engineering from Royal Melbourne Institute of Technology from Australia.

Mr Raymond Quah Eng KiatSales and Marketing Manager

Mr Raymond Quah Eng Kiat is our Sales and Marketing Manager. He joined our company in 2008 and was promoted to Sales and Marketing Manager with effect from 1 April 2010. He is responsible for all overseas sales and marketing activities predominantly for Russia, Indonesia and East Malaysia. Prior to joining our company, Mr Raymond Quah was in the banking sector for five years specializing in anti-money laundering and compliance matters for Standard Chartered Bank and Citigroup respectively. He holds a Master degree majoring in International Business from the University of New South Wales from Sydney.


Financial Statements

18 Corporate Governance Report

30 Directors’ Report

35 Statement by Directors

36 Independent Auditors’ Report

38 Statement of Financial Position

39 Income Statement

40 Statement of Comprehensive Income

41 Statement of Changes in Equity

42 Statement of Cash Flows

43 Notes to the Financial Statements

84 Supplementary Information

85 Shareholding Statistics

87 Notice of Annual General Meeting

Proxy Form

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Corporate Governance Report

The Board of Directors (the “Board”) is committed to ensure high standards of corporate governance

to protect the interests of shareholders at the same time to enhance long term shareholders’ value

through corporate performance and accountability. The Board observes and adheres to the principles

and guidelines set out in the Code of Corporate Governance 2005 (the “Code”). Where there are

deviations from the Code, appropriate explanations are provided.

A. BOARD MATTERS

The Board’s Conduct of its 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 is entrusted with the responsibility of the overall management of the Company and

their main duties are to:-

(a) provide entrepreneurial leadership, set strategic aims, and ensure that the necessary

financial and human resources are in place for the Company to meet its objective;

(b) approve board policies, strategic plans, and financial objectives of the Group and monitor

the performance of Management;

(c) approve annual budgets, funding, material investment and divestment proposals;

(d) approve half year and full year results and announcements and annual report;

(e) ensure an adequate system of internal controls and compliance with financial reporting

requirements;

(f) review the financial performance of the Group, proposal of dividends and review

interested person transactions;

(g) approve the nomination of directors and appointment of key personnel; and

(h) assume responsibility for corporate governance.

To facilitate effective management, certain functions have been delegated by the Board to

various Board Committees. The Board Committees operate under clearly defined terms of

reference. The Chairman of the respective Committees will report to the Board on the outcome

of the Committee meetings.

The Board conducts regular scheduled meetings during the year. Ad-hoc meetings are

convened when circumstances require. Article 106 of the Company’s Articles of Association

permits meetings of the Directors to be conducted by means of telephone conference or other

methods of simultaneous communication by electronic or telegraphic means.




A record of the Directors’ attendence at Board and Board Committee meetings during the

financial year ended 31 December 2009 is disclosed as follows:

Name of Director Board

Audit

Committee

Nominating

Committee

Remuneration

Committee

No. of

meetings Attendance

No. of

meetings Attendance

No. of

meetings Attendance

No. of

meetings Attendance

Kuah Geok Lin 2 2 - - 1 1 - -

Kuah Geok Khim 2 2 - - - - - -

Kuah Geok Koon 2 2 - - - - - -

Quah Yoke Hwee 2 2 - - - - - -

Ang Mong Seng 2 2 2 2 1 1 1 1

Lim Kok Hoong 2 2 2 2 - - 1 1

Peter Boo Song Heng 2 2 2 2 1 1 1 1

The Directors come from diverse backgrounds and possess varied expertise in audit, business,

finance, industry and management fields. At meetings and as and when necessary, the

Directors are provided with regular updates on changes in the relevant laws and regulations to

enable them to make well-informed decisions. Where possible and when opportunity arises, the

Directors will be invited to locations within the Group’s operating businesses to enable them

to obtain a better perspective of the business and enhance their understanding of the Group’s

operations. The directors of the Company are encouraged to attend seminars or training

conducted by professionals to keep pace with new laws, regulations, changing commercial

risk and accounting standards.

Board Composition and Guidance

Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making.

The Board comprises seven directors, three of whom are independent non-executive directors.

More than one third of the Board is independent. The strong independent element on the Board

ensures that it is able to exercise objective and independent judgement on corporate affairs.

The Executive Directors have extensive experience in the heavy equipment and industrial

machinery equipment parts industry and the non-executive directors are experienced and

successful in their respective professions. The Board’s structure, size and composition is

reviewed annually by the Nominating Committee who is of the view that the current size of the

Board is appropriate, taking into account the nature and scope of the Group’s operations, to

facilitate effective decision making.




The Nominating Committee is satisfied that the Board comprises directors who as a

group provide core competencies such as accounting, finance, business and management

experience, industry knowledge, strategic planning experience and customer-based experience

and knowledge to lead the company effectively.

Chairman and Chief Executive Officer

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 company’s business - which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power.

The Chairman and Chief Executive Officer (“CEO”) of the Company is Mr Kuah Geok Lin.

The Board, after careful consideration, is of opinion that it is not necessary, under current

circumstances, to separate the roles of the Chairman and CEO. This is after taking into

consideration the size, scope and nature of the operations of our Group, together with the

strong presence of our Independent Directors who ensure that decision-making is based on

collective decision and that there is no concentration of power and authority vested in one

individual.

Our Chairman and CEO has played an instrumental role in developing the business of our

Group. He has extensive industry experience and has also provided our Group with strong

leadership and vision. It is hence the view of the Board that it is in the best interests of our

Group to adopt a single leadership structure, whereby the Chairman and CEO are the same

individual.

The Chairman takes an active role in the management of the Group and also bears responsibility

for the workings of the Board, ensuring the integrity and effectiveness of the governance

process of the Board, ensuring that Board meetings are held regularly, and setting the Board

meeting agenda in consultation with all members of the Board. The Chairman reviews board

papers before they are presented to the Board and ensures that Board members are provided

with adequate and timely information.

Board Membership

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.

The Nominating Committee (“NC”) is established for the purposes of ensuring that there is a

formal and transparent process for all Board appointments. The NC comprises the following

three members, majority of whom are independent non-executive directors:-

Mr Peter Boo Song Heng (Chairman)

Mr Ang Mong Seng (Member)

Mr Kuah Geok Lin (Member)




The NC has adopted written terms of reference defining its membership, administration and

duties. Duties and responsibilities of the NC include:

(a) to make recommendations to the Board on all board appointments having regard to the

director’s contribution and performance;

(b) to determine annually whether a director is independent; and

(c) to assess the composition and effectiveness of the Board as a whole and to determine

if each director has been adequately carrying out his duties.

Each member of our NC shall abstain from voting on any resolution in respect of his re-

nomination as a director.

The search and nomination process for new directors, if any, will be through search companies,

contacts and recommendations that go through the normal selection process, to cast its net

as wide as possible for the right candidates.

Our Articles of Association require one-third of the Directors, or if their number is not a multiple

of three, the number nearest to but not less than one-third of our Directors, to retire and subject

themselves to re-election by the shareholders at every Annual General Meeting. In addition, all

Directors of the Company, including the Managing Director after his initial term of engagement

as Managing Director, shall retire from office at least once every three years. A retiring Director

is eligible for re-election at the meeting at which he retires.

The profiles of the Directors are disclosed on pages 14 and 15 (“Board of Directors”) of this

annual report.

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.

The NC will decide how the Board’s performance is to be evaluated and propose objective

performance criteria, subject to the approval of the Board, which will address how the Board

has enhanced long-term shareholders’ value. The NC has in place an annual Board evaluation

exercise to assess the effectiveness of the Board and to facilitate discussion to enable the

Board to discharge its duties more effectively. Each member of the NC shall abstain from voting

on any resolution in respect of his performance as a director.

Notwithstanding that some of the Directors have multiple board representations, the NC is

satisfied that each Director is able to and has been adequately carrying out his duties as a

director of the Company.

The Board and the NC have endeavoured to ensure that Directors appointed to the Board

possess the experience, knowledge and expertise relevant to the Group’s business.




Access to Information

Principle 6: In order to fulfill their responsibilities, Board members should be provided with complete, adequate and timely information prior to Board meetings and on an ongoing basis.

Management provides the Board with adequate and timely information as well as a review of the

Group’s performance prior to the Board meetings. The Board has separate and independent

access to the Group’s senior management and Company Secretary, should they have any

queries on the affairs of the Group.

Should the Directors, whether as a group or individually, require independent professional

advice, the Company will bear the expenses incurred if such advice is required to enable the

directors to discharge their duties professionally.

The Company Secretary attends all Board meetings and is responsible for ensuring that Board

procedures are followed and that applicable rules and regulations (in particular the Companies

Act and the SGX-ST Listing Rules) are complied with.

B. REMUNERATION MATTERS

Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration.

The Remuneration Committee (“RC”) is established for the purposes of ensuring that there is a

formal and transparent process for developing policy on executive remuneration and for fixing

the remuneration packages of individual directors and key executives. The RC comprises the

following three independent non-executive directors:-

Mr Ang Mong Seng (Chairman)

Mr Lim Kok Hoong (Member)

Mr Peter Boo Song Heng (Member)

The RC has adopted written terms of reference defining its membership, administration and

duties. Duties and responsibilities of the RC include:

(a) to review and recommend to the Board a framework of remuneration for the Board and

key executives;

(b) to review and determine specific remuneration packages for each Executive Director

and the CEO which should cover all aspects of remuneration including but not limited

to directors’ fees, salaries, allowances, bonuses, options and benefits in kind;

(c) to review and recommend to the Board the terms of renewal of service contracts of

Directors;




(d) to retain such professional consultancy firm as the committee may deem necessary to

enable it to discharge its duties satisfactorily;

(e) to consider various disclosure requirements for Directors’ remuneration, particularly those

required by regulatory bodies such as the SGX-ST, and ensure that there is adequate

disclosure in the financial statements to ensure and enhance transparency between the

Company and relevant interested parties; and

(f) to carry out such other duties as may be agreed to by the RC and the Board.

The RC’s recommendations would be made in consultation with the Chairman of the Board and

submitted for endorsement by the entire Board and no Director shall participate in decisions

on 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 the company should avoid paying more for this purpose. A significant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance.

It is the Group’s policy to set a level of remuneration that is appropriate to attract, retain and

motivate the directors. The independent non-executive directors receive directors’ fees in

accordance with their level of contribution, taking into account factors such as effort and time

spent and responsibilities of the directors. The Board may, if it considers necessary, consult

experts on the remuneration of non-executive directors and would recommend the remuneration

of the non-executive directors for approval at the Annual General Meeting (“AGM”).

The Company has entered into a service agreement with each of our Executive Directors,

namely Kuah Geok Lin, Kuah Geok Khim, Kuah Geok Koon and Quah Yoke Hwee (collectively

the “Appointees”). The service agreements contain non-competition and non-solicitation

clauses, which are binding on the Appointees during their period of employment with the

Company and for a period of 12 months after the cessation of their employment with the

Company. The Executive Directors do not receive directors’ fees. The remuneration of the

Appointees comprise a fixed basic salary component which includes the 13-month supplement

and a variable component which includes an incentive bonus (“Incentive Bonus”) at the end of

every financial year of the Company based on the audited consolidated profit before tax (before

the Incentive Bonus) of our Group. The Appointees are also entitled to other benefits including

dental, optical and medical benefits, personal accident, hospitalization and surgical insurance

and travelling and entertainment expenses incurred for the purposes of our Group’s business.

The service agreements of the Appointees shall be subject to termination:

(i) by the Company or any of the Appointees giving to the other at least three months’

written notice; or

(ii) without prior notice, upon the occurrence of certain specified events, including wilful

neglect in the discharge of duties.




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 company’s 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.

A breakdown showing the level and mix of each individual Director’s remuneration for the year

ended 31 December 2009 is disclosed in the table below:

Name of Directors

Remuneration Band

($)Salary(%)(#)

Incentive bonus

(%)Fees(%)

Other benefits

(%)Total(%)

Kuah Geok Lin (1)

$250,000 to

$499,999

60 15 - 25 100

Kuah Geok Khim (1) 75 13 - 12 100

Kuah Geok Koon (1) 78 13 - 9 100

Quah Yoke Hwee (1) 75 13 - 12 100

Ang Mong Seng

$0 to $249,999

- - 100 - 100

Lim Kok Hoong - - 100 - 100

Peter Boo Song Heng - - 100 - 100

Note:

(#) includes the 13-month supplement.

(1) All of our Executive Directors, namely Kuah Geok Lin, Kuah Geok Khim, Kuah Geok Koon and Quah Yoke

Hwee are siblings.




The table below shows the level and mix of the remuneration of our key executives (who are

not directors) for the year ended 31 December 2009:

Name of Executive

Remuneration Band

($)Salary(%)(#)

Incentive bonus

(%)

Variable bonus

(%)

Other benefits

and allowances

(%)Total(%)

Mdm Kuah Geok Khim (1)

$0 to $249,999

85 11 - 4 100

Lim Gek Ser (2) 73 - 17 10 100

Lim Lian Tuan 89 - - 11 100

Quah Seng Kee (2) 66 - 31 3 100

Tan Wee Boon 83 - 17 - 100

Note:

(#) includes the 13-month supplement.

(1) Mdm Kuah Geok Khim is the sister of our Executive Directors, namely Kuah Geok Lin, Kuah Geok Khim, Kuah

Geok Koon and Quah Yoke Hwee.

(2) Resigned during the year.

Save as disclosed above, there is no immediate family member of the directors and whose

remuneration exceeded $150,000 during the financial year.

C. ACCOUNTABILITY AND AUDIT

Accountability

Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects.

One of the Board’s principal duties is to protect and enhance the long-term value and returns

to the shareholders of the Company. The accountability of the Board to the shareholders is

demonstrated through the presentation of the periodic financial statements as well as the timely

announcements and news releases of significant corporate developments and activities so that

the shareholders can have a detailed explanation and balanced assessment of the Group’s

financial position and prospects.

The Management presents to the Audit Committee the interim and full-year results for review

and recommends them to the Board for approval. The Board approves the results and

authorizes the release of the results to the SGX-ST and the public via SGXNET as required by

the SGX-ST Listing Manual.




Audit Committee

Principle 11: The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly set out its authority and duties.

The AC comprises the following three independent directors:-

Mr Lim Kok Hoong (Chairman)

Mr Ang Mong Seng (Member)

Mr Peter Boo Song Heng (Member)

The Board is of the view that the members of the AC are appropriately qualified, having

accounting or related financial management expertise or experience as the Board interprets

such qualification, to discharge their responsibilities.

As a sub-committee of the Board of Directors, it assists the Board in discharging their

responsibility to safeguard our assets, maintain adequate accounting records, and develop

and maintain effective systems of internal control, with the overall objective of ensuring that

our management creates and maintains an effective control environment in our Group. The AC

will also review and supervise the internal audit functions of the Group.

Our AC will provide a channel of communication between our Board, our management and

our external auditors on matters relating to audit.

The AC had met twice during the financial year and these meetings were attended by the

Financial Controller, the Internal Auditors and External Auditors at relevant junctions relevant

to the meeting. The AC also met once during the financial year with External Auditors, without

presence of any executive of the Group.

Our AC has adopted written terms of reference defining its membership, administration and

duties. Duties and responsibilities of the AC include:

(a) review with the external auditors the audit plan, their evaluation of the system of internal

accounting controls, their letter to management and the management’s response;

(b) review the interim and annual financial statements before submission to our Board for

approval, focusing in particular on changes in accounting policies and practices, major

risk areas, significant adjustments resulting from the audit, compliance with accounting

standards and compliance with the Listing Manual and any other relevant statutory or

regulatory requirements;

(c) review the scope and results of the audit and its cost effectiveness and the independence

and objectivity of the external auditors. Where the auditors also supply a substantial

volume of non-audit services to the Company, the AC would keep the nature and extent

of such services under review, seeking to balance the maintenance of objectivity and

value for money;




(d) review the internal control procedures and ensure co-ordination between the external

auditors and our management, and review the assistance given by our management to

the auditors, and discuss problems and concerns, if any, arising from the interim and

final audits, and any matters which the auditors may wish to discuss in the absence of

our management at least annually;

(e) review and discuss with the external auditors any suspected fraud or irregularity, or

suspected infringement of any relevant laws, rules or regulations, which has or is likely

to have a material impact on our Group’s operating results or financial position, and our

management’s response;

(f) to review the independence and objectivity of the external auditors annually;

(g) consider the appointment or re-appointment of the external auditors and matters relating

to the resignation or dismissal of the auditors;

(h) review interested person transactions (if any) falling within the scope of Chapter 9 of the

Listing Manual;

(i) review potential conflicts of interest, if any;

(j) undertake such other reviews and projects as may be requested by the Board, and will

report to the Board its findings from time to time on matters arising and requiring the

attention of the AC; and

(k) generally undertake such other functions and duties as may be required by statute or

the Listing Manual, or by such amendments as may be made thereto from time to time.

