Prospectus Dated 28 May 2001 Application has been made to the Singapore Exchange Securities Trading Limited ("SGX-ST") for permission to deal in and for quotation of all the ordinary shares of par value $0.05 each (the "Shares") in the capital of AP Oil International Limited (the "Company") already issued as well as the new Shares (the "New Shares") which are the subject of this Invitation. Such permission will be granted when the Company has been admitted to the Official List of SGX-Sesdaq. Acceptance of applications will be conditional upon permission being granted to deal in and for quotation for all of the issued Shares as well as the New Shares, if the said permission is not granted, moneys paid in respect of any application accepted will be returned, without interest or any share of revenue or other benefit arising therefrom and at the applicant's own risk and the applicant will not have any claim whatsoever against the Company or the Manager.The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions expressed or reports contained in this Prospectus. Admission to the Official List of SGX- Sesdaq is not to be taken as an indication of the merits of the Invitation, the Company, its subsidiaries, the Shares or the New Shares. A copy of this Prospectus, together with copies of the Application Forms, has been lodged with and registered by the Registrar of Companies and Businesses in Singapore who takes no responsibility for its contents. Investing in the Shares involves a high degree of risk which are described in the “Risk Factors” section beginning on page 14 of this Prospectus. (Incorporated in the Republic of Singapore on 24 December 1975) Manager, Underwriter and Placement Agent Invitation in respect of 17,550,000 New Shares of $0.05 each comprising: (1) 1,000,000 Offer Shares at $0.235 for each Offer Shares by way of public offer; and (2)16,550,000 Placement Shares by way of placement, comprising: (a) 14,950,000 Placement Shares at $0.235 for each Placement Share; and (b)1,600,000 Reserved Shares at $0.235 for each Reserved Share reserved for the management staff, employees, Independent Directors and business associates of our Group and those who have contributed to the success of our Group, payable in full on application.
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Our Company &
AP Oil International Limited, formerly known as Huan Chew Oil Trading
Pte. Ltd., was incorporated in 1975. The Company started business as a
supplier of lubricants to local automative spare part retailers. We set up our
first lubricant manufacturing plant in 1981 and our second blending plant
in 1992.
Currently, the Company has four subsidiaries namely, Alpha Pacific Petroleum
(S) Pte Ltd, A.I.M. Chemical Industries Pte Ltd, AP Petrochemical Pte Ltd
and Alpha Pacific Petroleum Company Limited (UK).
Our core businesses include:
* Manufacturing of lubricating oils and fluids for industrial,
automotive and marine applications.
* Supplying base oils and additives used in lubricant production.
* Toll-blending and contract-manufacturing services for specialty
chemicals.
Our Business
Our Production
FacilitiesThe group operates three manufacturing plants in Singapore, two for lubricants
and one for specialty chemicals. One of the lubricant plants has a private
jetty and an oil terminal with bulk storage capacity of about 5,000 metric
tonnes. The total annual production for the two lubricant plants and chemical
plant are about 24,000 metric tonnes and 16,000 metric tonnes respectively.
Prospectus Dated 28 May 2001
Application has been made to the Singapore Exchange Securities TradingLimited ("SGX-ST") for permission to deal in and for quotation of all theordinary shares of par value $0.05 each (the "Shares") in the capital of APOil International Limited (the "Company") already issued as well as the newShares (the "New Shares") which are the subject of this Invitation. Suchpermission will be granted when the Company has been admitted to theOfficial List of SGX-Sesdaq. Acceptance of applications will be conditionalupon permission being granted to deal in and for quotation for all of theissued Shares as well as the New Shares, if the said permission is not granted,moneys paid in respect of any application accepted will be returned, withoutinterest or any share of revenue or other benefit arising therefrom and atthe applicant's own risk and the applicant will not have any claim whatsoeveragainst the Company or the Manager. The SGX-ST assumes no responsibilityfor the correctness of any of the statements made, opinions expressed orreports contained in this Prospectus. Admission to the Official List of SGX-Sesdaq is not to be taken as an indication of the merits of the Invitation,the Company, its subsidiaries, the Shares or the New Shares.
A copy of this Prospectus, together with copies of the Application Forms,has been lodged with and registered by the Registrar of Companies andBusinesses in Singapore who takes no responsibility for its contents.
Investing in the Shares involves a high degree of risk which are describedin the “Risk Factors” section beginning on page 14 of this Prospectus.
Subsidiaries
(Incorporated in the Republic of Singapore on 24 December 1975)
Manager, Underwriter and Placement Agent
AP
O
IL
I
NT
ER
NA
TI
ON
AL
L
IM
IT
ED
Invitation in respect of 17,550,000 New Shares of $0.05 each comprising:
(1) 1,000,000 Offer Shares at $0.235 for each Offer Shares by way of publicoffer; and
(2) 16,550,000 Placement Shares by way of placement, comprising:
(a) 14,950,000 Placement Shares at $0.235 for each Placement Share; and
(b)1,600,000 Reserved Shares at $0.235 for each Reserved Sharereserved for the management staff, employees, Independent Directorsand business associates of our Group and those who have contributedto the success of our Group,
payable in full on application.
Our Company &
AP Oil International Limited, formerly known as Huan Chew Oil Trading
Pte. Ltd., was incorporated in 1975. The Company started business as a
supplier of lubricants to local automative spare part retailers. We set up our
first lubricant manufacturing plant in 1981 and our second blending plant
in 1992.
Currently, the Company has four subsidiaries namely, Alpha Pacific Petroleum
(S) Pte Ltd, A.I.M. Chemical Industries Pte Ltd, AP Petrochemical Pte Ltd
and Alpha Pacific Petroleum Company Limited (UK).
Our core businesses include:
* Manufacturing of lubricating oils and fluids for industrial,
automotive and marine applications.
* Supplying base oils and additives used in lubricant production.
* Toll-blending and contract-manufacturing services for specialty
chemicals.
Our Business
Our Production
FacilitiesThe group operates three manufacturing plants in Singapore, two for lubricants
and one for specialty chemicals. One of the lubricant plants has a private
jetty and an oil terminal with bulk storage capacity of about 5,000 metric
tonnes. The total annual production for the two lubricant plants and chemical
plant are about 24,000 metric tonnes and 16,000 metric tonnes respectively.
Prospectus Dated 28 May 2001
Application has been made to the Singapore Exchange Securities TradingLimited ("SGX-ST") for permission to deal in and for quotation of all theordinary shares of par value $0.05 each (the "Shares") in the capital of APOil International Limited (the "Company") already issued as well as the newShares (the "New Shares") which are the subject of this Invitation. Suchpermission will be granted when the Company has been admitted to theOfficial List of SGX-Sesdaq. Acceptance of applications will be conditionalupon permission being granted to deal in and for quotation for all of theissued Shares as well as the New Shares, if the said permission is not granted,moneys paid in respect of any application accepted will be returned, withoutinterest or any share of revenue or other benefit arising therefrom and atthe applicant's own risk and the applicant will not have any claim whatsoeveragainst the Company or the Manager. The SGX-ST assumes no responsibilityfor the correctness of any of the statements made, opinions expressed orreports contained in this Prospectus. Admission to the Official List of SGX-Sesdaq is not to be taken as an indication of the merits of the Invitation,the Company, its subsidiaries, the Shares or the New Shares.
A copy of this Prospectus, together with copies of the Application Forms,has been lodged with and registered by the Registrar of Companies andBusinesses in Singapore who takes no responsibility for its contents.
Investing in the Shares involves a high degree of risk which are describedin the “Risk Factors” section beginning on page 14 of this Prospectus.
Subsidiaries
(Incorporated in the Republic of Singapore on 24 December 1975)
Manager, Underwriter and Placement Agent
AP
O
IL
I
NT
ER
NA
TI
ON
AL
L
IM
IT
ED
Invitation in respect of 17,550,000 New Shares of $0.05 each comprising:
(1) 1,000,000 Offer Shares at $0.235 for each Offer Shares by way of publicoffer; and
(2) 16,550,000 Placement Shares by way of placement, comprising:
(a) 14,950,000 Placement Shares at $0.235 for each Placement Share; and
(b)1,600,000 Reserved Shares at $0.235 for each Reserved Sharereserved for the management staff, employees, Independent Directorsand business associates of our Group and those who have contributedto the success of our Group,
payable in full on application.
Lubricants and Chemicals
We produce and market a wide range of lubricants for automotive,
industrial and marine applications. Our lubricant products are largely
marketed under the brand names SINO, AP and Polaris.
Our Company and Alpha Pacific Petroleum (S) Pte Ltd are American
Petroleum Institute (API) licence holders.
Our Products
Our Business Strategies/
Future Plans❍ Focus on higher value-added products❍ Business extension through diversification within petrochemical industry
* Expand Into New Markets• Explore export opportunities to new markets
such as India, Sri Lanka and East African countries.
* Set Up A Lubricant Blending Plant In Vietnam• To set up a new plant with an oil terminal and
a private jetty in Vietnam with a potential localpartner.
* Enhance Research & Development Capabilities• Set up a new research laboratory at the
proposed overseas plant to carry out applied research in tribology and lubricant technology.
* Expand Packing & Production Facilities• Expand our production and packing facilities in
Singapore to cater to the expected increase inbusiness volume of chemical operations andsmall packing lubricants products.
QA and R&DWe are committed to providing quality lubricating
oils and specialty chemicals to satisfy the needs of
our customers in various industries. We operate
four laboratories, two for quality assurance and
the other two for research and development.
One of our laboratories is equipped with an ICP
atomic emission spectrometer for R&D. Our R&D
team, comprising qualified chemists and chemical
engineers, constantly works to upgrade the quality
of existing products and to formulate and develop
new products for market demand.
Our Competitive Strengths
Our FinancialTrack Record
And Services* Quality Products And Services
• Products meet international standards such as API, SAE, ISO and ASTM.
• Our Company and Alpha Pacific Petroleum (S) Pte Ltd obtained ISO9002 certification for the production quality control system in 1998and ISO 9001 certification for R&D activities in 2000.
• Our Company and Alpha Pacific Petroleum (S) Pte Ltd obtained ISO14001 certification for environmental protection in 2001.
• A.I.M. Chemical Industries Pte Ltd is working towards OHSAS 18001for Occupational Health & Safety and ISO 14001 certification.
* Long-standing Relationship With Distributors and Customers• Established good working relationship with distributors and customers .• More than 60% of our Group's turnover in FY2000 were from
customers who have purchased from us for two or more consecutiveyears.
* Research & Development (R&D)• One of our four laboratories is equipped with an ICP atomic emission
spectrometer.• Qualified research personnel conducts R&D activities to improve the
quality of existing products and to formulate new products.
* Wide Product Range And Value-Added Services• A wide range of lubricating oils, greases, fluids and specialty chemicals.• Before and after sales technical support and consulting services.
* Track Record And Brand AwarenessOur Directors believe that
• Our SINO brand has gained recognition in Indonesia, Malaysia and Vietnam.
• Our AP brand has gained recognition in Myanmar, Malaysia and Indonesia.
• Considerable time and financial resources are required to develop new brand names and track records.
* Good Relationships With Suppliers• Maintain good relationships with international suppliers to obtain
reliable supply of raw materials.• Some suppliers have been working with us for more than 20 years.
* Export-oriented And Widespread Customer Network• About 90% of our total products are exported to more than 20
countries.• Adopt a geographical diversification strategy and wide customer base
to minimise the over reliance on a single market and to maintain a steady growth in the long run.
* Qualified And Experienced Management Team• Dr Ho Leng Woon and Ms Lau Woon Chan, both executive directors
have more than 20 years’ experience in the industry.• All our management level staff members are qualified professionals
or experienced managers.
* The financial results for FY1988 and FY1999 do not include the financialresults of A.I.M. Chemical Industries Pte Ltd. The financial results of A.I.M.Chemical Industries Pte Ltd for the period August 2000 to December 2000are included in the financial results for FY2000.
1999 2000
10,000
20,000
30,000
40,000
50,000
S$’000
year1998
Turnover
*
1999 2000
1,000
2,000
3,000
4,000
S$’000
year1998
Profit before Tax
*
The lubricants we manufacture meet the standards and specifications set by internationally recognised
institutions and organisations, namely API, SAE, ISO and ASTM.
For specialty chemicals, our main activity is the provision of blending services to
MNCs in the form of toll-blending and contract manufacturing. Specialty chemicals
include anti-corrosion agents, coating chemicals, coolants and transmission fluids,
cleaning and flushing agents and industrial detergents.
Lubricants and Chemicals
We produce and market a wide range of lubricants for automotive,
industrial and marine applications. Our lubricant products are largely
marketed under the brand names SINO, AP and Polaris.
Our Company and Alpha Pacific Petroleum (S) Pte Ltd are American
Petroleum Institute (API) licence holders.
Our Products
Our Business Strategies/
Future Plans❍ Focus on higher value-added products❍ Business extension through diversification within petrochemical industry
* Expand Into New Markets• Explore export opportunities to new markets
such as India, Sri Lanka and East African countries.
* Set Up A Lubricant Blending Plant In Vietnam• To set up a new plant with an oil terminal and
a private jetty in Vietnam with a potential localpartner.
* Enhance Research & Development Capabilities• Set up a new research laboratory at the
proposed overseas plant to carry out applied research in tribology and lubricant technology.
* Expand Packing & Production Facilities• Expand our production and packing facilities in
Singapore to cater to the expected increase inbusiness volume of chemical operations andsmall packing lubricants products.
QA and R&DWe are committed to providing quality lubricating
oils and specialty chemicals to satisfy the needs of
our customers in various industries. We operate
four laboratories, two for quality assurance and
the other two for research and development.
One of our laboratories is equipped with an ICP
atomic emission spectrometer for R&D. Our R&D
team, comprising qualified chemists and chemical
engineers, constantly works to upgrade the quality
of existing products and to formulate and develop
new products for market demand.
Our Competitive Strengths
Our FinancialTrack Record
And Services* Quality Products And Services
• Products meet international standards such as API, SAE, ISO and ASTM.
• Our Company and Alpha Pacific Petroleum (S) Pte Ltd obtained ISO9002 certification for the production quality control system in 1998and ISO 9001 certification for R&D activities in 2000.
• Our Company and Alpha Pacific Petroleum (S) Pte Ltd obtained ISO14001 certification for environmental protection in 2001.
• A.I.M. Chemical Industries Pte Ltd is working towards OHSAS 18001for Occupational Health & Safety and ISO 14001 certification.
* Long-standing Relationship With Distributors and Customers• Established good working relationship with distributors and customers .• More than 60% of our Group's turnover in FY2000 were from
customers who have purchased from us for two or more consecutiveyears.
* Research & Development (R&D)• One of our four laboratories is equipped with an ICP atomic emission
spectrometer.• Qualified research personnel conducts R&D activities to improve the
quality of existing products and to formulate new products.
* Wide Product Range And Value-Added Services• A wide range of lubricating oils, greases, fluids and specialty chemicals.• Before and after sales technical support and consulting services.
* Track Record And Brand AwarenessOur Directors believe that
• Our SINO brand has gained recognition in Indonesia, Malaysia and Vietnam.
• Our AP brand has gained recognition in Myanmar, Malaysia and Indonesia.
• Considerable time and financial resources are required to develop new brand names and track records.
* Good Relationships With Suppliers• Maintain good relationships with international suppliers to obtain
reliable supply of raw materials.• Some suppliers have been working with us for more than 20 years.
* Export-oriented And Widespread Customer Network• About 90% of our total products are exported to more than 20
countries.• Adopt a geographical diversification strategy and wide customer base
to minimise the over reliance on a single market and to maintain a steady growth in the long run.
* Qualified And Experienced Management Team• Dr Ho Leng Woon and Ms Lau Woon Chan, both executive directors
have more than 20 years’ experience in the industry.• All our management level staff members are qualified professionals
or experienced managers.
* The financial results for FY1988 and FY1999 do not include the financialresults of A.I.M. Chemical Industries Pte Ltd. The financial results of A.I.M.Chemical Industries Pte Ltd for the period August 2000 to December 2000are included in the financial results for FY2000.
1999 2000
10,000
20,000
30,000
40,000
50,000
S$’000
year1998
Turnover
*
1999 2000
1,000
2,000
3,000
4,000
S$’000
year1998
Profit before Tax
*
The lubricants we manufacture meet the standards and specifications set by internationally recognised
institutions and organisations, namely API, SAE, ISO and ASTM.
For specialty chemicals, our main activity is the provision of blending services to
MNCs in the form of toll-blending and contract manufacturing. Specialty chemicals
include anti-corrosion agents, coating chemicals, coolants and transmission fluids,
cleaning and flushing agents and industrial detergents.
CORPORATE INFORMATION
BOARD OF DIRECTORS : Dr Ho Leng Woon (Chairman & Managing Director)Ms Lau Woon Chan (Executive Director)Mr Ang Luck Seh (Executive Director)Dr Tan Poi Sik (Independent Director)Dr Lim Heng Kow (Independent Director)
JOINT COMPANYSECRETARIES
: Ms Tan Siok Kheng, ACIS, LLB (Hons) (London)Ms Lau Woon Chan, BA (Nanyang)
REGISTERED OFFICE : 30 Gul CrescentJurongSingapore 629535(Tel: 8615503)
REGISTRAR AND SHARETRANSFER OFFICE
: Barbinder & Co Pte Ltd8 Cross Street#11-00 PWC BuildingSingapore 048424
MANAGER, UNDERWRITERAND PLACEMENT AGENT
: The Development Bank of Singapore Ltd6 Shenton WayDBS Building Tower OneSingapore 068809
AUDITORS AND REPORTINGACCOUNTANTS
: Chio Lim & AssociatesCerti®ed Public Accountants95 South Bridge Road#07-28 Pidemco CentreSingapore 058717
SOLICITORS TO THEINVITATION
: White & Case, Colin Ng & Partners50 Raf¯es Place#30-00 Singapore Land TowerSingapore 048623
PRINCIPAL BANKERS : The Development Bank of Singapore Ltd6 Shenton WayDBS Building Tower OneSingapore 068809
Bank of ChinaSingapore Branch4 Battery RoadBank of China BuildingSingapore 049908
1
DEFINITIONS
For the purpose of this Prospectus and the accompanying Application Forms, the following de®nitionsapply where the context so admits:±
Companies and Business Firms
``A.I.M.'' : A.I.M. Chemical Industries Pte Ltd
``AP Oil'' or ``Company'' : AP Oil International Limited
``APP'' : AP Petrochemical Pte Ltd
``APP(M)'' : Alpha Paci®c Petroleum (M) Sdn. Bhd.
``APP(S)'' : Alpha Paci®c Petroleum (S) Pte Ltd
``APP(UK)'' : Alpha Paci®c Petroleum Company Limited
``Group'' or ``Proforma Group'' : AP Oil and its subsidiaries as at the date of this Prospectus
``SGTAC'' : Shanghai Golden Toe Arts & Craft Co., Ltd
``SP'' : SINO Petroleum
``Krex'' : Krex International
``Tai Yuan'' : Tai Yuan Jing Yan High-Quality Lubricant Oil Co., Ltd
Other Corporations and Agencies
``API'' : American Petroleum Institute
``ASEAN'' : Association of Southeast Asian Nations
``ASTM'' : American Society for Testing and Materials
``ISO'' : International Organisation for Standardisation
``OPEC'' : Organisation of Petroleum Exporting Countries
``PCD'' : Pollution Control Department
``SAE'' : Society of Automotive Engineers, USA
General
``Act'' or ``Companies Act'' : The Companies Act, Chapter 50 of Singapore
``Application Forms'' : The of®cial application forms to be used for the purpose ofthe Invitation and which form part of this Prospectus
``Application List'' : List of applications for subscription of the New Shares
``ATM'' : Automated teller machine
``Audit Committee'' : The audit committee of our Company
2
``Bonus Issues'' : The bonus issue of 1,560,000 ordinary shares of $1.00each and the bonus issue of 7,800,000 ordinary shares of$0.05 each fully paid to the existing shareholders of theCompany on 22 March and 15 May 2001 respectively asdescribed on page 69 of this Prospectus
``CDP'' : The Central Depository (Pte) Limited
``CPF'' : Central Provident Fund
``China'' : The People's Republic of China
``DBS Bank'', ``Manager'',``Placement Agent'' or``Underwriter''
: The Development Bank of Singapore Ltd
``Directors'' : The directors of our Company as at the date of thisprospectus, unless otherwise stated
``East Asia'' : the People's Republic of China (including The Hong KongSpecial Administrative Region), Taiwan and Japan
``Electronic Applications'' : Applications for the Offer Shares made through an ATM ofone of the Participating Banks or through the InternetBanking websites of one of the relevant ParticipatingBanks in accordance with the terms and conditions of thisProspectus
``EOLCS'' : Engine Oil Licensing and Certi®cation System, a voluntarylicensing program administered by API
``EPS'' : Earnings per Share
``Executive Of®cers'' : Our executive of®cers listed on pages 62 to 64 of thisProspectus
``FY'' : In respect of the Company and its subsidiaries (exceptA.I.M.), the ®nancial year ended 31 December, or, inrespect of A.I.M., the ®nancial year ended 31 March for®nancial years up to 31 March 2000 and subsequently the®nancial year ended 31 December
``Invitation'' : The invitation by our Company to the public to subscribefor the New Shares, subject to and on the terms andconditions of this Prospectus
``Issue Price'' : $0.235 for each Offer Share and each Placement Share
``Indochina'' : Vietnam, Cambodia and Laos
``Market Day'' : A day on which SGX-ST is open for trading in securities
``MNCs'' : Multinational companies
``NA'' or ``na'' : Not applicable
``NTA'' : Net tangible assets
3
``New Shares'' : 17,550,000 new Shares for which our Company invitesapplications to subscribe, subject to and on the terms andconditions of this Prospectus
``Offer'' : The offer by our Company of the Offer Shares to the publicfor subscription at the Issue Price, subject to and on theterms and conditions of this Prospectus
``Offer Shares'' : 1,000,000 of the New Shares which are the subject of theOffer
``Participating Banks'' : DBS Bank (including its POSBank Services Division);Keppel TatLee Bank Limited (``KTB'') and Oversea-Chinese Banking Corporation Limited (``OCBC'') Group(comprising OCBC and Bank of Singapore Limited)
``Placement'' : The placement of the Placement Shares by the PlacementAgent on behalf of our Company at the Issue Price, subjectto and on the terms and conditions of this Prospectus
``Placement Shares'' : 16,550,000 of the New Shares which are the subject of thePlacement (including the Reserved Shares)
``QC'' : Quality control
``Reserved Shares'' : 1,600,000 of the Placement Shares reserved for themanagement staff, employees, Independent Directors andbusiness associates of our Group and those who havecontributed to the success of our Group
``Restructuring Exercise'' : The restructuring exercise of our Group undertaken inconnection with the Invitation, as described on page 25 ofthis Prospectus
``R&D'' : Research and Development
``SCCS'' : Securities Clearing & Computer Services (Pte) Ltd
``SEA'' or ``South East Asia'' : Singapore, Malaysia, Indonesia and Brunei
``SGX-ST'' : Singapore Exchange Securities Trading Limited
``Securities Account'' : Securities account or sub-account maintained by adepositor with CDP
``Share Split'' : The sub-division of each share of $1.00 each in theauthorised and issued and paid-up share capital of theCompany into 20 shares of $0.05 each as described onpage 69 of this Prospectus
``Shares'' : Ordinary shares of $0.05 each in the capital of ourCompany
``UK'' : The United Kingdom
4
``USA'' : The United States of America
``%'' or ``per cent.'' : Per centum or percentage
``mt'' : Metric tonnes
``sqm'' : Square metres
``vs'' : Versus
Currencies
``RM'' : Ringgit Malaysia
``RMB'' : Renminbi
``S$'' or ``$'' and ``cents'' : Singapore dollars and cents respectively, unless otherwisestated
``US$'' : United States dollars
Words importing the singular shall, where applicable, include the plural and vice versa and wordsimporting the masculine gender shall, where applicable, include the feminine and neuter genders andvice versa. References to persons shall include corporations.
Any reference in this Prospectus and the Application Forms to any enactment is a reference to thatenactment as for the time being amended or re-enacted. Any word de®ned under the Act or anystatutory modi®cation thereof and used in this Prospectus and the Application Forms shall have themeaning assigned to it under the said Act or statutory modi®cation as the case may be.
Any reference in this Prospectus and the Application Forms to shares being allotted to an applicantincludes allotment to CDP for the account of that applicant.
A reference to a time of day in this Prospectus and the Application Forms shall be a reference toSingapore time unless otherwise stated.
5
GLOSSARY OF TECHNICAL TERMS
For the purpose of this Prospectus, the following technical terms and abbreviations have, whereappropriate, been used:±
``additives'' : Chemical substances which are added to impart or improve certainproperties such as anti-foam, anti-wear and anti-corrosioncharacteristics of lubricant and chemical products
``base oils'' : Oils derived from petroleum used as base material into whichadditives and other chemicals are blended to produce lubricants
``blending'' : A manufacturing process in which base components and additivesare mixed to form a homogeneous product
``contract manufacturing'' : A package of manufacturing services either on a contract basis orby other forms of written arrangement to produce chemicals orlubricants under customer labels or brands. The ®nished productsare then sold to the customers
``¯uid'' : Oil or water based products that are in a liquid form
``grease'' : A semi-solid oil-based lubricant
``lubricant'' : A substance made of base oils and additives which is applied ontomoving surfaces to reduce friction and wear. Lubricants compriselubricating oils, greases and ¯uids
``lubricating oil'' : A liquid oil-based lubricant
``specialty chemicals'' : Chemical products formulated to meet the requirements of aspeci®c application such as detergents for cleaning marine vessels
``specialty lubricants'' : Lubricant products formulated to meet the requirements of aspeci®c application such as lubricants for deep hole boringoperations
``toll-blending'' : The provision of a package of blending services for chemicals andlubricating oils at a fee. In this production arrangement,formulations and raw materials are supplied by customers
``tribology'' : The study of the science of friction
6
DETAILS OF THE INVITATION
LISTING ON SGX-SESDAQ
Application has been made to SGX-ST for permission to deal in and for quotation of all our Sharesalready issued as well as the New Shares on SGX-Sesdaq. Such permission will be granted whenthe Company has been admitted to the Of®cial List of SGX-Sesdaq. Acceptance of applications willbe conditional upon permission being granted to deal in and for quotation of all the issued Shares aswell as the New Shares. Moneys paid in respect of any application accepted will be returned, withoutinterest or any share of revenue or bene®t arising therefrom and at the applicant's own risk, if the saidpermission is not granted.
SGX-ST assumes no responsibility for the correctness of any of the statements made, opinionsexpressed or reports contained in this Prospectus. Admission to the Of®cial List of SGX-Sesdaq isnot to be taken as an indication of the merits of the Invitation, our Company, our subsidiaries, ourShares or our New Shares.
A copy of this Prospectus, together with copies of the Application Forms, has been lodged with, andregistered by the Registrar of Companies and Businesses in Singapore who takes no responsibility forits contents.
Our Directors individually and collectively accept full responsibility for the accuracy of the informationgiven in this Prospectus and con®rm, having made all reasonable enquiries, that to the best of theirknowledge and belief, there are no other material facts the omission of which would make anystatement in this Prospectus misleading.
No person is authorised to give any information or to make any representation not contained in thisProspectus in connection with the Invitation and, if given or made, such information or representationmust not be relied upon as having been authorised by our Company or the Manager. Neither thedelivery of this Prospectus and the Application Forms nor the Invitation shall, under anycircumstances, constitute a continuing representation or create any suggestion or implication thatthere has been no change in the affairs of the Company or of its subsidiaries or in any statements offact or information contained in this Prospectus since the date of this Prospectus. Where suchchanges occur, our Company may make an announcement of the same to SGX-ST and if requiredunder the Act, a supplementary or replacement prospectus will be issued and made available to thepublic after a copy thereof has been lodged with the Register of Companies and Businesses inSingapore. All applicants should take note of any such announcement, supplementary orreplacement prospectus and, upon release of such an announcement, supplementary or replacementprospectus, shall be deemed to have notice of such changes. Save as expressly stated in thisProspectus, nothing herein is, or may be relied upon as, a promise or representation as to the futureperformance or policies of the Company or its subsidiaries. This Prospectus has been prepared solelyfor the purpose of the Invitation and may not be relied upon by any persons other than the applicantsin connection with their application for the New Shares or for any other purpose. This Prospectusdoes not constitute an offer of, or invitation or solicitation, to subscribe for, the New Shares in anyjurisdiction in which such offer or invitation is unauthorised or unlawful nor does it constitute an offeror invitation or solicitation to any person to whom it is unlawful to make such offer or invitation.
Copies of this Prospectus and the Application Forms and envelopes may be obtained on request,subject to availability, from:±
The Development Bank of Singapore Ltd6 Shenton Way
DBS Building Tower OneSingapore 068809
and from DBS Bank branches (including POSBank Services Division), members of the Association ofBanks in Singapore, members of SGX-ST and merchant banks in Singapore.
7
The Application List will open at 10.00 a.m. on 5 June 2001 and will remain open until 12.00 noonon the same day or for such further period or periods as our Directors may, in their absolutediscretion, decide, subject to limitation under all applicable laws.
INDICATIVE TIMETABLE FOR LISTING
In accordance with SGX-ST's News Release of 28 May 1993 on the trading of initial public offeringshares on a ``when issued'' basis, an indicative timetable is set out below for the reference ofapplicants:±
Indicative date/time Event
5 June 2001, 12 noon Closing date and time for applications
6 June 2001 Balloting of applications, if necessary
7 June 2001, 9.00 a.m. Commence trading on a ``when issued'' basis
18 June 2001 Last day of trading on a ``when issued'' basis
19 June 2001, 9.00 a.m. Commence trading on a ``ready'' basis
22 June 2001 Settlement date for all trades done on a ``when issued'' basis and forall trades done on a ``ready'' basis on 19 June 2001
The above timetable is only indicative as it assumes that the closing of the Application List is 5 June2001, the date of admission of our Company to the Of®cial List of SGX-Sesdaq will be 7 June 2001,SGX-Sesdaq's shareholding spread requirement will be complied with and the New Shares will beissued and fully paid up prior to 7 June 2001. The actual date on which the Shares will commencetrading on a ``when issued'' basis will be announced when it is con®rmed by SGX-ST.
The above timetable and procedure may be subject to such modi®cations as SGX-ST may in itsdiscretion decide, including the decision to permit trading on a ``when issued'' basis, and thecommencement date of such trading. All persons trading in the Shares on a ``when issued''basis do so at their own risk. In particular, persons trading in the Shares before theirSecurities Accounts with CDP are credited with the relevant number of Shares do so at therisk of selling Shares which neither they nor their nominees, if applicable, have been allottedwith or are otherwise bene®cially entitled to. Such persons are also exposed to the risk ofhaving to cover their net sell positions earlier if ``when issued'' trading ends sooner than theindicative date mentioned above. Persons who have a net sell position traded on a ``whenissued'' basis should close their position on or before the ®rst day of ``ready'' basis trading.
In the event of any changes in the closure of the Application List or the time period during which theInvitation is open, we will publicly announce the same:±
(i) through a MASNET announcement to be posted on the Internet at the SGX-ST website http://www.singaporeexchange.com; and
(ii) in a local English newspaper, namely, The Straits Times.
Investors should consult SGX-ST announcement on the ``ready'' listing date on the Internet (at SGX-ST website http://www.singaporeexchange.com), INTV or the newspapers, or check with their brokerson the date on which trading on a ``ready'' basis will commence.
We will provide details of the results of the Invitation through the channels in (i) and (ii) above.
8
PROSPECTUS SUMMARY
The information contained in this summary is derived from and should be read in conjunction with thefull text of this Prospectus.
OUR GROUP
Our Company andSubsidiaries
Our Company was incorporated in Singapore under the name of HuanChew Oil Trading Pte. Ltd. on 24 December 1975 as a private companylimited by shares. On 24 March 2001, we were converted into a publiccompany and changed our name to ``AP Oil International Limited''.
Our group comprises our Company and four subsidiaries, Alpha Paci®cPetroleum (S) Pte Ltd, AP Petrochemical Pte Ltd, Alpha Paci®cPetroleum Company Limited and A.I.M. Chemical Industries Pte Ltd.We also carry out business under the registered business names ofSINO Petroleum and Krex International.
Our Business Our business is primarily the manufacturing and trading of lubricants andspecialty chemicals.
We manufacture a wide range of lubricating oils and ¯uids for industrial,automotive and marine applications. We are also engaged in the supplyand trading of base oils and additives used in lubricant production.
Through our subsidiary, A.I.M., we provide toll-blending and contractmanufacturing services for specialty chemicals for marine and industrialapplications. A.I.M. also supplies and trades in chemicals.
We operate three manufacturing plants, two for manufacturing lubricantsand one for manufacturing chemicals, in Singapore. One of our lubricantmanufacturing plants has an oil terminal and a private jetty for loadingand unloading of liquid cargo. The jetty is capable of berthing a 3,000mt vessel and the terminal has a total bulk storage capacity of about5,000 mt.
Our Products andMarkets
About 90% of our lubricant products are exported overseas. Vietnam,Myanmar, Indonesia and Bangladesh are our major markets. Thelubricant products manufactured are marketed under our own brandnames namely SINO, AP and Polaris.
The majority of specialty chemicals we manufacture are supplied locallyto international companies located in Singapore. Some chemicalproducts are also exported to overseas markets under our brandnames of Hexaclean, Hexafuel and Hexatreat.
9
Competitive Strengths Our competitive strengths are as follows:±
(a) We have established long-standing relationships with our customersand distributors;
(b) We provide quality products and services that meet our customers'expectations;
(c) We offer a wide range of customised products and value-addedservices;
(d) We have established track records and brand awareness for AP inMyanmar, Malaysia and Indonesia, and SINO in Indonesia, Vietnamand Malaysia;
(e) We have cultivated and maintained good relationships with oursuppliers;
(f) We are export-oriented and have a wide distribution network; and
(g) We have a quali®ed and experienced management team.
Business Strategies Our business strategies are as follows:±
(a) focus on higher value-added products;
(b) continuous quality upgrading and product innovation through R&D;
(c) expansion into new geographical markets;
(d) provision of one-stop blending services; and
(e) business extension through diversi®cation within the petrochemicalindustry.
Future plans Our future plans are to:±
(a) expand into new markets such as India, Sri Lanka and east Africancountries;
(b) set up a lubricant blending plant in Vietnam;
(c) enhance R&D capabilities; and
(d) expand production and packing facilities.
10
SUMMARY OF CONSOLIDATED FINANCIAL INFORMATION
The ®nancial results for our Proforma Group for the period under review have been prepared on thebasis that our Proforma Group has been in existence throughout the period under review. This doesnot include the ®nancial results of A.I.M. for our ®nancial years ended 31 December 1998 and 1999.The sale and purchase agreement for the acquisition of A.I.M. was entered into in August 2000 andthe transaction was legally completed in September 2000. The results of A.I.M. for the period August2000 to December 2000 were included in our ®nancial year ended 31 December 2000.
Selected Financial Information of the Proforma Group
----------------------------------------------------------------- Audited ----------------------------------------------------------------
Financial Year Ended 31 December
$'000 1998(1) 1999(1) 2000(2)
Revenue 9,574 27,531 40,527
Pro®t before tax 86 2,253 3,832
Pro®t after tax 12 1,465 2,735
Extraordinary item Ð (154) Ð
Pro®t after tax and extraordinary item attributable to Shareholders 12 1,311 2,735
Selected Financial Information of A.I.M.
------------------------------------------------------ Audited -----------------------------------------------------
Financial Year Ended 31 March
$'000 1998(1) 1999(1) 2000(2)
Revenue 4,765 4,140 4,777
Pro®t before tax 711 759 889
Pro®t after tax attributable to Shareholders 510 587 613
(1) excluding A.I.M.
(2) including A.I.M.'s results for the period August 2000 to December 2000
11
THE INVITATION
Issue Size : 17,550,000 New Shares comprising 1,000,000 Offer Shares and16,550,000 Placement Shares. The New Shares will, upon issue,allotment and registration in the name of CDP or its nominee, rank paripassu in all respects with the then existing issued Shares.
Issue Price : $0.235 for each Offer Share and each Placement Share (including theReserved Shares)
Purpose of theInvitation
: Our Directors consider that the listing of our Company and the quotationof our Shares on SGX-Sesdaq will enhance our Company's public imageand enable us to tap the capital markets for the expansion of ourbusiness. It will also provide members of the public, the management,staff and business associates of our Group an opportunity to participatein the equity of our Company.
Use of proceeds : The net proceeds from the issue of the New Shares (after deductingestimated expenses in relation to the Invitation) of approximately $3.0million is expected to be utilised as follows:±
(a) Approximately $0.8 million will be used for future business expansion,via joint ventures and/or strategic partnerships. Please refer to page53 of this Prospectus for further details;
(b) Approximately $0.1 million will be used to enhance our existing R&Dcapabilities. Please refer to page 53 of this Prospectus for furtherdetails;
(c) Approximately $2.0 million will be used to repay bank borrowingsfrom DBS Bank which was used to part ®nance the acquisition ofA.I.M. Please refer to page 24 of this Prospectus for further details;and
(d) the balance of $0.1 million will be used as working capital.
Pending the deployment of net proceeds as set out above, the netproceeds will be added to our Group's working capital and/or used forinvestment in short-term money market or debt instruments and/or torepay borrowings, as the Directors may deem appropriate.
Reserved Shares : 1,600,000 of the 16,550,000 Placement Shares will be reserved for ourGroup's management staff, employees, Independent Directors, businessassociates and those who have contributed to the success of our Group.In the event that any of the Reserved Shares are not taken up, they will bemade available to satisfy applications for the Placement Shares, or in theevent of an under-subscription for the Placement Shares, to satisfyapplications made by members of the public for the Offer Shares.
Listing Status : The Shares will be quoted on SGX-Sesdaq, subject to admission of theCompany to the Of®cial List of SGX-Sesdaq and permission for dealingin and quotation of the Shares being granted by SGX-ST.
12
FORWARD-LOOKING STATEMENTS
This Prospectus contains forward looking statements that involve risks and uncertainties. We usewords such as ``anticipate'', ``believe'', ``expect'', ``future'' and ``intend'' and similar expressions, toidentify forward looking statements. You should not place undue reliance on these forward lookingstatements, which apply only as of the date of this Prospectus. Our actual results could differmaterially from those anticipated in these forward looking statements for many reasons, includingthe risks described under ``Risk Factors'' and elsewhere in this Prospectus.
13
RISK FACTORS
You should carefully evaluate each of the following considerations and all other information set forth inthis Prospectus before deciding to invest in the Company's Shares. Some of the following risk factorsrelate principally to the industry in which we operate and our business in general. Other considerationsrelate principally to general economic and political conditions and ownership of our shares, includingpossible future sales of our shares.
If any of the following considerations and uncertainties develop into actual events, our business,®nancial conditions or results of operations could be adversely affected. In such case, the tradingprice of our Shares could decline due to any of these considerations, and you may lose all or part ofyour investment.
The ®nancial results for our Proforma Group for the period under review have been prepared onthe basis that our Proforma Group has been in existence throughout the period under review.These do not include the ®nancial results of A.I.M. for our ®nancial years ended 31 December1998 and 1999. The sale and purchase agreement for the acquisition of A.I.M. was entered intoin August 2000 and the transaction was legally completed in September 2000. Therefore, theresults of A.I.M. for the period August 2000 to December 2000 were included in our ®nancialresults for the ®nancial year ended 31 December 2000. Accordingly, the ®nancial data includedunder this ``Risk Factors'' section of this Prospectus so far as they relate to FY1998 or FY1999do not take into account the ®nancial results of A.I.M. Financial data relating to FY2000 includethe ®nancial results of A.I.M. for the period August 2000 to December 2000.
RISKS RELATING TO OUR GROUP
We are dependent on the Indochina, East Asia and South East Asia markets
Our lubricant products are exported mainly to regional markets namely Indochina, East Asia andSouth East Asia. Approximately 80%, 92% and 62% of our total revenue for FY1998, FY1999 andFY2000 respectively were to these markets. Revenue to countries in these regions can be affectedby changing economic, political and regulatory environments. Unfavourable changes arising frominternal unrest, trade restrictions, customs and tariffs will adversely affect our revenue and pro®tability.
Further, should there be any changes in exchange control regulations in any of these countriesresulting in more stringent restrictions on remittances or currency exchange, we will be adverselyaffected. As our sales to these countries are in US$, and our customers need to convert their localcurrencies into US$ in order to pay for the purchases from us, more stringent restrictions oncurrency exchanges in their home country may affect the supply of US$, thereby making it dif®cultto remit payment to us. This will adversely affect our sales and collection.
A.I.M. is dependent on the oil/gas and petrochemical industries
We provide toll-blending services and contract manufacturing of chemical products to oil/gasproduction and processing companies and chemical plant operators in South East Asia. We aretherefore exposed to the uncertainties and business ¯uctuations of these sectors in this region. Ourchemical business is dependent on the growth and outlook of the oil and petrochemical industries.Any decline in growth rate in these sectors will reduce the demand for our services and productsand will adversely affect our Group's overall turnover and pro®tability.
We are affected by foreign exchange ¯uctuations
Sales and purchases of our Group are denominated mainly in US$. For FY2000, approximately 84%of our sales and 92% of our purchases were denominated in US$, with the balance transacted in S$.Owing to the timing difference between payment to our suppliers and receipt from our customers, wemay incur foreign exchange transaction losses if US$ depreciates against S$. Accordingly, anysigni®cant depreciation in US$ against the S$ will have an adverse impact on our revenue andpro®tability. We currently do not have a comprehensive foreign exchange hedging policy as we
14
believe that our sales and purchases in the same currency provides a natural hedge and reduce ourexposure against any foreign exchange ¯uctuations.
The net foreign exchange differences of the Group for the three ®nancial years from FY1998 toFY2000 are shown below:±
$'000 FY1998 FY1999 FY2000
Realised exchange gains/(losses) (56) 42 78
Unrealised exchange gains/(losses) 27 (101) (62)
Net foreign exchange gains/(losses) (29) (59) 16
Our pro®tability will be affected by any severe shortage of supply or signi®cant price increasesof raw materials
Base oils, additives and chemicals are the main raw materials used in manufacturing our products.Base oils and additives are intermediate products derived from crude oil. Certain factors such asOPEC's actions to maintain or change its crude oil production quotas, unforeseen supply disruptionsand world-wide inventory levels contribute to the volatility of crude oil prices and supply and hencebase oil prices and supply. Constraints on crude oil production capacity world-wide will result inlimited supply of base oil. Due to the competitive nature of the lubricant industry, there is noassurance that any increase in the costs of these raw materials can be totally passed on to ourcustomers immediately. Any severe shortage of supply or signi®cant price increases of our rawmaterials will affect our operations and erode our pro®t margins, resulting in lower earnings.
For illustration purposes, the price trend of base oil SN500 FOB Singapore is shown in the tablebelow:±
US$ per mt FY1998 FY1999 FY2000
Jan 280-290 240-250 285-295
June 260-275 225-235 345-355
Source: Base oils (Asia Paci®c) Reports by ICIS-LOR Group Ltd dated 27 January 1998, 30 June 1998, 26 January 1999, 29June 1999, 25 January 2000 and 27 June 2000.
Our pro®tability will be affected by prolonged decline in the prices of our inventory
Our inventory as at 31 December 2000 stood at $3.69 million. Raw materials, comprising base oils andadditives constituted about 84% of our total inventory costs. A sudden drop in crude oil prices willcause a reduction in the prices of raw materials. Any prolonged decline in the prices of our rawmaterials may adversely affect our ®nancial performance as provisions may have to be made inrespect of the decline in value of our inventory.