In the event that any Director has a personal material interest in any contract or proposed

contract or arrangement, he will abstain from reviewing that particular transaction or voting

on the particular resolution.

Apart from the duties listed above, the AC shall commission and review the findings of internal

investigations into matters where there is any suspected fraud or irregularity, or failure of

internal controls or infringement of any Singapore law, rule or regulation which has or is likely

to have a material impact on our Company’s operating results and/or financial position.

In performing its functions, the AC has explicit authority to investigate any matter within its

terms of reference, having full access to and co-operation by management and full discretion

to invite any director or executive officer to attend meetings, and reasonable resources to

enable it to discharge its function properly.




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 company’s assets.

The Board recognizes the importance of maintaining a sound system of internal controls to

safeguard the shareholders’ interest and investments and the Group’s assets. The AC has

during FY2009 reviewed and assessed the Group’s internal controls and had accepted the

recommendations made by the appointed Internal Auditors. The Group is now in stages of

implementing improvement to the Group’s existing internal controls.

The Board further recognizes that no systems of internal controls can provide absolute

assurance against occurrence of material errors, poor judgement in decision making, human

errors or irregularities.

Internal Audit

Principle 13: The company should establish an internal audit function that is independent of the activities it audits.

The Company has engaged the services of an external consultant to perform its internal audit

function.

The AC reviews annually the Internal Audit plan independently of management and the internal

auditors reports directly to the Chairman of AC.

Communication with Shareholders

Principle 14: Companies should engage in regular, effective and fair communication with shareholders.

The Company endeavours to communicate regularly, effectively and fairly with its shareholders.

Timely, as well as, detailed disclosure is made to the public in compliance with SGX-ST

guidelines. The Company does not practise selective disclosure. Price sensitive information is

first publicly released, either before the Company meets with any group of investors or analysts.

Shareholders are kept informed of developments and performance of the Group through

announcements published via SGXNET and the press when necessary as well as in the annual

report. Other announcements are also made on an ad-hoc basis where applicable as soon as

possible to ensure timely dissemination of the information to shareholders.




Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the Company.

All shareholders of the Company receive the annual report of the Company and notice

of AGM within the prescribed period. Participation of shareholders is encouraged at the

Company’s general meetings. To facilitate voting by shareholders, the Company’s articles allow

shareholders to appoint not more than two proxies to attend and vote at the same general

meeting. The Board of Directors (including the Chairman of the respective Board committees),

management, as well as the external auditors will attend the Company’s AGM to address any

questions that shareholders may have.

D. DEALINGS IN SECURITIES

The Company has adopted the requirements in SGX-ST’s Rule 1207(18) applicable to dealings

in the Company’s securities by its Directors, management and officers. Directors, management

and officers of the Group who have access to price-sensitive, financial or confidential

information are not permitted to deal in the Company’s shares during the periods commencing

one month before the announcement of the Group’s half-year or full year results and ending

on the date of the announcements of such results.

Directors, management and officers of the Group are also required to observe insider trading

laws at all times even when dealing in securities within the permitted trading period. In addition,

the Directors, management and officers of the Group are discouraged from dealing in the

Company’s securities on short-term considerations.

E. INTERESTED PERSON TRANSACTIONS

The Board reviewed all interested person transactions for the financial year ended 31 December

2009 and was satisfied that aggregate value of the transactions is below the threshold level as

set out in SGX-ST’s Listing Rules and do not require any immediate announcement or obtain

shareholders approval as defined under the Listing Rules.

F. MATERIAL CONTRACTS

Pursuant to Rule 1207(8) of the Listing Manual, the Company confirms that there was no

material contract entered into between the Company and its subsidiaries which involved the

interests of any director or controlling shareholder, either still subsisting at the end of the

financial year or if not then subsisting, which was entered into since the end of the previous

financial year.



Directors’ Report

We are pleased to submit this annual report to the members of the Company together with the

audited financial statements for the financial year ended 31 December 2009.

Directors

The directors in office at the date of this report are as follows:

Kuah Geok Lin

Quah Yoke Hwee

Kuah Geok Khim

Kuah Geok Koon

Ang Mong Seng

Lim Kok Hoong

Peter Boo Song Heng

Directors’ interests

According to the register kept by the Company for the purposes of Section 164 of the Singapore

Companies Act, Chapter 50 (the Act), particulars of interests of directors who held office at the end

of the financial year (including those held by their spouses and infant children) in shares, debentures,

warrants and share options in the Company and its related corporations are as follows:

Name of director and corporation inwhich interests are held

Holdingsat beginning of

the year

Holdingsat end

of the year

Kuah Geok LinThe CompanyHoe Leong Corporation Ltd.Ordinary shares

- interests held 8,860,924 8,860,924

Warrants

- interests held 630,066 –

Ultimate Holding CompanyHoe Leong Co. (Pte.) Ltd.Ordinary shares

- interests held 288,600 288,600

SubsidiaryPT TrackspareOrdinary shares of US$1,000 each fully paid

- interests held 5 5

01_Hoe leong Director's report.indd 30 4/3/10 9:44 AM


Directors’ Report



the year

Holdingsat end

of the year

Quah Yoke HweeThe CompanyHoe Leong Corporation Ltd.Ordinary shares

- interests held 8,750,924 8,750,924

Warrants




Kuah Geok KhimThe CompanyHoe Leong Corporation Ltd.Ordinary shares

- interests held 8,750,924 8,750,924

Warrants




Kuah Geok KoonThe CompanyHoe Leong Corporation Ltd.Ordinary shares

- interests held 8,750,924 8,750,924

Warrants




Ang Mong SengThe CompanyHoe Leong Corporation Ltd.Ordinary shares




Directors’ Report



the year

Holdingsat end

of the year

Peter Boo Song HengThe CompanyHoe Leong Corporation Ltd.Ordinary shares


Warrants


Kuah Geok Lin, Quah Yoke Hwee, Kuah Geok Khim and Kuah Geok Koon have the following deemed

interests in the Company and related corporations:



the year

Holdingsat end

of the year

The CompanyHoe Leong Corporation Ltd. 158,994,276 133,994,276

By virtue of Section 7 of the Act, Kuah Geok Lin, Quah Yoke Hwee, Kuah Geok Khim and Kuah

Geok Koon are deemed to have an interest in all the other wholly-owned subsidiaries of Hoe Leong

Co. (Pte.) Ltd., at the beginning and at the end of the financial year.

There were no changes in any of the above mentioned interests in the Company between the end

of the financial year and 21 January 2010.

Except as disclosed in this report, no director who held office at the end of the financial year

had interests in shares, debentures, warrants or share options of the Company or of the 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 objects is, to enable the directors of the Company

to acquire benefits by means of the acquisition of shares in or debentures of the Company or any

other body corporate.

Except for salaries, bonuses and fees and those benefits that are disclosed in Note 21 to the financial

statements, since the end of the last financial year, no director has received or become entitled to

receive a benefit by reason of a contract made by the Company or a related corporation with the

director or with a firm of which he is a member or with a company in which he has a substantial

financial interest.



Directors’ Report

Share options

During the financial year, there were:

(i) no options granted by the Company or its subsidiaries to any person to take up unissued

shares in the Company or its subsidiaries; and

(ii) no shares issued by virtue of any exercise of option to take up unissued shares of the Company

or its subsidiaries.

As at the end of the financial year, there were no unissued shares of the Company or its subsidiaries

under option.

Audit Committee

The members of the Audit Committee during the year and at the date of this report are:

• Lim Kok Hoong (Chairman), non-executive director

• Ang Mong Seng, non-executive director

• Peter Boo Song Heng, non-executive director

The Audit Committee performs the functions specified in Section 201B of the Act, the SGX Listing

Manual and the Code of Corporate Governance.

The Audit Committee has held two meetings since the last directors’ report. In performing its

functions, the Audit Committee met with the Company’s external auditors to discuss the scope of their

work, the results of their examination and evaluation of the Company’s internal accounting control

system. The Company’s internal audit function has been outsourced and the Audit Committee has

discussed the scope of the work with the appointed firm, the results of their examination and their

evaluation of the Company’s internal accounting system, where appropriate.



Directors’ Report

The Audit Committee also reviewed the following:

• assistance provided by the Company’s officers to the internal and external auditors;

• half yearly financial information and annual financial statements of the Group and the Company

prior to their submission to the directors of the Company for adoption; and

• interested person transactions (as defined in Chapter 9 of the SGX Listing Manual).

The Audit Committee has full access to management and is given the resources required for it to

discharge its functions. It has full authority and the discretion to invite any director or executive officer

to attend its meetings. The Audit Committee also recommends the appointment of the external

auditors and reviews the level of audit and non-audit fees.

The Audit Committee is satisfied with the independence and objectivity of the external auditors and

has recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-

appointment as auditors at the forthcoming Annual General Meeting of the Company.

Auditors

The auditors, KPMG LLP, have indicated their willingness to accept re-appointment.

On behalf of the Board of Directors

Kuah Geok LinDirector

Quah Yoke HweeDirector

30 March 2010



Statement by Directors

In our opinion:

(a) the financial statements set out on pages 38 to 83 are drawn up so as to give a true and fair

view of the state of affairs of the Group and of the Company as at 31 December 2009 and

the results, changes in equity and cash flows of the Group for the year ended on that date in

accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore

Financial Reporting Standards; and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will

be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements for

issue.

On behalf of the Board of Directors

Kuah Geok LinDirector

Quah Yoke HweeDirector

30 March 2010

02_Hoe leong Statement by director.indd 3502_Hoe leong Statement by director.indd 35 4/3/10 9:43 AM4/3/10 9:43 AM


Independent Auditors’ Report

Members of the Company

Hoe Leong Corporation Ltd.

We have audited the accompanying financial statements of Hoe Leong Corporation Ltd. (the

Company) and its subsidiaries (the Group), which comprise the statements of financial position

of the Group and the Company as at 31 December 2009, the income statement, statement of

comprehensive income, statement of changes in equity and statement of cash flows of the Group

for the year then ended, and a summary of significant accounting policies and other explanatory

notes, as set out on pages 38 to 83.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements in

accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act) and Singapore

Financial Reporting Standards. This responsibility includes:

(a) devising and maintaining a system of internal accounting controls sufficient to provide a

reasonable assurance that assets are safeguarded against loss from unauthorised use or

disposition; and transactions are properly authorised and that they are recorded as necessary

to permit the preparation of true and fair profit and loss accounts and balance sheets and to

maintain accountability of assets;

(b) selecting and applying appropriate accounting policies; and

(c) making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with Singapore Standards on Auditing. Those standards require

that we comply with ethical requirements and plan and perform the audit to obtain reasonable

assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures selected depend on the auditor’s judgement, including

the assessment of the risks of material misstatement of the financial statements, whether due to

fraud or error. In making those risk assessments, the auditor considers internal control relevant

to the entity’s preparation and fair presentation of the financial statements in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made

by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis

for our audit opinion.

03_Hoe leong Independent auditor.indd 3603_Hoe leong Independent auditor.indd 36 4/3/10 9:57 AM4/3/10 9:57 AM


Independent Auditors’ Report

Opinion

In our opinion:

(a) the consolidated financial statements of the Group and the statement of financial position of the

Company, are properly drawn up in accordance with the provisions of the Act and Singapore

Financial Reporting Standards to give a true and fair view of the state of affairs of the Group

and of the Company as at 31 December 2009 and the results, changes in equity and cash

flows of the Group for the year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company and by those

subsidiaries incorporated in Singapore of which we are the auditors have been properly kept

in accordance with the provisions of the Act.

KPMG LLPPublic Accountants andCertified Public Accountants

Singapore30 March 2010

03_Hoe leong Independent auditor.indd 3703_Hoe leong Independent auditor.indd 37 4/3/10 9:57 AM4/3/10 9:57 AM


Statement of Financial PositionAs at 31 December 2009

Group CompanyNote 2009 2008 2009 2008

$’000 $’000 $’000 $’000AssetsProperty, plant and equipment 3 53,944 30,691 11,885 12,349

Subsidiaries 4 – – 9,991 15,783

Deferred tax assets 5 15 221 – –

Total non-current assets 53,959 30,912 21,876 28,132

Inventories 6 35,300 47,262 25,491 36,606

Trade and other receivables 7 19,023 21,050 33,298 31,487

Cash and cash equivalents 8 6,238 5,039 1,697 1,582

Total current assets 60,561 73,351 60,486 69,675

Total assets 114,520 104,263 82,362 97,807

EquityShare capital 9 53,897 46,564 53,897 46,564

Currency translation reserve 10 (2,052) (1,925) – –

Accumulated profits 7,775 3,585 3,150 7,467

Total equity attributable to equity holders of the Company 59,620 48,224 57,047 54,031

Minority interest 2,950 1,353 – –

Total equity 62,570 49,577 57,047 54,031

LiabilitiesFinancial liabilities 11 17,137 5,795 120 474

Deferred tax liabilities 5 702 304 2 37

Total non-current liabilities 17,839 6,099 122 511

Trade and other payables 12 10,271 9,562 6,030 5,859

Financial liabilities 11 22,953 38,034 18,288 36,517

Current tax payable 887 991 875 889

Total current liabilities 34,111 48,587 25,193 43,265

Total liabilities 51,950 54,686 25,315 43,776

Total equity and liabilities 114,520 104,263 82,362 97,807

The accompanying notes form an integral of these financial statements.

04_Hoe leong Statement of Financial.indd 3804_Hoe leong Statement of Financial.indd 38 4/3/10 9:45 AM4/3/10 9:45 AM


Income StatementYear ended 31 December 2009


GroupNote 2009 2008

$’000 $’000

Revenue 13 61,165 64,655

Cost of sales (42,276) (44,996)

Gross profit 18,889 19,659

Other income 1,996 1,737

Distribution expenses (3,842) (3,893)

Administrative expenses (8,230) (7,165)

Other expenses (633) (6,901)

Results from operating activities 8,180 3,437

Finance income 33 60

Finance expense (1,058) (1,560)

Net finance expense 14 (1,025) (1,500)

Profit before income tax 15 7,155 1,937

Income tax expense 16 (1,779) (1,411)

Profit for the year 5,376 526

Attributable to:Owners of the Company 4,454 197

Minority interest 922 329


Earnings per shareBasic earnings per share (cents) 17 1.65 0.07

Diluted earnings per share (cents) 17 1.65 0.07

05_Hoe leong Income statement.indd 3905_Hoe leong Income statement.indd 39 4/3/10 9:46 AM4/3/10 9:46 AM


Statement of Comprehensive IncomeYear ended 31 December 2009


Group2009 2008$’000 $’000


Other comprehensive incomeTranslation differences relating to financial statements of

foreign subsidiaries (84) (125)

Income tax relating to components of other comprehensive income – –

Other comprehensive income for the year, net of income tax (84) (125)

Total comprehensive income for the year 5,292 401

Attributable to:Owners of the Company 4,327 155

Minority interest 965 246

Total comprehensive income for the year 5,292 401

06_Hoe leong Statement comprehensive.indd 4006_Hoe leong Statement comprehensive.indd 40 4/3/10 9:46 AM4/3/10 9:46 AM


Statement of Changes in EquityYear ended 31 December 2009


Attributable to equity holders of the Company

Share capital

Currency translation

reserveAccumulated

profits TotalMinority interest

Total equity

Group $’000 $’000 $’000 $’000 $’000 $’000

At 1 January 2008 46,563 (1,883) 4,710 49,390 530 49,920

Total comprehensive income for the yearProfit or loss – – 197 197 329 526Other comprehensive incomeTranslation differences relating to financial statements of foreign subsidiaries – (42) – (42) (83) (125)

Total comprehensive income for the year – (42) 197 155 246 401

Transactions with owners, recorded directly in equityIssue of shares 1 – – 1 577 578Final dividend paid for 2007 of $0.005 per share (one-tier tax exempt) – – (1,322) (1,322) – (1,322)

Total transactions with owners 1 – (1,322) (1,321) 577 (744)

At 31 December 2008 46,564 (1,925) 3,585 48,224 1,353 49,577

Total comprehensive income for the yearProfit or loss – – 4,454 4,454 922 5,376Other comprehensive incomeTranslation differences relating to financial statements of foreign subsidiaries – (127) – (127) 43 (84)

Total comprehensive income for the year – (127) 4,454 4,327 965 5,292

Transactions with owners, recorded directly in equityIssue of shares 7,502 – – 7,502 632 8,134Expenses on issue of shares (169) – – (169) – (169)Final dividend paid for 2008 of $0.001 per share (one-tier tax exempt) – – (264) (264) – (264)

Total transaction with owners 7,333 – (264) 7,069 632 7,701

At 31 December 2009 53,897 (2,052) 7,775 59,620 2,950 62,570

07_Hoe leong Statement in equity.indd 4107_Hoe leong Statement in equity.indd 41 4/3/10 9:48 AM4/3/10 9:48 AM


Statement of Cash FlowsYear ended 31 December 2009


GroupNote 2009 2008

$’000 $’000Cash flows from operating activitiesProfit before income tax 7,155 1,937

Adjustments for:

Depreciation 3 1,908 1,644

Finance income 14 (33) (60)

Finance expense 14 1,058 1,560

Property, plant and equipment written off 652 38

Loss/(gain) on disposal of property, plant and equipment 216 (44)

10,956 5,075

Change in inventories 11,962 (6,698)

Change in trade and other receivables 2,067 5,189

Change in trade and other payables (700) 1,430

Cash generated from operations 24,285 4,996

Income taxes paid (1,242) (1,770)

Net cash from operating activities 23,043 3,226

Cash flows from investing activitiesFinance income received 33 60

Purchase of property, plant and equipment (27,861) (13,495)

Proceeds from disposal of property, plant and equipment 605 46

Net cash used in investing activities (27,223) (13,389)

Cash flows from financing activitiesDividends paid (264) (1,322)

Finance expense paid (1,058) (1,560)

Proceeds from short-term loans 2,419 1,444

Payment of bills payable and trust receipts (11,116) (1,574)

Proceeds from finance lease – 30

Payment of finance lease liabilities (154) (113)

Proceeds from interest-bearing borrowings 22,850 15,685

Repayment of interest-bearing borrowings (9,453) (6,844)

Proceeds from issue of shares to minority shareholder of subsidiary 632 577

Proceeds from issue of shares 7,502 1

Expenses for the issue of shares (169) –

Net cash from financing activities 11,189 6,324

Net increase/(decrease) in cash and cash equivalents 7,009 (3,839)

Cash and cash equivalents at beginning of year (996) 3,201

Effect of exchange fluctuations 225 (358)

Cash and cash equivalents at end of year 8 6,238 (996)

08_Hoe leong Statement cash flow.indd 4208_Hoe leong Statement cash flow.indd 42 4/3/10 9:48 AM4/3/10 9:48 AM


Notes to the Financial StatementsYear ended 31 December 2009

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 30 March 2010.