We are subject to credit risk of customers in developing countries
In FY2000, approximately 83% of our sales were to Vietnam, Myanmar, Indonesia and Bangladesh.We are exposed to the credit risks of customers in these countries due to the inherent risks involvedin their businesses, risks pertaining to political, social, legal, economic environment and foreignexchange. Credit risk will also arise from events or circumstances that are dif®cult to anticipate. Aswe extend credit terms ranging from 30 to 90 days to our customers in these countries, we aresubject to the risk of non-collectibility of debts in the event of a signi®cant devaluation of thecurrencies of these countries or should any of our major customers face ®nancial dif®culties. Thenon-collectibility of debts will have an adverse impact on our ®nancial performance.
We will be adversely affected by more stringent import regulations of countries that we export to
We are affected by certain import restrictions such as import taxes and duties in certain countrieswhere our goods are exported to, such as Vietnam, Myanmar, Indonesia and Bangladesh. OurGroup's performance will be adversely affected by unfavourable changes in the import regulations inthese countries. Any increase in import taxes and duties or imposition of additional import licence feewhich are imposed on our customers directly as they import the products into the country, will
15
increase our customers' cost of purchase as they incur these expenses. This will increase the saleprice of our products in that country and may adversely affect the demand for our products andhence our Group's turnover.
We face competition from other base oil suppliers
Trading of base oils and additives contributed approximately 57% of the Group's total turnover inFY2000. Our Group's continued success in trading of base oils and additives depends on our abilityto provide reliable and timely supply and value-added services to our customers in a cost-effectivemanner. As base oil is traded in the international markets, there is no assurance that our customerswill not source from alternative suppliers. Competition from other base oil suppliers may adverselyaffect our Group's overall turnover and pro®tability.
We are dependent on several major suppliers of base oils and additives
We are dependent on several major suppliers for the supply of base oils and additives. In FY1999,approximately 79% of our Group's total purchases were from three major suppliers namelyExxonMobil Corporation Group, Singapore Petroleum Co. and In®neum Singapore Pte Ltd. InFY2000, four major suppliers comprising ExxonMobil Corporation Group, AP Chemicals B.V.,SINOPEC International Trading Co. and In®neum Singapore Pte Ltd, accounted for about 79% of ourGroup's total purchases. Please refer to page 54 of this Prospectus for details. We do not have anyforward contacts with our base oil and additives suppliers. Any disruption in supply or unfavourableterms offered by the suppliers will reduce the overall sales or price competitiveness of our productsand services. This will affect our pro®t margin and overall pro®tability.
We are dependent on our sole agents and distributors
Our sales are dependent on the ability of our sole agents and distributors to promote and effectivelymarket our products. In FY2000, approximately 90% of our sales were to all of our sole agents anddistributors overseas. If our major sole agents and distributors, namely Paci®c Oil Co. Ltd, MyanmaPetrochemical Enterprise, Tien Thanh Trading Pte Ltd, PT Cipta Pratama Prana Mulya and AungThein Than Co. Ltd are unable to maintain or expand the market for our products, our sales willdecline and our revenue would reduce accordingly (Please refer to page 55 of this Prospectus forthe percentage of our Group's turnover attributable to the aforementioned major sole agents anddistributors).
We are dependent on key management personnel
The Executive Directors have been instrumental in charting business directions and spearheading ourgrowth. The loss of the services of any of these Executive Directors, namely Dr Ho Leng Woon, MsLau Woon Chan and Mr Ang Luck Seh, without appropriate and timely replacement could have asigni®cant adverse impact on us.
There is no assurance that any additional ®nancing we may need in the future, will be availablewithout any personal guarantees from our shareholders
As at 31 December 2000, the bank facilities (including the $2.0 million bridging loan which will berepaid using part of the proceeds of the Invitation as mentioned on page 12 of this Prospectus)granted by three banks to the Company and APP(S) amounting to approximately $13.0 million wereguaranteed by our shareholders, Dr Ho Leng Woon, Ms Lau Woon Chan, Ms Ho Aye Eng and/or MsLau Tong Hong. Please refer to page 78 of this Prospectus for details of these guarantees.
The banks have given their written consent, at the shareholders' request, to the release of theguarantees (other than the guarantee for the $2.0 million bridging loan which will be repaid upon thelisting of the Company on SGX-Sesdaq).
16
The consent in respect of the guarantee for APP(S)'s bank facilities is subject to the condition that theguarantee be replaced by a corporate guarantee from our Company. The consents in respect of therest of the guarantees are subject to the condition that the guarantees will be replaced by corporateguarantees acceptable to the banks (in respect of two of the three banks) or subject to the conditionthat the security arrangement accorded to the bank is no worse off than that given to all other lenders(in respect of the remaining bank).
The Directors believe that they are able to meet these conditions. The banks have not indicated thatthere will be any change in the interest rates or amount of the facilities which will result from therelease of the guarantees. While the banks will continue to provide the existing facilities after therelease of the guarantees, we cannot assure investors that we will be able to obtain additional®nancing in the future without the shareholders providing personal guarantees to secure such®nancing.
Our Group also cannot assure investors that any additional ®nancing we may need in the future will beon terms satisfactory to us. Any additional debt ®nancing may contain restrictive conditions withrespect to dividends, future capital raising and other ®nancial and operational matters. In the eventthat additional ®nancing is needed and we are unable to obtain such funds, our business, ®nancialcondition and ®nancial performance will be adversely affected.
We may need to incur further costs to comply with more stringent environmental regulations
We are in the oil and chemical industry and are subject to environmental regulations relating to airpollution, water pollution and pollution caused by oil spillage and chemical leakage. Please refer topages 36 to 38 of this Prospectus for details on the regulations.
Our operating costs include expenses for installing and maintaining pollution control equipment andfacilities, implementing pollution control procedures and obtaining the various licences requiredunder the various regulations. If more stringent environmental regulations are imposed in the future,we may need to incur further costs to comply with the regulations. The additional expenses couldaffect our overall pro®tability.
There is no assurance that registration of our trademarks will adequately protect us and preventa third party from adopting a similar trademark as enforcement of our rights may be dif®cult
We have registered our trademarks, namely SINO, AP, Polaris, AP Lube, Hexaclean, Hexafuel andHexatreat in areas where our products are marketed and distributed. Please refer to page 35 of thisProspectus for the list of our registered trademarks. In emerging markets such as Vietnam and China,there is no assurance that the registration will adequately protect us and prevent a third party fromadopting a similar trademark as enforcement of our rights may be dif®cult. Unauthorised use of ourtrademarks will damage our brand reputation, confuse our customers, will reduce the sales volumeof the affected products and adversely affect our overall pro®tability.
There is no assurance that our future plans will be commercially successful
As part of our future plans, we intend to enter into new markets such as China, India, Sri Lanka andeast African countries through distribution and licensing of our products and services. We arecurrently negotiating with a potential Vietnamese partner to set up a lubricant plant in Vietnamthrough a joint-venture arrangement (Please refer to page 53 of this Prospectus for more details).Our ability to expand into these new geographical regions will depend on the level of acceptanceand use of our products and services. We will face different regulatory, legal, economic andcompetitive environments in these countries. There is no assurance that such expansion plans canbe commercially successful. We will need to increase direct sales and marketing activities to developmarket awareness and relationships with potential customers and expand distribution channels todevelop the overseas markets. Such activities will consume ®nancial resources. An increase in theseexpenses without a corresponding increase in revenue would have an adverse impact on our future®nancial performance.
17
Additional funds raised through issuance of new shares for our future growth will diluteshareholders' equity interests
One of our strategies is to expand our capabilities and business through acquisition, joint venture andstrategic partnership with parties who can add value to our business. We may require additional equityfunding after the Invitation and shareholders will face dilution of their shareholdings should we issuenew shares to ®nance future acquisitions, joint ventures and strategic partnerships.
RISKS RELATING TO THE INVITATION AND INVESTMENT IN OUR SHARES
Future sale of our Shares could adversely affect the Share price
Any future sale or availability of our Shares can have a downward pressure on our share price. Thesale of a signi®cant amount of our Shares in the public market after the Invitation, or the perceptionthat such sales may occur, could materially and adversely affect the market price of our Shares. Thesefactors will also weaken our ability to sell additional equity securities. Except as otherwise described in``Moratorium'' (see page 72 of this Prospectus), there will be no restriction on the ability of thesubstantial shareholders to sell their Shares either on SGX-Sesdaq or otherwise.
Our Group's Directors and substantial shareholders will retain signi®cant control over our Groupafter the Invitation, which will allow them to in¯uence the outcome of matters submitted toshareholders for approval
Upon completion of the Invitation, our Group's present Executive Directors and substantialshareholders will bene®cially own in the aggregate approximately 66.15% of our post-Invitation sharecapital. As a result, these persons, if they act together, will be able to exercise signi®cant in¯uenceover all matters requiring shareholder approval, including the election of Directors and approval ofsigni®cant corporate transactions, and will have veto power with respect to any shareholder actionor approval requiring a majority vote. Such concentration of ownership also may have the effect ofdelaying, preventing or deterring a change in control of the Group which may bene®t our shareholders.
Investors in our Shares would face immediate and substantial dilution in the book value perShare and may experience future dilution
Our Issue Price of $0.235 is higher than our Group's net tangible assets per share of $0.097 (adjustedfor the net proceeds from the Invitation) as at 31 December 2000. Thus, there is an immediate andsubstantial dilution in the book value per Share.
There is a high probability that our Share price will ¯uctuate widely and may adversely affectyour investment
We expect that the trading of our Shares to be volatile and may respond to announcements oftechnological or competitive developments, merger or acquisitions by us or our competitors, gain orloss of major customers, or estimates of our ®nancial performance by investment analysts. In addition,our share price will be under downward pressure if certain of our Directors or management staff oremployees sold their respective shares after the Invitation.
No prior market for the Shares
Prior to this Invitation, there has been no public market for the Shares. The Issue Price may not beindicative of the market price for the Shares after the completion of this Invitation. We have appliedfor the listing and quotation of the Shares on SGX-Sesdaq. However, no assurance can be giventhat an active trading market for the Shares will develop or, if developed, will be sustained.
18
ISSUE STATISTICS
Issue Price for each New Share $0.235
NET TANGIBLE ASSETS
NTA per Share based on the consolidated balance sheet of the Group as at31 December 2000:±
(a) before adjusting for the estimated net proceeds from the issue of the New Shares(based on the pre-Invitation share capital of 70,200,000 Shares)
7.80 cents
(b) after adjusting for the estimated net proceeds from the issue of the New Shares(based on the post-Invitation share capital of 87,750,000 Shares)
9.66 cents
Premium of Issue Price of $0.235 per Share over the NTA per Share as at31 December 2000:±
(a) before adjusting for the estimated net proceeds from the issue of the New Shares(based on the pre-Invitation share capital of 70,200,000 Shares)
201%
(b) after adjusting for the estimated net proceeds from the issue of the New Shares(based on the post-Invitation share capital of 87,750,000 Shares)
143%
EARNINGS
Historical net earnings per Share of the Group for the ®nancial year ended31 December 2000 based on the pre-Invitation share capital of 70,200,000 Shares
3.90 cents
Historical net earnings per Share of the Group had the Service Agreements set out onpages 67 and 68 of this Prospectus been effected for the ®nancial year ended31 December 2000 and based on the pre-Invitation share capital of 70,200,000Shares
3.75 cents
PRICE EARNINGS RATIO
Historical price earnings ratio based on the historical net earnings per Share of theGroup for the ®nancial year ended 31 December 2000 based on the pre-Invitationshare capital of 70,200,000 Shares
6.03 times
Historical price earnings ratio based on the historical net earnings per Share of theGroup had the Service Agreements been effected for the ®nancial year ended31 December 2000 and based on the pre-Invitation share capital of 70,200,000Shares
6.27 times
NET OPERATING CASH FLOW (1)
Historical net operating cash ¯ow per Share for the ®nancial year ended 31 December2000 based on the pre-Invitation share capital of 70,200,000 Shares
6.01 cents
PRICE TO NET OPERATING CASH FLOW RATIO
Historical price to net operating cash ¯ow based on the historical net operating cash¯ow per Share for the ®nancial year ended 31 December 2000 and based on the pre-Invitation share capital of 70,200,000 Shares
3.91 times
Note:±
(1) Net operating cash ¯ow is de®ned as net pro®t before tax after adjusting for non-cash items, income tax paid and changesin working capital.
19
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected ®nancial information should be read in conjunction with the full text of thisProspectus, including the Accountants' Report set out on pages 82 to 112 of this Prospectus.
Operating Results of Our Proforma Group(1)
-------------------------------------------------------------------------------------------------- Audited --------------------------------------------------------------------------------------------------Financial Year Ended 31 December
($'000) 1998 1999 2000
Revenue 9,574 27,531 40,527
Cost of sales(2) (8,301) (22,642) (34,095)
Gross pro®t 1,273 4,889 6,432
Other Income(3) 488 219 848
1,761 5,108 7,280
Selling and distribution costs (637) (1,095) (1,012)
Administrative and other operating expenses(2) (797) (1,540) (1,708)
Operating pro®t 327 2,473 4,560
Finance costs(4) (241) (220) (728)
Pro®t before tax 86 2,253 3,832
Income tax (74) (788) (1,097)
Pro®t after tax 12 1,465 2,735
Extraordinary item Ð (154)(5) Ð
Pro®t attributable to Shareholders 12 1,311 2,735
Earnings per Share (cents)(6)
Ð before extraordinary item 0.02 2.09 3.90(7)
Ð after extraordinary item 0.02 1.87 3.90(7)
Notes:±
(1) The ®nancial results for our Proforma Group for the period under review have been prepared on the basis that our ProformaGroup has been in existence throughout the period under review. This does not include the ®nancial results of A.I.M. for our®nancial years ended 31 December 1998 and 1999. The sale and purchase agreement for the acquisition of A.I.M. wasentered into in August 2000 and the transaction was legally completed in September 2000. The results of A.I.M. for theperiod August to December 2000 were included in our ®nancial year ended 31 December 2000. Please refer to pages 46to 47 of this Prospectus for information on the past ®nancial performance of A.I.M. For illustrative purposes, the proforma®nancial statements of the Group have also been prepared on the assumption that A.I.M. has been a subsidiary of AP Oilfrom 1 January 2000. Please refer to page 146 to 147 of this Prospectus for information on the proforma statement.
(2) Cost of sales and other operating expenses include the following depreciation charges:±
($'000) FY1998 FY1999 FY2000
Depreciation 352 422 557
(3) Other income consists mainly of income derived from rental of equipment and facilities to third parties, compensationreceived for contaminated raw materials from suppliers, and income earned from consulting project, foreign exchangegains/(losses) and interest income.
($'000) FY1998 FY1999 FY2000
Rental & service income 353 259 359
Compensation Ð Ð 171
Consulting project Ð Ð 221
Interest income 10 5 100
Others 125 (45) (3)
488 219 848
(4) Finance costs include the following:±
($'000) FY1998 FY1999 FY2000
Interest expense 241 220 570
20
(5) The extraordinary item in FY1999 represents provision made for diminution in value of the Group's investment in Malaysia.The subsidiary was subsequently disposed off in FY2000 as part of the Restructuring Exercise. Please refer to page 25 ofthis Prospectus for details of the disposal.
(6) For comparative purposes, earnings per share for the period under review is computed based on pro®t after tax and beforeand after extraordinary item and the pre-Invitation share capital of 70,200,000 shares.
(7) Had the Service Agreements, which we entered into with Dr Ho Leng Woon, Ms Lau Woon Chan and Mr Ang Luck Sehrespectively as described on pages 67 to 68 of this Prospectus, been in place with effect from 1 January 2000, the pro®tbefore tax of the Group for FY2000 would have been $3.69 million, the pro®t after tax would have been $2.63 million andthe earnings per Share would have been 3.75 cents instead of 3.90 cents.
Financial Position of Our Proforma Group(1)
-------------------------------------------------------------------------------------------------- Audited --------------------------------------------------------------------------------------------------As at 31 December
($'000) 1998 1999 2000
Intangible assets 10 12 464
Fixed assets 2,493 2,523 3,799
Investment property Ð 4,064 4,096
Other investments 726 11 11
Current assets
Stocks 1,015 2,925 3,692
Trade debtors 2,879 3,977 3,914
Other debtors, deposits and prepayments 58 40 483
Amount due from related parties 543 522 Ð
Cash and bank balances 989 1,108 3,990
5,484 8,572 12,079
Current liabilities
Amounts due to bankers 2,018 1,692 6,093
Trade creditors 1,742 4,409 1,961
Other creditors and accruals 1,265 1,071 1,848
Amount due to related parties 182 Ð Ð
Amount due to directors 401 Ð Ð
Hire purchase creditors 53 76 63
Provision for taxation 75 761 1,438
5,736 8,009 11,403
Net current assets/(liabilities) (252) 563 676
Non-current liabilities (248) (3,226) (3,108)
2,729 3,947 5,938
Share capital 1,560 1,560 1,560
Revenue reserves 1,169 2,387 4,378
Shareholders' equity 2,729 3,947 5,938
NTA per Share (cents)(2) 3.87 5.61 7.80
Notes:±
(1) The ®nancial results for our Proforma Group for the period under review have been prepared on the basis that our ProformaGroup has been in existence throughout the period under review. This does not include the ®nancial results of A.I.M. for our®nancial years ended 31 December 1998 and 1999. The sale and purchase agreement for the acquisition of A.I.M. wasentered into in August 2000 and the transaction was legally completed in September 2000. The results of A.I.M. for theperiod August to December 2000 were included in our ®nancial year ended 31 December 2000. Please refer to pages 46,50 and 51 of this Prospectus for information on the past ®nancial performance of A.I.M. For illustrative purposes, theproforma statements of the Group have also been prepared on the assumption that A.I.M. has been a subsidiary of AP Oilfrom 1 January 2000. Please refer to pages 146 to 147 of this Prospectus for information on the proforma statement.
(2) For comparative purposes, the NTA per share for the period under review is computed based on the shareholders' equityand on the pre-Invitation share capital of 70,200,000 shares.
21
CAPITALISATION AND INDEBTEDNESS
The following table shows our cash and cash equivalents and capitalisation as at 31 March 2001
(i) on actual basis; and
(ii) as adjusted to re¯ect the Bonus Issues, the Share Split, the issue of New Shares pursuant to theInvitation and the net proceeds, based on the issue price of $0.235 per Share, after deductingestimated expenses.
You should read this table in conjunction with the Accountants' Report set out on pages 82 to 112 inthis Prospectus.
As at----------------------------------- 31 March 2001 ----------------------------------
Actual$'000
As Adjusted$'000
Cash at bank and ®xed deposits 1,891 4,890
Short term debt
Secured 5,569 5,569
Unsecured Ð Ð
5,569 5,569
Long term debt
Secured Ð Ð
Unsecured Ð Ð
Ð Ð
Shareholders' equity
Authorised capital 3,000 50,000
Issued and paid-up capital 1,560 4,387
Share premium Ð 2,122
Retained earnings 5,191 3,241
Total Shareholders' equity 6,751 9,750
Total capitalisation 12,320 15,319
As at 31 March 2001, we had contingent liabilities comprising secured bankers' guarantee and lettersof credit amounting to approximately $1,546,000.
22
DILUTION
Dilution is the amount by which the Issue Price to be paid by the applicants for our New Shares in thisInvitation exceeds the net tangible book value per Share after this Invitation. Net tangible book valueper Share is determined by subtracting our total liabilities from the total book value of our tangibleassets and dividing the difference by the number of Shares deemed to be outstanding on the dateas of which the book value is determined. Our net tangible book value as of 31 December 2000 was7.80 cents per Share.
Based on the issuance by us of 17,550,000 New Shares in this Invitation at an Issue Price of 23.5cents per Share and after deducting underwriting commissions and estimated transaction expensesto be paid by us, our net tangible book value as of 31 December 2000 would have been 9.66 centsper Share. This represents an immediate increase in net tangible book value of 1.86 cents per Share toour existing shareholders and an immediate dilution in net tangible book value of 13.84 cents perShare to new investors. The following table illustrates this per Share dilution:±
Cents
Issue Price per Share 23.5
Net tangible book value per Share as at 31 December 2000 7.80
Increase in net tangible book value per Share attributable to new public investors 1.86
Net tangible book value per Share after the Invitation 9.66
Dilution in net tangible book value per Share to new public investors 13.84
The following table summarises the total number of Shares subscribed, the total cash considerationpaid to us and the average price per Share paid by our existing Shareholders since our incorporationand by the new investors in this Invitation:±
Number ofShares %
AmountS$ %
AveragePrice
per ShareCents
Existing Shares 70,200,000 80.0 340,000 7.62 0.48
New Shares 17,550,000 20.0 4,124,250 92.38 23.5
Total 87,750,000 100.0 4,464,250 100.0 5.09
23
GENERAL INFORMATION ON THE GROUP
HISTORY
AP Oil International Limited, formerly known as Huan Chew Oil Trading Pte. Ltd., was incorporated inSingapore under the Act in 1975. From the commencement of business in 1975 until 1980, we weremainly engaged in supplying lubricants to local automotive spare parts retailers.
In 1981, we set up our ®rst manufacturing plant at 30 Gul Crescent with a blending capacity of about4,000 mt per annum. We began producing and marketing lubricant products for industrial, marine andautomotive applications under our own brand name of SINO in Singapore. In 1983, we began toexport our products to Malaysia, Indonesia and Bangladesh.
Alpha Paci®c Petroleum (S) Pte Ltd was incorporated in July 1988 for the purpose of acquiring aproperty with land area of approximately 8,426 sqm at 18 Pioneer Sector 1. In 1992, we built oursecond lubricant plant on the property with a blending capacity of approximately 14,400 mt perannum. The plant has a private jetty for loading and unloading of liquid cargo and a bulk storageterminal with a total capacity of approximately 5,000 mt. In the same year, we started marketing ourproducts under the AP brand.
To cope with the increasing demand for our products, we gradually upgraded and semi-automatedthe production lines at both plants over the years to improve productivity. Currently, the totalblending capacity of the two plants is about 24,000 mt per annum.
In 1998, the Company and APP(S) were awarded the ISO 9002 certi®cation for Quality ManagementSystems in the manufacture of lubricants by SGS Yarsley International Certi®cation Service Ltd (``SGSYarsley''). The Company and APP(S) were also awarded ISO 9001 certi®cation by SGS Yarsley formanufacturing, research and development of lubricants and specialty products in September 2000.
In addition, the Company is an American Petroleum Institute (``API'') licence holder. Our products arelicensed under the API's Engine Oil Licensing and Certi®cation System (``EOLCS''). This means thatthe certi®ed products manufactured at our plants meet the standards and speci®cations set by API.
We began to export our lubricant products to Vietnam in 1991 and Myanmar in 1996. Today, about90% of our products are exported world-wide.
Apart from manufacturing lubricating oils, we are also involved in the wholesale and trading of baseoils and additives since 1990.
Acquisition and Disposal of Investments
Acquisition of A.I.M. Chemical Industries Pte Ltd
In August 2000, we entered into a sale and purchase agreement with Asiatic Agricultural Industries PteLtd (``Asiatic''), an independent third party, to acquire the entire issued and paid up share capital ofA.I.M. comprising 1,160,000 shares of par value of S$1.00 each at an aggregate cash considerationof $2,380,000. Asiatic is a company incorporated in Singapore, having its registered address at 11 JooKoon Road, Singapore 628974. The sale was completed in September 2000. The NTA of A.I.M. as at31 March 2000 was $1,768,035. The consideration, which represented a premium of S$611,965 to theNTA of A.I.M. as at 31 March 2000 was arrived at after taking into consideration A.I.M.'s pro®tabletrack record and potential business synergies. The consideration translates into a price-to-earningsratio of 3.88 times based on the net earnings after tax of A.I.M. for the ®nancial year ended 31March 2000. The purchase was part ®nanced by a bank loan of $2 million from DBS Bank, securedby a mortgage of the shares in A.I.M. to DBS Bank.
A.I.M., formerly known as Hexol Chemicals (S) Pte Ltd, was incorporated on 2 April 1976 as a jointventure by two Norwegian companies, Kjemi-Service A.S. and Unitor A.S. (``Unitor''). The purpose ofthis joint venture company was to formulate, blend and supply marine chemicals to Unitor's shipsupply business in the Asia Paci®c region.
24
In 1983, Asiatic acquired the entire shareholding of A.I.M. and the company became a wholly-ownedsubsidiary of Asiatic. Following the acquisition, A.I.M. expanded its business by venturing into toll-blending of specialty chemicals for applications beyond the marine industry such as those in the oil/gas, petrochemical, water treatment, electronic and car-care industries. The company operates itsown chemical blending plant, which has a maximum capacity of about 16,000 mt per annum, at 19Tractor Road, Jurong. The company was accredited with ISO 9002 in December 1998. In September2000, A.I.M. was acquired by AP Oil and brought into our Group as part of our strategy to broaden ourrange of products and services.
Disposal of Tai Yuan Jing Yan High-Quality Lubricant Oil Co., Ltd.
In July 1993, our Company formed an equity joint venture company in China named Tai Yuan Jing YanHigh-Quality Lubricant Oil Co., Ltd. (``Tai Yuan'') together with Chinese partners. Our Company held28% equity interest in Tai Yuan. The business of Tai Yuan did not perform up to our expectations andour Company agreed to sell its 28% interest in Tai Yuan to an unrelated company incorporated inTaiwan at the consideration of US$164,430 (equivalent to S$265,093) based on the Company'scarrying cost of investment of S$265,093. The consideration was received in December 1999. Ashare transfer agreement with the Taiwanese purchasers was entered into in July 2000. Under Chinalaw, the share transfer requires the approval of the Ministry of Foreign Trade and EconomicCooperation, Tai Yuan of®ce. The approval was granted on 18 November 2000.
RESTRUCTURING EXERCISE
In connection with the Invitation, the following Restructuring Exercise was carried out:
(a) On 30 August 2000, the Company acquired the entire issued and paid up capital of APP,comprising 2 ordinary shares of $1.00 each, from Dr Ho Leng Woon and Mr Ang Luck Seh atan aggregate cash consideration of $2.00. APP was incorporated in Singapore in January 1996with Dr Ho Leng Woon and Mr. Ang Luck Seh as subscribers. APP has been dormant since itsincorporation. We intend to use APP as a vehicle for investments overseas in the future;
(b) On 1 June 2000, APP(S), a wholly-owned subsidiary of the Company, acquired the entire issuedand paid up capital of APP(UK) from the subscribers, Chew Bak Khim and Chew Mooi Hong,comprising 2 ordinary shares of £1.00 each at an aggregate cash consideration of $5.00.APP(UK) was incorporated in the UK in 1988. APP(UK) has not carried out any businessactivities except to apply for registration of trademarks in the UK;
(c) On 29 June 2000, the Company acquired ownership of SINO Petroleum, a sole proprietor ®rmfrom Ms Lau Woon Chan at a cash consideration of $1.00;
(d) On 29 June 2000, the Company acquired ownership of Krex International (formerly known asKrex Oil), a sole proprietor ®rm from Ms Lau Woon Chan at a cash consideration of $1.00;
(e) The Company disposed of its 70% interest in SGTAC to Dr Ho Leng Woon at a cashconsideration of RMB1.75 million (equivalent to $296,100) which is based on the Company'scarrying cost of investment of $296,100. The consideration was received in December 1999.The NTA for the Company's 70% equity was RMB1.24 million (equivalent to $236,357) as at 31December 1999. SGTAC is an equity joint venture company incorporated in China, engaged inthe business of art and craft. Approval for the share transfer was granted by the ShanghaiPudong New Area People's Government in September 2000. The transfer took effect underChina law as from the date of the approval; and
(f) Pursuant to a Share Sale Agreement dated 16 March 2001, the Company disposed of its 90%interest APP(M), comprising 270,000 ordinary shares of RM1.00 each to Ms Lau Woon Chan atan aggregate cash consideration of RM3.00. APP(M) had an audited negative NTA of RM196,199as at 31 December 1999 and an unaudited negative NTA of about RM210,296 as at 31December 2000. APP(M) had not carried out any business activity since its incorporation in1983 except for the acquisition of a plot of agricultural land in Malaysia in April 1996 which itstill holds. APP(M) was disposed of as holding of agricultural land in Malaysia is not part of thecore business of the Group.
25
GROUP STRUCTURE
Our Group structure after the Restructuring Exercise is shown below:
100%
100%
A.I.M. ChemicalIndustries
Pte Ltd(Singapore)
100%
AP OilInternational
Limited(Singapore)
Alpha PacificPetroleum (S)
Pte Ltd(Singapore)
Alpha PacificPetroleum
Company Limited(UK)
100%
APPetrochemical
Pte Ltd(Singapore)
Our Company also trades under the names of SINO Petroleum and Krex International which areregistered under the Business Registration Act, Cap.32.
BUSINESS
Principal Activities
We are principally engaged in the business of manufacturing lubricating oils and trading in base oilsand additives. We also manufacture automatic transmission ¯uids, brake ¯uids, cutting ¯uids/oils andcoolants (collectively termed as ``Fluids'').
Our subsidiary, A.I.M. is engaged in toll-blending and contract manufacturing for specialty chemicals.It also trades in chemical products.
Lubricating oils and Fluids
Our lubricating oils and Fluids are used in industrial, automotive and marine sectors. Lubricating oilsand ¯uids are a necessity for operations of machinery. The functions of lubricating oils and Fluids are:
(a) to reduce friction between moving parts and prevent machine breakdown;
(b) to remove heat from moving parts thereby cooling the parts;
(c) to clean and to prevent formation of sludge and sediment on surfaces of moving parts; and
(d) to prevent rust and corrosion.
In addition, Fluids are also able to act as a medium for hydraulic power transmission.
26
Manufacturing
We manufacture a wide range of lubricating oils and Fluids for industrial, automotive and marineapplications. Our products are manufactured and closely monitored to ensure that they meet thestandards and speci®cations set by internationally recognised institutions and organisations such asAPI, SAE, ISO and ASTM.
These products can be broadly classi®ed into the following three categories:
Product category Generic names of product
Automotive Gasoline engine oilsDiesel engine oilsGas engine oilsGear oilsTwo-stroke motorcycle oilsFour-stroke motorcycle oils
Automatic transmission ¯uidsBrake ¯uidsCar coolantsAutomotive greasesSynthetic and semi-synthetic motor oils
Industrial Industrial engine oilsHydraulic oilsIndustrial gear oilsNeat cutting oils and ¯uidsSoluble cutting oils and ¯uidsMachinery oilsSpindle oilsCirculatory oilsRock drilling oilsSlideway oilsTurbine oilsTextile oils
Steam cylinder oilsRefrigeration oilsCompressor oilsTransformer oilsVacuum pump oilsPneumatic oilsHeat transfer oilsQuenching oilsAnti-rust oilsMetal forming oilsIndustrial greases
Marine Marine diesel engine oilsCylinder oils2T outboard oilsSterntube oilsWire rope oilsHydraulic oils
Gear oilsMachinery oils
Our lubricants are marketed under the brand names of SINO, AP and Polaris. In addition tomanufacturing our own products, we also engage in third party blending of lubricants on a contract-manufacturing basis.
We also sell specialty lubricants which are formulated for speci®c applications such as in thecomputer hard disk industry and precision engineering.
Total sales of products manufactured by us (including products produced under contract-manufacturing arrangement) accounted for approximately 51%, 65% and 39% of our overallturnover of lubricant business in FY1998, FY1999 and FY2000 respectively. The main markets ofthese products are Myanmar, Indonesia, Singapore and Malaysia.
27
Trading
We trade in base oils and additives. Our main markets are Vietnam, Bangladesh, Taiwan, Hong Kongand Indonesia. Trading accounted for approximately 49%, 35% and 61% of our total turnover forFY1998, FY1999 and FY2000 respectively.
In Bangladesh where the importation of ®nished lubricant products is restricted, we supply base oilsand additives under a licensing agreement with our customer Paci®c Oil Co. Ltd, which is licensed tomanufacture ®nished lubricant products under our brand, SINO, in Bangladesh. The duration of thislicensing agreement is seven years from 7 March 1997, the date of the agreement. Under thisarrangement, we transferred the know-how and technology to the customer by planning, designingand assisting in the set up of its lubricant blending plant to commissioning of the plant for a lumpsum consulting fee. We also provide product formulation and speci®cations, blending procedures,quality control methods and training to ensure the products manufactured meet our qualitystandards. Royalty is payable to us for the duration of the licensing agreement based on the quantityof products produced.
We also sell similar packages of base oils and additives together with formulations required to othercustomers.
Chemicals
We specialise in the manufacturing and trading of specialty chemicals for marine and industrialapplications. These specialty chemicals include cleaning and ¯ushing agents, industrial detergents,anti-corrosion agents, coating chemicals, coolants and transmission ¯uids. We serve thepetrochemical, oil/gas production and process, water treatment, marine, electronics and automotivesectors. We also provide contract-manufacturing of chemicals to multinational companies which useSingapore as their regional operational, marketing and distribution hubs.
Manufacturing
The main manufacturing activity is the provision of blending services to MNCs in the form of toll-blending and contract-manufacturing. Toll-blending consists a major part of the manufacturingactivity at A.I.M. Our customers include Nalco/Exxon Energy Chemicals (S) Pte Ltd, SerayaChemicals (S) Pte Ltd, Shell Eastern Chemicals (S), TR Oil Services (Far East) Pte Ltd and BuckmanLaboratory Asia Pte Ltd. We also produce specialty chemicals under our own brands of Hexaclean,Hexatreat and Hexafuel for export.
Trading
This segment includes trading of raw materials (in liquid and powder forms) used in the manufacturingof chemical products as well as distribution of third party products such as chemical solvents both indomestic and overseas markets.
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Business Strategies
To maintain our competitive advantage and to sustain future growth, we have adopted the followingbusiness strategies:±
Focus on higher value-added products
One of our major business strategies is to focus on manufacturing and marketing of comparativelyhigher value-added products. These products include synthetic lubricants and specialty products forspeci®c areas of application such as cutting ¯uid for use in disc drive manufacturing in the computerindustry. The Directors believe that the production of such specialty lubricants/products requiresintensive R&D and marketing effort and there are relatively fewer players in this niche market. Ourmarketing and technical service engineers continuously seek new customers in the area of specialtylubricants/products and identify their needs. Our R&D personnel then design and formulate newproducts to meet the unique requirements of our customers.
Continuous quality upgrading and product innovation through R&D
We recognise the importance of product quality in our business. The effort made by us is evidencedby our achievements in obtaining ISO 9002 and ISO 9001 certi®cations and the EOLCS licence fromAPI. To stay ahead of competition, we will continue to improve the quality of our existing products andintroduce new products to the market. The focus of our R&D activities will be geared towardsdeveloping new synthetic-based lubricating oils and ¯uids and specially formulated products to meetthe needs and enhance the performance of equipment and machinery.
Expansion into new geographical markets
We plan to expand into new geographical markets that are relatively untapped through appointment ofnew distributors/agents, licensing arrangements or strategic alliances. We intend to gain entry intonew potential markets that prohibit or restrict the importation of ®nished lubricant products throughtechnology-transfer and licensing arrangements.
Provision of one-stop blending services
Customers of our chemical division are mainly MNCs engaged in oil/gas production and processingand in petrochemical activities. Many MNCs are increasingly outsourcing their non-core productionprocesses to third party vendors. More value-added tasks are delegated to the vendors. This trendprovides excellent opportunities for third party vendors such as A.I.M. to take an active role inproviding a wide range of supply chain management services. We intend to capitalise on ourmanufacturing expertise, know-how and facilities to capture this market by providing a one-stoptotal service package to customers. Such a service package would include the formulation, supplyof raw materials, blending services, design and supply of packing materials, handling and storagemanagement.
Business extension through diversi®cation within the petrochemical industry
Wherever opportunities arise, we will expand our capabilities and business through acquisition, jointventure or strategic partnership with parties who can add value to our business. We will also beexploring the opportunities to establish strategic alliances with market leaders of particular lubricantsto expand our business. These strategic alliances can be in the form of business co-operation inmanufacturing, marketing or joint R&D activities to achieve mutual bene®t.
29
Manufacturing Process
Lubricating oils and Fluids
A diagrammatic representation of our lubricant manufacturing process is as follows:
Raw Materials Input
Packaging
Blending/Reaction
Pre-mixing Process
Formulations
Incoming Quality Assurance(IQA)
Outgoing Quality Assurance(OQA)
Pass
Reject
The individual stages of the manufacturing process are described below:
Incoming Quality Assurance (IQA)
Incoming materials are subject to inspections to ensure that they conform to delivery orders as well ascriteria and speci®cations agreed with the suppliers. Base oils and additives are tested by our qualitycontrol staff before being unloaded into storage tanks. The test results for additives are comparedagainst the accompanying Certi®cate of Analysis (``COA'') from the suppliers. Packing materials suchas drums, pails, tins and cartons are checked against delivery orders for the correct quantity,description and physical conditions. Materials that do not conform to our speci®cations or aredefective will be rejected. The suppliers will be informed immediately and the materials will bereplaced accordingly. With this system of IQA inspection and monitoring in place, we ensure that theproduct quality is screened and maintained from the beginning of the manufacturing process.
Formulations
A production job-slip containing the information on the type, grade and quantity of the product to beblended and the corresponding raw materials required is issued for each batch of production. Theproduction job-slips for standard products are based on formulas retrieved from our systemdatabase. When a customer orders a product to meet speci®c requirements, our R&D Departmentwould develop a new formula to meet those requirements. We sell to the customer the productproduced but retain ownership of the formula which we then add to our formulation database. OurR&D Department regularly reviews and updates these formulas through continuous productimprovement and innovation.
30
Pre-mixing Process
The pre-mixing process is only required for additives of higher viscosity or which are in solid state. Inthis process, chemicals are transferred into a pre-mix tank where they are thoroughly mixed with baseoils prior to blending.
Blending/Reaction
The mixture from the pre-mix tank is pumped into a blending tank where chemical reactions may takeplace while the components are being mixed. Heating is performed, if necessary, to expedite theblending process. The time required for blending is determined by the quantity and viscosity of themixture being blended.
Outgoing Quality Assurance (OQA)
A sample of the ®nished product is taken and subject to a series of tests to ensure that it conforms tothe Group's standard of quality and customer speci®cations. In the event that the sample does notpass the test, the components in the production job-slip will be adjusted and the product will be re-blended until it conforms to the requirements. If the failed product cannot be re-blended, the entireproduction batch will be rejected.
Packaging
The ®nished products are transferred to holding tanks where they will be packed either into drums,pails, tins or bottles before being sent to the warehouse and subsequently delivered to thecustomers. They may also be loaded into road tankers and delivered in bulk directly to customers.
Chemicals
The chemical blending and production processes are similar to that of lubricating oils and Fluids,except that no pre-mixing process is required. For the toll-blending and contract manufacturing ofspecialty chemicals, the customers usually provide the formulae which are owned by them.
Production Facilities and Capacity
Lubricating oils and Fluids
We currently operate two lubricating oil blending plants at Gul Crescent and Pioneer Sector 1,Singapore. The latter has a private jetty with an oil terminal for loading and unloading liquid cargo.This jetty is capable of berthing a 3,000 mt vessel and our bulk storage terminal comprises11 storage tanks with a total capacity of about 5,000 mt.
The plants comprising three production and four packing lines, have a total built-in ¯oor area ofapproximately 3,387 sqm. Both facilities are engaged in the production of the entire range of ourlubricating oils and Fluids.
Our plants currently operate on one eight-hour shift a day, ®ve and a half days a week (with alternateSaturdays off). Based on the current work schedule, we have a combined manufacturing capacity ofmore than 24,000 mt per year, taking into account the set-up time, adjustment interval and downtime.
The annual production output and the percentage of capacity utilisation of our two lubricating oilblending plants over the past three ®nancial years ended 31 December 2000 are as follows:
FY1998 FY1999 FY2000
Annual production output (in metric tonnes) 6,370 23,407 13,731
Percentage of capacity utilisation1 27% 98% 57%
1Based on total capacity of 24,000 metric tonnes
31
The low capacity utilisation in FY1998 is consistent with the lower overall sales volume for that year,particularly the sales volume of manufactured products due to decreased demand for these productsas a result of the Asian ®nancial crisis.
In FY2000, as the supply of base oils was limited, we concentrated on packaged sales of base oilsand additives together with lubricant formulations to certain customers that yielded higher marginsand did not require the use of production facilities, over the sales of low margin ®nished products.As a result, the capacity utilisation of our production facilities decreased from 98% in FY1999 to57% in FY2000.
Our Directors believe that our Group's production capacity for lubricating oils and Fluids canadequately support future growth as the production capacity can easily be increased by extendingthe operating hours or increasing the number of shifts to a maximum of three shifts i.e. operating 24hours. We will also continue to upgrade and improve our manufacturing facilities through furtherinvestment in machines and through training and upgrading the skills of our workforce.
Chemicals
Our subsidiary, A.I.M., operates a chemical blending plant at Tractor Road. The plant comprises atwo-storey building, blending facilities and two warehouses.
We currently have three production lines. We have also installed pollution control equipment to controland remove fumes, odour and dust generated during the blending operations.
The annual production capacity based on our existing machinery, ¯oor space and current workschedule of a single eight-hour shift, ®ve and a half days a week (with alternate Saturdays off) isapproximately 16,000 mt.
Our chemicals production facility will have to be upgraded to cater for the expected increase in toll-blending and contract manufacturing business for the next two years.
Quality Assurance
A team of two chemists and two engineers has been assigned to oversee the quality control tasks.
Both our lubricating oil blending plants were awarded the ISO 9002 certi®cation in May 1998 by SGSYarsley International Certi®cation Services Ltd. In December 1998, our chemical plant was accreditedwith ISO 9002 by the Singapore Productivity and Standards Board. We further obtained our ISO 9001certi®cation for our research and development activities in respect of lubricants in September 2000.AP Oil and APP(S) have also obtained ISO 14001 certi®cation for their environmental managementsystems in March 2001. A.I.M. is also working towards the Occupational Health and SafetyAssessment Series (OHSAS) 18001 (Safety Management System) certi®cation by SGS YarsleyInternational Certi®cation Services.
Our quality assurance system is structured as follows:
(a) Planning, documentation and data control
The production processes and systems are documented in our Quality System Manual by thevarious departments of our Company to ensure a common understanding of the qualitystandards of the Company. In addition, we have established a Quality Planning System thatoutlines additional practices or a new quality system procedure for new services other thanthose already documented. All records of activities being carried out are kept and maintained inaccordance with the ISO 9001 requirements. Internal and external audits are conducted twice ayear each to ensure compliance with the established procedures.
32
(b) Incoming quality assurance
All incoming materials are subject to inspection to ensure that they comply with ourrequirements. Base oil, additives and chemicals are checked and tested before they aretransported to our warehouses. Packing materials are checked for the correct quantity,descriptions and physical damage, if any.
(c) Outgoing quality assurance
Upon the completion of the manufacturing process, a sample is tested to ensure that the®nished product meets the Company's quality standards and the customer's requirements.Should the sample fail the test, the formulation will be adjusted and the entire batch of theproduct will be re-blended until it conforms to the requirements. If the failed product cannot bere-blended, the entire batch will be rejected.
(d) Pre-shipment inspection
In addition to the outgoing quality assurance test, certain soluble and water-sensitive productsare subjected to a ®nal inspection before delivery. This inspection is usually conducted within24 hours prior to shipment.
The implementation of the quality control process has enabled us to provide consistent level ofproducts and services to the customers. Annual rate of customer complaints, based on the totalnumber of local and export orders secured, ranged from 0.09% to 0.14% over the past three®nancial years from FY1998 to FY2000.
Corporate Association
We are registered with API, an internationally recognised institute for standards of quality forlubricants. Our products, AP Super Extra 8888 and SINO XSuper Star 15W-40 are licensed underthe API's Engine Oil Licensing and Certi®cation System (``EOLCS''), which is a voluntary licensingand certi®cation program that authorises its licensees to display the API Quality Marks on theirproducts. The annual licence, effective from 25 April 2001, is renewable upon its expiry on paymentof a royalty, calculated based on the number of products registered subject to a minimum of US$825.The Quality Marks help customers to identify the quality of engine oils for their vehicles and is a signthat our products conform with API's quality and technical standards. The EOLCS program is a co-operative effort between the oil industry and the vehicle and engine manufacturers represented bythe American Automobile Manufacturers Association, the Japan Automobile ManufacturersAssociation and the Engine Manufacturers Association.
Research and Development
The objective of our Group's R&D is to develop products that will enable us to compete effectively inthe international marketplace. Our R&D activities are geared towards providing specialty lubricants forcustomers' newly introduced machines as well as improving our ability to provide better technicalservices to our customers. Product innovation and upgrading in speciality chemicals are other areasof our applied research.
We have four laboratories, two for R&D and two for quality control. The R&D laboratory at GulCrescent is equipped with an Inductively Coupled Plasma Atomic Emission Spectrometer (ICP-AES)for the analysis of metal contents in oil. The metal contents in lubricant is an indicator of the oilquality. As analysing the metal content in lubricant is a necessary process in developing lubricants,the ICP-AES will facilitate our research and development of new products.
The R&D team comprises three technical personnel who are partially involved in research activities,two chemical engineers and two chemists. Since inception of our R&D department in early FY1999,the R&D team has conducted R&D activities to improve the quality of existing products and toformulate new products. Some of the new products we have successfully introduced include semi-synthetic oils, special cutting ¯uids for disc drive manufacturing in the computer industry andcustomised metal working oils/¯uids.
33
Another task of the R&D personnel is to handle feedback and complaints from our customers. Ourengineers and chemists have to identify the problems by conducting researches, experiments andsimulation processes. The technical services engineer will then relay the solution and/orrecommendations to customers based on the ®nding and conclusion of our R&D Department.
Part of the proceeds from the issue of the New Shares will be used to ®nance the acquisition of newequipment and recruitment of new R&D staff.
Marketing and Distribution
Our marketing and sales teams consist of directors, business development manager, sales manager,technical service engineers, export co-ordinators and sales executives.
The task of formulating our Group's overall marketing policies and strategies is undertaken by theManaging Director and the senior marketing and sales staff.
We have established marketing policies based on the following principles:
. Maintaining customer loyalty through establishing a good working relationship with customershaving good payment history and credit worthiness; and
. Achieving total customer satisfaction by delivering quality products and services that meet orexceed customers' expectations.
Our sales and distribution networks are:
(1) Export Sales: We adopt the marketing strategy by appointing agents or distributors to marketour products overseas. Distributorships are only awarded to those who meet our requirements,i.e. either with proven business track records, technical capability, or ®nancial background togain entry into the respective markets. Currently, we have 12 sole agents and distributors.
We are constantly exploring new business opportunities to expand our customer base throughstrategic alliances with suitable partners whose products complement ours and allow us to refernew customers to each other for our mutual bene®t. We also award cross boundary agencies forspeci®c products whereby the agents are allowed to sell these products in more than onecountry.
(2) Domestic Sales: There are three types of customers in the Singapore market, namely: (i)distributors, (ii) end users, and (iii) toll-blending and contract manufacturing customers. Wehave accumulated more than 250 accounts over the past two decades. We regularly seekfeedback from our customers to further improve our products and services. As a result we areable to enjoy repeat orders from our existing customers. More than 60% of our Group's turnoverin FY1998, FY1999 and FY2000 are from customers who have purchased from us for two ormore consecutive years.
We place utmost importance in meeting our customer needs. One of our corporate values is to deliverquality products and services on time and achieve total customer satisfaction. We constantly ensurethat our products conform to customer speci®cations. Our marketing and sales team is trained torespond promptly to customer queries and needs at all times.
34
Staff Training
Employees are our primary asset and a crucial element in our business achievements. We placeemphasis on staff training to maintain a competent and progressive workforce. Our training policiesare geared towards ensuring that the knowledge and skills of our staff remain relevant in acontinuously changing environment. This is to enable our Group to provide a consistent level ofquality products and services to our customers.
All new employees are required to undergo an orientation programme to familiarise themselves withour working environment and to understand our corporate culture and policies. This includes brie®ngon the company quality policy and quality objectives and attending an in-house product knowledgecourse conducted by our own technical staff to enhance their understanding of the nature of ourbusiness and the products that we manufacture and market. Every employee is required to pass theproduct knowledge test before his or her service with the Company can be con®rmed. In addition, allemployees will be given on-the-job training by their respective supervisors to equip them with theworking knowledge and practical skills to carry out their duties and responsibilities. Staff membersare also encouraged to attend external short courses in their relevant ®elds such as informationtechnology, marketing and quality control on our Company's sponsorship.
Since most of the training is conducted in-house and comprises mainly on-the-job trainingprogrammes, the amount incurred in relation to staff training for the past three years as a percentageof our Group's total revenue has not been signi®cant.
Trademarks
The registered trademarks of our Group are as follows:
Trademark Registered Proprietor Territories
AP Oil Singapore, China, Taiwan, Vietnam
ALFALUBE SP Taiwan
APP(S) Singapore
APP(S) China, Vietnam, Malaysia,Indonesia
AP Oil Singapore
APP(UK) United Kingdom
Hexaclean A.I.M. Singapore
Hexafuel A.I.M. Singapore
Hexatreat A.I.M. Singapore
35
We have made applications to register the SINO trademark (the ®rst mark represented above) inMalaysia, Indonesia and Bangladesh. We have also made an application to register ``Hexaprote'' asa trademark in Singapore. However, there is no assurance that the applications will be successful.
We have in some instances granted and may in future grant licences to third parties to use ourtrademarks pursuant to distribution or licensing agreements entered into between ourselves andthird parties.
Government Regulations
We are subject to all relevant laws and regulations of Singapore where our business operations arebased. We identify the main laws and regulations that affect our operations and the relevantregulatory bodies as follows:
Factories Act (Cap. 104)
Premises used as factories are required to be registered under the Factories Act. The Department ofIndustrial Safety of the Ministry of Manpower is responsible for the registration of factories.Applications for registration must be made to the Chief Inspector of Factories at least one monthbefore the operation of a factory. The Chief Inspector of Factories will issue a certi®cate ofregistration to the occupier on being satis®ed that the premises are suitable for use as a factory. Thecerti®cate of registration is valid for a period of one year from its date of issue and may be renewed onpayment of the prescribed fees. If the premises have become un®t for occupation as a factory, theChief Inspector of Factories may issue a notice to the occupier to comply with such requirements asmay be speci®ed in the notice. If the occupier fails to comply with the requirements in the notice, theregistration of the factory may be revoked.
Our Group's factories at 30 Gul Crescent, Jurong, at 18 Pioneer Sector 1 and at 19 Tractor Road areall registered under the Factories Act. The certi®cates of registration issued by the Chief Inspector ofFactories to us are each valid for a period of one year from their respective dates of issue. Thecerti®cates are renewable annually upon payment of the prescribed fees.
Besides providing for the registration of factories, the Factories Act also lays down the standardswhich must be observed for the safety, health and welfare of persons employed in a factory and thepenalties for contravening or failing to comply with the standards. The Department of Industrial Safetyof the Ministry of Manpower is responsible for administering and enforcing the standards.
Environmental Pollution Control Act (Act 9 of 1999)
The Environmental Pollution Control Act (``EPCA'') which came into operation on 1 April 1999consolidates the previously separate laws on air, water and noise pollution, and hazardoussubstance control. The EPCA repealed the Clean Air Act and Part II of the Poisons List of thePoisons Act, and incorporated certain parts of the Water Pollution Control and Drainage Act and theEnvironmental Public Health Act. The regulations made under these laws pertaining to environmentalpollution control have also been transferred to the EPCA.
Air pollution control
Under the EPCA and the Clean Air (Standards) Regulations (``CASR''), industrial and trade premisesare not allowed to emit air impurities (such as smoke, gases, fumes and odours) in excess of theemission standards set by the CASR.
To comply with the emission standards set by the CASR, A.I.M. has installed pollution controlequipment at its factory to control and remove fumes, odours, vapours and dust generated duringthe blending and ®lling processes carried out at the factory.
36
Water pollution control
Under the EPCA and the Environmental Pollution Control (Trade Ef¯uent) Regulations 1999, industrialwaste water must be treated to speci®ed standards before discharge into a sewer or water course (ifthe public sewer is not available). Written permission must be obtained from the Pollution ControlDepartment (``PCD'') in order to discharge any trade ef¯uent (i.e, any liquid produced in the courseof or is the waste of any trade, business or manufacture or of any building) directly into the publicsewer for which a tariff is payable.
Our factories do not discharge the liquid waste generated during our production processes into thepublic sewer or any water course directly. Instead, our factories dispose of their liquid waste throughtoxic waste collectors licensed by the PCD under the Environmental Public Health (Toxic IndustrialWaste) Regulations.
Hazardous substances control
The control of hazardous substances is governed by the EPCA and the Environmental PollutionControl (Hazardous Substances) Regulations 1999. A licence is required to import, sell, export,purchase, store and/or use any hazardous substance controlled under the EPCA. A permit isrequired to purchase, store and/or use hazardous substances controlled under the EnvironmentalPollution Control (Hazardous Substances) Regulations.
Certain chemicals used in the blending of A.I.M.'s products and in the laboratories of our Companyare hazardous substances controlled under the EPCA. A.I.M. and our Company, through theirrespective employee representatives, hold the necessary licences issued by the PCD which have tobe renewed annually to enable A.I.M. and our Company to purchase, store and sell these chemicals.
Environmental Public Health Act (Cap. 95)
The management of toxic industrial waste is governed by the Environmental Public Health Act and theEnvironmental Public Health (Toxic Industrial Waste) Regulations (``TIWR'') which are administered andenforced by the PCD. The TIWR regulates the import, sale, supply, receipt, transport, treatment anddisposal of wastes listed in the TIWR.
A.I.M.'s factory generates wastes that are regulated under the TIWR. To comply with the TIWR, A.I.M.engages the services of toxic waste collectors licensed under the TIWR to collect, transport and treator incinerate the waste materials before they are disposed of in accordance with the TIWR.
Prevention of Pollution of the Sea Act (Cap. 243)
Under the Pollution of the Sea (Oil Pollution Preparedness, Response and Co-operation) Regulations1999 (``OPPRC''), all oil handling facilities are required to have oil pollution emergency plans approvedby the Maritime and Port Authority of Singapore (``MPA''), the regulatory authority responsible foradministering and enforcing the OPPRC.
In compliance with the OPPRC, APP(S) has developed and implemented an oil pollution emergencyplan and has instituted the necessary preventive measures against oil spill and pollution control at itsoil terminal.
The OPPRC also requires oil handling facilities to keep in stock readily usable dispersants as well ascertain oil spill response equipment. Our oil terminal has complied with these requirements and wehave also made arrangements with several suppliers to supply additional dispersants in the event ofan emergency.
All relevant operational staff are trained annually in the actual use of the dispersants and oil spillresponse equipment in the event of an oil spill. This includes the deployment of an oil containmentboom and the use of dispersant sprayer. In addition, staff are constantly updated with the latestinformation on pollution control.
37
As environmental preservation remains one of our Group's priorities, we will constantly encourage ouremployees to seek ways and means to improve our environmental management systems. TheCompany and APP(S) were accredited with ISO 14001 certi®cation in March 2001 and A.I.M. iscurrently working towards obtaining ISO 14001 certi®cation.
Maritime and Port Authority of Singapore Act (Cap. 107A)
APP(S) operates a private jetty at 18 Pioneer Sector 1 for loading and unloading liquid cargo. Rawmaterials for our lubricant factory are shipped to and received at the jetty. Our products are alsoloaded and shipped out from the jetty.
The operation of the jetty is subject to the Maritime and Port Authority of Singapore (Port) Regulations(``MPAPR'') made under the authority of the Maritime and Port Authority of Singapore Act. Under theMPAPR, APP(S) must obtain the approval of the MPA for every loading or unloading of cargo at thejetty. Wharfage charges on a per tonne basis are also payable to the MPA for every loading andunloading of cargo.
Insurance Coverage
Our Company, APP(S) and A.I.M. have ®re insurance cover for their respective plants. They are alsoinsured against consequential losses arising from the destruction or damage of their respective plantscaused by ®re. APP(S) has a special risks policy covering its concrete jetty while A.I.M. has a plant allrisks policy. Our Company also has an export credit risk policy. Other insurance policies held by theabove three companies cover public liability and workmen compensation. Our Directors believe thatthe above insurance policies are adequate.
38
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Investors should read the following discussion and analysis of our ®nancial condition and results ofoperations in conjunction with:
(1) the Selected Consolidated Financial Information on pages 20 to 21 of this Prospectus;
(2) the Accountants Report on pages 82 to 112 of this Prospectus; and
(3) our consolidated ®nancial statements included elsewhere in this Prospectus.
Overview
We manufacture a wide range of lubricating oils and ¯uids, and trade in base oils and additives. InSeptember 2000, we acquired A.I.M., a company involved in toll-blending, contract manufacturing ofspecialty chemicals and trading of chemical products.
We manufacture our lubricating oils and ¯uids in Singapore and market to customers in industrial,automotive and marine sectors. The lubricant products we manufacture are marketed mostly underour own brands namely SINO, AP and Polaris. Our raw materials are purchased from major re®neriesin Asia and Europe. Revenue from our manufacturing and trading segments accounted for 39% and61% of the total turnover in FY2000 respectively. Our main markets for lubricants are Vietnam,Myanmar, Indonesia, Bangladesh and Malaysia. Sales to South East Asia accounted for 34% andIndochina and East Asia accounted for 28% of our total turnover in FY2000.
Singapore is our main market for toll-blending and contract manufacturing services for specialtychemicals. We source our raw materials mainly from petrochemical plants in Singapore. Ourchemical products are manufactured locally and sold mainly to customers based in Singapore.Approximately 6% of A.I.M.'s total sales were to overseas markets for the period from 1 August2000 to 31 December 2000.
Revenue
Our revenues are derived mainly from sales of lubricating oils, base oils and additives. With theacquisition of A.I.M., we will derive revenue from the sales of specialty chemicals and chemicalproducts. Although the acquisition was legally completed in September 2000, the sale and purchaseagreement was signed in August 2000 and AP Oil began to be involved in A.I.M.'s operations sinceAugust 2000, therefore the revenue of A.I.M. was included with effect from August 2000.
We recognise revenue upon the acceptance of goods by our customers. Our revenue represents thenet invoiced value of goods and services, taking into account sales rebates and excludes Singaporegoods and services tax. In FY2000, approximately 84% of our sales were denominated in US$, withthe balance transacted in S$. Our business is historically non-seasonal and therefore, is notsigni®cantly subject to any particular seasonal ¯uctuations.
Factors that will affect our revenue include:
1. The availability of base oils and chemicals
Base oils and chemicals constitute approximately 90% of our raw materials. An acute shortageof supply of these raw materials will affect our production, reduce our sales volume and hencehas signi®cant adverse effect on our revenue;
2. The pricing of our products
The pricing of our products is largely dependent on the competition we face from other lubricantand chemical suppliers. We may reduce our selling prices in order to maintain our market shareshould competition intensify;
39
3. The political situations and economical conditions of our markets
Any adverse changes in these situations will affect the demand for our products, which in turnwill adversely affect our revenue;
4. The ¯uctuation in US$ against S$
As most of our revenue, particularly export sales, are received in US$, our revenue will beadversely affected if US$ depreciates against S$;
5. Dependence on distributors and channel partners
Our sales are dependent on the ability of our distributors and channel partners to promote andeffectively market our products. If our distributors and channel partners are unable to maintain orexpand the market for our products, our sales will decline and our revenue would be reducedaccordingly; and
6. The import regulations of the countries we export to
Any unfavourable changes, such as an increase in import taxes and duties or imposition ofimport licence fee, which are imposed on our customers directly as they import the productsinto the country and incur these expenses, will increase the sale price of our products in thatcountry and may adversely affect the demand for our products and hence our revenue.
Costs of Goods Sold
Our costs of goods sold comprise mainly costs of materials namely base oils, additives, solvents andother related chemical components. Other costs include direct labour, factory overheads, and othermiscellaneous costs pertaining to packaging and freight.
All our base oils and additives are purchased from Asia, Europe and the USA in US$. Packingmaterials and solvents are purchased locally in S$. All other costs incurred are in S$.
In FY2000, approximately 92% of costs of goods sold were in US$ and the remaining 8% were in S$.
Factors that affect our costs of goods sold include:
1. The availability of base oils and chemicals
Base oils and chemicals constitute approximately 90% of our raw materials. In the event of anacute shortage of supply of these raw materials resulting in signi®cant increase in raw materialprices, and should we fail to ®nd a cheaper alternative source of supply, our costs of goods willbe signi®cantly adversely affected;
2. The stability of crude oil prices
The crude oil is a basic component from which base oils and solvents are derived. Any increasein the prices of base oils and solvents will increase our costs of goods;
3. The ¯uctuation in US$ against S$
Approximately 92% of our purchases are denominated in US$. A signi®cant appreciation of US$against S$ will increase our costs of goods; and
4. Increases in salary related costs of our production labour
Any material increase in salary due to labour shortages or increase in foreign worker levy andrelated costs will increase our costs of sales. Approximately 20% of our workforce are foreignlabour.
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Operating Costs
Our operating costs comprise selling and distribution costs, administrative and other operatingexpenses.
Selling and distribution costs are mainly freight, transportation and marketing expenses.Administrative and other operating expenses consist of salary-related expenses (includingremuneration of directors and non-production staff), facilities-related expenses (such as land rentaland property tax), of®ce expenses, depreciation charges of assets not used in manufacturingactivities and other miscellaneous costs.
Almost all our operating costs are incurred in S$.
RESULTS OF PAST OPERATING PERFORMANCE
For the purpose of discussion, we have segmented our revenue and pro®t before tax/pro®t before taxmargins by activities and by geographical regions. Our segmental revenue by geographical regions isbased on the countries where our customers are situated.
The distribution of our revenue and pro®t before tax/pro®t before tax margins by activities andgeographical regions for the past three ®nancial years are provided below. This analysis should beread in conjunction with the Accountants' Report as set out on pages 82 to 112 of this Prospectus.
Overview
Our revenue for Manufacturing is derived from sales of our lubricating oils and Fluids, and sales ofspecialty chemicals and chemical products. Our revenue for Trading comprises sales of base oils,additives and chemicals.
For the ®nancial years ended 31 December 1998 and 1999, our revenue and earnings were derivedentirely from sales of lubricating oils and Fluids and trading sales of base oils and additives.Revenue and earnings from our chemicals operations were only included in the Group's results witheffect from August 2000. Although the acquisition of A.I.M. was legally completed in September 2000,the sale and purchase agreement was signed in August 2000 and AP Oil began to be involved inA.I.M.'s operations since August 2000, therefore the revenue of A.I.M. was included with effect fromAugust 2000.
Review of Past Performance by Activity
Revenue ---------------------------------------------------------------------------------------------------------------------- Audited ----------------------------------------------------------------------------------------------------------------------
FY1998 FY1999 FY2000
$'000 % $'000 % $'000 %
Manufacturing 4,865 50.8 17,990 65.3 15,706 38.8
Trading 4,709 49.2 9,541 34.7 24,821 61.2
9,574 100.0 27,531 100.0 40,527 100.0
Pro®t Before Tax & Pro®t Before Tax Margins
---------------------------------------------------------------------------------------------------------------------- Audited ----------------------------------------------------------------------------------------------------------------------
FY1998 FY1999 FY2000
$'000 % $'000 % $'000 %
Manufacturing (265) na 1,672 9.3 1,584 10.1
Trading (137) na 362 3.8 1,400 5.6
Other income 488 nm 219 nm 848 nm
86 0.9 2,253 8.2 3,832 9.5
Note:±
nm denotes not meaningful
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Review of Past Performance by Geographical Region
Revenue
---------------------------------------------------------------------------------------------------------------------- Audited ----------------------------------------------------------------------------------------------------------------------
FY1998 FY1999 FY2000
$'000 % $'000 % $'000 %
South East Asia 2,834 29.6 16,249 59.0 13,559 33.5
Ð Indonesia 1,625 17.0 15,100 54.8 7,903 19.5
Indochina and East Asia 4,820 50.3 9,096 33.0 11,419 28.2
Ð Vietnam 4,465 46.6 8,043 29.2 10,403 25.7
Other countries 1,920 20.1 2,186 8.0 15,549 38.3
Ð Myanmar 1,839 19.2 1,909 6.9 9,734 24.0
9,574 100.0 27,531 100.0 40,527 100.0
Pro®t Before Tax/Pro®t Before Tax Margins
---------------------------------------------------------------------------------------------------------------------- Audited ----------------------------------------------------------------------------------------------------------------------
FY1998 FY1999 FY2000
$'000 % $'000 % $'000 %
South East Asia (163) na 1,454 8.9 1,582 11.7
Indochina and East Asia (121) na 346 3.8 547 4.8
Other countries (118) na 234 10.7 855 5.5
Other income 488 nm 219 nm 848 nm
86 0.9 2,253 8.2 3,832 9.5
Note:±
nm denotes not meaningful
FY1998 vs FY1999
Revenue
Revenue increased by 187.6% or $18.0 million from $9.6 million in FY1998 to $27.5 million in FY1999.This was largely due to the increase in sale activities across all segments and in our primary marketsin South East Asia and Indochina.
Manufacturing sales increased from $4.9 million in FY1998 to $18.0 million in FY1999 due to higherdemand for lubricants in Indonesia. In that year, our sales to Indonesia increased by approximately$13.2 million primarily due to the increase in demand resulting from the country's economicrecovery. Of this amount, approximately $12.7 million were derived from three major customers,namely P.T. Cipta Pramata Prana Mulya, P.T. Wuta Pujakarya and P.T. Myra Gallery.
Trading segment also registered a signi®cant increase in revenue of about $4.8 million or 102.6% from$4.7 million in FY1998 to $9.5 million in FY1999 due to large volume of raw materials exported to theIndochina and East Asia markets. Our continuing marketing efforts in developing the markets byappointing new distributors/agents in Vietnam, Taiwan, Hong Kong and Bangladesh resulted in asigni®cant increase in revenue as these countries accounted for approximately 97.5% of the totaltrading sales in FY1999.
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Gross pro®t
Gross pro®t margin increased by 4.5 percentage points from 13.3% in FY1998 to 17.8% in F1999.The increase is principally due to an increase in overall gross pro®t margin of manufactured productsdue to increase in sales for high grade lubricants resulting from stronger demand in the South EastAsian region. Gross pro®t margin for trading segment remained constant in the period under review.In addition, sales of lubricants, which yielded higher margins, accounted for 65.3% of the totalturnover, an increase of 14.5 percentage points from 50.8% in FY1999. Trading sales constituted alower proportion of approximately 34.7% of the total turnover in FY1999.
Other income
Other income declined by $0.3 million from $0.5 million in FY1998 to $0.2 million in FY1999 mainlydue to lower income derived from rental of equipment and facilities to third parties in the year.
Operating expenses
Our total operating expenses increased by $1.2 million from $1.4 million in FY1998 to $2.6 million inFY1999 as a result of a general increase in expenses, consistent with the growth in our turnover andbusiness activities. The increase is primarily attributable to (i) a $0.5 million increase in selling anddistribution costs as a result of higher freight and transportation charges arising from the increase inthe sales volume of our products to overseas markets; and (ii) a $0.7 million increase in administrativeand other operating expenses arising from higher payroll expenses as we increased the number ofemployees to support the expanding business and higher provision made for doubtful debts duringthe period under review. In FY1999, the Company had made more provision for doubtful debts dueto uncertainty of payments from customers with debts outstanding for more than six months.
Finance costs
Our ®nance costs remained relatively unchanged at $0.2 million in FY1998 and FY1999.
Pro®t before tax
Our Group's overall pro®ts before tax increased from $0.1 million in FY1998 to $2.3 million in FY1999.This was in line with the increase in turnover and higher overall pro®t margins achieved. As a result,our overall pro®t before tax margin improved from 0.9% in FY1998 to 8.2% in FY1999.
Tax
Our Group's effective tax rates of 35.0% for the ®nancial year ended 31 December 1999 was higherthan the Singapore statutory tax rate of 26.0%, primarily due to depreciation of non-qualifying ®xedassets and certain expenses which were not tax-deductible.
Pro®t after tax
Our Group's pro®t after tax increased from approximately $12,000 in FY1998 to $1.5 million inFY1999. This was consistent with the increase in turnover and higher pro®t margin achieved duringthe period under review.
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FY1999 vs FY2000
Revenue
We recorded a turnover of $40.5 million in FY2000. This represented a 47.2% increase or $13.0 millionfrom turnover of $27.5 million in FY1999.
The increase was primarily due to a $15.3 million or 160.2% increase in trading revenue, offset by a$2.3 million or 12.7% decline in manufacturing sales.
Trading sales to Myanmar, Bangladesh and Vietnam, increased by $6.2 million, $4.4 million and $2.2million respectively. In FY2000, we secured a major contract to supply base oils and additivestogether with formulations to a new customer in Myanmar. The commencement of a customer's newlubricant production plant in Bangladesh and the improved economic condition in Vietnam resulted inan increase in demand for base oils and other raw materials used in lubricant production from ourcustomers in these countries.
In FY2000, as the supply of base oils was limited, we reduced the sales of low margin manufacturedproducts in countries such as Indonesia. In addition, the devaluation of Indonesian Rupiah againstUS$ resulted in less demand for high margin lubricating oils from our customers in Indonesia. As aresult, our manufacturing sales declined in FY2000. The decline, however, was moderated by a $1.6million increase in lubricant sales to Myanmar and about $1.0 million increase in semi-®nishedproducts and drum-packed additives to Bangladesh respectively. The appointments of newdistributors by our sole agent in Myanmar resulted in higher sales of our products to the country.
Gross pro®t
Our gross pro®t margin declined by 1.9 percentage points from 17.8% in FY1999 to 15.9% in FY2000.The decline was primarily due to higher percentage of sales derived from trading operations whichcomparatively yielded lower pro®t margin than the sales of manufactured products. Our tradingsegment accounted for 61% of our total revenue in FY2000 as compared to 35% in FY1999.
In the period under review, the overall gross pro®t margin for trading segment improved by 3.1percentage points due to higher margins earned from supplying lubricant formulations together withbase oils and additives to customers to manufacture the lubricants required. Gross pro®t margins formanufactured products remained constant in the period under review.
Other income
Other income increased by $0.6 million from $ 0.2 million in FY1999 to $0.8 million in FY2000. Theincrease was largely attributable to a $0.2 million compensation from a vendor for the supply ofcontaminated raw materials and $0.2 million consulting fees earned for consulting services renderedin setting up a lubricant blending plant in Bangladesh. We also recorded a $0.1 million increase inincome derived from rental of equipment and facilities to third parties and a $0.1 million increase ininterests income, in line with higher ®xed deposits balances in the period under review.
Operating expenses
Despite the 47.2% increase in turnover, our overall operating expenses only increased marginally by$0.1 million or 3.2% from $2.6 million in FY1999 to $2.7 million in FY2000. The increase in turnoverwas mainly due to increase in trading sales which did not incur high operating expenses as comparedto manufacturing sales.
Administrative and other operating expenses increased by $0.2 million due to the consolidation ofA.I.M.'s operating expenses for the period 1 August 2000 to 31 December 2000. The increase washowever offset by a decline in sales and distribution expenses amounting to $0.1 million due tolower outward freight and shipping charges, in line with lower sales of manufactured productsoverseas in FY2000.
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Finance costs
Our ®nance costs increased by $0.5 million principally due to interest charges incurred on a term loantaken by the Company at the end of FY1999 to ®nance the purchase of an investment residentialproperty (refer to Interested Person Transactions on page 79 of this Prospectus) and a bridging loantaken in FY2000 to ®nance the acquisition of A.I.M. In addition, we also utilised more trade ®nancingfacilities to support the increase in our overseas business activities, in line with the increase inturnover in FY2000.
Pro®t before tax
Our Group's overall pro®ts before tax increased by $1.6 million from $2.3 million in FY1999 to $3.8million in FY2000. The increase was mainly due to an increase in turnover resulting from highertrading sales which did not incur high operating expenses as compared to manufacturing sales. As aresult, our overall pro®t before tax margin increased from 8.2% in FY1999 to 9.5% in FY2000.
Tax
Our Group's income tax increased from $0.8 million in FY1999 to $1.1 million in FY2000 due to higherpro®ts achieved in FY2000. Our Group's effective tax rates of 28.6% for the ®nancial year ended 31December 2000 was higher than the Singapore statutory tax rate of 25.5%, primarily due to certainexpenses which were not tax-deductible.
Pro®t after tax
Our Group's pro®t after tax increased from $1.5 million in FY1999 to $2.7 million in FY2000. Theincrease was primarily due to the increase in overall turnover, higher pro®t margin and other incomeachieved in the period under review.
45
Review of past operating performance of A.I.M. Chemical Industries Pte Ltd
The selected ®nancial data of A.I.M. for the past three ®nancial years ended 31 March 1998, 1999 and2000, and for the 9 months ended 31 December 2000 are as follows:
Operating Results------------------------------------------------- Audited ------------------------------------------------(1) Audited 9
FY ended 31 March months ended
($'000) 1998 1999 2000 31 Dec 2000
Revenue
Manufacturing 3,056 2,873 3,126 2,663
Trading 1,709 1,267 1,651 1,633
4,765 4,140 4,777 4,296
Cost of sales (3,308) (2,637) (3,068) (2,807)
Gross pro®t 1,457 1,503 1,709 1,489
Other income 358 288 122 35
Selling and distribution costs (76) (51) (63) (43)
Administrative and other operating expenses (1,015) (973) (873) (1,048)
Operating pro®t 724 767 895 433
Finance costs (13) (8) (6) (8)
Pro®t before tax 711 759 889 425
Income tax (201) (172) (276) (184)
Pro®t after tax and attributable to Shareholders 510 587 613 241
Financial Position
($'000)
Fixed assets 1,837 1,713 1,528 1,299
Current assets
Stocks 105 99 194 232
Trade debtors 885 728 865 1,002
Other debtors 85 119 18 166
Amount due to holding company(2) 52 Ð 73 Ð
Cash and bank balances 1,167 1,919 2,633 902
2,294 2,865 3,783 2,302
Current liabilities
Trade creditors and accruals 1,524 1,388 1,377 1,187
Other creditors Ð Ð Ð 105
Hire purchase creditors 43 20 15 Ð
Amount due to directors 124 123 123 Ð
Amount due to holding company(2) Ð 20 Ð Ð
Provision for taxation 181 205 371 266
Proposed dividends Ð Ð 1,600 Ð
1,872 1,756 3,486 1,558
Net current assets 422 1,109 297 744
Non-current liabilities (92) (68) (58) (35)
2,167 2,754 1,767 2,008
Shareholders' equity 2,167 2,754 1,767 2,008
Note:±
(1) Chio Lim & Associates were appointed as auditors of A.I.M. with effect from the ®nancial period commencing 1 April 2000.The ®nancial statements prior to 1 April 2000 were audited by another ®rm of accountants.
(2) Holding company refers to Asiatic Agricultural Industries Pte Ltd.
46
Revenue for Manufacturing of A.I.M. is derived from fees earned from blending services rendered andsales of specialty chemicals. The revenue for Trading comprises sales of raw materials used in themanufacturing of chemicals and sales of third party chemical products.
Financial year ended 31 March 1998 compared with ®nancial year ended 31 March 1999
Revenue declined by 13% or $0.6 million from $4.7 million in FY1998 to $4.1 million in FY1999. Thedecrease was primarily attributable to the overall decline in demand for marine and industrialchemicals as a result of the regional economic crisis. Revenue from trading of raw materials andchemical products declined by $0.4 million as customers were affected by the crisis. During thisperiod, A.I.M. lost two trading accounts which contributed revenue amounting to approximately $0.2million respectively in FY1999. Revenue from manufacturing also declined by $0.2 million in the periodunder review.
Despite the decrease in revenue, pro®t before tax increased marginally from $0.71 million in FY1998 to$0.76 million in FY1999 mainly due to the reduction in production and operating overheads over thesame period.
Financial year ended 31 March 1999 compared with ®nancial year ended 31 March 2000
Revenue increased by 15% or $0.6 million from $4.1 million in FY1999 to $4.8 million in FY2000. Theincrease was due to improvement in trading and manufacturing revenue. During this period, A.I.M.intensi®ed its marketing efforts to increase its customer base in Singapore and expand its marketsoverseas. A.I.M. also bene®ted from the improvement in its customers' businesses which resulted inhigher demand for our products. In FY2000, A.I.M. was appointed as an authorised agent anddistributor by Shell Eastern Chemicals (S) for certain chemical products in Singapore.
In line with the increase in revenue, pro®t before tax increased by $0.13 million from $0.76 million inFY1999 to $0.89 million in FY2000. Despite a higher revenue, gross pro®t margin declined marginallyby 0.5 percentage points and total operating expenses declined by approximately $0.1 million as aresult of lower payroll costs incurred in that year. Therefore, a higher pro®t before tax was achievedin FY2000.
Nine months period ended 31 December 2000
For the nine months ended 31 December 2000, we recorded a turnover of $4.3 million of which 62%or $2.7 million were derived from manufacturing segment whilst 38% or $1.6 million were contributedby trading activities. Our gross margin was 34.7% and our pro®t before tax was $0.4 million in theperiod under review.
47
REVIEW OF FINANCIAL POSITION
Liquidity and Capital Resources
Liquidity
Our business growth has been ®nanced through a combination of shareholders' equity, retainedearnings, external borrowings and other credit facilities from ®nancial institutions.
As at 16 May 2001, our contingent liabilities comprising bankers' guarantees and letters of creditamounted to $1,418,000.
Our consolidated cash and cash equivalents (cash on hand and in banks less overdraft, ®xed depositsat banks) stood at $3.5 million as at 31 December 2000. Our working capital and capital expenditurerequirements are ®nanced by cash generated from operations, external borrowings and other creditfacilities from ®nancial institutions. In our opinion, after taking into consideration our present bankingfacilities, we have suf®cient working capital for present requirements.
Net cash generated from our operating activities for FY2000 amounted to $4.2 million. Our net cashused in investing activities was $1.6 million in FY2000. In FY2000, approximately $1.2 million and $0.4million was used to acquire A.I.M. and additional ®xed assets respectively.
Our net cash used in ®nancing activities stood at approximately $28,000 in FY2000 after payment ofdividends and repayment of hire purchase obligations and bank borrowings, offset by an additionalbridging loan obtained to ®nance the acquisition of A.I.M. in the period under review.
Capital resources
As at 31 December 2000, our total secured borrowings amounted to $8.9 million. We do not have anyunsecured borrowings. Please refer to pages 98 and 99 of this Prospectus for details on the securitiesprovided as disclosed in the Accountants' Report.
We have been able to service interests, loan and hire purchase repayments from funds generated fromoperations on a timely basis.
Intangibles
As part of the Restructuring Exercise, AP Petrochemical Pte Ltd was acquired by AP Oil in August2000. As a result, intangibles comprising of the incorporation and pre-operating expenses of APPetrochemical Pte Ltd was recorded in the Group in FY1998 and FY1999. In FY2000, intangiblesincreased to $0.5 million due to goodwill arising from our acquisition of A.I.M. in September 2000.The goodwill is amortised using the straight-line method over a ®ve-year period.
Fixed assets
Fixed assets consist of properties, plant and machinery, motor vehicles, furniture and ®ttings andof®ce equipment.
The marginal increase in ®xed assets in FY1999 was due to purchases of machinery, of®ce equipmentand a motor vehicle, offset by depreciation for the period under review. In FY2000, ®xed assetsincreased by $1.3 million from $2.5 million in FY1999 to $3.8 million as ®xed assets of A.I.M. wereincluded in the Group following its acquisition.
Investment property
Investment property comprised a freehold bungalow in Singapore. The property was purchased at theend of FY1999 and is stated at cost of purchase. The property was sold to two Directors/shareholders, Dr Ho Leng Woon and Ms Lau Woon Chan, based on the reserve price of a publicauction subsequent to 31 December 2000. Please refer to page 79 of this Prospectus for more details.
48
Other investments
Other investments comprised investments in unquoted shares of subsidiaries, APP(M) and ShanghaiGolden Toe Arts & Craft Co., Ltd (``SGTAC'') which amount to $153,900 and $296,100 respectively,unquoted investment in Tai Yuan Jing Yan High-Quality Lubricant Oil Co., Ltd (``Tai Yuan'') of$265,093 and marketable securities held on long-term basis for their investment and income potential.
The investment in APP(M) was disposed to Ms Lau Woon Chan in FY2000 at a consideration ofRM3.00. APP(M) had an audited negative NTA of RM196,199 as at 31 December 1999 and anunaudited negative NTA of about RM210,296 as at 31 December 2000. In FY1999, the Groupdisposed its investments in SGTAC to Dr Ho Leng Woon, and Tai Yuan to a third party based on theCompany's carrying cost of investment. Please refer to the Restructuring Exercise on page 25 of thisProspectus for details on the disposals.
Current Assets
Current assets comprise mainly stocks, debtors, deposits and prepayments, ®xed deposits and bankbalances.
Our current assets increased by 56.3% or $3.1 million from $5.5 million in FY1998 to $8.6 million inFY1999, owing largely to the increase in stocks and trade debtors' balances. We increased ourinventory holdings by $2.0 million from $1.0 million in FY1998 to $3.0 million in FY1999 inanticipation of higher volume of sales and an oil price increase in the ®rst half of FY2000. Theincrease in our trade debtors' balances amounting to approximately $1.1 million is in line with thesigni®cant increase in revenue in FY1999.
Current assets increased by $3.5 million or 40.9% to $12.1 million in FY2000 mainly due to higherstocks and cash and bank balances, which increased by $0.8 million and $2.9 million respectively.The increase in inventory holdings and cash and bank balances is in line with higher turnover andpro®ts achieved in FY2000. The increase was also attributable to consolidation of stocks and cashbalances of A.I.M. amounting to $0.2 million and $0.9 million respectively as at 31 December 2000.
Current Liabilities
Current liabilities comprise mainly trade creditors, other creditors and accruals, provisions for taxation,hire purchase creditors and amounts due to bankers. Amounts due to bankers consist of bills payable,trust receipts, term loans due within one year and bank overdrafts.
Our total current liabilities increased by 39.6% or $2.3 million from $5.7 million in FY1998 to $8.0million in FY1999. The increase in trade creditors of approximately $2.7 million was attributable tohigher amount of purchases, in line with the increase in the Group's turnover in FY1999. During theyear, provision for taxation increased by $0.7 million as we generated higher pro®ts. Amounts owingto directors decreased by $0.4 million due to repayments to the directors. In addition, amounts due tobankers decreased by $0.3 million due to less utilisation of trade facilities as we purchased on anopen account basis. Other creditors and accruals decreased by $0.2 million in FY1999 due torepayments to the creditors.
In FY2000, current liabilities increased by $3.4 million or 42.4% from $8.0 million in FY1999 to $11.4million. This was due to the increase in the amount due to bankers and other creditors and accruals,offset by a decrease in trade creditors.
Amounts due to bankers increased by $4.4 million primarily due to an additional $2.0 million bridgingloan used to ®nance the acquisition of A.I.M. and an increase in the utilisation of trade facilities of $2.1million to support the increase in our overseas business activities. Trade creditors correspondinglydecreased by $2.4m as we used more trade facilities for our purchases. Other creditors and accrualsincreased by $0.8 million from $1.0 million in FY1999 to $1.8 million in FY2000 due to accruals oflisting expenses of $0.2 million and inclusion of A.I.M.'s accrued operating expenses and otherpayables amounting to $0.6 million as at 31 December 2000. Higher pro®ts achieved in FY2000resulted in the increase in provision for taxation by $0.7 million.
49
Working capital
We had negative working capital in FY1998. The shortfall in our working capital amounting to $0.3million in FY1998 was due to utilisation of short term loan and bank overdraft facilities to ®nance ourother investment in Malaysia and China i.e APP(M) and SGTAC. With higher pro®ts generated inFY1999 and FY2000, our working capital improved to a positive position of $0.6 million and $0.7million respectively.
Non-Current Liabilities
Non-current liabilities include deferred tax, hire purchase creditors and the non-current portion of termloans.
In FY1999, a new term loan amounting to $2.9 million was obtained by the Group to ®nance theacquisition of the investment residential property at Pasir Panjang Road. This accounted for thesigni®cant increase in non-current liabilities from $0.25 million in FY1998 to $3.2 million in FY1999.Non-current liabilities decreased by $0.1 million from $3.2 million in FY1999 to $3.1 million inFY2000 due to repayment of hire purchase and term loan obligations, offset by a marginal increasein provision for deferred taxation. Higher provision for deferred taxation was due to consolidation ofA.I.M.'s deferred tax balances arising from the net book value of ®xed assets exceeding their taxwritten down values.
Shareholders' Equity
Shareholder's equity increased by 44.7% or $1.2 million from $2.7 million in FY1998 to $3.9 million inFY1999 due to pro®ts made by the Group during this period. In FY2000, shareholders' equityimproved by $2.0 million to $5.9 million due to reinvestment of our pro®ts to ®nance business growth.
Review of Financial Position of A.I.M. Chemical Industries Pte Ltd
A review of the ®nancial position of A.I.M. for the past 3 ®nancial years ended 31 March 2000 and forthe nine months ended 31 December 2000 is provided below. This analysis should be read inconjunction with the Accountant's Report as set out on pages 82 to 112 of this Prospectus.
Fixed assets
Fixed assets comprise a leasehold property, plant and machinery, of®ce and laboratory equipment,furniture and ®ttings, motor vehicles and building improvement. The decrease in ®xed assets by $0.5million from $1.8 million in FY1998 to $1.3 million as at 31 December 2000 was primarily due to theaggregate depreciation incurred during the period under review offset by the acquisition of newmachinery and equipment.
Current assets
Current assets increased by $1.5 million from $2.3 million in FY1998 to $3.8 million as at 31 March2000 due to higher ®xed deposits and bank balances of approximately $1.5 million. The increasewas due to pro®ts generated throughout the period under review. As at 31 December 2000, ourcurrent assets decreased to $2.3 million from $3.8 million as at 31 March 2000 due mainly to lowerbank balances following the payment of dividends amounting to $1.6 million to the shareholders ofA.I.M. prior to the acquisition of A.I.M. by our Company.
Current liabilities
Current liabilities increased by $1.6 million from $1.9 million in FY1998 to $3.5 million as at 31 March2000. The increase is primarily due to a $1.6 million provision for dividends payable to the formershareholders of A.I.M. prior to its acquisition by our Company. As at 31 December 2000, our currentliabilities decreased to $1.6 million from $3.5 million as at 31 March 2000 due to the payment ofdividends of $1.6 million to the shareholders of A.I.M as described in ``Current assets'' above.
50
Non-current liabilities
Non-current liabilities comprise deferred taxation and non-current portion of hire purchase obligations.Non-current liabilities decreased during the period under review from $0.09 million in FY1998 to $0.04million as at 31 December 2000 due to repayments of A.I.M.'s hire purchase obligations and lowerprovision for deferred taxation.
Shareholders' equity
Shareholders' equity decreased by $0.2 million from $2.2 million in FY1998 to $2.0 million as at 31December 2000 due to the payment of dividends of $1.6 million, offset by pro®ts amounting to $1.4million achieved during the period under review.