1 Domicile and activities

Hoe Leong Corporation Ltd. (the Company) is incorporated in the Republic of Singapore with

its registered office at 6 Clementi Loop, Singapore 129814.

The principal activities of the Group and of the Company are those relating to designing,

manufacturing, sale and distribution of machinery parts. The Group is also engaged in the

barge and vessel chartering business.

The immediate and ultimate holding company during the financial year was Hoe Leong Co.

(Pte.) Ltd., a company incorporated in the Republic of Singapore.

The consolidated financial statements relate to the Company and its subsidiaries (referred to

as the Group).

2 Summary of significant accounting policies

2.1 Basis of preparation

The financial statements have been prepared in accordance with Singapore Financial Reporting

Standards (FRS).

The financial statements have been prepared on the historical cost basis except for certain

financial assets and financial liabilities which are measured at fair value. The financial statements

are presented in Singapore dollars which is the Company’s functional currency. All financial

information presented in Singapore dollars has been rounded to the nearest thousand, unless

otherwise stated.

The preparation of financial statements in conformity with FRS requires management to make

judgements, estimates and assumptions that affect the application of policies and reported

amounts of assets, liabilities, income and expenses. Actual results may differ from these

estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognised in the period in which the estimate is revised and in any

future periods affected.

09_Hoe leong Notes.indd 4309_Hoe leong Notes.indd 43 4/3/10 9:49 AM4/3/10 9:49 AM



2 Summary of significant accounting policies (cont’d)

2.1 Basis of preparation (cont’d)

In particular, information about significant areas of estimation uncertainty and critical

judgements in applying accounting policies that have the most significant effect on the amount

recognised in the financial statements are as follows:

• Note 3 – measurement of depreciation of property, plant and equipment. Assets are

depreciated on a straight line basis over their estimated useful lives. Management

estimates the useful lives of these assets to be within 3 to 50 years. Changes in the

expected level of usage could impact the economic useful lives and the residual values

of these assets, therefore future depreciation charges could be revised.

• Note 4 – impairment of investment in subsidiaries. Determining whether investments

in subsidiaries are impaired requires estimates to be made regarding the recoverable

amount of an investment, and the financial health of and business outlook for the

investee. These include factors such as industry and sector performance, changes in

technology, and operational and financing cash flows.

• Note 6 – measurement of net realisable value of inventories. Inventories have been written

down to net realisable value to be consistent with the view that assets should not be

carried in excess of amounts expected to be realised from their sale or use. Estimates

of net realisable value are based on the most reliable evidence available at the reporting

date. These estimates take into consideration market demand, competition, selling price

and events occurring after the end of the financial year to the extent that such events

confirm conditions that existed at reporting date.

• Note 7 – measurement of recoverable amounts of trade receivables. The Group evaluates

whether there is any objective evidence that trade receivables are impaired, and

determines the amount of impairment losses as a result of the inability of the customers

to make required payments. The Group determines the estimates based on the aging

of the trade receivables balance, credit-worthiness, and historical write-off experience.

If the financial condition of the customers were to deteriorate, actual write-offs would

be higher than estimated.

• Note 16 – measurement of income taxes. The Group is exposed to income taxes in a

number of jurisdictions. Significant judgement is involved in determining the group-wide

provision for income taxes. There are certain transactions and computations for which

the ultimate tax determination is uncertain during the ordinary course of business. The

Group recognises liabilities for expected tax issues based on estimates of whether

additional taxes will be due. Where the final tax outcome of these matters is different

from the amounts that were initially recognised, such differences will impact the income

tax and deferred tax provisions in the period in which such determination is made.





2.2 Changes in accounting policies

Overview

Starting as of 1 January 2009 on adoption of new/revised FRSs, the Group has changed its

accounting policies in the following areas:

• Determination and presentation of operating segments

• Presentation of financial statements

• Disclosure of contractual maturity analysis

Determination and presentation of operating segments

As of 1 January 2009, the Group determines and presents operating segments based on the

information that is provided internally to the Chief Executive Officer (CEO), who is the Group’s

chief operating decision maker. This change in accounting policy is due to the adoption of FRS

108 Operating Segments. Previously operating segments were determined and presented in

accordance with FRS 14 Segment Reporting. The new accounting policy in respect of operating

segment disclosures is presented as follows.

The Group’s operating segments under FRS 108 are the same as its business segments under

FRS 14. Certain comparative segment information has been re-presented in conformity with

the transitional requirements of FRS 108. Since the change in accounting policy only impacts

presentation and disclosure aspects, there is no impact on earnings per share.

An operating segment is a component of the Group that engages in business activities from

which it may earn revenues and incur expenses, including revenues and expenses that relate

to transactions with any of the Group’s other components. An operating segment’s operating

results are reviewed regularly by the CEO to make decisions about resources to be allocated

to the segment and assess its performance, and for which discrete financial information is

available.

Segment results that are reported to the CEO include items directly attributable to a segment

as well as those that can be allocated on a reasonable basis. Unallocated items comprise

mainly corporate assets, head office expenses, and income tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the period to acquire property,

plant and equipment, and intangible assets other than goodwill.





2.2 Changes in accounting policies (cont’d)

Presentation of financial statements

The Group applies revised FRS 1 Presentation of Financial Statements (2008), which became

effective as of 1 January 2009. As a result, the Group presents in the consolidated statement

of changes in equity all owner changes in equity, whereas all non-owner changes in equity are

presented in the consolidated statement of comprehensive income.

Comparative information has been re-presented so that it also is in conformity with the revised

standard. Since the change in accounting policy only impacts presentation aspects, there is

no impact on earnings per share.

Disclosure of contractual maturity analysis

The Group applies the amendments to FRS 107 Financial Instruments: Disclosures, which

became effective as of 1 January 2009. As a result, the Group discloses the maximum amount

of issued financial guarantees in the earliest time period for which the guarantees could be

called upon in the contractual maturity analysis. Previously, the Group disclosed the maximum

amount of issued financial guarantees in the contractual maturity analysis only if the Group

assessed that it is probable that the guarantee would be called upon.

FRS 107 does not require comparative information to be restated and therefore, the contractual

maturity analysis for the comparative period has not been represented. Since the change in

accounting policy only impacts presentation and disclosure aspects, there is no impact on

earnings per share.

The accounting policies set out below have been applied consistently by the Group to all

periods presented in these financial statements.

2.3 Consolidation

Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power,

directly to govern the financial and operating policies of an entity so as to obtain benefits from

its activities. In assessing control, potential voting rights presently exercisable are taken into

account. The financial statements of subsidiaries are included in the consolidated financial

statements from the date that control commences until the date that control ceases. The

accounting policies of subsidiaries have been changed where necessary to align them with

the policies adopted by the Group.





2.3 Consolidation (cont’d)

Transactions eliminated on consolidation

Intra-group balances and transactions and any unrealised income or expenses arising from

intra-group transactions, are eliminated in preparing the consolidated financial statements.

Accounting for subsidiaries

Investments in subsidiaries are stated in the Company’s statement of financial position at cost

less impairment losses.

2.4 Foreign currencies

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of

Group entities at the exchange rate at the date of the transaction. Monetary assets and

liabilities denominated in foreign currencies at the reporting date are retranslated to the

functional currency at the exchange rate at the reporting date. Non-monetary assets and

liabilities denominated in foreign currencies that are measured at fair value are retranslated to

the functional currency at the exchange rate at the date on which the fair value was determined.

Foreign currency differences arising on retranslation are recognised in the income statement.

Foreign operations

The assets and liabilities of foreign operations are translated to Singapore dollars at exchange

rates prevailing at the reporting date. The income and expense of foreign operations are

translated to Singapore dollars at exchange rates prevailing at the dates of the transactions.

Foreign currency differences are recognised in the foreign currency translation reserve. When a

foreign operation is disposed of, in part or in full, the relevant amount in the foreign exchange

translation reserve is transferred to the income statement.

2.5 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment

losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost

of self-constructed assets includes the cost of materials and direct labour, any other costs

directly attributable to bringing the assets to a working condition for its intended use, and the

cost of dismantling and removing the items and restoring the site on which they are located.

Purchased software that is integral to the functionality of the related equipment is capitalised

as part of that equipment.





2.5 Property, plant and equipment (cont’d)

When parts of an item of property, plant and equipment have different useful lives, they are

accounted for as separate items (major components) of property, plant and equipment.

The cost of replacing part of an item of property, plant and equipment is recognised in the

carrying amount of the item if it is probable that the future economic benefits embodied within

the part will flow to the Group and its cost can be measured reliably. The costs of the day-

to-day servicing of property, plant and equipment are recognised in the income statement as

incurred.

Freehold land and construction-in-progress are not depreciated. Depreciation on other

property, plant and equipment is recognised in the income statement on a straight-line basis

over their estimated useful lives (or lease term, if shorter) of each part of an item of property,

plant and equipment.

The estimated useful lives are as follows:

Freehold building - 50 years

Leasehold land and building - Over the lease term ranging from 19 to 50

years

Furniture, fittings and office equipment - 5 to 10 years

Material handling equipment - 5 to 10 years

Computers - 3 years

Motor vehicles - 5 years

Barge and vessel - 20 to 25 years

Depreciation methods, useful lives and residual values are reviewed and adjusted as

appropriate, at each reporting date.

2.6 Financial instruments

Non-derivative financial instruments

Non-derivative financial instruments comprise trade and other receivables, cash and cash

equivalents, financial liabilities and trade and other payables.

Non-derivative financial instruments are recognised initially at fair value plus, for instruments

not at fair value through profit or loss, any directly attributable transaction costs. Subsequent

to initial recognition, non-derivative financial instruments are measured at amortised cost using

the effective interest method, less any impairment losses.





2.6 Financial instruments (cont’d)

Non-derivative financial instruments (cont’d)

A financial instrument is recognised if the Group becomes a party to the contractual provisions

of the instrument. Financial assets are derecognised if the Group’s contractual rights to the

cash flows from the financial assets expire or if the Group transfers the financial assets to

another party without retaining control or transfers substantially all the risks and rewards of the

assets. Regular way purchases and sales of financial assets are accounted for at trade date,

i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities

are derecognised if the Group’s obligations specified in the contract expire or are discharged

or cancelled.

Cash and cash equivalents comprise cash balances and bank deposits. Bank overdrafts that

are repayable on demand and that form an integral part of the Group’s cash management are

included as a component of cash and cash equivalents for the purposes of the statement of

cash flows.

The Group’s non-derivative financial instruments are mainly made up of loans and receivables.

Derivative financial instruments and hedging activities

The Group holds derivative financial instruments to hedge its foreign currency and interest

rate risk exposures.

Derivatives are recognised initially at fair value; attributable transaction costs are recognised

in the income statement when incurred. Subsequent to initial recognition, derivatives are

measured at fair value, and changes therein are recognised in the income statement.

Impairment of financial assets

A financial asset is assessed at each reporting date to determine whether there is any objective

evidence that it is impaired. A financial asset is considered to be impaired if objective evidence

indicates that one or more events have had a negative effect on the estimated future cash

flows of that asset.

An impairment loss in respect of a financial asset measured at amortised cost is calculated

as the difference between its carrying amount, and the present value of the estimated future

cash flows discounted at the original effective interest rate.

Individually significant financial assets are tested for impairment on an individual basis. The

remaining financial assets are assessed collectively in groups that share similar credit risk

characteristics.

All impairment losses are recognised in the income statement.

Impairment losses are reversed if the subsequent increase in fair value can be related objectively

to an event occurring after the impairment loss was recognised. For financial assets measured

at amortised cost, the reversal is recognised in the income statement.





2.6 Financial instruments (cont’d)

Intra-group financial guarantees

Financial guarantees are financial instruments issued by the Group that requires the issuer to

make specified payments to reimburse the holder for the loss it incurs because a specified

debtor fails to meet payment when due in accordance with the original or modified terms of

a debt instrument.

Financial guarantees are recognised initially at fair value and are classified as financial liabilities.

Subsequent to initial measurement, the financial guarantees are stated at the higher of the

initial fair value less cumulative amortisation and the amount that would be recognised if they

were accounted for as contingent liabilities. When financial guarantees are terminated before

their original expiry date, the carrying amount of the financial guarantees is transferred to the

income statement.

Share capital

Ordinary shares are classified as equity.

Incremental costs directly attributable to the issue of ordinary shares are recognised as a

deduction from equity, net of any tax effects.

2.7 Leases

When entities within the Group are lessees of a finance lease

Leased assets in which the Group assumes substantially all the risks and rewards of ownership

are classified as finance leases. Upon initial recognition, property, plant and equipment acquired

through finance leases are capitalised at the lower of its fair value and the present value of

the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in

accordance with the accounting policy applicable to that asset. Leased assets are depreciated

over the shorter of the lease term and their useful lives. Lease payments are apportioned

between finance expense and reduction of the lease liability. The finance expense is allocated

to each period during the lease term so as to produce a constant periodic rate of interest on

the remaining balance of the liability. Contingent lease payments are accounted for by revising

the minimum lease payments over the remaining term of the lease when the lease adjustment

is confirmed.

When entities within the Group are lessees of an operating lease

Where the Group has the use of assets under operating leases, payments made under the

leases are recognised in the income statement on a straight-line basis over the term of the

lease. Lease incentives received are recognised in the income statement as an integral part

of the total lease payments made. Contingent rentals are charged to the income statement in

the accounting period in which they are incurred.





2.7 Leases (cont’d)

When entities within the Group are lessors of an operating lease

Rental income (net of any incentives given to lessees) is recognised on a straight-line basis

over the lease term.

2.8 Impairment – non-financial assets

The carrying amounts of the Group’s non-financial assets, are reviewed at each reporting date

to determine whether there is any indication of impairment. If any such indication exists, the

assets’ recoverable amounts are estimated.

An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit

exceeds its estimated recoverable amount. A cash-generating unit is the smallest identifiable

asset group that generates cash flows that are largely independent from other assets and

groups. Impairment losses are recognised in the income statement unless it reverses a

previous revaluation, credited to equity, in which case it is charged to equity. Impairment

losses recognised in respect of cash-generating units are allocated first to reduce the carrying

amount of any goodwill allocated to the units and then to reduce the carrying amount of the

other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use

and its fair value less costs to sell. In assessing value in use, the estimated future cash flows

are discounted to their present value using a pre-tax discount rate that reflects current market

assessments of the time value of money and the risks specific to the asset or cash-generating

unit.

Impairment losses recognised in prior periods are assessed at each reporting date for any

indications that the loss has decreased or no longer exists. An impairment loss is reversed

if there has been a change in the estimates used to determine the recoverable amount. An

impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed

the carrying amount that would have been determined, net of depreciation or amortisation, if

no impairment loss had been recognised.

2.9 Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using

the weighted average cost formula and comprises all costs of purchase, costs of conversion

and other costs incurred in bringing the inventories to their present location and condition.