Foreign exchange exposure
Our reporting currency is S$. As we export our products to various countries outside Singapore andpurchase from foreign suppliers, we are subject to foreign currency exchange risks. In FY2000,approximately 84% of our sales and 92% of our purchases were denominated in US$, with thebalance transacted in S$. Our operating expenses are incurred in S$. Owing to the timing differencebetween payment to our suppliers and receipt from our customers, we may incur foreign exchangetransaction losses. This may have an adverse impact on our ®nancial performance.
We have, in the past, entered into forward contracts or other forms of derivative instrument to hedgeforeign currency exposure. However, we do not have a comprehensive foreign currency hedgingpolicy. Although, we may enter into forward contracts or other forms of derivative instrument infuture to hedge foreign currency exposure, when necessary, the measures may not becomprehensive enough to totally eliminate our risk in currency exchange.
The net foreign exchange differences for the three ®nancial years from FY1998 to FY2000 relative tothe Group's revenue and pro®t before tax are shown below:
$'000 FY1998 FY1999 FY2000
Realised exchange gains/(losses) (56) 42 78
Unrealised exchange gains/(losses) 27 (101) (62)
Net foreign exchange gains/(losses) (29) (59) 16
Percentage of revenue 0.3% 0.2% 0.0%
Percentage of pro®t before tax 33.7% 2.6% 0.4%
Credit Policy
Sales
We sell to our overseas or local customers either by letters of credit, payment in advance bytelegraphic transfer or on an open account basis. Transactions with new customers are made eitherthrough sight letters of credit or payment in advance. Open account credit is only extended toestablished customers who are able to satisfy our credit standards, have good working relationship,and have been trading with us for more than one year.
Depending on the transaction volume, ®nancial background, payment history, credit-worthiness andduration of their relationship with us, the credit terms extended to our customers are up to 90 days.
Collection days of our Group for the past three ®nancial years are as follows:
FY19981 FY19991 FY20001
Collection days2 108 52 35
1 FY1998 and FY1999 do not include the ®nancial results of A.I.M. Data relating to FY2000 included the ®nancial results ofA.I.M. for the period August 2000 to December 2000.
2 The collection days are computed based on the following formula : collection days = trade debtors / revenue x 360 days
51
The longer average collection period in FY1998 was due to customers delaying payments resultingfrom the regional ®nancial crisis. In FY1999 and FY2000, it improved to 52 and 35 days respectivelydue to prompt payments made by our customers and more sales on the terms of payment by sightletter of credit.
It is our practice to monitor and follow up on the payment status of each customer. We may considerlegal action ultimately if a debtor fails to respond to our payment request, by a letter of demand.Provision for doubtful debt is made when the debtor fails to response to our legal letter of demandafter the receivable is more than six months overdue. The amount owed is written off as bad debtwhen the customer is unable to meet its ®nancial obligation after legal proceedings have beeninstituted.
Purchases
We are granted a credit term of 30 to 90 days by our suppliers including those who provide materialsand services.
DIVIDENDS
We have paid dividends annually over the last three ®nancial years as follows:
Year Annual Gross Dividend Rate Net Dividends (less tax)($'000)
FY2000 94% 1,093
FY1999 8% 93
FY1998 8% 92
We do not have a ®xed dividend policy. The amount and frequency of our future dividends willdepend on our performance, working capital requirements and capital expenditure requirements
The amount of dividends we have paid in the past is not indicative of the amount of dividends we willpay in future. There is also no assurance that dividends will be paid in future or as to the amount ortiming of any dividends that are to be paid in future.
PROSPECTS AND FUTURE PLANS
Prospects
Positive signs are emerging from countries that we export our products. GDP growth rates in theASEAN countries, China and Taiwan are estimated at 5.2%, 7.2% and 6.3% in 2001. Speci®cally,Indonesia's GDP is expected to post a growth of 5.0% and Malaysia's economy is expected to growat an average rate of 7.0% in 2001. Similarly, over the same period, average real GDP growth for Indiais expected to rise to 7.0%. Elsewhere in Bangladesh, the annual real GDP growth is forecast at 5.7%for 2001. Vietnam is projected to achieve an overall 6.5% growth in GDP for year 20011. With theeconomic growth rates as mentioned above, we expect demand for lubricants to increase. Weexpect to bene®t from this expected increase in demand for lubricants.
The Economic Development Board (``EDB''), under its Industry 21 initiative, plans to grow Singaporeinto a world class petrochemicals hub2. According to the Singapore Economic Development BoardAnnual Report 2000, total ®xed asset investment commitments secured in 1999 for the chemicalsclusters amounted to $2.6 billion3. As more petrochemical and chemical companies are establishedin Singapore, the Directors believe that demand for toll-blending and contract manufacturing ofchemicals is also expected to rise. We expect to bene®t from the expected increase in demand forsuch chemicals.
1 13th Asian Economic Outlook Workshop at www.adb.org, a website maintained by Asian Development Bank2 Singapore Economic Development Board Industry 21 at www.sedb.com.sg/industry21, a website maintained by Singapore
Economic Development Board3 Singapore Economic Development Board Annual Report 2000
52
Future plans
Expansion into new markets
We have recently appointed a sole agent in China for our AP brand lubricants. We are also exploringthe opportunity of exporting of our products to new markets such as India, Sri Lanka and east Africancountries. Through our business network, we intend to source for appropriate agents or businesspartners in these new markets. New staff will be recruited to develop these markets. We haveidenti®ed potential distributors in India and Sri Lanka and have commenced negotiations with them.
Setting up a lubricant blending plant in Vietnam
We have identi®ed Vietnam as an ideal location to set up a new blending plant as we are familiar withthe market. We have been in discussion with a potential local partner to build the plant in Dong NaiProvince, southern Vietnam. A non-binding memorandum of understanding was signed by APP on 18May 2001 with the potential local partner. It is proposed that the local partner contribute a piece ofland of about 6 hectares in exchange for 20% equity stake in a joint venture company to be formed.The proposed plant to be built on the land will have an oil terminal and a private jetty. The amount ofthe investment has not been ®nalised. We intend to use internal sources of funds (which may includepart of the proceeds from the issue of the New Shares) and bank borrowings to ®nance this project.No binding agreement has, however, been entered into with the potential local partner in respect ofthe proposed joint venture. In the event that the Vietnamese project does not materialise, we willlook for an alternative location for a similar project.
To enhance R&D capabilities
Currently, we have a team of three technical personnel who are partially involved in research activities,two chemical engineers and two chemists. To further strengthen our R&D capabilities, new R&D staffwill be recruited locally and overseas to carry out new research projects. We intend to set up aresearch laboratory at the proposed overseas lubricant blending plant to carry out applied researchin tribology and lubricant technology. Part of the proceeds from the issue of the New Shares will beallotted for R&D activities.
Expansion of production and packing facilities
To cater for the expected increase in business volume of our chemical operations and small packinglubricant products, we intend to upgrade the production lines at our Pioneer Sector 1 and GulCrescent plants. With the expanded packing facility expected to be completed in the second half of2001, we will be able to cater for the increasing types and designs of our range of products in smallpacking under the brands, SINO, AP and Polaris.
53
MAJOR SUPPLIERS
We have enjoyed good working relationships with most of our suppliers and have over the yearsestablished a strong rapport with them. The credit terms of our Group's suppliers normally rangefrom 30 to 90 days.
The suppliers accounting for 5% or more of our Group's purchases during the past three ®nancialyears are as follows:
Percentage of Group Purchases1
Supplier FY1998 FY1999 FY2000
ExxonMobil Corporation Group2 25% 64% 33%
Singapore Petroleum Co. Ð 8% 5%
In®neum Singapore Pte Ltd 1% 7% 7%
SINOPEC International Trading Co. 19% 1% 9%
SSangyong International Ltd 16% Ð Ð
Italsing Petroleum Pte Ltd 13% 1% Ð
AP Chemicals B.V. Ð Ð 30%
1 The ®nancial data included under this ``Major Suppliers'' section of this Prospectus so far as they relate to FY1998 or FY1999do not take into account the ®nancial results of A.I.M. Financial data relating to FY2000 include the ®nancial results of A.I.M.for the period August 2000 to December 2000.
2 Include Mobil Sales & Supply Corporation (Asia Paci®c), Mobil Oil Singapore Pte Ltd, Mobil Chemical Products InternationalInc, ExxonMobil Chemical Singapore Private Limited, Esso Singapore Pte Ltd and ExxonMobil Lubricants & PetroleumSpecialities Co.
The year-to-year ¯uctuation in percentage of total purchases from individual supplier is dependent onour procurement decision and availability of supply. Among other things, the factors considered arethe quality, pricing, delivery schedule and the payment terms from the respective suppliers.
In FY1999, three major suppliers accounted for approximately 79% of our Group's total purchases.Recognising the risk of heavy reliance on a limited number of suppliers, we have made efforts ingrowing our supplier base to ensure continuous and uninterrupted supply of raw materials for ourproduction needs. The number of major suppliers increased from three in FY1999 to ®ve in FY2000.Investors should note that there is no assurance that our existing and future production needs will beconstantly met by the broadening of our supplier base. Any disruption and/or unfavourable termsoffered by the suppliers will have an adverse impact on our overall sales and price competitivenessof our products and services.
ExxonMobil has been our Group's supplier since early 1990 for the supply of base oils, additives andsolvents. Our purchases from ExxonMobil increased from 25% of our total purchases in FY1998 to64% in FY1999. During this period, our export of base oils increased. Correspondingly, ourpurchases from ExxonMobil increased as they were able to meet our delivery schedule andrequirements. However, in FY2000, the purchases from ExxonMobil were reduced to 33% of ourtotal purchases in line with our effort to broaden our supplier base.
Our Group started purchasing base oils from Singapore Petroleum Co. in FY1999 as part of our effortto widen our supplier base.
In®neum Singapore Pte Ltd is the main additive supplier for the Group. In®neum is the new entityresulting from a merger of Exxon Chemical Paramins Pte Ltd and Shell Chemicals Pte Ltd.
SINOPEC International Trading Co. and SSangyong International Ltd were two of our Group's mainsuppliers of base oils in FY1998. Due to the surge in domestic demand for base oils in China andKorea in FY1999, the supply from SINOPEC and SSangyong declined and our purchases from themcorrespondingly decreased. Our purchases from SINOPEC increased from 1% of our total purchasesin FY1999 to 9% in FY2000 as they were able to supply base oils meeting our requirements.
54
Purchases of base oils from Italsing Petroleum Pte Ltd declined as we moved to alternate supplysources.
In FY2000, purchases from AP Chemicals B.V. accounted for 30% of our total purchases. APChemicals B.V. had been one of our suppliers in the past. We did not purchase from them inFY1998 and FY1999 as they could not supply base oils meeting our requirements. We resumedpurchases from this company in FY2000 when base oils meeting our requirements became availablefrom them.
As at the date of this Prospectus, none of the Directors or substantial shareholders has any interest,direct or indirect, in the suppliers mentioned above.
MAJOR CUSTOMERS
We have approximately 250 customers as at the end of FY2000. These customers are spread oversome 20 countries/regions including Vietnam, Myanmar, Indonesia, Malaysia, Bangladesh, Japan,Taiwan, Hong Kong and Singapore.
Customers accounting for 5% or more of the Group's turnover in the last three ®nancial years are asfollows:
Percentage of Group Turnover1
Customer FY1998 FY1999 FY2000
P.T. Cipta Pratama Prana Mulya 7% 26% 13%
Tien Thanh Trading Pte Ltd 15% 17% 14%
Paci®c Oil Co. Ltd Ð 1% 14%
Myanma Petrochemical Enterprise Ð Ð 15%
P.T. Wuta Pujakarya 8% 12% 1%
P.T. Myra Gallery Ð 13% Ð
Aung Thein Than Co. Ltd. 19% 7% 8%
Toan Tam Trading & Producing Co. 7% 3% 4%
Indochina Petroleum Manufacturing & Trading Co. Ltd. 9% 2% 1%
Additives & Petroleum Products Co. 6% 1% Ð
1 The ®nancial data included under this ``Major Customers'' section of this Prospectus so far as they relate to FY1998 or FY1999do not take into account the ®nancial results of A.I.M. Financial data relating to FY2000 include the ®nancial results of A.I.M. forthe period August 2000 to December 2000.
P.T. Cipta Pratama Prana Mulya was our sole agent for AP products in Indonesia. Sales to thiscompany increased in FY1999 as the demand for high-grade lubricants from its customersincreased. Sales to this company decreased to 13% of our total sales in FY2000 mainly due to adecrease in demand for our products following the devaluation of the Indonesian Rupiah against US$.
Tien Thanh Trading Pte Ltd started business with our Group in 1991 as our agent for SINO products inVietnam. Our sales to this company grew steadily from 15% of our total turnover in FY1998 to 17% ofour total turnover in FY1999. Although in terms of percentage of our total turnover, sales to thiscompany declined from 17% of our total turnover in FY1999 to 14% in FY2000, we registered a24% increase in the absolute sales amount in that year. Apart from supplying base oils, additivesand lubricating oils, we also provide consulting services to this customer.
Paci®c Oil Co. Ltd is our licensee for SINO products. We supply base oils, additives and packingmaterials together with formulations to produce and market lubricants under the SINO brand inBangladesh. Our sales to Paci®c Oil Co. Ltd increased to 14% of our total turnover as thecompany's new lubricant plant commenced production in FY2000.
55
Myanma Petrochemical Enterprise is a new customer in FY2000.
Our Group has been selling both high and low-grade oils to P.T. Wuta Pujakarya since 1995. InFY1998, purchases from this customer were only 8% of our total sales due to a decrease in demandas a result of the regional economic crisis. P.T. Wuta Pujakarya had been importing our products onbehalf of P.T. Myra Gallery since 1995. In 1999, we also began to sell directly to P.T Myra Gallery.Sales to P.T. Wuta Pujakarya and P.T. Myra Gallery declined in FY2000 following the devaluation ofthe Indonesian Rupiah against US$ which resulted in a decrease in demand for our products.
Aung Thein Than Co. Ltd. is our sole agent for AP products in Myanmar. In terms of the percentage tototal turnover, sales to Aung Thein Than Co. Ltd were 19%, 7% and 8% of out total sales in FY1998,FY1999 and FY2000 respectively. The absolute sales amount, however, increased from $1.8 million inFY1998 to $3.4 million in FY2000, representing an increase of 88%. The increase was due to theincrease in demand for our products as a result of our intensi®ed marketing and promotional effortsin Myanmar and the appointment of more provincial distributors by Aung Thein Than Co. Ltd. in thecountry.
As at the date of this Prospectus, none of our directors or substantial shareholders has any interest,direct or indirect, in any of the above customers.
COMPETITION AND COMPETITIVE STRENGTHS
Competition
Lubricants
The lubricant industry is largely dominated by multinational companies such as Shell, ExxonMobil, BP,Castrol and Caltex. The Directors are not aware of any independent published statistics available onthe market share of our Group in countries where our products are marketed and distributed.However, our Directors believe that our Group is one of the largest lubricant companies inSingapore. (Source: ``Singapore's Lubricant Players'', Asia Paci®c Guide for Fuel, Lubricant &Additive Companies 1999 published by Fuels & Lubes Asia Publications Inc).
The Directors consider Bodok Trading Co Ltd, United Oil Co Pte Ltd, Unicorn Oil Company Pte Ltd,Castrol Singapore Pte Ltd and BP Singapore Pte Ltd as our main competitors.
Chemicals
To the best knowledge of the Directors, there are currently very few chemical formulators andblenders in Singapore who are capable of providing blending services to multinationals in thepetrochemical and chemical industries. The Directors consider Fair Chem Industries Pte Ltd as theGroup's closest competitor.
Competitive strengths
Notwithstanding the competitive environment, our Directors have identi®ed several key factors thathave and will continue to enable our Group to compete effectively. These competitive strengths are:
Established relationships with customers and distributors
As we have been in the lubricant and chemical business since the 1970s, we have established long-standing relationships with our customers. More than 60% of our Group's turnover in FY1998, FY1999and FY2000 are from customers who have purchased from us for two or more consecutive years. Webelieve in building strong rapport and trustworthy relationships with our customers, agents anddistributors. As at the end of FY2000, we had a network of 12 distributors covering more than9 countries.
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Quality products and services
We strongly believe that product quality is critical to the success of our business. We are committedto provide quality products and services that meet our customer requirements. We have institutedquality control procedures at various stages of the production process to ensure that our productsmeet stringent in-house requirements and international standards such as API, SAE, ISO and ASTM.We were awarded the ISO 9002 certi®cation in 1998 for our production quality control system. TheCompany and APP(S) also achieved ISO 9001 certi®cation in September 2000 for their R&D activities.
Wide product range with customised products and value-added services
We offer a wide range of lubricating oils, greases, ¯uids and specialty chemicals. Having our own R&Dteam enables us to customise new products to meet our customers' requirements. Our lubricant andchemical blending plants are also designed to allow ¯exibility in manufacturing small and/or largevolume of products. With a team of experienced personnel, we are able to provide value-addedservices such as before and after sales technical support and technical consulting services to ensuretotal customer satisfaction. The Directors believe that our ability to customise products and offervalue-added services gives us a competitive edge over many of our competitors.
Track record and brand awareness
Through years of effort in establishing our distribution network, advertisements and promotionalactivities, the Directors believe that our brands, SINO, has gained recognition in Indonesia,Bangladesh, Malaysia and Vietnam, and AP in Myanmar, Malaysia and Indonesia. We began toexport our products to Indonesia and Malaysia in 1982, Vietnam in 1991 and Myanmar in 1995. TheDirectors are of the opinion that a competitor would have to spend considerable time and money todevelop its brands in the markets where our products are sold. A new brand of lubricant would needtime and ®nancial resources to build its market presence as well as customer recognition.
Good relationships with suppliers
Our Group has a policy of continuously cultivating and maintaining strong relationships with oursuppliers. We have enjoyed and bene®ted from good working relationships with many of our long-term suppliers. Among those who have been our business partners for the past 20 years in thelubricant business are SINOPEC International Trading Co., Ethyl Asia Paci®c Co., Atlas PaperProducts Pte Ltd and See Hup Seng Can Manufacturing Pte Ltd. The companies who have beensuppliers for our chemical business for more than 10 years are ExxonMobil Chemical Singapore PteLtd, Shell Eastern Chemicals Pte Ltd and Mercury Chemicals Pte Ltd. We will continue to widen ourprocurement network to maintain continuous and reliable supply of raw materials at competitiveprices.
Export-oriented and wide distribution network
Recognising the growth limitations of the domestic market, it is our marketing policy to expand ourbusiness beyond Singapore. Over the years, our Group has directed its marketing efforts towardsdeveloping the export markets. We have successfully established many relationships with ourdistributors and business associates in the countries where our products are sold. In FY2000, about90% of our sales are derived from exports. Such a geographical diversi®cation strategy helps ourGroup to minimise the risk of over-dependence on a single geographical market and maintain asteady overall growth in the long run.
57
Quali®ed and experienced management team
Dr Ho Leng Woon, and Ms Lau Woon Chan, our Executive Directors, have had more than 20 years'experience each in the lubricant industry. Mr Ang Luck Seh, has been with the Company for more than8 years. We believe their combined experience in the business will enable our Group to formulatebetter business policies and strategies so as to compete effectively.
All 6 divisions of our Group are led by a quali®ed management team comprising 6 Executive Of®cers,all of whom are either quali®ed professionals or experienced managers.
The Production and Technical Divisions are each headed by a chemical engineer. A Certi®ed PublicAccountant oversees the Finance and Accounts Division. The Import & Export Division is managedby a business graduate with an 18-year service history with the Company. The Marketing and SalesDivision is run by a Business Development Manager who has 12 years' experience in businessdevelopment. Our wholly owned subsidiary, A.I.M., is led by a quali®ed and experienced professionalwho has spent more than 17 years in the chemical industry.
DIRECTORS, SENIOR MANAGEMENT AND STAFF
Directors
Our Board of Directors is entrusted with the responsibility for the overall management of theCompany. The Directors' particulars are set out below:
Name Age Qualification Current Position Address
Dr Ho Leng Woon 52 Ph.D. Chairman &Managing Director
87 Phoenix AvenueSingapore 668386
Ms Lau Woon Chan 52 B.A. Director (Finance) 87 Phoenix AvenueSingapore 668386
Mr Ang Luck Seh 53 B.A.(Hons) Director(Operations)
13 Dairy Farm Road#04-04Singapore 679041
Dr Tan Poi Sik 52 Ph.D. IndependentDirector
1 Jalan ParasSingapore 418853
Dr Lim Heng Kow 64 Ph.D. IndependentDirector
60 Bayshore Road#23-03 Jade TowerSingapore 469982
Dr. Ho Leng Woon is the Chairman and Managing Director of our Group. He is responsible for ourGroup's overall strategic planning, business and corporate directions. Dr Ho is also our MarketingDirector and plays a leading role in formulating the Group's marketing policies and strategies. Hespearheads our Group's business development activities and looks after our Group's majorcustomers. Prior to joining our Group in 1981, he was a Senior Hydrologist with the Public UtilitiesBoard of Singapore for 5 years. Dr Ho graduated with a Bachelor of Arts (1st Class Honours) degreefrom the Nanyang University. He holds a Ph.D. in Hydrology from the University of Hull, UK and aDiploma of Business Studies from the Graduate School of Business of the University of Chicago. Heis a member of the Society of Tribologists and Lubrication Engineers, USA.
Ms Lau Woon Chan is the Finance Director of the Group. Ms Lau founded our Company in 1975. Asthe Finance Director, she is responsible for all ®nancial management and accounting matters of ourGroup. Ms Lau also assists the Managing Director to explore and evaluate new businessopportunities for our Group. Prior to founding our Company, she was a bank of®cer at BanqueIndoSuez from 1972 to 1973. Ms Lau graduated from Nanyang University with a Bachelor of Artsdegree.
58
Mr Ang Luck Seh is the Director (Operations) of our Group. He was appointed as a Director of ourCompany on 22 March 2001. He is responsible for operational management of the Company andAPP(S). In addition to overseeing the day-to-day business activities, he is responsible for managingnew projects. As the Management Representative of our Company's ISO Committee, Mr Ang playeda key role in achieving our Group's ISO 9002 and ISO 9001 certi®cations. Prior to joining our Group in1993, he was a Superintendent(B) with the Customs and Excise Department for 20 years. Mr Angholds a Bachelor of Arts (Honours) degree from Nanyang University and a Diploma of ManagementStudies from the Singapore Institute of Management.
Dr Tan Poi Sik was appointed as an Independent Director of our Company on 22 March 2001. From1991, Dr Tan was the General Manager of ACMA ICCL Pte Ltd, a subsidiary of ACMA Ltd. He left in1995 and joined Rehau Pte Ltd as the Director of Administration cum Company Secretary, in which hewas responsible for the planning, set-up operational and logistics management of its sales of®ces andmanufacturing plants in the Asia Paci®c region. In 1999, Dr Tan left Rehau Pte Ltd and joined Far EastOrganization as Chief Manager of Leasing and Property Management and was responsible forcustomer services and facilities management. Dr Tan left Far East Organization in 2000 and joinedCKS Property Consultants Pte Ltd as Associate Director responsible for property management andplant and machinery valuation services. Dr Tan is a member of the Singapore Institute of Directorsand has held several other directorships in the past. Dr Tan holds a Ph.D. in Chemical Engineeringfrom the University of Bradford (United Kingdom), Master of Business Administration from the BrunelUniversity (United Kingdom), Postgraduate Diploma in Business Law and Master of Science in EstateManagement from the National University of Singapore (Singapore) as well as the Master of Businessin Professional Accounting from the Victoria University of Technology (Australia).
Dr Lim Heng Kow was appointed as an Independent Director of our Company on 22 March 2001. DrLim is currently a Director and the Audit Committee Chairman of China Everbright Paci®c Ltd and adirector of Wee Poh Holdings Limited. He is also currently an advisor to the Honorary Consulate of theRepublic of Madagascar. In 1990, Dr Lim was a Joint Managing Director of Apollo Enterprise Ltd. Heleft in 1991 and joined City Development Limited as its General Manager responsible for the Group'soverseas operations. In 1993, he left City Development Ltd and joined Sin Mui Sha Seaworld,Shenzhen, China as its Senior Consultant. Dr Lim left and joined China Everbright Paci®c Ltd in1996. Dr Lim holds a Ph.D. in Geography from University of London, a Master Arts degree fromUniversity of Ibadan and a Bachelor of Arts degree from Nanyang University.
Ms Lau Woon Chan is the wife of Dr Ho Leng Woon. Ms Lau Woon Chan is also the sister of Ms LauTong Hong, a substantial shareholder of our Company.
Save as disclosed above, none of our Directors have any relationship with any of our other Directorsor substantial shareholders of our Company.
59
The list of present and past directorships of each Director for the last ®ve years, other than in theCompany, is set out below:
Name Present Directorships Past Directorships
Dr Ho Leng Woon Group companies Group companiesAlpha Paci®c Petroleum (S) Pte LtdAP Petrochemical Pte LtdA.I.M. Chemical Industries Pte Ltd
Nil
Other companies Other companiesEastwood Health Care Consultancy
Pte LtdEast Coast Medicare Centre Pte LtdAlpha Paci®c Petroleum (M) Sdn. Bhd.Shanghai Golden Toe Art and Craft
Co. Ltd.
NilTai Yuan Jing Yan Lubricant Co., Ltd
Ms Lau Woon Chan Group companies Group companiesAlpha Paci®c Petroleum (S) Pte LtdA.I.M. Chemical Industries Pte Ltd
Nil
Other companies Other companiesAlpha Paci®c Petroleum (M) Sdn. Bhd. Nil
Mr Ang Luck Seh Group companies Group companiesAP Petrochemical Pte Ltd Nil
Other companies Other companiesAlpha Paci®c Petroleum (M) Sdn. Bhd. Universal Petroleum Sdn. Bhd.
Dr Tan Poi Sik Group companies Group companiesNil Alpha Paci®c Petroleum (S) Pte Ltd
Other companies Other companiesNil Acma Megacool Pte Ltd
P.T. Rehau Indonesia
Dr Lim Heng Kow Group companies Group companiesNil Nil
Other companies Other companiesXiang Long International Pte LtdFount Distance Learning Pte LtdFount Education Pte LtdSMIN Pte LtdChina Everbright Paci®c LtdWee Poh Holdings Ltd
Floritech Singapore Pte LtdJaya Netting Industries BhdHo Wah Genting International LtdGuoxin Investment Pte LtdPernik Investments Pte LtdUniversal Homes Ltd, New ZealandIBR Technology Pty Ltd, Australia
60
Independent Directors
The Independent Directors of our Company are Dr Tan Poi Sik and Dr Lim Heng Kow. Dr Tan Poi Sikand Dr Lim Heng Kow do not have any existing business or professional relationship with the Group,its other Directors and substantial shareholders.
Dr Tan Poi Sik was formerly a non-executive director of our Company from March 1989 to May 1995and a non-executive director of APP(S) from April 1989 to June 1995. Dr Lim Heng Kow was also anon-executive director of our Company from May 1994 to December 1998. During their tenure as non-executive directors, Dr Tan Poi Sik and Dr Lim Heng Kow had provided invaluable business advice tothe Group. Dr Tan Poi Sik resigned from his position as non-executive director of our Company andAPP(S) in 1995 at the request of his then employer, Rehau Pte Ltd. Rehau Pte Ltd is a polymercomponent manufacturer and Dr Tan's resignation was to avoid any possible con¯icts of interest. DrLim Heng Kow had resigned as non-executive director of our Company on his own accord in 1998.
Audit Committee
Our Audit Committee comprises Dr Tan Poi Sik, Dr Lim Heng Kow and Dr Ho Leng Woon. TheChairman of the Audit Committee is Dr Tan Poi Sik.
Corporate Governance, Practice and Principles
Our Directors understand the importance of corporate governance and are committed to highstandards of accountability to ensure that the interest of our Group's shareholders are protected,and will follow closely the best practices outlined in the Best Practices Guide issued by SGX-ST.
The main purpose of the Audit Committee is to assist the Board of Directors in ful®lling their ®duciaryresponsibilities relating to corporate governance and reporting practices of our Group.
The Audit Committee will meet periodically to perform the following functions:
(a) to review with the external auditors the audit plan, their evaluation of the system of internalcontrols, their audit report, their management letter and the management's response;
(b) to review the half-year and annual ®nancial statements and balance sheet and pro®t and lossaccounts before submission to the Board for approval, focusing in particular, on changes inaccounting policies and practices, major risk areas, signi®cant adjustments resulting from theaudit, the going concern statement, compliance with accounting standards as well ascompliance with any stock exchange and statutory/regulatory requirements;
(c) to review the internal control and procedures and ensure co-ordination between the externalauditors and the management, reviewing the assistance given by the management to theauditors, and discuss problems and concerns, if any arising from the interim and ®nal audits,and any matters which the auditors may wish to discuss (in the absence of the managementwhere necessary);
(d) to review and discuss with the external auditors any suspected fraud or irregularity, or suspectedinfringement of any relevant laws, rules or regulations, which has or is likely to have a materialimpact on the Group's operating results or ®nancial position, and the management's response;
(e) to consider the appointment or re-appointment of the external auditors and matters relating toresignation or dismissal of the auditors;
(f) to review and approve interested person transactions falling within the scope of Chapter 9A ofthe SGX-ST Listing Manual;
(g) to undertake such other reviews and projects as may be requested by the Board and will reportto the Board its ®ndings from time to time on matters arising and requiring the attention of theAudit Committee; and
(h) to generally undertake such other functions and duties as may be required by statute or theSGX-ST Listing Manual, and by such amendments made thereto from time to time.
61
Senior Management
The day-to-day operations of our Group are entrusted to the Executive Directors and an experiencedand quali®ed team of Executive Of®cers responsible for the different functions. The particulars of theExecutive Of®cers are set out below:
Name Age Qualification Current Position Address
Mr Chang KwokWah
49 M.B.A. Managing Director(A.I.M. ChemicalIndustries Pte Ltd)
56 Sunset WaySingapore 597081
Ms Koh ChooHuay
39 B.BA. Import & ExportManager
142 Bt Batok Street 11#16-03Singapore 650142
Ms Wong Sau Har@ Patricia Tey
47 B.Acc. Senior Accountant 501 Serangoon NorthAvenue 4, #09-488Singapore 550501
Mr Chew ChuanKiat
47 B.Com. Business DevelopmentManager
54A Frankel AvenueSingapore 458181
Mr Yu Bai Qiang 30 B. Chem. Eng. Head, TechnicalDepartment
Block 305, Bukit BatokStreet 31, #09-7Singapore 650305
Mr He Han Ming 33 B.Eng. Head, ProductionDepartment
167 Boon Lay Drive#03-657Singapore 640167
Mr Chang Kwok Wah is the Managing Director of A.I.M. He has been with A.I.M. since 1983 as itsFinance and Administration Manager. He was subsequently promoted to Managing Director in 1992.As the Managing Director, Mr Chang is responsible for the company's overall ®nancial performanceand operations. Together with his team of managers, Mr Chang plays a leading role in thecompany's business development, sales, ®nance, production, and general administration activities.Mr Chang graduated with a Masters degree in Business Administration from Brunel University,United Kingdom.
Ms Koh Choo Huay, Winnie is the Import and Export Manager of the Company. Ms Koh joined ourGroup in 1982 and has been with our Group for more than 18 years. She is responsible for all theGroup's import and export activities including negotiating with overseas suppliers for purchase ofmaterials and ensuring all export shipments to customers are on schedule. She graduated with aBachelor of Business in Business Administration degree from Royal Melbourne Institute ofTechnology in 1995.
Ms Wong Sau Har @ Patricia Tey joined our Company as a Senior Accountant in March 2000. She isresponsible for our Group's ®nancial and accounting matters. Prior to joining the Company, she was aFinance Manager with Stamford Tyres International Pte Ltd from 1997 to 1999. Ms Wong has alsoworked as a Senior Accountant at Maxtor Peripherals (S) Pte Ltd from 1988 to 1995. Ms Wonggraduated with a Bachelor of Accountancy degree from the University of Singapore in 1978 and hasbeen a member of the Institute of Certi®ed Public Accountants of Singapore since 1991.
62
Mr Chew Chuan Kiat joined the Company in August 2000 as the Business Development Manager.His areas of responsibility include new business developments including strategic marketing andnew projects. Mr Chew began his career as a Credit Of®cer with Bank of Tokyo in 1978. He leftBank of Tokyo to join Royal Bank of Canada in 1980, in which he held similar position. He was theAssistant Managing Director of Nordic Designs Pte Ltd for six years. Prior to joining the Group, hewas the Director of Operations and Business development in Sinko Maritime Services Pte Ltd, ashipping and trading company for the last twelve years. Mr Chew holds a Bachelor of Commerce(Industrial and Commercial Management) from Nanyang University, Singapore in 1975.
Mr Yu Bai Qiang is the Head of the Technical Division of our Company. He has been with theCompany since June 1999. He is responsible for all technical matters, including research anddevelopment, quality control and technical services. His area of responsibility also requires him toassist in production planning, conduct presentations and courses for customers and employees andliase with suppliers on quality matters. Prior to joining the Company, Mr Yu was a Production Engineerwith sino-foreign joint venture company, Xin Gong Synthetic Leather Co from 1993 to 1995, andsubsequently a Technical Of®cer with MC Packaging Pte Ltd, manufacturer of packing materials,from 1995 to 1999. Mr Yu holds a Bachelor of Organic Chemical Engineering degree from ZhejiangUniversity, China in 1993.
Mr He Han Ming joined the Company in 1999 as a Production Engineer. He is presently the Head ofthe Production Department. Mr He is responsible for production and all operational activities. Togetherwith Mr Yu, he is involved in production scheduling and planning. Mr He was an engineer withLiaoyang Lida Plastics Co. Ltd, China from 1990 to 1994, and with TKR (S) Pte Ltd from 1995 to1998. He holds an engineering degree from North-West Polytech University, China.
None of the Executive Of®cers are related to each other or to any Director or substantial shareholderof our Company.
The list of present and past directorships of each Executive Of®cer for the last ®ve years is set outbelow:
Name Present Directorships Past Directorships
Mr Chang Kwok Wah Group companies Group companiesA.I.M. Chemical Industries Pte Ltd Nil
Other companies Other companiesNil Asiatic Agricultural Industries Pte Ltd
Innovative Data Pte Ltd
Ms Koh Choo Huay,Winnie
Group companiesNil
Group companiesNil
Other companies Other companiesFocal Point Real Estate (S) Pte Ltd Nil
Ms Wong Sau Har@ Patricia Tey
Group companiesNil
Group companiesNil
Other companiesNil
Other companiesNil
Mr Chew Chuan Kiat Group companiesNil
Group companiesNil
Other companiesGrand Creation Pte LtdSinko Maritime Services Pte LtdBrickman Al-Ghalayani Pte Ltd
Other companiesMagicorner Private LimitedMaterial Procurement Co Pte LtdGolden Horse International Trading (S)
Pte LtdRed Bonus Enterprises Pte Ltd
63
Name Present Directorships Past Directorships
Mr Yu Bai Qiang Group companiesNil
Group companiesNil
Other companiesNil
Other companiesNil
Mr He Han Ming Group companiesNil
Group companiesNil
Other companiesNil
Other companiesNil
Staff
As at 31 December 2000, our Group had 84 full-time employees. The employees are not unionised.The number of full time employees is not subject to any signi®cant seasonal ¯uctuations. Therelationship between the management and staff is good and there has not been any incidence ofwork stoppages or labour disputes, which affected our operations.
Number of employees as at 31 December FY1998 FY1999 FY2000
Lubricant 24 39 46
Number of employees as at 31 Mar 1999 31 Mar 2000 31 Dec 2000
Chemical 30 36 38
64
Management Reporting Structure of Our Group
Chairman &Managing Director
______________Ho Leng Woon
BOARD OFDIRECTORS
Director(Operations)
_________________Ang Luck Seh
Director(Finance)
________________Lau Woon Chan
IMPORT & EXPORT
Import & ExportManager
______________Winnie Koh Choo
Huay
Business Development
Manager______________Chew Chuan Kiat
MARKETING & SALES
Head,ProductionDepartment
____________He Han Ming
PRODUCTION
SeniorAccountant
____________Wong Sau Har@Patricia Tey
FINANCE &ACCOUNTS
ManagingDirector
____________Chang Kwok
Wah
A.I.M. CHEMICALINDUSTRIES PTE LTD
Head,Technical
Department____________Yu Bai Qiang
TECHNICAL
Directorin-charge
____________Ang Luck Seh
ALPHA PACIFICPETROLEUM (S) PTE LTD
65
Auditors
Chio Lim & Associates has been our Company's auditors since FY1999. The Directors currently haveno intention of changing the auditors after the listing of the Company.
Compensation
Directors' Remuneration
The remuneration of our Directors on an aggregate basis and in remuneration bands for FY1999 andFY2000 are as follows:
(a) Aggregate Directors' Remuneration
$'000 FY1999 FY2000
Executive Directors1 370 407
Non-Executive Directors2 4 2
Total 374 409
Notes:1 Executive Directors comprise Dr Ho Leng Woon and Ms Lau Woon Chan. Mr. Ang Luck Seh was appointed an
Executive Director on 22 March 2001. The above remuneration to the Executive Directors does not includeremuneration paid to Mr. Ang who was a Senior Manager prior to his appointment as an Executive Director of theCompany.
2 Non-executive Directors comprise Ms Ho Aye Eng and Ms Lau Tong Hong. Ms Ho Aye Eng is the sister of Dr Ho LengWoon. Ms Lau Tong Hong is the sister of Ms Lau Woon Chan. Both Ms Ho Aye Eng and Ms Lau Tong Hong ceased tobe directors of the Company on 8 June 2000.
(b) Number of Directors in Each Remuneration Bands
------------------------------------------------------- FY1999 ------------------------------------------------------ ------------------------------------------------------- FY2000 ------------------------------------------------------
ExecutiveDirectors1
Non-ExecutiveDirectors2 Total
ExecutiveDirectors1
Non-ExecutiveDirectors2 Total
$500,000 and above Ð Ð Ð Ð Ð Ð
$250,000 to $499,999 1 Ð 1 1 Ð 1
$0 to $249,999 1 2 3 1 2 3
Total 2 2 4 2 2 4
Notes:1 Executive Directors comprise Dr Ho Leng Woon and Ms Lau Woon Chan. Mr. Ang Luck Seh was appointed an
Executive Director on 22 March 2001. The above remuneration to the Executive Directors does not includeremuneration paid to Mr. Ang who was a Senior Manager prior to his appointment as an Executive Director of theCompany.
2 Non-executive Directors comprise Ms Ho Aye Eng and Ms Lau Tong Hong. Ms Ho Aye Eng is the sister of Dr Ho LengWoon. Ms Lau Tong Hong is the sister of Ms Lau Woon Chan. Both Ms Ho Aye Eng and Ms Lau Tong Hong ceased tobe directors of the Company on 8 June 2000.
Executive Of®cers' Remuneration
For the ®nancial year ended 31 December 2000, our Executive Of®cers received an aggregate amountof $444,732 as compensation from our Group.
66
SERVICE AGREEMENTS
Our Company has entered into separate service agreements (``Service Agreements'') with Dr. Ho LengWoon and Ms Lau Woon Chan on 1 September 2000 and with Mr. Ang Luck Seh on 22 March 2001(each an ``Executive Director'' and collectively the ``Executive Directors'') for an initial period of twoyears from the respective dates of the Service Agreements. After the initial period of two years theService Agreements may be terminated by either party giving not less than six months' writtennotice to the other party. The Service Agreement may also be terminated by our Company at anytime immediately upon giving notice on the occurrence of certain events such as misconduct or amaterial breach by the Executive Directors of their obligations under the Service Agreements. Exceptfor termination by payment of salary in lieu of notice as provided for under the Service Agreements, nobene®t or compensation is payable under the terms of the Service Agreements to the ExecutiveDirectors in the event of the termination of their Service Agreements in accordance with the terms ofthe Service Agreements.
Under the terms of the Service Agreements, Dr Ho Leng Woon is entitled to a salary of $20,000 permonth commencing 1 September 2000, an annual bonus equivalent to three months' basic salary forevery twelve months of service. He has been granted the bene®t of the use of a motor car provided byour Company and is entitled to reimbursement of motor car expenses up to a maximum amount ofS$800 per month. Ms Lau Woon Chan is entitled to a salary of $6,000 per month commencing 1September 2000, an annual bonus equivalent to three months' basic salary for every twelve monthsof service and reimbursement of motor vehicle expenses up to a maximum amount of S$600 permonth. Mr Ang Luck Seh is entitled to a salary of $6,000 per month commencing 1 March 2001,annual bonus equivalent to three months' basic salary for every twelve months of service andreimbursement of motor vehicle expenses up to a maximum amount of S$600 per month.
The Board of Directors will review the remuneration packages of the Executive Directors annually andmay make additional payments, allowances or bene®ts to the Executive Directors at its discretion.
In addition to the above, in respect of each ®nancial year, the Executive Directors shall be entitled toincentive bonuses as follows:
(a) where Pro®ts for that ®nancial year is $2,500,000 or more but less than $3,000,001, Dr. Ho LengWoon shall be entitled to an incentive bonus of an amount equivalent to 1.5% of the Pro®ts forthat ®nancial year while Ms Lau Woon Chan shall be entitled to an incentive bonus equivalent to0.75% of the Pro®ts for that ®nancial year;
(b) where Pro®ts for that ®nancial year is $3,000,001 or more but less than $3,500,001, Dr. Ho LengWoon shall be entitled to an incentive bonus of an amount equivalent to 2.5% of the Pro®ts forthat ®nancial year, Ms Lau Woon Chan shall be entitled to an incentive bonus equivalent to1.25% of the Pro®ts for that ®nancial year and Mr Ang Luck Seh shall be entitled to anincentive bonus equivalent to 0.1% of the Pro®ts for that ®nancial year;
(c) where Pro®ts for that ®nancial year is $3,500,001 or more, Dr. Ho Leng Woon shall be entitled toan incentive bonus of an amount equivalent to 3.5% of the Pro®ts for that ®nancial year, Ms LauWoon Chan shall be entitled to an incentive bonus equivalent to 1.75% of the Pro®ts for that®nancial year and Mr Ang Luck Seh shall be entitled to an incentive bonus equivalent to 0.75%of the Pro®ts for that ®nancial year;
``Pro®ts'' shall in relation to each ®nancial year mean the aggregate of the net pro®ts of our Groupbefore tax, extraordinary items and the above-mentioned incentive bonuses, less minority interestsbased on the audited accounts of our Group for that ®nancial year.
The above-mentioned incentive bonuses are inclusive of CPF contributions required to be made bythe Company in respect thereof.
67
Under the terms of the Service Agreements, each Executive Director has agreed that he shall notduring his employment and within a period of one year upon his ceasing to be employed by ourCompany within Singapore or any other country in which our Group carries on business, directly orindirectly, except with the prior written consent of our Company: ±
(a) either on his own account or for any other person directly or indirectly solicit, interfere with orendeavour to entice away from any company in our Group any person who to his knowledge isnow or has been a client, customer or executive of, or in the habit of dealing with our Group; and
(b) either alone or jointly with or as a manager, agent for, director or executive of any person, ®rm orcompany, directly or indirectly carry on or be engaged or concerned or interested in the businessundertaken or engaged by our Group (the ``Relevant Business'') or in any business similar to orin competition with the Relevant Business.
Each Executive Director has also further agreed that he shall not during his employment with ourCompany and at all times thereafter without limit in point in time, directly or indirectly, except withthe prior written consent of our Company: ±
(a) use the name ``SINO'', ``AP'', ``Alpha Paci®c'' or any name similar to that of any company in ourGroup or any colourable imitation thereof in connection with any business; and
(b) use any trade mark, patent or any other intellectual property right of our Group in connectionwith any business not belonging to our Group.
As Ms Lau Woon Chan and Mr Ang Luck Seh are shareholders in APP(M), the Company has given itsconsent to Ms Lau's and Mr Ang's use of the name ``Alpha Paci®c Petroleum'' to the extent of beingshareholders of APP(M).
Had the Service Agreements been in place with effect from 1 January 2000, the aggregateremuneration (including CPF contributions thereon and bene®ts-in-kind) payable to the ExecutiveDirectors would have been $781,580 instead of $634,274 and the pro®t before tax of our Group forFY2000 would have been $3,685,116 instead of $3,832,422.
Other than the remuneration payable to them under the above-mentioned Service Agreements, Dr HoLeng Woon and Ms Lau Woon Chan who serve as directors of A.I.M. may also receive directors' feesas may be approved by the Company as shareholder of A.I.M.
Our Group has also entered into service agreements with our Executive Of®cers, which typicallyprovide for the remuneration payable to the Executive Of®cers, annual leave entitlement, terminationarrangements and certain restrictive covenants.
Save as disclosed above, none of the Directors is entitled to any performance bonus or pro®t sharing.
Save as disclosed above, there are no other existing or proposed service agreements between ourCompany or any of its subsidiaries and any of the Directors or Executive Of®cers.
68
SHARE CAPITAL
The Company was incorporated in Singapore under the name of Huan Chew Oil Trading Pte. Ltd. on24 December 1975 as a private limited company. On 24 March 2001, it changed its name to AP OilInternational Limited in connection with the Company's conversion to a public company limited byshares.
As at 31 December 2000, the date of the last audited ®nancial statements of the Group, the Companyhad an authorised share capital of $3,000,000 comprising 3,000,000 ordinary shares of $1.00 eachand the issued and paid up share capital of the Company was $1,560,000 comprising 1,560,000ordinary shares of $1.00 each.
At an Extraordinary General Meeting held on 22 March 2001, the shareholders of the Companyapproved, inter alia, the following:
(a) the conversion of the Company into a public limited company;
(b) the change of its name to ``AP Oil International Limited'';
(c) the adoption of a new set of Articles of Association of the Company;
(d) the alteration of the Memorandum of Association of the Company to remove provisionsrestricting membership in the Company to Singapore citizens and Singapore companies;
(e) an increase in the authorised share capital of the Company from $3,000,000 divided into3,000,000 shares of $1.00 each to $50,000,000 divided into 50,000,000 shares of $1.00 each;
(f) the capitalisation of $1,560,000 from unappropriated pro®t by way of a bonus issue of 1,560,000ordinary shares of $1.00 each fully paid to the existing shareholders of the Company;
(g) the sub-division of each share of $1.00 each in the authorised and issued and paid-up sharecapital of the Company into 20 shares of $0.05 each; and
(h) subject to the provisions of Section 161 of the Companies Act, Cap. 50 and upon the provisionsof the new Articles of Association of the Company becoming effective, and the approval of theSGX-ST to the listing of the issued ordinary shares of the Company on the Of®cial List of SGX-Sesdaq (the ``Listing'') being granted, the Directors be authorised with effect from the date of theListing to allot and issue such further shares in the capital of the Company at any time and fromtime to time thereafter to such persons and on such terms and conditions and for such purposesas the Directors may deem ®t provided always that the aggregate number of shares to be issuedshall not exceed ®fty per cent. (50%) of the issued share capital of the Company, of which theaggregate number of shares to be issued other than on a pro-rata basis to existing shareholdersshall not exceed twenty per cent. (20%) of the issued share capital of the Company for the timebeing and that such authority shall continue in force until the conclusion of the next AnnualGeneral Meeting or the expiration of the period within which the next Annual General Meetingof the Company is required by law to be held, whichever is the earlier.
At an Extraordinary General Meeting held on 15 May 2001, the shareholders of the Companyapproved, inter alia, the following:
(a) the capitalisation of $390,000 from unappropriated profit by way of a bonus issue of 7,800,000ordinary shares of $0.05 each fully paid to the existing shareholders of the Company;
(b) the offer and issue of 17,550,000 New Shares which are the subject of the Invitation. The NewShares, when paid in full, will rank, pari passu in all respects with the existing Shares of theCompany; and
(c) the listing and quotation of the issued ordinary shares of the Company (including the 17,550,000New Shares to be allotted and issued pursuant to Resolution (h) above) on the Of®cial List ofSGX-Sesdaq.
As at the date of this Prospectus, there is only one class of shares being ordinary shares of $0.05each. There are no founder, management or deferred shares. The rights and privileges attached tothe shares are as stated in the Articles of Association of the Company.
69
The details of the changes in our issued and paid-up share capital since 31 December 2000, being thedate of our last audited ®nancial statements, and our issued and paid-up share capital immediatelyafter the Invitation are as follows:±
Number of Shares $
Issued and fully paid ordinary shares of $1.00 each as at31 December 2000 1,560,000 1,560,000
Bonus issue on 22 March 2001 1,560,000 1,560,000
3,120,000 3,120,000
Sub-division of shares of$1.00 each to shares of $0.05 each 62,400,000 3,120,000
Bonus issue on 15 May 2001 7,800,000 390,000
Pre-invitation Share Capital 70,200,000 3,510,000
New Shares to be issued for public subscription 17,550,000 877,500
Post-invitation Share Capital 87,750,000 4,387,500
The authorised share capital of the Company as at 31 December 2000, before and after adjusting forthe increase in authorised share capital and the Share Split is set forth below. This should be read inconjunction with the Accountants' Report set out on pages 82 to 112 of this Prospectus.
As at 31 December 2000 As adjusted
Authorised Share Capital $ $
3,000,000 shares of $1.00 each 3,000,000 Ð
1,000,000,000 shares of $0.05 each Ð 50,000,000
The shareholders' funds of the Company as at 31 December 2000, before and after adjusting for theBonus Issues, the Share Split and the issue of the New Shares pursuant to the Invitation, are set forthbelow. This should be read in conjunction with the Accountants' Report set out on pages 82 to 112 ofthis Prospectus.
As at 31 December 2000 As adjusted
Shareholders' Funds $'000 $'000
Issued and fully paid up Shares 1,560 4,387
Share premium Ð 2,122
Retained pro®ts 4,378 1,711
Total shareholders' funds 5,938 8,220
70
SHAREHOLDERS
The shareholders of the Company and their respective total shareholdings immediately before theInvitation are set out below:±
Direct Interest Deemed Interest Total Interest
Number ofShares %
Number ofShares %
Number ofShares %
Directors
Ho Leng Woon(1), (3), (4) 38,250,000 54.49 14,850,000 21.15 53,100,000 75.64
Lau Woon Chan(1), (2) 14,850,000 21.15 38,250,000 54.49 53,100,000 75.64
Ang Luck Seh 450,000 0.64 Ð Ð 450,000 0.64
Tan Poi Sik Ð Ð Ð Ð Ð Ð
Lim Heng Kow Ð Ð Ð Ð Ð Ð
Holder of 5% or more
Lau Tong Hong(2) 4,500,000 6.41 Ð Ð 4,500,000 6.41
Others
Ho Aye Eng(3) 2,025,000 2.88 Ð Ð 2,025,000 2.88
Ho Chor Suan(3) 225,000 0.32 Ð Ð 225,000 0.32
Ho Kei Wen(4) 450,000 0.64 Ð Ð 450,000 0.64
Cheng Wing Quee(5) 2,700,000 3.85 Ð Ð 2,700,000 3.85
Koh Kwee Kee(5) 2,700,000 3.85 Ð Ð 2,700,000 3.85
Tan Kia Choo(5) 2,700,000 3.85 Ð Ð 2,700,000 3.85
Elizabeth Syn(5) 1,350,000 1.92 Ð Ð 1,350,000 1.92
Total 70,200,000 100.00
Notes:±
(1) Ho Leng Woon is the husband of Lau Woon Chan.
(2) Lau Tong Hong is the sister of Lau Woon Chan.
(3) Ho Aye Eng and Ho Chor Suan are the sisters of Ho Leng Woon.
(4) Ho Kei Wen is the nephew of Ho Leng Woon and an employee of the Company.
(5) Cheng Wing Quee, Koh Kwee Kee, Tan Kia Choo and Elizabeth Syn are not related to any Director or substantialshareholder of the Company.
71
The shareholders of the Company and their respective total shareholdings immediately after theInvitation are set out below:±
Direct Interest Deemed Interest Total InterestNumber of
Shares %Number of
Shares %Number of
Shares %
Directors
Ho Leng Woon(1), (3), (4) 38,250,000 43.59 14,850,000 16.92 53,100,000 60.51
Lau Woon Chan(1), (2) 14,850,000 16.92 38,250,000 43.59 53,100,000 60.51
Ang Luck Seh 450,000 0.51 Ð Ð 450,000 0.51
Tan Poi Sik(5) Ð Ð Ð Ð Ð Ð
Lim Heng Kow(5) Ð Ð Ð Ð Ð Ð
Holder of 5% or more
Lau Tong Hong(2) 4,500,000 5.13 Ð Ð 4,500,000 5.13
Others
Ho Aye Eng(3) 2,025,000 2.31 Ð Ð 2,025,000 2.31
Ho Chor Suan(3) 225,000 0.25 Ð Ð 225,000 0.25
Ho Kei Wen(4) 450,000 0.51 Ð Ð 450,000 0.51
Cheng Wing Quee(6) 2,700,000 3.08 Ð Ð 2,700,000 3.08
Koh Kwee Kee(6) 2,700,000 3.08 Ð Ð 2,700,000 3.08
Tan Kia Choo(6) 2,700,000 3.08 Ð Ð 2,700,000 3.08
Elizabeth Syn(6) 1,350,000 1.54 Ð Ð 1,350,000 1.54
Public 17,550,000 20.00 17,550,000 20.00
Total 87,750,000 100.00
Notes:
(1) Ho Leng Woon is the husband of Lau Woon Chan.
(2) Lau Tong Hong is the sister of Lau Woon Chan.
(3) Ho Aye Eng and Ho Chor Suan are the sisters of Ho Leng Woon.
(4) Ho Kei Wen is the nephew of Ho Leng Woon and an employee of the Company. He will be offered 7,000 Reserved Sharesand he may dispose of or transfer his shares in the Company at any time after the admission of the Company to the Of®cialList of SGX-Sesdaq.
(5) Tan Poi Sik and Lim Heng Kow will be offered 250,000 Reserved Shares each and they may dispose of or transfer theirshares in the Company at any time after the admission of the Company to the Of®cial List of SGX-Sesdaq. The ReservedShares are offered in recognition of their services and contribution in view of their roles as Independent Directors.
(6) Cheng Wing Quee, Koh Kwee Kee, Tan Kia Choo and Elizabeth Syn are not related to any Director or substantialshareholder of the Company.
Our Director and substantial shareholder, Ho Leng Woon, had acquired a total of 405,000 ordinaryshares of $1.00 each in the Company from Ho Lau Chwee, Tay Khi Sang and Ho Aye Eng on 1 June2000, thereby increasing his percentage shareholding in the Company from about 28.53% to 54.49%.
Save as disclosed above, there was no signi®cant change in the percentage shareholding of oursubstantial shareholders in the last 3 years.
MORATORIUM
To demonstrate their commitment to our Group, the controlling shareholders, namely Dr Ho LengWoon and Ms Lau Woon Chan and their associates Ms Ho Aye Eng, Ms Ho Chor Suan and Ms LauTong Hong and our Director, Mr Ang Luck Seh, who in aggregate hold 60,300,000 Shares,representing approximately 68.71% of our Company's issued and paid-up share capital immediatelyafter the Invitation, have given contractual undertakings to the Manager as follows:
(a) not to sell, realise, transfer or otherwise dispose of any part of their respective shareholdings inour Company for a period of 12 months (the ``Initial Period'') commencing from the date of ourCompany's admission to the Of®cial List of SGX-Sesdaq (the ``Listing Date''); and
(b) for a period of 12 months after the Initial Period, not to reduce their individual shareholdings tobelow 50 per cent. of their respective shareholdings in our Company as at the Listing Date.
72
DESCRIPTION OF OUR ORDINARY SHARES
The discussion below provides information about our share capital, the main provisions of our Articlesof Association and the laws of Singapore relating to our shares. This description is only a summaryand is quali®ed by reference to Singapore law and our Articles of Association.
Ordinary Shares
Our authorised capital is $50,000,000 consisting of 1,000,000,000 shares of par value $0.05 each. Wehave only one class of issued shares, namely, our ordinary shares, which have identical rights in allrespects and rank equally with one another. Our Articles of Association provide that we may issueshares of a different class with preferential, quali®ed, deferred, or other special rights, privileges orconditions as our Company may by ordinary resolution determine and may issue preference shareswhich are, or at our option are, subject to redemption, subject to certain limitations. Our Directorsmay issue shares at a premium. If shares are issued at a premium, a sum equal to the aggregateamount or value of the premium will, subject to certain exceptions, be transferred to a sharepremium account.
As of the date of this Prospectus, 70,200,000 ordinary shares of par value $0.05 are issued andpaid-up. All of our ordinary shares are in registered form. We may, subject to the provisions of theCompanies Act and the rules of the SGX-ST, purchase our own ordinary shares. However, we maynot, except in circumstances permitted by the Companies Act, grant any ®nancial assistance for theacquisition or proposed acquisition of our own ordinary shares.
New Shares
New shares may only be issued with the prior approval of our shareholders in a general meeting of ourshareholders. The approval, if granted, will lapse at the conclusion of the annual general meetingfollowing the date on which the approval was granted. Our shareholders have given us generalauthority (details of which are given on page 69 of this Prospectus) to issue shares prior to our nextAnnual General Meeting. Subject to the foregoing, the provisions of the Companies Act and anyspecial rights attached to any class of shares currently issued, all new ordinary shares are under thecontrol of our Board of Directors who may allot and issue the same with such rights and restrictionsas it may think ®t.
Shareholders
Only persons who are registered in our register of shareholders and, in cases in which the person soregistered is the CDP, the persons named as the depositors in the depository register maintained bythe CDP for our ordinary shares, are recognised as our shareholders.
We will not, except as required by law, recognise any equitable, contingent, future or partial interest inany ordinary share or other rights for any ordinary share other than the absolute right thereto of theregistered holder of the ordinary share or of the person whose name is entered in the depositoryregister for that ordinary share. We may close the register of shareholders for any time or times if weprovide the Registrar of Companies and Business of Singapore at least 14 days' notice. However, theregister may not be closed for more than 30 days in aggregate in any calendar year. We typically closethe register to determine shareholders' entitlement to receive dividends and other distributions.
73
Transfer of Ordinary Shares
Save for the moratorium undertakings described on page 72 of this Prospectus, there is no restrictionon the transfer of our fully paid ordinary shares except where required by law. Our Board of Directorsmay only decline to register any transfer of ordinary shares which are not fully paid shares or ordinaryshares on which we have a lien. Our ordinary shares may be transferred by a duly signed instrument oftransfer in the form approved by our Board of Directors and the SGX-ST. Our Board of Directors mayalso decline to register any instrument of transfer unless, among other things, it has been dulystamped and is presented for registration together with the share certi®cate and such other evidenceof title as they may require. We will replace lost or destroyed certi®cates for our ordinary shares if weare properly noti®ed and if the applicant pays a fee which will not exceed $1.00 and furnishes anyevidence and indemnity that our Board of Directors may require.
General Meetings of Shareholders
We are required to hold an Annual General Meeting every year. Our Board of Directors may convenean extraordinary general meeting whenever it thinks ®t and must do so if shareholders representingnot less than 10% of the total voting rights of all shareholders request in writing that such a meetingbe held. In addition, two or more shareholders holding not less than 10% of our issued share capitalmay call a meeting. Unless otherwise required by Singapore law or by our Articles of Association,voting at general meetings is by ordinary resolution, requiring an af®rmative vote of a simple majorityof the votes cast at that meeting. An ordinary resolution suf®ces, for example, for the appointment ofDirectors. A special resolution, requiring the af®rmative vote of at least 75% of the votes cast at themeeting, is necessary for certain matters under Singapore law, including the voluntary winding up ofour company, amendments to our Memorandum and Articles of Association, a change of ourcorporate name and a reduction in our share capital, share premium account or capital redemptionreserve fund. We must give at least 21 days' notice in writing for every general meeting convened forthe purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days'notice in writing. The notice must be given to every shareholder who has supplied us with anaddress in Singapore for the giving of notices and must set forth the place, the day and the hour ofthe meeting and, in the case of special business, the general nature of that business.
Voting Rights
A shareholder is entitled to attend, speak and vote at any general meeting, in person or by proxy. Aproxy need not be a shareholder. A person who holds ordinary shares through the CDP book-entryclearance system will only be entitled to vote at a general meeting as a shareholder if his nameappears on the depository register maintained by CDP 48 hours before the general meeting.
Except as otherwise provided in our Articles of Association, two or more shareholders must bepresent in person or by proxy to constitute a quorum at a general meeting. Under our Articles ofAssociation, on a show of hands, every shareholder present in person and each proxy shall haveone vote and, on a poll, every shareholder present in person or by proxy shall have one vote foreach ordinary share held. A poll may be demanded in certain circumstances, including by thechairman of the meeting or by any shareholder present in person or by proxy and representing notless than 10% of the total voting rights of all shareholders having the right to attend and vote at themeeting or by any two shareholders present in person or by proxy and entitled to vote.
Dividends
We may, by ordinary resolution, declare dividends at a general meeting, but we may not pay dividendsin excess of the amount recommended by our Board of Directors. Any dividend we pay must be paidout of our pro®ts or pursuant to Section 69 of the Companies Act. Our Board of Directors may alsodeclare an interim dividend. All dividends are paid pro rata among the shareholders in proportion tothe amount paid upon each shareholder's ordinary shares, unless the rights attaching to an issue ofany ordinary share provides otherwise. Unless otherwise directed, dividends are paid by cheque orwarrant sent through the post to each shareholder at his registered address. Notwithstanding theforegoing, our payment to the CDP of any dividend payable to a shareholder whose name is enteredin the depository register shall, to the extent of payment made to the CDP, discharge us from anyliability to that shareholder in respect of that payment.
74
Bonus and Rights Issue
Our Board of Directors may, with the approval of our shareholders at a general meeting, capitalise anyreserves or pro®ts (including pro®t or monies carried and standing to any reserve or to the sharepremium account) and distribute the same as bonus shares credited as paid-up to our shareholdersin proportion to their shareholdings. Our Board of Directors may also issue rights to take up additionalordinary shares to shareholders in proportion to their shareholdings. Such rights are subject to anyconditions attached to such issue.
Takeovers
The Companies Act and the Singapore Code on Takeovers and Mergers regulate the acquisition ofordinary shares of public companies and contain certain provisions that may delay, deter or preventa future takeover or change in control of our Company. Any person acquiring an interest, either actingsingly or together with other parties acting in concert with him, in 25% or more of our voting sharesmust extend a takeover offer for the remaining voting shares in accordance with the provisions of theSingapore Code on Takeovers and Mergers.
``Parties acting in concert'' include a company and its related and associated companies, a companyand its directors (including their relatives), a company and its pension funds, a person and anyinvestment company, unit trust or other fund whose investment such person manages on adiscretionary basis, and a ®nancial adviser and its client in respect of shares held by the ®nancialadviser and shares in the client held by funds managed by the ®nancial adviser on a discretionarybasis. An offer for consideration other than cash must be accompanied by a cash alternative at notless than the highest price paid by the offeror or parties acting in concert with the offeror within thepreceding 12 months. A mandatory takeover offer is also required to be made if a person holding,either singly or together with parties acting in concert with him, between 25% and 50% of the votingshares acquires additional voting shares representing more than 3% of the voting shares in any 12-month period.
Liquidation or Other Return of Capital
If our Company is liquidated or in the event of any other return of capital, holders of our ordinaryshares will be entitled to participate in any surplus assets in proportion to their shareholdings,subject to any special rights attaching to any other class of shares then existing.
Indemnity
As permitted by Singapore law, our Articles of Association provides that, subject to the CompaniesAct, we will indemnify our Board of Directors and of®cers against all losses or liabilities which hemay sustain or incur in or about the execution of the duties of his of®ce or otherwise in relationthereto. We may not indemnify directors and of®cers against any liability which by law wouldotherwise attach to them in respect of any negligence, default, breach of duty or breach of trust ofwhich they may be guilty in relation to our Company.
Limitations on Rights to Hold or Vote Ordinary Shares
Except as described in ``Voting Rights'' and ``Takeovers'' above, there are no limitations imposed bySingapore law or by our Articles of Association on the rights of non-resident shareholders to hold orvote our ordinary shares.
75
Minority Rights
The rights of minority shareholders of Singapore-incorporated companies are protected under Section216 of the Companies Act, which gives the Singapore courts a general power to make any order,upon application by any shareholder, as they think ®t to remedy any of the following situations:
Ð our affairs are being conducted or the powers of our Board of Directors are being exercised in amanner oppressive to, or in disregard of the interests of, one or more of our shareholders; or
Ð we take an action, or threaten to take an action, or our shareholders pass a resolution, orthreaten to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to,one or more of our shareholders, including the applicant.
Singapore courts have wide discretion as to the relief they may grant and the relief are in no waylimited to those listed in the Companies Act itself.
Without prejudice to the foregoing, Singapore courts may:
Ð direct or prohibit any act or cancel or vary any transaction or resolution;
Ð regulate our affairs in the future;
Ð authorise civil proceedings to be brought in the name of, or on behalf of, our Company by aperson or persons and on such terms as the court may direct;
Ð provide for the purchase of a minority shareholder's shares by our other shareholders or by ourCompany and, in the case of a purchase of shares by us, a corresponding reduction of our sharecapital;
Ð provide that our Memorandum and Articles of Association be amended; or
Ð provide that our Company be wound up.
76
INTERESTED PERSON TRANSACTIONS
Save as disclosed in this Prospectus, none of the Company's directors, chief executive of®cer,substantial shareholders or associates of such directors, chief executive of®cer or substantialshareholders, were or are interested in any material transactions undertaken by our Group within thelast three ®nancial years and up to the date of the Prospectus.
Woon International Enterprise (``Woon International'')
Woon International Enterprise is a sole proprietor ®rm owned by Ms Ho Aye Eng. The ®rm is engagedin general trading and garment business. Ms Ho Aye Eng is the sister of Dr Ho Leng Woon and is ashareholder of our Company.
In FY1998 and FY1999, our Group had on some occasions exported our products to customers inIndonesia and Nepal through Woon International, which acted as our export agent. Our sales toWoon International were on-sold to our customers without any mark-up. No fee was paid to WoonInternational for this export arrangement and all costs were paid directly by us.
We had also purchased certain additives from suppliers through Woon International. Approximately3% of the gross purchase amounts were paid to Woon International for handling and administrationof these purchases.
The value of sales and purchases between our Group and Woon International for the period underreview were as follows:±
FY1998 FY1999 FY2000
$ $ $
Sales by the Group 25,618 20,758 Nil
As percentage of total sales 0.3%(1) 0.1%(1) Ð
Purchases by the Group 100,165 202,715 16,315
As percentage of total purchases 1.4%(2) 0.9%(2) 0.1%
Notes:±
(1) Exclude sales of A.I.M.
(2) Exclude purchases of A.I.M.
We have ceased all such transactions with Woon International with effect from 1 October 2000 and donot intend to have any future transactions of this nature with the ®rm.
Advances to/from Directors
Our Group had in the past received advances from Dr Ho Leng Woon and Ms Lau Woon Chan to®nance the business activities. These advances were interest-free, unsecured and had no ®xedterms of repayments.
The amount due to/from Directors as at the end of the last three ®nancial years were as follows:±
FY1998 FY1999 FY2000
$ $ $
Amount owing to Directors 401,211 Nil Nil
Amount owing from Directors Nil Nil Nil
All advances whether owing to or from our Directors have been repaid as at the date of thisProspectus.
77
In FY1997, an interest-free staff loan amounting to $40,000 was made to Mr Ang Luck Seh when hewas a Senior Manager of the Company. The loan has been repaid in full in September 2000 prior tohis appointment as an Executive Director.
Guarantees provided by Directors and/or Shareholders
The guarantees currently provided by our Directors and/or Shareholders to secure bank facilities arelisted below:±
BankersFacilities
GuaranteedFacilities
for use by Guarantees provided by
The Development Bank of Singapore Ltd $6.20 million AP Oil Dr Ho Leng Woon
Ms Lau Woon Chan
Ms Ho Aye Eng
The Development Bank of Singapore Ltd $2.0 million AP Oil Dr Ho Leng Woon
Ms Lau Woon Chan
The Development Bank of Singapore Ltd $1.70 million APP(S) Dr Ho Leng Woon
Ms Lau Woon Chan
Bank of China Ltd Singapore Branch $2.10 million AP Oil Dr Ho Leng Woon
Ms Lau Woon Chan
Ms Ho Aye Eng
Ms Lau Tong Hong
Standard Chartered Bank $1.05 million AP Oil Dr Ho Leng Woon
Ms Lau Woon Chan
Ms Ho Aye Eng
Subsequent to the Invitation, Dr Ho Leng Woon, Ms Lau Woon Chan, Ms Ho Aye Eng and Ms LauTong Hong intend to obtain a release of these guarantees except the guarantee for the $2.0 millionbridging loan.
The banks have given their written consent, at the shareholders' request, to the release of theguarantees (other than the guarantee for the $2.0 million bridging loan which will be repaid upon thelisting of the Company on SGX-Sesdaq).
The consent in respect of the guarantee for APP(S)'s bank facilities is subject to the condition that theguarantee be replaced by a corporate guarantee from our Company. The consents in respect of therest of the guarantees are subject to the condition that the guarantees be replaced by corporateguarantees acceptable to the banks (in respect of two of the three banks) or subject to the conditionthat the security arrangement accorded to the bank is no worse off than that given to all other lenders(in respect of the remaining bank).
Shanghai Golden Toe Arts and Craft Company (``SGTAC'')
Our Company sold its 70% interest in SGTAC to Dr Ho Leng Woon at the consideration of RMB1.75million which is based on the Company's carrying cost of the investment of S$296,100 as at31 December 1999 as more fully described on page 25 of this Prospectus.
Alpha Paci®c Petroleum (M) Sdn. Bhd.
The Company disposed of its entire 90% interest comprising 270,000 shares of RM1.00 each inAPP(M) to our director, Ms Lau Woon Chan as more fully described on page 25 of this Prospectus.
78
Sale of Property to Directors
The Company sold its investment residential property at 370 Pasir Panjang Road, Singapore to ourDirectors, Dr Ho Leng Woon and Ms Lau Woon Chan at a consideration of $4,500,000 pursuant to asale and purchase agreement dated 12 September 2000. The investment cost of the property as at31 December 2000 was $4,094,000. The transaction was completed on 19 January 2001.
The said property was put on public auction on 30 August 2000 with the reserve price of $4,500,000.The Company however did not receive any bids for the property at the auction. The property wasvalued by DTZ Debenham Tie Leung (SEA) Pte Ltd at $5,500,000 as at 20 July 2000.
Review Procedures for Future Interested Person Transactions
Our Audit Committee will review all interested person transactions to ensure that they are on an arm'slength basis and on normal commercial terms. This is to ensure that the transactions will be on termsand prices not more favourable than if such transaction was made with a third party and that ourGroup has not suffered or has been disadvantaged in any other way.
Approval from the Audit Committee will be obtained before any transaction outside the ordinarycourse of business of our Group is made. In the event that a member of the Audit Committee isinterested in any interested person transactions, he/she will abstain from reviewing that particulartransaction. Any decision to proceed with such an agreement or arrangement would also berecorded for review by the Audit Committee.
The Audit Committee will also review the internal controls relating to future interested persontransactions of the Group. This is to ensure that all disclosure requirements on interested persontransactions, including those required by the Act and Chapter 9A of SGX-ST Listing Manual arecomplied with, and if required, shareholders' approval for such transactions will be sought.
POTENTIAL CONFLICTS OF INTEREST
Save as disclosed in the section on Interested Person Transactions on pages 77 to 79 in thisProspectus:±
(a) No Director, substantial shareholder or Executive Of®cer of our Group has any interest, direct orindirect, in any material transactions to which our Group is a party;
(b) No Director, substantial shareholder or Executive Of®cer of our Group has any interest, direct orindirect, in any company carrying on the same business or a similar trade which competesmaterially and directly with the existing business of our Group; and
(c) No Director, substantial shareholder or Executive Of®cer of our Group has any interest, direct orindirect, in any enterprise or company that is our Group's customer or supplier of goods orservices.
79
PROPERTIES AND FIXED ASSETS
The properties currently leased by us are as follows:±
Location Description Tenure
Grosslandarea
GrossBuilt-In
Area
Annualland
rental
Net bookvalueas at
31December
2000 Use of property Encumbrances
(sqm) (sqm) ($) ($'000)
No. 30 Gul Crescent, Jurong,Singapore 629535
A JTCstandarddetachedfactory
A 30+30 year leasewith effect from1 April 1981
5,217 1,550 68,556 793 Manufacture oflubricating oils and¯uids
Mortgaged to DBSBank to securebanking facilitiesgranted to AP Oil
No. 18 Pioneer Sector 1,Singapore 628428
A JTCdetachedfactory and ajetty
A 30-year lease witheffect from 1February 1979 withan option to extendanother10 years
8,426 1,837 136,087 967 Manufacture oflubricating oils and¯uids
Mortgaged to DBSBank to securebanking facilitiesgranted to AP Oiland APP(S)
No. 19 Tractor Road,Singapore 627977
A JTCdetachedfactory
A 22-year-and-4-month lease witheffect from 29October 1985
5,988 1,853 89,037 700 Toll-blend andmanufacture ofchemicals andspecialty chemicals
Mortgaged to UnitedOverseas Bank Ltdto secure bankingfacilities granted toA.I.M.
The ®xed assets of our Group comprising plant and machinery, furniture, ®tting, of®ce equipment and motor vehicles had a net book value of approximately$1.34 million as at 31 December 2000.
80
DIRECTORS' REPORT
28 May 2001
The ShareholdersAP Oil International Limited30 Gul CrescentSingapore 629535
Dear Sirs
This report has been prepared for inclusion in the Prospectus of AP Oil International Limited (the``Company'') dated 28 May 2001 in connection with the Invitation in respect of 17,550,000 newordinary shares of $0.05 each (the ``Shares'') in the capital of the Company by way of public offer.
On behalf of the Directors of the Company, I report that, having made due inquiry in relation to theinterval between 31 December 2000, the date to which the last audited accounts of the Companywere made up, and 16 May 2001 being a date not earlier than 14 days before the date of thisProspectus:±
(a) the business of the Company and its subsidiaries has, in the opinion of the Directors, beensatisfactorily maintained;
(b) no circumstances have, in the opinion of the Directors, arisen since the last Annual GeneralMeeting of the Company which would adversely affect the trading or the value of the assets ofthe Company or its subsidiaries;
(c) the current assets of the Company and its subsidiaries appear in the books at values which arebelieved to be realisable in the ordinary course of business;
(d) save as disclosed on page 48 of this Prospectus, no contingent liabilities have arisen by reasonof any guarantees given by the Company or its subsidiaries; and
(e) save as disclosed on pages 69, 70, 99 and 101 of this Prospectus, there have been no changesin the published reserves or any unusual factors affecting the pro®t of the Company and itssubsidiaries since the last audited accounts.
Yours faithfullyfor and on behalf of theBoard of Directors
Dr Ho Leng WoonChairman and Managing DirectorAP Oil International Limited
81
ACCOUNTANTS' REPORT
28 May 2001
The Board of DirectorsAP Oil International Limited30 Gul Crescent, JurongSingapore 629535
Dear Sirs
PART 1
A. INTRODUCTION
This report has been prepared for inclusion in the Prospectus of AP Oil International Limited (the``Company'') dated 28 May 2001 in connection with the invitation (the ``Invitation'') in respect of17,550,000 new ordinary shares of $0.05 each (``New Shares'') in the capital of the Companycomprising:±
(1) 1,000,000 Offer Shares at $0.235 for each Offer Share by way of public offer; and
(2) 16,550,000 Placement Shares by way of placement, comprising:
(a) 14,950,000 Placement Shares at $0.235 for each Placement Share; and
(b) 1,600,000 Reserved Shares at $0.235 for each Reserved Share reserved for themanagement staff, employees, Independent Directors and business associates ofour Group and those who have contributed to the success of our Group,
payable in full on application.
1. The Company
The Company was incorporated in Singapore on 24 December 1975 as a private limitedcompany under the name of Huan Chew Oil Trading Pte Ltd. On 24 March 2001, thename of the Company was changed to AP Oil International Limited in connection with theCompany's conversion to a public company limited by shares.
As at 31 December 2000, the Company had an authorised share capital of $3,000,000comprising 3,000,000 ordinary shares of $1.00 each and the issued paid up share capitalof the Company was $1,560,000 comprising 1,560,000 ordinary shares of $1.00 each.
The Company is principally engaged in the business of manufacturing lubricating oils and¯uids, and trading in lubricants and raw materials used in lubricant production.
At the Extraordinary General Meeting held on 22 March 2001, the shareholders of theCompany approved, inter alia, the following:±
(a) the conversion of the Company into a public limited company;
(b) the change of its name to ``AP Oil International Limited'';
(c) the adoption of a new set of Articles of Association of the Company;
82
1. The Company (continued)
(d) the alteration of the Memorandum of Association of the Company to removeprovisions restricting membership in the Company to Singapore citizen andSingapore companies;
(e) an increase in the authorised share capital of the Company from $3,000,000 dividedinto 3,000,000 shares of $1.00 each to $50,000,000 divided into 50,000,000 shares of$1.00 each;
(f) the capitalisation of $1,560,000 from unappropriated pro®ts by way of a bonus issueof 1,560,000 ordinary shares of $1.00 each fully paid to the existing shareholders ofthe Company;
(g) the sub-division of each ordinary shares of $1.00 each in the authorised and issuedand paid-up share capital of the Company into 20 ordinary shares of $0.05 each (the``Share Split''); and
(h) subject to the provisions of Section 161 of the Companies Act, Cap. 50 and upon theprovisions of the new Articles of Association of the Company becoming effective, andthe approval of the SGX-ST to the listing of the issued ordinary shares of theCompany on the Of®cial List of SGX-Sesdaq (the ``Listing'') being granted, theDirectors be authorised with effect from the date of the Listing to allot and issuesuch further shares in the capital of the Company at any time and from time to timethereafter to such persons and on such terms and conditions and for such purposesas the Directors may deem ®t provided always that the aggregate number of shares tobe issued shall not exceed ®fty per cent. (50%) of the issued share capital of theCompany, of which the aggregate number of shares to be issued other than on apro-rata basis to existing shareholders shall not exceed twenty per cent. (20%) ofthe issued share capital of the Company for the time being and that such authorityshall continue in force until the conclusion of the next Annual General Meeting or theexpiration of the period within which the next Annual General Meeting of the Companyis required by law to be held, whichever is the earlier.
At an Extraordinary General Meeting held on 15 May 2001, the shareholders of theCompany approved, inter alia, the following:
(a) the capitalisation of $390,000 from unappropriated profit by way of a bonus issue of7,800,000 ordinary shares of $0.05 each fully paid to the existing shareholders of theCompany;
(b) the offer and issue of 17,550,000 New Shares which are the subject of the Invitation.The New Shares, when paid in full, will rank, pari passu in all respects with the existingShares of the Company; and
(c) the listing and quotation of the issued ordinary shares of the Company (including the17,550,000 New Shares to be allotted and issued pursuant to Resolution (h) above) onthe Of®cial List of SGX-Sesdaq.
As at the date of this report, there is only one class of shares being ordinary shares of $0.05each. There are no founder, management or deferred shares. The right and privileges attachedto the shares are as stated in the Articles of Association of the Company.
83
A. INTRODUCTION (continued)
1. The Company (continued)
The authorised share capital of the Company as at 31 December 2000, before and afteradjusting for the increase in authorised share capital and the Share Split is set forth below:±
As at 31 December 2000 As adjusted
Authorised Share Capital $ $
3,000,000 shares of $1.00 each 3,000,000 Ð
1,000,000,000 shares of $0.05 each Ð 50,000,000
The details of the changes in issued and paid-up share capital since 31 December 2000,being the date ®nancial statements were last audited, and the issued and paid-up sharecapital immediately after the Invitation are as follows:±
Number of Shares $Issued and fully paid-up ordinary shares of $1.00 each as at
31 December 2000 1,560,000 1,560,000
Bonus issue on 22 March 2001 1,560,000 1,560,000
3,120,000 3,120,000
Subdivision of ordinary shares of $1.00 each into ordinaryshares of $0.05 each (``Share Split'') 62,400,000 3,120,000
Bonus issue on 15 May 2001 7,800,000 390,000
Pre-Invitation Share Capital 70,200,000 3,510,000
New Shares to be issued for public subscription 17,550,000 877,500
Post-Invitation Share Capital 87,750,000 4,387,500
2. The Restructuring Exercise
In view of the Invitation, the following Restructuring Exercise has been undertaken:±
(a) On 1 June 2000, Alpha Paci®c Petroleum (S) Pte Ltd, a wholly owned subsidiary of theCompany, acquired the entire issued and paid up capital of Alpha Paci®c PetroleumCompany Limited from Chew Bak Khim and Chew Mooi Hong, comprising 2 ordinaryshares of £1.00 each at an aggregate consideration of $5.00;
(b) On 29 June 2000, the Company acquired ownership of SINO Petroleum, a sole-proprietor ®rm from Ms Lau Woon Chan at a consideration of $1.00;
(c) On 29 June 2000, the Company acquired ownership of Krex International (formerlyknown as Krex Oil), a sole-proprietor ®rm from Ms Lau Woon Chan at aconsideration of $1.00;
(d) On 30 August 2000, the Company acquired the entire issued and paid up capital ofAP Petrochemical Pte Ltd, comprising 2 ordinary shares of $1.00 each, from Dr HoLeng Woon and Mr Ang Luck Seh at an aggregate consideration of $2.00;
(e) The Company disposed of its 70% interest in Shanghai Golden Toe Art & Craft Co.Ltd. (``SGTAC''), an equity joint venture company incorporated in the PeopleRepublic of China, to Dr. Ho Leng Woon for a consideration of RMB1.75 millionwhich is based on the Company's carrying cost of investment of $296,100 as at31 December 1999. The consideration was received in December 1999. The NTA forthe Company's 70% equity was RMB 1.24 million (equivalent to $236,357) as at31 December 1999. Approval for the share transfer was granted by the ShanghaiPudong New Area People's Government in September 2000. The transfer took effectunder PRC law as from the date of the approval; and
84
A. INTRODUCTION (continued)
2. The Restructuring Exercise (continued)
(f) Pursuant to a Share Sale Agreement dated 16 March 2001, the Company disposed ofits 90% interest in Alpha Paci®c Petroleum (M) Sdn Bhd (``APPM''), comprising270,000 ordinary shares of RM1.00 each to Ms Lau Woon Chan at an aggregateconsideration of RM3.00. APPM had an audited negative NTA of RM196,199 as at31 December 1999 and an unaudited negative NTA of about RM210,296 as at31 December 2000. APPM had not carried out any business activity since itsincorporation in 1983 except for the acquisition of a plot of agricultural land inMalaysia in April 1996 which it still holds. APPM was disposed of as the holding ofagricultural land in Malaysia is not part of the core business of the Group.
3. Acquisition of A.I.M. Chemical Industries Pte Ltd
In September 2000, the Company completed its acquisition of the entire issue and paid upshare capital of A.I.M. Chemical Industries Pte Ltd (``A.I.M.'') comprising 1,160,000 sharesof par value of $1.00 each at an aggregate cash consideration of $2,380,000. The post-acquisition pro®t after tax of A.I.M., amounting to $133,358, have been consolidated withthe ®nancial statements of the Proforma group for the year ended 31 December 2000.
A.I.M., formerly known as Hexol Chemicals (S) Pte Ltd, was incorporated on 2 April 1976.Its principal activities are in toll-blending and trading in chemical products and the provisionof contract manufacturing services for specialty chemicals. Additional ®nancial and otherinformation on A.I.M. is contained in Part 2 of this report.
4. The Proforma Group
Upon completion of the Restructuring Exercise and the acquisition of A.I.M., the Companyhad the following subsidiaries and business names (referred to collectively with theCompany as ``the Group'' or the ``Proforma Group''):±
Name of Company/Business
Date and Placeof Incorporation/Registration and
Operations
Percentageof Interest
Held
Issued andPaid-upCapital Principal Activities
Alpha Paci®c Petroleum (S)Pte Ltd
9 July 1988Singapore
100 $500,000 Manufacture andtrading inlubricating oils andgrease
A.I.M. Chemical IndustriesPte Ltd
2 April 1976Singapore
100 $1,160,000 Toll blending andtrading chemicalproducts andcontractmanufacturingservices
AP Petrochemical Pte Ltd 23 January 1996Singapore
100 $2 Dormant
SINO Petroleum* 11 October 1988Singapore
100 Ð Dormant
Krex International* 5 May 1986Singapore
100 Ð Dormant
*These are sole proprietorships registered under the Business Registration Act, Cap. 32.
85
A. INTRODUCTION (continued)
4. The Proforma Group (continued)
In addition, Alpha Paci®c Petroleum (S) Pte Ltd, has the following subsidiary company:±
Name of Company
Date and Placeof Incorporationand Operations
Percentageof Interest
Held
Issued andPaid-upCapital Principal Activities
Alpha Paci®c PetroleumCompany Limited
10 February 1998United Kingdom
100 £2 Dormant
Chio Lim & Associates (a member ®rm of Horwath International) have been appointed asauditors of the Company and Alpha Paci®c Petroleum (S) Pte Ltd, from the ®nancial yearended 31 December 1999 and AP Petrochemical Pte Ltd from the ®nancial year ended31 December 2000. We were also appointed as auditors of A.I.M. Chemical Industries PteLtd from the ®nancial period commencing 1 April 2000. The auditors of the Company andcertain subsidiary companies, prior to our appointments, for the period under review wereas follows:±
Name of Company Auditors Financial year/period
AP Oil International Limited(formerly known as Huan Chew Oil TradingPte Ltd)
Philip Liew & Co For 31 December 1998
Alpha Paci®c Petroleum (S) Pte Ltd Tan Chin Ren & Co For 31 December 1998
AP Petrochemical Pte Ltd Tay Tong & Co From 31 December 1998 to31 December 1999
A.I.M. Chemical Industries Pte Ltd H. Wee & Co. From 31 March 1998 to31 March 2000
No auditors were appointed for SINO Petroleum, Krex International and Alpha Paci®cPetroleum Company Limited as there is no statutory requirement for these entities toproduce audited ®nancial statements.
The proforma ®nancial information in this report is based on the audited ®nancialstatements and all the companies within the Group have co-terminous year-end.
We have reviewed the ®nancial statements of the Company and the companies within theGroup for the periods in which we were not auditors and performed such work as weconsidered necessary. We are satis®ed that the ®nancial statements are appropriate andproper for inclusion in this report.
The auditors' reports on the ®nancial statements of the Company and the above subsidiarycompanies for all the ®nancial years under review were not quali®ed.
B. BASIS OF PRESENTATION OF FINANCIAL INFORMATION OF THE PROFORMA GROUP
Save for the results of A.I.M. which was acquired in September 2000, the proforma ®nancialinformation set out in this report have been prepared on the assumption that the current Groupstructure as outlined above has been in existence throughout the period covered by this report,or since the dates of incorporation of the companies in the Group, if later. The proforma ®nancialinformation does not include the pre-acquisition results of A.I.M. since it was managed by adifferent management team before its acquisition. The post-acquisition pro®t after tax of A.I.M.,amounting to $133,358, have been consolidated with the ®nancial statements of the Proformagroup for the year ended 31 December 2000.
Please refer to Part 2 for ®nancial information on A.I.M.