In the case of manufactured inventories and work-in-progress, cost includes an appropriate

share of production overheads based on normal operating capacity. Net realisable value is

the estimated selling price in the ordinary course of business, less the estimated costs of

completion and selling expenses.





2.10 Employee benefits

Defined contribution plans

Obligations for contributions to defined contribution plans are recognised as an expense in

the income statement as incurred.

Short-term benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are

expensed as the related service is provided.

A provision is recognised for the amount expected to be paid under short-term cash bonus if

the Group has a present legal or constructive obligation to pay this amount as a result of past

service provided by the employee and the obligation can be estimated reliably.

2.11 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or

constructive obligation that can be estimated reliably, and it is probable that an outflow of

economic benefits will be required to settle the obligation. Provisions are determined by

discounting the expected future cash flows at a pre-tax rate that reflects current market

assessments of the time value of money and the risks specific to the liability.

2.12 Revenue recognition

Sale of goods

Revenue from the sale of goods is measured at the fair value of the consideration received or

receivable, net of returns and allowances, trade discounts and volume rebates. Revenue is

recognised when the significant risks and rewards of ownership have been transferred to the

buyer, recovery of the consideration is probable, the associated costs and possible return of

goods can be estimated reliably, and there is no continuing management involvement with the

goods, and the amount of revenue can be measured reliably.

Transfers of risks and rewards vary depending on the individual terms of the contract of sale.

For sales of goods, transfer usually occurs when the product is received at the customers’

warehouse; however, for certain international shipments, transfer occurs upon loading of goods

onto the carrier.

Revenue from barge and vessel chartering

Revenue from barge and vessel chartering under operating leases is recognised in the income

statement on a straight-line basis over the term of the lease.





2.12 Revenue recognition (cont’d)

Rental income

Rental income receivable under operating leases is recognised in the income statement on a

straight-line basis over the term of the lease. Lease incentives granted are recognised as an

integral part of the total rental income to be received. Contingent rentals are recognised as

income in the accounting period in which they are earned.

2.13 Government grants

Jobs Credit Scheme

Cash grants received from the government in relation to the Jobs Credit Scheme are recognised

upon receipt. Such grants are provided to defray the wage costs incurred by the Company

and are offset against staff costs in the financial statements.

2.14 Finance income and expenses

Finance income comprises interest income on funds placed in bank deposits that are recognised

in the income statement. Finance expenses comprise interest expense on borrowings that are

recognised in the income statement.

2.15 Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax

are recognised in the income statement except to the extent that it relates to a business

combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year,

using tax rates enacted or substantively enacted at the reporting date, and any adjustment to

tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts

of assets and liabilities for financial reporting purposes and the amounts used for taxation

purposes. Deferred tax is not recognised for the following temporary differences: the initial

recognition of assets or liabilities in a transaction that is not a business combination and that

affects neither accounting nor taxable profit or loss, and differences relating to investments

in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable

future. In addition, deferred tax is not recognised for taxable temporary differences arising on

the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected

to be applied to temporary differences when they reverse, based on the laws that have been

enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities

are offset if there is a legally enforceable right to offset current tax liabilities and assets, and

they relate to income taxes levied by the same tax authority on the same taxable entity, or on

different tax entities, but they intend to settle current tax liabilities and assets on a net basis

or their tax assets and liabilities will be realised simultaneously.





2.15 Income tax (cont’d)

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary

differences, to the extent that it is probable that future taxable profits will be available against

which they can be utilised. Deferred tax assets are reviewed at each reporting date and are

reduced to the extent that it is no longer probable that the related tax benefit will be realised.

2.16 Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares.

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of

the Company by the weighted average number of ordinary shares outstanding during the

period, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss

attributable to ordinary shareholders and the weighted average number of ordinary shares

outstanding, adjusted for own shares held, for the effects of all dilutive potential ordinary

shares, which comprise convertible notes and share options granted to employees.

2.17 Segment reporting

An operating segment is a component of the Group that engages in business activities from

which it may earn revenues and incur expenses, including revenues and expenses that relate

to transactions with any of the Group’s other components. All operating segments’ operating

results are reviewed regularly by the Group’s CEO to make decisions about resources to

be allocated to the segment and assess its performance, and for which discrete financial

information is available.




3 Property, plant and equipment

Freehold land

Freehold building

Leasehold land and building

Furniture, fittings

and office equipment

Material handling

equipment ComputersMotor

vehicles

Barge and

vesselConstruction-in-progress Total

Group $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000CostAt 1 January 2008 218 1,294 14,430 2,076 4,351 1,309 1,917 – 1 25,596Additions – – – 164 1,106 91 199 11,993 – 13,553Disposals – – – – (22) – (92) – – (114)Reclassified from assets held for sale – – 650 – – – – – – 650Transfer – – – (4) 43 4 (43) – – –Written off – – – (56) (36) (5) – – (1) (98)Translation differences on consolidation (11) (67) 44 (44) 256 (41) (123) 267 – 281

At 31 December 2008 207 1,227 15,124 2,136 5,698 1,358 1,858 12,260 – 39,868Additions – – – 71 45 32 34 27,679 – 27,861Disposals – – (700) – (397) – (221) – – (1,318)Transfer – – – – 1 (1) – – – –Written off – – – (19) (1,057) (23) (9) – – (1,108)Translation differences on consolidation (2) (12) 6 13 (67) 25 74 (1,259) – (1,222)

At 31 December 2009 205 1,215 14,430 2,201 4,223 1,391 1,736 38,680 – 64,081

Accumulated depreciationAt 1 January 2008 – 312 2,282 1,908 1,109 998 1,094 – – 7,703Depreciation charge for the year – 25 337 73 388 137 234 450 – 1,644Disposals – – – – (20) – (92) – – (112)Written off – – – (51) (7) (2) – – – (60)Reclassified from assets held for sale – – 100 – – – – – – 100Transfer – – – (5) 6 1 (2) – – –Translation differences on consolidation – (16) 10 (35) 27 (27) (67) 10 – (98)

At 31 December 2008 – 321 2,729 1,890 1,503 1,107 1,167 460 – 9,177Depreciation charge for the year – 24 337 76 465 140 224 642 – 1,908Disposals – – (205) – (112) – (180) – – (497)Written off – – – (18) (416) (17) (5) – – (456)Transfer – – – – 1 (1) – – – –Translation differences on consolidation – (3) 1 3 (10) 13 35 (34) – 5

At 31 December 2009 – 342 2,862 1,951 1,431 1,242 1,241 1,068 – 10,137

Carrying amountAt 1 January 2008 218 982 12,148 168 3,242 311 823 – 1 17,893

At 31 December 2008 207 906 12,395 246 4,195 251 691 11,800 – 30,691

At 31 December 2009 205 873 11,568 250 2,792 149 495 37,612 – 53,944




3 Property, plant and equipment (cont’d)

Leasehold land and building

Furniture, fittings

and office equipment

Material handling

equipment ComputersMotor

vehicles TotalCompany $’000 $’000 $’000 $’000 $’000 $’000CostAt 1 January 2008 14,430 1,327 760 907 588 18,012

Additions – 85 66 43 – 194

Disposals – (1) (20) (160) – (181)

At 31 December 2008 14,430 1,411 806 790 588 18,025

Additions – 44 5 20 – 69

Disposals – – – – (90) (90)

Written off – – – (2) – (2)

At 31 December 2009 14,430 1,455 811 808 498 18,002

Accumulated depreciationAt 1 January 2008 2,282 1,294 701 667 256 5,200

Depreciation charge for the

year 290 25 31 56 95 497

Disposals – (1) (20) – – (21)

At 31 December 2008 2,572 1,318 712 723 351 5,676

Depreciation charge for the

year 290 28 37 57 81 493

Disposals – – – – (50) (50)

Written off – – – (2) – (2)

At 31 December 2009 2,862 1,346 749 778 382 6,117

Carrying amountAt 1 January 2008 12,148 33 59 240 332 12,812

At 31 December 2008 11,858 93 94 67 237 12,349

At 31 December 2009 11,568 109 62 30 116 11,885

The carrying amount of the property, plant and equipment of the Group and the Company

includes amounts totalling $234,000 (2008: $436,000) and $110,000 (2008: $221,000)

respectively in respect of office equipment and motor vehicles held under finance lease

agreements.

During the year, the Group acquired property, plant and equipment with an aggregate cost of

$27,861,000 (2008: $13,553,000), of which $Nil (2008: $58,000) were under finance leases.




3 Property, plant and equipment (cont’d)

The following property, plant and equipment are pledged as security to secure credit facilities:

Group2009 2008$’000 $’000

At carrying amount:

- leasehold land and building 11,568 11,858

- motor vehicles 134 106

- barge and vessel 37,612 11,800

49,314 23,764

4 Subsidiaries

Company2009 2008$’000 $’000

Equity investments, at cost 20,986 19,509

Allowance for impairment losses (10,995) (3,726)

Carrying amount 9,991 15,783

During the financial year, the management of the Company performed a review of the

recoverable amounts of its investment in its subsidiaries in accordance with the accounting

policy stated in note 2.8. Certain subsidiaries have continued to remain inactive or become

inactive with no revenue generating activities. As such, the subsidiaries’ recoverable amounts

were determined either based on the net assets of the subsidiaries as at 31 December 2009,

which approximated the net selling price of these subsidiaries as net assets comprise mainly

monetary items, or its value in use. Value in use was determined by discounting future cash

flows generated from continuing use. Cash flows were projected over a period of 5 years at

constant profit margins, and discounted at pre-tax rates ranging from 15% to 22%. These

resulted in the recording of an impairment loss of $7,269,000.




4 Subsidiaries (cont’d)

Details of significant subsidiaries are as follows:

Name of subsidiariesCountry of

incorporationEffective equity

held by the Group2009 2008

% %Ho Leong Tractors Sdn. Bhd. + Malaysia 100 100

Hoe Leong Machinery (H.K.) Limited (a) Hong Kong 100 100

PT Trackspare (b) Indonesia 99 99

Kunshan Kanto Buhin Manufacturing Co., Ltd (c) People’s Republic

of China

100 100

Trackspares (Australia) Pty. Ltd. (d) Australia 71.4 71.4

Supreme Energy Pte. Ltd. * Singapore 60 60

Supreme Voyager Pte. Ltd. * Singapore 70 –

* Audited or reviewed by KPMG LLP for consolidation purposes.

+ Audited by KPMG Malaysia.

(a) Audited by Maradebbie & Partners (Practising) CPA, Hong Kong.

(b) Audited by Drs Bernardi & Co., Indonesia.

(c) Audited by Suzhou Hua Ming United Certified Public Accountants and reviewed by KPMG Shanghai for

consolidation purposes.

(d) Audited by Moore Stephens (Queensland) Audit Pty. Ltd.

5 Deferred tax

Movements in deferred tax assets and liabilities of the Group (prior to offsetting of balances)

during the year are as follows:

At 1 January

2008Exchange

differences

Recognised in income statement (note 16)

At 31 December

2008Exchange

differences

Recognised in income statement (note 16)

At 31 December

2009Group $’000 $’000 $’000 $’000 $’000 $’000 $’000Deferred tax assetsProvisions 24 (17) 96 103 20 – 123

Others 10 (28) 157 139 15 (244) (90)

34 (45) 253 242 35 (244) 33

Deferred tax liabilitiesProperty, plant and

equipment (90) (6) (261) (357) 22 (385) (720)

Others 32 – – 32 – (32) –

(58) (6) (261) (325) 22 (417) (720)




5 Deferred tax (cont’d)

Deferred tax assets and liabilities of the Company (prior to offsetting of balances) are

attributable to the following:

Company2009 2008$’000 $’000

Deferred tax assetsProvisions 18 21

Deferred tax liabilitiesProperty, plant and equipment (20) (58)

Deferred tax liabilities and assets are offset when there is a legally enforceable right to set off

current tax assets against current tax liabilities and when the deferred taxes relate to the same

taxation authority. The following amounts, determined after appropriate offsetting, are included

in the statement of financial position as follows:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Deferred tax assets 15 221 – –

Deferred tax liabilities (702) (304) (2) (37)

Deferred tax assets have been recognised in respect of provisions to the extent that these

balances will reverse in the foreseeable future and to the extent that their realisation through

future taxable profits is probable.

6 Inventories

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Raw materials 660 857 – –

Work-in-progress 382 782 – –

Finished goods 34,014 44,214 25,248 35,269

Goods-in-transit 244 1,409 243 1,337

35,300 47,262 25,491 36,606

In 2009, raw materials and changes in finished goods and work-in-progress, recognised in

cost of sales for the year, amounted to $40,634,000 (2008: $44,361,000).

Finished goods are stated after deducting an allowance for slow-moving inventories amounting

to $16,729,000 (2008: $19,789,000) and $14,476,000 (2008: $17,210,000) for the Group and

the Company respectively.




6 Inventories (cont’d)

Change in estimates

As a result of continued sales of slow-moving inventories, the Group reassessed the accounting

estimates used to calculate allowance for slow-moving inventories. Consequently, the Group

revised downwards the estimates of allowance for certain categories of inventories. The

effect of the change in estimates resulted in a lower allowance for slow-moving inventories

charged in the income statement by $6,871,000 (2008: $1,348,000) for financial year ended

31 December 2009.

7 Trade and other receivables

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Trade receivables 19,890 20,620 16,106 17,448

Impairment losses (3,110) (1,551) (1,622) (593)

Net receivables 16,780 19,069 14,484 16,855

Advances to suppliers 426 967 – –

Deposits 124 201 56 54

Recoverables 10 6 6 6

Rental receivables 6 20 6 20

Prepayments 476 460 125 114

Tax recoverables 127 132 – –

Others 64 181 – 3

Trade amounts due from:

- subsidiaries – – 9,194 10,228

- affiliated corporations 3 3 – –

Non-trade amounts due from:

- subsidiaries – – 9,427 4,207

- affiliated corporations 1,007 11 – –

19,023 21,050 33,298 31,487

Outstanding balances with subsidiaries and affiliated corporations are unsecured and interest-

free. An allowance of $40,000 (2008: $Nil) has been recorded for trade amounts due from

subsidiaries.




7 Trade and other receivables (cont’d)

The maximum exposure to credit risk for trade receivables at the reporting date (by geographical

distribution) was:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Singapore 447 508 7,919 9,985

Other Asean countries 11,635 12,874 8,848 9,275

Other Asian countries 3,148 4,783 4,482 5,098

Others 1,550 904 2,429 2,725

16,780 19,069 23,678 27,083

Impairment losses

The ageing of trade receivables at the reporting date is:

GrossImpairment

losses GrossImpairment

losses2009 2009 2008 2008$’000 $’000 $’000 $’000

GroupNot past due 6,700 – 5,916 –

Past due 0 - 30 days 2,500 – 2,779 –

Past due 31 - 120 days 5,367 – 5,981 –

Past due more than 120 days 5,323 3,110 5,944 1,551

19,890 3,110 20,620 1,551

CompanyNot past due 5,446 – 6,436 –

Past due 0 - 30 days 2,268 – 1,683 –

Past due 31 - 120 days 9,399 – 9,752 –

Past due more than 120 days 8,227 1,662 9,805 593

25,340 1,662 27,676 593




7 Trade and other receivables (cont’d)

The movements in impairment loss in respect of trade receivables during the year were as

follows:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

At 1 January 1,551 1,567 593 211

Impairment loss recognised,

net 1,561 1,085 1,069 382

Amount written off against

allowance – (1,021) – –

Translation differences on

consolidation (2) (80) – –

At 31 December 3,110 1,551 1,662 593

Based on historical default rates, the Group believes that no impairment allowance is necessary

in respect of trade receivables not past due or past due up to 120 days. These receivables

are mainly arising by customers that have a good record with the Group.

8 Cash and cash equivalents


$’000 $’000 $’000 $’000

Cash in hand and at bank 6,238 5,039 1,697 1,582

Bank overdrafts (secured) 11 – (3,775) – (3,775)

Bank overdrafts (unsecured) 11 – (2,260) – (2,260)

Cash and cash

equivalents in the

statement of cash flows 6,238 (996) 1,697 (4,453)

Included in cash at banks are amounts of approximately $2,894,000 (2008: $2,127,000) held

in countries under foreign exchange controls.

The weighted average effective interest rates per annum for cash in hand and at bank at the

reporting date for the Group and Company are 1.30% (2008: 1.59%) and 0.03% (2008: 0.21%)

respectively. Interest rates reprice at intervals of one, three or six months.




9 Share capital

Group and Company2009 2008

No. ofshares

No. ofshares

(’000) (’000)Fully paid ordinary shares, with no par valueAt 1 January 264,374 264,370

Issue of new shares

- Issued for cash 25,000 –

- Exercise of warrants 10 4

At 31 December 289,384 264,374

During the financial year, 9,600 (2008: 3,989) ordinary shares were issued at $0.16 (2008:

$0.16) each, fully paid for cash upon the exercise of warrants.

In October 2009, 25,000,000 ordinary shares were issued at $0.30 per share (2008: Nil). All

issued shares are fully paid.

At 31 December 2009, there were no (2008: 18,812,000) warrants outstanding. All outstanding

warrants have expired on 29 May 2009.

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 general meetings of the Company. All shares rank

equally with regard to the Company’s residual assets.

Dividends

The following dividends were declared and paid by the Group and Company:

Group and Company2009 2008$’000 $’000

For the year ended 31 December0.1 cents per ordinary share (2008: 0.5 cents) 264 1,322

After the respective reporting dates, the following dividends were proposed by the directors.

The dividends have not been provided for and there are no income tax consequences.

Group and Company2009 2008$’000 $’000

For the year ended 31 December0.25 cents per ordinary share (2008: 0.1 cents) 723 264




9 Share capital (cont’d)

Capital management

The Board’s policy is to maintain an adequate capital base so as to maintain investor, creditor

and market confidence and to sustain future development of the business. The Board of

Directors monitors the return on capital, which the Group defines as profit before income tax

divided by total shareholders’ equity excluding minority interests. The Board also monitors

the level of dividends to ordinary shareholders. The Group funds its operations and growth

through a mix of equity and debts. This includes the maintenance of adequate lines of credit

and assessing the need to raise additional equity, where required.

There were no changes in the Group’s approach to capital management during the year.

Neither the Company nor any of its subsidiaries are subject to externally imposed capital

requirements.

10 Currency translation reserve

The currency translation reserve of the Group comprises foreign exchange differences arising

from the translation to Singapore dollars of the financial statements of foreign entities whose

functional currency is in a foreign currency.

11 Financial liabilities


$’000 $’000 $’000 $’000Non-current liabilitiesSecured bank loan A – 262 – 262

Secured bank loan B 83 73 – –

Secured bank loan C 3,644 5,176 – –

Secured bank loan G 13,259 – – –

Finance lease liabilities 151 284 120 212

17,137 5,795 120 474




11 Financial liabilities (cont’d)


$’000 $’000 $’000 $’000Current liabilitiesBank overdraft (secured) 8 – 3,775 – 3,775

Bank overdraft (unsecured) 8 – 2,260 – 2,260

Secured bank loan A 262 609 262 609

Secured bank loan B 42 29 – –

Secured bank loan C 1,400 1,437 – –

Secured bank loan D 4,000 4,000 4,000 4,000

Secured bank loan G 3,182 – – –

Secured bank loan H 2,811 – 2,811 –

Unsecured bank loan E 7,156 9,238 7,156 9,238

Unsecured bank loan F 1,500 4,000 1,500 4,000

Unsecured trust receipts 2,373 12,458 2,373 12,458

Finance lease liabilities 83 103 42 52

Financial derivatives 144 125 144 125

22,953 38,034 18,288 36,517

Total financial liabilities 40,090 43,829 18,408 36,991

(i) The secured bank loans A, D and H are granted to the Company and are secured by a

first legal mortgage over the leasehold property of the Company.

(ii) The secured bank loan B is granted to a subsidiary and is secured by chattel mortgages

over the motor vehicles of a subsidiary and a personal guarantee by a director of a

subsidiary.

(iii) The secured bank loan C is granted to a subsidiary and is secured by a first legal

mortgage over the barge of the subsidiary and corporate guarantees by the Company

and the minority shareholder.

(iv) The secured bank loan G is granted to a subsidiary and is secured by a first legal

mortgage over the vessel of the subsidiary and corporate guarantees by the Company

and the minority shareholder.





Finance lease liabilities

At 31 December 2009, the Group and the Company had obligations under finance leases that

are repayable as follows:

2009 2008Payments Interest Principal Payments Interest Principal

Group $’000 $’000 $’000 $’000 $’000 $’000Payable:

Within 1 year 99 16 83 121 18 103

After 1 year but

within 5 years 185 34 151 329 58 271

More than 5 years – – – 16 3 13

284 50 234 466 79 387

CompanyPayable:

Within 1 year 53 11 42 65 13 52

After 1 year but

within 5 years 149 29 120 247 48 199

More than 5 years – – – 16 3 13

202 40 162 328 64 264





Terms and debt repayment schedule

Terms and conditions of outstanding loans and borrowings are as follows:

2009 2008

Year of maturityFace value

Carrying amount

Face value

Carrying amount

Group $’000 $’000 $’000 $’000S$ floating rate loans

- loan A 2010 262 262 871 871

- loan D 2010 4,000 4,000 4,000 4,000

- loan E 2010 7,156 7,156 9,238 9,238

- loan F 2010 1,500 1,500 4,000 4,000

A$ fixed rate loan B 2010 - 2013 125 125 102 102

US$ floating rate loans

- loan C 2010 - 2013 5,044 5,044 6,613 6,613

- loan G 2010 - 2014 16,441 16,441 – –

- loan H 2010 2,811 2,811 – –

Finance lease liabilities 2010 - 2013 234 234 387 387

Trust receipts 2010 2,373 2,373 12,458 12,458

Bank overdrafts – – – 6,035 6,035

Financial derivatives 2010 144 144 125 125

40,090 40,090 43,829 43,829

CompanyS$ floating rate loans

- loan A 2010 262 262 871 871

- loan D 2010 4,000 4,000 4,000 4,000

- loan E 2010 7,156 7,156 9,238 9,238

- loan F 2010 1,500 1,500 4,000 4,000

US$ floating rate loan H 2010 2,811 2,811 – –

Finance lease liabilities 2010 - 2013 162 162 264 264

Trust receipts 2010 2,373 2,373 12,458 12,458

Bank overdrafts – – – 6,035 6,035

Financial derivatives 2010 144 144 125 125

18,408 18,408 36,991 36,991

The S$ floating rate term loans bear interest of between 1% to 5% (2008: 2% to 5%) per

annum and are repriced on a monthly to half-yearly basis.

The US$ floating rate term loans bear interest of between 2% to 4% (2008: 4% to 7%) per

annum.

The A$ fixed rate loan bears interest of between 6% to 10% (2008: 8% to 10%) per annum.





Bank overdrafts are unsecured, repayable on demand and have a weighted average effective

interest rate of 6% (2008: 6%) per annum. Interest rates of bank overdrafts reprice at an

interval of one month.

The weighted average effective interest rate of trust receipts at the end of the financial year is

2% (2008: 5%) per annum. Interest rate reprice at intervals of one, three or six months.

The following are the contractual maturities of financial liabilities, including estimated interest

payments and excluding the impact of netting agreements:

Carrying amount Cash flows

GroupContractual cash flows

Within1 year

Within 1 to 5 years

More than 5 years

2009 $’000 $’000 $’000 $’000 $’000Non-derivative financial liabilitiesVariable interest rate loans 37,214 (38,980) (21,060) (17,920) –

Fixed interest rate loan 125 (141) (52) (89) –

Finance lease liabilities 234 (284) (99) (185) –

Trust receipts 2,373 (2,373) (2,373) – –

Trade and other payables 10,271 (10,271) (10,271) – –

(52,049) (33,855) (18,194) –

Derivative financial liabilitiesInterest rate swaps

- outflow 147 (165) (110) (55) –

Forward exchange contract

- inflow (3) 3 3 – –

(162) (107) (55) –

2008Non-derivative financial liabilitiesVariable interest rate loans 24,722 (25,438) (19,610) (5,828) –

Fixed interest rate loan 102 (120) (40) (80) –

Finance lease liabilities 387 (466) (121) (329) (16)

Bank overdrafts 6,035 (6,035) (6,035) – –

Trust receipts 12,458 (12,458) (12,458) – –


(54,079) (47,826) (6,237) (16)


- outflow 109 (231) (92) (139) –


- outflow 16 (16) (16) – –

(247) (108) (139) –





Carrying amount Cash flows

CompanyContractual cash flows

Within1 year

Within 1 to 5 years

More than 5 years

2009 $’000 $’000 $’000 $’000 $’000Non-derivative financial liabilitiesVariable interest rate loans 15,729 (15,761) (15,761) – –

Finance lease liabilities 162 (202) (53) (149) –

Trust receipts 2,373 (2,373) (2,373) – –


(24,366) (24,217) (149) –


- outflow 147 (165) (110) (55) –


- inflow (3) 3 3 – –

(162) (107) (55) –

2008Non-derivative financial liabilitiesVariable interest rate loans 18,109 (18,197) (17,932) (265) –

Finance lease liabilities 264 (328) (65) (247) (16)

Bank overdrafts 6,035 (6,035) (6,035) – –

Trust receipts 12,458 (12,458) (12,458) – –


(42,877) (42,349) (512) (16)


- outflow 109 (231) (92) (139) –


- outflow 16 (16) (16) – –

(247) (108) (139) –

It is not expected that the cash flows included in the maturity analysis could occur significantly

earlier, or at significantly different amounts.

Intra-group financial guarantees

Intra-group financial guarantees comprise guarantees granted by the Company to banks

in respect of banking facilities amounting to $14,535,000 (2008: $3,968,000) granted to

certain subsidiaries which expire between 2013 to 2014. The banking facilities are secured

by the barge and vessel of these subsidiaries and the fair value of the guarantees is therefore

insignificant. The maximum amount and earliest period for which the guarantees could be called

upon is $14,535,000 and within 1 year respectively. At the reporting date, the Company does

not consider it probable that a claim will be made against the Company under the guarantees.




12 Trade and other payables

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Trade payables 2,415 3,821 707 1,445

Bills payable (unsecured) 539 1,570 539 1,570

Other payables and accrued expenses 3,195 2,491 1,855 1,335

Deposits 220 236 220 236

Trade amounts due to:

- subsidiaries – – 50 32

Non-trade amounts due to:

- subsidiaries – – 2,659 1,241

- minority shareholder of

subsidiary 3,861 1,444 – –

- affiliated corporation 41 – – –

10,271 9,562 6,030 5,859

Outstanding balances with related parties are unsecured, interest free and repayable on

demand.

13 Revenue

Revenue represents sales of goods less discounts and returns and income from chartering of

barge and vessel.

Group2009 2008$’000 $’000

Sale of goods 56,795 62,003

Barge and vessel chartering 4,370 2,652

61,165 64,655

14 Finance income and expense

Group2009 2008$’000 $’000

Recognised in the income statementFinance income from bank deposits 33 60

Total finance income 33 60

Finance expense:

- interest-bearing borrowings (including bank overdrafts) (1,035) (1,539)

- finance lease liabilities (23) (21)

Total finance expense (1,058) (1,560)

Net finance expense (1,025) (1,500)




15 Profit before income tax

Profit before income tax includes the following:

Group2009 2008$’000 $’000

Non-audit fees paid to:

- other auditors 3 84

Operating lease expense 1,039 994

Exchange (gain)/loss (779) 1,328

Allowance (written back)/made for slow-moving inventories (3,099) 1,641

Inventories written off 623 713

Allowance for doubtful receivables, net 1,561 1,085

Bad debts written off 62 67

Property, plant and equipment written off 652 38

Loss/(gain) on disposal of property, plant and equipment 216 (44)

Rental income (1,647) (1,517)

Loss arising on derivative financial instruments 74 417

Staff costs 4,473 4,456

Contributions to defined contribution plans, included in staff costs 303 424

Government grants – Jobs credit scheme, included in staff

cost 124 –

16 Income tax expense

Group2009 2008$’000 $’000

Current tax expenseCurrent year 949 1,398

Under provision in prior years 169 5

1,118 1,403

Deferred tax expenseOrigination and reversal of temporary differences 692 8

Over provision in prior years (31) –

661 8

Total income tax expense 1,779 1,411

Reconciliation of effective tax rateProfit before income tax 7,155 1,937

Tax using the Singapore tax rate of 17% (2008: 18%) 1,216 349

Effect of reduction in tax rate (16) –

Effect of different tax rates in other countries (37) (487)

Expenses not deductible for tax purposes 548 1,436

Income not subject to tax (62) (28)

Under provision in prior years, net 138 5

(Utilisation of)/deferred tax asset not recognised (14) 151

Others 6 (15)

1,779 1,411




16 Income tax expense (cont’d)

The Singapore corporate tax rate has been reduced from 18% to 17% with effect from the

year of assessment 2010 as announced by the Minister for Finance of Singapore in his Budget

speech on 22 January 2009.

Deferred tax assets have not been recognised in respect of the following items:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Deductible temporary differences 2,415 2,678 – –

Capital allowances 56 – – –

Tax losses 85 – – –

The tax losses are subject to agreement by the tax authorities and compliance with tax

regulations in the respective countries in which certain subsidiaries operate. The tax losses,

capital allowances and deductible temporary differences do not expire under current tax

legislation. Deferred tax assets have not been recognised in respect of these items because it

is not probable that future taxable profit will be available against which the Group can utilise

the benefits.

17 Earnings per share

Group2009 2008$’000 $’000

Basic earnings per share is based on:

Net profit attributable to owners of the Company 4,454 197

No. of shares No. of shares(’000) (’000)

Issued ordinary shares at beginning of the year 264,374 264,370

Effect of new shares issued 6,256 3

Weighted average number of ordinary shares at the end of

the year 270,630 264,373

Weighted average number of ordinary shares used in the

calculation of basic earnings per share 270,630 264,373

Adjusted weighted average number of ordinary shares in

issue 270,630 264,373

$’000 $’000Diluted earnings per share is based on:

Net profit attributable to owners of the Company 4,454 197

For the purpose of calculating the diluted earnings per ordinary share, the weighted average

number of ordinary shares in issue for 2008 was adjusted to take into account the dilutive

effect arising from the warrants issued but not exercised for the period outstanding. There are

no ordinary shares with dilutive potential at the end of 2009.




18 Operating segments

The Group has three operating and reportable segments, as described below, which are the

Group’s strategic business units. The strategic business units offer different products and

services, and are managed separately because they require different marketing strategies. For

each of the strategic business units, the Group’s CEO reviews internal management reports

on at least a quarterly basis. The following summary describes the operations in each of the

Group’s reportable segments:

i) Design and manufacture

Design, manufacture and sale of equipment parts for both heavy equipment and industrial

machinery under in-house brand names, “KBJ”, “OEM”, “ROSSI” and “TMI”.

ii) Trading and distribution

Trading and distributing of an extensive range of equipment parts for both heavy

equipment and industrial machinery sourced from third parties.

iii) Barge and vessel chartering

Chartering of a barge and vessel on a fixed rate basis for oil and gas exploration

purposes.

Information regarding the results of each reportable segment is included below. Performance is

measured based on segment profit before income tax, as included in the internal management

reports that are reviewed by the Group’s CEO. Segment profit is used to measure performance

as management believes that such information is the most relevant in evaluating the results of

certain segments relative to other entities that operate within these industries.




18 Operating segments (cont’d)

Operating segments

Design and manufacture

Trading and distribution

Barge and vessel chartering Total

2009 2008 2009 2008 2009 2008 2009 2008$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

External revenue 25,598 25,355 31,197 36,648 4,370 2,652 61,165 64,655

Interest revenue 13 20 20 40 – – 33 60

Interest expense (453) (635) (375) (697) (230) (228) (1,058) (1,560)

Depreciation (899) (785) (367) (409) (642) (450) (1,908) (1,644)

Reportable segment profit

before income tax 1,294 116 3,258 391 2,603 1,430 7,155 1,937

Other material non-cash

items:

- Allowance written back/

(made) for

slow-moving

inventories 910 (845) 2,189 (796) – – 3,099 (1,641)

- Allowance for doubtful

receivables, net (342) (231) (1,219) (854) – – (1,561) (1,085)

- Bad debts written off (41) (20) (21) (47) – – (62) (67)

- Inventories written off (573) (271) (50) (442) – – (623) (713)

- Property, plant and

equipment written off (651) (34) (1) (4) – – (652) (38)

Capital expenditure (106) (1,243) (76) (317) (27,679) (11,993) (27,861) (13,553)

Reportable segment

assets 39,464 49,061 27,814 35,275 40,097 12,980 107,375 97,316

Unallocated assets 7,145 6,947

Total assets 114,520 104,263

Reportable segment

liabilities 3,704 10,551 1,826 7,535 26,717 8,831 32,247 26,917

Unallocated liabilities

- interest-bearing

borrowings 15,854 18,108

- others 3,849 9,661

Total liabilities 51,950 54,686




18 Operating segments (cont’d)

Geographical segments

The design and manufacture, trading and distribution, and barge and vessel chartering

segments operate in four principal regions, namely, Singapore, other Asean countries, Asian

countries (excluding Singapore and other Asean countries) and other regions of the world.

In presenting information on the basis of geographical segments, segment revenue is based

on the geographical location of customers. Segment assets are based on the geographical

location of the assets.