86
A. INTRODUCTION (continued)
The ®nancial information, expressed in Singapore dollars, set out in this report have beenprepared in accordance with the accounting policies of the Group set out in Section G Part 1of this report and shows:±
(i) the Proforma Statement of Group Results for the three ®nancial years ended 31 December1998 to 31 December 2000.
(ii) the Proforma Balance Sheets of the Group as at the end of each of the three ®nancial yearsended 31 December 1998 to 31 December 2000.
(iii) the Proforma Statement of Cash Flow for the three ®nancial years ended 31 December1998 to 31 December 2000.
(iv) the Proforma Statement of Changes in Equity for the three ®nancial years ended31 December 1998 to 31 December 2000.
(v) the Proforma Statement of Net Assets as at 31 December 2000 of the Group andCompany.
The purpose of the proforma ®nancial information of the Group is to show what the historical®nancial information might have been, in the event the Group as comprised of the aboveentities listed above existed at an earlier date. However, the proforma ®nancial information ofthe Group is not necessarily indicative of the results of the operations, or cash ¯ows or therelated effects of the ®nancial position that would have been attained in the event the ProformaGroup actually existed earlier.
C. PROFORMA STATEMENT OF GROUP RESULTS
The following Proforma Statement of Group Results sets out the Group results for the ®nancialyears ended 31 December 1998 to 31 December 2000.
------------- Year ended 31 December ------------Note 1998 1999 2000
$'000 $'000 $'000
Revenue D1 9,574 27,531 40,527
Cost of sales (8,301) (22,642) (34,095)
Gross pro®t 1,273 4,889 6,432
Other operating income 488 219 848
Distribution expenses (637) (1,095) (1,012)
Administrative and other operating expenses (797) (1,540) (1,708)
Pro®t from operations 327 2,473 4,560
Finance costs (241) (220) (728)
Pro®t before income tax D3 86 2,253 3,832
Income tax D4 (74) (788) (1,097)
Pro®t after income tax 12 1,465 2,735
Extraordinary item D5 Ð (154) Ð
Pro®t attributable to members of the Company 12 1,311 2,735
Earnings per share (cents)(1)
Ð before extraordinary item 0.02 2.09 3.90
Ð after extraordinary item 0.02 1.87 3.90
Note:±
(1) For comparative purposes, the earnings per share for the period under review has been computed based on thepro®t after taxation and the pre-Invitation share capital of 70,200,000 shares.
87
B. BASIS OF PRESENTATION OF FINANCIAL INFORMATION OF THE PROFORMAGROUP (continued)
D. NOTES TO STATEMENT OF PROFORMA GROUP RESULTS
1. Revenue
Revenue represents invoiced sales, net of discounts and returns, and blending fee incomeas analysed below:±
------------- Year ended 31 December ------------1998 1999 2000
$'000 $'000 $'000
Sales of goods 9,574 27,531 39,482
Service fee income Ð Ð 1,045
9,574 27,531 40,527
Transactions within the Group have been eliminated.
2. Transactions with related parties
Parties are considered to be related if one party has the ability to control the other party orexercise signi®cant in¯uence over the other party in making ®nancial or operating decisions.
In addition to the Restructuring Exercise set out in Section A (2) Part 1 of this report and thesale of investment property subsequent to 31 December 2000 set out in Section I Note 6Part 1 of this report, other signi®cant related party transactions based on terms agreedamong themselves are as follows:±
------------- Year ended 31 December ------------1998 1999 2000
$'000 $'000 $'000
Sales (26) (21) Ð
Purchases 100 203 16
3. Pro®t Before Income Tax
Pro®t before income tax of the Proforma Group as shown above has been arrived at:±
------------- Year ended 31 December ------------1998 1999 2000
$'000 $'000 $'000
After charging/(crediting):
Auditors' remuneration 9 17 24
Amortisation of goodwill Ð Ð 50
Bad and doubtful trade debts/(reversal) 30 233 (141)
Directors' remuneration 193 362 689
Depreciation of property, plant and equipment 352 422 557
Plant and equipment written off 4 Ð Ð
Foreign exchange loss/(gain) 29 59 (16)
Interest expense ±
bank facilities 235 209 560
hire purchase 6 11 10
Loss on disposal of plant and equipment Ð Ð 15
Staff costs (excluding Directors' remuneration) 521 769 1,437
Provision on inventory/(reversal) Ð 120 (62)
Interest income (10) (5) (100)
88
4. Income Tax
------------- Year ended 31 December ------------1998 1999 2000
$'000 $'000 $'000
Provision for income tax in respect of the years under review:±
Current tax 76 679 1,120
Deferred tax 30 (16) (26)
106 663 1,094
Under/(over) provision of tax in prior years (32) 125 3
74 788 1,097
The effective tax rate of the Proforma Group for the years under review is higher than therelevant statutory tax rates due primarily to depreciation charges of non-qualifying propertyand certain other expenses, which are non-deductible for tax purposes.
5. Extraordinary item
Extraordinary item represents provision made for impairment in value of the Group's otherinvestment.
89
D. NOTES TO STATEMENT OF PROFORMA GROUP RESULTS (continued)
E. PROFORMA BALANCE SHEETS OF THE GROUP
The following Proforma Balance Sheets of the Proforma Group sets out the Group balancesheets as at the end of the ®nancial years ended 31 December 1998 to 31 December 2000.
------------------------------ As at 31 December -----------------------------1998 1999 2000
$'000 $'000 $'000
Intangible assets 10 12 464
Property, plant and equipment 2,493 2,523 3,799
Investment property Ð 4,064 4,096
Other investments 726 11 11
Current assets
Inventories 1,015 2,925 3,692
Trade receivables 2,879 3,977 3,914
Other receivables and prepayments 58 40 483
Amount due from related parties 543 522 Ð
Cash and bank balances 989 1,108 3,990
5,484 8,572 12,079
Current liabilities:
Amount due to bankers 2,018 1,692 6,093
Trade payables and accrued liabilities 3,007 5,480 3,809
Amount due to related parties 182 Ð Ð
Amount due to directors 401 Ð Ð
Hire purchase creditors 53 76 63
Income tax payable 75 761 1,438
5,736 8,009 11,403
Net current (liabilities)/assets (252) 563 676
Term loans Ð (2,893) (2,821)
Hire purchase creditors (42) (61) Ð
Deferred tax (206) (272) (287)
2,729 3,947 5,938
Represented by:
Shareholders' equity 2,729 3,947 5,938
Net tangible assets (NTA) per share (cents)(1) 3.87 5.61 7.80
Note:±
(1) For comparative purposes, the NTA per share for the period under review has been computed based on theshareholders' equity and on the pre-Invitation share capital of 70,200,000 shares.
Proforma Statement of Changes in Equity
------------- Year ended 31 December ------------1998 1999 2000
$'000 $'000 $'000Balance brought forward 2,809 2,729 3,947
Pro®t for the year 12 1,311 2,735
Dividends (92) (93) (744)
Balance carried forward 2,729 3,947 5,938
90
F. PROFORMA STATEMENT OF CASH FLOWS OF THE GROUP
------------- Year ended 31 December ------------
1998 1999 2000
$'000 $'000 $'000
Cash ¯ow from operating activities
Pro®t before taxation 86 2,253 3,832
Adjustments for:
Amortisation of goodwill Ð Ð 50
Depreciation 352 422 557
Plant and equipment written off 4 Ð Ð
Loss on disposal of plant and equipment Ð Ð 15
Interest income (10) (5) (100)
Interest expense 241 220 570
Pro®t before reinvestment in working capital 673 2,890 4,924
(Increase)/decrease in inventories 221 (1,911) (576)
(Increase)/decrease in receivables 17 (1,057) 1,015
Increase in payables 1,190 1,384 191
Cash generated from operations 2,101 1,306 5,554
Interest income received 10 5 100
Interest expense paid (241) (220) (570)
Income tax paid (323) (34) (862)
Net cash provided by operating activities 1,547 1,057 4,222
Cash ¯ow from investing activities
Acquisition of property, plant and equipment (32) (452) (359)
Proceeds from disposal of plant and equipment Ð Ð 1
Acquisition of subsidiary Ð Ð (1,230)
Proceeds from disposal of investments Ð 560 Ð
Acquisition of investment property Ð (4,064) (33)
Preliminary expenses incurred (1) (1) Ð
Net cash used in investing activities (33) (3,957) (1,621)
Cash ¯ow from ®nancing activities
Increase/(decrease) in hire purchase creditors (62) 42 (74)
Increase/(decrease) in term loans (455) 3,249 836
Dividends paid (92) (46) (790)
Net cash (used in)/provided by ®nancing activities (609) 3,245 (28)
Net increase in cash and cash equivalents 905 345 2,573
Cash and cash equivalents at beginning of year (362) 543 888
Cash and cash equivalents at end of year 543 888 3,461
91
The fair value of assets acquired and liabilities assumed on acquisition of A.I.M. ChemicalIndustries Pte Ltd for the ®nancial year ended 31 December 2000 were as follows:±
$'000
Cash and bank balances 1,150
Inventories 191
Accounts receivable 873
Property, plant and equipment 1,490
Accounts payable (1,372)
Income tax payable (414)
Deferred tax (41)
Net assets acquired 1,877
Goodwill on acquisition of a subsidiary 503
Total consideration 2,380
Cash acquired (1,150)
Net cash ¯ow on acquisition 1,230
92
F. PROFORMA STATEMENT OF CASH FLOWS OF THE GROUP (continued)
G. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The signi®cant accounting policies, which have been consistently applied in the preparation ofthe ®nancial information set out in this report, are as follows:±
Accounting Convention Ð The ®nancial statements are prepared under the historical costconvention and in accordance with the provisions of the Singapore Companies Act andSingapore Statements of Accounting Standard.
Principle of Consolidation Ð The Proforma Group ®nancial statements include the ®nancialstatements of the Company and its subsidiaries made up to the end of the ®nancial year. Allsigni®cant intercompany balances and transactions have been eliminated on consolidation. Theresults of subsidiaries acquired and disposed of during the ®nancial year are consolidated fromthe respective dates of acquisition or up to the dates of disposal. Goodwill or negative goodwillarising on acquisition is based on the purchase method. Goodwill is measured as theconsideration less the fair value of the identi®able assets and liabilities acquired.
Revenue Recognition Ð Revenue from sale of goods is recognised upon passage of title to thecustomer which generally coincides with their delivery and acceptance. Revenue from blendingservices is recognised when services are rendered.
Inventories Ð Inventories are stated at the lower of cost and net realisable value on a ®rst-in®rst-out basis. In respect of ®nished goods, cost includes material, direct labour and anappropriate portion of production overheads expenditure.
Investments Ð Long-term investments, including those in subsidiaries, are stated at cost lessimpairment losses recognised where the carrying cost exceeds the estimated recoverableamount.
Dividend income is recorded gross on the date it is declared payable by the investee company.
Investment Property Ð Investment property is subjected to an external or Directors' valuationon an annual basis. Surpluses arising from revaluation of investment property are taken to assetrevaluation reserve and de®cits will ®rst be offset against available asset revaluation reserve andthe balance written off to the pro®t and loss statement.
Property, Plant and Equipment Ð All items of property, plant and equipment are initiallyrecorded at cost. The carrying amounts of these assets are reviewed at each balance sheetdate to assess whether they are recorded in excess of their recoverable amount, and if carryingvalues exceed this recoverable amount, assets are written down.
Expenditure for additions, improvements and renewals are capitalised and expenditure formaintenance and repairs are charged to the pro®t and loss statement. When assets are sold orretired, their cost and accumulated depreciation are removed from the ®nancial statement andany gain or loss resulting from their disposal is included in the pro®t and loss statement.
Depreciation Ð Depreciation is provided on gross carrying amounts in equal annual instalmentsover the estimated useful lives of the assets as follows:±
Leasehold properties Ð 20 to 40 years
Plant, equipment and machinery Ð 3 to 10 years
Furniture & ®ttings Ð 10 years
Motor vehicles Ð 5 years
Fully depreciated assets still in use are retained in the ®nancial statements.
93
Intangible Assets Ð Acquired intangible assets are carried at acquisition cost less amortisationaccording to their useful life using the straight-line method. Goodwill on consolidation isamortised over 5 years.
Preliminary expenses are written-off to pro®t and loss statement upon commencement ofoperation by the subsidiary.
Finance Leases Ð A ®nance lease is recognised as an asset and as liability in the balance sheetat amounts equal at the inception of the lease to the fair value of the leased asset or, if lower, atthe present value of the lease payments based on the interest rate implicit in the lease. Theexcess of the lease payments over the recorded lease obligations are treated as ®nancecharges which are allocated to each lease term so as to produce a constant rate of charge onthe remaining balance of the obligations. The assets are depreciated as owned depreciableassets.
Fair Value of Financial Instruments Ð The carrying value of cash, accounts receivable, othercurrent assets, short-term borrowings, accounts payables and other current liabilitiesapproximate their fair market values due to the short-term maturity of these instruments. Thefair market value of long-term debt was not determined as these approximate the carryingvalues.
The directors believe that the ®nancial risks associated with these ®nancial instruments areminimal. The company places its cash and cash equivalents with high credit quality institutions.The company performs ongoing credit evaluation of its customers' ®nancial condition andmaintains a provision for doubtful trade accounts receivable based upon the expectedcollectibility of all trade accounts receivable.
Provision Ð Provisions are recognised when the Group has a present obligation (legal orconstructive) as a result of a past event, it is probable that an out¯ow of resources embodyingeconomic bene®ts will be required to settle the obligation and a reliable estimate can be made ofthe amount of the obligation.
A provision for warranty is recognised for all products under warranty at the balance sheet datebased on past experience of the level of returns.
Accounting Estimates Ð The preparation of ®nancial statements in conformity with generallyaccepted accounting principles requires the directors to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the ®nancial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Transactions Ð Transactions in foreign currencies are recorded in Singaporedollars at the rates ruling at the dates of the transactions. At each balance sheet date, recordedmonetary balances and balances carried at fair value that are denominated in foreign currenciesare reported at the rates ruling at the balance sheet date. All realised and unrealised exchangeadjustment gains and losses are dealt with in the pro®t and loss statement.
For inclusion in the consolidated ®nancial statements, all assets and liabilities of foreignsubsidiaries are translated at the rates ruling at the balance sheet date. The results of thesesubsidiaries are translated at the weighted average exchange rates. Foreign exchangedifferences arise from such translation are taken directly to the foreign currency translationreserve.
Income Tax Ð Tax expense is determined on the basis of tax effect accounting, using theliability method, and it is applied to all signi®cant timing differences. Deferred tax bene®ts arenot recognised unless there is reasonable expectation of their realisation.
Cash and Cash Equivalents Ð Cash and cash equivalents for cash ¯ow statement includescash and bank balances less bank overdrafts.
94
G. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
H. PROFORMA STATEMENT OF NET ASSETS
The statement of net assets as at 31 December 2000 is as follows:±
Notes Group Company
$'000 $'000ASSETS
Current assets
Cash and bank balances 3,990 3,078
Trade receivables I1 3,914 2,903
Other receivables and prepayments I2 483 302
Amount due from subsidiaries I3 Ð 185
Inventories I4 3,692 3,461
Total current assets 12,079 9,929
Non-current assets
Other investments I5 11 11
Investment property I6 4,096 4,096
Investment in subsidiaries I3 Ð 2,877
Property, plant and equipment I7 3,799 1,272
Intangible assets I8 464 Ð
Total non-current assets 8,370 8,256
Total assets 20,449 18,185
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings I9 6,006 5,817
Trade payables and accrued liabilities 3,644 2,341
Other payables I10 165 61
Income tax payable 1,438 1,128
Long-term borrowings Ð current portion I11 87 87
Hire purchase creditors Ð current portion I12 63 63
Total current liabilities 11,403 9,497
Non-current liabilities
Deferred tax I13 287 173
Long-term borrowings I11 2,821 2,821
Total non-current liabilities 3,108 2,994
Proforma shareholders' equity I14 5,938 5,694
20,449 18,185
95
I. NOTES TO STATEMENT OF NET ASSETS
1. Trade Receivables
Group Company
$'000 $'000
Trade debtors 4,023 2,987
Provision for doubtful debts (109) (84)
3,914 2,903
Analysis of provision for doubtful debts:±
Balance at beginning of year 231 225
Due to acquisition of subsidiary 19 Ð
Reversal to pro®t and loss (141) (141)
Balance at end of year 109 84
2. Other Receivables and Prepayments
Group Company
$'000 $'000
Deposits 48 48
Other receivables 162 9
Prepayments 273 245
483 302
3. Interests in Subsidiaries
Company
$'000
Unquoted shares at cost 2,877
Amount due from subsidiaries, trade 185
4. Inventories
Group Company
$'000 $'000
Finished goods 581 538
Raw materials carried at net realisable value after provisionfor obsolescence 3,111 2,923
3,692 3,461
Movements in provision for obsolescence:
Balance at beginning of year 120 120
Reversal to pro®t and loss (62) (62)
Balance at end of year 58 58
96
5. Other Investments
Group and Company
$'000
Quoted shares, at cost 11
Market value of quoted shares 7
6. Investment Property
Investment property is stated at Directors' valuation, which represents cost of purchaseand renovation and comprises a freehold bungalow in Singapore. The investment propertyhas been mortgaged to a bank for banking facilities as disclosed in note I 9.
Subsequent to the ®nancial year-end, the investment property was sold to two Directors for$4,500,000. The consideration was based on the reserved price of the investment propertyconcerned for the purposes of a public auction.
7. Property, Plant and Equipment
CostAccumulatedDepreciation
Net BookValue
$'000 $'000 $'000Group
At cost
Leasehold properties 5,159 2,699 2,460
Plant, equipment and machinery 4,596 3,523 1,073
Furniture and ®ttings 288 202 86
Motor vehicles 470 290 180
10,513 6,714 3,799
Company
At cost
Leasehold properties 1,366 573 793
Plant, equipment and machinery 1,487 1,224 263
Furniture and ®ttings 101 65 36
Motor vehicles 470 290 180
3,424 2,152 1,272
(i) The Group and Company's motor vehicles with total cost of $350,415 were acquiredunder hire purchase plans.
(ii) The Group and Company's leasehold factory buildings are mortgaged to the bank forbanking facilities as disclosed in note I 9.
(iii) A motor vehicle costing $221,465 is registered in the name of a Director who holdsthe asset in trust for the Company.
97
I. NOTES TO STATEMENT OF NET ASSETS (continued)
8. Intangible Assets
Group
$'000Intangible assets are analysed as follows:
Goodwill on acquisition of subsidiaries, at cost 503
Accumulated amortisation (50)
Preliminary expenses 11
464
Movements in accumulated amortisation:
Balance at beginning of year Ð
Charge to pro®t and loss 50
Balance at end of year 50
9. Short-Term Borrowings
Group Company
$'000 $'000
Bank overdrafts 529 341
Trust receipts and bills payable to banks 3,277 3,276
Short-term bank loans 2,200 2,200
6,006 5,817
The short-term borrowings and long-term borrowings (note I11) are secured by thefollowing:±
(i) assignment and mortgage of shares in a subsidiary;
(ii) ®rst and legal mortgage of the Group's investment property and leasehold properties;and
(iii) joint and several personal guarantee from certain Directors of the Company.
The rates of interest for the short-term borrowings range from 0.5% to 1.5% perannum above the bank's prevailing prime rate.
The long-term borrowing bears interest of 1% per annum above the bank's prevailingprime rate. The loan is repayable in 240 monthly equal instalments of $21,493(including interest charge) with the ®rst instalment commencing in September 1999.
10. Other Payables
Group Company
$'000 $'000
Rental deposits received 16 16
Option money received for purchase of investment property 45 45
Other creditor 104 Ð
165 61
98
I. NOTES TO STATEMENT OF NET ASSETS (continued)
11. Long-Term Borrowings
Group Company
$'000 $'000
Bank loan 2,908 2,908
The bank loan is repayable as follows:
Due within 1 year 87 87
Due within next 2 to 5 years 403 403
Due after 5 years 2,418 2,418
2,908 2,908
The terms and conditions of the long-term borrowings are disclosed in note I 9. The loanwas fully repaid subsequent to the balance sheet date.
12. Hire Purchase Creditors
Group Company
$'000 $'000Instalments payable:
Within one year 70 70
Finance charges (7) (7)
63 63
The rates of interest for the hire purchase ranges from 3.5% to 3.875%.
13. Deferred Tax
Deferred tax is mainly due to the excess of net book value over tax written down value ofproperty, plant and equipment.
14. Proforma Shareholders' Equity
Group Company
$'000 $'000
Share capital 1,560 1,560
Retained pro®ts 4,378 4,134
5,938 5,694
Subsequent to the ®nancial year-end, the directors proposed a ®nal gross dividend of 29.60cents per ordinary share of $1 each, less tax of 24.5%, amounting to $348,660 in respectof the ®nancial year ended 31 December 2000.
99
I. NOTES TO STATEMENT OF NET ASSETS (continued)
15. OPERATING LEASE COMMITMENTS
The commitments in respect of operating leases with a term of more than one year are asfollows:±
Group Company
$'000 $'000
Within 1 year 278 68
Within 2 to 5 years 1,114 274
After next 5 years 3,014 2,418
Rental expense for the year 276 69
The leases expire at various dates till 2041 and contain provisions for rental adjustments.
16. CONTINGENT LIABILITIES
Group Company
$'000 $'000Bankers' guarantees
Ð Secured (note I 9) 1,414 1,387
Letters of credit
Ð Secured (note I 9) 4,097 4,097
17. NUMBER OF EMPLOYEES
As at 31 December 2000, the Group and Company have 84 and 39 employees respectively.
100
J. NET TANGIBLE ASSETS BACKING OF THE PROFORMA GROUP
The net tangible assets backing of the Proforma Group for each ordinary share of $0.05 is basedon the Proforma Statement of Net Assets of the Group as at 31 December 2000 after taking intoaccount the proceeds from the issue less estimated expenses in connection therewith.
$'000
Net assets as per Proforma Statement of Net Assets in Section H Part 1 5,938
Less: Intangible assets 464
Add: Proceeds from the issue of 17,550,000 New Shares of $0.05 each, thesubject of this Invitation 4,124
Deduct: Estimated expenses arising from the issue of the New Shares 1,125
Net tangible assets after the issue of the New Shares 8,473
Number ofshares
Issued and fully paid-up shares of $1.00 each as at 31 December 2000 1,560,000
Issue of bonus shares out of unappropriated pro®ts on 22 March 2001 1,560,000
Ordinary shares of $1.00 each 3,120,000
Sub-division of ordinary shares into $0.05 each 62,400,000
Issue of bonus shares out of unappropriated pro®ts on 15 May 2001 7,800,000
New Shares of $0.05 each to be issued pursuant to this Invitation 17,550,000
Post-Invitation, ordinary shares of $0.05 each 87,750,000
centsNet tangible assets backing for each ordinary share of $0.05 each
Before issue of the New Shares 7.80
After issue of the New Shares 9.66
101
K. DIVIDENDS
The dividends paid or declared for the years under review are as follows:±
--------- Year ended 31 December ---------1998 1999 2000
AP Oil International Limited
Gross rate of dividend (%):
Ð interim 4 4 64
Ð ®nal 4 4 30
8 8 94
Dividends less tax ($'000):
Ð interim 46 46 744
Ð ®nal 46 47 349
92 93 1,093
Issued and paid-up capital at date of declaration of dividends ($'000) 1,560 1,560 1,560
Dividend per share of $1 each (cents) 5.90 5.96 70.06
L. GENERAL
No audited ®nancial statements of the Company and the Group have been prepared for anyperiod subsequent to 31 December 2000.
102
PART 2
A. INTRODUCTION
This part of the report is prepared in connection with the Company's acquisition of the entireequity interest in A.I.M. Chemicals Industries Pte Ltd which will be satis®ed indirectly throughthe Invitation proceeds as described in Part 1 of this report.
In August 2000, the Company entered into a Sale and Purchase Agreement with AsiaticAgricultural Industries Pte Ltd to acquire 100% of A.I.M. Chemical Industries Pte Ltd (``A.I.M.'')comprising 1,160,000 shares of par value of $1.00 each at an aggregate cash consideration of$2,380,000. The sale was completed in September 2000. The net tangible asset of A.I.M. basedon the audited ®nancial statements as at 31 March 2000 was $1,768,035. The results of A.I.M.subsequent to the completion date have been consolidated with the ®nancial statements of theProforma Group for the year ended 31 December 2000.
A.I.M., formerly known as Hexol Chemicals (S) Pte Ltd, was incorporated on 2 April 1976. Theprincipal activities are those of toll-blending, contract manufacturing of specialty chemicals andtrading of chemical products.
The ®nancial information set out below is expressed in Singapore dollars and shows the resultsfor each of the ®nancial years ended 31 March 1998 to 2000 and for the nine months periodended 31 December 2000 and the Statement of the Net Assets as at 31 December 2000 ofA.I.M.
The ®nancial information is based on the audited ®nancial statements of A.I.M. and has beenprepared on the basis consistent with the accounting policies set out in Section H Part 2 ofthis report.
Chio Lim & Associates have been appointed as auditors of A.I.M. from the ®nancial periodcommencing 1 April 2000. H. Wee & Co. were the auditors of A.I.M. for the three ®nancial yearsfrom 31 March 1998 to 2000.
We have reviewed the ®nancial statements of A.I.M. for the periods in which we were notauditors and performed such works as we considered necessary. We are satis®ed that the®nancial statements are appropriate and proper for inclusion in this report.
The ®nancial statements for the periods under review were not quali®ed.
103
B. STATEMENT OF RESULTS
The following Statement of Results sets out the audited results of A.I.M. for the ®nancial yearsended 31 March 1998 to 31 March 2000 and the nine months ended 31 December 2000.
-------------------- Year ended 31 March -------------------
Nine monthsended
31 DecemberNote 1998 1999 2000 2000
$'000 $'000 $'000 $'000
Revenue C1 4,765 4,140 4,777 4,296
Cost of sales (3,308) (2,637) (3,068) (2,807)
Gross pro®t 1,457 1,503 1,709 1,489
Other operating income 358 288 122 35
Distribution costs (76) (51) (63) (43)
Administrative and other operating expenses (1,015) (973) (873) (1,048)
Pro®ts from operations 724 767 895 433
Finance costs (13) (8) (6) (8)
Pro®t before income tax C3 711 759 889 425
Income tax C4 (201) (172) (276) (184)
Pro®t attributable to members of A.I.M. 510 587 613 241
Earnings per shares (cents)(1) 0.73 0.84 0.87 0.34
Note:±
(1) The earnings per share for the respective years/period have been computed based on the pro®t after taxation andthe pre-Invitation share capital of 70,200,000 shares of AP Oil International Limited.
104
C. NOTES TO STATEMENT OF RESULTS
1. Revenue
Revenue represents invoiced sales and services rendered, net of discounts and returns,and are analysed as follows:±
-------------------- Year ended 31 March -------------------
Nine monthsended
31 December1998 1999 2000 2000
$'000 $'000 $'000 $'000
Sale of goods 4,545 3,880 4,501 2,415
Service fee 220 260 276 1,881
4,765 4,140 4,777 4,296
2. Transactions with related parties
Parties are considered to be related if one party has the ability to control the other party orexercise signi®cant in¯uence over the other party in making ®nancial or operating decisions.
Signi®cant transactions with Asiatic Agricultural Industries Pte Ltd, A.I.M.'s holdingcompany prior to its purchase by the Company, based on terms agreed amongthemselves, are as follows:±
-------------------- Year ended 31 March -------------------
Nine monthsended
31 December1998 1999 2000 2000
$'000 $'000 $'000 $'000
Sale of goods (168) (149) (146) (31)
Service income (260) (285) (83) (2)
Rental income (91) (91) (15) Ð
Commission income (6) (2) Ð Ð
Sale of ®xed assets Ð (13) Ð Ð
Purchases 1 7 Ð 1
Management fee expense 69 80 10 Ð
There were no signi®cant transactions between A.I.M. and the companies within theProforma Group as stated in Part 1 of this report.
105
3. Pro®t Before Income Tax
Pro®t before income tax as shown above has been arrived at:±
-------------------- Year ended 31 March -------------------
Nine monthsended
31 December1998 1999 2000 2000
$'000 $'000 $'000 $'000After charging:±
Auditors' remuneration 4 4 5 5
Directors' remuneration 359 357 350 531
Depreciation of property, plant and equipment 404 464 461 343
Plant and equipment written off 3 6 13 Ð
Interest expense 6 4 2 Ð
Loss on disposal of plant and equipment Ð 1 Ð Ð
Inventories written off 19 5 4 Ð
Provision for doubtful debts (trade) Ð 35 Ð Ð
Provision for warranty Ð Ð 207 Ð
Staff costs (excluding directors' remuneration) 741 759 760 687
And after crediting:±
Provision for waste disposals written-back Ð (258) (531) (296)
Foreign exchange gain (48) (12) (24) Ð
Gain on disposal of plant and equipment (5) Ð Ð Ð
Interest income (15) (38) (46) (34)
4. Income Tax
-------------------- Year ended 31 March -------------------
Nine monthsended
31 December1998 1999 2000 2000
$'000 $'000 $'000 $'000Provision for income tax in respect of the years
under review:±
Current taxation 175 205 300 190
Deferred taxation 25 6 Ð (47)
200 211 300 143
Under/(over) provision of taxation in respect ofprior years 1 (39) (24) 41
201 172 276 184
The effective tax rates of A.I.M. for the years and period under review are higher than therelevant statutory tax rates due primarily to depreciation charges of non-qualifying propertyand certain other expenses, which are non-deductible for tax purposes.
106
C. NOTES TO STATEMENT OF RESULTS (continued)
D. BALANCE SHEETS
The audited Balance Sheets of A.I.M. as at the end of the ®nancial years ended 31 March 1998to 31 March 2000 and as at 31 December 2000 are as follows:±
------------------------------------ As at 31 March ------------------------------------As at
31 December1998 1999 2000 2000
$'000 $'000 $'000 $'000
Property, plant and equipment 1,837 1,713 1,528 1,299
Current assets:
Inventories 105 99 194 232
Trade receivables 885 728 865 1,002
Other receivables 85 119 18 166
Amount due to holding company 52 Ð 73 Ð
Cash and bank balances 1,167 1,919 2,633 902
2,294 2,865 3,783 2,302
Current liabilities:
Trade payables and accrued liabilities 1,524 1,388 1,377 1,187
Other payables Ð Ð Ð 105
Hire purchase creditors 43 20 15 Ð
Amount due to directors 124 123 123 Ð
Amount due to holding company Ð 20 Ð Ð
Income tax payable 181 205 371 266
Proposed dividends Ð Ð 1,600 Ð
1,872 1,756 3,486 1,558
Net current assets 422 1,109 297 744
Hire purchase creditors (32) (2) (17) Ð
Deferred tax (60) (66) (41) (35)
2,167 2,754 1,767 2,008
Represented by:
Shareholders' equity 2,167 2,754 1,767 2,008
Net tangible assets (NTA) per share (cents)(1) 3.09 3.92 2.52 2.86
Note:±
(1) For comparative purposes, the NTA per share for the period under review has been computed based on theshareholders' equity and on the pre-Invitation share capital of 70,200,000 shares.
Proforma Statement of Changes in Equity
-------------------- Year ended 31 March -------------------
Nine monthsended
31 December1998 1999 2000 2000
$'000 $'000 $'000 $'000
Balance brought forward 1,657 2,167 2,754 1,767
Pro®t for the year 510 587 613 241
Dividends Ð Ð (1,600) Ð
Balance carried forward 2,167 2,754 1,767 2,008
107
E. STATEMENT OF NET ASSETS
The audited statement of net assets of A.I.M. as at 31 December 2000 is as follows:±
Note $'000ASSETS
Current assets
Cash and bank balances 902
Trade receivables F1 1,002
Other receivables and prepayments F2 166
Inventories F3 232
Total current assets 2,302
Non-current assets
Property, plant and equipment F4 1,299
Total non-current assets 1,299
Total assets 3,601
LIABILITIES AND EQUITY
Current liabilities
Trade payables and accrued liabilities F5 1,187
Other payables 105
Income tax payable 266
Total current liabilities 1,558
Non-current liabilities
Deferred tax 35
Total non-current liabilities 35
Shareholders' equity 2,008
Total liabilities and equity 3,601
108
F. NOTES TO STATEMENT OF NET ASSETS
1. TRADE RECEIVABLES
$'000
Outside parties 1,017
Provision for doubtful debts (19)
998
Holding company (Note 6) 2
Related company (Note 6) 2
1,002
Movements in provision for doubtful debts:
Balance at beginning of period 19
Bad debts written off Ð
Balance at end of period 19
2. OTHER RECEIVABLES AND PREPAYMENTS
$'000
Other receivables 148
Prepayments 18
Balance at end of period 166
3. INVENTORIES
$'000
Finished goods and goods for resale 43
Raw material and consumables/supplies 189
Balance at end of period 232
4. PROPERTY, PLANT AND EQUIPMENT
Cost orValuation
AccumulatedDepreciation
Net BookValue
$'000 $'000 $'000At valuation
Leasehold property 961 611 350
At cost
Leasehold property and improvements 1,069 719 350
Plant and equipment 2,071 1,497 574
Furniture and ®ttings 115 90 25
4,216 2,917 1,299
The leasehold property was revalued based on a professional appraisal by Knight FrankCheong Chye & Baillieu in January 1990. This valuation is on the basis of open marketvalue for mortgage purposes.
The net book value of the revalued property, if stated at cost less accumulateddepreciation, is $108,220.
109
5. TRADE PAYABLES AND ACCRUED LIABILITIES
$'000
Outside parties 555
Accrued liabilities 425
Provision for warranty 207
1,187
Movements in provision for warranty:
Balance at beginning of period 207
Provision for the period Ð
Balance at end of period 207
6. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS
As at 31 December 2000, the company is a subsidiary of AP Oil International Limited,incorporated in Singapore which is also the company's ultimate holding company. Relatedcompanies in these ®nancial statements refer to members of the ultimate holdingcompany's group of companies.
The inter-company balances are without ®xed repayment terms and interest unless statedotherwise.
7. NUMBER OF EMPLOYEES
As at 31 December 2000, A.I.M had 38 employees.
G. STATEMENT OF ADJUSTMENTS
The results as stated in Section B above have been arrived at after taking into account thefollowing adjustments:±
-------------------- Year ended 31 March -------------------
Nine monthsended
31 December1998 1999 2000 2000
$'000 $'000 $'000 $'000Revenue
Revenue as stated in the audited accounts 4,545 4,138 5,032 4,296
Reclassi®cation of:±
Service fee(1) 220 260 276 Ð
Provision for waste disposals written-back(2) Ð (258) (531) Ð
Revenue as stated in this report 4,765 4,140 4,777 4,296
Notes:±
(1) The service fee represents income from blending and packaging services provided to the customers that waspreviously classi®ed as other income in the audited accounts. The reclassi®cations were made to ensure therevenue disclosure is consistent with A.I.M.'s principal activities.
(2) The provision for waste disposals written-back was credited to the revenue as stated in the audited ®nancialstatements. The adjustment has been made as the write-back of this provision does not form part of the revenue.
110
F. NOTES TO STATEMENT OF NET ASSETS (continued)
H. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The signi®cant accounting policies, which have been consistently applied in the preparation ofthe ®nancial information set out in this report, are as follows:±
Accounting Convention Ð The ®nancial statements are prepared under the historical costconvention, modi®ed by the revaluation of properties and in accordance with the provisions ofthe Singapore Companies Act and Singapore Statements of Accounting Standard. It is not thenormal policy of A.I.M. to revalue properties.
Revenue Recognition Ð Revenue from sale of goods is recognised upon passage of title to thecustomer which generally coincides with their delivery and acceptance. Revenue from blendingservices is recognised when services are rendered.
Inventories Ð Inventories are stated at the lower of cost and net realisable value on a ®rst-in®rst-out basis. In respect of ®nished goods, cost includes material, direct labour and anappropriate portion of production overheads expenditure.
Property, Plant and Equipment Ð All items of property, plant and equipment are initiallyrecorded at cost. The carrying amounts of these assets are reviewed at each balance sheetdate to assess whether they are recorded in excess of their recoverable amount, and if carryingvalues exceed this recoverable amount, assets are written down.
Expenditure for additions, improvements and renewals are capitalised and expenditure formaintenance and repairs are charged to the pro®t and loss statement. When assets are sold orretired, their cost and accumulated depreciation are removed from the ®nancial statement andany gain or loss resulting from their disposal is included in the pro®t and loss statement.
When an asset is revalued, any increase in the carrying amount is credited directly to assetrevaluation are taken to asset revaluation reserve and de®cits will ®rst be offset againstavailable asset revaluation reserve relating to that asset and the balance written off to the pro®tand loss statement.
Depreciation Ð Depreciation is provided on gross carrying amounts in equal annual instalmentsover the estimated useful lives of the assets as follows:±
Leasehold properties and improvement Ð 5 to 221/3 years
Plant and equipment Ð 1 to 5 years
Furniture & ®ttings Ð 5 years
Fully depreciated assets still in use are retained in the ®nancial statements.
Fair Value of Financial Instruments Ð The carrying value of cash, accounts receivable, othercurrent assets, accounts payables and other current liabilities approximate their fair marketvalues due to the short-term maturity of these instruments.
The directors believe that the ®nancial risks associated with these ®nancial instruments areminimal. A.I.M. places its cash and cash equivalents with high credit quality institutions. A.I.M.performs ongoing credit evaluation of its customers' ®nancial condition and maintains aprovision for doubtful trade receivables based upon the expected collectibility of all tradereceivables.
Provision Ð Provisions are recognised when A.I.M. has a present obligation (legal orconstructive) as a result of a past event, it is probable that an out¯ow of resources embodyingeconomic bene®ts will be required to settle the obligation and a reliable estimate can be made ofthe amount of the obligation.
A provision for warranty is recognised for all products under warranty at the balance sheet datebased on past experience of the level of returns.
111
Accounting Estimates Ð The preparation of ®nancial statements in conformity with generallyaccepted accounting principles requires the directors to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the ®nancial statements and the reported amounts of revenues andexpenses during the reporting period. Actual results could differ from those estimates.
Foreign Currency Transactions Ð Transactions in foreign currencies are recorded in Singaporedollars at the rates ruling at the dates of the transactions. At each balance sheet date, recordedmonetary balances and balances carried at fair value that are denominated in foreign currenciesare reported at the rates ruling at the balance sheet date. All realised and unrealised exchangeadjustment gains and losses are dealt with in the pro®t and loss statement.
Income Tax Ð Tax expense is determined on the basis of tax effect accounting, using theliability method, and it is applied to all signi®cant timing differences. Deferred tax bene®ts arenot recognised unless there is reasonable expectation of their realisation.
I. DIVIDENDS
No dividend was declared or paid for the ®nancial years ended 31 March 1998 to 31 March1999. During the ®nancial year ended 31 March 2000, a ®nal dividend of $1.85 per ordinaryshare, less tax of 25.5%, amounting to $1,600,000 was declared and payable to AsiaticAgricultural Industries Pte Ltd, the previous holding company.
No dividend has been declared or paid in the period subsequent to 31 December 2000.
J. GENERAL
No audited ®nancial statements of A.I.M have been prepared for any period subsequent to31 December 2000.
Yours faithfully
CHIO LIM & ASSOCIATESCerti®ed Public AccountantsSingapore
PAUL LEE SENG MENGPartner-in-charge
112
H. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
GENERAL AND STATUTORY INFORMATION
INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS
1. The name, age, address and current occupation of each of our Directors and Executive Of®cersof our Group are set out on pages 58 and 62 of this Prospectus.
2. Information on the business and working experience of each of our Directors is set out on pages58 and 59 of this Prospectus.
3. The list of present and past directorships of each of our Director for the last ®ve years precedingthe date of this Prospectus excluding those held in our Company, is set out on page 60 of thisProspectus.
4. Information on the business and working experience of each of the Executive Of®cers of ourGroup is set out on pages 62 to 63 of this Prospectus.
5. The list of present and past directorships of each of the Executive Of®cers for the last ®ve yearspreceding the date of this Prospectus, is set out on pages 63 to 64 of this Prospectus.
6. Save as disclosed on pages 59, 71 and 72 of this Prospectus, none of our Directors have anyfamily relationship with one another or with any of our Executive Of®cers or substantialshareholders of our Company.
7. None of our Executive Of®cers have any family relationship with other Executive Of®cers or withany of our Directors or substantial shareholders of our Company.
8. None of our Directors or Executive Of®cers are or were involved in any of the following events:±
(a) a petition in the last 10 years under any bankruptcy laws ®led in any jurisdiction against himor any partnership in which he was a partner or any corporation of which he was a directoror an executive of®cer;
(b) unsatis®ed judgements outstanding against him;
(c) a conviction of any offence, in Singapore or elsewhere, involving fraud or dishonestypunishable with imprisonment for three months or more, or charged for violation of anysecurities laws or any such pending criminal proceeding against him;
(d) a conviction of any offence, in Singapore or elsewhere, involving a breach of any securitiesor ®nancial market laws, rules or regulations;
(e) the subject of judgement in any civil proceeding in Singapore or elsewhere in the last 10years involving fraud, misrepresentation or dishonesty or any such pending civilproceeding against him;
(f) a conviction in Singapore or elsewhere of any offence in connection with the formation ormanagement of any corporation;
(g) disquali®cation from acting as a director of any company, or from taking part in any waydirectly or indirectly in the management of any company;
(h) the subject of any order, judgement or ruling of any court of competent jurisdiction, tribunalor governmental body permanently or temporarily enjoining him from engaging in any typeof business practice or activity; and
(i) the management or conduct of affairs of any company or partnership which has beeninvestigated by an inspector appointed under the provisions of the Companies Act, orother securities enactment or by any other regulatory body in connection with any matterinvolving the company or partnership occurring or arising during the period when he was aconcerned with the company or partnership.
113
9. The aggregate emoluments (including CPF contributions and bene®ts-in-kind) paid to the thenexisting Directors for services rendered in all capacities to our Company and its subsidiaries inFY2000 amounted to approximately $409,000. The aggregate emoluments payable to thepresent Directors in FY2001 under the arrangements in force at the date of this Prospectus,including the Service Agreements referred to on pages 67 to 68 of this Prospectus, excludingthe pro®t sharing bonus, is approximately $584,000.
10. Save as disclosed on pages 67 to 68 of this Prospectus, there are no existing or proposedservice contracts between our Directors and our Company or its subsidiaries.
11. Save as disclosed on pages 59, 71 and 72 of this Prospectus, our Directors and ExecutiveOf®cers are unrelated by blood or marriage to one another nor are they so related to anysubstantial shareholder of our Company.
12. No option to subscribe for shares in, or debentures of, our Company or its subsidiaries has beengranted to, or was exercised by, any Director or Executive Of®cer within the two years precedingthe date of this Prospectus.
13. Save as disclosed on pages 25, 78 and 79 and paragraphs 27(g), (l) and (m) on pages 116 and117 of this Prospectus, no Director or expert is interested, directly or indirectly, in the promotionof, or in any assets acquired or disposed of by, or leased to, our Company or its subsidiarieswithin two years preceding the date of this Prospectus, or in any proposal for such acquisitionor disposal or lease as aforesaid.
14. Save as disclosed on pages 67 to 68 of this Prospectus, no Director has any interest in anyexisting contract or arrangement which is signi®cant in relation to the business of our Grouptaken as a whole.
15. No Director, substantial shareholder or Executive Of®cer has any interest, direct or indirect, inany business carrying on a similar trade as our Company or its subsidiaries.