Revenue Non-current assets Capital expenditure2009 2008 2009 2008 2009 2008$’000 $’000 $’000 $’000 $’000 $’000

Singapore 2,906 4,477 11,885 12,349 70 35

Other Asean countries 37,887 36,772 39,009 13,355 27,700 12,253

Other Asian countries 12,667 15,096 2,852 4,795 43 1,088

Others 7,705 8,310 198 192 48 177

61,165 64,655 53,944 30,691 27,861 13,553

19 Financial risk management

The Group has a system of controls in place to create an acceptable balance between the cost

of risks occurring and the cost of managing the risks. The management continually monitors

the Group’s risk management process to ensure that an appropriate balance between risk and

control is achieved. Risk management policies and systems are reviewed regularly to reflect

changes in market conditions and the Group’s activities.

The Audit Committee oversees how management monitors compliance with the Group’s risk

management policies and procedures and reviews the adequacy of the risk management

framework in relation to the risks faced by the Group. The Audit Committee is assisted in its

oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews

of risk management controls and procedures, the results of which are reported to the Audit

Committee.




19 Financial risk management (cont’d)

Credit risk

The Group has a credit policy in place which establishes credit limits for customers and

monitors their balances on an ongoing basis. Credit evaluations are performed on all customers

requiring credit over a certain amount. Credit quality of customers is assessed after taking into

account its financial position and past experience with the customers.

The Group establishes an allowance for impairment that represents its estimate of incurred

losses in respect of trade and other receivables. The allowance account in respect of trade

receivables is used to record impairment losses unless the Group is satisfied that no recovery

of the amount owing is possible. At that point, the financial asset is considered irrecoverable

and the amount charged to the allowance account is written off against the carrying amount

of the impaired financial asset.

Cash and fixed deposits are placed with banks and financial institutions which are regulated.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed

adequate by management to finance the Group’s operations and to mitigate the effects of

fluctuations in cash flows.

Market risk

Market risk is the risk that changes in market prices, such as interest rates and foreign exchange

rates will affect the Group’s income or the value of its holdings of financial instruments. The

objective of market risk management is to manage and control market risk exposures within

acceptable parameters, while optimising the return on risk.

Interest rate risk

The Group’s fixed-rate borrowings are exposed to a risk of change in their fair value due to

changes in interest rates. The Group’s variable-rate borrowings are exposed to a risk of change

in cash flows due to changes in interest rates. Short-term receivables and payables are not

exposed to interest rate risk.

At 31 December 2009, the Group had interest rate swap with a notional contract amount of

$10,000,000 (2008: $10,000,000) whereby it receives a variable rate interest equal to the

6-month Singapore dollar Swap Offer Rate (“SOR”) and pays a fixed rate of 2.07% on the

notional amount. The swap is being used to hedge the exposure to changes in the interest

rate of its floating rate term loans.

The net fair value payable of swaps recognised in the statement of financial position at 31

December 2009 is $147,000 (2008: $109,000).





Sensitivity analysis

For the interest rate swap, an increase of 100 bp in interest rate at the reporting date would

increase profit or decrease loss by $100,000. A decrease in 100 bp in interest rate would

have an equal but opposite effect. This analysis assumes that all other variables, in particular

foreign currency rates, remain constant.

For variable rate financial assets and liabilities, a change of 100 bp in interest rate at the

reporting date would increase/(decrease) profit or loss by the amounts shown below. This

analysis assumes that all other variables, in particular foreign currency rates, remain constant.

Profit or loss100 bp

increase100 bp

decrease$’000 $’000

Group31 December 2009Variable rate instruments (396) 396

Interest rate swap 100 (100)

31 December 2008Variable rate instruments (432) 432

Interest rate swaps 100 (100)

Foreign currency risk

The Group is exposed to foreign currency risk on sales, purchases and borrowings that are

denominated in currencies other than the respective functional currencies of Group entities.

The currencies giving rise to this risk are primarily Euro and US dollar.

In respect of other monetary assets and liabilities held in currencies other than Singapore dollar,

the Group ensures that the net exposure is kept to an acceptable level by buying or selling

foreign currencies at spot rates, where necessary, to address short term imbalances. The

Group uses forward exchange contracts to hedge its foreign currency risk. At 31 December

2009, the Group has outstanding forward exchange contracts with notional amounts of

approximately US$1,500,000 (2008: US$1,000,000).

Owing to the nature of the Group’s operations, most transactions have maturity dates of less

than one year.





The Group’s and Company’s exposures to foreign currency are as follows:

31 December 2009 31 December 2008Euro US dollar Euro US dollar$’000 $’000 $’000 $’000

GroupTrade and other receivables – 5,819 43 5,809

Cash and cash equivalents 25 672 4 1,372

Trade and other payables (511) (4,729) (1,522) (3,191)

Financial liabilities (136) (26,250) (1,561) (14,882)

(622) (24,488) (3,036) (10,892)

CompanyTrade and other receivables 758 18,211 834 22,341

Cash and cash equivalents 25 480 4 636

Trade and other payables (325) (1,603) (1,520) (1,182)

Financial liabilities (136) (4,765) (1,561) (8,269)

322 12,323 (2,243) 13,526

Sensitivity analysis

A 10% strengthening of the Singapore dollar against the following currencies at the reporting

date would increase/(decrease) profit or loss by the amounts shown below. This analysis

assumes that all other variables, in particular interest rates, remain constant.

Group CompanyProfit or loss Profit or loss

$’000 $’00031 December 2009Euro 62 (32)

US dollar 2,449 (1,232)

31 December 2008Euro 304 224

US dollar 1,089 (1,353)

A 10% weakening of the Singapore dollar against the above currencies would have had the

equal but opposite effect on the above currencies to the amounts shown above, on the basis

that all other variables remain constant.





Estimation of fair values

The following summarises the significant methods and assumptions used in estimating the fair

values of financial instruments of the Group and Company.

Derivatives

The fair value of forward exchange contracts and interest rate swap are based on counter

party quotes, if available. If a listed market price is not available, fair value is estimated by

discounting the difference between the contractual forward price and the current forward

price for the residual period to maturity of the contract using a risk-free interest rate (based

on government bonds).

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present

value of future principal and interest cash flows, discounted at the market rate of interest at

the reporting date. For finance leases, the market rate of interest is determined by reference

to similar lease agreements.

Fair value hierarchy

As at 31 December 2009, the Group held the following instruments measured at fair value.

The Group classifies the instruments into a hierarchy based on the valuation techniques used

to determine their fair value as follows:

• Level 1 fair value measurements are those instruments valued based on quoted prices

(unadjusted) in active markets for identical assets or liabilities;

• Level 2 fair value measurements are those instruments valued using inputs other than

quoted prices included within Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices); and

• Level 3 fair value measurements are those instruments valued using valuation techniques

that include inputs for the asset or liability that are not based on observable market data

(unobservable inputs).





Fair value hierarchy (cont’d)

Level 1 Level 2 Level 3 TotalGroup $’000 $’000 $’000 $’00031 December 2009Derivative financial liabilities – 147 – 147

Derivative financial assets – (3) – (3)

31 December 2008Derivative financial liabilities – 125 – 125

Company31 December 2009Derivative financial liabilities – 147 – 147

Derivative financial assets – (3) – (3)

31 December 2008Derivative financial liabilities – 125 – 125

20 Commitments

(a) Operating lease commitments

At 31 December 2009, the Group and Company had commitments for future minimum

lease payments under non-cancellable operating leases as follows:

The Group and Company lease land, warehouse and factory facilities under operating

leases. The leases typically run for an initial period of one to thirty years, with an option

to renew after that date. Lease payments are usually increased annually to reflect market

rentals. None of the leases includes contingent rentals.

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Payable:Within 1 year 674 523 403 325

After 1 year but within

5 years 1,853 1,447 1,613 1,300

After 5 years 15,629 12,941 15,629 12,941

18,156 14,911 17,645 14,566




20 Commitments (cont’d)

(b) Operating lease receivable

The Group and Company lease out its leasehold building, barge and vessel owned by the

Group (refer to Note 3). Non-cancellable operating lease rentals are receivable as follows:

Group Company2009 2008 2009 2008$’000 $’000 $’000 $’000

Receivable:Within 1 year 13,559 5,686 1,327 1,395

After 1 year but within 5 years 11,998 2,466 242 966

25,557 8,152 1,569 2,361

The leases typically run for an initial period of two to three years, with an option to renew

the lease after that date.

21 Related parties

For the purpose of these financial statements, parties are considered to be related to the Group

if the Group has the ability, directly or indirectly, to control the party or exercise significant

influence over the party in making financial and operating decisions, or vice versa, or where the

Group and the party are subject to common control or common significant influence. Related

parties may be individual or other entities. An affiliated corporation refers to a corporation other

than a subsidiary and associated corporation, which is directly or indirectly under common

management control or significant influence of certain shareholders of the Company.

Other related party transactions

Other than those disclosed elsewhere in the financial statements, transactions with related

parties are as follows:

Group2009 2008$’000 $’000

Affiliated corporationsRental and miscellaneous expenses 187 121

Rental income 79 81

Interest expense – 23




21 Related parties (cont’d)

Key management personnel compensation

Key management personnel of the Group are persons having the authority and responsibility for

planning, directing and controlling the activities of the entity. The directors, department heads

and the chief executive officer are considered as key management personnel of the Group.

Group2009 2008$’000 $’000

Short-term employee benefits

- directors 1,887 1,364

- other key management personnel 500 578

2,387 1,942

22 New accounting standards and interpretations not yet adopted

The Group has not applied the following accounting standards (including their consequential

amendments) and interpretations that have been issued as of the reporting date but are not

yet effective:

• Amendment to FRS 32 Financial Instruments: Presentation – Classification of Rights Issues

• Amendments to FRS 39 Financial Instruments: Recognition and Measurement – Eligible Hedged Items

• Amendments to FRS 102 Share-based Payment – Group Cash-settled Share-based Payment Transactions

• FRS 103 (revised) Business Combinations and FRS 27 (revised) Separate and Consolidated Financial Statements

• Amendments to FRS 105 Non-current Assets Held for Sale and Discontinued Operations

• Improvements to FRSs 2009

• INT FRS 117 Distributions of Non-cash Assets to Owners

FRS 103 (revised 2009) and FRS 27 (amended) will become effective for the Group’s financial

statements for the year ending 31 December 2010. FRS 103 (revised 2009) introduces

significant changes to the accounting for business combinations, both at the acquisition date

and post acquisition, and requires greater use of fair values. The amendments will mainly

impact the accounting for transaction costs, step acquisitions, goodwill and non-controlling

interests (NCI) (previously minority interests). The revised FRS 103 will be applied prospectively

and therefore there will be no impact on prior periods in the Group’s financial statements for

the year ending 31 December 2010.




22 New accounting standards and interpretations not yet adopted (cont’d)

The amended FRS 27 requires accounting for changes in ownership interests by the Group

in a subsidiary, while maintaining control, to be recognised as an equity transaction. When

the Group loses control of a subsidiary, any interest retained in the former subsidiary will be

measured at fair value with the gain or loss recognised in profit or loss. The amendments will

be applied prospectively to transactions with NCI and therefore there will be no impact on prior

periods in the Group’s financial statements for the year ending 31 December 2010.

Improvements to FRSs 2009 will become effective for the Group’s financial statements for

the year ending 31 December 2010 and 31 December 2011. Improvements to FRSs 2009

contain amendments to numerous accounting standards that result in accounting changes for

presentation, recognition or measurement purposes and terminology or editorial amendments.

The Group is in the process of assessing the impact of these amendments.

Other than as described above, the initial application of these standards (and its consequential

amendments) and interpretations is not expected to have any material impact on the Group’s

financial statements. The Group has not considered the impact of accounting standards issued

after the reporting date.



Supplementary Information(SGX-ST Listing Manual disclosure requirements)

1 Directors’ remuneration

The number of directors in each of the remuneration bands is as follows:

Executive Directors

Non-executive Directors Total

2009$500,000 and above – – –

$250,000 to below $500,000 4 – 4

Below $250,000 – 3 3

Total 4 3 7

2008$500,000 and above – – –

$250,000 to below $500,000 4 – 4

Below $250,000 – 3 3

Total 4 3 7

2 Interested person transactions

Aggregate value of all transactions (excluding transactions conducted under a shareholders’ mandate pursuant to

Rule 920)

Aggregate value of all transactions conducted under a shareholders’ mandate pursuant to Rule 920 of the SGX

Listing Manual$’000 $’000

Interested person – –

3 Use of share placement proceeds

The status of the utilisation of net proceeds from the private placement of 25,000,000 ordinary

shares of S$0.30 per Placement Share of approximately S$7.3 million is as follows:

• approximately S$0.98 million has been used as initial deposit for the acquisition of an

offshore supply vessel by a new subsidiary, Supreme Voyager Pte. Ltd.;

• approximately S$4.3 million has been used for partial payment of the purchase

consideration for the abovementioned vessel; and

• the remainder of approximately S$2.0 million has been used for general working capital

purposes.

10_Hoe leong Supplementary info.indd 8410_Hoe leong Supplementary info.indd 84 4/3/10 9:49 AM4/3/10 9:49 AM


Shareholding StatisticsAs at 15 March 2010

DISTRIBUTION OF SHAREHOLDERS BY SIZE OF SHAREHOLDINGS AS AT 15 MARCH 2010

Size of ShareholdingsNo. of

Shareholders % No. of shares %

1 — 999 115 7.86 49,774 0.02

1,000 — 10,000 535 36.57 3,774,443 1.30

10,001 — 1,000,000 796 54.41 53,667,782 18.55

1,000,001 and above 17 1.16 231,891,272 80.13

TOTAL 1,463 100.00 289,383,271 100.00

TWENTY LARGEST SHAREHOLDERS

As at 15 March 2010

NO. SHAREHOLDER'S NAMENUMBER OF

SHARES HELD %

1 HOE LEONG CO. (PTE.) LTD. 133,994,276 46.30

2 TAN KIM SENG 25,000,000 8.64

3 HSBC (SINGAPORE) NOMINEES PTE LTD 14,571,000 5.04

4 KUAH GEOK LIN 8,860,924 3.06

5 KUAH GEOK KHIM 8,750,924 3.02

6 KUAH GEOK KOON 8,750,924 3.02

7 QUAH YOKE HWEE 8,750,924 3.02

8 KUAH GEOK KHIM 4,228,910 1.46

9 OCBC SECURITIES PRIVATE LTD 3,951,390 1.37

10 2G CAPITAL PTE LTD 3,539,000 1.22

11 DBS NOMINEES PTE LTD 2,410,000 0.83

12 CIMB-GK SECURITIES PTE. LTD. 2,195,000 0.76

13 TAN SEK KHOON 1,739,000 0.60

14 UOB KAY HIAN PTE LTD 1,569,000 0.54

15 CHEONG GIM KHENG 1,400,000 0.48

16 LIM CHWEE KIM 1,100,000 0.38

17 NUN KWONG HOLDINGS PTE LTD 1,080,000 0.37

18 DMG & PARTNERS SECURITIES PTE LTD 941,000 0.33

19 KIM ENG SECURITIES PTE. LTD. 932,000 0.32

20 ONG MUN WAH 914,000 0.32

TOTAL 234,678,272 81.08

11_Hoe leong Shareholding Statistics.indd 8511_Hoe leong Shareholding Statistics.indd 85 4/3/10 9:50 AM4/3/10 9:50 AM


Shareholding StatisticsAs at 15 March 2010

Class of shares : Ordinary shares fully paid

Voting rights : One vote per share

No. of issued and paid-up shares : 289,383,271

Register of Substantial Shareholders as at 15 March 2010

Direct InterestNo. of Shares %

Deemed InterestNo. of Shares %

Hoe Leong Co. (Pte.) Ltd. 133,994,276 46.30 - -

Tan Kim Seng 25,000,000 8.64 - -

Kuah Geok Lin 8,860,924 3.06 133,994,276 * 46.30

Kuah Geok Khim 8,750,924 3.02 133,994,276 * 46.30

Kuah Geok Koon 8,750,924 3.02 133,994,276 * 46.30

Quah Yoke Hwee 8,750,924 3.02 133,994,276 * 46.30

Mdm Kuah Geok Khim 4,228,910 1.46 133,994,276 * 46.30

Note:

* Messrs Kuah Geok Lin, Kuah Geok Khim, Kuah Geok Koon, Quah Yoke Hwee and Mdm Kuah Geok Khim are deemed

to be interested in the shares held by Hoe Leong Co. (Pte.) Ltd. in the Company.

Percentage of Shareholding in the Hands of Public

As at 15 March 2010, approximately 31.25% of Hoe Leong’s issued ordinary shares is held by the

public and, therefore, Rule 723 of the Listing Manual is complied with.

11_Hoe leong Shareholding Statistics.indd 8611_Hoe leong Shareholding Statistics.indd 86 4/3/10 9:50 AM4/3/10 9:50 AM


Notice of Annual General Meeting

HOE LEONG CORPORATION LTD.(Company Registration No.: 199408433W)

(Incorporated in the Republic of Singapore on 18 November 1994)

NOTICE IS HEREBY GIVEN that an Annual General Meeting of the Shareholders of Hoe Leong

Corporation Ltd. (the “Company”) will be held at Jurong Country Club, 9 Science Centre Road,

Singapore 609078 (Albizia 1 at Level 2) on Monday 26 April 2010 at 10.00 a.m. for the purpose

of considering and, if thought fit, passing, with or without amendments, the following resolutions:-

ORDINARY BUSINESS

1. To receive and adopt the Audited Accounts of the Company for the financial year ended 31

December 2009 and the Directors’ Report and the Auditors’ Report thereon. (Resolution 1)

2. To declare a final one-tier tax-exempt dividend of 0.25 Singapore cents per ordinary share for

the financial year ended 31 December 2009. (Resolution 2)

3. To re-elect the following Directors retiring by rotation pursuant to Article 95(2) of the Company’s

Articles of Association:-

(i) Mr Lim Kok Hoong (Resolution 3)

Mr Lim Kok Hoong, if re-elected as Director of the Company will remain as the Chairman

of Audit Committee and member of the Remuneration Committee and will be considered

as Independent for purposes of Rule 704(8) of the Listing Manual of the Singapore

Exchange Securities Trading Limited.

(ii) Mr Kuah Geok Khim (Resolution 4)

Mr Kuah Geok Khim, who is an Executive Director, if re-elected as Director of the

Company, will be considered as Non-Independent Director.

4. To approve payment of Directors’ fees of S$140,000 for the financial year ending 31 December

2010 (2009: $110,000). (Resolution 5)

5. To re-appoint KPMG LLP as auditors of the Company and to authorise Directors to fix their

remuneration. (Resolution 6)

6. To transact any other ordinary business which may be properly transacted at an Annual General

Meeting.

SPECIAL BUSINESS

To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or

without modifications:-

7. Authority to issue shares

That pursuant to Section 161 of the Companies Act, Chapter 50 of Singapore (the “Companies Act”), and the Listing Manual of the Singapore Exchange Securities Trading Limited, approval

be and is hereby given to the Directors of the Company at any time to such persons and upon

such terms and for such purposes as the Directors may in their absolute discretion deem fit,

to:-

(a) (i) issue shares in the capital of the Company whether by way of rights, bonus or

otherwise;

12_Hoe leong Notice AGM.indd 8712_Hoe leong Notice AGM.indd 87 4/3/10 9:50 AM4/3/10 9:50 AM



(ii) make or grant offers, agreements or options that might or would require shares

to be issued or other transferable rights to subscribe for or purchase shares

(collectively, “Instruments”) including but not limited to the creation and issue of

warrants, debentures or other instruments convertible into shares;

(iii) issue additional Instruments arising from adjustments made to the number of

Instruments previously issued in the event of rights, bonus or capitalisation issues;

and

(b) (notwithstanding the authority conferred by the shareholders may have ceased to be in

force) issue shares in pursuance of any Instrument made or granted by the Directors

while the authority was in force,

provided always that

the aggregate number of shares to be issued pursuant to this resolution (including shares

to be issued in pursuance of Instruments made or granted pursuant to this resolution)

does not exceed 50% of the Company’s total number of issued shares excluding

treasury shares, of which the aggregate number of shares (including shares to be issued

in pursuance of Instruments made or granted pursuant to this resolution) to be issued

other than on a pro rata basis to shareholders of the Company does not exceed 20%

of the total number of issued shares excluding treasury shares of the Company, and

for the purpose of this resolution, the total number of issued shares excluding treasury

shares shall be the Company’s total number of issued shares excluding treasury shares

at the time this resolution is passed, after adjusting for:

(i) new shares arising from the conversion or exercise of convertible securities,

(ii) new shares arising from exercising share options or vesting of share awards

outstanding or subsisting at the time this resolution is passed provided the options

or awards were granted in compliance with Part VIII of Chapter 8 of the Listing

Manual of the Singapore Exchange Securities Trading Limited, and

(iii) any subsequent bonus issue, consolidation or subdivision of the Company’s

shares,

and such authority shall, unless revoked or varied by the Company at a general meeting,

continue in force until the conclusion of the next Annual General Meeting or the date by

which the next Annual General Meeting of the Company is required by law to be held,

whichever is the earlier.

(c) subject to the compliance with Listing Manual of the Singapore Exchange Securities

Trading Limited for the time being in force (unless such compliance has been waived by

the Singapore Exchange Securities Trading Limited), the 50% limit in sub-paragraph (b)

above may be increased to 100% for issues of Shares and/or Instruments by way of a

renounceable rights issue where shareholders of the Company are entitled to participate

in the same on a pro-rata basis.

(See Explanatory Note 1) (Resolution 7)




8. Authority to issue shares (other than on a pro-rata basis) with a maximum discount of 20%

That subject to and pursuant to the share issue mandate in Resolution 7 above being obtained,

authority be and is hereby given to the Directors to issue new shares other than on a pro-

rata basis to shareholders of the Company at an issue price per new share which shall be

determined by the Directors in their absolute discretion provided that such price shall not

represent more than a 20% discount for new shares to the weighted average price per share

determined in accordance with the requirements of the SGX-ST.


9. Renewal of the Share Buy-Back Mandate

That:-

(a) for the purposes of Sections 76C and 76E of the Companies Act, the exercise by the

Directors of all the powers of the Company to purchase or otherwise acquire issued

ordinary shares (“Share Buy-Backs”) in the capital of the Company (“Shares”) not

exceeding in aggregate the Prescribed Limit (as hereinafter defined), at such price(s) as

may be determined by the directors of the Company (“Directors”) from time to time up

to the Maximum Price (as hereinafter defined), whether by way of:-

(i) on-market Share Buy-Backs (each an “On-market Share Buy-Back”) transacted

on the Singapore Exchange Securities Trading Limited (“SGX-ST”); and/or

(ii) off-market Share Buy-Backs (each an “Off-market Share Buy-Back”) effected

otherwise than on the SGX-ST in accordance with any equal access schemes

as may be determined or formulated by the Directors as they consider fit, which

schemes shall satisfy all the conditions prescribed by the Companies Act,

and otherwise in accordance with the applicable provisions of the Companies Act and the

Listing Manual, be and is hereby authorised and approved generally and unconditionally

(the “Share Buy-Back Mandate”);

(b) unless varied or revoked by the Company in general meeting, the authority conferred

on the Directors pursuant to the Share Buy-Back Mandate may be exercised by the

Directors at any time and from time to time during the period commencing from the date

of the passing of this Resolution and expiring on the earlier of:-

(i) the date on which the next annual general meeting of the Company (“AGM”) is

held or required by law to be held;

(ii) the date on which the Share Buy-Backs are carried out to the full extent mandated;

and

(iii) the date on which the authority conferred by the Share Buy-Back Mandate is

revoked or varied by the Company in general meeting;




(c) in this Resolution:-

“Prescribed Limit” means 10% of the total number of Shares as at the date of passing

of this Resolution unless the Company has effected a reduction of the share capital of

the Company in accordance with the applicable provisions of the Companies Act, at

any time during the Relevant Period, in which event the issued ordinary share capital of

the Company shall be taken to be the amount of the issued ordinary share capital of the

Company as altered (excluding any treasury shares that may be held by the Company

from time to time);

“Relevant Period” means the period commencing from the date on which the last AGM

was held and expiring on the date the next AGM is held or is required by law to be held,

whichever is the earlier, after the date of this Resolution;

“Maximum Price” in relation to a Share to be purchased or acquired, means the

purchase price (excluding brokerage, commissions, stamp duties, applicable goods and

services tax and other related expenses) to be paid for a Share, which shall not exceed:-

(i) in the case of an On-market Share Buy-Back, 5% above the average of the closing

market prices of the Shares over the last 5 market days on the SGX-ST on which

transactions in the Shares were recorded, immediately preceding the day of the

On-market Share Buy-Back by the Company, and deemed to be adjusted for any

corporate action that occurs after such 5-day period; and

(ii) in the case of an Off-market Share Buy-Back pursuant to an equal access scheme,

20% above the average of the closing market prices of the Shares over the last 5

market days on the SGX-ST on which transactions in the Shares were recorded,

immediately preceding the day on which the Company announces its intention to

make an offer for the purchase of Shares from Shareholders, stating the purchase

price for each Share and the relevant terms of the equal access scheme for

effecting the Off-market Share Buy-Back, and deemed to be adjusted for any

corporate action that occurs after such 5-day period; and

(d) the Directors and/or any of them be and are hereby authorised to complete and do

all such acts and things (including executing such documents as may be required) as

they and/or he may consider necessary or expedient to give effect to the transactions

contemplated by this Resolution.





10. Grant of Options to Mr Kuah Geok Lin, a Controlling Shareholder

That the Directors be and are hereby empowered to offer and grant options to Mr Kuah Geok

Lin, Chairman of the Board and Chief Executive Officer of the Company (who is a controlling

shareholder) in accordance with the Rules of the Hoe Leong Share Option Scheme 2009

(“ESOS 2009”) and on the following terms:

Proposed date of grant of

options

: Within 4 weeks from the date of this Annual General

Meeting

Number of Shares comprised in

the proposed options

: Up to 100,000 Shares

Exercise Price per Share : Market Price at the Date of Grant

Date of vesting of proposed

options granted

: 50% of the proposed options exercisable at any time

after the first anniversary of the Date of Grant and the

balance 50% exercisable at any time after the second

anniversary

(See Explanatory Notes 4 and 5) (Resolution 10)

11. Grant of Options to Mr Kuah Geok Khim, a Controlling Shareholder


Khim, Sales and Marketing Director (Overseas) of the Company (who is a controlling shareholder

and a Director) in accordance with the Rules of the ESOS 2009 and on the following terms:


options


Meeting






options granted




anniversary





12. Grant of Options to Mr Quah Yoke Hwee, a Controlling Shareholder

That the Directors be and are hereby empowered to offer and grant options to Mr Quah

Yoke Hwee, Sales and Marketing Director (Singapore) of the Company (who is a controlling

shareholder and a Director) in accordance with the Rules of ESOS 2009 and on the following

terms:


options


Meeting






options granted




anniversary


13. Grant of Options to Mr Kuah Geok Koon, a Controlling Shareholder


Koon, Manufacturing and Production Director of the Company (who is a controlling shareholder

and a Director) in accordance with the Rules of ESOS 2009 and on the following terms:


options


Meeting






options granted




anniversary





14. Grant of Options to Mdm Kuah Geok Khim, an Associate of a Controlling Shareholder

That the Directors be and are hereby empowered to offer and grant options to Mdm Kuah Geok

Khim, Operations Manager of the Company (who is an associate of a controlling shareholder)

in accordance with the Rules of ESOS 2009 and on the following terms:


options:

Within 4 weeks from the date of this Annual General

Meeting


the proposed options:

Up to 80,000 Shares

Exercise Price per Share : 10% discount off the Market Price at the Date of Grant


options granted:

50% of the proposed options exercisable at any time

after the second anniversary of the Date of Grant and

the balance 50% exercisable at any time after the third

anniversary


15. Grant of Options to Mr Raymond Quah Eng Kiat, an Associate of a Controlling Shareholder

That the Directors be and are hereby empowered to offer and grant options to Mr Raymond

Quah Eng Kiat, Assistant Sales and Marketing Manager of the Company (who is an associate

of a controlling shareholder) in accordance with the Rules of the ESOS 2009 and on the

following terms:


options


Meeting




Exercise Price per Share : 10% discount off the Market Price at the Date of Grant


options granted


after the second anniversary of the Date of Grant and

the balance 50% exercisable at any time after the third

anniversary





NOTICE OF BOOKS CLOSURE

NOTICE IS HEREBY GIVEN that the Register of Members and Share Transfer Books of the Company

will be closed on 7 May 2010 to determine the shareholders’ entitlements to the proposed dividend.

Duly completed registrable transfers of shares received by the Company’s Share Registrar, Tricor

Barbinder Share Registration Services (a business division of Tricor Singapore Pte. Ltd.) at 8 Cross

Street, #11-00 PWC Building, Singapore 048424, up to 5.00 p.m. on 6 May 2010 will be registered to

determine shareholders’ entitlements to the proposed dividends. Subject as aforesaid, shareholders

whose securities accounts with The Central Depository (Pte) Limited are credited with ordinary

shares in the capital of the Company as at 5.00 p.m. on the Books Closure Date will be entitled to

the dividend.

The proposed dividend, if approved by the members at the Annual General Meeting, will be paid on

18 May 2010.

By Order of the Board

Kuah Geok Lin

Chairman and Chief Executive Officer

9 April 2010




Explanatory Notes:-

1. Resolution 7, if passed, will authorise and empower the Directors of the Company from the date

of the above Meeting until the next Annual General Meeting to issue shares and convertible

securities in the Company up to an amount not exceeding in aggregate 50% of the total number

of issued shares excluding treasury shares of the Company of which the total number of

shares and convertible securities issued other than on a pro rata basis to existing shareholders

shall not exceed 20% of the total number of issued shares excluding treasury shares of the

Company at the time the resolution is passed, for such purposes as they consider would be

in the interests of the Company. Rule 806(3) of the Listing Manual of Singapore Exchange

Securities Trading Limited (“Listing Manual”) currently provides that the total number of issued

shares excluding treasury shares of the Company for this purpose shall be the total number of

issued shares excluding treasury shares at the time of this resolution is passed (after adjusting

for new shares arising from the conversion of convertible securities or share options on issue

at the time this resolution is passed and any subsequent consolidation or subdivision of the

Company’s shares). This authority will, unless revoked or varied at a general meeting, expire

at the next Annual General Meeting of the Company. The increased limit of up to 100%

[referred to in sub-paragraph (c)] for renounceable pro-rata rights issues will be effective up to

31 December 2010 pursuant to SGX-ST’s news release of 19 February 2009. The increased

limit is subject to the condition that the issuer makes periodic announcements on the use of

proceeds as and when the funds are materially disbursed and provides a status report on the

use of proceeds in the annual report.

2. Resolution 8, if passed, will allow the Company to undertake placements of new shares on a

non pro-rata basis at discounts of up to 20%. This is also one of the new measures introduced

by the SGX-ST’s news release of 19 February 2009 and will be in effect until 31 December

2010.

3. Resolution 9 is to renew the Share Buy-Back Mandate which was originally approved by

shareholders on 27 April 2009. Please refer to Appendix 1 to this Notice of Annual General

Meeting for details.

4. At the extraordinary general meeting of the Company held on 27 April 2009, Shareholders (a)

adopted the rules of the Hoe Leong Share Option Scheme 2009 (“ESOS 2009”), (b) approved

the granting of share options under the ESOS 2009 at a discount to Group Employees who

are not directors of the Company and (c) approved the persons named in Resolutions 10 to

15 to participate in the ESOS 2009. The maximum number of shares under the share options

proposed to be offered and granted pursuant to Resolutions 10 to 15 represents only about

0.18% of the total number of issued shares of the Company as at 30 March 20101, the latest

practicable date prior to the printing of this Notice. As at the date of this Notice of AGM, no

options have been granted under the ESOS 2009. Accordingly, the total cost of the options

is insignificant as a percentage of the total revenue of the Group for FY 2009 and the effects

on the earnings per share and the net tangible asset per share are insignificant.

1 Based on total number of issued shares being 289,383,271




For the purposes of Resolutions 10 to 15 and Explanatory Notes 4 to 10, the following terms

shall have the respective meanings ascribed to them below:

“Market Price” means that the exercise price of the shares in respect of the options granted

under the ESOS 2009 which shall be calculated based on the average of the last dealt prices

for shares on the SGX-ST over the five consecutive trading days immediately preceding the

date of grant of the relevant options as determined by reference to the daily official list or any

other publication published by the SGX-ST, rounded to the nearest whole cent in the event

of fractional prices.

“Date of Grant” means the date on which the option under the ESOS 2009 is granted.

5. Despite the substantial shareholding held by Mr Kuah Geok Lin, the Directors are of the

view that as he plays an integral role in driving the strategic development and success of

the Company, granting the proposed options to him will motivate him to create greater

shareholders’ value in order to realize the benefits of the proposed options. The proposed

options, if exercised by him, would increase his cost of investment in the Company, and

would in turn demonstrate his long term commitment to further enhance shareholders’ wealth

through appreciation of the share price. Furthermore, as 50% of the proposed options may be

exercised only after the first anniversary of the Date of Grant and the balance of the proposed

options may be exercised only after the second anniversary of the Date of Grant, the rewards

to be reaped from the exercise of such proposed options would not be immediate. The value

of the proposed options would be best realized only when the results and the prospects of

the Group’s long term performances and growth translate directly into higher share price and

higher shareholders’ value.