16. There is no shareholding quali®cation for Directors in the Articles of Association of our Company.
17. The interests of our Directors and substantial shareholders in the Shares as at the date of thisProspectus and as recorded in the Register of Directors' Shareholdings and the Register ofSubstantial Shareholders maintained under the provisions of the Companies Act are as follows:±
Number ofShares
registered in thenames of
Directors andsubstantial
shareholders %
Number ofShares in which
our Directorsand substantial
shareholdersare deemed to
have an interest %
Total number ofShares in which
our Directorsand substantial
shareholdershave interests in %
Directors
Ho Leng Woon 38,250,000 54.49 14,850,000 21.15 53,100,000 75.64
Lau Woon Chan 14,850,000 21.15 38,250,000 54.49 53,100,000 75.64
Ang Luck Seh 450,000 0.64 Ð Ð 450,000 0.64
Tan Poi Sik Ð Ð Ð Ð Ð Ð
Lim Heng Kow Ð Ð Ð Ð Ð Ð
Holder of 5% ormore
Lau Tong Hong 4,500,000 6.41 Ð Ð 4,500,000 6.41
(1) Ho Leng Woon is deemed to be interested in the 14,850,000 shares held by his wife, Lau Woon Chan
(2) Lau Woon Chan is deemed to be interested in the 38,250,000 shares held by her husband, Ho Leng Woon
114
18. No sum has been paid or has been agreed to be paid to any Director or expert or to any ®rm inwhich a Director or expert is a partner or to any corporation in which such Director or expertholds shares or debentures, in cash or in shares or otherwise by any person in the case of aDirector to induce him to become or to qualify him as a Director or otherwise for servicesrendered by him or by such ®rm or corporation in connection with the promotion or formationof our Company, or in the case of an expert for services rendered by him or the ®rm or thecorporation in connection with the promotion or formation of our Company.
SHARE CAPITAL
19. As at the date of this Prospectus, there is only one class of shares in the capital of our Company.The rights and privileges attached to the Shares are stated in the Articles of Association of ourCompany. There are no founder, management or deferred shares.
20. Save as disclosed on pages 69 and 70 in this Prospectus, there were no changes in the issuedand paid-up share capital of our Company or its subsidiaries within the three years preceding thedate of this Prospectus.
21. Save as disclosed on pages 69 and 70 in this Prospectus, no shares or debentures were issuedor were agreed to be issued by our Company or its subsidiaries for cash or for a considerationother than cash during the past three years preceding the date of this Prospectus.
22. No person has been, or is entitled to be, given an option to subscribe for any shares in ordebentures of our Company or its subsidiaries.
ARTICLES OF ASSOCIATION
23. The provisions in the Articles of Association of our Company relating to the remuneration, votingrights on proposals, arrangements or contracts in which our Directors are interested, borrowingpowers of our Directors, the restrictions on the transferability of shareholdings, the voting rightsof members of our Company and the appointment, retirement and removal of our Directors areset out under ``Appendix B : SELECTED ARTICLES OF ASSOCIATION OF THE COMPANY''of this Prospectus.
BANK BORROWINGS AND WORKING CAPITAL
24. Save as disclosed on page 48 of this Prospectus and in Section I in the Accountants' Report onpages 98 to 100 of this Prospectus, our Company and its subsidiaries had as at 31 December2000, no other borrowings or indebtedness in the nature of borrowings including bank overdraftsand liabilities under acceptances (other than normal trading bills) or acceptances credits,mortgages, charges, hire purchase commitments, guarantees or other material contingentliabilities.
25. In the opinion of our Directors, there are no minimum amounts which must be raised by theInvitation in order to provide for the following items:±
(a) the purchase price of any property purchased or to be purchased which is to be defrayed inwhole or in part out of the proceeds of the Invitation;
(b) estimated preliminary and issue expenses (including underwriting and placementcommission) for the Invitation payable by our Company;
(c) the repayment of any money borrowed by our Company in respect of any of the foregoingmatters; and
(d) working capital.
No amount is required to be provided in respect of the matters aforesaid otherwise than out ofthe proceeds of the Invitation.
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26. Our Directors are of the opinion that, after taking into account the present banking facilities, ourGroup has adequate working capital for its present requirements.
MATERIAL CONTRACTS
27. The following contracts not being contracts entered into in the ordinary course of business of ourCompany and its subsidiaries (as the case may be) have been entered into by our Company andits subsidiaries (as the case may be) within the two years preceding the date of this Prospectusand are or may be material:±
(a) Option to Purchase the property at 370 Pasir Panjang Road, Singapore at the considerationof $3.83 million granted by its then owner on 17 May 1999 to the Company which wasaccepted by the Company on 23 May 1999.
(b) Letter of Offer dated 2 July 1999 from DBS Bank offering a 20-year term loan of $3 million,short term banking facilities of up to $3 million and a foreign exchange line of $200,000which was accepted by the Company.
(c) Legal Mortgage executed by the Company as mortgagor and DBS Bank as mortgagee on19 August 1999 under which the Company mortgaged the property at 370 Pasir PanjangRoad, Singapore to DBS Bank to secure all sums of money owing or remaining unpaidfrom time to time by the Company to DBS.
(d) Supplemental Deed entered into between the Company and DBS Bank on 19 August 1999to supplement the Legal Mortgage mentioned in sub-paragraph (c) above, and containingthe terms and conditions in respect of a term loan of $3 million granted by DBS Bank to theCompany.
(e) Tenancy Agreement entered into between the Company and SDRC Singapore Pte Ltd on15 February 2000 under which the Company agreed to let and SDRC Singapore Pte Ltdagreed to take the property at 370 Pasir Panjang Road, Singapore for a term of 2 yearscommencing on 1 February 2000 at a monthly rent of $7,900.
(f) Share Transfer Agreement entered into between the Company and Taiwan Da YaInternational Limited Company on 12 July 2000 under which the Company sold its 28%share in Tai Yuan Jing Yan High-Quality Lubricant Oil Co., Ltd. a sino-foreign joint venturecompany incorporated in China to Taiwan Da Ya International Limited Company for aconsideration of US$164,430.
(g) Share Transfer Agreement entered into between the Company and Dr Ho Leng Woon on10 July 2000 under which the Company sold its 70% share in Shanghai Golden Toe Art &Craft Co., Ltd. a sino-foreign joint venture company incorporated in China to Dr Ho LengWoon for a consideration of RMB 1.75 million.
(h) Sale and purchase agreement entered into between the Company as purchaser, AsiaticAgricultural Industries Pte Ltd as vendor and ®ve others as covenantors on 16 August2000 under which the Company agreed to purchase and Asiatic Agricultural Industries PteLtd agreed to sell 1,160,000 ordinary shares of S$1.00 each being the entire issued andpaid-up share capital in A.I.M. at the aggregate consideration of $2.38 million.
(i) Letter of Undertaking entered into between the Company and Chang Kwok Wah on16 August 2000 under which the Company agreed to procure A.I.M. to enter into aService Agreement with Chang Kwok Wah upon the completion of the Company'spurchase of the shares in A.I.M. pursuant to the sale and purchase agreement mentionedin sub-paragraph (h) above.
(j) Letter of Offer dated 11 September 2000 from DBS Bank offering a 1-year bridging loan of$2 million to the Company to ®nance the Company's purchase of all the shares in A.I.M.which was accepted by the Company on 11 September 2000.
(k) Deed of Assignment and Mortgage of A.I.M. Shares entered into between the Companyand DBS Bank on 11 September 2000 under which the Company assigned andmortgaged to DBS Bank all the shares, stock and securities of A.I.M. legally andbene®cially owned by the Company at the date of the Deed and at any time thereafter,and any further shares from time to time allotted by A.I.M. to the Company as a
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continuing security for all amounts owing and payable by the Company to DBS Bank fromtime to time.
(l) Sale and purchase agreement entered into on 12 September 2000 between the Companyas vendor and Dr Ho Leng Woon and Ms Lau Woon Chan as purchasers under which theCompany agreed to sell and Dr Ho Leng Woon and Ms Lau Woon Chan agreed topurchase the property at 370 Pasir Panjang Road, Singapore at the consideration of $4.5million.
(m) Share Sale Agreement entered into between the Company and Ms Lau Woon Chan on16 March 2001 under which the Company agreed to sell and Ms Lau Woon Chan agreedto purchase 270,000 ordinary shares of RM1.00 each in the share capital of Alpha Paci®cPetroleum (M) Sdn. Bhd. at the consideration of S$1.00.
(n) Management and Underwriting Agreement dated 28 May 2001 referred to in paragraph29(a) below.
(o) Placement Agreement dated 28 May 2001 referred to in paragraph 29(c) below.
(p) Depository Agreement dated 25 May 2001 made between our Company and the CDPpursuant to which the CDP agreed to act as depository for our Company's Securities fortrades in the securities of the Company through the SGX-ST.
LITIGATION
28. Neither our Company nor any of our subsidiaries is engaged in any litigation as plaintiff ordefendant in respect of any claims or amounts which are material in the context of theInvitation and our Directors have no knowledge of any proceedings pending or threatenedagainst our Company or any of our subsidiaries or any facts likely to give rise to any litigation,claims or proceedings which might materially affect the ®nancial position or the business of ourCompany or any of our subsidiaries.
MANAGEMENT, UNDERWRITING AND PLACEMENT ARRANGEMENTS
29. (a) Pursuant to the management and underwriting agreement (the ``Management andUnderwriting Agreement'') dated 28 May 2001, our Company appointed DBS Bank tomanage the Invitation and underwrite the Offer Shares. DBS Bank will receive amanagement fee from our Company for its services rendered in connection with theInvitation.
(b) Pursuant to the Management and Underwriting Agreement, DBS Bank agreed to underwritethe Offer Shares for a commission of 1.5% of the Offer Price for each Offer Share.
(c) Pursuant to the placement agreement (the ``Placement Agreement'') dated 28 May 2001,DBS Bank agreed to subscribe or procure subscriptions for the Placement Shares for aplacement commission of 1.5% of the Issue Price for each Placement Share.
(d) Brokerage will be paid by our Company to members of SGX-ST, merchant banks andmembers of the Association of Banks in Singapore in respect of accepted applicationsmade on Application Forms bearing their respective stamps, or to Participating Banks inrespect of successful applications made through Electronic Applications at the ATMs ofthe relevant Participating Banks, at the rate of 1.0% of the Issue Price for each OfferShare and each Placement Share.
(e) Save as aforesaid, no commission, discount or brokerage, has been paid or other specialterms granted within the two years preceding the date of this Prospectus or is payable toany Director, promoter, expert, proposed Director or any other person for subscribing oragreeing to subscribe or procuring or agreeing to procure subscriptions for any shares inor debentures of our Company.
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(f) The Management and Underwriting Agreement may be terminated by DBS Bank at anytime prior to the last date for the application and payment by members of the public forthe New Shares, on the occurence of certain events including, inter alia:
(a) any change or any development involving a prospective change or any crisis innational or international monetary, ®nancial, industrial, legal, economic or politicalconditions (including but without limiting thereto conditions in the stock market, inthe foreign exchange market, inter-bank market and conditions with respect tointerest rates or money markets, in Singapore and overseas and any outbreak orescalation of hostilities, insurrection or con¯ict) or foreign exchange controls inSingapore and overseas or any occurence of a combination of any such changes ordevelopments or crises, or any deterioration of any such conditions which hasresulted or is in the reasonable opinion of DBS Bank likely to result in (i) theconditions in the stock market in Singapore being materially and adversely affected;or (ii) the success of the Invitation being materially prejudiced; or (iii) it becominginadvisable, inexpedient or not commercially viable for the Invitation to commence,be proceeded with or completed or; (iv) it becoming for any reason not commerciallyviable or otherwise contrary to or outside the usual commercial customs or practicesin Singapore for the Underwriter to observe or perform or be obliged to observe orperform the terms of this Agreement or the Invitation; or (v) the business, tradingposition, operations or prospects of the Group being materially and adverselyaffected; or
(b) any change or prospective change in or any introduction or prospective introductionof any legislation, regulation, policy, directive, guideline, request or interpretation orapplication thereof, by any government body, the Securities Industry Council or theSGX-ST, whether or not having the force of law, or other occurrence of any naturewhatsoever which, in the reasonable opinion of DBS Bank, (i) materially affects or islikely to materially affect (aa) the listing and quotation of the Company's shares onthe SGX-Sesdaq; or (bb) the business, trading position, operations or prospects ofthe Group, or (ii) results or is likely to result in the Invitation not being substantiallysubscribed for.
(g) The Placement Agreement is conditional, inter alia, on the Management and UnderwritingAgreement not having been terminated or rescinded pursuant to the provisions of theManagement and Underwriting Agreement.
MISCELLANEOUS
30. The nature of the business of our Company is stated on pages 26 to 28 of this Prospectus. Atthe date of this Prospectus, the corporations listed below are by virtue of Section 6 of the Actdeemed to be related to our Company:±
Subsidiaries of our Company
Alpha Paci®c Petroleum (S) Pte LtdAP Petrochemical Pte LtdAlpha Paci®c Petroleum Company LimitedA.I.M. Chemical Industries Pte Ltd
31. The time of opening of the Application List is set out on page 8 of this Prospectus.
32. The amount payable on application is $0.235 for each New Share. There has been no previousissue of Shares by our Company or offer for sale of its Shares to the public within the two yearspreceding the date of this Prospectus.
33. Application moneys received by our Company in respect of successful applications (includingsuccessful balloted applications which are subsequently rejected) will be placed in a separatenon-interest bearing account with DBS Bank (the ``Receiving Bank''). In the ordinary course ofbusiness, the Receiving Bank will deploy these moneys in the interbank money market.Pursuant to an agreement contained in a letter dated 22 May 2001, our Company and the
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Receiving Bank have agreed that our Company will receive for its own account an aggregate of a50% share of any net revenue in excess of $50,000 earned by the Receiving Bank from thedeployment of such monies in the interbank money market. Any refund of all or part of theapplication moneys to unsuccessful or partially successful applicants will be made without anyinterest or any share of such revenue or any other bene®ts.
34. Save as disclosed below, no property has been purchased or acquired or proposed to bepurchased or acquired by our Company or its subsidiaries which is to be paid for wholly orpartly out of the proceeds of the Invitation or the purchase or acquisition of which has not beencompleted at the date of the issue of this Prospectus other than property the contract for thepurchase or acquisition whereof was entered into in the ordinary course of business of ourCompany or its subsidiaries, the contract not being made in contemplation of the Invitation northe Invitation in consequence of the contract.
Approximately $2 million out of the proceeds of the Invitation will be used to repay bankborrowings from DBS Bank which was used to part ®nance the acquisition by the Company ofall the shares in A.I.M. Please refer to page 24 of this Prospectus for more details of theacquisition.
35. The estimated amount of the preliminary expenses and expenses of this Invitation and of theapplication for listing, including underwriting and placement commission, brokerage,management fee, auditors' fee, solicitors' fee and all other incidental expenses in relation tothis Invitation, all of which are payable by the Company, can be broken down as follows:±
S$ million
Listing fee 0.01
Professional fees 0.81
Underwriting and placement commission and brokerage 0.10
Miscellaneous expenses 0.20
Total estimated expenses in connection with the Invitation 1.12
36. No amount of cash or securities or bene®t has been paid or given to any promoter within the twoyears preceding the date of this Prospectus or is proposed or intended to be paid or given to anypromoter at any time.
37. Save as disclosed in this Prospectus, our Directors are not aware of any relevant materialinformation including trading factors or risks not mentioned elsewhere in the Prospectus whichis unlikely to be known or anticipated by the general public and which could materially affect thepro®ts of our Company and its subsidiaries.
38. Save as disclosed in this Prospectus, the ®nancial condition and operations of our Group are notlikely to be affected by any of the following:±
(a) known trends or known demands, commitments, events or uncertainties that will result inor are reasonably likely to result in our Group's liquidity increasing or decreasing in anymaterial way;
(b) material commitments for capital expenditure;
(c) unusual or infrequent events or transactions or any signi®cant economic changes thatmaterially affected the amount of reported income from operations; and
(d) known trends or uncertainties that have had or that our Group reasonably expects to havea material favourable or unfavourable impact on revenues or operating income.
39. No Shares shall be allotted on the basis of this Prospectus later than six months after the date ofthis Prospectus.
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CONSENTS
40. The Auditors and Reporting Accountants have given and have not withdrawn their writtenconsent to the issue of this Prospectus with the inclusion herein of their Accountants' Reportand references to their name in the form and context in which it appears in this Prospectus andto act in such capacity in relation to this Prospectus.
41. The Manager, Underwriter and Placement Agent, the Solicitors, the Principal Bankers, the ShareRegistrar and DTZ Debenham Tie Leung (SEA) Pte Ltd have given and have not withdrawn theirconsent to the issue of this Prospectus with the inclusion herein of their names in the form andcontext in which they appear in this Prospectus and to act in those capacities in relation to thisProspectus.
DOCUMENTS AVAILABLE FOR INSPECTION
42. Copies of the following documents may be inspected at the registered of®ce of the Companyduring normal business hours for a period of six months from the date of this Prospectus:±
(a) the Memorandum and Articles of Association of our Company;
(b) the Accountants' Report;
(c) the Directors' Report;
(d) the material contracts referred to on pages 116 to 117 of this Prospectus;
(e) the letters of consent referred to on page 119 of this Prospectus;
(f) the audited accounts of our Company and its subsidiaries for the last three ®nancial yearsended 31 December 1998, 31 December 1999 and 31 December 2000; and
(g) the Service Agreements referred to on pages 67 to 68 of this Prospectus.
STATEMENT BY DIRECTORS OF OUR COMPANY
43. This Prospectus has been seen and approved by our Directors and they collectively andindividually accept full responsibility for the accuracy of the information given in this Prospectusand con®rm, having made all reasonable enquiries, that to the best of their knowledge and belief,there are no other material facts the omission of which would make any statements hereinmisleading, that this Prospectus constitutes full and true disclosure of all material facts aboutthe Invitation and our Company and its subsidiaries, and that the opinions expressed are fairand accurate in all material respects.
STATEMENT BY THE MANAGER
44. The Manager acknowledges that, having made due and careful enquiry and to the best of itsknowledge and belief, based on information furnished to it by the Group, this Prospectusconstitutes a full and true disclosure of all the material facts about the Invitation, the Companyand its subsidiaries and it is not aware of any other facts the omission of which would make anystatements herein misleading in any material respect.
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APPENDIX A
TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION
Applications are invited for the subscription of the New Shares at the Issue Price subject to thefollowing terms and conditions:±
1. Applications for the Offer Shares may be made by way of the Offer Shares Application Forms orby way of electronic applications through the Automated Teller Machines (``ATMs'') belonging tothe Participating Banks (``ATM Electronic Applications'') or the Internet Banking (``IB'') website ofDBS Bank (``Internet Electronic Applications'', which together with ATM Electronic Applications,shall be referred to as ``Electronic Applications''). Applications for Placement Shares (other thanReserved Shares) may only be made by way of the Placement Shares Application Forms, andapplications for Reserved Shares may only be made by way of the Reserved SharesApplication Forms. Applicants may not use their CPF Funds to apply for the New Shares.
2. Only one application may be made for the bene®t of one person for either the Offer Sharesor the Placement Shares (other than the Reserved Shares) in his own name. A personsubmitting an application for the Offer Shares by way of a printed application form maynot submit another application for Offer Shares by way of Electronic Application and viceversa. A person submitting an application for the Offer Shares by way of an ATM ElectronicApplication may not submit another application for Offer Shares by way of an InternetElectronic Application and vice versa. Such separate applications will be deemed to bemultiple applications and shall be rejected.
A person, other than an approved nominee company, who is submitting an application inhis own name should not submit any other applications, whether on a printed applicationform or through an Electronic Application, for any other person. Such separateapplications will be deemed to be multiple applications and shall be rejected.
An applicant who has agreed with the Placement Agent to subscribe for Placement Shares(other than Reserved Shares) or who otherwise subscribes for Placement Shares shall notmake or procure any separate application for Offer Shares either by way of an Offer SharesApplication Form or through an Electronic Application. Such separate applications will bedeemed to be multiple applications and shall be rejected.
Conversely, an applicant who has made an application for Offer Shares either by way ofthe Offer Shares Application Form or through an Electronic Application shall not make orprocure to be made any separate application for the Placement Shares (other than forReserved Shares). Such separate applications will be deemed to be multiple applicationsand shall be rejected.
Joint or multiple applications will be rejected. Persons submitting or procuringsubmissions of multiple share applications (whether for Offer Shares, Placement Sharesor both Offer Shares and Placement Shares) may be deemed to have committed anoffence under the Penal Code (Chapter 224) of Singapore and the Securities Industry Act(Chapter 289) of Singapore, and such applications may be referred to the relevantauthorities for investigation. Applications appearing to be or suspected of being multipleapplications will be liable to be rejected at the discretion of the Company.
An applicant making an application for the Reserved Shares using the Reserved SharesApplication Form may submit one separate application for Offer Shares in his own nameeither by way of an Offer Shares Application Form or through an Electronic Application orsubmit one separate application for Placement Shares (other than Reserved Shares) byway of a Placement Share Application Form, provided he adheres to the terms andconditions of this Prospectus. Such separate applications will not be treated as multipleapplications.
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3. Applications will not be accepted from any person under the age of 21, undischarged bankrupts,sole proprietorships, partnerships, chops or non-corporate bodies, joint Securities Accountholders of CDP and applicants whose addresses (furnished in their printed Application Formsor, in the case of Electronic Applications, contained in the records of the relevant ParticipatingBanks, as the case may be) bear post of®ce box numbers.
4. The existence of a trust will not be recognised. Any application by any person must therefore bemade in his/her/their own name(s) and without quali®cation or, where the application is made byway of a printed Application Form by a nominee, in the name(s) of approved nominee companyor companies after complying with paragraph 5 below.
5. Nominee applications may be made by approved nominee companies only. Approvednominee companies are de®ned as banks, merchant banks, ®nance companies, insurancecompanies, licensed securities dealers in Singapore and nominee companies controlled bythem. Applications made by persons acting as nominees other than approved nomineecompanies will be rejected.
6. For non-nominee applications, each applicant must maintain a Securities Account withCDP in his own name at the time of application. An applicant without an existing SecuritiesAccount with CDP in his own name at the time of application will have his application rejected(in the case of an application by way of an Application Form) or will not be able to complete hisElectronic Application (in the case of an Electronic Application). An applicant with an existingSecurities Account with CDP who fails to provide his Securities Account number or whoprovides an incorrect Securities Account number in section B of the Application Form or in hisElectronic Application, as the case may be, is liable to have his application rejected. Subject toparagraph 7 below, an application may be rejected if the applicant's particulars such as hisname, NRIC or passport number, nationality and permanent residence status provided in hisApplication Form or, in the case of an Electronic Application, contained in the records of therelevant Participating Bank at the time of his Electronic Application, as the case may be, differfrom those particulars in his Securities Account as maintained with CDP. If the applicantpossesses more than one individual direct Securities Account with CDP, his application will berejected.
7. If the address of an applicant stated on the Application Form or, in the case of anElectronic Application, contained in the records of the relevant Participating Bank, as thecase may be, is different from the address registered with CDP, the applicant must informCDP of his updated address promptly, failing which the noti®cation letter on successfulallotment and other correspondence from CDP will be sent to his address last registeredwith CDP.
8. The Company reserves the right to reject or accept, in whole or in part, or to scale down orballot, any application without assigning any reason therefor, and no enquiry and/orcorrespondence on the decision of the Company will be entertained. This right applies toapplications made by way of printed Application Forms and by way of Electronic Applications.In deciding the basis of allotment which shall be at the discretion of the Company, dueconsideration will be given to the desirability of allotting the New Shares to a reasonablenumber of applicants with a view to establishing an adequate market for the Shares.
9. The Company reserves the right to reject any application which does not conform strictly to theinstructions set out in the Application Forms and this Prospectus or which does not comply withthe instructions for Electronic Applications or with the terms and conditions of this Prospectusor, in the case of an application by way of a printed Application Form, which is illegible,incomplete, incorrectly completed or which is accompanied by an improperly drawn up orimproper form of remittance. The Company further reserves the right to treat as valid anyapplications not completed or submitted or effected in all respects in accordance with theterms and conditions of this Prospectus, the instructions set out in the Application Forms andthis Prospectus or the instructions for Electronic Applications and also to present for paymentor other processes all remittances at any time after receipt and to have full access to allinformation relating to, or deriving from, such remittances or the processing thereof.
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10. Share certi®cates will be registered in the name of CDP and will be forwarded only to CDP. It isexpected that CDP will send to each successful applicant at his own risk, within 15 Market Daysafter the close of the Application List, a statement showing that his Securities Account has beencredited with the number of New Shares allotted to him. This will be the only acknowledgementof application moneys received and is not an acknowledgement by the Company. Each applicantirrevocably authorises CDP to complete and sign on his behalf as transferee or renouncee anyinstrument of transfer and/or other documents required for the issue or transfer of the NewShares allotted to the applicant. This authorisation applies to applications made both by way ofprinted Application Forms and by way of Electronic Applications.
11. By completing and delivering an Application Form and, in the case of an ATM ElectronicApplication, by pressing the ``Enter'' or ``OK'' or ``Con®rm'' or ``Yes'' or any other relevant keyon the ATM or in the case of an Internet Electronic Application, by clicking ``Submit'' or``Continue'' or ``Yes'' or ``Con®rm'' or any other button on the IB website screen in accordancewith the provisions herein, each applicant:±
(a) irrevocably offers to subscribe for the number of New Shares speci®ed in his application (orsuch smaller number for which the application is accepted) at the Issue Price and agreesthat he will accept such Shares as may be allotted to him, in each case on the terms of,and subject to the conditions set out in, this Prospectus and the Memorandum andArticles of Association of the Company; and
(b) warrants the truth and accuracy of the information in his application.
12. Applications must be made in lots of 1,000 New Shares or higher integral multiples of 1,000 NewShares. Applications for any other number of New Shares will be rejected.
13. No Shares will be allotted on the basis of this Prospectus later than six months after the date ofthis Prospectus.
14. In the event of an under-subscription for the Offer Shares as at the close of the Application List,that number of Offer Shares under-subscribed shall be made available to satisfy applications forthe Placement Shares to the extent there is an over-subscription for the Placement Shares as atthe close of the Application List. Any of the Reserved Shares not taken up will be made availableto satisfy applications for the Placement Shares to the extent that there is an over-subscriptionfor the Placement Shares as at the close of the Application List. In the event of an under-subscription for the Placement Shares as at the close of the Application List, that number ofPlacement Shares under-subscribed shall be made available to satisfy applications for the OfferShares to the extent that there is an over-subscription for the Offer Shares as at the close of theApplication List.
15. In the event of an over-subscription for the Offer Shares as at the close of the Application Listand/or the number of Placement Shares are fully subscribed or over-subscribed as at the closeof the Application List, the successful applications for the Offer Shares shall be determined byballot, or otherwise as determined by the Directors and approved by SGX-ST.
16. Acceptance of applications will be conditional upon the Company being satis®ed that:±
(a) permission has been granted by SGX-ST to deal in, and for quotation for, all the existingShares and the New Shares on a ``when issued'' basis on SGX-Sesdaq; and
(b) the Management and Underwriting Agreement and Placement Agreement referred to onpages 117 and 118 of this Prospectus have become unconditional and have not beenterminated.
17. Additional terms and conditions for applications by way of printed Application Forms are set outon pages 124 to 127 of this Prospectus.
18. Additional terms and conditions for Electronic Applications are set out on pages 127 to 133 ofthis Prospectus.
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19. Each applicant irrevocably authorises CDP to disclose the outcome of his application, includingthe number of New Shares allotted to the applicant pursuant to his application, to authorisedoperators.
20. Any reference to the ``applicant'' in this section shall include a person applying for the OfferShares by way of an Electronic Application or by way of an Offer Shares Application Form, aperson applying for the Placement Shares through the Placement Agent, and a person applyingfor the Reserved Shares by way of a Reserved Shares Application Form.
21. No application will be held in reserve.
ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATIONFORMS
Applications by way of printed Application Forms shall be made on, and subject to, the terms andconditions of this Prospectus, including but not limited to the terms and conditions appearing belowand those set out under the section on ``Terms and Conditions and Procedures for Application'' foundon pages 121 to 124 of this Prospectus, as well as the Memorandum and Articles of Association ofthe Company.
1. Applications for the Offer Shares must be made using the WHITE Application Forms and of®cialenvelopes ``A'' and ``B'', applications for the Placement Shares (other than for the ReservedShares) must be made using the BLUE Application Forms and applications for the ReservedShares must be made using the PINK Application Forms, accompanying and forming part ofthis Prospectus. Care must be taken to follow the instructions set out in the respectiveApplication Forms and this Prospectus for the completion of the respective Application Forms.Applications which do not conform strictly to these instructions or to the terms and conditions ofthis Prospectus or which are illegible, incomplete, incorrectly completed or which areaccompanied by improperly drawn up or improper form of remittances may be rejected.
2. The Application Forms must be completed in English. Please type or write clearly in ink usingBLOCK LETTERS. All spaces in an Application Form, except those under the heading ``FOROFFICIAL USE ONLY'', must be completed and the words ``NOT APPLICABLE'' or ``N.A.''should be written in any space that is not applicable.
3. Individuals, corporations and approved nominee companies must give their names in full.Applications must be made, in the case of individuals, in their full names as appearing in theiridentity cards (if applicants have such identi®cation documents) or passports and, in the caseof corporations, in their full names as registered with a competent authority. Applicants, otherthan individuals, completing the Application Form under the hand of an of®cial, must state thename and capacity in which that of®cial signs. A corporation completing an Application Form isrequired to af®x its Common Seal (if any) in accordance with its Memorandum and Articles ofAssociation or the equivalent constitutive documents of the corporation. If an application by acorporate applicant is successful, a copy of its Memorandum and Articles of Association or itsequivalent constitutive documents must be lodged with the Company's Share Registrar. TheCompany reserves the right to require any applicant to produce documentary proof ofidenti®cation for veri®cation purposes.
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4. (a) All applicants must complete Sections A and B and sign page 1 of the Application Form.
(b) All applicants are required to delete either paragraph 7(a) or 7(b) on page 1 of theApplication Form. Where paragraph 7(a) is deleted, the applicant must also completeSection C of the Application Form with particulars of the bene®cial owner(s).
(c) Applicants who fail to make the required declaration in paragraph 7(a) or 7(b) (as the casemay be) on page 1 of the Application Form are liable to have their applications rejected.
5. Applications for the New Shares must be accompanied by payment in cash in the form set outbelow only. Each application must be accompanied by a cash remittance in Singapore currencyfor the full amount payable, in respect of the number of New Shares applied for, in the form of aBanker's Draft, Cashier's Order or POSB Cashier's Order drawn on a bank in Singapore, madeout in favour of ``AP OIL SHARE ISSUE ACCOUNT'' crossed ``A/C PAYEE ONLY'', or in theform of a DBS Autobank Cashier's Order Equivalent, and with the name and address of theapplicant written clearly on the reverse side. Applications not accompanied by any paymentor accompanied by any other form of payment will not be accepted. Remittances bearing``Not Transferable'' or ``Non Transferable'' crossings will be rejected. No acknowledgement ofreceipt will be issued by the Company or the Manager for applications and application moneysreceived.
6. Individual applicants will be required to declare whether they are citizens or permanent residentsof Singapore. Corporate applicants, whether incorporated or unincorporated and whereverincorporated or constituted, will be required to declare whether they are corporations in whichcitizens or permanent residents of Singapore or any body corporate constituted under anystatute of Singapore have an interest in the aggregate of more than 50% of the issued sharecapital of or interests in such corporations. Approved nominee companies are required todeclare whether the bene®cial owner of the New Shares is a citizen or permanent resident ofSingapore or a corporation, whether incorporated or unincorporated and wherever incorporatedor constituted, in which citizens or permanent residents of Singapore or any body corporateincorporated or constituted under any statute of Singapore have an interest in the aggregate ofmore than 50% of the issued share capital of or interests in such corporation.
7. Unsuccessful applications and those not successfully balloted or accepted are expected to bereturned to the applicants by ordinary post, at the risk of the applicants, within three MarketDays after the close of the Application List, without interest or any share of revenue or otherbene®t arising therefrom. Where an application is rejected or accepted in part only, the fullamount or the balance of the application moneys, as the case may be, will be refunded to theapplicant by ordinary post at his own risk (without interest or any share of revenue or otherbene®t arising therefrom) within 14 days after the close of the Application List provided that theremittance accompanying such application which has been presented for payment or otherprocesses has been honoured and the application moneys received in the designated shareissue account. Unsuccessful applicants using DBS Autobank Cashier's Order Equivalent willhave the full amount of their application moneys (without interest or any share of revenue orother bene®t arising therefrom) automatically credited to their accounts maintained with DBSBank.
8. Capitalised terms used in the Application Forms and de®ned in this Prospectus shall bear themeanings assigned to them in this Prospectus.
9. In consideration of the Company having distributed the Application Form to the applicant andagreeing to close the Application List at 12.00 noon on 5 June 2001 or such later time or dateas the Directors may, in their absolute discretion, decide and by completing and delivering theApplication Form, each applicant agrees that:±
(a) his application is irrevocable;
(b) his remittance will be honoured on ®rst presentation and that any moneys returnable maybe held pending clearance of his payment and he will not be entitled to any interest or anyshare of revenue or other bene®t arising therefrom;
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(c) in respect of the New Shares for which his application has been received and not rejected,acceptance of his application shall be constituted by written noti®cation by or on behalf ofthe Company and not otherwise, notwithstanding any remittance being presented forpayment by or on behalf of the Company;
(d) he will not be entitled to exercise any remedy of rescission for misrepresentation at anytime after acceptance of his application;
(e) all applications, acceptances and contracts resulting therefrom under the Invitation shall begoverned by and construed in accordance with the laws of Singapore and that heirrevocably submits to the non-exclusive jurisdiction of the Singapore courts; and
(f) in making his application, reliance is placed solely on the information contained in thisProspectus and that none of the Company, the Manager, the Underwriter, the PlacementAgent or any other person involved in the Invitation shall have any liability for anyinformation not so contained.
10. Applications for Offer Shares
(a) Applications for Offer Shares must be made using the WHITE Application Forms andWHITE of®cial envelopes ``A'' and ``B''.
(b) The applicant must:±
(i) enclose the WHITE Offer Shares Application Form, duly completed and executed,together with the correct remittance in accordance with the terms and conditions ofthis Prospectus in the WHITE of®cial envelope ``A'' which is provided;
(ii) in the appropriate spaces on the WHITE of®cial envelope ``A'':±
(A) write his name and address;
(B) state the number of Offer Shares applied for;
(C) tick the relevant box to indicate the form of payment; and
(D) af®x adequate Singapore postage;
(iii) SEAL THE OFFICIAL WHITE ENVELOPE ``A'';
(iv) write, in the appropriate box provided on the larger of®cial WHITE envelope ``B''addressed to DBS BANK, 6 SHENTON WAY #28-00, DBS BUILDING TOWERONE, SINGAPORE 068809, the number of Offer Shares for which the application ismade; and
(v) insert WHITE of®cial envelope ``A'' into WHITE of®cial envelope ``B'', seal WHITEof®cial envelope ``B'', af®x adequate Singapore postage on envelope ``B'' (ifdespatching by ordinary post) and thereafter DESPATCH BY ORDINARY POST ORDELIVER BY HAND at his own risk to DBS BANK, 6 SHENTON WAY #28-00, DBSBUILDING TOWER ONE, SINGAPORE 068809, so as to arrive by 12.00 noon on 5June 2001. Local Urgent Mail or Registered Post must NOT be used.
Applications that are illegible, incomplete or incorrectly completed or accompanied by animproperly drawn up or improper form of remittance are liable to be rejected.
(c) ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement ofreceipt will be issued for any application or remittance received.
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11. Applications for Placement Shares
(a) Applications for Placement Shares (other than Reserved Shares) must be made using theBLUE Application Forms.
(b) The completed BLUE Placement Shares Application Form and the applicant's remittance inaccordance with the terms and conditions of this Prospectus for the full amount payable inrespect of the number of Placement Shares applied for must be delivered by hand ordespatched by ordinary post enclosed and sealed in any envelope to be provided by theapplicant. The applicant must af®x adequate Singapore postage (if despatching byordinary post) and thereafter the sealed envelope must be despatched by ordinary post ordelivered by hand at the applicant's own risk to DBS Bank, 6 Shenton Way #28-00, DBSBuilding Tower One, Singapore 068809, for the attention of Equity Capital Markets, toarrive by 12.00 noon on 5 June 2001. Local Urgent Mail or Registered Post must NOT beused.
(c) ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement ofreceipt will be issued for any application or remittance received.
(d) Alternatively, the applicant may remit his application moneys by electronic transfer to theaccount of DBS Bank, Shenton Way Branch, Current Account No. 001-710011-3, infavour of ``AP OIL SHARE ISSUE ACCOUNT'' for the number of Placement Sharesapplied for by 12.00 noon on 5 June 2001. Applicants who remit their application moneysvia electronic transfer should send a copy of the telegraphic transfer advice slip to DBSBank, 6 Shenton Way #28-00, DBS Building Tower One, Singapore 068809, for theattention of Equity Capital Markets, to arrive by 12.00 noon on 5 June 2001.
12. Applications for Reserved Shares
(a) Applications for Reserved Shares must be made using the PINK Application Forms.
(b) The completed PINK Reserved Shares Application Form and the applicant's remittance inaccordance with the terms and conditions of this Prospectus for the full amount payable inrespect of the number of Reserved Shares applied for must be enclosed and sealed in anenvelope to be provided by the applicant. The applicant must af®x adequate Singaporepostage (if despatching by ordinary post) and thereafter the sealed envelope must bedespatched by ordinary post or delivered by hand at the applicant's own risk to DBSBank, 6 Shenton Way #28-00, DBS Building Tower One, Singapore 068809, so as toarrive by 12.00 noon on 5 June 2001. Local Urgent Mail or Registered Post must NOT beused.
(c) ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement ofreceipt will be issued for any application or remittance received.
ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS
The procedures for Electronic Applications are set out on the ATM screens (in the case of ATMElectronic Applications) and the IB website screens (in the case of Internet Electronic Applications) ofthe relevant Participating Banks (the ``Steps''). DBS Bank is the only Participating Bank providing theInternet Electronic Application service. For illustrative purposes, the procedures for ElectronicApplications through ATMs and the IB website of DBS Bank are set out in the ``Steps for ATMElectronic Applications through ATMs of DBS Bank (including its POSBank Services division)'' andthe ``Steps for Internet Electronic Application through the IB website of DBS Bank'' (the ``DBSSteps'') appearing on pages 132 to 133 of this Prospectus respectively. Please read carefully theterms of this Prospectus, the Steps and the terms and conditions for Electronic Applications set outbelow carefully before making an Electronic Application. An ATM card issued by one ParticipatingBank cannot be used to apply for Offer Shares at an ATM belonging to other Participating Banks.
Any reference to the ``Applicant'' in these Terms and Conditions for Electronic Applications and theSteps shall mean the applicant who applies for the Offer Shares through an ATM of a ParticipatingBank or the IB website of DBS Bank.
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For an ATM Electronic Application, an Applicant must have an existing bank account with, and be anATM cardholder of, one of the Participating Banks before he can make an ATM Electronic Applicationat the ATMs of that Participating Bank. For an Internet Electronic Application, the Applicant must havean existing bank account with and a User Identi®cation (``User ID'') and a Personal Identi®cationNumber/Password (``PIN'') given by DBS Bank. The DBS Steps set out the actions that the Applicantmust take at ATMs or the IB website of DBS Bank to complete an Electronic Application. The actionsthat the Applicant must take at the ATMs of the other Participating Banks are set out on the ATMscreens of the relevant Participating Banks. Upon the completion of his ATM Electronic Applicationtransaction, the Applicant will receive an ATM transaction slip (``Transaction Record''), con®rming thedetails of his ATM Electronic Application. The Transaction Record is for the Applicant's retention andshould not be submitted with any printed Application Form. Upon the completion of his InternetElectronic Application through the IB website of DBS Bank, there will be an on-screen con®rmation(``Con®rmation Screen'') of the application which can be printed out by the Applicant for his record.The printed record of the Con®rmation Screen is for the Applicant's retention and should not besubmitted with any printed Application Form.
An Applicant must ensure that he enters his own Securities Account Number when using theATM card issued to him in his own name. Using his own Securities Account Number with anATM card not issued to him in his own name will render his ATM Electronic Application liableto be rejected. An Applicant, including one who has a joint bank account with a ParticipatingBank, must use an ATM Card issued to him in his own name and must enter his ownSecurities Account Number. An Applicant who fails to use his own ATM card or who does notkey in his own Securities Account Number will have his application rejected.
An Applicant must ensure, when making an Internet Electronic Application, that the mailing address ofhis account selected for the application is in Singapore and the application is being made inSingapore. Otherwise, his application is liable to be rejected. In this connection, the Applicant will beasked to declare that he is in Singapore at the time when he makes his application.
An Electronic Application shall be made in accordance with, and subject to, the terms and conditionsof this Prospectus including but not limited to the terms and conditions appearing below as well asthose set out under the section on ``Terms and Conditions and Procedures for Application'' foundon pages 121 to 124 of this Prospectus, as well as the Memorandum and Articles of Association ofthe Company.
1. In connection with his Electronic Application for the Offer Shares, the Applicant is required tocon®rm statements to the following effect in the course of activating the Electronic Application:±
(a) that he has received a copy of this Prospectus and has read, understood and agreedto all the terms and conditions of application for the Offer Shares and this Prospectusprior to effecting the Electronic Application and agrees to be bound by the same;
(b) that he consents to the disclosure of his name, NRIC or passport number, address,nationality and permanent residence status, CDP Securities Account number, CPFInvestment Account number (if applicable) and share application amount (the``Relevant Particulars'') from his account with that Participating Bank to the ShareRegistrar, SCCS, CDP, CPF, the Company and the Manager (the ``Relevant Parties'');and
(c) that that application is his only application for the Offer Shares and it is made in hisname and at his own risk.
His application will not be successfully completed and cannot be recorded as a completedtransaction unless he presses the ``Enter'' or ``OK'' or ``Con®rm'' or ``Yes'' or any other relevantkey in the ATM or clicks ``Con®rm'' or ``OK'' or ``Submit'' or ``Continue'' or ``Yes'' or any otherrelevant button on the IB website screen. By doing so, the Applicant shall be treated assignifying his con®rmation of each of the above statements. In respect of statement 1(b) above,his con®rmation shall signify, and shall be treated as, his written permission given in accordancewith the relevant laws of Singapore, including Section 47(4) of the Banking Act (Chapter 19) ofSingapore, to the disclosure by that Participating Bank of the Relevant Particulars of hisaccount(s) with that Participating Bank to the Relevant Parties.
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2. An applicant may make an ATM Electronic Application at an ATM of any Participating Bank or anInternet Electronic Application at the IB website of DBS Bank for the Offer Shares in the form ofcash only by authorising such Participating Bank to deduct the full amount payable from hisaccount with such Participating Bank.
3. The Applicant irrevocably agrees and undertakes to subscribe for and to accept the number ofOffer Shares applied for as stated on the Transaction Record or on the Con®rmation Screen orany lesser number of Offer Shares that may be allotted to him in respect of his ElectronicApplication. In the event that the Company decides to allot any lesser number of such OfferShares or not to allot Offer Shares to the Applicant, the Applicant agrees to accept suchdecision as ®nal. If the Applicant's Electronic Application is successful, his con®rmation (by hisaction of pressing the ``Enter'' or ``OK'' or ``Con®rm'' or ``Yes'' or any other relevant key on theATM or clicking ``Con®rm'' or ``OK'' or ``Submit'' or ``Continue'' or ``Yes'' or any other relevantbutton on the IB website screen) of the number of Offer Shares applied for shall signify and shallbe treated as his acceptance of the number of Offer Shares that may be allotted to him and hisagreement to be bound by the Memorandum and Articles of Association of the Company.