While the Remuneration Committee believes that the existing remuneration of Mr Kuah Geok

Lin is not insufficient, the Remuneration Committee is of the view that granting the proposed

options to Mr Kuah Geok Lin is beneficial to the Group as the proposed options will encourage

him to take a long-term view of the Group and motivate himself as well as other employees

of the Group to work towards improving the Company’s performance. The Remuneration

Committee believes that the grant of the proposed options to Mr Kuah Geok Lin is in line with

similar grants to other employees.

Mr Kuah Geok Lin’s remuneration for financial year ended 31 December 2009 is set out at

page 24 of this Annual Report.

6. Despite the substantial shareholding held by Mr Kuah Geok Khim, the Directors are of the view

that granting the proposed options to him will motivate and encourage him to work towards

improving the Company’s performance, thereby correspondingly creating greater shareholders’

value and allowing him to realize the benefits of the proposed options. The proposed options,

if exercised by him, would increase his cost of investment in the Company, and would in

turn demonstrate his long term commitment to further enhance shareholders’ wealth through

appreciation of the share price. Furthermore, as 50% of the proposed options may be exercised

only after the first anniversary of the Date of Grant and the balance of the proposed options

may be exercised only after the second anniversary of the Date of Grant, the rewards to be

reaped from the exercise of such proposed options would not be immediate. The value of

the proposed options would be best realized only when the results and the prospects of the

Group’s long term performances and growth translate directly into higher share price and





While the Remuneration Committee believes that the existing remuneration of Mr Kuah

Geok Khim is not insufficient, the Remuneration Committee is of the view that granting the

proposed options to Mr Kuah Geok Khim is beneficial to the Group as the proposed options

will encourage him to take a long-term view of the Group and to work towards improving the

Company’s performance. The Remuneration Committee believes that the proposed grant of

options to Mr Kuah Geok Khim is in line with similar grants to other employees.

Mr Kuah Geok Khim’s remuneration for financial year ended 31 December 2009 is set out at


7. Despite the substantial shareholding held by Mr Quah Yoke Hwee, the Directors are of the view













While the Remuneration Committee believes that the existing remuneration of Mr Quah

Yoke Hwee is not insufficient, the Remuneration Committee is of the view that granting the

proposed options to Mr Quah Yoke Hwee is beneficial to the Group as the proposed options



options to Mr Quah Yoke Hwee is in line with similar grants to other employees.

Mr Quah Yoke Hwee’s remuneration for financial year ended 31 December 2009 is set out at


8. Despite the substantial shareholding held by Mr Kuah Geok Koon, the Directors are of the view
















While the Remuneration Committee believes that the existing remuneration of Mr Kuah

Geok Koon is not insufficient, the Remuneration Committee is of the view that granting the

proposed options to Mr Kuah Geok Koon is beneficial to the Group as the proposed options



options to Mr Kuah Geok Koon is in line with similar grants to other employees.

Mr Kuah Geok Koon’s remuneration for financial year ended 31 December 2009 is set out at


9. The Directors are of the view that granting the proposed options to Mdm Kuah Geok Khim

will motivate her to create greater shareholders’ value in order to realize the benefits of the

proposed options. Furthermore, as 50% of the proposed options may be exercised only

after the second anniversary of the Date of Grant and the balance of the 50% of proposed

options may be exercised only after the third anniversary of the Date of Grant, the rewards





While the Remuneration Committee believes that the existing remuneration of Mdm Kuah Geok

Khim is not insufficient, the Remuneration Committee is of the view that granting the proposed

options to Mdm Kuah Geok Khim is beneficial to the Group as the proposed options will

encourage her as a key executive officer of the Company to take a long-term view of the Group

and to work towards improving the Company’s performance. The Remuneration Committee

believes that the proposed grant of options to Mdm Kuah Geok Khim is in line with similar

grants to other employees.

10. The Directors are of the view that granting the proposed options to Mr Raymond Quah Eng

Kiat will motivate him to create greater shareholders’ value in order to realize the benefits of

the proposed options. Furthermore, as 50% of the proposed options may be exercised only

after the second anniversary of the Date of Grant and the balance of the 50% of proposed

options may be exercised only after the third anniversary of the Date of Grant, the rewards





While the Remuneration Committee believes that the existing remuneration of Mr Raymond

Quah Eng Kiat is not insufficient, the Remuneration Committee is of the view that granting the

proposed options to Mr Raymond Quah Eng Kiat is beneficial to the Group as the proposed

options will encourage him as an executive of the Company to work towards improving the


options to Mr Raymond Quah Eng Kiat is in line with similar grants to other employees.




11. The following applies to Resolutions 10 to 15 in this Notice:-

DIRECTORS’ RECOMMENDATIONS

The Remuneration Committee (comprising Messrs Ang Mong Seng, Lim Kok Hoong and

Peter Boo Song Heng) has been tasked to review the proposed participation and grant of

options under the ESOS 2009. Therefore, the Committee unanimously considers that all

the proposed options to Mr Kuah Geok Lin, Mr Kuah Geok Khim, Mr Quah Yoke Hwee, Mr

Kuah Geok Koon, Mdm Kuah Geok Khim and Mr Raymond Quah Eng Kiat are in the best

interests of the Company. The Directors are all eligible to participate in the ESOS 2009, and

are therefore interested in the ESOS 2009. They have accordingly abstained from making any

recommendation on Resolutions 10 to 15 thereof.

ABSTENTION FROM VOTING

Mr Kuah Geok Lin, Mr Kuah Geok Khim, Mr Quah Yoke Hwee, Mr Kuah Geok Koon, Mdm Kuah

Geok Khim and Mr Raymond Quah Eng Kiat will abstain from voting any shares held by them

at this AGM in respect of Resolutions 10 to 15, and will procure that any Shareholder holding

any shares on their behalf will likewise abstain from voting his/her/its shares at the AGM in

respect of Resolutions 10 to 15. The abovementioned persons will also decline to accept any

nomination as proxy for any Shareholders to vote in respect of Resolutions 10 to 15 unless

the Shareholder concerned shall have given instructions in his proxy form as to the manner in

which his votes are to be cast in respect of Resolutions 10 to 15.

Each Director shall abstain from voting on Resolutions 10 to 15. Each Director shall also decline

to accept appointment as proxies for any Shareholder to vote in respect of Resolutions 10 to

15 unless the Shareholder concerned shall have given instructions in his proxy form as to the

manner in which his votes are to be cast in respect of Resolutions 10 to 15.

In addition, all Shareholders who are eligible to participate in the ESOS 2009 (such as

employees of the Company and its subsidiaries) must also abstain from voting in respect of

Resolutions 10 to 15 relating to the proposed grant of the proposed options to Mr Kuah Geok

Lin, Mr Kuah Geok Khim, Mr Quah Yoke Hwee, Mr Kuah Geok Koon, Mdm Kuah Geok Khim

and Mr Raymond Quah Eng Kiat. Such Shareholder should also not accept nominations to

act as proxies or otherwise vote at the AGM in respect of Resolutions 10 to 15 unless the

Shareholder concerned shall have given instructions in his proxy form as to the manner in which

his votes are to be cast in respect of Resolutions 10 to 15. Mdm Kuah Geok Wah, the sister

of Mr Kuah Geok Lin, Mr Kuah Geok Khim, Mr Quah Yoke Hwee, Mr Kuah Geok Koon and

Mdm Kuah Geok Khim, will abstain from voting any shares held by her at this AGM in respect

of Resolutions 10 to 14. She will also not accept nominations to act as proxies or otherwise

vote at the AGM in respect of Resolutions 10 to 14, unless the Shareholder concerned shall

have given instructions in his proxy form as to the manner in which his votes are to be cast in

respect of Resolutions 10 to 14.




DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors collectively and individually accept full responsibility for the accuracy of the

information given herein and confirm, having made all reasonable enquiries, that to the best of

their knowledge and belief, the facts stated and opinions expressed in the Explanatory Notes

4 to 10 are accurate and fair in all material respects as at the date of this Notice and that

there are no material facts the omission of which would make any statement in the Explanatory

Notes 4 to 10 misleading.

SGX-ST DISCLAIMER

The SGX-ST assumes no responsibility for the correctness of the statements made, opinions

expressed or reports contained in this Notice and the approval shall not be taken as an

indication of the merits of any of the Resolutions proposed.

DOCUMENT FOR INSPECTION

The Rules of the ESOS 2009 is available for inspection at the registered office of the Company

at 6 Clementi Loop, Singapore 129814 during normal business hours from the date of this

Notice up to the date of the AGM.

Notes:-

1. A member of the Company entitled to attend and vote at this Annual General Meeting is entitled to appoint not more than

two proxies to attend and vote in his stead.

2. A proxy need not be a member of the Company.

3. If the appointor is a corporation, the proxy must be executed under seal or the hand of its duly authorised officer or

attorney.

4. The instrument appointing a proxy must be deposited at the registered office of the Company at 6 Clementi Loop,

Singapore 129814, not later than 48 hours before the time appointed for the Annual General Meeting.


HOE LEONG CORPORATION LTD.(Company Registration No.: 199408433W)

(Incorporated in the Republic of Singapore)

PROXY FORMFOR ANNUAL GENERAL MEETING

(PLEASE SEE NOTES OVERLEAF BEFORE COMPLETING THIS FORM)

I/We of

being a member/members of HOE LEONG CORPORATION LTD. (the “Company”), hereby appoint:–

Name NRIC/Passport No.

Proportion of Shareholdings

No. of Shares %

and/or (delete as appropriate)

Name NRIC/Passport No.

Proportion of Shareholdings

No. of Shares %

or failing him/her, the Chairman of the Annual General Meeting (the “Meeting”) as my/our proxy/proxies to

vote for me/us on my/our behalf at the Meeting of the Company to be held at Jurong Country Club, 9 Science

Centre Road, Singapore 609078 (Albizia 1 at Level 2) on Monday, 26 April 2010 at 10.00 a.m. and at any

adjournment thereof.

I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated

hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting

and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The

authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

No. ORDINARY RESOLUTIONS For Against

1. To receive and adopt the Audited Accounts of the Company for the financial year ended 31

December 2009 and the Directors’ Report and the Auditors’ Report thereon. (Resolution 1)

2. To declare a final one-tier tax-exempt dividend of 0.25 Singapore cents per ordinary share for the

financial year ended 31 December 2009. (Resolution 2)

3. To re-elect the following Directors retiring by rotation pursuant to Article 95(2) of the Company’s

Articles of Association:-

(i) Mr Lim Kok Hoong (Resolution 3)

(ii) Mr Kuah Geok Khim (Resolution 4)

4. To approve payment of Directors’ fees of S$140,000 for the financial year ending 31 December 2010.

(Resolution 5)

5. To re-appoint KPMG LLP as auditors of the Company and to authorise Directors to fix their remuneration.

(Resolution 6)

6. To authorise Directors to issue shares. (Resolution 7)

7. To authorise Directors to issue shares (other than on a pro-rata basis) with a maximum discount of 20%.

(Resolution 8)

8. Proposed Renewal of the Share Buy-Back Mandate. (Resolution 9)

9. To grant Options to Mr Kuah Geok Lin, a Controlling Shareholder, of up to 100,000 shares in

the capital of the Company in accordance with the Hoe Leong Share Option Scheme 2009.

(Resolution 10)

10. To grant Options to Mr Kuah Geok Khim, a Controlling Shareholder, of up to 100,000 shares

in the capital of the Company in accordance with the Hoe Leong Share Option Scheme 2009.

(Resolution 11)

11. To grant Options to Mr Quah Yoke Hwee, a Controlling Shareholder, of up to 100,000 shares


(Resolution 12)

IMPORTANT:

1. For investors who have used their CPF monies to buy ordinary shares in the

capital of Hoe Leong Corporation Ltd., this Annual Report 2009 is forwarded

to them at the request of their CPF Approved Nominees and is sent solely FOR

INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective

for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their

requests through their CPF Approved Nominees within the time frame specified.

If they also wish to vote, they must submit their voting instructions to the CPF

Approved Nominees within the time frame specified to enable them to vote on

their behalf.

13_Hoe leong Proxy.indd 10113_Hoe leong Proxy.indd 101 4/3/10 10:01 AM4/3/10 10:01 AM

No. ORDINARY RESOLUTIONS For Against

12. To grant Options to Mr Kuah Geok Koon, a Controlling Shareholder, of up to 100,000 shares


(Resolution 13)

13. To grant Options to Mdm Kuah Geok Khim, an Associate of a Controlling Shareholder, of up to

80,000 shares in the capital of the Company in accordance with the Hoe Leong Share Option

Scheme 2009. (Resolution 14)

14. To grant Options to Mr Raymond Quah Eng Kiat, an Associate of a Controlling Shareholder, of up

to 50,000 shares in the capital of the Company in accordance with the Hoe Leong Share Option

Scheme 2009. (Resolution 15)

(Please indicate your vote “For” or “Against” with a tick [√] within the box provided.)

Signed this day of 2010.

Total Number of Shares in: No. of Shares

(a) CDP Register

(b) Register of Members

Signature(s) of Shareholder(s) or Common Seal

IMPORTANT:–

Please read the notes overleaf:


Notes:-

1. A member of the Company entitled to attend and vote at the Annual General Meeting is entitled to appoint not more than two proxies to

attend and vote in his stead. Such proxy need not be a member of the Company.

2. Where a member of the Company appoints two proxies, he shall specify the proportion of his shareholding (expressed as a percentage of

the whole) to be represented by each such proxy.

3. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where

the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its common seal or under the

hand of its attorney or duly authorised officer.

4. A corporation which is a member of the Company may authorise by resolution of its directors or other governing body such person as it

thinks fit to act as its representative at the Annual General Meeting, in accordance with its Articles of Association and Section 179 of the

Companies Act, Chapter 50 of Singapore.

5. The instrument appointing proxy or proxies, together with the power of attorney or other authority (if any) under which it is signed, or

notarially certified copy thereof, must be deposited at the registered office of the Company at 6 Clementi Loop, Singapore 129814 not

later than 48 hours before the time set for the Annual General Meeting.

6. A member should insert the total number of shares held. If the member has shares entered against his name in the Depository Register

(as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), he should insert that number of shares. If the member has

shares registered in his name in the Register of Members of the Company, he should insert the number of shares. If the member has shares

entered against his name in the Depository Register and shares registered in his name in the Register of Members of the Company, he

should insert the aggregate number of shares. If no number is inserted, this form of proxy will be deemed to relate to all the shares held

by the member of the Company.

7. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or

where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing

a proxy or proxies. In addition, in the case of members of the Company whose shares are entered against their names in the Depository

Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have shares

entered against their names in the Depository Register 48 hours before the time appointed for holding the Annual General Meeting as

certified by The Central Depository (Pte) Limited to the Company.

8. A Depositor shall not be regarded as a member of the Company entitled to attend the Annual General Meeting and to speak and vote

thereat unless his name appears on the Depository Register 48 hours before the time set for the Annual General Meeting.

GENERAL

The Company shall be entitled to reject the instrument appointing a proxy if it is incomplete, improperly completed or illegible or where the

true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy. In

addition, in the case of shares entered in the Depository Register, the Company may reject any instrument appointing a proxy lodged if the

member, being the appointor, is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time

appointed for holding the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.


This page is intentionally left blank.


BOARD OF DIRECTORSExecutive:

James Kuah Geok Lin (Chairman and CEO)

Paul Kuah Geok Khim (Executive Director)

Peter Kuah Geok Koon (Executive Director)

Quah Yoke Hwee (Executive Director)

Non-Executive:

Ang Mong Seng (Independent Director)

Lim Kok Hoong (Independent Director)

Peter Boo Song Heng (Independent Director)

AUDIT COMMITTEELim Kok Hoong (Chairman)

Ang Mong Seng

Peter Boo Song Heng

NOMINATING COMMITTEEPeter Boo Song Heng (Chairman)

Ang Mong Seng

James Kuah Geok Lin

REMUNERATION COMMITTEEAng Mong Seng (Chairman)

Lim Kok Hoong

Peter Boo Song Heng

COMPANY SECRETARIESChan Wan Mei

Lim Mee Fun

REGISTERED OFFICE6 Clementi Loop, Singapore 129814

Tel : (65) 6463-8666 Fax : (65) 6564-7252

Website : http://www.hoeleong.com

Registration No. 199408433W

SHARE REGISTRARTricor Barbinder Share Registration Services

(A division of Tricor Singapore Pte. Ltd.)

8 Cross Street, #11-00 PWC Building

Singapore 048424

AUDITORS KPMG LLP

16 Raffles Quay, #22-00 Hong Leong Building

Singapore 048581

Audit Partner-in-charge

Jeremy Hoon

Partner-in-charge since financial year ended

31 December 2009

PRINCIPAL BANKERSUnited Overseas Bank Limited

The Development Bank of Singapore Limited

Corporate Information

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Corporate Profile - Hoe Leong

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