4. The Applicant irrevocably requests and authorises the Company to:±
(a) register the Offer Shares allotted to him in the name of CDP for deposit into his SecuritiesAccount;
(b) send the relevant Share certi®cate(s) to CDP;
(c) return or refund (without interest or any share of revenue or other bene®t arising therefrom)the application moneys in Singapore currency, should his Electronic Application not beaccepted, by automatically crediting the Applicant's bank account with his ParticipatingBank with the relevant amount within three Market Days after the close of the ApplicationList; and
(d) return or refund (without interest or any share of revenue or other bene®t arising therefrom)the balance of the application moneys in Singapore currency, should his ElectronicApplication be accepted in part only, by automatically crediting the Applicant's bankaccount with his Participating Bank with the relevant amount within 14 days after theclose of the Application List.
5. BY MAKING AN ELECTRONIC APPLICATION, THE APPLICANT CONFIRMS THAT HE ISNOT APPLYING FOR THE OFFER SHARES AS NOMINEE OF ANY OTHER PERSON ANDTHAT ANY ELECTRONIC APPLICATION THAT HE MAKES IS THE ONLY APPLICATIONMADE BY HIM AS BENEFICIAL OWNER.
THE APPLICANT SHALL MAKE ONLY ONE ELECTRONIC APPLICATION AND SHALL NOTMAKE ANY OTHER APPLICATION FOR THE NEW SHARES (OTHER THAN FOR THERESERVED SHARES), WHETHER AT THE ATMs OF ANY PARTICIPATING BANK OR THEIB WEBSITE OF DBS BANK OR ON THE PRESCRIBED PRINTED APPLICATION FORMS.WHERE A PERSON HAS MADE AN APPLICATION FOR NEW SHARES (OTHER THANRESERVED SHARES) ON AN APPLICATION FORM, HE SHALL NOT MAKE ANELECTRONIC APPLICATION FOR OFFER SHARES AND VICE VERSA.
6. The Applicant irrevocably agrees and acknowledges that his Electronic Application is subject torisks of electrical, electronic, technical and computer-related faults and breakdowns, ®res, actsof God and other events beyond the control of the Participating Banks, the Company and theManager and if, in any such event, the Participating Banks and/or the Company and/or theManager do not record or receive the Applicant's Electronic Application, or data relating to theApplicant's Electronic Application or the tape or any other devices containing such data is lost,corrupted, destroyed or not otherwise accessible, whether wholly or partially for whateverreason, the Applicant shall be deemed not to have made an Electronic Application and theApplicant shall have no claim whatsoever against the Participating Banks, the Company or theManager for the Offer Shares applied for or for any compensation, loss or damage.
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7. Electronic Applications shall close at 12.00 noon on 5 June 2001 or such other time as theDirectors may, in their absolute discretion, decide. Subject to the paragraph above, an InternetElectronic Application is deemed to be received only upon its completion, that is, when there isan on-screen con®rmation of the application.
8. All particulars of the Applicant in the records of his Participating Bank at the time he makes hisElectronic Application shall be deemed to be true and correct and the relevant Participating Bankand the Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been anychange in the particulars of the Applicant after the time of the making of his ElectronicApplication, the Applicant shall promptly notify his Participating Bank.
9. The Applicant must have suf®cient funds in his bank account(s) with his Participating Bank at thetime he makes his Electronic Application, failing which his Electronic Application will not becompleted or accepted. Any Electronic Application which does not strictly conform to theinstructions set out in this Prospectus or on the screens of the ATM or the IB website throughwhich that Electronic Application was made will be rejected.
10. No application will be kept in reserve. Where an Electronic Application is not accepted, it isexpected that the full amount of the application moneys will be refunded in Singapore currency(without interest or any share of revenue or other bene®t arising therefrom) to the Applicant bybeing automatically credited to the Applicant's bank account with the relevant ParticipatingBank within three Market Days after the close of the Application List. Trading on a ``whenissued'' basis, if applicable, is expected to commence after such refund has been made.Where an Electronic Application is rejected or accepted in part only, the full amount or thebalance of the application moneys will be refunded in Singapore currency (without interest orany share of revenue or other bene®t arising therefrom) to the Applicant by being automaticallycredited to the Applicant's bank account with his Participating Bank within 14 days after theclose of the Application List.
The responsibility for timely refund of application moneys arising from unsuccessful or partiallysuccessful Electronic Application lies solely with the respective Participating Banks. Therefore,Applicants are strongly advised to consult their respective Participating Banks regarding thestatus of their Electronic Applications and/or refund of application moneys to them arising fromtheir unsuccessful or partially successful Electronic Applications, to determine the exact numberof Shares, if any, which have been allotted to them. Neither the SGX-ST, CDP, SCCS, theParticipating Banks, the Company nor the Manager assumes any responsibility for any losswhich may be incurred as a result of Applicants having to cover any net sell positions or frombuy-in procedures activated by the SGX-ST.
If the applicant's ATM Electronic Application is made through the ATMs of OCBC Group,KTB or DBS Bank (including its POSBank Services division) and is unsuccessful, nonoti®cation will be sent by the relevant Participating Bank.
If the Applicant's Internet Electronic Application made through the IB website of DBS Bankis unsuccessful, no noti®cation will be sent by DBS Bank.
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Applicants who make ATM Electronic Applications through the ATMs of the following banks maycheck the provisional results of their ATM Electronic Applications as follows:±
Bank Telephone Available at ATM/Internet Operating Hours Service expected from
DBS Bank 1800-222 2222327 4767
Internet Banking or InternetKioskwww.dbs.com*
24 hours a day 7.00 p.m. on theballoting day
KTB 222 8228 ATM ATM-24 hours a dayPhone Banking
Mon-Fri 0800-2200Sat 0800-1500
ATM-Evening of theballoting day
Phone Banking-8.00 a.m. on the dayafter the balloting day
OCBC 1800-363 3333 ATM ATM-24 hours a day
Phone Banking24 hours a day
Evening of the ballotingday
* Applicants who have made Internet Electronics Applications through the IB website of DBS Bank may also check theresults of their applications through the same channels listed in the table above in relation to ATM ElectronicApplications made at ATMs of DBS Bank.
11. In consideration of the Company making available the Electronic Application facility through theATMs and the IB websites (if any) of the Participating Banks and agreeing to close theApplication List at 12.00 noon on 5 June 2001 or such later time or date as the Directors mayin their absolute discretion decide, and by making and completing an Electronic Application, theApplicant agrees that:±
(a) his Electronic Application is irrevocable;
(b) his Electronic Application, the acceptance of his Electronic Application by the Companyand the contract resulting therefrom under the Invitation shall be governed by andconstrued in accordance with the laws of Singapore and he irrevocably submits to thenon-exclusive jurisdiction of the Singapore courts;
(c) none of the Company, the Manager or the Participating Banks shall be liable for any delays,failures or inaccuracies in the recording, storage or in the transmission or delivery of datarelating to his Electronic Application to the Company or CDP due to a breakdown or failureof transmission, delivery or communication facilities or any risks referred to in paragraph 6on page 129 of this Prospectus or to any cause beyond their respective controls;
(d) he will not be entitled to exercise any remedy of rescission for misrepresentation at anytime after acceptance of his application;
(e) in respect of the Offer Shares for which his Electronic Application has been successfullycompleted and not rejected, acceptance of the Applicant's Electronic Application shall beconstituted by written noti®cation by or on behalf of the Company and not otherwise,notwithstanding any payment received by or on behalf of the Company; and
(f) in making his application, reliance is placed solely on the information contained in thisProspectus and that none of the Company, the Manager, the Underwriter, the PlacementAgent or any other person involved in the Invitation shall have any liability for anyinformation not so contained.
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12. The Applicant should ensure that his personal particulars as recorded by both CDP and therelevant Participating Banks are correct and identical. Otherwise his Electronic Application maybe rejected. The Applicant should promptly inform CDP of any change in his address, failingwhich the noti®cation letter on successful allotment will be sent to his address last registeredwith CDP.
13. The existence of a trust will not be recognised. Any Electronic Application by a person must bemade in his/their own name(s) and without quali®cation. The Company will reject any applicationby any person acting as nominee.
INSTRUCTIONS FOR ELECTRONIC APPLICATIONS THROUGH ATMS OF DBS BANK(INCLUDING ITS POSBANK SERVICES DIVISION) AND IB WEBSITE OF DBS BANK
Instructions for an Applicant using Electronic Application will appear on the ATM screens and the IBwebsite screens of the relevant Participating Banks.
Steps for ATM Electronic Application through ATMs of DBS Bank (including its POSBankServices division)
For illustrative purposes, the steps for making an ATM Electronic Application through a DBS Bank orPOSBank ATM and through the IB website of DBS Bank are shown below. Certain words appearingon the screen are in abbreviated form (``A/c'', ``amt'', ``appln'', ``&'', ``I/C'' and ``No.'' refer to``Account'', ``amount'', ``application'', ``and'', ``NRIC'' and ``Number'', respectively). Instructions forATM Electronic Applications on the ATM screens of Participating Banks (other than DBS Bank(including its POSBank Services division)) may differ slightly from those represented below.
Step 1 : Insert your personal DBS or POSBank ATM Card
2 : Enter your Personal Identi®cation Number
3 : Select ``CASHCARD & MORE SERVICES''
4 : Select ``ESA-IPO SHARE/BOND/RIGHTS''
5 : Select ``ELECTRONIC SECURITY APPLN (IPO-SHARE/BOND) to ``AP OIL''
6 : Press the ``ENTER'' key to acknowledge:±
Ð You have read, understood & agreed to all terms of appln & Prospectus.
Ð You consent to disclose your name, I/C/Passport No., address, nationality,CDP Securities A/c No., CPF Investment A/c No. & security appln amountfrom your bank account(s) to share registrars, SCCS, CDP, CPF and theissuer.
Ð For FIXED price security appln, this is your only appln and it is made in yourown name and at your own risk.
Ð For TENDER security appln, this is your only appln at the selected tender priceand it is made in your own name and at your own risk.
Ð You are not a US Person as referred to in the Prospectus/Document, whereapplicable.
7 : Select your nationality
8 : Select the DBS Bank account (Autosave/Current/Savings/Savings Plus) or the POSBankaccount (Current/Savings) from which to debit your application moneys
9 : Enter the number of shares/securities you wish to apply for using cash
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10 : Enter your own 12-digit CDP Securities Account number (Note: This step will be omittedautomatically if your CDP Securities Account number has already been stored in theBank's records)
11 : Check the details of your share application, your NRIC/Passport number and CDPSecurities Account number and the number of the shares on the screen and press the``ENTER'' key to con®rm application
12 : Remove the Transaction Record for your reference and retention only
Steps for Internet Electronic Application through the IB website of DBS Bank
For illustrative purposes, the steps for making an Internet Electronic Application through the DBSBank IB website is shown below. Certain words appearing on the screen are in abbreviated form(``A/c'', ``amt'', ``appln'', ``&'', ``I/C'' and ``No.'' refer to ``Account'', ``amount'', ``application'', ``and'',``NRIC'' and ``Number'', respectively).
Step 1 : Click on to DBS Bank website (www.dbs.com)
2 : Login to Internet Banking
3 : Enter your User ID and PIN
4 : Select ``Electronic Security Application''
5 : Click ``Yes'' to proceed and to warrant that you have observed and complied with allapplicable laws and regulations
6 : Click on ``AP OIL''
7 : Click ``Con®rm'' to acknowledge:±
(a) You have read, understood & agreed to all terms of application & Prospectus
(b) You consent to disclose your name, I/C/Passport No., address, nationality, CDPSecurities A/c No., CPF Investment A/c No. & share application amount from yourDBS/POSBank account(s) to share registrars, SCCS, CDP, CPF, issuer(s)
(c) This application is made in your own name and at your own risk
(d) For FIXED price securities application, this is your only application. For TENDERprice securities application, this is your only application at the selected tender price.
(e) You are not a US Person as referred to in the Prospectus/Document, whereapplicable.
8 : Fill in details for share application and click ``Submit''
9 : Check the details of your securities application, your IC/passport No. and click ``OK'' tocon®rm your application
10 : Print the Con®rmation Screen (optional) for your reference and retention only
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APPENDIX B
SELECTED ARTICLES OF ASSOCIATION OF THE COMPANY
1. The following provisions of the Articles of Association of the Company relate to theremuneration, restrictions on voting rights and borrowing powers of the Directors:±
Directors Remuneration
Article 101(3)
An alternate Director shall be entitled to contract and be interested in and bene®t from contracts,arrangements or transactions to the same extent mutatis mutandis as if he were a Director buthe shall not be entitled to receive from the Company any remuneration in respect of hisappointment as alternate Director except only such part (if any) of the remuneration otherwisepayable to his appointor in which event any fee paid by the Company to an alternate Directorshall be deducted from the fees of the Director appointing the alternate.
Article 102(1)
The Directors shall be entitled to receive by way of fees for their services as Directors in eachyear such sum as shall from time to time, subject to Section 169 of the Act, be determined bythe Company by resolution passed at a General Meeting, the notice of which shall specify theproposals concerning the same. Such remuneration shall be divided amongst the Directors asthey shall determine or failing agreement equally.
Article 102(2)
The fees payable to the Directors shall not be increased except pursuant to a resolution passedat a General Meeting, where notice of the proposed increase has been given in the noticeconvening the Meeting.
Article 102(3)
The remuneration of a non-executive Director shall be by a ®xed sum and not by a commissionon or percentage of pro®ts or turnover. The remuneration of an executive Director may notinclude a commission on or a percentage of turnover.
Article 102(4)
The provisions of this Article are without prejudice to the power of the Directors to appoint any oftheir number to be employee or agent of the Company at such remuneration and upon suchterms as they think ®t without the approval of the Members in General Meeting provided thatsuch remuneration may include a commission on or percentage of pro®ts but not acommission on or percentage of turnover.
Article 102(5)
Subject to the provisions of the Statutes, the Directors shall have power to pay and agree to paypensions or other retirement, superannuation, death or disability bene®ts to (or to any person inrespect of) any Director for the time being holding any executive of®ce and for the purpose ofproviding any such pensions or other bene®ts to contribute to any scheme of fund to paypremiums.
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Article 103
If any Director, being willing and having been called upon to do so, shall hold an executive of®cein the Company, shall render or perform extra or special services of any kind, including serviceson any committee established by the Directors, or shall travel or reside abroad for any businessor purposes of the Company, he shall be entitled to receive such sum as the Directors may think®t for expenses, and also such remuneration as the Directors may think ®t, either as a ®xed sumor as provided in Article 102(3) (but not by way of commission on or percentage of turnover) andsuch remuneration may, as the Directors shall determine, be either in addition to or insubstitution for any other remuneration he may be entitled to receive, and the same shall becharged as part of the ordinary working expenses of the Company.
Article 105(3)
A Director may hold any other of®ce or place of pro®t under the Company (other than the of®ceof Auditor) in conjunction with his of®ce of Director for such period and on such terms (as toremuneration and otherwise) as the Directors may determine. No Director or intending Directorshall be disquali®ed by his of®ce from contracting with the Company either with regard to histenure of any such other of®ce or place of pro®t or as a vendor, purchaser or otherwise.Subject to this Article 105, no such contract and no contract or arrangement entered into by oron behalf of the Company in which any Director is in any way interested shall be liable to beavoided nor shall any Director so contracting or being so interested be liable to account to theCompany for any pro®t realised by any such contract or arrangement by reason of such Directorholding that of®ce or of the ®duciary relationship thereby established.
Article 114
The Directors shall (subject to the provisions of any contract between the Managing Director andthe Company) from time to time ®x the remuneration of the Managing Director which may be byway of ®xed salary, commission or participation in pro®ts (but not turnover) of the Company orby any or all of these modes.
Restrictions on Voting Rights of Directors
Article 105(1)
A Director who is in any way whether directly or indirectly interested in a contract or proposedcontract with the Company shall declare the nature of his interest at a meeting of the Directors inaccordance with Section 156 of the Act.
Article 105(2)
A Director shall not vote in respect of any contract or proposed contract or arrangement with theCompany in which he has directly or indirectly a personal material interest and if he shall do sohis vote shall not be counted nor save as provided by Article 106 shall he be counted in thequorum present at the meeting.
Article 105(3)
A Director may hold any other of®ce or place of pro®t under the Company (other than the of®ceof Auditor) in conjunction with his of®ce of Director for such period and on such terms (as toremuneration and otherwise) as the Directors may determine. No Director or intending Directorshall be disquali®ed by his of®ce from contracting with the Company either with regard to histenure of any such other of®ce or place of pro®t or as a vendor, purchaser or otherwise.Subject to this Article 105, no such contract and no contract or arrangement entered into by oron behalf of the Company in which any Director is in any way interested shall be liable to beavoided nor shall any Director so contracting or being so interested be liable to account to theCompany for any pro®t realised by any such contract or arrangement by reason of such Directorholding that of®ce or of the ®duciary relationship thereby established.
135
Article 106
Subject to Article 105(2) above, a Director notwithstanding his interest may be counted in thequorum present at any meeting whereat he or any other Director is appointed to hold any suchof®ce or place of pro®t under the Company or whereat the terms of any such appointment arearranged.
Borrowing Powers of Directors
Article 62
The Directors may, from time to time, exercise all the powers of the Company to raise or borrowor secure the payment of any sum or sums of moneys for the purposes of the Company.
Article 63
The Directors may raise or secure the repayment of such sum or sums in such manner and uponsuch terms and conditions in all respects as they think ®t, and, in particular, by the issue ofdebentures or debenture stock of the Company, perpetual or otherwise, charged upon or bymortgage charge or lien of and on the undertaking of the whole or any part of the property ofthe Company (both present and future), including its uncalled capital for the time being, or bymaking, accepting, endorsing or executing any cheque, promissory note or bill of exchange.
2. The following provisions of the Articles of Association of the Company relate to the variation ofmembers' rights, the transfer of shares and voting rights of members:±
Variation of Members' Rights
Article 9
Subject to the provisions of the Statutes, all or any of the special rights or privileges for the timebeing attached to any preference share for the time being issued may from time to time (whetheror not the Company is being wound up) be modi®ed, affected, altered or abrogated andpreference capital other than redeemable preference shares may be repaid if authorised by aSpecial Resolution passed by holders of such preference shares at a special meeting called forthe purpose. To any such special meeting, all provisions of these Articles as to General Meetingsof the Company shall mutatis mutandis apply but so that the necessary quorum shall be twopersons at least holding or representing by proxy not less than one third of the issuedpreference shares concerned and that every holder of the preference shares concerned shall beentitled on a poll to one vote for every such share held by him and that any holder of thepreference shares concerned present either in person or by proxy may demand a poll ProvidedAlways that where the necessary majority for such a Special Resolution is not obtained at themeeting, consent in writing if obtained from holders of three-fourths of the preference sharesconcerned within two months of the meeting shall be as valid and effectual as a SpecialResolution carried at the meeting.
Article 61
Subject to the Statutes and save as provided by these Articles, all or any of the special rights orprivileges attached to any class of shares in the capital of the Company for the time being issuedmay, at any time, as well before as during liquidation, be modi®ed, affected, altered orabrogated, either with the consent in writing of the holders of not less than three-fourths of theissued shares of the class or with the sanction of a Special Resolution passed at a separateGeneral Meeting, but so that the quorum thereof shall be not less than two persons personallypresent and holding or representing by proxy one-third of issued shares of the class, and thatany holder of shares of the class, present in person or by proxy, shall on a poll be entitled toone vote for each share of the class held or represented by him, and if at any adjournedmeeting of such holders such quorum as aforesaid is not present, any two holders of shares ofthe class who are personally present shall be a quorum. The Directors shall comply with theprovisions of Section 186 of the Act as to forwarding a copy of any such consent or Resolutionto the Registrar of Companies.
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Transfer of Shares
Article 40
Save as provided by these Articles, there shall be no restriction on the transfer of fully paidshares (except where required by law or by the rules, bye-laws or listing rules of the Exchange).All transfers of shares may be effected by way of book-entry in the Depository Register ProvidedAlways that the legal title in the shares may be transferred by the registered holders thereof byan instrument of transfer in the form approved by the Directors and the Exchange. Theinstrument of transfer shall be left at the Of®ce accompanied by the certi®cate of the shares tobe transferred and such other evidence (if any) as the Directors may reasonably require to showthe right of the transferor to make the transfer. The transferor shall be deemed to remain theregistered holder of the shares until the name of the transferee is entered in the Register inrespect thereof.
Article 41
The instrument of transfer shall be signed both by the transferor and by the transferee, and itshall be witnessed Provided Always that an instrument of transfer in respect of which thetransferee is the Depository shall be effective although not signed or witnessed by or on behalfof the Depository.
Article 42
Shares of different classes shall not be comprised in the same instrument of transfer.
Article 43
No share shall in any circumstances be transferred to any infant, bankrupt or person of unsoundmind.
Article 44(1)
All instruments of transfer which are registered shall be retained by the Company, but anyinstrument of transfer which the Directors may refuse to register shall (except in any case offraud) be returned to the party presenting the same.
Article 44(2)
The Company shall be entitled to destroy:±
(a) all instruments of transfer which have been registered at any time after the expiration of sixyears from the date of registration thereof;
(b) all dividend mandates and noti®cations of change of address at any time after theexpiration of six years from the date of recording thereof; and
(c) all share certi®cates which have been cancelled at any time after the expiration of six yearsfrom the date of the cancellation thereof.
Article 44(3)
It shall be conclusively presumed in favour of the Company that every entry in the Registerpurporting to have been made on the basis of an instrument of transfer or other document sodestroyed was duly and properly made and that:±
(a) every instrument of transfer so destroyed was a valid and effective instrument duly andproperly registered;
(b) every share certi®cate so destroyed was a valid and effective certi®cate duly and properlycancelled; and
137
(c) every other document hereinbefore mentioned so destroyed was a valid and effectivedocument;
in accordance with the recorded particulars thereof in the books or records of the Company.
Article 44(4)
Articles 44(2) and 44(3) shall apply only to the destruction of a document in good faith andwithout notice of any claim (regardless of the parties thereto) to which the document might berelevant.
Article 44(5)
Nothing contained in this Article 44 shall be construed as imposing upon the Company anyliability in respect of the destruction of any such document earlier than as aforesaid or in anyother circumstance which would not attach to the Company in the absence of this Article 44,and references in this Article 44 to the destruction of any document include references to thedisposal thereof in any manner.
Article 45
The Directors may decline to accept any instrument of transfer unless:±
(a) all or any part of the stamp duty (if any) payable on each share transfer and such fee notexceeding two Singapore Dollars for each transfer or such other sum as may from time totime be prescribed by the Exchange is paid to the Company; and
(b) such fee not exceeding two Singapore Dollars as the Directors may from time to timedetermine is paid to the Company in respect of the registration of any instrument oftransfer, probate, letters of administration, certi®cate of marriage or death, power ofattorney or any document relating to or affecting the title to the shares.
Article 46
The Directors may refuse to register the transfer of shares or allow the entry of or against aperson's name in the Depository Register in respect of shares transferred or to be transferredto such person:±
(a) which are not fully paid up; or
(b) on which the Company has a lien.
Article 47
If the Directors refuse to register any transfer of any share they shall, where required by theStatutes, serve on the transferor and transferee, within one month beginning with the day onwhich the transfer was lodged with the Company, a notice in writing informing each of them ofsuch refusal and of the facts which are considered to justify the refusal.
Article 48
The Register may be closed at such times and for such periods as the Directors may from timeto time determine Provided Always that the Register shall not be closed for more than thirty daysin any year Provided Always that the Company shall give prior notice of such closure as may berequired to the Exchange stating the period and purpose or purposes for which such closure isto be made.
138
Voting Rights of Members
Article 10
Preference shareholders shall have the same rights as ordinary Members as regards thereceiving of notices, reports and balance sheets and the attending of General Meetings of theCompany. Preference shareholders shall also have the right to vote at any meeting convenedfor the purpose of reducing the capital of the Company or winding up or sanctioning the sale ofthe undertaking of the Company or where the proposal to be submitted to the meeting directlyaffects their rights and privileges or when the dividend on the preference shares is more than sixmonths in arrears.
Article 13(3)
The joint holder ®rst named in the Register or the Depository Register, as the case may be, shallas regards voting, proxy, service of notices and delivery of certi®cates and dividend warrants, bedeemed to be the sole owner of such share.
Article 80
At every General Meeting a resolution put to the vote of the meeting shall be decided on a showof hands by the Members present in person and entitled to vote, unless before or upon thedeclaration of the result of the show of hands a poll be demanded by:±
(a) the Chairman of the meeting; or
(b) not less than two Members present in person or by proxy and entitled to vote; or
(c) a Member or Members present in person or by proxy, holding or representing, as the casemay be:±
(i) not less than one-tenth of the total voting rights of all Members entitled to vote at themeeting; or
(ii) shares in the Company conferring a right to vote at the meeting being shares onwhich an aggregate sum has been paid up equal to not less than one-tenth of thetotal sum paid up on all the shares conferring that right.
Article 81(1)
If a poll is duly demanded it shall be taken in such manner as the Chairman directs, and theresults of the poll shall be deemed to be the resolution of the meeting at which the poll wasdemanded.
Article 81(2)
No poll shall be demanded on the election of a Chairman of a meeting or on a question ofadjournment. A poll demanded on any other question shall be taken at such time as theChairman of the meeting directs.
Article 82
Unless a poll be so demanded, a declaration by the Chairman of the meeting that a resolutionhas been carried, or has been carried by a particular majority, or lost, or not carried by aparticular majority shall be conclusive, and an entry to that effect in the minute book of theCompany shall be conclusive evidence thereof, without proof of the number or proportion ofthe votes recorded in favour of or against such resolution.
139
Article 83(1)
No objection shall be raised as to the admissibility of any vote except at the meeting oradjourned meeting, as the case may be, at which the vote objected to is or may be given,tendered or cast, and every vote not disallowed at such meeting shall be valid for all purposes.Any such objection shall be referred to the Chairman of the meeting whose decision shall be ®naland conclusive.
Article 83(2)
If any votes shall be counted which ought not to have been counted, or might have beenrejected, the error shall not vitiate the result of the voting unless it be pointed out at the samemeeting, or at any adjournment thereof, and unless in the opinion of the Chairman at themeeting or at any adjournment thereof as the case may be, it shall be of suf®cient importanceto vitiate the result of the voting.
Article 84
In case of an equality of votes, whether on a show of hands or on a poll, the Chairman of themeeting at which the show of hands takes place or at which the poll is demanded, as the casemay be, shall have a second or casting vote.
Article 85(1)
Subject to and without prejudice to any special privileges or restriction as to voting for the timebeing attached to any special class of shares for the time being forming part of the capital of theCompany:±
(a) every Member who is present in person or by proxy shall have one vote on a show ofhands, the Chairman to decide which proxy shall be entitled to vote where a Member isrepresented by two proxies; and
(b) every Member who is present in person or by proxy, in case of a poll, shall have one votefor every share which he holds or represents and upon which all calls or other sums duethereon to the Company have been paid.
Article 85(2)
For the purpose of determining the number of votes which a Member, being a Depositor, or hisproxy may cast at any General Meeting upon a poll being called, the number of shares held orrepresented shall, in relation to the shares of that Depositor, be the number of shares enteredagainst his name in the Depository Register as at the Cut-Off Time as certi®ed by theDepository to the Company.
Article 86
In the case of joint holders the vote of the senior who tenders a vote whether in person or byproxy, shall be accepted to the exclusion of the votes of the other joint holders; and for thispurpose seniority shall be determined by the order in which the names stand in the Register orthe Depository Register, as the case may be.
Article 87
Unless the Directors otherwise determine, no person other than a Member who shall have paideverything for the time being due from him and payable to the Company in respect of his shares,shall be entitled to be present or to vote on any question either personally or by proxy at anyGeneral Meeting.
140
Article 88
A Member of unsound mind, or in respect of whom an order has been made by any Court havingjurisdiction in lunacy, may vote, whether on a show of hands or on a poll by the committee,curator bonis, or other person in the nature of committee or curator bonis appointed by thatCourt, and any such committee, curator bonis, or other person may, on a poll, vote by proxy.
Article 89
On a poll, votes may be given either personally or by proxy and a person entitled to more thanone vote need not use all his votes or cast all the votes he uses in the same way.
Article 90(1)
A proxy need not be a Member.
Article 90(2)
A Member shall not be entitled to appoint more than two proxies to attend and vote at the sameGeneral Meeting Provided Always that where the Member is a Depositor, the Company shall beentitled and bound:±
(a) to reject any instrument of proxy lodged if the Depositor is not shown to have any sharesentered against his name in the Depository Register as at the Cut-Off Time as certi®ed bythe Depository to the Company;
(b) to accept as the maximum number of votes which in aggregate the proxy or proxiesappointed by the Depositor is or are able to cast on a poll a number which is the numberof shares entered against the name of that Depositor in the Depository Register as at theCut-Off Time as certi®ed by the Depository to the Company, whether that number begreater or smaller than the number speci®ed in any instrument of proxy executed by or onbehalf of that Depositor; and
(c) in determining rights to vote and other matters in respect of a completed instrument ofproxy submitted to it, to have regard to the instructions (if any) given by and the notes (ifany) set out in the instrument of proxy.
Article 90(3)
In any case where a form of proxy appoints more than one proxy, the proportion of theshareholding concerned to be represented by each proxy shall be speci®ed in the form ofproxy. If no proportion is speci®ed, the Company shall be entitled to treat the ®rst named proxyas representing the entire number of shares entered against his name in the Depository Registerand any second named proxy as an alternate to the ®rst named or at the Company's option totreat the instrument of proxy as invalid.
Article 91
Any corporation which is a Member may, by resolution of its directors or other governing body,authorise any person to act as its representative at any meetings of the Company or any class ofMembers of the Company, and such representative shall be entitled to exercise the samepowers on behalf of the corporation which he represents as if he had been an individualshareholder.
141
Article 92
An instrument appointing a proxy shall be in writing in any usual or common form (including theform approved from time to time by the Depository) or in any other form which the Directors mayapprove and:±
(1) in the case of an individual shall be signed by the appointor or his attorney;
(2) in the case of a corporation shall be either given under its common seal or signed on itsbehalf by an attorney or a duly authorised of®cer of the corporation.
Article 93
Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, theletter or the power of attorney or other authority, if any, or a duly certi®ed copy thereof shall(failing previous registration with the Company) if required by law, be duly stamped and bedeposited at the Of®ce, not less than forty-eight hours before the time for holding the meetingor adjourned meeting at which the person named in the instrument proposes to vote and indefault the instrument of proxy shall not be treated as valid.
Article 94
The signature on an instrument of proxy need not be witnessed.
Article 95
A vote given in accordance with the terms of an instrument of proxy shall be validnotwithstanding the previous death of the principal or revocation of the proxy or transfer of theshare in respect of which the vote is given Provided Always that no notice in writing of the deathor revocation or transfer shall have been received at the Of®ce one hour at least before the time®xed for holding the meeting.
Article 96
An instrument appointing a proxy shall be deemed to confer authority to demand or join indemanding a poll and to speak at the meeting.
Article 97
Where the capital of the Company consists of shares of different monetary denominations,voting rights shall be prescribed in such manner that a unit of capital in each class, whenreduced to a common denominator, shall carry the same voting power when such right isexercisable.
3. The following provisions of the Articles of Association of the Company relate to the appointment,retirement, and removal of Directors:
Appointment, Retirement and Removal of Directors
Article 98
Until otherwise determined by a Special Resolution at a General Meeting, the number ofDirectors shall not be less than two or more than ten. All the Directors of the Company shall benatural persons.
Article 100
A Director shall not be required to hold any share in the Company.
142
Article 101(1)
Any Director may at any time and from time to time appoint any other person approved by amajority of the Directors for the time being to be his alternate. An alternate Director shall beentitled (subject to his giving to the Company an address within the Republic of Singapore atwhich notices may be served on him) to receive notice of meetings of the Directors and toattend and vote as a Director at any such meeting at which the Director appointing him is notpresent, and generally at such meeting to exercise all the powers, rights, duties and authoritiesof the Director appointing him. Every person acting as an alternate Director shall be an of®cer ofthe Company and shall alone be responsible to the Company for his own acts and defaults andhe shall not be deemed to be the agent of or for the Director appointing him. All theappointments and removals of alternate Directors made by any Director in pursuance of thisArticle, shall be in writing under the hand of the Director making the same and shall be sent toor left at the Of®ce. A Director may not act as an alternate for another Director. A person may notact as an alternate Director for more than one Director of the Company.
Article 101(2)
An alternate Director may be removed by his appointor and the appointor (subject to theapproval of the Directors) may appoint another in his place. An alternate Director may beremoved from of®ce by a resolution of the Directors, but he shall be entitled to vote on suchresolution and he shall, ipso facto, cease to be an alternate Director if his appointor ceases forany reason to be a Director. The appointment of an alternate Director shall also determine on thehappening of any event which, if he were a Director, would cause him to vacate such of®ce.
Article 104(1)
The of®ce of a Director shall be vacant if the Director:±
(a) ceases to be a Director by virtue of the Statutes; or
(b) becomes bankrupt or makes any arrangement or composition with his creditors generally;or
(c) is or becomes prohibited from being a Director by reason of any order made under theStatutes; or
(d) becomes of unsound mind or a person whose person or estate is liable to be dealt with inany way under any law relating to mental disorder; or
(e) resigns his of®ce by notice in writing to the Company; or
(f) for more than six months is absent without permission of the Directors from meetings ofthe Directors held during that period and his alternate Director (if any) shall not duringsuch period have attended in his stead; or
(g) is directly or indirectly interested in any contract or proposed contract with the Companyand fails to declare the nature of his interest in manner required by the Statutes; or
(h) if he is removed from of®ce pursuant to the Statutes.
Article 104(2)
The appointment of any Director to the of®ce of Chairman or Deputy Chairman or Managing orJoint Managing or Deputy or Assistant Director shall automatically terminate if he ceases to be aDirector but without prejudice to any claim for any damage or breach of any contract of servicebetween him and the Company.
143
Article 104(3)
The appointment of any Director to any other executive of®ce shall automatically terminate if heceases from any cause to be a Director only if the contract or resolution under which he holdsof®ce expressly so provides, in which case such termination shall be without prejudice to anyclaim for damages or breach of any contract of service between him and the Company.
Article 107
At the Annual General Meeting in every year one-third of the Directors for the time being (otherthan the Managing Director), or, if their number is not three or a multiple of three, then thenumber nearest one-third, shall retire from of®ce Provided Always that all Directors (except theManaging Director) shall retire from of®ce at least once every three years.
Article 108
The Directors to retire in every year shall be those who have been longest in of®ce since their lastelection, but as between persons who became Directors on the same day those to retire shall(unless they otherwise agree among themselves) be determined by lot.
Article 109
Subject to the Statutes, a retiring Director shall be eligible for re-election at the meeting at whichhe retires.
Article 110
A person who is not a retiring Director shall be eligible for election to of®ce of Director at anyGeneral Meeting if some Member intending to propose him has, at least eleven clear daysbefore the meeting, left at the Of®ce of the company a notice in writing duly signed by thenominee, giving his consent to the nomination and signifying his candidature for the of®ce, orthe intention of such Member to propose him, Provided That in the case of a personrecommended by the Directors for election, nine clear days' notice only shall be necessary, andnotice of each and every candidature for election to the Board of Directors shall be served on theregistered holders of shares at least seven days prior to the meeting at which the election is totake place.
Article 111
The Company by Special Resolution in General Meeting may, from time to time, increase orreduce the number of Directors, and may alter their quali®cation, if any.
Article 112
The Directors may from time to time appoint one or more of their body to the of®ce of ManagingDirector for such period (not exceeding ®ve years) and on such terms as they think ®t, andsubject to the terms of any agreement entered into in any particular case, may revoke suchappointment. A Managing Director shall be subject to the control of the Directors. A Director soappointed shall not, while holding that of®ce be subject to retirement but his appointment shallbe automatically determined if he ceases from any cause to be a Director.
Article 117
The Directors shall have power at any time and from time to time to appoint any other quali®edperson as a Director either to ®ll a casual vacancy or as an addition to the Board. But anyDirector so appointed shall hold of®ce only until the next Annual General Meeting of theCompany, and shall be eligible for re-election.
144
Article 118
The Company may from time to time by Ordinary Resolution remove any Director before theexpiration of his period of of®ce, and may by an Ordinary Resolution appoint another person inhis stead. The person so appointed shall continue to hold of®ce until the next Annual GeneralMeeting.
Article 125
The continuing Directors may act notwithstanding any vacancy in their body, but if and so longas their number is reduced below the minimum number ®xed by or pursuant to these Articles, thecontinuing Directors may, except in an emergency, act for the purpose of increasing the numberof Directors to such minimum number, or of summoning a General Meeting of the Company,notwithstanding that there shall not be a quorum, but for no other purpose.
145
APPENDIX C
GROUP PROFORMA FINANCIAL INFORMATIONFOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2000
The proforma ®nancial information set out below have been prepared on the assumption that A.I.M.Chemical Industries Pte Ltd (``A.I.M.'') has been a subsidiary company of AP Oil International Limitedfrom 1 January 2000 and on the assumption that the consideration for the acquisition is $2,380,000.The proforma ®nancial information of the Group is based on the audited ®nancial statements of A.I.M.for the ®nancial year ended 31 March 2000, or time apportionment basis, and for the nine monthsended 31 December 2000. The proforma ®nancial information is expressed in Singapore dollars andhas been prepared in accordance with the accounting policies of the Group set out in Section G Part1 of the Accountants' Report.
The purpose of the proforma ®nancial information of the Group is to show what the historical ®nancialinformation might have, in the event A.I.M. had been a subsidiary since 1 January 2000. However, theproforma consolidated ®nancial information is not necessarily indicative of the results of theoperations on the related effects of the ®nancial position that would have been attained in the eventthat A.I.M. was actually acquired on that date.
PROFORMA STATEMENT OF GROUP RESULTS FOR THE FINANCIAL YEAR ENDED31 DECEMBER 2000
$'000
Revenue 43,784
Cost of sales (36,193)
Gross pro®t 7,591
Other operating income 868
Distribution expenses (1,040)
Administrative and other operating expenses (2,443)
Pro®t from operations 4,976
Finance costs (733)
Pro®t before income tax 4,243
Income tax (1,248)
Pro®t after income tax 2,995
Earnings per share (cents)1 4.27
Note:±
(1) The earning per share has been computed based on the pro®t after income tax and the pre-Invitation share capital of70,200,000 shares.
146
PROFORMA STATEMENT OF GROUP NET ASSETS AS AT 31 DECEMBER 2000
$'000
ASSETS
Current assets
Cash and bank balances 3,990
Trade receivables 3,914
Other receivables and prepayments 483
Inventories 3,692
Total current assets 12,079
Non-current assets
Other investments 11
Investment property 4,096
Property, plant and equipment 3,799
Intangible assets 724
Total non-current assets 8,630
Total assets 20,709
LIABILITIES AND EQUITY
Current liabilities
Short-term borrowings 6,006
Trade payables and accrued liabilities 3,644
Other payables 165
Income tax payable 1,438
Long-term borrowings - current portion 87
Hire purchase creditors - current portion 63
Total current liabilities 11,403
Non-current liabilities
Deferred tax 287
Long-term borrowings 2,821
Total non-current liabilities 3,108
Proforma shareholders' equity 6,198
20,709
Net tangible assets (NTA) per share (cents)2 7.80
Note:±
(2) The NTA per share has been computed based on the shareholders' equity and on the pre-Invitation share capital of70,200,000 shares.
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TABLE OF CONTENTSPage
CORPORATE INFORMATION . . . . . . . . . 1
DEFINITIONS. . . . . . . . . . . . . . . . . 2
GLOSSARY OF TECHNICAL TERMS . . . . . . 6
DETAILS OF THE INVITATION . . . . . . . . . 7
LISTING ON SGX-SESDAQ . . . . . . . . . . 7
INDICATIVE TIMETABLE FOR LISTING . . . . . 8
PROSPECTUS SUMMARY . . . . . . . . . . . 9
THE INVITATION . . . . . . . . . . . . . . . 12
FORWARD LOOKING STATEMENTS . . . . . . 13
RISK FACTORS . . . . . . . . . . . . . . . 14
ISSUE STATISTICS . . . . . . . . . . . . . . 19
SELECTED CONSOLIDATED FINANCIALINFORMATION . . . . . . . . . . . . . . . 20
CAPITALISATION AND INDEBTEDNESS . . . . 22
DILUTION . . . . . . . . . . . . . . . . . . 23
GENERAL INFORMATION ON THE GROUP . . . 24
HISTORY. . . . . . . . . . . . . . . . . . 24
RESTRUCTURING EXERCISE . . . . . . . . . 25
GROUP STRUCTURE . . . . . . . . . . . . 26
BUSINESS . . . . . . . . . . . . . . . . . 26
Principal Activities . . . . . . . . . . . . . 26
Business Strategies . . . . . . . . . . . . 29
Manufacturing Process . . . . . . . . . . . 30
Production Facilities and Capacity . . . . . . 31
Quality Assurance . . . . . . . . . . . . . 32
Corporate Association . . . . . . . . . . . 33
Research and Development . . . . . . . . . 33
Marketing and Distribution . . . . . . . . . 34
Staff Training . . . . . . . . . . . . . . . 35
Trademarks . . . . . . . . . . . . . . . . 35
Government Regulations . . . . . . . . . . 36
Insurance Coverage . . . . . . . . . . . . 38
ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS . . . . . . . . 39
DIVIDENDS . . . . . . . . . . . . . . . . . 52
PROSPECTS AND FUTURE PLANS . . . . . . 52
MAJOR SUPPLIERS . . . . . . . . . . . . . 54
MAJOR CUSTOMERS . . . . . . . . . . . . 55
COMPETITION AND COMPETITIVE STRENGTHS 56
DIRECTORS, SENIOR MANAGEMENT ANDSTAFF . . . . . . . . . . . . . . . . . . 58
SERVICE AGREEMENTS . . . . . . . . . . . 67
SHARE CAPITAL . . . . . . . . . . . . . . 69
SHAREHOLDERS . . . . . . . . . . . . . . 71
MORATORIUM . . . . . . . . . . . . . . . 72
DESCRIPTION OF OUR ORDINARY SHARES . . 73
INTERESTED PERSON TRANSACTIONS . . . . 77
POTENTIAL CONFLICTS OF INTEREST . . . . . 79
PROPERTIES AND FIXED ASSETS . . . . . . . 80
DIRECTORS' REPORT . . . . . . . . . . . . 81
ACCOUNTANTS' REPORT . . . . . . . . . . . 82
GENERAL AND STATUTORY INFORMATION . . 113
APPENDIX A : TERMS AND CONDITIONS ANDPROCEDURES FOR APPLICATION. . . . . . 121
APPENDIX B : SELECTED ARTICLES OFASSOCIATION OF THE COMPANY . . . . . . 134
APPENDIX C : GROUP PROFORMA FINANCIALINFORMATION FOR THE FINANCIAL YEARENDED 31 DECEMBER 2000 . . . . . . . . 146
AP OIL INTERNATIONAL LIMITED(Incorporated in the Republic of Singapore on
24 December 1975)
Invitation in respect of 17,550,000 New Shares of$0.05 each comprising:
(1) 1,000,000 Offer Shares at $0.235 for eachOffer Share by way of public offer; and
(2) 16,550,000 Placement Shares by way ofplacement, comprising:
(a) 14,950,000 Placement Shares at $0.235for each Placement Share; and
(b) 1,600,000 Reserved Shares at $0.235for each Reserved Share reserved forthe management staff, employees,Independent Directors, and businessassociates of our Group and thosewho have contributed to the successof our Group,
payable in full on application.
Manager, Underwriter and Placement Agent
PROSPECTUS
SNP SPrint Pte Ltd 612200
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